diff --git a/raw/filings/0000893538/2015/0000893538-16-000122/filing.txt b/raw/filings/0000893538/2015/0000893538-16-000122/filing.txt new file mode 100644 index 0000000000000000000000000000000000000000..e9734d3ac817958ad5ff9b023931dba4eab41417 --- /dev/null +++ b/raw/filings/0000893538/2015/0000893538-16-000122/filing.txt @@ -0,0 +1,7872 @@ +10-K +1 +sm-20151231x10k.htm +10-K +10-K +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +Washington, D.C. 20549 +FORM 10-K +þ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 +For the fiscal year ended December 31, 2015 +or +o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 +Commission file number 001-31539 +SM ENERGY COMPANY +(Exact name of registrant as specified in its charter) +Delaware +(State or other jurisdiction +of incorporation or organization) +41-0518430 +(I.R.S. Employer Identification No.) +1775 Sherman Street, Suite 1200, Denver, Colorado +(Address of principal executive offices) +80203 +(Zip Code) +(303) 861-8140 +(Registrant’s telephone number, including area code) +Securities registered pursuant to Section 12(b) of the Act: +Title of each class +Name of each exchange on which registered +Common stock, $.01 par value +New York Stock Exchange +Securities registered pursuant to Section 12(g) of the Act: None +Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No o +Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ +Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o +Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o +Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ +Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. +Large accelerated filer þ +Accelerated filer o +Non-accelerated filer o (Do not check if a smaller reporting company) +Smaller reporting company o +Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No þ +The aggregate market value of the 66,782,794 shares of voting stock held by non-affiliates of the registrant, based upon the closing sale price of the registrant’s common stock on June 30, 2015 , the last business day of the registrant’s most recently completed second fiscal quarter, of $46.12 per share, as reported on the New York Stock Exchange, was $3,080,022,459 . Shares of common stock held by each director and executive officer and by each person who owns 10 percent or more of the outstanding common stock or who is otherwise believed by the registrant to be in a control position have been excluded. This determination of affiliate status is not necessarily a conclusive determination for other purposes. +As of February 17, 2016 , the registrant had 68,077,546 shares of common stock outstanding. +DOCUMENTS INCORPORATED BY REFERENCE +Certain information required by Items 10, 11, 12, 13, and 14 of Part III is incorporated by reference from portions of the registrant’s definitive proxy statement relating to its 2016 annual meeting of stockholders to be filed within 120 days after December 31, 2015 . +1 +TABLE OF CONTENTS +ITEM +PAGE +PART I +ITEMS 1. and 2. +BUSINESS and PROPERTIES +4 +General +4 +Strategy +4 +Significant Developments in 2015 +4 +Outlook for 2016 +5 +Core Operational Areas +6 +Reserves +8 +Production +13 +Productive Wells +13 +Drilling and Completion Activity +14 +Acreage +15 +Delivery Commitments +16 +Major Customers +16 +Employees and Office Space +17 +Title to Properties +17 +Seasonality +17 +Competition +18 +Government Regulations +18 +Cautionary Information about Forward-Looking Statements +22 +Available Information +24 +Glossary of Oil and Gas Terms +25 +ITEM 1A. +RISK FACTORS +29 +ITEM 1B. +UNRESOLVED STAFF COMMENTS +52 +ITEM 3. +LEGAL PROCEEDINGS +52 +ITEM 4. +MINE SAFETY DISCLOSURES +52 +PART II +53 +ITEM 5. +MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES +53 +ITEM 6. +SELECTED FINANCIAL DATA +56 +ITEM 7. +MANAGEMENT’S DISCUSSION AND ANALYSIS OF +FINANCIAL CONDITION AND RESULTS OF OPERATIONS +58 +Overview of the Company +58 +Financial Results of Operations and Additional Comparative Data +64 +Comparison of Financial Results and Trends between 2015 and 2014 and between 2014 and 2013 +67 +Overview of Liquidity and Capital Resources +74 +Critical Accounting Policies and Estimates +81 +Accounting Matters +83 +Environmental +84 +Non-GAAP Financial Measures +85 +2 +TABLE OF CONTENTS +(Continued) +ITEM +PAGE +ITEM 7A. +QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT +MARKET RISK (included within the content of ITEM 7) +87 +ITEM 8. +FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA +88 +ITEM 9. +CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS +ON ACCOUNTING AND FINANCIAL DISCLOSURE +141 +ITEM 9A. +CONTROLS AND PROCEDURES +142 +ITEM 9B. +OTHER INFORMATION +145 +PART III +145 +ITEM 10. +DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE +GOVERNANCE +145 +ITEM 11. +EXECUTIVE COMPENSATION +145 +ITEM 12. +SECURITY OWNERSHIP OF CERTAIN BENEFICIAL +OWNERS AND MANAGEMENT AND RELATED +STOCKHOLDER MATTERS +145 +ITEM 13. +CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, +AND DIRECTOR INDEPENDENCE +147 +ITEM 14. +PRINCIPAL ACCOUNTANT FEES AND SERVICES +147 +PART IV +148 +ITEM 15. +EXHIBITS AND FINANCIAL STATEMENT SCHEDULES +148 +3 +PART I +When we use the terms “SM Energy,” “the Company,” “we,” “us,” or “our,” we are referring to SM Energy Company and its subsidiaries unless the context otherwise requires. We have included certain technical terms important to an understanding of our business under Glossary of Oil and Gas Terms. Throughout this document we make statements that may be classified as “forward-looking.” Please refer to the Cautionary Information about Forward-Looking Statements section of this document for an explanation of these types of statements. +ITEMS 1. and 2. BUSINESS and PROPERTIES +General +We are an independent energy company engaged in the acquisition, exploration, development, and production of crude oil and condensate, natural gas, and natural gas liquids (also respectively referred to as “oil,” “gas,” and “NGLs” throughout the document) in onshore North America. We were founded in 1908 and incorporated in Delaware in 1915. Our initial public offering of common stock was in December 1992. Our common stock trades on the New York Stock Exchange under the ticker symbol “SM.” +Our principal offices are located at 1775 Sherman Street, Suite 1200, Denver, Colorado 80203, and our telephone number is (303) 861-8140. +Strategy +Our strategic objective is to profitably build our ownership and operatorship of North American oil, gas, and NGL producing assets that have high operating margins and significant opportunities for additional economic investment. We pursue growth opportunities through both exploration and acquisitions, and seek to maximize the value of our assets through industry-leading technology application and outstanding operational execution. We focus on achieving high full-cycle economic returns on our investments and maintaining a simple, strong balance sheet through a conservative approach to leverage. +Significant Developments in 2015 +• +Production. We achieved record levels of production for 2015 . Our average daily production was composed of 52.7 MBbl of oil, 475.7 MMcf of gas, and 44.0 MBbl of NGLs, for an average equivalent production rate of 175.9 MBOE per day, which was an increase of 16 percent from an average of 151.1 MBOE per day in 2014 . Please refer to Core Operational Areas below for additional discussion. +• +Reserves and Capital Investment. Our estimated proved reserves decreased 14 percent to 471.3 MMBOE at December 31, 2015 , from 547.7 MMBOE at December 31, 2014 , of which 25.4 MMBOE related to the divestiture of proved reserves. We added 160.6 MMBOE through drilling activities during the year, led by our activities in the Eagle Ford shale and Bakken/Three Forks resource plays. Costs incurred for drilling and exploration activities, excluding acquisitions, decreased 34 percent to $1.4 billion in 2015 when compared to 2014 . We had strong reserve additions as a result of our success in reducing costs, optimizing completions, and generating better well results in our core development programs; however, these additions were offset by the impact of lower commodity prices. Our proved reserve life decreased to 7.3 years in 2015 compared to 9.9 years in 2014 . Please refer to Reserves and Core Operational Areas below for additional discussion. +• +Increased Liquidity . During 2015, we extended the maturity of a portion of our long-term debt by using the proceeds from our issuance of $500.0 million in aggregate principal amount of 5.625% Senior Notes due 2025 to redeem the $350.0 million principal amount of our 6.625% Senior Notes due 2019. The earliest maturity for any of our Senior Notes occurs in 2021. Please refer to Overview of Liquidity +4 +and Capital Resources in Part II, Item 7 of this report for additional discussion on our current and future liquidity. +• +Divestiture Activity . During 2015 , we divested a total of 25.4 MMBOE of proved reserves in multiple transactions for aggregate cash proceeds of approximately $357.9 million . Our most significant divestiture activity was the sale of our Mid-Continent assets in the second quarter of 2015. +• +Sustained Low Commodity Prices . Our financial condition and results of operations are significantly affected by the prices we receive for oil, gas, and NGLs, which can fluctuate dramatically. +Oil prices continued to decline throughout 2015. The daily NYMEX spot price ranged from a high of $61.43 per Bbl in June to a low of $34.73 per Bbl in December . Oil prices declined further subsequent to year end 2015, dropping to a 12-year low of $26.21 per Bbl in February 2016 . The average NYMEX price decreased to $48.68 per Bbl in 2015 compared to $93.03 per Bbl in 2014 . +Natural gas prices have been under downward pressure over the past several years due to high levels of supply and remained highly volatile during 2015 . The daily NYMEX spot price ranged from a high of $3.29 per MMBtu in January to a low of $1.53 per MMBtu in December . The average NYMEX price decreased in 2015 to $2.61 per MMBtu compared to $4.35 per MMBtu in 2014 . +NGL prices continued to decrease in 2015 in line with oil price declines. The monthly OPIS NGL price ranged from a high of $22.57 per Bbl in February to a low of $17.07 per Bbl in December . NGL prices declined further subsequent to year end 2015 , dropping to a low of $14.73 per Bbl in January 2016 . The average OPIS price decreased in 2015 to $19.76 per Bbl compared to $38.93 per Bbl in 2014 . +• +Impairments. We recorded impairment of proved properties expense of $468.7 million , abandonment and impairment of unproved properties expense of $78.6 million , and impairment of other property and equipment expense of $49.4 million for the year ended December 31, 2015 . These impairments were largely due to commodity price declines, which impacted our Powder River Basin program and certain legacy and non-core assets, as well as our decision to reduce capital invested in the development of our east Texas exploration program in light of the sustained, low commodity price environment. +Outlook for 2016 +Our goal is to maintain a strong balance sheet and preserve liquidity in the current commodity price environment. We expect to incur capital expenditures below adjusted EBITDAX in order to minimize any impact to our total debt. We believe this focus on our liquidity will best preserve our balance sheet and will give us the flexibility to adapt as industry conditions change. +Our capital program for 2016 will be approximately $705 million, of which, approximately 85 percent will be invested in drilling and completion activities, with the focus on our core development programs in the Bakken/Three Forks, Permian Basin, and Eagle Ford shale. We plan to continue our focus on conducting safe operations even as we pursue cost saving measures throughout our business. Please refer to Outlook for 2016 under Part II, Item 7 of this report for additional discussion concerning our capital plans for 2016 . +5 +Core Operational Areas +Our 2015 operations were concentrated in four onshore operating areas in the United States. We divested our Mid-Continent assets during the second quarter of 2015. The following table summarizes estimated proved reserves, PV-10, production, and costs incurred in oil and gas activities for the year ended December 31, 2015 , for our core operating areas: +South Texas & Gulf Coast +Rocky +Mountain +Permian +Mid- +Continent (2) +Total (1) +Proved Reserves +Oil (MMBbl) +43.6 +88.2 +13.4 +— +145.3 +Gas (Bcf) +1,116.9 +102.9 +44.2 +— +1,264.0 +NGLs (MMBbl) +112.6 +2.8 +— +— +115.4 +MMBOE (1) +342.4 +108.1 +20.8 +— +471.3 +Relative percentage +73 +% +23 +% +4 +% +— +% +100 +% +Proved Developed % +50 +% +57 +% +49 +% +— +% +52 +% +PV-10 (in millions) (3) +Proved Developed +$ +793.4 +$ +667.3 +$ +132.3 +$ +— +$ +1,593.0 +Proved Undeveloped +52.1 +129.3 +16.1 +— +197.5 +Total Proved +$ +845.5 +$ +796.6 +$ +148.4 +$ +— +$ +1,790.5 +Relative percentage +47 +% +45 +% +8 +% +— +% +100 +% +Production +Oil (MMBbl) +7.9 +9.5 +1.8 +— +19.2 +Gas (Bcf) +149.5 +9.3 +5.1 +9.7 +173.6 +NGLs (MMBbl) +15.7 +0.3 +— +— +16.1 +MMBOE (1) +48.5 +11.3 +2.7 +1.7 +64.2 +Avg. Daily Equivalents +(MBOE/d) +132.9 +31.1 +7.4 +4.6 +175.9 +Relative percentage +75 +% +18 +% +4 +% +3 +% +100 +% +Costs Incurred (in millions) (4) +$ +765.3 +$ +538.5 +$ +59.4 +$ +9.0 +$ +1,395.0 +____________________________________________ +(1) +Totals may not sum or calculate due to rounding. +(2) +We divested our Mid-Continent assets in the second quarter of 2015. +(3) +The standardized measure PV-10 calculation is presented in the Supplemental Oil and Gas Information section in Part II, Item 8 of this report. A reconciliation between PV-10 and the after tax amount is shown in the Reserves section below. +(4) +Amounts do not sum to total costs incurred due to certain costs relating to our new venture projects being excluded from the regional table above. +In general, we reduced our capital spending activity across all regions during 2015 in light of the low commodity price environment. We had strong proved reserve additions and positive performance revisions for the year ended December 31, 2015, especially in our Eagle Ford shale and Bakken/Three Forks resource plays; however, our total estimated proved reserves decreased from year-end 2014 due to the divestiture of our Mid-Continent assets, a significant negative price revision, and the removal of proved undeveloped reserves related to changes in our development plan. +South Texas & Gulf Coast Region. Operations in our South Texas & Gulf Coast region are managed from our office in Houston, Texas. Within this region, we have both operated and non-operated Eagle Ford shale programs on approximately 197,000 net acres. Our operated program accounts for approximately 80 percent of our total Eagle Ford acreage and production. Our acreage position covers a significant portion of the western Eagle Ford shale play, including acreage in the oil/condensate, NGL-rich gas, and dry gas windows of the play. Our development program has shifted to utilizing longer laterals and completions with higher sand loadings, which is +6 +resulting in improved well performance as shown in our positive performance revision to our proved reserves for the year ended December 31, 2015. +A significant portion of our 2015 capital was deployed in our South Texas & Gulf Coast region in our operated and outside-operated Eagle Ford shale programs. We incurred $765.3 million of costs to add approximately 119.3 MMBOE of estimated proved reserves through our drilling activities. As of December 31, 2015, we had 76 gross and net wells that had been drilled but not completed in our operated Eagle Ford shale program. Production for 2015 increased 21 percent over 2014 to 48.5 MMBOE. Estimated proved reserves decreased 13 percent at year-end 2015 to 342.4 MMBOE from 394.6 MMBOE at year-end 2014 . +Rocky Mountain Region. Operations in our Rocky Mountain region are managed from our office in Billings, Montana. We have approximately 162,000 net acres being actively developed in the Bakken and Three Forks formations. During 2015, we focused on testing completion optimizations and down-spacing in Divide County, North Dakota. +In the Powder River Basin, we have approximately 204,000 net acres, a large portion of which are prospective for the Frontier and Shannon intervals. Given the current commodity price environment, we have reduced our activity in the Powder River Basin. +We incurred $538.5 million of costs to add approximately 34.6 MMBOE of estimated proved reserves in our Rocky Mountain region through our drilling activities. As of December 31, 2015, we had 48 gross ( 40 net) drilled but not completed wells in our operated Bakken/Three Forks program. Production for 2015 increased 30 percent over 2014 to 11.3 MMBOE. Estimated proved reserves slightly decreased to 108.1 MMBOE at year-end 2015 from 108.4 MMBOE at year-end 2014 . +Permian Region. Operations in our Permian region are managed from our office in Midland, Texas. Our Permian region covers western Texas and southeastern New Mexico. As of December 31, 2015, we had approximately 23,000 net acres in our Permian region, a large portion of which is held by production. We began 2015 with one operated drilling rig and dropped this rig during the second quarter of 2015. +Costs incurred in our Permian region decreased to $59.4 million in 2015 compared to $195.4 million in 2014 . Estimated proved reserves increased four percent to 20.8 MMBOE at year-end 2015 from 20.0 MMBOE at year-end 2014 . Production decreased three percent to 2.7 MMBOE in 2015 from 2.8 MMBOE in 2014 . +Mid-Continent Region. During the second quarter of 2015, we divested our Mid-Continent assets located in the Arkoma Basin of Oklahoma and Arklatex area of east Texas and northern Louisiana. We also closed our regional office in Tulsa, Oklahoma in mid-2015. +7 +Reserves +The table below presents summary information with respect to the estimates of our proved reserves for each of the years in the three-year period ended December 31, 2015 . We engaged Ryder Scott Company, L.P. (“Ryder Scott”) to audit at least 80 percent of our total calculated proved reserve PV-10 for each year presented. The prices used in the calculation of proved reserve estimates reflect the 12-month average of the first-day-of-the-month prices in accordance with Securities and Exchange Commission (“SEC”) rules, and were $50.28 per Bbl for oil, $2.59 per MMBtu for natural gas, and $20.20 per Bbl for NGLs for the year ended December 31, 2015 . We then adjust these prices to reflect appropriate quality and location differentials over the period in estimating our proved reserves. +Reserve estimates are inherently imprecise and estimates for new discoveries and undeveloped locations are more imprecise than reserve estimates for producing oil and gas properties. Accordingly, these estimates are expected to change as new information becomes available. PV-10 shown in the following table is not intended to represent the current market value of our estimated proved reserves. The actual quantities and present value of our estimated proved reserves may be more or less than we have estimated. No estimates of our proved reserves have been filed with or included in reports to any federal authority or agency, other than the SEC, since the beginning of the last fiscal year. The following table should be read along with the section entitled Risk Factors – Risks Related to Our Business below. +Our ability to replace our production is critical to us. Please refer to the reserve replacement term in the Glossary of Oil and Gas Terms section of this report for information describing how this metric is calculated. +8 +The following table summarizes estimated proved reserves, PV-10, and standardized measure of discounted future cash flows as of December 31, 2015 , 2014 , and 2013 : +As of December 31, +2015 +2014 +2013 +Reserve data: +Proved developed +Oil (MMBbl) +75.6 +89.3 +70.2 +Gas (Bcf) +644.4 +784.6 +569.2 +NGLs (MMBbl) +61.5 +66.7 +43.8 +MMBOE (1) +244.5 +286.8 +208.9 +Proved undeveloped +Oil (MMBbl) +69.6 +80.4 +56.3 +Gas (Bcf) +619.7 +682.0 +620.1 +NGLs (MMBbl) +53.9 +66.8 +60.2 +MMBOE (1) +226.8 +260.9 +219.9 +Total Proved (1) +Oil (MMBbl) (1) +145.3 +169.7 +126.6 +Gas (Bcf) (1)(2) +1,264.0 +1,466.5 +1,189.3 +NGLs (MMBbl) (1) +115.4 +133.5 +103.9 +MMBOE (1) +471.3 +547.7 +428.7 +Proved developed reserves % +52 +% +52 +% +49 +% +Proved undeveloped reserves % +48 +% +48 +% +51 +% +Reserve data (in millions): +Proved developed PV-10 +$ +1,593.0 +$ +5,253.0 +$ +3,898.6 +Proved undeveloped PV-10 +197.5 +2,363.9 +1,629.9 +Total proved PV-10 +$ +1,790.5 +$ +7,616.9 +$ +5,528.5 +Standardized measure of discounted future net cash flows +$ +1,868.9 +$ +5,698.8 +$ +4,009.4 +Reserve life (years) +7.3 +9.9 +8.9 +(1) Totals may not sum or calculate due to rounding. +(2) As of December 31, 2015, proved gas reserves contain 48.1 Bcf of gas that we expect to produce and use as field fuel (primarily for compressors). +9 +The following table reconciles the standardized measure of discounted future net cash flows (GAAP) to the pre-tax PV-10 (Non-GAAP) of total proved reserves. Please see the definitions of standardized measure of discounted future net cash flows and PV-10 in the Glossary of Oil and Gas Terms section of this report below. +As of December 31, +2015 +2014 +2013 +(in millions) +Standardized measure of discounted future net cash flows +$ +1,868.9 +$ +5,698.8 +$ +4,009.4 +Add: 10 percent annual discount, net of income taxes +1,228.7 +3,407.2 +2,500.6 +Add: future undiscounted income taxes +— +3,511.4 +2,722.2 +Undiscounted future net cash flows +3,097.6 +12,617.4 +9,232.2 +Less: 10 percent annual discount without tax effect +(1,307.1 +) +(5,000.5 +) +(3,703.7 +) +PV-10 +$ +1,790.5 +$ +7,616.9 +$ +5,528.5 +Proved Undeveloped Reserves +Proved undeveloped reserves include those reserves that are expected to be recovered from new wells on undrilled acreage or from existing wells where a relatively major expenditure is required for recompletion. Undeveloped reserves may be classified as proved reserves on undrilled acreage directly offsetting development areas that are reasonably certain of production when drilled or where reliable technology provides reasonable certainty of economic producibility. Undrilled locations may be classified as having proved undeveloped reserves only if a development plan has been adopted indicating that they are scheduled to be drilled within five years, unless specific circumstances justify a longer time period. As of December 31, 2015 , 2.8 MMBOE of proved undeveloped reserves have been on our books in excess of five years. These reserves are associated with three wells that were drilled in 2015 and are scheduled to be completed and producing in 2016. +For locations that are more than one location removed from developed producing locations, we utilized reliable geologic and engineering technology to add approximately 76.4 MMBOE of proved undeveloped reserves in the more developed portions of our Eagle Ford shale position, 5.1 MMBOE of proved undeveloped reserves in the more developed portions of our Bakken/Three Forks shale position, and 0.4 MMBOE of proved undeveloped reserves in the more developed portion of our Wolfcamp shale position in the Permian Basin. We incorporated public and proprietary data from multiple sources to establish geologic continuity of each formation and their producing properties. This included seismic data and interpretations (3-D and micro seismic), open hole log information (both vertically and horizontally collected), and petrophysical analysis of the log data, mud logs, gas sample analysis, measurements of total organic content, thermal maturity, test production, fluid properties, and core data as well as significant statistical performance data yielding predictable and repeatable reserve estimates within certain analogous areas. These locations were limited to only those areas where both established geologic consistency and sufficient statistical performance data could be demonstrated to provide reasonably certain results. In all other areas, we restricted proved undeveloped locations to immediate offsets to producing wells. +10 +As of December 31, 2015 , we had 226.8 MMBOE of proved undeveloped reserves, which is a decrease of 34.1 MMBOE, or 13 percent , from 260.9 MMBOE at December 31, 2014 . The following table provides a reconciliation of our proved undeveloped reserves for the year ended December 31, 2015 : +Total +(MMBOE) +Total proved undeveloped reserves: +Beginning of year +260.9 +Revisions of previous estimates (1) +(35.4 +) +Additions from discoveries, extensions, and infill (2) +119.6 +Sales of reserves +(4.3 +) +Purchases of minerals in place +0.9 +Removed for five-year rule (3) +(79.4 +) +Conversions to proved developed (4) +(35.5 +) +End of year +226.8 +____________________________________________ +(1) +Revisions of previous estimates primarily relate to a negative price revision of 57.0 MMBOE due to the decline in commodity prices during 2015. The negative price revision was partially offset by positive performance revisions totaling 21.6 MMBOE primarily in our Eagle Ford shale and Bakken/Three Forks resource plays due to improved performance related to enhanced completions and reductions in operating expenses, which extended the economic lives of the wells. +(2) +We added 98.6 MMBOE of infill proved undeveloped reserves primarily in our Eagle Ford shale and Bakken/Three Forks resource plays, as well as an additional 21.0 MMBOE of proved undeveloped reserves through extensions and discoveries, primarily in our Eagle Ford shale play. +(3) +Proved undeveloped reserves were reduced by 79.4 MMBOE due to changes in our development plan, which caused these locations to be reclassified primarily to the probable reserves category due to the five-year rule. These locations were replaced by higher quality proved undeveloped reserves, which are classified as extensions or infills in the table above, and resulted from our testing and delineation programs implemented during 2015. +(4) +Conversions of proved undeveloped reserves to proved developed reserves were primarily in our Eagle Ford shale and Bakken/Three Forks resource plays. During 2015 , we incurred approximately $415 million on projects associated with reserves booked as proved undeveloped reserves at the end of 2014 . Our 2015 track record and development pace were both below 20 percent. This was due to delineation and testing of an incremental landing zone in our Eagle Ford shale asset, delineation and testing of the Bakken interval, step-out drilling on acreage acquired late in 2014 in our Divide County, North Dakota position, and due to the large reserve volumes associated with drilled and uncompleted wells at year-end 2015. At December 31, 2015, drilled but uncompleted wells represent 59.2 MMBOE of total proved undeveloped reserves. Our multi-year historical track is in excess of 20 percent. +As of December 31, 2015 , estimated future development costs relating to our proved undeveloped reserves are approximately $478 million , $344 million , and $465 million in 2016 , 2017 , and 2018 , respectively. +Internal Controls Over Proved Reserves Estimates +Our internal controls over the recording of proved reserves are structured to objectively and accurately estimate our reserve quantities and values in compliance with the SEC’s regulations. Our process for managing and monitoring our proved reserves is delegated to our corporate reserves group, which is managed by our Engineering Manager - Corporate Reserves, subject to the oversight of our management and the Audit Committee of our Board of Directors, as discussed below. Our Engineering Manager - Corporate Reserves has over 15 years of experience in the energy industry, and holds a Bachelor of Science degree in Chemical Engineering with a Petroleum Certificate from the University of Alabama. She is also a member of the Society of Petroleum Engineers. Technical, geological, and engineering reviews of our assets are performed throughout the year by our regional staff. This data, in conjunction with economic data and our ownership information, is used in making a determination of estimated proved reserve quantities. Our regional engineering technical staff do not report directly to our Engineering Manager - Corporate Reserves; they report to either their respective regional technical managers +11 +or directly to the regional manager. This design is intended to promote objective and independent analysis within our regions in the proved reserves estimation process. +Third-party Reserves Audit +Ryder Scott performed an independent audit using its own engineering assumptions, but with economic and ownership data we provided. Ryder Scott audits a minimum of 80 percent of our total calculated proved reserve PV-10. In the aggregate, the proved reserve amounts of our audited properties determined by Ryder Scott are required to be within 10 percent of our proved reserve amounts for the total company, as well as for each respective region. Ryder Scott is an independent petroleum engineering consulting firm that has been providing petroleum engineering consulting services throughout the world for over 70 years. The technical person at Ryder Scott primarily responsible for overseeing our reserves audit is an Advising Senior Vice President who received a Bachelor of Science Degree in Chemical Engineering from Purdue University in 1979 and a Master of Science Degree in Chemical Engineering from the University of California, Berkeley, in 1981. He is a licensed Professional Engineer in the State of Texas, a member of the Society of Petroleum Engineers, and the Society of Petroleum Evaluation Engineers. The Ryder Scott 2015 report concerning our reserves is included as Exhibit 99.1. +In addition to a third party audit, our reserves are reviewed by our management with the Audit Committee of our Board of Directors. Management, which includes our President and Chief Executive Officer, Executive Vice President and Chief Financial Officer, and Executive Vice President - Operations, is responsible for reviewing and verifying that the estimate of proved reserves is reasonable, complete, and accurate. The Audit Committee reviews a summary of the final reserves estimate in conjunction with Ryder Scott’s results and also meets with Ryder Scott representatives from time to time to discuss processes and findings. +12 +Production +The following table summarizes the volumes and realized prices of oil, gas, and NGLs produced and sold from properties in which we held an interest during the periods indicated. Realized prices presented below exclude the effects of derivative contract settlements. Also presented is a summary of related production costs per BOE. +For the Years Ended December 31, +2015 +2014 +2013 +Net production +Oil (MMBbl) +19.2 +16.7 +13.9 +Gas (Bcf) +173.6 +152.9 +149.3 +NGLs (MMBbl) +16.1 +13.0 +9.5 +MMBOE (2) +64.2 +55.1 +48.3 +Eagle Ford net production (1) +Oil (MMBbl) +7.6 +6.9 +5.1 +Gas (Bcf) +147.2 +120.6 +97.1 +NGLs (MMBbl) +15.6 +12.7 +9.2 +MMBOE (2) +47.7 +39.7 +30.5 +Realized price +Oil (per Bbl) +$ +41.49 +$ +80.97 +$ +91.19 +Gas (per Mcf) +$ +2.57 +$ +4.58 +$ +3.93 +NGLs (per Bbl) +$ +15.92 +$ +33.34 +$ +35.95 +Per BOE +$ +23.36 +$ +45.01 +$ +45.50 +Production costs per BOE +Lease operating expense +$ +3.73 +$ +4.28 +$ +4.49 +Transportation costs +$ +6.02 +$ +6.11 +$ +5.34 +Production taxes +$ +1.13 +$ +2.13 +$ +2.19 +Ad valorem tax expense +$ +0.39 +$ +0.46 +$ +0.33 +____________________________________________ +(1) +In each of the years 2015 , 2014 , and 2013 , total estimated proved reserves attributed to our Eagle Ford shale properties exceeded 15 percent of our total proved reserves expressed on an equivalent basis. +(2) +Amounts may not calculate due to rounding. +Productive Wells +As of December 31, 2015 , we had working interests in 1,459 gross (872 net) productive oil wells and 1,772 gross (653 net) productive gas wells. Productive wells are either wells producing in commercial quantities or wells mechanically capable of commercial production, but are temporarily shut-in. Multiple completions in the same wellbore are counted as one well. A well is categorized under state reporting regulations as an oil well or a gas well based on the ratio of gas to oil when it first commenced production, but such designation may not be indicative of current production. +13 +Drilling and Completion Activity +All of our drilling and completion activities are conducted by independent contractors. We do not own any drilling or completion equipment. The following table summarizes the number of operated and outside-operated wells drilled and completed or recompleted on our properties in 2015 , 2014 , and 2013 , excluding non-consented projects, active injector wells, salt water disposal wells, and any wells in which we own only a royalty interest: +For the Years Ended December 31, +2015 +2014 +2013 +Gross +Net +Gross +Net +Gross +Net +Development wells: +Oil +87 +56.5 +133 +66.1 +154 +75.4 +Gas +272 +100.8 +476 +165.5 +443 +162.5 +Non-productive +— +— +8 +5.3 +10 +8.5 +359 +157.3 +617 +236.9 +607 +246.4 +Exploratory wells: +Oil +5 +3.5 +5 +3.0 +6 +5.1 +Gas +1 +1.0 +7 +4.8 +4 +2.4 +Non-productive +5 +4.1 +4 +3.3 +1 +0.3 +11 +8.6 +16 +11.1 +11 +7.8 +Total +370 +165.9 +633 +248.0 +618 +254.2 +A productive well is an exploratory, development, or extension well that is producing or capable of commercial production of oil, gas, and/or NGLs. A non-productive well, frequently referred to within the industry as a dry hole, is an exploratory, development, or extension well that proves to be incapable of producing oil, gas, and/or NGLs in commercial quantities to justify completion, or upon completion, the economic operation of a well. +As defined by the SEC, an exploratory well is a well drilled to find a new field or to find a new reservoir in a field previously found to be productive of oil or gas in another reservoir. A development well is a well drilled within the proved area of an oil or natural gas reservoir to the depth of a stratigraphic horizon known to be productive. The number of wells drilled refers to the number of wells completed at any time during the respective year, regardless of when drilling was initiated. Completion refers to the installation of equipment for production of oil, gas, and/or NGLs, or in the case of a dry well, the reporting to the appropriate authority that the well has been plugged and abandoned. +In addition to the wells drilled and completed in 2015 (included in the table above), as of January 31, 2016, we were participating in the drilling of 33 gross wells. We operate 9 of these wells on a gross basis (7.5 on a net basis) and other companies operate the remaining 24 gross wells (4 on a net basis). With respect to completion activity, at such date, there were 364 gross wells in which we have an interest that were being completed or waiting on completion. We operate 143 of these wells on a gross basis (134 on a net basis) and were participating in 221 gross (38 on a net basis) outside-operated wells. +14 +Acreage +The following table sets forth the gross and net acres of developed and undeveloped oil and gas leasehold, fee properties, and mineral servitudes that we hold as of December 31, 2015 . Undeveloped acreage includes leasehold interests containing proved undeveloped reserves. +Developed Acres (1) +Undeveloped Acres (2) +Total +Gross +Net +Gross +Net +Gross +Net +South Texas & Gulf Coast: +Operated Eagle Ford +68,773 +66,027 +98,178 +95,447 +166,951 +161,474 +Outside-operated Eagle Ford +137,348 +24,089 +100,015 +11,869 +237,363 +35,958 +Other +22,083 +8,649 +204,647 +163,988 +226,730 +172,637 +Rocky Mountain: +North Rockies: +Divide +144,542 +90,639 +41,450 +26,647 +185,992 +117,286 +Raven +48,693 +30,466 +5,136 +1,163 +53,829 +31,629 +Bear Den +21,763 +11,233 +4,937 +1,555 +26,700 +12,788 +Stateline MT +21,102 +16,289 +12,740 +6,718 +33,842 +23,007 +Other +74,921 +51,400 +298,599 +208,365 +373,520 +259,765 +South Rockies: +PRB Cretaceous +75,035 +52,726 +193,815 +151,655 +268,850 +204,381 +Other +1,556 +1,472 +126,212 +102,642 +127,768 +104,114 +Permian: +Sweetie Peck +13,228 +13,177 +521 +521 +13,749 +13,698 +Other +12,439 +7,534 +1,831 +1,457 +14,270 +8,991 +Other +10,499 +10,499 +22,604 +17,583 +33,103 +28,082 +Total (3) +651,982 +384,200 +1,110,685 +789,610 +1,762,667 +1,173,810 +____________________________________________ +(1) +Developed acreage is acreage assigned to producing wells for the state approved spacing unit for the producing formation. Our developed acreage that includes multiple formations with different well spacing requirements may be considered undeveloped for certain formations, but has been included only as developed acreage in the presentation above. +(2) +Undeveloped acreage is acreage on which wells have not been drilled or completed to a point that would permit the production of commercial quantities of oil, gas, and/or NGLs regardless of whether such acreage contains estimated net proved reserves. +(3) +As of the filing date of this report, approximately 144,100 , 85,300 , and 26,700 net acres are scheduled to expire by December 31, 2016 , 2017 , and 2018 , respectively, if production is not established or we take no other action to extend the terms of the applicable lease or leases. Our east Texas acreage, which has been impaired as of December 31, 2015, represents more than 50 percent of the net acres scheduled to expire over the next three years. +15 +Delivery Commitments +As of December 31, 2015 , we had gathering, processing, and transportation throughput commitments with various parties that require us to deliver fixed, determinable quantities of production over specified time frames. We have an aggregate minimum commitment to deliver 2,277 Bcf of natural gas and 36 MMBbl of oil through 2028 , of which the first 1,059 Bcf of natural gas delivered under a certain agreement does not have a deficiency payment. We are required to make periodic deficiency payments for any shortfalls in delivering the minimum volume commitments. If a shortfall in the minimum volume commitment for natural gas is projected, we have rights under certain contracts to arrange for third party gas to be delivered, and such volume will count toward our minimum volume commitment. Our current production is insufficient to offset these aggregate contractual liabilities, but we expect to fulfill the delivery commitments with production from the future development of our proved undeveloped reserves and from the future development of resources not yet characterized as proved reserves or through arranging for the delivery of third party gas. In the event that no product is delivered in accordance with these agreements, the aggregate undiscounted deficiency payments would be approximately $864.0 million as of December 31, 2015 . +Subsequent to December 31, 2015 , we entered into amendments to oil and gas gathering agreements related to certain of our Eagle Ford shale assets, neither of which previously had a minimum volume commitment, in order to obtain more favorable rates and terms. Under these amendments, we are now committed to deliver 310 Bcf of natural gas and 41 MMBbl of oil through 2034. In the event that we deliver no product, the aggregate undiscounted deficiency payments under these amended agreements would be approximately $360.8 million . Subsequent to December 31, 2015 , we also entered into an amendment to a gas gathering agreement related to certain other Eagle Ford shale assets, which reduced our volume commitment amount as of December 31, 2015 , by 829 Bcf and the aggregate undiscounted deficiency payments by $118.2 million . As a result of these subsequent amendments, the aggregate undiscounted deficiency payments as of December 31, 2015, would have been approximately $1.1 billion. +As of the filing date of this report, we do not expect any material shortfalls. +Major Customers +We do not believe the loss of any single purchaser of our crude oil, natural gas, and NGLs would materially impact our operating results, as these are products with well-established markets and numerous purchasers are present in our operating regions. During 2015 and 2014, we had one major customer that represented approximately 21 percent and 19 percent , respectively, of our total production revenue, which is discussed in the next paragraph. In 2015 and 2014 , we also sold to four entities that are under common ownership. In aggregate, these four entities represented approximately 10 percent and 14 percent of our total production revenue in 2015 and 2014 , respectively; however, none of these entities individually represented more than 10 percent of our production revenue. Additionally, in 2015 we sold to three entities that are under common ownership, which in aggregate represented 11 percent of our total production revenue; however, none of these entities individually represented more than 10 percent of our production revenue. During 2013 , we had three major customers that represented approximately 26 percent , 16 percent , and 12 percent , respectively, of our total production revenue. +During the third quarter of 2013, we entered into various marketing agreements with a joint venture partner, whereby we are subject to certain gathering, transportation, and processing throughput commitments for up to 10 years pursuant to each contract. While our joint venture partner is the first purchaser under these contracts, representing 21 percent and 19 percent of our total production revenue in 2015 and 2014 , respectively, we also share with it the risk of non-performance by its counterparty purchasers and have included this joint venture partner as a major customer in the discussion above. Several of the joint venture partner’s counterparty purchasers under these contracts are also direct purchasers of our production from other areas. +16 +Employees and Office Space +As of February 17, 2016 , we had 786 full-time employees. This is an approximate 12 percent decrease from the 896 reported full-time employees as of February 18, 2015. None of our employees are subject to a collective bargaining agreement, and we consider our relations with our employees to be good. +The following table summarizes the approximate square footage of office space leased by us, as of December 31, 2015 , including our corporate headquarters and regional offices: +Region +Approximate Square Footage Leased +Corporate +108,000 +South Texas & Gulf Coast +64,000 +Rocky Mountain +44,000 +Permian +54,000 +Mid-Continent (1) +50,000 +Total +320,000 +____________________________________________ +(1) +During the third quarter of 2015, we vacated our office space in Tulsa, Oklahoma. We have subleased this space through 2019 and our lease expires in 2022. +In addition to the leased office space in the table above, we own a total of 72,000 square feet of office space. +Title to Properties +Substantially all of our interests are held pursuant to oil and gas leases from third parties. A title opinion is usually obtained prior to the commencement of initial drilling operations. We have obtained title opinions or have conducted other title review on substantially all of our producing properties and believe we have satisfactory title to such properties in accordance with standards generally accepted in the oil and gas industry. Most of our producing properties are subject to mortgages securing indebtedness under our credit facility, royalty and overriding royalty interests, liens for current taxes, and other burdens that we believe do not materially interfere with the use of, or affect the value of, such properties. We typically perform only minimal title investigation before acquiring undeveloped leasehold acreage. +Seasonality +Generally, but not always, the demand and price levels for natural gas increase during winter months and decrease during summer months. To lessen the impact of seasonal demand fluctuations, pipelines, utilities, local distribution companies, and industrial users utilize natural gas storage facilities and forward purchase some of their anticipated winter requirements during the summer. However, increased summertime demand for electricity can divert gas that traditionally is placed into storage. This could reduce the typical seasonal price differential. Demand for oil and heating oil is also generally higher in the winter and the summer driving season, although oil prices are impacted more significantly by global supply and demand. Seasonal anomalies, such as mild winters, sometimes lessen these fluctuations. Recently, the impact of seasonality on oil has been somewhat muted by overall supply and demand economics attributable to worldwide production in excess of existing worldwide demand for oil. Certain of our drilling, completion, and other operations are also subject to seasonal limitations. Seasonal weather conditions, government regulations and lease stipulations adversely affect our ability to conduct drilling activities in some of the areas where we operate. See Risk Factors - Risks Related to Our Business below for additional discussion. +17 +Competition +The oil and gas industry is intensely competitive, particularly with respect to acquiring prospective oil and natural gas properties. We believe our acreage position provides a foundation for development activities that we expect to fuel our future growth. Our competitive position also depends on our geological, geophysical, and engineering expertise, as well as our financial resources. We believe the location of our acreage; our exploration, drilling, operational, and production expertise; available technologies; our financial resources and expertise; and the experience and knowledge of our management and technical teams enable us to compete in our core operating areas. However, we face intense competition from a substantial number of major and independent oil and gas companies, which in some cases have larger technical staffs and greater financial and operational resources than we do. Many of these companies not only engage in the acquisition, exploration, development, and production of oil and natural gas reserves, but also have gathering, processing or refining operations, market refined products, own drilling rigs or other equipment, or generate electricity. +We also compete with other oil and gas companies in securing drilling rigs and other equipment and services necessary for the drilling, completion, and maintenance of wells, as well as for the gathering, transporting and processing of crude oil, natural gas and NGLs. Consequently, we may face shortages, delays or increased costs in securing these services from time to time. The oil and gas industry also faces competition from alternative fuel sources, including other fossil fuels such as coal and imported liquefied natural gas. Competitive conditions may be affected by future energy, climate-related, financial, or other policies, legislation, and regulations. +In addition, we compete for people, including experienced geologists, geophysicists, engineers, and other professionals. Throughout the oil and gas industry, the need to attract and retain talented people has grown at a time when the availability of individuals with these skills is becoming more limited due to the evolving demographics of our industry. We are not insulated from the competition for quality people, and we must compete effectively in order to be successful. +Government Regulations +Our business is extensively controlled by numerous federal, state, and local laws and governmental regulations. These laws and regulations may be changed from time to time in response to economic or political conditions, or other developments, and our regulatory burden may increase in the future. Laws and regulations have the potential to increase our cost of doing business and consequently could affect our profitability. However, we do not believe that we are affected to a materially greater or lesser extent than others in our industry. +Energy Regulations. Many of the states in which we conduct our operations have adopted laws and regulations governing the exploration for and production of oil, gas, and NGLs, including laws and regulations requiring permits for the drilling of wells, imposing bond requirements in order to drill or operate wells, and governing the timing of drilling and location of wells, the method of drilling and casing wells, the surface use and restoration of properties upon which wells are drilled, and the plugging and abandonment of wells. Our operations are also subject to various state conservation laws and regulations, including regulations governing the size of drilling and spacing units or proration units, the number of wells that may be drilled in an area, the spacing of wells, and the unitization or pooling of oil and gas properties. In addition, state conservation laws sometimes establish maximum rates of production from oil and gas wells, generally limit or prohibit the venting or flaring of gas, and may impose certain requirements regarding the ratability or fair apportionment of production from fields and individual wells. +Some of our operations are conducted on federal lands pursuant to oil and gas leases administered by the Bureau of Land Management (“BLM”). These leases contain relatively standardized terms and require compliance with detailed regulations and orders that are subject to change. In addition to permits required from other regulatory agencies, lessees must obtain a permit from the BLM before drilling and must comply with regulations governing, among other things, engineering and construction specifications for production facilities, safety procedures, the valuation of production and payment of royalties, the removal of facilities, and the posting of bonds +18 +to ensure that lessee obligations are met. Under certain circumstances, the BLM may suspend or terminate our operations on federal leases. +Our sales of natural gas are affected by the availability, terms, and cost of gas pipeline transportation. The Federal Energy Regulatory Commission (“FERC”) has jurisdiction over the transportation and sale for resale of natural gas in interstate commerce. FERC’s current regulatory framework generally provides for a competitive and open access market for sales and transportation of natural gas. However, FERC regulations continue to affect the midstream and transportation segments of the industry, and thus can indirectly affect the sales prices we receive for natural gas production. +Environmental, Health and Safety Matters +General. Our operations are subject to stringent and complex federal, state, tribal and local laws and regulations governing protection of the environment and worker health and safety as well as the discharge of materials into the environment. These laws and regulations may, among other things: +• +require the acquisition of various permits before drilling commences; +• +restrict the types, quantities and concentration of various substances that can be released into the environment in connection with oil and natural gas drilling and production and saltwater disposal activities; +• +limit or prohibit drilling activities on certain lands lying within wilderness, wetlands and other protected areas, including areas containing certain wildlife or threatened and endangered plant and animal species; and +• +require remedial measures to mitigate pollution from former and ongoing operations, such as closing pits and plugging abandoned wells. +These laws, rules and regulations may also restrict the rate of oil and natural gas production below the rate that would otherwise be possible. The regulatory burden on the oil and natural gas industry increases the cost of doing business in the industry and consequently affects profitability. Additionally, environmental laws and regulations are revised frequently, and any changes may result in more stringent permitting, waste handling, disposal, and cleanup requirements for the oil and natural gas industry and could have a significant impact on our operating costs. +The following is a summary of some of the existing laws, rules and regulations to which our business is subject. +Waste handling. The Resource Conservation and Recovery Act (“RCRA”) and comparable state statutes regulate the generation, transportation, treatment, storage, disposal, and cleanup of hazardous and non-hazardous wastes. Under the auspices of the United States Environmental Protection Agency (the “EPA”), individual states administer some or all of the provisions of RCRA, sometimes in conjunction with their own, more stringent requirements. Drilling fluids, produced water, and most of the other wastes associated with the exploration, development, and production of oil or natural gas are currently regulated under RCRA’s non-hazardous waste provisions. However, it is possible that certain oil and natural gas exploration and production wastes now classified as non-hazardous could be classified as hazardous wastes in the future. Any such change could result in an increase in our costs to manage and dispose of wastes, which could have a material adverse effect on our results of operations and financial position. +Comprehensive Environmental Response, Compensation and Liability Act. The Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), also known as the Superfund law, imposes joint and several liability, without regard to fault or legality of conduct, on classes of persons who are considered to +19 +be responsible for the release of a hazardous substance into the environment. These persons include the owner or operator of the site where the release occurred, and anyone who disposed or arranged for the disposal of a hazardous substance released at the site. Under CERCLA, such persons may be subject to joint and several liability for the costs of cleaning up the hazardous substances that have been released into the environment, for damages to natural resources and for the costs of certain health studies. In addition, it is not uncommon for third parties to file claims for personal injury and property damage allegedly caused by the hazardous substances released into the environment. +We currently own, lease, or operate numerous properties that have been used for oil and natural gas exploration and production for many years. Although we believe we have utilized operating and waste disposal practices that were standard in the industry at the time, hazardous substances, wastes, or hydrocarbons may have been released on or under the properties owned or leased by us, or on or under other locations, including off-site locations, where such substances have been taken for disposal. In addition, some of our properties have been operated by third parties or by previous owners or operators whose treatment and disposal of hazardous substances, wastes, or hydrocarbons were not under our control. These properties and the substances disposed or released on them may be subject to CERCLA, RCRA, and analogous state laws. Under such laws, we could be required to remove previously disposed substances and wastes, pay fines, remediate contaminated property, or perform remedial operations to prevent future contamination. +Water discharges. The federal Water Pollution Control Act (the “Clean Water Act”) and analogous state laws impose restrictions and strict controls with respect to the discharge of pollutants, including spills and leaks of oil and other substances, into waters of the United States and states. The discharge of pollutants into regulated waters is prohibited, except in accordance with the terms of a permit issued by the EPA, U.S. Army Corps of Engineers or analogous state agencies. Federal and state regulatory agencies can impose administrative, civil and criminal penalties for non-compliance with discharge permits or other requirements of the Clean Water Act and analogous state laws and regulations. +The Oil Pollution Act of 1990 (“OPA”) addresses prevention, containment and cleanup, and liability associated with oil pollution. OPA applies to vessels, offshore platforms, and onshore facilities. OPA subjects owners of such facilities to strict liability for containment and removal costs, natural resource damages and certain other consequences of oil spills into jurisdictional waters. Any unpermitted release of petroleum or other pollutants from our operations could result in governmental penalties and civil liability. +Air emissions. The federal Clean Air Act (“CAA”) and comparable state laws regulate emissions of various air pollutants through air emissions permitting programs and the imposition of other requirements. In addition, the EPA has developed, and continues to develop, stringent regulations governing emissions of toxic air pollutants at specified sources. Federal and state regulatory agencies can impose administrative, civil and criminal penalties for non-compliance with air permits or other requirements of the federal CAA and associated state laws and regulations. +Climate change. In December 2009, the EPA determined that emissions of carbon dioxide, methane and other “greenhouse gases” present an endangerment to public health and the environment because emissions of such gases are, according to the EPA, contributing to warming of the earth’s atmosphere and other climatic changes. Based on these findings, the EPA has begun adopting and implementing a comprehensive suite of regulations to restrict emissions of greenhouse gases under existing provisions of the CAA. Legislative and regulatory initiatives related to climate change could have an adverse effect on our operations and the demand for oil and gas. See Risk Factors - Risks Related to Our Business - Legislative and regulatory initiatives related to global warming and climate change could have an adverse effect on our operations and the demand for crude oil, natural gas and NGLs . In addition to the effects of regulation, the meteorological effects of global climate change could pose additional risks to our operations, including physical damage risks associated with more frequent, more intensive storms and flooding, and could adversely affect the demand for our products. +20 +Endangered species. The federal Endangered Species Act and analogous state laws regulate activities that could have an adverse effect on threatened or endangered species. Some of our operations are conducted in areas where protected species are known to exist. In these areas, we may be obligated to develop and implement plans to avoid potential adverse impacts on protected species, and we may be prohibited from conducting operations in certain locations or during certain seasons, such as breeding and nesting seasons, when our operations could have an adverse effect on these species. It is also possible that a federal or state agency could order a complete halt to activities in certain locations if it is determined that such activities may have a serious adverse effect on a protected species. The presence of a protected species in areas where we perform drilling, completion, and production activities could impair our ability to timely complete well drilling and development and could adversely affect our future production from those areas. +National Environmental Policy Act. Oil and natural gas exploration and production activities on federal lands are subject to the National Environmental Policy Act (“NEPA”). NEPA requires federal agencies, including the Department of Interior, to evaluate major agency actions having the potential to significantly impact the environment. In the course of such evaluations, an agency will prepare an environmental assessment to determine the potential direct, indirect, and cumulative impacts of a proposed project and, if necessary, will prepare a more detailed environmental impact statement that may be made available for public review and comment. All of our current exploration and production activities, as well as proposed exploration and development plans, on federal lands require governmental permits subject to the requirements of NEPA. This process has the potential to delay development of some of our oil and natural gas projects. +OSHA and other laws and regulation. We are subject to the requirements of the federal Occupational Safety and Health Act (“OSHA”) and comparable state statutes. The OSHA hazard communication standard, the EPA community right-to-know regulations under Title III of CERCLA and similar state statutes require that we organize and/or disclose information about hazardous materials used or produced in our operations. Also, pursuant to OSHA, the Occupational Safety and Health Administration has established a variety of standards relating to workplace exposure to hazardous substances and employee health and safety. We believe we are in substantial compliance with the applicable requirements of OSHA and comparable laws. +Hydraulic fracturing. Hydraulic fracturing is an important and common practice used to stimulate production of hydrocarbons from tight formations. We routinely utilize hydraulic fracturing techniques in most of our drilling and completion programs. The process involves the injection of water, sand and chemicals under pressure into the formation to fracture the surrounding rock and stimulate production. The process is typically regulated by state oil and natural gas commissions. However, the EPA has asserted federal regulatory authority over hydraulic fracturing involving diesel additives under the Safe Drinking Water Act’s (the “SDWA”) Underground Injection Control Program. The federal SDWA protects the quality of the nation’s public drinking water through the adoption of drinking water standards and controlling the injection of waste fluids, including saltwater disposal fluids, into below-ground formations that may adversely affect drinking water sources. +Increased regulation and attention given to the hydraulic fracturing process could lead to greater opposition to oil and gas activities using hydraulic fracturing techniques, which could potentially cause a decrease in the completion of new oil and gas wells, increased compliance costs, and delays, all of which could adversely affect our financial position, results of operations and cash flows. As new laws or regulations that significantly restrict hydraulic fracturing are adopted, such laws could make it more difficult or costly for us to perform fracturing to stimulate production from tight formations. In addition, if hydraulic fracturing becomes regulated at the federal level as a result of federal legislation or regulatory initiatives by the EPA or other federal agencies, our fracturing activities could become subject to additional permitting requirements, which could result in additional permitting delays and potential increases in costs. Restrictions on hydraulic fracturing could also reduce the amount of oil and natural gas that we are ultimately able to produce from our reserves. +We believe it is reasonably likely that the trend in environmental legislation and regulation will continue toward stricter standards. While we believe we are in substantial compliance with existing environmental laws and regulations applicable to our current operations and that our continued compliance with existing requirements will +21 +not have a material adverse impact on our financial condition and results of operations, we cannot give any assurance that we will not be adversely affected in the future. +Environmental, Health and Safety Initiatives. We are committed to conducting our business in a manner that protects the environment and the health and safety of our employees, contractors and the public. We set annual goals for our environmental, health and safety program focused on reducing the number of safety related incidents that occur and the number and impact of spills of produced fluids. We also periodically conduct regulatory compliance audits of our operations to ensure our compliance with all regulations and provide appropriate training for our employees. Reducing air emissions as a result of leaks, venting, or flaring of natural gas during operations has become a major focus area for regulatory efforts and for our compliance efforts. While flaring is sometimes necessary, releases of natural gas to the environment and flaring is an economic waste and reducing these volumes is a priority for us. To avoid flaring where possible, we restrict testing periods and make every effort to ensure that our production is connected to gas pipeline infrastructure as quickly as possible after well completions. We have cooperated with other producers in North Dakota in the ongoing development of recommendations to reduce the amount of flaring that is occurring there as a result of area wide infrastructure limitations that are beyond our control. Another focus for our environmental effort has been reduction of water use through recycling of flowback water in south Texas for use as frac fluid. We have incurred in the past, and expect to incur in the future, capital costs related to environmental compliance. Such expenditures are included within our overall capital budget and are not separately itemized. +Cautionary Information about Forward-Looking Statements +This Form 10-K contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). All statements, other than statements of historical facts, included in this Form 10-K that address activities, events, or developments with respect to our financial condition, results of operations, or economic performance that we expect, believe, or anticipate will or may occur in the future, or that address plans and objectives of management for future operations, are forward-looking statements. The words “anticipate,” “assume,” “believe,” “budget,” “estimate,” “expect,” “forecast,” “intend,” “plan,” “project,” “will,” and similar expressions are intended to identify forward-looking statements. Forward-looking statements appear throughout this Form 10-K, and include statements about such matters as: +• +the amount and nature of future capital expenditures and the availability of liquidity and capital resources to fund capital expenditures; +• +our outlook on future oil, gas, and NGL prices, well costs, and service costs; +• +the drilling of wells and other exploration and development activities and plans, as well as possible acquisitions; +• +the possible divestiture or farm-down of, or joint venture relating to, certain properties; +• +proved reserve estimates and the estimates of both future net revenues and the present value of future net revenues associated with those proved reserve estimates; +• +future oil, gas, and NGL production estimates; +• +cash flows, anticipated liquidity, and the future repayment of debt; +• +business strategies and other plans and objectives for future operations, including plans for expansion and growth of operations or to defer capital investment, and our outlook on our future financial condition or results of operations; and +22 +• +other similar matters such as those discussed in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section in Item 7 of this Form 10-K. +Our forward-looking statements are based on assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions, expected future developments, and other factors that we believe are appropriate under the circumstances. These statements are subject to a number of known and unknown risks and uncertainties, which may cause our actual results and performance to be materially different from any future results or performance expressed or implied by the forward-looking statements. Some of these risks are described in the Risk Factors section of this Form 10-K, and include such factors as: +• +the volatility of oil, gas, and NGL prices, and the effect it may have on our profitability, financial condition, cash flows, access to capital, and ability to grow production volumes and/or proved reserves; +• +weakness in economic conditions and uncertainty in financial markets; +• +our ability to replace reserves in order to sustain production; +• +our ability to raise the substantial amount of capital required to develop and/or replace our reserves; +• +our ability to compete against competitors that have greater financial, technical, and human resources; +• +our ability to attract and retain key personnel; +• +the imprecise estimations of our actual quantities and present value of proved oil, gas, and NGL reserves; +• +the uncertainty in evaluating recoverable reserves and estimating expected benefits or liabilities; +• +the possibility that exploration and development drilling may not result in commercially producible reserves; +• +our limited control over activities on outside operated properties; +• +our reliance on the skill and expertise of third-party service providers on our operated properties; +• +the possibility that title to properties in which we have an interest may be defective; +• +the possibility that our planned drilling in existing or emerging resource plays using some of the latest available horizontal drilling and completion techniques is subject to drilling and completion risks and may not meet our expectations for reserves or production; +• +the uncertainties associated with acquisitions, divestitures, joint ventures, farm-downs, farm-outs and similar transactions with respect to certain assets, including whether such transactions will be consummated or completed in the form or timing and for the value that we anticipate; +• +the uncertainties associated with enhanced recovery methods; +• +our commodity derivative contracts may result in financial losses or may limit the prices we receive for oil, gas, and NGL sales; +• +the inability of one or more of our service providers, customers, or contractual counterparties to meet their obligations; +• +our ability to deliver necessary quantities of natural gas or crude oil to contractual counterparties; +23 +• +price declines or unsuccessful exploration efforts resulting in write-downs of our asset carrying values; +• +the impact that lower oil, gas, or NGL prices could have on the amount we are able to borrow under our credit facility; +• +the possibility our amount of debt may limit our ability to obtain financing for acquisitions, make us more vulnerable to adverse economic conditions, and make it more difficult for us to make payments on our debt; +• +the possibility that covenants in our debt agreements may limit our discretion in the operation of our business, prohibit us from engaging in beneficial transactions or lead to the accelerated payment of our debt; +• +operating and environmental risks and hazards that could result in substantial losses; +• +the impact of seasonal weather conditions and lease stipulations on our ability to conduct drilling activities; +• +our ability to acquire adequate supplies of water and dispose of or recycle water we use at a reasonable cost in accordance with environmental and other applicable rules; +• +complex laws and regulations, including environmental regulations, that result in substantial costs and other risks; +• +the availability and capacity of gathering, transportation, processing, and/or refining facilities; +• +our ability to sell and/or receive market prices for our oil, gas, and NGLs; +• +new technologies may cause our current exploration and drilling methods to become obsolete; +• +the possibility of security threats, including terrorist attacks and cybersecurity breaches, against, or otherwise impacting, our facilities and systems; and +• +litigation, environmental matters, the potential impact of legislation and government regulations, and the use of management estimates regarding such matters. +We caution you that forward-looking statements are not guarantees of future performance and actual results or performance may be materially different from those expressed or implied in the forward-looking statements. The forward-looking statements in this report speak as of the filing date of this report. Although we may from time to time voluntarily update our prior forward-looking statements, we disclaim any commitment to do so except as required by securities laws. +Available Information +Our internet website address is www.sm-energy.com. We routinely post important information for investors on our website. Within our website’s investor relations section, we make available free of charge our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed with or furnished to the SEC under applicable securities laws. These materials are made available as soon as reasonably practical after we electronically file such materials with or furnish such materials to the SEC. We also make available through our website our Corporate Governance Guidelines, Code of Business Conduct and Conflict of Interest Policy, Financial Code of Ethics, and the Charters of the Audit, Compensation, Executive, and Nominating and Corporate Governance Committees of our Board of Directors. Information on our website is not incorporated by reference into this report and should not be considered part of this document. +24 +Glossary of Oil and Gas Terms +The oil and gas terms defined in this section are used throughout this report. The definitions of the terms developed reserves, exploratory well, field, proved reserves, and undeveloped reserves have been abbreviated from the respective definitions under SEC Rule 4-10(a) of Regulation S-X, as amended effective for fiscal years ending after December 31, 2009. The entire definitions of those terms under Rule 4-10(a) of Regulation S-X can be located through the SEC’s website at www.sec.gov. +Ad valorem tax. A tax based on the value of real estate or personal property. +Bbl. One stock tank barrel, or 42 U.S. gallons liquid volume, used in reference to oil, NGLs, or other liquid hydrocarbons. +Bcf . Billion cubic feet, used in reference to natural gas. +BOE. Barrels of oil equivalent. Oil equivalents are determined using the ratio of six Mcf of natural gas to one Bbl of oil or NGLs. +BTU. One British thermal unit, the quantity of heat required to raise the temperature of a one-pound mass of water by one degree Fahrenheit. +Developed acreage. The number of acres that are allocated or assignable to productive wells or wells capable of production. +Developed reserves. Reserves that can be expected to be recovered: (i) through existing wells with existing equipment and operating methods or in which the cost of the required equipment is relatively minor compared to the cost of a new well; and (ii) through installed extraction equipment and infrastructure operational at the time of the reserves estimate if the extraction is by means not involving a well. +Development well. A well drilled within the proved area of an oil or natural gas reservoir to the depth of a stratigraphic horizon known to be productive. +Dry hole. A well found to be incapable of producing either oil, natural gas, and/or NGLs in commercial quantities. +Exploratory well. A well drilled to find and produce oil or natural gas in an unproved area, to find a new reservoir in a field previously found to be productive of oil or natural gas in another reservoir, or to extend a known reservoir beyond its known horizon. +Fee properties. The most extensive interest that can be owned in land, including surface and mineral (including oil and natural gas) rights. +Field. An area consisting of a single reservoir or multiple reservoirs all grouped on or related to the same individual geological structural feature or stratigraphic condition. +Finding and development cost. Expressed in dollars per BOE. Finding and development cost metrics provide information as to the cost of adding proved reserves from various activities, and are widely utilized within the exploration and production industry, as well as by investors and analysts. The information used to calculate these metrics is included in the Supplemental Oil and Gas Information section in Part II, Item 8 of this report. It should be noted that finding and development cost metrics have limitations. For example, exploration efforts related to a particular set of proved reserve additions may extend over several years. As a result, the exploration costs incurred in earlier periods are not included in the amount of exploration costs incurred during the period in which that set of proved reserves is added. In addition, consistent with industry practice, future capital costs to develop proved undeveloped reserves are not included in costs incurred. Since the additional development costs that will need to be +25 +incurred in the future before the proved undeveloped reserves are ultimately produced are not included in the amount of costs incurred during the period in which those reserves were added, those development costs in future periods will be reflected in the costs associated with adding a different set of reserves. +Formation. A succession of sedimentary beds that were deposited under the same general geologic conditions. +Frac spread. Hydraulic fracturing requires custom-designed and purpose-built equipment. A “frac spread” is the equipment necessary to carry out a fracturing job. +Gross acre. An acre in which a working interest is owned. +Gross well. A well in which a working interest is owned. +Horizontal wells. Wells that are drilled at angles greater than 70 degrees from vertical. +Lease operating expenses. The expenses incurred in the lifting of crude oil, natural gas, and/or associated liquids from a producing formation to the surface, constituting part of the current operating expenses of a working interest, and also including labor, superintendence, supplies, repairs, maintenance, allocated overhead costs, and other expenses incidental to production, but not including lease acquisition, drilling, or completion costs. +MBbl. One thousand barrels of crude oil, NGLs, or other liquid hydrocarbons. +MBOE. One thousand barrels of oil equivalent. +Mcf. One thousand cubic feet, used in reference to natural gas. +MMBbl. One million barrels of oil, NGLs, or other liquid hydrocarbons. +MMBOE. One million barrels of oil equivalent. +MMBtu. One million British thermal units. +MMcf. One million cubic feet, used in reference to natural gas. +Net acres or net wells. Sum of our fractional working interests owned in gross acres or gross wells. +Net asset value per share. The result of the fair market value of total assets less total liabilities, divided by the total number of outstanding shares of common stock. +NGLs. The combination of ethane, propane, butane, and natural gasolines that when removed from natural gas become liquid under various levels of higher pressure and lower temperature. +NYMEX WTI. New York Mercantile Exchange West Texas Intermediate, a common industry benchmark price for crude oil. +NYMEX Henry Hub . New York Mercantile Exchange Henry Hub, a common industry benchmark price for natural gas. +OPIS . Oil Price Information Service, a common industry benchmark for NGL pricing at Mont Belvieu, Texas. +PV-10 (Non-GAAP). The present value of estimated future revenue to be generated from the production of estimated net proved reserves, net of estimated production and future development costs, based on prices used in estimating the proved reserves and costs in effect as of the date indicated (unless such costs are subject to change pursuant to contractual provisions), without giving effect to non-property related expenses such as general and +26 +administrative expenses, debt service, future income tax expenses, or depreciation, depletion, and amortization, discounted using an annual discount rate of 10 percent. While this measure does not include the effect of income taxes as it would in the use of the standardized measure of discounted future net cash flows calculation, it does provide an indicative representation of the relative value of the Company on a comparative basis to other companies and from period to period. This is a non-GAAP measure. +Productive well. A well that is producing crude oil, natural gas, and/or NGLs or that is capable of commercial production of those products. +Proved reserves. Those quantities of oil, gas, and NGLs which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible – from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulations – prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation. Existing economic conditions include prices and costs at which economic producibility from a reservoir is to be determined, and the price to be used is the average price during the 12-month period prior to the ending date of the period covered by the report, determined as an unweighted arithmetic average of the first-day-of-the-month price for each month within such period, unless prices are defined by contractual arrangements, excluding escalations based upon future conditions. +Recompletion. The completion of an existing wellbore in a formation other than that in which the well has previously been completed. +Reserve life. Expressed in years, represents the estimated net proved reserves at a specified date divided by actual production for the preceding 12-month period. +Reserve replacement. Reserve replacement metrics are used as indicators of a company’s ability to replenish annual production volumes and grow its reserves, and provide information related to how successful a company is at growing its proved reserve base. These are believed to be useful non-GAAP measures that are widely utilized within the exploration and production industry, as well as by investors and analysts. They are easily calculable metrics, and the information used to calculate these metrics is included in the Supplemental Oil and Gas Information section of Part II, Item 8 of this report. It should be noted that reserve replacement metrics have limitations. They are limited because they typically vary widely based on the extent and timing of new discoveries and property acquisitions. Their predictive and comparative value is also limited for the same reasons. In addition, because the metrics do not embed the cost or timing of future production of new reserves, they cannot be used as a measure of value creation. +Reservoir. A porous and permeable underground formation containing a natural accumulation of producible crude oil, natural gas, and/or associated liquid resources that is confined by impermeable rock or water barriers and is individual and separate from other reservoirs. +Resource play. A term used to describe an accumulation of crude oil, natural gas, and/or associated liquid resources known to exist over a large areal expanse, which when compared to a conventional play typically has lower expected geological risk. +Royalty. The amount or fee paid to the owner of mineral rights, expressed as a percentage or fraction of gross income from crude oil, natural gas, and NGLs produced and sold unencumbered by expenses relating to the drilling, completing, and operating of the affected well. +27 +Royalty interest. An interest in an oil and natural gas property entitling the owner to shares of crude oil, natural gas, and NGL production free of costs of exploration, development, and production operations. +Seismic. The sending of energy waves or sound waves into the earth and analyzing the wave reflections to infer the type, size, shape, and depth of subsurface rock formations. +Shale. Fine-grained sedimentary rock composed mostly of consolidated clay or mud. Shale is the most frequently occurring sedimentary rock. +Standardized measure of discounted future net cash flows. The discounted future net cash flows relating to proved reserves based on prices used in estimating the reserves, year-end costs, and statutory tax rates, and a 10 percent annual discount rate. The information for this calculation is included in Supplemental Oil and Gas Information located in Part II, Item 8 of this report. +Undeveloped acreage. Lease acreage on which wells have not been drilled or completed to a point that would permit the production of commercial quantities of oil, natural gas, and associated liquids regardless of whether such acreage contains estimated net proved reserves. +Undeveloped reserves. Reserves that are expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required for recompletion. The applicable SEC definition of undeveloped reserves provides that undrilled locations can be classified as having undeveloped reserves only if a development plan has been adopted indicating that they are scheduled to be drilled within five years, unless the specific circumstances justify a longer time. +Working interest. The operating interest that gives the owner the right to drill, produce, and conduct operating activities on the property and to share in the production, sales, and costs. +28 +ITEM 1A. RISK FACTORS +In addition to the other information included in this report, the following risk factors should be carefully considered when evaluating an investment in us. +Risks Related to Our Business +Crude oil, natural gas, and NGL prices are volatile, and declines in prices adversely affect our profitability, financial condition, cash flows, access to capital, and ability to grow. +Our revenues, operating results, profitability, future rate of growth, and the carrying value of our oil and natural gas properties depend heavily on the prices we receive for crude oil, natural gas, and NGL sales. Crude oil, natural gas, and NGL prices also affect our cash flows available for capital expenditures and other items, our borrowing capacity, and the volume and amount of our crude oil, natural gas, and NGL reserves. For example, the amount of our borrowing base under our credit facility is subject to periodic redeterminations based on crude oil, natural gas, and NGL prices specified by our bank group at the time of redetermination. In addition, we may have crude oil and natural gas property impairments or downward revisions of estimates of proved reserves if prices fall significantly. The decline in commodity prices during 2015 resulted in reductions to our proved reserve volumes and PV-10; reductions in revenues received from the sale of oil, gas, and NGLs, and thus cash flow from operating activities; and recorded impairments of proved, unproved, and other property. Please refer herein to the captions Significant Developments in 2015 within Part I, Items 1 and 2 Business and Properties ; the section Comparison of Financial Results and Trends between 2015 and 2014 and between 2014 and 2013 within Part II, Item 7, and Note 1 – Summary of Significant Accounting Policies and Note 11 – Fair Value Measurements in Part II, Item 8 for specific discussion. +Historically, the markets for crude oil, natural gas, and NGLs have been volatile, and they are likely to continue to be volatile. Wide fluctuations in crude oil, natural gas, and NGL prices may result from relatively minor changes in the supply of and demand for crude oil, natural gas, and NGLs, market uncertainty, and other factors that are beyond our control, including: +• +global and domestic supplies of crude oil, natural gas, and NGLs, and the productive capacity of the industry as a whole; +• +the level of consumer demand for crude oil, natural gas, and NGLs; +• +overall global and domestic economic conditions; +• +weather conditions; +• +the availability and capacity of gathering, transportation, processing, and/or refining facilities in regional or localized areas that may affect the realized prices for crude oil, natural gas, or NGLs; +• +liquefied natural gas deliveries to and from the United States; +• +the price and level of imports and exports of crude oil, refined petroleum products, and liquefied natural gas; +• +the price and availability of alternative fuels; +• +technological advances and regulations affecting energy consumption and conservation; +• +the ability of the members of the Organization of Petroleum Exporting Countries and other exporting countries to agree to and maintain crude oil price and production controls; +29 +• +political instability or armed conflict in crude oil or natural gas producing regions; +• +strengthening and weakening of the United States dollar relative to other currencies; and +• +governmental regulations and taxes. +These factors and the volatility of crude oil, natural gas, and NGL markets make it extremely difficult to predict future crude oil, natural gas, and NGL price movements with any certainty. Declines in crude oil, natural gas, and NGL prices would reduce our revenues and could also reduce the amount of crude oil, natural gas, and NGLs that we can produce economically, which could have a materially adverse effect on us. +Weakness in economic conditions or uncertainty in financial markets may have material adverse impacts on our business that we cannot predict. +In recent years, the United States and global economies and financial systems have experienced turmoil and upheaval characterized by extreme volatility in prices of equity and debt securities, periods of diminished liquidity and credit availability, inability to access capital markets, the bankruptcy, failure, collapse, or sale of financial institutions, increased levels of unemployment, and an unprecedented level of intervention by the United States federal government and other governments. Although the United States economy appears to have stabilized, the extent and timing of a recovery, and whether it can be sustained, are uncertain. Renewed weakness in the United States or other large economies could materially adversely affect our business and financial condition. For example: +• +crude oil, NGL and natural gas prices have recently been lower than at various times in the last decade because of increased supply resulting from, among other things, increased drilling in unconventional reservoirs, leading to lower revenues, which could affect our financial condition and results of operations; +• +the tightening of credit or lack of credit availability to our customers could adversely affect our ability to collect our trade receivables; +• +the liquidity available under our credit facility could be reduced if any lender is unable to fund its commitment; +• +our ability to access the capital markets may be restricted at a time when we would like, or need, to raise capital for our business, including for the exploration and/or development of reserves; +• +our commodity derivative contracts could become economically ineffective if our counterparties are unable to perform their obligations or seek bankruptcy protection; and +• +variable interest rate spread levels, including for LIBOR and the prime rate, could increase significantly, resulting in higher interest costs for unhedged variable interest rate based borrowings under our credit facility. +If we are unable to replace reserves, we will not be able to sustain production. +Our future operations depend on our ability to find, develop, or acquire crude oil, natural gas, and NGL reserves that are economically producible. Our properties produce crude oil, natural gas, and NGLs at a declining rate over time. In order to maintain current production rates, we must locate and develop or acquire new crude oil, natural gas, and NGL reserves to replace those being depleted by production. Without successful drilling or acquisition activities, our reserves and production will decline over time. In addition, competition for crude oil and natural gas properties is intense, and many of our competitors have financial, technical, human, and other resources necessary to evaluate and integrate acquisitions that are substantially greater than those available to us. +30 +In the event we do complete an acquisition, its successful impact on our business will depend on a number of factors, many of which are beyond our control. These factors include the purchase price for the acquisition, future crude oil, natural gas, and NGL prices, the ability to reasonably estimate or assess the recoverable volumes of reserves, rates of future production and future net revenues attainable from reserves, future operating and capital costs, results of future exploration, exploitation, and development activities on the acquired properties, and future abandonment and possible future environmental or other liabilities. There are numerous uncertainties inherent in estimating quantities of proved oil and gas reserves, actual future production rates, and associated costs and potential liabilities with respect to prospective acquisition targets. Actual results may vary substantially from those assumed in the estimates. A customary review of subject properties will not necessarily reveal all existing or potential problems. +Additionally, significant acquisitions can change the nature of our operations and business depending upon the character of the acquired properties if they have substantially different operating and geological characteristics or are in different geographic locations than our existing properties. To the extent that acquired properties are substantially different than our existing properties, our ability to efficiently realize the expected economic benefits of such transactions may be limited. +Integrating acquired businesses and properties involves a number of special risks. These risks include the possibility that management may be distracted from regular business concerns by the need to integrate operations and systems and that unforeseen difficulties can arise in integrating operations and systems and in retaining and assimilating employees. Any of these or other similar risks could lead to potential adverse short-term or long-term effects on our operating results and may cause us to not be able to realize any or all of the anticipated benefits of the acquisitions. +Substantial capital is required to develop and replace our reserves. +We must make substantial capital expenditures to find, acquire, develop, and produce crude oil, natural gas, and NGL reserves. Future cash flows and the availability of financing are subject to a number of factors, such as the level of production from existing wells, prices received for crude oil, natural gas, and NGL sales, our success in locating and developing and acquiring new reserves, and the orderly functioning of credit and capital markets. If crude oil, natural gas, and NGL prices further decrease or if we encounter operating difficulties that result in our cash flows from operations being less than expected, we may further reduce our planned capital expenditures unless we can raise additional funds through debt or equity financing or the divestment of assets. Debt or equity financing may not always be available to us in sufficient amounts or on acceptable terms, and the proceeds offered to us for potential divestitures may not always be of acceptable value to us. Our credit ratings were recently downgraded by two major rating agencies. These downgrades and any further downgrades may make it more difficult or expensive for us to borrow additional funds. +During 2015, our revenues decreased significantly from 2014 due to continued declines in commodity prices; however, we were able to fund our capital program through cash flows from operations, proceeds from divestitures, and financing activities. If our revenues continue to decrease in the future due to lower crude oil, natural gas, or NGL prices, decreased production, or other reasons, and if we cannot obtain funding through our credit facility, other acceptable debt or equity financing arrangements, or through the sale of assets, our ability to execute development plans, replace our reserves, maintain our acreage, or maintain production levels could be greatly limited. +The recent or future downgrades in our credit ratings by various credit rating agencies could impact our access to capital and materially adversely affect our business and financial condition. +In February 2016, Moody’s Investors Service and Standard & Poor’s downgraded our credit ratings (“Debt Rating”). +31 +Our Debt Rating levels could have materially adverse consequences on our business and future prospects and could: +• +limit our ability to access debt markets, including for the purpose of refinancing our existing debt; +• +cause us to refinance or issue debt with less favorable terms and conditions, which debt may restrict, among other things, our ability to make any dividend distributions or repurchase shares; +• +negatively impact current and prospective customers’ willingness to transact business with us; +• +impose additional insurance, guarantee and collateral requirements; +• +limit our access to bank and third-party guarantees, surety bonds and letters of credit; and +• +suppliers and financial institutions may lower or eliminate the level of credit provided through payment terms or intraday funding when dealing with us, thereby increasing the need for higher levels of cash on hand, which would decrease our ability to repay indebtedness. +We cannot provide assurance that any of our current Debt Ratings will remain in effect for any given period of time or that a Debt Rating will not be further lowered or withdrawn entirely by a rating agency if, in its judgment, circumstances warrant. +Competition in our industry is intense, and many of our competitors have greater financial, technical, and human resources than we do. +We face intense competition from major oil and gas companies, independent oil and gas exploration and production companies, and institutional and individual investors who seek oil and gas investments throughout the world, as well as the equipment, expertise, labor, and materials required to operate crude oil and natural gas properties. Many of our competitors have financial, technical, and other resources exceeding those available to us, and many crude oil and natural gas properties are sold in a competitive bidding process in which our competitors may be able and willing to pay more for exploratory and development prospects and productive properties, or in which our competitors have technological information or expertise that is not available to us to evaluate and successfully bid for properties. We may not be successful in acquiring and developing profitable properties in the face of this competition. In addition, other companies may have a greater ability to continue drilling activities during periods of low natural gas or oil prices and to absorb the burden of current and future governmental regulations and taxation. In addition, shortages of equipment, labor, or materials as a result of intense competition may result in increased costs or the inability to obtain those resources as needed. Also, we compete for human resources. Our inability to compete effectively with companies in any area of our business could have a material adverse impact on our business activities, financial condition and results of operations. +The loss of key personnel could adversely affect our business. +We depend to a large extent on the efforts and continued employment of our executive management team and other key personnel. The loss of their services could adversely affect our business. Our drilling success and the success of other activities integral to our operations will depend, in part, on our ability to attract and retain experienced geologists, engineers, landmen and other professionals. Competition for many of these professionals can be intense. If we cannot retain our technical personnel or attract additional experienced technical personnel and professionals, our ability to compete could be harmed. +32 +The actual quantities and present value of our proved crude oil, natural gas, and NGL reserves may be less than we have estimated. +This report and other of our SEC filings contain estimates of our proved crude oil, natural gas, and NGL reserves and the estimated future net revenues from those reserves. These estimates are based on various assumptions, including assumptions required by the SEC relating to crude oil, natural gas, and NGL prices, drilling and completion costs, gathering and transportation costs, operating expenses, capital expenditures, effects of governmental regulation, taxes, timing of operations, and availability of funds. The process of estimating crude oil, natural gas, and NGL reserves is complex. The process involves significant decisions and assumptions in the evaluation of available geological, geophysical, engineering, and economic data for each reservoir. These estimates are dependent on many variables, and changes often occur as our knowledge of these variables evolve. Therefore, these estimates are inherently imprecise. In addition, the reserve estimates we make for properties that do not have a significant production history may be less reliable than estimates for properties with lengthy production histories. A lack of production history may contribute to inaccuracy in our estimates of proved reserves, future production rates, and the timing and/or amount of development expenditures. +Actual future production; prices for crude oil, natural gas, and NGLs; revenues; production taxes; development expenditures; operating expenses; and quantities of producible crude oil, natural gas, and NGL reserves will most likely vary from those estimated. Any significant variance of any nature could materially affect the estimated quantities of and present value related to proved reserves disclosed by us, and the actual quantities and present value may be significantly less than we have previously estimated. In addition, we may adjust estimates of proved reserves to reflect production history, results of exploration, operations and development activity, prevailing crude oil, natural gas, and NGL prices, costs to develop and operate properties, and other factors, many of which are beyond our control. Our properties may also be susceptible to hydrocarbon drainage from production on adjacent properties, which we may not control. +As of December 31, 2015 , 48 percent , or 226.8 MMBOE, of our estimated proved reserves were proved undeveloped, and one percent , or 5.1 MMBOE, were proved developed non-producing. In order to develop our proved undeveloped reserves, as of December 31, 2015 , we estimate approximately $1.9 billion of capital expenditures would be required. Production revenues from proved developed non-producing reserves will not be realized until sometime in the future and after some investment of capital. In order to develop our proved developed non-producing reserves, as of December 31, 2015 , we estimate capital expenditures of approximately $10 million would be required. Although we have estimated our proved reserves and the costs associated with these proved reserves in accordance with industry standards, estimated costs may not be accurate, development may not occur as scheduled, and actual results may not occur as estimated. +You should not assume that the PV-10 and standardized measure of discounted future net cash flows included in this report represent the current market value of our estimated proved crude oil, natural gas, and NGL reserves. Management has based the estimated discounted future net cash flows from proved reserves on price and cost assumptions required by the SEC, whereas actual future prices and costs may be materially higher or lower. For example, the present value of our proved reserves as of December 31, 2015 , was estimated using a calculated 12-month average sales price of $2.59 per MMBtu of natural gas (NYMEX Henry Hub spot price), $50.28 per Bbl of oil (NYMEX WTI spot price), and $20.20 per Bbl of NGL (OPIS spot price). We then adjust these prices to reflect appropriate basis, quality, and location differentials over the period in estimating our proved reserves. During 2015 , our monthly average realized natural gas prices, excluding the effect of derivative settlements, were as high as $3.57 per Mcf and as low as $1.91 per Mcf. For the same period, our monthly average realized crude oil prices before the effect of derivative settlements were as high as $54.30 per Bbl and as low as $29.78 per Bbl, and were as high as $18.43 per Bbl and as low as $13.31 per Bbl for NGLs. Many other factors will affect actual future net cash flows, including: +• +amount and timing of actual production; +• +supply and demand for crude oil, natural gas, and NGLs; +33 +• +curtailments or increases in consumption by oil purchasers and natural gas pipelines; and +• +changes in government regulations or taxes, including severance and excise taxes. +The timing of production from oil and natural gas properties and of related expenses affects the timing of actual future net cash flows from proved reserves, and thus their actual present value. Our actual future net cash flows could be less than the estimated future net cash flows for purposes of computing PV-10. In addition, the 10 percent discount factor required by the SEC to be used to calculate PV-10 for reporting purposes is not necessarily the most appropriate discount factor given actual interest rates, costs of capital, and other risks to which our business and the oil and natural gas industry in general are subject. +Our property acquisitions may not be worth what we paid due to uncertainties in evaluating recoverable reserves and other expected benefits, as well as potential liabilities. +Successful property acquisitions require an assessment of a number of factors, some of which are beyond our control. These factors include exploration potential, future crude oil, natural gas, and NGL prices, operating costs, and potential environmental and other liabilities. These assessments are not precise and their accuracy is inherently uncertain. +In connection with our acquisitions, we typically perform a customary review of the acquired properties that will not necessarily reveal all existing or potential problems. In addition, our review may not allow us to fully assess the potential deficiencies of the properties. We do not inspect every well, and even when we inspect a well, we may not discover structural, subsurface, or environmental problems that may exist or arise. We may not be entitled to contractual indemnification for pre-closing liabilities, including environmental liabilities. Normally, we acquire interests in properties on an “as is” basis with limited remedies for breaches of representations and warranties. +In addition, significant acquisitions can change the nature of our operations and business if the acquired properties have substantially different operating and geological characteristics or are in different geographic locations than our existing properties. To the extent acquired properties are substantially different than our existing properties, our ability to efficiently realize the expected economic benefits of such acquisitions may be limited. +Integrating acquired properties and businesses involves a number of other special risks, including the risk that management may be distracted from normal business concerns by the need to integrate operations and systems as well as retain and assimilate additional employees. Therefore, we may not be able to realize all of the anticipated benefits of our acquisitions. +Our disposition activities may be subject to factors beyond our control, and in certain cases we may retain unforeseen liabilities for certain matters . +We regularly sell non-core assets in order to increase capital resources available for core assets and to create organizational and operational efficiencies. We also occasionally sell interests in core assets for the purpose of accelerating the development and increasing efficiencies in other core assets. Various factors could materially affect our ability to dispose of such assets, including the approvals of governmental agencies or third parties and the availability of purchasers willing to acquire the assets or terms we deem acceptable. We at times may be required to retain certain liabilities or agree to indemnify buyers for certain matters related to the sold assets. The magnitude of any such retained liabilities or of the indemnification obligations may be difficult to quantify at the time of the transaction and ultimately could be material. +34 +We have limited control over the activities on properties we do not operate. +Some of our properties, including a portion of our interests in the Eagle Ford shale in south Texas, are operated by other companies and involve third-party working interest owners. As a result, we have limited ability to influence or control the operation or future development of such properties, including the nature and timing of drilling and operational activities, the operator’s skill and expertise, compliance with environmental, safety and other regulations, the approval of other participants in such properties, the selection and application of suitable technology, or the amount of expenditures that we will be required to fund with respect to such properties. Moreover, we are dependent on the other working interest owners of such projects to fund their contractual share of the expenditures of such properties. These limitations and our dependence on the operator and other working interest owners in these projects could cause us to incur unexpected future costs and materially and adversely affect our financial condition and results of operations. +We rely on third-party service providers to conduct drilling and completion and other related operations on properties we operate. +Where we are the operator of a property, we rely on third-party service providers to perform necessary drilling and completion and other related operations. The ability of third-party service providers to perform such operations will depend on those service providers’ ability to compete for and retain qualified personnel, financial condition, economic performance, and access to capital, which in turn will depend upon the supply and demand for oil, natural gas, and NGLs, prevailing economic conditions and financial, business, and other factors. In addition, continued low commodity prices may cause third-party service providers to consolidate or declare bankruptcy, which could limit our options for engaging such providers. The failure of a third-party service provider to adequately perform operations could delay drilling or completion or reduce production from the property and adversely affect our financial condition and results of operations. +Title to the properties in which we have an interest may be impaired by title defects. +We generally rely on title reports in acquiring oil and gas leasehold interests and obtain title opinions only on significant properties that we drill. There is no assurance that we will not suffer a monetary loss from title defects or title failure. Additionally, undeveloped acreage has greater risk of title defects than developed acreage. Title insurance is not generally available for oil and gas properties. As is customary in our industry, we rely upon the judgment of staff and independent landmen who perform the field work of examining records in the appropriate governmental offices and title abstract facilities before attempting to acquire or place under lease a specific mineral interest and/or undertake drilling activities. We, in some cases, perform curative work to correct deficiencies in the marketability of the title to us. Generally, under the terms of the operating agreements affecting our properties, any monetary loss attributable to a loss of title is to be borne by all parties to any such agreement in proportion to their interests in such property. A material title defect can reduce the value of a property or render it worthless, thus adversely affecting our financial condition, results of operations, and operating cash flow if such property is of sufficient value. +Exploration and development drilling may not result in commercially producible reserves. +Crude oil and natural gas drilling, completion and production activities are subject to numerous risks, including the risk that no commercially producible crude oil, natural gas, or associated liquids will be found. The cost of drilling and completing wells is often uncertain, and crude oil, natural gas, or associated liquids drilling and production activities may be shortened, delayed, or canceled as a result of a variety of factors, many of which are beyond our control. These factors include: +• +unexpected adverse drilling or completion conditions; +• +title problems; +35 +• +disputes with owners or holders of surface interests on or near areas where we operate; +• +pressure or geologic irregularities in formations; +• +engineering and construction delays; +• +equipment failures or accidents; +• +hurricanes, tornadoes, flooding, or other adverse weather conditions; +• +governmental permitting delays; +• +compliance with environmental and other governmental requirements; and +• +shortages or delays in the availability of or increases in the cost of drilling rigs and crews, fracture stimulation crews and equipment, pipe, chemicals, water, sand, and other supplies. +The prevailing prices for crude oil, natural gas, and NGLs affect the cost of and the demand for drilling rigs, completion and production equipment, and other related services. However, changes in costs may not occur simultaneously with corresponding changes in commodity prices. The availability of drilling rigs can vary significantly from region to region at any particular time. Although land drilling rigs can be moved from one region to another in response to changes in levels of demand, an undersupply of rigs in any region may result in drilling delays and higher drilling costs for the available rigs in that region. +Another significant risk inherent in our drilling plans is the need to obtain drilling permits from state, local, and other governmental authorities. Delays in obtaining regulatory approvals and drilling permits, including delays that jeopardize our ability to realize the potential benefits from leased properties within the applicable lease periods, the failure to obtain a drilling permit for a well, or the receipt of a permit with unreasonable conditions or costs could have a materially adverse effect on our ability to explore or develop our properties. +The wells we drill may not be productive, and we may not recover all or any portion of our investment in such wells. The seismic data and other technologies we use do not allow us to know conclusively prior to drilling a well if crude oil, natural gas, or NGLs are present, or whether they can be produced economically. The cost of drilling, completing, and operating a well is often uncertain, and cost factors can adversely affect the economics of a project. Drilling activities can result in dry holes or wells that are productive but do not produce sufficient net revenues after operating and other costs to cover drilling and completion costs. Even if sufficient amounts of crude oil, natural gas, or NGLs exist, we may damage a potentially productive hydrocarbon-bearing formation or experience mechanical difficulties while drilling or completing a well, which could result in reduced or no production from the well, significant expenditure to repair the well, and/or the loss and abandonment of the well. +Results in our newer resource plays may be more uncertain than results in resource plays that are more developed and have longer established production histories. We and the industry generally have less information with respect to the ultimate recoverability of reserves and the production decline rates in newer resource plays than other areas with longer histories of development and production. Drilling and completion techniques that have proven to be successful in other resource plays are being used in the early development of new plays; however, we can provide no assurance of the ultimate success of these drilling and completion techniques. +In addition, a significant part of our strategy involves increasing our inventory of drilling locations. Such multi-year drilling inventories can be more susceptible to long-term uncertainties that could materially alter the occurrence or timing of actual drilling. Because of these uncertainties, we do not know if the potential drilling locations we have identified will ever be drilled, although we have the present intent to do so for locations booked as proved undeveloped locations, or if we will be able to produce crude oil, natural gas, or NGLs from these potential drilling locations. +36 +Our future drilling activities may not be successful. Our overall drilling success rate or our drilling success rate within a particular area may decline. In addition, we may not be able to obtain any options or lease rights in potential drilling locations that we identify. Unless production is established within the spacing units covering undeveloped acres on which our drilling locations are identified, the leases for such acreage will expire and we will lose our right to develop the related properties. Our total net acreage expiring in the next three years represents approximately 32 percent of our total net undeveloped acreage at December 31, 2015 . Although we have identified numerous potential drilling locations, we may not be able to economically drill for and produce crude oil, natural gas, or NGLs from all of them, and our actual drilling activities may materially differ from those presently identified, which could adversely affect our financial condition, results of operations and operating cash flow. +Part of our strategy involves drilling in existing or emerging resource plays using some of the latest available horizontal drilling and completion techniques. The results of our planned exploratory and delineation drilling in these plays are subject to drilling and completion technique risks, and results may not meet our expectations for reserves or production. As a result, we may incur material write-downs, and the value of our undeveloped acreage could decline if drilling results are unsuccessful. +Many of our operations involve utilizing the latest drilling and completion techniques as developed by us and our service providers in order to maximize production and ultimate recoveries and therefore generate the highest possible returns. Risks we face while drilling include, but are not limited to, landing our well bore outside the desired drilling zone, deviating from the desired drilling zone while drilling horizontally through the formation, the inability to run our casing the entire length of the well bore, and the inability to run tools and recover equipment consistently through the horizontal well bore. Risks we face while completing our wells include, but are not limited to, the inability to fracture stimulate the planned number of stages, the inability to run tools and other equipment the entire length of the well bore during completion operations, the inability to recover such tools and other equipment, and the inability to successfully clean out the well bore after completion of the final fracture stimulation. +Ultimately, the success of these drilling and completion techniques can only be evaluated over time as more wells are drilled and production profiles are established over a sufficiently long time period. If our drilling results are less than anticipated or we are unable to execute our drilling program because of capital constraints, lease expirations, limited access to gathering systems and takeaway capacity, and/or prices for crude oil, natural gas, and NGLs decline, then the return on our investment for a particular project may not be as attractive as we anticipated and we could incur material write-downs of oil and gas properties and the value of our undeveloped acreage could decline in the future. +37 +Uncertainties associated with enhanced recovery methods may result in us not realizing an acceptable return on our investments in such projects. +We inject water into formations on some of our properties to increase the production of crude oil, natural gas, and associated liquids. We may in the future expand these efforts to more of our properties or employ other enhanced recovery methods in our operations. The additional production and reserves, if any, attributable to the use of enhanced recovery methods are inherently difficult to predict. If our enhanced recovery methods do not allow for the extraction of crude oil, natural gas, and associated liquids in a manner or to the extent that we anticipate, we may not realize an acceptable return on our investments in such projects. In addition, as proposed legislation and regulatory initiatives relating to hydraulic fracturing become law, the cost of some of these enhanced recovery methods could increase substantially. +Many of our properties are in areas that may have been partially depleted or drained by offset wells and certain of our wells may be adversely affected by actions other operators may take when drilling, completing or operating wells that they own. +Many of our properties are in areas that may have already been partially depleted or drained by earlier offset drilling. The owners of leasehold interests adjoining any of our properties could take actions, such as drilling and completing additional wells, which could adversely affect our operations. When a new well is completed and produced, the pressure differential in the vicinity of the well causes the migration of reservoir fluids toward the new wellbore (and potentially away from existing wellbores). As a result, the drilling and production of these potential locations could cause a depletion of our proved reserves and may inhibit our ability to further develop our proved reserves. In addition, completion operations and other activities conducted on adjacent or nearby wells could cause production from our wells to be shut in for indefinite periods of time, could result in increased lease operating expenses and could adversely affect the production and reserves from our wells after they re-commence production. We have no control over the operations or activities of offsetting operators. +Our commodity derivative contract activities may result in financial losses or may limit the prices we receive for crude oil, natural gas, and NGL sales. +To mitigate a portion of the exposure to potentially adverse market changes in crude oil, natural gas, and NGL prices and the associated impact on cash flows, we have entered into various derivative contracts. Our derivative contracts in place include swap arrangements for crude oil, natural gas, and NGLs. As of December 31, 2015 , we were in a net accrued asset position of $488.4 million with respect to our crude oil, natural gas, and NGL derivative activities. These activities may expose us to the risk of financial loss in certain circumstances, including instances in which: +• +our production is less than expected; +• +one or more counterparties to our commodity derivative contracts default on their contractual obligations; or +• +there is a widening of price differentials between delivery points for our production and the delivery point assumed in the commodity derivative contract arrangement. +The risk of one or more counterparties defaulting on their obligations is heightened by continued declines in crude oil, natural gas, and NGL prices. These circumstances may adversely affect the ability of our counterparties to meet their obligations to us pursuant to derivative transactions, which could reduce our revenues and cash flows from derivative settlements. As a result, our financial condition, results of operations, and cash flows could be materially affected in an adverse way if our counterparties default on their contractual obligations under our commodity derivative contracts. +38 +In addition, commodity derivative contracts may limit the prices we receive for our crude oil, natural gas and NGL sales if crude oil, natural gas, or NGL prices rise substantially over the price established by the commodity derivative contract. +The inability of customers or co-owners of assets to meet their obligations may adversely affect our financial results. +Substantially all of our accounts receivable result from crude oil, natural gas, and NGL sales or joint interest billings to co-owners of oil and gas properties we operate. This concentration of customers and joint interest owners may impact our overall credit risk because these entities may be similarly affected by various economic and other conditions, including the continued declines in crude oil, natural gas, and NGL prices. The loss of one or more of these customers could reduce competition for our products and negatively impact the prices of commodities we sell. We do not believe the loss of any single purchaser would materially impact our operating results, as we have numerous options for purchasers in each of our operating regions for our crude oil, natural gas, and NGL production. Please refer to Note 1 - Summary of Significant Accounting Policies, under the heading Concentration of Credit Risk and Major Customers in Part II, Item 8 of this report for further discussion of our concentration of credit risk and major customers. Additionally, the inability of our co-owners to pay joint interest billings could negatively impact our cash flow and financial ability to drill and complete current and future wells. +We have entered into firm transportation contracts that require us to pay fixed sums of money to our counterparties regardless of quantities actually shipped, processed, or gathered. If we are unable to deliver the necessary quantities of natural gas to our counterparties, our results of operations, financial position, and liquidity could be adversely affected. +As of December 31, 2015 , we were contractually committed to deliver 2,277 Bcf of natural gas and 36 MMBbl of crude oil, of which the first 1,059 Bcf of natural gas delivered under a certain agreement does not have a deficiency payment. These contracts expire at various dates through 2028 . Subsequent to December 31, 2015 , we entered into amendments to oil and gas gathering agreements related to certain of our Eagle Ford shale assets, each of which previously did not have a minimum volume commitment. Under these amendments, we are now committed to deliver 310 Bcf of natural gas and 41 MMBbl of oil through 2034. Subsequent to December 31, 2015 , we also entered into an amendment to a gas gathering agreement related to certain other Eagle Ford shale assets, which reduced our volume commitment amount as of December 31, 2015 , by 829 Bcf. We may enter into additional firm transportation agreements as the development of our resource plays expands. At the current time, we do not have enough proved developed reserves to offset these contractual liabilities, but we expect to develop reserves that will meet or exceed the commitments and therefore do not expect any material shortfalls. In the event we encounter delays in drilling and completing our wells or otherwise due to construction, interruptions of operations, or delays in connecting new volumes to gathering systems or pipelines for an extended period of time, or if we further limit our capital expenditures due to further commodity price declines, the requirements to pay for quantities not delivered could have a material impact on our results of operations, financial position, and liquidity. +Future crude oil, natural gas, and NGL price declines or unsuccessful exploration efforts may result in write-downs of our asset carrying values. +We follow the successful efforts method of accounting for our crude oil and natural gas properties. All property acquisition costs and costs of exploratory and development wells are capitalized when incurred, pending the determination of whether proved reserves have been discovered. If commercial quantities of hydrocarbons are not discovered with an exploratory well, the costs of drilling the well are expensed. +The capitalized costs of our oil and gas properties, on a depletion pool basis, cannot exceed the estimated undiscounted future net cash flows of that depletion pool. If net capitalized costs exceed undiscounted future net revenues, we generally must write down the costs of each depletion pool to the estimated discounted future net cash flows of that depletion pool. Unproved properties are evaluated at the lower of cost or fair market value. We incurred impairment of proved properties expense and impairment of unproved properties expense totaling $468.7 +39 +million and $78.6 million , respectively, during 2015 , $84.5 million and $75.6 million , respectively, during 2014 , and $172.6 million and $46.1 million , respectively, during 2013 . We also incurred impairment of other property, plant, and equipment expense totaling $49.4 million during 2015. Commodity prices significantly declined in 2014 and 2015. Continued declines in the prices of crude oil, natural gas, or NGLs or unsuccessful exploration efforts could cause additional proved and/or unproved property impairments in the future. +We review the carrying value of our properties for indicators of impairment on a quarterly basis using the prices in effect as of the end of each quarter. Once incurred, a write-down of oil and natural gas properties cannot be reversed at a later date, even if crude oil, natural gas, or NGL prices increase. +Lower crude oil, natural gas, or NGL prices could limit our ability to borrow under our credit facility. +Our credit facility has a current commitment amount of $1.5 billion , subject to a borrowing base that the lenders redetermine semi-annually based on the bank group’s assessment of the value of our proved reserves, which in turn is impacted by crude oil, natural gas, and NGL prices. The current borrowing base under our credit facility is $2.0 billion . The prices of crude oil, natural gas, and NGLs declined significantly throughout 2015. These declines in prices, or further declines in prices, could limit our borrowing base and reduce the amount we can borrow under our credit facility. Our amendment to our credit facility in 2015 reduced our borrowing base from $2.4 billion to $2.0 billion . This expected reduction was primarily a result of the sale of our Mid-Continent assets in the second quarter of 2015, as well as adjustments consistent with lower commodity prices. Additionally, divestitures of properties or incurrence of additional debt could result in a reduction of our borrowing base. +The amount of our debt may limit our ability to obtain financing for acquisitions, make us more vulnerable to adverse economic conditions, and make it more difficult for us to make payments on our debt. +As of December 31, 2015 , we had $350.0 million of long-term senior unsecured debt outstanding relating to our 6.50% Senior Notes due 2021 (the “2021 Notes”) that we issued on November 8, 2011; $600.0 million of long-term senior unsecured debt outstanding relating to our 6.125% Senior Notes due 2022 (the “2022 Notes”) that we issued on November 17, 2014 ; $400.0 million of long-term senior unsecured debt outstanding relating to our 6.50% Senior Notes due 2023 (the “2023 Notes”) that we issued on June 29, 2012; $500.0 million of long-term senior unsecured debt outstanding relating to our 5.0% Senior Notes due 2024 (the “2024 Notes”) that we issued on May 20, 2013; and $500.0 million of long-term senior unsecured debt outstanding relating to our 5.625% Senior Notes due 2025 (the “2025 Notes”) that we issued on May 21, 2015 (collectively, the 2021 Notes, the 2022 Notes, the 2023 Notes, the 2024 Notes, and the 2025 Notes are referred to as our “Senior Notes”); and $202.0 million of outstanding borrowings under our secured credit facility. We had two outstanding letters of credit in the aggregate amount of $200,000 (which reduce the amount available for borrowing under the facility on a dollar-for-dollar basis), resulting in $1.3 billion of available borrowing capacity under our credit facility, assuming the borrowing conditions under this facility will be met. Our long-term debt represented 58 percent of our total book capitalization as of December 31, 2015 . +Our indebtedness could have important consequences for our operations, including: +• +making it more difficult for us to obtain additional financing in the future for our operations and potential acquisitions, working capital requirements, capital expenditures, debt service, or other general corporate requirements; +• +requiring us to dedicate a substantial portion of our cash flows from operations to the repayment of our debt and the service of interest costs associated with our debt, rather than to productive investments; +• +limiting our operating flexibility due to financial and other restrictive covenants, including restrictions on incurring additional debt, making acquisitions, and paying dividends; +• +placing us at a competitive disadvantage compared to our competitors with less debt; and +40 +• +making us more vulnerable in the event of adverse economic or industry conditions or a downturn in our business. +Our ability to make payments on our debt, refinance our debt, and fund planned capital expenditures will depend on our ability to generate cash in the future. This, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory, and other factors that are beyond our control. If our business does not generate sufficient cash flow from operations or future sufficient borrowings are not available to us under our credit facility or from other sources, we might not be able to service our debt or fund our other liquidity needs. If we are unable to service our debt, due to inadequate liquidity or otherwise, we may have to delay or cancel acquisitions, defer capital expenditures, sell equity securities, divest assets, and/or restructure or refinance our debt. We might not be able to sell our equity, sell our assets, or restructure or refinance our debt on a timely basis or on satisfactory terms or at all. In addition, the terms of our existing or future debt agreements, including our existing and future credit agreements, may prohibit us from pursuing any of these alternatives. Further, changes in the credit ratings of our debt may negatively affect the cost, terms, conditions, and availability of future financing. +Our debt agreements, including the agreement governing our credit facility and the indentures governing the Senior Notes, permit us to incur additional debt in the future, subject to compliance with restrictive covenants under those agreements. In addition, entities we may acquire in the future could have significant amounts of debt outstanding that we could be required to assume, and in some cases accelerate repayment thereof, in connection with the acquisition, or we may incur our own significant indebtedness to consummate an acquisition. +As discussed above, our credit facility is subject to periodic borrowing base redeterminations. We could be forced to repay a portion of our bank borrowings in the event of a downward redetermination of our borrowing base, and we may not have sufficient funds to make such repayment at that time. If we do not have sufficient funds and are otherwise unable to negotiate renewals of our borrowing base or arrange new financing, we may be forced to sell significant assets. +The agreements governing our debt contain various covenants that limit our discretion in the operation of our business, could prohibit us from engaging in transactions we believe to be beneficial, and could lead to the accelerated repayment of our debt. +Our debt agreements contain restrictive covenants that limit our ability to engage in activities that may be in our long-term best interests. Our ability to borrow under our credit facility is subject to compliance with certain financial covenants, including (i) maintenance of a quarterly ratio of total debt to 12-month trailing consolidated adjusted earnings before interest, taxes, depreciation, amortization, and exploration expense of less than 4.0, and (ii) maintenance of an adjusted current ratio of no less than 1.0, each as defined in our credit facility. Our credit facility also requires us to comply with certain financial covenants, including requirements that we maintain certain levels of stockholders’ equity and limit our annual cash dividends to no more than $50.0 million . These restrictions on our ability to operate our business could seriously harm our business by, among other things, limiting our ability to take advantage of financings, mergers and acquisitions, and other corporate opportunities. +The respective indentures governing the Senior Notes also contain covenants that, among other things, limit our ability and the ability of our subsidiaries to: +• +incur additional debt; +• +make certain dividends or pay dividends or distributions on our capital stock or purchase, redeem, or retire capital stock; +• +sell assets, including capital stock of our subsidiaries; +• +restrict dividends or other payments of our subsidiaries; +41 +• +create liens that secure debt; +• +enter into transactions with affiliates; and +• +merge or consolidate with another company. +Our failure to comply with these covenants could result in an event of default that, if not cured or waived, could result in the acceleration of all or a portion of our indebtedness. We do not have sufficient working capital to satisfy our debt obligations in the event of an acceleration of all or a significant portion of our outstanding indebtedness. +We are subject to operating and environmental risks and hazards that could result in substantial losses or liabilities that may not be fully insured. +Oil and gas operations are subject to many risks, including human error and accidents, that could cause personal injury, death, property damage, well blowouts, craterings, explosions, uncontrollable flows of crude oil, natural gas and associated liquids, or well fluids, releases or spills of completion fluids, spills or releases from facilities and equipment used to deliver or store these materials, spills or releases of brine or other produced or flowback water, subsurface conditions that prevent us from stimulating the planned number of completion stages, accessing the entirety of the wellbore with our tools during completion, or removing materials from the wellbore to allow production to begin, fires, adverse weather such as hurricanes or tornadoes, freezing conditions, floods, droughts, formations with abnormal pressures, pipeline ruptures or spills, pollution, releases of toxic gas such as hydrogen sulfide, and other environmental risks and hazards. If any of these types of events occurs, we could sustain substantial losses. +Furthermore, if we experience any of the problems with well stimulation and completion activities referenced above, our ability to explore for and produce crude oil, natural gas, or NGLs may be adversely affected. We could incur substantial losses or otherwise fail to realize reserves in particular formations as a result of the need to shutdown, abandon, or relocate drilling operations, the need to modify drill sites to lessen the risk of spills or releases, the need to investigate and/or remediate any spills, releases or ground water contamination that might have occurred, and the need to suspend our operations. +There is inherent risk of incurring significant environmental costs and liabilities in our operations due to our current and past generation, handling and disposal of materials, including solid and hazardous wastes and petroleum hydrocarbons. We may incur joint and several, strict liability under applicable United States federal and state environmental laws in connection with releases of petroleum hydrocarbons and other hazardous substances at, on, under or from our leased or owned properties, some of which have been used for natural gas and oil exploration and production activities for a number of years, often by third parties not under our control. For our outside operated properties, we are dependent on the operator for operational and regulatory compliance, and could be subject to liabilities in the event of non-compliance. These properties and the wastes disposed thereon or therefrom could be subject to stringent and costly investigatory or remedial requirements under applicable laws, some of which are strict liability laws without regard to fault or the legality of the original conduct, including the CERCLA or the Superfund law, the RCRA, the Clean Water Act, the CAA, the OPA, and analogous state laws. Under any implementing regulations, we could be required to remove or remediate previously disposed wastes (including wastes disposed of or released by prior owners or operators) or property contamination (including groundwater contamination), to perform natural resource mitigation or restoration practices, or to perform remedial plugging or closure operations to prevent future contamination. In addition, it is not uncommon for neighboring landowners and other third parties to file claims for personal injury or property damage, including induced seismicity damage, allegedly caused by the release of petroleum hydrocarbons or other hazardous substances into the environment. As a result, we may incur substantial liabilities to third parties or governmental entities, which could reduce or eliminate funds available for exploration, development, or acquisitions, or cause us to incur losses. +42 +We maintain insurance against some, but not all, of these potential risks and losses. We have significant but limited coverage for sudden environmental damage. We do not believe that insurance coverage for the full potential liability that could be caused by environmental damage that occurs gradually over time is appropriate for us at this time given the nature of our operations and the nature and cost of such coverage. Further, we may elect not to obtain insurance coverage under circumstances where we believe that the cost of available insurance is excessive relative to the risks to which we are subject. Accordingly, we may be subject to liability or may lose substantial assets in the event of environmental or other damages. If a significant accident or other event occurs and is not fully covered by insurance, we could suffer a material loss. +Our operations are subject to complex laws and regulations, including environmental regulations that result in substantial costs and other risks. +Federal, state, tribal, and local authorities extensively regulate the oil and natural gas industry. Legislation and regulations affecting the industry are under constant review for amendment or expansion, raising the possibility of changes that may become more stringent and, as a result, may affect, among other things, the pricing or marketing of crude oil, natural gas, and NGL production. Noncompliance with statutes and regulations and more vigorous enforcement of such statutes and regulations by regulatory agencies may lead to substantial administrative, civil, and criminal penalties, including the assessment of natural resource damages, the imposition of significant investigatory and remedial obligations and may also result in the suspension or termination of our operations. The overall regulatory burden on the industry increases the cost to place, design, drill, complete, install, operate, and abandon wells and related facilities and, in turn, decreases profitability. +Governmental authorities regulate various aspects of drilling for and the production of crude oil, natural gas, and NGLs, including the permit and bonding requirements of drilling wells, the spacing of wells, the unitization or pooling of interests in crude oil and natural gas properties, rights-of-way and easements, environmental matters, occupational health and safety, the sharing of markets, production limitations, plugging, abandonment, and restoration standards, oil and gas operations, and restoration. Public interest in environmental protection has increased in recent years, and environmental organizations have opposed, with some success, certain projects. Under certain circumstances, regulatory authorities may deny a proposed permit or right-of-way grant or impose conditions of approval to mitigate potential environmental impacts, which could, in either case, negatively affect our ability to explore or develop certain properties. Federal authorities also may require any of our ongoing or planned operations on federal leases to be delayed, suspended, or terminated. Any such delay, suspension, or termination could have a materially adverse effect on our operations. +Our operations are also subject to complex and constantly changing environmental laws and regulations adopted by federal, state, tribal and local governmental authorities in jurisdictions where we are engaged in exploration or production operations. New laws or regulations, or changes to current requirements, including the designation of previously unprotected wildlife or plant species as threatened or endangered in areas we operate in, could result in material costs or claims with respect to properties we own or have owned. We will continue to be subject to uncertainty associated with new regulatory interpretations and inconsistent interpretations between state and federal agencies. Under existing or future environmental laws and regulations, we could incur significant liability, including joint and several, strict liability under federal, state, and tribal environmental laws for noise emissions and for discharges of crude oil, natural gas, and associated liquids or other pollutants into the air, soil, surface water, or groundwater. We could be required to spend substantial amounts on investigations, litigation, and remediation for these emissions and discharges and other compliance issues. Any unpermitted release of petroleum or other pollutants from our operations could result not only in cleanup costs, but also natural resources, real or personal property and other damages and civil and criminal liabilities. The listing of additional wildlife or plant species as federally endangered or threatened could result in limitations on exploration and production activities in certain locations. Existing environmental laws or regulations, as currently interpreted or enforced, or as they may be interpreted, enforced, or altered in the future, may have a materially adverse effect on us. +43 +Seasonal weather conditions and lease stipulations adversely affect our ability to conduct drilling activities in some of the areas where we operate. +Operations in certain of our regions, such as our Rocky Mountain and Permian regions, are adversely affected by seasonal weather conditions and lease stipulations designed to protect various wildlife or plant species. In certain areas on federal lands, drilling and other oil and natural gas activities can only be conducted during limited times of the year. This limits our ability to operate in those areas and can intensify competition during those times for drilling rigs, oil field equipment, services, supplies and qualified personnel, which may lead to periodic shortages. Wildlife seasonal restrictions may limit access to federal leases or across federal lands. Possible restrictions may include seasonal restrictions in greater sage-grouse habitat during breeding and nesting seasons, within a certain distance of active raptor nests during fledging, and in big game winter or parturition ranges during winter or calving seasons. These constraints and the resulting shortages or high costs could delay our operations and materially increase our operating and capital costs. +Proposed federal and state legislative and regulatory initiatives relating to hydraulic fracturing could result in increased costs and additional operating restrictions or delays. +Hydraulic fracturing is a common practice in the oil and gas industry used to stimulate the production of oil, natural gas, and NGLs from dense subsurface rock formations. We routinely apply hydraulic fracturing techniques to many of our oil and natural gas properties, including our unconventional resource plays in the Eagle Ford shale of south Texas, the Bakken/Three Forks formations in North Dakota, and the Wolfcamp and Spraberry shale intervals in the Permian Basin. Hydraulic fracturing involves injecting water, sand and certain chemicals under pressure to fracture the hydrocarbon-bearing rock formation to allow the flow of hydrocarbons into the wellbore. The process is typically regulated by state oil and natural gas commissions. However, the EPA and other federal agencies have asserted federal regulatory authority over certain aspects of hydraulic fracturing activities, as outlined below. +The EPA has authority to regulate underground injections that contain diesel in the fluid system under the Safe Drinking Water Act (the “SDWA”). The EPA has published an interpretive memorandum and permitting guidance related to regulation of fracturing fluids using this regulatory authority. The EPA announced plans to update its chloride water quality criteria for the protection of aquatic life under the federal Water Pollution Control Act (the “Clean Water Act”). Flowback and produced water from the hydraulic fracturing process contain total dissolved solids, including chlorides, and regulation of these fluids could be affected by the new criteria. The EPA has delayed issuing a draft criteria document until 2016. The EPA has also announced that it will develop pre-treatment standards for disposal of wastewater produced from shale gas operations through publicly owned treatment works. The regulations will be developed under the EPA’s Effluent Guidelines Program under the authority of the Clean Water Act. On April 7, 2015, the EPA published a proposed rule requiring federal pre-treatment standards for wastewater generated during the hydraulic fracturing process in the Federal Register. If adopted, the new pre-treatment rules will require shale gas operations to pre-treat wastewater before transferring it to publicly-owned treatment facilities. The public comment period for the proposed rule ended on July 17, 2015. If the EPA implements further regulations of hydraulic fracturing, we may incur additional costs to comply with such requirements that may be significant in nature, experience delays or curtailment in the pursuit of exploration, development, or production activities, and could even be prohibited from drilling and/or completing certain wells. +Certain states in which we operate, including Texas and Wyoming, have adopted, and other states are considering adopting, regulations that could impose more stringent permitting, public disclosure, waste disposal, and well construction requirements on hydraulic fracturing operations or otherwise seek to ban fracturing activities altogether. In addition to state laws, local land use restrictions, such as city ordinances, may restrict or prohibit the performance of drilling in general and/or hydraulic fracturing in particular. Recently, several municipalities have passed or proposed zoning ordinances that ban or strictly regulate hydraulic fracturing within city boundaries, setting the stage for challenges by state regulators and third-parties. Similar events and processes are playing out in several cities, counties, and townships across the United States. In the event state, local, or municipal legal +44 +restrictions are adopted in areas where we are currently conducting, or in the future plan to conduct, operations, we may incur additional costs to comply with such requirements that may be significant in nature, experience delays or curtailment in the pursuit of exploration, development, or production activities, and could even be prohibited from drilling and/or completing certain wells. +Several federal governmental agencies are actively involved in studies or reviews that focus on environmental aspects and impacts of hydraulic fracturing practices. A number of federal agencies are analyzing, or have been requested to review, a variety of environmental issues associated with hydraulic fracturing. On June 4, 2015, the EPA issued a draft assessment of potential impacts to drinking water resources from hydraulic fracturing. The draft report did not find widespread impacts to drinking water from hydraulic fracturing. The EPA’s inspector general released a report on July 16, 2015 recommending increased EPA oversight of permit issuances as well as the chemicals used in hydraulic fracturing. The United States Department of Energy is also actively involved in research on hydraulic fracturing practices, including groundwater protection. +On March 26, 2015, the Bureau of Land Management (“BLM”) published a final rule governing hydraulic fracturing on federal and Indian lands, including private surface lands with underlying federal minerals. The rule was scheduled to become effective on June 24, 2015, but was temporarily stayed by a federal court. The rule requires public disclosure of chemicals used in hydraulic fracturing on federal and Indian lands, confirmation that wells used in hydraulic fracturing operations meet certain construction standards, development of appropriate plans for managing flowback water that returns to the surface, heightened standards for interim storage of recovered waste fluids, and submission of detailed information to the BLM regarding the geology, depth and location of pre-existing wells. Although several states, tribes, and industry groups filed several pending lawsuits challenging the rule and the BLM’s authority to regulate hydraulic fracturing, the outcome of this litigation is uncertain. If the rule becomes effective, we expect to incur additional costs to comply with such requirements that may be significant in nature, and we could experience delays or even curtailment in the pursuit of hydraulic fracturing activities in certain wells on federal and Indian lands. The rule could also affect drilling units that include both private and federal mineral resources. +Legislation has been introduced before Congress to provide for federal regulation of hydraulic fracturing and to require disclosure of the chemicals used in the hydraulic fracturing process. If hydraulic fracturing becomes regulated at the federal level, our fracturing activities could become subject to additional permit or disclosure requirements, associated permitting delays, operational restrictions, litigation risk, and potential cost increases. Additionally, certain members of Congress have called upon the United States Government Accountability Office to investigate how hydraulic fracturing might adversely affect water resources, the SEC to investigate the natural gas industry and any possible misleading of investors or the public regarding the economic feasibility of pursuing natural gas deposits in shales by means of hydraulic fracturing, and the United States Energy Information Administration to provide a better understanding of that agency’s estimates regarding natural gas reserves, including reserves from shale formations, as well as uncertainties associated with those estimates. The United States Geological Survey Offices of Energy Resources Program, Water Resources and Natural Hazards and Environmental Health Offices also have ongoing research projects on hydraulic fracturing. These ongoing studies, depending on their course and outcomes, could spur initiatives to further regulate hydraulic fracturing under the SDWA or other regulatory processes. +Further, on August 16, 2012, the EPA issued final rules subjecting all new and modified oil and gas operations (production, processing, transmission, storage, and distribution) to regulation under the New Source Performance Standards (“NSPS”) and all existing and new operations to the National Emission Standards for Hazardous Air Pollutants (“NESHAP”) programs. The EPA rules also include NSPS standards for completions of hydraulically fractured gas wells. These standards require the use of reduced emission completion (“REC”) techniques developed in the EPA’s Natural Gas STAR program along with the pit flaring of gas not sent to the gathering line beginning in January 2015. The standards are applicable to newly drilled and fractured wells as well as existing wells that are refractured. Further, the regulations under NESHAP include maximum achievable control technology (“MACT”) standards for those glycol dehydrators and certain storage vessels at major sources of +45 +hazardous air pollutants not currently subject to MACT standards. These rules will require additional control equipment, changes to procedure, and extensive monitoring and reporting. The EPA stated in January 2013, however, that it intends to reconsider portions of the final rule. On September 23, 2013, the EPA published new standards for storage tanks subject to the NSPS. In December 2014, the EPA finalized additional updates to the 2012 NSPS. The amendments clarified stages for flowback and the point at which green completion equipment is required and updated requirements for storage tanks and leak detection requirements for processing plants. The EPA has stated that it continues to review other issues raised in petitions for reconsideration. +Increased regulation and attention given to the hydraulic fracturing process could lead to greater opposition, including litigation, to oil and gas production activities using hydraulic fracturing techniques. Disclosure of chemicals used in the hydraulic fracturing process could make it easier for third parties opposing such activities to pursue legal proceedings against producers and service providers based on allegations that specific chemicals used in the fracturing process could adversely affect human health or the environment, including groundwater. Over the past year, several court cases have addressed aspects of hydraulic fracturing. In a case that could delay operations on public lands, a court in California held that the BLM did not adequately consider the impact of hydraulic fracturing and horizontal drilling before issuing leases. Courts in New York and Colorado reduced the level of evidence required before a court will agree to consider alleged damage claims from hydraulic fracturing by property owners. Litigation resulting in financial compensation for damages linked to hydraulic fracturing, including damages from induced seismicity, could spur future litigation and bring increased attention to the practice of hydraulic fracturing. Judicial decisions could also lead to increased regulation, permitting requirements, enforcement actions, and penalties. Additional legislation or regulation could also lead to operational delays or restrictions or increased costs in the exploration for, and production of, oil, natural gas, and associated liquids, including from the development of shale plays, or could make it more difficult to perform hydraulic fracturing. The adoption of additional federal, state, or local laws, or the implementation of new regulations, regarding hydraulic fracturing could potentially cause a decrease in the completion of new oil and gas wells, or an increase in compliance costs and delays, which could adversely affect our financial position, results of operations, and cash flows. +Requirements to reduce gas flaring could have an adverse effect on our operations. +Wells in the Bakken and Three Forks formations in North Dakota, where we have significant operations, produce natural gas as well as crude oil. Constraints in the current gas gathering and processing network in certain areas have resulted in some of that natural gas being flared instead of gathered, processed and sold. In June 2014, the North Dakota Industrial Commission, North Dakota’s chief energy regulator, adopted a policy to reduce the volume of natural gas flared from oil wells in the Bakken and Three Forks formations. The Commission is requiring operators to develop gas capture plans that describe how much natural gas is expected to be produced, how it will be delivered to a processor and where it will be processed. Production caps or penalties will be imposed on certain wells that cannot meet the capture goals. The Bureau of Land Management (BLM) has also indicated its intent to pursue a rulemaking related to further controls on the venting and flaring of natural gas on BLM land. A proposed rule has been sent to the White House Office of Management and Budget. These capture requirements, and any similar future obligations in North Dakota or our other locations, may increase our operational costs or restrict our production, which could materially and adversely affect our financial condition, results of operations and cash flows. +Our ability to produce crude oil, natural gas, and associated liquids economically and in commercial quantities could be impaired if we are unable to acquire adequate supplies of water for our drilling operations and/or completions or are unable to dispose of or recycle the water we use at a reasonable cost and in accordance with applicable environmental rules. +The hydraulic fracturing process on which we and others in our industry depend to complete wells that will produce commercial quantities of crude oil, natural gas, and NGLs requires the use and disposal of significant quantities of water. +46 +Our inability to secure sufficient amounts of water, or to dispose of or recycle the water used in our operations, could adversely impact our operations. Moreover, the imposition of new environmental initiatives and regulations could include restrictions on our ability to conduct certain operations such as hydraulic fracturing or disposal of wastes, including, but not limited to, produced water, drilling fluids, and other wastes associated with the exploration, development, or production of crude oil, natural gas, and NGLs. +Compliance with environmental regulations and permit requirements governing the withdrawal, storage, and use of surface water or groundwater necessary for hydraulic fracturing of wells may increase our operating costs and cause delays, interruptions, or termination of our operations, the extent of which cannot be predicted, all of which could have an adverse effect on our operations and financial condition. +Certain United States federal income tax deductions currently available with respect to oil and natural gas exploration and production may be eliminated as a result of future legislation . +Recent federal budget proposals, if enacted into law, would eliminate certain key United States federal income tax incentives currently available to oil and natural gas exploration and production companies. These potential changes include: +• +the elimination of current deductions for intangible drilling and development costs; +• +the repeal of the percentage depletion allowance for oil and natural gas properties; +• +the elimination of the deduction for certain domestic production activities; and +• +an extension of the amortization period for certain geological and geophysical expenditures. +It is unclear when or if these or similar changes will be enacted. The passage of legislation enacting these or similar changes in federal income tax laws could eliminate or postpone certain tax deductions that are currently available with respect to oil and natural gas exploration and development. Any such changes could have an adverse effect on our financial position, results of operations and cash flows. +Legislative and regulatory initiatives related to global warming and climate change could have an adverse effect on our operations and the demand for crude oil, natural gas, and NGLs. +In December 2009, the EPA made a finding that emissions of carbon dioxide, methane, and other “greenhouse gases” endanger public health and the environment because emissions of such gases contribute to warming of the earth’s atmosphere and other climatic changes. Based on this finding, the EPA has over the past four years adopted and implemented a comprehensive suite of regulations to restrict and otherwise regulate emissions of greenhouse gases under existing provisions of the CAA. In particular, the EPA has adopted two sets of rules regulating greenhouse gas emissions under the CAA. One rule requires a reduction in greenhouse gas emissions from motor vehicles, and the other regulates permitting and greenhouse gas emissions from certain large stationary sources. These EPA regulatory actions have been challenged by various industry groups, initially in the D.C. Circuit, which in 2012 ruled in favor of the EPA in all respects. However, in June 2014, the United States Supreme Court reversed the D.C. Circuit and struck down the EPA’s greenhouse gas permitting rules to the extent they impose a requirement to obtain a permit based solely on emissions of greenhouse gases. However, large sources of air pollutants other than greenhouse gases would still be required to implement the best available capture technology for greenhouse gases. The EPA has also adopted reporting rules for greenhouse gas emissions from specified greenhouse gas emission sources in the United States, including petroleum refineries as well as certain onshore oil and natural gas extraction and production facilities. +Several other kinds of cases on greenhouse gases have been heard by the courts in recent years. While courts have generally declined to assign direct liability for climate change to large sources of greenhouse gas emissions, some have required increased scrutiny of such emissions by federal agencies and permitting authorities. +47 +There is a continuing risk of claims being filed against companies that have significant greenhouse gas emissions, and new claims for damages and increased government scrutiny will likely continue. Such cases often seek to challenge air emissions permits that greenhouse gas emitters apply for, seek to force emitters to reduce their emissions, or seek damages for alleged climate change impacts to the environment, people, and property. Any court rulings, laws or regulations that restrict or require reduced emissions of greenhouse gases could lead to increased operating and compliance costs, and could have an adverse effect on demand for the oil and natural gas that we produce. +The United States Congress has from time to time considered adopting legislation to reduce emissions of greenhouse gases, and almost one-half of the states have already taken measures to reduce emissions of greenhouse gases, primarily through the planned development of greenhouse gas emission inventories and/or regional greenhouse gas “cap and trade” programs. Most of these cap and trade programs work by requiring major sources of emissions, such as electric power plants, or major producers of fuels, such as refineries and gas processing plants, to acquire and surrender emission allowances. The number of allowances available for purchase is reduced each year in an effort to achieve the overall greenhouse gas emission reduction goal. Recently, the Congressional Budget Office provided Congress with a study on the potential effects on the United States economy of a tax on greenhouse gas emissions. While “carbon tax” legislation has been introduced in the Senate, the prospects for passage of such legislation are highly uncertain at this time. +On June 25, 2013, President Obama outlined plans to address climate change through a variety of executive actions, including reduction of methane emissions from oil and gas production and processing operations as well as pipelines and coal mines (the “Climate Plan”). The President’s Climate Plan, along with recent regulatory initiatives and ongoing litigation filed by states and environmental groups, signal a new focus on methane emissions, which could pose substantial regulatory risk to our operations. In March 2014, President Obama released a strategy to reduce methane emissions, which directed the EPA to consider additional regulations to reduce methane emissions from the oil and gas sector. On January 14, 2015, the Obama Administration announced additional steps to reduce methane emissions from the oil and gas sector by 40 to 45 percent by 2025. These actions include a commitment from the EPA to issue new source performance standards for methane emissions from the oil and gas sector. Pursuant to this commitment, in September 2015, the EPA proposed emission standards for methane and VOC for sources in the oil and gas sector constructed or modified after September 1, 2015. The proposed rules expand the 2012 NSPS for VOC emissions from the oil and gas sector to include methane emissions. For sources not affected by the 2012 NSPS, the proposed rule imposes both VOC and methane standards. In particular, the proposal would require methane reductions from centrifugal and reciprocating compressors, pneumatic pumps, fugitive emissions from well sites and compressor stations and equipment leaks at natural gas processing plants. The proposal does not extend to existing sources and EPA has not indicated when it will propose existing source standards. Additionally, in January 2016, the BLM proposed additional rules designed to reduce methane venting and flaring from production wells, pneumatic controllers and storage tanks on federal and tribal lands, which are expected to be finalized in 2016. The focus on legislating methane also could eventually result in: +• requirements for methane emission reductions from existing oil and gas equipment; +• increased scrutiny for sources emitting high levels of methane, including during permitting processes; +• analysis, regulation and reduction of methane emissions as a requirement for project approval; and +• actions taken by one agency for a specific industry establishing precedents for other agencies and +industry sectors. +In relation to the Climate Plan, both assumed Global Warming Potential (“GWP”) and assumed social costs associated with methane and other greenhouse gas emissions have been finalized, including a 20% increase in the GWP of methane. Changes to these measurement tools could adversely impact permitting requirements, +48 +application of agencies’ existing regulations for source categories with high methane emissions, and determinations of whether a source qualifies for regulation under the CAA. +Finally, it should be noted that some scientists have predicted that increasing concentrations of greenhouse gases in the earth’s atmosphere may produce climate changes that have significant physical effects, such as increased frequency and severity of storms, droughts, and floods and other climatic events. Some scientists refute these predictions. However, President Obama’s Climate Plan emphasizes preparation for such events. If such effects were to occur, our operations could be adversely affected. Potential adverse effects could include disruption of our production activities, including, for example, damages to our facilities from flooding or increases in our costs of operation or reductions in the efficiency of our operations, as well as potentially increased costs for insurance coverage in the aftermath of such events. Significant physical effects of climate change could also have an indirect effect on our financing and operations by disrupting the transportation or process-related services provided by midstream companies, service companies or suppliers with whom we have a business relationship. We may not be able to recover through insurance some or any of the damages, losses or costs that may result from potential physical effects of climate change. Federal regulations or policy changes regarding climate change preparation requirements could also impact our costs and planning requirements. +Our ability to sell crude oil, natural gas and NGLs, and/or receive market prices for our production, may be adversely affected by constraints on gathering systems, processing facilities, pipelines and other transportation systems owned or operated by others or by other interruptions. +The marketability of our crude oil, natural gas, and NGL production depends in part on the availability, proximity, and capacity of gathering systems, processing facilities, pipelines, and other transportation systems owned or operated by third parties. Any significant interruption in service from, damage to, or lack of available capacity in these systems and facilities can result in the shutting-in of producing wells, the delay or discontinuance of development plans for our properties, or lower price realizations. Although we have some contractual control over the processing and transportation of our operated production, material changes in these business relationships could materially affect our operations. Federal and state regulation of crude oil, natural gas, and NGL production and transportation, tax and energy policies, changes in supply and demand, pipeline pressures, damage to or destruction of pipelines, infrastructure or capacity constraints, and general economic conditions could adversely affect our ability to produce, gather, process, and transport crude oil, natural gas, and NGLs. +In particular, if drilling in the Eagle Ford shale and Bakken/Three Forks resource plays continue to be successful, the amount of crude oil, natural gas, and NGLs being produced by us and others could exceed the capacity of, and result in strains on, the various gathering and transportation systems, pipelines, processing facilities, and other infrastructure available in these areas. It will be necessary for additional infrastructure, pipelines, gathering and transportation systems and processing facilities to be expanded, built or developed to accommodate anticipated production from these areas. Because of the current commodity price environment, certain processing, pipeline, and other gathering or transportation projects that might be, or are being, considered for these areas may not be developed timely or at all due to lack of financing or other constraints. Capital and other constraints could also limit our ability to build or access intrastate gathering and transportation systems necessary to transport our production to interstate pipelines or other points of sale or delivery. In such event, we might have to delay or discontinue development activities or shut in our wells to wait for sufficient infrastructure development or capacity expansion and/or sell production at significantly lower prices, which would adversely affect our results of operations and cash flows. In addition, the operations of the third parties on whom we rely for gathering and transportation services are subject to complex and stringent laws and regulations, which require obtaining and maintaining numerous permits, approvals, and certifications from various federal, state, and local government authorities. These third parties may incur substantial costs in order to comply with existing laws and regulations. If existing laws and regulations governing such third-party services are revised or reinterpreted, or if new laws and regulations become applicable to their operations, these changes may affect the costs we pay for such services. Similarly, a failure to comply with such laws and regulations by the third parties on whom we rely could have a material adverse effect on our business, financial condition and results of operations. +49 +A portion of our production in any region may be interrupted, or shut in, from time to time for numerous reasons, including as a result of weather conditions, accidents, loss of pipeline, gathering, processing or transportation system access or capacity, field labor issues or strikes, or we might voluntarily curtail production in response to market conditions. If a substantial amount of our production is interrupted at the same time, it could temporarily and adversely affect our cash flows and results of operations. +New technologies may cause our current exploration and drilling methods to become obsolete. +The oil and gas industry is subject to rapid and significant advancements in technology, including the introduction of new products and services using new technologies. As competitors use or develop new technologies, we may be placed at a competitive disadvantage, and competitive pressures may force us to implement new technologies at a substantial cost. In addition, competitors may have greater financial, technical, and personnel resources that allow them to enjoy technological advantages and may in the future allow them to implement new technologies before we can. One or more of the technologies we currently use or implement in the future may become obsolete. We cannot be certain we will be able to implement technologies on a timely basis or at a cost that is acceptable to us. If we are unable to maintain technological advancements consistent with industry standards, our operations and financial condition may be adversely affected. +Our business could be negatively impacted by security threats, including cybersecurity threats, terrorism, armed conflict, and other disruptions. +As a crude oil, natural gas, and NGLs producer, we face various security threats, including cybersecurity threats to gain unauthorized access to sensitive information or to render data or systems unusable; threats to the safety of our employees; threats to the security of our facilities and infrastructure or third party facilities and infrastructure, such as processing plants and pipelines; and threats from terrorist acts. Although we utilize various procedures and controls to monitor these threats and mitigate our exposure to such threats, there can be no assurance that these procedures and controls will be sufficient in preventing security threats from materializing. If any of these events were to materialize, they could lead to losses of sensitive information, critical infrastructure, personnel or capabilities essential to our operations and could have a material adverse effect on our reputation, financial position, results of operations, or cash flows. +Cybersecurity attacks in particular are evolving and include, but are not limited to, malicious software, attempts to gain unauthorized access to data, and other electronic security breaches that could lead to disruptions in critical systems, unauthorized release of confidential or otherwise protected information, and corruption of data. These events could damage our reputation and lead to financial losses from remedial actions, loss of business or potential liability. +The threat of terrorism and the impact of military and other action have caused instability in world financial markets and could lead to increased volatility in prices for crude oil, natural gas, and NGLs, all of which could adversely affect the markets for our operations. Energy assets might be specific targets of terrorist attacks. These developments have subjected our operations to increased risk and, depending on their occurrence and ultimate magnitude, could have a material adverse effect on our business. +50 +Risks Related to Our Common Stock +The price of our common stock may fluctuate significantly, which may result in losses for investors. +From January 1, 2015 , to February 17, 2016 , the low and high intraday trading prices per share of our common stock as reported by the New York Stock Exchange ranged from a low of $8.38 per share in January 2016 to a high of $60.28 per share in May 2015 . We expect our stock to continue to be subject to fluctuations as a result of a variety of factors, including factors beyond our control. These factors include: +• +changes in crude oil, natural gas, or NGL prices; +• +variations in drilling, recompletion, and operating activity; +• +changes in financial estimates by securities analysts; +• +changes in market valuations of comparable companies; +• +additions or departures of key personnel; +• +future sales of our common stock; and +• +changes in the national and global economic outlook. +We may not meet the expectations of our stockholders and/or of securities analysts at some time in the future, and our stock price could decline as a result. +Our certificate of incorporation and by-laws have provisions that discourage corporate takeovers and could prevent stockholders from receiving a takeover premium on their investment, which could adversely affect the price of our common stock. +Delaware corporate law and our certificate of incorporation and by-laws contain provisions that may have the effect of delaying or preventing a change of control of us or our management. These provisions, among other things, provide for non-cumulative voting in the election of members of the Board of Directors and impose procedural requirements on stockholders who wish to make nominations for the election of directors or propose other actions at stockholder meetings. These provisions, alone or in combination with each other, may discourage transactions involving actual or potential changes of control, including transactions that otherwise could involve payment of a premium over prevailing market prices to stockholders for their common stock. As a result, these provisions could make it more difficult for a third party to acquire us, even if doing so would benefit our stockholders, which may limit the price investors are willing to pay in the future for shares of our common stock. +Shares eligible for future sale may cause the market price of our common stock to drop significantly, even if our business is doing well. +The potential for sales of substantial amounts of our common stock in the public market may have a materially adverse effect on our stock price. As of February 17, 2016 , 68,037,643 shares of our common stock were freely tradable without substantial restriction or the requirement of future registration under the Securities Act. In addition, restricted stock units (“RSUs”) providing for the issuance of up to a total of 520,725 shares of our common stock and 716,129 performance share units (“PSUs”) were outstanding. The PSUs represent the right to receive, upon settlement of the PSUs after the completion of a three-year performance period, a number of shares of our common stock that may be from zero to two times the number of PSUs granted, depending on the extent to which the underlying performance criteria have been achieved and the extent to which the PSUs have vested. As of February 17, 2016 , there were 68,077,546 shares of our common stock outstanding. +51 +We may not always pay dividends on our common stock. +Payment of future dividends remains at the discretion of our Board of Directors, and will continue to depend on our earnings, capital requirements, financial condition, and other factors. In addition, the payment of dividends is subject to a covenant in our credit facility limiting our annual cash dividends to no more than $50.0 million , and to covenants in the indentures for our Senior Notes that limit our ability to pay dividends beyond a certain amount. Our Board of Directors may determine in the future to reduce the current semi-annual dividend rate of $0.05 per share, or discontinue the payment of dividends altogether. +ITEM 1B. UNRESOLVED STAFF COMMENTS +We have no unresolved comments from the SEC staff regarding our periodic or current reports under the Exchange Act. +ITEM 3. LEGAL PROCEEDINGS +From time to time, we may be involved in litigation relating to claims arising out of our business and operations in the normal course of business. As of the filing date of this report, no legal proceedings are pending against us that we believe individually or collectively could have a materially adverse effect upon our financial condition, results of operations or cash flows. +ITEM 4. MINE SAFETY DISCLOSURES +These disclosures are not applicable to us. +52 +PART II +ITEM 5. +MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES +Market Information. Our common stock is currently traded on the New York Stock Exchange under the ticker symbol “SM.” The following table presents the range of high and low intraday sales prices per share for the indicated quarterly periods in 2015 and 2014 , as reported by the New York Stock Exchange: +Quarter Ended +High +Low +December 31, 2015 +$ +42.23 +$ +18.06 +September 30, 2015 +$ +45.98 +$ +18.21 +June 30, 2015 +$ +60.28 +$ +43.70 +March 31, 2015 +$ +53.31 +$ +31.01 +December 31, 2014 +$ +79.89 +$ +29.41 +September 30, 2014 +$ +90.38 +$ +74.57 +June 30, 2014 +$ +85.39 +$ +71.00 +March 31, 2014 +$ +90.22 +$ +69.03 +PERFORMANCE GRAPH +The following performance graph compares the cumulative return on our common stock, for the period beginning December 31, 2010 , and ending on December 31, 2015 , with the cumulative total returns of the Dow Jones U.S. Exploration and Production Index, and the Standard & Poor’s 500 Stock Index. +COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURNS +The preceding information under the caption Performance Graph shall be deemed to be furnished, but not filed with the SEC. +Holders. As of February 17, 2016 , the number of record holders of our common stock was 71. Based upon inquiry, management believes that the number of beneficial owners of our common stock is approximately 21,200. +53 +Dividends. We have paid cash dividends to our stockholders every year since 1940. Annual dividends of $0.05 per share were paid in each of the years 1998 through 2004. Annual dividends of $0.10 per share were paid in each of the years 2005 through 2015 . We expect our practice of paying dividends on our common stock to continue, although the payment and amount of future dividends will continue to depend on our earnings, cash flow, capital requirements, financial condition, and other factors, including the discretion of our Board of Directors. In addition, the payment of dividends is subject to covenants in our credit facility that limit our annual dividend payment to no more than $50.0 million per year. We are also subject to certain covenants under our Senior Notes that restrict certain payments, including dividends; however, the first $6.5 million of dividends paid each year are not restricted by this covenant. Based on our current performance, we do not anticipate that these covenants will restrict future annual dividend payments in amounts not to exceed $0.10 per share of common stock. Dividends are currently paid on a semi-annual basis. Dividends paid totaled $6.8 million and $6.7 million for the years ended December 31, 2015 , and December 31, 2014 , respectively. +Restricted Shares. We have no restricted shares outstanding as of December 31, 2015 , aside from Rule 144 restrictions on shares held by insiders and shares issued to members of the Board of Directors under our Equity Incentive Compensation Plan (“Equity Plan”). +Purchases of Equity Securities by the Issuer and Affiliated Purchasers. The following table provides information about purchases by the Company and any affiliated purchaser (as defined in Rule 10b-18(a)(3) under the Exchange Act) during the indicated quarters and year ended December 31, 2015 , of shares of the Company’s common stock, which is the sole class of equity securities registered by the Company pursuant to Section 12 of the Exchange Act. +ISSUER PURCHASES OF EQUITY SECURITIES +Total Number of Shares Purchased (1) +Weighted Average Price Paid per Share +Total Number of Shares Purchased as Part of Publicly Announced Program +Maximum Number of Shares that May Yet be Purchased Under the Program (2) +January 1, 2015 - +March 31, 2015 +465 +$ +52.34 +— +3,072,184 +April 1, 2015 - +June 30, 2015 +98 +$ +56.22 +— +3,072,184 +July 1, 2015 - +September 30, 2015 +186,177 +$ +45.50 +— +3,072,184 +October 1, 2015 - +October 31, 2015 +4,988 +$ +35.39 +— +3,072,184 +November 1, 2015 - +November 30, 2015 +— +$ +— +— +3,072,184 +December 1, 2015 - +December 31, 2015 +— +$ +— +— +3,072,184 +Total October 1, 2015 - +December 31, 2015 +4,988 +$ +35.39 +— +3,072,184 +Total +191,728 +$ +45.27 +— +3,072,184 +____________________________________________ +(1) +All shares purchased in 2015 were purchased by us to offset grantee tax withholding obligations that arose upon the delivery of outstanding shares underlying RSUs and PSUs delivered under the terms of grants under the Equity Plan. +(2) +In July 2006, our Board of Directors approved an increase in the number of shares that may be repurchased under the original August 1998 authorization to 6,000,000 as of the effective date of the resolution. Accordingly, as of the date of this filing, subject to the approval of our Board of Directors, we may repurchase up to 3,072,184 shares of common stock on a prospective basis. The shares may be repurchased from time to time in open market transactions or privately negotiated transactions, subject to market conditions and other factors, including certain provisions of our credit facility, the indentures governing our Senior Notes and compliance with securities laws. Stock repurchases may be funded with +54 +existing cash balances, internal cash flow, or borrowings under our credit facility. The stock repurchase program may be suspended or discontinued at any time. Please refer to Dividends above for a description of our dividend limitations. +55 +ITEM 6. SELECTED FINANCIAL DATA +The following table sets forth selected supplemental financial and operating data as of the dates and periods indicated. The financial data for each of the five years presented were derived from our consolidated financial statements. The following data should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of this report, which includes a discussion of factors materially affecting the comparability of the information presented, and in conjunction with our consolidated financial statements included in this report. +Years Ended December 31, +2015 +2014 +2013 +2012 +2011 +(in millions, except per share data) +Total operating revenues and other income +$ +1,557.0 +$ +2,522.3 +$ +2,293.4 +$ +1,505.1 +$ +1,603.3 +Net income (loss) +$ +(447.7 +) +$ +666.1 +$ +170.9 +$ +(54.2 +) +$ +215.4 +Net income (loss) per share: +Basic +$ +(6.61 +) +$ +9.91 +$ +2.57 +$ +(0.83 +) +$ +3.38 +Diluted +$ +(6.61 +) +$ +9.79 +$ +2.51 +$ +(0.83 +) +$ +3.19 +Total assets at year-end (1) +$ +5,621.6 +$ +6,483.1 +$ +4,678.1 +$ +4,179.0 +$ +3,784.0 +Long-term debt: +Revolving credit facility +$ +202.0 +$ +166.0 +$ +— +$ +340.0 +$ +— +3.50% Senior Convertible Notes, net of debt discount (1) +$ +— +$ +— +$ +— +$ +— +$ +284.7 +Senior Notes, net of unamortized deferred financing costs (1) +$ +2,316.0 +$ +2,166.4 +$ +1,572.9 +$ +1,079.5 +$ +685.4 +Cash dividends declared and paid per common share +$ +0.10 +$ +0.10 +$ +0.10 +$ +0.10 +$ +0.10 +____________________________________________ +(1) Prior period amounts have been reclassified to conform to the current period presentation on the accompanying financial statements. Please refer to the caption Recently Issued Accounting Standards in Note 1 – Summary of Significant Accounting Policies for additional discussion of the change in presentation of debt issuance costs on the accompanying balance sheets. +56 +Supplemental Selected Financial and Operations Data +For the Years Ended December 31, +2015 +2014 +2013 +2012 +2011 +Balance Sheet Data (in millions) +Total working capital (deficit) +$ +216.5 +$ +(39.6 +) +$ +8.4 +$ +(201.0 +) +$ +(42.6 +) +Total stockholders’ equity +$ +1,852.4 +$ +2,286.7 +$ +1,606.8 +$ +1,414.5 +$ +1,462.9 +Weighted-average common shares outstanding (in thousands) +Basic +67,723 +67,230 +66,615 +65,138 +63,755 +Diluted +67,723 +68,044 +67,998 +65,138 +67,564 +Reserves +Oil (MMBbl) +145.3 +169.7 +126.6 +92.2 +71.7 +Gas (Bcf) +1,264.0 +1,466.5 +1,189.3 +833.4 +664.0 +NGLs (MMBbl) +115.4 +133.5 +103.9 +62.3 +27.5 +MMBOE +471.3 +547.7 +428.7 +293.4 +209.9 +Production and Operations (in millions) +Oil, gas, and NGL production revenue +$ +1,499.9 +$ +2,481.5 +$ +2,199.6 +$ +1,473.9 +$ +1,332.4 +Oil, gas, and NGL production expense +$ +723.6 +$ +715.9 +$ +597.0 +$ +391.9 +$ +290.1 +Depletion, depreciation, amortization, and asset retirement obligation liability accretion +$ +921.0 +$ +767.5 +$ +822.9 +$ +727.9 +$ +511.1 +General and administrative +$ +157.7 +$ +167.1 +$ +149.6 +$ +119.8 +$ +118.5 +Production Volumes +Oil (MMBbl) +19.2 +16.7 +13.9 +10.4 +8.1 +Gas (Bcf) +173.6 +152.9 +149.3 +120.0 +100.3 +NGLs (MMBbl) +16.1 +13.0 +9.5 +6.1 +3.5 +MMBOE +64.2 +55.1 +48.3 +36.5 +28.3 +Realized price +Oil (per Bbl) +$ +41.49 +$ +80.97 +$ +91.19 +$ +85.45 +$ +88.23 +Gas (per Mcf) +$ +2.57 +$ +4.58 +$ +3.93 +$ +2.98 +$ +4.32 +NGLs (per Bbl) +$ +15.92 +$ +33.34 +$ +35.95 +$ +37.61 +$ +53.32 +Expense per BOE +Lease operating expense +$ +3.73 +$ +4.28 +$ +4.49 +$ +4.54 +$ +4.97 +Transportation costs +$ +6.02 +$ +6.11 +$ +5.34 +$ +3.81 +$ +3.05 +Production taxes +$ +1.13 +$ +2.13 +$ +2.19 +$ +2.00 +$ +1.90 +Ad valorem tax expense +$ +0.39 +$ +0.46 +$ +0.33 +$ +0.39 +$ +0.33 +Depletion, depreciation, amortization, and asset retirement obligation liability accretion +$ +14.34 +$ +13.92 +$ +17.02 +$ +19.95 +$ +18.07 +General and administrative +$ +2.46 +$ +3.03 +$ +3.09 +$ +3.28 +$ +4.19 +Statement of Cash Flow Data (in millions) +Provided by operating activities +$ +978.4 +$ +1,456.6 +$ +1,338.5 +$ +922.0 +$ +760.5 +Used in investing activities +$ +(1,144.6 +) +$ +(2,478.7 +) +$ +(1,192.9 +) +$ +(1,457.3 +) +$ +(1,264.9 +) +Provided by financing activities +$ +166.2 +$ +740.0 +$ +130.7 +$ +422.1 +$ +618.5 +57 +ITEM 7. +MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS +This discussion includes forward-looking statements. Please refer to Cautionary Information about Forward-Looking Statements in Part I, Items 1 and 2 of this report for important information about these types of statements. +Overview of the Company +General Overview +We are an independent energy company engaged in the acquisition, exploration, development, and production of oil, gas, and NGLs in onshore North America. We currently have development positions in the Eagle Ford shale, Bakken/Three Forks and Permian Basin resource plays that are the focus of our capital investment program. We also have a smaller delineation and exploration program in the Powder River Basin. We have built a portfolio of onshore properties primarily through early entry into existing and emerging resource plays. This portfolio is comprised of properties with established production and reserves, prospective drilling opportunities, and unconventional resource prospects, which we believe provide for stable and predictable production and reserves growth. +Our strategic objective is to profitably build our ownership and operatorship of North American oil, gas, and NGL producing assets that have high operating margins and significant opportunities for additional economic investment. We pursue growth opportunities through both exploration and acquisitions, and we seek to maximize the value of our assets through industry leading technology application and outstanding operational execution. We focus on achieving high full-cycle economic returns on our investments and maintaining a simple, strong balance sheet through a conservative approach to leverage. +In 2015 , we had the following financial and operational results: +• +We had record annual production for 2015 . Our average daily production for 2015 was 52.7 MBbls of oil, 475.7 MMcf of gas, and 44.0 MBbls of NGLs, for an average daily equivalent production rate of 175.9 MBOE, compared with 151.1 MBOE in 2014 , an increase of 16 percent year-over-year. Please refer to the caption Production Results below for additional discussion. +• +At year-end 2015 , we had estimated proved reserves of 471.3 MMBOE, of which 55 percent were liquids (oil and NGLs) and 52 percent were characterized as proved developed. We added 160.6 MMBOE through our drilling program, the majority of which related to our activity in the Eagle Ford shale and the Bakken/Three Forks plays, and acquired 1.2 MMBOE. We had a positive performance revision of 47.3 MMBOE due to improved performance in our Eagle Ford shale and Bakken/Three Forks plays related to enhanced completions and reductions in operating expenses, which extended the economic lives of our wells. This upward revision was offset by a 116.5 MMBOE negative price revision due to the decline in commodity prices in 2015 and 79.4 MMBOE of proved undeveloped reserves removed due to the five-year rule. We divested of 25.4 MMBOE of proved reserves primarily in our Mid-Continent region. Our proved reserve life decreased to 7.3 years in 2015 compared to 9.9 years in 2014. Please refer to Reserves included in Part I, Items 1 and 2 of this report for additional discussion. +• +The standardized measure of discounted future net cash flows was $1.9 billion as of December 31, 2015 , compared with $5.7 billion as of December 31, 2014 . The standardized measure calculation is presented in the Supplemental Oil and Gas Information section located in Part II, Item 8 of this report. +• +We recorded a net loss of $447.7 million , or $6.61 per diluted share, for the year ended December 31, 2015 . This compares with net income of $666.1 million , or $9.79 per diluted share, for the year ended +58 +December 31, 2014 . The net loss in 2015 was driven largely by proved and unproved property impairments of $468.7 million and $78.6 million , respectively, as a result of the decline in commodity prices. Please refer to the caption Comparison of Financial Results and Trends between 2015 and 2014 and between 2014 and 2013 below for additional discussion regarding the components of net income (loss). +• +We had net cash flow provided by operating activities of $978.4 million for the year ended December 31, 2015 , compared with $1.5 billion for the year ended December 31, 2014 , which was a decrease of 33 percent year-over-year. Please refer to Analysis of cash flow changes between 2015 and 2014 and between 2014 and 2013 below for additional discussion. +• +Adjusted EBITDAX, a non-GAAP financial measure, for the year ended December 31, 2015 , was $1.1 billion , compared with $1.6 billion for the same period in 2014 . Please refer to Non-GAAP Financial Measures below for additional discussion, including our definition of adjusted EBITDAX and reconciliations of our net income (loss) and net cash provided by operating activities to adjusted EBITDAX. +• +Costs incurred for oil and gas property acquisition, exploration and development activities for the year ended December 31, 2015 , totaled $1.4 billion . The majority of our drilling and completion costs incurred during this period were in our Eagle Ford shale and Bakken/Three Forks programs. Please refer to the caption Production Results below for the number of operated wells completed in these programs during 2015. Additionally, we built an inventory of wells drilled during 2015, which we expect to be completed in future years. Total costs incurred for the same period in 2014 totaled $2.7 billion , which included the acquisition of proved and unproved properties in our Gooseneck prospect area and in the Powder River Basin for approximately $561.6 million. Please refer to the caption Costs Incurred in Oil and Gas Producing Activities below for additional discussion. +Oil, Gas, and NGL Prices +Our financial condition and the results of our operations are significantly affected by the prices we receive for our oil, gas, and NGL production, which can fluctuate dramatically. We sell the majority of our gas under contracts using first-of-the-month index pricing, which means gas produced in a given month is sold at the first-of-the-month price regardless of the spot price on the day the gas is produced. For assets where high BTU gas is sold at the wellhead, we also receive additional value for the higher energy content contained in the gas stream. Our NGL production is generally sold using contracts paying us a monthly average of the posted OPIS daily settlement prices, adjusted for processing, transportation, and location differentials. Our oil is sold using contracts paying us various industry posted prices, adjusted for basis differentials. We are paid the average of the daily settlement price for the respective posted prices for the period in which the product is sold, adjusted for quality, transportation, American Petroleum Institute (“API”) gravity, and location differentials. When we refer to realized oil, gas, and NGL prices below, the disclosed price represents the average price for the respective period, before the effects of derivative settlements, unless otherwise indicated. +59 +The following table summarizes commodity price data, as well as the effects of derivative settlements as further discussed under the caption Derivative Activity below, for the years ended December 31, 2015 , 2014 , and 2013 : +For the Years Ended December 31, +2015 +2014 +2013 +Crude Oil (per Bbl): +Average NYMEX price +$ +48.68 +$ +93.03 +$ +97.99 +Realized price, before the effect of derivative settlements +$ +41.49 +$ +80.97 +$ +91.19 +Effect of derivative settlements +$ +18.85 +$ +1.71 +$ +(1.27 +) +Natural Gas: +Average NYMEX price (per MMBtu) +$ +2.61 +$ +4.35 +$ +3.73 +Realized price, before the effect of derivative settlements (per Mcf) +$ +2.57 +$ +4.58 +$ +3.93 +Effect of derivative settlements (per Mcf) (1) +$ +0.71 +$ +(0.18 +) +$ +0.21 +NGLs (per Bbl): (2) +Average OPIS price +$ +19.76 +$ +38.93 +$ +40.44 +Realized price, before the effect of derivative settlements +$ +15.92 +$ +33.34 +$ +35.95 +Effect of derivative settlements +$ +1.69 +$ +0.84 +$ +0.71 +____________________________________________ +(1) +Natural gas derivative settlements for the years ended December 31, 2015, and 2014, include $15.3 million and $5.6 million , respectively, of early settlements of futures contracts as a result of divesting assets in our Mid-Continent region. These early settlements increased the effect of derivative settlements by $0.09 per Mcf and $0.04 per Mcf for the years ended December 31, 2015, and 2014, respectively. +(2) +Average OPIS prices per barrel of NGL, historical or strip, are based on a product mix of 37% Ethane, 32% Propane, 6% Isobutane, 11% Normal Butane, and 14% Natural Gasoline for all periods presented. This product mix represents the industry standard composite barrel and does not necessarily represent our product mix for NGL production. Realized prices reflect our actual product mix. +While quoted NYMEX oil and gas and OPIS NGL prices are generally used as a basis for comparison within our industry, the prices we receive are affected by quality, energy content, location, and transportation differentials for these products. +We expect future prices for oil, gas, and NGLs to continue to be volatile. In addition to supply and demand fundamentals, as a global commodity, the price of oil will continue to be impacted by real or perceived geopolitical risks in oil producing regions of the world, particularly the Middle East. The relative strength of the U.S. dollar compared to other currencies also affects the price of oil. In late 2015, the U.S. lifted its ban on the export of crude oil, which we expect to provide potential for market expansion. Crude oil prices declined throughout 2015 due to slower global economic growth combined with excess global supply. We expect this imbalance between supply and demand to remain for the foreseeable future keeping crude oil prices under downward pressure and at levels below their five-year average. Gas prices also remain under downward pressure as supply exceeds demand, resulting in higher levels of gas in storage compared to the prior year and compared to the five-year average. Excess supply of ethane and propane with higher volumes in storage than historical averages resulted in a further drop in pricing for those products throughout 2015. In response to lower oil, gas, and NGL prices, industry participants significantly cut capital spending in 2015, with additional cuts expected in 2016. We expect the lower capital spending by industry participants to eventually result in a decrease in supply providing upside to commodity pricing for all products. +60 +The following table summarizes 12-month strip prices for NYMEX WTI oil, NYMEX Henry Hub gas, and OPIS NGLs (same product mix as discussed under the table above) as of February 17, 2016 , and December 31, 2015 : +As of February 17, 2016 +As of December 31, 2015 +NYMEX WTI oil (per Bbl) +$ +37.77 +$ +41.34 +NYMEX Henry Hub gas (per MMBtu) +$ +2.30 +$ +2.53 +OPIS NGLs (per Bbl) +$ +16.12 +$ +17.48 +Derivative Activity +We use financial derivative instruments as part of our financial risk management program. We have a financial risk management policy governing our use of derivatives. The amount of our production covered by derivatives is driven by the amount of debt on our balance sheet and the level of capital commitments and long-term obligations we have in place. With our current derivative contracts, we believe we have partially reduced our exposure to volatility in commodity prices in the near term. Please refer to Note 10 - Derivative Financial Instruments in Part II, Item 8 of this report and the caption titled Commodity Price Risk in Overview of Liquidity and Capital Resources below for additional information regarding our oil, gas, and NGL derivatives. +2015 Operational Activity and Financial Results +Operational Activities. 2015 was a year of transition as the broader oil and gas industry adjusted to lower commodity prices. We scaled back our operated activity during the year by reducing the number of active drilling rigs from 17 to six and deferring the completion of certain drilled wells. The primary focus of our operated drilling activity in 2015 was the development of our Eagle Ford shale and Bakken/Three Forks assets. We realized significant drilling and completion cost reductions during 2015, as our service providers responded to continued commodity price declines. While production declined from quarter to quarter throughout 2015, we had record production for the full-year 2015, driven primarily by the activity in our operated Eagle Ford shale and Bakken/Three Forks development programs. +In our operated Eagle Ford shale program, we began the year operating five drilling rigs and released two rigs throughout the year. Our development program shifted to utilizing longer laterals and completions with higher sand loadings, which resulted in improved well performance. Throughout the year, we tested spacing and the prospectivity of the Upper Eagle Ford on our acreage. As of December 31, 2015, in our operated Eagle Ford shale program, we had 76 gross and net wells that were drilled but not completed. +In our outside-operated Eagle Ford shale program, the operator began 2015 running seven rigs and dropped six rigs throughout the year, exiting the year with one rig in operation. +In our Bakken/Three Forks program, we started the year operating five drilling rigs and released three rigs during the year. We continue to focus most of our activity in Divide County, North Dakota, where we are developing the Bakken and Three Forks intervals and testing completion optimizations and down-spacing. As of December 31, 2015, in our operated Bakken/Three Forks program, we had 48 gross wells ( 40 net) that were drilled but not completed. +In our Permian program, we started 2015 operating two drilling rigs and released both rigs by mid-year. A large portion of our leasehold position in this region is held by production. +We curtailed activity in our delineation and exploration programs in 2015 to focus on preserving our more prospective acreage. In our Powder River Basin program, we started 2015 operating four drilling rigs and decreased our rig count over 2015, exiting the year with one rig in operation. +61 +Mid-Continent Divestitures. During the second quarter of 2015, we completed the divestiture of our Mid-Continent assets in separate transactions for total cash proceeds received at closing, which reflect the aggregate gross purchase price net of closing adjustments (referred throughout this report as “divestiture proceeds”), of $316.8 million , with a net gain of $108.4 million . Please refer to Note 3 – Divestitures, Assets Held for Sale, and Acquisitions in Part II, Item 8 of this report for additional information, as this net gain was partially offset by write-downs on certain other assets held for sale and sold during 2015. In conjunction with the divestiture of our Mid-Continent assets, we closed our regional office in Tulsa, Oklahoma. +Production Results. The table below provides a regional breakdown of our production for 2015 : +South Texas & Gulf Coast +Rocky +Mountain +Permian +Mid-Continent +Total (1) +Production: +Oil (MMBbl) +7.9 +9.5 +1.8 +— +19.2 +Gas (Bcf) +149.5 +9.3 +5.1 +9.7 +173.6 +NGLs (MMBbl) +15.7 +0.3 +— +— +16.1 +Equivalent (MMBOE) (1) +48.5 +11.3 +2.7 +1.7 +64.2 +Avg. Daily Equivalents (MBOE/d) +132.9 +31.1 +7.4 +4.6 +175.9 +Relative percentage +75 +% +18 +% +4 +% +3 +% +100 +% +____________________________________________ +(1) Amounts may not calculate due to rounding. +For the year ended December 31, 2015 , we completed 66 gross and net wells in our operated Eagle Ford shale program and 41 gross wells ( 37 net) in our operated Bakken/Three Forks program. Please refer to Comparison of Financial Results and Trends between 2015 and 2014 and between 2014 and 2013 and A year-to-year overview of selected production and financial information, including trends below for additional discussion on production. +Costs Incurred in Oil and Gas Producing Activities. Costs incurred in oil and gas property acquisition, exploration and development activities, whether capitalized or expensed, are summarized as follows: +For the Year Ended +December 31, 2015 +(in millions) +Development costs +$ +1,234.1 +Exploration costs +132.5 +Acquisitions +Proved properties +10.0 +Unproved properties +18.4 +Total, including asset retirement obligation (1) +$ +1,395.0 +____________________________________________ +(1) +Please refer to the section Costs Incurred in Oil and Gas Producing Activities in Supplemental Oil and Gas Information in Part II, Item 8 of this report for additional discussion on the costs included in this table. +Costs incurred in oil and gas producing activities, excluding proved and unproved acquisitions, estimated asset retirement obligations, capitalized interest, and support facility allocations, for the year ended December 31, 2015, totaled approximately $1.3 billion and were primarily incurred in the development of our Eagle Ford shale and Bakken/Three Forks programs. +62 +Impairment of Proved and Unproved Properties and Other Property and Equipment. We recorded impairment of proved properties expense of $468.7 million , abandonment and impairment of unproved properties expense of $78.6 million , and impairment of other property and equipment expense of $49.4 million for the year ended December 31, 2015 . These impairment expenses were primarily due to continued commodity price declines, as well as our decision to reduce capital spending in our east Texas exploration program in light of the sustained, low commodity price environment. Please refer to Comparison of Financial Results and Trends between 2015 and 2014 and between 2014 and 2013 below for further discussion. +2025 Notes . On May 21, 2015 , we issued $500.0 million in aggregate principal amount of our 5.625% Senior Notes, at par, that mature on June 1, 2025 . We received net proceeds of $491.0 million from this issuance, which we used for the tender and redemption of the $350.0 million principal amount of our 6.625% Senior Notes due 2019 (the “2019 Notes”), as well as to repay outstanding borrowings under our credit facility and for general corporate purposes. Through these transactions, we extended the first maturity on our Senior Notes to 2021 and reduced our weighted average borrowing rate. Please refer to Note 5 - Long-Term Debt in Part II, Item 8 of this report for additional information. +Revolving Credit Facility. In the third quarter of 2015 , our lenders decreased the borrowing base under our credit facility to $2.0 billion from $2.4 billion , primarily a result of the sale of our Mid-Continent assets in the second quarter of 2015, as well as adjustments consistent with lower commodity prices. Please refer to Overview of Liquidity and Capital Resources below for additional discussion of our credit facility. +Outlook for 2016 +Our goal is to maintain a strong balance sheet and preserve liquidity in the current commodity price environment. We expect to incur capital expenditures below adjusted EBITDAX in order to minimize any impact to our total debt. We believe this focus on our liquidity will best preserve our balance sheet and will give us the flexibility to adapt as industry conditions change. Please refer to Overview of Liquidity and Capital Resources below for additional discussion on how we expect to fund our 2016 capital program. +Our capital program for 2016 will be approximately $705 million, of which approximately 85 percent will be invested in drilling and completion activities with the focus on our core development programs in the Bakken/Three Forks, Permian Basin, and Eagle Ford shale. We plan to continue our focus on conducting safe operations even as we pursue cost saving measures throughout our business. +In our operated Eagle Ford shale program, we entered 2016 operating three drilling rigs. We dropped two operated drilling rigs at the start of 2016 and expect to drop the remaining drilling rig during the third quarter. We plan to utilize one frac spread through the third quarter of 2016. We expect to focus the majority of our investment on wells that were drilled but uncompleted at year-end 2015 and to meet lease obligations. +In our outside-operated Eagle Ford shale program, we expect the operator will further slow its pace of development in 2016. +In our operated Bakken/Three Forks program, we entered 2016 operating two drilling rigs. We expect to run a two drilling rig program until the second quarter of 2016, at which time we expect to release one drilling rig and run a one rig program for the remainder of the year. +In our Permian Basin program, we began operating one drilling rig in early 2016 and currently expect to increase to two drilling rigs during the second quarter of 2016. Our focus will be on developing the Wolfcamp and Spraberry shale intervals on our Sweetie Peck property in Upton County, Texas. +We dropped our last operated drilling rig in our Powder River Basin program in mid-February 2016. +63 +Financial Results of Operations and Additional Comparative Data +The tables below provide information regarding selected production and financial information for the quarter ended December 31, 2015 , and the immediately preceding three quarters. A detailed discussion follows. +For the Three Months Ended +December 31, +September 30, +June 30, +March 31, +2015 +2015 +2015 +2015 +(in millions, except for production data) +Production (MMBOE) +14.9 +16.1 +16.5 +16.8 +Oil, gas, and NGL production revenue +$ +298.7 +$ +366.6 +$ +441.3 +$ +393.3 +Oil, gas, and NGL production expense +$ +169.2 +$ +184.6 +$ +173.7 +$ +196.2 +Depletion, depreciation, amortization, and asset retirement obligation liability accretion +$ +240.0 +$ +243.9 +$ +219.7 +$ +217.4 +Exploration +$ +37.9 +$ +19.7 +$ +25.5 +$ +37.4 +General and administrative +$ +33.6 +$ +37.8 +$ +42.6 +$ +43.6 +Net income (loss) +$ +(340.3 +) +$ +3.1 +$ +(57.5 +) +$ +(53.1 +) +____________________________________________ +Note: Amounts may not calculate due to rounding. +Selected Performance Metrics: +For the Three Months Ended +December 31, +September 30, +June 30, +March 31, +2015 +2015 +2015 +2015 +Average net daily production equivalent (MBOE per day) +162.1 +174.5 +181.0 +186.4 +Lease operating expense (per BOE) +$ +3.85 +$ +3.86 +$ +3.26 +$ +3.96 +Transportation costs (per BOE) +$ +6.10 +$ +6.27 +$ +5.64 +$ +6.08 +Production taxes as a percent of oil, gas, and NGL production revenue +5.1 +% +4.2 +% +5.2 +% +4.8 +% +Ad valorem tax expense (per BOE) +$ +0.38 +$ +0.40 +$ +0.25 +$ +0.52 +Depletion, depreciation, amortization, and asset retirement obligation liability accretion (per BOE) +$ +16.10 +$ +15.19 +$ +13.34 +$ +12.96 +General and administrative (per BOE) +$ +2.26 +$ +2.35 +$ +2.59 +$ +2.60 +____________________________________________ +Note: Amounts may not calculate due to rounding. +64 +A year-to-year overview of selected production and financial information, including trends: +For the Years Ended December 31, +Amount Change Between +Percent Change Between +2015 +2014 +2013 +2015/2014 +2014/2013 +2015/2014 +2014/2013 +Net production volumes (1) +Oil (MMBbl) +19.2 +16.7 +13.9 +2.6 +2.7 +15 +% +19 +% +Gas (Bcf) +173.6 +152.9 +149.3 +20.7 +3.6 +14 +% +2 +% +NGLs (MMBbl) +16.1 +13.0 +9.5 +3.1 +3.5 +24 +% +37 +% +Equivalent (MMBOE) +64.2 +55.1 +48.3 +9.1 +6.8 +16 +% +14 +% +Average net daily production (1) +Oil (MBbl per day) +52.7 +45.6 +38.2 +7.0 +7.4 +15 +% +19 +% +Gas (MMcf per day) +475.7 +419.0 +409.2 +56.7 +9.8 +14 +% +2 +% +NGLs (MBbl per day) +44.0 +35.6 +26.0 +8.4 +9.6 +24 +% +37 +% +Equivalent (MBOE per day) +175.9 +151.1 +132.4 +24.9 +18.6 +16 +% +14 +% +Oil, gas, and NGL production revenue (in millions) +Oil production revenue +$ +797.3 +$ +1,348.3 +$ +1,271.5 +$ +(551.0 +) +$ +76.8 +(41 +)% +6 +% +Gas production revenue +447.0 +699.8 +586.3 +(252.8 +) +113.5 +(36 +)% +19 +% +NGL production revenue +255.6 +433.4 +341.8 +(177.8 +) +91.6 +(41 +)% +27 +% +Total +$ +1,499.9 +$ +2,481.5 +$ +2,199.6 +$ +(981.6 +) +$ +281.9 +(40 +)% +13 +% +Oil, gas, and NGL production expense (in millions) +Lease operating expense +$ +239.6 +$ +235.8 +$ +216.9 +$ +3.8 +$ +18.9 +2 +% +9 +% +Transportation costs +386.6 +337.1 +258.2 +49.5 +78.9 +15 +% +31 +% +Production taxes +72.4 +117.2 +105.8 +(44.8 +) +11.4 +(38 +)% +11 +% +Ad valorem tax expense +25.0 +25.8 +16.1 +(0.8 +) +9.7 +(3 +)% +60 +% +Total +$ +723.6 +$ +715.9 +$ +597.0 +$ +7.7 +$ +118.9 +1 +% +20 +% +Realized price +Oil (per Bbl) +$ +41.49 +$ +80.97 +$ +91.19 +$ +(39.48 +) +$ +(10.22 +) +(49 +)% +(11 +)% +Gas (per Mcf) +$ +2.57 +$ +4.58 +$ +3.93 +$ +(2.01 +) +$ +0.65 +(44 +)% +17 +% +NGLs (per Bbl) +$ +15.92 +$ +33.34 +$ +35.95 +$ +(17.42 +) +$ +(2.61 +) +(52 +)% +(7 +)% +Per BOE +$ +23.36 +$ +45.01 +$ +45.50 +$ +(21.65 +) +$ +(0.49 +) +(48 +)% +(1 +)% +Per BOE data (1) +Production costs: +Lease operating expense +$ +3.73 +$ +4.28 +$ +4.49 +$ +(0.55 +) +$ +(0.21 +) +(13 +)% +(5 +)% +Transportation costs +$ +6.02 +$ +6.11 +$ +5.34 +$ +(0.09 +) +$ +0.77 +(1 +)% +14 +% +Production taxes +$ +1.13 +$ +2.13 +$ +2.19 +$ +(1.00 +) +$ +(0.06 +) +(47 +)% +(3 +)% +Ad valorem tax expense +$ +0.39 +$ +0.46 +$ +0.33 +$ +(0.07 +) +$ +0.13 +(15 +)% +39 +% +General and administrative +$ +2.46 +$ +3.03 +$ +3.09 +$ +(0.57 +) +$ +(0.06 +) +(19 +)% +(2 +)% +Depletion, depreciation, amortization, and asset retirement obligation liability accretion +$ +14.34 +$ +13.92 +$ +17.02 +$ +0.42 +$ +(3.10 +) +3 +% +(18 +)% +Derivative settlement gain (2)(3) +$ +7.98 +$ +0.22 +$ +0.42 +$ +7.76 +$ +(0.20 +) +3,527 +% +(48 +)% +Earnings per share information +Basic net income (loss) per common share +$ +(6.61 +) +$ +9.91 +$ +2.57 +$ +(16.52 +) +$ +7.34 +(167 +)% +286 +% +Diluted net income (loss) per common share +$ +(6.61 +) +$ +9.79 +$ +2.51 +$ +(16.40 +) +$ +7.28 +(168 +)% +290 +% +Basic weighted-average common shares outstanding (in thousands) +67,723 +67,230 +66,615 +493 +615 +1 +% +1 +% +Diluted weighted-average common shares outstanding (in thousands) +67,723 +68,044 +67,998 +(321 +) +46 +— +% +— +% +65 +____________________________________________ +(1) Amounts and percentage changes may not calculate due to rounding. +(2) We discontinued hedge accounting on January 1, 2011. As a result, fair values at December 31, 2010, were frozen in accumulated other comprehensive loss (“AOCL”) and were reclassified into earnings as the original derivative transactions settled, the last of which settled in the third quarter of 2013. For the year ended December 31, 2013, derivative settlements are included within the other operating revenues and derivative gain line items in the accompanying statements of operations. All derivative settlements for the years ended December 31, 2015, and 2014, are included within the derivative gain line item only. +(3) Natural gas derivative settlements for the years ended December 31, 2015, and 2014, include $15.3 million and $5.6 million , respectively, of early settlements of futures contracts as a result of divesting assets in our Mid-Continent region. These early settlements increased the effect of derivative settlements by $0.09 per Mcf and $0.04 per Mcf for the years ended December 31, 2015, and 2014, respectively. +We present per BOE information because we use this information to evaluate our performance relative to our peers and to identify and measure trends we believe may require additional analysis. Average daily production for the year ended December 31, 2015 , increased 16 percent compared to the same period in 2014 , driven by continued development of our Eagle Ford shale and Bakken/Three Forks programs. We expect production to decrease in 2016 when compared to 2015 as a result of the sale of our Mid-Continent assets during the second quarter of 2015 and reduced drilling and completion activity in late 2015 and throughout 2016 in response to the sustained low commodity price environment. Please refer to Comparison of Financial Results and Trends between 2015 and 2014 and between 2014 and 2013 below for additional discussion. +Changes in production volumes, revenues, and costs reflect the highly volatile nature of our industry. Our realized price on a per BOE basis for the year ended December 31, 2015 , decreased 48 percent compared to 2014 as a result of significantly lower commodity prices. Our derivative contracts resulted in a $7.98 settlement gain on a per BOE basis for the year ended December 31, 2015 . +Lease operating expense (“LOE”) on a per BOE basis for the year ended December 31, 2015 , decreased 13 percent compared to the same period in 2014 . Our LOE is comprised of recurring LOE and workover expense. We experience volatility in our LOE as a result of the impact industry activity has on service provider costs and seasonality in workover expense. Industry activity has significantly decreased in light of the low commodity price environment resulting in service providers lowering costs. For 2016, we expect LOE on a per BOE basis to increase compared with 2015 due to the anticipated decline in year-over-year production exceeding any further decrease in service provider costs. +Transportation costs on a per BOE basis for the year ended December 31, 2015 , slightly decreased compared to the same period in 2014 . Our Eagle Ford shale assets have meaningfully higher transportation expense per unit of production compared to assets in our other regions. Ongoing development of the Eagle Ford shale program has resulted in production from these assets becoming a larger portion of our total production, thereby increasing company-wide transportation expense per BOE over time. We expect transportation costs on a per BOE basis to increase in 2016 compared with 2015 as a result of the change in our production mix due to the sale of our Mid-Continent assets in the second quarter of 2015. +Production taxes on a per BOE basis for the year ended December 31, 2015 , decreased 47 percent compared to the same period in 2014 driven by the decrease in production revenues, as well as a decrease in our company-wide production tax rate as a result of divesting our Mid-Continent assets in the second quarter of 2015. We generally expect production tax expense to trend with oil, gas, and NGL production revenue on an absolute and per BOE basis. Product mix, the location of production, and incentives to encourage oil and gas development can all impact or change the amount of production tax we recognize. +General and administrative (“G&A”) expense on a per BOE basis for the year ended December 31, 2015 , decreased 19 percent compared to the same period in 2014 due to a six percent decrease in absolute G&A expense combined with a 16 percent increase in production. The decrease in absolute G&A expense is driven by lower short-term incentive compensation, as well as reduced headcount and overhead cost in the second half of 2015 upon +66 +closing our Tulsa office, partially offset by the $9.3 million of exit and disposal costs incurred related to this closure. A portion of our G&A expense is linked to our profitability and cash flow, which are driven in large part by the realized commodity prices we receive for our production. In 2016, we expect absolute G&A expense to decrease due to the reduced headcount resulting from the closure of our Tulsa office being in effect for the entire year, as well as other general corporate cost saving initiatives. We expect G&A on a per BOE basis to be relatively flat in 2016 compared with 2015 as we anticipate the reduction in absolute G&A expense to be partially offset by a decrease in production year-over-year. +Depletion, depreciation, amortization, and asset retirement obligation liability accretion ( “DD&A”) expense, for the year ended December 31, 2015 , increased three percent , on a per BOE basis, compared to the same period in 2014 . Our DD&A rate fluctuates as a result of impairments, planned and closed divestitures, and changes in the mix of our production and the underlying proved reserve volumes. The continued decrease in commodity prices resulted in a decrease in proved reserve volumes and consequently an increased DD&A rate for the last half of 2015. In general, excluding the impact of commodity pricing in recent months, our DD&A rate has decreased over the past several years as assets with lower finding and development costs have become a larger portion of our total production mix. Our finding and development costs have benefited from a general decrease in well costs and an increase in recoveries per well, as well as from our outside-operated Eagle Ford shale program, where from 2011 through the first half of 2014 we added reserves with minimal associated costs due to our carry with Mitsui E&P Texas LP ( “Mitsui”). Please refer to Note 12 - Acquisition and Development Agreement in Part II, Item 8 of this report for additional discussion on the Mitsui transaction. We expect DD&A expense on a per BOE basis to increase in 2016 in line with the increase that occurred in the last half of 2015 as discussed above, partially offset by reductions in the cost basis to be depleted due to proved properties that were impaired at December 31, 2015. Our DD&A rate will be further impacted should commodity prices further decline in 2016, which could result in lower proved reserves and additional impairments. Please refer to Comparison of Financial Results and Trends between 2015 and 2014 and between 2014 and 2013 for additional discussion. +Please refer to the section Earnings per Share in Note 1 - Summary of Significant Accounting Policies in Part II, Item 8 of this report for additional discussion on the types of shares included in our basic and diluted net income (loss) per common share calculations. We recorded a net loss for the year ended December 31, 2015. Consequently, our unvested RSUs and contingent PSUs were anti-dilutive for the year ended December 31, 2015, resulting in a decrease in the diluted weighted-average common shares outstanding for the year ended December 31, 2015, when compared to 2014. +Comparison of Financial Results and Trends between 2015 and 2014 and between 2014 and 2013 +Oil, gas, and NGL production +The following table presents the regional changes in our oil, gas, and NGL production, production revenues, and production costs between the years ended December 31, 2015 , and 2014 : +Average Net Daily Production Increase (Decrease) +Production Revenue Decrease +Production Costs Increase (Decrease) +(MBOE/d) +(in millions) +(in millions) +South Texas & Gulf Coast +22.8 +$ +(587.8 +) +$ +54.0 +Rocky Mountain +7.2 +(230.5 +) +(8.2 +) +Permian +(0.2 +) +(98.8 +) +(16.6 +) +Mid-Continent (1) +(4.9 +) +(64.5 +) +(21.5 +) +Total +24.9 +$ +(981.6 +) +$ +7.7 +___________________________________________ +(1) We divested our Mid-Continent assets in the second quarter of 2015. +67 +Our 16 percent increase in equivalent production volumes from 2014 to 2015 is offset by a 48 percent decrease in realized price on a per BOE basis, resulting in a 40 percent decrease in oil, gas, and NGL production revenue between the two periods. Please refer to the caption Oil, gas, and NGL production expense below for discussion on the reasons for the change in production costs from 2014 to 2015. +The following table presents the regional changes in our oil, gas, and NGL production, production revenues, and production costs between the years ended December 31, 2014 , and 2013 : +Average Net Daily Production Increase (Decrease) +Production Revenue Increase (Decrease) +Production Costs Increase (Decrease) +(MBOE/d) +(in millions) +(in millions) +South Texas & Gulf Coast +25.5 +$ +359.1 +$ +104.3 +Rocky Mountain +3.6 +40.6 +31.0 +Permian +1.0 +7.2 +(0.5 +) +Mid-Continent +(11.5 +) +(125.0 +) +(15.9 +) +Total +18.6 +$ +281.9 +$ +118.9 +The significant production growth in our Eagle Ford shale program from 2013 to 2014 far exceeded the production decrease in our Mid-Continent region, which resulted from the divestiture of our assets in the Anadarko Basin in December 2013. A 14 percent increase in production from 2013 to 2014 on an equivalent basis combined with a one percent decrease in realized price per BOE resulted in a 13 percent increase in revenue between the two periods. Please refer to the caption Oil, gas, and NGL production expense below for discussion on the reasons for the change in production costs from 2013 to 2014. +Please refer to A year-to-year overview of selected production and financial information, including trends above for realized prices received before the effects of derivative settlements for the years ended December 31, 2015 , 2014 , and 2013, and discussion of trends on a per BOE basis. +Net gain on divestiture activity +The following table presents our net gain on divestiture activity for the periods presented: +For the Years Ended December 31, +2015 +2014 +2013 +(in millions) +Net gain on divestiture activity +$ +43.0 +$ +0.6 +$ +28.0 +The net gain on divestiture activity recorded for the year ended December 31, 2015 , is due to the $108.4 million net gain recorded on the sale of our Mid-Continent assets in the second quarter, partially offset by the write-down to fair value of certain other assets held for sale and subsequently divested during 2015. +The minimal net gain on divestiture activity recorded for the year ended December 31, 2014 , is due to the $26.9 million gain realized on the sale of non-strategic properties in the Williston Basin in our Rocky Mountain region during the second quarter of 2014, which was mostly offset by write-downs to fair value recorded on other unrelated assets held for sale. +The net gain on divestiture activity recorded for the year ended December 31, 2013 , is due to the net gains recorded on the divestitures of certain assets in our Mid-Continent and Rocky Mountain regions of $25.3 million and $13.2 million , respectively, slightly offset by a $7.0 million loss recorded on the divestiture of non-strategic assets in our Permian region. +68 +Please refer to Note 3 – Divestitures, Assets Held for Sale, and Acquisitions in Part II, Item 8 of this report for additional discussion. +Marketed gas system revenue and expense +The following table presents our marketed gas system revenue and expense for the periods presented: +For the Years Ended December 31, +2015 +2014 +2013 +(in millions) +Marketed gas system revenue +$ +9.5 +$ +24.9 +$ +60.0 +Marketed gas system expense +$ +13.9 +$ +24.5 +$ +57.6 +Marketed gas system revenue decreased $15.4 million from 2014 to 2015 . Concurrent with the decrease in marketed gas system revenue, marketed gas system expense decreased $10.5 million from 2014 to 2015 . This decrease was due to the sale of our Mid-Continent gas assets in the second quarter of 2015, which eliminated all marketed gas volumes and thus all future marketed gas activity. +Marketed gas system revenue decreased $35.1 million from 2013 to 2014 . Concurrent with the decrease in marketed gas system revenue, marketed gas system expense decreased $33.2 million from 2013 to 2014 . The decrease occurred as a result of the divestiture of our assets in the Anadarko Basin in December 2013. +Other operating revenues +The following table presents our other operating revenues for the periods presented: +For the Years Ended December 31, +2015 +2014 +2013 +(in millions) +Other operating revenues +$ +4.5 +$ +15.2 +$ +5.8 +Other operating revenues for the year ended December 31, 2014, included a $10.7 million gain recorded in the second quarter of 2014 related to our settlement with Endeavour Operating Corporation (“Endeavour”), in which we, our working interest partners, and Endeavour agreed to mutually release all claims and dismiss certain litigation in exchange for certain cash payments and other consideration. This settlement gain is the primary cause of the $10.7 million decrease from 2014 to 2015 and the $9.4 million increase from 2013 to 2014, as there was no additional significant other operating revenue activity recorded for the years ended December 31, 2015, 2014, or 2013. +Oil, gas, and NGL production expense +The following table presents our oil, gas, and NGL production expense for the periods presented: +For the Years Ended December 31, +2015 +2014 +2013 +(in millions) +Oil, gas, and NGL production expense +$ +723.6 +$ +715.9 +$ +597.0 +Total production costs increased $7.7 million , or one percent , from 2014 to 2015 , primarily due to a 16 percent increase in net equivalent production volumes and a 15 percent increase in transportation expense resulting +69 +from the continued development of our Eagle Ford shale program, largely offset by lower service provider costs and decreased production taxes due to lower commodity prices. Please refer to the caption A year-to-year overview of selected production and financial information, including trends above for discussion of production costs on a per BOE basis. +Total production costs increased $118.9 million , or 20 percent , from 2013 to 2014 primarily due to a 14 percent increase in production volumes on a per BOE basis, as well as an overall increase in transportation costs in our South Texas & Gulf Coast region. +Depletion, depreciation, amortization, and asset retirement obligation liability accretion +The following table presents our DD&A expense for the periods presented: +For the Years Ended December 31, +2015 +2014 +2013 +(in millions) +Depletion, depreciation, amortization, and asset retirement obligation liability accretion +$ +921.0 +$ +767.5 +$ +822.9 +DD&A expense increased 20 percent in 2015 compared with 2014 , primarily due to the increase in production volumes and DD&A rate in 2015, partially offset by our Mid-Continent assets held for sale in the beginning of 2015 and sold in the second quarter. Please refer to the caption A year-to-year overview of selected production and financial information, including trends above for discussion of DD&A expense on a per BOE basis. +DD&A expense decreased seven percent in 2014 compared with 2013 , primarily due to an 18 percent decrease in the DD&A rate in 2014 driven largely by lower finding and development costs, partially offset by the 14 percent increase in production volumes. +Exploration +The components of exploration expense are summarized as follows: +For the Years Ended December 31, +2015 +2014 +2013 +Summary of Exploration Expense +(in millions) +Geological and geophysical expenses +$ +7.5 +$ +11.4 +$ +4.3 +Exploratory dry hole +36.6 +44.4 +5.8 +Overhead and other expenses +76.5 +74.1 +64.0 +Total +$ +120.6 +$ +129.9 +$ +74.1 +Exploration expense for 2015 decreased seven percent compared with 2014 mainly due to decreases in exploratory dry hole expense and geological and geophysical (“G&G”) expenses in 2015. During 2015, we expensed one exploratory dry hole in our Rocky Mountain region and three lower cost non-Eagle Ford exploratory dry holes in our South Texas & Gulf Coast region, compared to three higher cost exploratory non-Eagle Ford dry holes expensed in our South Texas & Gulf Coast region in 2014. An exploratory project resulting in non-commercial quantities of oil, gas, or NGLs is deemed an exploratory dry hole and impacts the amount of exploration expense we record. During the first quarter of 2014, we performed a seismic study in our Powder River Basin program, which resulted in increased G&G expenses in 2014 compared to 2015 and 2013. +70 +Exploration expense for 2014 increased 75 percent compared with the same period in 2013 mainly due to an increase in exploratory dry hole expense and G&G expense, as discussed above, in addition to higher exploration overhead. +Impairment of proved properties and abandonment and impairment of unproved properties +The following table presents our impairment of proved properties expense and abandonment and impairment of unproved properties expense for the periods presented: +For the Years Ended December 31, +2015 +2014 +2013 +(in millions) +Impairment of proved properties +$ +468.7 +$ +84.5 +$ +172.6 +Abandonment and impairment of unproved properties +$ +78.6 +$ +75.6 +$ +46.1 +Proved and unproved property impairments recorded in 2015 were due to continued commodity price declines, largely impacting our Powder River Basin program and certain legacy and non-core assets, as well as our decision to reduce capital invested in the development of our east Texas exploration program in light of the sustained, low commodity price environment. Commodity prices significantly declined subsequent to the filing date of our September 30, 2015 Quarterly Report on Form 10-Q resulting in additional impairments of proved and unproved properties in the fourth quarter of 2015 totaling $398.8 million . Any amount of future impairments is difficult to predict. If commodity prices remain at levels near those as of January 31, 2016, we would expect to incur impairments in the first quarter of 2016 of up to approximately $250 million. If commodity prices deteriorate further, additional impairments in future periods could occur. In addition to future commodity price declines, changes in drilling plans, downward engineering revisions, or unsuccessful exploration efforts may result in additional proved and unproved property impairments. +Proved and unproved property impairments recorded in 2014 were due to the significant decline in commodity prices in late 2014 resulting in changes in our drilling plans and the abandonment of certain acreage, as well as recognition of the outcomes of exploration and delineation wells in certain prospects in our South Texas & Gulf Coast and Permian regions. +Proved and unproved property impairments recorded in 2013 were a result of negative engineering revisions on our Mississippian limestone assets in our Permian region at the end of the year, the commencement of a plugging and abandonment program of dry gas assets in the Olmos interval in our South Texas & Gulf Coast region, and our decision to no longer pursue the development of certain under-performing assets during the year. +Impairment of other property and equipment +The following table presents our impairment of other property and equipment for the periods presented: +For the Years Ended December 31, +2015 +2014 +2013 +(in millions) +Impairment of other property and equipment +$ +49.4 +$ +— +$ +— +We impaired our gas gathering system assets in our east Texas program during the year ended December 31, 2015 , in conjunction with the impairment of the associated proved and unproved properties resulting from our decision not to allocate additional capital to the program in light of sustained low commodity prices. We did not record impairments of other property and equipment for the years ended December 31, 2014, or 2013. +71 +General and administrative +The following table presents our general and administrative expense for the periods presented: +For the Years Ended December 31, +2015 +2014 +2013 +(in millions) +General and administrative +$ +157.7 +$ +167.1 +$ +149.6 +G&A expense decreased $9.4 million , or six percent , from 2014 to 2015 due to lower short-term incentive compensation and reduced headcount and overhead costs resulting from the closing of our Tulsa office in the beginning of the third quarter of 2015. Included in G&A expense for the year ended December 31, 2015 , is $9.3 million of exit and disposal costs related to the closure of our Tulsa office. Please refer to the caption A year-to-year overview of selected production and financial information, including trends above for discussion of G&A costs on a per BOE basis. +G&A expense increased $17.6 million from 2013 to 2014 due primarily to an increase in employee headcount during 2014, which resulted in increased base compensation, benefits, and general office expenses. +Change in Net Profits Plan liability +The following table presents the change in our Net Profits Plan liability for the periods presented: +For the Years Ended December 31, +2015 +2014 +2013 +(in millions) +Change in Net Profits Plan liability +$ +(19.5 +) +$ +(29.8 +) +$ +(21.8 +) +This non-cash benefit generally relates to the change in the estimated value of the associated liability between the reporting periods resulting from settlements made or accrued during the period and changes in assumptions used for production rates, reserve quantities, commodity pricing, discount rates, and production costs. The non-cash benefit for 2015 and 2014 is a result of a 72 percent and 52 percent respective decrease in the corresponding liability, which is a result of the continued decline in commodity prices and cash payments made or accrued under the plan. For 2015 and 2014, these cash payments included $3.8 million and $8.3 million , respectively, related to proceeds received from asset divestitures. The non-cash benefit for 2013 is due to cash payments made or accrued under the plan, of which $10.3 million related to divestiture proceeds, slightly offset by an increase in the corresponding liability. We generally expect the change in our Net Profits Plan liability to correlate with fluctuations in commodity prices. +Derivative gain +The following table presents our derivative gain for the periods presented: +For the Years Ended December 31, +2015 +2014 +2013 +(in millions) +Derivative gain +$ +(408.8 +) +$ +(583.3 +) +$ +(3.1 +) +72 +We recognized a derivative gain of $408.8 million for the year ended December 31, 2015 , consisting of a $512.6 million gain related to settled contracts, partially offset by a $103.7 million decrease in the fair value of commodity derivative contracts during the period. The decrease in the fair value of commodity derivative contracts is related to the settlement of our 2015 contracts, largely offset by an increase in the fair value of remaining contracts as of December 31, 2015, due to the continued decline in forward commodity strip prices. This compares to a net derivative gain of $583.3 million for the same period in 2014 , which consists of a $12.6 million gain on settlements and a $570.7 million increase in the fair value of commodity derivative contracts during the period. Forward commodity strip prices declined at the end of 2014 and continued to decline throughout 2015, resulting in a significant gain on commodity derivative contracts settled in 2015 and a favorable mark-to-market adjustment on our commodity derivative contracts remaining at December 31, 2015. +As noted above, commodity strip pricing declined at the end of 2014, resulting in a significant increase in the fair value of our commodity derivative contracts at December 31, 2014. This compared to a derivative gain of $3.1 million for the year ended December 31, 2013 , which consisted of a $22.1 million gain on settlements and a $19.0 million decrease in the fair value of commodity derivative contracts during the period. +Please refer to Note 10 - Derivative Financial Instruments in Part II, Item 8 of this report for additional discussion. +Other operating expenses +The following table presents our other operating expenses for the periods presented: +For the Years Ended December 31, +2015 +2014 +2013 +(in millions) +Other operating expenses +$ +30.6 +$ +4.7 +$ +30.1 +Other operating expenses increased approximately $26.0 million from 2014 to 2015 . The increase is primarily due to $13.7 million of expense related to the early termination of drilling rig contracts or fees incurred on rigs placed on standby, $5.3 million of expense related to estimated claims for payment of royalties on certain Federal and Indian leases, as well as a $4.1 million materials inventory write-down during 2015. +Other operating expenses decreased $25.4 million from 2013 to 2014 . In 2013, other operating expenses included $23.1 million of expenses related to an agreed clarification concerning royalty payment provisions of various leases on certain South Texas & Gulf Coast acreage. +Loss on extinguishment of debt +The following table presents our loss on extinguishment of debt for the periods presented: +For the Years Ended December 31, +2015 +2014 +2013 +(in millions) +Loss on extinguishment of debt +$ +(16.6 +) +$ +— +$ +— +For the year ended December 31, 2015 , we recorded a $16.6 million loss on the early extinguishment of our 2019 Notes, which includes approximately $12.5 million associated with the premium paid for the tender offer and redemption of the notes and approximately $4.1 million for the acceleration of unamortized deferred financing costs. Please refer to Note 5 - Long-Term Debt in Part II, Item 8 of this report for additional information. +73 +Income tax (expense) benefit +The following table presents our income tax (expense) benefit for the periods presented: +For the Years Ended December 31, +2015 +2014 +2013 +(in millions, except tax rate) +Income tax (expense) benefit +$ +275.2 +$ +(398.6 +) +$ +(107.7 +) +Effective tax rate +38.1 +% +37.4 +% +38.6 +% +The increase in the effective tax rate in 2015 compared to 2014 resulted from a tax benefit effect of Oklahoma permanent tax benefits, enacted state rate changes in Texas and North Dakota, and claimed research and development (“R&D”) credits added to the benefit created by a pre-tax loss recorded for the year ended December 31, 2015. Please refer to Note 4 - Income Taxes in Part II, Item 8 of this report for further discussion. +The increase in income tax expense for the year ended December 31, 2014, generally trends with the increase in pre-tax net income. The net decrease in the effective tax rate from 2013 to 2014 is partially attributable to our 2013 Anadarko Basin divestiture, which caused a decrease in the composition of our blended state tax rate for future years, offset by an increase in our valuation allowance on state net operating losses in 2014. +Overview of Liquidity and Capital Resources +Based on the current commodity price environment, we believe we have sufficient liquidity and capital resources to execute our business plan for the foreseeable future. We continue to manage the duration and level of our drilling and completion service commitments to maintain the flexibility to adjust our activity and capital expenditures in periods of prolonged weak commodity prices or to respond should commodity prices recover. +Sources of cash +We currently expect our 2016 capital program to be primarily funded by cash flows from operations with any remaining cash needs to be funded by borrowings under our credit facility. Although we anticipate that cash flows from these sources will be sufficient to fund our expected 2016 capital program, we may also elect to access the capital markets, depending on prevailing market conditions, as well as divest additional non-strategic oil and gas properties to provide additional sources of funding. From time to time, we may enter into carrying cost funding and sharing arrangements with third parties for particular exploration and/or development programs. Our credit ratings were recently downgraded by two major rating agencies. These downgrades and any future downgrades may make it more difficult or expensive for us to borrow additional funds. All of our sources of liquidity can be impacted by the general condition of the broader economy and by fluctuations in commodity prices, operating costs, and volumes produced, all of which affect us and our industry. We have no control over the market prices for oil, gas, or NGLs, although we may be able to influence the amount of our realized revenues from our oil, gas, and NGL sales through the use of derivative contracts as part of our commodity price risk management program. During 2015, cash received from the settlement of commodity derivative contracts provided a significant positive source of cash, which is reflected in net cash provided by operating activities on our consolidated statements of cash flows. The fair value of our commodity derivative contracts was a net asset of $488.4 million at December 31, 2015 , of which $367.7 million relates to contracts expected to settle in 2016. As our derivative contracts settle in future periods, and if commodity prices remain at current levels or further decline, our future cash flow from operations will be negatively impacted. Please refer to Note 10 – Derivative Financial Instruments of Part II, Item 8 of this report for additional information about our oil, gas, and NGL derivative contracts currently in place and the timing of settlement of those contracts . There is additional discussion in the referenced note regarding certain commodity derivative contracts restructured subsequent to December 31, 2015, that effectively increased the natural gas volume swaps we have in place in 2017 and eliminated the natural gas volume swaps in place in 2018 and 2019. Decreases in commodity prices have limited our industry’s access to capital markets. The borrowing base under our +74 +credit facility could be reduced as a result of lower commodity prices, divestitures of proved properties, or newly issued debt. See Credit facility below for a discussion of our most recent borrowing base redetermination and our anticipated borrowing base reduction in 2016. +In the second quarter of 2015, we issued $500.0 million in aggregate principal amount of 5.625% Senior Notes due 2025 . We used the net proceeds of $491.0 million for the tender and redemption of the $350.0 million principal amount of our 2019 Notes, as well as to repay outstanding borrowings under our credit facility and for general corporate purposes. +Proposals to reform the Internal Revenue Code (“IRC”), which include eliminating or reducing current tax deductions for intangible drilling costs, depreciation of equipment acquisition costs, the domestic production activities deduction, percentage depletion, and other deductions which reduce our taxable income, continue to circulate. We expect that future legislation modifying or eliminating these deductions would reduce net operating cash flows over time, thereby reducing funding available for our exploration and development capital programs, as well as funding available to our peers in the industry for similar programs. If enacted, these reductions in available deductions could have a significant adverse effect on drilling in the United States for a number of years. +Credit facility +Our Fifth Amended and Restated Credit Agreement, as amended (the “Credit Agreement”) provides a maximum loan amount of $2.5 billion , current aggregate lender commitments of $1.5 billion , and a maturity date of December 10, 2019 . Our borrowing base is subject to regular semi-annual redeterminations. Effective as of October 7, 2015 , our lenders decreased the borrowing base to $2.0 billion from $2.4 billion , which was primarily a result of the sale of our Mid-Continent assets, and adjustments consistent with lower commodity prices. The borrowing base redetermination process under the credit facility considers the value of our proved oil and gas properties and our commodity derivative contracts, as determined by the lender group. We expect an additional reduction in our borrowing base in the first half of 2016 due to the decrease in our proved reserves that we reported as of December 31, 2015, resulting from the continued decline in commodity prices. We do not expect to be negatively impacted by this anticipated borrowing base reduction, as we currently plan to spend within adjusted EBITDAX during 2016 and believe the revised borrowing base amount will be sufficient to meet our anticipated liquidity and operating needs. No individual bank participating in our credit facility represents more than 10 percent of the lender commitments under the credit facility. Borrowings under our credit facility are secured by mortgages on assets having a value equal to at least 75 percent of the total value of our proved oil and gas properties. Please refer to Note 5 - Long-Term Debt in Part II, Item 8 of this report for additional discussion as well as the presentation of the outstanding balance, total amount of letters of credit, and available borrowing capacity under our credit facility as of February 17, 2016 , December 31, 2015 , and December 31, 2014 . +We are subject to customary covenants under our credit facility, including limitations on dividend payments and requirements to maintain certain financial ratios, which include debt to adjusted EBITDAX, as defined by our Credit Agreement as the ratio of debt to 12-month trailing adjusted EBITDAX, of less than 4.0 and an adjusted current ratio, as defined by our Credit Agreement, of no less than 1.0. Please refer to the caption Non-GAAP Financial Measures below. As of December 31, 2015 , our debt to EBITDAX ratio and adjusted current ratio were 2.3 and 4.8 , respectively. As of the filing date of this report, we are in compliance with all financial and non-financial covenants under our credit facility. +75 +Our daily weighted-average credit facility debt balance was approximately $253.7 million and $86.6 million for the years ended December 31, 2015 , and 2014 , respectively. Despite the decrease in our net operating cash flows for the year ended December 31, 2015, resulting from the continued decline in commodity prices, we were able to limit our credit facility borrowings through divestiture proceeds, primarily from the sale of our Mid-Continent assets, and the issuance of our 2025 Notes in the second quarter of 2015. Our daily weighted-average credit facility debt balance was lower throughout 2014 as a result of proceeds received from property divestitures in the fourth quarter of 2013, as well the proceeds from our 2022 Notes being used to reduce our credit facility balance in the fourth quarter of 2014. Cash flows provided by our operating activities, proceeds received from divestitures of properties and debt issuances, and the amount of our capital expenditures all impact the amount we have borrowed under our credit facility. +Weighted-average interest rates +Our weighted-average interest rates include paid and accrued interest, fees on the unused portion of the credit facility’s aggregate commitment amount, letter of credit fees, and the non-cash amortization of deferred financing costs. Our weighted-average borrowing rates include paid and accrued interest only. +The following table presents our weighted-average interest rates and our weighted-average borrowing rates for the years ended December 31, 2015 , 2014 , and 2013 . +For the Years Ended December 31, +2015 +2014 +2013 +Weighted-average interest rate +6.0 +% +6.5 +% +6.3 +% +Weighted-average borrowing rate +5.5 +% +5.9 +% +5.7 +% +Our weighted-average interest rates and weighted average borrowing rates for the years ended December 31, 2015 , 2014 , and 2013 , have been impacted by the timing of Senior Notes issuances and redemption, the average balance on our revolving credit facility, and the fees paid on the unused portion of our aggregate commitment. The rates disclosed in the above table for the year ended December 31, 2015, do not reflect the approximate $12.5 million premium paid for the tender offer and redemption of the 2019 Notes or the approximate $4.1 million of unamortized deferred financing costs expensed upon extinguishment of these notes during the second quarter of 2015. Please refer to Note 5 - Long-Term Debt in Part II, Item 8 of this report for additional discussion. +Uses of cash +We use cash for the acquisition, exploration, and development of oil and gas properties and for the payment of operating and general and administrative costs, income taxes, dividends, and debt obligations, including interest. Expenditures for the acquisition, exploration, and development of oil and gas properties are the primary use of our capital resources. During 2015 , we spent $1.5 billion in capital expenditures and in acquiring proved and unproved oil and gas properties. These amounts differ from the costs incurred amounts, which are accrual-based and include asset retirement obligation, G&G, and exploration overhead amounts. +The amount and allocation of future capital expenditures will depend upon a number of factors, including the number and size of acquisition opportunities, our cash flows from operating, investing, and financing activities, and our ability to assimilate acquisitions and execute our drilling program. In addition, the impact of oil, gas, and NGL prices on investment opportunities, the availability of capital, and the timing and results of our operated and non-operated exploration and development activities may lead to changes in funding requirements for future development. We periodically review our capital expenditure budget to assess changes in current and projected cash flows, acquisition and divestiture activities, debt requirements, and other factors. +76 +We may from time to time repurchase certain amounts of our outstanding debt securities for cash and/or through exchanges for other securities. Such repurchases or exchanges may be made in open market transactions, privately negotiated transactions, or otherwise. Any such repurchases or exchanges will depend on prevailing market conditions, our liquidity requirements, contractual restrictions, compliance with securities laws, and other factors. The amounts involved in any such transaction may be material. Repurchases or exchanges are reviewed as part of the allocation of our capital. During the second quarter of 2015, we conducted a tender offer and redeemed our 2019 Notes. Please refer to Note 5 - Long-Term Debt in Part II, Item 8 of this report for additional discussion. +As of the filing date of this report, we could repurchase up to 3,072,184 shares of our common stock under our stock repurchase program, subject to the approval of our Board of Directors. Shares may be repurchased from time to time in the open market, or in privately negotiated transactions, subject to market conditions and other factors, including certain provisions of our credit facility, the indentures governing our Senior Notes, compliance with securities laws, and the terms and provisions of our stock repurchase program. Our Board of Directors periodically reviews this program as part of the allocation of our capital. During 2015 , we did not repurchase any shares of our common stock, and we currently do not plan to repurchase any outstanding shares. +During 2015 , we paid $6.8 million in dividends to our stockholders, which constitutes a dividend of $0.10 per share. Our intention is to continue to make dividend payments for the foreseeable future, subject to our future earnings, our financial condition, credit facility and other covenants, and other factors which could arise. The payment and amount of future dividends remains at the discretion of our Board of Directors. +Analysis of cash flow changes between 2015 and 2014 and between 2014 and 2013 +The following tables present changes in cash flows between the years ended December 31, 2015 , 2014 , and 2013 , for our operating, investing, and financing activities. The analysis following each table should be read in conjunction with our consolidated statements of cash flows in Part II, Item 8 of this report. +Operating Activities +For the Years Ended +December 31, +Amount Change Between +Percent Change Between +2015 +2014 +2013 +2015/2014 +2014/2013 +2015/2014 +2014/2013 +(in millions) +Net cash provided by operating activities +$ +978.4 +$ +1,456.6 +$ +1,338.5 +$ +(478.2 +) +$ +118.1 +(33 +)% +9 +% +Cash received from oil, gas, and NGL production revenues, net of transportation costs and production taxes, including derivative cash settlements, decreased $366.1 million , or 18 percent , to $1.7 billion for the year ended December 31, 2015 , compared with the same period in 2014 . Cash paid for LOE increased $22.2 million , or 10 percent , to $252.5 million in 2015 compared with the same period in 2014 due primarily to a 16 percent increase in production volumes, partially offset by a reduction in service provider costs. Cash paid for interest, net of capitalized interest, increased $37.8 million during 2015 compared to 2014 due to making, in 2015, the first interest payment on our 2022 Notes issued at the end of 2014. Additionally, we paid approximately $12.5 million associated with the premium for the tender offer and redemption of the 2019 Notes. +77 +Cash received from oil, gas, and NGL production revenues, net of transportation costs and production taxes, including derivative cash settlements, increased $256.0 million , or 14 percent , to $2.0 billion for the year ended December 31, 2014 , compared to 2013 . Cash paid for lease operating expenses in 2014 increased $20.6 million , or nine percent , from 2013 . These increases were primarily the result of a 14 percent increase in production volumes. Cash paid for interest, net of capitalized interest, increased $18.4 million during 2014 compared to 2013 due to making, in 2014, the first interest payment on our 2024 Notes issued in 2013. Additionally, cash bonuses paid in 2014 for the 2013 performance year were $41.8 million compared to $16.3 million paid in 2013 for the 2012 performance year. These changes are offset by a decrease in other operating working capital in 2014. +Investing Activities +For the Years Ended +December 31, +Amount Change Between +Percent Change Between +2015 +2014 +2013 +2015/2014 +2014/2013 +2015/2014 +2014/2013 +(in millions) +Net cash used in investing activities +$ +(1,144.6 +) +$ +(2,478.7 +) +$ +(1,192.9 +) +$ +1,334.1 +$ +(1,285.8 +) +(54 +)% +108 +% +Capital expenditures in 2015 decreased $481.2 million , or 24 percent , compared to 2014 . Drilling capital incurred decreased approximately 38 percent in 2015 compared to 2014 as a result of reduced operated and non-operated rig count and lower service provider costs. Partially offsetting this decrease in capital activity was our payment, in 2015, of a significant amount of accrued payables at year-end 2014. Additionally, we did not have significant acquisition activity during 2015, whereas we acquired $544.6 million of proved and unproved properties in our Gooseneck prospect area and in the Powder River Basin during 2014. Net proceeds from the sale of oil and gas properties increased $314.1 million in 2015 compared to 2014 due primarily to the divestiture of our remaining Mid-Continent assets during the second quarter of 2015. +Capital expenditures in 2014 increased $421.3 million , or 27 percent , compared to 2013 due primarily to increased spending in our Eagle Ford shale and Bakken/Three Forks programs. As discussed above, we acquired proved and unproved properties in our Gooseneck prospect area and in the Powder River Basin in 2014 that resulted in an increase in acquisition costs of $483.0 million when compared to 2013. Net proceeds from the sale of oil and gas properties in 2014 decreased $381.0 million compared to 2013 due primarily to the sale of our Anadarko Basin assets in the fourth quarter of 2013. +Financing Activities +For the Years Ended +December 31, +Amount Change Between +Percent Change Between +2015 +2014 +2013 +2015/2014 +2014/2013 +2015/2014 +2014/2013 +(in millions) +Net cash provided by financing activities +$ +166.2 +$ +740.0 +$ +130.7 +$ +(573.8 +) +$ +609.3 +(78 +)% +466 +% +We received $491.0 million of net proceeds from the issuance of our 2025 Notes in the second quarter of 2015. These proceeds were primarily used for the tender and redemption of the principal amount of $350.0 million of our 2019 Notes. See the Operating Activities section above for discussion of the associated premium paid. In 2014 , we received $590.0 million of net proceeds from the issuance of our 2022 Notes. We had net borrowings under our credit facility of $36.0 million during the year ended December 31, 2015 , compared with net borrowings of $166.0 million in 2014 . +78 +We received $590.0 million of net proceeds from the issuance of our 2022 Notes in 2014 , compared with $490.2 million of net proceeds from the issuance of our 2024 Notes in 2013 . These proceeds were used to repay outstanding borrowings under our credit facility and for general corporate purposes. We had net borrowings under our credit facility of $166.0 million during 2014 compared with net payments of $340.0 million during 2013 . +Interest Rate Risk +We are exposed to market risk due to the floating interest rate on our revolving credit facility. Our Credit Agreement allows us to fix the interest rate for all or a portion of the principal balance of our revolving credit facility for a period up to six months. To the extent that the interest rate is fixed, interest rate changes will affect the credit facility’s fair market value, but will not impact results of operations or cash flows. Conversely, for the portion of the credit facility that has a floating interest rate, interest rate changes will not affect the fair market value, but will impact future results of operations and cash flows. Changes in interest rates do not impact the amount of interest we pay on our fixed-rate Senior Notes, but can impact their fair market values. As of December 31, 2015 , our fixed-rate debt and floating-rate debt outstanding totaled $2.35 billion and $202.0 million , respectively. The carrying amount of our floating-rate debt at December 31, 2015, approximates its fair value. Assuming a constant floating-rate debt level of $202.0 million , the before-tax cash flow impact resulting from a 100 basis point change would be $2.0 million over a 12-month period. Please refer to Note 11 - Fair Value Measurements in Part II, Item 8 of this report for additional discussion on the fair value of our Senior Notes. +Commodity Price Risk +The prices we receive for our oil, gas, and NGL production directly impact our revenue, overall profitability, access to capital, and future rate of growth. Oil, gas, and NGL prices are subject to wide fluctuations in response to changes in supply and demand and other factors. The markets for oil, gas, and NGLs have been volatile, especially over the last year, and these markets will likely continue to be volatile in the future. The prices we receive for our production depend on numerous factors beyond our control. Based on our 2015 production, a 10 percent decrease in our average realized oil, gas, and NGL prices, before the effects of derivative settlements, would have reduced our oil, gas, and NGL production revenues by approximately $79.7 million , $44.7 million , and $25.6 million , respectively. +79 +We enter into commodity derivative contracts in order to reduce the impact of fluctuations in commodity prices. The fair values of our commodity derivative contracts are largely determined by estimates of the forward curves of the relevant price indices. At December 31, 2015 , a 10 percent increase or decrease in the forward curves associated with our oil, gas, and NGL commodity derivative instruments would have changed our net asset positions by approximately $23 million , $46 million , and $14 million , respectively. +Schedule of Contractual Obligations +The following table summarizes our contractual obligations at December 31, 2015 , for the periods specified (in millions): +Contractual Obligations +Total +Less than 1 year +1-3 years +3-5 years +More than 5 years +Long-term debt (1) +$ +2,552.0 +$ +— +$ +— +$ +202.0 +$ +2,350.0 +Interest payments (2) +1,101.3 +146.9 +293.9 +285.1 +375.4 +Delivery commitments (3) +864.0 +87.4 +242.8 +269.1 +264.7 +Operating leases and contracts (3) +100.4 +45.3 +16.8 +14.9 +23.4 +Asset retirement obligations (4) +201.0 +12.4 +45.0 +10.8 +132.8 +Other (5) +47.2 +9.2 +14.9 +13.5 +9.6 +Total +$ +4,865.9 +$ +301.2 +$ +613.4 +$ +795.4 +$ +3,155.9 +____________________________________________ +(1) Long-term debt consists of our Senior Notes and the outstanding balance under our long-term revolving credit facility, and assumes no principal repayment until the due dates of the instruments. The actual payments under our revolving credit facility may vary significantly. +(2) Interest payments on our Senior Notes are estimated assuming no principal repayment until the due dates of the instruments. Interest payments on our credit facility have been estimated using the rate applicable to the balance on our credit facility as of December 31, 2015 , and assume no future borrowings or repayments until the December 10, 2019 , due date. The actual interest payments on our Senior Notes and credit facility may vary significantly. +(3) Please refer to Note 6 – Commitments and Contingencies in Part II, Item 8 of this report for additional discussion regarding our operating leases, contracts, and gathering, processing, and transportation throughput commitments. +(4) +Amounts shown represent estimated future undiscounted plugging and abandonment costs. The discounted obligations are recorded as liabilities on our accompanying consolidated balance sheets as of December 31, 2015 . The timing and amount of the ultimate settlement of these obligations is unknown and can be impacted by economic factors, a change in development plans, and federal and state regulations. Inactive wells as of December 31, 2015 , are shown as an obligation in 2016 due to the substantial uncertainty on the timing of plugging or re-entering these shut-in or temporarily abandoned wells. Please refer to Note 9 – Asset Retirement Obligations in Part II, Item 8 of this report for additional discussion regarding our asset retirement obligations. +(5) +The majority of the amount shown relates to the unfunded portion of our estimated pension liability of $36.8 million , for which we have estimated the timing of future payments based on historical annual contribution amounts. We expect to make contributions to our pension plan in 2016 of $5.8 million . Other amounts include the undiscounted forecasted payments for the Net Profits Plan. Please refer to Note 7 – Compensation Plans and Note 11 - Fair Value Measurements in Part II, Item 8 of this report for additional discussion regarding our Net Profits Plan liability. +Off-balance Sheet Arrangements +As part of our ongoing business, we have not participated in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities (“SPEs”), which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. +We evaluate our transactions to determine if any variable interest entities exist. If it is determined that we are the primary beneficiary of a variable interest entity, that entity is consolidated into our consolidated financial statements. We have not been involved in any unconsolidated SPE transactions in 2015 or 2014 . +80 +Critical Accounting Policies and Estimates +Our discussion of financial condition and results of operations is based upon the information reported in our consolidated financial statements. The preparation of these consolidated financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires us to make assumptions and estimates that affect the reported amounts of assets, liabilities, revenues, and expenses, as well as the disclosure of contingent assets and liabilities as of the date of our financial statements. We base our assumptions and estimates on historical experience and various other sources that we believe to be reasonable under the circumstances. Actual results may differ from the estimates we calculate due to changes in circumstances, global economics and politics, and general business conditions. A summary of our significant accounting policies is detailed in Note 1 – Summary of Significant Accounting Policies in Part II, Item 8 of this report. We have outlined below those policies identified as being critical to the understanding of our business and results of operations and that require the application of significant management judgment. +Oil and gas reserve quantities. Our estimated proved reserve quantities and future net cash flows are critical to the understanding of the value of our business. They are used in comparative financial ratios and are the basis for significant accounting estimates in our financial statements, including the calculations of depletion and impairment of proved oil and gas properties. Future cash inflows and future production and development costs are determined by applying prices and costs, including transportation, quality differentials, and basis differentials, applicable to each period to the estimated quantities of proved reserves remaining to be produced as of the end of that period. Expected cash flows are discounted to present value using an appropriate discount rate. For example, the standardized measure calculations require a 10 percent discount rate to be applied. Although reserve estimates are inherently imprecise, and estimates of new discoveries and undeveloped locations are more imprecise than those of established producing oil and gas properties, we make a considerable effort in estimating our reserves. We engage Ryder Scott, an independent reservoir-evaluation consulting firm, to audit at least 80 percent of our total calculated proved reserve PV-10. We expect proved reserve estimates will change as additional information becomes available and as commodity prices and operating and capital costs change. We evaluate and estimate our proved reserves each year-end. For purposes of depletion and impairment, reserve quantities are adjusted in accordance with GAAP for the impact of additions and dispositions. Changes in depletion or impairment calculations caused by changes in reserve quantities or net cash flows are recorded in the period the reserve estimates change. Please refer to Supplemental Oil and Gas Information in Part II, Item 8 of this report. +The following table presents information about proved reserve changes from period to period due to items we do not control, such as price, and from changes due to production history and well performance. These changes do not require a capital expenditure on our part, but may have resulted from capital expenditures we incurred to develop other estimated proved reserves. Please refer to Reserves included in Part I, Items 1 and 2 of this report for additional discussion. +For the Years Ended December 31, +2015 +2014 +2013 +MMBOE +MMBOE +MMBOE +Change +Change +Change +Revisions resulting from performance +47.3 +11.3 +7.2 +Removal of proved undeveloped reserves no longer in our development plan +(79.4 +) +(4.3 +) +(2.8 +) +Revisions resulting from price changes +(116.5 +) +3.4 +0.6 +Total +(148.6 +) +10.4 +5.0 +As previously noted, commodity prices are volatile, and estimates of reserves are inherently imprecise. Consequently, we expect to continue experiencing these types of changes. Please refer to additional reserves discussion above under Overview of the Company. +81 +The following table reflects the estimated MMBOE change and percentage change to our total reported reserve volumes from the described hypothetical changes: +For the Years Ended December 31, +2015 +2014 +2013 +MMBOE +Percentage +MMBOE +Percentage +MMBOE +Percentage +Change +Change +Change +Change +Change +Change +10% decrease in SEC pricing +(107.6 +) +(23 +)% +(9.6 +) +(2 +)% +(9.8 +) +(2 +)% +10% decrease in proved undeveloped reserves +(22.7 +) +(5 +)% +(26.1 +) +(5 +)% +(22.0 +) +(5 +)% +The table above solely reflects the impact of a 10 percent decrease in SEC pricing or decrease in proved undeveloped reserves and does not include additional impacts to our proved reserves that may result from our internal intent to drill hurdles, changes in future service or equipment costs, or related decreases in production taxes or transportation costs. Additional reserve information can be found in the reserve table and discussion included in Items 1 and 2 of Part I of this report, and in Supplemental Oil and Gas Information of Part II, Item 8 of this report. +Successful efforts method of accounting. GAAP provides for two alternative methods for the oil and gas industry to use in accounting for oil and gas producing activities. These two methods are generally known in our industry as the full cost method and the successful efforts method. Both methods are widely used. The methods are different enough that in many circumstances the same set of facts will provide materially different financial statement results within a given year. We have chosen the successful efforts method of accounting for our oil and gas producing activities. A more detailed description is included in Note 1 - Summary of Significant Accounting Policies of Part II, Item 8 of this report. +Revenue recognition. Our revenue recognition policy is significant because revenue is a key component of our results of operations and our forward-looking statements contained in our analysis of liquidity and capital resources. We derive our revenue primarily from the sale of produced oil, gas, and NGLs. Revenue is recognized when our production is delivered to the purchaser, but payment is generally received between 30 and 90 days after the date of production. No revenue is recognized unless it is determined that title to the product has transferred to a purchaser. At the end of each month, we make estimates of the amount of production delivered to the purchaser and the price we will receive. We use our knowledge of our properties, contractual arrangements, their historical performance, NYMEX, local spot market, and OPIS prices, and other factors as the basis for these estimates. Variances between our estimates and the actual amounts received are recorded in the month payment is received. A 10 percent change in our year end revenue accrual would have impacted total operating revenues by approximately $6 million in 2015 . +Asset retirement obligations. We are required to recognize an estimated liability for future costs associated with the abandonment of our oil and gas properties. We base our estimate of the liability on our historical experience in abandoning oil and gas wells and our current understanding of federal and state regulatory requirements. Our present value calculations require us to estimate the cost, estimate the economic lives and timing of abandonment of our properties, estimate future inflation rates, and determine what credit-adjusted risk-free discount rate to use. The impact to the accompanying consolidated statements of operations from these estimates is reflected in our depreciation, depletion, and amortization calculations and occurs over the remaining life of our respective oil and gas properties. Please refer to Note 9 – Asset Retirement Obligations in Part II, Item 8 of this report for additional discussion. +Impairment of oil and gas properties. Our proved oil and gas properties are recorded at cost. We evaluate our proved properties for impairment when events or changes in circumstances indicate that a decline in the recoverability of their carrying value may have occurred. We estimate the expected future cash flows of our oil and gas properties and compare these undiscounted cash flows to the carrying amount of the oil and gas properties to +82 +determine if the carrying amount is recoverable. If the carrying amount exceeds the estimated undiscounted future cash flows, we will write down the carrying amount of the oil and gas properties to fair value. The factors used to determine fair value include, but are not limited to, estimates of reserves, future commodity prices, future production estimates, estimated future operating and capital expenditures, and discount rates. +Unproved oil and gas properties are assessed periodically for impairment on a prospect-by-prospect basis based on the remaining lease terms, drilling results, commodity price outlook, and future capital allocations. Unproved oil and gas properties are impaired when we determine that the property will not be developed or the carrying value will not be realized. +Please refer to Impairment of Proved and Unproved Properties in Note 1 - Summary of Significant Accounting Policies in Part II, Item 8 of this report for impairment results. +Impairment of property and equipment. Our property and equipment is recorded at cost. We evaluate a long-lived asset, other than proved and unproved properties, when events or changes in circumstances indicate that its carrying value may be greater than its undiscounted future net cash flows. Impairment, if any, is measured as the excess of an asset’s carrying value over its estimated fair value. We use an income valuation technique if there is not a market-observable price for the asset. +Please refer to Impairment of Other Property and Equipment in Note 1 - Summary of Significant Accounting Policies in Part II, Item 8 of this report for impairment results. +Derivatives and Hedging. We periodically enter into commodity derivative contracts to manage our exposure to oil, gas and NGL price volatility. The accounting treatment for the change in fair value of a derivative instrument is dependent upon whether or not a derivative instrument is designated as a cash flow hedge. Prior to January 1, 2011, we designated our commodity derivative contracts as cash flow hedges, for which unrealized changes in fair value were recorded to AOCL, to the extent the hedges were effective. As of January 1, 2011, we elected to de-designate all of our commodity derivative contracts that had been previously designated as cash flow hedges at December 31, 2010. As a result, subsequent to December 31, 2010, we recognize all gains and losses from changes in commodity derivative fair values immediately in earnings rather than deferring any such amounts in AOCL. The estimated fair value of our derivative instruments requires substantial judgment. These values are based upon, among other things, option pricing models, futures prices, volatility, time to maturity, and credit risk. The values we report in our financial statements change as these estimates are revised to reflect actual results, changes in market conditions or other factors, many of which are beyond our control. +Income taxes. We provide for deferred income taxes on the difference between the tax basis of an asset or liability and its carrying amount in our financial statements. This difference will result in taxable income or deductions in future years when the reported amount of the asset or liability is recovered or settled, respectively. Considerable judgment is required in predicting when these events may occur and whether recovery of an asset is more likely than not. Additionally, our federal and state income tax returns are generally not filed before the consolidated financial statements are prepared. Therefore, we estimate the tax basis of our assets and liabilities at the end of each period, as well as the effects of tax rate changes, tax credits, and net operating and capital loss carryforwards and carrybacks. Adjustments related to differences between the estimates we use and actual amounts we report are recorded in the periods in which we file our income tax returns. These adjustments and changes in our estimates of asset recovery and liability settlement could have an impact on our results of operations. A one percent change in our effective tax rate would have changed our calculated income tax benefit by approximately $7 million for the year ended December 31, 2015 . +Accounting Matters +Please refer to the section entitled Recently Issued Accounting Standards under Note 1 – Summary of Significant Accounting Policies in Part II, Item 8 of this report for additional information on the recent adoption of new authoritative accounting guidance. +83 +Environmental +We believe we are in substantial compliance with environmental laws and regulations and do not currently anticipate that material future expenditures will be required under the existing regulatory framework. However, environmental laws and regulations are subject to frequent changes and we are unable to predict the impact that compliance with future laws or regulations, such as those currently being considered as discussed below, may have on future capital expenditures, liquidity, and results of operations. +Hydraulic fracturing. Hydraulic fracturing is an important and common practice that is used to stimulate production of hydrocarbons from tight formations. For additional information about hydraulic fracturing and related environmental matters, see Risk Factors – Risks Related to Our Business – Proposed federal and state legislative and regulatory initiatives relating to hydraulic fracturing could result in increased costs and additional operating restrictions or delays. +Climate Change. In September 2015, the EPA proposed emission standards for methane and VOC for sources in the oil and gas sector constructed or modified after September 1, 2015. The proposed rules expand the 2012 NSPS for VOC emissions from the oil and gas sector to include methane emissions. For sources not affected by the 2012 NSPS, the proposed rule imposes both VOC and methane standards. In particular, the proposal would require methane reductions from centrifugal and reciprocating compressors, pneumatic pumps, fugitive emissions from well sites and compressor stations and equipment leaks at natural gas processing plants. The proposal does not extend to existing sources and the EPA has not indicated when it will propose existing source standards. Additionally, in January of 2016, the BLM proposed additional rules designed to reduce methane venting and flaring from production wells, pneumatic controllers and storage tanks on federal and tribal lands, which are expected to be finalized in 2016. +In June 2013, President Obama announced a Climate Action Plan designed to further reduce greenhouse gas emissions and prepare the nation for the physical effects that may occur as a result of climate change. The Plan targets methane reductions from the oil and gas sector as part of a comprehensive interagency methane strategy. On January 14, 2015, the Obama Administration announced additional steps to reduce methane emissions from the oil and gas sector by 40 to 45 percent by 2025. Pursuant to this commitment, in September of 2015 the EPA proposed emission standards for methane and VOC for sources in the oil and gas sector constructed or modified after September 1, 2015. The proposed rules expand the 2012 NSPS for VOC emissions from the oil and gas sector to include methane emissions. For sources not affected by the 2012 NSPS, the proposed rule imposes both VOC and methane standards. In particular, the proposal would require methane reductions from centrifugal and reciprocating compressors, pneumatic pumps, fugitive emissions from well sites and compressor stations and equipment leaks at natural gas processing plants. The proposal does not extend to existing sources and the EPA has not indicated when it will propose existing source standards. Additionally, in January of 2016, the BLM proposed additional rules designed to reduce methane venting and flaring from production wells, pneumatic controllers and storage tanks on federal and tribal lands, which are expected to be finalized in 2016. In August of 2015, the EPA finalized existing source performance standards as stringent state emission “goals.” The proposed standards focus on re-dispatching electricity from coal-fired units to natural gas combined cycle plants and renewables. In February 2016, however, the Supreme Court stayed these rules pending judicial review. +In addition, the United States Congress has from time to time considered adopting legislation to reduce emissions of greenhouse gases and almost one-half of the states have already taken legal measures to reduce emissions of greenhouse gases primarily through the planned development of greenhouse gas emission inventories and/or regional greenhouse gas cap and trade programs. Most of these cap and trade programs work by requiring major sources of emissions, such as electric power plants, or major producers of fuels, such as refineries and gas processing plants, to acquire and surrender emission allowances. The number of allowances available for purchase is reduced each year in an effort to achieve the overall greenhouse gas emission reduction goal. +The adoption of legislation or regulatory programs to reduce emissions of greenhouse gases could require us to incur increased operating costs, such as costs to purchase and operate emissions control systems, to acquire +84 +emissions allowances, or comply with new regulatory or reporting requirements. Any such legislation or regulatory programs could also increase the cost of consuming, and thereby reduce demand for, the oil and natural gas we produce. Consequently, legislation and regulatory programs to reduce emissions of greenhouse gases could have an adverse effect on our business, financial condition, and results of operations. Finally, it should be noted that some scientists have concluded that increasing concentrations of greenhouse gases in the earth’s atmosphere may produce climate changes that have significant physical effects, such as increased frequency and severity of storms, droughts, floods, and other climatic events. If any such effects were to occur, they could have an adverse effect on our financial condition and results of operations. +In terms of opportunities, the regulation of greenhouse gas emissions and the introduction of alternative incentives, such as enhanced oil recovery, carbon sequestration, and low carbon fuel standards, could benefit us in a variety of ways. For example, although federal regulation and climate change legislation could reduce the overall demand for the oil and natural gas that we produce, the relative demand for natural gas may increase because the burning of natural gas produces lower levels of emissions than other readily available fossil fuels such as oil and coal. In addition, if renewable resources, such as wind or solar power become more prevalent, natural gas-fired electric plants may provide an alternative backup to maintain consistent electricity supply. Also, if states adopt low-carbon fuel standards, natural gas may become a more attractive transportation fuel. Approximately 45 and 46 percent of our production on a BOE basis in 2015 and 2014 , respectively, was natural gas. Market-based incentives for the capture and storage of carbon dioxide in underground reservoirs, particularly in oil and natural gas reservoirs, could also benefit us through the potential to obtain greenhouse gas emission allowances or offsets from or government incentives for the sequestration of carbon dioxide. +Non-GAAP Financial Measures +Adjusted EBITDAX represents net income (loss) before interest expense, other non-operating income or expense, income taxes, depreciation, depletion, amortization, and accretion expense, exploration expense, impairments, non-cash stock-based compensation expense, derivative gains and losses net of settlements, change in the Net Profits Plan liability, and gains and losses on divestitures. Adjusted EBITDAX excludes certain items that we believe affect the comparability of operating results and can exclude items that are generally one-time in nature or whose timing and/or amount cannot be reasonably estimated. Adjusted EBITDAX is a non-GAAP measure that is presented because we believe it provides useful additional information to investors and analysts, as a performance measure, for analysis of our ability to internally generate funds for exploration, development, acquisitions, and to service debt. We are also subject to a financial covenant under our credit facility based on our debt to adjusted EBITDAX ratio. In addition, adjusted EBITDAX is widely used by professional research analysts and others in the valuation, comparison, and investment recommendations of companies in the oil and gas exploration and production industry, and many investors use the published research of industry research analysts in making investment decisions. Adjusted EBITDAX should not be considered in isolation or as a substitute for net income (loss), income (loss) from operations, net cash provided by operating activities, or profitability or liquidity measures prepared under GAAP. Because adjusted EBITDAX excludes some, but not all items that affect net income (loss) and may vary among companies, the adjusted EBITDAX amounts presented may not be comparable to similar metrics of other companies. +85 +The following table provides reconciliations of our net income (loss) and net cash provided by operating activities to adjusted EBITDAX for the periods presented: +For the Years Ended December 31, +2015 +2014 +2013 +(in thousands) +Net income (loss) (GAAP) +$ +(447,710 +) +$ +666,051 +$ +170,935 +Interest expense +128,149 +98,554 +89,711 +Other non-operating (income) expense, net +(649 +) +2,561 +(67 +) +Income tax expense (benefit) +(275,151 +) +398,648 +107,676 +Depletion, depreciation, amortization, and asset retirement obligation liability accretion +921,009 +767,532 +822,872 +Exploration (1) +113,158 +122,577 +65,888 +Impairment of proved properties +468,679 +84,480 +172,641 +Abandonment and impairment of unproved properties +78,643 +75,638 +46,105 +Impairment of other property and equipment +49,369 +— +— +Stock-based compensation expense +27,467 +32,694 +32,347 +Derivative gain +(408,831 +) +(583,264 +) +(3,080 +) +Derivative settlement gain (2) +512,566 +12,615 +22,062 +Change in Net Profits Plan liability +(19,525 +) +(29,849 +) +(21,842 +) +Net gain on divestiture activity +(43,031 +) +(646 +) +(27,974 +) +Loss on extinguishment of debt +16,578 +— +— +Other, net +4,054 +— +— +Adjusted EBITDAX (Non-GAAP) +1,124,775 +1,647,591 +1,477,274 +Interest expense +(128,149 +) +(98,554 +) +(89,711 +) +Other non-operating income (expense), net +649 +(2,561 +) +67 +Income tax (expense) benefit +275,151 +(398,648 +) +(107,676 +) +Exploration (1) +(113,158 +) +(122,577 +) +(65,888 +) +Exploratory dry hole expense +36,612 +44,427 +5,846 +Amortization of deferred financing costs +7,710 +6,146 +5,390 +Deferred income taxes +(276,722 +) +397,780 +105,555 +Plugging and abandonment +(7,496 +) +(8,796 +) +(9,946 +) +Loss on extinguishment of debt +(12,455 +) +— +— +Other, net +9,707 +1,069 +2,775 +Changes in current assets and liabilities +61,728 +(9,302 +) +14,828 +Net cash provided by operating activities (GAAP) +$ +978,352 +$ +1,456,575 +$ +1,338,514 +____________________________________________ +(1) Stock-based compensation expense is a component of exploration expense and general and administrative expense on the accompanying statements of operations. Therefore, the exploration line items shown in the reconciliation above will vary from the amount shown on the accompanying statements of operations for the component of stock-based compensation expense recorded to exploration expense. +(2) +Natural gas derivative settlements for the years ended December 31, 2015, and 2014, include a $15.3 million gain and $5.6 million gain on the early settlement of futures contracts during the second quarter of 2015 and first quarter of 2014, respectively, as a result of divesting our Mid-Continent assets. +86 +ITEM 7A. +QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK +The information required by this item is provided under the captions Commodity Price Risk and Interest Rate Risk in Item 7 above, as well as under the section entitled Summary of Oil, Gas, and NGL Derivative Contracts in Place under Note 10 – Derivative Financial Instruments in Part II, Item 8 of this report and is incorporated herein by reference. +87 +ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA +Report of Independent Registered Public Accounting Firm +The Board of Directors and Stockholders of SM Energy Company and subsidiaries +We have audited the accompanying consolidated balance sheets of SM Energy Company and subsidiaries as of December 31, 2015 and 2014 , and the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2015 . These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. +We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. +In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of SM Energy Company and subsidiaries at December 31, 2015 and 2014 , and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2015 , in conformity with U.S. generally accepted accounting principles. +We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), SM Energy Company and subsidiaries’ internal control over financial reporting as of December 31, 2015 , based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 24, 2016 expressed an unqualified opinion thereon. +/s/ Ernst & Young LLP +Denver, Colorado +February 24, 2016 +88 +SM ENERGY COMPANY AND SUBSIDIARIES +CONSOLIDATED BALANCE SHEETS +(in thousands, except share amounts) +December 31, +2015 +2014 +ASSETS +(as adjusted) +Current assets: +Cash and cash equivalents +$ +18 +$ +120 +Accounts receivable (note 2) +134,124 +322,630 +Derivative asset +367,710 +402,668 +Prepaid expenses and other +17,137 +19,625 +Total current assets +518,989 +745,043 +Property and equipment (successful efforts method): +Proved oil and gas properties +7,606,405 +7,348,436 +Less - accumulated depletion, depreciation, and amortization +(3,481,836 +) +(3,233,012 +) +Unproved oil and gas properties +284,538 +532,498 +Wells in progress +387,432 +503,734 +Oil and gas properties held for sale, net of accumulated depletion, depreciation and amortization of $0 and $22,482, respectively +641 +17,891 +Other property and equipment, net of accumulated depreciation of $32,956 and $37,079, respectively +153,100 +334,356 +Total property and equipment, net +4,950,280 +5,503,903 +Noncurrent assets: +Derivative asset +120,701 +189,540 +Other noncurrent assets +31,673 +44,659 +Total other noncurrent assets +152,374 +234,199 +Total Assets +$ +5,621,643 +$ +6,483,145 +LIABILITIES AND STOCKHOLDERS’ EQUITY +Current liabilities: +Accounts payable and accrued expenses (note 2) +$ +302,517 +$ +640,684 +Derivative liability +8 +— +Deferred tax liability +— +142,976 +Other current liabilities +— +1,000 +Total current liabilities +302,525 +784,660 +Noncurrent liabilities: +Revolving credit facility +202,000 +166,000 +Senior Notes, net of unamortized deferred financing costs (note 5) +2,315,970 +2,166,445 +Asset retirement obligation +137,525 +120,867 +Net Profits Plan liability +7,611 +27,136 +Deferred income taxes +758,279 +891,681 +Derivative liability +— +70 +Other noncurrent liabilities +45,332 +39,631 +Total noncurrent liabilities +3,466,717 +3,411,830 +Commitments and contingencies (note 6) +Stockholders ’ equity: +Common stock, $0.01 par value - authorized: 200,000,000 shares; issued and outstanding: 68,075,700 and 67,463,060 shares, respectively +681 +675 +Additional paid-in capital +305,607 +283,295 +Retained earnings +1,559,515 +2,013,997 +Accumulated other comprehensive loss +(13,402 +) +(11,312 +) +Total stockholders ’ equity +1,852,401 +2,286,655 +Total Liabilities and Stockholders ’ Equity +$ +5,621,643 +$ +6,483,145 +The accompanying notes are an integral part of these consolidated financial statements. +89 +SM ENERGY COMPANY AND SUBSIDIARIES +CONSOLIDATED STATEMENTS OF OPERATIONS +(in thousands, except per share amounts) +For the Years Ended +December 31, +2015 +2014 +2013 +Operating revenues: +Oil, gas, and NGL production revenue +$ +1,499,905 +$ +2,481,544 +$ +2,199,550 +Net gain on divestiture activity (note 3) +43,031 +646 +27,974 +Marketed gas system revenue +9,485 +24,897 +60,039 +Other operating revenues +4,544 +15,220 +5,811 +Total operating revenues and other income +1,556,965 +2,522,307 +2,293,374 +Operating expenses: +Oil, gas, and NGL production expense +723,633 +715,878 +597,045 +Depletion, depreciation, amortization, and asset retirement obligation liability accretion +921,009 +767,532 +822,872 +Exploration +120,569 +129,857 +74,104 +Impairment of proved properties +468,679 +84,480 +172,641 +Abandonment and impairment of unproved properties +78,643 +75,638 +46,105 +Impairment of other property and equipment +49,369 +— +— +General and administrative +157,668 +167,103 +149,551 +Change in Net Profits Plan liability +(19,525 +) +(29,849 +) +(21,842 +) +Derivative gain +(408,831 +) +(583,264 +) +(3,080 +) +Marketed gas system expense +13,922 +24,460 +57,647 +Other operating expenses +30,612 +4,658 +30,076 +Total operating expenses +2,135,748 +1,356,493 +1,925,119 +Income (loss) from operations +(578,783 +) +1,165,814 +368,255 +Non-operating income (expense): +Other, net +649 +(2,561 +) +67 +Interest expense +(128,149 +) +(98,554 +) +(89,711 +) +Loss on extinguishment of debt +(16,578 +) +— +— +Income (loss) before income taxes +(722,861 +) +1,064,699 +278,611 +Income tax (expense) benefit +275,151 +(398,648 +) +(107,676 +) +Net income (loss) +$ +(447,710 +) +$ +666,051 +$ +170,935 +Basic weighted-average common shares outstanding +67,723 +67,230 +66,615 +Diluted weighted-average common shares outstanding +67,723 +68,044 +67,998 +Basic net income (loss) per common share +$ +(6.61 +) +$ +9.91 +$ +2.57 +Diluted net income (loss) per common share +$ +(6.61 +) +$ +9.79 +$ +2.51 +The accompanying notes are an integral part of these consolidated financial statements. +90 +SM ENERGY COMPANY AND SUBSIDIARIES +CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) +(in thousands) +For the Years Ended +December 31, +2015 +2014 +2013 +Net income (loss) +$ +(447,710 +) +$ +666,051 +$ +170,935 +Other comprehensive income (loss), net of tax: +Reclassification to earnings (1) +— +— +1,115 +Pension liability adjustment (2) +(2,090 +) +(5,896 +) +2,483 +Total other comprehensive income (loss), net of tax +(2,090 +) +(5,896 +) +3,598 +Total comprehensive income (loss) +$ +(449,800 +) +$ +660,155 +$ +174,533 +(1) +Reclassification from accumulated other comprehensive loss related to de-designated hedges. Refer to Note 10 - Derivative Financial Instruments for further information. +(2) +Refer to Note 1 - Summary of Significant Accounting Policies for detail of the pension amount reclassified to general and administrative expense on the Company ’s consolidated statements of operations. +The accompanying notes are an integral part of these consolidated financial statements. +91 +SM ENERGY COMPANY AND SUBSIDIARIES +CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY +(in thousands, except share amounts) +Additional Paid-in Capital +Accumulated Other Comprehensive Loss +Total Stockholders’ Equity +Common Stock +Treasury Stock +Retained Earnings +Shares +Amount +Shares +Amount +Balances, January 1, 2013 +66,245,816 +$ +662 +$ +233,642 +(50,581 +) +$ +(1,221 +) +$ +1,190,397 +$ +(9,014 +) +$ +1,414,466 +Net income +— +— +— +— +— +170,935 +— +170,935 +Other comprehensive income +— +— +— +— +— +— +3,598 +3,598 +Cash dividends, $ 0.10 per share +— +— +— +— +— +(6,663 +) +— +(6,663 +) +Issuance of common stock under Employee Stock Purchase Plan +77,427 +1 +3,671 +— +— +— +— +3,672 +Issuance of common stock upon vesting of RSUs and settlement of PSUs, net of shares used for tax withholdings +526,852 +5 +(16,225 +) +— +— +— +— +(16,220 +) +Issuance of common stock upon stock option exercises +228,758 +3 +3,183 +— +— +— +— +3,186 +Stock-based compensation expense +— +— +31,949 +28,169 +398 +— +— +32,347 +Other income tax benefit +— +— +1,500 +— +— +— +— +1,500 +Balances, December 31, 2013 +67,078,853 +$ +671 +$ +257,720 +(22,412 +) +$ +(823 +) +$ +1,354,669 +$ +(5,416 +) +$ +1,606,821 +Net income +— +— +— +— +— +666,051 +— +666,051 +Other comprehensive loss +— +— +— +— +— +— +(5,896 +) +(5,896 +) +Cash dividends, $ 0.10 per share +— +— +— +— +— +(6,723 +) +— +(6,723 +) +Issuance of common stock under Employee Stock Purchase Plan +83,136 +1 +4,060 +— +— +— +— +4,061 +Issuance of common stock upon vesting of RSUs and settlement of PSUs, net of shares used for tax withholdings +256,718 +3 +(10,627 +) +— +— +— +— +(10,624 +) +Issuance of common stock upon stock option exercises +39,088 +— +816 +— +— +— +— +816 +Stock-based compensation expense +5,265 +— +31,871 +22,412 +823 +— +— +32,694 +Other income tax expense +— +— +(545 +) +— +— +— +— +(545 +) +Balances, December 31, 2014 +67,463,060 +$ +675 +$ +283,295 +— +$ +— +$ +2,013,997 +$ +(11,312 +) +$ +2,286,655 +Net loss +— +— +— +— +— +(447,710 +) +— +(447,710 +) +Other comprehensive loss +— +— +— +— +— +— +(2,090 +) +(2,090 +) +Cash dividends, $ 0.10 per share +— +— +— +— +— +(6,772 +) +— +(6,772 +) +Issuance of common stock under Employee Stock Purchase Plan +197,214 +2 +4,842 +— +— +— +— +4,844 +Issuance of common stock upon vesting of RSUs and settlement of PSUs, net of shares used for tax withholdings +375,523 +4 +(8,682 +) +— +— +— +— +(8,678 +) +Stock-based compensation expense +39,903 +— +27,467 +— +— +— +— +27,467 +Other income tax expense +— +— +(1,315 +) +— +— +— +— +(1,315 +) +Balances, December 31, 2015 +68,075,700 +$ +681 +$ +305,607 +— +$ +— +$ +1,559,515 +$ +(13,402 +) +$ +1,852,401 +The accompanying notes are an integral part of these consolidated financial statements. +92 +SM ENERGY COMPANY AND SUBSIDIARIES +CONSOLIDATED STATEMENTS OF CASH FLOWS +(in thousands) +For the Years Ended +December 31, +2015 +2014 +2013 +Cash flows from operating activities: +Net income (loss) +$ +(447,710 +) +666,051 +170,935 +Adjustments to reconcile net income (loss) to net cash provided by operating activities: +Net gain on divestiture activity +(43,031 +) +(646 +) +(27,974 +) +Depletion, depreciation, amortization, and asset retirement obligation liability accretion +921,009 +767,532 +822,872 +Exploratory dry hole expense +36,612 +44,427 +5,846 +Impairment of proved properties +468,679 +84,480 +172,641 +Abandonment and impairment of unproved properties +78,643 +75,638 +46,105 +Impairment of other property and equipment +49,369 +— +— +Stock-based compensation expense +27,467 +32,694 +32,347 +Change in Net Profits Plan liability +(19,525 +) +(29,849 +) +(21,842 +) +Derivative gain +(408,831 +) +(583,264 +) +(3,080 +) +Derivative settlement gain +512,566 +12,615 +22,062 +Amortization of deferred financing costs +7,710 +6,146 +5,390 +Non-cash loss on extinguishment of debt +4,123 +— +— +Deferred income taxes +(276,722 +) +397,780 +105,555 +Plugging and abandonment +(7,496 +) +(8,796 +) +(9,946 +) +Other, net +13,761 +1,069 +2,775 +Changes in current assets and liabilities: +Accounts receivable +140,200 +24,088 +(79,398 +) +Prepaid expenses and other +2,563 +(1,822 +) +98 +Accounts payable and accrued expenses +(86,267 +) +9,466 +91,516 +Accrued derivative settlements +5,232 +(41,034 +) +2,612 +Net cash provided by operating activities +978,352 +1,456,575 +1,338,514 +Cash flows from investing activities: +Net proceeds from the sale of oil and gas properties +357,938 +43,858 +424,849 +Capital expenditures +(1,493,608 +) +(1,974,798 +) +(1,553,536 +) +Acquisition of proved and unproved oil and gas properties +(7,984 +) +(544,553 +) +(61,603 +) +Other, net +(985 +) +(3,256 +) +(2,613 +) +Net cash used in investing activities +(1,144,639 +) +(2,478,749 +) +(1,192,903 +) +Cash flows from financing activities: +Proceeds from credit facility +1,872,500 +1,285,500 +1,203,000 +Repayment of credit facility +(1,836,500 +) +(1,119,500 +) +(1,543,000 +) +Debt issuance costs related to credit facility +— +(3,388 +) +(3,444 +) +Net proceeds from Senior Notes +490,951 +589,991 +490,185 +Repayment of Senior Notes +(350,000 +) +— +— +Proceeds from sale of common stock +4,844 +4,877 +6,858 +Dividends paid +(6,772 +) +(6,723 +) +(6,663 +) +Net share settlement from issuance of stock awards +(8,678 +) +(10,624 +) +(16,220 +) +Other, net +(160 +) +(87 +) +(5 +) +Net cash provided by financing activities +166,185 +740,046 +130,711 +Net change in cash and cash equivalents +(102 +) +(282,128 +) +276,322 +Cash and cash equivalents at beginning of period +120 +282,248 +5,926 +Cash and cash equivalents at end of period +$ +18 +$ +120 +$ +282,248 +The accompanying notes are an integral part of these consolidated financial statements. +93 +SM ENERGY COMPANY AND SUBSIDIARIES +CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) +Supplemental schedule of additional cash flow information and non-cash activities: +For the Years Ended +December 31, +2015 +2014 +2013 +(in thousands) +Cash paid for interest, net of capitalized interest +$ +126,988 +$ +89,145 +$ +70,702 +Net cash paid (refunded) for income taxes +$ +1,630 +$ +1,936 +$ +(204 +) +As of December 31, 2015 , 2014 , and 2013 , $97.4 million , $357.2 million , and $217.8 million , respectively, of accrued capital expenditures were included in accounts payable and accrued expenses in the Company’s consolidated balance sheets. These oil and gas property additions are reflected in net cash used in investing activities in the periods during which the payables are settled. +During the second quarter of 2014 and the third quarter of 2013, the Company exchanged properties in its Rocky Mountain region with fair values of $6.2 million and $25.0 million , respectively. The amount of cash consideration paid at the respective closings for agreed upon adjustments is reflected in the acquisition of proved and unproved oil and gas properties line item in the consolidated statements of cash flows. +94 +SM ENERGY COMPANY AND SUBSIDIARIES +NOTES TO CONSOLIDATED FINANCIAL STATEMENTS +Note 1 – Summary of Significant Accounting Policies +Description of Operations +SM Energy Company is an independent energy company engaged in the acquisition, exploration, development, and production of crude oil and condensate, natural gas, and NGLs in onshore North America. +Basis of Presentation +The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries and have been prepared in accordance with GAAP and the instructions to Form 10-K and Regulation S-X. Subsidiaries that the Company does not control are accounted for using the equity or cost methods as appropriate. Equity method investments are included in other noncurrent assets in the accompanying consolidated balance sheets (“accompanying balance sheets”). Intercompany accounts and transactions have been eliminated. In connection with the preparation of the consolidated financial statements, the Company evaluated subsequent events after the balance sheet date of December 31, 2015 , through the filing date of this report. +Certain prior period amounts have been reclassified to conform to the current period presentation on the accompanying financial statements. Please refer to the caption Recently Issued Accounting Standards below for additional discussion of the change in presentation of debt issuance costs on the accompanying balance sheets. +Use of Estimates in the Preparation of Financial Statements +The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of proved oil and gas reserves, assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Estimates of proved oil and gas reserve quantities provide the basis for the calculation of depletion, depreciation, and amortization expense, impairment of proved properties, and asset retirement obligations, each of which represents a significant component of the accompanying consolidated financial statements. +Cash and Cash Equivalents +The Company considers all liquid investments purchased with an initial maturity of three months or less to be cash equivalents. The carrying value of cash and cash equivalents approximates fair value due to the short-term nature of these instruments. +Accounts Receivable +The Company’s accounts receivable consist mainly of receivables from oil, gas, and NGL purchasers and from joint interest owners on properties the Company operates. For receivables from joint interest owners, the Company typically has the ability to withhold future revenue disbursements to recover non-payment of joint interest billings. Generally, the Company’s oil and gas receivables are collected within two months and the Company has had minimal bad debts. +Although diversified among many companies, collectability is dependent upon the financial wherewithal of each individual company and is influenced by the general economic conditions of the industry. Receivables are not collateralized. The Company’s allowance for doubtful accounts as of December 31, 2015 , totaled $1.1 million , primarily for receivables from joint interest owners. The Company had no allowance for doubtful accounts as of December 31, 2014 . +95 +Concentration of Credit Risk and Major Customers +The Company is exposed to credit risk in the event of nonpayment by counterparties, a significant portion of which are concentrated in energy related industries. The creditworthiness of customers and other counterparties is subject to regular review. The Company does not believe the loss of any single purchaser would materially impact its operating results, as crude oil, natural gas, and NGLs are products with well-established markets and numerous purchasers in the Company’s operating regions. During 2015 and 2014, the Company had one major customer, which represented approximately 21 percent and 19 percent , respectively, of total production revenue, which is discussed in the next paragraph. During 2015 and 2014 , the Company also sold to four entities that are under common ownership. In aggregate, these four entities represented approximately 10 percent and 14 percent of total production revenue in 2015 and 2014 , respectively; however, none of these entities individually represented more than 10 percent of total production revenue. Additionally, in 2015 the Company sold to three entities that are under common ownership, which in aggregate represented 11 percent of its total production revenue; however, none of these entities individually represented more than 10 percent of the Company’s total production revenue. During 2013 , the Company had three major customers, which represented approximately 26 percent , 16 percent , and 12 percent , respectively, of total production revenue. +During the third quarter of 2013, the Company entered into various marketing agreements with a joint venture partner, whereby the Company is subject to certain gathering, transportation, and processing throughput commitments for up to 10 years pursuant to each contract. While the Company’s joint venture partner is the first purchaser under these contracts, representing 21 percent and 19 percent of total production revenue in 2015 and 2014 , respectively, the Company also shares with them the risk of non-performance by their counterparty purchasers. Several of the Company’s joint venture partner’s counterparty purchasers under these contracts are also direct purchasers of products produced by the Company from other operated areas. +The Company’s policy is to use the commodity affiliates of the lenders under its credit facility as its derivative counterparties, and each counterparty must have investment grade senior unsecured debt ratings. Each of the Company’s 10 counterparties meet both of these requirements as of the filing date of this report. +The Company has accounts in the following locations with a national bank: Denver, Colorado ; Houston, Texas ; Midland, Texas ; and Billings, Montana . The Company’s policy is to invest in highly-rated instruments and to limit the amount of credit exposure at each individual institution. +Oil and Gas Producing Activities +The Company accounts for its oil and gas exploration and development costs using the successful efforts method. G&G costs are expensed as incurred. Exploratory well costs are capitalized pending further evaluation of whether economically recoverable reserves have been found. If economically recoverable reserves are not found, exploratory well costs are expensed as dry holes. The application of the successful efforts method of accounting requires management’s judgment to determine the proper designation of wells as either development or exploratory, which will ultimately determine the proper accounting treatment of costs of dry holes. Once a well is drilled, the determination that economic proved reserves have been discovered may take considerable time and judgment. Exploratory dry hole costs are included in cash flows from investing activities as part of capital expenditures within the accompanying statements of cash flows. The costs of development wells are capitalized whether those wells are successful or unsuccessful. +DD&A of capitalized costs related to proved oil and gas properties is calculated on a pool-by-pool basis using the units-of-production method based upon proved reserves. The computation of DD&A takes into consideration restoration, dismantlement, and abandonment costs as well as the anticipated proceeds from salvaging equipment. As of December 31, 2015 , and 2014 , the estimated salvage value of the Company’s equipment was $29.7 million and $50.8 million , respectively. +96 +Assets Held for Sale +Any properties held for sale as of the balance sheet date have been classified as assets held for sale and are separately presented on the accompanying balance sheets at the lower of carrying value or fair value less the cost to sell. For additional discussion on assets held for sale, please refer to Note 3 – Divestitures, Assets Held for Sale, and Acquisitions . +Other Property and Equipment +Other property and equipment such as facilities, office furniture and equipment, buildings, and computer hardware and software are recorded at cost. Costs of renewals and improvements that substantially extend the useful lives of the assets are capitalized. Maintenance and repair costs are expensed when incurred. Depreciation is calculated using either the straight-line method over the estimated useful lives of the assets, which range from three to 30 years, or the unit of output method where appropriate. When other property and equipment is sold or retired, the capitalized costs and related accumulated depreciation are removed from the accounts. +Internal Use Software Development Costs +The Company capitalizes certain software costs incurred during the application development stage. The application development stage generally includes software design, configuration, testing and installation activities. Training and maintenance costs are expensed as incurred, while upgrades and enhancements are capitalized if it is probable that such expenditures will result in additional functionality. Capitalized software costs are depreciated over the estimated useful life of the underlying project on a straight-line basis upon completion of the project. As of December 31, 2015 , and 2014 , the Company has capitalized approximately $44.0 million and $35.0 million , respectively, related to the development and implementation of accounting and operational software. +Derivative Financial Instruments +The Company seeks to manage or reduce commodity price risk on its production by entering into derivative contracts. The Company seeks to minimize its basis risk and indexes its oil derivative contracts to NYMEX prices, its NGL derivative contracts to OPIS prices, and its gas derivative contracts to various regional index prices associated with pipelines into which the Company’s gas production is sold. For additional discussion on derivatives, please see Note 10 – Derivative Financial Instruments . +Net Profits Plan +The Company records the estimated fair value of expected future payments to be made under the Net Profits Plan as a noncurrent liability in the accompanying balance sheets. The underlying assumptions used in the calculation of the estimated liability include estimates of production, proved reserves, recurring and workover lease operating expense, transportation, production and ad valorem tax rates, present value discount factors, pricing assumptions, and overall market conditions. The estimates used in calculating the long-term liability are adjusted from period-to-period based on the most current information attributable to the underlying assumptions. Changes in the estimated liability of future payments associated with the Net Profits Plan are recorded as increases or decreases to expense in the current period as a separate line item in the accompanying statements of operations, as these changes are considered changes in estimates. +The distribution amounts due to participants and payable in each period under the Net Profits Plan as cash compensation related to periodic operations are recognized as compensation expense and are included within general and administrative expense and exploration expense in the accompanying statements of operations. The corresponding current liability is included in accounts payable and accrued expenses in the accompanying balance sheets. This treatment provides for a consistent matching of cash expense with net cash flows from the oil and gas properties in each respective pool of the Net Profits Plan. For additional discussion, please refer to the heading Net Profits Plan in Note 7 – Compensation Plans and Note 11 – Fair Value Measurements . +97 +Asset Retirement Obligations +The Company recognizes an estimated liability for future costs associated with the abandonment of its oil and gas properties. A liability for the fair value of an asset retirement obligation and corresponding increase to the carrying value of the related long-lived asset are recorded at the time a well is drilled or acquired. The increase in carrying value is included in proved oil and gas properties in the accompanying balance sheets. The Company depletes the amount added to proved oil and gas property costs and recognizes expense in connection with the accretion of the discounted liability over the remaining estimated economic lives of the respective oil and gas properties. For additional discussion, please refer to Note 9 – Asset Retirement Obligations . +Revenue Recognition +The Company derives revenue primarily from the sale of produced oil, gas, and NGLs. Revenue is recognized when the Company’s production is delivered to the purchaser, but payment is generally received between 30 and 90 days after the date of production. No revenue is recognized unless it is determined that title to the product has transferred to the purchaser. At the end of each month, the Company estimates the amount of production delivered to the purchaser and the price the Company will receive. The Company uses knowledge of its properties and historical performance, contractual agreements, NYMEX, OPIS, and local spot market prices, quality and transportation differentials, and other factors as the basis for these estimates. The Company uses the sales method of accounting for gas revenue whereby sales revenue is recognized on all gas sold to purchasers, regardless of whether the sales are proportionate to the Company’s ownership in the property. +Impairment of Proved and Unproved Properties +Proved oil and gas property costs are evaluated for impairment and reduced to fair value, which is based on expected future discounted cash flows, when there is an indication that the carrying costs may not be recoverable. Expected future cash flows are calculated on all proved reserves and risk adjusted probable and possible reserves using a discount rate and price forecasts that management believes are representative of current market conditions. The prices for oil and gas are forecasted based on NYMEX strip pricing, adjusted for basis differentials, for the first five years, after which a flat terminal price is used for each commodity stream. The prices for NGLs are forecasted using OPIS pricing, adjusted for basis differentials, for as long as the market is actively trading, after which a flat terminal price is used. Future operating costs are also adjusted as deemed appropriate for these estimates. An impairment is recorded on unproved property when the Company determines that either the property will not be developed or the carrying value is not realizable. +The Company recorded $468.7 million , $84.5 million , and $172.6 million , of proved property impairment expense for the years ended December 31, 2015 , 2014 , and 2013 , respectively. The impairments of proved properties in 2015 were due to continued commodity price declines, largely impacting the Company’s Powder River Basin program and certain legacy and non-core assets in the Rocky Mountain region, as well as the Company’s decision to reduce capital invested in the development of its east Texas exploration program in its South Texas & Gulf Coast region. The impairments of proved properties in 2014 were primarily a result of the significant decline in commodity prices in late 2014 and recognition of the outcomes of exploration and delineation wells in certain prospects in the Company’s South Texas & Gulf Coast and Permian regions. The impairments in 2013 primarily resulted from the write-down of certain Mississippian limestone assets in the Company’s Permian region due to negative engineering revisions, write-downs related to Olmos interval, dry gas assets in the South Texas & Gulf Coast region as a result of a plugging and abandonment program, and write-downs of certain underperforming assets due to the Company’s decision to no longer pursue the development of those assets. +98 +For the years ended December 31, 2015 , 2014 , and 2013 , the Company recorded expense related to the abandonment and impairment of unproved properties of $78.6 million , $75.6 million , and $46.1 million , respectively. The Company’s abandonment and impairment of unproved properties expense in 2015 and 2014 was primarily a result of lease expirations and acreage the Company no longer intended to develop in light of changes in drilling plans in response to the continued decline in commodity prices. The Company’s abandonment and impairment of unproved properties expense in 2013 was mostly related to acreage the Company no longer intended to develop in its Permian region. +Impairment of Other Property and Equipment +A long-lived asset is evaluated for potential impairment whenever events or changes in circumstances indicate that its carrying value may be greater than its undiscounted future net cash flows. Impairment, if any, is measured as the excess of an asset’s carrying value over its estimated fair value. The Company uses an income valuation technique if there is not a market-observable price for the asset. +For the year ended December 31, 2015 , the Company recorded a $49.4 million impairment charge on its gas gathering system assets in east Texas, in conjunction with the impairment of the associated proved and unproved properties, resulting from the Company’s decision to reduce capital spent in the program in light of sustained, low commodity prices. The Company did not have any impairments of other property and equipment for the years ended December 31, 2014, or 2013. +Sales of Proved and Unproved Properties +The partial sale of proved property within an existing field is accounted for as normal retirement and no net gain or loss on divestiture activity is recognized as long as the treatment does not significantly affect the units-of-production depletion rate. The sale of a partial interest in an individual proved property is accounted for as a recovery of cost. A net gain or loss on divestiture activity is recognized in the accompanying statements of operations for all other sales of proved properties. +The partial sale of unproved property is accounted for as a recovery of cost when substantial uncertainty exists as to the ultimate recovery of the cost applicable to the interest retained. A net gain on divestiture activity is recognized to the extent that the sales price exceeds the carrying amount of the unproved property. A net gain or loss on divestiture activity is recognized in the accompanying statements of operations for all other sales of unproved property. For additional discussion, please refer to Note 3 – Divestitures, Assets Held for Sale, and Acquisitions . +Stock-Based Compensation +At December 31, 2015 , the Company had stock-based employee compensation plans that included RSUs, PSUs, and restricted stock awards issued to employees and non-employee directors, as more fully described in Note 7 - Compensation Plans. The Company records expense associated with the fair value of stock-based compensation in accordance with authoritative accounting guidance, which is based on the estimated fair value of these awards determined at the time of grant, and included within general and administrative expense and exploration expense in the accompanying statements of operations. +Income Taxes +The Company accounts for deferred income taxes whereby deferred tax assets and liabilities are recognized based on the tax effects of temporary differences between the carrying amounts on the financial statements and the tax basis of assets and liabilities, as measured using current enacted tax rates. These differences will result in taxable income or deductions in future years when the reported amounts of the assets or liabilities are recorded or settled, respectively. The Company records deferred tax assets and associated valuation allowances, when appropriate, to reflect amounts more likely than not to be realized based upon Company analysis. +99 +Earnings per Share +Basic net income (loss) per common share is calculated by dividing net income or loss available to common stockholders by the basic weighted-average common shares outstanding for the respective period. The earnings per share calculations reflect the impact of any repurchases of shares of common stock made by the Company. +Diluted net income (loss) per common share is calculated by dividing adjusted net income or loss by the diluted weighted-average common shares outstanding, which includes the effect of potentially dilutive securities. Potentially dilutive securities for this calculation consist of unvested RSUs, contingent PSUs, and in-the-money outstanding stock options. When there is a loss from continuing operations, as was the case for the year ended December 31, 2015, all potentially dilutive shares are anti-dilutive and are consequently excluded from the calculation of diluted earnings per share. +PSUs represent the right to receive, upon settlement of the PSUs after the completion of the three -year performance period, a number of shares of the Company’s common stock that may range from zero to two times the number of PSUs granted on the award date. The number of potentially dilutive shares related to PSUs is based on the number of shares, if any, which would be issuable at the end of the respective reporting period, assuming that date was the end of the contingency period applicable to such PSUs. For additional discussion on PSUs, please refer to Note 7 – Compensation Plans under the heading Performance Share Units Under the Equity Plan . +The treasury stock method is used to measure the dilutive impact of unvested RSUs, contingent PSUs, and in-the-money stock options. All remaining stock options were exercised during the year ended December 31, 2014. +The following table details the weighted-average dilutive and anti-dilutive securities related to RSUs, PSUs, and stock options for the years presented: +For the Years Ended December 31, +2015 +2014 +2013 +(in thousands) +Dilutive +— +814 +1,383 +Anti-dilutive +256 +— +— +The following table sets forth the calculations of basic and diluted earnings per share: +For the Years Ended December 31, +2015 +2014 +2013 +(in thousands, except per share amounts) +Net income (loss) +$ +(447,710 +) +$ +666,051 +$ +170,935 +Basic weighted-average common shares outstanding +67,723 +67,230 +66,615 +Add: dilutive effect of stock options, unvested RSUs, and contingent PSUs (1) +— +814 +1,383 +Diluted weighted-average common shares outstanding +67,723 +68,044 +67,998 +Basic net income (loss) per common share +$ +(6.61 +) +$ +9.91 +$ +2.57 +Diluted net income (loss) per common share +$ +(6.61 +) +$ +9.79 +$ +2.51 +____________________________________________ +(1) +For the year ended December 31, 2015, the shares were anti-dilutive and excluded from the calculation of diluted earnings per share. +Comprehensive Income (Loss) +Comprehensive income (loss) is used to refer to net income (loss) plus other comprehensive income (loss). Other comprehensive income (loss) is comprised of revenues, expenses, gains, and losses that under GAAP are +100 +reported as separate components of stockholders’ equity instead of net income (loss). Comprehensive income (loss) is presented net of income taxes in the accompanying consolidated statements of comprehensive income (loss). +The changes in the balances of components comprising other comprehensive income (loss) are presented in the following table: +Derivative Adjustments (1) +Pension Liability Adjustments +(in thousands) +For the year ended December 31, 2013 +Net actuarial gain +$ +2,766 +Reclassification to earnings +$ +1,777 +1,239 +Tax expense +(662 +) +(1,522 +) +Income, net of tax +$ +1,115 +$ +2,483 +For the year ended December 31, 2014 +Net actuarial loss +$ +(10,062 +) +Reclassification to earnings +$ +— +706 +Tax benefit +— +3,460 +Loss, net of tax +$ +— +$ +(5,896 +) +For the year ended December 31, 2015 +Net actuarial loss +$ +(4,990 +) +Reclassification to earnings +$ +— +1,853 +Tax benefit +— +1,047 +Loss, net of tax +$ +— +$ +(2,090 +) +____________________________________________ +(1) +As of December 31, 2013, all commodity derivative contracts that had been previously designated as cash flow hedges had settled and had been reclassified into earnings from AOCL. +Fair Value of Financial Instruments +The Company’s financial instruments including cash and cash equivalents, accounts receivable, and accounts payable are carried at cost, which approximates fair value due to the short-term maturity of these instruments. The recorded value of the Company’s credit facility approximates its fair value as it bears interest at a floating rate that approximates a current market rate. The Company had $202.0 million of outstanding loans under its credit facility as of December 31, 2015 . The Company had $166.0 million of outstanding loans under its credit facility as of December 31, 2014 . The Company’s Senior Notes are recorded at cost, net of unamortized deferred financing costs, and the respective fair values are disclosed in Note 11 - Fair Value Measurements. The Company has derivative financial instruments that are recorded at fair value. Considerable judgment is required to develop estimates of fair value. The estimates provided are not necessarily indicative of the amounts the Company would realize upon the sale or refinancing of such instruments. +Industry Segment and Geographic Information +The Company operates in the exploration and production segment of the oil and gas industry within the United States. The Company reports as a single industry segment. The Company sold its Mid-Continent assets in 2015, and therefore, no longer has marketed gas volumes as of December 31, 2015. Prior to the sale of these assets, the Company’s gas marketing function provided mostly internal services and acted as the first purchaser of natural gas and natural gas liquids produced by the Company in certain cases. The Company considered its marketing function as ancillary to its oil and gas producing activities. The amount of income these operations generated from marketing gas produced by third parties was not material to the Company’s results of operations, and segmentation of such activity would not have provided a better understanding of the Company’s performance. However, gross +101 +revenue and expense related to marketing activities for gas produced by third parties is presented in the marketed gas system revenue and marketed gas system expense line items in the accompanying statements of operations. +Off-Balance Sheet Arrangements +The Company has not participated in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities (“SPE”), which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. +The Company evaluates its transactions to determine if any variable interest entities exist. If it is determined that SM Energy is the primary beneficiary of a variable interest entity, that entity is consolidated into SM Energy. The Company has not been involved in any unconsolidated SPE transactions in 2015 or 2014 . +Recently Issued Accounting Standards +In May 2014, the FASB issued new authoritative accounting guidance related to the recognition of revenue +from contracts with customers. This guidance is to be applied using a full retrospective method or a modified +retrospective method, as outlined in the guidance. In August 2015, the FASB deferred the effective date of the new revenue recognition standard by one year. The revenue recognition standard is now effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted but only for annual periods, and interim periods within those annual periods, beginning after December 15, 2016. The Company is currently evaluating the provisions of this guidance and assessing its impact on the Company’s financial statements and disclosures. +In August 2014, the FASB issued new authoritative guidance that requires management to evaluate whether there are conditions or events that raise substantial doubt about an entity’s ability to continue as a going concern within one year after the date that the entity’s financial statements are issued, or within one year after the date the entity’s financial statements are available to be issued, and to provide disclosures when certain criteria are met. This guidance is effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The Company is currently evaluating the provisions of this guidance and assessing its impact on the Company’s financial statements and disclosures but does not believe it will impact the Company’s financial statements or disclosures. +Effective January 1, 2015, the Company adopted, on a prospective basis, Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) No. 2015-01, “Income Statement – Extraordinary and Unusual Items.” This ASU simplifies income statement presentation by eliminating the concept of extraordinary items. There was no impact to the Company’s financial statements or disclosures from the adoption of this standard. +In February 2015, the FASB issued new authoritative accounting guidance meant to clarify the consolidation reporting guidance in GAAP. This guidance is to be applied using a full retrospective method or a modified retrospective method, as outlined in the guidance, and is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2015. Early application is permitted. The Company is currently evaluating the provisions of this guidance and assessing its impact on the Company’s financial statements and disclosures. +Effective November 1, 2015, the Company early adopted, on a retrospective basis, FASB ASU No. 2015-03, “Simplifying the Presentation of Debt Issuance Costs” (“ASU 2015-03”). ASU 2015-03 requires deferred financing costs to be presented on the accompanying balance sheets as a direct deduction from the carrying value of the related debt liability. In accordance, the Company has reclassified $33.6 million of deferred financing costs related to its Senior Notes at December 31, 2014, from the other noncurrent assets line item to the Senior Notes, net +102 +of unamortized deferred financing costs line item. The December 31, 2014, accompanying balance sheet line items that were adjusted as a result of the adoption of ASU 2015-03 are presented in the following table: +As of +December 31, 2014 +As Reported +As Adjusted +(in thousands) +Other noncurrent assets +$ +78,214 +$ +44,659 +Total other noncurrent assets +$ +267,754 +$ +234,199 +Total Assets +$ +6,516,700 +$ +6,483,145 +Senior Notes +$ +2,200,000 +N/A +Senior Notes, net of unamortized deferred financing costs +N/A +$ +2,166,445 +Total noncurrent liabilities +$ +3,445,385 +$ +3,411,830 +Total Liabilities and Stockholders’ Equity +$ +6,516,700 +$ +6,483,145 +ASU 2015-03 does not specifically address the accounting for deferred financing costs related to line-of-credit arrangements. In August 2015, the FASB issued ASU 2015-15, “Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements” (“ASU 2015-15”) allowing for deferred financing costs associated with line-of-credit arrangements to continue to be presented as assets. ASU 2015-15 is consistent with how the Company currently accounts for deferred financing costs related to the Company’s revolving credit facility. +Effective December 1, 2015, the Company early adopted, on a prospective basis, FASB ASU No. 2015-17, “Balance Sheet Classification of Deferred Taxes” (“ASU 2015-17”). ASU 2015-17 requires that deferred tax liabilities and assets, along with any related valuation allowance, be classified as noncurrent on the balance sheet. The current requirement that deferred tax liabilities and assets of a tax-paying component of an entity be offset and presented as a single amount is not affected by the amendments in ASU 2015-17. As ASU 2015-17 was adopted on a prospective basis, the Company did not retrospectively adjust prior periods. +There are no other accounting standards applicable to the Company that would have a material effect on the Company’s financial statements and disclosures that have been issued but not yet adopted by the Company as of December 31, 2015 , and through the filing date of this report. +103 +Note 2 – Accounts Receivable and Accounts Payable and Accrued Expenses +Accounts receivable are comprised of the following: +As of December 31, +2015 +2014 +(in thousands) +Accrued oil, gas, and NGL production revenue +$ +58,256 +$ +180,250 +Amounts due from joint interest owners +22,269 +58,347 +Accrued derivative settlements +34,579 +39,811 +State severance tax refunds +12,072 +24,394 +Other +6,948 +19,828 +Total accounts receivable +$ +134,124 +$ +322,630 +Accounts payable and accrued expenses are comprised of the following: +As of December 31, +2015 +2014 +(in thousands) +Accrued capital expenditures +$ +97,355 +$ +357,156 +Revenue and severance tax payable +44,387 +63,779 +Accrued lease operating expense +21,943 +34,822 +Accrued property taxes +14,078 +15,059 +Accrued compensation +41,154 +56,279 +Accrued interest +34,378 +40,786 +Other +49,222 +72,803 +Total accounts payable and accrued expenses +$ +302,517 +$ +640,684 +Note 3 – Divestitures, Assets Held for Sale, and Acquisitions +2015 Divestiture Activity +• +Mid-Continent Divestiture. During the second quarter of 2015, the Company divested its Mid-Continent assets in multiple transactions for total divestiture proceeds of $316.8 million and a final net gain of $108.4 million . Certain of these assets were written down by $30.0 million to reflect fair value less estimated costs to sell upon reclassification to assets held for sale as of March 31, 2015. This write-down is reflected in the final net gain of $108.4 million discussed above. +In conjunction with the divestiture of its Mid-Continent assets, the Company closed its Tulsa, Oklahoma office. For the year ended December 31, 2015 , the Company recorded $9.3 million of exit and disposal costs, the majority of which were recorded as general and administrative expense in the accompanying statements of operations. Additionally, during the third quarter of 2015, the Company vacated its office space in Tulsa. The Company has subleased the space for a portion of the remaining term. As of December 31, 2015 , the Company is obligated to pay lease costs of approximately $4.0 million , net of expected income from office space currently subleased, which will be expensed over the duration of the lease, which expires in 2022. This obligation will decrease if the Company successfully subleases space for additional terms. +• +Permian Divestiture. During the fourth quarter of 2015, the Company divested certain non-core assets in its Permian region. Total divestiture proceeds were $25.1 million and the estimated total net gain on this divestiture was $2.4 million . This divestiture is subject to normal post-closing adjustments, which are expected to occur in the first half of 2016. +104 +Write-downs on certain other assets held for sale and subsequently sold during the year ended December 31, 2015, totaled $68.6 million . Write-downs on assets held for sale are reflected as a loss on divestiture activity which is included in the net gain on divestiture activity line item in the accompanying statements of operations. Please refer to Assets Held for Sale below for further discussion. +2014 Divestiture Activity +• +Rocky Mountain Divestiture. During the second quarter of 2014, the Company divested certain non-core assets in the Montana portion of the Williston Basin. Total divestiture proceeds were $50.1 million and the final net gain on this divestiture was $26.9 million . +The Company recorded $27.6 million of write-downs to fair value less estimated costs to sell for assets that were held for sale during the year ended December 31, 2014, which offset the net gain on the Rocky Mountain divestiture discussed above. +2013 Divestiture Activity +• +Mid-Continent Divestitures. In December 2013, the Company divested of certain non-strategic assets located in its Mid-Continent region, with the largest transaction being the sale of the Company’s Anadarko Basin assets. Total divestiture proceeds were $368.5 million and the final net gain on these divestitures was $25.3 million . A portion of one transaction was structured to qualify as a like-kind exchange under Section 1031 of the IRC. +• +Rocky Mountain Divestitures . During 2013, the Company divested of certain non-strategic assets located in its Rocky Mountain region. Final divestiture proceeds for these divestitures were $57.1 million and the final net gain was $13.2 million . +• +Permian Divestiture . In December 2013, the Company divested of certain non-strategic assets located in its Permian region. Final divestiture proceeds were $14.0 million and the final net loss was $7.0 million . +The Company recorded an immaterial write-down to fair value less estimated costs to sell for assets that were held for sale as of December 31, 2013. +Assets Held for Sale +Assets are classified as held for sale when the Company commits to a plan to sell the assets and there is reasonable certainty the sale will take place within one year. Upon classification as held for sale, long-lived assets are no longer depreciated or depleted, and a measurement for impairment is performed to identify and expense any excess of carrying value over fair value less costs to sell. Any subsequent decreases to the estimated fair value less costs to sell impact the measurement of assets held for sale. +A s of December 31, 2015 , the accompanying balance sheets present $641,000 of assets held for sale. There is a corresponding asset retirement obligation liability of $241,000 for assets held for sale included in the asset retirement obligation financial statement line item. Certain assets classified as held for sale and subsequently sold during 2015 were written down to fair value less estimated costs to sell, as discussed above. +The Company determined that neither these planned nor executed asset sales qualify for discontinued operations accounting under financial statement presentation authoritative guidance. +105 +2015 Acquisition Activity +There was no significant acquisition activity during the year ended December 31, 2015. +2014 Acquisition Activity +• +Gooseneck Property Acquisitions +On September 24, 2014 , the Company acquired approximately 61,000 net acres of proved and unproved oil and gas properties in its Gooseneck area in North Dakota, along with related equipment, contracts, records, and other assets. Total cash consideration paid by the Company after final closing adjustments was $321.8 million and the effective date for the acquisition was July 1, 2014 . +On October 15, 2014 , the Company acquired additional interests in proved and unproved oil and gas properties in its Gooseneck area. Total cash consideration paid by the Company was $84.8 million and the effective date for the acquisition was August 1, 2014 . +The Company determined that both of these acquisitions met the criteria of a business combination under Accounting Standards Codification (“ASC”) Topic 805, Business Combinations . The Company allocated the final adjusted purchase price to the acquired assets and liabilities based on fair value as of the respective acquisition dates, as summarized in the table below. Refer to Note 11 – Fair Value Measurements for additional discussion on the valuation techniques used in determining the fair value of acquired properties. +Acquisition #1 +Acquisition #2 +As of September 24, 2014 +As of October 15, 2014 +Purchase Price +(in thousands) +Cash consideration +$ +321,807 +$ +84,836 +Fair value of assets and liabilities acquired: +Proved oil and gas properties +$ +203,467 +$ +54,612 +Unproved oil and gas properties +126,588 +29,610 +Total fair value of oil and gas properties acquired +330,055 +84,222 +Working capital +(6,135 +) +2,232 +Asset retirement obligation +(2,113 +) +(1,618 +) +Total fair value of net assets acquired +$ +321,807 +$ +84,836 +• +Rocky Mountain Acquisitions. In addition to the Gooseneck property acquisitions discussed above, the Company acquired other proved and unproved properties in its Rocky Mountain region during 2014, primarily in the Powder River Basin, in multiple transactions for approximately $135.5 million in total cash consideration after final closing adjustments, plus approximately 7,000 net acres of non-core assets in the Company’s Rocky Mountain region. +106 +Note 4 – Income Taxes +The provision for income taxes consists of the following: +For the Years Ended December 31, +2015 +2014 +2013 +(in thousands) +Current portion of income tax expense +Federal +$ +— +$ +— +$ +— +State +1,571 +868 +2,121 +Deferred portion of income tax expense (benefit) +(276,722 +) +397,780 +105,555 +Total income tax expense (benefit) +$ +(275,151 +) +$ +398,648 +$ +107,676 +Effective tax rate +38.1 +% +37.4 +% +38.6 +% +The components of the net deferred income tax liabilities are as follows: +As of December 31, +2015 +2014 +(in thousands) +Deferred tax liabilities: +Oil and gas properties +$ +854,029 +$ +1,029,424 +Derivative asset +179,543 +220,437 +Other +1,233 +4,475 +Total deferred tax liabilities +1,034,805 +1,254,336 +Deferred tax assets: +Federal and state tax net operating loss carryovers +244,942 +184,447 +Stock compensation +14,529 +16,763 +Other liabilities +27,449 +25,715 +Total deferred tax assets +286,920 +226,925 +Valuation allowance +(10,394 +) +(7,246 +) +Net deferred tax assets +276,526 +219,679 +Total net deferred tax liabilities (1) +$ +758,279 +$ +1,034,657 +Current federal income tax refundable +$ +5,378 +$ +4,734 +Current state income tax refundable +$ +65 +$ +— +Current state income tax payable +$ +— +$ +25 +____________________________________________ +(1) +All deferred tax liabilities and assets as of December 31, 2015, are classified as noncurrent on the accompanying balance sheets upon the Company’s adoption of ASU 2015-17 on a prospective basis. Prior year amounts have not been restated. Please refer to the caption Recently Issued Accounting Standards in Note 1 - Summary of Significant Accounting Policies for additional discussion. +At December 31, 2015 , the Company estimated its federal net operating loss carryforward at $796.7 million , which includes unrecognized excess income tax benefits associated with stock awards of $126.7 million . The federal net operating loss carryforward begins to expire in 2031 . The Company has estimated state net operating loss carryforwards of $338.9 million that expire between 2016 and 2036 and it has federal R&D credit carryforwards of $7.2 million that expire between 2028 and 2033. The Company’s valuation allowance relates to charitable contribution carryforwards, state net operating loss carryforwards, and state tax credits, which the Company anticipates will expire before they can be utilized. The change in the valuation allowance from 2014 to 2015 primarily reflects an allocable change to the Company’s mix of state apportioned losses and the anticipated utilization of state cumulative net operating losses. +107 +Federal income tax expense differs from the amount that would be provided by applying the statutory United States federal income tax rate to income before income taxes primarily due to the effect of state income taxes, changes in valuation allowances, R&D credits, and other permanent differences, as follows: +For the Years Ended December 31, +2015 +2014 +2013 +(in thousands) +Federal statutory tax expense (benefit) +$ +(253,001 +) +$ +372,644 +$ +97,514 +Increase (decrease) in tax resulting from: +State tax expense (benefit) (net of federal benefit) +(21,583 +) +21,350 +9,400 +Change in valuation allowance +3,148 +2,245 +(314 +) +Research and development credit +(1,971 +) +— +— +Other +(1,744 +) +2,409 +1,076 +Income tax expense (benefit) +$ +(275,151 +) +$ +398,648 +$ +107,676 +Acquisitions, divestitures, drilling activity, and basis differentials impacting the prices received for oil, gas, and NGLs affect apportionment of taxable income to the states where the Company owns oil and gas properties. As its apportionment factors change, the Company’s blended state income tax rate changes. This change, when applied to the Company’s total temporary differences, impacts the total state income tax expense (benefit) reported in the current year. Items affecting state apportionment factors are evaluated at the beginning of each year, after completion of the prior year income tax return, and when significant acquisition, divestiture, or changes in drilling activity or estimated state revenue occurs during the year. +The Company and its subsidiaries file federal income tax returns and various state income tax returns. With certain exceptions, the Company is no longer subject to United States federal or state income tax examinations by these tax authorities for years before 2007. During the first quarter of 2015, as a result of its R&D credit settlement with the IRS Appeals Office in late 2014, the Company recorded an additional $2.0 million net R&D credit from a claim filed on an amended return. At December 31, 2015, the Company’s 2007 - 2011 IRS examination was still ongoing, but a final agreement was reached in January 2016. There are no material adjustments to previously recorded amounts. During the quarter ended September 30, 2015, the IRS initiated an audit of the SM-Mitsui Tax Partnership for the 2013 tax year. The Company has a significant investment in the underlying assets of the tax partnership and this audit was still in progress at December 31, 2015 . +The Company complies with authoritative accounting guidance regarding uncertain tax provisions. The entire amount of unrecognized tax benefit reported by the Company would affect its effective tax rate if recognized. Interest expense in the accompanying statements of operations includes a negligible amount associated with income taxes. At December 31, 2015 , the Company estimates the range of reasonably possible change in 2016 to the recorded unrecognized tax benefits presented in the table below could be from zero to $1.8 million . +The total amount recorded for unrecognized tax benefits is presented below: +For the Years Ended December 31, +2015 +2014 +2013 +(in thousands) +Beginning balance +$ +1,582 +$ +2,358 +$ +2,278 +Additions for tax positions of prior years +1,200 +140 +80 +Settlements +— +(916 +) +— +Ending balance +$ +2,782 +$ +1,582 +$ +2,358 +108 +Note 5 – Long-Term Debt +Revolving Credit Facility +The Company’s Fifth Amended and Restated Credit Agreement, as amended, provides a maximum loan amount of $2.5 billion , current aggregate lender commitments of $1.5 billion , and a maturity date of December 10, 2019 . The borrowing base is subject to regular semi-annual redeterminations. Effective as of October 7, 2015 , the Company’s lenders decreased the borrowing base to $2.0 billion as part of the regularly scheduled semi-annual redetermination under the Credit Agreement. This expected reduction from $2.4 billion was primarily a result of the Company’s sale of its Mid-Continent assets, plus adjustments consistent with lower commodity prices. There was no change in the current aggregate lender commitments of $1.5 billion . The next redetermination date is scheduled for April 1, 2016 . The borrowing base redetermination process under the credit facility considers the value of the Company’s proved oil and gas properties and commodity derivative contracts, as determined by the lender group. Borrowings under the facility are secured by mortgages on assets having a value equal to at least 75 percent of the total value of the Company’s proved oil and gas properties. +The Company must comply with certain financial and non-financial covenants under the terms of the Credit Agreement, including limitations on dividend payments and requirements to maintain certain financial ratios, which include debt to adjusted EBITDAX, as defined by the Credit Agreement as the ratio of debt to 12-month trailing adjusted EBITDAX, of less than 4.0 and an adjusted current ratio, as defined by the Credit Agreement, of no less than 1.0 . The Company was in compliance with all financial and non-financial covenants under the Credit Agreement as of December 31, 2015 , and through the filing date of this report. +Interest and commitment fees are accrued based on the borrowing base utilization grid below. Eurodollar loans accrue interest at the London Interbank Offered Rate plus the applicable margin from the utilization table below, and Alternate Base Rate (“ABR”) and swingline loans accrue interest at Prime plus the applicable margin from the utilization table below. Commitment fees are accrued on the unused portion of the aggregate commitment amount and are included in interest expense in the accompanying statements of operations. +Borrowing Base Utilization Grid +Borrowing Base Utilization Percentage +<25% +≥25% <50% +≥50% <75% +≥75% <90% +≥90% +Eurodollar Loans +1.250 +% +1.500 +% +1.750 +% +2.000 +% +2.250 +% +ABR Loans or Swingline Loans +0.250 +% +0.500 +% +0.750 +% +1.000 +% +1.250 +% +Commitment Fee Rate +0.300 +% +0.300 +% +0.350 +% +0.375 +% +0.375 +% +The following table presents the outstanding balance, total amount of letters of credit, and available borrowing capacity under the Credit Agreement as of February 17, 2016 , December 31, 2015 , and December 31, 2014 : +As of February 17, 2016 +As of December 31, 2015 +As of December 31, 2014 +(in thousands) +Credit facility balance (1) +$ +243,000 +$ +202,000 +$ +166,000 +Letters of credit (2) +$ +200 +$ +200 +$ +808 +Available borrowing capacity +$ +1,256,800 +$ +1,297,800 +$ +1,333,192 +____________________________________________ +(1) +Deferred financing costs attributable to the credit facility are presented as a component of other noncurrent assets on the accompanying balance sheets and thus are not deducted from the credit facility balance. +(2) +Letters of credit reduce the amount available under the credit facility on a dollar-for-dollar basis. +109 +Senior Notes +The Senior Notes, net of unamortized deferred financing costs, line on the accompanying balance sheets as of December 31, 2015 , and 2014 , consisted of the following: +As of December 31, +2015 +2014 (1) +Senior Notes +Unamortized Deferred Financing Costs +Senior Notes, Net of Unamortized Deferred Financing Costs +Senior Notes +Unamortized Deferred Financing Costs +Senior Notes, Net of Unamortized Deferred Financing Costs +(in thousands) +6.625% Notes due 2019 +$ +— +$ +— +$ +— +$ +350,000 +$ +4,591 +$ +345,409 +6.50% Notes due 2021 +350,000 +4,106 +345,894 +350,000 +4,806 +345,194 +6.125% Notes due 2022 +600,000 +8,714 +591,286 +600,000 +9,812 +590,188 +6.50% Notes due 2023 +400,000 +5,231 +394,769 +400,000 +5,969 +394,031 +5.0% Notes due 2024 +500,000 +7,455 +492,545 +500,000 +8,377 +491,623 +5.625% Notes due 2025 +500,000 +8,524 +491,476 +— +— +— +Total +$ +2,350,000 +$ +34,030 +$ +2,315,970 +$ +2,200,000 +$ +33,555 +$ +2,166,445 +____________________________________________ +(1) +Prior period amounts have been reclassified to conform to the current period presentation on the accompanying balance sheets. Please refer to the section Recently Issued Accounting Standards in Note 1 – Summary of Significant Accounting Policies for additional discussion. +The Senior Notes are unsecured senior obligations and rank equal in right of payment with all of the Company’s existing and any future unsecured senior debt, and are senior in right of payment to any future subordinated debt. There are no subsidiary guarantors of the Senior Notes. The Company is subject to certain covenants under the indentures governing the Senior Notes that limit the Company’s ability to incur additional indebtedness, issue preferred stock, and make restricted payments, including dividends; however, the first $6.5 million of dividends paid each year are not restricted by the restricted payment covenant. The Company was in compliance with all covenants under its Senior Notes as of December 31, 2015 , and through the filing date of this report. All Senior Notes are registered under the Securities Act as of December 31, 2015. The Company may redeem some or all of its Senior Notes prior to their maturity at redemption prices based on a make-whole amount plus accrued and unpaid interest as described in the indentures governing the notes. +2019 Notes +On May 7, 2015, the Company commenced a cash tender offer for any and all of its outstanding 6.625% Senior Notes due 2019 at a price of $1,036.88 per $1,000 of principal amount for all 2019 Notes tendered by May 20, 2015 (“Consent Payment Deadline”), and at a price of $1,006.88 per $1,000 of principal amount for all 2019 Notes properly tendered thereafter. On the Consent Payment Deadline, the Company received tenders and consents from the holders of approximately $242.9 million in aggregate principal amount, or approximately 69 percent , of its outstanding 2019 Notes in connection with the cash tender offer. Following its entry into the supplemental indenture dated as of May 21, 2015, to the indenture dated as of February 7, 2011, between the Company and U.S. Bank National Association, as Trustee, the Company accepted the 2019 Notes tendered as of the Consent Payment Deadline in exchange for payment of total consideration, including accrued interest, of approximately $256.2 million under the Tender Offer and Consent Solicitation. On June 5, 2015 , the Company accepted $1.5 million of 2019 Notes tendered after the Consent Payment Deadline in exchange for payment of total consideration, including accrued interest, of approximately $1.6 million . +110 +On June 22, 2015 , the Company redeemed the remaining outstanding 2019 Notes at a redemption price of 103.313% of the principal amount for payment of total consideration, including accrued interest, of approximately $111.5 million . +The Company recorded a loss on extinguishment of debt related to the tender offer and redemption of its 2019 Notes of approximately $16.6 million for the quarter ended June 30, 2015. This amount includes approximately $12.5 million associated with the premium paid for the tender offer and redemption of the 2019 Notes and approximately $4.1 million related to the acceleration of unamortized deferred financing costs. +2021 Notes +On November 8, 2011 , the Company issued $350.0 million in aggregate principal amount of 6.50% Senior Notes due 2021 . The 2021 Notes were issued at par and mature on November 15, 2021 . The Company received net proceeds of $343.1 million after deducting fees of $6.9 million , which are being amortized as deferred financing costs over the life of the 2021 Notes. +2022 Notes +On November 17, 2014 , the Company issued $600.0 million in aggregate principal amount of 6.125% Senior Notes due 2022 . The 2022 Notes were issued at par and mature on November 15, 2022 . The Company received net proceeds of $590.0 million after deducting fees of $10.0 million , which are being amortized as deferred financing costs over the life of the 2022 Notes. +On November 17, 2014 , the Company entered into a registration rights agreement that provided holders of the 2022 Notes certain registration rights under the Securities Act. The Company closed its offer to exchange its 2022 Notes for notes registered under the Securities Act on July 10, 2015. +2023 Notes +On June 29, 2012 , the Company issued $400.0 million in aggregate principal amount of 6.50% Senior Notes due 2023 . The 2023 Notes were issued at par and mature on January 1, 2023 . The Company received net proceeds of $392.1 million after deducting fees of $7.9 million , which are being amortized as deferred financing costs over the life of the 2023 Notes. +2024 Notes +On May 20, 2013 , the Company issued $500.0 million in aggregate principal amount of 5.0% Senior Notes due 2024 . The 2024 Notes were issued at par and mature on January 15, 2024 . The Company received net proceeds of $490.2 million after deducting fees of $9.8 million , which are being amortized as deferred financing costs over the life of the 2024 Notes. +2025 Notes +On May 21, 2015 , the Company issued $500.0 million in aggregate principal amount of 5.625% Senior Notes due 2025 . The 2025 Notes were issued at par and mature on June 1, 2025 . The Company received net proceeds of $491.0 million after deducting fees of $9.0 million , which are being amortized as deferred financing costs over the life of the 2025 Notes. The net proceeds were used to fund the consideration paid to the tendering holders of the 2019 Notes and to redeem the remaining untendered 2019 Notes, as well as repay outstanding borrowings under the Credit Agreement and for general corporate purposes. +111 +Capitalized Interest +Capitalized interest costs for the Company for the years ended December 31, 2015 , 2014 , and 2013 , were $25.1 million , $16.2 million , and $11.0 million , respectively. +Note 6 – Commitments and Contingencies +Commitments +The Company has entered into various agreements, which include drilling rig contracts of $35.3 million , gathering, processing, and transportation throughput commitments of $864.0 million , office leases, including maintenance, of $59.4 million , and other miscellaneous contracts and leases of $5.7 million . The annual minimum payments for the next five years and total minimum payments thereafter are presented below: +Years Ending December 31, +Amount (1) +(in thousands) +2016 +$ +132,747 +2017 +128,074 +2018 +131,489 +2019 +142,161 +2020 +141,854 +Thereafter +288,113 +Total +$ +964,438 +____________________________________________ +(1) +During the third quarter of 2015, the Company vacated its office space in Tulsa, Oklahoma. These amounts include lease payments for the Tulsa office, net of sublease income. The Company expects to receive $3.5 million of sublease income as follows: $831,000 in 2016 , $953,000 in 2017 , $978,000 in 2018 , and $741,000 in 2019 . +Drilling rig contracts +The Company has multiple long-term drilling rig contracts. Early termination of these rig contracts as of December 31, 2015 , would result in termination penalties of $26.0 million , which would be in lieu of paying the remaining drilling commitments of $35.3 million included in the table above. In light of the low commodity price environment, the Company curtailed drilling activity during 2015 . For the year ended December 31, 2015 , the Company incurred $13.7 million of expense related to the early termination of drilling rig contracts or fees incurred on rigs placed on standby, which are recorded in the other operating expenses line item in the accompanying statements of operations. These fees include the costs to terminate the contract for an operated drilling rig in the Company’s South Texas & Gulf Coast region, in early 2016. +Subsequent to December 31, 2015, the Company renegotiated the terms of certain drilling rig contracts to provide increased flexibility with regard to the timing of activity and payment. +Transportation commitments +The Company has gathering, processing, and transportation throughput commitments with various third parties that require delivery of a minimum amount of 2,277 Bcf of natural gas and 36 MMBbl of crude oil, of which the first 1,059 Bcf of natural gas delivered under a certain agreement does not have a deficiency payment. These contracts expire at various dates through 2028 . The Company will be required to make periodic deficiency payments for any shortfalls in delivering the minimum volume commitments under certain agreements. As of December 31, 2015, if the Company delivers no product, the aggregate undiscounted deficiency payments total approximately $864.0 million . If a shortfall in the minimum volume commitment for natural gas is projected, the +112 +Company has rights under certain contracts to arrange for third party gas to be delivered, and such volumes would count toward its minimum volume commitment. +Subsequent to December 31, 2015 , the Company entered into amendments to certain oil gathering and gas gathering agreements related to certain of its Eagle Ford shale assets, neither of which previously had a minimum volume commitment, in order to obtain more favorable rates and terms. Under these amendments, the Company is now committed to deliver 310 Bcf of natural gas and 41 MMBbl of oil through 2034. In the event that the Company delivers no product, the aggregate undiscounted deficiency payments under these amended agreements would be approximately $360.8 million . Subsequent to December 31, 2015 , the Company also entered into an amendment to a gas gathering agreement related to certain of its other Eagle Ford shale assets, which reduced the Company’s volume commitment amount as of December 31, 2015 , by 829 Bcf and reduced the aggregate undiscounted deficiency payments by $118.2 million . +As of the filing date of this report, the Company does not expect to incur any material shortfalls. +Office leases +The Company leases office space under various operating leases with terms extending as far as 2026 . Rent expense, net of sublease income, for the years ended December 31, 2015 , 2014 , and 2013 , was $6.1 million , $6.5 million , and $5.7 million , respectively. The Company also leases office equipment under various operating leases. +Contingencies +The Company is subject to litigation and claims arising in the ordinary course of business. The Company accrues for such items when a liability is both probable and the amount can be reasonably estimated. In the opinion of management, the results of such pending litigation and claims will not have a material effect on the results of operations, the financial position, or the cash flows of the Company. +The Company is subject to routine severance, royalty and joint interest audits from regulatory authorities, non-operators and others, as the case may be, and records accruals for estimated exposure when a claim is deemed probable and estimable. Additionally, the Company is subject to various possible contingencies that arise from third party interpretations of the Company’s contracts or otherwise affecting the oil and natural gas industry. Such contingencies include differing interpretations as to the prices at which oil and natural gas sales may be made, the prices that royalty owners are paid for production from their leases, allowable costs under joint interest arrangements, and other matters. At December 31, 2015 , the Company had $5.3 million accrued for estimated exposure related to claims for payment of royalties on certain Federal and Indian leases. Although the Company believes that it has properly estimated its exposure with respect to the various contracts, laws and regulations, administrative rulings, and interpretations thereof, adjustments could be required as new interpretations and regulations arise. +Note 7 – Compensation Plans +Equity Plan +There are several components to the Company’s Equity Plan that are described in this section. Various types of equity awards have been granted by the Company in different periods. +As of December 31, 2015 , 2.8 million shares of common stock remained available for grant under the Equity Plan. The issuance of a direct share benefit, such as a share of common stock, a stock option, a restricted share, an RSU, or a PSU, counts as one share against the number of shares available to be granted under the Equity Plan. Each PSU has the potential to count as two shares against the number of shares available to be granted under the Equity Plan based on the final performance multiplier. Stock options were issued out of the St. Mary Land & Exploration Company Stock Option Plan and the St. Mary Land & Exploration Company Incentive Stock Option +113 +Plan, both predecessors to the Equity Plan, although the last grant was in 2004, and all remaining stock options were exercised during the year ended December 31, 2014. +Performance Share Units Under the Equity Plan +The Company grants PSUs to eligible employees as a part of its long-term equity compensation program. The number of shares of the Company’s common stock issued to settle PSUs ranges from 0% to 200% of the number of PSUs awarded and is determined based on certain performance criteria over a three -year measurement period. The performance criteria for the PSUs are based on a combination of the Company’s annualized Total Shareholder Return (“TSR”) for the performance period and the relative performance of the Company’s TSR compared with the annualized TSR of certain peer companies for the performance period. Compensation expense for PSUs is recognized within general and administrative and exploration expense over the vesting periods of the respective awards. +The fair value of PSUs was measured at the grant date with a stochastic process method using the Geometric Brownian Motion Model (“GBM Model”). A stochastic process is a mathematically defined equation that can create a series of outcomes over time. These outcomes are not deterministic in nature, which means that by iterating the equations multiple times, different results will be obtained for those iterations. In the case of the Company’s PSUs, the Company cannot predict with certainty the path its stock price or the stock prices of its peers will take over the three-year performance period. By using a stochastic simulation, the Company can create multiple prospective stock pathways, statistically analyze these simulations, and ultimately make inferences regarding the most likely path the stock price will take. As such, because future stock prices are stochastic, or probabilistic with some direction in nature, the stochastic method, specifically the GBM Model, is deemed an appropriate method by which to determine the fair value of the PSUs. Significant assumptions used in this simulation include the Company’s expected volatility, dividend yield, and risk-free interest rate based on U.S. Treasury yield curve rates with maturities consistent with a three-year vesting period, as well as the volatilities and dividend yields for each of the Company’s peers. +The Company records compensation expense associated with the issuance of PSUs based on the fair value of the awards as of the date of grant. Total compensation expense recorded for PSUs was $10.6 million , $16.0 million , and $16.8 million for the years ended December 31, 2015 , 2014 , and 2013 , respectively. As of December 31, 2015 , there was $18.4 million of total unrecognized expense related to PSUs, which is being amortized through 2018 . +114 +A summary of the status and activity of non-vested PSUs is presented in the following table: +For the Years Ended December 31, +2015 +2014 +2013 +PSUs +Weighted-Average Grant-Date Fair Value +PSUs +Weighted-Average Grant-Date Fair Value +PSUs +Weighted-Average Grant-Date Fair Value +Non-vested at beginning of year (1) +433,660 +$ +73.63 +572,469 +$ +66.07 +669,308 +$ +63.91 +Granted (1) +320,753 +$ +45.34 +202,404 +$ +94.66 +274,831 +$ +64.13 +Vested (1) +(76,438 +) +$ +51.76 +(206,830 +) +$ +64.79 +(345,005 +) +$ +60.06 +Forfeited (1) +(51,647 +) +$ +73.62 +(134,383 +) +$ +86.72 +(26,665 +) +$ +69.74 +Non-vested at end of year (1) +626,328 +$ +61.81 +433,660 +$ +73.63 +572,469 +$ +66.07 +____________________________________________ +(1) +The number of awards assumes a multiplier of one . The final number of shares of common stock issued may vary depending on the three -year performance multiplier, which ranges from zero to two . +The fair value of the PSUs granted in 2015 , 2014 , and 2013 was $14.5 million , $19.2 million , and $17.6 million , respectively. The PSUs granted in 2015 , 2014 , and 2013 will remain unvested until the third anniversary date of their issuance, at which time they will fully vest, unless the employee is retirement eligible in which case the PSUs vest immediately upon attainment of retirement age. +The total fair value of PSUs that vested during the years ended December 31, 2015 , 2014 , and 2013 was $4.0 million , $13.4 million , and $20.7 million , respectively. +During the years ended December 31, 2015 , 2014 , and 2013 , the Company issued 188,279 , 85,121 , and 387,461 net shares, respectively, of common stock for PSUs granted in 2012, 2011, and 2010 that earned a 1.0 , 0.55 , and 1.725 multiplier, respectively. The Company and the majority of grant recipients mutually agreed to net share settle a portion of the awards to cover income and payroll tax withholdings in accordance with the Company’s Equity Plan and individual award agreements. As a result, the Company withheld 100,683 , 45,042 , and 200,050 shares, respectively, to satisfy income and payroll tax withholding obligations that arose upon the delivery of the shares underlying the PSUs in 2015, 2014, and 2013, respectively. +Restricted Stock Units Under the Equity Plan +The Company grants RSUs to eligible employees as part of its long-term equity incentive compensation program. Restrictions and vesting periods for the awards are determined by the Compensation Committee of the Board of Directors and are set forth in the award agreements. Each RSU represents a right to receive one share of the Company’s common stock upon settlement of the award at the end of the specified vesting period. Compensation expense for RSUs is recognized within general and administrative expense and exploration expense over the vesting periods of the award. +Total compensation expense recorded for RSUs for the years ended December 31, 2015 , 2014 , and 2013 , was $13.4 million , $13.9 million , and $13.1 million , respectively. As of December 31, 2015 , there was $19.3 million of total unrecognized expense related to unvested RSU awards, which is being amortized through 2018 . The Company records compensation expense associated with the issuance of RSUs based on the fair value of the awards as of the date of grant. The fair value of an RSU is equal to the closing price of the Company’s common stock on the day of the grant. +115 +A summary of the status and activity of non-vested RSUs is presented below: +For the Years Ended December 31, +2015 +2014 +2013 +RSUs +Weighted- +Average +Grant-Date +Fair Value +RSUs +Weighted- +Average +Grant-Date +Fair Value +RSUs +Weighted- +Average +Grant-Date +Fair Value +Non-vested at beginning of year +515,724 +$ +68.29 +580,431 +$ +57.05 +496,244 +$ +51.81 +Granted +356,246 +$ +43.72 +234,560 +$ +83.98 +329,939 +$ +60.01 +Vested +(278,289 +) +$ +63.12 +(253,031 +) +$ +58.19 +(207,376 +) +$ +49.73 +Forfeited +(49,944 +) +$ +66.53 +(46,236 +) +$ +62.06 +(38,376 +) +$ +54.37 +Non-vested at end of year +543,737 +$ +55.01 +515,724 +$ +68.29 +580,431 +$ +57.05 +The fair value of RSUs granted in 2015 , 2014 , and 2013 was $15.6 million , $19.7 million , and $19.8 million , respectively. The RSUs granted in 2015 , 2014 , and 2013 vest one-third of the total grant on each of the next three anniversaries of the date of the grant. +The total fair value of RSUs that vested during the years ended December 31, 2015 , 2014 , and 2013 , was $17.6 million , $14.7 million , and $10.3 million , respectively. +During the years ended December 31, 2015 , 2014 , and 2013 , the Company settled 278,289 , 253,031 , and 207,378 RSUs, respectively. The Company and the majority of grant recipients mutually agreed to net share settle a portion of the awards to cover income and payroll tax withholdings in accordance with the Company’s Equity Plan and individual award agreements. As a result, the Company issued net shares of common stock of 187,244 , 171,597 , and 139,391 for 2015 , 2014 , and 2013 , respectively. The remaining 91,045 , 81,434 , and 67,987 shares were withheld to satisfy income and payroll tax withholding obligations that arose upon delivery of the shares underlying the RSUs for 2015 , 2014 , and 2013 , respectively. +Stock Option Grants Under the Equity Plan +The Company previously granted stock options under the St. Mary Land & Exploration Company Stock Option Plan and the St. Mary Land & Exploration Company Incentive Stock Option Plan. The last issuance of stock options occurred on December 31, 2004. Stock options to purchase shares of the Company’s common stock had been granted to eligible employees and members of the Board of Directors. All options granted under the option plans were granted at exercise prices equal to the respective closing market price of the Company’s underlying common stock on the grant dates. All stock options granted under the option plans were exercisable for a period of up to 10 years from the date of grant. The remaining options from the 2004 grant were exercised during the year ended December 31, 2014. As of December 31, 2015, and 2014, there was no unrecognized compensation expense related to stock option awards. +116 +A summary of activity associated with the Company’s Stock Option Plans during the years ended December 31, 2014, and 2013, is presented in the following table: +Weighted - +Average +Aggregate +Exercise +Intrinsic +Shares +Price +Value +For the year ended December 31, 2013 +Outstanding, start of year +267,846 +$ +14.95 +Exercised +(228,758 +) +$ +13.92 +$ +12,326,994 +Forfeited +— +$ +— +Outstanding, end of year +39,088 +$ +20.87 +$ +2,432,837 +Vested and exercisable at end of year +39,088 +$ +20.87 +$ +2,432,837 +For the year ended December 31, 2014 +Outstanding, start of year +39,088 +$ +20.87 +Exercised +(39,088 +) +$ +20.87 +$ +1,993,726 +Forfeited +— +$ +— +Outstanding, end of year +— +$ +— +$ +— +Vested and exercisable at end of year +— +$ +— +$ +— +The fair value of options was measured at the date of grant using the Black-Scholes-Merton option-pricing model. Cash received from stock options exercised for the years ended December 31, 2014 , and 2013 , was $4.0 million and $3.2 million , respectively. +Cash flows resulting from excess tax benefits are classified as part of cash flows from financing activities. Excess tax benefits are realized tax benefits from tax deductions for vested RSUs, settled PSUs, and exercised options in excess of the deferred tax asset attributable to stock compensation costs for such equity awards. The Company recorded no excess tax benefits for the years ended December 31, 2015 , 2014 , and 2013 . +Director Shares +In 2015 , 2014 , and 2013 , the Company issued 37,950 , 27,677 , and 28,169 shares, respectively, of its common stock to its non-employee directors under the Company’s Equity Plan. Additionally, the Company issued 1,953 shares to the Company’s former Chief Executive Officer in 2015 for his service as a director through May 2015, following his retirement as an officer of the Company. The Company recorded compensation expense related to these issuances of $1.6 million , $1.6 million , and $1.4 million for the years ended December 31, 2015 , 2014 , and 2013 , respectively. +All shares of common stock issued to the Company’s non-employee directors are earned over the one -year service period following the date of grant, unless five years of service has been provided to the Company by the director, in which case that director’s shares vest upon the earlier of the completion of the one year service period or the director retiring from the Board of Directors. +117 +Employee Stock Purchase Plan +Under the Company’s Employee Stock Purchase Plan (“ESPP”), eligible employees may purchase shares of the Company’s common stock through payroll deductions of up to 15 percent of eligible compensation, without accruing in excess of $25,000 in value from purchases for each calendar year. The purchase price of the stock is 85% of the lower of the fair market value of the stock on the first or last day of the purchase period, and shares issued under the ESPP have no restriction period. The ESPP is intended to qualify under Section 423 of the IRC. The Company had approximately 0.9 million shares available for issuance under the ESPP as of December 31, 2015 . There were 197,214 , 83,136 , and 77,427 shares issued under the ESPP in 2015 , 2014 , and 2013 , respectively. Total proceeds to the Company for the issuance of these shares were $4.8 million , $4.1 million , and $3.7 million for the years ended December 31, 2015 , 2014 , and 2013 , respectively. +The fair value of ESPP grants is measured at the date of grant using the Black-Scholes-Merton option-pricing model. Expected volatility was calculated based on the Company’s historical daily common stock price, and the risk-free interest rate is based on U.S. Treasury yield curve rates with maturities consistent with a six month vesting period. +The fair value of ESPP shares issued during the periods reported were estimated using the following weighted-average assumptions: +For the Years Ended December 31, +2015 +2014 +2013 +Risk free interest rate +0.1 +% +0.1 +% +0.1 +% +Dividend yield +0.2 +% +0.1 +% +0.2 +% +Volatility factor of the expected market +price of the Company’s common stock +61.2 +% +33.0 +% +41.1 +% +Expected life (in years) +0.5 +0.5 +0.5 +The Company expensed $1.8 million , $1.1 million , and $1.1 million for the years ended December 31, 2015 , 2014 , and 2013 , respectively, based on the estimated fair value of the ESPP grants. +401(k) Plan +The Company has a defined contribution plan (the “401(k) Plan”) that is subject to the Employee Retirement Income Security Act of 1974. The 401(k) Plan allows eligible employees to contribute a maximum of 60 percent of their base salaries up to the contribution limits established under the IRC. The Company matches each employee’s contribution up to six percent of the employee’s base salary and performance bonus, and may make additional contributions at its discretion. The Company matches contributions made by employees hired after December 31, 2014, up to nine percent of the employee’s base salary and performance bonus in lieu of pension plan benefits. Please refer to Note 8 - Pension Benefits for additional discussion of change to pension benefits. The Company’s matching contributions to the 401(k) Plan were $5.6 million , $6.4 million , and $4.2 million for the years ended December 31, 2015 , 2014 , and 2013 , respectively. No discretionary contributions were made by the Company to the 401(k) Plan for any of these years. +Net Profits Plan +Under the Company’s Net Profits Plan, all oil and gas wells that were completed or acquired during each year were designated within a specific pool. Key employees recommended by senior management and designated as participants by the Compensation Committee of the Company’s Board of Directors and employed by the Company on the last day of that year became entitled to payments under the Net Profits Plan after the Company has received net cash flows returning 100 percent of all costs associated with that pool. Thereafter, 10 percent of future net cash flows generated by the pool are allocated among the participants and distributed at least annually. The +118 +portion of net cash flows from the pool to be allocated among the participants increases to 20 percent after the Company has recovered 200 percent of the total costs for the pool, including payments made under the Net Profits Plan at the 10 percent level. In December 2007, the Board of Directors discontinued the creation of new pools under the Net Profits Plan. As a result, the 2007 pool was the last Net Profits Plan pool established by the Company. +Cash payments made or accrued under the Net Profits Plan that have been recorded as either general and administrative expense or exploration expense are detailed in the table below: +For the Years Ended December 31, +2015 +2014 +2013 +(in thousands) +General and administrative expense +$ +3,239 +$ +8,326 +$ +13,734 +Exploration expense +259 +690 +1,310 +Total +$ +3,498 +$ +9,016 +$ +15,044 +Additionally, the Company made or accrued cash payments under the Net Profits Plan of $3.8 million , $8.3 million , and $10.3 million for the years ended December 31, 2015 , 2014 , and 2013 , respectively, as a result of divestitures of properties subject to the Net Profits Plan. These cash payments are accounted for as a reduction in the net gain on divestiture activity line item in the accompanying statements of operations. +The Company records changes in the present value of estimated future payments under the Net Profits Plan as a separate line item in the accompanying statements of operations. The change in the estimated liability is recorded as a non-cash expense or benefit in the current period. The amount recorded as an expense or benefit associated with the change in the estimated liability is not allocated to general and administrative expense or exploration expense because it is associated with the future net cash flows from oil and gas properties in the respective pools rather than results being realized through current period production. If the Company allocated the change in liability to these specific functional line items, based on the current allocation of actual distributions made by the Company, such expenses or benefits would predominately be allocated to general and administrative expense. As time has passed, the amount distributed relating to prospective exploration efforts has become insignificant as more is paid to employees that have terminated employment and do not provide ongoing exploration support to the Company. +Note 8 – Pension Benefits +The Company has a non-contributory defined benefit pension plan covering substantially all employees who meet age and service requirements (the “Qualified Pension Plan”). The Company also has a supplemental non-contributory pension plan covering certain management employees (the “Nonqualified Pension Plan” and together with the Qualified Pension Plan, the “Pension Plans”). The Company froze the Pension Plans to new participants, effective as of December 31, 2015. Employees participating in the Pension Plans as of December 31, 2015, will continue to earn benefits. +Obligations and Funded Status for the Pension Plans +The Company recognizes the funded status (i.e. the difference between the fair value of plan assets and the projected benefit obligation) of the Company’s Pension Plans in the accompanying balance sheets as either an asset or a liability and recognizes a corresponding adjustment to accumulated other comprehensive income, net of tax. The projected benefit obligation is the actuarial present value of the benefits earned to date by plan participants based on employee service and compensation including the effect of assumed future salary increases. The accumulated benefit obligation uses the same factors as the projected benefit obligation but excludes the effects of assumed future salary increases. The Company’s measurement date for plan assets and obligations is December 31. +119 +For the Years Ended December 31, +2015 +2014 +(in thousands) +Change in benefit obligation: +Projected benefit obligation at beginning of year +$ +57,867 +$ +43,285 +Service cost +7,949 +6,335 +Interest cost +2,496 +2,191 +Actuarial loss +2,397 +8,821 +Benefits paid +(8,162 +) +(2,765 +) +Projected benefit obligation at end of year +62,547 +57,867 +Change in plan assets: +Fair value of plan assets at beginning of year +27,940 +24,658 +Actual return on plan assets +(410 +) +737 +Employer contribution +6,401 +5,310 +Benefits paid +(8,162 +) +(2,765 +) +Fair value of plan assets at end of year +25,769 +27,940 +Funded status at end of year +$ +(36,778 +) +$ +(29,927 +) +The Company’s underfunded status for the Pension Plans as of December 31, 2015 , and 2014 , is $36.8 million and $29.9 million , respectively, and is recognized in the accompanying balance sheets as a portion of other noncurrent liabilities. No plan assets of the Qualified Pension Plan were returned to the Company during the year ended December 31, 2015 . There are no plan assets in the Nonqualified Pension Plan. +Accumulated Benefit Obligation in Excess of Plan Assets for the Pension Plans +As of December 31, +2015 +2014 +(in thousands) +Projected benefit obligation +$ +62,547 +$ +57,867 +Accumulated benefit obligation +$ +46,439 +$ +43,205 +Less: Fair value of plan assets +(25,769 +) +(27,940 +) +Underfunded accumulated benefit obligation +$ +20,670 +$ +15,265 +Pension expense is determined based upon the annual service cost of benefits (the actuarial cost of benefits earned during a period) and the interest cost on those liabilities, less the expected return on plan assets. The expected long-term rate of return on plan assets is applied to a calculated value of plan assets that recognizes changes in fair value over a five-year period. This practice is intended to reduce year-to-year volatility in pension expense, but it can have the effect of delaying recognition of differences between actual returns on assets and expected returns based on long-term rate of return assumptions. Amortization of unrecognized net gain or loss resulting from actual experience different from that assumed and from changes in assumptions (excluding asset gains and losses not yet reflected in market-related value) is included as a component of net periodic benefit cost for a year. If, as of the beginning of the year, the unrecognized net gain or loss exceeds 10 percent of the greater of the projected benefit obligation and the market-related value of plan assets, then the amortization is the excess divided by the average remaining service period of participating employees expected to receive benefits under the plan. +120 +Pre-tax amounts not yet recognized in net periodic pension costs, but rather recognized in accumulated other comprehensive loss as of December 31, 2015 and 2014 , consist of: +As of December 31, +2015 +2014 +(in thousands) +Unrecognized actuarial losses +$ +20,966 +$ +17,812 +Unrecognized prior service costs +101 +118 +Unrecognized transition obligation +— +— +Accumulated other comprehensive loss +$ +21,067 +$ +17,930 +The estimated net loss that will be amortized from accumulated other comprehensive loss into net periodic benefit cost over the next fiscal year is $1.5 million . +Pre-tax changes recognized in other comprehensive income (loss) during 2015 , 2014 , and 2013 , were as follows: +For the Years Ended December 31, +2015 +2014 +2013 +(in thousands) +Net actuarial gain (loss) +$ +(4,990 +) +$ +(10,062 +) +$ +2,766 +Prior service cost +— +— +— +Less: +Amortization of prior service cost +(17 +) +(17 +) +(17 +) +Amortization of net actuarial loss +(1,486 +) +(689 +) +(1,222 +) +Settlements +(350 +) +— +— +Total other comprehensive income (loss) +$ +(3,137 +) +$ +(9,356 +) +$ +4,005 +Components of Net Periodic Benefit Cost for the Pension Plans +For the Years Ended December 31, +2015 +2014 +2013 +(in thousands) +Components of net periodic benefit cost: +Service cost +$ +7,949 +$ +6,335 +$ +6,291 +Interest cost +2,496 +2,191 +1,627 +Expected return on plan assets that reduces periodic pension cost +(2,182 +) +(1,978 +) +(1,538 +) +Amortization of prior service cost +17 +17 +17 +Amortization of net actuarial loss +1,486 +689 +1,222 +Settlements +350 +— +— +Net periodic benefit cost +$ +10,116 +$ +7,254 +$ +7,619 +Gains and losses in excess of 10 percent of the greater of the benefit obligation and the market-related value of assets are amortized over the average remaining service period of active participants. +121 +Pension Plan Assumptions +Weighted-average assumptions to measure the Company’s projected benefit obligation and net periodic benefit cost are as follows: +As of December 31, +2015 +2014 +2013 +Projected benefit obligation +Discount rate +4.7% +4.3% +5.0% +Rate of compensation increase +6.2% +6.2% +6.2% +Net periodic benefit cost +Discount rate +4.3% +5.0% +3.9% +Expected return on plan assets (1) +7.5% +7.5% +7.5% +Rate of compensation increase +6.2% +6.2% +6.2% +____________________________________________ +(1) +There is no assumed expected return on plan assets for the Nonqualified Pension Plan because there are no plan assets in the Nonqualified Pension Plan. +The Company’s pension investment policy includes various guidelines and procedures designed to ensure that assets are prudently invested in a manner necessary to meet the future benefit obligation of the Pension Plans. The policy does not permit the direct investment of plan assets in the Company’s securities. The Qualified Pension Plan’s investment horizon is long-term and accordingly the target asset allocations encompass a strategic, long-term perspective of capital markets, expected risk and return behavior and perceived future economic conditions. The key investment principles of diversification, assessment of risk, and targeting the optimal expected returns for given levels of risk are applied. +The Qualified Pension Plan’s investment portfolio contains a diversified blend of investments, which may reflect varying rates of return. The investments are further diversified within each asset classification. This portfolio diversification provides protection against a single security or class of securities having a disproportionate impact on aggregate investment performance. The actual asset allocations are reviewed and rebalanced on a periodic basis to maintain the target allocations. The weighted-average asset allocation of the Qualified Pension Plan is as follows: +Target +As of December 31, +Asset Category +2016 +2015 +2014 +Equity securities +42.0 +% +39.1 +% +39.6 +% +Fixed income securities +35.0 +% +34.0 +% +33.9 +% +Other securities +23.0 +% +26.9 +% +26.5 +% +Total +100.0 +% +100.0 +% +100.0 +% +There is no asset allocation of the Nonqualified Pension Plan since there are no plan assets in that plan. An expected return on plan assets of 7.5 percent was used to calculate the Company’s obligation under the Qualified Pension Plan for 2015 and 2014 . Factors considered in determining the expected rate of return include the long-term historical rate of return provided by the equity and debt securities markets and input from the investment consultants and trustees managing the plan assets. The difference in investment income using the projected rate of return compared to the actual rates of return for the past two years was not material and is not expected to have a material effect on the accompanying statements of operations or cash flows from operating activities in future years. +122 +Fair Value Assumptions +The fair values of the Company’s Qualified Pension Plan assets as of December 31, 2015 and 2014 , utilizing the fair value hierarchy discussed in Note 11 – Fair Value Measurements are as follows: +Fair Value Measurements Using: +Actual Asset Allocation +Total +Level 1 Inputs +Level 2 Inputs +Level 3 Inputs +(in thousands) +As of December 31, 2015 +Cash +— +% +$ +— +$ +— +$ +— +$ +— +Equity Securities: +Domestic (1) +26.1 +% +6,729 +4,943 +1,786 +— +International (2) +13.0 +% +3,353 +3,353 +— +— +Total Equity Securities +39.1 +% +10,082 +8,296 +1,786 +— +Fixed Income Securities: +High-Yield Bonds (3) +2.8 +% +722 +722 +— +— +Core Fixed Income (4) +22.5 +% +5,789 +5,789 +— +— +Floating Rate Corp Loans (5) +8.7 +% +2,247 +2,247 +— +— +Total Fixed Income Securities +34.0 +% +8,758 +8,758 +— +— +Other Securities: +Commodities (6) +2.7 +% +700 +700 +— +— +Real Estate (7) +5.8 +% +1,499 +— +— +1,499 +Collective Investment Trusts (8) +4.6 +% +1,184 +— +1,184 +— +Hedge Fund (9) +13.8 +% +3,546 +— +— +3,546 +Total Other Securities +26.9 +% +6,929 +700 +1,184 +5,045 +Total Investments +100.0 +% +$ +25,769 +$ +17,754 +$ +2,970 +$ +5,045 +As of December 31, 2014 +Cash +— +% +$ +— +$ +— +$ +— +$ +— +Equity Securities: +Domestic (1) +27.1 +% +7,569 +5,550 +2,019 +— +International (2) +12.5 +% +3,498 +3,498 +— +— +Total Equity Securities +39.6 +% +11,067 +9,048 +2,019 +— +Fixed Income Securities: +High-Yield Bonds (3) +2.9 +% +797 +797 +— +— +Core Fixed Income (4) +22.4 +% +6,247 +6,247 +— +— +Floating Rate Corp Loans (5) +8.6 +% +2,413 +2,413 +— +— +Total Fixed Income Securities +33.9 +% +9,457 +9,457 +— +— +Other Securities: +Commodities (6) +2.9 +% +810 +810 +— +— +Real Estate (7) +4.7 +% +1,327 +— +— +1,327 +Collective Investment Trusts (8) +4.1 +% +1,149 +— +1,149 +— +Hedge Fund (9) +14.8 +% +4,130 +593 +— +3,537 +Total Other Securities +26.5 +% +7,416 +1,403 +1,149 +4,864 +Total Investments +100.0 +% +$ +27,940 +$ +19,908 +$ +3,168 +$ +4,864 +____________________________________________ +123 +(1) +Level 1 equity securities consist of United States large and small capitalization companies, which are actively traded securities that can be sold upon demand. Level 2 equity securities are investments in a collective investment fund that is valued at net asset value based on the value of the underlying investments and total units outstanding on a daily basis. The objective of this fund is to approximate the S&P 500 by investing in one or more collective investment funds. +(2) +International equity securities consists of a well-diversified portfolio of holdings of mostly large issuers organized in developed countries with liquid markets, commingled with investments in equity securities of issuers located in emerging markets and believed to have strong sustainable financial productivity at attractive valuations. +(3) +High-yield bonds consist of non-investment grade fixed income securities. The investment objective is to obtain high current income. Due to the increased level of default risk, security selection focuses on credit-risk analysis. +(4) +The objective is to achieve value added from sector or issue selection by constructing a portfolio to approximate the investment results of the Barclay’s Capital Aggregate Bond Index with a modest amount of variability in duration around the index. +(5) +Investments consist of floating rate bank loans. The interest rates on these loans are typically reset on a periodic basis to account for changes in the level of interest rates. +(6) +Investments with exposure to commodity price movements, primarily through the use of futures, swaps and other commodity-linked securities. +(7) +The investment objective of direct real estate is to provide current income with the potential for long-term capital appreciation. Ownership in real estate entails a long-term time horizon, periodic valuations, and potentially low liquidity. +(8) +Collective investment trusts invest in short-term investments and are valued at the net asset value of the collective investment trust. The net asset value, as provided by the trustee, is used as a practical expedient to estimate fair value. The net asset value is based on the fair value of the underlying investments held by the fund less its liabilities. +(9) +The hedge fund portfolio includes an investment in an actively traded global mutual fund that focuses on alternative investments and a hedge fund of funds that invests both long and short using a variety of investment strategies. +Included below is a summary of the changes in Level 3 plan assets (in thousands): +Balance at January 1, 2014 +$ +3,421 +Purchases +1,232 +Realized gain on assets +144 +Unrealized gain on assets +67 +Balance at December 31, 2014 +$ +4,864 +Purchases +— +Realized gain on assets +165 +Unrealized gain on assets +16 +Balance at December 31, 2015 +$ +5,045 +Contributions +The Company contributed $6.4 million , $5.3 million , and $5.0 million , to the Pension Plans in the years ended December 31, 2015 , 2014 , and 2013 , respectively. The Company expects to make a $5.8 million contribution to the Pension Plans in 2016 . +124 +Benefit Payments +The Pension Plans made actual benefit payments of $8.2 million , $2.8 million , and $3.3 million in the years ended December 31, 2015 , 2014 , and 2013 , respectively. Expected benefit payments over the next 10 years are as follows: +Years Ending December 31, +(in thousands) +2016 +$ +3,618 +2017 +$ +4,350 +2018 +$ +4,605 +2019 +$ +6,057 +2020 +$ +6,846 +2021 through 2025 +$ +47,188 +Note 9 – Asset Retirement Obligations +The Company recognizes an estimated liability for future costs associated with the plugging and abandonment of its oil and gas properties. A liability for the fair value of an asset retirement obligation (“ARO”) and a corresponding increase to the carrying value of the related long-lived asset are recorded at the time a well is drilled or acquired. The increase in carrying value is included in proved oil and gas properties in the accompanying balance sheets. The Company depletes the amount added to proved oil and gas property costs and recognizes expense in connection with the accretion of the discounted liability over the remaining estimated economic lives of the respective oil and gas properties. Cash paid to settle asset retirement obligations is included in the operating section of the Company’s accompanying statements of cash flows. +The Company’s estimated asset retirement obligation liability is based on historical experience in plugging and abandoning wells, estimated economic lives, estimated plugging and abandonment cost, and federal and state regulatory requirements. The liability is discounted using the credit-adjusted risk-free rate estimated at the time the liability is incurred or revised. The credit-adjusted risk-free rates used to discount the Company’s plugging and abandonment liabilities range from 5.5 percent to 12 percent . In periods subsequent to initial measurement of the liability, the Company must recognize period-to-period changes in the liability resulting from the passage of time, revisions to either the amount of the original estimate of undiscounted cash flows or changes in inflation factors or the Company’s credit-adjusted risk-free rate as market conditions warrant. +A reconciliation of the Company’s total asset retirement obligation liability is as follows: +As of December 31, +2015 +2014 +(in thousands) +Beginning asset retirement obligation +$ +122,124 +$ +121,186 +Liabilities incurred +14,471 +13,506 +Liabilities settled +(24,781 +) +(11,372 +) +Accretion expense +5,091 +6,090 +Revision to estimated cash flows +23,969 +(7,286 +) +Ending asset retirement obligation +$ +140,874 +$ +122,124 +As of December 31, 2015 and 2014 , accounts payable and accrued expenses contain $3.3 million and $1.3 million , respectively, related to the Company’s current asset retirement obligation liability for estimated plugging and abandonment costs associated with platform structures that are being retired, which are also included in the table above. +125 +Note 10 – Derivative Financial Instruments +Summary of Oil, Gas, and NGL Derivative Contracts in Place +The Company has entered into various commodity derivative contracts to mitigate a portion of its exposure to potentially adverse market changes in commodity prices and the associated impact on cash flows. All contracts are entered into for other-than-trading purposes. The Company’s derivative contracts consist of swap arrangements for oil, gas, and NGLs. +As of December 31, 2015 , the Company had commodity derivative contracts outstanding through the second quarter of 2020 for a total of 5.6 million Bbls of oil production, 172.7 million MMBtu of gas production, and 13.0 million Bbls of NGL production. +In a typical commodity swap agreement, if the agreed upon published third-party index price (“index price”) is lower than the swap fixed price, the Company receives the difference between the index price and the agreed upon swap fixed price. If the index price is higher than the swap fixed price, the Company pays the difference. +The following tables summarize the approximate volumes and average contract prices of contracts the Company had in place as of December 31, 2015 : +Oil Swaps +Contract Period +NYMEX WTI Volumes +Weighted- +Average +Contract +Price +(Bbls) +(per Bbl) +First quarter 2016 +1,868,000 +$ +86.93 +Second quarter 2016 +1,752,000 +$ +86.73 +Third quarter 2016 +1,170,000 +$ +90.29 +Fourth quarter 2016 +780,000 +$ +90.05 +All oil swaps +5,570,000 +126 +Natural Gas Swaps +Contract Period +Volumes +Weighted- +Average +Contract +Price +(MMBtu) +(per MMBtu) +First quarter 2016 +23,341,000 +$ +3.82 +Second quarter 2016 +20,780,000 +$ +3.40 +Third quarter 2016 +18,829,000 +$ +3.38 +Fourth quarter 2016 +17,236,000 +$ +3.82 +2017 +37,528,000 +$ +4.09 +2018 +30,606,000 +$ +4.27 +2019 +24,415,000 +$ +4.34 +All gas swaps* +172,735,000 +____________________________________________ +*Natural gas swaps are comprised of IF El Paso Permian ( 2% ), IF HSC ( 95% ), IF NGPL TXOK ( 1% ), and IF NNG Ventura ( 2% ). +NGL Swaps +OPIS Purity Ethane Mont Belvieu +OPIS Propane Mont Belvieu Non-TET +OPIS Normal Butane Mont Belvieu Non-TET +OPIS Isobutane Mont Belvieu Non-TET +Contract Period +Volumes +Weighted-Average +Contract Price +Volumes +Weighted-Average +Contract Price +Volumes +Weighted-Average +Contract Price +Volumes +Weighted-Average +Contract Price +(Bbls) +(per Bbl) +(Bbls) +(per Bbl) +(Bbls) +(per Bbl) +(Bbls) +(per Bbl) +First quarter 2016 +926,000 +$ +8.29 +1,059,000 +$ +19.60 +143,000 +$ +25.62 +122,000 +$ +25.87 +Second quarter 2016 +828,000 +$ +8.28 +949,000 +$ +19.64 +130,000 +$ +25.62 +111,000 +$ +25.87 +Third quarter 2016 +751,000 +$ +8.70 +862,000 +$ +19.03 +— +$ +— +— +$ +— +Fourth quarter 2016 +688,000 +$ +8.71 +791,000 +$ +18.53 +— +$ +— +— +$ +— +2017 +2,271,000 +$ +9.16 +— +$ +— +— +$ +— +— +$ +— +2018 +1,671,000 +$ +10.65 +— +$ +— +— +$ +— +— +$ +— +2019 +1,200,000 +$ +10.92 +— +$ +— +— +$ +— +— +$ +— +2020 +539,000 +$ +11.13 +— +$ +— +— +$ +— +— +$ +— +Total NGL swaps +8,874,000 +3,661,000 +273,000 +233,000 +127 +Commodity Derivative Contracts Entered Into After December 31, 2015 +Subsequent to December 31, 2015, the Company restructured certain of its gas derivative contracts by buying fixed price volumes to exactly offset existing 2018 and 2019 fixed price swap contracts totaling 55.0 million MMBtu. The Company then entered into new 2017 fixed price swap contracts totaling 38.6 million MMBtu with a contract price of $4.43 per MMBtu. No cash or other consideration was included as part of the restructuring. The net result of buying fixed price volumes in 2018 and 2019 is that the Company no longer has protection against natural gas price volatility in those years. These updated contracts are reflected in the following table, which summarizes the approximate gas volumes and average contract prices of contracts the Company had in place as of February 17, 2016 , including derivatives contracts for settlement anytime during the first quarter of 2016 and later periods: +Natural Gas Swaps +Contract Period +Volumes +Weighted- +Average +Contract +Price +Purchased Volumes +Weighted- +Average +Contract +Price +Total Volumes +(MMBtu) +(per MMBtu) +(MMBtu) +(per MMBtu) +(MMBtu) +First quarter 2016 +23,341,000 +$ +3.82 +— +$ +— +23,341,000 +Second quarter 2016 +20,780,000 +$ +3.40 +— +$ +— +20,780,000 +Third quarter 2016 +18,829,000 +$ +3.38 +— +$ +— +18,829,000 +Fourth quarter 2016 +17,236,000 +$ +3.82 +— +$ +— +17,236,000 +2017 +76,135,000 +$ +4.26 +— +$ +— +76,135,000 +2018 +30,606,000 +$ +4.27 +(30,606,000 +) +$ +4.27 +— +2019 +24,415,000 +$ +4.34 +(24,415,000 +) +$ +4.34 +— +All gas swaps* +211,342,000 +(55,021,000 +) +156,321,000 +____________________________________________ +*Total volumes of natural gas swaps are comprised of IF El Paso Permian ( 2% ), IF HSC ( 96% ), IF NGPL TXOK ( 1% ), and IF NNG Ventura ( 1% ). +Additionally, subsequent to December 31, 2015, the Company entered into NGL fixed price swap contracts for 1.6 million Bbls of ethane production through 2018 with an average contract price of $8.67 per Bbl and 235,000 Bbls of isobutane production through the fourth quarter of 2016 with a contract price of $22.58 per Bbl. +Derivative Assets and Liabilities Fair Value +The Company’s commodity derivatives are measured at fair value and are included in the accompanying balance sheets as derivative assets and liabilities. The fair value of the commodity derivative contracts was a net asset of $488.4 million and $592.1 million at December 31, 2015 and 2014 , respectively. +The following tables detail the fair value of derivatives recorded in the accompanying balance sheets, by category: +As of December 31, 2015 +Derivative Assets +Derivative Liabilities +Balance Sheet +Classification +Fair Value +Balance Sheet +Classification +Fair Value +(in thousands) +Commodity Contracts +Current assets +$ +367,710 +Current liabilities +$ +8 +Commodity Contracts +Noncurrent assets +120,701 +Noncurrent liabilities +— +Derivatives not designated as hedging instruments +$ +488,411 +$ +8 +128 +As of December 31, 2014 +Derivative Assets +Derivative Liabilities +Balance Sheet +Classification +Fair Value +Balance Sheet +Classification +Fair Value +(in thousands) +Commodity Contracts +Current assets +$ +402,668 +Current liabilities +$ +— +Commodity Contracts +Noncurrent assets +189,540 +Noncurrent liabilities +70 +Derivatives not designated as hedging instruments +$ +592,208 +$ +70 +Offsetting of Derivative Assets and Liabilities +As of December 31, 2015 and 2014 , all derivative instruments held by the Company were subject to master netting arrangements by various financial institutions. In general, the terms of the Company’s agreements provide for offsetting of amounts payable or receivable between it and the counterparty, at the election of both parties, for transactions that settle on the same date and in the same currency. The Company’s agreements also provide that in the event of an early termination, the counterparties have the right to offset amounts owed or owing under that and any other agreement with the same counterparty. The Company’s accounting policy is to not offset these positions in its accompanying balance sheets. +The following table provides a reconciliation between the gross assets and liabilities reflected on the accompanying balance sheets and the potential effects of master netting arrangements on the fair value of the Company’s derivative contracts: +Derivative Assets +Derivative Liabilities +As of December 31, +As of December 31, +Offsetting of Derivative Assets and Liabilities +2015 +2014 +2015 +2014 +(in thousands) +Gross amounts presented in the accompanying balance sheets +$ +488,411 +$ +592,208 +$ +(8 +) +$ +(70 +) +Amounts not offset in the accompanying balance sheets +(8 +) +(70 +) +8 +70 +Net amounts +$ +488,403 +$ +592,138 +$ +— +$ +— +Discontinuance of Cash Flow Hedge Accounting +As of January 1, 2011, the Company elected to de-designate all of its commodity derivative contracts that had been previously designated as cash flow hedges at December 31, 2010. Fair values at December 31, 2010, were frozen in AOCL as of the de-designation date and were reclassified into earnings as the original derivative transactions settled. As of September 30, 2013, all commodity derivative contracts that had been previously designated as cash flow hedges had settled and had been reclassified into earnings from AOCL. +Subsequent to December 31, 2010, the Company recognizes all gains and losses from changes in commodity derivative fair values immediately in earnings rather than deferring any such amounts in AOCL. The Company had no derivatives designated as cash flow hedges for the years ended December 31, 2015 , 2014 , and 2013 , and no new gains or losses were deferred to AOCL during these respective years. Please refer to Note 11 - Fair Value Measurements for more information regarding the Company’s derivative instruments, including its valuation techniques. +129 +The following table summarizes the components of derivative gain presented in the accompanying statements of operations: +For the Years Ended December 31, +2015 +2014 +2013 +(in thousands) +Derivative settlement (gain) loss: +Oil contracts +$ +(362,219 +) +$ +(28,410 +) +$ +15,161 +Gas contracts (1) +(123,180 +) +26,706 +(30,338 +) +NGL contracts +(27,167 +) +(10,911 +) +(6,885 +) +Total derivative settlement gain +$ +(512,566 +) +$ +(12,615 +) +$ +(22,062 +) +Total derivative (gain) loss: +Oil contracts +$ +(191,165 +) +$ +(457,082 +) +$ +14,665 +Gas contracts +(189,734 +) +(93,267 +) +(14,053 +) +NGL contracts +(27,932 +) +(32,915 +) +(3,692 +) +Total derivative gain +$ +(408,831 +) +$ +(583,264 +) +$ +(3,080 +) +____________________________________________ +(1) +Natural gas derivative settlements for the years ended December 31, 2015 , and 2014, include $15.3 million and $5.6 million , respectively, of early settlements of futures contracts as a result of divesting assets in the Company’s Mid-Continent region. +The following table details the effect of derivative instruments on AOCL and the accompanying statements of operations (net of income tax): +Location on +Accompanying +Statements of +Operations +For the Years Ended December 31, +Derivatives +2015 +2014 +2013 +(in thousands) +Amount reclassified from AOCL +Commodity Contracts +Other operating revenues +$ +— +$ +— +$ +1,115 +The realized net hedge loss for the year ended December 31, 2013, shown net of income tax in the table above, is comprised of realized settlements on commodity derivative contracts that were previously designated as cash flow hedges. Realized hedge gains or losses from the settlement of commodity derivatives previously designated as cash flow hedges are reported in the other operating revenues line item on the accompanying statements of operations. The Company realized a pre-tax net loss of $1.8 million from its commodity derivative contracts that were previously designated as cash flow hedges for the year ended December 31, 2013. +Credit Related Contingent Features +As of December 31, 2015 , and through the filing date of this report, all of the Company’s derivative counterparties were members of the Company’s credit facility lender group. The Company’s obligations under its credit facility and derivative contracts are secured by mortgages on assets having a value equal to at least 75 percent of the total value of the Company’s proved oil and gas properties. +130 +Note 11 – Fair Value Measurements +The Company follows fair value measurement accounting guidance for all assets and liabilities measured at fair value. This guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. Market or observable inputs are the preferred sources of values, followed by assumptions based on hypothetical transactions in the absence of market inputs. The fair value hierarchy for grouping these assets and liabilities is based on the significance level of the following inputs: +• +Level 1 – quoted prices in active markets for identical assets or liabilities +• +Level 2 – quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations whose inputs are observable or whose significant value drivers are observable +• +Level 3 – significant inputs to the valuation model are unobservable +The following table is a listing of the Company’s assets and liabilities that are measured at fair value in the accompanying balance sheets and where they are classified within the fair value hierarchy as of December 31, 2015 : +Level 1 +Level 2 +Level 3 +(in thousands) +Assets: +Derivatives (1) +$ +— +$ +488,411 +$ +— +Proved oil and gas properties (2) +$ +— +$ +— +$ +124,184 +Other property and equipment (2) +$ +— +$ +— +$ +629 +Liabilities: +Derivatives (1) +$ +— +$ +8 +$ +— +Net Profits Plan (1) +$ +— +$ +— +$ +7,611 +____________________________________________ +(1) This represents a financial asset or liability that is measured at fair value on a recurring basis. +(2) This represents a non-financial asset that is measured at fair value on a nonrecurring basis. +The following table is a listing of the Company’s assets and liabilities that are measured at fair value in the accompanying balance sheets and where they are classified within the fair value hierarchy as of December 31, 2014 : +Level 1 +Level 2 +Level 3 +(in thousands) +Assets: +Derivatives (1) +$ +— +$ +592,208 +$ +— +Proved oil and gas properties (2) +$ +— +$ +— +$ +33,423 +Oil and gas properties held for sale (2) +$ +— +$ +— +$ +17,891 +Liabilities: +Derivatives (1) +$ +— +$ +70 +$ +— +Net Profits Plan (1) +$ +— +$ +— +$ +27,136 +____________________________________________ +(1) This represents a financial asset or liability that is measured at fair value on a recurring basis. +(2) This represents a non-financial asset that is measured at fair value on a nonrecurring basis. +131 +Both financial and non-financial assets and liabilities are categorized within the above fair value hierarchy based on the lowest level of input that is significant to the fair value measurement. The following is a description of the valuation methodologies used by the Company as well as the general classification of such instruments pursuant to the above fair value hierarchy. +Derivatives +The Company uses Level 2 inputs to measure the fair value of oil, gas, and NGL commodity derivatives. Fair values are based upon interpolated data. The Company derives internal valuation estimates taking into consideration forward commodity price curves, counterparties’ credit ratings, the Company’s credit rating, and the time value of money. These valuations are then compared to the respective counterparties’ mark-to-market statements. The considered factors result in an estimated exit-price that management believes provides a reasonable and consistent methodology for valuing derivative instruments. The derivative instruments utilized by the Company are not considered by management to be complex, structured, or illiquid. The oil, gas, and NGL commodity derivative markets are highly active. +Generally, market quotes assume that all counterparties have near zero, or low, default rates and have equal credit quality. However, an adjustment may be necessary to reflect the credit quality of a specific counterparty to determine the fair value of the instrument. The Company monitors the credit ratings of its counterparties and may require counterparties to post collateral if their ratings deteriorate. In some instances, the Company will attempt to novate the trade to a more stable counterparty. +Valuation adjustments are necessary to reflect the effect of the Company’s credit quality on the fair value of any derivative liability position. This adjustment takes into account any credit enhancements, such as collateral margin that the Company may have posted with a counterparty, as well as any letters of credit between the parties. The methodology to determine this adjustment is consistent with how the Company evaluates counterparty credit risk, taking into account the Company’s credit rating, current credit facility margins, and any change in such margins since the last measurement date. All of the Company’s derivative counterparties are members of the Company’s credit facility lender group. +The methods described above may result in a fair value estimate that may not be indicative of net realizable value or may not be reflective of future fair values and cash flows. While the Company believes that the valuation methods utilized are appropriate and consistent with authoritative accounting guidance and with other marketplace participants, the Company recognizes that third parties may use different methodologies or assumptions to determine the fair value of certain financial instruments that could result in a different estimate of fair value at the reporting date. +Refer to Note 10 - Derivative Financial Instruments for more information regarding the Company’s derivative instruments. +132 +Net Profits Plan +The Net Profits Plan is a standalone liability for which there is no available market price, principal market, or market participants. The inputs available for this instrument are unobservable and are therefore classified as Level 3 inputs. The Company employs the income valuation technique, which converts expected future cash flow amounts to a single present value amount. This technique uses the estimate of future cash payments, expectations of possible variations in the amount and/or timing of cash flows, the risk premium, and nonperformance risk to calculate the fair value. There is a direct correlation between realized oil, gas, and NGL commodity prices driving net cash flows and the Net Profits Plan liability. Generally, higher commodity prices result in a larger Net Profits Plan liability and lower commodity prices result in a smaller Net Profits Plan liability. +The Company records the estimated fair value of the long-term liability for estimated future payments under the Net Profits Plan based on the discounted value of estimated future payments associated with each individual pool. Discount rates of 10 percent and 12 percent were used to calculate this liability as of December 31, 2015, and 2014, respectively, and are intended to represent the Company’s best estimate of the present value of expected future payments under the Net Profits Plan. +The Company’s estimate of its liability is highly dependent on commodity prices, cost assumptions, discount rates, and overall market conditions. The Company regularly assesses the current market environment. The Net Profits Plan liability is determined using price assumptions of five one -year strip prices with the fifth year’s pricing then carried out indefinitely. The average price is adjusted for realized price differentials and to include the effects of the forecasted production covered by derivative contracts in the relevant periods. The non-cash expense associated with this significant management estimate is highly volatile from period to period due to fluctuations that occur in the oil, gas, and NGL commodity markets. +If the commodity prices used in the calculation changed by five percent , the liability recorded at December 31, 2015 , would differ by approximately $1.1 million . A one percent increase or decrease in the discount rate would result in a change of approximately $300,000 . Actual cash payments to be made to participants in future periods are dependent on realized actual production, realized commodity prices, and costs associated with the properties in each individual pool of the Net Profits Plan. Consequently, actual cash payments are inherently different from the amounts estimated. +No published market quotes exist on which to base the Company’s estimate of fair value of its Net Profits Plan liability. As such, the recorded fair value is based entirely on management estimates that are described within this footnote. While some inputs to the Company’s calculation of fair value of the Net Profits Plan’s future payments are from published sources, others, such as the discount rate and the expected future cash flows, are derived from the Company’s own calculations and estimates. +133 +The following table reflects the activity for the Company’s Net Profits Plan liability measured at fair value using Level 3 inputs: +For the Years Ended December 31, +2015 +2014 +2013 +(in thousands) +Beginning balance +$ +27,136 +$ +56,985 +$ +78,827 +Net increase (decrease) in liability (1) +(12,238 +) +(12,492 +) +3,527 +Net settlements (1) (2) +(7,287 +) +(17,357 +) +(25,369 +) +Transfers in (out) of Level 3 +— +— +— +Ending balance +$ +7,611 +$ +27,136 +$ +56,985 +____________________________________________ +(1) +Net changes in the Company’s Net Profits Plan liability are shown in the Change in Net Profits Plan liability line item of the accompanying statements of operations. +(2) +Settlements represent cash payments made or accrued under the Net Profits Plan. The amounts in the table include cash payments made or accrued under the Net Profits Plan of $3.8 million , $8.3 million , and $10.3 million for the years ended December 31, 2015 , 2014 , and 2013 , respectively, as a result of the divestitures of properties subject to the Net Profits Plan. +Long-Term Debt +The following table reflects the fair value of the Senior Notes measured using Level 1 inputs based on quoted secondary market trading prices. The Senior Notes were not presented at fair value on the accompanying balance sheets as of December 31, 2015 or 2014 , as they are recorded at carrying value, net of unamortized deferred financing costs. +As of December 31, +2015 +2014 +(in thousands) +2019 Notes (1) +$ +— +$ +350,018 +2021 Notes +$ +262,938 +$ +343,000 +2022 Notes +$ +440,250 +$ +556,500 +2023 Notes +$ +296,000 +$ +379,000 +2024 Notes +$ +334,065 +$ +435,000 +2025 Notes (1) +$ +326,875 +$ +— +____________________________________________ +(1) The 2019 Notes were fully redeemed on June 22, 2015 and the 2025 Notes were issued on May 21, 2015 . +The carrying value of the Company’s credit facility approximates its fair value, as the applicable interest rates are floating, based on prevailing market rates. +Proved and Unproved Oil and Gas Properties +Proved oil and gas property costs are evaluated for impairment and reduced to fair value when there is an indication the carrying costs may not be recoverable. The Company uses Level 3 inputs and the income valuation technique, which converts future amounts to a single present value amount, to measure the fair value of proved properties through an application of discount rates and price forecasts representative of the current operating environment, as selected by the Company’s management. The calculation of the discount rate is based on the best information available and was estimated to be 10 percent to 15 percent based on the reservoir specific weightings of future estimated proved and unproved cash flows as of December 31, 2015 . A 12 percent discount rate was +134 +estimated as of December 31, 2014 . The Company believes the discount rate is representative of current market conditions and takes into account estimates of future cash payments, reserve categories, expectations of possible variations in the amount and/or timing of cash flows, the risk premium, and nonperformance risk. The prices for oil and gas are forecast based on NYMEX strip pricing, adjusted for basis differentials, for the first five years, after which a flat terminal price is used for each commodity stream. The prices for NGLs are forecast using OPIS Mont Belvieu pricing, for as long as the market is actively trading, after which a flat terminal price is used. Future operating costs are also adjusted as deemed appropriate for these estimates. The Company recorded impairment of proved oil and gas properties expense of $468.7 million for the year ended December 31, 2015 , due to the decline in proved and risk-adjusted probable and possible reserve expected cash flows, driven by the continued commodity price declines. Impairments were recorded mainly in the Company’s east Texas and Powder River Basin programs with smaller impacts on other legacy and non-core assets in the Rocky Mountain region. These assets were impaired to fair value totaling $124.2 million as of December 31, 2015 . The Company recorded impairment of proved oil and gas properties expense of $84.5 million for the year ended December 31, 2014, resulting from the significant decline in commodity prices at the end of 2014 and recognition of the outcomes of exploration and delineation wells in certain prospects in the Company’s South Texas & Gulf Coast and Permian regions. As of December 31, 2014 , proved oil and gas properties measured at fair value totaled $33.4 million . +Unproved oil and gas property costs are evaluated for impairment and reduced to fair value when there is an indication that the carrying costs may not be recoverable. To measure the fair value of unproved properties, the Company uses a market approach, which takes into account the following significant assumptions: future development plans, risk weighted potential resource recovery, and estimated reserve values. The Company recorded abandonment and impairment of unproved oil and gas properties expense of $78.6 million and $75.6 million for the years ended December 31, 2015 , and 2014, respectively, resulting from lease expirations and acreage the Company no longer intended to develop in light of changes in drilling plans in response to the decline in commodity prices. Unproved properties measured at fair value were zero in the accompanying balance sheets as of December 31, 2015 , and 2014 . +Other property and equipment costs are evaluated for impairment and reduced to fair value when there is an indication the carrying costs may not be recoverable. Fair value of other property and equipment is valued using an income valuation technique or market approach depending on the quality of information available to support management’s assumptions and the circumstances. The valuation includes consideration of the proved and unproved assets supported by the property and equipment, future cash flows associated with the assets, and fixed costs necessary to operate and maintain the assets. The Company recorded impairment of other property and equipment expense of $49.4 million for the year ended December 31, 2015 , on the Company’s gathering system assets in its east Texas program. These assets were impaired in conjunction with the impairment of the associated proved and unproved properties, which the Company does not intend to develop during an environment of sustained low commodity prices. The fair value of these assets at December 31, 2015 , was $629,000 . +Proved properties classified as held for sale, including the corresponding asset retirement obligation liability, are valued using a market approach, based on an estimated selling price, as evidenced by the most current bid prices received from third parties, if available. If an estimated selling price is not available, the Company utilizes the income valuation technique discussed above. Unproved properties classified as held for sale are valued using a market approach, based on an estimated selling price, as evidenced by the most current bid prices received from third parties. If an estimated selling price is not available, the Company estimates acreage value based on the price received for similar acreage in recent transactions by the Company or other market participants in the principal market. For the years ended December 31, 2015 , and 2014, write-downs on certain assets held for sale totaled $98.6 million and $27.6 million , respectively. These write-downs are included within the net gain on divestiture activity line item on the accompanying statements of operations. Please refer to Note 3 – Divestitures, Assets Held for Sale, and Acquisitions for further discussion. There were no assets held for sale recorded at fair value as of December 31, 2015, as the carrying value was below the estimated fair value less costs to sell. As of December 31, 2014, assets held for sale measured at fair value totaled $17.9 million . +135 +The fair value measurements of assets acquired and liabilities assumed are measured on a nonrecurring basis on the acquisition date using an income valuation technique based on inputs that are not observable in the market and therefore represent Level 3 inputs. Significant inputs to the valuation of acquired oil and gas properties include estimates of: (i) reserves; (ii) production rates; (iii) future operating and development costs; (iv) future commodity prices, including price differentials; (v) future cash flows; and (vi) a market participant-based weighted average cost of capital rate. These inputs require significant judgments and estimates by the Company’s management at the time of the valuation. Refer to Note 3 – Divestitures, Assets Held for Sale, and Acquisitions for additional information on the fair value of assets acquired during 2014. +Note 12 - Acquisition and Development Agreement +In June 2011, the Company entered into an Acquisition and Development Agreement with Mitsui (the “Acquisition and Development Agreement”). Pursuant to the Acquisition and Development Agreement, the Company agreed to transfer to Mitsui a 12.5 percent working interest in certain non-operated oil and gas assets representing approximately 39,000 net acres in Dimmit, LaSalle, Maverick, and Webb Counties, Texas. As consideration for the oil and gas interests transferred, Mitsui agreed to pay, or carry, 90 percent of certain drilling and completion costs attributable to the Company’s remaining interest in these assets until Mitsui expended an aggregate $680.0 million on behalf of the Company. The Acquisition and Development Agreement also provided for reimbursement of capital expenditures and other costs, net of revenues, paid by the Company that were attributable to the transferred interest during the period between the effective date and the closing date, which the parties agreed would be applied over the carry period to cover the Company’s remaining 10 percent of drilling and completion costs for the affected acreage. +During the second quarter of 2014, the remainder of the carry under the Acquisition and Development Agreement was expended. Accordingly, the Company accrued and funded its full share of drilling and completion costs in its non-operated Eagle Ford shale program for the remainder of 2014 and all of 2015. +Note 13 - Suspended Well Costs +The following table reflects the net changes in capitalized exploratory well costs during 2015 , 2014 , and 2013 . The table does not include amounts that were capitalized and either subsequently expensed or reclassified to producing well costs in the same year: +For the Years Ended December 31, +2015 +2014 +2013 +(in thousands) +Beginning balance on January 1, +$ +43,589 +$ +34,527 +$ +9,100 +Additions to capitalized exploratory well costs pending the determination of proved reserves +11,952 +43,589 +34,527 +Divestitures +(809 +) +— +— +Reclassifications to wells, facilities, and equipment based on the determination of proved reserves +(18,485 +) +(33,340 +) +(9,100 +) +Capitalized exploratory well costs charged to expense +(24,295 +) +(1,187 +) +— +Ending balance at December 31, +$ +11,952 +$ +43,589 +$ +34,527 +As of December 31, 2015 , there were no exploratory well costs that were capitalized for more than one year. +136 +Supplemental Oil and Gas Information (unaudited) +Costs Incurred in Oil and Gas Producing Activities +Costs incurred in oil and gas property acquisition, exploration and development activities, whether capitalized or expensed, are summarized as follows: +For the Years Ended December 31, +2015 +2014 +2013 +(in thousands) +Development costs (1) +$ +1,234,114 +$ +1,782,324 +$ +1,350,116 +Exploration costs +132,465 +288,270 +168,612 +Acquisitions +Proved properties +10,040 +272,902 +29,859 +Unproved properties (2) +18,382 +368,208 +172,546 +Total, including asset retirement obligation (3)(4) +$ +1,395,001 +$ +2,711,704 +$ +1,721,133 +____________________________________________ +(1) +Includes facility costs of $75.6 million , $75.1 million , and $49.5 million for the years ended December 31, 2015 , 2014 , and 2013 , respectively. +(2) +Includes $924,000 , $288.7 million , and $58.5 million of unproved properties acquired as part of proved property acquisitions for the years ended December 31, 2015 , 2014 , and 2013 , respectively. The remaining balance relates to leasing activity. +(3) +Includes capitalized interest of $25.1 million , $16.2 million , and $11.0 million for the years ended December 31, 2015 , 2014 , and 2013 , respectively. +(4) +Includes amounts relating to estimated asset retirement obligations of $38.5 million , $11.4 million , and $26.8 million for the years ended December 31, 2015 , 2014 , and 2013 , respectively. +Oil and Gas Reserve Quantities +The reserve estimates presented below were made in accordance with GAAP requirements for disclosures about oil and gas producing activities and SEC rules for oil and gas reporting of reserve estimation and disclosure. +Proved reserves are the estimated quantities of oil, gas, and NGLs, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulations prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation. Existing economic conditions include prices and costs at which economic producibility from a reservoir is to be determined, and the price to be used is the average price during the 12-month period prior to the ending date of the period covered by the report, determined as an unweighted arithmetic average of the first-day-of-the-month price for each month within such period, unless prices are defined by contractual arrangements, excluding escalations based upon future conditions. All of the Company’s estimated proved reserves are located in the United States. +137 +The table below presents a summary of changes in the Company’s estimated proved reserves for each of the years in the three-year period ended December 31, 2015 . The Company engaged Ryder Scott to audit internal engineering estimates for at least 80 percent of the Company’s total calculated proved reserve PV-10 for each year presented. The Company emphasizes that reserve estimates are inherently imprecise and that estimates of new discoveries and undeveloped locations are more imprecise than estimates of established producing oil and gas properties. Accordingly, these estimates are expected to change as future information becomes available. +For the Years Ended December 31, +2015 (1) +2014 (2) +2013 (3) +Oil +Gas +NGLs +Oil +Gas +NGLs +Oil +Gas +NGLs +(MMBbl) +(Bcf) +(MMBbl) +(MMBbl) +(Bcf) +(MMBbl) +(MMBbl) +(Bcf) +(MMBbl) +Total proved reserves: +Beginning of year +169.7 +1,466.5 +133.5 +126.6 +1,189.3 +103.9 +92.2 +833.4 +62.3 +Revisions of previous estimate +(46.2 +) +(369.6 +) +(40.6 +) +(5.1 +) +46.0 +7.8 +(5.2 +) +68.8 +(1.3 +) +Discoveries and extensions +16.9 +122.3 +9.3 +15.0 +103.5 +10.5 +34.6 +399.2 +39.8 +Infill reserves in an existing proved field +24.9 +356.2 +29.7 +32.0 +270.8 +24.1 +21.6 +118.7 +13.2 +Sales of +reserves (4) +(1.9 +) +(138.4 +) +(0.4 +) +(1.9 +) +(1.1 +) +— +(3.4 +) +(85.1 +) +(0.6 +) +Purchases of minerals in place +1.1 +0.6 +— +19.8 +10.9 +0.2 +0.7 +3.6 +— +Production +(19.2 +) +(173.6 +) +(16.1 +) +(16.7 +) +(152.9 +) +(13.0 +) +(13.9 +) +(149.3 +) +(9.5 +) +End of year +145.3 +1,264.0 +115.4 +169.7 +1,466.5 +133.5 +126.6 +1,189.3 +103.9 +Proved developed reserves: +Beginning of year +89.3 +784.6 +66.7 +70.2 +569.2 +43.8 +58.8 +483.2 +27.2 +End of year +75.6 +644.4 +61.5 +89.3 +784.6 +66.7 +70.2 +569.2 +43.8 +Proved undeveloped reserves: +Beginning of year +80.4 +682.0 +66.8 +56.3 +620.1 +60.2 +33.5 +350.2 +35.1 +End of year +69.6 +619.7 +53.9 +80.4 +682.0 +66.8 +56.3 +620.1 +60.2 +____________________________________________ +Note: Amounts may not calculate due to rounding. +(1) +For the year ended December 31, 2015, the Company added 160.6 MMBOE from its drilling program, the majority of which related to activity in the Eagle Ford shale and Bakken/Three Forks plays. The Company had net negative engineering revisions of 148.6 MMBOE, consisting of 47.3 MMBOE of positive performance revisions in the Eagle Ford shale and Bakken/Three Forks plays resulting from enhanced completions and reductions in operating expenses, offset by a 116.5 MMBOE negative price revision due to the decline in commodity prices in 2015 and the removal of 79.4 MMBOE of proved undeveloped reserves due to the five-year rule. +(2) +For the year ended December 31, 2014, the Company added 143.9 MMBOE from its drilling program and had upward engineering revisions of 10.4 MMBOE related primarily to improved performance and lower operating expenses in its operated Eagle Ford assets. +(3) +For the year ended December 31, 2013, the Company added 195.5 MMBOE from its drilling program and had upward engineering revisions of 5.0 MMBOE related primarily to an upward performance revision of 4.4 MMBOE. +(4) +Please refer to Note 3 – Divestitures, Assets Held for Sale, and Acquisitions for additional information on assets divested. +138 +Standardized Measure of Discounted Future Net Cash Flows +The Company computes a standardized measure of future net cash flows and changes therein relating to estimated proved reserves in accordance with authoritative accounting guidance. Future cash inflows and production and development costs are determined by applying prices and costs, including transportation, quality, and basis differentials, to the year-end estimated future reserve quantities. Each property the Company operates is also charged with field-level overhead in the estimated reserve calculation. Estimated future income taxes are computed using the current statutory income tax rates, including consideration for estimated future statutory depletion. The resulting future net cash flows are reduced to present value amounts by applying a 10 percent annual discount factor. +Future operating costs are determined based on estimates of expenditures to be incurred in developing and producing the proved reserves in place at the end of the period using year-end costs and assuming continuation of existing economic conditions, plus Company overhead incurred by the central administrative office attributable to operating activities. +The assumptions used to compute the standardized measure are those prescribed by the FASB and the SEC. These assumptions do not necessarily reflect the Company’s expectations of actual revenues to be derived from those reserves, nor their present value amount. The limitations inherent in the reserve quantity estimation process, as discussed previously, are equally applicable to the standardized measure computations since these reserve quantity estimates are the basis for the valuation process. The following prices as adjusted for transportation, quality, and basis differentials were used in the calculation of the standardized measure: +For the Years Ended December 31, +2015 +2014 +2013 +Oil (per Bbl) +$ +42.98 +$ +84.65 +$ +90.19 +Gas (per Mcf) +$ +2.48 +$ +4.63 +$ +3.99 +NGLs (per Bbl) +$ +16.99 +$ +35.48 +$ +35.92 +139 +The following summary sets forth the Company’s future net cash flows relating to proved oil, gas, and NGL reserves based on the standardized measure. +As of December 31, +2015 +2014 +2013 +(in thousands) +Future cash inflows +$ +11,337,865 +$ +25,897,730 +$ +19,895,360 +Future production costs +(6,234,687 +) +(9,986,239 +) +(7,771,747 +) +Future development costs +(2,005,599 +) +(3,294,164 +) +(2,891,325 +) +Future income taxes +— +(3,511,352 +) +(2,722,230 +) +Future net cash flows +3,097,579 +9,105,975 +6,510,058 +10 percent annual discount +(1,228,671 +) +(3,407,192 +) +(2,500,619 +) +Standardized measure of discounted future net cash flows +$ +1,868,908 +$ +5,698,783 +$ +4,009,439 +The principle sources of changes in the standardized measure of discounted future net cash flows are: +For the Years Ended December 31, +2015 +2014 +2013 +(in thousands) +Standardized measure, beginning of year +$ +5,698,783 +$ +4,009,439 +$ +3,021,014 +Sales of oil, gas, and NGLs produced, net of production costs +(776,272 +) +(1,765,666 +) +(1,602,505 +) +Net changes in prices and production costs +(4,709,908 +) +(75,966 +) +142,199 +Extensions, discoveries and other including infill reserves in an existing proved field, net of related costs +386,069 +1,819,657 +2,309,075 +Sales of reserves in place +(262,210 +) +(49,736 +) +(259,031 +) +Purchase of reserves in place +4,686 +413,175 +30,771 +Previously estimated development costs incurred during the period +449,738 +1,015,694 +581,107 +Changes in estimated future development costs +191,447 +138,247 +68,613 +Revisions of previous quantity estimates +(1,819,639 +) +167,500 +82,226 +Accretion of discount +761,746 +552,852 +384,914 +Net change in income taxes +1,863,868 +(399,587 +) +(690,953 +) +Changes in timing and other +80,600 +(126,826 +) +(57,991 +) +Standardized measure, end of year +$ +1,868,908 +$ +5,698,783 +$ +4,009,439 +140 +Quarterly Financial Information (unaudited) +The Company’s quarterly financial information for fiscal years 2015 and 2014 is as follows (in thousands, except per share amounts): +First +Second (2) +Third (3) +Fourth (3) (4) +Quarter +Quarter +Quarter +Quarter +Year Ended December 31, 2015 +Total operating revenues and other income +$ +365,934 +$ +516,146 +$ +371,151 +$ +303,734 +Total operating expenses +420,369 +567,025 +339,047 +809,307 +Income (loss) from operations +$ +(54,435 +) +$ +(50,879 +) +$ +32,104 +$ +(505,573 +) +Loss before income taxes +$ +(86,511 +) +$ +(98,211 +) +$ +(1,026 +) +$ +(537,113 +) +Net income (loss) +$ +(53,058 +) +$ +(57,508 +) +$ +3,114 +$ +(340,258 +) +Basic net income (loss) per common share (1) +$ +(0.79 +) +$ +(0.85 +) +$ +0.05 +$ +(5.01 +) +Diluted net income (loss) per common share (1) +$ +(0.79 +) +$ +(0.85 +) +$ +0.05 +$ +(5.01 +) +Dividends declared per common share +$ +0.05 +$ +— +$ +0.05 +$ +— +Year Ended December 31, 2014 +Total operating revenues and other income +$ +632,720 +$ +674,980 +$ +618,786 +$ +595,821 +Total operating expenses +504,086 +553,264 +261,807 +37,336 +Income from operations +$ +128,634 +$ +121,716 +$ +356,979 +$ +558,485 +Income before income taxes +$ +104,470 +$ +95,829 +$ +333,686 +$ +530,714 +Net income +$ +65,607 +$ +59,780 +$ +208,938 +$ +331,726 +Basic net income per common share (1) +$ +0.98 +$ +0.89 +$ +3.10 +$ +4.92 +Diluted net income per common share (1) +$ +0.96 +$ +0.88 +$ +3.05 +$ +4.91 +Dividends declared per common share +$ +0.05 +$ +— +$ +0.05 +$ +— +____________________________________________ +(1) +Amounts may not sum due to rounding. +(2) +During the second quarter of 2015, the Company recorded a $71.9 million net gain on divestiture activity resulting from the sale of its Mid-Continent assets offset by write-downs on certain other assets held for sale. Please refer to Note 3 – Divestitures, Assets Held for Sale, and Acquisitions in Part II, Item 8 of this report for additional information. Additionally, the Company recorded a $16.6 million net loss on the early extinguishment of its 2019 Notes. Please refer to Note 5 - Long-Term Debt in Part II, Item 8 of this report for additional information. +(3) +The volatility of commodity prices at the end of 2014 and throughout 2015 has resulted in significant net derivative gains recorded for the years ended December 31, 2015, and 2014, with the third quarter of 2015 including a $212.3 million net derivative gain and the third and fourth quarters of 2014 including a $190.7 million and $616.7 million net derivative gain, respectively. Please refer to the caption Derivative gain included in Comparison of Financial Results and Trends between 2015 and 2014 and between 2014 and 2013 included in Part II, Item 7 of this report for additional discussion. +(4) +During the fourth quarter of 2015, the Company recorded $344.2 million of impairment of proved properties expense, $54.6 million of abandonment and impairment of unproved properties expense, and $49.4 million of impairment of other property and equipment expense. During the fourth quarter of 2014, the Company recorded $84.5 million of impairment of proved properties expense and $57.2 million of abandonment and impairment of unproved properties expense. Please refer to the caption Impairment of Proved and Unproved Properties included in Note 1 - Summary of Significant Accounting Policies for additional discussion. +ITEM 9. +CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE +None. +141 +ITEM 9A. CONTROLS AND PROCEDURES +Evaluation of Disclosure Controls and Procedures +We maintain a system of disclosure controls and procedures that are designed to reasonably ensure that information required to be disclosed in our SEC reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and to reasonably ensure that such information is accumulated and communicated to our management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. +Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) (“Disclosure Controls”) will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. We monitor our Disclosure Controls and make modifications as necessary; our intent in this regard is that the Disclosure Controls will be modified as systems change and conditions warrant. +An evaluation of the effectiveness of the design and operation of our Disclosure Controls was performed as of the end of the period covered by this report. This evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that these Disclosure Controls are effective at a reasonable assurance level. +Changes in Internal Control Over Financial Reporting +There have been no changes during the fourth quarter of 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. +142 +Management’s Report on Internal Control over Financial Reporting +Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s internal control over financial reporting includes those policies and procedures that: +(i) +pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; +(ii) +provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and +(iii) +provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that have a material effect on the financial statements. +Because of the inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. Even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of the changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate. +Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2015 . In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013 framework) . +Based on our assessment and those criteria, management believes that the Company maintained effective internal control over financial reporting as of December 31, 2015 . +The Company’s independent registered public accounting firm has issued an attestation report on the Company’s internal control over financial reporting. That report immediately follows this report. +143 +Report of Independent Registered Public Accounting Firm +The Board of Directors and Stockholders of SM Energy Company and subsidiaries +We have audited SM Energy Company and subsidiaries’ internal control over financial reporting as of December 31, 2015 , based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). SM Energy Company and subsidiaries’ management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit. +We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. +A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. +Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. +In our opinion, SM Energy Company and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of December 31, 2015 , based on the COSO criteria. +We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of SM Energy Company and subsidiaries as of December 31, 2015 and 2014, and the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2015 of SM Energy Company and subsidiaries and our report dated February 24, 2016 expressed an unqualified opinion thereon . +/s/ Ernst & Young LLP +Denver, Colorado +February 24, 2016 +144 +ITEM 9B. OTHER INFORMATION +None. +PART III +ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE +The information required by this Item concerning SM Energy’s Directors, Executive Officers, and corporate governance is incorporated by reference to the information provided under the captions “Proposal 1 - Election of Directors,” “Information about Executive Officers,” and “Corporate Governance” in SM Energy’s definitive proxy statement for the 2016 annual meeting of stockholders to be filed within 120 days from December 31, 2015 . +The information required by this Item concerning compliance with Section 16(a) of the Securities Exchange Act of 1934 is incorporated by reference to the information provided under the caption “Section 16(a) Beneficial Ownership Reporting Compliance” in SM Energy’s definitive proxy statement for the 2016 annual meeting of stockholders to be filed within 120 days from December 31, 2015 . +ITEM 11. EXECUTIVE COMPENSATION +The information required by this Item is incorporated by reference to the information provided under the captions “Executive Compensation” and “Director Compensation” in SM Energy’s definitive proxy statement for the 2016 annual meeting of stockholders to be filed within 120 days from December 31, 2015 . +ITEM 12. +SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS +The information required by this Item concerning security ownership of certain beneficial owners and management is incorporated by reference to the information provided under the caption “Security Ownership of Certain Beneficial Owners and Management” in SM Energy’s definitive proxy statement for the 2016 annual meeting of stockholders to be filed within 120 days from December 31, 2015 . +145 +Securities Authorized for Issuance Under Equity Compensation Plans. SM Energy has the Equity Plan under which options and shares of SM Energy common stock are authorized for grant or issuance as compensation to eligible employees, consultants, and members of the Board of Directors. Our stockholders have approved this plan. See Note 7 – Compensation Plans included in Part II, Item 8 of this report for further information about the material terms of our equity compensation plans. The following table is a summary of the shares of common stock authorized for issuance under the equity compensation plans as of December 31, 2015 : +(a) +(b) +(c) +Plan category +Number of securities to be issued upon exercise of outstanding options, warrants, and rights +Weighted-average exercise price of outstanding options, warrants, and rights +Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) +Equity compensation plans approved by security holders: +Equity Incentive Compensation Plan +Stock options and incentive stock options (1) +— +$ +— +Restricted stock (1)(3) +543,737 +N/A +Performance share units (1)(3)(4) +725,408 +N/A +Total for Equity Incentive Compensation Plan +1,269,145 +$ +— +2,781,642 +Employee Stock Purchase Plan (2) +— +— +949,707 +Equity compensation plans not approved by security holders +— +— +— +Total for all plans +1,269,145 +$ +— +3,731,349 +____________________________________________ +(1) +In May 2006, the stockholders approved the Equity Plan to authorize the issuance of restricted stock, restricted stock units, non-qualified stock options, incentive stock options, stock appreciation rights, performance shares, performance units, and stock-based awards to key employees, consultants, and members of the Board of Directors of SM Energy or any affiliate of SM Energy. Our Board of Directors approved amendments to the Equity Plan in 2009, 2010, and 2013 and each amended plan was approved by stockholders at the respective annual stockholders’ meetings. The awards granted in 2015 , 2014 , and 2013 under the Equity Plan were 714,949 , 464,641 , and 632,939 , respectively. +(2) +Under the SM Energy Company ESPP, eligible employees may purchase shares of our common stock through payroll deductions of up to 15 percent of their eligible compensation. The purchase price of the stock is 85 percent of the lower of the fair market value of the stock on the first or last day of the six-month offering period, and shares issued under the ESPP on or after December 31, 2011, have no minimum restriction period. The ESPP is intended to qualify under Section 423 of the Internal Revenue Code. Shares issued under the ESPP totaled 197,214 , 83,136 , and 77,427 in 2015 , 2014 , and 2013 , respectively. +(3) +RSUs and PSUs do not have exercise prices associated with them, but rather a weighted-average per share fair value, which is presented in order to provide additional information regarding the potential dilutive effect of the awards. The weighted-average grant date per share fair value for the outstanding RSUs and PSUs was $55.01 and $63.43, respectively. Please refer to Note 7 - Compensation Plans in Part II, Item 8 of this report for additional discussion. +(4) +The number of awards vested assumes a one multiplier. The final number of shares issued upon settlement may vary depending on the three -year multiplier determined at the end of the performance period under the Equity Plan, which ranges from zero to two . +146 +ITEM 13. +CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE +The information required by this Item is incorporated by reference to the information provided under the captions “Certain Relationships and Related Transactions” and “Corporate Governance” in SM Energy’s definitive proxy statement for the 2016 annual meeting of stockholders to be filed within 120 days from December 31, 2015 . +ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES +The information required by this Item is incorporated by reference to the information provided under the captions “Independent Registered Public Accounting Firm” and “Audit Committee Preapproval Policy and Procedures” in SM Energy’s definitive proxy statement for the 2016 annual meeting of stockholders to be filed within 120 days from December 31, 2015 . +147 +PART IV +ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES +(a)(1) and (a)(2) Financial Statements and Financial Statement Schedules: +Report of Independent Registered Public Accounting Firm +88 +Consolidated Balance Sheets +89 +Consolidated Statements of Operations +90 +Consolidated Statements of Comprehensive Income (Loss) +91 +Consolidated Statements of Stockholders’ Equity +92 +Consolidated Statements of Cash Flows +93 +Notes to Consolidated Financial Statements +95 +All schedules are omitted because the required information is not applicable or is not present in amounts sufficient to require submission of the schedule or because the information required is included in the Consolidated Financial Statements and Notes thereto. +(b) Exhibits. The following exhibits are filed or furnished with or incorporated by reference into this report on Form 10-K: +Exhibit +Number +Description +1.1 +Underwriting Agreement dated May 7, 2015, among SM Energy Company, and Wells Fargo Securities, LLC, Merrill Lynch, Pierce, Fenner, & Smith Incorporated and J.P. Morgan Securities LLC, as representatives of the several underwriters (filed as Exhibit 1.1 to the registrant’s Current Report on Form 8-K filed on May 8, 2015, and incorporated herein by reference)
 +2.1 +Acquisition and Development Agreement dated June 29, 2011 between SM Energy Company and Mitsui E&P Texas LP (filed as Exhibit 2.2 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011 and incorporated herein by reference) +2.2 +First Amendment to Acquisition and Development Agreement dated October 13, 2011 between SM Energy Company and Mitsui E&P Texas LP (filed as Exhibit 2.1 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2011 and incorporated herein by reference) +2.3 *** +Purchase and Sale Agreement dated November 4, 2013, among SM Energy Company, EnerVest Energy Institutional Fund XIII-A, L.P., EnerVest Energy Institutional Fund XIII-WIB, L.P., and EnerVest Energy Institutional Fund XIII-WIC, L.P. (filed as Exhibit 2.4 to the registrant’s Amendment to the Annual Report on Form 10-K/A filed on May 9, 2014 for the year ended December 31, 2013, and incorporated herein by reference) +2.4 *** +Purchase and Sale Agreement dated July 29, 2014 between SM Energy Company and Baytex Energy USA LLC (filed as Exhibit 2.1 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2014 and incorporated herein by reference) +3.1 +Restated Certificate of Incorporation of SM Energy Company, as amended through June 1, 2010 (filed as Exhibit 3.1 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2010, and incorporated herein by reference) +3.2 +Amended and Restated Bylaws of SM Energy Company, effective as of December 15, 2015 (filed as Exhibit 3.1 to the registrant’s Current Report on Form 8-K filed on December 21, 2015, and incorporated herein by reference) +4.1 +Indenture related to the 6.625% Senior Notes due 2019, dated as of February 7, 2011, by and between SM Energy Company, as issuer, and U.S. Bank National Association, as Trustee (filed as Exhibit 4.1 to the registrant’s Current Report on Form 8-K filed on February 10, 2011, and incorporated herein by reference) +148 +4.2 +Indenture related to the 6.50% Senior Notes due 2021, dated as of November 8, 2011, by and among SM Energy Company, as issuer, and U.S. Bank National Association, as Trustee (filed as Exhibit 4.1 to the registrant’s Current Report on Form 8-K filed on November 10, 2011, and incorporated herein by reference) +4.3 +Indenture related to the 6.50% Senior Notes due 2023, dated June 29, 2012, between SM Energy Company, as Issuer, and U.S. Bank National Association, as Trustee (filed as Exhibit 4.1 to the registrant’s Current Report on Form 8-K filed on July 3, 2012, and incorporated herein by reference) +4.4 +Indenture related to the 5.0% Senior Notes due 2024, dated May 20, 2013, by and between SM Energy Company, as issuer, and U.S. Bank National Association, as Trustee (filed as Exhibit 4.1 to the registrant’s Current Report on Form 8-K filed on May 20, 2013, and incorporated herein by reference) +4.5 +Indenture related to the 6.125% Senior Notes due 2022, dated November 17, 2014, by and between SM Energy Company, as issuer, and U.S. Bank National Association, as Trustee (filed as Exhibit 4.1 to the registrant’s Current Report on Form 8-K filed on November 18, 2014, and incorporated herein by reference) +4.6 +Indenture related to senior debt securities of SM Energy Company by and between SM Energy Company and U.S. Bank National Association, as trustee (filed as Exhibit 4.1 to the registrant’s Registration Statement on Form S-3 filed on May 7, 2015 (Registration No. 333-203936) and incorporated herein by reference) +4.7 +2025 Notes Supplemental Indenture (filed as Exhibit 4.2 to the registrant’s Current Report on Form 8-K filed on May 21, 2015, and incorporated herein by reference) +4.8 +2019 Notes Supplemental Indenture (filed as Exhibit 4.3 to the registrant’s Current Report on Form 8-K filed on May 21, 2015 and incorporated herein by reference) +10.1† +Stock Option Plan, as Amended on May 22, 2003 (filed as Exhibit 99.1 to the registrant’s Registration Statement on Form S-8 (Registration No. 333-106438) and incorporated herein by reference) +10.2† +Incentive Stock Option Plan, as Amended on May 22, 2003 (filed as Exhibit 99.2 to the registrant’s Registration Statement on Form S-8 (Registration No. 333-106438) and incorporated herein by reference) +10.3 +Supplement and Amendment to Deed of Trust, Mortgage, Line of Credit Mortgage, Assignment, Security Agreement, Fixture Filing and Financing Statement for the benefit of Wachovia Bank, National Association, as Administrative Agent, dated effective as of April 14, 2009 (filed as Exhibit 10.2 to the registrant’s Current Report on Form 8-K filed on April 20, 2009, and incorporated herein by reference) +10.4 +Deed of Trust to Wachovia Bank, National Association, as Administrative Agent, dated effective as of April 14, 2009 (filed as Exhibit 10.3 to the registrant’s Current Report on Form 8-K filed on April 20, 2009, and incorporated herein by reference) +10.5† +Form of Non-Employee Director Restricted Stock Award Agreement as of May 27, 2010 (filed as Exhibit 10.5 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2010 and incorporated herein by reference) +10.6*** +Gas Services Agreement effective as of July 1, 2010 between SM Energy Company and Eagle Ford Gathering LLC (filed as Exhibit 10.3 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2010 and incorporated herein by reference) +10.7 s +Net Profits Interest Bonus Plan, As Amended by the Board of Directors on July 30, 2010 (filed as Exhibit 10.6 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2010 and incorporated herein by reference) +10.8 † +Pension Plan for Employees of SM Energy Company as Amended and Restated as of January 1, 2010 (filed as Exhibit 10.30 to the registrant’s Annual Report on Form 10-K filed for the year ended December 31, 2010, and incorporated herein by reference) +10.9+ +SM Energy Company Non-Qualified Unfunded Supplemental Retirement Plan as Amended as of November 9, 2010 (filed as Exhibit 10.31 to the registrant’s Annual Report on Form 10-K filed for the year ended December 31, 2010, and incorporated herein by reference) +149 +10.10 +Gas Gathering Agreement dated May 31, 2011 between Regency Field Services LLC and SM Energy Company (filed as Exhibit 10.2 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011, and incorporated herein by reference) +10.11 +Gathering and Natural Gas Services Agreement effective as of April 1, 2011 between SM Energy Company and ETC Texas Pipeline, Ltd. (filed as Exhibit 10.3 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011, and incorporated herein by reference) +10.12 +Gas Processing Agreement effective as of April 1, 2011 between ETC Texas Pipeline, Ltd. and SM Energy Company (filed as Exhibit 10.4 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011, and incorporated herein by reference) +10.13† +Employee Stock Purchase Plan, As Amended and Restated as of June 10, 2011 (filed as Exhibit 10.5 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011, and incorporated herein by reference) +10.14 † +Amendment No. 1 to the Pension Plan for Employees of SM Energy Company amended as of January 1, 2011 (filed as Exhibit 10.41 to the registrant’s Annual Report on Form 10-K filed for the year ended December 31, 2011, and incorporated herein by reference) +10.15 † +Amendment No. 2 to the Pension Plan for Employees of SM Energy Company amended as of January 1, 2012 (filed as Exhibit 10.42 to the registrant’s Annual Report on Form 10-K filed for the year ended December 31, 2011, and incorporated herein by reference) +10.16† +Equity Incentive Compensation Plan, As Amended as of May 22, 2013 (filed as Annex A to the registrant’s Schedule 14A filed on April 11, 2013, and incorporated herein by reference) +10.17 +Fifth Amended and Restated Credit Agreement dated April 12, 2013, among SM Energy Company, as Borrower, Wells Fargo Bank, National Association, as Administrative Agent, and the Lenders party thereto (filed as Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on April 15, 2013, and incorporated herein by reference) +10.18† +Form of Performance Stock Unit Award Agreement as of July 31, 2013 (filed as Exhibit 10.2 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013, and incorporated herein by reference) +10.19† +Form of Restricted Stock Unit Award Agreement as of July 31, 2013 (filed as Exhibit 10.3 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013, and incorporated herein by reference) +10.20† +SM Energy Company Non-Qualified Deferred Compensation Plan as of March 10, 2014 (filed as Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on January 24, 2014, and incorporated herein by reference) +10.21† +Cash Bonus Plan, As Amended and Restated as of February 1, 2014 (filed as Exhibit 10.41 to the registrant’s Annual Report on Form 10-K filed for the year ended December 31, 2013, and incorporated herein by reference) +10.22† +Section 162(m) Cash Bonus Plan, effective as of May 21, 2014 (filed as Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on May 28, 2014, and incorporated herein by reference) +10.23*† +Summary of Compensation Arrangements for Non-Employee Directors +10.24 +Second Amendment to the Fifth Amended and Restated Credit Agreement dated December 10, 2014, among SM Energy Company, as Borrower, Wells Fargo Bank, National Association, as Administrative Agent, and the Lenders party thereto (filed as Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on December 16, 2014, and incorporated herein by reference) +10.25 +Third Amendment to Fifth Amended and Restated Credit Agreement, dated May 20, 2015, among SM Energy Company, Wells Fargo Bank, National Association, as Administrative Agent, and the Lenders party thereto (filed as Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on May 27, 2015, and incorporated herein by reference) +10.26 +Fourth Amendment to Fifth Amended and Restated Credit Agreement, dated October 7, 2015, among SM Energy Company, Wells Fargo Bank, National Association, as Administrative Agent, and the Lenders party thereto (filed as Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on October 8, 2015, and incorporated herein by reference) +150 +10.27 +Fifth Amendment to Fifth Amended and Restated Credit Agreement, dated November 11, 2015, among SM Energy Company, Wells Fargo Bank, National Association, as Administrative Agent, and the Lenders party thereto (filed as Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on November 11, 2015, and incorporated herein by reference) +10.28 +Change of Control Executive Severance Agreement (filed as Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on October 20, 2015, and incorporated herein by reference) +10.29*† +Amendment No. 3 to the Pension Plan for Employees of SM Energy Company amended as of January 1, 2016 +10.30 *** +Amendment to Amended and Restated Gas Gathering Agreement, effective as of September 1, 2015, by and between SM Energy Company and Regency Field Services LLC (filed as Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on September 15, 2015, and incorporated herein by reference) +10.31 +Amendment to Amended and Restated Gas Gathering Agreement, effective as of February 1, 2016, by and between SM Energy Company and ETC Field Services LLC (filed as Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on February 22, 2016, and incorporated herein by reference) +12.1* +Computation of Ratio of Earnings to Fixed Charges +21.1* +Subsidiaries of Registrant +23.1* +Consent of Ernst & Young LLP +23.2* +Consent of Ryder Scott Company L.P. +24.1* +Power of Attorney +31.1* +Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes – Oxley Act of 2002 +31.2* +Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes – Oxley Act of 2002 +32.1** +Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes - Oxley Act of 2002 +99.1* +Ryder Scott Audit Letter +101.INS* +XBRL Instance Document +101.SCH* +XBRL Schema Document +101.CAL* +XBRL Calculation Linkbase Document +101.LAB* +XBRL Label Linkbase Document +101.PRE* +XBRL Presentation Linkbase Document +101.DEF* +XBRL Taxonomy Extension Definition Linkbase Document +* Filed with this Form 10-K. +** Furnished with this Form 10-K. +*** +Certain portions of this exhibit have been redacted and are subject to a confidential treatment order granted by the Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934. +† +Exhibit constitutes a management contract or compensatory plan or agreement. +s +Exhibit constitutes a management contract or compensatory plan or agreement. This document was amended on July 30, 2010 primarily to reflect the change in the name of the registrant from St. Mary Land & Exploration Company to SM Energy Company. There were no material changes to the substantive terms and conditions in this document. ++ +Exhibit constitutes a management contract or compensatory plan or agreement. This document was amended on November 9, 2010, in order to make technical revisions to ensure compliance with Section 409A of the Internal Revenue Code. There were no material changes to the substantive terms and conditions in this document. +(c) Financial Statement Schedules. See Item 15(a) above. +151 +SIGNATURES +Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. +SM ENERGY COMPANY +(Registrant) +Date: +February 24, 2016 +By: +/s/ JAVAN D. OTTOSON +Javan D. Ottoson +President and Chief Executive Officer +(Principal Executive Officer) +GENERAL POWER OF ATTORNEY +KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints each of Javan D. Ottoson and A. Wade Pursell his or her true and lawful attorney-in-fact and agent with full power of substitution and resubstitution, and each with full power to act alone, for the undersigned and in his or her name, place and stead, in any and all capacities, to sign any amendments to this Annual Report on Form 10-K for the fiscal year ended December 31, 2015 , and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorney-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof. +Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. +Signature +Title +Date +/s/ JAVAN D. OTTOSON +President, Chief Executive Officer, and Director +February 24, 2016 +Javan D. Ottoson +(Principal Executive Officer) +/s/ A. WADE PURSELL +Executive Vice President and Chief Financial Officer +February 24, 2016 +A. Wade Pursell +(Principal Financial Officer) +/s/ MARK T. SOLOMON +Vice President - Controller and Assistant Secretary +February 24, 2016 +Mark T. Solomon +(Principal Accounting Officer) +152 +Signature +Title +Date +/s/ WILLIAM D. SULLIVAN +Chairman of the Board of Directors +February 24, 2016 +William D. Sullivan +/s/ LARRY W. BICKLE +Director +February 24, 2016 +Larry W. Bickle +/s/ STEPHEN R. BRAND +Director +February 24, 2016 +Stephen R. Brand +/s/ WILLIAM J. GARDINER +Director +February 24, 2016 +William J. Gardiner +/s/ LOREN M. LEIKER +Director +February 24, 2016 +Loren M. Leiker +/s/ RAMIRO G. PERU +Director +February 24, 2016 +Ramiro G. Peru +/s/ JULIO M. QUINTANA +Director +February 24, 2016 +Julio M. Quintana +/s/ ROSE M. ROBESON +Director +February 24, 2016 +Rose M. Robeson +153 \ No newline at end of file diff --git a/raw/filings/0000893538/2015/0000893538-16-000122/filing_metadata.csv b/raw/filings/0000893538/2015/0000893538-16-000122/filing_metadata.csv new file mode 100644 index 0000000000000000000000000000000000000000..3ab1cf64994431575772145be578f83ec0cd74d7 --- /dev/null +++ b/raw/filings/0000893538/2015/0000893538-16-000122/filing_metadata.csv @@ -0,0 +1,2 @@ +cik,ticker,company_name,form,filing_date,report_date,acceptance_datetime,accession_number,primary_document,primary_doc_description,size,is_xbrl,is_inline_xbrl,document_url,filing_index_url,year,fiscal_year,is_primary_filing +0000893538,SM,SM Energy Co,10-K,2016-02-24,2015-12-31,2016-02-24T14:05:23.000Z,0000893538-16-000122,sm-20151231x10k.htm,10-K,16324681,1,0,https://www.sec.gov/Archives/edgar/data/893538/000089353816000122/sm-20151231x10k.htm,https://www.sec.gov/Archives/edgar/data/893538/000089353816000122/,2015,2015,1 diff --git a/raw/filings/0000893538/2015/0000893538-16-000122/item1.txt b/raw/filings/0000893538/2015/0000893538-16-000122/item1.txt new file mode 100644 index 0000000000000000000000000000000000000000..e69de29bb2d1d6434b8b29ae775ad8c2e48c5391 diff --git a/raw/filings/0000893538/2015/0000893538-16-000122/item13.txt b/raw/filings/0000893538/2015/0000893538-16-000122/item13.txt new file mode 100644 index 0000000000000000000000000000000000000000..10ef2cdd44bf0bb7efcbdb7f474ec7e7f609b9a1 --- /dev/null +++ b/raw/filings/0000893538/2015/0000893538-16-000122/item13.txt @@ -0,0 +1,3 @@ +ITEM 13. +CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE +The information required by this Item is incorporated by reference to the information provided under the captions “Certain Relationships and Related Transactions” and “Corporate Governance” in SM Energy’s definitive proxy statement for the 2016 annual meeting of stockholders to be filed within 120 days from December 31, 2015 . \ No newline at end of file diff --git a/raw/filings/0000893538/2015/0000893538-16-000122/item9a.txt b/raw/filings/0000893538/2015/0000893538-16-000122/item9a.txt new file mode 100644 index 0000000000000000000000000000000000000000..9f0734505d786e8792de18c5c4996ac3fd78430b --- /dev/null +++ b/raw/filings/0000893538/2015/0000893538-16-000122/item9a.txt @@ -0,0 +1,33 @@ +ITEM 9A. CONTROLS AND PROCEDURES +Evaluation of Disclosure Controls and Procedures +We maintain a system of disclosure controls and procedures that are designed to reasonably ensure that information required to be disclosed in our SEC reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and to reasonably ensure that such information is accumulated and communicated to our management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. +Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) (“Disclosure Controls”) will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. We monitor our Disclosure Controls and make modifications as necessary; our intent in this regard is that the Disclosure Controls will be modified as systems change and conditions warrant. +An evaluation of the effectiveness of the design and operation of our Disclosure Controls was performed as of the end of the period covered by this report. This evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that these Disclosure Controls are effective at a reasonable assurance level. +Changes in Internal Control Over Financial Reporting +There have been no changes during the fourth quarter of 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. +142 +Management’s Report on Internal Control over Financial Reporting +Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s internal control over financial reporting includes those policies and procedures that: +(i) +pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; +(ii) +provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and +(iii) +provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that have a material effect on the financial statements. +Because of the inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. Even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of the changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate. +Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2015 . In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013 framework) . +Based on our assessment and those criteria, management believes that the Company maintained effective internal control over financial reporting as of December 31, 2015 . +The Company’s independent registered public accounting firm has issued an attestation report on the Company’s internal control over financial reporting. That report immediately follows this report. +143 +Report of Independent Registered Public Accounting Firm +The Board of Directors and Stockholders of SM Energy Company and subsidiaries +We have audited SM Energy Company and subsidiaries’ internal control over financial reporting as of December 31, 2015 , based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). SM Energy Company and subsidiaries’ management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit. +We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. +A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. +Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. +In our opinion, SM Energy Company and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of December 31, 2015 , based on the COSO criteria. +We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of SM Energy Company and subsidiaries as of December 31, 2015 and 2014, and the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2015 of SM Energy Company and subsidiaries and our report dated February 24, 2016 expressed an unqualified opinion thereon . +/s/ Ernst & Young LLP +Denver, Colorado +February 24, 2016 +144 \ No newline at end of file diff --git a/raw/filings/0000893538/2015/0000893538-16-000122/rp_note.txt b/raw/filings/0000893538/2015/0000893538-16-000122/rp_note.txt new file mode 100644 index 0000000000000000000000000000000000000000..e69de29bb2d1d6434b8b29ae775ad8c2e48c5391 diff --git a/raw/filings/0000893538/2015/0000893538-16-000122/rpt_disclosure.txt b/raw/filings/0000893538/2015/0000893538-16-000122/rpt_disclosure.txt new file mode 100644 index 0000000000000000000000000000000000000000..00d1d5f887a2226d8d979f8ff691f1caa12b5ad4 --- /dev/null +++ b/raw/filings/0000893538/2015/0000893538-16-000122/rpt_disclosure.txt @@ -0,0 +1,25 @@ +CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS +Policies and Procedures on Transactions with Related Persons +Our Related Person Transactions Policy sets forth the policies and procedures for the Audit Committee's review of any transaction, +arrangement, or relationship (including any indebtedness or guarantee of indebtedness) or series of similar transactions, arrangements, or relationships in which (a) we are a participant, +(b) the aggregate amount involved will or may be expected to exceed $120,000 per annum, and (c) a related person has or will have a direct or indirect material interest. For purposes of +our Related Person Transactions Policy, a "related person" means (i) any of our directors, executive officers, or nominees for director, (ii) any stockholder that beneficially owns more +than 5% of our outstanding shares of common stock, and (iii) any immediate family member of any of the foregoing. The Audit Committee approves or ratifies only those transactions that it +determines in good faith are in, or are not inconsistent with, our best interests and the best interests of our stockholders. +In +determining whether to approve or ratify a transaction with a related person, the Audit Committee takes into account the factors it deems appropriate, which may include, among +others, the benefits to us, the availability of other sources for comparable products or services, the impact on a director's independence in the event the related person is a director, and the extent +of the related person's interest in the transaction. The Audit Committee reviews and assesses ongoing relationships with a related person on at least an annual basis to ensure that they are in +compliance with the policy and remain appropriate. +In +addition, our By-Laws provide that a director, officer, or employee of our company may not pursue for his or her own account a business or investment opportunity that he or she +learned about through his or her affiliation with us. These restrictions do not apply to the acquisition of less than 1% of the publicly traded stock of another company. +Related Person Transactions +We recognize that transactions with related persons may raise questions among stockholders regarding whether those transactions are +consistent with our best interests and the best interests of our stockholders. It is our policy to enter into or ratify such transactions only when the Board, acting through the Audit Committee or as +otherwise described herein, determines that the transaction in question is in, or is not inconsistent with, our best interests and the best interests of our stockholders. Such transactions include, +but are not limited to, situations where we may obtain products or services of a nature, quantity or quality, or on other terms, that are not readily available from alternate sources, or when we +obtain products or services from, or provide products or services to, related persons on an arm's length basis on terms comparable to those obtained from or provided to unrelated third parties or on +terms comparable to those obtained from or provided to employees generally. We had no transactions that required approval under our Related Person Transactions Policy during 2015. +12 +Table of Contents \ No newline at end of file diff --git a/raw/filings/0000893538/2021/0000893538-22-000020/filing.txt b/raw/filings/0000893538/2021/0000893538-22-000020/filing.txt new file mode 100644 index 0000000000000000000000000000000000000000..2302b9bd22423d955723c585d52f9667b6611601 --- /dev/null +++ b/raw/filings/0000893538/2021/0000893538-22-000020/filing.txt @@ -0,0 +1,2726 @@ +sm-20211231 +0000893538 12-31 2021 FY false P3Y P3Y P6M P3Y P6M P3Y P3Y P3Y P6M P6M P3Y http://fasb.org/us-gaap/2021-01-31#OtherLiabilitiesCurrent http://fasb.org/us-gaap/2021-01-31#OtherLiabilitiesCurrent http://fasb.org/us-gaap/2021-01-31#OtherLiabilitiesNoncurrent http://fasb.org/us-gaap/2021-01-31#OtherLiabilitiesNoncurrent 0000893538 2021-01-01 2021-12-31 0000893538 2021-06-30 iso4217:USD 0000893538 2022-02-10 xbrli:shares 0000893538 2021-12-31 0000893538 2020-12-31 iso4217:USD xbrli:shares 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file number 001-31539 +SM ENERGY CO MPANY +(Exact name of registrant as specified in its charter) +Delaware 41-0518430 +(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) +1775 Sherman Street, Suite 1200 , Denver , Colorado +80203 +(Address of principal executive offices) (Zip Code) +( 303 ) 861-8140 +(Registrant’s telephone number, including area code) +Securities registered pursuant to Section 12(b) of the Act: +Title of each class Trading Symbol(s) Name of each exchange on which registered +Common stock, $.01 par value SM New York Stock Exchange +Securities registered pursuant to Section 12(g) of the Act: None +Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☑ No ☐ +Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☑ +Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐ +Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐ +Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. +Large accelerated filer ☑ Accelerated filer ☐ +Non-accelerated filer ☐ Smaller reporting company ☐ +Emerging growth company ☐ +If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ +Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☑ +Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☑ +The aggregate market value of the 119,336,315 shares of voting stock held by non-affiliates of the registrant, based upon the closing sale price of the registrant’s common stock on June 30, 2021, the last business day of the registrant’s most recently completed second fiscal quarter, of $24.63 per share, as reported on the New York Stock Exchange, was $ 2,939,253,438 . Shares of common stock held by each director and executive officer and by each person who owns 10 percent or more of the outstanding common stock or who is otherwise believed by the registrant to be in a control position have been excluded. This determination of affiliate status is not necessarily a conclusive determination for other purposes. +As of February 10, 2022, the registrant had 121,862,248 shares of common stock outstanding. +DOCUMENTS INCORPORATED BY REFERENCE +Certain information required by Items 10, 11, 12, 13, and 14 of Part III of this report is incorporated by reference from portions of the registrant’s Definitive Proxy Statement on Schedule 14A relating to its 2022 annual meeting of stockholders, to be filed within 120 days after December 31, 2021. +1 +TABLE OF CONTENTS +Item Page +Cautionary Information about Forward-Looking Statements +4 +Glossary +5 +Part I +8 +Items 1. and 2. +Business and Properties +8 +General +8 +Strategy +8 +Significant Developments in 2021 +8 +Outlook +9 +Areas of Operation +9 +Reserves +11 +Production +15 +Productive Wells +15 +Drilling and Completion Activity +16 +Title to Properties +16 +Acreage +17 +Delivery Commitments +17 +Major Customers +17 +Human Capital +17 +Seasonality +18 +Competition +19 +Government Regulations +19 +Available Information +22 +Item 1A. +Risk Factors +22 +Item 1B. +Unresolved Staff Comments +35 +Item 3. +Legal Proceedings +35 +Item 4. +Mine Safety Disclosures +35 +Part II +36 +Item 5. +Market For Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities +36 +Item 6. +[Reserved] +37 +Item 7. +Management’s Discussion and Analysis of Financial Condition and Results of Operations +38 +Overview of the Company +38 +Financial Results of Operations and Additional Comparative Data +42 +Comparison of Financial Results and Trends Between 2021 and 2020 and Between 2020 and 2019 +45 +Overview of Liquidity and Capital Resources +48 +Critical Accounting Policies and Estimates +52 +Accounting Matters +55 +Environmental +55 +Non-GAAP Financial Measures +56 +Item 7A. +Quantitative and Qualitative Disclosures About Market Risk +57 +Item 8. +Consolidated Financial Statements and Supplementary Data +58 +Item 9. +Changes In and Disagreements With Accountants on Accounting and Financial Disclosure +100 +Item 9A. +Controls and Procedures +101 +Item 9B. +Other Information +104 +Item 9C. +Disclosure Regarding Foreign Jurisdictions that Prevent Inspection +104 +2 +TABLE OF CONTENTS +(Continued) +Item Page +Part III +104 +Item 10. +Directors, Executive Officers, and Corporate Governance +104 +Item 11. +Executive Compensation +104 +Item 12. +Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters +104 +Item 13. +Certain Relationships and Related Transactions, and Director Independence +105 +Item 14. +Principal Accountant Fees and Services +105 +Part IV +106 +Item 15. +Exhibits and Consolidated Financial Statement Schedules +106 +Item 16. +Form 10-K Summary +109 +Signatures +110 +3 +Cautionary Information about Forward-Looking Statements +This Annual Report on Form 10-K (“Form 10-K” or “this report”) contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements included in this report, other than statements of historical facts, that address activities, conditions, events, or developments with respect to our financial condition, results of operations, business prospects or economic performance that we expect, believe, or anticipate will or may occur in the future, or that address plans and objectives of management for future operations, are forward-looking statements. The words “anticipate,” “assume,” “believe,” “budget,” “could,” “estimate,” “expect,” “forecast,” “goal,” “intend,” “pending,” “plan,” “potential,” “projected,” “target,” “will,” and similar expressions are intended to identify forward-looking statements. Forward-looking statements appear throughout this report, and include statements about such matters as: +• the impacts of the global COVID-19 pandemic (“Pandemic”) on us, our industry, our financial condition, and our results of operations; +• the amount and nature of future capital expenditures and the availability of liquidity and capital resources to fund capital expenditures; +• any changes to the borrowing base or aggregate lender commitments under our Sixth Amended and Restated Credit Agreement, as amended (“Credit Agreement”); +• our outlook on prices for future crude oil, natural gas, and natural gas liquids (also referred to throughout this report as “oil,” “gas,” and “NGLs,” respectively), well costs, service costs, production costs, and general and administrative costs; +• our drilling and completion activities and other exploration and development activities, our ability to obtain permits and governmental approvals, and plans by us, our joint development partners, and/or other third-party operators; +• possible or expected acquisitions and divestitures, including the possible divestiture or farm-out of, or farm-in or joint development of, certain properties; +• oil, gas, and NGL reserve estimates and estimates of both future net revenues and the present value of future net revenues associated with those reserve estimates, as well as the conversion of proved undeveloped reserves to proved developed reserves; +• our expected future production volumes, identified drilling locations, as well as drilling prospects, inventories, projects and programs; +• cash flows, liquidity, interest and related debt service expenses, changes in our effective tax rate, and our ability to repay debt in the future; +• business strategies and other plans and objectives for future operations, including plans for expansion and growth of operations or to defer capital investment, plans with respect to future dividend payments, debt redemptions or equity repurchases, capital markets activities, environmental, social, and governance (“ESG”) goals and initiatives, and our outlook on our future financial condition or results of operations; and +• other similar matters, such as those discussed in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of this report. +Our forward-looking statements are based on assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions, expected future developments, and other factors that we believe are appropriate under the circumstances. We caution you that forward-looking statements are not guarantees of future performance and these statements are subject to known and unknown risks and uncertainties, which may cause our actual results or performance to be materially different from any future results or performance expressed or implied by the forward-looking statements. Factors that may cause our financial condition, results of operations, business prospects or economic performance to differ from expectations include the factors discussed in Part I, Item 1A, Risk Factors below and elsewhere in this report. +The forward-looking statements in this report speak only as of the filing of this report. Although we may from time to time voluntarily update our prior forward-looking statements, we disclaim any commitment to do so except as required by applicable securities laws. +4 +Glossary +The oil and gas terms and other terms defined in this section are used throughout this report. The definitions of the terms “developed reserves,” “exploratory well,” “field,” “proved reserves,” and “undeveloped reserves” have been abbreviated from the respective definitions under Rule 4-10(a) of Regulation S-X. The entire definitions of those terms under Rule 4-10(a) of Regulation S-X can be located through the Securities and Exchange Commission’s (“SEC”) website at www.sec.gov. +Ad valorem tax. A tax based on the value of real estate or personal property. +ASC. Accounting Standards Codification. +ASU. Accounting Standards Update. +Bbl. One stock tank barrel, or 42 U.S. gallons liquid volume, used in reference to oil, NGLs, water, or other liquid hydrocarbons. +BBtu. One billion British thermal units. +Bcf . One billion cubic feet, used in reference to gas. +BOE. Barrels of oil equivalent. Oil equivalents are determined using the ratio of six Mcf of gas to one Bbl of oil or NGLs. +Btu. One British thermal unit, the quantity of heat required to raise the temperature of a one-pound mass of water by one degree Fahrenheit. +Completion. The installation of equipment for production of oil, gas, and/or NGLs, or in the case of a dry hole, the reporting to the applicable authority that the well has been abandoned. +Conversion rate. Current year conversions of proved undeveloped reserves to proved developed reserves, divided by beginning of the year proved undeveloped reserves (also commonly referred to in our industry as “ track record” ). +Costs incurred. Costs incurred in oil and gas property acquisition, exploration, and development activities, whether capitalized or expensed. +Developed acreage. The number of acres that are allocated or assignable to productive wells or wells capable of production. +Developed reserves. Reserves that can be expected to be recovered: (i) through existing wells with existing equipment and operating methods or in which the cost of the required equipment is relatively minor compared to the cost of a new well; and (ii) through installed extraction equipment and infrastructure operational at the time of the reserves estimate if the extraction is by means not involving a well. +Development well. A well drilled within the proved area of an oil or gas reservoir to the depth of a stratigraphic horizon known to be productive. +Dry hole. An exploratory, development, or extension well that proves to be incapable of producing oil, gas, and/or NGLs in sufficient commercial quantities to justify completion, or upon completion, the economic operation of a well (also referred to as “ non-productive well” ). +Exploratory well. A well drilled to find a new field or to find a new reservoir in a field previously found to be productive of oil or gas in another reservoir. +FASB. Financial Accounting Standards Board. +Fee properties. The most extensive interest that can be owned in land, including surface and mineral (including oil and gas) rights. +Field. An area consisting of a single reservoir or multiple reservoirs all grouped on or related to the same individual geological structural feature and/or stratigraphic condition. +Formation. A succession of sedimentary beds that were deposited under the same general geologic conditions. +GAAP. Accounting principles generally accepted in the United States. +Gross acres or gross wells. Acres or wells in which a working interest is owned. +5 +Horizontal wells. Wells that are drilled at angles greater than 70 degrees from vertical. +LIBOR . London Interbank Offered Rate. Discontinued as a global reference rate for new loans and contracts after December 31, 2021. +Lease operating expenses. The expenses incurred in the lifting of oil, gas, and/or NGLs from a producing formation to the surface, constituting part of the current operating expenses of a working interest, and also including labor, superintendence, supplies, repairs, maintenance, allocated overhead costs, and other expenses incidental to production, but not including lease acquisition, drilling, or completion costs. +MBbl. One thousand barrels, used in reference to oil, NGLs, water, or other liquid hydrocarbons. +MBOE. One thousand barrels of oil equivalent. +Mcf. One thousand cubic feet, used in reference to gas. +MMBbl. One million barrels, used in reference to oil, NGLs, water, or other liquid hydrocarbons. +MMBOE. One million barrels of oil equivalent. +MMBtu. One million British thermal units. +MMcf. One million cubic feet, used in reference to gas. +Net acres or net wells. Sum of our fractional working interests owned in gross acres or gross wells. +NGLs. The combination of ethane, propane, isobutane, normal butane, and natural gasoline that when removed from gas become liquid under various levels of higher pressure and lower temperature. +NYMEX WTI. New York Mercantile Exchange West Texas Intermediate, a common industry benchmark price for oil. +NYMEX Henry Hub . New York Mercantile Exchange Henry Hub, a common industry benchmark price for gas. +OPEC+. The Organization of the Petroleum Exporting Countries Plus other non-OPEC oil producing countries. +OPIS . Oil Price Information Service, a common industry benchmark for NGL pricing at Mont Belvieu, Texas. +PV-10. PV-10 is a non-GAAP measure. The present value of estimated future revenue to be generated from the production of estimated net proved reserves, net of estimated production and future development costs, based on prices used in estimating the proved reserves and costs in effect as of the date indicated (unless such costs are subject to change pursuant to contractual provisions), without giving effect to non-property related expenses such as general and administrative expenses, debt service, future income tax expenses, or depreciation, depletion, and amortization, discounted using an annual discount rate of 10 percent. While this measure does not include the effect of income taxes as it would in the use of the standardized measure of discounted future net cash flows calculation, it does provide an indicative representation of the relative value of the Company on a comparative basis to other companies and from period to period. +Productive well. An exploratory, development, or extension well that is producing or is capable of commercial production of oil, gas, and/or NGLs. +Proved reserves. Those quantities of oil, gas, and NGLs which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulations prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation. Existing economic conditions include prices and costs at which economic producibility from a reservoir is to be determined, and the price to be used is the average price during the 12-month period prior to the ending date of the period covered by the report, determined as an unweighted arithmetic average of the first-day-of-the-month price for each month within such period, unless prices are defined by contractual arrangements, excluding escalations based upon future conditions. +Recompletion. The completion of an existing wellbore in a formation other than that in which the well has previously been completed. +Reserve life index. Expressed in years, represents the estimated net proved reserves at a specified date divided by actual production for the preceding 12-month period. +6 +Reservoir. A porous and permeable underground formation containing a natural accumulation of producible oil, gas, and/or associated liquid resources that is confined by impermeable rock or water barriers and is individual and separate from other reservoirs. +Resource play. A term used to describe an accumulation of oil, gas, and/or associated liquid resources known to exist over a large areal expanse, which when compared to a conventional play typically has lower expected geological risk. +Royalty. The amount or fee paid to the owner of mineral rights, expressed as a percentage or fraction of gross income from oil, gas, and NGLs produced and sold unencumbered by expenses relating to the drilling, completing, and operating of the affected well. +Royalty interest. An interest in an oil and gas property entitling the owner to shares of oil, gas, and NGL production free of costs of exploration, development, and production operations. +Seismic. The sending of energy waves or sound waves into the earth and analyzing the wave reflections to infer the type, size, shape, and depth of subsurface rock formations. +Shale. Fine-grained sedimentary rock composed mostly of consolidated clay or mud. Shale is the most frequently occurring sedimentary rock. +Standardized measure of discounted future net cash flows. The discounted future net cash flows related to estimated proved reserves based on prices used in estimating the reserves, year-end costs, and statutory tax rates, at a 10 percent annual discount rate. The information for this calculation is included in Supplemental Oil and Gas Information (unaudited) located in Part II, Item 8 of this report. +Undeveloped acreage. Lease acreage on which wells have not been drilled or completed to a point that would permit the production of commercial quantities of oil, gas, and NGLs regardless of whether such acreage contains estimated net proved reserves. +Undeveloped reserves. Reserves that are expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required for recompletion. The applicable SEC definition of undeveloped reserves provides that undrilled locations can be classified as having undeveloped reserves only if a development plan has been adopted indicating that they are scheduled to be drilled within five years, unless the specific circumstances justify a longer time. +Working interest. The operating interest that gives the owner the right to drill, produce, and conduct operating activities on the property and to share in the production, sales, and costs. +7 +PART I +When we use the terms “SM Energy,” the “Company,” “we,” “us,” or “our,” we are referring to SM Energy Company and its subsidiaries unless the context otherwise requires. We have included certain technical terms important to an understanding of our business in the Glossary section of this report. Throughout this document we make statements and projections that address future expectations, possibilities, or events, all of which may be classified as “forward-looking statements.” Please refer to the Cautionary Information about Forward-Looking Statements section of this report for an explanation of these types of statements and the associated risks and uncertainties. +ITEMS 1. AND 2. BUSINESS AND PROPERTIES +General +We are an independent energy company engaged in the acquisition, exploration, development, and production of oil, gas, and NGLs in the state of Texas. SM Energy was founded in 1908, incorporated in Delaware in 1915, and our initial public offering of common stock was in December 1992. Our common stock trades on the New York Stock Exchange under the ticker symbol “SM.” +Our principal office is located at 1775 Sherman Street, Suite 1200, Denver, Colorado 80203, and our telephone number is (303) 861-8140. +Strategy +Our strategic objective is to be a premier operator of top-tier oil and gas assets. Our purpose is to make people’s lives better by responsibly producing energy supplies, contributing to domestic energy security and prosperity, and having a positive impact in the communities where we live and work. Our short-term operational and financial goals include generating positive cash flows while strengthening our balance sheet through absolute debt reduction and improved leverage metrics, and increasing the value of our capital project inventory through exploration and development optimization. Our long-term vision is to sustainably grow value for all of our stakeholders. We believe that in order to accomplish this vision, we must be a premier operator of top-tier oil and gas assets. Our strategy for achieving these goals is to focus on high-quality economic drilling, completion, and production opportunities. Our investment portfolio is comprised of oil and gas producing assets in the state of Texas, specifically in the Midland Basin of West Texas and in the Maverick Basin of South Texas. +We are committed to exceptional safety, health, and environmental stewardship; supporting the professional development of a diverse and thriving team of employees; making a positive impact in the communities where we live and work; and transparency in reporting our progress in these areas. We have prioritized ESG initiatives by, among other things, integrating enhanced environmental and social programs throughout the organization and setting near-term and medium-term goals that include reducing flaring and greenhouse gas (“GHG” or “GHGs”) emissions intensity, and maintaining low methane emissions intensity. Additionally, we are putting systems in place to track additional ESG metrics to enable increased reporting in the future and to increase employee awareness. The Environmental, Social and Governance Committee of our Board of Directors oversees, among other things, the development and implementation of the Company’s ESG policies, programs and initiatives, and, together with management, reports to our Board of Directors regarding such matters. Further demonstrating our commitment to sustainable operations and environmental stewardship, compensation for our executives and eligible employees under our long-term incentive plan, and compensation for all employees under our short-term incentive plan is calculated based on, in part, certain Company-wide performance-based metrics that include key financial, operational, and environmental, health, and safety measures. +Significant Developments in 2021 +Cash Flows and Debt Reduction. For the year ended December 31, 2021, net cash provided by operating activities was $1.2 billion, which was in excess of net cash used in investing activities of $667.2 million, resulting in a six percent decrease in the principal balance of our total outstanding long-term debt to $2.1 billion as of December 31, 2021, from $2.3 billion as of December 31, 2020. The decrease in the principal balance of our total outstanding long-term debt was primarily driven by a $93.0 million decrease in the outstanding balance on our revolving credit facility, and the retirement of the remaining $65.5 million of our 2021 Senior Secured Convertible Notes. Additionally, as of December 31, 2021, we had a cash and cash equivalents balance of $332.7 million and no outstanding balance on our revolving credit facility. Please refer to Analysis of Cash Flow Changes Between 2021 and 2020 and Between 2020 and 2019 in Overview of Liquidity and Capital Resources in Part II, Item 7, and to Note 5 – Long-Term Debt in Part II, Item 8 of this report for additional discussion, including the definition of 2021 Senior Secured Convertible Notes. +Production, Pricing, Revenue, and Commodity Derivatives. Our average net daily equivalent production in 2021 increased 11 percent compared with 2020 to 140.7 MBOE, consisting of 76.5 MBbl of oil, 296.9 MMcf of gas, and 14.7 MBbl of NGLs. This increase was primarily driven by a 19 percent increase from our Midland Basin assets and resulted from an increased number of completions, strong well performance, and our focus on operational execution. Oil production as a percentage of total production increased to 54 percent in 2021 from 50 percent in 2020. Realized prices before the effect of derivative settlements (“realized price” or “realized prices”) for oil, gas, and NGLs increased 83 percent, 169 percent, and 141 percent, respectively, for the year ended December 31, +8 +2021, compared with 2020. As a result of increased realized prices, oil, gas, and NGL production revenue increased 131 percent to $2.6 billion for the year ended December 31, 2021, compared with $1.1 billion for 2020. Oil production revenue was 73 percent and 76 percent of total production revenue for the years ended December 31, 2021, and 2020, respectively. We recorded a net derivative loss of $901.7 million for the year ended December 31, 2021, compared to a net derivative gain of $161.6 million for 2020. These amounts include a derivative settlement loss of $749.0 million for the year ended December 31, 2021, and a derivative settlement gain of $351.3 million for the year ended December 31, 2020. Please refer to Areas of Operation below and Overview of the Company in Part II, Item 7 of this report for additional discussion. +Reserves and Capital Investment. Total estimated proved reserves were 492.0 MMBOE as of December 31, 2021, which was an increase of 22 percent from 404.6 MMBOE as of December 31, 2020. We added 139.1 MMBOE through extensions and infill as a result of continued success in and further development of our Austin Chalk and Midland Basin assets, partially offset by 51.4 MMBOE of production during 2021. Our proved reserve life index increased to 9.6 years as of December 31, 2021, compared with 8.7 years as of December 31, 2020. Please refer to Areas of Operation and Reserves below for additional discussion regarding additions from extensions, discoveries, and infill, the removal of certain proved undeveloped reserve cases that are no longer within our development plan over the next five years, and price and performance revisions. Costs incurred increased 23 percent from 2020 to $718.0 million in 2021. Please refer to Areas of Operation below, and to Supplemental Oil and Gas Information (unaudited) in Part II, Item 8 of this report for additional discussion. +Outlook +Our vision to sustainably grow value for all of our stakeholders includes short-term operational and financial goals of generating cash flows while strengthening our balance sheet through absolute debt reduction and improved leverage metrics, and increasing the value of our capital project inventory through exploration and development optimization. Our long-term plan is to deliver cash flow growth that is supported by our high-quality asset base and ability to generate favorable returns. +Our total 2022 capital program, which we expect to fund with cash flows from operations, is expected to be approximately $750.0 million. We expect to focus our 2022 capital program on highly economic oil development projects in both our Midland Basin assets and our South Texas assets. +Areas of Operation +____________________________________________ +(1) As of December 31, 2021. +9 +Our 2021 operations were concentrated in the Midland Basin and South Texas, as described below. The following table summarizes estimated proved reserves, net production volumes, and costs incurred for the year ended December 31, 2021, for these areas: +Midland Basin +South Texas +Total (1) +Proved reserves +Oil (MMBbl) 156.7 42.9 199.5 +Gas (Bcf) 568.9 674.5 1,243.5 +NGLs (MMBbl) 0.1 85.1 85.2 +MMBOE (1) +251.6 240.4 492.0 +Relative percentage +51 % 49 % 100 % +Proved developed % 66 % 56 % 61 % +Net production volumes +Oil (MMBbl) 25.2 2.7 27.9 +Gas (Bcf) 55.4 52.9 108.4 +NGLs (MMBbl) — 5.4 5.4 +MMBOE (1) +34.4 16.9 51.4 +Avg. daily equivalents (MBOE/d) (1) +94.4 46.4 140.7 +Relative percentage +67 % 33 % 100 % +Costs incurred (in millions) (2) +$ 433.8 $ 240.7 $ 718.0 +___________________________________________ +(1) Amounts may not calculate due to rounding. +(2) Asset costs incurred do not sum to total costs incurred primarily due to corporate overhead charges incurred on exploration activities that are excluded from this table. Please refer to Costs Incurred in Supplemental Oil and Gas Information (unaudited) in Part II, Item 8 of this report. +Total estimated proved reserves at December 31, 2021, increased 22 percent from December 31, 2020. Total net equivalent production increased 11 percent for the year ended December 31, 2021, compared with 2020. Costs incurred for the year ended December 31, 2021, increased 23 percent compared with 2020, primarily as a result of the increase in our capital activity, specifically an increase related to the development of our South Texas assets. +Midland Basin. Our Midland Basin assets, which are located in the Permian Basin in West Texas, are comprised of approximately 80,000 net acres, and include our RockStar assets in Howard and Martin Counties, Texas and our Sweetie Peck assets in Upton and Midland Counties, Texas (“Midland Basin”). In 2021, drilling and completion activities within our RockStar and Sweetie Peck positions continued to focus primarily on development optimization and further delineating our Midland Basin position. Our current Midland Basin position provides substantial future development opportunities within multiple oil-rich intervals, including the Spraberry and Wolfcamp formations. We expect 2022 capital activity in the Midland Basin to be focused on highly economic oil development projects. +In 2021, costs incurred were $433.8 million and we averaged three drilling rigs and two completion crews. We completed 97 gross (81 net) wells, and as of December 31, 2021, 30 gross (27 net) wells had been drilled but not completed. Net equivalent production for the year ended December 31, 2021, was 34.4 MMBOE, an 18 percent increase from 29.1 MMBOE for the year ended December 31, 2020. Estimated proved reserves increased 13 percent to 251.6 MMBOE at December 31, 2021, from 222.0 MMBOE at December 31, 2020, as a result of additions of 46.6 MMBOE and positive price and performance revisions of 29.6 MMBOE partially offset by production of 34.4 MMBOE. Additionally, we removed 11.8 MMBOE of proved undeveloped reserves which were replaced by recognizing additions to proved undeveloped reserves associated with different locations that were added to our five-year development plan. Additions to proved reserves primarily resulted from extensions and infill reserves replacing converted proved undeveloped reserves. +South Texas. Our South Texas assets are comprised of approximately 155,000 net acres located in Dimmit and Webb Counties, Texas (“South Texas”). In 2021, our operations in South Texas were focused on production from the Eagle Ford shale formation and Austin Chalk formation, and further development of the Austin Chalk formation. Our overlapping acreage position in the Maverick Basin covers a significant portion of the western Eagle Ford shale and Austin Chalk formations (“Maverick Basin”) and includes acreage across the oil, gas-condensate, and dry gas windows with gas composition amenable to processing for NGL extraction. We expect 2022 capital activity in South Texas to be focused primarily on developing the Austin Chalk formation. +In 2021, costs incurred were $240.7 million and we averaged one drilling rig and one completion crew. We completed 31 gross (28 net) wells, and as of December 31, 2021, 32 gross (32 net) wells had been drilled but not completed. Net equivalent production for the year ended December 31, 2021, was 16.9 MMBOE, a two percent decrease from 17.3 MMBOE for the year ended +10 +December 31, 2020. Estimated proved reserves increased 32 percent to 240.4 MMBOE at December 31, 2021, from 182.6 MMBOE at December 31, 2020, as a result of additions of 92.5 MMBOE and positive price revisions of 29.0 MMBOE offset by production of 16.9 MMBOE and downward revisions of 46.8 MMBOE. Additions to proved reserves from extensions and infill were the result of continued success in our development of the Austin Chalk formation. Downward revisions consisted of 28.7 MMBOE of proved undeveloped reserves which were replaced by recognizing additions to proved undeveloped reserves associated with different locations that were added to our five-year development plan, and 18.1 MMBOE resulting from performance revisions. +Office Space. As of December 31, 2021, we leased and owned office space as summarized in the table below: +Approximate Square Footage Leased Approximate Square Footage Owned +Corporate (1) +164,000 — +Midland Basin 59,000 — +South Texas (2) +62,000 12,000 +Total 285,000 12,000 +__________________________________________ +(1) We expect to reduce our Corporate leased office space to approximately 59,000 square feet in 2022. +(2) Subsequent to December 31, 2021, the square footage leased in South Texas was reduced to approximately 21,000 square feet. +Reserves +Reserve estimates are inherently imprecise and estimates for new discoveries and undeveloped locations are more imprecise than reserve estimates for producing oil and gas properties. Accordingly, we expect these estimates to change as new information becomes available. The following table presents the standardized measure of discounted future net cash flows and PV-10. PV-10 is a non-GAAP financial measure, and generally differs from the standardized measure of discounted future net cash flows, the most directly comparable GAAP financial measure, because it does not include the effects of income taxes on future net revenues. Neither the standardized measure of discounted future net cash flows nor PV-10 represents the fair market value of our oil and gas properties. We and others in the oil and gas industry use PV-10 as a measure to compare the relative size and value of proved reserves held without regard to the specific tax characteristics of such entities. Please refer to the Glossary section of this report for additional information regarding these measures and refer to the reconciliation of the standardized measure of discounted future net cash flows to PV-10 set forth below. The actual quantities and present value of our estimated proved reserves may be more or less than we have estimated. No estimates of our proved reserves have been filed with or included in reports to any federal authority or agency, other than the SEC, since the beginning of the last fiscal year. The following table should be read along with the Risk Factors section below. +11 +The following table summarizes estimated proved reserves, the standardized measure of discounted future net cash flows (GAAP), PV-10 (non-GAAP), the prices used in the calculation of proved reserves estimates, and reserve life index as of December 31, 2021, 2020, and 2019: +As of December 31, +2021 2020 2019 +Reserve volumes: +Proved developed +Oil (MMBbl) 110.7 89.8 85.0 +Gas (Bcf) 833.0 643.9 712.1 +NGLs (MMBbl) 50.7 32.1 43.4 +MMBOE (1) +300.2 229.3 247.0 +Proved undeveloped +Oil (MMBbl) 88.8 82.9 99.1 +Gas (Bcf) 410.4 408.1 511.1 +NGLs (MMBbl) 34.5 24.4 30.6 +MMBOE (1) +191.8 175.3 214.9 +Total proved (1) +Oil (MMBbl) 199.5 172.7 184.1 +Gas (Bcf) 1,243.5 1,052.0 1,223.2 +NGLs (MMBbl) 85.2 56.6 74.0 +MMBOE 492.0 404.6 462.0 +Proved developed reserves percentage 61 % 57 % 53 % +Proved undeveloped reserves percentage 39 % 43 % 47 % +Reserve data (in millions): +Standardized measure of discounted future net cash flows (GAAP) $ 6,962.6 $ 2,682.5 $ 4,104.0 +PV-10 (non-GAAP): +Proved developed PV-10 $ 5,407.2 $ 1,848.8 $ 2,830.4 +Proved undeveloped PV-10 2,751.4 833.7 1,532.4 +Total proved PV-10 (non-GAAP) $ 8,158.6 $ 2,682.5 $ 4,362.8 +12-month trailing average prices: (2) +Oil (per Bbl) +$ 66.56 $ 39.57 $ 55.69 +Gas (per MMBtu) +$ 3.60 $ 1.99 $ 2.58 +NGLs (per Bbl) +$ 36.60 $ 17.64 $ 22.68 +Reserve life index (years) (3) +9.6 8.7 9.6 +____________________________________________ +(1) Amounts may not calculate due to rounding. +(2) The prices used in the calculation of proved reserve estimates reflect the unweighted arithmetic average of the first-day-of-the-month price of each month within the trailing 12-month period in accordance with SEC rules. We then adjust these prices to reflect appropriate quality and location differentials over the period in estimating our proved reserves. +(3) Our ability to replace production with new oil and gas reserves is critical to the future success of our business. Please refer to the reserve life index term in the Glossary section of this report for information describing how this metric is calculated. +12 +The following table reconciles the standardized measure of discounted future net cash flows (GAAP) to the PV-10 (non-GAAP) of total estimated proved reserves. Please refer to the Glossary section of this report for the definitions of standardized measure of discounted future net cash flows and PV-10. +As of December 31, +2021 2020 2019 +(in millions) +Standardized measure of discounted future net cash flows (GAAP) +$ 6,962.6 $ 2,682.5 $ 4,104.0 +Add: 10 percent annual discount, net of income taxes +4,844.9 1,856.3 2,955.3 +Add: future undiscounted income taxes +2,130.3 — 579.8 +Pre-tax undiscounted future net cash flows +13,937.8 4,538.8 7,639.1 +Less: 10 percent annual discount without tax effect +(5,779.2) (1,856.3) (3,276.3) +PV-10 (non-GAAP) $ 8,158.6 $ 2,682.5 $ 4,362.8 +Proved Undeveloped Reserves +Proved undeveloped reserves include those reserves that are expected to be recovered from future wells on undrilled acreage, or from existing wells where a relatively major expenditure is required for recompletion. Undeveloped reserves may be classified as proved reserves on undrilled acreage directly offsetting development areas that are reasonably certain of economic producibility when drilled or where reliable technology provides reasonable certainty of economic producibility. Undrilled locations may be classified as having proved undeveloped reserves only if a development plan has been adopted indicating that they are scheduled to be drilled within five years, unless specific circumstances justify a longer time. As of December 31, 2021, we did not have any proved undeveloped reserves that had been on our books in excess of five years, and none of our proved undeveloped reserves were on acreage expected to expire or on acreage that was not expected to be held through renewal before the targeted completion date. +For proved undeveloped locations that are more than one development spacing area from developed producing locations, we utilized reliable geologic and engineering technology when booking estimated proved undeveloped reserves. Of the 191.8 MMBOE of total proved undeveloped reserves as of December 31, 2021, approximately 29.0 MMBOE of proved undeveloped reserves in the Midland Basin and 68.7 MMBOE of proved undeveloped reserves in our South Texas position were offset by more than one development spacing area from the nearest developed producing location. We incorporated public and proprietary data from multiple sources to establish geologic continuity of each formation and their producing properties. This included seismic data and interpretations (3-D and micro seismic), open hole log information (both vertically and horizontally collected) and petrophysical analysis of that log data, mud logs, gas sample analysis, measurements of total organic content, thermal maturity, test production, fluid properties, and core data as well as statistical performance data yielding predictable and repeatable reserve estimates within certain analogous areas. These locations were limited to only those areas where both established geologic consistency and sufficient statistical performance data could be demonstrated to provide reasonably certain results. +As of December 31, 2021, estimated proved undeveloped reserves increased 16.5 MMBOE, or nine percent compared with December 31, 2020. The following table provides a reconciliation of our proved undeveloped reserves for the year ended December 31, 2021: +Total +(MMBOE) +Total proved undeveloped reserves: +Beginning of year 175.3 +Additions from extensions, discoveries, and infill 125.2 +Conversions to proved developed (66.0) +Removed for five-year rule (40.6) +Revisions of previous estimates (2.1) +End of year 191.8 +Additions from extensions, discoveries, and infill. During 2021, we added 81.0 MMBOE and 44.2 MMBOE of estimated proved undeveloped reserves in South Texas and the Midland Basin, respectively. The majority of the additions in South Texas resulted from extensions from our continued success in, and further development of, the Austin Chalk formation, while the majority of the additions in the Midland Basin resulted from infill development. +Conversions to proved developed. Our 2021 conversion rate was 38 percent and was primarily the result of developing proved reserves in our Austin Chalk and Midland Basin assets. During 2021, we incurred $448.7 million on projects with reserves +13 +booked as proved undeveloped at the end of 2020, of which $396.0 million was spent on converting proved undeveloped reserves to proved developed reserves by December 31, 2021. At December 31, 2021, drilled but not completed wells represented 32.3 MMBOE of total estimated proved undeveloped reserves. We expect to incur $124.5 million of capital expenditures in completing these drilled but not completed wells, and we expect all estimated proved undeveloped reserves to be converted to proved developed reserves within five years from their initial booking as proved undeveloped reserves. +Removed for five-year rule. As a result of our testing and delineation efforts in 2021, we revised certain aspects of our future development plan to focus on maximizing returns and the value of our assets. As a result, we removed 40.6 MMBOE of estimated proved undeveloped reserves and reclassified these locations to unproved reserve categories, of which 27.0 MMBOE related to our Eagle Ford shale proved undeveloped reserves and reflects our continued shift to further develop the Austin Chalk formation, and 11.8 MMBOE related to optimization in our future development plan for our Midland Basin program. The Eagle Ford shale future development locations were replaced by Austin Chalk locations which are reflected as additions from extensions, discoveries, and infill. +As of December 31, 2021, estimated future development costs relating to our proved undeveloped reserves totaled $1.4 billion, and we expect to incur approximately $481.8 million, $336.8 million, and $364.5 million in 2022, 2023, and 2024, respectively. +Internal Controls Over Proved Reserves Estimates +Our internal controls over the recording of proved reserves are structured to objectively and accurately estimate our reserve quantities and values in compliance with the SEC’s regulations. Our process for managing and monitoring our proved reserves is delegated to our corporate reserves group and is coordinated by our Corporate Engineering Manager, subject to the oversight of our management and the Audit Committee of our Board of Directors, as discussed below. Our Corporate Engineering Manager has worked in the energy industry since 2008 and has been employed by the Company since 2010. He holds a Bachelor of Science Degree in Petroleum Engineering from Montana Technological University and is a Registered Professional Petroleum Engineer in the states of Texas, Wyoming, and Montana. He is also a member of the Society of Petroleum Engineers. Technical, geological, and engineering reviews of our assets are performed throughout the year by our staff. Data obtained from these reviews, in conjunction with economic data and our ownership information, is used in making a determination of estimated proved reserve quantities. Our asset team’s engineering technical staff do not report directly to our Corporate Engineering Manager; they report to either their respective asset technical managers or directly to the Senior Vice President of Exploration, Development and EHS. This design is intended to promote objective and independent analysis within our asset teams in the proved reserves estimation process. +Third-party Reserves Audit +Ryder Scott is an independent petroleum engineering consulting firm that has been providing petroleum engineering consulting services throughout the world for over 80 years. Ryder Scott performed an independent audit using its own engineering assumptions, but with economic and ownership data we provided. Ryder Scott audits a minimum of 80 percent of our total calculated proved reserve PV-10. In the aggregate, the proved reserve amounts of our audited properties determined by Ryder Scott are required, per our policy, to be within 10 percent of our proved reserve amounts for the total Company, as well as for each respective major asset. The technical engineer at Ryder Scott primarily responsible for overseeing our reserves audit was a Managing Senior Vice President who received a Bachelor of Science degree in Chemical Engineering from Brigham Young University in 2003. He is a licensed Professional Engineer in the State of Texas and a member of the Society of Petroleum Engineers. The 2021 Ryder Scott audit report is included as Exhibit 99.1. +In addition to a third-party audit, our reserves are reviewed by our management with the Audit Committee of our Board of Directors. Our management, which includes our President and Chief Executive Officer, Executive Vice President and Chief Financial Officer, and Senior Vice President of Exploration, Development and EHS, is responsible for reviewing and verifying that the estimate of proved reserves is reasonable, complete, and accurate. The Audit Committee reviews a summary of the final reserves estimate in conjunction with Ryder Scott’s results and also meets with Ryder Scott representatives, separate from our management, from time to time to discuss processes and findings. +14 +Production +The following table summarizes our net production volumes and realized prices for oil, gas, and NGLs produced and sold during the periods presented. Realized prices presented below exclude the effects of derivative contract settlements. Also presented is a summary of related production expense on a per BOE basis. +For the Years Ended December 31, +2021 2020 2019 +Net production volumes +Oil (MMBbl) 27.9 23.0 21.9 +Gas (Bcf) 108.4 103.9 109.8 +NGLs (MMBbl) 5.4 6.1 8.1 +Equivalent (MMBOE) (1) +51.4 46.4 48.3 +Midland Basin net production volumes (2) +Oil (MMBbl) 25.2 21.3 20.5 +Gas (Bcf) 55.4 46.6 34.4 +NGLs (MMBbl) — — — +Equivalent (MMBOE) (1) +34.4 29.1 26.3 +Maverick Basin net production volumes (2) +Oil (MMBbl) 2.7 1.7 1.3 +Gas (Bcf) 52.8 57.2 75.4 +NGLs (MMBbl) 5.4 6.1 8.1 +Equivalent (MMBOE) (1) +16.9 17.3 21.9 +Realized price +Oil (per Bbl) $ 67.72 $ 37.08 $ 54.10 +Gas (per Mcf) $ 4.85 $ 1.80 $ 2.39 +NGLs (per Bbl) $ 33.67 $ 13.96 $ 17.26 +Per BOE $ 50.58 $ 24.26 $ 32.84 +Production expense per BOE +Lease operating expense $ 4.39 $ 3.97 $ 4.67 +Transportation costs $ 2.71 $ 3.06 $ 3.88 +Production taxes $ 2.36 $ 0.99 $ 1.35 +Ad valorem tax expense $ 0.38 $ 0.41 $ 0.48 +____________________________________________ +(1) Amounts may not calculate due to rounding. +(2) For each of the years ended December 31, 2021, 2020, and 2019, total estimated proved reserves attributed to our Midland Basin field and our Maverick Basin field exceeded 15 percent of our total estimated proved reserves expressed on an equivalent basis. +Productive Wells +As of December 31, 2021, we had working interests in 825 gross (743 net) productive oil wells and 483 gross (449 net) productive gas wells. Productive wells may be temporarily shut-in. Multiple completions in the same wellbore are counted as one well, and as of December 31, 2021, two of these wells had multiple completions. A well is categorized under state reporting regulations as an oil well or a gas well based on the ratio of gas to oil when it first commenced production, but such designation may not be indicative of current or future production composition. +15 +Drilling and Completion Activity +All of our drilling and completion activities are conducted by independent contractors using equipment they own and operate. The following table summarizes the number of operated and outside-operated wells drilled and completed or recompleted on our properties in 2021, 2020, and 2019, excluding non-consented projects, active injector wells, saltwater disposal wells, or wells in which we own only a royalty interest: +For the Years Ended December 31, +2021 2020 2019 +Gross Net Gross Net Gross Net +Development wells +Oil 107 91 78 71 119 107 +Gas 11 8 — — 27 16 +Non-productive — — — — 1 1 +118 99 78 71 147 124 +Exploratory wells +Oil 2 2 5 5 4 4 +Gas 8 8 1 1 4 4 +Non-productive — — — — 1 1 +10 10 6 6 9 9 +Total 128 109 84 77 156 133 +____________________________________________ +Note: The number of wells drilled refers to the number of wells completed at any time during the respective year, regardless of when drilling was initiated. +In addition to the wells drilled and completed in 2021 (included in the table above), we were actively participating in the drilling of seven gross (seven net) wells and had 63 gross (59 net) drilled but not completed wells as of January 31, 2022. Drilled but not completed wells as of January 31, 2022, represent wells that were being completed or were waiting on completion. The drilled but not completed well count as of January 31, 2022, includes 11 gross (11 net) wells that are not included in our five-year development plan, 10 of which are in the Eagle Ford shale. +Title to Properties +As of December 31, 2021, over 98 percent of our operated oil and gas producing assets are located on private lands, are held pursuant to oil and gas leases from private mineral owners, and are not located on federal lands or leased from the federal government. The remainder of our operated oil and gas producing assets are located on Texas state lands. We have obtained title opinions or have conducted other title review on substantially all of our producing properties and believe we have satisfactory title to such properties. We obtain new or updated title opinions prior to commencing initial drilling operations on the properties that we operate. Most of our producing properties are subject to mortgages securing indebtedness under our Credit Agreement and Senior Secured Notes, as defined in Note 5 – Long-Term Debt in Part II, Item 8 of this report, royalty and overriding royalty interests, liens for current taxes, and other ordinary course burdens that we believe do not materially interfere with the development of such properties. We typically perform title investigations in accordance with standards generally accepted in the oil and gas industry before acquiring developed and undeveloped leasehold acreage. +16 +Acreage +The following table sets forth the number of gross and net surface acres of developed and undeveloped oil and gas leasehold, fee properties, and mineral servitudes that we held as of December 31, 2021. +Developed Acres (1) +Undeveloped Acres (2)(3) +Total +Gross Net Gross Net Gross Net +Midland Basin: +RockStar 67,528 61,510 2,802 2,019 70,330 63,529 +Sweetie Peck 19,308 16,125 2,242 340 21,550 16,465 +Midland Basin Total (4) +86,836 77,635 5,044 2,359 91,880 79,994 +South Texas 80,101 79,708 78,340 75,355 158,441 155,063 +Other (5) +16,259 11,363 89,691 25,306 105,950 36,669 +Total 183,196 168,706 173,075 103,020 356,271 271,726 +____________________________________________ +(1) Developed acreage is acreage assigned to producing wells for the state approved spacing unit for the producing formation. Our developed acreage that includes multiple formations with different well spacing requirements may be considered undeveloped for certain formations but has been included only as developed acreage in the table above. +(2) Undeveloped acreage is acreage on which wells have not been drilled or completed to a point that would permit the production of commercial quantities of oil, gas, and/or NGLs regardless of whether such acreage contains estimated net proved reserves. +(3) As of February 10, 2022, none of our undeveloped acreage is scheduled to expire by December 31, 2022, and 82 and 564 net acres of undeveloped acreage are scheduled to expire by December 31, 2023, and 2024, respectively, unless production is established or we take other action to extend the terms of the applicable leases. Certain of our acreage, primarily in South Texas, is subject to lease consolidation agreements containing drilling, completion, and other obligations that we currently intend to satisfy. Failure to meet these obligations results in payments to lessors, or termination of the lease consolidation agreements, which could result in additional future lease expirations if continuous development obligations required by individual leases are not met. +(4) As of December 31, 2021, total Midland Basin acreage excludes approximately 1,523 net acres associated with drill-to-earn opportunities that we intend to pursue. +(5) Includes other non-core acreage located in Colorado, Louisiana, Montana, North Dakota, Texas, Utah, and Wyoming. +Delivery Commitments +For gathering, processing, transportation throughput, and delivery commitments, please refer to Pipeline Transportation Commitments within Note 6 – Commitments and Contingencies in Part II, Item 8 of this report. +Major Customers +For major customers and entities under common control that accounted for 10 percent or more of our total oil, gas, and NGL production revenue for at least one of the years ended December 31, 2021, 2020, and 2019, please refer to Concentration of Credit Risk and Major Customers within Note 1 – Summary of Significant Accounting Policies in Part II, Item 8 of this report. +Human Capital +Our Company culture, which seeks to recognize our employees as our most valuable asset, drives the manner in which we pursue our short-term and long-term goals, as well as our efforts to attract and retain talent. Through our culture, we work to promote: +• integrity and ethical behavior in the conduct of our business; +• environmental, health, and safety priorities; +• prioritizing the success of others and the team; +• understanding and communicating why we do what we do and how every employee contributes to achieving success; +• collaboration and openness to new ideas and technologies that serve business improvement; +• support for team members’ professional and personal development; and +• support for the communities where we live and work. +The core values of integrity and ethical behavior are the pillars of our culture, and as a result, the health and safety of our employees and contractors is our highest priority. All employees are responsible for upholding Company-wide standards and values. We have many long-standing policies designed to promote ethical conduct and integrity, that employees are required to read and +17 +acknowledge on an annual basis. Employees are consistently provided training opportunities to develop skills in leadership, safety, and technical acumen, which help strengthen our efforts in conducting business with high ethical standards. +We strive to provide competitive, performance-based compensation and benefits to our employees, including market-competitive pay, short-term and long-term incentive compensation plans, an employee stock purchase program, and various healthcare, retirement, and other benefit packages such as a hybrid work environment that is guided by each employee’s job function and responsibilities. Compensation for our executives and employees under our short-term and long-term incentive plans is determined based on individual performance and Company performance with respect to qualitative and quantitative metrics that include environmental, health, and safety measures. The Compensation Committee of our Board of Directors oversees our compensation programs and regularly modifies program design to incentivize achievement of our corporate strategy and the matters of importance to our stakeholders. Significant planning for succession of key personnel is performed each year, or more frequently as deemed necessary by management. +We believe that our relationship with our employees is strong. As of February 10, 2022, we had 506 full-time employees, none of whom were subject to a collective bargaining agreement. We are committed to diversity at all levels of our organization and we strive to provide equal employment opportunities to all employees and job applicants. On an annual basis, we retain a third party to analyze our workforce demographics and conduct discrimination and pay equity testing. No discriminatory practices have been identified and no evidence of discrimination or pay inequity has been found. Additionally, we have established procedures and controls designed to support our objective of remaining, at all times, in material compliance with federal, state, and local laws and governmental regulations. +The following charts present certain Board of Directors and workforce metrics as of December 31, 2021: +Board of Directors Diversity (1) +Officer Gender Diversity (2) +Employee Ethnic Diversity (1) +Employee Gender Diversity +____________________________________________ +(1) Ethnic diversity data is determined under guidelines set forth by the United States Equal Employment Opportunity Commission and includes employees in the following categories: American Indian or Alaska Native, Asian, Black or African American, Hispanic or Latino, or the combination of two or more races (not Hispanic or Latino). +(2) Includes officers at the level of Vice President and above. +Seasonality +The price of crude oil is primarily driven by global socioeconomic factors and is less affected by seasonal fluctuations; however, demand for energy is generally higher in the winter and in the summer driving season. The demand and price for gas frequently increases during winter months and decreases during summer months. To lessen the impact of seasonal gas demand and +18 +price fluctuations, pipelines, utilities, local distribution companies, and industrial users regularly utilize gas storage facilities and forward purchase some of their anticipated winter requirements during the summer. However, increased summertime demand for electricity can divert gas that is traditionally placed into storage which, in turn, may increase the typical winter seasonal price. Seasonal anomalies, such as mild winters, or other unexpected impacts, such as the Pandemic, sometimes lessen or exacerbate these fluctuations. +Certain of our drilling, completion, and other operations are also subject to seasonal limitations. Seasonal weather conditions, government regulations, and lease stipulations could adversely affect our ability to conduct drilling activities in some of the areas where we operate. Please refer to Risk Factors in Part I, Item 1A of this report for additional discussion. +Competition +The oil and gas industry is intensely competitive, particularly with respect to acquiring prospective oil and gas properties. We believe our acreage positions provide a foundation for development activities that we expect to fuel our future growth. Our competitive position also depends on our geological, geophysical, and engineering expertise, as well as our financial resources. We believe the location of our acreage; our exploration, drilling, operational, and production expertise; available technologies; our financial resources and expertise; and the experience and knowledge of our management and technical teams enable us to compete in our core operating areas. However, we face intense competition from many major and independent oil and gas companies, which in some cases have larger technical teams and greater financial and operational resources than we do. Many of these companies not only engage in the acquisition, exploration, development, and production of oil and gas reserves, but also have gathering, processing or refining operations, market refined products, provide, dispose of and transport fresh and produced water, own drilling rigs or production equipment, or generate electricity, all of which, individually or in the aggregate, could provide such companies with a competitive advantage. +We also compete with other oil and gas companies in securing drilling rigs and other equipment and services necessary for the drilling, completion, and maintenance of wells, as well as for the gathering, transporting, and processing of oil, gas, NGLs, and water. Consequently, we may face shortages, delays, or increased costs in securing these services from time to time. The oil and gas industry also faces competition from alternative fuel sources, including renewable energy sources such as solar and wind-generated energy, and other fossil fuels such as coal. Competitive conditions may be affected by future energy, environmental, climate-related, financial, or other policies, legislation, and regulations. +In addition, we compete for people, including experienced geologists, geophysicists, engineers, and other professionals. Throughout the oil and gas industry, the need to attract and retain talented people has grown at a time when the availability of individuals with these skills is becoming more limited due to the evolving demographics of our industry. We are not insulated from competition for quality people, and we must compete effectively to be successful. Please refer to Human Capital above and Risk Factors in Part I, Item 1A of this report for additional discussion. +Government Regulations +Although our regulatory compliance obligations are mitigated by the fact that we do not own or operate oil and gas properties on federal lands, nearly every aspect of our business is subject to expansive federal, state, and local laws and governmental regulations. These laws and regulations frequently change in response to economic or political conditions, or other developments, and our regulatory burden may increase in the future. Laws and regulations have the potential to increase our cost of conducting business and consequently could affect our profitability. +Energy Regulations +Texas, the state where we conduct operations and lease or own nearly all of our oil and gas assets, has adopted laws and regulations governing the exploration for and production of oil, gas, and NGLs, including laws and regulations requiring permits for the drilling of wells, imposing bond requirements in order to drill or operate wells, governing the timing of drilling and location of wells, the method of drilling and casing wells, the surface use and restoration of properties upon which wells are drilled, and the plugging and abandonment of wells. Our operations are also subject to Texas conservation laws and regulations, including regulations governing the size of drilling and spacing units or proration units, the number of wells that may be drilled in an area, the spacing of wells, and the unitization or pooling of oil and gas properties. In addition, Texas conservation laws establish maximum rates of production from oil and gas wells, generally limit or prohibit the venting or flaring of gas, and may impose certain requirements regarding the ratability or fair apportionment of production from fields and individual wells. +Our sales of gas are affected by the availability, terms, and cost of gas pipeline transportation. The Federal Energy Regulatory Commission (“FERC”) has jurisdiction over the transportation and sale for resale of gas in interstate commerce. FERC’s current regulatory framework generally provides for a competitive and open access market for sales and transportation of gas. However, FERC regulations continue to affect the midstream and transportation segments of the industry, and thus can indirectly affect the sales prices we receive for gas production. +19 +Environmental, Health, and Safety Matters +General. Our operations are subject to stringent and complex federal, state, and local laws and regulations governing protection of the environment and worker health and safety, as well as the discharge of materials and emissions into the environment. These laws and regulations may, among other things: +• require the acquisition of various permits before drilling commences; +• restrict the types, quantities, and concentration of various substances and emissions that may be released into the environment in connection with oil and gas drilling and production and saltwater disposal activities; +• limit or prohibit drilling activities on certain lands lying within wilderness, wetlands, and other protected areas, including areas containing certain wildlife or threatened and endangered plant and animal species; and +• require remedial measures to mitigate pollution from former and ongoing operations, such as closing pits and plugging abandoned wells. +These laws, rules, and regulations may also restrict the rate of oil and gas production below the rate that would otherwise be possible. The regulatory burden on the oil and gas industry increases the cost of conducting business and consequently affects profitability. Additionally, environmental laws and regulations are revised frequently, and any changes may result in more stringent, or different permitting, waste handling, disposal, and cleanup requirements for the oil and gas industry and could have a significant impact on our operating costs. +The following is a summary of some of the existing laws, rules, and regulations to which our business is subject. +Waste handling. The Resource Conservation and Recovery Act (“RCRA”) and comparable state statutes regulate the generation, transportation, treatment, storage, disposal, and cleanup of hazardous and non-hazardous wastes. Under the auspices of the United States Environmental Protection Agency (“EPA”), individual states administer some or all of the provisions of RCRA, sometimes in conjunction with their own, more stringent requirements. Drilling fluids, produced water, and most of the other wastes associated with the exploration, development, and production of oil or gas are currently regulated under RCRA’s non-hazardous waste provisions. However, it is possible that certain oil and gas exploration and production wastes now classified as non-hazardous could be classified as hazardous wastes in the future. Any such change could result in an increase in our costs to manage and dispose of wastes, which could have a material adverse effect on our results of operations and financial position. +Comprehensive Environmental Response, Compensation, and Liability Act. The Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”), also known as the Superfund law, imposes joint and several liability, without regard to fault or legality of conduct, on classes of persons who are considered to be responsible for the release or threatened release of a hazardous substance into the environment. These persons include the owner or operator of the site where the release occurred, and anyone who disposed or arranged for the disposal of, or transported, a hazardous substance released at the site. Under CERCLA, such persons may be subject to joint and several liability for the costs of cleaning up the hazardous substances that have been released into the environment, for damages to natural resources and for the costs of environmental investigation and certain health studies. In addition, it is not uncommon for third-parties to file claims for personal injury and property damage allegedly caused by the hazardous substances released into the environment. +We currently own, lease, or operate numerous properties that have been used for oil and gas exploration and production for many years. CERCLA excludes petroleum and natural gas from its definition of hazardous substances, and although we believe we have utilized operating and waste disposal practices that were standard in the industry at the time, hazardous substances or wastes may have been released on or under the properties owned or leased by us, or on or under other locations, including off-site locations, where such substances have been taken for disposal. In addition, some of our properties have been operated by third-parties or by previous owners or operators whose treatment and disposal of hazardous substances, wastes, or hydrocarbons were not under our control. These properties, and the substances disposed or released on them, may be subject to CERCLA, RCRA, and analogous state laws. Under such laws, we could be required to remove previously disposed substances and wastes, pay fines, remediate contaminated property, or perform remedial operations to prevent future contamination. +Water discharges. The federal Water Pollution Control Act (“Clean Water Act”) and analogous state laws impose restrictions and strict controls with respect to the discharge of pollutants, including spills and leaks of oil and other substances, into waters of the United States and states. The discharge of pollutants into regulated waters is prohibited, except in accordance with the terms of a permit issued by the EPA, or analogous state agencies. This includes the discharge of certain storm water without a permit which requires periodic monitoring and sampling. In addition, the Clean Water Act regulates wastewater generated by unconventional oil and gas operations during the hydraulic fracturing process and discharged to publicly-owned wastewater treatment facilities. The Clean Water Act also prohibits discharge of dredged or fill material into waters of the United States, including wetlands, except in accordance with the terms of a permit issued by the United States Army Corps of Engineers, or a state, if the state has assumed authority to issue such permits. Federal and state regulatory agencies can impose administrative, civil, and criminal penalties for non-compliance with discharge permits or other requirements of the Clean Water Act and analogous state laws and regulations. +20 +The Oil Pollution Act of 1990 (“OPA”) addresses prevention, containment and cleanup, and liability associated with oil pollution. OPA applies to vessels, offshore platforms, and onshore facilities. OPA subjects owners of such facilities to strict liability for containment and removal costs, natural resource damages, and certain other consequences of oil spills into jurisdictional waters. Any unpermitted release of petroleum or other pollutants from our operations could result in governmental penalties and civil liability. +Air emissions. The federal Clean Air Act (“CAA”) and comparable state laws and regulations regulate emissions of various air pollutants through air emissions permitting programs and the imposition of other requirements, such as requirements for emission reduction, capture and control. In addition, the EPA has developed, and continues to develop, stringent regulations governing emissions of hazardous air pollutants at specified sources. Federal and state regulatory agencies can impose administrative, civil, and criminal penalties for non-compliance with air permits or other requirements of the CAA and associated state laws and regulations. Please refer to the Environmental section in Part II, Item 7 of this report for additional information about the regulation of air emissions from the oil and gas sector. +Climate change. In December 2009, the EPA determined that emissions of carbon dioxide, methane, and other GHGs endanger public health and welfare, and as a result, began adopting and implementing a comprehensive suite of regulations to restrict emissions of GHGs under existing provisions of the CAA. While President Trump’s administration had taken steps to rescind or review many of these regulations, President Biden’s administration has actively been reviewing those actions and taking steps to strengthen and expand the regulations, specifically targeting, among other things, the regulation of methane emissions from the oil and gas sector. Legislative and regulatory initiatives related to climate change could have an adverse effect on our operations and the demand for oil and gas. Please refer to Risk Factors - Risks Related to Oil and Gas Operations and the Industry - Legislative and regulatory initiatives and litigation related to global warming and climate change could have an adverse effect on our operations and the demand for oil, gas, and NGLs in Part I, Item 1A of this report. In addition to the effects of regulation, the meteorological and physical effects of global climate change could pose additional risks to our operations, including physical damage risks associated with more frequent, more intensive storms, flooding, and wildfires, and could adversely affect the demand for our products. +Endangered species. The federal Endangered Species Act and analogous state laws regulate activities that could have an adverse effect on threatened or endangered species. Some of our operations are conducted in areas where protected species are known to exist. In these areas, we may be obligated to develop and implement plans to avoid potential adverse impacts on protected species, and we may be prohibited from conducting operations in certain locations or during certain seasons, such as breeding and nesting seasons, when our operations could have an adverse effect on these species. It is also possible that a federal or state agency could order a complete halt to activities in certain locations if it is determined that such activities may have a serious adverse effect on a protected species. The presence of a protected species in areas where we perform drilling, completion, and production activities could impair our ability to timely complete well drilling and development and could adversely affect our future production from those areas. +OSHA and other laws and regulations. We are subject to the requirements of the federal Occupational Safety and Health Act (“OSHA”) and comparable state statutes. The OSHA hazard communication standard, the EPA community right-to-know regulations under Title III of CERCLA and similar state statutes require that we organize and/or disclose information about hazardous materials used or produced in our operations. Also, pursuant to OSHA, the Occupational Safety and Health Administration has established a variety of standards relating to workplace exposure to hazardous substances and employee health and safety. We believe we are in substantial compliance with the applicable requirements of OSHA and comparable laws. +Hydraulic fracturing. Hydraulic fracturing is an important and common practice used to stimulate production of hydrocarbons from tight shale formations. We routinely utilize hydraulic fracturing techniques in most of our drilling and completion programs. The process involves the injection of water, sand, and chemicals under pressure into the formation to fracture the surrounding rock and stimulate production. The process is typically regulated by state oil and gas commissions. However, even on private lands, the EPA has asserted federal regulatory authority over hydraulic fracturing involving diesel additives under the Safe Drinking Water Act’s Underground Injection Control Program. The federal Safe Drinking Water Act protects the quality of the nation’s public drinking water through the adoption of drinking water standards and controlling the injection of waste fluids, including saltwater disposal fluids, into below-ground formations that may adversely affect drinking water sources. +Increased regulation and scrutiny on oil and gas activities involving hydraulic fracturing techniques could potentially lead to a decrease in the completion of new oil and gas wells, an increase in compliance costs, delays, and changes in federal income tax laws, all of which could adversely affect our financial position, results of operations, and cash flows. As new laws or regulations that significantly restrict hydraulic fracturing are adopted at the state and local levels, such laws could make it more difficult or costly for us to perform fracturing to stimulate production from tight formations. In addition, if hydraulic fracturing becomes regulated at the federal level as a result of federal legislation or regulatory initiatives by the EPA or other federal agencies, our fracturing activities could become subject to additional permitting requirements, which could result in additional permitting delays and potential increases in costs. Restrictions on hydraulic fracturing could also reduce the amount of oil and gas that we are ultimately able to produce from our reserves. +We believe the trend in local, state, and federal environmental legislation and regulation will continue toward stricter standards, particularly under President Biden’s administration. While we believe we are in substantial compliance with existing environmental laws and regulations applicable to our current operations and that our continued compliance with existing requirements will not have a +21 +material adverse impact on our financial condition and results of operations, we cannot give any assurance that we will not be adversely affected in the future. +Environmental, Health, and Safety Initiatives. We are committed to exceptional safety, health, and environmental stewardship; making a positive difference in the communities where we live and work; and transparency in reporting our progress in these areas. We set annual goals for our safety, health, and environmental program focused on reducing the number of safety related incidents and the number and impact of spills of produced fluids. In addition, we set annual goals for GHG emissions intensity and methane emissions as a percentage of total methane produced, and as part of our current ESG initiatives, we have set near-term and medium-term goals that include reducing flaring and GHG emissions intensity, and maintaining low methane emissions intensity. We also periodically conduct audits of our operations to ensure regulatory compliance and we strive to provide appropriate training for our employees. Reducing air emissions as a result of leaks, venting, or flaring of gas during operations has become a major focus area as we consider this a best practice and seek to comply with regulations. While flaring is sometimes necessary, reducing these volumes is a priority for us. To avoid flaring when possible, we restrict testing periods and connect our production to gas pipeline infrastructure as quickly as possible after well completions. We have incurred in the past, and expect to incur in the future, capital costs related to environmental compliance. Such expenditures are included within our overall capital budget and are not separately itemized. +Available Information +Our internet website address is www.sm-energy.com. We routinely post important information for investors on our website. Within our website’s investor relations section, we make available free of charge our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed with or furnished to the SEC under applicable securities laws. These materials are made available as soon as reasonably practical after we electronically file such materials with or furnish such materials to the SEC, and can also be located at www.sec.gov. We also make available through our website our Corporate Governance Guidelines, Code of Business Conduct and Conflict of Interest Policy, Financial Code of Ethics, and the Charters of the Audit, Compensation, Executive, and Environmental, Social and Governance committees of our Board of Directors. Information on our website is not incorporated by reference into this report and should not be considered part of this document. +ITEM 1A. RISK FACTORS +In addition to the other information included in this report, the following risk factors should be carefully considered when evaluating an investment in us. +Risks Related to Commodity Prices and Global Macroeconomics +Oil, gas, and NGL prices are volatile, and declines in prices may adversely affect our profitability, financial condition, cash flows, access to capital, and ability to grow. +Our revenues, operating results, profitability, future rate of growth, and the carrying value of our oil and gas properties depend heavily on the prices we receive for oil, gas, and NGL sales. Oil, gas, and NGL prices also affect our cash flows available for capital expenditures, debt reductions, and other expenditures, our borrowing capacity, and the volume and value of our oil, gas, and NGL reserves. In addition, we may have oil and gas property impairments or downward revisions of estimates of proved reserves if prices fall significantly. Please refer to Significant Developments in 2021 and Reserves in Part I, Items 1 and 2, Comparison of Financial Results and Trends Between 2021 and 2020 and Between 2020 and 2019 in Part II, Item 7, and Note 1 – Summary of Significant Accounting Policies , Note 8 – Fair Value Measurements , and Supplemental Oil and Gas Information (unaudited) in Part II, Item 8 for specific discussion. +Historically, the markets for oil, gas, and NGLs have been volatile, and they are likely to continue to be volatile. Wide fluctuations in oil, gas, and NGL prices often result from relatively minor changes in the supply of and demand for oil, gas, and NGLs, market uncertainty, and other factors that are beyond our control, including: +• global and domestic supplies of oil, gas, and NGLs, and the productive capacity of the industry as a whole; +• the level of consumer demand for oil, gas, and NGLs; +• overall global and domestic economic conditions; +• weather conditions; +• the availability and capacity of gathering, transportation, processing, and/or refining facilities in asset-specific or localized areas; +• liquefied natural gas deliveries to and from the United States; +• the price and availability of alternative fuels or sources of energy; +• technological advances in, and regulations affecting, energy consumption and conservation; +• the ability of the members of the Organization of Petroleum Exporting Countries and other exporting countries to maintain effective oil price and production controls; +22 +• political instability or armed conflict in oil or gas producing regions, such as the escalating tensions currently occurring between Russia and Ukraine; +• actual or perceived epidemic or pandemic risks; +• strengthening and weakening of the United States dollar relative to other currencies; +• inflation; +• stockholder activism or activities by non-governmental organizations to limit sources of funding or restrict the exploration and production of oil, gas, and NGLs and related infrastructure; and +• governmental regulations and taxes. +Declines in oil, gas, and NGL prices would reduce our revenues and could also reduce the amount of oil, gas, and NGLs that we can produce economically, which could have a material adverse effect on our business, financial condition, liquidity, results of operations, and prospects. +The global COVID-19 Pandemic has impacted, and will likely continue to impact, us and our industry and could have a material adverse effect on our business, financial condition, liquidity, results of operations and prospects. +Since the beginning of 2020, the Pandemic has spread across the globe and disrupted markets and economies around the world, including the oil, gas, and NGL industry in which we operate. Approximately two years after its onset, the Pandemic remains a global health crisis and continues to evolve, and as a result, the markets for the commodities produced by our industry remain subject to heightened levels of uncertainty. Volatile market conditions are likely to persist and could impact our business, financial condition, liquidity, results of operations, prospects, or the timing of further recovery. Although demand for the commodities produced by our industry has increased, further negative financial markets and industry-specific impacts could result from future case surges, outbreaks, COVID-19 virus variants, the potential that current vaccines may be less effective or ineffective against future COVID-19 virus variants, and the risk that large groups of the population may not receive vaccinations against COVID-19, and as a result, may require us to adjust our business plan. In addition to the risks directly related to the Pandemic that are discussed throughout this report, the Pandemic is likely to increase the likelihood and magnitude of the other risk factors described in this section. +Weakness in economic conditions or uncertainty in financial markets may have material adverse impacts on our business that we cannot predict. +Historically, the United States and global economies and financial systems have experienced turmoil and upheaval characterized by extreme volatility in prices of equity and debt securities, periods of diminished liquidity and credit availability, inability to access capital markets, the bankruptcy, failure, collapse, or sale of financial institutions, inflation, and an unprecedented level of intervention by the United States federal government and other governments. Weakness or uncertainty in the United States economy or other large economies could materially adversely affect our business and financial condition. For example: +• the tightening of credit or lack of credit availability to our customers could adversely affect our ability to collect our trade receivables; +• the liquidity available under our Credit Agreement could be reduced if any lender is unable to fund its commitment; +• our ability, or the ability of our suppliers or contractors, to access the capital markets may be restricted or non-existent at a time when we or they would like, or need, to raise capital for our or their business, including for the exploration and/or development of reserves; +• our commodity derivative contracts could become economically ineffective if our counterparties are unable to perform their obligations or seek bankruptcy protection; +• in an inflationary environment, we could be impacted by increased borrowing costs as a result of rising interest rates; and +• variable interest rate spread levels, including for LIBOR (or any applicable replacement rate) and the prime rate, could increase significantly, resulting in higher interest costs for unhedged variable interest rate based borrowings under our Credit Agreement. +Risks Related to Oil and Gas Operations and the Industry +If we are unable to replace reserves, we will not be able to sustain production. +Our future operations depend on our ability to find or acquire and develop oil, gas, and NGL reserves that are economically producible. Our properties produce oil, gas, and NGLs at a declining rate over time. In order to maintain current production rates, we must locate or acquire and develop new oil, gas, and NGL reserves to replace those being depleted by production. +For future acquisitions we may complete, a successful outcome for our business will depend on a number of factors, many of which are beyond our control. These factors include the purchase price and transaction costs for the acquisition, future oil, gas, and NGL prices, the ability to reasonably estimate the recoverable volumes of reserves, rates of future production and future net revenues attainable from reserves, future operating and capital costs, results of future exploration, exploitation, and development activities on the +23 +acquired properties, and future abandonment and possible future environmental or other liabilities. There are numerous uncertainties inherent in estimating these variables with respect to prospective acquisition targets. Actual results may vary substantially from those assumed in the estimates. Our customary review in connection with acquisitions will not necessarily reveal, or allow us to fully assess, all existing or potential problems and deficiencies with such properties. We do not inspect every well, and even when we inspect a well, we may not discover structural, subsurface, or environmental problems that may exist or arise. We may not be entitled to contractual indemnification for pre-closing liabilities, including environmental liabilities. We often acquire interests in properties on an “as-is” basis with limited remedies for breaches of representations and warranties. +Additionally, significant acquisitions can change the nature of our operations and business depending upon the character of the acquired properties if they have substantially different operating and geological characteristics or are in different geographic locations than our existing properties. To the extent that acquired properties are substantially different than our existing properties, our ability to efficiently realize the expected economic benefits of such transactions may be limited. +Integrating acquired businesses and properties involves a number of unique risks. These risks include the possibility that management may be distracted from regular business concerns by the need to integrate operations and systems and that unforeseen difficulties can arise in integrating operations and systems, and in retaining and assimilating employees. Any of these or other similar risks could lead to potential adverse short-term or long-term effects on our operating results and may cause us to not be able to realize any or all of the anticipated benefits of the acquisitions. +Competition in our industry is intense, and many of our competitors have greater financial, technical, and human resources than we do. +We face intense competition from oil and gas exploration and production companies of all sizes for the capital, equipment, expertise, labor, and materials required to operate oil and gas properties. Many of our competitors have financial, technical, and other resources exceeding those available to us, and many oil and gas properties are sold in a competitive bidding process in which our competitors may be able and willing to pay more for exploratory and development prospects and productive properties, or in which our competitors have technological information or expertise that is not available to us to evaluate and successfully bid for properties. As a result, we may not be successful in acquiring and developing profitable properties. In addition, other companies may have a greater ability to continue drilling activities during periods of low oil or gas prices and to absorb the burden of current and future governmental regulations and taxation. In addition, shortages of equipment, labor, or materials as a result of intense competition may result in increased costs or the inability to obtain those resources as needed. Our inability to compete effectively with companies in any area of our business could have a material adverse impact on our business activities, financial condition, and results of operations. +The loss of personnel could adversely affect our business. +We depend to a large extent on the efforts and continued employment of our executive management team, other key personnel, and our general labor force. The loss of their services could adversely affect our business. Our drilling success and the success of other activities integral to our operations will depend, in part, on our ability to attract and retain experienced geologists, engineers, landmen, and other professionals. Competition for many of these professionals can be intense. If we cannot retain our technical personnel or attract additional experienced technical personnel and professionals, our ability to compete could be harmed. +The actual quantities and present value of our proved oil, gas, and NGL reserves may be less than we have estimated, and the cost to develop our reserves may be more than we have estimated. +This report and certain of our other SEC filings contain estimates of our proved oil, gas, and NGL reserves and the present value of estimated future net revenues from those reserves. The process of estimating reserves is complex and estimates are based on various assumptions, including geological and geophysical characteristics, future oil, gas, and NGL prices, drilling and completion costs, gathering and transportation costs, operating expenses, capital expenditures, effects of governmental regulation, taxes, timing of operations, and availability of funds. Therefore, these estimates are inherently imprecise. In addition, our reserve estimates for properties with limited production history may be less reliable than estimates for properties with lengthy production histories. +Actual future production; prices for oil, gas, and NGLs; revenues; production taxes; development expenditures; operating expenses; and quantities of producible oil, gas, and NGL reserves will most likely vary from those estimated. Any significant variance could materially affect the estimated quantities of and present value related to proved reserves disclosed by us, and the actual quantities and present value may be significantly less than what we have previously estimated. Our properties may also be susceptible to hydrocarbon drainage from production on adjacent properties, which we may not control. +As of December 31, 2021, 39 percent, or 191.8 MMBOE, of our estimated proved reserves were proved undeveloped. In order to develop our proved undeveloped reserves, as of December 31, 2021, we estimate approximately $1.4 billion of capital expenditures would be required. Although we have estimated our proved reserves and the costs associated with these proved reserves in accordance with industry standards, estimated costs may not be accurate, development may not occur as scheduled, and actual results may not occur as estimated. +24 +One should not assume that the standardized measure of discounted future net cash flows or PV-10 included in this report represent the current market value of our estimated proved oil, gas, and NGL reserves. Management has based the estimated discounted future net cash flows from proved reserves on price and cost assumptions required by the SEC, whereas actual future prices and costs may be materially higher or lower. Please refer to Reserves in Part I, Items 1 and 2 of this report for discussion regarding the prices used in estimating the present value of our proved reserves as of December 31, 2021, and to the caption Oil and Gas Reserve Quantities under Critical Accounting Policies and Estimates in Part II, Item 7 of this report for additional information. +The timing of production from oil and gas properties and of related expenses affects the timing of actual future net cash flows from proved reserves, and thus their actual present value. Our actual future net cash flows could be less than the estimated future net cash flows for purposes of computing PV-10. In addition, the 10 percent discount factor required by the SEC to calculate PV-10 for reporting purposes is not necessarily the most appropriate discount factor given actual interest rates, costs of capital, and other risks to which our business and the oil and gas industry in general are subject. +Our disposition activities may be subject to factors beyond our control, and in certain cases we may retain unforeseen liabilities for certain matters . +We regularly sell non-core assets in order to increase capital resources available for core assets and other purposes and to create organizational and operational efficiencies. We also occasionally sell interests in core assets for the purpose of accelerating the development and increasing efficiencies in other core assets. Various factors could materially affect our ability to dispose of such assets, including the approvals of governmental agencies or third parties, the availability of purchaser financing and purchasers willing to acquire the assets on terms we deem acceptable, or other matters or uncertainties that could impact such dispositions, including whether transactions could be consummated or completed in the form or timing and for the value that we anticipate. At times we may be required to retain certain liabilities or agree to indemnify buyers in connection with such asset sales. The magnitude of such retained liabilities or of the indemnification obligations may be difficult to quantify at the time of the transaction and ultimately could be material. +We rely on third-party service providers to conduct drilling and completion and other related operations. +We rely on third-party service providers to perform necessary drilling and completion and other related operations. The ability of third-party service providers to perform such operations will depend on those service providers’ ability to compete for and retain qualified personnel, financial condition, economic performance, and access to capital, which in turn will depend upon the supply and demand for oil, gas, and NGLs, prevailing economic conditions, and financial, business, and other factors. In addition, sustained low commodity prices could cause third-party service providers to consolidate or declare bankruptcy, which could limit our options for engaging such providers. The failure of a third-party service provider to adequately perform operations could delay drilling or completion or reduce production from the property and adversely affect our financial condition and results of operations. +Title to the properties in which we have an interest may be impaired by title defects. +We generally rely on title due diligence reports when acquiring oil and gas leasehold interests, and we obtain title opinions prior to commencing initial drilling operations on the properties we operate. Title to the properties in which we have an interest may be impaired by title defects that may not be identified in the due diligence title reports or title opinions we obtain, or such defects may not be cured following identification. A material title defect can reduce the value of a property or render it worthless, thus adversely affecting our oil and gas reserves, financial condition, results of operations, and operating cash flow, and may also impair the value of or render adjacent properties uneconomic to develop. Undeveloped acreage has greater risk of title defects than developed acreage and title insurance is not generally available for oil and gas properties. +Oil and gas drilling, completion, and production activities are subject to numerous risks, including the risk that no commercially producible oil, gas, or NGLs will be found. +The cost of drilling and completing wells is often uncertain, and oil, gas, or NGLs drilling and production activities may be shortened, delayed, or canceled as a result of a variety of factors, many of which are beyond our control. These factors may include, but are not limited to: +• unexpected adverse drilling or completion conditions; +• title problems; +• disputes with owners or holders of surface interests on or near areas where we operate; +• pressure or geologic irregularities in formations; +• engineering and construction delays; +• equipment failures or accidents; +• hurricanes, tornadoes, flooding, or other adverse weather conditions; +• operational restrictions resulting from seismicity concerns; +• governmental permitting delays; +25 +• supply chain issues, including cost increases and availability of equipment or materials; +• compliance with environmental and other governmental requirements; and +• shortages or delays in the availability of or increases in the cost of drilling rigs and crews, fracture stimulation crews and equipment, pipe, chemicals, water, sand, and other supplies. +The wells we drill may not be productive, and we may not recover all or any portion of our investment in such wells. The seismic data and other technologies we use do not allow us to know conclusively prior to drilling a well if oil, gas, or NGLs are present, or whether they can be produced economically. Drilling activities can result in dry holes or wells that are productive but do not produce sufficient net revenues after operating and other costs to cover drilling and completion costs. Even if sufficient amounts of oil, gas, or NGLs exist, we may damage a potentially productive hydrocarbon-bearing formation or experience mechanical difficulties while drilling or completing a well, which could result in reduced or no production from the well, significant expenditure to repair the well, and/or the loss and abandonment of the well. +Another significant risk inherent in our drilling plans is the need to obtain drilling permits from state, local, and other governmental authorities. Delays in obtaining regulatory approvals and drilling permits, including delays that jeopardize our ability to realize the potential benefits from leased properties within the applicable lease periods, the failure to obtain a drilling permit for a well, or the receipt of a permit with unreasonable conditions or costs could have a materially adverse effect on our ability to explore or develop our properties. +Results in newer resource plays may be more uncertain than results in resource plays that are more developed and have longer established production histories. We, and the industry, generally have less information with respect to the ultimate recoverability of reserves and the production decline rates in newer resource plays than other areas with longer histories of development and production. Drilling and completion techniques that have proven to be successful in other resource plays are being used in the early development of new plays; however, we can provide no assurance of the ultimate success of these drilling and completion techniques. +We may not be able to obtain any options or lease rights in potential drilling locations that we identify. Unless production is established within the spacing units covering undeveloped acres on which our drilling locations are identified, the leases for such acreage will expire and we will lose our right to develop the related properties. Our total net acreage as of February 10, 2022, that is scheduled to expire over the next three years, represents less than one percent of our total net undeveloped acreage as of December 31, 2021. Although we have identified numerous potential drilling locations, we may not be able to economically drill for and produce oil, gas, or NGLs from all of them, and our actual drilling activities may materially differ from those presently identified, which could adversely affect our financial condition, results of operations and operating cash flow. +The results of our operations are subject to drilling and completion technique risks, and results may not meet our expectations for reserves or production. As a result, we may incur material write-downs, and the value of our undeveloped acreage could decline if drilling results are unsuccessful. +Many of our operations involve utilizing the latest drilling and completion techniques as developed by us, other operators and our service providers in order to maximize production and ultimate recoveries and therefore generate the highest possible returns. Risks we face while drilling include, but are not limited to, landing our well bore outside the desired drilling zone, deviating from the desired drilling zone while drilling horizontally through the formation, the inability to run our casing the entire length of the well bore, and the inability to run tools and recover equipment consistently through the horizontal well bore. Risks we face while completing our wells include, but are not limited to, the inability to fracture stimulate the planned number of stages, the inability to run tools and other equipment the entire length of the well bore during completion operations, the inability to recover such tools and other equipment, and the inability to successfully clean out the well bore after completion of the final fracture stimulation. +In addition, exploration and drilling technologies we currently use or implement in the future may become obsolete. If we are unable to maintain technological advancements consistent with industry standards, our operations and financial condition may be adversely affected. We cannot be certain we will be able to implement exploration and drilling technologies on a timely basis or at a cost that is acceptable to us. +Ultimately, the success of exploration, drilling, and completion technologies and techniques can only be evaluated over time as more wells are drilled and production profiles are established over a sufficiently long time period. If our drilling results are less than anticipated or we are unable to execute our drilling program because of capital constraints, lease expirations, limited access to gathering systems and takeaway capacity, and/or prices for oil, gas, and NGLs decline, then the return on our investment for a particular project may not be as attractive as we anticipated and we could incur material write-downs of oil and gas properties and the value of our undeveloped acreage could decline in the future. +Many of our properties are in areas that may have been partially depleted or drained by offset wells and certain of our wells may be adversely affected by actions other operators may take when drilling, completing, or operating wells that they own. +Many of our properties are in areas that may have already been partially depleted or drained by earlier offset drilling. The owners of leasehold interests adjoining any of our properties could take actions, such as drilling and completing additional wells, which +26 +could adversely affect our operations. When a new well is completed and produced, the pressure differential in the vicinity of the well causes the migration of reservoir fluids toward the new wellbore (and potentially away from existing wellbores). As a result, the drilling and production of these potential locations could cause a depletion of our proved reserves and may inhibit our ability to further develop our proved reserves. In addition, completion operations and other activities conducted on adjacent or nearby wells could cause production from our wells to be shut in for indefinite periods of time, result in increased lease operating expenses and adversely affect the production and reserves from our wells after they re-commence production. We have no control over the operations or activities of offsetting operators. +The inability of customers or co-owners of assets to meet their obligations may adversely affect our financial results. +Substantially all of our accounts receivable result from oil, gas, and NGL sales or joint interest billings to co-owners of oil and gas properties we operate. This concentration of customers and joint interest owners may impact our overall credit risk because these entities may be similarly affected by various economic and other market conditions, including declines in oil, gas, and NGL prices. The loss of one or more of these customers could reduce competition for our products and negatively impact the prices of commodities we sell. We do not believe the loss of any single purchaser would materially impact our operating results, as we have numerous options for purchasers in each of our operating areas for our oil, gas, and NGL production. Please refer to Concentration of Credit Risk and Major Customers in Note 1 – Summary of Significant Accounting Policies, in Part II, Item 8 of this report for further discussion of our concentration of credit risk and major customers. Additionally, the inability of our co-owners to pay joint interest billings could negatively impact our cash flows and financial ability to drill and complete current and future wells. +We have entered into firm transportation contracts that require us to pay fixed sums of money to our counterparties regardless of quantities actually shipped, processed, or gathered. If we are unable to deliver the necessary quantities of oil, gas, NGL, or produced water to our counterparties, our results of operations, financial position, and liquidity could be adversely affected. +As of December 31, 2021, we were contractually committed to deliver a minimum of 10 MMBbl of oil and 89 Bcf of gas through 2024, and 14 MMBbl of produced water through 2027. We may enter into additional firm transportation agreements as we expand the development of our resource plays. We do not expect to incur any material shortfalls related to our existing contractual commitments. In the event we encounter delays in drilling and completing our wells or otherwise due to construction, interruptions of operations, or delays in connecting new volumes to gathering systems or pipelines for an extended period of time, or if we further limit our capital expenditures due to future commodity price declines or for other reasons, the requirements to pay for quantities not delivered could have a material impact on our results of operations, financial position, and liquidity. +Negative public perception and investor sentiment regarding our business and the oil and gas industry as a whole could adversely affect our business, operations, and our ability to attract capital. +Certain segments of the public as a whole, and the investment community in particular, have developed negative sentiment towards our industry. In recent years, equity returns in the sector versus other industry sectors have led to lower oil and gas representation in certain key equity market indices. In addition, some investors, including investment management firms, sovereign wealth and pension funds, university endowments and other investment advisors, have adopted policies to discontinue or reduce their investments in the oil and gas sector based on social and environmental considerations. Furthermore, other influential stakeholders have pressured commercial and investment banks and other service providers to reduce or cease financing of oil and gas companies and related infrastructure projects. +Such developments, including increased focus on environmental, social and governance matters and initiatives aimed at limiting climate change and reducing air pollution, and changes in federal income tax laws could result in downward pressure on the stock prices of oil and gas companies, including ours. This may also potentially result in a reduction of available capital funding for potential development projects, impacting our future financial results. +We are subject to operating and environmental risks and hazards that could result in substantial losses or liabilities that may not be fully insured. +Oil and gas operations are subject to many risks, including human error and accidents, that could cause personal injury, death, property damage, well blowouts, craterings, explosions, uncontrollable flows of oil, gas and NGLs, or well fluids, releases or spills of completion fluids, spills or releases from facilities and equipment used to deliver or store these materials, spills or releases of brine or other produced or flowback water, subsurface conditions that prevent us from stimulating the planned number of completion stages, accessing the entirety of the wellbore with our tools during completion, or removing materials from the wellbore to allow production to begin, fires, adverse weather such as hurricanes or tornadoes, freezing conditions, floods, droughts, formations with abnormal pressures, pipeline ruptures or spills, pollution, seismic events, releases of toxic gas such as hydrogen sulfide, and other environmental risks and hazards. If any of these types of events occurs, we could sustain substantial losses. +In response to increased seismic activity in the Permian Basin in Texas, the Railroad Commission of Texas (“RRC”) has developed a seismic review process for injection wells near qualifying seismic activity. As a result of the seismic review process, the RRC may declare an area to be a Seismic Response Area (“SRA”) and may adjust limits for injection rates and pressure, require bottom-hole pressure tests, or modify, suspend, or terminate injection well permits within the SRA. If a SRA is declared within an area +27 +of our operations, our ability to dispose of produced water may be adversely affected, and as a result, we may be forced to shut-in injection wells or find alternate produced water disposal options which could affect production and therefore oil, gas, and NGL production revenue, and could cause us to incur additional capital or operating expense. The declaration of SRAs has required us to adjust the areas where we seek permits for injection wells to areas or formations that are less desirable, and could further restrict the areas where we are able to obtain and operate under such permits without restrictions. Additionally, we could be subject to third-party claims and liability based on allegations that our operations caused or contributed to seismic events that resulted in damage to property or personal injury, or that are otherwise related to seismic events. +If we experience any of the problems with well stimulation, completion activities, and disposal referenced above, our ability to explore for and produce oil, gas, and NGLs may be adversely affected. We could incur substantial losses or otherwise fail to realize reserves in particular formations as a result of the need to shut down, abandon, or relocate drilling operations, the need to modify drill sites to lessen the risk of spills or releases, the need to investigate and/or remediate any spills, releases or ground water contamination that might have occurred, and the need to suspend our operations. +There is inherent risk of incurring significant environmental costs and liabilities in our operations due to our current and past generation, handling, and disposal of materials, including produced water, solid and hazardous wastes, and petroleum hydrocarbons. We may incur joint and several, and/or strict liability under applicable United States federal and state environmental laws in connection with releases of hazardous substances at, on, under, or from our leased or owned properties, some of which have been used for oil and gas exploration and production activities for a number of years, often by third-parties not under our control. For our outside-operated properties, we are dependent on the operator for operational and regulatory compliance and could be subject to liabilities in the event of non-compliance. These properties and the wastes disposed thereon or therefrom could be subject to stringent and costly investigatory or remedial requirements under applicable laws, some of which are strict liability laws without regard to fault or the legality of the original conduct, including CERCLA or the Superfund law, RCRA, the Clean Water Act, the CAA, the OPA, and analogous state laws. Under various implementing regulations, we could be required to remove or remediate previously disposed wastes (including wastes disposed of or released by prior owners or operators) or property contamination (including groundwater contamination), to perform natural resource mitigation or restoration practices, or to perform remedial plugging or closure operations to prevent future contamination. In addition, it is not uncommon for neighboring landowners and other third-parties to file claims for personal injury or property damage, including induced seismicity damage, allegedly caused by the release of petroleum hydrocarbons or other hazardous substances into the environment. As a result, we may incur substantial liabilities to third-parties or governmental entities, which could reduce or eliminate funds available for exploration, development, or acquisitions, or cause us to incur losses. +We maintain insurance against some, but not all, of these potential risks and losses. We have significant but limited coverage for sudden environmental damage. We do not believe that insurance coverage for the full potential liability that could be caused by environmental damage that occurs gradually over time is appropriate for us at this time given the nature of our operations and the nature and cost of such coverage. Further, we may elect not to obtain insurance coverage under circumstances where we believe that the cost of available insurance is excessive relative to the risks to which we are subject. Accordingly, we may be subject to liability or may lose substantial assets in the event of environmental or other damages. If a significant accident or other event occurs and is not fully covered by insurance, we could suffer an uninsured material loss. +Our operations are subject to complex laws and regulations, including environmental regulations, that result in substantial costs and other risks. +Federal, state, and local authorities extensively regulate the oil and gas industry. Legislation and regulations affecting the industry are under constant review for amendment or expansion, raising the possibility of changes that may become more stringent and, as a result, may affect, among other things, the pricing, or marketing of oil, gas, and NGL production. Non-compliance with statutes and regulations and more vigorous enforcement of such statutes and regulations by regulatory agencies may lead to increased operational and compliance costs, substantial administrative, civil, and criminal penalties, including the assessment of natural resource damages, the imposition of significant investigatory and remedial obligations and may also result in the suspension or termination of our operations. The overall regulatory burden on the industry increases the cost to place, design, drill, complete, install, operate, and abandon wells and related facilities and, in turn, decreases profitability. +Governmental authorities regulate various aspects of drilling for and the production of oil, gas, and NGLs, including the permit and bonding requirements of drilling wells, the spacing of wells, the unitization or pooling of interests in oil and gas properties, rights-of-way and easements, disposal of produced water, environmental matters, occupational health and safety, the sharing of markets, production limitations, plugging, abandonment, restoration standards, and oil and gas operations. Public interest in environmental protection has increased in recent years, and environmental organizations have opposed, with some success, certain projects. Under certain circumstances, regulatory authorities may deny a proposed permit or right-of-way grant or impose conditions of approval to mitigate potential environmental impacts, which could, in either case, negatively affect our ability to explore or develop certain properties. Any such delay, suspension, or termination could have a materially adverse effect on our operations. +Our operations are also subject to complex and constantly changing environmental laws and regulations adopted by federal, state, and local governmental authorities in jurisdictions where we are engaged in exploration or production operations. New laws or regulations, or changes to current requirements, including the designation of previously unprotected wildlife or plant species as threatened or endangered in areas we operate in, could result in material costs or claims with respect to properties we own or have +28 +owned or limitations on exploration and production activities in certain locations. We will continue to be subject to uncertainty associated with new regulatory interpretations and inconsistent interpretations between state and federal agencies. Under existing or future environmental laws and regulations, we could incur significant liability, including joint and several, strict liability under federal, state, and local environmental laws for emissions and for discharges of oil, gas, and NGLs or other pollutants into the air, soil, surface water, or groundwater as described in Government Regulations in Part I, Items 1 and 2 of this report. Existing environmental laws or regulations, as currently interpreted or enforced, or as they may be interpreted, enforced, or altered in the future, may have a materially adverse effect on us. +The impact of extreme weather conditions and lease stipulations adversely affect our ability to conduct drilling activities in some of the areas where we operate. +Our operations have been in the past, and may continue to be, adversely affected by the impact of extreme weather conditions. Additionally, lease stipulations designed to protect various wildlife or plant species may adversely impact our operations. In certain areas, drilling and other oil and gas activities can only be conducted during limited times of the year. This limits our ability to operate in those areas and can intensify competition during those times for drilling rigs and completion equipment, oil field equipment, services, supplies and qualified personnel, which may lead to periodic shortages. These constraints and the resulting shortages or high costs could delay our operations and materially increase our operating and capital costs. +Federal and state legislative and regulatory initiatives relating to hydraulic fracturing could result in increased costs and additional operating restrictions or delays. +Hydraulic fracturing is a common practice in the oil and gas industry used to stimulate the production of oil, gas, and NGLs from dense subsurface rock formations. We routinely apply hydraulic fracturing techniques to many of our oil and gas properties, including our unconventional resource plays within our Midland Basin and South Texas assets. Hydraulic fracturing involves injecting water, sand, and certain chemicals under pressure to fracture the hydrocarbon-bearing rock formation to allow the flow of hydrocarbons into the wellbore. The process is typically regulated by state oil and gas commissions. However, the EPA and other federal agencies have asserted federal regulatory authority over certain aspects of hydraulic fracturing activities, as outlined below. +The EPA has authority to regulate underground injections that contain diesel in the fluid system under the Safe Drinking Water Act. The EPA also has authority under the Clean Water Act to regulate wastewater generated by unconventional oil and gas operations during the hydraulic fracturing process and discharged to publicly-owned wastewater treatment facilities. If the EPA implements further regulations of hydraulic fracturing, we may incur additional costs to comply with such requirements that may be significant in nature, experience delays or curtailment in the pursuit of exploration, development, or production activities, and could even be prohibited from drilling and/or completing certain wells. +Certain states, including Texas, have adopted, and other states are considering adopting, regulations that could impose more stringent permitting, public disclosure, waste disposal, and well construction requirements on hydraulic fracturing operations or otherwise seek to ban fracturing activities altogether. In addition to state laws, local land use restrictions, such as city ordinances, may restrict, or prohibit the performance of drilling in general and/or hydraulic fracturing in particular. Recently, municipalities have passed or proposed zoning ordinances that ban or strictly regulate hydraulic fracturing within city boundaries, setting the stage for challenges by state regulators and third-parties. Similar events and processes are playing out in several cities, counties, and townships across the United States. In the event that state, local, or municipal legal restrictions are adopted in areas where we are currently conducting, or in the future plan to conduct, operations, we may incur additional costs to comply with such requirements that may be significant in nature, experience delays or curtailment in the pursuit of exploration, development, or production activities, and could even be prohibited from drilling and/or completing certain wells. +In the recent past, several federal governmental agencies were actively involved in studies or reviews that focus on environmental aspects and impacts of hydraulic fracturing practices. Increased regulation and attention given to the hydraulic fracturing process could lead to greater opposition, including litigation, to oil and gas production activities using hydraulic fracturing techniques. Disclosure of chemicals used in the hydraulic fracturing process could make it easier for third parties opposing such activities to pursue legal proceedings against producers and service providers based on allegations that specific chemicals used in the fracturing process could adversely affect human health or the environment, including groundwater. In 2013, a court in California, and in 2020 the United States District Court for the District of Montana each held that the Bureau of Land Management (“BLM”) did not comply with NEPA because it did not adequately consider the impact of hydraulic fracturing and horizontal drilling before issuing leases. Similar cases continue to be filed. Courts in New York and Colorado reduced the level of evidence required before a court will agree to consider alleged damage claims from hydraulic fracturing by property owners. Litigation resulting in financial compensation for damages linked to hydraulic fracturing, including damages from induced seismicity, could spur future litigation and bring increased attention to the practice of hydraulic fracturing. Judicial decisions could also lead to increased regulation, permitting requirements, enforcement actions, and penalties. Additional legislation or regulation could also lead to operational delays or restrictions or increased costs in the exploration for, and production of, oil, gas, and NGLs, including from the development of shale plays, or could make it more difficult to perform hydraulic fracturing. The adoption of additional state or local laws, or the implementation of new regulations regarding hydraulic fracturing could potentially cause a decrease in the completion of new oil and gas wells, or an increase in compliance costs and delays, which could adversely affect our financial position, results of operations, and cash flows. +29 +We will continue to be subject to uncertainty associated with new regulatory suspensions, revisions or rescissions and inconsistent state and federal regulatory mandates that could adversely affect our production. +Federal and state regulatory initiatives relating to air quality and greenhouse gas emissions could result in increased costs and additional operating restrictions or delays. +There has been a trend toward increased air quality and GHG regulation and reduced emissions from oil and gas sources. These regulations include the New Source Performance Standards (“NSPS”), the National Emission Standards for Hazardous Air Pollutants programs, and ozone standards set under the National Ambient Air Quality Standards (“NAAQS”), among others. The adoption of additional state or local laws, or the implementation of new regulations could potentially cause a decrease in the completion of new oil and gas wells, or an increase in compliance costs and delays, which could adversely affect our financial position, results of operations, and cash flows. Please refer to the Environmental section in Part II, Item 7 of this report for additional information about the regulation of air emissions, particularly methane emissions from the oil and gas sector. +Requirements to reduce gas flaring could have an adverse effect on our operations. +Wells in the Midland Basin in Texas, where we have significant operations, produce natural gas, as well as oil and NGLs. Constraints in the gas gathering and processing network in certain areas of the Midland Basin have resulted in significant quantities of that gas being flared instead of gathered, processed, and sold. Further, we are subject to laws established by state and other regulatory agencies that restrict the duration and amount of natural gas that can be legally flared. These laws and regulations, including potential future regulations that may impose further restrictions on flaring, could limit the amount of oil and gas we can produce from our wells or may limit the number of wells or the locations that we can drill. Any future laws and regulations may increase our operational costs, or restrict our production, which could materially and adversely affect our financial condition, results of operations and cash flows. +Our ability to produce oil, gas, and NGLs economically and in commercial quantities could be impaired if we are unable to acquire adequate supplies of water for our drilling operations and/or completions or are unable to dispose of or recycle the water we use at a reasonable cost and in accordance with applicable environmental rules. +The hydraulic fracturing process on which we and others in our industry depend to complete wells that will produce commercial quantities of oil, gas, and NGLs requires the use and disposal of significant quantities of water. +Our inability to secure sufficient amounts of water, or to dispose of, or recycle, the water produced from our wells, could adversely impact our operations. Moreover, the imposition of new environmental initiatives and regulations could include restrictions on our ability to conduct certain operations such as hydraulic fracturing or disposal of wastes, including, but not limited to, produced water, drilling fluids, and other wastes associated with the exploration, development, or production of oil, gas, and NGLs. +Compliance with environmental regulations, surface use agreements, and permit requirements governing the withdrawal, storage, and use of surface water or groundwater necessary for hydraulic fracturing of wells may increase our operating costs and cause delays, interruptions, or termination of our operations, the extent of which cannot be predicted, all of which could have an adverse effect on our operations and financial condition. +Legislative and regulatory initiatives and litigation related to global warming and climate change could have an adverse effect on our operations and the demand for oil, gas, and NGLs. +While courts have generally declined to assign direct liability for climate change to large sources of GHG emissions, some have required increased scrutiny of such emissions by federal agencies and permitting authorities. There is a continuing risk of claims being filed against companies that have significant GHG emissions, and new claims for damages and increased government scrutiny, especially from state and local governments, will likely continue. +The United States Congress has from time to time considered adopting legislation to reduce emissions of GHGs, and the majority of states have already taken measures to reduce emissions of GHGs through various measures, including, primarily through the planned development of GHG emission inventories, participation in and/or regional GHG “cap and trade” programs, and/or transition to clean energy. The focus on legislating and/or regulating methane could result in increased scrutiny for sources emitting high levels of methane, including during permitting processes, analysis, regulation and reduction of methane emissions as a requirement for project approval, and actions taken by one agency for a specific industry establishing precedents for other agencies and industry sectors. In 2021, the EPA proposed requirements for methane emission reductions from existing oil and gas equipment. +Any court rulings, laws, or regulations that restrict or require reduced emissions of GHGs could lead to increased operating and compliance costs and could have an adverse effect on demand for the oil and gas that we produce. +Scientists have predicted that increasing concentrations of GHGs in the earth’s atmosphere may produce climate changes that have significant physical effects, such as increased frequency and severity of storms, droughts, and floods and other climatic events. If such effects were to occur, our operations could be adversely affected. Potential adverse effects could include disruption of our drilling, +30 +completion, and production activities, including, for example, damages to our facilities from flooding or increases in our costs of operation or reductions in the efficiency of our operations, as well as potentially increased costs for insurance coverage in the aftermath of such events. Significant physical effects of climate change could also have an indirect effect on our financing and operations by disrupting the transportation or process-related services provided by midstream companies, service companies, or suppliers with whom we have a business relationship. We may not be able to recover through insurance some or any of the damages, losses, or costs that may result from potential physical effects of climate change. Federal regulations or policy changes regarding climate change preparation requirements could also impact our costs and planning requirements because emissions of such gases contribute to warming of the earth’s atmosphere and other climatic changes. +Our ability to sell oil, gas, and NGLs, and/or receive market prices for our production, may be adversely affected by constraints on gathering systems, processing facilities, pipelines, and other transportation systems owned or operated by third-parties or by other interruptions beyond our control, which could obstruct, limit, or eliminate our access to oil, gas, and NGL markets. +The marketability of our oil, gas, and NGL production depends in part on the availability, proximity, and capacity of gathering systems, processing facilities, pipelines, and other transportation systems, which are generally owned or operated by third parties. Any significant interruption in service from, damage to, or lack of available capacity in these systems and facilities can result in the shutting-in of producing wells, the delay, or discontinuance of development plans for our properties, increases in costs, or lower price realizations. Although we have some influence over the processing and transportation of our operated production, material changes in these business relationships could materially affect our operations. Federal and state regulation of oil, gas, and NGL production and transportation, tax and energy policies, changes in supply and demand, pipeline pressures, damage to or destruction of pipelines or processing facilities, infrastructure or capacity constraints, and general economic conditions could adversely affect our ability to produce, gather, process, transport, or market oil, gas, and NGLs. +Production may be interrupted, or shut in, from time to time for numerous reasons, including weather conditions, accidents, loss of pipeline, gathering, processing or transportation system access or capacity, field labor issues or strikes, or we might voluntarily curtail production in response to market or other conditions. If a substantial amount of our production is interrupted at the same time, it could adversely affect our cash flows and results of operations. +We have limited control over the activities on properties we do not operate. +Some of our properties are operated by other companies and involve third-party working interest owners. As a result, we have limited ability to influence or control the operation or future development of such properties, including the nature and timing of drilling and operational activities, the operator’s skill and expertise, compliance with environmental, safety and other regulations, the approval of other participants in such properties, the selection and application of suitable technology, or the amount of expenditures that we will be required to fund with respect to such properties. Moreover, we are dependent on the other working interest owners of such projects to fund their contractual share of the expenditures of such properties. These limitations and our dependence on the operator and other working interest owners in these projects could cause us to incur unexpected future costs. +Risks Related to Debt, Liquidity, and Access to Capital +Substantial capital is required to develop and replace our reserves. +We must make substantial capital expenditures to find, acquire, develop, and produce oil, gas, and NGL reserves. Future cash flows and the availability of financing are subject to a number of factors, such as the level of production from existing wells, prices received for oil, gas, and NGL sales, our success in locating, developing, and acquiring new reserves, and the orderly functioning of credit and capital markets. If our cash flows from operations are less than expected, we may reduce our planned capital expenditures. If we cannot access sufficient liquidity under our Credit Agreement, or raise additional funds through debt or equity financing or the sale of assets, our ability to execute development plans, replace our reserves, maintain our acreage, or maintain production levels could be greatly limited. +Downgrades in our credit ratings by various credit rating agencies could impact our access to capital and materially adversely affect our business and financial condition. +Downgrades of our credit rating levels could have material adverse consequences on our business and future prospects and could: +• limit our ability to access capital markets, including for the purpose of refinancing our existing debt; +• cause us to refinance or issue debt with less favorable terms and conditions, which debt may restrict, among other things, our ability to make any dividend distributions or repurchase shares; +• negatively impact lenders’ willingness to transact business with us which could impact our ability to obtain favorable terms and conditions under our Credit Agreement; +• negatively impact current and prospective customers’ willingness to transact business with us; +31 +• impose additional insurance, guarantee, bonding, and collateral requirements; +• limit our access to bank and third-party guarantees, surety bonds, and letters of credit; and +• cause our suppliers and financial institutions to lower or eliminate the level of credit provided through payment terms or intraday funding when dealing with us, thereby increasing the need for higher levels of cash on hand, which would decrease our ability to repay outstanding indebtedness. +We cannot provide assurance that any of our current credit ratings will remain in effect for any given period of time or that a credit rating will not be lowered or withdrawn entirely by a rating agency if, in its judgment, circumstances warrant. +Our commodity derivative contract activities may result in financial losses or may limit the prices we receive for oil, gas, and NGL sales. +To mitigate a portion of the exposure to potentially adverse market changes in oil, gas, and NGL prices and the associated impact on cash flows, we regularly enter into commodity derivative contracts. Our commodity derivative contracts include swap and collar arrangements for oil, gas, and NGLs. These activities may expose us to the risk of financial loss in certain circumstances, including instances in which: +• our production is less than expected; +• one or more counterparties to our commodity derivative contracts default on their contractual obligations; or +• there is a widening of price differentials between delivery points for our production and the delivery point assumed in the commodity derivative contract arrangement. +In addition, commodity derivative contracts may limit the prices we receive for our oil, gas, and NGL sales if oil, gas, or NGL prices rise substantially over the price established by the commodity derivative contract, which we experienced in 2021. Please refer to Note 10 – Derivative Financial Instruments in Part II, Item 8 of this report for additional detail regarding our commodity derivative contracts. +Future oil, gas, and NGL price declines or unsuccessful exploration efforts may result in write-downs of our asset carrying values. +We follow the successful efforts method of accounting for our oil and gas properties. All property acquisition costs and development costs are capitalized when incurred. Exploratory well costs are initially capitalized, pending the determination of whether proved reserves have been discovered. If commercial quantities of proved reserves are not discovered with an exploratory well, the costs of drilling the well are expensed as dry holes. +The capitalized costs of our oil and gas properties, on a depletion pool basis, cannot exceed the estimated undiscounted future net cash flows of that depletion pool. If net capitalized costs exceed undiscounted future net cash flows, we generally must write down the costs of each depletion pool to the estimated discounted future net cash flows of that depletion pool. Write downs for unproved properties are also evaluated for carrying costs in excess of fair value. This evaluation considers the potential for abandonment due to actual and anticipated lease expirations, as well as actual and anticipated losses on acreage due to title defects, changes in development plans, and other inherent acreage risks. Declines in the prices of oil, gas, or NGLs, or unsuccessful exploration efforts, could cause proved and/or unproved property impairments in the future. +We review the carrying values of our properties for indicators of impairment on a quarterly basis using the prices in effect as of the end of each quarter. Once incurred, a write-down of oil and gas properties held for use cannot be reversed at a later date, even if oil, gas, or NGL prices increase. +Lower oil, gas, or NGL prices could limit our ability to borrow under our Credit Agreement. +As of December 31, 2021, both the borrowing base and aggregate lender commitments under our Credit Agreement were $1.1 billion. The borrowing base is subject to semi-annual redetermination based on the bank group’s assessment of the value of our proved reserves, which in turn is impacted by oil, gas, and NGL prices. The next borrowing base redetermination date is scheduled for April 1, 2022. Divestitures of additional properties, incurrence of additional debt, or declines in commodity prices could limit our borrowing base and reduce the amount we can borrow under our Credit Agreement, which could in turn impact, among other things, our ability to service our debt, fund our capital program, or compete for the acquisition of new properties. +The amount of our debt may limit our ability to obtain financing for acquisitions, make us more vulnerable to adverse economic conditions, and make it more difficult for us to make payments on our debt. +As of December 31, 2021, we had $2.1 billion of aggregate principal amount outstanding of Senior Notes with maturities through 2028, as further discussed and defined in Note 5 – Long-Term Debt in Part II, Item 8 of this report. Additionally, we had no outstanding balance on our revolving credit facility and $1.1 billion of available borrowing capacity under our Credit Agreement as of December 31, 2021. Our long-term debt represented 51 percent of our total book capitalization as of December 31, 2021. +32 +The amounts of our indebtedness could have important consequences for our operations, including: +• making it more difficult for us to obtain additional financing in the future for our operations and potential acquisitions, working capital requirements, capital expenditures, debt service, or other general corporate requirements; +• requiring us to dedicate a substantial portion of our cash flows from operations to the repayment of our debt and the service of interest costs associated with our debt, rather than to capital investments; +• limiting our operating flexibility due to financial and other restrictive covenants, including restrictions on incurring additional debt, making acquisitions, and paying dividends; +• placing us at a competitive disadvantage compared to our competitors with less debt; and +• making us more vulnerable in the event of adverse economic or industry conditions or a downturn in our business. +If our business does not generate sufficient cash flow from operations or future sufficient borrowings are not available to us under our Credit Agreement or from other sources, we might not be able to service our debt, issue additional debt, or fund our planned capital expenditures and other liquidity needs. If we are unable to service our debt, due to inadequate liquidity or otherwise, we may have to delay or cancel acquisitions, defer capital expenditures, sell equity securities, divest assets, and/or restructure or refinance our debt. We might not be able to sell our equity, sell our assets, or restructure or refinance our debt on a timely basis or on satisfactory terms or at all. In addition, the terms of our existing or future debt agreements, including our Credit Agreement and any future credit agreements, may prohibit us from pursuing any of these alternatives. +As discussed above, our Credit Agreement is subject to periodic borrowing base redeterminations. We could be forced to repay a portion of our bank borrowings in the event of a downward redetermination of our borrowing base, and we may not have sufficient funds to make such repayment at that time. If we do not have sufficient funds and are otherwise unable to negotiate adjustments to our borrowing base or arrange new financing, we may be forced to sell significant assets. +The agreements governing our debt arrangements contain various covenants that limit our discretion in the operation of our business, could prohibit us from engaging in transactions we believe to be beneficial, and could lead to the accelerated repayment of our debt. +Our debt agreements, including our Credit Agreement and the indentures governing our Senior Notes, contain restrictive covenants that limit our ability to engage in activities that may be in our long-term best interests, including restrictions on incurring debt, issuing dividends, redeeming common stock, selling assets, creating liens, entering into transactions with affiliates, and merging, consolidating, or selling our assets. Our ability to borrow under our Credit Agreement is subject to compliance with certain financial and non-financial covenants, as outlined in the Credit Agreement. Please refer to Note 5 – Long-Term Debt in Part II, Item 8 of this report for additional discussion. These restrictions on our ability to operate our business could significantly harm us by, among other things, limiting our ability to take advantage of financings, mergers and acquisitions, and other corporate opportunities. +Our failure to comply with these covenants could result in an event of default that, if not cured or waived, could result in the acceleration of all or a portion of our indebtedness. We do not have sufficient working capital to satisfy our debt obligations in the event of an acceleration of all or a significant portion of our outstanding indebtedness. +Risks Related to Corporate Governance and Ownership of Public Equity Securities +The price of our common stock may fluctuate significantly, which may result in losses for investors. +From January 1, 2021, to February 10, 2022, the intraday trading prices per share of our common stock as reported by the New York Stock Exchange ranged from a low of $5.89 per share in January 2021 to a high of $38.25 per share in November 2021. We expect our stock to continue to be subject to fluctuations as a result of a variety of factors, including factors beyond our control. These factors include, in addition to the other risk factors set forth herein, the following: +• changes in oil, gas, or NGL prices; +• changes in the outlook for regional, national, or global commodity supply and demand; +• variations in drilling, recompletion, and operating activity; +• changes in financial estimates by securities analysts; +• changes in market valuations of comparable companies; +• additions or departures of key personnel; +• increased volatility due to the impacts of algorithmic trading practices; +• future sales of our common stock; +• negative public perception and investor sentiment regarding our business and the oil and gas industry as a whole; +• changes in the national and global economic outlook, including potential impacts from trade agreements; and +• international trade relationships, potentially including the effects of trade restrictions or tariffs affecting the raw materials we utilize and the commodities we produce in our business. +33 +We may not meet the expectations of our stockholders and/or of securities analysts at some time in the future, and our stock price could decline as a result. +Our certificate of incorporation and by-laws have provisions that discourage corporate takeovers and could prevent stockholders from receiving a takeover premium on their investment, which could adversely affect the price of our common stock. +Delaware corporate law and our certificate of incorporation and by-laws contain provisions that may have the effect of delaying or preventing a change of control of us or our management. These provisions, among other things, provide for non-cumulative voting in the election of members of the Board of Directors and impose procedural requirements on stockholders who wish to make nominations for the election of directors or propose other actions at stockholder meetings. These provisions, alone or in combination with each other, may discourage transactions involving actual or potential changes of control, including transactions that otherwise could involve payment of a premium over prevailing market prices to stockholders for their common stock. As a result, these provisions could make it more difficult for a third party to acquire us, even if doing so would benefit our stockholders, which may limit the price investors are willing to pay in the future for shares of our common stock. +In addition, stockholder activism in our industry has been present in recent years, and if investors seek to exert influence or affect changes to our business that we do not believe are in the long-term best interests of our stockholders, such actions could adversely impact our business by, among other things, distracting our Board of Directors and management team, causing us to incur unexpected advisory fees and other related costs, impacting execution of our strategic objectives, and creating unnecessary market uncertainty. +We may not always pay dividends on our common stock. +Payment of future dividends remains at the discretion of our Board of Directors, and will continue to depend on our earnings, capital requirements, financial condition, and other factors. In addition, the payment of dividends is subject to a covenant in our Credit Agreement limiting our annual cash dividends to no more than $12.0 million, and to covenants in the indentures governing our Senior Notes that limit our ability to pay dividends beyond a certain amount. Our Board of Directors may determine in the future to reduce the current annual dividend rate or discontinue the payment of dividends altogether. +General Risk Factors +Our increasing dependence on digital technologies puts us at risk for a cyber incident that could result in information theft, data corruption, operational disruptions or financial loss. +We are subject to cybersecurity risks. The oil and gas industry is increasingly dependent on digital technology in all aspects of our business. We use digital technology to conduct certain aspects of our drilling development, production and gathering activities, manage drilling rigs and completion equipment, gather and interpret seismic data, conduct reservoir modeling, record financial and operating data, and maintain employee and other databases. Our service providers, including those who gather, process, and market our oil, gas, and NGLs, are also increasingly reliant on digital technology. Our and their reliance on this technology increasingly puts us at risk for technology system failures, data or network disruptions, cyberattacks and other breaches in cybersecurity. Power failures, telecommunication or other system failures due to hardware or software malfunctions, computer viruses, vandalism, terrorism, natural disasters, fire, flood, human error or other means could significantly impair our ability to conduct our business. +Cybersecurity attacks are evolving and include, but are not limited to, malicious software, attempts to gain unauthorized access to data, cash, or other assets, and other electronic security breaches that could lead to disruptions in critical systems, unauthorized release of confidential or otherwise protected information, and corruption of data. Deliberate attacks on, or security breaches in our systems, infrastructure, the systems and infrastructure of third-parties, or cloud-based applications could lead to disclosure of confidential information, a corruption or loss of our proprietary data, delays in production or exploration activities, difficulty in completing or settling transactions, challenges in maintaining our books and records, environmental damage, communication or other operational disruptions, and liability to third parties. Any insurance we might obtain in the future may not provide adequate protection from these risks. Any such events could damage our reputation and lead to financial losses from remedial actions, loss of business or potential liability. As these cyber risks continue to evolve and our dependence on digital technologies grows, we may be required to expend significant additional resources to continue to modify or enhance our protective measures and remediate cyber vulnerabilities. +Our business could be negatively impacted by security threats, including cybersecurity threats, terrorism, armed conflict, and other disruptions. +As an oil, gas, and NGL producer, we face various security threats, including cybersecurity threats to gain unauthorized access to sensitive information or to render data or systems unusable; threats to the safety of our employees; threats to the security of our facilities and infrastructure or third-party facilities and infrastructure, such as processing plants and pipelines; and threats from terrorist acts. Although we utilize various procedures and controls to monitor these threats and mitigate our exposure to such threats, there can be no assurance that these procedures and controls will be sufficient in preventing security threats from materializing. If any of these +34 +events were to materialize, they could lead to losses of sensitive information, critical infrastructure, personnel, or capabilities essential to our operations and could have a material adverse effect on our reputation, financial position, results of operations, or cash flows. +The threat of terrorism and the impact of military and other actions have caused instability in world financial markets and could lead to increased volatility in prices for oil, gas, and NGLs, all of which could adversely affect the markets for our production. Energy assets might be specific targets of terrorist attacks. While we currently maintain insurance that provides limited coverage against terrorist attacks, such insurance has become increasingly expensive and difficult to obtain. As a result, insurance providers may not continue to offer this coverage to us on terms we consider reasonable, or at all. In addition, this insurance may not cover all of our losses for a terrorist attack. These developments have subjected our operations to increased risk and, depending on their occurrence and ultimate magnitude, could have a material adverse effect on our business, financial condition, or results of operations. +ITEM 1B. UNRESOLVED STAFF COMMENTS +We have no unresolved comments from the SEC staff regarding our periodic or current reports under the Exchange Act. +ITEM 3. LEGAL PROCEEDINGS +At times, we may be involved in litigation relating to claims arising out of our business and operations in the normal course of business. As of the filing of this report, no legal proceedings are pending against us that we believe individually or collectively are likely to have a materially adverse effect upon our financial condition, results of operations, or cash flows. +SPM NAM LLC. et al., v. SM Energy Company, Case No. 2018-07160, in the 189th Judicial District of Harris County, Texas (the “Lawsuit”). Plaintiff SPM NAM LLC (“SPM”) filed the Lawsuit against the Company on February 1, 2018. The Lawsuit concerned the Acquisition and Development Funding Agreement dated August 2, 2016 (together with its amendments, the “ADFA”). The parties to the ADFA (and its amendments) were the Company; SPM; and certain affiliates of SPM: (1) Schlumberger Technology Corporation; (2) Smith International, Inc.; (3) M-I, L.L.C.; and (4) Cameron International Corporation (the “Schlumberger Service Providers”). SPM and the Schlumberger Service Providers were the plaintiffs, and the Company was the defendant. The Company settled this matter on August 6, 2021. +ITEM 4. MINE SAFETY DISCLOSURES +These disclosures are not applicable to us. +35 +PART II +ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES +Our common stock is currently traded on the New York Stock Exchange under the ticker symbol “SM.” For dividend information, please refer to the caption Uses of Cash in Overview of Liquidity and Capital Resources in Item 7 of this report. Information regarding the SM Energy Equity Incentive Compensation Plan, as amended and restated effective as of May 22, 2018 (the “Equity Plan”), and the securities authorized under the Equity Plan is included below. +PERFORMANCE GRAPH +The following performance graph compares the cumulative return on our common stock, for the period beginning December 31, 2016, and ending December 31, 2021, with the cumulative total returns of the Dow Jones Exploration and Production Index (“DJUSOS”), and the Standard & Poor’s 500 Stock Index (“SPX”). +COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURNS +The preceding information under the caption Performance Graph shall be deemed to be furnished, but not filed with the SEC. +Holders. As of February 10, 2022, the number of record holders of our common stock was 100. A substantially greater number of holders of our common stock are beneficial holders, whose shares of record are held by banks, brokers, and other financial institutions. +36 +Purchases of Equity Securities by Issuer and Affiliated Purchasers. The following table provides information about purchases made by us and any affiliated purchaser (as defined in Rule 10b-18(a)(3) under the Exchange Act) during the indicated quarters and year ended December 31, 2021, of shares of our common stock, which is the sole class of equity securities registered by us pursuant to Section 12 of the Exchange Act. +PURCHASES OF EQUITY SECURITIES BY ISSUER AND AFFILIATED PURCHASERS +Period +Total Number of Shares Purchased (1) +Weighted Average Price Paid per Share +Total Number of Shares Purchased as Part of Publicly Announced Program +Maximum Number of Shares that May Yet be Purchased Under the Program (2) +First quarter of 2021 +— — — 3,072,184 +Second quarter of 2021 +— — — 3,072,184 +Third quarter of 2021 +219,462 $ 21.56 — 3,072,184 +10/01/2021 - 10/31/2021 — — — 3,072,184 +11/01/2021 - 11/30/2021 — — — 3,072,184 +12/01/2021 - 12/31/2021 143,806 30.18 — 3,072,184 +Total 363,268 $ 24.97 — 3,072,184 +____________________________________________ +(1) All shares purchased by us in 2021 were to offset tax withholding obligations that occurred upon the delivery of outstanding shares underlying Restricted Stock Units (“RSU” or “RSUs”) and Performance Share Units (“PSU” or “PSUs”) issued under the terms of award agreements granted under the Equity Plan. +(2) In July 2006, our Board of Directors approved an increase in the number of shares of common stock that may be repurchased under the original August 1998 authorization to 6,000,000 as of the effective date of the resolution. Accordingly, as of the filing of this report, subject to the approval of our Board of Directors, we may repurchase up to 3,072,184 shares of common stock on a prospective basis. The shares may be repurchased from time to time in open market transactions or privately negotiated transactions, subject to market conditions and other factors, including certain provisions of our Credit Agreement, the indentures governing our Senior Notes, as defined in Note 5 – Long-Term Debt in Part II, Item 8 of this report, and compliance with securities laws. Stock repurchases may be funded with existing cash balances, internal cash flows, or borrowings under our Credit Agreement. The stock repurchase program may be suspended or discontinued at any time. During 2021, we did not repurchase any shares of our common stock. +ITEM 6. [RESERVED] +37 +ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS +The following discussion includes forward-looking statements. Please refer to the Cautionary Information about Forward-Looking Statements section of this report for important information about these types of statements. +Overview of the Company +General Overview +Our purpose is to make people’s lives better by responsibly producing energy supplies, contributing to domestic energy security and prosperity, and having a positive impact in the communities where we live and work. Our short-term operational and financial goals include generating positive cash flows while strengthening our balance sheet through absolute debt reduction and improved leverage metrics, and increasing the value of our capital project inventory through exploration and development optimization. Our long-term vision is to sustainably grow value for all of our stakeholders. We believe that in order to accomplish this vision, we must be a premier operator of top-tier oil and gas assets. Our strategy for achieving these goals is to focus on high-quality economic drilling, completion, and production opportunities. Our investment portfolio is comprised of oil and gas producing assets in the state of Texas, specifically in the Midland Basin of West Texas and in the Maverick Basin of South Texas. +We are committed to exceptional safety, health, and environmental stewardship; supporting the professional development of a diverse and thriving team of employees; making a positive impact in the communities where we live and work; and transparency in reporting our progress in these areas. The Environmental, Social and Governance Committee of our Board of Directors oversees, among other things, the development and implementation of the Company’s ESG policies, programs and initiatives, and, together with management, reports to our Board of Directors regarding such matters. Further demonstrating our commitment to sustainable operations and environmental stewardship, compensation for our executives and eligible employees under our long-term incentive plan, and compensation for all employees under our short-term incentive plan is calculated based on, in part, certain Company-wide performance-based metrics that include key financial, operational, and environmental, health, and safety measures. Please refer to our Definitive Proxy Statement on Schedule 14A for the 2022 annual meeting of stockholders to be filed within 120 days from December 31, 2021, for additional discussion. +The markets for the commodities produced by our industry strengthened in 2021 as a result of increased demand outpacing increased supply for each of the commodities we produce. Prices for the commodities produced by our industry improved from historic lows in 2020, with oil and natural gas prices reaching their highest average annual price since 2014. However, commodity markets remain subject to heightened levels of uncertainty related to the Pandemic and escalating tensions between Russia and Ukraine. Russian military incursion into Ukraine could give rise to regional instability and result in heightened economic sanctions by the U.S. and the international community that, in turn, could increase uncertainty with respect to global financial markets and production output from OPEC+ and other oil producing nations. Additionally, the Pandemic remains a global health crisis and continues to evolve. Despite the emergence of new variants, deployment of vaccines and vaccine boosters to slow the spread of the COVID-19 virus has resulted in substantial improvements in global financial markets and public health. Disruption in financial and commodity markets and industry-specific impacts could result from future case surges, outbreaks, COVID-19 virus variants, the potential that current vaccines may be less effective or ineffective against future COVID-19 virus variants, and the risk that large groups of the population may not receive vaccinations against COVID-19, and as a result, may require us to adjust our business plan. Despite continuing impacts of the Pandemic, geopolitical issues, and future uncertainty, we expect to maintain our ability to sustain strong operational performance and financial stability while maximizing returns, improving leverage metrics, and increasing the value of our top-tier Midland Basin and South Texas assets. +Throughout the Pandemic, the safety of our employees, contractors, and the communities where we work has remained our first priority. While our core business operations require certain individuals to be physically present at well site locations, the majority of our office-based employees have worked remotely since the onset of the Pandemic, in order to limit physical interactions and to mitigate the spread of COVID-19. We maintain and continually assess procedures designed to limit the spread of COVID-19, and we continue to communicate to and train all of our employees regarding best practices for maintaining a healthy and safe work environment. We believe that we meet or exceed Centers for Disease Control and Prevention and OSHA guidelines related to the prevention of the transmission of COVID-19. Throughout the Pandemic, we have operated without significant disruptions to our business, and we believe that our pre-existing control environment and internal controls continue to be effective. +2021 Financial and Operational Highlights +We remain focused on maximizing returns and increasing the value of our top-tier Midland Basin and South Texas assets. We expect to do this through continued development optimization and further delineation of our Midland Basin assets and through further development of our Austin Chalk formation in South Texas. We believe our assets provide strong returns and are capable of providing for growth of internally generated cash flows while allowing for flexibility of production levels, which aligns with our priorities of reducing debt, improving leverage metrics and maintaining strong financial flexibility. +Financial and Operational Results. Average net daily equivalent production for the year ended December 31, 2021, increased 11 percent to 140.7 MBOE, compared with 126.9 MBOE for 2020, comprised of a 19 percent increase from our Midland Basin assets +38 +and a two percent decrease from our South Texas assets. The total increase resulted from an increased number of completions, strong well performance, and our continued focus on operational execution. Realized prices for oil, gas, and NGLs increased 83 percent, 169 percent, and 141 percent, respectively, for the year ended December 31, 2021, compared with 2020. As a result of increased realized prices, oil, gas, and NGL production revenue increased 131 percent to $2.6 billion for the year ended December 31, 2021, compared with $1.1 billion for 2020. We recorded a net derivative loss of $901.7 million for the year ended December 31, 2021, compared to a net derivative gain of $161.6 million for 2020. These amounts include a derivative settlement loss of $749.0 million for the year ended December 31, 2021, and a derivative settlement gain of $351.3 million for the year ended December 31, 2020. Operational activities during the year ended December 31, 2021, resulted in the following financial and operational results: +• Net cash provided by operating activities of $1.2 billion for the year ended December 31, 2021, which was in excess of net cash used in investing activities of $667.2 million for the same period. Please refer to Analysis of Cash Flow Changes Between 2021 and 2020 and Between 2020 and 2019 in Part II, Item 8 of this report below for additional discussion. +• A cash balance of $332.7 million and no outstanding balance on the revolving credit facility as of December 31, 2021, compared with a revolving credit facility balance of $93.0 million as of December 31, 2020. +• Net income of $36.2 million, or $0.29 per diluted share, for the year ended December 31, 2021, compared with a net loss of $764.6 million, or $6.72 per diluted share for 2020. Net income for the year ended December 31, 2021, was primarily a result of increased production volumes and improved pricing, substantially offset by net derivative losses of $901.7 million. Please refer to Comparison of Financial Results and Trends Between 2021 and 2020 and Between 2020 and 2019 below for additional discussion regarding the components of net income (loss) for each period presented. +• Adjusted EBITDAX, a non-GAAP financial measure, for the year ended December 31, 2021, of $1.2 billion, compared with $975.4 million for 2020. Please refer to Non-GAAP Financial Measures below for additional discussion, including our definition of adjusted EBITDAX and reconciliations to net income (loss) and net cash provided by operating activities. +• Total estimated proved reserves as of December 31, 2021, increased 22 percent from December 31, 2020, to 492.0 MMBOE, of which, 58 percent were liquids (oil and NGLs) and 61 percent were proved developed reserves. We added 139.1 MMBOE through extensions and infill as a result of continued success in and further development of our Austin Chalk and Midland Basin assets, partially offset by 51.4 MMBOE of production during 2021 and the removal of 40.6 MMBOE of proved undeveloped reserves reclassified to unproved reserves categories as a result of development plan optimization. Our proved reserve life index increased to 9.6 years as of December 31, 2021, compared with 8.7 years as of December 31, 2020. Please refer to Reserves in Part I, Items 1 and 2 of this report for additional discussion. The standardized measure of discounted future net cash flows was $7.0 billion as of December 31, 2021, compared with $2.7 billion as of December 31, 2020, which was an increase of 160 percent year-over-year. Please refer to Supplemental Oil and Gas Information (unaudited) in Part II, Item 8 of this report for additional discussion. +Operational Activities. During 2021, we continued to experience strong well performance in the RockStar area of our Midland Basin position due to successful operational execution, enhanced completion designs, and execution of our development strategy to drill and complete long laterals resulting from successful infill leasing and acreage trades, which have increased the contiguous nature of our acreage position. A large portion of our water transportation and disposal needs continue to be satisfied by the water facilities we operate in a core area of our RockStar acreage. Our South Texas program benefited from successful development of the Austin Chalk formation and continued strong performance from Eagle Ford shale wells. Efficiency and optimization in completions and operations in both the Midland Basin and in South Texas continued throughout 2021, and effective partnerships with our key service providers have allowed us to maintain continuity of operations during the Pandemic. +Our Midland Basin program averaged three drilling rigs and two completion crews during 2021. We drilled 61 gross (49 net) wells and completed 97 gross (81 net) wells during 2021 and net equivalent production increased year-over-year by 18 percent to 34.4 MMBOE. Costs incurred during 2021 totaled $433.8 million, or 60 percent of our total 2021 costs incurred. Drilling and completion activities within our RockStar and Sweetie Peck positions in the Midland Basin continue to focus primarily on developing the Spraberry and Wolfcamp formations. +Our South Texas program averaged one drilling rig and one completion crew during 2021. We drilled 32 gross (32 net) and completed 31 gross (28 net) wells during 2021 and net equivalent production decreased year-over-year by two percent to 16.9 MMBOE. Costs incurred during 2021 totaled $240.7 million, or 34 percent of our total 2021 costs incurred. Drilling and completion activities in South Texas during 2021 were primarily focused on developing the Austin Chalk formation. +39 +The table below provides a summary of changes in our drilled but not completed well count and current year drilling and completion activity in our operated programs for the year ended December 31, 2021: +Midland Basin South Texas Total +Gross Net Gross Net Gross Net +Wells drilled but not completed at December 31, 2020 (1) +66 58 31 28 97 86 +Wells drilled 61 49 32 32 93 81 +Wells completed (97) (81) (31) (28) (128) (109) +Other (2) +— 1 — — — 1 +Wells drilled but not completed at December 31, 2021 (3) +30 27 32 32 62 59 +____________________________________________ +(1) The South Texas drilled but not completed well count as of December 31, 2020, included 13 gross (13 net) wells that were not included in our five-year development plan, 12 of which were in the Eagle Ford shale. +(2) Includes adjustments related to normal business activities, including working interest changes for existing drilled but not completed wells. Working interest changes can result from divestitures, joint development agreements, farm-outs, and other activities. +(3) The South Texas drilled but not completed well count as of December 31, 2021, includes 11 gross (11 net) wells that are not included in our five-year development plan, 10 of which are in the Eagle Ford shale. +Costs Incurred. Costs incurred in oil and gas property acquisition, exploration, and development activities, whether capitalized or expensed, are summarized as follows: +For the Year Ended +December 31, 2021 +(in millions) +Development costs $ 583.5 +Exploration costs 125.4 +Acquisitions +Proved properties 0.1 +Unproved properties 9.0 +Total, including asset retirement obligations (1) +$ 718.0 +____________________________________________ +(1) Please refer to the caption Costs Incurred in Supplemental Oil and Gas Information (unaudited) in Part II, Item 8 of this report. +Production Results. The table below presents the disaggregation of our net production volumes by product type for each of our assets for the year ended December 31, 2021: +Midland Basin South Texas Total +Net production volumes: +Oil (MMBbl) 25.2 2.7 27.9 +Gas (Bcf) 55.4 52.9 108.4 +NGLs (MMBbl) — 5.4 5.4 +Equivalent (MMBOE) 34.4 16.9 51.4 +Average net daily equivalent (MBOE per day) 94.4 46.4 140.7 +Relative percentage 67 % 33 % 100 % +____________________________________________ +Note: Amounts may not calculate due to rounding. +Net equivalent production increased 11 percent for the year ended December 31, 2021, compared with 2020, comprised of an 18 percent increase from our Midland Basin assets and a two percent decrease from our South Texas assets. Please refer to Overview of Selected Production and Financial Information, Including Trends and Comparison of Financial Results and Trends Between 2021 and 2020 and Between 2020 and 2019 below for additional discussion on production. +40 +Oil, Gas, and NGL Prices +Our financial condition and the results of our operations are significantly affected by the prices we receive for our oil, gas, and NGL production, which can fluctuate dramatically. When we refer to realized oil, gas, and NGL prices below, the disclosed price represents the average price for the respective period, before the effect of derivative settlements. While quoted NYMEX oil and gas and OPIS NGL prices are generally used as a basis for comparison within our industry, the prices we receive are affected by quality, energy content, location and transportation differentials, and contracted pricing benchmarks for these products. +The following table summarizes commodity price data, as well as the effects of derivative settlements, for the years ended December 31, 2021, 2020, and 2019: +For the Years Ended December 31, +2021 2020 2019 +Oil (per Bbl): +Average NYMEX contract monthly price $ 67.92 $ 39.40 $ 57.03 +Realized price $ 67.72 $ 37.08 $ 54.10 +Effect of oil derivative settlements $ (18.73) $ 14.40 $ (0.90) +Gas: +Average NYMEX monthly settle price (per MMBtu) $ 3.84 $ 2.08 $ 2.63 +Realized price (per Mcf) $ 4.85 $ 1.80 $ 2.39 +Effect of gas derivative settlements (per Mcf) $ (1.41) $ 0.11 $ 0.21 +NGLs (per Bbl): +Average OPIS price (1) +$ 36.65 $ 17.96 $ 22.34 +Realized price $ 33.67 $ 13.96 $ 17.26 +Effect of NGL derivative settlements $ (13.68) $ 1.28 $ 4.43 +____________________________________________ +(1) Average OPIS prices per barrel of NGL, historical or strip, assumes a composite barrel product mix of 37% Ethane, 32% Propane, 6% Isobutane, 11% Normal Butane, and 14% Natural Gasoline for all periods presented. This product mix represents the industry standard composite barrel and does not necessarily represent our product mix for NGL production. Realized prices reflect our actual product mix. +Commodity prices in 2021 significantly improved from historic lows experienced in 2020 as a result of the misalignment of supply and demand caused by the Pandemic and other macroeconomic events. Given the dynamic nature of the Pandemic, uncertainty surrounding the escalating tensions between Russia and Ukraine, and the potential impacts to global commodity and financial markets, we expect future benchmark prices for oil, gas, and NGLs to remain volatile for the foreseeable future, and we cannot reasonably predict the timing or likelihood of any future impacts that may result. In addition to supply and demand fundamentals, as a global commodity, the price of oil is affected by real or perceived geopolitical risks in various regions of the world as well as the relative strength of the United States dollar compared to other currencies. Our realized prices at local sales points may also be affected by infrastructure capacity in the area of our operations and beyond. +The following table summarizes 12-month strip prices for NYMEX WTI oil, NYMEX Henry Hub gas, and OPIS NGLs as of February 10, 2022, and December 31, 2021: +As of February 10, 2022 As of December 31, 2021 +NYMEX WTI oil (per Bbl) $ 83.82 $ 72.89 +NYMEX Henry Hub gas (per MMBtu) $ 4.15 $ 3.69 +OPIS NGLs (per Bbl) $ 41.29 $ 37.02 +We use financial derivative instruments as part of our financial risk management program. We have a financial risk management policy governing our use of derivatives, and decisions regarding entering into commodity derivative contracts are overseen by a financial risk management committee consisting of certain senior executive officers and finance personnel. We make decisions about the amount of our expected production that we cover by derivatives based on the amount of debt on our balance sheet, the level of capital commitments and long-term obligations we have in place, and the terms and futures prices that are made available by our approved counterparties. With our current commodity derivative contracts, we believe we have partially reduced our exposure to volatility in commodity prices and basis differentials in the near term. Our use of costless collars for a portion of our derivatives allows +41 +us to participate in some of the upward movements in oil and gas prices while also setting a price floor below which we are insulated from further price decreases. Please refer to Note 10 – Derivative Financial Instruments in Part II, Item 8 of this report and to Commodity Price Risk in Overview of Liquidity and Capital Resources below for additional information regarding our oil, gas, and NGL derivatives. +Outlook +Our total 2022 capital program, which we expect to fund with cash flows from operations, is expected to be approximately $750.0 million. We expect to focus our 2022 capital program on highly economic oil development projects in both our Midland Basin assets and our South Texas assets. +Financial Results of Operations and Additional Comparative Data +The tables below provide information regarding selected production and financial information for the three months ended December 31, 2021, and the preceding three quarters. +For the Three Months Ended +December 31, September 30, June 30, March 31, +2021 2021 2021 2021 +(in millions) +Net equivalent production (MMBOE) 14.6 14.3 12.4 10.0 +Oil, gas, and NGL production revenue +$ 852.4 $ 759.8 $ 562.6 $ 423.2 +Oil, gas, and NGL production expense $ 143.3 $ 135.7 $ 125.5 $ 100.9 +Depletion, depreciation, amortization, and asset retirement obligation liability accretion $ 200.0 $ 202.7 $ 204.7 $ 167.0 +Exploration $ 12.6 $ 8.7 $ 8.7 $ 9.3 +General and administrative $ 37.1 $ 25.5 $ 24.6 $ 24.7 +Net income (loss) $ 424.9 $ 85.6 $ (223.0) $ (251.3) +____________________________________________ +Note: Amounts may not calculate due to rounding. +Selected Performance Metrics +For the Three Months Ended +December 31, September 30, June 30, March 31, +2021 2021 2021 2021 +Average net daily equivalent production (MBOE per day) 158.3 155.8 136.5 111.6 +Lease operating expense (per BOE) $ 4.21 $ 4.20 $ 4.62 $ 4.64 +Transportation costs (per BOE) $ 2.61 $ 2.41 $ 3.01 $ 2.94 +Production taxes as a percent of oil, gas, and NGL production revenue 4.8 % 4.7 % 4.5 % 4.6 % +Ad valorem tax expense (per BOE) $ 0.22 $ 0.38 $ 0.45 $ 0.52 +Depletion, depreciation, amortization, and asset retirement obligation liability accretion (per BOE) $ 13.74 $ 14.14 $ 16.48 $ 16.62 +General and administrative (per BOE) $ 2.55 $ 1.78 $ 1.98 $ 2.46 +____________________________________________ +Note: Amounts may not calculate due to rounding. +42 +Overview of Selected Production and Financial Information, Including Trends +For the Years Ended +December 31, Amount Change Between Percent Change Between +2021 2020 2019 2021/2020 2020/2019 2021/2020 2020/2019 +Net production volumes: (1) +Oil (MMBbl) 27.9 23.0 21.9 4.9 1.1 21 % 5 % +Gas (Bcf) 108.4 103.9 109.8 4.5 (5.9) 4 % (5) % +NGLs (MMBbl) 5.4 6.1 8.1 (0.7) (2.0) (12) % (25) % +Equivalent (MMBOE) 51.4 46.4 48.3 4.9 (1.9) 11 % (4) % +Average net daily production: (1) +Oil (MBbl per day) 76.5 62.9 59.9 13.6 3.0 22 % 5 % +Gas (MMcf per day) 296.9 283.9 300.8 13.0 (17.0) 5 % (6) % +NGLs (MBbl per day) 14.7 16.7 22.2 (2.0) (5.6) (12) % (25) % +Equivalent (MBOE per day) 140.7 126.9 132.3 13.9 (5.4) 11 % (4) % +Oil, gas, and NGL production revenue (in millions): (1) +Oil production revenue $ 1,891.8 $ 853.6 $ 1,183.2 $ 1,038.3 $ (329.6) 122 % (28) % +Gas production revenue 525.5 187.5 262.5 338.0 (75.1) 180 % (29) % +NGL production revenue 180.6 85.2 140.0 95.4 (54.8) 112 % (39) % +Total oil, gas, and NGL production revenue $ 2,597.9 $ 1,126.2 $ 1,585.8 $ 1,471.7 $ (459.6) 131 % (29) % +Oil, gas, and NGL production expense (in millions): (1) +Lease operating expense $ 225.5 $ 184.2 $ 225.5 $ 41.2 $ (41.3) 22 % (18) % +Transportation costs 139.4 142.0 187.1 (2.6) (45.1) (2) % (24) % +Production taxes 121.1 46.1 65.0 75.0 (18.9) 163 % (29) % +Ad valorem tax expense 19.4 18.9 23.1 0.5 (4.2) 3 % (18) % +Total oil, gas, and NGL production expense $ 505.4 $ 391.2 $ 500.7 $ 114.2 $ (109.5) 29 % (22) % +Realized price: +Oil (per Bbl) $ 67.72 $ 37.08 $ 54.10 $ 30.64 $ (17.02) 83 % (31) % +Gas (per Mcf) $ 4.85 $ 1.80 $ 2.39 $ 3.05 $ (0.59) 169 % (25) % +NGLs (per Bbl) $ 33.67 $ 13.96 $ 17.26 $ 19.71 $ (3.30) 141 % (19) % +Per BOE $ 50.58 $ 24.26 $ 32.84 $ 26.32 $ (8.58) 108 % (26) % +Per BOE data: (1) +Oil, gas, and NGL production expense: +Lease operating expense $ 4.39 $ 3.97 $ 4.67 $ 0.42 $ (0.70) 11 % (15) % +Transportation costs 2.71 3.06 3.88 (0.35) (0.82) (11) % (21) % +Production taxes 2.36 0.99 1.35 1.37 (0.36) 138 % (27) % +Ad valorem tax expense 0.38 0.41 0.48 (0.03) (0.07) (7) % (15) % +Total oil, gas, and NGL production expense $ 9.84 $ 8.43 $ 10.38 $ 1.41 $ (1.95) 17 % (19) % +Depletion, depreciation, amortization, and asset retirement obligation liability accretion $ 15.08 $ 16.91 $ 17.06 $ (1.83) $ (0.15) (11) % (1) % +General and administrative $ 2.18 $ 2.14 $ 2.75 $ 0.04 $ (0.61) 2 % (22) % +Derivative settlement gain (loss) (2) +$ (14.58) $ 7.57 $ 0.81 $ (22.15) $ 6.76 (293) % 835 % +Earnings per share information (in thousands, except per share data): (3) +Basic weighted-average common shares outstanding 119,043 113,730 112,544 5,313 1,186 5 % 1 % +Diluted weighted-average common shares outstanding 123,690 113,730 112,544 9,960 1,186 9 % 1 % +Basic net income (loss) per common share $ 0.30 $ (6.72) $ (1.66) $ 7.02 $ (5.06) 104 % (305) % +Diluted net income (loss) per common share $ 0.29 $ (6.72) $ (1.66) $ 7.01 $ (5.06) 104 % (305) % +43 +____________________________________________ +(1) Amounts and percentage changes may not calculate due to rounding. +(2) Derivative settlements for the years ended December 31, 2021, 2020, and 2019, are included within the net derivative (gain) loss line item in the accompanying consolidated statements of operations (“accompanying statements of operations”). +(3) Please refer to Note 9 - Earnings Per Share in Part II, Item 8 of this report for additional discussion. +Average net daily equivalent production for the year ended December 31, 2021, increased 11 percent compared with 2020, comprised of a 19 percent increase from our Midland Basin assets and a two percent decrease from our South Texas assets. The total increase resulted from an increased number of completions, strong well performance, and our continued focus on operational execution. In 2022, we expect total production volumes to remain relatively flat compared with 2021, and we expect oil volumes as a percentage of our total production mix to decrease due to increased capital allocation to our Austin Chalk assets and timing of Midland Basin completions. Please refer to Comparison of Financial Results and Trends Between 2021 and 2020 and Between 2020 and 2019 below for additional discussion. +We present certain information on a per BOE basis in order to evaluate our performance relative to our peers and to identify and measure trends we believe may require additional analysis and discussion. +Our realized price on a per BOE basis increased $26.32 for the year ended December 31, 2021, compared with 2020, primarily as a result of higher benchmark commodity prices which have improved from historic lows experienced during 2020 as a result of the impacts of the Pandemic and other macroeconomic events. Further contributing to the increase were improved gas prices during the first quarter of 2021 resulting from a supply and demand imbalance caused by a significant cold weather event in the state of Texas that lasted for several days in February 2021. The positive impact on oil, gas, and NGL production revenues resulting from the year-over-year realized price increase was substantially offset by a 293 percent change in the settlement of our derivative contracts which were a loss of $14.58 per BOE for the year ended December 31, 2021, compared to a gain of $7.57 per BOE for 2020. +LOE on a per BOE basis increased 11 percent for the year ended December 31, 2021, compared with 2020, driven by the increased percentage of oil in our total product mix, which has higher lifting costs per BOE, and increased workover expense. For 2022, we expect LOE on a per BOE basis to slightly increase, compared with 2021, primarily as a result of anticipated increases in service provider costs and workover activity, which we expect to be partially offset by a shift in activity toward the Austin Chalk. We anticipate volatility in LOE on a per BOE basis as a result of changes in total production, changes in our overall production mix, timing of workover projects, and industry activity, all of which impact total LOE. +Transportation costs on a per BOE basis decreased 11 percent for the year ended December 31, 2021, compared with 2020. This decrease was driven by transportation contract cost reductions during the second half of 2021, and a two percent decrease in net equivalent production from our South Texas assets, which incur the majority of our transportation costs. In general, we expect total transportation costs to fluctuate relative to changes in gas and NGL production from our South Texas assets. For 2022, we expect transportation costs on a per BOE basis to increase compared with 2021. +Production tax expense on a per BOE basis for the year ended December 31, 2021, increased 138 percent compared with 2020, primarily driven by increases in realized prices and an increase in production from our Midland Basin assets. Our overall production tax rate was 4.7 percent and 4.1 percent for the years ended December 31, 2021, and 2020, respectively. We generally expect production tax expense to correlate with oil, gas, and NGL production revenue on an absolute and per BOE basis. Product mix, the location of production, and incentives to encourage oil and gas development can also impact the amount of production tax expense that we recognize. +Ad valorem tax expense on a per BOE basis decreased seven percent for the year ended December 31, 2021, compared with 2020, primarily as a result of increased production and changes to the expected value assessments of our producing properties. We anticipate volatility in ad valorem tax expense on a per BOE and absolute basis as the valuation of our producing properties changes. +Depletion, depreciation, amortization, and asset retirement obligation liability accretion (“DD&A”) expense on a per BOE basis decreased 11 percent for the year ended December 31, 2021, compared with 2020, as a result of strong well performance, increased estimated proved reserves, lower well costs in our Midland Basin assets, and the reduction in the depletable cost basis of our South Texas proved oil and gas properties as a result of proved property impairments recognized during the first quarter of 2020. Our DD&A rate fluctuates as a result of impairments, divestiture activity, carrying cost funding and sharing arrangements with third parties, changes in our production mix, and changes in our total estimated proved reserve volumes. We expect DD&A expense per BOE and DD&A expense on an absolute basis to decrease in 2022, compared with 2021, primarily as a result of increased estimated proved reserves, strong well performance, and increased activity in our Austin Chalk program, as these assets have a lower DD&A rate than our Midland Basin assets. +General and administrative (“G&A”) expense on a per BOE basis increased two percent for the year ended December 31, 2021, compared with 2020. This increase was primarily driven by increased compensation expense partially offset by increased production. Certain components of G&A expense, and G&A expense on a per BOE basis, are impacted by the Company’s full year performance against performance targets established at the beginning of the year and therefore are subject to variability. For 2022, we expect G&A expense to slightly decrease on an absolute basis and to decrease on a per BOE basis, compared with 2021. +44 +Please refer to Comparison of Financial Results and Trends Between 2021 and 2020 and Between 2020 and 2019 for additional discussion of operating expenses. +Comparison of Financial Results and Trends Between 2021 and 2020 and Between 2020 and 2019 +Please refer to Comparison of Financial Results and Trends Between 2020 and 2019 and Between 2019 and 2018 in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of our 2020 Annual Report on Form 10-K, filed with the SEC on February 18, 2021, for a detailed discussion of certain comparisons of our financial results and trends for the year ended December 31, 2020, compared with the year ended December 31, 2019. +Average net daily equivalent production, production revenue, and production expense +The following table presents the changes in our average net daily equivalent production, production revenue, and production expense, by area, between the years ended December 31, 2021, and 2020: +Net Equivalent Production Increase (Decrease) Production Revenue Increase Production Expense Increase +(MBOE per day) (in millions) (in millions) +Midland Basin 14.9 $ 1,148.8 $ 95.0 +South Texas (1.0) 322.9 19.2 +Total 13.9 $ 1,471.7 $ 114.2 +____________________________________________ +Note: Amounts may not calculate due to rounding. +Average net daily equivalent production volumes for the year ended December 31, 2021, increased 11 percent compared with 2020, comprised of a 19 percent increase from our Midland Basin assets, and a two percent decrease from our South Texas assets. Realized prices for oil, gas, and NGLs increased 83 percent, 169 percent, and 141 percent, respectively, for the year ended December 31, 2021, compared with 2020. As a result of increased production and improved pricing, production revenue for oil, gas, and NGLs increased 131 percent for the year ended December 31, 2021, compared with 2020. Total production expense for the year ended December 31, 2021, increased 29 percent, compared with 2020, primarily as a result of increased production taxes and LOE. +The following table presents the changes in our average net daily equivalent production, production revenue, and production expense, by area, between the years ended December 31, 2020, and 2019: +Net Equivalent Production Increase (Decrease) Production Revenue Decrease Production Expense Decrease +(MBOE per day) (in millions) (in millions) +Midland Basin 7.5 $ (316.2) $ (34.1) +South Texas (12.9) (143.4) (75.4) +Total (5.4) $ (459.6) $ (109.5) +____________________________________________ +Note: Amounts may not calculate due to rounding. +Average net daily equivalent production volumes for the year ended December 31, 2020, decreased four percent compared with 2019. Realized prices for oil, gas, and NGLs decreased 31 percent, 25 percent, and 19 percent, respectively, for the year ended December 31, 2020, compared with 2019. As a result of decreased production and pricing, production revenue for oil, gas, and NGLs decreased 29 percent for the year ended December 31, 2020, compared with 2019. Total production expense for the year ended December 31, 2020, decreased 22 percent compared with 2019. +Please refer to Overview of Selected Production and Financial Information, Including Trends for additional discussion, including discussion of trends on a per BOE basis. +45 +Depletion, depreciation, amortization, and asset retirement obligation liability accretion +For the Years Ended December 31, +2021 2020 2019 +(in millions) +Depletion, depreciation, amortization, and asset retirement obligation liability accretion $ 774.4 $ 785.0 $ 823.8 +DD&A expense for the year ended December 31, 2021, remained flat compared with 2020. DD&A expense for the year ended December 31, 2020, decreased five percent compared with 2019, primarily as a result of the reduction in the depletable cost basis of our South Texas proved oil and gas properties as a result of proved property impairments recognized during the first quarter of 2020, partially offset by higher production from our oil producing Midland Basin assets that have higher depletion rates than our primarily gas and NGL producing South Texas assets. Please refer to Overview of Selected Production and Financial Information, Including Trends above for discussion of DD&A expense on a per BOE basis. +Exploration +For the Years Ended December 31, +2021 2020 2019 +(in millions) +Geological and geophysical expenses $ 1.2 $ 4.3 $ 2.9 +Exploratory dry hole — — 4.8 +Overhead and other expenses 38.1 36.7 43.8 +Total $ 39.3 $ 41.0 $ 51.5 +Exploration expense decreased four percent for the year ended December 31, 2021, compared with 2020, primarily as a result of decreases in geological and geophysical expenses. Exploration expense is impacted by actual geological and geophysical studies we perform within an exploratory area and unsuccessful exploration activities, if any. +Impairment +For the Years Ended December 31, +2021 2020 2019 +(in millions) +Impairment of proved oil and gas properties and related support equipment $ — $ 956.7 $ — +Abandonment and impairment of unproved properties 35.0 59.3 33.8 +Total $ 35.0 $ 1,016.0 $ 33.8 +During the year ended December 31, 2020, we recorded impairment expense related to our South Texas proved oil and gas properties and related support facilities as a result of the decrease in commodity price forecasts at the end of the first quarter of 2020, specifically decreases in oil and NGL prices. There were no proved oil and gas impairments recorded during 2021 or 2019. +Unproved property abandonments and impairments recorded during the years ended December 31, 2021, 2020, and 2019, related to actual and anticipated lease expirations, as well as actual and anticipated losses of acreage due to title defects, changes in development plans, and other inherent acreage risks. +We expect proved property impairments to occur more frequently in periods of declining or depressed commodity prices, and that the frequency of unproved property abandonments and impairments will fluctuate with the timing of lease expirations or title defects, and changing economics associated with decreases in commodity prices. Additionally, changes in drilling plans, unsuccessful exploration activities, and downward engineering revisions may result in proved and unproved property impairments. +Reserve estimates and related impairments of proved and unproved properties are difficult to predict in a volatile price environment. If commodity prices for the products we produce decline as a result of supply and demand fundamentals associated with the Pandemic or other macroeconomic events, we may experience additional proved and unproved property impairments in the future. Future impairments of proved and unproved properties are difficult to predict; however, based on our commodity price assumptions as +46 +of February 10, 2022, we do not expect any material oil and gas property impairments in the first quarter of 2022 resulting from commodity price impacts. +Please refer to Critical Accounting Policies and Estimates below and Note 8 – Fair Value Measurements in Part II, Item 8 of this report for additional discussion. +General and administrative +For the Years Ended December 31, +2021 2020 2019 +(in millions) +General and administrative $ 111.9 $ 99.2 $ 132.8 +G&A expense increased 13 percent for the year ended December 31, 2021, compared with 2020, primarily as a result of increased compensation expense incurred during the year. G&A expense decreased 25 percent for the year ended December 31, 2020, compared with 2019, primarily due to reduced overhead costs resulting from the reorganization of certain functions in the fourth quarter of 2019 that eliminated duplicative regional operational functions, as well as actions taken to reduce costs as a result of the Pandemic. Please refer to Overview of Selected Production and Financial Information, Including Trends above for discussion of G&A expense. +Net derivative (gain) loss +For the Years Ended December 31, +2021 2020 2019 +(in millions) +Net derivative (gain) loss $ 901.7 $ (161.6) $ 97.5 +Net derivative (gain) loss is a result of changes in derivative fair values associated with fluctuations in the forward price curves for the commodities underlying our outstanding derivative contracts and the monthly cash settlements of our derivative positions during the period. The net derivative loss for the year ended December 31, 2021, resulted from increases in benchmark commodity prices during 2021. The net derivative gain for the year ended December 31, 2020, resulted from decreases in benchmark commodity prices during 2020. Please refer to Note 10 – Derivative Financial Instruments in Part II, Item 8 of this report for additional discussion. +Other operating expense, net +For the Years Ended December 31, +2021 2020 2019 +(in millions) +Other operating expense, net $ 46.1 $ 24.8 $ 19.9 +Other operating expense, net, increased for the year ended December 31, 2021, compared with 2020, as a result of legal settlements recorded during 2021, including the settlement of the SPM NAM LLC et al. case disclosed in Legal Proceedings in Part I, Item 3 of this report. +Interest expense +For the Years Ended December 31, +2021 2020 2019 +(in millions) +Interest expense $ (160.4) $ (163.9) $ (159.1) +Interest expense decreased two percent for the year ended December 31, 2021, compared with 2020. In 2022, we expect interest expense related to our Senior Notes to decrease compared with 2021 as result of the reduction in the aggregate principal amount of Senior Secured Notes and Senior Unsecured Notes through various transactions in 2021 and 2022. Total interest expense is impacted by, and can vary based on, the timing and amount of borrowings under our revolving credit facility. Please refer to Overview of Liquidity and Capital Resources below, and to Note 5 – Long-Term Debt in Part II, Item 8 of this report for additional discussion, including the definitions of Senior Notes, Senior Secured Notes, Senior Unsecured Notes, and 2028 Senior Notes. +47 +Net gain (loss) on extinguishment of debt +For the Years Ended December 31, +2021 2020 2019 +(in millions) +Net gain (loss) on extinguishment of debt $ (2.1) $ 280.1 $ — +The Exchange Offers executed during the second quarter of 2020 resulted in a net gain on extinguishment of debt of $227.3 million, which was primarily comprised of the gain on the partial principal redemption of Old Notes and the debt discount associated with the issuance of the 2025 Senior Secured Notes. Additionally, during the year ended December 31, 2020, we repurchased certain of our 2022 Senior Notes and 2024 Senior Notes in open market transactions, resulting in a net gain on extinguishment of debt of $52.8 million. Please refer to Note 5 – Long-Term Debt in Part II, Item 8 of this report for additional discussion, including the definitions of Exchange Offers, Old Notes, 2025 Senior Secured Notes, 2022 Senior Notes, and 2024 Senior Notes. +Income tax (expense) benefit +For the Years Ended December 31, +2021 2020 2019 +(in millions, except tax rate) +Income tax (expense) benefit $ (9.9) $ 192.1 $ 44.0 +Effective tax rate 21.5 % 20.1 % 19.1 % +The increase in the effective tax rate for the year ended December 31, 2021, compared with 2020, was primarily due to the differing effects of permanent items on income before income taxes for the year ended December 31, 2021, compared to a loss before income taxes in 2020. During 2021, an additional valuation allowance recorded against tax effected net derivative liabilities partially offset by an excess tax benefit from stock-based compensation awards and other deferred tax adjustments, resulted in an increase in the tax rate year-over-year. The additional valuation allowance recorded against tax effected net derivative liabilities could reverse and decrease our effective tax rate in 2022, if commodity prices remain at or exceed their current levels and we generate cumulative net income. The United States Congress continues to work on separate provisions of the Build Back Better Act, however, as of the filing of this report, no legislation impacting the Internal Revenue Code (“IRC”) has been passed. Changes to the IRC could eliminate or reduce certain oil and gas industry deductions and could increase the overall corporate income tax rate. +The increase in the effective tax rate for the year ended December 31, 2020, compared with 2019, was primarily due to the differing effects of permanent items on the loss before income taxes for each of the years ended December 31, 2020, and 2019. For the year ended December 31, 2020, the tax benefit rate increased compared with the same period in 2019 as a result of state permanent items reflecting state planning strategies. This increase was partially offset by the impact of the valuation allowance recorded on our deferred tax assets combined with the effects of excess tax deficiencies from stock-based compensation awards, limits on expensing of certain covered individuals’ compensation, and other permanent expense items. +Please refer to Overview of Liquidity and Capital Resources and Critical Accounting Policies and Estimates below as well as Note 4 – Income Taxes in Part II, Item 8 of this report for further discussion. +Overview of Liquidity and Capital Resources +Based on the current commodity price environment, we believe we have sufficient liquidity and capital resources to execute our business plan while continuing to meet our current financial obligations. We continue to manage the duration and level of our drilling and completion service commitments in order to maintain flexibility with regard to our activity level and capital expenditures. +Sources of Cash +We expect our 2022 capital program to be funded by cash flows from operations. Although we expect cash flows from operations to be sufficient to fund our expected 2022 capital program, we may also use borrowings under our revolving credit facility or raise funds through new debt or equity offerings or from other sources of financing. If we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our current stockholders could be diluted, and these newly issued securities may have rights, preferences, or privileges senior to those of existing stockholders and bondholders. Additionally, we may enter into carrying cost and sharing arrangements with third parties for certain exploration or development programs. All of our sources of liquidity can be affected by the general conditions of the broader economy, force majeure events, fluctuations in commodity prices, operating costs, tax law changes, and volumes produced, all of which affect us and our industry. +48 +Our credit ratings impact the availability of and cost for us to borrow additional funds. During the first half of 2021, three major credit rating agencies upgraded our credit ratings, citing our improved debt leverage and our expected ability to generate meaningful free cash flows, among other reasons. Additionally, one of these major credit rating agencies further upgraded our credit rating in conjunction with the issuance of our 2028 Senior Notes. Subsequent to December 31, 2021, and in consideration of the redemption of our 2024 Senior Notes on February 14, 2022, one major credit rating agency upgraded our credit rating, citing our priorities of continuing to reduce debt and improve our leverage metrics, and our expected ability to generate meaningful cash flows, among other reasons. Please refer to Note 5 – Long-Term Debt in Part II, Item 8 of this report for the definition of 2024 Senior Notes and 2028 Senior Notes. +We have no control over the market prices for oil, gas, and NGLs, although we may be able to influence the amount of our realized revenues from our oil, gas, and NGL sales through the use of derivative contracts as part of our commodity price risk management program. Commodity derivative contracts may limit the prices we receive for our oil, gas, and NGL sales if oil, gas, or NGL prices rise substantially over the price established by the commodity derivative contract. Please refer to Note 10 – Derivative Financial Instruments in Part II, Item 8 of this report for additional information about our oil, gas, and NGL derivative contracts currently in place and the timing of settlement of those contracts . +Credit Agreement +Our Credit Agreement provides for a senior secured revolving credit facility with a maximum loan amount of $2.5 billion, and a borrowing base and aggregate lender commitments of $1.1 billion. The borrowing base under the Credit Agreement is subject to regular, semi-annual redetermination, and considers the value of both our (a) proved oil and gas properties reflected in the most recent reserve report provided to our lenders under the Credit Agreement; and (b) commodity derivative contracts, each as determined by our lender group. During the fourth quarter of 2021, the fall semi-annual borrowing base redetermination was completed, which reaffirmed both our borrowing base and aggregate lender commitments at $1.1 billion. The next borrowing base redetermination date is scheduled for April 1, 2022. Our borrowing base can be adjusted as a result of changes in commodity prices, acquisitions or divestitures of proved properties, or financing activities, all as provided for in the Credit Agreement. No individual bank participating in our Credit Agreement represents more than 10 percent of the lender commitments under the Credit Agreement. Please refer to Note 5 – Long-Term Debt in Part II, Item 8 of this report for additional discussion as well as the presentation of the outstanding balance, total amount of letters of credit, and available borrowing capacity under our Credit Agreement as of February 10, 2022, December 31, 2021, and December 31, 2020. +We must comply with certain financial and non-financial covenants under the terms of the Credit Agreement, including covenants limiting dividend payments and requiring that we maintain certain financial ratios, as set forth in the Credit Agreement. We were in compliance with all financial and non-financial covenants as of December 31, 2021, and through the filing of this report. Please refer to Note 5 – Long-Term Debt in Part II, Item 8 of this report for additional discussion. +As of December 31, 2021, we had no outstanding balance on our revolving credit facility. Our daily weighted-average revolving credit facility debt balance was $106.0 million and $145.6 million for the years ended December 31, 2021, and 2020, respectively. Cash flows provided by our operating activities, proceeds received from divestitures of properties, capital markets activities including open market debt repurchases, repayment of scheduled debt maturities, and our capital expenditures, including acquisitions, all impact the amount we borrow under our revolving credit facility. +Under our Credit Agreement, borrowings in the form of Eurodollar loans accrue interest based on LIBOR which was discontinued as a global reference rate for new loans and contracts after December 31, 2021. Our Credit Agreement specifies that if LIBOR is no longer a widely used benchmark rate, or if it is no longer used for determining interest rates for loans in the United States, a replacement interest rate that fairly reflects the cost to the lenders of funding loans shall be established by the Administrative Agent, as defined in the Credit Agreement, in consultation with us. During 2022, in advance of the maturity date of our existing Credit Agreement, we expect to enter into a new credit agreement that will, in addition to other negotiated terms, conditions, agreements, and other provisions, specify a new interest rate for Eurodollar loans. We currently do not expect to incur borrowings in the form of Eurodollar loans prior to that time, and we currently do not expect the transition from LIBOR to have a material impact on interest expense or borrowing activities under the Credit Agreement, or to otherwise have a material adverse impact on our business. Please refer to Note 1 – Summary of Significant Accounting Policies in Part II, Item 8 of this report for discussion of FASB ASU 2020-04 and ASU 2021-01, which provide guidance related to reference rate reform. +Weighted-Average Interest and Weighted-Average Borrowing Rates +Our weighted-average interest rate includes paid and accrued interest, fees on the unused portion of the aggregate commitment amount under the Credit Agreement, letter of credit fees, the non-cash amortization of deferred financing costs, and for the periods during which they were outstanding, the non-cash amortization of the discounts related to the 2021 Senior Secured Convertible Notes and 2025 Senior Secured Notes, each as defined in Note 5 – Long-Term Debt in Part II, Item 8 of this report. Our weighted-average borrowing rate includes paid and accrued interest only. +49 +The following table presents our weighted-average interest rates and our weighted-average borrowing rates for the years ended December 31, 2021, 2020, and 2019: +For the Years Ended December 31, +2021 2020 2019 +Weighted-average interest rate 7.7 % 7.0 % 6.4 % +Weighted-average borrowing rate 6.8 % 6.1 % 5.7 % +Our weighted-average interest rates and our weighted-average borrowing rates increased for the year ended December 31, 2021, compared with 2020, and for the year ended December 31, 2020, compared with 2019. These increases were primarily a result of the higher interest rate on our 2025 Senior Secured Notes issued during the second quarter of 2020. +Our weighted-average interest rate and weighted-average borrowing rate are impacted by the occurrence and timing of long-term debt issuances and redemptions and the average outstanding balance on our revolving credit facility. Additionally, our weighted-average interest rates are impacted by the fees paid on the unused portion of our aggregate lender commitments. The rates disclosed in the above table do not reflect amounts associated with the repurchase or redemption of Senior Notes, such as the acceleration of unamortized deferred financing costs, as these amounts are netted against the associated gain or loss on extinguishment of debt. The 2021 Senior Secured Convertible Notes were retired upon maturity on July 1, 2021. After this date, the weighted-average interest rate was no longer impacted by the non-cash amortization of deferred financing costs or the non-cash amortization of the discount related to the 2021 Senior Secured Convertible Notes. Please refer to Note 5 – Long-Term Debt in Part II, Item 8 of this report for additional discussion and definitions. +Uses of Cash +We use cash for the development, exploration, and acquisition of oil and gas properties and for the payment of operating and general and administrative costs, income taxes, dividends, and debt obligations, including interest. Expenditures for the development, exploration, and acquisition of oil and gas properties are the primary use of our capital resources. During 2021, we spent approximately $678.2 million on capital expenditures and on acquiring proved and unproved oil and gas properties. This amount differs from the costs incurred amount of $718.0 million for the year ended December 31, 2021, as costs incurred is an accrual-based amount that also includes asset retirement obligations, geological and geophysical expenses, and exploration overhead amounts. Please refer to Costs Incurred in Supplemental Oil and Gas Information (unaudited) in Part II, Item 8 of this report for additional discussion. +The amount and allocation of our future capital expenditures will depend upon a number of factors, including our cash flows from operating, investing, and financing activities, our ability to execute our development program, and the number and size of acquisitions that we complete. In addition, the impact of oil, gas, and NGL prices on investment opportunities, the availability of capital, tax law changes, and the timing and results of our exploration and development activities may lead to changes in funding requirements for future development. We periodically review our capital expenditure budget to assess if changes are necessary based on current and projected cash flows, acquisition and divestiture activities, debt requirements, and other factors. +Changes to the IRC could increase the corporate income tax rate and could eliminate or reduce current tax deductions for intangible drilling costs, depreciation of equipment costs, and other deductions which currently reduce our taxable income. Future legislation regarding these issues could reduce our net cash provided by operating activities over time, and could therefore result in a reduction of funding available for the items discussed above. +We may from time to time repurchase or redeem all or portions of our outstanding debt securities for cash, through exchanges for other securities, or a combination of both. Such repurchases or redemptions may be made in open market transactions, privately negotiated transactions, tender offers, pursuant to contractual provisions, or otherwise. Any such repurchases or redemptions will depend on prevailing market conditions, our liquidity requirements, contractual restrictions, compliance with securities laws, and other factors. The amounts involved in any such transaction may be material. During 2021, we issued our 2028 Senior Notes and with the proceeds, repurchased certain of our 2022 Senior Notes and 2024 Senior Notes through the Tender Offer. Subsequently, we redeemed the remaining 2022 Senior Notes then outstanding through the 2022 Senior Notes Redemption. The 2021 Senior Secured Convertible Notes matured on July 1, 2021, and on that day, we used borrowings under our revolving credit facility to retire, at par, the outstanding principal amount. During 2020, we completed the Exchange Offers and we repurchased certain of our 2022 Senior Notes and 2024 Senior Notes in open market transactions. As part of our strategy for 2022, we continue to focus on reducing absolute debt and improving our debt metrics and on February 14, 2022, we redeemed the remaining $104.8 million of aggregate principal amount outstanding of our 2024 Senior Notes. Please refer to Note 5 – Long-Term Debt in Part II, Item 8 of this report for additional discussion and definitions. +As of the filing of this report, we could repurchase up to 3,072,184 shares of our common stock under our stock repurchase program, subject to the approval of our Board of Directors. Shares may be repurchased from time to time in the open market, or in privately negotiated transactions, subject to market conditions and other factors, including certain provisions of our Credit Agreement, the indentures governing each series of our outstanding Senior Notes, compliance with securities laws, and the terms and provisions of +50 +our stock repurchase program. Our Board of Directors periodically reviews this program as part of the allocation of our capital. During 2021, we did not repurchase any shares of our common stock. +During the years ended December 31, 2021, 2020, and 2019, we paid $2.4 million, $2.3 million, and $11.3 million, respectively, in dividends to our stockholders. These amounts reflect a bi-annual dividend of $0.01 per share for each of the years ended December 31, 2021, and 2020, and a bi-annual dividend of $0.05 per share for the year ended December 31, 2019. Our current intention is to continue to make dividend payments for the foreseeable future, subject to our future earnings, our financial condition, covenants under our Credit Agreement and indentures governing each series of our outstanding Senior Notes, other covenants, and other factors that could arise. The payment and amount of future dividends remains at the discretion of our Board of Directors. +Analysis of Cash Flow Changes Between 2021 and 2020 and Between 2020 and 2019 +The following tables present changes in cash flows between the years ended December 31, 2021, 2020, and 2019, for our operating, investing, and financing activities. The analysis following each table should be read in conjunction with our accompanying consolidated statements of cash flows (“accompanying statements of cash flows”) in Part II, Item 8 of this report. +Operating Activities +For the Years Ended December 31, Amount Change Between +2021 2020 2019 2021/2020 2020/2019 +(in millions) +Net cash provided by operating activities $ 1,159.8 $ 790.9 $ 823.6 $ 368.9 $ (32.7) +Net cash provided by operating activities increased for the year ended December 31, 2021, compared with 2020, primarily as a result of a $1.3 billion increase in cash received from oil, gas, and NGL production revenues, net of transportation costs and production taxes, partially offset by an increase of $1.0 billion in cash paid on settled derivative trades. +Net cash provided by operating activities decreased for the year ended December 31, 2020, compared with 2019, primarily as a result of a $316.9 million decrease in cash received from oil, gas, and NGL production revenues, net of transportation costs and production taxes, offset by an increase in cash received from settled derivative trades of $290.7 million. +Net cash provided by operating activities is affected by working capital changes and the timing of cash receipts and disbursements. +Investing Activities +For the Years Ended December 31, Amount Change Between +2021 2020 2019 2021/2020 2020/2019 +(in millions) +Net cash used in investing activities $ (667.2) $ (555.6) $ (1,013.3) $ (111.6) $ 457.7 +Net cash used in investing activities increased for the year ended December 31, 2021, compared with 2020, primarily as a result of increased capital expenditures of $127.1 million. Net cash used in investing activities during the year ended December 31, 2021, was funded by net cash provided by operating activities. +Net cash used in investing activities decreased for the year ended December 31, 2020, compared with 2019, primarily as a result of reduced capital expenditures of $476.0 million. Net cash used in investing activities during the year ended December 31, 2020, was funded by net cash provided by operating activities. +Financing Activities +For the Years Ended December 31, Amount Change Between +2021 2020 2019 2021/2020 2020/2019 +(in millions) +Net cash provided by (used in) financing activities $ (159.8) $ (235.4) $ 111.8 $ 75.6 $ (347.2) +During the year ended December 31, 2021, we paid $385.3 million, including net premiums, to fund the Tender Offer and the 2022 Senior Notes Redemption, and we received net cash proceeds of $392.8 million from the issuance of our 2028 Senior Notes. +51 +Additionally, we paid $65.5 million to retire our 2021 Senior Secured Convertible Notes and had net repayments under our revolving credit facility of $93.0 million. +During the year ended December 31, 2020, we paid $136.5 million to repurchase certain of our 2022 Senior Notes and 2024 Senior Notes in open market transactions, we paid $53.5 million to certain holders of the 2021 Senior Secured Convertible Notes in connection with the Private Exchange, and we had net repayments under our revolving credit facility of $29.5 million. +During the year ended December 31, 2019, we had net borrowings under our revolving credit facility of $122.5 million. +Please refer to Note 5 – Long-Term Debt in Part II, Item 8 of this report for additional discussion and definitions. +Interest Rate Risk +We are exposed to market risk due to the floating interest rate associated with any outstanding balance on our revolving credit facility. As of December 31, 2021, we had no outstanding balance on our revolving credit facility. Our Credit Agreement allows us to fix the interest rate for all or a portion of the principal balance of our revolving credit facility for a period up to six months. To the extent that the interest rate is fixed, interest rate changes will affect the revolving credit facility’s fair value but will not impact results of operations or cash flows. Conversely, for the portion of the revolving credit facility that has a floating interest rate, interest rate changes will not affect the fair value but will impact future results of operations and cash flows. Changes in interest rates do not impact the amount of interest we pay on our fixed-rate Senior Notes but can impact their fair values. As of December 31, 2021, our outstanding principal amount of fixed-rate debt totaled $2.1 billion and we had no floating-rate debt outstanding. Please refer to Note 8 – Fair Value Measurements in Part II, Item 8 of this report for additional discussion on the fair values of our Senior Notes. +Commodity Price Risk +The prices we receive for our oil, gas, and NGL production directly impact our revenue, profitability, access to capital, and future rate of growth. Oil, gas, and NGL prices are subject to unpredictable fluctuations resulting from a variety of factors, including changes in supply and demand and the macroeconomic environment, and seasonal anomalies, all of which are typically beyond our control. The markets for oil, gas, and NGLs have been volatile, especially over the last several years. Commodity prices have improved from historic lows in 2020 resulting from the impacts of the Pandemic, however, future case surges, outbreaks, COVID-19 virus variants, the potential that current vaccines may be less effective or ineffective against future COVID-19 virus variants, and the risk that large groups of the population may not receive vaccinations against COVID-19, could have further negative impacts on prices. Additionally, commodity prices are subject to heightened levels of uncertainty related to geopolitical issues such as the escalating tensions between Russia and Ukraine. The realized prices we receive for our production also depend on numerous factors that are typically beyond our control. Based on our 2021 production, a 10 percent decrease in our average realized prices for oil, gas, and NGLs, would have reduced our oil, gas, and NGL production revenues by approximately $189.2 million, $52.5 million, and $18.1 million, respectively. If commodity prices had been 10 percent lower, our net derivative settlements for the year ended December 31, 2021, would have offset the declines in oil, gas, and NGL production revenue by approximately $189.2 million. +We enter into commodity derivative contracts in order to reduce the risk of fluctuations in commodity prices. The fair value of our commodity derivative contracts is largely determined by estimates of the forward curves of the relevant price indices. As of December 31, 2021, a 10 percent increase or decrease in the forward curves associated with our oil, gas, and NGL commodity derivative instruments would have changed our net derivative positions for these products by approximately $94.3 million, $17.1 million, and $5.6 million, respectively. +Off-Balance Sheet Arrangements +We have not participated in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities (“SPE” or “SPEs”), which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. +We evaluate our transactions to determine if any variable interest entities exist. If we determine that we are the primary beneficiary of a variable interest entity, that entity is consolidated into our consolidated financial statements. We have not been involved in any unconsolidated SPE transactions during 2021 or 2020, or through the filing of this report. +Critical Accounting Policies and Estimates +Our discussion of financial condition and results of operations is based upon the information reported in our consolidated financial statements. The preparation of these consolidated financial statements in conformity with GAAP requires us to make assumptions and estimates that affect the reported amounts of assets, liabilities, revenues, and expenses, as well as the disclosure of contingent assets and liabilities as of the date of our consolidated financial statements. We base our assumptions and estimates on historical experience and various other sources that we believe to be reasonable under the circumstances. Actual results may differ from the estimates we calculate as a result of changes in circumstances, global economics and politics, and general business +52 +conditions. A summary of our significant accounting policies is detailed in Note 1 – Summary of Significant Accounting Policies in Part II, Item 8 of this report. We have outlined below, those policies identified as being critical to the understanding of our business and results of operations and that require the application of significant management judgment. +Successful Efforts Method of Accounting. GAAP provides two alternative methods for the oil and gas industry to use in accounting for oil and gas producing activities. These two methods are generally known in our industry as the full cost method and the successful efforts method, and both methods are widely used. The methods are different enough that in many circumstances the same set of facts will provide materially different financial statement results within a given year. We have chosen the successful efforts method of accounting for our oil and gas producing activities. A more detailed description is included in Note 1 – Summary of Significant Accounting Policies of Part II, Item 8 of this report. +Oil and Gas Reserve Quantities. Our estimated proved reserve quantities and future net cash flows are critical to understanding the value of our business. They are used in comparative financial ratios and are the basis for significant accounting estimates in our consolidated financial statements, including the calculations of DD&A expense, impairment of proved and unproved oil and gas properties, and asset retirement obligations. Please refer to Oil and Gas Producing Activities in Note 1 – Summary of Significant Accounting Policies of Part II, Item 8 of this report for additional discussion on our accounting policies impacted by estimated reserve quantities. +Future cash inflows and future production and development costs are determined by applying prices and costs, including transportation, quality differentials, and basis differentials, applicable to each period to the estimated quantities of proved reserves remaining to be produced as of the end of that period. Expected cash flows are discounted to present value using an appropriate discount rate. For example, the standardized measure of discounted future net cash flows calculation requires that a 10 percent discount rate be applied. Although reserve estimates are inherently imprecise, and estimates of new discoveries and undeveloped locations are more imprecise than those of established producing oil and gas properties, we make a considerable effort in estimating our reserves. We engage Ryder Scott, an independent reservoir evaluation consulting firm, to audit a minimum of 80 percent of our total calculated proved reserve PV-10. We expect proved reserve estimates will change as additional information becomes available and as commodity prices and operating and capital costs change. We evaluate and estimate our proved reserves each year end. It should not be assumed that the standardized measure of discounted future net cash flows (GAAP) or PV-10 (non-GAAP) as of December 31, 2021, is the current market value of our estimated proved reserves. In accordance with SEC requirements, we based these measures on the unweighted arithmetic average of the first-day-of-the-month price of each month within the trailing 12-month period ended December 31, 2021. Actual future prices and costs may be materially higher or lower than the prices and costs utilized in the estimates. Please refer to Risk Factors in Part I, Item 1A of this report. +If the estimates of proved reserves decline, the rate at which we record DD&A expense will increase, which would reduce future net income. Changes in DD&A rate calculations caused by changes in reserve quantities are made prospectively. In addition, a decline in reserve estimates may impact the outcome of our assessment of proved and unproved properties for impairment. Impairments are recorded in the period in which they are identified. +The following table presents information about proved reserve changes from period to period due to items we do not control, such as price, and from changes due to production history and well performance. These changes do not require a capital expenditure on our part, but may have resulted from capital expenditures we incurred to develop other estimated proved reserves. +For the Years Ended December 31, +2021 2020 2019 +MMBOE Change MMBOE Change MMBOE Change +Revisions resulting from performance 3.4 3.6 (14.9) +Removal of proved undeveloped reserves no longer in our five-year development plan (40.6) (65.0) (9.8) +Revisions resulting from price changes 37.2 (32.6) (70.0) +Total — (94.0) (94.7) +____________________________________________ +Note: Amounts may not calculate due to rounding. +As previously noted, commodity prices are volatile and estimates of reserves are inherently imprecise. Consequently, we expect to continue experiencing these types of changes. +53 +We cannot reasonably predict future commodity prices, although we believe that together, the below analyses provide reasonable information regarding the impact of changes in pricing and trends on total estimated proved reserves. The following table reflects the estimated MMBOE change and percentage change to our total reported estimated proved reserve volumes from the described hypothetical changes: +For the year ended December 31, 2021 +MMBOE Change Percentage Change +10 percent decrease in SEC pricing (1) +(3.7) (1) % +Average NYMEX strip pricing as of fiscal year end (2) +(3.6) (1) % +10 percent decrease in proved undeveloped reserves (3) +(19.2) (4) % +____________________________________________ +(1) The change solely reflects the impact of a 10 percent decrease in SEC pricing to the total reported estimated proved reserve volumes as of December 31, 2021, and does not include additional impacts to our estimated proved reserves that may result from our internal intent to drill hurdles or changes in future service or equipment costs. +(2) The change solely reflects the impact of replacing SEC pricing with the five-year average NYMEX strip pricing as of December 31, 2021, and does not include additional impacts to our estimated proved reserves that may result from our internal intent to drill hurdles or changes in future service or equipment costs. As of December 31, 2021, SEC pricing was $66.56 per Bbl for oil, $3.60 per MMBtu for gas, and $36.60 per Bbl for NGLs, and five-year average NYMEX strip pricing was $64.34 per Bbl for oil, $3.26 per MMBtu for gas, and $30.19 per Bbl for NGLs. +(3) The change solely reflects a 10 percent decrease in proved undeveloped reserves as of December 31, 2021, and does not include any additional impacts to our estimated proved reserves. +Additional reserve information can be found in Reserves in Part I, Items 1 and 2 of this report, and in Supplemental Oil and Gas Information (unaudited) in Part II, Item 8 of this report. +Impairment of Oil and Gas Properties. Proved oil and gas properties are evaluated for impairment on a pool-by-pool basis and reduced to fair value when events or changes in circumstances indicate that their carrying amount may not be recoverable. We estimate the expected future cash flows of our proved oil and gas properties and compare these undiscounted cash flows to the carrying amount to determine if the carrying amount is recoverable. If the carrying amount exceeds the estimated undiscounted future cash flows, we will write down the carrying amount of the proved oil and gas properties to fair value (or discounted future cash flows). Management estimates future cash flows from all proved reserves and risk adjusted probable and possible reserves using various factors, which are subject to our judgment and expertise, and include, but are not limited to, commodity price forecasts, estimated future operating and capital costs, development plans, and discount rates to incorporate the risk and current market conditions associated with realizing the expected cash flows. +Unproved oil and gas properties are evaluated for impairment and reduced to fair value when there is an indication that the carrying costs may not be recoverable. Lease acquisition costs that are not individually significant are aggregated by asset group and the portion of such costs estimated to be nonproductive prior to lease expiration are amortized over the appropriate period. The estimate of what could be nonproductive is based on historical trends or other information, including current drilling plans and our intent to renew leases. We estimate the fair value of unproved properties using a market approach, which takes into account the following significant assumptions: remaining lease terms, future development plans, risk weighted potential resource recovery, estimated reserve values, and estimated acreage value based on price(s) received for similar, recent acreage transactions by us or other market participants. +We cannot predict when or if future impairment charges will be recorded because of the uncertainty in the factors discussed above. Despite any amount of future impairment being difficult to predict, based on our commodity price assumptions as of February 10, 2022, we do not expect any material oil and gas property impairments in the first quarter of 2022 resulting from commodity price impacts. +Please refer to Note 1 – Summary of Significant Accounting Policies and Note 8 – Fair Value Measurements in Part II, Item 8 of this report for discussion of impairments of oil and gas properties recorded for the years ended December 31, 2021, 2020, and 2019. +Revenue Recognition. We predominately derive our revenue from the sale of produced oil, gas, and NGLs. Our revenue recognition policy is a critical accounting policy because revenue is a key component of our results of operations and our forward-looking statements contained in our analysis of liquidity and capital resources. A 10 percent change in our revenue accrual at year-end 2021 would have impacted total operating revenues by approximately $21.6 million for the year ended December 31, 2021. Please refer to Note 1 – Summary of Significant Accounting Policies and Note 2 - Revenue from Contracts with Customers in Part II, Item 8 of this report for additional discussion. +Derivative Financial Instruments. We periodically enter into commodity derivative contracts to mitigate a portion of our exposure to oil, gas, and NGL price volatility and location differentials. We recognize all gains and losses from changes in commodity derivative fair values immediately in earnings rather than deferring any such amounts in accumulated other comprehensive income +54 +(loss). The estimated fair value of our derivative instruments requires substantial judgment. These values are based upon, among other things, option pricing models, futures prices, volatility, time to maturity, and credit risk. The values we report in our consolidated financial statements change as these estimates are revised to reflect actual results, changes in market conditions or other factors, many of which are beyond our control. Please refer to Note 1 – Summary of Significant Accounting Policies and Note 10 – Derivative Financial Instruments in Part II, Item 8 of this report for additional discussion. +Income Taxes. We account for deferred income taxes, whereby deferred tax assets and liabilities are recognized based on the tax effects of temporary differences between the carrying amounts on the consolidated financial statements and the tax basis of assets and liabilities, as measured using currently enacted tax rates. These differences will result in taxable income or deductions in future years when the reported amounts of the assets or liabilities are recovered or settled, respectively. Considerable judgment is required in predicting when these events may occur and whether recovery of an asset is more likely than not. We record deferred tax assets and associated valuation allowances, when appropriate, to reflect amounts more likely than not to be realized based upon Company analysis. Additionally, our federal and state income tax returns are generally not filed before the consolidated financial statements are prepared. Therefore, we estimate the tax basis of our assets and liabilities at the end of each period, as well as the effects of tax rate changes, tax credits, and net operating and capital loss carryforwards and carrybacks. Adjustments related to differences between the estimates we use and actual amounts we report are recorded in the periods in which we file our income tax returns. These adjustments and changes in our estimates of asset recovery and liability settlement as well as significant enacted tax rate changes could have an impact on our results of operations. A one percent change in our effective tax rate would have changed our calculated income tax benefit by approximately $0.5 million for the year ended December 31, 2021. Please refer to Note 1 – Summary of Significant Accounting Policies and Note 4 – Income Taxes in Part II, Item 8 of this report for additional discussion. +Accounting Matters +Please refer to Recently Issued Accounting Standards in Note 1 – Summary of Significant Accounting Policies in Part II, Item 8 of this report for information on new authoritative accounting guidance. +Environmental +We believe we are in substantial compliance with environmental laws and regulations and do not currently anticipate that material future expenditures will be required under the existing regulatory framework. However, environmental laws and regulations are subject to frequent changes, and we are unable to predict the impact that compliance with future laws or regulations, such as those currently being considered as discussed below, may have on future capital expenditures, liquidity, and results of operations. +Hydraulic Fracturing. Hydraulic fracturing is an important and common practice that is used to stimulate production of hydrocarbons from tight formations. For additional information about hydraulic fracturing and related environmental matters, please refer to Risk Factors – Risks Related to Oil and Gas Operations and the Industry – Federal and state legislative and regulatory initiatives relating to hydraulic fracturing could result in increased costs and additional operating restrictions or delays. +Climate Change and Air Quality. In June 2013, President Obama announced a Climate Action Plan designed to further reduce GHG emissions and prepare the nation for the physical effects that may occur as a result of climate change. The Climate Action Plan targeted methane reductions from the oil and gas sector as part of a comprehensive interagency methane strategy. As part of the Climate Action Plan, on May 12, 2016, the EPA issued final regulations applicable to new, modified, or reconstructed sources that amended and expanded 2012 regulations for the oil and gas sector by, among other things, setting emission limits for volatile organic compounds (“VOCs” or “VOC”) and methane, a GHG, and added requirements for previously unregulated sources. The 2016 NSPS requires reduction of methane and VOCs from certain activities in oil and gas production, processing, transmission and storage and applies to facilities constructed, modified, or reconstructed after September 18, 2015. The regulation requires, among other things, GHG and VOC emission limits for certain equipment, such as centrifugal compressors and reciprocating compressors; semi-annual leak detection and repair for well sites and quarterly for boosting and garnering compressor stations and gas transmission compressor stations; control requirements and emission limits for pneumatic pumps; and additional requirements for control of GHGs and VOCs from well completions. On September 14, and 15, 2020, the EPA finalized amendments to the 2012 and 2016 NSPS that removed transmission and storage infrastructure from regulation of methane emissions and other VOCs, as well as removed methane control requirements. The portion of the 2020 amendments that removed the transmission and storage infrastructure from the regulations was disapproved by the Congressional Review Act in 2021. In November 2021, the EPA proposed to expand the requirements of the 2012 and 2016 NSPS and also include requirements for states to develop performance standards to control methane emissions from existing sources. +States are also required to comply with the NAAQS. The oil and gas sector is often subjected to additional controls when areas within states are not attaining the ozone NAAQS as the VOCs emitted by the oil and gas sector are a precursor to ozone formation. The ozone NAAQS was set at 70 parts per billion (“ppb”) in 2015. The EPA maintained the standard in 2020, but in 2021 the EPA communicated that it is reconsidering the 2020 decision. Oil and gas facilities operating in areas that are determined to be out of compliance with the 70 ppb requirement or a lowered ozone NAAQS may be subject to increased emission controls and associated costs of compliance. +55 +On November 16, 2016, the BLM finalized regulations to address methane emissions from oil and gas operations on federal and tribal lands, as part of President Obama’s Climate Action Plan. The regulations were intended to reduce the waste of gas from flaring, venting, and leaks by oil and gas production. The rule included requirements that prohibits venting of gas except in limited circumstances and limits flaring of gas and includes requirements for leak detection and repair. The rule also increased royalty payments for “waste” gas that is released in contravention of the rule requirements. After continuous court challenges, the BLM issued a final rule in September 2018 that rescinded most of the 2016 rule, including most of the methane control requirements. After the 2018 rescission was vacated by the District Court for the Northern District of California, the 2016 rule was vacated by the District Court for the District of Wyoming. Any future regulations requiring similar capture standards may increase our operational costs, or restrict our production, which could materially and adversely affect our financial condition, results of operations, and cash flows. +The United States Congress has from time to time considered adopting legislation to reduce emissions of GHGs and many of the states have already taken legal measures to reduce emissions of GHGs primarily through the planned development of GHG emission inventories and/or regional GHG cap and trade programs. Most of these cap and trade programs work by requiring major sources of emissions, such as electric power plants, or major producers of fuels, such as refineries and gas processing plants, to acquire and surrender emission allowances. The number of allowances available for purchase is reduced each year in an effort to achieve the overall GHG emission reduction goal. In addition, there have been international conventions and efforts to establish standards for the reduction of GHGs globally, including the Paris accords in December 2015. The conditions for entry into force of the Paris accords were met on October 5, 2016 and the Agreement went into force 30 days later on November 4, 2016. At the United Nations Climate Change Conference in Glasgow in 2021, the United States and the European Union announced the Global Methane Pledge that aims to reduce methane emissions by 30 percent compared with 2020 levels. +The adoption of legislation or regulatory programs to reduce emissions of GHGs could require us to incur increased operating costs, such as costs to purchase and operate emissions control systems, to acquire emissions allowances, or comply with new regulatory or reporting requirements. Any such legislation or regulatory programs could also increase the cost of consuming, and thereby reduce demand for, the oil and gas we produce. Consequently, legislation and regulatory programs to reduce emissions of GHGs could have an adverse effect on our business, financial condition, and results of operations. Judicial challenges to new regulatory measures are likely and we cannot predict the outcome of such challenges. New regulatory suspensions, revisions, or rescissions and conflicting state and federal regulatory mandates may inhibit our ability to accurately forecast the costs associated with future regulatory compliance. Finally, scientists have concluded that increasing concentrations of GHGs in the earth’s atmosphere produce climate changes that likely have significant physical effects, such as increased frequency and severity of storms, droughts, floods, and other climatic events. Such effects could have an adverse effect on our financial condition and results of operations. +In terms of opportunities, the regulation of GHG emissions and the introduction of alternative incentives, such as enhanced oil recovery, carbon sequestration, and low carbon fuel standards, could benefit us in a variety of ways. For example, although federal regulation and climate change legislation could reduce the overall demand for the oil and gas that we produce, the relative demand for gas may increase because the burning of gas produces lower levels of emissions than other readily available fossil fuels such as oil and coal. In addition, if renewable resources such as wind or solar power become more prevalent, gas-fired electric plants may provide an alternative backup to maintain consistent electricity supply. Also, if states adopt low-carbon fuel standards, gas may become a more attractive transportation fuel. Approximately 35 percent and 37 percent of our production on a BOE basis in 2021 and 2020, respectively, was gas. Market-based incentives for the capture and storage of carbon dioxide in underground reservoirs, particularly in oil and gas reservoirs, could also benefit us through the potential to obtain GHG emission allowances or offsets from or government incentives for the sequestration of carbon dioxide. +Non-GAAP Financial Measures +Adjusted EBITDAX represents net income (loss) before interest expense, interest income, income taxes, depletion, depreciation, amortization and asset retirement obligation liability accretion expense, exploration expense, property abandonment and impairment expense, non-cash stock-based compensation expense, derivative gains and losses net of settlements, gains and losses on divestitures, gains and losses on extinguishment of debt, and certain other items. Adjusted EBITDAX excludes certain items that we believe affect the comparability of operating results and can exclude items that are generally non-recurring in nature or whose timing and/or amount cannot be reasonably estimated. Adjusted EBITDAX is a non-GAAP measure that we believe provides useful additional information to investors and analysts, as a performance measure, for analysis of our ability to internally generate funds for exploration, development, acquisitions, and to service debt. We are also subject to financial covenants under our Credit Agreement based on adjusted EBITDAX ratios as further described in Note 5 – Long-Term Debt in Part II, Item 8 of this report. In addition, adjusted EBITDAX is widely used by professional research analysts and others in the valuation, comparison, and investment recommendations of companies in the oil and gas exploration and production industry, and many investors use the published research of industry research analysts in making investment decisions. Adjusted EBITDAX should not be considered in isolation or as a substitute for net income (loss), income (loss) from operations, net cash provided by operating activities, or other profitability or liquidity measures prepared under GAAP. Because adjusted EBITDAX excludes some, but not all items that affect net income (loss) and may vary among companies, the adjusted EBITDAX amounts presented may not be comparable to similar metrics of other companies. Our revolving credit facility provides a material source of liquidity for us. Under the terms of our Credit Agreement, if we failed to comply with the covenants that establish a maximum permitted ratio of total funded debt, as defined in the Credit Agreement, to adjusted EBITDAX, we would be in default, an event that would prevent us from borrowing under our revolving credit facility and would therefore materially limit a significant source of our liquidity. In addition, if we are in default under our revolving credit facility and are unable to obtain a waiver of +56 +that default from our lenders, lenders under that facility and under the indentures governing each series of our outstanding Senior Notes, as defined in Note 5 – Long-Term Debt in Part II, Item 8 of this report, would be entitled to exercise all of their remedies for default. +The following table provides reconciliations of our net income (loss) (GAAP) and net cash provided by operating activities (GAAP) to adjusted EBITDAX (non-GAAP) for the periods presented: +For the Years Ended December 31, +2021 2020 2019 +(in thousands) +Net income (loss) (GAAP) $ 36,229 $ (764,614) $ (187,001) +Interest expense 160,353 163,892 159,102 +Income tax expense (benefit) 9,938 (192,091) (44,043) +Depletion, depreciation, amortization, and asset retirement obligation liability accretion 774,386 784,987 823,798 +Exploration (1) +35,346 37,541 46,995 +Impairment 35,000 1,016,013 33,842 +Stock-based compensation expense 18,819 14,999 24,318 +Net derivative (gain) loss 901,659 (161,576) 97,539 +Derivative settlement gain (loss) (748,958) 351,261 39,222 +Net (gain) loss on extinguishment of debt 2,139 (280,081) — +Other, net 507 5,074 (381) +Adjusted EBITDAX (non-GAAP) 1,225,418 975,405 993,391 +Interest expense (160,353) (163,892) (159,102) +Income tax (expense) benefit (9,938) 192,091 44,043 +Exploration (1) +(35,346) (37,541) (46,995) +Amortization of debt discount and deferred financing costs 17,275 17,704 15,474 +Deferred income taxes 9,565 (192,540) (41,835) +Other, net (4,260) (11,874) 1,739 +Net change in working capital 117,411 11,591 16,852 +Net cash provided by operating activities (GAAP) $ 1,159,772 $ 790,944 $ 823,567 +____________________________________________ +(1) Stock-based compensation expense is a component of the exploration expense and general and administrative expense line items on the accompanying statements of operations. Therefore, the exploration line items shown in the reconciliation above will vary from the amount shown on the accompanying statements of operations for the component of stock-based compensation expense recorded to exploration expense. +ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK +The information required by this Item is provided under the captions Interest Rate Risk and Commodity Price Risk in Item 7 above, as well as under the section entitled Summary of Oil, Gas, and NGL Derivative Contracts in Place in Note 10 – Derivative Financial Instruments in Part II, Item 8 of this report and is incorporated herein by reference. +57 +ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA +Report of Independent Registered Public Accounting Firm +To the Stockholders and the Board of Directors of SM Energy Company and subsidiaries +Opinion on the Financial Statements +We have audited the accompanying consolidated balance sheets of SM Energy Company and subsidiaries (the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income (loss), changes in stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles. +We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 25, 2022, expressed an unqualified opinion thereon. +Basis for Opinion +These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. +We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. +Critical Audit Matters +The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. +58 +Depletion, depreciation and amortization (“DD&A”) of proved oil and gas properties +Description of the Matter +At December 31, 2021, the net book value of the Company’s proved oil and gas properties was $3.8 billion, and depletion, depreciation, amortization, and asset retirement obligation liability accretion was $774.4 million for the year then ended. As described in Note 1 to the consolidated financial statements, under the successful efforts method of accounting, the costs of development wells are capitalized whether those wells are successful or unsuccessful. Capitalized drilling and completion costs, including lease and well equipment, intangible development costs, and operational support facilities in the field are depleted as a group of assets using the units-of-production method based on proved developed oil and gas reserves, as estimated by the Company’s engineering technical team. Similarly, proved leasehold costs are depleted on the same group asset basis; however, the units-of-production method is based on total proved oil and gas reserves, as estimated by the Company’s engineering technical team. Significant judgment is required by the Company’s engineering technical team in evaluating geoscience and engineering data when estimating proved oil and gas reserves. Estimating reserves also requires the use of inputs, including oil and gas prices and operating and capital costs assumptions, among others. Because of the complexity involved in estimating oil and gas reserves, management used an independent petroleum engineering consulting firm to audit the estimates prepared by the Company’s engineering technical team for at least 80% of the Company’s total calculated proved reserve PV-10 as of December 31, 2021. +Auditing the Company’s DD&A calculation is especially complex and judgmental because of our use of the work of the Company’s engineering technical team and independent petroleum engineering consulting firm and the evaluation of management’s determination of the inputs described above used by the engineering technical team and independent petroleum engineering consulting firm in estimating proved oil and gas reserves. +How We Addressed the Matter in Our Audit +We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s process to calculate DD&A, including management’s controls over the completeness and accuracy of the financial data provided to the Company’s engineering technical team and independent petroleum engineering consulting firm for use in estimating the proved oil and gas reserves. +Our audit procedures included, among others, evaluating the professional qualifications and objectivity of the engineering technical team primarily responsible for overseeing the preparation of the reserve estimates and the independent petroleum engineering consulting firm used to audit the estimates. In addition, in assessing whether we can use the work of the Company’s engineering technical team and independent petroleum engineering consulting firm we evaluated the completeness and accuracy of the financial data and inputs described above used by the engineering technical team and independent petroleum engineering consulting firm in estimating proved oil and gas reserves by agreeing them to source documentation and we identified and evaluated corroborative and contrary evidence. We also tested the mathematical accuracy of the DD&A calculations, including comparing the proved oil and gas reserve amounts used to the Company’s reserve report. +/s/ Ernst & Young LLP +We have served as the Company’s auditor since 2012. +Denver, Colorado +February 25, 2022 +59 +SM ENERGY COMPANY AND SUBSIDIARIES +CONSOLIDATED BALANCE SHEETS +(in thousands, except share data) +December 31, +2021 2020 +ASSETS +Current assets: +Cash and cash equivalents $ 332,716 $ 10 +Accounts receivable 247,201 162,455 +Derivative assets 24,095 31,203 +Prepaid expenses and other 9,175 10,001 +Total current assets 613,187 203,669 +Property and equipment (successful efforts method): +Proved oil and gas properties 9,397,407 8,608,522 +Accumulated depletion, depreciation, and amortization ( 5,634,961 ) ( 4,886,973 ) +Unproved oil and gas properties 629,098 714,602 +Wells in progress 148,394 233,498 +Other property and equipment, net of accumulated depreciation of $ 62,359 and $ 63,662 , respectively +36,060 32,217 +Total property and equipment, net 4,575,998 4,701,866 +Noncurrent assets: +Derivative assets 239 23,150 +Other noncurrent assets 44,553 47,746 +Total noncurrent assets 44,792 70,896 +Total assets $ 5,233,977 $ 4,976,431 +LIABILITIES AND STOCKHOLDERS’ EQUITY +Current liabilities: +Accounts payable and accrued expenses $ 563,306 $ 371,670 +Derivative liabilities 319,506 200,189 +Other current liabilities 6,515 11,880 +Total current liabilities 889,327 583,739 +Noncurrent liabilities: +Revolving credit facility — 93,000 +Senior Notes, net 2,081,164 2,121,319 +Asset retirement obligations 97,324 83,325 +Deferred income taxes 9,769 — +Derivative liabilities 25,696 22,331 +Other noncurrent liabilities 67,566 56,557 +Total noncurrent liabilities 2,281,519 2,376,532 +Commitments and contingencies (note 6) +Stockholders’ equity: +Common stock, $ 0.01 par value - authorized: 200,000,000 shares; issued and outstanding: 121,862,248 and 114,742,304 shares, respectively +1,219 1,147 +Additional paid-in capital 1,840,228 1,827,914 +Retained earnings 234,533 200,697 +Accumulated other comprehensive loss ( 12,849 ) ( 13,598 ) +Total stockholders’ equity 2,063,131 2,016,160 +Total liabilities and stockholders’ equity $ 5,233,977 $ 4,976,431 +The accompanying notes are an integral part of these consolidated financial statements. +60 +SM ENERGY COMPANY AND SUBSIDIARIES +CONSOLIDATED STATEMENTS OF OPERATIONS +(in thousands, except per share data) +For the Years Ended +December 31, +2021 2020 2019 +Operating revenues and other income: +Oil, gas, and NGL production revenue $ 2,597,915 $ 1,126,188 $ 1,585,750 +Other operating income 24,979 485 4,355 +Total operating revenues and other income 2,622,894 1,126,673 1,590,105 +Operating expenses: +Oil, gas, and NGL production expense 505,416 391,217 500,709 +Depletion, depreciation, amortization, and asset retirement obligation liability accretion 774,386 784,987 823,798 +Exploration 39,296 40,997 51,500 +Impairment 35,000 1,016,013 33,842 +General and administrative 111,945 99,160 132,797 +Net derivative (gain) loss 901,659 ( 161,576 ) 97,539 +Other operating expense, net 46,069 24,825 19,888 +Total operating expenses 2,413,771 2,195,623 1,660,073 +Income (loss) from operations 209,123 ( 1,068,950 ) ( 69,968 ) +Interest expense ( 160,353 ) ( 163,892 ) ( 159,102 ) +Net gain (loss) on extinguishment of debt ( 2,139 ) 280,081 — +Other non-operating expense, net ( 464 ) ( 3,944 ) ( 1,974 ) +Income (loss) before income taxes 46,167 ( 956,705 ) ( 231,044 ) +Income tax (expense) benefit ( 9,938 ) 192,091 44,043 +Net income (loss) $ 36,229 $ ( 764,614 ) $ ( 187,001 ) +Basic weighted-average common shares outstanding 119,043 113,730 112,544 +Diluted weighted-average common shares outstanding 123,690 113,730 112,544 +Basic net income (loss) per common share $ 0.30 $ ( 6.72 ) $ ( 1.66 ) +Diluted net income (loss) per common share $ 0.29 $ ( 6.72 ) $ ( 1.66 ) +The accompanying notes are an integral part of these consolidated financial statements. +61 +SM ENERGY COMPANY AND SUBSIDIARIES +CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) +(in thousands) +For the Years Ended +December 31, +2021 2020 2019 +Net income (loss) $ 36,229 $ ( 764,614 ) $ ( 187,001 ) +Other comprehensive income (loss), net of tax: +Pension liability adjustment (1) +749 ( 2,279 ) 1,061 +Total other comprehensive income (loss), net of tax 749 ( 2,279 ) 1,061 +Total comprehensive income (loss) $ 36,978 $ ( 766,893 ) $ ( 185,940 ) +____________________________________________ +(1) Please refer to Note 11 – Pension Benefits for additional discussion of the pension liability adjustment. +The accompanying notes are an integral part of these consolidated financial statements. +62 +SM ENERGY COMPANY AND SUBSIDIARIES +CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY +(in thousands, except share data and dividends per share) +Additional Paid-in Capital Accumulated Other Comprehensive Loss Total Stockholders’ Equity +Common Stock Retained Earnings +Shares Amount +Balances, January 1, 2019 112,241,966 $ 1,122 $ 1,765,738 $ 1,165,842 $ ( 12,380 ) $ 2,920,322 +Net loss — — — ( 187,001 ) — ( 187,001 ) +Other comprehensive income — — — — 1,061 1,061 +Cash dividends, $ 0.10 per share +— — — ( 11,254 ) — ( 11,254 ) +Issuance of common stock under Employee Stock Purchase Plan 314,868 3 3,206 — — 3,209 +Issuance of common stock upon vesting of RSUs, net of shares used for tax withholdings 334,399 4 ( 1,665 ) — — ( 1,661 ) +Stock-based compensation expense 96,719 1 24,317 — — 24,318 +Balances, December 31, 2019 112,987,952 $ 1,130 $ 1,791,596 $ 967,587 $ ( 11,319 ) $ 2,748,994 +Net loss — — — ( 764,614 ) — ( 764,614 ) +Other comprehensive loss — — — — ( 2,279 ) ( 2,279 ) +Cash dividends, $ 0.02 per share +— — — ( 2,276 ) — ( 2,276 ) +Issuance of common stock under Employee Stock Purchase Plan 464,757 4 1,460 — — 1,464 +Issuance of common stock upon vesting of RSUs and settlement of PSUs, net of shares used for tax withholdings 1,022,019 10 ( 1,570 ) — — ( 1,560 ) +Stock-based compensation expense 267,576 3 14,996 — — 14,999 +Issuance of Warrants — — 21,520 — — 21,520 +Other — — ( 88 ) — — ( 88 ) +Balances, December 31, 2020 114,742,304 $ 1,147 $ 1,827,914 $ 200,697 $ ( 13,598 ) $ 2,016,160 +Net income — — — 36,229 — 36,229 +Other comprehensive income — — — — 749 749 +Cash dividends, $ 0.02 per share +— — — ( 2,393 ) — ( 2,393 ) +Issuance of common stock under Employee Stock Purchase Plan 313,773 3 2,636 — — 2,639 +Issuance of common stock upon vesting of RSUs and settlement of PSUs, net of shares used for tax withholdings 827,572 9 ( 9,081 ) — — ( 9,072 ) +Stock-based compensation expense 60,510 1 18,818 — — 18,819 +Issuance of common stock through cashless exercise of Warrants 5,918,089 59 ( 59 ) — — — +Balances, December 31, 2021 121,862,248 $ 1,219 $ 1,840,228 $ 234,533 $ ( 12,849 ) $ 2,063,131 +The accompanying notes are an integral part of these consolidated financial statements. +63 +SM ENERGY COMPANY AND SUBSIDIARIES +CONSOLIDATED STATEMENTS OF CASH FLOWS +(in thousands) +For the Years Ended +December 31, +2021 2020 2019 +Cash flows from operating activities: +Net income (loss) $ 36,229 $ ( 764,614 ) $ ( 187,001 ) +Adjustments to reconcile net income (loss) to net cash provided by operating activities: +Depletion, depreciation, amortization, and asset retirement obligation liability accretion 774,386 784,987 823,798 +Impairment 35,000 1,016,013 33,842 +Stock-based compensation expense 18,819 14,999 24,318 +Net derivative (gain) loss 901,659 ( 161,576 ) 97,539 +Derivative settlement gain (loss) ( 748,958 ) 351,261 39,222 +Amortization of debt discount and deferred financing costs 17,275 17,704 15,474 +Net (gain) loss on extinguishment of debt 2,139 ( 280,081 ) — +Deferred income taxes 9,565 ( 192,540 ) ( 41,835 ) +Other, net ( 3,753 ) ( 6,800 ) 1,358 +Changes in working capital: +Accounts receivable ( 101,047 ) 29,100 ( 39,556 ) +Prepaid expenses and other 220 5,873 6,130 +Accounts payable and accrued expenses 218,238 ( 23,382 ) 50,278 +Net cash provided by operating activities 1,159,772 790,944 823,567 +Cash flows from investing activities: +Net proceeds from the sale of oil and gas properties 10,927 92 13,059 +Capital expenditures ( 674,841 ) ( 547,785 ) ( 1,023,769 ) +Acquisition of proved and unproved oil and gas properties ( 3,321 ) ( 7,873 ) ( 2,581 ) +Net cash used in investing activities ( 667,235 ) ( 555,566 ) ( 1,013,291 ) +Cash flows from financing activities: +Proceeds from revolving credit facility 1,832,500 1,447,000 1,589,000 +Repayment of revolving credit facility ( 1,925,500 ) ( 1,476,500 ) ( 1,466,500 ) +Net proceeds from Senior Notes 392,771 — — +Cash paid to repurchase Senior Notes ( 450,776 ) ( 189,998 ) — +Debt issuance costs related to 10.0% Senior Secured Notes due 2025 — ( 13,069 ) — +Net proceeds from sale of common stock 2,639 1,464 3,209 +Dividends paid ( 2,393 ) ( 2,276 ) ( 11,254 ) +Other, net ( 9,072 ) ( 1,999 ) ( 2,686 ) +Net cash used in financing activities ( 159,831 ) ( 235,378 ) 111,769 +Net change in cash, cash equivalents, and restricted cash 332,706 — ( 77,955 ) +Cash, cash equivalents, and restricted cash at beginning of period 10 10 77,965 +Cash, cash equivalents, and restricted cash at end of period $ 332,716 $ 10 $ 10 +Supplemental schedule of additional cash flow information and non-cash activities: +Operating activities: +Cash paid for interest, net of capitalized interest $ ( 136,606 ) $ ( 140,493 ) $ ( 141,902 ) +Net cash (paid) refunded for income taxes $ ( 864 ) $ 6,664 $ 6,109 +Investing activities: +Decrease in capital expenditure accruals and other $ ( 10,826 ) $ ( 7,965 ) $ ( 24,289 ) +Non-cash investing and financing activities (1)(2) +____________________________________________ +(1) Please refer to Note 16 – Acquisitions, Divestitures, and Assets Held for Sale for discussion of the carrying value of properties exchanged during the years ended December 31, 2021, 2020, and 2019. +(2) Please refer to Note 5 – Long-Term Debt for discussion of the debt transactions completed during the years ended December 31, 2021, and 2020. +The accompanying notes are an integral part of these consolidated financial statements. +64 +SM ENERGY COMPANY AND SUBSIDIARIES +NOTES TO CONSOLIDATED FINANCIAL STATEMENTS +Note 1 – Summary of Significant Accounting Policies +Description of Operations +SM Energy Company, together with its consolidated subsidiaries, is an independent energy company engaged in the acquisition, exploration, development, and production of oil, gas, and NGLs in the state of Texas. +Basis of Presentation +The accompanying consolidated financial statements include the accounts of the Company and have been prepared in accordance with GAAP and the instructions to Form 10-K and Regulation S-X. Intercompany accounts and transactions have been eliminated. In connection with the preparation of the accompanying consolidated financial statements, the Company evaluated events subsequent to the balance sheet date of December 31, 2021, through the filing of this report. Additionally, certain prior period amounts have been reclassified to conform to current period presentation in the accompanying consolidated financial statements. +Use of Estimates in the Preparation of Financial Statements +The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of proved oil and gas reserves, assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Estimates of proved oil and gas reserve quantities provide the basis for the calculation of DD&A expense, impairment of proved and unproved oil and gas properties, and asset retirement obligations, each of which represents a significant component of the accompanying consolidated financial statements. +Cash and Cash Equivalents +The Company considers all liquid investments purchased with an initial maturity of three months or less to be cash equivalents. The carrying value of cash and cash equivalents approximates fair value due to the short-term nature of these instruments. +Accounts Receivable +The Company’s accounts receivable primarily consist of receivables due from oil, gas, and NGL purchasers and from joint interest owners on properties the Company operates. For receivables due from joint interest owners, the Company generally has the ability to withhold future revenue disbursements to recover non-payment of joint interest billings. Generally, the Company’s oil, gas, and NGL receivables are collected within 30 to 90 days and the Company has had minimal bad debts. Although diversified among many companies, collectability is dependent upon the financial wherewithal of each individual company and is influenced by the general economic conditions of the industry. Receivables are not collateralized. Please refer to Note 13 – Accounts Receivable and Accounts Payable and Accrued Expenses for additional disclosure. +Concentration of Credit Risk and Major Customers +The Company is exposed to credit risk in the event of nonpayment by counterparties, a significant portion of which are concentrated in energy related industries. The creditworthiness of customers and other counterparties is subject to regular review. +65 +The Company does not believe the loss of any single purchaser of its production would materially impact its operating results, as oil, gas, and NGLs are products with well-established markets and numerous purchasers in the Company’s operating areas. The following major customers and entities under common control accounted for 10 percent or more of the Company’s total oil, gas, and NGL production revenue for at least one of the periods presented: +For the Years Ended December 31, +2021 2020 2019 +Major customer #1 27 % 15 % 4 % +Major customer #2 18 % 6 % 9 % +Major customer #3 15 % 24 % 13 % +Major customer #4 9 % 20 % 14 % +Major customer #5 1 % — % 18 % +Group #1 of entities under common control (1) +7 % 5 % 13 % +Group #2 of entities under common control (1) +6 % 7 % 11 % +____________________________________________ +(1) In the aggregate, these groups of entities under common control represented purchasers of more than 10 percent of total oil, gas, and NGL production revenue for at least one of the periods presented; however, no individual entity comprising either group was a purchaser of more than 10 percent of the Company’s total oil, gas, and NGL production revenue. +The Company generally contracts with the affiliates of the lenders under its Credit Agreement as its derivative counterparties, and the Company’s policy is that each counterparty must have certain minimum investment grade senior unsecured debt ratings. +The Company maintains its primary bank accounts with a large, multinational bank that has branch locations in the Company’s areas of operations. The Company’s policy is to diversify its concentration of cash and cash equivalent investments among multiple institutions and investment products to limit the amount of credit exposure to any single institution or investment. +Oil and Gas Producing Activities +Proved properties . The Company follows the successful efforts method of accounting for its oil and gas properties. Under this method, property acquisition costs and development costs are capitalized when incurred. Capitalized drilling and completion costs, including lease and well equipment, intangible development costs, and operational support facilities in the field, are depleted on an asset group basis (properties aggregated based on geographical and geological characteristics) using the units-of-production method based on estimated proved developed oil and gas reserves. Similarly, proved leasehold costs are depleted on the same asset group basis; however, the units-of-production method is based on estimated total proved oil and gas reserves. The computation of DD&A expense takes into consideration restoration, dismantlement, and abandonment costs as well as the anticipated proceeds from salvaging equipment. +Proved oil and gas property costs are evaluated for impairment on a pool-by-pool basis and reduced to fair value when there is an indication that associated carrying costs may not be recoverable. The Company uses Level 3 inputs and the income valuation technique, which converts future cash flows to a single present value amount, to measure the fair value of proved properties using a discount rate, price and cost forecasts, and certain reserve risk-adjustment factors, as selected by the Company’s management. The Company uses a discount rate that represents a current market-based weighted average cost of capital. The discount rate typically ranges from 10 percent to 15 percent. The prices for oil and gas are forecasted based on NYMEX strip pricing, adjusted for basis differentials, for the first five years , after which a flat terminal price is used for each commodity stream. The prices for NGLs are forecasted using OPIS Mont Belvieu pricing, for as long as the market is actively trading, after which a flat terminal price is used. Future operating costs are also adjusted as deemed appropriate for these estimates. Certain undeveloped reserve estimates are also risk-adjusted given the risk to related projected cash flows due to performance and exploitation uncertainties. +The partial sale of a proved property within an existing field is accounted for as a normal retirement and no net gain or loss on divestiture activity is recognized as long as the treatment does not significantly affect the units-of-production depletion rate. The sale of a partial interest in an individual proved property is accounted for as a recovery of cost. A net gain or loss on divestiture activity is recognized in the accompanying statements of operations for all other sales of proved properties. +Unproved properties . The unproved oil and gas properties line item on the accompanying consolidated balance sheets (“accompanying balance sheets”) consists of the costs incurred to acquire unproved leases. Leasehold costs allocated to those leases, or partial leases that have associated proved reserves recorded, are reclassified to proved properties and depleted on an asset group basis using the units-of-production method based on estimated total proved oil and gas reserves. Unproved oil and gas property costs are evaluated for impairment and reduced to fair value when there is an indication that the carrying costs may not be recoverable. Lease acquisition costs that are not individually significant are aggregated by asset group and the portion of such costs estimated to be nonproductive prior to lease expiration are recognized as a valuation allowance and amortized over the appropriate period. The estimate of what could be nonproductive is based on historical trends or other information, including current drilling plans and the +66 +Company’s intent to renew leases. To measure the fair value of unproved properties, the Company uses a market approach, which takes into account the following significant assumptions: remaining lease terms, future development plans, risk-weighted potential resource recovery, estimated reserve values, and estimated acreage value based on price(s) received for similar, recent acreage transactions by the Company or other market participants. +For the sale of unproved properties where the original cost has been partially or fully amortized by providing a valuation allowance on an asset group basis, neither a gain nor loss is recognized unless the sales price exceeds the original cost of the property, in which case a gain shall be recognized in the accompanying statements of operations in the amount of such excess. +Exploratory . Exploratory geological and geophysical, including exploratory seismic studies, and the costs of carrying and retaining unproved acreage are expensed as incurred. Under the successful efforts method of accounting for oil and gas properties, exploratory well costs are initially capitalized pending the determination of whether proved reserves have been discovered. If proved reserves are discovered, exploratory well costs will be capitalized as proved properties and will be accounted for following the successful efforts method of accounting described above. If proved reserves are not found, exploratory well costs are expensed as dry holes. The application of the successful efforts method of accounting requires management’s judgment to determine the proper designation of wells as either development or exploratory, which will ultimately determine the proper accounting treatment of costs of dry holes. Once a well is drilled, the determination that proved reserves have been discovered may take considerable time and judgment. Exploratory dry hole costs are included in the cash flows from investing activities section as part of capital expenditures within the accompanying statements of cash flows. +Please refer to Note 8 – Fair Value Measurements for additional information. +Other Property and Equipment +Other property and equipment such as facilities, office furniture and equipment, buildings, and computer hardware and software are recorded at cost. The Company capitalizes certain software costs incurred during the application development stage. The application development stage generally includes software design, configuration, testing, and installation activities. Costs of renewals and improvements that substantially extend the useful lives of the assets are capitalized. Maintenance and repair costs are expensed when incurred. Depreciation is calculated using either the straight-line method over the estimated useful lives of the assets, which range from three to 30 years, or the unit of output method when appropriate. When other property and equipment is sold or retired, the capitalized costs and related accumulated depreciation are removed from the Company’s accounts. +Other property and equipment costs are evaluated for impairment and reduced to fair value when there is an indication the carrying costs may not be recoverable. To measure the fair value of other property and equipment, the Company uses an income valuation technique or market approach depending on the quality of information available to support management’s assumptions and the circumstances. The valuation includes consideration of the proved and unproved assets supported by the property and equipment, future cash flows associated with the assets, and fixed costs necessary to operate and maintain the assets. +Asset Retirement Obligations +The Company recognizes an estimated liability for future costs associated with the abandonment of its oil and gas properties, including facilities requiring decommissioning. A liability for the fair value of an asset retirement obligation and corresponding increase to the carrying value of the related long-lived asset are recorded at the time a well is drilled or acquired, or a facility is constructed. The increase in carrying value is included in the proved oil and gas properties line item in the accompanying balance sheets. The Company depletes the amount added to proved oil and gas property costs and recognizes expense in connection with the accretion of the discounted liability over the remaining estimated economic lives of the respective long-lived assets. Cash paid to settle asset retirement obligations is included in the cash flows from operating activities section of the accompanying statements of cash flows. +The Company’s estimated asset retirement obligation liability is based on historical experience in plugging and abandoning wells, estimated economic lives, estimated plugging and abandonment cost, and federal and state regulatory requirements. The liability is discounted using the credit-adjusted risk-free rate estimated at the time the liability is incurred or revised. The credit-adjusted risk-free rates used to discount the Company’s plugging and abandonment liabilities range from 5.5 percent to 12 percent. In periods subsequent to initial measurement of the liability, the Company must recognize period-to-period changes in the liability resulting from the passage of time, revisions to either the amount of the original estimate of undiscounted cash flows or economic life, or changes in inflation factors or the Company’s credit-adjusted risk-free rate as market conditions warrant. Please refer to Note 14 – Asset Retirement Obligations for a reconciliation of the Company’s total asset retirement obligation liability as of December 31, 2021, and 2020. +Derivative Financial Instruments +The Company periodically enters into commodity derivative instruments to mitigate a portion of its exposure to oil, gas, and NGL price volatility and location differentials for its expected future oil, natural gas, and NGL production, and the associated impact on cash flows. These instruments typically include commodity price swaps and costless collars, as well as, basis differential and roll +67 +differential swaps. Commodity derivative instruments are measured at fair value and are included in the accompanying balance sheets as derivative assets and liabilities, with the exception of derivative instruments that meet the “normal purchase normal sale” exclusion. The Company does not designate its commodity derivative contracts as hedging instruments. Accordingly, the Company reflects changes in the fair value of its derivative instruments in its accompanying statements of operations as they occur. Gains and losses on derivatives are included within the cash flows from operating activities section of the accompanying statements of cash flows. Please refer to Note 10 – Derivative Financial Instruments for additional discussion. +Revenue Recognition +The Company derives revenue predominately from the sale of produced oil, gas, and NGLs. Revenue is recognized at the point in time when custody and title (“control”) of the product transfers to the purchaser, which may differ depending on the applicable contractual terms. Revenue accruals are recorded monthly and are based on estimated production delivered to a purchaser and the expected price to be received. We use our knowledge of our properties, contractual arrangements, historical performance, NYMEX, local spot market, and OPIS prices, and other factors as the basis of these estimates. Variances between estimates and the actual amounts received are recorded in the month payment is received. Please refer to Note 2 - Revenue from Contracts with Customers for additional discussion. +Stock-Based Compensation +At December 31, 2021, the Company had stock-based employee compensation plans that included RSUs and PSUs issued to employees, RSUs and restricted stock issued to non-employee directors, and an employee stock purchase plan available to eligible employees. The Company records expense associated with the fair value of stock-based compensation in accordance with authoritative accounting guidance, which is based on the estimated fair value of these awards determined at the time of grant, and is included within the general and administrative and exploration expense line items in the accompanying statements of operations. For stock-based compensation awards containing non-market based performance conditions, the Company evaluates the probability of the number of shares that are expected to vest, and then adjusts the expense to reflect the number of shares expected to vest and the cumulative vesting period met to date. Further, the Company accounts for forfeitures of stock-based compensation awards as they occur. Please refer to Note 7 – Compensation Plans for additional discussion . +Income Taxes +The Company accounts for deferred income taxes whereby deferred tax assets and liabilities are recognized based on the tax effects of temporary differences between the carrying amounts on the accompanying consolidated financial statements and the tax basis of assets and liabilities, as measured using current enacted tax rates. These differences will result in taxable income or deductions in future years when the reported amounts of the assets or liabilities are recorded or settled, respectively. The Company records deferred tax assets and associated valuation allowances, when appropriate, to reflect amounts more likely than not to be realized based upon Company analysis. The cumulative effect of enacted tax rate changes on the net balance of reported amounts of assets and liabilities is recognized in the period of enactment. Please refer to Note 4 – Income Taxes for additional discussion. +Earnings per Share +The Company uses the treasury stock method to determine the effect of potentially dilutive instruments. Please refer to Note 9 - Earnings Per Share for additional discussion. +Comprehensive Income (Loss) +Comprehensive income (loss) is used to refer to net income (loss) plus other comprehensive income (loss). Other comprehensive income (loss) is comprised of revenues, expenses, gains, and losses that under GAAP are reported as separate components of stockholders’ equity instead of net income (loss). Comprehensive income (loss) is presented net of income taxes in the accompanying consolidated statements of comprehensive income (loss) (“accompanying statements of comprehensive income (loss)”). The Company’s policy for releasing income tax effects within accumulated other comprehensive loss is an incremental, unit-of-account approach. Please refer to Note 11 – Pension Benefits for detail on the changes in the balances of components comprising other comprehensive income (loss). +Fair Value of Financial Instruments +The Company’s financial instruments including cash and cash equivalents, accounts receivable, and accounts payable are carried at cost, which approximates fair value due to the short-term maturity of these instruments. The recorded value of the Company’s revolving credit facility approximates its fair value as it bears interest at a floating rate that approximates a current market rate. The Company had no outstanding balance under its revolving credit facility as of December 31, 2021, and had a $ 93.0 million balance as of December 31, 2020. The Company’s Senior Notes, as defined in Note 5 – Long-Term Debt , are recorded at cost, net of any unamortized discount and deferred financing costs, and their respective fair values are disclosed in Note 8 – Fair Value Measurements. The Company’s Warrants, as defined in Note 3 - Equity , were recorded at fair value upon issuance, with no recurring +68 +fair value measurement required. Additionally, the Company has derivative financial instruments that are recorded at fair value. Considerable judgment is required to develop estimates of fair value. The estimates provided are not necessarily indicative of the amounts the Company would realize upon the sale or refinancing of such instruments. +Leases +The Company accounts for leases in accordance with ASC Topic 842, Leases , (“Topic 842”), which requires lessees to recognize operating and finance leases with terms greater than 12 months on the balance sheet. The Company evaluates a contractual arrangement at its inception to determine if it is a lease or contains an identifiable lease component. Certain leases may contain both lease and non-lease components. The Company’s policy for all asset classes is to combine lease and non-lease components together and account for the arrangement as a single lease. +Certain assumptions and judgments made by the Company when evaluating a contract that meets the definition of a lease under Topic 842 include those to determine the discount rate and lease term. Unless implicitly defined, the Company determines the present value of future lease payments using an estimated incremental borrowing rate based on a yield curve analysis that factors in certain assumptions, including the term of the lease and credit rating of the Company at lease inception. The Company evaluates each contract containing a lease arrangement at inception to determine the length of the lease term when recognizing a right-of-use (“ROU”) asset and corresponding lease liability. When determining the lease term, options available to extend or early terminate the arrangement are evaluated and included when it is reasonably certain an option will be exercised. Exercising an early termination option may result in an early termination penalty depending on the terms of the underlying agreement. The Company excludes from the balance sheet leases with terms that are less than one year. +A ROU asset represents a lessee’s right to use an underlying asset for the lease term, while the associated lease liability represents the lessee’s obligations to make lease payments. At the commencement date, which is the date on which a lessor makes an underlying asset available for use by a lessee, a lease ROU asset and corresponding lease liability is recognized based on the present value of the future lease payments. The initial measurement of lease payments may also be adjusted for certain items, including options that are reasonably certain to be exercised, such as options to purchase the asset at the end of the lease term, or options to extend or early terminate the lease. Excluded from the initial measurement of a ROU asset and corresponding lease liability are certain variable lease payments, such as payments made that vary depending on actual usage or performance. +Subsequent to initial measurement, costs associated with the Company’s operating leases are either expensed or capitalized depending on how the underlying ROU asset is utilized and in accordance with GAAP requirements. When calculating the Company’s ROU asset and liability for a contractual arrangement that qualifies as an operating lease, the Company considers all of the necessary payments made or that are expected to be made upon commencement of the lease. As discussed above, excluded from the initial measurement are certain variable lease payments, which for the Company’s drilling rigs, completion crews, and midstream agreements, may be a significant component of the total lease costs. Please refer to Note 12 - Leases for additional discussion. +Industry Segment and Geographic Information +The Company operates in the exploration and production segment of the oil and gas industry, onshore in the United States. The Company reports as a single industry segment. +Off-Balance Sheet Arrangements +The Company has not participated in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or SPEs, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. +The Company evaluates its transactions to determine if any variable interest entities exist. If it is determined that the Company is the primary beneficiary of a variable interest entity, that entity is consolidated into the Company’s consolidated financial statements. The Company has not been involved in any unconsolidated SPE transactions during 2021 or 2020, or through the filing of this report. +Recently Issued Accounting Standards +In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”), and in January 2021, issued ASU No. 2021-01, Reference Rate Reform (Topic 848): Scope (“ASU 2021-01”), to provide clarifying guidance regarding the scope of Topic 848. ASU 2020-04 was issued to provide optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. Generally, the guidance is to be applied as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued. ASU 2020-04 and ASU 2021-01 are effective for all entities through December 31, 2022. The Company has elected not to use the optional guidance provided by these +69 +ASUs. Please refer to Note 5 – Long-Term Debt for discussion of the use of the LIBOR in connection with borrowings under the Credit Agreement. +In August 2020, the FASB issued ASU No. 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”). ASU 2020-06 was issued to reduce the complexity associated with accounting for certain financial instruments with characteristics of liabilities and equity. The guidance is to be applied using either a modified retrospective or a fully retrospective method. ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, with early adoption permitted. The Company adopted ASU 2020-06 on January 1, 2022, and there was no material impact on the Company’s accompanying consolidated financial statements or related disclosures. +As of December 31, 2021, and through the filing of this report, no other ASUs have been issued that are applicable to the Company and that would have a material effect on the Company’s consolidated financial statements and related disclosures. +Note 2 - Revenue from Contracts with Customers +The Company recognizes its share of revenue from the sale of produced oil, gas, and NGLs from its Midland Basin and South Texas assets. Oil, gas, and NGL production revenue presented within the accompanying statements of operations is reflective of the revenue generated from contracts with customers. +The tables below present oil, gas, and NGL production revenue by product type for each of the Company’s operating areas for the years ended December 31, 2021, 2020, and 2019: +For the year ended December 31, 2021 +Midland Basin South Texas Total +(in thousands) +Oil production revenue $ 1,701,915 $ 189,911 $ 1,891,826 +Gas production revenue 326,115 199,364 525,479 +NGL production revenue 381 180,229 180,610 +Total $ 2,028,411 $ 569,504 $ 2,597,915 +Relative percentage 78 % 22 % 100 % +For the year ended December 31, 2020 +Midland Basin South Texas Total +(in thousands) +Oil production revenue $ 802,494 $ 51,074 $ 853,568 +Gas production revenue 76,759 110,700 187,459 +NGL production revenue 324 84,837 85,161 +Total $ 879,577 $ 246,611 $ 1,126,188 +Relative percentage 78 % 22 % 100 % +For the year ended December 31, 2019 +Midland Basin South Texas Total +(in thousands) +Oil production revenue $ 1,119,786 $ 63,426 $ 1,183,212 +Gas production revenue 75,827 186,702 262,529 +NGL production revenue 123 139,886 140,009 +Total $ 1,195,736 $ 390,014 $ 1,585,750 +Relative percentage 75 % 25 % 100 % +The Company recognizes oil, gas, and NGL production revenue at the point in time when control of the product transfers to the purchaser, which differs depending on the applicable contractual terms. Transfer of control drives the presentation of transportation, gathering, processing, and other post-production expenses (“fees and other deductions”) within the accompanying statements of operations. Fees and other deductions incurred by the Company prior to control transfer are recorded within the oil, gas, and NGL production expense line item on the accompanying statements of operations. When control is transferred at or near the wellhead, sales +70 +are based on a wellhead market price that is impacted by fees and other deductions incurred by the purchaser subsequent to the transfer of control. In general, the Company generates production revenue from a combination of the following types of contracts: +• The Company sells oil and gas production at or near the wellhead and receives an agreed-upon market price from the purchaser. Under this type of arrangement, control transfers at or near the wellhead. +• The Company has certain processing arrangements that include the delivery of unprocessed gas to a midstream processor’s facility for processing. Upon completion of processing, the midstream processor purchases the NGLs and redelivers residue gas back to the Company in-kind. For the NGLs extracted during processing, the midstream processor remits payment to the Company. For the residue gas taken in-kind, the Company has separate sales contracts where control transfers at points downstream of the processing facility. The Company also has certain oil sales that occur at market locations downstream of the production area. Given the structure of these arrangements and where control transfers, the Company separately recognizes fees and other deductions incurred prior to control transfer. These fees are recorded within the oil, gas, and NGL production expense line item on the accompanying statements of operations. +Significant judgments made in applying the guidance in ASC Topic 606, Revenue from Contracts with Customers, relate to the point in time when control transfers to purchasers in gas processing arrangements with midstream processors. The Company does not believe that significant judgments are required with respect to the determination of the transaction price, including amounts that represent variable consideration, as volume and price carry a low level of estimation uncertainty given the precision of volumetric measurements and the use of index pricing with generally predictable differentials. Accordingly, the Company does not consider estimates of variable consideration to be constrained. +The Company’s performance obligations arise upon the production of hydrocarbons from wells in which the Company has an ownership interest. The performance obligations are considered satisfied upon control transferring to a purchaser at the wellhead, inlet, or tailgate of the midstream processor’s processing facility, or other contractually specified delivery point. The time period between production and satisfaction of performance obligations is generally less than one day; thus, there are no material unsatisfied or partially unsatisfied performance obligations at the end of the reporting period. +Revenue is recorded in the month when performance obligations are satisfied. However, settlement statements from the purchasers of hydrocarbons and the related cash consideration are received 30 to 90 days after production has occurred. As a result, the Company must estimate the amount of production delivered to its customers and the consideration that will ultimately be received for sale of the product. Estimated revenue due to the Company is recorded within the accounts receivable line item on the accompanying balance sheets until payment is received. The accounts receivable balances from contracts with customers within the accompanying balance sheets as of December 31, 2021, and 2020, were $ 215.6 million and $ 108.9 million, respectively. To estimate accounts receivable from contracts with customers, the Company uses knowledge of its properties, historical performance, contractual arrangements, index pricing, quality and transportation differentials, and other factors as the basis for these estimates. Differences between estimates and actual amounts received for product sales are recorded in the month that payment is received from the purchaser. +Note 3 - Equity +On June 17, 2020, in connection with the Exchange Offers described below in Note 5 – Long-Term Debt , the Company issued warrants to purchase up to an aggregate of approximately 5.9 million shares, or approximately five percent of its then outstanding common stock, at an exercise price of $ 0.01 per share (“Warrants”). +Upon issuance, the $ 21.5 million fair value of the Warrants was recorded in additional paid-in capital on the accompanying balance sheets, and was determined using a stochastic Monte Carlo simulation using geometric Brownian motion (“GBM Model”). The Company evaluated the Warrants under authoritative accounting guidance and determined that they should be classified as equity instruments, with no recurring fair value measurement required. There have been no changes to the initial carrying amount of the Warrants since issuance. +The Warrant Agreement, dated as of June 17, 2020 (“Warrant Agreement”), provides that the Warrants are exercisable any time from and after the Triggering Date, as subsequently defined, until June 30, 2023 . The Triggering Date, which occurred on January 15, 2021 , is defined by the Warrant Agreement as the first trading day following five consecutive trading days on which the product of the number of shares of common stock issued and outstanding on four of the five trading days multiplied by the closing price per share of common stock for each such trading day exceeds $ 1.0 billion (“Triggering Date”). The Warrants are indexed to the Company’s common stock and are required to be settled through physical settlement or net share settlement, if exercised. +During 2021, the Company issued 5,918,089 shares of common stock as a result of the cashless exercise of 5,922,260 Warrants at a weighted-average share price of $ 15.45 per share, as determined under the terms of the Warrant Agreement. At the request of stockholders and pursuant to the Company’s obligations under the Warrant Agreement, a registration statement covering the resale of a majority of these shares was filed with the SEC on June 11, 2021. The unexercised Warrants will remain exercisable at the election of the holders until their expiration on June 30, 2023 . +71 +Note 4 – Income Taxes +The provision for income taxes consists of the following: +For the Years Ended December 31, +2021 2020 2019 +(in thousands) +Current portion of income tax (expense) benefit +Federal $ — $ — $ 3,826 +State ( 373 ) ( 449 ) ( 1,618 ) +Deferred portion of income tax (expense) benefit ( 9,565 ) 192,540 41,835 +Income tax (expense) benefit $ ( 9,938 ) $ 192,091 $ 44,043 +Effective tax rate 21.5 % 20.1 % 19.1 % +The components of the net deferred tax liabilities are as follows: +As of December 31, +2021 2020 +(in thousands) +Deferred tax liabilities +Oil and gas properties excluding asset retirement obligation liabilities $ 117,085 $ 83,816 +Other 4,835 10,054 +Total deferred tax liabilities 121,920 93,870 +Deferred tax assets +Derivative liabilities 69,283 36,311 +Asset retirement obligation liabilities 21,899 18,424 +Debt discount and deferred financing costs 20,551 23,925 +Pension 7,413 7,183 +Federal and state tax net operating loss carryovers 3,299 3,898 +Stock compensation 2,246 2,701 +Credit carryover 897 7,543 +Other liabilities 5,024 7,273 +Total deferred tax assets 130,612 107,258 +Valuation allowance ( 18,461 ) ( 13,388 ) +Net deferred tax assets 112,151 93,870 +Total net deferred tax liabilities $ 9,769 $ — +Current state income tax payable $ 362 $ 853 +As of December 31, 2021, the Company estimated complete utilization of its federal net operating loss (“NOL”). The Company has state NOL carryforwards of $ 4.2 million and de minimus state tax credits which expire between 2022 and 2037. The Company’s current valuation allowance includes an amount for state NOL carryforwards and state tax credits, which are expected to expire before they can be utilized. The Company estimated its federal research and development (“R&D”) credit carryforward at $ 0.9 million, which will expire between 2028 and 2033 if not used, but the Company expects to utilize this credit before it expires. The remaining valuation allowance includes amounts related primarily to the Company’s net derivative liabilities, a portion of which the Company estimates will convert to an unused federal NOL in future years as a result of having cumulative financial statement losses exceeding cumulative financial statement income for the periods included in the Company’s accompanying statements of operations. +Recorded income tax expense or benefit differs from the amount that would be provided by applying the statutory United States federal income tax rate to income or loss before income taxes. These differences primarily relate to the effect of state income taxes, excess tax benefits and deficiencies from stock-based compensation awards, tax limitations on compensation of covered individuals, changes in valuation allowances, the cumulative impact of other smaller permanent differences, and can also reflect the +72 +cumulative effect of an enacted tax rate change, in the period of enactment, on the Company’s net deferred tax asset and liability balance. These differences are reported as follows: +For the Years Ended December 31, +2021 2020 2019 +(in thousands) +Federal statutory tax (expense) benefit $ ( 9,695 ) $ 200,908 $ 48,519 +(Increase) decrease in tax resulting from: +Employee share-based compensation 3,080 ( 2,578 ) ( 3,346 ) +Acquisition basis, expired statute of limitation 1,658 — — +Return to provision 1,230 ( 857 ) ( 152 ) +State tax (expense) benefit (net of federal benefit) ( 211 ) 5,722 ( 260 ) +Compensation of covered individuals ( 1,216 ) ( 719 ) ( 471 ) +Change in valuation allowance ( 5,073 ) ( 10,318 ) 13 +Other +289 ( 67 ) ( 260 ) +Income tax (expense) benefit $ ( 9,938 ) $ 192,091 $ 44,043 +Acquisitions, divestitures, drilling activity, and basis differentials, which impact the prices received for oil, gas, and NGLs, impact the apportionment of taxable income to the states where the Company owns oil and gas properties. As these factors change, the Company’s state income tax rate changes. This change, when applied to the Company’s total temporary differences, impacts the total state income tax (expense) benefit reported in the current year. Items affecting state apportionment factors are evaluated upon completion of the prior year income tax return, after significant acquisitions and divestitures, if there are significant changes in drilling activity, or if estimated state revenue changes occur during the year. During the year ended December 31, 2021, the Company recorded tax benefit and expense items which decreased the Company’s change in valuation allowance and resulted in a net zero impact to the Company’s 2021 tax rate. +The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted on March 27, 2020. The primary feature of the CARES Act that the Company benefited from was the acceleration of its refundable Alternative Minimum Tax (“AMT”) credits. On April 1, 2020, the Company filed an election to accelerate its remaining refundable AMT credits of $ 7.6 million. The Company received the refund in July 2020. +For all years before 2018, the Company is generally no longer subject to United States federal or state income tax examinations by tax authorities. +The Company complies with authoritative accounting guidance regarding uncertain tax provisions. The entire amount of unrecognized tax benefit reported by the Company would affect its effective tax rate if recognized. Interest expense in the accompanying statements of operations includes a negligible amount associated with income taxes. The total amount recorded for unrecognized tax benefits for each of the years ended December 31, 2021, 2020, and 2019, was $ 0.4 million. The Company does not expect a significant change to the recorded unrecognized tax benefits in 2022. +Note 5 – Long-Term Debt +The following table summarizes the Company’s total outstanding balance on its revolving credit facility, Senior Secured Notes net of unamortized discount and deferred financing costs, and Senior Unsecured Notes net of unamortized deferred financing costs, as of December 31, 2021, and 2020: +As of December 31, 2021 As of December 31, 2020 +(in thousands) +Revolving credit facility $ — $ 93,000 +Senior Secured Notes (1) +407,712 460,656 +Senior Unsecured Notes (1) +1,673,452 1,660,663 +Total $ 2,081,164 $ 2,214,319 +____________________________________________ +(1) Senior Secured Notes and Senior Unsecured Notes are defined below. +73 +Credit Agreement +The Company’s Credit Agreement, which is scheduled to mature on September 28, 2023, provides for a senior secured revolving credit facility with a maximum loan amount of $ 2.5 billion. As of December 31, 2021, the borrowing base and aggregate lender commitments under the Credit Agreement were $ 1.1 billion. The next borrowing base redetermination date is scheduled for April 1, 2022. On June 8, 2021, the Company entered into a sixth amendment to the Credit Agreement which amended certain definitions and covenants relating to the Company's ability to issue permitted refinancing debt and to repurchase or redeem outstanding indebtedness to facilitate the Tender Offer and the 2022 Senior Notes Redemption, each as defined below. +Interest and commitment fees associated with the revolving credit facility are accrued based on a borrowing base utilization grid set forth in the Credit Agreement, as presented in the table below. At the Company’s election, borrowings under the Credit Agreement may be in the form of Eurodollar, Alternate Base Rate (“ABR”), or Swingline loans. Eurodollar loans accrue interest at LIBOR, plus the applicable margin from the utilization grid, and ABR and Swingline loans accrue interest at a market-based floating rate, plus the applicable margin from the utilization grid. Commitment fees are accrued on the unused portion of the aggregate lender commitment amount at rates from the utilization grid and are included in the interest expense line item on the accompanying statements of operations. +Borrowing Base Utilization Percentage <25% ≥25% <50% ≥50% <75% ≥75% <90% ≥90% +Eurodollar Loans (1) +1.750 % 2.000 % 2.500 % 2.750 % 3.000 % +ABR Loans or Swingline Loans 0.750 % 1.000 % 1.500 % 1.750 % 2.000 % +Commitment Fee Rate 0.375 % 0.375 % 0.500 % 0.500 % 0.500 % +____________________________________________ +(1) LIBOR was discontinued as a global reference rate for new loans and contracts after December 31, 2021. The Credit Agreement specifies that if LIBOR is no longer a widely used benchmark rate, or if it is no longer used for determining interest rates for loans in the United States, a replacement interest rate that fairly reflects the cost to the lenders of funding loans shall be established by the Administrative Agent, as defined in the Credit Agreement, in consultation with the Company. During 2022, in advance of the maturity date of the Company’s existing Credit Agreement, the Company expects to enter into a new credit agreement that will, in addition to other negotiated terms, conditions, agreements, and other provisions, specify a new interest rate for Eurodollar loans. The Company does not expect to incur borrowings in the form of Eurodollar loans prior to that time. Please refer to Note 1 – Summary of Significant Accounting Policies for discussion of FASB ASU 2020-04 and ASU 2021-01, which provide guidance related to reference rate reform . +The following table presents the outstanding balance, total amount of letters of credit outstanding, and available borrowing capacity under the Credit Agreement as of February 10, 2022, December 31, 2021, and December 31, 2020: +As of February 10, 2022 As of December 31, 2021 As of December 31, 2020 +(in thousands) +Revolving credit facility (1) +$ — $ — $ 93,000 +Letters of credit (2) +2,500 2,500 42,000 +Available borrowing capacity 1,097,500 1,097,500 965,000 +Total aggregate lender commitment amount $ 1,100,000 $ 1,100,000 $ 1,100,000 +____________________________________________ +(1) Unamortized deferred financing costs attributable to the revolving credit facility are presented as a component of the other noncurrent assets line item on the accompanying balance sheets and totaled $ 2.7 million and $ 4.3 million as of December 31, 2021, and 2020, respectively. These costs are being amortized over the term of the revolving credit facility on a straight-line basis. +(2) Letters of credit outstanding reduce the amount available under the revolving credit facility on a dollar-for-dollar basis. +74 +Senior Secured Notes +Senior Secured Notes, net of unamortized discount and deferred financing costs, included within the Senior Notes, net line item on the accompanying balance sheets as of December 31, 2021, and December 31, 2020, consisted of the following (collectively referred to as “Senior Secured Notes”): +As of December 31, 2021 +Principal Amount Unamortized Debt Discount Unamortized Deferred Financing Costs Net +(in thousands) +10.0 % Senior Secured Notes due 2025 +$ 446,675 $ 30,236 $ 8,727 $ 407,712 +As of December 31, 2020 +Principal Amount Unamortized Debt Discount Unamortized Deferred Financing Costs Net +(in thousands) +1.50 % Senior Secured Convertible Notes due 2021 +$ 65,485 $ 1,828 $ 175 $ 63,482 +10.0 % Senior Secured Notes due 2025 +446,675 37,943 11,558 397,174 +Total $ 512,160 $ 39,771 $ 11,733 $ 460,656 +The Senior Secured Notes listed above are senior obligations of the Company, secured on a second-priority basis, ranking junior to the Company’s obligations under the Credit Agreement. The Senior Secured Notes rank senior in right of payment with all of the Company’s existing and any future unsecured senior or subordinated debt. +2021 Senior Secured Convertible Notes . On August 12, 2016, the Company issued $ 172.5 million in aggregate principal amount of 1.50 % Senior Convertible Notes with a maturity date of July 1, 2021 (“2021 Senior Convertible Notes”). +Upon issuance of the 2021 Senior Convertible Notes, the Company received net proceeds of $ 166.6 million after deducting fees of $ 5.9 million, of which a portion was amortized over the life of the 2021 Senior Convertible Notes. The Company recorded $ 132.3 million as the initial carrying amount of the debt component, which approximated its fair value at issuance, and was estimated by using an interest rate for nonconvertible debt with terms similar to the Senior Convertible Notes. The effective interest rate used was 7.25 %. The $ 40.2 million excess of the principal amount of the 2021 Senior Convertible Notes over the fair value of the debt component was recorded as a debt discount and a corresponding increase in additional paid-in capital. The Company incurred fees of $ 5.9 million relating to the issuance of the 2021 Senior Convertible Notes, which were allocated between the debt and equity components in proportion to their determined fair value amounts. +In connection with the issuance of the 2021 Senior Convertible Notes, the Company entered into capped call transactions with affiliates of the underwriters of such issuance. The aggregate cost of the capped call transactions was approximately $ 24.2 million. The Company classified the costs associated with the capped call transactions as equity instruments with no recurring fair value measurement recorded. The capped call transactions expired upon the maturity of the 2021 Senior Convertible Notes on July 1, 2021. +During the second quarter of 2020, the Company agreed to satisfy any conversion obligation solely in cash, resulting in the reclassification of the fair value of the equity components related to the debt discount and the capped call transactions out of additional paid-in capital. The debt discount and debt-related issuance costs were amortized to the principal value of the 2021 Senior Secured Convertible Notes as interest expense through the maturity date. Interest expense recognized on the 2021 Senior Secured Convertible Notes related to the stated interest rate and amortization of the debt discount and totaled $ 2.3 million, $ 7.7 million, and $ 11.0 million for the years ended December 31, 2021, 2020, and 2019, respectively. +Upon the closing of the Exchange Offers on June 17, 2020, the Company retired $ 107.0 million in aggregate principal amount of its 2021 Senior Convertible Notes and at that time, the remaining outstanding 2021 Senior Convertible Notes became secured and are subsequently referred to as “2021 Senior Secured Convertible Notes”. The Company canceled all 2021 Senior Convertible Notes that were retired upon closing of the Exchange Offers. See below for additional discussion and definition of Exchange Offers. On July 1, 2021, the Company used borrowings under its revolving credit facility to retire, at par, the remaining outstanding principal amount of $ 65.5 million. +2025 Senior Secured Notes . On June 17, 2020, the Company issued $ 446.7 million in aggregate principal amount of 10.0 % Senior Secured Notes (“2025 Senior Secured Notes”), at par, which mature on January 15, 2025. The Company incurred fees of $ 13.1 million, which are being amortized as deferred financing costs over the life of the 2025 Senior Secured Notes. Upon the issuance of the 2025 Senior Secured Notes, the Company recorded $ 405.0 million as the initial carrying amount, which approximated their fair +75 +value at issuance. The excess of the principal amount of the 2025 Senior Secured Notes over its fair value was recorded as a debt discount. The debt discount and deferred financing costs are being amortized to interest expense through the maturity date. The Company may redeem some or all of its 2025 Senior Secured Notes prior to their maturity at redemption prices based on a premium, plus accrued and unpaid interest, as described in the indenture governing the 2025 Senior Secured Notes. +Senior Unsecured Notes +Senior Unsecured Notes, net of unamortized deferred financing costs, included within the Senior Notes, net line item on the accompanying balance sheets as of December 31, 2021, and 2020, consisted of the following: +As of December 31, 2021 As of December 31, 2020 +Principal Amount Unamortized Deferred Financing Costs Principal Amount, Net Principal Amount Unamortized Deferred Financing Costs Principal Amount, Net +(in thousands) +6.125 % Senior Notes due 2022 +$ — $ — $ — $ 212,403 $ 855 $ 211,548 +5.0 % Senior Notes due 2024 +104,769 403 104,366 277,034 1,576 275,458 +5.625 % Senior Notes due 2025 +349,118 2,160 346,958 349,118 2,792 346,326 +6.75 % Senior Notes due 2026 +419,235 3,270 415,965 419,235 3,970 415,265 +6.625 % Senior Notes due 2027 +416,791 3,949 412,842 416,791 4,725 412,066 +6.5 % Senior Notes due 2028 +400,000 6,679 393,321 — — — +Total $ 1,689,913 $ 16,461 $ 1,673,452 $ 1,674,581 $ 13,918 $ 1,660,663 +The senior unsecured notes listed above (collectively referred to as “Senior Unsecured Notes,” and together with the Senior Secured Notes, “Senior Notes”) are unsecured senior obligations and rank equal in right of payment with all of the Company’s existing and any future unsecured senior debt and are senior in right of payment to any future subordinated debt. The Company may redeem some or all of its Senior Unsecured Notes prior to their maturity at redemption prices based on a premium, plus accrued and unpaid interest as described in the indentures governing the Senior Unsecured Notes. Fees incurred upon issuance of each series of Senior Unsecured Notes are being amortized as deferred financing costs over the life of the respective notes, unless earlier redeemed or retired, in which case amortization has been proportionately accelerated. +2022 Senior Notes. On November 17, 2014, the Company issued $ 600.0 million in aggregate principal amount of 6.125 % Senior Notes due 2022, at par, which mature on November 15, 2022 (“2022 Senior Notes”). The Company received net proceeds of $ 590.0 million after deducting fees of $ 10.0 million. +2024 Senior Notes. On May 20, 2013, the Company issued $ 500.0 million in aggregate principal amount of 5.0 % Senior Notes due 2024, at par, which mature on January 15, 2024 (“2024 Senior Notes”). The Company received net proceeds of $ 490.2 million after deducting fees of $ 9.8 million. +2025 Senior Notes. On May 21, 2015, the Company issued $ 500.0 million in aggregate principal amount of 5.625 % Senior Notes due 2025, at par, which mature on June 1, 2025. The Company received net proceeds of $ 491.0 million after deducting fees of $ 9.0 million. +2026 Senior Notes. On September 12, 2016, the Company issued $ 500.0 million in aggregate principal amount of 6.75 % Senior Notes due 2026, at par, which mature on September 15, 2026. The Company received net proceeds of $ 491.6 million after deducting fees of $ 8.4 million. +2027 Senior Notes. On August 20, 2018, the Company issued $ 500.0 million in aggregate principal amount of 6.625 % Senior Notes due 2027, at par, which mature on January 15, 2027. The Company received net proceeds of $ 492.1 million after deducting fees of $ 7.9 million. +2028 Senior Notes. On June 23, 2021, the Company issued $ 400.0 million in aggregate principal amount of 6.5 % Senior Notes due 2028, at par, which mature on July 15, 2028 (“2028 Senior Notes”). The Company received net proceeds of $ 392.8 million after deducting fees of $ 7.2 million. +Senior Notes Activity +2022 Senior Notes Transactions. On February 14, 2022, the Company redeemed the remaining $ 104.8 million of aggregate principal amount outstanding of its 2024 Senior Notes, with cash on hand, pursuant to the terms of the indenture governing the 2024 Senior Notes which provided for a redemption price equal to 100 percent of the principal amount of the 2024 Senior Notes on the date +76 +of redemption, plus accrued and unpaid interest. Upon redemption, the Company accelerated the amortization of all remaining previously unamortized deferred financing costs. +2021 Senior Notes Transactions. On June 23, 2021, the Company issued $ 400.0 million in aggregate principal amount of its 2028 Senior Notes, as described above. The net proceeds of $ 392.8 million were used to repurchase $ 193.1 million and $ 172.3 million of outstanding principal amount of the Company’s 2022 Senior Notes and 2024 Senior Notes, respectively, through a cash tender offer (“Tender Offer”), and to redeem the remaining $ 19.3 million of 2022 Senior Notes not repurchased as part of the Tender Offer (“2022 Senior Notes Redemption”). The Company paid total consideration, excluding accrued interest, of $ 385.3 million, and recorded a net loss on extinguishment of debt of $ 2.1 million for the year ended December 31, 2021, which included the accelerated amortization of $ 1.5 million of previously unamortized deferred financing costs and $ 0.6 million of net premiums. The Company canceled all repurchased and redeemed 2022 Senior Notes and 2024 Senior Notes upon settlement. +2020 Senior Notes Transactions. During the second quarter of 2020, the Company initiated an offer to exchange certain of its then outstanding Senior Unsecured Notes, other than its 2021 Senior Convertible Notes, (and together with the Senior Unsecured Notes, “Old Notes”), and entered into a private exchange of certain of its then outstanding 2021 Senior Convertible Notes and portions of its then outstanding Senior Unsecured Notes (“Private Exchange”), in each case, for newly issued 2025 Senior Secured Notes, referred to together as “Exchange Offers.” +On June 17, 2020, the Company exchanged $ 611.9 million in aggregate principal amount of Senior Unsecured Notes and $ 107.0 million in aggregate principal amount of 2021 Senior Convertible Notes for $ 446.7 million in aggregate principal amount of 2025 Senior Secured Notes. Further, in connection with the Private Exchange, the Company tendered $ 53.5 million in cash to certain holders of the 2021 Senior Convertible Notes and issued the Warrants. Please refer to Note 3 - Equity for more information regarding the Warrants. Upon the closing of the Exchange Offers, the Company recorded a net gain on extinguishment of debt of $ 227.3 million which included the accelerated amortization of $ 6.1 million and $ 5.6 million of previously unamortized debt discount and deferred financing costs, respectively. +Upon the closing of the Exchange Offers, the Company retired $ 611.9 million in aggregate principal amount of its Senior Unsecured Notes. Portions of the then-outstanding principal amount of each series of our Senior Unsecured Notes listed below were tendered and retired in connection with the Exchange Offers. The following table summarizes the principal amounts of the Senior Unsecured Notes tendered as of the Settlement Date: +Title of Senior Unsecured Notes Tendered Principal Amount of Senior Unsecured Notes Tendered +(in thousands) +6.125 % Senior Notes due 2022 +$ 141,701 +5.0 % Senior Notes due 2024 +155,339 +5.625 % Senior Notes due 2025 +150,882 +6.75 % Senior Notes due 2026 +80,765 +6.625 % Senior Notes due 2027 +83,209 +Total +$ 611,896 +The Company canceled all Senior Unsecured Notes that were retired upon closing of the Exchange Offers. +Additionally, during 2020, in open market transactions, the Company repurchased a total of $ 122.7 million and $ 67.6 million in aggregate principal amount of its 2022 Senior Notes and 2024 Senior Notes, respectively, for a total settlement amount, excluding accrued interest, of $ 136.5 million. In connection with the repurchases, the Company recorded a net gain on extinguishment of debt of $ 52.8 million for the year ended December 31, 2020. This amount included discounts realized upon repurchase of $ 53.8 million partially offset by approximately $ 1.0 million related to the accelerated amortization of previously unamortized deferred financing costs. The Company canceled all repurchased 2022 Senior Notes and 2024 Senior Notes upon settlement. +Covenants +The Company is subject to certain financial and non-financial covenants under the Credit Agreement and the indentures governing the Senior Notes that, among other terms, limit the Company’s ability to incur additional indebtedness, make restricted payments including dividends, sell assets, create liens that secure debt, enter into transactions with affiliates, merge or consolidate with another company, and with respect to the Company’s restricted subsidiaries, permit the consensual restriction on the ability of such restricted subsidiaries to pay dividends or indebtedness owing to the Company or to any other restricted subsidiaries. The financial covenants under the Credit Agreement require that the Company’s (a) total funded debt, as defined in the Credit Agreement, to 12-month trailing adjusted EBITDAX ratio cannot be greater than 4.00 to 1.00 on the last day of each fiscal quarter; and (b) adjusted current ratio, as defined in the Credit Agreement, cannot be less than 1.00 to 1.00 as of the last day of any fiscal quarter. The Company +77 +was in compliance with all covenants under the Credit Agreement and the indentures governing the Senior Notes as of December 31, 2021, and through the filing of this report. +Capitalized Interest +Capitalized interest costs for the years ended December 31, 2021, 2020, and 2019, totaled $ 15.0 million, $ 15.8 million, and $ 18.5 million, respectively. The amount of interest the Company capitalizes generally fluctuates based on the amount borrowed, the Company’s capital program, and the timing and amount of costs associated with capital projects that are considered in progress. Capitalized interest costs are included in total costs incurred. Please refer to Costs Incurred in Overview of the Company in Part II, Item 7, and Supplemental Oil and Gas Information (unaudited) in Part II, Item 8 of this report. +Note 6 – Commitments and Contingencies +Commitments +As of December 31, 2021, the Company had entered into various agreements, which included drilling rig contracts of $ 7.7 million, gathering, processing, transportation throughput, and delivery commitments of $ 96.9 million, office leases, including maintenance, of $ 40.5 million, fixed price contracts to purchase electricity of $ 38.0 million, and other miscellaneous contracts and leases of $ 15.2 million. As of December 31, 2021, the annual minimum payments for the next five years and total minimum payments thereafter are presented below: +For the Years Ending December 31, Amount +(in thousands) +2022 $ 83,565 +2023 48,473 +2024 15,530 +2025 14,882 +2026 14,205 +Thereafter 21,665 +Total $ 198,320 +Drilling Rig and Completion Service Contracts. The Company has drilling rig and completion service contracts in place to facilitate its drilling and completion plans. As of December 31, 2021, the Company’s drilling rig commitments totaled $ 7.7 million under contract terms extending through the third quarter of 2022. If all of these contracts were terminated as of December 31, 2021, the Company would avoid a portion of the contractual service commitments; however, the Company would be required to pay $ 4.9 million in early termination fees. Subsequent to December 31, 2021, the Company entered into a new drilling rig contract, and as of the filing of this report, the Company’s drilling rig commitments totaled $ 10.1 million under contract terms extending through the fourth quarter of 2022. If all of these contracts were terminated as of the filing of this report, the Company would avoid a portion of the contractual service commitments; however, the Company would be required to pay $ 6.3 million in early termination fees. Excluded from these amounts are variable commitments and potential penalties determined by the number of completion crews the Company has in operation in a particular area under a completion service agreement. As of December 31, 2021, potential penalties under this completion service agreement, which expires on December 31, 2023, range from zero to a maximum of $ 6.7 million. No material expenses related to early termination or standby fees were incurred by the Company during the year ended December 31, 2021, and the Company does not expect to incur material penalties with regard to its drilling rig and completion service contracts during 2022. +Pipeline Transportation Commitments. The Company has gathering, processing, transportation throughput, and delivery commitments with various third-parties that require delivery of a minimum amount of oil, gas, and produced water. As of December 31, 2021, the Company has commitments to deliver a minimum of 10 MMBbl of oil and 89 Bcf of gas through 2024, and 14 MMBbl of produced water through 2027. The Company will be required to make periodic deficiency payments for any shortfalls in delivering the minimum volume commitments under certain agreements. As of December 31, 2021, if the Company fails to deliver any product, as applicable, the aggregate undiscounted deficiency payments total approximately $ 96.9 million. This amount does not include deficiency payment estimates associated with approximately 8 MMBbl of future oil delivery commitments where the Company cannot predict with accuracy the amount and timing of these payments, as such payments are dependent upon the price of oil in effect at the time of settlement. The Company expects to fulfill the delivery commitments from a combination of production from existing productive wells, future development of proved undeveloped reserves, and future development of resources not yet characterized as proved reserves. Under certain of the Company’s commitments, if the Company is unable to deliver the minimum quantity from its production, it may deliver production acquired from third-parties to satisfy its minimum volume commitments. As of the filing of this report, the Company does not expect to incur material shortfalls with regard to these commitments. +78 +Office Leases. The Company leases office space under various operating leases totaling $ 40.5 million, including maintenance, with certain terms extending into 2033. Rent expense for the years ended December 31, 2021, 2020, and 2019, was $ 4.8 million, $ 5.4 million, and $ 5.5 million, respectively. +Electrical Power Purchase Contracts. As of December 31, 2021, the Company had a fixed price contract for the purchase of electrical power through 2027 with a total remaining obligation of $ 38.0 million. +Delivery and Purchase Commitments. As of December 31, 2021, the Company had a sand sourcing agreement with certain commitments and potential penalties that vary based on the amount of sand the Company uses in well completions occurring in a particular area. This sand sourcing agreement expires on December 31, 2023. As of December 31, 2021, potential penalties under this sand sourcing agreement range from zero to a maximum of $ 10.0 million. The Company does not expect to incur penalties with regard to this agreement. +Drilling and Completion Commitments. During 2021, the Company amended an agreement that includes minimum drilling and completion footage requirements on certain existing leases. If these minimum requirements are not satisfied by March 31, 2022, the Company will be required to pay liquidated damages based on the difference between the actual footage drilled and completed and the minimum requirements. As of December 31, 2021, the liquidated damages could range from zero to a maximum of $ 17.7 million, with the maximum exposure assuming no additional development activity occurred prior to March 31, 2022. The Company does not expect to incur material liquidated damages with regard to this agreement. +Contingencies +The Company is subject to litigation and claims arising in the ordinary course of business. The Company accrues for such items when a liability is both probable and the amount can be reasonably estimated. In the opinion of management, the anticipated results of any pending litigation and claims are not expected to have a material effect on the results of operations, the financial position, or the cash flows of the Company. +Note 7 – Compensation Plans +Equity Incentive Compensation Plan +As of December 31, 2021, approximately 4.9 million shares of common stock were available for grant under the Equity Plan. The issuance of a direct share benefit, such as a share of common stock, a stock option, a restricted share, an RSU, or a PSU, counts as one share against the number of shares available to be granted under the Equity Plan. Each PSU has the potential to count as two shares against the number of shares available to be granted under the Equity Plan based on the final performance multiplier. +Performance Share Units +The Company may grant PSUs to eligible employees as part of its Equity Plan. The number of shares of the Company’s common stock issued to settle PSUs ranges from zero to two times the number of PSUs awarded and is determined based on certain criteria over a three -year performance period. PSUs generally vest on the third anniversary of the date of the grant or upon other triggering events as set forth in the Equity Plan. Employees who are retirement eligible at the time a PSU award is granted, vest in each portion of that award equally in six -month increments over a three -year period beginning at the grant date. Retirement eligible employees must stay with the Company through the entire six -month vesting period to receive that increment of vesting and any non-vested portions of a PSU award will be forfeited when the employee leaves the Company. +The fair value of PSUs is measured at the grant date using a stochastic Monte Carlo simulation using the GBM Model. A stochastic process is a mathematically defined equation that can create a series of outcomes over time. These outcomes are not deterministic in nature, which means that by iterating the equations multiple times, different results will be obtained for each iteration. In the case of the Company’s PSUs, the Company cannot predict with certainty the path its stock price or the stock prices of its peers will take over the three -year performance period. By using a stochastic simulation, the Company can create multiple prospective stock pathways, statistically analyze these simulations, and ultimately make inferences regarding the path the stock price may take. As such, because future stock prices are stochastic, or probabilistic with some direction in nature, the stochastic method, specifically the GBM Model, is deemed an appropriate method by which to determine the fair value of the PSUs. Significant assumptions used in this simulation include the Company’s expected volatility, dividend yield, and risk-free interest rate based on U.S. Treasury yield curve rates with maturities consistent with a three-year vesting period, as well as the volatilities and dividend yields for each of the Company’s peers. +For PSUs granted in 2018 and 2019, which the Company determined to be equity awards, the settlement criteria include a combination of the Company’s Total Shareholder Return (“TSR”) relative to the TSR of certain peer companies and the Company’s cash return on total capital invested (“CRTCI”) relative to the CRTCI of certain peer companies over the associated three-year performance period. In addition to these performance criteria, the award agreements for these grants also stipulate that if the Company’s absolute TSR is negative over the three -year performance period, the maximum number of shares of common stock that can be issued to settle +79 +outstanding PSUs is capped at one times the number of PSUs granted on the award date, regardless of the Company’s TSR and CRTCI performance relative to its peer group. The fair value of the PSUs granted in 2018 and 2019 was measured on the applicable grant dates using the GBM Model, with the assumption that the associated CRTCI performance condition will be met at the target amount at the end of the respective performance periods. Compensation expense for PSUs is recognized within general and administrative expense and exploration expense over the vesting periods of the respective awards. As these awards depend on a combination of performance-based settlement criteria and market-based settlement criteria, compensation expense may be adjusted in future periods as the number of units expected to vest increases or decreases based on the Company’s expected CRTCI performance relative to the applicable peer companies. The PSUs granted in 2018 fully vested during 2021 and were settled as discussed below. +The Company records compensation expense associated with the issuance of PSUs based on the fair value of the awards as of the grant date. Total compensation expense recorded for PSUs was $ 6.0 million, $ 4.4 million, and $ 10.9 million for the years ended December 31, 2021, 2020, and 2019, respectively. As of December 31, 2021, there was $ 1.4 million of total unrecognized expense related to non-vested PSUs, which is being amortized through mid-2022. +A summary of activity is presented in the following table: +For the Years Ended December 31, +2021 2020 2019 +PSUs (1) +Weighted-Average Grant-Date Fair Value +PSUs (1) +Weighted-Average Grant-Date Fair Value +PSUs (1) +Weighted-Average Grant-Date Fair Value +Non-vested at beginning of year 830,464 $ 17.52 2,022,585 $ 16.87 1,711,259 $ 20.68 +Granted — $ — — $ — 793,125 $ 12.80 +Vested ( 352,395 ) $ 23.81 ( 792,572 ) $ 15.85 ( 346,021 ) $ 26.32 +Forfeited ( 13,586 ) $ 15.46 ( 399,549 ) $ 17.56 ( 135,778 ) $ 16.98 +Non-vested at end of year 464,483 $ 12.80 830,464 $ 17.52 2,022,585 $ 16.87 +____________________________________________ +(1) The number of shares of common stock assumes a multiplier of one . The actual final number of shares of common stock to be issued will range from zero to two times the number of PSUs awarded depending on the three -year performance multiplier. +The fair value of the PSUs granted in 2019 was $ 10.2 million. No PSUs were granted in 2021 or 2020. +A summary of the shares of common stock issued to settle employee PSUs is presented in the table below: +For the Years Ended December 31, +2021 2020 +Shares of common stock issued to settle PSUs (1) +347,742 700,511 +Less: shares of common stock withheld for income and payroll taxes ( 112,919 ) ( 215,451 ) +Net shares of common stock issued 234,823 485,060 +Multiplier earned +1.0 +0.9 +____________________________________________ +(1) During the years ended December 31, 2021, and 2020, the Company settled PSUs that were granted in 2018 and 2017, respectively. The Company and all eligible recipients in 2021 and the majority of eligible recipients in 2020, mutually agreed to net share settle a portion of the awards to cover income and payroll tax withholdings, as provided for in the Equity Plan and applicable award agreements. +During the year ended December 31, 2019, PSUs that were granted in 2016 did not satisfy the minimum performance requirements. This resulted in a multiplier of zero times and no shares of common stock were issued upon settlement. +The total fair value of PSUs that vested during the years ended December 31, 2021, 2020, and 2019, was $ 8.4 million, $ 12.6 million, and $ 9.1 million, respectively. +Employee Restricted Stock Units +The Company may grant RSUs to eligible persons as part of its Equity Plan. Each RSU represents a right to receive one share of the Company’s common stock upon settlement of the award at the end of the specified vesting period. RSUs generally vest one-third of the total grant on each anniversary date of the grant over the applicable vesting period or upon other triggering events as +80 +set forth in the Equity Plan. Employees who are retirement eligible at the time an RSU award is granted generally vest in each portion of that award equally in six -month increments over the applicable vesting period beginning at the grant date. Retirement eligible employees must stay with the Company through the entire six -month vesting period to receive that increment of vesting and any non-vested portions of an RSU award will be forfeited when the employee leaves the Company. +The Company records compensation expense associated with the issuance of RSUs based on the fair value of the awards as of the grant date. The fair value of an RSU is equal to the closing price of the Company’s common stock on the date of the grant. Compensation expense for RSUs is recognized within general and administrative expense and exploration expense over the vesting periods of the respective awards. Total compensation expense recorded for employee RSUs for the years ended December 31, 2021, 2020, and 2019, was $ 10.2 million, $ 8.7 million, and $ 11.1 million, respectively. As of December 31, 2021, there was $ 20.7 million of total unrecognized compensation expense related to non-vested RSUs, which is being amortized through mid-2024. +A summary of activity is presented in the following table: +For the Years Ended December 31, +2021 2020 2019 +RSUs Weighted- +Average +Grant-Date +Fair Value RSUs Weighted- +Average +Grant-Date +Fair Value RSUs Weighted- +Average +Grant-Date +Fair Value +Non-vested at beginning of year +2,097,860 $ 8.83 1,532,131 $ 16.01 1,243,163 $ 21.50 +Granted 666,052 $ 25.52 1,458,869 $ 5.98 978,932 $ 12.36 +Vested ( 843,098 ) $ 11.00 ( 746,132 ) $ 16.74 ( 466,535 ) $ 21.94 +Forfeited ( 79,577 ) $ 10.64 ( 147,008 ) $ 15.34 ( 223,429 ) $ 18.16 +Non-vested at end of year +1,841,237 $ 13.79 2,097,860 $ 8.83 1,532,131 $ 16.01 +The fair value of RSUs granted to eligible employees in 2021, 2020, and 2019, was $ 17.0 million, $ 8.7 million, and $ 12.1 million, respectively. +A summary of the shares of common stock issued to settle employee RSUs is presented in the table below: +For the Years Ended December 31, +2021 2020 2019 +Shares of common stock issued to settle RSUs (1) +843,098 746,132 466,535 +Less: shares of common stock withheld for income and payroll taxes ( 250,349 ) ( 209,173 ) ( 132,136 ) +Net shares of common stock issued 592,749 536,959 334,399 +____________________________________________ +(1) During the years ended December 31, 2021, 2020, and 2019, the Company issued shares of common stock to settle RSUs that related to awards granted in previous years. The Company and all eligible recipients in 2021, and the majority of eligible recipients in 2020, and 2019 mutually agreed to net share settle a portion of the awards to cover income and payroll tax withholdings in accordance with the Company’s Equity Plan and individual award agreements. +The total fair value of employee RSUs that vested during the years ended December 31, 2021, 2020, and 2019, was $ 9.3 million, $ 12.5 million, and $ 10.2 million, respectively. +Director Shares +In 2021, 2020, and 2019, the Company issued 60,510 , 267,576 , and 96,719 shares, respectively, of its common stock to its non-employee directors under the Equity Plan. For the years ended December 31, 2021, 2020, and 2019, the Company recorded $ 1.2 million, $ 1.0 million, and $ 1.2 million, respectively, of compensation expense related to director shares. All shares issued to non-employee directors fully vest on December 31 of the year granted. +Employee Stock Purchase Plan +Under the Company’s Employee Stock Purchase Plan (“ESPP”), eligible employees may purchase shares of the Company’s common stock through payroll deductions of up to 15 percent of eligible compensation, subject to a maximum of 2,500 shares per offering period and a maximum of $ 25,000 in value related to purchases for each calendar year. The purchase price of the common stock is 85 percent of the lower of the trading price of the common stock on either the first or last day of the six-month offering period. +81 +The ESPP is intended to qualify as an “employee stock purchase plan” under Section 423 of the IRC. The Company had approximately 3.5 million shares of its common stock available for issuance under the ESPP as of December 31, 2021. There were 313,773 , 464,757 , and 314,868 shares issued under the ESPP in 2021, 2020, and 2019, respectively. Total proceeds to the Company for the issuance of these shares was $ 2.6 million, $ 1.5 million, and $ 3.2 million, for the years ended December 31, 2021, 2020, and 2019, respectively. +The fair value of ESPP grants is measured at the grant date using the Black-Scholes option-pricing model. Expected volatility is calculated based on the Company’s historical daily common stock price, and the risk-free interest rate is based on U.S. Treasury yield curve rates with maturities consistent with a six-month vesting period. +The fair value of ESPP shares issued during the periods reported above were estimated using the following weighted-average assumptions: +For the Years Ended December 31, +2021 2020 2019 +Risk free interest rate 0.8 % 0.8 % 2.3 % +Dividend yield 0.3 % 0.7 % 0.7 % +Volatility factor of the expected market price of the Company’s common stock 106.1 % 166.2 % 56.6 % +Expected life (in years) 0.5 0.5 0.5 +For the years ended December 31, 2021, 2020, and 2019, the Company expensed $ 1.4 million, $ 0.9 million, and $ 1.1 million, respectively, based on the estimated fair value of the ESPP grants. +401(k) Plan +The Company has a defined contribution plan (“401(k) Plan”) that is subject to the Employee Retirement Income Security Act of 1974. The 401(k) Plan allows eligible employees to contribute a maximum of 60 percent of their base salaries up to the contribution limits established under the IRC. For employees hired before December 31, 2014, the Company matches 100 percent of each employee’s contribution in cash on a dollar-for-dollar basis, up to six percent of the employee’s base salary and performance bonus, and may make additional contributions at its discretion. The Company matches 150 percent of contributions made by employees hired after December 31, 2014, up to six percent of the employee’s base salary and performance bonus in lieu of pension plan benefits, and may make additional contributions at its discretion. Please refer to Note 11 – Pension Benefits for additional discussion of pension benefits. The Company’s matching contributions to the 401(k) Plan were $ 3.9 million, $ 4.2 million, and $ 5.1 million for the years ended December 31, 2021, 2020, and 2019, respectively. +Note 8 – Fair Value Measurements +The Company follows fair value measurement accounting guidance for all assets and liabilities measured at fair value. This guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. Market or observable inputs are the preferred sources of values, followed by assumptions based on hypothetical transactions in the absence of market inputs. The fair value hierarchy for grouping these assets and liabilities is based on the significance level of the following inputs: +• Level 1 – quoted prices in active markets for identical assets or liabilities +• Level 2 – quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations whose inputs are observable or whose significant value drivers are observable +• Level 3 – significant inputs to the valuation model are unobservable +82 +The following table is a listing of the Company’s assets and liabilities that are measured at fair value in the accompanying balance sheets and where they are classified within the fair value hierarchy as of December 31, 2021: +Level 1 Level 2 Level 3 +(in thousands) +Assets: +Derivatives (1) +$ — $ 24,334 $ — +Liabilities: +Derivatives (1) +$ — $ 345,202 $ — +____________________________________________ +(1) This represents a financial asset or liability that is measured at fair value on a recurring basis. +The following table is a listing of the Company’s assets and liabilities that are measured at fair value in the accompanying balance sheets and where they are classified within the fair value hierarchy as of December 31, 2020: +Level 1 Level 2 Level 3 +(in thousands) +Assets: +Derivatives (1) +$ — $ 54,353 $ — +Liabilities: +Derivatives (1) +$ — $ 222,520 $ — +____________________________________________ +(1) This represents a financial asset or liability that is measured at fair value on a recurring basis. +Both financial and non-financial assets and liabilities are categorized within the above fair value hierarchy based on the lowest level of input that is significant to the fair value measurement. The following is a description of the valuation methodologies used by the Company as well as the general classification of such instruments pursuant to the above fair value hierarchy. Please refer to Note 1 – Summary of Significant Accounting Policies for additional information on the Company’s policies for determining fair value for the categories discussed below. +Derivatives +The Company uses Level 2 inputs to measure the fair value of oil, gas, and NGL commodity derivative instruments. Fair values are based upon interpolated data. The Company derives internal valuation estimates taking into consideration forward commodity price curves, counterparties’ credit ratings, the Company’s credit rating, and the time value of money. These valuations are then compared to the respective counterparties’ mark-to-market statements. The considered factors result in an estimated exit price that management believes provides a reasonable and consistent methodology for valuing derivative instruments. The commodity derivative instruments utilized by the Company are not considered by management to be complex, structured, or illiquid. The oil, gas, and NGL commodity derivative markets are highly active. +Generally, market quotes assume that all counterparties have near zero, or low, default rates and have equal credit quality. However, an adjustment may be necessary to reflect the credit quality of a specific counterparty to determine the fair value of the instrument. The Company monitors the credit ratings of its counterparties and may require counterparties to post collateral if their ratings deteriorate. In some instances, the Company will attempt to novate the trade to a more stable counterparty. +Valuation adjustments are necessary to reflect the effect of the Company’s credit quality on the fair value of any commodity derivative liability position. This adjustment takes into account any credit enhancements, such as collateral margin that the Company may have posted with a counterparty, as well as any letters of credit between the parties. The methodology to determine this adjustment is consistent with how the Company evaluates counterparty credit risk, taking into account the Company’s credit rating, current revolving credit facility margins, and any change in such margins since the last measurement date. +The methods described above may result in a fair value estimate that may not be indicative of net realizable value or may not be reflective of future fair values and cash flows. While the Company believes that the valuation methods utilized are appropriate and consistent with authoritative accounting guidance and other marketplace participants, the Company recognizes that third parties may use different methodologies or assumptions to determine the fair value of certain financial instruments that could result in a different estimate of fair value at the reporting date. +Please refer to Note 10 – Derivative Financial Instruments for more information regarding the Company’s derivative instruments. +83 +Oil and Gas Properties and Other Property and Equipment +The Company had no assets included in total property and equipment, net, measured at fair value as of December 31, 2021, or 2020. +The following table presents impairment of proved properties expense and abandonment and impairment of unproved properties expense recorded for the periods presented: +For the Years Ended December 31, +2021 2020 2019 +(in thousands) +Impairment of proved oil and gas properties and related support equipment $ — $ 956,650 $ — +Abandonment and impairment of unproved properties (1) +35,000 59,363 33,842 +Impairment $ 35,000 $ 1,016,013 $ 33,842 +____________________________________________ +(1) These impairments related to actual and anticipated lease expirations, as well as actual and anticipated losses on acreage due to title defects, changes in development plans, and other inherent acreage risks. The balances in the unproved oil and gas properties line item on the accompanying balance sheets as of December 31, 2021, 2020, and 2019, are recorded at carrying value. +For the year ended December 31, 2020, the Company recorded impairment expense of $ 956.7 million related to its South Texas proved oil and gas properties and related support facilities due to the decrease in commodity price forecasts at the end of the first quarter of 2020, specifically decreases in oil and NGL prices. The Company used a discount rate of 11 percent in its calculation of the present value of expected future cash flows based on the prevailing market-based weighted average cost of capital as of March 31, 2020. No proved property impairment expense was recorded during the years ended December 31, 2021, or 2019. +Please refer to Note 1 – Summary of Significant Accounting Policies for information on the Company’s policies for determining fair value of its oil and gas producing properties and related impairment expense. +Long-Term Debt +The following table reflects the fair value of the Company’s Senior Notes obligations measured using Level 1 inputs based on quoted secondary market trading prices. These notes were not presented at fair value on the accompanying balance sheets as of December 31, 2021, or 2020, as they were recorded at carrying value, net of any unamortized discounts and deferred financing costs. Please refer to Note 5 – Long-Term Debt for additional information. +As of December 31, +2021 2020 +Principal Amount Fair Value Principal Amount Fair Value +(in thousands) +1.50 % Senior Secured Convertible Notes due 2021 +$ — $ — $ 65,485 $ 61,449 +10.0 % Senior Secured Notes due 2025 +$ 446,675 $ 491,628 $ 446,675 $ 482,887 +6.125 % Senior Notes due 2022 +$ — $ — $ 212,403 $ 205,379 +5.0 % Senior Notes due 2024 +$ 104,769 $ 104,583 $ 277,034 $ 240,072 +5.625 % Senior Notes due 2025 +$ 349,118 $ 353,091 $ 349,118 $ 289,401 +6.75 % Senior Notes due 2026 +$ 419,235 $ 431,787 $ 419,235 $ 342,385 +6.625 % Senior Notes due 2027 +$ 416,791 $ 432,783 $ 416,791 $ 331,220 +6.5 % Senior Notes due 2028 +$ 400,000 $ 417,284 $ — $ — +As of December 31, 2020, the carrying value of the Company’s revolving credit facility approximated its fair value, as the applicable interest rates are floating, based on prevailing market rates. +Warrants +As discussed in Note 3 - Equity and Note 5 – Long-Term Debt , on June 17, 2020, the Company issued Warrants to purchase up to an aggregate of approximately 5.9 million shares, or approximately five percent of its outstanding common stock, at an exercise price of $ 0.01 per share. The fair value of the Warrants on the issuance date was determined using a stochastic Monte Carlo simulation using the GBM Model. The Company evaluated the Warrants under authoritative accounting guidance and determined that +84 +they should be classified as equity instruments. Upon issuance, the Warrants were recorded in additional paid-in capital on the accompanying balance sheets at a fair value of $ 21.5 million, with no recurring fair value measurement required. There have been no changes to the initial carrying amount of the Warrants since issuance. +Note 9 - Earnings Per Share +Basic net income or loss per common share is calculated by dividing net income or loss available to common stockholders by the basic weighted-average number of common shares outstanding for the respective period. Diluted net income or loss per common share is calculated by dividing net income or loss available to common stockholders by the diluted weighted-average number of common shares outstanding, which includes the effect of potentially dilutive securities. +For the years ended December 31, 2021, and 2020, potentially dilutive securities for this calculation consisted primarily of non-vested RSUs, contingent PSUs, and Warrants, all of which were measured using the treasury stock method. The Warrants became exercisable at the election of the holders on January 15, 2021 , and as a result, they were included as potentially dilutive securities on an adjusted weighted-average basis for the portion of the year ended December 31, 2021, for which they were outstanding. The Warrants were not exercisable for the year ended December 31, 2020, and therefore had no dilutive impact. Please refer to Note 3 - Equity for additional detail regarding the terms of the Warrants. +For the year ended December 31, 2019, potentially dilutive securities for this calculation consisted primarily of non-vested RSUs, contingent PSUs, and shares into which the 2021 Senior Convertible Notes were convertible, all of which were measured using the treasury stock method. The 2021 Senior Convertible Notes did not become convertible into shares of common stock at any time prior to their maturity on July 1, 2021, and therefore had no dilutive impact at any point in time while they were outstanding. Please refer to Note 5 – Long-Term Debt for additional discussion. +PSUs represent the right to receive, upon settlement of the PSUs after the completion of the three -year performance period, a number of shares of the Company’s common stock that may range from zero to two times the number of PSUs granted on the award date. The number of potentially dilutive shares related to PSUs is based on the number of shares, if any, which would be issuable at the end of the respective reporting period, assuming that date was the end of the contingency period applicable to such PSUs. For additional discussion on PSUs, please refer to Note 7 – Compensation Plans under the heading Performance Share Units . +When the Company recognizes a net loss from continuing operations, all potentially dilutive shares are anti-dilutive and are consequently excluded from the calculation of diluted net loss per common share. The following table details the weighted-average number of anti-dilutive securities for the years presented: +For the Years Ended December 31, +2021 2020 2019 +(in thousands) +Anti-dilutive — 265 684 +The following table sets forth the calculations of basic and diluted net income (loss) per common share: +For the Years Ended December 31, +2021 2020 2019 +(in thousands, except per share data) +Net income (loss) $ 36,229 $ ( 764,614 ) $ ( 187,001 ) +Basic weighted-average common shares outstanding 119,043 113,730 112,544 +Dilutive effect of non-vested RSUs and contingent PSUs 2,582 — — +Dilutive effect of Warrants 2,065 — — +Diluted weighted-average common shares outstanding 123,690 113,730 112,544 +Basic net income (loss) per common share $ 0.30 $ ( 6.72 ) $ ( 1.66 ) +Diluted net income (loss) per common share $ 0.29 $ ( 6.72 ) $ ( 1.66 ) +85 +Note 10 – Derivative Financial Instruments +Summary of Oil, Gas, and NGL Derivative Contracts in Place +The Company regularly enters into commodity derivative contracts to mitigate a portion of its exposure to oil, gas, and NGL price volatility and location differentials, and the associated impact on cash flows. As of December 31, 2021, all contracts were entered into for other-than-trading purposes. The Company’s commodity derivative contracts consist of swap and collar arrangements for oil, gas, and NGL production. In a typical commodity swap agreement, if the agreed upon published third-party index price (“index price”) is lower than the swap fixed price, the Company receives the difference between the index price and the agreed upon swap fixed price. If the index price is higher than the swap fixed price, the Company pays the difference. For collar arrangements, the Company receives the difference between an agreed upon index price and the floor price if the index price is below the floor price. The Company pays the difference between the agreed upon ceiling price and the index price if the index price is above the ceiling price. No amounts are paid or received if the index price is between the floor and ceiling prices. +The Company has entered into fixed price oil and gas basis swaps in order to mitigate exposure to adverse pricing differentials between certain industry benchmark prices and the actual physical pricing points where the Company’s production is sold. As of the filing of this report, the Company had basis swap contracts with fixed price differentials between: +• NYMEX WTI and WTI Midland for a portion of its Midland Basin production with sales contracts that settle at WTI Midland prices; +• NYMEX WTI and Intercontinental Exchange Brent Crude (“ICE Brent”) for a portion of its Midland Basin oil production with sales contracts that settle at ICE Brent prices; +• NYMEX WTI and Argus WTI Houston Magellan East Houston Terminal ("MEH”) for a portion of its South Texas oil production with sales contracts that settle at Argus WTI Houston MEH (“WTI Houston MEH”) prices; +• NYMEX Henry Hub (“HH”) and Inside FERC Tennessee Texas, Zone 0 (“IF Tenn TX Z0”) for a portion of its South Texas gas production with sales contracts that settle at IF Tenn TX Z0 prices; and +• NYMEX HH and Inside FERC West Texas (“IF WAHA”) for a portion of its South Texas gas production with sales contracts that settle at IF WAHA prices. +The Company has also entered into crude oil swap contracts to fix the differential in pricing between the NYMEX calendar month average and the physical crude oil delivery month (“Roll Differential”) in which the Company pays the periodic variable Roll Differential and receives a weighted-average fixed price differential. The weighted-average fixed price differential represents the amount of net addition (reduction) to delivery month prices for the notional volumes covered by the swap contracts. +As of December 31, 2021, the Company had commodity derivative contracts outstanding through the fourth quarter of 2023 as summarized in the table below. +Contract Period +First Quarter Second Quarter Third Quarter Fourth Quarter +2022 2022 2022 2022 2023 +Oil Derivatives (volumes in MBbl and prices in $ per Bbl): +Swaps +NYMEX WTI Volumes 2,009 1,953 1,938 1,923 1,190 +Weighted-Average Contract Price $ 44.81 $ 44.75 $ 44.63 $ 44.58 $ 45.20 +Collars +NYMEX WTI Volumes 896 894 868 584 858 +Weighted-Average Floor Price $ 53.54 $ 56.94 $ 61.88 $ 57.91 $ 60.00 +Weighted-Average Ceiling Price $ 63.73 $ 64.93 $ 66.54 $ 61.61 $ 73.09 +Basis Swaps +WTI Midland-NYMEX WTI Volumes 2,222 2,374 2,442 2,462 — +Weighted-Average Contract Price $ 1.15 $ 1.15 $ 1.15 $ 1.15 $ — +NYMEX WTI-ICE Brent Volumes 900 910 920 920 — +Weighted-Average Contract Price $ ( 7.78 ) $ ( 7.78 ) $ ( 7.78 ) $ ( 7.78 ) $ — +86 +Contract Period +First Quarter Second Quarter Third Quarter Fourth Quarter +2022 2022 2022 2022 2023 +Basis Swaps (continued) +WTI Houston MEH-NYMEX WTI Volumes 271 349 335 374 — +Weighted-Average Contract Price $ 1.25 $ 1.25 $ 1.25 $ 1.25 $ — +Roll Differential Swaps +NYMEX WTI Volumes 2,907 2,841 2,782 2,748 1,832 +Weighted-Average Contract Price $ 0.11 $ 0.10 $ 0.11 $ 0.10 $ 0.39 +Gas Derivatives (volumes in BBtu and prices in $ per MMBtu): +Swaps +IF HSC Volumes 8,208 6,808 6,934 6,982 — +Weighted-Average Contract Price $ 2.85 $ 2.34 $ 2.37 $ 2.47 $ — +IF WAHA Volumes 4,856 3,079 3,085 3,067 — +Weighted-Average Contract Price $ 2.63 $ 2.09 $ 2.19 $ 2.22 $ — +IF Tenn TX Z0 513 — — — — +Weighted-Average Contract Price $ 3.22 $ — $ — $ — $ — +Collars +NYMEX HH Volumes 859 1,270 760 1,908 2,601 +Weighted-Average Floor Price $ 4.00 $ 3.00 $ 3.25 $ 3.50 $ 3.00 +Weighted-Average Ceiling Price $ 8.02 $ 4.48 $ 5.45 $ 4.44 $ 8.76 +IF HSC Volumes — — — — 900 +Weighted-Average Floor Price $ — $ — $ — $ — $ 3.38 +Weighted-Average Ceiling Price $ — $ — $ — $ — $ 7.75 +Basis Swaps +IF Tenn TX Z0-NYMEX HH Volumes 859 1,270 760 — — +Weighted-Average Contract Price $ 0.12 $ ( 0.14 ) $ ( 0.14 ) $ — $ — +IF WAHA-NYMEX HH — — — — 1,849 +Weighted-Average Contract Price $ — $ — $ — $ — $ ( 0.48 ) +NGL Derivatives (volumes in MBbl and prices in $ per Bbl): +Swaps +OPIS Propane Mont Belvieu Non-TET Volumes 351 116 55 58 — +Weighted-Average Contract Price $ 28.67 $ 33.03 $ 29.44 $ 29.63 $ — +Collars +OPIS Propane Mont Belvieu Non-TET Volumes 180 253 164 173 — +Weighted-Average Floor Price $ 28.68 $ 25.94 $ 24.09 $ 24.11 $ — +Weighted-Average Ceiling Price $ 38.25 $ 31.69 $ 27.84 $ 28.13 $ — +Commodity Derivative Contracts Entered Into Subsequent to December 31, 2021 +Subsequent to December 31, 2021, and through the filing of this report, the Company entered into the following commodity derivative contracts: +Oil derivatives: +• NYMEX WTI fixed swap contracts for the second quarter of 2022 for a total of 0.5 MMBbl at a weighted-average contract price of $ 83.91 per Bbl; +• NYMEX WTI collar contracts for the third and fourth quarters of 2022 for a total of 0.8 MMBbl at a weighted-average floor contract price of $ 71.55 per Bbl and a weighted-average ceiling contract price of $ 90.50 per Bbl; +• WTI Midland-NYMEX WTI basis swap contract for 2023 for a total of 0.9 MMBbl at a weighted-average contract +87 +price of $ 0.60 per Bbl; +• WTI Houston MEH-NYMEX WTI basis swap contracts for 2023 for a total of 0.6 MMBbl at a weighted-average contract price of $ 1.24 per Bbl; and +• NYMEX WTI Roll Differential swap contracts for 2022 and 2023 for a total of 3.6 MMBbl at a weighted-average contract price of $ 0.68 per Bbl. +Gas derivatives: +• NYMEX HH fixed swap contracts for the second through fourth quarters of 2022 for a total of 5,557 BBtu at a weighted-average contract price of $ 4.07 per MMBtu; +• IF WAHA-NYMEX HH basis swap contracts for the second quarter of 2023 through the fourth quarter of 2025 for a total of 36,608 BBtu at a weighted-average contract price of $( 0.85 ) per MMBtu; +• IF WAHA fixed swap contracts for the first quarter of 2023 for a total of 900 BBtu at a weighted-average contract price of $ 3.98 per MMBtu; and +• NYMEX HH collar contracts for 2023 for a total of 8,975 BBtu at a weighted-average floor contract price of $ 3.32 per MMBtu and a weighted-average ceiling contract price of $ 4.76 per MMBtu. +NGL derivatives: +• OPIS Propane Mont Belvieu Non-TET swap contracts for the second through fourth quarters of 2022 for a total of 0.3 MMBbl at a weighted-average contract price of $ 45.88 per Bbl. +Derivative Assets and Liabilities Fair Value +The Company’s commodity derivatives are measured at fair value and are included in the accompanying balance sheets as derivative assets and liabilities, with the exception of derivative instruments that meet the “normal purchase normal sale” exclusion. The Company does not designate its commodity derivative contracts as hedging instruments. The fair value of the commodity derivative contracts at December 31, 2021, and 2020, was a net liability of $ 320.9 million and $ 168.2 million, respectively. +The following table details the fair value of commodity derivative contracts recorded in the accompanying balance sheets, by category: +As of December 31, 2021 As of December 31, 2020 +(in thousands) +Derivative assets: +Current assets $ 24,095 $ 31,203 +Noncurrent assets 239 23,150 +Total derivative assets $ 24,334 $ 54,353 +Derivative liabilities: +Current liabilities $ 319,506 $ 200,189 +Noncurrent liabilities 25,696 22,331 +Total derivative liabilities $ 345,202 $ 222,520 +Offsetting of Derivative Assets and Liabilities +As of December 31, 2021, and 2020, all derivative instruments held by the Company were subject to master netting arrangements with various financial institutions. In general, the terms of the Company’s agreements provide for offsetting of amounts payable or receivable between it and the counterparty, at the election of both parties, for transactions that settle on the same date and in the same currency. The Company’s agreements also provide that in the event of an early termination, the counterparties have the right to offset amounts owed or owing under that and any other agreement with the same counterparty. The Company’s accounting policy is to not offset these positions in its accompanying balance sheets. +88 +The following table provides a reconciliation between the gross assets and liabilities reflected on the accompanying balance sheets and the potential effects of master netting arrangements on the fair value of the Company’s commodity derivative contracts: +Derivative Assets as of Derivative Liabilities as of +December 31, 2021 December 31, 2020 December 31, 2021 December 31, 2020 +(in thousands) +Gross amounts presented in the accompanying balance sheets $ 24,334 $ 54,353 $ ( 345,202 ) $ ( 222,520 ) +Amounts not offset in the accompanying balance sheets ( 22,862 ) ( 53,598 ) 22,862 53,598 +Net amounts $ 1,472 $ 755 $ ( 322,340 ) $ ( 168,922 ) +The Company recognizes all gains and losses from changes in commodity derivative fair values immediately in earnings rather than deferring such amounts in accumulated other comprehensive loss. The Company had no commodity derivative contracts designated as hedging instruments for the years ended December 31, 2021, 2020, and 2019. Please refer to Note 8 – Fair Value Measurements for more information regarding the Company’s derivative instruments, including its valuation techniques. +The following table summarizes the commodity components of the derivative settlement (gain) loss, and the net derivative (gain) loss line items presented within the accompanying statements of cash flows and the accompanying statements of operations, respectively: +For the Years Ended December 31, +2021 2020 2019 +(in thousands) +Derivative settlement (gain) loss: +Oil contracts $ 523,245 $ ( 331,559 ) $ 19,685 +Gas contracts 152,361 ( 11,898 ) ( 23,008 ) +NGL contracts 73,352 ( 7,804 ) ( 35,899 ) +Total derivative settlement (gain) loss: $ 748,958 $ ( 351,261 ) $ ( 39,222 ) +Net derivative (gain) loss: +Oil contracts $ 650,959 $ ( 205,180 ) $ 172,055 +Gas contracts 172,248 30,038 ( 41,205 ) +NGL contracts 78,452 13,566 ( 33,311 ) +Total net derivative (gain) loss: $ 901,659 $ ( 161,576 ) $ 97,539 +Credit Related Contingent Features +As of December 31, 2021, and through the filing of this report, all of the Company’s derivative counterparties were members of the Company’s Credit Agreement lender group. Under the Credit Agreement, the Company is required to provide mortgage liens on assets having a value equal to at least 85 percent of the total PV-9, as defined in the Credit Agreement, of the Company’s proved oil and gas properties evaluated in the most recent reserve report. Collateral securing indebtedness under the Credit Agreement also secures the Company’s derivative agreement obligations. +Note 11 – Pension Benefits +The Company has a non-contributory defined benefit pension plan covering employees who meet age and service requirements and who began employment with the Company prior to January 1, 2016 (“Qualified Pension Plan”). The Company also has a supplemental non-contributory pension plan covering certain management employees (“Nonqualified Pension Plan” and together with the Qualified Pension Plan, “Pension Plans”). The Company froze the Pension Plans to new participants, effective January 1, 2016. Employees participating in the Pension Plans prior to the plans being frozen will continue to earn benefits. +Obligations and Funded Status for the Pension Plans +The Company recognizes the funded status (i.e. the difference between the fair value of plan assets and the projected benefit obligation) of the Company’s Pension Plans in the accompanying balance sheets as either an asset or a liability and recognizes a corresponding adjustment within the other comprehensive income (loss), net of tax, line item in the accompanying statements of +89 +comprehensive income (loss). The projected benefit obligation is the actuarial present value of the benefits earned to date by plan participants based on employee service and compensation including the effect of assumed future salary increases. The accumulated benefit obligation uses the same factors as the projected benefit obligation, but excludes the effects of assumed future salary increases. The Company’s measurement date for plan assets and obligations is December 31. +For the Years Ended December 31, +2021 2020 +(in thousands) +Change in benefit obligation: +Projected benefit obligation at beginning of year $ 73,593 $ 70,843 +Service cost 4,455 4,516 +Interest cost 2,089 2,358 +Actuarial loss 1,914 7,483 +Benefits paid ( 4,630 ) ( 905 ) +Settlements ( 1,661 ) ( 10,702 ) +Projected benefit obligation at end of year 75,760 73,593 +Change in plan assets: +Fair value of plan assets at beginning of year 32,894 35,634 +Actual return on plan assets 2,777 2,837 +Employer contribution 6,561 6,030 +Benefits paid ( 4,630 ) ( 905 ) +Settlements ( 1,661 ) ( 10,702 ) +Fair value of plan assets at end of year 35,941 32,894 +Funded status at end of year $ ( 39,819 ) $ ( 40,699 ) +The Company’s underfunded status for the Pension Plans as of December 31, 2021, and 2020, was $ 39.8 million and $ 40.7 million, respectively, and is recognized in the accompanying balance sheets within the other noncurrent liabilities line item. There are no plan assets in the Nonqualified Pension Plan. +Accumulated Benefit Obligation in Excess of Plan Assets for the Pension Plans +As of December 31, +2021 2020 +(in thousands) +Projected benefit obligation $ 75,760 $ 73,593 +Accumulated benefit obligation $ 64,325 $ 63,934 +Less: fair value of plan assets ( 35,941 ) ( 32,894 ) +Underfunded accumulated benefit obligation $ 28,384 $ 31,040 +Pension expense is determined based upon the annual service cost of benefits (the actuarial cost of benefits earned during a period) and the interest cost on those liabilities, less the expected return on plan assets. The expected long-term rate of return on plan assets is applied to a calculated value of plan assets that recognizes changes in fair value over a five-year period. This practice is intended to reduce year-to-year volatility in pension expense, but it can have the effect of delaying recognition of differences between actual returns on assets and expected returns based on long-term rate of return assumptions. Amortization of the unrecognized net gain or loss resulting from actual experience different from that assumed and from changes in assumptions (excluding asset gains and losses not yet reflected in market-related value) is included as a component of net periodic benefit cost for the year. If, as of the beginning of the year, the unrecognized net gain or loss exceeds 10 percent of the greater of the projected benefit obligation and the market-related value of plan assets, then the amortization is the excess divided by the average remaining service period of participating employees expected to receive benefits under the plan. +90 +The pre-tax amounts not yet recognized in net periodic pension costs, but rather recognized in the accumulated other comprehensive loss line item within the accompanying balance sheets as of December 31, 2021, and 2020, were as follows: +As of December 31, +2021 2020 +(in thousands) +Unrecognized actuarial losses $ 16,388 $ 17,328 +Unrecognized prior service costs — 14 +Accumulated other comprehensive loss (pre-tax) $ 16,388 $ 17,342 +The pension liability adjustments recognized in other comprehensive income (loss) during 2021, 2020, and 2019, were as follows: +For the Years Ended December 31, +2021 2020 2019 +(in thousands) +Net actuarial gain (loss) $ ( 612 ) $ ( 6,381 ) $ 377 +Amortization of prior service cost 13 17 17 +Amortization of net actuarial loss 1,240 950 958 +Settlements 312 2,509 — +Total pension liability adjustment, pre-tax 953 ( 2,905 ) 1,352 +Tax (expense) benefit ( 204 ) 626 ( 291 ) +Total pension liability adjustment, net $ 749 $ ( 2,279 ) $ 1,061 +Components of Net Periodic Benefit Cost for the Pension Plans +For the Years Ended December 31, +2021 2020 2019 +(in thousands) +Components of net periodic benefit cost: +Service cost $ 4,455 $ 4,516 $ 5,582 +Interest cost 2,089 2,358 2,791 +Expected return on plan assets that reduces periodic pension benefit cost ( 1,474 ) ( 1,735 ) ( 1,574 ) +Amortization of prior service cost 13 17 17 +Amortization of net actuarial loss 1,240 950 958 +Net periodic benefit cost 6,323 6,106 7,774 +Settlements 312 2,509 — +Total net benefit cost $ 6,635 $ 8,615 $ 7,774 +Pension Plan Assumptions +The weighted-average assumptions used to measure the Company’s projected benefit obligation are as follows: +As of December 31, +2021 2020 +Projected benefit obligation: +Discount rate 3.1 % 2.9 % +Rate of compensation increase 3.6 % 4.4 % +91 +The weighted-average assumptions used to measure the Company’s net periodic benefit cost are as follows: +For the Years Ended December 31, +2021 2020 2019 +Net periodic benefit cost: +Discount rate 2.9 % 3.6 % 4.4 % +Expected return on plan assets (1) +4.4 % 5.3 % 5.0 % +Rate of compensation increase 4.4 % 4.5 % 6.2 % +____________________________________________ +(1) There is no assumed expected return on plan assets for the Nonqualified Pension Plan because there are no plan assets in the Nonqualified Pension Plan. +The Company’s pension investment policy includes various guidelines and procedures designed to ensure that assets are prudently invested in a manner necessary to meet the future benefit obligation of the Pension Plans. The policy prohibits the direct investment of plan assets in the Company’s securities. The Qualified Pension Plan’s investment horizon is long-term and accordingly the target asset allocations encompass a strategic, long-term perspective of capital markets, expected risk and return behavior and perceived future economic conditions. The key investment principles of diversification, assessment of risk, and targeting the optimal expected returns for given levels of risk are applied. +The Qualified Pension Plan’s investment portfolio contains a diversified blend of investments, which may reflect varying rates of return. The investments are further diversified within each asset classification. This portfolio diversification provides protection against a single security or class of securities having a disproportionate impact on aggregate investment performance. The actual asset allocations are reviewed and rebalanced on a periodic basis to maintain the target allocations. +The weighted-average asset allocation of the Qualified Pension Plan is as follows: +Target As of December 31, +Asset Category 2022 2021 2020 +Equity securities 37.0 % 39.0 % 37.0 % +Fixed income securities 38.0 % 27.9 % 24.9 % +Other securities 25.0 % 33.1 % 38.1 % +Total 100.0 % 100.0 % 100.0 % +There is no asset allocation of the Nonqualified Pension Plan since there are no plan assets in the plan. The assumption of the expected long-term rate of return on plan assets of the Qualified Pension Plan is based upon the target asset allocation and is determined using forward-looking assumptions in the context of historical returns and volatilities for each asset class, as well as correlations among asset classes. The Company evaluates the expected rate of return on plan assets assumption on an annual basis. +92 +Pension Plan Assets +The fair values of the Company’s Qualified Pension Plan assets as of December 31, 2021, and 2020, utilizing the fair value hierarchy discussed in Note 8 – Fair Value Measurements are as follows: +Fair Value Measurements Using: +Actual Asset Allocation (1) +Total Level 1 Inputs Level 2 Inputs Level 3 Inputs +(in thousands) +As of December 31, 2021 +Equity securities: +Domestic (2) +19.1 % $ 6,860 $ 4,909 $ 1,951 $ — +International (3) +19.9 % 7,138 7,138 — — +Total equity securities 39.0 % 13,998 12,047 1,951 — +Fixed income securities: +Core fixed income (4) +18.8 % 6,770 6,770 — — +Floating rate corporate loans (5) +9.1 % 3,272 3,272 — — +Total fixed income securities 27.9 % 10,042 10,042 — — +Other securities: +Real estate (6) +5.1 % 1,833 — — 1,833 +Collective investment trusts (7) +1.4 % 499 — 499 — +Hedge fund (8) +26.6 % 9,569 5,207 — 4,362 +Total other securities 33.1 % 11,901 5,207 499 6,195 +Total investments 100.0 % $ 35,941 $ 27,296 $ 2,450 $ 6,195 +As of December 31, 2020 +Equity securities: +Domestic (2) +18.7 % $ 6,149 $ 4,165 $ 1,984 $ — +International (3) +18.3 % 6,010 6,010 — — +Total equity securities 37.0 % 12,159 10,175 1,984 — +Fixed income securities: +Core fixed income (4) +16.6 % 5,447 5,447 — — +Floating rate corporate loans (5) +8.3 % 2,755 2,755 — — +Total fixed income securities 24.9 % 8,202 8,202 — — +Other securities: +Real estate (6) +5.7 % 1,870 — — 1,870 +Collective investment trusts (7) +4.6 % 1,498 — 1,498 — +Hedge fund (8) +27.8 % 9,165 5,299 — 3,866 +Total other securities 38.1 % 12,533 5,299 1,498 5,736 +Total investments 100.0 % $ 32,894 $ 23,676 $ 3,482 $ 5,736 +____________________________________________ +(1) Percentages may not calculate due to rounding. +(2) Level 1 equity securities consist of United States large and small capitalization companies, which are actively traded securities that can be sold on demand. Level 2 equity securities are investments in a collective investment fund that is valued at net asset value based on the value of the underlying investments and total units outstanding on a daily basis. The objective of these funds is to approximate the S&P 500 by investing in one or more collective investment funds. +(3) International equity securities consist of a well-diversified portfolio of holdings of mostly large issuers organized in developed countries with liquid markets, commingled with investments in equity securities of issuers located in emerging markets that are believed to have strong sustainable financial productivity at attractive valuations. +(4) The objective of core fixed income funds is to achieve value added from sector or issue selection by constructing a portfolio to approximate the investment results of the Barclay’s Capital Aggregate Bond Index with a modest amount of variability in duration around the index. +93 +(5) Investments consist of floating rate bank loans. The interest rates on these loans are typically reset on a periodic basis to account for changes in the level of interest rates. +(6) The investment objective of direct real estate is to provide current income with the potential for long-term capital appreciation. Ownership in real estate entails a long-term time horizon, periodic valuations, and potentially low liquidity. +(7) Collective investment trusts invest in short-term investments and are valued at the net asset value of the collective investment trust. The net asset value, as provided by the trustee, is used as a practical expedient to estimate fair value. The net asset value is based on the fair value of the underlying investments held by the fund less its liabilities. +(8) The hedge fund portfolio includes investments in actively traded global mutual funds that focus on alternative investments and a hedge fund of funds that invests both long and short using a variety of investment strategies. +Included below is a summary of the changes in Level 3 plan assets (in thousands): +Balance at January 1, 2020 $ 5,748 +Purchases — +Realized gain on assets 526 +Unrealized gain on assets 41 +Disposition ( 579 ) +Balance at December 31, 2020 $ 5,736 +Purchases 250 +Realized gain on assets 132 +Unrealized gain on assets 298 +Disposition ( 221 ) +Balance at December 31, 2021 $ 6,195 +Contributions +The Company contributed $ 6.6 million, $ 6.0 million, and $ 7.2 million to the Pension Plans for the years ended December 31, 2021, 2020, and 2019, respectively. The Company expects to make a $ 6.0 million contribution to the Pension Plans in 2022. +Benefit Payments +The Pension Plans made actual benefit payments of $ 6.3 million, $ 11.6 million, and $ 5.7 million for the years ended December 31, 2021, 2020, and 2019, respectively. Expected benefit payments over the next 10 years are as follows: +For the Years Ending December 31, Amount +(in thousands) +2022 $ 4,200 +2023 $ 5,066 +2024 $ 4,404 +2025 $ 4,879 +2026 $ 6,834 +2027 through 2031 $ 27,197 +Note 12 - Leases +As of December 31, 2021, and 2020, the Company had operating leases for asset classes that include office space, office equipment, drilling rigs, midstream agreements, vehicles, and equipment rentals used in field operations. For operating leases recorded on the accompanying balance sheets, remaining lease terms range from less than one year to approximately 11 years. Certain leases contain optional extension periods that allow for terms to be extended for up to an additional 10 years, however in order to maintain financial and operational flexibility, there are no available options to extend that the Company is reasonably certain it will exercise. An early termination option exists for certain leases, some of which allow the Company to terminate a lease within one year, however, there are no leases in which material early termination options are reasonably certain to be exercised by the Company. As of December 31, 2021, and 2020, the Company did not have any agreements in place that were classified as finance leases under Topic 842. As of December 31, 2021, and through the filing of this report, the Company has no material lease arrangements which are scheduled to commence in the future. Please refer to Note 1 – Summary of Significant Accounting Policies for additional information on the Company’s policies for lease determination and classification. +94 +The following table reflects the components of the Company’s total costs, whether capitalized or expensed, related to operating leases, including short-term leases, and variable lease payments made for leases with initial lease terms greater than 12 months, for the years ended December 31, 2021, and 2020. This total does not reflect amounts that may be reimbursed by other third parties in the normal course of business, such as non-operating working interest owners. +For the Years Ended December 31, +2021 2020 +(in thousands) +Operating lease cost $ 12,825 $ 17,980 +Short-term lease cost (1) +145,052 143,892 +Variable lease cost (2) +48,931 70,858 +Total lease cost $ 206,808 $ 232,730 +____________________________________________ +(1) Costs associated with short-term lease agreements relate primarily to operational activities where underlying lease terms are less than one year. This amount includes drilling and completion activities and field equipment rentals, most of which are contracted for 12 months or less. It is expected that this amount will fluctuate primarily with the number of drilling rigs and completion crews the Company is operating under short-term agreements. +(2) Variable lease payments include additional payments made that were not included in the initial measurement of the ROU asset and corresponding liability for lease agreements with terms longer than 12 months. Variable lease payments relate to the actual volumes transported under certain midstream agreements, actual usage associated with drilling rigs, completion crews, and vehicles, and variable utility costs associated with the Company’s leased office space. Fluctuations in variable lease payments are driven by actual volumes delivered and the number of drilling rigs and completion crews operating under long-term agreements. +Cash paid for amounts included in the measurement of lease liabilities for the years ended December 31, 2021, and 2020, were as follows: +For the Years Ended December 31, +2021 2020 +(in thousands) +Operating cash flows from operating leases $ 11,286 $ 12,046 +Investing cash flows from operating leases $ 2,316 $ 7,313 +Maturities for the Company’s operating lease liabilities included on the accompanying balance sheets as of December 31, 2021, were as follows: +As of December 31, 2021 +(in thousands) +2022 $ 7,123 +2023 4,601 +2024 3,330 +2025 3,308 +2026 2,381 +Thereafter 10,965 +Total Lease payments $ 31,708 +Less: Imputed interest (1) +( 5,752 ) +Total $ 25,956 +____________________________________________ +(1) The weighted-average discount rate used to determine the operating lease liability as of December 31, 2021, was 5.4 percent. +95 +The following table presents supplemental accompanying balance sheet information for operating leases as of December 31, 2021, and 2020: +As of December 31, +2021 2020 +(in thousands, except discount rate and lease term) +Balance sheet classifications of operating leases: +Other noncurrent assets $ 19,026 $ 21,701 +Other current liabilities $ 6,516 $ 11,659 +Other noncurrent liabilities $ 19,440 $ 11,898 +ROU assets obtained in exchange for operating lease liabilities $ 13,018 $ 745 +Weighted-average discount rate +5.4 % +7.0 % +Weighted-average remaining lease term (in years) 7 3 +Note 13 – Accounts Receivable and Accounts Payable and Accrued Expenses +Accounts receivable are comprised of the following accruals: +As of December 31, +2021 2020 +(in thousands) +Oil, gas, and NGL production revenue $ 215,630 $ 108,928 +Amounts due from joint interest owners 23,782 31,514 +State severance tax refunds 1,416 2,301 +Derivative settlements — 16,348 +Other 6,373 3,364 +Total accounts receivable $ 247,201 $ 162,455 +Accounts payable and accrued expenses are comprised of the following accruals: +As of December 31, +2021 2020 +(in thousands) +Drilling and lease operating cost accruals $ 71,012 $ 65,365 +Trade accounts payable 25,072 63,006 +Revenue and severance tax payable 254,422 105,233 +Property taxes 20,250 20,584 +Compensation 47,037 30,907 +Derivative settlements 57,186 1,146 +Interest 60,273 52,802 +Other 28,054 32,627 +Total accounts payable and accrued expenses $ 563,306 $ 371,670 +Note 14 – Asset Retirement Obligations +Please refer to Asset Retirement Obligations in Note 1 – Summary of Significant Accounting Policies for a discussion of the initial and subsequent measurements of asset retirement obligation liabilities and the significant assumptions used in the estimates. +96 +The following is a reconciliation of the Company’s total asset retirement obligation liability as of December 31, 2021, and 2020: +As of December 31, +2021 2020 +(in thousands) +Beginning asset retirement obligations $ 85,325 $ 86,846 +Liabilities incurred (1) +1,715 1,018 +Liabilities settled (2) +( 1,948 ) ( 1,404 ) +Accretion expense +4,159 4,034 +Revision to estimated cash flows +12,173 ( 5,169 ) +Ending asset retirement obligations (3) +$ 101,424 $ 85,325 +____________________________________________ +(1) Reflects liabilities incurred through drilling activities and acquisitions of drilled wells. +(2) Reflects liabilities settled through plugging and abandonment activities and divestitures of properties. +(3) Balances as of December 31, 2021, and 2020, included $ 4.1 million and $ 2.0 million, respectively, related to the Company’s current asset retirement obligation liability, which is recorded in the accounts payable and accrued expenses line item on the accompanying balance sheets. +Note 15 – Suspended Well Costs +The following table reflects the net changes in capitalized exploratory well costs during 2021, 2020, and 2019. The table does not include amounts that were capitalized and either subsequently expensed or reclassified to producing well costs in the same year: +For the Years Ended December 31, +2021 2020 2019 +(in thousands) +Beginning balance $ 5,698 $ 11,925 $ 11,197 +Additions to capitalized exploratory well costs pending the determination of proved reserves 15,576 3,346 11,925 +Divestitures +— — — +Reclassifications based on the determination of proved reserves ( 5,698 ) ( 9,573 ) ( 11,197 ) +Capitalized exploratory well costs charged to expense — — — +Ending balance $ 15,576 $ 5,698 $ 11,925 +As of December 31, 2021, there were no exploratory well costs that were capitalized for more than one year. +Note 16 – Acquisitions, Divestitures, and Assets Held for Sale +During the years ended December 31, 2021, 2020, and 2019, the Company completed non-monetary acreage trades of primarily undeveloped properties located in Howard, Martin, Midland, and Upton Counties, Texas, with $ 4.7 million, $ 6.5 million, and $ 73.4 million, respectively, of carrying value attributed to the properties transferred by the Company. These trades were recorded at carryover basis with no gain or loss recognized. +97 +Supplemental Oil and Gas Information (unaudited) +Costs Incurred +Costs incurred in oil and gas property acquisition, exploration, and development activities, whether capitalized or expensed, are summarized as follows: +For the Years Ended December 31, +2021 2020 2019 +(in thousands) +Development costs (1) +$ 583,527 $ 490,935 $ 913,959 +Exploration costs 125,415 77,911 114,957 +Acquisitions +Proved properties +71 5,579 (310) +Unproved properties (2) +9,036 10,854 11,633 +Total, including asset retirement obligations (3)(4) +$ 718,049 $ 585,279 $ 1,040,239 +____________________________________________ +(1) Includes facility costs of $18.2 million, $27.2 million, and $28.3 million for the years ended December 31, 2021, 2020, and 2019, respectively. +(2) Includes amounts related to leasing activity and acquiring surface rights outside of acquisitions of proved and unproved properties totaling $5.8 million, $8.6 million, and $8.7 million for the years ended December 31, 2021, 2020, and 2019, respectively. +(3) Includes amounts relating to estimated asset retirement obligations of $12.8 million, $(4.7) million, and $(9.9) million for the years ended December 31, 2021, 2020, and 2019, respectively. +(4) Includes capitalized interest of $15.0 million, $15.8 million, and $18.5 million for the years ended December 31, 2021, 2020, and 2019, respectively. +Oil and Gas Reserve Quantities +The reserve estimates presented below were made in accordance with GAAP requirements for disclosures about oil and gas producing activities and SEC rules for oil and gas reporting of reserve estimation and disclosure. +Proved reserves are the estimated quantities of oil, gas, and NGLs which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulations prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation. Existing economic conditions include prices and costs at which economic producibility from a reservoir is to be determined, and the price to be used is the average price during the 12-month period prior to the ending date of the period covered by the report, determined as an unweighted arithmetic average of the first-day-of-the-month price for each month within such period, unless prices are defined by contractual arrangements, excluding escalations based upon future conditions. All of the Company’s estimated proved reserves are located in the United States. +The table below presents a summary of changes in the Company’s estimated proved reserves for each of the years in the three-year period ended December 31, 2021. The Company engaged Ryder Scott to audit internal engineering estimates for at least 80 percent of the Company’s total calculated proved reserve PV-10 for each year presented. The Company emphasizes that reserve estimates are inherently imprecise and that estimates of new discoveries and undeveloped locations are more imprecise than estimates of established producing oil and gas properties. Accordingly, these estimates are expected to change as future information becomes available. +98 +For the Years Ended December 31, +2021 (1) +2020 (2) +2019 (3) +Oil Gas NGLs Oil Gas NGLs Oil Gas NGLs +(MMBbl) (Bcf) (MMBbl) (MMBbl) (Bcf) (MMBbl) (MMBbl) (Bcf) (MMBbl) +Total proved reserves: +Beginning of year 172.7 1,052.0 56.6 184.1 1,223.2 74.0 175.7 1,321.8 107.4 +Revisions of previous estimate (4.7) 11.8 2.7 (28.2) (246.6) (24.7) (19.2) (212.5) (40.0) +Discoveries and extensions 19.3 141.4 21.9 19.6 96.5 11.5 5.4 28.8 2.9 +Infill reserves in an existing proved field 40.4 147.1 9.5 20.5 91.1 3.0 41.8 190.2 11.8 +Sales of reserves (0.3) (0.5) (0.1) (0.5) (8.9) (1.1) (0.2) (0.7) — +Purchases of minerals in place 0.1 0.1 — 0.2 0.6 — 2.5 5.4 — +Production (27.9) (108.4) (5.4) (23.0) (103.9) (6.1) (21.9) (109.8) (8.1) +End of year 199.5 1,243.5 85.2 172.7 1,052.0 56.6 184.1 1,223.2 74.0 +Proved developed reserves: +Beginning of year 89.8 643.9 32.1 85.0 712.1 43.4 68.2 699.1 60.1 +End of year 110.7 833.0 50.7 89.8 643.9 32.1 85.0 712.1 43.4 +Proved undeveloped reserves: +Beginning of year 82.9 408.1 24.4 99.1 511.1 30.6 107.6 622.7 47.2 +End of year 88.8 410.4 34.5 82.9 408.1 24.4 99.1 511.1 30.6 +____________________________________________ +Note: Amounts may not calculate due to rounding. +(1) For the year ended December 31, 2021, the Company added 139.1 MMBOE through extensions and infill as a result of continued success in and further development of the Company’s Austin Chalk and Midland Basin assets. The Company also added 40.6 MMBOE of estimated proved reserves through positive price and performance revisions, primarily driven by improved commodity prices during 2021. These additions were offset by production of 51.4 MMBOE and the removal of 40.6 MMBOE of estimated proved undeveloped reserves reclassified to unproved reserves categories as a result of revising certain aspects of our future development plans. Please refer to Areas of Operation in Part I, Items 1 and 2 of this report, and to Oil and Gas Reserve Quantities in Critical Accounting Policies and Estimates in Part II, Item 7 of this report for additional information. +(2) For the year ended December 31, 2020, the Company added 85.8 MMBOE from its drilling program and through further development plan optimization, and had net downward revisions of 94.0 MMBOE, which were primarily driven by the removal of certain longer term estimated proved undeveloped reserves and declining commodity prices during 2020. +(3) For the year ended December 31, 2019, the Company added 98.4 MMBOE from its drilling program and through further development plan optimization. These additions were offset by net downward revisions of 94.7 MMBOE, which were primarily driven by declining commodity prices during 2019. +Standardized Measure of Discounted Future Net Cash Flows +The Company computes a standardized measure of discounted future net cash flows and changes therein relating to estimated proved reserves in accordance with authoritative accounting guidance. Future cash inflows and production and development costs are determined by applying prices and costs, including transportation, quality, and basis differentials, to the year end estimated future reserve quantities. Each property the Company operates is also charged with field-level overhead in the estimated reserve calculation. Estimated future income taxes are computed using the current statutory income tax rates, including consideration for estimated future statutory depletion. The resulting future net cash flows are reduced to present value amounts by applying a 10 percent annual discount factor. +Future operating costs are determined based on estimates of expenditures to be incurred in developing and producing the estimated proved reserves in place at the end of the period using year end costs and assuming continuation of existing economic conditions, plus Company overhead incurred by the central administrative office attributable to operating activities. +The assumptions used to compute the standardized measure of discounted future net cash flows are those prescribed by the FASB and the SEC. These assumptions do not necessarily reflect the Company’s expectations of actual revenues to be derived from those reserves, nor their present value amount. The limitations inherent in the reserve quantity estimation process, as discussed previously, are equally applicable to the standardized measure of discounted future net cash flows computations since these reserve +99 +quantity estimates are the basis for the valuation process. The following prices as adjusted for transportation, quality, and basis differentials were used in the calculation of the standardized measure of discounted future net cash flows: +For the Years Ended December 31, +2021 2020 2019 +Oil (per Bbl) $ 66.21 $ 37.63 $ 53.68 +Gas (per Mcf) $ 4.28 $ 1.81 $ 2.49 +NGLs (per Bbl) $ 29.31 $ 14.64 $ 18.88 +The following summary sets forth the Company’s future net cash flows relating to proved oil, gas, and NGL reserves based on the standardized measure of discounted future net cash flows: +As of December 31, +2021 2020 2019 +(in thousands) +Future cash inflows $ 21,027,406 $ 9,227,390 $ 14,327,131 +Future production costs (5,498,098) (3,429,288) (4,579,119) +Future development costs (1,591,550) (1,259,395) (2,108,859) +Future income taxes (2,130,280) — (579,815) +Future net cash flows 11,807,478 4,538,707 7,059,338 +10 percent annual discount (4,844,871) (1,856,250) (2,955,340) +Standardized measure of discounted future net cash flows +$ 6,962,607 $ 2,682,457 $ 4,103,998 +The principal sources of changes in the standardized measure of discounted future net cash flows were: +For the Years Ended December 31, +2021 2020 2019 +(in thousands) +Standardized measure of discounted future net cash flows, beginning of year +$ 2,682,457 $ 4,103,998 $ 4,654,383 +Sales of oil, gas, and NGLs produced, net of production costs (2,092,499) (734,971) (1,085,041) +Net changes in prices and production costs 5,242,783 (2,251,636) (1,539,042) +Extensions, discoveries and other including infill reserves in an existing proved field, net of related costs 1,953,633 482,717 887,254 +Sales of reserves in place (4,361) (10,755) (2,788) +Purchase of reserves in place 1,565 2,120 57,519 +Previously estimated development costs incurred during the period 426,120 431,926 736,770 +Changes in estimated future development costs (25,355) 215,460 132,825 +Revisions of previous quantity estimates (154,879) (172,197) (398,409) +Accretion of discount 268,246 436,284 510,427 +Net change in income taxes (1,196,013) 258,844 191,040 +Changes in timing and other (139,090) (79,333) (40,940) +Standardized measure of discounted future net cash flows, end of year +$ 6,962,607 $ 2,682,457 $ 4,103,998 +100 +ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE +None. +ITEM 9A. CONTROLS AND PROCEDURES +Evaluation of Disclosure Controls and Procedures +We maintain a system of disclosure controls and procedures that are designed to reasonably ensure that information required to be disclosed in our SEC reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and to reasonably ensure that such information is accumulated and communicated to our management, including our Chief Executive Officer (Principal Executive Officer) and our Chief Financial Officer (Principal Financial Officer), as appropriate, to allow for timely decisions regarding required disclosure. +Our management, including our Chief Executive Officer and our Chief Financial Officer, does not expect that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) (“Disclosure Controls”) will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. We monitor our Disclosure Controls and make modifications as necessary; our intent in this regard is that the Disclosure Controls will be modified as systems change and conditions warrant. +An evaluation of the effectiveness of the design and operation of our Disclosure Controls was performed as of the end of the period covered by this report. This evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our Disclosure Controls are effective at a reasonable assurance level. +Changes in Internal Control Over Financial Reporting +There have been no changes during the fourth quarter of 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. +101 +Management’s Report on Internal Control over Financial Reporting +Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s internal control over financial reporting includes those policies and procedures that: +(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; +(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and +(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that have a material effect on the financial statements. +Because of the inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. Even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of the changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate. +Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2021. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013 framework) . +Based on management’s assessment and those criteria, management believes that the Company maintained effective internal control over financial reporting as of December 31, 2021. +The Company’s independent registered public accounting firm has issued an attestation report on the Company’s internal control over financial reporting. That report immediately follows this report. +102 +Report of Independent Registered Public Accounting Firm +To the Stockholders and the Board of Directors of SM Energy Company and subsidiaries +Opinion on Internal Control Over Financial Reporting +We have audited SM Energy Company and subsidiaries’ internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, SM Energy Company and subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on the COSO criteria. +We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income (loss), changes in stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and our report dated February 25, 2022, expressed an unqualified opinion thereon. +Basis for Opinion +The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. +We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. +Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. +Definition and Limitations of Internal Control Over Financial Reporting +A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. +Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. +/s/ Ernst & Young LLP +Denver, Colorado +February 25, 2022 +103 +ITEM 9B. OTHER INFORMATION +None. +ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS +These disclosures are not applicable to the Company. +PART III +ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE +The information required by this Item concerning the Company’s Directors, Executive Officers, and corporate governance is incorporated by reference to the information provided under the captions “Proposal 1 - Election of Directors,” “Information about our Executive Officers,” and “Corporate Governance” in the Company’s Definitive Proxy Statement on Schedule 14A for the 2022 annual meeting of stockholders, to be filed within 120 days from December 31, 2021. +The information required by this Item concerning compliance with Section 16(a) of the Exchange Act is incorporated by reference to the information provided under the caption “Security Ownership of Certain Beneficial Owners and Management” in the Company’s Definitive Proxy Statement on Schedule 14A for the 2022 annual meeting of stockholders, to be filed within 120 days from December 31, 2021. +ITEM 11. EXECUTIVE COMPENSATION +The information required by this Item is incorporated by reference to the information provided under the captions “Executive Compensation Tables” and “Director Compensation” in the Company’s Definitive Proxy Statement on Schedule 14A for the 2022 annual meeting of stockholders, to be filed within 120 days from December 31, 2021. +ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS +The information required by this Item concerning security ownership of certain beneficial owners and management is incorporated by reference to the information provided under the caption “Security Ownership of Certain Beneficial Owners and Management” in the Company’s Definitive Proxy Statement on Schedule 14A for the 2022 annual meeting of stockholders, to be filed within 120 days from December 31, 2021. +Securities Authorized for Issuance Under Equity Compensation Plans. The Company has equity compensation plans under which options and shares of the Company’s common stock are authorized for grant or issuance as compensation to eligible employees, consultants, and members of the Board of Directors. The Company’s stockholders have approved these plans. Please refer to Note 7 – Compensation Plans in Part II, Item 8 of this report for further information about the material terms of the Company’s equity +104 +compensation plans. The following table is a summary of the shares of common stock authorized for issuance under equity compensation plans as of December 31, 2021: +(a) (b) (c) +Plan category Number of securities to be issued upon exercise of outstanding options, warrants, and rights Weighted-average exercise price of outstanding options, warrants, and rights Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) +Equity compensation plans approved by security holders: +Equity Incentive Compensation Plan (1) +Restricted stock units (2) +1,850,031 N/A +Performance share units (2)(3) +505,760 N/A +Total for Equity Incentive Compensation Plan 2,355,791 $ — 4,864,999 +Employee Stock Purchase Plan (4) +— — 3,538,892 +Equity compensation plans not approved by security holders +— — — +Total for all plans 2,355,791 $ — 8,403,891 +____________________________________________ +(1) In May 2006, the stockholders approved the Equity Plan to authorize the issuance of restricted stock, restricted stock units, non-qualified stock options, incentive stock options, stock appreciation rights, performance shares, performance units, and stock-based awards to key employees, consultants, and members of the Board of Directors of the Company or any affiliate of the Company. The Company’s Board of Directors approved amendments to the Equity Plan in 2009, 2010, 2013, 2016, and 2018 and each amended plan was approved by stockholders at the respective annual stockholders’ meetings. The number of shares of the Company’s common stock underlying awards granted in 2021, 2020, and 2019 under the Equity Plan were 726,562, 1,726,445, and 1,868,776, respectively. +(2) RSUs and PSUs do not have exercise prices associated with them, but rather a weighted-average per unit fair value, which is presented in order to provide additional information regarding the potential dilutive effect of the awards. The weighted-average grant date per unit fair value for the outstanding RSUs and PSUs was $13.83 and $12.80, respectively. Please refer to Note 7 – Compensation Plans in Part II, Item 8 of this report for additional discussion. +(3) The number of shares of common stock assumes a multiplier of one. The actual final number of shares of common stock to be issued will range from zero to two times the number of PSUs awarded depending on the three-year performance multiplier. +(4) Under the ESPP, eligible employees may purchase shares of the Company’s common stock through payroll deductions of up to 15 percent of their eligible compensation. The purchase price of the common stock is 85 percent of the lower of the trading price of the common stock on either the first or last day of the six-month offering period. The ESPP is intended to qualify under Section 423 of the IRC. The number of shares of the Company’s common stock issued in 2021, 2020, and 2019 under the ESPP were 313,773, 464,757, and 314,868, respectively. +ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE +The information required by this Item is incorporated by reference to the information provided under the captions “ Certain Relationships and Related Transactions ” and “ Corporate Governance ” in the Company’s Definitive Proxy Statement on Schedule 14A for the 2022 annual meeting of stockholders, to be filed within 120 days from December 31, 2021. +ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES +The information required by this Item is incorporated by reference to the information provided under the captions “ Independent Registered Public Accounting Firm ” and “ Audit Committee Pre-approval Policy and Procedures ” in the Company’s Definitive Proxy Statement on Schedule 14A for the 2022 annual meeting of stockholders, to be filed within 120 days from December 31, 2021. +105 +PART IV +ITEM 15. EXHIBITS AND CONSOLIDATED FINANCIAL STATEMENT SCHEDULES +(a)(1) and (a)(2) Consolidated Financial Statements and Financial Statement Schedules: +Report of Independent Registered Public Accounting Firm (PCAOB ID 42 ) +58 +Consolidated Balance Sheets +60 +Consolidated Statements of Operations +61 +Consolidated Statements of Comprehensive Income (Loss) +62 +Consolidated Statements of Stockholders’ Equity +63 +Consolidated Statements of Cash Flows +64 +Notes to Consolidated Financial Statements +65 +All schedules are omitted because the required information is not applicable or is not present in amounts sufficient to require submission of the schedule or because the information required is included in the Consolidated Financial Statements and Notes thereto. +(b) Exhibits. The following exhibits are filed or furnished with or incorporated by reference into this report on Form 10-K: +Exhibit +Number +Description +3.1 +Restated Certificate of Incorporation of SM Energy Company, as amended through June 1, 2010 (filed as Exhibit 3.1 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2010, and incorporated herein by reference) +3.2 +Amended and Restated By-Laws of SM Energy Company, effective as of February 21, 2017 (filed as Exhibit 3.2 to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2016, and incorporated herein by reference) +4.1 +Indenture related to the 5.0% Senior Notes due 2024, dated May 20, 2013, by and between SM Energy Company, as issuer, and U.S. Bank National Association, as Trustee (filed as Exhibit 4.1 to the registrant’s Current Report on Form 8-K filed on May 20, 2013, and incorporated herein by reference) +4.2 +Indenture related to the 6.125% Senior Notes due 2022, dated November 17, 2014, by and between SM Energy Company, as issuer, and U.S. Bank National Association, as Trustee (filed as Exhibit 4.1 to the registrant’s Current Report on Form 8-K filed on November 18, 2014, and incorporated herein by reference) +4.3 +Indenture related to senior debt securities of SM Energy Company by and between SM Energy Company and U.S. Bank National Association, as trustee (filed as Exhibit 4.1 to the registrant’s Registration Statement on Form S-3 filed on May 7, 2015 (Registration No. 333-203936) and incorporated herein by reference) +4.4 +2025 Notes Supplemental Indenture (filed as Exhibit 4.2 to the registrant’s Current Report on Form 8-K filed on May 21, 2015, and incorporated herein by reference) +4.5 +Base Indenture, dated as of May 21, 2015, by and between SM Energy Company and U.S. Bank National Association, as trustee (filed as Exhibit 4.1 to the registrant’s Current Report on Form 8-K filed on August 12, 2016, and incorporated herein by reference) +4.6 +Second Supplemental Indenture, dated August 12, 2016, by and between SM Energy Company and U.S. Bank, National Association, as trustee (filed as Exhibit 4.2 to the registrant’s Current Report on Form 8-K filed on August 12, 2016, and incorporated herein by reference) +4.7 +Third Supplemental Indenture, dated September 12, 2016 by and between SM Energy Company and U.S. Bank National Association, as trustee (filed as Exhibit 4.2 to the registrant’s Current Report on Form 8-K filed on September 12, 2016, and incorporated herein by reference) +4.8 +Fourth Supplemental Indenture, dated as of August 20, 2018, by and between SM Energy Company and U.S. Bank National Association, as trustee (filed as Exhibit 4.2 to the registrant’s Current Report on Form 8-K filed on August 20, 2018, and incorporated herein by reference) +4.9 +Third Supplemental Indenture, dated as of April 29, 2020, to the Indenture, dated as of May 21, 2015, between the Company and U.S. Bank National Association, as trustee, as supplemented and amended by the Second Supplemental Indenture, dated as of August 12, 2016 governing the Company’s outstanding 1.50% Senior Convertible Notes due 2021 (filed as Exhibit 4.1 to the registrant’s Current Report on Form 8-K filed on April 29, 2020, and incorporated herein by reference) +4.10 +Indenture, dated as of June 17, 2020, between SM Energy Company and UMB Bank, N.A., as trustee, governing the Company’s outstanding 10.0% Senior Secured Notes due 2025 (filed as Exhibit 4.1 to the registrant’s Current Report on Form 8-K filed on June 17, 2020, and incorporated herein by reference) +106 +4.11 +Warrant Agreement dated as of June 17, 2020, among SM Energy Company, Computershare Inc. and Computershare Trust Company, N.A., collectively as warrant agent (filed as Exhibit 4.2 to the registrant’s Current Report on Form 8-K filed on June 17, 2020, and incorporated herein by reference) +4.12 +Fifth Supplemental Indenture, dated as of June 23, 2021, by and between SM Energy Company and U.S. Bank National Association, as trustee (filed as Exhibit 4.2 to the registrant’s Current Report on Form 8-K filed on June 23, 2021, and incorporated herein by reference) +4.13 +2022 Notes Supplemental Indenture, dated as of June 23, 2021, by and between SM Energy Company and U.S. Bank National Association, as trustee (filed as Exhibit 4.3 to the registrant’s Current Report on Form 8-K filed on June 23, 2021, and incorporated herein by reference) +4.14† +SM Energy Company Equity Incentive Compensation Plan, amended and restated effective as of May 22, 2018 (filed as Annex A in the registrant’s Definitive Proxy Statement on Schedule 14A, filed on April 12, 2018, and incorporated herein by reference) +4.15* +Description of Securities +10.1 +Deed of Trust to Wachovia Bank, National Association, as Administrative Agent, dated effective as of April 14, 2009 (filed as Exhibit 10.2 to the registrant’s Current Report on Form 8-K filed on April 20, 2009, and incorporated herein by reference) +10.2 +Supplement and Amendment to Deed of Trust, Mortgage, Line of Credit Mortgage, Assignment, Security Agreement, Fixture Filing and Financing Statement for the benefit of Wachovia Bank, National Association, as Administrative Agent, dated effective as of April 14, 2009 (filed as Exhibit 10.3 to the registrant’s Current Report on Form 8-K filed on April 20, 2009, and incorporated herein by reference) +10.3 +Sixth Amended and Restated Credit Agreement dated as of September 28, 2018, among SM Energy Company, Wells Fargo Bank, National Association, as Administrative Agent, and the Lenders party thereto (filed as Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on October 4, 2018, and incorporated herein by reference) +10.4 +First Amendment to Sixth Amended and Restated Credit Agreement, dated April 18, 2019 among SM Energy Company, Wells Fargo Bank, National Association, as Administrative Agent, and the Lenders party thereto (filed as Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on April 18, 2019, and incorporated herein by reference) +10.5 +Second Amendment to Sixth Amended and Restated Credit Agreement, dated September 19, 2019 among SM Energy Company, Wells Fargo Bank, National Association, as Administrative Agent, and the Lenders party thereto (filed as Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on September 24, 2019, and incorporated herein by reference) +10.6 +Third Amendment to the Sixth Amended and Restated Credit Agreement, dated April 29, 2020, among SM Energy Company, Wells Fargo Bank, National Association, as Administrative Agent, and the institutions named therein as Lenders party thereto (filed as Exhibit 10.1 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, and incorporated herein by reference) +10.7 +Fourth Amendment to the Sixth Amended and Restated Credit Agreement, dated as of May 5, 2020, by and among the Company, Wells Fargo Bank, National Association, as Administrative Agent, and the institutions named therein as Lenders party thereto (filed as Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on May 6, 2020, and incorporated herein by reference) +10.8 +Fifth Amendment to the Sixth Amended and Restated Credit Agreement, dated as of November 13, 2020, among SM Energy Company, Wells Fargo Bank, National Association, as Administrative Agent, and the Lenders party thereto (filed as Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on November 16, 2020, and incorporated herein by reference) +10.9 +Sixth Amendment to the Sixth Amended and Restated Credit Agreement, dated as of June 8, 2021, by and among the Company, Wells Fargo Bank, National Association, as Administrative Agent, and the institutions named therein as Lenders that are a party thereto (filed as Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on June 9, 2021, and incorporated herein by reference) +10.10 +Intercreditor Agreement dated as of June 17, 2020 among SM Energy Company, Wells Fargo Bank, National Association, as priority lien agent, and UMB Bank, N.A., as second lien collateral trustee (filed as Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on June 17, 2020, and incorporated herein by reference) +10.11 +Second Lien Pledge and Security Agreement dated as of June 17, 2020 between SM Energy Company and UMB Bank, N.A., as collateral trustee (filed as Exhibit 10.2 to the registrant’s Current Report on Form 8-K filed on June 17, 2020, and incorporated herein by reference) +10.12 +Second Lien Security Agreement dated as of June 17, 2020 between SM Energy Company and UMB Bank, N.A., as collateral trustee (filed as Exhibit 10.3 to the registrant’s Current Report on Form 8-K filed on June 17, 2020, and incorporated herein by reference) +10.13 +Collateral Trust Agreement dated as of June 17, 2020 among SM Energy Company, UMB Bank, N.A., as trustee, UMB Bank, N.A., as collateral trustee, and (by joinder) U.S. Bank National Association, as trustee under the 2021 Notes Indenture (filed as Exhibit 10.4 to the registrant’s Current Report on Form 8-K filed on June 17, 2020, and incorporated herein by reference) +10.14†† +Net Profits Interest Bonus Plan, As Amended by the Board of Directors on July 30, 2010 (filed as Exhibit 10.6 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2010 and incorporated herein by reference) +107 +10.15† +Pension Plan for Employees of SM Energy Company as Amended and Restated as of January 1, 2010 (filed as Exhibit 10.30 to the registrant’s Annual Report on Form 10-K filed for the year ended December 31, 2010, and incorporated herein by reference) +10.16† +Amendment No. 1 to the Pension Plan for Employees of SM Energy Company amended as of January 1, 2011 (filed as Exhibit 10.41 to the registrant’s Annual Report on Form 10-K filed for the year ended December 31, 2011, and incorporated herein by reference) +10.17† +Amendment No. 2 to the Pension Plan for Employees of SM Energy Company amended as of January 1, 2012 (filed as Exhibit 10.42 to the registrant’s Annual Report on Form 10-K filed for the year ended December 31, 2011, and incorporated herein by reference) +10.18† +Amendment No. 3 to the Pension Plan for Employees of SM Energy Company amended as of January 1, 2016 (filed as Exhibit 10.29 to the registrant’s Annual Report on Form 10-K filed for the year ended December 31, 2015, and incorporated herein by reference) +10.19+ +SM Energy Company Non-Qualified Unfunded Supplemental Retirement Plan as Amended as of December 31, 2010 (filed as Exhibit 10.31 to the registrant’s Annual Report on Form 10-K filed for the year ended December 31, 2010, and incorporated herein by reference) +10.20† +SM Energy Company Non-Qualified Deferred Compensation Plan as of March 10, 2014 (filed as Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on January 24, 2014, and incorporated herein by reference) +10.21† +Cash Bonus Plan, As Amended and Restated as of February 1, 2014 (filed as Exhibit 10.41 to the registrant’s Annual Report on Form 10-K filed for the year ended December 31, 2013, and incorporated herein by reference) +10.22† +Section 162(m) Cash Bonus Plan, effective as of May 21, 2014 (filed as Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on May 28, 2014, and incorporated herein by reference) +10.2 3 † +Performance Share Unit Award Agreement as of July 1, 2019 (filed as Exhibit 10.2 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, and incorporated herein by reference) +10.2 4 † +SM Energy Company Employee Stock Purchase Plan, amended and restated effective as of April 5, 2021 (filed as Annex A in the registrant’s Definitive Proxy Statement on Schedule 14A, filed on April 16, 2021, and incorporated herein by reference) +10.2 5 † +Form of Non-Employee Director Restricted Stock Award Agreement as of May 27, 2010 (filed as Exhibit 10.5 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2010, and incorporated herein by reference) +10.2 6 *† +Summary of Compensation Arrangements for Non-Employee Directors +10.2 7 † +Change of Control Executive Severance Agreement (filed as Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on October 20, 2015, and incorporated herein by reference) +10.2 8 † +Non-Competition and Non-Solicitation Agreement dated October 26, 2020 between Javan D. Ottoson and SM Energy Company (filed as Exhibit 10.7 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, and incorporated herein by reference) +10. 29 *** +Gas Services Agreement effective as of July 1, 2010 between SM Energy Company and Eagle Ford Gathering LLC (filed as Exhibit 10.3 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2010, and incorporated herein by reference) +10.3 0 *** +Gathering and Natural Gas Services Agreement effective as of April 1, 2011 between SM Energy Company and ETC Texas Pipeline, Ltd. (filed as Exhibit 10.3 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011, and incorporated herein by reference) +10.3 1 *** +Gas Processing Agreement effective as of April 1, 2011 between ETC Texas Pipeline, Ltd. and SM Energy Company (filed as Exhibit 10.4 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011, and incorporated herein by reference) +10.32 +Amendment to Amended and Restated Gas Gathering Agreement, effective as of February 1, 2016, by and between SM Energy Company and ETC Field Services LLC (filed as Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on February 22, 2016, and incorporated herein by reference) +21.1* +Subsidiaries of Registrant +23.1* +Consent of Ernst & Young LLP +23.2* +Consent of Ryder Scott Company L.P. +24.1* +Power of Attorney +31.1* +Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes – Oxley Act of 2002 +31.2* +Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes – Oxley Act of 2002 +32.1** +Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes - Oxley Act of 2002 +99.1* +Ryder Scott Audit Letter +101.INS Inline XBRL Instance Document - The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. +108 +101.SCH* Inline XBRL Schema Document +101.CAL* Inline XBRL Calculation Linkbase Document +101.LAB* Inline XBRL Label Linkbase Document +101.PRE* Inline XBRL Presentation Linkbase Document +101.DEF* Inline XBRL Taxonomy Extension Definition Linkbase Document +104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101.INS) +_____________________________________ +* Filed with this report. +** Furnished with this report. +*** Certain portions of this exhibit have been redacted and are subject to a confidential treatment order granted by the Securities and Exchange Commission pursuant to Rule 24b-2 under the Exchange Act. +† Exhibit constitutes a management contract or compensatory plan or agreement. +†† Exhibit constitutes a management contract or compensatory plan or agreement. This document was amended on July 30, 2010 primarily to reflect the change in the name of the registrant from St. Mary Land & Exploration Company to SM Energy Company. There were no material changes to the substantive terms and conditions in this document. ++ Exhibit constitutes a management contract or compensatory plan or agreement. This document was amended on November 9, 2010, in order to make technical revisions to ensure compliance with Section 409A of the Internal Revenue Code. There were no material changes to the substantive terms and conditions in this document. +(c) Financial Statement Schedules. Please refer to Item 15(a) above. +ITEM 16. FORM 10-K SUMMARY +None. +109 +SIGNATURES +Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. +SM ENERGY COMPANY +(Registrant) +Date: February 25, 2022 By: /s/ HERBERT S. VOGEL +Herbert S. Vogel +President and Chief Executive Officer +(Principal Executive Officer) +GENERAL POWER OF ATTORNEY +KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints each of Herbert S. Vogel and A. Wade Pursell his or her true and lawful attorney-in-fact and agent with full power of substitution and resubstitution, and each with full power to act alone, for the undersigned and in his or her name, place and stead, in any and all capacities, to sign any amendments to this Annual Report on Form 10-K for the fiscal year ended December 31, 2021, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorney-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof. +Pursuant to the requirements of the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. +Signature Title Date +/s/ HERBERT S. VOGEL President, Chief Executive Officer, and Director February 25, 2022 +Herbert S. Vogel (Principal Executive Officer) +/s/ A. WADE PURSELL Executive Vice President and Chief Financial Officer February 25, 2022 +A. Wade Pursell (Principal Financial Officer) +/s/ PATRICK A. LYTLE Vice President - Chief Accounting Officer and Controller February 25, 2022 +Patrick A. Lytle (Principal Accounting Officer) +110 +Signature Title Date +/s/ WILLIAM D. SULLIVAN Chairman of the Board of Directors February 25, 2022 +William D. Sullivan +/s/ CARLA J. BAILO Director February 25, 2022 +Carla J. Bailo +/s/ STEPHEN R. BRAND Director February 25, 2022 +Stephen R. Brand +/s/ RAMIRO G. PERU Director February 25, 2022 +Ramiro G. Peru +/s/ ANITA M. POWERS Director February 25, 2022 +Anita M. Powers +/s/ JULIO M. QUINTANA Director February 25, 2022 +Julio M. Quintana +/s/ ROSE M. ROBESON Director February 25, 2022 +Rose M. Robeson +111 \ No newline at end of file diff --git a/raw/filings/0000893538/2021/0000893538-22-000020/filing_metadata.csv b/raw/filings/0000893538/2021/0000893538-22-000020/filing_metadata.csv new file mode 100644 index 0000000000000000000000000000000000000000..65f875a3962efdfe9358e25327ceb6c23abc91b7 --- /dev/null +++ b/raw/filings/0000893538/2021/0000893538-22-000020/filing_metadata.csv @@ -0,0 +1,2 @@ +cik,ticker,company_name,form,filing_date,report_date,acceptance_datetime,accession_number,primary_document,primary_doc_description,size,is_xbrl,is_inline_xbrl,document_url,filing_index_url,year,fiscal_year,is_primary_filing +0000893538,SM,SM Energy Co,10-K,2022-02-25,2021-12-31,2022-02-25T13:55:04.000Z,0000893538-22-000020,sm-20211231.htm,10-K,16691803,1,1,https://www.sec.gov/Archives/edgar/data/893538/000089353822000020/sm-20211231.htm,https://www.sec.gov/Archives/edgar/data/893538/000089353822000020/,2021,2021,1 diff --git a/raw/filings/0000893538/2021/0000893538-22-000020/item1.txt b/raw/filings/0000893538/2021/0000893538-22-000020/item1.txt new file mode 100644 index 0000000000000000000000000000000000000000..e69de29bb2d1d6434b8b29ae775ad8c2e48c5391 diff --git a/raw/filings/0000893538/2021/0000893538-22-000020/item13.txt b/raw/filings/0000893538/2021/0000893538-22-000020/item13.txt new file mode 100644 index 0000000000000000000000000000000000000000..fde8269765a961bc208c3f4847f291130d177b3a --- /dev/null +++ b/raw/filings/0000893538/2021/0000893538-22-000020/item13.txt @@ -0,0 +1,2 @@ +ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE +The information required by this Item is incorporated by reference to the information provided under the captions “ Certain Relationships and Related Transactions ” and “ Corporate Governance ” in the Company’s Definitive Proxy Statement on Schedule 14A for the 2022 annual meeting of stockholders, to be filed within 120 days from December 31, 2021. \ No newline at end of file diff --git a/raw/filings/0000893538/2021/0000893538-22-000020/item9a.txt b/raw/filings/0000893538/2021/0000893538-22-000020/item9a.txt new file mode 100644 index 0000000000000000000000000000000000000000..a69ad1c99e793c02e7b7761c7c4e02904e4f1e3b --- /dev/null +++ b/raw/filings/0000893538/2021/0000893538-22-000020/item9a.txt @@ -0,0 +1,34 @@ +ITEM 9A. CONTROLS AND PROCEDURES +Evaluation of Disclosure Controls and Procedures +We maintain a system of disclosure controls and procedures that are designed to reasonably ensure that information required to be disclosed in our SEC reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and to reasonably ensure that such information is accumulated and communicated to our management, including our Chief Executive Officer (Principal Executive Officer) and our Chief Financial Officer (Principal Financial Officer), as appropriate, to allow for timely decisions regarding required disclosure. +Our management, including our Chief Executive Officer and our Chief Financial Officer, does not expect that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) (“Disclosure Controls”) will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. We monitor our Disclosure Controls and make modifications as necessary; our intent in this regard is that the Disclosure Controls will be modified as systems change and conditions warrant. +An evaluation of the effectiveness of the design and operation of our Disclosure Controls was performed as of the end of the period covered by this report. This evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our Disclosure Controls are effective at a reasonable assurance level. +Changes in Internal Control Over Financial Reporting +There have been no changes during the fourth quarter of 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. +101 +Management’s Report on Internal Control over Financial Reporting +Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s internal control over financial reporting includes those policies and procedures that: +(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; +(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and +(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that have a material effect on the financial statements. +Because of the inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. Even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of the changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate. +Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2021. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013 framework) . +Based on management’s assessment and those criteria, management believes that the Company maintained effective internal control over financial reporting as of December 31, 2021. +The Company’s independent registered public accounting firm has issued an attestation report on the Company’s internal control over financial reporting. That report immediately follows this report. +102 +Report of Independent Registered Public Accounting Firm +To the Stockholders and the Board of Directors of SM Energy Company and subsidiaries +Opinion on Internal Control Over Financial Reporting +We have audited SM Energy Company and subsidiaries’ internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, SM Energy Company and subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on the COSO criteria. +We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income (loss), changes in stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and our report dated February 25, 2022, expressed an unqualified opinion thereon. +Basis for Opinion +The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. +We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. +Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. +Definition and Limitations of Internal Control Over Financial Reporting +A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. +Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. +/s/ Ernst & Young LLP +Denver, Colorado +February 25, 2022 +103 \ No newline at end of file diff --git a/raw/filings/0000893538/2021/0000893538-22-000020/rp_note.txt b/raw/filings/0000893538/2021/0000893538-22-000020/rp_note.txt new file mode 100644 index 0000000000000000000000000000000000000000..e69de29bb2d1d6434b8b29ae775ad8c2e48c5391 diff --git a/raw/filings/0000893538/2021/0000893538-22-000020/rpt_disclosure.txt b/raw/filings/0000893538/2021/0000893538-22-000020/rpt_disclosure.txt new file mode 100644 index 0000000000000000000000000000000000000000..3274aa1fa9578b6731a0bc5e30c11c91afa52994 --- /dev/null +++ b/raw/filings/0000893538/2021/0000893538-22-000020/rpt_disclosure.txt @@ -0,0 +1,11 @@ +CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS +Policies and Procedures on Transactions with Related Persons +Our Related Person Transactions Policy sets forth the policies and procedures for the Audit Committee’s review of any transaction, arrangement, or relationship (including any indebtedness or guarantee of indebtedness) or series of similar transactions, arrangements, or relationships in which (a) we are a participant, (b) the aggregate amount involved will or may be expected to exceed $120,000 per annum, and (c) a related person has or will have a direct or indirect material interest. For purposes of our Related Person Transactions Policy, a “related person” means (i) any of our directors, executive officers, or nominees for director, (ii) any stockholder that beneficially owns more than five percent of our outstanding shares of common stock, and (iii) any immediate family member of any of the foregoing. The Audit Committee approves or ratifies only those transactions that it determines in good faith are in, or are not inconsistent with, our best interests and the best interests of our stockholders. +In determining whether to approve or ratify a transaction with a related person, the Audit Committee takes into account the factors it deems appropriate, which may include, among others, the benefits to us, the availability of other sources for comparable products or services, the impact on a director’s independence in the event the related person is a director, and the extent of the related person’s interest in the transaction. The Audit Committee reviews and assesses ongoing relationships with a related person on at least an annual basis to ensure that they are in compliance with the policy and remain appropriate. +In addition, our By-Laws provide that a director, officer, or employee of our Company may not pursue for his or her own account a business or investment opportunity that he or she learned about through his or her affiliation with us. These restrictions do not apply to the acquisition of less than 1 percent of the publicly traded stock of another company. +Transactions with Related Persons +We recognize that transactions with related persons may raise questions among stockholders regarding whether those transactions are consistent with our best interests and the best interests of our stockholders. It is our policy to enter into or ratify such transactions only when our Board, acting through the Audit Committee or as otherwise described herein, determines that the transaction in question is in, or is not inconsistent with, our best interests and the best interests of our stockholders. Such transactions include, but are not limited to, situations where we may obtain products or services of a nature, quantity or quality, or on other terms, that are not readily available from alternate sources, or when we obtain products or services from, or provide products or services to, related persons on an arm’s length basis on terms comparable to those obtained from or provided to unrelated third parties or on terms comparable to those obtained from or provided to employees generally. With the exception of the transaction described in the following paragraph, which was approved by our Audit Committee, we had no transactions that required approval under our Related Person Transactions Policy. +Dean Lutey, the spouse of Ms. Mary Ellen Lutey, our Senior Vice President—Exploration, Development and EHS, joined the Company in 2008. Mr. Lutey was appointed Vice President—Chief Information Officer in April, 2021. Prior to this appointment, Mr. Lutey served as the Company’s Vice President—Information Technology since May 2013. During the fiscal year ended December 31, 2021, Mr. Lutey earned total compensation of $592,898 which included his base salary, annual bonus, LTIP awards, benefits under our qualified and non-qualified benefit plans, and matching contributions by the Company under its 401(k) Profit Sharing Plan and Non-Qualified Deferred Compensation Plan. Mr. Lutey also participated in the Company’s benefit programs for its employees. +Compensation Committee Interlocks and Insider Participation +None of the directors who served on the Compensation Committee during fiscal year 2021 has ever served as one of our officers or employees. 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Securities Exchange Act of 1934 +Commission file number 001-31539 +SM ENERGY CO MPANY +(Exact name of registrant as specified in its charter) +Delaware 41-0518430 +(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) +1700 Lincoln Street , Suite 3200 , Denver , Colorado +80203 +(Address of principal executive offices) (Zip Code) +( 303 ) 861-8140 +(Registrant’s telephone number, including area code) +Securities registered pursuant to Section 12(b) of the Act: +Title of each class Trading Symbol(s) Name of each exchange on which registered +Common stock, $0.01 par value SM New York Stock Exchange +Securities registered pursuant to Section 12(g) of the Act: None +Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☑ No ☐ +Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☑ +Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐ +Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐ +Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. +Large accelerated filer ☑ Accelerated filer ☐ +Non-accelerated filer ☐ Smaller reporting company ☐ +Emerging growth company ☐ +If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ +Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☑ +If securities are registered pursuant to section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐ +Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐ +Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☑ +The aggregate market value of the 77,905,978 shares of voting stock held by non-affiliates of the registrant, based upon the closing sale price of the registrant’s common stock on June 28, 2024, the last business day of the registrant’s most recently completed second fiscal quarter, of $43.23 per share, as reported on the New York Stock Exchange, was $ 3,367,875,429 . Shares of common stock held by each director and executive officer and by each person who owns 10 percent or more of the outstanding common stock or who is otherwise believed by the registrant to be in a control position have been excluded. This determination of affiliate status is not necessarily a conclusive determination for other purposes. +As of January 31, 2025, the registrant had 114,461,934 shares of common stock outstanding. +DOCUMENTS INCORPORATED BY REFERENCE +Certain information required by Items 10, 11, 12, 13, and 14 of Part III of this report is incorporated by reference from portions of the registrant’s Definitive Proxy Statement on Schedule 14A relating to its 2025 annual meeting of stockholders, to be filed within 120 days after December 31, 2024. +1 +TABLE OF CONTENTS +Item Page +Cautionary Information about Forward-Looking Statements +4 +Glossary +5 +Part I +8 +Items 1. and 2. +Business and Properties +8 +General +8 +Strategy +8 +Significant Developments in 2024 +8 +Outlook +9 +Areas of Operation +10 +Reserves +11 +Production +15 +Productive Wells +15 +Drilling and Completion Activity +16 +Title to Properties +16 +Acreage +17 +Delivery Commitments +17 +Major Customers +17 +Human Capital +17 +Seasonality +18 +Competition +18 +Government Regulations +19 +Available Information +22 +Item 1A. +Risk Factors +22 +Item 1B. +Unresolved Staff Comments +36 +Item 1C. +Cybersecurity +37 +Item 3. +Legal Proceedings +38 +Item 4. +Mine Safety Disclosures +38 +Part II +39 +Item 5. +Market For Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities +39 +Item 6. +[Reserved] +40 +Item 7. +Management’s Discussion and Analysis of Financial Condition and Results of Operations +41 +Overview of the Company +41 +Financial Results of Operations and Additional Comparative Data +45 +Comparison of Financial Results and Trends Between 2024 and 2023, and Between 2023 and 2022 +49 +Overview of Liquidity and Capital Resources +52 +Critical Accounting Estimates +56 +Accounting Matters +58 +Environmental +58 +Non-GAAP Financial Measures +59 +Item 7A. +Quantitative and Qualitative Disclosures About Market Risk +60 +Item 8. +Consolidated Financial Statements and Supplementary Data +61 +Item 9. +Changes In and Disagreements With Accountants on Accounting and Financial Disclosure +107 +Item 9A. +Controls and Procedures +107 +Item 9B. +Other Information +110 +Item 9C. +Disclosure Regarding Foreign Jurisdictions that Prevent Inspections +110 +2 +TABLE OF CONTENTS +(Continued) +Item Page +Part III +110 +Item 10. +Directors, Executive Officers, and Corporate Governance +110 +Item 11. +Executive Compensation +110 +Item 12. +Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters +110 +Item 13. +Certain Relationships and Related Transactions, and Director Independence +111 +Item 14. +Principal Accountant Fees and Services +111 +Part IV +112 +Item 15. +Exhibits and Consolidated Financial Statement Schedules +112 +Item 16. +Form 10-K Summary +114 +Signatures +115 +3 +Cautionary Information about Forward-Looking Statements +This Annual Report on Form 10-K (“Form 10-K” or “this report”) contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”). All statements included in this report, other than statements of historical fact, that address activities, conditions, events, or developments with respect to our financial condition, results of operations, business prospects or economic performance that we expect, believe, or anticipate will or may occur in the future, or that address plans and objectives of management for future operations, are forward-looking statements. The words “anticipate,” “assume,” “believe,” “budget,” “could,” “estimate,” “expect,” “forecast,” “goal,” “intend,” “pending,” “plan,” “potential,” “projected,” “seek,” “target,” “will,” and similar expressions are intended to identify forward-looking statements. Forward-looking statements appear throughout this report, and include statements about such matters as: +• business strategies and other plans and objectives for future operations, including plans for expansion and growth of operations or reallocation of capital, plans with respect to future dividend payments, debt repayments or redemptions, equity repurchases, capital markets activities, environmental, social, and governance (“ESG”) goals and initiatives, and our outlook on our future financial condition or results of operations; +• risks related to the integration of the Uinta Basin Acquisition, including our ability to realize the expected benefits of the Uinta Basin Acquisition or any business disruptions that could result from the Uinta Basin Acquisition; refer to Note 17 – Acquisitions in Part II, Item 8 of this report for discussion and the definition of the Uinta Basin Acquisition; +• the amount and nature of future capital expenditures, the resilience of our assets to declining commodity prices, the ability of our assets to generate strong returns in the current macroeconomic environment, and the availability of liquidity and capital resources to fund capital expenditures; +• our outlook on prices for future crude oil, natural gas, and natural gas liquids (also referred to throughout this report as “oil,” “gas,” and “NGLs,” respectively), well costs, service costs, production costs, and general and administrative costs, and the effects of inflation, tariffs or trade restrictions on each of these; +• armed conflict, political instability, or civil unrest in oil and gas producing regions and shipping channels, including instability in the Middle East, the wars and armed conflicts between Russia and Ukraine, and among Israel and Hamas, Hezbollah, and Iran and its proxy forces, and related potential effects on laws and regulations, or the imposition of economic or trade sanctions (“War and Geopolitical Instability”); +• any changes to the borrowing base or aggregate revolving lender commitments under, or the maturity date of, our Seventh Amended and Restated Credit Agreement, as amended (“Credit Agreement”); +• cash flows, liquidity, interest and related debt service expenses, changes in our effective tax rate, and our ability to repay debt in the future; +• our drilling and completion activities and other exploration and development activities, each of which could be affected by supply chain disruptions and inflation, tariffs or trade restrictions, our ability to obtain permits and governmental approvals, and plans by us, our joint development partners, and/or other third-party operators; +• possible or expected acquisitions and divestitures, including the possible divestiture or farm-out of, or farm-in or joint development of, certain properties; +• oil, gas, and NGL reserve estimates and estimates of both future net revenues and the present value of future net revenues associated with those reserve estimates, as well as the conversion of proved undeveloped reserves to proved developed reserves; +• our expected future production volumes, identified drilling locations, as well as drilling prospects, inventories, projects and programs; +• changes in proposed or final federal income tax laws and regulations or exposure to additional income tax liabilities; and +• other similar matters, such as those discussed in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of this report. +Our forward-looking statements are based on assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions, expected future developments, and other factors that we believe are appropriate under the circumstances. We caution you that forward-looking statements are not guarantees of future performance and these statements are subject to known and unknown risks and uncertainties, which may cause our actual results or performance to be materially different from any future results or performance expressed or implied by the forward-looking statements. Factors that may cause our financial condition, results of operations, business prospects or economic performance to differ from expectations include the factors discussed in Part I, Item 1A, Risk Factors below and elsewhere in this report. +The forward-looking statements in this report speak only as of the filing of this report. Although we may from time to time voluntarily update our prior forward-looking statements, we disclaim any commitment to do so except as required by applicable securities laws. +4 +Glossary +The oil and gas terms and other terms defined in this section are used throughout this report. The definitions of the terms “developed reserves,” “exploratory well,” “field,” “proved reserves,” and “undeveloped reserves” have been abbreviated from the respective definitions under Rule 4-10(a) of Regulation S-X. The entire definitions of those terms under Rule 4-10(a) of Regulation S-X can be located on the Securities and Exchange Commission’s (“SEC”) website at www.sec.gov. +Ad valorem tax. A tax based on the value of real estate or personal property. +ASC. Accounting Standards Codification. +ASU. Accounting Standards Update. +Bbl. One stock tank barrel, or 42 U.S. gallons liquid volume, used in reference to oil, NGLs, water, or other liquid hydrocarbons. +BBtu. One billion British thermal units. +Bcf . One billion cubic feet, used in reference to gas. +BOE. Barrels of oil equivalent. Oil equivalents are determined using the ratio of six Mcf of gas to one Bbl of oil or NGLs. +Btu. One British thermal unit, the quantity of heat required to raise the temperature of a one-pound mass of water by one degree Fahrenheit. +Completion. The installation of equipment for production of oil, gas, and/or NGLs, or in the case of a dry hole, the reporting to the applicable authority that the well has been abandoned. +Conversion rate. Current year conversions of proved undeveloped reserves to proved developed reserves, divided by beginning of the year proved undeveloped reserves (also commonly referred to in our industry as “ track record” ). +Costs incurred. Costs incurred in oil and gas property acquisition, exploration, and development activities, whether capitalized or expensed. +Developed acreage. The number of acres that are allocated or assignable to productive wells or wells capable of production. +Developed reserves. Reserves that can be expected to be recovered: (i) through existing wells with existing equipment and operating methods or in which the cost of the required equipment is relatively minor compared to the cost of a new well; and (ii) through installed extraction equipment and infrastructure operational at the time of the reserves estimate if the extraction is by means not involving a well. +Development well. A well drilled within the proved area of an oil or gas reservoir to the depth of a stratigraphic horizon known to be productive. +Dry hole. An exploratory, development, or extension well that proves to be incapable of producing oil, gas, and/or NGLs in sufficient commercial quantities to justify completion, or upon completion, the economic operation of a well (also referred to as “ non-productive well” ). +Exploratory well. A well drilled to find a new field or to find a new reservoir in a field previously found to be productive of oil or gas in another reservoir. +Extension well . A well drilled to extend the limits of a known reservoir. +FASB. Financial Accounting Standards Board. +Fee properties. The most extensive interest that can be owned in land, including surface and mineral (including oil and gas) rights. +Field. An area consisting of a single reservoir or multiple reservoirs all grouped on or related to the same individual geological structural feature and/or stratigraphic condition. +Formation. A succession of sedimentary beds that were deposited under the same general geologic conditions. +GAAP. Accounting principles generally accepted in the United States. +5 +Gross acres or gross wells. Acres or wells in which a working interest is owned. +Horizontal wells. Wells that are drilled at angles greater than 70 degrees from vertical. +Lease operating expenses (“LOE ”) . The expenses incurred in the lifting of oil, gas, and/or NGLs from a producing formation to the surface, constituting part of the current operating expenses of a working interest, and also including labor, superintendence, supplies, repairs, maintenance, allocated overhead costs, and other expenses incidental to production, but not including lease acquisition, drilling, or completion costs. +MBbl. One thousand barrels, used in reference to oil, NGLs, water, or other liquid hydrocarbons. +MBOE. One thousand barrels of oil equivalent. +Mcf. One thousand cubic feet, used in reference to gas. +MMBbl. One million barrels, used in reference to oil, NGLs, water, or other liquid hydrocarbons. +MMBOE. One million barrels of oil equivalent. +MMBtu. One million British thermal units. +MMcf. One million cubic feet, used in reference to gas. +Net acres or net wells. Sum of our fractional working interests owned in gross acres or gross wells. +NGLs. The combination of ethane, propane, isobutane, normal butane, and natural gasoline that when removed from gas become liquid under various levels of higher pressure and lower temperature. +NYMEX WTI. New York Mercantile Exchange West Texas Intermediate, a common industry benchmark price for oil. +NYMEX Henry Hub (“HH”). New York Mercantile Exchange Henry Hub, a common industry benchmark price for gas. +OPEC+. The Organization of the Petroleum Exporting Countries (“ OPEC ”) plus other non-OPEC oil producing countries. +OPIS . Oil Price Information Service, a common industry benchmark for NGL pricing at Mont Belvieu, Texas. +PV-10. PV-10 is a non-GAAP measure. The present value of estimated future revenue to be generated from the production of estimated proved reserves, net of estimated production and future development costs, based on prices used in estimating the proved reserves and costs in effect as of the date indicated (unless such costs are subject to change pursuant to contractual provisions), without giving effect to non-property related expenses such as general and administrative expenses, debt service, future income tax expenses, or depreciation, depletion, and amortization, discounted using an annual discount rate of 10 percent. While this measure does not include the effect of income taxes as it would in the use of the standardized measure of discounted future net cash flows calculation, it does provide an indicative representation of the relative value of the Company on a comparative basis to other companies and from period to period. This measure is presented because management believes it provides useful information to investors for analysis of the Company's fundamental business on a recurring basis. +Productive well. An exploratory, development, or extension well that is producing or is capable of commercial production of oil, gas, and/or NGLs. +Proved reserves. Those quantities of oil, gas, and NGLs that, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulations prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation. Existing economic conditions include prices and costs at which economic producibility from a reservoir is to be determined, and the price to be used is the average price during the 12-month period prior to the ending date of the period covered by the report, determined as an unweighted arithmetic average of the first-day-of-the-month price for each month within such period, unless prices are defined by contractual arrangements, excluding escalations based upon future conditions. +Recompletion. The completion of an existing wellbore in a formation other than that in which the well has previously been completed. +Reserve life index. Expressed in years, represents the estimated proved reserves as of the end of the year divided by actual production for the preceding 12-month period. +6 +Reservoir. A porous and permeable underground formation containing a natural accumulation of producible oil, gas, and/or associated liquid resources that is confined by impermeable rock or water barriers and is individual and separate from other reservoirs. +Resource play. A term used to describe an accumulation of oil, gas, and/or associated liquid resources known to exist over a large areal expanse, which when compared to a conventional play typically has lower expected geological risk. +Royalty. The amount or fee paid to the owner of mineral rights, expressed as a percentage or fraction of gross income from oil, gas, and NGLs produced and sold unencumbered by expenses relating to the drilling, completing, and operating of the affected well. +Royalty interest. An interest in an oil and gas property entitling the owner to shares of oil, gas, and NGL production free of costs of exploration, development, and production operations. +Seismic. The sending of energy waves or sound waves into the earth and analyzing the wave reflections to infer the type, size, shape, and depth of subsurface rock formations. +Shale. Fine-grained sedimentary rock composed mostly of consolidated clay or mud. Shale is the most frequently occurring sedimentary rock. +SOFR. Secured Overnight Financing Rate. +Standardized measure of discounted future net cash flows. The discounted future net cash flows related to estimated proved reserves based on prices used in estimating the reserves, year-end costs, and statutory tax rates, at a 10 percent annual discount rate. The information for this calculation is included in Supplemental Oil and Gas Information (unaudited) located in Part II, Item 8 of this report. +Undeveloped acreage. Lease acreage on which wells have not been drilled or completed to a point that would permit the production of commercial quantities of oil, gas, and NGLs regardless of whether such acreage contains estimated proved reserves. +Undeveloped reserves. Reserves that are expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required for recompletion. The applicable SEC definition of undeveloped reserves provides that undrilled locations can be classified as having undeveloped reserves only if a development plan has been adopted indicating that they are scheduled to be drilled within five years, unless the specific circumstances justify a longer time. +Working interest. The operating interest that gives the owner the right to drill, produce, and conduct operating activities on the property and to share in the production, sales, and costs. +7 +PART I +When we use the terms “SM Energy,” the “Company,” “we,” “us,” or “our,” we are referring to SM Energy Company and its subsidiaries unless the context otherwise requires. We have included certain technical terms important to an understanding of our business in the Glossary section of this report. Throughout this document we make statements and projections that address future expectations, possibilities, or events, all of which may be classified as “forward-looking statements.” Refer to the Cautionary Information about Forward-Looking Statements section of this report for an explanation of these types of statements and the associated risks and uncertainties. +ITEMS 1. AND 2. BUSINESS AND PROPERTIES +General +We are an independent energy company engaged in the acquisition, exploration, development, and production of oil, gas, and NGLs in Texas and Utah. SM Energy was founded in 1908, incorporated in Delaware in 1915, and our initial public offering of common stock was in 1992. Our common stock trades on the New York Stock Exchange under the ticker symbol “SM.” +Our principal office is located at 1700 Lincoln Street, Suite 3200, Denver, Colorado 80203, and our telephone number is (303) 861-8140. +Strategy +Our purpose is to make people’s lives better by responsibly producing energy supplies, contributing to domestic energy security and prosperity, and having a positive impact in the communities where we live and work. Our long-term vision and strategy is to sustainably grow value for all of our stakeholders as a premier operator of top-tier assets by maintaining and optimizing our high-quality asset portfolio, generating cash flows, and maintaining a strong balance sheet. Our team executes this strategy by prioritizing safety, technological innovation, and stewardship of natural resources, all of which are integral to our corporate culture. Our near-term goals include focusing on operational execution and successfully integrating the Uinta Basin assets; generating cash flows that enable us to continue returning value to stockholders through fixed dividend payments, debt repayments, and our Stock Repurchase Program; and expanding our portfolio of top-tier economic drilling inventory through acquisition and exploration. Refer to Significant Developments in 2024 below for the definitions of the Uinta Basin and the Stock Repurchase Program, and to Outlook for additional discussion of our 2025 strategy and operational plans. +Our asset portfolio is comprised of high-quality assets in the Midland Basin of West Texas, the Maverick Basin of South Texas, and the Uinta Basin of northeastern Utah, which we believe are capable of generating strong returns in the current macroeconomic environment and provide resilience to commodity price risk and volatility. We seek to maximize returns and increase the value of our top-tier assets through disciplined capital spending, strategic acquisitions, including the Uinta Basin Acquisition, and continued development and optimization of our existing assets. We believe that our high-quality assets facilitate a sustainable approach to prioritizing operational execution, maintaining a strong balance sheet, generating cash flows, returning capital to stockholders, and maintaining financial flexibility. Refer to Note 17 – Acquisitions in Part II, Item 8 of this report for additional discussion and the definition of the Uinta Basin Acquisition. +We are committed to exceptional safety, health, and environmental stewardship; supporting the professional development of a diverse and thriving team of employees; building and maintaining partnerships with our stakeholders by investing in and connecting with the communities where we live and work; and transparency in reporting our progress in these areas. We have prioritized ESG initiatives by, among other things, integrating enhanced environmental and social programs throughout the organization and setting goals that include safety and spill metrics, minimizing flaring and reducing greenhouse gas (“GHG” or “GHGs”) emissions intensity, and maintaining low methane emissions intensity. Additionally, we have implemented systems and technologies to track ESG metrics to improve future reporting and performance and to increase employee awareness. We continue to evaluate new technologies to support our ESG initiatives. The Environmental, Social and Governance Committee of our Board of Directors oversees, among other things, the effectiveness of our ESG policies, programs and initiatives, monitors and responds to emerging trends, issues, and associated risks, and, together with management, reports to our Board of Directors regarding such matters. Further demonstrating our commitment to sustainable operations and environmental stewardship, compensation for our executives and eligible employees under our long-term incentive plan, and compensation for all employees under our short-term incentive plan is calculated based on, in part, certain Company-wide, performance-based metrics that include key financial, operational, environmental, health, and safety measures. +Significant Developments in 2024 +Acquisition Activity . On October 1, 2024, we acquired approximately 63,300 net acres of primarily proved oil and gas assets, and related supporting facilities located in Duchesne and Uintah counties, Utah, including approximately 103.2 MMBOE of existing net proved reserves, for an unadjusted purchase price of $2.1 billion, establishing a new position in the Uinta Basin in northeastern Utah (“Uinta Basin”). Our Uinta Basin position provides future development and exploration opportunities within multiple oil-rich intervals in the Lower Green River and Wasatch formations, and includes acreage with waxy crude and gas composition amenable to processing +8 +for NGL extraction. Refer to Note 17 – Acquisitions in Part II, Item 8 of this report for additional discussion. The information presented in this report regarding our Uinta Basin assets pertains to the fourth quarter of 2024 and does not represent the full-year 2024. +Senior Notes Activity. During 2024, we issued $750.0 million in aggregate principal amount of our 6.75% Senior Notes at par with a maturity date of August 1, 2029 (“2029 Senior Notes”) and $750.0 million in aggregate principal amount of our 7.0% Senior Notes at par with a maturity date of August 1, 2032 (“2032 Senior Notes”). As a result of these issuances, we received combined net proceeds of $1.5 billion after deducting fees of $23.0 million, which we used in part to fund the acquisition activity discussed above, and to redeem the $349.1 million of aggregate principal amount outstanding of our 5.625% Senior Notes due June 1, 2025 (“2025 Senior Notes”). The redeemed 2025 Senior Notes were canceled upon settlement. Refer to Note 5 – Long-Term Debt in Part II, Item 8 of this report for additional discussion. +Reserves and Capital Investment. Our total estimated net proved reserves were 678.3 MMBOE as of December 31, 2024, an increase of 12 percent from 604.9 MMBOE as of December 31, 2023. This increase primarily consisted of the acquisition of 103.2 MMBOE of estimated net proved reserves in the Uinta Basin and revisions of previous estimates of 74.7 MMBOE related to infill reserves in both our South Texas and Midland Basin programs. This increase was partially offset by 62.4 MMBOE of production and 30.5 MMBOE of revisions of previous estimates related to the removal of certain net proved undeveloped reserve cases that are no longer expected to be developed within the five-year period from initial booking as a result of the reallocation of capital to include our Uinta Basin assets. Our proved reserve life index remained flat at 10.9 years as of December 31, 2024, and 2023. Refer to Areas of Operation and Reserves below for additional discussion of changes in estimated net proved reserves. Costs incurred increased 184 percent from 2023 to $3.5 billion in 2024. Refer to Areas of Operation below, and to Supplemental Oil and Gas Information (unaudited) in Part II, Item 8 of this report for additional discussion. +Return of Capital Program . In 2024, we continued to execute on our goal of sustainably returning capital to our stockholders through our fixed dividend payments and Stock Repurchase Program, as defined below. Our Board of Directors approved an increase to our fixed dividend to $0.80 per share annually, to be paid in quarterly increments of $0.20 per share, which commenced in the fourth quarter of 2024. During the year ended December 31, 2024, we paid dividends of $0.74 per share, an increase from $0.60 per share paid during the year ended December 31, 2023. +During the first half of 2024, we repurchased and subsequently retired 1.8 million shares of our common stock at a cost of $84.0 million, excluding excise taxes, commissions, and fees. In June 2024, our Board of Directors re-authorized the existing stock repurchase program to re-establish our authorization to repurchase up to $500.0 million in aggregate value of our common stock through December 31, 2027 (“Stock Repurchase Program”). As of December 31, 2024, $500.0 million remained available for repurchases of our outstanding common stock under the Stock Repurchase Program. Refer to Note 3 – Equity in Part II, Item 8 of this report for additional discussion. +Production, Pricing and Revenue, and Commodity Derivatives. Our average net daily equivalent production in 2024 increased 12 percent compared with 2023 to 170.5 MBOE, consisting of 80.2 MBbl of oil, 374.3 MMcf of gas, and 27.9 MBbl of NGLs, as a result of an increased number of completions, strong well performance, and production from our Uinta Basin assets during the fourth quarter of 2024. Oil production as a percentage of total production increased to 47 percent in 2024 from 43 percent in 2023, as a result of increased oil production from both our Midland Basin and South Texas assets, in addition to oil production from our Uinta Basin assets. +Realized prices before the effect of net derivative settlements (“realized price” or “realized prices”) for oil and gas decreased two percent and 27 percent, respectively, for the year ended December 31, 2024, compared with 2023. Realized price for NGLs remained flat for the year ended December 31, 2024, compared with 2023. Oil, gas, and NGL production revenue increased 13 percent to $2.7 billion for the year ended December 31, 2024, compared with $2.4 billion for 2023, primarily as a result of the timing of well completions, strong well performance, and production from our Uinta Basin assets. Oil production revenue was 82 percent and 77 percent of total production revenue for the years ended December 31, 2024, and 2023, respectively. +We recorded net derivative gains of $50.0 million and $68.2 million for the years ended December 31, 2024, and 2023, respectively. These amounts include net derivative settlement gains of $68.7 million and $26.9 million for the years ended December 31, 2024, and 2023, respectively. +Refer to Areas of Operation below and Overview of the Company in Part II, Item 7 of this report for additional discussion. +Outlook +Our long-term vision and strategy is to sustainably grow value for all of our stakeholders as a premier operator of top-tier assets. Our 2025 strategy and operational plan seeks to deliver long-term profitability and value creation by: +• focusing on operational execution, successfully integrating our Uinta Basin assets, and delivering low breakeven, high return wells across our portfolio by optimizing capital efficiency, demonstrating innovation and remaining a leader in stewardship; +9 +• returning capital to stockholders by generating cash flows to support our increased fixed dividend payments, reduce debt, and return value through our Stock Repurchase Program; and +• expanding our portfolio of top-tier economic drilling inventory through acquisition and exploration, and the application of advanced analytics, new technologies, and development optimization. +We expect our total 2025 capital program to be approximately $1.3 billion, excluding acquisitions, which we expect to fund with cash flows from operations, with any remaining cash needs being funded by borrowings under our revolving credit facility. We plan to focus our 2025 capital program on highly economic oil development projects in our Midland Basin, South Texas, and Uinta Basin assets. +Areas of Operation +Our operations are conducted in the United States, with activity in the Midland Basin, South Texas, and the Uinta Basin, as described below. The following table summarizes estimated net proved reserves, net production volumes, and costs incurred for the year ended December 31, 2024, for these areas: +Midland Basin +South Texas +Uinta Basin +Total (1) +Net proved reserves +Oil (MMBbl) 134.3 79.2 82.5 296.0 +Gas (Bcf) 576.4 868.1 104.6 1,549.1 +NGLs (MMBbl) 0.1 124.0 — 124.1 +MMBOE (1) +230.5 347.9 99.9 678.3 +Relative percentage +34 % 51 % 15 % 100 % +Proved developed % 75 % 56 % 38 % 60 % +Net production volumes +Oil (MMBbl) 19.1 7.4 2.9 29.4 +Gas (Bcf) 62.0 72.3 2.7 137.0 +NGLs (MMBbl) — 10.2 — 10.2 +MMBOE (1) +29.4 29.6 3.3 62.4 +Avg. daily equivalents (MBOE/d) (1) +80.5 81.0 9.1 170.5 +Relative percentage +47 % 48 % 5 % 100 % +Costs incurred (in millions) (2)(3) +$ 720.9 $ 478.3 $ 2,261.2 $ 3,503.7 +___________________________________________ +(1) Amounts may not calculate due to rounding. +(2) Asset costs incurred do not sum to total costs incurred primarily due to corporate charges incurred on exploration activities and costs related to exploration efforts outside of our core areas of operation that are excluded from this table. For total costs incurred, refer to Costs Incurred in Supplemental Oil and Gas Information (unaudited) in Part II, Item 8 of this report. +(3) Asset costs incurred include $2.1 billion related to acquisition costs, primarily related to the Uinta Basin Acquisition. Refer to Note 17 – Acquisitions in Part II, Item 8 of this report for additional discussion and the definition of the Uinta Basin Acquisition. +Total estimated net proved reserves at December 31, 2024, increased 12 percent from December 31, 2023. Total net equivalent production increased 12 percent for the year ended December 31, 2024, compared with 2023. Costs incurred for the year ended December 31, 2024, increased 184 percent compared with 2023, primarily as a result of an increase in capital activity related to the acquisition of proved and unproved properties in the Uinta Basin. +Midland Basin. Our Midland Basin assets, located in the Permian Basin in West Texas, are comprised of approximately 110,000 net acres, and include our RockStar assets in Howard and Martin counties, our Sweetie Peck assets in Upton and Midland counties, and our Klondike assets in Dawson and northern Martin counties (“Midland Basin”). In 2024, our drilling and completion activities focused on development optimization of our RockStar and Sweetie Peck assets, and delineation and development of our Klondike assets. Our Midland Basin position provides substantial future development opportunities within multiple oil-rich intervals, including the Spraberry, Wolfcamp, and Woodford Barnett formations. We expect our 2025 capital activity in the Midland Basin to be focused on highly economic oil development projects. +In 2024, costs incurred totaled $720.9 million, and we averaged four drilling rigs and one completion crew. We drilled 89 gross (73 net) wells and completed 88 gross (73 net) wells, and as of December 31, 2024, 40 gross (29 net) wells had been drilled but not completed in our operated Midland Basin program. Net equivalent production for the year ended December 31, 2024, was 29.4 MMBOE, a seven percent increase from 27.5 MMBOE for the year ended December 31, 2023. Estimated net proved reserves decreased 14 percent to 230.5 MMBOE at December 31, 2024, from 268.5 MMBOE at December 31, 2023. We removed 10.5 +10 +MMBOE of net proved undeveloped reserves that are no longer expected to be developed within the five-year period from initial booking as a result of the reallocation of capital to include our Uinta Basin assets. Reserve reductions also included 29.4 MMBOE of production and 8.0 MMBOE of negative performance revisions. These decreases were partially offset by 8.2 MMBOE of additions from extensions and discoveries and 5.8 MMBOE of positive revisions of previous estimates related to infill. +South Texas. Our South Texas assets are comprised of approximately 155,000 net acres located in Dimmit and Webb counties, Texas (“South Texas”). In 2024, our operations focused on development and further delineation of the Austin Chalk formation, and on production from both the Austin Chalk formation and the Eagle Ford shale formation. Our overlapping acreage position in South Texas covers a significant portion of the western Eagle Ford shale and Austin Chalk formations (“Maverick Basin”) and includes acreage across the oil, gas-condensate, and dry gas windows with gas composition amenable to processing for NGL extraction. We expect our 2025 capital activity in South Texas to be focused primarily on developing the Austin Chalk formation. +In 2024, costs incurred totaled $478.3 million, and we averaged two drilling rigs and one completion crew. We drilled 52 gross (52 net) wells and completed 54 gross (54 net) wells, and as of December 31, 2024, 35 gross (35 net) wells had been drilled but not completed in our operated South Texas program. Net equivalent production for the year ended December 31, 2024, was 29.6 MMBOE, a six percent increase from 28.0 MMBOE for the year ended December 31, 2023. Estimated net proved reserves increased three percent to 347.9 MMBOE at December 31, 2024, from 336.4 MMBOE at December 31, 2023. Positive revisions of previous estimates primarily consisted of 69.0 MMBOE of infill, partially offset by 29.6 MMBOE of production. We removed 20.1 MMBOE of net proved undeveloped reserves that are no longer expected to be developed within the five-year period from initial booking as a result of the reallocation of capital to include our Uinta Basin assets. Reserve reductions also included 10.6 MMBOE due to decreases in gas prices. +Uinta Basin. Our Uinta Basin assets, which we acquired during the fourth quarter of 2024, are comprised of approximately 63,300 net acres located in northeastern Utah. During the fourth quarter of 2024, our operations focused on delineation and development. Our Uinta Basin position provides substantial future development and exploration opportunities within multiple oil-rich intervals in the Lower Green River and Wasatch formations, and includes acreage with waxy crude and gas composition amenable to processing for NGL extraction. We expect our 2025 capital activity in the Uinta Basin to be focused on highly economic oil development projects. +During the fourth quarter of 2024, costs incurred totaled $2.3 billion, of which, over $2.1 billion related to acquisition costs, and we averaged three drilling rigs and one completion crew. We drilled 19 gross (15 net) wells and completed 11 gross (eight net) wells, and as of December 31, 2024, 48 gross (38 net) wells had been drilled but not completed in our operated Uinta Basin program. During the year ended December 31, 2024, we acquired 103.2 MMBOE of existing net proved reserves in the Uinta Basin, and net equivalent production was 3.3 MMBOE, resulting in 99.9 MMBOE of estimated net proved reserves remaining at December 31, 2024. Refer to Note 17 – Acquisitions in Part II, Item 8 of this report for additional discussion and the definition of the Uinta Basin Acquisition. +Office Space. As of December 31, 2024, we leased and owned office space as summarized in the table below: +Approximate Square Footage Leased Approximate Square Footage Owned +Corporate - Denver, CO +59,000 — +Midland, TX +59,000 — +Houston, TX and Catarina, TX, respectively +21,000 12,000 +Roosevelt, UT +7,000 — +Total 146,000 12,000 +Reserves +Reserve estimates are inherently imprecise. Estimates for new discoveries and undeveloped locations are considered more imprecise than reserve estimates for producing oil and gas properties. Accordingly, we expect these estimates to change as new information becomes available. The table below presents the standardized measure of discounted future net cash flows and PV-10. PV-10 is a non-GAAP financial measure that is reconciled to the standardized measure of discounted future net cash flows, the most directly comparable GAAP financial measure. PV-10 does not include the effects of income taxes on future net revenues. Neither the standardized measure of discounted future net cash flows nor PV-10 represents the fair market value of our oil and gas properties. We and others in the oil and gas industry use PV-10 as a measure to compare the relative size and value of proved reserves held before consideration of tax characteristics specific to individual entities. Refer to the Glossary section of this report for additional information regarding these measures and refer to the reconciliation of the standardized measure of discounted future net cash flows to PV-10 set forth below. The actual quantities and present value of our estimated net proved reserves may be more or less than we have estimated. No estimates of our proved reserves have been filed with or included in reports to any federal authority or agency, other than the SEC, since the beginning of the last fiscal year. The table below should be read along with Risk Factors in Part I, Item 1A of this report. +11 +The following table summarizes estimated net proved reserves, the standardized measure of discounted future net cash flows (GAAP), PV-10 (non-GAAP), the prices used in the calculation of net proved reserves estimates, and reserve life index as of December 31, 2024, 2023, and 2022: +As of December 31, +2024 2023 2022 +Net reserve volumes: +Proved developed +Oil (MMBbl) 160.3 118.5 110.4 +Gas (Bcf) 1,031.3 948.5 902.1 +NGLs (MMBbl) 71.8 64.7 57.1 +MMBOE (1) +404.0 341.2 317.8 +Proved undeveloped +Oil (MMBbl) 135.7 111.6 95.4 +Gas (Bcf) 517.8 583.5 500.8 +NGLs (MMBbl) 52.4 54.8 40.7 +MMBOE (1) +274.3 263.6 219.6 +Total proved (1) +Oil (MMBbl) 296.0 230.1 205.8 +Gas (Bcf) 1,549.1 1,532.0 1,402.9 +NGLs (MMBbl) 124.1 119.5 97.8 +MMBOE 678.3 604.9 537.4 +Net proved developed reserves percentage +60 % 56 % 59 % +Net proved undeveloped reserves percentage +40 % 44 % 41 % +Reserve data (in millions): +Standardized measure of discounted future net cash flows (GAAP) $ 7,267.9 $ 6,280.1 $ 9,962.1 +PV-10 (non-GAAP): +Proved developed PV-10 +$ 5,647.6 $ 4,965.1 $ 8,234.8 +Proved undeveloped PV-10 +2,708.1 2,411.4 3,919.7 +Total proved PV-10 (non-GAAP) $ 8,355.7 $ 7,376.5 $ 12,154.5 +12-month trailing average prices: (2) +Oil (per Bbl) +$ 75.48 $ 78.22 $ 93.67 +Gas (per MMBtu) +$ 2.13 $ 2.64 $ 6.36 +NGLs (per Bbl) +$ 28.29 $ 27.72 $ 42.52 +Reserve life index (years) (3) (4) +10.9 10.9 10.1 +____________________________________________ +(1) Amounts may not calculate due to rounding. +(2) The prices used in the calculation of proved reserve estimates reflect the unweighted arithmetic average of the first-day-of-the-month price of each month within the trailing 12-month period in accordance with SEC rules. We then adjust these prices to reflect appropriate quality and location differentials over the period in estimating our net proved reserves. +(3) Refer to the reserve life index term in the Glossary section of this report for a description of how this metric is calculated. +(4) As of December 31, 2024, the reserve life index includes production from our Uinta Basin assets and reflects activity occurring after the closing of the Uinta Basin Acquisition on October 1, 2024. Refer to Note 17 – Acquisitions in Part II, Item 8 of this report for additional discussion and the definition of the Uinta Basin Acquisition. +12 +The following table reconciles the standardized measure of discounted future net cash flows (GAAP) to the PV-10 (non-GAAP) of total estimated net proved reserves. Refer to the Glossary section of this report for the definitions of standardized measure of discounted future net cash flows and PV-10. +As of December 31, +2024 2023 2022 +(in millions) +Standardized measure of discounted future net cash flows (GAAP) +$ 7,267.9 $ 6,280.1 $ 9,962.1 +Add: 10 percent annual discount, net of income taxes +5,018.5 5,294.5 7,551.5 +Add: future undiscounted income taxes +1,796.3 2,000.0 3,888.3 +Pre-tax undiscounted future net cash flows +14,082.7 13,574.6 21,401.9 +Less: 10 percent annual discount without tax effect +(5,727.0) (6,198.1) (9,247.4) +PV-10 (non-GAAP) $ 8,355.7 $ 7,376.5 $ 12,154.5 +Proved Undeveloped Reserves +Proved undeveloped reserves include those reserves that are expected to be recovered from future wells on undrilled acreage, or from existing wells where a relatively major expenditure is required for recompletion. Undeveloped reserves may be classified as proved reserves on undrilled acreage directly offsetting development areas that are reasonably certain of economic producibility when drilled or where reliable technology provides reasonable certainty of economic producibility. Undrilled locations may be classified as having proved undeveloped reserves only if a development plan has been adopted indicating that they are scheduled to be drilled within five years, unless specific circumstances justify a longer time. As of December 31, 2024, we did not have any net proved undeveloped reserves that had been on our books in excess of five years, and substantially all of our net proved undeveloped reserves were on acreage that was not expected to expire, or that was expected to be held through renewal, before the targeted completion date. +For proved undeveloped locations that are more than one development spacing area from developed producing locations, we utilized reliable geologic and engineering technology when booking estimated net proved undeveloped reserves. Of the 274.3 MMBOE of total net proved undeveloped reserves as of December 31, 2024, approximately 26.4 MMBOE, 63.0 MMBOE, and 18.7 MMBOE of net proved undeveloped reserves in the Midland Basin, South Texas, and the Uinta Basin, respectively, were offset by more than one development spacing area from the nearest proved developed producing location. We incorporated public and proprietary data from multiple sources to establish geologic continuity of each formation and their producing properties. This included seismic data and interpretations (3-D and micro seismic), open hole log information (both vertically and horizontally collected) and petrophysical analysis of that log data, mud logs, gas sample analysis, measurements of total organic content, thermal maturity, test production, fluid properties, and core data as well as statistical performance data yielding predictable and repeatable reserve estimates within certain analogous areas. These locations were limited to only those areas where both established geologic consistency and sufficient statistical performance data could be demonstrated to provide reasonably certain results. +As of December 31, 2024, estimated net proved undeveloped reserves increased 10.7 MMBOE, or four percent, compared with December 31, 2023. The following table provides a reconciliation of our net proved undeveloped reserves for the year ended December 31, 2024: +Total +(MMBOE) +Total net proved undeveloped reserves: +Beginning of year 263.6 +Conversions to proved developed (86.9) +Purchases of minerals in place 62.3 +Revisions of previous estimates 58.0 +Removed for five-year rule (30.5) +Additions from extensions and discoveries 7.8 +End of year +274.3 +Conversions to proved developed. Our 2024 conversion rate was 33 percent and resulted primarily from the development of proved reserves in our Midland Basin program and in our Austin Chalk assets in our South Texas program. During 2024, we incurred $872.9 million on projects with reserves booked as proved undeveloped at the end of 2023, of which $685.6 million was spent on converting net proved undeveloped reserves to proved developed reserves by December 31, 2024. During the fourth quarter of 2024, we incurred $84.4 million on projects with reserves booked as proved undeveloped as of December 31, 2024, that were acquired as +13 +part of the Uinta Basin Acquisition. At December 31, 2024, drilled but not completed wells represented 55.9 MMBOE of total estimated net proved undeveloped reserves. We expect to incur $423.1 million of additional capital expenditures in completing these drilled but not completed wells, and we expect all estimated net proved undeveloped reserves to be converted to proved developed reserves within five years from their initial booking as net proved undeveloped reserves. +Purchases of minerals in place. During 2024, we completed the Uinta Basin Acquisition and acquired 62.3 MMBOE of net proved undeveloped reserves in the Uinta Basin. Refer to Note 17 – Acquisitions in Part II Item 8 of this report for additional information and the definition of the Uinta Basin Acquisition. +Revisions of previous estimates . During 2024, revisions of previous estimates totaled 58.0 MMBOE. Positive revisions consisted of 63.1 MMBOE of infill reserves, of which 57.8 MMBOE and 5.3 MMBOE of estimated net proved undeveloped reserves were attributable to our South Texas and Midland Basin programs, respectively. Negative revisions consisted of 2.6 MMBOE related to price revisions as a result of a decrease in gas prices and 2.5 MMBOE that resulted from well performance related to infill development. +Removed for five-year rule. As a result of our testing and delineation efforts in 2024, and the reallocation of capital to include our Uinta Basin assets, we revised certain aspects of our future development plan to focus on maximizing returns and the value of our assets. We removed 30.5 MMBOE of estimated net proved undeveloped reserves that are no longer expected to be developed within the five-year period from initial booking and reclassified these locations to unproved reserve categories, of which 20.1 MMBOE and 10.5 MMBOE related to our South Texas and Midland Basin programs, respectively. +Additions from extensions and discoveries. During 2024, we added 7.8 MMBOE of estimated net proved undeveloped reserves, of which 6.0 MMBOE were in the Midland Basin, and resulted from further development of our assets. The remaining 1.9 MMBOE of additions were in South Texas, and resulted from extensions from our continued success in delineating the Austin Chalk formation. +As of December 31, 2024, estimated future development costs relating to our net proved undeveloped reserves totaled $2.8 billion, and we expect to incur approximately $1.0 billion, $647.3 million, and $590.5 million in 2025, 2026, and 2027, respectively. +Internal Controls Over Proved Reserves Estimates +Our internal controls over the recording of proved reserves are structured to objectively and accurately estimate our reserve quantities and values in compliance with the SEC’s regulations. Our process for managing and monitoring our proved reserves is delegated to our Corporate Engineering group and this year was coordinated by our Corporate Business Development Director, subject to the oversight of our management and the Audit Committee of our Board of Directors (“Audit Committee”), as discussed below. Our Corporate Business Development Director has worked in the energy industry since 1988 and has been employed by the Company since 2000. He holds a Bachelor of Science degree in Petroleum Engineering from Montana Technological University and is a member of the Society of Petroleum Engineers. Technical, geological, and engineering reviews of our assets are performed throughout the year by our staff. Data obtained from these reviews, in conjunction with economic data and our ownership information, is used in making a determination of estimated net proved reserve quantities. Our asset teams’ engineering technical staff do not report directly to our Corporate Business Development Director; they report to either their respective asset technical managers or directly to the regional vice president or senior vice president. This design is intended to promote objective and independent analysis within our asset teams in the proved reserves estimation process. +Third-party Reserves Audit +Ryder Scott is an independent petroleum engineering consulting firm that has been providing petroleum engineering consulting services throughout the world since 1937. Ryder Scott performed an independent audit using its own engineering assumptions, but with economic and ownership data we provided. Ryder Scott audits a minimum of 80 percent of our total calculated proved reserve PV-10. In the aggregate, the proved reserve amounts of our audited properties determined by Ryder Scott are required, per our policy, to be within 10 percent of our proved reserve amounts for the total Company, as well as for each respective major asset. The technical person at Ryder Scott primarily responsible for overseeing our reserves audit is a Senior Vice President who received a Bachelor of Science degree in Petroleum Engineering and a Business Foundations Certificate from The University of Texas at Austin in 2002. She is a registered Professional Engineer in the State of Texas and a member of the Society of Petroleum Engineers. The 2024 Ryder Scott audit report is included as Exhibit 99.1. +In addition to a third-party audit, our reserves are reviewed by our management with the Audit Committee. Our management, which includes our President and Chief Executive Officer, Executive Vice President and Chief Financial Officer, and Executive Vice President and Chief Operating Officer, is responsible for reviewing and verifying that the estimate of proved reserves is reasonable, complete, and accurate. The Audit Committee reviews a summary of the final reserves estimate in conjunction with Ryder Scott’s results and also meets with Ryder Scott representatives, separate from our management, from time to time to discuss processes and findings. +14 +Production +The following table summarizes our net production volumes and realized prices for oil, gas, and NGLs produced and sold during the periods presented, and related production expense on a per BOE basis: +For the Years Ended December 31, +2024 2023 2022 +Net production volumes +Oil (MMBbl) 29.4 23.8 24.0 +Gas (Bcf) 137.0 132.4 125.9 +NGLs (MMBbl) 10.2 9.7 8.0 +Equivalent (MMBOE) (1) +62.4 55.5 53.0 +Midland Basin net production volumes (2) +Oil (MMBbl) 19.1 17.5 19.1 +Gas (Bcf) 62.0 59.8 63.5 +NGLs (MMBbl) — — — +Equivalent (MMBOE) (1) +29.4 27.5 29.7 +Maverick Basin net production volumes (2) +Oil (MMBbl) 7.4 6.2 4.8 +Gas (Bcf) 72.2 72.5 62.4 +NGLs (MMBbl) 10.2 9.6 8.0 +Equivalent (MMBOE) (1) +29.6 27.9 23.2 +Uinta Basin net production volumes (3) +Oil (MMBbl) 2.9 — — +Gas (Bcf) 2.7 — — +NGLs (MMBbl) — — — +Equivalent (MMBOE) (1) +3.3 — — +Realized price +Oil (per Bbl) $ 74.49 $ 76.28 $ 94.67 +Gas (per Mcf) $ 1.82 $ 2.48 $ 6.28 +NGLs (per Bbl) $ 23.01 $ 23.02 $ 35.66 +Per BOE $ 42.81 $ 42.60 $ 63.18 +Production expense per BOE +Lease operating expense $ 5.11 $ 5.13 $ 5.03 +Transportation costs $ 2.68 $ 2.46 $ 2.83 +Production taxes $ 1.86 $ 1.89 $ 3.07 +Ad valorem tax expense $ 0.56 $ 0.67 $ 0.79 +____________________________________________ +(1) Amounts may not calculate due to rounding. +(2) For each of the years ended December 31, 2024, 2023, and 2022, total estimated net proved reserves attributed to our Midland Basin field and our Maverick Basin field each exceeded 15 percent of our total estimated net proved reserves expressed on an equivalent basis. +(3) For the year ended December 31, 2024, total estimated net proved reserves attributed to our Uinta Basin field represented 15 percent of our total estimated net proved reserves expressed on an equivalent basis. +Productive Wells +As of December 31, 2024, we had working interests in 1,262 gross (950 net) productive oil wells and 566 gross (530 net) productive gas wells. Productive wells are wells producing in commercial quantities or wells capable of commercial production that are temporarily shut-in. Multiple completions in the same wellbore are counted as one well, and as of December 31, 2024, two of these wells had multiple completions. A well is categorized under state reporting regulations as an oil well or a gas well based on the ratio of gas to oil when it first commenced production, but such designation may not be indicative of current or future production composition. +15 +Drilling and Completion Activity +All of our drilling and completion activities are conducted by independent contractors using equipment they own and operate. The following table summarizes the number of operated and outside-operated wells drilled and completed or recompleted on our properties in 2024, 2023, and 2022, excluding non-consented projects, active injector wells, saltwater disposal wells, or wells in which we own only a royalty interest: +For the Years Ended December 31, +2024 2023 2022 +Gross Net Gross Net Gross Net +Development wells +Oil 115 97 74 62 68 57 +Gas 21 21 21 21 18 18 +Non-productive — — — — — — +136 118 95 83 86 75 +Exploratory wells +Oil 15 15 5 4 4 3 +Gas 1 1 5 5 2 2 +Non-productive (1) +1 1 1 1 1 1 +17 17 11 10 7 6 +Total 153 135 106 93 93 81 +____________________________________________ +Note: The number of wells drilled refers to the number of wells completed at any time during the respective year, regardless of when drilling was initiated. +(1) For each of the years ended December 31, 2024, and 2023, one gross (one net) well was unsuccessful due to technical issues during the drilling phase and was not included in the drilled or completed well counts. +In addition to the wells completed in 2024 (included in the table above), we were actively participating in the drilling of 27 gross (20 net) wells and had 121 gross (103 net) drilled but not completed wells as of January 31, 2025. Drilled but not completed wells as of January 31, 2025, represent wells that were being completed or were waiting on completion. The drilled but not completed well count as of January 31, 2025, includes nine gross (nine net) wells that were not included in our five-year development plan as of December 31, 2024, eight of which are in the Eagle Ford shale. +Title to Properties +As of December 31, 2024, approximately 98 percent and 97 percent of our Texas and Utah operated oil and gas producing assets, respectively, were located on private lands, held pursuant to oil and gas leases from private mineral owners, and were not located on federal lands or leased from the federal government. The remainder of our operated oil and gas producing assets in Texas are located on state lands, and the remainder of our operated oil and gas producing assets in Utah are located on federal, state or tribal lands. We have obtained title opinions or have conducted other title review on substantially all of our producing properties and believe we have satisfactory title to such properties. We obtain new or updated title opinions prior to commencing initial drilling operations on the properties that we operate. Most of our producing properties are subject to mortgages securing indebtedness under our Credit Agreement, as defined in Note 5 – Long-Term Debt in Part II, Item 8 of this report, royalty and overriding royalty interests, liens for current taxes, and other ordinary course burdens that we believe do not materially interfere with the development of such properties. We typically perform title investigations in accordance with standards generally accepted in the oil and gas industry before acquiring developed and undeveloped leasehold acreage. +16 +Acreage +The following table sets forth the number of gross and net surface acres of developed and undeveloped oil and gas leasehold, fee properties, and mineral servitudes that we held as of December 31, 2024: +Developed Acres (1) +Undeveloped Acres (2)(3) +Total +Gross Net Gross Net Gross Net +Midland Basin: +RockStar 69,856 63,572 59 58 69,915 63,630 +Sweetie Peck 20,549 17,348 12,867 9,056 33,416 26,404 +Klondike +8,958 7,832 14,168 12,091 23,126 19,923 +Midland Basin Total (4) +99,363 88,752 27,094 21,205 126,457 109,957 +South Texas 92,409 91,475 65,683 63,282 158,092 154,757 +Uinta Basin +93,654 51,728 20,965 11,580 114,619 63,308 +Other (5) +10,499 10,499 125,850 61,899 136,349 72,398 +Total 295,925 242,454 239,592 157,966 535,517 400,420 +____________________________________________ +(1) Developed acreage is acreage assigned to producing wells for the state approved spacing unit for the producing formation. Our developed acreage that includes multiple formations with different well spacing requirements may be considered undeveloped for certain formations but has been included only as developed acreage in the table above. +(2) Undeveloped acreage is acreage on which wells have not been drilled or completed to a point that would permit the production of commercial quantities of oil, gas, and/or NGLs regardless of whether such acreage contains estimated net proved reserves. +(3) As of January 31, 2025, 6,299, 46,663, and 640 net acres of our undeveloped acreage is scheduled to expire by December 31, 2025, 2026, and 2027, respectively, unless production is established, or we take other action to extend the terms of the applicable leases (a majority of this acreage is included in Other). Certain of our acreage, primarily in South Texas, is subject to lease consolidation agreements containing drilling, completion, and other obligations that we currently expect to satisfy. Failure to meet these obligations results in payments to lessors, or termination of the lease consolidation agreements, which could result in additional future lease expirations if continuous development obligations required by individual leases are not met. +(4) As of December 31, 2024, total Midland Basin acreage excludes 1,050 net acres associated with drill-to-earn opportunities that we intend to pursue. +(5) Includes other non-core acreage located in Colorado, Louisiana, Montana, North Dakota, Texas, Utah, and Wyoming. +Delivery Commitments +For information about delivery commitments, refer to Commitments within Note 6 – Commitments and Contingencies in Part II, Item 8 of this report. +Major Customers +For major customers and entities under common control that accounted for 10 percent or more of our total oil, gas, and NGL production revenue for at least one of the years ended December 31, 2024, 2023, and 2022, refer to Concentration of Credit Risk and Major Customers within Note 1 – Summary of Significant Accounting Policies in Part II, Item 8 of this report. +Human Capital +Our Company culture recognizes our employees as our most valuable assets, encourages personal and professional development, promotes innovation and leadership among all employees and, in turn, supports our efforts to attract and retain talent. Through our culture, we promote: +• integrity and ethical behavior in the conduct of our business; +• environmental, health, and safety priorities; +• prioritizing the success of others and the team; +• collaboration and openness to new ideas and technologies that serve business improvement; +• support for team members’ professional and personal development; and +• support for the communities where we live and work. +17 +The core values of integrity and ethical behavior are the pillars of our culture, and all employees are responsible for upholding Company-wide standards and values. We have policies designed to promote ethical conduct and integrity, which employees are required to read and acknowledge on an annual basis. The health and safety of our employees and contractors is our highest priority. We strive to achieve performance excellence in environmental, health, and safety management, and compensation of all employees is tied to annual environmental, health, and safety performance goals. +Personal and professional development is an important part of our culture and is employee driven, manager facilitated, and organizationally supported. Employees are routinely provided training opportunities to develop skills in leadership, safety, and technical acumen, which help strengthen our efforts to conduct business with high ethical standards. During 2024, many of our employees participated in four leadership and talent development programs that included more than 7,000 hours of aggregate training, exclusive of safety and other specialized technical training. In 2024, we were honored with two distinguished Leadership Development awards from the Brandon Hall Group. The Gold Award recognized our innovative approach to building competencies and skills, while the Bronze Award celebrated overall excellence in leadership development. These accolades underscore our commitment to cultivating a thriving corporate culture and strong leadership values. +We measure employee engagement and satisfaction through periodic surveys, administered by an independent third-party vendor. +We are proud of our many outstanding employees who invest their time, talents, and financial resources in their communities. Our annual charitable giving program includes a monetary match of our employees’ personal contributions to qualified organizations and up to 12 hours per employee of Company-granted time to volunteer in the communities where we live and work. +We strive to provide competitive, performance-based compensation and benefits to our employees, including market-competitive pay, short-term and long-term incentive compensation plans, an employee stock purchase program, and various healthcare, retirement, and other benefit packages such as a hybrid work environment that is guided by each employee’s job function and responsibilities. Compensation for our executives and employees under our short-term and long-term incentive plans is determined based on individual performance and Company performance with respect to qualitative and quantitative metrics that include environmental, health, and safety measures. The Compensation Committee of our Board of Directors oversees our compensation programs and regularly reviews program design to incentivize achievement of our corporate strategy and the matters of importance to our stakeholders. Significant planning for succession of key personnel is performed each year, or more frequently as deemed necessary by management. +As of January 31, 2025, we had 663 full-time employees, none of whom were subject to a collective bargaining agreement. We are committed to diversity at all levels of our organization, and we strive to provide equal employment opportunities to all employees and job applicants. We regularly perform internal analyses of our workforce demographics, and, at times, we retain a third party to conduct discrimination and pay equity testing. No discriminatory practices have been identified and no evidence of discrimination or pay inequity has been found. Additionally, we have established procedures and controls designed to support our objective of remaining, at all times, in material compliance with applicable federal, state, tribal, and local laws and governmental regulations. +Seasonality +The price of crude oil is primarily driven by global socioeconomic and geopolitical factors and is less affected by seasonal fluctuations; however, demand for energy is generally higher in the winter and in the summer driving season. The demand and price for gas generally increases during winter months and decreases during summer months. To lessen the effect of seasonal gas demand and price fluctuations, pipelines, utilities, local distribution companies, and industrial users regularly utilize gas storage facilities and forward purchase some of their anticipated winter requirements during the summer. However, increased summertime demand for electricity can divert gas that is traditionally placed into storage which, in turn, may increase the typical winter seasonal price. Seasonal anomalies, such as mild or extreme winters sometimes lessen or exacerbate these fluctuations. +Certain of our drilling, completion, and other operational activities are also subject to seasonal limitations. Seasonal weather conditions, government or tribal regulations, and lease stipulations could adversely affect our ability to conduct drilling activities in some of the areas where we operate. Refer to Risk Factors in Part I, Item 1A of this report for additional discussion. +Competition +The oil and gas industry is highly competitive, particularly with respect to acquiring prospective oil and gas properties. We believe our acreage positions provide a foundation for development activities that we expect to fuel our future growth. Our competitive position also depends on our geological, geophysical, and engineering expertise, as well as our financial resources. We believe the location of our acreage; our exploration, drilling, operational, and production expertise; available technologies; our financial resources and expertise; and the experience and knowledge of our management and technical teams enable us to compete in our core operating areas. However, we face competition from many major and independent oil and gas companies, which in some cases have larger technical teams and greater financial and operational resources than we do. Many of these companies not only engage in the acquisition, exploration, development, and production of oil and gas reserves, but also have gathering, processing or refining operations, market refined products, provide, dispose of and transport fresh and produced water, own drilling rigs or production +18 +equipment, or generate electricity, all of which, individually or in the aggregate, could provide such companies with a competitive advantage. +We also compete with other oil and gas companies in securing drilling rigs and other equipment and services necessary for the drilling, completion, and maintenance of wells, as well as for the gathering, transporting, and processing of oil, gas, NGLs, and water. Consequently, we may face shortages, delays, or increased costs in securing these services from time to time. The oil and gas industry also faces competition from alternative fuel sources, including renewable energy sources such as solar and wind-generated energy, and other fossil fuels such as coal. Competitive conditions may be affected by future energy, environmental, climate-related, financial, or other policies, legislation, and regulations. +In addition, we compete for professionals in our workforce, including specialized roles in the oil and gas industry such as geologists, geophysicists, engineers, and others. Throughout the general labor market, the need to attract and retain talented people has grown at a time when the availability of individuals with these skills is becoming more limited due to the evolving demographics of our industry. The oil and gas industry is not insulated from the competition for quality people, and we must compete effectively to be successful. Refer to Human Capital above and Risk Factors in Part I, Item 1A of this report for additional discussion. +Government Regulations +Our business is subject to federal, state, tribal, and local laws and governmental regulations. These laws and regulations frequently change in response to economic or political conditions, or other developments, and our regulatory burden may increase in the future. Laws and regulations have the potential to increase our cost of conducting business and consequently could affect our profitability. +Energy Regulations +Both Texas and Utah have adopted laws and regulations governing the exploration for and production of oil, gas, and NGLs, including laws and regulations requiring permits for the drilling of wells, imposing bond requirements in order to drill or operate wells, governing the timing of drilling and location of wells, the method of drilling and casing wells, the surface use and restoration of properties upon which wells are drilled, and the plugging and abandonment of wells. Our operations are also subject to Texas and Utah conservation laws and regulations, including regulations governing the size of drilling and spacing units or proration units, the number of wells that may be drilled in an area, the spacing of wells, and the unitization or pooling of oil and gas properties. In addition, both Texas and Utah conservation laws establish maximum rates of production from oil and gas wells, generally limit or prohibit the venting or flaring of gas, and may impose certain requirements regarding the ratability or fair apportionment of production from fields and individual wells. +A portion of our acreage in the Uinta Basin is subject to tribal laws, ordinances, rules, and regulations. In addition to potential regulation by federal, state and local agencies and authorities, an entirely separate and distinct set of laws and regulations may apply to lessees, operators, third party contractors, and other parties on tribal or allotted Indian lands. These regulations include lease provisions, royalty matters, drilling and production requirements, environmental standards, and tribal employment and contractor preferences, among other matters. Further, lessees and operators on Indian lands may be subject to the jurisdiction of tribal courts, unless there is a specific waiver of sovereign immunity by the relevant tribe allowing resolution of disputes between the tribe and those lessees or operators to occur in federal or state court. +A portion of our acreage in the Uinta Basin is on federal lands subject to oil and gas leases administered by the Bureau of Land Management (“BLM”). These leases contain relatively standardized terms and require compliance with detailed regulations and orders that are subject to change. In addition to permits required from other regulatory agencies, lessees must obtain a permit from the BLM before drilling and must comply with regulations governing, among other things, engineering and construction specifications for production facilities, safety procedures, the valuation of production and payment of royalties, the removal of facilities, and the posting of bonds to ensure that lessee obligations are met. Under certain circumstances, the BLM may suspend or terminate our operations on federal leases. +Our sales of gas are affected by the availability, terms, and cost of gas pipeline transportation. The Federal Energy Regulatory Commission (“FERC”) has jurisdiction over the transportation and sale for resale of gas in interstate commerce. FERC’s current regulatory framework generally provides for a competitive and open access market for sales and transportation of gas. However, FERC regulations continue to affect the midstream and transportation segments of the industry, and thus can indirectly affect the sales prices we receive for gas production. +Environmental, Health, and Safety Matters +General. Our operations are subject to complex federal, state, tribal, and local laws and regulations governing protection of the environment and worker health and safety, as well as the discharge of materials and emissions into the environment. These laws and regulations may, among other things: +19 +• require the acquisition of various permits before drilling commences; +• restrict the types, quantities, and concentration of various substances and emissions that may be released into the environment in connection with oil and gas drilling and production and saltwater disposal activities; +• limit or prohibit drilling activities on certain lands lying within wilderness, wetlands, and other protected areas, including areas containing certain wildlife or threatened and endangered plant and animal species; and +• require remedial measures to mitigate pollution from former and ongoing operations, such as closing pits and plugging abandoned wells. +These laws, rules, and regulations may also restrict the rate of oil and gas production below the rate that would otherwise be possible. The regulatory burden on the oil and gas industry increases the cost of conducting business and consequently affects profitability. Additionally, environmental laws and regulations are revised frequently, and any changes may result in more stringent, or different permitting, waste handling, disposal, and cleanup requirements for the oil and gas industry and could have a significant impact on our operating costs. +The following is a summary of some of the existing laws, rules, and regulations to which our business is subject. +Waste handling. The Resource Conservation and Recovery Act (“RCRA”) and comparable state statutes regulate the generation, transportation, treatment, storage, disposal, and cleanup of hazardous and non-hazardous wastes. Under the auspices of the United States Environmental Protection Agency (“EPA”), individual states administer some or all of the provisions of RCRA, sometimes in conjunction with their own, more stringent requirements. Drilling fluids, produced water, and most of the other wastes associated with the exploration, development, and production of oil or gas are currently regulated under RCRA’s non-hazardous waste provisions. However, it is possible that certain oil and gas exploration and production wastes now classified as non-hazardous could be classified as hazardous wastes in the future. Any such change could result in an increase in our costs to manage and dispose of wastes, which could have a material adverse effect on our results of operations and financial position. +Comprehensive Environmental Response, Compensation, and Liability Act. The Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”), also known as the Superfund law, imposes joint and several liability, without regard to fault or legality of conduct, on classes of persons who are considered to be responsible for the release or threatened release of a hazardous substance into the environment. These persons include the owner or operator of the site where the release occurred, and anyone who disposed or arranged for the disposal of, or transported, a hazardous substance released at the site. Under CERCLA, such persons may be subject to joint and several liability for the costs of cleaning up the hazardous substances that have been released into the environment, for damages to natural resources and for the costs of environmental investigation and certain health studies. In addition, it is not uncommon for third-parties to file claims for personal injury and property damage allegedly caused by the hazardous substances released into the environment. +We currently own, lease, or operate numerous properties that have been used for oil and gas exploration and production for many years. CERCLA excludes petroleum and natural gas from its definition of hazardous substances, and although we believe we have utilized operating and waste disposal practices that were standard in the industry at the time, hazardous substances or wastes may have been released on or under the properties owned or leased by us, or on or under other locations, including off-site locations, where such substances have been taken for disposal. In addition, some of our properties have been operated by third-parties or by previous owners or operators whose treatment and disposal of hazardous substances, wastes, or hydrocarbons were not under our control. These properties, and the substances disposed or released on them, may be subject to CERCLA, RCRA, and analogous state laws. Under such laws, we could be required to remove previously disposed substances and wastes, pay fines, remediate contaminated property, or perform remedial operations to prevent future contamination. +Water discharges. The federal Water Pollution Control Act (“Clean Water Act”) and analogous state laws impose restrictions and strict controls with respect to the discharge of pollutants, including spills and leaks of oil and other substances, into waters of the United States and waters of the applicable states. The discharge of pollutants into regulated waters is prohibited, except in accordance with the terms of a permit issued by the EPA, or analogous state agencies. This includes the discharge of certain storm water without a permit which requires periodic monitoring and sampling. In addition, the Clean Water Act regulates wastewater generated by unconventional oil and gas operations during the hydraulic fracturing process and discharged to publicly-owned wastewater treatment facilities. The Clean Water Act also prohibits discharge of dredged or fill material into waters of the United States, including wetlands, except in accordance with the terms of a permit issued by the United States Army Corps of Engineers, or a state, if the state has assumed authority to issue such permits. Federal and state regulatory agencies can impose administrative, civil, and criminal penalties for non-compliance with discharge permits or other requirements of the Clean Water Act and analogous state laws and regulations. +The Oil Pollution Act of 1990 (“OPA”) addresses prevention, containment and cleanup, and liability associated with oil pollution. OPA applies to vessels, offshore platforms, and onshore facilities. OPA subjects owners of such facilities to strict liability for containment and removal costs, natural resource damages, and certain other consequences of oil spills into jurisdictional waters. Any unpermitted release of petroleum or other pollutants from our operations could result in governmental penalties and civil liability. +20 +Air emissions. The federal Clean Air Act (“CAA”) and comparable state laws and regulations regulate emissions of various air pollutants through air emissions permitting programs and the imposition of other requirements, such as requirements for emission reduction, capture and control. In addition, the EPA has developed, and continues to develop, stringent regulations governing emissions of hazardous air pollutants at specified sources. Federal and state regulatory agencies can impose administrative, civil, and criminal penalties for non-compliance with air permits or other requirements of the CAA and associated state laws and regulations. Refer to the Environmental section in Part II, Item 7 of this report for additional information about the regulation of air emissions from the oil and gas sector. +Climate change. In December 2009, the EPA determined that emissions of carbon dioxide, methane, and other GHGs endanger public health and welfare, and as a result, began adopting and implementing a comprehensive suite of regulations to restrict emissions of GHGs under existing provisions of the CAA. Current and future legislative and regulatory initiatives related to climate change and emissions of GHGs could have an adverse effect on our operations and the demand for oil and gas. President Biden’s administration took steps to strengthen and expand many of these regulations, specifically targeting, among other things, the regulation of methane emissions from the oil and gas sector. President Trump’s administration may take steps to rescind or review many of these regulations; however, any future actions may be subject to legal challenges and cannot be predicted with accuracy at this time. Refer to Risk Factors - Risks Related to Government Regulations - Legislative and regulatory initiatives and litigation related to global warming and climate change could have an adverse effect on our operations and the demand for oil, gas, and NGLs, and could result in significant litigation, capital, and related expenses in Part I, Item 1A of this report. Meteorological or extreme weather events (whether or not related to climate change) pose additional risks to our operations, and in the past, have resulted in temporary shut-ins of certain wells and temporary capacity constraints at third-party purchasers impacting their ability to take delivery of our products. +Endangered species. The federal Endangered Species Act and analogous state laws regulate activities that could have an adverse effect on threatened or endangered species. Some of our operations are conducted in areas where protected species are known to exist. In these areas, we may be obligated to develop and implement plans to avoid potential adverse impacts on protected species, and we may be prohibited from conducting operations in certain locations or during certain seasons, such as breeding and nesting seasons, when our operations could have an adverse effect on these species. It is also possible that a federal or state agency could order a complete halt to activities in certain locations if it is determined that such activities may have a serious adverse effect on a protected species. The presence of a protected species in areas where we perform drilling, completion, and production activities could impair our ability to timely complete well drilling and development and could adversely affect our future production from those areas. +OSHA and other laws and regulations. We are subject to the requirements of the federal Occupational Safety and Health Act (“OSHA”) and comparable state statutes. The OSHA hazard communication standard, the EPA community right-to-know regulations under Title III of CERCLA and similar state statutes require that we organize and/or disclose information about hazardous materials used or produced in our operations. Also, pursuant to OSHA, the Occupational Safety and Health Administration has established a variety of standards relating to workplace exposure to hazardous substances and employee health and safety. We believe we are in substantial compliance with the applicable requirements of OSHA and comparable laws. +Hydraulic fracturing. Hydraulic fracturing is an important and common practice used to stimulate production of hydrocarbons from tight shale formations. We routinely utilize hydraulic fracturing techniques in most of our drilling and completion programs. The process involves the injection of water, sand, and chemicals under pressure into the formation to fracture the surrounding rock and stimulate production. The process is typically regulated by state oil and gas commissions. However, even on private lands, the EPA has asserted federal regulatory authority over hydraulic fracturing involving diesel additives under the Safe Drinking Water Act’s Underground Injection Control Program. The federal Safe Drinking Water Act protects the quality of the nation’s public drinking water through the adoption of drinking water standards and controlling the injection of waste fluids, including saltwater disposal fluids, into below-ground formations that may adversely affect drinking water sources. +Increased regulation and scrutiny on oil and gas activities involving hydraulic fracturing techniques could potentially lead to a decrease in the completion of new oil and gas wells, an increase in compliance costs, delays, and changes in federal income tax laws, all of which could adversely affect our financial position, results of operations, and cash flows. As new laws or regulations that significantly restrict hydraulic fracturing are adopted at the state and local levels, such laws could make it more difficult or costly for us to perform fracturing to stimulate production from tight formations. In addition, if hydraulic fracturing becomes regulated at the federal level as a result of federal legislation or regulatory initiatives by the EPA or other federal agencies, our fracturing activities could become subject to additional permitting requirements, which could result in additional permitting delays and potential increases in costs. Restrictions on hydraulic fracturing could also reduce the amount of oil and gas that we are ultimately able to produce from our reserves. +We believe the trend in local and state environmental legislation and regulation may continue toward stricter standards, while the outlook regarding federal environmental legislation and regulation is uncertain under the Trump administration. While we believe we are in substantial compliance with existing environmental laws and regulations applicable to our current operations and that our continued compliance with existing requirements will not have a material adverse impact on our financial condition and results of operations, we cannot give any assurance that we will not be adversely affected in the future. +Environmental, Health, and Safety Initiatives. We are committed to exceptional safety, health, and environmental stewardship; making a positive difference in the communities where we live and work; and transparency in reporting our progress in these areas. We +21 +set annual goals for our safety, health, and environmental program focused on minimizing the number of safety related incidents and the number and impact of spills of produced fluids. In addition, we set annual goals for GHG emissions intensity and methane emissions as a percentage of total methane produced, and as part of our current ESG initiatives, we have set goals that include minimizing flaring, reducing GHG emissions intensity, and maintaining low methane emissions intensity. We also periodically conduct audits of our operations to ensure regulatory compliance, and we strive to provide appropriate training for our employees. Minimizing air emissions as a result of leaks, venting, or flaring of gas during operations has become a major focus area as we consider this a best practice and seek to comply with regulations. While flaring is sometimes necessary, minimizing these volumes is a priority for us. To avoid flaring when possible, we restrict testing periods and connect our production to gas pipeline infrastructure as quickly as possible after well completions. We have incurred in the past, and expect to incur in the future, capital costs related to environmental compliance. Such expenditures are included within our overall capital budget and are not separately itemized. +Available Information +Our internet website address is www.sm-energy.com. We routinely post important information for investors on our website. Within our website’s investor relations section, we make available free of charge our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed with or furnished to the SEC under applicable securities laws. These materials are made available as soon as reasonably practical after we electronically file such materials with or furnish such materials to the SEC, and can also be located at www.sec.gov. We also make available through our website our Corporate Governance Guidelines, Code of Business Conduct and Conflict of Interest Policy, Financial Code of Ethics, Human Rights Policy, and the Charters of the Audit, Compensation, Executive, and Environmental, Social and Governance committees of our Board of Directors. Information on our website is not incorporated by reference into this report and should not be considered part of this document. +ITEM 1A. RISK FACTORS +In addition to the other information included in this report, the following risk factors should be carefully considered when evaluating an investment in SM Energy. +Risks Related to Commodity Prices and Global Macroeconomics +Oil, gas, and NGL prices are volatile, and declines in prices may adversely affect our profitability, financial condition, cash flows, access to capital, and ability to grow. +Our revenues, operating results, profitability, future rate of growth, and the carrying value of our oil and gas properties depend heavily on the prices we receive for oil, gas, and NGL sales. Oil, gas, and NGL prices also affect our cash flows available for capital expenditures, debt reductions, return of capital, and other expenditures, our borrowing capacity, and the volume and value of our oil, gas, and NGL reserves. In addition, we may have oil and gas property impairments or downward revisions of estimates of proved reserves if prices fall significantly. Refer to Significant Developments in 2024 and Reserves in Part I, Items 1 and 2, Comparison of Financial Results and Trends Between 2024 and 2023 and Between 2023 and 2022 and Overview of Liquidity and Capital Resources in Part II, Item 7, and Note 1 – Summary of Significant Accounting Policies , Note 8 – Fair Value Measurements , and Supplemental Oil and Gas Information (unaudited) in Part II, Item 8 for specific discussion. +Historically, the markets for oil, gas, and NGLs have been volatile, and they are likely to continue to be volatile. Wide fluctuations in oil, gas, and NGL prices often result from relatively minor changes in the supply of and demand for oil, gas, and NGLs, market uncertainty, and other factors that are beyond our control, including: +• global and domestic supplies of oil, gas, and NGLs, and the productive capacity of the industry as a whole; +• the level of consumer demand for oil, gas, and NGLs; +• overall global and domestic economic conditions; +• inflation and other economic factors that contribute to market volatility including tariffs and trade restrictions; +• weather conditions; +• the availability and capacity of gathering, transportation, processing, storage, and/or refining facilities in asset-specific or localized areas; +• liquefied natural gas deliveries to and from the United States; +• the increased demand for, price, and availability of alternative fuels or sources of energy; +• technological advances in, and regulations affecting, energy consumption and conservation; +• the ability of the members of OPEC+ to maintain effective oil price and production controls; +• War and Geopolitical Instability; +• shipping channel constraints and disruptions to and from oil and gas producing countries or regions; +• actual or perceived epidemic or pandemic risks; +• strengthening and weakening of the United States dollar relative to other currencies; +22 +• stockholder activism or activities by non-governmental organizations to limit sources of funding or restrict the exploration and production of oil, gas, and NGLs and related infrastructure; and +• governmental regulations and taxes. +Declines in oil, gas, and NGL prices would reduce our revenues and could also reduce the amount of oil, gas, and NGLs that we can produce economically, which could have a material adverse effect on our business, financial condition, liquidity, results of operations, and prospects. +Future oil, gas, and NGL price declines or unsuccessful exploration efforts may result in write-downs of our asset carrying values. +We follow the successful efforts method of accounting for our oil and gas properties. All property acquisition costs and development costs are capitalized when incurred. Exploratory well costs are initially capitalized, pending the determination of whether proved reserves have been discovered. If commercial quantities of proved reserves are not discovered with an exploratory well, the costs initially capitalized are expensed as dry hole costs. +The capitalized costs of our oil and gas properties, on a depletion pool basis, cannot exceed the estimated undiscounted future net cash flows of that depletion pool. If net capitalized costs exceed undiscounted future net cash flows, we generally must write down the costs of each depletion pool to the estimated discounted future net cash flows of that depletion pool. Write downs for unproved properties are also evaluated for carrying costs in excess of fair value. This evaluation considers the potential for abandonment due to actual and anticipated lease expirations, as well as actual and anticipated losses on acreage due to title defects, changes in development plans, and other inherent acreage risks. Declines in the prices of oil, gas, or NGLs, or unsuccessful exploration efforts, could cause proved and/or unproved property impairments in the future, which could have a material adverse effect on our business, financial condition, liquidity, and results of operations. +We review the carrying values of our properties for indicators of impairment on a quarterly basis using the prices in effect as of the end of each quarter. Once incurred, a write-down of oil and gas properties held for use cannot be reversed at a later date, even if oil, gas, or NGL prices increase. +Weakness in economic conditions, inflation, or uncertainty in financial markets may have material adverse impacts on our business that we cannot predict. +Historically, the United States and global economies and financial systems have experienced turmoil and upheaval characterized by extreme volatility in prices of equity and debt securities, periods of diminished liquidity and credit availability, inability to access capital markets, the bankruptcy, failure, collapse, or sale of financial institutions, inflation, tariffs or trade restrictions, and heightened levels of intervention by the United States federal government and other governments. Weakness or uncertainty in the United States economy or other large economies could have a material adverse effect on our business and financial condition. For example: +• inflation has increased certain costs of our drilling and completion activities, and the costs of oilfield services, equipment, and materials in recent years and could continue or worsen and further impact our financial condition, liquidity, and results of operations, and could limit our pool of economic development opportunities; +• a potential economic recession could impact demand for oil, gas, and NGLs, and cause commodity price volatility; +• the tightening of credit or lack of credit availability to our customers could adversely affect our ability to collect our trade receivables; +• the liquidity available under our Credit Agreement could be reduced if any of our lenders is unable to fund its commitment; +• our ability, or the ability of our suppliers or contractors, to access the capital markets may be restricted or non-existent at a time when we or they would like, or need, to raise capital for our or their business, including for the exploration and/or development of reserves; +• our commodity derivative contracts could become economically ineffective if our counterparties are unable to perform their obligations or seek bankruptcy protection; +• the Federal Reserve may change interest rates, as they did in 2024, 2023, and 2022, which could impact borrowing costs; +• variable interest rate spread levels, including for SOFR and the prime rate, could increase significantly, resulting in higher interest costs for unhedged variable interest rate-based borrowings under our Credit Agreement; and +• changes in tax laws and regulations could require us to adjust our business plan. +Global geopolitical tensions may create heightened volatility in oil, gas, and NGL prices and could adversely affect our business, financial condition and results of operations. +War and Geopolitical Instability could lead to significant market and other disruptions, including, but not limited to: significant volatility in commodity prices and supply of energy resources, instability in financial markets, supply chain interruptions, shipping channel constraints and disruptions, political and social instability, political and economic sanctions, geopolitical shifts, embargoes, +23 +changes in consumer or purchaser preferences, the potential destruction of critical oil-related infrastructure, as well as increases in cyberattacks and espionage. These factors could impact our operations and the financial condition of our business as well as the global economy. +Risks Related to Oil and Gas Operations and the Industry +Integration of assets acquired in the recent Uinta Basin Acquisition with our existing business will be a complex and time-consuming process. A failure to successfully integrate the acquired assets with our existing business in a timely manner may have a material adverse effect on our business, financial condition, or results of operations. +The Uinta Basin Acquisition involved our acquisition of a significant set of assets that we have not previously operated. Our ability to achieve the anticipated benefits of the Uinta Basin Acquisition depends in part on whether we can complete the integration of the Uinta Basin assets into our existing business in an efficient and effective manner. The integration process may result in the disruption of ongoing business and there could be potential unknown liabilities and unforeseen expenses associated with the Uinta Basin Acquisition that were not discovered in the course of performing due diligence. The integration may also require significant time and focus from management following the Uinta Basin Acquisition that may disrupt our business and results of operations. Potential risks or difficulties include: +• operating assets in the Uinta Basin, an area in which we have not previously owned assets or conducted operations; +• operating assets that are partially within the exterior boundaries of the Uinta and Ouray Reservation, and we have no recent experience operating on tribal lands; +• complexities associated with integrating our existing complex systems, technologies, and other workflows with new assets in a new region; +• the inability to retain the services of key management and personnel; +• the accuracy of our assessments of the Uinta Basin Assets, including recoverable reserves, transportation costs and availability, drilling and completion equipment cost and availability, regulatory, permitting, and related matters; +• establishing business relationships with new third-party contractors and other service providers with whom we have no prior experience; +• operating in less familiar geological formations, with different legal and regulatory environments, different completion techniques, different transportation methods and operators, and unfamiliar operating conditions; and +• potential unknown liabilities and unforeseen increased expenses or delays associated with the Uinta Basin Acquisition. +Any of these issues could adversely affect our ability to maintain relationships with customers, suppliers, employees, and other constituencies. We may fail to realize the anticipated benefits expected from the Uinta Basin Acquisition. The success of the Uinta Basin Acquisition will depend, in significant part, on our ability to successfully complete the integration of the acquired assets, grow the revenue, and realize the anticipated strategic benefits from the Uinta Basin Acquisition. The anticipated benefits of the Uinta Basin Acquisition may not be realized fully or at all or may take longer to realize than expected. Actual operating, technological, strategic, and revenue opportunities, if achieved at all, may be less significant than expected or may take longer to achieve than anticipated. If we are not able to realize the anticipated benefits expected from the Uinta Basin Acquisition within the anticipated timing or at all, our business and operating results may be adversely affected. +We have incurred additional costs in connection with the Uinta Basin Acquisition, which may continue in 2025. +During 2024, we incurred non-recurring costs associated with the Uinta Basin Acquisition, integrating the Uinta Basin assets into our business, and realizing the expected benefits of the Uinta Basin Acquisition, and we expect to continue to incur such costs during a portion of 2025. A substantial majority of non-recurring expenses consist of transaction costs and include, among others, fees paid to financial, legal, accounting, and other advisors. Although we expect that the elimination of any duplicative costs, as well as the realization of expected benefits related to the integration of the Uinta Basin assets, should allow us to offset these transaction costs over time, this net benefit may not be achieved in the near term or at all. +Securities class action and derivative lawsuits may be brought against us in connection with the Uinta Basin Acquisition, which could result in substantial costs. +Securities class action lawsuits and derivative lawsuits are often brought against public companies that have entered into acquisition, merger, or other business combination agreements. Even if such a lawsuit is without merit, defending against these claims can result in substantial costs and divert management time and resources. An adverse judgment could result in monetary damages, which could have a negative impact on our liquidity and financial condition. +The loss of personnel could adversely affect our business. +We depend to a large extent on the efforts and continued employment of our executive management team, other key personnel, and our general labor force. The loss of their services could adversely affect our business. Our success in drilling and +24 +completing new wells and the success of other activities integral to our operations will depend, in part, on our ability to attract and retain experienced geologists, engineers, landmen, and other professionals. Competition for many of these professionals can be intense. If we cannot retain our technical personnel or attract additional experienced technical personnel and professionals, our ability to compete could be harmed. +Our increasing dependence on digital technologies puts us at risk for a cyber incident that could result in information theft, data corruption, operational disruptions or financial loss. +We are subject to cybersecurity risks. The oil and gas industry, and our business, are increasingly dependent on digital technology. We use digital technology to conduct certain aspects of our drilling development, production and gathering activities, manage drilling rigs and completion equipment, gather and interpret seismic data, conduct reservoir modeling, record financial and operating data, and maintain employee and other databases. Our service providers, including those who gather, process, and market our oil, gas, and NGLs, are also increasingly reliant on digital technology. Our and their reliance on this technology increasingly puts us at risk for technology system failures, data or network disruptions, cyberattacks and other breaches in cybersecurity. Power failures, telecommunication or other system failures due to hardware or software malfunctions, computer viruses, vandalism, terrorism, natural disasters, fire, flood, human error or other means could significantly impair our ability to conduct our business. +Cybersecurity attacks are evolving and include, but are not limited to, malicious software, attempts to gain unauthorized access to data, cash, or other assets, and other electronic security breaches that could lead to disruptions in critical systems, unauthorized release of confidential or otherwise protected information, and corruption of data. Deliberate attacks on, or security breaches in our systems, infrastructure, the systems and infrastructure of third-parties, or cloud-based applications could lead to disclosure of confidential information, a corruption or loss of our proprietary data, delays in production or exploration activities, difficulty in completing or settling transactions, challenges in maintaining our books and records, environmental damage, communication or other operational disruptions, and liability to third parties. Any insurance we might obtain in the future may not provide adequate protection from these risks. Any such events could damage our reputation and lead to financial losses from remedial actions, loss of business or potential liability. As these cyber risks continue to evolve and our dependence on digital technologies grows, we may be required to expend significant additional resources to continue to modify or enhance our protective measures and remediate cyber vulnerabilities. +Refer to Cybersecurity in Item 1C of this report for discussion of the Audit Committee’s role in cybersecurity governance. We did not experience any material cybersecurity incidents during 2024, however there can be no assurance that the measures we have taken to address information technology (“IT”) and cybersecurity risks will prove effective in the future. +We are incorporating artificial intelligence technologies into our processes and these technologies may present business, compliance, and reputational risks. +Our business increasingly utilizes artificial intelligence (“AI”), machine learning, and automated decision making to improve our processes. Issues in the development and use of AI, combined with an uncertain regulatory environment, may result in new or enhanced governmental or regulatory scrutiny, litigation, confidentiality or security risks, reputational harm, liability, or other adverse consequences to our business operations, all of which could adversely affect our business, results of operations, and financial condition. +In addition, it is possible that AI and machine learning-technology could, unbeknownst to us, be improperly utilized by employees while carrying out their responsibilities. The use of AI can lead to unintended consequences, including the unauthorized use or disclosure of confidential and proprietary information, or generating content that appears correct but is factually inaccurate, misleading, biased, or otherwise flawed, which could harm our reputation and business and expose us to risks related to inaccuracies or errors in the output of such technologies. As the use of AI in our business becomes more prominent, we may be required to expend additional resources to further enhance our digital security, and we may face challenges in fully anticipating or implementing adequate preventive measures or mitigating potential harm. These costs may include deploying additional personnel and protection technologies, training employees, and engaging third party experts and consultants. +It is not possible to predict all of the risks related to the use of AI, machine learning and automated decision making, and developments in the regulatory frameworks governing the use of such technologies and in related stakeholder expectations may adversely affect our ability to develop and use such technologies or subject us to liability. If we fail to successfully integrate AI into our business processes, or if we fail to keep pace with rapidly evolving AI technological developments, including attracting and retaining talented data scientists, data engineers, and programmers, we may face a competitive disadvantage. +Competition in our industry is intense, and many of our competitors have greater financial, technical, and human resources than we do. +We face intense competition from oil and gas exploration and production companies of all sizes for the capital, equipment, expertise, labor, and materials required to operate oil and gas properties. Many of our competitors have financial, technical, and other resources exceeding those available to us, and many oil and gas properties are sold in a competitive bidding process in which our competitors may be able and willing to pay more for exploratory and development prospects and productive properties, or in which our competitors have technological information or expertise that is not available to us to evaluate and successfully bid for properties. As a result, we may not be successful in acquiring and developing profitable properties. In addition, other companies may have a greater +25 +ability to continue drilling activities during periods of low oil or gas prices and to absorb the burden of current and future governmental regulations and taxation. In addition, shortages of equipment, labor, or materials as a result of intense competition may result in increased costs or the inability to obtain those resources as needed. Our inability to compete effectively with companies in any area of our business could have a material adverse impact on our business activities, financial condition, and results of operations. +Our ability to sell oil, gas, and NGLs, and/or receive market prices for our production, may be adversely affected by constraints on gathering systems, processing facilities, pipelines, rail systems, and other transportation systems owned or operated by third-parties or by other interruptions beyond our control, which could obstruct, limit, or eliminate our access to oil, gas, and NGL markets. +The marketability of our oil, gas, and NGL production depends in part on the availability, proximity, and capacity of gathering systems, processing facilities, pipelines, rail systems, and other transportation systems, which are generally owned or operated by third parties. Any significant interruption in service from, damage to, or lack of available capacity in these systems and facilities can result in the shutting-in of producing wells, the delay, or discontinuance of development plans for our properties, increases in costs, or lower price realizations. Although we have some influence over the processing and transportation of our operated production, material changes in these business relationships could materially affect our operations. Federal, state, and tribal regulation of oil, gas, and NGL production and transportation, tax and energy policies, changes in supply and demand, pipeline pressures, damage to or destruction of pipelines or processing facilities, infrastructure or capacity constraints, train derailments, and general economic conditions could adversely affect our ability to produce, gather, process, transport, or market oil, gas, and NGLs. +Production may be interrupted, or shut in, from time to time for numerous reasons, including weather conditions, accidents, loss of pipeline, gathering, processing or transportation system access or capacity, field labor issues or strikes, or we might voluntarily curtail production in response to market or other conditions. If a substantial amount of our production is interrupted at the same time, it could adversely affect our cash flows and results of operations. +As part of the Uinta Basin Acquisition, our operations expanded to include the use of rail systems operated by third-parties to transport our crude oil to market which involves inherent risk, including the potential for accidents and derailments. In the event of a rail system accident or derailment, there could be significant delays in the delivery of oil to processing facilities, or impacts to rail system access or capacity, which may disrupt our business operations and could adversely affect our financial condition. Additionally, we could experience financial losses related to spills or damages to the oil in transit that we may not be able to recoup from the third-party rail operators. We continue to monitor our transportation arrangements and maintain contingency plans to mitigate potential impacts of transportation-related disruptions; however, we cannot guarantee that such measures will adequately reduce the risks associated with transportation by rail. During the fourth quarter of 2024, certain of our third-party rail operators experienced train and/or railcar derailments, one of which related to two railcars transporting our oil production in Jefferson, Texas. Refer to Note 17 – Acquisitions in Part II, Item 8 of this report for the definition of the Uinta Basin Acquisition. +We have entered into firm transportation contracts that require us to pay fixed sums of money to our counterparties regardless of the quantities actually transported under these contracts. If we are unable to deliver the necessary quantities of oil, gas, NGL, or produced water to our counterparties, our results of operations, financial position, and liquidity could be adversely affected. +As of December 31, 2024, we were contractually committed to deliver a minimum of 46 MMBbl of oil through December of 2028 and 3 MMBbl of produced water to certain disposal facilities through June of 2027. We may enter into additional firm transportation agreements as we expand the development of our resource plays. We do not expect to incur any material shortfalls related to our existing contractual commitments. In the event we encounter delays in drilling and completing our wells or otherwise due to construction, interruptions of operations, or delays in connecting new volumes to rail systems, gathering systems, or pipelines for an extended period of time, or if we further limit our capital expenditures due to future commodity price declines or for other reasons, the requirements to pay for quantities not delivered could have a material impact on our results of operations, financial position, and liquidity. +We have limited control over the activities on properties we do not operate. +Some of our properties are operated by other companies and involve third-party working interest owners. As a result, we have limited ability to influence or control the operation or future development of such properties, including the nature and timing of drilling and operational activities, the operator’s skill and expertise, compliance with environmental, safety and other regulations, the approval of other participants in such properties, the selection and application of suitable technology, or the amount of expenditures that we will be required to fund with respect to such properties. Moreover, we are dependent on the other working interest owners of such projects to fund their contractual share of the expenditures of such properties. These limitations and our dependence on the operator and other working interest owners in these projects could cause us to incur unexpected future costs. +We rely on third-party service providers to conduct drilling and completion and other related operations. +We rely on third-party service providers to perform necessary drilling and completion and other related operations. The ability of third-party service providers to perform such operations will depend on those service providers’ ability to compete for and retain qualified personnel, financial condition, economic performance, and access to capital, which in turn will depend upon the supply and demand for oil, gas, and NGLs, prevailing economic conditions, and financial, business, and other factors. Future periods of sustained +26 +low commodity prices could occur and could cause third-party service providers to consolidate or declare bankruptcy, which could limit our options for engaging such providers. The failure of a third-party service provider to adequately perform operations could delay drilling or completion or reduce production from the property and adversely affect our financial condition and results of operations. +The inability of customers or co-owners of assets to meet their obligations may adversely affect our financial results. +Substantially all of our accounts receivable result from oil, gas, and NGL sales or joint interest billings to co-owners of oil and gas properties we operate. This concentration of customers and joint interest owners may impact our overall credit risk because these entities may be similarly affected by various economic and other market conditions, including declines in oil, gas, and NGL prices. The loss of one or more of these customers could reduce competition for our products and negatively impact the prices of commodities we sell. We do not believe the loss of any single purchaser would materially impact our operating results, as we have numerous options for purchasers in each of our operating areas for our oil, gas, and NGL production. Refer to Concentration of Credit Risk and Major Customers in Note 1 – Summary of Significant Accounting Policies, in Part II, Item 8 of this report for further discussion of our concentration of credit risk and major customers. Additionally, the inability of our co-owners, some of which have significant non-operated interests in a substantial portion of our oil and gas properties, to pay joint interest billings could negatively impact our cash flows and financial ability to drill and complete current and future wells. +Many of our properties are in areas that may have been partially depleted or drained by offset wells and certain of our wells may be adversely affected by actions other operators may take when drilling, completing, or operating wells that they own. +Many of our properties are in areas that may have already been partially depleted or drained by earlier offset drilling. The owners of leasehold interests adjoining any of our properties could take actions, such as drilling and completing additional wells, which could adversely affect our operations. When a new well is completed and produced, the pressure differential in the vicinity of the well causes the migration of reservoir fluids toward the new wellbore (and potentially away from existing wellbores). As a result, the drilling and production of these potential locations could cause a depletion of our proved reserves and may inhibit our ability to further develop our proved reserves. In addition, completion operations and other activities conducted on adjacent or nearby wells could cause production from our wells to be shut in for indefinite periods of time, result in increased lease operating expenses and adversely affect the production and reserves from our wells after they re-commence production. We have no control over the operations or activities of offsetting operators. +Oil and gas drilling, completion, and production activities are subject to numerous risks, including the risk that no commercially producible oil, gas, or NGLs will be found. +The cost of drilling and completing wells is often uncertain, and oil, gas, or NGLs drilling and production activities may be shortened, delayed, or canceled as a result of a variety of factors, many of which are beyond our control. These factors may include, but are not limited to: +• supply chain issues, including cost increases and availability of equipment or materials; +• unexpected adverse drilling or completion conditions; +• title problems; +• disputes with owners or holders of surface interests on or near areas where we operate; +• pressure or geologic irregularities in formations; +• engineering and construction delays; +• equipment failures or accidents; +• hurricanes, tornadoes, flooding, wildfires, seasonal weather, or other adverse weather conditions; +• operational restrictions resulting from seismicity concerns; +• governmental permitting delays; +• compliance with environmental and other governmental requirements; and +• shortages or delays in the availability of or increases in the cost of drilling rigs and crews, fracture stimulation crews and equipment, pipe, chemicals, water, sand, and other supplies. +The wells we drill may not be productive, and we may not recover all or any portion of our investment in such wells. The seismic data and other technologies we use do not allow us to know conclusively prior to drilling a well if oil, gas, or NGLs are present, or whether they can be produced economically. Drilling activities can result in dry holes or wells that are productive but do not produce sufficient net revenues after operating and other costs to cover drilling and completion costs. Even if sufficient amounts of oil, gas, or NGLs exist, we may damage a potentially productive hydrocarbon-bearing formation or experience mechanical difficulties while drilling or completing a well, which could result in reduced or no production from the well, significant expenditure to repair the well, and/or the loss and abandonment of the well. +Another significant risk inherent in our drilling plans is the need to obtain drilling permits from federal, state, tribal, local, and other governmental authorities. Delays in obtaining regulatory approvals and drilling permits, including delays that jeopardize our ability +27 +to realize the potential benefits from leased properties within the applicable lease periods, the failure to obtain a drilling permit for a well, or the receipt of a permit with unreasonable conditions or costs could have a material adverse effect on our ability to explore or develop our properties. +Results in newer resource plays may be more uncertain than results in resource plays that are more developed and have longer established production histories. We, and the industry, generally have less information with respect to the ultimate recoverability of reserves and the production decline rates in newer resource plays than other areas with longer histories of development and production. Drilling and completion techniques that have proven to be successful in other resource plays are being used in the early development of new plays; however, we can provide no assurance of the ultimate success of these drilling and completion techniques. +We may not be able to obtain any options or lease rights in potential drilling locations that we identify. Unless production is established within the spacing units covering undeveloped acres on which our drilling locations are identified, the leases for such acreage will expire, and we will lose our right to develop the related properties. Our total net acreage as of January 31, 2025, that is scheduled to expire over the next three years, represents approximately 34 percent of our total net undeveloped acreage as of December 31, 2024. Although we have identified numerous potential drilling locations, we may not be able to economically drill for and produce oil, gas, or NGLs from all of them, and our actual drilling activities may materially differ from those presently identified, which could adversely affect our financial condition, results of operations and operating cash flow. +Our ability to produce oil, gas, and NGLs economically and in commercial quantities could be impaired if we are unable to acquire adequate supplies of water for our drilling and/or completions operations or are unable to dispose of or recycle the water we produce at a reasonable cost and in accordance with applicable environmental rules. +The hydraulic fracturing process on which we and others in our industry depend to complete wells that will produce commercial quantities of oil, gas, and NGLs require the use and disposal of significant quantities of water. Our inability to secure sufficient amounts of water, or to dispose of, or recycle, the water produced from our wells, could adversely impact our operations. Moreover, the imposition of new environmental initiatives and regulations could include restrictions on our ability to conduct certain operations such as hydraulic fracturing or disposal of wastes, including, but not limited to, produced water, drilling fluids, and other wastes associated with the exploration, development, or production of oil, gas, and NGLs. +Compliance with environmental regulations, oil and gas leases, surface use agreements, and permit requirements governing the withdrawal, storage, and use of surface water and disposal or recycling of produced water or groundwater necessary for hydraulic fracturing of wells may increase our operating costs and cause delays, interruptions, or termination of our operations, the extent of which cannot be predicted, all of which could have an adverse effect on our operations and financial condition. +If we are unable to replace reserves, we will not be able to sustain production. +Our future operations depend on our ability to find or acquire and develop oil, gas, and NGL reserves that are economically producible. Our properties produce oil, gas, and NGLs at a declining rate over time. In order to maintain current production rates, we must locate or acquire and develop new oil, gas, and NGL reserves to replace those being depleted by production. +For future acquisitions we may complete, a successful outcome for our business will depend on a number of factors, many of which are beyond our control. These factors include the purchase price and transaction costs for the acquisition; future oil, gas, and NGL prices; the ability to reasonably estimate the recoverable volumes of reserves, rates of future production and future net revenues attainable from reserves; future operating and capital costs; results of future exploration, exploitation, and development activities on the acquired properties; future abandonment and possible future environmental or other liabilities; ability to attract and retain employees and contractors; success in transitioning ownership of the acquired properties; relationships with local regulatory authorities, landowners, and communities; and the ability to review and confirm the seller’s title to the subject properties. There are numerous uncertainties inherent in estimating these variables with respect to prospective acquisition targets. Actual results may vary substantially from those assumed in the estimates. Our customary review in connection with acquisitions will not necessarily reveal, or allow us to fully assess, all existing or potential problems and deficiencies with such properties. We do not inspect every well, and even when we inspect a well, we may not discover structural, subsurface, or environmental problems that may exist or arise. We may not be entitled to contractual indemnification for pre-closing liabilities, including environmental liabilities, and we may not be able to obtain representation and warranty or similar insurance products on terms or at a price that efficiently manages the perceived or actual risk profile. We often acquire interests in properties on an “as-is” basis with limited remedies for breaches of representations and warranties. +Significant acquisitions can change the nature of our operations and business depending upon the character of the acquired properties. For example, newly acquired properties may have substantially different operating and geological characteristics or be in different geographic locations than our existing properties. +To the extent that acquired properties are substantially different than our existing properties, our ability to efficiently realize the expected economic benefits of such transactions may be limited. If we are unable to replace any significant volume declines with additional volumes from other sources, our results of operations and cash flows could be materially and adversely impacted. +28 +The results of our operations are subject to drilling and completion technique risks, and results may not meet our expectations for reserves or production. As a result, we may incur material write-downs, and the value of our undeveloped acreage could decline if drilling and completion results are unsuccessful. +Many of our operations involve utilizing the latest drilling and completion techniques as developed by us, other operators and our service providers in order to maximize production and ultimate recoveries and therefore generate the highest possible returns. Risks we face while drilling include, but are not limited to, landing our well bore outside the desired drilling zone, deviating from the desired drilling zone while drilling horizontally through the formation, the inability to run our casing the entire length of the well bore, and the inability to run tools and recover equipment consistently through the horizontal well bore. Risks we face while completing our wells include, but are not limited to, the inability to fracture stimulate the planned number of stages, the inability to run tools and other equipment the entire length of the well bore during completion operations, the inability to recover such tools and other equipment, and the inability to successfully clean out the well bore after completion of the final fracture stimulation. +In addition, exploration and drilling technologies we currently use or implement in the future may become obsolete. If we are unable to maintain technological advancements consistent with industry standards, our operations and financial condition may be adversely affected. We cannot be certain we will be able to implement exploration and drilling technologies on a timely basis or at a cost that is acceptable to us. +Ultimately, the success of exploration, drilling, and completion technologies and techniques can only be evaluated over time as more wells are drilled and production profiles are established over a sufficiently long time period. If our drilling results are less than anticipated or we are unable to execute our drilling program because of capital constraints, lease expirations, limited access to gathering systems and takeaway capacity, and/or prices for oil, gas, and NGLs decline, then the return on our investment for a particular project may not be as attractive as we anticipated and we could incur material write-downs of oil and gas properties and the value of our undeveloped acreage could decline in the future. +The actual quantities and present value of our proved oil, gas, and NGL reserves may be less than we have estimated, and the cost to develop our reserves may be more than we have estimated. +This report and certain of our other SEC filings contain estimates of our proved oil, gas, and NGL reserves and the present value of estimated future net revenues from those reserves. The process of estimating reserves is complex and estimates are based on various assumptions, including geological and geophysical characteristics, future oil, gas, and NGL prices, drilling, completion and other capital expenditures, gathering and transportation costs, operating expenses, effects of governmental regulation, taxes, timing of operations, and availability of funds. Therefore, these estimates are inherently imprecise. In addition, our reserve estimates for properties with limited production history may be less reliable than estimates for properties with lengthy production histories. +Actual future production; prices for oil, gas, and NGLs; revenues; production taxes; development expenditures; operating expenses; and quantities of producible oil, gas, and NGL reserves will most likely vary from those estimated. Any significant variance could materially affect the estimated quantities of, and present value related to proved reserves disclosed by us, and the actual quantities and present value may be significantly less than we have previously estimated. Our properties may also be susceptible to hydrocarbon drainage from production on adjacent properties, which we may not control. +As of December 31, 2024, 40 percent, or 274.3 MMBOE, of our estimated proved reserves were proved undeveloped. In order to develop our net proved undeveloped reserves, as of December 31, 2024, we estimate approximately $2.8 billion of capital expenditures would be required. Although we have estimated our proved reserves and the costs associated with these proved reserves in accordance with industry standards, estimated costs may not be accurate, development may not occur as scheduled, and actual results may not occur as estimated. +One should not assume that the standardized measure of discounted future net cash flows or PV-10 included in this report represent the current market value of our estimated proved oil, gas, and NGL reserves. Management has based the estimated discounted future net cash flows from proved reserves on price and cost assumptions required by the SEC, whereas actual future prices and costs may be materially higher or lower. Refer to Reserves in Part I, Items 1 and 2 of this report for discussion regarding the prices used in estimating the present value of our proved reserves as of December 31, 2024, and to the caption Oil and Gas Reserve Quantities under Critical Accounting Estimates in Part II, Item 7 of this report for additional information. +The timing of production from oil and gas properties and of related expenses affects the timing of actual future net cash flows from proved reserves, and thus their actual present value. Our actual future net cash flows could be less than the estimated future net cash flows for purposes of computing PV-10. In addition, the 10 percent discount factor required by the SEC to calculate PV-10 for reporting purposes is not necessarily the most appropriate discount factor given actual interest rates, costs of capital, and other risks to which our business and the oil and gas industry in general are subject. +29 +Our disposition activities may be subject to factors beyond our control, and in certain cases we may retain unforeseen liabilities for certain matters . +We periodically sell non-core assets in order to increase capital resources available for core assets and other purposes and to create organizational and operational efficiencies. We also occasionally sell interests in core assets for the purpose of accelerating the development and increasing efficiencies in other core assets. Various factors could materially affect our ability to dispose of such assets, including the approvals of governmental agencies or third parties, the availability of purchaser financing and purchasers willing to acquire the assets on terms we deem acceptable, or other matters or uncertainties that could impact such dispositions, including whether transactions could be consummated or completed in the form or timing and for the value that we anticipate. At times, we may be required to retain certain liabilities or agree to indemnify buyers in connection with such asset sales, or we may have to rely on third parties to perpetuate leases we intend to develop in the future. The magnitude of such retained liabilities or of the indemnification obligations may be difficult to quantify at the time of the transaction and ultimately could be material. +Title to the properties in which we have an interest may be impaired by title defects. +We generally rely on title due diligence reports when acquiring oil and gas leasehold interests, and we obtain title opinions prior to commencing initial drilling operations on the properties we operate. Title to the properties in which we have an interest may be impaired by title defects that may not be identified in the due diligence title reports or title opinions we obtain, or such defects may not be cured following identification. A material title defect can reduce the value of a property or render it worthless, thus adversely affecting our oil and gas reserves, financial condition, results of operations, and operating cash flow, and may also impair the value of or render adjacent properties uneconomic to develop. Undeveloped acreage has greater risk of title defects than developed acreage and title insurance is not generally available for oil and gas properties. +Our business could be negatively impacted by security threats, including cybersecurity threats, terrorism, armed conflict, and other disruptions. +As an oil, gas, and NGL producer, we face various security threats, including cybersecurity threats to gain unauthorized access to sensitive information or to render data or systems unusable; threats to the safety of our employees; threats to the security of our facilities and infrastructure or third-party facilities and infrastructure, such as processing plants and pipelines; and threats from terrorist acts, including armed attacks on shipping channels. Although we utilize various procedures and controls to monitor these threats and mitigate our exposure to such threats, there can be no assurance that these procedures and controls will be sufficient in preventing security threats from materializing. If any of these events were to materialize, they could lead to losses of sensitive information, critical infrastructure, personnel, or capabilities essential to our operations and could have a material adverse effect on our reputation, financial position, results of operations, or cash flows. +The threat of terrorism and the impact of military and other actions have caused instability in world financial markets and could lead to increased volatility in prices for oil, gas, and NGLs, all of which could adversely affect the markets for our production. Energy assets might be specific targets of terrorist attacks. Depending on their occurrence and ultimate magnitude, terrorist threats or attacks could have a material adverse effect on our business, financial condition, or results of operations. +We are subject to operating and environmental risks and hazards that could result in substantial losses or liabilities that may not be fully insured. +Oil and gas operations are subject to many risks, including human error and accidents, that could cause personal injury, death, property damage, well blowouts, craterings, explosions, uncontrollable flows of oil, gas and NGLs, or well fluids, releases or spills of completion fluids, spills or releases from facilities and equipment used to deliver or store these materials, spills or releases of brine or other produced or flowback water, subsurface conditions that prevent us from stimulating the planned number of completion stages, accessing the entirety of the wellbore with our tools during completion, or removing materials from the wellbore to allow production to begin, fires, adverse weather such as hurricanes or tornadoes, freezing conditions, wildfires, floods, droughts, formations with abnormal pressures, pipeline ruptures or spills, train derailments, pollution, seismic events, releases of toxic gas such as hydrogen sulfide, and other environmental risks and hazards. If any of these types of events occur, we could sustain substantial losses. +In response to increased seismic activity in the Permian Basin in Texas, the Railroad Commission of Texas (“RRC”) has developed a seismic review process for injection wells near qualifying seismic activity. As a result of the seismic review process, the RRC may declare an area to be a Seismic Response Area (“SRA”) and may adjust limits for injection rates and pressure, require bottom-hole pressure tests, or modify, suspend, or terminate injection well permits within the SRA. If an SRA is declared within an area of our operations, our ability to dispose of produced water may be adversely affected, and as a result, we may be forced to shut-in injection wells or find alternate produced water disposal options which could affect production and therefore oil, gas, and NGL production revenue, and could cause us to incur additional capital or operating expense. The declaration of SRAs has required us to adjust the areas where we seek permits for injection wells to areas or formations that are less desirable, and could further restrict the areas where we are able to obtain and operate under such permits without restrictions. Additionally, we could be subject to third-party claims and liability based on allegations that our operations caused or contributed to seismic events that resulted in damage to property or personal injury, or that are otherwise related to seismic events. +30 +If we experience any of the problems with well stimulation, completion activities, and disposal referenced above, our ability to explore for and produce oil, gas, and NGLs may be adversely affected. We could incur substantial losses or otherwise fail to realize reserves in particular formations as a result of the need to shut down, abandon, or relocate drilling operations, the need to modify drill sites to lessen the risk of spills or releases, the need to investigate and/or remediate any spills, releases or ground water contamination that might have occurred, and the need to suspend our operations. +There is an inherent risk of incurring significant environmental costs and liabilities in our operations due to our current and past generation, handling, and disposal of materials, including produced water, solid and hazardous wastes, and petroleum hydrocarbons. We may incur joint and several, and/or strict liability under applicable United States federal and state environmental laws in connection with releases of hazardous substances at, on, under, or from our leased or owned properties, some of which have been used for oil and gas exploration and production activities for a number of years, often by third-parties not under our control. For our outside-operated properties, we are dependent on the operator for operational and regulatory compliance and could be subject to liabilities in the event of non-compliance. These properties and the wastes disposed thereon or therefrom could be subject to stringent and costly investigatory or remedial requirements under applicable laws, some of which are strict liability laws without regard to fault or the legality of the original conduct, including CERCLA or the Superfund law, RCRA, the Clean Water Act, the CAA, the OPA, and analogous state laws. Under various implementing regulations, we could be required to remove or remediate previously disposed wastes (including wastes disposed of or released by prior owners or operators) or property contamination (including groundwater contamination), to perform natural resource mitigation or restoration practices, or to perform remedial plugging or closure operations to prevent future contamination. In addition, it is not uncommon for neighboring landowners and other third-parties to file claims for personal injury or property damage, including induced seismicity damage, allegedly caused by the release of petroleum hydrocarbons or other hazardous substances into the environment. As a result, we may incur substantial liabilities to third-parties or governmental entities, which could reduce or eliminate funds available for exploration, development, or acquisitions, or cause us to incur losses. +We maintain insurance against some, but not all, of these potential risks and losses. We have significant but limited coverage for sudden environmental damage. We do not believe that insurance coverage for the full potential liability that could be caused by environmental damage that occurs gradually over time is appropriate for us at this time given the nature of our operations and the nature and cost of such coverage. Further, we may elect not to obtain insurance coverage under circumstances where we believe that the cost of available insurance is excessive relative to the risks to which we are subject. Accordingly, we may be subject to liability or may lose substantial assets in the event of environmental or other damages. If a significant accident or other event occurs and is not fully covered by insurance, we could suffer an uninsured material loss. +The impact of seasonal and extreme weather conditions and lease stipulations adversely affect our ability to conduct drilling activities in some of the areas where we operate. +Our operations have been in the past, and may continue to be, adversely affected by the impact of seasonal and extreme weather conditions. Additionally, lease stipulations designed to protect various wildlife or plant species may adversely impact our operations. In certain areas, drilling and other oil and gas activities can only be conducted during limited times of the year. This limits our ability to operate in those areas and can intensify competition during those times for drilling rigs and completion equipment, oil field equipment, services, supplies and qualified personnel, which may lead to periodic shortages. These constraints and the resulting shortages or high costs could delay our operations and materially increase our operating and capital costs. +Risks Related to Government Regulations +Our operations are subject to complex laws and regulations, including environmental regulations, which result in substantial costs and other risks. +Federal, state, tribal, and local authorities extensively regulate the oil and gas industry. Legislation and regulations affecting the industry are under constant review for amendment or expansion, and subject to constantly changing or differing interpretations, raising the possibility of changes that may become more stringent and, as a result, may affect, among other things, the pricing, or marketing of oil, gas, and NGL production. Non-compliance with statutes and regulations and more vigorous enforcement of such statutes and regulations by regulatory agencies may lead to increased operational and compliance costs, substantial administrative, civil, and criminal penalties, including the assessment of natural resource damages, the imposition of significant investigatory and remedial obligations and may also result in the suspension or termination of our operations. The overall regulatory burden on the industry increases the cost to place, design, drill, complete, install, operate, and abandon wells and related facilities and, in turn, decreases profitability. +Governmental authorities regulate various aspects of drilling for and the production of oil, gas, and NGLs, including the permit and bonding requirements of drilling wells, the spacing of wells, the unitization or pooling of interests in oil and gas properties, rights-of-way and easements, disposal of produced water, environmental matters, occupational health and safety, the sharing of markets, production limitations, plugging, abandonment, restoration standards, and oil and gas operations. Public interest in environmental protection has increased over time, and environmental and other public interest organizations have opposed, with some success, certain projects. Under certain circumstances, regulatory authorities may deny a proposed permit or right-of-way grant or impose conditions of approval to mitigate potential environmental impacts, which could, in either case, negatively affect our ability to explore or develop certain properties. Any such delay, suspension, or termination could have a material adverse effect on our operations. +31 +Our operations are also subject to complex and constantly changing environmental laws and regulations adopted by federal, state, tribal, and local governmental authorities in jurisdictions where we are engaged in exploration or production operations. New laws or regulations, or changes to current requirements, including, among other things, air quality and GHG emissions standards and the designation of previously unprotected wildlife or plant species as threatened or endangered in areas we operate in, could result in material costs or claims with respect to properties we own or have owned or limitations on exploration and production activities in certain locations. We will continue to be subject to uncertainty associated with new regulatory interpretations and inconsistent interpretations between state and federal agencies. Under existing or future environmental laws and regulations, we could incur significant liability, including joint and several, strict liability under federal, state, tribal, and local environmental laws for emissions and for discharges of oil, gas, and NGLs or other pollutants into the air, soil, surface water, or groundwater as described in Government Regulations in Part I, Items 1 and 2 of this report. Existing environmental laws or regulations, as currently interpreted or enforced, or as they may be interpreted, enforced, or altered in the future, may have a material adverse effect on us. +Federal and state legislative and regulatory initiatives relating to hydraulic fracturing could result in increased costs and additional operating restrictions or delays. +Hydraulic fracturing is a common practice in the oil and gas industry used to stimulate the production of oil, gas, and NGLs from dense subsurface rock formations. We routinely apply hydraulic fracturing techniques to many of our oil and gas properties, including our unconventional resource plays within our Midland Basin, South Texas, and Uinta Basin assets. Hydraulic fracturing involves injecting water, sand, and certain chemicals under pressure to fracture the hydrocarbon-bearing rock formation to allow the flow of hydrocarbons into the wellbore. The process is typically regulated by state oil and gas commissions. However, the EPA and other federal agencies have asserted federal regulatory authority over certain aspects of hydraulic fracturing activities, as outlined below. +The EPA has authority to regulate underground injections that contain diesel in the fluid system under the Safe Drinking Water Act. The EPA also has authority under the Clean Water Act to regulate wastewater generated by unconventional oil and gas operations during the hydraulic fracturing process and discharged to publicly-owned wastewater treatment facilities. If the EPA implements further regulations of hydraulic fracturing, we may incur additional costs to comply with such requirements that may be significant in nature, experience delays or curtailment in the pursuit of exploration, development, or production activities, and could even be prohibited from drilling and/or completing certain wells. +Certain states, including Texas and Utah, have adopted or may adopt, regulations that could impose more stringent permitting, public disclosure, waste disposal, and well construction requirements on hydraulic fracturing operations or otherwise seek to ban fracturing activities altogether. In addition to state laws, local land use restrictions, such as city ordinances, may restrict, or prohibit the performance of drilling in general and/or hydraulic fracturing in particular. Recently, municipalities have passed or proposed zoning ordinances that ban or strictly regulate hydraulic fracturing within city boundaries, setting the stage for challenges by state regulators and third-parties. Similar events and processes are playing out in several cities, counties, and townships across the United States. In the event that tribal, state, local, or municipal legal restrictions are adopted in areas where we are currently conducting, or in the future plan to conduct, operations, we may incur additional costs to comply with such requirements that may be significant in nature, experience delays or curtailment in the pursuit of exploration, development, or production activities, and could even be prohibited from drilling and/or completing certain wells. +In the recent past, several federal governmental agencies were actively involved in studies or reviews that focus on environmental aspects and impacts of hydraulic fracturing practices. Increased regulation and attention given to the hydraulic fracturing process could lead to greater opposition, including litigation, to oil and gas production activities using hydraulic fracturing techniques. Disclosure of chemicals used in the hydraulic fracturing process could make it easier for third parties opposing such activities to pursue legal proceedings against producers and service providers based on allegations that specific chemicals used in the fracturing process could adversely affect human health or the environment, including groundwater. In 2013, a court in California, and in 2020, the United States District Court for the District of Montana, each held that the BLM did not comply with the National Environmental Policy Act (“NEPA”) because it did not adequately consider the impact of hydraulic fracturing and horizontal drilling before issuing leases. In 2022, the federal Ninth Circuit Court of Appeals held that two federal agencies violated NEPA, in part, by failing to evaluate the environmental impacts of well stimulation treatments such as hydraulic fracturing before authorizing unconventional oil drilling offshore. Similar cases continue to be filed. In addition, courts in New York and Colorado reduced the level of evidence required before a court will agree to consider alleged damage claims from hydraulic fracturing by property owners. Litigation resulting in financial compensation for damages linked to hydraulic fracturing, including damages from induced seismicity, could spur future litigation and bring increased attention to the practice of hydraulic fracturing. Judicial decisions could also lead to increased regulation, permitting requirements, enforcement actions, and penalties. Additional legislation or regulation could also lead to operational delays or restrictions or increased costs in the exploration for, and production of, oil, gas, and NGLs, including from the development of shale plays, or could make it more difficult to perform hydraulic fracturing. The adoption of additional state or local laws, or the implementation of new regulations regarding hydraulic fracturing could potentially cause a decrease in the completion of new oil and gas wells, or an increase in compliance costs and delays, which could adversely affect our financial position, results of operations, and cash flows. +We will continue to be subject to uncertainty associated with new regulatory suspensions, revisions or rescissions and inconsistent state and federal regulatory mandates that could adversely affect our production. +32 +Federal and state regulatory initiatives relating to air quality and greenhouse gas emissions could result in increased costs and additional operating restrictions or delays. +There has been a trend toward increased air quality and GHG regulation and reduced emissions from oil and gas sources. These regulations include the New Source Performance Standards (“NSPS”), the National Emission Standards for Hazardous Air Pollutants programs, and ozone standards set under the National Ambient Air Quality Standards (“NAAQS”), among others. The adoption of additional state or local laws, or the implementation of new regulations could potentially cause a decrease in the completion of new oil and gas wells, or an increase in compliance costs and delays, which could adversely affect our financial position, results of operations, and cash flows. Refer to the Environmental section in Part II, Item 7 of this report for additional information about the regulation of air emissions, particularly methane emissions from the oil and gas sector. +Additionally, certain areas where we currently operate (such as the Uinta Basin in Utah) or may operate in the future are or may be designated as ozone non-attainment areas, and are subject to stricter emissions regulations and control measures. These increased regulations and controls, which may increase over time, result in certain restrictions or limitations to our operations, increase our costs and may cause delays, which could affect our financial position, results of operations, and cash flows. +Legislative and regulatory initiatives and litigation related to global warming and climate change could have an adverse effect on our operations and the demand for oil, gas, and NGLs, and could result in significant litigation, capital, and related expenses. +While courts have generally declined to assign direct liability for climate change to large sources of GHG emissions, some have required increased scrutiny of such emissions by federal agencies and permitting authorities. There is a continuing risk of claims being filed against companies that have significant GHG emissions, and new claims for damages and increased government scrutiny, especially from state and local governments, will likely continue. +The United States Congress has from time to time considered adopting legislation to reduce emissions of GHGs, and the majority of states have already taken measures to reduce emissions of GHGs through various measures, including, primarily through the planned development of GHG emission inventories, participation in and/or regional GHG “cap and trade” programs, and/or transition to clean energy. The focus on legislating and/or regulating methane could result in increased scrutiny for sources emitting high levels of methane, including during permitting processes, analysis, regulation and reduction of methane emissions as a requirement for project approval, and actions taken by one agency for a specific industry establishing precedents for other agencies and industry sectors. In 2021, the EPA proposed requirements for methane emission reductions from existing oil and gas equipment. In 2022, the EPA released a supplemental proposal expanding its initial requirements as well as updating requirements, and in 2023, proposed updates to GHG reporting requirements. In 2024, the EPA announced a final rule that facilitates the implementation of Congress’s directive in the Inflation Reduction Act of 2022 (“IRA”) to collect a waste emissions charge, and adds new reporting requirements for facilities and wells completed after May 7, 2024. +The IRA imposes fees on emissions of GHGs, including methane, that exceed applicable thresholds. Our GHG emissions in 2024 did not exceed the thresholds set forth by the IRA; however, there is no assurance that we will be able to meet our goals or that we will not exceed the thresholds set forth by the IRA in the future. This and any court rulings, laws, or regulations that restrict or require reduced emissions of GHGs or introduce new climate-related regulations such as a carbon pricing system, could have an adverse effect on demand for the oil and gas that we produce, and could lead to increased operating and compliance costs, and litigation costs, which could have a material adverse impact on our business. +Scientists have predicted that increasing concentrations of GHGs in the earth’s atmosphere may produce climate changes that have significant physical effects, such as increased frequency and severity of storms, droughts, and floods and other climatic events. If such effects were to occur, our operations could be adversely affected. Potential adverse effects could include disruption of our drilling, completion, and production activities, including, for example, damages to our facilities from flooding or increases in our costs of operation or reductions in the efficiency of our operations. Significant physical effects of climate change could also have an indirect effect on our financing and operations by disrupting the transportation or process-related services provided by midstream companies, service companies, or suppliers with whom we have a business relationship. We may not be able to recover through insurance some or any of the damages, losses, or costs that may result from potential physical effects of climate change. Federal regulations or policy changes regarding climate change preparation requirements could also impact our costs and planning requirements because emissions of such gases contribute to warming of the earth’s atmosphere and other climatic changes. +Requirements to reduce gas flaring could have an adverse effect on our operations. +In the areas where we have significant operations, there have been, and could be, in the future, constraints in gas takeaway capacity which has historically led to increased gas flaring. We are subject to laws established by state and other regulatory agencies that restrict the duration and amount of natural gas that can be legally flared. These laws and regulations, including potential future regulations that may impose further restrictions on flaring, could limit the amount of oil and gas we can produce from our wells or may limit the number of wells or the locations that we can drill. Any future laws or commitments may increase our operational costs, or restrict our production, which could have a material adverse effect on our financial condition, results of operations and cash flows. +33 +Risks Related to Debt, Liquidity, and Access to Capital +Lower oil, gas, or NGL prices could limit our ability to borrow under our Credit Agreement. +As of December 31, 2024, the borrowing base and aggregate revolving lender commitments under our Credit Agreement were $3.0 billion and $2.0 billion, respectively. The borrowing base is subject to semi-annual redetermination based on the bank group’s assessment of the value of our proved reserves, which in turn is impacted by oil, gas, and NGL prices. The next borrowing base redetermination date is scheduled to occur on April 1, 2025. Divestitures of properties, incurrence of additional debt, or declines in commodity prices could limit our borrowing base and reduce the amount we can borrow under our Credit Agreement, which could in turn impact, among other things, our ability to service our debt, fund our capital program, or compete for the acquisition of new properties. +Negative public perception and investor sentiment regarding our business and the oil and gas industry as a whole could adversely affect our business, operations, and our ability to attract capital. +Certain segments of the public as a whole, and the investment community in particular, have developed negative sentiment toward our industry. In recent years, equity returns in the sector versus other industry sectors have led to lower oil and gas representation in certain key equity market indices. In addition, some investors, including investment management firms, sovereign wealth and pension funds, university endowments and other investment advisors, have adopted policies to discontinue or reduce their investments in the oil and gas sector based on social and environmental considerations. Furthermore, other influential stakeholders have pressured commercial and investment banks and other service providers to reduce or cease financing of oil and gas companies and related infrastructure projects. +Such developments, including increased focus on environmental, social and governance matters and initiatives aimed at limiting climate change and reducing air pollution, and changes in federal income tax laws could result in downward pressure on the stock prices of oil and gas companies, including ours. This may also potentially result in a reduction of available capital funding for potential development projects, impacting our future financial results. +Substantial capital is required to develop and replace our reserves. +We must make substantial capital expenditures to find, acquire, develop, and produce oil, gas, and NGL reserves. Future cash flows and the availability of financing are subject to a number of factors, such as the level of production from existing wells, prices received for oil, gas, and NGL sales, our success in locating, acquiring, and developing new reserves, and the orderly functioning of credit and capital markets. If our cash flows from operations are less than expected, we may reduce our planned capital expenditures. If we cannot access sufficient liquidity under our Credit Agreement, or raise additional funds through debt or equity financing or the sale of assets, our ability to execute development plans, replace our reserves, maintain our acreage, or maintain production levels could be greatly limited. +Downgrades in our credit ratings by various credit rating agencies could impact our access to capital and have a material adverse effect on our business and financial condition. +Downgrades of our credit ratings could have material adverse consequences on our business and future prospects and could: +• limit our ability to access capital markets, including for the purpose of refinancing our existing debt; +• cause us to refinance or issue debt with less favorable terms and conditions, which may restrict, among other things, our ability to make any dividend payments or repurchase shares; +• negatively impact lenders’ willingness to transact business with us, which could impact our ability to obtain favorable terms and conditions under our Credit Agreement; +• negatively impact current and prospective customers’ willingness to transact business with us; +• impose additional insurance, guarantee, bonding, and collateral requirements; +• limit our access to bank and third-party guarantees, surety bonds, and letters of credit; and +• cause our suppliers and financial institutions to lower or eliminate the level of credit provided through payment terms or intraday funding when dealing with us, thereby increasing the need for higher levels of cash on hand, which would decrease our ability to repay outstanding indebtedness. +We cannot provide assurance that any of our current credit ratings will remain in effect for any given period of time or that a credit rating will not be lowered or withdrawn entirely by a rating agency if, in its judgment, circumstances warrant. +Our commodity derivative contract activities may result in financial losses or may limit the prices we receive for oil, gas, and NGL sales. +To mitigate a portion of the exposure to potentially adverse market changes in oil, gas, and NGL prices and the associated impact on cash flows, we regularly enter into commodity derivative contracts. Our commodity derivative contracts typically include price +34 +swaps and collar arrangements for oil, gas, and NGLs. These activities may expose us to the risk of financial loss in certain circumstances, including instances in which: +• our production is less than expected; +• one or more counterparties to our commodity derivative contracts default on their contractual obligations; or +• there is a widening of price differentials between delivery points for our production and the delivery point assumed in the commodity derivative contract arrangement. +In addition, commodity derivative contracts may limit the prices we receive for our oil, gas, and NGL sales if oil, gas, or NGL prices rise substantially over the price established by the commodity derivative contract. Refer to Note 7 – Derivative Financial Instruments in Part II, Item 8 of this report for additional detail regarding our commodity derivative contracts. +The amount of our debt may limit our ability to obtain financing for acquisitions, make us more vulnerable to adverse economic conditions, and make it more difficult for us to make payments on our debt. +As of December 31, 2024, we had $2.7 billion of aggregate principal amount outstanding of Senior Notes with maturities through 2032, as further discussed and defined in Note 5 – Long-Term Debt in Part II, Item 8 of this report. We had $68.5 million outstanding balance on our revolving credit facility and had $1.9 billion of available borrowing capacity under our Credit Agreement as of December 31, 2024. Our long-term debt represented 40 percent of our total book capitalization as of December 31, 2024. +The amounts of our indebtedness could have important consequences for our operations, including: +• making it more difficult for us to obtain additional financing in the future for our operations and potential acquisitions, working capital requirements, capital expenditures, debt service, or other general corporate requirements; +• requiring us to dedicate a substantial portion of our cash flows from operations to the repayment of our debt and the service of interest costs associated with our debt, rather than to capital investments; +• limiting our operating flexibility due to financial and other restrictive covenants, including restrictions on incurring additional debt, making acquisitions, and paying dividends or repurchasing shares of common stock; +• placing us at a competitive disadvantage compared to our competitors with less debt; and +• making us more vulnerable in the event of adverse economic or industry conditions or a downturn in our business. +If our business does not generate sufficient cash flow from operations or future sufficient borrowings are not available to us under our Credit Agreement or from other sources, we might not be able to service our debt, issue additional debt, or fund our planned capital expenditures and other liquidity needs. If we are unable to service our debt due to inadequate liquidity or otherwise, we may have to delay or cancel acquisitions, defer capital expenditures, sell equity securities, divest assets, and/or restructure or refinance our debt. We might not be able to sell our equity, sell our assets, or restructure or refinance our debt on a timely basis or on satisfactory terms or at all. In addition, the terms of our existing or future debt agreements, including our Credit Agreement and any future credit agreements, may prohibit us from pursuing any of these alternatives. +As discussed above, our Credit Agreement is subject to periodic borrowing base redeterminations. At times when we have an outstanding balance, we could be forced to repay a portion of our bank borrowings in the event of a downward redetermination of our borrowing base, and we may not have sufficient funds to make such repayment at that time. If we do not have sufficient funds and are otherwise unable to negotiate adjustments to our borrowing base or arrange new financing, we may be forced to sell significant assets. +The agreements governing our debt arrangements contain various covenants that limit our discretion in the operation of our business, could prohibit us from engaging in transactions we believe to be beneficial, and could lead to the accelerated repayment of our debt. +Our debt agreements, including our Credit Agreement and the indentures governing our Senior Notes, contain restrictive covenants that limit our ability to engage in activities that may be in our long-term best interests, including restrictions on incurring debt, issuing dividends, repurchasing common stock, selling assets, creating liens, entering into transactions with affiliates, and merging, consolidating, or selling our assets. Our ability to borrow under our Credit Agreement is subject to compliance with certain financial and non-financial covenants, as outlined in the Credit Agreement. Refer to Note 5 – Long-Term Debt in Part II, Item 8 of this report for additional discussion. These restrictions on our ability to operate our business could significantly harm us by, among other things, limiting our ability to take advantage of financings, mergers and acquisitions, and other corporate opportunities. +Our failure to comply with these covenants could result in an event of default that, if not cured or waived, could result in the acceleration of all or a portion of our indebtedness. We do not have sufficient working capital to satisfy our debt obligations in the event of an acceleration of all or a significant portion of our outstanding indebtedness. +35 +Risks Related to Corporate Governance and Ownership of Public Equity Securities +Our certificate of incorporation and by-laws have provisions that discourage corporate takeovers and could prevent stockholders from receiving a takeover premium on their investment, which could adversely affect the price of our common stock. +Delaware corporate law and our certificate of incorporation and by-laws contain provisions that may have the effect of delaying or preventing a change of control of us or our management. These provisions, among other things, provide for non-cumulative voting in the election of members of the Board of Directors and impose procedural requirements on stockholders who wish to make nominations for the election of directors or propose other actions at stockholder meetings. These provisions, alone or in combination with each other, may discourage transactions involving actual or potential changes of control, including transactions that otherwise could involve payment of a premium over prevailing market prices to stockholders for their common stock. As a result, these provisions could make it more difficult for a third party to acquire us, even if doing so would benefit our stockholders, which may limit the price investors are willing to pay in the future for shares of our common stock. +In addition, stockholder activism in our industry has been present in recent years, and if investors seek to exert influence or affect changes to our business that we do not believe are in the long-term best interests of our stockholders, such actions could adversely impact our business by, among other things, distracting our Board of Directors and management team, causing us to incur unexpected advisory fees and other related costs, impacting execution of our strategic objectives, and creating unnecessary market uncertainty. +The price of our common stock may fluctuate significantly, which may result in losses for investors. +From January 1, 2024, to January 31, 2025, the intraday trading prices per share of our common stock as reported by the New York Stock Exchange ranged from a low of $34.76 per share in January 2024 to a high of $53.26 per share in April 2024. We expect our stock to continue to be subject to fluctuations as a result of a variety of factors, including factors beyond our control. These factors include, in addition to the other risk factors set forth herein, the following: +• changes in oil, gas, or NGL prices; +• changes in the outlook for regional, national, or global commodity supply and demand; +• variations in drilling, recompletion, and operating activity; +• inflation; +• changes in financial estimates by securities analysts; +• changes in market valuations of comparable companies; +• additions or departures of key personnel; +• increased volatility due to the impacts of algorithmic trading practices; +• future sales of our common stock; +• negative public perception and investor sentiment regarding our business and the oil and gas industry as a whole; +• changes in the national and global economic outlook, including potential impacts from trade agreements or tariffs; and +• international trade relationships, potentially including the effects of trade restrictions or tariffs affecting the raw materials we utilize and the commodities we produce in our business. +We may not meet the expectations of our stockholders and/or of securities analysts at some time in the future, and our stock price could decline as a result. +We may not always pay dividends on our common stock or repurchase common stock under our Stock Repurchase Program. +Payment of future dividends remains at the discretion of our Board of Directors, and common stock repurchases under our Stock Repurchase Program remain at the discretion of our Board of Directors and certain authorized officers of the Company. Decisions regarding the payment of dividends and the repurchase of common stock will continue to depend on our earnings, capital requirements, financial condition, general market and economic conditions, applicable legal requirements, the market price of our common stock, and other factors. The payment of dividends and the repurchase of our common stock are each subject to covenants in our Credit Agreement and in the indentures governing our Senior Notes that could limit our ability to make certain restricted payments including dividends and common stock repurchases. Our Board of Directors may determine in the future to reduce the current annual dividend rate or discontinue the payment of dividends altogether. The value of shares authorized for repurchase by the Board of Directors does not require us to repurchase such shares or guarantee that such shares will be repurchased, and the Stock Repurchase Program may be suspended, modified, or discontinued at any time without prior notice. No assurance can be given that any particular number or dollar value of our shares will be repurchased. +ITEM 1B. UNRESOLVED STAFF COMMENTS +36 +We have no unresolved comments from the SEC staff regarding our periodic or current reports under the Exchange Act. +ITEM 1C. CYBERSECURITY +Risk Management and Strategy +We believe that mitigating cybersecurity risks is the responsibility of every employee. We take a preventative approach with respect to cybersecurity threats by building a resilient cybersecurity culture and strong IT infrastructure. Our processes for assessing, identifying, and managing material risks from cybersecurity threats include: +• monitoring the threat landscape and taking measures to enhance our cybersecurity program to adapt to new and developing risks; +• ongoing training, testing, and utilizing other forms of social engineering awareness and education for our employees; +• using cybersecurity systems and tools to monitor endpoints and environment logs in a centralized security information and event management system with capabilities for reporting and alerting on known threats and anomalous behaviors; +• assessing the cybersecurity practices and external ratings and assessments of certain of our third-party technology and data vendors and service providers, and maintaining preventative controls and monitoring systems related to these partners ; +• creating and testing various incident response plans to hypothetical cybersecurity attacks in order to quickly assess and respond to potential and actual threats; +• engaging third-party cybersecurity experts and consultants to perform penetration testing and scanning of our systems for vulnerabilities; +• obtaining third-party security maturity assessments, benchmarking, and security effectiveness ratings of our cybersecurity program; and +• maintaining a retainer for incident response services with a trusted cybersecurity partner in order to quickly respond, investigate, contain, and recover in the event of a cybersecurity incident. +We have structured our cybersecurity risk management program according to the National Institute of Standards and Technology Cybersecurity Framework. We strive to employ cybersecurity best practices, including implementing new technologies to proactively monitor new threats and vulnerabilities and reduce risk; maintaining a Cybersecurity Incident Response Plan, Disaster Recovery Plan, and Business Continuity Plan; and regularly updating our response planning and protocols. We have integrated our cybersecurity processes into our overall risk management program, thereby establishing a comprehensive approach by which we determine and implement strategies designed to manage external, strategic, operational and financial risks to our business, including cybersecurity threats. +We utilize a wide range of protective cybersecurity technologies and tools, including, but not limited to, encryption, firewalls, endpoint detection and response, security information and event management, multi-factor authentication, and threat intelligence feeds. In addition, we use an information security risk management approach that includes monitoring security threats and trends in the industry, analyzing potential security risks that could impact the business, partnering with industry recognized security organizations, and coordinating an appropriate response should the need arise. +Cybersecurity threats and incidents could have a material impact on our financial condition and results of operations. A successful cyber-attack could lead to operational disruptions, financial losses, regulatory penalties, reputational damage, and legal liabilities. In some cases, the costs associated with investigating and remediating a cybersecurity incident, as well as potential litigation and regulatory fines, could result in a material impact to our financial condition and results of operations. During 2024, we did not experience any cybersecurity incidents that materially affected or are reasonably likely to materially affect us, including our business strategy, results of operations, or financial condition, however, there can be no assurance that the measures we have taken to address IT and cybersecurity risks will prove effective in the future. For additional discussion of the IT and cybersecurity risks facing our business, refer to Risk Factors in Part 1, Item 1A of this report. +We prioritize investment in cybersecurity risk management and governance. We continually assess the adequacy of our resources and capabilities to address emerging threats, regulatory requirements, and changes in technology. As cybersecurity threats evolve, we may need to further enhance our processes and technologies, which could require additional financial resources. +Governance +Our Board of Directors receives regular updates on relevant IT matters affecting the Company, including cybersecurity risks and mitigation strategies. In addition to the general oversight provided by the full Board of Directors, the Audit Committee is responsible for oversight of our risk assessment and management processes, including with respect to IT and cybersecurity risks. The Audit Committee receives a quarterly cybersecurity report and regular updates from our Vice President and Chief Information Officer and our Director of Cybersecurity Risk and Business Continuity, which includes, among other information, the steps management has taken, and the specific guidelines and policies that have been established, to monitor, control, mitigate and report exposure to IT and cybersecurity risk. +37 +We have established a Cyber Incident Response Team (“CIRT”) to provide an efficient, effective, and orderly response to technology related incidents and our Cybersecurity Incident Response Plan contains protocols for communication within this team and reporting to executive management and the Audit Committee. +The CIRT is led by our Vice President and Chief Information Officer and Director of Cybersecurity Risk and Business Continuit y . Together, these professionals are responsible for assessing and managing cybersecurity risks and they lead a team of specialized technologists entrusted with ensuring the functionality, continuity, and security of our technology infrastructure and data. Our Vice President and Chief Information Officer is a seasoned IT professional with over 29 years of experience encompassing all facets of IT within the energy industry. His extensive background comprises managing IT service delivery, designing and administering secure solutions, establishing robust IT and Internet of Things infrastructures, and effectively managing technology-related risks. His skill set includes proficiency in threat mitigation, comprehensive risk assessment, and integration of cybersecurity strategies into business operations designed to safeguard critical assets and sensitive data. He reports to our Executive Vice President and Chief Financial Officer. Our Director of Cybersecurity Risk and Business Continuity has over 24 years of experience in the IT field with a majority of that time focused on designing, building and maintaining technology systems. His experience includes implementing security solutions and processes with a focus on adapting to the evolving cybersecurity threat landscape. He is a skilled leader and reports to our Executive Vice President and Chief Financial Officer. +ITEM 3. LEGAL PROCEEDINGS +At times, we may be involved in litigation relating to claims arising out of our business and operations in the normal course of business. As of the filing of this report, no legal proceedings are pending against us that we believe individually or collectively are likely to have a material adverse effect upon our financial condition, results of operations, or cash flows. +ITEM 4. MINE SAFETY DISCLOSURES +The required disclosure under Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K is included in Exhibit 95.1 to this report. +38 +PART II +ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES +Our common stock is currently traded on the New York Stock Exchange under the ticker symbol “SM.” For dividend information, refer to the caption Uses of Cash in Overview of Liquidity and Capital Resources in Item 7 of this report. Information regarding the SM Energy Equity Incentive Compensation Plan, as amended and restated effective as of May 22, 2018 (the “Equity Plan”), and the securities authorized under the Equity Plan is included below. +PERFORMANCE GRAPH +The following performance graph compares the cumulative return on our common stock, for the period beginning December 31, 2019, and ending December 31, 2024, with the cumulative total returns of the Dow Jones Exploration and Production Index (“DJUSOS”), and the Standard & Poor’s 500 Stock Index (“SPX”). +COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURNS +The preceding information under the caption Performance Graph shall be deemed to be furnished, but not filed with the SEC. +Holders. As of January 31, 2025, the number of record holders of our common stock was 111. A substantially greater number of holders of our common stock are beneficial holders, whose shares of record are held by banks, brokers, and other financial institutions. +39 +Purchases of Equity Securities by Issuer and Affiliated Purchasers. The following table provides information about purchases made by us and any affiliated purchaser (as defined in Rule 10b-18(a)(3) under the Exchange Act) during the indicated quarters and months, and the year ended December 31, 2024, of shares of our common stock, which is the sole class of equity securities registered by us pursuant to Section 12 of the Exchange Act: +PURCHASES OF EQUITY SECURITIES BY ISSUER AND AFFILIATED PURCHASERS +Period +Total Number of +Shares +Purchased (1) +Weighted +Average Price +Paid per Share +Total Number of Shares Purchased as Part of Publicly Announced Program (2) +Maximum Number or Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (as of the period end date) (2) +First quarter of 2024 +712,844 $ 45.98 712,235 $ 182,101,195 +Second quarter of 2024 +1,058,956 $ 48.35 1,058,956 $ 500,000,000 +Third quarter of 2024 +157,643 $ 43.23 — $ 500,000,000 +10/01/2024 - 10/31/2024 — $ — — $ 500,000,000 +11/01/2024 - 11/30/2024 — $ — — $ 500,000,000 +12/01/2024 - 12/31/2024 — $ — — $ 500,000,000 +Total 1,929,443 $ 47.06 1,771,191 +____________________________________________ +(1) 158,252 shares purchased by us in 2024 were to offset tax withholding obligations that occurred upon the delivery of outstanding shares underlying Restricted Stock Units (“RSU” or “RSUs”) issued under the terms of award agreements granted under the Equity Plan. +(2) In June 2024, our Board of Directors re-authorized the existing Stock Repurchase Program, and authorized us to repurchase up to $500.0 million in aggregate value of our common stock through December 31, 2027. The Stock Repurchase Program permits us to repurchase our shares from time to time in open market transactions, through privately negotiated transactions or by other means in accordance with federal securities laws and subject to certain provisions of our Credit Agreement and the indentures governing our Senior Notes. The timing, as well as the number and value of shares repurchased under the Stock Repurchase Program, is determined by certain authorized officers of the Company at their discretion and depends on a variety of factors, including the market price of our common stock, general market and economic conditions and applicable legal requirements. The value of shares authorized for repurchase by our Board of Directors does not require us to repurchase such shares or guarantee that such shares will be repurchased, and the Stock Repurchase Program may be suspended, modified, or discontinued at any time without prior notice. No assurance can be given that any particular number or dollar value of our shares will be repurchased. During the year ended December 31, 2024, we repurchased and subsequently retired 1,771,191 shares of our common stock under the Stock Repurchase Program at a weighted-average share price of $47.40 for a total cost of $84.0 million, excluding excise taxes, commissions and fees. +Our payment of cash dividends to our stockholders and repurchases of our common stock are each subject to certain covenants under the terms of our Credit Agreement and Senior Notes. Based on our current performance, we do not anticipate that any of these covenants will limit our potential repurchases of our common stock or our payment of dividends at our current rate for the foreseeable future if any dividends are declared by our Board of Directors. +During the year ended December 31, 2024, we paid $85.0 million in dividends to our stockholders. Dividends paid reflect $0.74 per share during the year ended December 31, 2024. We currently intend to continue paying dividends to our stockholders for the foreseeable future, subject to our future earnings, our financial condition, covenants under our Credit Agreement and indentures governing each series of our outstanding Senior Notes, and other factors that could arise. The payment and amount of future dividends remain at the discretion of our Board of Directors. +ITEM 6. [RESERVED] +40 +ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS +The following discussion includes forward-looking statements. Refer to the Cautionary Information about Forward-Looking Statements section of this report for important information about these types of statements. +Overview of the Company +General Overview +Our purpose is to make people’s lives better by responsibly producing energy supplies, contributing to domestic energy security and prosperity, and having a positive impact in the communities where we live and work. Our long-term vision and strategy is to sustainably grow value for all of our stakeholders as a premier operator of top-tier assets by maintaining and optimizing our high-quality asset portfolio, generating cash flows, and maintaining a strong balance sheet. Our team executes this strategy by prioritizing safety, technological innovation, and stewardship of natural resources, all of which are integral to our corporate culture. Our near-term goals include focusing on operational execution and successfully integrating the Uinta Basin assets; generating cash flows that enable us to continue returning value to stockholders through fixed dividend payments, debt repayments, and our Stock Repurchase Program; and expanding our portfolio of top-tier economic drilling inventory through acquisition and exploration. +Our asset portfolio is comprised of high-quality assets in the Midland Basin of West Texas, the Maverick Basin of South Texas, and the Uinta Basin of northeastern Utah, which we believe are capable of generating strong returns in the current macroeconomic environment and provide resilience to commodity price risk and volatility. We seek to maximize returns and increase the value of our top-tier assets through disciplined capital spending, strategic acquisitions, including the Uinta Basin Acquisition, and continued development and optimization of our existing assets. We believe that our high-quality assets facilitate a sustainable approach to prioritizing operational execution, maintaining a strong balance sheet, generating cash flows, returning capital to stockholders, and maintaining financial flexibility. Refer to Note 17 – Acquisitions in Part II, Item 8 of this report for additional discussion and for the definition of the Uinta Basin Acquisition. +We are committed to exceptional safety, health, and environmental stewardship; supporting the professional development of a diverse and thriving team of employees; building and maintaining partnerships with our stakeholders by investing in and connecting with the communities where we live and work; and transparency in reporting our progress in these areas. The Environmental, Social and Governance Committee of our Board of Directors oversees, among other things, the effectiveness of our ESG policies, programs and initiatives, monitors and responds to emerging trends, issues, and associated risks, and, together with management, reports to our Board of Directors regarding such matters. Further demonstrating our commitment to sustainable operations and environmental stewardship, compensation for our executives and eligible employees under our long-term incentive plan, and compensation for all employees under our short-term incentive plan is calculated based on, in part, certain Company-wide, performance-based metrics that include key financial, operational, environmental, health, and safety measures. Refer to our Definitive Proxy Statement on Schedule 14A for the 2025 annual meeting of stockholders to be filed within 120 days from December 31, 2024, for additional discussion of our compensation programs. +We are affected by global commodity and financial markets that remain subject to heightened levels of uncertainty and volatility. Key factors contributing to market fluctuations include ongoing oil production curtailment agreements among OPEC+, fluctuations in oil and gas demand from China, War and Geopolitical Instability, United States Federal Reserve monetary policy, shipping channel constraints and disruptions, tariffs or trade restrictions, and changes in global oil inventory in storage. These factors have driven commodity price volatility, contributed to instances of supply chain disruptions and fluctuations in interest rates, and could have further industry-specific impacts that may require us to adjust our business plan. Future impacts of these and other events on commodity and financial markets are inherently unpredictable. Despite continuing uncertainty, we expect to maximize the value of our high-quality asset base and sustain strong operational performance and financial stability. We remain focused on generating cash flows to enable us to return capital to stockholders and reduce our debt. +Outlook +We expect our total 2025 capital program to be approximately $1.3 billion, excluding acquisitions, which we expect to fund with cash flows from operations, with any remaining cash needs being funded by borrowings under our revolving credit facility. We plan to focus our 2025 capital program on highly economic oil development projects in our Midland Basin, South Texas, and Uinta Basin assets. Refer to Outlook in Part I, Items 1 and 2 of this report for additional discussion. +2024 Financial and Operational Highlights +During 2024: +• We expanded our operations into Utah upon the completion of the Uinta Basin Acquisition during the fourth quarter of 2024. Refer to Note 17 – Acquisitions in Part II, Item 8 of this report for additional discussion and the definition of the Uinta Basin Acquisition. +41 +• We issued a combined $1.5 billion of aggregate principal amount of our 2029 Senior Notes and 2032 Senior Notes and redeemed the remaining $349.1 million aggregate principal amount outstanding of our 2025 Senior Notes. Refer to Note 5 – Long-Term Debt in Part II, Item 8 of this report for additional discussion. +• Our Board of Directors approved an increase to our fixed dividend to $0.80 per share annually, to be paid in quarterly increments of $0.20 per share, which commenced in the fourth quarter of 2024. We paid a net cash dividend of $0.74 per share, an increase from $0.60 per share paid during 2023. Refer to Note 3 – Equity in Part II, Item 8 of this report for additional discussion. +• During the first half of 2024, we repurchased and subsequently retired 1.8 million shares of our common stock at a cost of $84.0 million, excluding excise taxes, commissions, and fees. In June 2024, our Board of Directors re-authorized our existing Stock Repurchase Program, and as of December 31, 2024, $500.0 million remained available under the Stock Repurchase Program for repurchases of our common stock through December 31, 2027. Refer to Note 3 – Equity in Part II, Item 8 of this report for additional discussion. +Financial and Operational Results. Average net daily equivalent production for the year ended December 31, 2024, increased 12 percent to 170.5 MBOE, compared with 152.0 MBOE for 2023, as a result of strong well performance, an increased number of completions, and production from our Uinta Basin assets during the fourth quarter of 2024. The increase primarily consisted of increases of seven percent and six percent from our Midland Basin and South Texas assets, respectively, and 9.1 MBOE of production from our Uinta Basin assets. +Realized prices for oil and gas decreased two percent and 27 percent, respectively, for the year ended December 31, 2024, compared with 2023, as a result of decreases in oil and gas benchmark commodity prices. Realized price for NGLs remained flat for the year ended December 31, 2024, compared with 2023. Total realized price per BOE remained flat for the year ended December 31, 2024, compared with 2023, primarily driven by a 24 percent increase in oil production, offset by decreases in oil and gas benchmark commodity prices. Oil, gas, and NGL production revenue increased 13 percent to $2.7 billion for the year ended December 31, 2024, compared with $2.4 billion for 2023, primarily as a result of the timing of well completions, strong well performance, and production from our Uinta Basin assets during the fourth quarter of 2024. Oil, gas, and NGL production expense of $10.21 per BOE for the year ended December 31, 2024, remained flat, compared with 2023. +We recorded net derivative gains of $50.0 million and $68.2 million for the years ended December 31, 2024, and 2023, respectively. These amounts include net derivative settlement gains of $68.7 million and $26.9 million for the years ended December 31, 2024, and 2023, respectively. +Operational activities during the year ended December 31, 2024, resulted in the following: +• Net cash provided by operating activities of $1.8 billion, compared with $1.6 billion for 2023. +• Net income of $770.3 million, or $6.67 per diluted share, compared with net income of $817.9 million, or $6.86 per diluted share for 2023. +• Adjusted EBITDAX, a non-GAAP financial measure, of $2.0 billion, compared with $1.7 billion for 2023. Refer to Non-GAAP Financial Measures below for additional discussion, including our definition of adjusted EBITDAX and reconciliations to net income and net cash provided by operating activities. +• A 12 percent increase in total estimated net proved reserves as of December 31, 2024, from December 31, 2023, to 678.3 MMBOE, of which, 62 percent were liquids (oil and NGLs) and 60 percent were proved developed reserves. The increase primarily consisted of the acquisition of 103.2 MMBOE of estimated net proved reserves in the Uinta Basin and revisions of previous estimates of 74.7 MMBOE related to infill reserves in both our South Texas and Midland Basin programs, partially offset by 62.4 MMBOE of production during 2024 and the removal of 30.5 MMBOE of certain net proved undeveloped reserves cases that are no longer expected to be developed within the five-year period from initial booking, as a result of the reallocation of capital to include our Uinta Basin assets. Our proved reserve life index remained flat at 10.9 years as of December 31, 2024, and 2023. Refer to Reserves in Part I, Items 1 and 2 of this report for additional discussion. The standardized measure of discounted future net cash flows was $7.3 billion as of December 31, 2024, compared with $6.3 billion as of December 31, 2023, which was an increase of 16 percent year-over-year primarily driven by the Uinta Basin Acquisition, partially offset by decreases in oil and gas benchmark commodity prices during 2024. Refer to Supplemental Oil and Gas Information (unaudited) in Part II, Item 8 of this report for additional discussion. +Operational Activities. During 2024, successful operational execution drove strong well performance and capital efficiency across our asset portfolio. Our continued success in both our Midland Basin and South Texas programs is attributable to our top-tier assets and technical teams, and our commitment to geoscience, technology, and innovation. During the fourth quarter of 2024, we began integrating our Uinta Basin assets where we focused on delineation and development. +In our Midland Basin program, we averaged four drilling rigs and one completion crew during 2024. Average net daily equivalent production volumes increased year-over-year by seven percent to 80.5 MBOE. Costs incurred during 2024 totaled +42 +$720.9 million, or 21 percent, of our total 2024 costs incurred. Drilling and completion activities focused on developing formations within our RockStar, Sweetie Peck, and Klondike assets. +In our South Texas program, we averaged two drilling rigs and one completion crew during 2024. Average net daily equivalent production volumes increased year-over-year by six percent to 81.0 MBOE. Costs incurred during 2024 totaled $478.3 million, or 14 percent, of our total 2024 costs incurred. Drilling and completion activities were primarily focused on delineating and developing the Austin Chalk formation. +In our Uinta Basin program, we averaged three drilling rigs and one completion crew during the fourth quarter of 2024. Average net daily equivalent production volumes totaled 36.1 MBOE for the fourth quarter of 2024, or 9.1 MBOE if calculated over the full year 2024. Costs incurred during 2024 totaled $2.3 billion, or 65 percent, of our total 2024 costs incurred, of which, over $2.1 billion related to acquisition costs. Drilling and completion activities primarily focused on delineating and developing the Lower Green River and Wasatch formations. +The table below provides a summary of changes in our drilled but not completed well count and current year drilling, completion, and acquisition activity in our operated programs for the year ended December 31, 2024: +Midland Basin +South Texas (1) +Uinta Basin Total +Gross Net Gross Net Gross Net Gross Net +Wells drilled but not completed at December 31, 2023 +39 29 37 37 — — 76 66 +Drilled but not completed wells acquired (2) +— — — — 40 31 40 31 +Wells drilled 89 73 52 52 19 15 160 140 +Wells completed (88) (73) (54) (54) (11) (8) (153) (135) +Wells drilled but not completed at December 31, 2024 +40 29 35 35 48 38 123 102 +____________________________________________ +Note: Amounts may not calculate due to rounding. +(1) As of December 31, 2023, and 2024, the drilled but not completed well count included nine gross (nine net) wells that were not included in our five-year development plan, eight of which were in the Eagle Ford shale. +(2) We acquired these drilled but not completed wells as part of the Uinta Basin Acquisition on October 1, 2024. All drilling and completion activity presented in the table above for the Uinta Basin occurred during the fourth quarter of 2024. Refer to Note 17 – Acquisitions in Part II, Item 8 of this report for additional discussion and the definition of the Uinta Basin Acquisition. +Costs Incurred. Costs incurred in oil and gas property acquisition, exploration, and development activities, whether capitalized or expensed, are summarized as follows: +For the Year Ended +December 31, 2024 +(in thousands) +Development costs $ 1,196,542 +Exploration costs 170,297 +Acquisitions +Proved properties 1,622,192 +Unproved properties 514,647 +Total, including asset retirement obligations (1) +$ 3,503,678 +____________________________________________ +(1) Refer to the caption Costs Incurred in Supplemental Oil and Gas Information (unaudited) in Part II, Item 8 of this report. +43 +Production Results. The table below presents the disaggregation of our net production volumes by product type for each of our assets for the year ended December 31, 2024: +Midland Basin South Texas +Uinta Basin +Total +Net production volumes: +Oil (MMBbl) 19.1 7.4 2.9 29.4 +Gas (Bcf) 62.0 72.3 2.7 137.0 +NGLs (MMBbl) — 10.2 — 10.2 +Equivalent (MMBOE) 29.4 29.6 3.3 62.4 +Average net daily equivalent (MBOE per day) 80.5 81.0 9.1 170.5 +Relative percentage 47 % 48 % 5 % 100 % +____________________________________________ +Note: Amounts may not calculate due to rounding. +Net equivalent production increased 12 percent for the year ended December 31, 2024, compared with 2023, comprised of increases of seven percent and six percent from our Midland Basin and South Texas assets, respectively, and 3.3 MMBOE of production during the fourth quarter of 2024 from our Uinta Basin assets. Refer to Overview of Selected Production and Financial Information, Including Trends and Comparison of Financial Results and Trends Between 2024 and 2023 and Between 2023 and 2022 below for additional discussion of production. +Oil, Gas, and NGL Prices +Our financial condition and the results of our operations are significantly affected by the prices we receive for our oil, gas, and NGL production, which can fluctuate dramatically. When we refer to realized oil, gas, and NGL prices below, the disclosed price represents the average price for the respective period, before the effect of net derivative settlements. While quoted NYMEX oil and gas and OPIS NGL prices are generally used as a basis for comparison within our industry, the prices we receive are affected by quality, energy content, location and transportation differentials, and contracted pricing benchmarks for these products. +The following table summarizes commodity price data, as well as the effect of net derivative settlements, for the years ended December 31, 2024, 2023, and 2022: +For the Years Ended December 31, +2024 2023 2022 +Oil (per Bbl): +Average NYMEX contract monthly price $ 75.72 $ 77.62 $ 94.23 +Realized price $ 74.49 $ 76.28 $ 94.67 +Effect of oil net derivative settlements $ 0.43 $ (1.13) $ (21.46) +Gas: +Average NYMEX monthly settle price (per MMBtu) $ 2.27 $ 2.74 $ 6.64 +Realized price (per Mcf) $ 1.82 $ 2.48 $ 6.28 +Effect of gas net derivative settlements (per Mcf) $ 0.43 $ 0.37 $ (1.36) +NGLs (per Bbl): +Average OPIS price (1) +$ 28.30 $ 27.71 $ 43.48 +Realized price $ 23.01 $ 23.02 $ 35.66 +Effect of NGL net derivative settlements $ (0.25) $ 0.48 $ (3.06) +____________________________________________ +(1) Effective January 1, 2023, average OPIS price per barrel of NGL, historical or strip, assumes a composite barrel product mix of 42% Ethane, 28% Propane, 6% Isobutane, 11% Normal Butane, and 13% Natural Gasoline. For periods prior to 2023, average OPIS price per barrel of NGL, historical or strip, assumed a composite barrel product mix of 37% Ethane, 32% Propane, 6% Isobutane, 11% Normal Butane, and 14% Natural Gasoline. These product mixes represent the industry standard composite barrel for the respective periods presented and do not necessarily represent our product mix for NGL production. Realized prices reflect our actual product mix. +44 +As global commodities, the prices for oil, gas, and NGLs are affected by real or perceived geopolitical risks in various regions of the world, as well as the relative strength of the United States dollar compared to other currencies. Given the uncertainty surrounding global financial markets, production output from OPEC+, global shipping channel constraints and disruptions, fluctuations in oil and gas demand from China, War and Geopolitical Instability, changes in global oil inventory in storage, tariffs or trade restrictions, and the potential impacts of these issues on global commodity markets, we expect benchmark prices for oil, gas, and NGLs to remain volatile for the foreseeable future, and we cannot reasonably predict the timing or likelihood of any future impacts that may result, which could include inflation, supply chain disruptions, fluctuations in interest rates, and industry-specific impacts. Our realized prices at local sales points may also be affected by infrastructure capacity in the areas of our operations and beyond. +The following table summarizes 12-month strip prices for NYMEX WTI oil, NYMEX Henry Hub gas, and OPIS NGLs as of January 31, 2025, and December 31, 2024: +As of January 31, 2025 As of December 31, 2024 +NYMEX WTI oil (per Bbl) $ 70.00 $ 70.01 +NYMEX Henry Hub gas (per MMBtu) $ 3.63 $ 3.53 +OPIS NGLs (per Bbl) $ 29.02 $ 28.77 +We use financial derivative instruments as part of our financial risk management program. We have a financial risk management policy governing our use of derivatives, and decisions regarding entering into commodity derivative contracts are overseen by a financial risk management committee consisting of certain senior executive officers and finance personnel. We make decisions about the amount of our expected production that we cover by derivatives based on the amount of debt on our balance sheet, the level of capital commitments and long-term obligations we have in place, and the terms and futures prices that are made available by our approved counterparties. With our current commodity derivative contracts, we believe we have partially reduced our exposure to volatility in commodity prices and basis differentials in the near term. Our use of costless collars for a portion of our derivatives allows us to participate in some of the upward movements in oil and gas prices while also setting a price floor below which we are insulated from further price decreases. Refer to Note 7 – Derivative Financial Instruments in Part II, Item 8 of this report and to Commodity Price Risk in Overview of Liquidity and Capital Resources below for additional information regarding our oil, gas, and NGL derivatives. +Financial Results of Operations and Additional Comparative Data +The tables below provide information regarding selected production and financial information for the three months ended December 31, 2024, and the preceding three quarters: +For the Three Months Ended +December 31, September 30, June 30, March 31, +2024 2024 2024 2024 +(in millions) +Production (MMBOE) 19.1 15.6 14.4 13.2 +Oil, gas, and NGL production revenue $ 835.9 $ 642.4 $ 633.5 $ 559.6 +Oil, gas, and NGL production expense $ 214.6 $ 148.4 $ 136.6 $ 137.4 +Depletion, depreciation, and amortization +$ 260.5 $ 202.9 $ 179.7 $ 166.2 +Exploration $ 16.3 $ 12.1 $ 17.1 $ 18.6 +General and administrative $ 41.9 $ 35.1 $ 31.1 $ 30.2 +Net income $ 188.3 $ 240.5 $ 210.3 $ 131.2 +____________________________________________ +Note: Amounts may not calculate due to rounding. +45 +Selected Performance Metrics +For the Three Months Ended +December 31, September 30, June 30, March 31, +2024 2024 2024 2024 +Average net daily equivalent production (MBOE per day) 208.0 170.0 158.5 145.1 +Lease operating expense (per BOE) $ 5.35 $ 4.73 $ 4.82 $ 5.54 +Transportation costs (per BOE) $ 4.10 $ 2.13 $ 1.94 $ 2.07 +Production taxes as a percent of oil, gas, and NGL production revenue 4.1 % 4.6 % 4.3 % 4.5 % +Ad valorem tax expense (per BOE) $ (0.03) $ 0.76 $ 0.82 $ 0.89 +Depletion, depreciation, and amortization (per BOE) +$ 13.61 $ 12.98 $ 12.46 $ 12.59 +General and administrative (per BOE) $ 2.19 $ 2.25 $ 2.16 $ 2.29 +____________________________________________ +Note: Amounts may not calculate due to rounding. +46 +Overview of Selected Production and Financial Information, Including Trends +For the Years Ended +December 31, Amount Change Between Percent Change Between +2024 2023 2022 2024/2023 2023/2022 2024/2023 2023/2022 +Net production volumes: (1) +Oil (MMBbl) 29.4 23.8 24.0 5.6 (0.2) 24 % (1) % +Gas (Bcf) 137.0 132.4 125.9 4.6 6.4 3 % 5 % +NGLs (MMBbl) 10.2 9.7 8.0 0.6 1.7 6 % 21 % +Equivalent (MMBOE) 62.4 55.5 53.0 6.9 2.5 12 % 5 % +Average net daily production: (1) +Oil (MBbl per day) 80.2 65.1 65.7 15.1 (0.6) 23 % (1) % +Gas (MMcf per day) 374.3 362.7 345.0 11.6 17.6 3 % 5 % +NGLs (MBbl per day) 27.9 26.4 21.9 1.4 4.5 5 % 21 % +Equivalent (MBOE per day) 170.5 152.0 145.1 18.5 6.9 12 % 5 % +Oil, gas, and NGL production revenue (in millions): (1) +Oil production revenue $ 2,187.5 $ 1,813.8 $ 2,270.1 $ 373.7 $ (456.3) 21 % (20) % +Gas production revenue 249.1 327.9 790.9 (78.8) (463.0) (24) % (59) % +NGL production revenue 234.7 222.2 285.0 12.5 (62.7) 6 % (22) % +Total oil, gas, and NGL production revenue $ 2,671.3 $ 2,363.9 $ 3,345.9 $ 307.4 $ (982.0) 13 % (29) % +Oil, gas, and NGL production expense (in millions): (1) +Lease operating expense $ 319.0 $ 284.8 $ 266.5 $ 34.2 $ 18.3 12 % 7 % +Transportation costs 167.1 136.2 150.0 30.9 (13.8) 23 % (9) % +Production taxes 116.0 105.1 162.6 10.8 (57.5) 10 % (35) % +Ad valorem tax expense 34.9 37.4 41.7 (2.5) (4.3) (7) % (10) % +Total oil, gas, and NGL production expense $ 637.0 $ 563.5 $ 620.9 $ 73.4 $ (57.4) 13 % (9) % +Realized price: +Oil (per Bbl) $ 74.49 $ 76.28 $ 94.67 $ (1.79) $ (18.39) (2) % (19) % +Gas (per Mcf) $ 1.82 $ 2.48 $ 6.28 $ (0.66) $ (3.80) (27) % (61) % +NGLs (per Bbl) $ 23.01 $ 23.02 $ 35.66 $ (0.01) $ (12.64) — % (35) % +Per BOE $ 42.81 $ 42.60 $ 63.18 $ 0.21 $ (20.58) — % (33) % +Per BOE data: (1) +Oil, gas, and NGL production expense: +Lease operating expense $ 5.11 $ 5.13 $ 5.03 $ (0.02) $ 0.10 — % 2 % +Transportation costs 2.68 2.46 2.83 0.22 (0.37) 9 % (13) % +Production taxes 1.86 1.89 3.07 (0.03) (1.18) (2) % (38) % +Ad valorem tax expense 0.56 0.67 0.79 (0.11) (0.12) (16) % (15) % +Total oil, gas, and NGL production expense (1) +$ 10.21 $ 10.16 $ 11.72 $ 0.05 $ (1.56) — % (13) % +Depletion, depreciation, and amortization +$ 12.97 $ 12.44 $ 11.40 $ 0.53 $ 1.04 4 % 9 % +General and administrative $ 2.22 $ 2.18 $ 2.16 $ 0.04 $ 0.02 2 % 1 % +Net derivative settlement gain (loss) (2) +$ 1.10 $ 0.49 $ (13.42) $ 0.61 $ 13.91 124 % 104 % +Earnings per share information (in thousands, except per share data): (3) +Basic weighted-average common shares outstanding 114,757 118,678 122,351 (3,921) (3,673) (3) % (3) % +Diluted weighted-average common shares outstanding 115,533 119,240 124,084 (3,707) (4,844) (3) % (4) % +Basic net income per common share $ 6.71 $ 6.89 $ 9.09 $ (0.18) $ (2.20) (3) % (24) % +Diluted net income per common share $ 6.67 $ 6.86 $ 8.96 $ (0.19) $ (2.10) (3) % (23) % +47 +____________________________________________ +(1) Amounts and percentage changes may not calculate due to rounding. +(2) Net derivative settlements for the years ended December 31, 2024, 2023, and 2022, are included within the net derivative (gain) loss line item in the accompanying consolidated statements of operations (“accompanying statements of operations”). +(3) Refer to Note 9 – Earnings Per Share in Part II, Item 8 of this report for additional discussion. +Average net daily equivalent production for the year ended December 31, 2024, increased 12 percent compared with 2023, as a result of an increased number of completions, strong well performance, and production from our Uinta Basin assets during the fourth quarter of 2024. Oil production as a percentage of total production increased to 47 percent in 2024 from 43 percent in 2023, as a result of increased oil production from both our Midland Basin and South Texas assets, in addition to oil production from our Uinta Basin assets. In 2025, we expect total production volumes and oil as a percentage of total production to each increase compared with 2024. Refer to Comparison of Financial Results and Trends Between 2024 and 2023 and Between 2023 and 2022 below for additional discussion. +We present certain information on a per BOE basis in order to evaluate our performance relative to our peers and to identify and measure trends we believe may require additional analysis and discussion. +Our realized price on a per BOE basis remained flat for the year ended December 31, 2024, compared with 2023, primarily because a 24 percent increase in oil production was offset by decreases in oil and gas benchmark commodity prices. For the years ended December 31, 2024, and 2023, we recognized net gains on the settlement of our commodity derivative contracts of $1.10 per BOE and $0.49 per BOE, respectively. +LOE on a per BOE basis remained flat for the year ended December 31, 2024, compared with 2023, as increases in labor costs and certain other operating costs were offset by an increase in total net equivalent production and a decrease in workover expense due to the timing of activity. For 2025, we expect LOE on a per BOE basis to increase, compared with 2024, as our product mix continues to shift towards more oil production with our Uinta Basin assets, and as a result of expected increases in certain operating costs associated with our Midland Basin assets. We anticipate volatility in LOE on a per BOE basis as a result of changes in total production, timing of workover projects, changes in service provider costs, and industry activity, all of which affect total LOE. +Transportation costs on a per BOE basis increased nine percent for the year ended December 31, 2024, compared with 2023. This increase was due to a six percent increase in NGL production from our South Texas assets and 3.3 MMBOE of production from our Uinta Basin assets, both of which incur higher transportation costs than our Midland Basin assets. In general, we expect total transportation costs to fluctuate relative to changes in gas and NGL production from our South Texas assets and oil production from our Uinta Basin assets, where we incur a majority of our transportation costs. For 2025, we expect transportation costs on a per BOE basis to increase, compared with 2024, as a result of the addition of our Uinta Basin assets. +Production tax expense on a per BOE basis for the year ended December 31, 2024, decreased two percent compared with 2023, primarily as a result of a decrease in the realized price of gas. Our overall production tax rate was 4.3 percent and 4.4 percent for the years ended December 31, 2024, and 2023, respectively. We expect that our Uinta Basin assets will incur a lower production tax rate compared to our Midland Basin and South Texas assets. We generally expect production tax expense to correlate with oil, gas, and NGL production revenue on a per BOE and absolute basis. Product mix, the location of production, and incentives to encourage oil and gas development can also impact the amount of production tax expense that we recognize. +Ad valorem tax expense on a per BOE basis decreased 16 percent for the year ended December 31, 2024, compared with 2023, as a result of changes to the assessed values of our producing properties due to decreased commodity price assumptions used in the current year valuation, and increased net equivalent production. We anticipate volatility in ad valorem tax expense on a per BOE and absolute basis as the valuation of our producing properties changes, which is generally driven by fluctuations in commodity prices, and can be impacted by changes in tax laws. +Depletion, depreciation, and amortization (“DD&A”) expense on a per BOE basis increased four percent for the year ended December 31, 2024, compared with 2023, due to a shift in production mix to our Uinta Basin assets. Our Midland Basin and Uinta Basin assets have higher DD&A rates than our South Texas assets. For 2025, we expect DD&A expense per BOE and on an absolute basis to increase, compared with 2024, primarily as a result of expected increased production resulting from the addition of our Uinta Basin assets, and a shift in our production mix. Our DD&A rate fluctuates as a result of changes in our production mix, changes in our total estimated proved reserve volumes, changes in capital allocation, impairments, acquisition and divestiture activity, and carrying cost funding and sharing arrangements with third parties. +General and administrative (“G&A”) expense on a per BOE basis increased two percent for the year ended December 31, 2024, compared with 2023, primarily as a result of increases in certain G&A expenses resulting from the Uinta Basin Acquisition and increased compensation expense, partially offset by a 12 percent increase in average net equivalent production. For 2025, we expect G&A expense on an absolute basis to increase, compared with 2024, primarily as a result of an increase in employee headcount as a result of the Uinta Basin Acquisition and expected increases in compensation expense. We expect G&A expense on a per BOE basis to remain relatively flat, compared with 2024, as the expected increases in G&A expense on an absolute basis are expected to be mostly offset by increases in production. Certain components of G&A expense, and G&A expense on a per BOE basis, are impacted by +48 +the Company’s full year performance against performance targets established at the beginning of the year and, therefore, are subject to variability. Refer to Note 17 – Acquisitions in Part II, Item 8 of this report for the definition of the Uinta Basin Acquisition. +Refer to Comparison of Financial Results and Trends Between 2024 and 2023 and Between 2023 and 2022 for additional discussion of operating expenses. +Comparison of Financial Results and Trends Between 2024 and 2023 and Between 2023 and 2022 +Refer to Comparison of Financial Results and Trends Between 2023 and 2022 and Between 2022 and 2021 in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of our 2023 Annual Report on Form 10-K, filed with the SEC on February 22, 2024, for a detailed discussion of certain comparisons of our financial results and trends for the year ended December 31, 2023, compared with the year ended December 31, 2022. Refer to Comparison of Financial Results and Trends Between 2022 and 2021 and Between 2021 and 2020 in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of our 2022 Annual Report on Form 10-K, filed with the SEC on February 23, 2023, for a detailed discussion of certain comparisons of our financial results and trends for the year ended December 31, 2022, compared with the year ended December 31, 2021. +Average net daily equivalent production, production revenue, and production expense +The following table presents the changes in our average net daily equivalent production, oil, gas, and NGL production revenue, and oil, gas, and NGL production expense, by area, between the years ended December 31, 2024, and 2023: +Average Net Equivalent Production Increase Oil, Gas, and NGL Production Revenue Increase Oil, Gas, and NGL Production Expense Increase (Decrease) +(MBOE per day) (in millions) (in millions) +Midland Basin 5.1 $ 43.1 $ 6.6 +South Texas 4.3 60.2 (7.9) +Uinta Basin +9.1 204.0 74.7 +Total 18.5 $ 307.4 $ 73.4 +____________________________________________ +Note: Amounts may not calculate due to rounding. +Average net daily equivalent production volumes for the year ended December 31, 2024, increased 12 percent compared with 2023, comprised of a seven percent increase from our Midland Basin assets, a six percent increase from our South Texas assets, and 9.1 MBOE of production from our Uinta Basin assets. As a result of decreases in benchmark oil and gas prices, realized prices for oil and gas decreased two percent and 27 percent, respectively, while the realized price for NGLs remained flat. The 13 percent increase in oil, gas, and NGL production revenue is primarily a result of the increase in average net daily equivalent production volumes. Oil, gas, and NGL production expense for the year ended December 31, 2024, increased 13 percent compared with 2023, as activity related to our Uinta Basin assets contributed to increases in transportation costs, LOE, and production tax expense. +The following table presents the changes in our average net daily equivalent production, oil, gas, and NGL production revenue, and oil, gas, and NGL production expense, by area, between the years ended December 31, 2023, and 2022: +Average Net Equivalent Production Increase (Decrease) Oil, Gas, and NGL Production Revenue Decrease Oil, Gas, and NGL Production Expense Decrease +(MBOE per day) (in millions) (in millions) +Midland Basin (6.0) $ (726.8) $ (44.3) +South Texas 13.0 (255.3) (13.1) +Total 6.9 $ (982.0) $ (57.4) +____________________________________________ +Note: Amounts may not calculate due to rounding. +Average net daily equivalent production volumes for the year ended December 31, 2023, increased five percent compared with 2022, comprised of a 20 percent increase from our South Texas assets, partially offset by a seven percent decrease from our Midland Basin assets. As a result of decreases in benchmark commodity prices, realized prices for oil, gas, and NGLs decreased 19 percent, 61 percent, and 35 percent, respectively, resulting in a 29 percent decrease in oil, gas, and NGL production revenue. Oil, gas, and NGL production expense for the year ended December 31, 2023, decreased nine percent compared with 2022, primarily driven by decreases in production taxes and transportation costs, partially offset by an increase in LOE. +49 +Refer to Overview of Selected Production and Financial Information, Including Trends above for additional discussion, including discussion of trends on a per BOE basis. +Depletion, depreciation, and amortization +For the Years Ended December 31, +2024 2023 2022 +(in millions) +Depletion, depreciation, and amortization $ 809.3 $ 690.5 $ 603.8 +DD&A expense for the year ended December 31, 2024, increased 17 percent compared with 2023, primarily as a result of a combination of increased average net daily equivalent production, including the addition of production from our Uinta Basin assets during the fourth quarter of 2024, and a shift in production mix to our Uinta Basin assets. Our Midland Basin and Uinta Basin assets have higher DD&A rates than our South Texas assets. DD&A expense for the year ended December 31, 2023, increased 14 percent compared with 2022, primarily as a result of inflation and a five percent increase in average net daily equivalent production volumes, partially offset by a shift in production mix due to higher activity in our South Texas assets, which have a lower DD&A rate than our Midland Basin assets. Refer to Overview of Selected Production and Financial Information, Including Trends above for discussion of DD&A expense on a per BOE basis. +Exploration +For the Years Ended December 31, +2024 2023 2022 +(in millions) +Geological, geophysical, and other expenses $ 28.4 $ 26.4 $ 24.7 +Overhead 35.7 33.1 30.2 +Total $ 64.1 $ 59.5 $ 54.9 +Exploration expense increased eight percent for the year ended December 31, 2024, compared with 2023, primarily as a result of an increase in geological and geophysical expenses related to our Uinta Basin assets. Exploration expense fluctuates based on actual geological and geophysical studies we perform within an exploratory area, exploratory dry hole expense incurred, and changes in the amount of allocated overhead. +General and administrative +For the Years Ended December 31, +2024 2023 2022 +(in millions) +General and administrative $ 138.3 $ 121.1 $ 114.6 +G&A expense increased 14 percent for the year ended December 31, 2024, compared with 2023, primarily as a result of increases in certain G&A expenses resulting from the Uinta Basin Acquisition and increased compensation expense. Refer to Overview of Selected Production and Financial Information, Including Trends above for discussion of G&A expense, including G&A expense on a per BOE basis, and to Note 17 – Acquisitions in Part II, Item 8 of this report for the definition of the Uinta Basin Acquisition. +Net derivative (gain) loss +For the Years Ended December 31, +2024 2023 2022 +(in millions) +Net derivative (gain) loss $ (50.0) $ (68.2) $ 374.0 +Net derivative (gain) loss is a result of changes in fair values associated with fluctuations in the forward price curves for the commodities underlying our outstanding derivative contracts and the monthly cash settlements of our derivative positions during the period. We expect increases in benchmark commodity prices to result in net derivative losses, and decreases in benchmark commodity +50 +prices to result in net derivative gains, as measured against our derivative contract prices. Refer to Note 7 – Derivative Financial Instruments in Part II, Item 8 of this report for additional discussion. +Interest expense +For the Years Ended December 31, +2024 2023 2022 +(in millions) +Interest expense $ (140.7) $ (91.6) $ (120.3) +Interest expense increased 54 percent for the year ended December 31, 2024, compared with 2023, as a result of the issuance of our 2029 Senior Notes and 2032 Senior Notes during 2024, an increase in interest expense associated with borrowings under our revolving credit facility, and a $9.0 million fee that was paid to secure firm commitments for up to $1.2 billion of senior unsecured 364-day bridge term loans (“Bridge Facility”) in connection with the Uinta Basin Acquisition. We did not draw on the Bridge Facility, and after issuance of the 2029 Senior Notes and 2032 Senior Notes on July 25, 2024, we terminated the Bridge Facility, and the associated fees were recognized as interest expense. Total interest expense can vary based on the amount of our outstanding fixed-rate debt securities, fluctuations in the amount of capitalized interest as a result of the timing of the development of our wells in progress, and due to the timing and amount of borrowings under our revolving credit facility. Refer to Overview of Liquidity and Capital Resources below, Significant Developments in 2024 in Part I, Items 1 and 2 for the definitions of 2029 Senior Notes and 2032 Senior Notes, and to Note 5 – Long-Term Debt and Note 17 – Acquisitions in Part II, Item 8 of this report for additional discussion and definitions. +Interest income +For the Years Ended December 31, +2024 2023 2022 +(in millions) +Interest income $ 31.9 $ 19.9 $ 5.8 +Interest income increased for the year ended December 31, 2024, compared with 2023, primarily due to maintaining a higher average balance of our interest-bearing cash and cash equivalents as a result of the issuance of our 2029 Senior Notes and 2032 Senior Notes during the third quarter of 2024 resulting in excess cash prior to the Closing Date of the Uinta Basin Acquisition. Refer to Note 17 – Acquisitions in Part II, Item 8 of this report for additional discussion and definitions. +Loss on extinguishment of debt +For the Years Ended December 31, +2024 2023 2022 +(in millions) +Loss on extinguishment of debt $ (0.5) $ — $ (67.6) +The redemption of our 2025 Senior Secured Notes during 2022 resulted in a net loss on extinguishment of debt of $67.2 million, which included $33.5 million of premium paid, $26.3 million of accelerated expense recognition of the unamortized debt discount, and $7.4 million of accelerated expense recognition of the unamortized deferred financing costs. Refer to Note 5 – Long-Term Debt in Part II, Item 8 of this report for additional discussion and the definition of 2025 Senior Secured Notes. +Income tax expense +For the Years Ended December 31, +2024 2023 2022 +(in millions, except tax rate) +Income tax expense $ (195.9) $ (96.3) $ (283.8) +Effective tax rate 20.3 % 10.5 % 20.3 % +Our effective tax rate in 2023 benefited from credits claimed as the result of the completion of a multi-year research and development (“R&D”) credit study. Excess tax deficiencies from stock-based compensation awards offset limits on expensing of certain +51 +covered individual’s compensation, net apportionment changes and other permanent expense items reduced the rate for each period presented. We benefited from the release of a valuation allowance on certain deferred tax assets in 2022. +During 2024, we made federal estimated tax payments of $25.5 million and state tax payments, net of refunds, of $1.4 million. +Enactment of changes to federal income tax laws, including changes in the corporate tax rate, could have a material effect on our current tax expense, tax receivable, and deferred tax liabilities. Effective for tax years beginning after December 31, 2022, the IRA provides for a 15 percent corporate alternative minimum tax (“CAMT”) on corporations with average adjusted financial statement income over $1.0 billion for any three-year period preceding the tax year. While the final proposed regulations regarding the CAMT may impact our calculation, as of the filing of this report we do not anticipate that we will become subject to the CAMT in 2025. Refer to Overview of Liquidity and Capital Resources below and to the Risk Factors section in Part 1, Item 1A of this report. +Refer to Critical Accounting Estimates below and Note 4 – Income Taxes in Part II, Item 8 of this report for further discussion. +Overview of Liquidity and Capital Resources +Based on the current commodity price environment, we believe we have sufficient liquidity and capital resources to execute our business plan while continuing to meet our current financial obligations. We continue to manage the duration and level of our drilling and completion service commitments in order to maintain flexibility with regard to our activity level and capital expenditures. +Sources of Cash +We expect to fund our 2025 capital expenditures and return of capital program with cash flows from operations, with any remaining cash needs being funded by borrowings under our revolving credit facility. Although we expect cash flows from these sources to be sufficient for 2025, we may also elect to raise funds through new debt or equity offerings or from other sources of financing. If we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our current stockholders could be diluted, and these newly issued securities may have rights, preferences, or privileges senior to those of existing stockholders and bondholders. Additionally, we may enter into carrying cost and sharing arrangements with third parties for certain exploration or development programs. +During 2024, we issued our 2029 Senior Notes and 2032 Senior Notes. See below for discussion on how the net proceeds received were used, and to Note 5 – Long-Term Debt in Part II, Item 8 of this report for additional discussion. +Our credit ratings affect the availability of, and cost for us to borrow, additional funds. One major credit rating agency upgraded our credit ratings following the close of the Uinta Basin Acquisition on October 1, 2024, citing our increased size and scale, increased inventory, increased oil percentage of expected production, strong operational performance, our priority of improving our leverage metrics, our ability to consistently generate cash flows, and our use of financial derivative instruments as part of our financial risk management program. Refer to Note 17 – Acquisitions in Part II, Item 8 of this report for the definition of the Uinta Basin Acquisition. +All of our sources of liquidity can be affected by the general conditions of the broader economy, force majeure events, fluctuations in commodity prices, operating costs, interest rate changes, tax law changes, and volumes produced, all of which affect us and our industry. +We have no control over the market prices for oil, gas, and NGLs, although we may be able to influence the amount of our realized revenues from our oil, gas, and NGL sales through the use of commodity derivative contracts as part of our financial risk management program. Commodity derivative contracts may limit the prices we receive for our oil, gas, and NGL sales if oil, gas, or NGL prices rise over the price established by the commodity derivative contract. Refer to Note 7 – Derivative Financial Instruments in Part II, Item 8 of this report for additional information about our commodity derivative contracts currently in place and the timing of settlement of those contracts . +Credit Agreement +Our Credit Agreement provides for a senior secured revolving credit facility with a maximum loan amount of $3.0 billion. As of December 31, 2024, the borrowing base and aggregate revolving lender commitments under our Credit Agreement were $3.0 billion and $2.0 billion, respectively. The borrowing base is subject to regular, semi-annual redetermination, and considers the value of both our proved oil and gas properties reflected in our most recent reserve report and commodity derivative contracts, each as determined by our lender group. The next borrowing base redetermination date is scheduled to occur on April 1, 2025. No individual bank participating in our Credit Agreement represents more than 10 percent of the lender commitments under the Credit Agreement. We must comply with certain financial and non-financial covenants under the terms of the Credit Agreement, including covenants limiting dividend payments and requiring that we maintain certain financial ratios, as set forth in the Credit Agreement. We were in compliance with all financial and non-financial covenants as of December 31, 2024, and through the filing of this report. Refer to Note 5 – Long-Term Debt in Part II, Item 8 of this report for additional discussion, as well as the presentation of the outstanding balance, total amount +52 +of letters of credit, and available borrowing capacity under the Credit Agreement as of January 31, 2025, December 31, 2024, and December 31, 2023. +Our daily weighted-average revolving credit facility balance was $56.7 million during the year ended December 31, 2024. We had no revolving credit facility borrowings during the year ended December 31, 2023, and through the third quarter of 2024. Cash flows provided by our operating activities, proceeds received from divestitures of properties, capital markets activities including open market debt repurchases, debt redemptions, repayment of scheduled debt maturities, other financing activities, and our capital expenditures, including acquisitions, all impact the amount we borrow under our revolving credit facility. +Weighted-Average Interest and Weighted-Average Borrowing Rates +Our weighted-average interest rate includes paid and accrued interest, fees on the unused portion of the aggregate commitment amount under the Credit Agreement, letter of credit fees, the non-cash amortization of deferred financing costs, and for the portion of 2022 during which they were outstanding, the non-cash amortization of the discount related to the 2025 Senior Secured Notes, as defined in Note 5 – Long-Term Debt in Part II, Item 8 of this report. Our weighted-average borrowing rate includes paid and accrued interest only. +The following table presents our weighted-average interest rates and our weighted-average borrowing rates for the years ended December 31, 2024, 2023, and 2022: +For the Years Ended December 31, +2024 2023 2022 +Weighted-average interest rate 7.6 % 7.1 % 7.6 % +Weighted-average borrowing rate 6.6 % 6.4 % 6.8 % +Our weighted-average interest rate and weighted-average borrowing rate each increased for the year ended December 31, 2024, compared with 2023, primarily as a result of the issuance of our 2029 Senior Notes and 2032 Senior Notes during 2024, which have greater outstanding aggregate principal balances and higher interest rates compared with our other outstanding Senior Notes and our 2025 Senior Notes that we redeemed during the third quarter of 2024, and as a result of borrowings under our revolving credit facility during the fourth quarter of 2024. Our weighted-average interest rate and weighted-average borrowing rate each decreased for the year ended December 31, 2023, compared with 2022, as a result of the redemptions of our 2024 Senior Notes and 2025 Senior Secured Notes during 2022. The rates disclosed in the table above for the year ended December 31, 2024, do not reflect the $9.0 million fee paid to secure the Bridge Facility in connection with the Uinta Basin Acquisition. +Our weighted-average interest rate and weighted-average borrowing rate are affected by the occurrence and timing of long-term debt issuances and redemptions and the average outstanding balance on our revolving credit facility. Additionally, our weighted-average interest rate is affected by the fees paid on the unused portion of our aggregate revolving lender commitments. The rates disclosed in the above table do not reflect certain amounts associated with the repurchase or redemption of Senior Notes, such as the accelerated expense recognition of the unamortized deferred financing costs and unamortized discounts, as these amounts are netted against the associated gain or loss on extinguishment of debt. The 2024 Senior Notes were redeemed on February 14, 2022, the 2025 Senior Secured Notes were redeemed on June 17, 2022, and the 2025 Senior Notes were redeemed on August 26, 2024. After these dates, the weighted-average interest rate was no longer affected by the non-cash amortization of deferred financing costs or, for the 2025 Senior Secured Notes, the non-cash amortization of the discount. +Refer to Significant Developments in 2024 in Part I, Items 1 and 2 for the definitions of 2029 Senior Notes and 2032 Senior Notes, and to Note 5 – Long-Term Debt and Note 17 – Acquisitions in Part II, Item 8 of this report for additional discussion and definitions. +Uses of Cash +We use cash for the development, exploration, and acquisition of oil and gas properties; for the payment of operating and general and administrative costs, income taxes, debt obligations, including interest and early repayments or redemptions, and dividends; and for repurchases of shares of our outstanding common stock under the Stock Repurchase Program. Expenditures for the development, exploration, and acquisition of oil and gas properties are the primary use of our capital resources. During 2024, we spent $3.4 billion on capital expenditures and on acquisitions of proved and unproved oil and gas properties. This amount differs from the costs incurred amount of $3.5 billion for the year ended December 31, 2024, as costs incurred is an accrual-based amount that also includes asset retirement obligations, geological and geophysical expenses, and exploration overhead amounts. Refer to Costs Incurred in Supplemental Oil and Gas Information (unaudited) in Part II, Item 8 of this report for additional discussion. +The amount and allocation of our future capital expenditures will depend upon a number of factors, including our cash flows from operating, investing, and financing activities, our ability to execute our development program, inflation, and the number and size of acquisitions that we complete. In addition, the impact of oil, gas, and NGL prices on investment opportunities, the availability of capital, +53 +tax law and other regulatory changes, and the timing and results of our exploration and development activities may lead to changes in funding requirements for future development. We periodically review our capital expenditure budget and guidance to assess if changes are necessary based on current and projected cash flows, acquisition and divestiture activities, debt requirements, and other factors. +Changes to the Internal Revenue Code (“IRC“) and federal income tax laws could increase our corporate income tax rate and eliminate or reduce current tax deductions, such as those for intangible drilling costs, depreciation of equipment costs, and other deductions which currently reduce our taxable income. The CAMT and other possible future legislation could reduce our net cash provided by operating activities resulting in a reduction of available funding. Refer to Comparison of Financial Results and Trends Between 2024 and 2023 and Between 2023 and 2022 above for additional discussion. +We may from time to time repurchase shares of our common stock, or repurchase or redeem all or portions of our outstanding debt securities, for cash, through exchanges for other securities, or a combination of both. Such repurchases or redemptions may be made in open market transactions, privately negotiated transactions, tender offers, pursuant to contractual provisions, or otherwise. Any such repurchases or redemptions will depend on our business strategy, prevailing market conditions, our liquidity requirements, contractual restrictions or covenants, compliance with securities laws, and other factors. The amounts involved in any such transaction may be material. +During the years ended December 31, 2024, and 2023, we repurchased and subsequently retired 1.8 million shares and 6.9 million shares, respectively, of our common stock at a cost, excluding excise taxes, commissions, and fees, of $84.0 million and $228.0 million, respectively. As of December 31, 2024, $500.0 million remained available under the Stock Repurchase Program for repurchases of our common stock through December 31, 2027. Effective January 1, 2023, shares of common stock repurchased, net of shares of common stock issued, are subject to a one percent excise tax imposed by the IRA. We paid a minimal amount of excise tax related to common stock repurchases during 2024. Refer to Note 3 – Equity in Part II, Item 8 of this report for discussion of the Stock Repurchase Program. +During the years ended December 31, 2024, 2023, and 2022, we paid $85.0 million, $71.6 million, and $19.6 million, respectively, in dividends to our stockholders. Dividends paid were $0.74, $0.60, and $0.16 per share during the years ended December 31, 2024, 2023, and 2022, respectively. During 2024, our Board of Directors approved an 11 percent increase to our fixed dividend to $0.80 per share annually, to be paid in quarterly increments of $0.20 per share, which commenced in the fourth quarter of 2024. We currently intend to continue paying dividends to our stockholders for the foreseeable future, subject to our future earnings, our financial condition, covenants under our Credit Agreement and indentures governing each series of our outstanding Senior Notes, and other factors that could arise. The payment and amount of future dividends remain at the discretion of our Board of Directors. +During 2024, we redeemed all of the $349.1 million of aggregate principal amount outstanding of our 2025 Senior Notes. Additionally, we used a portion of the net proceeds from the 2029 Senior Notes and 2032 Senior Notes, cash on hand, and borrowings under our revolving credit facility to fund our proportionate share of the Uinta Basin Acquisition. Refer to Significant Developments in 2024 in Part I, Items 1 and 2 for the definitions of 2029 Senior Notes and 2032 Senior Notes, and to Note 5 – Long-Term Debt and Note 17 – Acquisitions in Part II, Item 8 of this report for additional discussion and definitions. +Analysis of Cash Flow Changes Between 2024 and 2023 and Between 2023 and 2022 +The following tables present changes in cash flows between the years ended December 31, 2024, 2023, and 2022, for our operating, investing, and financing activities. The analysis following each table should be read in conjunction with our accompanying consolidated statements of cash flows (“accompanying statements of cash flows”) in Part II, Item 8 of this report. +Operating Activities +For the Years Ended December 31, Amount Change Between +2024 2023 2022 2024/2023 2023/2022 +(in millions) +Net cash provided by operating activities $ 1,782.5 $ 1,574.4 $ 1,686.4 $ 208.1 $ (112.0) +Net cash provided by operating activities increased for the year ended December 31, 2024, compared with 2023, primarily as a result of a $184.8 million increase in cash received from oil, gas, and NGL production revenues, net of transportation costs and production taxes, and an increase of $62.4 million in cash received on settled derivative trades. These amounts were partially offset by an increase of $46.5 million in cash paid for G&A expense, LOE, and ad valorem taxes. Net cash provided by operating activities was also affected by the timing of payments made between us and XCL Resources related to activity occurring after the Closing Date of the Uinta Basin Acquisition. Refer to Note 17 – Acquisitions in Part II, Item 8 of this report for additional discussion and definitions. +Net cash provided by operating activities decreased for the year ended December 31, 2023, compared with 2022, primarily as a result of a $937.3 million decrease in cash received from oil, gas, and NGL production revenues, net of transportation costs and +54 +production taxes, and an increase of $44.5 million in cash paid for LOE and ad valorem taxes, partially offset by a decrease of $749.3 million in cash paid on settled derivative trades and a $45.5 million decrease in cash paid for interest. +Net cash provided by operating activities is affected by working capital changes and the timing of cash receipts and disbursements. +Investing Activities +For the Years Ended December 31, Amount Change Between +2024 2023 2022 2024/2023 2023/2022 +(in millions) +Net cash used in investing activities $ (3,407.2) $ (1,098.7) $ (880.3) $ (2,308.5) $ (218.4) +Net cash used in investing activities increased for the year ended December 31, 2024, compared with 2023, as a result of $2.1 billion of cash paid for the Uinta Basin Acquisition and a $321.2 million increase in capital expenditures. +Net cash used in investing activities increased for the year ended December 31, 2023, compared with 2022, as a result of a $109.5 million increase in capital expenditures and $109.9 million of cash paid to acquire proved and unproved oil and gas properties in the Midland Basin, including the acquisition of additional working interests in certain wells. +Refer to Note 17 – Acquisitions in Part II, Item 8 of this report for additional discussion of acquisition activity and the definition of the Uinta Basin Acquisition. +Financing Activities +For the Years Ended December 31, Amount Change Between +2024 2023 2022 2024/2023 2023/2022 +(in millions) +Net cash provided by (used in) financing activities $ 1,008.5 $ (304.5) $ (693.9) $ 1,313.0 $ 389.4 +Net cash provided by financing activities increased during the year ended December 31, 2024, primarily related to net cash proceeds of $1.5 billion from the issuance of our 2029 Senior Notes and 2032 Senior Notes, and net borrowings under our revolving credit facility of $68.5 million, partially offset by $349.1 million of cash paid to redeem our 2025 Senior Notes. Additionally, we paid $86.1 million, including commission and fees, to repurchase and subsequently retire 1.8 million shares of our common stock under the Stock Repurchase Program, and paid $85.0 million of dividends to our stockholders. +Net cash used in financing activities during the year ended December 31, 2023, primarily consisted of $228.1 million of cash paid, including commission and fees, to repurchase and subsequently retire 6.9 million shares of our common stock under the Stock Repurchase Program, and $71.6 million of dividends paid to our stockholders. +Net cash used in financing activities during the year ended December 31, 2022, related to $480.2 million of cash paid, including premium, to redeem our 2025 Senior Secured Notes, and $104.8 million to redeem our 2024 Senior Notes. Additionally, we paid $57.2 million, including commission and fees, to repurchase and subsequently retire 1.4 million shares of our common stock under the Stock Repurchase Program, $25.1 million for the net share settlement of employee stock awards, and paid $19.6 million of dividends to our stockholders. +Refer to Note 3 – Equity in Part II, Item 8 of this report for additional discussion of our Stock Repurchase Program and Note 5 – Long-Term Debt in Part II, Item 8 of this report for additional discussion and definitions related to our debt transactions. +Interest Rate Risk +We are exposed to market and credit risk due to the floating interest rate associated with any outstanding balance on our revolving credit facility. Our Credit Agreement allows us to fix the interest rate for all or a portion of the principal balance of our revolving credit facility for a period up to six months. To the extent that the interest rate is fixed, interest rate changes will affect the revolving credit facility’s fair value but will not affect results of operations or cash flows. Conversely, for the portion of the revolving credit facility that has a floating interest rate, interest rate changes will not affect the fair value but will affect future results of operations and cash flows. Changes in interest rates do not affect the amount of interest we pay on our fixed-rate Senior Notes, but can affect their fair values. As of December 31, 2024, our outstanding principal amount of fixed-rate debt totaled $2.7 billion and our floating-rate debt +55 +outstanding totaled $68.5 million. Refer to Note 8 – Fair Value Measurements in Part II, Item 8 of this report for additional discussion on the fair values of our Senior Notes. +Commodity Price Risk +The prices we receive for our oil, gas, and NGL production directly affect our revenue, profitability, access to capital, ability to return capital to our stockholders, and future rate of growth. Oil, gas, and NGL prices are subject to unpredictable fluctuations resulting from a variety of factors that are typically beyond our control, including changes in supply and demand associated with the broader macroeconomic environment, constraints on gathering systems, processing facilities, pipelines, rail systems, and other transportation systems, and weather-related events. The markets for oil, gas, and NGLs have been volatile, especially over the last decade, and remain subject to high levels of uncertainty and volatility related to production output from OPEC+, fluctuations in oil and gas demand from China, global shipping channel constraints and disruptions, War and Geopolitical Instability, tariffs or trade restrictions, and the potential impacts of these issues on global commodity and financial markets. These circumstances have contributed to inflation, instances of supply chain disruptions, and fluctuations in interest rates, and could have further industry-specific impacts that may require us to adjust our business plan. The realized prices we receive for our production also depend on numerous factors that are typically beyond our control. Refer to Risk Factors - Risks Related to Commodity Prices and Global Macroeconomics in Part I, Item 1A of this report. Based on our 2024 production, a 10 percent decrease in our average realized prices for oil, gas, and NGLs would have reduced our oil, gas, and NGL production revenues by approximately $218.7 million, $24.9 million, and $23.5 million, respectively. If commodity prices had been 10 percent lower, our net derivative settlements for the year ended December 31, 2024, would have offset the declines in oil, gas, and NGL production revenue by approximately $50.3 million. +We enter into commodity derivative contracts in order to reduce the risk of fluctuations in commodity prices. The fair value of our commodity derivative contracts is largely determined by estimates of the forward curves of the relevant price indices. As of December 31, 2024, a 10 percent increase or decrease in the forward curves associated with our oil, gas, and NGL commodity derivative instruments would have changed our net derivative positions for these products by approximately $51.9 million, $23.4 million, and $1.7 million, respectively. +Off-Balance Sheet Arrangements +We have not participated in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities (“SPE” or “SPEs”). Refer to Off-Balance Sheet Arrangements within Note 1 – Summary of Significant Accounting Policies in Part II, Item 8 of this report for additional discussion. +Critical Accounting Estimates +Our discussion of financial condition and results of operations is based upon the information reported in our consolidated financial statements. The preparation of these consolidated financial statements in conformity with GAAP requires us to make assumptions and estimates that affect the reported amounts of assets, liabilities, revenues, and expenses, as well as the disclosure of contingent assets and liabilities as of the date of our consolidated financial statements. We base our assumptions and estimates on historical experience and various other sources that we believe to be reasonable under the circumstances. Actual results may differ from the estimates we calculate as a result of changes in circumstances, global economics and politics, and general business conditions. A summary of our significant accounting policies is detailed in Note 1 – Summary of Significant Accounting Policies in Part II, Item 8 of this report. We have outlined below, those policies identified as being critical to the understanding of our business and results of operations and that require the application of significant management judgment. +Successful Efforts Method of Accounting. GAAP provides two alternative methods for the oil and gas industry to use in accounting for oil and gas producing activities. These two methods are generally known in our industry as the full cost method and the successful efforts method, and both methods are widely used. The methods are different enough that in many circumstances the same set of facts will provide materially different financial statement results within a given year. We have chosen the successful efforts method of accounting for our oil and gas producing activities. A more detailed description is included in Note 1 – Summary of Significant Accounting Policies of Part II, Item 8 of this report. +Oil and Gas Reserve Quantities. Our estimated proved reserve quantities and future net cash flows are critical to understanding the value of our business. They are used in comparative financial ratios and are the basis for significant accounting estimates in our consolidated financial statements, including the calculations of DD&A expense, impairment of proved and unproved oil and gas properties, asset retirement obligations, and purchase price allocations. Refer to Oil and Gas Producing Activities in Note 1 – Summary of Significant Accounting Policies of Part II, Item 8 of this report for additional discussion on our accounting policies impacted by estimated reserve quantities. +Future cash inflows and future production and development costs are determined by applying prices and costs, including transportation, quality differentials, and basis differentials, applicable to each period to the estimated quantities of proved reserves remaining to be produced as of the end of that period. Expected cash flows are discounted to present value using an appropriate discount rate. For example, the standardized measure of discounted future net cash flows calculation requires that a 10 percent discount rate be applied. Although reserve estimates are inherently imprecise and estimates of new discoveries and undeveloped +56 +locations are more imprecise than those of established producing oil and gas properties, we make a considerable effort in estimating our reserves. We engage Ryder Scott, an independent reservoir evaluation consulting firm, to audit a minimum of 80 percent of our total calculated proved reserve PV-10. We expect proved reserve estimates will change as additional information becomes available and as commodity prices and operating and capital costs change. We evaluate and estimate our proved reserves each year end. It should not be assumed that the standardized measure of discounted future net cash flows (GAAP) or PV-10 (non-GAAP) as of December 31, 2024, is the current market value of our estimated proved reserves. In accordance with SEC requirements, we based these measures on the unweighted arithmetic average of the first-day-of-the-month price of each month within the trailing 12-month period ended December 31, 2024. Actual future prices and costs may be materially higher or lower than the prices and costs utilized in the estimates. Refer to Risk Factors in Part I, Item 1A of this report for additional discussion. +If the estimates of proved reserves decline, the rate at which we record DD&A expense will increase, which would reduce future net income. Changes in DD&A rate calculations caused by changes in reserve quantities are made prospectively. In addition, a decline in reserve estimates may impact the outcome of our assessment of proved and unproved properties for impairment. Impairments are recorded in the period in which they are identified. +The following table presents information about proved reserve changes from period to period due to items we do not control, such as price, and from changes due to production history and well performance. These changes do not require a capital expenditure on our part, but may have resulted from capital expenditures we incurred to develop other estimated proved reserves. +For the Years Ended December 31, +2024 2023 2022 +MMBOE Change +Revisions resulting from performance (1) +(8.0) 37.2 (11.1) +Removal of net proved undeveloped reserves no longer in our five-year development plan (30.5) (30.8) (19.9) +Revisions resulting from price changes (13.4) (28.4) 9.5 +Total (51.9) (22.0) (21.5) +____________________________________________ +Note: Amounts may not calculate due to rounding. +(1) For the year ended December 31, 2023, performance revisions consisted of positive revisions of 65.3 MMBOE resulting from changes to decline curve estimates based on reservoir engineering analysis and negative revisions of 28.0 MMBOE related to well performance. +As previously noted, commodity prices are volatile and estimates of reserves are inherently imprecise. Consequently, we expect to continue experiencing these types of changes. +We cannot reasonably predict future commodity prices, although we believe that together, the analyses below provide reasonable information regarding the impact of changes in pricing and trends on total estimated net proved reserves. The following table reflects the estimated MMBOE change and percentage change to our total reported estimated net proved reserve volumes from the described hypothetical changes: +For the year ended December 31, 2024 +MMBOE Change Percentage Change +10 percent decrease in SEC pricing (1) +(19.3) (3) % +Average NYMEX strip pricing as of fiscal year end (2) +11.5 2 % +10 percent decrease in net proved undeveloped reserves (3) +(27.4) (4) % +____________________________________________ +(1) The change solely reflects the impact of a 10 percent decrease in SEC pricing to the total reported estimated net proved reserve volumes as of December 31, 2024, and does not include additional impacts to our estimated net proved reserves that may result from our internal intent to drill hurdles or changes in future service or equipment costs. +(2) The change solely reflects the impact of replacing SEC pricing with the five-year average NYMEX strip pricing as of December 31, 2024, and does not include additional impacts to our estimated net proved reserves that may result from our internal intent to drill hurdles or changes in future service or equipment costs. As of December 31, 2024, SEC pricing was $75.48 per Bbl for oil, $2.13 per MMBtu for gas, and $28.29 per Bbl for NGLs, and five-year average NYMEX strip pricing was $65.69 per Bbl for oil, $3.72 per MMBtu for gas, and $26.08 per Bbl for NGLs. +(3) The change solely reflects a 10 percent decrease in net proved undeveloped reserves as of December 31, 2024, and does not include any additional impacts to our estimated net proved reserves. +57 +Additional reserve information can be found in Reserves in Part I, Items 1 and 2 of this report, and in Supplemental Oil and Gas Information (unaudited) in Part II, Item 8 of this report. +Impairment of Proved Properties. Proved oil and gas properties are evaluated for impairment on a depletion pool-by-pool basis and reduced to fair value when events or changes in circumstances indicate that their carrying amount may not be recoverable. We estimate the expected future cash flows of our proved oil and gas properties and compare these undiscounted cash flows to the carrying amount to determine if the carrying amount is recoverable. If the carrying amount exceeds the estimated undiscounted future cash flows, we will write down the carrying amount of the proved oil and gas properties to fair value (or discounted future cash flows). Management estimates future cash flows from all proved reserves and risk adjusted probable and possible reserves using various factors, which are subject to our judgment and expertise, and include, but are not limited to, commodity price forecasts, estimated future operating and capital costs, development plans, and discount rates to incorporate the risk and current market conditions associated with realizing the expected cash flows. We cannot predict when or if future impairment charges will be recorded because of the uncertainty in the factors discussed above. Despite any amount of future impairment being difficult to predict, based on our commodity price assumptions as of January 31, 2025, we do not expect any material proved oil and gas property impairments in the first quarter of 2025 resulting from commodity price impacts. +Accounting Matters +Refer to Recently Issued Accounting Guidance in Note 1 – Summary of Significant Accounting Policies in Part II, Item 8 of this report for information on new authoritative accounting guidance. +Environmental +We believe we are in substantial compliance with environmental laws and regulations and do not currently anticipate that material future expenditures will be required under the existing regulatory framework. However, environmental laws and regulations are subject to frequent changes, and we are unable to predict the impact that compliance with future laws or regulations, such as those currently being considered as discussed below, may have on future capital expenditures, liquidity, and results of operations. +Hydraulic Fracturing. Hydraulic fracturing is an important and common practice that is used to stimulate production of hydrocarbons from tight formations. For additional information about hydraulic fracturing and related environmental matters, refer to Risk Factors – Risks Related to Government Regulations – Federal and state legislative and regulatory initiatives relating to hydraulic fracturing could result in increased costs and additional operating restrictions or delays. +Climate Change and Air Quality. In June 2013, President Obama announced a Climate Action Plan designed to further reduce GHG emissions and prepare the nation for the physical effects that may occur as a result of climate change. The Climate Action Plan targeted methane reductions from the oil and gas sector as part of a comprehensive interagency methane strategy. As part of the Climate Action Plan, on May 12, 2016, the EPA issued final regulations applicable to new, modified, or reconstructed sources that amended and expanded 2012 regulations for the oil and gas sector by, among other things, setting emission limits for volatile organic compounds (“VOCs” or “VOC”) and methane, a GHG, and added requirements for previously unregulated sources. The 2016 NSPS requires reduction of methane and VOCs from certain activities in oil and gas production, processing, transmission and storage and applies to facilities constructed, modified, or reconstructed after September 18, 2015. The regulation requires, among other things, GHG and VOC emission limits for certain equipment, such as centrifugal compressors and reciprocating compressors; semi-annual leak detection and repair for well sites and quarterly for boosting and garnering compressor stations and gas transmission compressor stations; control requirements and emission limits for pneumatic pumps; and additional requirements for control of GHGs and VOCs from well completions. On September 14, and 15, 2020, the EPA finalized amendments to the 2012 and 2016 NSPS that removed transmission and storage infrastructure from regulation of methane emissions and other VOCs, as well as removed methane control requirements. The portion of the 2020 amendments that removed the transmission and storage infrastructure from the regulations was disapproved by the Congressional Review Act in 2021. In November 2021, the EPA proposed to expand the requirements of the 2012 and 2016 NSPS and also include requirements for states to develop performance standards to control methane emissions from existing sources. In December 2022, the EPA issued a supplemental proposal to update, strengthen, and expand the 2021 proposed rules. The EPA finalized the rule in December 2023. In March 2024, the EPA announced a final rule that implements a waste emissions charge and new reporting requirements for facilities and wells completed after May 7, 2024. +States are also required to comply with the NAAQS. The oil and gas sector is often subjected to additional controls when areas within states are not attaining the ozone NAAQS as the VOCs emitted by the oil and gas sector are a precursor to ozone formation. The ozone NAAQS was set at 70 parts per billion (“ppb”) in 2015. In 2023, the EPA announced its plan to perform a full and complete review of the ozone NAAQS. The results of this review could result in changes to the ozone NAAQS which, if lowered, may result in additional actions by states requiring further emission controls and associated costs. Oil and gas facilities operating in areas that are determined to be out of compliance with the 70 ppb requirement or a lowered ozone NAAQS may be subject to increased emission controls and associated costs of compliance. As part of the integrated review process, the EPA held a workshop in May 2024 to discuss policy-relevant science that will inform the EPA’s current review of the air quality criteria and the NAAQS for ozone and related photochemical oxidants. +58 +The United States Congress has from time to time considered adopting legislation to reduce emissions of GHGs and many of the states have already taken legal measures to reduce emissions of GHGs primarily through the planned development of GHG emission inventories and/or regional GHG cap and trade programs. Most of these cap and trade programs work by requiring major sources of emissions, such as electric power plants, or major producers of fuels, such as refineries and gas processing plants, to acquire and surrender emission allowances. The number of allowances available for purchase is reduced each year in an effort to achieve the overall GHG emission reduction goal. In addition, there have been international conventions and efforts to establish standards for the reduction of GHGs globally, including the Paris Agreement in December 2015. The conditions for entry into force of the Paris Agreement were met on October 5, 2016, and the Agreement went into force 30 days later on November 4, 2016. In January of 2025, President Trump issued an executive order that initiated the process for the United States to exit the Paris Agreement. At the United Nations Climate Change Conference in Glasgow in 2021, the United States and the European Union announced the Global Methane Pledge that aims to reduce methane emissions by 30 percent compared with 2020 levels. +The adoption of legislation or regulatory programs to reduce emissions of GHGs could require us to incur increased operating costs, such as costs to purchase and operate emissions control systems, to acquire emissions allowances, or comply with new regulatory or reporting requirements. Any such legislation or regulatory programs could also increase the cost of consuming, and thereby reduce demand for, the oil and gas we produce. Consequently, legislation and regulatory programs to reduce emissions of GHGs could have an adverse effect on our business, financial condition, and results of operations. Judicial challenges to new regulatory measures are likely and we cannot predict the outcome of such challenges. New regulatory suspensions, revisions, or rescissions and conflicting state and federal regulatory mandates may inhibit our ability to accurately forecast the costs associated with future regulatory compliance. Finally, scientists have concluded that increasing concentrations of GHGs in the earth’s atmosphere produce climate changes that likely have significant physical effects, such as increased frequency and severity of storms, droughts, floods, and other climatic events. Such effects could have an adverse effect on our financial condition and results of operations. +In terms of opportunities, the regulation of GHG emissions and the introduction of alternative incentives, such as enhanced oil recovery, carbon sequestration, and low carbon fuel standards, could benefit us in a variety of ways. For example, although federal regulation and climate change legislation could reduce the overall demand for the oil and gas that we produce, the relative demand for gas may increase because the burning of gas produces lower levels of emissions than other readily available fossil fuels such as oil and coal. In addition, if renewable resources such as wind or solar power become more prevalent, gas-fired electric plants may provide an alternative backup to maintain consistent electricity supply. Also, if states adopt low-carbon fuel standards, gas may become a more attractive transportation fuel. For the years ended December 31, 2024, and 2023, approximately 37 percent and 40 percent, respectively, of our production on a per BOE basis was gas. Market-based incentives for the capture and storage of carbon dioxide in underground reservoirs, particularly in oil and gas reservoirs, could also benefit us through the potential to obtain GHG emission allowances or offsets from or government incentives for the sequestration of carbon dioxide. For additional information about climate change, air quality, and related environmental matters, refer to Risk Factors – Risks Related to Government Regulations – Legislative and regulatory initiatives and litigation related to global warming and climate change could have an adverse effect on our operations and the demand for oil, gas, and NGLs, and could result in significant litigation, capital, and related expenses and Federal and state regulatory initiatives relating to air quality and greenhouse gas emissions could result in increased costs and additional operating restrictions or delays. +Non-GAAP Financial Measures +Adjusted EBITDAX represents net income (loss) before interest expense, interest income, income taxes, depletion, depreciation, and amortization expense, exploration expense, property abandonment and impairment expense, non-cash stock-based compensation expense, derivative gains and losses net of settlements, gains and losses on divestitures, gains and losses on extinguishment of debt, and certain other items. Adjusted EBITDAX excludes certain items that we believe affect the comparability of operating results and can exclude items that are generally non-recurring in nature or whose timing and/or amount cannot be reasonably estimated. Adjusted EBITDAX is a non-GAAP measure that we believe provides useful additional information to investors and analysts, as a performance measure, for analysis of our ability to internally generate funds for exploration, development, acquisitions, and to service debt. We are also subject to financial covenants under our Credit Agreement. In addition, adjusted EBITDAX is widely used by professional research analysts and others in the valuation, comparison, and investment recommendations of companies in the oil and gas exploration and production industry, and many investors use the published research of industry research analysts in making investment decisions. Adjusted EBITDAX should not be considered in isolation or as a substitute for net income (loss), income (loss) from operations, net cash provided by operating activities, or other profitability or liquidity measures prepared under GAAP. Because adjusted EBITDAX excludes some, but not all items that affect net income (loss) and may vary among companies, the adjusted EBITDAX amounts presented may not be comparable to similar metrics of other companies. Our revolving credit facility provides a material source of liquidity for us. Under the terms of our Credit Agreement, if we failed to comply with the covenants that establish a maximum permitted ratio of total funded debt, as defined in the Credit Agreement, to adjusted EBITDAX, we would be in default, an event that would prevent us from borrowing under our revolving credit facility and would therefore materially limit a significant source of our liquidity. In addition, if we are in default under our revolving credit facility and are unable to obtain a waiver of that default from our lenders, lenders under that facility and under the indentures governing each series of our outstanding Senior Notes would be entitled to exercise all of their remedies for default. Refer to Note 5 – Long-Term Debt in Part II, Item 8 of this report, for definition of and further detail about our Credit Agreement. +59 +The following table provides reconciliations of our net income (GAAP) and net cash provided by operating activities (GAAP) to adjusted EBITDAX (non-GAAP) for the periods presented: +For the Years Ended December 31, +2024 2023 2022 +(in thousands) +Net income (GAAP) $ 770,293 $ 817,880 $ 1,111,952 +Interest expense 140,659 91,630 120,346 +Interest income (31,903) (19,854) (5,774) +Income tax expense 195,930 96,322 283,818 +Depletion, depreciation, and amortization +809,305 690,481 603,780 +Exploration (1) +59,006 55,333 50,978 +Stock-based compensation expense 25,021 20,250 18,772 +Net derivative (gain) loss (49,958) (68,154) 374,012 +Net derivative settlement gain (loss) 68,716 26,921 (710,700) +Loss on extinguishment of debt 483 — 67,605 +Other, net (301) 1,497 3,499 +Adjusted EBITDAX (non-GAAP) 1,987,251 1,712,306 1,918,288 +Interest expense (140,659) (91,630) (120,346) +Interest income 31,903 19,854 5,774 +Income tax expense (195,930) (96,322) (283,818) +Exploration (1) (2) +(49,889) (46,467) (36,810) +Amortization of debt discount and deferred financing costs 7,456 5,486 10,281 +Deferred income taxes 174,986 88,256 269,057 +Other, net (43,812) (12,538) (3,957) +Net change in working capital 11,208 (4,551) (72,063) +Net cash provided by operating activities (GAAP) $ 1,782,514 $ 1,574,394 $ 1,686,406 +____________________________________________ +(1) Stock-based compensation expense is a component of the exploration expense and general and administrative expense line items on the accompanying statements of operations. Therefore, the exploration line items shown in the reconciliation above will vary from the amount shown on the accompanying statements of operations for the component of stock-based compensation expense recorded to exploration expense. +(2) For the year ended December 31, 2024, amount excludes certain capital expenditures related to one well deemed non-commercial. For the year ended December 31, 2023, amount excludes certain capital expenditures related to unsuccessful exploration activity for one well that experienced technical issues during the drilling phase. For the year ended December 31, 2022, amount excludes certain capital expenditures related to unsuccessful exploration efforts outside of our core areas of operation. +ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK +The information required by this Item is provided under the captions Interest Rate Risk and Commodity Price Risk in Item 7 above, as well as under the section entitled Summary of Oil, Gas, and NGL Derivative Contracts in Place in Note 7 – Derivative Financial Instruments in Part II, Item 8 of this report and is incorporated herein by reference. +60 +ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA +Report of Independent Registered Public Accounting Firm +To the Stockholders and the Board of Directors of SM Energy Company and subsidiaries +Opinion on the Financial Statements +We have audited the accompanying consolidated balance sheets of SM Energy Company and subsidiaries (the Company) as of December 31, 2024 and 2023, the related consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with U.S. generally accepted accounting principles. +We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 20, 2025 expressed an unqualified opinion thereon. +Basis for Opinion +These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. +We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. +Critical Audit Matter +The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. +61 +Depletion, Depreciation and Amortization (“DD&A”) of Proved Oil and Gas Properties +Description of the Matter +At December 31, 2024, the net book value of the Company’s proved oil and gas properties was $6.7 billion, and depletion, depreciation and amortization was $809.3 million for the year then ended. As described in Note 1 to the consolidated financial statements, the Company follows the successful efforts method of accounting of its oil and gas properties. Under the successful efforts method of accounting, the capitalized costs of proved properties are depleted using the units-of-production method based on proved oil and gas reserves, as estimated by the Company’s engineers. Proved oil and gas reserve estimates are impacted by various inputs, including historical production, oil and gas price assumptions, and future operating and capital cost assumptions, among others, and requires the expertise of the Company’s engineers in evaluating and interpreting the relevant data. Because of the complexity involved in estimating oil and gas reserves, management used independent petroleum engineers to audit the estimates prepared by the Company's engineers as of December 31, 2024. +Auditing the impact of proved oil and gas reserves on DD&A is especially complex because of the use of the work of the Company’s engineers and the independent petroleum engineers and the evaluation of management’s determination of the inputs described above used by the engineers in estimating proved oil and gas reserves. +How We Addressed the Matter in Our Audit +Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management's estimates of proved oil and natural gas reserve volumes. The work of management's specialists was used in performing the procedures to evaluate the reasonableness of the proved oil and natural gas reserve volumes. As a basis for using this work, the specialists’ qualifications were understood and the Company’s relationship with the specialists was assessed. The procedures performed also included i) evaluating the methods and assumptions used by the specialists, ii) testing the completeness and accuracy of the data used by the specialists related to historical production volumes, iii) evaluating the specialists’ findings related to estimated future production volumes by comparing the estimate to relevant historical and current period information, as applicable. +/s/ Ernst & Young LLP +We have served as the Company’s auditor since 2012. +Denver, Colorado +February 20, 2025 +62 +SM ENERGY COMPANY AND SUBSIDIARIES +CONSOLIDATED BALANCE SHEETS +(in thousands, except share data) +December 31, +2024 2023 +ASSETS +Current assets: +Cash and cash equivalents $ — $ 616,164 +Accounts receivable 360,976 231,165 +Derivative assets 48,522 56,442 +Prepaid expenses and other 25,201 12,668 +Total current assets 434,699 916,439 +Property and equipment (successful efforts method): +Proved oil and gas properties 14,301,502 11,477,358 +Accumulated depletion, depreciation, and amortization ( 7,603,195 ) ( 6,830,253 ) +Unproved oil and gas properties, net of valuation allowance of $ 32,680 and $ 35,362 , respectively +764,924 335,620 +Wells in progress 481,893 358,080 +Other property and equipment, net of accumulated depreciation of $ 61,737 and $ 59,669 , respectively +47,585 35,615 +Total property and equipment, net 7,992,709 5,376,420 +Noncurrent assets: +Derivative assets 3,973 8,672 +Other noncurrent assets 145,266 78,454 +Total noncurrent assets 149,239 87,126 +Total assets $ 8,576,647 $ 6,379,985 +LIABILITIES AND STOCKHOLDERS’ EQUITY +Current liabilities: +Accounts payable and accrued expenses $ 760,473 $ 611,598 +Derivative liabilities 7,058 6,789 +Other current liabilities 22,419 15,425 +Total current liabilities 789,950 633,812 +Noncurrent liabilities: +Revolving credit facility 68,500 — +Senior Notes, net 2,708,243 1,575,334 +Asset retirement obligations 145,313 118,774 +Net deferred tax liabilities 545,295 369,903 +Derivative liabilities 7,142 1,273 +Other noncurrent liabilities 74,947 65,039 +Total noncurrent liabilities 3,549,440 2,130,323 +Commitments and contingencies (note 6) +Stockholders’ equity: +Common stock, $ 0.01 par value - authorized: 200,000,000 shares; issued and outstanding: 114,461,934 and 115,745,393 shares, respectively +1,145 1,157 +Additional paid-in capital 1,501,779 1,565,021 +Retained earnings 2,735,494 2,052,279 +Accumulated other comprehensive loss ( 1,161 ) ( 2,607 ) +Total stockholders’ equity 4,237,257 3,615,850 +Total liabilities and stockholders’ equity $ 8,576,647 $ 6,379,985 +The accompanying notes are an integral part of these consolidated financial statements. +63 +SM ENERGY COMPANY AND SUBSIDIARIES +CONSOLIDATED STATEMENTS OF OPERATIONS +(in thousands, except per share data) +For the Years Ended December 31, +2024 2023 2022 +Operating revenues and other income: +Oil, gas, and NGL production revenue $ 2,671,285 $ 2,363,889 $ 3,345,906 +Other operating income, net 18,974 9,997 12,741 +Total operating revenues and other income 2,690,259 2,373,886 3,358,647 +Operating expenses: +Oil, gas, and NGL production expense 636,971 563,543 620,912 +Depletion, depreciation, and amortization 809,305 690,481 603,780 +Exploration 64,121 59,480 54,943 +General and administrative 138,344 121,063 114,558 +Net derivative (gain) loss ( 49,958 ) ( 68,154 ) 374,012 +Other operating expense, net 15,781 20,567 10,961 +Total operating expenses 1,614,564 1,386,980 1,779,166 +Income from operations 1,075,695 986,906 1,579,481 +Interest expense ( 140,659 ) ( 91,630 ) ( 120,346 ) +Interest income 31,903 19,854 5,774 +Loss on extinguishment of debt ( 483 ) — ( 67,605 ) +Other non-operating expense ( 233 ) ( 928 ) ( 1,534 ) +Income from before income taxes 966,223 914,202 1,395,770 +Income tax expense ( 195,930 ) ( 96,322 ) ( 283,818 ) +Net income $ 770,293 $ 817,880 $ 1,111,952 +Basic weighted-average common shares outstanding 114,757 118,678 122,351 +Diluted weighted-average common shares outstanding 115,533 119,240 124,084 +Basic net income per common share $ 6.71 $ 6.89 $ 9.09 +Diluted net income per common share $ 6.67 $ 6.86 $ 8.96 +The accompanying notes are an integral part of these consolidated financial statements. +64 +SM ENERGY COMPANY AND SUBSIDIARIES +CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME +(in thousands) +For the Years Ended December 31, +2024 2023 2022 +Net income $ 770,293 $ 817,880 $ 1,111,952 +Other comprehensive income, net of tax: +Pension liability adjustment (1) +1,446 1,415 8,827 +Total other comprehensive income, net of tax 1,446 1,415 8,827 +Total comprehensive income $ 771,739 $ 819,295 $ 1,120,779 +____________________________________________ +(1) Refer to Note 12 – Pension Benefits for discussion of the pension liability adjustment. +The accompanying notes are an integral part of these consolidated financial statements. +65 +SM ENERGY COMPANY AND SUBSIDIARIES +CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY +(in thousands, except share data and dividends per share) +Additional Paid-in Capital Accumulated Other Comprehensive Loss Total Stockholders’ Equity +Common Stock Retained Earnings +Shares Amount +Balances, January 1, 2022 121,862,248 $ 1,219 $ 1,840,228 $ 234,533 $ ( 12,849 ) $ 2,063,131 +Net income — — — 1,111,952 — 1,111,952 +Other comprehensive income — — — — 8,827 8,827 +Net cash dividends declared, $ 0.31 per share +— — — ( 37,927 ) — ( 37,927 ) +Issuance of common stock under Employee Stock Purchase Plan 113,785 1 3,038 — — 3,039 +Issuance of common stock upon vesting of RSUs and settlement of PSUs, net of shares used for tax withholdings 1,291,427 13 ( 25,142 ) — — ( 25,129 ) +Stock-based compensation expense 29,471 — 18,772 — — 18,772 +Purchase of shares under Stock Repurchase Program ( 1,365,255 ) ( 14 ) ( 57,193 ) — — ( 57,207 ) +Balances, December 31, 2022 121,931,676 $ 1,219 $ 1,779,703 $ 1,308,558 $ ( 4,022 ) $ 3,085,458 +Net income — — — 817,880 — 817,880 +Other comprehensive income — — — — 1,415 1,415 +Net cash dividends declared, $ 0.63 per share +— — — ( 74,159 ) — ( 74,159 ) +Issuance of common stock under Employee Stock Purchase Plan 114,427 1 3,057 — — 3,058 +Issuance of common stock upon vesting of RSUs, net of shares used for tax withholdings 554,216 6 ( 7,888 ) — — ( 7,882 ) +Stock-based compensation expense 56,872 1 20,249 — — 20,250 +Purchase of shares under Stock Repurchase Program ( 6,930,835 ) ( 70 ) ( 230,100 ) — — ( 230,170 ) +Other 19,037 — — — — — +Balances, December 31, 2023 115,745,393 $ 1,157 $ 1,565,021 $ 2,052,279 $ ( 2,607 ) $ 3,615,850 +Net income — — — 770,293 — 770,293 +Other comprehensive income — — — — 1,446 1,446 +Net cash dividends declared, $ 0.76 per share +— — — ( 87,078 ) — ( 87,078 ) +Issuance of common stock under Employee Stock Purchase Plan 97,500 2 3,199 — — 3,201 +Issuance of common stock upon vesting of RSUs, net of shares used for tax withholdings 350,675 4 ( 6,841 ) — — ( 6,837 ) +Stock-based compensation expense 39,557 — 25,021 — — 25,021 +Purchase of shares under Stock Repurchase Program ( 1,771,191 ) ( 18 ) ( 84,621 ) — — ( 84,639 ) +Balances, December 31, 2024 114,461,934 $ 1,145 $ 1,501,779 $ 2,735,494 $ ( 1,161 ) $ 4,237,257 +The accompanying notes are an integral part of these consolidated financial statements. +66 +SM ENERGY COMPANY AND SUBSIDIARIES +CONSOLIDATED STATEMENTS OF CASH FLOWS +(in thousands) +For the Years Ended December 31, +2024 2023 2022 +Cash flows from operating activities: +Net income $ 770,293 $ 817,880 $ 1,111,952 +Adjustments to reconcile net income to net cash provided by operating activities: +Depletion, depreciation, and amortization 809,305 690,481 603,780 +Stock-based compensation expense 25,021 20,250 18,772 +Net derivative (gain) loss ( 49,958 ) ( 68,154 ) 374,012 +Net derivative settlement gain (loss) 68,716 26,921 ( 710,700 ) +Amortization of debt discount and deferred financing costs 7,456 5,486 10,281 +Loss on extinguishment of debt 483 — 67,605 +Deferred income taxes 174,986 88,256 269,057 +Other, net ( 34,996 ) ( 2,175 ) 13,710 +Changes in working capital: +Accounts receivable ( 85,528 ) ( 10,191 ) 38,554 +Prepaid expenses and other ( 12,535 ) ( 2,437 ) ( 1,055 ) +Accounts payable and accrued expenses 109,271 8,077 ( 109,562 ) +Net cash provided by operating activities 1,782,514 1,574,394 1,686,406 +Cash flows from investing activities: +Capital expenditures ( 1,310,630 ) ( 989,411 ) ( 879,934 ) +Acquisition of proved and unproved oil and gas properties ( 2,103,677 ) ( 109,931 ) ( 7 ) +Other, net 7,136 657 ( 322 ) +Net cash used in investing activities ( 3,407,171 ) ( 1,098,685 ) ( 880,263 ) +Cash flows from financing activities: +Proceeds from revolving credit facility 1,018,500 — — +Repayment of revolving credit facility ( 950,000 ) — — +Debt issuance costs related to revolving credit facility ( 12,976 ) — ( 9,981 ) +Net proceeds from Senior Notes 1,476,799 — — +Cash paid to repurchase Senior Notes ( 349,118 ) — ( 584,946 ) +Repurchase of common stock ( 86,056 ) ( 228,105 ) ( 57,207 ) +Dividends paid ( 85,020 ) ( 71,614 ) ( 19,637 ) +Net proceeds from sale of common stock 3,201 3,058 3,039 +Net share settlement from issuance of stock awards ( 6,837 ) ( 7,882 ) ( 25,129 ) +Net cash provided by (used in) financing activities 1,008,493 ( 304,543 ) ( 693,861 ) +Net change in cash, cash equivalents, and restricted cash ( 616,164 ) 171,166 112,282 +Cash, cash equivalents, and restricted cash at beginning of period 616,164 444,998 332,716 +Cash, cash equivalents, and restricted cash at end of period $ — $ 616,164 $ 444,998 +The accompanying notes are an integral part of these consolidated financial statements. +67 +SM ENERGY COMPANY AND SUBSIDIARIES +CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) +(in thousands) +For the Years Ended December 31, +2024 2023 2022 +Supplemental schedule of additional cash flow information and non-cash activities: +Operating activities: +Cash paid for interest, net of capitalized interest (1) +$ ( 88,389 ) $ ( 86,947 ) $ ( 134,240 ) +Net cash paid for income taxes $ ( 26,904 ) $ ( 8,975 ) $ ( 10,576 ) +Investing activities: +Changes in capital expenditure accruals $ ( 24,342 ) $ 80,794 $ 29,789 +Non-cash financing activities (2) +____________________________________________ +(1) Cash paid for interest, net of capitalized interest during the year ended December 31, 2024, does not include $ 9.0 million in fees paid to secure firm commitments for senior unsecured bridge term loans in connection with the Uinta Basin Acquisition, as defined in Note 17 – Acquisitions. +(2) Refer to Note 5 – Long-Term Debt for discussion of the debt transactions completed during the years ended December 31, 2024, and 2022. +The accompanying notes are an integral part of these consolidated financial statements. +68 +SM ENERGY COMPANY AND SUBSIDIARIES +NOTES TO CONSOLIDATED FINANCIAL STATEMENTS +Note 1 – Summary of Significant Accounting Policies +Description of Operations +SM Energy Company, together with its consolidated subsidiaries, is an independent energy company engaged in the acquisition, exploration, development, and production of oil, gas, and NGLs in Texas and Utah. +Basis of Presentation +The accompanying consolidated financial statements include the accounts of the Company and have been prepared in accordance with GAAP and the instructions to Form 10-K and Regulation S-X. Intercompany accounts and transactions have been eliminated. Additionally, certain prior period amounts have been reclassified to conform to current period presentation in the accompanying consolidated financial statements. +Use of Estimates in the Preparation of Financial Statements +The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of proved oil and gas reserves, assets and liabilities, disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Estimates of proved oil and gas reserve quantities provide the basis for the calculation of DD&A expense, impairment of proved and unproved oil and gas properties, acquisitions of oil and gas properties, and asset retirement obligations, each of which represents a significant component of the accompanying consolidated financial statements. +Cash and Cash Equivalents +The Company considers all liquid investments purchased with an initial maturity of three months or less and deposits in money market mutual funds that are readily convertible into cash to be cash equivalents. The carrying value of cash and cash equivalents approximates fair value due to the short-term nature of these instruments. +Accounts Receivable +The Company’s accounts receivable primarily consist of receivables due from oil, gas, and NGL purchasers and from joint interest owners on properties the Company operates. For receivables due from joint interest owners, the Company generally has the ability to withhold future revenue disbursements to recover non-payment of joint interest billings. Generally, the Company’s oil, gas, and NGL receivables are collected within 30 to 90 days and the Company has had minimal bad debts. Although diversified among many companies, collectability is dependent upon the financial wherewithal of each individual company and is influenced by the general economic conditions of the industry. Receivables are not collateralized. Refer to Note 14 – Accounts Receivable and Accounts Payable and Accrued Expenses for additional disclosure. +Concentration of Credit Risk and Major Customers +The Company is exposed to credit risk in the event of nonpayment by counterparties, a significant portion of which are concentrated in energy-related industries. The creditworthiness of customers and other counterparties is regularly reviewed. +The Company does not believe the loss of any single purchaser of its production would materially affect its operating results, as oil, gas, and NGLs are products with well-established markets and numerous purchasers in the Company’s operating areas. +69 +The following major customers and entities under common control accounted for 10 percent or more of the Company’s total oil, gas, and NGL production revenue for at least one of the periods presented: +For the Years Ended December 31, +2024 2023 2022 +Amount % of total Amount % of total Amount % of total +(in thousands) +Major customer #1 $ 899,609 34 % $ 580,557 24 % $ 848,595 24 % +Major customer #2 +$ 248,383 9 % $ 260,574 11 % $ 255,395 7 % +Group of entities under common control +$ 426,248 16 % $ 530,131 22 % $ 830,276 24 % +For its commodity derivative instruments, the Company’s policy is to only enter into contracts with affiliates of the lenders under its Credit Agreement as its derivative counterparties, and each counterparty must have certain minimum investment grade senior unsecured debt ratings. +The Company maintains its primary bank accounts with a large, multinational bank that has branch locations in the Company’s areas of operation. The Company’s policy is to diversify its concentration of cash and cash equivalent investments among multiple institutions and investment products to limit the amount of credit exposure to any single institution or investment. +Oil and Gas Producing Activities +Proved properties . The Company follows the successful efforts method of accounting for its oil and gas properties. Under this method, property acquisition costs and development costs are capitalized when incurred. Capitalized drilling and completion costs, including lease and well equipment, intangible development costs, and operational support facilities in the field, are depleted on a pool-by-pool basis (properties aggregated based on geographical and geological characteristics) using the units-of-production method based on estimated net proved developed oil and gas reserves. Similarly, proved leasehold costs are depleted on the same pool-by-pool basis; however, the units-of-production method is based on estimated total net proved oil and gas reserves. The computation of DD&A expense takes into consideration restoration, dismantlement, and abandonment costs as well as the anticipated proceeds from salvaging equipment. +Proved oil and gas property costs are evaluated for impairment on a depletion pool-by-pool basis and reduced to fair value when there is an indication that associated carrying costs may not be recoverable. The Company uses Level 3 inputs and the income valuation technique, which converts future cash flows to a single present value amount, to measure the fair value of proved properties using a discount rate, price and cost forecasts, and certain reserve risk-adjustment factors, as selected by the Company’s management. The Company uses a discount rate that represents a current market-based weighted average cost of capital. The discount rate typically ranges from 10 percent to 15 percent. The prices for oil and gas are forecast based on NYMEX strip pricing, adjusted for basis differentials, for the first five years , after which a flat terminal price is used for each commodity stream. The prices for NGLs are forecast using OPIS Mont Belvieu pricing, adjusted for basis differentials, for as long as the market is actively trading, after which a flat terminal price is used. Future operating costs are also adjusted as deemed appropriate for these estimates. Certain undeveloped reserve estimates are also risk-adjusted given the risk to related projected cash flows due to performance and exploitation uncertainties. +The partial sale of a proved property within an existing asset group is accounted for as a normal retirement and no gain or loss on divestiture activity is recognized as long as the treatment does not significantly affect the units-of-production depletion rate. The sale of a partial interest in an individual proved property is accounted for as a recovery of cost. A gain or loss on divestiture activity is recognized in the accompanying statements of operations for all other sales of proved properties. +Unproved properties . The unproved oil and gas properties line item on the accompanying consolidated balance sheets (“accompanying balance sheets”) consists of the costs incurred to acquire unproved leases. Leasehold costs allocated to those leases, or partial leases that have associated proved reserves recorded, are reclassified to proved properties and depleted on an asset group basis using the units-of-production method based on estimated total proved oil and gas reserves. Unproved oil and gas property costs are evaluated for impairment and reduced to fair value when there is an indication that the carrying costs may not be recoverable. Lease acquisition costs that are not individually significant are aggregated by asset group and the portion of such costs estimated to be nonproductive prior to lease expiration are recognized as a valuation allowance and amortized over the appropriate period. The estimate of what could be nonproductive is based on historical trends or other information, including current drilling plans and the Company’s intent to renew leases. To measure the fair value of unproved properties, the Company uses an income approach, which takes into account the following significant assumptions: remaining lease terms, future development plans, risk-weighted potential resource recovery, estimated reserve values, and estimated acreage value based on price(s) received for similar, recent acreage transactions by the Company or other market participants. +70 +For the sale of unproved properties where the original cost has been partially or fully amortized by providing a valuation allowance on an asset group basis, neither a gain nor loss is recognized unless the sales price exceeds the original cost of the property, in which case a gain shall be recognized in the accompanying statements of operations in the amount of such excess. +Exploratory . Exploratory geological and geophysical, including exploratory seismic studies, and the costs of carrying and retaining unproved acreage are expensed as incurred. Under the successful efforts method of accounting for oil and gas properties, exploratory well costs are initially capitalized pending the determination of whether proved reserves have been discovered. If proved reserves are discovered, exploratory well costs will be capitalized as proved properties and will be accounted for following the successful efforts method of accounting described above. If proved reserves are not found, exploratory well costs are expensed as dry holes. The application of the successful efforts method of accounting requires management’s judgment to determine the proper designation of wells as either development or exploratory, which will ultimately determine the proper accounting treatment of costs of dry holes. Once a well is drilled, the determination that proved reserves have been discovered may take considerable time and judgment. Exploratory dry hole costs are included in the cash flows from investing activities section as part of capital expenditures within the accompanying statements of cash flows. +Refer to Note 8 – Fair Value Measurements for additional information. +Other Property and Equipment +Other property and equipment such as facilities, equipment inventory, office furniture and equipment, buildings, and computer hardware and software, are recorded at cost. The Company capitalizes certain software costs incurred during the application development stage. The application development stage generally includes software design, configuration, testing, and installation activities. Costs of renewals and improvements that substantially extend the useful lives of the assets are capitalized. Maintenance and repair costs are expensed when incurred. Depreciation is calculated using either the straight-line method over the estimated useful lives of the assets, which range from three to 30 years, or the unit of output method when appropriate. When other property and equipment is sold or retired, the capitalized costs and related accumulated depreciation are removed from the Company’s accounts. +Facilities and equipment inventory costs are evaluated for impairment and reduced to fair value when there is an indication the carrying costs may not be recoverable. To measure the fair value of facilities and equipment inventory, the Company uses an income valuation technique or market approach depending on the quality of information available to support management’s assumptions and the circumstances. For facilities, the valuation includes consideration of the proved and unproved assets supported by the facilities, future cash flows associated with the assets, and fixed costs necessary to operate and maintain the assets. +Asset Retirement Obligations +The Company recognizes an estimated liability for future costs associated with the abandonment of its oil and gas properties, including facilities requiring decommissioning. A liability for the fair value of an asset retirement obligation and corresponding increase to the carrying value of the related long-lived asset are recorded at the time a well is drilled or acquired, or a facility is constructed. The increase in carrying value is included in the proved oil and gas properties line item in the accompanying balance sheets. The Company depletes the amount added to proved oil and gas property costs and recognizes expense in connection with the accretion of the discounted liability over the remaining estimated lives of the respective long-lived assets. Asset retirement obligation liability accretion expense is included in the depletion, depreciation, and amortization line on the accompanying statements of operations. Cash paid to settle asset retirement obligations is included in the cash flows from operating activities section of the accompanying statements of cash flows. +The Company’s estimated asset retirement obligation liability is based on historical experience in plugging and abandoning wells, estimated lives, estimated plugging and abandonment cost, and federal and state regulatory requirements. The liability is discounted using the credit-adjusted risk-free rate estimated at the time the liability is incurred or revised. The credit-adjusted risk-free rates used to discount the Company’s plugging and abandonment liabilities range from 5.5 percent to 12 percent. In periods subsequent to initial measurement of the liability, the Company must recognize period-to-period changes in the liability resulting from the passage of time, revisions to either the amount of the original estimate of undiscounted cash flows or economic life, changes in inflation factors, or the Company’s credit-adjusted risk-free rate as market conditions warrant. Refer to Note 15 – Asset Retirement Obligations for a reconciliation of the Company’s total asset retirement obligation liability as of December 31, 2024, and 2023. +Derivative Financial Instruments +The Company regularly enters into commodity derivative contracts to mitigate a portion of its exposure to oil, gas, and NGL price volatility and location differentials for its expected future oil, gas, and NGL production, and the associated effect on cash flows. All commodity derivative contracts that the Company enters into are for other-than-trading purposes. The Company’s commodity derivative contracts generally consist of price swap, collar, and basis swap arrangements. Commodity derivative instruments are measured at fair value and are included in the accompanying balance sheets as derivative assets and liabilities, with the exception of derivative instruments that meet the “normal purchase normal sale” exclusion. The fair value of the Company’s commodity derivative contracts is measured based on, among other things, option pricing models, futures prices, volatility, time to maturity, and credit risk. The Company does not designate its commodity derivative contracts as hedging instruments. Accordingly, the Company reflects gains +71 +and losses from changes in the fair value of its commodity derivative contracts in the accompanying statements of operations as such changes occur, rather than deferring any such amounts in accumulated other comprehensive income (loss). Gains and losses on net derivative settlements are included within the cash flows from operating activities section of the accompanying statements of cash flows. Refer to Note 7 – Derivative Financial Instruments for additional discussion. +Revenue Recognition +The Company derives revenue predominately from the sale of produced oil, gas, and NGLs. Revenue is recognized at the point in time when custody and title (“control”) of the product transfers to the purchaser, which may differ depending on the applicable contractual terms. Revenue accruals are recorded monthly and are based on estimated production delivered to a purchaser and the expected price to be received. The Company uses knowledge of its properties, contractual arrangements, historical performance, NYMEX, local spot market, and OPIS prices, and other factors as the basis of these estimates. Variances between estimates and the actual amounts received are recorded in the month payment is received. Refer to Note 2 – Revenue from Contracts with Customers for additional discussion. +Stock-Based Compensation +At December 31, 2024, the Company had stock-based employee compensation plans that included RSUs and Performance Share Units (“PSU or “PSUs”) issued to employees, RSUs and restricted stock issued to non-employee directors, and an employee stock purchase plan available to eligible employees. The Company records expense associated with the fair value of stock-based compensation in accordance with authoritative accounting guidance, which is based on the estimated fair value of these awards determined at the time of grant, and is included within the general and administrative and exploration expense line items in the accompanying statements of operations. For stock-based compensation awards containing non-market based performance conditions, the Company evaluates the probability of the number of shares that are expected to vest, and then adjusts the expense to reflect the number of shares expected to vest and the cumulative vesting period met to date. Further, the Company accounts for forfeitures of stock-based compensation awards as they occur. Refer to Note 10 – Compensation Plans for additional discussion . +Income Taxes +The Company accounts for deferred income taxes whereby deferred tax assets and liabilities are recognized based on the tax effects of temporary differences between the carrying amounts on the accompanying consolidated financial statements and the tax basis of assets and liabilities, as measured using current enacted tax rates. These differences will result in taxable income or deductions in future years when the reported amounts of the assets or liabilities are recorded or settled, respectively. Judgment is required in predicting when these events may occur and whether recovery of an asset is more likely than not. The Company records deferred tax assets and associated valuation allowances, when appropriate, to reflect amounts more likely than not to be realized based upon Company analysis. The Company’s federal and state income tax returns are not filed before the consolidated financial statements are prepared. Therefore, the Company estimates the tax basis of its assets and liabilities at the end of each period, as well as the effects of tax rate changes, tax credits, and net operating and capital loss carryforwards and carrybacks. Adjustments related to differences between the estimates used and actual amounts reported are recorded in the periods in which the income tax returns are filed. The cumulative effect of enacted tax rate changes on the net balance of reported amounts of assets and liabilities is recognized in the period of enactment. The Company’s policy is to record interest related to income taxes in the interest expense line item in the accompanying statements of operations, and to record penalties related to income taxes in the other non-operating expense line item in the accompanying statements of operations. Refer to Note 4 – Income Taxes for additional discussion. +Earnings per Share +The Company uses the treasury stock method to determine the effect of potentially dilutive instruments. Refer to Note 9 – Earnings Per Share for additional discussion. +Comprehensive Income (Loss) +Comprehensive income (loss) is used to refer to net income (loss) plus other comprehensive income (loss). Other comprehensive income (loss) is comprised of revenues, expenses, gains, and losses that, under GAAP, are reported as separate components of stockholders’ equity instead of net income (loss). Comprehensive income (loss) is presented net of income taxes in the accompanying consolidated statements of comprehensive income. The Company’s policy for releasing income tax effects within accumulated other comprehensive loss is an incremental, unit-of-account approach. Refer to Note 12 – Pension Benefits for detail on adjustments impacting other comprehensive income. +Fair Value of Financial Instruments +The Company’s financial instruments, including cash and cash equivalents, accounts receivable, and accounts payable are carried at cost, which approximates fair value due to the short-term maturity of these instruments. The Company’s Senior Notes, as defined in Note 5 – Long-Term Debt , are recorded at cost, net of unamortized deferred financing costs, and their respective fair values +72 +are disclosed in Note 8 – Fair Value Measurements. Additionally, the Company has derivative financial instruments that are recorded at fair value. Considerable judgment is required to develop estimates of fair value. The estimates provided are not necessarily indicative of the amounts the Company would realize upon the sale or refinancing of such instruments. +Leases +The Company accounts for leases in accordance with ASC Topic 842, Leases , (“Topic 842”), which requires lessees to recognize operating and finance leases with terms greater than 12 months on the balance sheet. The Company evaluates a contractual arrangement at its inception to determine if it is a lease or contains an identifiable lease component. Certain leases may contain both lease and non-lease components. The Company’s policy for all asset classes is to combine lease and non-lease components together and account for the arrangement as a single lease. +Certain assumptions and judgments made by the Company when evaluating a contract that meets the definition of a lease under Topic 842 include those to determine the discount rate and lease term. Unless implicitly defined, the Company determines the present value of future lease payments using an estimated incremental borrowing rate based on a yield curve analysis that factors in certain assumptions, including the term of the lease and credit rating of the Company at lease inception. The Company evaluates each contract containing a lease arrangement at inception to determine the length of the lease term when recognizing a right-of-use (“ROU”) asset and corresponding lease liability. When determining the lease term, options available to extend or early terminate the arrangement are evaluated and included when it is reasonably certain an option will be exercised. Exercising an early termination option may result in an early termination penalty depending on the terms of the underlying agreement. The Company excludes from the balance sheet leases with terms that are less than one year. +An ROU asset represents a lessee’s right to use an underlying asset for the lease term, while the associated lease liability represents the lessee’s obligations to make lease payments. At the commencement date, which is the date on which a lessor makes an underlying asset available for use by a lessee, a lease ROU asset and corresponding lease liability is recognized based on the present value of the future lease payments. The initial measurement of lease payments may also be adjusted for certain items, including options that are reasonably certain to be exercised, such as options to purchase the asset at the end of the lease term, or options to extend or early terminate the lease. Excluded from the initial measurement of an ROU asset and corresponding lease liability are certain variable lease payments, such as payments made that vary depending on actual usage or performance. +Subsequent to initial measurement, costs associated with the Company’s operating leases are either expensed or capitalized depending on how the underlying ROU asset is utilized and in accordance with GAAP requirements. When calculating the Company’s ROU asset and liability for a contractual arrangement that qualifies as an operating lease, the Company considers all of the necessary payments made or that are expected to be made upon commencement of the lease. As discussed above, excluded from the initial measurement are certain variable lease payments, which for the Company’s drilling rigs, completion crews, and midstream agreements, may be a significant component of the total lease costs. Refer to Note 13 – Leases for additional discussion. +Industry, Geographic, and Segment Information +The Company operates in the oil and gas extraction industry, focused on exploration and production activities, onshore in the United States. The Company has one reportable segment. Refer to Note 11 – Segment Reporting for additional discussion. +Off-Balance Sheet Arrangements +The Company has not participated in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or SPEs, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. +The Company evaluates its transactions to determine if any variable interest entities exist. If it is determined that the Company is the primary beneficiary of a variable interest entity, that entity is consolidated into the Company’s consolidated financial statements. The Company has not been involved in any unconsolidated SPE transactions during 2024 or 2023, or through the filing of this report. +Recently Issued Accounting Guidance +Accounting Standards Updates. In November 2024, the FASB issued ASU No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”). ASU 2024-03 was issued to improve disclosures about a public business entity’s expenses and address requests from investors for more detailed information about the types of expenses in commonly presented expense captions. ASU 2024-03 is effective for the fiscal years beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027, with early adoption permitted. The guidance is to be applied on a prospective basis; however, retrospective application is permitted. The Company is within the scope of this ASU and expects to adopt ASU 2024-03 on January 1, 2027, on a prospective basis, and adoption will result in new disclosures as prescribed by the guidance. +73 +In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”) . ASU 2023-07 was issued to improve the disclosures about a public entity’s reportable segments and to provide additional, more detailed information about a reportable segment’s expenses. The Company adopted ASU 2023-07 on December 31, 2024, on a retrospective basis. Refer to Note 11 – Segment Reporting for additional discussion. +In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”) . ASU 2023-09 was issued to improve the disclosures related to rate reconciliations and income taxes paid. ASU 2023-09 is effective for annual periods beginning after December 15, 2024, with early adoption permitted. The guidance is to be applied on a prospective basis; however, retrospective application is permitted. The Company adopted ASU 2023-09 on January 1, 2025, on a prospective basis, and will present the required new disclosures in the 2025 Form 10-K. +SEC Final Rule to Enhance and Standardize Climate-Related Disclosures. On March 6, 2024, the SEC adopted final rules to require registrants to disclose certain climate-related information in registration statements and annual reports. On April 4, 2024, the SEC issued an order staying the final rules pending completion of judicial review of the petitions challenging the final rules. The order does not amend the compliance dates contemplated by the final rules, which are applicable to the Company for fiscal years beginning with the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2025. The Company is currently evaluating the potential impact of the final rules on its financial statements and related disclosures. +As of December 31, 2024, and through the filing of this report, no other accounting guidance has been issued and not yet adopted that are applicable to the Company and that would have a material effect on the Company’s consolidated financial statements and related disclosures. +Note 2 – Revenue from Contracts with Customers +The Company recognizes its share of revenue from the sale of produced oil, gas, and NGLs from its Midland Basin, South Texas, and Uinta Basin assets. Oil, gas, and NGL production revenue presented within the accompanying statements of operations reflects revenue generated from contracts with customers. +The tables below present oil, gas, and NGL production revenue by product type for each of the Company’s operating areas: +For the year ended December 31, 2024 +Midland Basin South Texas +Uinta Basin +Total +(in thousands) +Oil production revenue $ 1,447,679 $ 542,704 $ 197,098 $ 2,187,481 +Gas production revenue 118,455 123,685 6,932 249,072 +NGL production revenue 634 234,098 — 234,732 +Total $ 1,566,768 $ 900,487 $ 204,030 $ 2,671,285 +Relative percentage 59 % 34 % 7 % 100 % +For the year ended December 31, 2023 +Midland Basin South Texas Total +(in thousands) +Oil production revenue $ 1,347,780 $ 465,995 $ 1,813,775 +Gas production revenue 175,183 152,700 327,883 +NGL production revenue 687 221,544 222,231 +Total $ 1,523,650 $ 840,239 $ 2,363,889 +Relative percentage 64 % 36 % 100 % +74 +For the year ended December 31, 2022 +Midland Basin South Texas Total +(in thousands) +Oil production revenue $ 1,816,597 $ 453,471 $ 2,270,068 +Gas production revenue 432,831 358,049 790,880 +NGL production revenue 986 283,972 284,958 +Total $ 2,250,414 $ 1,095,492 $ 3,345,906 +Relative percentage 67 % 33 % 100 % +The Company recognizes oil, gas, and NGL production revenue at the point in time when control of the product transfers to the purchaser, which may differ depending on the applicable contractual terms. Transfer of control determines the presentation of transportation, gathering, processing, and other post-production expenses (“costs and other deductions”) within the accompanying statements of operations. Costs and other deductions incurred by the Company prior to transfer of control are recorded within the oil, gas, and NGL production expense line item on the accompanying statements of operations. When control is transferred, sales are based on a market price that may be affected by fees and other deductions incurred by the purchaser subsequent to the transfer of control. In general, the Company generates production revenue from a combination of the following types of contracts: +• The Company sells oil and gas production at or near the wellhead and receives an agreed-upon market price from the purchaser. Under this type of arrangement, control transfers at or near the wellhead. +• The Company has certain processing arrangements that include the delivery of unprocessed gas to a midstream processor’s facility for processing. Upon completion of processing, the midstream processor purchases the NGLs and redelivers residue gas back to the Company in-kind. For the NGLs extracted during processing, the midstream processor remits payment to the Company. For the residue gas taken in-kind, the Company has separate sales contracts where control transfers at points downstream of the processing facility. The Company also has certain oil sales that occur at market locations downstream of the production area. Given the structure of these arrangements and where control transfers, the Company separately recognizes costs and other deductions incurred prior to control transfer. These fees are recorded within the oil, gas, and NGL production expense line item on the accompanying statements of operations. +• The Company has certain arrangements where oil volumes are transported by railcar to purchasers. For these sales arrangements, the Company generally delivers produced oil to customers at defined locations, including domestic rail terminal facilities primarily along the Gulf Coast. Upon delivery, the Company is entitled to an agreed upon index price, net of pricing differentials for each barrel sold. The Company recognizes revenue when control transfers to the customer and the Company has no further contractual obligation to the customer. Costs associated with the transportation of these oil volumes are recorded within the oil, gas, and NGL production expense line item on the accompanying statements of operations. +The Company does not believe that significant judgments are required with respect to the determination of the transaction price, including amounts that represent variable consideration, as volume and price carry a low level of estimation uncertainty given the precision of volumetric measurements and the use of index pricing with generally predictable differentials. Accordingly, the Company does not consider estimates of variable consideration to be constrained. +The Company’s performance obligations arise upon the production of hydrocarbons from wells in which the Company has an ownership interest. The performance obligations are considered satisfied upon control transferring to a purchaser at the wellhead, inlet, or tailgate of the midstream processor’s processing facility, rail terminal, or other contractually specified delivery point. For volumes sold at, or in close proximity to the wellhead, the time period between production and satisfaction of performance obligations is generally less than one day. For volumes transported by rail, this period is generally less than two weeks. As of December 31, 2024, there were no material unsatisfied or partially unsatisfied performance obligations. +Revenue is recorded in the month when performance obligations are satisfied. However, settlement statements from the purchasers of hydrocarbons and the related cash consideration are received 30 to 90 days after production has occurred. As a result, the Company must estimate the amount of production delivered to the customer and the consideration that will ultimately be received for sale of the product. Estimated revenue due to the Company is recorded within the accounts receivable line item on the accompanying balance sheets until payment is received. The accounts receivable balances from contracts with customers within the accompanying balance sheets as of December 31, 2024, and 2023, were $ 246.4 million and $ 175.3 million, respectively. To estimate accounts receivable from contracts with customers, the Company uses knowledge of its properties, historical performance, contractual arrangements, index pricing, quality and transportation differentials, and other factors as the basis for these estimates. Differences between estimates and actual amounts received for product sales are recorded in the month that payment is received from the purchaser. +75 +Note 3 – Equity +Stock Repurchase Program +In June 2024, the Company’s Board of Directors re-authorized the Company’s existing Stock Repurchase Program to re-establish the Company’s authorization to repurchase up to $ 500.0 million in aggregate value of its common stock through December 31, 2027 . The Stock Repurchase Program permits the Company to repurchase shares of its common stock from time to time in open market transactions, through privately negotiated transactions or by other means in accordance with federal securities laws and subject to certain provisions of the Credit Agreement and the indentures governing the Senior Notes, as defined in Note 5 – Long-Term Debt . The timing, as well as the number and value of shares repurchased under the Stock Repurchase Program, will be determined by certain authorized officers of the Company at their discretion and will depend on a variety of factors, including the market price of the Company’s common stock, general market and economic conditions and applicable legal requirements. The value of shares authorized for repurchase by the Board of Directors does not require the Company to repurchase such shares or guarantee that such shares will be repurchased, and the Stock Repurchase Program may be suspended, modified, or discontinued at any time without prior notice. No assurance can be given that any particular number or dollar value of its shares will be repurchased by the Company. +The following table presents activity under the Company’s Stock Repurchase Program: +For the Years Ended December 31, +2024 2023 2022 +(in thousands, except per share data) +Shares of common stock repurchased (1) +1,771 6,931 1,365 +Weighted-average price per share (2) +$ 47.40 $ 32.89 $ 41.88 +Cost of shares of common stock repurchased (2) (3) +$ 83,955 $ 227,966 $ 57,179 +____________________________________________ +(1) All repurchased shares of the Company’s common stock were retired upon repurchase. +(2) Amounts exclude excise taxes, commissions, and fees. +(3) Amounts may not calculate due to rounding. +As of December 31, 2024, $ 500.0 million remained available for repurchases of the Company’s outstanding common stock through December 31, 2027 , under the Stock Repurchase Program. +Dividends +During 2024, the Company’s Board of Directors approved an increase to the Company’s fixed dividend to $ 0.80 per share annually, to be paid in quarterly increments of $ 0.20 per share, which commenced in the fourth quarter of 2024. During the year ended December 31, 2024, net cash dividends declared totaled $ 87.1 million. +Note 4 – Income Taxes +The provision for income taxes consisted of the following: +For the Years Ended December 31, +2024 2023 2022 +(in thousands) +Current portion of income tax (expense) benefit +Federal $ ( 18,168 ) $ ( 8,461 ) $ ( 9,230 ) +State ( 2,776 ) 395 ( 5,531 ) +Deferred portion of income tax expense ( 174,986 ) ( 88,256 ) ( 269,057 ) +Income tax expense $ ( 195,930 ) $ ( 96,322 ) $ ( 283,818 ) +Effective tax rate 20.3 % 10.5 % 20.3 % +76 +The components of the net deferred tax liabilities are as follows: +As of December 31, +2024 2023 +(in thousands) +Deferred tax liabilities: +Oil and gas properties excluding asset retirement obligation liabilities $ 596,401 $ 450,634 +Derivative assets 8,336 12,319 +Other 6,391 6,283 +Total deferred tax liabilities 611,128 469,236 +Deferred tax assets: +Asset retirement obligation liabilities 32,503 26,592 +Credit carryover, net 19,079 56,097 +Lease liabilities 4,042 4,454 +Legal liabilities 3,168 2,838 +Federal and state tax net operating loss carryovers 2,837 3,271 +Equity compensation +2,387 725 +Pension 1,089 2,453 +Other 1,607 4,309 +Total deferred tax assets 66,712 100,739 +Valuation allowance ( 879 ) ( 1,406 ) +Net deferred tax assets 65,833 99,333 +Net deferred tax liabilities $ 545,295 $ 369,903 +Current federal income tax refundable (payable) $ 2,362 $ ( 4,899 ) +Current state income tax refundable (payable) $ ( 118 ) $ 1,253 +As of December 31, 2024, the Company had gross state net operating loss (“NOL”) carryforwards of $ 71.3 million. Other than in states with no NOL carryforward expiration, the Company’s state NOL carryforwards expire between 2034 and 2039. The Company’s current valuation allowance includes an amount for state NOL carryforwards and state tax credits, which are expected to expire before they can be utilized. +The Company completed a multi-year R&D credit study in 2023, which resulted in a favorable adjustment to the Company’s effective tax rate for the year ended December 31, 2023, and a reduction of the Company’s 2023 tax obligation. After utilizing a portion of the credits for the 2023 and 2024 tax years, the recorded net carryover R&D credit, as of December 31, 2024, expected to be utilized in future periods totaled $ 18.8 million. The R&D credits expire between 2041 and 2044. +77 +Income tax expense or benefit differs from the amount that would be calculated by applying the statutory United States federal income tax rate to income or loss before income taxes. These differences primarily relate to the effect of federal tax credits, state income taxes, changes in valuation allowances, excess tax benefits and deficiencies from stock-based compensation awards, tax deduction limitations on compensation of covered individuals, the cumulative effect of other smaller permanent differences, and can also reflect the cumulative effect of an enacted tax rate change, in the period of enactment, on the Company’s net deferred tax asset and liability balances. These differences for the years ended December 31, 2024, 2023, and 2022, are presented below: +For the Years Ended December 31, +2024 2023 2022 +(in thousands) +Federal statutory tax expense $ ( 202,907 ) $ ( 191,983 ) $ ( 293,112 ) +(Increase) decrease in tax resulting from: +Net federal R&D tax credit 16,909 92,420 — +Change in valuation allowance 527 210 16,845 +State tax (expense) benefit, net of federal effect ( 8,977 ) 5,166 ( 9,870 ) +Other ( 1,482 ) ( 2,135 ) 2,319 +Income tax expense $ ( 195,930 ) $ ( 96,322 ) $ ( 283,818 ) +Acquisitions, divestitures, drilling activity, and basis differentials, which impact the prices received for oil, gas, and NGLs, impact the apportionment of taxable income to the states where the Company owns oil and gas properties. Transporting oil from the location where it is produced to the different markets where it may be sold affects the apportionment of income taxes. As these factors change, the Company’s state income tax rate changes. This change, when applied to the Company’s total temporary differences, impacts the total state income tax expense reported. Items affecting state apportionment factors are evaluated upon completion of the prior year income tax return, after significant acquisitions and divestitures, if there are significant changes in drilling activity, or if estimated state revenue changes occur during the year. +For all years before 2021, the Company is generally no longer subject to United States federal or state income tax examinations by tax authorities. +The Company complies with authoritative accounting guidance regarding uncertain tax provisions. The entire amount of unrecognized tax benefit reported by the Company would affect its effective tax rate if recognized. The Company does not expect a significant change to the recorded unrecognized tax benefits in 2025. +The total amount recorded for unrecognized tax benefits is presented below: +For the Years Ended December 31, +2024 2023 2022 +(in thousands) +Beginning balance $ 24,159 $ 446 $ 446 +Additions based on tax positions related to current year 4,654 23,713 — +Ending balance $ 28,813 $ 24,159 $ 446 +Note 5 – Long-Term Debt +Credit Agreement +On July 2, 2024, the Company and its lenders entered into the First Amendment to the Credit Agreement (“First Amendment”) to amend certain provisions of the Credit Agreement to facilitate financing for the Uinta Basin Acquisition . On October 1, 2024, the Company and its lenders entered into the Second Amendment to the Credit Agreement (“Second Amendment”) in conjunction with the closing of the Uinta Basin Acquisition , to, among other things: (i) increase the aggregate revolving lender commitments available under the Credit Agreement from $ 1.25 billion to $ 2.0 billion; (ii) extend the maturity date of the Credit Agreement, as discussed below; and (iii) modify certain other provisions reflective of the increased aggregate revolving lender commitments, increased Company size and scale, and extended maturity date. The Company’s Credit Agreement provides for a senior secured revolving credit facility with a maximum loan amount of $ 3.0 billion. As of December 31, 2024, the borrowing base and aggregate revolving lender commitments under the Credit Agreement were $ 3.0 billion and $ 2.0 billion, respectively. Refer to Note 17 – Acquisitions for the definition of the Uinta Basin Acquisition. +78 +The revolving credit facility is secured by substantially all of the Company’s proved oil and gas properties. The borrowing base is subject to regular, semi-annual redetermination, and considers the value of both the Company’s proved oil and gas properties reflected in the Company’s most recent reserve report; and commodity derivative contracts, each as determined by the Company’s lender group. The next borrowing base redetermination date is scheduled to occur on April 1, 2025. The Credit Agreement is scheduled to mature on the earlier of (a) October 1, 2029 (“Stated Maturity Date”), or (b) 91 days prior to the maturity date of any of the Company’s outstanding Senior Notes, as defined below, to the extent that, on or before such date, the respective Senior Notes in an amount exceeding $ 50.0 million have not been repaid, exchanged, repurchased, refinanced, or otherwise redeemed in full, and, if refinanced or exchanged, with a scheduled maturity date that is not earlier than at least 180 days after the Stated Maturity Date. The financial covenants under the Credit Agreement are discussed under Covenants below. +Interest and commitment fees associated with the revolving credit facility are accrued based on a total revolving commitments utilization grid set forth in the Credit Agreement, and as presented in the table below. At the Company’s election, borrowings under the Credit Agreement may be in the form of SOFR revolving loans, Alternate Base Rate (“ABR”) revolving loans, or Swingline loans. SOFR revolving loans accrue interest at SOFR plus the applicable margin from the utilization grid, and ABR revolving loans and Swingline loans accrue interest at a market-based floating rate, plus the applicable margin from the utilization grid. Commitment fees are accrued on the unused portion of the aggregate revolving lender commitment amount at rates from the utilization grid. +Total Revolving Commitments Utilization Percentage +<25% ≥25% <50% ≥50% <75% ≥75% <90% ≥90% +SOFR Revolving Loans +1.750 % 2.000 % 2.250 % 2.500 % 2.750 % +ABR Revolving Loans or Swingline Loans +0.750 % 1.000 % 1.250 % 1.500 % 1.750 % +Commitment Fee Rate 0.375 % 0.375 % 0.500 % 0.500 % 0.500 % +The following table presents the outstanding balance, total amount of letters of credit outstanding, and available borrowing capacity under the Credit Agreement: +As of January 31, 2025 As of December 31, 2024 As of December 31, 2023 +(in thousands) +Revolving credit facility (1) +$ 40,000 $ 68,500 $ — +Letters of credit (2) +2,000 2,000 2,500 +Available borrowing capacity 1,958,000 1,929,500 1,247,500 +Total aggregate lender revolving commitment amount +$ 2,000,000 $ 2,000,000 $ 1,250,000 +____________________________________________ +(1) Unamortized deferred financing costs attributable to the revolving credit facility are presented as a component of the other noncurrent assets line item on the accompanying balance sheets and totaled $ 18.7 million and $ 8.5 million as of December 31, 2024, and 2023, respectively. These costs are being amortized over the term of the Credit Agreement on a straight-line basis. +(2) Letters of credit outstanding reduce the amount available under the revolving credit facility on a dollar-for-dollar basis. +Senior Notes +The Company’s Senior Notes, net line item on the accompanying balance sheets as of December 31, 2024, and 2023, consisted of the following (collectively referred to as “Senior Notes”): +As of December 31, 2024 As of December 31, 2023 +Principal Amount Unamortized Deferred Financing Costs Principal Amount, Net Principal Amount Unamortized Deferred Financing Costs Principal Amount, Net +(in thousands) +5.625 % Senior Notes due 2025 +$ — $ — $ — $ 349,118 $ 896 $ 348,222 +6.75 % Senior Notes due 2026 +419,235 1,168 418,067 419,235 1,868 417,367 +6.625 % Senior Notes due 2027 +416,791 1,618 415,173 416,791 2,395 414,396 +6.5 % Senior Notes due 2028 +400,000 3,636 396,364 400,000 4,651 395,349 +6.75 % Senior Notes due 2029 +750,000 10,489 739,511 — — — +7.0 % Senior Notes due 2032 +750,000 10,872 739,128 — — — +Total $ 2,736,026 $ 27,783 $ 2,708,243 $ 1,585,144 $ 9,810 $ 1,575,334 +79 +2026 Senior Notes. On September 12, 2016, the Company issued $ 500.0 million in aggregate principal amount of 6.75 % Senior Notes due 2026, at par, which mature on September 15, 2026 (“2026 Senior Notes”). The Company received net proceeds of $ 491.6 million after deducting fees of $ 8.4 million. +2027 Senior Notes. On August 20, 2018, the Company issued $ 500.0 million in aggregate principal amount of 6.625 % Senior Notes due 2027, at par, which mature on January 15, 2027 (“2027 Senior Notes”). The Company received net proceeds of $ 492.1 million after deducting fees of $ 7.9 million. +2028 Senior Notes. On June 23, 2021, the Company issued $ 400.0 million in aggregate principal amount of 6.5 % Senior Notes due 2028, at par, which mature on July 15, 2028 (“2028 Senior Notes”). The Company received net proceeds of $ 392.8 million after deducting fees of $ 7.2 million. +2029 Senior Notes . On July 25, 2024, the Company issued $ 750.0 million in aggregate principal amount of 6.75 % Senior Notes due 2029, at par, which mature on August 1, 2029. The Company received net proceeds of $ 738.5 million after deducting fees of $ 11.5 million. +2032 Senior Notes . On July 25, 2024, the Company issued $ 750.0 million in aggregate principal amount of 7.0 % Senior Notes due 2032, at par, which mature on August 1, 2032. The Company received net proceeds of $ 738.5 million after deducting fees of $ 11.5 million. +Senior Notes Activity +On August 26, 2024, the Company redeemed the $ 349.1 million of aggregate principal amount outstanding of its 2025 Senior Notes, pursuant to the terms of the indenture governing the 2025 Senior Notes, which provided for a redemption price equal to 100 percent of the principal amount outstanding of the 2025 Senior Notes on the date of redemption, plus accrued and unpaid interest. Upon redemption, the Company recorded a loss on extinguishment of debt of $ 0.5 million related to the accelerated expense recognition of the remaining unamortized deferred financing costs. The Company canceled all redeemed 2025 Senior Notes upon settlement. +On February 14, 2022, the Company redeemed the $ 104.8 million of aggregate principal amount outstanding of its 5.0 % Senior Notes due 2024 (“2024 Senior Notes”), with cash on hand, pursuant to the terms of the indenture governing the 2024 Senior Notes, which provided for a redemption price equal to 100 percent of the principal amount of the 2024 Senior Notes on the date of redemption, plus accrued and unpaid interest. Upon redemption, the Company accelerated the amortization of all remaining previously unamortized deferred financing costs. The Company canceled all redeemed 2024 Senior Notes upon settlement. +The Senior Notes are unsecured senior obligations and rank equal in right of payment with all of the Company’s existing and any future unsecured senior debt and are senior in right of payment to any future subordinated debt. The Company may redeem some or all of its Senior Notes prior to their maturity at redemption prices that may include a premium, plus accrued and unpaid interest as described in the indentures governing the Senior Notes. Fees incurred upon issuance of each series of Senior Notes are being amortized as deferred financing costs over the life of the respective notes, unless earlier redeemed or retired, in which case amortization has been proportionately accelerated. +Senior Secured Notes Activity +On June 17, 2022, the Company redeemed all of the $ 446.7 million of aggregate principal amount outstanding of its 10.0 % Senior Secured Notes due 2025 (“2025 Senior Secured Notes”), with cash on hand, at a redemption price equal to 107.5 percent of the principal amount outstanding on the date of the redemption, plus accrued and unpaid interest. Upon redemption, the Company recorded a net loss on extinguishment of debt of $ 67.2 million which included $ 33.5 million of premium paid, $ 26.3 million of accelerated expense recognition of the unamortized debt discount, and $ 7.4 million of accelerated expense recognition of the remaining unamortized deferred financing costs. The Company canceled all redeemed 2025 Senior Secured Notes upon settlement. +Covenants +The Company is subject to certain financial and non-financial covenants under the Credit Agreement and the indentures governing the Senior Notes that, among other terms, limit the Company’s ability to incur additional indebtedness, make restricted payments including dividends, sell assets, create liens that secure debt, enter into transactions with affiliates, make certain investments, or merge or consolidate with other entities. The financial covenants under the Credit Agreement require that the Company’s (a) total funded debt, as defined in the Credit Agreement, to 12-month trailing adjusted EBITDAX ratio cannot be greater than 3.50 to 1.00 on the last day of each fiscal quarter; and (b) adjusted current ratio, as defined in the Credit Agreement, cannot be less than 1.00 to 1.00 as of the last day of any fiscal quarter. The Company was in compliance with all covenants under the Credit Agreement and the indentures governing the Senior Notes as of December 31, 2024, and through the filing of this report. Refer to the First Amendment and Second Amendment to the Credit Agreement, included as Exhibits 10.4 and 10.5, respectively, to this report, for additional detail on the Company’s covenants under the Credit Agreement and indentures governing the Senior Notes. +80 +Capitalized Interest +Capitalized interest costs for the years ended December 31, 2024, 2023, and 2022, totaled $ 25.5 million, $ 20.4 million, and $ 17.6 million, respectively. The amount of interest the Company capitalizes generally fluctuates based on the amount borrowed, the Company’s capital program, and the timing and amount of costs associated with capital projects that are considered in progress. Capitalized interest costs are included in total costs incurred. Refer to Costs Incurred in Supplemental Oil and Gas Information (unaudited) in Part II, Item 8 of this report for additional information. +Note 6 – Commitments and Contingencies +Commitments +As of December 31, 2024, the Company had entered into various types of agreements as discussed below. The following table presents the annual minimum payments related to these agreements for the next five years, and the total minimum payments thereafter as of December 31, 2024: +For the Years Ending December 31, +2025 2026 2027 2028 2029 +Thereafter +Total +(in thousands) +Delivery commitments (1) (2) +$ 48,002 $ 28,679 $ 25,814 $ 20,879 $ — $ — $ 123,374 +Drilling rig contracts (3) +34,729 — — — — — 34,729 +Office space leases (4) +4,926 3,785 3,272 3,361 2,571 9,321 27,236 +Electrical power purchase contracts +13,268 13,945 15,735 16,683 2,209 — 61,840 +Compression service contracts +11,916 9,677 7,967 3,296 — — 32,856 +Railcar agreements +10,080 7,993 7,775 2,938 1,469 — 30,255 +Sand purchase agreement (5) +16,800 4,200 — — — — 21,000 +Other (6) +15,159 13,197 7,425 1,293 — — 37,074 +Total +$ 154,880 $ 81,476 $ 67,988 $ 48,450 $ 6,249 $ 9,321 $ 368,364 +____________________________________________ +Note: The Company does not expect to incur material penalties or shortfalls with regard to its commitments. +(1) The Company has transportation throughput, terminal services, transloading, and delivery commitments with various third-parties that require delivery of a minimum amount of oil and produced water. As of December 31, 2024, the Company had commitments to deliver a minimum of 46 MMBbl of oil through December of 2028, and 3 MMBbl of produced water through June of 2027. Certain of these oil delivery commitments may be fulfilled with the same single barrel of oil. The Company would be required to make periodic deficiency payments for any shortfalls in delivering the minimum volume commitments under certain agreements. Additionally, one of the contracts does not have a minimum volume commitment associated with it, however, as of December 31, 2024, the Company would owe a cancellation fee of $ 3.4 million if the agreement was terminated. +(2) The Company expects to fulfill the delivery commitments from a combination of production from existing productive wells, future development of net proved undeveloped reserves, and future development of resources not yet characterized as proved reserves. Under certain of the Company’s commitments, if the Company is unable to deliver the minimum quantity from its production, it may deliver production acquired from third-parties to satisfy its minimum volume commitments. +(3) As of December 31, 2024, the Company’s drilling rig commitments had contract terms extending through the fourth quarter of 2025. If all of these contracts were terminated as of December 31, 2024, the Company would avoid a portion of the contractual service commitments; however, the Company would be required to pay $ 24.0 million in early termination fees. No material expenses related to early termination or standby fees were incurred by the Company during the year ended December 31, 2024. +(4) The Company leases office space under various operating leases, including maintenance, with certain terms extending into 2033. Rent expense was $ 2.5 million for each of the years ended December 31, 2024, and 2023, and was $ 3.5 million for the year ended December 31, 2022. +(5) If the Company terminated the agreement as of December 31, 2024, the Company would avoid a portion of the contractual purchase commitment; however, the Company would be required to pay an $ 8.0 million penalty. +(6) Primarily consists of IT contracts, water purchase agreements, and vehicle leases. +Drilling and Completion Commitments. As of December 31, 2024, the Company had an agreement that includes minimum drilling and completion footage requirements on certain existing leases. If these minimum requirements are not satisfied by March 31, 2026, the Company will be required to pay liquidated damages based on the difference between the actual footage drilled and completed and the minimum requirements. As of December 31, 2024, the liquidated damages could range from zero to a maximum of $ 37.2 million, with the maximum exposure assuming no additional development activity occurs prior to March 31, 2026. As of the filing of this report, the Company does not expect to incur material liquidated damages with regard to this agreement. +81 +Contingencies +The Company is subject to litigation and claims arising in the ordinary course of business. The Company accrues for such items when a liability is both probable and the amount can be reasonably estimated. In the opinion of management, the anticipated results of any pending litigation and claims are not expected to have a material effect on the results of operations, the financial position, or the cash flows of the Company. +Note 7 – Derivative Financial Instruments +Summary of Oil, Gas, and NGL Derivative Contracts in Place +The Company regularly enters into commodity derivative contracts to mitigate a portion of its exposure to oil, gas, and NGL price volatility and location differentials, and the associated effect on cash flows. All commodity derivative contracts that the Company enters into are for other-than-trading purposes. The Company’s commodity derivative contracts consist of price swap and collar arrangements for oil and gas production, and price swap arrangements for NGL production. In a typical commodity swap agreement, if the agreed upon published third-party index price (“index price”) is lower than the swap price, the Company receives the difference between the index price and the agreed upon swap price. If the index price is higher than the swap price, the Company pays the difference. For collar arrangements, the Company receives the difference between an agreed upon index price and the floor price if the index price is below the floor price. The Company pays the difference between the agreed upon ceiling price and the index price if the index price is above the ceiling price. No amounts are paid or received if the index price is between the floor and ceiling prices. +The Company has entered into fixed price oil and gas basis swaps in order to mitigate exposure to adverse pricing differentials between certain industry benchmark prices and the actual physical pricing points where the Company’s production is sold. As of December 31, 2024, the Company had basis swap contracts with fixed price differentials between: +• NYMEX WTI and Argus WTI Midland (“WTI Midland”) for a portion of its Midland Basin oil production with sales contracts that settle at WTI Midland prices; +• NYMEX WTI and Argus WTI Houston Magellan East Houston Terminal ("WTI Houston MEH”) for a portion of its South Texas and Uinta Basin oil production with sales contracts that settle at WTI Houston MEH prices; +• NYMEX HH and Inside FERC West Texas (“IF Waha”) for a portion of its Midland Basin gas production with sales contracts that settle at IF Waha prices; and +• NYMEX HH and Inside FERC Houston Ship Channel (“IF HSC”) for a portion of its South Texas gas production with sales contracts that settle at IF HSC prices. +82 +As of December 31, 2024, the Company had commodity derivative contracts outstanding through the first quarter of 2027 as summarized in the table below: +Contract Period +First Quarter Second Quarter Third Quarter Fourth Quarter +2025 2025 2025 2025 2026 2027 +Oil Derivatives (volumes in MBbl and prices in $ per Bbl): +Swaps +NYMEX WTI Volumes 1,838 2,024 1,246 — — — +Weighted-Average Contract Price $ 72.49 $ 70.22 $ 71.62 $ — $ — $ — +Collars +NYMEX WTI Volumes 1,936 1,178 741 660 — — +Weighted-Average Floor Price $ 67.17 $ 66.25 $ 63.76 $ 62.50 $ — $ — +Weighted-Average Ceiling Price $ 82.57 $ 81.70 $ 80.98 $ 79.65 $ — $ — +Basis Swaps +WTI Midland-NYMEX WTI Volumes +1,156 1,118 1,104 1,178 1,460 — +Weighted-Average Contract Price $ 1.18 $ 1.18 $ 1.18 $ 1.18 $ 1.00 $ — +WTI Houston MEH-NYMEX WTI Volumes +516 544 544 526 1,546 — +Weighted-Average Contract Price $ 1.85 $ 1.86 $ 1.86 $ 1.86 $ 2.02 $ — +Gas Derivatives (volumes in BBtu and prices in $ per MMBtu): +Swaps +NYMEX HH Volumes +1,382 2,896 2,937 3,415 12,752 1,639 +Weighted-Average Contract Price $ 4.41 $ 3.49 $ 3.70 $ 4.00 $ 3.66 $ 4.10 +IF Waha Volumes +— — — — 3,348 4,094 +Weighted-Average Contract Price $ — $ — $ — $ — $ 3.12 $ 3.63 +Collars +NYMEX HH Volumes +8,548 5,893 7,497 7,982 13,438 — +Weighted-Average Floor Price $ 3.20 $ 3.25 $ 3.24 $ 3.25 $ 3.25 $ — +Weighted-Average Ceiling Price $ 5.42 $ 3.58 $ 4.12 $ 5.31 $ 4.90 $ — +Basis Swaps +IF Waha-NYMEX HH Volumes +5,102 5,236 5,117 5,046 — — +Weighted-Average Contract Price $ ( 0.46 ) $ ( 0.78 ) $ ( 0.72 ) $ ( 0.66 ) $ — $ — +IF HSC-NYMEX HH Volumes +946 — — — — — +Weighted-Average Contract Price $ 0.0025 $ — $ — $ — $ — $ — +NGL Derivatives (volumes in MBbl and prices in $ per Bbl): +Swaps +OPIS Propane Mont Belvieu Non-TET Volumes 396 — — — — — +Weighted-Average Contract Price $ 32.86 $ — $ — $ — $ — $ — +OPIS Normal Butane Mont Belvieu Non-TET Volumes 45 — — — — — +Weighted-Average Contract Price $ 39.48 $ — $ — $ — $ — $ — +OPIS Isobutane Mont Belvieu Non-TET Volumes +25 — — — — — +Weighted-Average Contract Price $ 41.58 $ — $ — $ — $ — $ — +83 +Commodity Derivative Contracts Entered Into Subsequent to December 31, 2024 +Subsequent to December 31, 2024, and through the filing of this report, the Company entered into the following commodity derivative contracts: +Contract Period +First Quarter Second Quarter Third Quarter Fourth Quarter +2025 2025 2025 2025 2026 2027 +Oil Derivatives (volumes in MBbl and prices in $ per Bbl): +Swaps +NYMEX WTI Volumes — 455 920 1,012 — — +Weighted-Average Contract Price $ — $ 72.04 $ 70.37 $ 69.99 $ — $ — +Collars +NYMEX WTI Volumes — — — 552 — — +Weighted-Average Floor Price $ — $ — $ — $ 68.00 $ — $ — +Weighted-Average Ceiling Price $ — $ — $ — $ 70.90 $ — $ — +Basis Swaps +WTI Midland-NYMEX WTI Volumes +— — — — 881 — +Weighted-Average Contract Price $ — $ — $ — $ — $ 0.95 $ — +Gas Derivatives (volumes in BBtu and prices in $ per MMBtu): +Swaps +NYMEX HH Volumes — 858 882 920 6,854 1,753 +Weighted-Average Contract Price $ — $ 3.68 $ 3.97 $ 4.27 $ 3.81 $ 4.26 +IF HSC Volumes — — — — 957 — +Weighted-Average Contract Price $ — $ — $ — $ — $ 4.07 $ — +Collars +NYMEX HH Volumes — — — — 1,885 — +Weighted-Average Floor Price $ — $ — $ — $ — $ 3.50 $ — +Weighted-Average Ceiling Price $ — $ — $ — $ — $ 5.53 $ — +NGL Derivatives (volumes in MBbl and prices in $ per Bbl): +Swaps +OPIS Propane Mont Belvieu Non-TET Volumes 51 151 — — — — +Weighted-Average Contract Price $ 35.70 $ 32.81 $ — $ — $ — $ — +OPIS Ethane Mont Belvieu Non-TET Volumes +— — — — 545 — +Weighted-Average Contract Price $ — $ — $ — $ — $ 11.71 $ — +Derivative Assets and Liabilities Fair Value +The Company’s commodity derivatives are measured at fair value and are included in the accompanying balance sheets as derivative assets and liabilities, with the exception of derivative instruments that meet the “normal purchase normal sale” exclusion. The Company does not designate its commodity derivative contracts as hedging instruments. The fair value of the commodity derivative contracts at December 31, 2024, and 2023, was a net asset of $ 38.3 million and $ 57.1 million, respectively. +84 +The following table details the fair value of commodity derivative contracts recorded in the accompanying balance sheets, by category: +As of December 31, 2024 As of December 31, 2023 +(in thousands) +Derivative assets: +Current assets $ 48,522 $ 56,442 +Noncurrent assets 3,973 8,672 +Total derivative assets $ 52,495 $ 65,114 +Derivative liabilities: +Current liabilities $ 7,058 $ 6,789 +Noncurrent liabilities 7,142 1,273 +Total derivative liabilities $ 14,200 $ 8,062 +Offsetting of Derivative Assets and Liabilities +As of December 31, 2024, and 2023, all derivative instruments held by the Company were subject to master netting arrangements with various financial institutions. In general, the terms of the Company’s agreements provide for offsetting of amounts payable or receivable between it and the counterparty, at the election of both parties, for transactions that settle on the same date and in the same currency. The Company’s agreements also provide that in the event of an early termination, the counterparties have the right to offset amounts owed or owing under that and any other agreement with the same counterparty. The Company’s accounting policy is to not offset these positions in its accompanying balance sheets. +The following table provides a reconciliation between the gross assets and liabilities reflected on the accompanying balance sheets and the potential effects of master netting arrangements on the fair value of the Company’s commodity derivative contracts: +Derivative Assets as of Derivative Liabilities as of +December 31, +2024 December 31, +2023 December 31, +2024 December 31, +2023 +(in thousands) +Gross amounts presented in the accompanying balance sheets +$ 52,495 $ 65,114 $ ( 14,200 ) $ ( 8,062 ) +Amounts not offset in the accompanying balance sheets +( 12,995 ) ( 7,362 ) 12,995 7,362 +Net amounts $ 39,500 $ 57,752 $ ( 1,205 ) $ ( 700 ) +The Company recognizes all gains and losses from changes in commodity derivative fair values immediately in earnings rather than deferring such amounts in accumulated other comprehensive loss. The Company had no commodity derivative contracts designated as hedging instruments for the years ended December 31, 2024, 2023, and 2022. Refer to Note 8 – Fair Value Measurements for more information regarding the Company’s derivative instruments, including its valuation techniques. +85 +The following table summarizes the commodity components of the net derivative settlement (gain) loss and the net derivative (gain) loss line items presented within the accompanying statements of cash flows and the accompanying statements of operations, respectively: +For the Years Ended December 31, +2024 2023 2022 +(in thousands) +Net derivative settlement (gain) loss: +Oil contracts $ ( 12,606 ) $ 26,873 $ 514,641 +Gas contracts ( 58,679 ) ( 49,156 ) 171,598 +NGL contracts 2,569 ( 4,638 ) 24,461 +Total net derivative settlement (gain) loss: $ ( 68,716 ) $ ( 26,921 ) $ 710,700 +Net derivative (gain) loss: +Oil contracts $ ( 4,856 ) $ ( 20,813 ) $ 284,863 +Gas contracts ( 48,681 ) ( 42,713 ) 82,769 +NGL contracts 3,579 ( 4,628 ) 6,380 +Total net derivative (gain) loss: $ ( 49,958 ) $ ( 68,154 ) $ 374,012 +Credit Related Contingent Features +As of December 31, 2024, all of the Company’s derivative counterparties were members of the Company’s Credit Agreement lender group. The Company does not enter into derivative contracts with counterparties that are not part of the lender group. Under the Credit Agreement, the Company is required to provide mortgage liens on assets having a value equal to at least 85 percent of the total PV-9, as defined in the Credit Agreement, of the Company’s proved oil and gas properties evaluated in the most recent reserve report. Collateral securing indebtedness under the Credit Agreement also secures the Company’s derivative agreement obligations. +Note 8 – Fair Value Measurements +The Company follows fair value measurement accounting guidance for all assets and liabilities measured at fair value. This guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. Market or observable inputs are the preferred sources of values, followed by assumptions based on hypothetical transactions in the absence of market inputs. The fair value hierarchy for grouping these assets and liabilities is based on the significance level of the following inputs: +• Level 1 – quoted prices in active markets for identical assets or liabilities +• Level 2 – quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations whose inputs are observable or whose significant value drivers are observable +• Level 3 – significant inputs to the valuation model are unobservable +The following table is a listing of the Company’s assets and liabilities that are measured at fair value on a recurring basis in the accompanying balance sheets and where they are classified within the fair value hierarchy: +As of December 31, 2024 As of December 31, 2023 +Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 +(in thousands) +Assets: +Derivatives +$ — $ 52,495 $ — $ — $ 65,114 $ — +Liabilities: +Derivatives +$ — $ 14,200 $ — $ — $ 8,062 $ — +Both financial and non-financial assets and liabilities are categorized within the above fair value hierarchy based on the lowest level of input that is significant to the fair value measurement. The following is a description of the valuation methodologies used by the +86 +Company as well as the general classification of such instruments pursuant to the above fair value hierarchy. Refer to Note 1 – Summary of Significant Accounting Policies for additional information on the Company’s policies for determining fair value for the categories discussed below. +Derivatives +The Company uses Level 2 inputs to measure the fair value of oil, gas, and NGL commodity derivative instruments. Fair values are based upon interpolated data. The Company derives internal valuation estimates taking into consideration forward commodity price curves, counterparties’ credit ratings, the Company’s credit rating, and the time value of money. These valuations are then compared to the respective counterparties’ mark-to-market statements. The considered factors result in an estimated exit price that management believes provides a reasonable and consistent methodology for valuing derivative instruments. The commodity derivative instruments utilized by the Company are not considered by management to be complex, structured, or illiquid. The oil, gas, and NGL commodity derivative markets are highly active. +Generally, market quotes assume that all counterparties have near zero, or low, default rates and have equal credit quality. However, an adjustment may be necessary to reflect the credit quality of a specific counterparty to determine the fair value of the instrument. The Company monitors the credit ratings of its counterparties and may require counterparties to post collateral if their ratings deteriorate. In some instances, the Company will attempt to novate the trade to a more stable counterparty. +Valuation adjustments are necessary to reflect the effect of the Company’s credit quality on the fair value of any commodity derivative liability position. This adjustment takes into account any credit enhancements, such as collateral margin that the Company may have posted with a counterparty, as well as any letters of credit between the parties. The methodology to determine this adjustment is consistent with how the Company evaluates counterparty credit risk, taking into account the Company’s credit rating, current revolving credit facility margins, and any change in such margins since the last measurement date. +The methods described above may result in a fair value estimate that may not be indicative of net realizable value or may not be reflective of future fair values and cash flows. While the Company believes that the valuation methods utilized are appropriate and consistent with authoritative accounting guidance and other marketplace participants, the Company recognizes that third parties may use different methodologies or assumptions to determine the fair value of certain financial instruments that could result in a different estimate of fair value at the reporting date. +Refer to Note 7 – Derivative Financial Instruments for more information regarding the Company’s derivative instruments. +Acquisition of proved and unproved properties +Assets acquired and liabilities assumed under transactions that do not meet the criteria of a business combination under ASC Topic 805, Business Combinations are accounted for as an asset acquisition and are recorded based on the fair value of the total consideration transferred on the acquisition date using the lowest observable inputs available. Refer to Note 17 – Acquisitions for additional discussion. +Long-Term Debt +The following table reflects the fair value of the Company’s Senior Notes obligations measured using Level 1 inputs based on quoted secondary market trading prices. These notes were not presented at fair value on the accompanying balance sheets as of December 31, 2024, or 2023, as they were recorded at carrying value, net of any unamortized deferred financing costs. Refer to Note 5 – Long-Term Debt for additional information. +As of December 31, +2024 2023 +Principal Amount Fair Value Principal Amount Fair Value +(in thousands) +5.625 % Senior Notes due 2025 +$ — $ — $ 349,118 $ 348,189 +6.75 % Senior Notes due 2026 +$ 419,235 $ 419,654 $ 419,235 $ 420,660 +6.625 % Senior Notes due 2027 +$ 416,791 $ 416,149 $ 416,791 $ 416,549 +6.5 % Senior Notes due 2028 +$ 400,000 $ 398,676 $ 400,000 $ 401,372 +6.75 % Senior Notes due 2029 +$ 750,000 $ 742,275 $ — $ — +7.0 % Senior Notes due 2032 +$ 750,000 $ 741,053 $ — $ — +87 +The carrying value of the Company’s revolving credit facility approximates its fair value, as the applicable interest rates are floating, based on prevailing market rates. +Note 9 – Earnings Per Share +Basic net income or loss per common share is calculated by dividing net income or loss available to common stockholders by the basic weighted-average number of common shares outstanding for the respective period. Diluted net income or loss per common share is calculated by dividing net income or loss available to common stockholders by the diluted weighted-average number of common shares outstanding, which includes the effect of potentially dilutive securities. +For the years ended December 31, 2024, 2023, and 2022, potentially dilutive securities for this calculation consisted primarily of non-vested RSUs and contingent PSUs, which were measured using the treasury stock method. +PSUs represent the right to receive, upon settlement of the PSUs after the completion of the three -year performance period, a number of shares of the Company’s common stock that may range from zero to two times the number of PSUs granted on the award date. The number of potentially dilutive shares related to PSUs is based on the number of shares, if any, which would be issuable at the end of the respective reporting period, assuming that date was the end of the contingency period applicable to such PSUs. +Refer to Note 10 – Compensation Plans for additional detail on RSUs and PSUs. +The following table sets forth the calculations of basic and diluted net income per common share: +For the Years Ended December 31, +2024 2023 2022 +(in thousands, except per share data) +Net income $ 770,293 $ 817,880 $ 1,111,952 +Basic weighted-average common shares outstanding 114,757 118,678 122,351 +Dilutive effect of non-vested RSUs, contingent PSUs, and other 776 562 1,733 +Diluted weighted-average common shares outstanding 115,533 119,240 124,084 +Basic net income per common share $ 6.71 $ 6.89 $ 9.09 +Diluted net income per common share $ 6.67 $ 6.86 $ 8.96 +Note 10 – Compensation Plans +The Company may grant various types of both short-term and long-term incentive-based awards under its compensation plans, such as time-based cash awards, performance-based cash awards, and equity awards to eligible employees. Additionally, the Company grants stock-based compensation to its Board of Directors, and provides an employee stock purchase plan and a 401(k) plan to eligible employees. +As of December 31, 2024, approximately 1.9 million shares of common stock were available for grant under the Equity Plan. The issuance of a direct share benefit, such as a share of common stock, a stock option, a restricted share, an RSU or a PSU, counts as one share against the number of shares available to be granted under the Equity Plan. Each PSU has the potential to count as two shares against the number of shares available to be granted under the Equity Plan based on the final performance multiplier. +Performance Share Units +The Company has granted PSUs to eligible employees as part of its Equity Plan. The number of shares of the Company’s common stock issued to settle PSUs ranges from zero to two times the number of PSUs awarded and is determined based on certain criteria over a three -year performance period. PSUs generally vest on the third anniversary of the grant date or upon other triggering events as set forth in the Equity Plan. Employees who meet retirement eligibility criteria, as defined by the applicable grant agreement, on the grant date of a PSU award vest in pro-rata increments on a daily basis over the three -year performance period beginning at the grant date, and any non-vested portions of a PSU award will be forfeited if the employee leaves the Company. +The fair value of PSUs is measured at the grant date using a stochastic Monte Carlo simulation using geometric Brownian motion (“GBM Model”). A stochastic process is a mathematically defined equation that can create a series of outcomes over time. These outcomes are not deterministic in nature, which means that by iterating the equations multiple times, different results will be obtained for each iteration. In the case of the Company’s PSUs, the Company cannot predict with certainty the path its stock price or +88 +the stock prices of its peers will take over the three -year performance period. By using a stochastic simulation, the Company can create multiple prospective stock pathways, statistically analyze these simulations, and ultimately make inferences regarding the path the stock price may take. As such, because future stock prices are stochastic, or probabilistic with some direction in nature, the stochastic method, specifically the GBM Model, is deemed an appropriate method by which to determine the fair value of the PSUs. Significant assumptions used in this simulation include the Company’s expected volatility, dividend yield, and risk-free interest rate based on U.S. Treasury yield curve rates with maturities consistent with a three-year vesting period, as well as the volatilities and dividend yield for each of the Company’s peers. +For PSUs granted in 2024, 2023, and 2022, which the Company determined to be equity awards, settlement will be determined based on a combination of the following criteria measured over the three -year performance period: the Company’s Total Shareholder Return (“TSR”) relative to the TSR of certain peer companies, the Company’s absolute TSR, free cash flow (“FCF”) generation, and the achievement of certain ESG targets, in each case as defined by the award agreement. The relative and absolute TSR portions of the fair value of the PSUs granted in 2024, 2023, and 2022, were measured on the grant date using the GBM Model. The portion of the awards associated with FCF generation and ESG performance conditions assumes that target amounts will be met at the end of the performance period. As a portion of these awards depends on performance-based settlement criteria, compensation expense may be adjusted in future periods as the expected number of shares of the Company’s common stock issued to settle the units increases or decreases based on the Company’s expected FCF generation and achievement of certain ESG targets. +The Company initially records compensation expense associated with the issuance of PSUs based on the fair value of the awards as of the grant date and may adjust compensation expense in future periods as discussed above. Compensation expense for PSUs is recognized within general and administrative expense and exploration expense over the vesting periods of the respective awards. Total compensation expense recorded for PSUs was $ 5.5 million, $ 2.8 million, and $ 2.6 million for the years ended December 31, 2024, 2023, and 2022, respectively. As of December 31, 2024, there was $ 13.9 million of total unrecognized expense related to non-vested PSUs, which is being amortized through mid-2027. +The fair value of PSUs granted in 2024, 2023, and 2022, was $ 9.9 million, $ 7.7 million, and $ 7.4 million, respectively. +A summary of activity is presented in the following table: +For the Years Ended December 31, +2024 2023 2022 +PSUs (1) +Weighted-Average Grant-Date Fair Value (2) +PSUs (1) +Weighted-Average Grant-Date Fair Value (2) +PSUs (1) +Weighted-Average Grant-Date Fair Value (2) +Non-vested at beginning of year 469,432 $ 27.83 273,258 $ 26.67 464,483 $ 12.80 +Granted 231,120 $ 42.76 256,633 $ 29.93 276,010 $ 26.67 +Vested — $ — ( 15,950 ) $ 25.50 ( 461,387 ) $ 12.81 +Forfeited ( 6,186 ) $ 25.87 ( 44,509 ) $ 26.45 ( 5,848 ) $ 18.24 +Non-vested at end of year 694,366 $ 32.99 469,432 $ 27.83 273,258 $ 26.67 +____________________________________________ +(1) The number of PSUs presented assumes a multiplier of one . The actual final number of shares of common stock to be issued at the end of the three -year performance period will range from zero to two times the number of PSUs awarded depending on the three -year performance multiplier. +(2) Amounts represent price per unit. +During the years ended December 31, 2024, and 2023, there were no shares of common stock issued to settle PSUs. During the year ended December 31, 2022, the Company settled PSUs that were granted in 2019, which earned a 2.0 times multiplier. The Company and all eligible recipients mutually agreed to net share settle a portion of the awards to cover income and payroll tax withholdings, as provided for in the Equity Plan and applicable award agreements. After withholding 349,487 shares to satisfy income and payroll tax withholding obligations that occurred upon delivery of the shares underlying those PSUs, 654,923 shares of the Company’s common stock were issued in accordance with the terms of the applicable PSU awards. The fair value of PSUs that vested during the year ended December 31, 2022, was $ 12.3 million. +Employee Restricted Stock Units +The Company has granted RSUs to eligible employees as part of its Equity Plan. Each RSU represents a right to receive one share of the Company’s common stock upon settlement of the award at the end of the specified vesting period. RSUs generally vest in one-third increments on each anniversary of the applicable grant date over the applicable vesting period or upon other triggering events as set forth in the Equity Plan. Employees who meet retirement eligibility criteria, as defined by the applicable grant agreement, at the time an RSU award is granted generally vest in six -month increments over the applicable vesting period beginning at the grant date. +89 +Retirement eligible employees must stay with the Company through the entire six -month vesting period to receive that increment of vesting and any non-vested portions of an RSU award will be forfeited when the employee leaves the Company. +The Company records compensation expense associated with the issuance of RSUs based on the fair value of the awards as of the grant date. The fair value of an RSU is equal to the closing price of the Company’s common stock on the grant date. Compensation expense for RSUs is recognized within general and administrative expense and exploration expense over the vesting periods of the respective awards. Total compensation expense recorded for RSUs for the years ended December 31, 2024, 2023, and 2022, was $ 16.7 million, $ 14.8 million, and $ 13.5 million, respectively. As of December 31, 2024, there was $ 29.7 million of total unrecognized compensation expense related to non-vested RSUs, which is being amortized through mid-2027. +The fair value of RSUs granted to eligible employees in 2024, 2023 and 2022, was $ 21.9 million, $ 20.2 million, and $ 18.0 million, respectively, and the fair value of RSUs that vested during the years ended December 31, 2024, 2023, and 2022, was $ 15.3 million, $ 13.5 million, and $ 11.2 million, respectively. +A summary of activity is presented in the following table: +For the Years Ended December 31, +2024 2023 2022 +RSUs +Weighted- +Average +Grant-Date +Fair Value (1) +RSUs +Weighted- +Average +Grant-Date +Fair Value (1) +RSUs +Weighted- +Average +Grant-Date +Fair Value (1) +Non-vested at beginning of year 1,080,544 $ 31.49 1,375,052 $ 22.42 1,841,237 $ 13.79 +Granted 504,010 $ 43.44 630,474 $ 32.03 526,776 $ 34.08 +Vested ( 507,171 ) $ 30.18 ( 805,205 ) $ 16.75 ( 920,927 ) $ 12.17 +Forfeited ( 37,546 ) $ 32.96 ( 119,777 ) $ 29.26 ( 72,034 ) $ 18.24 +Non-vested at end of year 1,039,837 $ 37.87 1,080,544 $ 31.49 1,375,052 $ 22.42 +____________________________________________ +(1) Amounts represent price per unit. +A summary of the shares of common stock issued to settle RSUs is presented in the table below: +For the Years Ended December 31, +2024 2023 2022 +Shares of common stock issued to settle RSUs (1) +508,927 803,449 920,927 +Less: shares of common stock withheld for income and payroll taxes ( 158,252 ) ( 249,233 ) ( 284,423 ) +Net shares of common stock issued 350,675 554,216 636,504 +____________________________________________ +(1) During the years ended December 31, 2024, 2023, and 2022, the Company issued shares of common stock to settle RSUs that related to awards granted in previous years. The Company and all eligible recipients in 2024 and 2022, and a majority of eligible recipients in 2023, mutually agreed to net share settle a portion of the awards to cover income and payroll tax withholdings in accordance with the Company’s Equity Plan and individual award agreements. +Director Shares +In 2024, 2023, and 2022, the Company issued a total of 39,557 , 56,872 , and 29,471 shares, respectively, of its common stock to its non-employee directors under the Equity Plan. For the years ended December 31, 2024, 2023, and 2022, the Company recorded $ 1.9 million, $ 1.6 million, and $ 1.5 million, respectively, of compensation expense related to director shares. All shares issued to non-employee directors fully vested during the year in which they were granted. +Employee Stock Purchase Plan +Under the Company’s Employee Stock Purchase Plan (“ESPP”), eligible employees may purchase shares of the Company’s common stock through payroll deductions of up to 15 percent of their eligible compensation, subject to a maximum of 2,500 shares per offering period and a maximum of $ 25,000 in value related to purchases for each calendar year. The purchase price of the common stock is 85 percent of the lower of the trading price of the common stock on either the first or last day of the six-month offering period. The ESPP is intended to qualify as an “employee stock purchase plan” under Section 423 of the IRC. +90 +A total of 97,500 , 114,427 , and 113,785 shares were issued under the ESPP in 2024, 2023, and 2022, respectively. Total proceeds to the Company for the issuance of these shares was $ 3.2 million, $ 3.1 million, and $ 3.0 million, for the years ended December 31, 2024, 2023, and 2022, respectively. As of December 31, 2024, the Company had approximately 3.2 million shares of its common stock available for issuance under the ESPP. The Company records compensation expense associated with the ESPP based on the estimated fair value of the ESPP grants as of the beginning of the offering period, and the expense is recognized within general and administrative expense and exploration expense over the six-month offering period. Total compensation expense recorded for the ESPP for the years ended December 31, 2024, 2023, and 2022, was $ 1.0 million, $ 1.1 million, and $ 1.2 million, respectively. +The fair value of ESPP grants is measured at the grant date using the Black-Scholes option-pricing model. Expected volatility is calculated based on the Company’s historical daily common stock price, and the risk-free interest rate is based on U.S. Treasury yield curve rates with maturities consistent with a six-month vesting period. +The fair value of ESPP shares issued during the periods reported above were estimated using the following weighted-average assumptions: +For the Years Ended December 31, +2024 2023 2022 +Risk free interest rate 5.3 % 5.1 % 1.2 % +Dividend yield 1.8 % 1.8 % 0.1 % +Volatility factor of the expected market price of the Company’s common stock 35.2 % 53.6 % 69.1 % +Expected life (in years) 0.5 0.5 0.5 +401(k) Plan +The Company has a defined contribution plan (“401(k) Plan”) that is subject to the Employee Retirement Income Security Act of 1974. The 401(k) Plan allows eligible employees to contribute a maximum of 60 percent of their base salaries up to the contribution limits established under the IRC. The Company matches either 100 percent or 150 percent of each employee’s contributions, depending on pension plan eligibility, up to six percent of the employee’s base salary and short-term incentive bonus, and may make additional contributions at its discretion. Refer to Note 12 – Pension Benefits for additional discussion of pension benefits. The Company’s matching contributions to the 401(k) Plan were $ 6.4 million, $ 5.7 million, and $ 5.5 million for the years ended December 31, 2024, 2023, and 2022, respectively. +Note 11 – Segment Reporting +The Company’s operations are all related to the exploration, development, and production of oil, gas, and NGLs in the United States, from which the Company derives all of its revenue. The nature of the production process, the types of purchasers, and the regulatory environment under which the Company operates are consistent across the Company. Additionally, for financial reporting purposes related to oil and gas extraction activities, the United States is considered to be one geographic area. As a result of these factors, the Company has one reportable segment : the oil, gas, and NGL exploration and production segment (“E&P Segment”). The E&P Segment constitutes all of the consolidated entity and the accompanying consolidated financial statements and the notes to the accompanying consolidated financial statements are representative of such amounts for the E&P Segment. The accounting policies of the E&P Segment are the same as those described in Note 1 – Summary of Significant Accounting Policies. +The Company’s Chief Operating Decision Maker (“CODM”) is the President and Chief Executive Officer . The CODM uses net income as presented on the accompanying statements of operations to measure E&P Segment profit or loss, and to evaluate income generated from E&P Segment assets in deciding whether to reinvest profits into operational activities or to use profits for other purposes, such as debt reduction, acquisitions, or the Company’s Stock Repurchase Program. Additionally, net income is used in assessing budget versus actual results and in benchmarking to the Company’s competitors. +91 +Segment Revenue, Significant Expenses, and Net Income +For the Years Ended December 31, +2024 2023 2022 +(in thousands) +Total operating revenues and other income $ 2,690,259 $ 2,373,886 $ 3,358,647 +Less: +Lease operating expense 318,987 284,790 266,527 +Transportation costs 167,121 136,237 150,049 +Production taxes 115,973 105,134 162,629 +Ad valorem tax expense 34,890 37,382 41,707 +Depletion, depreciation, and amortization +809,305 690,481 603,780 +Exploration 64,121 59,480 54,943 +General and administrative 138,344 121,063 114,558 +Net derivative (gain) loss +( 49,958 ) ( 68,154 ) 374,012 +Other operating expense, net 15,781 20,567 10,961 +Interest expense 140,659 91,630 120,346 +Interest income ( 31,903 ) ( 19,854 ) ( 5,774 ) +Loss on extinguishment of debt +483 — 67,605 +Other non-operating income 233 928 1,534 +Income tax expense 195,930 96,322 283,818 +E&P Segment net income $ 770,293 $ 817,880 $ 1,111,952 +___________________________________________ +Note: There are no reconciling items between net income presented on the accompanying statements of operations and E&P Segment net income. +Note 12 – Pension Benefits +The Company has a non-contributory defined benefit pension plan covering employees who met age and service requirements and began employment with the Company prior to January 1, 2016 (“Qualified Pension Plan”). The Company also has a supplemental non-contributory pension plan covering certain management employees (“Nonqualified Pension Plan” and together with the Qualified Pension Plan, “Pension Plans”). The Company froze the Pension Plans to new participants, effective January 1, 2016. Employees participating in the Pension Plans prior to the plans being frozen continue to earn benefits. +Obligations and Funded Status for the Pension Plans +The Company recognizes the funded status ( i.e ., the difference between the fair value of plan assets and the projected benefit obligation) of the Company’s Pension Plans in the accompanying balance sheets as either an asset or a liability and recognizes a corresponding adjustment within the other comprehensive income, net of tax, line item in the accompanying consolidated statements of comprehensive income. The projected benefit obligation is the actuarial present value of the benefits earned to date by plan participants based on employee service and compensation including the effect of assumed future salary increases. The accumulated +92 +benefit obligation uses the same factors as the projected benefit obligation, but excludes the effects of assumed future salary increases. The Company’s measurement date for plan assets and obligations is December 31. +For the Years Ended December 31, +2024 2023 +(in thousands) +Change in benefit obligation: +Projected benefit obligation at beginning of year $ 67,268 $ 65,161 +Service cost 3,652 3,706 +Interest cost 3,209 3,200 +Actuarial (gain) loss ( 1,281 ) 84 +Benefits paid ( 2,204 ) ( 4,883 ) +Settlements +( 482 ) — +Projected benefit obligation at end of year 70,162 67,268 +Change in plan assets: +Fair value of plan assets at beginning of year 45,692 36,414 +Actual return on plan assets 3,547 4,161 +Employer contribution 10,482 10,000 +Benefits paid ( 2,204 ) ( 4,883 ) +Settlements +( 482 ) — +Fair value of plan assets at end of year 57,035 45,692 +Funded status at end of year $ ( 13,127 ) $ ( 21,576 ) +The Company’s underfunded status for the Pension Plans as of December 31, 2024, and 2023, was $ 13.1 million and $ 21.6 million, respectively, and is recognized in the accompanying balance sheets within the other noncurrent liabilities line item. There are no plan assets in the Nonqualified Pension Plan. +Accumulated Benefit Obligation in Excess of Plan Assets for the Pension Plans +As of December 31, +2024 2023 +(in thousands) +Projected benefit obligation $ 70,162 $ 67,268 +Accumulated benefit obligation $ 58,807 $ 55,557 +Less: fair value of plan assets ( 57,035 ) ( 45,692 ) +Underfunded accumulated benefit obligation $ 1,772 $ 9,865 +Pension expense is determined based upon the annual service cost of benefits (the actuarial cost of benefits earned during a period) and the interest cost on those liabilities, less the expected return on plan assets. The expected long-term rate of return on plan assets is applied to a calculated value of plan assets that recognizes changes in fair value over a five-year period. This practice is intended to reduce year-to-year volatility in pension expense, but it can have the effect of delaying recognition of differences between actual returns on assets and expected returns based on long-term rate of return assumptions. Amortization of the unrecognized net gain or loss resulting from actual experience different from that assumed and from changes in assumptions (excluding asset gains and losses not yet reflected in market-related value) is included as a component of net periodic benefit cost for the year. If, as of the beginning of the year, the unrecognized net gain or loss exceeds 10 percent of the greater of the projected benefit obligation and the market-related value of plan assets, then the amortization is the excess divided by the average remaining service period of participating employees expected to receive benefits under the plan. +The pre-tax amounts not yet recognized in net periodic pension costs, but rather recognized in the accumulated other comprehensive loss line item within the accompanying balance sheets as of December 31, 2024, and 2023, totaled $ 1.5 million and $ 3.3 million, respectively, and related to unrecognized actuarial losses. +93 +The pension liability adjustments recognized in other comprehensive income during 2024, 2023, and 2022, were as follows: +For the Years Ended December 31, +2024 2023 2022 +(in thousands) +Net actuarial gain $ 1,681 $ 1,737 $ 10,327 +Amortization of net actuarial loss 46 68 931 +Settlements 124 — — +Total pension liability adjustment, pre-tax 1,851 1,805 11,258 +Tax expense ( 405 ) ( 390 ) ( 2,431 ) +Total pension liability adjustment, net $ 1,446 $ 1,415 $ 8,827 +Components of Net Periodic Benefit Cost for the Pension Plans +For the Years Ended December 31, +2024 2023 2022 +(in thousands) +Components of net periodic benefit cost: +Service cost $ 3,652 $ 3,706 $ 4,652 +Interest cost 3,209 3,200 2,314 +Expected return on plan assets that reduces periodic pension benefit cost ( 3,147 ) ( 2,340 ) ( 1,711 ) +Amortization of net actuarial loss 46 68 931 +Net periodic benefit cost 3,760 4,634 6,186 +Settlements 124 — — +Total net benefit cost $ 3,884 $ 4,634 $ 6,186 +Pension Plan Assumptions +The weighted-average assumptions used to measure the Company’s projected benefit obligation are as follows: +As of December 31, +2024 2023 +Projected benefit obligation: +Discount rate 5.6 % 5.0 % +Rate of compensation increase 3.5 % 3.5 % +The weighted-average assumptions used to measure the Company’s net periodic benefit cost are as follows: +For the Years Ended December 31, +2024 2023 2022 +Net periodic benefit cost: +Discount rate 5.1 % 5.2 % 3.1 % +Expected return on plan assets (1) +6.5 % 6.3 % 3.6 % +Rate of compensation increase 3.5 % 3.5 % 4.8 % +____________________________________________ +(1) There is no assumed expected return on plan assets for the Nonqualified Pension Plan because there are no plan assets in the Nonqualified Pension Plan. +The Company’s pension investment policy includes various guidelines and procedures designed to ensure that assets are prudently invested in a manner necessary to meet the future benefit obligation of the Pension Plans. The policy prohibits the direct investment of plan assets in the Company’s securities. The Qualified Pension Plan’s investment horizon is long-term and accordingly +94 +the target asset allocations encompass a strategic, long-term perspective of capital markets, expected risk and return behavior and perceived future economic conditions. The key investment principles of diversification, assessment of risk, and targeting of expected returns for given levels of risk are applied. +The Qualified Pension Plan’s investment portfolio contains a diversified blend of investments, which may reflect varying rates of return. The investments are further diversified within each asset classification. This portfolio diversification provides protection against a single security or class of securities having a disproportionate impact on aggregate investment performance. The actual asset allocations are reviewed and rebalanced on a periodic basis to maintain the target allocations. +The weighted-average asset allocation of the Qualified Pension Plan is as follows: +Target As of December 31, +Asset Category 2025 2024 2023 +Equity securities 30.0 % 41.0 % 43.0 % +Fixed income securities 50.0 % 40.3 % 25.5 % +Other securities 20.0 % 18.7 % 31.5 % +Total 100.0 % 100.0 % 100.0 % +There is no asset allocation of the Nonqualified Pension Plan since there are no plan assets in the plan. The assumption of the expected long-term rate of return on plan assets of the Qualified Pension Plan is based upon the target asset allocation and is determined using forward-looking assumptions in the context of historical returns and volatilities for each asset class, as well as correlations among asset classes. The Company evaluates the expected rate of return on plan assets assumption on an annual basis. +95 +Pension Plan Assets +The fair values of the Company’s Qualified Pension Plan assets utilizing the fair value hierarchy discussed in Note 8 – Fair Value Measurements are as follows: +Fair Value Measurements Using: +Actual Asset Allocation (1) +Total Level 1 Inputs Level 2 Inputs Level 3 Inputs +(in thousands) +As of December 31, 2024 +Equity securities: +Domestic (2) +19.5 % $ 11,128 $ 7,149 $ 3,979 $ — +International (3) +21.5 % 12,236 12,236 — — +Total equity securities 41.0 % 23,364 19,385 3,979 — +Fixed income securities: +Core fixed income (4) +40.3 % 22,973 22,973 — — +Total fixed income securities 40.3 % 22,973 22,973 — — +Other securities: +Real estate (5) +3.3 % 1,878 — — 1,878 +Collective investment trusts (6) +6.1 % 3,507 — 3,507 — +Hedge fund (7) +9.3 % 5,313 1,707 — 3,606 +Total other securities 18.7 % 10,698 1,707 3,507 5,484 +Total investments 100.0 % $ 57,035 $ 44,065 $ 7,486 $ 5,484 +As of December 31, 2023 +Equity securities: +Domestic (2) +20.3 % $ 9,280 $ 6,097 $ 3,183 $ — +International (3) +22.7 % 10,349 10,349 — — +Total equity securities 43.0 % 19,629 16,446 3,183 — +Fixed income securities: +Core fixed income (4) +25.5 % 11,646 11,646 — — +Total fixed income securities 25.5 % 11,646 11,646 — — +Other securities: +Real estate (5) +4.6 % 2,116 — — 2,116 +Collective investment trusts (6) +13.6 % 6,206 — 6,206 — +Hedge fund (7) +13.3 % 6,095 1,498 — 4,597 +Total other securities 31.5 % 14,417 1,498 6,206 6,713 +Total investments 100.0 % $ 45,692 $ 29,590 $ 9,389 $ 6,713 +____________________________________________ +(1) Percentages may not calculate due to rounding. +(2) Level 1 equity securities consist of United States large and small capitalization companies, which are actively traded securities that can be sold on demand. Level 2 equity securities are investments in collective investment funds that are valued at net asset value based on the value of the underlying investments and total units outstanding on a daily basis. The objective of these funds is to approximate the S&P 500 by investing in one or more collective investment funds. +(3) International equity securities consist of a well-diversified portfolio of holdings of mostly large issuers organized in developed countries with liquid markets, commingled with investments in equity securities of issuers located in emerging markets that are believed to have strong sustainable financial productivity at attractive valuations. +(4) The objective of core fixed income funds is to achieve value added from sector or issue selection by constructing a portfolio to approximate the investment results of the Barclay’s Capital Aggregate Bond Index with a modest amount of variability in duration around the index. +(5) The investment objective of direct real estate is to provide current income with the potential for long-term capital appreciation. Ownership in real estate entails a long-term time horizon, periodic valuations, and potentially low liquidity. +96 +(6) Collective investment trusts invest in short-term investments and are valued at the net asset value of the collective investment trust. The net asset value, as provided by the trustee, is used as a practical expedient to estimate fair value. The net asset value is based on the fair value of the underlying investments held by the fund less its liabilities. +(7) The hedge fund portfolio includes investments in actively traded global mutual funds that focus on alternative investments and a hedge fund of funds that invests both long and short using a variety of investment strategies. +The following is a summary of the changes in Level 3 plan assets (in thousands): +Balance at January 1, 2023 $ 6,797 +Purchases — +Realized gain on assets 364 +Unrealized loss on assets ( 448 ) +Disposition — +Balance at December 31, 2023 $ 6,713 +Purchases — +Realized gain on assets 282 +Unrealized loss on assets ( 110 ) +Disposition ( 1,401 ) +Balance at December 31, 2024 $ 5,484 +Contributions +The Company contributed $ 10.5 million, $ 10.0 million, and $ 6.0 million to the Pension Plans during the years ended December 31, 2024, 2023, and 2022, respectively. The Company expects to make an $ 8.2 million contribution to the Pension Plans in 2025. +Benefit Payments +The Pension Plans made actual benefit payments of $ 2.7 million, $ 4.9 million, and $ 2.0 million during the years ended December 31, 2024, 2023, and 2022, respectively. Expected benefit payments over the next 10 years are as follows: +For the Years Ending December 31, Amount +(in thousands) +2025 $ 9,726 +2026 $ 7,606 +2027 $ 5,233 +2028 $ 4,880 +2029 $ 4,637 +2030 through 2034 $ 26,858 +Note 13 – Leases +As of December 31, 2024, and 2023, the Company had operating leases for asset classes that include office space, office equipment, drilling rigs, completion crews, midstream agreements, vehicles, railcars, and equipment rentals used in field operations. For operating leases recorded on the accompanying balance sheets, the remaining lease terms range from less than one year to approximately eight years . Certain leases contain optional extension periods that allow for terms to be extended for up to an additional 10 years; however, in order to maintain financial and operational flexibility, there are no available options to extend that the Company is reasonably certain it will exercise. An early termination option exists for certain leases, some of which allow the Company to terminate a lease within one year; however, there are no leases in which material early termination options are reasonably certain to be exercised by the Company. As of December 31, 2024, and 2023, the Company did not have any agreements in place that were classified as finance leases under Topic 842. As of December 31, 2024, and through the filing of this report, the Company has no material lease arrangements which are scheduled to commence in the future. Refer to Note 1 – Summary of Significant Accounting Policies for additional information on the Company’s policies for lease determination and classification. +The following table reflects the components of the Company’s total lease costs, whether capitalized or expensed, related to operating leases, including short-term leases, and variable lease costs for both short-term and long-term leases for the years ended +97 +December 31, 2024, 2023, and 2022. This total does not reflect amounts that may be reimbursed by other third parties in the normal course of business, such as non-operating working interest owners. +For the Years Ended December 31, +2024 2023 2022 +(in thousands) +Operating lease cost $ 26,809 $ 15,625 $ 10,174 +Short-term lease cost (1) +85,875 251,628 175,098 +Variable lease cost (2) +386,766 11,838 7,085 +Total lease cost $ 499,450 $ 279,091 $ 192,357 +____________________________________________ +(1) Costs associated with short-term lease agreements relate primarily to operational activities where underlying lease terms are less than one year. This amount includes drilling and completion activities, most of which are contracted for 12 months or less. It is expected that this amount will fluctuate primarily with the number of drilling rigs and completion crews the Company is operating under short-term agreements. +(2) Variable lease payments relate to the actual volumes delivered under certain midstream agreements, actual usage associated with drilling rigs, completion crews, and vehicles, and variable utility costs associated with the Company’s leased office space. Fluctuations in variable lease payments are primarily driven by actual volumes delivered and the number of drilling rigs and completion crews operating. +Cash paid for amounts included in the measurement of lease liabilities were as follows: +For the Years Ended December 31, +2024 2023 2022 +(in thousands) +Operating cash flows related to operating leases $ 10,806 $ 4,181 $ 4,718 +Investing cash flows related to operating leases $ 16,003 $ 11,300 $ 5,042 +Maturities for the Company’s operating lease liabilities included on the accompanying balance sheets as of December 31, 2024, were as follows: +As of December 31, 2024 +(in thousands) +2025 $ 31,681 +2026 18,949 +2027 15,493 +2028 5,645 +2029 1,499 +Thereafter 5,405 +Total Lease payments $ 78,672 +Less: Imputed interest (1) +( 13,351 ) +Total $ 65,321 +____________________________________________ +(1) The weighted-average discount rate used to determine the operating lease liability as of December 31, 2024, was 5.5 percent. +98 +The following table presents supplemental accompanying balance sheet information for operating leases: +As of December 31, +2024 2023 +(in thousands, except discount rate and lease term) +Balance sheet classifications of operating leases: +Other noncurrent assets $ 111,882 $ 32,264 +Other current liabilities $ 22,419 $ 15,425 +Other noncurrent liabilities $ 42,902 $ 24,352 +ROU assets obtained in exchange for operating lease liabilities $ 26,844 $ 19,341 +Weighted-average discount rate +5.5 % +6.2 % +Weighted-average remaining lease term (years) 4 4 +Note 14 – Accounts Receivable and Accounts Payable and Accrued Expenses +The components of accounts receivable are as follows: +As of December 31, +2024 2023 +(in thousands) +Oil, gas, and NGL production revenue $ 246,437 $ 175,334 +Amounts due from joint interest owners 98,391 46,289 +Other 16,148 9,542 +Total accounts receivable $ 360,976 $ 231,165 +The components of accounts payable and accrued expenses are as follows: +As of December 31, +2024 2023 +(in thousands) +Drilling and lease operating cost accruals $ 200,351 $ 146,381 +Trade accounts payable 82,500 107,315 +Revenue and severance tax payable 245,631 184,989 +Property taxes 41,235 43,406 +Compensation 46,243 54,819 +Interest 79,553 35,976 +Dividends payable 22,892 20,834 +Other 42,068 17,878 +Total accounts payable and accrued expenses $ 760,473 $ 611,598 +____________________________________________ +Note: Prior periods have been adjusted to conform to the current period presentation. +Note 15 – Asset Retirement Obligations +Refer to Asset Retirement Obligations in Note 1 – Summary of Significant Accounting Policies for a discussion of the initial and subsequent measurements of asset retirement obligation liabilities and the significant assumptions used in the estimates. +99 +The following is a reconciliation of the Company’s total asset retirement obligation liability: +As of December 31, +2024 2023 +(in thousands) +Beginning asset retirement obligations $ 123,154 $ 115,313 +Liabilities incurred (1) +21,442 4,062 +Liabilities settled (2) +( 27,130 ) ( 4,489 ) +Accretion expense +5,403 6,330 +Revision to estimated cash flows +26,444 1,938 +Ending asset retirement obligations (3) +$ 149,313 $ 123,154 +____________________________________________ +(1) Reflects liabilities incurred through drilling activities and acquisitions of drilled wells. +(2) Reflects liabilities settled through plugging and abandonment activities and divestitures of properties. +(3) Balances as of December 31, 2024, and 2023, included $ 4.0 million and $ 4.4 million, respectively, related to the Company’s current asset retirement obligation liability, which is recorded in the accounts payable and accrued expenses line item on the accompanying balance sheets. +Note 16 – Suspended Well Costs +The following table reflects the net changes in capitalized exploratory well costs during the periods presented. The table does not include amounts that were capitalized and either subsequently expensed or reclassified to producing well costs in the same year: +For the Years Ended December 31, +2024 2023 2022 +(in thousands) +Beginning balance $ 71,369 $ 49,047 $ 15,576 +Additions to capitalized exploratory well costs pending the determination of net proved reserves +32,599 70,762 49,047 +Reclassifications based on the determination of net proved reserves +( 67,494 ) ( 47,985 ) ( 14,721 ) +Capitalized exploratory well costs charged to expense (1) +( 3,875 ) ( 455 ) ( 855 ) +Ending balance $ 32,599 $ 71,369 $ 49,047 +____________________________________________ +(1) For the year ended December 31, 2024, amount relates to one well deemed non-commercial. For the year ended December 31, 2023, amount relates to one well that experienced technical issues during the drilling phase. For the year ended December 31, 2022, amount relates to unsuccessful exploration activity outside of the Company’s core areas of operation. +As of December 31, 2024, there were no exploratory well costs that were capitalized for more than one year. +Note 17 – Acquisitions +2024 Acquisition Activity +Uinta Basin Asset Acquisition . On June 27, 2024 , the Company entered into a Purchase and Sale Agreement (“XCL Acquisition Agreement”) with XCL AssetCo, LLC, XCL Marketing, LLC, Wasatch Water Logistics, LLC, XCL Resources, LLC, and XCL SandCo, LLC, (collectively referred to as the “XCL Sellers” or “XCL Resources”) and, for the limited purposes described therein, Northern Oil and Gas, Inc. (“NOG”). Pursuant to the XCL Acquisition Agreement, the Company agreed to purchase all of the rights, titles and interests in primarily proved oil and gas assets, and related supporting facilities in the Uinta Basin owned by the XCL Sellers (“XCL Assets”). Concurrently with the execution of the XCL Acquisition Agreement, the Company entered into an Acquisition and Cooperation Agreement (“Cooperation Agreement”) with NOG, pursuant to which the Company and NOG agreed to cooperate in connection with the XCL Acquisition Agreement and NOG agreed to acquire an undivided 20 percent interest in the assets acquired pursuant to the XCL Acquisition Agreement. Upon execution of the XCL Acquisition Agreement, the Company deposited with an escrow agent a cash deposit of $ 102.0 million (“Cash Deposit”). Pursuant to the terms of the XCL Acquisition Agreement, the Company had the option to acquire certain additional assets adjacent to the XCL Assets (“Altamont Option Assets”) from the XCL Sellers for a purchase price equal to the XCL Sellers’ cost to acquire the Altamont Option Assets plus the XCL Sellers’ related out of pocket expenses. On August 5, 2024 , the Company exercised the option to acquire the Altamont Option Assets. +100 +On October 1, 2024 (“Closing Date”), immediately prior to the closing of the transactions contemplated by the XCL Acquisition Agreement, and as permitted by the XCL Acquisition Agreement and Cooperation Agreement, the Company assigned an undivided 20 percent interest in the XCL Acquisition Agreement to NOG and caused the XCL Sellers to directly assign an undivided 20 percent interest in both the XCL Assets and the Altamont Option Assets to NOG. Accordingly, on the Closing Date, the Company completed the acquisition of an undivided 80 percent interest in both the XCL Assets and the Altamont Option Assets with an effective date of May 1, 2024 (“Uinta Basin Acquisition“). The Company’s undivided 80 percent interest in the assets acquired in the Uinta Basin Acquisition consists of approximately 63,300 net acres. +On the Closing Date, the unadjusted purchase price, net to the Company’s 80 percent undivided interest in the Uinta Basin Acquisition, was approximately $ 2.1 billion. The Company paid approximately $ 1.9 billion in cash to the XCL Sellers, using a portion of the net proceeds from the issuance of the 2029 Senior Notes and 2032 Senior Notes discussed in Note 5 – Long-Term Debt , cash on hand, and borrowings under the Company’s revolving credit facility. Additionally, the $ 102.0 million Cash Deposit was applied toward the unadjusted purchase price and a majority of the Cash Deposit was disbursed to the XCL Sellers on the Closing Date. The beneficial ownership of the remaining portion of the Cash Deposit transferred to the XCL Sellers on the Closing Date and will remain in escrow pending the completion of post-closing purchase price adjustments, which are expected to occur in the first quarter of 2025. +In accordance with GAAP, this transaction was considered to be an asset acquisition as substantially all the gross assets acquired were concentrated in a group of similar identifiable assets. Therefore, the properties were recorded based on the total consideration paid after purchase price adjustments and the transaction costs were capitalized as a component of the cost of the assets acquired. The adjusted purchase price was allocated to the assets and liabilities acquired based on their estimated fair value as of the acquisition date using certain assumptions including: (i) estimated net proved and unproved reserves; (ii) production rates; (iii) future operating and development costs; (iv) future commodity prices, including price differentials; (v) risk adjusted future cash flows; and (vi) a market participant-based weighted average cost of capital rate. These inputs required significant judgment by management at the time of the valuation. +The adjusted purchase price was $ 2.0 billion and was allocated to the assets acquired and liabilities assumed based on the relative fair values on the closing date as follows: (i) $ 1.6 billion to proved oil and gas properties, (ii) $ 495.2 million to unproved oil and gas properties, (iii) $ 16.3 million to both operating lease right-of-use assets and operating liabilities, (iv) $ 58.1 million to revenue and royalties payable and other liabilities, net, and (v) $ 15.1 million to asset retirement obligations. +The Uinta Basin Acquisition is subject to normal post-closing adjustments expected to occur in the first quarter of 2025. +2023 Acquisition Activity +On June 30, 2023 , the Company acquired approximately 20,000 net acres of oil and gas properties in Dawson and northern Martin counties, Texas. In accordance with GAAP, this transaction was considered to be an asset acquisition. Therefore, the properties were recorded based on the total consideration paid after purchase price adjustments and the transaction costs were capitalized as a component of the cost of the assets acquired. During the third quarter of 2023, the Company acquired additional working interests in certain wells located in the Midland Basin. Total consideration paid for these transactions, after purchase price adjustments, was $ 109.9 million. +Additionally, during the year ended December 31, 2023, the Company completed a non-monetary asset exchange of proved properties in Upton County, Texas. This exchange was recorded at carryover basis with no gain or loss recognized. +101 +Supplemental Oil and Gas Information (unaudited) +Costs Incurred +Costs incurred in oil and gas property acquisition, exploration, and development activities, whether capitalized or expensed, are summarized as follows: +For the Years Ended December 31, +2024 2023 2022 +(in thousands) +Development costs (1) +$ 1,196,542 $ 931,803 $ 810,520 +Exploration costs 170,297 172,590 147,042 +Acquisitions +Proved properties 1,622,192 65,019 18 +Unproved properties (2) +514,647 65,570 4,153 +Total, including asset retirement obligations (3)(4) +$ 3,503,678 $ 1,234,982 $ 961,733 +____________________________________________ +(1) Includes facility costs of $42.3 million, $24.1 million, and $30.0 million for the years ended December 31, 2024, 2023, and 2022, respectively. +(2) Includes amounts related to leasing activity and acquiring surface rights outside of acquisitions of proved and unproved properties totaling $2.9 million, $18.1 million, and $4.2 million for the years ended December 31, 2024, 2023, and 2022, respectively. +(3) Includes amounts related to estimated asset retirement obligations of $47.9 million, $6.0 million, and $15.1 million for the years ended December 31, 2024, 2023, and 2022, respectively. +(4) Includes capitalized interest of $25.5 million, $20.4 million, and $17.6 million for the years ended December 31, 2024, 2023, and 2022, respectively. +Oil and Gas Reserve Quantities +The reserve estimates presented below were made in accordance with GAAP requirements for disclosures about oil and gas producing activities and SEC rules for oil and gas reporting of reserve estimation and disclosure. +Proved reserves are the estimated quantities of oil, gas, and NGLs that, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulations prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation. Existing economic conditions include prices and costs at which economic producibility from a reservoir is to be determined, and the price to be used is the average price during the 12-month period prior to the ending date of the period covered by the report, determined as an unweighted arithmetic average of the first-day-of-the-month price for each month within such period, unless prices are defined by contractual arrangements, excluding escalations based upon future conditions. All of the Company’s estimated net proved reserves are located in the United States. +The tables below present a summary of changes in the Company’s estimated net proved reserves for each of the years ended December 31, 2024, 2023, and 2022. The Company engaged Ryder Scott to audit internal engineering estimates for at least 80 percent of the Company’s total calculated proved reserve PV-10 for each year presented. The Company emphasizes that reserve estimates are inherently imprecise and that estimates of new discoveries and undeveloped locations are more imprecise than estimates of established producing oil and gas properties. Accordingly, these estimates are expected to change as future information becomes available. +102 +For the Year Ended December 31, 2024 +Oil Gas NGLs Total +(MMBbl) (Bcf) (MMBbl) (MMBOE) +Total net proved reserves: +Beginning of year 230.1 1,532.0 119.5 604.9 +Revisions of previous estimates (1) +3.5 30.7 14.1 22.7 +Discoveries and extensions 7.2 19.4 0.7 11.1 +Sales of reserves (0.7) (3.3) — (1.2) +Purchases of minerals in place (2) +85.3 107.3 — 103.2 +Production (29.3) (137.0) (10.2) (62.4) +End of year 296.0 1,549.1 124.1 678.3 +Net proved developed reserves: +Beginning of year 118.5 948.5 64.7 341.2 +End of year 160.3 1,031.3 71.8 404.0 +Net proved undeveloped reserves: +Beginning of year 111.6 583.5 54.8 263.6 +End of year 135.7 517.8 52.4 274.3 +____________________________________________ +Note: Amounts may not calculate due to rounding. +(1) Revisions of previous estimates consist of: +• 74.7 MMBOE of infill reserves; +• 30.5 MMBOE of certain net proved undeveloped reserves cases that are no longer expected to be developed within the five-year period from initial booking as a result of the reallocation of capital to include our Uinta Basin assets, and certain lease obligations; +• 13.4 MMBOE of negative price revisions resulting primarily from decreases in gas prices; and +• 8.0 MMBOE of negative performance revisions related to well performance. +(2) Purchases of minerals in place consist of 103.2 MMBOE acquired as part of the Uinta Basin Acquisition. Refer to Note 17 – Acquisitions for additional information. +Refer to Areas of Operation in Part I, Items 1 and 2 of this report, and to Oil and Gas Reserve Quantities in Critical Accounting Estimates in Part II, Item 7 of this report for additional information. +103 +For the Year Ended December 31, 2023 +Oil Gas NGLs Total +(MMBbl) (Bcf) (MMBbl) (MMBOE) +Total net proved reserves: +Beginning of year 205.8 1,402.9 97.8 537.4 +Revisions of previous estimates (1) +38.7 194.2 20.8 91.9 +Discoveries and extensions 8.9 69.1 10.5 30.9 +Sales of reserves (3.2) (13.1) — (5.4) +Purchases of minerals in place 3.6 11.2 — 5.5 +Production (23.8) (132.4) (9.7) (55.5) +End of year 230.1 1,532.0 119.5 604.9 +Net proved developed reserves: +Beginning of year 110.4 902.1 57.1 317.8 +End of year 118.5 948.5 64.7 341.2 +Net proved undeveloped reserves: +Beginning of year 95.4 500.8 40.7 219.6 +End of year 111.6 583.5 54.8 263.6 +____________________________________________ +Note: Amounts may not calculate due to rounding. +(1) Revisions of previous estimates consist of: +• 113.9 MMBOE of infill reserves; +• 65.3 MMBOE of positive performance revisions resulting from changes to decline curve estimates based on reservoir engineering analysis; +• 28.0 MMBOE of negative performance revisions related to well performance; +• 30.8 MMBOE of estimated net proved undeveloped reserves reclassified to unproved reserves categories resulting from revising certain aspects of the Company’s future development plans, and due to certain lease obligations; and +• 28.4 MMBOE of negative price revisions resulting primarily from decreases in gas and NGL prices. +For the Year Ended December 31, 2022 +Oil Gas NGLs Total +(MMBbl) (Bcf) (MMBbl) (MMBOE) +Total net proved reserves: +Beginning of year 199.5 1,243.5 85.2 492.0 +Revisions of previous estimates (1) +23.7 248.2 16.7 81.7 +Discoveries and extensions 6.6 37.2 3.9 16.7 +Sales of reserves — — — — +Purchases of minerals in place — — — — +Production (24.0) (125.9) (8.0) (53.0) +End of year 205.8 1,402.9 97.8 537.4 +Net proved developed reserves: +Beginning of year 110.7 833.0 50.7 300.2 +End of year 110.4 902.1 57.1 317.8 +Net proved undeveloped reserves: +Beginning of year 88.8 410.4 34.5 191.8 +End of year 95.4 500.8 40.7 219.6 +____________________________________________ +Note: Amounts may not calculate due to rounding. +(1) Revisions of previous estimates consist of: +• 103.2 MMBOE of infill reserves; +• 9.5 MMBOE of positive price revisions; +104 +• 19.9 MMBOE of estimated net proved undeveloped reserves reclassified to unproved reserves categories resulting from revising certain aspects of the Company’s future development plans; and +• 11.1 MMBOE of negative performance revisions. +Standardized Measure of Discounted Future Net Cash Flows +The Company computes a standardized measure of discounted future net cash flows and changes therein relating to estimated proved reserves in accordance with authoritative accounting guidance. Future cash inflows and production and development costs are determined by applying prices and costs, including transportation, quality, and basis differentials, to the year-end estimated future reserve quantities. Each property the Company operates is also charged with field-level overhead in the estimated reserve calculation. Estimated future income taxes are computed using the current statutory income tax rates, including consideration for estimated future statutory depletion. The resulting future net cash flows are reduced to present value amounts by applying a 10 percent annual discount factor. +Future operating costs are determined based on estimates of expenditures to be incurred in developing and producing the estimated proved reserves in place at the end of the period using year end costs and assuming continuation of existing economic conditions, plus Company overhead incurred by the central administrative office attributable to operating activities and estimated abandonment costs. +The assumptions used to compute the standardized measure of discounted future net cash flows are those prescribed by the FASB and the SEC. These assumptions do not necessarily reflect the Company’s expectations of actual revenues to be derived from those reserves, nor their present value amount. The limitations inherent in the reserve quantity estimation process, as discussed previously, are equally applicable to the standardized measure of discounted future net cash flows computations since these reserve quantity estimates are the basis for the valuation process. The following prices as adjusted for transportation, quality, and basis differentials were used in the calculation of the standardized measure of discounted future net cash flows: +For the Years Ended December 31, +2024 2023 2022 +Oil (per Bbl) $ 74.75 $ 77.96 $ 95.02 +Gas (per Mcf) $ 1.86 $ 2.52 $ 6.39 +NGLs (per Bbl) $ 22.45 $ 22.35 $ 35.88 +The following summary sets forth the Company’s future net cash flows relating to proved oil, gas, and NGL reserves based on the standardized measure of discounted future net cash flows: +As of December 31, +2024 2023 2022 +(in thousands) +Future cash inflows $ 27,798,245 $ 24,466,288 $ 32,024,639 +Future production costs (10,480,264) (7,894,043) (7,672,906) +Future development costs (3,235,254) (2,997,545) (2,949,871) +Future income taxes (1,796,305) (2,000,016) (3,888,342) +Future net cash flows 12,286,422 11,574,684 17,513,520 +10 percent annual discount (5,018,512) (5,294,535) (7,551,454) +Standardized measure of discounted future net cash flows $ 7,267,910 $ 6,280,149 $ 9,962,066 +105 +The principal sources of changes in the standardized measure of discounted future net cash flows were: +For the Years Ended December 31, +2024 2023 2022 +(in thousands) +Standardized measure of discounted future net cash flows, beginning of year +$ 6,280,149 $ 9,962,066 $ 6,962,607 +Sales of oil, gas, and NGLs produced, net of production costs (2,034,314) (1,800,346) (2,724,994) +Net changes in prices and production costs (922,271) (5,649,606) 4,428,804 +Extensions and discoveries, net of related costs +183,024 280,545 424,463 +Sales of reserves in place (13,769) (83,850) — +Purchase of reserves in place 1,654,555 151,263 — +Previously estimated development costs incurred during the period 1,022,451 772,602 423,527 +Changes in estimated future development costs 58,531 99,974 (462,015) +Revisions of previous quantity estimates +466,777 537,502 1,327,530 +Accretion of discount 737,650 1,215,452 815,862 +Net change in income taxes 8,531 1,096,099 (996,437) +Changes in timing and other (173,404) (301,552) (237,281) +Standardized measure of discounted future net cash flows, end of year +$ 7,267,910 $ 6,280,149 $ 9,962,066 +106 +ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE +None. +ITEM 9A. CONTROLS AND PROCEDURES +Evaluation of Disclosure Controls and Procedures +We maintain a system of disclosure controls and procedures that are designed to reasonably ensure that information required to be disclosed in our SEC reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and to reasonably ensure that such information is accumulated and communicated to our management, including our Chief Executive Officer (Principal Executive Officer) and our Chief Financial Officer (Principal Financial Officer), as appropriate, to allow for timely decisions regarding required disclosure. +Our management, including our Chief Executive Officer and our Chief Financial Officer, does not expect that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) (“Disclosure Controls”) will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. We monitor our Disclosure Controls and make modifications as necessary; our intent in this regard is that the Disclosure Controls will be modified as systems change and conditions warrant. +An evaluation of the effectiveness of the design and operation of our Disclosure Controls was performed as of the end of the period covered by this report. This evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our Disclosure Controls are effective at a reasonable assurance level. +Changes in Internal Control Over Financial Reporting +There have been no changes to our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during the fourth quarter of 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. +107 +Management’s Report on Internal Control over Financial Reporting +Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s internal control over financial reporting includes those policies and procedures that: +(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; +(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and +(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that have a material effect on the financial statements. +Because of the inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. Even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of the changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate. +Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2024. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013 framework) . +Based on management’s assessment and those criteria, management concluded that the Company maintained effective internal control over financial reporting as of December 31, 2024. +The Uinta Basin Acquisition was considered the acquisition of a business as defined by Article 11-01(d) of Regulation S-X. As permitted by the SEC, management’s assessment and conclusion on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2024, excludes an assessment of the internal controls over the oil and gas properties acquired in the Uinta Basin Acquisition. Due to the recent nature of the acquisition, it was not practical from a timing or resource perspective for management to conduct a thorough assessment of the internal control over financial reporting related to the Uinta Basin Acquisition prior to December 31, 2024. The Uinta Basin Acquisition is included in our 2024 consolidated financial statements and represents approximately 27 percent of the total assets of the consolidated Company as of December 31, 2024, and approximately seven percent of consolidated revenues for the year then ended. Refer to Note 17 – Acquisitions in Part II, Item 8 of this report for additional discussion of the Uinta Basin Acquisition. +The Company’s independent registered public accounting firm has issued an attestation report on the Company’s internal control over financial reporting. That report immediately follows this report. +108 +Report of Independent Registered Public Accounting Firm +To the Stockholders and the Board of Directors of SM Energy Company and subsidiaries +Opinion on Internal Control Over Financial Reporting +We have audited SM Energy Company and subsidiaries’ internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, SM Energy Company and subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on the COSO criteria. +As indicated in the accompanying Management’s Report on Internal Control over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls over the oil and natural gas properties the Company acquired on October 1, 2024 in the Uinta Basin (the “Uinta Basin Acquisition”). The Uinta Basin Acquisition was included in the 2024 consolidated financial statements of the Company and represented 27% of total consolidated assets as of December 31, 2024 and 7% of consolidated revenues for the year then ended. Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of the Uinta Basin Acquisition. +We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2024 and 2023, the related consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2024, and the related notes and our report dated February 20, 2025 expressed an unqualified opinion thereon. +Basis for Opinion +The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. +We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. +Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. +Definition and Limitations of Internal Control Over Financial Reporting +A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. +Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. +/s/ Ernst & Young LLP +Denver, Colorado +February 20, 2025 +109 +ITEM 9B. OTHER INFORMATION +None . +ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS +These disclosures are not applicable to the Company. +PART III +ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE +The information required by this Item is incorporated by reference to the information provided in the Company’s Definitive Proxy Statement on Schedule 14A for the 2025 annual meeting of stockholders, to be filed within 120 days from December 31, 2024. +The Company has adopted insider trading policies and procedures governing the purchase, sale, and/or other dispositions of the registrant’s securities by directors, officers, and employees. This policy is filed as Exhibit 19.1 to this report. +ITEM 11. EXECUTIVE COMPENSATION +The information required by this Item is incorporated by reference to the information provided in the Company’s Definitive Proxy Statement on Schedule 14A for the 2025 annual meeting of stockholders, to be filed within 120 days from December 31, 2024. +ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS +The Company is not aware of any arrangements that may result in a change in control of the Company. +The information required by this Item concerning security ownership of certain beneficial owners and management is incorporated by reference to the information provided in the Company’s Definitive Proxy Statement on Schedule 14A for the 2025 annual meeting of stockholders, to be filed within 120 days from December 31, 2024. +110 +Securities Authorized for Issuance Under Equity Compensation Plans. The Company has equity compensation plans under which options and shares of the Company’s common stock are authorized for grant or issuance as compensation to eligible employees, consultants, and members of the Board of Directors. The Company’s stockholders have approved these plans. Refer to Note 10 – Compensation Plans in Part II, Item 8 of this report for further information about the material terms of the Company’s equity compensation plans. The following table is a summary of the shares of common stock authorized for issuance under equity compensation plans as of December 31, 2024: +(a) (b) (c) +Plan category Number of securities to be issued upon exercise of outstanding options, warrants, and rights Weighted-average exercise price of outstanding options, warrants, and rights Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) +Equity compensation plans approved by security holders: +Equity Incentive Compensation Plan (1) +Restricted stock units (2) +1,048,631 N/A +Performance share units (2) (3) +710,316 N/A +Total for Equity Incentive Compensation Plan 1,758,947 $ — 1,852,397 +Employee Stock Purchase Plan (4) +— — 3,213,180 +Equity compensation plans not approved by security holders +— — — +Total for all plans 1,758,947 $ — 5,065,577 +____________________________________________ +(1) In May 2006, the stockholders approved the Equity Plan to authorize the issuance of restricted stock, restricted stock units, non-qualified stock options, incentive stock options, stock appreciation rights, performance shares, performance units, and stock-based awards to key employees, consultants, and members of the Board of Directors of the Company or any affiliate of the Company. The Company’s Board of Directors approved amendments to the Equity Plan in 2009, 2010, 2013, 2016, and 2018 and each amended plan was approved by stockholders at the respective annual stockholders’ meetings. The total number of shares of the Company’s common stock underlying awards granted in 2024, 2023, and 2022 under the Equity Plan were 774,687, 943,979, and 832,257, respectively. +(2) RSUs and PSUs do not have exercise prices associated with them, but rather a weighted-average per unit fair value, which is presented in order to provide additional information regarding the potential dilutive effect of the awards. The weighted-average grant date per unit fair value for the outstanding RSUs and PSUs was $37.73 and $32.83, respectively. Refer to Note 10 – Compensation Plans in Part II, Item 8 of this report for additional discussion. +(3) The number of shares of common stock assumes a multiplier of one. The actual final number of shares of common stock to be issued will range from zero to two times the number of PSUs awarded depending on the three-year performance multiplier. +(4) Under the ESPP, eligible employees may purchase shares of the Company’s common stock through payroll deductions of up to 15 percent of their eligible compensation, subject to certain limitations discussed in Note 10 – Compensation Plans in Part II, Item 8 of this report. The purchase price of the common stock is 85 percent of the lower of the trading price of the common stock on either the first or last day of the six-month offering period. The ESPP is intended to qualify under Section 423 of the IRC. The total number of shares of the Company’s common stock issued in 2024, 2023, and 2022 under the ESPP were 97,500, 114,427, and 113,785, respectively. +ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE +The information required by this Item is incorporated by reference to the information provided in the Company’s Definitive Proxy Statement on Schedule 14A for the 2025 annual meeting of stockholders, to be filed within 120 days from December 31, 2024. +ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES +The information required by this Item is incorporated by reference to the information provided in the Company’s Definitive Proxy Statement on Schedule 14A for the 2025 annual meeting of stockholders, to be filed within 120 days from December 31, 2024. +111 +PART IV +ITEM 15. EXHIBITS AND CONSOLIDATED FINANCIAL STATEMENT SCHEDULES +(a)(1) and (a)(2) Consolidated Financial Statements and Financial Statement Schedules: +Report of Independent Registered Public Accounting Firm (PCAOB ID 42 ) +61 +Consolidated Balance Sheets +63 +Consolidated Statements of Operations +64 +Consolidated Statements of Comprehensive Income +65 +Consolidated Statements of Stockholders’ Equity +66 +Consolidated Statements of Cash Flows +67 +Notes to Consolidated Financial Statements +69 +All schedules are omitted because the required information is not applicable or is not present in amounts sufficient to require submission of the schedule or because the information required is included in the Consolidated Financial Statements and Notes thereto. +(b) Exhibits. The following exhibits are filed or furnished with or incorporated by reference into this report on Form 10-K: +Exhibit +Number +Description +3.1 +Restated Certificate of Incorporation of SM Energy Company, as amended through June 1, 2010 (filed as Exhibit 3.1 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2010, and incorporated herein by reference) +3.2 +Certificate of Amendment of Restated Certificate of Incorporation of SM Energy Company, as amended through June 1, 2010, dated May 25, 2023 (filed as Exhibit 3.1 to the registrant’s Current Report on Form 8-K filed on May 30, 2023, and incorporated herein by reference) +3.3 +Amended and Restated By-Laws of SM Energy Company, effective as of February 21, 2017 (filed as Exhibit 3.2 to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2016, and incorporated herein by reference) +4.1 +Indenture related to senior debt securities of SM Energy Company by and between SM Energy Company and U.S. Bank National Association, as trustee (filed as Exhibit 4.1 to the registrant’s Registration Statement on Form S-3 filed on May 7, 2015 (Registration No. 333-203936) and incorporated herein by reference) +4.2 +2025 Notes Supplemental Indenture (filed as Exhibit 4.2 to the registrant’s Current Report on Form 8-K filed on May 21, 2015, and incorporated herein by reference) +4.3 +Base Indenture, dated as of May 21, 2015, by and between SM Energy Company and U.S. Bank National Association, as trustee (filed as Exhibit 4.1 to the registrant’s Current Report on Form 8-K filed on August 12, 2016, and incorporated herein by reference) +4.4 +Third Supplemental Indenture, dated September 12, 2016 by and between SM Energy Company and U.S. Bank National Association, as trustee (filed as Exhibit 4.2 to the registrant’s Current Report on Form 8-K filed on September 12, 2016, and incorporated herein by reference) +4.5 +Fourth Supplemental Indenture, dated as of August 20, 2018, by and between SM Energy Company and U.S. Bank National Association, as trustee (filed as Exhibit 4.2 to the registrant’s Current Report on Form 8-K filed on August 20, 2018, and incorporated herein by reference) +4.6 +Fifth Supplemental Indenture, dated as of June 23, 2021, by and between SM Energy Company and U.S. Bank National Association, as trustee (filed as Exhibit 4.2 to the registrant’s Current Report on Form 8-K filed on June 23, 2021, and incorporated herein by reference) +4.7 +Indenture, dated as of July 25, 2024, by and between SM Energy Company and U.S. Bank Trust Company, National Association, as trustee (filed as Exhibit 4.1 to the registrant’s Current Report on Form 8-K filed on July 25, 2024, and incorporated herein by reference) +4.8* +Description of Securities +10.1 +Deed of Trust to Wachovia Bank, National Association, as Administrative Agent, dated effective as of April 14, 2009 (filed as Exhibit 10.2 to the registrant’s Current Report on Form 8-K filed on April 20, 2009, and incorporated herein by reference) +10.2 +Supplement and Amendment to Deed of Trust, Mortgage, Line of Credit Mortgage, Assignment, Security Agreement, Fixture Filing and Financing Statement for the benefit of Wachovia Bank, National Association, as Administrative Agent, dated effective as of April 14, 2009 (filed as Exhibit 10.3 to the registrant’s Current Report on Form 8-K filed on April 20, 2009, and incorporated herein by reference) +112 +10.3 +Seventh Amended and Restated Credit Agreement dated as of August 2, 2022, among SM Energy Company, Wells Fargo Bank, National Association, as Administrative Agent and Swingline Lender, and the Lenders party thereto (filed as Exhibit 10.1 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2022, and incorporated herein by reference) +10.4 +First Amendment to Seventh Amended and Restated Credit Agreement, dated as of July 2, 2024, by and among SM Energy Company, a Delaware corporation, each of the Lenders that is a party thereto; and Wells Fargo Bank, National Association, as administrative agent for the Lenders, the Issuing Banks and the Swingline Lender (filed as Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on July 8, 2024, and incorporated herein by reference) +10.5 +Second Amendment to Seventh Amended and Restated Credit Agreement, dated as of October 1, 2024, by and among SM Energy Company, a Delaware corporation, each of the Lenders that is a party thereto; and Wells Fargo Bank, National Association, as administrative agent for the Lenders, the Issuing Banks and the Swingline Lender (filed as Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on October 2, 2024, and incorporated herein by reference) +10.6 +Purchase and Sale Agreement dated as of June 27, 2024 by and among XCL AssetCo, LLC, XCL Marketing, LLC, Wasatch Water Logistics, LLC, XCL Resources, LLC and XCL SandCo, LLC, as Seller, and SM Energy Company, as Purchaser, and solely for the limited purposes as set forth therein, Northern Oil and Gas, Inc.(filed as Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on June 28, 2024, and incorporated herein by reference) +10.7 +Acquisition and Cooperation Agreement dated as of June 27, 2024 by and between SM Energy Company and Northern Oil and Gas, Inc. (filed as Exhibit 10.2 to the registrant’s Current Report on Form 8-K filed on June 28, 2024, and incorporated herein by reference) +10.8†† +Net Profits Interest Bonus Plan, As Amended by the Board of Directors on July 30, 2010 (filed as Exhibit 10.6 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2010 and incorporated herein by reference) +10.9† +Pension Plan for Employees of SM Energy Company as Amended and Restated as of January 1, 2010 (filed as Exhibit 10.30 to the registrant’s Annual Report on Form 10-K filed for the year ended December 31, 2010, and incorporated herein by reference) +10.10† +Amendment No. 1 to the Pension Plan for Employees of SM Energy Company amended as of January 1, 2011 (filed as Exhibit 10.41 to the registrant’s Annual Report on Form 10-K filed for the year ended December 31, 2011, and incorporated herein by reference) +10.11† +Amendment No. 2 to the Pension Plan for Employees of SM Energy Company amended as of January 1, 2012 (filed as Exhibit 10.42 to the registrant’s Annual Report on Form 10-K filed for the year ended December 31, 2011, and incorporated herein by reference) +10.12† +Amendment No. 3 to the Pension Plan for Employees of SM Energy Company amended as of January 1, 2016 (filed as Exhibit 10.29 to the registrant’s Annual Report on Form 10-K filed for the year ended December 31, 2015, and incorporated herein by reference) +10.13+ +SM Energy Company Non-Qualified Unfunded Supplemental Retirement Plan as Amended as of December 31, 2010 (filed as Exhibit 10.31 to the registrant’s Annual Report on Form 10-K filed for the year ended December 31, 2010, and incorporated herein by reference) +10.14† +SM Energy Company Non-Qualified Deferred Compensation Plan as of March 10, 2014 (filed as Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on January 24, 2014, and incorporated herein by reference) +10.15† +Cash Bonus Plan, As Amended and Restated as of February 1, 2014 (filed as Exhibit 10.41 to the registrant’s Annual Report on Form 10-K filed for the year ended December 31, 2013, and incorporated herein by reference) +10.16† +Section 162(m) Cash Bonus Plan, effective as of May 21, 2014 (filed as Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on May 28, 2014, and incorporated herein by reference) +10.17† +SM Energy Company Employee Stock Purchase Plan, amended and restated effective as of April 5, 2021 (filed as Annex A in the registrant’s Definitive Proxy Statement on Schedule 14A, filed on April 16, 2021, and incorporated herein by reference) +10.18† +Form of Non-Employee Director Restricted Stock Award Agreement as of May 27, 2010 (filed as Exhibit 10.5 to the registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2010, and incorporated herein by reference) +10.19*† +Summary of Compensation Arrangements for Non-Employee Directors +10.20† +Change of Control Executive Severance Agreement (filed as Exhibit 1 0.16 to the registrant ’ s Annual Report on Form 10-K for the year ended December 31, 2023, and incorporated herein by re ference) +10.21† +Change of Control Severance Agreement dated December 18, 2022 between Lehman E. Newton, III and SM Energy Company. (filed as Exhibit 10.2 to the registrant’s Current Report on Form 8-K filed on December 21, 2022, and incorporated herein by reference) +10.22† +Change of Control Severance Agreement dated December 29, 2022 between David Copeland and SM Energy Company. (filed as Exhibit 10.2 to the registrant’s Current Report on Form 8-K filed on December 30, 2022, and incorporated herein by reference) +10.23† +Non-Competition and Non-Solicitation Agreement dated December 18, 2022 between Lehman E. Newton, III and SM Energy Company (filed as Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on December 21, 2022, and incorporated herein by reference) +113 +10.24† +Non-Competition and Non-Solicitation Agreement dated December 29, 2022 between David Copeland and SM Energy Company (filed as Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on December 30, 2022, and incorporated herein by reference) +10.25† +SM Energy Company Equity Incentive Compensation Plan, amended and restated effective as of May 22, 2018 (filed as Annex A in the registrant’s Definitive Proxy Statement on Schedule 14A, filed on April 12, 2018, and incorporated herein by reference) +10.26† +Form of Performance Share Unit Award Agreement as of July 1, 2023 (filed as Exhibit 10. 22 to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2023, and incorporated herein by reference) +10.27† +Form of Restricted Stock Unit Award Agreement as of July 1, 2023 (filed as Exhibit 10. 23 to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2023, and incorporated herein by reference) +19.1 * +Insider Trading Policy and Procedures +21.1* +Subsidiaries of Registrant +23.1* +Consent of Ernst & Young LLP +23.2* +Consent of Ryder Scott Company L.P. +24.1* +Power of Attorney +31.1* +Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes – Oxley Act of 2002 +31.2* +Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes – Oxley Act of 2002 +32.1** +Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes - Oxley Act of 2002 +95.1* +Mine Safety Disclosures +97.1† +Policy Relating to Recovery of Erroneously Awarded Compensation (filed as Exhibit 97 . 1 to the registrant’s Annual Report on Form 10-K for the year ended December 31, 2023, and incorporated herein by reference) +99.1* +Ryder Scott Audit Letter +101.INS Inline XBRL Instance Document - The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. +101.SCH* Inline XBRL Schema Document +101.CAL* Inline XBRL Calculation Linkbase Document +101.LAB* Inline XBRL Label Linkbase Document +101.PRE* Inline XBRL Presentation Linkbase Document +101.DEF* Inline XBRL Taxonomy Extension Definition Linkbase Document +104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101.INS) +_____________________________________ +* Filed with this report. +** Furnished with this report. +† Exhibit constitutes a management contract or compensatory plan or agreement. +†† Exhibit constitutes a management contract or compensatory plan or agreement. This document was amended on July 30, 2010 primarily to reflect the change in the name of the registrant from St. Mary Land & Exploration Company to SM Energy Company. There were no material changes to the substantive terms and conditions in this document. ++ Exhibit constitutes a management contract or compensatory plan or agreement. This document was amended on November 9, 2010, in order to make technical revisions to ensure compliance with Section 409A of the Internal Revenue Code. There were no material changes to the substantive terms and conditions in this document. +(c) Financial Statement Schedules. Refer to Item 15(a) above. +ITEM 16. FORM 10-K SUMMARY +None. +114 +SIGNATURES +Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. +SM ENERGY COMPANY +(Registrant) +Date: February 20, 2025 By: /s/ HERBERT S. VOGEL +Herbert S. Vogel +President and Chief Executive Officer +(Principal Executive Officer) +GENERAL POWER OF ATTORNEY +KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints each of Herbert S. Vogel and A. Wade Pursell his or her true and lawful attorney-in-fact and agent with full power of substitution and resubstitution, and each with full power to act alone, for the undersigned and in his or her name, place and stead, in any and all capacities, to sign any amendments to this Annual Report on Form 10-K for the fiscal year ended December 31, 2024, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorney-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof. +Pursuant to the requirements of the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. +Signature Title Date +/s/ HERBERT S. VOGEL President, Chief Executive Officer, and Director February 20, 2025 +Herbert S. Vogel (Principal Executive Officer) +/s/ A. WADE PURSELL Executive Vice President and Chief Financial Officer February 20, 2025 +A. Wade Pursell (Principal Financial Officer) +/s/ PATRICK A. LYTLE Vice President - Chief Accounting Officer and Controller February 20, 2025 +Patrick A. Lytle (Principal Accounting Officer) +115 +Signature Title Date +/s/ JULIO M. QUINTANA +Chairman of the Board of Directors February 20, 2025 +Julio M. Quintana +/s/ CARLA J. BAILO Director February 20, 2025 +Carla J. Bailo +/s/ STEPHEN R. BRAND Director February 20, 2025 +Stephen R. Brand +/s/ BARTON R. BROOKMAN +Director February 20, 2025 +Barton R. Brookman +/s/ RAMIRO G. PERU Director February 20, 2025 +Ramiro G. Peru +/s/ ANITA M. POWERS Director February 20, 2025 +Anita M. Powers +/s/ ROSE M. ROBESON Director February 20, 2025 +Rose M. Robeson +/s/ WILLIAM D. SULLIVAN +Director February 20, 2025 +William D. Sullivan +/s/ ASHWIN VENKATRAMAN +Director +February 20, 2025 +Ashwin Venkatraman +116 \ No newline at end of file diff --git a/raw/filings/0000893538/2024/0000893538-25-000008/filing_metadata.csv b/raw/filings/0000893538/2024/0000893538-25-000008/filing_metadata.csv new file mode 100644 index 0000000000000000000000000000000000000000..8789a0fb2e450add032060fc8b3732428cdfdf41 --- /dev/null +++ b/raw/filings/0000893538/2024/0000893538-25-000008/filing_metadata.csv @@ -0,0 +1,2 @@ +cik,ticker,company_name,form,filing_date,report_date,acceptance_datetime,accession_number,primary_document,primary_doc_description,size,is_xbrl,is_inline_xbrl,document_url,filing_index_url,year,fiscal_year,is_primary_filing +0000893538,SM,SM Energy Co,10-K,2025-02-20,2024-12-31,2025-02-20T13:55:17.000Z,0000893538-25-000008,sm-20241231.htm,10-K,16653058,1,1,https://www.sec.gov/Archives/edgar/data/893538/000089353825000008/sm-20241231.htm,https://www.sec.gov/Archives/edgar/data/893538/000089353825000008/,2024,2024,1 diff --git a/raw/filings/0000893538/2024/0000893538-25-000008/item13.txt b/raw/filings/0000893538/2024/0000893538-25-000008/item13.txt new file mode 100644 index 0000000000000000000000000000000000000000..51d7166e9bceb56d8df30dad646c8e1cb8fb9e53 --- /dev/null +++ b/raw/filings/0000893538/2024/0000893538-25-000008/item13.txt @@ -0,0 +1,2 @@ +ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE +The information required by this Item is incorporated by reference to the information provided in the Company’s Definitive Proxy Statement on Schedule 14A for the 2025 annual meeting of stockholders, to be filed within 120 days from December 31, 2024. \ No newline at end of file diff --git a/raw/filings/0000893538/2024/0000893538-25-000008/rpt_disclosure.txt b/raw/filings/0000893538/2024/0000893538-25-000008/rpt_disclosure.txt new file mode 100644 index 0000000000000000000000000000000000000000..368bc8244d0f3cb78d240af6a2c440f353080f1c --- /dev/null +++ b/raw/filings/0000893538/2024/0000893538-25-000008/rpt_disclosure.txt @@ -0,0 +1,11 @@ +CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS +Policies and Procedures on Transactions with Related Persons +Our Related Person Transactions Policy sets forth the policies and procedures for the Audit Committee’s review of any transaction, arrangement, or relationship (including any indebtedness or guarantee of indebtedness) or series of similar transactions, arrangements, or relationships in which (a) we are a participant, (b) the aggregate amount involved will or may be expected to exceed $120,000 per annum, and (c) a related person has or will have a direct or indirect material interest. For purposes of our Related Person Transactions Policy, a “related person” means (i) any of our directors, executive officers, or nominees for director, (ii) any stockholder that beneficially owns more than five percent of our outstanding shares of common stock, and (iii) any immediate family member of any of the foregoing. The Audit Committee approves or ratifies only those transactions that it determines in good faith are in, or are not inconsistent with, our best interests and the best interests of our stockholders. +In determining whether to approve or ratify a transaction with a related person, the Audit Committee takes into account the factors it deems appropriate, which may include, among others, the benefits to us, the availability of other sources for comparable products or services, the impact on a director’s independence in the event the related person is a director, and the extent of the related person’s interest in the transaction. The Audit Committee reviews and assesses ongoing relationships with a related person on at least an annual basis to ensure that they are in compliance with the policy and remain appropriate. +In addition, our By-Laws provide that a director, officer, or employee of our Company may not pursue for his or her own account a business or investment opportunity that he or she learned about through his or her affiliation with us. These restrictions do not apply to the acquisition of less than one percent of the publicly traded stock of another company. +Transactions with Related Persons +We recognize that transactions with related persons may raise questions among stockholders regarding whether those transactions are consistent with our best interests and the best interests of our stockholders. It is our policy to enter into or ratify such transactions only when our Board, acting through the Audit Committee or as otherwise described herein, determines that the transaction in question is in, or is not inconsistent with, our best interests and the best interests of our stockholders. Such transactions include, but are not limited to, situations where we may obtain products or services of a nature, quantity or quality, or on other terms, that are not readily available from alternate sources, or when we obtain products or services from, or provide products or services to, related persons on an arm’s length basis on terms comparable to those obtained from or provided to unrelated third parties or on terms comparable to those obtained from or provided to employees generally. Since January 1, 2024, with the exception of the transaction described in the following paragraph, which was approved by our Audit Committee, we had no transactions that required approval under our Related Person Transactions Policy. +Dean Lutey, the spouse of Ms. Mary Ellen Lutey, our Senior Vice President - Texas, joined the Company in 2008. Mr. Lutey was appointed Senior Vice President - Chief Information Officer in March 2025. Prior to this appointment, Mr. Lutey served as the Company’s Vice President - Chief Information Officer since April 2021 and as Vice President - Information Technology since May 2013. During the fiscal year ended December 31, 2024, Mr. Lutey earned total compensation of $1,136,048, which included his base salary, annual bonus, LTIP awards, benefits under our qualified and non-qualified benefit plans, and matching contributions by the Company under its 401(k) Profit Sharing Plan and Non-Qualified Deferred Compensation Plan. Mr. Lutey also participated in the Company’s benefit programs for its employees. +Compensation Committee Interlocks and Insider Participation +None of the directors who served on the Compensation Committee during fiscal year 2024 has ever served as one of our officers or employees. During fiscal year 2024, there were no Compensation Committee interlocks. +79 \ No newline at end of file diff --git a/raw/proxies/0000110471/0001047469-15-002388/proxy.txt b/raw/proxies/0000110471/0001047469-15-002388/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..0afbbc43e951382e8bf7fcb913e7d4192ca964db --- /dev/null +++ b/raw/proxies/0000110471/0001047469-15-002388/proxy.txt @@ -0,0 +1,4196 @@ +DEF 14A +1 +a2223501zdef14a.htm +DEF 14A +Use these links to rapidly review the document +Table of Contents +Table of Contents +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +Washington, D.C. 20549 +SCHEDULE 14A +Proxy +Statement Pursuant to Section 14(a) of +the Securities Exchange Act of 1934 +Filed by the Registrant ý +Filed by a Party other than the Registrant o +Check the appropriate box: +o +Preliminary Proxy Statement +o +Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +ý +Definitive Proxy Statement +o +Definitive Additional Materials +o +Soliciting Material Pursuant to §240.14a-12 +WOLVERINE WORLD WIDE, INC. +(Name of Registrant as Specified In Its Charter) +(Name of Person(s) Filing Proxy Statement, if other than the Registrant) +Payment of Filing Fee (Check the appropriate box): +ý +No fee required. +o +Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. +(1) +Title of each class of securities to which transaction applies: +(2) +Aggregate number of securities to which transaction applies: +(3) +Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): +(4) +Proposed maximum aggregate value of transaction: +(5) +Total fee paid: +o +Fee paid previously with preliminary materials. +o +Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration +statement number, or the Form or Schedule and the date of its filing. +(1) +Amount Previously Paid: +(2) +Form, Schedule or Registration Statement No.: +(3) +Filing Party: +(4) +Date Filed: +Table of Contents +Table of Contents +LETTER TO STOCKHOLDERS +Wolverine World Wide, Inc. +9341 Courtland Drive, N.E. +Rockford, Michigan 49351 +March 18, 2015 +Dear +Stockholder, +You +are invited to attend the 2015 Annual Meeting of Stockholders, on Wednesday, April 22, 2015, at Wolverine Worldwide's headquarters in Rockford, Michigan. +The +annual meeting will begin with an introduction of management attendees and directors, followed by voting on the matters set forth in the accompanying Notice of Annual Meeting and Proxy Statement +and any other business matters properly brought before the meeting. The meeting will adjourn for a presentation on the Company's business operations, and then resume for a report on the voting. +Whether +or not you plan to attend, you can ensure that your shares are represented at the meeting by promptly voting and submitting your proxy by telephone or through the Internet, or by completing, +signing, dating and returning your proxy form in the enclosed envelope. +Sincerely, +Blake +W. Krueger +Chairman, Chief Executive Officer and President +Wolverine Worldwide Notice of 2015 Annual Meeting of Stockholders and Proxy Statement +| Page +1 +Table of Contents +NOTICE OF 2015 ANNUAL MEETING OF STOCKHOLDERS +10:00 a.m., +April 22, 2015 +Wolverine World Wide, Inc. +9341 Courtland Drive, N.E. +Rockford, Michigan 49351 +March 18, 2015 +To +our Stockholders: +We +invite you to attend Wolverine Worldwide's Annual Meeting of Stockholders at the Company's headquarters located at 9341 Courtland Drive, N.E., Rockford, Michigan, on Wednesday, April 22, +2015, at 10:00 a.m. Eastern Daylight Time. The annual meeting will begin with an introduction of management attendees and directors, after which stockholders will: +(1) vote +on the election of the three director nominees named in the proxy statement for three-year terms expiring in 2018; (2) vote +on the ratification of the Audit Committee's appointment of Ernst & Young LLP as the Company's independent registered public accounting +firm for fiscal year 2015; (3) vote +on an advisory resolution approving compensation for the Company's named executive officers; and (4) transact +other business that may properly come before the meeting. +The +meeting will adjourn for a presentation on the Company's business operations, then resume for a report on the voting. You can vote at the meeting and any adjournment of the meeting if you were a +stockholder of record on March 2, 2015. +By +Order of the Board of Directors +Brendan +M. Gibbons +Vice President, General Counsel and Secretary +Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be held on April 22, 2015. +Wolverine's Proxy Statement for the 2015 Annual Meeting of Stockholders and the Annual Report to Stockholders for the fiscal year ended January 3, 2015, are available at +www.wolverineworldwide.com/2015annualmeeting . +Page 2 | +Wolverine Worldwide Notice of 2015 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +2015 PROXY STATEMENT +Table of Contents +Notice of 2015 Annual Meeting of Stockholders +2 +Proxy Statement +4 +Board of Directors +4 +Board Composition +4 +Item 1 – Election of Directors for Terms Expiring in 2018 +5 +Continuing Directors with Terms Expiring in 2016 +9 +Continuing Directors with Terms Expiring in 2017 +13 +Corporate Governance +17 +Risk Oversight +17 +Risk Considerations in Compensation Programs +17 +Board Leadership +18 +Director Independence +18 +Board Committees +19 +Audit Committee +19 +Compensation Committee +21 +Governance Committee +22 +Code of Conduct & Compliance and Accounting and Finance Code of +Ethics +23 +Stockholder Communications Policy +23 +Non-Employee Director Compensation in Fiscal Year 2014 +24 +Non-Employee Director Stock Ownership Guidelines +26 +Securities Ownership of Officers and Directors and Certain Beneficial Owners +27 +Five Percent Stockholders +27 +Stock Ownership by Management and Others +28 +Compensation Discussion and Analysis +29 +Section 1 – 2014: 2014 Overview +29 +Strong Financial Performance +30 +Executive Compensation Overview for 2014 +31 +Section 2 – Compensation Program Overview +32 +Compensation Philosophy and Objectives +32 +Compensation Program Summary +32 +Purposes of Compensation Program Elements +33 +Compensation Committee Role +34 +CEO Role +34 +Compensation Consultant Role +34 +Competitive Data Use +35 +Section 3 - 2014 Compensation +36 +Base Salary +36 +Annual Bonus +36 +Annual Bonus – Performance Bonus +37 +Annual Bonus – Individual Bonus +39 +Long-Term Incentive Compensation +39 +Long-Term Incentive Compensation – Performance Share +Bonuses +40 +Long-Term Incentive Compensation – Stock Option Grants and Restricted +Stock Awards +41 +Benefits +42 +Retirement and Welfare Plans +42 +Perquisites +42 +Section 4 – Other Compensation Policies and Practices +43 +NEO Stock Ownership Guidelines +43 +Stock Hedging and Pledging Policies +43 +Impact of Accounting and Tax Treatments on Compensation +43 +Post-Employment Compensation +43 +Compensation Committee Report +45 +Summary Compensation Table +46 +Grants of Plan-Based Awards in Fiscal Year 2014 +48 +Outstanding Equity Awards at 2014 Fiscal Year-End +50 +Option Exercises and Stock Vested in Fiscal Year 2014 +54 +Pension Plans and 2014 Pension Benefits +54 +Qualified Pension Plan +54 +Supplemental Executive Retirement Plan +54 +Pension Benefits in Fiscal Year 2014 +55 +Potential Payments Upon Termination or Change in Control +56 +Benefits Triggered by Termination for Cause or Voluntary +Termination +56 +Benefits Triggered by Termination Other Than for Cause or by the NEO for Good +Reason +56 +Benefits Triggered Upon a Change in Control +57 +Benefits Triggered by Retirement, Death or Permanent Disability +58 +Description of Restrictive Covenants that Apply During and After Termination of +Employment +59 +Estimated Payments on Termination or Change in Control +59 +Audit Committee Report +62 +Independent Registered Public Accounting Firm +64 +Item 2 – Ratification of Appointment of Independent Registered Public Accounting Firm +65 +Item 3 – Advisory Resolution to Approve Executive Compensation +66 +Related Party Matters +67 +Certain Relationships and Related Transactions +67 +Related Person Transactions Policy +67 +Additional Information +69 +Stockholders List +69 +Director and Officer Indemnification +69 +Section 16(a) Beneficial Ownership Reporting Compliance +69 +Stockholder Proposals for Inclusion in Next Year's Proxy +Statement +69 +Other Stockholder Proposals for Presentation at Next Year's Annual +Meeting +69 +Voting Securities +70 +Conduct of Business +70 +Vote Required for Election and Approval +70 +Voting Results of the Annual Meeting +70 +Attending the Annual Meeting +71 +Manner for Voting Proxies +71 +Revocation of Proxies +71 +Solicitation of Proxies +71 +Delivery of Documents to Stockholders Sharing an Address +71 +Access to Proxy Statement and Annual Report +72 +Wolverine Worldwide Notice of 2015 Annual Meeting of Stockholders and Proxy Statement +| Page +3 +Table of Contents +2015 PROXY STATEMENT +We +are furnishing you this proxy statement and enclosed proxy card in connection with the solicitation of proxies by the Board of Directors of Wolverine World Wide, Inc. ("Wolverine Worldwide" +or the "Company") to be used at the Annual Meeting of Stockholders of the Company occurring on April 22, 2015 at the Company's corporate headquarters in Rockford, Michigan (the "Annual +Meeting"). Distribution of this proxy statement and enclosed proxy card to stockholders is scheduled to begin on or about March 18, 2015. +You +can ensure that your shares are voted at the Annual Meeting by submitting your instructions by telephone or through the Internet, or by completing, signing, dating and returning your proxy form in +the enclosed envelope. Submitting your instructions or proxy by any of these methods will not affect your right to attend and vote at the Annual Meeting. We encourage stockholders to submit proxies in +advance. A stockholder who gives a proxy may revoke it at any time before it is exercised by voting in person at the Annual Meeting, by delivering a subsequent proxy or by notifying the inspectors of +election in writing of such revocation. In order to vote any shares at the Annual Meeting that are held for you in a brokerage, bank or other institutional account, you must obtain a proxy from that +entity and bring it with you to hand in with your ballot. +References +to "2014" or "fiscal year 2014" in this proxy statement are to the Company's fiscal year ended January 3, 2015, unless otherwise noted in the text. References to "2015" or "fiscal +year 2015" in this proxy statement are to the Company's fiscal year ending January 2, 2016, unless otherwise noted in the text. +Board of Directors +The stockholders elect directors to serve on the Company's Board of Directors (the "Board of Directors" or "Board"). The Board oversees the management of the business by the Chief Executive Officer +("CEO") and senior management. In addition to its general oversight function, the Board's additional responsibilities include, but are not limited to, the following: +» Reviewing, approving and monitoring the implementation of the Company's key strategic and business objectives; +» reviewing the Company's financial objectives and major corporate plans and actions; +» selecting, evaluating and compensating the CEO and overseeing CEO succession planning; +» providing advice and oversight regarding the selection, evaluation, development and compensation of senior management; +» overseeing the Company's identification, assessment and management of significant risks confronting the Company; and +» assessing whether adequate policies and procedures are in place to safeguard the integrity of the Company's business operations and +financial reporting and to promote compliance with applicable laws and regulations, and monitoring management's administration of those policies and procedures. +The +Company expects directors to attend every meeting of the Board and the committees on which they serve and to attend the annual meeting of stockholders. In 2014, 12 directors (all directors then +serving on the Board) attended the 2014 Annual Meeting of Stockholders, and all directors attended at least 75% of the meetings of the Board and the committees on which they served. +BOARD COMPOSITION +The Board prides itself on its ability to recruit and retain directors who have high personal and professional integrity and have +demonstrated exceptional ability and judgment to effectively serve the stockholders' long-term interests. The Board believes that our directors, including the nominees for election as directors with +terms expiring in 2018, have valuable skills that provide the Company with the variety and depth of knowledge, judgment and strategic vision necessary to provide effective oversight of the Company. +Our directors have extensive experience in different fields, including footwear and apparel, retail, global operations, finance and accounting, and information technology. In addition, +Page 4 | +Wolverine Worldwide Notice of 2015 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +2015 PROXY STATEMENT +many +of our directors have significant leadership experience and experience in public company governance and related matters from their service as directors or senior executives of Wolverine Worldwide +or other companies. We believe that all our directors possess the professional and personal qualifications necessary for board service and have highlighted noteworthy attributes for each director in +the individual biographies below. +The +Board's Governance Committee serves as its nominating committee. The Governance Committee, in anticipation of upcoming director elections and other potential or expected Board vacancies, searches +for qualified individuals and recommends candidates to the Board. The Committee may retain a search firm or other external parties to assist it in identifying candidates, and the Committee has the +sole authority to retain and terminate any such search firm and to approve the search firm's fees and other retention terms. +The +Committee considers candidates suggested by directors, senior management or stockholders. Stockholders may recommend individuals as potential director candidates by communicating with the +Committee through one of the Board communication mechanisms described under the heading " Stockholder Communications Policy ." Stockholders that wish to +nominate a director candidate +must comply with the procedures set forth in the Company's By-Laws, which are posted on its website. Ultimately, upon the recommendation of the Governance Committee, the Board selects the Company +nominees for election at each annual meeting. In selecting director nominees, the Board considers candidates' personal and professional integrity, ability and judgment, and likelihood to be effective, +in conjunction with the other nominees and directors, in collectively serving the long-term interests of the stockholders. The Governance Committee also considers candidates' relative skills, +background and characteristics; independence under applicable New York Stock Exchange ("NYSE") listing standards and the Company's Director Independence Standards; potential contribution to the +composition and culture of the Board; and ability and willingness to actively participate in the Board and committee meetings and to otherwise devote sufficient time to Board duties. +The +Governance Committee reviews with the Board on an annual basis the appropriate skills and characteristics desired of Board members in the context of the current make-up of the Board. The Board, +with the assistance of the Governance Committee, annually assesses the current composition of the Board and considers diversity across many dimensions. As set forth in the Company's Corporate +Governance Guidelines, which are posted on its website, this assessment addresses issues of experience, diversity, age and skills. +ITEM 1 – Election of Directors +for Terms Expiring in 2018 +The Company's Board consists of 11 directors. The Company's By-Laws establish three classes of directors, with each class being as nearly equal in number as possible and serving three-year terms. At +each annual meeting, the term of one class expires. The Company's Corporate Governance Guidelines state that a director must offer to resign from the Board at the Annual Meeting of Stockholders +following his or her 72 nd birthday, subject to the Board waiving this requirement under circumstances determined by the Board. The Board has nominated three directors for election +at the annual meeting of stockholders to be held on April 22, 2015: Roxane Divol, Joseph R. Gromek and Brenda J. Lauderback. Each director has been nominated to serve for a +three-year term expiring at the annual meeting of stockholders to be held in 2018 or until his or her successor, if any, has been elected and is qualified. +Ms. Divol, Mr. Gromek and Ms. Lauderback are independent directors, as determined by the Board under the applicable NYSE listing standards +and the Company's Director Independence Standards. Each director nominee currently serves on the Board. The stockholders elected Mr. Gromek and Ms. Lauderback at the Company's 2012 +annual meeting, and Ms. Divol was appointed to the Board in October 2014. The Company is not aware of any nominee who will be unable or unwilling to serve as a director. However, if a nominee +is unable to serve or is otherwise unavailable for election, the incumbent directors may or may not select a substitute +nominee. If the directors select a substitute nominee, the proxy holder will vote the shares represented by all valid proxies for the substitute nominee (unless other instructions are given). +The +biographies of the three nominees and the other directors of the Company are below, along with a discussion of the above-described skills and qualifications for each director. +Wolverine Worldwide Notice of 2015 Annual Meeting of Stockholders and Proxy Statement +| Page +5 +Table of Contents +2015 PROXY STATEMENT +ROXANE DIVOL +Age: +42 +Director since: +October 2014 +Senior Vice President and +General Manager, Trust +Services for Symantec +Corporation +Since 2014, Ms. Divol has been Senior Vice President and General Manager, Trust Services, for Symantec Corporation, a global leader in information, security, backup and availability solutions, including Norton security products. From 2013 to +2014, Ms. Divol was Senior Vice President of Alliances with Symantec. Ms. Divol joined McKinsey & Company, a global management consulting firm, in 1996 and was a principal in its San Francisco office until 2013, where she led the +West Coast marketing and sales practice, with a focus on marketing return on investment and marketing transformation. Ms. Divol's experience with Symantec Corporation and McKinsey & Company provides her with expertise in global +operations and information technology, which the Board believes are critical areas in the Company's long-term strategic plans. +Page 6 | +Wolverine Worldwide Notice of 2015 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +2015 PROXY STATEMENT +JOSEPH R. GROMEK +Age: +68 +Director since: +2008 +Retired President, Chief +Executive Officer +and a Director of +The Warnaco Group, Inc. +Board Committees: +Compensation +Governance +Public Directorships: +Guess?, Inc. +The Children's Place Retail Stores, Inc. +Tumi, Inc. +From 2003 until his retirement in 2012, Mr. Gromek served as President, Chief Executive Officer and a director of The Warnaco Group, Inc., a publicly traded company. Mr. Gromek also served as Chief Executive Officer of Brooks Brothers, +Inc. from 1995 until 2002. He is currently the Chairman of the Board of Tumi, Inc., a publicly traded company featuring a leading global brand of premium travel, business and lifestyle products and accessories, and serves as a director of +Guess?, Inc., an apparel wholesaler and retailer, and The Children's Place Retail Stores, Inc., a children's clothing retailer. Mr. Gromek is also a director of Stanley M. Proctor Company and J. McLaughlin, both privately held +companies. Having served for more than 40 years in the retail and apparel industries, including 30 years managing and marketing apparel brands and a collective 15 years as the chief executive officer of two leading, multi-national +apparel companies, Mr. Gromek has expertise in apparel, retail and global operations. His service as a senior executive and director at various public companies has given him extensive leadership experience and experience in public company +governance and related matters. +Wolverine Worldwide Notice of 2015 Annual Meeting of Stockholders and Proxy Statement +| Page +7 +Table of Contents +2015 PROXY STATEMENT +BRENDA J. LAUDERBACK +Age: +64 +Director since: +2003 +Retired President of the +Wholesale and Retail Group of +Nine West Group, Inc. +Board Committees: +Audit +Governance +Public Directorships: +Big Lots, Inc. +Denny's Corporation +Select Comfort Corporation +From 1995 until her retirement in 1998, Ms. Lauderback was President of the Wholesale and Retail Group of Nine West Group, Inc., a footwear wholesaler and distributor. She previously was the President of the Wholesale Division of U.S. Shoe +Corporation, a footwear manufacturer and distributor, a position that included responsibility for offices in China, Italy and Spain, and she was a Vice President/General Merchandise Manager of Dayton Hudson Corporation (now Target Corporation), a +retailer. During the preceding five years, Ms. Lauderback also was, but no longer is, a director of Irwin Financial Corporation, a publicly traded bank holding company. Ms. Lauderback has more than 25 years of experience in the retail +industry, with more than 20 years in the footwear, apparel, and accessories industries. In particular, senior leadership positions have provided her with strong footwear, apparel and retail expertise. With her service on publicly traded company +boards, including Big Lots, Inc., a retail company, Denny's Corporation, a restaurant company, and Select Comfort Corporation, a bed manufacturer and retailer, and as a director of Wolverine Worldwide, she also has extensive experience with +public company governance and related matters. +BOARD RECOMMENDATION +The Board recommends that you vote "FOR" the election of the above nominees for terms expiring in 2018. +Page 8 | +Wolverine Worldwide Notice of 2015 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +2015 PROXY STATEMENT +Directors with Terms +Expiring in 2016 +JEFFREY M. BOROMISA +Age: +60 +Director since: +2006 +Retired Executive Vice +President of Kellogg +International, President of Latin +America; Senior Vice President +of Kellogg Company +Board Committees: +Audit +Compensation +Mr. Boromisa worked at Kellogg Company, a global food manufacturing company, and its affiliates from 1981 to 2009. From +2008 through his retirement in May 2009, Mr. Boromisa was Executive Vice President of Kellogg International, President of Latin America; Senior Vice President of Kellogg Company. From 2007 until 2008, Mr. Boromisa served as Executive Vice +President of Kellogg International, President of Asia Pacific and Senior Vice President of the Kellogg Company. From 2004 through 2006, he was Senior Vice President and Chief Financial Officer of Kellogg Company. In addition, beginning in 2004 and +through his retirement, Mr. Boromisa was a member of Kellogg Company's Global Leadership Team. Prior to 2004, Mr. Boromisa occupied various leadership positions with Kellogg. Mr. Boromisa is also a director at Haworth International, +Inc., a privately held, multinational, office furniture design and manufacturing company. With nearly 30 years of experience at Kellogg Company, including serving as its chief financial officer and leading various operational business +units, Mr. Boromisa has obtained leadership, retail, global operations and finance expertise. +Wolverine Worldwide Notice of 2015 Annual Meeting of Stockholders and Proxy Statement +| Page +9 +Table of Contents +2015 PROXY STATEMENT +GINA R. BOSWELL +Age: +52 +Director since: +2013 +Executive Vice President, +Personal Care for Unilever PLC +/ Unilever N.V. +Public Directorships: +ManpowerGroup Inc. +Since 2011, Ms. Boswell has been Executive Vice President, Personal Care for Unilever PLC / Unilever N.V., a +global food, personal care, and household products company whose products are sold in more than 190 countries and include such well-known global brands as Dove , Vaseline , Lipton and Hellman's . From 2008 to 2011, Ms. Boswell served as President, Global Brands, for The +Alberto-Culver Company, a consumer goods company. Ms. Boswell has held numerous other senior leadership positions with other leading global companies, including Avon Products, Inc., Ford Motor Company, and Estee Lauder Companies, Inc. +Ms. Boswell is a member of the board of ManpowerGroup Inc., a publicly traded workforce solutions company, where she is also the chairperson of the audit committee. Through senior leadership roles with leading, branded companies, +Ms. Boswell has obtained expertise in brand building and leadership, global operations and finance experience; and her service as a director at ManpowerGroup Inc. has provided her with public company governance and related experience. +Page 10 | +Wolverine Worldwide Notice of 2015 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +2015 PROXY STATEMENT +DAVID T. KOLLAT +Age: +76 +Director since: +1992 +President and Chairman of 22, Inc. +Public Directorships: +L Brands, Inc. +Select Comfort Corporation +Mr. Kollat has been Chairman and President of 22, Inc., a company specializing in research and management consulting +for retailers and consumer goods manufacturers, since 1987. In addition to his marketing and management experience as Chairman and President of 22, Inc., Mr. Kollat served for 11 years in senior leadership positions at L Brands, +Inc. (formerly Limited Brands, Inc.), a publicly traded, multinational apparel and retail company, including as Executive Vice President, Marketing, President of Victoria's Secret Direct, and as a member of its executive committee. +Mr. Kollat is Lead Director of Wolverine Worldwide. Mr. Kollat has been a director of L Brands, Inc. since 1976 and a director of Select Comfort Corporation, a bed manufacturer and retailer, since 1994. During the preceding five years, +Mr. Kollat was, but no longer is, a director of Big Lots, Inc., a publicly traded retail company. Mr. Kollat's work for L Brands, Inc. and 22, Inc. has provided him with marketing, apparel, retail and leadership expertise. He +also has experience with public company governance and related matters through his extensive service on public company boards. +Wolverine Worldwide Notice of 2015 Annual Meeting of Stockholders and Proxy Statement +| Page +11 +Table of Contents +2015 PROXY STATEMENT +TIMOTHY J. O'DONOVAN +Age: +69 +Director since: +1993 +Retired Chairman and Chief +Executive Officer of Wolverine +World Wide, Inc. +Public Directorships: +SpartanNash Company +Mr. O'Donovan is a former Chairman of the Board of Wolverine Worldwide and served in that position from April 2005 through +December 2009. In April 2007, Mr. O'Donovan retired as Chief Executive Officer of Wolverine Worldwide, a position that he had held since April 2000. Mr. O'Donovan served Wolverine Worldwide as its Chief Executive Officer and President from +April 2000 until April 2005, and as Chief Operating Officer and President from 1996 until April 2000. Prior to 1996, Mr. O'Donovan held various positions with the Company, including Executive Vice President of Wolverine Worldwide. During the +preceding five years, Mr. O'Donovan was, but no longer is, a director of Kaydon Corporation, a publicly traded company that designed and manufactured custom-engineered products. Mr. O'Donovan has obtained footwear and apparel, retail, +leadership, global operations and finance expertise through his more than 40 years with the Company. His service on public company boards has provided him with public company governance and related experience. +Page 12 | +Wolverine Worldwide Notice of 2015 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +2015 PROXY STATEMENT +Directors with Terms +Expiring in 2017 +WILLIAM K. GERBER +Age: +61 +Director since: +2008 +Managing Director of Cabrillo +Point Capital LLC +Board Committees: +Audit +Public Directorships: +AK Steel Holding Corporation +Mr. Gerber is Managing Director of Cabrillo Point Capital LLC, a private investment fund. He has held that position +since 2008. From 1998 to 2007, Mr. Gerber was Executive Vice President and Chief Financial Officer of Kelly Services, Inc., a publicly traded global staffing solutions company with operations in more than 35 countries. During the preceding +five years, Mr. Gerber was, but no longer is, a director of Kaydon Corporation, a publicly traded company that designed and manufactured custom-engineered products. From his 15 years in leadership positions with L Brands, Inc. +(formerly Limited Brands, Inc.), a multinational apparel and retail company, and Kelly Services, Inc., Mr. Gerber has obtained extensive experience in apparel, retail, leadership, global operations and finance, and his service as a +director of various public companies has given him experience with public company governance and related matters. +Wolverine Worldwide Notice of 2015 Annual Meeting of Stockholders and Proxy Statement +| Page +13 +Table of Contents +2015 PROXY STATEMENT +BLAKE W. KRUEGER +Age: +61 +Director since: +2006 +Chairman, Chief Executive Officer and President of Wolverine World Wide, Inc. +Mr. Krueger is Chairman of Wolverine Worldwide, a position he assumed in January 2010, and Chief Executive Officer and +President of Wolverine Worldwide, positions he assumed in April 2007. From October 2005 until April 2007, Mr. Krueger served as President and Chief Operating Officer of Wolverine Worldwide. From 2004 to October 2005, he served as Executive Vice +President and Secretary of Wolverine Worldwide and President of its Heritage Brands Group. From 2003 to 2004, Mr. Krueger served as Executive Vice President and Secretary of Wolverine Worldwide and President of the Company's Caterpillar Footwear +Group. He also previously served as Executive Vice President, General Counsel and Secretary of Wolverine Worldwide with various responsibilities including the human resources, retail, business development, accessory licensing, mergers and +acquisitions, and legal areas. Mr. Krueger's more than 15 years in senior leadership roles with the Company have provided him expertise in footwear and apparel, retail, global operations and finance, and his board experience at the Company +and Professionals Direct, Inc., a then publicly traded insurance company, has given him extensive experience with public company governance and related matters. +Page 14 | +Wolverine Worldwide Notice of 2015 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +2015 PROXY STATEMENT +NICHOLAS T. LONG +Age: +56 +Director since: +2011 +Chief Executive Officer of +MillerCoors LLC +Board Committees: +Compensation +Governance +Mr. Long has been Chief Executive Officer of MillerCoors LLC ("MillerCoors"), a joint venture between two publicly +traded beverage companies, since 2011. In February of 2015, Mr. Long announced his retirement as CEO of MillerCoors, effective June 30, 2015. From 2008 to 2011, Mr. Long served as President and Chief Commercial Officer of MillerCoors. +From 2007 to 2008, Mr. Long served as Chief Executive Officer of Miller Brewing Company, a beverage company, and he served as Chief Marketing Officer of Miller Brewing Company from 2005 to 2007. Prior to joining Miller Brewing Company, +Mr. Long spent 17 years in various senior leadership positions at The Coca-Cola Company, a beverage company, including Vice President of Strategic Marketing, Global Brands, Vice President Strategic Marketing Research and Trends, President +of Coca-Cola's Great Britain and Ireland Division and President of the Northwest Europe Division. Through his more than 20 years in senior positions at category-leading, branded companies, Mr. Long has developed marketing and global +operations expertise. +Wolverine Worldwide Notice of 2015 Annual Meeting of Stockholders and Proxy Statement +| Page +15 +Table of Contents +2015 PROXY STATEMENT +MICHAEL A. VOLKEMA +Age: +59 +Director since: +2005 +Chairman of Herman Miller, +Inc. +Board Committees: +Compensation +Governance +Public Directorships: +Herman Miller, Inc. +Mr. Volkema has been Chairman of Herman Miller, Inc., a publicly traded multinational furniture manufacturer, since +2000. Mr. Volkema became President and Chief Executive Officer of Herman Miller in 1995 and held those positions until 2003 and 2004, respectively. Mr. Volkema has more than 30 collective years of experience on public company boards, +including 14 years as Chairman of the Board at Herman Miller, Inc., and including service on the compensation and audit committees of boards of publicly traded companies. Mr. Volkema also is a director at Milliken & Company, a +privately held, innovation-based company serving the textile, chemical, and floor covering markets. Mr. Volkema has obtained leadership and global operations expertise from his more than 20 years in senior leadership positions with Herman +Miller, Inc. Mr. Volkema also has public company governance and related experience from his extensive service on public company boards. +Page 16 | +Wolverine Worldwide Notice of 2015 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +2015 PROXY STATEMENT +Corporate Governance +As part of an annual self-assessment, each director evaluates the performance of the Board, and any committee on which he or +she serves, across a number of dimensions. Mr. Kollat, as the Lead Director working with the Governance Committee, reviews the Board self-assessment with directors following the end of each +fiscal year. Committee Chairpersons review the committee self-assessments with their respective committee members and discuss them with the Board. In addition, the Lead Director, working with the +Governance Committee, develops and implements guidelines for evaluating all directors standing for nomination and re-election. +The Corporate Governance Guidelines (including the Director Independence Standards); the Charter for each Board standing +committee (Audit, Compensation and Governance); the Company's Certificate of Incorporation; By-Laws; Code of Conduct & Compliance and its Accounting and Finance Code of Ethics all are available +on the Wolverine Worldwide website at: +http://www.wolverineworldwide.com/investor-relations/ +corporate-governance/ +The Board and committees annually review these and other key governance documents. +RISK OVERSIGHT +The Board oversees the Company's risk management and mitigation activities through presentations by and discussions with the CEO, +Chief Financial Officer ("CFO"), General Counsel, brand and department leaders and other members of management. The Vice President of Internal Audit and Risk Compliance coordinates management's +day-to-day risk management and mitigation processes, and reports directly to the Audit Committee and CFO. The Vice President of Internal Audit and Risk Compliance reviews with the Audit Committee +quarterly, and with the full Board annually, management's related assessment and mitigation strategies. In addition to the above processes, the Board has delegated the following risk management and +mitigation oversight responsibilities to its standing committees, which meet regularly to review and discuss risk topics and then report to the Board: +» The Audit Committee reviews the Company's policies and systems with respect to risk assessment and risk management. The Committee also +oversees the Company's risk policies and processes relating to its financial statements and financial reporting processes, credit risks, and liquidity risks, as well as the Company's management of +risks related to cybersecurity. The Committee discusses with management and the independent auditors significant risks or exposures and the steps taken by management to resolve them. +» The Compensation Committee monitors the risks associated with management resources; organization structure; succession planning, +hiring, development and retention processes; and it reviews and evaluates risks associated with the Company's compensation structure. +» The Governance Committee oversees risks related to the Company's governance structure and processes and potential risks arising from +related person transactions. +RISK CONSIDERATIONS IN COMPENSATION PROGRAMS +The Company reviewed its compensation policies and practices to assess whether they are reasonably likely to have a material adverse +effect on the Company. As part of this review, the Company compiled information about the Company's incentive plans, including reviewing the Company's compensation philosophy, evaluating key incentive +plan design features and reviewing historic payout levels and pay mix. With assistance from Company management, the Compensation Committee reviewed the executive compensation programs, and managers +from the Company's human resources and legal departments reviewed the non-executive compensation programs. +Wolverine Worldwide Notice of 2015 Annual Meeting of Stockholders and Proxy Statement +| Page +17 +Table of Contents +2015 PROXY STATEMENT +BOARD LEADERSHIP +The Company's CEO currently also serves as the Chairman of the Board. Since 1993, the Company has had an independent Lead Director +who functions in many ways similar to an independent Chairman. This long-established structure provides the Board with independent oversight of the CEO's leadership. The Board considers the +appropriate leadership +structure, including whether to separate the roles of Chairman and CEO, based upon the Company's then-current circumstances. The Board believes that separating the Chairman and CEO roles at this time +would add unnecessary complexity to the organization structure without adding materially to the Board's independent oversight of the CEO function. The Company's independent directors annually select +an independent Lead Director. As outlined in the Corporate Governance Guidelines, the principal duties of the Lead Director include: +» reviewing and approving the agenda and scheduling for Board and committee meetings; +» reviewing and approving information and meeting materials sent to the Board; +» presiding over executive sessions and having the authority to call executive sessions; +» serving as a liaison between the Chairman and the independent directors; +» presiding over Board meetings in the absence of the Chairman; and +» being available for consultation and communication with stockholders, as appropriate. +DIRECTOR INDEPENDENCE +The +Board annually assesses the independence of all directors. To qualify as "independent," the Board must affirmatively determine that the director is independent under the Company's Director +Independence Standards, which are modeled after the listing standards of the NYSE. Under NYSE listing standards, the Board has determined that 10 of the Company's 11 directors are independent. Only +Mr. Krueger, the Company's CEO, is not independent. All of the Board's committees are comprised entirely of independent directors. The independent directors meet periodically each year in +executive session. +The +Director Independence Standards define an "Independent Director" as a director who the Board determines otherwise has no material relationship with the Company (either directly or as a partner, +stockholder or officer of an organization that has a relationship with the Company), and who: +Name +Management +Non-Management +Independent +Boromisa +X +X +Boswell +X +X +Divol +X +X +Gerber +X +X +Gromek +X +X +Kollat +X +X +Krueger +X +Lauderback +X +X +Long +X +X +O'Donovan +X +X +Volkema +X +X +» is not, and in the past three years has not been, an employee of the Company; +» does not have, and has not had within the last three years, an immediate family member employed as an executive officer of the +Company; +» has not received, and has not had an immediate family member receive during any 12-month period within the last three years, any +direct compensation from the Company in excess of $120,000 (other than compensation for Board service; compensation received by the director for former service as an interim Chairman, CEO or other +executive officer; compensation received by the director's immediate family member +for +service as a non-executive employee; or pension and other forms of deferred compensation for prior service if such compensation is not contingent in any way on continued service); +» is not a current employee or partner of a firm that is the Company's internal or external auditor; +» has not been, and has not had an immediate family member who has been within the last three years, a partner or employee of the +Company's internal or external auditor and personally worked on the Company's audit within that time; +» has not had an immediate family member who is (i) a current partner of the Company's internal or external auditor, or +(ii) a +Page 18 | +Wolverine Worldwide Notice of 2015 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +2015 PROXY STATEMENT +current +employee of the Company's internal or external auditor who personally works on the Company's audit; +» is not, and has not been within the last three years, part of an interlocking directorate in which a current executive officer of +Wolverine Worldwide serves or served on the compensation committee of another company where the director or the director's immediate family member concurrently serves or served as an executive +officer; +» is not an employee of, and does not have an immediate family member who is an executive officer of, another company that has made +payments to, or received payments from, Wolverine Worldwide for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of $1,000,000 or 2% of the other +company's consolidated gross revenues; or +» has not had any other direct or indirect relationship with Wolverine Worldwide that the Board determines is material. +"Immediate +Family Member" is defined as spouses, parents, children, siblings, in-laws, and any person (other than domestic employees) sharing the household of any director, nominee for director, +executive officer, or significant stockholder of a company. +BOARD COMMITTEES +The following table identifies the current members of the Board and its standing committees and the number of meetings the Board and +each committee held in 2014. +BOARD OF DIRECTORS +(6 Meetings) +Audit Committee +Compensation Committee +Finance Committee* +Governance Committee +(9 Meetings) +(7 Meetings) +(2 Meetings) +(6 Meetings) +Gerber (Chair) +Gromek (Chair) +Boromisa (Chair) +Lauderback (Chair) +Boromisa +Boromisa +Gerber +Gromek +Lauderback +Long +Gromek +Long +Volkema +Volkema +* The Finance Committee was dissolved in April 2014. +Audit Committee +The Board has determined that each Audit Committee member is "independent" as defined by NYSE listing standards and the +Sarbanes-Oxley Act of 2002, as applicable to audit committee members, and satisfies the NYSE "financial literacy" requirement. In addition, the Board has determined that Mr. Boromisa and +Mr. Gerber are "audit committee financial experts" under Securities and Exchange Commission ("SEC") rules. +The +charter of the Audit Committee is published on the Company's website at http://www.wolverineworldwide.com/investor-relations/corporate-governance/ and lists all the +Audit Committee's duties and responsibilities. In accordance with its charter, the Audit Committee: +» represents and assists the Board in fulfilling its oversight responsibility regarding the Company's financial statements and the +financial reporting process, the Company's internal control over financial reporting, the performance of the internal audit function and the independent auditors, the qualifications and independence +of the independent auditors, the annual independent audit of the Company's financial statements and internal control over financial reporting, the Company's compliance with legal and regulatory +requirements, and the Company's policies and systems with respect to risk assessment and risk management; +» appoints, retains, compensates, oversees, evaluates and, if appropriate, terminates the independent auditors; +» approves in advance all audit and permissible non-audit services to be provided by the independent auditors and establishes policies +and procedures for the engagement of the independent auditors to provide audit and permissible non-audit services; annually obtains and reviews the independent auditors' internal quality control +report and other reports required by applicable rules, regulations and standards; +Wolverine Worldwide Notice of 2015 Annual Meeting of Stockholders and Proxy Statement +| Page +19 +Table of Contents +2015 PROXY STATEMENT +» annually obtains and reviews the independent auditors' report regarding the auditors' independence; +» annually reviews and assesses auditor objectivity and independence; +» annually reviews the performance, effectiveness, objectivity and independence of the independent auditors and the Company's internal +audit function; +» discusses with the internal audit staff and the independent auditors the overall scope and plans for their respective audits; +» receives, reviews and discusses reports from management, the finance and internal audit staff and the independent auditors regarding +the adequacy and effectiveness of the Company's internal control over financial reporting; +» receives, reviews and discusses reports from management regarding the adequacy and effectiveness of the Company's disclosure controls +and procedures; +» reviews and discusses the Company's policies and processes with respect to risk assessment and risk management and discusses with +management and the independent auditors significant risks or exposures and steps taken by management to mitigate them; oversees the Company's risk policies and processes relating to its financial +statements and financial reporting processes, credit risks and liquidity risks; +» oversees the Company's management of risks related to cybersecurity; +» meets separately, periodically with management, internal audit staff, and the independent auditors; +» reviews with the independent auditors any audit problems or difficulties and management's response; +» reviews and discusses with the independent auditors matters required to be discussed by the independent auditors under Accounting +Standard No. 16, as adopted by the Public Company Accounting Oversight Board and amended from time to time; +» meets to review with management and the Company's independent auditors the Company's interim and annual audited +financial +statements, including disclosures in Management's Discussion and Analysis of Financial Condition and Results of Operations, that are included in the Company's Quarterly Reports on +Form 10-Q and Annual Reports on Form 10-K; +» recommends to the Board whether the Company's audited financial statements should be included in the company's Annual Report on +Form 10-K; +» establishes and oversees procedures for the receipt, retention and treatment of complaints regarding accounting, internal accounting +controls, auditing or federal securities law matters, and for the confidential, anonymous submission by the Company's employees of concerns regarding questionable accounting, auditing or federal +securities law matters; +» reviews and discusses with management and the independent auditors the Company's earnings press releases and financial information and +earnings guidance provided by the Company to analysts and rating agencies; +» oversees the preparation of the audit committee report required by the SEC rules to be included in the Company's proxy statement for +the annual meeting of stockholders; +» establishes the Company's hiring policies for employees and former employees of the independent auditors; +» engages consultants and advisors at the expense of the Company to assist the Committee as it deems necessary in the performance of its +functions; +» oversees the Company's legal and regulatory compliance systems and reviews the Company's codes of conduct and programs to monitor +compliance with such codes; +» at least annually receives a report on the Company's compliance programs, and reviews and discusses the implementation and +effectiveness of the Company's compliance programs with the General Counsel, who has the authority to communicate promptly and directly to the Audit Committee and the Board about reports that involve +actual and alleged violations of law or the Company's codes of conduct; and +» conducts and discusses with the Board an annual performance evaluation of the Committee, including the Committee's adherence to its +charter. +Page 20 | +Wolverine Worldwide Notice of 2015 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +2015 PROXY STATEMENT +Compensation Committee +The Board has determined that each Compensation Committee member is "independent" as defined by NYSE listing standards, as applicable +to compensation committee members. +The +charter of the Compensation Committee is published on the Company's website at http://www.wolverineworldwide.com/investor-relations/corporate-governance/ and lists all the Compensation Committee's +duties and responsibilities. In accordance with its charter, the Compensation Committee: +» assists the Board in fulfilling its responsibilities relating to executive compensation and the Company's compensation and benefit +programs and policies; +» oversees the overall compensation structure, policies and programs, including whether the compensation structure establishes +appropriate incentives for management and employees; +» oversees the Company's management of risks relating to management resources, organization structure, and succession planning, hiring, +development and retention processes, as well as those relating to the Company's compensation structure, policies and programs; +» administers and makes recommendations with respect to incentive compensation plans, including stock incentive plans; +» assesses the results of the Company's most recent advisory vote on executive compensation; +» reviews and approves corporate and personal goals and objectives relevant to CEO compensation, evaluates the performance of the CEO in +light of these goals and objectives, and, together with the other independent directors, approves the compensation of the CEO based on the evaluation; +» discusses with the CEO the performance of other executives on the CEO's management team as well as certain brand presidents as it +deems appropriate (together with the CEO, the "Executives"); +» reviews the compensation of Executives, and reviews and approves the compensation of Executives who report directly to the CEO; +» reviews and approves, as appropriate, stock incentive grants and other equity compensation to Executives, including the terms and +conditions of any such compensation; +» reviews and discusses with management Wolverine Worldwide's Compensation Discussion and Analysis and related disclosures required by +the SEC rules and recommends to +the +Board whether such disclosures should be included in the annual report and proxy statement; +» oversees the preparation of the compensation committee report required by the SEC rules to be included in the annual report and proxy +statement; +» reviews and approves the design of benefit plans pertaining to Executives; +» reviews and recommends employment agreements and severance arrangements for the CEO, including change in control provisions, plans or +agreements; +» reviews and approves employment agreements and severance agreements for Executives other than the CEO, including change in control +provisions, plans or agreements; +» establishes stock ownership guidelines for directors, Executives and other appropriate employees and monitors compliance with the +guidelines; +» considers and recommends to the Board the frequency of the Company's advisory vote on executive compensation; +» engages consultants and advisors at the expense of the Company to assist the Committee as it deems necessary in the performance of its +functions; +» appoints, determines compensation for and oversees the work of any consultants and advisors retained by the Committee and oversees +compliance with any applicable requirements relating to the independence of such consultants or advisors; +» at least annually, assesses whether the work of compensation consultants involved in determining or recommending executive or director +compensation has raised any conflict of interest that is required to be disclosed in the Company's annual report and proxy statement; and +» conducts and discusses with the Board an annual performance evaluation of the Committee, including the Committee's adherence to its +charter. +Wolverine Worldwide Notice of 2015 Annual Meeting of Stockholders and Proxy Statement +| Page +21 +Table of Contents +2015 PROXY STATEMENT +Compensation Committee Interlocks and Insider Participation. During fiscal year 2014, none of the members of the Compensation Committee was an officer or employee +of the Company, was a former officer of the Company, nor had a relationship with the Company requiring disclosure as a related party transaction under Item 404 of Regulation S-K of the +Securities Act of 1933. None of the Company's executive officers served on the compensation committee or board of directors of another entity whose executive officer(s) served as a director on the +Company's Board or on the Compensation Committee. +See the "Compensation Discussion and Analysis" section below for more information regarding the Compensation Committee's +processes and procedures. +Governance Committee +The Board has determined that each Governance Committee member is "independent" as defined by NYSE listing standards. +The +charter of the Governance Committee is published on the Company's website at http://www.wolverineworldwide.com/investor-relations/corporate-governance/ and lists all the Governance Committee's +duties and responsibilities. In accordance with its charter, the Governance Committee: +» assists the Board in fulfilling its responsibilities on matters and issues related to the Company's corporate governance +practices; +» in conjunction with the Board, establishes qualification standards for membership on the Board and its committees; +» leads the search for individuals qualified to become members of the Board and reviews the qualifications of candidates for election to +the Board; +» establishes procedures for the consideration of candidates for election to the Board recommended for the Committee's consideration by +the Company's stockholders; +» recommends to the Board the Company's nominees for election or reelection by the stockholders at the annual meeting, and to fill +vacancies and newly created directorships on the Board; +» recommends to the Board qualified individuals to serve as committee members and chairpersons on the various Board committees; +» develops and recommends to the Board corporate governance guidelines, reviews the guidelines on an annual basis, and recommends any +changes to the guidelines as necessary; +» periodically reviews the Board's leadership structure as part of the succession planning process and recommends changes to the Board +as appropriate, and makes recommendations to the independent directors regarding the appointment of the Lead Director; +» develops and recommends to the Board guidelines, in accordance with applicable rules and regulations, to be applied when assessing the +independence of directors; +» reviews related person transactions, as defined in applicable SEC rules, and establishes policies and procedures for the review, +approval and ratification of related person transactions; +» oversees the Company's management of risks related to the Company's governance structure and related person transactions; +» annually reviews the compensation of directors for service on the Board and committees and makes recommendations to the Board +regarding such compensation; +» annually reviews and makes recommendations to the Board concerning the structure, composition and functioning of the Board and its +committees and recommends to the Board directors to serve as committee members and chairpersons; +» reviews and recommends to the Board retirement and other tenure policies for directors; +» reviews directorships in other public companies held by or offered to directors and Company employees; +» develops and recommends to the Board for its approval an annual self-evaluation process for the Board and its committees, and oversees +the evaluation process; +» engages consultants and advisors at the expense of the Company to assist the Committee as it deems necessary in the performance of its +functions; and +» conducts and discusses with the Board an annual performance evaluation of the Committee, including the Committee's adherence to its +charter. +Page 22 | +Wolverine Worldwide Notice of 2015 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +2015 PROXY STATEMENT +CODE OF CONDUCT & COMPLIANCE AND ACCOUNTING AND FINANCE CODE OF ETHICS +The Board has adopted a Code of Conduct & Compliance for the Company's directors, officers and employees. The Board also has +adopted an Accounting and Finance Code of Ethics ("Accounting and Finance Code") that focuses on the financial reporting process and applies to the Company's CEO, CFO and Corporate Controller. +The Company will disclose amendments to or waivers from its Code of Conduct & Compliance affecting directors or executive officers and amendments to or waivers from its Accounting and Finance +Code, on its website at: +www.wolverineworldwide.com/investor-relations/corporate-governance +. +STOCKHOLDER COMMUNICATIONS POLICY +Stockholders and other interested parties may send correspondence to the Board, the non-management directors as a group, a specific +Board committee or a director (including the Lead Director). +The +General Counsel will provide a summary and copies of all correspondence (other than solicitations for services, products or publications) to the applicable directors at each regularly scheduled +meeting. +Communications may be sent: +• By emailing through various links provided on Wolverine Worldwide's website at: www.wolverineworldwide.com/investor-relations/corporate-governance/ +• c/o General Counsel and Secretary, Wolverine World Wide, Inc., 9341 Courtland Drive, N.E., Rockford, +Michigan 49351 +The General Counsel will alert individual directors to items which warrant a prompt response from the individual director prior to the next regularly scheduled meeting. Items +warranting a prompt response, but not addressed to a specific director, will be routed to the applicable Committee Chairperson. +Wolverine Worldwide Notice of 2015 Annual Meeting of Stockholders and Proxy Statement +| Page +23 +Table of Contents +2015 PROXY STATEMENT +Non-Employee Director Compensation in Fiscal Year 2014 +Wolverine +Worldwide's director compensation philosophy is to pay compensation competitive with compensation paid by companies of similar size in the same industries and with +whom Wolverine Worldwide competes for director candidates. The Governance Committee, with input from management and from Towers Watson, reviewed director compensation and compared it to market data, +including a comparison to director compensation data for the Peer Group, as defined on page 31. The following table provides information concerning the compensation of the Company's non-employee +directors for fiscal year 2014. Mr. Krueger receives compensation for his services as the Company's CEO and President, but does not receive any additional compensation for his service as a +director. +Fees Paid in +Cash +Cash Amounts +Voluntarily +Deferred +Cash Amounts +Deferred +Through Annual +Equity Retainers +Fees Earned or +Paid in Cash 1 +Option +Awards 2 +Total +Boromisa +$ +105,500 ++ +- ++ +$ +65,000 += +$ +170,500 ++ +$ +45,000 += +$ +215,500 +Boswell +$ +65,000 ++ +- ++ +$ +65,000 += +$ +130,000 ++ +$ +45,000 += +$ +175,000 +Divol 3 +- ++ +- ++ +- += +- ++ +$ +65,000 += +$ +65,000 +Gerber +$ +106,000 ++ +- ++ +$ +65,000 += +$ +171,000 ++ +$ +45,000 += +$ +216,000 +Grimoldi 4 +- ++ +$ +20,357 ++ +$ +20,357 += +$ +40,714 ++ +- += +$ +40,714 +Gromek +- ++ +$ +110,000 ++ +$ +65,000 += +$ +175,000 ++ +$ +45,000 += +$ +220,000 +Kollat +$ +120,000 ++ +- ++ +$ +86,000 += +$ +206,000 ++ +$ +59,000 += +$ +265,000 +Lauderback +$ +80,250 ++ +$ +26,750 ++ +$ +65,000 += +$ +172,000 ++ +$ +45,000 += +$ +217,000 +Long +$ +89,000 ++ +- ++ +$ +65,000 += +$ +154,000 ++ +$ +45,000 += +$ +199,000 +O'Donovan +$ +65,000 ++ +- ++ +$ +65,000 += +$ +130,000 ++ +$ +45,000 += +$ +175,000 +Peterson 4 +$ +28,813 ++ +- ++ +$ +20,357 += +$ +49,170 ++ +- += +$ +49,170 +Volkema +- ++ +$ +89,000 ++ +$ +65,000 += +$ +154,000 ++ +$ +45,000 += +$ +199,000 +1 Represents cash payments received or deferred by directors for fiscal year 2014. Directors may defer director fees and receive stock units pursuant +to the Deferred Compensation Plan. The table shows the Fees Earned or Paid in Cash separated into Fees Paid in Cash, Cash Amounts Voluntarily Deferred, and Cash Amounts Deferred Through +Annual Equity Retainers (required as part of the compensation program for directors) that will be paid out in stock. 2 Represents the aggregate grant date fair value of stock +options granted to non-employee directors in fiscal year 2014, calculated in accordance with +Accounting Standard Codification ("ASC") Topic 718. The chart below lists the aggregate outstanding option awards held by non-employee directors at the end of fiscal year 2014. For valuation +assumptions, see the Stock-Based Compensation footnote to Wolverine Worldwide's Consolidated Financial Statements for fiscal year 2014. 3 Ms. Divol was appointed to the +Board in October 2014. 4 Mr. Grimoldi and Ms. Peterson retired from the Board at the 2014 Annual Meeting of Stockholders. +Name +Option Awards Outstanding at +January 3, 2015 +(#) +Name +Option Awards Outstanding at +January 3, 2015 +(#) +Boromisa +70,851 +Kollat +76,274 +Boswell +15,940 +Lauderback +45,617 +Divol +11,207 +Long +31,847 +Gerber +49,079 +O'Donovan +49,379 +Gromek +61,997 +Volkema +33,199 +Page 24 | +Wolverine Worldwide Notice of 2015 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +2015 PROXY STATEMENT +The +following table shows the non-employee director compensation program for 2014: +Compensation Plan for 2014 +Component +Cash +Options +Stock Units +Changes Effective +for 2015 +Newly Appointed or Elected Director +$0 +Number of options equal to $65,000, determined using the Black-Scholes method. 1 +No change +Annual Director Fee +$65,000 +Number of options equal to $45,000, determined using the Black-Scholes method. 2 +Number of stock units equal to $65,000, determined by dividing the dollar amount by the closing market price of the Company's common stock on the grant date. 3 Units are credited to the Amended and Restated Outside Directors' Deferred +Compensation Plan. +Cash fee changed to $70,000. Option award changed to number of options equal to $50,000 determined using the Black-Scholes method. Stock units changed to the equivalent of $70,000 determined by dividing the dollar amount by the closing market price +of the Company's common stock on the grant date. +Audit Committee Annual Fee +$15,000 +No change +Audit Committee Chairperson Annual Fee +$20,000 +No change +Compensation Committee Annual Fee +$12,000 +No change +Compensation Committee Chairperson Annual Fee +$15,000 +No change +Finance Committee Annual Fee +$12,000 +N/A 4 +Finance Committee Chairperson Annual Fee +$15,000 +N/A 4 +Governance Committee Annual Fee +$12,000 +No change +Governance Committee Chairperson Annual Fee +$15,000 +No change +Lead Director Annual Fee +In lieu of the standard Annual Director Fee, the Lead Director was paid a Cash Retainer of $120,000. +In lieu of the standard stock option grant, the Lead Director received a quantity of stock options equal to $59,000, calculated in the same manner as the standard grant. 2 +In lieu of the standard stock unit grant, the Lead Director received stock units equivalent to $86,000, calculated and credited in the same manner as the standard grant. 3 +In lieu of other compensation for serving on the Board, the Lead Director will be paid a Cash Retainer of $130,000, receive stock unit grants equal to $92,000, and receive a stock option award equal to $63,000, where the grant and award will be +calculated as described above for the "Annual Director Fee." +1 Upon her appointment on October 8, 2014, Ms. Divol received 11,207 options under the Stock Option Plan of 2013. The exercise price of options +granted is equal to the closing market price of Wolverine Worldwide's common stock on the date the options were granted. 2 For fiscal year 2014, Messrs. Boromisa, Gerber, +Gromek, Long, O'Donovan and Volkema and Mses. Boswell and Lauderback each received 6,999 options (9,176 +for Mr. Kollat) granted in April 2014 under the Stock Incentive Plan of 2013. The exercise price of options granted is equal to the closing market price of Wolverine Worldwide's common stock on +the date of grant. 3 For fiscal year 2014, one grant was made on the first business day of each calendar quarter. For fiscal year 2014, the Company credited each of +Messrs. Boromisa, Gerber, Gromek, Long, O'Donovan and Volkema and Mses. Boswell and Lauderback with an aggregate of 2,328 stock units and credited Mr. Kollat with 3,080 stock units. +Mr. Grimoldi and Ms. Peterson served for only one full quarter of fiscal year 2014 and the Company credited each of them with 624 stock units with respect to that quarter. Stock units +are fully vested on the grant date and are credited under the Amended and Restated Outside Directors' Deferred Compensation Plan (described below). 4 The Finance Committee was +dissolved in April 2014. +Wolverine Worldwide Notice of 2015 Annual Meeting of Stockholders and Proxy Statement +| Page +25 +Table of Contents +2015 PROXY STATEMENT +The +Company also: +» pays director expenses associated with Board and committee meetings, other Company functions, and industry functions; +» pays spouse travel expenses associated with international Board strategic planning meetings (there were no such meetings in 2014); +» provides office space and administrative assistance to directors who visit Company locations; +» occasionally provides to directors for review and assessment samples of its products that have nominal value; and +» reimburses directors for some expenses relating to director education. +Management +directors do not receive an annual cash or equity retainer or director stock option grant. +Deferred Compensation Plan. The Company's Amended and Restated Outside Directors' Deferred Compensation Plan (the "Deferred Compensation Plan") is a supplemental +nonqualified deferred compensation plan for non-employee directors. A separate non-employee director deferred compensation plan applies to benefits accrued under that plan before January 1, +2005. The Deferred Compensation Plan permits all non-employee directors to defer, at their option, 25%, 50%, 75% or 100% of their director fees. The Company establishes a book account for each +non-employee director and treats deferred compensation as if invested in Wolverine Worldwide common stock. The Company credits the director's account with the annual equity retainer amount described +above and with a number of stock units equal to the amounts deferred, each divided by the closing market price of common stock on the payment date. The Company also credits director accounts with +dividend equivalents in the form of additional stock units. +Upon +a director's termination of service, or such later date as a director selects, the Company distributes the stock units in the director's book account in shares of Wolverine Worldwide common stock +in either a single, lump-sum distribution or annual installment distributions over a period of up to 20 years (10 years under the plan for benefits accrued before January 1, +2005). The Company converts each stock unit to one share of Wolverine Worldwide common stock. +Upon +a "change in control," the Company distributes to the director, in a single, lump-sum distribution, Wolverine Worldwide common stock in a number of shares equal to the stock units credited to a +director's book account. The Deferred Compensation Plan defines "change in control" as: +» the acquisition by any person, or by more than one person acting as a group, of more than 50% of either (i) the then +outstanding shares of common stock of Wolverine Worldwide or (ii) the total fair market value of Wolverine Worldwide; +» the acquisition by any person, or more than one person acting as a group, during the 12-month period from and including the date of +the most recent acquisition, of ownership of 30% or more of the outstanding common stock of Wolverine Worldwide; +» the replacement of a majority of the individuals who constitute the Board during any 12-month period by directors whose appointment or +election is not endorsed by a majority of the directors prior to the date of the appointment or election; or +» the acquisition, during any 12-month period ending on the date of the most recent acquisition, by any person of assets from Wolverine +Worldwide having a gross fair market value of at least 40% of the gross fair market value of all the assets of Wolverine Worldwide immediately before the acquisition. +NON-EMPLOYEE DIRECTOR STOCK OWNERSHIP GUIDELINES +Wolverine Worldwide's stock ownership guidelines require each non-employee director to maintain a stock ownership level equal to six +times the non-employee director annual cash retainer. Owned shares, vested stock options, to the extent of their in-the-money value, and stock units under the Deferred Compensation Plan count toward +the ownership requirements. These guidelines are intended to align the interests of the directors with the stockholders. The guidelines prohibit non-employee directors from transferring Company stock +by sale or gift unless he or she has first attained the applicable stockholding requirement and continues to meet that requirement immediately following the proposed transaction. During 2014, all +non-employee directors were in compliance with these guidelines. +Page 26 | +Wolverine Worldwide Notice of 2015 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +2015 PROXY STATEMENT +Securities Ownership of +Officers and Directors and +Certain Beneficial Owners +FIVE PERCENT STOCKHOLDERS +The following table sets forth information about those holders known by Wolverine Worldwide to be the beneficial owners of more than +five percent of Wolverine Worldwide's outstanding shares of common stock as of March 2, 2015: +Amount and Nature of Beneficial Ownership of Common Stock +Name and Address +of Beneficial Owner +Sole Voting +Power +Sole +Investment +Power +Shared Voting +or Investment +Power +Total +Beneficial +Ownership +Percent +of Class 5 +BlackRock, Inc. 1 +40 East 52 nd Street +New York, NY 10022 +8,319,421 +8,540,960 +0 +8,540,960 +8.29% +T. Rowe Price Associates, Inc. 2 +100 E. Pratt Street +Baltimore, MD 21202 +2,016,191 +10,271,021 +0 +10,271,021 +9.96% +Janus Capital Management LLC 3 +151 Detroit Street +Denver, CO 80206 +10,809,526 +10,809,526 +119,920 +10,929,446 +10.60% +The Vanguard Group, Inc. 4 +100 Vanguard Boulevard +Malvern, PA 19355 +135,798 +6,374,578 +127,398 +6,501,976 +6.31% +1 Based solely on information set forth in a Schedule 13G/A filed on January 23, 2015. The Schedule 13G/A indicates that +BlackRock, Inc. beneficially owns, in the aggregate, 8,540,960 shares of Wolverine Worldwide common stock. 2 Based solely on information set forth in a Schedule 13G +filed on January 12, 2015. The Schedule 13G indicates that T. Rowe Price +Associates, Inc. beneficially owns, in the aggregate, 10,271,021 shares of Wolverine Worldwide common stock. 3 Based solely on information set forth in a +Schedule 13G/A filed on February 18, 2015. The Schedule 13G/A indicates that Janus Capital +Management LLC, beneficially owns, in the aggregate, 10,929,446 shares of Wolverine Worldwide common stock. 4 Based solely on information set forth in a Schedule 13G/A +filed on February 10, 2015. The Schedule 13G/A indicates that The Vanguard +Group, Inc., beneficially owns, in the aggregate, 6,501,976 shares of Wolverine Worldwide common stock. 5 As of March 2, 2015, based on 103,087,484 shares outstanding +on that date. +Wolverine Worldwide Notice of 2015 Annual Meeting of Stockholders and Proxy Statement +| Page +27 +Table of Contents +2015 PROXY STATEMENT +STOCK OWNERSHIP BY MANAGEMENT AND OTHERS +The following table sets forth the number of shares of common stock beneficially owned as of March 2, 2015, by each of the +Company's directors and named executive officers and all of the Company's directors and executive officers as a group: +Amount and Nature of Beneficial Ownership of Common Stock 1 +Sole Voting +and/or +Investment +Power 2 +Shared Voting or +Investment +Power 3 +Stock Options 4 +Total +Beneficial +Ownership 4 +Percent +of Class 5 +Jeffrey M. Boromisa +4,000 +— +70,851 +74,851 +* +Gina R. Boswell +— +— +15,940 +15,940 +* +Roxane Divol +— +— +11,207 +11,207 +* +James A. Gabel +112,758 +— +— +112,758 +* +William K. Gerber +10,000 +— +45,231 +55,231 +* +Donald T. Grimes +193,385 +— +212,146 +405,531 +* +Joseph R. Gromek +35,000 +— +61,997 +96,997 +* +David T. Kollat +215,344 +— +67,784 +283,128 +* +Blake W. Krueger +1,286,330 +59,796 +473,197 +1,819,323 +1.74% +Brenda J. Lauderback +10,200 +— +45,617 +55,817 +* +Nicholas T. Long +— +— +31,847 +31,847 +* +Timothy J. O'Donovan +724,020 +48,960 +49,379 +822,359 +* +Andrew Simister +120,701 +— +— +120,701 +* +Michael A. Volkema +10,000 +— +33,199 +43,199 +* +James D. Zwiers +182,620 +115,144 +204,188 +501,952 +* +All directors and executive officers as a group (19 people) +3,378,082 +223,900 +1,568,558 +5,170,540 +4.94% +* Represents beneficial ownership of less than 1%. +1 The numbers of shares stated are based on information provided by each person listed and include shares personally owned of record and shares that, under +applicable regulations, are considered to be otherwise beneficially owned. 2 These numbers include restricted shares and performance shares held, which are subject to +forfeiture if the terms of the award are not satisfied. 3 These numbers include shares over which the listed person is legally entitled to share voting or investment power by +reason of joint ownership, trust or other +contract or property right and shares held by spouses, children or other relatives over whom the listed person may have influence by reason of such relationship. 4 The numbers +represent shares that may be acquired within 60 days after March 2, 2015, by the exercise of stock options granted under Wolverine's +various stock option plans. These numbers are also included in the Total Beneficial Ownership column. 5 As of March 2, 2015, based on 103,087,474 shares outstanding on +that date plus the number of stock options exercisable by the specified person(s) +within 60 days of March 2, 2015, as indicated in the "Stock Options" column. +Page 28 | +Wolverine Worldwide Notice of 2015 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +2015 PROXY STATEMENT +Compensation Discussion and Analysis +The Company's Compensation Discussion and Analysis ("CD&A") provides an overview and analysis of Wolverine Worldwide's executive compensation program and +policies, the material compensation decisions made with respect to fiscal year 2014 compensation, and the material factors considered in making those decisions. The CD&A refers only to the +compensation of Wolverine Worldwide's "named executive officers" ("NEOs") unless noted otherwise: +Blake W. Krueger, Chairman, Chief Executive Officer and President +James A. Gabel, President, Performance Group +Donald T. Grimes, Senior Vice President, Chief Financial Officer and Treasurer +Andrew Simister, President, Lifestyle Group +James D. Zwiers, Senior Vice President and President, International Group +The CD&A is divided into the following four Sections: +Section 1 - 2014 Overview +Section 2 - Compensation +Program Overview +Section 3 - 2014 +Compensation +Section 4 - Other +Compensation Policies and Practices +SECTION 1 +- 2014 OVERVIEW +The Company had another strong year in fiscal 2014. Highlights for the year include: +» revenues of $2.76 billion, including fourth quarter revenue growth of 9.2%, marking record full-year revenue for Wolverine +Worldwide; +» record net earnings of $133.1 million; +» cash provided by operating activities of $314.6 million; and +» three-year total shareholder return in the 60th percentile compared to the Peer Group (defined below). +Wolverine Worldwide Notice of 2015 Annual Meeting of Stockholders and Proxy Statement +| Page +29 +Table of Contents +2015 PROXY STATEMENT +Strong Financial Performance +Wolverine Worldwide has a history of delivering strong financial performance. Our 15 brands are marketed in approximately 200 +countries and territories around the world, and we believe this brand portfolio approach and the diversified geographic and customer base served by those brands have helped buffer the Company against +challenges in any specific economic region or demographic sector and helped deliver strong financial performance in a variety of difficult economic environments. +Over +the past five years, the Company's performance, based on cumulative total stockholder return, compared to the S&P SmallCap Index and the S&P Footwear Index, is as shown in the following table: +Page 30 | +Wolverine Worldwide Notice of 2015 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +2015 PROXY STATEMENT +Executive Compensation Overview for 2014 +Peer Group +The Compensation Committee (the "Committee"), with input from Towers Watson (the compensation consultant engaged by the Committee, as +more fully described below), established the below peer group for use in setting 2014 NEO compensation (the "Peer Group"). As of the end of the 2014 Fiscal Year, companies in the Peer Group had market +capitalizations ranging from 0.1 times to 3.7 times Wolverine Worldwide's market capitalization, and Peer Group company revenue ranged from 0.6 times to 3.0 times Wolverine Worldwide's 2014 revenue. +Wolverine Worldwide's market capitalization and revenue placed it at the 48 th and 51 st percentile of the Peer Group, respectively, with respect to these +measures. +The +following companies comprise the Peer Group: +Aéropostale, Inc. +Carter's, Inc. +DSW Inc. +The Jones Group Inc. +American Eagle Outfitters Inc. +Chico's FAS, Inc. +Foot Locker, Inc. +PVH Corp. +ANN Inc. +Coach, Inc. +Genesco Inc. +Williams-Sonoma, Inc. +Ascena Retail Group, Inc. +Deckers Outdoor Corporation +Guess?, Inc. +Brown Shoe Company, Inc. +Dick's Sporting Goods, Inc. +Hanesbrands Inc. +Demonstrated Pay-for-Performance +The Board and the Committee believe that the Company's executive compensation program should pay for performance. The Committee +reviewed the results of the stockholder advisory vote on executive compensation that was held at the Annual Meeting of Stockholders in April 2014. The vote was with respect to the 2013 compensation +actions and decisions for the Company's NEOs. Over 95 percent of the votes cast on the proposal were voted in support of the compensation of the Company's NEOs set forth in the CD&A, the +summary compensation table and the related compensation tables and narratives in the 2014 proxy statement. Based on the results of the "say-on-pay" vote, the Committee concluded that the Company's +executive compensation policies and practices enjoy substantial stockholder support. Taking into account the results of the say-on-pay vote, along with other factors such as the Company's corporate +business objectives, the Committee's consideration of the Company's compensation philosophy and the Committee's review of competitive data (as discussed in more detail on page 35), the Committee did +not make any changes to the structure of the executive compensation program for 2014. +KEY COMPENSATION AND CORPORATE GOVERNANCE POLICIES AND PRACTICES +The Company's executive compensation program includes many contemporary corporate governance +practices: +» authorizing the Compensation Committee to hire an independent consultant; » implementing Stock Ownership Guidelines covering all +NEOs; » prohibiting hedging and pledging of Company securities; and +» requiring a double-trigger for change-in-control benefits under the Company's Executive Severance Agreements. +Other Relevant Factors +CEO and other NEO compensation for fiscal year 2014, and, in the case of the long-term incentive compensation for the three-year +period ending with fiscal year 2014, reflected the Company's financial performance over the past three years: +» over 80% of the CEO's total direct compensation (cash and equity) as reported in the Summary Compensation Table is tied to the +Company's stock or performance measures; +» the ratio of performance-based equity awards (including stock options) to time-vested restricted stock awards for the CEO is 1.8 to +1.0; and +» each NEO's bonus opportunity was capped at 200% of his Target Percentage for each bonus program. +Wolverine Worldwide Notice of 2015 Annual Meeting of Stockholders and Proxy Statement +| Page +31 +Table of Contents +2015 PROXY STATEMENT +SECTION 2 +- COMPENSATION PROGRAM OVERVIEW +Compensation Philosophy and Objectives +Wolverine Worldwide's compensation philosophy is to provide executives with competitive salaries and incentives to achieve superior +business and financial performance. The Committee oversees the Company's executive compensation program. The Committee reviews and approves NEO compensation, other than the CEO's compensation, which +is approved by the Board's independent directors. The NEO compensation program has four primary objectives: +» attract and retain talented NEOs who will lead Wolverine Worldwide and drive for superior business and financial performance; +» provide incentives for achieving specific, pre-established near-term individual, business-unit and corporate goals and reward the +attainment of those goals; +» provide incentives for achieving pre-established longer-term corporate financial goals and reward the attainment of those goals; and +» align the interests of NEOs with those of the stockholders through incentives based on increasing stockholder value. +Wolverine +Worldwide's executive compensation program balances fixed compensation (base salaries) with performance-based compensation (annual bonuses and long-term incentives) and rewards annual +performance while maintaining emphasis on longer-term objectives. The program also blends cash, non-cash (equity and +equity-based awards), long- and short-term compensation components, and current and future compensation components. The Committee considers qualitative and quantitative factors when setting the amount +and mix of NEO compensation. Each NEO's compensation mix and cash-to-equity ratio depends on his responsibilities, experience, skills, and potential to affect Wolverine Worldwide's overall +performance. The Committee and Board believe the CEO has the broadest scope of responsibilities and typically approve higher compensation for the CEO (with a higher proportion of variable +compensation) than for any other NEO. The Committee and Board believe this executive compensation philosophy has successfully generated superior performance over the long term. +Compensation Program Summary +The Company's executive compensation program consists of four key elements, as shown in the accompanying table. First, each NEO receives a base salary. Second, +each NEO is eligible to receive a cash-based Annual Bonus. The Annual Bonus has two parts: (i) an annual bonus based on performance +EXECUTIVE COMPENSATION PROGRAM +Annual Bonus +Long-Term Incentive +Compensation +Benefits +Base +Salary +Performance +Bonus +Individual +Bonus +Long-Term +Incentive +Bonus +Equity +Retirement and +Welfare Plans +Perquisites +measured against Company or business unit performance criteria established by the Compensation Committee at the beginning of the fiscal year (the "Performance +Bonus") under the Annual Bonus Plan, and (ii) an annual bonus based on performance measured against individual performance criteria (the "Individual Bonus") under the Individual Performance +Bonus Plan. Third, each NEO is eligible to receive Long-Term Incentive Compensation. The Long-Term Incentive Compensation has two parts: (i) a long-term incentive bonus based on performance +measured against pre-established Company performance criteria for a three-year period (the "3-Year Bonus"), and (ii) equity in the form of time-vested restricted stock awards and time-vested +stock option grants. Fourth, NEOs hired before January 1, 2013 may participate in the Company's defined-benefit plan (subject to certain vesting criteria) and, at the discretion of the +Committee, may participate in a supplemental executive retirement plan. In addition, each NEO may receive assistance with tax and estate planning, a matching contribution to his 401(k) account and +other perquisites as discussed below under the "Perquisites" heading. The executive compensation program is set out in more detail in the remainder of this CD&A. +Page 32 | +Wolverine Worldwide Notice of 2015 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +2015 PROXY STATEMENT +Purposes of Compensation Program Elements +Pay Element +What the Pay Element Rewards +Purpose of the Pay Element +Base Salary +» +Scope of core responsibilities, years of +service with the Company (or experience in similar positions at other companies), skills, and knowledge +» +Provide a regular and stable source of +income to NEOs +Annual Incentive Compensation +» +Performance Bonus rewards achieving specific +corporate business objectives over which the NEO has reasonable control +» +For certain NEOs, Performance Bonus rewards achieving specific division business objectives over which the NEO has reasonable control +» +Individual Bonus rewards achieving specific personal objectives +» +Focus NEOs on specific annual goals that +contribute to the Company's long-term success +» +Provide annual performance-based cash compensation +» +Align participants on important annual corporate, business level and individual performance metrics, with total annual opportunity heavily weighted toward achievement of corporate and business +level goals +Long Term Incentive Compensation +» +Focusing on long-term corporate business +objectives +» +Focusing on driving long-term +stockholder value +» +Continuing employment with +the Company during the vesting period +» +More closely align NEOs' interests with +stockholders' interests +» +Reward NEOs for +building stockholder value +» +Encourage +long-term investment in the Company by participating NEOs +» +Retain NEOs +Retirement and Welfare Benefits +» +Focusing on long-term corporate business +objectives +» +Continuing long-term employment +with the Company +» +In the case of the Supplemental Executive +Retirement Plan, provide retirement benefits that NEO participants would have received under the broad-based plan in the absence of the IRS limits +» +Provide retirement security +» +Encourage long-term commitment to the Company by NEOs and assist Wolverine Worldwide in +retaining talented NEOs +Wolverine Worldwide Notice of 2015 Annual Meeting of Stockholders and Proxy Statement +| Page +33 +Table of Contents +2015 PROXY STATEMENT +Compensation Committee Role +The Committee is responsible for overseeing the development and administration of the Company's compensation and benefits policies +and programs. The Committee consists of four independent directors. Among its other responsibilities, the Committee formulates the compensation recommendations to the independent directors of the +Board for the Company's CEO, reviews and approves all aspects of compensation for the other NEOs, and sets the Company's NEO compensation program, including: +» reviewing and approving the Company's incentive goals and objectives relevant to compensation; +» evaluating individual performance results in light of these goals and objectives; +» evaluating the competitiveness of each NEO's total compensation package; and +» approving (or, in the case of the CEO, recommending to the independent directors of the Board) any changes to the NEO's total +compensation package, including, but not limited to, base salary, Annual Bonus, and long-term incentive compensation. +When +making compensation recommendations or decisions, the Committee considers the CEO's assessment of the performance of each NEO, other than himself; the performance of the individual and the +individual's respective business unit or function; the scope of the individual's responsibilities, years of service with the Company (or in similar positions with other companies), skills and +knowledge; market data; market and economic conditions; retention considerations; and Wolverine Worldwide's compensation philosophy (collectively, the "Compensation Factors"). The Committee considers +these Compensation Factors subjectively, and no single factor or combination of factors is determinative. Following its review and discussion, the Committee approves compensation for all NEOs, except +the CEO. The Committee recommends compensation for the CEO to the independent directors of the Board, and those independent directors approve the CEO's compensation. The Lead Director and Compensation +Committee Chair meet with the CEO at the end of the year to evaluate his performance compared to his personal objectives set at the beginning of the year. The Committee is supported in its work by the +Senior Vice President of Global Human Resources, the General Counsel, and an independent executive compensation consultant as described below. +CEO Role +Within the framework of the Company's executive compensation program, the CEO recommends the level of base salary, Annual Bonus, +long-term incentive compensation, equity awards and other compensation components for his direct reports, including the other NEOs. The CEO bases his recommendation upon his assessment of the +Compensation Factors applicable to each NEO. The CEO considers these Compensation Factors subjectively and no single factor is determinative. The Committee discusses these recommendations with the CEO +prior to setting the compensation for each NEO, other than the CEO. +Compensation Consultant Role +The Compensation Committee has retained Towers Watson as its executive compensation consultant. Towers Watson reports directly to the +Committee, and the Committee determines the scope of its engagement and may replace it or hire additional consultants at any time. The Committee has evaluated Towers Watson's independence under the +rules established by the NYSE and has determined that Towers Watson is "independent" as defined by NYSE rules. In addition, the Committee has evaluated whether the engagement of Towers Watson raises +any conflicts of interest and has determined that no such conflicts of interest exist. +Page 34 | +Wolverine Worldwide Notice of 2015 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +2015 PROXY STATEMENT +At +the Committee's invitation, a representative of Towers Watson generally attends Committee meetings and also communicates with the Compensation Committee Chair between meetings. However, the +Committee makes all decisions regarding NEO compensation. Towers Watson provides various executive compensation services to the Committee pursuant to a consulting agreement with the Committee. +Generally, these services include advising the Committee on the principal aspects of the Company's executive compensation program, evolving industry practices, and providing market information and +analysis regarding the competitiveness of the Company's program design. During 2014, Towers Watson performed the following specific services: +» advised the Committee on management proposals, as requested; +» reviewed the CD&A and other executive compensation-related disclosures included in the Company's proxy statement; +» attended Committee meetings, as requested; +» reviewed the Company's peer group and advised the Committee on the composition of the peer group; +» reviewed survey data for competitive comparisons; +» provided market data and recommendations on CEO and other NEO compensation; +» advised the Committee on market trends related to compensation policies and programs; and +» proactively advised the Committee on best-practice approaches for governance of executive compensation. +The +total fees the Company paid to Towers Watson for services to the Committee in 2014 were $115,000. Towers Watson also was engaged by Wolverine Worldwide in 2014 to perform actuarial services, +pension plan consulting and risk and financial services that are not part of the executive compensation services provided to the Committee. These services were performed on an interim and annual basis +for financial reporting purposes. The total annual expense for this work was approximately $279,000. The total fees the +Company paid to Towers Watson ($394,000) represent approximately one one hundredth of one percent (0.01%) of Towers Watson's revenue for its 2014 fiscal year ($3.5 billion). +Competitive Data Use +The Committee uses surveys and Peer Group information as market reference points. The Committee believes that compensation levels in +the footwear, apparel and retail industries typically exceed levels reported in general industry surveys. The Committee also considers information the Company learns through recruiting NEOs and the +experience levels and responsibilities of NEOs prior to joining the Company as reference points in setting NEO compensation. +As +part of its competitive data review in connection with determining 2014 compensation, the Committee considered information presented by Towers Watson based on publicly-disclosed Peer Group +information and on three published compensation surveys: (1) 2013 Towers Watson Data Services Survey Report on Top Management Compensation – Retail and Wholesale Trade +Industry Cut, (2) 2013 Towers Watson Compensation Database Executive Database – Retail/Wholesale Executive Database, and (3) 2013 US Mercer Benchmark Database, +Executive – General, Retail Industry Cut. +Wolverine Worldwide Notice of 2015 Annual Meeting of Stockholders and Proxy Statement +| Page +35 +Table of Contents +2015 PROXY STATEMENT +SECTION 3 +– 2014 COMPENSATION +EXECUTIVE COMPENSATION PROGRAM +Base Salary +Annual Bonus +Long-Term Incentive +Compensation +Benefits +Base +Salary +Performance +Bonus +Individual +Bonus +Long-Term +Incentive +Bonus +Equity +Retirement +and Welfare +Plans +Perquisites +As +part of approving an NEO's base salary, the Committee considers the Compensation Factors described above. The Committee considers these Compensation Factors subjectively, and no single factor or +combination of factors was determinative for any NEO. Based on these factors, the Committee approved the 2014 base salaries for the NEOs as noted in the table. +Name +2014 Base Salary +2013 Base Salary +Krueger +$1,150,000 +$1,100,000 +Gabel +$510,000 +N/A +Grimes +$580,000 +$560,000 +Simister +$580,000 +N/A +Zwiers +$608,000 +$590,000 +EXECUTIVE COMPENSATION PROGRAM +Annual Bonus +Annual Bonus +Long-Term Incentive +Compensation +Benefits +Base +Salary +Performance +Bonus +Individual +Bonus +Long-Term +Incentive +Bonus +Equity +Retirement +and Welfare +Plans +Perquisites +In +2014, each NEO had the opportunity to earn annual cash incentive compensation ("Annual Bonus"), consisting of two parts: (i) an annual bonus based on performance measured against Company or +business unit performance criteria established by the Committee at the beginning of the fiscal year ("Performance Bonus") under the Annual Bonus Plan, and (ii) an individual performance bonus +measured against individual performance criteria ("Individual Bonus") under the Individual Performance Bonus Plan. Each NEO's payout under the two parts was determined by comparing his performance +against specific criteria set at the beginning of each year, with 85% of each NEO's payout relating to the Performance Bonus and 15% relating to the Individual Bonus. For the Performance Bonus, each +NEO's payout was determined by comparing his performance against four performance levels set for each pre-set criterion: threshold (50% payout), target (100% payout), goal (150% payout) and stretch +(200% payout). For the Individual Bonus, each NEO's payout was determined by comparing his performance against each pre-set criterion and scoring it on a scale of 0% to 100%. As shown in further +detail below under the heading "Individual Bonus," Individual Bonus payouts can range from 0% to 200% depending on the NEO's cumulative weighted performance score on his individual performance +objectives. +The +Compensation Committee set a percentage of each NEO's 2014 base salary as his Annual Bonus target percentage (the "Target Bonus Percentage"). The Target Bonus Percentage represents the percentage +of each NEO's salary he could earn as annual incentive compensation at a "target" performance level (100% payout) for each of the Performance Bonus and Individual Bonus. As part of approving an NEO's +2014 Target Bonus Percentage, the Committee considered the Compensation Factors described above. The Committee considers these Compensation Factors subjectively, and no single factor or combination of +factors was determinative for any NEO. Generally, the Committee set higher Target Bonus Percentages for individuals with greater influence on business strategy, profits or sales. This put a larger +percentage of an NEO's total potential cash compensation "at risk." +Page 36 | +Wolverine Worldwide Notice of 2015 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +2015 PROXY STATEMENT +Consistent +with the 2013 bonus opportunity, each NEO's total Annual Bonus opportunity for 2014 ranged from 0% to 200% of his Target Bonus Percentage. The accompanying table shows the total aggregate +annual incentive compensation payout earned by each NEO for 2014, as well as the portion of that aggregate number that is attributable to the Performance Bonus and Individual Bonus. +Annual Bonus Compensation Component +as a Percentage of Target Bonus Performance +Performance Bonus Percentage By +Company or Business unit as a Percentage of +Target Bonus Percentage +2014 +Target Percentage +2013 +Target Percentage +Total Individual +Bonus as a +Percentage of Target +Percentage +Company 1 +International Group 2 +Lifestyle Group 3 +Performance Group 4 +2014 Performance +Bonus +2014 Individual Bonus +Total 2014 Actual +Annual Bonus +Compensation +Krueger +125% +125% +15% +85% +$1,298,229 +$332,903 +$1,631,132 +Gabel +50% +N/A +15% +20% +65% +$138,901 +6 +$27,584 +6 +$200,000 +7 +Grimes +60% +60% +15% +85% +$314,865 +$80,740 +$395,605 +Simister +50% +N/A +15% +20% +65% +$28,785 +6 +$31,370 +6 +$200,000 +7 +Zwiers +55% +55% +15% +20% +65% 5 +65% 5 +$400,945 +$77,663 +$478,608 +1 The Committee approved revenue and pretax earnings performance criteria for the Company, as described below under " Annual Incentive +Compensation – Performance Bonus ." 2 The Committee approved revenue and pretax earnings as the performance criteria for the +International Group. 3 The Committee approved revenue and pretax earnings as the performance criteria for the Lifestyle +Group. +4 The Committee approved revenue and pretax earnings as the performance criteria for the Performance Group. 5 +Mr. Zwiers' Performance Bonus opportunity relating to business unit performance is prorated between the Performance Group and International Group to +reflect that he served a portion of 2014 as president of each of these groups. 6 Amounts for Messrs. Gabel and Simister are prorated to reflect that they were not employed by +Wolverine for the full fiscal +year. 7 As part of each's employment arrangement upon hiring, the Company determined to pay at least $200,000 in total 2014 Annual Bonus for Messrs. Gabel and +Simister. This column includes a discretionary bonus ($33,515 for Mr. Gabel; $139,845 for Mr. Simister) added to the payout earned under the Annual Bonus so that Annual Bonus amount for +each equals $200,000. +Annual Bonus – Performance Bonus +In connection with setting the Target Bonus Percentages, the Compensation Committee established the performance criteria for the +Company and business units under the Annual Bonus Plan. Each NEO's Performance Bonus was based on performance criteria for the Company, or for the Company and a business unit. The Committee set fiscal +year 2014 revenue (weighted 35% of the Company component) and pretax earnings (weighted 65%) as the Company's performance criteria. The Committee selected these criteria because it believed a strong +correlation exists between performance on these financial measures and increases in stockholder value. As shown in the accompanying table, the Committee also set four performance levels for each +criterion: threshold (50% payout), target (100% payout), goal (150% payout) and stretch (200% payout). The Committee set the revenue and pretax earnings goals for these performance levels (shown in +the accompanying table) following discussion with management and a review of the Company's operating plan, historical performance, and economic conditions facing the Company. +Company +Performance Level +in millions +(% of Target Payout) 1 +Revenue 2 +Pretax Earnings 2 +Threshold (50%) +$2,691 +$207.4 +Target (100%) +$2,771 +$221.9 +Goal (150%) +$2,852 +$241.2 +Stretch (200%) +$2,933 +$260.5 +1 The maximum payout an NEO can receive is 200% of the payment earned at his Target Bonus Percentage, even if performance is above Stretch, and an NEO would +receive 0% of his Target Bonus Percentage if performance is below Threshold. 2 Not including the effect of acquisitions, divestitures, accounting changes, restructuring, or other +special charges or extraordinary items excluded by the +Compensation Committee. Pretax earnings for 2014 exclude acquisition-related integration, restructuring and debt extinguishment costs. +Wolverine Worldwide Notice of 2015 Annual Meeting of Stockholders and Proxy Statement +| Page +37 +Table of Contents +2015 PROXY STATEMENT +Two +of the NEOs, Messrs. Krueger and Grimes, have significant influence on the Company's overall business performance and, accordingly, all of their respective Performance Bonus opportunities +(85% of total Annual Bonus Opportunity) are based on the Company performance criteria. Three of the NEOs, Messrs. Gabel, Simister and Zwiers, are directly responsible for specific business +units and exert a significant influence on those business units in particular. Accordingly, for each of those three NEOs, only 20% of their overall Annual Bonus opportunity was based on the Company's +performance. The remaining portions of the Performance Bonus portion of the Annual Bonus opportunities for each of these three NEOs were based on the performance of their respective business units, +expressed as a percentage of overall Annual Bonus opportunity: Mr. Gabel (65% Performance Group); Mr. Simister (65% Lifestyle Group); and Mr. Zwiers (65% International +Group/Performance Group (prorated)). The remaining 15% of each NEOs Annual Bonus opportunity was determined by his respective Individual Bonus criteria. +For +each business unit, the Committee set the goals at substantially similar levels of difficulty as the goals for the Company and with a similar degree of difficulty as in prior years. The +accompanying table shows historical weighted average revenue and pretax earnings performance levels achieved by the business units using these performance criteria for the years for which a meaningful +comparison can be made. +Historical Group Performance +2014 +2013 +2012 +2011 +2010 +International Group +Between goal and stretch +Between threshold and target +Below threshold +Above stretch +N/A +Lifestyle Group +Below threshold +Between threshold and target +N/A +N/A +N/A +Performance Group +Between target and goal +Between target and goal +Below threshold +Above stretch +Above stretch +In +early 2015, the Committee certified actual 2014 performance compared to the performance levels for the Company and business unit criteria. The Company's fiscal year 2014 revenue was approximately +$2.76 billion, which was between threshold and target performance level. The Company's adjusted pretax earnings for fiscal year 2014 were $225 million, which was between target and goal +performance level. The weighted average results for the applicable performance criterion are shown in the accompanying table: +2014 Performance +Overall Weighted Payout as +a Percent of Bonus Target +International Group +Between goal +and stretch +151% +Lifestyle Group +Below threshold +0% +Performance Group +Between target +and goal +143% +Wolverine Worldwide +Between target +and goal +103% +For +2014, the Company paid the NEOs the following amounts relating to the Performance Bonus. +Name +Performance Bonus Opportunity +(as a % of an NEO's Target Percentage) +Performance Bonus +Percentage Earned +Performance Bonus Paid 1 +Other Bonus 2 +Krueger +0 – 200% +103% +$1,298,229 +Gabel +0 – 200% +133% +$138,901 +$33,515 +Grimes +0 – 200% +103% +$314,865 +Simister +0 – 200% +24% +$28,785 +$139,845 +Zwiers +0 – 200% +150% +$400,945 +1 Not including Individual Performance Bonus or any other bonus paid. 2 As part of each's employment arrangement upon +hiring, the Company determined to pay at least $200,000 in total 2014 Annual Bonus for +Messrs. Gabel and Simister. +Page 38 | +Wolverine Worldwide Notice of 2015 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +2015 PROXY STATEMENT +Annual Bonus – Individual Bonus +At the same time Target Bonus Percentages are set, the CEO approves for each NEO other than himself, Individual Bonus personal objectives. The CEO recommends, +and the Committee approves, personal objectives for himself. Personal objectives may include elements such as executing strategies supporting Wolverine Worldwide's vision, developing employees, +growing new business initiatives and driving operational excellence. Each NEO has personal objectives specific to him. Performance is evaluated subjectively, generally based on qualitative and +quantitative factors. +NEO +2014 Personal Objectives +Krueger +Employee development, integration, brand and platform building and cash flows +Gabel +Assimilation, growth, direct-to consumer performance and Performance Group development +Grimes +Employee development, growth, profitability and cash flows +Simister +Assimilation, growth, Lifestyle Group development and restructuring management +Zwiers +International group assimilation, employee development, asset management and growth +Each +personal objective is given a weight from 0% to 100%. The sum of the weights for each NEO's personal objectives equals 100%. An NEO's cumulative weighted personal objectives score is calculated +by multiplying the score for each objective by its weight, and summing those results for all of the NEO's personal objectives. The Individual Bonus payout level ranges from 0% to 200%, determined by +the cumulative weighted personal objectives score. +Personal Objectives Score +2014 Payout Level +95-100% +200% +90-95% +175% +80-90% +150% +70-80% +100% +60-70% +50% +Less than 60% +0% +The +CEO recommended to the Committee the 2014 cumulative weighted personal objectives scores and payout levels for each of the NEOs, other than himself. The Committee and the other independent +directors of the Board met with the CEO at the end of the year to evaluate his performance compared to his personal objectives. The Committee determined the cumulative weighted personal objectives +score for the CEO and recommended to the independent directors of the Board the CEO's payout level. The Individual Bonus payout for each NEO, as shown in the accompanying table, was determined by +multiplying his cumulative weighted performance score payout level by 15 percent (representing the percentage of the Individual Bonus to the total Annual Bonus opportunity) of his Target Bonus +Percentage. +Name +2014 Individual Bonus +Opportunity +(as a % of an NEO's Target +Percentage) +Personal Objectives +Score +2014 +Individual Bonus +Percentage Awarded +2014 +Individual +Bonus Paid +Krueger +0 – 200% +84% +150% +$332,903 +Gabel +0 – 200% +85% +150% +$27,584 +Grimes +0 – 200% +82% +150% +$80,740 +Simister +0 – 200% +81% +150% +$31,370 +Zwiers +0 – 200% +82% +150% +$77,663 +EXECUTIVE COMPENSATION PROGRAM +Long- +Term Incentive +Compensation +Annual Bonus +Long-Term Incentive +Compensation +Benefits +Base +Salary +Performance +Bonus +Individual +Bonus +Long-Term +Incentive +Bonus +Equity +Retirement +and Welfare +Plans +Perquisites +In +2014, each NEO had the opportunity to earn long-term incentive compensation, consisting of two parts: (1) performance shares under the Company's stock incentive plan and (2) equity +awards in the form of time-vested stock option grants and time-vested restricted stock awards under the stock incentive plan. +Wolverine Worldwide Notice of 2015 Annual Meeting of Stockholders and Proxy Statement +| Page +39 +Table of Contents +2015 PROXY STATEMENT +Long-Term Incentive Compensation – Performance Share Bonuses +Each NEO had the opportunity to earn long-term incentive compensation in the form of performance shares issued under the Company's +stock incentive plan based on performance criteria covering three-year periods ("3-Year Bonus"). The Committee established two performance criteria for the performance period 2012-2014: +(1) fully diluted earnings per share ("EPS"), and (2) business value added ("BVA"), each as adjusted to account for and exclude the effects of acquisitions, divestitures, accounting +changes, restructuring, or other special charges or extraordinary items excluded by the Committee. BVA is calculated by starting with operating income determined in accordance with U.S. generally +accepted accounting principles ("GAAP"), and then reducing operating income by (1) an amount for income taxes where the effective tax rate used to calculate the income tax amount is determined +in accordance with GAAP (adjusted as described in the footnote to the table below), and (2) a capital charge equal to a 2-point average of "net operating assets" during the fiscal year (with +"net operating assets" defined as the net of trade receivables (net of reserves), inventory (net of reserves), other current assets, property, plant and equipment, trade payables and accrued +liabilities) multiplied by 10%. The Committee believes that BVA is useful for determining incentive compensation because it ties the income statement (profit delivery) to the balance sheet (effective +asset utilization) and does not focus on one to the exclusion of the other. The Committee further believes that focusing NEOs' interests on increasing BVA aligns their interests more closely with +stockholder interests. The Committee believes EPS is a key metric that plays an important role in driving the Company's stock price and that it further aligns the interests of the NEOs with other +stockholders. The use of both EPS and BVA balances the NEOs' focus on near-term profitability with longer-term stockholder value. The Committee weights EPS 65% and BVA 35% when determining the overall +performance level. +3-Year Performance Share Bonus (Fiscal 2012-2014) +The following table lists performance levels set by the Committee for the 2012-2014 performance period: +Performance level +(Percentage of Target +Payout) +Cumulative EPS for the +2012-2014 period 1 +Cumulative BVA for the +2012-2014 period 1 +(in millions) +Threshold (50%) +$3.57 +$276.2 +Target (100%) +$3.94 +$314.0 +Goal (150%) +$4.57 +$341.2 +Stretch (200%) +$5.19 +$369.2 +1 As adjusted to account for and excluding the effects of acquisitions, divestitures, accounting changes, restructuring, or +other special charges or extraordinary items excluded by the Compensation Committee. Excludes transaction and integration expenses related to the PLG acquisition, +restructuring charges, store impairment charges, and expenses relating to the October 2013 debt refinancing. +The +Committee evaluated the Company's performance for the 2012-2014 performance period against these criteria and certified that the Company's performance on both the EPS and BVA criteria as noted +above fell between target and goal performance levels. The EPS attainment (120.0%) was weighted 65%, and the BVA attainment (135.5%) was weighted 35%, for a weighted average attainment of 125.4%, +resulting in the vesting of the number of shares shown for each NEO in the accompanying table under the 3-Year Bonus for the 2012-2014 performance period. Due to Mr. Krueger having been granted +fewer shares at the start of the 2012-2014 period than would have vested according to the vesting formula in the applicable agreement, 100% of Mr. Krueger's shares for the 2012-2014 period +vested and he received a discretionary cash bonus equal to the difference between the value (including the value of dividends for the performance period) of the number of shares that would have vested +under the applicable agreement (that is, the number of shares that would have vested at the 125.4% performance level) and the value (including the value of dividends for the performance period) of the +number of shares actually vesting. +Name +Shares Vesting +(#) +Krueger +75,102 +Gabel +1,987 +1 +Grimes +21,892 +Simister +2,259 +1 +Zwiers +19,124 +1 Prorated to reflect employment for less than the full three-year period. +Page 40 | +Wolverine Worldwide Notice of 2015 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +2015 PROXY STATEMENT +3-Year Performance Share Bonus (Fiscal 2014-2016) +The Committee evaluated each NEO's long-term incentive target payout opportunity expressed as a percentage of base salary, similar to the Annual Bonus. The +Committee considered the Compensation Factors noted above in determining 3-year target bonus percentages. The Committee considers these Compensation Factors subjectively, and no single factor or +combination of factors was determinative for any NEO. The Committee decided to set the NEOs' Target Percentage for the 2014-2016 3-Year Bonus opportunity, as set out in the accompanying table. In +February 2015, the Committee reviewed Mr. Krueger's overall compensation against peer market data provided by Towers Watson, which showed that Mr. Krueger's overall compensation +was below median, particularly in his long-term incentive compensation. To address this, rather than making any changes to his base salary or Annual Bonus opportunity, the Committee recommended and +the Board approved an increase in Mr. Krueger's Target Percentage for the 2015-2017 3-year period from 125% of his base salary to 200%. In addition, the Committee later recommended and the +Board approved new grants of performance shares to Mr. Krueger for a 2015 performance period and a 2015-2016 performance period with Target Percentages of 100% and 75%, respectively, of +Mr. Krueger's base salary. The performance targets for each period are based on (i) earnings per share (weighted at 65%) and BVA (weighted at 35%) targets that are consistent with the +targets for the same metrics used in the 2013-2015 and 2014-2016 3-year periods, and (ii) threshold revenue targets that must be met before any shares would vest. +Name +2014-2016 +Percent +2013-2015 +Percent +Krueger +125% +100% +Gabel 1,2 +55% +55% +Grimes 2 +65% +65% +Simister 1,2 +55% +55% +Zwiers 2 +55% +55% +1 Any vesting will be prorated to reflect employment for less than the full three-year period. 2 Upon reviewing overall +compensation in February 2015, the Compensation Committee approved an increase to target percentages (as a percentage of base salary) +for the 2013-2015 and 2014-2016 performance periods for Messrs. Gabel, Simister and Zwiers from 50% to 55% and an increase from 60% to 65% for Mr. Grimes. +The +Committee awarded performance shares to each NEO with a value equal to the estimated maximum bonus payout the NEO could earn as the 3-Year Bonus for the 2014-2016 performance period. The Committee +weighted the EPS performance criterion at 65% of the total payout and weighted the BVA performance criterion at 35% of the total payout for the 2014-2016 performance period, which was consistent with +the 2012 and 2013 performance share grants. The Committee intended the level of difficulty in attaining Threshold, Target, Goal and Stretch performance levels it set for the 2014-2016 performance +period to be substantially similar to the level of difficulty in attaining the performance levels for the 2013-2015 performance period. The Committee granted the awards under the Company's Stock +Incentive Plan of 2013. The award details are in the table " Grants of Plan-Based Awards in Fiscal Year 2014 " on pages 48-49. The Company accrues, +but does not pay, dividends on the performance shares during the performance period. Once the Committee certifies the Company's performance compared to the performance criteria, the restrictions on +some, all, or none of the performance shares awarded to each NEO will lapse at that time, and the NEO will receive accrued dividends only on the shares actually earned. +Long-Term Incentive Compensation – Stock Option Grants and Restricted Stock Awards +The Compensation Committee believes that NEO stock ownership benefits stockholders. The Committee administers the stock incentive +plans for stock option grants and restricted stock awards. It approves the amount of and terms +applicable to all grants and awards (except for grants to the CEO, which the Committee recommends for approval by the independent directors). In addition to annual grants and awards, the Committee may +approve special grants or awards to NEOs, such as a grant or award to a new hire or for a promotion. +When +granting equity awards, the Committee considered the Compensation Factors described above as well as previous equity grants made to each NEO. The Committee considers these Compensation Factors +subjectively, and no single factor or combination of factors was determinative for any NEO. The accompanying table reflects the grant-date value of the regular, annual time-vested restricted stock +award and stock option grant to each NEO as a percentage of base salary. The " Grants of Plan-Based Awards in Fiscal Year 2014 " table on +pages 48-49 shows the actual grants and awards for 2014. +Wolverine Worldwide Notice of 2015 Annual Meeting of Stockholders and Proxy Statement +| Page +41 +Table of Contents +2015 PROXY STATEMENT +A +stock option's exercise price is set at the closing market price of the Company's common stock on the grant date. The Committee generally grants annual equity awards at its regularly scheduled +February meeting. The independent directors of the Board generally approve equity grants to the CEO on the same day. A stock option grant typically vests one-third each year over three years. The +restrictions on restricted stock awards typically lapse 25% on each of the third and fourth anniversary and 50% on the fifth anniversary of the award. +The +restricted stock award, not including performance shares, was approximately 60%, and the stock option grants were approximately 40% of the combined value of the regular annual grant awarded to +each NEO in 2014, as reflected in the accompanying table. These were the same approximate percentages as in 2013 and in the past five years. The Committee believed this mix was appropriate based on +the fact that restricted stock promotes retention and stock options incentivize stock price performance. +Name +2014 Regular Annual Grants +Actual % of Base Salary Awarded +Krueger +302% +Gabel +51% +1 +Grimes +100% +Simister +45% +1 +Zwiers +87% +1 Prorated grant percentage reflects employment for less that the full year. See below for information regarding additional sign-on and retention restricted +stock grants to Messrs. Gabel and Simister. +In +addition to the regular annual equity grants Messrs. Gabel and Simister each received: a sign-on grant of 15,000 shares of restricted stock; and a retention grant of 15,000 shares of +restricted stock. Restrictions on the sign-on share grant lapse 25% on each of the third and fourth anniversary and 50% on the fifth anniversary of the award. Restrictions on the retention share grant +lapse on a slightly modified schedule – restrictions on 25% of the shares lapse on each of the third and fourth anniversary of the January 1 st after the date of +the award and 50% on the fifth anniversary of the January 1 st after the date of the award. +EXECUTIVE COMPENSATION PROGRAM +Benefits +Annual Bonus +Long-Term Incentive +Compensation +Benefits +Base +Salary +Performance +Bonus +Individual +Bonus +Long-Term +Incentive +Bonus +Equity +Retirement +and Welfare +Plans +Perquisites +Retirement and Welfare Plans +The NEOs participate in Wolverine Worldwide's medical and dental plans and receive life and disability insurance. Subject to +variations to account for requirements in local jurisdictions, variances in local compensation structure (for example, as applicable to Wolverine Worldwide's employees in the United States versus +certain overseas offices), and to requirements under collective bargaining agreements, all Wolverine Worldwide employees receive the same health and welfare benefit opportunities. Messers. Krueger, +Grimes and Zwiers also participate in the Wolverine Worldwide Employees' Pension Plan (a defined benefit plan) and the Wolverine World Wide, Inc. 409A Supplemental Executive Retirement Plan (an +unfunded, non-qualified plan). For a description of the benefits under Wolverine Worldwide's retirement plans, see " Pension Plans and 2014 Pension +Benefits " below. +Perquisites +The Company provides limited perquisites to NEOs in order to provide a competitive total compensation package. The Company reimbursed +NEOs for tax, financial planning and estate planning services, and made 401(k) matching payments in the amounts set forth in footnote 8 to the " Summary Compensation +Table " on pages 46-47. +Page 42 | +Wolverine Worldwide Notice of 2015 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +2015 PROXY STATEMENT +SECTION 4 +– OTHER COMPENSATION POLICIES AND PRACTICES +The +dates of the Compensation Committee's and Board's February meetings at which annual grants are made generally are scheduled at least one year in advance. During 2014, the Committee also +delegated to the CEO the authority to award restricted stock or grant stock options to employees during the period from the February 2014 regular meeting of the Compensation Committee until the +February 2015 regular meeting of the Committee. The CEO may not make such grants or awards to himself or other NEOs. The grants and awards are intended to recognize outstanding performance by +employees. The delegation limits the CEO's authority to make such grants and awards for the February 2014 to February 2015 period to an aggregate of 34,000 restricted stock awards and an +aggregate of 26,322 stock option awards. +NEO Stock Ownership Guidelines +Through stock ownership guidelines, the Company requires that NEOs maintain a minimum stock ownership level (including owned shares, +restricted stock awards and performance shares (for up to 50% of the applicable ownership requirement), and the in-the-money value of vested stock options) to align further the interests of these +individuals with the stockholders. The stock ownership guidelines preclude individuals covered by the policy (including NEOs and directors) from transferring Company stock by sale or gift unless he or +she has first attained the applicable holding requirement and continues to +meet such requirement immediately following the proposed transaction. During 2014, NEOs were in compliance with these guidelines. +Covered Positions +Guideline +CEO +6x Annual Base Salary +Other NEOs +2x Annual Base Salary +Stock Hedging and Pledging Policies +The Company acknowledges that certain forms of hedging, such as zero-cost collars and forward sale contracts, allow a stockholder to +lock in much of the value of his or her stock holdings, often in exchange for all or part of the potential for appreciation in the stock. These transactions allow a person to continue to own the +covered securities but without the full risks and rewards of ownership. When that occurs, he or she may no longer have the same objectives as the Company's other shareholders. As a result, under the +Company's Insider Trading Policy, all directors, officers and other employees are prohibited from engaging in any hedging transactions involving Company securities beneficially owned by them. The +Company also considers it inappropriate for any such person to engage in speculative transactions in the Company's securities, including short sales, publicly traded options, margin accounts and +pledges and standing and limit orders. Securities that are pledged (or hypothecated) as collateral for a loan may be sold in foreclosure if the borrower defaults on the loan. Because a foreclosure +sale may occur at a time when the pledgor is aware of material, non-public information or otherwise is not permitted to trade in Company securities, all directors, officers and other employees are +prohibited from pledging Company securities as collateral for a loan. +Impact of Accounting and Tax Treatments on Compensation +Section 162(m) of the Internal Revenue Code provides that publicly held companies may not deduct compensation paid to the CEO +and the three next most highly-paid executive officers (other than the CFO) in excess of $1,000,000 annually, with certain exceptions for qualified "performance-based" compensation. Wolverine +Worldwide has designed each of its Annual Bonus Plan, Long-Term Incentive Plan, and stock incentive plans, to permit certain awards payable under these plans that are intended to qualify as +"performance-based" compensation for purposes of Section 162(m). Wolverine Worldwide does not require all of its compensation programs, including programs under the plans listed above, to be +fully deductible under Section 162(m) because Wolverine Worldwide believes it is important to preserve flexibility in administering compensation programs in a manner designed to promote varying +corporate goals. Wolverine Worldwide may pay compensation that does not qualify as performance-based compensation. +Post-Employment Compensation +Each NEO is party to an Executive Severance Agreement that provides for certain payments and benefits upon termination of employment +after a change in control of Wolverine Worldwide. The Board believes Executive Severance Agreements will promote management stability during the transition period accompanying a change in control. +Each NEO is eligible to receive compensation if his employment is terminated within two years (Messrs. Gabel, Grimes, Simister and Zwiers) or three years (Mr. Krueger) following a change +in control of +Wolverine Worldwide Notice of 2015 Annual Meeting of Stockholders and Proxy Statement +| Page +43 +Table of Contents +2015 PROXY STATEMENT +Wolverine +Worldwide. The Compensation Committee believes this "double trigger" requirement of (1) change in control, and (2) termination of employment, is appropriate because a change in +control does not, in many circumstances, materially harm an NEO unless his employment with the Company is terminated. An NEO does not receive payment under the Executive Severance Agreement if his +employment terminates: +» due to death or retirement in accordance with Wolverine Worldwide's policy or as otherwise agreed; +» for cause or disability; or +» by resignation of the NEO, other than for "good reason," which is discussed under the heading " Benefits +Triggered by Termination Other than For Cause or by the NEO for Good Reason " and the heading " Benefits Triggered Under a Change in +Control ," both under the heading " Potential Payments Upon Termination or Change in Control ." +NEOs +may also be eligible under Wolverine Worldwide's retirement plans or equity plans to receive certain payments and benefits upon termination of employment or in connection with a change in +control. The Compensation Committee believes that single-trigger accelerated vesting upon a change in control is appropriate in some circumstances because, by protecting a significant component of the +NEO's total compensation, the acceleration of equity vesting (1) mitigates potential conflicts of interest that might arise between the NEOs and the stockholders, and (2) serves as a +substantial incentive for those NEOs to obtain the highest possible value for the stockholders if the Company becomes an acquisition target. The Compensation Committee also retains the discretion to +modify the accelerated vesting. +Mr. Krueger +is also party to a Separation Agreement under which he receives certain payments and benefits if the Company terminates his employment other than for "cause" or if he terminates his +employment for "good reason." The Compensation Committee determined upon appointing Mr. Krueger as CEO that, given the Company's strategic initiatives the Board had asked him to lead, it was +appropriate for the Company to enter into a separation arrangement. You will find information on benefits payable to Mr. Krueger and each other NEO and the specific elements comprising the +payments and benefits under the Separation Agreement, Executive Severance Agreements, and other retirement and equity plans of Wolverine Worldwide, in the " Potential Payments +Upon Termination or Change in Control " section of this proxy statement. +Page 44 | +Wolverine Worldwide Notice of 2015 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +2015 PROXY STATEMENT +Compensation Committee Report +The +Compensation Committee has reviewed and discussed with management the information provided under the heading "Compensation Discussion and Analysis." Based on this review +and discussion, the Compensation Committee recommended to the Board of Directors that the Company include the Compensation Discussion and Analysis section in this proxy statement and incorporate it by +reference into the Company's Annual Report on Form 10-K. +Respectfully +submitted, +Joseph +R. Gromek (Chairperson) +Jeffrey M. Boromisa +Nicholas T. Long +Michael A. Volkema +Wolverine Worldwide Notice of 2015 Annual Meeting of Stockholders and Proxy Statement +| Page +45 +Table of Contents +2015 PROXY STATEMENT +Summary Compensation Table +Name and Principal Position +Year +Salary 1 +Bonus 1,2 +Stock Awards 3 +Option Awards 4 +Non-Equity Incentive Plan +Compensation 1,5 +Change in Pension Value and +Nonqualified Deferred +Compensation Earnings 6 +All Other Compensation 8 +Total +Blake W. Krueger +Chairman, CEO +2014 +$1,183,654 +$440,249 +$4,383,045 +$1,394,846 +$1,631,132 +$5,499,286 +7 +$18,847 +$14,551,059 +and President +2013 +$1,090,869 +$500,000 +$3,550,125 +$1,044,046 +$1,821,983 +$0 +$30,264 +$8,037,287 +2012 +$853,906 +$2,638,485 +$615,287 +$192,129 +$3,366,911 +$18,772 +$7,685,490 +James A. Gabel 9 +President, +2014 +$245,192 +$33,510 +$1,555,602 +$105,650 +$166,485 +$0 +$88,920 +$2,195,359 +Performance Group +Donald T. Grimes +Senior Vice President, +2014 +$598,077 +$904,834 +$231,841 +$395,605 +$434,700 +$14,120 +$2,579,177 +CFO, Treasurer and +2013 +$555,038 +$100,000 +$816,866 +$222,144 +$457,827 +$33,418 +$19,573 +$2,204,886 +Chief Accounting Officer +2012 +$427,827 +$50,000 +$826,172 +$170,553 +$52,944 +$253,321 +$12,810 +$1,793,627 +Andrew Simister 10 +President, +2014 +$278,846 +$139,845 +$1,633,171 +$105,650 +$60,155 +$0 +$86,279 +$2,303,946 +Lifestyle Group +James D. Zwiers +Senior Vice President +2014 +$627,577 +$803,213 +$210,567 +$478,608 +$795,787 +$17,856 +$2,933,608 +and President, +2013 +$584,654 +$75,000 +$728,005 +$201,760 +$413,050 +$0 +$19,424 +$2,021,893 +International Group +2012 +$445,500 +$1,108,664 +$170,553 +$81,351 +$509,767 +$16,866 +$2,332,701 +1 Includes any amounts deferred under the Company's qualified 401(k) plan. +2 As part of each's employment arrangement upon hiring, the Company determined to pay at least $200,000 in total 2014 Annual Bonus for Messrs. Gabel and +Simister. The amount reflected in the "Bonus" column for Messrs. Gabel and Simister is the amount paid to increase the Annual Bonus amount to $200,000. As discussed above under +" Long-Term Incentive Compensation – Performance Share Bonuses ," the 2014 bonus for Mr. Krueger represents a discretionary cash +bonus paid because the number of performance shares he was granted for the 2012-2014 performance period was less than the actual number of shares to which he would have been entitled under the vesting +formula in the applicable agreement at the performance level achieved by the Company for the 2012-2014 performance period. +Page 46 | +Wolverine Worldwide Notice of 2015 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +2015 PROXY STATEMENT +3 Includes the value of restricted stock awards and performance share awards, as follows: +Name +Time-vested Restricted Value +Performance Share Value +Total +Krueger +$2,085,022 +$2,298,023 +$4,383,045 +Gabel +$990,458 +$565,144 +$1,555,602 +Grimes +$348,512 +$556,322 +$904,834 +Simister +$990,458 +$642,713 +$1,633,171 +Zwiers +$317,231 +$485,982 +$803,213 +Restricted stock was valued using the closing market price of Wolverine Worldwide common stock on the date of grant. Performance shares awarded in 2014 were valued using the closing market price of +Wolverine Worldwide common stock on the date of grant and assuming performance between Target (100% payout) and Goal (150% payout) level, consistent with the assumptions used at the time of the award +under ASC Topic 718. Assuming payout at Stretch performance, the aggregate award date fair value of performance shares awarded in 2014 for each NEO (and, in parenthesis, the award date fair value of +the sum of performance share awards assuming (Stretch) performance assumptions and award date fair value of restricted stock awards for 2014), would have been: $3,018,750 ($5,103,772) for +Mr. Krueger; $886,625 ($1,877,083) for Mr. Gabel; $804,513 ($1,153,025) for Mr. Grimes; $1,017,778 ($2,008,236) for Mr. Simister; and $702,803 ($1,020,034) for +Mr. Zwiers. Restrictions on performance share awards will lapse in the February following the last year in the performance period, if at all, based on the Company's performance for the period. +For additional valuation assumptions, see Note 11 to Wolverine Worldwide's Consolidated Financial Statements for the fiscal year ended January 3, 2015. +4 Represents the aggregate grant date fair value of stock options granted in the years shown, calculated in accordance with ASC Topic 718. Stock options were +valued using the Black-Scholes model. For additional valuation assumptions, see Note 11 to Wolverine Worldwide's Consolidated Financial Statements for the fiscal year ended January 3, +2015. +5 Reflects the sum of Performance Bonus and Individual Bonus amounts earned in 2014, 2013 and 2012, respectively, and paid in 2015, 2014 and 2013, respectively. +6 All amounts in this column reflect the aggregate change in the actuarial present value of the NEOs' accumulated benefits under the Wolverine Worldwide +Employees' Pension Plan ("Pension Plan") and Wolverine World Wide, Inc. 409A Supplemental Executive Retirement Plan ("SERP"). The amounts in the table were determined using assumptions +consistent with those used in Wolverine Worldwide's Consolidated Financial Statements for each respective year. See the "Pension Plans and 2014 Pension Benefits" section starting on page 54. +Messrs. Gabel and Simister do not participate in the Pension Plan or SERP. +7 Approximately $2.5 million of Mr. Krueger's change in pension value is attributable to year-over-year changes in the assumptions the Company is +required to use in calculating pension values, specifically a decrease in discount rate and change in mortality assumptions. Using the same discount rates and mortality assumptions as used in 2013, +Mr. Krueger's change in pension value would have been $3.0 million. +8 The amounts listed in this column for 2014 include Wolverine Worldwide's matching contributions to the accounts of the NEOs under Wolverine Worldwide's 401(k) +Money Accumulation Plan, payments made by Wolverine Worldwide for the premiums on certain life insurance policies, tax and estate planning services, relocation costs (including tax gross-ups) and +health care reimbursements in the amounts listed in the table below. +Name +401(k) Match +Life Insurance Premiums +Tax and Estate Planning +Relocation +Health +Krueger +$7,800 +$3,842 +$7,205 +– +– +Gabel +$11,700 +$1,495 +$4,915 +$68,433 +$2,377 +Grimes +$7,800 +– +$6,320 +– +– +Simister +– +$899 +$4,915 +$80,265 +$200 +Zwiers +$7,800 +$2,851 +$7,205 +– +– +9 Mr. Gabel was hired as President of the Performance Group in July 2014. +10 Mr. Simister was hired as President of the Lifestyle Group in July 2014. +Wolverine Worldwide Notice of 2015 Annual Meeting of Stockholders and Proxy Statement +| Page +47 +Table of Contents +2015 PROXY STATEMENT +Grants of Plan-Based Awards in Fiscal Year 2014 +The +following table provides information concerning each grant of an award made to the NEOs in fiscal year 2014: +Estimated Future Payouts +Under Non-Equity Incentive Plan +Awards 1 +Estimated Future Payouts +Under Equity Incentive Plan +Awards 2 +Name +Award Type +Grant Date +Threshold +($) +Target +($) +Maximum +($) +Threshold +(#) +Target +(#) +Maximum +(#) +All +Other +Stock +Awards: +Number of +Shares of +Stock or +Units 3 +(#) +All +Other +Option +Awards: +Number of +Securities +Underlying +Options 4 +(#) +Exercise +or Base +Price of +Option +Awards 5 +($/Share) +Grant +Date Fair +Value of +Stock and +Option +Awards 6 +($) +Krueger +Annual Bonus +$739,784 +$1,479,567 +$2,959,135 +FY14-FY16 Performance Shares +2/11/14 +27,817 +55,635 +111,270 +$2,298,023 +Stock Options +2/11/14 +225,284 +$27.13 +$1,394,846 +Restricted Stock +2/11/14 +76,853 +$2,085,022 +Gabel +Annual Bonus +$61,298 +$122,596 +$245,192 +FY14-FY16 Performance Shares +7/9/14 +4,757 +9,514 +19,027 +$327,994 +FY13-FY15 Performance Shares +2,718 +5,436 +10,873 +$187,425 +FY12-FY14 Performance Shares +793 +1,585 +3,170 +$49,725 +Stock Options +7/9/14 +17,005 +$26.81 +$105,650 +Restricted Stock +7/9/14 +20,847 +$558,908 +Restricted Stock +12/10/14 +15,000 +$431,550 +Grimes +Annual Bonus +$179,423 +$358,846 +$717,692 +FY14-FY16 Performance Shares +2/11/14 +7,673 +15,346 +29,654 +$556,322 +Stock Options +2/11/14 +37,445 +$27.13 +$231,841 +Restricted Stock +2/11/14 +12,846 +$348,512 +Page 48 | +Wolverine Worldwide Notice of 2015 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +2015 PROXY STATEMENT +Estimated Future Payouts +Under Non-Equity Incentive Plan +Awards 1 +Estimated Future Payouts +Under Equity Incentive Plan +Awards 2 +Name +Award Type +Grant Date +Threshold +($) +Target +($) +Maximum +($) +Threshold +(#) +Target +(#) +Maximum +(#) +All +Other +Stock +Awards: +Number of +Shares of +Stock or +Units 3 +(#) +All +Other +Option +Awards: +Number of +Securities +Underlying +Options 4 +(#) +Exercise +or Base +Price of +Option +Awards 5 +($/Share) +Grant +Date Fair +Value of +Stock and +Option +Awards 6 +($) +Simister +Annual Bonus +$69,712 +$139,423 +$278,846 +FY14-FY16 Performance Shares +7/9/14 +5,475 +10,950 +21,864 +$373,013 +FY13-FY15 Performance Shares +3,128 +6,257 +12,493 +$213,150 +FY12-FY14 Performance Shares +901 +1,803 +3,606 +$56,550 +Stock Options +7/9/14 +17,005 +$26.81 +$105,650 +Restricted Stock +7/9/14 +20,847 +$558,908 +Restricted Stock +12/10/14 +15,000 +$431,550 +Zwiers +Annual Bonus +$172,584 +$345,167 +$690,335 +FY14-FY16 Performance Shares +2/11/14 +6,684 +13,368 +25,905 +$485,982 +Stock Options +2/11/14 +34,009 +$27.13 +$210,567 +Restricted Stock +2/11/14 +11,693 +$317,231 +1 Estimated payout levels relating to the Performance Bonus and Individual Bonus. For a description of these bonuses and the payouts under them, see +pages 36-39. 2 Estimated payout levels of performance shares granted under the Stock Incentive Plan of 2013 relating to each NEO's participation (prorated for +Messrs. Gabel and Simister) in the 3-Year Bonus Plan for the 2014-2016 performance period and, for Messrs. Gabel and Simister, prorated participation in the 2012-2014 and 2013-2015 +performance periods. Following the end of the applicable performance period, restrictions may lapse on some, all or none of the performance shares depending upon the Company's achievement of the +relevant performance criteria. The Company accrues, but does not pay, dividends on the performance shares during the performance period. At the end of the applicable performance period, the Company +will pay to the NEO the accrued dividends (if any) on the performance shares for which the restrictions lapse. For a description of this 3-Year Bonus Plan and the payout under it, see +pages 39-41. 3 The Company awarded restricted stock awards under the Stock Incentive Plan of 2013 for all NEOs. With the exception of the December 2014 grants to +Messrs. Gabel and Simister, which vest on a slightly longer schedule, as described in CD&A, the restrictions on 25% of the shares received under the awards reflected in this column lapse on +each of the third and fourth anniversary and 50% on the fifth anniversary of the award. All restrictions on shares of restricted stock lapse upon an NEO's death, disability or voluntary termination +after attaining age 62 or age 50 with seven years of service with the Company, subject to certain conditions. In the event of a change in control, as described under the "Benefits Upon a Change in +Control Only" sub-heading on page 58, restrictions lapse on all shares. Holders of restricted stock are entitled to receive dividends and to vote the restricted shares. 4 +The Company granted stock options under the Stock Incentive Plan of 2013 to all NEOs. Stock options granted to NEOs vest ratably over three years beginning on +the first anniversary of the grant date and have a term of 10 years. All stock options vest upon an NEO's death, disability or voluntary termination after attaining age 62 or age 50 with seven +years of service with the Company, subject to certain conditions. In the event of a change in control, as described under the "Benefits Upon a Change in Control Only" sub-heading on page 58, +all stock options vest. 5 The exercise price is equal to the closing market price of shares of Wolverine Worldwide common stock on the date of the grant. +6 Represents the grant date fair value for stock options and award date fair value for performance share and time-vested restricted stock awards made in fiscal +year 2014, determined as described in footnotes 3 and 4 to the "Summary Compensation Table." +Wolverine Worldwide Notice of 2015 Annual Meeting of Stockholders and Proxy Statement +| Page +49 +Table of Contents +2015 PROXY STATEMENT +Outstanding Equity Awards at 2014 Fiscal Year-End +The +following table provides information concerning unexercised options and stock awards that have not vested for each NEO outstanding as of January 3, 2015: +Option Awards +Stock Awards +Name +Grant Date +Number of Securities Underlying +Unexercised Options Exercisable +(#) +Number of Securities Underlying +Unexercised Options +Unexercisable 1 +(#) +Option Exercise Price +($) +Option Expiration Date +Number of Shares or Units of +Stock That Have Not Vested 2 +(#) +Market Value of Shares or Units +of Stock That Have Not Vested 3 +($) +Equity Incentive Plan Awards: +Number of Unearned Shares, +Units or Other Rights That Have +Not Vested 4 +(#) +Equity Incentive Plan Awards: +Market or Payout Value of +Unearned Shares, Units or Other +rights That Have Not Vested 3 +($) +Krueger +Various +254,943 +$7,400,995 +Various +345,584 +$10,032,304 +2/6/08 +7,984 +- +$12.53 +2/5/18 +2/10/10 +44,266 +- +$12.50 +2/10/20 +2/9/11 +98,000 +- +$18.25 +2/8/21 +2/8/12 +76,000 +38,000 +$19.92 +2/7/22 +2/6/13 +66,926 +133,852 +$21.48 +2/5/23 +2/11/14 +- +225,284 +$27.13 +2/10/24 +Gabel +Various +35,847 +$1,040,638 +Various +33,699 +$978,282 +7/9/14 +- +17,005 +$26.81 +7/8/24 +Grimes +Various +58,296 +$1,692,333 +Various +90,832 +$2,636,853 +5/27/08 +10,784 +- +$14.14 +5/26/18 +2/10/09 +60,000 +- +$8.56 +2/9/19 +2/10/10 +40,600 +- +$12.50 +2/10/20 +2/9/11 +28,200 +- +$18.25 +2/8/21 +2/8/12 +21,068 +10,532 +$19.92 +2/7/22 +2/6/13 +14,240 +28,480 +$21.48 +2/5/23 +2/11/14 +- +37,445 +$27.13 +2/10/24 +Simister +Various +35,847 +$1,040,638 +Various +38,323 +$1,112,517 +7/9/14 +- +17,005 +$26.81 +7/8/24 +Page 50 | +Wolverine Worldwide Notice of 2015 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +2015 PROXY STATEMENT +Option Awards +Stock Awards +Name +Grant Date +Number of Securities Underlying +Unexercised Options Exercisable +(#) +Number of Securities Underlying +Unexercised Options +Unexercisable 1 +(#) +Option Exercise Price +($) +Option Expiration Date +Number of Shares or Units of +Stock That Have Not Vested 2 +(#) +Market Value of Shares or Units +of Stock That Have Not Vested 3 +($) +Equity Incentive Plan Awards: +Number of Unearned Shares, +Units or Other Rights That Have +Not Vested 4 +(#) +Equity Incentive Plan Awards: +Market or Payout Value of +Unearned Shares, Units or Other +rights That Have Not Vested 3 +($) +Zwiers +Various +75,743 +$2,198,819 +Various +83,833 +$2,433,672 +2/7/07 +2,432 +- +$15.13 +2/6/17 +2/6/08 +22,152 +- +$12.53 +2/5/18 +2/10/09 +38,000 +- +$8.56 +2/9/19 +4/22/09 +4,000 +- +$10.90 +4/21/19 +2/10/10 +40,600 +- +$12.50 +2/10/20 +2/9/11 +28,200 +- +$18.25 +2/8/21 +2/8/12 +21,068 +10,532 +$19.92 +2/7/22 +2/6/13 +12,934 +25,866 +$21.48 +2/5/23 +2/11/14 +- +34,009 +$27.13 +2/10/24 +1 All options become exercisable on the vesting date. The vesting period for options is one-third of the shares on each of the first three +anniversaries of the date of the grant. Stock option vesting may accelerate upon certain events, including death, disability or voluntary termination after attaining age 62 or age 50 with seven years +of service with the Company, subject to certain conditions, as further described in the "Grants of Plan Based Awards" section. +Wolverine Worldwide Notice of 2015 Annual Meeting of Stockholders and Proxy Statement +| Page +51 +Table of Contents +2015 PROXY STATEMENT +2 The following table sets forth the vesting dates for the unvested restricted stock awards of each NEO as of January 3, 2015: +Named +Executive +Officer +Vesting +Date +Number of Shares to Vest +Krueger +2/8/15 +11,600 +2/9/15 +10,400 +2/10/15 +27,000 +2/6/16 +18,372 +2/8/16 +11,600 +2/9/16 +20,800 +2/6/17 +18,373 +2/8/17 +23,200 +2/11/17 +19,213 +2/6/18 +36,745 +2/11/18 +19,213 +2/11/19 +38,427 +Gabel +7/9/17 +5,211 +1/1/18 +3,750 +7/9/18 +5,212 +1/1/19 +3,750 +7/9/19 +10,424 +1/1/20 +7,500 +Grimes +2/8/15 +3,200 +2/9/15 +2,950 +2/10/15 +8,200 +2/6/16 +3,900 +2/8/16 +3,200 +2/9/16 +5,900 +2/6/17 +3,900 +2/8/17 +6,400 +2/11/17 +3,211 +2/6/18 +7,800 +2/11/18 +3,212 +2/11/19 +6,423 +Page 52 | +Wolverine Worldwide Notice of 2015 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +2015 PROXY STATEMENT +Named +Executive +Officer +Vesting +Date +Number of Shares to Vest +Simister +7/9/17 +5,211 +1/1/18 +3,750 +7/9/18 +5,212 +1/1/19 +3,750 +7/9/19 +10,424 +1/1/20 +7,500 +Zwiers +2/8/15 +8,200 +2/9/15 +2,950 +2/10/15 +8,200 +2/6/16 +3,550 +2/8/16 +8,200 +2/9/16 +5,900 +2/6/17 +3,550 +2/8/17 +16,400 +2/11/17 +2,923 +2/6/18 +7,100 +2/11/18 +2,923 +2/11/19 +5,847 +3 The dollar values are calculated using a per share stock price of $ 29.03 , the closing price of Wolverine +Worldwide common stock as of the end of fiscal year 2014. 4 Following the end of the applicable three-year performance period, restrictions may lapse on some, all or none of +the performance shares depending upon the +Company's achievement of the relevant performance criteria. +Wolverine Worldwide Notice of 2015 Annual Meeting of Stockholders and Proxy Statement +| Page +53 +Table of Contents +2015 PROXY STATEMENT +Option Exercises and Stock Vested in Fiscal Year 2014 +Option Awards +Stock Awards +Number of Shares +Acquired on Exercise +(#) +Value Realized +on Exercise +($) +Number of Shares +Acquired on Vesting +(#) +Value Realized +on Vesting 1 +($) +Krueger +- +- +159,471 +$ +4,555,892 +Gabel +- +- +- +- +Grimes +21,216 +$ +269,231 +50,224 +$ +1,439,616 +Simister +- +- +- +- +Zwiers +32,716 +$ +480,275 +40,506 +$ +1,136,187 +1 The Company calculates the dollar values using the closing price of Wolverine Worldwide common stock on the date of +vesting. +Pension Plans and 2014 Pension Benefits +Wolverine Worldwide maintains the following defined benefit retirement plans covering Messrs. Krueger, Grimes and Zwiers: (1) the Wolverine Worldwide Employees' Pension Plan ("Pension +Plan"), which is a funded and tax-qualified defined benefit plan under the Internal Revenue Code that covers eligible employees, and (2) the Wolverine World Wide, Inc. 409A Supplemental +Executive Retirement Plan ("SERP"), which is an unfunded non-qualified plan that covers individuals recommended by the CEO and approved by the Compensation Committee. Messrs. Gabel and Simister +were hired after the Pension Plan was closed to new hires and do not participate in the SERP. The following describes the material features of the Pension Plan and SERP. +QUALIFIED PENSION PLAN +Participants vest in the Pension Plan after five years of qualifying service. Subject to the limitations imposed by the Internal +Revenue Code, the Pension Plan generally pays a monthly benefit in an amount equal to a percentage of the participant's final average monthly earnings multiplied by his or her number of years of +service. For purposes of this benefits formula, the Pension Plan caps years of service at 25 (30 for non-SERP participants) and the percentages of final average monthly earnings is 2.4% for +Mr. Krueger and 2.0% for Messrs. Grimes and Zwiers. "Earnings" as used in this formula generally includes base salary and annual bonus, less Social Security allowance, and for 2014 was +capped at $260,000, the IRS limit applicable to tax-qualified plans. +Upon +retirement, a participant may elect to receive the benefit in the form of a life annuity, 5- or 10-year certain annuities, or joint and 50%, joint and 75%, or joint and 100% survivor annuities. +The payments are actuarially adjusted based on the participant's election. Any election, other than an election to receive life annuity benefits, reduces the monthly benefit payable. The "normal" +retirement age under the plan is age 65. Mr. Krueger is currently the only NEO eligible to begin drawing early retirement benefits under the Pension Plan. +SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN +Messrs. Krueger, Grimes and Zwiers participate in the SERP, which provides retirement benefits above amounts available under +the Company's tax-qualified Pension Plan. The SERP benefit generally equals the difference between the participant's retirement benefit under +Page 54 | +Wolverine Worldwide Notice of 2015 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +2015 PROXY STATEMENT +the +Pension Plan and the benefits the participant would have received if there were no IRS-imposed cap on earnings when calculating the Pension Plan benefit. The SERP caps years of service at 25 in +calculating a participant's benefit. The SERP also allows a retired participant who has five years of service to draw earlier (beginning at age 55) and on different terms than under the Pension +Plan. A participant's earnings percentage multiplier is the same under the SERP as it is under the Pension Plan (2.4% for Mr. Krueger and 2.0% for Messrs Grimes and Zwiers). The +Compensation Committee may grant additional deemed years of service to a participant, subject to the cap of 25 years. The full benefit of any additional years of deemed service is paid under +the SERP. Mr. Krueger reached the 25-year cap in 2012. +If +a retired participant draws the SERP benefit prior to age 65, the reduction factor is 0.333% for each month prior to age 60, and 0.1666% for each month between age 60 and age 65. As of the end of +fiscal year 2014, Mr. Krueger was the only NEO eligible to retire and begin drawing early benefits under the SERP. +SERP +benefits are paid monthly, and the SERP has a lump sum payment option in the event of death or termination of employment after a change in control. The SERP also includes a disability benefit and +a death benefit payable to the participant's designated beneficiary if the participant dies before retiring. The SERP provides for lump sum payments to participants who resign for good reason or are +terminated by Wolverine other than for cause or due to death or disability within two years (Messrs. Grimes and Zwiers) or three years (Mr. Krueger) after a change in control. +The +SERP also contains non-competition, confidentiality and employee non-solicitation provisions in favor of Wolverine Worldwide. Under the SERP non-competition provisions, a participant is not +entitled to any benefit payment if the participant enters into certain relationships with a competing business prior to the date on which such benefit payment is due. If the participant's employment +is terminated for serious misconduct or if Wolverine Worldwide cannot collect under an insurance policy purchased to fund SERP benefits for certain reasons, the Company may terminate a participant's +benefits under the SERP. Wolverine Worldwide may terminate the SERP or stop further accrual of SERP benefits for a participating NEO at any time, but termination will not affect previously accrued +benefits. +PENSION BENEFITS IN FISCAL YEAR 2014 +The following table provides for each NEO certain information concerning each plan that provides for payments or other benefits at, +following, or in connection with retirement: +Name +Plan Name +Number of Years +Credited Service +(#) +Present Value of +Accumulated Benefit 1 +($) +Payments During +Last Fiscal Year +($) +Krueger +SERP +25 +$14,455,650 +2 +- +Pension +19 +$1,392,198 +- +Gabel +SERP 3 +- +- +- +Pension 3 +- +- +- +Grimes +SERP +7 +$654,083 +- +Pension +7 +$292,623 +- +Simister +SERP 3 +- +- +- +Pension 3 +- +- +- +Zwiers +SERP +17 +$1,241,667 +- +Pension +17 +$565,359 +- +1 These values are as of January 3, 2015, and are calculated assuming the participants will commence their benefits at age 65 (in the +form of the annuity elected by the NEO) and use the modified RP2014 mortality tables for males and females (post-retirement) projected generationally with modified MP2014 projection +scale and a 4.37% discount rate (compared to 5.26% in 2013). 2 The present value of Mr. Krueger's accumulated benefit under the SERP is $3,803,483 greater taking into +account his deemed years of +service. Mr. Krueger was previously granted three additional service years in 1996 in recognition of his service as a member of Wolverine Worldwide's executive team for three +years before becoming a participant in the SERP, and additional deemed years of service were previously granted as part of Mr. Krueger's CEO compensation. The present value of +Mr. Krueger's SERP benefit would be $10,652,167 if 19 service years were used to calculate his benefit. Mr. Krueger reached 25 years of service in 2012, the +maximum years of service permitted under the SERP, and will not accrue any further years of service under the SERP. 3 The pension plan was closed to new hires starting +January 1, 2013. Messrs. Gabel and Simister do not participate in the Pension +Plan or SERP. +Wolverine Worldwide Notice of 2015 Annual Meeting of Stockholders and Proxy Statement +| Page +55 +Table of Contents +2015 PROXY STATEMENT +Potential Payments Upon Termination or Change in Control +Wolverine Worldwide has entered into an Executive Severance Agreement with each NEO that provides certain rights, including the right to receive payments in the event of a termination of employment +following a change in control. The Company also has entered into an agreement with Mr. Krueger regarding certain termination benefits in the event of termination of his employment under certain +other circumstances described below. +BENEFITS TRIGGERED BY TERMINATION FOR CAUSE OR VOLUNTARY TERMINATION +An NEO is not entitled to receive any additional forms of severance payments or benefits upon termination for Cause or upon the NEO's +voluntary decision, other than for Good Reason (as each of Cause and Good Reason is defined in the applicable agreements for each NEO) to terminate employment with Wolverine Worldwide in circumstances +other than those described below. +BENEFITS TRIGGERED BY TERMINATION OTHER THAN FOR CAUSE OR BY THE NEO FOR GOOD REASON +Mr. Krueger entered into a Separation Agreement on March 13, 2008, which states that upon termination of his employment +other than termination by Wolverine Worldwide for Cause or termination by Mr. Krueger without Good Reason, as such terms are defined in the Separation Agreement, Wolverine Worldwide will pay +Mr. Krueger the following payments in exchange for a general release of claims in favor of Wolverine Worldwide: (1) continued base salary for 18 months (reduced by payments he +receives if he is employed by a Competing Business, as defined in the Separation Agreement); (2) the pro-rata portion of the annual incentive bonus and the 3-year bonus for all uncompleted +performance periods based on actual corporate performance for the applicable performance periods; (3) the pro-rata portion of the annual individual performance bonus relating to personal +performance objectives; and (4) retiree medical benefits for Mr. Krueger, his spouse and dependents for a period starting on the day after the termination date and ending on the last day +of the 18th month following the month in which the termination date falls. +"Cause" +generally is defined in Mr. Krueger's Separation Agreement to mean: (1) any act or omission knowingly undertaken or omitted with the intent of causing material damage to +Wolverine Worldwide; (2) any intentional act involving fraud, misappropriation +or embezzlement, that causes material damage to Wolverine Worldwide; (3) repeated willful failure to substantially perform any of his significant duties as reasonably directed by the Board of +Directors of Wolverine Worldwide; (4) a conviction (including any plea of guilty or nolo contendere) of any criminal act that (a) results in the executive serving prison time and not +being able to perform the normal duties of his position for more than thirty (30) days; or (b) causes material damage to Wolverine Worldwide; or (5) chronic or habitual use or +consumption of drugs or alcohol that causes material damage to Wolverine Worldwide. +"Good +Reason" generally is defined in Mr. Krueger's Separation Agreement to mean: (1) a material reduction in base compensation, including a reduction in base salary or opportunities +under Wolverine Worldwide's bonus plans or equity plans (other than those implemented for the executive team as a whole); (2) a material reduction in authority, duties, or responsibilities; +(3) a requirement to report to a Company officer or employee instead of reporting directly to the Board of Directors; or (4) certain relocations, other than those related to a change in +the location of Wolverine Worldwide's headquarters affecting a majority of the executive team. +Page 56 | +Wolverine Worldwide Notice of 2015 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +2015 PROXY STATEMENT +BENEFITS TRIGGERED UPON A CHANGE IN CONTROL +Benefits Upon Termination Following a Change in Control. Under the Executive Severance Agreements entered into with the NEOs, payments and benefits are triggered +when employment is terminated without "cause" or when an executive terminates employment for "good reason" within two years (Messrs. Gabel, Grimes, Simister and Zwiers) or three years +(Mr. Krueger) following a change in control of Wolverine Worldwide. +Upon +such a qualifying termination, Wolverine Worldwide would pay the lump sum severance payment under the Executive Severance Agreement composed of the following: (1) unpaid base salary and +bonus payments that had been earned; (2) in lieu of a bonus payment under the Annual Bonus Plan, an amount equal to the quotient of the number of days the NEO was employed by Wolverine +Worldwide, or any successor company, in the year of termination divided by the number of days in the year, multiplied by 100% of the greater of either (a) the bonus awarded to the NEO under an +Annual Bonus Plan for the preceding year and (b) the average paid to the NEO over the preceding two-year period under an Annual Bonus Plan; (3) in lieu of payments under the various +three-year performance periods that remain open on the date of termination, an amount equal to the bonus the NEO would have received based on actual and assumed performance measures, multiplied by the +quotient of the number of days the NEO participated in the performance period prior to the termination, divided by the total number of days in the performance period (in determining the earnings per +share or other performance measures that can be determined annually for any year subsequent to the year of termination, performance will equal the level required to attain the maximum goal under the +three year plan for that year); (4) either two (Messrs. Gabel, Grimes, Simister and Zwiers) or three (Mr. Krueger) times the sum of (a) the NEO's highest annual base salary +during the 12-month period prior to termination and (b) the greater of (i) the average amount earned by the NEO during the previous two years and (ii) the amount earned during the +previous year under the Annual Bonus Plan; (5) 100% of the positive spread for any options held by the NEO on the date of termination, whether or not vested; (6) in the case of +Messrs. Krueger, Grimes and Zwiers, an excise tax gross-up adjustment (Mr. Gabel's and Mr. Simister's agreements were entered into after 2008 and do not include an excise tax +gross-up adjustment); and (7) in the case of Messrs. Grimes and Zwiers, the present value of an additional three years of deemed service under the Pension Plan and SERP. Upon a +termination of employment following a change of control, Wolverine Worldwide, or any successor company, will maintain for a period of six months to one year the NEO's benefits under the +then-current benefit plans, programs or arrangements that the NEO was entitled to participate in immediately prior to the termination date. Wolverine Worldwide, or any successor company, will provide +outplacement services through the last day of the second calendar year following the calendar year of termination. +"Change +in control" under the Executive Severance Agreements generally means certain changes in composition of the Board of Directors, certain acquisitions of 20% or more of Wolverine Worldwide's +common stock or combined outstanding voting power of Wolverine Worldwide, and other specified reorganizations, mergers, consolidations, liquidations, dissolutions or distributions of substantial +assets (unless such transactions result in the creation of an entity in which at least 50% of the common stock and combined voting power is owned by the owners of record prior to the transaction, no +single stockholder owns more than 20% of the combined voting power and a majority of the board remains unchanged). +"Cause" +is defined under the Executive Severance Agreements to generally mean the willful and continued failure to substantially perform duties or willfully engaging in gross misconduct that is +injurious to Wolverine Worldwide. +"Good +Reason" is defined under the Executive Severance Agreements generally to mean: (1) any materially adverse change in position, duties, responsibilities or title or any removal, involuntary +termination or failure to re-elect an officer; (2) a reduction in annual base salary; (3) any relocation or requirement to substantially increase business travel; (4) the failure +to continue providing any executive incentive plans or bonus plans; (5) the failure to continue any employee benefit plan or compensation plan unless a comparable plan is available; +(6) the failure to pay any salary, bonus, deferred compensation or other compensation; (7) the failure to obtain an assumption agreement from any successor; (8) any purported +termination of the employment which is not effected in a manner prescribed by the Executive Severance Agreement; or (9) any other material breach by Wolverine Worldwide or a successor of its +obligations under the Executive Severance Agreement. +Excise Tax Gross-Up. The Compensation Committee previously determined that Wolverine Worldwide would not provide excise tax gross-up payments in employment +agreements entered into after 2008. +Wolverine Worldwide Notice of 2015 Annual Meeting of Stockholders and Proxy Statement +| Page +57 +Table of Contents +2015 PROXY STATEMENT +Benefits Upon a Change in Control Only. Upon a change in control of Wolverine Worldwide, all of each NEO's outstanding stock options become immediately exercisable +in full and will remain exercisable during their remaining term, regardless of whether the NEO remains in the employ or service of Wolverine Worldwide or any successor company. The Compensation +Committee may determine that one or all of the NEOs shall receive cash in an amount equal to the positive spread amount. In addition, all other outstanding equity incentive awards of the NEOs, +including shares of restricted stock, become immediately and fully vested and non-forfeitable upon a change in control of Wolverine Worldwide. Change in control for this purpose generally means +certain changes in the composition of the Board of Directors, certain acquisitions of 20% of Wolverine Worldwide's common stock and other specified reorganizations, mergers, consolidations, +liquidations, dissolutions or dispositions of substantial assets. +BENEFITS TRIGGERED BY RETIREMENT, DEATH OR PERMANENT DISABILITY +Pension Plan. In the event of death before retirement, the Pension Plan provides the surviving spouse of a vested participant a death benefit equal to the +qualified pre-retirement survivor annuity as defined in the Internal Revenue Code (generally 50% of the participant's accrued normal retirement benefit). This benefit is paid annually to the surviving +spouse beginning when the participant would have turned 60 and continues for the life of the surviving spouse. For participants with at least three years of service as of December 31, 2003, and +who have at least 10 years of service and are employed by Wolverine Worldwide at the time of death, the amount of the survivor benefit under the Pension Plan is calculated as though the +participant had continued as an employee of Wolverine Worldwide until age 65 at the compensation level as of the date of death and the benefit begins upon the date of death, unreduced for early +commencement. The survivor benefit for participants who meet all the criteria set forth in the preceding sentence, but who die when they are not employed by Wolverine Worldwide are entitled to a joint +and survivor benefit commencing upon the date of death, unreduced for early commencement. +SERP. If a SERP participant dies before beginning to receive benefits under the SERP, Wolverine Worldwide must, based on the participant's election, pay the +beneficiary either a monthly annuity or a lump sum death benefit equal to the present value of the benefit computed as if the participant had retired on the date of death, had begun receiving benefits +at age 55 and had continued to receive benefits for the remainder of the participant's life expectancy. If the participant dies after beginning to receive benefit +payments, benefits cease unless the participant was receiving benefits in the form of one of the joint and survivor annuity optional elections under the plan or had elected benefits in a form that +provides for a continuation of benefits. +If +a participant becomes totally and permanently disabled, the SERP provides a disability benefit equal to 60% of the normal retirement accrued benefit based upon years of service up to the date that +the participant became disabled through the date the participant reaches age 65 (at which point, the participant would begin drawing full SERP benefits) or is no longer disabled. +Annual Bonus Plan. Upon termination of employment at least six months after the beginning of a fiscal year due to death, disability or early or normal retirement, +an NEO is entitled to receive a pro rata portion of any Annual Bonus award earned under the Annual Bonus Plan based on the NEO's service during such fiscal year and actual performance under the Annual +Bonus Plan. The Annual Bonus is payable at the same time and in the same manner as awards are paid to other NEOs for the fiscal year. +Stock Incentive Plans. Upon death, disability or voluntary termination of employment after attaining age 62 or age 50 with seven years of service with the Company, +subject to certain conditions, the restrictions applicable to each NEO's shares of restricted stock (excluding performance shares) terminate automatically and stock options vest in full if held for +more than one year or, if employed for less than one year after the grant, on a percentage basis based on months employed after the grant divided by 12. Upon death, disability or voluntary termination +of employment after attaining age 62 or age 50 with seven years of service with the Company, subject to certain conditions, the restrictions on performance shares lapse on a prorated basis, based on +months employed in the performance period and actual Company performance during the performance period. Any prorated award is payable at the time awards are paid to other NEOs. At fiscal year-end, +Mr. Krueger is the only NEO eligible for early vesting as a result of age or service with the Company. +Page 58 | +Wolverine Worldwide Notice of 2015 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +2015 PROXY STATEMENT +DESCRIPTION OF RESTRICTIVE COVENANTS THAT APPLY DURING AND AFTER TERMINATION OF EMPLOYMENT +The SERP contains non-competition, confidentiality and employee non-solicitation provisions in favor of Wolverine Worldwide. Under +the non-competition provisions of the SERP, the participant will not be entitled to any benefit payment if, prior to the date on which such benefit payment is due, the participant enters into certain +relationships with a competing business. +ESTIMATED PAYMENTS ON TERMINATION OR CHANGE IN CONTROL +The following table summarizes the potential payments and benefits payable to each NEO upon a change in control or termination of +employment following each of the triggering events set forth in the table. As required, the amounts in the table assume that the termination of employment or change in control of Wolverine Worldwide +took place on the Company's last day of fiscal 2014 – January 3, 2015. The amounts set out below are in addition to benefits that are generally available to the Company's +employees such as distributions under the Company's 401(k) savings plan, disability or life insurance benefits and accrued vacation. Due to the many factors that affect the nature and amount of any +benefits provided upon the termination events discussed below, any actual amounts paid or distributed to NEOs may be different. Factors that may affect these amounts include timing during the year of +the occurrence of the event, Wolverine Worldwide's stock price and the NEO's age and years of service. +The +value of the accelerated vesting of unvested equity-based compensation awards was computed using the closing market price ($29.03) of Wolverine Worldwide's common stock on January 2, 2015, +the last business day in the fiscal year. The value for unvested restricted stock is computed by multiplying $29.03 by the number of shares of the NEO's restricted stock that would vest as a result of +an event. The value of stock options that would vest as a result of an event equals the difference between the exercise price of each option and $29.03. No value was attributed to accelerated vesting +of a stock option if its exercise price was greater than $29.03. +Each +of the hypothetical events described in the following table (the highlighted blue headings in the left-hand column) is calculated and reported as a discreet event. For example, the amounts +disclosed under the "Change in Control Only" heading are not cumulative with the amounts disclosed under the "Change in Control Termination" heading. +Wolverine Worldwide Notice of 2015 Annual Meeting of Stockholders and Proxy Statement +| Page +59 +Table of Contents +2015 PROXY STATEMENT +Termination Event and Payments/Benefits +Krueger +Gabel +Grimes +Simister +Zwiers +Termination by Company for Cause or Voluntary Termination +- +- +- +- +- +Termination by Company Other Than for Cause or by Executive for Good Reason +$7,123,209 +1 +- +- +- +- +Change in Control Termination +Executive Severance Agreement 2 +$25,938,349 +$1,453,182 +12 +$9,698,769 +$1,627,569 +12 +$10,434,238 +Benefits under Executive Severance Agreement 3 +$54,173 +$59,523 +$56,661 +$58,507 +$57,775 +Stock Incentive Plans 4 +$9,185,797 +$1,078,390 +$2,074,449 +$1,078,390 +$2,554,671 +Lump sum payment under the SERP 5 +$23,081,706 +- +$1,513,647 +- +$2,738,260 +TOTAL +$58,260,025 +$2,591,095 +$13,343,526 +$2,764,466 +$15,784,944 +Death +SERP 6 +$17,673,105 +- +$1,133,894 +- +$1,924,766 +Pension Plan 7 +$1,058,946 +- +$161,091 +- +$1,146,860 +Stock Incentive Plans 4 +$8,742,617 +$267,892 +$2,000,438 +$267,892 +$2,487,327 +Earned Incentive Compensation 8 +$5,826,095 +$355,722 +$1,497,565 +$376,416 +$1,434,286 +Disability +SERP 9 +$17,268,209 +- +$1,077,141 +- +$2,606,713 +Stock Incentive Plans 4 +$8,742,617 +$267,892 +$2,000,438 +$267,892 +$2,487,327 +Earned Incentive Compensation 8 +$5,826,095 +$355,722 +$1,497,565 +$378,416 +$1,434,286 +Retirement +SERP 10 +$14,455,650 +- +$654,083 +- +$1,241,667 +Pension Plan 10 +$1,392,198 +- +$292,623 +- +$565,359 +Stock Incentive Plans 4,11 +$8,742,617 +- +- +- +- +Earned Incentive Compensation 8,11 +$5,826,095 +- +- +- +- +Change in Control Only +Stock Incentive Plans 5 +$9,185,797 +$1,078,390 +$2,074,449 +$1,078,390 +$2,554,671 +1 The estimate for Mr. Krueger assumes Target performance for the 2013-2015 and 2014-2016 performance periods. Actual payout or vesting, +if any, would be determined and made at the end of the period. The amount reflected in the table also includes an estimated cost of $15,577 for retiree medical benefits for +18 months and the estimated cost of $25,000 for outplacement services. 2 Payments would be triggered after termination of employment under certain circumstances within two +years (Messrs. Gabel, Grimes, +Simister and Zwiers) or three years (Mr. Krueger) following a change in control. Includes amounts payable in cash under the terms of the Executive Severance Agreement, excluding +the value of the cash payout to each NEO of the option spread for already vested options. The timing of the payment would be delayed to the extent earlier payment would trigger +Section 409A of the Tax Code. See the "Outstanding Equity Awards at Fiscal Year-End" table above for more information regarding each NEO's vested options as of January 3, +2015. The value of unvested options and time-vested restricted shares that vest upon a change in control under the terms of the Company's stock incentive plans are included in the +Stock Incentive Plans row. 3 These estimates assume that Wolverine Worldwide, or any successor company, maintains the benefit plans for a period of one year after +termination and the out-placement services for a period beginning with the date of termination and ending on the last day of the second calendar year following the calendar year in +which the date of termination occurred. 4 Reflects the value of unvested stock options and shares of time-vested restricted stock that would vest because of the event. +5 Reflects the entire lump sum benefit payable to applicable NEOs, including any accumulated benefit. For a description of the SERP, see +"Supplemental Executive Retirement Plan" under the heading "Pension Plans and 2014 Pension Benefits." The timing of the payment would be delayed to the extent earlier payment would +trigger Section 409A of the Tax Code. 6 Reflects the entire lump sum death benefit payable to a participating NEO's beneficiary, including any accumulated benefit. +Messrs. Gabel and Simister do not participate in the SERP, so no death benefit would be payable to any surviving spouse. +Page 60 | +Wolverine Worldwide Notice of 2015 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +2015 PROXY STATEMENT +7 Amounts reflect the net present value of the annuity paid to the surviving spouse calculated using the same discount rate and mortality +assumptions used in the Pension Benefits table under the heading "Pension Benefits in Fiscal Year 2014" under the heading "Pension Plans and 2014 Pension Benefits." In accordance with +the terms of the Pension Plan, the death benefit for Messrs. Krueger and Zwiers was calculated as though the NEO had continued as an employee of Wolverine Worldwide until age 65 +at the compensation level as of the date of death. Messrs. Gabel and Simister do not participate in the Pension Plan, so no death benefit would be payable to any surviving +spouse. 8 Under the Annual Bonus Plan and the terms of performance share awards, each NEO may be eligible to receive a pro rata portion of any award if +employment is terminated as a result of any of the specified events in the table. The amount reported represents actual payout under the Annual Bonus Plan for fiscal year 2014, actual +payout under the 2012-2014 performance cycle, and for the 2013-2015 and 2014-2016 performance cycles, an estimated value of performance shares that would vest at the end of the +performance period. Performance shares would vest on a prorated basis based on actual Company performance. For purposes of this estimate, the calculation uses target performance. 9 Reflects the net present value of the annuity using the same discount rate and mortality assumptions used in the Pension Benefits table and +assuming the NEO drew the disability benefit until age 65 and then the normal retirement benefit. 10 Reflects the net present value of benefits, as reflected in the Pension +Benefits table under the heading "Pension Benefits in Fiscal Year +2014" under the heading "Pension Plans and 2014 Pension Benefits." 11 Mr. Krueger is the only NEO eligible for retirement (as defined in the applicable plan) at fiscal +year end. 12 Messrs. Gabel and Simister started employment with the Company in July 2014, and their Executive Severance Agreements do not include +excise tax gross-up adjustments. Under the provisions of their Agreements, if payments to Messrs. Gabel and Simister under the Agreement would trigger application of an excise +tax, the Company shall reduce the payment to an amount that avoids application of the excise tax and minimizes the impact on the payments to Messrs. Gabel and Simister. +Wolverine Worldwide Notice of 2015 Annual Meeting of Stockholders and Proxy Statement +| Page +61 +Table of Contents +2015 PROXY STATEMENT +Audit Committee Report +The +Audit Committee of the Board of Directors consists of three directors who are independent under the Company's Director Independence Standards, the NYSE listed company +standards, and applicable SEC standards. The Audit Committee represents and assists the Board in fulfilling its oversight responsibility regarding the Company's financial statements and the financial +reporting process, the internal control over financial reporting, the performance of the internal audit function and the independent auditors, the qualifications and independence of the independent +auditors, the annual independent audit of Wolverine Worldwide's financial statements and internal control over financial reporting, and compliance with legal and regulatory requirements. The Audit +Committee is directly responsible in its capacity as a committee of the Board for appointing, retaining, compensating, overseeing, evaluating and terminating (if appropriate) Wolverine Worldwide's +independent auditors. Wolverine Worldwide's management has primary responsibility for the financial statements and the financial reporting process, including the application of accounting and +financial principles, the preparation, presentation and integrity of the financial statements, and the systems of internal controls and other procedures designed to promote compliance with accounting +standards and applicable laws and regulations. Wolverine Worldwide's independent auditors are responsible for expressing an opinion on the conformity of Wolverine Worldwide's financial statements with +generally accepted accounting principles and for auditing the effectiveness of Wolverine Worldwide's internal control over financial reporting. +The +Audit Committee has taken steps to provide assurances regarding Audit Committee composition and procedures, the independence of Wolverine Worldwide's outside auditors and the integrity of +Wolverine Worldwide's financial statements and disclosures. These steps include: (i) reviewing the Audit Committee Charter; (ii) reviewing the Accounting and Finance Code; +(iii) maintaining Financial, Accounting and Business Ethics Complaint Procedures to allow employees, stockholders and the public to report concerns regarding Wolverine Worldwide's financial +statements, internal controls and disclosures; and (iv) reviewing procedures for the Audit Committee to pre-approve all audit and non-audit services provided by Wolverine Worldwide's +independent auditors. +As +part of its supervisory duties, the Audit Committee has reviewed Wolverine Worldwide's audited financial statements for the fiscal year ended January 3, 2015, and has discussed those +financial statements with Wolverine Worldwide's management, internal financial staff, and the internal auditors and independent auditors with and without management present. The Audit Committee has +also +reviewed and discussed the following with Wolverine Worldwide's management, the financial staff, and the internal auditors and independent auditors with and without management +present: +» accounting and financial principles and significant assumptions, estimates and matters of judgment used in preparing the financial +statements; +» allowances and reserves for accounts receivable, inventories and taxes; +» accounting for acquisitions, pension plans and equity-based compensation plans; +» goodwill impairment analysis; and +» other significant financial reporting issues and practices. +The +Audit Committee has discussed with Wolverine Worldwide's independent auditors the results of the independent auditors' examinations and the judgments of the independent auditors concerning the +quality, as well as the acceptability, of Wolverine Worldwide's accounting principles and such other matters that it is required to discuss with the independent auditors under applicable rules, +regulations or generally accepted auditing standards, including the matters required to be discussed by applicable rules of the Public Company Accounting Oversight Board ("PCAOB"). In addition, the +Audit Committee has received from the independent auditors the written disclosures and the letter required by the applicable requirements of the PCAOB regarding the independent auditor's +communications with the Audit Committee concerning independence rules and has discussed their independence from Wolverine Worldwide and Wolverine Worldwide's management with them, including a +consideration of the compatibility of non-audit services with their independence, the scope of the audit and the scope of all fees paid to the independent auditors during the year. After and in +reliance upon the reviews and discussions described above, the Audit +Page 62 | +Wolverine Worldwide Notice of 2015 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +2015 PROXY STATEMENT +Committee +recommended that the audited financial statements for the fiscal year ended January 3, 2015, be included in Wolverine Worldwide's Annual Report on Form 10-K for the year then +ended to be filed with the SEC. +Respectfully +submitted, +William +K. Gerber (Chairperson) +Jeffrey M. Boromisa +Brenda J. Lauderback +Wolverine Worldwide Notice of 2015 Annual Meeting of Stockholders and Proxy Statement +| Page +63 +Table of Contents +2015 PROXY STATEMENT +Independent Registered Public +Accounting Firm +Wolverine +Worldwide's Audit Committee has adopted a policy under which the Audit Committee must approve all audit and non-audit services provided by the Company's +independent registered public accounting firm, Ernst & Young LLP, and which prohibits Ernst & Young LLP from providing any non-audit services that are prohibited by the SEC +or the PCAOB. The Company's Audit Committee provides categorical pre-approval for routine and recurring services, with specific service descriptions and budgets. All audit services, internal +control-related services, and other services not within the specifically pre-approved service descriptions and budgets require engagement-specific pre-approval. With certain exceptions (such as +pre-approval of audit services), the Audit Committee may delegate engagement-specific pre-approval to one or more Committee members. Management must communicate to the Audit Committee at its next +regularly scheduled meeting any services approved by a Committee member. Wolverine Worldwide's Audit Committee pre-approved all fees paid to Ernst & Young LLP for services performed in +2014 and 2013. The aggregate fees billed by Ernst & Young LLP for audit and non-audit services were: +2014 +2013 +Audit Fees 1 +$ +1,689,100 +$ +1,618,331 +Audit Related Fees +- +- +Total Audit and Audit Related +$ +1,689,100 +$ +1,618,331 +Tax Fees +Tax Compliance +$ +651,900 +$ +691,100 +Tax Planning & Advisory +$ +615,000 +$ +115,000 +Tax Planning & Advisory Other +- +- +Total Tax Fees +$ +1,266,900 +$ +806,100 +All Other Fees +- +- +Total Fees +$ +2,956,000 +$ +2,424,431 +1 "Audit Fees" is comprised of fees for the annual audit, reviews of the financial statements included in Wolverine Worldwide's +Quarterly Reports on Form 10-Q, audit of internal control over financial reporting, foreign statutory audits and consultations concerning accounting matters associated +with the annual audit. +Wolverine +Worldwide's Audit Committee has adopted a policy restricting the Company's hiring of current or former partners or employees of the independent registered public accounting firm retained by +the Company. +Page 64 | +Wolverine Worldwide Notice of 2015 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +2015 PROXY STATEMENT +Item 2 – Ratification of Appointment of Independent Registered Public Accounting Firm +The +Audit Committee has reappointed Ernst & Young LLP as the Company's independent registered public accounting firm for the current fiscal year. As a matter +of good corporate governance, the Audit Committee has determined to submit its appointment of Ernst & Young LLP to the Company's stockholders for ratification. If this appointment is not +ratified by the holders of a majority of shares cast affirmatively or negatively on the matter, the Audit Committee will review its future selection of an independent registered public accounting +firm. Even if the appointment is ratified, the Audit Committee in its discretion may select different independent auditors any time during the year if it determines that such a change would be in the +best interests of the Company and the Company's stockholders. +The +Audit Committee reviewed Ernst & Young LLP's performance prior to appointing them as the Company's independent registered public accounting firm, and +considered: +» the historical and recent performance of Ernst & Young LLP on the Company's audit, including the quality of the +engagement team and Ernst & Young LLP's experience, client service, responsiveness and technical expertise; +» the PCAOB report of selected Ernst & Young LLP audits; +» Ernst & Young LLP's financial strength and performance; +» the appropriateness of fees charged; and +» Ernst & Young LLP's familiarity with the Company's accounting policies and practices and internal control over financial +reporting. +Ernst & +Young LLP, a registered public accounting firm, was the Company's independent registered public accounting firm for the fiscal year ended January 3, 2015. Representatives +of Ernst & Young LLP are expected to be present at the Annual Meeting, will have an opportunity to make a statement if they desire to do so, and are expected to be available to respond +to appropriate questions from stockholders. +Board Recommendation +The Board recommends that you vote "FOR" ratification of the Audit Committee's selection of the firm of Ernst & Young LLP as the Company's independent registered public accounting firm +for fiscal year 2015. +Wolverine Worldwide Notice of 2015 Annual Meeting of Stockholders and Proxy Statement +| Page +65 +Table of Contents +2015 PROXY STATEMENT +Item 3 – Advisory Resolution To Approve Executive Compensation +The +Company is asking its stockholders to indicate their support for Wolverine Worldwide's NEO compensation, as described in this proxy statement. This proposal, commonly known as a "say-on-pay" +proposal, gives the Company's stockholders the opportunity to express their view on compensation for the Company's NEOs. The say-on-pay vote is advisory and, therefore, not binding on the Company, the +Compensation Committee or the Board. The Board and Compensation Committee value the opinions of Wolverine Worldwide's stockholders and will review and consider the voting results when making future +decisions regarding the Company's executive compensation program. +As +described above in the " Compensation Discussion and Analysis " section of this proxy statement, the Compensation Committee has structured the +executive compensation program to achieve the following key objectives: +» attract and retain talented NEOs who will lead Wolverine Worldwide and drive for superior business and financial performance; +» provide incentives for achieving specific, near-term individual, business-unit and corporate goals and reward the attainment of those +goals; +» provide incentives for achieving pre-established longer-term corporate financial goals and reward attainment of those goals; and +» align the interests of NEOs with those of the stockholders through incentives based on increasing stockholder value. +The +executive compensation program achieves these objectives, in part, by: +» balancing fixed compensation (base salaries) with performance-based compensation (annual bonuses and long-term incentives); +» rewarding annual performance while maintaining emphasis on longer-term objectives; and +» blending cash, non-cash, long- and short-term compensation components, and current and future compensation components. +The +Company performed strongly in 2014, with record revenue and net earnings. Over the past five years, the Company's performance, based on cumulative total stockholder return, has outperformed the +S&P SmallCap 600 Index and S&P 600 Footwear Index. +The +Company urges stockholders to read the " Compensation Discussion and Analysis " beginning on page 29 of this proxy statement, which describes +in more detail how the Company's executive compensation policies and procedures operate and are designed to achieve the Company's compensation objectives. The Company also encourages stockholders to +read the Summary Compensation Table and other related compensation tables and narrative, appearing on pages 46 through 61, which provide detailed information on the compensation of the +Company's NEOs. The Compensation Committee and the Board of Directors believe that the policies and procedures articulated in the " Compensation Discussion and +Analysis " section are effective in achieving the Company's goals and that the compensation of the Company's NEOs reported in this proxy statement has supported and contributed +to the Company's recent and long-term success. +In +accordance with the rules under Section 14A of the Exchange Act, and as a matter of good corporate governance, the Company asks stockholders to approve the following advisory resolution at +the 2015 Annual Meeting of Stockholders: +RESOLVED, that the stockholders of Wolverine World Wide, Inc. (the "Company") approve, on an advisory basis, the compensation of the Company's +named executive officers disclosed in the Compensation Discussion and Analysis section, the Summary Compensation Table and the related compensation tables, notes and narrative in the Proxy Statement +for the Company's 2015 Annual Meeting of Stockholders. +Board Recommendation +The Board recommends that you vote "FOR" approval of the advisory resolution to approve executive compensation. +Page 66 | +Wolverine Worldwide Notice of 2015 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +2015 PROXY STATEMENT +Related Party Matters +CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS +Wolverine Worldwide has entered into agreements with Grimoldi S.A., an Argentinean corporation of which +Mr. Alberto L. Grimoldi, a former director of Wolverine Worldwide, is chairman and a 35% stockholder. The agreements grant Grimoldi, S.A. the exclusive rights to distribute and +sell footwear and apparel products in Argentina under various Company brand names. Grimoldi S.A. or its subsidiary purchases products, samples, footwear components, advertising materials and +miscellaneous items from Wolverine Worldwide or pays Wolverine Worldwide royalties and certain sublicense fees based on sales or purchases of products in Argentina. Grimoldi S.A. was obligated +to pay Wolverine Worldwide purchase prices, royalties, sublicense fees, service fees and interest relating to purchases made or royalties and fees incurred in fiscal year 2014 totaling $4,857,581. All +of the transactions described above occurred pursuant to continuing contractual arrangements between Wolverine Worldwide and Grimoldi S.A. Wolverine Worldwide expects similar transactions to +occur between Grimoldi S.A. and Wolverine Worldwide and its subsidiaries during fiscal year +2015. The Governance Committee reviewed and approved or ratified each of these transactions in accordance with Wolverine Worldwide's related person transactions policy, as described below. +RELATED PERSON TRANSACTIONS POLICY +Wolverine Worldwide's Board adopted written policies and procedures regarding related person transactions. They require the +Governance Committee to review and either approve or disapprove the Company entering into any Interested Transactions (defined below). If advance approval is not feasible, then the Governance +Committee must review and ratify the Interested Transaction at its next meeting. +Interested Transaction +Any transaction, arrangement or relationship or series of similar transactions, arrangements or relationships (including any indebtedness or guarantee of indebtedness) in which: +(1) +the aggregate amount involved is or is expected to exceed $120,000 since the beginning of Wolverine Worldwide's last completed fiscal year; +(2) +Wolverine Worldwide is a participant; and +(3) +any Related Person (defined below) has or will have a direct or indirect interest. +An Interested Transaction does not include: +1. +Any employment compensation paid to an executive officer of the Company if the Compensation Committee approved or recommended to the Board of Directors for approval such compensation. +2. +Any compensation paid to a director for service as a director of the Company. +3. +Any transaction in which a Related Person has an indirect interest solely as a result of being (i) a director or, together with all other Related Persons, as defined below, a less than 10% beneficial owner of an equity interest in another +entity, or both, or (ii) a limited partner in a partnership in which the Related Person, together with all other Related Persons, has an interest of less than 10%. +4. +Any transaction in which the Related Person's interest arises solely from the ownership of the Company's common stock and all holders of the Company's common stock received the same benefit on a pro rata basis (e.g., a dividend). +Wolverine Worldwide Notice of 2015 Annual Meeting of Stockholders and Proxy Statement +| Page +67 +Table of Contents +2015 PROXY STATEMENT +Related Person +Any: +(a) +person who is or was at any point during the last fiscal year for which Wolverine Worldwide filed an Annual Report on Form 10-K and proxy statement, an executive officer, director or, to the extent information regarding such nominee is being +presented in a proxy or information statement relating to the election of that nominee as a director, nominee for election as a director; +(b) +beneficial owner of greater than five percent of Wolverine Worldwide's common stock; or +(c) +immediate family member * of any of the foregoing. +* Immediate family member is defined as a person's spouse, parents, stepparents, children, stepchildren, +siblings, mothers-and fathers-in-law, sons- and daughters-in-law, and brothers- and sisters-in-law and anyone residing in such person's home (other than a tenant or employee). +The +Governance Committee considers whether the Interested Transaction is on terms no less favorable than terms generally available to an unaffiliated third-party under the same or similar +circumstances, the extent of the Related Person's interest in the transaction, and other factors that it deems relevant. No director participates in any discussion or approval of an Interested +Transaction for which he or she is a Related Person, except to provide information to the Governance Committee. +Page 68 | +Wolverine Worldwide Notice of 2015 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +2015 PROXY STATEMENT +Additional Information +STOCKHOLDERS LIST +A list of stockholders entitled to vote at the meeting will be available for review by Wolverine Worldwide stockholders at the office +of Secretary, Wolverine World Wide, Inc., 9341 Courtland Drive, N.E., Rockford, Michigan 49351, during ordinary business hours for the 10-day period before the meeting. +DIRECTOR AND OFFICER INDEMNIFICATION +The Company indemnifies its directors and NEOs to the fullest extent permitted by law so that they will be free from undue concern +about personal liability in connection with their service to the Company. +SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE +Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") requires the Company's directors and +NEOs, and persons who beneficially own more than 10% of the outstanding shares of the Company's common stock, to file reports of ownership and changes in ownership of shares of common stock with the +SEC. Directors, NEOs and greater than 10% beneficial owners are required by SEC regulations to furnish Wolverine Worldwide with copies of all Section 16(a) reports they file. Based on its +review of the copies of such reports received by it, or written representations from certain reporting persons that no reports on Form 5 were required for those persons for fiscal year 2014, +the Company believes that during fiscal year 2014, its officers and directors filed the required reports under Section 16(a) on a timely basis. +STOCKHOLDER PROPOSALS FOR INCLUSION IN NEXT YEAR'S PROXY STATEMENT +Pursuant to SEC Rule 14a-8, some stockholder proposals may be eligible for inclusion in Wolverine Worldwide's 2016 proxy +statement and proxy card. Any such stockholder proposals must be submitted in writing to the Secretary of Wolverine Worldwide no later than the close of business on November 19, 2015. You +should address all stockholder proposals to the attention of Secretary, Wolverine World Wide, Inc., 9341 Courtland Drive, N.E., Rockford, Michigan 49351. +OTHER STOCKHOLDER PROPOSALS FOR PRESENTATION AT NEXT YEAR'S ANNUAL MEETING +The By-laws require that any stockholder proposal that is not submitted for inclusion in next year's proxy statement under SEC +Rule 14a-8, but is instead sought to be presented directly at the 2016 Annual Meeting of Stockholders, must be received at the Company's principal executive offices by the close of business not +less than 90 days nor more than 120 days prior to the first anniversary of the 2015 Annual Meeting. As a result, proposals, including director nominations, submitted pursuant to these +provisions of the By-laws must be received between December 24, 2015, and the close of business on January 23, 2016. You should address a proposal to Secretary, Wolverine World +Wide, Inc., 9341 Courtland Drive N.E., Rockford, Michigan 49351, and include the information and comply with the requirements set forth in those By-laws, which the Company has posted on +its website. SEC rules permit management to vote proxies in its discretion in certain cases if the stockholder does not comply with this deadline, and in certain other cases notwithstanding the +stockholder's compliance with this deadline. +Wolverine Worldwide Notice of 2015 Annual Meeting of Stockholders and Proxy Statement +| Page +69 +Table of Contents +2015 PROXY STATEMENT +VOTING SECURITIES +Stockholders of record at the close of business on March 2, 2015, are eligible to vote at the Annual Meeting. The Company's +voting securities consist of its $1.00 par value common stock, and there were 103,087,484 shares outstanding and entitled to vote on the record date. Each share outstanding on the record date will be +entitled to one vote on each director nominee and one vote on each other matter. Treasury shares are not voted. Individual votes of stockholders are kept private, except as appropriate to meet legal +requirements. Access to proxies and other individual stockholder voting records is limited to the independent inspectors of election and certain employees of the Company and its agents who acknowledge +their responsibility to comply with this policy of confidentiality. +CONDUCT OF BUSINESS +A majority of the outstanding shares of common stock as of the record date must be present at the Annual Meeting in order to hold the +Annual Meeting and conduct business. This is called a "quorum." Your shares are counted as present at the meeting if you are present at the Annual Meeting and vote in person, a proxy card has been +properly submitted by you or on your behalf, or you have submitted your proxy by telephone or by Internet, or by completing, signing, dating and returning your proxy form in the enclosed envelope. +Both abstentions and broker non-votes (defined below in " Vote Required for Election and Approval ") are counted as present for the purpose of determining +the presence of a quorum. +VOTE REQUIRED FOR ELECTION AND APPROVAL +For Item 1, Election of Directors, directors are elected by a majority of votes cast unless the election is contested, in +which case directors are elected by a plurality of votes cast. A majority of votes cast means that the number of shares voted "for" a Director nominee exceeds the number of votes cast "against" the +Director nominee. If an incumbent director in an uncontested election does not receive a majority of votes cast for his or her election, under our Corporate Governance Guidelines the director is +required to submit a letter of resignation to the Board for consideration by the Governance Committee. The Governance Committee will then make a recommendation to the Board as to whether to accept or +reject the tendered resignation. The Governance Committee and the Board, in making their decisions, may implement any procedures they deem appropriate and may consider any factor or other information +that they deem relevant. The Board will then act on the tendered resignation, taking into account the Governance Committee's recommendation, and will publicly disclose its decision regarding the +resignation within 90 days after the results of the election are certified. A director whose resignation is under consideration shall abstain from participating in any recommendation or +decision regarding that resignation. If the resignation is not accepted, the director will continue to serve until the next annual meeting of shareholders at which such director faces re-election and +until such director's successor is elected and qualified. +Item 2, +Ratification of Appointment of Independent Registered Public Accounting Firm, requires the affirmative vote of a majority of shares cast affirmatively or negatively on the matter for +approval. +Item 3, +Advisory Resolution To Approve Executive Compensation, is a non-binding, advisory vote. Therefore, there is no required vote that would constitute approval. We value the opinions +expressed by our shareholders in this advisory vote, and our Board and Compensation Committee will consider the outcome of these votes when designing our compensation programs and making future +compensation decisions for our named executive officers. +With +respect to the Items 1, 2 and 3, abstentions and broker non-votes, if any, will have will have no effect. Generally, broker non-votes occur when shares held by a broker in "street name" +for a beneficial owner are not voted with respect to a particular proposal because (1) the broker has not received voting instructions from the beneficial owner, and (2) the broker lacks +discretionary voting power to vote those shares. Brokers do not have discretionary authority with respect to Item 1 but do have discretionary authority with respect to Item 2 and +Item 3. +VOTING RESULTS OF THE ANNUAL MEETING +The Company will announce preliminary voting results at the Annual Meeting and publish final results in a Form 8-K within four +business days following the Annual Meeting. If final results are not known within four business days of the Annual Meeting, then the Company will +Page 70 | +Wolverine Worldwide Notice of 2015 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +2015 PROXY STATEMENT +file a +Current Report on Form 8-K with the preliminary results and file an amended Current Report on Form 8-K within four business days of the availability of the final results. +ATTENDING THE ANNUAL MEETING +You may vote shares held directly in your name as the stockholder of record in person at the Annual Meeting. If you choose to vote in +person, please bring the enclosed proxy card and proof of identification. Even if you plan to attend the Annual Meeting in person, Wolverine Worldwide recommends that you vote your shares in advance +as described below so that your vote will be counted if you later decide not to attend the Annual Meeting. You may vote shares held in "street name" through a brokerage account or by a bank or other +nominee in person if you obtain a proxy from the record holder giving you the right to vote the shares. +MANNER FOR VOTING PROXIES +The shares represented by all valid proxies received by telephone, by Internet or by mail will be voted in the manner specified. +Where the stockholder has not indicated a specific choice, the shares represented by all valid proxies received will be voted in accordance with the Board's recommendations as follows: (1) for +each of the nominees for directors named earlier in this proxy statement, (2) for ratification of the appointment of the independent registered public accounting firm, and (3) for +approval of the advisory resolution to approve executive compensation. The Board has not received timely notice of any matter that may come before the Annual Meeting. However, should any matter not +described above be properly presented at the Annual Meeting, the persons named in the proxy form will vote in accordance with their judgment as permitted. +REVOCATION OF PROXIES +A stockholder who gives a proxy may revoke it at any time before it is exercised by voting in person at the Annual Meeting, by +delivering a subsequent proxy or by notifying the inspectors of election in writing of such revocation. If your Wolverine Worldwide shares are held for you in a brokerage, bank or other institutional +account, you must obtain a proxy from that entity and bring it with you to hand in with your ballot, in order to be able to vote your shares at the Annual Meeting. +SOLICITATION OF PROXIES +The Company will pay the expenses of solicitation of proxies for the Annual Meeting. Solicitations may be made in person or by +telephone, by officers and employees of the Company, or by nominees or other fiduciaries who may mail materials to or otherwise communicate with the beneficial owners of shares held by the nominees or +other fiduciaries. These individuals will not be paid any additional compensation for any such solicitation. Upon request, the Company will reimburse brokers, dealers, banks and trustees, or their +nominees, for reasonable expenses incurred by them in forwarding material to beneficial owners of the Company's common stock. The Company has engaged Georgeson Inc. at an estimated cost of +$9,000, plus expenses and disbursements, to assist in solicitation of proxies. +DELIVERY OF DOCUMENTS TO STOCKHOLDERS SHARING AN ADDRESS +If you are the beneficial owner, but not the record holder, of shares of Wolverine Worldwide stock, your broker, bank or other +nominee may only deliver one copy of this proxy statement and the Company's 2014 Annual Report to multiple stockholders who share an address, unless that nominee has received contrary instructions +from one or more of the stockholders. The Company will deliver promptly, upon written or oral request, a separate copy of this proxy statement and its 2014 Annual Report to a stockholder at a shared +address to which a single copy of the documents was delivered. A stockholder who wishes to receive a separate copy of the proxy statement and annual report, now or in the future, or stockholders who +share an address and receive multiple copies of the proxy statement and annual report but would like to receive a single copy, should submit this request by writing to Investor Relations, Wolverine +World Wide, Inc., 9341 Courtland Drive N.E., Rockford, Michigan 49351, or by calling (616) 866-5500 and asking for Investor Relations. Beneficial owners sharing an address who are receiving +multiple copies of proxy materials and who wish to receive a single copy of such materials in the future should make a request directly to their broker, bank or other nominee. +Wolverine Worldwide Notice of 2015 Annual Meeting of Stockholders and Proxy Statement +| Page +71 +Table of Contents +2015 PROXY STATEMENT +ACCESS TO PROXY STATEMENT AND ANNUAL REPORT +Wolverine Worldwide's financial statements for the fiscal year ended January 3, 2015, are included in the Company's 2014 +Annual Report, which the Company is providing to stockholders at the same time as this proxy statement. Wolverine Worldwide's Proxy Statement for the Annual Meeting and the Annual Report to +Stockholders for the fiscal year ended January 3, 2015, are available at www.wolverineworldwide.com/2015annualmeeting . If you have not +received or do not have access to the 2014 Annual Report, write to Wolverine World Wide, Inc., 9341 Courtland Drive N.E., Rockford, Michigan 49351, Attn: Investor Relations +or call (616) 866-5500 and ask for Investor Relations, and the Company will send a copy to you without charge. +Page 72 | +Wolverine Worldwide Notice of 2015 Annual Meeting of Stockholders and Proxy Statement +Using a black +ink pen, mark your votes with an X as shown in this example. Please do not +write outside the designated areas. X 020LYC 3 2 A V + . Authorized +Signatures — This section must be completed for your vote to be counted. — +Date and Sign Below C IMPORTANT - Please sign exactly as your name(s) appears +on this Proxy. When signing on behalf of a corporation, partnership, estate +or trust, indicate title or capacity of person signing. If shares are held +jointly, each holder must sign. Signature 1 — Please keep signature within +the box. Signature 2 — Please keep signature within the box. Date +(mm/dd/yyyy) — Please print date below. + B Non-Voting Items A Proposals — +The Board of Directors recommends a vote FOR all the nominees listed and FOR +Proposals 2 and 3. Change of Address — Please print new address below. +IMPORTANT ANNUAL MEETING INFORMATION Annual Meeting Proxy Card For Against +Abstain 2. Proposal to ratify the appointment of Ernst & Young LLP as the +Company’s independent registered public accounting firm for fiscal year 2015. +For Against Abstain 3. An advisory resolution approving compensation for the +Company’s named executive officers. 01 - Roxane Divol 02 - Joseph R. Gromek +03 - Brenda J. Lauderback 1. Election of Directors: For Withhold For Withhold +For Withhold qIF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG +THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED +ENVELOPE.q Electronic Voting Instructions Available 24 hours a day, 7 days a +week! Instead of mailing your proxy, you may choose one of the voting methods +outlined below to vote your proxy. VALIDATION DETAILS ARE LOCATED BELOW IN +THE TITLE BAR. Proxies submitted by the Internet or telephone must be +received by 11:59 p.m., Eastern Daylight Time, on April 21, 2015. Vote by +Internet • Go to www.investorvote.com/WWW • Or scan the QR code with your +smartphone • Follow the steps outlined on the secure website Vote by +telephone • Call toll free 1-800-652-VOTE (8683) within the USA, US +territories & Canada on a touch tone telephone • Follow the instructions +provided by the recorded message +. This proxy is +solicited on behalf of the Board of Directors The undersigned stockholder +hereby appoints Blake W. Krueger and Donald T. Grimes, and each of them, each +with full power of substitution, as proxies to represent the undersigned +stockholder and to vote all shares of Common Stock of Wolverine World Wide, +Inc. that the stockholder would be entitled to vote on all matters that +properly come before the Annual Meeting of Stockholders to be held at the +Company’s headquarters located at 9341 Courtland Drive N.E., Rockford, +Michigan, 49351, on Wednesday, April 22, 2015, at 10 a.m. Eastern Daylight +Time, and any adjournment of that meeting. If this Proxy is properly executed, +the shares represented by this Proxy will be voted as specified. If this +Proxy is properly executed but no specification is made, the shares +represented by this Proxy will be voted for the election of all nominees +named on this Proxy as directors and for approval of Proposals 2 and 3 +identified on this Proxy. The shares represented by this Proxy will be voted +in the discretion of the proxies on any other matters that may properly come +before the meeting. PLEASE DO NOT VOTE BY MORE THAN ONE METHOD. THE LAST VOTE +RECEIVED WILL BE THE OFFICIAL VOTE. DO NOT RETURN THIS PROXY IF YOU ARE +VOTING BY THE INTERNET OR BY TELEPHONE. (CONTINUED AND TO BE SIGNED ON +REVERSE SIDE.) Proxy — WOLVERINE WORLD WIDE, INC. WOLVERINE WORLD WIDE, INC. +9341 Courtland Drive, N.E. Rockford, Michigan 49351 Wolverine World Wide, +Inc. will be holding its Annual Meeting of Stockholders on April 22, 2015. +The enclosed Notice of 2015 Annual Meeting of Stockholders provides +information regarding the matters that are expected to be voted on at the +meeting. Your vote is important to us. Even if you plan to attend the +meeting, please read the enclosed materials and vote through the Internet, by +telephone or by mailing the Proxy Card below. Telephone and Internet Voting. +On the reverse side of this card are instructions on how to vote through the +Internet or by telephone. Please consider voting through one of these +methods. Your vote is recorded as if you mailed in your Proxy. Thank you in +advance for your participation in our 2015 Annual Meeting. Wolverine World +Wide, Inc. qIF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG +THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED +ENVELOPE.q \ No newline at end of file diff --git a/raw/proxies/0000110471/0001047469-15-002388/proxy_rpt.txt b/raw/proxies/0000110471/0001047469-15-002388/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..054ad6c90af16dc6bf50cfd82670553d142dc802 --- /dev/null +++ b/raw/proxies/0000110471/0001047469-15-002388/proxy_rpt.txt @@ -0,0 +1,35 @@ +CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS +Wolverine Worldwide has entered into agreements with Grimoldi S.A., an Argentinean corporation of which +Mr. Alberto L. Grimoldi, a former director of Wolverine Worldwide, is chairman and a 35% stockholder. The agreements grant Grimoldi, S.A. the exclusive rights to distribute and +sell footwear and apparel products in Argentina under various Company brand names. Grimoldi S.A. or its subsidiary purchases products, samples, footwear components, advertising materials and +miscellaneous items from Wolverine Worldwide or pays Wolverine Worldwide royalties and certain sublicense fees based on sales or purchases of products in Argentina. Grimoldi S.A. was obligated +to pay Wolverine Worldwide purchase prices, royalties, sublicense fees, service fees and interest relating to purchases made or royalties and fees incurred in fiscal year 2014 totaling $4,857,581. All +of the transactions described above occurred pursuant to continuing contractual arrangements between Wolverine Worldwide and Grimoldi S.A. Wolverine Worldwide expects similar transactions to +occur between Grimoldi S.A. and Wolverine Worldwide and its subsidiaries during fiscal year +2015. The Governance Committee reviewed and approved or ratified each of these transactions in accordance with Wolverine Worldwide's related person transactions policy, as described below. +RELATED PERSON TRANSACTIONS POLICY +Wolverine Worldwide's Board adopted written policies and procedures regarding related person transactions. They require the +Governance Committee to review and either approve or disapprove the Company entering into any Interested Transactions (defined below). If advance approval is not feasible, then the Governance +Committee must review and ratify the Interested Transaction at its next meeting. +Interested Transaction +Any transaction, arrangement or relationship or series of similar transactions, arrangements or relationships (including any indebtedness or guarantee of indebtedness) in which: +(1) +the aggregate amount involved is or is expected to exceed $120,000 since the beginning of Wolverine Worldwide's last completed fiscal year; +(2) +Wolverine Worldwide is a participant; and +(3) +any Related Person (defined below) has or will have a direct or indirect interest. +An Interested Transaction does not include: +1. +Any employment compensation paid to an executive officer of the Company if the Compensation Committee approved or recommended to the Board of Directors for approval such compensation. +2. +Any compensation paid to a director for service as a director of the Company. +3. +Any transaction in which a Related Person has an indirect interest solely as a result of being (i) a director or, together with all other Related Persons, as defined below, a less than 10% beneficial owner of an equity interest in another +entity, or both, or (ii) a limited partner in a partnership in which the Related Person, together with all other Related Persons, has an interest of less than 10%. +4. +Any transaction in which the Related Person's interest arises solely from the ownership of the Company's common stock and all holders of the Company's common stock received the same benefit on a pro rata basis (e.g., a dividend). +Wolverine Worldwide Notice of 2015 Annual Meeting of Stockholders and Proxy Statement +| Page +67 +Table of Contents \ No newline at end of file diff --git a/raw/proxies/0000110471/0001047469-16-011167/proxy.txt b/raw/proxies/0000110471/0001047469-16-011167/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..7f26200eb9e317668cdb91b935603f21410d26e5 --- /dev/null +++ b/raw/proxies/0000110471/0001047469-16-011167/proxy.txt @@ -0,0 +1,5882 @@ +DEF 14A +1 +a2227670zdef14a.htm +DEF 14A +Use these links to rapidly review the document +Table of Contents +Table of Contents +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +Washington, D.C. 20549 +SCHEDULE 14A +Proxy +Statement Pursuant to Section 14(a) of +the Securities Exchange Act of 1934 +Filed by the Registrant ý +Filed by a Party other than the Registrant o +Check the appropriate box: +o +Preliminary Proxy Statement +o +Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +ý +Definitive Proxy Statement +o +Definitive Additional Materials +o +Soliciting Material Pursuant to §240.14a-12 +WOLVERINE WORLD WIDE, INC. +(Name of Registrant as Specified In Its Charter) +(Name of Person(s) Filing Proxy Statement, if other than the Registrant) +Payment of Filing Fee (Check the appropriate box): +ý +No fee required. +o +Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. +(1) +Title of each class of securities to which transaction applies: +(2) +Aggregate number of securities to which transaction applies: +(3) +Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): +(4) +Proposed maximum aggregate value of transaction: +(5) +Total fee paid: +o +Fee paid previously with preliminary materials. +o +Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration +statement number, or the Form or Schedule and the date of its filing. +(1) +Amount Previously Paid: +(2) +Form, Schedule or Registration Statement No.: +(3) +Filing Party: +(4) +Date Filed: +Table of Contents +Table of Contents +LETTER TO STOCKHOLDERS +Wolverine World Wide, Inc. +9341 Courtland Drive, N.E. +Rockford, Michigan 49351 +March 15, +2016 +Dear +Stockholder, +You +are invited to attend the 2016 Annual Meeting of Stockholders, on Thursday, April 21, 2016, at Wolverine Worldwide's headquarters in Rockford, Michigan. +The +annual meeting will begin with voting on the matters set forth in the accompanying Notice of Annual Meeting and Proxy Statement and any other business matters properly brought before the meeting +and conclude with a report on the voting. +Whether +or not you plan to attend, you can ensure that your shares are represented at the meeting by promptly voting and submitting your proxy by telephone or through the internet, or by completing, +signing, dating and returning your proxy form in the enclosed envelope. +Sincerely, +Blake +W. Krueger +Chairman, Chief Executive Officer and President +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +| Page +1 +Table of Contents +NOTICE OF 2016 ANNUAL MEETING OF STOCKHOLDERS +10:00 a.m., +April 21, 2016 +Wolverine World Wide, Inc. +9341 Courtland Drive, N.E. +Rockford, Michigan 49351 +March 15, 2016 +To +our Stockholders: +We +invite you to attend Wolverine Worldwide's Annual Meeting of Stockholders at the Company's headquarters located at 9341 Courtland Drive, N.E., Rockford, Michigan, on Thursday, April 21, +2016, at 10:00 a.m. Eastern Daylight Time. At the annual meeting, the stockholders will: +(1) vote +on the election of the four director nominees named in the proxy statement for three-year terms expiring in 2019; (2) vote +on the ratification of the Audit Committee's appointment of Ernst & Young LLP as the Company's independent registered public accounting +firm for fiscal year 2016; (3) vote +on an advisory resolution approving compensation for the Company's named executive officers; (4) vote +on a proposal to approve the Stock Incentive Plan of 2016; and (5) transact +other business that may properly come before the meeting. +Stockholders +can vote at the meeting and any adjournment of the meeting if you were a stockholder of record on March 1, 2016. +By +Order of the Board of Directors +Brendan +M. Gibbons +Vice President, General Counsel and Secretary +Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be held on April 21, 2016. +Wolverine's Proxy Statement for the 2016 Annual Meeting of Stockholders and the Annual Report to Stockholders for the fiscal year ended January 2, 2016, are available at +www.wolverineworldwide.com/2016annualmeeting . +Page 2 | +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +2016 PROXY STATEMENT +Table of Contents +Table of Contents +Notice of 2016 Annual Meeting of Stockholders +2 +Proxy Statement +4 +Board of Directors +4 +Board Composition +4 +Item 1 – Election of Directors for Terms Expiring in +2019 +5 +Directors with Terms Expiring in 2017 +10 +Directors with Terms Expiring in 2018 +14 +Corporate Governance +17 +Risk Oversight +17 +Risk Considerations in Compensation Programs +17 +Board Leadership +18 +Director Independence +18 +Board Committees +19 +Audit Committee +19 +Compensation Committee +21 +Governance Committee +22 +Code of Business Conduct and Accounting and Finance Code of +Ethics +23 +Stockholder Communications Policy +23 +Non-Employee Director Compensation in Fiscal Year 2015 +24 +Non-Employee Director Stock Ownership Guidelines +26 +Securities Ownership of Officers and Directors and Certain Beneficial +Owners +27 +Five Percent Stockholders +27 +Stock Ownership by Management and Others +28 +Compensation Discussion and Analysis +29 +2015 Business Performance and Outlook +29 +An Analysis of CEO Compensation +30 +Overview +30 +Pay at Risk +30 +Pay for Performance +31 +Compensation Program Overview +33 +Compensation Practices +33 +Compensation Philosophy and Objectives +33 +Compensation Program Summary +34 +Purposes of Compensation Program Elements +35 +Compensation Committee Role +36 +CEO Role +36 +Compensation Consultant Role +36 +Executive Compensation Overview for 2015 +37 +Competitive Data Use +37 +2015 Compensation +38 +Base Salary +38 +Annual Bonus +38 +Annual Bonus – Performance Bonus +40 +Annual Bonus – Individual Bonus +41 +Long-Term Incentive Compensation +42 +Long-Term Incentive Compensation – Performance Share +42 +Long-Term Incentive Compensation – Stock Option Grants and Restricted +Stock Awards +44 +Benefits +45 +Retirement and Welfare Plans +45 +Perquisites +45 +Other Compensation Policies and Practices +46 +NEO Stock Ownership Guidelines +46 +Stock Hedging and Pledging Policies +46 +Clawback Policy +46 +Post-Employment Compensation +46 +Impact of Accounting and Tax Treatments on Compensation +47 +Compensation Committee Report +48 +Summary Compensation Table +49 +Grants of Plan-Based Awards in Fiscal Year 2015 +51 +Outstanding Equity Awards at 2015 Fiscal Year-End +54 +Option Exercises and Stock Vested in Fiscal Year 2015 +58 +Pension Plans and 2015 Pension Benefits +58 +Qualified Pension Plan +58 +Supplemental Executive Retirement Plan +59 +Pension Benefits in Fiscal Year 2015 +60 +Potential Payments Upon Termination or Change in Control +60 +Benefits Triggered by Termination for Cause or Voluntary +Termination +61 +Benefits Triggered by Termination Other Than for Cause or by the NEO for Good +Reason +61 +Benefits Triggered Upon a Change in Control +61 +Benefits Triggered by Retirement, Death or Permanent Disability +62 +Description of Restrictive Covenants that Apply During and After Termination of +Employment +64 +Estimated Payments on Termination or Change in Control +64 +Audit Committee Report +67 +Independent Registered Public Accounting Firm +69 +Item 2 – Ratification of Appointment of Independent Registered +Public Accounting Firm +70 +Item 3 – Advisory Resolution to Approve Executive +Compensation +71 +Item 4 – Approval of Stock Incentive Plan of 2016 +72 +Related Party Matters +85 +Related Person Transactions Policy +85 +Additional Information +86 +Stockholders List +86 +Director and Officer Indemnification +86 +Section 16(a) Beneficial Ownership Reporting Compliance +86 +Stockholder Proposals for Inclusion in Next Year's Proxy +Statement +86 +Other Stockholder Proposals for Presentation at Next Year's Annual +Meeting +86 +Voting Securities +87 +Conduct of Business +87 +Vote Required for Election and Approval +87 +Voting Results of the Annual Meeting +88 +Attending the Annual Meeting +88 +Manner for Voting Proxies +88 +Revocation of Proxies +88 +Solicitation of Proxies +88 +Delivery of Documents to Stockholders Sharing an Address +88 +Access to Proxy Statement and Annual Report +89 +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +| Page +3 +Table of Contents +2016 PROXY STATEMENT +We +are furnishing you this proxy statement and enclosed proxy card in connection with the solicitation of proxies by the Board of Directors of Wolverine World Wide, Inc. ("Wolverine Worldwide" +or the "Company") to be used at the Annual Meeting of Stockholders of the Company occurring on April 21, 2016 at the Company's corporate headquarters in Rockford, Michigan (the "Annual +Meeting"). Distribution of this proxy statement and enclosed proxy card to stockholders is scheduled to begin on or about March 15, 2016. +You +can ensure that your shares are voted at the Annual Meeting by submitting your instructions by telephone or through the Internet, or by completing, signing, dating, and returning your proxy form +in the enclosed envelope. Submitting your instructions or proxy by any of these methods will not affect your right to attend and vote at the Annual Meeting. We encourage stockholders to submit proxies +in advance. A stockholder who gives a proxy may revoke it at any time before it is exercised by voting in person at the Annual Meeting, by delivering a subsequent proxy, or by notifying the inspectors +of election in writing of such revocation. In order to vote any shares at the Annual Meeting that are held for you in a brokerage, bank, or other institutional account, you must obtain a proxy from +that entity and bring it with you to hand in with your ballot. +References +to "2015" or "fiscal 2015" in this proxy statement are to the Company's fiscal year ended January 2, 2016, unless otherwise noted in the text. References to "2016" or "fiscal 2016" +in this proxy statement are to the Company's fiscal year ending December 31, 2016, unless otherwise noted in the text. +Board of Directors +The stockholders elect directors to serve on the Company's Board of Directors (the "Board of Directors" or "Board"). The Board oversees the management of the business by the Chief Executive Officer +("CEO") and senior management. In addition to its general oversight function, the Board's additional responsibilities include, but are not limited to, the following: +• Reviewing and approving the Company's key objectives and strategic business plans and monitoring implementation of those plans and the +Company's success in meeting identified objectives +• Selecting, evaluating and compensating the CEO and overseeing CEO succession planning +• Providing advice and oversight regarding the selection, evaluation, development and compensation of management +• Overseeing the Company's risk management and mitigation activities +• Reviewing and monitoring administration of the policies and procedures to safeguard the integrity of the Company's business operations +and financial reporting and to promote compliance with applicable laws and regulations +The +Company expects directors to attend every meeting of the Board and the committees on which they serve and to attend the annual meeting of stockholders. In 2015, 11 directors (all directors then +serving on the Board) attended the 2015 Annual Meeting of Stockholders, and all directors attended at least 75% of the meetings of the Board and the committees on which they served. +BOARD COMPOSITION +The Board prides itself on its ability to recruit and retain directors who have high personal and professional integrity and have +demonstrated exceptional ability and judgment to effectively serve the stockholders' long-term interests. The Board believes that our directors, including the nominees for election as directors at the +Annual Meeting, have these characteristics and valuable skills that provide the Company with the variety and depth of knowledge, judgment and strategic vision necessary to provide effective oversight +of the Company. Our directors have extensive experience in different fields, including footwear and apparel, retail, global operations, finance and accounting, and information technology. In addition, +many of our directors have significant leadership experience and experience in public company governance and related matters from their service as directors or senior executives of Wolverine Worldwide +or other companies. We believe that all our +Page 4 | +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +2016 PROXY STATEMENT +directors +possess the professional and personal qualifications necessary for service on our Board, and we have highlighted noteworthy attributes for each director in the individual biographies below. +The +Board's Governance Committee serves as its nominating committee. The Governance Committee, in anticipation of upcoming director elections and other potential or expected Board vacancies, searches +for qualified individuals and recommends candidates to the Board. The Committee may retain a search firm or other external parties to assist it in identifying candidates, and the Committee has the +sole authority to approve the search firm's fees and retention terms, and to terminate the firm if necessary. +The +Committee considers candidates suggested by directors, senior management or stockholders. Stockholders may recommend individuals as potential director candidates by communicating with the +Committee through one of the Board communication mechanisms described under the heading " Stockholder Communications Policy ." Stockholders that wish to +nominate a director candidate must comply with the procedures set forth in the Company's By-Laws, which are posted on its website. Ultimately, upon the recommendation of the Governance Committee, the +Board selects the Company nominees for election at each annual meeting. In selecting director nominees, the Board considers candidates' personal and professional integrity, ability and judgment, and +likelihood to be effective, in conjunction with the other nominees and directors, in serving the long-term interests of the stockholders. The Governance Committee also considers candidates' relative +skills, background and characteristics; independence under applicable New York Stock Exchange ("NYSE") listing standards and the Company's Director Independence Standards; potential to contribute to +the composition and culture of the Board; and ability and willingness to actively participate in the Board and committee meetings and to otherwise devote sufficient time to Board duties. +The +Governance Committee reviews with the Board on an annual basis the appropriate skills and characteristics desired of Board members in the context of the current make-up of the Board. The Board, +with the assistance of the Governance Committee, annually assesses the current composition and diversity of the Board across many dimensions. As set forth in the Company's Corporate Governance +Guidelines, which are posted on its website, this assessment addresses issues of experience, age and skills. +ITEM 1 – Election of Directors +for Terms Expiring in 2019 +The Company's Board consists of 11 directors. The Company's By-Laws establish three classes of directors, with each class being as nearly equal in number as possible and serving three-year terms. At +each annual meeting, the term of one class expires. The Company's Corporate Governance Guidelines state that a director must offer to resign from the Board at the Annual Meeting of Stockholders +following his or her 72 nd birthday, subject to the Board waiving this requirement under circumstances determined by the Board. The Board has nominated four directors for election +at the Annual Meeting: Jeffrey M. Boromisa, Gina R. Boswell, David T. Kollat, and Timothy J. O'Donovan. Each director has been nominated to serve for a three-year term +expiring at the annual meeting of stockholders to be held in 2019 or until his or her successor, if any, has been elected and is qualified. +Ms. Boswell and Messrs. Boromisa, Kollat and O'Donovan are independent directors, as determined by the Board under the applicable NYSE listing +standards and the Company's Director Independence Standards. Each director nominee currently serves on the Board. The stockholders most recently elected Messrs. Boromisa, Kollat and O'Donovan +at the Company's 2013 annual meeting. Ms. Boswell was appointed to the Board in December 2013. +The +Company is not aware of any nominee who will be unable or unwilling to serve as a director. However, if a nominee is unable to serve or is otherwise unavailable for election, the incumbent +directors may or may not select a substitute nominee. If the directors select a substitute nominee, the proxy holder will vote the shares represented by all valid proxies for the substitute nominee +(unless other instructions are given). +The +biographies of the four nominees and the other directors of the Company are below, along with a discussion of the above-described characteristics, skills and qualifications for each director. +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +| Page +5 +Table of Contents +2016 PROXY STATEMENT +JEFFREY M. BOROMISA +Age: +61 +Director since: +2006 +Retired Executive Vice +President of Kellogg +International, President of Latin +America; Senior Vice President +of Kellogg Company +Board Committees: +Audit +Compensation +Other Public Directorships: +None +Mr. Boromisa worked at Kellogg Company, a global food manufacturing company, and its affiliates from 1981 to 2009. From +2008 through his retirement in May 2009, Mr. Boromisa was Executive Vice President of Kellogg International, President of Latin America; Senior Vice President of Kellogg Company. From 2007 until 2008, Mr. Boromisa served as Executive Vice +President of Kellogg International, President of Asia Pacific and Senior Vice President of Kellogg Company. From 2004 through 2006, he was Senior Vice President and Chief Financial Officer of Kellogg Company. In addition, beginning in 2004 and +through his retirement, Mr. Boromisa was a member of Kellogg Company's Global Leadership Team. Prior to 2004, Mr. Boromisa occupied various leadership positions with Kellogg. Mr. Boromisa is also a director at Haworth International, +Inc., a privately held, multinational, office furniture design and manufacturing company. With nearly 30 years of experience at Kellogg Company, including serving as its chief financial officer and leading various operational business +units, Mr. Boromisa has obtained leadership, retail, global operations and finance expertise. +Page 6 | +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +2016 PROXY STATEMENT +GINA R. BOSWELL +Age: +53 +Director since: +2013 +Executive Vice President and +General Manager, +Unilever UK & Ireland +Board Committees: +Governance +Other Public Directorships: +ManpowerGroup Inc. +Since July 2015, Ms. Boswell has been Executive Vice President and General Manager for Unilever UK & Ireland, one +of the largest markets for Unilever PLC / Unilever N.V., a multinational consumer goods company whose products include Dove, Vaseline, Lipton, and Hellman's. From 2011 to July 2015, Ms. Boswell served as Executive Vice President, Personal Care for Unilever PLC / Unilever N.V. From 2008 to 2011, Ms. Boswell served as President, Global Brands, +for The Alberto-Culver Company, a consumer goods company. Ms. Boswell has held numerous other senior leadership positions with other leading global companies, including Avon Products, Inc., Ford Motor Company, and Estee Lauder Companies, +Inc. Ms. Boswell is a member of the board of ManpowerGroup Inc., a publicly traded workforce solutions company, where she is also the chairperson of the audit committee. Through senior leadership roles with leading branded companies, +Ms. Boswell has obtained expertise in brand building and leadership, global operations and finance experience; and her service as a director at ManpowerGroup Inc. has provided her with public company governance and related experience. +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +| Page +7 +Table of Contents +2016 PROXY STATEMENT +DAVID T. KOLLAT +Age: +77 +Director since: +1992 +President and Chairman, +22, Inc. +Board Role: +Lead Director +Other Public Directorships: +L Brands, Inc. +Select Comfort Corporation +Mr. Kollat has been Chairman and President of 22, Inc., a company specializing in research and management consulting +for retailers and consumer goods manufacturers, since 1987. In addition to his marketing and management experience as Chairman and President of 22, Inc., Mr. Kollat served for 11 years in senior leadership positions at L Brands, +Inc. (formerly Limited Brands, Inc.), a publicly traded, multinational apparel and retail company, including as Executive Vice President, Marketing, President of Victoria's Secret Direct, and as a member of its executive committee. +Mr. Kollat is Lead Director of Wolverine Worldwide. Mr. Kollat has been a director of L Brands, Inc. since 1976 and a director of Select Comfort Corporation, a bed manufacturer and retailer, since 1994. During the preceding five years, +Mr. Kollat was, but no longer is, a director of Big Lots, Inc., a publicly traded retail company. Mr. Kollat's work for L Brands, Inc. and 22, Inc. has provided him with marketing, apparel, retail and leadership expertise. He +also has experience with public company governance and related matters through his extensive service on public company boards. +The Board, which previously waived the age 72 retirement provision with respect to Mr. Kollat, has determined that it is in the best interests of stockholders for Mr. Kollat to continue to serve as a director, and, therefore, determined to +nominate him for an additional three-year term. +Page 8 | +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +2016 PROXY STATEMENT +TIMOTHY J. O'DONOVAN +Age: +70 +Director since: +1993 +Retired Chairman and Chief +Executive Officer of +Wolverine World Wide, Inc. +Board Committees: +None +Other Public Directorships: +SpartanNash Company +Mr. O'Donovan is a former Chairman of the Board of Wolverine Worldwide and served in that position from April 2005 through +December 2009. In April 2007, Mr. O'Donovan retired as Chief Executive Officer of Wolverine Worldwide, a position he had held since April 2000. Mr. O'Donovan served Wolverine Worldwide as its Chief Executive Officer and President from April +2000 until April 2005, and as Chief Operating Officer and President from 1996 until April 2000. Prior to 1996, Mr. O'Donovan held various positions with the Company, including Executive Vice President of Wolverine Worldwide. Mr. O'Donovan +is lead director of SpartanNash Company, a grocery distribution and retail company. During the preceding five years, Mr. O'Donovan was, but no longer is, a director of Kaydon Corporation, a publicly traded company that designed and manufactured +custom-engineered products. Mr. O'Donovan has obtained footwear and apparel, retail, leadership, global operations and finance expertise through his more than 40 years with the Company. His service on public company boards has provided him +with public company governance and related experience. +BOARD RECOMMENDATION +The Board recommends that you vote "FOR" the election of the above nominees for terms expiring in 2019. +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +| Page +9 +Table of Contents +2016 PROXY STATEMENT +Directors with Terms +Expiring in 2017 +WILLIAM K. GERBER +Age: +62 +Director since: +2008 +Managing Director of +Cabrillo Point Capital LLC +Board Committees: +Audit (Chair) +Compensation +Other Public Directorships: +AK Steel Holding Corporation +Mr. Gerber is Managing Director of Cabrillo Point Capital LLC, a private investment fund. He has held that position +since 2008. From 1998 to 2007, Mr. Gerber was Executive Vice President and Chief Financial Officer of Kelly Services, Inc., a publicly traded global staffing solutions company with operations in more than 35 countries. During the preceding +five years, Mr. Gerber was, but no longer is, a director of Kaydon Corporation, a publicly traded company that designed and manufactured custom-engineered products. From his 15 years in leadership positions with L Brands, Inc. +(formerly Limited Brands, Inc.), a multinational apparel and retail company, and Kelly Services, Inc., Mr. Gerber has obtained extensive experience in apparel, retail, leadership, global operations and finance, and his service as a +director of various public companies has given him experience with public company governance and related matters. +Page 10 | +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +2016 PROXY STATEMENT +BLAKE W. KRUEGER +Age: +62 +Director since: +2006 +Chairman, Chief Executive +Officer and President of +Wolverine World Wide, Inc. +Board Committees: +None +Other Public Directorships: +None +Mr. Krueger is Chairman of Wolverine Worldwide, a position he assumed in January 2010, and Chief Executive Officer and +President of Wolverine Worldwide, positions he assumed in April 2007. From October 2005 until April 2007, Mr. Krueger served as President and Chief Operating Officer of Wolverine Worldwide. From 2004 to October 2005, he served as Executive Vice +President and Secretary of Wolverine Worldwide and President of its Heritage Brands Group. From 2003 to 2004, Mr. Krueger served as Executive Vice President and Secretary of Wolverine Worldwide and President of the Company's Caterpillar Footwear +Group. He also previously served as Executive Vice President, General Counsel and Secretary of Wolverine Worldwide with various responsibilities including the human resources, retail, business development, accessory licensing, mergers and +acquisitions, and legal areas. Mr. Krueger serves as a director of Bissell Homecare, Inc., a privately-held company and leading marketer of floor care appliances. Mr. Krueger's more than 15 years in senior leadership roles with +the Company have provided him expertise in footwear and apparel, retail, global operations and finance, and his board experience at the Company and Professionals Direct, Inc., a then publicly traded insurance company, has given him extensive +experience with public company governance and related matters. +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +| Page +11 +Table of Contents +2016 PROXY STATEMENT +NICHOLAS T. LONG +Age: +57 +Director since: +2011 +Retired Chief Executive Officer +of MillerCoors LLC +Board Committees: +Compensation +Governance +Other Public Directorships: +None +From 2011 until his retirement in 2015, Mr. Long served as Chief Executive Officer of MillerCoors LLC ("MillerCoors"), +a joint venture between two publicly traded beverage companies. From 2008 to 2011, Mr. Long served as President and Chief Commercial Officer of MillerCoors. From 2007 to 2008, Mr. Long served as Chief Executive Officer of Miller Brewing +Company, a beverage company, and he served as Chief Marketing Officer of Miller Brewing Company from 2005 to 2007. Prior to joining Miller Brewing Company, Mr. Long spent 17 years in various senior leadership positions at The Coca-Cola +Company, a beverage company, including Vice President of Strategic Marketing, Global Brands, Vice President Strategic Marketing Research and Trends, President of Coca-Cola's Great Britain and Ireland Division and President of the Northwest Europe +Division. Through his more than 20 years in senior positions at category-leading, branded companies, Mr. Long has developed marketing and global operations expertise. +Page 12 | +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +2016 PROXY STATEMENT +MICHAEL A. VOLKEMA +Age: +60 +Director since: +2005 +Chairman of Herman Miller, +Inc. +Board Committees: +Audit +Governance +Other Public Directorships: +Herman Miller, Inc. +Mr. Volkema has been Chairman of Herman Miller, Inc., a publicly traded multinational furniture manufacturer, since +2000. Mr. Volkema became President and Chief Executive Officer of Herman Miller in 1995 and held those positions until 2003 and 2004, respectively. Mr. Volkema has extensive experience on public company boards, including 15 years as +Chairman of the Board at Herman Miller, Inc., and including service on the compensation and audit committees of boards of publicly traded companies. Mr. Volkema also is a director at Milliken & Company, a privately held, +innovation-based company serving the textile, chemical, and floor covering markets. Mr. Volkema has obtained leadership and global operations expertise from his more than 20 years in senior leadership positions with Herman Miller, Inc. +Mr. Volkema also has public company governance and related experience from his extensive service on public company boards. +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +| Page +13 +Table of Contents +2016 PROXY STATEMENT +Directors with Terms +Expiring in 2018 +ROXANE DIVOL +Age: +43 +Director since: +October 2014 +Senior Vice President and +General Manager, Website +Security for Symantec +Corporation +Board Committees: +Audit +Other Public Directorships: +None +Ms. Divol is Senior Vice President and General Manager, Website Security, for Symantec Corporation, a global leader in +information, security, backup and availability solutions, including Norton security products. From 2014 to January 2016, Ms. Divol was Senior Vice President and General Manager, Trust Services, for Symantec Corporation and from 2013 to 2014, +Ms. Divol was Senior Vice President of Alliances with Symantec. Ms. Divol joined Symantec from McKinsey & Company, a global management consulting firm, where she was a partner in its San Francisco office and led the West Coast +marketing and sales practice, with a focus on marketing return on investment and marketing transformation. Ms. Divol's experience with Symantec Corporation and McKinsey & Company provides her with expertise in leadership, global +operations and information technology, which the Board believes are critical areas in the Company's long-term strategic plans. +Page 14 | +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +2016 PROXY STATEMENT +JOSEPH R. GROMEK +Age: +69 +Director since: +2008 +Retired President, Chief +Executive Officer +and a Director of +The Warnaco Group, Inc. +Board Committees: +Compensation (Chair) +Governance +Other Public Directorships: +Guess?, Inc. +The Children's Place Retail Stores, Inc. +Tumi, Inc. +From 2003 until his retirement in 2012, Mr. Gromek served as President, Chief Executive Officer and a director of The +Warnaco Group, Inc., a publicly traded company. Mr. Gromek also served as Chief Executive Officer of Brooks Brothers, Inc. from 1995 until 2002. He is currently the Chairman of the Board of Tumi, Inc., a publicly traded company +featuring a leading global brand of premium travel, business and lifestyle products and accessories, and serves as a director of Guess?, Inc., an apparel wholesaler and retailer, and The Children's Place Retail Stores, Inc., a children's +clothing retailer. Mr. Gromek is also a director of Stanley M. Proctor Company, a privately held company. Having served for more than 40 years in the retail and apparel industries, including 30 years managing and marketing apparel +brands and a collective 15 years as the chief executive officer of two leading, multi-national apparel companies, Mr. Gromek has expertise in apparel, retail and global operations. His service as a senior executive and director at various +public companies has given him extensive leadership experience and experience in public company governance and related matters. +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +| Page +15 +Table of Contents +2016 PROXY STATEMENT +BRENDA J. LAUDERBACK +Age: +65 +Director since: +2003 +Retired President of the +Wholesale and Retail Group +of Nine West Group, Inc. +Board Committees: +Audit +Governance (Chair) +Other Public Directorships: +Denny's Corporation +Select Comfort Corporation +From 1995 until her retirement in 1998, Ms. Lauderback was President of the Wholesale and Retail Group of Nine West Group, +Inc., a footwear wholesaler and distributor. She previously was the President of the Wholesale Division of U.S. Shoe Corporation, a footwear manufacturer and distributor, a position that included responsibility for offices in China, Italy and +Spain, and she was a Vice President/General Merchandise Manager of Dayton Hudson Corporation (now Target Corporation), a retail company. During the preceding five years, Ms. Lauderback also was, but no longer is, a director of Big Lots, +Inc., a retail company. Ms. Lauderback has more than 25 years of experience in the retail industry, with more than 20 years in the footwear, apparel, and accessories industries. In particular, senior leadership positions have +provided her with strong footwear, apparel and retail expertise. With her service on publicly traded company boards, including Denny's Corporation, a restaurant company, and Select Comfort Corporation, a bed manufacturer and retailer, and as a +director of Wolverine Worldwide, she also has extensive experience with public company governance and related matters. +Page 16 | +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +2016 PROXY STATEMENT +Table of Contents +Corporate Governance +As part of an annual self-assessment, each director evaluates the performance of the Board, and any committee on which he or +she serves, across a number of dimensions. Mr. Kollat, as the Lead Director working with the Governance Committee, reviews the Board self-assessment with directors following the end of each +fiscal year. Committee Chairpersons review the committee self-assessments with their respective committee members and discuss them with the Board. In addition, the Governance Committee, working with +the Lead Director, develops and implements guidelines for evaluating all directors standing for nomination and re-election. +The Corporate Governance Guidelines (including the Director Independence Standards), the Charter for each Board standing +committee (Audit, Compensation and Governance), the Company's Certificate of Incorporation, By-Laws, Code of Business Conduct, and its Accounting and Finance Code of Ethics all are available on the +Wolverine Worldwide website at: +http://www.wolverineworldwide.com/investor-relations/corporate-governance/ +The Board and applicable committees annually review these and other key governance documents. +RISK OVERSIGHT +The Board oversees the Company's risk management and mitigation activities through presentations by and discussions with the CEO, +Chief Financial Officer ("CFO"), General Counsel, brand and department leaders and other members of management. The Vice President of Internal Audit and Risk Compliance coordinates management's +day-to-day risk management and mitigation efforts, and reports directly to the Audit Committee. The Vice President of Internal Audit and Risk Compliance reviews with the Audit Committee periodically, +and with the full Board annually, management's related assessment and mitigation strategies. In addition to the above processes, the Board has delegated the following risk management and mitigation +oversight responsibilities to its standing committees, which meet regularly to review and discuss risk topics and then report to the Board: +• The Audit Committee reviews the Company's approach to risk management generally. The Committee also oversees the Company's risk +policies and processes relating to its financial statements and financial reporting processes, credit risks, and liquidity risks, as well as the Company's management of risks related to cybersecurity. +The Committee discusses with management and the independent auditors significant risks or exposures and the steps taken by management to resolve them. +• The Compensation Committee monitors the risks associated with management resources; organization structure; succession planning, +hiring, development and retention processes; and it reviews and evaluates risks associated with the Company's compensation structure. +• The Governance Committee oversees risks related to the Company's governance structure and processes and potential risks arising from +related person transactions. +RISK CONSIDERATIONS IN COMPENSATION PROGRAMS +The Company reviewed its compensation policies and practices to assess whether they are reasonably likely to have a material adverse +effect on the Company. As part of this review, the Company compiled information about the Company's incentive plans, including reviewing the Company's compensation philosophy, evaluating key incentive +plan design features and reviewing historic payout levels and pay mix. With assistance from Company management and its independent compensation consultant, the Compensation Committee reviewed the +executive compensation program, and managers from the Company's human resources and legal departments reviewed the non-executive compensation programs. +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +| Page +17 +Table of Contents +BOARD LEADERSHIP +The Company's CEO currently also serves as the Chairman of the Board. Since 1993, the Company has had an independent Lead Director +who functions in many ways similar to an independent Chairman. This long-established structure provides the Board with independent oversight of the CEO's leadership. The Board considers the +appropriate leadership structure, including whether to separate the roles of Chairman and CEO, based upon the Board and Company's then-current circumstances. The Board believes that separating the +Chairman and CEO roles at this time would add unnecessary complexity to the organization structure without adding materially to the Board's independent oversight of the CEO function. +The +Company's independent directors annually select an independent Lead Director. As outlined in the Corporate Governance Guidelines, the principal duties of the Lead Director include: +• Reviewing and approving the agendas and scheduling for Board and committee meetings +• Reviewing and approving information and meeting materials sent to the Board +• Presiding over executive sessions and having the authority to call executive sessions +• Serving, as necessary, as a liaison between the Chairman and the independent directors +• Presiding over Board meetings in the absence of the Chairman +• Being available for consultation and communication with stockholders, as appropriate +DIRECTOR INDEPENDENCE +The +Board annually assesses the independence of all directors. To qualify as "independent," the Board must affirmatively determine that the director is independent under the Company's Director +Independence Standards, which are modeled after the listing standards of the NYSE. Under NYSE listing standards, the Board has determined that 10 of the Company's 11 directors are independent. Only +Mr. Krueger, the Company's CEO, is not independent. All of the Board's committees are comprised entirely of independent directors. The independent directors generally meet in executive session +at each regularly scheduled meeting. +The +Director Independence Standards define an "Independent Director" as a director who the Board determines otherwise has no material relationship with the Company (either directly or as a partner, +stockholder or officer of an organization that has a relationship with the Company), and who: +Name +Management +Non-Management +Independent +Boromisa +X +X +Boswell +X +X +Divol +X +X +Gerber +X +X +Gromek +X +X +Kollat +X +X +Krueger +X +Lauderback +X +X +Long +X +X +O'Donovan +X +X +Volkema +X +X +• Is not, and in the past three years has not been, an employee of the Company +• Does not have, and has not had within the last three years, an immediate family member employed as an executive officer of the Company +• Has not received, and has not had an immediate family member receive during any 12-month period within the last three years, any +direct compensation from the Company in excess of $120,000 (other than compensation for Board +service; +compensation received by the director for former service as an interim Chairman, CEO or other executive officer; compensation received by the director's immediate family member for service as +a non-executive employee; or pension and other forms of deferred compensation for prior service if such compensation is not contingent in any way on continued service) +• Is not a current employee or partner of a firm that is the Company's internal or external auditor +Page 18 | +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +• Has not been, and has not had an immediate family member who has been within the last three years, a partner or employee of the +Company's internal or external auditor and personally worked on the Company's audit within that time +• Has not had an immediate family member who is (i) a current partner of the Company's internal or external auditor, or +(ii) a current employee of the Company's internal or external auditor who personally works on the Company's audit +• Is not, and has not been within the last three years, part of an interlocking directorate in which a current executive officer of +Wolverine Worldwide serves or served on the compensation +committee +of another company where the director or the director's immediate family member concurrently serves or served as an executive officer +• Is not an employee of, and does not have an immediate family member who is an executive officer of, another company that has made +payments to, or received payments from, Wolverine Worldwide for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of $1,000,000 or 2% of the other +company's consolidated gross revenues, or +• Has not had any other direct or indirect relationship with Wolverine Worldwide that the Board determines is material +"Immediate +Family Member" is defined as spouses, parents, children, siblings, in-laws, and any person (other than domestic employees) sharing the household of any director, nominee for director, +executive officer, or significant stockholder of a company. +BOARD COMMITTEES +The following table identifies the current members of the Board and its standing committees and the number of meetings the Board and +each committee held in 2015. +BOARD OF DIRECTORS +(6 Meetings) +Audit Committee +Compensation Committee +Governance Committee +(9 Meetings) +(9 Meetings) +(4 Meetings) +Gerber (Chair) +Boromisa +Divol +Lauderback +Volkema +Gromek (Chair) +Boromisa +Gerber +Long +Lauderback (Chair) +Boswell +Gromek +Long +Volkema +Audit Committee +The Board has determined that each Audit Committee member is "independent" as defined by NYSE listing standards and the +Sarbanes-Oxley Act of 2002, as applicable to audit committee members, and satisfies the NYSE "financial literacy" requirement. In addition, the Board has determined that Mr. Boromisa and +Mr. Gerber are "audit committee financial experts" under Securities and Exchange Commission ("SEC") rules. +The +charter of the Audit Committee is published on the Company's website at http://www.wolverineworldwide.com/investor-relations/corporate-governance/ and lists all the Audit Committee's duties and +responsibilities. In accordance with its charter, the Audit Committee: +• Represents and assists the Board in fulfilling its oversight responsibility regarding the Company's financial statements and the +financial reporting process, the Company's internal control over financial reporting, the performance of the internal audit function and the independent auditors, the qualifications and independence +of the independent auditors, the annual independent audit of the Company's financial +statements +and internal control over financial reporting, the Company's compliance with legal and regulatory requirements, and the Company's policies and systems with respect to risk assessment and +risk management +• Appoints, retains, compensates, oversees, evaluates and, if appropriate, terminates the independent auditors +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +| Page +19 +Table of Contents +• Approves in advance all audit and permissible non-audit services to be provided by the independent auditors and establishes policies +and procedures for the engagement of the independent auditors to provide audit and permissible non-audit services; annually obtains and reviews the independent auditors' internal quality control +report and other reports required by applicable rules, regulations and standards +• Annually obtains and reviews the independent auditors' report regarding the auditors' independence +• Annually reviews and assesses auditor objectivity and independence +• Annually reviews and assesses the performance and effectiveness of the independent auditors and the Company's internal audit function +• Discusses with the internal audit staff and the independent auditors the overall scope and plans for their respective audits +• Receives, reviews and discusses reports from management, the finance and internal audit staff and the independent auditors regarding +the adequacy and effectiveness of the Company's internal control over financial reporting +• Receives, reviews and discusses reports from management regarding the adequacy and effectiveness of the Company's disclosure controls +and procedures +• Reviews and discusses the Company's policies and processes with respect to risk assessment and risk management and discusses with +management and the independent auditors significant risks or exposures and steps taken by management to mitigate them; oversees the Company's risk policies and processes relating to its financial +statements and financial reporting processes, credit risks and liquidity risks +• Oversees the Company's management of risks related to cybersecurity +• Meets separately, periodically with management, internal audit staff, the independent auditors and the General Counsel +• Reviews with the independent auditors any audit problems or difficulties and management's response +• Reviews and discusses with the independent auditors matters required to be discussed by the independent auditors under Accounting +Standard No. 16, as adopted by the Public Company Accounting Oversight Board and amended from time to time +• Meets to review with management and the Company's independent auditors the Company's interim financial statements and annual audited +financial statements, including disclosures in Management's Discussion and Analysis of Financial Condition and Results of Operations, that are included in the Company's Quarterly Reports on +Form 10-Q and Annual Reports on Form 10-K +• Recommends to the Board whether the Company's audited financial statements should be included in the Company's Annual Report on +Form 10-K +• Establishes and oversees procedures for the receipt, retention and treatment of complaints regarding accounting, internal accounting +controls, auditing or federal securities law matters, and for the confidential, anonymous submission by the Company's employees of concerns regarding questionable accounting, auditing or federal +securities law matters +• Reviews and discusses with management and the independent auditors the Company's earnings press releases and financial information and +earnings guidance provided by the Company to analysts and rating agencies +• Oversees the preparation of the audit committee report required by the SEC rules to be included in the Company's proxy statement for +the annual meeting of stockholders +• Establishes the Company's hiring policies for employees and former employees of the independent auditors +• Engages consultants and advisors at the expense of the Company to assist the Committee as it deems necessary in the performance of its +functions +• Oversees the Company's legal and regulatory compliance systems and reviews the Company's codes of conduct and programs to monitor +compliance with such codes +• At least annually receives a report on the Company's compliance programs, and reviews and discusses the implementation and +effectiveness of the Company's compliance programs with the General Counsel, who has the authority to communicate promptly and directly to the Audit Committee and the Board about reports that involve +actual and alleged violations of law or the Company's codes of conduct +• Conducts and discusses with the Board an annual performance evaluation of the Committee, including the Committee's adherence to its +charter +Page 20 | +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +2016 PROXY STATEMENT +Compensation Committee +The Board has determined that each Compensation Committee member is "independent" as defined by NYSE listing standards, as applicable +to compensation committee members. +The +charter of the Compensation Committee is published on the Company's website at http://www.wolverineworldwide.com/investor-relations/corporate-governance/ and lists all the Compensation Committee's +duties and responsibilities. In accordance with its charter, the Compensation Committee: +• Assists the Board in fulfilling its responsibilities relating to executive compensation and the Company's compensation and benefit +programs and policies +• Oversees the overall compensation structure, policies and programs, including whether the compensation structure establishes +appropriate incentives for management and employees +• Oversees the Company's management of risks relating to management resources, organization structure, and succession planning, hiring, +development and retention processes, as well as those relating to the Company's compensation structure, policies and programs +• Administers and makes recommendations with respect to incentive compensation plans, including stock incentive plans +• Assesses the results of the Company's most recent advisory vote on executive compensation +• Reviews and approves corporate and personal goals and objectives relevant to CEO compensation, evaluates the performance of the CEO in +light of these goals and objectives, and, together with the other independent directors, approves the compensation of the CEO based on the evaluation +• Discusses with the CEO the performance of other executives on the CEO's management team as well as certain brand presidents as it +deems appropriate (together with the CEO, the "Executives") +• Reviews the compensation of Executives, and reviews and approves the compensation of Executives who report directly to the CEO +• Reviews and approves, as appropriate, stock incentive grants and other equity compensation to Executives, including the terms and +conditions of any such compensation +• Reviews and discusses with management the Company's Compensation Discussion and Analysis and related disclosures required by the SEC +rules and recommends to the +Board +whether such disclosures should be included in the annual report and proxy statement +• Oversees the preparation of the compensation committee report required by the SEC rules to be included in the annual report and proxy +statement +• Reviews and approves the design of benefit plans pertaining to Executives +• Reviews and recommends employment agreements and severance arrangements for the CEO, including change in control provisions, plans or +agreements +• Reviews and approves employment agreements and severance agreements for Executives other than the CEO, including change in control +provisions, plans or agreements +• Establishes stock ownership guidelines for directors, Executives and other appropriate employees and monitors compliance with the +guidelines +• Considers and recommends to the Board the frequency of the Company's advisory vote on executive compensation +• Engages consultants and advisors at the expense of the Company to assist the Committee as it deems necessary in the performance of its +functions +• Appoints, determines compensation for and oversees the work of any consultants and advisors retained by the Committee and oversees +compliance with any applicable requirements relating to the independence of such +consultants or advisors +• At least annually, assesses whether the work of compensation consultants involved in determining or recommending executive or director +compensation has raised any conflict of interest that is required to be disclosed in the Company's annual report and proxy statement +• Conducts and discusses with the Board an annual performance evaluation of the Committee, including the Committee's adherence to its +charter +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +| Page +21 +Table of Contents +2016 PROXY STATEMENT +Governance Committee +The Board has determined that each Governance Committee member is "independent" as defined by NYSE listing standards. +The +charter of the Governance Committee is published on the Company's website at http://www.wolverineworldwide.com/investor-relations/corporate-governance/ and lists all the Governance Committee's +duties and responsibilities. In accordance with its charter, the Governance Committee: +• Assists the Board in fulfilling its responsibilities on matters and issues related to the Company's corporate governance practices +• In conjunction with the Board, establishes qualification standards for membership on the Board and its committees +• Leads the search for individuals qualified to become members of the Board and reviews the qualifications of candidates for election to +the Board +• Establishes procedures for the consideration of candidates for election to the Board recommended for the Committee's consideration by +the Company's stockholders +• Recommends to the Board the Company's nominees for election or reelection by the stockholders at the annual meeting, and to fill +vacancies and newly created directorships on the Board +• Recommends to the Board qualified individuals to serve as committee members and chairpersons on the various Board committees +• Develops and recommends to the Board corporate governance guidelines, reviews the guidelines on an annual basis, and recommends any +changes to the guidelines as necessary +• Periodically reviews the Board's leadership structure as part of the succession planning process and recommends changes to the Board +as appropriate, and makes recommendations to the independent directors regarding the appointment of the Lead Director +• Develops and recommends to the Board guidelines, in accordance with applicable rules and regulations, to be applied when assessing the +independence of directors +• Reviews related person transactions, as defined in applicable SEC rules, and establishes policies and procedures for the review, +approval and ratification of related person transactions +• Oversees the Company's management of risks related to the Company's governance structure and related person transactions +• Annually reviews the compensation of directors for service on the Board and committees and makes recommendations to the Board +regarding such compensation +• Annually reviews and makes recommendations to the Board concerning the structure, composition and functioning of the Board and its +committees and recommends to the Board directors to serve as committee members and chairpersons +• Reviews and recommends to the Board retirement and other tenure policies for directors +• Reviews directorships in other public companies held by or offered to directors and Company employees +• Develops and recommends to the Board for its approval an annual self-evaluation process for the Board and its committees, and oversees +the evaluation process +• Engages consultants and advisors at the expense of the Company to assist the Committee as it deems necessary in the performance of its +functions +• Conducts and discusses with the Board an annual performance evaluation of the Committee, including the Committee's adherence to its +charter +Page 22 | +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +2016 PROXY STATEMENT +CODE OF BUSINESS CONDUCT AND ACCOUNTING AND FINANCE CODE OF ETHICS +The Board has adopted a Code of Business Conduct for the Company's directors, officers and employees. The Board also has adopted an +Accounting and Finance Code of Ethics ("Accounting and Finance Code") that focuses on the financial reporting process and applies to the Company's CEO, CFO and Corporate Controller. +The Company will disclose amendments to or waivers from its Code of Business Conduct affecting directors or executive officers and amendments to or waivers from its Accounting and Finance Code, on +its website at: +www.wolverineworldwide.com/investor-relations/corporate-governance/ +STOCKHOLDER COMMUNICATIONS POLICY +Stockholders and other interested parties may send correspondence to the Board, the non-employee directors as a group, a specific +Board committee or an individual director (including the Lead Director). +The +General Counsel will provide a summary and copies of all correspondence (other than solicitations for services, products or publications) as applicable at each regularly scheduled meeting. +Communications may be sent: +• By emailing through various links provided on Wolverine Worldwide's website at: www.wolverineworldwide.com/investor-relations/corporate-governance/ +• By regular mail c/o General Counsel and Secretary, Wolverine World Wide, Inc., 9341 Courtland Drive, +N.E., Rockford, Michigan 49351 +The General Counsel will alert individual directors to items which warrant a prompt response from the individual director prior to the next regularly scheduled meeting. Items +warranting a prompt response, but not addressed to a specific director, will be routed to the applicable Committee Chairperson. +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +| Page +23 +Table of Contents +2016 PROXY STATEMENT +Non-Employee Director Compensation in Fiscal Year 2015 +The +Company's non-employee director compensation philosophy is to pay compensation competitive with compensation paid by companies of similar size, in similar industries and +with whom Wolverine Worldwide competes for director candidates. The Governance Committee, with input from management and from the Compensation Committee's independent compensation consultant, reviewed +director compensation and compared it to market data, including a comparison to director compensation data for the Company's Peer Group, as defined on page 37. The following table provides +information concerning the compensation of the Company's non-employee directors for fiscal year 2015. Mr. Krueger receives compensation for his services as the Company's CEO and President, but +does not receive any additional compensation for his service as a director. +Fees Paid in Cash +Cash Amounts +Voluntarily +Deferred +Cash Amounts +Deferred +Through Annual +Equity Retainers +Fees Earned or +Paid in Cash 1 +Option +Awards 2 +Total +Boromisa +$ +97,000 ++ +- ++ +$ +70,000 += +$ +167,000 ++ +$ +50,192 += +$ +217,192 +Boswell +$ +76,000 ++ +- ++ +$ +70,000 += +$ +146,000 ++ +$ +50,192 += +$ +196,192 +Divol +$ +19,375 ++ +$ +58,125 ++ +$ +70,000 += +$ +147,500 ++ +$ +50,192 += +$ +197,692 +Gerber +$ +111,000 ++ +- ++ +$ +70,000 += +$ +181,000 ++ +$ +50,192 += +$ +231,192 +Gromek +- ++ +$ +109,000 ++ +$ +70,000 += +$ +179,000 ++ +$ +50,192 += +$ +229,192 +Kollat +$ +130,000 ++ +- ++ +$ +92,000 += +$ +222,000 ++ +$ +63,242 += +$ +285,242 +Lauderback +$ +84,000 ++ +$ +28,000 ++ +$ +70,000 += +$ +182,000 ++ +$ +50,192 += +$ +232,192 +Long +$ +94,000 ++ +- ++ +$ +70,000 += +$ +164,000 ++ +$ +50,192 += +$ +214,192 +O'Donovan +$ +70,000 ++ +- ++ +$ +70,000 += +$ +140,000 ++ +$ +50,192 += +$ +190,192 +Volkema +- ++ +$ +95,500 ++ +$ +70,000 += +$ +165,500 ++ +$ +50,192 += +$ +215,692 +1 Represents cash payments received or deferred by directors for fiscal year 2015. Directors may defer director fees and receive stock units pursuant +to the Deferred Compensation Plan (as defined below). The table shows the Fees Earned or Paid in Cash separated into Fees Paid in Cash, Cash Amounts Voluntarily Deferred, and Cash Amounts +Deferred Through Annual Equity Retainers (required as part of the compensation program for directors) that will be paid out in stock. 2 Represents the aggregate grant date fair +value of stock options granted to non-employee directors in fiscal year 2015, calculated in accordance with +Accounting Standard Codification ("ASC") Topic 718. The chart below lists the aggregate outstanding option awards held by non-employee directors at the end of fiscal year 2015. For valuation +assumptions, see the Stock-Based Compensation footnote to Wolverine Worldwide's Consolidated Financial Statements for fiscal year 2015. +Name +Option Awards Outstanding at +January 2, 2016 +(#) +Name +Option Awards Outstanding at +January 2, 2016 +(#) +Boromisa +77,701 +Kollat +76,415 +Boswell +22,790 +Lauderback +52,467 +Divol +18,057 +Long +38,697 +Gerber +52,081 +O'Donovan +56,229 +Gromek +68,847 +Volkema +33,381 +Page 24 | +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +2016 PROXY STATEMENT +The +following table shows the non-employee director compensation program for 2015: +Compensation Plan for 2015 +Component +Cash +Options +Stock Units +Newly Appointed or Elected Director +$0 +Number of options equal to $65,000, determined using the Black-Scholes method. +Annual Director Fee +$70,000 +Number of options equal to $50,000, determined using the Black-Scholes method. 1 +Number of stock units with a value equal to $70,000, determined by dividing the dollar amount by the closing market price of the Company's common stock on the grant date. 2 Units are credited to the Amended and Restated Outside Directors' +Deferred Compensation Plan. +Audit Committee Annual Fee +$15,000 +Audit Committee Chairperson Annual Fee +$20,000 +Compensation Committee Annual Fee +$12,000 +Compensation Committee Chairperson Annual Fee +$15,000 +Governance Committee Annual Fee +$12,000 +Governance Committee Chairperson Annual Fee +$15,000 +Lead Director Annual Fee +In lieu of the standard Annual Director Fee, the Lead Director was paid a Cash Retainer of $130,000. +In lieu of the standard stock option grant, the Lead Director received a quantity of stock options equal to $63,000, calculated in the same manner as the standard grant. 1 +In lieu of the standard stock unit grant, the Lead Director received stock units with a value equal to $92,000, calculated and credited in the same manner as the standard grant. 2 +1 For fiscal year 2015, Messrs. Boromisa, Gerber, Gromek, Long, O'Donovan and Volkema and Mses. Boswell, Divol and Lauderback each received 6,850 options +(8,631 for Mr. Kollat) granted in April 2015 under the Stock Incentive Plan of 2013. The exercise price of options granted is equal to the closing market price of Wolverine Worldwide's common +stock on the date of grant. 2 For fiscal year 2015, one grant was made on the first business day of each calendar quarter. For fiscal year 2015, the Company credited each of +Messrs. Boromisa, Gerber, Gromek, Long, O'Donovan and Volkema and Mses. Boswell, Divol and Lauderback with an aggregate of 2,553 stock units and credited Mr. Kollat with an aggregate of +3,356 stock units. Stock units are fully vested on the grant date and are credited under the Amended and Restated Outside Directors' Deferred Compensation Plan (described below). +The +Company also: +• Pays director expenses associated with Board and committee meetings, other Company functions, and industry functions +• Pays spouse travel expenses associated with certain meetings +• Reimburses directors for some expenses relating to director education +• Provides samples of its products that have nominal value +• Provides office space and administrative assistance to directors who visit Company locations +Deferred Compensation Plan. The Company's Amended and Restated Outside Directors' Deferred Compensation Plan (the "Deferred Compensation Plan") is a supplemental +nonqualified deferred compensation plan for non-employee directors. A separate non-employee director deferred compensation plan applies to benefits accrued under that plan before January 1, +2005. The Deferred Compensation Plan permits all non-employee directors to voluntarily defer, at their option, 25%, 50%, 75% or 100% of their director fees. The Company establishes a book account for +each non-employee director and credits the director's account with the annual equity retainer amount as described above and with a number of stock units equal to the amounts voluntarily deferred, each +divided by the closing market price of common stock on the payment/deferral date. The Company also credits director accounts with dividend equivalents on amounts previously +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +| Page +25 +Table of Contents +2016 PROXY STATEMENT +deferred +in the form of additional stock units. The amounts credited to director accounts are treated as if invested in Wolverine Worldwide common stock. +Upon +a director's termination of service, or such later date as a director selects, the Company distributes the stock units in the director's book account in shares of Wolverine World +Wide, Inc. common stock in either a single, lump-sum distribution or annual installment distributions over a period of up to 20 years (10 years under the plan for benefits accrued +before January 1, 2005). The Company converts each stock unit to one share of Wolverine Worldwide common stock. +Upon +a "change in control," the Company distributes to the director, in a single, lump-sum distribution, Wolverine World Wide, Inc. common stock in a number of shares equal to the stock units +credited to a director's book account. The Deferred Compensation Plan defines "change in control" as any of the following: +• The acquisition by any person, or by more than one person acting as a group, of more than 50% of either (i) the then +outstanding shares of common stock of Wolverine Worldwide or (ii) the total fair market value of Wolverine Worldwide +• The acquisition by any person, or more than one person acting as a group, during the 12-month period from and including the date of +the most recent acquisition, of ownership of 30% or more of the outstanding common stock of Wolverine Worldwide +• The replacement of a majority of the individuals who constitute the Board during any 12-month period by directors whose appointment or +election is not endorsed by a majority of the directors prior to the date of the appointment or election +• The acquisition, during any 12-month period ending on the date of the most recent acquisition, by any person of assets from Wolverine +Worldwide having a gross fair market value of at least 40% of the gross fair market value of all the assets of Wolverine Worldwide immediately before the acquisition +NON-EMPLOYEE DIRECTOR STOCK OWNERSHIP GUIDELINES +Each non-employee director must attain (and maintain) a minimum stock ownership level (including owned shares, the in-the-money value +of stock options, and stock units under the Directors' Deferred Compensation Plan) equal to +six times the non-employee director annual cash retainer prior to being able to gift or sell any Company stock. During 2015, all non-employee directors were in compliance with these guidelines. +Page 26 | +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +2016 PROXY STATEMENT +Securities Ownership of +Officers and Directors and +Certain Beneficial Owners +FIVE PERCENT STOCKHOLDERS +The following table sets forth information about those holders known by Wolverine Worldwide to be the beneficial owners of more than +five percent of Wolverine Worldwide's outstanding shares of common stock as of March 1, 2016: +Amount and Nature of Beneficial Ownership of Common Stock +Name and Address +of Beneficial Owner +Sole Voting +Power +Sole +Investment +Power +Shared Voting +Power +Shared +Investment +Power +Total +Beneficial +Ownership +Percent +of Class 4 +BlackRock, Inc. 1 +40 East 52 nd Street +New York, NY 10022 +9,350,178 +9,574,726 +- +- +9,574,726 +9.6% +Janus Capital Management LLC 2 +151 Detroit Street +Denver, CO 80206 +9,701,041 +9,701,041 +1,972,887 +1,972,887 +11,678,918 +11.7% +The Vanguard Group, Inc. 3 +100 Vanguard Boulevard +Malvern, PA 19355 +226,755 +7,321,438 +6,100 +226,655 +7,548,093 +7.6% +1 Based solely on information set forth in a Schedule 13G/A filed on January 27, 2016. The Schedule 13G/A indicates that +BlackRock, Inc. beneficially owns, in the aggregate, 9,574,726 shares of Wolverine Worldwide common stock. 2 Based solely on information set forth in a Schedule 13G/A +filed on February 16, 2016. The Schedule 13G/A indicates that Janus Capital +Management LLC, beneficially owns, in the aggregate, 11,678,918 shares of Wolverine Worldwide common stock. 3 Based solely on information set forth in a +Schedule 13G/A filed on February 11, 2016. The Schedule 13G/A indicates that The Vanguard +Group, Inc., beneficially owns, in the aggregate, 7,548,093 shares of Wolverine Worldwide common stock. 4 Based on 99,858,594 shares outstanding as of March 1, 2016. +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +| Page +27 +Table of Contents +2016 PROXY STATEMENT +STOCK OWNERSHIP BY MANAGEMENT AND OTHERS +The following table sets forth the number of shares of common stock beneficially owned as of March 1, 2016, by each of the +Company's directors and named executive officers and all of the Company's directors and executive officers as a group: +Amount and Nature of Beneficial Ownership of Common Stock 1 +Sole Voting +and/or +Investment +Power 2 +Shared Voting or +Investment +Power 3 +Stock +Options 4 +Total +Beneficial +Ownership 4 +Percent +of Class 5 +Jeffrey M. Boromisa +- +6,500 +77,701 +84,201 +* +Gina R. Boswell +- +- +22,790 +22,790 +* +Roxane Divol +- +- +18,057 +18,057 +* +James A. Gabel +1,279 +- +5,669 +5,669 +* +William K. Gerber +10,000 +- +52,081 +62,081 +* +Donald T. Grimes +19,313 +- +- +19,313 +* +Joseph R. Gromek +35,000 +- +68,847 +103,847 +* +Michael Jeppesen +191,885 +- +71,399 +263,284 +* +David T. Kollat +215,344 +- +76,415 +291,759 +* +Blake W. Krueger +1,670,111 +43,338 +688,880 +2,402,329 +2.36% +Brenda J. Lauderback +10,200 +- +52,467 +62,667 +* +Nicholas T. Long +- +- +38,697 +38,697 +* +Timothy J. O'Donovan +611,621 +- +56,229 +667,850 +* +Andrew Simister +1,434 +- +5,669 +5,669 +* +Michael D. Stornant +156,431 +- +110,593 +267,024 +* +Michael A. Volkema +10,000 +- +33,381 +43,381 +* +James D. Zwiers +255,774 +115,144 +239,629 +610,547 +* +All directors and executive officers as a group (17 people) +3,624,390 +164,982 +1,847,471 +5,636,843 +5.54% +* Represents beneficial ownership of less than 1%. +1 The numbers of shares stated are based on information provided by each person listed and include shares personally owned of record and shares that, under +applicable regulations, are considered to be otherwise beneficially owned. 2 These numbers include restricted shares and performance shares held, which are subject to +forfeiture if the terms of the award are not satisfied. 3 These numbers include shares over which the listed person is legally entitled to share voting or investment power by +reason of joint ownership, trust or other +contract or property right and shares held by spouses, children or other relatives over whom the listed person may have influence by reason of such relationship. 4 The numbers +represent shares that may be acquired within 60 days after March 1, 2016, by the exercise of stock options granted under Wolverine's +various stock option plans. These numbers are also included in the Total Beneficial Ownership column. 5 The table does not include the following restricted stock units (which are +converted to shares of common stock after retirement) owned by non-employee +directors as of March 1, 2016: Boromisa 54,884; Boswell 6,007; Divol 6,763; Gerber 24,382; Gromek 60,061; Kollat 72,664; Lauderback 43,669; Long 13,124; O'Donovan 17,211; and Volkema 39,331. 6 As of March 1, 2016, based on 99,858,594 shares outstanding on that date plus the number of stock options exercisable by the specified person(s) within +60 days of March 1, 2016, as indicated in the "Stock Options" column. +Page 28 | +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +2016 PROXY STATEMENT +Compensation Discussion and Analysis +The Company's Compensation Discussion and Analysis ("CD&A") provides an overview and analysis of Wolverine Worldwide's executive compensation program and +policies, the material compensation decisions made with respect to fiscal year 2015 compensation, and the material factors considered in making those decisions. The CD&A refers only to the +compensation of Wolverine Worldwide's "named executive officers" ("NEOs") unless noted otherwise. For 2015, the Company's NEOs were: +Blake W. Krueger, Chairman, Chief Executive Officer and President +James A. Gabel, Former President, Performance Group (resigned effective February 4, 2016) +Donald T. Grimes, Former Senior Vice President, Chief Financial Officer and Treasurer (resigned effective June 12, 2015) +Michael Jeppesen, President, Global Operations Group +Andrew Simister, Former President, Lifestyle Group (resigned effective December 18, 2015) +Michael D. Stornant, Senior Vice President, Chief Financial Officer and Treasurer (effective June 12, 2015) +James D. Zwiers, President, Wolverine Outdoor & Lifestyle Group +2015 BUSINESS PERFORMANCE AND OUTLOOK +2015 was a challenging year for companies in the retail, footwear, apparel and consumer soft goods industries, as well as companies +with significant international footprints. A broad-based slowing of consumer demand, destabilizing geopolitical events, the continued strengthening of the U.S. dollar, and other macroeconomic +factors combined to create a volatile consumer retail environment around the world. Our Company was not immune to these headwinds. +Notwithstanding +these conditions, the Company delivered healthy business results, including constant currency revenue growth, strong earnings performance, which has long been a strength of the +Company, and significant free cash flow, all while continuing to invest in our brands and key strategic priorities. The Company's diverse portfolio of award-winning, heritage brands, our extensive +global distribution network, and disciplined approach to execution help position us well, we believe, not just to weather turbulent economic environments, but also to perform well in them. +Particular highlights for 2015 include: +• Delivering revenue of $2.69 billion, representing underlying growth of 2.1% when adjusting for foreign exchange, the exit of +non-recurring businesses and store closures. On a reported basis, revenue declined 2.5% +• Achieving adjusted diluted earnings per share of $1.45, despite a significant negative impact from foreign exchange and higher +pension expense – reported diluted earnings per share were $1.20 +• Generating operating free cash flow of $165.5 million, enabling us to reduce net debt by over $50 million +• Returning value to stockholders through $0.24 per share in cash dividends and $93 million in share repurchases +• Investing an incremental $23.4 million in our brands and omnichannel ecommerce initiative +As +we look forward, we are excited to continue to execute against our key strategic initiatives and take advantage of the many opportunities we see ahead. Specifically, in 2016, we are focused +on: +• Amplifying product innovation to deliver dynamic products that surpass our consumers' expectations +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +| Page +29 +Table of Contents +2016 PROXY STATEMENT +• Drawing even closer to our consumers through enhanced consumer research and injecting resulting insights into every part of our +business +• Deepening consumer connections through compelling storytelling and marketing investments +• Strengthening digital, ecommerce and mobile executions to deliver amazing omnichannel experiences to consumers +• Building on our extensive global distribution footprint +• Expanding the lifestyle opportunities for our largest brands +AN ANALYSIS OF CEO COMPENSATION +Overview +Stockholder Outreach +The Board and Compensation Committee (the "Committee") believe that the Company's executive compensation program, particularly for the Chief +Executive Officer, should pay for performance. The Company's compensation program has enjoyed considerable support from stockholders through the "Say-on-Pay" vote – receiving 97%, +97%, 98%, 99%, and 99% approval for each year from 2010 to 2014. Given this strong approval, our compensation program for 2015 remained largely the same as in past years while increasing the +percentage of CEO compensation that is "at-risk," as more fully described below. Because of the extremely strong support for our compensation program from our stockholders, we did not engage in +outreach efforts, or receive any suggestions for improvement, regarding our compensation program. +CEO Compensation +Each February, the Committee recommends (and the Boards sets) target compensation for our CEO for the upcoming year after considering the latest +available information, including information provided by the Company's compensation consultant regarding executive compensation trends, total shareholder return ("TSR") performance, and median and +average compensation levels paid to other chief executive officers of companies in our comparative Peer Group (defined below), as well as information provided by management on recent Company +performance and future outlook. The Committee's goal is to set our CEO's compensation generally in-line with the anticipated market median compensation for that year. This process is inherently +imprecise as the comparative information available to the Committee is based on compensation data that often lags the year for which the pay determination is being made by one or two years. +In +February 2015, the Committee sought to increase Mr. Krueger's compensation (which had been below median-level compensation of the Peer Group for a number of years despite the Committee's +intent to set his pay at a level that would be in-line with market median for such years) to a level it anticipated would approximate the market median of compensation ultimately paid in 2015. +Rather than increasing his base salary or annual bonus opportunity, the Board increased his performance share target from 125% of base salary to 200%. In light of this increase, the Board approved +one-time performance share "bridge" grants to Mr. Krueger that will vest based on 2015 and 2015-2016 performance, respectively, and increased his target performance share award with respect +to the 2015-2017 performance period. These performance grants will only vest to the extent the Company achieves the pre-established performance goals set by the Committee, as describe in more detail +below. The bridge grants resulted in a one-time impact on his 2015 compensation as reported in the Summary Compensation Table. Such bridge grants were not repeated in 2016, and the Board did not +increase Mr. Krueger's 2016 "target" compensation from the prior year because it believed such level would likely approximate actual 2016 median-level compensation of the Peer Group. At the +time the Board determined Mr. Krueger's 2015 compensation, the Company's three-year TSR performance was above the median TSR performance of our Peer Group and was at the median at the end of +2015. +Pay at Risk +As described in more detail under "Compensation Program Overview," the Company's compensation program places a significant portion +of the compensation awarded to its NEOs generally, and the CEO in particular, "at-risk" and "variable," i.e., contingent upon the +Page 30 | +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +2016 PROXY STATEMENT +attainment +of various pre-established short and long-term financial goals, and for the performance of the Company's stock price. An example of the Committee's philosophy and compensation program in +practice is the decision to effectuate Mr. Krueger's target compensation increase by adjusting his performance share target (including making the bridge grants), rather than just increasing +fixed compensation. Such an at-risk pay element is subject to both the attainment of financial goals and the performance of the Company's stock price. +The +following graphic shows the percentage of "at-risk" and "variable" target compensation of our CEO and the average of our other currently-employed NEOs: +Given +the significant weight the Company's executive compensation program places on at-risk and variable compensation, the compensation realized by our CEO and NEOs can be significantly affected, +both positively and negatively, by performance against the various operational and financial performance metrics pre-established by the Committee and by the performance of the Company's stock price. +The Board and Committee believe such a compensation program aligns the interests of the CEO and other NEOs with the interests of our stockholders. +Pay for Performance +Because the vast majority of our CEO's pay is at-risk or variable and is dependent on actual Company and stock performance, the +Committee finds it useful to look at the estimated value of CEO pay at various points in time. Rather than focusing exclusively on the compensation values required to be reported in the Summary +Compensation Table, some of which only reflect, as of the date of grant, the best estimate of future value based on then-anticipated Company performance and then-current Company stock price, the +Committee also considers updated valuations based on more recent stock prices and performance assumptions. These updated performance affected values reflect a more current snapshot of CEO +compensation as of a particular date and take into account actual Company and stock price performance. +As +expected, with a pay-for-performance structure like ours that so heavily weights at-risk and variable compensation our CEO's "performance affected" (as defined below) compensation was +significantly negatively affected in 2015 by less-than-desired Company performance and a declining TSR. The following graphic shows (i) "performance affected" compensation for our CEO as of +the end of fiscal 2015 (ii) compensation as reflected in the Summary Compensation Table ("SCT"), and (iii) the Company's TSR over the past three fiscal years. +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +| Page +31 +Table of Contents +2016 PROXY STATEMENT +• +The darker-shaded portions of the graphic provide, the Committee believes, a +more normalized view of Mr. Krueger's compensation +• +The lighter-shaded portion of the 2014 SCT value represents $5.5 million change in pension value, driven in part by changes in actuarial assumptions +• +The lighter-shaded portions of the 2015 SCT and performance affected values represent the +$2.6 million and $1.5 million values, respectively, of the bridge grants +1. "Performance affected" compensation reflects: (a) base salary and annual bonus earned in any given year, consistent with the amounts reflected in the Summary Compensation Table; +(b) performance shares granted in any given year, re-valued using both the 2015 fiscal year-end stock price and updated performance assumptions; (c) service-based restricted shares granted in any given year, re-valued using the 2015 fiscal +year-end stock price; (d) service-based options granted in any given year, re-valued using an updated Black-Scholes valuation based on the 2015 fiscal year-end stock price and other updated assumptions. +The following graphic shows the impact of the Company's 2015 business and stock price performance on Mr. Krueger's performance affected compensation as of the end of fiscal 2015 +compared to his SCT compensation and target compensation for that year and his target compensation for 2016, as well as providing a breakdown of each component: +• +Each at-risk and variable component +of Mr. Krueger's performance +affected pay declined from +target values in 2015, +demonstrating the effect +of the Company's +pay-for-performance philosophy. +• +Mr. Krueger's 2016 target +compensation was not +increased from 2015. +Page 32 | +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +2016 PROXY STATEMENT +As +shown in the above graphic, because the Company's 2015 business and financial performance fell short of initial expectations entering the year, and, given the decline in the Company's stock price +during 2015, and the challenging performance targets set by the Committee, the value of Mr. Krueger's at-risk and variable compensation, as measured at the end of 2015, was materially lower +than his target compensation and compensation reported in the Summary Compensation Table, including a voluntary reduction of Mr. Krueger's annual cash bonus to a level that approximated only +one-third of his target bonus. The Board and Committee feel such +a result was appropriate for 2015 and that its pay-for-performance compensation program aligns stockholders' interests with management's and appropriately incentivizes management for superior +performance in 2016 and beyond. +COMPENSATION PROGRAM OVERVIEW +Compensation Practices +What we do +What we do not do +✓ +Vast majority of pay is "at-risk" or "variable", i.e., performance-based or equity-based or both +✓ +Stringent share ownership requirements +✓ +Prohibit hedging, pledging, and short sales of Company stock +✓ +Broad-based clawback policy +✓ +Significant vesting horizon for equity grants +✗ +No dividends or dividend equivalents on options or unearned performance shares +✗ +No repricing or replacing of underwater stock options +✗ +No overlapping metrics for different compensation programs +✗ +No excessive or unnecessary perquisites +Compensation Philosophy and Objectives +The Company's compensation philosophy is to provide executives with an overall compensation package that provides a competitive +salary, but that is heavily weighted towards at-risk and variable compensation in order to incentivize superior business, stock price and financial performance. The Committee oversees the Company's +executive compensation program. The Committee reviews and approves NEO compensation, other than the CEO's compensation, which is recommended by the Committee and approved by the Board's independent +directors. The NEO compensation program has four primary objectives: +• Attract and retain talented NEOs who will lead Wolverine Worldwide and drive for superior business and financial performance +• Provide incentives for achieving specific, pre-established near-term individual, business-unit and corporate goals and reward the +attainment of those goals +• Provide incentives for achieving pre-established longer-term corporate financial goals and reward the attainment of those goals +• Align the interests of NEOs with those of the stockholders through incentives based on increasing stockholder value +The +Company's executive compensation program utilizes fixed compensation (base salaries) while putting more emphasis on at-risk and variable compensation (annual bonuses and long-term service-based +incentives and performance incentives); rewards annual performance while maintaining emphasis on longer-term objectives; and blends cash and non-cash compensation components. The Committee considers +qualitative and quantitative factors when setting the amount and mix of NEO compensation. Each NEO's compensation mix and cash-to-equity ratio depends on his responsibilities, experience, skills, and +potential to affect Wolverine Worldwide's overall performance. The Committee and Board believe the CEO has the broadest scope of responsibilities and typically approve higher compensation for the CEO +(with a higher proportion of at-risk and variable compensation) than for any other NEO. The Committee and Board believe this executive compensation philosophy is designed to successfully generate +superior performance over the long term. +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +| Page +33 +Table of Contents +2016 PROXY STATEMENT +Compensation Program Summary +The Company's executive compensation program consists of four key elements, as shown in the accompanying table. First, each NEO receives a base salary. Second, +each NEO is eligible to receive a cash-based annual bonus. The annual bonus has two parts: (i) a bonus based on performance +EXECUTIVE COMPENSATION PROGRAM +Annual Bonus +Long-Term Incentive +Compensation +Benefits +Base +Salary +Performance +Bonus +Individual +Bonus +Long-Term +Incentive +Bonus +Equity +Retirement and +Welfare Plans +Perquisites +measured against Company or business unit performance criteria (the "performance bonus"), and (ii) a bonus based on performance measured against +individual performance criteria (the "individual bonus"). Third, each NEO is eligible to receive Long-Term Incentive Compensation. The Long-Term Incentive Compensation has two parts: (i) a +long-term incentive award paid in Company shares based on performance against pre-established Company performance criteria and stock price performance over a three-year period (the "3-year bonus"), +and (ii) equity in the form of service-based restricted stock awards and service-based stock option grants. Fourth, NEOs hired before January 1, 2013 may participate in the Company's +defined-benefit plan (subject to certain vesting criteria) and, at the discretion of the Committee, any NEO may participate in a supplemental executive retirement plan. In addition, each NEO may +receive assistance with tax and estate planning, a matching contribution to his 401(k) account and other perquisites as discussed below under the "Perquisites" heading. The executive compensation +program is set out in more detail in the remainder of this CD&A. +Page 34 | +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +2016 PROXY STATEMENT +Purposes of Compensation Program Elements +Pay Element +What the Pay Element Rewards +Purpose of the Pay Element +Base Salary +• +Scope of core responsibilities, years of +experience with the Company (or experience in similar positions at other companies), skills, knowledge, and potential to affect the Company's overall performance +• +Provide a regular and stable source of income +to NEOs +Annual Incentive Compensation +• +Achieving specific corporate business and/or +divisional objectives over which the NEO has reasonable control +• +Achieving specific personal objectives +• +Focus NEOs on specific annual goals that +contribute to the Company's short- and long-term success +• +Incentivizes NEOs to achieve on important annual corporate, business level and individual performance metrics, with the total annual opportunity heavily weighted toward achievement of corporate +and business level goals +Long Term Incentive Compensation +• +Achieving long-term corporate business +objectives +• +Driving long-term stockholder +value +• +Continued long-term employment with the +Company +• +More closely align NEOs' interests with +stockholders' interests +• +Reward NEOs for +building stockholder value +• +Encourage +long-term investment in the Company by NEOs +• +Retain NEOs +Retirement and Welfare Benefits +• +Achieving long-term corporate business +objectives +• +Continued long-term employment +with the Company +• +In the case of the Supplemental Executive +Retirement Plan, provide retirement benefits that certain NEO participants would have received under the broad-based plan in the absence of the IRS limits +• +Provide retirement security +• +Encourage long-term commitment to the Company by NEOs and assist Wolverine Worldwide in +retaining NEOs +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +| Page +35 +2016 PROXY STATEMENT +Table of Contents +Compensation Committee Role +The Committee is responsible for overseeing the development and administration of the Company's compensation and benefits policies +and programs generally. More specifically, the Committee sets the compensation for all NEOs (other than the CEO) and for the CEO, formulates the compensation recommendations to the independent +directors for their approval. In so doing, the Committee sets the structure of the Company's executive compensation program, including: +• Reviewing and approving the Company's incentive goals and objectives relevant to compensation +• Evaluating individual performance results in light of these goals and objectives +• Evaluating the competitiveness of each NEO's total compensation package +• Approving CEO individual bonus personal objectives +• Approving (or, in the case of the CEO, recommending to the independent directors of the Board) any changes to the NEO's total +compensation package, including, but not limited to, base salary, annual bonus, and long-term incentive compensation +When +making compensation recommendations or decisions, the Committee considers the CEO's assessment of the performance of each NEO, other than himself; the performance of the individual and the +individual's respective business unit or function; the scope of the individual's responsibilities, years of experience with the Company (or in similar positions with other companies), skills and +knowledge; market data; market and economic conditions; Company performance; retention considerations; and Wolverine Worldwide's compensation philosophy (collectively, the "compensation factors"). The +Committee considers these compensation factors subjectively, and no single factor or combination of factors is determinative. Following its review and discussion, the Committee approves compensation +for all NEOs, except the CEO. The Committee recommends compensation for the CEO to the independent directors of the Board, and those independent directors approve the CEO's compensation. The Lead +Director and Compensation Committee Chair meet with the CEO at the end of the year to evaluate his performance compared to his personal objectives set at the beginning of the year. The Committee is +supported in its work by the Senior Vice President of Global Human Resources, the General Counsel, and an independent executive compensation consultant as described below (whose compensation is +determined by the non-employee directors of the Board). +CEO Role +Within the framework of the Company's executive compensation program, the CEO recommends the level of base salary, annual bonus, +long-term incentive compensation, equity awards and other compensation components for his direct reports, including the other NEOs. The CEO bases his recommendation upon his assessment of the +compensation factors applicable to each NEO. The CEO considers these compensation factors subjectively and no single factor is determinative. The Committee discusses these recommendations with the CEO +prior to setting the compensation for each NEO, other than the CEO. The Committee, however, ultimately determines all compensation for NEOs other than the CEO. +Compensation Consultant Role +The Committee has retained Willis Towers Watson ("Towers Watson") as its executive compensation consultant. Towers Watson reports +directly to the Committee, and the Committee determines the scope of its engagement and may replace it or hire additional consultants at any time. The Committee has evaluated Towers Watson's +independence under the rules established by the NYSE and has determined that Towers Watson is "independent" as defined by NYSE rules. In addition, the Committee has evaluated whether the engagement of +Towers Watson raises any conflicts of interest and has determined that no such conflicts of interest exist. +At +the Committee's invitation, a representative of Towers Watson generally attends Committee meetings and also communicates with the Committee Chair and management between meetings. However, the +Committee makes all decisions regarding NEO compensation. Towers Watson provides various executive compensation services to the Committee pursuant to a consulting agreement with the Committee. +Generally, these services include advising the Committee on the principal aspects of the Company's executive compensation program, +Page 36 | +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +evolving +industry practices, and providing market information and analysis regarding the competitiveness of the Company's program design. During 2015, Towers Watson performed the following specific +services: +• Advised the Committee on management proposals, as requested +• Attended Committee meetings, as requested +• Reviewed the Company's peer group and advised the Committee on the composition of the peer group +• Reviewed survey data for competitive comparisons +• Provided market data and recommendations on CEO and other NEO compensation +• Advised the Committee on market trends related to compensation policies and programs +• Proactively advised the Committee on best-practice approaches for governance of executive compensation +• Reviewed the CD&A and other executive compensation-related disclosures included in the Company's proxy statement +The +total fees the Company paid to Towers Watson for services to the Committee in 2015 were $212,927. Towers Watson also was engaged by Wolverine Worldwide in 2015 to perform actuarial services, +pension plan consulting and risk and financial services that are not part of the executive compensation services provided to the Committee. These services were performed on an interim and annual basis +for financial reporting purposes. The total annual expense for this work was approximately $450,122. The total fees the Company paid to Towers Watson ($663,049) represent approximately two one +hundredths of one percent of Towers Watson's revenue for its 2015 fiscal year ($3.6 billion). +Executive Compensation Overview for 2015 +Peer Group +The Committee, with input from Towers Watson, established the below peer group for use in setting 2015 NEO compensation (the "Peer +Group"). In determining the Peer Group, the Committee generally considers each potential peer company's industry, channels of distribution revenue and market capitalization. The Company also considers +the typicality of a company's pay practices, excluding companies whose chief executive may not receive market compensation because of a founder relationship, family ownership position, or other +similar relationships. +The +following companies comprise the Peer Group, which is consistent with last year: +Aéropostale, Inc. +Carter's, Inc. +DSW Inc. +PVH Corp. +American Eagle Outfitters Inc. +Chico's FAS, Inc. +Foot Locker, Inc. +Williams-Sonoma, Inc. +ANN Inc.* +Coach, Inc. +Genesco Inc. +Ascena Retail Group, Inc. +Deckers Outdoor Corporation +Guess?, Inc. +Caleres, Inc. +Dick's Sporting Goods, Inc. +Hanesbrands Inc. +* ANN Inc. was removed from the peer group in August 2015 following its acquisition by Ascena Retail Group, Inc. +Competitive Data Use +The Committee uses market surveys and Peer Group information provided by Towers Watson as market reference points. The Committee also +considers information the Company learns through recruiting NEOs and the experience levels and responsibilities of NEOs prior to joining the Company as reference points in setting NEO compensation. +As +part of its competitive data review in connection with determining 2015 compensation, the Committee considered information presented by Towers Watson based on publicly-disclosed Peer Group +information and on three published compensation surveys: (1) 2015 Towers Watson Data Services Survey Report on Top Management Compensation – Retail and Wholesale Trade +Industry Cut, (2) 2015 Towers Watson Compensation Database Executive Database – Retail/Wholesale Executive Database, and (3) 2015 US Mercer Benchmark Database, +Executive – General, Retail Industry Cut. +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +| Page +37 +Table of Contents +2015 COMPENSATION +EXECUTIVE COMPENSATION PROGRAM +Base Salary +Annual Bonus +Long-Term Incentive +Compensation +Benefits +Base +Salary +Performance +Bonus +Individual +Bonus +Long-Term +Incentive +Award +Equity +Retirement +and Welfare +Plans +Perquisites +As +part of approving an NEO's base salary, the Committee considers the compensation factors described above. The Committee considers these compensation factors subjectively, and no single factor or +combination of factors was determinative for any NEO. Based on this, the Committee approved the 2015 base salaries for the NEOs as noted in the table, other than Mr. Stornant who was promoted +to CFO effective June 12, 2015. The Committee set his base salary following his promotion based on Mr. Stornant's experience with the Company, new responsibilities, and market data. +Name +2015 Base Salary +2014 Base Salary +Krueger +$1,150,000 +$1,150,000 +Gabel +$530,000 +$510,000 +Grimes +$610,000 +$580,000 +Jeppesen +$530,000 +$510,000 +Simister +$610,000 +$580,000 +Stornant +$520,000 +$250,000 +Zwiers +$628,000 +$608,000 +EXECUTIVE COMPENSATION PROGRAM +Annual Bonus +Annual Bonus +Long-Term Incentive +Compensation +Benefits +Base +Salary +Performance +Bonus +Individual +Bonus +Long-Term +Incentive +Award +Equity +Retirement +and Welfare +Plans +Perquisites +In +2015, each NEO had the opportunity to earn annual cash incentive compensation ("annual bonus"), consisting of two parts: (i) a bonus based on performance measured against Company or business +unit performance criteria established by the Committee at the beginning of the fiscal year ("performance bonus") under the Company's Annual Bonus Plan, and (ii) an individual performance bonus +measured against individual performance criteria ("individual bonus") under the Company's Individual Performance Bonus Plan. Each NEO's payout was determined by comparing his performance against +specific criteria set at the beginning of 2015, with 85% of each NEO's payout relating to the performance bonus and 15% relating to the individual bonus. For the performance bonus, each NEO's payout +was determined by comparing his performance against four performance levels set for each pre-set criterion: threshold (50% payout), target (100% payout), goal (150% payout) and stretch (200% payout). +For the individual bonus, each NEO's payout was determined by comparing his performance against each pre-set criterion and scoring it on a scale of 0% to 100%. As shown in further detail below under +the heading " Annual Bonus – Individual Bonus ," individual bonus payouts can range from 0% to 200% depending on the NEO's cumulative +weighted performance score on his individual performance objectives. +The +Committee set a percentage of each NEO's 2015 base salary as his annual bonus target percentage (the "Target Bonus Percentage"). The Target Bonus Percentage represents the percentage of each NEO's +salary he could earn as annual incentive compensation at a "target" performance level (100% payout) for each of the performance bonus and individual bonus. As part of approving an NEO's 2015 Target +Bonus Percentage, the Committee considered the compensation factors described above. The Committee considers these compensation factors subjectively, and no single factor or combination of factors was +determinative for any NEO. Generally, the Committee sets higher Target Bonus Percentages for individuals with greater influence on business strategy, profits or sales. This puts a larger percentage of +an NEO's total potential cash compensation "at-risk." The Target Bonus Percentage for each NEO for 2015 remained unchanged from 2014, other than for Mr. Stornant, whose Target Bonus Percentage +was increased in connection with his promotion. +Page 38 | +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +Consistent +with the 2014 bonus opportunity, each NEO's total annual bonus opportunity for 2015 ranged from 0% to 200% of his Target Bonus Percentage. The accompanying table shows the total aggregate +annual incentive compensation payout earned by each NEO for 2015, as well as the portion of that aggregate number that is attributable to the performance bonus and individual bonus. +Annual Bonus Compensation Component +as a Percentage of Target Bonus Performance +Performance Bonus Percentage By +Company or Business unit as a Percentage of +Target Bonus Percentage +2015 +Target Percentage +2014 +Target Percentage +Total Individual +Bonus as a +Percentage of Target +Percentage +Company 1 +International Group 2 +Lifestyle Group 3 +Performance Group 4 +Sourcing 5 +Owned Manufacturing 5 +Leathers 5 +2015 Performance +Bonus +2015 Individual Bonus +Total 2015 Actual +Annual Bonus +Compensation +Krueger +125% +125% +15% +85% +$417,441 +$107,813 +$525,254 +Gabel +50% +50% +15% +20% +65% +$190,691 +$39,490 +$230,181 +Grimes +60% +60% +15% +85% +$0 +7 +$0 +7 +$0 +7 +Jeppesen +55% +55% +15% +10% +30% +25% +20% +$364,870 +$65,159 +$430,029 +Simister +50% +50% +15% +20% +65% +$0 +7 +$0 +7 +$0 +7 +Stornant 6 +50% +30% +15% +85% +$52,700 +$40,833 +$193,533 +8 +Zwiers +55% +55% +15% +20% +65% +$313,486 +$77,287 +$390,773 +1 Based on constant-currency revenue and pretax earnings performance criteria for the Company, as described below under " Annual +Bonus – Performance Bonus ." 2 Based on constant-currency revenue and pretax earnings as the performance criteria for the International +Group. 3 Based on constant-currency revenue and pretax earnings as the performance criteria for the Lifestyle +Group. +4 Based on constant-currency revenue and pretax earnings as the performance criteria for the Performance +Group. 5 Based on revenue and pre-tax earnings for Leathers and various key performance indicators for Sourcing and Owned +Manufacturing. 6 Mr. Stornant was promoted to Senior Vice President, CFO and Treasurer on June 12, 2015. 7 Messrs. Grimes and Simister were not eligible for an annual bonus because they left the Company in +2015. 8 Mr. Stornant's total annual bonus includes a discretionary $100,000 bonus paid to Mr. Stornant for driving profit performance in a difficult +economic environment and leading global strategic and financial initiatives. +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +| Page +39 +Table of Contents +Annual Bonus – Performance Bonus +In connection with setting the Target Bonus Percentages, the Committee established the performance criteria for the Company and +business units under the Annual Bonus Plan. Each NEO's performance bonus was based on performance criteria for the Company, or for the Company and a business unit based on his position within the +Company. The Committee set fiscal year 2015 constant-currency revenue (weighted 35% of the Company component) and constant-currency pretax earnings (weighted 65%) as the Company's performance +criteria. The Committee selected these criteria because it believed a strong correlation exists between performance on these financial measures and increases in stockholder value and excluded the +impact of foreign exchange given the anticipation of extraordinary fluctuations in currency values during 2015 at the time the Committee set the criteria. The criteria were set on a +"constant-currency" basis by: (1) translating foreign subsidiary revenue and pretax earnings to U.S. dollars using the rate the Company used for its 2015 operating plan; (2) adjusting +foreign subsidiary cost of U.S. dollar inventory purchases using the Company's 2015 operating plan rate; and (3) for markets with sizeable third-party distributor operations, translating +royalty income using rates assumed at the beginning of the period. As shown in the accompanying table, the Committee also set four performance levels for each criterion: threshold (50% payout), target +(100% payout), goal (150% payout) and stretch (200% payout). The Committee set the revenue and pretax earnings goals for these performance levels +(shown in the accompanying table) following discussion with management and a review of the Company's operating plan, historical performance, and economic conditions facing the Company. +Company +Performance Level +in millions +(% of Target Payout) 1 +Revenue 2,3 +Pretax Earnings 2,3 +Threshold (50%) +$2,708 +$200.8 +Target (100%) +$2,792 +$217.8 +Goal (150%) +$2,876 +$234.8 +Stretch (200%) +$2,959 +$251.8 +1 The maximum payout an NEO can receive is 200% of the payment earned at his Target Bonus Percentage, even if performance is above Stretch, and an NEO would +receive 0% of his Target Bonus Percentage if performance is below Threshold. 2 Calculated on a constant-currency basis using the Company's 2015 operating plan-rate assumptions. +Does not include the effect of acquisitions, divestitures, +accounting changes, restructuring, or other special charges or extraordinary items excluded by the Compensation Committee. Pretax earnings for 2015 exclude restructuring and debt extinguishment costs. 3 Revenue targets were higher in 2015 than in 2014 despite very challenging macroeconomic conditions and significantly negative foreign exchange assumptions +compared to 2014. 2015 revenue performance fell below threshold, resulting in no bonus payout tied to revenue. 2015 pretax earnings targets were set slightly below 2014 targets due to challenging +macroeconomic conditions, significantly negative foreign exchange assumptions compared to 2014 and a planned increase in marketing spending in 2015 intended to drive future revenue +growth – performance on this measure was at approximately threshold level. Using the same foreign exchange assumptions in 2015 as used in 2014, the 2015 pretax earnings targets +would have been higher than 2014 targets. +Messrs. Krueger, +Stornant, and Mr. Grimes (prior to his departure), had significant influence on the Company's overall business performance and, accordingly, their respective performance +bonus opportunities (85% of total annual bonus opportunity) are based on the Company performance criteria only. Messrs. Gabel (prior to his departure), Jeppesen, Simister (prior to his +departure) and Zwiers, were directly responsible for specific business units and exert a significant influence on those business units in particular. Accordingly, for each of these NEOs, only 20% (10% +for Mr. Jeppesen) of their overall annual bonus opportunity was based on the Company's performance. The remaining portions of the performance bonus portion of the annual bonus opportunities for +each of these NEOs were based on the performance of their respective business units, expressed as a percentage of overall annual bonus opportunity: Mr. Gabel (65% Performance Group); +Mr. Jeppesen (75% aggregate between Sourcing, Owned Manufacturing and Leathers); Mr. Simister (65% Lifestyle Group); and Mr. Zwiers (65% International Group). The remaining 15% of +each NEOs annual bonus opportunity was determined by each's individual bonus criteria, which are approved by the CEO (and, in the case of the CEO, the Committee) and described on pages 41-42. +For +each business unit, the Committee set the goals at substantially similar levels of difficulty as the goals for the Company and with a similar degree of difficulty as in prior years. The +accompanying table shows historical weighted performance levels achieved by the business units using these performance criteria for the years for which a meaningful comparison can be made. +Historical Group Performance +2015 +2014 +2013 +2012 +2011 +International Group +Between target and goal +Between goal and stretch +Between threshold and target +Below threshold +Above stretch +Lifestyle Group +Below threshold +Below threshold +Between threshold and target +N/A +N/A +Performance Group +Between target and goal +Between target and goal +Between target and goal +Below threshold +Above stretch +Sourcing/Owned Manufacturing/Leathers 1 +Between goal and stretch +Between target and goal +Between target and goal +Between threshold and target +Between threshold and target +1 Weighted consistent with Mr. Jeppesen's bonus opportunities. +Page 40 | +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +2016 PROXY STATEMENT +In +early 2016, the Committee certified actual 2015 performance compared to the performance levels for the Company and business unit criteria. The Company's fiscal year 2015 constant-currency revenue +was approximately $2.69 billion, which was below threshold level. The Company's adjusted constant-currency pretax earnings for fiscal year 2015 were $201.7 million, which was between +threshold and target level. The weighted average results for the applicable performance criterion are shown in the accompanying table: +2015 Performance +Overall Weighted +Payout by Group +International Group +Between target and goal +130% +Lifestyle Group +Below threshold +0% +Performance Group +Between target +and goal +101% +Sourcing/Owned Manufacturing/Leathers +Between goal +and stretch +163% +Wolverine Worldwide +Above threshold on pretax earnings; below threshold on revenue +34% +For +2015, the Company paid the NEOs the following amounts relating to the performance bonus. +Name +Performance Bonus Opportunity +(as a % of an NEO's Target Percentage) +Performance Bonus +Percentage Earned 1 +Performance Bonus Paid 1,2 +Krueger +0 - 200% +34% +$417,441 +Gabel +0 - 200% +85% +$190,691 +Grimes 3 +0 - 200% +0% +$0 +Jeppesen +0 - 200% +148% +$364,870 +Simister 3 +0 - 200% +0% +$0 +Stornant +0 - 200% +34% +$52,700 +Zwiers +0 - 200% +107% +$313,486 +1 Percentages earned and bonuses paid vary due to the relative performance of various business units versus overall corporate performance. 2 Not including individual bonus or any other bonus paid. 3 +Messrs. Grimes and Simister did not receive a Performance Bonus because they left the Company in 2015. +Annual Bonus – Individual Bonus +At the same time Target Bonus Percentages are set, the CEO approves measureable personal objectives for each NEO's individual bonus, other than for himself. The +CEO recommends, and the Committee approves, the CEO's personal objectives. Such measureable personal objectives may include elements such as executing strategies supporting Wolverine Worldwide's +vision, developing employees, growing new business initiatives and driving operational excellence. Each NEO has personal objectives specific to him. Performance is evaluated by the CEO (and, in the +case of the CEO, by the Committee and other independent directors) subjectively, generally based on qualitative and quantitative factors. +NEO +2015 Personal Objectives +Krueger +People, growth, innovation and cash flow +Gabel +Growth, innovation, people and organization, international business and strategy +Grimes +Growth, innovation, people and strategy +Jeppesen +Growth, innovation, people and strategy +Simister +Growth, innovation, people and strategy +Stornant +Growth, innovation, people and strategy +Zwiers +Growth, innovation, people and strategy +Each +personal objective is given a weight from 0% to 100%. The sum of the weights for each NEO's personal objectives equals 100%. An NEO's cumulative weighted personal objectives score is calculated +by multiplying the score for each objective by its weight, and summing those results for all of the NEO's personal objectives. The individual bonus payout level ranges from 0% to 200%, determined by +the cumulative weighted personal objectives score. +Personal Objectives Score +2015 Payout Level +95-100% +200% +90-95% +175% +80-90% +150% +70-80% +100% +60-70% +50% +Less than 60% +0% +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +| Page +41 +Table of Contents +2016 PROXY STATEMENT +The +CEO determined the 2015 cumulative weighted personal objectives scores and payout levels for each of the NEOs other than himself. The Committee and the other independent directors of the Board met +with the CEO at the end of the year to evaluate his performance compared to his personal objectives. The Committee determined the cumulative weighted personal objectives score for the CEO and +recommended to the independent directors of the Board the CEO's payout level. The individual bonus payout for each NEO, as shown in the accompanying table, was determined by multiplying his cumulative +weighted performance score payout level by 15 percent (representing the percentage of the individual bonus to the total annual bonus opportunity) of his Target Bonus Percentage. The Committee +also approved a $100,000 discretionary bonus to Mr. Stornant for +driving profit performance in 2015 – a difficult economic environment – and leading global strategic and financial initiatives. +Name +2015 Individual Bonus +Opportunity +(as a % of an NEO's Target +Percentage) +Personal Objectives +Score +2015 +Individual Bonus +Percentage Awarded +2015 +Individual +Bonus Paid +Krueger +0 – 200% +70% +50% +$107,813 +Gabel +0 – 200% +75.3% +100% +$39,490 +Grimes 1 +0 – 200% +0% +0% +$0 +Jeppesen +0 – 200% +86.6% +150% +$65,159 +Simister 1 +0 – 200% +0% +0% +$0 +Stornant +0 – 200% +80.25% +150% +$40,833 +Zwiers +0 – 200% +80.25% +150% +$77,287 +1 Messrs. Grimes and Simister did not receive an individual bonus because they left the Company in 2015. +EXECUTIVE COMPENSATION PROGRAM +Long- +Term Incentive +Compensation +Annual Bonus +Long-Term Incentive +Compensation +Benefits +Base +Salary +Performance +Bonus +Individual +Bonus +Long-Term +Incentive +Award +Equity +Retirement +and Welfare +Plans +Perquisites +In +2015, each NEO had the opportunity to earn long-term incentive compensation, consisting of two parts: (1) performance shares under the Company's stock incentive plan and (2) equity +awards in the form of stock option grants and restricted stock awards, in each case subject to service vesting conditions, under the stock incentive plan. The Committee has chosen to provide long-term +incentives in these forms because they incentivize and motivate different behaviors. Performance shares reward the achievement of key business criteria, as described below. Stock options are +performance-based because no value is created unless the value of our common stock appreciates after grant and they encourage employee retention through the use of a time-based vesting schedule. +Time-based restricted stock encourages employee retention by providing some level of value to executives who remain employed for three years after grant. Restricted stock also supports an ownership +culture and thereby encourages our executives to take actions that are best for the Company's long-term success. +Long-Term Incentive Compensation – Performance Share +Each NEO had the opportunity to earn long-term incentive compensation in the form of performance shares issued under the Company's +stock incentive plan based on performance criteria covering three-year periods. The Committee established two performance criteria for the performance period 2013-2015 – a period +for which performance shares vested for 2015 compensation: (1) fully diluted earnings per share ("EPS"), and (2) business value added ("BVA"), each as adjusted to account for and exclude +the effects of acquisitions, divestitures, accounting changes, restructuring, or other similar special charges or extraordinary items excluded by the Committee. BVA is calculated by starting with +operating income determined in accordance with U.S. generally accepted accounting principles ("GAAP"), and then reducing operating income by (1) an amount for income taxes where the effective +tax rate used to calculate the income tax amount is determined in accordance with GAAP (adjusted as described above), and (2) a capital charge equal to a 2-point average of "net operating +assets" during the fiscal year (with "net operating assets" defined as the net of trade receivables (net of reserves), inventory (net of reserves), other current assets, property, plant and equipment, +trade payables and accrued liabilities) multiplied by 10%. +The +Committee believes that BVA is useful for determining incentive compensation because it ties the income statement (profit delivery) to the balance sheet (effective asset utilization) and does not +focus on one to the exclusion of the other. The Committee further believes that focusing NEOs' interests on increasing BVA aligns +their interests more closely with stockholder interests. The Committee believes EPS is a key metric that plays an important role in driving the Company's stock price and that it further aligns the +interests of the NEOs with other +Page 42 | +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +2016 PROXY STATEMENT +stockholders. +The use of both EPS and BVA balances the NEOs' focus on near-term profitability with longer-term stockholder value. The Committee weighted EPS 65% and BVA 35% when determining the +overall performance level. +Performance Share Award Performance and Vesting +The following table lists performance levels set by the Committee for performance share awards granted for the 2013-2015 performance period the +vesting for which occurred on February 10, 2016 following the Committee's certification of 2015 financial results. As more fully described in the "Performance Share Award" section below, the +performance share bridge grant to Mr. Krueger for the 2015 performance period was subject to BVA and EPS performance targets set at levels consistent with the EPS and BVA levels that remained +outstanding under his original performance share grant for the 2013-2015 period, as well as an additional requirement that the Company's fiscal 2015 revenue exceed $2.5 billion. +Performance level +(Percentage of Target Payout) +Cumulative EPS for the 2013-2015 period 1 +Cumulative BVA for the 2013-2015 period 1 +(in millions) +Threshold (50%) +$3.76 +$283.8 +Target (100%) +$4.27 +$330.9 +Goal (150%) +$4.96 +$378.9 +Stretch (200%) +$5.45 +$424.6 +1 Adjusted as described above. +In +February 2016, the Committee evaluated the Company's performance for the 2013-2015 performance period (and, for Mr. Krueger, the 2015 performance period) against these criteria and certified +that the Company's performance on both the EPS and BVA criteria noted above fell between target and goal performance levels for both periods (and, for Mr. Krueger, that the Company's fiscal +2015 revenue exceeded $2.5 billion). The EPS attainment (117%) had previously been weighted 65%, and the BVA attainment (124%) had previously been weighted 35%, resulting in a weighted average +attainment of 119%, and the vesting of the number of shares shown for each NEO in the accompanying table under the 3-year bonus for the 2013-2015 performance period (and also, for Mr. Krueger, +the 2015 performance period). In calculating the number of shares that vest, the Company uses the stock price on the date of the grant, which results in the NEOs bearing the risk of stock price +performance during the performance period. Because Mr. Stornant was not CFO in 2013 when performance shares were granted for the 2013-2015 performance period, he was granted fewer shares at the +start of the 2013-2015 period than would have vested at a weighted average attainment of the EPS and BVA performance goals of 119%. As a result, 100% of Mr. Stornant's shares for the 2013-2015 +period vested, and he received a discretionary cash bonus of $166,649 – equal to the difference between the value (including the value of dividends for the performance period) of +the number of shares that would have vested at a 119% performance level and the value (including the value of dividends for the performance period) of the number of shares actually vesting. Had +Mr. Stornant been CFO in 2013, when performance shares were granted for the 2013-2015 performance period, he would have received a larger award with sufficient shares to vest in accordance with +performance. +Name +Shares Vesting +(#) +Krueger +127,538 +Gabel 1 +0 +Grimes 1 +0 +Jeppesen +16,165 +Simister 1 +0 +Stornant +6,188 +Zwiers +19,153 +1 All of Messrs. Gabel's, Grimes' and Simister's performance shares were forfeited because they left the Company prior to vesting. +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +| Page +43 +Table of Contents +2016 PROXY STATEMENT +Performance Share Award +The Committee evaluated each NEO's long-term incentive target payout opportunity expressed as a percentage of base salary, similar to the annual bonus. The +Committee considered the compensation factors noted above in determining 3-year target bonus percentages. The Committee considers these compensation factors subjectively, and no single factor or +combination of factors was determinative for any NEO. The Committee decided to set the NEOs' Target Percentage for the 2015-2017 3-year bonus opportunity, as set out in the accompanying table. +As +discussed above in " An Analysis of CEO Compensation – Overview " on page 30, in February 2015, the Committee reviewed +Mr. Krueger's compensation for recent past years against market compensation data provided by Towers Watson, which showed that Mr. Krueger's compensation had been below market median. To +address this, rather than making any changes to his base salary or annual bonus opportunity, the Committee recommended and the Board approved an increase in Mr. Krueger's target percentage for +the 2015-2017 3-year period from 125% of his base salary to 200%. In addition, the Committee recommended and the Board approved two new bridge grants of performance shares to Mr. Krueger for a +2015 performance period and a 2015-2016 performance period with Target Percentages of 100% and 75%, respectively, of Mr. Krueger's base salary. The performance metrics for these new periods are +(i) EPS and BVA, with targets and weightings consistent with the EPS and BVA levels that remained outstanding under Mr. Krueger's original performance share grants for the 2013-2015 and +2014-2016 3-year periods, respectively and (ii) threshold revenue targets of $2.5 million for 2015 and $5.1 million over 2015 and 2016 that must be met before any shares would +vest. The bridge grants were not repeated in 2016, and the Board did not increase Mr. Krueger's three-year performance target for the 2016-2018 performance period. +Name +2015-2017 +Percent +2014-2016 +Percent +Krueger +200% +125% +Gabel +55% +55% +Grimes +65% +60% +Jeppesen +55% +55% +Simister +55% +55% +Stornant 1 +55% +55% +Zwiers +55% +55% +1 Mr. Stornant's target percentage was increased in connection with his promotion to Chief Financial Officer and the increase was applied to open +three-year periods. +The +Committee weighted the constant-currency EPS performance criterion at 65% of the total payout and weighted the constant-currency BVA performance criterion at 35% of the total payout for the +2015-2017 performance period. The Committee intended the level of difficulty in attaining Threshold, Target, Goal and Stretch performance levels it set for the 2015-2017 performance period to be +substantially similar to the level of difficulty in attaining the performance levels for the 2014-2016 performance period. For the award to Mr. Krueger for a 2015 performance period and +2015-2016 performance period, the intended level of difficulty was consistent with the degree of difficulty for the remaining terms of the 2013-2015 and 2014-2016 cycles, respectively. The Committee +granted the awards under the Company's Stock Incentive Plan of 2013. The award details are in the table " Grants of Plan-Based Awards in Fiscal Year +2015 " on pages 51-53. The Company accrues, but does not pay, any dividends on any performance shares during the performance period. Once the Committee certifies the +Company's performance compared to the performance criteria, the restrictions on some, all, or none of the +performance shares awarded to each NEO will lapse at that time, and the NEO will receive accrued dividends only on the shares actually earned. The number of performance shares granted to each NEO +reflected a value approximating the estimated maximum bonus payout the NEO could earn as the 3-year bonus for the 2015-2017 performance period. The number of shares anticipated to vest at the end of +the 2015-2017 period is less than the shares initially granted. +Long-Term Incentive Compensation – Stock Option Grants and Restricted Stock Awards +As discussed previously, the Company's compensation program utilizes at-risk and variable compensation (as opposed to just fixed +compensation) and the Committee believes that NEO stock ownership aligns the interests of NEOs with stockholders. The Committee administers the stock incentive plans for stock option grants and +restricted stock awards. It approves the amount of and terms applicable to all grants and awards, except for grants to the CEO, which the Committee recommends for approval by the independent +directors. +When +granting equity awards, the Committee considered the compensation factors described above as well as previous equity grants made to each NEO. The Committee considered these compensation factors +subjectively, and no single factor or combination of factors was determinative for any NEO. The accompanying table reflects the grant-date value of the regular, annual service-based restricted stock +award and stock option grant to each NEO as a percentage of base salary. The " Grants of Plan-Based Awards in Fiscal Year 2015 " table on +pages 51-53 shows the actual grants and awards for 2015. +Page 44 | +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +2016 PROXY STATEMENT +A +stock option's exercise price is set at the closing market price of the Company's common stock on the grant date. The Committee generally grants annual equity awards at its regularly scheduled +February meeting. The dates of the Committee's and Board's February meetings at which annual grants are made generally are scheduled well in advance. The independent directors of the Board generally +approve equity grants to the CEO on the same day. A stock option grant typically vests one-third each year over three years. The restrictions on restricted +stock awards typically lapse 0% for the first two years, 25% on each of the third and fourth anniversary, and 50% on the fifth anniversary of the award. +Approximately +60% of the combined value of the regular annual restricted stock and stock option grant awarded to each NEO in 2015 was in the form of restricted stock and 40% was in the form of stock +options. These were the same approximate percentages as in 2014 and in the past five years. The Committee believes that restricted stock and stock options promote retention and incentivize stock price +performance and that this mix was appropriate. +Name +2015 Regular Annual Grants +Actual % of Base Salary Awarded +Krueger +302% +Gabel +100% +Grimes +95% +Jeppesen +80% +Simister +86% +Stornant 1 +65% +Zwiers +84% +1 Includes grants of 4,275 restricted shares and 12,687 options granted to Mr. Stornant upon his promotion +In +addition to the regular annual equity grants Messrs. Gabel and Simister each received a retention grant of 10,000 shares of restricted stock. Restrictions on these shares lapse 25% on each +of the third and fourth anniversary and 50% on the fifth anniversary of the award. Prior to his promotion to Senior Vice President and CFO, Mr. Stornant received a grant of 2,000 restricted +shares with one-year vesting in recognition of his leadership in his former role as Vice President, Finance. +EXECUTIVE COMPENSATION PROGRAM +Benefits +Annual Bonus +Long-Term Incentive +Compensation +Benefits +Base +Salary +Performance +Bonus +Individual +Bonus +Long-Term +Incentive +Award +Equity +Retirement +and Welfare +Plans +Perquisites +Retirement and Welfare Plans +The NEOs participate in Wolverine Worldwide's medical and dental plans and receive life and disability insurance. Subject to +variations to account for requirements in local jurisdictions, variances in local compensation structure (for example, as applicable to Wolverine Worldwide's employees in the United States versus +certain overseas offices), and to requirements under collective bargaining agreements, all Wolverine Worldwide employees receive the same health and welfare benefit opportunities. In 2015, Messrs. +Krueger, Grimes, Jeppesen, Stornant and Zwiers also participated in the Wolverine Worldwide Employees' Pension Plan (a defined benefit plan) and the Wolverine World Wide, Inc. 409A Supplemental +Executive Retirement Plan (an unfunded, non-qualified plan). For a description of the benefits under Wolverine Worldwide's retirement plans, see " Pension Plans and 2015 Pension +Benefits " below. +Perquisites +The Company provides limited perquisites to NEOs. The Company feels the perquisites that are provided round out a competitive total +compensation package for each NEO. The Company reimbursed NEOs, where applicable, for relocation, tax, financial and estate planning services, and made 401(k) matching payments in the amounts set +forth in footnote 8 to the " Summary Compensation Table " on pages 49-50. +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +| Page +45 +Table of Contents +2016 PROXY STATEMENT +OTHER COMPENSATION POLICIES AND PRACTICES +NEO Stock Ownership Guidelines +Each NEO, as well as each non-employee director, must attain (and maintain) a minimum stock ownership level (including owned shares, +restricted stock awards, a certain level of performance shares, and the in-the-money value of vested stock options) prior to being able to gift or sell any Company stock. During 2015, each NEO was in +compliance with these guidelines. +Covered Positions +Guideline +CEO +6x Annual Base Salary +Non-employee Directors +6x Annual Cash Retainer +Other NEOs +2x Annual Base Salary +Stock Hedging and Pledging Policies +Under the Company's Insider Trading Policy, all directors, officers and other employees are prohibited from engaging in any hedging +transactions involving Company securities beneficially owned by them. The Company also considers it inappropriate for any such person to engage in speculative transactions in the Company's securities, +including short sales, publicly traded options, margin accounts and pledges and standing and limit orders. Also, all directors, officers and other employees are prohibited from pledging Company +securities as collateral for a loan. +Clawback Policy +The Company has adopted a clawback policy which empowers the Board or a committee of the Board to seek recovery of specified +incentive compensation received by executive officers under specific circumstances where there is a material restatement of the Company's financial results that would have led to a lower level of +incentive compensation payout. +Post-Employment Compensation +Each NEO is party to an Executive Severance Agreement that provides for certain payments and benefits upon termination of employment +after a change in control of Wolverine Worldwide. The Board believes Executive Severance Agreements will promote management to actively pursue a business transaction that is in the best interests of +the stockholders, even if it could ultimately result in his or her job elimination, and promotes management stability during the transition period accompanying a change in control. Each NEO is +eligible to receive compensation if his employment is terminated within two years (Messrs. Jeppesen, Stornant and Zwiers) or three years (Mr. Krueger) following a change in control of +Wolverine Worldwide. Even following a change in control, an NEO does not receive payment under the Executive Severance Agreement if his employment +terminates: +• Due to death or retirement in accordance with Wolverine Worldwide's policy or as otherwise agreed +• For cause or disability, or +• By resignation of the NEO, other than for "good reason," which is discussed under the heading " Benefits +Triggered by Termination Other than For Cause or by the NEO for Good Reason " and the heading " Benefits Triggered Under a Change in +Control ," both under the heading " Potential Payments Upon Termination or Change in Control " +NEOs +may also be eligible under Wolverine Worldwide's retirement plans or equity plans to receive certain payments and benefits upon termination of employment or in connection with a change in +control. The Committee believes that accelerated vesting upon a change in control is appropriate in some circumstances because, by protecting a significant component of the NEO's total compensation, +the acceleration of equity vesting (1) mitigates potential conflicts of interest that might arise between the NEOs and the stockholders, and (2) serves as a substantial incentive for +those NEOs to obtain the highest possible value for the stockholders if the +Company becomes an acquisition target. The Committee also retains the discretion to modify the accelerated vesting. +Mr. Krueger +is also party to a Separation Agreement under which he receives certain payments and benefits if the Company terminates his employment, even if not following a change in control, +other than for "cause" or if he terminates his employment for "good reason." The Committee determined upon appointing Mr. Krueger as CEO that, given the Company's strategic initiatives the +Board had asked him to +Page 46 | +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +2016 PROXY STATEMENT +lead, +it was appropriate for the Company to enter into a separation arrangement. You will find information on benefits payable to Mr. Krueger and each other NEO and the specific elements +comprising the payments and benefits under the Separation Agreement, Executive Severance Agreements, and other retirement and equity plans of Wolverine Worldwide, in the +" Potential Payments Upon Termination or Change in Control " section of this proxy statement. +Impact of Accounting and Tax Treatments on Compensation +Section 162(m) of the Internal Revenue Code provides that publicly held companies may not deduct compensation paid to the CEO +and the three next most highly-paid executive officers (other than the CFO) in excess of $1,000,000 annually, with certain exceptions for qualified "performance-based" compensation. Wolverine +Worldwide has designed each of its Annual Bonus Plan, Long-Term Incentive Plan, and stock incentive plans, to permit certain awards payable under these plans that are intended to qualify as +"performance-based" compensation for purposes of Section 162(m). Wolverine Worldwide does not require all of its compensation programs, including programs under the plans listed above, to be +fully deductible under Section 162(m) because Wolverine Worldwide believes it is important to preserve flexibility in administering compensation programs in a manner designed to promote varying +corporate goals. Wolverine Worldwide has and in the future may continue to pay compensation that does not qualify as performance-based compensation. +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +| Page +47 +Table of Contents +2016 PROXY STATEMENT +Compensation Committee Report +The +Committee has reviewed and discussed with management the information provided under the heading "Compensation Discussion and Analysis." Based on this review and +discussion, the Committee recommended to the Board of Directors that the Company include the Compensation Discussion and Analysis section in this proxy statement and incorporate it by reference into +the Company's Annual Report on Form 10-K. +Respectfully +submitted, +Joseph +R. Gromek (Chairperson) +Jeffrey M. Boromisa +William K. Gerber +Nicholas T. Long +Compensation Committee Interlocks and Insider Participation. During fiscal year 2015, none of the members of the Compensation Committee was an officer or employee +of the Company, was a former officer of the Company, nor had a relationship with the Company requiring disclosure as a related party transaction under Item 404 of Regulation S-K of the +Securities Act of 1933. None of the Company's executive officers served on the compensation committee or board of directors of another entity whose executive officer(s) served as a director on the +Company's Board or on the Compensation Committee. +See +the "Compensation Discussion and Analysis" section for more information regarding the Compensation Committee's processes and procedures. +Page 48 | +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +2016 PROXY STATEMENT +Summary Compensation Table +Name and Principal Position +Year +Salary 1 +Bonus 1,2 +Stock Awards 3 +Option Awards 4 +Non-Equity Incentive Plan +Compensation 1,5 +Change in Pension Value and +Nonqualified Deferred +Compensation Earnings 6 +All Other Compensation 7 +Total +Blake W. Krueger +Chairman, CEO +2015 +$1,150,000 +- +a) 4,385,024 +$1,392,843 +$525,254 +$24,899 +$32,928 +$10,118,602 +8 +and President +b) 2,607,654 +2014 +$1,183,654 +$440,249 +$4,383,045 +$1,394,846 +$1,631,132 +$5,499,286 +$18,847 +$14,551,059 +2013 +$1,090,869 +$500,000 +$3,550,125 +$1,044,046 +$1,821,983 +- +$30,264 +$8,037,287 +James A. Gabel 9 +Former President, +2015 +$526,539 +- +$917,588 +$211,232 +$230,181 +- +$87,180 +$1,972,720 +Performance Group +2014 +$245,192 +$33,510 +$1,555,602 +$105,650 +$166,485 +- +$88,920 +$2,195,359 +Donald T. Grimes 10 +Former Senior Vice +2015 +$278,686 +- +$785,148 +$232,472 +- +$79,500 +$11,208 +$1,387,014 +President, CFO, +2014 +$598,077 +- +$904,834 +$231,841 +$395,605 +$434,700 +$14,120 +$2,579,177 +Treasurer and Chief +2013 +$555,038 +$100,000 +$816,866 +$222,144 +$457,827 +$33,418 +$19,573 +$2,204,886 +Accounting Officer +Michael Jeppesen +President, Global +2015 +526,539 +- +$576,588 +$170,352 +$430,029 +$114,395 +$22,057 +$1,839,960 +Operations Group +Andrew Simister 11 +Former President, +2015 +$632,962 +- +$966,084 +$211,232 +- +- +$40,213 +$1,850,491 +Lifestyle Group +2014 +$278,846 +$139,845 +$1,633,171 +$105,650 +$60,155 +- +$86,279 +$2,303,946 +Michael D. Stornant 12 +Senior Vice President, +2015 +$403,538 +$266,649 +$630,606 +$159,033 +$93,533 +$412,331 +$26,710 +$1,992,400 +CFO, Treasurer and +Chief Accounting Officer +James D. Zwiers +President, Wolverine +2015 +$624,539 +- +$697,004 +$211,232 +$390,773 +$17,604 +$33,897 +$1,975,049 +Outdoor & Lifestyle +2014 +$627,577 +- +$803,213 +$210,567 +$478,608 +$795,787 +$17,856 +$2,933,608 +Group (President, +2013 +$584,654 +$75,000 +$728,005 +$201,760 +$413,050 +- +$19,424 +$2,021,893 +International Group in 2015) +1 Includes any amounts deferred under the Company's qualified 401(k) plan. +2 As discussed above under " Annual Bonus – Individual Bonus ," the Company paid a $100,000 +discretionary bonus to Mr. Stornant for 2015 for driving profit performance in a difficult economic environment and leading global strategic and financial initiatives. As discussed above under +" Performance Share Award Performance and Vesting ," the 2015 bonus for Mr. Stornant also includes a $166,649 discretionary cash bonus paid because +the number of performance shares he was granted for the 2013-2015 performance period was less than the actual number of shares to which he would have been entitled based on the attainment of our +pre-established performance goals for the 2013-2015 performance period. +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +| Page +49 +Table of Contents +2016 PROXY STATEMENT +3 Includes the value of restricted stock awards and performance share awards, as follows: +Name +Service-based Restricted Value +Performance Share Value +"Bridge" Grants Performance Share Value +Total +Krueger +$2,085,020 (included in (a)) +$2,300,004 (included in (a)) +$2,607,654 (included in (b)) +$6,992,678 +Gabel +$596,204 +$321,384 +- +$917,588 +Grimes +$348,012 +$437,136 +- +$785,148 +Jeppesen +$255,204 +$321,384 +- +$576,588 +Simister +$596,204 +$369,880 +- +$966,084 +Stornant +$294,420 +$336,186 +- +$630,606 +Zwiers +$316,204 +$380,800 +- +$697,004 +Restricted stock was valued using the closing market price of Wolverine Worldwide common stock on the date of grant. Performance shares awarded in 2015 were valued using the closing market price of +Wolverine Worldwide common stock on the date of grant and assuming Target performance for all performance periods, consistent with ASC Topic 718. Assuming payout at Stretch performance, the +aggregate award date fair value of performance shares awarded in 2015 for each NEO (and, in parenthesis, the award date fair value of the sum of performance share awards assuming (Stretch) performance +assumptions and award date fair value of restricted stock awards for 2015), would have been: $9,147,229 ($11,232,249) for Mr. Krueger; $642,758 ($1,238,962) for Mr. Gabel; $874,283 +($1,222,295) for Mr. Grimes; $642,758 ($897,962) for Mr. Jeppesen; $739,778 ($1,335,982) for Mr. Simister; $336,186 ($630,606) for Mr. Stornant and $761,607 +($1,077,811) for Mr. Zwiers. Restrictions on performance share awards will lapse in the February following the last year of the applicable performance period, if at all, based on the Company's +performance for the period. The grants to Messrs. Simister, Gabel and Grimes were forfeited upon their termination of employment with Wolverine. For Mr. Stornant the amount also includes +the incremental fair value ($169,383), calculated in accordance with ASC Topic 718, with respect to the 2013-2015 and 2014-2016 performance awards held by him that were modified in connection +with his promotion to CFO. For additional valuation assumptions, see Note 11 to Wolverine Worldwide's Consolidated Financial Statements for the fiscal year ended January 2, 2016. +4 Represents the aggregate grant date fair value of stock options granted in the years shown, calculated in accordance with ASC Topic 718. Stock options were +valued using the Black-Scholes model. For additional valuation assumptions, see Note 11 to Wolverine Worldwide's Consolidated Financial Statements for the fiscal year ended January 2, +2016. +5 Reflects the sum of performance bonus and individual bonus amounts earned in 2015, 2014 and 2013, respectively, and paid in 2016, 2015 and 2014, respectively. +6 All amounts in this column reflect, where applicable, the aggregate change in the actuarial present value of the NEOs' accumulated benefits under the +Wolverine Worldwide Employees' Pension Plan ("Pension Plan") and Wolverine World Wide, Inc. 409A Supplemental Executive Retirement Plan ("SERP"). The amounts in the table were determined using +assumptions consistent with those used in Wolverine Worldwide's Consolidated Financial Statements for each respective year. See the " Pension Plans and 2015 +Pension Benefits " section starting on page 58. +7 The amounts listed in this column for 2015 include +Wolverine Worldwide's matching contributions to the accounts of the NEOs under Wolverine Worldwide's 401(k) +Money Accumulation Plan, payments made by Wolverine Worldwide for the premiums on certain life insurance policies, tax and estate planning services, relocation costs (including tax gross-ups) and +health care reimbursements in the amounts listed in the table below. +Name +401(k) Match +Life Insurance Premiums +Tax and Estate Planning +Relocation +Health +Krueger +$7,950 +$6,964 +$7,400 +- +$10,614 +Gabel +$11,925 +$10,929 +$9,912 +$50,000 +$4,414 +Grimes +- +$389 +$4,650 +- +$6,169 +Jeppesen +$7,950 +$740 +- +- +$13,367 +Simister +$11,925 +$8,886 +$9,912 +- +$9,490 +Stornant +$7,950 +$6,767 +- +$11,993 +Zwiers +$7,950 +$5,180 +$7,400 +- +$13,367 +8 Excluding the "Bridge" performance share grants for a 2015 period and a 2015-2016 period, Mr. Krueger's total compensation would have been $7,510,944, +well below the target level of $8,365,000 set by the Compensation Committee for 2015, primarily because of a lower-than-target annual bonus payout. In addition, the "performance affected" value of +Mr. Krueger's compensation as of the end of fiscal 2015, excluding the approximately $57,000 aggregate amount of "change in pension value" and "all other compensation," but including the bridge +performance share grants, is $6,000,000, reflecting the fact Mr. Krueger's compensation is primarily performance-based, stock-based, or both. +9 Mr. Gabel resigned his position with the Company effective February 4, 2016. +10 Mr. Grimes resigned his position with the Company effective June 12, 2015. +11 Mr. Simister resigned his position with the Company effective December 18, 2015. +12 Mr. Stornant was promoted to Senior Vice President, Chief Financial Officer and Treasurer on June 12, 2015. +Page 50 | +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +2016 PROXY STATEMENT +Grants of Plan-Based Awards in Fiscal Year 2015 +The +following table provides information concerning each grant of an award made to the NEOs in fiscal year 2015: +Estimated Future Payouts +Under Non-Equity Incentive Plan +Awards 1 +Estimated Future Payouts +Under Equity Incentive Plan +Awards 2 +Name +Award Type +Grant Date +Threshold +($) +Target +($) +Maximum +($) +Threshold +(#) +Target +(#) +Maximum +(#) +All +Other +Stock +Awards: +Number of +Shares of +Stock or +Units 3 +(#) +All +Other +Option +Awards: +Number of +Securities +Underlying +Options 4 +(#) +Exercise +or Base +Price of +Option +Awards 5 +($/Share) +Grant +Date Fair +Value of +Stock and +Option +Awards 6 +($) +Krueger +Annual Bonus +$718,750 +$1,437,500 +$2,875,000 +FY15-FY17 +Performance +Shares +2/11/15 +41,071 +82,143 +164,286 +$2,300,004 +FY15-FY16 +Performance +Shares +2/27/15 +15,896 +31,791 +63,583 +$971,533 +FY15 +Performance +Shares +2/27/15 +26,769 +53,538 +85,214 +$1,636,121 +Stock Options +2/11/15 +220,988 +$28 +$1,392,843 +Restricted Stock +2/11/15 +74,465 +$2,085,020 +Gabel +Annual Bonus +$131,635 +$263,269 +$526,539 +FY15-FY17 +Performance +Shares +2/11/15 +5,739 +11,478 +22,956 +$321,384 +Stock Options +2/11/15 +33,514 +$28 +$211,232 +Restricted Stock +2/11/15 +21,293 +$596,204 +Grimes +Annual Bonus +$183,000 +$366,000 +$732,000 +FY15-FY17 +Performance +Shares +2/11/15 +7,806 +15,612 +31,224 +$437,136 +Stock Options +2/11/15 +36,884 +$28 +$232,472 +Restricted Stock +2/11/15 +12,429 +$348,012 +Jeppesen +Annual Bonus +$144,798 +$289,596 +$579,192 +FY15-FY17 +Performance +Shares +2/11/15 +5,739 +11,478 +22,956 +$321,384 +Stock Options +2/11/15 +27,028 +$28 +$170,352 +Restricted Stock +2/11/15 +9,108 +$255,024 +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +| Page +51 +Table of Contents +2016 PROXY STATEMENT +Estimated Future Payouts +Under Non-Equity Incentive Plan +Awards 1 +Estimated Future Payouts +Under Equity Incentive Plan +Awards 2 +Name +Award Type +Grant Date +Threshold +($) +Target +($) +Maximum +($) +Threshold +(#) +Target +(#) +Maximum +(#) +All +Other +Stock +Awards: +Number of +Shares of +Stock or +Units 3 +(#) +All +Other +Option +Awards: +Number of +Securities +Underlying +Options 4 +(#) +Exercise +or Base +Price of +Option +Awards 5 +($/Share) +Grant +Date Fair +Value of +Stock and +Option +Awards 6 +($) +Simister +Annual Bonus +$152,500 +$305,000 +$610,000 +FY15-FY17 +Performance +Shares +2/11/15 +6,605 +13,210 +26,421 +$369,880 +Stock Options +2/11/15 +33,514 +$28 +$211,232 +Restricted Stock +2/11/15 +21,293 +$596,204 +Stornant +Annual Bonus +$90,740 +$181,481 +$362,961 +FY15-FY17 +Performance +Shares +2/11/15 +5,107 +5,691 +5,691 +$336,186 +7 +Stock Options +2/11/15 +11,765 +$28 +$74,152 +Stock Options +6/11/15 +12,687 +$29.31 +$84,881 +Restricted Stock +2/5/15 +2,000 +$58,100 +Restricted Stock +2/11/15 +3,965 +$111,020 +Restricted Stock +6/11/15 +4,275 +$125,300 +Zwiers +Annual Bonus +$171,748 +$343,496 +$686,992 +FY15-FY17 +Performance +Shares +2/11/15 +6,800 +13,600 +27,200 +$380,800 +Stock Options +2/11/15 +33,514 +$28 +$211,232 +Restricted Stock +2/11/15 +11,293 +$316,204 +1 Estimated payout levels relating to the performance bonus and individual bonus. For a description of these bonuses and the payouts under them, see +pages 38-42. 2 Estimated payout levels of performance shares granted under the Stock Incentive Plan of 2013 relating to each NEO's participation in the 3-Year Bonus Plan for +the 2015-2017 performance period and, for Mr. Krueger, for a 2015 and 2015-2016 performance period. Following the end of the applicable performance period, restrictions may lapse on some, all +or none of the performance shares depending upon the Company's achievement of the relevant performance criteria. The Company accrues, but does not pay, dividends on the performance shares during the +performance period. At the end of the applicable performance period, the Company will pay to the NEO the accrued dividends (if any) on the performance shares for which the restrictions lapse. For a +description of the performance shares granted in 2015 under the Stock Incentive Plan of 2013 (including the 3-Year Bonus Plan and the awards to Mr. Krueger for 2015 and 2015-2016 periods), see +pages 42-44. 3 The Company awarded service-based restricted stock awards under the Stock Incentive Plan of 2013 for all NEOs. The restrictions on 25% of the shares received +under the awards reflected in this column lapse on each of the third and fourth anniversary and 50% on the fifth anniversary of the award except for the grant of 2,000 restricted shares to +Mr. Stornant on February 5, 2015 in recognition of his leadership in his former role as Vice President, Finance, which vests on the first anniversary of the date of grant. All +restrictions on shares of restricted stock lapse upon an NEO's death, disability or voluntary termination after attaining age 62 or age 50 with seven years of service with the Company, subject to +certain conditions. In the event of a change in control, as described under the "Benefits Upon a Change in Control Only" sub-heading on page 62, restrictions lapse on all shares. Holders of restricted +stock are entitled to receive dividends and to vote the restricted shares. 4 The Company granted stock options under the Stock Incentive Plan of 2013 to all NEOs. Stock options +granted to NEOs vest ratably over three years beginning on +the first anniversary of the grant date and have a term of 10 years. All stock options vest upon an NEO's death, disability or voluntary termination after attaining age 62 or age 50 with seven +years of service with the Company, subject to certain conditions. In the event of a change in control, as described under the "Benefits Upon a Change in Control Only" sub-heading on page 62, all stock +options vest. 5 The exercise price is equal to the closing market price of shares of Wolverine Worldwide common stock on the date of the grant. +Page 52 | +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +2016 PROXY STATEMENT +6 Represents the grant date fair value for stock options and award date fair value for performance share and service-based restricted stock awards made in +fiscal year 2015, determined as described in footnotes 3 and 4 to the "Summary Compensation Table." 7 For Mr. Stornant the amount also includes the incremental fair value +($169,383), calculated in accordance with ASC Topic 718, with respect to the +2013-2015 and 2014-2016 performance awards held by him that were modified in connection with his promotion to CFO. +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +| Page +53 +Table of Contents +2016 PROXY STATEMENT +Outstanding Equity Awards at 2015 Fiscal Year-End +The +following table provides information concerning options and stock awards that have not vested for each NEO outstanding as of January 2, 2016: +Option Awards +Stock Awards +Name +Grant Date +Number of Securities Underlying +Unexercised Options Exercisable +(#) +Number of Securities Underlying +Unexercised Options +Unexercisable 1 +(#) +Option Exercise Price +($) +Option Expiration Date +Number of Shares or Units of +Stock That Have Not Vested 2 +(#) +Market Value of Shares or Units +of Stock That Have Not Vested 3 +($) +Equity Incentive Plan Awards: +Number of Unearned Shares, +Units or Other Rights That Have +Not Vested 4 +(#) +Equity Incentive Plan Awards: +Market or Payout Value of +Unearned Shares, Units or Other +rights That Have Not Vested 3 +($) +Krueger +Various +280,408 +$4,685,618 +Various +613,179 +$10,246,221 +2/6/08 +7,984 +- +$12.53 +2/5/18 +2/10/10 +44,266 +- +$12.50 +2/10/20 +2/9/11 +98,000 +- +$18.25 +2/8/21 +2/8/12 +114,000 +- +$19.92 +2/7/22 +2/6/13 +133,852 +66,926 +$21.48 +2/5/23 +2/11/14 +75,095 +150,189 +$27.13 +2/10/24 +2/11/15 +220,988 +$28.00 +2/10/25 +Gabel 5 +Various +57,140 +$954,809 +Various +54,339 +$908,005 +7/9/14 +5,669 +11,336 +$26.81 +7/8/24 +2/11/15 +- +33,514 +$28.00 +2/10/25 +Grimes +- +- +- +- +- +- +- +- +- +Jeppesen +Various +52,707 +$880,734 +Various +60,283 +$1,007,329 +2/8/12 +22,400 +- +$19.92 +2/7/22 +2/6/13 +16,827 +8,413 +$21.48 +2/5/23 +2/11/14 +7,375 +14,748 +$27.13 +2/10/24 +2/11/15 +- +27,028 +$28.00 +2/10/25 +Page 54 | +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +2016 PROXY STATEMENT +Option Awards +Stock Awards +Name +Grant Date +Number of Securities Underlying +Unexercised Options Exercisable +(#) +Number of Securities Underlying +Unexercised Options +Unexercisable 1 +(#) +Option Exercise Price +($) +Option Expiration Date +Number of Shares or Units of +Stock That Have Not Vested 2 +(#) +Market Value of Shares or Units +of Stock That Have Not Vested 3 +($) +Equity Incentive Plan Awards: +Number of Unearned Shares, +Units or Other Rights That Have +Not Vested 4 +(#) +Equity Incentive Plan Awards: +Market or Payout Value of +Unearned Shares, Units or Other +rights That Have Not Vested 3 +($) +Simister +7/9/14 +5,669 +- +$26.81 +7/8/24 +Stornant +Various +25,736 +$430,049 +Various +17,205 +$287,496 +2/7/07 +6,000 +- +$15.13 +2/6/17 +2/6/08 +7,800 +- +$12.53 +2/5/18 +4/16/08 +2,600 +- +$13.85 +4/15/18 +2/10/09 +27,000 +- +$8.56 +2/9/19 +2/10/10 +16,800 +- +$12.50 +2/9/20 +2/9/11 +12,300 +- +$18.25 +2/8/21 +2/8/12 +12,640 +- +$19.92 +2/7/22 +2/6/13 +9,060 +4,530 +$21.48 +2/5/23 +2/11/14 +3,971 +7,941 +$27.13 +2/10/24 +2/11/15 +- +11,765 +$28.00 +2/10/25 +6/12/15 +- +12,687 +$29.31 +6/11/25 +Zwiers +Various +67,686 +$1,131,033 +Various +86,245 +$1,441,154 +2/7/07 +2,432 +- +$15.13 +2/6/17 +2/6/08 +22,152 +- +$12.53 +2/5/18 +2/10/09 +38,000 +- +$8.56 +2/9/19 +4/22/09 +4,000 +- +$10.90 +4/21/19 +2/10/10 +40,600 +- +$12.50 +2/9/20 +2/9/11 +28,200 +- +$18.25 +2/8/21 +2/8/12 +31,600 +- +$19.92 +2/7/22 +2/6/13 +25,867 +12,933 +$21.48 +2/5/23 +2/11/14 +11,337 +22,672 +$27.13 +2/10/24 +2/11/15 +- +33,514 +$28.00 +2/10/25 +1 All options become exercisable on the vesting date. The vesting period for options is one-third of the shares on each of the first three anniversaries of the +date of the grant. Stock option vesting may accelerate upon certain events, including death, disability or voluntary termination after attaining age 62 or age 50 with seven years of service with the +Company, subject to certain conditions, as further described in the "Grants of Plan Based Awards" section. +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +| Page +55 +Table of Contents +2016 PROXY STATEMENT +2 The following table sets forth the vesting dates for the unvested service-based restricted stock awards of each NEO as of January 2, +2016: +Named +Executive +Officer +Vesting +Date +Number of Shares to Vest +Krueger +2/6/16 +18,372 +2/8/16 +11,600 +2/9/16 +20,800 +2/6/17 +18,373 +2/8/17 +23,200 +2/11/17 +19,213 +2/6/18 +36,745 +2/11/18 +37,829 +2/11/19 +57,043 +2/11/20 +37,233 +Gabel +7/9/17 +5,211 +1/1/18 +3,750 +2/11/18 +5,323 +7/9/18 +5,212 +1/1/19 +3,750 +2/11/19 +5,323 +7/9/19 +10,424 +1/1/20 +7,500 +2/11/20 +10,647 +Grimes +- +- +Jeppesen +2/6/16 +2,310 +2/8/16 +2,250 +2/6/17 +2,310 +2/8/17 +4,500 +2/11/17 +1,902 +10/8/17 +5,000 +2/6/18 +4,620 +2/11/18 +4,179 +10/8/18 +5,000 +2/11/19 +6,082 +10/8/19 +10,000 +2/11/20 +4,554 +Simister +- +- +Page 56 | +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +2016 PROXY STATEMENT +Named +Executive +Officer +Vesting +Date +Number of Shares to Vest +Stornant +2/5/16 +2,000 +2/6/16 +1,245 +2/8/16 +1,305 +2/9/16 +2,500 +2/6/17 +1,245 +2/8/17 +2,610 +2/11/17 +1,025 +2/6/18 +2,490 +2/11/18 +2,016 +6/12/18 +1,068 +2/11/19 +3,042 +6/12/19 +1,069 +2/11/20 +1,983 +6/12/20 +2,138 +Zwiers +2/6/16 +3,550 +2/8/16 +8,200 +2/9/16 +5,900 +2/6/17 +3,550 +2/8/17 +16,400 +2/11/17 +2,923 +2/6/18 +7,100 +2/11/18 +5,746 +2/11/19 +8,670 +2/11/20 +5,647 +3 The dollar values are calculated using a per share stock price of $16.71, the closing price of Wolverine Worldwide common stock as of the end of fiscal year +2015. 4 Following the end of the applicable three-year performance period, restrictions may lapse on some, all or none of the performance shares depending upon the +Company's achievement of the relevant performance criteria. 5 With the exception of 5,669 vested options, all awards listed for Mr. Gabel were forfeited to the Company upon +his termination of employment after the +end of fiscal 2015. +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +| Page +57 +Table of Contents +2016 PROXY STATEMENT +Option Exercises and Stock Vested in Fiscal Year 2015 +Option Awards +Stock Awards +Number of Shares +Acquired on Exercise +(#) +Value Realized +on Exercise +($) +Number of Shares +Acquired on Vesting +(#) +Value Realized +on Vesting 1 +($) +Krueger +- +- +124,102 +$3,475,530 +Gabel +- +- +1,987 +$55,636 +Grimes +212,146 +$2,863,843 +36,242 +$1,014,885 +Jeppesen +16,688 +$468,367 +Simister +- +- +- +- +Stornant +6,400 +$122,240 +10,087 +$282,448 +Zwiers +- +- +38,474 +$1,079,831 +1 The Company calculates the dollar values using the closing price of Wolverine Worldwide common stock on the date of vesting. +Pension Plans and 2015 Pension Benefits +Wolverine Worldwide maintains the following defined benefit retirement plans covering Messrs. Krueger, Grimes, Jeppesen, Stornant and Zwiers: (1) the Wolverine Worldwide Employees' +Pension Plan ("Pension Plan"), which is a funded and tax-qualified defined benefit plan under the Internal Revenue Code that covers eligible employees and (2) the Wolverine World +Wide, Inc. 409A Supplemental Executive Retirement Plan ("SERP"), which is an unfunded, non-qualified plan that covers individuals recommended by the CEO and approved by the Compensation +Committee. +QUALIFIED PENSION PLAN +Participants vest in the Pension Plan after five years of qualifying service. Subject to the limitations imposed by the Internal +Revenue Code, the Pension Plan generally pays a monthly benefit in an amount equal to a percentage of the participant's final average monthly earnings multiplied by his or her number of years of +service. For purposes of this benefits formula, the Pension Plan caps years of service at 25 (30 for non-SERP participants), and the percentages of final average monthly earnings is 2.4% for +Mr. Krueger and 2.0% for Messrs. Grimes, Jeppesen, Stornant and Zwiers. "Earnings" as used in this formula generally includes base salary and annual bonus, less Social Security +allowance, and for 2015 was capped at $265,000, the IRS limit applicable to tax-qualified plans. +Upon +retirement, a participant may elect to receive the benefit in the form of a life annuity, 5- or 10-year certain annuities, or joint and 50%, joint and 75%, or joint and 100% survivor annuities. +The payments are actuarially adjusted based on the participant's election. Any election, other than an election to receive life annuity benefits, reduces the monthly benefit payable. The "normal" age +at which benefits may be drawn under the plan is 65. Mr. Krueger is currently the only NEO eligible to begin drawing early retirement benefits under the Pension Plan. +Page 58 | +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +2016 PROXY STATEMENT +SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN +Messrs. Krueger, Grimes, Jeppesen, Stornant and Zwiers participate in the SERP, which provides retirement benefits above +amounts available under the Company's tax-qualified Pension Plan. The SERP benefit generally equals the difference between the participant's retirement benefit under the Pension Plan and the benefits +the participant would have received if there were no IRS-imposed cap on earnings when calculating the Pension Plan benefit. The SERP caps years of service at 25 in calculating a participant's benefit. +The SERP also allows a retired participant who has five years of service to draw earlier (beginning at age 55) and on different terms than under the Pension Plan. A participant's earnings +percentage multiplier is the same under the SERP as it is under the Pension Plan (2.4% for Mr. Krueger and 2.0% for Messrs. Grimes, Jeppesen, Stornant and Zwiers). The Compensation +Committee may grant additional deemed years of service to a participant, subject to the cap of 25 years. The full benefit of any additional years of deemed service is paid under the SERP. +Mr. Krueger reached the 25-year cap in 2012. +If +a retired participant draws the SERP benefit prior to age 65, the reduction factor is 0.333% for each month prior to age 60, and 0.1666% for each month between age 60 and age 65. As of the end of +fiscal year 2015, Mr. Krueger was the only NEO eligible to retire and begin drawing early benefits under the SERP. +SERP +benefits are paid monthly, and the SERP has a lump sum payment option in the event of death or termination of employment after a change in control. The SERP also includes a disability benefit and +a death benefit payable to the participant's designated beneficiary if the participant dies before retiring. The SERP provides for lump sum payments equal to 125% of the net present value of accrued +benefits without regard to any reduction for early payment to participants who resign for good reason or are terminated by Wolverine other than for cause or due to death or disability within two years +(Messrs. Jeppesen, Stornant and Zwiers) or three years (Mr. Krueger) after a change in control. +The +SERP also contains non-competition, confidentiality and employee non-solicitation provisions in favor of Wolverine Worldwide. Under the SERP non-competition provisions, a participant is not +entitled to any benefit payment if the participant enters into certain relationships with a competing business prior to the date on which such benefit payment is due. If the participant's employment +is terminated for serious misconduct or if Wolverine Worldwide cannot collect under an insurance policy purchased to fund SERP benefits for certain reasons, the Company may terminate a participant's +benefits under the SERP. Wolverine Worldwide may terminate +the SERP or stop further accrual of SERP benefits for a participating NEO at any time, but termination will not affect previously accrued benefits. +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +| Page +59 +Table of Contents +2016 PROXY STATEMENT +PENSION BENEFITS IN FISCAL YEAR 2015 +The following table provides for each NEO certain information concerning each plan that provides for payments or other benefits at, +following, or in connection with retirement: +Name +Plan Name +Number of Years +Credited Service +(#) +Present Value of +Accumulated Benefit 1 +($) +Payments During +Last Fiscal Year +($) +Krueger +SERP +25 +$14,479,640 +- +Pension +20 +$1,393,107 +- +Gabel +SERP 3 +- +- +- +Pension 3 +- +- +- +Grimes +SERP +8 +$718,658 +- +Pension +8 +$307,548 +- +Jeppesen +SERP +4 +$248,786 +- +Pension +4 +$175,148 +- +Simister +SERP 3 +- +- +- +Pension 3 +- +- +- +Stornant +SERP +19 +$182,356 +- +Pension +19 +$602,337 +- +Zwiers +SERP +18 +$1,301,485 +- +Pension +18 +$523,145 +- +1 These values are as of January 2, 2016, and are calculated assuming the participants will commence their benefits at age 65 (in +the form of the annuity elected by the NEO) and use the modified RP2014 mortality tables for males and females (post-retirement) projected generationally with modified MP2015 +projection scale and a 5.00% discount rate (compared to 4.37% in 2015). 2 The present value of Mr. Krueger's accumulated benefit under the SERP is $3,174,550 greater +taking into account his deemed years of +service. Mr. Krueger was previously granted three additional service years in 1996 in recognition of his service as a member of Wolverine Worldwide's executive team for three +years before becoming a participant in the SERP, and additional deemed years of service were previously granted as part of Mr. Krueger's CEO compensation. The present value of +Mr. Krueger's SERP benefit would be $11,305,090 if 20 service years were used to calculate his benefit. Mr. Krueger reached 25 years of service in 2012, the +maximum years of service permitted under the SERP, and will not accrue any further years of service under the SERP. 3 The pension plan was closed to new hires starting +January 1, 2013. Messrs. Gabel and Simister do not participate in the Pension +Plan or SERP. +Potential Payments Upon Termination or Change in Control +Wolverine Worldwide has entered into an Executive Severance Agreement with each currently-employed NEO that provides certain rights, including the right to receive payments in the event of a +termination of employment following a change in control. The Company also has entered into an agreement with Mr. Krueger regarding certain termination benefits in the event of termination of +his employment under +certain other circumstances described below. +Page 60 | +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +2016 PROXY STATEMENT +BENEFITS TRIGGERED BY TERMINATION FOR CAUSE OR VOLUNTARY TERMINATION +An NEO is not entitled to receive any additional forms of severance payments or benefits upon termination of employment for Cause or +upon the NEO's voluntary decision, other than for Good Reason, to terminate his employment. +BENEFITS TRIGGERED BY TERMINATION OTHER THAN FOR CAUSE OR BY THE NEO FOR GOOD REASON +Mr. Krueger entered into a Separation Agreement on March 13, 2008, which states that upon termination of his employment +by Wolverine Worldwide without Cause or termination by Mr. Krueger with Good Reason, as such terms are +defined in Mr. Krueger's Separation Agreement, Wolverine Worldwide will pay Mr. Krueger the following payments in exchange for a general release of claims in favor of Wolverine +Worldwide: (1) continued base salary for 18 months (reduced by payments he receives if he is employed by a Competing Business, as defined in Mr. Krueger's Separation Agreement); +(2) the pro-rata portion of the annual incentive bonus and the 3-year bonus for all uncompleted performance periods based on actual corporate performance for the applicable performance periods; +(3) the pro-rata portion of the annual individual performance bonus relating to personal performance objectives; and (4) retiree medical benefits for Mr. Krueger, his spouse and +dependents for a period starting on the day after the termination date and ending on the last day of the 18th month following the month in which the termination date falls. +"Cause" +generally is defined in Mr. Krueger's Separation Agreement to mean: (1) any act or omission knowingly undertaken or omitted with the intent of causing material damage to +Wolverine Worldwide; (2) any intentional act involving fraud, misappropriation or embezzlement, that causes material damage to Wolverine Worldwide; (3) repeated willful failure to +substantially perform any of his significant duties as reasonably directed by the Board of Directors of Wolverine Worldwide; (4) a conviction (including any plea of guilty or nolo contendere) +of any criminal act that (a) results in the executive serving prison time and not being able to perform the normal duties of his position for more than thirty (30) days; or +(b) causes material damage to Wolverine Worldwide; or (5) chronic or habitual use or consumption of drugs or alcohol that causes material damage to Wolverine Worldwide. +"Good +Reason" generally is defined in Mr. Krueger's Separation Agreement to mean: (1) a material reduction in base compensation, including a reduction in base salary or opportunities +under Wolverine Worldwide's bonus plans or equity plans (other than those implemented for the executive team as a whole); (2) a material reduction in authority, duties, or responsibilities; +(3) a requirement to report to a Company officer or employee instead of reporting directly to the Board of Directors; or (4) certain relocations, other than those related to a change in +the location of Wolverine Worldwide's headquarters affecting a majority of the executive team. +BENEFITS TRIGGERED UPON A CHANGE IN CONTROL +Benefits Upon Termination Following a Change in Control. Under the Executive Severance Agreements entered into with the NEOs, payments and benefits are triggered +when employment is terminated without "Cause" or when an executive terminates employment for "Good Reason" within two years (Messrs. Gabel, Jeppesen, Stornant and Zwiers) or three years +(Mr. Krueger) following a change in control of Wolverine Worldwide. +Upon +such a qualifying termination, Wolverine Worldwide would pay the lump sum severance payment under the Executive Severance Agreement composed of the following: (1) unpaid base salary and +bonus payments that had been earned; (2) in lieu of a bonus payment under the Annual Bonus Plan, an amount equal to the quotient of the number of days the NEO was employed by Wolverine +Worldwide, or any successor company, in the year of termination divided by the number of days in the year, multiplied by 100% of the greater of either (a) the bonus awarded to the NEO under an +Annual Bonus Plan for the preceding year and (b) the average paid to the NEO over the preceding two-year period under an Annual Bonus Plan; (3) in lieu of payments under the various +three-year performance periods that remain open on the date of termination, an amount equal to the bonus the NEO would have received based on actual and assumed performance measures, multiplied by the +quotient of the number of days the NEO participated in the performance period prior to the termination, divided by the total number of days in the performance period (in determining the earnings per +share or other performance measures that can be determined annually for any year subsequent to the year of termination, performance will equal the level required to +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +| Page +61 +Table of Contents +2016 PROXY STATEMENT +attain +the maximum goal under the three year plan for that year); (4) either two (Messrs. Gabel, Jeppesen, Stornant and Zwiers) or three (Mr. Krueger) times the sum of +(a) the NEO's highest annual base salary during the 12-month period prior to termination and (b) the greater of (i) the average amount earned by the NEO during the previous two +years under this Annual Bonus Plan and (ii) the amount earned during the previous year under the Annual Bonus Plan; (5) 100% of the positive spread for any stock options held by the NEO +on the date of termination, whether or not vested; (6) in the case of Messrs. Krueger and Zwiers, an excise tax gross-up adjustment (Note: the agreements with Messrs. Gabel, +Jeppesen and Stornant were entered into after 2008 and that the Committee determined to not provide such gross-ups after that date); and (7) in the case of Messrs. Jeppesen, Stornant and +Zwiers, the present value of an additional three years of deemed service under the Pension Plan and SERP. Upon a termination of employment following a change of control, Wolverine Worldwide, or any +successor company, will maintain for a period of six months to one year the NEO's benefits under the then-current benefit plans, programs or arrangements that the NEO was entitled to participate in +immediately prior to the termination date. Wolverine Worldwide, or any successor company, will provide outplacement services through the last day of the second calendar year following the calendar +year of termination. +"Change +in Control" under the Executive Severance Agreements generally means certain changes in composition of the Board of Directors, certain acquisitions of 20% or more of Wolverine Worldwide's +common stock or combined outstanding voting power of Wolverine World Wide, Inc., and other specified reorganizations, mergers, consolidations, liquidations, dissolutions or distributions of +substantial assets (unless such transactions result in the creation of an entity in which at least 50% of the common stock and combined voting power is owned by the owners of record prior to the +transaction, no single stockholder owns more than 20% of the combined voting power and a majority of the board remains unchanged). +"Cause" +is defined under the Executive Severance Agreements to generally mean the willful and continued failure to substantially perform duties or willfully engaging in gross misconduct that is +injurious to the Company. +"Good +Reason" is defined under the Executive Severance Agreements generally to mean: (1) any materially adverse change in position, duties, responsibilities or title or any removal, involuntary +termination or failure to re-elect an officer; (2) a reduction in annual base salary; (3) any relocation or requirement to substantially increase business travel; (4) the failure +to continue providing any executive incentive plans or bonus plans; (5) the failure to continue any employee benefit plan or compensation plan unless a comparable plan is available; +(6) the failure to pay any salary, bonus, deferred compensation or other compensation; (7) the failure to obtain an assumption agreement from any successor; (8) any purported +termination of the employment which is not effected in a manner +prescribed by the Executive Severance Agreement; or (9) any other material breach by Wolverine Worldwide or a successor of its obligations under the Executive Severance Agreement. +Benefits Upon a Change in Control Only. Upon a change in control of Wolverine World Wide, Inc., absent a determination by the Committee to the contrary all +of each NEO's outstanding stock options become immediately exercisable in full and will remain exercisable during their remaining term, regardless of whether the NEO remains an employee of Wolverine +Worldwide or any successor company. The Compensation Committee may determine that one or all of the NEOs shall receive cash in an amount equal to the positive spread amount. In addition, all other +outstanding equity incentive awards of the NEOs, including shares of restricted stock, become immediately and fully vested and non-forfeitable upon a change in control of Wolverine Worldwide. Change +in control for this purpose generally means certain changes in the composition of the Board of Directors, certain acquisitions of 20% of Wolverine Worldwide's common stock and other specified +reorganizations, mergers, consolidations, liquidations, dissolutions or dispositions of substantial assets. +Excise Tax Gross-Up. The Compensation Committee previously determined that Wolverine Worldwide would not provide excise tax gross-up payments in employment +agreements entered into after 2008. +BENEFITS TRIGGERED BY RETIREMENT, DEATH OR PERMANENT DISABILITY +Pension Plan. In the event of death before retirement, the Pension Plan provides the surviving spouse of a vested participant a death benefit equal to the +qualified pre-retirement survivor annuity as defined in the Internal Revenue Code (generally 50% of the participant's accrued normal retirement benefit). This benefit is paid annually to the surviving +spouse beginning when the participant would have turned 60 and +Page 62 | +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +2016 PROXY STATEMENT +continues +for the life of the surviving spouse. For participants with at least three years of service as of December 31, 2003, and who have at least 10 years of service and are employed +by the Company at the time of death, the amount of the survivor benefit under the Pension Plan is calculated as though the participant had continued as an employee of the Company until age 65 at the +compensation level as of the date of death and the benefit begins upon the date of death, unreduced for early commencement. The survivor benefit for participants who meet all the criteria set forth in +the preceding sentence, but who die when they are not employed by the Company are entitled to a joint and survivor benefit commencing upon the date of death, unreduced for early commencement. +SERP. If a SERP participant dies before beginning to receive benefits under the SERP, the Company must, based on the participant's election, pay the beneficiary +either a monthly annuity or a lump sum death benefit equal to the present value of the benefit computed as if the participant had retired on the date of death, had begun receiving benefits at age 55 +and had continued to receive benefits for the remainder of the participant's life expectancy. If the participant dies after beginning to receive benefit payments, benefits cease unless the participant +was receiving benefits in the form of one of the joint and survivor annuity optional elections under the plan or had elected benefits in a form that provides for a continuation of benefits. +If +a participant becomes disabled (as defined), the SERP provides a disability benefit equal to 60% of the normal retirement accrued benefit based upon years of service up to the date that the +participant became disabled through the date the participant reaches age 65 (at which point, the participant would begin drawing full SERP benefits) or is no longer disabled. +Annual Bonus Plan. Upon termination of employment at least six months after the beginning of a fiscal year due to death, disability or early or normal retirement, +an NEO is entitled to receive a pro rata portion of any annual bonus award earned under the Annual Bonus Plan based on the NEO's service during such fiscal year and actual performance under the Annual +Bonus Plan. The annual bonus is payable at the same time and in the same manner as awards are paid to other NEOs for the fiscal year. +Stock Incentive Plans. Upon death, disability or voluntary termination of employment after attaining age 62 or age 50 with seven years of service with the Company, +subject to certain conditions, the restrictions applicable to each NEO's shares of restricted stock terminate automatically and stock options vest in full if held for more than one year or, if +employed for less than one year after the grant, on a percentage basis based on months employed after the grant divided by 12. Upon death, disability or voluntary termination of employment after +attaining age 62 or age 50 with seven years of service with the Company, subject to certain conditions, the restrictions on performance shares lapse on a prorated basis, based on months employed in +the performance period and actual Company performance during the performance period. Any prorated award is payable at the time awards are paid to other NEOs. At fiscal year-end, Mr. Krueger was +the only NEO eligible for early vesting as a result of age or service with the Company. On February 10, 2016, for equity grants occurring after that date, the Compensation Committee determined +to change the age and years of service requirements for retirement vesting eligibility from the attainment age of 62 or age 50 with seven (7) years of service to the attainment of age 59 with +ten (10) years of service and determined to fully accelerate all stock options and service-based restricted shares rather than providing prorated acceleration for such awards held for less than +one year. +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +| Page +63 +Table of Contents +2016 PROXY STATEMENT +DESCRIPTION OF RESTRICTIVE COVENANTS THAT APPLY DURING AND AFTER TERMINATION OF EMPLOYMENT +The SERP contains non-competition, confidentiality and employee non-solicitation provisions in favor of Wolverine Worldwide. Under +the non-competition provisions of the SERP, the participant will not be entitled to any benefit payment if, prior to the date on which such benefit payment is due, the participant enters into certain +relationships with a competing business. +ESTIMATED PAYMENTS ON TERMINATION OR CHANGE IN CONTROL +The following table summarizes the potential payments and benefits payable to each NEO upon a change in control or termination of +employment following each of the triggering events set forth in the table. As required, the amounts in the table assume that the termination of employment or change in control of Wolverine Worldwide +took place on the Company's last day of fiscal 2015, which was January 2, 2016. The amounts set out below are in addition to benefits that are generally available to the Company's employees +such as distributions under the Company's 401(k) savings plan, disability or life insurance benefits and accrued vacation. Due to the many factors that affect the nature and amount of any benefits +provided upon the termination events discussed below, any actual amounts paid or distributed to NEOs may be different. Factors that may affect these amounts include timing during the year of the +occurrence of the event, Wolverine Worldwide's stock price and the NEO's age and years of service. +The +value of the accelerated vesting of unvested equity-based compensation awards was computed using the closing market price ($16.71) of Wolverine World Wide, Inc.'s common stock on +December 31, 2015, the last business day in fiscal 2015. The value for unvested restricted stock is computed by multiplying $16.71 by the number of shares of the NEO's restricted stock that +would vest as a result of an event. The value of stock options that would vest as a result of an event equals the difference between the exercise price of each option and $16.71. +Page 64 | +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +2016 PROXY STATEMENT +Each +of the hypothetical events described in the following table (the highlighted blue headings in the left-hand column) is calculated and reported as a discreet event. For example, the amounts +disclosed under the "Change in Control Only" heading are not cumulative with the amounts disclosed under the "Change in Control/Termination" heading. +Termination Event and Payments/Benefits +Krueger +Gabel 1 +Grimes 2 +Jeppesen +Simister 3 +Stornant +Zwiers +Termination by Company for Cause or Voluntary Termination +Termination by Company Other Than for Cause or by Executive for Good Reason +$5,989,073 +4 +Change in Control/Termination +Executive Severance Agreement 5 +18,456,689 +1,750,543 +15 +- +$3,703,309 +15 +- +$3,494,983 +15 +$8,732,129 +Benefits under Executive Severance Agreement 6 +$58,567 +$61,245 +- +$55,606 +- +$54,129 +$58,128 +Stock Incentive Plans 7 +$14,931,839 +$1,862,814 +- +$1,888,065 +- +$717,545 +$2,572,187 +Lump sum payment under the SERP 8 +$23,386,744 +- +- +$1,016,290 +- +$471,145 +$3,348,945 +TOTAL +$56,833,839 +$3,674,602 +- +$6,663,268 +- +$4,737,802 +$14,711,389 +Death +SERP 9 +$18,370,531 +- +$1,530,184 +$783,942 +- +$362,759 +$2,387,231 +Pension Plan 10 +$960,420 +- +$170,415 +$0 +- +$1,032,697 +$1,037,580 +Stock Incentive Plans 7 +$4,478,230 +$895,506 +- +$855,368 +- +$407,106 +$1,099,585 +Earned Incentive Compensation 11 +$4,041,495 +2 +$520,405 +- +$880,728 +- +$540,758 +$924,792 +Disability +SERP 12 +$16,783,500 +- +- +$607,972 +- +$361,141 +$2,820,720 +Stock Incentive Plans 7 +$4,478,230 +$895,506 +- +$855,368 +- +$407,106 +$1,099,585 +Earned Incentive Compensation 11 +$4,041,492 +$520,405 +- +$880,728 +- +$540,758 +$924,792 +Retirement +SERP 13 +$16,783,500 +- +- +$0 +- +$385,541 +$1,886,828 +Pension Plan 13 +$1,554,106 +- +- +$0 +- +$672,982 +$581,932 +Stock Incentive Plans 7,14 +$4,478,230 +- +- +- +- +- +- +Earned Incentive Compensation 11,14 +$4,041,492 +- +- +- +- +- +- +Change in Control Only +Stock Incentive Plans 7 +$14,931,839 +$1,862,814 +- +$1,888,063 +- +$717,545 +$2,572,187 +1 Mr. Gabel is no longer employed by the company and is not currently entitled to any benefits. The table reflects estimated values at +2015 year end, when he would still have been entitled to benefits. 2 Mr. Grimes was not employed at year end and so was only entitled to certain vested pension plan +and SERP benefits. 3 Mr. Simister was not employed at year end and so was not entitled to any benefits. 4 The estimate for Mr. Krueger assumes Target performance for the 2015, 2015-2016, 2014-2016 and 2015-2017 performance periods. Actual +payout or vesting, if any, would be determined and made at the end of the period. The amount reflected in the table also includes an estimated cost of $25,000 for retiree medical +benefits for 18 months and the estimated cost of $14,300 for outplacement services. +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +| Page +65 +Table of Contents +2016 PROXY STATEMENT +5 Payments would be triggered after termination of employment under certain circumstances within two years (Messrs. Gabel, Jeppesen, +Stornant and Zwiers) or three years (Mr. Krueger) following a change in control. Includes amounts payable in cash under the terms of the Executive Severance Agreement, excluding +the value of the cash payout to each NEO of the option spread for already vested options. The timing of the payment would be delayed to the extent earlier payment would trigger +Section 409A of the Tax Code. The value of unvested options and service-based restricted shares that vest upon a change in control under the terms of the Company's stock +incentive plans are included in the Stock Incentive Plans row. 6 These estimates assume that Wolverine Worldwide, or any successor company, maintains the benefit plans for a +period of one year after +termination and the outplacement services for a period beginning with the date of termination and ending on the last day of the second calendar year following the calendar year in +which the date of termination occurred. 7 Reflects the value of unvested stock options and shares of restricted stock that would vest because of the event. +8 Reflects the entire lump sum benefit payable to applicable NEOs, including any accumulated benefit. For a description of the SERP, see +"Supplemental Executive Retirement Plan" under the heading "Pension Plans and 2015 Pension Benefits." The timing of the payment would be delayed to the extent earlier payment would +trigger Section 409A of the Tax Code. 9 Reflects the entire lump sum death benefit payable to a participating NEO's beneficiary, including any accumulated benefit. +10 Amounts reflect the net present value of the annuity paid to the surviving spouse calculated using the same discount rate and mortality +assumptions used in the Pension Benefits table under the heading "Pension Benefits in Fiscal Year 2015" under the heading "Pension Plans and 2015 Pension Benefits." In accordance with +the terms of the Pension Plan, the death benefit for Messrs. Krueger and Zwiers was calculated as though the NEO had continued as an employee of Wolverine Worldwide until age 65 +at the compensation level as of the date of death. 11 Under the Annual Bonus Plan and the terms of performance share awards, each NEO may be eligible to receive a pro rata +portion of any award if +employment is terminated as a result of any of the specified events in the table. The amount reported represents (a) actual payout under the Annual Bonus Plan for fiscal year +2015, (b) actual payout under the 2013-2015 performance cycle and the 2015 performance cycle, and (c) estimated target performance for the 2014-2016, 2015-2016, and +2015-2017 performance cycles. Performance shares would vest on a prorated basis based on actual Company performance. 12 Reflects the net present value of the annuity using the +same discount rate and mortality assumptions used in the Pension Benefits table and +assuming the NEO drew the disability benefit until age 65 and then the normal retirement benefit. 13 Reflects the net present value of benefits, as reflected in the Pension +Benefits table under the heading "Pension Benefits in Fiscal Year +2015" under the heading "Pension Plans and 2015 Pension Benefits." 14 Mr. Krueger is the only NEO eligible for retirement (as defined in the applicable plan) at fiscal +2015 year end. 15 The Executive Severance Agreements with Messrs. Gabel, Jeppesen and Stornant do not include excise tax gross-up adjustments. Under the +provisions of their Agreements, if payments to Messrs. Gabel, Jeppesen or Stornant under the Agreement would trigger application of an excise tax, the Company would reduce the +payment to an amount that avoids application of the excise tax and minimizes the impact on the payments to Messrs. Gabel, Jeppesen and Stornant. +Page 66 | +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +2016 PROXY STATEMENT +Audit Committee Report +The +Audit Committee of the Board of Directors consists of five directors who are independent under the Company's Director Independence Standards, the NYSE listed company +standards, and applicable SEC standards. The Audit Committee represents and assists the Board in fulfilling its oversight responsibility regarding the Company's financial statements and the financial +reporting process, the internal control over financial reporting, the performance of the internal audit function and the independent registered public accounting firm, the qualifications and +independence of the independent registered public accounting firm, the annual independent audit of Wolverine Worldwide's financial statements and internal control over financial reporting, and +compliance with legal and regulatory requirements. The Audit Committee is directly responsible for appointing, retaining, compensating, overseeing, evaluating and terminating (if appropriate) +Wolverine Worldwide's independent registered public accounting firm. Wolverine Worldwide's management has primary responsibility for the financial statements and the financial reporting process, +including the application of accounting and financial principles, the preparation, presentation and integrity of the financial statements, and the systems of internal controls and other procedures +designed to promote compliance with accounting standards and applicable laws and regulations. Wolverine Worldwide's independent registered public accounting firm is responsible for expressing an +opinion on the conformity of Wolverine Worldwide's financial statements with generally accepted accounting principles and for auditing the effectiveness of Wolverine Worldwide's internal control over +financial reporting. +The +Audit Committee has taken steps to provide assurances regarding Audit Committee composition and procedures, the independence of Wolverine Worldwide's independent registered public accounting firm +and the integrity of Wolverine Worldwide's financial statements and disclosures. These steps include: (i) reviewing the Audit Committee Charter; (ii) reviewing with legal counsel and the +independent registered public accounting firm the Accounting and Finance Code of Ethics; (iii) maintaining Financial, Accounting and Business Ethics Complaint Procedures to allow employees, +stockholders and the public to report concerns regarding Wolverine Worldwide's financial statements, internal controls and disclosures; and (iv) reviewing procedures for the Audit Committee to +pre-approve all audit and non-audit services provided by Wolverine Worldwide's independent registered public accounting firm. +As +part of its supervisory duties, the Audit Committee has reviewed Wolverine Worldwide's audited financial statements for the fiscal year ended January 2, 2016, and has discussed those +financial statements with Wolverine Worldwide's management and internal financial staff, and the internal auditors and independent registered public accounting firm with and without management +present. The Audit Committee has also reviewed and discussed the following with Wolverine Worldwide's management and the financial staff, and with the internal auditors and independent registered +public accounting firm with and without management present: +• Accounting and financial principles and significant assumptions, estimates and matters of judgment used in preparing the financial +statements +• Allowances and reserves for accounts receivable, inventories and taxes +• Accounting for acquisitions, pension plans and equity-based compensation plans +• Goodwill impairment analysis +• Other significant financial reporting issues and practices +The +Audit Committee has discussed with Wolverine Worldwide's independent registered the results of its examinations and its judgments concerning the quality, as well as the acceptability, of Wolverine +Worldwide's accounting principles and such other matters that it is required to discuss with the independent registered public accounting firm under applicable rules, regulations or generally accepted +auditing standards, including the matters required to be discussed by applicable rules of the Public Company Accounting Oversight Board ("PCAOB"). In addition, the Audit Committee has received from +the independent registered public accounting firm the written disclosures and the letter required by the applicable requirements of the PCAOB regarding the independent registered public accounting +firm's communications with the Audit Committee concerning independence rules and has discussed their independence from Wolverine Worldwide and Wolverine Worldwide's management with them, including a +consideration of the compatibility of non-audit services with +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +| Page +67 +Table of Contents +2016 PROXY STATEMENT +their +independence, the scope of the audit and the scope of all fees paid to the independent registered public accounting firm during the year. After and in reliance upon the reviews and discussions +described above, the Audit Committee recommended that the audited financial statements for the fiscal year ended January 2, 2016, be included in Wolverine Worldwide's Annual Report on +Form 10-K for the year then ended to be filed with the SEC. +Respectfully +submitted, +William +K. Gerber (Chairperson) +Jeffrey M. Boromisa +Roxane Divol +Brenda J. Lauderback +Michael A. Volkema +Page 68 | +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +2016 PROXY STATEMENT +Independent Registered Public +Accounting Firm +The +Company's Audit Committee has adopted a policy under which the Audit Committee must approve all audit and non-audit services provided by the Company's independent +registered public accounting firm, Ernst & Young LLP, and which prohibits Ernst & Young LLP from providing any non-audit services that are prohibited by the SEC or the +PCAOB. The Company's Audit Committee provides categorical pre-approval for routine and recurring services, with specific service descriptions and budgets. All audit services, internal control-related +services, and other services not within the specifically pre-approved service descriptions and budgets require engagement-specific pre-approval. With certain exceptions (such as pre-approval of audit +services), the Audit Committee may delegate engagement-specific pre-approval to one or more Committee members, and has so delegated in certain instances to the Audit Committee Chairperson. Management +must communicate to the Audit Committee at its next regularly scheduled meeting any services approved by a Committee member. Wolverine Worldwide's Audit Committee pre-approved all fees paid to +Ernst & Young LLP for services performed in 2015 and 2014. The aggregate fees billed by Ernst & Young LLP for audit and non-audit services were: +2015 +2014 +Audit Fees 1 +$ +1,607,400 +$ +1,689,100 +Audit Related Fees +- +- +Total Audit and Audit Related +$ +1,607,400 +$ +1,689,100 +Tax Fees +Tax Compliance +$ +777,600 +$ +651,900 +Tax Planning & Advisory +$ +100,250 +$ +615,000 +Tax Planning & Advisory Other +- +- +Total Tax Fees +$ +877,850 +$ +1,266,900 +All Other Fees +- +- +Total Fees +$ +2,485,250 +$ +2,956,000 +1 "Audit Fees" is comprised of fees for the annual audit, reviews of the financial statements included in Wolverine Worldwide's +Quarterly Reports on Form 10-Q, audit of internal control over financial reporting, foreign statutory audits and consultations concerning accounting matters associated +with the annual audit. +Wolverine +Worldwide's Audit Committee has adopted a policy restricting the Company's hiring of current or former partners or employees of the independent registered public accounting firm retained by +the Company. +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +| Page +69 +Table of Contents +2016 PROXY STATEMENT +Item 2 – Ratification of Appointment of Independent Registered Public Accounting Firm +Ernst & +Young LLP ("Ernst & Young") was the Company's independent registered public accounting firm for the fiscal year ended January 2, 2016. +The Audit Committee has reappointed Ernst & Young as the Company's independent registered public accounting firm for the current fiscal year. As a matter of good corporate governance, the Audit +Committee has determined to submit its appointment of Ernst & Young to the Company's stockholders for ratification. If this appointment is not ratified by the holders of a majority of shares +cast affirmatively or negatively on the matter, the Audit Committee will review its future selection of an independent registered public accounting firm. Even if the appointment is ratified, the Audit +Committee in its discretion may select a different independent registered public accounting firm any time during the year if it determines that such a change would be in the best interests of the +Company and the Company's stockholders. +The +Audit Committee reviewed Ernst & Young's performance prior to appointing them as the Company's independent registered public accounting firm, and +considered: +• the historical and recent performance of Ernst & Young on the Company's audit, including the quality of the engagement team and +Ernst & Young's experience, client service, responsiveness and technical expertise; +• the PCAOB report of selected Ernst & Young audits; +• the appropriateness of fees charged; +• Ernst & Young's familiarity with the Company's accounting policies and practices and internal control over financial reporting; +and +• Ernst & Young's financial strength and performance. +Representatives +of Ernst & Young are expected to be present at the Annual Meeting. They will have an opportunity to make a statement if they desire to do so, and are expected to be available to +respond to appropriate questions from stockholders. +Board Recommendation +The Board recommends that you vote "FOR" ratification of the Audit Committee's selection of the firm of Ernst & Young LLP as the Company's independent registered public accounting firm +for fiscal year 2016. +Page 70 | +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +2016 PROXY STATEMENT +Item 3 – Advisory Resolution To Approve Executive Compensation +The +Company is asking its stockholders to indicate their support for Wolverine Worldwide's NEO compensation, as described in this proxy statement. This proposal, commonly +known as a "say-on-pay" proposal, gives the Company's stockholders the opportunity to express their view on compensation for the Company's NEOs. The say-on-pay vote is advisory and, therefore, not +binding on the Company, the Compensation Committee or the Board. Even though non-binding, the Board and Compensation Committee value the opinions of Wolverine Worldwide's stockholders and will review +and consider the voting results when making future decisions regarding the Company's executive compensation program. +The +Company encourages stockholders to read the " Compensation Discussion and Analysis " ("CD&A") section of this proxy statement beginning on page 29. As +described in the CD&A section, the Compensation Committee has structured the executive compensation program to achieve the following key objectives: +• Align the interests of NEOs with those of the stockholders through weighting heavily at-risk and variable compensation +• Provide incentives for achieving specific, near-term corporate, business unit and individual goals and reward the achievement of those +goals +• Provide incentives for achieving pre-established, longer-term corporate financial goals and reward achievement of those goals +• Attract and retain talented NEOs who will lead Wolverine Worldwide and drive for superior business and financial performance +The +executive compensation program achieves these objectives, in part, by: +• Weighting at-risk and variable compensation (annual bonuses and long-term incentives) much more heavily than fixed compensation (base +salaries) +• Rewarding annual performance while maintaining emphasis on longer-term objectives +• Blending cash, non-cash, long- and short-term compensation components, and current and future compensation components +The +Company encourages stockholders to read the Summary Compensation Table and other related compensation tables and narrative, appearing on pages 49-66, which provide detailed information on the +compensation of the Company's NEOs. +The +Compensation Committee and the Board of Directors believe that the Company's compensation program and its policies and procedures articulated in the CD&A section are effective in aligning the +interests of the Company's NEOs with the interests of stockholders, promoting the achievement of the Company's near and long term objectives, and increasing stockholder value. +In +accordance with the rules under Section 14A of the Exchange Act, and as a matter of good corporate governance, the Company asks stockholders to approve the following advisory resolution at +the 2016 Annual Meeting of Stockholders: +RESOLVED, that the stockholders of Wolverine World Wide, Inc. (the "Company") approve, on an advisory basis, the compensation of the Company's +named executive officers disclosed in the Compensation Discussion and Analysis section, the Summary Compensation Table and the related compensation tables, notes and narrative in the Proxy Statement +for the Company's 2016 Annual Meeting of Stockholders. +Board Recommendation +The Board recommends that you vote "FOR" approval of the advisory resolution to approve executive compensation. +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +| Page +71 +Table of Contents +2016 PROXY STATEMENT +Item 4 – Approval of Stock Incentive Plan of 2016 +Overview +On February 10, 2016, the Board of Directors unanimously adopted and approved the Wolverine World Wide, Inc. Stock +Incentive Plan of 2016 (the "Plan"), subject to stockholder approval. The Plan allows grants of cash awards, stock options, stock appreciation rights, restricted stock, restricted stock units and +stock awards, any of which may be performance-based, and for incentive bonuses. +Since +its approval by stockholders at the 2013 annual meeting, the Company has granted stock incentive awards under the Company's Stock Incentive Plan of 2013 (which superseded certain earlier plans +with respect to awards granted following its adoption) (the "Prior Plan"). If the Plan is approved by the Company's stockholders as proposed, no further awards will be made under the Prior Plan, and +the Plan will become the primary equity compensation plan for the Company. Upon effectiveness of the Plan, the only other equity plan under which common stock of the Company may be issued is the +Outside Directors' Deferred Compensation Plan. +The +Company has granted stock options under the Plan with respect to 1,450,389 shares, subject to stockholder approval of the Plan at the 2016 annual meeting or any adjournment thereof. These stock +option awards are granted subject to, and may not be exercised prior to stockholder approval of the Plan. No other awards under the Plan have been granted subject to stockholder approval. Stockholder +approval of the Plan will be deemed to constitute approval of any options previously granted under the Plan and such options will count against the shares authorized for issuance under the Plan. +Why You Should Vote For the Plan +The Board of Directors recommends that the Company's stockholders approve the Plan because it believes that equity awards are a +critical part of the Company's compensation program and are essential to the Company's ability to effectively compete for and appropriately motivate and reward key talent. The Board of Directors +believes that it is in the interests of both the Company and its stockholders to strengthen the Company's ability to attract, motivate and retain high quality employees, directors and consultants and +to incentivize such persons to achieve the Company's financial and strategic goals through equity and other performance-based awards. In addition, approval of the Plan by the Company's stockholders +would preserve the Company's ability to grant stock options, stock appreciation rights and other awards under the Plan that may qualify as tax-deductible "qualified performance-based compensation," as +described in more detail below. The Company is seeking stockholder approval of the Plan because the Board of Directors does not believe that the shares available for issuance with respect to equity +awards under the Prior Plan are sufficient to meet the Company's short- or long-term needs. If the Plan is not approved at the Annual Meeting, the Plan will not be effective and the Company will have +less than 10,000 shares under the Prior Plan. The Company believes that the availability of 6,100,000 shares under the Plan would provide sufficient additional shares to continue to make awards at +historical average rates for one year or less. +Promotion of Good Corporate Governance Practices +The Plan includes a number of provisions that we believe promote good corporate governance and the interests of stockholders. Under +the Plan: +• Stock options and stock appreciation rights may not be granted with exercise prices lower than the fair market value of the underlying +shares on the grant date +• The administrator may not, without prior approval of the Company's stockholders, "reprice" any previously granted underwater stock +options or stock appreciation rights +• Shares underlying awards issued under the Plan will not be recycled into the share pool under the Plan if they are withheld in payment +of the exercise price of the award or to satisfy tax withholding obligations in respect of the award or if they were not issued upon the net +Page 72 | +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +2016 PROXY STATEMENT +settlement +or net exercise of stock-settled stock appreciation rights, and the number of shares available for delivery under the Plan will not be increased by any shares that have been repurchased on +the open market with the proceeds of a stock option exercise +• The Plan has a fungible share feature whereby so-called "full value" awards are counted against the share pool at a higher rate +(2.6:1) than stock options or stock appreciations rights +• Outstanding awards under the Plan may be forfeited in the event a participant engages in an act of misconduct +• The Administrator may recover awards made under the Plan and payments under or gain in respect of any award in accordance with the +Company's Policy for Recovery of Incentive Compensation or any other clawback policy maintained by the Company +• Awards generally must be granted with vesting schedules pursuant to which they will not vest or become exercisable for at least one +year +• The Plan limits the aggregate grant date value of awards that may be granted to non-employee directors +• No dividends or dividend equivalents will be paid with respect to performance-based restricted stock units and restricted stock until +the underlying performance awards vest +• No dividends or dividend equivalents will be paid with respect to shares subject to stock options +• Awards generally may not be transferred except by will or the laws of descent and distribution or, if approved by the administrator, +to certain family members, family trusts, or family partnerships pursuant to a gift or domestic relations order +• Under the Plan, the administrator may grant performance-based awards intended to qualify as exempt performance-based compensation +under Section 162(m) of the Internal Revenue Code of 1986, as well as other performance-based awards +Key Data +The following table provides information regarding equity awards outstanding and shares available for future awards under all of the +Company's equity plans as of January 2, 2016 (and without giving effect to approval of the Plan under this Item 4). We have no equity awards outstanding other than stock options, +restricted stock and performance awards. +Total shares underlying all outstanding stock options +6,372,394 +Weighted average exercise price of outstanding stock options +$20.54 +Weighted average remaining contractual life of outstanding stock options +6.1 +Total shares underlying all outstanding and unvested performance shares +1,506,119 +Total shares underlying all outstanding and unvested restricted stock (excluding performance shares) +1,726,639 +Shares available for future awards that could be issued under Prior Plan* +4,780,457 +Shares available for future issuance under the Outside Directors' Deferred Compensation Plan +213,542 +* No shares will be issued under Prior Plan upon the approval of the Plan (defined above as the Stock Incentive Plan of 2016). Upon approval of the +Plan, the only shares available for future awards will be the (1) shares approved under the Plan, and (2) the 213,542 shares under the Outside Directors' Deferred Compensation +Plan. No shares under any prior plan, except the Stock Incentive Plan of 2016 in the Outside Directors' Deferred Compensation Plan, will be available for future +issuance. +Section 162(m) of the Code +The Board of Directors believes that it is in the best interests of the Company and its stockholders to continue to maintain an +equity incentive plan under which awards made to the Company's executive officers may be deductible by the Company for federal income tax purposes. Approval of the Plan by the Company's stockholders +would preserve the Company's ability to grant stock options, stock appreciation rights +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +| Page +73 +Table of Contents +2016 PROXY STATEMENT +and +other awards under the Plan that may qualify as "qualified performance-based compensation" within the meaning of Section 162(m) of the Internal Revenue Code of 1986 (the "Code"). In +general, under Section 162(m) of the Code, compensation in excess of $1,000,000 paid in any one year to the Company's chief executive officer or any of the Company's three other most highly +compensated executive officers (other than the Company's CFO) is not deductible unless it satisfies the requirements of an exception for "qualified performance-based compensation." For compensation +awarded under a plan to fit within this exception under Section 162(m) of the Code, among other things, the following terms must be disclosed to and approved by the stockholders of the company +before the compensation is paid: (i) a description of the employees eligible to receive such awards, (ii) a description of the business criteria on which the performance goals may be +based, and (iii) the maximum amount that can be paid to any participant for a specified period. Although stockholder approval is one of the requirements of the exception to the deductibility +limits under Section 162(m) of the Code, even with stockholder approval, there can be no guarantee that awards under the Plan will be deductible as qualified performance-based compensation +under Section 162(m) of the Code. In addition, the Compensation Committee has and will continue to have authority to pay or provide compensation (including under the Plan, if approved by +stockholders) that is not deductible under Section 162(m) of the Code in order to maintain a competitive compensation program and provide compensation that will attract and retain highly +qualified executives. +Plan Summary +The following summary of the material terms of the Plan is qualified in its entirety by reference to the complete statement of the +Plan, which is set forth in Appendix A to this proxy statement. +Administration +The Plan will be administered by the Compensation Committee, which is referred to in this summary in its capacity as administrator of +the Plan as the "administrator." Any power of the Compensation Committee as administrator may also be exercised by the Board of Directors, except to the extent that the grant or exercise of such +authority would cause any award or transaction to become subject to (or lose an exemption under) the short-swing profit recovery provisions of Section 16 of the Exchange Act or cause an award +designated as a performance award not to qualify for treatment as performance-based compensation under Section 162(m) of the Code. Subject to the express provisions of the Plan, the +administrator is authorized and empowered to do all things that it determines to be necessary or appropriate in connection with the administration of the Plan. All decisions, determinations and +interpretations by the Compensation Committee regarding the Plan and awards granted under the Plan will be final and binding on all participants and other persons holding or claiming rights under the +Plan or to an award under the Plan. The Compensation Committee may authorize one or more officers of the Company to perform any or all things that the administrator is authorized and empowered to do +or perform under the Plan; provided, however, that no such officer may designate himself or herself as a recipient of any awards granted under the authority delegated to such officer and that any +delegation of the power to grant awards to an officer must otherwise be consistent with the requirements of Section 157(c) of the Delaware General Corporation Law. The Compensation Committee +has designated the Company's CEO, CFO, general counsel and secretary, and head of the human resource function to assist in administering the Plan and executing award agreements and other documents +entered into under the Plan. In addition, the Compensation Committee may delegate any or all aspects of the day-to-day administration of the Plan to one or more officers or employees of the Company or +any subsidiary, and/or to one or more agents. +Eligibility +Any person who is a current or prospective officer or employee of the Company or of any Company subsidiary will be eligible for +selection by the administrator for the grant of awards under the Plan. In addition, non-employee directors and any service providers who have been retained to provide consulting, advisory or other +services to the Company or to any Company subsidiary will be eligible for the grant of awards under the Plan. Stock options intended to qualify as "incentive stock options" ("ISOs") within the meaning +of Section 422 of the Code may only be granted to employees of the Company or a Company subsidiary. As of February 29, 2016, approximately 8 executive officers, 450 employees, 10 +non-employee directors and a very limited number (likely less than 10) of other service providers would be eligible to participate in the Plan. As of this same date, the closing price of a +share of common stock of the Company was $18.93. +Page 74 | +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +2016 PROXY STATEMENT +Shares Subject to the Plan and to Awards +Subject to changes in the Company's capitalization, the aggregate number of shares of the Company's common stock issuable pursuant to +all awards under the Plan will not exceed 6,100,000 plus any shares of the Company's common stock underlying awards granted under the Prior Plan or the Company's Stock Incentive Plan of 2010 that on +or after the effective date of the Plan cease for any reason to be subject to such awards (other than by reason of exercise or settlement of the awards to the extent they are exercised for or settled +in vested and nonforfeitable shares). Any shares granted under stock options or stock appreciation rights will be counted against this limit on a one-for-one basis, and any shares granted under any +other awards will be counted against this limit as 2.6 shares for every one share subject to such award. The shares issued pursuant to awards granted under the Plan may be shares that are authorized +and unissued or issued shares that were reacquired by the Company, including shares purchased in the open market. No fractional shares will be delivered under the Plan. +For +purposes of determining the share limits described in the paragraph above, the aggregate number of shares issued under the Plan at any time will equal only the number of shares actually issued (as +calculated above) upon exercise or settlement of an award. Notwithstanding the foregoing, shares subject to an award under the Plan may not again be made available for issuance under the Plan if such +shares were: (i) subject to a stock-settled stock appreciation right and were not issued upon the net settlement or net exercise of such stock appreciation right, (ii) used to pay the +exercise price of a stock option or the purchase price, if any, for an award, (iii) delivered to or withheld by the Company to pay the withholding taxes related to an award, or +(iv) repurchased on the open market with the proceeds of a stock option exercise. Shares subject to awards that have been canceled, expired, forfeited or otherwise not issued under an award and +shares subject to awards settled in cash will not count as shares issued under the Plan for purposes of the above limit. +Subject +to certain adjustments, the aggregate number of shares that may be delivered, or the value of which could be paid in cash or other property, under awards granted under the Plan during any +calendar year to any one participant may not exceed 3,600,000 and the aggregate number of shares that may be issued pursuant to the exercise of ISOs granted under the Plan may not exceed 3,600,000. +The maximum amount payable pursuant to that portion of an incentive bonus granted in any calendar year to any participant under the Plan that is intended to satisfy the requirements for +"performance-based compensation" under Section 162(m) of the Code may not exceed $20,000,000. The aggregate grant date fair value of awards (computed as of the date of grant in accordance with +applicable financial accounting rules) granted under the Plan during any calendar year to any one non-employee director will not exceed $400,000. +In +addition, (i) no portion of any grant of restricted stock will be scheduled to vest prior to the date that is one year following the date the restricted stock is granted; (ii) no +portion of any grant of an option or stock appreciation right will be scheduled to become exercisable prior to the date that is one year following the date the option or stock appreciation right is +granted; and (iii) no portion of any grant of a restricted stock unit or incentive bonus will be scheduled to vest or be settled, paid or distributed prior to the date that is one year +following the date the award is granted; provided; however, that awards that result in the issuance of an aggregate of up to 5% of the shares reserved for issuance under the Plan may be granted to +eligible persons without regard to the minimum vesting, exercisability, settlement, payment and distribution provisions described in this paragraph. +Stock Options +Stock options granted under the Plan may either be ISOs or stock options that are not intended to qualify as ISOs ("nonqualified +stock options" or "NQSOs"). The administrator will establish the exercise price per share under each stock option, which will not be less than the fair market value (or 110% of the fair market value +in the case of ISOs granted to individuals who own more than 10% of the Company's common stock) of a share on the date the stock option is granted, except in certain cases where substitute or +replacement awards are granted in connection with a merger or acquisition. The administrator will establish the term of each stock option, which in no case may exceed a period of 10 years from +the date of grant (or five years in the case of ISOs granted to individuals who own more than 10% of the Company's common stock). Unless the administrator determines otherwise, (i) upon +termination of employment other than due to death, disability, retirement or termination for cause, to the extent vested on the date of such termination, stock options remain exercisable for three +months following such date (or until the expiration +date of the stock option, if earlier), (ii) upon death or disability, stock options become fully vested and remain exercisable for one year following such event (or until the expiration date of +the stock option, if earlier), (iii) upon retirement, stock options become fully vested and remain exercisable until their expiration date, and (iv) upon termination of employment for +cause, all stock options are forfeited. +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +| Page +75 +Table of Contents +2016 PROXY STATEMENT +No +dividends or dividend equivalents may be paid or granted in respect of shares subject to stock options and no holder of a stock option is entitled to any dividends with respect to the shares +subject to stock options unless and until such stock options have vested and have been exercised in accordance with the terms of the Plan and the applicable award agreement and such shares are +reflected as issued and outstanding. +Stock Appreciation Rights +A stock appreciation right provides the right to receive the monetary equivalent of the increase in value of a specified number of +the shares over a specified period of time after the right is granted. Stock appreciation rights may be granted to participants either in tandem with or as a component of other awards granted under +the Plan ("tandem SARs") or not in conjunction with other awards ("freestanding SARs"). All freestanding SARs will be granted subject to the same terms and conditions applicable to options as set +forth above and in the Plan, and all tandem SARs will have the same exercise price, vesting, exercisability, forfeiture and termination provisions as the award to which they relate. +Restricted Stock and Restricted Stock Units +Restricted stock is an award or issuance of shares the grant, issuance, retention, vesting and/or transferability of which is subject +during specified periods of time to certain conditions (including continued employment or performance conditions) determined by the administrator. Restricted stock units are awards denominated in +units of shares under which the issuance of shares is subject to such conditions (including continued employment or performance conditions) and terms as the administrator deems appropriate. +Notwithstanding the satisfaction of any performance goals, the number of shares granted, issued, retainable and/or vested under a restricted stock award or restricted stock units on account of either +financial performance or personal performance evaluations may at all times be reduced, but not increased, by the administrator on the basis of such further consideration as the administrator may +determine. +Unless +the administrator determines otherwise, (i) upon termination of employment for any reason other than death, disability or retirement, all restricted stock and restricted stock units +still subject to restrictions as of the date of termination will be forfeited, and (ii) upon death, disability or retirement, in general, the restrictions remaining on a participant's +restricted stock and restricted stock units will lapse, except that in the case of awards intended to satisfy the exception for "performance-based compensation" under Section 162(m) of the +Code, any applicable qualifying performance criteria will not lapse upon a participant's retirement other than in a manner that is consistent with such requirements. +Unless +otherwise determined by the administrator, participants holding shares of restricted stock granted under the Plan may exercise full voting rights with respect to those shares during the period +of restriction, but participants will have no voting rights with respect to shares underlying restricted stock units unless and until such shares are reflected as issued and outstanding shares on the +Company's stock ledger. +The +administrator will determine the extent to which participants are entitled to receive dividends or dividend equivalents with respect to restricted stock and shares underlying restricted stock +units. Any cash or stock dividends and dividend equivalents with respect to restricted stock and restricted stock units granted as performance awards, if any, will be withheld by the Company for the +participant's account and will be paid, if at all, (i) in the case of restricted stock, upon the achievement of the applicable performance measure(s) and the satisfaction of any other +restrictions imposed on the restricted stock in respect of which the dividends were paid and (ii) in the case of restricted stock units, at the time the shares and/or cash underlying such +restricted stock units is paid, and any dividends deferred in respect of any restricted stock and restricted stock units granted as performance awards will be forfeited upon the forfeiture of such +restricted stock and restricted stock units. Any non-cash dividends or distributions paid with respect to restricted stock and restricted stock units granted as performance awards will be subject to +the same restrictions that apply to the award to which they relate. +Stock Awards +Stock awards may be granted under the Plan with such terms and conditions as determined by the administrator, consistent with the 5% +limit set forth above under "Shares Subject to the Plan and to Awards." Participants will have all voting, dividend, liquidation and other rights with respect to shares underlying a stock award, but +such awards may be subject to restrictions on transfer as determined by the administrator. +Page 76 | +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +2016 PROXY STATEMENT +Incentive Bonuses +An incentive bonus will confer upon the participant the opportunity to earn a future payment, in cash or shares, tied to the level of +achievement with respect to one or more performance criteria established for a performance period of not less than one year. The administrator will establish the terms and conditions to which the +award is subject, including performance criteria and the level of achievement of the criteria that will determine the target and maximum amounts payable under an incentive bonus award, which criteria +may be based on financial performance and/or personal performance evaluations. An incentive bonus may or may not be intended to satisfy the requirements of the "performance-based compensation" +exception under Section 162(m) of the Code. Notwithstanding the satisfaction of any performance goals, the amount paid under an incentive bonus award on account of either financial performance +or personal performance evaluations may be reduced, but not increased, by the administrator on the basis of such further consideration as the administrator may determine. +Deferral of Gains +The administrator may, in an award agreement or otherwise, provide for the deferred delivery of shares upon settlement, vesting or +other events with respect to restricted stock or restricted stock units, or for the deferred payment or satisfaction of an incentive bonus. However, in no event will any deferral of the delivery of +shares or any other payment with respect to any award be allowed if the administrator determines, in its sole and absolute discretion, that the deferral would result in the imposition of the +additional tax under Section 409A of the Code. +Qualifying Performance Criteria +With respect to performance-based awards the administrator may establish performance criteria and level of achievement of such +criteria that will determine the number of shares to be granted, retained, vested, issued or issuable under or in settlement of or the amount payable pursuant to an award, which criteria may be based +on "qualifying performance criteria" (as described below) or other standards of financial performance and/or personal performance evaluations. In addition, the administrator may specify that an award +or a portion of an award is intended to satisfy the requirements for "performance-based compensation" under Section 162(m) of the Code, provided that the performance criteria for such award or +portion of an award that is intended by the administrator to satisfy the requirements for "performance-based compensation" under Section 162(m) of the Code will be a measure based on one or +more qualifying performance criteria selected by the administrator and specified in writing at the time the award is granted, which will be not later than 90 days after the commencement of the +performance period to which the incentive bonus relates (or at such earlier time as is required to qualify the incentive bonus as performance-based under Section 162(m) of the Code). The +administrator will certify the extent to which any qualifying performance criteria has been satisfied, and the amount payable as a result thereof, prior to payment, settlement or vesting of any award +that is intended to satisfy the requirements for "performance-based compensation" under Section 162(m) of the Code. +For +purposes of the Plan, the term "qualifying performance criteria" means an objectively determinable measure of performance relating to any one or more of the following performance criteria, or +derivations of such performance criteria, either individually, alternatively or in any combination, applied to either the Company as a whole or to a business unit, division, line or subsidiary, either +individually, alternatively or in any combination, and measured either annually or cumulatively over a period of years, on an absolute basis or relative to a pre-established target, to previous years' +results or to an index or indices or a designated comparison group or +groups, in each case as specified by the administrator: (i) net earnings or earnings per share (including earnings before interest, taxes, depreciation and/or amortization), (ii) income, +net income or operating income, (iii) revenues, (iv) net sales, (v) return on sales, (vi) return on equity, (vii) return on capital (including return on total +capital or return on invested capital), (viii) return on assets or net assets, (ix) earnings per share, (x) economic or business value added measurements (xi) return on +invested capital, (xii) return on operating revenue, (xiii) cash flow (before or after dividends), (xiv) stock price, (xv) total stockholder return, (xvi) market +capitalization, (xvii) economic value added, (xviii) debt leverage (debt to capital), (xix) operating profit or net operating profit, (xx) operating margin or profit +margin, (xxi) cash from operations, (xxii) market share, (xxiii) product development or release schedules, (xxiv) new product innovation, (xxv) cost reductions, +(xxvi) customer acquisition or retention, (xxvii) customer service, or (xxviii) customer satisfaction. +To +the extent consistent with the requirements for satisfying performance-based compensation exception under Section 162(m) of the Code, the administrator (i) may appropriately adjust +any evaluation of performance under qualifying performance criteria to eliminate the effects of charges for restructurings, discontinued operations, unusual or infrequently occurring items and all +items of gain, loss or expense determined +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +| Page +77 +Table of Contents +2016 PROXY STATEMENT +to +be unusual or infrequent in nature or related to the disposal of a segment of a business or related to a change in accounting principle all as determined in accordance with applicable accounting +provisions, as well as the cumulative effect of accounting changes, in each case as determined in accordance with generally accepted accounting principles or identified in the Company's financial +statements or notes to the financial statements, and (ii) may appropriately adjust any evaluation of performance under qualifying performance criteria to exclude any of the following events +that occurs during a performance period: (a) asset write-downs, (b) litigation, claims, judgments or settlements, (c) the effect of changes in tax law or other such laws or +provisions affecting reported results, and (d) accruals of any amounts for payment under the Plan or any other compensation arrangement maintained by the Company. +Suspension or Termination of Awards +Unless otherwise determined by the administrator, (i) if the Company's chief executive officer or any other person designated +by the administrator reasonably believes that a participant may have committed an act of misconduct (as defined in the Plan), then the participant's rights to exercise any stock option, vest in any +award and/or receive payment for or shares in settlement of an award may be suspended pending a determination of whether such misconduct has been committed, and (ii) if the administrator, the +Company's chief executive officer or any other person designated by the administrator determines that a participant has committed an act of misconduct, then the participant (a) may not exercise +any stock option or stock appreciation right, vest in any award, have restrictions on an award lapse or otherwise receive payment of an award, (b) will forfeit all outstanding awards, and +(c) may be required, at the discretion of the administrator, to return or repay to the Company any then unvested shares previously +issued under the Plan. In addition, the administrator may seek to recover awards made under the Plan and payments under or gain in respect of any award in accordance with the Company's Policy for +Recovery of Incentive Compensation or any successor or additional clawback or recoupment policy or as otherwise required by applicable law or applicable stock exchange listing standards. +Settlement of Awards +Awards (other than stock awards), may be settled in shares, cash or a combination thereof, as determined by the administrator. +No Repricing Without Stockholder Approval +Other than in connection with certain changes in the Company's capitalization, the administrator may not, without prior approval of +the Company's stockholders, effect any "repricing" of a previously granted stock option or stock appreciation right that is "underwater" (i.e., the fair market value of the shares underlying +such award is less than the exercise price of such award) by (i) amending or modifying the terms of the award to lower the exercise price; (ii) canceling the underwater award and +granting either (A) replacement stock options or stock appreciation rights, as applicable, having a lower exercise price or (B) restricted stock, restricted stock units, performance +awards or stock awards in exchange; or (iii) cancelling or repurchasing the underwater award for cash or other securities. +Amendment and Termination +The Board of Directors may amend, alter or discontinue the Plan, and the administrator may amend or alter any agreement or other +document evidencing an award made under the Plan, except that, unless in connection with a change in the capitalization of the Company or a change in control, no such amendment or alteration may, +without the approval of the stockholders of the Company: (i) increase the maximum number of shares for which awards may be granted under the Plan, (ii) reduce the minimum price set forth +in the Plan at which stock options or stock appreciation rights may be granted, (iii) reduce the exercise price of outstanding stock options or stock appreciation rights, (iv) extend the +term of the Plan, (v) change the class of persons eligible to be participants, (vi) otherwise amend the Plan in any manner requiring stockholder approval by law or under the New York +Stock Exchange listing requirements (or the listing requirements of any successor exchange that is the primary stock exchange for trading of the Company's shares), or (vii) increase the +individual maximum limits set forth in the Plan. +In +addition, no amendment or alteration to the Plan or an award or award agreement may be made that would impair the rights of the holder of an award without such holder's consent, provided that no +such consent will be required if the administrator determines in its sole discretion and prior to the date of any change in control that such amendment or alteration either is required or advisable in +order for the Company, the Plan or the award to satisfy any law or regulation or to meet the requirements of or avoid adverse financial accounting consequences under any accounting standard. In +addition, the Plan may not be amended in any way that causes the Plan to fail to comply +Page 78 | +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +2016 PROXY STATEMENT +with +or be exempt from Section 409A of the Code, unless the Board of Directors expressly determines to amend the Plan to be subject to Section 409A of the Code. +The +administrator may, in its sole and absolute discretion, modify the provisions of the Plan or an award as they pertain to a participant who is employed or providing services outside the United +States in order to comply with applicable foreign law or to recognize differences in local law, currency or tax policy. +Change in Control +The administrator may determine the effect of a change in control (as defined in the Plan) on outstanding awards in a manner that is +fair and equitable to participants (as determined by the administrator in its reasonable discretion). These effects, which need not be the same for all participants, may include, but are not limited +to (i) substituting for the shares subject to an outstanding award or portion thereof the stock or securities of the surviving corporation or any successor corporation (or parent or subsidiary +thereof), in which event the aggregate exercise price of the award will remain the same, and/or (ii) converting any outstanding award or portion thereof into a right to receive cash or other +property following the consummation of the change in control in an amount equal to the value of the consideration to be received for one share of the Company's common stock in connection with such +transaction less the purchase or exercise price of the shares subject to the award, if any, multiplied by the number of shares subject to the award or portion thereof. +In +addition, unless otherwise determined by the administrator, upon a change in control all outstanding stock options and stock appreciation rights will become immediately exercisable and, unless such +awards will receive a cash payment as described in the following sentence, will remain exercisable through their terms without any requirement to continue in the service or employ of the Company and +all other outstanding awards immediately will become vested. The administrator may determine that some or all participants holding stock options or stock appreciation rights will receive with respect +to some or all of the shares subject to such awards cash in an amount equal to the excess of (i) the greater of (a) the highest sales price of the shares on the New York Stock Exchange +(or any successor exchange that is the primary stock exchange for trading of the Company's shares) on the date immediately prior to the change in control and (b) the highest price per share +actually paid in connection with the change in control, over (ii) the exercise price of the award. +Adjustments +The number and kind of shares available for issuance under the Plan, and the number and kind of shares subject to the individual and +ISO limits set forth under the Plan, will be equitably adjusted by the administrator to reflect any reorganization, reclassification, combination of shares, stock split, reverse stock split, spin-off, +dividend or distribution of securities, property or cash (other than regular, quarterly cash dividends), or any other event or transaction that affects the number or kind of shares of the Company +outstanding. The terms of any outstanding award will also be equitably adjusted by the administrator as to +price, number or kind of shares subject to such award and other terms to reflect the foregoing events, which adjustments need not be uniform as between different awards or different types of awards. +In +the event there is a change in the number or kind of outstanding shares under the Plan as a result of a change of control, other merger, consolidation or otherwise, then the administrator will +determine the appropriate and equitable adjustment to be effected. In addition, in the event of such a change, the administrator may accelerate the time or times at which any award may be exercised +and may provide for cancellation of such accelerated awards that are not exercised within a time prescribed by the administrator in its sole discretion. +Transferability +Unless the administrator determines otherwise, awards may not be sold, transferred, pledged, assigned, or otherwise alienated or +hypothecated by a participant other than by will or the laws of descent and distribution, and each stock option or stock appreciation right may be exercisable only by the participant during his or her +lifetime. To the extent permitted by the administrator, the person to whom an award is initially granted may transfer awards, in certain limited circumstances, to certain family members, family +trusts, or family partnerships. +No Right to Company Employment +Nothing in the Plan or an award agreement will interfere with or limit in any way the right of the Company, its subsidiaries and/or +its affiliates to terminate any participant's employment, service on the Board of Directors or service for the Company at any time or for any +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +| Page +79 +Table of Contents +2016 PROXY STATEMENT +reason +not prohibited by law, nor will the Plan or an award itself confer upon any participant any right to continue his or her employment or service for any specified period of time. Neither an award +nor any benefits arising under the Plan will constitute an employment contract with the Company, any subsidiary and/or its affiliates. +Effective Date and Termination of the Plan +The Plan was adopted by the Board of Directors on February 10, 2016. Any awards granted under the Plan prior to the date the +Plan is approved by the Company's stockholders are subject to such approval. The Plan will remain available for the grant of awards until February 10, 2026, unless earlier terminated by the +Board of Directors. +Federal Income Tax Treatment +The following discussion is a general summary as of the date of this Proxy Statement of the significant U.S. federal income tax +consequences to the Company and the participants in the Plan. The discussion is intended solely for general information and does not make specific representations to any participant. The discussion +does not address state, local or foreign income tax rules or other U.S. tax provisions, such as estate or gift taxes. A recipient's particular situation may be such that some variation of the basic +rules is applicable to him or her. In addition, the federal income tax laws and regulations are frequently revised and may change at any time. Therefore, each recipient is urged to consult a tax +advisor before exercising any award or before disposing of any shares acquired under the plan both with respect to federal income tax consequences as well as any foreign, state or local tax +consequences. +Stock Options +ISOs and NQSOs are treated differently for federal income tax purposes. ISOs are intended to comply with the requirements of +Section 422 of the Code. NQSOs do not comply with such requirements. +In +general, a participant is not taxed on the grant or exercise of an ISO. The difference between the exercise price and the fair market value of the shares on the exercise date may, however, be a +preference item for purposes of the alternative minimum tax. If a participant holds the shares acquired upon exercise of an ISO until the later of two years following the stock option grant date and +one year following exercise, the gain, if any, upon a subsequent disposition of such shares will be long term capital gain. The amount of the gain will be the difference between the proceeds received +on disposition and the participant's basis in the shares (which generally equals the exercise price). If a participant disposes of stock acquired pursuant to exercise of an ISO before satisfying these +holding periods, the participant will recognize ordinary income in the year of disposition an amount equal to the excess of the fair market value of the shares at the time of exercise (or, if less, +the amount realized on the disposition of the shares), over the exercise price paid for the shares, and capital gain or loss for any other difference between the sale price and the exercise price. The +Company is not entitled to an income tax deduction on the grant or exercise of an ISO or on the participant's disposition of the shares after satisfying the holding period requirement described above. +If the holding periods are not satisfied, the Company generally will be entitled to a deduction in the year the participant disposes of the shares in an amount equal to the ordinary income recognized +by the participant. +The +Company does not guarantee that any option intended to be an ISO will quality for the tax treatment of ISOs described above. If an option intended to be an ISO fails to so qualify, it will be +taxed as an NQSO, as described below. +In +general, a participant is not taxed on the grant of an NQSO. On exercise, the participant recognizes ordinary income equal to the difference between the exercise price and the fair market value of +the shares acquired on the date of exercise. The Company is generally entitled to an income tax deduction in the year of exercise in the amount recognized by the participant as ordinary income. The +participant's gain (or loss) on subsequent disposition of the shares is long-term capital gain (or loss) if the shares are held for at least one year following exercise, and otherwise is short-term +capital gain (or loss). The Company does not receive a deduction for any such capital gain. +Stock Appreciation Rights +In general, the recipient of a freestanding SAR will not recognize any taxable income at the time the freestanding SAR is granted. If +the freestanding SAR is settled in cash, the cash will be taxable as ordinary income to the recipient at the time that it is received. If the +Page 80 | +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +2016 PROXY STATEMENT +freestanding +SAR is settled in shares, the recipient will recognize ordinary income equal to the excess of the fair market value of the shares on the day the free standing SAR is exercised over any +amounts paid by the recipient for the shares. +With +respect to tandem SARs, if a holder elects to surrender the underlying stock option in exchange for cash or stock equal to the appreciation inherent in the underlying stock option, the tax +consequences to the employee will be the same as discussed above relating to freestanding SARs. If the employee elects to exercise the underlying stock option, the holder will be taxed at the time of +exercise as if he or she had exercised an NQSO (discussed above). +The +Company generally is entitled to a deduction with respect to a SAR at the same time the recipient recognizes ordinary income with respect thereto. +Restricted Stock and Restricted Stock Units +A participant who is awarded or purchases shares subject to a substantial risk of forfeiture, or restricted stock, generally does not +recognize income at the time of the grant. When the risk of forfeiture lapses, the participant generally recognizes ordinary income in an amount equal to the excess of the fair market value of the +shares over the purchase price, if any, +and a deduction is generally available to the Company in the same year that the participant recognizes income. However, a participant may make an election under Section 83(b) of the Code to +recognize taxable ordinary income at the time the shares are transferred to the participant, rather than later, when the risk of forfeiture lapses, in an amount equal to the fair market value of the +shares at the time of such transfer. Such election must be made no later than 30 days after the date the shares are transferred to the participant. If the participant makes a timely and +effective election, when the restrictions on the shares lapse, the participant will not recognize any additional income. For purposes of determining capital gain or loss on a sale of shares acquired +under a restricted stock award under the Plan, the holding period in the shares begins when the participant recognizes taxable income with respect to the transfer. The participant's tax basis in the +shares equals the amount paid for the shares plus any income realized with respect to the transfer. If the participant forfeits the shares to the Company (e.g., upon the participant's +termination prior to vesting), the participant may not claim a deduction with respect to the income recognized as a result of the election. Dividends (if any) paid with respect to unvested shares of +restricted stock generally will be taxable at the time the dividends are received as ordinary income to the participant, if an effective 83(b) election was not made with respect to the shares. +A +participant who is awarded restricted stock units generally does not recognize income at the time of grant. Instead, the participant is taxed upon vesting (and a corresponding deduction is generally +available to the Company), unless he or she has made a proper election to defer receipt of the shares (or cash if the award is cash settled) under Section 409A of the Code. If the shares +delivered are restricted for tax purposes, the participant will instead be subject to the rules described above for restricted stock. +Stock Awards +A participant who receives a stock award generally is required to recognize ordinary income in an amount equal to the excess of the +fair market value of the shares on the date the shares are granted over the purchase price (if any) paid for the shares. The Company generally will be entitled to a deduction with respect to stock +awards at the same time the recipient recognizes ordinary income with respect thereto. +Incentive Bonuses +A participant will have taxable income at the time an incentive bonus is paid. At that time, the participant will recognize ordinary +income equal to the value of the amount then payable and, the Company generally will be entitled to a corresponding deduction. +Certain Change in Control Payments +Under Section 280G of the Code, the vesting or accelerated exercisability of stock options or the vesting and payments of +other awards in connection with a change in control of a corporation may be required to be valued and taken into account in determining whether participants have received compensatory payments, +contingent on the change in control, in excess of certain limits. If these limits are exceeded, a substantial portion of amounts payable to the participant, including income recognized by reason of +the grant, vesting or exercise of awards, may be subject to an additional 20% federal tax and may be non-deductible to the Company. +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +| Page +81 +Table of Contents +2016 PROXY STATEMENT +Company Deduction and Section 162(m) of the Code +As described above under "Section 162(m) of the Code," Section 162(m) of the Code generally disallows a deduction to a +publicly held corporation and its affiliates for certain compensation paid to a "covered employee" in a taxable year in excess of $1 million, unless the compensation satisfies the requirements +of the "performance-based compensation" exception under Section 162(m) of the Code. Stock options, stock appreciation rights and certain performance awards under the Plan are generally intended +to satisfy the requirements of this exception. However, as discussed above, the Compensation Committee will have discretionary authority to grant awards under the Plan that do not satisfy the +requirements of this exception. +New Plan Benefits +The benefits that will be awarded or paid under the Plan are not currently determinable. Awards granted under the Plan are within the +discretion of the Compensation Committee. On February 10, 2016, the Compensation Committee approved, subject to stockholder approval of the Plan, the grant of the stock options described in the +table below. If the Company's stockholders do not approve the Plan, these awards will be cancelled. +Name and Position +Number of Stock Options +Blake W. Krueger +Chief Executive Officer +- +James A. Gabel +Former President, Performance Group +- +Donald T. Grimes +Former Senior Vice President, CFO, Treasurer and Chief Accounting Officer +- +Michael Jeppesen +President, Global Operations Group +51,988 +Andrew Simister +Former President, Lifestyle Group +- +Michael D. Stornant +Senior Vice President, CFO, Treasurer and Chief Accounting Officer +70,948 +James D. Zwiers +President, International Group +64,465 +Executive Group +320,307 +Non-Executive Director Group +- +Non-Executive Officer Group +1,130,082 +Page 82 | +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +2016 PROXY STATEMENT +Equity Compensation Plan Information +The following table provides information about the Company's equity compensation plans as of January 2, 2016: +Plan Category 1 +Number of Securities to be +Issued Upon Exercise of +Outstanding Options, +Warrants and Rights +(a) +Weighted Average +Exercise Price of +Outstanding Options, +Warrants, and Rights +(b) +Number of Securities Remaining +Available for Future Issuance +under Equity Compensation +Plans (Excluding Securities +Reflected in Column (a)) +(c) +Equity compensation plans approved by security holders +6,372,394 +2, 3 +$ +20.54 +4,993,999 +4 +Equity compensation plans not approved by security holders +Total +6,372,394 +$ +20.54 +4,993,999 +1 Each plan for which aggregated information is provided contains customary anti-dilution provisions that are applicable in the event of a stock +split, stock dividend or certain other changes in the Company's capitalization. 2 Includes: (i) 5,875,729 stock options awarded to employees under the Amended and Restated +Stock Incentive Plan of 1999, the Amended and +Restated Stock Incentive Plan of 2001, the Amended and Restated Stock Incentive Plan of 2003, the Amended and Restated Stock Incentive Plan of 2005, the Stock Incentive Plan of 2010 and the +Stock Incentive Plan of 2013; and (ii) and 496,665 stock options awarded to non-employee directors under the Stock Incentive Plan of 2013, Stock Incentive Plan of 2010, the Amended +and Restated Stock Incentive Plan of 2005 and the Amended and Restated Directors' Stock Option Plan last approved by stockholders in 2002. Column (a) does not include stock units +credited to outside directors' fee accounts or retirement accounts under the Outside Directors' Deferred Compensation Plan. Stock units do not have an exercise price. Each stock unit +credited to a director's fee account and retirement account under the Outside Directors' Deferred Compensation Plan will be converted into one share of common stock upon distribution. Column +(a) also does not include shares of restricted or unrestricted common stock previously issued under the Company's equity compensation plans. 3 Of this amount, 2,030,948 +stock options were not exercisable as of January 2, 2016 due to vesting restrictions. 4 Comprised of: (i) 213,542 shares available for issuance under the Outside +Directors' Deferred Compensation Plan upon the retirement of the +current directors or upon a change in control; and (ii) 4,780,457 shares issuable under the Stock Incentive Plan of 2013. Upon stockholder approval of the Stock Incentive Plan of +2016, no additional shares will be issued under the Stock Incentive Plan of 2013. +The +Outside Directors' Deferred Compensation Plan is a supplemental, unfunded, nonqualified deferred compensation plan for non-employee directors. Beginning in 2006, the Company began paying an annual +equity retainer to non-employee directors in the form of a contribution under the Outside Directors' Deferred Compensation Plan. Non-employee directors may also voluntarily elect to receive, in lieu +of some or all directors' fees, a number of stock units equal to the amount of the deferred directors' fees divided by the fair market value of the Company's common stock on the date of payment of the +next cash dividend on the Company's common stock. These stock units are increased by a dividend equivalent based on dividends paid by the Company and the amount of stock units credited to the +participating director's fee account and retirement account. Upon distribution, the participating directors receive a number of shares of the Company's common stock equal to the number of stock units +to be distributed at that time. Distribution is triggered by termination of service as a director or by a change in control of the Company and can occur in a lump sum, in installments or on another +deferred basis. A total of 343,685 shares have been issued to a trust to satisfy the Company's obligations when distribution is triggered and are included in shares the Company reports as issued and +outstanding. +The +Stock Incentive Plan of 2013 is an equity-based incentive plan for officers, key employees, and directors. The Stock Incentive Plan of 2013 authorizes awards of stock options, restricted common +stock, common stock, restricted stock units and/or stock appreciation rights. The Stock Incentive Plan of 2013 provides that each share of restricted or unrestricted common stock and each restricted +stock unit issued under the plan is counted as 2.6 shares against the total number of shares authorized for issuance under the plan. The number of securities listed as remaining available in column +(c) of the table assumes only stock options will be issued under the plan in the future; each stock option counts as only one share against the total number of shares authorized for issuance +under the plan. Actual shares available under the plan will be less to the extent that the Company awards restricted common stock, unrestricted common stock or restricted stock units under the plan. +The numbers provided in this footnote and in column (c) will increase to the extent that stock options relating to the number of shares listed in column (a) of the table or other +outstanding awards (e.g., shares of restricted or unrestricted stock, restricted stock units or stock +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +| Page +83 +Table of Contents +2016 PROXY STATEMENT +appreciation +rights) previously issued under the plan are canceled, surrendered, modified, exchanged for substitutes, expire or terminate prior to exercise or vesting because the number of shares +underlying any such awards. +Of +the total number of shares available under column (c), the number of shares with respect to the following plans may be issued other than upon the exercise of a stock option, warrant or right +outstanding as of January 2, 2016: +• Outside Directors' Deferred Compensation Plan: 213,542 +• Stock Incentive Plan of 2013: 1,838,637 +Vote Required and Board Recommendation +Approval of the Stock Incentive Plan of 2016 requires the affirmative vote of a majority of shares cast affirmatively or negatively +on the matter for approval. +Board Recommendation +The Board of Directors recommends that you vote "FOR" approval of the Stock Incentive Plan of 2016. +Page 84 | +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +2016 PROXY STATEMENT +Related Party Matters +RELATED PERSON TRANSACTIONS POLICY +Wolverine Worldwide's Board adopted written policies and procedures regarding related person transactions. They require the +Governance Committee to review and either approve or disapprove the Company entering into any Interested Transactions (defined below). If advance approval is not feasible, then the Governance +Committee must review and ratify the Interested Transaction at its next meeting. +Interested Transaction +Any transaction, arrangement or relationship or series of similar transactions, arrangements or relationships (including any indebtedness or guarantee of indebtedness) in which: +(1) +the aggregate amount involved is or is expected to exceed $120,000 since the beginning of Wolverine Worldwide's last completed fiscal year; +(2) +Wolverine Worldwide is a participant; and +(3) +any Related Person (defined below) has or will have a direct or indirect interest. +An Interested Transaction does not include: +1. +Any employment compensation paid to an executive officer of the Company if the Compensation Committee approved or recommended to the Board of Directors for approval such compensation. +2. +Any compensation paid to a director for service as a director of the Company. +3. +Any transaction in which a Related Person has an indirect interest solely as a result of being (i) a director or, together with all other Related Persons, as defined below, a less than 10% beneficial owner of an equity interest in another +entity, or both, or (ii) a limited partner in a partnership in which the Related Person, together with all other Related Persons, has an interest of less than 10%. +4. +Any transaction in which the Related Person's interest arises solely from the ownership of the Company's common stock and all holders of the Company's common stock received the same benefit on a pro rata basis (e.g., a dividend). +Related Person +Any: +(a) +person who is or was at any point during the last fiscal year for which Wolverine Worldwide filed an Annual Report on Form 10-K and proxy statement, an executive officer, director or, to the extent information regarding such nominee is being +presented in a proxy or information statement relating to the election of that nominee as a director, nominee for election as a director; +(b) +beneficial owner of greater than five percent of Wolverine Worldwide's common stock; or +(c) +immediate family member * of any of the foregoing. +* Immediate family member is defined as a person's spouse, parents, stepparents, children, stepchildren, +siblings, mothers-and fathers-in-law, sons- and daughters-in-law, and brothers- and sisters-in-law and anyone residing in such person's home (other than a tenant or employee). +The +Governance Committee considers whether the Interested Transaction is on terms no less favorable than terms generally available to an unaffiliated third-party under the same or similar +circumstances, the extent of the Related Person's interest in the transaction, and other factors that it deems relevant. No director participates in any discussion or approval of an Interested +Transaction for which he or she is a Related Person, except to provide information to the Governance Committee. +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +| Page +85 +Table of Contents +2016 PROXY STATEMENT +Additional Information +STOCKHOLDERS LIST +A list of stockholders entitled to vote at the meeting will be available for review by Wolverine Worldwide stockholders at the office +of Secretary, Wolverine World Wide, Inc., 9341 Courtland Drive, N.E., Rockford, Michigan 49351, during ordinary business hours for the 10-day period before the meeting. +DIRECTOR AND OFFICER INDEMNIFICATION +The Company indemnifies its directors and NEOs to the fullest extent permitted by law so that they will be free from undue concern +about personal liability in connection with their service to the Company. +SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE +Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") requires the Company's directors and +NEOs, and persons who beneficially own more than 10% of the outstanding shares of the Company's common stock, to file reports of ownership and changes in ownership of shares of common stock with the +SEC. Directors, NEOs and greater than 10% beneficial owners are required by SEC regulations to furnish Wolverine Worldwide with copies of all Section 16(a) reports they file. Based on its +review of the copies of such reports received by it, or written representations from certain reporting persons that no reports on Form 5 were required for those persons for fiscal year 2015, +the Company believes that during fiscal year 2015, its officers and directors filed the required reports under Section 16(a) on a timely basis. +STOCKHOLDER PROPOSALS FOR INCLUSION IN NEXT YEAR'S PROXY STATEMENT +Pursuant to SEC Rule 14a-8, some stockholder proposals may be eligible for inclusion in Wolverine Worldwide's 2017 proxy +statement and proxy card. Any such stockholder proposals must be submitted in writing to the Secretary of Wolverine Worldwide no later than the close of business on November 14, 2016. You +should address all stockholder proposals to the attention of Secretary, Wolverine World Wide, Inc., 9341 Courtland Drive, N.E., Rockford, Michigan 49351. +OTHER STOCKHOLDER PROPOSALS FOR PRESENTATION AT NEXT YEAR'S ANNUAL MEETING +The Company's By-Laws require that any stockholder proposal that is not submitted for inclusion in next year's proxy statement under +SEC Rule 14a-8, but is instead sought to be presented directly at the 2017 Annual Meeting of Stockholders, must be received at the Company's principal executive offices by the close of business +not less than 90 days nor more than 120 days prior to the first anniversary of the 2016 Annual Meeting. As a result, proposals, including director nominations, submitted pursuant to +these provisions of the By-laws must be received between December 22, 2016, and the close of business on January 21, 2017. You should address a proposal to Secretary, Wolverine World +Wide, Inc., 9341 Courtland Drive N.E., Rockford, Michigan 49351, and include the information and comply with the requirements set forth in those By-laws, which the Company has posted on its +website. SEC rules permit management to vote proxies in its discretion in certain cases if the stockholder does not comply with this deadline, and in certain other cases notwithstanding the +stockholder's compliance with this deadline. +Page 86 | +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +2016 PROXY STATEMENT +VOTING SECURITIES +Stockholders of record at the close of business on March 1, 2016, are eligible to vote at the Annual Meeting. The Company's +voting securities consist of its $1.00 par value common stock, and there were 99,858,594 shares outstanding and entitled to vote on the record date. Each share outstanding on the record date will be +entitled to one vote on each director nominee and one vote on each other matter. Treasury shares are not voted. Individual votes of stockholders are kept private, except as +appropriate to meet legal requirements. Access to proxies and other individual stockholder voting records is limited to the independent inspectors of election and certain employees of the Company and +its agents who acknowledge their responsibility to comply with this policy of confidentiality. +CONDUCT OF BUSINESS +A majority of the outstanding shares of common stock as of the record date must be present at the Annual Meeting in order to hold the +Annual Meeting and conduct business. This is called a "quorum." Your shares are counted as present at the meeting if you are present at the Annual Meeting and vote in person, a proxy card has been +properly submitted by you or on your behalf, or you have submitted your proxy by telephone or by Internet, or by completing, signing, dating and returning your proxy form in the enclosed envelope. +Both abstentions and broker non-votes (defined below in " Vote Required for Election and Approval ") are counted as present for the purpose of determining +the presence of a quorum. +VOTE REQUIRED FOR ELECTION AND APPROVAL +For Item 1, Election of Directors, directors are elected by a majority of votes cast unless the election is contested, in +which case directors are elected by a plurality of votes cast. A majority of votes cast means that the number of shares voted "for" a Director nominee exceeds the number of votes cast "against" the +Director nominee. If an incumbent director in an uncontested election does not receive a majority of votes cast for his or her election, under our Corporate Governance Guidelines the director is +required to submit a letter of resignation to the Board for consideration by the Governance Committee. The Governance Committee will then make a recommendation to the Board as to whether to accept or +reject the tendered resignation. The Governance Committee and the Board, in making their decisions, may implement any procedures they deem appropriate and may consider any factor or other information +that they deem relevant. The Board will then act on the tendered resignation, taking into account the Governance Committee's recommendation, and will publicly disclose its decision regarding the +resignation within 90 days after the results of the election are certified. A director whose resignation is under consideration shall abstain from participating in any +recommendation or decision regarding that resignation. If the resignation is not accepted, the director will continue to serve until the next annual meeting of stockholders at which such director +faces re-election and until such director's successor is elected and qualified. +Item 2, +Ratification of Appointment of Independent Registered Public Accounting Firm, requires the affirmative vote of a majority of shares cast affirmatively or negatively on the matter for +approval. +Item 3, +Advisory Resolution To Approve Executive Compensation, is a non-binding, advisory vote. Therefore, there is no required vote that would constitute approval. We value the opinions +expressed by our stockholders in this advisory vote, and our Board and Compensation Committee will consider the outcome of these votes when designing our compensation programs and making future +compensation decisions for our named executive officers. +Item 4, +Approval of the Stock Incentive Plan of 2016 requires the affirmative vote of shares cast affirmatively or negatively on the matter for approval. +With +respect to the Items 1, 2, 3 and 4, abstentions and broker non-votes, if any, will have will have no effect. Generally, broker non-votes occur when shares held by a broker in "street name" +for a beneficial owner are not voted with respect to a particular proposal because (1) the broker has not received voting instructions from the beneficial owner, and (2) the broker lacks +discretionary voting power to vote those shares. Brokers do not have discretionary authority with respect to Item 1, Item 3 or Item 4 but do have discretionary authority with +respect to Item 2. +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +| Page +87 +Table of Contents +2016 PROXY STATEMENT +VOTING RESULTS OF THE ANNUAL MEETING +The Company will announce preliminary voting results at the Annual Meeting and publish final results in a Form 8-K within four +business days following the Annual Meeting. If final results are not known within four business days of the +Annual Meeting, then the Company will file a Current Report on Form 8-K with the preliminary results and file an amended Current Report on Form 8-K within four business days of +the availability of the final results. +ATTENDING THE ANNUAL MEETING +You may vote shares held directly in your name as the stockholder of record in person at the Annual Meeting. If you choose to vote in +person, please bring the enclosed proxy card and proof of identification. Even if you plan to attend the Annual Meeting in person, Wolverine Worldwide recommends that you vote your shares in advance +as described below so that your vote will be counted if you later decide not to attend the Annual Meeting. You may vote shares held in "street name" through a brokerage account or by a bank or other +nominee in person if you obtain a proxy from the record holder giving you the right to vote the shares. +MANNER FOR VOTING PROXIES +The shares represented by all valid proxies received by telephone, by Internet or by mail will be voted in the manner specified. +Where the stockholder has not indicated a specific choice, the shares represented by all valid proxies received will be voted in accordance with the Board's recommendations as follows: (1) for +each of the nominees for directors named earlier in this proxy statement, (2) for ratification of the appointment of the independent registered public accounting firm, (3) for approval +of the advisory resolution to approve executive compensation, and (4) for approval of the Stock Incentive Plan of 2016. The Board has not received timely notice of any matter that may come +before the Annual Meeting. However, should any matter not described above be properly presented at the Annual Meeting, the persons named in the proxy form will vote in accordance with their judgment +as permitted. +REVOCATION OF PROXIES +A stockholder who gives a proxy may revoke it at any time before it is exercised by voting in person at the Annual Meeting, by +delivering a subsequent proxy or by notifying the inspectors of election in writing of such revocation. If your Wolverine Worldwide shares are held for you in a brokerage, bank or other institutional +account, you must obtain a proxy from that entity and bring it with you to hand in with your ballot, in order to be able to vote your shares at the Annual Meeting. +SOLICITATION OF PROXIES +The Company will pay the expenses of solicitation of proxies for the Annual Meeting. Solicitations may be made in person or by +telephone, by officers and employees of the Company, or by nominees or other fiduciaries who may mail materials to or otherwise communicate with the beneficial owners of shares held by the nominees or +other fiduciaries. These individuals will not be paid any additional compensation for any such solicitation. Upon request, the Company will reimburse brokers, dealers, banks and trustees, or their +nominees, for reasonable expenses incurred by them in forwarding material to beneficial owners of the Company's common stock. The Company has engaged Georgeson Inc. at an estimated cost of +$9,500, plus expenses and disbursements, to assist in solicitation of proxies. +DELIVERY OF DOCUMENTS TO STOCKHOLDERS SHARING AN ADDRESS +If you are the beneficial owner, but not the record holder, of shares of Wolverine Worldwide stock, your broker, bank or other +nominee may only deliver one copy of this proxy statement and the Company's 2015 Annual Report to multiple stockholders who share an address, unless that nominee has received contrary instructions +from one or more of the stockholders. The Company will deliver promptly, upon written or oral request, a separate copy of this proxy statement and its 2015 Annual Report to a stockholder at a shared +address to which a single copy of the documents was delivered. A stockholder who wishes to receive a separate copy of the proxy statement and annual report, now or in the future, or stockholders who +share an address and receive multiple copies of the proxy statement and annual report but would like to receive a single copy, should submit this request by writing to Investor Relations, Wolverine +World Wide, Inc., 9341 Courtland Drive N.E., Rockford, +Page 88 | +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +2016 PROXY STATEMENT +Michigan +49351, or by calling (616) 866-5500 and asking for Investor Relations. Beneficial owners sharing an address who are receiving multiple copies of proxy materials and who wish to receive +a single copy of such materials in the future should make a request directly to their broker, bank or other nominee. +ACCESS TO PROXY STATEMENT AND ANNUAL REPORT +Wolverine Worldwide's financial statements for the fiscal year ended January 2, 2016, are included in the Company's 2015 +Annual Report, which the Company is providing to stockholders at the same time as this proxy statement. Wolverine +Worldwide's Proxy Statement for the Annual Meeting and the Annual Report to Stockholders for the fiscal year ended January 2, 2016, are available at www.wolverineworldwide.com/2016annualmeeting . If you have not +received or do not have access to the 2015 Annual Report, write to Wolverine World +Wide, Inc., 9341 Courtland Drive N.E., Rockford, Michigan 49351, Attn: Investor Relations or call (616) 866-5500 and ask for Investor Relations, and the Company will send a +copy to you without charge. +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +| Page +89 +Table of Contents +APPENDIX A +WOLVERINE WORLD WIDE, INC. +STOCK INCENTIVE PLAN OF 2016 +1. Purpose +The purpose of the Wolverine World Wide, Inc. Stock Incentive Plan of 2016 (the "Plan") is to advance the interests of Wolverine World Wide, Inc. (the "Company") +by stimulating the efforts of employees, officers, non-employee directors and other service providers, in each case who are selected to be participants, by heightening the desire of such persons to +continue working toward and contributing to the success and progress of the Company. The Plan supersedes the Company's Stock Incentive Plan of 2010 and the Company's Amended and Restated Stock +Incentive Plan of 2013 (the "Prior Plans") with respect to future awards, and provides for the grant of Incentive and Nonqualified Stock Options, Stock Appreciation Rights, Restricted Stock, +Restricted Stock Units and Stock Awards, any of which may be performance-based, and for Incentive Bonuses, which may be paid in cash or stock or a combination thereof, as determined by the +Administrator. No new awards shall be issued under the Prior Plans after the approval of this Plan by the Company's stockholders. +2. Definitions +As used in the Plan, the following terms shall have the meanings set forth below: +(a) "Act" +means the Securities Exchange Act of 1934, as amended from time to time and in effect, or any successor statute as from time to time in effect. +(b) "Act +of Misconduct" means an act of embezzlement, fraud, dishonesty, nonpayment of any obligation owed to the Company or any Subsidiary, breach of fiduciary duty, or deliberate +disregard of the Company or Subsidiary rules resulting in loss, damage or injury to the Company or any Subsidiary, or if a Participant makes an unauthorized disclosure of any Company or Subsidiary +trade secret or confidential information, solicits any employee or service provider to leave the employ or cease providing services to the Company or any Subsidiary, breaches any intellectual property +or assignment of inventions covenant, engages in any conduct constituting unfair competition, breaches any non-competition agreement, induces any Company or Subsidiary customer to breach a contract +with the Company or any Subsidiary or to cease doing business with the Company or any Subsidiary, or induces any principal for whom the Company or any Subsidiary acts as agent to terminate such agency +relationship +(c) "Administrator" +means the Administrator of the Plan in accordance with Section 19 of the Plan. +(d) "Award" +means an Incentive Stock Option, Nonqualified Stock Option, Stock Appreciation Right, share of Restricted Stock, Restricted Stock Unit, Stock Award or Incentive Bonus granted +to a Participant pursuant to the provisions of the Plan, any of which the Administrator may structure to qualify in whole or in part as a Performance Award. +(e) "Award +Agreement" means a written agreement or other instrument as may be approved from time to time by the Administrator implementing the grant of each Award. An Agreement may be in +the form of an agreement to be executed by both the Participant and the Company (or an authorized representative of the Company) or certificates, notices or similar instruments as approved by the +Administrator. +(f) "Board" +means the board of directors of the Company. +(g) "Cause" +means, in the case of any Participant who is party to an employment or severance-benefit agreement that contains a definition of "Cause," the definition set forth in such +agreement will apply with respect to such Participant under the Plan; if a Participant is party to multiple such agreements, any Cause determination must meet the standards of all such agreements to +qualify as for Cause under this Plan. In the case of any other Participant, "Cause" means (i) a substantial failure of the Participant to perform the Participant's duties and responsibilities +to the Company or subsidiaries or substantial negligence in the performance of such duties and responsibilities; (ii) the commission by the Participant of a felony or a crime involving moral +turpitude; (iii) the commission by the Participant of theft, fraud, embezzlement, material breach of trust or any material act of dishonesty involving the Company or any of its subsidiaries, +including, but not limited to, any Act of Misconduct; (iv) a significant violation by the Participant of the code of conduct of the Company or its subsidiaries of any material policy of the +Company or its subsidiaries, or of any statutory or common law duty of loyalty to the Company or its subsidiaries, including, but not limited to, any Act of Misconduct; or (v) a material breach +of any of the terms of the Plan or any Award made under the Plan, or of the terms of any other agreement between the Company or subsidiaries and the Participant. +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +| Page +A-1 +Table of Contents +APPENDIX A +(h) "Change +in Control" unless otherwise defined in an Award Agreement, means (i) the failure of the Continuing Directors at any time to constitute at least a majority of the +members of the Board; (ii) the acquisition by any Person other than an Excluded Holder of beneficial ownership (within the meaning of Rule 13d-3 issued under the Act) of twenty percent +(20%) or more of the outstanding Shares or the combined voting power of the Company's outstanding securities entitled to vote generally in the election of directors; (iii) the consummation of a +reorganization, merger, or consolidation of the Company, unless such reorganization, merger or consolidation is with or into a Permitted Successor and clauses (i), (ii), or (iv) of this +Section 2(h) have not been triggered; or (iv) a complete liquidation or dissolution of the Company or the sale or disposition of all or substantially all of the assets of the Company +other than to a Permitted Successor. +(i) "Code" +means the Internal Revenue Code of 1986, as amended from time to time and in effect, or any successor statute as from time to time in effect, and the rulings and regulations +issued thereunder. +(j) "Continuing +Directors" mean the individuals constituting the Board as of the date this Plan was adopted and any subsequent directors whose election or nomination for election by the +Company's stockholders was approved by a vote of three-quarters ( 3 / 4 ) of the individuals who are then Continuing Directors, but specifically excluding any individual whose initial +assumption of office occurs as a result of either an actual or threatened solicitation subject to Rule 14a-12(c) of Regulation 14A issued under the Act or other actual or threatened +solicitation of proxies or consents by or on behalf of a Person other than the Board. +(k) "Company" +means Wolverine World Wide, Inc., a Delaware corporation. +(l) "Determination +Period" means the fourteen (14) day period following a Termination of Employment by a Participant. +(m) "Disability" +has the meaning set forth in the Company's long-term disability plan. The determination of the Administrator as to an individual's Disability shall be conclusive on all +parties. +(n) "Employee +Benefit Plan" means any plan or program established by the Company or a Subsidiary for the compensation or benefit of employees of the Company or any of its Subsidiaries. +(o) "Excluded +Holder" means (i) any Person who at the time this Plan was adopted was the beneficial owner of twenty percent (20%) or more of the outstanding Shares; or +(ii) the Company, a Subsidiary or any Employee Benefit Plan of the Company or a Subsidiary or any trust holding Shares or other securities pursuant to the terms of an Employee Benefit Plan. +(p) "Factors" +means such considerations as would result in a determination by the Administrator that a Termination of Employment does not constitute a Retirement, and shall include the +Participant's: (i) inadequate job performance; (ii) inadequate notice of resignation; (iii) intention for comparable future employment at a third party organization; +(iv) intention for future employment or other service or advisory relationship with a competitor of the Company; or (iv) any other similar consideration. +(q) "Fair +Market Value" means, as of any date, the closing price per share at which the Shares are sold in the regular way on the New York Stock Exchange (or any successor exchange that +is the primary stock exchange for trading of Shares) or, if no Shares are traded on the New York Stock Exchange (or any successor exchange that is the primary stock exchange for trading of Shares) on +the date in question, then for the next preceding date for which Shares were traded on the New York Stock Exchange (or any successor exchange that is the primary stock exchange for trading of Shares). +(r) "Incentive +Bonus" means a bonus opportunity awarded under Section 10 of the Plan pursuant to which a Participant may become entitled to receive an amount based on satisfaction +of such performance criteria as are specified in the Award Agreement or otherwise. +(s) "Incentive +Stock Option" means a stock option that is intended to qualify as an "incentive stock option" within the meaning of Section 422 of the Code. +(t) "Nonemployee +Director" means each person who is, or is elected to be, a member of the Board and who is not an employee of the Company or any Subsidiary. +Page A-2 | +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +APPENDIX A +(u) "Nonqualified +Stock Option" means a stock option that is not intended to qualify as an "incentive stock option" within the meaning of Section 422 of the Code. Each stock option +granted pursuant to the Plan will be treated as providing by its terms that it is to be a Nonqualified Stock Option unless, as of the date of grant, it is expressly designated as an Incentive Stock +Option. +(v) "Option" +means an Incentive Stock Option and/or a Nonqualified Stock Option granted pursuant to Section 6 of the Plan. +(w) "Participant" +means any individual described in Section 3 of the Plan to whom Awards have been granted from time to time by the Administrator and any authorized transferee of +such individual. +(x) "Permitted +Successor" means a company that, immediately following the consummation of a transaction specified in clauses (iii) and (iv) of the definition of "Change in +Control" above, satisfies each of the following criteria: (i) 50% or more of the outstanding common stock of the company and the combined voting power of the outstanding securities of the +company entitled to vote generally in the election of directors (in each case determined immediately following the consummation of the applicable transaction) is beneficially owned, directly or +indirectly, by all or substantially all of the Persons who were the beneficial owners of the Company's outstanding Shares and outstanding securities entitled to vote generally in the election of +directors (respectively) immediately prior to the applicable transaction; (ii) no Person other than an Excluded Holder beneficially owns, directly or indirectly, 20% or more of the outstanding +common stock of the company or the combined voting power of the outstanding securities of the company entitled to vote generally in the election of directors (for these purposes the term Excluded +Holder shall include the company, any subsidiary of the company and any employee benefit plan of the company or any such subsidiary or any trust holding common stock or other securities of the company +pursuant to the terms of any such employee benefit plan); and (iii) at least a majority of the board of directors of the company is comprised of Continuing Directors. +(y) "Person" +has the same meaning as set forth in Sections 13(d) and 14(d)(2) of the Act. +(z) "Performance +Award" means an Award, the grant, issuance, retention, vesting or settlement of which is subject to satisfaction of one or more Qualifying Performance Criteria +established pursuant to Section 14 of the Plan. +(aa) "Plan" +means the Wolverine World Wide, Inc. Stock Incentive Plan of 2016 as set forth herein and as amended from time to time. +(bb) "Qualifying +Performance Criteria" has the meaning set forth in Section 14(b) of the Plan. +(cc) "Restricted +Stock" means Shares granted pursuant to Section 8 of the Plan. +(dd) "Restricted +Stock Unit" means an Award granted to a Participant pursuant to Section 8 of the Plan that is an unfunded and unsecured promise pursuant to which Shares or cash in +lieu thereof may be issued in the future. +(ee) "Retirement" +means the voluntary Termination of Employment by a Participant after the Participant has attained 59 years of age and ten years of service (as a director and/or +an employee of the Company or a Subsidiary), absent a determination to the contrary by the Administrator (after taking into consideration the Factors) within the Determination Period; Retirement shall +be deemed to occur on the date immediately following the last day of the Determination Period in the absence of a determination to the contrary by the Administrator. +(ff) "Share" +means a share of the Company's common stock, par value $1.00, subject to adjustment as provided in Section 13 of the Plan. +(gg) "Stock +Appreciation Right" means a right granted pursuant to Section 7 of the Plan that entitles the Participant to receive, in cash or Shares or a combination thereof, as +determined by the Administrator, value equal to or otherwise based on the excess of (i) the Fair Market Value of a specified number of Shares at the time of exercise over (ii) the +exercise price of the right, as established by the Administrator on the date of grant. +(hh) "Stock +Award" means an award of Shares to a Participant pursuant to Section 9 of the Plan. +(ii) "Subsidiary" +means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company where each of the corporations in the unbroken chain other +than the last corporation owns stock possessing at least 50 percent or more of the +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +| Page +A-3 +Table of Contents +APPENDIX A +total +combined voting power of all classes of stock in one of the other corporations in the chain, and if specifically determined by the Administrator in the context other than with respect to +Incentive Stock Options, may include an entity in which the Company has a significant ownership interest or that is directly or indirectly controlled by the Company. +(jj) "Substitute +Awards" means Awards granted or Shares issued by the Company in assumption of, or in substitution or exchange for, awards previously granted, or the right or obligation +to make future awards, by a company acquired by the Company or any Subsidiary or with which the Company or any Subsidiary combines. +(kk) "Termination +of Employment" means ceasing to serve as a full-time employee of the Company and its Subsidiaries or, with respect to a Nonemployee Director or other service provider, +ceasing to serve as such for the Company, except that with respect to all or any Awards held by a Participant (i) the Administrator may determine, subject to Section 6(d) of the Plan, +that an approved leave of absence or approved employment on a less than full-time basis is not considered a Termination of Employment; (ii) the Administrator may determine that a transition of +employment to service with a partnership, joint venture or corporation not meeting the requirements of a Subsidiary in which the Company or a Subsidiary is a party is not considered a Termination of +Employment; (iii) unless otherwise determined by the Administrator, service as a member of the Board or other service provider shall not constitute continued employment with respect to Awards +granted to a Participant while he or she served as an employee; and (iv) service as an employee of the Company or a Subsidiary shall constitute continued employment with respect to Awards +granted to a Participant while he or she served as a member of the Board or other service provider. The Administrator shall determine whether any corporate transaction, such as a sale or spin-off of a +division or subsidiary that employs a Participant, shall be deemed to result in a Termination of Employment with the Company and its Subsidiaries for purposes of any affected Participant's Options, +and the Administrator's decision shall be final and binding. +3. Eligibility +Any person who is a current or prospective officer or employee of the Company or of any Subsidiary shall be eligible for selection by the Administrator for the grant of Awards +hereunder. In addition, Nonemployee Directors and any other service providers who have been retained to provide consulting, advisory or other services to the Company or to any Subsidiary shall be +eligible for the grant of Awards hereunder as determined by the Administrator. Options intending to qualify as Incentive Stock Options may only be granted to employees of the Company or any Subsidiary +within the meaning of the Code, as selected by the Administrator. +4. Effective Date and Termination of Plan +This Plan was adopted by the Board as of February 10, 2016 (the "Effective Date"), provided that any grants made prior to the approval of the Plan by the Company's +stockholders shall be subject to such approval. All Awards granted under this Plan are subject to, and may not be exercised before, the approval of this Plan by the stockholders, prior to the first +anniversary of the date the Board adopts the Plan, by the affirmative vote of the holders of a majority of the outstanding Shares of the Company present, or represented by proxy, and entitled to vote, +at a meeting of the Company's stockholders or by written consent in accordance with the laws of the State of Delaware; provided, however, that if such approval by the stockholders of the Company is +not forthcoming, all Awards previously granted under this Plan shall be void. The Plan shall remain available for the grant of Awards until the tenth (10th) anniversary of the Effective Date. +Notwithstanding the foregoing, the Plan may be terminated at such earlier time as the Board may determine. Termination of the Plan will not affect the rights and obligations of the Participants and +the Company arising under Awards theretofore granted and then in effect. +5. Shares Subject to the Plan and to Awards +(a) Aggregate Limits. The aggregate number of Shares issuable pursuant to all Awards shall not exceed 6,100,000 plus any +shares subject to outstanding awards under the Prior Plans that on or after the Effective Date cease for any reason to be subject to such awards (other than by reason of exercise or settlement of the +awards to the extent they are exercised for or settled in vested and nonforfeitable shares); provided, however, that any Shares granted under Options or Stock Appreciation Rights shall be counted +against this limit on a one-for-one basis and any Shares granted as Awards other than Options or Stock Appreciation Rights shall be counted against this limit as two and six tenths (2.6) Shares for +every one (1) Share subject to such Award. The aggregate number of Shares available for grant under this Plan and the number of Shares subject to outstanding Awards shall be subject to +adjustment as provided in Section 13 of the Plan. The Shares issued pursuant to Awards granted under this Plan may be shares that are authorized and unissued or shares that were reacquired by +the Company, including shares purchased in the open market. No fractional Shares will be delivered under the Plan. +Page A-4 | +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +APPENDIX A +(b) Issuance of Shares. For purposes of Section 5(a) and Section 5(f) of the Plan, the aggregate number of +Shares issued under this Plan at any time shall equal only the number of Shares actually issued upon exercise or settlement of an Award. Notwithstanding the foregoing, Shares subject to an Award under +the Plan may not again be made available for issuance under the Plan if such Shares are: (i) Shares that were subject to a stock-settled Stock Appreciation Right and were not issued upon the +net settlement or net exercise of such Stock Appreciation Right; (ii) Shares used to pay the exercise price of an Option or the purchase price, if any, for an Award; (iii) Shares +delivered to or withheld by the Company to pay the withholding taxes related an Award; or (iv) Shares repurchased on the open market with the proceeds of an Option exercise. Shares subject to +Awards that have been canceled, expired, forfeited or otherwise not issued under an Award and Shares subject to Awards settled in cash shall not count as Shares issued under this Plan for purposes of +Section 5(a) or Section 5(f) of the Plan. +(c) Tax Code Limits. The aggregate number of Shares that may be delivered, or the value of which could be paid in cash or +other property, under Awards granted under this Plan during any calendar year to any one Participant shall not exceed 3,600,000, which aggregate number shall be calculated and adjusted pursuant to +Section 13 of the Plan only to the extent that such calculation or adjustment will not affect the status of any Award intended to qualify as "performance-based compensation" under +Section 162(m) of the Code but which number shall not count any tandem SARs (as defined in Section 7 of the Plan). The aggregate number of Shares that may be issued pursuant to the +exercise of Incentive Stock Options granted under this Plan shall not exceed 3,600,000, which aggregate number shall be calculated and adjusted pursuant to Section 13 of the Plan only to the +extent that such calculation or adjustment will not affect the status of any option intended to qualify as an Incentive Stock Option under Section 422 of the Code. The maximum cash amount +payable pursuant to that portion of an Incentive Bonus granted in any calendar year to any Participant under this Plan that is intended to satisfy the requirements for "performance-based compensation" +under Section 162(m) of the Code shall not exceed $20,000,000. +(d) Director Awards. Notwithstanding any other provision of the Plan to the contrary, the aggregate grant date fair value of +Awards (computed as of the date of grant in accordance with applicable financial accounting rules) granted under this Plan during any calendar year to any one Nonemployee Director shall not exceed +$400,000. +(e) Substitute Awards. Substitute Awards shall not reduce the Shares authorized for issuance under the Plan or authorized for +grant to a Participant in any calendar year. Additionally, in the event that a company acquired by the Company or any Subsidiary, or with which the Company or any Subsidiary combines, has shares +available under a pre-existing plan approved by stockholders and not adopted in contemplation of such acquisition or combination, the shares available for grant pursuant to the terms of such +pre-existing plan (as adjusted, to the extent appropriate, using the exchange ratio or other adjustment or valuation ratio or formula used in such acquisition or combination to determine the +consideration payable to the holders of common stock of the entities party to such acquisition or combination) may be used for Awards under the Plan and shall not reduce the Shares authorized for +issuance under the Plan; provided, however, that Awards using such available shares shall not be made after the date awards or grants could have been made under the terms of the pre-existing plan, +absent the acquisition or combination, and shall only be made to individuals who were employees, directors or other service providers of such acquired or combined company before such acquisition or +combination. +(f) Award Vesting/Exercisability/Distribution Limitations. (i) No portion of any grant of Restricted Stock shall be scheduled +to vest prior to the date that is one (1) year following the date the Restricted Stock is granted; (ii) no portion of any grant of an Option or Stock +Appreciation Right shall be scheduled to become exercisable prior to the date that is one (1) year following the date the Option or Stock Appreciation Right is granted; and (iii) no +portion of any grant of a Restricted Stock Unit or Incentive Bonus shall be scheduled to vest or be settled, paid or distributed prior to the date that is one (1) year following the date the +applicable Restricted Stock Unit or Incentive Bonus is granted; provided; however, that Awards that result in the issuance (as determined in accordance with the rules set forth in Section 5(b) +of the Plan) of an aggregate of up to 5% of the Shares reserved for issuance under Section 5(a) of the Plan may be granted to eligible persons without regard to the minimum vesting, +exercisability, settlement, payment and distribution provisions of this Section 5(f). +6. Options +(a) Option Awards. Options may be granted at any time and from time to time prior to the termination of the Plan to +Participants as determined by the Administrator. No Participant shall have any rights as a stockholder with respect to any Shares subject to Options hereunder until such Shares have been issued. Each +Option shall be evidenced by an Award Agreement. Options granted pursuant to the Plan need not be identical but each Option must contain and be subject to the terms and conditions set forth below. +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +| Page +A-5 +Table of Contents +APPENDIX A +(b) Price. The Administrator will establish the exercise price per Share under each Option, which in no event will be less +than the Fair Market Value of the Shares on the date of grant; provided, however, that the exercise price per Share with respect to an Option that is granted in connection with a merger or other +acquisition as a substitute or replacement award for options held by optionees of the acquired entity may be less than 100% of the Fair Market Value of the Shares on the date such Option is granted if +such exercise price is based on a formula set forth in the terms of the options held by such optionees or in the terms of the agreement providing for such merger or other acquisition. The exercise +price of any Option may be paid in Shares, cash or a combination thereof, as determined by the Administrator, including an irrevocable commitment by a broker to pay over such amount from a sale of the +Shares issuable under an Option, the delivery of previously owned Shares and withholding of Shares deliverable upon exercise, or in such other form as is acceptable to the Administrator. +(c) No Repricing without Stockholder Approval. Other than in connection with a change in the Company's capitalization (as +described in Section 13 of the Plan), the Administrator may not, without prior approval of the Company's shareholders, seek to effect any repricing of any previously granted underwater Option +by: (i) amending or modifying the terms of the Option to lower the exercise price; (ii) canceling the underwater Option and granting either (A) replacement Options having a lower +exercise price or (B) Restricted Stock, Restricted Stock Units, Performance Awards or Stock Awards in exchange; or (iii) cancelling or repurchasing the underwater Options for cash or +other securities. An Option will be deemed to be "underwater" at any time when the Fair Market Value of the Shares covered by such Award is less than the exercise price of the Award. +(d) Provisions Applicable to Options. The date on which Options become exercisable shall be determined at the sole and +absolute discretion of the Administrator and set forth in an Award Agreement. Unless provided otherwise in the applicable Award Agreement, to the extent that the Administrator determines that an +approved leave of absence or employment on a less than full-time basis is not a Termination of Employment, the vesting period and/or exercisability of an Option shall be adjusted by the Administrator +during or to reflect the effects of any period during which the Participant is on an approved leave of absence or is employed on a less than full-time basis. No dividends or dividend equivalents shall +be paid or granted in respect of Shares subject to Options and no holder of an Option shall be entitled to any dividends with respect to the Shares subject to Options unless and until such Options +have vested and have been exercised in accordance with the terms of the Plan and the applicable Award Agreement and such Shares are reflected as issued and outstanding. +(e) Term of Options and Termination of Employment: The Administrator shall establish the term of each Option, which in no case +shall exceed a period of ten (10) years from the date of grant. Unless an Option earlier expires upon the expiration date established pursuant to the foregoing sentence, upon the Participant's +Termination of Employment, his or her rights to exercise an Option then held shall be only as follows, unless the Administrator specifies otherwise: +(1) General. If a Participant's Termination of Employment is for any reason other than the Participant's death, Disability, +Retirement or termination for Cause, Options granted to the Participant may continue to be exercised in accordance with their terms for the lesser of (i) a period of three (3) months +after such Termination of Employment or (ii) the period ending on the latest date on which such Options could have been exercised without regard to this Section 6(e)(1), but only to the +extent the Participant was entitled to exercise the Options on the date of such termination. +(2) Death. If a Participant dies either while an employee or officer of the Company or a Subsidiary or member of the Board, or +after the Termination of Employment other than for Cause but during the time when the Participant could have exercised an Option, the Options issued to such Participant shall become fully vested and +exercisable by the personal representative of such Participant or other successor to the interest of the Participant for the lesser of (i) a period of one (1) year after the +Participant's death or (ii) the period ending on the latest date on which such Options could have been exercised without regard to this Section 6(e)(2), but only to the extent the +Participant was entitled to exercise the Options on the date of such termination. +(3) Disability. If a Participant's Termination of Employment is due to Disability, then all of the Participant's Options shall +immediately fully vest, and the Options held by the Participant at the time of such Termination of Employment shall be exercisable by the Participant or the personal representative of such Participant +for the lesser of (i) a period of one (1) year after the Participant's Termination of Employment or (ii) the period ending on the latest date on which such Options could have been +exercised without regard to this Section 6(e)(3), but only to the extent the Participant was entitled to exercise the Options on the date of such termination. +Page A-6 | +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +APPENDIX A +(4) Participant Retirement. Upon a Participant's Retirement as an employee of the Company and its Subsidiaries or Retirement +from service as a member of the Board, then all of the Participant's Options shall immediately fully vest, and the Options held by the Participant at the time of such Retirement shall be exercisable +by the Participant or the personal representative of such Participant during the remaining term of the Options. +(5) Termination for Cause. If a Participant is terminated for Cause, the Participant shall have no further right to exercise +any Options previously granted. The Administrator or officers designated by the Administrator shall determine, in its or their reasonable discretion, whether a termination is for Cause. +(f) Incentive Stock Options. Notwithstanding anything to the contrary in this Section 6, in the case of the grant of an +Option intending to qualify as an Incentive Stock Option: (i) if the Participant owns stock possessing more than 10 percent (10%) of the combined voting power of all classes of stock of +the Company, the exercise price of such Option must be at least 110 percent of the Fair Market Value of the Shares on the date of grant and the Option must expire within a period of not more +than five (5) years from the date of grant and (ii) Termination of Employment will occur when the person to whom an Award was granted ceases to be an employee (as determined in +accordance with Section 3401(c) of the Code and the regulations promulgated thereunder) of the Company and its Subsidiaries. Notwithstanding anything in this Section 6 to the contrary, +options designated as Incentive Stock Options shall not be eligible for treatment under the Code as Incentive Stock Options (and will be deemed to be Nonqualified Stock Options) to the extent that +either (a) the aggregate Fair Market Value of Shares (determined as of the time of grant) with respect to which such Options are exercisable for the first time by the Participant during any +calendar year (under all plans of the Company and any Subsidiary) exceeds $100,000, taking Options into account in the order in which they were granted, or (b) such Options otherwise remain +exercisable but are not exercised within three (3) months of Termination of Employment (or such other period of time provided in Section 422 of the Code). +7. Stock Appreciation Rights +(a) General. Stock Appreciation Rights may be granted to Participants from time to time either in tandem with or as a +component of other Awards granted under the Plan ("tandem SARs") or not in conjunction with other Awards ("freestanding SARs") and may, but need not, relate to a specific Option granted under +Section 6 of the Plan. The provisions of Stock Appreciation Rights need not be the same with respect to each grant or each recipient. Any Stock Appreciation Right granted in tandem with an +Award may be granted at the same time such Award is granted or at any time thereafter before exercise or expiration of such Award. All freestanding SARs shall be granted subject to the same terms and +conditions applicable to Options as set forth in Section 6 of the Plan and all tandem SARs shall have the same exercise price, vesting, exercisability, forfeiture and termination provisions as +the Award to which they relate. Subject to the provisions of Section 6 of the Plan and the immediately preceding sentence, the Administrator may impose such other conditions or restrictions on +any Stock Appreciation Right as it shall deem appropriate. Stock Appreciation Rights may be settled in Shares, cash or a combination thereof, as determined by the Administrator and set forth in the +applicable Award Agreement. +(b) No Repricing without Stockholder Approval. Other than in connection with a change in the Company's capitalization (as +described in Section 13 of the Plan), the Administrator may not, without prior approval of the Company's shareholders, seek to effect any repricing of any previously granted underwater Stock +Appreciation Right by: (i) amending or modifying the terms of the Stock Appreciation Right to lower the exercise price; (ii) canceling the underwater Stock Appreciation Right and +granting either (A) replacement Stock Appreciation Rights having a lower exercise price or (B) Restricted Stock, Restricted Stock Units, Performance Awards or Stock Awards in exchange; +or (iii) cancelling or repurchasing the underwater Stock Appreciation Rights for cash or other securities. A Stock Appreciation Right will be deemed to be "underwater" at any time when the Fair +Market Value of the Shares covered by such Award is less than the exercise price of the Award. +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +| Page +A-7 +Table of Contents +APPENDIX A +8. Restricted Stock and Restricted Stock Units +(a) Restricted Stock and Restricted Stock Unit Awards. Restricted Stock and Restricted Stock Units may be granted at any time +and from time to time prior to the termination of the Plan to Participants as determined by the Administrator. Restricted Stock is an award or issuance of Shares the grant, issuance, retention, +vesting and/or transferability of which is subject during specified periods of time to such conditions (including continued employment or performance conditions) and terms as the Administrator deems +appropriate. Restricted Stock Units are Awards denominated in units of Shares under which the issuance of Shares is subject to such conditions (including continued employment or performance +conditions) and terms as the Administrator deems appropriate. Each grant of Restricted Stock and Restricted Stock Units shall be evidenced by an Award Agreement. Unless determined otherwise by the +Administrator, each Restricted Stock Unit will be equal to one Share and will entitle a Participant to either the issuance of Shares or payment of an amount of cash determined with reference to the +value of Shares. To the extent determined by the Administrator, Restricted Stock and Restricted Stock Units may be satisfied or settled in Shares, cash or a combination thereof. Restricted Stock and +Restricted Stock Units granted pursuant to the Plan need not be identical but each grant of Restricted Stock and Restricted Stock Units must contain and be subject to the terms and conditions set +forth below. +(b) Contents of Agreement. Each Award Agreement shall contain provisions regarding (i) the number of Shares or +Restricted Stock Units subject to such Award or a formula for determining such number; (ii) the purchase price of the Shares, if any, and the means of payment; (iii) the performance +criteria, if any, and level of achievement versus these criteria that shall determine the number of Shares or Restricted Stock Units granted, issued, retainable and/or vested; (iv) such terms +and conditions on the grant, issuance, vesting and/or forfeiture of the Shares or Restricted Stock Units as may be determined from time to time by the Administrator; (v) the term of the +performance period, if any, as to which performance will be measured for determining the number of such Shares or Restricted +Stock Units; and (vi) restrictions on the transferability of the Shares or Restricted Stock Units. Shares issued under a Restricted Stock Award may be issued in the name of the Participant and +held by the Participant or held by the Company, in each case as the Administrator may provide. +(c) Vesting and Performance Criteria. The grant, issuance, retention, vesting and/or settlement of shares of Restricted Stock +and Restricted Stock Units will occur when and in such installments as the Administrator determines or under criteria the Administrator establishes, which may include Qualifying Performance Criteria. +Notwithstanding anything in this Plan to the contrary, the performance criteria for any Restricted Stock or Restricted Stock Unit that is intended to satisfy the requirements for "performance-based +compensation" under Section 162(m) of the Code will be a measure based on one or more Qualifying Performance Criteria selected by the Administrator and specified in writing when the Award is +granted, which shall be not later than ninety (90) days after the commencement of the performance period to which the Incentive Bonus relates (or at such earlier time as is required to qualify +the Incentive Bonus as performance-based under Section 162(m) of the Code). +(d) Termination of Employment. Unless the Administrator provides otherwise: +(i) General. In the event of Termination of Employment for any reason other than death, Disability or Retirement, any +Restricted Stock or Restricted Stock Units still subject in full or in part to restrictions at the date of such Termination of Employment shall automatically be forfeited and returned to the Company. +(ii) Death, Retirement or Disability. In the event a Participant's Termination of Employment is because of death, Disability +or Retirement, the restrictions remaining on any or all Shares remaining subject to a Restricted Stock or Restricted Stock Unit Award shall lapse. Notwithstanding the foregoing and for the avoidance +of doubt, the Award Agreement with respect to any Restricted Stock or Restricted Stock Unit that is intended to satisfy the requirements for "performance-based compensation" under +Section 162(m) of the Code shall not provide for the lapse of any applicable Qualifying Performance Criteria upon a Participant's Retirement other than in a manner that is consistent with such +requirements. +(e) Discretionary Adjustments and Limits. Subject to the limits imposed under Section 162(m) of the Code for Awards +that are intended to qualify as "performance-based compensation," notwithstanding the satisfaction of any performance goals, the number of Shares granted, issued, retainable and/or vested under an +Award of Restricted Stock or Restricted Stock Units on account of either financial performance or personal performance evaluations may, to the extent specified in the Award Agreement, be reduced, but +not increased, by the Administrator on the basis of such further considerations as the Administrator shall determine. +Page A-8 | +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +APPENDIX A +(f) Voting Rights. Unless otherwise determined by the Administrator, Participants holding shares of Restricted Stock granted +hereunder may exercise full voting rights with respect to those shares during the period of restriction. Participants shall have no voting rights with respect to Shares underlying Restricted Stock +Units unless and until such Shares are reflected as issued and outstanding shares on the Company's stock ledger. +(g) Dividends and Distributions. +(1) Participants +in whose name Restricted Stock is granted shall be entitled to receive dividends and other distributions paid with respect to those Shares only to the extent provided by +the Administrator, in which case the Administrator will determine whether any such dividends or distributions will be automatically reinvested in additional shares of Restricted Stock and subject to +the same restrictions on transferability as the Restricted Stock with respect to which they were distributed or whether such dividends or distributions will be paid in cash. Shares underlying +Restricted Stock Units shall be entitled to dividends or dividend equivalents only to the extent provided by the Administrator. +(2) Notwithstanding +the foregoing Section 8(g)(1), any cash or stock dividends and dividend equivalents with respect to Restricted Stock and Restricted Stock Units granted as +Performance Awards, if any, will be withheld by the Company for the Participant's account and will be paid, if at all, (i) in the case of Restricted Stock, upon the achievement of the +applicable performance measure(s) and the satisfaction of any other restrictions imposed on the Restricted Stock in respect of which the dividends were paid and (ii) in the case of Restricted +Stock Units, at the time the Shares and/or cash underlying such Restricted Stock Units is paid, and any dividends deferred in respect of any Restricted Stock and Restricted Stock Units granted as +Performance Awards will be forfeited upon the forfeiture of such Restricted Stock and Restricted Stock Units. Any noncash dividends or distributions paid with respect to Restricted Stock and +Restricted Stock Units granted as Performance Awards shall be subject to the same restrictions as those relating to the Restricted Stock and Restricted Stock Units. +(h) Payment of Restricted Stock Units. In all events, unless payment with respect to a Restricted Stock Unit is deferred in a +manner consistent with Section 409A of the Code, the Shares and/or cash underlying such Restricted Stock Unit shall be paid to the Participant no later than two and one-half months following +the end of the year in which the Restricted Stock Unit is no longer subject to a substantial risk of forfeiture. +(i) Legending of Restricted Stock. The Administrator may also require that certificates representing shares of Restricted +Stock be retained and held in escrow by a designated employee or agent of the Company or any Subsidiary until any restrictions applicable to shares of Restricted Stock so retained have been satisfied +or lapsed. Any certificates evidencing shares of Restricted Stock awarded pursuant to the Plan shall bear the following legend: +The +shares represented by this certificate were issued subject to certain restrictions under the Wolverine World Wide, Inc. Stock Incentive Plan of 2016 (the "Plan"). This certificate is held +subject to the terms and conditions contained in a restricted stock agreement that includes a prohibition against the sale or transfer of the stock represented by this certificate except in compliance +with that agreement and that provides for forfeiture upon certain events. Copies of the Plan and the restricted stock agreement are on file in the office of the Secretary of the Company. +9. Stock Awards +(a) Grant. Stock Awards may be granted at any time and from time to time prior to the termination of the Plan to Participants +as determined by the Administrator, consistent with the 5% limit set forth in Section 5(f) of the Plan. Stock Awards shall be subject to such terms and conditions, consistent with the other +provisions of the Plan, as may be determined by the Administrator. +(b) Rights as a Stockholder. A Participant shall have all voting, dividend, liquidation and other rights with respect to +Shares issued to the Participant as a Stock Award under this Section 9 upon the Participant becoming the holder of record of the Shares granted pursuant to such Stock Award; provided, however, +that the Administrator may impose such restrictions on the assignment or transfer of Shares awarded pursuant to a Stock Award as it considers appropriate. +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +| Page +A-9 +Table of Contents +APPENDIX A +10. Incentive Bonuses +(a) General. Each Incentive Bonus Award will confer upon the Participant the opportunity to earn a future payment tied to the +level of achievement with respect to one or more performance criteria established for a performance period of not less than one year. +(b) Incentive Bonus Document. Unless otherwise determined by the Administrator, the terms of any Incentive Bonus will be set +forth in an Award Agreement. Each Award Agreement evidencing an Incentive Bonus shall contain provisions regarding (i) the target and maximum amount payable to the Participant as an Incentive +Bonus; (ii) the performance criteria and level of achievement versus these criteria that shall determine the amount of such payment; (iii) the term of the performance period as to which +performance shall be measured for determining the amount of any payment; (iv) the timing of any payment earned by virtue of performance; (v) restrictions on the alienation or transfer of +the Incentive Bonus prior to actual payment; (vi) forfeiture provisions; and (vii) such further terms and conditions, in each case not inconsistent with this Plan, as may be determined +from time to time by the Administrator. +(c) Performance Criteria. The Administrator shall establish the performance criteria and level of achievement versus these +criteria that shall determine the target and maximum amount payable under an Incentive Bonus, which criteria may be based on financial performance and/or personal performance evaluations. The +Administrator may specify the percentage of the target Incentive Bonus, if any, that is intended to satisfy the requirements for "performance-based compensation" under Section 162(m) of the +Code. Notwithstanding anything to the contrary herein, the performance criteria for any portion of an Incentive Bonus that is intended by the Administrator to satisfy the requirements for +"performance-based compensation" under Section 162(m) of the Code shall be a measure based on one or more Qualifying Performance Criteria (as defined in Section 14(b) of the Plan) +selected by the Administrator and specified in writing at the time the Incentive Bonus is granted, which shall be not later than ninety (90) days after the commencement of the performance +period to which the Incentive Bonus relates (or at such earlier time as is required to qualify the Incentive Bonus +as performance-based under Section 162(m) of the Code). The Administrator shall certify the extent to which any Qualifying Performance Criteria has been satisfied, and the amount payable as a +result thereof, prior to payment of any Incentive Bonus that is intended to satisfy the requirements for "performance-based compensation" under Section 162(m) of the Code. +(d) Timing and Form of Payment. The Administrator shall determine the timing of payment of any Incentive Bonus. Payment of the +amount due under an Incentive Bonus may be made in cash or in Shares, as determined by the Administrator. The Administrator may provide for or, subject to such terms and conditions as the +Administrator may specify, may permit a Participant to elect for the payment of any Incentive Bonus to be deferred to a specified date or event. In all events, unless payment of an Incentive Bonus is +deferred in a manner consistent with Section 409A of the Code, any Incentive Bonus shall be paid to the Participant no later than two and one-half months following the end of the year in which +the Incentive Bonus is no longer subject to a substantial risk of forfeiture. +(e) Discretionary Adjustments. Notwithstanding satisfaction of any performance goals, the amount paid under an Incentive Bonus +on account of either financial performance or personal performance evaluations may, to the extent specified in the Award Agreement or other document evidencing the Award, be reduced, but not +increased, by the Administrator on the basis of such further considerations as the Administrator shall determine. +11. Deferral of Gains +The Administrator may, in an Award Agreement or otherwise, provide for the deferred delivery of Shares upon settlement, vesting or other events with respect to Restricted Stock +or Restricted Stock Units, or in payment or satisfaction of an Incentive Bonus. Notwithstanding anything herein to the contrary, in no event will any deferral of the delivery of Shares or any other +payment with respect to any Award be allowed if the Administrator determines, in its sole and absolute discretion, that the deferral would result in the imposition of the additional tax under +Section 409A(a)(1)(B) of the Code. No award shall provide for deferral of compensation that does not comply with Section 409A of the Code, unless the Board, at the time of grant, +specifically provides that the Award is not intended to comply with Section 409A of the Code. The Company shall have no liability to a Participant, or any other party, if an Award that is +intended to be exempt from, or compliant with, Section 409A of the Code is not so exempt or compliant or for any action taken by the Administrator or the Board. +Page A-10 | +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +APPENDIX A +12. Conditions and Restrictions Upon Securities Subject to Awards +The Administrator may provide that the Shares issued upon exercise of an Option or Stock Appreciation Right or otherwise subject to or issued under an Award shall be subject to +such further agreements, restrictions, conditions or limitations as the Administrator in its sole and absolute discretion may specify prior to the exercise of such Option or Stock Appreciation Right +or the grant, vesting or settlement of such Award, including without limitation, conditions on vesting or transferability, forfeiture or repurchase provisions and method of payment for the Shares +issued upon exercise, vesting or settlement of such Award (including the actual or constructive surrender of Shares already owned by the Participant) or payment of taxes arising in connection with an +Award. Without limiting the foregoing, such restrictions may address the timing and manner of any resales by the Participant or other subsequent transfers by the Participant of any Shares issued under +an Award, including without limitation (i) restrictions under an insider trading policy or pursuant to applicable law; (ii) restrictions designed to delay and/or coordinate the timing +and manner of sales by Participant and holders of other Company equity compensation arrangements; (iii) restrictions as to the use of a specified brokerage firm for such resales or other +transfers; and (iv) provisions requiring Shares to be sold on the open market or to the Company in order to satisfy tax withholding or other obligations. +13. Adjustment of and Changes in the Stock +(a) General. The number and kind of Shares available for issuance under this Plan (including under any Awards then +outstanding), and the number and kind of Shares subject to the limits set forth in Section 5 of this Plan, shall be equitably adjusted by the Administrator to reflect any reorganization, +reclassification, combination of shares, stock split, reverse stock split, spin-off, dividend or distribution of securities, property or cash (other than regular, quarterly cash dividends), or any +other event or transaction that affects the number or kind of Shares outstanding. Such adjustment may be designed to comply with Sections 409A and 424 of the Code as applicable, or, except as +otherwise expressly provided in Section 5(c) of this Plan, may be designed to treat the Shares available under the Plan and subject to Awards as if they were all outstanding on the record date +for such event or transaction or to increase the number of such Shares to reflect a deemed reinvestment in Shares of the amount distributed to the Company's security holders. The terms of any +outstanding Award shall also be equitably adjusted by the Administrator as to price, number or kind of Shares subject to such Award, vesting and other terms to reflect the foregoing events, which +adjustments need not be uniform as between different Awards or different types of Awards. +In +the event there shall be any other change in the number or kind of outstanding Shares, or any stock or other securities into which such Shares shall have been changed, or for which it shall have +been exchanged, by reason of a change of control, other merger, consolidation or otherwise, then the Administrator shall determine the appropriate and equitable adjustment to be effected. In addition, +in the event of such change described in this paragraph, the Administrator may accelerate the time or times at which any Award may be exercised and may provide for cancellation of such accelerated +Awards that are not exercised within a time prescribed by the Administrator in its sole and absolute discretion. +No +right to purchase fractional shares shall result from any adjustment in Awards pursuant to this Section 13. In case of any such adjustment, the Shares subject to the Award shall be rounded +up to the nearest whole share for Awards other than Options and Stock Appreciation Rights, and shall be rounded down to the nearest whole Share with respect to Options and Stock Appreciation Rights. +The Company shall notify Participants holding Awards subject to any adjustments pursuant to this Section 13 of such adjustment, but (whether or not notice is given) such adjustment shall be +effective and binding for all purposes of the Plan. +(b) Change in Control. The Administrator may determine the effect of a Change in Control on outstanding Awards in a manner +that, in the Administrator's reasonable discretion, is fair and equitable to Participants. Such effects, which need not be the same for every Participant, may include, without limitation: +(x) the substitution for the Shares subject to any outstanding Award, or portion thereof, of stock or other securities of the surviving corporation or any successor corporation to the Company, +or a parent or subsidiary thereof, in which event the aggregate purchase or exercise price, if any, of such Award, or portion thereof, shall remain the same, and/or (y) the conversion of any +outstanding Award, or portion thereof, into a right to receive cash or other property upon or following the consummation of the Change in Control in an amount equal to the value of the consideration +to be received by holders of Shares in connection with such transaction for one Share, less the per share purchase or exercise price of such Award, if any, multiplied by the number of Shares subject +to such Award, or a +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +| Page +A-11 +Table of Contents +APPENDIX A +portion +thereof. Notwithstanding the foregoing, unless otherwise determined by the Administrator, Awards shall be treated as follows in connection with a Change in Control: +(i) Acceleration of Vesting. Without action by the Administrator or the Board: (a) all outstanding Options and Stock +Appreciation Rights shall become immediately exercisable in full and, notwithstanding any other provision of the Plan or the Award Agreement to the contrary and to the extent the Administrator does +not determine that a cash payment shall be made with respect to such Options and Stock Appreciation Rights pursuant to the following Section 13(b)(ii), shall remain outstanding and exercisable +during the remaining original terms thereof, regardless of whether the Participants to whom such Options and Stock Appreciation Rights have been granted remain in the employ or service of the Company +or any Subsidiary; and (b) all other outstanding Awards shall become immediately fully vested and exercisable and nonforfeitable; and +(ii) Cash Payment for Stock Options/Stock Appreciation Rights. Without the consent of any Participant affected thereby, the +Administrator may determine that some or all Participants holding outstanding Options and/or Stock Appreciation Rights shall receive, with respect to some or all of the Shares subject to such Options +and/or Stock Appreciation Rights, as of the effective date of any such Change in Control of the Company, cash in an amount equal to the greater of the excess of (A) the highest sales price of +the shares on the New York Stock Exchange (or any successor exchange that is the primary stock exchange for trading of Shares) on the date immediately prior to the effective date of such Change in +Control of the Company or (B) the highest price per share actually paid in connection with any Change in Control of the Company over the exercise price per share of such Options and/or Stock +Appreciation Rights. +14. Qualifying Performance-Based Compensation +(a) General. The Administrator may establish performance criteria and level of achievement versus such criteria that shall +determine the number of Shares to be granted, retained, vested, issued or issuable under or in settlement of or the amount payable pursuant to an Award, which criteria may be based on Qualifying +Performance Criteria or other standards of financial performance and/or personal +performance evaluations. In addition, the Administrator may specify that an Award or a portion of an Award is intended to satisfy the requirements for "performance-based compensation" under +Section 162(m) of the Code, provided that the performance criteria for such Award or portion of an Award that is intended by the Administrator to satisfy the requirements for "performance-based +compensation" under Section 162(m) of the Code shall be a measure based on one or more Qualifying Performance Criteria selected by the Administrator and specified in writing at the time the +Award is granted, which shall be not later than ninety (90) days after the commencement of the performance period to which the Incentive Bonus relates (or at such earlier time as is required to +qualify the Incentive Bonus as performance-based under Section 162(m) of the Code). The Administrator shall certify the extent to which any Qualifying Performance Criteria has been satisfied, +and the amount payable as a result thereof, prior to payment, settlement or vesting of any Award that is intended to satisfy the requirements for "performance-based compensation" under +Section 162(m) of the Code. +(b) Qualifying Performance Criteria. For purposes of this Plan, the term "Qualifying Performance Criteria" shall mean an +objectively determinable measure of performance relating to any one or more of the following performance criteria, or derivations of such performance criteria, either individually, alternatively or in +any combination, applied to either the Company as a whole or to a business unit, division, line or Subsidiary, either individually, alternatively or in any combination, and measured either annually or +cumulatively over a period of years, on an absolute basis or relative to a pre-established target, to previous years' results or to an index or indices or a designated comparison group or groups, in +each case as specified by the Administrator: (i) net earnings or earnings per share (including earnings before interest, taxes, depreciation and/or amortization); (ii) income, net income +or operating income; (iii) revenues; (iv) net sales; (v) return on sales; (vi) return on equity; (vii) return on capital (including return on total capital or return +on invested capital); (viii) return on assets or net assets; (ix) earnings per share; (x) economic or business value added measurements; (xi) return on invested capital; +(xii) return on operating revenue; (xiii) cash flow (before or after dividends); (xiv) stock price; (xv) total stockholder return; (xvi) market capitalization; +(xvii) economic value added; (xviii) debt leverage (debt to capital); (xix) operating profit or net operating profit; (xx) operating margin or profit margin; +(xxi) cash from operations; (xxii) market share; (xxiii) product development or release schedules; (xxiv) new product innovation; (xxv) cost reductions; +(xxvi) customer acquisition or retention; (xxvii) customer service; or (xxviii) customer satisfaction. To the extent consistent with the requirements for satisfying the +performance-based compensation exception under Section 162(m) of the Code, the Administrator (A) may appropriately adjust any evaluation of performance under a Qualifying Performance +Criteria to eliminate the effects of charges for restructurings, discontinued operations, unusual or infrequently occurring items and all items of gain, loss or expense +Page A-12 | +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +APPENDIX A +determined +to be unusual or infrequent in nature or related to the disposal of a segment of a business or related to a change in accounting principle all as determined in accordance with applicable +accounting provisions, as well as the cumulative effect of accounting changes, in each case as determined in accordance with generally accepted accounting principles or identified in the Company's +financial statements or notes to the financial statements, and (B) may appropriately adjust any evaluation of performance under a Qualifying Performance Criteria to exclude any of the following +events that occurs during a performance period: (i) asset write-downs; (ii) litigation, claims, judgments or settlements; (iii) the effect of changes in tax law or other such laws +or provisions affecting reported results; and (iv) accruals of any amounts for payment under this Plan or any other compensation arrangement maintained by the Company. +15. Transferability +Unless the Administrator determines otherwise, each Award may not be sold, transferred, pledged, assigned or otherwise alienated or hypothecated by a Participant other than by +will or the laws of descent and distribution, and each Option or Stock Appreciation Right shall be exercisable only by the Participant during his or her lifetime. To the extent permitted by the +Administrator, the person to whom an Award is initially granted (the "Grantee") may transfer an Award to any "family member" of the Grantee (as such term is defined in Section 1(a)(5) of the +General Instructions to Form S-8 under the Securities Act of 1933, as amended ("Form S-8")), to trusts solely for the benefit of such family members and to partnerships in which such +family members and/or trusts are the only partners; provided, however, that (i) as a condition thereof, the transferor and the transferee must execute a written agreement containing such terms +as specified by the Administrator and (ii) the transfer is pursuant to a gift or a domestic relations order to the extent permitted under the General Instructions to Form S-8. Except to +the extent specified otherwise in the agreement the Administrator provides for the Grantee and transferee to execute, all vesting, exercisability and forfeiture provisions that are conditioned on the +Grantee's continued employment or service shall continue to be determined with reference to the Grantee's employment or service (and not to the status of the transferee) after any transfer of an Award +pursuant to this Section 15. +16. Suspension, Termination or Recovery of Awards and Payments Thereunder +Except as otherwise provided by the Administrator, if at any time (including after a notice of exercise has been delivered or an award has vested) the Company's chief executive +officer or any other person designated by the Administrator (each such person, an "Authorized Officer") reasonably believes that a Participant may have committed an Act of Misconduct as described in +this Section 16, the Authorized Officer, Administrator or the Board may suspend the Participant's rights to exercise any Option, to vest in an Award, and/or to receive payment for or receive +Shares in settlement of an Award pending a determination of whether an Act of Misconduct has been committed. +If +the Administrator or an Authorized Officer determines a Participant has committed an Act of Misconduct, then except as otherwise provided by the Administrator, including through any agreement +approved by the Administrator, (i) neither the Participant nor his or her estate nor transferee shall be entitled to exercise any Option or Stock Appreciation Right whatsoever, vest in or have +the restrictions on an Award lapse, or otherwise receive payment of an Award, (ii) the Participant will forfeit all outstanding Awards and (iii) the Participant may be required, at the +Administrator's sole and absolute discretion, to return and/or repay to the Company any then unvested Shares previously issued under the Plan. In making such determination, the Administrator or an +Authorized Officer shall give the Participant an opportunity to appear and present evidence on his or her behalf at a hearing before the Administrator or its designee or an opportunity to submit +written comments, documents, information and arguments to be considered by the Administrator. +In +addition to the foregoing, the Administrator may recover Awards made under the Plan and payments under or gain in respect of any Award in accordance with the Company's Policy for Recovery of +Incentive Compensation or any successor or additional clawback or recoupment policy, as such policy or policies may be amended and in effect from time to time, or as otherwise required by applicable +law or applicable stock exchange listing standards, including, without limitation, Section 10D of the Act. +17. Compliance with Laws and Regulations +This Plan, the grant, issuance, vesting, exercise and settlement of Awards thereunder, and the obligation of the Company to sell, issue, deliver or remove any restrictions on +Shares under such Awards, shall be subject to all applicable foreign, federal, state and local laws, rules and regulations, stock exchange rules and regulations, and to such approvals by any +governmental or regulatory agency as may be required. The Company shall not be required to register in a Participant's name or deliver any Shares prior to the completion of any registration or +qualification of such shares under any foreign, federal, state or local law or any ruling or regulation of any government body which the +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +| Page +A-13 +Table of Contents +APPENDIX A +Administrator +shall determine to be necessary or advisable. To the extent the Company is unable to or the Administrator deems it infeasible to obtain authority from any regulatory body having +jurisdiction, which authority is deemed by the Company's counsel to be necessary to the lawful issuance and sale of any Shares hereunder, the Company and its Subsidiaries shall be relieved of any +liability with respect to the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained. No Option shall be exercisable and no Shares shall be issued +and/or transferable under any other Award unless a registration statement with respect to the Shares underlying such Option is effective and current or the Company has determined that such +registration is unnecessary. +In +the event an Award is granted to or held by a Participant who is employed or providing services outside the United States, the Administrator may, in its sole and absolute discretion, modify the +provisions of the Plan or of such Award as they pertain to such individual to comply with applicable foreign law or to recognize differences in local law, currency or tax policy. The Administrator may +also impose conditions on the grant, issuance, exercise, vesting, settlement or retention of Awards in order to comply with such foreign law and/or to minimize the Company's obligations with respect +to tax equalization for Participants employed outside their home country. +18. Withholding +To the extent required by applicable federal, state, local or foreign law, a Participant shall be required to satisfy, in a manner satisfactory to the Company, any withholding +tax obligations that arise by reason of an Option exercise, disposition of Shares issued under an Incentive Stock Option, the grant, vesting or settlement of an Award, an election pursuant to +Section 83(b) of the Code or otherwise with respect to an Award. To the extent a Participant makes an election under Section 83(b) of the Code, within ten days of filing such election +with the Internal Revenue Service, the Participant must notify the Company in writing of such election. The Company and its Subsidiaries shall not be required to issue Shares, make any payment or to +recognize the transfer or disposition of Shares until all such obligations are satisfied. The Administrator may provide for or permit these obligations to be satisfied through the mandatory or +elective sale of Shares and/or by having the Company withhold a portion of the Shares that otherwise would be issued to him or her upon exercise of the Option or the vesting or settlement of an Award, +or by tendering Shares previously acquired. +19. Administration of the Plan +(a) Administrator of the Plan. The Plan shall be administered by the Administrator who shall be the Compensation Committee of +the Board or, in the absence of a Compensation Committee, the Board itself. Any power of the Administrator may also be exercised by the Board, except to the extent that the grant or exercise of such +authority would cause any Award or transaction to become subject to (or lose an exemption under) the short-swing profit recovery provisions of Section 16 of the Act or cause an Award designated +as a Performance Award not to qualify for treatment as performance-based compensation under Section 162(m) of the Code. To the extent that any permitted action taken by the Board conflicts with +action taken by the Administrator, the Board action shall control. The Compensation Committee may by resolution authorize one or more officers of the Company to perform any or all things that the +Administrator is authorized and empowered to do or perform under the Plan, and for all purposes under this Plan, such officer or officers shall be treated as the Administrator; provided, however, that +no such officer shall designate himself or herself as a recipient of any Awards granted under authority delegated to such officer and that any delegation of the power to grant Awards to an officer +shall otherwise be consistent with the requirements of Section 157(c) of the Delaware General Corporation Law. The Compensation Committee hereby designates the Company's chief executive +officer, the Company's chief financial officer, the Secretary of the Company, and the head of the Company's human resource function to assist the Administrator in the administration of the Plan and +execute agreements evidencing Awards made under this Plan or other documents entered into under this Plan on behalf of the Administrator or the Company. In addition, the Compensation Committee may +delegate any or all aspects of the day-to-day administration of the Plan to one or more officers or employees of the Company or any Subsidiary, and/or to one or more agents. +(b) Powers of Administrator. Subject to the express provisions of this Plan, the Administrator shall be authorized and +empowered to do all things that it determines to be necessary or appropriate in connection with the administration of this Plan, including, without limitation: (i) to prescribe, amend and +rescind rules and regulations relating to this Plan and to define terms not otherwise defined herein; (ii) to determine which persons are Participants, to which of such Participants, if any, +Awards shall be granted hereunder and the timing of any such Awards; (iii) to grant Awards to Participants and determine the terms and conditions thereof, including the number of Shares subject +to Awards and the exercise or purchase price of such Shares and the circumstances under which Awards become exercisable or vested or are forfeited or expire, which terms may but need not be +conditioned upon the passage of time, continued employment, the satisfaction of performance criteria, the occurrence of certain events (including a Change in Control), or other factors; (iv) to +establish and verify the extent +Page A-14 | +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +APPENDIX A +of +satisfaction of any performance goals or other conditions applicable to the grant, issuance, exercisability, vesting and/or ability to retain any Award; (v) to prescribe and amend the terms +of the agreements or other documents evidencing Awards made under this Plan (which need not be identical) and the terms of or form of any document or notice required to be delivered to the Company by +Participants under this Plan; (vi) to determine the extent to which adjustments are required pursuant to Section 13 of the Plan; (vii) to interpret and construe this Plan, any +rules and regulations under this Plan and the terms and conditions of any Award granted hereunder, and to make exceptions to any such provisions if the Administrator, in good faith, determines that it +is necessary to do so in light of extraordinary circumstances and for the benefit of the Company; (viii) to approve corrections in the documentation or administration of any Award; and +(ix) to make all other determinations deemed necessary or advisable for the administration of this Plan. The Administrator may, in its sole and absolute discretion, without amendment to the +Plan, waive or amend the operation of +Plan provisions respecting exercise after termination of employment or service to the Company or an Affiliate and, except as otherwise provided herein, adjust any of the terms of any Award. The +Administrator may also (A) accelerate the date on which any Award granted under the Plan becomes exercisable or (B) accelerate the vesting date or waive or adjust any condition imposed +hereunder with respect to the vesting or exercisability of an Award, provided that the Administrator, in good faith, determines that such acceleration, waiver or other adjustment is necessary or +desirable. For the avoidance of doubt, notwithstanding anything in the Plan to the contrary, no Award outstanding under the Plan may be repriced, regranted through cancellation or otherwise amended to +reduce the exercise price applicable thereto (other than with respect to adjustments made in connection with a transaction or other change in the Company's capitalization as described in +Section 13 of the Plan) without the approval of the Company's stockholders. +(c) Determinations by the Administrator. All decisions, determinations and interpretations by the Administrator regarding the +Plan, any rules and regulations under the Plan and the terms and conditions of or operation of any Award granted hereunder, shall be final and binding on all Participants, beneficiaries, heirs, +assigns or other persons holding or claiming rights under the Plan or any Award. The Administrator shall consider such factors as it deems relevant, in its sole and absolute discretion, to making such +decisions, determinations and interpretations including, without limitation, the recommendations or advice of any officer or other employee of the Company and such attorneys, consultants and +accountants as it may select. +(d) Subsidiary Awards. In the case of a grant of an Award to any Participant employed by a Subsidiary, such grant may, if the +Administrator so directs, be implemented by the Company issuing any subject Shares to the Subsidiary, for such lawful consideration as the Administrator may determine, upon the condition or +understanding that the Subsidiary will transfer the Shares to the Participant in accordance with the terms of the Award specified by the Administrator pursuant to the provisions of the Plan. +Notwithstanding any other provision hereof, such Award may be issued by and in the name of the Subsidiary and shall be deemed granted on such date as the Administrator shall determine. +(e) Indemnification of Administrator. Neither any member nor former member of the Administrator nor any individual to whom +authority is or has been delegated shall be personally responsible or liable for any act or omission in connection with the performance of powers or duties or the exercise of discretion or judgment in +the administration and implementation of the Plan. Each person who is or shall have been a member of the Administrator shall be indemnified and held harmless by the Company from and against any cost, +liability or expense imposed or incurred in connection with such person's or the Administrator's taking or failing to take any action under the Plan. Each such person shall be justified in relying on +information furnished in connection with the Plan's administration by any employee, officer, agent or expert employed or retained by the Administrator or the Company. +20. Amendment of the Plan or Awards +The Board may amend, alter or discontinue this Plan and the Administrator may amend or alter any agreement or other document evidencing an Award made under this Plan but, +except as provided pursuant to the provisions of Section 13 of the Plan, no such amendment shall, without the approval of the stockholders of the Company: +(a) increase +the maximum number of Shares for which Awards may be granted under this Plan; +(b) reduce +the price at which Options or Stock Appreciation Rights may be granted below the price provided for in Section 6(a) of the Plan; +(c) reduce +the exercise price of outstanding Options or Stock Appreciation Rights; +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +| Page +A-15 +Table of Contents +APPENDIX A +(d) extend +the term of this Plan; +(e) change +the class of persons eligible to be Participants; +(f) otherwise +amend the Plan in any manner requiring stockholder approval by law or under the New York Stock Exchange listing requirements (or the listing requirements of any successor +exchange that is the primary stock exchange for trading of Shares); or +(g) increase +the individual maximum limits in Sections 5(c) and (d) of the Plan. +No +amendment or alteration to the Plan or an Award or Award Agreement shall be made which would impair the rights of the holder of an Award, without such holder's consent, provided that no such +consent shall be required if the Administrator determines in its sole and absolute discretion and prior to the date of any Change in Control that such amendment or alteration either is required or +advisable in order for the Company, the Plan or the Award to satisfy any law or regulation or to meet the requirements of or avoid adverse financial accounting consequences under any accounting +standard. In addition, the Plan may not be amended in any way that causes the Plan to fail to comply with or be exempt from Section 409A of the Code, unless the Board expressly determines to +amend the Plan to be subject to Section 409A of the Code. +21. No Liability of Company +The Company and any Subsidiary or affiliate which is in existence or hereafter comes into existence shall not be liable to a Participant or any other person as to: +(a) the non-issuance or sale of Shares as to which the Company has been unable to obtain from any regulatory body having jurisdiction the authority deemed by the Company's counsel to be +necessary to the lawful issuance and sale of any Shares hereunder and (b) any tax consequence expected, but not realized, by any Participant or other person due to the grant, receipt, exercise, +settlement of any Award granted hereunder. +22. Non-Exclusivity of Plan +Neither the adoption of this Plan by the Board nor the submission of this Plan to the stockholders of the Company for approval shall be construed as creating any limitations on +the power of the Board or the Administrator to adopt such other incentive arrangements as either may deem desirable, including without limitation, the granting of restricted stock or stock options +otherwise than under this Plan or an arrangement not intended to qualify under Code Section 162(m), and such arrangements may be either generally applicable or applicable only in specific +cases. +23. Governing Law +This Plan and any agreements or other documents hereunder shall be interpreted and construed in accordance with the laws of Delaware and applicable federal law. Any reference +in this Plan or in the agreement or other document evidencing any Awards to a provision of law or to a rule or regulation shall be deemed to include any successor law, rule or regulation of similar +effect or applicability. +24. Waiver of Jury Trial . +By +accepting an Award under the Plan, each Participant waives any right to a trial by jury in any action, proceeding or counterclaim concerning any rights under the Plan and any Award, or under any +amendment, waiver, consent, instrument, document or other agreement delivered or which in the future may be delivered in connection therewith, and agrees that any such action, proceedings or +counterclaim will be tried before a court and not before a jury. By accepting an Award under the Plan, each Participant certifies that no officer, representative, or attorney of the Company has +represented, expressly or otherwise, that the Company would not, in the event of any action, proceeding or counterclaim, seek to enforce the foregoing waivers. Notwithstanding anything to the contrary +in the Plan, nothing herein is to be construed as limiting the ability of the Company and a Participant to agree to submit disputes arising under the terms of the Plan or any Award made hereunder to +binding arbitration or as limiting the ability of the Company to require any eligible individual to agree to submit such disputes to binding arbitration as a condition of receiving an Award hereunder. +Page A-16 | +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +Table of Contents +APPENDIX A +25. No Right to Employment, Reelection or Continued Service +Nothing in this Plan or an Award Agreement shall interfere with or limit in any way the right of the Company, its Subsidiaries and/or its affiliates to terminate any +Participant's employment, service on the Board or service for the Company at any time or for any reason not prohibited by law, nor shall this Plan or an Award itself confer upon any Participant any +right to continue his or her employment or service for any specified period of time. Neither an Award nor any benefits arising under this Plan shall constitute an employment contract with the Company, +any Subsidiary and/or its affiliates. Subject to Sections 4 and 20 of the Plan, this Plan and the benefits hereunder may be terminated at any time in the sole and exclusive discretion of the +Board without giving rise to any liability on the part of the Company, its Subsidiaries and/or its affiliates. +26. Unfunded Plan +The Plan is intended to be an unfunded plan. Participants are and shall at all times be general creditors of the Company with respect to their Awards. If the Administrator or +the Company chooses to set aside funds in a trust or otherwise for the payment of Awards under the Plan, such funds shall at all times be subject to the claims of the creditors of the Company in the +event of its bankruptcy or insolvency. +Effective as of February 10, 2016 +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +| Page +A-17 +Table of Contents +APPENDIX B +The +following tables contain information regarding the non-GAAP adjustments used by the Company in the presentation of its financial results: +WOLVERINE WORLD WIDE, INC. +RECONCILIATION OF REPORTED REVENUE GROWTH +TO UNDERLYING REVENUE GROWTH* +(Unaudited) +(In millions) +GAAP Basis +Revenue +Foreign +Exchange +Impact +Adjustments 1 +Underlying +Revenue +Fiscal 2015 Full-Year +$2,691.6 +$65.6 +$2,757.2 +Fiscal 2014 Full-Year +$2,761.1 +$(59.9 +) +$2,701.2 +Revenue Growth +(2.5 +)% +2.1 +% +1 Fiscal 2014 Full-Year Adjustments include the impact from retail store closures associated with the Strategic Realignment Plan and the termination of the +Patagonia license agreement. +RECONCILIATION OF REPORTED DILUTED EPS TO ADJUSTED DILUTED EPS* +(Unaudited) +GAAP Basis +EPS +Adjustments 1 +As Adjusted +EPS +Fiscal 2015 Full-Year +$1.20 +$0.25 +$1.45 +1 Fiscal 2015 Full-Year Adjustments include restructuring and impairment costs and debt extinguishment costs. +COMPONENTS OF OPERATING FREE CASH FLOW* +(Unaudited) +(In millions) +Fiscal 2015 Full-Year +Cash provided by operating activities +$215.5 +Cash used in investing activities +(50.0 +) +Operating free cash flow +$165.5 +RECONCILIATION OF REPORTED DEBT TO NET DEBT* +(Unaudited) +(In millions) +Fiscal 2015 Q4 +Fiscal 2014 Q4 +GAAP reported debt +$820.0 +$900.8 +Cash and cash equivalents +(194.1 +) +(223.8 +) +Net debt +$625.9 +$677.0 +* To supplement the consolidated financial statements presented in accordance with Generally Accepted Accounting Principles ("GAAP"), the Company describes what +certain financial measures would have been if acquisition-related integration costs, restructuring and impairment costs and debt extinguishment costs were excluded. The Company also describes the +revenue impact from planned retail store closures associated with the Strategic Realignment Plan and the exit of the Patagonia Footwear business. The Company believes these non-GAAP measures provide +useful information to both management and investors to increase +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +| Page +B-1 +Table of Contents +APPENDIX B +comparability to the prior period by adjusting for certain items that may not be indicative of core operating measures and to better identify trends in our business. The adjusted financial results are +used by management to, and allow investors to, evaluate the operating performance of the Company on a comparable basis. The Company has defined operating free cash flow as cash used in operating +activities less cash used in investing activities. The Company views operating free cash flow as a measure of the Company's after-tax cash flow available to reduce debt, add to cash balances, pay +dividends, repurchase stock, and fund other financing activities. The Company has defined net debt as debt less cash and cash equivalents. The Company believes that netting these sources of cash +against debt provides a clearer picture of the future demands on cash to repay debt. The Company evaluates results of operations on both a reported and a constant currency basis. The constant currency +presentation, which is a non-GAAP measure, excludes the impact of fluctuations in foreign currency exchange rates. The Company believes providing constant currency information provides valuable +supplemental information regarding results of operations, consistent with how the Company evaluates performance. The Company calculates constant currency by converting the current-period local +currency financial results using the prior period exchange rates and comparing these adjusted amounts to our current period reported results. Management does not, nor should investors, consider such +non-GAAP financial measures in isolation from, or as a substitution for, financial information prepared in accordance with GAAP. A reconciliation of all non-GAAP measures included in this press +release, to the most directly comparable GAAP measures, are found in the financial tables above. +Page B-2 | +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +. Electronic Voting Instructions Available 24 hours a day, 7 days a week! Instead of mailing your proxy, you may choose one of the voting methods outlined below to vote your proxy. VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR. Proxies submitted by the Internet or telephone must be received by 11:59 p.m., Eastern Daylight Time, on April 20, 2016. Vote by Internet • Go to www.investorvote.com/WWW • Or scan the QR code with your smartphone • Follow the steps outlined on the secure website Vote by telephone • Call toll free 1-800-652-VOTE (8683) within the USA, US territories & Canada on a touch tone telephone • Follow the instructions provided by the recorded message Using a black ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas. q IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q A Proposals — The Board of Directors recommends a vote FOR all the nominees listed and FOR Proposals 2, 3 and 4. + 1. Election of Directors: 01 - Jeffrey M. Boromisa For Withhold For Withhold For Withhold 02 - Gina R. Boswell 03 - David T. Kollat 04 - Timothy J. O’Donovan For Against Abstain ForAgainst Abstain 2. Proposal to ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for fiscal year 2016. 4. Proposal to approve the Stock Incentive Plan of 2016. 3. An advisory resolution approving compensation for the Company’s named executive officers. B Non-Voting Items Change of Address — Please print new address below. C Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below IMPORTANT - Please sign exactly as your name(s) appears on this Proxy. When signing on behalf of a corporation, partnership, estate or trust, indicate title or capacity of person signing. If shares are held jointly, each holder must sign. Date (mm/dd/yyyy) — Please print date below. Signature 1 — Please keep signature within the box. Signature 2 — Please keep signature within the box. + 4 3 A V 02AJ8A Annual Meeting Proxy Card X IMPORTANT ANNUAL MEETING INFORMATION +. WOLVERINE WORLD WIDE, INC. 9341 Courtland Drive, N.E. Rockford, Michigan 49351 Wolverine World Wide, Inc. will be holding its Annual Meeting of Stockholders on April 21, 2016. The enclosed Notice of 2016 Annual Meeting of Stockholders provides information regarding the matters that are expected to be voted on at the meeting. Your vote is important to us. Even if you plan to attend the meeting, please read the enclosed materials and vote through the Internet, by telephone or by mailing the Proxy Card below. Telephone and Internet Voting. On the reverse side of this card are instructions on how to vote through the Internet or by telephone. Please consider voting through one of these methods. Your vote is recorded as if you mailed in your Proxy. Thank you in advance for your participation in our 2016 Annual Meeting. Wolverine World Wide, Inc. q IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q Proxy — WOLVERINE WORLD WIDE, INC. This proxy is solicited on behalf of the Board of Directors The undersigned stockholder hereby appoints Blake W. Krueger and Brendan M. Gibbons, and each of them, each with full power of substitution, as proxies to represent the undersigned stockholder and to vote all shares of Common Stock of Wolverine World Wide, Inc. that the stockholder would be entitled to vote on all matters that properly come before the Annual Meeting of Stockholders to be held at the Company’s headquarters located at 9341 Courtland Drive N.E., Rockford, Michigan, 49351, on Thursday, April 21, 2016, at 10 a.m. Eastern Daylight Time, and any adjournment of that meeting. If this Proxy is properly executed, the shares represented by this Proxy will be voted as specified. If this Proxy is properly executed but no specification is made, the shares represented by this Proxy will be voted for the election of all nominees named on this Proxy as directors and for approval of Proposals 2, 3 and 4 identified on this Proxy. The shares represented by this Proxy will be voted in the discretion of the proxies on any other matters that may properly come before the meeting. PLEASE DO NOT VOTE BY MORE THAN ONE METHOD. THE LAST VOTE RECEIVED WILL BE THE OFFICIAL VOTE. DO NOT RETURN THIS PROXY IF YOU ARE VOTING BY THE INTERNET OR BY TELEPHONE. (CONTINUED AND TO BE SIGNED ON REVERSE SIDE.) \ No newline at end of file diff --git a/raw/proxies/0000110471/0001047469-16-011167/proxy_rpt.txt b/raw/proxies/0000110471/0001047469-16-011167/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..252e7573cc84cd8f1a4724c2ff7cc5a63b515d7f --- /dev/null +++ b/raw/proxies/0000110471/0001047469-16-011167/proxy_rpt.txt @@ -0,0 +1,41 @@ +RELATED PERSON TRANSACTIONS POLICY +Wolverine Worldwide's Board adopted written policies and procedures regarding related person transactions. They require the +Governance Committee to review and either approve or disapprove the Company entering into any Interested Transactions (defined below). If advance approval is not feasible, then the Governance +Committee must review and ratify the Interested Transaction at its next meeting. +Interested Transaction +Any transaction, arrangement or relationship or series of similar transactions, arrangements or relationships (including any indebtedness or guarantee of indebtedness) in which: +(1) +the aggregate amount involved is or is expected to exceed $120,000 since the beginning of Wolverine Worldwide's last completed fiscal year; +(2) +Wolverine Worldwide is a participant; and +(3) +any Related Person (defined below) has or will have a direct or indirect interest. +An Interested Transaction does not include: +1. +Any employment compensation paid to an executive officer of the Company if the Compensation Committee approved or recommended to the Board of Directors for approval such compensation. +2. +Any compensation paid to a director for service as a director of the Company. +3. +Any transaction in which a Related Person has an indirect interest solely as a result of being (i) a director or, together with all other Related Persons, as defined below, a less than 10% beneficial owner of an equity interest in another +entity, or both, or (ii) a limited partner in a partnership in which the Related Person, together with all other Related Persons, has an interest of less than 10%. +4. +Any transaction in which the Related Person's interest arises solely from the ownership of the Company's common stock and all holders of the Company's common stock received the same benefit on a pro rata basis (e.g., a dividend). +Related Person +Any: +(a) +person who is or was at any point during the last fiscal year for which Wolverine Worldwide filed an Annual Report on Form 10-K and proxy statement, an executive officer, director or, to the extent information regarding such nominee is being +presented in a proxy or information statement relating to the election of that nominee as a director, nominee for election as a director; +(b) +beneficial owner of greater than five percent of Wolverine Worldwide's common stock; or +(c) +immediate family member * of any of the foregoing. +* Immediate family member is defined as a person's spouse, parents, stepparents, children, stepchildren, +siblings, mothers-and fathers-in-law, sons- and daughters-in-law, and brothers- and sisters-in-law and anyone residing in such person's home (other than a tenant or employee). +The +Governance Committee considers whether the Interested Transaction is on terms no less favorable than terms generally available to an unaffiliated third-party under the same or similar +circumstances, the extent of the Related Person's interest in the transaction, and other factors that it deems relevant. No director participates in any discussion or approval of an Interested +Transaction for which he or she is a Related Person, except to provide information to the Governance Committee. +Wolverine Worldwide Notice of 2016 Annual Meeting of Stockholders and Proxy Statement +| Page +85 +Table of Contents \ No newline at end of file diff --git a/raw/proxies/0000110471/0001047469-17-002079/proxy.txt b/raw/proxies/0000110471/0001047469-17-002079/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..51b57cc5ade0f3ed31b170dd71ee6d131f5a02ec --- /dev/null +++ b/raw/proxies/0000110471/0001047469-17-002079/proxy.txt @@ -0,0 +1,6379 @@ +DEF 14A +1 +a2231297zdef14a.htm +DEF 14A +Use these links to rapidly review the document +Table of Contents +Table of Contents +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +Washington, D.C. 20549 +SCHEDULE 14A +Proxy +Statement Pursuant to Section 14(a) of +the Securities Exchange Act of 1934 (Amendment No. ) +Filed by the Registrant ý +Filed by a Party other than the Registrant o +Check the appropriate box: +o +Preliminary Proxy Statement +o +Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +ý +Definitive Proxy Statement +o +Definitive Additional Materials +o +Soliciting Material under §240.14a-12 +Wolverine World Wide, Inc. +(Name of Registrant as Specified In Its Charter) +(Name of Person(s) Filing Proxy Statement, if other than the Registrant) +Payment of Filing Fee (Check the appropriate box): +ý +No fee required. +o +Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. +(1) +Title of each class of securities to which transaction applies: +(2) +Aggregate number of securities to which transaction applies: +(3) +Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): +(4) +Proposed maximum aggregate value of transaction: +(5) +Total fee paid: +o +Fee paid previously with preliminary materials. +o +Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration +statement number, or the Form or Schedule and the date of its filing. +(1) +Amount Previously Paid: +(2) +Form, Schedule or Registration Statement No.: +(3) +Filing Party: +(4) +Date Filed: +Table of Contents +Table of Contents +LETTER TO SHAREHOLDERS +Wolverine World Wide, Inc. +9341 Courtland Drive, N.E. +Rockford, Michigan 49351 +March 28, +2017 +Dear +Fellow Shareholders, +I +am pleased to invite you to join me, our Board of Directors, members of Wolverine Worldwide's senior management team, and your fellow shareholders at Wolverine Worldwide's 2017 Annual Meeting of +Shareholders on Thursday, May 4, 2017, at 10:00 a.m. EDT, at the Company's headquarters in Rockford, Michigan. The attached Proxy +Statement and Notice of 2017 Annual Meeting of Shareholders provide you with information regarding the business to be conducted. +There are a number of proposals for you to consider. Your vote is important, so please be sure to do so – whether online, by phone, or by mail with the enclosed proxy or voting +instruction card. +2016 +was a year of great progress for our Company, with our Board of Directors and senior management team focused on addressing the dynamic and fast-changing consumer marketplace through a +prioritization on innovation and growth, omnichannel transformation, and operational excellence. We opened a new design and innovation center, reorganized our European, Canadian, Apparel and +Accessories, and Direct-to-Consumer businesses, and restructured our credit facility, while delivering nearly $300 million in operating cash flow, reducing year-end inventories by 25%, and, +most importantly, delivering 32.9% in total shareholder return, performance at the 91 st percentile of our peer group. Our strong performance has continued into 2017, with 14.0% +year-to-date total shareholder return through the March 13, 2017 record date for this year's annual meeting. +In +addition, since our last annual meeting, the Compensation Committee engaged a new independent executive compensation consultant, and members of our Board of Directors and senior management team +redoubled efforts to speak with shareholders to better understand your perspectives on important governance and compensation matters. Of primary importance this past year, following the disappointing +results of our 2016 say-on-pay vote, was discussing our executive compensation program with shareholders and determining how to best demonstrate responsiveness to your concerns. We reached out to +shareholders holding nearly two-thirds of our outstanding shares and held meetings, most of them in person, with more than half of these shareholders, including each shareholder who accepted our +invitation. Joseph Gromek, the Chair of our Compensation Committee, led these meetings, which focused not only on our executive compensation program, but also on the Company's governance protocols and +publicly-announced strategic initiatives. The details of this outreach effort and the changes made by the Compensation Committee in response to shareholder feedback are discussed throughout this Proxy +Statement and within the Compensation Discussion and Analysis, but, in summary, we: +• Shifted the mix of long-term incentive compensation to be more heavily weighted to performance share units +• Added an adjusted operating margin performance modifier to our annual bonus plan to link executive compensation to one of the Company's key +strategic initiatives +• Added a relative total shareholder return performance modifier to our three-year performance share unit program +• Adopted a new peer group, creating greater revenue alignment with peers +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +| Page 1 +Table of Contents +• Adopted "double-trigger" equity vesting upon a change in control +• Reduced 2017 CEO equity grants by $500,000 compared to 2016 and used negative discretion to pay 0% on 2016 CEO "individual performance bonus" +despite actual performance in excess of that +We +greatly value the conversation we have had with our shareholders. We appreciate that this is an ongoing dialogue and look forward to continuing the conversation before, at, and after our 2017 +Annual Meeting. +Sincerely, +David +T. Kollat +Lead Independent Director +Page 2 | +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +Table of Contents +NOTICE OF 2017 ANNUAL MEETING OF SHAREHOLDERS +10:00 a.m., May 4, 2017 +Wolverine World Wide, Inc. +9341 Courtland Drive, N.E. +Rockford, Michigan 49351 +March 28, 2017 +To +our Shareholders: +We +invite you to attend Wolverine Worldwide's Annual Meeting of Shareholders at the Company's headquarters located at 9341 Courtland Drive, N.E., Rockford, Michigan 49351, on Thursday, May 4, +2017, at 10:00 a.m. EDT. At the annual meeting, the shareholders will vote on the following items: +(1) Election +of the four director nominees named in the proxy statement for three-year terms expiring in 2020 (2) Advisory +resolution approving compensation for the Company's named executive officers ("NEOs," and each an "NEO") (3) Frequency +of future advisory votes on compensation of the Company's NEOs (4) Ratification +of the Audit Committee's appointment of Ernst & Young LLP as the Company's independent registered public accounting firm for fiscal year +2017 (5) Approval +of the Amended and Restated Executive Short-Term Incentive Plan (the "Annual Bonus Plan") +Shareholders +of record as of March 13, 2017 can vote at the meeting and any adjournment of the meeting. +This +Notice of 2017 Annual Meeting of Shareholders, Proxy Statement, proxy or voting instruction card and Annual Report for our fiscal year ended December 31, 2016 are being mailed or made +available to shareholders starting on or about March 28, 2017. +Whether +or not you plan to attend, you can ensure that your shares are represented at the meeting by promptly voting and submitting your proxy by telephone or through the internet, or by completing, +signing, dating and returning your proxy card in the enclosed envelope. +By +Order of the Board of Directors +Brendan +M. Gibbons +Senior Vice President, General Counsel and Secretary +Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to be held on May 4, 2017. +Wolverine's Proxy Statement for the 2017 Annual Meeting of Shareholders and the Annual Report to Shareholders for the fiscal year ended December 31, 2016, are available +at www.wolverineworldwide.com/2017annualmeeting . +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +| Page 3 +Table of Contents +MEETING INFORMATION +Wolverine World Wide, Inc. ("Wolverine Worldwide" or the "Company") is furnishing this proxy statement and enclosed proxy card in +connection with the solicitation of proxies by its Board of Directors to be used at the Annual Meeting of Shareholders of the Company occurring on May 4, 2017 at the Company's corporate +headquarters in Rockford, Michigan (the "Annual Meeting"). Distribution of this proxy statement and enclosed proxy card to shareholders is scheduled to begin on or about March 28, 2017. +You +can ensure that your shares are voted at the Annual Meeting by submitting your instructions by telephone or through the Internet, or by completing, signing, dating, and returning your proxy form +in the enclosed envelope. Submitting your instructions or proxy by any of these methods will not affect your right to attend and vote at the Annual Meeting. The Company encourages shareholders to +submit proxies in advance. A shareholder who gives a proxy may revoke it at any time before it is exercised by voting in person at the Annual Meeting, by delivering a subsequent proxy, or by notifying +the inspectors of election in writing of such revocation. In order to vote any shares at the Annual Meeting that are held for you in a brokerage, bank, or other institutional account, you must obtain +a proxy from that entity and bring it with you to hand in with your ballot. +References +to "2016" or "fiscal 2016" in this proxy statement are to the Company's fiscal year ended December 31, 2016, unless otherwise noted in the text. References to "2017" or "fiscal 2017" +in this proxy statement are to the Company's fiscal year ending December 30, 2017, unless otherwise noted in the text. +Page 4 | +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +Table of Contents +2017 PROXY STATEMENT +Table of Contents +Letter to Shareholders +1 +Notice of 2017 Annual Meeting of Shareholders +3 +Meeting Information +4 +Proxy Statement Summary +7 +Summary of Shareholder Voting Matters +7 +Proposal 1 – Election of Directors for Terms Expiring in 2020 +7 +Board Highlights +8 +Board is Composed of Directors with the Right Mix of Skills and Experiences +8 +Corporate Governance Highlights +9 +Proposal 2 – Advisory Vote to Approve NEO Compensation +10 +Our Brand Portfolio +10 +Strategic Focus +10 +Key 2016 Accomplishments and Financial Highlights +11 +Shareholder Engagement +11 +Compensation Philosophy – Pay at Risk +12 +Compensation Best Practices +13 +Corporate Governance +14 +Board of Directors +14 +Board Composition +14 +Director Nominations +15 +Board Self-Assessment +16 +Risk Oversight +16 +Code of Business Conduct and Accounting and Finance Code of Ethics +17 +Shareholder Communications Policy +17 +Proposal 1 – Election of Directors for Terms Expiring in 2020 +18 +Directors with Terms Expiring in 2020 +19 +Directors with Terms Expiring in 2018 +23 +Directors with Terms Expiring in 2019 +26 +Board Leadership +30 +Director Independence +30 +Board Committees, Meetings and Meeting Attendance +31 +Audit Committee +31 +Compensation Committee +32 +Governance Committee +32 +Non-Employee Director Compensation in Fiscal Year 2016 +33 +Non-Employee Director Stock Ownership Guidelines +35 +Securities Ownership of Officers and Directors and Certain Beneficial Owners +36 +Five Percent Shareholders +36 +Stock Ownership by Management and Others +37 +A Letter From Our Compensation Committee +38 +Compensation Discussion and Analysis +39 +Summary +39 +Compensation Philosophy and Objectives +39 +Shareholder Outreach +39 +Strategic Priorities +41 +Compensation Decisions in Context: Key 2016 Accomplishments and Financial Highlights +42 +Compensation Overview +42 +Year-Over-Year Change in CEO Pay +43 +CEO Annual Bonus/TSR Analysis +44 +2016 Compensation Program Overview +45 +Long-Term Incentive Program Mix +45 +Pay at Risk +46 +Compensation Best Practices +46 +Compensation Discussion and Analysis in Detail +47 +2016 Compensation Program Overview +47 +Setting Targets +47 +Base Salary +47 +Annual Bonus +48 +Performance Bonus +48 +Individual Performance Bonus +49 +2017 Annual Bonus Plan Update +51 +Long-Term Incentive Compensation +52 +Performance Shares +52 +2016 Performance Share Awards +53 +Stock Option Grants and Restricted Stock Awards +54 +2017 Long-Term Incentive Plan Update +54 +Benefits +54 +Retirement, Deferred Compensation and Welfare Plans +54 +Perquisites +55 +Post-Employment Compensation +55 +Compensation Setting Process +56 +Setting Targets +56 +Competitive Philosophy and Competitive Market Data +56 +Peer Group +56 +New 2017 Peer Group +57 +CEO Role +57 +Compensation Consultant Role +57 +Other Compensation Policies and Practices +58 +NEO Stock Ownership Guidelines +58 +Stock Hedging and Pledging Policies +58 +Clawback Policy +58 +Impact of Accounting and Tax Treatments on Compensation +58 +Compensation Committee Report +59 +Summary Compensation Table +60 +Grants of Plan-Based Awards in Fiscal Year 2016 +62 +Outstanding Equity Awards at 2016 Fiscal Year-End +64 +Option Exercises and Stock Vested in Fiscal Year 2016 +68 +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +| Page 5 +Table of Contents +2017 PROXY STATEMENT +Pension Plans and 2016 Pension Benefits +69 +Qualified Pension Plan +69 +Supplemental Executive Retirement Plan +69 +Pension Benefits in Fiscal Year 2016 +70 +Nonqualified Deferred Compensation +71 +Nonqualified Deferred Compensation +71 +Potential Payments Upon Termination or Change in Control +72 +Benefits Triggered by Termination for Cause or Voluntary +Termination +72 +Benefits Triggered by Termination Other Than for Cause or for Good +Reason +72 +Benefits Triggered Upon a Change in Control +73 +Benefits Triggered by Retirement, Death or Permanent Disability +74 +Description of Restrictive Covenants that Apply During and After Termination of +Employment +75 +Estimated Payments on Termination or Change in Control +75 +Proposal 2 – Advisory Resolution To Approve Executive Compensation +78 +Proposal 3 – Advisory Vote on the Frequency of Future Advisory Votes on Executive Compensation +79 +Proposal 4 – Ratification of Appointment of Independent Registered Public Accounting Firm +80 +Audit Committee Report +81 +Independent Registered Public Accounting Firm +83 +Proposal 5 – Approval of Amended and Restated Executive Short-Term +Incentive Plan (Annual Bonus Plan) +84 +Overview +84 +Purpose of the Plan +84 +Summary of the Plan +85 +Amendment and Termination +87 +Vote Required and Board Recommendation +87 +Related Party Matters +88 +Certain Relationships and Related Transactions +88 +Related Person Transactions Policy +88 +Additional Information +89 +Shareholders List +89 +Director and Officer Indemnification +89 +Section 16(a) Beneficial Ownership Reporting Compliance +89 +Shareholder Proposals for Inclusion in Next Year's Proxy +Statement +89 +Other Shareholder Proposals for Presentation at Next Year's Annual +Meeting +89 +Voting Securities +90 +Conduct of Business +90 +Vote Required for Election and Approval +90 +Voting Results of the Annual Meeting +91 +Attending the Annual Meeting +91 +Manner for Voting Proxies +91 +Revocation of Proxies +91 +Solicitation of Proxies +91 +Delivery of Documents to Shareholders Sharing an Address +91 +Access to Proxy Statement and Annual Report +92 +Appendix A – Amended any Restated Executive Short Term Incentive Plan (Annual Bonus Plan) +A-1 +Appendix B – Forward-Looking Statements and Non-GAAP Reconciliation +Table +B-1 +Page 6 | +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +Table of Contents +Proxy Statement Summary +This +summary highlights key information that can be found in greater detail elsewhere in this Proxy Statement. This summary does not contain all of the information that shareholders +should consider, and shareholders should read the entire Proxy Statement before voting. +SUMMARY OF SHAREHOLDER VOTING MATTERS +Shareholders are being asked to vote on the following matters at the 2017 Annual Meeting of Shareholders: +PROPOSAL +BOARD VOTE +RECOMMENDATION +PAGE +REFERENCE +1. +Election of Directors for Terms Expiring in 2020 +FOR each Nominee +18 +2. +Advisory Resolution Approving NEO Compensation +FOR +78 +3. +Frequency of Future Advisory Votes on Executive Officers Compensation to be Every Year +EVERY ONE YEAR +79 +4. +Ratification of Ernst & Young LLP as Auditor for Fiscal Year 2017 +FOR +80 +5. +Approval of the Amended & Restated Executive Short-Term Incentive Plan +(Annual Bonus Plan) +FOR +87 +PROPOSAL 1 – ELECTION OF DIRECTORS FOR TERMS EXPIRING IN 2020 +The Company's Board consists of 11 directors. The Company's By-Laws establish three classes of directors, with each class being as nearly +equal in number as possible and serving three-year terms. +The +Board has nominated four directors for election at the Annual Meeting, as outlined in the table below. Each director has been nominated to serve for a three-year term expiring at the annual +meeting of shareholders to be held in 2020. The Board recommends that shareholders vote "FOR" each of the nominees named below. +Age +Director Since +Independent +Other Public Directorships +Committees +Proposed Term +Expiration +William K. Gerber +Managing Director, Cabrillo Point Capital +63 +2008 +✓ +AK Steel Holding Corporation +Audit (Chair) +Compensation +2020 +Blake W. Krueger +Chairman, CEO & President of Wolverine World Wide, Inc. +63 +2006 +None +None +2020 +Nicholas T. Long +Retired CEO of MillerCoors LLC +58 +2011 +✓ +None +Compensation Governance +2020 +Michael A. Volkema +Chairman of Herman Miller, Inc. +61 +2005 +✓ +Herman Miller, Inc. +Audit +Governance (Chair) +2020 +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +| Page 7 +Table of Contents +Board Highlights +The following pie charts illustrate key characteristics of the Company's Board: +Board is Composed of Directors with the Right Mix of Skills and Experiences +The following chart lists the important experiences and attributes that the Company's Directors possess: +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +| Page 8 +Table of Contents +Corporate Governance Highlights +Wolverine Worldwide is committed to a governance structure that provides strong shareholder rights and meaningful accountability: +✓ +Highly independent Board (All Non-Management Directors) and Committees +✓ +Lead Independent Director with clearly defined role +✓ +Majority voting with director +resignation policy +✓ +No supermajority vote requirements +✓ +Shareholder right to act by written consent +✓ +Annual Board and Committee self-evaluations +✓ +Robust Board and executive +succession planning, including annual written director nominee evaluations +✓ +Long-standing commitment toward diversity +✓ +Director onboarding orientation program +✓ +Active shareholder engagement +practices +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +| Page 9 +Table of Contents +PROPOSAL 2 – ADVISORY VOTE TO APPROVE NEO COMPENSATION +For a more detailed discussion of compensation matters, please reference the CD&A beginning on page 39. While the outcome of this proposal is +non-binding, the Board and Compensation Committee will consider the outcome of the vote when making future compensation decisions. The Board recommends that shareholders vote +"FOR" the advisory vote to approve named executive officer compensation. +Our Brand Portfolio +Wolverine Worldwide has a portfolio of brands organized into four key operating groups as illustrated below: +Strategic Focus +In 2016, the Company launched the WOLVERINE WAY FORWARD, an enterprise-wide initiative to transform the Company in light of the fast-changing +retail environment. The WOLVERINE WAY FORWARD includes the following key components: +Innovation & Growth +Operational Excellence +Portfolio Management +People & Teams +• +Building great brands +through product innovation and compelling marketing +• +Relentless focus on the consumer +• +Consumer-centric product innovation +• +Demand creation initiatives +• +Deep focus on digital connection, specifically eCommerce and social media +• +International expansion +• +Healthier supply chain, +with improved speed to market +• +Omnichannel transformation focused on aggressively growing highly profitable eCommerce business and right-sizing underperforming store fleet +• +Faster, more efficient structure +• +Aggressive goal to achieve 12% adjusted operating margin by +the end of 2018 +• +Focus on core, go-forward +brands that provide the biggest growth and profit opportunities +• +Identify strategic alternatives for non-core, underperforming businesses +• +Strategic, value-creating acquisitions +• +Amazing place to work +• +Build the best team and +talent pipeline +• +Modern +skillset +• +Investment in +enhanced learning and development initiatives +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +| Page 10 +Table of Contents +Key 2016 Accomplishments and Financial Highlights +Key 2016 financial highlights and accomplishments against the Company's strategic priorities are below. +Financial Highlights +Business Accomplishments +• +Delivered 32.9% total +shareholder return for 2016, performance in the top decile of companies in its peer group +• +Generated operating cash flow for the year of $296.3 million, up $80.8 million or 37.5% versus the prior year +• +Reduced year-end inventory by 25% against a corporate objective to +reduce overall inventory by 12% +• +Delivered revenue of $2.495 billion, in line with original guidance +• +Delivered reported diluted 2016 EPS of $0.89, compared to $1.20 in 2015; adjusted diluted EPS of $1.36; and, on a constant currency basis, $1.52 compared to $1.45 in 2015 +• +Returned value to +shareholders through $0.24 per share cash dividends and approximately $62 million in share repurchases +• +Progressed in our +omnichannel transformation – closing 101 stores in 2016 while investing in eCommerce; additional 110 store closures anticipated for early 2017 +• +Refinanced debt, expecting to result in $30 million of interest +savings through 2020 +• +Reorganized European, Canadian, Apparel and Accessories, and Direct-to-Consumer businesses +• +Opened new design and innovation center +• +Drove considerable efficiencies through supply chain improvements, including consolidation of factory base +Shareholder Engagement +The Company's Board and management team were disappointed with the results of the 2016 say-on-pay vote, which failed to receive majority +shareholder support. In response, the Compensation Committee and full Board undertook a thorough review of the Company's compensation program in order to determine how best to respond to shareholders. +Since the 2016 annual meeting, the Company's Compensation Committee Chair has reached out to shareholders representing nearly two-thirds of its outstanding shares and has held meetings with more than +half of these shareholders, mostly in person. The Company met with every shareholder who accepted its invitation to engage, and the Company's Compensation Committee Chairman, Joseph Gromek, led each +of the meetings. After aggregating all shareholder feedback and sharing it with the full Board, the Compensation Committee made significant changes to the executive compensation program. The feedback +received and the changes made in response are discussed in greater detail in the CD&A Summary beginning on page 39. Some highlights are summarized below: +What we heard: +What we did: +• +A desire to further +strengthen the link between Company performance and NEO compensation +• +Reallocated LTI pay mix to +be more heavily weighted towards performance units – 2017 CEO mix is 70% performance stock units and 30% time-vested restricted stock units +• +Paid 0% on the CEO's "individual performance +bonus," resulting in an overall 2016 annual bonus payout of 58% of target +• +Reduced 2017 CEO long-term incentive equity grants by $500,000 +compared to 2016 +• +An appreciation for the +Company's publicly announced aggressive operating margin goal and a desire for NEO compensation to be tied to it +• +Incorporated an adjusted +operating margin performance modifier into the 2017 annual bonus plan to link NEO compensation to the execution of Company goals +• +Our use of multiple, +separate financial metrics (revenue, pretax income, EPS, and BVA) could be complimented with a relative performance metric +• +Added a TSR performance +modifier (vs. Russell 3000 Consumer Discretionary Index) to the 2017-2019 performance share unit program +• +An observation that +select companies in our peer group had grown too large to serve as adequate comparators +• +Adopted a new peer group, +removing companies that had grown too large and adding other companies to provide greater revenue alignment with the peer group median +• +An opportunity to improve +certain governance practices +• +Implemented +"double-trigger" equity vesting for 2017 grants +• +Engaged a new independent compensation consultant in 2016 +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +| Page 11 +Table of Contents +Compensation Philosophy – Pay at Risk +The Company's compensation philosophy is to align the interests of NEOs and shareholders by placing a significant portion of the compensation +awarded to its NEOs generally, and the CEO in particular, at-risk (performance shares and annual bonus) and variable (restricted stock and, prior to 2017, stock options). The Compensation Committee +believes this incentivizes superior business, stock price and financial performance and aligns the interests of executives with those of shareholders. +The +below graphic illustrates the percentage of at-risk and variable target compensation for the CEO and the average of the other NEOs: +CEO 2016 vs. 2017 Target Total Compensation +Note: 2017 CEO equity grants were reduced by $500,000 compared to 2016 to respond to shareholders concerns regarding our 2016 say-on-pay vote. +This one-time reduction is not reflected in the graphic above. +Other NEO 2016 vs. 2017 Target Total Compensation (Average) +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +| Page 12 +Table of Contents +The below graphic illustrates the CEO's actual annual performance bonus compared to his target opportunity over the last three years and demonstrates the Company's pay-for-performance +compensation philosophy in action – there is a clear link between Company TSR performance and annual bonus achievement over these periods. The CEO's target annual bonus opportunity +has not increased over the past three years and was not increased in 2017. +CEO 3-Year Target & Actual Bonus +(in $000s) +Compensation Best Practices +What we do +What we do not do +✓ +Vast majority of pay is at-risk or variable, i.e., performance-based or equity-based or both +✓ +Stringent share ownership requirements (6x base salary for CEO) +✓ +Broad-based clawback +policy +✓ +Significant vesting horizon for equity grants +✓ +Double-trigger equity acceleration (for grants in 2017 and beyond) +✗ +No dividends or dividend equivalents on unearned performance shares/units +✗ +No repricing or replacing of underwater stock options +✗ +No overlapping metrics +✗ +No excessive or unnecessary perquisites +✗ +No hedging, pledging, or short +sales of Company stock +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +| Page 13 +Table of Contents +2017 PROXY STATEMENT +Corporate Governance +Wolverine +Worldwide is committed to the highest level of corporate governance, and the Board has adopted its Corporate Governance Guidelines to strengthen management accountability and +promote long-term shareholder interests. These governance practices include: +✓ +Highly independent Board (All Non-Management Directors) and Committees +✓ +Lead Independent Director with clearly defined role +✓ +Majority voting with director +resignation policy +✓ +No supermajority vote requirements +✓ +Shareholder right to act by written consent +✓ +Annual Board and Committee self-evaluations +✓ +Robust Board and executive +succession planning, including annual written director nominee evaluations +✓ +Long-standing commitment toward diversity +✓ +Director onboarding orientation program +✓ +Active shareholder engagement +practices +BOARD OF DIRECTORS +The shareholders elect directors to serve on the Company's Board of Directors (the "Board of Directors" or "Board"). The Board oversees the +management of the business by the Chief Executive Officer ("CEO") and senior management. In addition to its general oversight function, the Board's additional responsibilities include, but are not +limited to, the following: +• Reviewing and approving the Company's key objectives and strategic business plans and monitoring implementation of those plans and the +Company's success in meeting identified objectives +• Selecting, evaluating and compensating the CEO and overseeing CEO succession planning +• Providing advice and oversight regarding the selection, evaluation, development and compensation of management +• Overseeing the Company's risk management and mitigation activities +• Reviewing and monitoring administration of the policies and procedures to safeguard the integrity of the Company's business operations and +financial reporting and to promote compliance with applicable laws and regulations +Board Composition +Board Highlights +The +following charts illustrate Key Board characteristics: +Page 14 | +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +Table of Contents +2017 PROXY STATEMENT +The +Board prides itself on its ability to recruit and retain directors who have high personal and professional integrity and have demonstrated exceptional ability and judgment to effectively serve +shareholders' long-term interests. The Board believes that its directors, including the nominees for election as directors at the Annual Meeting, have these characteristics and valuable skills that +provide the Company with the variety and depth of knowledge, judgment and strategic vision necessary to provide effective oversight of the Company. +To +help accomplish this, and to assist in succession planning, the Board, at the recommendation of the Governance Committee, has identified specified skills and attributes it desires its members to +possess. The below graphic lists these skills and attributes and indicates which of the directors possess each. As shown, these skills and attributes are well represented within the Board. +SKILLS & ATTRIBUTES +Totals +Krueger +Kollat +Boromisa +Boswell +Divol +Gerber +Gromek +Lauderback +Long +O'Donovan +Volkema +Active Executive +3 +✓ +✓ +✓ +Brand Building +9 +✓ +✓ +✓ +✓ +✓ +✓ +✓ +✓ +✓ +Current or Former CEO +5 +✓ +✓ +✓ +✓ +✓ +Digital/eComm/IT +4 +✓ +✓ +✓ +✓ +Diversity +3 +✓ +✓ +✓ +Finance +9 +✓ +✓ +✓ +✓ +✓ +✓ +✓ +✓ +✓ +Footwear/Apparel +6 +✓ +✓ +✓ +✓ +✓ +✓ +Global Supply Chain +4 +✓ +✓ +✓ +✓ +International Business +11 +✓ +✓ +✓ +✓ +✓ +✓ +✓ +✓ +✓ +✓ +✓ +Marketing +10 +✓ +✓ +✓ +✓ +✓ +✓ +✓ +✓ +✓ +✓ +Public Company Governance +8 +✓ +✓ +✓ +✓ +✓ +✓ +✓ +✓ +Retail +6 +✓ +✓ +✓ +✓ +✓ +✓ +The +Governance Committee reviews with the Board on an annual basis the appropriate skills and characteristics desired of Board members in the context of the current make-up of the Board. The Board, +with the assistance of the Governance Committee, annually assesses the current composition of the Board across many dimensions. As set forth in the Company's Corporate Governance Guidelines, which are +posted on its website, this assessment addresses the above-referred skills and attributes and the individual performance, experience, age and skills of each director. +Director Nominations +The Board's Governance Committee serves as its nominating committee. The Governance Committee, in anticipation of upcoming director elections +and other potential or expected Board vacancies, evaluates qualified individuals and recommends candidates to the Board. The Governance Committee may retain a search firm or other external parties to +assist it in identifying candidates, and the Governance Committee has the sole authority to approve the search firm's fees and retention terms, and to terminate the firm if necessary. +The +Governance Committee considers candidates suggested by directors, senior management or shareholders. Shareholders may recommend individuals as potential director candidates by communicating with +the Governance Committee through one of the Board communication mechanisms described under the heading " Shareholder Communications Policy ." Shareholders +that wish to nominate a director candidate must comply with the procedures set forth in the Company's By-Laws, which are posted on its website. Ultimately, upon the recommendation of the Governance +Committee, the Board selects the director nominees for election at each annual meeting. In selecting director nominees, the Board considers candidates' performance as a director (which is assessed +through an anonymous written peer evaluation), personal and professional integrity, ability and judgment, and likelihood to be effective, in conjunction with the other nominees and directors, in +serving the long-term interests of the shareholders. The Governance Committee also considers candidates' relative skills, attributes, background and characteristics; independence under applicable New +York Stock Exchange ("NYSE") listing standards and the Company's Director Independence Standards; potential to contribute to the composition and culture of the Board; and ability and willingness to +actively participate in the Board and committee meetings and to otherwise devote sufficient time to Board duties. +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +| Page 15 +Table of Contents +2017 PROXY STATEMENT +BOARD SELF-ASSESSMENT +As part of an annual self-assessment, each director evaluates the performance of the Board, and any committee on which he or she serves, +across a number of dimensions. Mr. Kollat, as the Lead Independent Director working with the Governance Committee, reviews the Board self-assessment with directors following the end of each +fiscal year, and conducts individual director interviews at the end of each year. Committee Chairpersons review the committee self-assessments with their respective committee members and discuss them +with the Board. In addition, the Governance Committee, working with the Lead Independent Director, develops and implements guidelines for evaluating all directors standing for nomination and +re-election. +The Corporate Governance Guidelines (including the Director Independence Standards), the Charter for each Board standing committee (Audit, Compensation and Governance), the Company's Certificate of +Incorporation, By-Laws, Code of Business Conduct, and its Accounting and Finance Code of Ethics all are available on the Wolverine Worldwide website at: +http://www.wolverineworldwide.com/investor-relations/corporate-governance/ +The Board and applicable committees annually review these and other key governance documents. +RISK OVERSIGHT +The Board oversees the Company's risk management and mitigation activities with a focus on the most significant risks facing the Company, +including strategic, operational, financial, and legal compliance risks. This oversight is conducted through presentations by and discussions with the CEO, Chief Financial Officer ("CFO"), General +Counsel, Chief Information Officer, brand and department leaders and other members of management. The Vice President of Internal Audit and Risk Compliance coordinates management's day-to-day risk +management and mitigation efforts, and reports directly to the Audit Committee. +The +Vice President of Internal Audit and Risk Compliance reviews with the Audit Committee periodically, and with the full Board annually, management's related assessment and mitigation strategies. In +addition to the above processes, the Board has delegated risk management and mitigation oversight responsibilities to its standing committees, which meet regularly to review and discuss specific risk +topics that align with their core responsibilities. +• The Audit Committee reviews the Company's approach to risk management generally. The Audit Committee also oversees the Company's risk policies +and processes relating to its financial statements and financial reporting processes, credit risks, and liquidity risks, as well as the Company's management of risks related to cybersecurity. The +Audit Committee discusses with management and the independent auditors significant risks or exposures and the steps taken by management to resolve them. +• The Compensation Committee monitors the risks associated with management resources; organization structure; succession planning, hiring, +development and retention processes; and it reviews and evaluates risks associated with the Company's compensation structure. +• The Governance Committee oversees risks related to the Company's governance structure and processes and potential risks arising from related +person transactions. +The +Company reviewed its compensation policies and practices to assess whether they are reasonably likely to have a material adverse effect on the Company. As part of this review, the Company compiled +information about the Company's incentive plans, including reviewing the Company's compensation philosophy, evaluating key incentive plan design features and reviewing historic payout levels and pay +mix. With assistance from Company management and its independent compensation consultant, the Compensation Committee reviewed the executive compensation program, and managers from the Company's human +resources and legal departments reviewed the non-executive compensation programs. +Page 16 | +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +Table of Contents +2017 PROXY STATEMENT +CODE OF BUSINESS CONDUCT AND ACCOUNTING AND FINANCE CODE OF ETHICS +The Board has adopted a Code of Business Conduct for the Company's directors, officers and employees. The Board also has adopted an Accounting +and Finance Code of Ethics ("Accounting and Finance Code") that focuses on the financial reporting process and applies to the Company's CEO, CFO and Corporate Controller. +The Company discloses amendments to or waivers from its Code of Business Conduct affecting directors or executive officers and amendments to or waivers from its Accounting and Finance Code on its +website at: +www.wolverineworldwide.com/investor-relations/corporate-governance/ +SHAREHOLDER COMMUNICATIONS POLICY +Shareholders and other interested parties may send correspondence to the Board, the non-employee directors as a group, a specific Board +committee or an individual director (including the Lead Director) in the manner described below. +The +General Counsel will provide a summary and copies of all correspondence (other than solicitations for services, products or publications) as applicable at each regularly scheduled meeting. +Communications may be sent via email through various links on our website at +www.wolverineworldwide.com/investor-relations/corporate-governance/ +or by regular mail c/o Senior Vice President, General Counsel and Secretary, Wolverine World Wide, Inc., 9341 Courtland Drive, N.E., Rockford, Michigan 49351. +The +General Counsel will alert individual directors if an item warrants a prompt response from the individual director prior to the next regularly scheduled meeting. Items warranting a prompt +response, but not addressed to a specific director, will be routed to the applicable committee Chairperson. +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +| Page 17 +Table of Contents +2017 PROXY STATEMENT +Proposal 1 – Election of +Directors for Terms Expiring +in 2020 +The Company's Board consists of 11 directors. The Company's By-Laws establish three classes of directors, with each class being as nearly equal in number as possible and serving three-year terms. At +each annual meeting, the term of one class expires. The Board has nominated four directors for election at the Annual Meeting: William K. Gerber, Blake W. Krueger, Nicholas T. Long, and Michael A. +Volkema. Each director has been nominated to serve for a three-year term expiring at the annual meeting of shareholders to be held in 2020 or until his successor, if any, has been elected and is +qualified. +Messrs. Gerber, Long and Volkema are independent directors, as determined by the Board under the applicable NYSE listing standards and the Company's +Director Independence Standards. Each director nominee currently serves on the Board. The shareholders elected Messrs. Gerber, Krueger, Long and Volkema at the Company's 2014 annual meeting by +affirmative vote of at least 98% of shares voted. +The +Company is not aware of any nominee who will be unable or unwilling to serve as a director. However, if a nominee is unable to serve or is otherwise unavailable for election, the incumbent +directors may or may not select a substitute nominee. If the directors select a substitute nominee, the proxy holder will vote the shares represented by all valid proxies for the substitute nominee +(unless other instructions are given). +The +biographies of the four nominees and the other directors of the Company are below, along with a discussion of the experience and skills of each director. +Page 18 | +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +Table of Contents +2017 PROXY STATEMENT +Directors with Terms +Expiring in 2020 +WILLIAM K. GERBER +Age: +63 +Director since: +2008 +Select Business Experience: +Managing Director of +Cabrillo Point Capital LLC +Board Committees: +Audit (Chair) +Compensation +Other Public Directorships: +AK Steel Holding Corporation +Career Highlights: +Mr. Gerber is Managing Director of Cabrillo Point Capital LLC, a private investment fund. He has held that position since 2008. From 1998 to 2007, Mr. Gerber was Executive Vice President and Chief Financial Officer of Kelly Services, +Inc., a publicly traded global staffing solutions company with operations in more than 35 countries. Mr. Gerber served in various leadership positions with L Brands (formerly Limited Brands, Inc.), a multinational apparel and retail +company, prior to joining Kelly Services, Inc. During the preceding five years, Mr. Gerber was, but no longer is, a director of Kaydon Corporation, a publicly traded company that designed and manufactured custom-engineered +products. +Experience and Skills: +From his 15 years in senior leadership positions with L Brands, Inc. and Kelly Services, Inc., Mr. Gerber has obtained extensive experience in apparel, retail, international business and finance, and his service as a director of +various public companies has given him experience with public company governance and related matters. +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +| Page 19 +Table of Contents +2017 PROXY STATEMENT +BLAKE W. KRUEGER +Age: +63 +Director since: +2006 +Select Business Experience: +Chairman, Chief Executive +Officer and President of +Wolverine World Wide, Inc. +Board Committees: +None +Other Public Directorships: +None +Career Highlights: +Mr. Krueger is Chairman of Wolverine Worldwide, a position he assumed in January 2010, and Chief Executive Officer and President of Wolverine Worldwide, positions he assumed in April 2007. From October 2005 until April 2007, Mr. Krueger +served as President and Chief Operating Officer of Wolverine Worldwide. From 2004 to October 2005, he served as Executive Vice President and Secretary of Wolverine Worldwide and President of its Heritage Brands Group. From 2003 to 2004, +Mr. Krueger served as Executive Vice President and Secretary of Wolverine Worldwide and President of the Company's Caterpillar Footwear Group. He also previously served as Executive Vice President, General Counsel and Secretary of Wolverine +Worldwide with various responsibilities including the human resources, retail, business development, accessory licensing, mergers and acquisitions, and legal areas. Mr. Krueger serves as a director of Bissell Homecare, Inc., a +privately-held company and leading brand of floor care appliances. +Experience and Skills: +Mr. Krueger's more than 20 years in senior leadership roles with the Company have provided him expertise in footwear and apparel, retail, international business and finance, and his board experience at the Company and Professionals Direct, +Inc., a then publicly traded insurance company, has given him extensive experience with public company governance and related matters. +Page 20 | +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +Table of Contents +2017 PROXY STATEMENT +NICHOLAS T. LONG +Age: +58 +Director since: +2011 +Select Business Experience: +Retired Chief Executive Officer +of MillerCoors LLC +Board Committees: +Compensation +Governance +Other Public Directorships: +None +Career Highlights: +From 2011 until his retirement in 2015, Mr. Long served as Chief Executive Officer of MillerCoors LLC ("MillerCoors"), a joint venture between two publicly traded beverage companies. From 2008 to 2011, Mr. Long served as President and +Chief Commercial Officer of MillerCoors. From 2007 to 2008, Mr. Long served as Chief Executive Officer of Miller Brewing Company, a beverage company, and he served as Chief Marketing Officer of Miller Brewing Company from 2005 to 2007. Prior to +joining Miller Brewing Company, Mr. Long spent 17 years in various senior leadership positions at The Coca-Cola Company, a beverage company, including Vice President of Strategic Marketing, Global Brands, Vice President Strategic Marketing +Research and Trends, President of Coca-Cola's Great Britain and Ireland Division and President of the Northwest Europe Division. +Experience and Skills: +Through his more than 20 years in senior positions at category-leading, branded companies, Mr. Long has developed significant marketing, international business and brand building expertise. +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +| Page 21 +Table of Contents +2017 PROXY STATEMENT +MICHAEL A. VOLKEMA +Age: +61 +Director since: +2005 +Select Business Experience: +Chairman of Herman Miller, Inc. +Board Committees: +Audit +Governance (Chair) +Other Public Directorships: +Herman Miller, Inc. +Career Highlights: +Mr. Volkema has been Chairman of Herman Miller, Inc., a publicly traded multinational furniture manufacturer, since 2000. Mr. Volkema became President and Chief Executive Officer of Herman Miller in 1995 and held those positions until +2003 and 2004, respectively. Mr. Volkema also is a director at Milliken & Company, a privately held, innovation-based company serving the textile, chemical, and floor covering markets. +Experience and Skills: +Mr. Volkema has obtained international business and brand building expertise from his more than 20 years in senior leadership positions with Herman Miller, Inc. Mr. Volkema also has public company governance and related experience +from his extensive service on public company boards, including 16 years as Chairman of Herman Miller, Inc. and service on compensation and audit committees of boards of publicly-traded companies. +BOARD RECOMMENDATION +The Board recommends that you vote "FOR" the election of the above nominees for terms expiring in 2020. +Page 22 | +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +Table of Contents +2017 PROXY STATEMENT +Directors with Terms +Expiring in 2018 +ROXANE DIVOL +Age: +44 +Director since: +October 2014 +Select Business Experience: +Executive Vice President and +General Manager, Website +Security for Symantec +Corporation +Board Committees: +Audit +Other Public Directorships: +None +Career Highlights: +Ms. Divol is Executive Vice President and General Manager, Website Security, for Symantec Corporation, a global leader in information security solutions. From January 2016 to February 2017, Ms, Divol was Senior Vice President and General Manager, +Website Security for Symantec. From 2014 to January 2016, Ms. Divol was Senior Vice President and General Manager, Trust Services, for Symantec and from 2013 to 2014, Ms. Divol was Senior Vice President of Alliances with Symantec. +Ms. Divol joined Symantec from McKinsey & Company, a global management consulting firm, where she was a partner in its San Francisco office and led the West Coast marketing and sales practice, with a focus on marketing return on +investment and marketing transformation. +Experience and Skills: +Ms. Divol's experience with Symantec Corporation and McKinsey & Company provides her with expertise in international business, marketing, digital/eCommerce and information technology. +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +| Page 23 +Table of Contents +2017 PROXY STATEMENT +JOSEPH R. GROMEK +Age: +70 +Director since: +2008 +Select Business Experience: +Retired President, Chief +Executive Officer +and a Director of +The Warnaco Group, Inc. +Board Committees: +Compensation (Chair) +Governance +Other Public Directorships: +Guess?, Inc. +The Children's Place Retail Stores, Inc. +Career Highlights: +From 2003 until his retirement in 2012, Mr. Gromek served as President, Chief Executive Officer and a director of The Warnaco Group, Inc., a publicly traded company. Mr. Gromek also served as Chief Executive Officer of Brooks Brothers, +Inc. from 1995 until 2002. He served as Chairman of the Board of Tumi, Inc. from 2013 until its acquisition by Samsonite International S.A. in 2016. He currently serves as a director of Guess?, Inc., an apparel wholesaler and retailer, +and The Children's Place Retail Stores, Inc., a children's clothing retailer. Mr. Gromek is also a director of Stanley M. Proctor Company, a privately held company. +Experience and Skills: +Having served for more than 40 years in the retail and apparel industries, including 30 years managing and marketing apparel brands and a collective 15 years as the chief executive officer of two leading, multi-national apparel +companies, Mr. Gromek has expertise in apparel, retail and international business. His service as a senior executive and director at various public companies has given him extensive leadership experience in public company governance and related +matters. +Page 24 | +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +Table of Contents +2017 PROXY STATEMENT +BRENDA J. LAUDERBACK +Age: +66 +Director since: +2003 +Select Business Experience: +Retired President of the +Wholesale and Retail Group +of Nine West Group, Inc. +Board Committees: +Audit +Governance +Other Public Directorships: +Denny's Corporation +Select Comfort Corporation +Career Highlights: +From 1995 until her retirement in 1998, Ms. Lauderback was President of the Wholesale and Retail Group of Nine West Group, Inc., a footwear wholesaler and distributor. She previously was the President of the Wholesale Division of U.S. Shoe +Corporation, a footwear manufacturer and distributor, a position that included responsibility for offices in China, Italy and Spain, and she was a Vice President/General Merchandise Manager of Dayton Hudson Corporation (now Target Corporation), a +retail company. During the preceding five years, Ms. Lauderback also was, but no longer is, a director of Big Lots, Inc., a retail company. +Experience and Skills: +Ms. Lauderback has more than 25 years of experience in the retail industry, with more than 20 years in the footwear, apparel, and accessories industries. These senior leadership positions have provided her with strong footwear, apparel +and retail expertise. With her service on publicly traded company boards, including Denny's Corporation, a restaurant company, and Select Comfort Corporation, a bed manufacturer and retailer, and as a director of Wolverine Worldwide, she also has +extensive experience with public company governance and related matters. +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +| Page 25 +Table of Contents +2017 PROXY STATEMENT +Directors with Terms +Expiring in 2019 +JEFFREY M. BOROMISA +Age: +62 +Director since: +2006 +Select Business Experience: +Retired Executive Vice +President of Kellogg +International, President of Latin +America; Senior Vice President +of Kellogg Company +Board Committees: +Audit +Compensation +Other Public Directorships: +None +Career Highlights: +Mr. Boromisa worked at Kellogg Company, a global food manufacturing company, and its affiliates from 1981 to 2009. From 2008 through his retirement in May 2009, Mr. Boromisa was Executive Vice President of Kellogg International, President +of Latin America; and Senior Vice President of Kellogg Company. From 2007 until 2008, Mr. Boromisa served as Executive Vice President of Kellogg International, President of Asia Pacific and Senior Vice President of Kellogg Company. From 2004 +through 2006, he was Senior Vice President and Chief Financial Officer of Kellogg Company. In addition, beginning in 2004 and through his retirement, Mr. Boromisa was a member of Kellogg Company's Global Leadership Team. Prior to 2004, +Mr. Boromisa occupied various leadership positions with Kellogg. Mr. Boromisa is also a director at Haworth International, Inc., a privately held, multinational, office furniture design and manufacturing company. +Experience and Skills: +With nearly 30 years of experience at Kellogg Company, including serving as its chief financial officer and leading various operational business units, Mr. Boromisa has obtained international business, brand building and finance +expertise. +Page 26 | +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +Table of Contents +2017 PROXY STATEMENT +GINA R. BOSWELL +Age: +54 +Director since: +2013 +Select Business Experience: +Executive Vice President and +General Manager, +Unilever UK & Ireland +Board Committees: +Governance +Other Public Directorships: +ManpowerGroup Inc. +Career Highlights: +Since July 2015, Ms. Boswell has been Executive Vice President and General Manager for Unilever UK & Ireland, one of the largest markets for Unilever PLC / Unilever N.V., a multinational consumer goods company whose products +include Dove, Vaseline, Lipton, and Hellman's. From 2011 to July 2015, Ms. Boswell served as Executive Vice President, Personal Care for +Unilever PLC / Unilever N.V. From 2008 to 2011, Ms. Boswell served as President, Global Brands, for The Alberto-Culver Company, a consumer goods company. Ms. Boswell has held numerous other senior leadership positions with other +leading global companies, including Avon Products, Inc., Ford Motor Company, and Estee Lauder Companies, Inc. Ms. Boswell is a member of the board of ManpowerGroup Inc., a publicly traded workforce solutions company, where she is +also the chairperson of the audit committee. +Experience and Skills: +Through senior leadership roles with leading branded companies, Ms. Boswell has obtained expertise in brand building, international business, marketing, digital/eCommerce and finance. +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +| Page 27 +Table of Contents +2017 PROXY STATEMENT +DAVID T. KOLLAT +Age: +78 +Director since: +1992 +Select Business Experience: +President and Chairman, +22, Inc. +Board Role: +Independent Lead Director +Other Public Directorships: +L Brands, Inc. +Select Comfort Corporation +Career Highlights: +Mr. Kollat has been Chairman and President of 22, Inc., a company specializing in research and management consulting for retailers and consumer goods manufacturers, since 1987. In addition to his marketing and management experience as +Chairman and President of 22, Inc., Mr. Kollat served for 11 years in senior leadership positions at L Brands, Inc. (formerly Limited Brands, Inc.), a publicly traded, multinational apparel and retail company, including as +Executive Vice President, Marketing, President of Victoria's Secret Direct, and as a member of its executive committee. Mr. Kollat is Lead Independent Director of Wolverine Worldwide, a position he has held since 2007. Mr. Kollat has been a +director of L Brands, Inc. since 1976 and a director of Select Comfort Corporation, a bed manufacturer and retailer, since 1994. During the preceding five years, Mr. Kollat was, but no longer is, a director of Big Lots, Inc., a +publicly traded retail company. +Experience and Skills: +Mr. Kollat's more than 40 years' experience at L Brands, Inc. and 22, Inc. has provided him with marketing, apparel, international business, brand building, retail and finance expertise. He also has significant experience with company +governance and related matters through service on more than twenty boards of directors, including extensive service on public company boards, and service as a lead independent director and chair of nominating, audit and compensation +committees. +Page 28 | +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +Table of Contents +2017 PROXY STATEMENT +TIMOTHY J. O'DONOVAN +Age: +71 +Director since: +1993 +Select Business Experience: +Retired Chairman and Chief +Executive Officer of +Wolverine World Wide, Inc. +Board Committees: +None +Other Public Directorships: +SpartanNash Company +Career Highlights: +Mr. O'Donovan served as Chairman of the Board of Wolverine Worldwide from 2007-2009. From April 2005 until 2007 he served Wolverine Worldwide as Chief Executive Officer and Chairman. Mr. O'Donovan served Wolverine Worldwide as its Chief +Executive Officer and President from April 2000 until April 2005, and as Chief Operating Officer and President from 1996 until April 2000. Prior to 1996, Mr. O'Donovan held various senior leadership positions with the Company, including +Executive Vice President of Wolverine Worldwide. Mr. O'Donovan is lead independent director of SpartanNash Company, a grocery distribution and retail company. During the preceding five years, Mr. O'Donovan was, but no longer is, a director +of Kaydon Corporation, a publicly traded company that designed and manufactured custom-engineered products. +Experience and Skills: +Mr. O'Donovan has obtained footwear and apparel, international business, brand building and finance expertise through his more than 40 years with the Company. His service on public company boards has provided him with public company +governance and related experience. +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +| Page 29 +Table of Contents +2017 PROXY STATEMENT +BOARD LEADERSHIP +The Company's CEO currently also serves as the Chairman of the Board. Since 1993, the Company has had a lead independent director who +functions in many ways similar to an independent Chairman. This long-established structure provides the Board with independent oversight of the CEO's leadership. On an annual basis, the independent +directors consider the appropriate leadership structure, including whether to separate the roles of Chairman and CEO, based upon the Board and Company's then-current circumstances. The independent +directors believe that its current structure is appropriate at this time, and set the following enumurated responsibilities for the lead independent director: +• Serves, as necessary, as a liaison between the Chairman and the independent directors +• Presides over Board meetings in the absence of the Chairman +• Reviews, approves and helps develop the agendas and scheduling for Board and committee meetings +• Reviews and approves information and meeting materials sent to the Board +• Presides over executive sessions and has the authority to call executive sessions +• Works with the Compensation Committee and members of the Board to provide an effective annual performance review of the CEO and participates in +CEO succession planning +• Oversees, along with the Governance Committee, the annual Board and committee evaluations +• Is available for consultation and communication with shareholders, as appropriate +DIRECTOR INDEPENDENCE +The Board annually assesses the independence of all directors. To qualify as "independent," the Board must affirmatively determine that the +director is independent under the Company's Director Independence Standards, which are modeled after the listing standards of the NYSE. Under NYSE listing standards, the Board has determined that 10 +of the Company's 11 directors are independent. Only Mr. Krueger, the Company's CEO, is not independent. All of the Board's committees are comprised entirely of independent directors. The +independent directors generally meet in executive session at each regularly scheduled meeting. +The +Director Independence Standards define an "Independent Director" as a director who the Board determines otherwise has no material relationship with the Company (either directly or as a partner, +stockholder or officer of an organization that has a relationship with the Company), and who: +• Is not, and in the past three years has not been, an employee of the Company +• Does not have, and has not had within the last three years, an immediate family member employed as an executive officer of the Company +• Has not received, and has not had an immediate family member receive during any 12-month period within the last three years, any direct +compensation from the Company in excess of $120,000 (other than compensation for Board service; compensation received by the director for former service as an interim Chairman, CEO or other executive +officer; compensation received by the director's immediate family member for service as a non-executive employee; or pension and other forms of deferred compensation for prior service if such +compensation is not contingent in any way on continued service) +• Is not a current employee or partner of a firm that is the Company's internal or external auditor +Page 30 | +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +Table of Contents +2017 PROXY STATEMENT +• Has not been, and has not had an immediate family member who has been within the last three years, a partner or employee of the Company's +internal or external auditor and personally worked on the Company's audit within that time +• Has not had an immediate family member who is (i) a current partner of the Company's internal or external auditor, or (ii) a +current employee of the Company's internal or external auditor who personally works on the Company's audit +• Is not, and has not been within the last three years, part of an interlocking directorate in which a current executive officer of Wolverine +Worldwide serves or served on the compensation committee of another company where the director or the director's immediate family member concurrently serves or served as an executive officer +• Is not an employee of, and does not have an immediate family member who is an executive officer of, another company that has made payments to, +or received payments from, Wolverine Worldwide for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of $1,000,000 or 2% of the other company's +consolidated gross revenues +• Has not had any other direct or indirect relationship with Wolverine Worldwide that the Board determines is material +BOARD COMMITTEES, MEETINGS AND MEETING ATTENDANCE +The Board has three standing committees: Audit, Compensation and Governance. Each committee meets periodically throughout the year, and +reports its recommendations to the Board. The Company expects directors to attend every meeting of the Board and the committees on which they serve and to attend the annual meeting of shareholders. In +2016, all directors then serving on the Board attended the 2016 Annual Meeting of Shareholders, and all directors attended at least 75% of the meetings of the Board (6 meetings in 2016) and the +committees on which they served. All directors are typically invited to and attend all committee meetings. +Each +committee annually evaluates its performance to determine its effectiveness. The Board has determined that all committee members are "independent" as defined by NYSE listing standards. +Furthermore, each Audit Committee member satisfies the NYSE "financial literacy" requirement. In addition, the Board has determined that Mr. Boromisa and Mr. Gerber are "audit committee +financial experts" under Securities and Exchange Commission ("SEC") rules. Each committee's charter, with a complete list of the duties and responsibilities is available on the Company's website at http://www.wolverineworldwide.com/investor-relations/corporate-governance/ . +Audit Committee +Committee Members +• +Gerber +(Chair) +• +Boromisa +• +Divol +• +Lauderback +• +Volkema +Number of Meetings in 2016 +9 +Highlighted Responsibilities +• +Appoints, evaluates and +oversees the work of the independent auditors and oversees the internal audit function +• +Oversees the integrity of the Company's financial statements, financial reporting process and internal controls +• +Oversees the Company's policies and systems regarding risk +assessment and management and the Company's compliance with legal and regulatory requirements +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +| Page 31 +Table of Contents +2017 PROXY STATEMENT +Compensation Committee +Committee Members +• +Gromek +(Chair) +• +Boromisa +• +Gerber +• +Long +Number of Meetings in 2016 +8 +Highlighted Responsibilities +• +Assists the Board in +fulfilling its responsibilities relating to executive compensation and the Company's compensation and benefit programs and policies +• +Oversees the overall compensation structure, policies and programs, including whether the compensation structure establishes +appropriate incentives for management and employees +• +Oversees the Company's management of risks relating to management resources, organization structure and succession planning, hiring, development and retention processes, as well as those relating to the Company's +compensation structure, policies and programs +Governance Committee +Committee Members +• +Volkema +(Chair) +• +Boswell +• +Gromek +• +Lauderback +• +Long +Number of Meetings in 2016 +6 +Highlighted Responsibilities +• +Assists the Board in +fulfilling its responsibilities on matters and issues related to the Company's corporate governance practices +• +In conjunction with the Board, establishes qualification standards for membership on the Board and its committees and recommends qualified individuals to become +Board members or serve for re-election as directors +• +Develops and recommends to the Board for its approval an annual self-evaluation process for the Board and its committees, and oversees the evaluation process +Page 32 | +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +Table of Contents +2017 PROXY STATEMENT +Non-Employee Director Compensation +in Fiscal Year 2016 +The +Company's non-employee director compensation philosophy is to pay compensation competitive with compensation paid by companies of similar size, in similar industries and with +whom Wolverine Worldwide competes for director candidates. The Governance Committee, with input from management and from the Compensation Committee's independent compensation consultant, reviewed +director compensation and compared it to market data, including a comparison to director compensation for the Company's Peer Group, as defined on page 56, and to that of companies in the +2014-2015 National Association of Corporate Director Compensation Report. Based on this review non-employee director compensation for 2016 did not change from 2015 levels. The following table provides +information concerning the compensation of the Company's non-employee directors for fiscal year 2016. Mr. Krueger receives compensation for his services as the Company's CEO and President, but +does not receive any additional compensation for his service as a director or chairman. +Fees Paid in Cash +Cash Amounts +Voluntarily +Deferred +Cash Amounts +Deferred +Through Annual +Equity Retainers +Fees Earned or +Paid in Cash 1 +Option +Awards 2 +Total +Boromisa +$97,000 ++ +- ++ +$70,000 += +$167,000 ++ +$50,002 += +$217,002 +Boswell +$82,000 ++ +- ++ +$70,000 += +$152,000 ++ +$50,002 += +$202,002 +Divol +$21,250 ++ +$63,750 ++ +$70,000 += +$155,000 ++ +$50,002 += +$205,002 +Gerber +$117,000 ++ +- ++ +$70,000 += +$187,000 ++ +$50,002 += +$237,002 +Gromek +- ++ +$109,000 ++ +$70,000 += +$179,000 ++ +$50,002 += +$229,002 +Kollat +$130,000 ++ +- ++ +$92,000 += +$222,000 ++ +$63,002 += +$285,002 +Lauderback +$78,375 ++ +$26,125 ++ +$70,000 += +$174,500 ++ +$50,002 += +$224,502 +Long +$94,000 ++ +- ++ +$70,000 += +$164,000 ++ +$50,002 += +$214,002 +O'Donovan +$70,000 ++ +- ++ +$70,000 += +$140,000 ++ +$50,002 += +$190,002 +Volkema +- ++ +$104,500 ++ +$70,000 += +$174,500 ++ +$50,002 += +$224,502 +1 Represents cash payments received or deferred by directors for fiscal year 2016. Directors may defer fees and receive stock units pursuant to the Deferred +Compensation Plan (as defined below). The table shows the Fees Earned or Paid in Cash separated into Fees Paid in Cash, Cash Amounts Voluntarily Deferred, and Cash Amounts Deferred Through +Annual Equity Retainers (required as part of the compensation program for directors) that will be paid out in stock. 2 Represents the aggregate grant date fair value of stock +options granted to non-employee directors in fiscal year 2016, calculated in accordance with +Accounting Standard Codification ("ASC") Topic 718. The chart below lists the aggregate outstanding option awards held by non-employee directors at the end of fiscal year 2016. For valuation +assumptions, see the Stock-Based Compensation footnote to Wolverine Worldwide's Consolidated Financial Statements for fiscal year 2016 included in its Form 10-K for this +year. +Name +Option Awards Outstanding at +December 31, 2016 +(#) +Name +Option Awards Outstanding at +December 31, 2016 +(#) +Boromisa +75,191 +Kollat +85,129 +Boswell +35,644 +Lauderback +65,321 +Divol +30,911 +Long +51,551 +Gerber +62,773 +O'Donovan +69,083 +Gromek +81,701 +Volkema +46,235 +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +| Page 33 +Table of Contents +2017 PROXY STATEMENT +The +following table shows the non-employee director compensation program for 2016: +Compensation Plan for 2016 +Component +Cash +Options 1 +Stock Units 2 +Newly Appointed or Elected Director +$0 +Number of options equal to $65,000, determined using the Black-Scholes method. +Annual Director Fee +$70,000 +Number of options equal to $50,000, determined using the Black-Scholes method. +Number of stock units with a value equal to $70,000, determined by dividing the dollar amount by the closing market price of the Company's common stock on the grant date. Units are credited to the Amended and Restated Outside Directors' Deferred +Compensation Plan, described below. +Audit Committee Annual Fee +$15,000 +Audit Committee Chairperson Annual Fee +$20,000 +Compensation Committee Annual Fee +$12,000 +Compensation Committee Chairperson Annual Fee +$15,000 +Governance Committee Annual Fee +$12,000 +Governance Committee Chairperson Annual Fee +$15,000 +Lead Director Annual Fee +In lieu of the standard Annual Director Fee, the Lead Director was paid a Cash Retainer of $130,000. +In lieu of the standard stock option grant, the Lead Director received a number of stock options equal to $63,000, calculated in the same manner as the standard grant. +In lieu of the standard stock unit grant, the Lead Director received stock units with a value equal to $92,000, calculated and credited in the same manner as the standard grant. +1 For fiscal year 2016, Messrs. Boromisa, Gerber, Gromek, Long, O'Donovan and Volkema and Mses. Boswell, Divol and Lauderback each received 12,854 options (16,196 +for Mr. Kollat) granted in April 2016 under the Stock Incentive Plan of 2016. The exercise price of options granted is equal to the closing market price of Wolverine Worldwide's common stock on +the date of grant. Stock options granted to non-employee directors are fully vested upon grant. +2 For fiscal year 2016, one grant was made on the first business day of each calendar quarter. For fiscal year 2016, the Company credited each of +Messrs. Boromisa, Gerber, Gromek, Long, O'Donovan and Volkema and Mses. Boswell, Divol and Lauderback with an aggregate of 3,642 stock units and credited Mr. Kollat with an aggregate of +4,787 stock units. Stock units granted to our non-employee directors are fully vested on the grant date and are credited under the Amended and Restated Outside Directors' Deferred Compensation Plan +(described below). +The +Company also: +• Pays director expenses associated with Board and committee meetings, other Company functions, and industry functions +• Pays spouse travel expenses associated with certain meetings +• Reimburses directors for some expenses relating to director education +• Provides samples of its products that have nominal value +• Provides office space and administrative assistance to directors who visit Company locations +Deferred Compensation Plan. The Company's Amended and Restated Outside Directors' Deferred Compensation Plan (the "Deferred Compensation Plan") is a supplemental +nonqualified deferred compensation plan for non-employee directors. A separate non-employee director deferred compensation plan applies to benefits accrued under that plan before January 1, +2005. The Deferred Compensation Plan +Page 34 | +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +Table of Contents +2017 PROXY STATEMENT +permits +all non-employee directors to voluntarily defer, at their option, 25%, 50%, 75% or 100% of their director fees. The Company establishes a book account for each non-employee director and +credits the director's account with the annual equity retainer amount as described above and with a number of stock units equal to the amounts voluntarily deferred, each divided by the closing market +price of common stock on the payment/deferral date. The Company also credits director accounts with dividend equivalents on amounts previously deferred in the form of additional stock units. The +amounts credited to director accounts are treated as if invested in Wolverine Worldwide common stock. The number of stock units held in director accounts is set forth under the "Stock Ownership By +Management and Others" table below. +Upon +a director's termination of service, or such later date as a director selects, the Company distributes the stock units in the director's book account in shares of Wolverine Worldwide common stock +in either a single, lump-sum distribution or annual installment distributions over a period of up to 20 years (10 years under the plan for benefits accrued before January 1, +2005). The Company converts each stock unit to one share of Wolverine Worldwide common stock. +Upon +a "change in control," the Company distributes to the director, in a single, lump-sum distribution, Wolverine Worldwide common stock in a number of shares equal to the stock units credited to a +director's book account. The Deferred Compensation Plan defines "change in control" as any of the following: +• The acquisition by any person, or by more than one person acting as a group, of more than 50% of either (i) the then outstanding shares +of common stock of Wolverine Worldwide or (ii) the total fair market value of Wolverine Worldwide +• The acquisition by any person, or more than one person acting as a group, during the 12-month period from and including the date of the most +recent acquisition, of ownership of 30% or more of the outstanding common stock of Wolverine Worldwide +• The replacement of a majority of the individuals who constitute the Board during any 12-month period by directors whose appointment or election +is not endorsed by a majority of the directors prior to the date of the appointment or election +• The acquisition, during any 12-month period ending on the date of the most recent acquisition, by any person of assets from Wolverine Worldwide +having a gross fair market value of at least 40% of the gross fair market value of all the assets of Wolverine Worldwide immediately before the acquisition +NON-EMPLOYEE DIRECTOR STOCK OWNERSHIP GUIDELINES +Each non-employee director must attain (and maintain) a minimum stock ownership level (including owned shares, the in-the-money value of stock +options, and stock units under the Directors' Deferred Compensation Plan) equal to six times the non-employee director annual cash retainer prior to being able to gift or sell any Company stock. +During 2016, all non-employee directors were in compliance with these guidelines. +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +| Page 35 +Table of Contents +2017 PROXY STATEMENT +Securities Ownership of Officers and Directors and Certain Beneficial Owners +FIVE PERCENT SHAREHOLDERS +The following table sets forth information about those holders known by Wolverine Worldwide to be the beneficial owners of more than five +percent of Wolverine Worldwide's outstanding shares of common stock as of March 13, 2017: +Amount and Nature of Beneficial Ownership of Common Stock +Name and Address of Beneficial Owner +Sole Voting +Power +Sole +Investment +Power +Shared Voting +Power +Shared +Investment +Power +Total +Beneficial +Ownership +Percent +of Class 4 +BlackRock, Inc. 1 +55 East 52nd Street +New York, NY 10055 +11,417,003 +11,646,668 +- +- +11,646,668 +12.0% +Janus Capital Management LLC 2 +151 Detroit Street +Denver, CO 80206 +7,094,347 +7,094,347 +26,059 +26,059 +7,120,406 +7.3% +The Vanguard Group 3 +100 Vanguard Boulevard +Malvern, PA 19355 +128,438 +7,959,136 +11,475 +134,678 +8,093,814 +8.3% +1 Based solely on information set forth in a Schedule 13G/A filed on January 17, 2017. The Schedule 13G/A indicates that BlackRock, Inc. +beneficially owns, in the aggregate, 11,646,668 shares of Wolverine Worldwide common stock. 2 Based solely on information set forth in a Schedule 13G/A filed on +February 13, 2017. The Schedule 13G/A indicates that Janus Capital +Management LLC beneficially owns, in the aggregate, 7,120,406 shares of Wolverine Worldwide common stock. 3 Based solely on information set forth in a Schedule 13G/A +filed on February 10, 2017. The Schedule 13G/A indicates that The Vanguard Group +beneficially owns, in the aggregate, 8,093,814 shares of Wolverine Worldwide common stock. 4 Based on 96,954,357 shares outstanding as of March 13, 2017. +Page 36 | +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +Table of Contents +2017 PROXY STATEMENT +STOCK OWNERSHIP BY MANAGEMENT AND OTHERS +The following table sets forth the number of shares of common stock beneficially owned as of March 13, 2017, by each of the Company's +directors and named executive officers and all of the Company's directors and executive officers as a group: +Amount and Nature of Beneficial Ownership of Common Stock 1 +Deferred +Stock Units, +Sole Voting +and/or +Investment +Power 2,3 +Shared Voting or +Investment +Power 4 +Stock +Options 5 +Total +Beneficial +Ownership +Percent +of Class 6 +Jeffrey M. Boromisa +58,901 +27,972 +69,083 +155,956 +* +Gina R. Boswell +9,481 +- +35,644 +45,125 +* +Roxane Divol +13,350 +- +30,911 +44,261 +* +William K. Gerber +38,061 +- +58,773 +96,834 +* +Joseph R. Gromek +104,443 +- +81,701 +186,144 +* +Michael Jeppesen +161,448 +- +105,112 +266,560 +* +David T. Kollat +300,776 +- +79,021 +379,797 +* +Blake W. Krueger +1,363,761 +50,000 +971,345 +2,385,106 +2.44% +Brenda J. Lauderback +58,996 +- +59,213 +118,209 +* +Nicholas T. Long +16,678 +- +51,551 +68,229 +* +Timothy J. O'Donovan +617,431 +- +69,083 +686,514 +* +Michael D. Stornant +153,917 +- +140,364 +294,281 +* +Michael A. Volkema +58,417 +- +46,235 +104,652 +* +Richard J. Woodworth +126,907 +- +58,279 +185,186 +* +James D. Zwiers +163,732 +161,003 +259,041 +583,776 +* +All directors and executive officers as a group (15 people) +3,246,299 +238,975 +2,115,356 +5,600,630 +5.65% +* Represents beneficial ownership of less than 1%. +1 The numbers of shares stated are based on information provided by each person listed and include shares personally owned of record and shares that, under applicable +regulations, are considered to be otherwise beneficially owned. 2 These numbers include restricted shares and performance shares held, which are subject to forfeiture if the +terms of the award are not satisfied and also include +deferred stock units held by directors under the Directors' Deferred Compensation Plan. 3 The table does not include the following time-vested restricted stock units and +performance units owned by executive officers as of March 13, 2017: +Restricted +Units +Performance +Units +Krueger +69,196 +159,926 +Jeppesen +13,100 +19,649 +Stornant +15,570 +23,355 +Woodworth +14,643 +21,965 +Zwiers +15,548 +23,321 +4 These numbers include shares over which the listed person is legally entitled to share voting or investment power by reason of joint ownership, trust or other contract +or property right and shares held by spouses, children or other relatives over whom the listed person may have influence by reason of such relationship. 5 The numbers represent +shares that may be acquired within 60 days after March 13, 2017, by the exercise of stock options granted under Wolverine's various +stock option plans. These numbers are also included in the Total Beneficial Ownership column. 6 As of March 13, 2017, based on 96,954,357 shares outstanding on that date plus +the number of stock options exercisable by the specified person(s) within +60 days of March 13, 2017, as indicated in the "Stock Options" column. +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +| Page 37 +Table of Contents +2017 PROXY STATEMENT +A LETTER FROM OUR COMPENSATION COMMITTEE +Dear +Shareholders, +As +members of the Wolverine Worldwide Compensation Committee, two of our most important responsibilities are to ensure that our executive compensation program pays for performance and aligns with the +interests of our shareholders. The disappointing outcome of our 2016 say-on-pay vote was a signal by our shareholders that you took issue with some aspects of our executive compensation program, and +we were determined to understand your perspectives on this program and committed to making constructive changes in response. +To +accomplish this, the Committee launched a direct shareholder engagement initiative and retained a new independent executive compensation consultant to help us assess our current plans and programs. +Since the Company's 2016 annual meeting, we have reached out to shareholders representing nearly two-thirds of our outstanding shares and had conversations with more than half of these +shareholders – meeting with every shareholder who accepted our invitation. Our Committee Chairman Joseph Gromek led this effort and was present for all of the conversations we had +with our investors. The purpose of these meetings was twofold – to gain a better understanding of the specific shareholder concerns with our executive compensation program and to +also get feedback on a number of changes to the program that the Committee was considering. +After +aggregating the shareholder feedback, sharing it with the full Board and deliberating as a Committee, we made significant changes to our executive compensation program and took targeted actions +to reduce the CEO's 2016 and 2017 compensation. These changes reflect the thoughtful and constructive insights we received from our shareholders and are summarized below: +• Long-Term Incentive Plan +o Reallocated 2017 pay mix to be more heavily weighted in performance share +units – performance share units make up 70% of CEO and 60% of other NEO long-term pay o Added a 3-year relative TSR performance modifier to the 2017-2019 +performance unit program +• Annual Bonus Plan +o Added an adjusted operating margin performance modifier to the 2017 plan +• CEO Pay +o Reduced 2017 CEO long-term incentive equity grants by $500,000 compared to +2016 o Used negative discretion to pay 0% on the CEO's individual performance +objectives and related bonus despite performance in excess of that, resulting in an overall annual bonus payout of 58% of target +• Peer Group +o Adopted a new peer group, creating greater alignment of our revenue with +the peer group median +• Change in Control Equity Acceleration +o Implemented "double-trigger" equity vesting following a change in control +We +have listened to shareholder concerns and have taken significant steps to address them and improve the Company's overall compensation program. We are committed to the ongoing evaluation and +improvement of our executive compensation program to further enhance alignment with the interests of our shareholders. We welcome the opportunity to engage and encourage you to reach out with any +questions or concerns related to our program. Correspondence can be addressed to the Compensation Committee care of the Corporate Secretary, as set forth on page 17 of this proxy statement. +Sincerely, +The +Wolverine Worldwide Compensation Committee +Joseph R. Gromek (Chairman), Jeffrey M. Boromisa, William K. Gerber, Nicholas T. Long +Page 38 | +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +Table of Contents +2017 PROXY STATEMENT +Compensation Discussion +and Analysis +SUMMARY +The Company's Compensation Discussion and Analysis ("CD&A") provides an overview and analysis of the executive compensation for the Company's named executive officers ("NEOs"). For 2016, the Company's NEOs +were: +Blake W. Krueger +Chairman, Chief Executive Officer and President +Michael Jeppesen +President, Wolverine Heritage Group and Global Operations Group +Michael D. Stornant +Senior Vice President, Chief Financial Officer and Treasurer +Richard J. Woodworth +President, Wolverine Boston Group +James D. Zwiers +President, Wolverine Outdoor & Lifestyle Group (in 2016); +Assumed new role as Executive Vice President in February 2017 +Compensation Philosophy and Objectives +The Company's compensation philosophy is to provide executives with a competitive compensation package that is heavily weighted towards +at-risk (performance shares and annual bonus) and variable (restricted stock and, prior to 2017, stock options) compensation in order to encourage superior business, stock price and financial +performance over the short and longer term and to closely align the interests of the Company's NEOs with those of its shareholders. The Compensation Committee (the "Committee") oversees the Company's +executive compensation program. +The executive compensation program has four primary objectives: +• Attract and retain talented NEOs who will lead Wolverine Worldwide and drive superior business and financial performance +• Provide incentives for achieving specific pre-established near-term individual, business-unit and corporate goals and reward the attainment of +those goals +• Provide incentives for achieving pre-established longer-term corporate financial goals and reward the attainment of those goals +• Align the interests of NEOs with those of the shareholders through incentives based on achieving performance objectives that enable increased +shareholder value +Shareholder Outreach +The Company's say-on-pay proposal received insufficient support at the 2016 annual meeting. Since that meeting, the Company reached out to +shareholders representing nearly two-thirds of its outstanding shares and had conversations with more than half of these shareholders. The Compensation Committee Chairman Joseph Gromek led this +effort, was present for all of these conversations, and solicited and received direct feedback from shareholders on what drove their 2016 say-on-pay vote and what changes the Committee could make to +address these concerns. The feedback was shared with the full Board and significant changes were made in response to the feedback. +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +| Page 39 +Table of Contents +Below +is a list of the key themes heard during Mr. Gromek's conversations with shareholders and the Committee's actions in response, with additional details provided below the chart: +TOPIC +WHAT WE HEARD FROM SHAREHOLDERS +WHAT WE DID IN RESPONSE +CEO "bridge grants" +• +Concerns over the one-time +"bridge grants" awarded to the CEO in 2015 intended to bring his compensation to peer group median +• +The Company understands +shareholders' concerns in this area, and these CEO awards were not repeated in 2016 or 2017 +Pay for performance +• +Desire to see a greater +link between the Company's stated strategic and financial goals and its compensation program, and to see relative performance measures used +• +Incorporated an adjusted +operating margin modifier into the 2017 annual bonus plan and a 3-year relative TSR modifier into the 2017-2019 performance unit plan +CEO pay in light of Company performance +• +Notwithstanding positive +2016 total shareholder return (TSR), the CEO's compensation appeared high relative to peers in light of three-year TSR +• +Despite very strong 2016 +TSR, the Committee reduced the CEO's 2017 total long-term incentive grants by $500,000 +• +Paid $0 on the individual +performance objectives portion of his 2016 annual bonus despite actual performance in excess of that +Pay mix +• +Preference to shift the +long-term incentive mix to a heavier weighting on performance share units, the most at-risk pay element +• +Beginning in 2017, the +Company no longer utilizes stock options and increased from 40% to 70% the percentage of CEO long-term compensation that is granted as performance share units; other NEOs' performance share units now make up 60% of the total long-term incentive +opportunity +Peer group +• +Some concern that select +peers within the 2015 peer group were significantly larger than the Company +• +The Company adopted a new +2017 peer group to create better alignment from a size perspective. The Company is now above the median of the new peer group as measured by market capitalization and enterprise value +Compensation consultant +• +Some independence concerns +that the compensation consultant performed other services for the Company +• +For this reason and to +provide a fresh perspective on the Company's compensation programs, the Committee appointed a new independent compensation consultant in 2016 +Change in control equity acceleration +• +Desire to see the Company +move away from single-trigger vesting of equity awards upon a change in control +• +2017 equity award change in +control provisions provide for double-trigger acceleration upon a change in control +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +| Page 40 +Table of Contents +• Adjusted operating margin modifier to 2017 annual bonus: +o Less than 100bps adjusted operating margin improvement vs. 2016 = +25% negative adjustment +o 100bps to 150bps improvement = no adjustment +o 151bps to 200bps improvement = 10% positive adjustment +o More than 200bps improvement = 25% positive adjustment +• TSR modifier relative to the Russell 3000 Consumer Discretionary Index to the 2017-2019 long-term incentive period: +o If TSR is bottom quartile = 25% negative adjustment +o If TSR falls between the 25th and 75th percentiles = +no adjustment +o If TSR is top quartile = 25% positive adjustment +• Adopted new peer group with the following changes: +o Removed: Aeropostale, Dick's Sporting Goods, PVH Corp., Williams-Sonoma +o Added: Express, G-III Apparel Group, Kate Spade, Skechers, The Children's +Place +Strategic Priorities +Near the end of 2016, Wolverine Worldwide announced a holistic, enterprise-wide business initiative designed to transform the Company to +compete and win in the fast-changing global consumer retail environment — the WOLVERINE WAY FORWARD. It includes four critical components: +Innovation & Growth +Operational Excellence +Portfolio Management +People & Teams +• +Building great brands +through product innovation and compelling marketing +• +Relentless focus on the consumer +• +Consumer-centric product innovation +• +Demand creation initiatives +• +Deep focus on digital connection, specifically eCommerce and social media +• +International expansion +• +Healthier supply chain, +with improved speed to market +• +Omnichannel transformation focused on aggressively growing highly profitable eCommerce business and right-sizing underperforming store fleet +• +Faster, more efficient structure +• +Aggressive goal to achieve 12% adjusted operating margin by +the end of 2018 +• +Focus on core, go-forward +brands that provide the biggest growth and profit opportunities +• +Identify strategic alternatives for non-core, underperforming businesses +• +Strategic, value-creating acquisitions +• +Amazing place to work +• +Build the best team and +talent pipeline +• +Modern +skillset +• +Investment in +enhanced learning and development initiatives +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +| Page 41 +Table of Contents +Compensation Decisions in Context: Key 2016 Accomplishments and Financial Highlights +The Company performed well in 2016, despite broad-based slowing of consumer demand, destabilizing geopolitical events, the continued +strengthening of the U.S. dollar, over-stored U.S. retail sector, and other macroeconomic factors that combined to create a volatile consumer retail environment around the world and a challenging year +for companies in the retail, footwear, apparel and consumer soft goods industries, as well as companies with significant international footprints. Notwithstanding +this, however, the Company finished 2016 with significant accomplishments against its strategic priorities outlined above. +• Delivered 32.9% total shareholder return for 2016, performance in the top decile of companies in the peer group +• Generated operating cash flow for the year of $296.3 million, up $80.8 million or 37.5% versus the prior year +• Achieved a 25% reduction in year-end inventory against a corporate objective to reduce overall inventory by 12% +• Delivered revenue of $2.495 billion, in line with original guidance +• Delivered reported diluted 2016 EPS of $0.89, compared to $1.20 in 2015; adjusted diluted EPS of $1.36, and, on a constant currency basis, +$1.52 compared to $1.45 in 2015 +• Returned value to shareholders through $0.24 per share cash dividends and approximately $62 million in share repurchases +• Advanced omnichannel transformation by closing 101 stores during 2016 while investing in eCommerce; additional 110 store closures anticipated +for early 2017 +• Refinanced debt, expecting to result in $30 million of interest savings through 2020 +• Reorganized European, Canadian, Apparel and Accessories, and Direct-to-Consumer business +• Opened new design and innovation center +• Drove considerable efficiencies through supply chain improvements, including factory consolidation +Compensation Overview +Despite a solid year in the face of macroeconomic and industry headwinds, NEO compensation was below target on a number of measures and the +Compensation Committee took additional actions, including: +• Below-target annual bonuses for all NEOs; 0% payout on CEO individual performance portion of annual bonus +• Below-target performance (80%) under the 2014-2016 performance share plan +• No CEO base salary or annual bonus target opportunity increase in 2014, 2015, 2016 or 2017 (level for four years) +• $500,000 reduction in CEO 2017 long-term incentive compensation +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +| Page 42 +Table of Contents +Year-Over-Year Change in CEO Pay +The graphic below presents the year-over-year change in the CEO's pay as disclosed in the Summary Compensation Table (SCT) on page 60, without +impact of change in pension value. As shown, the year-over-year change in CEO's pay decreased from 2015 to 2016 by $2,342,955 or 23%. +Total CEO Pay* +* Excluding change in pension value +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +| Page 43 +Table of Contents +CEO Annual Bonus/TSR Analysis +The below graphic shows the CEO's actual annual bonus compared to his target opportunity over the last three years and demonstrates a clear +link between Company TSR performance and annual bonus achievement over these periods: +CEO 3-Year Target & Actual Bonus +(in $000s) +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +| Page 44 +Table of Contents +2016 Compensation Program Overview +The Company's executive compensation program consists of base salary, annual bonus, long-term incentive compensation, and benefits. A +breakdown of base salary, annual performance bonus, and long-term incentive compensation is illustrated below: +ELEMENT +COMPONENT +METRICS +WHAT THE PAY ELEMENT REWARDS +Base +Salary +• +Cash +• +Fixed amount based on responsibilities, experiences and market data +• +Scope of core responsibilities, years of experience, and potential to affect the Company's overall performance +Annual +Performance +Bonus 1 +• +Company/Business Unit Cash Bonus +• +Individual Cash Bonus +• +85% Revenue and adjusted pretax earnings +• +15% Specific individualized performance targets +• +Achieving specific corporate business and/or divisional objectives over which the NEO has reasonable control +• +Achieving specific personal objectives +Long-Term +Incentive +Compensation 1 +• +Performance shares +• +Time-based stock options and restricted stock +• +Uses the following performance metrics (weighted as indicated) +• +65% Adjusted earnings per share +• +35% Adjusted business value-added +• +Balances focus on near-term profitability with longer-term shareholder value creation +• +Achieving long-term corporate objectives +• +Driving long-term shareholder value +• +Continued, long-term employment at Wolverine +Worldwide +1 These reflect the 2016 compensation program and, therefore, do not reflect the 2017 changes discussed elsewhere. BVA is a business value added measure calculated as +described in footnotes 1 and 2 on the table on page 52. +Long-Term Incentive Program Mix +Based on shareholder feedback during the Committee's outreach, the Committee decided to modify the mix of vehicles used for long-term +incentive compensation in 2017 and going forward. Beginning in 2017, the long-term incentive program does not utilize stock options and reflects a mix of 70% performance share units and 30% +time-vested restricted share units for the CEO. For other NEOs, the 2017 mix changed to 60% performance share units and 40% time-vested restricted share units. This change is intended to strengthen +the Company's pay-for-performance philosophy, create stronger alignment with shareholders and simplify the compensation program. +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +| Page 45 +Table of Contents +Pay at Risk +Under the Company's compensation program, a significant portion of the compensation awarded to the NEOs generally, and to the CEO in +particular, is at-risk (contingent upon the attainment of various pre-established short and long-term financial goals) and variable (contingent on the performance of the Company's stock price). NEO +compensation that is significantly at-risk and variable, incentivizes superior business, stock price and financial performance and aligns the interests of executives with those of shareholders. +The +following graphic shows the percentage of at-risk and variable target compensation of the CEO and the average of the other NEOs: +CEO 2016 vs. 2017 Target Total Compensation +Note: 2017 CEO equity grants were reduced by $500,000 compared to 2016 to respond to shareholder concerns regarding our 2016 say-on-pay vote. This one-time +reduction is not reflected in the graphic above. +Other NEO 2016 vs. 2017 Target Total Compensation +Compensation Best Practices +What we do +What we do not do +✓ +Vast majority of pay is at-risk or variable, i.e., performance-based or equity-based or both +✓ +Stringent share ownership requirements (6x base salary for CEO) +✓ +Broad-based clawback +policy +✓ +Significant vesting horizon for equity grants +✓ +Double-trigger equity acceleration (for grants in 2017 and beyond) +✗ +No dividends or dividend equivalents on unearned performance shares +✗ +No repricing or replacing of underwater stock options +✗ +No overlapping metrics +✗ +No excessive or unnecessary perquisites +✗ +No hedging, pledging, or short +sales of Company stock +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +| Page 46 +Table of Contents +2017 PROXY STATEMENT +COMPENSATION DISCUSSION AND ANALYSIS IN DETAIL +2016 Compensation Program Overview +Setting Targets +Each February, the Committee recommends (and the independent directors approve) target compensation for the CEO for the upcoming year after +considering the latest available information, including the Company's TSR and other business and financial performance, information provided by the Company's compensation consultant regarding +executive compensation trends and compensation paid to other chief executive officers of companies in the comparative peer group, and information provided by management on recent Company performance +and future business and financial outlook. The Committee's goal is to set the CEO's compensation in-line with the anticipated market median compensation for that year. +Given +the significant weight the Company's executive compensation program places on at-risk and variable compensation, the compensation realized by the CEO and NEOs can be significantly affected, both +positively and negatively, by performance against the various operational and financial performance metrics pre-established by the Committee and by the performance of the Company's stock price. The +Board and Committee believe such a compensation program aligns the interests of the CEO and other NEOs with the interests of the shareholders. +The +Company's executive compensation program consists of four primary elements: base salary, annual bonus, long-term incentive compensation and benefits. These elements are described in greater detail +below. +Base Salary +As part of approving an NEO's base salary, the Committee considers a variety of factors including individual responsibilities, experience, +skills, and potential to affect Wolverine Worldwide's overall performance, as well as market surveys and peer group information. The Committee considers these compensation factors subjectively, and no +single factor or combination of factors was determinative in setting base salaries for any NEO. +Based +on the above factors, the Committee approved the 2016 base salaries for the NEOs as noted in the following table. The Committee held CEO salary flat for the third year in a row (and held it flat +again in 2017). Mr. Jeppesen's increase reflects, in part, the fact that he took on significant additional responsibility as President of the Wolverine Heritage Group in 2016. +Mr. Woodworth's increase reflects, in part, his promotion from a brand president to a brand group president in 2016. +Name +2016 Base Salary +2015 Base Salary +Krueger +$1,150,000 +$1,150,000 +Jeppesen +$575,000 +$530,000 +Stornant +$550,000 +$520,000 +Woodworth +$550,000 +$488,632 +Zwiers +$645,000 +$628,000 +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +| Page 47 +Table of Contents +2017 PROXY STATEMENT +Annual Bonus +In 2016, each NEO had the opportunity to earn annual cash incentive compensation ("annual bonus"), consisting of two parts, a performance +bonus and an individual performance bonus: +Key Factors +2016 Company Metrics +Performance Bonus +85% of Total +• +Based on performance +measured against Company and/or business unit performance criteria established at the beginning of the fiscal year +• +Payout determined by comparing performance against four performance levels set for each pre-set criterion: threshold (50% payout), target (100% payout), goal (150% +payout) and stretch (200% payout) +• +Revenue (35%) +• +Adjusted pretax earnings (65%) +Individual +Performance Bonus +15% of Total +• +Measured against +individual performance criteria +• +Each NEO's payout was determined by comparing individual performance against specific individual criteria set at the beginning of 2016 +• +Payouts can range from 0% to 200% depending on the NEO's performance against individual performance objectives +• +Vary by each NEO +A +percentage of each NEO's 2016 base salary was set as the annual bonus target percentage (the "Target Bonus Percentage"). The Target Bonus Percentage represents the percentage of each NEO's base +salary that could be earned as annual incentive compensation at a "target" performance level (100% payout) for each of the performance bonus and individual bonus. Generally, the Committee sets higher +Target Bonus Percentages for individuals with greater influence on business strategy, profit or sales. This puts a larger percentage of an NEO's total potential cash compensation "at-risk," in line +with the NEO's ability to influence these factors. +The +Committee selected fiscal year 2016 revenue and adjusted pretax earnings as metrics for the annual bonus because it believes a strong correlation exists between performance on these financial +measures and increases in shareholder value. +Performance Bonus +Messrs. Krueger and Stornant had significant influence on the Company's overall business performance and, accordingly, their respective performance +bonus opportunity (85% of their total annual bonus opportunity) is based on the Company performance criteria only. Messrs. Jeppesen, Woodworth and Zwiers were directly responsible for specific +business units and exert a significant influence on those business units in particular, in addition to influencing Company performance. Accordingly, for each of these NEOs, a larger percentage of +their overall annual bonus opportunity was based on business unit performance, with a smaller percentage based on the Company's performance, as reflected in the table on page 51. +As +shown in the table below, the Committee also set four performance levels for each criterion: threshold (25% payout), target (100% payout), goal (150% payout) and stretch (200% payout). The +Committee set the revenue and pretax earnings goals for these performance levels following a review of the Company's operating plan, historical performance, and industry and macroeconomic conditions. +The performance targets, though lower than 2015 targets, were set aggressively in light of the difficult industry and macroeconomic conditions discussed in the " Compensation +Decisions in Context: Key 2016 Accomplishments and Financial Highlights " section, as evidenced by only a 68% payout on revenue performance that met the Company's original +revenue guidance for the year. +Company +Performance Level +in millions +(% of Target Payout) 1 +Revenue 2,3 +Pretax Earnings 2,3 +Threshold (25%) +$2,344 +$164.1 +Target (100%) +$2,608 +$193.6 +Goal (150%) +$2,701 +$209.4 +Stretch (200%) +$2,796 +$225.7 +1 The maximum payout an NEO can receive is 200% of his Target Bonus Percentage, even if performance is above stretch, and an NEO would receive 0% of his Target Bonus +Percentage if performance is below threshold. 2 Pretax earnings are earnings before income taxes, excluding the effect of acquisitions, divestitures, accounting changes, +restructuring, or other special charges or +extraordinary items excluded by the Compensation Committee. Pretax earnings for 2016 exclude restructuring and impairment costs, organizational transformation costs, and debt extinguishment and other +costs. 3 2016 revenue performance fell between threshold and target, resulting in a 68% payout on this measure. 2016 pretax earnings performance was between threshold and +target, resulting in a 68% payout. +Page 48 | +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +Table of Contents +2017 PROXY STATEMENT +For +each business unit, the Committee sets the goals at substantially similar levels of difficulty as the goals for the Company and with a similar degree of difficulty as in prior years. The below +table shows historical weighted performance levels achieved by the business units using these performance criteria for the years for which a meaningful comparison can be made. +Historical Group Performance 1 +2016 +2015 +2014 +2013 +2012 +Sourcing/Owned +Manufacturing/Leathers +Between target and goal +Between goal and stretch +Between target and goal +Between target and goal +Between threshold and target +Wolverine Boston Group +Between threshold and target +Below threshold +Below threshold +Between threshold and target +N/A +Wolverine Heritage Group +Between threshold and target +Below threshold +Between target and goal +Between threshold and target +Below threshold +Wolverine Outdoor & +Lifestyle Group +Between threshold and target +Between target and goal +Between target and goal +Between target and goal +Below threshold +1 The brand groups were changed in 2016. The performance information above is for the historical group closest in makeup to the current group. +In +February 2017, the Committee certified actual 2016 performance compared to the performance levels for the Company and business unit criteria. The Company's fiscal year 2016 revenue was +approximately $2.495 billion, which was between threshold and target level. The Company's adjusted pretax earnings for fiscal year 2016 were $181.0 million, which was between threshold +and target level. The weighted average results for the applicable performance criterion are shown in the below table: +2016 Performance +Overall Weighted Payout by Group +Sourcing/Owned Manufacturing/Leathers +Between target and goal +129% +Wolverine Boston Group +Between threshold and target +45% +Wolverine Outdoor & Lifestyle Group +Between threshold and target +52% +Wolverine Heritage Group +Between threshold and target +28% +Wolverine Worldwide +Between threshold and target +68% +For +2016, the Company paid the NEOs the following amounts relating to the performance bonus. +Name +Performance Bonus Opportunity +(as a % of an NEO's Target Percentage) +Performance Bonus +Percentage Earned 1 +Performance Bonus Paid 1,2 +Krueger +0 - 200% +68% +$831,376 +Jeppesen +0 - 200% +88% +$229,888 +Stornant +0 - 200% +68% +$173,299 +Woodworth +0 - 200% +53% +$123,655 +Zwiers +0 - 200% +57% +$172,529 +1 Percentages earned and bonuses paid vary due to the relative performance of various business units versus overall corporate performance. 2 Not including Individual Performance Bonus. +Individual Performance Bonus +At the same time Target Bonus Percentages are set, the CEO approves measurable personal objectives for each NEO's individual bonus, other than for himself. +The CEO submits, and the Committee approves, the CEO's personal objectives. Such measurable personal objectives may include goals such as executing strategies supporting the Company's vision, +developing employees, growing new business initiatives and driving operational excellence. Performance is evaluated by the CEO (or, in the case of the CEO, by the Committee and other independent +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +| Page 49 +Table of Contents +2017 PROXY STATEMENT +directors) +based on qualitative and quantitative factors. Summaries of the specific personal objectives for each NEO are outlined in the table below: +NEO +2016 Personal Objectives +Krueger +People, Growth, Strategy, Innovation, Cash Flow +Jeppesen +Strategy, Organization, Cash Flow, Supply Chain, Product Development, Talent, Growth – Heritage Group +Stornant +Maximize Shareholder Value, Cash Flow, People, Growth +Woodworth +Inventory, Culture, Talent, Growth +Zwiers +Brands' Sales Growth, Inventory, People +Each +personal objective is given a rating from "does not achieve" to "far exceeds," with weighted performance ratings and payouts consistent with the following table: +Personal Objectives Rating +2016 Payout Level +Far Exceeds +200% +Exceeds +150% +Achieves +100% +Achieves Most But Not All +65% +Does Not Achieve +0% +The +CEO recommended, and the Committee approved, the 2016 cumulative weighted personal objectives scores and payout levels for each of the NEOs other than himself. The Committee and the other +independent directors of the Board met with the CEO at the end of the year to evaluate his performance against his personal objectives. The Committee determined the cumulative weighted personal +objectives score for the CEO and recommended to the independent directors of the Board the CEO's payout level. The individual bonus payout for each NEO other than the CEO, as shown in the accompanying +table, was determined by multiplying the bonus percentage achieved by 15% (representing the percentage of the individual bonus to the total annual bonus opportunity) of the Target Bonus Percentage. +The Committee used negative discretion to reduce the CEO's individual performance bonus to $0 in response to shareholder feedback received in its engagement efforts. +Name +2016 Individual Bonus +Opportunity +(as a % of an NEO's Target +Percentage) +Personal Objectives Rating +2016 +Individual Bonus +Percentage Achieved +2016 +Individual +Bonus Paid +Krueger +0 - 200% +Achieves most but not all +65% +$0 +Jeppesen +0 - 200% +Achieves +100% +$46,129 +Stornant +0 - 200% +Achieves most but not all +65% +$29,215 +Woodworth +0 - 200% +Achieves +100% +$41,161 +Zwiers +0 - 200% +Achieves most but not all +65% +$34,430 +Page 50 | +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +Table of Contents +2017 PROXY STATEMENT +Consistent +with the 2015 bonus opportunity, each NEO's total annual bonus opportunity for 2016 ranged from 0% to 200% of Target Bonus Percentage. The accompanying table shows the total aggregate +annual incentive compensation payout earned by each NEO for 2016, as well as the portion of that aggregate number that is attributable to the performance bonus and individual bonus. +Annual Bonus Compensation Component +as a Percentage of Target Bonus Performance +Performance Bonus Percentage By +Company or Business unit as a Percentage of +Target Bonus Percentage +2016 Target Percentage +Total Individual Performance Bonus as a +Percentage of Target Percentage +Company 1 +Wolverine Outdoor & Lifestyle Group 2 +Wolverine Boston Group 3 +Wolverine Heritage Group +Sourcing 4 +Owned Manufacturing 4 +Leathers 4 +2016 Performance Bonus +2016 Individual +Performance Bonus +Total 2016 Actual Annual +Bonus Compensation +% of 2016 Actual Incentive Target +Krueger +125 +% +15 +% +85 +% +$ +831,376 +$ +0 +$ +831,376 +58 +% +Jeppesen 5 +55 +% +15 +% +40 +% +10 +% +20 +% +10 +% +5% +$ +229,888 +$ +46,129 +$ +276,017 +90 +% +Stornant +50 +% +15 +% +85 +% +$ +173,299 +$ +29,215 +$ +202,514 +68 +% +Woodworth +40 +% +15 +% +30 +% +55 +% +$ +123,655 +$ +41,161 +$ +164,816 +60 +% +Zwiers +55 +% +15 +% +30 +% +55 +% +$ +172,529 +$ +34,430 +$ +206,959 +59 +% +1 Based on revenue and pretax earnings performance criteria for the Company, as described above under " Annual Bonus – +Performance Bonus ." 2 Based on revenue and pretax earnings as the performance criteria for the Wolverine Outdoor & Lifestyle Group. +3 Based on revenue and pretax earnings as the performance criteria for the Wolverine Boston Group. 4 +Based on revenue and pretax earnings for Leathers. Based on the following factors for sourcing: expense management, on-time delivery, product pricing, factory lead +times, and product quality. Based on the following factors for owned manufacturing: profit contribution, on-time delivery, and product quality. 5 Mr. Jeppesen served as +President of the Global Operations Group for all of 2016 and also served as President of the Wolverine Heritage Group for the second half +of 2016. The percentages in this table reflect a weighted average of the criteria achieved. +2017 Annual Bonus Plan Update +Based on feedback from shareholders and to create even stronger alignment between NEO compensation and the Company's strategic objectives, the Committee added +adjusted operating margin to the 2017 annual bonus plan as a modifier to adjust, up or down, the calculated payments generated using the following metrics: +• Less than 100bps adjusted operating margin improvement vs. +2016 ➡ 25% negative adjustment +• 100bps to 150bps improvement ➡ no adjustment +• 151bps to 200bps improvement ➡ 10% positive adjustment +• More than 200bps improvement ➡ 25% positive adjustment +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +| Page 51 +Table of Contents +2017 PROXY STATEMENT +Long-Term Incentive Compensation +In 2016, each NEO had the opportunity to earn long-term incentive compensation reflected as a mix of performance shares and time-based stock +options and restricted stock awards. +Key Factors +Performance Share Metrics 1 +Performance Shares +• +Performance shares are +based on performance criteria covering three-year periods +• +Awards balance focus on near-term profitability with longer-term shareholder value creation +• +Fully diluted adjusted EPS +(65%) +• +Adjusted Business +Value Added ("BVA") 2 (35%) +Time-Based Stock +Options and Restricted +Stock Awards +• +Encourages employee +retention and rewards increases in stock price +1 EPS is calculated on a fully diluted basis and EPS and BVA are each adjusted to account for and exclude the effects of acquisitions, divestitures, accounting changes, +restructuring, or other similar special charges or extraordinary items excluded by the Committee, including foreign exchange. 2 BVA is calculated by starting with operating +income determined in accordance with U.S. generally accepted accounting principles ("GAAP"), and then reducing operating +income by (1) an amount for income taxes where the effective tax rate used to calculate the income tax amount is determined in accordance with GAAP (adjusted as described above), and +(2) a capital charge equal to a 14-point average of "net operating assets" during the fiscal year (with "net operating assets" defined as the net of trade receivables (net of reserves), +inventory (net of reserves), other current assets, property, plant and equipment, trade payables and accrued liabilities) multiplied by 10%. +The Committee believes EPS is a key metric that plays an important role in driving shareholder value and that it further aligns the interests of the NEOs with other shareholders. The +Committee believes that BVA is useful for determining incentive compensation because it ties the income statement (profit delivery) to the balance sheet (effective asset utilization) and does not +focus on one to the exclusion of the other. The Committee further believes that focusing NEOs' interests on increasing BVA aligns their interests more closely with shareholder interests. The use of +both EPS and BVA balances the NEOs' focus on near-term profitability with longer-term shareholder value; these measures received positive shareholder feedback during the Committee's shareholder +outreach. The Committee weighted EPS 65% and BVA 35% when determining the overall performance level. +The +Committee has chosen to provide long-term incentives in these forms because they incentivize and motivate different behaviors. Performance shares reward the achievement of key business criteria. +Time-based stock options encourage employee retention and only +reward employees if the stock price appreciates after the grant. Time-based restricted stock encourages employee retention by providing some level of value to executives who remain employed during the +vesting period. Restricted stock also supports an ownership culture and thereby encourages executives to take actions that are best for the Company's long-term success. +Performance Shares +The following table lists performance levels set by the Committee for performance share awards granted for the 2014-2016 performance period (and, for +Mr. Krueger, a 2015-2016 performance period) the vesting of which occurred on February 8, 2017 following the Committee's certification of 2014-2016 financial results. The performance +share grant to Mr. Krueger for the 2015-2016 performance period was subject to EPS and BVA performance targets set at levels consistent with the EPS and BVA levels that remained outstanding +under his original performance share grant for the 2014-2016 period, as well as an additional requirement that the Company's aggregate 2015 and 2016 revenue exceed $5.1 billion. +Performance level +(Percentage of Target Payout) +Cumulative EPS for the 2014-2016 period 1 +Cumulative BVA for the 2014-2016 period 1 +(in millions) +Threshold (50%) +$4.61 +$343.8 +Target (100%) +$5.13 +$381.4 +Goal (150%) +$5.67 +$407.2 +Stretch (200%) +$6.12 +$449.4 +1 Adjusted as described above. +Page 52 | +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +Table of Contents +2017 PROXY STATEMENT +In February 2017, the Committee evaluated the Company's performance for the 2014-2016 performance period (and, in addition, for Mr. Krueger, the +2015-2016 performance period) against these criteria set forth in the table above and certified that the Company's performance on both the EPS and BVA criteria fell between threshold and target +performance levels for both periods (and, for Mr. Krueger, that the Company's aggregate 2015-2016 revenue exceeded $5.1 billion). The Committee weighted the EPS attainment ($4.96; 84% of +target performance) at 65% and the BVA attainment ($361.3 million; 73% of target performance) at 35%, resulting in a weighted average performance of 80%. The vesting of the number of shares is +shown for each NEO in the accompanying table. In calculating the number of shares that vest, the Company uses the stock price on the date of the grant, which results in the NEOs bearing the risk of +stock price performance during the performance period. +The +following table lists the number of shares that vested for each NEO under the 2014-2016 performance share grant (and also, for Mr. Krueger, with respect to his 2015-2016 award): +Name +Shares Vesting +(#) +Krueger +67,870 +Jeppesen +9,328 +Stornant +5,326 +Woodworth +8,923 +Zwiers +10,464 +2016 Performance Share Awards +In the beginning of 2016, the Committee evaluated each NEO's long-term incentive target payout opportunity expressed as a percentage of base salary that would +apply to the grant of performance shares for the 2016-2018 period. Determining that these opportunities remained set at appropriate levels, the Committee made no changes to the 2016-2018 target +percentage from those in effect for the 2015-2017 performance period. The number of performance shares granted to the NEOs for the 2016-2018 performance period is set forth in the "Grants of +Plan-Based Awards" table below and approximates the estimated maximum bonus payout the NEO could earn for the period. Like performance shares granted for the 2015-2017 performance period, performance +shares are eligible to vest based on achievement of constant-currency EPS goals (weighted 65%) and constant-currency BVA goals (weighted 35%). An NEO may earn none, some or all of the performance +shares granted, depending on Company performance against the EPS and BVA targets and base salary and target bonus percentage over the three-year performance period. +Name +2016-2018 +Target +Percentage +2015-2017 +Target +Percentage +Krueger +200% +200% +Jeppesen +55% +55% +Stornant +55% +55% +Woodworth +55% +55% +Zwiers +55% +55% +The +Company accrues, but does not pay, any dividends on any performance shares during the performance period. Once the Committee certifies the Company's performance compared to the pre-determined +performance criteria, the restrictions on some, all, or none of the performance shares awarded to each NEO will lapse at that time, and the NEO will receive accrued dividends only on the shares +actually earned. +The +Committee goes through a rigorous process in setting three-year EPS and BVA performance targets, including a careful review of the Company's prior year business and financial performance, current +year operating plan and future expectations. To achieve target level EPS and BVA for the 2016-2018 performance period, the Company would need to achieve compounded annual EPS and BVA growth over the +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +| Page 53 +Table of Contents +2017 PROXY STATEMENT +most +recently completed fiscal year's actual results in the mid- and low-single digit range, respectively, with double-digit compounded annual growth required on both EPS and BVA to achieve stretch +performance. +Stock Option Grants and Restricted Stock Awards +The accompanying table reflects the grant-date value of the regular, annual service-based restricted stock award and stock option grant to each NEO. Except +for Messrs. Stornant and Woodworth, who both received promotions between the time of the 2015 and 2016 grants, the value of awards was the same as in 2015. +Name +Time-vested +Restricted Stock +Time-vested +Stock Options +Krueger +$2,085,000 +$1,390,000 +Jeppesen +$255,000 +$170,000 +Stornant +$348,000 +$232,000 +Woodworth +$316,200 +$210,800 +Zwiers +$316,200 +$210,800 +A +stock option's exercise price is set at the closing market price of the Company's common stock on the grant date. The Committee generally grants annual equity awards at its regularly scheduled +February meeting, and the independent directors of the Board approve equity grants to the CEO generally on the same day that the Committee meets. Stock option grants vest in equal annual installments +over three years. The restrictions on restricted stock awards typically lapse 25% on the third and fourth anniversaries of grant and 50% on the fifth anniversary. +Approximately +60% of the combined value of the regular annual restricted stock and stock option grant awarded to each NEO in 2016 was in the form of restricted stock and 40% was in the form of stock +options. These were the same approximate percentages as in 2015 and in each of the past five years. +In +addition to the annual equity grants described above, Messrs. Stornant, Jeppesen, and Zwiers each received a retention grant of 20,000 shares of restricted stock and Mr. Woodworth +received a retention grant of 5,000 shares of restricted stock. The retention grants were made, in part, to maintain stability within senior management in light of recent turnover. Mr. Jeppesen +also received a grant of 10,000 shares for assuming additional responsibilities as President of the Wolverine Heritage Group, in addition to his continuing as President of the Global Operations Group. +Restrictions on these shares lapse 25% on the third and fourth anniversary of grant and 50% on the fifth anniversary. +2017 Long-Term Incentive Plan Update +Based on feedback from shareholders and to create even greater alignment with shareholders, the Compensation Committee decided to add a three-year relative +Total Shareholder Return ("TSR") modifier to the 2017-2019 performance unit grant. TSR will be benchmarked relative to the Russell 3000 Consumer Discretionary Index. The number of shares that vest, if +any, will be increased by 25% for top-quartile TSR performance and will decrease by 25% for bottom-quartile relative TSR performance. +The +Committee stopped granting options beginning with 2017 long-term incentive compensation. The Committee also shifted NEO long-term incentive compensation to a much heavier weighting on performance +units (70% for the CEO and 60% for other NEOs), the Company's most at-risk pay element, and adjusted the vesting schedule of restricted stock units to four years (options had previously vested over +three years and restricted stock over five years). The Committee also implemented a "double-trigger" equity vesting for all 2017 equity grants. +Benefits +Retirement, Deferred Compensaton and Welfare Plans +The NEOs participate in Wolverine Worldwide's medical and dental plans and receive life and disability insurance. In 2016, Messrs. Krueger, Jeppesen, +Stornant and Zwiers also participated in the Wolverine Worldwide Employees' Pension Plan (a defined benefit plan) and the +Page 54 | +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +Table of Contents +2017 PROXY STATEMENT +Wolverine +World Wide, Inc. 409A Supplemental Executive Retirement Plan (an unfunded, non-qualified plan). For a description of the benefits under Wolverine Worldwide's retirement plans, see +" Pension Plans and 2016 Pension Benefits " below. +All +of full-time employees of the Company in the United States, including the NEOs, are also eligible to participate in one of Wolverine's 401(k) Plans (the "401(k) Plan"). Pursuant to the 401(k) +Plan, employees, including the NEOs, may elect to defer a portion of their salary and receive a Company match of up to 3% of salary for 2016 (4.5% for those who do not participate in the Pension +Plan), subject to limits set forth in the Internal Revenue Code of 1986, as amended. In 2016, the Company adopted the Wolverine Worldwide Executive Deferred Compensation Plan (the "Deferred +Compensation Plan"). This plan allows executives and other eligible senior employees of the Company to elect to defer a portion of their eligible compensation. Wolverine Worldwide may, but need not, +credit a participant with an additional discretionary Company contributions. No discretionary Company contributions were made in 2016. The Company adopted the Deferred Compensation Plan as a retention +and recruitment tool to facilitate retirement savings and provide financial flexibility for key employees, and because many of the companies with which we compete for executive talent provide similar +plans to their key employees. For a description of the benefits under the Deferred Compensation Plan, see "Nonqualified Deferred Compensation" below. +Perquisites +The Company provides limited perquisites to NEOs. The Company feels the perquisites that are provided round out a competitive total compensation package for +each NEO. For details on perquisites, see footnote 6 to the " Summary Compensation Table " on pages 60-61. +Post-Employment Compensation +Each NEO is party to an Executive Severance Agreement that provides for certain payments and benefits upon termination of employment after a +change in control of Wolverine Worldwide. The Board believes Executive Severance Agreements will promote management to actively pursue a business transaction that is in the best interests of the +shareholders, even if it could ultimately result in his or her job elimination, and promotes management stability during the transition period accompanying a change in control. Each NEO is eligible to +receive compensation if his employment is terminated within two years (Messrs. Jeppesen, Stornant, Woodworth and Zwiers) or three years (Mr. Krueger) following a change in control of +Wolverine Worldwide. Even following a change in control, an NEO does not receive payment under the Executive Severance Agreement if his employment terminates: +• Due to death or retirement in accordance with Wolverine Worldwide's policy or as otherwise agreed, +• For cause or disability, or +• By resignation of the NEO, other than for "good reason," which is discussed under the heading " Benefits Triggered by +Termination Other than For Cause or for Good Reason " and the heading " Benefits Triggered Upon a Change in Control ," both under +the heading " Potential Payments Upon Termination or Change in Control " +NEOs +may also be eligible under Wolverine Worldwide's retirement plans or equity plans to receive certain payments and benefits upon termination of employment or in connection with a change in +control. The Committee believes that accelerated vesting upon a change in control is appropriate in some circumstances because, by protecting a significant component of the NEO's total compensation, +the acceleration of equity vesting (1) mitigates potential conflicts of interest that might arise between the NEOs and the shareholders, and (2) serves as a substantial incentive for +those NEOs to obtain the highest possible value for the shareholders if the Company becomes an acquisition target. The Committee also retains the discretion to modify the accelerated vesting. +Mr. Krueger +is also party to a 2007 Separation Agreement under which he receives certain payments and benefits if the Company terminates his employment, even if not following a change in +control, other than for "cause" or if he terminates his employment for "good reason." The Committee determined upon appointing Mr. Krueger as CEO that, given the Company's strategic initiatives +the Board had asked him to lead, it was appropriate for the Company to enter into a separation arrangement. You will find information on benefits payable to Mr. Krueger and each other NEO and +the specific elements comprising the payments and benefits under the Separation Agreement, Executive Severance Agreements, and other retirement and equity plans of Wolverine Worldwide, in the +" Potential Payments Upon Termination or Change in Control " section of this proxy statement. +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +| Page 55 +Table of Contents +2017 PROXY STATEMENT +COMPENSATION SETTING PROCESS +Setting Targets +The Committee goes through a rigorous process in setting performance targets, including a careful review of the Company's prior year business +and financial performance, current year operating plan, and future expectations. The Committee engages with management in this process over several months leading up to setting final annual bonus and +three-year performance targets in February. The rigor of this process is demonstrated by the below-target annual bonus payout for 2016, a year in which the Company met its original revenue and +adjusted earnings per share guidance and delivered TSR of 32.9%, putting it in the top decile of its peer group. +Competitive Philosophy and Competitive Market Data +When making compensation recommendations and decisions, the Committee considers the CEO's assessment of the performance of each NEO, other +than himself; the performance of the individual and the individual's respective business unit or function; the scope of the individual's responsibilities, years of experience with the Company (or in +similar positions with other companies), skills and knowledge; market compensation data; market and economic conditions; Company performance; retention considerations; and Wolverine Worldwide's +compensation philosophy (collectively, the "compensation factors"). The Committee considers these compensation factors both subjectively and objectively, and no single factor or combination of factors +is determinative. With respect to CEO compensation, the Committee seeks to set compensation in line with the anticipated market median for a given year. +The +Compensation Committee terminated its engagement with Willis Towers Watson in 2016, at which time it selected and engaged another independent compensation consultant, Frederic W. +Cook & Co. ("FW Cook"), to provide services beginning in September 2016. The Committee uses market surveys and Peer Group information provided by its compensation consultant as market +reference points. The Committee also considers information the Company learns through recruiting NEOs and the experience levels and responsibilities of NEOs prior to joining the Company as reference +points in setting NEO compensation. +As +part of its competitive data review in connection with determining 2016 compensation, the Committee considered information presented by Willis Towers Watson based on publicly-disclosed Peer Group +information and on three published compensation surveys: (1) 2015 Towers Watson Data Services Survey Report on Top Management Compensation – Retail and Wholesale Trade +Industry Cut, (2) 2015 Towers Watson Compensation Database Executive Database – Retail/Wholesale Executive Database, and (3) 2015 US Mercer Benchmark Database, +Executive – General, Retail Industry Cut. +Peer Group +The Committee, with input from Willis Towers Watson (the Committee's former independent compensation consultant), established the following +peer group for use in setting 2016 NEO compensation (the "Peer Group"). In determining the Peer Group, the Committee considers each potential peer company's industry, channels of distribution, revenue +and market capitalization. The Company also considers the typicality of a company's pay practices, excluding companies whose chief executive may not receive market compensation because of a founder +relationship, family ownership position, or other similar relationships. +The +following companies comprised the 2016 Peer Group, which is consistent with the 2015 peer group: +Aéropostale, Inc.Inc. +Chico's FAS, Inc. +Foot Locker, Inc. +Williams-Sonoma, Inc. +American Eagle Outfitters Inc. +Coach, Inc. +Genesco Inc. +Ascena Retail Group, Inc. +Deckers Outdoor Corporation +Guess?, Inc. +Caleres, Inc. +Dick's Sporting Goods, Inc. +Hanesbrands Inc. +Carter's, Inc. +DSW Inc. +PVH Corp. +Page 56 | +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +Table of Contents +2017 PROXY STATEMENT +New 2017 Peer Group +In 2017, as part of its annual compensation review and in response to some shareholder concerns, the Committee evaluated each peer company and decided to +adopt a new peer group for 2017 and going forward. The changes to the group ultimately create greater alignment of Company revenues with those of the peer group median through the removal of several +larger companies. The following adjustments to the peer group were made for 2017 and going forward: +REMOVED: +Aéropostale, Dick's Sporting Goods, PVH Corp., Williams-Sonoma +ADDED: +Express, G-III Apparel Group, Kate Spade, Skechers, The Children's Place +CEO Role +Within the framework of the Company's executive compensation program, the CEO recommends the level of base salary, annual bonus, long-term +incentive compensation, equity awards and other compensation components for his direct reports, including the other NEOs. The CEO bases his recommendation upon his assessment of the compensation +factors applicable to each NEO. The CEO considers these compensation factors both objectively and subjectively, and no single factor is determinative. The Committee discusses these recommendations +with the CEO prior to setting the compensation for each NEO, other than the CEO. The Committee, however, ultimately determines all compensation for NEOs other than the CEO, whose compensation is +determined by the independent directors as a whole. +Compensation Consultant Role +FW Cook was engaged as the Committee's independent compensation consultant in September 2016, and reports directly to the Committee (as Willis +Towers Watson previously did). The Committee determines the scope of engagement and may replace the consultant or hire additional consultants at any time. The Committee has evaluated Willis Towers +Watson's and FW Cook's independence under the rules established by the NYSE and has determined that both firms are "independent" as defined by NYSE rules. In addition, the Committee has evaluated +whether the engagement of either firm raised any conflicts of interest and has determined that no such conflicts of interest exist. +At +the Committee's invitation, a representative of FW Cook generally attends all Committee meetings and also communicates with the Committee Chair and management regularly between meetings. However, +the Committee makes all decisions regarding NEO compensation. FW Cook provides various executive compensation services to the Committee pursuant to a consulting agreement with the Committee. +Generally, these services include advising the Committee on the principal aspects of the Company's executive compensation program, evolving industry practices, and providing market information and +analysis regarding the competitiveness of the Company's program design. +During +2016, FW Cook performed the following specific services: +• Attended Committee meetings, as requested +• Reviewed the Company's peer group and advised the Committee on the composition of the peer group +• Reviewed survey data for competitive comparisons +• Provided market data and recommendations on CEO and other NEO compensation +• Advised the Committee on market trends related to compensation policies and programs +• Proactively advised the Committee on best-practice approaches for governance of executive compensation +• Reviewed the Compensation Discussion & Analysis and other executive compensation-related disclosures included in the Company's proxy +statement +The +Company did not pay FW Cook any fees for services other than compensation consulting but did pay such fees to Willis Towers Watson, its former consultant. The total fees the Company paid to Willis +Towers Watson for executive compensation services to the Committee in +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +| Page 57 +Table of Contents +2017 PROXY STATEMENT +2016 +were $369,261. Towers Watson also was engaged by Wolverine Worldwide in 2016 to perform actuarial services, pension plan consulting and risk and financial services that are not part of the +executive and non-employee director compensation services provided to the Committee. These services were performed on an interim and annual basis for financial reporting purposes. The total annual +expense for this work was approximately $296,454. The total fees the Company paid to Willis Towers Watson were $665,715. Willis Towers Watson's revenue for its 2016 fiscal year was +$7.9 billion. +Other Compensation Policies and Practices +NEO Stock Ownership Guidelines +Each NEO, as well as each non-employee director, must attain (and maintain) a minimum stock ownership level (including owned shares, a certain +level of performance shares and restricted shares, and the in-the-money value of vested stock options) prior to being able to gift or sell any Company stock. During 2016, each NEO was in compliance +with these guidelines. +Covered Positions +Guideline +CEO +6x Annual Base Salary +Other NEOs +2x Annual Base Salary +Non-employee Directors +6x Annual Cash Retainer +Stock Hedging and Pledging Policies +Under the Company's Insider Trading Policy, all directors, officers and other employees are prohibited from engaging in any hedging +transactions involving Company securities beneficially owned by them. The Company also considers it inappropriate for any such person to engage in speculative transactions in the Company's securities, +including short sales, publicly traded options, margin accounts and pledges and standing and limit orders. Also, all directors, officers and other employees are prohibited from pledging Company +securities as collateral for a loan. +Clawback Policy +The Company has adopted a clawback policy which empowers the Board or a committee of the Board to seek recovery of specified incentive +compensation received by executive officers under specific circumstances where there is a material restatement of the Company's financial results that would have led to a lower level of incentive +compensation payout. +Impact of Accounting and Tax Treatments on Compensation +Section 162(m) of the Internal Revenue Code provides that publicly held companies may not deduct compensation paid to the CEO and the +three next most highly-paid executive officers (other than the CFO) in excess of $1,000,000 annually, with certain exceptions for qualified "performance-based" compensation. Wolverine Worldwide has +designed its Annual Bonus Plan and stock incentive plans to permit the grant or payment of certain awards that are intended to qualify as "performance-based" compensation for purposes of +Section 162(m). The Company is asking its shareholders to approve the material terms of the Amended and Restated Executive Short-Term Incentive Plan, consistent with the requirements of the +performance-based compensation exemption under Section 162(m). Wolverine Worldwide, however, does not require all of its compensation programs, including programs under the plans listed above, +to be fully deductible under Section 162(m) because Wolverine Worldwide believes it is important to preserve flexibility in administering compensation programs in a manner designed to promote +varying corporate goals. Wolverine Worldwide has and in the future may continue to pay compensation that does not qualify as performance-based compensation. +Page 58 | +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +Table of Contents +2017 PROXY STATEMENT +Compensation Committee Report +The +Committee has reviewed and discussed with management the information provided under the heading "Compensation Discussion and Analysis." Based on this review and discussion, the +Committee recommended to the Board of Directors that the Company include the Compensation Discussion and Analysis section in this proxy statement and incorporate it by reference into the Company's +Annual Report on Form 10-K. +Respectfully +submitted, +Joseph +R. Gromek (Chairperson), +Jeffrey M. Boromisa, +William K. Gerber, +Nicholas T. Long +Compensation Committee Interlocks and Insider Participation. During fiscal year 2016, none of the members of the Compensation Committee was an officer or employee +of the Company, was a former officer of the Company, nor had a relationship with the Company requiring disclosure as a related party transaction under Item 404 of Regulation S-K of the +Securities Act of 1933. None of the Company's executive officers served on the compensation committee or board of directors of another entity whose executive officer(s) served as a director on the +Company's Board or on the Compensation Committee. +See +the "Compensation Discussion and Analysis" section for more information regarding the Compensation Committee's processes and procedures. +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +| Page 59 +Table of Contents +2017 PROXY STATEMENT +Summary Compensation Table +Name and Principal Position +Year +Salary 1 +Bonus +Stock Awards 2 +Option Awards 3 +Non-Equity Incentive Plan +Compensation 4 +Change in Pension Value and +Nonqualified Deferred +Compensation Earnings 5 +All Other Compensation 6 +Total +Total (excluding pension) +Blake W. Krueger +Chairman, CEO +2016 +$1,150,000 +- +$4,385,006 +$1,389,999 +$831,376 +$2,391,996 +$34,958 +$10,183,335 +$7,791,339 +and President +2015 +$1,150,000 +- +$6,992,678 +$1,392,843 +$525,254 +$24,899 +$32,928 +$10,118,602 +$10,093,703 +2014 +$1,183,654 +$440,249 +$4,383,045 +$1,394,846 +$1,631,132 +$5,499,286 +$18,847 +$14,551,059 +$9,051,773 +Michael Jeppesen +President, Heritage +2016 +$559,135 +- +$1,150,937 +$170,001 +$276,017 +$364,635 +$27,636 +$2,548,361 +$2,183,726 +Group and Global +2015 +$526,539 +- +$576,588 +$170,352 +$430,029 +$114,395 +$22,057 +$1,839,960 +$1,725,565 +Operations Group +Michael D. Stornant +Senior Vice President, +2016 +$544,808 +- +$1,011,716 +$232,000 +$202,514 +$553,651 +$29,248 +$2,573,937 +$2,020,286 +CFO, Treasurer and +2015 +$403,538 +$266,649 +$630,606 +$159,033 +$93,533 +$412,331 +$26,710 +$1,992,400 +$1,580,069 +Chief Accounting Officer +Richard J. Woodworth +President, Wolverine +2016 +$548,820 +- +$732,269 +$210,801 +$164,816 +$13,889 +$39,952 +$1,710,547 +$1,696,658 +Boston Group +James D. Zwiers +Executive Vice +2016 +$642,058 +- +$1,037,522 +$210,801 +$206,959 +$734,223 +$37,331 +$2,868,894 +$2,134,671 +President (President, +2015 +$624,539 +- +$697,004 +$211,232 +$390,773 +$17,604 +$33,897 +$1,975,049 +$1,957,445 +Wolverine Outdoor & +2014 +$627,577 +- +$803,213 +$210,567 +$478,608 +$795,787 +$17,856 +$2,933,608 +$2,137,821 +Lifestyle Group for 2016) +1 Includes any amounts deferred under the Company's qualified 401(k) plan and, for Mr. Stornant, Executive Deferred Compensation Plan. 2014 included an extra pay +period compared to 2015 and 2016 because the Company's fiscal year differs slightly from the calendar year. 2 Includes the value of restricted stock awards and performance +share awards, as follows for 2016: +Name +Service-based Restricted Stock Value +Performance Share Value +Total +Krueger +$2,084,998 +$2,300,008 +$4,385,006 +Jeppesen +$814,397 +$336,540 +$1,150,937 +Stornant +$678,198 +$333,519 +$1,011,716 +Woodworth +$398,750 +$333,519 +$732,269 +Zwiers +$646,400 +$391,122 +$1,037,522 +Page 60 | +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +Table of Contents +2017 PROXY STATEMENT +Restricted stock was valued using the closing market price of Wolverine Worldwide common stock on the date of the grant of the respective award. +Performance shares were valued using the closing market price of Wolverine Worldwide common stock on the date of grant of the respective award and assuming target performance for all performance +periods, consistent with ASC Topic 718. Assuming payout at stretch performance (the highest level of performance under the award), the aggregate grant date fair value of performance shares +awarded in 2016, for each NEO (and, in parenthesis, the grant date fair value of the sum of performance share awards assuming stretch performance was achieved and grant date fair value of restricted +stock awards for 2016) would have been: $5,294,774 ($7,379,772) for Mr. Krueger; $702,715 ($1,517,112) for Mr. Jeppesen; $696,375 ($1,374,573) for Mr. Stornant; $696,375 +($1,095,125) for Mr. Woodworth and $816,667 ($1,463,067) for Mr. Zwiers. Restrictions on performance share awards will lapse in the February following the last year of the applicable +performance period, if at all, based on the Company's performance for the period. For additional valuation assumptions, see the Stock-Based Compensation footnote to Wolverine Worldwide's Consolidated +Financial Statements for the fiscal year ended December 31, 2016 included in its Form 10-K for this year. 3 Represents the aggregate grant date fair value of stock +options granted in the years shown, calculated in accordance with ASC Topic 718. Stock options were +valued using the Black-Scholes-Merton model. For additional valuation assumptions, see the Stock-Based Compensation Footnote to Wolverine Worldwide's Consolidated Financial Statements for the fiscal +year ended December 31, 2016 included in its Form 10-K for this year. 4 Reflects the sum of performance bonus and individual bonus amounts earned in 2016, 2015 and +2014, respectively, and paid in 2017, 2016 and 2015 respectively. For +Mr. Stornant, includes amounts deferred under the Deferred Compensation Plan. 5 All amounts in this column reflect, where applicable, the aggregate change in the actuarial +present value of the accumulated benefits under the Wolverine Worldwide +Employees' Pension Plan ("Pension Plan") and Wolverine World Wide, Inc. 409A Supplemental Executive Retirement Plan ("SERP") for Messrs. Krueger, Jeppesen, Stornant and Zwiers, and +benefits under the Stride Rite Retirement Income Plan for Mr. Woodworth. The amounts in the table were determined using assumptions consistent with those used in Wolverine Worldwide's +Consolidated Financial Statements for each respective year. See the "Pension Plans and 2016 Pension Benefits" section starting on page 69. +6 The amounts listed in this column for 2016 include Wolverine Worldwide's matching contributions to the accounts of the NEOs under Wolverine Worldwide's 401(k) plans, +payments made by Wolverine Worldwide for the premiums on certain life insurance policies, tax and estate planning services, health care reimbursements and, in one instance, a car allowance, in the +amounts listed in the table below. +Name +401(k) Match +Tax and Estate Planning +Health +Life Insurance Premiums +Car Allowance +Krueger +$7,950 +$7,560 +$15,533 +$3,915 +- +Jeppesen +$7,950 +- +$18,898 +$788 +- +Stornant +$7,950 +- +$18,268 +$3,030 +- +Woodworth +$11,925 +$6,201 +$14,051 +$775 +$7,000 +Zwiers +$7,950 +$7,560 +$18,898 +$2,924 +- +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +| Page 61 +Table of Contents +2017 PROXY STATEMENT +Grants of Plan-Based Awards in Fiscal Year 2016 +The +following table provides information concerning each grant of an award made to the NEOs in fiscal year 2016: +Estimated Future Payouts Under +Non-Equity Incentive Plan Awards 1 +Estimated Future Payouts Under +Equity Incentive Plan Awards 2 +Name +Award Type +Grant Date +Threshold +($) +Target +($) +Maximum +($) +Threshold +(#) +Target +(#) +Maximum +(#) +All Other Stock Awards: Number of Shares of Stock or +Units 3 +(#) +All Other Option Awards: Number of Securities +Underlying Options 4 +(#) +Exercise or Base Price of Option Awards 5 +($/Share) +Grant Date Fair Value of Stock and Option Awards 6 +($) +Krueger +Annual Bonus +$718,750 +$1,437,500 +$2,875,000 +FY16-FY18 Performance Shares +02/10/16 +69,655 +139,310 +320,701 +$2,300,008 +Stock Options +02/10/16 +425,076 +$16.51 +$1,389,999 +Restricted Stock +02/10/16 +126,287 +$2,084,998 +Jeppesen +Annual Bonus +$153,762 +$307,524 +$615,048 +FY16-FY18 Performance Shares +02/10/16 +10,192 +20,384 +42,563 +$336,540 +Stock Options +02/10/16 +51,988 +$16.51 +$170,001 +Restricted Stock +02/10/16 +35,445 +$585,197 +Restricted Stock +07/13/16 +10,000 +$229,200 +Stornant +Annual Bonus +$149,822 +$299,644 +$599,289 +FY16-FY18 Performance Shares +02/10/16 +10,101 +20,201 +42,179 +$333,519 +Stock Options +02/10/16 +70,948 +$16.51 +$232,000 +Restricted Stock +02/10/16 +41,078 +$678,198 +Woodworth +Annual Bonus +$137,205 +$274,410 +$548,820 +FY16-FY18 Performance Shares +02/10/16 +10,101 +20,201 +42,179 +$333,519 +Stock Options +02/10/16 +64,465 +$16.51 +$210,801 +Restricted Stock +02/10/16 +24,152 +$398,750 +Zwiers +Annual Bonus +$176,566 +$353,132 +$706,263 +FY16-FY18 Performance Shares +02/10/16 +11,845 +23,690 +49,465 +$391,122 +Stock Options +02/10/16 +64,465 +$16.51 +$210,801 +Restricted Stock +02/10/16 +39,152 +$646,400 +Page 62 | +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +Table of Contents +2017 PROXY STATEMENT +1 Estimated payout levels relating to the performance bonus and individual bonus. For a description of these bonuses and the payouts under them, see pages 48-51. +2 Estimated payout levels of performance shares granted under the Amended and Restated Stock Incentive Plan of 2013 (the "Stock Incentive Plan of 2013") for the +2016-2018 performance period. Following the end of the applicable performance period, restrictions may lapse on some, all or none of the performance shares depending upon the Company's achievement of +the relevant performance criteria. The Company accrues, but does not pay, dividends on the performance shares during the performance period. At the end of the applicable performance period, the +Company will pay to the NEO the accrued dividends (if any) on the performance shares for which the restrictions lapse. For a description of the performance shares granted in 2016 under the Stock +Incentive Plan of 2013, see pages 52-54. +3 The Company awarded service-based restricted stock awards under the Stock Incentive Plan of 2013 for all NEOs, and under the Stock Incentive Plan of 2016 for the +July 13, 2016 grant to Mr. Jeppesen. The restrictions on 25% of the shares received under the awards reflected in this column lapse 25% on each of the third and fourth anniversary and +50% on the fifth anniversary of the award. All restrictions on shares of restricted stock lapse upon an NEO's death, disability or voluntary termination after attaining age 59 with ten years of +service with the Company, subject to certain conditions. In the event of a change in control, as described under the "Benefits Upon a Change in Control Only" sub-heading on page 73, +restrictions lapse on all shares. Holders of restricted stock are entitled to receive dividends and to vote the restricted shares. +4 The Company granted stock options under the Stock Incentive Plan of 2013 to Mr. Krueger and under the Stock Incentive Plan of 2016 to all other NEOs. Stock +options granted to NEOs vest ratably over three years beginning on the first anniversary of the grant date and have a term of 10 years. All stock options vest upon an NEO's death, disability or +voluntary termination after attaining age 59 with ten years of service with the Company, subject to certain conditions. In the event of a change in control, as described under the "Benefits Upon a +Change in Control Only" sub-heading on page 73, all stock options vest. +5 The exercise price is equal to the closing market price of shares of Wolverine Worldwide common stock on the date of the grant. +6 Represents the grant date fair value for stock options and award date fair value for performance share and service-based restricted stock awards made in fiscal year +2016, determined as described in footnotes 2 and 3 to the "Summary Compensation Table." +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +| Page 63 +Table of Contents +2017 PROXY STATEMENT +Outstanding Equity Awards at 2016 Fiscal Year-End +The +following table provides information concerning options and stock awards that have not vested for each NEO outstanding as of December 31, 2016: +Option Awards +Stock Awards +Name +Grant Date +Number of Securities Underlying +Unexercised Options Exercisable +(#) +Number of Securities Underlying +Unexercised Options +Unexercisable 1 +(#) +Option Exercise Price +($) +Option Expiration Date +Number of Shares or Units of +Stock That Have Not Vested 2 +(#) +Market Value of Shares or Units +of Stock That Have Not Vested 3 +($) +Equity Incentive Plan Awards: +Number of Unearned Shares, +Units or Other Rights That Have +Not Vested 4 +(#) +Equity Incentive Plan Awards: +Market or Payout Value of +Unearned Shares, Units or Other +Rights That Have Not Vested 3 +($) +Krueger +Various +355,923 +$7,812,510 +Various +195,505 +$4,291,335 +2/10/10 +44,266 +- +$12.50 +2/10/20 +2/9/11 +98,000 +- +$18.25 +2/8/21 +2/8/12 +114,000 +- +$19.92 +2/7/22 +2/6/13 +200,778 +- +$21.48 +2/5/23 +2/11/14 +150,189 +75,095 +$27.13 +2/10/24 +2/11/15 +73,663 +147,325 +$28.00 +2/10/25 +2/10/16 +- +425,076 +$16.51 +2/9/26 +Jeppesen +Various +93,592 +$2,054,344 +Various +28,147 +$617,827 +2/8/12 +22,400 +- +$19.92 +2/7/22 +2/6/13 +25,240 +- +$21.48 +2/5/23 +2/11/14 +14,749 +7,374 +$27.13 +2/10/24 +2/11/15 +9,010 +18,018 +$28.00 +2/10/25 +2/10/16 +- +51,988 +$16.51 +2/9/26 +Page 64 | +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +Table of Contents +2017 PROXY STATEMENT +Option Awards +Stock Awards +Name +Grant Date +Number of Securities Underlying +Unexercised Options Exercisable +(#) +Number of Securities Underlying +Unexercised Options +Unexercisable 1 +(#) +Option Exercise Price +($) +Option Expiration Date +Number of Shares or Units of +Stock That Have Not Vested 2 +(#) +Market Value of Shares or Units +of Stock That Have Not Vested 3 +($) +Equity Incentive Plan Awards: +Number of Unearned Shares, +Units or Other Rights That Have +Not Vested 4 +(#) +Equity Incentive Plan Awards: +Market or Payout Value of +Unearned Shares, Units or Other +rights That Have Not Vested 3 +($) +Stornant +Various +59,764 +$1,311,820 +Various +21,099 +$463,123 +2/6/08 +7,800 +- +$12.53 +2/5/18 +4/16/08 +2,600 +- +$13.85 +4/15/18 +2/10/09 +27,000 +- +$8.56 +2/9/19 +2/10/10 +16,800 +- +$12.50 +2/10/20 +2/9/11 +12,300 +- +$18.25 +2/8/21 +2/8/12 +12,640 +- +$19.92 +2/7/22 +2/6/13 +13,590 +- +$21.48 +2/5/23 +2/11/14 +7,941 +3,971 +$27.13 +2/10/24 +2/11/15 +3,922 +7,843 +$28.00 +2/10/25 +6/12/15 +4,229 +8,458 +$29.31 +6/11/25 +2/10/16 +- +70,948 +$16.51 +2/9/26 +Woodworth +Various +50,143 +$1,100,639 +Various +26,924 +$590,982 +2/6/13 +17,030 +- +$21.48 +2/5/23 +2/11/14 +7,945 +3,972 +$27.13 +2/10/24 +2/11/15 +3,922 +7,843 +$28.00 +2/10/25 +2/10/16 +- +64,465 +$16.51 +2/9/26 +Zwiers +Various +89,188 +$1,957,677 +Various +31,573 +$693,027 +2/10/09 +38,000 +- +$8.56 +2/9/19 +4/22/09 +4,000 +- +$10.90 +4/21/19 +2/10/10 +40,600 +- +$12.50 +2/10/20 +2/9/11 +28,200 +- +$18.25 +2/8/21 +2/8/12 +31,600 +- +$19.92 +2/7/22 +2/6/13 +38,800 +- +$21.48 +2/5/23 +2/11/14 +22,673 +11,336 +$27.13 +2/10/24 +2/11/15 +11,172 +22,342 +$28.00 +2/10/25 +2/10/16 +- +64,465 +$16.51 +2/9/26 +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +| Page 65 +Table of Contents +2017 PROXY STATEMENT +1 All stock options become exercisable as to one-third of the shares subject to the stock option on each of the first three anniversaries of the date of the grant. Stock +option vesting may accelerate upon certain events, including death, disability or voluntary termination after attaining age 62 or age 50 with seven years of service (age 59, with ten years of service +for 2016 grants) with the Company, subject to certain conditions, as further described in the "Grants of Plan Based Awards" section. +2 The following table sets forth the vesting dates for the un-vested service-based restricted stock awards of each NEO as of December 31, 2016: +Named +Executive +Officer +Vesting +Date +Number of Shares to Vest +Krueger +2/6/17 +18,373 +2/8/17 +23,200 +2/11/17 +19,213 +2/6/18 +36,745 +2/11/18 +37,829 +2/10/19 +31,571 +2/11/19 +57,043 +2/10/20 +31,572 +2/11/20 +37,233 +2/11/21 +63,144 +Jeppesen +2/6/17 +2,310 +2/8/17 +4,500 +2/11/17 +1,902 +10/8/17 +5,000 +2/6/18 +4,620 +2/11/18 +4,179 +10/8/18 +5,000 +2/10/19 +8,861 +2/11/19 +6,082 +7/13/19 +2,500 +10/8/19 +10,000 +2/10/20 +8,861 +2/11/20 +4,554 +7/13/20 +2,500 +2/10/21 +17,723 +7/13/21 +5,000 +Page 66 | +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +Table of Contents +2017 PROXY STATEMENT +Named +Executive +Officer +Vesting +Date +Number of Shares to Vest +Stornant +2/6/17 +1,245 +2/8/17 +2,610 +2/11/17 +1,025 +2/6/18 +2,490 +2/11/18 +2,016 +6/12/18 +1,068 +2/10/19 +10,269 +2/11/19 +3,042 +6/12/19 +1,069 +2/10/20 +10,270 +2/11/20 +1,983 +6/12/20 +2,138 +2/10/21 +20,539 +Woodworth +2/6/17 +1,558 +2/11/17 +1,437 +12/12/17 +10,000 +2/6/18 +3,115 +2/11/18 +2,829 +2/10/19 +6,038 +2/11/19 +4,267 +2/10/20 +6,038 +2/11/20 +2,785 +2/10/21 +12,076 +Zwiers +2/6/17 +3,550 +2/8/17 +16,400 +2/11/17 +2,923 +2/6/18 +7,100 +2/11/18 +5,746 +2/10/19 +9,788 +2/11/19 +8,670 +2/10/20 +9,788 +2/11/20 +5,647 +2/10/21 +19,576 +3 The dollar values are calculated using a per share stock price of $21.95, the closing price of Wolverine Worldwide common stock on December 30, 2016, the last +business day of fiscal year 2016. +4 Following the end of the applicable three-year performance period, restrictions may lapse on some, all or none of the performance shares depending upon the Company's +achievement of the relevant EPS and BVA performance criteria. The number of shares listed assumes target performance for the 2014-2016 cycle and threshold performance for the 2015-2017 and 2016-2018 +cycles. +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +| Page 67 +Table of Contents +2017 PROXY STATEMENT +Option Exercises and Stock Vested in Fiscal Year 2016 +Option Awards +Stock Awards +Number of Shares +Acquired on Exercise +(#) +Value Realized +On Exercise 1 +($) +Number of Shares +Acquired on Vesting +(#) +Value Realized +On Vesting 2 +($) +Krueger +7,984 +$93,173 +178,310 +$2,949,463 +Jeppesen +- +- +20,725 +$342,951 +Stornant +6,000 +$57,660 +13,238 +$219,502 +Woodworth +- +- +21,143 +$389,541 +Zwiers +24,584 +$289,373 +36,803 +$609,091 +1 The Company calculates the dollar values by multiplying the number of shares of common stock acquired upon exercise by the difference between the exercise price and +the closing price of the Company common stock on the exercise date. 2 The Company calculates the dollar values using the closing price of Wolverine Worldwide common stock on +the date of vesting. +Page 68 | +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +Table of Contents +2017 PROXY STATEMENT +Pension Plans and 2016 Pension Benefits +Wolverine Worldwide maintains the following defined benefit retirement plans covering Messrs. Krueger, Jeppesen, Stornant, and Zwiers: (1) the Wolverine Worldwide Employees' Pension Plan +("Pension Plan"), which is a funded and tax-qualified defined benefit plan under the Internal Revenue Code that covers eligible employees, and (2) the Wolverine World Wide, Inc. 409A +Supplemental Executive Retirement Plan ("SERP"), which is an unfunded, non-qualified plan that covers individuals recommended by the CEO and approved by the Compensation Committee. +Mr. Woodworth does not participate in these plans, but has "frozen" benefits under the Stride Rite Corporation Retirement Income Plan ("SR Plan"). +QUALIFIED PENSION PLANS +Participants vest in the Pension Plan after five years of qualifying service. Subject to the limitations imposed by the Internal Revenue Code, +the Pension Plan generally pays a monthly benefit in an amount equal to a percentage of the participant's final average monthly earnings multiplied by his or her number of years of service. For +purposes of this benefits formula, the Pension Plan caps years of service at 25 (30 for non-SERP participants), and the percentages of final average monthly earnings are 2.4% for Mr. Krueger +and 2.0% for Messrs. Jeppesen, Stornant, and Zwiers. "Earnings" as used in this formula generally includes base salary and annual bonus, less Social Security allowance, and for 2016 was capped +at $265,000, the IRS limit applicable to tax-qualified plans. +Upon +retirement, a participant may elect to receive the benefit in the form of a life annuity, 5- or 10-year certain annuities, or joint and 50%, joint and 75%, or joint and 100% survivor annuities. +The payments are actuarially adjusted based on the participant's election. Any election, other than an election to receive life annuity benefits, reduces the monthly benefit payable. The "normal" age +at which benefits may be drawn under the plan is 65. Mr. Krueger is currently the only NEO eligible to begin drawing early retirement benefits under the Pension Plan. +SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN +Messrs. Krueger, Jeppesen, Stornant and Zwiers participate in the SERP, which provides retirement benefits above amounts available +under the Company's tax-qualified Pension Plan. The SERP benefit generally equals the difference between the participant's retirement benefit under the Pension Plan and the benefits the participant +would have received if there were no IRS-imposed cap on earnings when calculating the Pension Plan benefit. The SERP caps years of service at 25 in calculating a participant's benefit. The SERP also +allows a retired participant who has five years of service to draw earlier (beginning at age 55) and on different terms than under the Pension Plan. A participant's earnings percentage +multiplier is the same under the SERP as it is under the Pension Plan (2.4% for Mr. Krueger and 2.0% for Messrs. Jeppesen, Stornant and Zwiers). The Compensation Committee may grant +additional deemed years of service to a participant, subject to the cap of 25 years. The full benefit of any additional years of deemed service is paid under the SERP. Mr. Krueger +reached the 25-year cap in 2012. +If +a retired participant draws the SERP benefit prior to age 65, the reduction factor is 0.333% for each month prior to age 60, and 0.1666% for each month between age 60 and age 65. As of the end of +fiscal year 2016, Mr. Krueger was the only NEO eligible to retire and begin drawing early benefits under the SERP. +SERP +benefits are paid monthly, and the SERP has a lump sum payment option in the event of death or termination of employment after a change in control. The SERP also includes a disability benefit and +a death benefit payable to the participant's designated beneficiary if the participant dies before retiring. The SERP provides for lump sum payments equal to 125% of the net present value of accrued +benefits without regard to any reduction for early payment to participants who resign for good reason or are terminated by Wolverine other than for +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +| Page 69 +Table of Contents +2017 PROXY STATEMENT +cause +or due to death or disability within two years (Messrs. Jeppesen, Stornant and Zwiers) or three years (Mr. Krueger) after a change in control. +The +SERP also contains non-competition, confidentiality and employee non-solicitation provisions in favor of Wolverine Worldwide. Under the SERP non-competition provisions, a participant is not +entitled to any benefit payment if the participant enters into certain relationships with a competing business prior to the date on which such benefit payment is due. If the participant's employment +is terminated for serious misconduct or if Wolverine Worldwide cannot collect under an insurance policy purchased to fund SERP benefits for certain reasons, the Company may terminate a participant's +benefits under the SERP. Wolverine Worldwide may terminate the SERP or stop further accrual of SERP benefits for a participating NEO at any time, but termination will not affect previously accrued +benefits. +PENSION BENEFITS IN FISCAL YEAR 2016 +The following table provides for each NEO certain information concerning each plan that provides for payments or other benefits at, following, +or in connection with retirement: +Name +Plan Name +Number of Years +Credited Service +(#) +Present Value of +Accumulated Benefit 1 +($) +Payments During +Last Fiscal Year +($) +Krueger +SERP +25 +$16,623,170 +2 +- +Pension +21 +$1,641,573 +- +Jeppesen +SERP +5 +$531,397 +- +Pension +5 +$257,172 +- +Stornant +SERP +20 +$575,663 +- +Pension +20 +$762,681 +- +Woodworth 3 +SERP +- +- +- +Pension +- +- +- +SR Plan +3 +$111,435 +- +Zwiers +SERP +19 +$1,887,768 +- +Pension +19 +$671,085 +- +1 These values are as of December 31, 2016, and are calculated assuming the participants will commence their benefits at age 65 (in the form of +the annuity elected by the NEO) and use the modified RP2014 mortality tables for males and females (post-retirement) projected generationally with modified MP2016 projection scale and +the following discount rates (compared to 5.00% in 2016): 4.36% WEPP; 4.33% SERP; 4.34% SR Plan. 2 The present value of Mr. Krueger's accumulated benefit under the SERP is +$2,929,695 greater taking into account his deemed years of service. +Mr. Krueger was previously granted three additional service years in 1996 in recognition of his service as a member of Wolverine Worldwide's executive team for three years +before becoming a participant in the SERP, and additional deemed years of service were previously granted as part of Mr. Krueger's CEO compensation. The present value of +Mr. Krueger's SERP benefit would be $13,693,475 if 21 service years were used to calculate his benefit. Mr. Krueger reached 25 years of service in 2012, the +maximum years of service permitted under the SERP, and will not accrue any further years of service under the SERP. 3 Mr. Woodworth does not participate in the Pension +Plan or SERP, but has "frozen" benefits under the SR Plan. +Page 70 | +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +Table of Contents +2017 PROXY STATEMENT +Nonqualified Deferred Compensation +Wolverine +Worldwide maintains a Deferred Compensation Plan. This unfunded and non-qualified plan allows executives and other eligible senior employees of the Company to elect to defer all or a portion +of their base salary, cash bonus, or other performance-based cash compensation. Wolverine Worldwide may, but need not, credit a participant's account under the plan with an additional discretionary +Company contributions, which may be subject to a vesting schedule and which would vest in full on a change in control. Amounts deferred pursuant to the Deferred Compensation Plan may be invested, at +the direction of the participant, in an investment fund, index, or other investment vehicle, as designated by the Compensation Committee to be available under the plan, and earnings, if any, are +credited to the participant's account. +Accounts +are paid out upon the earliest to occur of (i) a qualifying separation from service, (ii) a change in control (as such term is defined in the plan), and (iii) a +termination of the Deferred Compensation Plan. Payment must generally be made, or installment payments must begin, (as elected by the participant at the time of deferral) within 60 days of the +event triggering payment. +Mr. Stornant +is the only NEO who has elected to defer amounts under the Deferred Compensation Plan. Wolverine Worldwide did not make any discretionary Company contributions on behalf of +Mr. Stornant or any other NEO during 2016. +NONQUALIFIED DEFERRED COMPENSATION +Name +Executive +Contributions +in 2016 +($) +Registrant +Contributions +in 2016 +($) +Aggregate Earnings +in 2016 +($) +Aggregate +Withdrawals / +Distributions +($) +Aggregate Balance +at Last FYE +($) +Stornant +$13,462 1 +- +$0 2 +- +$13,462 1 +1 Reflects the amount deferred by Mr. Stornant with respect to 2016 compensation. These amounts are also reported for Mr. Stornant in the +Summary Compensation Table under "Salary" and "Non-Equity Incentive Plan Compensation." 2 Reflects market-based earnings (losses) on amounts credited to Mr. Stornant under +the Deferred Compensation Plan. +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +| Page 71 +Table of Contents +2017 PROXY STATEMENT +Potential Payments Upon Termination or Change in Control +Wolverine Worldwide has entered into an Executive Severance Agreement with each NEO that provides certain rights, including the right to receive payments in the event of a termination of employment +following a change in control. The Company also has entered into an agreement with Mr. Krueger regarding certain termination benefits in the event of termination of his employment under certain +other circumstances described below. +BENEFITS TRIGGERED BY TERMINATION FOR CAUSE OR VOLUNTARY TERMINATION +An NEO is not entitled to receive any additional forms of severance payments or benefits upon termination of employment for Cause or upon the +NEO's voluntary decision, other than for Good Reason, to terminate his employment. +BENEFITS TRIGGERED BY TERMINATION OTHER THAN FOR CAUSE OR FOR GOOD REASON +Mr. Krueger entered into a Separation Agreement on March 13, 2008, which states that upon termination of his employment by +Wolverine Worldwide without Cause or termination by Mr. Krueger with Good Reason, as such terms are defined in Mr. Krueger's Separation Agreement, Wolverine Worldwide will pay +Mr. Krueger the following payments in exchange for a general release of claims in favor of Wolverine Worldwide: (1) continued base salary for 18 months (reduced by payments he +receives if he is employed by a Competing Business, as defined in Mr. Krueger's Separation Agreement); (2) the pro-rata portion of the annual incentive bonus and the 3-year bonus for all +uncompleted performance periods based on actual corporate performance for the applicable performance periods; (3) the pro-rata portion of the annual individual performance bonus relating to +personal performance objectives; and (4) retiree medical benefits for Mr. Krueger, his spouse and dependents for a period starting on the day after the termination date and ending on the +last day of the 18th month following the month in which the termination date falls. +"Cause" +generally is defined in Mr. Krueger's Separation Agreement to mean: (1) any act or omission knowingly undertaken or omitted with the intent of causing material damage to +Wolverine Worldwide; (2) any intentional act involving fraud, misappropriation or embezzlement, that causes material damage to Wolverine Worldwide; (3) repeated willful failure to +substantially perform any of his significant duties as reasonably directed by the Board of Directors of Wolverine Worldwide; (4) a conviction (including any plea of guilty or nolo contendere) +of any criminal act that (a) results in the executive serving prison time and not being able to perform the normal duties of his position for more than thirty (30) days; or +(b) causes material damage to Wolverine Worldwide; or (5) chronic or habitual use or consumption of drugs or alcohol that causes material damage to Wolverine Worldwide. +"Good +Reason" generally is defined in Mr. Krueger's Separation Agreement to mean: (1) a material reduction in base compensation, including a reduction in base salary or opportunities +under Wolverine Worldwide's bonus plans or equity plans (other than those implemented for the executive team as a whole); (2) a material reduction in authority, duties, or responsibilities; +(3) a requirement to report to a Company officer or employee instead of reporting directly to the Board of Directors; or (4) certain relocations, other than those related to a change in +the location of Wolverine Worldwide's headquarters affecting a majority of the executive team. +Page 72 | +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +Table of Contents +2017 PROXY STATEMENT +BENEFITS TRIGGERED UPON A CHANGE IN CONTROL +Benefits Upon Termination Following a Change in Control. Under the Executive Severance Agreements entered into with the NEOs, payments and benefits are triggered +when employment is terminated without "Cause" or when an executive terminates employment for "Good Reason" within two years (Messrs. Jeppesen, Stornant, Woodworth and Zwiers) or three years +(Mr. Krueger) following a change in control of Wolverine Worldwide. +Upon +such a qualifying termination, Wolverine Worldwide will pay the lump sum severance payment under the Executive Severance Agreement composed of the following: (1) unpaid base salary and +bonus payments that had been earned; (2) in lieu of a bonus payment under the Annual Bonus Plan, an amount equal to the quotient of the number of days the NEO was employed by Wolverine +Worldwide, or any successor company in the year of termination, divided by the number of days in the year, multiplied by 100% of the greater of either (a) the bonus awarded to the NEO under the +annual bonus plan for the preceding year and (b) the average paid to the NEO over the preceding two-year period under the annual bonus plan; (3) in lieu of payments under the various +three-year performance periods that remain open on the date of termination, an amount equal to the bonus the NEO would have received based on actual and assumed performance measures, multiplied by the +quotient of the number of days the NEO participated in the performance period prior to the termination, divided by the total number of days in the performance period (in determining the earnings per +share or other performance measures that can be determined annually for any year subsequent to the year of termination, performance will equal the level required to attain the maximum goal under the +three-year plan for that year); (4) either two (Messrs. Jeppesen, Stornant, Woodworth and Zwiers) or three (Mr. Krueger) times the sum of (a) the NEO's highest annual base +salary during the 12-month period prior to termination and (b) the greater of (i) the average amount earned by the NEO during the previous two years under the annual bonus plan and +(ii) the amount earned during the previous year under the Annual Bonus Plan; (5) 100% of the positive spread for any stock options held by the NEO on the date of termination, whether or +not vested; (6) in the case of Messrs. Krueger and Zwiers, an excise tax gross-up adjustment (note: the agreements with Messrs. Jeppesen, Stornant and Woodworth were entered into +after 2008 and that the Committee determined to not provide such gross-ups after that date); and (7) in the case of Messrs. Jeppesen, Stornant and Zwiers, the present value of an +additional three years of deemed service under the Pension Plan and SERP. Upon a termination of employment following a change of control, Wolverine Worldwide or any successor company will maintain for +a period of six months to one year the NEO's benefits under the then-current benefit plans, programs or arrangements that the NEO was entitled to participate in immediately prior to the termination +date. In addition, Wolverine Worldwide or any successor company will provide outplacement services through the last day of the second calendar year following the calendar year of termination. +"Change +in Control" under the Executive Severance Agreements generally means certain changes in composition of the Board of Directors, certain acquisitions of 20% or more of Wolverine Worldwide's +common stock or combined outstanding voting power of +Wolverine World Wide, Inc., and other specified reorganizations, mergers, consolidations, liquidations, dissolutions or distributions of substantial assets (unless such transactions result in +the creation of an entity in which at least 50% of the common stock and combined voting power is owned by the owners of record prior to the transaction, no single shareholder owns more than 20% of the +combined voting power and a majority of the board remains unchanged). +"Cause" +is defined under the Executive Severance Agreements to generally mean the willful and continued failure to substantially perform duties or willfully engaging in gross misconduct that is +injurious to the Company. +"Good +Reason" is defined under the Executive Severance Agreements to generally mean: (1) any materially adverse change in position, duties, responsibilities or title, or any removal, +involuntary termination or failure to re-elect an officer; (2) a reduction in annual base salary; (3) any relocation or requirement to substantially increase business travel; +(4) the failure to continue providing any executive incentive plans or bonus plans; (5) the failure to continue any employee benefit plan or compensation plan unless a comparable plan is +available; (6) the failure to pay any salary, bonus, deferred compensation or other compensation; (7) the failure to obtain an assumption agreement from any successor; (8) any +purported termination of the employment which is not effected in a manner prescribed by the Executive Severance Agreement; or (9) any other material breach by Wolverine Worldwide or any +successor company of its obligations under the Executive Severance Agreement. +Benefits Upon a Change in Control Only. Upon a change in control of Wolverine Worldwide, absent a determination by the Compensation Committee to the contrary, all +of each NEO's outstanding stock options become immediately exercisable in full and will remain exercisable +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +| Page 73 +Table of Contents +2017 PROXY STATEMENT +during +their remaining term, regardless of whether the NEO remains an employee of Wolverine Worldwide or any successor company. The Committee may determine that one or all of the NEOs shall receive +cash in an amount equal to the positive spread amount. In addition, upon a change in control of Wolverine Worldwide all other outstanding equity incentive awards of the NEOs, including shares of +restricted stock, become immediately and fully vested and non-forfeitable. To the extent that the Company has made discretionary contributions under the Deferred Compensation Plan that are subject to +a vesting schedule, any unvested portion of these contributions will vest on a change in control. Change in control for this purpose generally means certain changes in the composition of the Board of +Directors, certain acquisitions of 20% of Wolverine Worldwide's common stock (50% in the case of the Deferred Compensation Plan) and other specified reorganizations, mergers, consolidations, +liquidations, dissolutions or dispositions of substantial assets. Equity awards granted to the NEOs in 2017 no longer have single trigger acceleration upon a change in control. +Excise Tax Gross-Up. The Compensation Committee previously determined that Wolverine Worldwide would not provide excise tax gross-up payments in employment +agreements entered into after 2008. Messrs. Krueger and Zwiers are the only NEOs who have excise tax gross-up protection in their agreements. +BENEFITS TRIGGERED BY RETIREMENT, DEATH OR PERMANENT DISABILITY +Pension Plan. In the event of death before retirement, the Pension Plan provides the surviving spouse of a vested participant a death benefit equal to the +qualified pre-retirement survivor annuity as defined in the Internal Revenue Code (generally 50% of the participant's accrued normal retirement benefit). This benefit is paid annually to the surviving +spouse beginning when the participant would have turned 60 and continues for the life of the surviving spouse. For participants with at least three years of service as of December 31, 2003, and +who have at least 10 years of service and are employed by the Company at the time of death, the amount of the survivor benefit under the Pension Plan is calculated as though the participant had +continued as an employee of the Company until age 65 at the compensation level as of the date of death and the benefit begins upon the date of death, unreduced for early commencement. The survivor +benefit for participants who meet all the criteria set forth in the preceding sentence, but who die when they are not employed by the Company, are entitled to a joint and survivor benefit commencing +upon the date of death, unreduced for early commencement. +SERP. If a SERP participant dies before beginning to receive benefits under the SERP, the Company must, based on the participant's election, pay the beneficiary +either a monthly annuity or a lump sum death benefit equal to the present value of the benefit computed as if the participant had retired on the date of death, had begun receiving benefits at age 55 +and had continued to receive benefits for the remainder of the participant's life expectancy. If the participant dies after beginning to receive benefit payments, benefits cease unless the participant +was receiving benefits in the form of one of the joint and survivor annuity optional elections under the plan or had elected benefits in a form that provides for a continuation of benefits. +If +a participant becomes disabled (as defined), the SERP provides a disability benefit equal to 60% of the normal retirement accrued benefit based upon years of service up to the date that the +participant became disabled through the date the participant reaches age 65 (at which point, the participant would begin drawing full SERP benefits) or is no longer disabled. +Annual Bonus Plan. Upon termination of employment at least six months after the beginning of a fiscal year due to death, disability or +early or normal retirement, an NEO is entitled to receive a pro rata portion of any annual bonus award earned under the Annual Bonus Plan based on the NEO's service during such fiscal year and actual +performance under the Annual Bonus Plan. The annual bonus is payable at the same time and in the same manner as awards are paid to other NEOs for the fiscal year. +Stock Incentive Plans. Upon death, disability or voluntary termination of employment after attaining age 62 or age 50 with seven years of service with the Company, +subject to certain conditions, the restrictions applicable to each NEO's shares of restricted stock terminate automatically and stock options vest in full if held for more than one year or, if +employed for less than one year after the grant, on a percentage basis based on months employed after the grant divided by 12. Upon death, disability or voluntary termination of employment after +attaining age 62 or age 50 with seven years of service with the Company, subject to certain conditions, the restrictions on performance shares lapse on a prorated basis, based on months employed in +the performance period and actual Company performance during the performance period. Any prorated award is payable at the time awards are paid to other NEOs. At fiscal year-end, Mr. Krueger was +the only NEO eligible for early +Page 74 | +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +Table of Contents +2017 PROXY STATEMENT +vesting +as a result of age or service with the Company. On February 10, 2016, for equity grants occurring on or after that date, the Compensation Committee determined to change the age and +years of service requirements for retirement vesting eligibility from the attainment age of 62 or age 50 with seven years of service to the attainment of age 59 with ten years of service and +determined to fully accelerate all stock options and service-based restricted shares rather than providing prorated acceleration for such awards held for less than one year. +Deferred Compensation Plan. Upon death, disability, or other qualifying separation from service, including retirement, all in accordance with Section 409A +of the Internal Revenue Code, all amounts deferred by the NEOs under the Deferred Compensation Plan, including any vested amounts credited to the NEOs pursuant to a discretionary Company contribution, +shall generally be paid, or commence payment, within 60 days of the termination in accordance with the schedule elected by the NEO at the time of deferral. +DESCRIPTION OF RESTRICTIVE COVENANTS THAT APPLY DURING AND AFTER TERMINATION OF EMPLOYMENT +The SERP contains non-competition, confidentiality and employee non-solicitation provisions in favor of Wolverine Worldwide. Under the +non-competition provisions of the SERP, the participant will not be entitled to any benefit payment if, prior to the date on which such benefit payment is due, the participant enters into certain +relationships with a competing business. +ESTIMATED PAYMENTS ON TERMINATION OR CHANGE IN CONTROL +The following table summarizes the potential payments and benefits payable to each NEO upon a change in control or termination of employment +following each of the triggering events set forth in the table. As required, the amounts in the table assume that the termination of employment or change in control of Wolverine Worldwide took place +on the Company's last day of fiscal 2016, which was December 31, 2016. The amounts set out below are in addition to benefits that are generally available to the Company's employees such as +distributions under the Company's 401(k) savings plan, disability or life insurance benefits and accrued vacation. Due to the many factors that affect the nature and amount of any benefits provided +upon the termination events discussed below, any actual amounts paid or distributed to NEOs may be different. Factors that may affect these amounts include timing during the year of the occurrence of +the event, Wolverine Worldwide's stock price and the NEO's age and years of service. +The +value of the accelerated vesting of unvested equity-based compensation awards was computed using the closing market price ($21.95) of Wolverine Worldwide's common stock on December 30, +2016, the last business day in fiscal 2016. The value for unvested restricted stock is computed by multiplying $21.95 by the number of shares of the NEO's restricted stock that would vest as a result +of an event. The value of stock options that would vest as a result of an event equals the difference between the exercise price of each option and $21.95. +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +| Page 75 +Table of Contents +2017 PROXY STATEMENT +Each +of the hypothetical events described in the following table (the highlighted blue headings in the left-hand column) is calculated and reported as a discrete event. For example, the amounts +disclosed under the "Change in Control Only" heading are not cumulative with the amounts disclosed under the "Change in Control/Termination" heading. +Termination Event and Payments/Benefits +Krueger +Jeppesen +Stornant +Woodworth +Zwiers +Termination by Company for Cause or Voluntary Termination (other than for Good Reason or due to Retirement) +Termination by Company Other Than for Cause or by Executive for Good Reason +$6,525,616 +1 +Change in Control/Termination +Executive Severance Agreement 2 +$19,303,052 +$3,945,927 +13 +$5,163,360 +13 +$1,659,209 +13 +$8,457,889 +Benefits under Executive Severance Agreement 3 +$60,714 +$56,429 +$56,492 +$59,921 +$58,555 +Stock Incentive Plans 4 +$10,124,923 +$2,337,159 +$1,697,777 +$1,451,328 +$2,308,366 +Lump sum payment under the SERP 5 +$22,759,627 +$1,039,773 +$1,252,332 +- +$4,026,587 +TOTAL +$52,248,316 +$7,379,288 +$8,169,961 +$3,170,458 +$14,851,397 +Death +SERP 6 +$18,368,498 +$931,794 +$968,779 +- +$2,929,220 +Pension Plan 7 +$989,778 +$145,716 +$1,098,705 +$44,996 +$1,103,900 +Stock Incentive Plans 4 +$10,124,923 +$2,337,159 +$1,697,777 +$1,451,328 +$2,308,366 +Earned Incentive Compensation 8 +$4,542,471 +$786,218 +$611,570 +$652,848 +$779,278 +Disability +SERP 9 +$18,452,334 +$711,761 +$1,030,857 +- +$3,658,941 +Stock Incentive Plans 4 +$10,124,923 +$2,337,159 +$1,697,777 +$1,451,328 +$2,308,366 +Earned Incentive Compensation 8 +$4,542,471 +$786,218 +$611,570 +$652,848 +$779,278 +Retirement +SERP 10 +$18,452,334 +$708,950 +$890,446 +- +$2,572,657 +Pension Plan 10 +$1,813,070 +$305,484 +$833,788 +$95,557 +$730,091 +Stock Incentive Plans 4,11 +$10,124,923 +- +$410,158 +- +- +Earned Incentive Compensation 8,11 +$4,542,471 +- +$274,998 +- +- +Change in Control Only +Stock Incentive Plans 12 +$10,124,923 +$2,337,159 +$1,697,777 +$1,451,328 +$2,308,366 +1 The estimate for Mr. Krueger assumes target performance for the 2015-2017 and 2016-2018 performance periods. Actual payout or vesting, if any, +would be determined and made at the end of those periods. The amount reflected in the table also includes an estimated cost of $17,520 for retiree medical benefits for 18 months +and the estimated cost of $25,000 for outplacement services. 2 Payments would be triggered after termination of employment under certain circumstances within two years +(Messrs. Jeppesen, Stornant, Woodworth +and Zwiers) or three years (Mr. Krueger) following a change in control. Includes amounts payable in cash under the terms of the Executive Severance Agreement, excluding the +value of the cash payout to each NEO of the option spread for already vested options. The timing of the payment would be delayed to the extent earlier payment would trigger +Section 409A of the tax code. The value of unvested options and service-based restricted shares that vest upon a change in control under the terms of the Company's stock +incentive plans are included in the Stock Incentive Plans row. 3 These estimates assume that Wolverine Worldwide, or any successor company, maintains the benefit plans for a +period of one year after termination and +the outplacement services for a period beginning with the date of termination and ending on the last day of the second calendar year following the calendar year in which the date of +termination occurred. +Page 76 | +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +Table of Contents +2017 PROXY STATEMENT +4 Reflects the value of unvested stock options and shares of restricted stock that would vest because of the event. 5 +Reflects the entire lump sum benefit payable to applicable NEOs, including any accumulated benefit. The timing of the payment would be delayed to the +extent earlier payment would trigger Section 409A of the Tax Code. 6 Reflects the entire lump sum death benefit payable to a participating NEO's beneficiary, including any +accumulated benefit. 7 Amounts reflect the net present value of the annuity paid to the surviving spouse calculated using the same discount rate and mortality assumptions +used in the Pension Benefits table under the heading "Pension Benefits in Fiscal Year 2016" under the heading "Pension Plans and 2016 Pension Benefits." In accordance with the terms of +the Pension Plan, the death benefit for Messrs. Krueger and Zwiers was calculated as though the NEO had continued as an employee of Wolverine Worldwide until age 65 at the +compensation level as of the date of death. 8 Under the Annual Bonus Plan and the terms of performance share awards, each NEO may be eligible to receive a pro rata portion of +any award if +employment is terminated as a result of any of the specified events in the table. The amount reported represents (a) actual payout under the Annual Bonus Plan for fiscal year +2016, (b) actual payout under the 2014-2016 performance cycle and the 2015-2016 cycle, and (c) estimated target performance for the 2015-2017 and 2016-2018 performance +cycles. Performance shares would vest on a prorated basis based on actual Company performance. 9 Reflects the net present value of the annuity using the same discount rate and +mortality assumptions used in the Pension Benefits table and assuming +the NEO drew the disability benefit until age 65 and then the normal retirement benefit. 10 Reflects the net present value of benefits, as reflected in the Pension Benefits +table under the heading "Pension Benefits in Fiscal Year 2016" under +the heading "Pension Plans and 2016 Pension Benefits." 11 Mr. Krueger is the only NEO eligible for retirement (as defined in the applicable plan) at fiscal 2016 year +end. Mr. Stornant is +eligible for retirement (as defined in the Stock Incentive Plan of 2013) at fiscal 2016 year end for awards granted prior to 2016. As such, Mr. Stornant is eligible for +accelerated vesting of such awards upon retirement. 12 Reflects the value of unvested stock options and shares of restricted stock (including performance share awards) that +would vest because of the event. 13 The Executive Severance Agreements with Messrs. Jeppesen, Stornant and Woodworth do not include excise tax gross-up adjustments. Under +the +provisions of their Agreements, if payments to Messrs. Jeppesen, Stornant or Woodworth under the Agreement would trigger application of an excise tax, the Company would reduce +the payment to an amount that avoids application of the excise tax or pay the full amount, whichever results in the greater after-tax amount to the executive. +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +| Page 77 +Table of Contents +2017 PROXY STATEMENT +Proposal 2 – Advisory Resolution To Approve Executive Compensation +The +Company is asking its shareholders to indicate their support for Wolverine Worldwide's NEO compensation, as described in this Proxy Statement. This proposal, commonly known as a +"say-on-pay" proposal, gives the Company's shareholders the opportunity to express their view on compensation for the Company's NEOs. The say-on-pay vote is advisory and, therefore, not binding on the +Company, the Compensation Committee or the Board. Even though non-binding, the Board and Compensation Committee value the opinions of Wolverine Worldwide's shareholders and will review and consider +the voting results when making future decisions regarding the Company's executive compensation program. +The +Company encourages shareholders to read the " Compensation Discussion and Analysis " ("CD&A") section of this proxy statement beginning on page 39. As +described in the CD&A section, the Compensation Committee has structured the executive compensation program to achieve the following key objectives: +• Align the interests of NEOs with those of the shareholders through incentives based on achieving performance objectives that enable increased +shareholder value +• Provide incentives for achieving specific, near-term corporate, business unit and individual goals and reward the achievement of those goals +• Provide incentives for achieving pre-established, longer-term corporate financial goals and reward achievement of those goals +• Attract and retain talented NEOs who will lead Wolverine Worldwide and drive superior business and financial performance +The +executive compensation program is designed to achieve these objectives, in part, by: +• Weighting at-risk and variable compensation (annual bonuses and long-term incentives) much more heavily than fixed compensation (base salaries) +• Rewarding annual performance while maintaining emphasis on longer-term objectives +• Blending cash, non-cash, long- and short-term compensation components, and current and future compensation components +The +Company encourages shareholders to read the Summary Compensation Table and other related compensation tables and narrative, appearing on pages 60-77, which provide detailed information on the +compensation of the Company's NEOs. +The +Compensation Committee and the Board of Directors believe the Company's compensation program and its policies and procedures articulated in the CD&A section are effective in aligning the interests +of the Company's NEOs with the interests of shareholders, promoting the achievement of the Company's near and long term objectives, and increasing shareholder value. +In +accordance with the rules under Section 14A of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and as a matter of good corporate governance, the Company asks +shareholders to approve the following advisory resolution at the 2017 Annual Meeting of Shareholders: +RESOLVED, that the shareholders of Wolverine World Wide, Inc. (the "Company") approve, on an advisory basis, the compensation of the Company's +named executive officers disclosed in the Compensation Discussion and Analysis section, the Summary Compensation Table and the related compensation tables, notes and narrative in the Proxy Statement +for the Company's 2017 Annual Meeting of Shareholders. +Board Recommendation +The Board recommends that you vote "FOR" approval of the advisory resolution to approve executive +compensation. +Page 78 | +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +Table of Contents +2017 PROXY STATEMENT +Proposal 3 – Advisory Vote on the +Frequency of Future Advisory Votes +on Executive Compensation +Pursuant +to Section 14A of the Exchange Act, the Company is asking its shareholders to vote on whether future advisory votes on executive compensation of the nature reflected +in Proposal 2 above should occur every year, every two years or every three years. You may cast your vote on your preferred voting frequency by choosing the option of one year, two years, three years +or abstain from voting when you vote. Shareholders are not voting to approve or disapprove the Board's recommendation. This advisory vote on the frequency of future advisory votes on executive +compensation is non-binding on the Board of Directors. The Board may decide that it is in the best interests of the Company's shareholders and the Company to hold an advisory vote on executive +compensation on a more or less frequent basis and may vary its practice based on factors such as discussions with shareholders and the adoption of material changes to compensation programs. +BOARD RECOMMENDATION +The Board recommends that you vote for conducting future advisory votes on executive compensation "EVERY ONE YEAR." +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +| Page 79 +Table of Contents +2017 PROXY STATEMENT +Proposal 4 – Ratification of Appointment of +Independent Registered Public Accounting Firm +Ernst & +Young LLP ("Ernst & Young") was the Company's independent registered public accounting firm for the fiscal year ended December 31, 2016. The Audit +Committee has reappointed Ernst & Young as the Company's independent registered public accounting firm for the current fiscal year. As a matter of good corporate governance, the Audit Committee +has determined to submit its appointment of Ernst & Young to the Company's shareholders for ratification. If this appointment is not ratified by the holders of a majority of shares cast +affirmatively or negatively on the matter, the Audit Committee will review its future selection of an independent registered public accounting firm. Even if the appointment is ratified, the Audit +Committee in its discretion may select a different independent registered public accounting firm any time during the year if it determines that such a change would be in the best interests of the +Company and the Company's shareholders. +The +Audit Committee reviewed Ernst & Young's performance prior to appointing it as the Company's independent registered public accounting firm, and +considered: +• the historical and recent performance of Ernst & Young on the Company's audit, including the quality of the engagement team and +Ernst & Young's experience, client service, responsiveness and technical expertise +• the Public Company Accounting Oversight Board report of selected Ernst & Young audits +• the appropriateness of fees charged +• Ernst & Young's familiarity with the Company's accounting policies and practices and internal control over financial reporting +• Ernst & Young's financial strength and performance +Representatives +of Ernst & Young are expected to be present at the Annual Meeting. They will have an opportunity to make a statement if they desire to do so, and are expected to be available to +respond to appropriate questions from shareholders. +Board Recommendation +The Board recommends that you vote "FOR" ratification of the Audit Committee's selection of the firm of Ernst & Young LLP as the Company's independent registered public accounting firm +for fiscal year 2017. +Page 80 | +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +Table of Contents +2017 PROXY STATEMENT +Audit Committee Report +The +Audit Committee of the Board of Directors consists of five directors who are independent under the Company's Director Independence Standards, the NYSE listed company standards, +and applicable SEC standards. The Audit Committee represents and assists the Board in fulfilling its oversight responsibility regarding the Company's financial statements and the +financial reporting process, the internal control over financial reporting, the performance of the internal audit function and the independent registered public accounting firm, the qualifications and +independence of the independent registered public accounting firm, the annual independent audit of Wolverine Worldwide's financial statements and internal control over financial reporting, and +compliance with legal and regulatory requirements. The Audit Committee is directly responsible for appointing, retaining, compensating, overseeing, evaluating and terminating (if appropriate) +Wolverine Worldwide's independent registered public accounting firm. Wolverine Worldwide's management has primary responsibility for the financial statements and the financial reporting process, +including the application of accounting and financial principles, the preparation, presentation and integrity of the financial statements, and the systems of internal controls and other procedures +designed to promote compliance with accounting standards and applicable laws and regulations. Wolverine Worldwide's independent registered public accounting firm is responsible for expressing an +opinion on the conformity of Wolverine Worldwide's financial statements with generally accepted accounting principles and for auditing the effectiveness of Wolverine Worldwide's internal control over +financial reporting. +The +Audit Committee has taken steps to provide assurances regarding Audit Committee composition and procedures, the independence of Wolverine Worldwide's independent registered public accounting firm +and the integrity of Wolverine Worldwide's financial statements and disclosures. These steps include: (i) reviewing the Audit Committee Charter; (ii) reviewing with legal counsel and the +independent registered public accounting firm the Accounting and Finance Code of Ethics; (iii) maintaining financial, accounting and business ethics complaint procedures to allow employees, +shareholders and the public to report concerns regarding Wolverine Worldwide's financial statements, internal controls and disclosures; and (iv) reviewing procedures for the Audit Committee to +pre-approve all audit and non-audit services provided by Wolverine Worldwide's independent registered public accounting firm. +As +part of its supervisory duties, the Audit Committee has reviewed Wolverine Worldwide's audited financial statements for the fiscal year ended December 31, 2016, and has discussed those +financial statements with Wolverine Worldwide's management and internal financial staff, and the internal auditors and independent registered public accounting firm with and without management +present. The Audit Committee has also reviewed and discussed the following with Wolverine Worldwide's management and the financial staff, and with the internal auditors and independent registered +public accounting firm with and without management present: +• Accounting and financial principles and significant assumptions, estimates and matters of judgment used in preparing the financial statements +• Allowances and reserves for accounts receivable, inventories and taxes +• Accounting for acquisitions, pension plans and equity-based compensation plans +• Goodwill impairment analysis +• Other significant financial reporting issues and practices +The +Audit Committee has discussed with Wolverine Worldwide's independent registered public accounting firm the results of its examinations and its judgments concerning the quality, as well as the +acceptability, of Wolverine Worldwide's accounting principles and such other matters that it is required to discuss with the independent registered public accounting firm under applicable rules, +regulations or generally accepted auditing standards, including the matters required to be discussed by applicable rules of the Public Company Accounting Oversight Board ("PCAOB"). In addition, the +Audit Committee has received from the independent registered public accounting firm the written disclosures and the letter required by the applicable requirements of the PCAOB regarding the +independent registered public accounting firm's communications with the Audit Committee concerning independence rules and has discussed their independence from Wolverine Worldwide and Wolverine +Worldwide's management with them, including a consideration of the compatibility of non-audit services with +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +| Page 81 +Table of Contents +2017 PROXY STATEMENT +their +independence, the scope of the audit and the scope of all fees paid to the independent registered public accounting firm during the year. After and in reliance upon the reviews and discussions +described above, the Audit Committee recommended that the audited financial statements for the fiscal year ended December 31, 2016, be included in Wolverine Worldwide's Annual Report on +Form 10-K for the year then ended to be filed with the SEC. +Respectfully +submitted, +William K. +Gerber (Chairperson) +Jeffrey M. Boromisa +Roxane Divol +Brenda J. Lauderback +Michael A. Volkema +Page 82 | +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +Table of Contents +2017 PROXY STATEMENT +Independent Registered Public +Accounting Firm +The +Company's Audit Committee has adopted a policy under which the Audit Committee must approve all audit and non-audit services provided by the Company's independent registered +public accounting firm, Ernst & Young LLP, and which prohibits Ernst & Young LLP from providing any non-audit services that are prohibited by the SEC or the PCAOB. The +Company's Audit Committee provides categorical pre-approval for routine and recurring services, with specific service descriptions and budgets. All audit services, internal control-related services, +and other services not within the specifically pre-approved service descriptions and budgets require engagement-specific pre-approval. With certain exceptions (such as pre-approval of audit services), +the Audit Committee may delegate engagement-specific pre-approval to one or more Audit Committee members, and has so delegated in certain instances to the Audit Committee Chairperson. Management must +communicate to the Audit Committee at its next regularly scheduled meeting any services approved by an Audit Committee member. Wolverine Worldwide's Audit Committee pre-approved all fees paid to +Ernst & Young LLP for services performed in 2016 and 2015. The aggregate fees billed by Ernst & Young LLP for audit and non-audit services were: +2016 +2015 +Audit Fees 1 +$ +1,843,600 +$ +1,607,400 +Audit Related Fees +- +- +Total Audit and Audit Related +$ +1,843,600 +$ +1,607,400 +Tax Fees +Tax Compliance +$ +1,141,800 +$ +777,600 +Tax Planning & Advisory +$ +370,000 +$ +100,250 +Tax Planning & Advisory Other +- +- +Total Tax Fees +$ +1,511,800 +$ +877,850 +All Other Fees +- +- +Total Fees +$ +3,355,400 +$ +2,485,250 +1 "Audit Fees" is comprised of fees for the annual audit, reviews of the financial statements included in Wolverine Worldwide's Quarterly +Reports on Form 10-Q audit of internal control over financial reporting, foreign statutory audits and consultations concerning accounting matters associated with the +annual audit. +Wolverine +Worldwide's Audit Committee has adopted a policy restricting the Company's hiring of current or former partners or employees of the independent registered public accounting firm retained by +the Company. +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +| Page 83 +Table of Contents +2017 PROXY STATEMENT +Proposal 5 – Approval of Amended and +Restated Executive Short-Term +Incentive Plan (Annual Bonus Plan) +OVERVIEW +To provide incentives and rewards for achievement of annual corporate and business unit goals, on March 13, 2017, the Board of +Directors adopted, subject to shareholder approval, the Amended and Restated Executive Short-Term Incentive Plan (Annual Bonus Plan) (the "Restated Annual Bonus Plan"). The Restated Annual Bonus Plan +would amend and restate the existing Amended and Restated Executive Short-Term Incentive Plan (Annual Bonus Plan), which was most recently approved by shareholders at the 2012 Annual Meeting of +Shareholders (the "2012 Annual Plan"). +The +Restated Annual Bonus Plan differs from the 2012 Annual Plan in three main ways: (a) it would extend the term of the 2012 Annual Plan to the first meeting of shareholders in 2022; +(b) it would update the performance criteria that the Compensation Committee may select for the purpose of setting and determining annual bonuses, and (c) it would make clarifying and +other minor changes. The term of the 2012 Annual Plan expires at this year's Annual Meeting of Shareholders unless shareholders approve the extension of the 2012 Annual Plan by approving the Restated +Annual Bonus Plan at the 2017 Annual Meeting of Shareholders. +PURPOSE OF THE PLAN +The Restated Annual Bonus Plan is designed to provide executive officers, senior corporate and divisional officers and other key employees of +the Company or its subsidiaries with the opportunity for bonuses based on the performance of the Company or any business unit or units to which the employee is assigned, as applicable. The Restated +Annual Bonus Plan is +intended to allow the Company to grant awards designed to qualify as performance-based compensation under Section 162(m) of the Code, as amended, and will be interpreted and administered to +achieve that purpose, however, there can be no guarantee that amounts payable under the Restated Annual Bonus Plan will be treated as qualified performance-based compensation under +Section 162(m). The Company intends to continue its established practice of paying annual incentive bonuses to officers and key management employees based on individual performance goals. +Participants in the Restated Annual Bonus Plan may also receive cash or other bonuses from the Company under other bonus programs, which may or may not qualify for deductibility under +Section 162(m) of the Code. No payment under any such other arrangement may be contingent upon failure to satisfy the criteria for payment of an incentive bonus under the Restated Annual Bonus +Plan. +The +Board believes it is in the best interests of the Company and its shareholders to provide for a shareholder-approved plan under which annual bonuses paid to its executive officers can qualify for +deductibility for federal income tax purposes. Accordingly, the Company has structured the Restated Annual Bonus Plan in a manner such that payments under it can satisfy the requirements for +"performance-based" compensation within the meaning of Section 162(m) of the Code. The Company may also grant annual bonuses under the Restated Annual Plan that are not intended to meet the +requirements for "performance-based" compensation within the meaning of Section 162(m). Notwithstanding the fact that the Restated Annual Bonus Plan has been structured to enable the Company to +pay bonuses that are intended to constitute "performance-based" compensation, there is no guarantee that amounts payable under the Restated Annual Bonus Plan will qualify as such and, as described in +the Compensation Discussion & Analysis section of this proxy statement, the Compensation Committee may, and has, awarded compensation that does not qualify as performance-based compensation. +In +general, Section 162(m) places a limit on the deductibility for federal income tax purposes of the compensation paid to the NEOs set forth in the Summary Compensation Table, other than the +Chief Financial Officer, who were employed by the Company on the last day of its taxable year. Under Section 162(m), compensation paid to such persons in excess of $1 million in a +taxable year is not generally deductible. However, compensation that qualifies as "performance-based" as determined under Section 162(m) does not count against the $1,000,000 limitation. +Page 84 | +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +Table of Contents +2017 PROXY STATEMENT +One +of the requirements of "performance-based" compensation for purposes of Section 162(m) is that the material terms of the performance goal under which compensation may be paid be disclosed +to and approved by the Company's shareholders at least once every five years. For purposes of Section 162(m), the material terms include: (a) the employees eligible to receive +compensation; (b) a description of the business criteria on which the performance goal is based; and (c) the maximum amount of compensation that can be paid to an employee under the +performance goal. Each of these aspects of the Restated Annual Bonus Plan is discussed below, and shareholder approval of the Restated Annual Bonus Plan is intended to constitute approval of each of +these aspects of the Restated Annual Bonus Plan for purposes of the approval requirements of Section 162(m) of the Code. +SUMMARY OF THE PLAN +The following is a summary of the principal features of the Restated Annual Bonus Plan and is qualified in its entirety by reference to the +terms of the Restated Annual Bonus Plan set forth in Appendix A to this Proxy Statement. The Restated Annual Bonus Plan is effective as of March 13, 2017, contingent upon shareholder +approval. +The +Restated Annual Bonus Plan is administered by the Compensation Committee of the Board of Directors (the "Compensation Committee") or such other committee as the Board designates. The Compensation +Committee currently consists of four independent members, all of whom are "non-employee directors" as defined in Rule 16b-3 issued under the Exchange Act and "outside directors" as defined in +the regulations issued under Section 162(m) of the Code. Except as limited by the Restated Annual Bonus Plan, the Compensation Committee has all of the express and implied powers and duties set +forth in the Restated Annual Bonus Plan and has full authority and discretion to interpret the Restated Annual Bonus Plan and to make all other determinations considered necessary or advisable for the +administration of the Restated Annual Bonus Plan. The Compensation Committee can adopt such other rules, policies and forms for the administration, interpretation and implementation of the Restated +Annual Bonus Plan as it considers advisable. All determinations, interpretations and selections made by the Compensation Committee regarding the Restated Annual Bonus Plan are final and conclusive. +The Compensation Committee may delegate certain administrative functions to individuals designated by the committee. +For +each fiscal year or part thereof (in the case of an individual who only becomes eligible to participate after the beginning of the fiscal year), the Compensation Committee selects the executive +officers (currently eight persons), senior corporate and divisional officers and other key employees (currently approximately 833 persons in the aggregate) who would be participants for the year. The +Compensation Committee may limit the number of executive officers and senior corporate and divisional officers and other key employees who would be participants for a fiscal year or part thereof. +Selection as a participant for a fiscal year or part thereof by the Compensation Committee is limited to that fiscal year or part thereof. An individual is a participant for a fiscal year or part +thereof only if designated as a participant by the Compensation Committee for such fiscal year or part thereof. The amount of bonus any individual receives under the Restated Annual Bonus Plan depends +upon corporate and/or business unit performance for each fiscal year and is not presently determinable for the Company's 2017 fiscal year. The benefits set forth in the table below were paid under the +2012 Annual Plan with respect to fiscal 2016: +Name and Position +Dollar Value +Blake W. Krueger, Chairman, CEO and President +$831,376 +Michael Jeppesen, President, Wolverine Heritage Group and Global Operations Group +$229,888 +Michael D. Stornant, Senior Vice President, Chief Financial Officer and Treasurer +$173,299 +Richard J. Woodworth, President, Wolverine Boston Group +$123,655 +James D. Zwiers, President, Wolverine Outdoor & Lifestyle Group +$172,529 +Executive Group (non-NEO) +$148,309 +Non-Executive Director Group +$0 +Non-Executive Officer Employee Group +$6,988,924 +The +Compensation Committee establishes performance goals for each participant in the manner and within the time limits specified in the plan. A target bonus goal is established by the Compensation +Committee, expressed as a percentage of the participant's base salary or a +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +| Page 85 +Table of Contents +2017 PROXY STATEMENT +specified +dollar amount. The Compensation Committee then establishes incentive bonus levels, expressed as a percentage of the target bonus, which is paid to the participant at specified levels of +performance by the Company, a business unit, subsidiary, division, or profit center, as applicable. The term incentive bonus, as used in the Restated Annual Bonus Plan, means an annual bonus awarded +and paid to a participant for services to the Company during a fiscal year or part thereof that is based upon achievement of pre-established objectives. The Compensation Committee also establishes any +specific conditions under which an incentive bonus could be reduced or forfeited (but not increased). +Under +the Restated Annual Bonus Plan, performance is determined by reference to one or more of the following objectively determinable factors, either individually, alternatively or in any combination, +applied to either the Company as a whole or to a business unit, subsidiary, division, or profit center, either individually, alternatively or in any combination, on an absolute basis or relative to a +pre-established target, to previous years' results or to a designated comparison group, as selected by the Compensation +Committee: (i) net earnings or earnings per share (including earnings before interest, taxes, depreciation and/or amortization); (ii) income, net income or operating income; +(iii) revenues; (iv) net sales; (v) return on sales; (vi) return on equity; (vii) return on capital (including return on total capital or return on invested +capital); (viii) return on assets or net assets; (ix) earnings per share; (x) economic or business value added measurements; (xi) return on invested capital; +(xii) return on operating revenue; (xiii) cash flow (before or after dividends); (xiv) stock price; (xv) total shareholder return; (xvi) market capitalization; +(xvii) economic value added; (xviii) debt leverage (debt to capital); (xix) operating profit or net operating profit; (xx) operating margin or profit margin; +(xxi) cash from operations; (xxii) market share; (xxiii) product development, release schedules lead times, delivery or quality; (xxiv) new product innovation; +(xxv) cost or expense control; (xxvi) customer acquisition or retention; (xxvii) customer service; or (xxviii) customer satisfaction. +To +the extent consistent with Section 162(m) of the Code, the administrator (i) will appropriately adjust any evaluation of performance under qualifying performance criteria to eliminate +the effects of charges for restructurings, discontinued operations, extraordinary items and all items of gain, loss or expense determined to be extraordinary or unusual in nature or related to the +disposal of a segment of a business or related to a change in accounting principle, all as determined in accordance with standards established by applicable accounting provisions, as well as the +cumulative effect of accounting changes, in each case as determined in accordance with generally accepted accounting principles or identified in the Company's financial statements or notes to the +financial statements, and (ii) may appropriately adjust any evaluation of performance under qualifying performance criteria to exclude any of the following events that occurs during a +performance period: (a) asset write-downs, (b) litigation, claims, judgments or settlements, (c) the effect of changes in tax law or other such laws or provisions affecting +reported results, (d) corporate stock and asset acquisitions and dispositions, and (e) accruals of any amounts for payment under the Restated Annual Bonus Plan or any other compensation +arrangement maintained by the Company. +The +incentive bonus for each eligible participant for a fiscal year is determined on the basis of the target bonus and performance criteria established by the Compensation Committee for the fiscal +year or part thereof, as applicable. The Compensation Committee determines, and certifies in writing prior to payment of the incentive bonus, that performance for the fiscal year or part thereof, as +applicable, satisfied the criteria established by the Compensation Committee. The incentive bonus for any participant for a fiscal year may not, in any event, exceed $4,000,000. The incentive bonus of +each participant is paid as soon as feasible following the final determination and certification by the Compensation Committee of the amount payable, but not later than the fifteenth day of the third +month following the end of the performance period to which it relates. +In +the event of a termination of employment prior to the end of a fiscal year, the incentive bonus otherwise payable to a participant for the fiscal year is adjusted as follows. If a participant +ceases to be a participant before the end of any fiscal year and more than six months after the beginning of such fiscal year because of death, or normal or early retirement under the Company's +retirement plan, as then in effect, or total disability under the Company's long-term disability plan, an award is paid to the participant or the participant's beneficiary after the end of such fiscal +year prorated as follows: the award, if any, for such fiscal year is equal to 100% of the incentive bonus that the participant would have received if the participant had been a participant during the +entire fiscal year, multiplied by the ratio of the participant's full months as a participant during that fiscal year to the 12 months in that fiscal year. If an employee ceases to be a +participant during any fiscal year, or prior to actual receipt of the award for a previous fiscal year, because of the participant's termination of employment for any reason other than as described +above, the participant is not entitled to any award for such fiscal year. +Page 86 | +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +Table of Contents +2017 PROXY STATEMENT +AMENDMENT AND TERMINATION +The Board of Directors may terminate the Restated Annual Bonus Plan at any time or may from time to time amend the Restated Annual Bonus Plan +as it considers proper and in the best interests of the Company. +If +the Restated Annual Bonus Plan is approved by the Company's shareholders, the Restated Annual Bonus Plan would terminate as of the date of the first meeting of shareholders occurring in the fifth +year following approval (that is, 2022) or any subsequent re-approval. If the Restated Annual Bonus Plan terminates due to lack of approval by the shareholders, no incentive bonus would be awarded +under the plan for the fiscal year in which the Restated Annual Bonus Plan terminates. +VOTE REQUIRED AND BOARD RECOMMENDATION +Approval of the Amended and Restated Executive Short-Term Incentive Plan (Annual Bonus Plan) requires the favorable vote of a majority of +shares cast affirmatively or negatively on the matter for approval. +BOARD RECOMMENDATION +The Board of Directors recommends that you vote FOR approval of the Restated Executive Short-Term Incentive Plan (Annual Bonus Plan). +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +| Page 87 +Table of Contents +2017 PROXY STATEMENT +Related Party Matters +CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS +Since January 2, 2016, the Company has not engaged in any "related person" transactions with its directors, executive officers or +holders of 5% or more of Company voting securities, affiliates or any member of the immediate family of the foregoing persons. +RELATED PERSON TRANSACTIONS POLICY +Wolverine Worldwide's Board adopted written policies and procedures regarding related person transactions. They require the Governance +Committee to review and either approve or disapprove the Company entering into any Interested Transactions (defined below). If advance approval is not feasible, then the Governance Committee must +review and ratify the Interested Transaction at its next meeting. +Interested Transaction +Any transaction, arrangement or relationship or series of similar transactions, arrangements or relationships (including any indebtedness or guarantee of indebtedness) in which: +(1) +the aggregate amount involved is or is expected to exceed $120,000 since the beginning of Wolverine Worldwide's last completed fiscal year; +(2) +Wolverine Worldwide is a participant; and +(3) +any Related Person (defined below) has or will have a direct or indirect interest. +An Interested Transaction does not include: +(1) +any employment compensation paid to an executive officer of the Company if the Compensation Committee approved or recommended to the Board of Directors for approval such compensation; +(2) +any compensation paid to a director for service as a director of the Company; +(3) +any transaction in which a Related Person has an indirect interest solely as a result of being (i) a director or, together with all other Related Persons, as defined below, a less than 10% beneficial owner of an equity interest in another +entity, or both, or (ii) a limited partner in a partnership in which the Related Person, together with all other Related Persons, has an interest of less than 10%; or +(4) +any transaction in which the Related Person's interest arises solely from the ownership of the Company's common stock and all holders of the Company's common stock received the same benefit on a pro rata basis (e.g., a dividend). +Related Person +Any: +(a) +person who is or was at any point during the last fiscal year for which Wolverine Worldwide filed an Annual Report on Form 10-K and proxy statement, an executive officer, director or, to the extent information regarding such nominee is being +presented in a proxy or information statement relating to the election of that nominee as a director, nominee for election as a director; +(b) +beneficial owner of greater than five percent of Wolverine Worldwide's common stock; or +(c) +immediate family member * of any of the foregoing. +* Immediate family member is defined as a person's spouse, parents, stepparents, children, stepchildren, siblings, mothers- and +fathers-in-law, sons- and daughters-in-law, and brothers- and sisters-in-law and anyone residing in such person's home (other than a tenant or employee). +The +Governance Committee considers whether the Interested Transaction is on terms no less favorable than terms generally available to an unaffiliated third-party under the same or similar +circumstances, the extent of the Related Person's interest in the transaction, and other factors that it deems relevant. No director participates in any discussion or approval of an Interested +Transaction for which he or she is a Related Person, except to provide information to the Governance Committee. +Page 88 | +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +Table of Contents +2017 PROXY STATEMENT +Additional Information +SHAREHOLDERS LIST +A list of shareholders entitled to vote at the meeting will be available for review by Wolverine Worldwide shareholders at the office of +Secretary, Wolverine World Wide, Inc., 9341 Courtland Drive, N.E., Rockford, Michigan 49351, during ordinary business hours for the 10-day period before the meeting. +DIRECTOR AND OFFICER INDEMNIFICATION +The Company indemnifies its directors and NEOs to the fullest extent permitted by law so that they will be free from undue concern about +personal liability in connection with their service to the Company. +SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE +Section 16(a) of the Exchange Act requires the Company's directors and NEOs, and persons who beneficially own more than 10% of the +outstanding shares of the Company's common stock, to file reports of ownership and changes in ownership of shares of common stock with the SEC. Directors, NEOs and greater than 10% beneficial owners +are required by SEC regulations to furnish Wolverine Worldwide with copies of all Section 16(a) reports they file. Based on its review of the copies of such reports received by it, or written +representations from certain reporting persons that no reports on Form 5 were required for those persons for fiscal year 2016, the Company believes that during fiscal year 2016, its officers +and directors filed the required reports under Section 16(a) on a timely basis, except as follows: (i) one report related to an award of restricted stock, an award of performance stock, +and an issuance of stock options, which vests in three installments, to Amy Klimek on July 13, 2016 and (ii) one report related to an award of restricted stock to Michael Jeppesen on +July 13, 2016; both reports were filed on July 20, 2016 due to an inadvertent delay by the Company. +SHAREHOLDER PROPOSALS FOR INCLUSION IN NEXT YEAR'S PROXY STATEMENT +Pursuant to SEC Rule 14a-8, some shareholder proposals may be eligible for inclusion in Wolverine Worldwide's 2018 proxy statement and +proxy card. Any such shareholder proposals must be submitted in writing to the Secretary of Wolverine Worldwide no later than the close of business on November 28, 2017. You should address all +shareholder proposals to the attention of Secretary, Wolverine World Wide, Inc., 9341 Courtland Drive, N.E., Rockford, Michigan 49351. +OTHER SHAREHOLDER PROPOSALS FOR PRESENTATION AT NEXT YEAR'S ANNUAL MEETING +The Company's By-Laws require that any shareholder proposal that is not submitted for inclusion in next year's proxy statement under SEC +Rule 14a-8, but is instead sought to be presented directly at the 2018 Annual Meeting of Shareholders, must be received at the Company's principal executive offices by the close of business not +less than 90 days nor more than 120 days prior to the first anniversary of the 2017 Annual Meeting. As a result, proposals, including director nominations, submitted pursuant to these +provisions of the By-laws must be received between January 4, 2018, and the close of business on February 3, 2018. You should address a proposal to Secretary, Wolverine World +Wide, Inc., 9341 Courtland Drive N.E., Rockford, Michigan 49351, and include the information and comply with the requirements set forth in those By-laws, which the Company has posted on its +website. SEC rules permit management to vote proxies in its discretion in certain cases if the shareholder does not comply with this deadline, and in certain other cases notwithstanding the +shareholder's compliance with this deadline. +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +| Page 89 +Table of Contents +2017 PROXY STATEMENT +VOTING SECURITIES +Shareholders of record at the close of business on March 13, 2017, are eligible to vote at the Annual Meeting. The Company's voting +securities consist of its $1.00 par value common stock, and there were 96,954,357 shares outstanding and entitled to vote on the record date. Each share outstanding on the record date will be entitled +to one vote on each director nominee and one vote on each other matter. Treasury shares are not voted. Individual votes of shareholders are kept private, except as appropriate to meet legal +requirements. Access to proxies and other individual shareholder voting records is limited to the independent inspectors of election and certain employees of the Company and its agents who acknowledge +their responsibility to comply with this policy of confidentiality. +CONDUCT OF BUSINESS +A majority of the outstanding shares of common stock as of the record date must be present at the Annual Meeting in order to hold the Annual +Meeting and conduct business. This is called a "quorum." Your shares are counted as present at the meeting if you are present at the Annual Meeting and vote in person, a proxy card has been properly +submitted by you or on your behalf, or you have submitted your proxy by telephone or by Internet, or by completing, signing, dating and returning your proxy form in the enclosed envelope. Both +abstentions and broker non-votes (defined below in " Vote Required for Election and Approval ") are counted as present for the purpose of determining the +presence of a quorum. +VOTE REQUIRED FOR ELECTION AND APPROVAL +For Proposal 1, Election of Directors for Terms Expiring in 2020, directors are elected by a majority of votes cast unless the election +is contested, in which case directors are elected by a plurality of votes cast. A majority of votes cast means that the number of shares voted "for" a Director nominee exceeds the number of votes cast +"against" the Director nominee. If an incumbent director in an uncontested election does not receive a majority of votes cast for his or her election, under the Company's Corporate Governance +Guidelines the director is required to submit a letter of resignation to the Board for consideration by the Governance Committee. The Governance Committee will then make a recommendation to the Board +as to whether to accept or reject the tendered resignation. The Governance Committee and the Board, in making their decisions, may implement any procedures they deem appropriate and may consider any +factor or other information that they deem relevant. The Board will then act on the tendered resignation, taking into account the Governance Committee's recommendation, and will publicly disclose its +decision regarding the resignation within 90 days after the results of the election are certified. A director whose resignation is under consideration shall abstain from participating in any +recommendation or decision regarding that resignation. If the resignation is not accepted, the director will continue to serve until the next annual meeting of shareholders at which such director +faces re-election and until such director's successor is elected and qualified. +Proposal 2, +Advisory Vote To Approve Executive Compensation, is a non-binding, advisory vote. Therefore, there is no required vote that would constitute approval. The Company values the +opinions expressed by its shareholders in this advisory vote, and the Board and Compensation Committee will consider the outcome of these votes when designing compensation programs and making future +compensation decisions for the Company's named executive officers. +Proposal 3, +Advisory Vote on the Frequency of Future Advisory Votes on Executive Compensation, is a non-binding advisory vote. Therefore, there is no required vote that would constitute +approval. The Company values the opinions expressed by its shareholders in this advisory vote, and the Board and Compensation Committee will consider the outcome of these votes when determining the +frequency of future advisory votes on executive compensation. +Proposal 4, +Ratification of Appointment of Independent Registered Public Accounting Firm, requires the affirmative vote of a majority of shares cast affirmatively or negatively on the matter +for approval. +Proposal 5, +Approval of Amended and Restated Executive Short-Term Incentive Plan (Annual Bonus Plan) requires the affirmative vote of a majority of shares cast affirmatively or negatively on +the matter for approval. +With +respect to Proposals 1, 2, 3, 4 and 5, abstentions and broker non-votes, if any, will have will have no effect. Generally, broker non-votes occur when shares held by a broker in "street +name" for a beneficial owner are not voted with respect to a particular proposal because (1) the +Page 90 | +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +Table of Contents +2017 PROXY STATEMENT +broker +has not received voting instructions from the beneficial owner, and (2) the broker lacks discretionary voting power to vote those shares. Brokers do not have discretionary authority with +respect to any of the proposals except for Proposal 4. +VOTING RESULTS OF THE ANNUAL MEETING +The Company will announce preliminary voting results at the Annual Meeting and publish final results in a Form 8-K within four business +days following the Annual Meeting. If final results are not known within four business days of the +Annual Meeting, then the Company will file a Current Report on Form 8-K with the preliminary results and file an amended Current Report on Form 8-K within four business days of +the availability of the final results. +ATTENDING THE ANNUAL MEETING +You may vote shares held directly in your name as the shareholder of record in person at the Annual Meeting. If you choose to vote in person, +please bring the enclosed proxy card and proof of identification. Even if you plan to attend the Annual Meeting in person, Wolverine Worldwide recommends that you vote your shares in advance as +described below so that your vote will be counted if you later decide not to attend the Annual Meeting. You may vote shares held in "street name" through a brokerage account or by a bank or other +nominee in person if you obtain a proxy from the record holder giving you the right to vote the shares. +MANNER FOR VOTING PROXIES +The shares represented by all valid proxies received by telephone, by Internet or by mail will be voted in the manner specified. Where the +shareholder has not indicated a specific choice, the shares represented by all valid proxies received will be voted in accordance with the Board's recommendations as follows: (1) for each of +the nominees for directors named earlier in this proxy statement, (2) for approval of the advisory resolution to approve executive compensation, (3) for every one year frequency of +advisory votes on executive compensation, (4) for ratification of the appointment of the independent registered public accounting firm and (5) for approval of the Amended and Restated +Executive Short-Term Incentive Plan (Annual Bonus Plan). The Board has not received timely notice of any other matter that may come before the Annual Meeting. However, should any matter not described +above be properly presented at the Annual Meeting, the persons named in the proxy form will vote in accordance with their judgment, as permitted. +REVOCATION OF PROXIES +A shareholder who gives a proxy may revoke it at any time before it is exercised by voting in person at the Annual Meeting, by delivering a +subsequent proxy or by notifying the inspectors of election in writing of such revocation. If your Wolverine Worldwide shares are held for you in a brokerage, bank or other institutional account, you +must obtain a proxy from that entity and bring it with you to hand in with your ballot, in order to be able to vote your shares at the Annual Meeting. +SOLICITATION OF PROXIES +The Company will pay the expenses of solicitation of proxies for the Annual Meeting. Solicitations may be made in person or by telephone, by +officers and employees of the Company, or by nominees or other fiduciaries who may mail materials to or otherwise communicate with the beneficial owners of shares held by the nominees or other +fiduciaries. These individuals will not be paid any additional compensation for any such solicitation. Upon request, the Company will reimburse brokers, dealers, banks and trustees, or their nominees, +for reasonable expenses incurred by them in forwarding material to beneficial owners of the Company's common stock. The Company has engaged Georgeson Inc. at an estimated cost of $9,500, plus +expenses and disbursements, to assist in solicitation of proxies. +DELIVERY OF DOCUMENTS TO SHAREHOLDERS SHARING AN ADDRESS +If you are the beneficial owner, but not the record holder, of shares of Wolverine Worldwide stock, your broker, bank or other nominee may +only deliver one copy of this proxy statement and the Company's 2016 Annual Report to multiple shareholders who share an address, unless that nominee has received contrary instructions from one or +more of the shareholders. The Company will deliver promptly, upon written or +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +| Page 91 +Table of Contents +2017 PROXY STATEMENT +oral +request, a separate copy of this proxy statement and its 2016 Annual Report to a shareholder at a shared address to which a single copy of the documents was delivered. A shareholder who wishes to +receive a separate copy of the proxy statement and annual report, now or in the future, or shareholders who share an address and receive multiple copies of the proxy statement and annual report but +would like to receive a single copy, should submit this request by writing to Investor Relations, Wolverine World Wide, Inc., 9341 Courtland Drive N.E., Rockford, Michigan 49351, or by calling +(616) 866-5500 and asking for Investor Relations. Beneficial owners sharing an address who are receiving multiple copies of proxy materials and who wish to receive a single copy of such +materials in the future should make a request directly to their broker, bank or other nominee. +ACCESS TO PROXY STATEMENT AND ANNUAL REPORT +Wolverine Worldwide's financial statements for the fiscal year ended December 31, 2016, are included in the Company's 2016 Annual +Report, which the Company is providing to shareholders at the same time as this proxy statement. Wolverine Worldwide's Proxy Statement for the Annual Meeting and the Annual Report to Shareholders for +the fiscal year ended December 31, 2016, are available at www.wolverineworldwide.com/2017annualmeeting . If you have not received or do not +have access to the 2016 Annual Report, write to Wolverine World Wide, Inc., 9341 Courtland Drive N.E., Rockford, Michigan 49351, Attn: Investor Relations or call +(616) 866-5500 and ask for Investor Relations, and the Company will send a copy to you without charge. +Page 92 | +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +Table of Contents +APPENDIX A +APPENDIX A – Amended and Restated +Executive Short-Term Incentive Plan +(Annual Bonus Plan) +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +| Page A-1 +Table of Contents +APPENDIX A +WOLVERINE WORLD WIDE, INC. +AMENDED AND RESTATED EXECUTIVE +SHORT-TERM INCENTIVE PLAN (ANNUAL BONUS PLAN) +SECTION 1: +Establishment of Plan; Purpose of Plan +1.1 +Establishment of Plan. The Company hereby establishes the AMENDED AND RESTATED EXECUTIVE SHORT-TERM INCENTIVE PLAN (ANNUAL BONUS PLAN) (the "Plan"), for its executive +officers, senior corporate and divisional officers and other key employees. The Plan amends and restates the Wolverine World Wide, Inc. Amended and Restated Executive Short-Term Incentive Plan (Annual Bonus Plan) previously approved by the +stockholders at the 2012 Annual Meeting of Stockholders. The Plan provides for the payment of Incentive Bonuses to Participants based upon the achievement of Performance Measures during a specified Performance Period. +1.2 +Purpose of Plan. The purpose of the Plan is to motivate Participants to improve the Company's profitability and growth through the attainment of carefully planned goals, +to promote initiative and cooperation through awards based on corporate and divisional performance and to encourage outstanding individuals to enter and continue in the employ of the Company. The Plan is intended to provide for Incentive Bonuses +that satisfy the exception for performance-based compensation under Section 162(m) of the Code and shall be interpreted and administered to achieve that purpose with respect to such Incentive Bonuses. +1.3 +Effective Date. The Plan is initially effective as of March 13, 2017. Adoption of the Plan by the Board and payment of Incentive Bonuses for Performance Periods +beginning in Fiscal Year 2018 and thereafter shall be contingent upon approval of the Plan by the Company's stockholders at the 2017 Annual Meeting of Stockholders or any adjournment thereof or at a Special Meeting of the Stockholders. In the absence +of such approval, this Plan shall be void. +SECTION 2: +Definitions +The following terms have the stated definitions unless a different meaning is plainly required by the context: +2.1 +"Act" means the Securities Exchange Act of 1934, as amended. +2.2 +"Beneficiary" means the individual, trust or other entity designated by the Participant to receive any amount payable with respect to the Participant under the Plan after the Participant's +death. A Participant may designate or change a Beneficiary by filing a signed designation with the Committee in a form approved by the Committee. A Participant's will is not effective for this purpose. If a designation has not been completed properly +and filed with the Committee or is ineffective for any other reason, the Beneficiary shall be the Participant's Surviving Spouse. If there is no effective designation and the Participant does not have a Surviving Spouse, the remaining benefits, if +any, shall be paid to the Participant's estate. +2.3 +"Board" means the Board of Directors of the Company. +2.4 +"Code" means the Internal Revenue Code of 1986, as amended. +2.5 +"Committee" means the Compensation Committee of the Board or such other committee as the Board shall designate to administer the Plan. The Committee shall consist of at least two members and +all of its members shall be "non-employee directors" as defined in Rule 16b-3 issued under the Act and "outside directors" as defined in the regulations issued under Section 162(m) of the Code. +2.6 +"Company" means Wolverine World Wide, Inc., a Delaware corporation, and its successors and assigns. +2.7 +"Eligible Employees" means executive officers, senior corporate and divisional officers and other key employees of the Company or a Subsidiary. +2.8 +"Fiscal Year" means the fiscal year of the Company for financial reporting purposes as the Company may adopt from time to time. +Page A-2 | +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +Table of Contents +APPENDIX A +2.9 +"Incentive Bonus" means an annual bonus awarded and paid to a Participant for services to the Company during a Performance Period that is based upon the achievement of Performance Measures +established in accordance with the Plan. +2.10 +"Participant" means an Eligible Employee who is designated as a Participant by the Committee for a Performance Period. +2.11 +"Performance" means the level of achievement of the Performance Measures as determined by the Committee pursuant to Section 6.1. +2.12 +"Performance Measure" or " Performance Measures" means the performance measures established by the Committee pursuant to +Section 5. +2.13 +"Performance Period" means a Fiscal Year or other period determined by the Committee. +2.14 +"Subsidiary" means any company or other entity of which 50% or more of the outstanding voting stock or voting ownership interest is directly or indirectly owned or controlled by the +Company. +2.15 +"Surviving Spouse" means the spouse of the Participant at the time of the Participant's death who survives the Participant. If the Participant and spouse die under circumstances which prevent +ascertainment of the order of their deaths, it shall be presumed for the Plan that the Participant survived the spouse. +2.16 +"Target Bonus" means the bonus amount established by the Committee for each Participant under Section 5.1(a). +SECTION 3: +Administration +3.1 +Power and Authority. The Plan shall be administered by the Committee. The Committee may delegate recordkeeping, calculation, payment and other ministerial or +administrative functions to individuals designated by the Committee, who may be employees of the Company or its Subsidiaries. Except as limited by the Plan, the Committee shall have all of the express and implied powers and duties set forth in the +Plan and shall have full authority and discretion to interpret the Plan and to make all other determinations deemed necessary or advisable for the administration of the Plan. Action may be taken by a written instrument signed by a majority of the +members of the Committee and any action so taken shall be as effective as if it had been taken at a meeting. The Committee may make such other rules for the conduct of its business and may adopt such other rules, policies and forms for the +administration, interpretation and implementation of the Plan as it deems advisable. All determinations, interpretations and selections made by the Committee regarding the Plan shall be final and conclusive. +3.2 +Indemnification of Committee Members. Neither any member or former member of the Committee nor any individual to whom authority is or has been delegated shall be +personally responsible or liable for any act or omission in connection with the performance of powers or duties or the exercise of discretion or judgment in the administration and implementation of the Plan or for any adverse tax or other consequence +to any Participant or to the estate or beneficiary of a Participant, including by reason of the application of Section 7.10 or any acceleration of income or any additional tax (including interest and penalties) asserted by reason of the failure +of an Incentive Bonus to satisfy the requirements of Section 409A of the Code or Section 4999 of the Code. Each individual who is or has been a member of the Committee, or delegated authority by the Committee, shall be indemnified and held +harmless by the Company from and against any cost, liability or expense imposed or incurred in connection with any act or failure to act under the Plan. Each such individual shall be justified in relying on information furnished in connection with +the Plan's administration by any appropriate person or persons. +SECTION 4: +Participation +4.1 +Participation. The Committee shall select the Eligible Employees who will Participants in the Plan for a Performance Period. If, following the commencement of a +Performance Period, (a) an Eligible Employee commences employment with the Company or a Subsidiary, or (b) a current employee of the Company or a Subsidiary first becomes an Eligible Employee, and, in either case, such Eligible Employee is +designated as a Participant by the Committee, unless otherwise determined by the Committee, the Performance Period applicable to such Eligible Employee's Incentive Bonus for such Fiscal Year will begin on the date of such commencement of employment +or eligibility, as applicable, and end on the last day of such Performance Period. +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +| Page A-3 +Table of Contents +APPENDIX A +4.2 +Continuing Participation. Selection as a Participant for a Performance Period by the Committee is limited to that Performance Period. An Eligible Employee will be a +Participant for a Performance Period only if designated as a Participant by the Committee for such Performance Period. +SECTION 5: +Incentive Bonus Terms; Performance Measures +5.1 +Incentive Bonus Terms. The Committee shall establish the terms of the Incentive Bonus for each Participant or group of Participants in the manner and within the time +limits specified in this Section 5. For each Participant or group of Participants for each Performance Period, the Committee shall specify: +(a) +Target Bonus. A Target Bonus, expressed as a percentage of the Participant's base salary or a specified dollar amount; +(b) +Incentive Bonus. The amount that may be payable under an Incentive Bonus, expressed as a percentage of the Target Bonus, based on the level (or varying levels) of +achievement of the Performance Measures; for these purposes, the Incentive Bonus payable based on varying levels of achievement may be expressed either as (i) a matrix of percentages of the Target Bonus that will be paid at specified levels of +achievement of the Performance Measures or (ii) a mathematical formula that determines the percentage of the Target Bonus that will be paid at varying levels of achievement of the Performance Measures. +(c) +Performance Measures. The Performance Measures applicable to the Incentive Bonus; and +(d) +Conditions on Incentive Bonus. Any specific circumstances under which an Incentive Bonus specified under subsection (b) above may be reduced or forfeited (but +not increased). +5.2 +Performance Measures. For purposes of the Plan, "Performance Measure" means any objectively determinable measure (or measures) of performance relating to any one or +more of the following performance criteria, or derivations of such performance criteria, either individually, alternatively or in any combination, applied to either the Company as a whole or to a business unit, division, line or Subsidiary, either +individually, alternatively or in any combination, and measured either annually or cumulatively over a period of years, on an absolute basis or relative to a pre-established target, to previous years' results or to an index or indices or a designated +comparison group or groups, in each case as specified by the Committee: (i) net earnings or earnings per share (including earnings before interest, taxes, depreciation and/or amortization); (ii) income, net income or operating income; +(iii) revenues; (iv) net sales; (v) return on sales; (vi) return on equity; (vii) return on capital (including return on total capital or return on invested capital); (viii) return on assets or net assets; +(ix) earnings per share; (x) economic or business value added measurements; (xi) return on invested capital; (xii) return on operating revenue; (xiii) cash flow (before or after dividends); (xiv) stock price; +(xv) total stockholder return; (xvi) market capitalization; (xvii) economic value added; (xviii) debt leverage (debt to capital); (xix) operating profit or net operating profit; (xx) operating margin or profit margin; +(xxi) cash from operations; (xxii) market share; (xxiii) product development, release schedules, lead times, delivery or quality; (xxiv) new product innovation; (xxv) cost or expense controls; (xxvi) customer acquisition +or retention; (xxvii) customer service; or (xxviii) customer satisfaction. The Performance Measure and any targets with respect thereto determined by the Committee need not be based upon an increase, a positive or improved result or +avoidance of loss. +To the extent consistent with the requirements for satisfying the performance-based compensation exception under Section 162(m) of the Code, the Committee (a) may appropriately adjust any evaluation of the +satisfaction of Performance Measures to eliminate the effects of charges for restructurings, discontinued operations, unusual or infrequently occurring items and all items of gain, loss or expense determined to be unusual or infrequent in nature or +related to the disposal of a segment of a business or related to a change in accounting principle, all as determined in accordance with applicable accounting provisions, as well as the cumulative effect of accounting changes, in each case as +determined in accordance with generally accepted accounting principles or identified in the Company's financial statements or notes to the financial statements, and (b) may appropriately adjust any evaluation of the achievement of Performance +Measures to exclude any of the following events that occurs during a Performance Period: (i) asset write-downs; (ii) litigation, claims, judgments or settlements; (iii) the effect of changes in tax law or other such laws or provisions +affecting reported results; (iv) corporate stock and asset acquisitions and dispositions; and (v) accruals of any amounts for payment under this Plan or any other compensation arrangement maintained by the Company. +Page A-4 | +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +Table of Contents +APPENDIX A +5.3 +Incentive Bonus Conditioned on Performance. Payment of an Incentive Bonus to a Participant for a Performance Period or part thereof under this Plan shall be entirely +contingent upon achievement of the Performance Measures established by the Committee pursuant to this Section 5, the satisfaction of which is substantially uncertain when established by the Committee for the Performance Period. +5.4 +Time of Determination by Committee. The Committee shall establish in writing all terms applicable to an Incentive Bonus pursuant to this Section 5 not later than +(i) the 90th day of the applicable Performance Period (in the case of a Performance Period of 360 days or longer), or (ii) if sooner, the end of the period constituting the first quarter of the Performance Period (in the case of a +Performance period of less than 360 days). Once the Committee has established such terms in accordance with the foregoing, it may not thereafter adjust such terms, except to reduce payments, if any, under the Incentive Bonus in accordance with +Section 5.5 or as otherwise permitted in accordance with the requirements of Section 162(m) of the Code. +5.5 +Committee Discretion. Except as specifically provided in Section 5.2, the Committee may not increase any Incentive Bonus or construct, modify or apply the +Performance Measures in a manner that will directly or indirectly increase the Incentive Bonus for any Participant for any Performance Period above the amount determined by the applicable objective standards established within the time periods set +forth in this Section. The Committee may exercise negative discretion to reduce or eliminate any Incentive Bonus. +SECTION 6: +Determination and Payment of Incentive Bonuses +6.1 +Committee Certification. The Incentive Bonus, if any, payable to each Participant for any Performance Period shall be determined by the Committee on the basis of the +Target Bonus and achievement of the Performance Measures established by the Committee pursuant to Section 5. After the end of the Performance Period, the Committee shall determine, and shall certify in writing prior to payment of any Incentive +Bonus, the extent to which the applicable Performance Measures were achieved. +6.2 +Eligibility for Payment. An Incentive Bonus otherwise payable to a Participant for a Performance Period shall be adjusted as follows: +(a) +Retirement, Death or Total Disability. If the Participant ceases to be a Participant before the end of the Performance Period and more than six months after the +beginning of such Performance Period because of death, normal or early retirement under the Company's retirement plan, as then in effect, or total disability under the Company's long-term disability plan, as then in effect, the Participant or the +Participant's Beneficiary, will be entitled to payment of a prorated portion of the Incentive Bonus calculated as follows: 100% of the Incentive Bonus that the Participant would have received, if any, had the Participant been a Participant until the +last day of the applicable Performance Period, multiplied by the ratio of the Participant's full months as a Participant during that Performance Period to the number of months in the Performance Period. Notwithstanding the foregoing, the Committee +shall have discretion to reduce or eliminate any Incentive Bonus otherwise payable pursuant to this Section 6.2(a). +(b) +Reassignment of Duties. If a Participant is reassigned employment duties before the end of any Performance Period, the Participant will be entitled to payment of a +prorated portion of the Incentive Bonus calculated as follows: 100% of the Incentive Bonus that the Participant would have received, if any, had the Participant been a Participant until the last day of the applicable Performance Period, multiplied by +the ratio of the Participant's full months as a Participant during the Performance Period prior to the reassignment to the number of months in the Performance Period. If such Participant is designated as a Participant in his or her new position, the +Participant will also be entitled to payment of a prorated portion of the Incentive Bonus with respect to such new position calculated as follows: 100% of the Incentive Bonus that the Participant would have received, if any, had the Participant had +been a Participant during the entire Performance Period, multiplied by the ratio of the Participant's months as a Participant during that Performance Period after the reassignment (rounded up to the next full month) to the number of months in that +Performance Period (but not in excess of the maximum amount payable in respect of such Performance Period, as previously determined by the Committee). +(c) +Other Termination. Except as provided in Section 6.2(a), if the Participant's employment terminates prior to the payment of an Incentive Bonus with respect to +any Performance Period, the Participant will not be entitled to payment of the Incentive Bonus for such Performance Period. +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +| Page A-5 +Table of Contents +APPENDIX A +6.3 +Maximum Incentive Bonus. The maximum Incentive Bonus payable to any Participant for a Fiscal Year under this Plan shall not exceed $4,000,000. +6.4 +Payment to Participant or Beneficiary. Any Incentive Bonus payable to a Participant shall be paid to the Participant, or the Beneficiary of any deceased Participant, by +the Company as soon as feasible following final determination and certification by the Committee of the amount payable as provided in Section 6.1; provided, however, in no event may an Incentive Bonus be paid later than the fifteenth day of the +third month following the end of the Performance Period to which the Incentive Bonus relates. +6.5 +Manner of Payment. Each Participant will receive his or her Incentive Bonus in cash. +SECTION 7: +General Provisions +7.1 +Benefits Not Guaranteed . Neither the establishment and maintenance of the Plan nor participation in the Plan shall provide any guarantee or other assurance that an +Incentive Bonus will be payable under the Plan. +7.2 +No Right to Participate. Nothing in this Plan shall be deemed or interpreted to provide a Participant or any Eligible Employee any contractual right to participate in +or receive benefits under the Plan. No designation of an employee as an Eligible Employee or a Participant for all or any part of a Performance Period shall create a right to an Incentive Bonus under the Plan for any other Performance Period. There +is no obligation of uniformity of treatment of Eligible Employees or Participants under the Plan. The loss of any Incentive Bonus will not constitute an element of damages in the event of termination of employment for any reason, even if the +termination is in violation of an obligation of the Company or a Subsidiary to a Participant. +7.3 +No Employment Right. Participation in this Plan shall not be construed as constituting a commitment, guarantee, agreement or understanding of any kind that the Company +or any Subsidiary will continue to employ any individual and this Plan shall not be construed or applied as an employment contract or obligation. Nothing in this Plan shall abridge or diminish the rights of the Company or any Subsidiary to determine +the terms and conditions of employment of any Participant or Eligible Employee or to terminate the employment of any Participant or Eligible Employee with or without reason at any time. +7.4 +No Assignment or Transfer. Neither a Participant nor any Beneficiary or other representative of a Participant shall have any right to assign, transfer, attach or +hypothecate any amount or credit, potential payment or right to future payments of any amount or credit or any other benefit provided under this Plan. Payment of any amount due or to become due under this Plan shall not be subject to the claims of +creditors of the Participant or to execution by attachment or garnishment or any other legal or equitable proceeding or process. +7.5 +No Limit on Other Compensation Arrangements. Nothing contained in this Plan shall prevent the Company or any Subsidiary from adopting or continuing in effect other or +additional compensation arrangements. A Participant may have other targets under other plans of the Company. However, no payment under any other plan or arrangement shall be contingent upon failure to attain the criteria for payment of an Incentive +Bonus under this Plan. +7.6 +Withholding and Payroll Taxes . The Company shall deduct from any payment made under this Plan all amounts required by federal, state, local and foreign tax laws to be +withheld and shall subject any payments made under the Plan to all applicable payroll taxes and assessments. +7.7 +Incompetent Payee. If the Committee determines that an individual entitled to a payment under this Plan is incompetent, it may cause benefits to be paid to another +individual for the use or benefit of the Participant or Beneficiary at the time or times otherwise payable under this Plan in total discharge of the Plan's obligations to the Participant or Beneficiary. +7.8 +Governing Law. The validity, construction and effect of the Plan shall be determined in accordance with the laws of the State of Michigan and applicable federal +law. +7.9 +Severability. In the event any provision of the Plan shall be held illegal or invalid for any reason, the remaining provisions of the Plan shall not be affected and the +Plan shall be construed and enforced as if the illegal or invalid provision had not been included. +Page A-6 | +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +Table of Contents +APPENDIX A +7.10 +Clawback. Incentive Bonuses are subject to forfeiture, termination and rescission, and a Participant will be obligated to return to the Company payments received with +respect to Incentive Bonuses, in each case (a) to the extent provided by the Committee in connection with (i) a breach by the Participant any non-competition, non-solicitation, confidentiality or similar covenant or agreement with the +Company or any of its affiliates or (ii) an overpayment to the Participant of incentive compensation due to inaccurate financial data, (b) in accordance with any applicable Company clawback or recoupment policy, as such policy may be +amended and in effect from time to time, or (c) as otherwise required by law or applicable stock exchange listing standards, including, without limitation, Section 10D of the Act. Each Participant, by accepting an Incentive Bonus pursuant +to the Plan, agrees to return the full amount required under this Section 7.10 at such time and in such manner as the Company shall determine in its sole discretion. +SECTION 8: +Termination and Amendment +The Board may terminate the Plan at any time, or may from time to time amend the Plan as it deems proper and in the best interests of the Company. Except as otherwise provided in this Plan and the applicable Performance +Measures established pursuant to this Plan for determining the amount of any Incentive Bonus for a Fiscal Year or part thereof, no Incentive Bonuses shall be payable for the Fiscal Year in which the Plan is terminated, or, if later, in which the +termination is effective. +SECTION 9: +Duration of the Plan +Subject to earlier termination by the Board, this Plan shall terminate without action by the Board as of the date of the first meeting of stockholders held in 2022, unless reapproved by the stockholders at such meeting +or earlier. If reapproval occurs, the Plan will terminate as of the date of the first meeting of stockholders in the fifth year following reapproval or any subsequent reapproval. If the Plan terminates under this provision due to lack of reapproval +by the stockholders, no Incentive Bonuses shall be awarded for the Fiscal Year in which the Plan terminates. +SECTION 10: +Other Awards +Notwithstanding anything to the contrary in this Plan, the Committee may grant Incentive Bonuses under this Plan to Eligible Employees whose compensation is not subject to Section 162(m) (such employees, +"Non-Covered Employees"). Any Incentive Bonuses granted to Non-Covered Employees may, but need not, be subject to those provisions of this Plan that are intended to satisfy the applicable requirements of performance based compensation under +Section 162(m). Incentive Bonuses granted to Non-Covered Employees under this Section 10 shall be construed as separate and apart from any Incentive Bonus granted hereunder that are intended to qualify as performance based compensation for +purposes of Section 162(m). +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +| Page A-7 +Table of Contents +APPENDIX B +APPENDIX B – Forward-Looking +Statements and Non-GAAP +Reconciliation Table +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +| Page B-1 +Table of Contents +APPENDIX B +FORWARD-LOOKING STATEMENTS +This Proxy Statement contains "forward-looking statements," which are statements relating to future, not past, events. In this context, +forward-looking statements often address the Company's current beliefs, assumptions, expectations, estimates and projections about future business and financial performance, national, regional or +global political, economic and market conditions, and the Company itself. Such statements often contain words such as "anticipates," "believes," "estimates," "expects," "forecasts," "intends," "is +likely," "plans," "predicts," "projects," "should," "will," variations of such words, and similar expressions. Forward-looking statements, by their nature, address matters that are, to varying +degrees, uncertain. Uncertainties that could cause the Company's performance to differ materially from what is expressed in forward-looking statements include, but are not limited to, the +following: +• changes in general economic conditions, employment rates, business conditions, interest rates, tax policies and other factors affecting +consumer spending in the markets and regions in which the Company's products are sold; +• the inability for any reason to effectively compete in global footwear, apparel and consumer-direct markets; +• the inability to maintain positive brand images and anticipate, understand and respond to changing footwear and apparel trends and consumer +preferences; +• the inability to effectively manage inventory levels; +• increases or changes in duties, tariffs, quotas or applicable assessments in countries of import and export; +• foreign currency exchange rate fluctuations; +• currency restrictions; +• capacity constraints, production disruptions, quality issues, price increases or other risks associated with foreign sourcing; +• the cost and availability of raw materials, inventories, services and labor for owned and contract manufacturers; +• labor disruptions; +• changes in relationships with, including the loss of, significant wholesale customers; +• the failure of the U.S. Department of Defense to exercise future purchase options or award new contracts, or the cancellation or modification +of existing contracts by the U.S. Department of Defense or other military purchasers; +• risks related to the significant investment in, and performance of, the Company's consumer-direct operations; +• risks related to the expanding into new markets and complementary product categories as well as consumer-direct operations; +• the impact of seasonality and unpredictable weather conditions; +• changes in general economic conditions and/or the credit markets on the Company's distributors, suppliers and retailers; +• increase in the Company's effective tax rates; +• failure of licensees or distributors to meet planned annual sales goals or to make timely payments to the Company; +• the risks of doing business in developing countries and politically or economically volatile areas; +• the ability to secure and protect owned intellectual property or use licensed intellectual property; +Page B-2 | +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +Table of Contents +APPENDIX B +• the impact of regulation, regulatory and legal proceedings and legal compliance risks; +• the potential breach of the Company's databases, or those of its vendors, which contain certain personal information or payment card data; +• problems affecting the Company's distribution system, including service interruptions at shipping and receiving ports; +• strategic actions, including new initiatives and ventures, acquisitions and dispositions, and the Company's success in integrating acquired +businesses, and implementing new initiatives and ventures; +• the risk of impairment to goodwill and other acquired intangibles; +• the success of the Company's consumer-direct realignment initiatives; and +• changes in future pension funding requirements and pension expenses. +These +uncertainties could cause a material difference between an actual outcome and a forward-looking statement. The uncertainties included here are not exhaustive. Given these risks and +uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. The Company does not undertake an obligation to update, amend or clarify +forward-looking statements, whether as a result of new information, future events or otherwise. +NON-GAAP RECONCILIATION TABLE +RECONCILIATION OF REPORTED DILUTED EPS TO ADJUSTED +DILUTED EPS ON A CONSTANT CURRENCY BASIS +(Unaudited) +GAAP Basis +EPS +Adjustments 1 +As Adjusted +EPS +Foreign +Exchange +Impact +As Adjusted +EPS On a +Constant +Currency Basis +Fiscal 2016 +$ +0.89 +$ +0.47 +$ +1.36 +$ +0.16 +$ +1.52 +Fiscal 2015 +$ +1.20 +$ +0.25 +$ +1.45 +1 Adjustments include the impact of restructuring and impairment costs, organizational transformation costs and debt extinguishment and other costs. +To supplement the consolidated financial statements presented in accordance with Generally Accepted Accounting Principles ("GAAP"), the Company describes what certain financial +measures would have been if restructuring and impairment costs, organizational transformation costs and debt extinguishment costs were excluded. The Company believes these non-GAAP measures provide +useful information to both management and investors to increase comparability to the prior period by adjusting for certain items that may not be indicative of core operating measures and to better +identify trends in our business. The adjusted financial results are used by management to, and allow investors to, evaluate the operating performance of the Company on a comparable basis. The Company +evaluates results of operations on both a reported and a constant currency basis. The constant currency presentation, which is a non-GAAP measure, excludes the impact of fluctuations in foreign +currency exchange rates. The Company believes providing constant currency information provides valuable supplemental information regarding results of operations, consistent with how the Company +evaluates performance. The Company calculates constant currency by converting the current-period local currency financial results using the prior period exchange rates and comparing these adjusted +amounts to our current period reported results. Management does not, nor should investors, consider such non-GAAP financial measures in isolation from, or as a substitution for, financial information +prepared in accordance with GAAP. +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +| Page B-3 +. Electronic Voting Instructions Available 24 hours a day, 7 days a week! Instead of mailing your proxy, you may choose one of the voting methods outlined below to vote your proxy. VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR. Proxies submitted by the Internet or telephone must be received by 11:59 p.m., Eastern Daylight Time, on May 3, 2017. Vote by Internet • Go to www.investorvote.com/WWW • Or scan the QR code with your smartphone • Follow the steps outlined on the secure website Vote by telephone • Call toll free 1-800-652-VOTE (8683) within the USA, US territories & Canada on a touch tone telephone • Follow the instructions provided by the recorded message Using a black ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas. q IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q A Proposals — The Board of Directors recommends a vote FOR all the nominees listed, FOR Proposals 2, 4 and 5, and 1 Yr on Proposal 3. + 1. Election of Directors: For Against Abstain For Against Abstain For Against Abstain 01 - William K. Gerber 02 - Blake W. Krueger 03 - Nicholas T. Long 04 - Michael A. Volkema 3 Yrs2 Yrs1 Yr Abstain For Against Abstain 3. Advisory vote on the frequency of future advisory votes on compensation of the Company’s named executive officers. 2. An advisory resolution approving compensation for the Company’s named executive officers. ForAgainst Abstain 4. Proposal to ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for fiscal year 2017. 5. Proposal to approve the Amended and Restated Executive Short-Term Incentive Plan (Annual Bonus Plan). B Non-Voting Items Change of Address — Please print new address below. C Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below IMPORTANT - Please sign exactly as your name(s) appears on this Proxy. When signing on behalf of a corporation, partnership, estate or trust, indicate title or capacity of person signing. If shares are held jointly, each holder must sign. Date (mm/dd/yyyy) — Please print date below. Signature 1 — Please keep signature within the box. Signature 2 — Please keep signature within the box. + 1 U P X 02JY3C Annual Meeting Proxy Card X IMPORTANT ANNUAL MEETING INFORMATION +. WOLVERINE WORLD WIDE, INC. 9341 Courtland Drive, N.E. Rockford, Michigan 49351 Wolverine World Wide, Inc. will be holding its Annual Meeting of Stockholders on May 4, 2017. The enclosed Notice of 2017 Annual Meeting of Stockholders provides information regarding the matters that are expected to be voted on at the meeting. Your vote is important to us. Even if you plan to attend the meeting, please read the enclosed materials and vote through the Internet, by telephone or by mailing the Proxy Card below. Telephone and Internet Voting. On the reverse side of this card are instructions on how to vote through the Internet or by telephone. Please consider voting through one of these methods. Your vote is recorded as if you mailed in your Proxy. Thank you in advance for your participation in our 2017 Annual Meeting. Wolverine World Wide, Inc. q IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q Proxy — WOLVERINE WORLD WIDE, INC. This proxy is solicited on behalf of the Board of Directors The undersigned stockholder hereby appoints Blake W. Krueger and Brendan M. Gibbons, and each of them, each with full power of substitution, as proxies to represent the undersigned stockholder and to vote all shares of Common Stock of Wolverine World Wide, Inc. that the stockholder would be entitled to vote on all matters that properly come before the Annual Meeting of Stockholders to be held at the Company’s headquarters located at 9341 Courtland Drive N.E., Rockford, Michigan, 49351, on Thursday, May 4, 2017, at 10 a.m. Eastern Daylight Time, and any adjournment of that meeting. If this Proxy is properly executed, the shares represented by this Proxy will be voted as specified. If this Proxy is properly executed but no specification is made, the shares represented by this Proxy will be voted for the election of all nominees named on this Proxy as directors, for approval of Proposals 2, 4 and 5, and 1 Yr on Proposal 3. The shares represented by this Proxy will be voted in the discretion of the proxies on any other matters that may properly come before the meeting. PLEASE DO NOT VOTE BY MORE THAN ONE METHOD. THE LAST VOTE RECEIVED WILL BE THE OFFICIAL VOTE. DO NOT RETURN THIS PROXY IF YOU ARE VOTING BY THE INTERNET OR BY TELEPHONE. (CONTINUED AND TO BE SIGNED ON REVERSE SIDE.) \ No newline at end of file diff --git a/raw/proxies/0000110471/0001047469-17-002079/proxy_rpt.txt b/raw/proxies/0000110471/0001047469-17-002079/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..26dc1761682a9e679b9ce0cb4e1a0aed5ae4dda4 --- /dev/null +++ b/raw/proxies/0000110471/0001047469-17-002079/proxy_rpt.txt @@ -0,0 +1,54 @@ +CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS +Since January 2, 2016, the Company has not engaged in any "related person" transactions with its directors, executive officers or +holders of 5% or more of Company voting securities, affiliates or any member of the immediate family of the foregoing persons. +RELATED PERSON TRANSACTIONS POLICY +Wolverine Worldwide's Board adopted written policies and procedures regarding related person transactions. They require the Governance +Committee to review and either approve or disapprove the Company entering into any Interested Transactions (defined below). If advance approval is not feasible, then the Governance Committee must +review and ratify the Interested Transaction at its next meeting. +Interested Transaction +Any transaction, arrangement or relationship or series of similar transactions, arrangements or relationships (including any indebtedness or guarantee of indebtedness) in which: +(1) +the aggregate amount involved is or is expected to exceed $120,000 since the beginning of Wolverine Worldwide's last completed fiscal year; +(2) +Wolverine Worldwide is a participant; and +(3) +any Related Person (defined below) has or will have a direct or indirect interest. +An Interested Transaction does not include: +(1) +any employment compensation paid to an executive officer of the Company if the Compensation Committee approved or recommended to the Board of Directors for approval such compensation; +(2) +any compensation paid to a director for service as a director of the Company; +(3) +any transaction in which a Related Person has an indirect interest solely as a result of being (i) a director or, together with all other Related Persons, as defined below, a less than 10% beneficial owner of an equity interest in another +entity, or both, or (ii) a limited partner in a partnership in which the Related Person, together with all other Related Persons, has an interest of less than 10%; or +(4) +any transaction in which the Related Person's interest arises solely from the ownership of the Company's common stock and all holders of the Company's common stock received the same benefit on a pro rata basis (e.g., a dividend). +Related Person +Any: +(a) +person who is or was at any point during the last fiscal year for which Wolverine Worldwide filed an Annual Report on Form 10-K and proxy statement, an executive officer, director or, to the extent information regarding such nominee is being +presented in a proxy or information statement relating to the election of that nominee as a director, nominee for election as a director; +(b) +beneficial owner of greater than five percent of Wolverine Worldwide's common stock; or +(c) +immediate family member * of any of the foregoing. +* Immediate family member is defined as a person's spouse, parents, stepparents, children, stepchildren, siblings, mothers- and +fathers-in-law, sons- and daughters-in-law, and brothers- and sisters-in-law and anyone residing in such person's home (other than a tenant or employee). +The +Governance Committee considers whether the Interested Transaction is on terms no less favorable than terms generally available to an unaffiliated third-party under the same or similar +circumstances, the extent of the Related Person's interest in the transaction, and other factors that it deems relevant. No director participates in any discussion or approval of an Interested +Transaction for which he or she is a Related Person, except to provide information to the Governance Committee. +Page 88 | +Wolverine +Worldwide +Notice +of +2017 +Annual +Meeting +of +Shareholders +and +Proxy +Statement +Table of Contents \ No newline at end of file diff --git a/raw/proxies/0000110471/0001047469-18-002189/proxy.txt b/raw/proxies/0000110471/0001047469-18-002189/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..24a445007575b751d4b7de5f10843a351bcdd285 --- /dev/null +++ b/raw/proxies/0000110471/0001047469-18-002189/proxy.txt @@ -0,0 +1,5261 @@ +DEF 14A +1 +a2234929zdef14a.htm +DEF 14A +Use these links to rapidly review the document +Table of Contents +Table of Contents +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +Washington, D.C. 20549 +SCHEDULE 14A +Proxy +Statement Pursuant to Section 14(a) of +the Securities Exchange Act of 1934 (Amendment No. ) +Filed by the Registrant ý +Filed by a Party other than the Registrant o +Check the appropriate box: +o +Preliminary Proxy Statement +o +Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +ý +Definitive Proxy Statement +o +Definitive Additional Materials +o +Soliciting Material under §240.14a-12 +Wolverine World Wide, Inc. +(Name of Registrant as Specified In Its Charter) +(Name of Person(s) Filing Proxy Statement, if other than the Registrant) +Payment of Filing Fee (Check the appropriate box): +ý +No fee required. +o +Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. +(1) +Title of each class of securities to which transaction applies: +(2) +Aggregate number of securities to which transaction applies: +(3) +Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): +(4) +Proposed maximum aggregate value of transaction: +(5) +Total fee paid: +o +Fee paid previously with preliminary materials. +o +Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration +statement number, or the Form or Schedule and the date of its filing. +(1) +Amount Previously Paid: +(2) +Form, Schedule or Registration Statement No.: +(3) +Filing Party: +(4) +Date Filed: +Table of Contents +Table of Contents +LETTER TO SHAREHOLDERS +Wolverine World Wide, Inc. +9341 Courtland Drive, N.E. +Rockford, Michigan 49351 +March 27, +2018 +Dear +Fellow Shareholders, +Thank +you for your investment in Wolverine Worldwide. We made significant progress on our strategic and financial objectives in 2017, including: +• significant execution against the WOLVERINE WAY FORWARD transformation to better position the Company for profitable growth +• revenue of $2.35 billion, the top end of our full-year outlook entering the year, including high single digit growth for Merrell, the +Company's biggest brand +• reduced inventories by over 20% +• year-end cash and cash equivalents up over 30%, reflecting the Company's health and strong position to invest in future growth under our GLOBAL +GROWTH AGENDA +These +achievements helped reward the Company's shareholders, as the Company achieved over 45% total shareholder return for the year, resulting in performance at the +88 th percentile of our peer group. We expect continued progress in 2018 as the Company seeks to execute its GLOBAL GROWTH AGENDA, and to shift its focus to long-term organic +growth. +In +addition to overseeing the Company's execution of our transformation and formulation of our blueprint for growth under the GLOBAL GROWTH AGENDA in 2017, the Board focused on other matters critical +to the Company's long-term success, including Board and management succession planning, cybersecurity protection and brand stewardship, which we describe in greater detail in +this proxy statement. We are proud of all we accomplished in 2017 and the Board will continue to lead the Company with a view to continued success in 2018 and beyond. We hope to receive your support +at this year's annual meeting on May 3, 2018, and encourage you to vote either online, by phone, or by mail. +Sincerely, +Blake +W. Krueger +Chairman, Chief Executive Officer and President +2018 +PROXY +STATEMENT +1 +Table of Contents +NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS +10:00 a.m., May 3, 2018 +Wolverine World Wide, Inc. +500 Totten Pond Road +Waltham, Massachusetts 02451 +March 27, 2018 +To +Our Shareholders: +We +invite you to attend Wolverine Worldwide's Annual Meeting of Shareholders at the Company's offices located at 500 Totten Pond Road, Waltham, Massachusetts 02451, on May 3, 2018, at +10:00 a.m. EDT. At the annual meeting, the shareholders will vote on the following items: +(1) Election +of the three director nominees named in the proxy statement for three year terms expiring in 2021 (2) Advisory +resolution approving compensation for the Company's named executive officers ("NEOs," and each an "NEO") (3) Ratification +of the Audit Committee's appointment of Ernst & Young LLP as the Company's independent registered public accounting firm for fiscal year +2018 (4) Approval +of the Stock Incentive Plan of 2016 (as amended and restated) (the "Plan") +Shareholders +of record as of March 12, 2018 can vote at the meeting and any adjournment of the meeting. +This +Notice of 2018 Annual Meeting of Shareholders, Proxy Statement, proxy or voting instruction card and Annual Report for our fiscal year ended December 30, 2017 are being mailed or made +available to shareholders starting on or about March 27, 2018. +Whether +or not you plan to attend, you can ensure that your shares are represented at the meeting by promptly voting and submitting your proxy by telephone or through the internet, or by completing, +signing, dating and returning your proxy card in the enclosed envelope. +By +Order of the Board of Directors +David +A. Latchana +Associate General Counsel and Assistant Secretary +Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to be held on May 3, 2018. +Wolverine's Proxy Statement for the 2018 Annual Meeting of Shareholders and the Annual Report to Shareholders for the fiscal year ended December 30, 2017, are available +at: www.wolverineworldwide.com/2018annualmeeting . +2018 +PROXY +STATEMENT +2 +Table of Contents +Table of Contents +Letter to Shareholders +1 +Notice of 2018 Annual Meeting of Shareholders +2 +Proxy Statement Summary +5 +Our Brand Portfolio +5 +Strategic Focus +5 +Election of Directors for Terms Expiring in 2021 +6 +Board Highlights +6 +Board is Composed of Directors with the Right Mix of Skills and +Experiences +7 +Shareholder Engagement +7 +Corporate Governance Highlights +7 +Compensation Best Practices +8 +Corporate Governance +10 +Board of Directors +10 +Board Composition +10 +Director Nominations +11 +Board Self-Assessment +11 +Risk Oversight +12 +Code of Business Conduct and Accounting and Finance Code of +Ethics +12 +Shareholder Communications Policy +13 +Proposal 1 – Election of Directors for Terms Expiring +in 2021 +14 +Director Nominees with Proposed Terms Expiring in 2021 +15 +Directors with Terms Expiring in 2019 +18 +Directors with Terms Expiring in 2020 +22 +Board Leadership +26 +Director Independence +26 +Board Committees, Meetings and Meeting Attendance +27 +Non-Employee Director Compensation in Fiscal Year 2017 +29 +Non-Employee Director Stock Ownership Guidelines +31 +Securities Ownership of Officers and Directors and Certain Beneficial +Owners +32 +Five Percent Shareholders +32 +Stock Ownership by Management and Others +33 +Compensation Discussion and Analysis +34 +Summary +34 +Compensation Philosophy and Objectives +34 +Compensation Decisions in Context: Key 2017 Accomplishments and Financial +Highlights; 2018 Focus +34 +CEO Annual Bonus/TSR Analysis +35 +2017 Compensation Program Overview +36 +Pay at Risk +36 +Long-Term Incentive Program Mix +37 +Compensation Best Practices +38 +Compensation Discussion and Analysis +39 +2017 Compensation Program Overview +39 +Setting Targets +39 +Base Salary +39 +Annual Bonus +40 +Performance Bonus +40 +Individual Performance Bonus +42 +Adjusted Operating Margin Modifier +43 +2018 Annual Bonus Plan Update +44 +Long-Term Incentive Compensation +44 +2015-2017 Performance Shares +44 +2017 Performance Share Awards +45 +Restricted Stock Unit Awards +46 +Benefits +46 +Retirement, Deferred Compensation and Welfare Plans +46 +Perquisites +46 +Post-Employment Compensation +46 +Compensation Setting Process +47 +Setting Targets +47 +Competitive Philosophy and Competitive Market Data +47 +Peer Group +48 +New Peer Group +48 +CEO Role +48 +Compensation Consultant Role +48 +Other Compensation Policies and Practices +49 +NEO Stock Ownership Guidelines +49 +Stock Hedging and Pledging Policies +49 +Clawback Policy +49 +Impact of Accounting and Tax Treatments on Compensation +49 +Compensation Committee Report +50 +Summary Compensation Table +51 +Grants of Plan-Based Awards in Fiscal Year 2017 +53 +Outstanding Equity Awards at 2017 Fiscal Year-End +55 +Option Exercises and Stock Vested in Fiscal Year 2017 +59 +Pension Plans and 2017 Pension Benefits +60 +Qualified Pension Plans +60 +Supplemental Executive Retirement Plan +60 +Pension Benefits in Fiscal Year 2017 +61 +Nonqualified Deferred Compensation +62 +Nonqualified Deferred Compensation +62 +Potential Payments Upon Termination or Change in Control +63 +Benefits Triggered by Termination for Cause or Voluntary +Termination +63 +Benefits Triggered by Termination Other Than for Cause or for Good +Reason +63 +Benefits Triggered Upon a Change in Control +63 +Benefits Triggered by Retirement, Death or Permanent Disability +65 +2018 +PROXY +STATEMENT +3 +Table of Contents +Description of Restrictive Covenants that Apply During and After Termination of +Employment +66 +Estimated Payments on Termination or Change in Control +66 +CEO Pay Ratio +68 +Proposal 2 – Advisory Resolution to Approve Executive +Compensation +69 +Proposal 3 – Ratification of Appointment of Independent Registered +Public Accounting Firm +70 +Audit Committee Report +71 +Independent Registered Public +Accounting Firm +73 +Proposal 4 – Approval of Amended and Restated Stock Incentive Plan of +2016 +74 +Overview +74 +Key Changes in the Plan +74 +Why You Should Vote For the Plan +74 +Promotion of Good Corporate Governance Practices +75 +Key Data +75 +Section 162(m) of the Code +76 +Plan Summary +76 +Administration +76 +Eligibility +77 +Shares Subject to the Plan and to Awards +77 +Stock Options +78 +Stock Appreciation Rights +78 +Restricted Stock and Restricted Stock Units +78 +Stock Awards +79 +Incentive Bonuses +79 +Deferral of Gains +79 +Qualifying Performance Criteria +79 +Suspension or Termination of Awards +80 +Settlement of Awards +80 +No Repricing Without Shareholder Approval +80 +Amendment and Termination +81 +Change in Control +81 +Adjustments +82 +Transferability +82 +No Right to Company Employment +82 +Effective Date and Termination of the Plan +82 +Federal Income Tax Treatment +82 +Stock Options +83 +Stock Appreciation Rights +83 +Restricted Stock and Restricted Stock Units +83 +Stock Awards +84 +Incentive Bonuses +84 +Certain Change in Control Payments +84 +Company Deduction and Section 162(m) of the Code +84 +New Plan Benefits +84 +Equity Compensation Plan Information +85 +Vote Required and Board Recommendation +86 +Related Party Matters +87 +Certain Relationships and Related Transactions +87 +Related Person Transactions Policy +87 +Additional Information +88 +Shareholders List +88 +Director and Officer Indemnification +88 +Section 16(A) Beneficial Ownership Reporting Compliance +88 +Shareholder Proposals for Inclusion in Next Year's Proxy +Statement +88 +Other Shareholder Proposals for Presentation at Next Year's Annual +Meeting +88 +Voting Securities +88 +Conduct of Business +89 +Vote Required for Election and Approval +89 +Voting Results of the Annual Meeting +89 +Attending the Annual Meeting +89 +Manner for Voting Proxies +90 +Revocation of Proxies +90 +Solicitation of Proxies +90 +Delivery of Documents to Shareholders Sharing an Address +90 +Access to Proxy Statement and Annual Report +90 +Wolverine World Wide, Inc. Stock Incentive Plan of 2016 (As Amended +and Restated as of February 7, 2018) +A-1 +Appendix B – Forward-Looking Statements and Non-GAAP Reconciliation +Tables +B-1 +2018 +PROXY +STATEMENT +4 +Table of Contents +Proxy Statement Summary +This +summary highlights key information that can be found in greater detail elsewhere in this Proxy Statement. This summary does not contain all of the information that shareholders +should consider, and shareholders should read the entire Proxy Statement before voting. +Our Brand Portfolio +Wolverine Worldwide has a portfolio of brands organized into four key operating groups in fiscal 2017 as illustrated below: +Strategic Focus +In 2017, the Company successfully executed against the WOLVERINE WAY FORWARD, an enterprise-wide initiative to transform the Company in light +of the fast changing retail environment, making progress in all four areas of key focus, or "sprint lanes:" Innovation & Growth; Operational Excellence; Portfolio Management; and People and +Teams. Key executions included: +• portfolio management — divesture of the Bates Department of Defense business and the Sebago brand and the licensing of the +Stride Rite brand +• improving speed to market with a faster, more efficient sourcing structure +• progressing toward the Company's 12% adjusted operating margin goal ahead of schedule +• transforming our consumer footprint by closing 215 stores and intensifying focus on eCommerce investment and growth +• building a team with a consumer-focused skillset +With +much of this heavy lifting behind, the Company is now focusing on organic growth with its new GLOBAL GROWTH AGENDA, which is comprised of three key elements: +Powerful Product Creation Engine +Digital-Direct Offense +International Expansion +• +Relentless and frequent +introduction of craveable product +• +Capitalization on new creative design capabilities, stronger consumer insights, and a faster supply chain +• +Seamless consumer +interaction through more effective digital engagement +• +Drive owned eCommerce growth beyond 20% +• +Improve online businesses of our retail customers and enhance brand positioning +• +Invest in regional +resources and systems to accelerate international growth +• +Key focus on growth in China and the Asia Pacific region +2018 +PROXY +STATEMENT +5 +Table of Contents +Shareholders +are being asked to vote on the following matters at the 2018 Annual Meeting of Shareholders: +PROPOSAL +BOARD VOTE +RECOMMENDATION +PAGE +REFERENCE +1. +Election of Directors for Terms Expiring in 2021 +FOR each Nominee +14 +2. +Advisory Resolution Approving NEO Compensation +FOR +69 +3 +Ratification of Ernst & Young LLP as Auditor for Fiscal Year 2018 +FOR +70 +4. +Approval of the Stock Incentive Plan of 2016 (as amended and restated) +FOR +86 +ELECTION OF DIRECTORS FOR TERMS EXPIRING IN 2021 +The Company's Board consists of 11 directors. The Company's By-Laws establish three classes of directors, with each class being as nearly +equal in number as possible and serving three-year terms. +The +Board has nominated three directors for election at the Annual Meeting, as outlined in the table below. Each director has been nominated to serve for a three-year term expiring at the annual +meeting of shareholders to be held in 2021. The Board recommends that shareholders vote "FOR" each of the nominees named below. +Age +Director Since +Independent +Other Public Directorships +Committees +Proposed Term +Expiration +Roxane Divol +Former Executive Vice President and General Manger, Website Security for Symantec Corporation +45 +2014 +✓ +None +Audit +Governance +2021 +Joseph R. Gromek +Retired President, Chief Executive Officer and Director of The Warnaco Group, Inc. +71 +2008 +✓ +Guess?, Inc. +The Children's Place Retail Stores, Inc. +Compensation (Chair) +Governance +2021 +Brenda J. Lauderback +Retired President of Wholesale and Retail Group of Nine West Group, Inc. +67 +2003 +✓ +Denny's Corporation (Board Chair) +Sleep Number Corporation +Audit +Governance +2021 +Board Highlights +The following pie charts illustrate key characteristics of the Company's Board: +2018 +PROXY +STATEMENT +6 +Table of Contents +Board is Composed of Directors with the Right Mix of Skills and Experiences +The following chart lists the important experiences and attributes that the Company's Directors possess: +Shareholder Engagement +Our Board takes shareholder feedback very seriously, as evidenced by the meaningful changes made to our compensation and governance programs +over the last several years. Most notable were the significant changes made to our executive compensation program in advance of our annual meeting last year. Shareholder response to these changes was +overwhelmingly positive, which translated to 98% support for our say on pay proposal. As part of its ongoing shareholder engagement efforts, the Company reached out again in 2018 to shareholders +representing 60% of its outstanding shares and has held or expects to hold telephonic meetings with all shareholders who accepted (representing about 13% of outstanding shares). Discussions focused on +Company strategy, financial performance, governance and compensation programs. +Corporate Governance Highlights +Wolverine Worldwide is committed to a governance structure that provides strong shareholder rights and meaningful accountability. +✓ +Highly independent Board (All Non-Management Directors) and Committees +✓ +Lead Independent Director with clearly defined role +✓ +Majority voting with director +resignation policy +✓ +No supermajority vote requirements +✓ +Shareholder right to act by written consent +✓ +Annual Board and Committee self-evaluations +✓ +Robust Board and executive +succession planning, including annual written director nominee evaluations +✓ +Long-standing commitment toward diversity +✓ +Director onboarding orientation program +✓ +Active shareholder engagement +practices +2018 +PROXY +STATEMENT +7 +Table of Contents +Compensation Best Practices +What we do +What we do not do +✓ +Vast majority of pay is at risk or variable, i.e., performance based or equity based or both +✓ +Stringent share ownership requirements (6x base salary for CEO) +✓ +Broad based clawback +policy +✓ +Significant vesting horizon for equity grants +✓ +Double trigger equity acceleration (for grants in 2017 and beyond) after change in control +✓ +Independent Compensation Committee Consultant +✗ +No dividends or dividend equivalents on unearned performance shares/units +✗ +No repricing or replacing of underwater stock options +✗ +No overlapping metrics +✗ +No excessive or unnecessary perquisites +✗ +No hedging, pledging, or short +sales of Company stock +The +below graphics illustrate how the increased percentage of NEO target compensation that is at risk increased in 2017 as well as a comparison of CEO annual bonus compared to target opportunity and +Company TSR, reflecting the Company's pay for performance philosophy. +CEO 2016 vs. 2017 Target Total Compensation +Other NEO 2016 vs. 2017 Target Total Compensation +2018 +PROXY +STATEMENT +8 +Table of Contents +2018 +PROXY +STATEMENT +9 +Table of Contents +Corporate Governance +Wolverine +Worldwide is committed to the highest level of corporate governance, and the Board has adopted its Corporate Governance Guidelines to strengthen management accountability and +promote long-term shareholder interests. These governance practices include: +✓ +Highly independent Board (All Non-Management Directors) and Committees +✓ +Lead Independent Director with clearly defined role +✓ +Majority voting with director +resignation policy +✓ +No supermajority vote requirements +✓ +Shareholder right to act by written consent +✓ +Annual Board and Committee self-evaluations +✓ +Robust Board and executive +succession planning, including annual written director nominee evaluations +✓ +Long-standing commitment toward diversity +✓ +Director onboarding orientation program +✓ +Active shareholder engagement +practices +BOARD OF DIRECTORS +The shareholders elect directors to serve on the Company's Board of Directors (the "Board of Directors" or "Board"). The Board oversees the +management of the business by the Chief Executive Officer ("CEO") and senior management. In addition to its general oversight function, the Board's additional responsibilities include, but are not +limited to, the following: +• Reviewing and approving the Company's key objectives and strategic business plans and monitoring implementation of those plans and the +Company's success in meeting identified objectives +• Selecting, evaluating and compensating the CEO and overseeing CEO succession planning +• Providing advice and oversight regarding the selection, evaluation, development and compensation of management +• Overseeing the Company's risk management and mitigation activities +• Reviewing and monitoring administration of the policies and procedures to safeguard the integrity of the Company's business operations and +financial reporting and to promote compliance with applicable laws and regulations +Board Composition +Board Highlights +The +Board prides itself on its ability to recruit and retain directors who have high personal and professional integrity and have demonstrated exceptional ability and judgment to effectively serve +shareholders' long-term interests. These skills and attributes also link with the Company's most important strategic objectives, such as eCommerce and digital growth, brand building, operational +excellence and supply chain management, and international growth. The Board also values diversity, as evidenced by the current makeup of the Board. The Board believes that its directors, including the +nominees for election as directors at the Annual Meeting, have these characteristics and valuable skills that provide the Company with the variety and depth of knowledge, judgment and strategic vision +necessary to provide effective oversight of the Company. +To +help accomplish this, and to assist in succession planning, the Board, at the recommendation of the Governance Committee, has identified specified skills and attributes it desires its members to +possess. The below graphic lists these skills and attributes and indicates which of the directors possess each. As shown, these skills and attributes are well represented within the Board. +2018 +PROXY +STATEMENT +10 +Table of Contents +The +Governance Committee reviews with the Board on an annual basis the appropriate skills and characteristics desired of Board members in the context of the current makeup of the Board. The Board, +with the assistance of the Governance Committee, annually assesses the current composition of the Board across many dimensions. As set forth in the Company's Corporate Governance Guidelines, which are +posted on its website, this assessment addresses the above referred skills and attributes and the individual performance, experience, age and skills of each director. +Director Nominations +The Board's Governance Committee serves as its nominating committee. The Governance Committee, in anticipation of upcoming director elections +and other potential or expected Board vacancies, evaluates qualified individuals and recommends candidates to the Board. The Governance Committee may retain a search firm or other external parties to +assist it in identifying candidates, and the Governance Committee has the sole authority to approve the search firm's fees and retention terms, and to terminate the firm if necessary. +The +Governance Committee considers candidates suggested by directors, senior management or shareholders. Shareholders may recommend individuals as potential director candidates by communicating with +the Governance Committee through one of the Board communication mechanisms described under the heading " Shareholder Communications Policy ." Shareholders +that wish to nominate a director candidate must comply with the procedures set forth in the Company's By-Laws, which are posted on its website. Ultimately, upon the recommendation of the Governance +Committee, the Board selects the director nominees for election at each annual meeting. In selecting director nominees, the Board considers candidates' performance as a director (which is assessed +through an anonymous written peer evaluation), personal and professional integrity, ability and judgment, and likelihood to be effective, in conjunction with the other nominees and directors, in +serving the long-term interests of the shareholders. The Governance Committee also considers candidates' relative skills, attributes, background and characteristics; independence under applicable New +York Stock Exchange ("NYSE") listing standards and the Company's Director Independence Standards; potential to contribute to the composition and culture of the Board; and ability and willingness to +actively participate in the Board and committee meetings and to otherwise devote sufficient time to Board duties. +BOARD SELF-ASSESSMENT +As part of an annual self-assessment, each director evaluates the performance of the Board, and any committee on which he or she serves, +across a number of dimensions. Mr. Kollat, as the Lead Independent Director working with the Governance Committee, reviews the Board self-assessment with directors following the end of each +fiscal year, and conducts individual director interviews at the end of each year. Committee Chairpersons review the committee self-assessments with their respective +committee members and discuss them with the Board. In addition, the Governance Committee, working with the Lead Independent Director, develops and implements guidelines for evaluating all directors +standing for nomination and re-election. +2018 +PROXY +STATEMENT +11 +Table of Contents +The Corporate Governance Guidelines (including the Director Independence Standards), the Charter for each Board standing committee (Audit, Compensation and Governance), the Company's Certificate of +Incorporation, By-Laws, Code of Business Conduct, and its Accounting and Finance Code of Ethics all are available on the Wolverine Worldwide website at: +www.wolverineworldwide.com/investor-relations/corporate-governance/ +The Board and applicable committees annually review these and other key governance documents. +RISK OVERSIGHT +The Board oversees the Company's risk management and mitigation activities with a focus on the most significant risks facing the Company, +including strategic, operational, financial, and legal compliance risks. This oversight is conducted through presentations by and discussions with the CEO, Chief Financial Officer ("CFO"), General +Counsel or Associate General Counsel, Chief Information Officer, brand and department leaders and other members of management. The Vice President of Internal Audit and Risk Compliance coordinates +management's day-to-day risk management and mitigation efforts, and reports directly to the Audit Committee. +The +Vice President of Internal Audit and Risk Compliance reviews with the Audit Committee regularly, and with the full Board periodically, management's risk assessment and mitigation strategies. In +addition to the above processes, the Board has delegated risk management and mitigation oversight responsibilities to its standing committees, which meet regularly to review and discuss specific risk +topics that align with their core responsibilities. +• The Audit Committee reviews the Company's approach to risk management generally. The Audit Committee also oversees the Company's risk policies +and processes relating to its financial statements and financial reporting processes, credit risks, and liquidity risks, as well as the Company's management of risks related to cybersecurity. The +Audit Committee discusses with management and the independent auditors significant risks or exposures and the steps taken by management to resolve them. +• The Compensation Committee monitors the risks associated with management resources; organization structure; succession planning, hiring, +development and retention processes; and it reviews and evaluates risks associated with the Company's compensation structure and programs. +• The Governance Committee oversees risks related to the Company's governance structure and processes and potential risks arising from related +person transactions. +The +Company reviewed its compensation policies and practices to assess whether they are reasonably likely to have a material adverse effect on the Company. As part of this review, the Company compiled +information about the Company's incentive plans, including reviewing the Company's compensation philosophy, evaluating key incentive plan design features and reviewing historic payout levels and pay +mix. With assistance from Company management and its independent compensation consultant, the Compensation Committee reviewed the executive compensation program, and managers from the Company's human +resources and legal departments reviewed the non-executive compensation programs. +CODE OF BUSINESS CONDUCT AND ACCOUNTING AND FINANCE CODE OF ETHICS +The Board has adopted a Code of Business Conduct for the Company's directors, officers and employees. The Board also has adopted an Accounting +and Finance Code of Ethics ("Accounting and Finance Code") that focuses on the financial reporting process and applies to the Company's CEO, CFO and Corporate Controller. +The Company discloses amendments to or waivers from its Code of Business Conduct affecting directors or executive officers and amendments to or waivers from its Accounting and Finance Code on its +website at: +www.wolverineworldwide.com/investor-relations/corporate-governance/ +2018 +PROXY +STATEMENT +12 +Table of Contents +SHAREHOLDER COMMUNICATIONS POLICY +Shareholders and other interested parties may send correspondence to the Board, the non-employee directors as a group, a specific Board +committee or an individual director (including the Lead Director) in the manner described below. +The +General Counsel or Associate General Counsel will provide a summary and copies of all correspondence (other than solicitations for services, products or publications) as applicable at each +regularly scheduled meeting. +Communications may be sent via email through various links on our website at: +www.wolverineworldwide.com/investor-relations/corporate-governance/ +or by regular mail c/o General Counsel, Wolverine World Wide, Inc., 9341 Courtland Drive, N.E., Rockford, MI 49351. +The +General Counsel or Associate General Counsel will alert individual directors if an item warrants a prompt response from the individual director prior to the next regularly scheduled meeting. Items +warranting a prompt response, but not addressed to a specific director, will be routed to the applicable committee Chairperson. +2018 +PROXY +STATEMENT +13 +Table of Contents +Proposal 1 — Election of Directors for Terms Expiring +in 2021 +The Company's Board consists of 11 directors. The Company's By-Laws establish three classes of directors, with each class being as nearly equal in number as possible and serving three-year terms. At +each annual meeting, the term of one class expires. The Board has nominated three directors for election at the Annual Meeting: Roxane Divol, Joseph R. Gromek, and Brenda J. Lauderback. Each director +has been nominated to serve for a three-year term expiring at the annual meeting of shareholders to be held in 2021 or until his/her successor, if any, has been elected and is qualified. +Mr. Gromek and Mses. Divol and Lauderback are independent directors, as determined by the Board under the applicable NYSE listing standards and the +Company's Director Independence Standards. Each director nominee currently serves on the Board. The shareholders elected Mr. Gromek and Mses. Divol and Lauderback at the Company's 2015 annual +meeting by affirmative vote of at least 98% of shares voted. +The +Company is not aware of any nominee who will be unable or unwilling to serve as a director. However, if a nominee is unable to serve or is otherwise unavailable for election, the incumbent +directors may or may not select a substitute nominee. If the directors select a substitute nominee, the proxy holder will vote the shares represented by all valid proxies for the substitute nominee +(unless other instructions are given). +The +biographies of the three nominees and the other directors of the Company are below, along with a discussion of the experience and skills of each director. +2018 +PROXY +STATEMENT +14 +Table of Contents +Director Nominees with Proposed Terms +Expiring in 2021 +ROXANE DIVOL +Age: +45 +Director Since: +October 2014 +Select Business Experience: +Former Executive Vice President and +General Manager, Website +Security for Symantec +Corporation +Board Committees: +Audit +Governance +Other Public Directorships: +None +Career Highlights: +Ms. Divol was Executive Vice President and General Manager, Website Security, for Symantec Corporation, a global leader in information security solutions from February 2017 until January 2018. From 2014 to February 2017, Ms, Divol was Senior +Vice President and General Manager, Website Security for Symantec. From 2013 to 2014, Ms. Divol was Senior Vice President of Alliances with Symantec. Ms. Divol joined Symantec from McKinsey & Company, a global management consulting +firm, where she was a partner in its San Francisco office and led the West Coast marketing and sales practice, with a focus on marketing return on investment and marketing transformation. +Experience and Skills: +Ms. Divol's experience with Symantec Corporation and McKinsey & Company provides her with expertise in international business, marketing, digital/eCommerce and information technology. In 2017, Ms. Divol was named one of the 50 most +powerful women in technology by the National Diversity Council. +2018 +PROXY +STATEMENT +15 +Table of Contents +JOSEPH R. GROMEK +Age: +71 +Director since: +2008 +Select Business Experience: +Retired President, Chief +Executive Officer +and Director of +The Warnaco Group, Inc. +Board Committees: +Compensation (Chair) +Governance +Other Public Directorships: +Guess?, Inc. +The Children's Place Retail Stores, Inc. +Career Highlights: +From 2003 until his retirement in 2012, Mr. Gromek served as President, Chief Executive Officer and a director of The Warnaco Group, Inc., a publicly traded company. Mr. Gromek also served as Chief Executive Officer of Brooks Brothers, +Inc. from 1995 until 2002. He served as Chairman of the Board of Tumi, Inc. from 2013 until its acquisition by Samsonite International S.A. in 2016. He currently serves as a director of Guess?, Inc., an apparel wholesaler and +retailer, and The Children's Place Retail Stores, Inc., a children's clothing retailer. Mr. Gromek is also a director of Stanley M. Proctor Company, a privately held company. +Experience and Skills: +Having served for more than 40 years in the retail and apparel industries, including 30 years managing and marketing apparel brands and a collective 15 years as the chief executive officer of two leading, multi-national apparel +companies, Mr. Gromek has expertise in apparel, retail and international business. His service as a senior executive and director at various public companies has given him extensive leadership experience in public company governance and related +matters. +2018 +PROXY +STATEMENT +16 +Table of Contents +BRENDA J. LAUDERBACK +Age: +67 +Director since: +2003 +Select Business Experience: +Retired President of the +Wholesale and Retail Group +of Nine West Group, Inc. +Board Committees: +Audit +Governance +Other Public Directorships: +Denny's Corporation (Board Chair) +Sleep Number Corporation +Career Highlights: +From 1995 until her retirement in 1998, Ms. Lauderback was President of the Wholesale and Retail Group of Nine West Group, Inc., a footwear wholesaler and distributor. She previously was the President of the Wholesale Division of U.S. Shoe +Corporation, a footwear manufacturer and distributor, a position that included responsibility for offices in China, Italy and Spain, and she was a Vice President/General Merchandise Manager of Dayton Hudson Corporation (now Target Corporation), a +retail company. During the preceding five years, Ms. Lauderback also was, but no longer is, a director of Big Lots, Inc., a retail company. +Experience and Skills: +Ms. Lauderback has more than 25 years of experience in the retail industry, with more than 20 years in the footwear, apparel, and accessories industries. These senior leadership positions have provided her with strong footwear, apparel +and retail expertise. With her service on publicly traded company boards, including Denny's Corporation, a restaurant company, and Sleep Number Corporation, a bed manufacturer and retailer, and as a director of Wolverine Worldwide, she also has +extensive experience with public company governance and related matters. Ms. Lauderback was named to the National Association of Corporate Directors' (NACD) 2017 Directorship 100 list. +BOARD RECOMMENDATION +The Board recommends that you vote "FOR" the election of the above nominees for proposed terms expiring in 2021. +2018 +PROXY +STATEMENT +17 +Table of Contents +Directors with Terms +Expiring in 2019 +JEFFREY M. BOROMISA +Age: +63 +Director since: +2006 +Select Business Experience: +Retired Executive Vice +President of Kellogg +International, President of Latin +America; Senior Vice President of +Kellogg Company +Board Committees: +Audit +Compensation +Other Public Directorships: +None +Career Highlights: +Mr. Boromisa worked at Kellogg Company, a global food manufacturing company, and its affiliates from 1981 to 2009. From 2008 through his retirement in May 2009, Mr. Boromisa was Executive Vice President of Kellogg International, President +of Latin America; and Senior Vice President of Kellogg Company. From 2007 until 2008, Mr. Boromisa served as Executive Vice President of Kellogg International, President of Asia Pacific and Senior Vice President of Kellogg Company. From 2004 +through 2006, he was Senior Vice President and Chief Financial Officer of Kellogg Company. In addition, beginning in 2004 and through his retirement, Mr. Boromisa was a member of Kellogg Company's Global Leadership Team. Prior to 2004, +Mr. Boromisa occupied various leadership positions with Kellogg. Mr. Boromisa is also a director at Haworth International, Inc., a privately held, multinational, office furniture design and manufacturing company. +Experience and Skills: +With nearly 30 years of experience at Kellogg Company, including serving as its chief financial officer and leading various operational business units, Mr. Boromisa has obtained international business, brand building and finance +expertise. +2018 +PROXY +STATEMENT +18 +Table of Contents +GINA R. BOSWELL +Age: +55 +Director since: +2013 +Select Business Experience: +President, Customer Development, +Unilever U.S.A. +Board Committees: +Compensation +Governance +Other Public Directorships: +ManpowerGroup Inc. +Career Highlights: +Since May 2017, Ms. Boswell has been President, Customer Development for Unilever U.S.A., one of the largest markets for Unilever PLC / Unilever N.V., a multinational consumer goods company whose products include Dove, Vaseline, Lipton, +and Hellman's. From July 2015 to May 2017, Ms. Boswell served as Executive Vice President and General Manager for Unilever UK & Ireland. From 2011 to July 2015, Ms. Boswell served as Executive Vice President, Personal Care for +Unilever PLC / Unilever N.V. From 2008 to 2011, Ms. Boswell served as President, Global Brands, for The Alberto Culver Company, a consumer goods company. Ms. Boswell has held numerous other senior leadership positions with other +leading global companies, including Avon Products, Inc., Ford Motor Company, and Estee Lauder Companies, Inc. Ms. Boswell is a member of the board of ManpowerGroup Inc., a publicly traded workforce solutions company, where she is +also the chairperson of the audit committee. +Experience and Skills: +Through senior leadership roles with leading branded companies, Ms. Boswell has obtained expertise in brand building, international business, marketing, digital/eCommerce and finance. +2018 +PROXY +STATEMENT +19 +Table of Contents +DAVID T. KOLLAT +Age: +79 +Director since: +1992 +Select Business Experience: +President and Chairman, +22, Inc. +Board Committees: +Independent Lead Director +Other Public Directorships: +L Brands, Inc. +Sleep Number Corporation +Career Highlights: +Mr. Kollat has been Chairman and President of 22, Inc., a company specializing in research and management consulting for retailers and consumer goods manufacturers, since 1987. In addition to his marketing and management experience as +Chairman and President of 22, Inc., Mr. Kollat served for 11 years in senior leadership positions at L Brands, Inc., a publicly traded, multinational apparel and retail company, including as Executive Vice President, Marketing, +President of Victoria's Secret Direct, and as a member of its executive committee. Mr. Kollat is Lead Independent Director of Wolverine Worldwide, a position he has held since 2007. Mr. Kollat has been a director of L Brands, Inc. +since 1976 and a director of Sleep Number Corporation, a bed manufacturer and retailer, since 1994. +Experience and Skills: +Mr. Kollat's more than 40 years' experience at L Brands, Inc. and 22, Inc. has provided him with marketing, apparel, international business, brand building, retail and finance expertise. He also has significant experience with +company governance and related matters through service on more than twenty boards of directors, including extensive service on public company boards, and service as a lead independent director and chair of nominating, audit and compensation +committees. +2018 +PROXY +STATEMENT +20 +Table of Contents +TIMOTHY J. O'DONOVAN +Age: +72 +Director since: +1993 +Select Business Experience: +Retired Chairman and Chief +Executive Officer of +Wolverine World Wide, Inc. +Board Committees: +None +Other Public Directorships: +SpartanNash Company +Career Highlights: +Mr. O'Donovan served as Chairman of the Board of Wolverine Worldwide from 2007 until 2009. From April 2005 until 2007 he served Wolverine Worldwide as Chief Executive Officer and Chairman. Mr. O'Donovan served Wolverine Worldwide as its +Chief Executive Officer and President from April 2000 until April 2005, and as Chief Operating Officer and President from 1996 until April 2000. Prior to 1996, Mr. O'Donovan held various senior leadership positions with the Company, including +Executive Vice President of Wolverine Worldwide. Mr. O'Donovan is lead independent director of SpartanNash Company, a grocery distribution and retail company. During the preceding five years, Mr. O'Donovan was, but no longer is, a director +of Kaydon Corporation, a publicly traded company that designed and manufactured custom engineered products. +Experience and Skills: +Mr. O'Donovan has obtained footwear and apparel, international business, brand building and finance expertise through his more than 40 years with the Company. His service on public company boards has provided him with public company +governance and related experience. +2018 +PROXY +STATEMENT +21 +Table of Contents +Directors with Terms +Expiring in 2020 +WILLIAM K. GERBER +Age: +64 +Director since: +2008 +Select Business Experience: +Managing Director of +Cabrillo Point Capital LLC +Board Committees: +Audit (Chair) +Compensation +Other Public Directorships: +AK Steel Holding Corporation +Career Highlights: +Mr. Gerber is Managing Director of Cabrillo Point Capital LLC, a private investment fund. He has held that position since 2008. From 1998 to 2007, Mr. Gerber was Executive Vice President and Chief Financial Officer of Kelly Services, +Inc., a publicly traded global staffing solutions company with operations in more than 35 countries. Mr. Gerber served in various leadership positions with L Brands, Inc., a multinational apparel and retail company, prior to joining +Kelly Services, Inc. Mr. Gerber is a director of AK Steel Holding Corporation, an innovative steel solutions provider. During the preceding five years, Mr. Gerber was, but no longer is, a director of Kaydon Corporation, a publicly +traded company that designed and manufactured custom engineered products. +Experience and Skills: +From his 15 years in senior leadership positions with L Brands, Inc. and Kelly Services, Inc., Mr. Gerber has obtained extensive experience in apparel, retail, international business and finance, and his service as a director of +various public companies has given him experience with public company governance and related matters. +2018 +PROXY +STATEMENT +22 +Table of Contents +BLAKE W. KRUEGER +Age: +64 +Director since: +2006 +Select Business Experience: +Chairman, Chief Executive +Officer and President of +Wolverine World Wide, Inc. +Board Committees: +None +Other Public Directorships: +None +Career Highlights: +Mr. Krueger is Chairman of Wolverine Worldwide, a position he assumed in January 2010, and Chief Executive Officer and President of Wolverine Worldwide, positions he assumed in April 2007. From October 2005 until April 2007, Mr. Krueger +served as President and Chief Operating Officer of Wolverine Worldwide. From 2004 to October 2005, he served as Executive Vice President and Secretary of Wolverine Worldwide and President of its Heritage Brands Group. From 2003 to 2004, +Mr. Krueger served as Executive Vice President and Secretary of Wolverine Worldwide and President of the Company's Caterpillar Footwear Group. He also previously served as Executive Vice President, General Counsel and Secretary of Wolverine +Worldwide with various responsibilities including the human resources, retail, business development, accessory licensing, mergers and acquisitions, and legal areas. Mr. Krueger serves as a director of Bissell Homecare, Inc., a privately +held company and leading brand of floor care appliances. +Experience and Skills: +Mr. Krueger's more than 20 years in senior leadership roles with the Company have provided him expertise in footwear and apparel, retail, international business and finance, and his board experience at the Company and Professionals Direct, +Inc., a then publicly traded insurance company, has given him extensive experience with public company governance and related matters. +2018 +PROXY +STATEMENT +23 +Table of Contents +NICHOLAS T. LONG +Age: +59 +Director since: +2011 +Select Business Experience: +Retired Chief Executive Officer of +MillerCoors LLC +Board Committees: +Compensation +Governance +Other Public Directorships: +Amcor Limited +Career Highlights: +From 2011 until his retirement in 2015, Mr. Long served as Chief Executive Officer of MillerCoors LLC, a joint venture between two publicly traded beverage companies. From 2008 to 2011, Mr. Long served as President and Chief Commercial +Officer of MillerCoors. From 2007 to 2008, Mr. Long served as Chief Executive Officer of Miller Brewing Company, a beverage company, and he served as Chief Marketing Officer of Miller Brewing Company from 2005 to 2007. Prior to joining Miller +Brewing Company, Mr. Long spent 17 years in various senior leadership positions at The Coca Cola Company, a beverage company, including Vice President of Strategic Marketing, Global Brands, Vice President, Strategic Marketing Research and +Trends, President of Coca Cola's Great Britain and Ireland Division and President of the Northwest Europe Division. +Experience and Skills: +Through his more than 20 years in senior positions at category leading, branded companies, Mr. Long has developed significant marketing, international business and brand building expertise. +2018 +PROXY +STATEMENT +24 +Table of Contents +MICHAEL A. VOLKEMA +Age: +62 +Director since: +2005 +Select Business Experience: +Chairman of Herman Miller, Inc. +Board Committees: +Audit +Governance (Chair) +Other Public Directorships: +Herman Miller, Inc. +Career Highlights: +Mr. Volkema has been Chairman of Herman Miller, Inc., a publicly traded multinational furniture manufacturer, since 2000. Mr. Volkema became President and Chief Executive Officer of Herman Miller in 1995 and held those positions until +2003 and 2004, respectively. Mr. Volkema also is a director at Milliken & Company, a privately held, innovation based company serving the textile, chemical, and floor covering markets. +Experience and Skills: +Mr. Volkema has obtained international business and brand building expertise from his more than 20 years in senior leadership positions with Herman Miller, Inc. Mr. Volkema also has public company governance and related experience +from his extensive service on public company boards, including 16 years as Chairman of Herman Miller, Inc. and service on compensation and audit committees of boards of publicly traded companies. +2018 +PROXY +STATEMENT +25 +Table of Contents +BOARD LEADERSHIP +The Company's CEO currently also serves as the Chairman of the Board. Since 1993, the Company has had a lead independent director who +functions in many ways similar to an independent Chairman. This long established structure provides the Board with independent oversight of the CEO's leadership. On an annual basis, the independent +directors consider the appropriate leadership structure, including whether to separate the roles of Chairman and CEO, based upon the Board and Company's then current circumstances. The independent +directors believe that the Board's current structure is appropriate at this time, and set the following enumerated responsibilities for the lead independent +director: +• Serve, as necessary, as a liaison between the Chairman and the independent directors +• Preside over Board meetings in the absence of the Chairman +• Review, approve and help develop the agendas and scheduling for Board and committee meetings +• Review and approve information and meeting materials sent to the Board +• Preside over executive sessions, with the authority to call executive sessions +• Work with the Compensation Committee and members of the Board to provide an effective annual performance review of the CEO and participate in +CEO succession planning +• Oversee, along with the Governance Committee, the annual Board and committee evaluations +• Be available for consultation and communication with shareholders, as appropriate +DIRECTOR INDEPENDENCE +The Board annually assesses the independence of all directors. To qualify as "independent," the Board must affirmatively determine that the +director is independent under the Company's Director Independence Standards, which are modeled after the listing standards of the NYSE. Under NYSE listing standards, the Board has determined that 10 +of the Company's 11 directors are independent. Only Mr. Krueger, the Company's CEO, is not independent. All of the Board's committees are comprised entirely of independent directors. The +independent directors generally meet in executive session at each regularly scheduled meeting. +The +Director Independence Standards define an "Independent Director" as a director who the Board determines otherwise has no material relationship with the Company (either directly or as a partner, +shareholder or officer of an organization that has a relationship with the Company), and who: +• Is not, and in the past three years has not been, an employee of the Company +• Does not have, and has not had within the last three years, an immediate family member employed as an executive officer of the Company +• Has not received, and has not had an immediate family member receive during any 12 month period within the last three years, any direct +compensation from the Company in excess of $120,000 (other than compensation for Board service; compensation received by the director for former service as an interim Chairman, CEO or other executive +officer; compensation received by the director's immediate family member for service as a non-executive employee; or pension and other forms of deferred compensation for prior service if such +compensation is not contingent in any way on continued service) +• Is not a current employee or partner of a firm that is the Company's internal or external auditor +• Has not been, and has not had an immediate family member who has been within the last three years, a partner or employee of the Company's +internal or external auditor and personally worked on the Company's audit within that time +2018 +PROXY +STATEMENT +26 +Table of Contents +• Has not had an immediate family member who is (i) a current partner of the Company's internal or external auditor, or (ii) a +current employee of the Company's internal or external auditor who personally works on the Company's audit +• Is not, and has not been within the last three years, part of an interlocking directorate in which a current executive officer of Wolverine +Worldwide serves or served on the compensation committee of another company where the director or the director's immediate family member concurrently serves or served as an executive officer +• Is not an employee of, and does not have an immediate family member who is an executive officer of, another company that has made payments to, +or received payments from, Wolverine Worldwide for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of $1,000,000 or 2% of the other company's +consolidated gross revenues +• Has not had any other direct or indirect relationship with Wolverine Worldwide that the Board determines is material +BOARD COMMITTEES, MEETINGS AND MEETING ATTENDANCE +The Board has three standing committees: Audit, Compensation and Governance. Each committee meets periodically throughout the year, and +reports its recommendations to the Board. The Company expects directors to attend every meeting of the Board and the committees on which they serve and to attend the annual meeting of shareholders. In +2017, all +directors then serving on the Board attended the 2017 Annual Meeting of Shareholders, and all directors attended at least 75% of the meetings of the Board (5 meetings in 2017) and the committees on +which they served. All directors are typically invited to and attend all committee meetings. +Each +committee annually evaluates its performance to determine its effectiveness. The Board has determined that all committee members are "independent" as defined by NYSE listing standards. +Furthermore, each Audit Committee member satisfies the NYSE "financial literacy" requirement. In addition, the Board has determined that Mr. Boromisa and Mr. Gerber are "audit committee +financial experts" under Securities and Exchange Commission ("SEC") rules. Each committee's charter, with a complete list of the duties and responsibilities is available on the Company's website at www.wolverineworldwide.com/investor-relations/corporate-governance/ . +AUDIT COMMITTEE +Committee Members +• +Gerber (Chair) +• +Boromisa +• +Divol +• +Lauderback +• +Volkema +Number of Meetings in 2017 +6 +Highlighted Responsibilities +• +Appoints, evaluates and +oversees the work of the independent auditors and oversees the internal audit function +• +Oversees the integrity of the Company's financial statements, financial reporting process and internal controls +• +Oversees the Company's policies and systems regarding risk assessment +and management and the Company's compliance with legal and regulatory requirements +2018 +PROXY +STATEMENT +27 +Table of Contents +COMPENSATION COMMITTEE +Committee Members +• +Gromek (Chair) +• +Boromisa +• +Boswell +• +Gerber +• +Long +Number of Meetings in 2017 +8 +Highlighted Responsibilities +• +Assists the Board in +fulfilling its responsibilities relating to executive compensation and the Company's compensation and benefit policies and programs +• +Oversees the overall compensation structure, policies and programs, including whether the compensation structure establishes appropriate +incentives for management and employees +• +Oversees the Company's management of risks relating to management resources, organization structure and succession planning, hiring, development and retention processes, as well as those relating to the Company's +compensation structure, policies and programs +GOVERNANCE COMMITTEE +Committee Members +• +Volkema +(Chair) +• +Boswell +• +Divol +• +Gromek +• +Lauderback +• +Long +Number of Meetings in 2017 +5 +Highlighted Responsibilities +• +Assists the Board in +fulfilling its responsibilities on matters and issues related to the Company's corporate governance practices +• +In conjunction with the Board, establishes qualification standards for membership on the Board and its committees and recommends qualified individuals to become +Board members or serve for re-election as directors +• +Develops and recommends to the Board for its approval an annual self-evaluation process for the Board and its committees, and oversees the evaluation process +2018 +PROXY +STATEMENT +28 +Table of Contents +Non-Employee Director Compensation +in Fiscal Year 2017 +The +Company's non-employee director compensation philosophy is to pay compensation that is competitive with the compensation paid by companies of similar size, in similar industries +and with whom Wolverine Worldwide competes for director candidates. The Governance Committee, with input from management and from the Compensation Committee's independent compensation consultant, +reviewed director compensation and compared it to market data, including a comparison to director compensation for the Company's Peer Group, as defined on page 48, and to that of companies in +the 2015-2016 National Association of Corporate Director Compensation Report. Based on this review non-employee director compensation for fiscal year 2017 did not change from fiscal year 2016 levels. +The following table provides information concerning the compensation of the Company's non-employee directors for fiscal year 2017. Mr. Krueger receives compensation for his services as the +Company's CEO and President, but does not receive any additional compensation for his service as a director or chairman. +Fees Paid in +Cash +Cash Amounts +Voluntarily +Deferred +Cash Amounts +Deferred +Through Annual +Equity Retainers +Fees Earned or +Paid in Cash 1 +Option +Awards 2 +Totals +Boromisa +$97,000 ++ +- ++ +$70,000 += +$167,000 ++ +$50,001 += +$217,001 +Boswell +$90,000 ++ +- ++ +$70,000 += +$160,000 ++ +$50,001 += +$210,001 +Divol +$23,250 ++ +$69,750 ++ +$70,000 += +$163,000 ++ +$50,001 += +$213,001 +Gerber +$117,000 ++ +- ++ +$70,000 += +$187,000 ++ +$50,001 += +$237,001 +Gromek +- ++ +$109,000 ++ +$70,000 += +$179,000 ++ +$50,001 += +$229,001 +Kollat +$130,000 ++ +- ++ +$92,000 += +$222,000 ++ +$63,003 += +$285,003 +Lauderback +$72,750 ++ +$24,250 ++ +$70,000 += +$167,000 ++ +$50,001 += +$217,001 +Long +$94,000 ++ +- ++ +$70,000 += +$164,000 ++ +$50,001 += +$214,001 +O'Donovan +$70,000 ++ +- ++ +$70,000 += +$140,000 ++ +$50,001 += +$190,001 +Volkema +- ++ +$112,000 ++ +$70,000 += +$182,000 ++ +$50,001 += +$232,001 +1 Represents cash payments received or deferred by directors for fiscal year 2017. Directors may defer fees and receive stock units pursuant to the Director +Deferred Compensation Plan (as defined below). The table shows the Fees Earned or Paid in Cash separated into Fees Paid in Cash, Cash Amounts Voluntarily Deferred, and Cash Amounts Deferred +Through Annual Equity Retainers (required as part of the compensation program for directors) that will be paid out in shares of Wolverine Worldwide common +stock. 2 Represents the aggregate grant date fair value of stock options granted to non-employee directors in fiscal year 2017, calculated in accordance with +Accounting Standard Codification ("ASC") Topic 718, without regard to estimated forfeitures. The chart below lists the aggregate outstanding option awards held by non-employee directors at +the end of fiscal year 2017. For valuation assumptions, see the Stock Based Compensation footnote to Wolverine Worldwide's Consolidated Financial Statements for fiscal year 2017 included in +its Form 10-K for this year. +Name +Option Awards Outstanding at +December 30, 2017 +(#) +Name +Option Awards Outstanding at +December 30, 2017 +(#) +Boromisa +78,174 +Kollat +90,476 +Boswell +44,735 +Lauderback +68,304 +Divol +40,002 +Long +60,642 +Gerber +67,864 +O'Donovan +78,174 +Gromek +71,864 +Volkema +55,326 +2018 +PROXY +STATEMENT +29 +Table of Contents +The +following table shows the non-employee director compensation program for fiscal year 2017: +Compensation Plan for 2017 +Component +Cash +Options 1 +Stock Units 2 +Newly Appointed or Elected Director +$0 +Number of options with a grant date value of $65,000, determined using the Black Scholes method. +Annual Director Fee +$70,000 +Number of options with a grant date value of $50,000, determined using the Black Scholes method. +Number of stock units with a grant date value of $70,000, determined by dividing the dollar amount by the closing market price of the Company's common stock on the grant date. Units are credited to the Amended and Restated Outside Directors' +Deferred Compensation Plan, described below. +Audit Committee Annual Fee +$15,000 +Audit Committee Chairperson Annual Fee +$20,000 +Compensation Committee Annual Fee +$12,000 +Compensation Committee Chairperson Annual Fee +$15,000 +Governance Committee Annual Fee +$12,000 +Governance Committee Chairperson Annual Fee +$15,000 +Lead Director Annual Fee +In lieu of the standard Annual Director Fee, the Lead Director was paid a Cash Retainer of $130,000. +In lieu of the standard stock option grant, the Lead Director received a number of stock options with a grant date value of $63,000, calculated in the same manner as the standard grant. +In lieu of the standard stock unit grant, the Lead Director received stock units with a grant date value of $92,000, calculated and credited in the same manner as the standard grant. +1 For fiscal year 2017, Messrs. Boromisa, Gerber, Gromek, Long, O'Donovan and Volkema and Mses. Boswell, Divol and Lauderback each received 9,091 options (11,455 +for Mr. Kollat) granted in May 2017 under the Stock Incentive Plan of 2016. The exercise price of options granted is equal to the closing market price of Wolverine Worldwide's common stock on +the date of grant. Stock options granted to non-employee directors are fully vested upon grant. +2 For fiscal year 2017, one grant was made on +the first business day of each calendar quarter. For fiscal year 2017, the Company credited each of +Messrs. Boromisa, Gerber, Gromek, Long, O'Donovan and Volkema and Mses. Boswell, Divol and Lauderback with an aggregate of 2,739 stock units and credited Mr. Kollat with an aggregate of +3,600 stock units. Stock units granted to our non-employee directors are fully vested on the grant date and are credited under the Amended and Restated Outside Directors' Deferred Compensation Plan +(described below). +The +Company also: +• Pays director expenses associated with Board and committee meetings, other Company functions, and industry functions +• Pays spousal travel expenses associated with certain meetings +• Reimburses directors for some expenses relating to director education +• Provides samples of its products that have nominal value +• Provides office space and administrative assistance to directors who visit Company locations +2018 Updates. After a review of Wolverine's director compensation program compared to both its peer group and broader industry market surveys (FW Cook 2016 +Director Compensation Report and NACD 2016-2017 Compensation Update Report), the Company modified director compensation as follows for 2018. Prior to this update, the Company had not adjusted its +director compensation since 2015: +• Increased overall annual equity grant value by $10,000 +2018 +PROXY +STATEMENT +30 +Table of Contents +• Changed the form of equity to 100% restricted stock units that vest in one year +• Increased the Compensation Committee and Audit Committee chair cash fees by $5,000 +• Added directors as potential participants in the Company's existing Deferred Compensation Plan (formerly known as the Executive Deferred +Compensation Plan), a plan that allows for the deferral of cash fees into general investment options — this option will be in addition to the option to defer under the Director +Deferred Compensation Plan, as described immediately below +Director Deferred Compensation Plan. The Company's Amended and Restated Outside Directors' Deferred Compensation Plan (the "Director Deferred Compensation Plan") +is a supplemental nonqualified deferred compensation plan for non-employee directors. A separate non-employee director deferred compensation plan applies to benefits accrued under that plan before +January 1, 2005. The Director Deferred Compensation Plan permits all non-employee directors to voluntarily defer, at their option, 25%, 50%, 75% or 100% of their director fees. The Company +establishes a book account for each non-employee director and credits the director's account with the annual equity retainer amount as described above and with a number of stock units equal to the +amounts voluntarily deferred, each divided by the closing market price of common stock on the payment/deferral date. The Company also credits director accounts with dividend equivalents on amounts +previously deferred in the form of additional stock units. The amounts credited to director accounts are treated as if invested in Wolverine Worldwide common stock. The number of stock units held in +director accounts is set forth under the "Stock Ownership By Management and Others" table below. +Upon +a director's termination of service, or such later date as a director selects, the Company distributes the stock units in the director's book account in shares of Wolverine Worldwide common stock +in either a single, lump sum distribution or annual installment distributions over a period of up to 20 years (10 years under the plan for benefits accrued before January 1, +2005). The Company converts each stock unit to one share of Wolverine Worldwide common stock. +Upon +a "change in control," the Company distributes to the director, in a single, lump sum distribution, Wolverine Worldwide common stock in a number of shares equal to the stock units credited to a +director's book account. The Deferred Compensation Plan defines "change in control" as any of the following: +• The acquisition by any person, or by more than one person acting as a group, of more than 50% of either (i) the then outstanding shares +of common stock of Wolverine Worldwide or (ii) the total fair market value of Wolverine Worldwide +• The acquisition by any person, or more than one person acting as a group, during the 12 month period from and including the date of the +most recent acquisition, of ownership of 30% or more of the outstanding common stock of Wolverine Worldwide +• The replacement of a majority of the individuals who constitute the Board during any 12 month period by directors whose appointment or +election is not endorsed by a majority of the directors prior to the date of the appointment or election +• The acquisition, during any 12 month period ending on the date of the most recent acquisition, by any person of assets from Wolverine +Worldwide having a gross fair market value of at least 40% of the gross fair market value of all the assets of Wolverine Worldwide immediately before the acquisition +NON-EMPLOYEE DIRECTOR STOCK OWNERSHIP GUIDELINES +Each non-employee director must attain (and maintain) a minimum stock ownership level (including owned shares, the in the money value of stock +options, and stock units under the Directors' Deferred Compensation Plan) equal to six times +the non-employee director annual cash retainer prior to being able to gift or sell any Company stock. During 2017, all non-employee directors were in compliance with these guidelines. +2018 +PROXY +STATEMENT +31 +Table of Contents +Securities Ownership of Officers and Directors and Certain Beneficial Owners +FIVE PERCENT SHAREHOLDERS +The following table sets forth information about those holders known by Wolverine Worldwide to be the beneficial owners of more than five +percent of Wolverine Worldwide's outstanding shares of common stock as of March 12, 2018: +Amount and Nature of Beneficial Ownership of Common Stock +Name and Address of Beneficial Owner +Sole Voting +Power +Sole +Investment +Power +Shared Voting +Power +Shared +Investment +Power +Total +Beneficial +Ownership +Percent +of Class 4 +ArrowMark Colorado +Holdings, LLC 1 +100 Fillmore St., Suite 325 +Denver, CO 80206 +4,787,969 +4,787,969 +- +- +4,787,969 +5.0% +BlackRock, Inc. 2 +55 East 52 nd Street +New York, NY 10055 +11,830,084 +12,032,149 +- +- +12,032,149 +12.6% +The Vanguard Group 3 100 +Vanguard Boulevard +Malvern, PA 19355 +183,790 +8,446,510 +12,875 +188,840 +8,635,350 +9.1% +1 Based solely on information set forth in a Schedule 13G/A filed on February 9, 2018. 2 Based solely on +information set forth in a Schedule 13G/A filed on January 19, 2018. 3 +Based solely on information set forth in a Schedule 13G/A filed on February 9, 2018. 4 Based on 95,248,198 shares outstanding as of March 12, +2018. +2018 +PROXY +STATEMENT +32 +Table of Contents +STOCK OWNERSHIP BY MANAGEMENT AND OTHERS +The following table sets forth the number of shares of common stock beneficially owned as of March 12, 2018, by each of the Company's +directors and named executive officers and all of the Company's directors and executive officers as a group: +Amount and Nature of Beneficial Ownership of Common Stock 1 +Deferred +Stock Units, +Sole Voting +and/or +Investment +Power 2,3 +Shared Voting or +Investment +Power 4 +Stock +Options 5 +Total +Beneficial +Ownership +Percent +of Class 6 +Jeffrey M. Boromisa +67,674 +27,972 +71,864 +167,510 +* +Gina R. Boswell +11,517 +- +44,735 +56,252 +* +Roxane Divol +17,406 +- +40,002 +57,408 +* +William K. Gerber +40,257 +- +61,994 +102,251 +* +Joseph R. Gromek +110,877 +- +71,864 +182,741 +* +David T. Kollat +304,018 +- +84,166 +388,184 +* +Blake W. Krueger +1,202,522 +39,739 +1,186,700 +2,428,961 +2.52% +Brenda J. Lauderback +62,235 +- +61,994 +124,229 +* +Nicholas T. Long +18,776 +- +60,642 +79,418 +* +Timothy J. O'Donovan +584,565 +- +61,994 +646,559 +* +Todd W. Spaletto +9,819 +- +- +9,819 +* +Michael D. Stornant +156,326 +- +161,764 +318,090 +* +Michael A. Volkema +63,913 +- +55,326 +119,239 +* +Richard J. Woodworth +120,186 +- +83,689 +203,875 +* +James D. Zwiers +125,067 +154,025 +209,100 +488,192 +* +All directors and executive officers as a group (17 people) +3,042,827 +221,736 +2,410,665 +5,675,228 +5.81% +* Represents beneficial ownership of less than 1%. +1 The numbers of shares stated are based on information provided by each person listed and include shares personally owned of record and shares that, under applicable +regulations, are considered to be otherwise beneficially owned. 2 These numbers include restricted shares and performance shares held, which are subject to forfeiture if the terms +of the award are not satisfied and also include +deferred stock units held by directors under the Directors' Deferred Compensation Plan. 3 The table does not include the following time-vested restricted stock units and +performance units owned by NEOs as of March 12, 2018: +Restricted +Units +Performance +Units +Krueger +109,753 +288,381 +Spaletto +26,892 +48,957 +Stornant +24,764 +41,817 +Woodworth +22,230 +37,737 +Zwiers +23,604 +40,069 +4 These numbers include shares over which the listed person is legally entitled to share voting or investment power by reason of joint ownership, trust or other contract +or property right and shares held by spouses, children or other relatives over whom the listed person may have influence by reason of such relationship. 5 The numbers represent +shares that may be acquired within 60 days after March 12, 2018, by the exercise of stock options granted under Wolverine's various +stock option plans. These numbers are also included in the Total Beneficial Ownership column. 6 As of March 12, 2018, based on 95,248,198 shares outstanding on that date plus +the number of stock options exercisable by the specified person(s) within +60 days of March 12, 2018, as indicated in the "Stock Options" column. +2018 +PROXY +STATEMENT +33 +Table of Contents +Compensation Discussion +and Analysis +SUMMARY +The Company's Compensation Discussion and Analysis ("CD&A") provides an overview and analysis of the executive compensation program for the Company's named executive officers ("NEOs"). For 2017, the +Company's NEOs were: +Blake W. Krueger +Chairman, Chief Executive Officer and President +Todd W. Spaletto +President, Wolverine Outdoor & Lifestyle Group +Michael D. Stornant +Senior Vice President, Chief Financial Officer and Treasurer +Richard J. Woodworth +President, Wolverine Boston Group +James D. Zwiers +Executive Vice President +COMPENSATION PHILOSOPHY AND OBJECTIVES +The Company's compensation philosophy is to provide executives with a competitive compensation package that is heavily weighted towards +performance-based (performance shares and annual bonus) and variable (restricted stock or restricted stock units and, prior to 2017, stock options) compensation in order to encourage superior business +and financial performance over the short and longer term and, by linking compensation with stock price performance, to closely align the interests of the Company's NEOs with those of its shareholders +without encouraging excess risk-taking. The Compensation Committee (the "Committee") oversees the Company's executive compensation program. +The executive compensation program has four primary objectives: +• Attract and retain talented NEOs who will lead Wolverine Worldwide and drive superior business and financial performance +• Provide incentives for achieving specific pre-established near-term individual, business unit and corporate goals and reward the attainment of +those goals +• Provide incentives for achieving pre-established longer term corporate financial goals and reward the attainment of those goals +• Align the interests of NEOs with those of the shareholders through incentives based on achieving performance objectives that enable increased +shareholder value +Compensation Decisions in Context: Key 2017 Accomplishments and Financial Highlights; 2018 Focus +The Company performed well in 2017, delivering strong financial results, executing against its WOLVERINE WAY FORWARD transformation, and +establishing its go-forward GLOBAL GROWTH AGENDA. In 2017, the Company: +• Delivered over 45% total shareholder return ("TSR"), resulting in performance at the 88 th percentile of companies in the +Company's 2018 peer group (as described under "New Peer Group") +• Delivered revenue of $2.35 billion, at the top end of original guidance +• Delivered reported diluted EPS of $0.00; adjusted diluted EPS of $1.64, and, on a constant currency basis, $1.71 compared to $1.36 in 2016, +growth of nearly 26% +2018 +PROXY +STATEMENT +34 +Table of Contents +• Reduced year-end inventory by 20.6% +• Returned value to shareholders through $0.24 per share cash dividends and over $42 million in share repurchases +• Substantially completed the Company's strategic transformation and established the Company's GLOBAL GROWTH AGENDA, focusing the Company on +future organic growth +• Completed divestitures of the Sebago and Bates Department of Defense businesses and licensed the Stride Rite brand +• Accelerated our omnichannel transformation — closing 215 stores while investing in eCommerce +• Drove considerable efficiencies through supply chain improvements, including consolidation of factory base +CEO Annual Bonus/TSR Analysis +The below graphic shows the CEO's target bonus opportunity compared to his actual annual bonus earned over the last three years, which +demonstrates the Company's pay for performance philosophy in action: there is clear directional alignment between the Company's TSR performance and the CEO's annual bonus achievement over these +periods. The Company's three-year TSR for this period was at the 68 th percentile of the Company's 2018 peer group while average CEO annual bonus payout was below target. The CEO's +target annual bonus opportunity has not increased over the last three years and was not increased for 2018. +2018 +PROXY +STATEMENT +35 +Table of Contents +2017 Compensation Program Overview +The Company's executive compensation program consists of base salary, annual bonus, long-term incentive compensation, and benefits. A +breakdown of base salary, annual performance bonus, and long-term incentive compensation is illustrated below: +ELEMENT +COMPONENT +METRICS +WHAT THE PAY ELEMENT REWARDS +Base +Salary +• +Cash +• +Fixed amount based on responsibilities, experience and market data +• +Scope of core responsibilities, years of experience, and potential to affect the Company's overall performance +Annual +Performance +Bonus +• +Company/Business Unit Cash Bonus +• +Individual Cash Bonus +• +Operating Margin Modifier +• +50%-85% revenue and adjusted pretax earnings 1 +• +15%-50% specific individualized performance targets 1 +• +Payout adjusted up/down up to plus or minus 25% based on operating +margin modifier +• +Achieving specific corporate business and/or divisional objectives over which the NEO has reasonable control +• +Achieving specific personal objectives +• +Achieving key financial metric, consistent with +communicated objectives +Long-Term +Incentive +Compensation +• +Performance share units +• +Time-vesting restricted stock units +• +Uses the following performance metrics (weighted as indicated) +• +65% Adjusted earnings per share +• +35% Adjusted business value-added +• +Relative TSR adjusted total payout up/down up to plus or +minus 25% +• +Four-year vesting +for time- vested restricted stock units +• +Balances focus on near-term profitability with longer-term shareholder value creation +• +Achieving long-term corporate objectives +• +Driving long-term shareholder value +• +Continued, long-term employment at Wolverine +Worldwide +• +Adjusted to +increase (or reduce) payout based on relative TSR performance +1 Certain individuals had a higher percentage of Annual Bonus tied to the Company's achievements against its WOLVERINE WAY FORWARD transformation initiative, as +described in more detail in the "Annual Bonus" section. +Pay at Risk +Under the Company's compensation program, a significant portion of the compensation awarded to the NEOs generally, and to the CEO in +particular, is at risk (contingent upon the attainment of various pre-established short and long-term financial goals) and variable (contingent on the performance of the Company's stock price). NEO +compensation that is significantly at risk and variable, incentivizes superior business and financial performance and, by linking compensation with stock price performance, aligns the interests of +executives with those of shareholders. +2018 +PROXY +STATEMENT +36 +Table of Contents +The +following graphic illustrates the increase to the percentage of 2017 NEO target compensation that is at risk: +CEO 2016 vs. 2017 Target Total Compensation +Other NEO 2016 vs. 2017 Target Total Compensation +Long-Term Incentive Program Mix +The Committee modified the mix of vehicles used for long-term incentive compensation in 2017 and going forward. Beginning in 2017, the +long-term incentive program does not utilize stock options and reflects a mix of 70% performance stock units and 30% time vested restricted stock units for the CEO. For other NEOs, the 2017 mix +changed to 60% performance stock units and 40% time vested restricted stock units. This change is intended to strengthen the Company's pay for performance philosophy while balancing retention +objectives, create stronger alignment with shareholders and simplify the compensation program. +2018 +PROXY +STATEMENT +37 +Table of Contents +Compensation Best Practices +What we do +What we do not do +✓ +Vast majority of pay is at risk or variable, i.e., performance based or equity-based or both +✓ +Stringent share ownership requirements (6x base salary for CEO) +✓ +Broad-based clawback +policy +✓ +Significant vesting horizon for equity grants +✓ +Double trigger equity acceleration (for grants in 2017 and beyond) +✓ +Independent Compensation Committee Consultant +✗ +No dividends or dividend equivalents on unearned performance shares/units +✗ +No repricing or replacing of underwater stock options +✗ +No overlapping metrics +✗ +No excessive or unnecessary perquisites +✗ +No hedging, pledging, or short +sales of Company stock +2018 +PROXY +STATEMENT +38 +Table of Contents +Compensation Discussion and Analysis +2017 COMPENSATION PROGRAM OVERVIEW +Setting Targets +Each February, the Committee recommends (and the independent directors approve) target compensation for the CEO for the upcoming year after +considering the latest available information, including the Company's TSR and other business and financial performance, information provided by the Committee's compensation consultant regarding +executive compensation trends and compensation paid to other chief executive officers of companies in the compensation peer group (described below), and information provided by management on recent +Company performance and the Company's future business and financial outlook. The Committee's goal is to set the CEO's compensation in line with the anticipated market median compensation for that +year. +Given +the significant weight the Company's executive compensation program places on at risk and variable compensation, the compensation realized by the CEO and NEOs can be significantly affected, both +positively and negatively, by performance against the various operational and financial performance metrics pre-established by the Committee and by the performance of the Company's stock. The Board +and Committee believe such a compensation program aligns the interests of the CEO and other NEOs with the interests of the shareholders. +The +Company's executive compensation program consists of four primary elements: base salary, annual bonus, long-term incentive compensation and benefits. These elements are described in greater detail +below. +Base Salary +As part of approving an NEO's base salary, the Committee considers a variety of factors including individual responsibilities, experience, +skills, and potential to affect Wolverine Worldwide's overall performance, as well as market surveys and peer group information. The Committee considers these compensation factors subjectively, and no +single factor or combination of factors was determinative in setting base salaries for any NEO for fiscal 2017. +Based +on the above factors, the Committee approved the 2017 base salaries for the NEOs as noted in the following table. The Committee held CEO salary flat in 2017 for the fourth year in a row (and +held it flat again in 2018). The 2.0%-2.5% base salary increases for Messrs. Stornant, Woodworth and Zwiers were based on their annual performance evaluations as well as consideration of +peer group and broad-based industry compensation data, as described in detail below. Mr. Spaletto's base salary and other compensation was set in connection with his hiring in 2017 and was +based on his experience, market and industry information, and on negotiations between Mr. Spaletto and the Company. +Name +2017 Base Salary +2016 Base Salary +Krueger +$1,150,000 +$1,150,000 +Spaletto +$575,000 +— +Stornant +$564,000 +$550,000 +Woodworth +$564,000 +$550,000 +Zwiers +$658,000 +$645,000 +2018 +PROXY +STATEMENT +39 +Table of Contents +Annual Bonus +In 2017, each NEO had the opportunity to earn annual cash incentive compensation ("annual bonus"), consisting of a performance bonus and an +individual performance bonus, and further subject to a modifier: +Key Factors +2017 Company Metrics +Performance Bonus +• +Based on performance +measured against Company and/or business unit performance criteria established at the beginning of 2017 +• +Payout determined by comparing performance against four performance levels set for each pre-set criterion: threshold (25% payout), target (100% payout), goal (150% +payout) and stretch (200% payout) +• +Revenue (35%) +• +Adjusted pretax earnings (65%) +Individual +Performance Bonus +• +Measured against +individual performance criteria +• +Each NEO's payout was determined by comparing individual performance against specific individual criteria set at the beginning of 2017 +• +Payouts can range from 0% to 200% depending on the NEO's performance against individual performance objectives +• +Vary by each NEO +Modifier +• +Total payout based on +the above two components adjusted up or down by up to 25% based on adjusted operating margin performance +• ++/- 25% adjusted operating +margin modifier +A percentage of each NEO's 2017 base salary was set as the annual bonus target percentage (the "Target Bonus Percentage"). The Target Bonus Percentage represents the percentage of each +NEO's base salary that could be earned as annual incentive compensation at a "target" performance level (100% payout) for each of the performance bonus and individual performance bonus. Generally, the +Committee sets higher Target Bonus Percentages for individuals with greater influence on business strategy, profit or sales. This puts a larger percentage of an NEO's total potential cash compensation +at risk, in line with the NEO's ability to influence these factors. For 2017, Mr. Krueger had a Target Bonus Percentage of 125% of his base salary and each other NEO had a Target Bonus +Percentage of 55% of his base salary. +The +Committee selected fiscal year 2017 revenue and adjusted pretax earnings as metrics for the performance bonus because it believes a strong correlation exists between performance on these financial +measures and increases in shareholder value. The Committee also added an adjusted operating margin modifier for 2017 to more directly align with the Company's operational transformation and +publicly-stated financial objectives. +Performance Bonus +Messrs. Krueger and Stornant had significant influence on the Company's overall business performance and, accordingly, their respective performance +bonus opportunity (85% of their total annual bonus opportunity) is based on the Company performance criteria only. Messrs. Spaletto, Woodworth and Zwiers were directly responsible for specific +business units and exert a significant influence on those business units in particular, in addition to influencing Company performance. Accordingly, for each of these NEOs, a larger percentage of +their overall annual bonus opportunity was based on business unit performance, with a smaller percentage based on the Company's performance, as reflected in the table on page 43. In addition, given +each of these NEO's impact on the success of the WOLVERINE WAY FORWARD Company transformation, each had an increased percentage of his total annual bonus opportunity shifted to measures relating to +this transformation, and these measures were included in the Individual Performance Bonus portion of the annual bonus. +As +shown in the table below, the Committee also set four performance levels for each criterion: threshold (25% payout), target (100% payout), goal (150% payout) and stretch (200% payout). The +Committee set the revenue and pretax earnings goals for these performance levels following a review of the Company's operating plan, historical performance, and industry and macroeconomic conditions. +The revenue performance targets, though lower than 2016 targets, were set aggressively in light of the difficult industry and macroeconomic conditions. Revenue performance at target (100%) was set +above the mid-point of the Company's initial 2017 guidance, and goal performance (150%) was set above the top end of the guidance. Despite the planned decrease in revenue, the Committee set higher +adjusted pretax earnings targets compared to 2016, reflecting the expectation of improved adjusted profitability driven by the WOLVERINE WAY FORWARD transformation. The adjusted operating margin +modifier was set at a level needed to pace the Company to reach its stated goal of 12% +2018 +PROXY +STATEMENT +40 +Table of Contents +adjusted +operating margin by 2018; the Company expects to achieve this goal ahead of its original schedule based on strong 2017 performance. +Company +Performance Level +in millions +(% of Target Payout) 1 +Revenue 2,3 +Adjusted Pretax Earnings 2,3 +Threshold (25%) +$2,186.7 +$187.0 +Target (100%) +$2,335.0 +$211.7 +Goal (150%) +$2,403.9 +$226.5 +Stretch (200%) +$2,495.9 +$241.3 +1 The maximum payout (before the effect of the modifier) an NEO can receive is 200% of his Target Bonus Percentage, even if performance is above stretch, and an NEO +would receive 0% of his Target Bonus Percentage if performance is below threshold. 2 Adjusted pretax earnings are earnings before income taxes, excluding the effect of +acquisitions, divestitures, accounting changes, restructuring, or other special +charges or extraordinary items excluded by the Compensation Committee. Pretax earnings for 2017 exclude impairment of intangible assets, environmental and other related costs, organizational +transformation costs which include gains or losses from divestures, restructuring and other related costs and operating losses from stores closing in 2017. Revenue results were adjusted for the +licensing of the Stride Rite business in 2017 and for extended store closure dates. 3 2017 revenue performance fell between target and goal, resulting in a 135% payout on this +measure. 2017 pretax earnings performance was between target and goal, +resulting in a 146% payout. +For +each business unit, the Committee sets the revenue and adjusted pretax earnings goals at substantially similar levels of difficulty as the goals for the Company and with a similar degree of +difficulty as in prior years. The below table shows historical weighted performance levels achieved by the business units using these performance criteria for the years for which a meaningful +comparison can be made. +Historical Group Performance 1 +2017 +2016 +2015 +2014 +2013 +Wolverine Boston Group +Between threshold and target +Between threshold and target +Below threshold +Below threshold +Between threshold and target +Wolverine Outdoor & Lifestyle Group +Between target and goal +Between threshold and target +Between target and goal +Between target and goal +Between target and goal +1 The brand groups were changed in 2016. The performance information above is for the historical group closest in makeup to the current group. +In +February 2018, the Committee certified actual 2017 performance compared to the performance levels for the Company and business unit criteria. The Company's fiscal year 2017 adjusted revenue was +approximately $2.384 billion, which was between target and goal level. The Company's adjusted pretax earnings for fiscal year 2017 were $225.0 million, which was between target and goal +level. The weighted average results for the applicable performance criterion are shown in the below table: +2017 Performance +Overall Weighted Payout by Group +Wolverine Boston Group +Between threshold and target +79% +Wolverine Outdoor & Lifestyle Group +Between target and goal +136% +Wolverine Worldwide +Between target and goal +142% +For +2017, the Company paid the NEOs the following amounts relating to the performance bonus. +Name +Performance Bonus +(as a % of Total Annual Bonus +Opportunity) +Performance Bonus Opportunity +(as a % of an NEO's Target Percentage) +Performance Bonus +Percentage Earned 1 +Performance Bonus Paid 1,2 +Krueger +85% +0 - 200% +142% +$1,735,148 +Spaletto +70% +0 - 200% +138% +$258,207 +Stornant +85% +0 - 200% +142% +$372,822 +Woodworth +70% +0 - 200% +97% +$210,006 +Zwiers +50% +0 - 200% +138% +$249,778 +1 Percentages earned and bonuses paid vary due to the relative performance of various business units versus overall corporate +performance. 2 Not including Individual Performance Bonus. +2018 +PROXY +STATEMENT +41 +Table of Contents +Individual Performance Bonus +At the same time Target Bonus Percentages are set, the CEO approves measurable personal objectives for each NEO's individual bonus, other than for himself. +The CEO submits, and the Committee reviews and approves, with such changes as it considers appropriate, the CEO's personal objectives. Such measurable personal objectives may include goals such as +executing strategies supporting the Company's vision, developing employees, growing new business initiatives and driving operational excellence. Performance is evaluated by the CEO (or, in the case of +the CEO, by the Committee and the other independent directors) based on qualitative and quantitative factors. For 2017, the Company focused NEO Individual Performance Bonuses on execution against the +Company's WOLVERINE WAY FORWARD transformation and increased the percentage of the overall bonus tied to achievement of critical transformation goals. Summaries of the specific personal objectives for +each NEO are outlined in the table below: +NEO +2017 Personal Objectives +Krueger +Global Way Forward, People and Teams, Cash Flow +Spaletto +Global Way Forward, Target Year-end Backing Increase and Q4 at-Once Increase, Lead the Brand Growth Work Stream, Drive Change within OLG Division +Stornant +Global Way Forward, Restructure Global Finance Organization, Drive Brand Growth, Activities to Achieve Mid-single Digit Organic Growth in 2018 +Woodworth +Global Way Forward, Target Year-end Backing Increase and Q4 at-Once Increase, Salesforce Way Forward Work Stream +Zwiers +Global Way Forward, Canada & eCommerce Revenue and Pretax Earnings to Meet and Exceed Plan, Action and Support the Portfolio Management Pillar of the Way Forward +Each +personal objective is given a rating from "does not achieve" to "exceptional," with weighted performance ratings and payouts consistent with the following table: +Personal Objectives Rating +2017 Payout Level +Exceptional +200% +Far Exceeds +175% +Exceeds +150% +Achieves +100% +Achieves Some But Not All +50% +Does Not Achieve +0% +The +CEO recommended, and the Committee approved, the 2017 cumulative weighted personal objectives scores and payout levels for each of the NEOs other than himself. The Committee and the other +independent directors of the Board met with the CEO at the end of the year to evaluate his performance against his personal objectives. The Committee determined the cumulative weighted personal +objectives score for the CEO and recommended to the independent directors of the Board the CEO's payout level. +Name +Individual +Performance Bonus +(as a % of Total Annual Bonus +Opportunity) +2017 Individual Bonus +Opportunity +(as a % of an NEO's Target +Percentage) +2017 +Individual Bonus +Percentage Achieved +2017 +Individual +Bonus Paid +Krueger +15% +0 - 200% +132.5% +$285,703 +Spaletto +30% +0 - 200% +117.5% +$94,328 +Stornant +15% +0 - 200% +131.3% +$60,808 +Woodworth +30% +0 - 200% +112.5% +$104,243 +Zwiers +50% 1 +0 - 200% +125.0% +$225,414 +1 Mr. Zwiers served as Chief Transformation Officer for the WOLVERINE WAY FORWARD and so had a higher percentage of his annual bonus opportunity tied to this +transformation initiative through the Individual Performance Bonus than other NEOs. +Overall +annual bonus payouts for Messrs. Spaletto and Zwiers were less in 2017 as a result of the increased percentage of annual bonus dedicated to Individual Performance Bonus than they would +have been if the Individual Performance Bonuses had represented only 15% of the annual bonus opportunity as it had for NEOs in previous years, and Mr. Woodworth's payout was slightly higher. +2018 +PROXY +STATEMENT +42 +Table of Contents +Adjusted Operating Margin Modifier +The Committee set the following annual bonus payout operating margin modifier for 2017. In addition, to add a measure of line-of-sight accountability, for any +positive adjustment to apply based on Company adjusted operating margin, as detailed below, the brand group for which an NEO has primary responsibility must have met its specific adjusted operating +margin plan: +• Less than 100bps adjusted operating margin improvement vs. 2016 ➡ 25% negative adjustment +• 100bps to 150bps improvement ➡ no adjustment +• 151bps to 200bps improvement ➡ 10% positive adjustment +• More than 200bps improvement ➡ 25% positive adjustment +The +Company achieved 10.9% adjusted operating margin in 2017, more than a 200bps, very strong improvement over 8.5% adjusted operating margin in 2016. Based on this performance (and the achievement of +the respective group adjusted operating margin targets for the Wolverine Outdoors & Lifestyle Group and the Wolverine Boston Group, as required for their respective Presidents to participate in +any upward adjustment based on Company performance) the overall payouts for each NEO included a 25% positive adjustment. +Each +NEO's total annual bonus opportunity for 2017 ranged from 0% to 200% of Target Bonus Percentage before applying the adjusted operating margin modifier. The accompanying table shows the aggregate +annual incentive compensation payout earned by each NEO for 2017, as well as the portion of that aggregate number that is attributable to the performance bonus and individual performance bonus and the +effect of the adjusted operating margin modifier. +1 Based on revenue and pretax earnings performance criteria for the Company, as described above under " Annual Bonus — +Performance Bonus ." 2 Based on revenue and pretax earnings as the performance criteria for the Wolverine Outdoor & Lifestyle +Group. 3 Based on revenue and pretax earnings as the performance criteria for the Wolverine Boston +Group. +2018 +PROXY +STATEMENT +43 +Table of Contents +2018 Annual Bonus Plan Update +Given the Company's significant progress toward and confidence in achieving its 2018 adjusted operating margin goal and its shift in strategic focus to the +Company's GLOBAL GROWTH AGENDA, the Company made two important changes to the 2018 Annual Bonus Plan: +• Shifted the mix of the Performance Bonus component from 65% pretax/35% revenue to 55% pretax/45% revenue to increase emphasis on organic growth +• Changed the modifier to focus on growth in 2018 year-end backlog to further focus the Company on organic growth leading into 2019 +LONG-TERM INCENTIVE COMPENSATION +In 2017, each NEO had the opportunity to earn long-term incentive compensation comprised of a mix of performance share units and time-based +restricted stock unit awards. +Key Factors +Performance Share Metrics 1 +Performance Share Units +• +Performance shares are +based on performance criteria covering three-year periods +• +Awards balance focus on near term profitability with longer term shareholder value creation +• +Fully diluted adjusted EPS +(65%) +• +Adjusted Business +Value Added ("BVA") 2 (35%) +Time-Based Restricted +Stock Unit Awards +• +Encourages employee +retention and rewards increases in stock price +1 EPS is calculated on a fully diluted basis and EPS and BVA are each adjusted to account for and exclude the effects of acquisitions, divestitures, accounting changes, +restructuring, or other similar special charges or extraordinary items excluded by the Committee, including foreign exchange. 2 BVA is calculated by starting with operating income +determined in accordance with U.S. generally accepted accounting principles ("GAAP"), and then reducing operating +income by (1) an amount for income taxes where the effective tax rate used to calculate the income tax amount is determined in accordance with GAAP (adjusted consistent with EPS adjustments, as +described above), and (2) a capital charge equal to a 14 point average of "net operating assets" during the fiscal year (with "net operating assets" defined as the net of trade receivables (net +of reserves), inventory (net of reserves), other current assets, property, plant and equipment, trade payables and accrued liabilities) multiplied by 10%. +The +Committee believes EPS is a key metric that plays an important role in driving shareholder value and that it further aligns the interests of the NEOs with other shareholders. The Committee +believes that BVA is useful for determining incentive compensation because it ties the income statement (profit delivery) to the balance sheet (effective asset utilization) and does not focus on one +to the exclusion of the other. The Committee further believes that focusing NEOs' interests on increasing BVA aligns their interests more closely with shareholder interests. The use of both EPS and +BVA balances the NEOs' focus on near term profitability with longer term shareholder value. Shareholders gave positive feedback on these measures during the Committee's shareholder outreach. The +Committee weighted EPS 65% and BVA 35% when determining the overall performance level. For the 2017-2019 performance period, +the Committee added a relative TSR modifier that provides a 25% positive adjustment for TSR performance in the top quartile of the Company's peer group and a 25% negative adjustment for performance in +the bottom quartile of the peer group. +The +Committee has chosen to provide long-term incentives in these forms because they incentivize and motivate different behaviors. Performance share units reward the achievement of key business +criteria. Time-based restricted stock units encourage employee retention by providing some level of value to executives who remain employed during the vesting period. The use of restricted stock units +also supports an ownership culture and thereby encourages executives to take actions that are best for the Company's long-term success. Both forms of long-term incentive compensation reward increased +Company stock price. +2015-2017 Performance Shares +The following table lists the performance levels set by the Committee for performance share awards granted for the 2015-2017 performance period, the vesting +of which occurred on February 7, 2018 following the Committee's certification of 2015-2017 financial results. +Performance Level +(Percentage of Target Payout) +Cumulative EPS for the 2015- 2017 period 1 +Cumulative BVA for the 2015- 2017 period 1 +(in millions) +Threshold (50%) +$4.34 +$327.2 +Target (100%) +$4.75 +$358.8 +Goal (150%) +$5.21 +$396.1 +Stretch (200%) +$5.66 +$432.1 +1 Adjusted as described above. +2018 +PROXY +STATEMENT +44 +Table of Contents +In +February 2018, the Committee evaluated the Company's performance for the 2015-2017 performance period against the criteria set forth in the table above and certified that the Company's performance +on both the EPS and BVA criteria fell between target and goal performance levels. The Committee weighted the EPS attainment ($4.84; 110% of target performance) at 65% and the BVA attainment +($361.9 million; 104% of target performance) at 35%, resulting in a weighted average performance of 108%. The vesting of the number of performance shares based on this performance is shown for +each NEO in the table below. In calculating the number of shares that vest, the Company uses the stock price on the date of the grant, which results in the NEOs bearing the risk of stock price +performance during the performance period. +The +following table lists the number of shares that vested for each NEO under the 2015-2017 performance share grant: +Name +Shares Vesting +(#) +Krueger +88,557 +Spaletto +6,026 +1 +Stornant +5,691 +Woodworth +11,944 +Zwiers +13,935 +1 Mr. Spaletto was granted prorated awards for open performance periods upon his hire, based on his ability to +affect performance during the remainder of these employment periods. His vesting is prorated based on the time he worked during the 2015-2017 period. +2017 Performance Share Awards +In the beginning of 2017, the Committee evaluated each NEO's long-term incentive target payout opportunity expressed as a dollar amount at target grant value +for the grant of performance shares for the 2017-2019 period. These values are higher than in previous years as a result of the greater weighting on performance units as a percentage of overall +long-term incentive opportunity compared to previous years (70% of target long-term incentive opportunity for the CEO and 60% for the other NEOs). Like performance shares granted for the 2016-2018 +performance period, performance units are eligible to vest based on achievement of adjusted constant-currency EPS goals (weighted 65%) and adjusted constant-currency BVA goals (weighted 35%). An NEO +may earn none, some, all, or a multiple of the performance units granted, depending on Company performance against the EPS and BVA targets and base salary and target bonus percentage over the +three-year performance period. For the 2017-2019 performance period, the Committee added a relative TSR modifier that provides a 25% positive adjustment for TSR performance in the top quartile of the +Company's peer group and a 25% negative adjustment for performance in the bottom quartile of the peer group. +Name +2017-2019 +Target 1 +Krueger +$3,692,500 +Spaletto +$477,889 +Stornant +$534,119 +Woodworth +$502,320 +Zwiers +$533,340 +1 See footnote 2 to the Summary Compensation Table for the grant date fair value of these awards, which reflects an +accounting valuation of the effect of the TSR modifier. Mr. Spaletto also received prorated grants for the 2015-2017 and 2016-2018 performance +periods when hired in 2017. +The +Company accrues, but does not pay, any dividends on any performance units during the performance period. Once the Committee certifies the Company's performance compared to the pre-determined +performance criteria, the restrictions on some, all, none, or multiple of the performance share units awarded to each NEO will vest, and the NEO will receive accrued dividends only on the shares +actually earned. +The +Committee goes through a rigorous process in setting three-year EPS and BVA performance targets, including a careful review of the Company's prior year business and financial performance, current +year operating plan and future expectations. To achieve target level EPS and BVA performance would require over 10% compounded annual growth over the performance period based on 2016 actual +performance. +2018 +PROXY +STATEMENT +45 +Table of Contents +Restricted Stock Unit Awards +The accompanying table reflects the grant date value of the annual service-based restricted stock unit awards granted to each NEO. +Name +2017 Time-vested +Restricted Stock Units +Krueger +$1,582,513 +Spaletto +$574,522 +Stornant +$356,086 +Woodworth +$334,885 +Zwiers +$355,583 +The +Committee generally grants annual equity awards at its regularly scheduled February meeting, and the independent directors of the Board approve equity grants to the CEO generally on the same day +that the Committee meets. Stock units awarded vest 20% on the first and second anniversaries of the grant and 30% on the third and fourth anniversaries. Mr. Spaletto's grants include a sign-on +grant of 10,000 restricted stock units. These stock units vest 50% on the first anniversary of the grant and 50% on the second anniversary. This grant to Mr. Spaletto was made as consideration +for his agreeing to become the President of the Wolverine Outdoor & Lifestyle Group in 2017 and as a retention incentive as he transitions into the business. +BENEFITS +Retirement, Deferred Compensation and Welfare Plans +The NEOs participate in Wolverine Worldwide's medical and dental plans and receive life and disability insurance. In 2017, Messrs. Krueger, Stornant, +and Zwiers also participated in the Wolverine Worldwide Employees' Pension Plan (a defined benefit plan) and the Wolverine World Wide, Inc. 409A Supplemental Executive Retirement Plan (an +unfunded, non-qualified plan). For a description of the benefits under Wolverine Worldwide's retirement plans, see " Pension Plans and 2017 Pension +Benefits " below. +All +full time employees of the Company in the United States, including the NEOs, are also eligible to participate in one of Wolverine's 401(k) Plans (the "401(k) Plan"). Pursuant to the 401(k) Plan, +employees, including the NEOs, may elect to defer a portion of their salary and receive a Company match on eligible deferrals of up to 3% of salary for 2017 (4.5% for those who do not participate in +the Pension Plan), subject to limits set forth in the Internal Revenue Code of 1986, as amended. In 2016, the Company adopted the Wolverine Worldwide Executive Deferred Compensation Plan (the +"Deferred Compensation Plan"). This plan allows executives and other eligible senior employees of the Company to elect to defer a portion of their eligible compensation. Wolverine Worldwide may, but +need not, credit a participant with an additional discretionary Company contribution. No discretionary Company contributions were made in 2017. The Company adopted the Deferred Compensation Plan as a +retention and recruitment tool to facilitate retirement savings and provide financial flexibility for key employees, and because many of the companies with which we compete for executive talent +provide similar plans to their key employees. For a description of the benefits under the Deferred Compensation Plan, see " Nonqualified Deferred +Compensation " below. +Perquisites +The Company provides limited perquisites to NEOs. The Company feels the perquisites that are provided round out a competitive total compensation package for +each NEO. For details on perquisites, see footnote 6 to the "Summary Compensation Table" on page 52. +POST-EMPLOYMENT COMPENSATION +Each NEO is party to an Executive Severance Agreement that provides for certain payments and benefits upon termination of employment after a +change in control of Wolverine Worldwide. The Board believes Executive Severance Agreements will motivate management to actively pursue a business transaction that is in the best interests of the +shareholders, even if it could ultimately result in his or her job elimination, and also will promote management stability during the transition period accompanying a change in control. Each NEO is +eligible to receive compensation if his employment is terminated within two years (Messrs. Spaletto, Stornant, Woodworth and Zwiers) or three years (Mr. Krueger) following a change in +control of Wolverine Worldwide. Even following a change in control, an NEO does not receive payment under the Executive Severance Agreement if his employment terminates: +• Due to death or retirement in accordance with Wolverine Worldwide's policy or as otherwise agreed, +2018 +PROXY +STATEMENT +46 +Table of Contents +• For cause or disability, or +• By resignation of the NEO, other than for "good reason," which is discussed under the heading "Benefits Triggered by Termination Other than For +Cause or for Good Reason" and the heading "Benefits Triggered Upon a Change in Control," both under the heading "Potential Payments Upon Termination or Change in Control" +NEOs +may also be eligible under Wolverine Worldwide's retirement plans or equity plans to receive certain payments and benefits upon termination of employment or in connection with a change in control +as described in the " Potential Payments Upon Termination or Change in Control " section of this proxy statement. +Mr. Krueger +is also party to a 2008 Separation Agreement under which he receives certain payments and benefits if the Company terminates his employment, even if not following a change in +control, other than for "cause" or if he terminates his employment for "good reason." The Committee determined upon appointing Mr. Krueger as CEO that, given the Company's strategic initiatives +the Board had asked him to lead, it was appropriate for the Company to enter into a separation arrangement. +The +Company includes accelerated retirement vesting provisions for equity awards, provided certain conditions are met, and for the payout of a prorated annual bonus for a qualifying retirement more +than six months into the fiscal year. You will find details on these provisions and information on benefits payable to Mr. Krueger under his Separation Agreement and to each of the NEOs under +the Executive Severance Agreements, as well as information on the other retirement and equity plans of Wolverine Worldwide, in the " Potential Payments Upon Termination or +Change in Control " section of this proxy statement. +COMPENSATION SETTING PROCESS +Setting Targets +The Committee goes through a rigorous process in setting performance targets, including a careful review of the Company's prior year business +and financial performance, current year operating plan, and future expectations. The Committee +engages with management in this process over several months leading up to setting final annual bonus and three-year performance targets in February. +Competitive Philosophy and Competitive Market Data +When making compensation recommendations and decisions, the Committee considers the CEO's assessment of the performance of each NEO, other +than himself; the performance of the individual and the individual's respective business unit or function; the scope of the individual's responsibilities, years of experience with the Company (or in +similar positions with other companies), skills and knowledge; market compensation data; market and economic conditions; Company performance; retention considerations; and Wolverine Worldwide's +compensation philosophy (collectively, the "compensation factors"). The Committee considers these compensation factors both subjectively and objectively, and no single factor or combination of factors +is determinative. With respect to CEO compensation, the Committee seeks to set compensation in line with the anticipated market median for a given year. +The +Committee uses market surveys and Peer Group (as defined below) information provided by its compensation consultant as market reference points. The Committee also considers information the Company +learns through recruiting NEOs and the experience levels and responsibilities of NEOs prior to joining the Company as reference points in setting NEO compensation. +As +part of its competitive data review in connection with determining 2017 compensation, the Committee considered information presented by its independent compensation consultant Frederick W. +Cook & Co. ("FW Cook") based on publicly-disclosed Peer Group information and on two published surveys: (1) 2016 Willis Towers Watson (WTW) CDB Executive Compensation Survey +Report; and (2) 2016 US MBD Mercer Benchmark Database Executive Survey. +The +Committee also took into account, and made significant program changes to 2017 compensation in response to, shareholder feedback following the Company's disappointing 2016 say on pay vote. +Shareholder response to these changes was overwhelmingly positive, which translated to 98% support for our 2017 say on pay proposal. +2018 +PROXY +STATEMENT +47 +Table of Contents +Peer Group +The Committee, with input from FW Cook, updated its established peer group in 2017 after it had made 2017 compensation decisions. This updated +peer group was used in connection with 2018 compensation decisions. For 2017, however, the following peer group was used (the "Peer Group"). In determining the Peer Group and the new peer group +described below, the Committee considered each potential peer company's industry, channels of distribution, revenue and market capitalization. The +Company also considered the typicality of a company's pay practices, excluding companies whose chief executive may not receive market compensation because of a founder relationship, family ownership +position, or other similar relationships. +Aéropostale, Inc.Inc. +Carter's, Inc. +Dick's Sporting Goods, Inc. +Guess?, Inc. +American Eagle Outfitters Inc. +Chico's FAS, Inc. +DSW Inc. +Hanesbrands Inc. +Ascena Retail Group, Inc. +Coach, Inc. +Foot Locker, Inc. +PVH Corp +Caleres, Inc. +Deckers Outdoor Corporation +Genesco Inc. +Williams-Sonoma, Inc. +New Peer Group +In 2017 (after 2017 compensation decisions had been made), as part of its annual compensation review and in response to some shareholder +concerns, the Committee evaluated each peer company within our 2017 peer group and decided to adopt a new peer group. The changes to the group ultimately create greater alignment of Company revenues +with those of the peer group median through the removal of several larger companies. The following adjustments to the peer group were made in 2017 and used in connection with making 2018 compensation +decisions: +REMOVED: +Aéropostale, Dick's Sporting Goods, PVH Corp., Williams-Sonoma +ADDED: +Express, G-III Apparel Group, Kate Spade, Skechers, The Children's Place +CEO Role +Within the framework of the Company's executive compensation program, the CEO recommends the level of base salary, annual bonus, long-term +incentive compensation, equity awards and other compensation components for his direct reports, including the other NEOs. The CEO bases his recommendation upon his assessment of the compensation +factors applicable to each NEO. The CEO considers these compensation factors both objectively and subjectively, and no single factor is determinative. The Committee discusses these recommendations +with the CEO prior to setting the compensation for each NEO, other than the CEO. The Committee, however, ultimately determines all compensation for NEOs other than the CEO, whose compensation is +determined by the independent directors as a whole. +Compensation Consultant Role +FW Cook was engaged as the Committee's independent compensation consultant in September 2016 and reports directly to the Committee. The +Committee determines the scope of engagement and may replace the consultant or hire additional consultants at any time. The Committee has evaluated FW Cook's independence under the rules established +by the NYSE and has determined that FW Cook is "independent" as defined by NYSE rules. In addition, the Committee has evaluated whether the engagement of FW Cook raised any conflicts of interest and +has determined that no such conflicts of interest exist. +At +the Committee's invitation, a representative of FW Cook generally attends all Committee meetings and also communicates with the Committee Chair and management regularly between meetings. However, +the Committee makes all decisions regarding NEO compensation. FW Cook provides various executive compensation services to the Committee pursuant to a consulting agreement with the Committee. +Generally, these services include advising the Committee on the principal aspects of the Company's executive compensation program, evolving industry practices, and providing market information and +analysis regarding the competitiveness of the Company's program design. +During +2017, FW Cook performed the following specific services: +• Attended Committee meetings, as requested +• Reviewed the Company's peer group and advised the Committee on the composition of the peer group +2018 +PROXY +STATEMENT +48 +Table of Contents +• Reviewed survey data for competitive comparisons +• Provided market data and recommendations on CEO and other NEO compensation +• Advised the Committee on market trends related to compensation policies and programs +• Proactively advised the Committee on best practice approaches for governance features of executive compensation programs +• Reviewed the Compensation Discussion & Analysis and other executive compensation related disclosures included in the Company's proxy +statement +The +total fees the Company paid to FW Cook for services to the Committee in 2017 were $126,996, less than 1% of FW Cook's total consulting income during the same period. The Company did not pay or +incur any other fees to or with FW Cook. +OTHER COMPENSATION POLICIES AND PRACTICES +NEO Stock Ownership Guidelines +Each NEO, as well as each non-employee director, must attain (and maintain) a minimum stock ownership level (including owned shares, a certain +level of performance shares and restricted shares, and the in the money value of vested stock options) prior to being able to gift or sell any Company stock. During 2017, each NEO complied with the +requirements of these guidelines. +Covered Positions +Guideline +CEO +6x Annual Salary +Other NEOs +2x Annual Salary +Non-Employee Directors +6x Annual Cash Retainer +Stock Hedging and Pledging Policies +Under the Company's Insider Trading Policy, all directors, officers and other employees are prohibited from engaging in any hedging +transactions involving Company securities beneficially owned by them. The Company also considers it inappropriate for any such person to engage in speculative transactions in the Company's securities, +including short sales, publicly traded options, margin accounts and pledges and standing and limit orders. Also, all directors, officers and other employees are prohibited from pledging Company +securities as collateral for a loan. +Clawback Policy +The Company has adopted a clawback policy which empowers the Board or a committee of the Board to seek recovery of specified incentive +compensation received by executive officers under specific circumstances where there is a material restatement of the Company's financial results that would have led to a lower level of incentive +compensation payout. +Impact of Accounting and Tax Treatments on Compensation +Prior to the enactment of the Tax Cuts and Jobs Act on December 22, 2017 ("Tax Act"), Section 162(m) of the Internal Revenue +Code generally limited to $1 million the federal income tax deduction available to publicly held companies for compensation paid to a company's CEO and its three next most highly paid executive +officers (other than the CFO), with certain exceptions for qualified "performance based" compensation. The Tax Act eliminated the Section 162(m) performance-based compensation exemption +prospectively and made other changes to Section 162(m), but with a transition rule that preserves the performance-based compensation exemption for certain arrangements and awards in place as of +November 2, 2017. For 2017, Wolverine Worldwide intends to administer its Annual Bonus Plan and performance shares, to the extent covered under this transition rule, with a view towards +preserving their ability to qualify as exempt "performance based" compensation for purposes of Section 162(m). Wolverine Worldwide, however, does not require all of its compensation programs, +including programs under the plans listed above, to be fully deductible under Section 162(m) because Wolverine Worldwide believes it is important to preserve flexibility in administering +compensation programs in a manner designed to promote varying corporate goals. Wolverine Worldwide has and in the future may continue to pay compensation that is limited in whole or in part as to tax +deductibility. +2018 +PROXY +STATEMENT +49 +Table of Contents +Compensation Committee Report +The +Committee has reviewed and discussed with management the information provided under the heading "Compensation Discussion and Analysis." Based on this review and discussion, the +Committee recommended to the Board of Directors that the Company include the Compensation Discussion and Analysis section in this proxy statement and incorporate it by reference into the Company's +Annual Report on Form 10-K. +Respectfully +submitted, +Joseph +R. Gromek (Chair) +Jeffrey M. Boromisa +Gina R. Boswell +William K. Gerber +Nicholas T. Long +Compensation Committee Interlocks and Insider Participation. During fiscal year 2017, none of the members of the Compensation Committee was an officer or employee +of the Company, was a former officer of the Company, nor had a relationship with the Company requiring disclosure as a related party transaction under Item 404 of Regulation S-K of the +Securities Act of 1933. None of the Company's executive officers served on the compensation committee or board of directors of another entity whose executive officer(s) served as a director on the +Company's Board or on the Compensation Committee. +2018 +PROXY +STATEMENT +50 +Table of Contents +Summary Compensation Table +1 Includes any amounts deferred under the Company's qualified 401(k) plan and, for Mr. Stornant, the Deferred Compensation +Plan. 2 Includes the grant date fair value of restricted stock unit awards and performance unit awards, as follows for 2017: +Name +Service-based Restricted Stock Unit Value +Performance Unit Value +Total +Krueger +$1,582,513 +$4,028,352 +$5,610,865 +Spaletto +$574,522 +$969,621 +$1,544,143 +Stornant +$356,086 +$582,707 +$938,793 +Woodworth +$334,885 +$548,027 +$882,912 +Zwiers +$355,583 +$581,859 +$937,442 +2018 +PROXY +STATEMENT +51 +Table of Contents +Restricted stock or restricted stock units, as applicable, were valued using the closing market price of Wolverine Worldwide common stock on the date of +the grant of the respective award. Performance units were valued using the closing market price of Wolverine Worldwide common stock on the date of grant of the respective award and assuming target +performance for all performance periods, with an adjustment to value for the TSR modifier for 2017, all consistent with ASC Topic 718. Assuming maximum payout, which is structured to continue to allow +the awards to be eligible to qualify as exempt performance-based compensation under Section 162(m) of the Tax Code, the aggregate grant date fair value of performance shares awarded in 2017 for +each NEO (and, in parenthesis, the maximum value is combined with the grant date fair value of restricted stock awards for 2017) would have been: $24,170,113 ($25,752,625) for Mr. Krueger; +$5,817,725 ($6,392,247) for Mr. Spaletto; $3,496,244 ($3,852,329) for Mr. Stornant; $3,288,161 ($3,623,046) for Mr. Woodworth and $3,491,154 ($3,846,736) for Mr. Zwiers. +Restrictions on such performance unit awards will lapse in the February following the last year of the applicable performance period, if at all, based on the Company's performance for the period +(capped at 200%), potential +/- 25% adjustments for relative TSR performance, and base salary and target bonus percentage over the three-year performance period. The actual value of shares that vest +is also dependent on the stock price at the time of vesting. For additional valuation assumptions, see the Stock Based Compensation footnote to Wolverine Worldwide's Consolidated Financial Statements +for the fiscal year ended December 30, 2017 included in its Form 10-K for this year. 3 Represents the aggregate grant date fair value of stock options granted in the +years shown, calculated in accordance with ASC Topic 718. Stock options were valued +using the Black Scholes Merton model. For additional valuation assumptions, see the Stock-Based Compensation Note to Wolverine Worldwide's Consolidated Financial Statements for the fiscal year ended +December 30, 2017 included in its Form 10-K for this year. 4 Reflects the sum of performance bonus and individual bonus amounts earned in 2017, 2016 and 2015, +respectively, and paid in 2018, 2017 and 2016 respectively. For +Mr. Stornant, includes amounts deferred under the Deferred Compensation Plan. 5 All amounts in this column reflect, where applicable, the aggregate change in the actuarial +present value of the accumulated benefits under the Wolverine Worldwide +Employees' Pension Plan ("Pension Plan") and Wolverine World Wide, Inc. 409A Supplemental Executive Retirement Plan ("SERP") for Messrs. Krueger, Stornant and Zwiers, and benefits under +the Stride Rite Retirement Income Plan for Mr. Woodworth. The amounts in the table were determined using assumptions consistent with those used in Wolverine Worldwide's Consolidated Financial +Statements for each respective year. See the "Pension Plans and 2017 Pension Benefits" section starting on page 60. Nearly $1.3 million of Mr. Krueger's increase in pension value +is attributable solely to a year-over-year decrease in actuarial discount rate. +6 The amounts listed in this column for 2017 include Wolverine Worldwide's matching contributions to the accounts of the NEOs under Wolverine Worldwide's 401(k) plans, +payments made by Wolverine Worldwide for the premiums on certain life insurance policies, tax and estate planning services, health care reimbursements and, in one instance, a car allowance, in the +amounts listed in the table below. The amounts also include Company-paid relocation expenses for Mr. Spaletto, who was hired and moved near the Company's Michigan headquarters in 2017. $31,214 +of the expenses included for Mr. Spaletto's relocation were paid as a tax gross up. +Name +401(k) Match +Tax and Estate Planning +Health +Life Insurance Premiums +Relocation Expenses +Car Allowance +Krueger +$8,100 +$7,775 +$16,680 +$4,248 +$0 +$0 +Spaletto +$12,150 +$9,600 +$17,690 +$685 +$93,435 +$0 +Stornant +$8,100 +$0 +$17,998 +$3,284 +$0 +$0 +Woodworth +$12,150 +$8,369 +$15,498 +$791 +$0 +$7,000 +Zwiers +$8,100 +$7,775 +$19,998 +$3,139 +$0 +$0 +2018 +PROXY +STATEMENT +52 +Table of Contents +Grants of Plan-Based Awards in Fiscal Year 2017 +The +following table provides information concerning each grant of an award made to the NEOs in fiscal year 2017: +2018 +PROXY +STATEMENT +53 +Table of Contents +1 Estimated payout levels relating to the performance bonus and individual bonus. Maximum amount assumes stretch revenue and pretax earnings performance and achievement +of the maximum operating margin adjustment. For a description of these bonuses and the payouts under them, see pages 40 - 43. +2 Estimated payout levels of performance stock units granted under the Stock Incentive Plan of 2016 (the "Stock Incentive Plan of 2016") for the 2017-2019 performance +period. The maximum payout is structured to continue to allow the awards to be eligible to qualify as exempt performance-based compensation under Section 162(m) of the Tax Code. Restrictions on +such performance unit awards will lapse in the February following the last year of the applicable performance period, if at all, based on the Company's performance for the period (capped at 200%), +potential +/- 25% adjustments for relative TSR performance, and base salary and target bonus percentage over the three-year performance period. The actual value of shares that vest is also dependent +on the stock price at the time of vesting. The Company accrues, but does not pay, dividends on the performance shares during the performance period. At the end of the applicable performance period, +the Company will pay to the NEO the accrued dividends (if any) on the performance shares for which the restrictions lapse. For a description of the performance units granted in 2017 under the Stock +Incentive Plan of 2016, see pages 44 - 45. +3 The Company awarded service-based restricted stock unit awards under the Stock Incentive Plan of 2016 for all NEOs. 20% of the units received under the awards +reflected in this column vest on each of the first and second anniversaries of the date of grant of the award and 30% on the third and fourth anniversaries of the date of grant of the award. All +restricted stock units vest upon an NEO's death, disability or retirement. Holders of restricted stock units are entitled to receive dividend equivalents on restricted stock units. +4 Represents the award date fair value for performance stock units and service-based restricted stock unit awards made in fiscal year 2017, determined as described in +footnote 2 to the "Summary Compensation Table." +2018 +PROXY +STATEMENT +54 +Table of Contents +Outstanding Equity Awards at 2017 Fiscal Year-End +The +following table provides information concerning options and stock awards that have not vested for each NEO outstanding as of December 30, 2017: +2018 +PROXY +STATEMENT +55 +Table of Contents +1 All stock options become exercisable as to one third of the shares subject to the stock option on each of the first three anniversaries of the date of the grant. Stock +option vesting may accelerate upon certain events, including death, disability or voluntary termination after attaining age 62 or age 50 with seven years of service (age 59, with ten years of service +for 2016 and later grants) with the Company, subject to certain conditions. +2018 +PROXY +STATEMENT +56 +Table of Contents +2 The following table sets forth the vesting dates for the unvested service-based restricted stock or stock unit awards of each NEO as of December 30, +2017: +Named +Executive +Officer +Vesting +Date +Number of Shares to Vest +Krueger +02/06/18 +36,745 +02/08/18 +13,839 +02/11/18 +37,829 +02/08/19 +13,839 +02/10/19 +31,571 +02/11/19 +57,043 +02/08/20 +20,759 +02/10/20 +31,572 +02/11/20 +37,233 +02/08/21 +20,759 +02/10/21 +63,144 +Spaletto +02/20/18 +7,844 +02/20/19 +7,844 +02/20/20 +4,266 +02/20/21 +4,267 +Stornant +02/06/18 +2,490 +02/08/18 +3,114 +02/11/18 +2,016 +06/12/18 +1,068 +02/08/19 +3,114 +02/10/19 +10,269 +02/11/19 +3,042 +06/12/19 +1,069 +02/08/20 +4,671 +02/10/20 +10,270 +02/11/20 +1,983 +06/12/20 +2,138 +02/08/21 +4,671 +02/10/21 +20,539 +2018 +PROXY +STATEMENT +57 +Table of Contents +Named +Executive +Officer +Vesting +Date +Number of Shares to Vest +Woodworth +02/06/18 +3,115 +02/08/18 +2,928 +02/11/18 +2,829 +02/08/19 +2,929 +02/10/19 +6,038 +02/11/19 +4,267 +02/08/20 +4,393 +02/10/20 +6,038 +02/11/20 +2,785 +02/08/21 +4,393 +02/10/21 +12,076 +Zwiers +02/06/18 +7,100 +02/08/18 +3,109 +02/11/18 +5,746 +02/08/19 +3,110 +02/10/19 +9,788 +02/11/19 +8,670 +02/08/20 +4,664 +02/10/20 +9,788 +02/11/20 +5,647 +02/08/21 +4,665 +02/10/21 +19,576 +3 The dollar values are calculated using a per share stock price of $31.88, the closing price of Wolverine Worldwide common stock on December 29, 2017, the last +business day of fiscal year 2017. +4 Following the end of the applicable three-year performance period, restrictions may lapse on some, all or none of the performance shares depending upon the Company's +achievement of the relevant EPS and BVA performance criteria. The number of shares listed assumes actual shares vested for the 2015-2017 cycle and assumes target performance for the 2016-2018 and +2017-2019 cycles. +2018 +PROXY +STATEMENT +58 +Table of Contents +Option Exercises and Stock Vested in Fiscal Year 2017 +Option Awards +Stock Awards +Number of Shares +Acquired on Exercise +(#) +Value Realized +On Exercise 1 +($) +Number of Shares +Acquired on Vesting +(#) +Value Realized +On Vesting 2 +($) +Krueger +— +— +128,658 +$2,926,287 +Spaletto +— +— +— +— +Stornant +10,400 +$139,776 +10,206 +$232,061 +Woodworth +— +— +21,919 +$563,242 +Zwiers +— +— +33,338 +$758,591 +1 The Company calculates the dollar values by multiplying the number of shares of common stock acquired upon exercise by the difference between the +exercise price and the closing price of the Company common stock on the exercise date. 2 The Company calculates the dollar values using the closing price of Wolverine Worldwide +common stock on the date of vesting. +2018 +PROXY +STATEMENT +59 +Table of Contents +Pension Plans and 2017 Pension Benefits +Wolverine Worldwide maintains the following defined benefit retirement plans covering Messrs. Krueger, Stornant, and Zwiers: (1) the Wolverine Worldwide Employees' Pension Plan ("Pension +Plan"), which is a funded and tax-qualified defined benefit plan under the Internal Revenue Code that covers eligible employees, and (2) the Wolverine World Wide, Inc. 409A Supplemental +Executive Retirement Plan ("SERP"), which is an unfunded, non-qualified plan that covers individuals recommended by the CEO and approved by the Compensation Committee. Mr. Woodworth does not +participate in these plans, but has "frozen" benefits under the Stride Rite Corporation Retirement Income Plan ("SR Plan"). Mr. Spaletto does not participate in these plans. +QUALIFIED PENSION PLANS +Participants vest in the Pension Plan after five years of qualifying service. Subject to the limitations imposed by the Internal Revenue Code, +the Pension Plan generally pays a monthly benefit in an amount equal to a percentage of the participant's final average monthly earnings multiplied by his or her number of years of service. For +purposes of this benefits formula, the Pension Plan caps years of service at 25 (30 for non SERP participants), and the percentages of final average monthly earnings are 2.4% for Mr. Krueger +and 2.0% for Messrs. Stornant and Zwiers. "Earnings" as used in this Pension Plan formula generally includes base salary and annual bonus, less Social Security allowance, and for 2017 was +capped at $270,000, the IRS limit applicable to tax qualified plans. +Upon +retirement, a participant may elect to receive the benefit in the form of a life annuity, 5 or 10 year certain annuities, or joint and 50%, joint and 75%, or joint and 100% survivor +annuities. The payments are actuarially adjusted based on the participant's election. Any election, other than an election to receive life annuity benefits, reduces the monthly benefit payable. The +"normal" age at which benefits may be drawn under the plan is 65. Mr. Krueger is currently the only NEO eligible to begin drawing early retirement benefits under the Pension Plan, as described +in the "Benefits Triggered By Retirement, Death or Permanent Disability" section. +SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN +Messrs. Krueger, Stornant, and Zwiers participate in the SERP, which provides retirement benefits above amounts available under the +Company's tax qualified Pension Plan. The SERP benefit generally equals the difference between the participant's retirement benefit under the Pension Plan and the benefits the participant would have +received if there were no IRS imposed cap on earnings when calculating the Pension Plan benefit. The SERP caps years of service at 25 in calculating a participant's benefit. The SERP also allows a +retired participant who has five years of service to draw earlier (beginning at age 55) and on different terms than under the Pension Plan. A participant's earnings percentage multiplier is the +same under the SERP as it is under the Pension Plan (2.4% for Mr. Krueger and 2.0% for Messrs. Stornant and Zwiers). The Compensation Committee may grant additional deemed years of +service under the SERP to a participant, subject to the cap of 25 years. The full benefit of any additional years of deemed service is paid under the SERP. Mr. Krueger reached the +25 year cap in 2012. +If +a retired participant draws the SERP benefit prior to age 65, the reduction factor is 0.333% for each month prior to age 60, and 0.1666% for each month between age 60 and age 65. As of the end of +fiscal year 2017, Mr. Krueger was the only NEO eligible to retire and begin drawing early benefits under the SERP. +SERP +benefits are paid monthly, and the SERP has a lump sum payment option in the event of death or termination of employment after a change in control. The SERP also includes a disability benefit and +a death benefit payable to the participant's designated beneficiary if the participant dies before retiring. The SERP provides for lump sum payments equal to 125% of the net present value of accrued +benefits without regard to any reduction for early payment to participants who resign for good reason or are terminated by Wolverine other than for cause or due to death or disability within two years +(Messrs. Stornant and Zwiers) or three years (Mr. Krueger) after a change in control. +2018 +PROXY +STATEMENT +60 +Table of Contents +The +SERP also contains non-competition, confidentiality and employee non solicitation provisions in favor of Wolverine Worldwide. Under the SERP non-competition provisions, a participant is not +entitled to any benefit payment if the participant enters into certain relationships with a competing business prior to the date on which such benefit payment is due. If the participant's employment +is terminated for serious misconduct or if Wolverine Worldwide cannot collect under an insurance policy purchased to fund SERP benefits for certain reasons, the Company may terminate a participant's +benefits under the SERP. Wolverine Worldwide may terminate the SERP or stop further accrual of SERP benefits for a participating NEO at any time, but termination will not affect previously accrued +benefits. +PENSION BENEFITS IN FISCAL YEAR 2017 +The following table provides for each NEO certain information concerning each plan that provides for payments or other benefits at, following, +or in connection with retirement: +Name +Plan Name +Number of Years +Credited Service +(#) +Present Value of +Accumulated Benefit 1 +($) +Payments During +Last Fiscal Year +($) +Krueger +SERP +25 +$18,970,915 +2 +- +Pension +22 +$1,988,655 +- +Spaletto +SERP +- +- +- +Pension +- +- +- +Stornant +SERP +21 +$1,194,457 +- +Pension +21 +$971,037 +- +Woodworth 3 +SERP +- +- +- +Pension +- +- +- +SR Plan +3 +$126,750 +- +Zwiers +SERP +20 +$2,541,250 +- +Pension +20 +$861,928 +- +1 These values are as of December 30, 2017, and are calculated assuming the participants will commence their benefits at age 65 (in the form of +the annuity elected by the NEO) and use the RP-2014 mortality tables for males and females (post retirement) projected generationally with modified MP-2017 projection scale and the +following discount rates: 3.81% WEPP; 3.80% SERP; 3.80% SR Plan. 2 The present value of Mr. Krueger's accumulated benefit under the SERP is $2,512,180 greater taking into +account his deemed years of service. +Mr. Krueger was previously granted three additional service years in 1996 in recognition of his service as a member of Wolverine Worldwide's executive team for three years +before becoming a participant in the SERP, and additional deemed years of service were previously granted as part of Mr. Krueger's CEO compensation. The present value of +Mr. Krueger's SERP benefit would be $16,458,735 if 22 service years were used to calculate his benefit. Mr. Krueger reached 25 years of service in 2012, the +maximum years of service permitted under the SERP, and will not accrue any further years of service under the SERP. 3 Mr. Woodworth does not participate in the Pension Plan +or SERP, but has "frozen" benefits under the SR +Plan. +2018 +PROXY +STATEMENT +61 +Table of Contents +Nonqualified Deferred Compensation +Wolverine +Worldwide maintains a Deferred Compensation Plan. This unfunded and non-qualified plan allows executives and other eligible senior employees of the Company to elect to defer all or a portion +of their base salary, cash bonus, or other performance based cash compensation. Wolverine Worldwide may, but need not, credit a participant's account under the plan with an additional discretionary +Company contributions, which may be subject to a vesting schedule and which would vest in full on a change in control. Amounts deferred pursuant to the Deferred Compensation Plan may be invested, at +the direction of the participant, in an investment fund, index, or other investment vehicle, as designated by the Compensation Committee to be available under the plan, and earnings, if any, are +credited to the participant's account. +Accounts +are paid out upon the earliest to occur of (i) a qualifying separation from service, (ii) a change in control (as such term is defined in the plan), and (iii) a +termination of the Deferred Compensation Plan. Payment must generally be made, or installment payments must begin, (as elected by the participant at the time of deferral) within 60 days of the +event triggering payment. +Mr. Stornant +is the only NEO who has elected to defer amounts under the Deferred Compensation Plan. Wolverine Worldwide did not make any discretionary Company contributions on behalf of +Mr. Stornant or any other NEO during 2017. +NONQUALIFIED DEFERRED COMPENSATION +Name +Executive +Contributions +in 2017 +($) +Registrant +Contributions +in 2017 +($) +Aggregate Earnings +in 2017 +($) +Aggregate +Withdrawals / +Distributions +($) +Aggregate Balance +at Last FYE +($) +Stornant +$5,000 1 +- +$28 2 +- +$13,461.52 1 +1 Reflects the amount deferred by Mr. Stornant with respect to 2017 compensation. These amounts are also reported for Mr. Stornant in the +Summary Compensation Table under "Salary" and "Non-Equity Incentive Plan Compensation." 2 Reflects market based earnings (losses) on amounts credited to Mr. Stornant under +the Deferred Compensation +Plan. +2018 +PROXY +STATEMENT +62 +Table of Contents +Potential Payments Upon Termination or Change in Control +Wolverine Worldwide has entered into an Executive Severance Agreement with each NEO that provides certain rights, including the right to receive payments in the event of a termination of employment +following a change in control. The Company also has entered into an agreement with Mr. Krueger regarding certain termination benefits in the event of termination of his employment under certain +other circumstances described below. +BENEFITS TRIGGERED BY TERMINATION FOR CAUSE OR VOLUNTARY TERMINATION +An NEO is not entitled to receive any additional forms of severance payments or benefits upon termination of employment for Cause or upon the +NEO's voluntary decision, other than for Good Reason, to terminate his employment. +BENEFITS TRIGGERED BY TERMINATION OTHER THAN FOR CAUSE OR FOR GOOD REASON +Mr. Krueger entered into a Separation Agreement on March 13, 2008, which states that upon termination of his employment by +Wolverine Worldwide without Cause or termination by Mr. Krueger with Good Reason, as such terms are defined in +Mr. Krueger's Separation Agreement, Wolverine Worldwide will pay Mr. Krueger the following payments in exchange for a general release of claims in favor of Wolverine Worldwide: +(1) continued base salary for 18 months (reduced by payments he receives if he is employed by a Competing Business, as defined in Mr. Krueger's Separation Agreement); +(2) the pro rata portion of the annual incentive bonus and the 3 year bonus for all uncompleted performance periods based on actual corporate performance for the applicable performance +periods; (3) the pro rata portion of the annual individual performance bonus relating to personal performance objectives; and (4) retiree medical benefits for Mr. Krueger, his +spouse and dependents for a period starting on the day after the termination date and ending on the last day of the 18th month following the month in which the termination date falls. +"Cause" +generally is defined in Mr. Krueger's Separation Agreement to mean: (1) any act or omission knowingly undertaken or omitted with the intent of causing material damage to +Wolverine Worldwide; (2) any intentional act involving fraud, misappropriation or embezzlement, that causes material damage to Wolverine Worldwide; (3) repeated willful failure to +substantially perform any of his significant duties as reasonably directed by the Board of Directors of Wolverine Worldwide; (4) a conviction (including any plea of guilty or nolo contendere) +of any criminal act that (a) results in the executive serving prison time and not being able to perform the normal duties of his position for more than thirty (30) days; or +(b) causes material damage to Wolverine Worldwide; or (5) chronic or habitual use or consumption of drugs or alcohol that causes material damage to Wolverine Worldwide. +"Good +Reason" generally is defined in Mr. Krueger's Separation Agreement to mean: (1) a material reduction in base compensation, including a reduction in base salary or opportunities +under Wolverine Worldwide's bonus plans or equity plans (other than those implemented for the executive team as a whole); (2) a material reduction in authority, duties, or responsibilities; +(3) a requirement to report to a Company officer or employee instead of reporting directly to the Board of Directors; or (4) certain relocations, other than those related to a change in +the location of Wolverine Worldwide's headquarters affecting a majority of the executive team. +BENEFITS TRIGGERED UPON A CHANGE IN CONTROL +Benefits Upon Termination Following a Change in Control. Under the Executive Severance Agreements entered into with the NEOs, payments and benefits are triggered +when employment is terminated without "Cause" or when an executive terminates employment for +2018 +PROXY +STATEMENT +63 +Table of Contents +"Good +Reason" within two years (Messrs. Spaletto, Stornant, Woodworth and Zwiers) or three years (Mr. Krueger) following a change in control of Wolverine Worldwide. +Upon +such a qualifying termination, Wolverine Worldwide will pay the lump sum severance payment under the Executive Severance Agreement composed of the following: (1) unpaid base salary and +bonus payments that had been earned; (2) in lieu of a bonus payment under the Annual Bonus Plan, an amount equal to the quotient of the number of days the NEO was employed by Wolverine +Worldwide, or any successor company in the year of termination, divided by the number of days in the year, multiplied by 100% of the greater of either (a) the bonus awarded to the NEO under the +annual bonus plan for the preceding year and (b) the average paid to the NEO over the preceding two year period under the annual bonus plan; (3) in lieu of payments under the various +three year performance periods that remain open on the date of termination, if any, an amount equal to the bonus the NEO would have received based on actual and assumed performance measures, +multiplied by the quotient of the number of days the NEO participated in the performance period prior to the termination, divided by the total number of days in the performance period (in determining +the earnings per share or other performance measures that can be determined annually for any year subsequent to the year of termination, performance will equal the level required to attain the maximum +goal under the three year plan for that year); (4) either two (Messrs. Spaletto, Stornant, Woodworth and Zwiers) or three (Mr. Krueger) times the sum of (a) the NEO's +highest annual base salary during the 12 month period prior to termination and (b) the greater of (i) the average amount earned by the NEO during the previous two years under the +annual bonus plan and (ii) the amount earned during the previous year under the Annual Bonus Plan; (5) 100% of the positive spread for any stock options held by the NEO on the date of +termination, whether or not vested; (6) in the case of Messrs. Krueger and Zwiers, an excise tax gross up adjustment (note: the agreements with Messrs. Spaletto, Stornant and +Woodworth were entered into after 2008 and the Committee determined to not provide such gross ups after that date); and (7) in the case of Messrs. Spaletto, Stornant and Zwiers, the +present value of an additional three years of deemed service under the Pension Plan and SERP. Upon a termination of employment following a change of control, Wolverine Worldwide or any successor +company will maintain for a period of six months to one year the NEO's benefits under the then current benefit plans, programs or arrangements that the NEO was entitled to participate in immediately +prior to the termination date. In addition, Wolverine Worldwide or any successor company will provide outplacement services through the last day of the second calendar year following the calendar year +of termination. +"Change +in Control" under the Executive Severance Agreements generally means certain changes in composition of the Board of Directors, certain acquisitions of 20% or more of Wolverine Worldwide's +common stock or combined outstanding voting power of Wolverine World Wide, Inc., and other specified reorganizations, mergers, consolidations, liquidations, dissolutions or distributions of +substantial assets (unless such transactions result in the creation of an entity in which at least 50% of the common stock and combined voting power is owned by the owners of record prior to the +transaction, no single shareholder owns more than 20% of the combined voting power and a majority of the board remains unchanged). +"Cause" +is defined under the Executive Severance Agreements to generally mean the willful and continued failure to substantially perform duties or willfully engaging in gross misconduct that is +injurious to the Company. +"Good +Reason" is defined under the Executive Severance Agreements to generally mean: (1) any materially adverse change in position, duties, responsibilities or title, or any removal, +involuntary termination or failure to re-elect an officer; (2) a reduction in annual base salary; (3) any relocation or requirement to substantially increase business travel; +(4) the failure to continue providing any executive incentive plans or bonus plans; (5) the failure to continue any employee benefit plan or compensation plan unless a comparable plan is +available; (6) the failure to pay any salary, bonus, deferred compensation or other compensation; (7) the failure to obtain an assumption agreement from any successor; (8) any +purported termination of the employment which is not effected in a manner prescribed by the Executive Severance Agreement; or (9) any other material breach by Wolverine Worldwide or any +successor company of its obligations under the Executive Severance Agreement. +Benefits Upon a Change in Control Only. For 2017 and future years, the Company adopted double-trigger vesting, meaning that equity vesting only accelerates upon a +qualifying termination of employment after a change in control. For grants prior to 2017, upon a change in control of Wolverine Worldwide, absent a determination by the Compensation Committee to the +contrary, outstanding stock options become immediately exercisable in full and will remain exercisable during their remaining term, regardless of whether the NEO remains an employee of Wolverine +Worldwide or any successor company. The Committee may determine that one or all of the NEOs shall receive cash in an amount equal to the positive spread amount associated with these options. In +addition, upon a change in control of Wolverine Worldwide all other outstanding equity incentive awards of the NEOs that were granted prior to 2017, including shares of restricted stock, become +immediately and fully vested and non-forfeitable. To the extent that the Company has made discretionary contributions under the +2018 +PROXY +STATEMENT +64 +Table of Contents +Deferred +Compensation Plan that are subject to a vesting schedule, any unvested portion of these contributions will vest on a change in control. Change in control for this purpose generally means +certain changes in the composition of the Board of Directors, certain acquisitions of 20% of Wolverine Worldwide's common stock (50% in the case of the Deferred Compensation Plan) and other specified +reorganizations, mergers, consolidations, liquidations, dissolutions or dispositions of substantial assets. +Excise Tax Gross Up. The Compensation Committee previously determined that Wolverine Worldwide would not provide excise tax gross up payments in employment +agreements entered into after 2008. Messrs. Krueger and Zwiers are the only NEOs who have excise tax gross up protection in their agreements. +BENEFITS TRIGGERED BY RETIREMENT, DEATH OR PERMANENT DISABILITY +Pension Plan. In the event of death before retirement, the Pension Plan provides the surviving spouse of a vested participant a death benefit equal to the +qualified pre-retirement survivor annuity as defined in the Internal Revenue Code (generally 50% of the participant's accrued normal retirement benefit). This benefit is paid annually to the surviving +spouse beginning when the participant would have turned 60 and continues for the life of the surviving spouse. For participants with at least three years of service as of December 31, 2003, and +who have at least 10 years of service and are employed by the Company at the time of death, the amount of the survivor benefit under the Pension Plan is calculated as though the participant had +continued as an employee of the Company until age 65 at the compensation level as of the date of death and the benefit begins upon the date of death, unreduced for early commencement. The survivor +benefit for participants who meet all the criteria set forth in the preceding sentence, but who die when they are not employed by the Company, are entitled to a joint and survivor benefit commencing +upon the date of death, unreduced for early commencement. +SERP. If a SERP participant dies before beginning to receive benefits under the SERP, the Company must, based on the participant's election, pay the beneficiary +either a monthly annuity or a lump sum death benefit equal to the present value of the benefit computed as if the participant had retired on the date of death, had begun receiving benefits at age 55 +and had continued to receive benefits for the remainder of the participant's life expectancy. If the participant dies after beginning to receive benefit payments, benefits cease unless the participant +was receiving benefits in the form of one of the joint and survivor annuity optional elections under the plan or had elected benefits in a form that provides for a continuation of benefits. +If +a participant becomes disabled (as defined), the SERP provides a disability benefit equal to 60% of the normal retirement accrued benefit based upon years of service up to the date that the +participant became disabled through the date the participant reaches age 65 (at which point, the participant would begin drawing full SERP benefits) or is no longer disabled. +Annual Bonus Plan. Upon termination of employment at least six months after the beginning of a fiscal year due to death, disability or early or normal retirement, +an NEO is entitled to receive a pro rata portion of any annual bonus award earned under the Annual Bonus Plan based on the NEO's service during such fiscal year and actual performance under the Annual +Bonus Plan. The annual bonus is payable at the same time and in the same manner as awards are paid to other NEOs for the fiscal year. +Stock Incentive Plans. Upon death, disability or voluntary termination of employment after attaining age 59 with ten years of service with the Company +(50 years of age and seven years of service or age 62 for grants prior to 2016), subject to certain conditions, the restrictions applicable to each NEO's shares of restricted stock terminate +and stock options vest in full (prorated for grants prior to 2016). Upon death, disability or voluntary termination of employment after attaining age 59 with ten years of service (50 years of +age and seven years of service or age 62 for grants prior to 2016) with the Company, subject to certain conditions, the restrictions on time-vested shares lapse or units vest. At fiscal year-end, +Mr. Krueger was the only NEO eligible for early vesting as a result of age or service with the Company. +Deferred Compensation Plan. Upon death, disability, or other qualifying separation from service, including retirement, all in accordance with Section 409A +of the Internal Revenue Code, all amounts deferred by the NEOs under the Deferred Compensation Plan, including any vested amounts credited to the NEOs pursuant to a discretionary Company contribution, +shall generally be paid, or commence payment, within 60 days of the termination in accordance with the schedule elected by the NEO at the time of deferral. +2018 +PROXY +STATEMENT +65 +Table of Contents +DESCRIPTION OF RESTRICTIVE COVENANTS THAT APPLY DURING AND AFTER TERMINATION OF EMPLOYMENT +The SERP contains non-competition, confidentiality and employee non solicitation provisions in favor of Wolverine Worldwide. Under the +non-competition provisions of the SERP, the participant will not be entitled to any benefit payment if, prior to the date on which such benefit payment is due, the participant enters into certain +relationships with a competing business. +ESTIMATED PAYMENTS ON TERMINATION OR CHANGE IN CONTROL +The following table summarizes the potential payments and benefits payable to each NEO upon a change in control or termination of employment +following each of the triggering events set forth in the table. As required, the amounts in the table assume that the termination of employment or change in control of Wolverine Worldwide took place +on the Company's last day of fiscal 2017, which was December 30, 2017. The amounts set out below are in addition to benefits that are generally available to the Company's employees such as +distributions under the Company's 401(k) savings plan, disability or life insurance benefits and accrued vacation. Due to the many factors that affect the nature and amount of any benefits provided +upon the termination events discussed below, any actual amounts paid or distributed to NEOs may be different. Factors that may affect these amounts include timing during the year of the occurrence of +the event, Wolverine Worldwide's stock price and the NEO's age and years of service. +The +value of the accelerated vesting of unvested equity-based compensation awards was computed using the closing market price $31.88 of Wolverine Worldwide's common stock on December 29, 2017, +the last business day in fiscal 2017. The value for unvested restricted stock is computed by multiplying $31.88 by the number of shares of the NEO's restricted stock that would vest as a result of an +event. The value of stock options that would vest as a result of an event equals the difference between the exercise price of each option and $31.88. +2018 +PROXY +STATEMENT +66 +Table of Contents +Each +of the hypothetical events described in the following table (the highlighted blue headings in the left hand column) is calculated and reported as a discrete event. For example, the amounts +disclosed under the "Change in Control Only" heading are not cumulative with the amounts disclosed under the "Change in Control/Termination" heading. +Termination Event and Payment / Benefits +Krueger +Spaletto +Stornant +Woodworth +Zwiers +Termination by Company for Cause or Voluntary Termination (other than for Good Reason or due to Retirement) +- +- +- +- +- +Termination by Company Other Than for Cause or by Executive for Good Reason +$9,336,838 +1 +- +- +- +- +Change in Control / Termination +Executive Severance Agreement 2 +$47,190,753 +$2,837,528 +13 +$7,671,359 +13 +$4,282,186 +13 +$12,587,899 +Benefits under Executive Severance Agreement 3 +$62,285 +$62,535 +$58,886 +$61,830 +$59,818 +Stock Incentive Plans 4 +$16,256,361 +$772,165 +$2,999,130 +$2,326,856 +$3,313,677 +Lump sum payment under the SERP 5 +$24,044,107 +- +$2,516,414 +- +$5,245,630 +Death +SERP 6 +$19,896,557 +- +$1,821,935 +- +$3,764,652 +Pension Plan 7 +$1,032,071 +- +$1,173,275 +- +$1,178,821 +Stock Incentive Plans 4 +$16,256,361 +$772,165 +$2,999,130 +$2,326,856 +$3,313,677 +Earned Incentive Compensation 8 +$10,173,853 +$1,115,345 +$1,390,971 +$1,426,329 +$1,775,272 +Disability +SERP 9 +$19,690,533 +- +$1,969,229 +- +$4,499,125 +Stock Incentive Plans 4 +$16,256,361 +$772,165 +$2,999,130 +$2,326,856 +$3,313,677 +Earned Incentive Compensation 8 +$10,173,853 +$1,115,345 +$1,390,971 +$1,426,329 +$1,775,272 +Retirement +SERP 10 +$19,690,533 +- +$1,635,674 +- +$3,298,033 +Pension Plan 10 +$2,026,340 +- +$1,025,963 +- +$908,734 +Stock Incentive Plans 4,11 +$16,256,361 +- +$466,281 +- +- +Earned Incentive Compensation 8,11 +$10,173,853 +- +$723,467 +- +- +Change in Control Only +Stock Incentive Plans 12 +$14,050,392 +- +$2,502,758 +$1,860,037 +$2,818,007 +1 The estimate for Mr. Krueger assumes target performance for the 2016-2018 and 2017-2019 performance periods and actual performance for the +2015-2017 period. Actual payout or vesting, if any, would be determined and made at the end of those periods. The amount reflected in the table also includes an estimated cost of +$20,557 for retiree medical benefits for 18 months and the estimated cost of $25,000 for outplacement services. 2 Payments would be triggered after termination of employment +under certain circumstances within two years (Messrs. Spaletto, Stornant, Woodworth +and Zwiers) or three years (Mr. Krueger) following a change in control. Includes amounts payable in cash under the terms of the Executive Severance Agreement, excluding the +value of the cash payout to each NEO of the option spread for already vested options. The timing of the payment would be delayed to the extent earlier payment would trigger +Section 409A of the tax code. The value of unvested options and service-based restricted shares that vest upon a change in control under the terms of the Company's stock +incentive plans are included in the Stock Incentive Plans row. 3 These estimates assume that Wolverine Worldwide, or any successor company, maintains the benefit plans for a +period of one year after termination and +the outplacement services for a period beginning with the date of termination and ending on the last day of the second calendar year following the calendar year in which the date of +termination occurred. 4 Reflects the value of unvested stock options and shares of restricted stock that would vest because of the +event. 5 Reflects the entire lump sum benefit payable to applicable NEOs, including any accumulated benefit. The timing of the payment would be delayed to the +extent earlier payment would trigger Section 409A of the Tax Code. 6 Reflects the entire lump sum death benefit payable to a participating NEO's beneficiary, including any +accumulated benefit. +2018 +PROXY +STATEMENT +67 +Table of Contents +7 Amounts reflect the net present value of the annuity paid to the surviving spouse calculated using the same discount rate and mortality assumptions +used in the Pension Benefits table under the heading "Pension Benefits in Fiscal Year 2017" under the heading "Pension Plans and 2017 Pension Benefits." In accordance with the terms of +the Pension Plan, the death benefit for Messrs. Krueger and Zwiers was calculated as though the NEO had continued as an employee of Wolverine Worldwide until age 65 at the +compensation level as of the date of death. 8 Under the Annual Bonus Plan and the terms of performance share awards, each NEO may be eligible to receive a pro rata portion of any +award if +employment is terminated as a result of any of the specified events in the table. The amount reported represents (a) actual payout under the Annual Bonus Plan for fiscal year +2017, (b) actual payout under the 2015-2017 performance cycle and (c) estimated target performance for the 2016-2018 and 2017-2019 performance cycles. Performance shares +would vest on a prorated basis based on actual Company performance. 9 Reflects the net present value of the annuity using the same discount rate and mortality assumptions used in +the Pension Benefits table and assuming +the NEO drew the disability benefit until age 65 and then the normal retirement benefit. 10 Reflects the net present value of benefits, as reflected in the Pension Benefits table +under the heading "Pension Benefits in Fiscal Year 2017" under +the heading "Pension Plans and 2017 Pension Benefits." 11 Mr. Krueger is the only NEO eligible for retirement (as defined in the applicable plan) for all awards at fiscal +2017 year end. +Mr. Stornant is eligible for retirement (as defined in the Stock Incentive Plan of 2013) at fiscal 2017 year end for awards granted prior to 2016. As such, +Mr. Stornant is eligible for accelerated vesting of such awards upon retirement. 12 Reflects the value of unvested stock options and shares of restricted stock (including +performance share awards) that would vest because of the +event. 13 The Executive Severance Agreements with Messrs. Spaletto, Stornant and Woodworth do not include excise tax gross up adjustments. Under the +provisions of their Agreements, if payments to Messrs. Spaletto, Stornant or Woodworth under the Agreement would trigger application of an excise tax, the Company would reduce +the payment to an amount that avoids application of the excise tax or pay the full amount, whichever results in the greater after-tax amount to the executive. +CEO PAY RATIO +As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of +Regulation S-K, we are providing the following information about the relationship of the annual total compensation of our employees and the annual total compensation of Blake Krueger, the +Company's Chief Executive Officer. +For +2017, our last completed fiscal year the annual total compensation of the employee of the Company identified at median was $64,167, and the annual total compensation of the CEO, as reported in the +Summary Compensation Table above, was $12,018,559. +Based +on this information, the 2017 ratio of the annual total compensation of Mr. Krueger to the median of the annual total compensation of all employees was estimated to be 188 to 1. +The +methodology and the material assumptions, adjustments, and estimates that we used to identify the median of the annual total compensation of all our employees, as well as to determine the annual +total compensation of our "median employee" and our CEO, are described below. +• We determined that, as of October 1, 2017, our employee population consisted of approximately 3,745 (2,884 in the U.S. and 861 outside +the U.S.) individuals globally. After excluding employees from India (15 employees) and Vietnam (39 employees) pursuant to the "de minimis" exception provided in the rules, we used a base of 3,691 +employees for purposes of determining the "median employee." We selected October 1, 2017, which is within the last three months of 2017, as the date upon which we would identify the median +employee to allow sufficient time to identify the median employee given the global scope of our operations. +• To identify the median employee from our employee population, we used annual base salary as well as bonus and other cash incentives paid for +the 12-month period ending October 15, 2017 as our consistently applied compensation measure. In making this determination, we annualized the compensation of all newly hired regular employees +during this period. +• Once we identified our median employee, we combined all of the elements of such employee's compensation for fiscal 2017 in accordance with the +SEC's rules, resulting in annual total compensation of $64,167. The difference between such employee's cash compensation and annual total compensation determined for purposes of this calculation was +$23,825, which includes change in pension value, employer paid health care and life insurance premiums, and 401(k) match. +• With respect to the annual total compensation of our CEO, we used the amount reported in the "Total" column of our 2017 Summary Compensation +Table included in the Proxy Statement. +2018 +PROXY +STATEMENT +68 +Table of Contents +Proposal 2 — Advisory Resolution to Approve Executive Compensation +The +Company is asking its shareholders to indicate their support for Wolverine Worldwide's NEO compensation, as described in this Proxy Statement. This proposal, commonly known as a +"say on pay" proposal, gives the Company's shareholders the opportunity to express their view on compensation for the Company's NEOs. The say on pay vote is advisory and, therefore, not binding on the +Company, the Compensation Committee or the Board. Even though non-binding, the Board and Compensation Committee value the opinions of Wolverine Worldwide's shareholders and will review and consider +the voting results when making future decisions regarding the Company's executive compensation program. +At +the 2017 annual meeting of shareholders, the Company also held an advisory vote on the frequency of future say-on-pay votes. Our shareholders voted in favor of an annual say-on-pay vote and the +Company has elected to follow such recommendation. In accordance with Rule 14a-21(b) of the Exchange Act, shareholders will be asked to vote again on how frequently the Company should hold +future say-on-pay votes at the Company's 2023 annual meeting of shareholders. +The +Company encourages shareholders to read the "Compensation Discussion and Analysis" ("CD&A") section of this proxy statement beginning on page 34. As described in the CD&A section, the +Compensation Committee has structured the executive compensation program to achieve the following key objectives: +• Align the interests of NEOs with those of the shareholders through incentives based on achieving performance objectives that enable increased +shareholder value +• Provide incentives for achieving specific, near term corporate, business unit and individual goals and reward the achievement of those goals +• Provide incentives for achieving pre-established, longer term corporate financial goals and reward achievement of those goals +• Attract and retain talented NEOs who will lead Wolverine Worldwide and drive superior business and financial performance +The +executive compensation program is designed to achieve these objectives, in part, by: +• Weighting at risk and variable compensation (annual bonuses and long-term incentives) much more heavily than fixed compensation (base salaries) +• Rewarding annual performance while maintaining emphasis on longer-term objectives +• Blending cash, non-cash, long- and short-term compensation components, and current and future compensation components +The +Company encourages shareholders to read the Summary Compensation Table and other related compensation tables and narrative, appearing on pages 51-68, which provide detailed information on +the compensation of the Company's NEOs. +The +Compensation Committee and the Board of Directors believe the Company's compensation program and its policies and procedures articulated in the CD&A section are effective in aligning the interests +of the Company's NEOs with the interests of shareholders, promoting the achievement of the Company's near and long-term objectives, and increasing shareholder value. +In +accordance with the rules under Section 14A of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and as a matter of good corporate governance, the Company asks +shareholders to approve the following advisory resolution at the 2018 Annual Meeting of Shareholders: +RESOLVED , that the shareholders of Wolverine World Wide, Inc. (the "Company") approve, on an advisory basis, the compensation of the Company's +named executive officers disclosed in the Compensation Discussion and Analysis section, the Summary Compensation Table and the related compensation tables, notes and narrative in the Proxy Statement +for the Company's 2018 Annual Meeting of Shareholders. +BOARD RECOMMENDATION +The Board recommends that you vote "FOR" approval of the advisory resolution to approve executive compensation. +2018 +PROXY +STATEMENT +69 +Table of Contents +Proposal 3 – Ratification of Appointment of +Independent Registered Public Accounting +Firm +Ernst & +Young LLP ("Ernst & Young") was the Company's independent registered public accounting firm for the fiscal year ended December 30, 2017. The Audit +Committee has reappointed Ernst & Young as the Company's independent registered public accounting firm for the current fiscal year. As a matter of good corporate governance, the Audit Committee +has determined to submit its appointment of Ernst & Young to the Company's shareholders for ratification. If this appointment is not ratified by the holders of a majority of shares cast +affirmatively or negatively on the matter, the Audit Committee will review its future selection of an independent registered public accounting firm. Even if the appointment is ratified, the Audit +Committee in its discretion may select a different independent registered public accounting firm any time during the year if it determines that such a change would be in the best interests of the +Company and the Company's shareholders. +The +Audit Committee reviewed Ernst & Young's performance prior to appointing it as the Company's independent registered public accounting firm, and +considered: +• the historical and recent performance of Ernst & Young on the Company's audit, including the quality of the engagement team and +Ernst & Young's experience, client service, responsiveness and technical expertise +• the Public Company Accounting Oversight Board report of selected Ernst & Young audits +• the appropriateness of fees charged +• Ernst & Young's familiarity with the Company's accounting policies and practices and internal control over financial reporting +• Ernst & Young's financial strength and performance +Representatives +of Ernst & Young are expected to be present at the Annual Meeting. They will have an opportunity to make a statement if they desire to do so, and are expected to be available to +respond to appropriate questions from shareholders. +BOARD RECOMMENDATION +The Board recommends that you vote "FOR" ratification of the Audit Committee's selection of the firm of Ernst & Young LLP as the Company's independent registered public accounting firm +for fiscal year 2018. +2018 +PROXY +STATEMENT +70 +Table of Contents +Audit Committee Report +The +Audit Committee of the Board of Directors consists of five directors who are independent under the Company's Director Independence Standards, the NYSE listed company standards, +and applicable SEC standards. The Audit Committee represents and assists the Board in fulfilling its oversight responsibility regarding the Company's financial statements and the +financial reporting process, the internal control over financial reporting, the performance of the internal audit function and the independent registered public accounting firm, the qualifications and +independence of the independent registered public accounting firm, the annual independent audit of Wolverine Worldwide's financial statements and internal control over financial reporting, and +compliance with legal and regulatory requirements. The Audit Committee is directly responsible for appointing, retaining, compensating, overseeing, evaluating and terminating (if appropriate) +Wolverine Worldwide's independent registered public accounting firm. Wolverine Worldwide's management has primary responsibility for the financial statements and the financial reporting process, +including the application of accounting and financial principles, the preparation, presentation and integrity of the financial statements, and the systems of internal controls and other procedures +designed to promote compliance with accounting standards and applicable laws and regulations. Wolverine Worldwide's independent registered public accounting firm is responsible for expressing an +opinion on the conformity of Wolverine Worldwide's financial statements with generally accepted accounting principles and for auditing the effectiveness of Wolverine Worldwide's internal control over +financial reporting. +The +Audit Committee has taken steps to provide assurances regarding Audit Committee composition and procedures, the independence of Wolverine Worldwide's independent registered public accounting firm +and the integrity of Wolverine Worldwide's financial statements and disclosures. These steps include: (i) reviewing the Audit Committee Charter; (ii) reviewing with legal counsel and the +independent registered public accounting firm the Accounting and Finance Code of Ethics; (iii) maintaining financial, accounting and business ethics complaint procedures to allow employees, +shareholders and the public to report concerns regarding Wolverine Worldwide's financial statements, internal controls and disclosures; and (iv) reviewing procedures for the Audit Committee to +pre-approve all audit and non-audit services provided by Wolverine Worldwide's independent registered public accounting firm. +As +part of its supervisory duties, the Audit Committee has reviewed Wolverine Worldwide's audited financial statements for the fiscal year ended December 30, 2017, and has discussed those +financial statements with Wolverine Worldwide's management and internal financial staff, and the internal auditors and independent registered public accounting firm with and without management +present. The Audit Committee has also reviewed and discussed the following with Wolverine Worldwide's management and the financial staff, and with the internal auditors and independent registered +public accounting firm with and without management present: +• Accounting and financial principles and significant assumptions, estimates and matters of judgment used in preparing the financial statements +• Allowances and reserves for accounts receivable, inventories and taxes +• Accounting for acquisitions, pension plans and equity-based compensation plans +• Goodwill impairment analysis +• Other significant financial reporting issues and practices +The +Audit Committee has discussed with Wolverine Worldwide's independent registered public accounting firm the results of its examinations and its judgments concerning the quality, as well as the +acceptability, of Wolverine Worldwide's accounting principles and such other matters that it is required to discuss with the independent registered public accounting firm under applicable rules, +regulations or generally accepted auditing standards, including the matters required to be discussed by applicable rules of the Public Company Accounting Oversight Board ("PCAOB"). In addition, the +Audit Committee has received from the independent registered public accounting firm the written disclosures and the letter required by the applicable requirements of the PCAOB regarding the +independent registered public accounting firm's communications with the Audit Committee concerning independence rules and has discussed their independence from Wolverine Worldwide and Wolverine +Worldwide's management with them, including a consideration of the compatibility of non-audit services with their independence, the scope of the audit and the scope of all fees paid to the independent +registered public accounting firm during the year. After and in reliance upon the reviews and discussions described above, the Audit Committee recommended that the audited financial +2018 +PROXY +STATEMENT +71 +Table of Contents +statements +for the fiscal year ended December 30, 2017, be included in Wolverine Worldwide's Annual Report on Form 10-K for the year then ended to be filed with the SEC. +Respectfully +submitted, +William +K. Gerber (Chair) +Jeffrey M. Boromisa +Roxane Divol +Brenda J. Lauderback +Michael A. Volkema +2018 +PROXY +STATEMENT +72 +Table of Contents +Independent Registered Public +Accounting Firm +The +Company's Audit Committee has adopted a policy under which the Audit Committee must approve all audit and non-audit services provided by the Company's independent registered +public accounting firm, Ernst & Young LLP, and which prohibits Ernst & Young LLP from providing any non-audit services that are prohibited by the SEC or the PCAOB. The +Company's Audit Committee provides categorical pre-approval for routine and recurring services, with specific service descriptions and budgets. All audit services, internal control related services, +and other services not within the specifically pre-approved service descriptions and budgets require engagement specific pre-approval. With certain exceptions (such as pre-approval of audit services), +the Audit Committee may delegate engagement specific pre-approval to one or more Audit Committee members, and has so delegated in certain instances to the Audit Committee Chairperson. Management must +communicate to the Audit Committee at its next regularly scheduled meeting any services approved by an Audit Committee member. Wolverine Worldwide's Audit Committee pre-approved all fees paid to +Ernst & Young LLP for services performed in 2018 and 2017. The aggregate fees billed by Ernst & Young LLP for audit and non-audit services were: +2017 +2016 +Audit Fees 1 +$ +1,877,000 +$ +1,843,600 +Audit Related Fees +- +- +Total Audit & Audit Related Fees +$ +1,877,000 +$ +1,843,600 +Tax Fees +Tax Compliance +$ +941,500 +$ +1,141,800 +Tax Planning & Advisory +$ +60,000 +$ +370,000 +Tax Planning & Advisory Other +- +- +Total Tax Fees +$ +1,001,500 +$ +1,511,800 +All Other Fees +- +- +TOTAL FEES +$ +2,878,500 +$ +3,355,400 +1 "Audit Fees" is comprised of fees for the annual audit, reviews of the financial statements included in Wolverine Worldwide's Quarterly +Reports on Form 10 Q audit of internal control over financial reporting, foreign statutory audits and consultations concerning accounting matters associated with the +annual audit. +Wolverine +Worldwide's Audit Committee has adopted a policy restricting the Company's hiring of current or former partners or employees of the independent registered public accounting firm retained by +the Company. +2018 +PROXY +STATEMENT +73 +Table of Contents +Proposal 4 — Approval of Amended +and Restated Stock Incentive +Plan of 2016 +Overview +On February 7, 2018 (the "Amendment Date"), the Board of Directors unanimously adopted and approved the Wolverine World +Wide, Inc. Stock Incentive Plan of 2016, as amended and restated (the "Plan"), subject to shareholder approval. The Plan amends and restates the Wolverine World Wide, Inc. Stock +Incentive Plan of 2016, which was approved by Company shareholders at the 2016 annual meeting (the "Current Plan"). The Plan allows grants of cash awards, stock options, stock appreciation rights, +restricted stock, restricted stock units and stock awards, any of which may be performance-based, and for incentive bonuses. The only other equity plan under which common stock of the Company may be +issued is the Outside Directors' Deferred Compensation Plan, which authorizes the issuance of shares only to non-employee directors. If shareholders do not approve the Plan, the Current Plan will +remain in existence, but the Company will not have sufficient shares under it to meet its short- or long-term needs. +Key Changes in the Plan +The amendment and restatement of the Plan is generally effective on the Amendment Date and makes the following changes, as described in more +detail under "Plan Summary" below: +• Increases the shares available under the Plan by 8.5 million shares, subject to shareholder approval; +• Extends the term of the Plan by approximately two years, from February 10, 2026 to February 7, 2028, subject to shareholder +approval; +• Provides that awards subject to time-based vesting that are granted on or after the Amendment Date are subject to "double-trigger" vesting on a +change in control of the Company; and +• Makes other administrative changes, including changes clarifying the treatment of awards subject to performance-based vesting on a change in +control of the Company. +Notwithstanding +the foregoing, the terms of the Plan, as amended and restated on the Amendment Date, will only apply to awards granted after the Amendment Date. Awards granted prior to the Amendment +Date continue to be governed by the terms of the Current Plan as in effect on November 2, 2017, which were those same terms in effect as of immediately prior to the Amendment Date. It is the +intent of the Company that the amendment and restatement of the Plan on the Amendment Date not constitute a "material modification" of the Plan or awards granted under it prior to the Amendment Date +within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code") and the Plan will be interpreted in accordance with the foregoing intent. +Why You Should Vote For the Plan +The Board of Directors recommends that the Company's shareholders approve the Plan because it believes that equity awards are a critical part +of the Company's compensation program and are essential to the Company's ability to effectively compete for and appropriately motivate and reward key talent. The Board of Directors believes that it is +in the interests of both the Company and its shareholders to strengthen the Company's ability to attract, motivate and retain high quality employees, directors and consultants and to incentivize such +persons to achieve the Company's financial and strategic goals through the issuance of equity and other performance-based awards. The Company is seeking shareholder approval of the Plan because the +Board of Directors does not believe that the shares available for issuance with respect to equity awards under the Current Plan are sufficient to meet the Company's short- or long-term needs. The +Company believes that the availability of an additional 8.5 million shares under the Plan in addition to the remaining shares under the Current Plan (2,673,893 shares at the end of fiscal 2017) +would provide sufficient additional shares to continue to make awards at historical average rates for 2-3 years. +2018 +PROXY +STATEMENT +74 +Table of Contents +Promotion of Good Corporate Governance Practices +The Plan includes a number of provisions that we believe promote good corporate governance and the interests of shareholders. Under the +Plan: +• Stock options and stock appreciation rights may not be granted with exercise prices lower than the fair market value of the underlying shares +on the grant date +• The administrator may not, without prior approval of the Company's shareholders, "reprice" any previously granted underwater stock options or +stock appreciation rights +• Shares subject to an award under the Plan may not again be made available for issuance under the Plan if such shares were: (i) subject +to a stock-settled stock appreciation right and were not issued upon the net settlement or net exercise of such stock appreciation right, (ii) used to pay the exercise price of a stock option +or the purchase price, if any, for an award, (iii) delivered to or withheld by the Company to pay the withholding taxes related to an award, or (iv) repurchased on the open market with +the proceeds of a stock option exercise +• The Plan has a fungible share feature whereby so-called "full value" awards are counted against the share pool at a higher rate (2.6:1) than +stock options or stock appreciations rights +• Outstanding awards under the Plan may be forfeited in the event a participant engages in an act of misconduct +• The Plan administrator may recover awards made under the Plan and payments under or gain in respect of any award in accordance with the +Company's Policy for Recovery of Incentive Compensation or any other clawback policy maintained by the Company +• Awards generally must be granted with vesting schedules pursuant to which they will not vest or become exercisable for at least one year +• The Plan limits the aggregate grant date value of awards that may be granted to non-employee directors +• No dividends or dividend equivalents will be paid with respect to performance-based restricted stock units or performance-based restricted +stock until the underlying performance awards vest +• No dividends or dividend equivalents will be paid with respect to shares subject to stock options or stock appreciation rights +• Awards generally may not be transferred except by will or the laws of descent and distribution or, if approved by the administrator, to certain +family members, family trusts, or family partnerships pursuant to a gift or domestic relations order +• Awards subject to time-based vesting that are granted on or after the Amendment Date are subject to "double-trigger" vesting on a change in +control of the Company +Key Data +The following table provides information regarding equity awards outstanding and shares available for future awards under all of the Company's +equity plans as of December 30, 2017, the end of the Company's fiscal year (and without giving effect to approval of the Plan +2018 +PROXY +STATEMENT +75 +Table of Contents +under +this Item 4). We have no equity awards outstanding other than stock options, restricted stock, restricted stock units and performance awards (in the form of both performance restricted +stock and performance restricted stock units). +Total shares underlying all outstanding stock options +6,089,664 +Weighted average exercise price of outstanding stock options +$20.05 +Weighted average remaining contractual life of outstanding stock options (years) +5.8 +Total shares underlying all outstanding and unvested performance shares and units +1,690,668 +Total shares underlying all outstanding and unvested restricted stock and units (excluding performance shares) +2,025,072 +Shares available for future awards that could be issued under Current Plan 1 +2,673,893 +Shares available for future issuance under the Outside Directors' Deferred Compensation Plan 1 +111,282 +1 Upon approval of the Plan, the only additional shares available for future awards will be the additional 8.5 million shares approved under the Plan. The 111,282 +shares available under the Outside Directors' Deferred Compensation Plan are only for issuance to non-employee directors. No shares under any other plan will be available for future +issuance. +Section 162(m) of the Code +The Board of Directors believes that it is in the best interests of the Company and its shareholders to continue to maintain an equity +incentive plan under which awards made to the Company's executive officers before November 2, 2017 may +continue to qualify as exempt "performance based" compensation for purposes of Section 162(m) (to the extent applicable). Prior to the enactment of the Tax Cuts and Jobs Act on +December 22, 2017 ("Tax Act"), Section 162(m) of the Code generally limited to; $1,000,000 the federal income tax deduction available to publicly held companies for compensation paid in +any one year to the Company's chief executive officer or any of the Company's three other most highly compensated executive officers (other than the Company's CFO), with certain exceptions for +"qualified performance-based compensation." For compensation awarded under a plan before November 2, 2017 to fit within this exception under Section 162(m) of the Code, among other +things, the following terms must be disclosed to and approved by the shareholders of the company before the compensation is paid: (i) a description of the employees eligible to receive such +awards, (ii) a description of the business criteria on which the performance goals may be based, and (iii) the maximum amount that can be paid to any participant for a specified period. +While it is the intent of the Company that the amendment and restatement of the Plan on the Amendment Date not constitute a "material modification" of the Plan or awards granted under it prior to the +Amendment Date within the meaning of Section 162(m) of the Code, there can be no guarantee that awards made before November 2, 2017 under the Plan will be deductible as qualified +performance-based compensation under Section 162(m) of the Code. In addition, the Compensation Committee has and will continue to have authority to pay or provide compensation (including under +the Plan, if approved by shareholders) that is not deductible under Section 162(m) of the Code in order to maintain a competitive compensation program and provide compensation that will attract +and retain highly qualified executives +Plan Summary +The following summary of the material terms of the Plan is qualified in its entirety by reference to the complete statement of the Plan, which +is set forth in Appendix A to this proxy statement. +Administration +The Plan will be administered by the Compensation Committee, which is referred to in this summary in its capacity as administrator of the Plan +as the "administrator." Any power of the Compensation Committee as administrator may also be exercised by the Board of Directors, except to the extent that the grant or exercise of such authority +would cause any award or transaction to become subject to (or lose an exemption under) the short-swing profit recovery provisions of Section 16 of the Exchange Act or cause an award designated +as a performance award not to qualify for treatment as performance-based compensation under Section 162(m) of the Code, to the extent applicable. Subject to the express provisions of the Plan, +the administrator is authorized and +empowered to do all things that it determines to be necessary or appropriate in connection with the administration of the Plan. All decisions, determinations and interpretations by the Compensation +Committee regarding the Plan and awards granted under the Plan will be final and binding on all participants and other persons holding or claiming rights under the Plan or to an award under the Plan. +The Compensation Committee may authorize one or more officers of the Company to perform any or all things that the administrator is authorized and empowered to do or perform under the Plan; provided, +however, that no such officer may designate himself or herself as a recipient of any awards granted under the authority delegated to +2018 +PROXY +STATEMENT +76 +Table of Contents +such +officer and that any delegation of the power to grant awards to an officer must otherwise be consistent with the requirements of Section 157(c) of the Delaware General Corporation Law. The +Compensation Committee has designated the Company's CEO, CFO, general counsel and secretary, and head of the human resource function to assist in administering the Plan and executing award +agreements and other documents entered into under the Plan. In addition, the Compensation Committee may delegate any or all aspects of the day-to-day administration of the Plan to one or more officers +or employees of the Company or any subsidiary, and/or to one or more agents. +References +to Section 162(m) of the Code in this "Administration" section, as well as in the sections captioned "Shares Subject to the Plan and to Awards," "Restricted Stock and Restricted +Stock Units," "Incentive Bonuses" and "Qualifying Performance Criteria" below, shall refer to such Code section as in effect prior to December 22, 2017, including the regulations thereunder and +other applicable Internal Revenue Service guidance, whether promulgated or issued before or after December 22, 2017. +Eligibility +Any person who is a current or, to the extent consistent with Section 409A of the Code, prospective officer or employee of the Company +or of any Company subsidiary will be eligible for selection by the administrator for the grant of awards under the Plan. In addition, non-employee directors and any service providers who have been +retained to provide consulting, advisory or other services to the Company or to any Company subsidiary will be eligible for the grant of awards under the Plan. Stock options intended to qualify as +"incentive stock options" ("ISOs") within the meaning of Section 422 of the Code may only be granted to employees of the Company or a Company subsidiary. As of March 1, 2018, +approximately 7 executive officers, 415 employees, 10 non-employee directors and a very limited number (likely less than 10) of other service providers would be eligible to participate in the +Plan. As of this same date, the closing price of a share of common stock of the Company was $29.00. +Shares Subject to the Plan and to Awards +Subject to changes in the Company's capitalization, the aggregate number of shares of the Company's common stock issuable pursuant to all +awards under the Plan will not exceed 6,100,000 (the number of shares authorized under the Current Plan as approved by shareholders on April 21, 2016), plus an additional 8,500,000 shares, plus +any shares of the Company's common stock underlying awards granted under the Company's Stock Incentive Plan of 2013 and the Company's Stock Incentive Plan of 2010 that on or after the effective date +of the Current Plan, or the Amendment Date, as applicable, cease for any reason to be subject to such awards (other than by reason of exercise or settlement of the awards to the extent they are +exercised for or settled in vested and +non-forfeitable shares). Any shares granted under stock options or stock appreciation rights will be counted against this limit on a one-for-one basis, and any shares granted under any other awards +will be counted against this limit as 2.6 shares for every one share subject to such award. The shares issued pursuant to awards granted under the Plan may be shares that are authorized and unissued +or issued shares that were reacquired by the Company, including shares purchased in the open market. No fractional shares will be delivered under the Plan. +For +purposes of determining the share limits described in the paragraph above, the aggregate number of shares issued under the Plan at any time will equal only the number of shares actually issued (as +calculated above) upon exercise or settlement of an award. Notwithstanding the foregoing, shares subject to an award under the Plan may not again be made available for issuance under the Plan if such +shares were: (i) subject to a stock-settled stock appreciation right and were not issued upon the net settlement or net exercise of such stock appreciation right, (ii) used to pay the +exercise price of a stock option or the purchase price, if any, for an award, (iii) delivered to or withheld by the Company to pay the withholding taxes related to an award, or +(iv) repurchased on the open market with the proceeds of a stock option exercise. Shares subject to awards that have been canceled, expired, forfeited or otherwise not issued under an award and +shares subject to awards settled in cash will not count as shares issued under the Plan for purposes of the above limit. +Subject +to certain adjustments, the aggregate number of shares that may be delivered, or the value of which could be paid in cash or other property, under awards granted under the Plan during any +calendar year to any one participant may not exceed 3,600,000 and the aggregate number of shares that may be issued pursuant to the exercise of ISOs granted under the Plan may not exceed 3,600,000. +The maximum amount payable pursuant to that portion of an incentive bonus granted in any calendar year to any participant under the Plan that is intended to satisfy the requirements for +"performance-based compensation" under Section 162(m) of the Code may not exceed $20,000,000. The aggregate grant date fair value of awards (computed as of the date of grant in accordance with +applicable financial accounting rules) granted under the Plan during any calendar year to any one non-employee director will not exceed $400,000. +2018 +PROXY +STATEMENT +77 +Table of Contents +In +addition, (i) no portion of any grant of restricted stock will be scheduled to vest prior to the date that is one year following the date the restricted stock is granted; (ii) no +portion of any grant of an option or stock appreciation right will be scheduled to become exercisable prior to the date that is one year following the date the option or stock appreciation right is +granted; and (iii) no portion of any grant of a restricted stock unit or incentive bonus will be scheduled to vest or be settled, paid or distributed prior to the date that is one year +following the date the award is granted; provided; however, that awards that result in the issuance of an aggregate of up to 5% of the shares reserved for issuance under the Plan may be granted to +eligible persons without regard to the minimum vesting, exercisability, settlement, payment and distribution provisions described in this paragraph. +Stock Options +Stock options granted under the Plan may either be ISOs or stock options that are not intended to qualify as ISOs ("nonqualified stock +options" or "NQSOs"). The administrator will establish the exercise price per share under each stock option, which will not be less than the fair market value (or 110% of the fair market value in the +case of ISOs granted to individuals who own more than 10% of the Company's common stock) of a share on the date the stock option is granted, except in certain cases where substitute or replacement +awards are granted in connection with a merger or acquisition. The administrator will establish the term of each stock option, which in no case may exceed a period of 10 years from the date of +grant (or five years in the case of ISOs granted to individuals who own more than 10% of the Company's common stock). Unless the administrator determines otherwise, (i) upon termination of +employment other than due to death, disability, retirement or termination for cause, to the extent vested on the date of such termination, stock options remain exercisable for three months following +such date (or until the expiration date of the stock option, if earlier), (ii) upon death or disability, stock options become fully vested and remain exercisable for one year following such +event (or until the expiration date of the stock option, if earlier), (iii) upon retirement, stock options become fully vested and remain exercisable until their expiration date, and +(iv) upon termination of employment for cause, all stock options are forfeited. +No +dividends or dividend equivalents may be paid or granted in respect of shares subject to stock options or stock appreciation rights and no holder of a stock option is entitled to any dividends with +respect to the shares subject to stock options or appreciation rights unless and until such awards have vested and have been exercised in accordance with the terms of the Plan and the applicable award +agreement and such shares are reflected as issued and outstanding. +Stock Appreciation Rights +A stock appreciation right provides the right to receive the monetary equivalent of the increase in value of a specified number of the shares +over a specified period of time after the right is granted. Stock appreciation rights may be granted to participants either in tandem with or as a component of other awards granted under the Plan +("tandem SARs") or not in conjunction with other awards ("freestanding SARs"). All freestanding SARs will be granted subject to the same terms and conditions applicable to options as set forth above +and in the Plan, and all tandem SARs will have the same exercise price, vesting, exercisability, forfeiture and termination provisions as the award to which they relate. +Restricted Stock and Restricted Stock Units +Restricted stock is an award or issuance of shares the grant, issuance, retention, vesting and/or transferability of which is subject during +specified periods of time to certain conditions (including continued employment or performance conditions) determined by the administrator. Restricted stock units are awards denominated in units of +shares under which the issuance of shares is subject to such conditions (including continued employment or performance conditions) and terms as the administrator deems appropriate. Notwithstanding the +satisfaction of any performance goals, the number of shares granted, issued, retainable and/or vested under an award of restricted stock or restricted stock units on account of either financial +performance or personal performance evaluations may be reduced, but not increased, by the administrator on the basis of such further consideration as the administrator may determine. +Unless +the administrator determines otherwise, (i) upon termination of employment for any reason other than death, disability or retirement, all restricted stock and restricted stock units +still subject to restrictions as of the date of termination will be forfeited, and +(ii) upon death, disability or retirement, in general, the restrictions remaining on a participant's restricted stock and restricted stock units will lapse, except that in the case of awards +intended to satisfy the exception for "performance-based compensation" under Section 162(m) of the Code, any applicable qualifying performance criteria will not lapse upon a participant's +retirement other than in a manner that is consistent with such requirements. +2018 +PROXY +STATEMENT +78 +Table of Contents +Unless +otherwise determined by the administrator, participants holding shares of restricted stock granted under the Plan may exercise full voting rights with respect to those shares during the period +of restriction, but participants will have no voting rights with respect to shares underlying restricted stock units unless and until such shares are reflected as issued and outstanding shares on the +Company's stock ledger. +The +administrator will determine the extent to which participants are entitled to receive dividends or dividend equivalents with respect to restricted stock and shares underlying restricted stock +units. Any cash or stock dividends and dividend equivalents with respect to restricted stock and restricted stock units granted as performance awards, if any, will be withheld by the Company for the +participant's account and will be paid, if at all, (i) in the case of restricted stock, upon the achievement of the applicable performance measure(s) and the satisfaction of any other +restrictions imposed on the restricted stock in respect of which the dividends were paid and (ii) in the case of restricted stock units, at the time the shares and/or cash underlying such +restricted stock units is paid, and any dividends deferred in respect of any restricted stock and restricted stock units granted as performance awards will be forfeited upon the forfeiture of such +restricted stock and restricted stock units. Any non-cash dividends or distributions paid with respect to restricted stock and restricted stock units granted as performance awards will be subject to +the same restrictions that apply to the award to which they relate. +Stock Awards +Stock awards may be granted under the Plan with such terms and conditions as determined by the administrator, consistent with the 5% limit set +forth above under "Shares Subject to the Plan and to Awards." Participants will have all voting, dividend, liquidation and other rights with respect to shares underlying a stock award, but such awards +may be subject to restrictions on transfer as determined by the administrator. +Incentive Bonuses +An incentive bonus will confer upon the participant the opportunity to earn a future payment, in cash or shares, tied to the level of +achievement with respect to one or more performance criteria established for a performance period of not less than one year. The administrator will establish the terms and conditions to which the +award is subject, including performance criteria and the level of achievement of the criteria that will determine the target and maximum amounts payable under an incentive bonus award, which criteria +may be based on financial performance and/or personal performance evaluations. An incentive bonus may or may not be intended to satisfy the requirements of the "performance-based compensation" +exception under Section 162(m) of the Code, to the extent applicable. The Company does not anticipate that awards granted after November 2, 2017 will qualify as performance-based +compensation under Section 162(m) of the Code. Notwithstanding the satisfaction of any performance goals, the +amount paid under an incentive bonus award on account of either financial performance or personal performance evaluations may be reduced, but not increased, by the administrator on the basis of such +further consideration as the administrator may determine. +Deferral of Gains +The administrator may, in an award agreement or otherwise, provide for the deferred delivery of shares upon settlement, vesting or other +events with respect to restricted stock or restricted stock units, or for the deferred payment or satisfaction of an incentive bonus. However, in no event will any deferral of the delivery of shares +or any other payment with respect to any award be allowed if the administrator determines, in its sole and absolute discretion that the deferral would result in the imposition of the additional tax +under Section 409A of the Code. Notwithstanding the foregoing and to the extent compliant with Section 409A of the Code, if the administrator permits any deferral of shares or any other +payment as described above, payment of any vested award that a participant has elected to defer will be made regardless of any deferral election within thirty (30) days of a change in control +or the participant's separation from service (including death). +Qualifying Performance Criteria +With respect to performance-based awards the administrator may establish performance criteria and level of achievement of such criteria that +will determine the number of shares to be granted, retained, vested, issued or issuable under or in settlement of or the amount payable pursuant to an award, which criteria may be based on "qualifying +performance criteria" (as described below) or other standards of financial performance and/or personal performance evaluations. In addition, the administrator may specify that an award or a portion of +an award is intended to satisfy the requirements for "performance-based compensation" under Section 162(m) of the Code, to the extent applicable, provided that the performance criteria for such +award or portion of an award that is intended by the administrator to satisfy the requirements for "performance-based compensation" under Section 162(m) of the Code will be a measure based on +one or more qualifying performance criteria selected by the administrator and specified in writing at the time the award is granted, which will be not later than 90 days after the commencement +of the performance period to which the incentive bonus relates (or at such earlier time as is required to qualify the incentive +2018 +PROXY +STATEMENT +79 +Table of Contents +bonus +as performance-based under Section 162(m) of the Code). The administrator will certify the extent to which any qualifying performance criteria has been satisfied, and the amount payable +as a result thereof, prior to payment, settlement or vesting of any award that is intended to satisfy the requirements for "performance-based compensation" under Section 162(m) of the Code. +For +purposes of the Plan, the term "qualifying performance criteria" means an objectively determinable measure of performance relating to any one or more of the following performance criteria, or +derivations of such performance criteria, either individually, alternatively or in any combination, applied to either the Company as a whole or to a business unit, division, line or subsidiary, either +individually, alternatively or in any combination, and measured either annually or cumulatively over a period of years, on an absolute basis or relative to a pre-established target, to previous years' +results or to an index or indices or a designated comparison group or +groups, in each case as specified by the administrator: (i) net earnings or earnings per share (including earnings before interest, taxes, depreciation and/or amortization), (ii) income, +net income or operating income, (iii) revenues, (iv) net sales, (v) return on sales, (vi) return on equity, (vii) return on capital (including return on total +capital or return on invested capital), (viii) return on assets or net assets, (ix) earnings per share, (x) economic or business value added measurements (xi) return on +invested capital, (xii) return on operating revenue, (xiii) cash flow (before or after dividends), (xiv) stock price, (xv) total shareholder return, (xvi) market +capitalization, (xvii) economic value added, (xviii) debt leverage (debt to capital), (xix) operating profit or net operating profit, (xx) operating margin or profit +margin, (xxi) cash from operations, (xxii) market share, (xxiii) product development or release schedules, (xxiv) new product innovation, (xxv) cost reductions, +(xxvi) customer acquisition or retention, (xxvii) customer service, or (xxviii) customer satisfaction. +To +the extent consistent with the requirements for satisfying performance-based compensation exception under Section 162(m) of the Code, the administrator (i) may appropriately adjust +any evaluation of performance under qualifying performance criteria to eliminate the effects of charges for restructurings, discontinued operations, unusual or infrequently occurring items and all +items of gain, loss or expense determined to be unusual or infrequent in nature or related to the disposal of a segment of a business or related to a change in accounting principle all as determined +in accordance with applicable accounting provisions, as well as the cumulative effect of accounting changes, in each case as determined in accordance with generally accepted accounting principles or +identified in the Company's financial statements or notes to the financial statements, and (ii) may appropriately adjust any evaluation of performance under qualifying performance criteria to +exclude any of the following events that occurs during a performance period: (a) asset write-downs, (b) litigation, claims, judgments or settlements, (c) the effect of changes in +tax law or other such laws or provisions affecting reported results, and (d) accruals of any amounts for payment under the Plan or any other compensation arrangement maintained by the Company. +Suspension or Termination of Awards +Unless otherwise determined by the administrator, (i) if the Company's chief executive officer or any other person designated by the +administrator reasonably believes that a participant may have committed an act of misconduct (as defined in the Plan), then the participant's rights to exercise any stock option, vest in any award +and/or receive payment for or shares in settlement of an award may be suspended pending a determination of whether such misconduct has been committed, and (ii) if the administrator, the +Company's chief executive officer or any other person designated by the administrator determines that a participant has committed an act of misconduct, then the participant (a) may not exercise +any stock option or stock appreciation right, vest in any award, have restrictions on an award lapse or otherwise receive payment of an award, (b) will forfeit all outstanding awards, and +(c) may be required, at the discretion of the administrator, to return or repay to the Company any then unvested shares previously issued under the Plan. In addition, the administrator may seek +to recover awards made under the Plan and payments under or gain in respect of any award in accordance with the Company's Policy for Recovery of Incentive Compensation or any successor or additional +clawback or recoupment policy or as otherwise required by applicable law or applicable stock exchange listing standards. +Settlement of Awards +Awards (other than stock awards), may be settled in shares, cash or a combination thereof, as determined by the administrator. +No Repricing Without Shareholder Approval +Other than in connection with certain changes in the Company's capitalization, the administrator may not, without prior approval of the +Company's shareholders, effect any "repricing" of a previously granted stock option or stock appreciation right that is "underwater" (i.e., the fair market value of the shares underlying such +award is less than the exercise price of such award) by (i) amending or modifying the terms of the award to lower the exercise price; (ii) canceling the underwater award and granting +either (A) replacement stock options or stock appreciation rights, as applicable, having a lower exercise price or (B) restricted stock, restricted stock units, performance awards or +stock awards in exchange; or (iii) cancelling or repurchasing the underwater award for cash or other securities. +2018 +PROXY +STATEMENT +80 +Table of Contents +Amendment and Termination +The Board of Directors may amend, alter or discontinue the Plan, and the administrator may amend or alter any agreement or other document +evidencing an award made under the Plan, except that, unless in connection with a change in the capitalization of the Company or a change in control, no such amendment or alteration may, without the +approval of the shareholders of the Company: (i) increase the maximum number of shares for which awards may be granted under the Plan, (ii) reduce the minimum price set forth in the Plan +at which stock options or stock appreciation rights may be granted, (iii) reduce the exercise price of outstanding stock options or stock appreciation rights, (iv) extend the term of the +Plan, (v) change the class of persons eligible to be participants, (vi) otherwise amend the Plan in any manner requiring shareholder approval by law or under the New York Stock Exchange +listing requirements (or the listing requirements of any successor exchange that is the primary stock exchange for trading of the Company's shares), or (vii) increase the individual maximum +limits set forth in the Plan. +Except +as set forth in the Plan, no amendment or alteration to the Plan or an award or award agreement may be made that would impair the rights of the holder of an award without such holder's consent. +In addition, the Plan may not be amended in any way that causes the Plan to fail to comply with or be exempt from Section 409A of the Code, unless the Board of Directors expressly determines to +amend the Plan to be subject to Section 409A of the Code. +The +administrator may, in its sole and absolute discretion, modify the provisions of the Plan or an award as they pertain to a participant who is employed or providing services outside the United +States in order to comply with applicable foreign law or to recognize differences in local law, currency or tax policy. +Change in Control +For awards granted prior to the Amendment Date, unless otherwise determined by the administrator, upon a change in control all outstanding +stock options and stock appreciation rights will become immediately exercisable and, unless such awards will receive a cash payment as described in the last paragraph of this "change in control" +section, will remain exercisable through their terms without any requirement to continue in the service or employ of the Company, and all other outstanding awards immediately will become vested. +For +awards granted on or after the Amendment Date that are subject to vesting based on continuous employment or service, to the extent awards are assumed or substituted by an acquirer in the change in +control (as defined in the Plan) awards shall not immediately vest upon the change in control and instead shall continue to vest in accordance with their terms, provided that if a participant +experiences a termination of employment (as defined in the Plan) by the Company without cause (as defined in the Plan) or by the participant for good reason (as defined in the Plan), in each case, +within the twenty-four (24) month period following the change in control, the awards shall immediately vest and become exercisable or shall be settled upon such qualifying termination. If, at +any time during the vesting period of an award, a participant is or becomes eligible to terminate his or her employment with the Company or its Subsidiaries due to retirement, the award shall +immediately vest in full upon the change in control. +For +awards granted on or after the Amendment Date that are subject to performance conditions, if a change in control occurs prior to the end date of a performance period, to the extent the performance +award is outstanding immediately prior to such change in control, such award will vest (a) based on actual performance through the date of the change in control as determined by the +administrator (treating the change in control as the end of the applicable performance period) without proration for the time elapsed in such performance period prior to such change in control for +purposes of determining performance, but in the discretion of the administrator, prorated for purposes of elapsed time in a manner consistent with subsection (b) below, (b) assuming that +target level of performance is attained and prorated based on the number of days in the performance period that elapsed prior to the change in control over the total number of days in the performance +period, or (c) a combination of (a) and (b) (without double counting). Any portion of the performance award (or the full award as applicable) that does not vest in connection with +a change in control as contemplated herein will automatically terminate upon such change in control. +Subject +to and limited by the requirements of the preceding three paragraphs, the administrator shall determine the effect of a change in control (as defined in the Plan) on outstanding awards. These +effects, which need not be the same for all participants, may include, but are not limited to (i) substituting for the shares subject to an outstanding award or portion thereof the stock or +securities of the surviving corporation or any successor corporation (or parent or subsidiary thereof), in which event the aggregate exercise price of the award will remain the same, and/or +(ii) converting any outstanding award or portion thereof into a right to receive cash or other property following the consummation of the change in control in an amount equal to the value of +the consideration to be received for one share of the Company's +2018 +PROXY +STATEMENT +81 +Table of Contents +common +stock in connection with such transaction less the purchase or exercise price of the shares subject to the award, if any, multiplied by the number of shares subject to the award or portion +thereof. +The +administrator may determine that some or all participants holding vested and exercisable stock options or stock appreciation rights will receive with respect to some or all of the shares subject +to such awards cash in an amount equal to the excess of (i) the greater of (a) the highest sales price of the shares on the New York Stock Exchange (or any successor exchange that is the +primary stock exchange for trading of the Company's shares) on the date immediately prior to the change in control and (b) the highest price per share actually paid in connection with the +change in control, over (ii) the exercise price of the award. +Adjustments +The number and kind of shares available for issuance under the Plan, and the number and kind of shares subject to the individual and ISO +limits set forth under the Plan, will be equitably adjusted by the administrator to reflect any reorganization, reclassification, combination of shares, stock split, reverse stock split, spin-off, +dividend or distribution of securities, property or cash (other than regular, quarterly cash dividends), or any other event or transaction that affects the number or kind of shares of the Company +outstanding. The terms of any outstanding award will also be equitably adjusted by the administrator as to price, number or kind of shares subject to such award and other terms to reflect the +foregoing events, which adjustments need not be uniform as between different awards or different types of awards. +In +the event there is a change in the number or kind of outstanding shares under the Plan as a result of a change of control, other merger, consolidation or otherwise, then the administrator will +determine the appropriate and equitable adjustment to be effected. In addition, in the event of such a change, the administrator may accelerate the time or times at which any award may be exercised +(subject to the limitations described above under the "Change in Control" heading) and may provide for cancellation of such accelerated awards that are not exercised within a time prescribed by the +administrator in its sole discretion. +Transferability +Unless the administrator determines otherwise, awards may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated +by a participant other than by will or the laws of descent and distribution, and each stock option or stock appreciation right may be exercisable only by the participant during his or her lifetime. To +the extent permitted by the administrator, the person to whom an award is initially granted may transfer awards, in certain limited circumstances, to certain family members, family trusts, or family +partnerships. +No Right to Company Employment +Nothing in the Plan or an award agreement will interfere with or limit in any way the right of the Company, its subsidiaries and/or its +affiliates to terminate any participant's employment, service on the Board of Directors or service for the Company at any time or for any reason not prohibited by law, nor will the Plan or an award +itself confer upon any participant any right to continue his or her employment or service for any specified period of time. Neither an award nor any benefits arising under the Plan will constitute an +employment contract with the Company, any subsidiary and/or its affiliates. +Effective Date and Termination of the Plan +The Plan was adopted by the Board of Directors on February 7, 2018, subject to shareholder approval. The Plan will remain available for +the grant of awards until February 7, 2028, unless earlier terminated by the Board of Directors. If shareholders do not approve this proposal, the Company can continue to make awards under the +Current Plan to the extent of the number of shares authorized under the Current Plan as of immediately prior to the Amendment Date. Any award granted on or after the Amendment Date, to the extent that +the number of shares subject to such award, or portions thereof, exceeds the number of shares authorized under the Current Plan as of the Amendment Date, shall be void as determined by the +Administrator if shareholder approval of the Plan is not obtained. +Federal Income Tax Treatment +The following discussion is a general summary as of the date of this Proxy Statement of the significant U.S. federal income tax consequences +to the Company and the participants in the Plan. The discussion is intended solely for general information and does not make specific representations to any participant. The discussion does not +address state, local or foreign income tax rules or other U.S. tax provisions, such as estate or gift taxes. A recipient's particular situation may be such that some variation of the basic rules is +applicable to him or her. In addition, +2018 +PROXY +STATEMENT +82 +Table of Contents +the +federal income tax laws and regulations are frequently revised and may change at any time. Therefore, each recipient is urged to consult a tax advisor before exercising any award or before +disposing of any shares acquired under the Plan both with respect to federal income tax consequences as well as any foreign, state or local tax consequences. The Company does not anticipate that +awards granted after November 2, 2017 will qualify as performance-based compensation under Section 162(m) of the Code. +Stock Options +ISOs and NQSOs are treated differently for federal income tax purposes. ISOs are intended to comply with the requirements of +Section 422 of the Code. NQSOs do not comply with such requirements. +In +general, a participant is not taxed on the grant or exercise of an ISO. The difference between the exercise price and the fair market value of the shares on the exercise date may, however, be a +preference item for purposes of the alternative minimum tax. If a participant holds the shares acquired upon exercise of an ISO until the later of two years following the stock option grant date and +one year following exercise, the gain, if any, upon a subsequent disposition of such shares will be long-term capital gain. The amount of the gain will be the difference between the proceeds received +on disposition and the participant's basis in the shares (which generally equals the exercise price). If a participant disposes of stock acquired pursuant to exercise of an ISO before satisfying these +holding periods, the participant will recognize as ordinary income in the year of disposition an amount equal to the excess of the fair market value of the shares at the time of exercise (or, if less, +the amount realized on the disposition of the shares), over the exercise price paid for the shares, and capital gain or loss for any other difference between the sale price and the exercise price. The +Company is not entitled to an income tax deduction on the grant or exercise of an ISO or on the participant's disposition of the shares after satisfying the holding period requirement described above. +If the holding periods are not satisfied, the Company generally will be entitled to a deduction in the year the participant disposes of the shares in an amount equal to the ordinary income recognized +by the participant. +The +Company does not guarantee that any option intended to be an ISO will qualify for the tax treatment of ISOs described above. If an option intended to be an ISO fails to so qualify, it will be +taxed as an NQSO, as described below. +In +general, a participant is not taxed on the grant of an NQSO. On exercise, the participant recognizes ordinary income equal to the difference between the exercise price and the fair market value of +the shares acquired on the date of exercise. The Company is generally entitled to an income tax deduction in the year of exercise in the amount recognized by the participant as ordinary income. The +participant's gain (or loss) on subsequent disposition of the shares is long-term capital gain (or loss) if the shares are held for at least one year following exercise, and otherwise is short-term +capital gain (or loss). The Company does not receive a deduction for any such capital gain. +Stock Appreciation Rights +In general, the recipient of a freestanding SAR will not recognize any taxable income at the time the freestanding SAR is granted. If the +freestanding SAR is settled in cash, the cash will be taxable as ordinary income to the recipient at the time that it is received. If the freestanding SAR is settled in shares, the recipient will +recognize ordinary income equal to the excess of the fair market value of the shares on the day the freestanding SAR is exercised over any amounts paid by the recipient for the shares. +With +respect to tandem SARs, if a holder elects to surrender the underlying stock option in exchange for cash or stock equal to the appreciation inherent in the underlying stock option, the tax +consequences to the employee will be the same as discussed above relating to freestanding SARs. If the employee elects to exercise the underlying stock option, the holder will be taxed at the time of +exercise as if he or she had exercised an NQSO (discussed above). +The +Company generally is entitled to a deduction with respect to a SAR at the same time the recipient recognizes ordinary income with respect thereto. +Restricted Stock and Restricted Stock Units +A participant who is awarded or purchases shares subject to a substantial risk of forfeiture, or restricted stock, generally does not +recognize income at the time of the grant. When the risk of forfeiture lapses, the participant generally recognizes ordinary income in an amount equal to the excess of the fair market value of the +shares over the purchase price, if any, and a +deduction is generally available to the Company in the same year that the participant recognizes income. However, a participant may make an election under Section 83(b) of the Code to recognize +taxable ordinary income at the time the shares are transferred to the participant, rather than later, when the risk of forfeiture lapses, in an +2018 +PROXY +STATEMENT +83 +Table of Contents +amount +equal to the fair market value of the shares at the time of such transfer. Such election must be made no later than 30 days after the date the shares are transferred to the participant. +If the participant makes a timely and effective election, when the restrictions on the shares lapse, the participant will not recognize any additional income. For purposes of determining capital gain +or loss on a sale of shares acquired under a restricted stock award under the Plan, the holding period in the shares begins when the participant recognizes taxable income with respect to the transfer. +The participant's tax basis in the shares equals the amount paid for the shares plus any income realized with respect to the transfer. If the participant forfeits the shares to the Company +(e.g., upon the participant's termination prior to vesting), the participant may not claim a deduction with respect to the income recognized as a result +of the election. Dividends (if any) paid with respect to unvested shares of restricted stock generally will be taxable as ordinary income to the participant at the time the dividends are paid, if an +effective 83(b) election was not made with respect to the shares. +A +participant who is awarded restricted stock units generally does not recognize income at the time of grant. Instead, the participant is generally taxed upon settlement of the award (and a +corresponding deduction is generally available to the Company), unless he or she has made a proper election to defer receipt of the shares (or cash if the award is cash settled) under +Section 409A of the Code. (FICA taxes will apply upon the vesting of the restricted stock unit award.) If the shares delivered are restricted for tax purposes, the participant will instead be +subject to the rules described above for restricted stock. +Stock Awards +A participant who receives a stock award generally is required to recognize ordinary income in an amount equal to the excess of the fair +market value of the shares on the date the shares are granted over the purchase price (if any) paid for the shares. The Company generally will be entitled to a deduction with respect to stock awards +at the same time the recipient recognizes ordinary income with respect thereto. +Incentive Bonuses +A participant will have taxable income at the time an incentive bonus is paid. At that time, the participant will recognize ordinary income +equal to the value of the amount then payable and, the Company generally will be entitled to a corresponding deduction. +Certain Change in Control Payments +Under Section 280G of the Code, the vesting or accelerated exercisability of stock options or the vesting and payments of other awards +in connection with a change in control of a corporation may be required to be valued and taken into account in determining whether participants have received compensatory payments, contingent on the +change in control, in excess of certain limits. If these limits are exceeded, a substantial portion of amounts payable to the participant, including income recognized by reason of the grant, vesting +or exercise of awards, may be subject to an additional 20% federal tax, which is non-deductible to the Company. +Company Deduction and Section 162(m) of the Code +As described above under "Section 162(m) of the Code," Section 162(m) of the Code generally disallows a deduction to a publicly +held corporation and its affiliates for certain compensation paid to a "covered employee" in a taxable year in excess of $1 million, unless the compensation satisfies the requirements of the +"performance-based compensation" exception under Section 162(m) of the Code. Stock options, stock appreciation rights and certain performance awards under the Plan granted before +November 2, 2017 are generally intended to satisfy the requirements of this exception. However, as discussed above, the Compensation Committee has and will continue to have discretionary +authority to grant awards under the Plan that do not satisfy the requirements of this exception in order to maintain a competitive compensation program and provide compensation that will attract and +retain highly qualified executives. +New Plan Benefits +The benefits that will be awarded or paid under the Plan are not currently determinable. Awards granted under the Plan are within the +discretion of the Compensation Committee. +2018 +PROXY +STATEMENT +84 +Table of Contents +Equity Compensation Plan Information +The following table provides information about the Company's equity compensation plans as of December 30, 2017 (and does not include +the 8.5 million shares of common stock that are the subject of this Proposal 4): +Plan Category 1 +Number of Securities to be +Issued Upon Exercise of +Outstanding Options, +Warrants and Rights +(a) +Weighted Average +Exercise Price of +Outstanding Options, +Warrants, and Rights +(b) +Number of Securities Remaining +Available for Future Issuance +under Equity Compensation +Plans (Excluding Securities +Reflected in Column (a)) +(c) +Equity compensation plans approved by security holders +6,089,664 +2,3 +$ +20.05 +2,785,175 +4 +Equity compensation plans not approved by security holders +— +— +— +Total +6,089,664 +$ +20.05 +2,785,175 +1 Each plan for which aggregated information is provided contains customary anti-dilution provisions that are applicable in the event of a stock split, stock +dividend or certain other changes in the Company's capitalization. 2 Includes: (i) 5,434,103 stock options awarded to employees under the Amended and Restated Stock +Incentive Plan of 1999, the Amended and Restated +Stock Incentive Plan of 2001, the Amended and Restated Stock Incentive Plan of 2003, the Amended and Restated Stock Incentive Plan of 2005, the Stock Incentive Plan of 2010, the Stock +Incentive Plan of 2013 and the Stock Incentive Plan of 2016 (Current Plan); and (ii) 655,561 stock options awarded to non-employee directors under the Amended and Restated Stock +Incentive Plan of 2005, the Stock Incentive Plan of 2010, the Stock Incentive Plan of 2013 and the Stock Incentive Plan of 2016 (Current Plan). Column (a) does not include stock +units credited to outside directors' fee accounts or retirement accounts under the Outside Directors' Deferred Compensation Plan. Stock units do not have an exercise price. Each stock unit +credited to a director's fee account and retirement account under the Outside Directors' Deferred Compensation Plan will be converted into one share of common stock upon distribution. +Column (a) also does not include shares of restricted or unrestricted common stock previously issued under the Company's equity compensation plans. 3 Of this amount, +1,439,221 options were not exercisable as of December 30, 2017 due to vesting restrictions. 4 Comprised of: (i) 111,282 shares available for issuance under the +Outside Directors' Deferred Compensation Plan upon the retirement of the current +directors or upon a change in control; and (ii) 2,673,893 shares issuable under the Stock Incentive Plan of 2016. +The +Outside Directors' Deferred Compensation Plan is a supplemental, unfunded, nonqualified deferred compensation plan for non-employee directors. Beginning in 2006, the Company began paying an annual +equity retainer to non-management directors in the form of a contribution under the Outside Directors' Deferred Compensation Plan. Non-management directors may also voluntarily elect to receive, in +lieu of some or all directors' fees, a number of stock units equal to the amount of the deferred directors' fees divided by the fair market value of the Company's common stock on the date of payment. +These stock units are increased by a dividend equivalent based on dividends paid by the Company and the amount of stock units credited to the participating director's fee account and retirement +account. Upon distribution, the participating directors receive a number of shares of the Company's common stock equal to the number of stock units to be distributed at that time. Distribution is +triggered by termination of service as a director or by a change in control of the Company and can occur in a lump sum, in installments or on another deferred basis. A total of 437,282 shares have +been issued to a trust to satisfy the Company's obligations when distribution is triggered and are included in shares the Company reports as issued and outstanding. +The +Stock Incentive Plan of 2016, defined as the "Current Plan" above, was most recently approved by Company shareholders at the 2016 annual meeting and is the subject of this Proposal 4. +Of +the total number of shares available under column (c), the number of shares with respect to the following plans may be issued other than upon the exercise of an option, warrant or right outstanding +as of December 30, 2017: +Outside +Directors' Deferred Compensation Plan: 111,282 +Stock +Incentive Plan of 2016: 1,028,420 +2018 +PROXY +STATEMENT +85 +Table of Contents +VOTE REQUIRED AND BOARD RECOMMENDATION +Approval of the Wolverine World Wide, Inc. Stock Incentive Plan of 2016, as amended and restated, requires the affirmative vote of a +majority of shares cast affirmatively or negatively on the matter for approval. +BOARD RECOMMENDATION +The Board of Directors recommends that you vote "FOR" approval of the Stock Incentive Plan of 2016, as Amended and Restated. +2018 +PROXY +STATEMENT +86 +Table of Contents +Related Party Matters +CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS +Since January 1, 2017, the Company has not engaged in any "related person" transactions with its directors, executive officers or +holders of 5% or more of Company voting securities, affiliates or any member of the immediate family of the foregoing persons. +RELATED PERSON TRANSACTIONS POLICY +Wolverine Worldwide's Board adopted written policies and procedures regarding related person transactions. They require the Governance +Committee to review and either approve or disapprove the Company entering into any Interested Transactions (defined below). If advance approval is not feasible, then the Governance Committee must +review and ratify the Interested Transaction at its next meeting. +Interested Transaction +Any transaction, arrangement or relationship or series of similar transactions, arrangements or relationships (including any indebtedness or guarantee of indebtedness) in which: +(1) +the aggregate amount involved is or is expected to exceed $120,000 since the beginning of Wolverine Worldwide's last completed fiscal year; +(2) +Wolverine Worldwide is a participant; and +(3) +any Related Person (defined below) has or will have a direct or indirect interest. +An Interested Transaction does not include: +(1) +any employment compensation paid to an executive officer of the Company if the Compensation Committee approved or recommended to the Board of Directors for approval such compensation; +(2) +any compensation paid to a director for service as a director of the Company; +(3) +any transaction in which a Related Person has an indirect interest solely as a result of being (i) a director or, together with all other Related Persons, as defined below, a less than 10% beneficial owner of an equity interest in another +entity, or both, or (ii) a limited partner in a partnership in which the Related Person, together with all other Related Persons, has an interest of less than 10%; or +(4) +any transaction in which the Related Person's interest arises solely from the ownership of the Company's common stock and all holders of the Company's common stock received the same benefit on a pro rata basis (e.g., a dividend). +Related Person +Any: +(a) +person who is or was at any point during the last fiscal year for which Wolverine Worldwide filed an Annual Report on Form 10-K and proxy statement, an executive officer, director or, to the extent information regarding such nominee is being +presented in a proxy or information statement relating to the election of that nominee as a director, nominee for election as a director; +(b) +beneficial owner of greater than five percent of Wolverine Worldwide's common stock; or +(c) +immediate family member * of any of the foregoing. +* Immediate family member is defined as a person's spouse, parents, stepparents, children, stepchildren, siblings, mothers- and +fathers-in-law, sons- and daughters-in-law, and brothers- and sisters-in-law and anyone residing in such person's home (other than a tenant or employee) +The +Governance Committee considers whether the Interested Transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar +circumstances, the extent of the Related Person's interest in the transaction, and other factors that it deems relevant. No director participates in any discussion or approval of an Interested +Transaction for which he or she is a Related Person, except to provide information to the Governance Committee. +2018 +PROXY +STATEMENT +87 +Table of Contents +Additional Information +SHAREHOLDERS LIST +A list of shareholders entitled to vote at the meeting will be available for review by Wolverine Worldwide shareholders at the office of +Secretary, Wolverine World Wide, Inc., 9341 Courtland Drive, N.E., Rockford, Michigan 49351, during ordinary business hours for the 10-day period before the meeting. +DIRECTOR AND OFFICER INDEMNIFICATION +The Company indemnifies its directors and NEOs to the fullest extent permitted by law so that they will be free from undue concern about +personal liability in connection with their service to the Company. +SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE +Section 16(a) of the Exchange Act requires the Company's directors and NEOs, and persons who beneficially own more than 10% of the +outstanding shares of the Company's common stock, to file reports of ownership and changes in ownership of shares of common stock with the SEC. Directors, NEOs and greater than 10% beneficial owners +are required by SEC regulations to furnish Wolverine Worldwide with copies of all Section 16(a) reports they file. Based on its review of the copies of such reports received by it, or written +representations from certain reporting persons that no reports on Form 5 were required for those persons for fiscal year 2017, the Company believes that during fiscal year 2017, its officers +and directors filed the required reports under Section 16(a) on a timely basis, except as follows: one report related to a gift of stock by Mr. O'Donovan made on March 13, 2017 +was filed on February 27, 2018 due to an inadvertent delay by the Company. +SHAREHOLDER PROPOSALS FOR INCLUSION IN NEXT YEAR'S PROXY STATEMENT +Pursuant to SEC Rule 14a-8, some shareholder proposals may be eligible for inclusion in Wolverine Worldwide's 2019 proxy statement and +proxy card. Any such shareholder proposals must be submitted in writing to the Secretary of Wolverine Worldwide no later than the close of business on November 27, 2018. You should address all +shareholder proposals to the attention of Secretary, Wolverine World Wide, Inc., 9341 Courtland Drive, N.E., Rockford, Michigan 49351. +OTHER SHAREHOLDER PROPOSALS FOR PRESENTATION AT NEXT YEAR'S ANNUAL MEETING +The Company's By-Laws require that any shareholder proposal that is not submitted for inclusion in next year's proxy statement under SEC +Rule 14a-8, but is instead sought to be presented directly at the 2019 Annual Meeting of Shareholders, must be received at the Company's principal executive offices by the close of business not +less than 90 days nor more than 120 days prior to the first anniversary of the 2018 Annual Meeting. As a result, proposals, including director nominations, submitted pursuant to these +provisions of the By-laws must be received between January 3, 2019, and the close of business on February 2, 2019. You should address a proposal to Secretary, Wolverine World +Wide, Inc., 9341 Courtland Drive N.E., Rockford, Michigan 49351, and include the information and comply with the requirements set forth in those By-laws, which the Company has posted on its +website. SEC rules permit management to vote proxies in its discretion in certain cases if the shareholder does not comply with this deadline, and in certain other cases notwithstanding the +shareholder's compliance with this deadline. +VOTING SECURITIES +Shareholders of record at the close of business on March 12, 2018, are eligible to vote at the Annual Meeting. The Company's voting +securities consist of its $1.00 par value common stock, and there were 95,248,198 shares outstanding and entitled to vote on the record date. Each share outstanding on the record date will be +entitled to one vote on each director nominee and one vote on each other matter. Treasury shares are not voted. Individual votes of shareholders are kept private, except as appropriate to meet legal +requirements. Access to proxies and +2018 +PROXY +STATEMENT +88 +Table of Contents +other +individual shareholder voting records is limited to the independent inspectors of election and certain employees of the Company and its agents who acknowledge their responsibility to comply with +this policy of confidentiality. +CONDUCT OF BUSINESS +A majority of the outstanding shares of common stock as of the record date must be present at the Annual Meeting in order to hold the Annual +Meeting and conduct business. This is called a "quorum." Your shares are counted as present at the meeting if you are present at the Annual Meeting and vote in person, a proxy card has been properly +submitted by you or on your behalf, or you have submitted your proxy by telephone or by internet, or by completing, signing, dating and returning your proxy form in the enclosed envelope. Both +abstentions and broker non-votes (defined below in " Vote Required for Election and Approval ") are counted as present for the purpose of determining the +presence of a quorum. +VOTE REQUIRED FOR ELECTION AND APPROVAL +For Proposal 1, Election of Directors for Terms Expiring in 2021, directors are elected by a majority of votes cast unless the election is +contested, in which case directors are elected by a plurality of votes cast. A majority of votes cast means that the number of shares voted "for" a Director nominee exceeds the number of votes cast +"against" the Director nominee. If an incumbent director in an uncontested election does not receive a majority of votes cast for his or her election, under the Company's Corporate Governance +Guidelines the director is required to submit a letter of resignation to the Board for consideration by the Governance Committee. The Governance Committee will then make a recommendation to the Board +as to whether to accept or reject the tendered resignation. The Governance Committee and the Board, in making their decisions, may implement any procedures they deem appropriate and may consider any +factor or other information that they deem relevant. The Board will then act on the tendered resignation, taking into account the Governance Committee's recommendation, and will publicly disclose its +decision regarding the resignation within 90 days after the results of the election are certified. A director whose resignation is under consideration shall abstain from participating in any +recommendation or decision regarding that resignation. If the resignation is not accepted, the director will continue to serve until the next annual meeting of shareholders at which such director +faces re-election and until such director's successor is elected and qualified. +Proposal +2, Advisory Vote to Approve Executive Compensation, is a non-binding, advisory vote. Therefore, there is no required vote that would constitute approval. The Company values the opinions +expressed by its shareholders in this advisory vote, and the Board and Compensation Committee will consider the outcome of these votes when designing compensation programs and making future +compensation decisions for the Company's named executive officers. +Proposal +3, Ratification of Appointment of Independent Registered Public Accounting Firm, requires the affirmative vote of a majority of shares cast affirmatively or negatively on the matter for +approval. +Proposal +4, Approval of the Stock Incentive Plan of 2016 (as amended and restated) requires the affirmative vote of a majority of shares cast affirmatively or negatively on the matter for approval. +With +respect to Proposals 1, 2, 3 and 4, abstentions and broker non-votes, if any, will have no effect. Generally, broker non-votes occur when shares held by a broker in "street name" for a beneficial +owner are not voted with respect to a particular proposal because (1) the broker has not received voting instructions from the beneficial owner, and (2) the broker lacks discretionary +voting power to vote those shares. Brokers do not have discretionary authority with respect to any of the proposals except for Proposal 3. +VOTING RESULTS OF THE ANNUAL MEETING +The Company will announce preliminary voting results at the Annual Meeting and publish final results in a Form 8-K within four business +days following the Annual Meeting. If final results are not known within four business days of the Annual Meeting, then the Company will file a Current Report on Form 8-K with the +preliminary results and file an amended Current Report on Form 8-K within four business days of the availability of the final results. +ATTENDING THE ANNUAL MEETING +You may vote shares held directly in your name as the shareholder of record in person at the Annual Meeting. If you choose to vote in person, +please bring the enclosed proxy card and proof of identification. Even if you plan to attend the Annual Meeting in person, Wolverine +2018 +PROXY +STATEMENT +89 +Table of Contents +Worldwide +recommends that you vote your shares in advance as described below so that your vote will be counted if you later decide not to attend the Annual Meeting. You may vote shares held in "street +name" through a brokerage account or by a bank or other nominee in person if you obtain a proxy from the record holder giving you the right to vote the shares. +MANNER FOR VOTING PROXIES +The shares represented by all valid proxies received by telephone, by internet or by mail will be voted in the manner specified. Where the +shareholder has not indicated a specific choice, the shares represented by all valid proxies received will be voted in accordance with the Board's recommendations as follows: (1) for each of +the nominees for directors named earlier in this proxy statement, (2) for approval of the advisory resolution to approve executive compensation, (3) for ratification of the appointment +of the independent registered public accounting firm and (4) for approval of the Stock Incentive Plan of 2016 (as amended and restated). The Board has not received timely notice of any other +matter that may come before the Annual Meeting. However, should any matter not described above be properly presented at the Annual Meeting, the persons named in the proxy form will vote in accordance +with their judgment, as permitted. +REVOCATION OF PROXIES +A shareholder who gives a proxy may revoke it at any time before it is exercised by voting in person at the Annual Meeting, by delivering a +subsequent proxy or by notifying the inspectors of election in writing of such revocation. If your Wolverine Worldwide shares are held for you in a brokerage, bank or other institutional account, you +must obtain a proxy from that entity and bring it with you to hand in with your ballot, in order to be able to vote your shares at the Annual Meeting. +SOLICITATION OF PROXIES +The Company will pay the expenses of solicitation of proxies for the Annual Meeting. Solicitations may be made in person or by telephone, by +officers and employees of the Company, or by nominees or other fiduciaries who may mail materials to or otherwise communicate with the beneficial owners of shares held by the nominees or other +fiduciaries. These individuals will not be paid any additional compensation for any such solicitation. Upon request, the Company will reimburse brokers, dealers, banks and trustees, or their nominees, +for reasonable expenses incurred by them in forwarding material to beneficial owners of the Company's common stock. The Company has engaged Georgeson Inc. at an estimated cost of $9,500, plus +expenses and disbursements, to assist in solicitation of proxies. +DELIVERY OF DOCUMENTS TO SHAREHOLDERS SHARING AN ADDRESS +If you are the beneficial owner, but not the record holder, of shares of Wolverine Worldwide stock, your broker, bank or other nominee may only +deliver one copy of this proxy statement and the Company's 2017 Annual Report to multiple shareholders who share an address, unless that nominee has received contrary instructions from one or more of +the shareholders. The Company will deliver promptly, upon written or oral request, a separate copy of this proxy statement and its 2017 Annual Report to a shareholder at a shared address to which a +single copy of the documents was delivered. A shareholder who wishes to receive a separate copy of the proxy statement and annual report, now or in the future, or shareholders who share an address and +receive multiple copies of the proxy statement and annual report but would like to receive a single copy, should submit this request by writing to Investor Relations, Wolverine World +Wide, Inc., 9341 Courtland Drive N.E., Rockford, Michigan 49351, or by calling (616) 866-5500 and asking for Investor Relations. Beneficial owners sharing an address who are receiving +multiple copies of proxy materials and who wish to receive a single copy of such materials in the future should make a request directly to their broker, bank or other nominee. +ACCESS TO PROXY STATEMENT AND ANNUAL REPORT +Distribution of this proxy statement and enclosed proxy card to shareholders is scheduled to begin on or about March 27, 2018. Wolverine +Worldwide's financial statements for the fiscal year ended December 30, 2017, are included in the Company's 2017 Annual Report, which the Company is providing to shareholders at the same time +as this proxy statement. Wolverine Worldwide's Proxy Statement for the Annual Meeting and the Annual Report to Shareholders for the fiscal year ended December 31, 2017, are available at www.wolverineworldwide.com/2018annualmeeting . If you have not received or do not have access to the 2017 Annual Report, write to: Wolverine World +Wide, Inc., 9341 Courtland Drive N.E., Rockford, Michigan 49351, Attn: Investor Relations or call (616) 866-5500 and ask for Investor Relations, and the +Company will send a copy to you without charge. +2018 +PROXY +STATEMENT +90 +Table of Contents +APPENDIX A +WOLVERINE WORLD WIDE, INC. +STOCK INCENTIVE PLAN OF 2016 +(AS AMENDED AND RESTATED AS OF FEBRUARY 7, 2018) +1. Purpose +The purpose of the Wolverine World Wide, Inc. Stock Incentive Plan of 2016 (as amended and restated as of February 7, 2018 and as it may be further +amended or amended and restated from time to time, the "Plan") is to advance the interests of Wolverine World Wide, Inc. (the "Company") by stimulating the efforts of employees, officers, +non-employee directors and other service providers, in each case who are selected to be participants, by heightening the desire of such persons to continue working toward and contributing to the +success and progress of the Company. The Plan supersedes the Company's Stock Incentive Plan of 2010 and the Company's Amended and Restated Stock Incentive Plan of 2013 (the "Prior Plans") with respect +to future awards, and provides for the grant of Incentive and Nonqualified Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units and Stock Awards, any of which may be +performance-based, and for Incentive Bonuses, which may be paid in cash or stock or a combination thereof, as determined by the Administrator. No new awards shall be issued under the Prior Plans after +April 21, 2016 (the date the Plan was initially approved by the Company's stockholders). The terms of the Plan, as amended and restated as of February 7, 2018 (the "Amendment Date"), +shall only apply to Awards granted on or after the Amendment Date. Awards granted prior to the Amendment Date shall be governed by the terms of the Plan as in effect on November 2, 2017, which +were those same terms in effect as of immediately prior to the Amendment Date. It is the intent of the Company that the amendment and restatement of the Plan on the Amendment Date not constitute a +"material modification" (within the meaning of Section 162(m) of the Code) of the Plan or Awards granted under it prior to the Amendment Date, and the Plan shall be interpreted in accordance +with the foregoing intent. +2. Definitions +As used in the Plan, the following terms shall have the meanings set forth below: +(a) "Act" +means the Securities Exchange Act of 1934, as amended from time to time and in effect, or any successor statute as from time to time. +(b) "Act +of Misconduct" means an act of embezzlement, fraud, dishonesty, nonpayment of any obligation owed to the Company or any Subsidiary, breach of fiduciary duty, or +deliberate disregard of the Company or Subsidiary rules resulting in loss, damage or injury to the Company or any Subsidiary, or if a Participant makes an unauthorized disclosure of any Company or +Subsidiary trade secret or confidential information, solicits any employee or service provider to leave the employ or cease providing services to the Company or any Subsidiary, breaches any +intellectual property or assignment of inventions covenant, engages in any conduct constituting unfair competition, breaches any non-competition agreement, induces any Company or Subsidiary customer +to breach a contract with the Company or any Subsidiary or to cease doing business with the Company or any Subsidiary, or induces any principal for whom the Company or any Subsidiary acts as agent to +terminate such agency relationship in effect. +(c) "Administrator" +means the Administrator of the Plan in accordance with Section 19 of the Plan. +(d) "Award" +means an Incentive Stock Option, Nonqualified Stock Option, Stock Appreciation Right, share of Restricted Stock, Restricted Stock Unit, Stock Award or Incentive +Bonus granted to a Participant pursuant to the provisions of the Plan, any of which the Administrator may structure to qualify in whole or in part as a Performance Award. +(e) "Award +Agreement" means a written agreement or other instrument as may be approved from time to time by the Administrator implementing the grant of each Award. An +Agreement may be in the form of an agreement to be executed by both the Participant and the Company (or an authorized representative of the Company) or certificates, notices or similar instruments +(which do not need to be executed) as approved by the Administrator. +2018 +PROXY +STATEMENT +A-1 +Table of Contents +APPENDIX A +(f) "Board" +means the board of directors of the Company. +(g) "Cause" +means, in the case of any Participant who is party to an employment or severance-benefit agreement that contains a definition of "Cause," the definition set +forth in such agreement will apply with respect to such Participant under the Plan for so long as such agreement remains in effect; if a Participant is party to multiple such agreements, any Cause +determination must meet the standards of all such agreements to qualify as for Cause under this Plan. In the case of any other Participant, "Cause" means (i) a substantial failure of the +Participant to perform the Participant's duties and responsibilities to the Company or its Subsidiaries or substantial negligence in the performance of such duties and responsibilities; +(ii) the commission by the Participant of a felony or a crime involving moral turpitude; (iii) the commission by the Participant of theft, fraud, embezzlement, material breach of trust +or any material act of dishonesty involving the Company or any of its Subsidiaries, including, but not limited to, any Act of Misconduct; (iv) a significant violation by the Participant of the +code of conduct of the Company or its Subsidiaries of any material policy of the Company or its Subsidiaries, or of any statutory or common law duty of loyalty to the Company or its Subsidiaries, +including, but not limited to, any Act of Misconduct; or (v) a material breach of any of the terms of the Plan or any Award made under the Plan, or of the terms of any other agreement between +the Company or subsidiaries and the Participant. +(h) "Change +in Control" unless otherwise defined in an Award Agreement, means (i) the failure of the Continuing Directors at any time to constitute at least a +majority of the members of the Board; (ii) the acquisition by any Person other than an Excluded Holder of beneficial ownership (within the meaning of Rule 13d-3 issued under the Act) of +twenty percent (20%) or more of the outstanding Shares or the combined voting power of the Company's outstanding securities entitled to vote generally in the election of directors; (iii) the +consummation of a reorganization, merger, or consolidation of the Company, unless such reorganization, merger or consolidation is with or into a Permitted Successor and clauses (i), (ii), or +(iv) of this Section 2(h) have not been triggered; or (iv) a complete liquidation or dissolution of the Company or the sale or disposition of all or substantially all of the +assets of the Company other than to a Permitted Successor. +Notwithstanding +the foregoing, in any case where the occurrence of a Change in Control could affect the vesting of or payment under an Award subject to the requirements of +Section 409A of the Code, to the extent required to comply with Section 409A of the Code, the term "Change in Control" shall mean an occurrence that both (i) satisfies the +requirements set forth above in this definition and (ii) is a "change in control event" as that term is defined in the regulations under Section 409A of the Code. +(i) "Code" +means the Internal Revenue Code of 1986, as amended from time to time and in effect, or any successor statute as from time to time in effect, and the rulings and +regulations issued thereunder. +(j) "Continuing +Directors" mean the individuals constituting the Board as of the date this Plan was adopted and any subsequent directors whose election or nomination for +election by the Company's stockholders was approved by a vote of three-quarters ( 3 / 4 ) of the individuals who are then Continuing Directors, but specifically excluding any individual +whose initial assumption of office occurs as a result of either an actual or threatened solicitation subject to Rule 14a-12(c) of Regulation 14A issued under the Act or other actual or +threatened solicitation of proxies or consents by or on behalf of a Person other than the Board. +(k) "Company" +means Wolverine World Wide, Inc., a Delaware corporation. +(l) "Determination +Period" means the fourteen- (14-) day period following a Termination of Employment by a Participant. +(m) "Disability" +has the meaning set forth in the Company's long-term disability plan. The determination of the Administrator as to an individual's Disability shall be +conclusive on all parties. +(n) "Employee +Benefit Plan" means any plan or program established by the Company or a Subsidiary for the compensation or benefit of employees of the Company or any of its +Subsidiaries. +(o) "Excluded +Holder" means (i) any Person who at the time this Plan was adopted was the beneficial owner of twenty percent (20%) or more of the outstanding Shares; +or (ii) the Company, a Subsidiary or any Employee Benefit Plan of the Company or a Subsidiary or any trust holding Shares or other securities pursuant to the terms of an Employee Benefit Plan. +2018 +PROXY +STATEMENT +A-2 +Table of Contents +APPENDIX A +(p) "Factors" +means such considerations as would result in a determination by the Administrator that a Termination of Employment does not constitute a Retirement, and shall +include the Participant's: (i) inadequate job performance; (ii) inadequate notice of resignation; (iii) intention for comparable future employment at a third party organization; +(iv) intention for future employment or other service or advisory relationship with a competitor of the Company; or (iv) any other similar consideration. +(q) "Fair +Market Value" means, as of any date, the closing price per share at which the Shares are sold in the regular way on the New York Stock Exchange (or any successor +exchange that is the primary stock exchange for trading of Shares) or, if no Shares are traded on the New York Stock Exchange (or any successor exchange that is the primary stock exchange for trading +of Shares) on the date in question, then for the next preceding date for which Shares were traded on the New York Stock Exchange (or any successor exchange that is the primary stock exchange for +trading of Shares). +(r) "Good +Reason" means, in the case of a Participant who is party to an employment or other severance-benefit agreement that contains a definition of "Good Reason," the +definition set forth in such agreement will apply with respect to such Participant under the Plan so long as such agreement remains in effect; provided, however, that if the Participant is party to +multiple such agreements, "Good Reason" under any such agreement shall count as "Good Reason" for purposes of this Plan. If the Participant is not party to any such agreement, "Good Reason" shall mean +any of the following, with the below notice provision applying: (i) a reduction in the Participant's base salary, annual bonus opportunity, or long-term incentive opportunity below the level in +effect immediately prior to a Change in Control; (ii) failure by the Company or its Subsidiaries to pay amounts owed to the Participant as salary, bonus, deferred compensation or other +compensation; (iii) any material adverse change to the Participant's position, duties, responsibilities, reporting responsibilities or title from that or those in effect immediately prior to a +Change in Control; or (iv) any requirement that the Participant be based at a location that is more than twenty-five (25) miles from his or her regular place of employment immediately +prior to a Change in Control, unless such change results in a shorter commute for the Participant. Notwithstanding the foregoing, no Termination of Employment shall be for Good Reason unless +(i) such Termination of Employment occurs during the twenty-four (24) month period following a Change in Control and (ii) the Participant gives the Company written notice within +ninety (90) days of the Participant obtaining knowledge of circumstances giving rise to Good Reason (describing in reasonable detail the circumstances and the Good Reason event that has +occurred) and the Company does not remedy these circumstances within thirty (30) days of receipt of such notice and the Participant terminates employment not later than thirty (30) days +thereafter. +(s) "Incentive +Bonus" means a bonus opportunity awarded under Section 10 of the Plan pursuant to which a Participant may become entitled to receive an amount based +on satisfaction of such performance criteria as are specified in the Award Agreement or otherwise. +(t) "Incentive +Stock Option" means a stock option that is intended to qualify as an "incentive stock option" within the meaning of Section 422 of the Code. +(u) "Nonemployee +Director" means each person who is, or is elected to be, a member of the Board and who is not an employee of the Company or any Subsidiary. +(v) "Nonqualified +Stock Option" means a stock option that is not intended to qualify as an "incentive stock option" within the meaning of Section 422 of the Code. +Each stock option granted pursuant to the Plan will be treated as providing by its terms that it is to be a Nonqualified Stock Option unless, as of the date of grant, it is expressly designated as an +Incentive Stock Option. +(w) "Option" +means an Incentive Stock Option and/or a Nonqualified Stock Option granted pursuant to Section 6 of the Plan. +(x) "Participant" +means any individual described in Section 3 of the Plan to whom Awards have been granted from time to time by the Administrator and any authorized +transferee of such individual. +(y) "Permitted +Successor" means a company that, immediately following the consummation of a transaction specified in clauses (iii) and (iv) of the definition +of "Change in Control" above, satisfies each of the following criteria: (i) 50% or more of the outstanding common stock of the company and the combined voting power of the outstanding +securities of the company entitled to vote generally in the election of directors (in each case determined immediately following the consummation of the applicable transaction) is beneficially owned, +2018 +PROXY +STATEMENT +A-3 +Table of Contents +APPENDIX A +directly +or indirectly, by all or substantially all of the Persons who were the beneficial owners of the Company's outstanding Shares and outstanding securities entitled to vote generally in the +election of directors (respectively) immediately prior to the applicable transaction; (ii) no Person other than an Excluded Holder beneficially owns, directly or indirectly, 20% or more of the +outstanding common stock of the company or the combined voting power of the outstanding securities of the company entitled to vote generally in the election of directors (for these purposes the term +Excluded Holder shall include the company, any subsidiary of the company and any employee benefit plan of the company or any such subsidiary or any trust holding common stock or other securities of +the company pursuant to the terms of any such employee benefit plan); and (iii) at least a majority of the board of directors of the company is comprised of Continuing Directors. +(z) "Person" +has the same meaning as set forth in Sections 13(d) and 14(d)(2) of the Act. +(aa) "Performance +Award" means an Award, the grant, issuance, retention, vesting or settlement of which is subject to satisfaction of one or more Qualifying Performance +Criteria or other performance-based criteria established pursuant to Section 14 of the Plan or otherwise by the Administrator. +(bb) "Qualifying +Performance Criteria" has the meaning set forth in Section 14(b) of the Plan. +(cc) "Restricted +Stock" means Shares granted pursuant to Section 8 of the Plan. +(dd) "Restricted +Stock Unit" means an Award granted to a Participant pursuant to Section 8 of the Plan that is an unfunded and unsecured promise pursuant to which +Shares or cash in lieu thereof may be issued in the future. +(ee) "Retirement" +means the voluntary Termination of Employment by a Participant after the Participant has attained 59 years of age and ten years of service (as a +director and/or an employee of the Company or a Subsidiary, provided, for the avoidance of doubt, that any service by a Participant for a Subsidiary prior to the time when such Subsidiary is owned +directly or indirectly by the Company shall be disregarded for purposes of a "Retirement" determination hereunder), absent a determination to the contrary by the Administrator (after taking into +consideration the Factors) within the Determination Period; Retirement shall be deemed to occur on the date immediately following the last day of the Determination Period in the absence of a +determination to the contrary by the Administrator. +(ff) "Section 162(m) +of the Code" shall mean Section 162(m) of the Code, including the regulations promulgated thereunder and other applicable Internal +Revenue Service guidance. With respect to Sections 5, 8, 10, 14 and 19 of the Plan, references to Section 162(m) of the Code shall refer to such Code section as in effect prior to +December 22, 2017, including the regulations thereunder and other applicable Internal Revenue Service guidance, whether promulgated or issued before, as of or after December 22, 2017. +(gg) "Share" +means a share of the Company's common stock, par value $1.00, subject to adjustment as provided in Section 13 of the Plan. +(hh) "Stock +Appreciation Right" means a right granted pursuant to Section 7 of the Plan that entitles the Participant to receive, in cash or Shares or a combination +thereof, as determined by the Administrator, value equal to or otherwise based on the excess of (i) the Fair Market Value of a specified number of Shares at the time of exercise over +(ii) the exercise price of the right, as established by the Administrator on the date of grant. +(ii) "Stock +Award" means an award of Shares to a Participant pursuant to Section 9 of the Plan. +(jj) "Subsidiary" +means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company where each of the corporations in the +unbroken chain other than the last corporation owns stock possessing at least 50 percent or more of the total combined voting power of all classes of stock in one of the other corporations in +the chain, and if specifically determined by the Administrator in the context other than with respect to Incentive Stock Options, may include an entity in which the Company has a significant ownership +interest or that is directly or indirectly controlled by the Company. +2018 +PROXY +STATEMENT +A-4 +Table of Contents +APPENDIX A +(kk) "Substitute +Awards" means Awards granted or Shares issued by the Company in assumption of, or in substitution or exchange for, awards previously granted, or the right +or obligation to make future awards, by a company acquired by the Company or any Subsidiary or with which the Company or any Subsidiary combines. +(ll) "Termination +of Employment" means ceasing to serve as a full-time employee of the Company and its Subsidiaries or, with respect to a Nonemployee Director or other +service provider, ceasing to serve as such for the Company, except that with respect to all or any Awards held by a Participant (i) the Administrator may determine, subject to +Section 6(d) of the Plan, that an approved leave of absence or approved employment on a less than full-time basis is not considered a Termination of Employment; (ii) the Administrator +may determine that a transition of employment to service with a partnership, joint venture or corporation not meeting the requirements of a Subsidiary in which the Company or a Subsidiary is an equity +owner is not considered a Termination of Employment; (iii) unless otherwise determined by the Administrator, service as a member of the Board or other service provider shall not constitute +continued employment with respect to Awards granted to a Participant while he or she served as an employee; and (iv) service as an employee of the Company or a Subsidiary shall constitute +continued employment with respect to Awards granted to a Participant while he or she served as a member of the Board or other service provider. The Administrator shall determine whether any corporate +transaction, such as a sale or spin-off of a division or subsidiary that employs a Participant, shall be deemed to result in a Termination of Employment with the Company and its Subsidiaries for +purposes of any affected Participant's Awards, and the Administrator's decision shall be final and binding. +3. Eligibility +Any person who is a current or, to the extent consistent with Section 409A of the Code, prospective officer or employee of the Company or of any +Subsidiary shall be eligible for selection by the Administrator for the grant of Awards hereunder. In addition, Nonemployee Directors and any other service providers who have been retained to provide +consulting, advisory or other services to the Company or to any Subsidiary shall be eligible for the grant of Awards hereunder as determined by the Administrator. Options intending to qualify as +Incentive Stock Options may only be granted to employees of the Company or any subsidiary of the Company within the meaning of the Code, as selected by the Administrator. Eligibility for Options other +than Incentive Stock Options is limited to individuals described this Section 3 who are providing direct services on the date of grant of the Option (or it is reasonably anticipated that the +individuals will begin to provide direct services) to the Company or to a subsidiary of the Company that would be described in the first sentence of Treasury Regulation +§ 1.409A-1(b)(5)(iii)(E). +4. Effective Date, Amendment Date and Termination of Plan +The Plan was initially adopted by the Board as of February 10, 2016 (the "Effective Date"), provided that any grants made after the Effective Date and +prior to the approval of the Plan by the Company's stockholders were subject to such approval. With respect to any Award granted on or after the Amendment Date, to the extent that the number of Shares +subject to such Awards, or portions thereof, exceeds the number of shares authorized under the Plan as of the Amendment Date, such Awards, or portions thereof, shall be subject to, and may not be +exercised before, the approval of this Plan by the stockholders of the Company prior to the first anniversary of the Amendment Date by the affirmative vote of the holders of a majority of the +outstanding Shares of the Company present, or represented by proxy, and entitled to vote, at a meeting of the Company's stockholders or by written consent in accordance with the laws of the State of +Delaware; and, if such approval is not so obtained, the Awards (or portions thereof) shall by void as determined by the Administrator. The Plan shall remain available for the grant of Awards until the +tenth (10th) anniversary of the Amendment Date. Notwithstanding the foregoing, the Plan may be terminated at such earlier time as the Board may determine. +Termination of the Plan will not affect the rights and obligations of the Participants and the Company arising under Awards theretofore granted and then in effect. +5. Shares Subject to the Plan and to Awards +(a) Aggregate Limits. The aggregate number of Shares issuable pursuant to all Awards shall not exceed 6,100,000 +(the number of Shares authorized under the Plan, as approved by stockholders on April 21, 2016) plus an additional 8,500,000 Shares, plus any shares subject to outstanding awards under the +Prior Plans that on or after the Effective Date or the Amendment Date, as applicable, cease for any reason to be subject to such awards (other than by reason of exercise or settlement of the awards to +the extent they are exercised for or settled in vested and nonforfeitable shares); provided, however, that any Shares granted under Options or Stock Appreciation Rights shall be counted against this +limit on a one-for-one basis and any Shares granted as Awards other than Options or Stock Appreciation Rights shall be counted against this limit as two and six tenths (2.6) Shares for every one +(1) Share subject to such Award. The aggregate number of Shares +2018 +PROXY +STATEMENT +A-5 +Table of Contents +APPENDIX A +available +for grant under this Plan and the number of Shares subject to outstanding Awards shall be subject to adjustment as provided in Section 13 of the Plan. The Shares issued pursuant to +Awards granted under this Plan may be shares that are authorized and unissued or shares that were reacquired by the Company, including shares purchased in the open market. No fractional Shares will be +delivered under the Plan. +(b) Issuance of Shares. For purposes of Section 5(a) and Section 5(f) of the Plan, the aggregate +number of Shares issued under this Plan at any time shall equal only the number of Shares actually issued upon exercise or settlement of an Award. Notwithstanding the foregoing, Shares subject to an +Award under the Plan may not again be made available for issuance under the Plan if such Shares are: (i) Shares that were subject to a stock-settled Stock Appreciation Right and were not issued +upon the net settlement or net exercise of such Stock Appreciation Right; (ii) Shares used to pay the exercise price of an Option or the purchase price, if any, for an Award; +(iii) Shares delivered to or withheld by the Company to pay the withholding taxes related an Award; or (iv) Shares repurchased on the open market with the proceeds of an Option exercise. +Shares subject to Awards that have been canceled, expired, forfeited or otherwise not issued under an Award and Shares subject to Awards settled in cash shall not count as Shares issued under this +Plan for purposes of Section 5(a) or Section 5(f) of the Plan. +(c) Tax Code Limits. The aggregate number of Shares that may be delivered, or the value of which could be paid +in cash or other property, under Awards granted under this Plan during any calendar year to any one Participant shall not exceed 3,600,000, which aggregate number shall be calculated and adjusted +pursuant to Section 13 of the Plan only to the extent that such calculation or adjustment will not affect the status of any Award intended to qualify as "performance-based compensation" under +Section 162(m) of the Code but which number shall not count any tandem SARs (as defined in Section 7 of the Plan). The aggregate number of Shares that may be issued pursuant to the +exercise of Incentive Stock Options granted under this Plan shall not exceed 3,600,000, which aggregate number shall be calculated and adjusted pursuant to Section 13 of the Plan only to the +extent that such calculation or adjustment will not affect the status of any option intended to qualify as an Incentive Stock Option under Section 422 of the Code. The maximum cash amount +payable pursuant to that portion of an Incentive Bonus granted in any calendar year to any Participant under this Plan that is intended to satisfy the requirements for "performance-based compensation" +under Section 162(m) of the Code shall not exceed $20,000,000. +(d) Director Awards. Notwithstanding any other provision of the Plan to the contrary, the aggregate grant date +fair value of Awards (computed as of the date of grant in accordance with applicable financial accounting rules) granted under this Plan during any calendar year to any one Nonemployee Director shall +not exceed $400,000. +(e) Substitute Awards. Substitute Awards shall not reduce the Shares authorized for issuance under the Plan or +authorized for grant to a Participant in any calendar year. Additionally, in the event that a company acquired by the Company or any Subsidiary, or with which the Company or any Subsidiary combines, +has shares available under a pre-existing plan approved by stockholders and not adopted in contemplation of such acquisition or combination, the shares available for grant pursuant to the terms of +such pre-existing plan (as adjusted, to the extent appropriate, using the exchange ratio or other adjustment or valuation ratio or formula used in such acquisition or combination to determine the +consideration payable to the holders of common stock of the entities party to such acquisition or combination) may be used for Awards under the Plan and shall not reduce the Shares authorized for +issuance under the Plan; provided, however, that Awards using such available shares shall not be made after the date awards or grants could have been made under the terms of the pre-existing plan, +absent the acquisition or combination, and shall only be made to individuals who were employees, directors or other service providers of such acquired or combined company before such acquisition or +combination and shall be subject to such other terms and limitations as required by the stock exchange on which the Shares are then listed or traded. +(f) Award Vesting/Exercisability/Distribution Limitations. (i) No portion of any grant of Restricted Stock +shall be scheduled to vest prior to the date that is one (1) year following the date the Restricted Stock is granted; (ii) no portion of any grant of an Option or Stock Appreciation +Right shall be scheduled to become exercisable prior to the date that is one (1) year following the date the Option or Stock Appreciation Right is granted; and (iii) no portion of any +grant of a Restricted Stock Unit or Incentive Bonus shall be scheduled to vest or be settled, paid or distributed prior to the date that is one (1) year following the date the applicable +Restricted Stock Unit or Incentive Bonus is granted; provided; however, that Awards that result in the issuance (as determined in accordance with the rules set forth in Section 5(b) of the +Plan) of an aggregate of up to 5% of the Shares reserved for issuance under Section 5(a) of the Plan may be granted to eligible persons +2018 +PROXY +STATEMENT +A-6 +Table of Contents +APPENDIX A +without +regard to the minimum vesting, exercisability, settlement, payment and distribution provisions of this Section 5(f). As set forth in Section 9(a), Stock Awards may only be +granted consistent with the 5% limit set forth in the preceding sentence. +6. Options +(a) Option Awards. Options may be granted at any time and from time to time prior to the termination of the +Plan to Participants as determined by the Administrator. No Participant shall have any rights as a stockholder with respect to any Shares subject to Options hereunder until such Shares have been +issued. Each Option shall be evidenced by an Award Agreement. Options granted pursuant to the Plan need not be identical but each Option must contain and be subject to the terms and conditions set +forth below. +(b) Price. The Administrator will establish the exercise price per Share under each Option, which in no event +will be less than the Fair Market Value of the Shares on the date of grant; provided, however, that the exercise price per Share with respect to an Option that is granted in connection with a merger +or other acquisition as a substitute or replacement award for options held by optionees of the acquired entity may be less than 100% of the Fair Market Value of the Shares on the date such Option is +granted if such exercise price is based on a formula set forth in the terms of the options held by such optionees or in the terms of the agreement providing for such merger or other acquisition. The +exercise price of any Option may be paid in Shares, cash or a combination thereof, as determined by the Administrator, including an irrevocable commitment by a broker to pay over such amount from a +sale of the Shares issuable under an Option, the delivery of previously owned Shares and withholding of Shares deliverable upon exercise, or in such other form as is acceptable to the Administrator. +(c) No Repricing Without Stockholder Approval. Other than in connection with a change in the Company's +capitalization (as described in Section 13 of the Plan), the Administrator may not, without prior approval of the Company's shareholders, seek to effect any repricing of any previously granted +underwater Option by: (i) amending or modifying the terms of the Option to lower the exercise price; (ii) canceling the underwater Option and granting either (A) replacement +Options having a lower exercise price or (B) Restricted Stock, Restricted Stock Units, Performance Awards or Stock Awards in exchange; or (iii) cancelling or repurchasing the underwater +Options for cash or other securities. An Option will be deemed to be "underwater" at any time when the Fair Market Value of the Shares covered by such Award is less than the exercise price of the +Award. +(d) Provisions Applicable to Options. The date on which Options become exercisable shall be determined at the +sole and absolute discretion of the Administrator and set forth in an Award Agreement. Unless provided otherwise in the applicable Award Agreement, to the extent that the Administrator determines that +an approved leave of absence or employment on a less than full-time basis is not a Termination of Employment, the vesting period and/or exercisability of an Option shall be adjusted by the +Administrator during or to reflect the effects of any period during which the Participant is on an approved leave of absence or is employed on a less than full-time basis. No dividends or dividend +equivalents shall be paid or granted in respect of Shares subject to Options and no holder of an Option shall be entitled to any dividends with respect to the Shares subject to Options unless and +until such Options have vested and have been exercised in accordance with the terms of the Plan and the applicable Award Agreement and such Shares are reflected as issued and outstanding. +(e) Term of Options and Termination of Employment. The Administrator shall establish the term of each Option, +which in no case shall exceed a period of ten (10) years from the date of grant. Unless an Option earlier expires upon the expiration date established pursuant to the foregoing sentence, upon +the Participant's Termination of Employment, his or her rights to exercise an Option then held shall be only as follows, unless the Administrator specifies otherwise: +(1) General. If a Participant's Termination of Employment is for any reason other than the Participant's death, +Disability, Retirement or termination for Cause, Options granted to the Participant may continue to be exercised in accordance with their terms for the lesser of (i) a period of three +(3) months after such Termination of Employment or (ii) the period ending on the latest date on which such Options could have been exercised without regard to this +Section 6(e)(1), but only to the extent the Participant was entitled to exercise the Options on the date of such termination. +(2) Death. If a Participant dies either while an employee or officer of the Company or a Subsidiary or member +of the Board, or after the Termination of Employment other than for Cause but during the time when the Participant could have exercised an Option, the Options issued to such Participant shall become +fully vested (in the case of Termination of Employment due to death) and exercisable by the personal representative of such Participant or other successor to the interest of the Participant for the +lesser of +2018 +PROXY +STATEMENT +A-7 +Table of Contents +APPENDIX A +(i) a +period of one (1) year after the Participant's death or (ii) the period ending on the latest date on which such Options could have been exercised without regard to this +Section 6(e)(2), but only to the extent the Participant was entitled to exercise the Options on the date of such termination. +(3) Disability. If a Participant's Termination of Employment is due to Disability, then all of the +Participant's Options shall immediately fully vest, and the Options held by the Participant at the time of such Termination of Employment shall be exercisable by the Participant or the personal +representative of such Participant for the lesser of (i) a period of one (1) year after the Participant's Termination of Employment or (ii) the period ending on the latest date on +which such Options could have been exercised without regard to this Section 6(e)(3), but only to the extent the Participant was entitled to exercise the Options on the date of such termination. +(4) Participant Retirement. Upon a Participant's Retirement as an employee of the Company and its Subsidiaries +or Retirement from service as a member of the Board, then all of the Participant's Options shall immediately fully vest, and the Options held by the +Participant at the time of such Retirement shall be exercisable by the Participant or the personal representative of such Participant during the remaining term of the Options. +(5) Termination for Cause. If a Participant is terminated for Cause, the Participant shall have no further +right to exercise any Options previously granted. The Administrator or officers designated by the Administrator shall determine, in its or their reasonable discretion, whether a termination is for +Cause. +(f) Incentive Stock Options. Notwithstanding anything to the contrary in this Section 6, in the case of +the grant of an Option intending to qualify as an Incentive Stock Option: (i) if the Participant owns stock possessing more than 10 percent (10%) of the combined voting power of all +classes of stock of the Company, the exercise price of such Option must be at least 110 percent of the Fair Market Value of the Shares on the date of grant and the Option must expire within a +period of not more than five (5) years from the date of grant and (ii) Termination of Employment will occur when the person to whom an Award was granted ceases to be an employee (as +determined in accordance with Section 3401(c) of the Code and the regulations promulgated thereunder) of the Company and its Subsidiaries. Notwithstanding anything in this Section 6 to +the contrary, options designated as Incentive Stock Options shall not be eligible for treatment under the Code as Incentive Stock Options (and will be deemed to be Nonqualified Stock Options) to the +extent that either (a) the aggregate Fair Market Value of Shares (determined as of the time of grant) with respect to which such Options are exercisable for the first time by the Participant +during any calendar year (under all plans of the Company and any Subsidiary) exceeds $100,000, taking Options into account in the order in which they were granted, or (b) such Options otherwise +remain exercisable but are not exercised within three (3) months of Termination of Employment (as defined in this subsection (f)) (or such other period of time provided in +Section 422 of the Code). +7. Stock Appreciation Rights +(a) General. Stock Appreciation Rights may be granted to Participants from time to time either in tandem with +or as a component of other Awards granted under the Plan ("tandem SARs") or not in conjunction with other Awards ("freestanding SARs") and may, but need not, relate to a specific Option granted under +Section 6 of the Plan. The provisions of Stock Appreciation Rights need not be the same with respect to each grant or each recipient. Any Stock Appreciation Right granted in tandem with an +Award may be granted at the same time such Award is granted or at any time thereafter before exercise or expiration of such Award. All freestanding SARs shall be granted subject to the same terms and +conditions applicable to Options as set forth in Section 6 of the Plan and all tandem SARs shall have the same exercise price, vesting, exercisability, forfeiture and termination provisions as +the Award to which they relate. Subject to the provisions of Section 6 of the Plan and the immediately preceding sentence, the Administrator may impose such other conditions or restrictions on +any Stock Appreciation Right as it shall deem appropriate. Stock Appreciation Rights may be settled in Shares, cash or a combination thereof, as determined by the Administrator and set forth in the +applicable Award Agreement. +(b) No Repricing Without Stockholder Approval. Other than in connection with a change in the Company's +capitalization (as described in Section 13 of the Plan), the Administrator may not, without prior approval of the Company's shareholders, seek to effect any repricing of any previously granted +underwater Stock Appreciation Right by: (i) amending or modifying the terms of the Stock Appreciation Right to lower the exercise price; (ii) canceling the underwater Stock Appreciation +Right and granting either (A) replacement Stock Appreciation Rights having a lower exercise price or (B) Restricted Stock, Restricted Stock Units, Performance Awards or Stock Awards in +2018 +PROXY +STATEMENT +A-8 +Table of Contents +APPENDIX A +exchange; +or (iii) cancelling or repurchasing the underwater Stock Appreciation Rights for cash or other securities. A Stock Appreciation Right will be deemed to be "underwater" at any time +when the Fair Market Value of the Shares covered by such Award is less than the exercise price of the Award. +8. Restricted Stock and Restricted Stock Units +(a) Restricted Stock and Restricted Stock Unit Awards. Restricted Stock and Restricted Stock Units may be +granted at any time and from time to time prior to the termination of the Plan to Participants as determined by the Administrator. Restricted Stock is an award or issuance of Shares the grant, +issuance, retention, vesting and/or transferability of which is subject during specified periods of time to such conditions (including continued employment or performance conditions) and terms as the +Administrator deems appropriate. Restricted Stock Units are Awards denominated in units of Shares under which the issuance of Shares is subject to such conditions (including continued employment or +performance conditions) and terms as the Administrator deems appropriate. Each grant of Restricted Stock and Restricted Stock Units shall be evidenced by an Award Agreement. Unless determined +otherwise by the Administrator, each Restricted Stock Unit will be equal to one Share and will entitle a Participant to either the issuance of Shares or payment of an amount of cash determined with +reference to the value of Shares. To the extent determined by the Administrator, Restricted Stock and Restricted Stock Units may be satisfied or settled in Shares, cash or a combination thereof. +Restricted Stock and Restricted Stock Units granted pursuant to the Plan need not be identical but each grant of Restricted Stock and Restricted Stock Units must contain and be subject to the terms +and conditions set forth below. +(b) Contents of Agreement. Each Award Agreement shall contain provisions regarding (i) the number of +Shares or Restricted Stock Units subject to such Award or a formula for determining such number; (ii) the purchase price of the Shares, if any, and the means of payment; (iii) the +performance criteria, if any, and level of achievement versus these criteria that shall determine the number of Shares or Restricted Stock Units granted, issued, retainable and/or vested; +(iv) such terms and conditions on the grant, issuance, vesting and/or forfeiture of the Shares or Restricted Stock Units as may be determined from time to time by the Administrator; +(v) the term of the performance period, if any, as to which performance will be measured for determining the number of such Shares or Restricted Stock Units; and (vi) restrictions on the +transferability of the Shares or Restricted Stock Units. Shares issued under a Restricted Stock Award may be issued in the name of the Participant and held by the Participant or held by the Company, +in each case as the Administrator may provide. +(c) Vesting and Performance Criteria. The grant, issuance, retention, vesting and/or settlement of shares of +Restricted Stock and Restricted Stock Units will occur when and in such installments as the Administrator determines or under criteria the Administrator establishes, which may include Qualifying +Performance Criteria. Notwithstanding anything in this Plan to the contrary, the performance criteria for any Restricted Stock or Restricted Stock Unit that is intended to satisfy the requirements for +"performance-based compensation" under Section 162(m) of the Code will be a measure based on one or more Qualifying Performance Criteria selected by the Administrator and specified in writing +when the Award is granted, which shall be not later than ninety (90) days after the commencement of the performance period to which the Restricted Stock or Restricted Stock Units relate (or at +such earlier time as is required to qualify the Incentive Bonus as performance-based under Section 162(m) of the Code). +(d) Termination of Employment. Unless the Administrator provides otherwise: +(i) General. In the event of Termination of Employment for any reason other than death, Disability or +Retirement, any Restricted Stock or Restricted Stock Units still subject in full or in part to restrictions at the date of such Termination of Employment shall automatically be forfeited and returned +to the Company. +(ii) Death, Retirement or Disability. In the event a Participant's Termination of Employment is because of +death, Disability or Retirement, the restrictions remaining on any or all Shares remaining subject to a Restricted Stock or Restricted Stock Unit Award shall lapse. Notwithstanding the foregoing and +for the avoidance of doubt, the Award Agreement with respect to any Restricted Stock or Restricted Stock Unit that is intended to satisfy the requirements for "performance-based compensation" under +Section 162(m) of the Code shall not provide for the lapse of any applicable Qualifying Performance Criteria upon a Participant's Retirement other than in a manner that is consistent with such +requirements +2018 +PROXY +STATEMENT +A-9 +Table of Contents +APPENDIX A +(e) Discretionary Adjustments and Limits. Subject to the limits imposed under +Section 162(m) of the Code for Awards that are intended to qualify as "performance-based compensation," notwithstanding the satisfaction of any performance goals, the number of Shares granted, +issued, retainable and/or vested under an Award of Restricted Stock or Restricted Stock Units on account of either financial performance or personal performance evaluations may, to the extent +specified in the Award Agreement, be reduced, but not increased, by the Administrator on the basis of such further considerations as the Administrator shall determine. +(f) Voting Rights. Unless otherwise determined by the Administrator, Participants holding shares of Restricted +Stock granted hereunder may exercise full voting rights with respect to those shares during the period of restriction. Participants shall have no voting rights with respect to Shares underlying +Restricted Stock Units unless and until such Shares are reflected as issued and outstanding shares on the Company's stock ledger. +(g) Dividends and Distributions . +(i) Participants +in whose name Restricted Stock is granted shall be entitled to receive dividends and other distributions paid with respect to those Shares only to the +extent provided by the Administrator, in which case the Administrator will determine whether any +such dividends or distributions will be automatically reinvested in additional shares of Restricted Stock and subject to the same restrictions on transferability as the Restricted Stock with respect +to which they were distributed or whether such dividends or distributions will be paid in cash. Shares underlying Restricted Stock Units shall be entitled to dividends or dividend equivalents only to +the extent provided by the Administrator. +(ii) Notwithstanding +the foregoing Section 8(g)(1), any cash or stock dividends and dividend equivalents with respect to Restricted Stock and Restricted Stock Units +granted as Performance Awards, if any, will be withheld by the Company for the Participant's account and will be paid, if at all, (i) in the case of Restricted Stock, upon the achievement of +the applicable performance measure(s) and the satisfaction of any other restrictions imposed on the Restricted Stock in respect of which the dividends were paid and (ii) in the case of +Restricted Stock Units, at the time the Shares and/or cash underlying such Restricted Stock Units is paid, and any dividends deferred in respect of any Restricted Stock and Restricted Stock Units +granted as Performance Awards will be forfeited upon the forfeiture of such Restricted Stock and Restricted Stock Units. Any noncash dividends or distributions paid with respect to Restricted Stock +and Restricted Stock Units granted as Performance Awards shall be subject to the same restrictions as those relating to the Restricted Stock and Restricted Stock Units. +(h) Payment of Restricted Stock Units. In all events, unless payment with respect to a Restricted Stock Unit is +deferred in a manner consistent with Section 409A of the Code, the Shares and/or cash underlying such Restricted Stock Unit shall be paid to the Participant no later than two and one-half +months following the end of the year in which the Restricted Stock Unit is no longer subject to a substantial risk of forfeiture. +(i) Legending of Restricted Stock. The Administrator may also require that certificates representing shares of +Restricted Stock be retained and held in escrow by a designated employee or agent of the Company or any Subsidiary until any restrictions applicable to shares of Restricted Stock so retained have been +satisfied or lapsed. Any certificates evidencing shares of Restricted Stock awarded pursuant to the Plan shall bear the following legend: +The +shares represented by this certificate were issued subject to certain restrictions under the Wolverine World Wide, Inc. Stock Incentive Plan of 2016 (the "Plan"). This certificate is held +subject to the terms and conditions contained in a restricted stock agreement that includes a prohibition against the sale or transfer of the stock represented by this certificate except in compliance +with that agreement and that provides for forfeiture upon certain events. Copies of the Plan and the restricted stock agreement are on file in the office of the Secretary of the Company. +9. Stock Awards +(a) Grant. Stock Awards may be granted at any time and from time to time prior to the termination of the Plan +to Participants as determined by the Administrator, consistent with the 5% limit set forth in Section 5(f) of the Plan. Stock Awards shall be subject to such terms and conditions, consistent +with the other provisions of the Plan, as may be determined by the Administrator. +2018 +PROXY +STATEMENT +A-10 +Table of Contents +APPENDIX A +(b) Rights as a Stockholder. A Participant shall have all voting, dividend, liquidation and other rights with +respect to Shares issued to the Participant as a Stock Award under this Section 9 upon the Participant becoming the holder of record of the Shares granted pursuant to such Stock Award; +provided, however, that the Administrator may impose such restrictions on the assignment or transfer of Shares awarded pursuant to a Stock Award as it considers appropriate. +10. Incentive Bonuses +(a) General. Each Incentive Bonus Award will confer upon the Participant the opportunity to earn a future +payment tied to the level of achievement with respect to one or more performance criteria established for a performance period of not less than one year. +(b) Incentive Bonus Document. Unless otherwise determined by the Administrator, the terms of any Incentive +Bonus will be set forth in an Award Agreement. Each Award Agreement evidencing an Incentive Bonus shall contain provisions regarding (i) the target and maximum amount payable to the Participant +as an Incentive Bonus; (ii) the performance criteria and level of achievement versus these criteria that shall determine the amount of such payment; (iii) the term of the performance +period as to which performance shall be measured for determining the amount of any payment; (iv) the timing of any payment earned by virtue of performance; (v) restrictions on the +alienation or transfer of the Incentive Bonus prior to actual payment; (vi) forfeiture provisions; and (vii) such further terms and conditions, in each case not inconsistent with this +Plan, as may be determined from time to time by the Administrator. +(c) Performance Criteria. The Administrator shall establish the performance criteria and level of achievement +versus these criteria that shall determine the target and maximum amounts payable under an Incentive Bonus, which criteria may be based on financial performance and/or personal performance +evaluations. The Administrator may specify the percentage of the target Incentive Bonus, if any, that is intended to satisfy the requirements for "performance-based compensation" under +Section 162(m) of the Code. Notwithstanding anything to the contrary herein, the performance criteria for any portion of an Incentive Bonus that is intended by the Administrator to satisfy the +requirements for "performance-based compensation" under Section 162(m) of the Code shall be a measure based on one or more Qualifying Performance Criteria (as defined in Section 14(b) of +the Plan) selected by the Administrator and specified in writing at the time the Incentive Bonus is granted, which shall be not later than ninety (90) days after the commencement of the +performance period to which the Incentive Bonus relates (or at such earlier time as is required to qualify the Incentive Bonus as performance-based under Section 162(m) of the Code). The +Administrator shall certify the extent to which any Qualifying Performance Criteria has been satisfied, and the amount payable as a result thereof, prior to payment of any Incentive Bonus that is +intended to satisfy the requirements for "performance-based compensation" under Section 162(m) of the Code. +(d) Timing and Form of Payment. The Administrator shall determine the timing of payment of any Incentive Bonus. +Payment of the amount due under an Incentive Bonus may be made in cash or in Shares, as determined by the Administrator. The Administrator may provide for or, subject to such terms and conditions as +the Administrator may specify, may permit a Participant to elect for the payment of any Incentive Bonus to be deferred to a specified date or event. In all events, unless payment of an Incentive Bonus +is deferred in a manner consistent with Section 409A of the Code, any Incentive Bonus shall be paid to the Participant no later than two and one-half months following the end of the year in +which the Incentive Bonus is no longer subject to a substantial risk of forfeiture. +(e) Discretionary Adjustments. Notwithstanding satisfaction of any performance goals, the amount paid under an +Incentive Bonus on account of either financial performance or personal performance evaluations may, to the extent specified in the Award Agreement or other document evidencing the Award, be reduced, +but not increased, by the Administrator on the basis of such further considerations as the Administrator shall determine. +11. Deferral of Gains +(a) Deferral of Payment. The Administrator may, in an Award Agreement or otherwise, provide for the deferred +delivery of Shares upon settlement, vesting or other events with respect to Restricted Stock or Restricted Stock Units, or in payment or satisfaction of an Incentive Bonus. Notwithstanding anything +herein to the contrary, in no event will any deferral of the delivery of Shares or any other payment with respect to any Award be allowed if the Administrator determines, in its sole and absolute +discretion, that the deferral would result in the imposition of the additional tax under Section 409A(a)(1)(B) of the Code. No award shall provide for deferral of compensation that does not +comply with Section 409A of the Code, unless the Board, at the time of grant, specifically provides that the Award is not intended to comply with Section 409A of the Code. The Company +shall have no liability to a Participant, or any other party, if an Award that +2018 +PROXY +STATEMENT +A-11 +Table of Contents +APPENDIX A +is +intended to be exempt from, or compliant with, Section 409A of the Code is not so exempt or compliant or for any action taken by the Administrator or the Board. +(b) Conditions of Deferral. Notwithstanding anything herein to the contrary, if the Administrator permits any +initial or subsequent deferral elections pursuant to Section 11(a) of this Plan, subject to the requirements of Section 409A of the Code, the terms of this Plan and the applicable Award +Agreement and any applicable deferral election form, the Participant may elect to defer payment (that would otherwise occur upon the lapse of a substantial risk of forfeiture) for a fixed period of +time measured from the date the Award is granted; provided, however, that in each case (i) the deferral election is made before the end of the election period established by the Administrator, +and (ii) to the extent compliant with Section 409A of the Code, payment of any vested Award that the Participant has elected to defer will be made regardless of any deferral election +(including any subsequent deferral election) within thirty (30) days of a change in control or the Participant's separation from service (including death). For purposes of this +Section 11, "change in control" and "separation from service" shall be defined in the applicable Award Agreement and have the meanings set forth in Section 409A of the Code and the +regulations thereunder (and, with respect to the definition of "separation from service", after giving effect to the presumptions contained therein), and, notwithstanding anything herein to the +contrary, if the Administrator allows deferral elections under an Award Agreement subject to Section 409A of the Code, neither Disability nor Retirement shall accelerate the time of payment of +any Award (even if it accelerates vesting) unless there has been a "separation from service" or "disability" within the meaning of Section 409A of the Code and the regulations promulgated +thereunder (and, with respect to the definition of "separation from service", after giving effect to the presumptions contained therein). To the extent applicable, this provision, the Plan and any +Awards hereunder are intended to comply with Section 409A of the Code and shall be interpreted accordingly. +12. Conditions and Restrictions Upon Securities Subject to Awards +The Administrator may provide that the Shares issued upon exercise of an Option or Stock Appreciation Right or otherwise subject to or issued under an Award +shall be subject to such further agreements, restrictions, conditions or limitations as the Administrator in its sole and absolute discretion may specify prior to the exercise of such Option or Stock +Appreciation Right or the grant, vesting or settlement of such Award, including without limitation, conditions on vesting or transferability, forfeiture or repurchase provisions and method of payment +for the Shares issued upon exercise, vesting or settlement of such Award (including the actual or constructive surrender of Shares already owned by the Participant) or payment of taxes arising in +connection with an Award. Without limiting the foregoing, such restrictions may address the timing and manner of any resales by the Participant or other subsequent transfers by the Participant of any +Shares issued under an Award, including without limitation (i) restrictions under an insider trading policy or pursuant to applicable law; (ii) restrictions designed to delay and/or +coordinate the timing and manner of sales by Participant and holders of other Company equity compensation arrangements; (iii) restrictions as to the use of a specified brokerage firm for such +resales or other transfers; and (iv) provisions requiring Shares to be sold on the open market or to the Company in order to satisfy tax withholding or other obligations. +13. Adjustment of and Changes in the Stock +(a) General. The number and kind of Shares available for issuance under this Plan (including under any Awards +then outstanding), and the number and kind of Shares subject to the limits set forth in Section 5 of this Plan, shall be equitably adjusted by the Administrator to reflect any reorganization, +reclassification, combination of shares, stock split, reverse stock split, spin-off, dividend or distribution of securities, property or cash (other than regular, quarterly cash dividends), or any +other event or transaction that affects the number or kind of Shares outstanding. Such adjustment may be designed to comply with Sections 409A and 424 of the Code as applicable, or, except as +otherwise expressly provided in Section 5(c) of this Plan, may be designed to treat the Shares available under the Plan and subject to Awards as if they were all outstanding on the record date +for such event or transaction or to increase the number of such Shares to reflect a deemed reinvestment in Shares of the amount distributed to the Company's security holders. The terms of any +outstanding Award shall also be equitably adjusted by the Administrator as to price, number or kind of Shares subject to such Award, vesting and other terms to reflect the foregoing events, which +adjustments need not be uniform as between different Awards or different types of Awards. +In +the event there shall be any other change in the number or kind of outstanding Shares, or any stock or other securities into which such Shares shall have been changed, or for which +it shall have been exchanged, by reason of a change of control, other merger, consolidation or otherwise, then the Administrator shall determine the appropriate and equitable adjustment to be +effected. In addition, in the event of such change described in this paragraph, the Administrator may accelerate the time or times at which any Award may be exercised and may +2018 +PROXY +STATEMENT +A-12 +Table of Contents +APPENDIX A +provide +for cancellation of such accelerated Awards that are not exercised within a time prescribed by the Administrator in its sole and absolute discretion. +No +right to purchase fractional shares shall result from any adjustment in Awards pursuant to this Section 13. In case of any such adjustment, the Shares subject to the Award +shall be rounded up to the nearest whole share for Awards other than Options and Stock Appreciation Rights, and shall be rounded down to the nearest whole Share with respect to Options and Stock +Appreciation Rights. The Company shall notify Participants holding Awards subject to any adjustments pursuant to this Section 13 of such adjustment, but (whether or not notice is given) such +adjustment shall be effective and binding for all purposes of the Plan. +(b) Change in Control. Subject to and limited by the requirements of subsections (i), (ii) and +(iii) below, the Administrator shall determine the effect of a Change in Control on outstanding Awards. Such effects, which need not be the same for every Participant, may include, without +limitation: (x) the substitution for the Shares subject to any outstanding Award, or portion thereof, of stock or other securities of the surviving corporation or any successor corporation to +the Company, or a parent or subsidiary thereof, in which event the aggregate purchase or exercise price, if any, of such Award, or portion thereof, shall remain the same, and/or (y) the +conversion of any outstanding Award, or portion thereof, into a right to receive cash or other property upon or following the consummation of the Change in Control in an amount equal to the value of +the consideration to be received by holders of Shares in connection with such transaction for one Share, less the per share purchase or exercise price of such Award, if any, multiplied by the number +of Shares subject to such Award, or a portion thereof. Notwithstanding the foregoing, Awards shall be treated as follows in connection with a Change in Control: +(i) Acceleration of Vesting. The following provisions shall apply to Awards granted prior to the Amendment +Date: Without action by the Administrator or the Board: (a) all outstanding Options and Stock Appreciation Rights shall become immediately exercisable in full and, notwithstanding any other +provision of the Plan or the Award Agreement to the contrary and to the extent the Administrator does not determine that a cash payment shall be made with respect to such Options and Stock +Appreciation Rights pursuant to the following Section 13(b)(iv), shall remain outstanding and exercisable during the remaining original terms thereof, regardless of whether the Participants to +whom such Options and Stock Appreciation Rights have been granted remain in the employ or service of the Company or any Subsidiary; and (b) all other outstanding Awards shall become immediately +fully vested and exercisable and non-forfeitable; +(ii) Double-Trigger Acceleration of Vesting of Time-Based Awards. The following provisions shall apply to +Awards granted on or after the Amendment Date that are subject to vesting based on continuous employment or service: To the extent an Award is assumed or substituted by an acquiror in connection with +a Change in Control as contemplated by Section 13(b) above, such Award shall not immediately vest upon a Change in Control and instead shall continue to vest in accordance with its terms, +provided, however, that if a Participant experiences a Termination of Employment by the Company without Cause or by the Participant for Good Reason, in either case, within the twenty-four- (24-) month +period immediately following the Change in Control, the Award shall immediately vest and become exercisable or shall be settled upon such qualifying termination. The Participant's rights under this +Section 13(b)(ii) are in addition to any other rights Participant has in the event of death, Disability or Retirement. Notwithstanding anything in this Section 13(b)(ii) to the contrary, +if, at any time during the vesting period of an Award, the Participant is or becomes eligible to terminate his or her employment with the Company or its Subsidiaries due to Retirement (without regard +to the application of any Factor or any Determination Period) the Award shall immediately vest in full upon the Change in Control. In the event of acceleration in connection with a Termination of +Employment as contemplated by this Section 13(b)(ii), all outstanding Options and Stock Appreciation Rights shall remain outstanding and exercisable during the remaining original terms thereof; +(iii) Treatment of Performance Awards. The following provisions shall apply to Awards granted on or after the +Amendment Date: If a Change in Control occurs prior to the end date of a performance period for a Performance Award, to the extent the Performance Award is outstanding immediately prior to such Change +in Control, such Award will vest (A) based on actual performance through the date of the Change in Control as determined by the Administrator (treating the Change in Control as the end of the +applicable performance period), without proration for the time elapsed in such performance period prior to such Change in Control for purposes of determining performance, but, in the discretion of the +Administrator, prorated for purposes of elapsed time in a manner consistent with subsection (B), below, (B) assuming that target level of performance is attained and prorated based on +the number of days in the performance period that elapsed prior to the Change in Control over the total number of days in the performance period, or (C) a combination of (A) and +(B) (without double counting). Any portion of the Performance Award (or the +2018 +PROXY +STATEMENT +A-13 +Table of Contents +APPENDIX A +full +Award, as applicable) that does not vest in connection with a Change in Control as contemplated herein will automatically terminate upon such Change in Control; and +(iv) Cash Payment for Stock Options/Stock Appreciation Rights. Without the consent of any Participant affected +thereby, the Administrator may determine that some or all Participants holding outstanding vested and exercisable Options and/or Stock Appreciation Rights shall receive, with respect to some or all of +the Shares subject to such Options and/or Stock Appreciation Rights, as of the effective date of any such Change in Control, cash in an amount equal to the greater of the excess of (A) the +highest sales price of the shares on the New York Stock Exchange (or any successor exchange that is the primary stock exchange for trading of Shares) on the date immediately prior to the effective +date of such Change in Control or (B) the highest price per share actually paid in connection with any Change in Control over the exercise price per share of such Options and/or Stock +Appreciation Rights. +14. Qualifying Performance-Based Compensation +(a) General. The Administrator may establish performance criteria and level of achievement versus such criteria +that shall determine the number of Shares to be granted, retained, vested, issued or issuable under or in settlement of or the amount payable pursuant to an Award, which criteria may be based on +Qualifying Performance Criteria or other standards of financial performance and/or personal performance evaluations. In addition, the Administrator may specify that an Award or a portion of an Award +is intended to satisfy the requirements for "performance-based compensation" under Section 162(m) of the Code, provided that the performance criteria for such Award or portion of an Award that +is intended by the Administrator to satisfy the requirements for "performance-based compensation" under Section 162(m) of the Code shall be a measure based on one or more Qualifying Performance +Criteria selected by the Administrator and specified in writing at the time the Award is granted, which shall be not later than ninety (90) days after the commencement of the performance period +to which the Incentive Bonus relates (or at such earlier time as is required to qualify the Incentive Bonus as performance-based under Section 162(m) of the Code). The Administrator shall +certify the extent to which any Qualifying Performance Criteria has been satisfied, and the amount payable as a result thereof, prior to payment, settlement or vesting of any Award that is intended to +satisfy the requirements for "performance-based compensation" under Section 162(m) of the Code. +(b) Qualifying Performance Criteria. For purposes of this Plan, the term "Qualifying Performance Criteria" +shall mean an objectively determinable measure of performance relating to any one or more of the following performance criteria, or derivations of such performance criteria, either individually, +alternatively or in any combination, applied to either the Company as a whole or to a business unit, division, line or Subsidiary, either individually, alternatively or in any combination, and +measured either annually or cumulatively over a period of years, on an absolute basis or relative to a pre-established target, to previous years' results or to an index or indices or a designated +comparison group or groups, in each case as specified by the Administrator: (i) net earnings or earnings per share (including earnings before interest, taxes, depreciation and/or amortization); +(ii) income, net income or operating income; (iii) revenues; (iv) net sales; (v) return on sales; (vi) return on equity; (vii) return on capital (including +return on total capital or return on invested capital); (viii) return on assets or net assets; (ix) earnings per share; (x) economic or business value added measurements; +(xi) return on invested capital; (xii) return on operating revenue; (xiii) cash flow (before or after dividends); (xiv) stock price; (xv) total stockholder return; +(xvi) market capitalization; (xvii) economic value added; (xviii) debt leverage (debt to capital); (xix) operating profit or net operating profit; (xx) operating +margin or profit margin; (xxi) cash from operations; (xxii) market share; (xxiii) product development or release schedules; (xxiv) new product innovation; (xxv) cost +reductions; (xxvi) customer acquisition or retention; (xxvii) customer service; or (xxviii) customer satisfaction. To the extent consistent with the requirements for satisfying +the performance-based compensation exception under Section 162(m) of the Code, the Administrator (A) may appropriately adjust any evaluation of performance under a Qualifying Performance +Criteria to eliminate the effects of charges for restructurings, discontinued operations, unusual or infrequently occurring items and all items of gain, loss or expense determined to be unusual or +infrequent in nature or related to the disposal of a segment of a business or related to a change in accounting principle all as determined in accordance with applicable accounting provisions, as well +as the cumulative effect of accounting changes, in each case as determined in accordance with generally accepted accounting principles or identified in the Company's financial statements or notes to +the financial statements, and (B) may appropriately adjust any evaluation of performance under a Qualifying Performance Criteria to exclude any of the following events that occurs during a +performance period: (i) asset write-downs; (ii) litigation, claims, judgments or settlements; (iii) the effect of changes in tax law or other such laws or provisions affecting +reported results; and (iv) accruals of any amounts for payment under this Plan or any other compensation arrangement maintained by the Company. +2018 +PROXY +STATEMENT +A-14 +Table of Contents +APPENDIX A +15. Transferability +Unless the Administrator determines otherwise, each Award may not be sold, transferred, pledged, assigned or otherwise alienated or hypothecated by a Participant +other than by will or the laws of descent and distribution, and each Option or Stock Appreciation Right shall be exercisable only by the Participant during his or her lifetime. To the extent permitted +by the Administrator, the person to whom an Award is initially granted (the "Grantee") may transfer an Award to any "family member" of the Grantee (as such term is defined in Section 1(a)(5) of +the General Instructions to Form S-8 under the Securities Act of 1933, as amended ("Form S-8")), to trusts solely for the benefit of such family members and to partnerships in which such +family members and/or trusts are the only partners; provided, however, that (i) as a condition thereof, the transferor and the transferee must execute a written agreement containing such terms +as specified by the Administrator and (ii) the transfer is pursuant to a gift or a domestic relations order to the extent permitted under the General Instructions to Form S-8. Except to +the extent specified otherwise in the agreement the Administrator provides for the Grantee and transferee to execute, all vesting, exercisability and forfeiture provisions that are conditioned on the +Grantee's continued employment or service shall continue to be determined with reference to the Grantee's employment or service (and not to the status of the transferee) after any transfer of an Award +pursuant to this Section 15. +16. Suspension, Termination or Recovery of Awards and Payments Thereunder +Except as otherwise provided by the Administrator, if at any time (including after a notice of exercise has been delivered or an award has vested) the Company's +chief executive officer or any other person designated by the Administrator (each such person, an "Authorized Officer") reasonably believes that a Participant may have committed an Act of Misconduct +as described in this Section 16, the Authorized Officer, Administrator or the Board may suspend the Participant's rights to exercise any Option, to vest in an Award, and/or to receive payment +for or receive Shares in settlement of an Award pending a determination of whether an Act of Misconduct has been committed. +If +the Administrator or an Authorized Officer determines a Participant has committed an Act of Misconduct, then except as otherwise provided by the Administrator, including through any +agreement approved by the Administrator, (i) neither the Participant nor his or her estate nor transferee shall be entitled to exercise any Option or Stock Appreciation Right whatsoever, vest +in or have the restrictions on an Award lapse, or otherwise receive payment of an Award, (ii) the Participant will forfeit all outstanding Awards and (iii) the Participant may be +required, at the Administrator's sole and absolute discretion, to return and/or repay to the Company any then unvested Shares previously issued under the Plan. In making such determination, the +Administrator or an Authorized Officer shall give the Participant an opportunity to appear and present evidence on his or her behalf at a hearing before the Administrator or its designee or an +opportunity to submit written comments, documents, information and arguments to be considered by the Administrator. +In +addition to the foregoing, the Administrator may recover Awards made under the Plan and payments under or gain in respect of any Award in accordance with the Company's Policy for +Recovery of Incentive Compensation or any successor or additional clawback or recoupment policy, as such policy or policies may be amended and in effect from time to time, or as otherwise required by +applicable law or applicable stock exchange listing standards, including, without limitation, Section 10D of the Act. +17. Compliance with Laws and Regulations +This Plan, the grant, issuance, vesting, exercise and settlement of Awards thereunder, and the obligation of the Company to sell, issue, deliver or remove any +restrictions on Shares under such Awards, shall be subject to all applicable foreign, federal, state and local laws, rules and regulations, stock exchange rules and regulations, and to such approvals +by any governmental or regulatory agency as may be required. The Company shall not be required to register in a Participant's name or deliver any Shares prior to the completion of any registration or +qualification of such shares under any foreign, federal, state or local law or any ruling or regulation of any government body which the Administrator shall determine to be necessary or advisable. To +the extent the Company is unable to or the Administrator deems it infeasible to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company's counsel to be +necessary to the lawful issuance and sale of any Shares hereunder, the Company and its Subsidiaries shall be relieved of any liability with respect to the failure to issue or sell such Shares as to +which such requisite authority shall not have been obtained. No Option shall be exercisable and no Shares shall be issued and/or transferable under any other Award unless a registration statement with +respect to the Shares underlying such Option is effective and current or the Company has determined that such registration is unnecessary. +2018 +PROXY +STATEMENT +A-15 +Table of Contents +APPENDIX A +In +the event an Award is granted to or held by a Participant who is employed or providing services outside the United States, the Administrator may, in its sole and absolute discretion, +modify the provisions of the Plan or of such Award as they pertain to such individual to comply with applicable foreign law or to recognize differences in local law, currency or tax policy. The +Administrator may also impose conditions on the grant, issuance, exercise, vesting, settlement or retention of Awards in order to comply with such foreign law and/or to minimize the Company's +obligations with respect to tax equalization for Participants employed outside their home country. +18. Withholding +To the extent required by applicable federal, state, local or foreign law, a Participant shall be required to satisfy, in a manner satisfactory to the Company, +any withholding tax obligations that arise by reason of an Option exercise, disposition of Shares issued under an Incentive Stock Option, the grant, vesting or settlement of an Award, an election +pursuant to Section 83(b) of the Code or otherwise with respect to an Award. To the extent a Participant makes an election under Section 83(b) of the Code, within ten days of filing such +election with the Internal Revenue Service, the Participant must notify the Company in writing of such election. The Company and its Subsidiaries shall not be required to issue Shares, make any +payment or to recognize the transfer or disposition of Shares until all such obligations are satisfied. The Administrator may provide for or permit these obligations to be satisfied through the +mandatory or elective sale of Shares and/or by having the Company withhold a portion of the Shares that otherwise would be issued to him or her upon exercise of the Option or the vesting or settlement +of an Award, or by tendering Shares previously acquired. +19. Administration of the Plan +(a) Administrator of the Plan. The Plan shall be administered by the Administrator who shall be the +Compensation Committee of the Board or, in the absence of a Compensation Committee, the Board itself. Any power of the Administrator may also be exercised by the Board, except to the extent that the +grant or exercise of such authority would cause any Award or transaction to become subject to (or lose an exemption under) the short-swing profit recovery provisions of Section 16 of the Act or +cause an Award designated as a Performance Award not to qualify for treatment as performance-based compensation under Section 162(m) of the Code, to the extent applicable. To the extent that +any permitted action taken by the Board conflicts with action taken by the Administrator, the Board action shall control. The Compensation Committee may by resolution authorize one or more officers of +the Company to perform any or all things that the Administrator is authorized and empowered to do or perform under the Plan, and for all purposes under this Plan, such officer or officers shall be +treated as the Administrator; provided, however, that no such officer shall designate himself or herself as a recipient of any Awards granted under authority delegated to such officer and that any +delegation of the power to grant Awards to an officer shall otherwise be consistent with the requirements of Section 157(c) of the Delaware General Corporation Law. The Compensation Committee +hereby designates the Company's chief executive officer, the Company's chief financial officer, the Secretary of the Company, and the head of the Company's human resource function to assist the +Administrator in the administration of the Plan and execute agreements evidencing Awards made under this Plan or other documents entered into under this Plan on behalf of the Administrator or the +Company. In addition, the Compensation Committee may delegate any or all aspects of the day-to-day administration of the Plan to one or more officers or employees of the Company or any Subsidiary +and/or to one or more agents. +(b) Powers of Administrator. Subject to the express provisions of this Plan, the Administrator shall be +authorized and empowered to do all things that it determines to be necessary or appropriate in connection with the administration of this Plan, including, without limitation: (i) to prescribe, +amend and rescind rules and regulations relating to this Plan and to define terms not otherwise defined herein; (ii) to determine which persons are Participants, to which of such Participants, +if any, Awards shall be granted hereunder and the timing of any such Awards; (iii) to grant Awards to Participants and determine the terms and conditions thereof, including the number of Shares +subject to Awards and the exercise or purchase price of such Shares and the circumstances under which Awards become exercisable or vested or are forfeited or expire, which terms may but need not be +conditioned upon the passage of time, continued employment, the satisfaction of performance criteria, the occurrence of certain events, or other factors; (iv) to establish and verify the extent +of satisfaction of any performance goals or other conditions applicable to the grant, issuance, exercisability, vesting and/or ability to retain any Award; (v) to prescribe and amend the terms +of the agreements or other documents evidencing Awards made under this Plan (which need not be identical) and the terms of or form of any document or notice required to be delivered to the Company by +Participants under this Plan; (vi) to determine the extent to which adjustments are required pursuant to Section 13 of the Plan; (vii) to interpret and construe this Plan, any +rules and regulations under this Plan and the terms and conditions of any Award granted hereunder, and to make exceptions to any such provisions if the Administrator, in good faith, determines that it +is necessary to do so in light of extraordinary circumstances and for the benefit of the Company; (viii) to +2018 +PROXY +STATEMENT +A-16 +Table of Contents +APPENDIX A +approve +corrections in the documentation or administration of any Award; and (ix) to make all other determinations deemed necessary or advisable for the administration of this Plan. The +Administrator may, in its sole and absolute discretion, without amendment to the Plan, waive or amend the operation of Plan provisions respecting exercise after termination of employment or service to +the Company or an Affiliate and, except as otherwise provided herein, adjust any of the terms of any Award. The Administrator may also (A) accelerate the date on which any Award granted under +the Plan becomes exercisable or (B) accelerate the vesting date or waive or adjust any condition imposed hereunder with respect to the vesting or exercisability of an Award, provided that the +Administrator, in good faith, determines that such acceleration, waiver or other adjustment is necessary or desirable. For the avoidance of doubt, +notwithstanding anything in the Plan to the contrary, no Award outstanding under the Plan may be repriced, re-granted through cancellation or otherwise amended to reduce the exercise price applicable +thereto (other than with respect to adjustments made in connection with a transaction or other change in the Company's capitalization as described in Section 13 of the Plan) without the +approval of the Company's stockholders. +(c) Determinations by the Administrator. All decisions, determinations and interpretations by the Administrator +regarding the Plan, any rules and regulations under the Plan and the terms and conditions of or operation of any Award granted hereunder, shall be final and binding on all Participants, beneficiaries, +heirs, assigns or other persons holding or claiming rights under the Plan or any Award. The Administrator shall consider such factors as it deems relevant, in its sole and absolute discretion, to +making such decisions, determinations and interpretations including, without limitation, the recommendations or advice of any officer or other employee of the Company and such attorneys, consultants +and accountants as it may select. +(d) Subsidiary Awards. In the case of a grant of an Award to any Participant employed by a Subsidiary, such +grant may, if the Administrator so directs, be implemented by the Company issuing any subject Shares to the Subsidiary, for such lawful consideration as the Administrator may determine, upon the +condition or understanding that the Subsidiary will transfer the Shares to the Participant in accordance with the terms of the Award specified by the Administrator pursuant to the provisions of the +Plan. Notwithstanding any other provision hereof, such Award may be issued by and in the name of the Subsidiary and shall be deemed granted on such date as the Administrator shall determine. +(e) Indemnification of Administrator. Neither any member nor former member of the Administrator nor any +individual to whom authority is or has been delegated shall be personally responsible or liable for any act or omission in connection with the performance of powers or duties or the exercise of +discretion or judgment in the administration and implementation of the Plan. Each person who is or shall have been a member of the Administrator shall be indemnified and held harmless by the Company +from and against any cost, liability or expense imposed or incurred in connection with such person's or the Administrator's taking or failing to take any action under the Plan. Each such person shall +be justified in relying on information furnished in connection with the Plan's administration by any employee, officer, agent or expert employed or retained by the Administrator or the Company. +20. Amendment of the Plan or Awards +The Board may amend, alter or discontinue this Plan and the Administrator may amend or alter any agreement or other document evidencing an Award made under this +Plan but, except as provided pursuant to the provisions of Section 13 of the Plan, no such amendment shall, without the approval of the stockholders of the Company: +(a) increase +the maximum number of Shares for which Awards may be granted under this Plan; +(b) reduce +the price at which Options or Stock Appreciation Rights may be granted below the price provided for in Section 6(a) of the Plan; +(c) reduce +the exercise price of outstanding Options or Stock Appreciation Rights; +(d) extend +the term of this Plan; +(e) change +the class of persons eligible to be Participants; +2018 +PROXY +STATEMENT +A-17 +Table of Contents +APPENDIX A +(f) otherwise +amend the Plan in any manner requiring stockholder approval by law or under the New York Stock Exchange listing requirements (or the listing requirements of +any successor exchange that is the primary stock exchange for trading of Shares); or +(g) to +the extent required by Section 162(m) of the Code, increase the individual maximum limits in Sections 5(c) and (d) of the Plan. +No +amendment or alteration to the Plan or an Award or Award Agreement shall be made which would impair the rights of the holder of an Award, without such holder's consent, provided that +no such consent shall be required if the Administrator determines in its sole and absolute discretion and prior to the date of any Change in Control that such amendment or alteration either is +required or advisable in order for the Company, the Plan or the Award to satisfy any law or regulation or to meet the requirements of or avoid adverse financial accounting consequences under any +accounting standard. In addition, the Plan may not be amended in any way that causes the Plan to fail to comply with or be exempt from Section 409A of the Code, unless the Board expressly +determines to amend the Plan to be subject to Section 409A of the Code. +21. No Liability of Company +The Company and any Subsidiary or affiliate which is in existence or hereafter comes into existence shall not be liable to a Participant or any other person as +to: (a) the non-issuance or sale of Shares as to which the Company has been unable to obtain from any regulatory body having jurisdiction the authority deemed by the Company's counsel to be +necessary to the lawful issuance and sale of any Shares hereunder and (b) any tax consequence expected, but not realized, by any Participant or other person due to the grant, receipt, exercise, +settlement of any Award granted hereunder. +22. Non-Exclusivity of Plan +Neither the adoption of this Plan by the Board nor the submission of this Plan to the stockholders of the Company for approval shall be construed as creating any +limitations on the power of the Board or the Administrator to adopt such other incentive arrangements as either may deem desirable, including without limitation, the granting of restricted stock or +stock options otherwise than under this Plan or an arrangement not intended to qualify under Section 162(m) of the Code, and such arrangements may be either generally applicable or applicable +only in specific cases. +23. Governing Law +This Plan and any agreements or other documents hereunder shall be interpreted and construed in accordance with the laws of Delaware and applicable federal law. +Any reference in this Plan or in the agreement or other document evidencing any Awards to a provision of law or to a rule or regulation shall be deemed to include any successor law, rule or regulation +of similar effect or applicability. +24. Waiver of Jury Trial +By accepting an Award under the Plan, each Participant waives any right to a trial by jury in any action, proceeding or counterclaim concerning any rights under +the Plan and any Award, or under any amendment, waiver, consent, instrument, document or other agreement delivered or which in the future may be delivered in connection therewith, and agrees that any +such action, proceedings or counterclaim will be tried before a court and not before a jury. By accepting an Award under the Plan, each Participant certifies that no officer, representative, or +attorney of the Company has represented, expressly or otherwise, that the Company would not, in the event of any action, proceeding or counterclaim, seek to enforce the foregoing waivers. +Notwithstanding anything to the contrary in the Plan, nothing herein is to be construed as limiting the ability of the Company and a Participant to agree to submit disputes arising under the terms of +the Plan or any Award made hereunder to binding arbitration or as limiting the ability of the Company to require any eligible individual to agree to submit such disputes to binding arbitration as a +condition of receiving an Award hereunder. +25. No Right to Employment, Reelection or Continued Service +Nothing in this Plan or an Award Agreement shall interfere with or limit in any way the right of the Company, its Subsidiaries and/or its affiliates to terminate +any Participant's employment, service on the Board or service for the Company at any time or for any reason not prohibited by law, nor shall this Plan or an Award itself confer upon any Participant +any right to continue his or her employment or service for any specified period of time. Neither an Award nor any benefits arising under this Plan shall constitute an employment contract with the +2018 +PROXY +STATEMENT +A-18 +Table of Contents +APPENDIX A +Company, +any Subsidiary and/or its affiliates. Subject to Sections 4 and 20 of the Plan, this Plan and the benefits hereunder may be terminated at any time in the sole and exclusive discretion +of the Board without giving rise to any liability on the part of the Company, its Subsidiaries and/or its affiliates. +26. Unfunded Plan +The Plan is intended to be an unfunded plan. Participants are and shall at all times be general creditors of the Company with respect to their Awards. If the +Administrator or the Company chooses to set aside funds in a trust or otherwise for the payment of Awards under the Plan, such funds shall at all times be subject to the claims of the creditors of the +Company in the event of its bankruptcy or insolvency. +Effective as of February 7, 2018 +2018 +PROXY +STATEMENT +A-19 +Table of Contents +APPENDIX B +APPENDIX B – Forward-Looking +Statements and Non-GAAP +Reconciliation Tables +2018 +PROXY +STATEMENT +B-1 +Table of Contents +APPENDIX B +FORWARD-LOOKING STATEMENTS +This document contains "forward-looking statements," which are statements relating to future, not past, events. In this context, +forward-looking statements often address management's current beliefs, assumptions, expectations, estimates and projections about future business and financial performance, national, regional or +global political, economic and market conditions, and the Company itself. Such statements often contain words such as "anticipates," "believes," "estimates," "expects," "forecasts," "intends," "is +likely," "plans," "predicts," "projects," "should," "will," variations of such words, and similar expressions. Forward-looking statements, by their nature, address matters that are, to varying +degrees, uncertain. Uncertainties that could cause the Company's performance to differ materially from what is expressed in forward-looking statements include, but are not limited to, the +following: +• changes in general economic conditions, employment rates, business conditions, interest rates, tax policies and other factors affecting +consumer spending in the markets and regions in which the Company's products are sold; +• the inability for any reason to effectively compete in global footwear, apparel and consumer-direct markets; +• the inability to maintain positive brand images and anticipate, understand and respond to changing footwear and apparel trends and consumer +preferences; +• the inability to effectively manage inventory levels; +• increases or changes in duties, tariffs, quotas or applicable assessments in countries of import and export; +• foreign currency exchange rate fluctuations; +• currency restrictions; +• capacity constraints, production disruptions, quality issues, price increases or other risks associated with foreign sourcing; +• the cost and availability of raw materials, inventories, services and labor for contract manufacturers; +• labor disruptions; +• changes in relationships with, including the loss of, significant wholesale customers; +• risks related to the significant investment in, and performance of, the Company's consumer-direct operations; +• risks related to expansion into new markets and complementary product categories as well as consumer-direct operations; +• the impact of seasonality and unpredictable weather conditions; +• changes in general economic conditions and/or the credit markets on the Company's distributors, suppliers and retailers; +• increase in the Company's effective tax rates; +• failure of licensees or distributors to meet planned annual sales goals or to make timely payments to the Company; +• the risks of doing business in developing countries and politically or economically volatile areas; +• the ability to secure and protect owned intellectual property or use licensed intellectual property; +2018 +PROXY +STATEMENT +B-2 +Table of Contents +APPENDIX B +• the impact of regulation, regulatory and legal proceedings and legal compliance risks, including compliance with federal, state and local laws +and regulations relating to the protection of the environment, environmental remediation and other related costs, and litigation or other legal proceedings relating to the protection of the +environment or environmental effects on human health; +• the potential breach of the Company's databases, or those of its vendors, which contain certain personal information or payment card data; +• problems affecting the Company's distribution system, including service interruptions at shipping and receiving ports; +• strategic actions, including new initiatives and ventures, acquisitions and dispositions, and the Company's success in integrating acquired +businesses, and implementing new initiatives and ventures; +• the risk of impairment to goodwill and other intangibles; +• the success of the Company's restructuring and realignment initiatives; and +• changes in future pension funding requirements and pension expenses. +These +uncertainties could cause a material difference between an actual outcome and a forward-looking statement. The uncertainties included here are not exhaustive and are described in more detail in +Part I, Item 1A: "Risk Factors" of this Annual Report on Form 10-K. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as +a prediction of actual results. The Company does not undertake an obligation to update, amend or clarify forward-looking statements, whether as a result of new information, future events or otherwise. +NON-GAAP RECONCILIATION TABLES +RECONCILIATION OF REPORTED DILUTED EPS TO ADJUSTED +DILUTED EPS ON A CONSTANT CURRENCY BASIS* +(Unaudited) +GAAP Basis +EPS +Adjustments 1 +As Adjusted +EPS +Foreign +Exchange +Impact +As Adjusted +EPS On a +Constant +Currency Basis +Fiscal 2017 +— +$ +1.64 +$ +1.64 +$ +0.07 +$ +1.71 +Fiscal 2016 +$ +0.89 +$ +0.47 +$ +1.36 +1 Fiscal 2017 Adjustments include the impact of restructuring and other related costs, organizational transformation costs, incremental inventory +mark-downs, impairment of intangible assets, environmental and other related costs and the impact of recent tax reform. Fiscal 2016 Adjustments include the impact of impairment +of intangible assets, restructuring and other related costs, organizational transformation costs and debt extinguishment and other costs. +2018 +PROXY +STATEMENT +B-3 +Table of Contents +APPENDIX B +RECONCILIATION OF REPORTED OPERATING MARGIN GUIDANCE TO +ADJUSTED OPERATING MARGIN GUIDANCE* +(Unaudited) +(In millions) +GAAP Basis +Adjustments 1 +As Adjusted +Fiscal 2018 Operating Profit Guidance +$256 - $275 +$ +10.0 +$266 - $285 +Operating Margin Guidance +11.4% - 11.9% +11.9% - 12.3% +1 Fiscal 2018 Adjustment includes the estimated midpoint within an $8 million to $12 million range of environmental related costs for +legal, consulting and other costs. +* To +supplement the consolidated financial statements presented in accordance with Generally Accepted Accounting Principles ("GAAP"), the Company describes what fiscal +2017 and fiscal 2016 EPS would have been if restructuring and other related costs, incremental inventory mark-downs, organizational transformation costs which include gains or losses from +divestitures, impairment of intangible assets, environmental and other related costs and the impact from recent tax reform were excluded and for fiscal 2018 operating profit guidance if environmental +and other related costs were excluded. The Company believes these non-GAAP measures provide useful information to both management and investors to increase comparability to the prior period by +adjusting for certain items that may not be indicative of core operating measures and to better identify trends in our business. The adjusted financial results are used by management to, and allow +investors to, evaluate the operating performance of the Company on a comparable basis. The Company evaluates results of operations on both a reported and a constant currency basis. The constant +currency presentation, which is a non-GAAP measure, excludes the impact of fluctuations in foreign currency exchange rates. The Company believes providing constant currency information provides +valuable supplemental information regarding results of operations, consistent with how the Company evaluates performance. The Company calculates constant currency by converting the current-period +local currency financial results using the prior period exchange rates and comparing these adjusted amounts to our current period reported results. Management does not, nor should investors, consider +such non-GAAP financial measures in isolation from, or as a substitution for, financial information prepared in accordance with GAAP. A reconciliation of all non-GAAP measures included in this proxy +statement, to the most directly comparable GAAP measures are found in the financial tables above. +2018 +PROXY +STATEMENT +B-4 +. Electronic Voting Instructions Available 24 hours a day, 7 days a week! Instead of mailing your proxy, you may choose one of the voting methods outlined below to vote your proxy. VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR. Proxies submitted by the Internet or telephone must be received by 11:59 p.m., Eastern Daylight Time, on May 2, 2018. Vote by Internet • Go to www.investorvote.com/WWW • Or scan the QR code with your smartphone • Follow the steps outlined on the secure website Vote by telephone • Call toll free 1-800-652-VOTE (8683) within the USA, US territories & Canada on a touch tone telephone • Follow the instructions provided by the recorded message Using a black ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas. q IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q A Proposals — The Board of Directors recommends a vote FOR all the nominees listed and FOR Proposals 2, 3 and 4. + 1. Election of Directors: For Against Abstain For Against Abstain For Against Abstain 01 - Roxane Divol 02 - Joseph R. Gromek 03 - Brenda J. Lauderback For Against Abstain ForAgainst Abstain 2. An advisory resolution approving compensation for the Company’s named executive officers. 3. Proposal to ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for fiscal year 2018. 4. Proposal to approve the Stock Incentive Plan of 2016 (as amended and restated). B Non-Voting Items Change of Address — Please print new address below. C Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below IMPORTANT - Please sign exactly as your name(s) appears on this Proxy. When signing on behalf of a corporation, partnership, estate or trust, indicate title or capacity of person signing. If shares are held jointly, each holder must sign. Date (mm/dd/yyyy) — Please print date below. Signature 1 — Please keep signature within the box. Signature 2 — Please keep signature within the box. + 1 U P X 02SLHB Annual Meeting Proxy Card X IMPORTANT ANNUAL MEETING INFORMATION +. WOLVERINE WORLD WIDE, INC. 9341 Courtland Drive, N.E. Rockford, Michigan 49351 Wolverine World Wide, Inc. will be holding its Annual Meeting of Stockholders on May 3, 2018, at its offices located at 500 Totten Pond Road, Waltham, Massachusetts, 02451. The enclosed Notice of 2018 Annual Meeting of Stockholders provides information regarding the matters that are expected to be voted on at the meeting. Your vote is important to us. Even if you plan to attend the meeting, please read the enclosed materials and vote through the Internet, by telephone or by mailing the Proxy Card below. Telephone and Internet Voting. On the reverse side of this card are instructions on how to vote through the Internet or by telephone. Please consider voting through one of these methods. Your vote is recorded as if you mailed in your Proxy. Thank you in advance for your participation in our 2018 Annual Meeting. Wolverine World Wide, Inc. q IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q Proxy — WOLVERINE WORLD WIDE, INC. This proxy is solicited on behalf of the Board of Directors The undersigned stockholder hereby appoints Blake W. Krueger and David A. Latchana, and each of them, each with full power of substitution, as proxies to represent the undersigned stockholder and to vote all shares of Common Stock of Wolverine World Wide, Inc. that the stockholder would be entitled to vote on all matters that properly come before the Annual Meeting of Stockholders to be held at the Company’s offices located at 500 Totten Pond Road, Waltham, Massachusetts, 02451, on Thursday, May 3, 2018, at 10 a.m. Eastern Daylight Time, and any adjournment of that meeting. If this Proxy is properly executed, the shares represented by this Proxy will be voted as specified. If this Proxy is properly executed but no specification is made, the shares represented by this Proxy will be voted for the election of all nominees named on this Proxy as directors and for approval of Proposals 2, 3 and 4. The shares represented by this Proxy will be voted in the discretion of the proxies on any other matters that may properly come before the meeting. PLEASE DO NOT VOTE BY MORE THAN ONE METHOD. THE LAST VOTE RECEIVED WILL BE THE OFFICIAL VOTE. DO NOT RETURN THIS PROXY IF YOU ARE VOTING BY THE INTERNET OR BY TELEPHONE. (CONTINUED AND TO BE SIGNED ON REVERSE SIDE.) \ No newline at end of file diff --git a/raw/proxies/0000110471/0001047469-18-002189/proxy_rpt.txt b/raw/proxies/0000110471/0001047469-18-002189/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..0ad8ca01bb2c6a2dcda9c53751910677b6ba7dd7 --- /dev/null +++ b/raw/proxies/0000110471/0001047469-18-002189/proxy_rpt.txt @@ -0,0 +1,46 @@ +CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS +Since January 1, 2017, the Company has not engaged in any "related person" transactions with its directors, executive officers or +holders of 5% or more of Company voting securities, affiliates or any member of the immediate family of the foregoing persons. +RELATED PERSON TRANSACTIONS POLICY +Wolverine Worldwide's Board adopted written policies and procedures regarding related person transactions. They require the Governance +Committee to review and either approve or disapprove the Company entering into any Interested Transactions (defined below). If advance approval is not feasible, then the Governance Committee must +review and ratify the Interested Transaction at its next meeting. +Interested Transaction +Any transaction, arrangement or relationship or series of similar transactions, arrangements or relationships (including any indebtedness or guarantee of indebtedness) in which: +(1) +the aggregate amount involved is or is expected to exceed $120,000 since the beginning of Wolverine Worldwide's last completed fiscal year; +(2) +Wolverine Worldwide is a participant; and +(3) +any Related Person (defined below) has or will have a direct or indirect interest. +An Interested Transaction does not include: +(1) +any employment compensation paid to an executive officer of the Company if the Compensation Committee approved or recommended to the Board of Directors for approval such compensation; +(2) +any compensation paid to a director for service as a director of the Company; +(3) +any transaction in which a Related Person has an indirect interest solely as a result of being (i) a director or, together with all other Related Persons, as defined below, a less than 10% beneficial owner of an equity interest in another +entity, or both, or (ii) a limited partner in a partnership in which the Related Person, together with all other Related Persons, has an interest of less than 10%; or +(4) +any transaction in which the Related Person's interest arises solely from the ownership of the Company's common stock and all holders of the Company's common stock received the same benefit on a pro rata basis (e.g., a dividend). +Related Person +Any: +(a) +person who is or was at any point during the last fiscal year for which Wolverine Worldwide filed an Annual Report on Form 10-K and proxy statement, an executive officer, director or, to the extent information regarding such nominee is being +presented in a proxy or information statement relating to the election of that nominee as a director, nominee for election as a director; +(b) +beneficial owner of greater than five percent of Wolverine Worldwide's common stock; or +(c) +immediate family member * of any of the foregoing. +* Immediate family member is defined as a person's spouse, parents, stepparents, children, stepchildren, siblings, mothers- and +fathers-in-law, sons- and daughters-in-law, and brothers- and sisters-in-law and anyone residing in such person's home (other than a tenant or employee) +The +Governance Committee considers whether the Interested Transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar +circumstances, the extent of the Related Person's interest in the transaction, and other factors that it deems relevant. No director participates in any discussion or approval of an Interested +Transaction for which he or she is a Related Person, except to provide information to the Governance Committee. +2018 +PROXY +STATEMENT +87 +Table of Contents +Additional Information \ No newline at end of file diff --git a/raw/proxies/0000110471/0001047469-19-001623/proxy.txt b/raw/proxies/0000110471/0001047469-19-001623/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..58beefe76519acfe3529c4d9cf3ea7fe23bf8e43 --- /dev/null +++ b/raw/proxies/0000110471/0001047469-19-001623/proxy.txt @@ -0,0 +1,3881 @@ +DEF 14A +1 +a2238022zdef14a.htm +DEF 14A +Use these links to rapidly review the document +Table of Contents +Table of Contents +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +Washington, D.C. 20549 +SCHEDULE 14A +Proxy +Statement Pursuant to Section 14(a) of +the Securities Exchange Act of 1934 (Amendment No. ) +Filed by the Registrant ý +Filed by a Party other than the Registrant o +Check the appropriate box: +o +Preliminary Proxy Statement +o +Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +ý +Definitive Proxy Statement +o +Definitive Additional Materials +o +Soliciting Material under §240.14a-12 +Wolverine World Wide, Inc. +(Name of Registrant as Specified In Its Charter) +(Name of Person(s) Filing Proxy Statement, if other than the Registrant) +Payment of Filing Fee (Check the appropriate box): +ý +No fee required. +o +Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. +(1) +Title of each class of securities to which transaction applies: +(2) +Aggregate number of securities to which transaction applies: +(3) +Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): +(4) +Proposed maximum aggregate value of transaction: +(5) +Total fee paid: +o +Fee paid previously with preliminary materials. +o +Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration +statement number, or the Form or Schedule and the date of its filing. +(1) +Amount Previously Paid: +(2) +Form, Schedule or Registration Statement No.: +(3) +Filing Party: +(4) +Date Filed: +Table of Contents +Table of Contents +LETTER TO SHAREHOLDERS +Wolverine World Wide, Inc. +9341 Courtland Drive, N.E. +Rockford, Michigan 49351 +March 26, +2019 +Dear +Fellow Shareholders, +Thank +you for your investment in Wolverine Worldwide. We made significant progress in 2018 on our strategic and financial objectives, including: +• Successful transition to our Global Growth Agenda, where we made investments totaling approximately $41 million across our business +during the year. +• Revenue of $2.24 billion grew at an underlying rate of nearly 3%, with solid growth among several of our largest brands including +high-single digit growth for Merrell and Wolverine, mid-single digits for CAT Footwear and low-single digits for Sperry. +• Reported operating margin of 11.2% and adjusted operating margin of 12.0%. The adjusted margin exceeded our original expectations and +represents an 80-basis point improvement over last year. +• Earnings significantly exceeded our outlook entering the year, with record diluted earnings per share of $2.05. Adjusted earnings per share +were $2.17, an increase of 32% compared to the prior year. +• The company generated $97.5 million in operating cash flow. On an adjusted basis, cash from operations was $235 million when +excluding $60 million in voluntary pension contributions and $77 million related to the wind-down of the accounts receivable financing program. +In +addition to overseeing the Company's execution on our Global Growth Agenda and other initiatives during 2018, the Board focused on other matters critical to the Company's long-term success. These +included Board and management succession planning, cybersecurity protection and brand stewardship, which we describe in greater detail in this Proxy Statement. +Our +impressive 2018 performance reflects the hard work and effort by our team over the last two years to transform the business to succeed in the fast-changing global retail environment. During 2019 +the Wolverine team is fully engaged and laser focused on the global growth opportunities that exist for our portfolio of leading performance and lifestyle brands. We expect to continue to invest in a +variety of initiatives to continue driving revenue growth and earnings leverage, and the Board will continue to lead the Company with a view toward continued success in 2019 and beyond. We hope to +receive your support at this year's annual meeting on May 2, 2019, and encourage you to vote either online, by phone or by mail. +Sincerely, +Blake +W. Krueger +Chairman, Chief Executive Officer and President +2019 +PROXY +STATEMENT +1 +Table of Contents +NOTICE OF 2019 ANNUAL MEETING OF SHAREHOLDERS +10:00 a.m. EDT, May 2, 2019 +Wolverine World Wide, Inc. +9341 Courtland Drive, NE +Rockford, MI 49351 +March 26, +2019 +To +Our Shareholders: +We +invite you to attend the 2019 Annual Meeting of Shareholders (the "Annual Meeting") of Wolverine World Wide, Inc. (the "Company", "Wolverine Worldwide" or "Wolverine") at the Company's +offices located at 9341 Courtland Drive, NE, Rockford, MI 49351, on May 2, 2019, at 10:00 a.m. EDT. At the Annual Meeting, shareholders will vote on the following +items: +(1) Election +of the three director nominees named in the Proxy Statement for three year terms expiring in 2022 (2) Advisory +resolution approving compensation for the Company's named executive officers ("NEOs," and each an "NEO") (3) Ratification +of the Audit Committee's appointment of Ernst & Young LLP as the Company's independent registered public accounting firm for fiscal year +2019 +Shareholders +of record at the close of business on March 11, 2019 can vote at the Annual Meeting and any adjournment of the Annual Meeting. +This +Notice of 2019 Annual Meeting of Shareholders, Proxy Statement, proxy or voting instruction card and Annual Report for our fiscal year ended December 29, 2018 are being mailed or made +available to shareholders starting on or about March 26, 2019. +Whether +or not you plan to attend, you can ensure that your shares are represented at the meeting by promptly voting and submitting your proxy by telephone or through the internet, or by completing, +signing, dating and returning your proxy card in the enclosed envelope. +By +Order of the Board of Directors, +Kyle +L. Hanson +Secretary +Important Notice Regarding the Availability of Proxy Statement Materials for the Annual Meeting of Shareholders to be held on May 2, 2019. +Wolverine's Proxy Statement for the 2019 Annual Meeting of Shareholders and the Annual Report to Shareholders for the fiscal year ended +December 29, 2018, are available at: www.wolverineworldwide.com/2019annualmeeting . +2019 +PROXY +STATEMENT +2 +Table of Contents +Table of Contents +Letter to Shareholders +1 +Notice of 2019 Annual Meeting of Shareholders +2 +Proxy Statement Summary +4 +Our Brand Portfolio +4 +Strategic Focus – Global Growth Agenda +4 +Matters to be Voted Upon +5 +Election of Directors for Terms Expiring in 2022 +5 +Board Highlights +5 +Board is Composed of Directors with the Right Mix of Skills and +Experiences +6 +Shareholder Engagement +6 +Corporate Governance Highlights +6 +Compensation Best Practices +7 +Corporate Governance +8 +Board of Directors +8 +Board Composition +8 +Board Highlights +8 +Director Nominations +9 +Board Self-Assessment +9 +Risk Oversight +10 +Code of Business Conduct and Accounting and Finance Code of +Ethics +10 +Shareholder Communications Policy +11 +Proposal 1 – Election of Directors for Terms Expiring in +2022 +12 +Director Nominees with Proposed Terms Expiring in 2022 +13 +Directors with Terms Expiring in 2020 +16 +Directors with Terms Expiring in 2021 +20 +Board Leadership +23 +Director Independence +23 +Board Committees, Meetings and Meeting Attendance +24 +Non-Employee Director Compensation in Fiscal Year 2018 +26 +Non-Employee Director Stock Ownership Guidelines +28 +Securities Ownership of Officers and Directors and Certain Beneficial +Owners +29 +Five Percent Shareholders +29 +Stock Ownership by Management and Others +30 +Compensation Discussion and Analysis +31 +Summary +31 +Compensation Philosophy and Objectives +31 +Compensation Decisions in Context: Key 2018 Accomplishments and Financial +Highlights; 2019 Focus +31 +2018 Compensation Program Overview +32 +Pay at Risk +33 +Long-Term Incentive Program Mix +33 +Compensation Best Practices +33 +Compensation Discussion and Analysis +34 +2018 Compensation Program Overview +34 +Setting Targets +34 +Base Salary +34 +Annual Bonus +35 +Performance Bonus +35 +Individual Performance Bonus +37 +Backlog Modifier +38 +Long-Term Incentive Compensation +40 +2016-2018 Performance Shares +41 +2018 Performance Share Awards +41 +Restricted Stock Unit Awards +42 +Benefits +42 +Retirement, Deferred Compensation and Welfare Plans +42 +Perquisites +43 +Post-Employment Compensation +43 +Say on Pay Advisory Vote +43 +Compensation Setting Process +44 +Setting Targets +44 +Competitive Philosophy and Competitive Market Data +44 +Peer Group +44 +CEO Role +44 +Compensation Consultant Role +45 +Other Compensation Policies and Practices +45 +NEO Stock Ownership Guidelines +45 +Stock Hedging and Pledging Policies +45 +Clawback Policy +46 +Impact of Accounting and Tax Treatments on Compensation +46 +Compensation Committee Report +47 +Summary Compensation Table +48 +Grants of Plan-Based Awards in Fiscal Year 2018 +50 +Outstanding Equity Awards at 2018 Fiscal Year-End +52 +Option Exercises and Stock Vested in Fiscal Year 2018 +56 +Pension Plans and 2018 Pension Benefits +57 +Qualified Pension Plans +57 +Supplemental Executive Retirement Plan +57 +Pension Benefits in Fiscal Year 2018 +58 +Nonqualified Deferred Compensation +59 +Nonqualified Deferred Compensation +59 +Potential Payments Upon Termination or Change in Control +60 +Benefits Triggered by Termination for Cause or Voluntary +Termination +60 +Benefits Triggered by Termination Other Than for Cause or for Good +Reason +60 +Benefits Triggered Upon a Change in Control +60 +Benefits Triggered by Retirement, Death or Permanent Disability +62 +Description of Restrictive Covenants that Apply During and After Termination of +Employment +63 +Estimated Payments on Termination or Change in Control +63 +CEO Pay Ratio +65 +Proposal 2 – Advisory Resolution to Approve Executive +Compensation +66 +Proposal 3 – Ratification of Appointment of Independent +Registered Public Accounting Firm +67 +Audit Committee Report +68 +Independent Registered Public Accounting Firm +70 +Related Party Matters +71 +Certain Relationships and Related Transactions +71 +Related Person Transactions Policy +71 +Additional Information +72 +Shareholders List +72 +Director and Officer Indemnification +72 +Section 16(A) Beneficial Ownership Reporting Compliance +72 +Shareholder Proposals for Inclusion in Next Year's Proxy +Statement +72 +Other Shareholder Proposals for Presentation at Next Year's Annual +Meeting +72 +Voting Securities +72 +Conduct of Business +73 +Vote Required for Election and Approval +73 +Voting Results of the Annual Meeting +73 +Attending the Annual Meeting +73 +Manner for Voting Proxies +74 +Revocation of Proxies +74 +Solicitation of Proxies +74 +Delivery of Documents to Shareholders Sharing an Address +74 +Access to Proxy Statement and Annual Report +74 +Appendix A – Forward-Looking Statements and Non-GAAP Reconciliation Tools +A-1 +2019 +PROXY +STATEMENT +3 +Table of Contents +Proxy Statement Summary +This +summary highlights key information that can be found in greater detail elsewhere in this Proxy Statement. This summary does not contain all of the information that shareholders +should consider, and shareholders should read the entire Proxy Statement before voting. +Our Brand Portfolio +Wolverine Worldwide organized its portfolio of brands into three key operating groups for fiscal 2018 as illustrated below: +Strategic Focus — Global Growth Agenda +The Company continued to make important investments across its global business during 2018 within all three key elements of its Global Growth +Agenda — Powerful Product Creation Engine , Digital-Direct Offense and International Expansion . +This growth agenda serves as a robust reinvestment framework to identify and prioritize a variety of strategic initiatives. We +made approximately $41 million of investments during the year, with the focus on accelerating sustainable revenue growth. +Powerful Product Creation Engine +The first element of our Global Growth Agenda is focused on a more innovative and faster Powerful Product Creation +Engine , and approximately 45% of the incremental investments in 2018 related to this area. Investments were made across a wide variety of initiatives including new creative +talent to support implementation of the Brand Growth Model, and systems to streamline the product development process and accelerate speed-to-market. +Digital-Direct Offense +Significant investments were made during 2018 to advance the Digital-Direct Offense , which represented +approximately 35% of the spend for the year. Investments were primarily focused on improving social prospecting capabilities, customer retention and developing a more constant flow of compelling new +content. The transition to a new West Coast distribution center was also completed to support the growing eCommerce business. These investments directly impacted the Company's owned eCommerce +business, which has been the fastest growing channel over the last two years — with growth accelerating to nearly 30% during 2018. +International Expansion +The third element of the Global Growth Agenda is International Expansion , which represented approximately 20% +of the investment spend during 2018. The Company focused on directly attacking international opportunities to make its products and brands more relevant in key global markets, and has added strategic +and operational resources to regional international teams, especially in China. International grew at a mid-single digit rate during 2018, and this growth is expected to accelerate during 2019 as more +direct investment is being targeted in Europe and Asia. +The +early success associated with the Global Growth Agenda is very encouraging, and the Company is now positioned to complete the final stage of its transformation and expand on the initiatives and +concepts that were validated in 2018. During 2019, the focus is to ensure that all brands fully incorporate these new skillsets, tools and processes. +2019 +PROXY +STATEMENT +4 +Table of Contents +MATTERS TO BE VOTED UPON +Shareholders are being asked to vote on the following matters at the 2019 Annual Meeting of Shareholders: +PROPOSAL +BOARD VOTE +RECOMMENDATION +PAGE +REFERENCE +1. +Election of Directors for Terms Expiring in 2022 +FOR each Nominee +12 +2. +Advisory Resolution Approving NEO Compensation +FOR +66 +3 +Ratification of Ernst & Young LLP as Auditor for Fiscal Year 2019 +FOR +67 +ELECTION OF DIRECTORS FOR TERMS EXPIRING IN 2022 +The Company's Board consists of 10 directors. The Company's By-Laws establish three classes of directors with each class being as nearly equal +in number as possible and serving three-year terms. +The +Board has nominated three directors for election at the Annual Meeting, as outlined in the table below. Each director nominee has been nominated to serve for a three-year term expiring at the +annual meeting of shareholders to be held in 2022. The Board recommends that shareholders vote "FOR" each of the nominees named below. +Age +Director Since +Independent +Other Public Directorships +Committees +Proposed Term +Expiration +Jeffery M. Boromisa +Retired Executive Vice President of Kellogg International, President of Latin America; Senior Vice President of Kellogg Company +64 +2006 +✓ +None +Audit +Compensation +2022 +Gina R. Boswell +President, Customer Development, Unilever U.S.A. +56 +2013 +✓ +ManpowerGroup Inc. +Compensation +Governance +2022 +David T. Kollat +President and Chairman, 22, Inc. +80 +1992 +✓ +L. Brands, Inc. +Independent +Lead Director +2022 +Board Highlights +The following charts illustrate key characteristics of the Company's Board: +2019 +PROXY +STATEMENT +5 +Table of Contents +Board is Composed of Directors with the Right Mix of Skills and Experiences +The following chart lists the important experiences and attributes that the Company's Directors possess: +Shareholder Engagement +Our Board greatly values the views of our shareholders and has made meaningful changes to our compensation and governance programs over the +last several years in response to shareholder feedback. For example, we made significant changes to our executive compensation program in 2017 after discussion with shareholders and other +stakeholders. Shareholder response to these changes was overwhelmingly positive, which translated to 98% and 94% support in 2017 and 2018, respectively, for our say on pay proposal. As part of its +ongoing shareholder engagement efforts, the Company reached out again in early 2019 to shareholders representing 54% of its outstanding shares and has held or expects to hold telephonic meetings with +all shareholders who accepted (representing about 17.4% of outstanding shares). Discussions focused on Company strategy, financial performance, governance and compensation programs. +Corporate Governance Highlights +Wolverine Worldwide is committed to a governance structure that provides strong shareholder rights and meaningful accountability. +✓ +Highly independent Board and Committees +✓ +Lead Independent Director with +clearly defined role +✓ +Majority voting with director resignation policy +✓ +No supermajority vote requirements +✓ +Shareholder right to act by written +consent +✓ +Annual Board and Committee self-evaluations +✓ +Robust Board and executive +succession planning, including annual written director nominee evaluations +✓ +Long-standing commitment toward diversity +✓ +Director onboarding orientation program +✓ +Active shareholder engagement +practices +2019 +PROXY +STATEMENT +6 +Table of Contents +Compensation Best Practices +What we do +What we do not do +✓ +Vast majority of pay is at risk or variable, i.e., performance based or equity-based or both +✓ +Stringent share ownership requirements (6x base salary for CEO) +✓ +Broad-based clawback +policy +✓ +Significant vesting horizon for equity grants +✓ +Double trigger equity acceleration (for grants in 2017 and after) +✓ +Independent Compensation +Committee Consultant +✓ +Review executive compensation program to ensure it doesn't promote excessive risk taking +✓ +Proactively engage with top shareholders on compensation and governance issues +✓ +Conduct annual say-on-pay votes +✓ +Balance short-term and long-term incentives +✗ +No dividends or dividend equivalents on unearned performance shares/units +✗ +No repricing or replacing of underwater stock options +✗ +No overlapping metrics +✗ +No excessive or unnecessary perquisites +✗ +No hedging, pledging, or short +sales of Company stock +✗ +No excise tax gross-ups in change-in-control agreements for new officers (hired after 2008) +2019 +PROXY +STATEMENT +7 +Table of Contents +Corporate Governance +Wolverine +Worldwide is committed to the highest level of corporate governance, and the Board has adopted Corporate Governance Guidelines to strengthen management accountability and promote long-term +shareholder interests. +BOARD OF DIRECTORS +The shareholders elect directors to serve on the Company's Board of Directors (the "Board of Directors" or "Board"). The Board oversees the +management of the business by the Chief Executive Officer ("CEO") and senior management. In addition to its general oversight function, the Board's additional responsibilities include, but are not +limited to, the following: +• Reviewing and approving the Company's key objectives and strategic business plans, and monitoring implementation of those plans and the +Company's success in meeting identified objectives +• Selecting, evaluating and approving the compensation of the CEO and overseeing CEO succession planning +• Providing advice and oversight regarding the selection, evaluation, development and compensation of management +• Overseeing the Company's risk management and mitigation activities +• Reviewing and monitoring administration of policies and procedures to safeguard the integrity of the Company's business operations and +financial reporting and to promote compliance with applicable laws and regulations +Board Composition +Board Highlights +The +Board prides itself on its ability to recruit and retain directors who have high personal and professional integrity and have demonstrated exceptional ability and judgment to effectively serve +shareholders' long-term interests. These skills and attributes also link with the Company's most important strategic objectives, such as eCommerce and digital growth, brand building, operational +excellence and supply chain management, and international growth. The Board also values diversity, as evidenced by the current makeup of the Board. The Board believes that its directors, including the +nominees for election as directors at the Annual Meeting, have these characteristics and valuable skills that provide the Company with the variety and depth of knowledge, judgment and strategic vision +necessary to provide effective oversight of the Company. +To +help accomplish this, and to assist in succession planning, the Board, at the recommendation of the Governance Committee, has identified specified skills and attributes it desires its members to +possess. The below graphic lists these skills and attributes and indicates which of the directors possess each. As shown, these skills and attributes are well represented within the Board. +2019 +PROXY +STATEMENT +8 +Table of Contents +The +Governance Committee reviews with the Board on an annual basis the appropriate skills and characteristics desired of Board members in the context of the current makeup of the Board. The Board, +with the assistance of the Governance Committee, annually assesses the current composition of the Board across many dimensions. As set forth in the Company's Corporate Governance Guidelines, which are +posted on its website, this assessment addresses the above referred skills and attributes and the individual performance, experience, age and skills of each director. +Director Nominations +The Board's Governance Committee serves as its nominating committee. The Governance Committee, in anticipation of upcoming director elections +and other potential or expected Board vacancies, evaluates qualified individuals and recommends candidates to the Board. The Governance Committee may retain a search firm or other external parties to +assist it in identifying candidates, and the Governance Committee has the sole authority to approve the search firm's fees and retention terms, and to terminate the firm if necessary. +The +Governance Committee considers candidates suggested by directors, senior management or shareholders. Shareholders may recommend individuals as potential director candidates by communicating with +the Governance Committee through one of the Board communication mechanisms described under the heading " Shareholder Communications Policy ." Shareholders +that wish to nominate a director candidate must comply with the procedures set forth in the Company's By-Laws, which are posted on its website. Ultimately, upon the recommendation of the Governance +Committee, the Board selects the director nominees for election at each annual meeting. In selecting director nominees, the Board considers each candidate's performance as a director (which is +assessed through an anonymous written peer evaluation), personal and professional integrity, ability and judgment, and likelihood to be effective, in conjunction with the other nominees and directors, +in serving the long-term interests of the shareholders. The Governance Committee also considers candidates' relative skills, attributes, background and characteristics as well as independence under +applicable New York Stock Exchange ("NYSE") listing standards and the Company's Director Independence Standards, potential to contribute to the composition and culture of the Board, and ability and +willingness to actively participate in the Board and committee meetings and to otherwise devote sufficient time to Board duties. +BOARD SELF-ASSESSMENT +As part of an annual self-assessment, each director evaluates the performance of the Board and any committee on which he or she serves across +a number of dimensions. Mr. Kollat, as the Lead Independent Director working with the Governance Committee, reviews the Board self-assessment with directors following the end of each fiscal +year, and conducts individual director interviews at the end of each year. Committee Chairpersons review the committee self-assessments with their respective committee members and discuss them with +the Board. In addition, the Governance Committee, working with the Lead Independent Director, develops and implements guidelines for evaluating all directors standing for nomination and re-election +and oversees the evaluation of such nominees. +2019 +PROXY +STATEMENT +9 +Table of Contents +The Corporate Governance Guidelines (including the Director Independence Standards), the Charter for each Board standing committee (Audit, Compensation and Governance), the Company's Certificate of +Incorporation, By-Laws, Code of Business Conduct, and its Accounting and Finance Code of Ethics all are available on the Wolverine Worldwide website at: +www.wolverineworldwide.com/investor-relations/corporate-governance/ +The Board and applicable committees annually review these and other key governance documents. +RISK OVERSIGHT +The Board oversees the Company's risk management and mitigation activities with a focus on the most significant risks facing the Company, +including strategic, operational, financial, environmental, cybersecurity, and legal compliance risks. This oversight is conducted through presentations by and discussions with the CEO, Chief +Financial Officer ("CFO"), General Counsel or Associate General Counsel, Chief Information Officer, brand and department leaders and other members of management. The Vice President of Internal Audit +and Risk Compliance coordinates management's day-to-day risk management and mitigation efforts, and reports directly to the Audit Committee. +The +Vice President of Internal Audit and Risk Compliance reviews with the Audit Committee regularly, and with the full Board periodically, management's risk assessment and mitigation strategies. In +addition to the above processes, the Board has delegated risk management and mitigation oversight responsibilities to its standing committees, which meet regularly to review and discuss specific risk +topics that align with their core responsibilities. +• The Audit Committee reviews the Company's approach to risk management generally. The Audit Committee also oversees the Company's risk policies +and processes relating to its financial statements and financial reporting processes, credit risks, and liquidity risks, as well as the Company's management of risks related to cybersecurity. The +Audit Committee discusses with management and the independent auditors significant risks or exposures and the steps taken by management to resolve them. +• The Compensation Committee monitors the risks associated with management resources; organization structure; succession planning, hiring, +development and retention processes; and it reviews and evaluates risks associated with the Company's compensation structure and programs. +• The Governance Committee oversees risks related to the Company's governance structure and processes and potential risks arising from related +person transactions. +The +Company reviewed its compensation policies and practices to assess whether they are reasonably likely to have a material adverse effect on the Company. As part of this review, the Company compiled +information about the Company's incentive plans, including reviewing the Company's compensation philosophy, evaluating key incentive plan design features and reviewing historic payout levels and pay +mix. With assistance from Company management and its independent compensation consultant, the Compensation Committee reviewed the executive compensation program, and managers from the Company's human +resources and legal departments reviewed the non-executive compensation programs. +CODE OF BUSINESS CONDUCT AND ACCOUNTING AND FINANCE CODE OF ETHICS +The Board has adopted a Code of Business Conduct for the Company's directors, officers and employees. The Board also has adopted an Accounting +and Finance Code of Ethics ("Accounting and Finance Code") that focuses on the financial reporting process and applies to the Company's CEO, CFO and Corporate Controller. +The Company discloses amendments to or waivers from its Code of Business Conduct affecting directors or executive officers and amendments to or waivers from its Accounting and Finance Code on its +website at: +www.wolverineworldwide.com/investor-relations/corporate-governance/ +2019 +PROXY +STATEMENT +10 +Table of Contents +SHAREHOLDER COMMUNICATIONS POLICY +Shareholders and other interested parties may send correspondence to the Board, the non-employee directors as a group, a specific Board +committee or an individual director (including the Lead Director) in the manner described below. +The +General Counsel or Associate General Counsel will provide a summary and copies of all correspondence (other than solicitations for services, products or publications) as applicable at each +regularly scheduled meeting. +Communications may be sent via email through various links on our website at: +www.wolverineworldwide.com/investor-relations/corporate-governance/ +or by regular mail c/o General Counsel, Wolverine World Wide, Inc., 9341 Courtland Drive, N.E., Rockford, MI 49351. +The +General Counsel or Associate General Counsel will alert individual directors if an item warrants a prompt response from the individual director prior to the next regularly scheduled meeting. Items +warranting a prompt response, but not addressed to a specific director, will be routed to the applicable committee Chairperson. +2019 +PROXY +STATEMENT +11 +Table of Contents +Proposal 1 — Election of +Directors for Terms Expiring +in 2022 +The +Company's Board consists of 10 directors. The Company's By-Laws establish three classes of directors, with each class being as nearly equal in number as possible and serving three-year terms. At +each annual meeting, the term of one class expires. The Board has nominated three directors for election at the Annual Meeting: Jeffrey M. Boromisa, Gina R. Boswell and David T. Kollat. Each director +has been nominated to serve for a three-year term expiring at the annual meeting of shareholders to be held in 2022 or until his/her successor, if any, has been elected and is qualified. +All +director nominees are independent directors, as determined by the Board under the applicable NYSE listing standards and the Company's Director Independence Standards. Each director nominee +currently serves on the Board. The shareholders most recently elected Ms. Boswell and Messrs. Boromisa and Kollat at the Company's 2016 annual meeting. +The +Company is not aware of any nominee who will be unable or unwilling to serve as a director. However, if a nominee is unable to serve or is otherwise unavailable for election, the incumbent +directors may or may not select a substitute nominee. If the directors select a substitute nominee, the proxy holder will vote the shares represented by all valid proxies for the substitute nominee +(unless other instructions are given). +The +biographies of the three nominees and the other directors of the Company are below, along with a discussion of the experience and skills of each director. +2019 +PROXY +STATEMENT +12 +Table of Contents +Director Nominees with +Proposed Terms +Expiring in 2022 +JEFFREY M. BOROMISA +Age: +64 +Director since: +2006 +Select Business Experience: +Retired Executive Vice +President of Kellogg +International, President of Latin +America; Senior Vice President +of Kellogg Company +Board Committees: +Audit +Compensation +Other Public Directorships: +None +Career Highlights: +Mr. Boromisa worked at Kellogg Company, a global food manufacturing company, and its affiliates from 1981 to 2009. From 2008 through his retirement in May 2009, Mr. Boromisa was Executive Vice President of Kellogg International, President +of Latin America; and Senior Vice President of Kellogg Company. From 2007 until 2008, Mr. Boromisa served as Executive Vice President of Kellogg International, President of Asia Pacific and Senior Vice President of Kellogg Company. From 2004 +through 2006, he was Senior Vice President and Chief Financial Officer of Kellogg Company. In addition, beginning in 2004 and through his retirement, Mr. Boromisa was a member of Kellogg Company's Global Leadership Team. Prior to 2004, +Mr. Boromisa occupied various leadership positions with Kellogg. Mr. Boromisa is also a director and Audit Committee Chair at Haworth International, Inc., a privately held, multinational, office furniture design and manufacturing +company. +Experience and Skills: +With nearly 30 years of experience at Kellogg Company, including serving as its chief financial officer and leading various operational business units, Mr. Boromisa has obtained international business, brand building and finance +expertise. +2019 +PROXY +STATEMENT +13 +Table of Contents +GINA R. BOSWELL +Age: +56 +Director since: +2013 +Select Business Experience: +President, Customer +Development, +Unilever U.S.A. +Board Committees: +Compensation +Governance +Other Public Directorships: +ManpowerGroup Inc. +Career Highlights: +Since May 2017, Ms. Boswell has been President, Customer Development for Unilever U.S.A., one of the largest markets for Unilever PLC / Unilever N.V., a multinational consumer goods company whose products include Dove, Vaseline, Lipton, +and Hellman's. From July 2015 to May 2017, Ms. Boswell served as Executive Vice President and General Manager for Unilever UK & Ireland. From 2011 to July 2015, Ms. Boswell served as Executive Vice President, Personal Care for +Unilever PLC / Unilever N.V. From 2008 to 2011, Ms. Boswell served as President, Global Brands, for The Alberto Culver Company, a consumer goods company. Ms. Boswell has held numerous other senior leadership positions with other +leading global companies, including Avon Products, Inc., Ford Motor Company, and Estee Lauder Companies, Inc. Ms. Boswell is a member of the board of ManpowerGroup Inc., a publicly traded workforce solutions company. +Experience and Skills: +Through senior leadership roles with leading branded companies, Ms. Boswell has obtained expertise in brand building, international business, marketing, digital/eCommerce and finance, and her service as a director of public companies has given +her experience with public company governance and related matters. +2019 +PROXY +STATEMENT +14 +Table of Contents +DAVID T. KOLLAT +Age: +80 +Director since: +1992 +Select Business Experience: +President and Chairman, +22, Inc. +Board Committees: +Independent Lead Director +Other Public Directorships: +L Brands, Inc. +Career Highlights: +Dr. Kollat has been Chairman and President of 22, Inc., a company specializing in research and management consulting for retailers and consumer goods manufacturers, since 1987. In addition to his marketing and management experience as +Chairman and President of 22, Inc., Dr. Kollat served for 11 years in senior leadership positions at L Brands, Inc., a publicly traded, multinational apparel and retail company, including as Executive Vice President, Marketing, +President of Victoria's Secret Direct, and as a member of its executive committee. Dr. Kollat is Lead Independent Director of Wolverine Worldwide, a position he has held since 2007. Dr. Kollat has been a director of L Brands, Inc. +since 1976 and was a director of Sleep Number Corporation, a bed manufacturer and retailer, from 1994-2018. +Experience and Skills: +Dr. Kollat's more than 40 years' experience at L Brands, Inc. and 22, Inc. has provided him with marketing, apparel, international business, brand building, retail and finance expertise. He also has significant experience with +company governance and related matters through service on more than twenty boards of directors, including extensive service on public company boards, and service as a lead independent director and chair of nominating, audit and compensation +committees. +The Board, which previously waived the age 72 retirement provision with respect to Dr. Kollat, has determined that it is in the best interests of stockholders for Dr. Kollat to continue to serve as a director, and, therefore, determined to +nominate him for an additional three-year term. +BOARD RECOMMENDATION +The Board recommends that you vote "FOR" the election of the above nominees for proposed terms expiring in 2022. +2019 +PROXY +STATEMENT +15 +Table of Contents +Directors with Terms +Expiring in 2020 +WILLIAM K. GERBER +Age: +65 +Director since: +2008 +Select Business Experience: +Managing Director of +Cabrillo Point Capital LLC +Board Committees: +Audit (Chair) +Compensation +Other Public Directorships: +AK Steel Holding +Corporation +Career Highlights: +Mr. Gerber is Managing Director of Cabrillo Point Capital LLC, a private investment fund. He has held that position since 2008. From 1998 to 2007, Mr. Gerber was Executive Vice President and Chief Financial Officer of Kelly Services, +Inc., a publicly traded global staffing solutions company with operations in more than 35 countries. Mr. Gerber served in various leadership positions with L Brands, Inc., a multinational apparel and retail company, prior to +joining Kelly Services, Inc. Mr. Gerber is a director of AK Steel Holding Corporation, an innovative steel solutions provider. During the preceding five years, Mr. Gerber was, but no longer is, a director of Kaydon Corporation, a +publicly traded company that designed and manufactured custom engineered products. +Experience and Skills: +From his 15 years in senior leadership positions with L Brands, Inc. and Kelly Services, Inc., Mr. Gerber has obtained extensive experience in apparel, retail, international business and finance, and his service as a director of +various public companies has given him experience with public company governance and related matters. +2019 +PROXY +STATEMENT +16 +Table of Contents +BLAKE W. KRUEGER +Age: +65 +Director since: +2006 +Select Business Experience: +Chairman, Chief Executive +Officer and President of +Wolverine World Wide, Inc. +Board Committees: +None +Other Public Directorships: +None +Career Highlights: +Mr. Krueger is Chairman of Wolverine Worldwide, a position he assumed in January 2010, and Chief Executive Officer and President of Wolverine Worldwide, positions he assumed in April 2007. From October 2005 until April 2007, Mr. Krueger +served as President and Chief Operating Officer of Wolverine Worldwide. From 2004 to October 2005, he served as Executive Vice President and Secretary of Wolverine Worldwide and President of its Heritage Brands Group. From 2003 to 2004, +Mr. Krueger served as Executive Vice President and Secretary of Wolverine Worldwide and President of the Company's Caterpillar Footwear Group. He also previously served as Executive Vice President, General Counsel and Secretary of Wolverine +Worldwide with various responsibilities including the human resources, retail, business development, accessory licensing, mergers and acquisitions, and legal areas. Mr. Krueger serves as a director of Bissell Homecare, Inc., a privately +held company and leading brand of floor care appliances. +Experience and Skills: +Mr. Krueger's more than 25 years in senior leadership roles with the Company have provided him expertise in footwear and apparel, retail, international business and finance, and his board experience at the Company and Professionals Direct, +Inc., a then publicly traded insurance company, has given him extensive experience with public company governance and related matters. +2019 +PROXY +STATEMENT +17 +Table of Contents +NICHOLAS T. LONG +Age: +60 +Director since: +2011 +Select Business Experience: +Retired Chief Executive Officer of MillerCoors LLC +Board Committees: +Compensation (Chair) +Governance +Other Public Directorships: +Amcor Limited +Career Highlights: +From 2011 until his retirement in 2015, Mr. Long served as Chief Executive Officer of MillerCoors LLC, a joint venture between two publicly traded beverage companies. From 2008 to 2011, Mr. Long served as President and Chief Commercial +Officer of MillerCoors. From 2007 to 2008, Mr. Long served as Chief Executive Officer of Miller Brewing Company, a beverage company, and he served as Chief Marketing Officer of Miller Brewing Company from 2005 to 2007. Prior to joining Miller +Brewing Company, Mr. Long spent 17 years in various senior leadership positions at The Coca Cola Company, a beverage company, including Vice President of Strategic Marketing, Global Brands, Vice President, Strategic Marketing Research and +Trends, President of Coca Cola's Great Britain and Ireland Division and President of the Northwest Europe Division. Mr. Long currently serves as a director of Amcor Limited, a packaging solutions company. +Experience and Skills: +Through his more than 20 years in senior positions at category leading, branded companies, Mr. Long has developed significant marketing, international business and brand building expertise. +2019 +PROXY +STATEMENT +18 +Table of Contents +MICHAEL A. VOLKEMA +Age: +63 +Director since: +2005 +Select Business Experience: +Chairman of Herman Miller, Inc. +Board Committees: +Audit +Governance (Chair) +Other Public Directorships: +Herman Miller, Inc. +Career Highlights: +Mr. Volkema has been Chairman of Herman Miller, Inc., a publicly traded multinational furniture manufacturer, since 2000. Mr. Volkema became President and Chief Executive Officer of Herman Miller in 1995 and held those positions until +2003 and 2004, respectively. Mr. Volkema also is a director at Milliken & Company, a privately held, innovation based company serving the textile, chemical, and floor covering markets. +Experience and Skills: +Mr. Volkema has obtained international business and brand building expertise from his more than 20 years in senior leadership positions with Herman Miller, Inc. Mr. Volkema also has public company governance and related experience +from his extensive service on public company boards, including 18 years as Chairman of Herman Miller, Inc. and service on compensation and audit committees of boards of publicly traded companies. +2019 +PROXY +STATEMENT +19 +Table of Contents +Directors with Terms +Expiring in 2021 +ROXANE DIVOL +Age: +46 +Director Since: +October 2014 +Select Business Experience: +Former Executive Vice President and +General Manager, Website +Security for Symantec +Corporation +Board Committees: +Audit +Governance +Other Public Directorships: +None +Career Highlights: +Since March 2019, Ms. Divol has been Group Chief Operating Officer for Webhelp, a European leader in business process and customer experience outsourcing. From February 2017 until January 2018, Ms. Divol was Executive Vice President and +General Manager, Website Security, for Symantec Corporation, a global leader in information security solutions. From 2014 to February 2017, Ms. Divol was Senior Vice President and General Manager, Website Security for Symantec. From 2013 to 2014, +Ms. Divol was Senior Vice President of Alliances with Symantec. Ms. Divol joined Symantec from McKinsey & Company, a global management consulting firm, where she was a partner in its San Francisco office and led the West Coast +marketing and sales practice, with a focus on marketing return on investment and marketing transformation. +Experience and Skills: +Ms. Divol's experience with Symantec Corporation and McKinsey & Company provides her with expertise in international business, marketing, digital/eCommerce and information technology. In 2017, Ms. Divol was named one of the 50 most +powerful women in technology by the National Diversity Council. +2019 +PROXY +STATEMENT +20 +Table of Contents +JOSEPH R. GROMEK +Age: +72 +Director since: +2008 +Select Business Experience: +Retired President, Chief +Executive Officer +and Director of +The Warnaco Group, Inc. +Board Committees: +Compensation +Governance +Other Public Directorships: +Guess?, Inc. +The Children's Place Retail Stores, Inc. +Career Highlights: +From 2003 until his retirement in 2012, Mr. Gromek served as President, Chief Executive Officer and a director of The Warnaco Group, Inc., a publicly traded textile and apparel company. Mr. Gromek also served as Chief Executive Officer +of Brooks Brothers, Inc., a global clothing retailer, from 1995 until 2002. He served as Chairman of the Board of Tumi, Inc., a global luggage and accessories manufacturer, from 2013 until its acquisition by Samsonite +International S.A. in 2016. He currently serves as a director of Guess?, Inc., an apparel wholesaler and retailer, and The Children's Place Retail Stores, Inc., a children's clothing retailer. Mr. Gromek is also a director of +Stanley M. Proctor Company, a privately held company that distributes a comprehensive range of process-control automation products and solutions. +Experience and Skills: +Having served for more than 40 years in the retail and apparel industries, including 30 years managing and marketing apparel brands and a collective 15 years as the chief executive officer of two leading, multi-national apparel +companies, Mr. Gromek has expertise in apparel, retail and international business. His service as a senior executive and director at various public companies has given him extensive leadership experience in public company governance and related +matters. +2019 +PROXY +STATEMENT +21 +Table of Contents +BRENDA J. LAUDERBACK +Age: +69 +Director since: +2003 +Select Business Experience: +Retired President of the +Wholesale and Retail Group +of Nine West Group, Inc. +Board Committees: +Audit +Governance +Other Public Directorships: +Denny's Corporation (Board Chair) +Sleep Number Corporation +Career Highlights: +From 1995 until her retirement in 1998, Ms. Lauderback was President of the Wholesale and Retail Group of Nine West Group, Inc., a footwear wholesaler and distributor. She previously was the President of the Wholesale Division of U.S. Shoe +Corporation, a footwear manufacturer and distributor, a position that included responsibility for offices in China, Italy and Spain, and she was a Vice President/General Merchandise Manager of Dayton Hudson Corporation (now Target Corporation), a +retail company. From 1998 to 2015, Ms. Lauderback also was a director of Big Lots, Inc., a retail company. +Experience and Skills: +Ms. Lauderback has more than 25 years of experience in the retail industry, with more than 20 years in the footwear, apparel, and accessories industries. These senior leadership positions have provided her with strong footwear, apparel +and retail expertise. With her service on publicly traded company boards, including Denny's Corporation, a restaurant company, and Sleep Number Corporation, a bed manufacturer and retailer, and as a director of Wolverine Worldwide, she also has +extensive experience with public company governance and related matters. Ms. Lauderback was named to the National Association of Corporate Directors' (NACD) 2017 Directorship 100 list. +2019 +PROXY +STATEMENT +22 +Table of Contents +BOARD LEADERSHIP +The Company's Corporate Governance Guidelines give the Board the flexibility to determine the best leadership structure for the Company based +upon the Company's evolving needs and opportunities. The Governance Committee periodically reviews the Board's leadership structure, including whether to separate the roles of Chairman and CEO, based +upon the Board and Company's then-current circumstances, and recommends changes to the Board as appropriate. Currently, the Company's CEO also serves as the Chairman of the Board. In addition, since +1993, the independent directors have annually elected a lead independent director who functions in many ways similar to an independent Chairman. The Board continues to believe that this leadership +structure is in the best interests of the Company and its shareholders at this time and provides the Board with effective independent oversight of management. Specifically, the lead independent +director has the following enumerated responsibilities: +• Serve, as necessary, as a liaison between the Chairman and the independent directors +• Preside over Board meetings in the absence of the Chairman +• Review, approve and help develop the agendas and scheduling for Board and committee meetings +• Review and approve information and meeting materials sent to the Board +• Preside over executive sessions, with the authority to call executive sessions +• Work with the Compensation Committee and members of the Board to provide an effective annual performance review of the CEO and participate in +CEO succession planning +• Oversee, along with the Governance Committee, the annual Board and committee evaluations +• Be available for consultation and communication with shareholders, as appropriate +DIRECTOR INDEPENDENCE +The Board annually assesses the independence of all directors. To qualify as "independent," the Board must affirmatively determine that the +director is independent under the Company's Director Independence Standards, which are modeled after the listing standards of the NYSE. Under NYSE listing standards, the Board has determined that 9 of +the Company's 10 directors are independent. Only Mr. Krueger, the Company's CEO, is not independent. All of the Board's committees are comprised entirely of independent directors. The +independent directors generally meet in executive session at each regularly scheduled meeting. +The +Director Independence Standards define an "Independent Director" as a director who the Board determines otherwise has no material relationship with the Company (either directly or as a partner, +shareholder or officer of an organization that has a relationship with the Company), and who: +• Is not, and in the past three years has not been, an employee of the Company +• Does not have, and has not had within the last three years, an immediate family member employed as an executive officer of the Company +• Has not received, and has not had an immediate family member receive during any 12 month period within the last three years, any direct +compensation from the Company in excess of $120,000 (other than compensation for Board service; compensation received by the director for former service as an interim Chairman, CEO or other executive +officer; compensation received by the director's immediate family member for service as a non-executive employee; or pension and other forms of deferred compensation for prior service if such +compensation is not contingent in any way on continued service) +• Is not a current employee or partner of a firm that is the Company's internal or external auditor +2019 +PROXY +STATEMENT +23 +Table of Contents +• Has not been, and has not had an immediate family member who has been within the last three years, a partner or employee of the Company's +internal or external auditor and personally worked on the Company's audit within that time +• Has not had an immediate family member who is (i) a current partner of the Company's internal or external auditor, or (ii) a +current employee of the Company's internal or external auditor who personally works on the Company's audit +• Is not, and has not been within the last three years, part of an interlocking directorate in which a current executive officer of Wolverine +Worldwide serves or served on the compensation committee of another company where the director or the director's immediate family member concurrently serves or served as an executive officer +• Is not an employee of, and does not have an immediate family member who is an executive officer of, another company that has made payments to, +or received payments from, Wolverine Worldwide for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of $1,000,000 or 2% of the other company's +consolidated gross revenues +• Has not had any other direct or indirect relationship with Wolverine Worldwide that the Board determines is material +BOARD COMMITTEES, MEETINGS AND MEETING ATTENDANCE +The Board has three standing committees: Audit, Compensation, and Governance. Each committee meets periodically throughout the year and +reports its recommendations to the Board. The Company expects directors to attend every meeting of the Board and the committees on which they serve and to attend the annual meeting of shareholders. In +2018, all directors then serving on the Board attended the 2018 Annual Meeting of Shareholders, and all directors attended at least 75% of the meetings of the Board (5 meetings in 2018) and the +committees on which they served. All directors are typically invited to and attend all committee meetings. +Each +committee annually evaluates its performance to determine its effectiveness. The Board has determined that all committee members are "independent" as defined by NYSE listing standards. +Furthermore, each Audit Committee member satisfies the NYSE "financial literacy" requirement. In addition, the Board has determined that Mr. Boromisa and Mr. Gerber are "audit committee +financial experts" under Securities and Exchange Commission ("SEC") rules. Each committee's charter, with a complete list of the duties and responsibilities is available on the Company's website at www.wolverineworldwide.com/investor-relations/corporate-governance/ . +AUDIT COMMITTEE +Committee Members +• +Gerber (Chair) +• +Boromisa +• +Divol +• +Lauderback +• +Volkema +Number of Meetings in 2018 +6 +Highlighted Responsibilities +• +Appoints, evaluates and +oversees the work of the independent auditors and oversees the internal audit function +• +Oversees the integrity of the Company's financial statements, financial reporting process and internal controls +• +Oversees the Company's policies and systems regarding risk assessment +and management and the Company's compliance with legal and regulatory requirements +2019 +PROXY +STATEMENT +24 +Table of Contents +COMPENSATION COMMITTEE +Committee Members +• +Long (Chair) +• +Boromisa +• +Boswell +• +Gerber +• +Gromek +Number of Meetings in 2018 +6 +Highlighted Responsibilities +• +Assists the Board in +fulfilling its responsibilities relating to executive compensation and the Company's compensation and benefit policies and programs +• +Oversees the overall compensation structure, policies and programs, including whether the compensation structure establishes appropriate +incentives for management and employees +• +Oversees the Company's management of risks relating to management resources, organization structure and succession planning, hiring, development and retention processes, as well as those relating to the Company's +compensation structure, policies and programs +GOVERNANCE COMMITTEE +Committee Members +• +Volkema +(Chair) +• +Boswell +• +Divol +• +Gromek +• +Lauderback +• +Long +Number of Meetings in 2018 +5 +Highlighted Responsibilities +• +Assists the Board in +fulfilling its responsibilities on matters and issues related to the Company's corporate governance practices +• +In conjunction with the Board, establishes qualification standards for membership on the Board and its committees and recommends qualified individuals to become +Board members or serve for re-election as directors +• +Develops and recommends to the Board for its approval an annual self-evaluation process for the Board and its committees, and oversees the evaluation process +2019 +PROXY +STATEMENT +25 +Table of Contents +Non-Employee Director Compensation +in Fiscal Year 2018 +The +Company's non-employee director compensation philosophy is to pay compensation that is competitive with the compensation paid by companies of similar size, in similar industries +and with whom Wolverine Worldwide competes for director candidates. The Governance Committee, with input from management and from the Compensation Committee's independent compensation consultant, +reviewed director compensation and compared it to market data, including a comparison to director compensation for the Company's Peer Group, as defined on page 44, and broader industry market surveys +(FW Cook 2016 Director Compensation Report and NACD 2016-2017 Compensation Report). Based on this review, non-employee director compensation for fiscal year 2018 was updated as follows compared to +fiscal year 2017 compensation. +• Increased overall annual equity grant value by $10,000 +• Changed the form of equity to 100% restricted stock units that vest in one year +• Increased the Compensation Committee and Audit Committee chair cash fees by $5,000 +• Added directors as potential participants in the Company's existing Deferred Compensation Plan (formerly known as the Executive Deferred +Compensation Plan), a plan that allows for the deferral of cash fees into general investment options — this option is in addition to the options to defer cash fees under the +Director Deferred Compensation Plan, as described below +These +changes were implemented to keep Wolverine director compensation near the median of its peer group. The update in form of equity grant was to align with market grant practices. +The +following table provides information regarding the compensation of the Company's non-employee directors for fiscal year 2018. Mr. Krueger receives compensation for his services as the +Company's CEO and President, but does not receive any additional compensation for his service as a director or chairman. +Fees Paid in +Cash +Cash Amounts +Voluntarily +Deferred +Fees Earned or +Paid in Cash 1 +Restricted +Stock Unit +Awards 2 +Totals +Boromisa +$97,000 ++ +- += +$97,000 ++ +$130,003 += +$227,003 +Boswell +$94,000 ++ +- += +$94,000 ++ +$130,003 += +$224,003 +Divol +$97,000 ++ +- += +$97,000 ++ +$130,003 += +$227,003 +Gerber +$117,000 ++ +- += +$117,000 ++ +$130,003 += +$247,003 +Gromek +- ++ +$101,500 += +$101,500 ++ +$130,003 += +$231,503 +Kollat +$130,000 ++ +- += +$130,000 ++ +$165,022 += +$295,022 +Lauderback +$72,750 ++ +$24,250 += +$97,000 ++ +$130,003 += +$227,003 +Long +$101,500 ++ +- += +$101,500 ++ +$130,003 += +$231,503 +O'Donovan +$50,000 ++ +- += +$50,000 ++ +$130,003 += +$180,003 +Volkema +$56,000 ++ +$56,000 += +$112,000 ++ +$130,003 += +$242,003 +1 Represents cash payments received or deferred by directors for fiscal year 2018. Directors may defer fees pursuant to the Director Deferred Compensation Plan or +Deferred Compensation Plan (each as defined below). The table shows the Fees Earned or Paid in Cash separated into Fees Paid in Cash and Cash Amounts Voluntarily +Deferred. 2 Represents the aggregate grant date fair value of restricted stock units granted to non-employee directors in fiscal year 2018, calculated in accordance with +Accounting Standard Codification units ("ASC") Topic 718, without regard to estimated forfeitures. The chart below lists the aggregate outstanding option awards (granted prior to 2018) and restricted +stock units held by non-employee directors at the end of fiscal year 2018. For valuation assumptions, see the Stock Based Compensation footnote to Wolverine Worldwide's Consolidated Financial +Statements for fiscal year 2018 included in its Form 10-K for this year. +2019 +PROXY +STATEMENT +26 +Table of Contents +Name +Option Awards Outstanding at +December 29, 2018 +(#) +Restricted Stock Units held at +December 29, 2018 +(#) +Boromisa +71,864 +4,440 +Boswell +44,735 +4,440 +Divol +40,002 +4,440 +Gerber +61,994 +4,440 +Gromek +71,864 +4,440 +Kollat +84,166 +5,636 +Lauderback +61,994 +4,440 +Long +60,642 +4,440 +O'Donovan +61,994 +- +Volkema +55,326 +4,440 +The +following table shows the non-employee director compensation program for fiscal year 2018: +Compensation Plan for 2018 +Component +Cash +Restricted Stock Units 1 +Annual Director Fee +$70,000 +Number of restricted stock units "RSUs" with a grant date value of $130,000. +Audit Committee Annual Fee +$15,000 +Audit Committee Chairperson Annual Fee +$25,000 +Compensation Committee Annual Fee +$12,000 +Compensation Committee Chairperson Annual Fee +$20,000 +Governance Committee Annual Fee +$12,000 +Governance Committee Chairperson Annual Fee +$15,000 +Lead Director Annual Fee +In lieu of the standard Annual Director Fee, the Lead Director was paid a Cash Retainer of $135,000. +In lieu of the standard RSU grant, the Lead Director received a number of RSUs with a grant date value of $165,000. +1 For fiscal year 2018, Messrs. Boromisa, Gerber, Gromek, Long and Volkema and Mses. Boswell, Divol and Lauderback each received 4,440 +restricted stock units (5,636 for Dr. Kollat) granted in May 2018 under the Stock Incentive Plan of 2016, as amended. RSUs vest one year from the date of grant. +The +Company also: +• Pays director expenses associated with Board and committee meetings, other Company functions, and industry functions +• Pays spousal travel expenses associated with certain Board meetings +• Reimburses directors for some expenses relating to director education +• Provides samples of its products that have nominal value +• Provides office space and administrative assistance to directors who visit Company locations +2019 +PROXY +STATEMENT +27 +Table of Contents +2019 Updates. After a review of Wolverine's director compensation program compared to both its peer group and broader industry +market surveys (FW Cook 2017 Director Compensation Report and NACD 2017-2018 Compensation Report), the Company modified director compensation as follows for 2019. +• Increased annual cash director fee by $5,000 +• Increased annual Governance Chair fee by $2,500 +• Increased annual restricted stock unit grant by $5,000 +These +changes were implemented to keep Wolverine's director compensation near the median of its peer group. +Director Deferred Compensation Plan. The Company's Amended and Restated Outside Directors' Deferred Compensation Plan (the "Director Deferred Compensation Plan") +is a supplemental nonqualified deferred compensation plan for non-employee directors. A separate non-employee director deferred compensation plan applies to benefits accrued under that plan before +January 1, 2005. The Director Deferred Compensation Plan permits all non-employee directors to voluntarily defer, at their option, 25%, 50%, 75% or 100% of their director fees. The Company +establishes a book account for each non-employee director and credits the director's account with a number of stock units equal to the amounts voluntarily deferred, divided by the closing market price +of common stock on the payment/deferral date. The Company also credits director accounts with dividend equivalents on amounts previously deferred in the form of additional stock units. The amounts +credited to director accounts are treated as if invested in Wolverine Worldwide common stock. The number of stock units held in director accounts is set forth under the "Stock Ownership By Management +and Others" table below. +Upon +a director's termination of service, or such later date as a director selects, the Company will distribute the stock units in the director's book account in shares of Wolverine Worldwide common +stock in either a single, lump sum distribution or annual installment distributions over a period of up to 20 years (10 years under the plan for benefits accrued before January 1, +2005). The Company converts each stock unit to one share of Wolverine Worldwide common stock. +Upon +a "change in control," the Company will distribute to the director, in a single, lump sum distribution, Wolverine Worldwide common stock in a number of shares equal to the stock units credited to +a director's book account. The Deferred Compensation Plan defines "change in control" as any of the following: +• The acquisition by any person, or by more than one person acting as a group, of more than 50% of either (i) the then outstanding shares +of common stock of Wolverine Worldwide or (ii) the total fair market value of Wolverine Worldwide +• The acquisition by any person, or more than one person acting as a group, during the 12 month period from and including the date of the +most recent acquisition, of ownership of 30% or more of the outstanding common stock of Wolverine Worldwide +• The replacement of a majority of the individuals who constitute the Board during any 12 month period by directors whose appointment or +election is not endorsed by a majority of the directors prior to the date of the appointment or election +• The acquisition, during any 12 month period ending on the date of the most recent acquisition, by any person of assets from Wolverine +Worldwide having a gross fair market value of at least 40% of the gross fair market value of all the assets of Wolverine Worldwide immediately before the acquisition +Deferred Compensation Plan. For a description of the non-qualified Deferred Compensation Plan under which Directors may also defer cash fees, please see the +" Non-Qualified Deferred Compensation " section on page 59. +NON-EMPLOYEE DIRECTOR STOCK OWNERSHIP GUIDELINES +Each non-employee director must attain (and maintain) a minimum stock ownership level (including owned shares, the in the money value of stock +options, and stock units under the Directors' Deferred Compensation Plan) equal to six times the non-employee director annual cash retainer prior to being able to gift or sell any Company stock. +During 2018, all non-employee directors were in compliance with these guidelines. +2019 +PROXY +STATEMENT +28 +Table of Contents +Securities Ownership of Officers and Directors and Certain Beneficial Owners +FIVE PERCENT SHAREHOLDERS +The following table sets forth information about those holders known by Wolverine Worldwide to be the beneficial owners of more than five +percent of Wolverine Worldwide's outstanding shares of common stock as of March 11, 2019: +Amount and Nature of Beneficial Ownership of Common Stock +Name and Address of Beneficial Owner +Sole Voting +Power +Sole +Investment +Power +Shared Voting +Power +Shared +Investment +Power +Total +Beneficial +Ownership +Percent +of Class 3 +BlackRock, Inc. 1 +55 East 52nd Street +New York, NY 10055 +13,548,359 +13,830,159 +- +- +13,830,159 +15.4% +The Vanguard Group 2 +100 Vanguard Boulevard +Malvern, PA 19355 +194,464 +9,315,339 +12,875 +198,019 +9,513,358 +10.6% +1 Based solely on information set forth in a Schedule 13G/A filed on January 31, 2019. 2 Based solely on +information set forth in a Schedule 13G/A filed on March 11, 2019. 3 +Based on 90,006,408 shares outstanding as of March 11, 2019. +2019 +PROXY +STATEMENT +29 +Table of Contents +STOCK OWNERSHIP BY MANAGEMENT AND OTHERS +The following table sets forth the number of shares of common stock beneficially owned as of March 11, 2019, by each of the Company's +directors and named executive officers and all of the Company's directors and executive officers as a group: +Amount and Nature of Beneficial Ownership of Common Stock 1 +Deferred +Stock Units, +Sole Voting +and/or +Investment +Power 2,3 +Shared Voting or +Investment +Power 4 +Stock +Options 5 +Total +Beneficial +Ownership +Percent +of Class 6 +Jeffrey M. Boromisa +76,113 +34,282 +61,994 +172,389 +* +Gina R. Boswell +16,038 +— +44,735 +60,773 +* +Roxane Divol +21,970 +— +40,002 +61,972 +* +William K. Gerber +43,913 +— +55,326 +99,239 +* +Joseph R. Gromek +118,902 +— +61,994 +180,896 +* +David T. Kollat +310,234 +— +75,296 +385,530 +* +Michael Jeppesen +51,138 +— +51,988 +103,126 +* +Blake W. Krueger +780,688 +29,889 +1,328,392 +2,138,969 +2.34% +Brenda J. Lauderback +67,599 +— +55,326 +122,925 +* +Nicholas T. Long +23,349 +— +60,642 +83,991 +* +Michael D. Stornant +136,341 +— +145,842 +282,183 +* +Michael A. Volkema +68,738 +— +55,326 +124,064 +* +Richard J. Woodworth +79,846 +— +105,177 +185,023 +* +James D. Zwiers +71,387 +176,158 +230,588 +478,133 +* +All directors and executive officers as a group (17 people) +1,920,872 +240,329 +2,395,769 +4,556,970 +4.93% +* Represents beneficial ownership of less than 1%. +1 The numbers of shares stated are based on information provided by each person listed and include shares personally owned of record and shares that, under applicable +regulations, are considered to be otherwise beneficially owned. 2 These numbers include restricted shares and performance shares held, which are subject to forfeiture if the +terms of the award are not satisfied and also include +deferred stock units held by directors under the Directors' Deferred Compensation Plan. +3 The table does not include the following time-vested restricted stock units and performance units owned by NEOs as of March 11, 2019: +Restricted +Units +Performance +Units +Krueger +134,806 +404,512 +Jeppesen +25,393 +49,015 +Stornant +30,281 +58,454 +Woodworth +26,819 +52,168 +Zwiers +28,477 +55,393 +4 These numbers include shares over which the listed person is legally entitled to share voting or investment power by reason of joint ownership, trust or other contract +or property right and shares held by spouses, children or other relatives over whom the listed person may have influence by reason of such relationship. +5 The numbers represent shares that may be acquired within 60 days after March 11, 2019, by the exercise of stock options granted under Wolverine's various +stock option plans. These numbers are also included in the Total Beneficial Ownership column. +6 As of March 11, 2019, based on 90,006,408 shares outstanding on that date plus the number of stock options exercisable by the specified person(s) within +60 days of March 11, 2019, as indicated in the "Stock Options" column. +2019 +PROXY +STATEMENT +30 +Table of Contents +Compensation Discussion +and Analysis +SUMMARY +The Company's Compensation Discussion and Analysis ("CD&A") provides an overview and analysis of the executive compensation program for the Company's named executive officers ("NEOs"). For 2018, the +Company's NEOs were: +Blake W. Krueger +Chairman, Chief Executive Officer and President +Michael Jeppesen +President, Global Operations Group and Wolverine Heritage Group +Michael D. Stornant +Senior Vice President, Chief Financial Officer and Treasurer +Richard J. Woodworth +President, Wolverine Boston Group +James D. Zwiers +Executive Vice President +COMPENSATION PHILOSOPHY AND OBJECTIVES +The Company's compensation philosophy is to provide executives with a competitive compensation package that is heavily weighted towards +performance-based (performance shares and annual bonus opportunity) and variable (restricted stock units) compensation in order to encourage superior business and financial performance over the short +and longer term and, by linking compensation with stock price performance, to closely align the interests of the Company's NEOs with those of its shareholders without encouraging excessive +risk-taking. The Compensation Committee (the "Committee") oversees the Company's executive compensation program. +The executive compensation program has four primary objectives: +• Attract and retain talented NEOs who will lead Wolverine Worldwide and drive superior business and financial performance +• Provide incentives for achieving pre-established longer term corporate financial goals and reward the attainment of those goals +• Provide incentives for achieving specific pre-established near-term individual, business unit and corporate goals and reward the attainment of +those goals +• Align the interests of NEOs with those of the shareholders through incentives based on achieving performance objectives that enable increased +shareholder value +Compensation Decisions in Context: Key 2018 Accomplishments and Financial Highlights; 2019 Focus +2018 was a successful year for the Company as it executed on the Global Growth Agenda, with solid underlying revenue growth achieved across +the portfolio including several of the largest brands. Key financial highlights for the Company during 2018 included the following: +• Revenue of $2.24 billion, representing nearly 3% underlying growth and within the Company's original guidance range. +• Gross margin was 41.1%, a record for the Company and an increase of 150 basis points compared to the prior year's adjusted gross margin. +• Reported operating margin of 11.2% and adjusted operating margin of 12.0%. The adjusted margin was up 80 basis points compared to the prior +year and inclusive of approximately $41 million of investments to drive growth. +2019 +PROXY +STATEMENT +31 +Table of Contents +• Reported diluted earnings per share was a record of $2.05. Adjusted diluted earnings per share was $2.17, an increase of 32% over the prior +year and well above original guidance given for the year. +• Reported operating cash flow of $97.5 million. On an adjusted basis, cash from operations was $235 million when excluding +$60 million in voluntary pension contributions and $77 million related to the wind-down of the accounts receivable financing program. +• Returned capital to shareholders in an efficient manner including $175 million in share repurchases, as well as a 33% dividend increase +earlier in 2018 for a $0.32 per share annual dividend. +• Reduced debt by $212 million including $175 million of voluntary payments. +• Made a total of $60 million of discretionary pension contributions to bring the plans near fully funded status. +• Completed a pension annuity buyout in the fourth quarter removing approximately $66 million or 20% of the Company's defined benefit +pension liabilities. +• Completed a refinancing of debt in December, which provides enhanced flexibility for uses of capital and extends the credit facility maturity +until December 2023. +• Ended 2018 in an extremely strong financial position, with a bank-defined leverage ratio of only 1.26 times, and total liquidity of +approximately $1.5 billion available to execute future actions intended to drive total shareholder return. +2018 Compensation Program Overview +The Company's executive compensation program consists of base salary, annual bonus opportunity, long-term incentive compensation, and +benefits. A breakdown of base salary, annual performance bonus, and long-term incentive compensation is illustrated below: +ELEMENT +COMPONENT +METRICS +WHAT THE PAY ELEMENT REWARDS +Base +Salary +• +Cash +• +Fixed amount based on responsibilities, experience and market data +• +Scope of core responsibilities, years of experience, and potential to affect the Company's overall performance +Annual +Performance +Bonus +• +Company/Business Unit Cash Bonus +• +Individual Cash Bonus +• +Backlog Modifier +• +85% revenue and adjusted pretax earnings +• +15% specific individualized performance targets +• +Total payout adjusted up/down up to plus or minus 25% based on year-end backlog modifier +• +Achieving specific corporate business and/or divisional objectives over which the NEO has reasonable control +• +Achieving specific personal objectives +• +Achieving key financial +metric, consistent with communicated objectives +Long-Term +Incentive Compensation +• +Performance share units +• +Time-vesting restricted stock units +• +Uses the following performance metrics (weighted as indicated) +• +65% Adjusted earnings per share +• +35% Adjusted business value-added +• +Relative TSR adjusted total payout up/down up to plus or +minus 25% +• +Four-year vesting +for time- vested restricted stock units +• +Balances focus on near-term profitability with longer-term shareholder value creation +• +Achieving long-term corporate objectives +• +Driving long-term shareholder value +• +Continued, long-term employment at Wolverine +Worldwide +• +Adjusted to +increase (or reduce) payout based on relative TSR performance +2019 +PROXY +STATEMENT +32 +Table of Contents +Pay at Risk +Under the Company's compensation program, a significant portion of the compensation awarded to the NEOs generally, and to the CEO in +particular, is at risk (contingent upon the attainment of various pre-established short and long-term financial goals) and variable (contingent on the performance of the Company's stock price). NEO +compensation that is significantly at risk and variable incentivizes superior business and financial performance and, by linking compensation with stock price performance, aligns the interests of +executives with those of shareholders. +The +following graphic illustrates the percentage of 2018 NEO target compensation that is at risk: +2018 Target Total Compensation +CEO +Average NEOS +Long-Term Incentive Program Mix +The long-term incentive program is heavily weighted to at-risk compensation, with a mix of 70% performance stock units and 30% time vested +restricted stock units for the CEO. For other NEOs, the 2018 mix was 60% performance stock units and 40% time vested restricted stock units. +Compensation Best Practices +What we do +What we do not do +✓ +Vast majority of pay is at risk or variable, i.e. , performance based or equity-based or both +✓ +Stringent share ownership requirements (6x base salary for CEO) +✓ +Broad-based clawback +policy +✓ +Significant vesting horizon for equity grants +✓ +Double trigger equity acceleration (for grants in 2017 and beyond) +✓ +Independent Compensation Committee Consultant +✓ +Review executive compensation +program to ensure it doesn't promote excessive risk taking +✓ +Proactively engage with top shareholders on compensation and governance issues +✓ +Conduct annual say-on-pay votes +✓ +Balance short-term and long-term +incentives +✗ +No dividends or dividend equivalents on unearned performance shares/units +✗ +No repricing or replacing of underwater stock options +✗ +No overlapping metrics +✗ +No excessive or unnecessary perquisites +✗ +No hedging, pledging, or short +sales of Company stock +✗ +No excise tax gross-ups in change-in-control agreements for new officers (hired after 2008) +2019 +PROXY +STATEMENT +33 +Table of Contents +Compensation Discussion and Analysis +2018 COMPENSATION PROGRAM OVERVIEW +Setting Targets +Each February, the Committee recommends (and the independent directors approve) target compensation for the CEO for the upcoming year after +considering the latest available information, including the Company's TSR and other business and financial performance, information provided by the Committee's compensation consultant regarding +executive compensation trends and compensation paid to other chief executive officers of companies in the compensation peer group (described below), and +information provided by management on recent Company performance and the Company's future business and financial outlook. The Committee's goal is to set the CEO's compensation in line with the +anticipated market median compensation for that year. +Given +the significant weight the Company's executive compensation program places on at risk and variable compensation, the compensation realized by the CEO and NEOs can be significantly affected, both +positively and negatively, by performance against the various operational and financial performance metrics pre-established by the Committee and by the performance of the Company's stock. The Board +and Committee believe such a compensation program aligns the interests of the CEO and other NEOs with the interests of the shareholders. +The +Company's executive compensation program consists of four primary elements: base salary, annual bonus opportunity, long- term incentive compensation and benefits. These elements are described in +greater detail below. +Base Salary +As part of approving an NEO's base salary, the Committee considers a variety of factors including individual responsibilities, experience, +skills, and potential to affect Wolverine Worldwide's overall performance, as well as market surveys and peer group information. The Committee considers these compensation factors subjectively, and no +single factor or combination of factors was determinative in setting base salaries for any NEO for fiscal 2018. +Based +on the above factors, the Committee approved the 2018 base salaries for the NEOs as noted in the following table. The Committee held CEO salary flat in 2018 for the fifth year in a row and held +it flat again in 2019. The 2-6% base salary increases for Messrs. Jeppesen, Stornant, Woodworth and Zwiers were based on their performance evaluations as well as consideration of peer group and +broad-based industry compensation data, as described in detail below. +Name +2018 Base Salary +2017 Base Salary +Krueger +$1,150,000 +$1,150,000 +Jeppesen +$607,000 +$589,000 +Stornant +$600,000 +$564,000 +Woodworth +$580,000 +$564,000 +Zwiers +$670,000 +$658,000 +2019 +PROXY +STATEMENT +34 +Table of Contents +Annual Bonus +In 2018, each NEO had the opportunity to earn annual cash incentive compensation ("annual bonus"), consisting of a performance bonus and an +individual performance bonus, and further subject to a modifier: +Key Factors +2018 Company Metrics +Performance Bonus +• +Based on performance +measured against Company and/or business unit performance criteria established at the beginning of 2018 +• +Payout determined by comparing performance against four performance levels set for each pre-set criterion: threshold (25% payout), target (100% payout), goal (150% +payout) and stretch (200% payout) +• +Revenue (45%) +• +Adjusted pretax earnings (55%) +Individual +Performance Bonus +• +Measured against +individual performance criteria +• +Each NEO's payout was determined by comparing individual performance against specific individual criteria set at the beginning of 2018 +• +Payouts can range from 0% to 200% depending on the NEO's performance against individual performance objectives +• +Vary by each NEO +Modifier +• +Total payout based on +the above two components adjusted up or down by up to 25% based on year-end backlog +• ++/- 25% year-end backlog +modifier +A percentage of each NEO's 2018 base salary was set as the annual bonus target percentage (the "Target Bonus Percentage"). The Target Bonus Percentage represents the percentage of each +NEO's base salary that could be earned as annual incentive compensation at a "target" performance level (100% payout) for each of the performance bonus and individual performance bonus. Generally, the +Committee sets higher Target Bonus Percentages for individuals with greater influence on business strategy, profit or sales. This puts a larger percentage of an NEO's total potential cash compensation +at risk, in line with the NEO's ability to influence these factors. For 2018, the NEOs had the following Target Bonus Percentages: Mr. Krueger 125%, Mr. Jeppesen 55%, Mr. Stornant +60%, Mr. Woodworth 55%, Mr. Zwiers 55%. +The +Committee selected fiscal year 2018 revenue and adjusted pretax earnings as metrics for the performance bonus because it believes a strong correlation exists between performance on these financial +measures and increases in shareholder value. The Committee also added a year-end backlog modifier for 2018 to more directly align with the Company's focus on go-forward revenue growth. The change from +the adjusted operating margin modifier used in 2017 to the backlog modifier used in 2018 and the increased revenue weighting in 2018 compared to 2017 reflects the Company's shift in focus from its +Wolverine Way Forward operational transformation to its revenue-focused Global Growth Agenda. +Performance Bonus +Messrs. Krueger and Stornant had significant influence on the Company's overall business performance and, accordingly, their respective performance +bonus opportunity (85% of their total annual bonus opportunity) is based on the Company performance criteria only. Messrs. Jeppesen, Woodworth and Zwiers were directly responsible for specific +business units and exert a significant influence on those business units in particular, in addition to influencing Company performance. Accordingly, for each of these NEOs, a larger percentage of +their overall annual bonus opportunity was based on business unit performance, with a smaller percentage based on the Company's performance, as reflected in the table on page 39. +As +shown in the table below, the Committee also set four performance levels for each criterion: threshold (25% payout), target (100% payout), goal (150% payout) and stretch (200% payout). The +Committee set the revenue and pretax earnings goals for these performance levels following a review of the Company's operating plan, historical performance, and industry and macroeconomic conditions. +The revenue performance targets, though slightly lower than 2017 targets, were set aggressively in light of the difficult industry and macroeconomic conditions. Revenue performance at target (100%) +was set above the mid-point of the Company's initial 2018 guidance, and goal performance (150%) was set above the top end of the guidance. Despite the planned decrease in revenue, the Committee set +adjusted pretax earnings targets 13% higher than 2017, reflecting the expectation of improved adjusted profitability driven by the 2017 Wolverine Way Forward transformation. +2019 +PROXY +STATEMENT +35 +Table of Contents +Company +Performance Level +in millions +(% of Target Payout) 1 +Revenue 2 +Adjusted Pretax Earnings 2,3 +Threshold (25%) +$2,145 +$211.8 +Target (100%) +$2,290 +$239.7 +Goal (150%) +$2,358 +$256.5 +Stretch (200%) +$2,448 +$273.3 +1 The maximum payout (before the effect of the modifier) an NEO can receive is 200% of his Target Bonus Percentage, even if performance is above stretch, and an NEO +would receive 0% of his Target Bonus Percentage if performance is below threshold. With the addition of the modifier, an NEO could earn up to an additional 25% of his overall payout before the +modifier. 2 2018 corporate revenue performance fell between threshold and target, resulting in a 65% payout on this measure. 2018 corporate pretax earnings performance was between +target and goal, resulting in a 116% payout on this measure. 3 Adjusted pretax earnings are earnings before income taxes, excluding the effect of acquisitions, divestitures, +accounting changes, restructuring, or other special +charges or extraordinary items excluded by the Compensation Committee. Pretax earnings for 2018 exclude the impact of environmental and related costs, pension settlement costs and other +costs. +For +each business unit, the Committee sets the revenue and adjusted pretax earnings goals at substantially similar levels of difficulty as the goals for the Company and with a similar degree of +difficulty as in prior years. The below table shows historical weighted performance levels achieved by the business units using these performance criteria for the years for which a meaningful +comparison can be made. +Historical Group Performance 1 +2018 +2017 +2016 +2015 +2014 +Wolverine Boston Group +Between threshold and target +Between threshold and target +Between threshold and target +Below threshold +Below threshold +Wolverine Heritage Group +Between threshold and target +Between threshold and target +Between threshold and target +Below threshold +Between target and goal +International Group +Between target and goal +Between target and goal +Between target and goal +Between target and goal +Between goal and stretch +eCommerce +Between threshold and target +Between target and goal +Between threshold and target +N/A +N/A +Stores +Between threshold and target +Between threshold and target +N/A +N/A +N/A +1 The brand groups were changed in 2016. The performance information above is for the historical group closest in makeup to the 2018 groups. +In +February 2019, the Committee certified actual 2018 performance compared to the performance levels for the Company and business unit criteria. The Company's fiscal year 2018 revenue was +approximately $2.239 billion, which was between threshold and target level. The Company's adjusted pretax earnings for fiscal year 2018 were $245.1 million, which was between target and +goal level. The weighted average results for the applicable performance criterion are shown in the below table: +2018 Performance +Overall Weighted Payout by Group +Wolverine Boston Group +Between threshold and target +80% +Wolverine Heritage Group +Between threshold and target +69% +Wolverine Worldwide +Between threshold and target +93% +International Group +Between target and goal +101% +eCommerce +Between threshold and target +50% +Stores +Between threshold and target +51% +2019 +PROXY +STATEMENT +36 +Table of Contents +For +2018, the Company paid the NEOs the following amounts relating to the performance bonus. +Name +Performance Bonus +(as a % of Total Annual Bonus +Opportunity) 1 +Performance Bonus Opportunity +(as a % of an NEO's Target +Percentage) 1 +Performance Bonus +Percentage Earned 1,2,3 +Performance Bonus Paid 1,2,3 +Krueger +85% +0 - 200% +94% +$1,143,485 +Jeppesen +85% +0 - 200% +78% +$220,432 +Stornant +85% +0 - 200% +94% +$283,064 +Woodworth +85% +0 - 200% +85% +$228,897 +Zwiers +85% +0 - 200% +77% +$241,795 +1 Not including any positive or negative adjustment based on the modifier described below. 2 Percentages earned and bonuses +paid vary due to the relative performance of various business units versus overall corporate performance. +3 Not including Individual Performance Bonus. +Individual Performance Bonus +At the same time Target Bonus Percentages are set, the CEO approves measurable personal objectives for each NEO's individual bonus, other than for himself. +The CEO submits, and the Committee reviews and approves, with such changes as it considers appropriate, the CEO's personal objectives. Such measurable personal objectives may include goals such as +executing strategies supporting the Company's vision, developing employees, growing new business initiatives and driving operational excellence. +Performance is evaluated by the CEO (or, in the case of the CEO, by the Committee and the other independent directors) based on qualitative and quantitative factors. Summaries of the specific personal +objectives for each NEO are outlined in the table below: +NEO +2018 Personal Objectives +Krueger +transformation scorecard, organic growth, cash flow +Jeppesen +transformation scorecard, backlog, successful implementation of PLM and PDM, senior leadership development +Stornant +transformation scorecard, organic growth, protect company investments and market share +Woodworth +transformation scorecard, backlog, senior leadership development +Zwiers +transformation scorecard, revenue growth, individual development plan achievement +Each +personal objective is given a rating from "does not achieve" to "exceptional," with weighted performance ratings and payouts consistent with the following table: +Personal Objectives Rating +2018 Payout Level +Exceptional +200% +Far Exceeds +175% +Exceeds +150% +Achieves +100% +Achieves Some But Not All +50% +Does Not Achieve +0% +2019 +PROXY +STATEMENT +37 +Table of Contents +The +CEO recommended, and the Committee approved, the 2018 cumulative weighted personal objectives scores and payout levels for each of the NEOs other than himself. The Committee and the other +independent directors of the Board met with the CEO at the end of the year to evaluate his performance against his personal objectives. The Committee determined the cumulative weighted personal +objectives score for the CEO and recommended to the independent directors of the Board the CEO's payout level. +Name +Individual +Performance Bonus +(as a % of Total Annual Bonus +Opportunity) +2018 Individual Bonus +Opportunity +(as a % of an NEO's Target +Percentage) +2018 +Individual Bonus +Percentage Achieved +2018 +Individual +Bonus Paid +Krueger +15% +0 - 200% +108% +$232,659 +Jeppesen +15% +0 - 200% +100% +$49,792 +Stornant +15% +0 - 200% +100% +$53,377 +Woodworth +15% +0 - 200% +113% +$53,546 +Zwiers +15% +0 - 200% +94% +$51,642 +Backlog Modifier +The Committee added a backlog modifier for 2018 to align with the Company's shift in focus to go-forward revenue growth upon completion of its Wolverine Way +Forward operational transformation. The Committee set the following backlog modifier for 2018. +Company Backlog 1,2 +Achieved Backlog Growth ++2x +Maintained Backlog Growth +No Adjustment +Did Not Achieve Backlog Growth +–2x +Brand/Group Backlog 1,2 +Exceeded Backlog Growth Threshold ++3x +Achieved Backlog Target Growth Threshold +No Adjustment +Did Not Achieve Backlog Growth Threshold +–2x +1 Times the % increase or decrease in backlog 2 Modifier adjustments will not fall below –25% or exceed 25% +At +the Company level, a 2x modification was applied to each percentage increase (positive modification) or decrease (negative modification), capped at +/– 25%, based on +average backlog at the end of the last three weeks of the 2018 fiscal year compared to the same periods during the 2017 fiscal year. At the brand/group level, a 3x positive modification was applied to +each percent increase above a target backlog growth threshold and a 2x negative modification was applied to each percent below the target growth threshold, measured at the same time and with the same +25% cap as the Company calculation. The resulting modifications are reflected in the table below in the "Backlog Multiplier" column. +2019 +PROXY +STATEMENT +38 +Table of Contents +Each NEO's total annual bonus opportunity for 2018 ranged from 0% to 200% of the Target Bonus Percentage before applying the backlog modifier. The accompanying table shows the +aggregate annual incentive compensation payout earned by each NEO for 2018, as well as the portion of that aggregate number that is attributable to the performance bonus and individual performance +bonus and the effect of the backlog modifier. +1 Based on revenue and pretax earnings performance criteria for the Company, as described above under " Annual Bonus — +Performance Bonus ." 2 Based on revenue and pretax earnings as the performance criteria for the Wolverine Heritage Group. 3 Based on revenue and pretax earnings as the performance criteria for the Wolverine Boston Group. 4 Based on revenue and pretax +earnings as the performance criteria for: Stores (10%), eCommerce (25%), and International (20%). +Overall +NEO annual bonus paid out at near target levels, including for the CEO, in a year when the Company's TSR performance was at the 61 st percentile of its peer group. Further, the +following graph shows the CEO's target bonus opportunity compared to his actual annual bonus earned over the last three years, which demonstrates the Company's pay for performance philosophy in +action. There is clear directional alignment between the Company's TSR performance and the CEO's annual bonus achievement over this period, during which the +2019 +PROXY +STATEMENT +39 +Table of Contents +Company's +TSR performance was at the 96 th percentile of its peer group. The CEO's target annual bonus opportunity was not increased over this timeframe. +LONG-TERM INCENTIVE COMPENSATION +In 2018, each NEO had the opportunity to earn long-term incentive compensation comprised of a mix of performance share units and +time-based restricted stock unit awards. +Key Factors +Performance Share Metrics 1 +Performance Share Units +• +Performance share units +are based on performance criteria covering three-year periods +• +Awards balance focus on near term profitability with longer term shareholder value creation +• +Fully diluted adjusted EPS +(65%) +• +Adjusted Business +Value Added ("BVA") 2 (35%) +Time-Based Restricted Stock Unit Awards +• +Encourages employee +retention and rewards increases in stock price +1 EPS is calculated on a fully diluted basis and EPS and BVA are each adjusted to account for and exclude the effects of acquisitions, divestitures, accounting changes, +restructuring, or other similar special charges or extraordinary items excluded by the Committee, including foreign exchange. 2 BVA is calculated by starting with operating income +determined in accordance with U.S. generally accepted accounting principles ("GAAP"), and then reducing operating +income by (1) an amount for income taxes where the effective tax rate used to calculate the income tax amount is determined in accordance with GAAP (adjusted consistent with EPS adjustments, as +described above), and (2) a capital charge equal to a 14 point average of "net operating assets" during the fiscal year (with "net operating assets" defined as the net of trade receivables (net +of reserves), inventory (net of reserves), other current assets, property, plant and equipment, trade payables and accrued liabilities) multiplied by 10%. +The +Committee believes EPS is a key metric that plays an important role in driving shareholder value and that it further aligns the interests of the NEOs with other shareholders. The Committee +believes that BVA is useful for determining incentive compensation because it ties the income statement (profit delivery) to the balance sheet (effective asset utilization) and does not focus on one +to the exclusion of the other. The Committee further believes that focusing NEOs' interests on increasing BVA aligns their interests more closely with shareholder interests. The use of both EPS and +BVA balances the NEOs' focus on near term profitability with longer term shareholder value. Shareholders gave positive feedback on these measures during the Committee's shareholder outreach. The +Committee weighted EPS 65% +2019 +PROXY +STATEMENT +40 +Table of Contents +and +BVA 35% when determining the overall performance level. For the 2018-2020 performance period, the Committee added a relative TSR modifier that provides a 25% positive adjustment to total payout +for TSR performance in the top quartile of the Company's peer group and a 25% negative adjustment to total payout for performance in the bottom quartile of the peer group. +The +Committee has chosen to provide long-term incentives in these forms because they incentivize and motivate different behaviors. Performance share units reward the achievement of key business +criteria. Time-based restricted stock units encourage employee retention by providing some level of value to executives who remain employed during the vesting period. The use of restricted stock units +also supports an ownership culture and thereby encourages executives to take actions that are best for the Company's long-term success. Both forms of long-term incentive compensation reward increased +Company stock price. +2016-2018 Performance Shares +The following table lists the performance levels set by the Committee for performance share awards granted for the 2016-2018 performance period, the vesting +of which occurred on February 6, 2019 following the Committee's certification of 2016-2018 financial results. +Performance Level +(Percentage of Target Payout) +Cumulative EPS for the 2016-2018 period 1 +Cumulative BVA for the 2016-2018 period 1 +(in millions) +Threshold (50%) +$4.31 +$288.4 +Target (100%) +$4.70 +$317.2 +Goal (150%) +$5.09 +$347.5 +Stretch (200%) +$5.48 +$379.1 +1 Adjusted as described above. +In +February 2019, the Committee evaluated the Company's performance for the 2016-2018 performance period against the criteria set forth in the table above and certified that the Company's performance +on the EPS criteria fell between goal and stretch performance levels and on the BVA criteria was above the stretch performance level. The Committee weighted the EPS attainment ($5.22; 167% of target +performance) at 65% and the BVA attainment ($412.1 million; 200% of target performance) at 35%, resulting in a weighted average performance of 178%. During the 2016-2018 performance period, the +Company's TSR performance was at the 96th percentile of its peer group. +The +following table lists the number of shares that vested for each NEO under the 2016-2018 performance share grant. In calculating the number of shares that vest, the Company uses the stock price on +the date of the grant, which results in the NEOs bearing the risk of stock price performance during the performance period. +Name +Shares Vesting +(#) +Krueger +248,448 +Jeppesen +36,061 +Stornant +35,646 +Woodworth +34,457 +Zwiers +39,805 +2018 Performance Share Awards +In the beginning of 2018, the Committee evaluated each NEO's long-term incentive target payout opportunity expressed as a dollar amount at target grant value +for the grant of performance shares for the 2018-2020 period. Like performance shares granted for the 2017-2019 performance period, performance units are eligible to vest based on achievement of +adjusted +constant-currency EPS goals (weighted 65%) and adjusted constant-currency BVA goals (weighted 35%). An NEO may earn none, some, all, or a multiple of the performance units granted, depending on +Company performance against the EPS and BVA targets and base salary and target bonus percentage over the three-year performance period. For the 2018-2020 performance period, the Committee added a +relative TSR modifier that provides a 25% +2019 +PROXY +STATEMENT +41 +Table of Contents +positive +adjustment for TSR performance in the top quartile of the Company's peer group and a 25% negative adjustment for performance in the bottom quartile of the peer group. +Name +2018-2020 +Target 1 +Krueger +$4,042,500 +2 +Jeppesen +$488,400 +Stornant +$588,000 +Woodworth +$502,320 +Zwiers +$533,400 +1 See footnote 2 to the Summary Compensation Table for the grant date fair value of these awards, which reflects an +accounting valuation of the effect of the TSR modifier. 2 Higher than the 2017 grant value due to a one-time reduction from the target grant value made in 2017. Target value was +not increased in 2018, but no one-time reductions were made in 2018. +The +Company accrues, but does not pay, any dividends on any performance units during the performance period. Once the Committee certifies the Company's performance compared to the pre-determined +performance criteria, the restrictions on some, all, none, or multiple of the performance share units awarded to each NEO will vest, and the NEO will receive accrued dividends only on the shares +actually earned. +The +Committee goes through a rigorous process in setting three-year EPS and BVA performance targets, including a careful review of the Company's prior year business and financial performance, current +year operating plan and future expectations. To achieve threshold level EPS and BVA performance would require over 10% compounded annual growth over the performance period based on 2017 actual +performance. +Restricted Stock Unit Awards +The accompanying table reflects the grant date value of the annual service-based restricted stock unit awards granted to each NEO. +Name +2018 Time-vested +Restricted Stock Units +Krueger +$1,732,513 +1 +Jeppesen +$325,603 +Stornant +$392,010 +Woodworth +$334,903 +Zwiers +$355,605 +1 Higher than the 2017 grant value due to a one-time reduction from the target grant value made in 2017. Target value was +not increased in 2018, but no one-time reductions were made in 2018. +The +Committee generally grants annual equity awards at its regularly scheduled February meeting, and the independent directors of the Board approve equity grants to the CEO generally on the same day +that the Committee meets. Restricted stock units awarded vest 20% on the first and second anniversaries of the grant and 30% on the third and fourth anniversaries. +BENEFITS +Retirement, Deferred Compensation and Welfare Plans +The NEOs participate in Wolverine Worldwide's medical and dental plans and receive life and disability insurance. In 2018, Messrs. Krueger, Jeppesen, +Stornant, and Zwiers also participated in the Wolverine Worldwide Employees' Pension Plan (a defined benefit plan) and the Wolverine World Wide, Inc. 409A Supplemental Executive Retirement Plan +(an unfunded, non-qualified plan). For a description of the benefits under Wolverine Worldwide's retirement plans, see " Pension Plans and 2018 Pension +Benefits " below. +2019 +PROXY +STATEMENT +42 +Table of Contents +All +full time employees of the Company in the United States, including the NEOs, are also eligible to participate in one of Wolverine's 401(k) Plans (the "401(k) Plan"). Pursuant to the 401(k) Plan, +employees, including the NEOs, may elect to defer a portion of their salary and receive a Company match on eligible deferrals of up to 3% of salary for 2018 (4.5% for those who do not participate in +the Pension Plan), subject to limits set forth in the Internal Revenue Code of 1986, as amended. In 2016, the Company adopted the Wolverine Worldwide Executive Deferred Compensation Plan (the +"Deferred Compensation Plan"). This plan allows directors, executives and other eligible senior employees of the Company to elect to defer a portion of their eligible compensation. Wolverine Worldwide +may, but need not, credit a participant with an additional discretionary Company contribution. No discretionary Company contributions were made in 2018. The Company adopted the Deferred Compensation +Plan as a retention and recruitment tool to facilitate retirement savings and provide financial flexibility for key employees, and because many of the companies with which it competes for executive +talent provide similar plans to their key employees. For a description of the benefits under the Deferred Compensation Plan, see " Nonqualified Deferred +Compensation " below. +Perquisites +The Company provides limited perquisites to NEOs. The Company feels the perquisites that are provided round out a competitive total compensation package for +each NEO. For details on perquisites, see footnote 6 to the "Summary Compensation Table" on page 48. +POST-EMPLOYMENT COMPENSATION +Each NEO is party to an Executive Severance Agreement that provides for certain payments and benefits upon termination of employment after a +change in control of Wolverine Worldwide. The Board believes Executive Severance Agreements will motivate management to actively pursue a business transaction that is in the best interests of the +shareholders, even if it could ultimately result in his or her job elimination, and also will promote management stability during the transition period accompanying +a change in control. Each NEO is eligible to receive compensation if his employment is terminated within two years (Messrs. Jeppesen, Stornant, Woodworth and Zwiers) or three years +(Mr. Krueger) following a change in control of Wolverine Worldwide. Even following a change in control, an NEO does not receive payment under the Executive Severance Agreement if his employment +terminates: +• Due to death or retirement in accordance with Wolverine Worldwide's policy or as otherwise agreed, +• For cause or disability, or +• By resignation of the NEO, other than for "good reason," which is discussed under the heading "Benefits Triggered by Termination Other than For +Cause or for Good Reason" and the heading "Benefits Triggered Upon a Change in Control," both under the heading "Potential Payments Upon Termination or Change in Control" +NEOs +may also be eligible under Wolverine Worldwide's retirement plans or equity plans to receive certain payments and benefits upon termination of employment or in connection with a change in control +as described in the " Potential Payments Upon Termination or Change in Control " section of this Proxy Statement. +Mr. Krueger +is also party to a 2008 Separation Agreement under which he receives certain payments and benefits if the Company terminates his employment, even if not following a change in +control, other than for "cause" or if he terminates his employment for "good reason." The Committee determined upon appointing Mr. Krueger as CEO that, given the Company's strategic initiatives +the Board had asked him to lead, it was appropriate for the Company to enter into a separation arrangement. +The +Company includes accelerated retirement vesting provisions for equity awards, provided certain conditions are met, and for the payout of a prorated annual bonus for a qualifying retirement more +than six months into the fiscal year. Details on these provisions and information on benefits payable to Mr. Krueger under his Separation Agreement and to each of the NEOs under the Executive +Severance Agreements, as well as information on the other retirement and equity plans of Wolverine Worldwide, are included in the " Potential Payments Upon Termination or Change +in Control " section of this Proxy Statement. +SAY ON PAY ADVISORY VOTE +We asked shareholders to vote on a "say-on-pay" advisory vote on our executive compensation in 2018. Shareholders expressed substantial +support for the compensation of our named executive officers, with approximately 94% of the votes cast for the "say- on-pay" advisory vote. The Committee carefully evaluated the results of the 2018 +advisory vote. The Committee also considers many other factors in evaluating our +2019 +PROXY +STATEMENT +43 +Table of Contents +executive +compensation programs as discussed in this Compensation Discussion and Analysis, including the Committee's assessment of total stockholder return, the interaction of our compensation +programs with our corporate business objectives, evaluations of our programs by external consultants, and review of peer group and survey data, each of which is evaluated in the context of the +Committee's fiduciary duty to act as the directors determine to be in shareholders' best interests. While each factor bore on the Committee's decisions regarding our named executive officers' +compensation, the Committee made no changes to our executive compensation program and policies directly as a result of the 2018 say on pay advisory vote. +COMPENSATION SETTING PROCESS +Setting Targets +The Committee goes through a rigorous process in setting performance targets, including a careful review of the Company's prior year business +and financial performance, current year operating plan, and future expectations. The Committee engages with management in this process over several months leading up to setting final annual bonus and +three-year performance targets in February. +Competitive Philosophy and Competitive Market Data +When making compensation recommendations and decisions, the Committee considers the CEO's assessment of the performance of each NEO, other +than himself; the performance of the individual and the individual's respective business unit or function; the scope of the individual's responsibilities, years of experience with the Company (or in +similar positions with other companies), skills and knowledge; market compensation data; market and economic conditions; Company performance; retention +considerations; and Wolverine Worldwide's compensation philosophy (collectively, the "compensation factors"). The Committee considers these compensation factors both subjectively and objectively, and +no single factor or combination of factors is determinative. With respect to CEO compensation, the Committee seeks to set compensation in line with the anticipated market median for a given year. +The +Committee uses market surveys and Peer Group (as defined below) information provided by its compensation consultant as market reference points. The Committee also considers information the Company +learns through recruiting NEOs and the experience levels and responsibilities of NEOs prior to joining the Company as reference points in setting NEO compensation. +As +part of its competitive data review in connection with determining 2018 compensation, the Committee considered information presented by its consultant Frederick W. Cook & Co. ("FW +Cook") based on publicly-disclosed Peer Group information and on two published surveys: (1) 2017 Willis Towers Watson (WTW) CDB Executive Compensation Survey Report; and (2) 2017 US MBD +Mercer Benchmark Database Executive Survey. +Peer Group +Below is the peer group used in late 2017 and early 2018 in connection with 2018 compensation decisions. In determining the Peer Group, the +Committee considered each potential peer company's industry, channels of distribution, revenue and market capitalization. The Company also considered the typicality of a company's pay practices, +excluding companies whose chief executive may not receive market compensation because of a founder relationship, family ownership position, or other similar relationships. +American Eagle Outfitters Inc. +Chico's FAS, Inc +Express, Inc. +Guess?, Inc. +The Children's Place, Inc. +Ascena Retail Group, Inc. +Coach, Inc. +Foot Locker, Inc. +Hanesbrands Inc. +Caleres, Inc. +Deckers Outdoor Corporation +G-III Apparel Group, Ltd. +Kate Spade & Co +Carter's, Inc. +DSW Inc. +Genesco Inc. +Skechers, Inc. +CEO Role +Within the framework of the Company's executive compensation program, the CEO recommends the level of base salary, annual bonus, long-term +incentive compensation, equity awards and other compensation components for his direct reports, including the other NEOs. The CEO bases his recommendation upon his assessment of the compensation +factors applicable to each NEO. The CEO considers these +2019 +PROXY +STATEMENT +44 +Table of Contents +compensation +factors both objectively and subjectively, and no single factor is determinative. The Committee discusses these recommendations with the CEO prior to setting the compensation for each +NEO, other than the CEO. The Committee, however, ultimately determines all compensation for NEOs other than the CEO, whose compensation is determined by the independent directors as a whole. +Compensation Consultant Role +FW Cook was first engaged as the Committee's independent compensation consultant in 2016 and reports directly to the Committee. The Committee +determines the scope of engagement and may replace the consultant or hire additional consultants at any time. The Committee has evaluated FW Cook's independence under the rules established by the NYSE +and has determined that FW Cook is "independent" as defined by NYSE rules. In addition, the Committee has evaluated whether the engagement of FW Cook raised any conflicts of interest and has +determined that no such conflicts of interest exist. +At +the Committee's invitation, a representative of FW Cook generally attends all Committee meetings and also communicates with the Committee Chair and management regularly between meetings. However, +the Committee makes all decisions regarding NEO compensation. FW Cook provides various executive compensation services to the Committee pursuant to a consulting agreement with the Committee. +Generally, these services include advising the Committee on the principal aspects of the Company's executive compensation program, evolving industry practices, and providing market information and +analysis regarding the competitiveness of the Company's program design. +During +2018, FW Cook performed the following specific services: +• Attended Committee meetings, as requested +• Reviewed the Company's peer group and advised the Committee on the composition of the peer group +• Reviewed survey data for competitive comparisons +• Provided market data and recommendations on CEO and other NEO compensation +• Advised the Committee on market trends related to compensation policies and programs +• Proactively advised the Committee on best practice approaches for governance features of executive compensation programs +• Reviewed the Compensation Discussion & Analysis and other executive compensation related disclosures included in the Company's Proxy +Statement +The +total fees the Company paid to FW Cook for services to the Committee in 2018 were $94,408, less than 1% of FW Cook's total consulting income during the same period. The Company did not pay or +incur any other fees to or with FW Cook. +OTHER COMPENSATION POLICIES AND PRACTICES +NEO Stock Ownership Guidelines +Each NEO, as well as each non-employee director, must attain (and maintain) a minimum stock ownership level (including owned shares, a certain +level of performance shares and restricted shares, and the in the money value of vested stock options) prior to being able to gift or sell any Company stock. During 2018, each NEO complied with the +requirements of these guidelines. +Covered Positions +Guideline +CEO +6x Annual Salary +Other NEOs +2x Annual Salary +Non-Employee Directors +6x Annual Cash Retainer +Stock Hedging and Pledging Policies +Under the Company's Insider Trading Policy, all directors, officers and other employees are prohibited from engaging in any hedging +transactions involving Company securities beneficially owned by them. The Company also considers it inappropriate for any such person to engage in speculative transactions in the Company's securities, +including short sales, publicly traded options, margin accounts and pledges +2019 +PROXY +STATEMENT +45 +Table of Contents +and +standing and limit orders. Also, all directors, officers and other employees are prohibited from pledging Company securities as collateral for a loan. +Clawback Policy +The Company has adopted a clawback policy which empowers the Board or a committee of the Board to seek recovery of specified incentive +compensation received by executive officers under specific circumstances where there is a material restatement of the Company's financial results that would have led to a lower level of incentive +compensation payout. +Impact of Accounting and Tax Treatments on Compensation +The Tax Cuts and Jobs Act on December 22, 2017 eliminated the Section 162(m) performance-based compensation exemption, so the +grants and awards made in 2018 are not eligible for such exemption. Even prior to the elimination of the performance-based compensation exemption, Wolverine Worldwide did not require all of its +compensation programs, including programs under the plans listed above, to fit the performance-based compensation exemption under Section 162(m) because it believes it is important to preserve +flexibility in administering compensation programs in a manner designed to promote varying corporate goals. Wolverine Worldwide has and in the future may continue to pay compensation that is limited +in whole or in part as to tax deductibility. +2019 +PROXY +STATEMENT +46 +Table of Contents +Compensation Committee Report +The +Committee has reviewed and discussed with management the information provided under the heading "Compensation Discussion and Analysis." Based on this review and discussion, the +Committee recommended to the Board of Directors that the Company include the Compensation Discussion and Analysis section in this Proxy Statement and incorporate it by reference into the Company's +Annual Report on Form 10-K. +Respectfully +submitted, +Nicholas +T. Long (Chair) +Jeffrey M. Boromisa +Gina R. Boswell +William K. Gerber +Joseph R. Gromek +Compensation Committee Interlocks and Insider Participation. During fiscal year 2018, none of the members of the Compensation Committee was an officer or employee +of the Company, was a former officer of the Company, nor had a relationship with the Company requiring disclosure as a related party transaction under Item 404 of Regulation S-K of the +Securities Act of 1933. None of the Company's executive officers served on the compensation committee or board of directors of another entity whose executive officer(s) served as a director on the +Company's Board or on the Compensation Committee. +2019 +PROXY +STATEMENT +47 +Table of Contents +Summary Compensation Table +1 Includes any amounts deferred under the Company's qualified 401(k) plan and, for Mr. Stornant, the Deferred Compensation +Plan. 2 Includes the grant date fair value of restricted stock unit awards and performance unit awards, as follows for 2018: +Name +Service-based Restricted Stock Unit Value +Performance Unit Value +Total +Krueger +$1,732,513 +$4,437,263 +$6,169,776 +Jeppesen +$325,603 +$536,112 +$861,715 +Stornant +$392,010 +$645,432 +$1,037,442 +Woodworth +$334,903 +$551,389 +$886,292 +Zwiers +$355,605 +$585,510 +$941,115 +2019 +PROXY +STATEMENT +48 +Table of Contents +Restricted stock or restricted stock units, as applicable, were valued using the closing market price of Wolverine Worldwide common stock on the date of +the grant of the respective award. Performance units were valued using the closing market price of Wolverine Worldwide common stock on the date of grant of the respective award and assuming target +performance for all performance periods, with an adjustment to value for the TSR modifier for 2018, all consistent with ASC Topic 718. Assuming maximum payout, the aggregate grant date fair value of +performance shares awarded in 2018 for each NEO (and, in parenthesis, the maximum value is combined with the grant date fair value of restricted stock unit awards for 2018) would have been: +$33,615,578 ($35,348,091) for Mr. Krueger; $3,308,335 ($3,643,238) for Mr. Jeppesen; $3,872,589 ($4,264,599) for Mr. Stornant; $3,308,335 ($3,643,238) for Mr. Woodworth and +$3,513,060 ($3,868,665) for Mr. Zwiers. Restrictions on such performance unit awards will lapse in the February following the last year of the applicable performance period, if at all, based on +the Company's performance for the period (capped at 200%), potential +/- 25% adjustments for relative TSR performance, and base salary and target bonus percentage over the three-year performance +period. The actual value of shares that vest is also dependent on the stock price at the time of vesting. For additional valuation assumptions, see the Stock Based Compensation footnote to Wolverine +Worldwide's Consolidated Financial Statements for the fiscal year ended December 29, 2018 included in its Form 10-K for this year. 3 Represents the aggregate grant date +fair value of stock options granted in the years shown, calculated in accordance with ASC Topic 718. Stock options were valued +using the Black Scholes Merton model. For additional valuation assumptions, see the Stock-Based Compensation Note to Wolverine Worldwide's Consolidated Financial Statements for the fiscal year ended +December 29, 2018 included in its Form 10-K for this year. 4 Reflects the sum of performance bonus and individual bonus amounts, as adjusted by any applicable modifier, +earned in 2018, 2017 and 2016, respectively, and paid in +2019, 2018 and 2017 respectively. For Mr. Stornant, includes amounts deferred under the Deferred Compensation Plan. 5 All amounts in this column reflect, where applicable, +the aggregate change in the actuarial present value of the accumulated benefits under the Wolverine Worldwide +Employees' Pension Plan ("Pension Plan") and Wolverine World Wide, Inc. 409A Supplemental Executive Retirement Plan ("SERP") for Messrs. Krueger, Jeppesen, Stornant and Zwiers, and +benefits under the Stride Rite Retirement Income Plan for Mr. Woodworth. The amounts in the table were determined using assumptions consistent with those used in Wolverine Worldwide's +Consolidated Financial Statements for each respective year. See the "Pension Plans and 2018 Pension Benefits" section starting on page 57. 6 The amounts listed in this column +for 2018 include Wolverine Worldwide's matching contributions to the accounts of the NEOs under Wolverine Worldwide's 401(k) plans, +payments made by Wolverine Worldwide for the premiums on certain life insurance policies, tax and estate planning services, health care reimbursements and, in one instance, a car allowance, in the +amounts listed in the table below. +Name +401(k) Match +Tax and Estate Planning +Health +Life Insurance Premiums +Car Allowance +Krueger +$8,250 +$7,970 +$18,705 +$1,523 +$0 +Jeppesen +$8,250 +$0 +$21,148 +$850 +$0 +Stornant +$8,250 +$0 +$20,570 +$3,030 +$0 +Woodworth +$12,375 +$7,970 +$17,570 +$812 +$7,000 +Zwiers +$8,250 +$7,970 +$21,148 +$3,018 +$0 +2019 +PROXY +STATEMENT +49 +Table of Contents +Grants of Plan-Based Awards in Fiscal Year 2018 +The +following table provides information concerning each grant of an award made to the NEOs in fiscal year 2018: +2019 +PROXY +STATEMENT +50 +Table of Contents +1 Estimated payout levels relating to the performance bonus and individual bonus. Maximum amount assumes stretch revenue and pretax earnings performance and achievement +of the maximum backlog adjustment. For a description of these bonuses and the payouts under them, see pages 35-40. 2 Estimated payout levels of performance stock units granted +under the Stock Incentive Plan of 2016, as amended (the "Stock Incentive Plan of 2016") for the 2018-2020 +performance period. Restrictions on such performance unit awards will lapse in the February following the last year of the applicable performance period, if at all, based on the Company's performance +for the period (capped at 200%), potential +/- 25% adjustments for relative TSR performance, and base salary and target bonus percentage over the three-year performance period. The actual value of +shares that vest is also dependent on the stock price at the time of vesting. The Company accrues, but does not pay, dividends on the performance shares during the performance period. At the end of +the applicable performance period, the Company will pay to the NEO the accrued dividends (if any) on the performance shares for which the restrictions lapse. For a description of the performance units +granted in 2018 under the Stock Incentive Plan of 2016, see pages 40-42. 3 The Company awarded service-based restricted stock unit awards under the Stock Incentive Plan of 2016 +for all NEOs. 20% of the units received under the awards +reflected in this column vest on each of the first and second anniversaries of the date of grant of the award and 30% on the third and fourth anniversaries of the date of grant of the award. All +restricted stock units vest upon an NEO's death, disability or retirement. Holders of restricted stock units are entitled to receive dividend equivalents on restricted stock units. 4 Represents the award date fair value for performance stock units and service-based restricted stock unit awards made in fiscal year 2018, determined as described in +footnote 2 to the "Summary Compensation Table." +2019 +PROXY +STATEMENT +51 +Table of Contents +Outstanding Equity Awards at 2018 Fiscal Year-End +The +following table provides information concerning options and stock awards that have not vested for each NEO outstanding as of December 29, 2018: +2019 +PROXY +STATEMENT +52 +Table of Contents +1 All stock options become exercisable as to one third of the shares subject to the stock option on each of the first three anniversaries of the date of the grant. Stock +option vesting may accelerate upon certain events, including death, disability or voluntary termination after attaining age 62 or age 50, with seven years of service (age 59, with ten years of service +for 2016 and later grants) with the Company, subject to certain conditions. +2019 +PROXY +STATEMENT +53 +Table of Contents +2 The following table sets forth the vesting dates for the unvested service-based restricted stock or stock unit awards of each NEO as of December 29, +2018: +Named +Executive +Officer +Vesting +Date +Number of Shares to Vest +Krueger +02/07/19 +10,879 +02/08/19 +13,839 +02/10/19 +31,571 +02/11/19 +57,043 +02/07/20 +10,879 +02/08/20 +20,759 +02/10/20 +31,572 +02/11/20 +37,233 +02/07/21 +16,319 +02/08/21 +20,759 +02/10/21 +63,144 +02/07/22 +16,319 +Jeppesen +02/07/19 +2,044 +02/08/19 +2,620 +02/10/19 +8,861 +02/11/19 +6,082 +07/13/19 +2,500 +10/08/19 +10,000 +02/07/20 +2,045 +02/08/20 +3,930 +02/10/20 +8,861 +02/11/20 +4,554 +07/13/20 +2,500 +02/07/21 +3,067 +02/08/21 +3,930 +02/10/21 +17,723 +07/13/21 +5,000 +02/07/22 +3,067 +Stornant +02/07/19 +2,461 +02/08/19 +3,114 +02/10/19 +10,269 +02/11/19 +3,042 +06/12/19 +1,069 +02/07/20 +2,462 +02/08/20 +4,671 +02/10/20 +10,270 +02/11/20 +1,983 +06/12/20 +2,138 +02/07/21 +3,692 +02/08/21 +4,671 +02/10/21 +20,539 +02/07/22 +3,693 +2019 +PROXY +STATEMENT +54 +Table of Contents +Named +Executive +Officer +Vesting +Date +Number of Shares to Vest +Woodworth +02/07/19 +2,103 +02/08/19 +2,929 +02/10/19 +6,038 +02/11/19 +4,267 +02/07/20 +2,103 +02/08/20 +4,393 +02/10/20 +6,038 +02/11/20 +2,785 +02/07/21 +3,154 +02/08/21 +4,393 +02/10/21 +12,076 +02/07/22 +3,155 +Zwiers +02/07/19 +2,233 +02/08/19 +3,110 +02/10/19 +9,788 +02/11/19 +8,670 +02/07/20 +2,233 +02/08/20 +4,664 +02/10/20 +9,788 +02/11/20 +5,647 +02/07/21 +3,349 +02/08/21 +4,665 +02/10/21 +19,576 +02/07/22 +3,350 +3 The dollar values are calculated using a per share stock price of $32.41, the closing price of Wolverine Worldwide common stock on December 28, 2018, the last +business day of fiscal year 2018. 4 Following the end of the applicable three-year performance period, restrictions may lapse on some, all or none of the performance shares +depending upon the Company's +achievement of the relevant EPS and BVA performance criteria. Shares actually vested for the 2016-2018 cycle are included in the "Number of Shares or Units of Stock That Have Not Vested" column. +Stretch performance was assumed for the 2017-2019 cycle and performance between goal and stretch was assumed for the 2018-2020 cycles. +2019 +PROXY +STATEMENT +55 +Table of Contents +Option Exercises and Stock Vested in Fiscal Year 2018 +Option Awards +Stock Awards +Number of Shares +Acquired on Exercise +(#) +Value Realized +on Exercise 1 +($) +Number of Shares +Acquired on Vesting +(#) +Value Realized +on Vesting 2 +($) +Krueger +— +— +163,131 +$5,118,562 +Jeppesen +96,791 +$3,357,161 +26,273 +$850,465 +Stornant +43,800 +$1,418,315 +11,265 +$359,201 +Woodworth +— +— +17,888 +$563,959 +Zwiers +82,600 +$2,460,122 +26,781 +$841,239 +1 The Company calculates the dollar values by multiplying the number of shares of common stock acquired upon exercise by the difference between the +exercise price and the closing price of the Company common stock on the exercise date. 2 The Company calculates the dollar values using the closing price of Wolverine Worldwide +common stock on the date of vesting. +2019 +PROXY +STATEMENT +56 +Table of Contents +Pension Plans and 2018 Pension Benefits +Wolverine +Worldwide maintains the following defined benefit retirement plans covering Messrs. Krueger, Jeppesen, Stornant, and Zwiers: (1) the Wolverine Worldwide +Employees' Pension Plan ("Pension Plan"), which is a funded and tax-qualified defined benefit plan under the Internal Revenue Code that covers eligible employees, and (2) the Wolverine World +Wide, Inc. 409A Supplemental Executive Retirement Plan ("SERP"), which is an unfunded, non-qualified plan that covers individuals recommended by the CEO and approved by the Compensation +Committee. Mr. Woodworth does not participate in these plans, but has "frozen" benefits under the Stride Rite Corporation Retirement Income Plan ("SR Plan"). +QUALIFIED PENSION PLANS +Participants vest in the Pension Plan after five years of qualifying service. Subject to the limitations imposed by the Internal Revenue Code, +the Pension Plan generally pays a monthly benefit in an amount equal to a percentage of the participant's final average monthly earnings multiplied by his or her number of years of service. For +purposes of this benefits formula, the Pension Plan caps years of service at 25 (30 for non-SERP participants), and the percentages of final average monthly earnings are 2.4% for Mr. Krueger +and 2.0% for Messrs. Jeppesen, Stornant, and Zwiers. "Earnings" as used in this Pension Plan formula generally includes base salary and annual bonus, less Social Security allowance, and for +2018 was capped at $275,000, the IRS limit applicable to tax qualified plans. +Upon +retirement, a participant may elect to receive the benefit in the form of a life annuity, 5 or 10-year certain annuities, or joint and 50%, joint and 75%, or joint and 100% survivor annuities. +The payments are actuarially adjusted based on the participant's election. Any election, other than an election to receive life annuity benefits, reduces the monthly benefit payable. The "normal" age +at which benefits may be drawn under the plan is 65. Mr. Krueger is currently the only NEO eligible to begin drawing early retirement benefits under the Pension Plan, as described in the +"Benefits Triggered By Retirement, Death or Permanent Disability" section of this Proxy Statement. +SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN +Messrs. Krueger, Jeppesen, Stornant, and Zwiers participate in the SERP, which provides retirement benefits above amounts available +under the Company's tax qualified Pension Plan. The SERP benefit generally equals the difference between the participant's retirement benefit under the Pension Plan and the benefits the participant +would have received if there were no IRS imposed cap on earnings when calculating the Pension Plan benefit. The SERP caps years of service at 25 in calculating a participant's benefit. The SERP also +allows a retired participant who has five years of service to draw earlier (beginning at age 55) and on different terms than under the Pension Plan. A participant's earnings percentage +multiplier is the same under the SERP as it is under the Pension Plan (2.4% for Mr. Krueger and 2.0% for Messrs. Jeppesen, Stornant, and Zwiers). The Compensation Committee may grant +additional deemed years of service under the SERP to a participant, subject to the cap of 25 years. The full benefit of any additional years of deemed service is paid under the SERP. +Mr. Krueger reached the 25-year cap in 2012. +If +a retired participant draws the SERP benefit prior to age 65, the reduction factor is 0.333% for each month prior to age 60, and 0.1666% for each month between age 60 and age 65. As of the end of +fiscal year 2018, Mr. Krueger was the only NEO eligible to retire and begin drawing early benefits under the SERP. +SERP +benefits are paid monthly, and the SERP has a lump sum payment option in the event of death or termination of employment after a change in control. The SERP also includes a disability benefit and +a death benefit payable to the participant's designated beneficiary if the participant dies before retiring. The SERP provides for lump sum payments equal to 125% of the net present value of accrued +benefits without regard to any reduction for early payment to participants who resign for good reason or are terminated by Wolverine other than for cause or due to death or disability within two years +(Messrs. Jeppesen, Stornant, and Zwiers) or three years (Mr. Krueger) after a change in control. +The +SERP also contains non-competition, confidentiality and employee non-solicitation provisions in favor of Wolverine Worldwide. Under the SERP non-competition provisions, a participant is not +entitled to any benefit payment if the participant enters into certain relationships +2019 +PROXY +STATEMENT +57 +Table of Contents +with +a competing business prior to the date on which such benefit payment is due. If the participant's employment is terminated for serious misconduct, or if Wolverine Worldwide cannot collect under +an insurance policy purchased to fund SERP benefits for certain reasons, the Company may terminate a participant's benefits under the SERP. Wolverine Worldwide may terminate the SERP or stop further +accrual of SERP benefits for a participating NEO at any time, but termination will not affect previously accrued benefits. +PENSION BENEFITS IN FISCAL YEAR 2018 +The following table provides for each NEO certain information concerning each plan that provides for payments or other benefits at, following, +or in connection with retirement: +Plan Name +Number of Years +Credited Service +(#) +Present Value of +Accumulated Benefit 1 +($) +Payments During +Last Fiscal Year +($) +Krueger +SERP +25 +$18,445,053 2 +- +Pension +23 +$2,072,481 +- +Jeppesen +SERP +7 +$957,258 +- +Pension +7 +$419,545 +- +Stornant +SERP +22 +$1,801,190 +- +Pension +22 +$932,685 +- +Woodworth 3 +SERP +- +- +- +Pension +- +- +- +SR Plan +3 +$120,072 +- +Zwiers +SERP +21 +$2,471,820 +- +Pension +21 +$820,579 +- +1 These values are as of December 29, 2018, and are calculated assuming the participants will commence their benefits at age 65 (in the form of +the annuity elected by the NEO) and use the RP-2014 mortality tables for males and females (post retirement), white collar for SERP and no collar for Pension Plan or SR Plan, projected +back to 2006 with MP-2014, projected forward with generational projection using a modified MP-2018 projection scale and the following discount rates: 4.45% Pension Plan; 4.46% SERP; +4.47% SR Plan. 2 The present value of Mr. Krueger's accumulated benefit under the SERP is $1,638,573 greater when taking into account his deemed years of +service. Mr. Krueger was previously granted three additional service years in 1996 in recognition of his service as a member of Wolverine Worldwide's executive team for three +years before becoming a participant in the SERP, and additional deemed years of service were previously granted as part of Mr. Krueger's CEO compensation. The present value of +Mr. Krueger's SERP benefit would be $16,806,480 if 23 service years were used to calculate his benefit. Mr. Krueger reached 25 years of service in 2012, the +maximum years of service permitted under the SERP, and will not accrue any further years of service under the SERP. 3 Mr. Woodworth does not participate in the Pension Plan +or SERP but has "frozen" benefits under the SR Plan. +2019 +PROXY +STATEMENT +58 +Table of Contents +Non-Qualified Deferred Compensation +Wolverine +Worldwide maintains a Deferred Compensation Plan. This unfunded and non-qualified plan allows executives and other eligible senior employees of the Company to elect to defer all or a portion +of their base salary, cash bonus, or other performance-based cash compensation. Wolverine Worldwide may, but need not, credit a participant's account under the plan with additional discretionary +Company contributions, which may be subject to a vesting schedule and which would vest in full on a change in control. Amounts deferred pursuant to the Deferred Compensation Plan may be invested, at +the direction of the participant, in an +investment fund, index, or other investment vehicle, as designated by the Compensation Committee to be available under the plan, and earnings, if any, are credited to the participant's account. +Accounts +are paid out upon the earliest to occur of (i) a qualifying separation from service, (ii) a change in control (as such term is defined in the Deferred Compensation Plan), and +(iii) a termination of the Deferred Compensation Plan. Payment must generally be made, or installment payments must begin, (as elected by the participant at the time of deferral), within +60 days of the event triggering payment. +Mr. Stornant +is the only NEO who has elected to defer amounts under the Deferred Compensation Plan. Wolverine Worldwide did not make any discretionary Company contributions on behalf of +Mr. Stornant or any other NEO during 2018. +NONQUALIFIED DEFERRED COMPENSATION +Name +Executive +Contributions +in 2018 +($) +Registrant +Contributions +in 2018 +($) +Aggregate Earnings +in 2018 +($) +Aggregate +Withdrawals / +Distributions +($) +Aggregate Balance +at Last FYE +($) +Stornant +- +- +$163 1 +- +$13,666 +1 Reflects market-based earnings on amounts credited to Mr. Stornant under the Deferred Compensation Plan. +2019 +PROXY +STATEMENT +59 +Table of Contents +Potential Payments Upon Termination or Change in Control +Wolverine +Worldwide has entered into an Executive Severance Agreement with each NEO that provides certain rights, including the right to receive payments in the event of a +termination of employment following a change in control. The Company also has entered into an agreement with Mr. Krueger regarding certain termination benefits in the event of termination of +his employment under certain other circumstances described below. +BENEFITS TRIGGERED BY TERMINATION FOR CAUSE OR VOLUNTARY TERMINATION +An NEO is not entitled to receive any additional forms of severance payments or benefits upon termination of employment for Cause or upon the +NEO's voluntary decision, other than for Good Reason, to terminate his employment, as discussed in further detail below. +BENEFITS TRIGGERED BY TERMINATION OTHER THAN FOR CAUSE OR FOR GOOD REASON +Mr. Krueger entered into a Separation Agreement on March 13, 2008, which states that upon termination of his employment by +Wolverine Worldwide without Cause, or termination by Mr. Krueger with Good Reason, as such terms are defined in Mr. Krueger's Separation Agreement, Wolverine Worldwide will pay +Mr. Krueger the following payments in exchange for a general release of claims in favor of Wolverine Worldwide: (1) continued base salary for 18 months (reduced by payments he +receives if he is employed by a Competing Business, as defined in Mr. Krueger's Separation Agreement); (2) the pro rata portion of the annual incentive bonus and the three year bonus for +all uncompleted performance periods based on actual corporate performance for the applicable performance periods; (3) the pro rata portion of the annual individual performance bonus relating to +personal performance objectives; and (4) retiree medical benefits for Mr. Krueger, his spouse and dependents for a period starting on the day after the termination date and ending on the +last day of the 18th month following the month in which the termination date falls. +"Cause" +generally is defined in Mr. Krueger's Separation Agreement to mean: (1) any act or omission knowingly undertaken or omitted with the intent of causing material damage to +Wolverine Worldwide; (2) any intentional act involving fraud, misappropriation or embezzlement, that causes material damage to Wolverine Worldwide; (3) repeated willful failure to +substantially perform any of his significant duties as reasonably directed by the Board of Directors of Wolverine Worldwide; (4) a conviction (including any plea of guilty or nolo contendere) +of any criminal act that (a) results in the executive serving prison time and not being able to perform the normal duties of his position for more than thirty (30) days; or +(b) causes material damage to Wolverine Worldwide; or (5) chronic or habitual use or consumption of drugs or alcohol that causes material damage to Wolverine Worldwide. +"Good +Reason" generally is defined in Mr. Krueger's Separation Agreement to mean: (1) a material reduction in base compensation, including a reduction in base salary or opportunities +under Wolverine Worldwide's bonus plans or equity plans (other than those implemented for the executive team as a whole); (2) a material reduction in authority, duties, or responsibilities; +(3) a requirement to +report to a Company officer or employee instead of reporting directly to the Board of Directors; or (4) certain relocations, other than those related to a change in the location of Wolverine +Worldwide's headquarters affecting a majority of the executive team. +BENEFITS TRIGGERED UPON A CHANGE IN CONTROL +Benefits Upon Termination Following a Change in Control. Under the Executive Severance Agreements entered into with the NEOs, payments and benefits are triggered +when employment is terminated without "Cause" or when an executive terminates employment for +2019 +PROXY +STATEMENT +60 +Table of Contents +"Good +Reason" within two years (Messrs. Jeppesen, Stornant, Woodworth, and Zwiers) or three years (Mr. Krueger) following a change in control of Wolverine Worldwide. +Upon +such a qualifying termination, Wolverine Worldwide will pay the lump sum severance payment under the Executive Severance Agreement composed of the following: (1) unpaid base salary and +bonus payments that had been earned; (2) in lieu of a bonus payment under the Annual Bonus Plan, an amount equal to the quotient of the number of days the NEO was employed by Wolverine +Worldwide, or any successor company in the year of termination, divided by the number of days in the year, multiplied by 100% of the greater of either (a) the bonus awarded to the NEO under the +annual bonus plan for the preceding year and (b) the average paid to the NEO over the preceding two year period under the annual bonus plan; (3) in lieu of payments under the various +three year performance periods that remain open on the date of termination, if any, an amount equal to the bonus the NEO would have received based on actual and assumed performance measures, +multiplied by the quotient of the number of days the NEO participated in the performance period prior to the termination, divided by the total number of days in the performance period (in determining +the earnings per share or other performance measures that can be determined annually for any year subsequent to the year of termination, performance will equal the level required to attain the maximum +goal under the three year plan for that year); (4) either two (Messrs. Jeppesen, Stornant, Woodworth, and Zwiers) or three (Mr. Krueger) times the sum of (a) the NEO's +highest annual base salary during the 12 month period prior to termination and (b) the greater of (i) the average amount earned by the NEO during the previous two years under the +annual bonus plan and (ii) the amount earned during the previous year under the Annual Bonus Plan; (5) 100% of the positive spread for any stock options held by the NEO on the date of +termination, whether or not vested; (6) in the case of Messrs. Krueger, and Zwiers, an excise tax gross up adjustment (note: the agreements with Messrs. Jeppesen, Stornant, and +Woodworth were entered into after 2008, and the Committee determined to not provide such gross ups after that date); and (7) in the case of Messrs. Jeppesen, Stornant, and Zwiers, the +present value of an additional three years of deemed service under the Pension Plan and SERP. Upon a termination of employment following a change of control, Wolverine Worldwide or any successor +company will maintain for a period of six months to one year the NEO's benefits under the then current benefit plans, programs or arrangements that the NEO was entitled to participate in immediately +prior to the termination date. In addition, Wolverine Worldwide or any successor company will provide outplacement services through the last day of the second calendar year following the calendar year +of termination. +"Change +in Control" under the Executive Severance Agreements generally means certain changes in composition of the Board of Directors, certain acquisitions of 20% or more of Wolverine Worldwide's +common stock or combined outstanding voting power of Wolverine World Wide, Inc., and other specified reorganizations, mergers, consolidations, liquidations, dissolutions or distributions of +substantial assets (unless such transactions result in the creation of an entity in which at least 50% of the common stock and combined voting power is owned by the owners of record prior to the +transaction, no single shareholder owns more than 20% of the combined voting power and a majority of the board remains unchanged). +"Cause" +is defined under the Executive Severance Agreements to generally mean the willful and continued failure to substantially perform duties or willfully engaging in gross misconduct that is +injurious to the Company. +"Good +Reason" is defined under the Executive Severance Agreements to generally mean: (1) any materially adverse change in position, duties, responsibilities or title, or any removal, +involuntary termination or failure to re-elect an officer; (2) a reduction in annual base salary; (3) any relocation or requirement to substantially increase business travel; +(4) the failure to continue providing any executive incentive plans or bonus plans; (5) the failure to continue any employee benefit plan or compensation plan unless a comparable plan is +available; (6) the failure to pay any salary, bonus, deferred compensation or other compensation; (7) the failure to obtain an assumption agreement from any successor; (8) any +purported termination of the employment which is not effected in a manner prescribed by the Executive Severance Agreement; or (9) any other material breach by Wolverine Worldwide or any +successor company of its obligations under the Executive Severance Agreement. +Benefits Upon a Change in Control Only. For 2017 and future years, the Company adopted double-trigger equity vesting, meaning that equity vesting only accelerates +upon a qualifying termination of employment after a change in control. For grants prior to 2017, upon a change in control of Wolverine Worldwide, absent a determination by the Compensation Committee +to the contrary, outstanding stock options become immediately exercisable in full and will remain exercisable during their remaining term, regardless of whether the NEO remains an employee of +Wolverine Worldwide, or any successor company. The Committee may determine that one or all of the NEOs shall receive cash in an amount equal to the positive spread amount associated with these +options. In addition, upon a change in control of Wolverine Worldwide, all other outstanding equity incentive awards of the NEOs that were granted prior to 2017, including shares of restricted stock, +2019 +PROXY +STATEMENT +61 +Table of Contents +become +immediately and fully vested and non-forfeitable. To the extent that the Company has made discretionary contributions under the Deferred Compensation Plan that are subject to a vesting +schedule, any unvested portion of these contributions will vest on a change in control. Change in control for this purpose generally means certain changes in the composition of the Board of Directors, +certain acquisitions of 20% of Wolverine Worldwide's common stock (50% in the case of the Deferred Compensation Plan) and other specified reorganizations, mergers, consolidations, liquidations, +dissolutions or dispositions of substantial assets. +Excise Tax Gross Up. The Compensation Committee previously determined that Wolverine Worldwide would not provide excise tax gross up payments in employment +agreements entered into after 2008. Messrs. Krueger and Zwiers are the only NEOs who have excise tax gross up protection in their agreements. +BENEFITS TRIGGERED BY RETIREMENT, DEATH OR PERMANENT DISABILITY +Pension Plan. In the event of death before retirement, the Pension Plan provides the surviving spouse of a vested participant a death benefit equal to the +qualified pre-retirement survivor annuity as defined in the Internal Revenue Code (generally 50% of the participant's accrued normal retirement benefit). This benefit is paid annually to the surviving +spouse beginning when the participant would have turned 60 and continues for the life of the surviving spouse. For participants with at least three years of service as of December 31, 2003, and +who have at least 10 years of service and are employed by the Company at the time of death, the amount of the survivor benefit under the Pension Plan is calculated as though the participant had +continued as an employee of the Company until age 65 at the compensation level as of the date of death and the benefit begins upon the date of death, unreduced for early commencement. The survivor +benefit for participants who meet all the criteria set forth in the preceding sentence, but who die when +they are not employed by the Company, are entitled to a joint and survivor benefit commencing upon the date of death, unreduced for early commencement. +SERP. If a SERP participant dies before beginning to receive benefits under the SERP, the Company must, based on the participant's election, pay the beneficiary +either a monthly annuity or a lump sum death benefit equal to the present value of the benefit computed as if the participant had retired on the date of death, had begun receiving benefits at age 55, +and had continued to receive benefits for the remainder of the participant's life expectancy. If the participant dies after beginning to receive benefit payments, benefits cease unless the participant +was receiving benefits in the form of one of the joint and survivor annuity optional elections under the plan or had elected benefits in a form that provides for a continuation of benefits. +If +a participant becomes disabled (as defined in the SERP), the SERP provides a disability benefit equal to 60% of the normal retirement accrued benefit based upon years of service up to the date that +the participant became disabled through the date the participant reaches age 65 (at which point, the participant would begin drawing full SERP benefits) or is no longer disabled. +Annual Bonus Plan. Upon termination of employment at least six months after the beginning of a fiscal year due to death, disability, or early or normal retirement, +an NEO is entitled to receive a pro rata portion of any annual bonus award earned under the Annual Bonus Plan based on the NEO's service during such fiscal year and actual performance under the Annual +Bonus Plan. The annual bonus is payable at the same time and in the same manner as awards are paid to other NEOs for the fiscal year. +Stock Incentive Plans. Upon death, disability, or voluntary termination of employment after attaining age 59 with ten years of service with the Company +(50 years of age and seven years of service or age 62 for grants prior to 2016), subject to certain conditions, the restrictions applicable to each NEO's shares of restricted stock terminate +and stock options vest in full (prorated for grants prior to 2016). Upon death, disability or voluntary termination of employment after attaining age 59 with ten years of service with the Company +(50 years of age and seven years of service or age 62 for grants prior to 2016), subject to certain conditions, the restrictions on time-vested shares lapse or units vest. +Deferred Compensation Plan. Upon death, disability, or other qualifying separation from service, including retirement, all in accordance with Section 409A +of the Internal Revenue Code, all amounts deferred by the NEOs under the Deferred Compensation Plan, including any vested amounts credited to the NEOs pursuant to a discretionary Company contribution, +shall generally be paid, or commence payment, within 60 days of the termination in accordance with the schedule elected by the NEO at the time of deferral. +2019 +PROXY +STATEMENT +62 +Table of Contents +DESCRIPTION OF RESTRICTIVE COVENANTS THAT APPLY DURING AND AFTER TERMINATION OF EMPLOYMENT +The SERP contains non-competition, confidentiality, and employee non-solicitation provisions in favor of Wolverine Worldwide. Under the +non-competition provisions of the SERP, the participant will not be entitled to any benefit payment if, prior to the date on which such benefit payment is due, the participant enters into certain +relationships with a competing business. +ESTIMATED PAYMENTS ON TERMINATION OR CHANGE IN CONTROL +The following table summarizes the potential payments and benefits payable to each NEO upon a change in control or termination of employment +following each of the triggering events set forth in the table. As required, the amounts in the table assume that the termination of employment or change in control of Wolverine Worldwide took place +on the Company's last day of fiscal 2018, which was December 29, 2018. The amounts set out below are in addition to benefits that are generally available to the Company's employees such as +distributions under the Company's 401(k) savings plan, disability or life insurance benefits and accrued vacation. Due to the many factors that affect the nature and amount of any benefits provided +upon the termination events discussed below, any actual amounts paid or distributed to NEOs may be different. Factors that may affect these amounts include timing during the year of the occurrence of +the event, Wolverine Worldwide's stock price and the NEO's age and years of service. +The +value of the accelerated vesting of unvested equity-based compensation awards was computed using the closing market price $32.41 of Wolverine Worldwide's common stock on December 28, 2018, +the last business day in fiscal 2018. The value for unvested restricted stock is computed by multiplying $32.41 by the number of shares of the NEO's restricted stock that would vest as a result of an +event. The value of stock options that would vest as a result of an event equals the difference between the exercise price of each option and $32.41. +2019 +PROXY +STATEMENT +63 +Table of Contents +Each +of the hypothetical events described in the following table (the highlighted blue headings in the left-hand column) is calculated and reported as a discrete event. For example, the amounts +disclosed under the "Change in Control Only" heading are not cumulative with the amounts disclosed under the "Change in Control/Termination" heading. +Termination Event and Payment / Benefits +Krueger +Jeppesen +Stornant +Woodworth +Zwiers +Termination by Company for Cause or Voluntary Termination (other than for Good Reason or due to Retirement) +- +- +- +- +- +Termination by Company Other Than for Cause or by Executive for Good Reason +$16,410,511 +1 +- +- +- +- +Change in Control / Termination +Executive Severance Agreement 2 +$52,264,191 +$6,305,844 +$11,262,347 +$4,893,098 +$16,256,223 +Benefits under Executive Severance Agreement 3 +$62,144 +$61,926 +$58,167 +$61,505 +$59,341 +Stock Incentive Plans 4 +$12,958,444 +$3,088,201 +$2,776,757 +$2,073,455 +$2,839,595 +Lump sum payment under the SERP 5 +$24,342,242 +$1,830,750 +$4,489,752 +- +$6,136,782 +Death +SERP 6 +$20,614,863 +$1,864,680 +$3,003,659 +- +$4,160,475 +Pension Plan 7 +$976,128 +$225,986 +$1,082,003 +- +$1,086,534 +Stock Incentive Plans 4 +$12,958,444 +$3,088,201 +$2,776,757 +$2,073,455 +$2,839,595 +Earned Incentive Compensation 8 +$19,045,137 +$2,647,170 +$2,898,648 +$3,484,429 +$2,950,843 +Disability +SERP 9 +$18,445,053 +$1,191,440 +$2,983,689 +- +$4,429,649 +Stock Incentive Plans 4 +$12,958,444 +$3,088,201 +$2,776,757 +$2,073,455 +$2,839,595 +Earned Incentive Compensation 8 +$19,045,137 +$2,647,170 +$2,898,648 +$3,484,429 +$2,950,843 +Retirement +SERP 10 +$18,445,053 +$1,269,261 +$2,512,883 +- +$3,373,945 +Pension Plan 10 +$2,072,481 +$450,074 +$1,007,509 +- +$884,344 +Stock Incentive Plans 4,11 +$12,958,444 +- +$266,799 +- +$464,014 +Earned Incentive Compensation 8,11 +$19,045,137 +- +- +- +- +Change in Control Only +Stock Incentive Plans 12 +$9,401,350 +$2,417,216 +$1,974,156 +$1,352,981 +$2,074,589 +1 The estimate for Mr. Krueger assumes target performance for the 2017-2019 and 2018-2020 performance periods and actual performance for the +2016-2018 period. Actual payout or vesting, if any, would be determined and made at the end of those periods. The amount reflected in the table also includes an estimated cost of +$19,566.72 for retiree medical benefits for 18 months and the estimated cost of $25,000 for outplacement services. 2 Payments would be triggered after termination of +employment under certain circumstances within two years (Messrs. Jeppesen, Stornant, Woodworth, +and Zwiers) or three years (Mr. Krueger) following a change in control. Includes amounts payable in cash under the terms of the Executive Severance Agreement, excluding the +value of the cash payout to each NEO of the option spread for already vested options. The timing of the payment would be delayed to the extent earlier payment would trigger +Section 409A of the tax code. The value of unvested options and service-based restricted shares that vest upon a change in control under the terms of the Company's stock +incentive plans are included in the Stock Incentive Plans row. 3 These estimates assume that Wolverine Worldwide, or any successor company, maintains the benefit plans for a +period of one year after termination and +the outplacement services for a period beginning with the date of termination and ending on the last day of the second calendar year following the calendar year in which the date of +termination occurred. 4 Reflects the value of unvested stock options and shares of restricted stock that would vest because of the +event. 5 Reflects the entire lump sum benefit payable to applicable NEOs, including any accumulated benefit. The timing of the payment would be delayed to the +extent earlier payment would trigger Section 409A of the Tax Code. 6 Reflects the entire lump sum death benefit payable to a participating NEO's beneficiary, including any +accumulated benefit. +2019 +PROXY +STATEMENT +64 +Table of Contents +7 Amounts reflect the net present value of the annuity paid to the surviving spouse calculated using the same discount rate and mortality assumptions +used in the Pension Benefits table under the heading "Pension Benefits in Fiscal Year 2018" under the heading "Pension Plans and 2018 Pension Benefits." In accordance with the terms of +the Pension Plan, the death benefit for Messrs. Krueger and Zwiers was calculated as though the NEO had continued as an employee of Wolverine Worldwide until age 65 at the +compensation level as of the date of death. 8 Under the Annual Bonus Plan and the terms of performance share awards, each NEO may be eligible to receive a pro rata portion of any +award if +employment is terminated as a result of any of the specified events in the table. The amount reported represents (a) actual payout under the Annual Bonus Plan for fiscal year +2018, (b) actual payout under the 2016-2018 performance cycle, and (c) estimated target performance for the 2017-2019 and 2018-2020 performance cycles. Performance shares +would vest on a prorated basis based on actual Company performance. 9 Reflects the net present value of the annuity using the same discount rate and mortality assumptions used in +the Pension Benefits table and assuming +the NEO drew the disability benefit until age 65 followed by the normal retirement benefit. 10 Reflects the net present value of benefits according to actual elections in place +and assuming benefits begin at age 55 (or immediately if older than +55). 11 Mr. Krueger is the only NEO eligible for retirement (as defined in the applicable plan) for all awards at fiscal 2018 year-end. +Messrs. Stornant and Zwiers are eligible for retirement (as defined in the Stock Incentive Plan of 2013) at fiscal 2018 year-end for awards granted prior to 2016. As +such, Messrs. Stornant and Zwiers are eligible for accelerated vesting of such awards upon retirement. 12 Reflects the value of unvested stock options and shares of +restricted stock (including performance share awards) that would vest because of the +event. +CEO PAY RATIO +As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of +Regulation S-K, we are providing the following information about the relationship of the annual total compensation of our employees and the annual total compensation of Blake Krueger, the +Company's Chief Executive Officer. +For +2018, our last completed fiscal year, the annual total compensation of the employee of the Company identified at median was $48,755 and the annual total compensation of the CEO, as reported in the +Summary Compensation Table above, was $8,869,982. +Based +on this information, the 2018 ratio of the annual total compensation of Mr. Krueger to the median of the annual total compensation of all employees was estimated to be 182 to 1. +The +methodology and the material assumptions, adjustments, and estimates that we used to identify the median of the annual total compensation of all our employees, as well as to determine the annual +total compensation of our "median employee" and our CEO, are described below. +• We determined that, as of December 29, 2018, our employee population consisted of approximately 3,691 (2,778 in the U.S. and 913 outside +the U.S.) individuals globally. After excluding employees from India (15 employees), Dominican Republic (5 employees), Mexico (2 employees), Netherlands (35 employees), Thailand (4 employees), and +Vietnam (48 employees) pursuant to the "de minimis" exception provided for in the rules, we used a base of 3,582 employees for purposes of determining the "median employee." We selected +December 29, 2018 (versus October of last year), as the date upon which we would identify the median employee in order to align with the Company's fiscal year end. +• To identify the median employee from our employee population, we used annual base salary as well as bonus and other cash incentives paid for +the 12-month period ending December 29, 2018 as our consistently applied compensation measure. In making this determination, we annualized the compensation of all newly hired regular employees +during this period. +• Once we identified our median employee, we combined all of the elements of such employee's compensation for fiscal 2018 in accordance with the +SEC's rules, resulting in annual total compensation of $48,755. +• With respect to the annual total compensation of our CEO, we used the amount reported in the "Total" column of our 2018 Summary Compensation +Table included in the Proxy Statement. +2019 +PROXY +STATEMENT +65 +Table of Contents +Proposal 2 — Advisory Resolution to +Approve Executive Compensation +The +Company is asking its shareholders to indicate their support for Wolverine Worldwide's NEO compensation, as described in this Proxy Statement. This proposal, commonly known as a +"say-on-pay" proposal, gives the Company's shareholders the opportunity to express their view on compensation for the Company's NEOs. The say-on-pay vote is advisory and, therefore, not binding on the +Company, the Compensation Committee or the Board. Even though non-binding, the Board and Compensation Committee value the opinions of Wolverine Worldwide's shareholders and will review and consider +the voting results when making future decisions regarding the Company's executive compensation program. +At +the 2017 annual meeting of shareholders, the Company also held an advisory vote on the frequency of future say-on-pay votes. Our shareholders voted in favor of an annual say-on-pay vote and the +Company has elected to follow such recommendation. As such, unless the Company modifies its policies on the frequency of say-on-pay votes, it is expected that the next say-on-pay vote will occur at +the 2020 annual meeting of shareholders. Further, in accordance with Rule 14a-21(b) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), shareholders will be asked to vote +again on how frequently the Company should hold future say-on-pay votes at the Company's 2023 annual meeting of shareholders. +The +Company encourages shareholders to read the "Compensation Discussion and Analysis" ("CD&A") section of this Proxy Statement beginning on page 31. As described in the CD&A section, the +Compensation Committee has structured the executive compensation program to achieve the following key objectives: +• Align the interests of NEOs with those of the shareholders through incentives based on achieving performance objectives that enable increased +shareholder value +• Provide incentives for achieving specific, near term corporate, business unit and individual goals and reward the achievement of those goals +• Provide incentives for achieving pre-established, longer-term corporate financial goals and reward achievement of those goals +• Attract and retain talented NEOs who will lead Wolverine Worldwide and drive superior business and financial performance +The +executive compensation program is designed to achieve these objectives, in part, by: +• Weighting at-risk and variable compensation (annual bonuses and long-term incentives) much more heavily than fixed compensation (base salaries) +• Rewarding annual performance while maintaining emphasis on longer-term objectives +• Blending cash, non-cash, long- and short-term compensation components, and current and future compensation components +The +Company encourages shareholders to read the Summary Compensation Table and other related compensation tables and narrative, appearing on pages 48-65, which provide detailed information on +the compensation of the Company's NEOs. +The +Compensation Committee and the Board of Directors believe the Company's compensation program and its policies and procedures articulated in the CD&A section are effective in aligning the interests +of the Company's NEOs with the interests of shareholders, promoting the achievement of the Company's near and long-term objectives, and increasing shareholder value. +In +accordance with the rules under Section 14A of the Exchange Act, and as a matter of good corporate governance, the Company asks shareholders to approve the following advisory resolution at +the 2019 Annual Meeting of Shareholders: +RESOLVED , that the shareholders of Wolverine World Wide, Inc. (the "Company") approve, on an advisory basis, the compensation of the Company's +named executive officers disclosed in the Compensation Discussion and Analysis section, the Summary Compensation Table and the related compensation tables, notes and narrative in the Proxy Statement +for the Company's 2019 Annual Meeting of Shareholders. +BOARD RECOMMENDATION +The Board recommends that you vote "FOR" approval of the advisory resolution to approve executive compensation. +2019 +PROXY +STATEMENT +66 +Table of Contents +Proposal 3 – Ratification of Appointment of +Independent Registered Public Accounting +Firm +Ernst & +Young LLP ("Ernst & Young") was the Company's independent registered public accounting firm for the fiscal year ended December 29, 2018. The Audit +Committee has reappointed Ernst & Young as the Company's independent registered public accounting firm for the current fiscal year. As a matter of good corporate governance, the Audit Committee +has determined to submit its appointment of Ernst & Young to the Company's shareholders for ratification. If this appointment is not ratified by the holders of a majority of shares cast +affirmatively or negatively on the matter, the Audit Committee will review its future selection of +an independent registered public accounting firm. Even if the appointment is ratified, the Audit Committee in its discretion may select a different independent registered public accounting firm any +time during the year if it determines that such a change would be in the best interests of the Company and the Company's shareholders. +The +Audit Committee reviewed Ernst & Young's performance prior to appointing it as the Company's independent registered public accounting firm, and +considered: +• the historical and recent performance of Ernst & Young on the Company's audit, including the quality of the engagement team and +Ernst & Young's experience, client service, responsiveness and technical expertise +• the Public Company Accounting Oversight Board ("PCAOB") report of selected Ernst & Young audits +• the appropriateness of fees charged +• Ernst & Young's familiarity with the Company's accounting policies and practices and internal control over financial reporting +• Ernst & Young's financial strength and performance +Representatives +of Ernst & Young are expected to be present at the Annual Meeting. They will have an opportunity to make a statement if they desire to do so and are expected to be available to +respond to appropriate questions from shareholders. +BOARD RECOMMENDATION +The Board recommends that you vote "FOR" ratification of the Audit Committee's selection of the firm of Ernst & Young LLP as the Company's independent registered public accounting firm +for fiscal year 2019. +2019 +PROXY +STATEMENT +67 +Table of Contents +Audit Committee Report +The +Audit Committee of the Board of Directors consists of five directors who are independent under the Company's Director Independence Standards, the NYSE listed company standards, +and applicable SEC standards. The Audit Committee represents and assists the Board in fulfilling its oversight responsibility regarding the Company's financial statements and the financial reporting +process, the internal control over financial reporting, the performance of the internal audit function and the independent registered public accounting firm, the qualifications and independence of the +independent registered public accounting firm, the annual independent audit of Wolverine Worldwide's financial statements and internal control over financial reporting, and compliance with legal and +regulatory requirements. The Audit Committee is directly responsible for appointing, retaining, compensating, overseeing, evaluating and terminating (if appropriate) Wolverine Worldwide's independent +registered public accounting firm. Wolverine Worldwide's management has primary responsibility for the financial statements and the financial reporting process, including the application of accounting +and financial principles, the preparation, presentation and integrity of the financial statements, and the systems of internal controls and other procedures designed to promote compliance with +accounting standards and applicable laws and regulations. Wolverine Worldwide's independent registered public accounting firm is responsible for expressing an opinion on the conformity of Wolverine +Worldwide's financial statements with generally accepted accounting principles and for auditing the effectiveness of Wolverine Worldwide's internal control over financial reporting. +The +Audit Committee has taken steps to provide assurances regarding Audit Committee composition and procedures, the independence of Wolverine Worldwide's independent registered public accounting firm +and the integrity of Wolverine Worldwide's financial statements and disclosures. These steps include: (i) reviewing the Audit Committee Charter; (ii) reviewing with legal counsel and the +independent registered public accounting firm the Accounting and Finance Code of Ethics; (iii) maintaining financial, accounting and business ethics complaint procedures to allow employees, +shareholders and the public to report concerns regarding Wolverine Worldwide's financial statements, internal controls and disclosures; and (iv) reviewing procedures for the Audit Committee to +pre-approve all audit and non-audit services provided by Wolverine Worldwide's independent registered public accounting firm. +As +part of its supervisory duties, the Audit Committee has reviewed Wolverine Worldwide's audited financial statements for the fiscal year ended December 29, 2018, and has discussed those +financial statements with Wolverine Worldwide's management and internal financial staff, and the internal auditors and independent registered public accounting firm with and without management +present. The Audit Committee has also reviewed and discussed the following with Wolverine Worldwide's management and the financial staff, and with the internal auditors and independent registered +public accounting firm with and without management present: +• Accounting and financial principles and significant assumptions, estimates and matters of judgment used in preparing the financial statements +• Allowances and reserves for accounts receivable, inventories and taxes +• Accounting for acquisitions, pension plans and equity-based compensation plans +• Goodwill impairment analysis +• Other significant financial reporting issues and practices +The +Audit Committee has discussed with Wolverine Worldwide's independent registered public accounting firm the results of its examinations and its judgments concerning the quality, as well as the +acceptability, of Wolverine Worldwide's accounting principles and such other matters that it is required to discuss with the independent registered public accounting firm under applicable rules, +regulations or generally accepted auditing standards, including the matters required to be discussed by applicable rules of the PCAOB. In addition, the Audit Committee has received from the +independent registered public accounting firm the written disclosures and the letter required by the applicable requirements of the PCAOB regarding the independent registered public accounting firm's +communications with the Audit Committee concerning independence rules and has discussed their independence from Wolverine Worldwide and Wolverine Worldwide's management with them, including a +consideration of the compatibility of non-audit services with their independence, the scope of the audit and the scope of all fees paid to the independent registered public accounting firm during the +year. After, and in reliance upon the reviews and +2019 +PROXY +STATEMENT +68 +Table of Contents +discussions +described above, the Audit Committee recommended that the audited financial statements for the fiscal year ended December 29, 2018, be included in Wolverine Worldwide's Annual +Report on Form 10-K for the year then ended to be filed with the SEC. +Respectfully +submitted, +William +K. Gerber (Chair) +Jeffrey M. Boromisa +Roxane Divol +Brenda J. Lauderback +Michael A. Volkema +2019 +PROXY +STATEMENT +69 +Table of Contents +Independent Registered Public Accounting Firm +The +Company's Audit Committee has adopted a policy under which the Audit Committee must approve all audit and non-audit services provided by the Company's independent registered +public accounting firm, Ernst & Young LLP, and which prohibits Ernst & Young LLP from providing any non-audit services that are prohibited by the SEC or the PCAOB. The +Company's Audit Committee provides categorical pre-approval for routine and recurring services, with specific service descriptions and budgets. All audit services, internal control related services, +and other services not within the specifically pre-approved service descriptions and budgets require engagement specific pre-approval. With certain exceptions (such as pre-approval of audit services), +the Audit Committee may delegate engagement specific pre-approval to one or more Audit Committee members, and has so delegated in certain instances to the Audit Committee Chairperson. Management must +communicate to the Audit Committee at its next regularly scheduled meeting any services approved by an Audit Committee member. Wolverine Worldwide's Audit Committee pre-approved all fees paid to +Ernst & Young LLP for services performed in 2019 and 2018. The aggregate fees billed by Ernst & Young LLP for audit and non-audit services were: +2018 +2017 +Audit Fees 1 +$ +1,886,000 +$ +1,877,000 +Audit Related Fees +- +- +Total Audit & Audit Related Fees +$ +1,886,000 +$ +1,877,000 +Tax Fees +Tax Compliance +$ +1,289,300 +$ +941,500 +Tax Planning & Advisory +$ +190,000 +$ +60,000 +Tax Planning & Advisory Other +- +- +Total Tax Fees +$ +1,479,300 +$ +1,001,500 +All Other Fees +- +- +TOTAL FEES +$ +3,365,300 +$ +2,878,500 +1 "Audit Fees" are comprised of fees for the annual audit, reviews of the financial statements included in Wolverine Worldwide's Quarterly +Reports on Form 10-Q audit of internal control over financial reporting, foreign statutory audits and consultations concerning accounting matters associated with the +annual audit. +Wolverine +Worldwide's Audit Committee has adopted a policy restricting the Company's hiring of current or former partners or employees of the independent registered public accounting firm retained by +the Company. +2019 +PROXY +STATEMENT +70 +Table of Contents +Related Party Matters +CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS +Since January 1, 2018, the Company has not engaged in any "related person" transactions with its directors, executive officers or +holders of 5% or more of Company voting securities, affiliates or any member of the immediate family of the foregoing persons. +RELATED PERSON TRANSACTIONS POLICY +Wolverine Worldwide's Board adopted written policies and procedures regarding related person transactions. They require the Governance +Committee to review and either approve or disapprove the Company entering into any Interested Transactions (defined below). If advance approval is not feasible, then the Governance Committee must +review and ratify the Interested Transaction at its next meeting. +Interested Transaction +Any transaction, arrangement or relationship or series of similar transactions, arrangements or relationships (including any indebtedness or guarantee of indebtedness) in which: +(1) +the aggregate amount involved is or is expected to exceed $120,000 since the beginning of Wolverine Worldwide's last completed fiscal year; +(2) +Wolverine Worldwide is a participant; and +(3) +any Related Person (defined below) has or will have a direct or indirect interest. +An Interested Transaction does not include: +(1) +any employment compensation paid to an executive officer of the Company if the Compensation Committee approved or recommended to the Board of Directors for approval of such compensation; +(2) +any compensation paid to a director for service as a director of the Company; +(3) +any transaction in which a Related Person has an indirect interest solely as a result of being (i) a director or, together with all other Related Persons, as defined below, a less than 10% beneficial owner of an equity interest in another entity, or +both, or (ii) a limited partner in a partnership in which the Related Person, together with all other Related Persons, has an interest of less than 10%; or +(4) +any transaction in which the Related Person's interest arises solely from the ownership of the Company's common stock and all holders of the Company's common stock received the same benefit on a pro rata basis (e.g., a dividend). +Related Person +Any: +(a) +person who is or was at any point during the last fiscal year for which Wolverine Worldwide filed an Annual Report on Form 10-K and Proxy Statement, an executive officer, director or, to the extent information regarding such nominee is being +presented in a proxy or information statement relating to the election of that nominee as a director, nominee for election as a director; +(b) +beneficial owner of greater than five percent of Wolverine Worldwide's common stock; or +(c) +immediate family member* of any of the foregoing. +* Immediate family member is defined as a person's spouse, parents, stepparents, children, stepchildren, siblings, mothers and +fathers-in-law, sons-and daughters-in-law, and brothers- and sisters-in-law, and anyone residing in such person's home (other than a tenant or employee). +The +Governance Committee considers whether the Interested Transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar +circumstances, the extent of the Related Person's interest in the transaction, and other factors that it deems relevant. No director participates in any discussion or approval of an Interested +Transaction for which he or she is a Related Person, except to provide information to the Governance Committee. +2019 +PROXY +STATEMENT +71 +Table of Contents +Additional Information +SHAREHOLDERS LIST +A list of shareholders entitled to vote at the meeting will be available for review by Wolverine Worldwide shareholders at the office of +Secretary, Wolverine World Wide, Inc., 9341 Courtland Drive, N.E., Rockford, Michigan 49351, during ordinary business hours for the 10-day period before the meeting. +DIRECTOR AND OFFICER INDEMNIFICATION +The Company indemnifies its directors and NEOs to the fullest extent permitted by law so that they will be free from undue concern about +personal liability in connection with their service to the Company. +SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE +Section 16(a) of the Exchange Act requires the Company's directors and NEOs, and persons who beneficially own more than 10% of the +outstanding shares of the Company's common stock, to file reports of ownership and changes in ownership of shares of common stock with the SEC. Directors, NEOs and greater than 10% beneficial owners +are required by SEC regulations to furnish Wolverine Worldwide with copies of all Section 16(a) reports they file. Based on its review of the copies of such reports received by it, or written +representations from certain reporting persons, the Company believes that during fiscal year 2018, its officers and directors filed the required reports under Section 16(a) on a timely basis. +SHAREHOLDER PROPOSALS FOR INCLUSION IN NEXT YEAR'S PROXY STATEMENT +Pursuant to SEC Rule 14a-8, some shareholder proposals may be eligible for inclusion in Wolverine Worldwide's 2020 Proxy Statement and +proxy card. Any such shareholder proposals must be submitted in writing to the Secretary of Wolverine Worldwide no later than the close of business on November 27, 2019. You should address all +shareholder proposals to the attention of Secretary, Wolverine World Wide, Inc., 9341 Courtland Drive, N.E., Rockford, Michigan 49351. +OTHER SHAREHOLDER PROPOSALS FOR PRESENTATION AT NEXT YEAR'S ANNUAL MEETING +The Company's By-Laws require that any shareholder proposal that is not submitted for inclusion in next year's Proxy Statement under SEC +Rule 14a-8, but is instead sought to be presented directly at the 2020 Annual Meeting of Shareholders, must be received at the Company's principal executive offices by the close of business not +less than 90 days nor more than 120 days prior to the first anniversary of the 2019 Annual Meeting. As a result, proposals, including director nominations, submitted pursuant to these +provisions of the By-Laws must be received between January 3, 2020, and the close of business on February 2, 2020. You should address a proposal to Secretary, Wolverine World +Wide, Inc., 9341 Courtland Drive N.E., Rockford, Michigan 49351, and include the information and comply with the requirements set forth in those By-Laws, which the Company has posted on its +website. SEC rules permit management to vote proxies in its discretion in certain cases if the shareholder does not comply with this deadline, and in certain other cases notwithstanding the +shareholder's compliance with this deadline. +VOTING SECURITIES +Shareholders of record at the close of business on March 11, 2019, are eligible to vote at the Annual Meeting. The Company's voting +securities consist of its $1.00 par value common stock, and there were 90,006,408 shares outstanding and entitled to vote on the record date. Each share outstanding on the record date will be entitled +to one vote on each director nominee +and one vote on each other matter. Treasury shares are not voted. Individual votes of shareholders are kept private, except as appropriate to meet legal requirements. Access to proxies and +2019 +PROXY +STATEMENT +72 +Table of Contents +other +individual shareholder voting records is limited to the independent inspectors of election and certain employees of the Company and its agents who acknowledge their responsibility to comply with +this policy of confidentiality. +CONDUCT OF BUSINESS +A majority of the outstanding shares of common stock as of the record date must be present at the Annual Meeting in order to hold the Annual +Meeting and conduct business. This is called a "quorum." Your shares are counted as present at the meeting if you are present at the Annual Meeting and vote in person, a proxy card has been properly +submitted by you or on your behalf, or you have submitted your proxy by telephone or by internet, or by completing, signing, dating and returning your proxy form in the enclosed envelope. Both +abstentions and broker non-votes (defined below in " Vote Required for Election and Approval ") are counted as present for the purpose of determining the +presence of a quorum. +VOTE REQUIRED FOR ELECTION AND APPROVAL +For Proposal 1, Election of Directors for Terms Expiring in 2022, directors are elected by a majority of votes cast unless the election is +contested, in which case directors are elected by a plurality of votes cast. A majority of votes cast means that the number of shares voted "for" a Director nominee exceeds the number of votes cast +"against" the Director nominee. If an incumbent director in an uncontested election does not receive a majority of votes cast for his or her election, under the Company's Corporate Governance +Guidelines, the director is required to submit a letter of resignation to the Board for consideration by the Governance Committee. The Governance Committee will then make a recommendation to the Board +as to whether to accept or reject the tendered resignation. The Governance Committee and the Board, in making their decisions, may implement any procedures they deem appropriate and may consider any +factor or other information that they deem relevant. The Board will then act on the tendered resignation, taking into account the Governance Committee's recommendation, and will publicly disclose its +decision regarding the resignation within 90 days after the results of the election are certified. A director whose resignation is under consideration shall abstain from participating in any +recommendation or decision regarding that resignation. If the resignation is not accepted, the director will continue to serve until the next annual meeting of shareholders at which such director +faces re-election and until such director's successor is elected and qualified. +Proposal +2, Advisory Vote to Approve Executive Compensation, is a non-binding, advisory vote. Therefore, there is no required vote that would constitute approval. The Company values the opinions +expressed by its shareholders in this advisory vote, and the Board and Compensation Committee will consider the outcome of these votes when designing compensation programs and making future +compensation decisions for the Company's named executive officers. +Proposal +3, Ratification of Appointment of Independent Registered Public Accounting Firm, requires the affirmative vote of a majority of shares cast affirmatively or negatively on the matter for +approval. +Abstentions +and broker non-votes, if any, will have no effect on the outcome of the election of directors. Generally, broker non-votes occur when shares held by a broker in "street name" for a +beneficial owner are not voted with respect to a particular proposal because (1) the broker has not received voting instructions from the beneficial owner, and (2) the broker lacks +discretionary voting power to vote those shares. Brokers do not have discretionary authority with respect to any of the proposals except for Proposal (3). Abstentions are not counted as affirmative +votes on a matter. +VOTING RESULTS OF THE ANNUAL MEETING +The Company will announce preliminary voting results at the Annual Meeting and publish final results in a Form 8-K within four business +days following the Annual Meeting. If final results are not known within four business days of the Annual Meeting, then the Company will file a Current Report on Form 8-K with the +preliminary results and file an amended Current Report on Form 8-K within four business days of the availability of the final results. +ATTENDING THE ANNUAL MEETING +You may vote shares held directly in your name as the shareholder of record in person at the Annual Meeting. If you choose to vote in person, +please bring the enclosed proxy card and proof of identification. Even if you plan to attend the Annual Meeting in person, Wolverine Worldwide recommends that you vote your shares in advance as +described below so that your vote will be counted if you later decide not to +2019 +PROXY +STATEMENT +73 +Table of Contents +attend +the Annual Meeting. You may vote shares held in "street name" through a brokerage account or by a bank or other nominee in person if you obtain a proxy from the record holder giving you the +right to vote the shares. +MANNER FOR VOTING PROXIES +The shares represented by all valid proxies received by telephone, by internet or by mail will be voted in the manner specified. Where the +shareholder has not indicated a specific choice, the shares represented by all valid proxies received will be voted in accordance with the Board's recommendations as follows: (1) for each of +the nominees for directors named earlier in this Proxy Statement, (2) for approval of the advisory resolution to approve executive compensation, and (3) for ratification of the +appointment of the independent registered public accounting firm. The Board has not received timely notice of any other matter that may come before the Annual Meeting. However, should any matter not +described above be properly presented at the Annual Meeting, the persons named in the proxy form will vote in accordance with their judgment, as permitted. +REVOCATION OF PROXIES +A shareholder who gives a proxy may revoke it at any time before it is exercised by voting in person at the Annual Meeting, by delivering a +subsequent proxy or by notifying the inspectors of election in writing of such revocation. If your Wolverine Worldwide shares are held for you in a brokerage, bank or other institutional account, you +must obtain a proxy from that entity and bring it with you to hand in with your ballot, in order to be able to vote your shares at the Annual Meeting. +SOLICITATION OF PROXIES +The Company will pay the expenses of solicitation of proxies for the Annual Meeting. Solicitations may be made in person or by telephone, by +officers and employees of the Company, or by nominees or other fiduciaries who may mail materials to or otherwise communicate with the beneficial owners of shares held by the nominees or other +fiduciaries. These individuals will not be paid any additional compensation for any such solicitation. Upon request, the Company will reimburse brokers, dealers, banks and trustees, or their nominees, +for reasonable expenses incurred by them in forwarding material to beneficial owners of the Company's common stock. The Company has engaged Georgeson Inc. at an estimated cost of $9,500, plus +expenses and disbursements, to assist in solicitation of proxies. +DELIVERY OF DOCUMENTS TO SHAREHOLDERS SHARING AN ADDRESS +If you are the beneficial owner, but not the record holder, of shares of Wolverine Worldwide stock, your broker, bank or other nominee may +only deliver one copy of this Proxy Statement and the Company's 2018 Annual Report to multiple shareholders who share an address, unless that nominee has received contrary instructions from one or +more of the shareholders. The Company will deliver promptly, upon written or oral request, a separate copy of this Proxy Statement and its 2018 Annual Report to a shareholder at a shared address to +which a single copy of the documents was delivered. A shareholder who wishes to receive a separate copy of the Proxy Statement and annual report, now or in the future, or shareholders who share an +address and receive multiple copies of the Proxy Statement and annual report but would like to receive a single copy, should submit this request by +writing to Investor Relations, Wolverine World Wide, Inc., 9341 Courtland Drive N.E., Rockford, Michigan 49351, or by calling (616) 866-5500 and asking for Investor Relations. Beneficial +owners sharing an address who are receiving multiple copies of proxy materials and who wish to receive a single copy of such materials in the future should make a request directly to their broker, +bank or other nominee. +ACCESS TO PROXY STATEMENT AND ANNUAL REPORT +Distribution of this Proxy Statement and enclosed proxy card to shareholders is scheduled to begin on or about March 26, 2019. +Wolverine Worldwide's financial statements for the fiscal year ended December 29, 2018, are included in the Company's 2018 Annual Report, which the Company is providing to shareholders at the +same time as this Proxy Statement. Wolverine Worldwide's Proxy Statement for the 2019 Annual Meeting and the Annual Report to Shareholders for the fiscal year ended December 29, 2018, are +available at www.wolverineworldwide.com/2019annualmeeting . If you have not received or do not have access to the 2018 Annual Report, write to: +Wolverine World Wide, Inc., 9341 Courtland Drive N.E., Rockford, Michigan 49351, Attn: Investor Relations or call (616) 866-5500 and ask for Investor Relations, and the Company will send +a copy to you without charge. +2019 +PROXY +STATEMENT +74 +Table of Contents +APPENDIX A +APPENDIX A — Forward-Looking +Statements and Non-GAAP +Reconciliation Tables +2019 +PROXY +STATEMENT +A-1 +Table of Contents +APPENDIX A +FORWARD-LOOKING STATEMENTS +This +document contains "forward-looking statements," which are statements relating to future, not past, events. In this context, forward-looking statements often address management's current beliefs, +assumptions, expectations, estimates and projections about future business and financial performance, national, regional or global political, economic and market conditions, and the Company itself. +Such statements often contain words such as "anticipates," "believes," "estimates," "expects," "forecasts," "intends," "is likely," "plans," "predicts," "projects," "should," "will," variations of +such words, and similar expressions. Forward-looking statements, by their nature, address matters that are, to varying degrees, uncertain. Uncertainties that could cause the Company's performance to +differ materially from what is expressed in forward-looking statements include, but are not limited to, the following: +• changes in general economic conditions, employment rates, business conditions, interest rates, tax policies and other factors affecting +consumer spending in the markets and regions in which the Company's products are sold; +• the inability for any reason to effectively compete in global footwear, apparel and consumer-direct markets; +• the inability to maintain positive brand images and anticipate, understand and respond to changing footwear and apparel trends and consumer +preferences; +• the inability to effectively manage inventory levels; +• increases or changes in duties, tariffs, quotas or applicable assessments in countries of import and export; +• foreign currency exchange rate fluctuations; +• currency restrictions; +• capacity constraints, production disruptions, quality issues, price increases or other risks associated with foreign sourcing; +• the cost and availability of raw materials, inventories, services and labor for contract manufacturers; +• labor disruptions; +• changes in relationships with, including the loss of, significant wholesale customers; +• risks related to the significant investment in, and performance of, the Company's consumer-direct operations; +• risks related to expansion into new markets and complementary product categories as well as consumer-direct operations; +• the impact of seasonality and unpredictable weather conditions; +• changes in general economic conditions and/or the credit markets on the Company's distributors, suppliers and retailers; +• increase in the Company's effective tax rates; +• failure of licensees or distributors to meet planned annual sales goals or to make timely payments to the Company; +• the risks of doing business in developing countries and politically or economically volatile areas; +• the ability to secure and protect owned intellectual property or use licensed intellectual property; +2019 +PROXY +STATEMENT +A-2 +Table of Contents +APPENDIX A +• the impact of regulation, regulatory and legal proceedings and legal compliance risks, including compliance with federal, state and local laws +and regulations relating to the protection of the environment, environmental remediation and other related costs, and litigation or other legal proceedings relating to the protection of the +environment or environmental effects on human health; +• the potential breach of the Company's databases, or those of its vendors, which contain certain personal information or payment card data; +• problems affecting the Company's distribution system, including service interruptions at shipping and receiving ports; +• strategic actions, including new initiatives and ventures, acquisitions and dispositions, and the Company's success in integrating acquired +businesses, and implementing new initiatives and ventures; +• the risk of impairment to goodwill and other intangibles; +• the success of the Company's restructuring and realignment initiatives; and +• changes in future pension funding requirements and pension expenses. +These +uncertainties could cause a material difference between an actual outcome and a forward-looking statement. The uncertainties included here are not exhaustive and are described in more detail in +Part I, Item 1A: "Risk Factors" of the Company's Annual Report on Form 10-K. Given these risks and uncertainties, investors should not place undue reliance on forward-looking +statements as a prediction of actual results. The Company does not undertake an obligation to update, amend or clarify forward-looking statements, whether as a result of new information, future events +or otherwise. +NON-GAAP RECONCILIATION TABLES +The +following tables contain information regarding the non-GAAP adjustments used by the Company in the presentation of its financial results: +WOLVERINE WORLD WIDE, INC. +2018 FULL-YEAR RECONCILIATION TABLES +RECONCILIATION OF REPORTED REVENUE +TO ADJUSTED REVENUE BASIS* +(Unaudited) +(In millions) +GAAP Basis +Adjustments (1) +Underlying +Revenue +Revenue — Fiscal 2018 +$ +2,239.2 +$ +2,239.2 +Growth (decline) +(4.7 +)% +2.5 +% +Revenue — Fiscal 2017 +$ +2,350.0 +$ +(165.6 +) +$ +2,184.4 +(1) Fiscal 2017 adjustments include the impact from retail store closures, the transition of Stride +Rite® to a license business model, the sale of Sebago® and the sale of the Department of Defense business. +2019 +PROXY +STATEMENT +A-3 +Table of Contents +APPENDIX A +RECONCILIATION OF REPORTED GROSS MARGIN +TO ADJUSTED GROSS MARGIN* +(Unaudited) +(In millions) +GAAP Basis +Adjustments (1) +As Adjusted +Gross Profit — Fiscal 2018 +$ +921.3 +$ +921.3 +Gross margin +41.1 +% +41.1 +% +Gross Profit — Fiscal 2017 +$ +914.4 +$ +16.5 +$ +930.9 +Gross margin +38.9 +% +39.6 +% +(1) Fiscal 2017 adjustments include $9.0 million of restructuring costs and $7.5 million of +incremental inventory markdowns. +RECONCILIATION OF REPORTED OPERATING MARGIN +TO ADJUSTED OPERATING MARGIN* +(Unaudited) +(In millions) +GAAP Basis +Adjustments (1) +As Adjusted +Operating Profit — Fiscal 2018 +$ +251.9 +$ +15.8 +$ +267.7 +Operating margin +11.2 +% +12.0 +% +Operating Profit — Fiscal 2017 +$ +31.6 +$ +231.1 +$ +262.7 +Operating margin +1.3 +% +11.2 +% +(1) Fiscal 2018 adjustments include $15.3 million of environmental and related costs and +$0.5 million of other costs. Fiscal 2017 adjustments include $81.9 million of restructuring and other related costs, $37.8 million of organizational +transformation costs, $7.5 million of incremental inventory mark-downs, $68.6 million for impairment of intangible assets and $35.3 million of environmental +and other related costs. +RECONCILIATION OF REPORTED DILUTED EPS +TO ADJUSTED DILUTED EPS* +(Unaudited) +GAAP Basis EPS +Adjustments (1) +As Adjusted EPS +Fiscal 2018 +$ +2.05 +$ +0.12 +$ +2.17 +Fiscal 2017 +$ +0 +$ +1.64 +$ +1.64 +(1) Fiscal 2018 adjustments include the impact of environmental and related costs, pension settlement costs, a +foreign currency remeasurement gain recorded in the second quarter that is not expected to reoccur and other costs. Fiscal 2017 adjustments include the impact of restructuring +and other related costs, organizational transformation costs, incremental inventory mark-downs, impairment of intangible assets, environmental and other related costs and the +impact of tax reform. +RECONCILIATION OF REPORTED CASH FROM OPERATIONS TO +ADJUSTED CASH FROM OPERATIONS* +(Unaudited) +Fiscal 2018 +GAAP Basis — Cash from Operations +$ +97.5 +Adjustments (1) +137.4 +Adjusted Basis — Cash from Operations +$ +234.9 +(1) Adjustments include the impact of winding-down the Company's accounts receivable financing program +($77.4 million) and the impact of voluntary pension contributions ($60.0 million). +2019 +PROXY +STATEMENT +A-4 +Table of Contents +APPENDIX A +To +supplement the consolidated financial statements presented in accordance with Generally Accepted Accounting Principles ("GAAP"), the Company describes what certain financial measures would have +been if restructuring and other related costs, incremental inventory mark-downs, organizational transformation costs which include gains or losses from divestitures, a foreign currency remeasurement +gain recorded in the second quarter of fiscal 2018 that is not expected to reoccur, a pension settlement loss related to the Company's purchase of pension annuity contracts in the fourth quarter of +fiscal 2018, environmental and other related costs and for cash from operations significant cash outlays for the wind-down of the Company's accounts receivable financing program and voluntary pension +contributions were excluded. The Company also describes underlying revenue, which excludes the impact of retail store closures, the transition of Stride +Rite ® to a license business model, the sale of the Sebago ® brand and the sale of the Department of +Defense business. The Company believes these non- GAAP measures provide useful information to both management and investors to increase comparability to the prior period by adjusting for certain items +that may not be indicative of core operating measures and to better identify trends in our business. The adjusted financial results are used by management to, and allow investors to, evaluate the +operating performance of the Company on a comparable basis. +Beginning +in Q1 2018, the Company has separately provided the impact of changes in foreign currency exchange rates on revenue, rather than including it as a part of underlying revenue, to better +isolate this variable. The constant currency presentation, which is a non-GAAP measure, excludes the impact of fluctuations in foreign currency exchange rates. The Company believes providing constant +currency information provides valuable supplemental information regarding results of operations, consistent with how the Company evaluates performance. The Company calculates constant currency by +converting the current-period local currency financial results using the prior period exchange rates and comparing these adjusted amounts to our current period reported results. +Management +does not, nor should investors, consider such non-GAAP financial measures in isolation from, or as a substitution for, financial information prepared in accordance with GAAP. A +reconciliation of all non-GAAP measures included in this press release, to the most directly comparable GAAP measures are found in the financial tables above. +2019 +PROXY +STATEMENT +A-5 +Your vote matters – here’s how to vote! You may vote online or by phone instead of mailing this card. Votes submitted electronically must be received by 11:59 p.m., Eastern Daylight Time, on May 1, 2019. Online Go to www.investorvote.com/WWW or scan the QR code — login details are located in the shaded bar below. Phone Call toll free 1-800-652-VOTE (8683) within the USA, US territories and Canada Save paper, time and money! Sign up for electronic delivery at Using a black ink pen, mark your votes with an X as shown in this example. www.investorvote.com/WWW Please do not write outside the designated areas. q IF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q + 1. Election of Directors: For Against Abstain For Against Abstain For Against Abstain 01 - Jeffrey M. Boromisa 02 - Gina R. Boswell 03 - David T. Kollat For Against Abstain For Against Abstain 2. An advisory resolution approving compensation for the Company’s named executive officers. 3. Proposal to ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for fiscal year 2019. IMPORTANT - Please sign exactly as your name(s) appears on this Proxy. When signing on behalf of a corporation, partnership, estate or trust, indicate title or capacity of person signing. If shares are held jointly, each holder must sign. Date (mm/dd/yyyy) — Please print date below. Signature 1 — Please keep signature within the box. Signature 2 — Please keep signature within the box. + 3 2 A M 030GZB B Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below A Proposals — The Board of Directors recommend a vote FOR all the nominees listed and FOR Proposals 2 and 3. Annual Meeting Proxy Card +WOLVERINE WORLD WIDE, INC. 9341 Courtland Drive, N.E. Rockford, Michigan 49351 Wolverine World Wide, Inc. will be holding its Annual Meeting of Stockholders on May 2, 2019, at its offices located at 9341 Courtland Drive, N.E. Rockford, MI 49351. The enclosed Notice of 2019 Annual Meeting of Stockholders provides information regarding the matters that are expected to be voted on at the meeting. Your vote is important to us. Even if you plan to attend the meeting, please read the enclosed materials and vote through the Internet, by telephone or by mailing the Proxy Card below. Telephone and Internet Voting. On the reverse side of this card are instructions on how to vote through the Internet or by telephone. Please consider voting through one of these methods. Your vote is recorded as if you mailed in your Proxy. Thank you in advance for your participation in our 2019 Annual Meeting. Wolverine World Wide, Inc. q IF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q + This proxy is solicited on behalf of the Board of Directors The undersigned stockholder hereby appoints Blake W. Krueger and Kyle L. Hanson, and each of them, each with full power of substitution, as proxies to represent the undersigned stockholder and to vote all shares of Common Stock of Wolverine World Wide, Inc. that the stockholder would be entitled to vote on all matters that properly come before the Annual Meeting of Stockholders to be held at the Company’s offices located at 9341 Courtland Drive, N.E. RockFord, MI 49351, on Thursday, May 2, 2019, at 10 a.m. Eastern Daylight Time, and any adjournment of that meeting. If this Proxy is properly executed, the shares represented by this Proxy will be voted as specified. If this Proxy is properly executed but no specification is made, the shares represented by this Proxy will be voted for the election of all nominees named on this Proxy as directors and for approval of Proposals 2 and 3. The shares represented by this Proxy will be voted in the discretion of the proxies on any other matters that may properly come before the meeting. PLEASE DO NOT VOTE BY MORE THAN ONE METHOD. THE LAST VOTE RECEIVED WILL BE THE OFFICIAL VOTE. DO NOT RETURN THIS PROXY IF YOU ARE VOTING BY THE INTERNET OR BY TELEPHONE. (CONTINUED AND TO BE SIGNED ON REVERSE SIDE.) Change of Address — Please print new address below. + C Non-Voting Items Proxy — WOLVERINE WORLD WIDE, INC. Small steps make an impact. Help the environment by consenting to receive electronic delivery, sign up at www.investorvote.com/WWW \ No newline at end of file diff --git a/raw/proxies/0000110471/0001047469-19-001623/proxy_rpt.txt b/raw/proxies/0000110471/0001047469-19-001623/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..c22ec0823ad748caa0752da5c3da3fb1c2043631 --- /dev/null +++ b/raw/proxies/0000110471/0001047469-19-001623/proxy_rpt.txt @@ -0,0 +1,46 @@ +CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS +Since January 1, 2018, the Company has not engaged in any "related person" transactions with its directors, executive officers or +holders of 5% or more of Company voting securities, affiliates or any member of the immediate family of the foregoing persons. +RELATED PERSON TRANSACTIONS POLICY +Wolverine Worldwide's Board adopted written policies and procedures regarding related person transactions. They require the Governance +Committee to review and either approve or disapprove the Company entering into any Interested Transactions (defined below). If advance approval is not feasible, then the Governance Committee must +review and ratify the Interested Transaction at its next meeting. +Interested Transaction +Any transaction, arrangement or relationship or series of similar transactions, arrangements or relationships (including any indebtedness or guarantee of indebtedness) in which: +(1) +the aggregate amount involved is or is expected to exceed $120,000 since the beginning of Wolverine Worldwide's last completed fiscal year; +(2) +Wolverine Worldwide is a participant; and +(3) +any Related Person (defined below) has or will have a direct or indirect interest. +An Interested Transaction does not include: +(1) +any employment compensation paid to an executive officer of the Company if the Compensation Committee approved or recommended to the Board of Directors for approval of such compensation; +(2) +any compensation paid to a director for service as a director of the Company; +(3) +any transaction in which a Related Person has an indirect interest solely as a result of being (i) a director or, together with all other Related Persons, as defined below, a less than 10% beneficial owner of an equity interest in another entity, or +both, or (ii) a limited partner in a partnership in which the Related Person, together with all other Related Persons, has an interest of less than 10%; or +(4) +any transaction in which the Related Person's interest arises solely from the ownership of the Company's common stock and all holders of the Company's common stock received the same benefit on a pro rata basis (e.g., a dividend). +Related Person +Any: +(a) +person who is or was at any point during the last fiscal year for which Wolverine Worldwide filed an Annual Report on Form 10-K and Proxy Statement, an executive officer, director or, to the extent information regarding such nominee is being +presented in a proxy or information statement relating to the election of that nominee as a director, nominee for election as a director; +(b) +beneficial owner of greater than five percent of Wolverine Worldwide's common stock; or +(c) +immediate family member* of any of the foregoing. +* Immediate family member is defined as a person's spouse, parents, stepparents, children, stepchildren, siblings, mothers and +fathers-in-law, sons-and daughters-in-law, and brothers- and sisters-in-law, and anyone residing in such person's home (other than a tenant or employee). +The +Governance Committee considers whether the Interested Transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar +circumstances, the extent of the Related Person's interest in the transaction, and other factors that it deems relevant. No director participates in any discussion or approval of an Interested +Transaction for which he or she is a Related Person, except to provide information to the Governance Committee. +2019 +PROXY +STATEMENT +71 +Table of Contents +Additional Information \ No newline at end of file diff --git a/raw/proxies/0000110471/0001047469-20-001803/proxy.txt b/raw/proxies/0000110471/0001047469-20-001803/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..1d4b4d55ed518c34c6091608a5f3459d8d9b3e1b --- /dev/null +++ b/raw/proxies/0000110471/0001047469-20-001803/proxy.txt @@ -0,0 +1,3521 @@ +DEF 14A +1 +a2240976zdef14a.htm +DEF 14A +Use these links to rapidly review the document +Table of Contents +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +Washington, D.C. 20549 +SCHEDULE 14A INFORMATION +Proxy +Statement Pursuant to Section 14(a) of +the Securities Exchange Act of 1934 (Amendment No. ) +Filed by the Registrant ý +Filed by a party other than the Registrant o +Check the appropriate box: +o +Preliminary Proxy Statement +o +Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +ý +Definitive Proxy Statement +o +Definitive Additional Materials +o +Soliciting Material under §240.14a-12 +Wolverine World Wide, Inc. +(Name of Registrant as Specified In Its Charter) +(Name of Person(s) Filing Proxy Statement, if other than the Registrant) +Payment of Filing Fee (Check the appropriate box): +ý +No fee required. +o +Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. +(1) +Title of each class of securities to which transaction applies: +(2) +Aggregate number of securities to which transaction applies: +(3) +Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): +(4) +Proposed maximum aggregate value of transaction: +(5) +Total fee paid: +o +Fee paid previously with preliminary materials. +o +Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration +statement number, or the Form or Schedule and the date of its filing. +(1) +Amount Previously Paid: +(2) +Form, Schedule or Registration Statement No.: +(3) +Filing Party: +(4) +Date Filed: +Table of Contents +LETTER TO SHAREHOLDERS +Wolverine World Wide, Inc. +9341 Courtland Drive, NE +Rockford, Michigan 49351 +March 26, +2020 +Dear +Fellow Shareholders, +Thank +you for your investment in Wolverine Worldwide. We made significant progress in 2019 on our strategic and financial objectives, including: +• Continued successful execution of our Global Growth Agenda by adding a Chief Merchant Officer to accelerate innovation and elevate our product +creation process, establishing a joint venture with Xtep to grow the Merrell and Saucony brands, acquiring a key Saucony distributor and making significant investments to support our fast-growing +direct-to-consumer business. +• Revenue of $2.27 billion grew at a 1.5% rate and an underlying rate of 2.3%, with solid growth across some of our largest +brands – Merrell, Sperry, and CAT – and significant growth in our direct-to-consumer channels, including eCommerce and stores. +• Reported diluted earnings per share of $1.44; adjusted diluted earnings per share of $2.25, a record for the Company. +• Full-year cash from operations of $222.6 million exceeded expectations. +• Very strong return of capital to shareholders, with share purchases of $319.2 million during the year, and dividends of +$34 million. +In +addition to overseeing the Company's execution on our Global Growth Agenda and other key initiatives during 2019, the Board focused on other matters critical to the Company's long-term success. +These included Board and management succession planning, cybersecurity protection, and brand development, which we describe in greater detail in this Proxy Statement. +During +2020, our team remains focused on global growth opportunities for our portfolio of leading performance and lifestyle brands, especially in direct-to-consumer and key international channels. We +plan to further invest in a variety of initiatives to drive revenue growth and earnings leverage, and the Board will lead the Company with a view toward continued success in 2020 and beyond. We hope +to receive your support at this year's annual meeting on April 30, 2020, and encourage you to vote either online, by phone, or by mail. +Sincerely, +Blake +W. Krueger +Chairman, Chief Executive Officer and President +2020 +PROXY +STATEMENT +1 +Table of Contents +NOTICE OF 2020 ANNUAL MEETING OF SHAREHOLDERS +10:00 a.m. EDT, April 30, 2020 +Wolverine World Wide, Inc. +9341 Courtland Drive, NE +Rockford, MI 49351 +March 26, +2020 +To +Our Shareholders: +We +invite you to attend the 2020 Annual Meeting of Shareholders (the "Annual Meeting") of Wolverine World Wide, Inc. (the "Company", "Wolverine Worldwide" or "Wolverine") at the Company's +offices located at 9341 Courtland Drive, NE, Rockford, MI 49351, on April 30, 2020, at 10:00 a.m. EDT.* At the Annual Meeting, shareholders will vote on the following +items: +(1) Election +of the four director nominees named in the Proxy Statement for three year terms expiring in 2023 (2) Advisory +resolution approving compensation for the Company's named executive officers ("NEOs," and each an "NEO") (3) Ratification +of the Audit Committee's appointment of Ernst & Young LLP as the Company's independent registered public accounting firm for fiscal year +2020 +Shareholders +of record at the close of business on March 18, 2020 can vote at the Annual Meeting and any adjournment of the Annual Meeting. +This +Notice of 2020 Annual Meeting of Shareholders, Proxy Statement, proxy or voting instruction card and Annual Report for our fiscal year ended December 28, 2019 are being mailed or made +available to shareholders starting on or about March 26, 2020. +Whether +or not you plan to attend, you can ensure that your shares are represented at the meeting by promptly voting and submitting your proxy by telephone or through the internet, or by completing, +signing, dating and returning your proxy card in the enclosed envelope. +By +Order of the Board of Directors, +Kyle +L. Hanson +Secretary +* The +Company is actively monitoring the public health and travel concerns relating to the coronavirus (COVID-19) and the protocols that federal, state, and local +governments may impose. In the event it is not possible or advisable to hold the Annual Meeting in person, the Company will announce alternative arrangements for the meeting, which may include a +change in venue or holding the meeting solely by means of remote communication (i.e., a virtual meeting). Please monitor the Company's website where Annual Meeting materials are posted +(www.wolverineworldwide.com/2020annualmeeting) for updated information. If you plan to attend the meeting, please check the website regularly prior to the meeting date. As always, the Company +encourages you to vote your shares before the Annual Meeting. +Important Notice Regarding the Availability of Proxy Statement Materials for the Annual Meeting of Shareholders to be held on April 30, 2020. +Wolverine's Proxy Statement for the 2020 Annual Meeting of Shareholders and the Annual Report to Shareholders for the fiscal year ended +December 28, 2019, are available at: www.wolverineworldwide.com/2020annualmeeting . +2020 +PROXY +STATEMENT +2 +Table of Contents +Table of Contents +Letter to Shareholders +1 +Notice of 2020 Annual Meeting of Shareholders +2 +Proxy Statement Summary +4 +Our Brand Portfolio +4 +Strategic Focus +4 +Matters to be Voted Upon +5 +Election of Directors for Terms Expiring in 2023 +5 +Board Highlights +6 +Board is Composed of Directors with the Right Mix of Skills and +Experiences +6 +Shareholder Engagement +7 +Corporate Governance Highlights +7 +Meeting Information +7 +Corporate Governance +8 +Board of Directors +8 +Board Composition +8 +Director Nominations +9 +Board Self-Assessment +9 +Risk Oversight +10 +Code of Business Conduct and Accounting and Finance Code of +Ethics +10 +Shareholder Communications Policy +11 +Proposal 1 – Election of Directors for Terms Expiring in 2023 +12 +Director Nominees with Proposed Terms Expiring in 2023 +13 +Directors with Terms Expiring in 2021 +17 +Directors with Terms Expiring in 2022 +20 +Board Leadership +23 +Director Independence +23 +Board Committees, Meetings and Meeting Attendance +24 +Non-Employee Director Compensation in Fiscal Year 2019 +26 +Non-Employee Director Stock Ownership Guidelines +28 +Securities Ownership of Officers and Directors and Certain Beneficial +Owners +29 +Five Percent Shareholders +29 +Stock Ownership by Management and Others +30 +Compensation Discussion and Analysis +32 +Summary +32 +Compensation Philosophy and Objectives +32 +Compensation Decisions in Context: Key 2019 Accomplishments and Financial +Highlights +32 +2019 Compensation Program Overview +33 +Pay at Risk +33 +Long-Term Incentive Program Mix +34 +Compensation Best Practices +34 +Compensation Discussion and Analysis +35 +2019 Compensation Program Overview +35 +Setting Targets +35 +Base Salary +35 +Annual Bonus +36 +Performance Bonus +36 +Individual Performance Bonus +38 +Backlog Modifier +39 +Long-Term Incentive Compensation +41 +2017-2019 Performance Stock Units +42 +2019 Performance Stock Unit Awards +42 +Restricted Stock Unit Awards +43 +Benefits +43 +Retirement, Deferred Compensation and Welfare Plans +43 +Perquisites +44 +Post-Employment Compensation +44 +Say-On-Pay Advisory Vote +44 +Compensation Setting Process +45 +Setting Targets +45 +Competitive Philosophy and Competitive Market Data +45 +Peer Group +45 +CEO Role +45 +Compensation Consultant Role +45 +Other Compensation Policies and Practices +46 +NEO Stock Ownership Guidelines +46 +Stock Hedging and Pledging Policies +46 +Clawback Policy +46 +Impact of Accounting and Tax Treatments on Compensation +47 +Compensation Committee Report +48 +Summary Compensation Table +49 +Grants of Plan-Based Awards in Fiscal Year 2019 +51 +Outstanding Equity Awards at 2019 Fiscal Year-End +53 +Option Exercises and Stock Vested in Fiscal Year 2019 +57 +Pension Plans and 2019 Pension Benefits +58 +Qualified Pension Plans +58 +Supplemental Executive Retirement Plan +58 +Pension Benefits in Fiscal Year 2019 +59 +Non-Qualified Deferred Compensation +60 +Nonqualified Deferred Compensation +60 +Potential Payments Upon Termination or Change in Control +61 +Benefits Triggered by Termination for Cause or Voluntary +Termination +61 +Benefits Triggered by Termination Other Than for Cause or for Good +Reason +61 +Benefits Triggered Upon a Change in Control +61 +Benefits Triggered by Retirement, Death or Permanent Disability +63 +Description of Restrictive Covenants that Apply During and After Termination of +Employment +64 +Estimated Payments on Termination or Change in Control +64 +CEO Pay Ratio +66 +Proposal 2 – Advisory Resolution to Approve Executive +Compensation +67 +Proposal 3 – Ratification of Appointment of Independent Registered +Public Accounting Firm +68 +Audit Committee Report +69 +Independent Registered Public Accounting Firm +71 +Related Party Matters +72 +Certain Relationships and Related Transactions +72 +Related Person Transactions Policy +72 +Additional Information +73 +Shareholders List +73 +Director and Officer Indemnification +73 +Delinquent Section 16(a) Reports +73 +Shareholder Proposals for Inclusion in Next Year's Proxy +Statement +73 +Other Shareholder Proposals for Presentation at Next Year's Annual +Meeting +73 +Voting Securities +73 +Conduct of Business +74 +Vote Required for Election and Approval +74 +Voting Results of the Annual Meeting +74 +Attending the Annual Meeting +74 +Manner for Voting Proxies +75 +Revocation of Proxies +75 +Solicitation of Proxies +75 +Delivery of Documents to Shareholders Sharing an Address +75 +Access to Proxy Statement and Annual Report +75 +Appendix A – Forward-Looking Statements and Non-GAAP Reconciliation Tables +A-1 +2020 +PROXY +STATEMENT +3 +Table of Contents +Proxy Statement Summary +This +summary highlights key information that can be found in greater detail elsewhere in this Proxy Statement. This summary does not contain all of the information that shareholders +should consider, and shareholders should read the entire Proxy Statement before voting. +Our Brand Portfolio +Wolverine Worldwide organized its portfolio of brands into two key operating groups for fiscal 2019 as illustrated below: +Strategic Focus — Global Growth Agenda +2019 was another successful year for the Company with further progress against our Global Growth +Agenda . This agenda is our roadmap for growth and is focused on developing an innovative and faster Product Creation Engine , +implementing a modern, consumer-driven Digital-Direct Offense, and accelerating our growth in International markets. Focused efforts and investments behind +these pillars helped build momentum and allowed us to deliver top-line growth as we worked +to fulfill our vision to "Build a family of the most admired performance and lifestyle brands on earth." +We +maintained our level of operating investment in 2019 to drive organic growth and build an innovative and faster Product Creation Engine , the first +element of our Global Growth Agenda . In 2019, we recruited a Chief Merchant Officer to supplement the efforts of our brands, accelerate innovation and +elevate our product creation process. We are excited by the 2020 pipeline of on-trend and innovative product offerings across the brand portfolio and the powerful marketing stories that have been +developed to support them. +We +also made significant investments during 2019 to advance our Digital-Direct Offense , the second element of our Global Growth +Agenda . For us, this means leveraging our commercial platforms and optimizing demand creation investments across all channels of distribution, especially owned eCommerce, which +grew over 20%, delivered 260 basis points of operating margin expansion, and increased customer retention by over 30%. Our owned eCommerce channel has averaged approximately 20% growth over the +past three years and is expected to continue as our highest growth channel over the near term. Digital growth within our U.S. wholesale channel was also strong. +The +third pillar of our Global Growth Agenda is focused on International Expansion . We have a long track +record of driving brand success and growth on a global basis through a variety of business models. In 2019, we executed a joint venture with Xtep to position the Merrell and Saucony brands for +accelerated growth. We also acquired a key Saucony distributor and are using that talent to build a global design hub for the brand's successful Originals lifestyle business. We expect our +international business to be a key source of growth over the next several years as we continue to gain more direct engagement with consumers in strategic markets. +The +continued success associated with the execution of our Global Growth Agenda is very encouraging. The team has achieved success and momentum over the +last two years that will be leveraged to accelerate future growth. +2020 +PROXY +STATEMENT +4 +Table of Contents +MATTERS TO BE VOTED UPON +Shareholders are being asked to vote on the following matters at the 2020 Annual Meeting of Shareholders: +PROPOSAL +BOARD VOTE +RECOMMENDATION +PAGE +REFERENCE +1. +Election of Directors for Terms Expiring in 2023 +FOR each Nominee +12 +2. +Advisory Resolution Approving NEO Compensation +FOR +67 +3. +Ratification of Ernst & Young LLP as Auditor for Fiscal Year 2020 +FOR +68 +ELECTION OF DIRECTORS FOR TERMS EXPIRING IN 2023 +The Company's Board consists of 10 directors. The Company's By-Laws establish three classes of directors with each class being as nearly equal +in number as possible and serving three-year terms. +The +Board has nominated four directors for election at the Annual Meeting, as outlined in the table below. Each director nominee has been nominated to serve for a three-year term expiring at the +annual meeting of shareholders to be held in 2023. The Board recommends that shareholders vote "FOR" each of the nominees named below. +Age +Director Since +Independent +Other Public Directorships +Committees +Proposed Term +Expiration +William K. Gerber +Managing Partner, Cabrillo Point Capital, LLC; Retired Executive Vice President and Chief Financial Officer of Kelly Services, Inc. +66 +2008 +✓ +Cleveland-Cliffs, Inc. +Audit +Compensation +2023 +Blake W. Krueger +Chairman, CEO and President of Wolverine World Wide, Inc. +66 +2006 +None +None +2023 +Nicholas T. Long +Managing Partner, Bridger Growth Partners, LLC; Retired CEO of MillerCoors LLC +61 +2011 +✓ +Amcor Limited +Compensation (Chair) +Governance +2023 +Michael A. Volkema +Chairman of Herman Miller, Inc. +64 +2005 +✓ +Herman Miller, Inc. +Audit +Governance (Chair) +2023 +2020 +PROXY +STATEMENT +5 +Table of Contents +Board Highlights +The following charts illustrate key characteristics of the Company's Board: +Board is Composed of Directors with the Right Mix of Skills and Experiences +The following chart lists the important experiences and attributes that the Company's Directors possess: +2020 +PROXY +STATEMENT +6 +Table of Contents +Shareholder Engagement +As part of its ongoing shareholder engagement efforts, the Company reached out in early 2020 to shareholders representing 60% of its +outstanding shares and has held or expects to hold telephonic meetings with all shareholders who accepted the Company's invitation (representing about 21% of outstanding shares). Discussions focused +on Company strategy, financial performance, governance and compensation programs. +Corporate Governance Highlights +Wolverine Worldwide is committed to a governance structure that provides strong shareholder rights and meaningful accountability. +✓ +Highly independent Board and Committees +✓ +Lead Independent Director with +clearly defined role +✓ +Majority voting with director resignation policy +✓ +No supermajority vote requirements +✓ +Shareholder right to act by written +consent +✓ +Annual Board and Committee self-evaluations +✓ +Robust Board and executive +succession planning, including annual written director nominee evaluations +✓ +Long-standing commitment toward diversity +✓ +Director onboarding orientation program +✓ +Active shareholder engagement +practices +Meeting Information +The meeting is scheduled to take place at the Company's Corporate offices at 9341 Courtland Drive, N.E., Rockford, +MI 49351, on April 30, 2020, at 10:00 a.m. EDT. The Company is actively monitoring the public health and travel concerns relating to the coronavirus (COVID-19) and the protocols +that federal, state, and local governments may impose. In the event it is not possible or advisable to hold the Annual Meeting in person, the Company will announce alternative arrangements for the +meeting, which may include a change in venue or holding the meeting solely by means of remote communication (i.e., a virtual meeting). Please monitor the Company's website where Annual Meeting +materials are posted (www.wolverineworldwide.com/2020annualmeeting) for updated information. If you plan to attend the meeting, please check the website regularly prior to the meeting date. As always, +the Company encourages you to vote your shares before the Annual Meeting. +2020 +PROXY +STATEMENT +7 +Table of Contents +Corporate Governance +Wolverine +Worldwide is committed to the highest level of corporate governance, and the Board has adopted Corporate Governance Guidelines to strengthen management accountability and promote long-term +shareholder interests. +BOARD OF DIRECTORS +The shareholders elect directors to serve on the Company's Board of Directors (the "Board of Directors" or "Board"). The Board oversees the +management of the business by the Chief Executive Officer ("CEO") and senior management. In addition to its general oversight function, the Board's additional responsibilities include, but are not +limited to, the following: +• Reviewing and approving the Company's key objectives and strategic business plans, and monitoring implementation of those plans and the +Company's success in meeting identified objectives +• Selecting, evaluating and approving the compensation of the CEO and overseeing CEO succession planning +• Providing advice and oversight regarding the selection, evaluation, development and compensation of management +• Overseeing the Company's risk management and mitigation activities +• Reviewing and monitoring administration of policies and procedures to safeguard the integrity of the Company's business operations and +financial reporting and to promote compliance with applicable laws and regulations +Board Composition +Board Highlights +The +Board prides itself on its ability to recruit and retain directors who have high personal and professional integrity and have demonstrated exceptional ability and judgment to effectively serve +shareholders' long-term interests. These skills and attributes also link with the Company's most important strategic objectives, such as eCommerce and digital growth, brand building, operational +excellence and supply chain management, and international growth. The Board also values diversity, as evidenced by the current makeup of the Board. The Board believes that its directors, including the +nominees for election as directors at the Annual Meeting, have these characteristics and valuable skills that provide the Company with the variety and depth of knowledge, judgment and strategic vision +necessary to provide effective oversight of the Company. This includes the Company's newest director, David W. McCreight, who was appointed to the Board in May 2019. +To +help accomplish the right mix of experience and expertise, and to assist in succession planning, the Board, at the recommendation of the Governance Committee, has identified specified skills and +attributes it desires its members to possess. The below graphic lists these skills and attributes and indicates which of the directors possess each. As shown, these skills and attributes are well +represented within the Board. +2020 +PROXY +STATEMENT +8 +Table of Contents +The +Governance Committee reviews with the Board on an annual basis the skills and characteristics desired of Board members in the context of the current makeup of the Board. The Board, with the +assistance of the Governance Committee, annually assesses the current composition of the Board across many dimensions. As set forth in the Company's Corporate Governance Guidelines, which are posted +on its website, this assessment addresses the skills and attributes set forth in the table above and the individual performance, experience, age and skills of each director. +Director Nominations +The Board's Governance Committee serves as its nominating committee. The Governance Committee, in anticipation of upcoming director elections +and other potential or expected Board vacancies, evaluates qualified individuals and recommends candidates to the Board. The Governance Committee may retain a search firm or other external parties to +assist it in identifying candidates, and the Governance Committee has the sole authority to select such a firm, approve the search firm's fees and retention terms, and to terminate the firm if +necessary. +The +Governance Committee considers candidates suggested by directors, senior management or shareholders. Shareholders may recommend individuals as potential director candidates by communicating with +the Governance Committee through one of the Board communication mechanisms described under the heading " Shareholder Communications Policy ." Shareholders +that wish to nominate a director candidate must comply with the procedures set forth in the Company's By-Laws, which are posted on its website. Ultimately, upon the recommendation of the Governance +Committee, the Board selects the director nominees for election at each annual meeting. In selecting director nominees, the Board considers each candidate's performance as a director (which is +assessed through an anonymous written peer evaluation), personal and professional integrity, ability and judgment, and likelihood to be effective, in conjunction with the other nominees and directors, +in serving the long-term interests of the shareholders. The Governance Committee also considers candidates' relative skills, attributes, background and characteristics as well as independence under +applicable New York Stock Exchange ("NYSE") listing standards and the Company's Director Independence Standards, potential to contribute to the composition and culture of the Board, and ability and +willingness to actively participate in the Board and committee meetings and to otherwise devote sufficient time to Board duties. +BOARD SELF-ASSESSMENT +As part of an annual self-assessment, each director evaluates the performance of the Board and any committee on which he or she serves across +a number of dimensions. Dr. Kollat, the Lead Independent Director, works with the Governance Committee to review the Board self-assessment with directors following the end of each fiscal year +and to conduct individual director interviews at the end of each year. Committee Chairpersons review the committee self-assessments with their respective committee members and discuss them with the +Board. +2020 +PROXY +STATEMENT +9 +Table of Contents +In +addition, the Governance Committee, working with the Lead Independent Director, develops and implements guidelines for evaluating all directors standing for nomination and re-election and oversees +the evaluation of such nominees. +The Corporate Governance Guidelines (including the Director Independence Standards), the Charter for each Board standing committee (Audit, Compensation and Governance), the Company's Certificate of +Incorporation, By-Laws, Code of Business Conduct, and its Accounting and Finance Code of Ethics all are available on the Wolverine Worldwide website at: +www.wolverineworldwide.com/investor-relations/corporate-governance/ +The Board and applicable committees annually review these and other key governance documents. +RISK OVERSIGHT +The Board oversees the Company's risk management and mitigation activities with a focus on the most significant risks facing the Company, +including strategic, operational, financial, environmental, cybersecurity, and legal compliance risks. This oversight is conducted through presentations by and discussions with the CEO, Chief +Financial Officer ("CFO"), General Counsel or Associate General Counsel, Chief Information Officer, brand and department leaders and other members of management. The Associate General Counsel and +Director of Internal Audit coordinate management's day-to-day risk management and mitigation efforts, and the Director of Internal Audit reports directly to the Audit Committee. +The +Associate General Counsel and Director of Internal Audit review with the Audit Committee regularly, and with the full Board periodically, management's risk assessment and mitigation strategies. In +addition to the above processes, the Board has delegated risk management and mitigation oversight responsibilities to its standing committees, which meet regularly to review and discuss specific risk +topics that align with their core responsibilities. +• The Audit Committee reviews the Company's approach to risk management generally. The Audit Committee also oversees the Company's risk policies +and processes relating to its financial statements and financial reporting processes, credit risks, and liquidity risks, as well as the Company's management of risks related to cybersecurity. The +Audit Committee discusses with management and the independent auditors significant risks or exposures and the steps taken by management to resolve them. +• The Compensation Committee monitors the risks associated with management resources; organization structure; succession planning, hiring, +development and retention processes; and it reviews and evaluates risks associated with the Company's compensation structure and programs. +• The Governance Committee oversees risks related to the Company's governance structure and processes and potential risks arising from related +person transactions. +The +Company reviewed its compensation policies and practices to assess whether they are reasonably likely to have a material adverse effect on the Company. As part of this review, the Company compiled +information about the Company's incentive plans, including reviewing the Company's compensation philosophy, evaluating key incentive plan design features and reviewing historic payout levels and pay +mix. With assistance from Company management and its independent compensation consultant, the Compensation Committee reviewed the executive compensation program, and managers from the Company's human +resources and legal departments reviewed the non-executive compensation programs. +CODE OF BUSINESS CONDUCT AND ACCOUNTING AND FINANCE CODE OF ETHICS +The Board has adopted a Code of Business Conduct for the Company's directors, officers and employees. The Board also has adopted an Accounting +and Finance Code of Ethics ("Accounting and Finance Code") that focuses on the financial reporting process and applies to the Company's CEO, CFO and Corporate Controller. +The Company discloses amendments to or waivers from its Code of Business Conduct affecting directors or executive officers and amendments to or waivers from its Accounting and Finance Code on its +website at: +www.wolverineworldwide.com/investor-relations/corporate-governance/ +2020 +PROXY +STATEMENT +10 +Table of Contents +SHAREHOLDER COMMUNICATIONS POLICY +Shareholders and other interested parties may send correspondence to the Board, the non-employee directors as a group, a specific Board +committee or an individual director (including the Lead Director) in the manner described below. +The +General Counsel or Associate General Counsel will provide a summary and copies of all correspondence (other than solicitations for services, products or publications) as applicable at each +regularly scheduled Board meeting. +Communications may be sent via email through various links on our website at: +www.wolverineworldwide.com/investor-relations/corporate-governance/ +or by regular mail c/o General Counsel, Wolverine World Wide, Inc., 9341 Courtland Drive, N.E., Rockford, MI 49351. +The +General Counsel or Associate General Counsel will alert individual directors if an item warrants a prompt response from the individual director prior to the next regularly scheduled meeting. Items +warranting a prompt response, but not addressed to a specific director, will be routed to the applicable committee Chairperson. +2020 +PROXY +STATEMENT +11 +Table of Contents +Proposal 1 — Election of +Directors for Terms Expiring +in 2023 +The +Company's Board consists of ten directors. The Company's By-Laws establish three classes of directors, with each class being as nearly equal in number as possible and serving three-year terms. At +each annual meeting, the term of one class expires. The Board has nominated four directors for election at the Annual Meeting: William K. Gerber, Blake W. Krueger, Nicholas T. Long and Michael A. +Volkema. Each director has been nominated to serve for a three-year term expiring at the annual meeting of shareholders to be held in 2023 or until his/her successor, if any, has been elected and is +qualified. +All +director nominees other than Mr. Krueger are independent directors, as determined by the Board under the applicable NYSE listing standards and the Company's Director Independence Standards. +Each director nominee currently serves on the Board. The shareholders most recently elected Messrs. Gerber, Krueger, Long and Volkema at the Company's 2017 Annual Meeting. +The +Company is not aware of any nominee who will be unable or unwilling to serve as a director. However, if a nominee is unable to serve or is otherwise unavailable for election, the incumbent +directors may or may not select a substitute nominee. If the directors select a substitute nominee, the proxy holder will vote the shares represented by all valid proxies for the substitute nominee +(unless other instructions are given). +The +biographies of the four nominees and the other directors of the Company are below, along with a discussion of the experience and skills of each director. +2020 +PROXY +STATEMENT +12 +Table of Contents +Director Nominees with Proposed Terms +Expiring in 2023 +WILLIAM K. GERBER +Age: +66 +Director since: +2008 +Select Business Experience: +Managing Director of +Cabrillo Point Capital LLC; +Retired Executive Vice President +and Chief Financial Officer of +Kelly Services, Inc. +Board Committees: +Audit +Compensation +Other Public Directorships: +Cleveland-Cliffs, Inc. +Career Highlights: +Mr. Gerber is Managing Director of Cabrillo Point Capital LLC, a private investment fund. He has held that position since 2008. From 1998 to 2007, Mr. Gerber was Executive Vice President and Chief Financial Officer of Kelly Services, +Inc., a publicly traded global staffing solutions company with operations in more than 35 countries. Mr. Gerber served in various leadership positions with L Brands, Inc., a multinational apparel and retail company, prior to joining +Kelly Services, Inc. Mr. Gerber currently serves as director of Cleveland-Cliffs, Inc., a producer of iron ore and steel products, since 2020. From 2007 through 2020, Mr. Gerber was a director of AK Steel Holding Corporation, +which merged with Cleveland-Cliffs in 2020. +Experience and Skills: +From his 15 years in senior leadership positions with L Brands, Inc. and Kelly Services, Inc., Mr. Gerber has obtained extensive experience in apparel, retail, international business and finance, and his service as a director of +various public companies has given him experience with public company governance and related matters. +2020 +PROXY +STATEMENT +13 +Table of Contents +BLAKE W. KRUEGER +Age: +66 +Director since: +2006 +Select Business Experience: +Chairman, Chief Executive +Officer and President of +Wolverine Worldwide +Board Committees: +None +Other Public Directorships: +None +Career Highlights: +Mr. Krueger is Chairman of Wolverine Worldwide, a position he assumed in January 2010, and Chief Executive Officer and President of Wolverine Worldwide, positions he assumed in April 2007. From October 2005 until April 2007, Mr. Krueger +served as President and Chief Operating Officer of Wolverine Worldwide. From 2004 to October 2005, he served as Executive Vice President and Secretary of Wolverine Worldwide and President of its Heritage Brands Group. From 2003 to 2004, +Mr. Krueger served as Executive Vice President and Secretary of Wolverine Worldwide and President of the Company's Caterpillar Footwear Group. He also previously served as Executive Vice President, General Counsel and Secretary of Wolverine +Worldwide with various responsibilities including the human resources, retail, business development, accessory licensing, mergers and acquisitions, and legal areas. Mr. Krueger serves as a director of Bissell Homecare, Inc., a privately +held company and leading brand of floor care appliances. +Experience and Skills: +Mr. Krueger's more than 25 years in senior leadership roles with the Company have provided him expertise in footwear and apparel, retail, international business and finance, and his board experience at the Company and Professionals Direct, +Inc., a then publicly traded insurance company, has given him extensive experience with public company governance and related matters. +2020 +PROXY +STATEMENT +14 +Table of Contents +NICHOLAS T. LONG +Age: +61 +Director since: +2011 +Select Business Experience: +Managing Partner, Bridger Growth Partners, LLC; Retired Chief Executive Officer of MillerCoors LLC +Board Committees: +Compensation (Chair) +Governance +Other Public Directorships: +Amcor Limited +Career Highlights: +Mr. Long has acted as a Managing Partner for Bridger Growth Partners, LLC, a private investment fund, since 2015. From 2011 until his retirement in 2015, Mr. Long served as Chief Executive Officer of MillerCoors LLC, a joint +venture between two publicly traded beverage companies. From 2008 to 2011, Mr. Long served as President and Chief Commercial Officer of MillerCoors LLC. From 2007 to 2008, Mr. Long served as Chief Executive Officer of Miller Brewing +Company, a beverage company, and he served as Chief Marketing Officer of Miller Brewing Company from 2005 to 2007. Prior to joining Miller Brewing Company, Mr. Long spent 17 years in various senior leadership positions at The Coca Cola +Company, a beverage company, including Vice President of Strategic Marketing, Global Brands, Vice President, Strategic Marketing Research and Trends, President of Coca Cola's Great Britain and Ireland Division and President of the Northwest Europe +Division. Mr. Long currently serves as a director of Amcor Limited, a packaging solutions company. +Experience and Skills: +Through his more than 20 years in senior positions at category leading, branded companies, Mr. Long has developed significant marketing, international business and brand building expertise. +2020 +PROXY +STATEMENT +15 +Table of Contents +MICHAEL A. VOLKEMA +Age: +64 +Director since: +2005 +Select Business Experience: +Chairman of Herman Miller, Inc. +Board Committees: +Audit +Governance (Chair) +Other Public Directorships: +Herman Miller, Inc. +Career Highlights: +Mr. Volkema has been Chairman of Herman Miller, Inc., a publicly traded multinational furniture manufacturer, since 2000. Mr. Volkema became President and Chief Executive Officer of Herman Miller in 1995 and held those positions until +2003 and 2004, respectively. Mr. Volkema also is a director at Milliken & Company, a privately held, innovation based company serving the textile, chemical, and floor covering markets. +Experience and Skills: +Mr. Volkema has obtained international business and brand building expertise from his more than 20 years in senior leadership positions with Herman Miller, Inc. Mr. Volkema also has public company governance and related experience +from his extensive service on public company boards, including 19 years as Chairman of Herman Miller, Inc. and service on compensation and audit committees of boards of publicly traded companies. +BOARD RECOMMENDATION +The Board recommends that you vote "FOR" the election of the above nominees for proposed terms expiring in 2023. +2020 +PROXY +STATEMENT +16 +Table of Contents +Directors with Terms +Expiring in 2021 +ROXANE DIVOL +Age: +47 +Director since: +2014 +Select Business Experience: +Former Group Chief Operating Officer of Webhelp, Inc. +Board Committees: +Audit +Governance +Other Public Directorships: +None +Career Highlights: +From March to December 2019, Ms. Divol was the Group Chief Operating Officer for Webhelp, Inc., a European leader in business process and customer experience outsourcing. From February 2017 until January 2018, Ms. Divol was Executive +Vice President and General Manager, Website Security, for Symantec Corporation, a global leader in information security solutions. From 2014 to February 2017, Ms. Divol was Senior Vice President and General Manager, Website Security for +Symantec. From 2013 to 2014, Ms. Divol was Senior Vice President of Alliances with Symantec. Ms. Divol joined Symantec from McKinsey & Company, a global management consulting firm, where she was a partner in its San Francisco +office and led the West Coast marketing and sales practice, with a focus on marketing return on investment and marketing transformation. +Experience and Skills: +Ms. Divol's experience with Webhelp, Inc., Symantec Corporation and McKinsey & Company provides her with expertise in international business, marketing, cybersecurity, digital/eCommerce and information technology. In 2017, +Ms. Divol was named one of the 50 most powerful women in technology by the National Diversity Council. +2020 +PROXY +STATEMENT +17 +Table of Contents +BRENDA J. LAUDERBACK +Age: +70 +Director since: +2003 +Select Business Experience: +Chair of Denny's Corporation; +Retired President of the Wholesale and Retail Group of Nine West Group, Inc. +Board Committees: +Audit +Governance +Other Public Directorships: +Denny's Corporation (Board Chair) +Sleep Number Corporation +Career Highlights: +Ms. Lauderback is currently the Chair of the Board of Denny's Corporation, a restaurant company, and has acted as a Director for Denny's Corporation since 2005 and Sleep Number Corporation, a bed manufacturer and retailer, since 2004. From 1995 +until her retirement in 1998, Ms. Lauderback was President of the Wholesale and Retail Group of Nine West Group, Inc., a footwear wholesaler and distributor. She previously was the President of the Wholesale Division of U.S. Shoe +Corporation, a footwear manufacturer and distributor, a position that included responsibility for offices in China, Italy and Spain, and she was a Vice President/General Merchandise Manager of Dayton Hudson Corporation (now Target Corporation), a +retail company. From 1998 to 2015, Ms. Lauderback also was a director of Big Lots, Inc., a retail company. +Experience and Skills: +Ms. Lauderback has more than 25 years of experience in the retail industry, with more than 20 years in the footwear, apparel, and accessories industries. These senior leadership positions have provided her with strong footwear, apparel +and retail expertise. She also has extensive experience with public company governance and related matters. Ms. Lauderback was named to the National Association of Corporate Directors' (NACD) 2017 Directorship 100 list. +2020 +PROXY +STATEMENT +18 +Table of Contents +DAVID W. MCCREIGHT +Age: +57 +Director since: +2019 +Select Business Experience: +Retired President of URBN and Retired CEO of Anthropologie Group +Board Committees: +None +Other Public Directorships: +CarMax, Inc. +Career Highlights: +From 2016-2018 Mr. McCreight was President of URBN, Inc., the parent company of multinational lifestyle brands Anthropologie, Urban Outfitters, and Free People. Between 2011 and 2018, Mr. McCreight was the Chief Executive Officer of +Anthropologie Group, the primary brand of which is Anthropologie, a leading multinational and multichannel lifestyle brand. Prior to that, Mr. McCreight was the President of Under Armour, Inc. from 2008 through 2010 and Lands' End, +Inc. through 2008. +Experience and Skills: +Through 30 years of senior leadership positions with leading multinational and multichannel apparel, footwear, accessories, and lifestyle brands, Mr. McCreight has obtained global direct-to-consumer and international business experience. +Mr. McCreight also has strong leadership and business experience from his service on public company boards, including CarMax, Inc. and DavidsTea, Inc. In 2019, Mr. McCreight became a Governance fellow of the National Association of +Corporate Directors. +2020 +PROXY +STATEMENT +19 +Table of Contents +Directors with Terms +Expiring in 2022 +JEFFREY M. BOROMISA +Age: +65 +Director since: +2006 +Select Business Experience: +Retired Executive Vice President of Kellogg International, President of Latin America; Senior Vice President of Kellogg Company +Board Committees: +Audit (Chair) Compensation +Other Public Directorships: +None +Career Highlights: +Mr. Boromisa worked at Kellogg Company, a global food manufacturing company, and its affiliates from 1981 to 2009. From 2008 through his retirement in May 2009, Mr. Boromisa was Executive Vice President of Kellogg International, President +of Latin America; and Senior Vice President of Kellogg Company. From 2007 until 2008, Mr. Boromisa served as Executive Vice President of Kellogg International, President of Asia Pacific and Senior Vice President of Kellogg Company. From 2004 +through 2006, he was Senior Vice President and Chief Financial Officer of Kellogg Company. In addition, beginning in 2004 and through his retirement, Mr. Boromisa was a member of Kellogg Company's Global Leadership Team. Prior to 2004, +Mr. Boromisa occupied various leadership positions with Kellogg. Mr. Boromisa is also a director at Haworth International, Inc., a privately held, multinational, office furniture design and manufacturing company. +Experience and Skills: +With nearly 30 years of experience at Kellogg Company, including serving as its Chief Financial Officer and leading various operational business units, Mr. Boromisa has obtained international business, brand building and finance +expertise. +2020 +PROXY +STATEMENT +20 +Table of Contents +GINA R. BOSWELL +Age: +57 +Director since: +2013 +Select Business Experience: +Retired President, Customer Development, +Unilever U.S.A. +Board Committees: +Compensation Governance +Other Public Directorships: +ManpowerGroup Inc. +Career Highlights: +From May 2017 until her retirement in October 2019, Ms. Boswell was the President, Customer Development for Unilever U.S.A., one of the largest markets for Unilever PLC / Unilever N.V., a multinational consumer goods company whose +products include Dove, Vaseline, Lipton, and Hellman's. From July 2015 to May 2017, Ms. Boswell served as Executive Vice President and General Manager for Unilever UK & Ireland. From 2011 to September 2015, Ms. Boswell served as +Executive Vice President, Personal Care for Unilever PLC / Unilever N.V. From 2008 to 2011, Ms. Boswell served as President, Global Brands, for The Alberto Culver Company, a consumer goods company. Ms. Boswell has held numerous +other senior leadership positions with other leading global companies, including Avon Products, Inc., Ford Motor Company, and Estee Lauder Companies, Inc. Ms. Boswell is a member of the board of ManpowerGroup Inc., a publicly +traded workforce solutions company. +Experience and Skills: +Through senior leadership roles with leading branded companies, Ms. Boswell has obtained expertise in brand building, international business, marketing, digital/eCommerce and finance, and her service as a director of public companies has given +her experience with public company governance and related matters. +2020 +PROXY +STATEMENT +21 +Table of Contents +DAVID T. KOLLAT +Age: +81 +Director since: +1992 +Select Business Experience: +President and Chairman, 22, Inc. +Board Committees: +Independent Lead Director +Other Public Directorships: +None +Career Highlights: +Dr. Kollat has been Chairman and President of 22, Inc., a company specializing in research and management consulting for retailers and consumer goods manufacturers, since 1987. In addition to his marketing and management experience as +Chairman and President of 22, Inc., Dr. Kollat served for 11 years in senior leadership positions at L Brands, Inc., a publicly traded, multinational apparel and retail company, including as Executive Vice President, Marketing; +President of Victoria's Secret Direct; and as a member of its executive committee. Dr. Kollat is Lead Independent Director of Wolverine Worldwide, a position he has held since 2007. Dr. Kollat was a director of L Brands, Inc. from 1976 +to 2019 and was a director of Sleep Number Corporation, a bed manufacturer and retailer, from 1994-2018. +Experience and Skills: +Dr. Kollat's more than 40 years' experience at L Brands, Inc. and 22, Inc. has provided him with marketing, apparel, international business, brand building, retail and finance expertise. He also has significant experience with +company governance and related matters through service on more than twenty boards of directors, including extensive service on public company boards, and service as a Lead Independent Director and chair of nominating, audit and compensation +committees. +2020 +PROXY +STATEMENT +22 +Table of Contents +BOARD LEADERSHIP +The Company's Corporate Governance Guidelines give the Board the flexibility to determine the best leadership structure for the Company based +upon the Company's evolving needs and opportunities. The Governance Committee periodically reviews the Board's leadership structure, including whether to separate the roles of Chairman and CEO, based +upon the Board and Company's then-current circumstances, and recommends changes to the Board as appropriate. Currently, the Company's CEO also serves as the Chairman of the Board. In addition, since +1993, the independent directors have annually elected a Lead Independent Director who performs a role in many ways similar to an independent Chairman. The Board continues to believe that this +leadership structure is in the best interests of the Company and its shareholders at this time because it provides the Board with effective independent oversight of management. Specifically, the Lead +Independent Director has the following enumerated responsibilities: +• Serve, as necessary, as a liaison between the Chairman and the independent directors +• Preside over Board meetings in the absence of the Chairman +• Review, approve and help develop the agendas and scheduling for Board and committee meetings +• Review and approve information and meeting materials sent to the Board +• Preside over executive sessions, with the authority to call executive sessions +• Work with the Compensation Committee and members of the Board to provide an effective annual performance review of the CEO and participate in +CEO succession planning +• Oversee, along with the Governance Committee, the annual Board and committee evaluations +• Be available for consultation and communication with shareholders, as appropriate +DIRECTOR INDEPENDENCE +The Board annually assesses the independence of all directors. To qualify as "independent," the Board must affirmatively determine that the +director is independent under the Company's Director Independence Standards, which are modeled after the listing standards of the NYSE. Under NYSE listing standards, the Board has determined that 9 of +the Company's 10 directors are independent. Only Mr. Krueger, the Company's CEO, is not independent. All of the Board's committees are comprised entirely of independent directors. The +independent directors generally meet in executive session at each regularly scheduled meeting. +The +Director Independence Standards define an "Independent Director" as a director who the Board determines otherwise has no material relationship with the Company (either directly or as a partner, +shareholder or officer of an organization that has a relationship with the Company), and who: +• Is not, and in the past three years has not been, an employee of the Company +• Does not have, and has not had within the last three years, an immediate family member employed as an executive officer of the Company +• Has not received, and has not had an immediate family member receive during any 12 month period within the last three years, any direct +compensation from the Company in excess of $120,000 (other than compensation for Board service; compensation received by the director for former service as an interim Chairman, CEO or other executive +officer; compensation received by the director's immediate family member for service as a non-executive employee; or pension and other forms of deferred compensation for prior service if such +compensation is not contingent in any way on continued service) +• Is not a current employee or partner of a firm that is the Company's internal or external auditor +2020 +PROXY +STATEMENT +23 +Table of Contents +• Has not been, and has not had an immediate family member who has been within the last three years, a partner or employee of the Company's +internal or external auditor and personally worked on the Company's audit within that time +• Has not had an immediate family member who is (i) a current partner of the Company's internal or external auditor, or (ii) a +current employee of the Company's internal or external auditor who personally works on the Company's audit +• Is not, and has not been within the last three years, part of an interlocking directorate in which a current executive officer of Wolverine +Worldwide serves or served on the compensation committee of another company where the director or the director's immediate family member concurrently serves or served as an executive officer +• Is not an employee of, and does not have an immediate family member who is an executive officer of, another company that has made payments to, +or received payments from, Wolverine Worldwide for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of $1,000,000 or 2% of the other company's +consolidated gross revenues +• Has not had any other direct or indirect relationship with Wolverine Worldwide that the Board determines is material +BOARD COMMITTEES, MEETINGS AND MEETING ATTENDANCE +The Board has three standing committees: Audit, Compensation and Governance. Each committee meets periodically throughout the year and reports +its recommendations to the Board. The Company expects directors to attend every meeting of the Board and the committees on which they serve and to attend the annual meeting of shareholders. In 2019, +all directors then serving on the Board attended the 2019 Annual Meeting of Shareholders, and all directors attended at least 75% of the meetings of the Board (8 meetings in 2019) and the committees +on which they served. All directors are typically invited to and attend all committee meetings. +Each +committee annually evaluates its performance to determine its effectiveness. The Board has determined that all committee members are "independent" as defined by NYSE listing standards. +Furthermore, each Audit Committee member satisfies the NYSE "financial literacy" requirement. In addition, the Board has determined that Mr. Boromisa and Mr. Gerber are "audit committee +financial experts" under Securities and Exchange Commission ("SEC") rules. Each committee's charter, with a complete list of the duties and responsibilities, is available on the Company's website at www.wolverineworldwide.com/investor-relations/corporate-governance/ . +2020 +PROXY +STATEMENT +24 +Table of Contents +2020 +PROXY +STATEMENT +25 +Table of Contents +Non-Employee Director Compensation in Fiscal Year 2019 +The +Company's non-employee director compensation philosophy is to pay compensation that is competitive with the compensation paid by companies of similar size, in similar industries +and with whom Wolverine Worldwide competes for director candidates. The Governance Committee, with input from management and from the Compensation Committee's independent compensation consultant, +reviewed director compensation and compared it to market data, including a comparison to director compensation for the Company's Peer Group, as defined on page 45, and broader industry market surveys +(FW Cook 2017 Director Compensation Report and NACD 2017-2018 Director Compensation Report). Based on this review, non-employee director compensation for fiscal year 2019 was updated as follows +compared to fiscal year 2018 compensation. +• Increased annual cash director fee by $5,000 +• Increased annual Governance Chair fee by $2,500 +• Increased annual restricted stock unit grant by $5,000 +These +changes were implemented to keep Wolverine director compensation near the median of its peer group. +The +following table provides information regarding the compensation of the Company's non-employee directors for fiscal year 2019. Mr. Krueger receives compensation for his services as the +Company's CEO and President, but does not receive any additional compensation for his service as a director or chairman. +Fees Paid in +Cash +Cash Amounts +Voluntarily +Deferred +Fees Earned or +Paid in Cash 1 +Restricted +Stock Unit +Awards 2 +Totals +Boromisa +- ++ +$114,500 += +$114,500 ++ +$135,011 += +$249,511 +Boswell +$99,000 ++ +- += +$99,000 ++ +$135,011 += +$234,011 +Divol +$102,000 ++ +- += +$102,000 ++ +$135,011 += +$237,011 +Gerber +$119,500 ++ +- += +$119,500 ++ +$135,011 += +$254,511 +Gromek +- ++ +$51,185 += +$51,185 ++ +- += +$51,185 +Kollat +$135,000 ++ +- += +$135,000 ++ +$170,014 += +$305,014 +Lauderback +$76,500 ++ +$25,500 += +$102,000 ++ +$135,011 += +$237,011 +Long +$122,315 ++ +- += +$122,315 ++ +$135,011 += +$257,326 +McCreight +$49,863 ++ +- += +$49,863 ++ +$135,020 += +$184,883 +Volkema +- ++ +$119,500 += +$119,500 ++ +$135,011 += +$254,511 +1 Represents cash payments received or deferred by directors for fiscal year 2019. Directors may defer fees pursuant to the Director Deferred Compensation Plan or +Deferred Compensation Plan (each as defined below). The table shows the Fees Earned or Paid in Cash separated into Fees Paid in Cash and Cash Amounts Voluntarily +Deferred. 2 Represents the aggregate grant date fair value of restricted stock units granted to non-employee directors in fiscal year 2019, calculated in accordance with +Accounting Standard Codification ("ASC") Topic 718, without regard to estimated forfeitures. The chart below lists the aggregate outstanding option awards (granted prior to 2018) and restricted stock +units held by non-employee directors at the end of fiscal year 2019. For valuation assumptions, see the Stock-Based Compensation footnote to Wolverine Worldwide's Consolidated Financial Statements for +fiscal year 2019 included in its Form 10-K for this year. +2020 +PROXY +STATEMENT +26 +Table of Contents +Name +Option Awards Outstanding at +December 28, 2019 +(#) +Restricted Stock Units held at +December 28, 2019 +(#) +Boromisa +61,994 +8,085 +Boswell +44,735 +3,645 +Divol +40,002 +3,645 +Gerber +55,326 +3,645 +Gromek +61,994 +- +Kollat +74,296 +10,226 +Lauderback +55,326 +3,645 +Long +60,642 +8,085 +McCreight +- +3,781 +Volkema +55,326 +8,085 +Includes 4,440, 5,636, 4,440 and 4,440 fully vested restricted stock units held by each of Mr. Boromisa, Dr. Kollat, Mr. Long and Mr. Volkema, respectively, that were +deferred and will be settled on such date as elected by the director. +The +following table shows the non-employee director compensation program for fiscal year 2019: +Compensation Plan for 2019 +Component +Cash +Restricted Stock Units 1 +Annual Director Fee +$75,000 +Number of restricted stock units "RSUs" with a grant date value of $135,000. +Audit Committee Annual Fee +$15,000 +Audit Committee Chairperson Annual Fee +$25,000 +Compensation Committee Annual Fee +$12,000 +Compensation Committee Chairperson Annual Fee +$20,000 +Governance Committee Annual Fee +$12,000 +Governance Committee Chairperson Annual Fee +$17,500 +Lead Director Annual Fee +In lieu of the standard Annual Director Fee, the Lead Director was paid a Cash Retainer of +$135,000. +In lieu of the standard RSU grant, the Lead Director received a number of RSUs with a grant date value of +$170,000. +1 For fiscal year 2019, Messrs. Boromisa, Gerber, Long and Volkema and Mses. Boswell, Divol and Lauderback each received 3,645 restricted stock +units, Mr. McCreight received 3,781 and Dr. Kollat received 4,590 restricted stock units, in all cases, granted in May 2019 under the Stock Incentive Plan of 2016, as amended. Director +RSUs vest one year from the date of grant. +Director Deferred Compensation Plan. The Company's Amended and Restated Outside Directors' Deferred Compensation Plan (the "Director Deferred Compensation Plan") +is a supplemental nonqualified deferred compensation plan for non-employee directors. A separate non-employee director deferred compensation plan applies to benefits accrued under that plan before +January 1, 2005. The Director Deferred Compensation Plan permits all non-employee directors to voluntarily defer, at their option, 25%, 50%, 75% or 100% of their director fees. The Company +establishes a book account for each non-employee director and credits the director's account with a number of stock units equal to the amounts voluntarily deferred, divided by the closing market price +of common stock on the payment/deferral date. The Company also credits director accounts with dividend equivalents on amounts previously deferred in the form of additional stock units. The amounts +credited to director accounts are treated as if invested in Wolverine Worldwide common stock. The number of stock units held in director accounts is set forth under the "Stock Ownership By Management +and Others" table below. +Upon +a director's termination of service, or such later date as a director selects, the Company will distribute the stock units in the director's book account in shares of Wolverine Worldwide common +stock in either a single, lump sum distribution or annual installment distributions over a +2020 +PROXY +STATEMENT +27 +Table of Contents +period +of up to 20 years (10 years under the plan for benefits accrued before January 1, 2005). The Company converts each stock unit to one share of Wolverine Worldwide common +stock. +Upon +a "change in control," the Company will distribute to the director, in a single, lump sum distribution, Wolverine Worldwide common stock in a number of shares equal to the stock units credited to +a director's book account. The Deferred Compensation Plan defines "change in control" as any of the following: +• The acquisition by any person, or by more than one person acting as a group, of more than 50% of either (i) the then outstanding shares +of common stock of Wolverine Worldwide or (ii) the total fair market value of Wolverine Worldwide +• The acquisition by any person, or more than one person acting as a group, during the 12 month period from and including the date of the +most recent acquisition, of ownership of 30% or more of the outstanding common stock of Wolverine Worldwide +• The replacement of a majority of the individuals who constitute the Board during any 12 month period by directors whose appointment or +election is not endorsed by a majority of the directors prior to the date of the appointment or election +• The acquisition, during any 12 month period ending on the date of the most recent acquisition, by any person of assets from Wolverine +Worldwide having a gross fair market value of at least 40% of the gross fair market value of all the assets of Wolverine Worldwide immediately before the acquisition +Deferred Compensation Plan. For a description of the non-qualified Deferred Compensation Plan under which directors may also defer cash fees, please see the +" Non-Qualified Deferred Compensation " section on page 60. +NON-EMPLOYEE DIRECTOR STOCK OWNERSHIP GUIDELINES +Each non-employee director must attain (and maintain) a minimum stock ownership level (including owned shares, the in-the-money value of stock +options, and stock units under the Directors' Deferred Compensation Plan) equal to six times the non-employee director annual cash retainer prior to being able to gift or sell any Company stock. +During 2019, all non-employee directors were in compliance with these guidelines. +2020 +PROXY +STATEMENT +28 +Table of Contents +Securities Ownership of Officers and Directors and Certain Beneficial Owners +FIVE PERCENT SHAREHOLDERS +The following table sets forth information about those holders known by Wolverine Worldwide to be the beneficial owners of more than five +percent of Wolverine Worldwide's outstanding shares of common stock as of March 18, 2020: +Amount and Nature of Beneficial Ownership of Common Stock +Name and Address of +Beneficial Owner +Sole Voting +Power +Sole +Investment +Power +Shared Voting +Power +Shared +Investment +Power +Total +Beneficial +Ownership +Percent +of Class 3 +BlackRock, Inc. 1 +55 East 52nd Street +New York, NY 10055 +12,504,053 +12,737,540 +- +- +12,737,540 +15.7% +The Vanguard Group 2 +100 Vanguard Boulevard +Malvern, PA 19355 +121,949 +8,075,497 +14,538 +125,360 +8,200,857 +10.1% +1. Based solely on information set forth in Schedule 13G/A filed on February 4, 2020. 2. Based solely on +information set forth in Schedule 13G/A filed on February 12, 2020. 3. +Based on 81,069,852 shares outstanding as of March 18, 2020. +2020 +PROXY +STATEMENT +29 +Table of Contents +STOCK OWNERSHIP BY MANAGEMENT AND OTHERS +The following table sets forth the number of shares of common stock beneficially owned as of March 18, 2020, by each of the Company's +directors and named executive officers and all of the Company's directors and executive officers as a group: +Amount and Nature of Beneficial Ownership of Common Stock 1 +Deferred +Stock Units, +Sole Voting +and/or +Investment +Power 2,3 +Shared Voting or +Investment +Power 4 +Stock +Options 5 +Total +Beneficial +Ownership +Percent +of Class 6 +Jeffrey M. Boromisa +65,504 +54,152 +55,326 +174,982 +* +Gina R. Boswell +16,217 +- +44,735 +60,952 +* +Roxane Divol +22,241 +- +40,002 +62,243 +* +William K. Gerber +44,383 +- +55,326 +99,709 +* +Michael Jeppesen +26,693 +- +51,988 +78,681 +* +David T. Kollat +305,859 +- +67,628 +373,487 +* +Blake W. Krueger +806,531 +50,000 +1,072,126 +1,928,657 +2.35% +Brenda J. Lauderback +69,259 +- +55,326 +124,585 +* +Nicholas T. Long +19,201 +- +60,642 +79,843 +* +David W. McCreight +- +- +- +- +Todd W. Spaletto +63,903 +- +- +63,903 +* +Michael D. Stornant +161,805 +- +145,842 +307,647 +* +Michael A. Volkema +65,136 +- +55,326 +120,462 +* +James D. Zwiers +96,534 +176,158 +230,588 +503,280 +* +All directors and executive officers as a group (16 people) +1,808,025 +280,310 +1,964,460 +4,052,795 +4.88% +* Represents beneficial ownership of less than 1%. +1 The numbers of shares stated are based on information provided by each person listed and include shares personally owned of record and shares that, under applicable +regulations, are considered to be otherwise beneficially owned. 2 These numbers include restricted shares held, which are subject to forfeiture if the terms of the award are +not satisfied and also include deferred stock units held by +directors under the Directors' Deferred Compensation Plan. +2020 +PROXY +STATEMENT +30 +Table of Contents +3 The table does not include the following time-vested restricted stock units and performance units owned by directors and NEOs as of March 18, 2020: +Restricted +Units +Performance +Units +Boromisa +8,085 +* +- +Boswell +3,645 +- +Divol +3,645 +- +Gerber +3,645 +- +Jeppesen +27,460 +44,234 +Kollat +10,226 +* +- +Krueger +145,954 +366,115 +Lauderback +3,645 +- +Long +8,085 +* +- +McCreight +3,781 +- +Spaletto +28,468 +45,495 +Stornant +32,683 +52,729 +Volkema +8,085 +* +- +Zwiers +30,362 +48,310 +* Includes 4,440, 5,636, 4,440 and 4,440 fully vested restricted stock units held by each of Mr. Boromisa, Dr. Kollat, +Mr. Long and Mr. Volkema, respectively, that were deferred and will be settled on such date as elected by the director. +4 These numbers include shares over which the listed person is legally entitled to share voting or investment power by reason of joint ownership, trust or other contract +or property right and shares held by spouses, children or other relatives over whom the listed person may have influence by reason of such relationship. 5 The numbers represent +shares that may be acquired within 60 days after March 18, 2020, by the exercise of stock options granted under Wolverine's various +stock option plans. These numbers are also included in the Total Beneficial Ownership column. 6 As of March 18, 2020, based on 81,069,852 shares outstanding on that +date plus the number of stock options exercisable by the specified person(s) within +60 days of March 18, 2020, as indicated in the "Stock Options" column. +2020 +PROXY +STATEMENT +31 +Table of Contents +Compensation Discussion +and Analysis +SUMMARY +The Company's Compensation Discussion and Analysis ("CD&A") provides an overview and analysis of the executive compensation program for the Company's named executive officers ("NEOs"). For 2019, the +Company's NEOs were: +Blake W. Krueger +Chairman, Chief Executive Officer and President +Michael Jeppesen +President, Global Operations Group +Todd W. Spaletto +President, Wolverine Michigan Group +Michael D. Stornant +Senior Vice President, Chief Financial Officer and Treasurer +James D. Zwiers +Executive Vice President +COMPENSATION PHILOSOPHY AND OBJECTIVES +The Company's compensation philosophy is to provide executives with a competitive compensation package that is heavily weighted towards +performance-based (performance units and annual bonus opportunity) and variable (restricted stock units) compensation in order to encourage superior business and financial performance over the short +and longer term and, by linking compensation with stock price performance, to closely align the interests of the Company's NEOs with those of its shareholders without encouraging excessive +risk-taking. The Compensation Committee (the "Committee") oversees the Company's executive compensation program. +The executive compensation program has four primary objectives: +• Attract and retain talented NEOs who will lead Wolverine Worldwide and drive superior business and financial performance +• Provide incentives for achieving specific pre-established longer-term corporate financial goals and reward the attainment of those goals +• Provide incentives for achieving specific pre-established near-term individual, business unit and corporate goals and reward the attainment of +those goals +• Align the interests of NEOs with those of the shareholders through incentives based on achieving performance objectives that enable increased +shareholder value +Compensation Decisions in Context: Key 2019 Accomplishments and Financial Highlights +2019 was a successful year for the Company. Key financial highlights for the Company in 2019 included the +following: +• Revenue of $2.27 billion grew at a 1.5% rate and an underlying rate of 2.3%, with solid growth among our largest +brands – Merrell, Sperry, and CAT – and significant growth in our direct-to-consumer channel, including eCommerce and stores. +• Reported diluted earnings per share of $1.44; adjusted diluted earnings per share of $2.25, a record for the Company. +• Full-year cash from operations of $222.6 million exceeded expectations. +• Returned capital to shareholders in an efficient manner, including $319.2 million in share repurchases and a 25% dividend increase for a +$0.40 per share annual dividend. +2020 +PROXY +STATEMENT +32 +Table of Contents +• Ended 2019 in an extremely strong financial position, with a bank-defined leverage ratio of only 2.05 times, and total liquidity of +approximately $1.3 billion available to execute future actions intended to drive total shareholder return. +2019 Compensation Program Overview +The Company's executive compensation program consists of base salary, annual bonus opportunity, long-term incentive compensation, and +benefits. A breakdown of base salary, annual performance bonus, and long-term incentive compensation is illustrated below: +Pay at Risk +Under the Company's compensation program, a significant portion of the compensation awarded to the NEOs generally, and to the CEO in +particular, is at risk (contingent upon the attainment of various pre-established short and long-term financial goals) and variable (contingent on the performance of the Company's stock price). NEO +compensation that is significantly at risk and variable incentivizes superior business and financial performance and, by linking compensation with stock price performance, aligns the interests of +executives with those of shareholders. +2020 +PROXY +STATEMENT +33 +Table of Contents +The +following graphic illustrates the percentage of 2019 NEO target compensation that is at risk: +CEO 2019 Target Total Compensation +Other NEO 2019 Average Target Total Compensation +Long-Term Incentive Program Mix +The long-term incentive program is heavily weighted to at-risk compensation, with a mix of 70% performance stock units and 30% time vested +restricted stock units for the CEO. For other NEOs, the 2019 mix was 60% performance stock units and 40% time vested restricted stock units. +Compensation Best Practices +What we do +What we do not do +✓ +Vast majority of pay is at risk or variable, i.e., performance-based or equity-based or both +✓ +Stringent share ownership requirements (6x base salary for CEO) +✓ +Broad-based clawback +policy +✓ +Significant vesting horizon for equity grants +✓ +Double trigger equity acceleration (for grants in 2017 and beyond) +✓ +Independent Compensation Committee Consultant +✓ +Review executive compensation +program to ensure it doesn't promote excessive risk taking +✓ +Proactively engage with top shareholders on compensation and governance issues +✓ +Conduct annual say-on-pay votes +✓ +Balance short-term and long-term +incentives +✗ +No dividends or dividend equivalents on unearned performance shares/units +✗ +No repricing or replacing of underwater stock options +✗ +No overlapping metrics +✗ +No excessive or unnecessary perquisites +✗ +No hedging, pledging, or short +sales of Company stock +✗ +No excise tax gross-ups in change-in-control agreements for new officers (hired after 2008) +2020 +PROXY +STATEMENT +34 +Table of Contents +Compensation Discussion and Analysis +2019 COMPENSATION PROGRAM OVERVIEW +Setting Targets +Each February, the Committee recommends (and the independent directors approve) target compensation for the CEO for the upcoming year after +considering the latest available information, including the Company's TSR and other business and financial performance, information provided by the Committee's compensation consultant regarding +executive compensation trends and compensation paid to other chief executive officers of companies in the compensation peer group (described below), and +information provided by management on recent Company performance and the Company's future business and financial outlook. The Committee's goal is to set the CEO's compensation in line with the +anticipated market median compensation for that year. +Given +the significant weight the Company's executive compensation program places on at risk and variable compensation, the compensation realized by the CEO and NEOs can be significantly affected, both +positively and negatively, by performance against the various operational and financial performance metrics pre-established by the Committee and by the performance of the Company's stock. The Board +and Committee believe such a compensation program aligns the interests of the CEO and other NEOs with the interests of the shareholders. +The +Company's executive compensation program consists of four primary elements: base salary, annual bonus opportunity, long-term incentive compensation and benefits. These elements are described in +greater detail below. +Base Salary +As part of approving an NEO's base salary, the Committee considers a variety of factors including individual responsibilities, experience, +skills, and potential to affect Wolverine Worldwide's overall performance, as well as market surveys and peer group information. The Committee considers these compensation factors subjectively, and no +single factor or combination of factors was determinative in setting base salaries for any NEO for fiscal year 2019. +Based +on the above factors, the Committee approved the 2019 base salaries for the NEOs as noted in the following table. The Committee held CEO salary flat in 2019 for the fifth year in a row and held +it flat again in 2020. The 2-5% base salary increases for Messrs. Jeppesen, Spaletto, Stornant and Zwiers in 2019 were based on their performance evaluations as well as consideration of peer +group and broad-based industry compensation data, as described in detail below. Like the CEO salary, the Committee held these base salaries flat in 2020. +Name +2019 Base Salary +2018 Base Salary +Krueger +$1,150,000 +$1,150,000 +Jeppesen +$625,000 +$607,000 +Spaletto +$630,000 +$600,000 +Stornant +$630,000 +$600,000 +Zwiers +$685,000 +$670,000 +2020 +PROXY +STATEMENT +35 +Table of Contents +Annual Bonus +In 2019, each NEO had the opportunity to earn annual cash incentive compensation ("annual bonus"), consisting of a performance bonus and an +individual performance bonus, and further subject to a modifier: +Key Factors +2019 Company Metrics +Performance Bonus +• +Based on performance +measured against Company and/or business unit performance criteria established at the beginning of 2019 +• +Payout determined by comparing performance against four performance levels set for each pre-set criterion: threshold, target, goal, and stretch +• +Revenue (45%) +• +Adjusted pretax earnings (55%) +Individual +Performance Bonus +• +Measured against +individual performance criteria +• +Each NEO's payout was determined by comparing individual performance against specific individual criteria set at the beginning of 2019 +• +Payouts can range from 0% to 200% depending on the NEO's performance against individual performance objectives +• +Vary by each NEO +Modifier +• +Total payout based on +the above two components adjusted up or down by up to 25% based on year-end backlog +• ++/– 25% year-end +backlog modifier +A percentage of each NEO's 2019 base salary was set as the annual bonus target percentage (the "Target Bonus Percentage"). The Target Bonus Percentage represents the percentage of each +NEO's base salary that could be earned as annual incentive compensation at a "target" performance level (100% payout) for each of the performance bonus and individual performance bonus. Generally, the +Committee sets higher Target Bonus Percentages for individuals with greater influence on business strategy, profit or sales. This puts a larger percentage of an NEO's total potential cash compensation +at risk, in line with the NEO's ability to influence these factors. For 2019, the NEOs had the following Target Bonus Percentages: Mr. Krueger 140%, Mr. Jeppesen 55%, and +Mr. Stornant 60%, Mr. Spaletto 55%, and Mr. Zwiers 55%. +The +Committee selected fiscal year 2019 revenue and adjusted pretax earnings as metrics for the performance bonus because it believes a strong correlation exists between performance on these financial +measures and increases in shareholder value. The Committee also continued to include a year-end backlog modifier for 2019 to more directly align with the Company's focus on go-forward revenue growth. +Performance Bonus +Messrs. Krueger and Stornant had significant influence on the Company's overall business performance and, accordingly, their respective performance +bonus opportunity (85% of their total annual bonus opportunity) is based on the Company performance criteria only. Messrs. Jeppesen, Spaletto and Zwiers were directly responsible for specific +business units and exert a significant influence on those business units in particular, in addition to influencing Company performance. Accordingly, for each of these NEOs, a large percentage of their +overall annual bonus opportunity was based on business unit performance, as reflected in the table on page 40. +As +shown in the table below, the Committee also set four performance levels for each criterion: threshold (25% payout for pretax; 50% for revenue), target (100% payout), goal (150% payout) and stretch +(200% payout). The Committee set the revenue and pretax earnings goals for these performance levels following a review of the Company's operating plan, historical performance, and industry and +macroeconomic conditions. The performance targets were set aggressively, including setting the revenue performance at target (100%) at the high end of the Company's initial 2019 guidance. Performance +targets required for 100% payout on both revenue and pretax earnings were set above 2018 performance targets and 2018 actual results. +2020 +PROXY +STATEMENT +36 +Table of Contents +Company +Performance Level +in millions +(% of Target Payout) 1 +Revenue 2 +Adjusted Pretax Earnings 2,3 +Threshold (25% for pretax; 50% for revenue) +$2,250 +$247.0 +Target (100%) +$2,330 +$277.0 +Goal (150%) +$2,390 +$295.0 +Stretch (200%) +$2,445 +$312.0 +1 The maximum payout (before the effect of the modifier) an NEO can receive is 200% of his Target Bonus Percentage, even if performance is above stretch. An NEO would +receive 0% of his Target Bonus Percentage if performance is below threshold. With the addition of the modifier, an NEO could earn up to an additional 25% of his overall payout after the +modifier. 2 2019 corporate revenue performance fell between threshold and target, resulting in a 64.8% payout on this measure. 2019 corporate pretax earnings performance was below +threshold, resulting in a 0% payout on this measure. 3 Adjusted pretax earnings are earnings before income taxes, excluding the effect of acquisitions, divestitures, accounting +changes, restructuring, or other special +charges or extraordinary items excluded by the Compensation Committee. Pretax earnings for 2019 exclude the impact of environmental and related costs, business development costs and reorganization +costs. +For +each business unit, the Committee sets the revenue and adjusted pretax earnings goals at substantially similar levels of difficulty as the goals for the Company and with a similar degree of +difficulty as in prior years. The below table shows historical weighted performance levels achieved by the business units using these performance criteria for the years for which a meaningful +comparison can be made. +Historical Group Performance 1 +2019 +2018 +2017 +2016 +2015 +Wolverine Michigan Group +Below threshold +Between threshold and target +Between target and goal +Below threshold +Below threshold +Sourcing / Leathers / Distribution +Between threshold and target +Between threshold and target +Between target and goal +Between target and goal +Between goal and stretch +International Group +Between threshold and target +Between target and goal +Between target and goal +Between target and goal +Between target and goal +eCommerce +Between target and goal +Between threshold and target +Between target and goal +Between threshold and target +N/A +Stores +Below threshold +Between threshold and target +Between threshold and target +N/A +N/A +1 The brand groups were changed in 2019. The performance information above is for the historical group closest in makeup to the 2019 groups. +In +February 2020, the Committee certified actual 2019 performance compared to the performance levels for the Company and business unit criteria. The Company's fiscal year 2019 revenue was +approximately $2.274 billion, which was between threshold and target level. The Company's adjusted pretax earnings for fiscal year 2019 were $238.8 million, which was below threshold. +The weighted average results for the applicable performance criterion are shown in the below table: +2019 Performance +Overall Weighted Payout by Group +Wolverine Michigan Group +Below Threshold +0% +Sourcing / Leathers / Distribution +Between Threshold and Target +94% +Wolverine Worldwide +Below Overall Threshold +29% +International Group +Between Threshold and Target +58% +eCommerce +Between Target and Goal +107% +Stores +Below Overall Threshold +44% +2020 +PROXY +STATEMENT +37 +Table of Contents +For +2019, the Company paid the NEOs the following amounts relating to the performance bonus. +Name +Performance Bonus +(as a % of Total Annual Bonus +Opportunity) 1 +Performance Bonus Opportunity +(as a % of an NEO's Target +Percentage) 1 +Performance Bonus +Percentage Earned 1,2,3 +Performance Bonus Paid 1,2,3 +Krueger +85% +0 - 200% +29% +$399,055 +Jeppesen +85% +0 - 200% +62% +$181,385 +Spaletto +85% +0 - 200% +10% +$30,034 +Stornant +85% +0 - 200% +29% +$92,833 +Zwiers +85% +0 - 200% +55% +$174,419 +1 Not including any positive or negative adjustment based on the modifier described below. 2 Percentages earned and bonuses +paid vary due to the relative performance of various business units versus overall corporate +performance. 3 Not including Individual Performance Bonus. +Individual Performance Bonus +At the same time Target Bonus Percentages are set, the CEO approves measurable personal objectives for each NEO's individual bonus, other than for himself. +The CEO submits, and the Committee reviews and approves, with such changes as it considers appropriate, the CEO's personal objectives. Such measurable personal objectives may include goals such as +executing strategies supporting the Company's vision, developing employees, growing new business initiatives and driving operational excellence. Performance is evaluated by the CEO (or, in the case of +the CEO, by the Committee and the other independent directors) based on +qualitative and quantitative factors. Summaries of the specific personal objectives for each NEO are outlined in the table below, along with unweighted performance levels achieved on each measure in +parenthesis: +NEO +2019 Personal Objectives +Krueger +people (80%), brand growth model (50%), growth (50%), and cash flow (100%) +Jeppesen +meeting sourcing diversification (150%), personnel (100%), and cost (100%) objectives +Spaletto +meeting financial plan (50%), brand growth (100%), brand initiatives (100%), brand protection (150%), and Google search interest (0%) objectives +Stornant +meeting financial plan (50%), growth (100%), process (100%), and cost (100%) objectives +Zwiers +meeting eCommerce (150%), stores (50%), international acceleration (50%), M&A (100%), brand protection (150%), and Google search interest (0%) objectives +Each +personal objective is given a rating from "does not achieve" to "exceptional," with weighted performance ratings and payouts consistent with the following table: +Personal Objectives Rating +2019 Payout Level +Exceptional +200% +Far Exceeds +175% +Exceeds +150% +Achieves +100% +Achieves Some But Not All +50% +Does Not Achieve +0% +2020 +PROXY +STATEMENT +38 +Table of Contents +The +CEO recommended, and the Committee approved, the 2019 cumulative weighted personal objectives scores and payout levels for each of the NEOs other than himself. The Committee and the other +independent directors of the Board met with the CEO at the end of the year to evaluate his performance against his personal objectives. The Committee determined the cumulative weighted personal +objectives score for the CEO and recommended to the independent directors of the Board the CEO's payout level. +Name +Individual +Performance Bonus +(as a % of Total Annual Bonus +Opportunity) +2019 Individual Bonus +Opportunity +(as a % of an NEO's Target +Percentage) +2019 +Individual Bonus +Percentage Achieved +2019 +Individual +Bonus Paid +Krueger +15% +0 - 200% +67% +$161,201 +Jeppesen +15% +0 - 200% +125% +$64,096 +Spaletto +15% +0 - 200% +80% +$41,199 +Stornant +15% +0 - 200% +85% +$47,754 +Zwiers +15% +0 - 200% +85% +$47,833 +Backlog Modifier +The Committee maintained a backlog modifier for 2019 to continue to align with the Company's focus on revenue growth. The Committee set the following backlog +modifier for 2019. +Company and Brand/Group Backlog 1,2 +Exceeded Backlog Growth Target ++2x +Achieved Backlog Growth Target +No Adjustment +Did Not Achieve Backlog Growth Target +–2x +1 Times the % increase or decrease in backlog 2 Modifier adjustments will not fall below –25% or exceed 25% +At +the Company and Brand/Group levels, a 2x modification was applied to each percentage increase (positive modification) or decrease (negative modification) above or below a threshold increase level, +capped at +/– 25%, based on average backlog at the end of the last three weeks of the 2019 fiscal year compared to the same periods during the 2018 fiscal year. The backlog modifier +reduced overall payouts by 25%, and the resulting reductions in overall payouts are reflected in the table below in the "Backlog Multiplier" column. +2020 +PROXY +STATEMENT +39 +Table of Contents +Each NEO's total annual bonus opportunity for 2019 ranged from 0% to 200% of the Target Bonus Percentage before applying the backlog modifier. The accompanying table shows the +aggregate annual incentive compensation payout earned by each NEO for 2019, as well as the portion of that aggregate number that is attributable to the performance bonus and individual performance +bonus and the effect of the backlog modifier. +1 Based on revenue and pretax earnings performance criteria for the Company, as described above under "Annual Bonus — Performance +Bonus." 2 Based on revenue and pretax earnings as the performance criteria for Leathers (15%). Based on the following factors for sourcing (20%); expense management, on-time +delivery, product pricing, factory lead times, and product quality. Based on Distribution (5%) expense management. 3 Based on revenue and pretax earnings as the performance +criteria for the Wolverine Michigan Group. 4 Based on revenue and pretax earnings as the performance criteria for: Stores (10%), eCommerce (15%), and International +(30%). +Overall +NEO annual bonus paid out below target levels, including for the CEO, in a year when the Company's TSR performance was at the 62nd percentile of its peer group. Further, the following +graph shows the CEO's target bonus opportunity compared to his actual bonus earned over the last three years, which demonstrates the Company's pay for performance philosophy in action. There is clear +directional alignment between the Company's TSR performance and the CEO's annual bonus achievement over this period, during which the Company's TSR performance was at the 80th percentile of its +current peer group. +2020 +PROXY +STATEMENT +40 +Table of Contents +LONG-TERM INCENTIVE COMPENSATION +In 2019, each NEO had the opportunity to earn long-term incentive compensation comprised of a mix of performance share units and time-based +restricted stock unit awards. +Key Factors +Performance Share Metrics 1 +Performance Share Units +• +Performance share units +are based on performance criteria covering three-year periods +• +Awards balance focus on near term profitability with longer term shareholder value creation +• +Fully diluted adjusted EPS +(65%) +• +Adjusted Business +Value Added ("BVA") 2 (35%) +Time-Based Restricted Stock Unit Awards +• +Encourages employee +retention and rewards increases in stock price +1 EPS is calculated on a fully diluted basis and EPS and BVA are each adjusted to account for and exclude the effects of acquisitions, divestitures, accounting changes, +restructuring, or other similar special charges or extraordinary items excluded by the Committee, including foreign exchange. 2 BVA is calculated by starting with operating income +determined in accordance with U.S. generally accepted accounting principles ("GAAP"), and then reducing operating +income by (1) an amount for income taxes where the effective tax rate used to calculate the income tax amount is determined in accordance with GAAP (adjusted consistent with EPS adjustments, as +described above), and (2) a capital charge equal to a 14 point average of "net operating assets" during the fiscal year (with "net operating assets" defined as the net of trade receivables (net +of reserves), inventory (net of reserves), other current assets, property, plant and equipment, trade payables and accrued liabilities) multiplied by 10%. +The +Committee believes EPS is a key metric that plays an important role in driving shareholder value and that it further aligns the interests of the NEOs with other shareholders. The Committee +believes that BVA is useful for determining incentive compensation because it ties the income statement (profit delivery) to the balance sheet (effective asset utilization) and does not focus on one +to the exclusion of the other. The Committee further believes that focusing NEOs' interests on increasing BVA aligns their interests more closely with shareholder interests. The use of both EPS and +BVA balances the NEOs' focus on near term profitability with longer term shareholder value. The Committee weighted EPS 65% and BVA 35% when determining the overall performance level. For the 2019-2021 +performance period, the +2020 +PROXY +STATEMENT +41 +Table of Contents +Committee +included a relative TSR modifier that provides a 25% positive adjustment to total payout for TSR performance in the top quartile of the Company's peer group and a 25% negative adjustment to +total payout for performance in the bottom quartile of the peer group. +The +Committee has chosen to provide long-term incentives in these forms because they incentivize and motivate different behaviors. Performance share units reward the achievement of key business +criteria. Time-based restricted stock units encourage employee retention by providing some level of value to executives who remain employed during the vesting period. The use of restricted stock units +also supports an ownership culture and thereby encourages executives to take actions that are best for the Company's long-term success. Both forms of long-term incentive compensation reward increased +Company stock price. +2017-2019 Performance Stock Units +The following table lists the performance levels set by the Committee for performance stock unit awards granted for the 2017-2019 performance period, the +vesting of which occurred on February 5, 2020 following the Committee's certification of 2017-2019 financial results. +Performance Level +(Percentage of Target Payout) +Cumulative EPS for the 2017-2019 period 1 +Cumulative BVA for the 2017-2019 period 1 +(in millions) +Threshold (50%) +$4.63 +$336.3 +Target (100%) +$5.02 +$370.1 +Goal (150%) +$5.41 +$403.9 +Stretch (200%) +$5.80 +$440.9 +1 Adjusted as described above. +In +February 2020, the Committee evaluated the Company's performance for the 2017-2019 performance period against the criteria set forth in the table above and certified that the Company's performance +on the EPS criteria and on the BVA criteria was above the stretch performance level. The Committee weighted the EPS attainment ($5.84; 200% of target performance) at 65% and the BVA attainment +($468.5 million; 200% of target performance) at 35%, resulting in a weighted average performance of 200%. During the 2017-2019 performance period, the Company's TSR performance was at the +69th percentile of its peer group so no TSR adjustment was made. +The +following table lists the number of stock units that vested for each NEO under the 2017-2019 performance stock unit grant. In calculating the number of stock units that vest, the Company uses the +stock price on the date of the grant, which results in the NEOs bearing the risk of stock price performance during the performance period. +Name +Stock Units Vesting +(#) +Krueger +343,322 +Jeppesen +41,576 +Spaletto +40,088 +Stornant +49,593 +Zwiers +46,647 +2019 Performance Stock Unit Awards +In the beginning of 2019, the Committee evaluated each NEO's long-term incentive target payout opportunity expressed as a dollar amount at target grant value +for the grant of performance shares for the 2019-2021 period. Like performance shares granted for the 2018-2020 performance period, performance units are eligible to vest based on achievement of +adjusted +constant-currency EPS goals (weighted 65%) and adjusted constant-currency BVA goals (weighted 35%). An NEO may earn none, some, all, or a multiple of the performance units granted, depending on +Company performance against the EPS and BVA targets and bonus targets over the three-year performance period. For the 2019-2021 performance period, the Committee included a relative TSR modifier that +provides a 25% positive adjustment for TSR +2020 +PROXY +STATEMENT +42 +Table of Contents +performance +in the top quartile of the Company's peer group and a 25% negative adjustment for performance in the bottom quartile of the peer group. +Name +2019-2021 +Target 1 +Krueger +$4,042,500 +Jeppesen +$488,400 +Spaletto +$502,320 +Stornant +$579,120 +Zwiers +$533,400 +1 See footnote 2 to the Summary Compensation Table for the grant date fair value of these awards, which reflects an +accounting valuation of the effect of the TSR modifier. +The +Company accrues, but does not pay, any dividends on any performance units during the performance period. Once the Committee certifies the Company's performance compared to the pre-determined +performance criteria, some, all, none, or multiple of the performance share units awarded to each NEO will vest, and the NEO will receive accrued dividends only on the shares actually earned. +The +Committee goes through a rigorous process in setting three-year EPS and BVA performance targets, including a careful review of the Company's prior year business and financial performance, current +year operating plan and future expectations. To achieve target level EPS and BVA performance would require upper- to mid-single digit compounded annual growth percentages, respectively, over the +performance period based on 2018 actual performance. +Restricted Stock Unit Awards +The accompanying table reflects the grant date value of the annual service-based restricted stock unit awards granted to each NEO. +Name +2019 Time-vested +Restricted Stock Units +Krueger +$1,732,529 +Jeppesen +$325,613 +Spaletto +$334,907 +Stornant +$386,113 +Zwiers +$355,619 +The +Committee generally grants annual equity awards at its regularly scheduled February meeting, and the independent directors of the Board approve equity grants to the CEO generally on the same day +that the Committee meets. Restricted stock units awarded vest 20% on the first and second anniversaries of the grant and 30% on the third and fourth anniversaries. +BENEFITS +Retirement, Deferred Compensation and Welfare Plans +The NEOs participate in Wolverine Worldwide's medical and dental plans and receive life and disability insurance. In 2019, Messrs. Krueger, Jeppesen, +Stornant, and Zwiers also participated in the Wolverine Worldwide Employees' Pension Plan (a defined benefit plan) and the Wolverine World Wide, Inc. 409A Supplemental Executive Retirement Plan +(an unfunded, non-qualified plan). For a description of the benefits under Wolverine Worldwide's retirement plans, see " Pension Plans and 2019 Pension +Benefits " below. +All +full time employees of the Company in the United States, including the NEOs, are also eligible to participate in one of Wolverine's 401(k) Plans (the "401(k) Plan"). Pursuant to the 401(k) Plan, +employees, including the NEOs, may elect to defer a portion of their salary and receive a Company match on eligible deferrals of up to 3% of salary for 2019 (5.5% for those who do not participate in +the Pension Plan), subject to limits set forth in the Internal Revenue Code of 1986, as amended. In 2016, the Company adopted the Wolverine Worldwide Executive Deferred Compensation Plan (the +"Deferred Compensation Plan"). This plan allows directors, executives and other eligible senior +2020 +PROXY +STATEMENT +43 +Table of Contents +employees +of the Company to elect to defer a portion of their eligible compensation. Wolverine Worldwide may, but need not, credit a participant with an additional discretionary Company contribution. +In 2019, the Company made a discretionary voluntary contribution to the Deferred Compensation Plan on behalf of Mr. Spaletto, taking into account internal equity considerations given that he is +not a participant in the Company's Employees' Pension Plan or Supplemental Executive Retirement Plan. The Company did not make any discretionary contributions on behalf of any other NEO in 2019. The +Company adopted the Deferred Compensation Plan as a retention and recruitment tool to facilitate retirement savings and provide financial flexibility for key employees, and because many of the +companies with which it competes for executive talent provide similar plans to their key employees. For a description of the benefits under the Deferred Compensation Plan, see +" Non-qualified Deferred Compensation " below. +Perquisites +The Company provides limited perquisites to NEOs. The Company feels the perquisites that are provided round out a competitive total compensation package for +each NEO. For details on perquisites, see footnote 5 to the "Summary Compensation Table" on page 49. +POST-EMPLOYMENT COMPENSATION +Each NEO is party to an Executive Severance Agreement that provides for certain payments and benefits upon termination of employment after a +change in control of Wolverine Worldwide. The Board believes Executive Severance Agreements will motivate management to actively pursue a business transaction that is in the best interests of the +shareholders, even if it could ultimately result in his or her job elimination, and also will promote management stability during the transition period accompanying a change in control. Each NEO is +eligible to receive compensation if his employment is terminated within two years (Messrs. Jeppesen, Spaletto, Stornant and Zwiers) or three years (Mr. Krueger) following a change in +control of Wolverine Worldwide. Even following a change in control, an NEO does not receive payment under the Executive Severance Agreement if his employment +terminates: +• Due to death or retirement in accordance with Wolverine Worldwide's policy or as otherwise agreed, +• For cause or disability, or +• By resignation of the NEO, other than for "good reason," which is discussed under the heading "Benefits Triggered by Termination Other than For +Cause or for Good Reason" and the heading "Benefits Triggered Upon a Change in Control," both under the heading "Potential Payments Upon Termination or Change in Control" +NEOs +may also be eligible under Wolverine Worldwide's retirement plans or equity plans to receive certain payments and benefits upon termination of employment or in connection with a change in control +as described in the " Potential Payments Upon Termination or Change in Control " section of this Proxy Statement. +Mr. Krueger +is also party to a 2008 Separation Agreement under which he receives certain payments and benefits if the Company terminates his employment, even if not following a change in +control, other than for "cause" or if he terminates his employment for "good reason." The Committee determined upon appointing Mr. Krueger as CEO that, given the Company's strategic initiatives +the Board had asked him to lead, it was appropriate for the Company to enter into a separation arrangement. +The +Company includes accelerated retirement vesting provisions for equity awards, provided certain conditions are met, and for the payout of a prorated annual bonus for a qualifying retirement more +than six months into the fiscal year. Details on these provisions and information on benefits payable to Mr. Krueger under his Separation Agreement and to each of the NEOs under the Executive +Severance Agreements, as well as information on the other retirement and equity plans of Wolverine Worldwide, are included in the " Potential Payments Upon Termination or Change +in Control " section of this Proxy Statement. +SAY-ON-PAY ADVISORY VOTE +We asked shareholders to vote on a "say-on-pay" advisory vote on our executive compensation in 2019. Shareholders expressed substantial +support for the compensation of our named executive officers, with approximately 98% of the votes cast for the say-on-pay advisory vote. The Committee carefully evaluated the results of the 2019 +advisory vote. The Committee also considers many other factors in evaluating our executive compensation programs as discussed in this Compensation Discussion and Analysis, including the Committee's +assessment of total shareholder return, the interaction of our compensation programs with our corporate business objectives, evaluations of our programs by external consultants, and review of peer +group and survey data, each of which is evaluated in the context of the Committee's fiduciary duty to act as the directors determine to be in shareholders' best interests. While each factor bore on +the Committee's decisions regarding our named executive officers' compensation, the Committee made no changes to our executive compensation program and policies directly as a result of the 2019 +say-on-pay advisory vote. +2020 +PROXY +STATEMENT +44 +Table of Contents +COMPENSATION SETTING PROCESS +Setting Targets +The Committee goes through a rigorous process in setting performance targets, including a careful review of the Company's prior year business +and financial performance, current year operating plan, and future expectations. The Committee engages with management in this process over several months leading up to setting final annual bonus and +three-year performance targets in February. +Competitive Philosophy and Competitive Market Data +When making compensation recommendations and decisions, the Committee considers the CEO's assessment of the performance of each NEO, other +than himself; the performance of the individual and the individual's respective business unit or function; the scope of the individual's responsibilities, years of experience with the Company (or in +similar positions with other companies), skills and knowledge; market compensation data; market and economic conditions; Company performance; retention considerations; and Wolverine Worldwide's +compensation philosophy (collectively, the "compensation factors"). The Committee considers these compensation factors both subjectively and objectively, and no single factor or combination of factors +is determinative. With respect to CEO compensation, the Committee seeks to set compensation in line with the anticipated market median for a given year. +The +Committee uses market surveys and Peer Group (as defined below) information provided by its compensation consultant as market reference points. The Committee also considers information the Company +learns through recruiting NEOs and the experience levels and responsibilities of NEOs prior to joining the Company as reference points in setting NEO compensation. +As +part of its competitive data review in connection with determining 2019 compensation, the Committee considered information presented by its consultant Frederic W. Cook & Co. ("FW +Cook") based on publicly-disclosed Peer Group information and on two published surveys: (1) 2018 Willis Towers Watson (WTW) CDB Executive Compensation Survey Report; and (2) 2018 US MBD +Mercer Benchmark Database Executive Survey. +Peer Group +Below is the peer group used in late 2018 and early 2019 in connection with 2019 compensation decisions. In determining the Peer Group, the +Committee considered each potential peer company's industry, channels of distribution, revenue and market capitalization. The Company also considered the typicality of a company's pay practices, +excluding companies whose chief executive may not receive market compensation because of a founder relationship, family ownership position, or other similar relationships. +Abercrombie & Fitch Co. +Chico's FAS, Inc. +Foot Locker, Inc. +Hanesbrands Inc. +The Children's Place, Inc. +American Eagle Outfitters Inc. +Deckers Outdoor Corporation +G-III Apparel Group, Ltd. +Skechers USA, Inc. +Caleres, Inc. +Designer Brands, Inc. +Genesco Inc. +Tapestry, Inc. +Carter's, Inc. +Express, Inc. +Guess?, Inc. +Tailored Brands, Inc. +CEO Role +Within the framework of the Company's executive compensation program, the CEO recommends the level of base salary, annual bonus, long-term +incentive compensation, equity awards and other compensation components for his direct reports, including the other NEOs. The CEO bases his recommendation upon his assessment of the compensation +factors applicable to each NEO. The CEO considers these compensation factors both objectively and subjectively, and no single factor is determinative. The Committee discusses these recommendations +with the CEO prior to setting the compensation for each NEO, other than the CEO. The Committee, however, ultimately determines all compensation for NEOs other than the CEO, whose compensation is +determined by the independent directors as a whole. +Compensation Consultant Role +FW Cook was first engaged as the Committee's independent compensation consultant in 2016 and reports directly to the Committee. The Committee +determines the scope of engagement and may replace the consultant or hire additional consultants at any time. The Committee has evaluated FW Cook's independence under the rules established by the NYSE +and has determined that FW Cook is "independent" as +2020 +PROXY +STATEMENT +45 +Table of Contents +defined +by NYSE rules. In addition, the Committee has evaluated whether the engagement of FW Cook raised any conflicts of interest and has determined that no such conflicts of interest exist. +At +the Committee's invitation, a representative of FW Cook generally attends all Committee meetings and also communicates with the Committee Chair and management regularly between meetings. However, +the Committee makes all decisions regarding NEO compensation. FW Cook provides various executive compensation services to the Committee pursuant to a consulting agreement with the Committee. +Generally, these services include advising the Committee on the principal aspects of the Company's executive compensation program, evolving industry practices, and providing market information and +analysis regarding the competitiveness of the Company's program design. +During +2019, FW Cook performed the following specific services: +• Attended Committee meetings, as requested +• Reviewed the Company's peer group and advised the Committee on the composition of the peer group +• Reviewed survey data for competitive comparisons +• Provided market data and recommendations on CEO and other NEO compensation +• Advised the Committee on market trends related to compensation policies and programs +• Proactively advised the Committee on best practice approaches for governance features of executive compensation programs +• Reviewed the Compensation Discussion & Analysis and other executive compensation related disclosures included in the Company's Proxy +Statement +The +total fees the Company paid to FW Cook for services to the Committee in 2019 were $74,000, less than 1% of FW Cook's total consulting income during the same period. The Company did not pay or +incur any other fees to or with FW Cook. +OTHER COMPENSATION POLICIES AND PRACTICES +NEO Stock Ownership Guidelines +Each NEO, as well as each non-employee director, must attain (and maintain) a minimum stock ownership level (including owned shares, a certain +level of performance shares or units and restricted shares or units, and the in-the-money value of vested stock options) prior to being able to gift or sell any Company stock. During 2019, each NEO +complied with the requirements of these guidelines. +Covered Positions +Guideline +CEO +6x Annual Salary +Other NEOs +2x Annual Salary +Non-Employee Directors +6x Annual Cash Retainer +Stock Hedging and Pledging Policies +Under the Company's Insider Trading Policy, all directors, officers and other employees are prohibited from engaging in any hedging +transactions involving Company securities beneficially owned by them. The Company also considers it inappropriate for any such person to engage in speculative transactions in the Company's securities, +including short sales, publicly traded options, margin accounts and pledges and standing and limit orders. Also, all directors, officers and other employees are prohibited from pledging Company +securities as collateral for a loan. +Clawback Policy +The Company has adopted a clawback policy which empowers the Board or a committee of the Board to seek recovery of specified incentive +compensation received by executive officers under specific circumstances where there is a material restatement of the Company's financial results that would have led to a lower level of incentive +compensation payout. +2020 +PROXY +STATEMENT +46 +Table of Contents +Impact of Accounting and Tax Treatments on Compensation +The Tax Cuts and Jobs Act on December 22, 2017 eliminated the Section 162(m) performance-based compensation exemption, so the +grants and awards made in 2019 are not eligible for such exemption. Even prior to the elimination of the performance-based compensation exemption, Wolverine Worldwide did not require all of its +compensation programs, including programs under the plans listed above, to fit the performance-based compensation exemption under Section 162(m) because it believes it is important to preserve +flexibility in administering compensation programs in a manner designed to promote varying corporate goals. Wolverine Worldwide has and in the future may continue to pay compensation that is limited +in whole or in part as to tax deductibility. +2020 +PROXY +STATEMENT +47 +Table of Contents +Compensation Committee Report +The +Committee has reviewed and discussed with management the information provided under the heading "Compensation Discussion and Analysis." Based on this review and discussion, the +Committee recommended to the Board of Directors that the Company include the Compensation Discussion and Analysis section in this Proxy Statement and incorporate it by reference into the Company's +Annual Report on Form 10-K. +Respectfully +submitted, +Nicholas +T. Long (Chair) +Jeffrey M. Boromisa +Gina R. Boswell +William K. Gerber +Compensation Committee Interlocks and Insider Participation. During fiscal year 2019, none of the members of the Compensation Committee was an officer or employee +of the Company, was a former officer of the Company, nor had a relationship with the Company requiring disclosure as a related party transaction under Item 404 of Regulation S-K of the +Securities Act of 1933. None of the Company's executive officers served on the compensation committee or board of directors of another entity whose executive officer(s) served as a director on the +Company's Board or on the Compensation Committee. +2020 +PROXY +STATEMENT +48 +Table of Contents +Summary Compensation Table +1 Includes any amounts deferred under the Company's qualified 401(k) plan or Deferred Compensation Plan. 2 Includes the +grant date fair value of restricted stock unit awards and performance unit awards, as follows for 2019: +Name +Service-based Restricted Stock Unit Value +Performance Unit Value +Total +Krueger +$1,732,529 +$4,605,665 +$6,338,194 +Jeppesen +$325,613 +$528,267 +$853,880 +Spaletto +$334,907 +$543,327 +$878,234 +Stornant +$386,113 +$626,383 +$1,012,496 +Zwiers +$355,619 +$576,949 +$932,568 +2020 +PROXY +STATEMENT +49 +Table of Contents +Restricted stock units were valued using the closing market price of Wolverine Worldwide common stock on the date of the grant of the respective award. +Performance units were valued using the closing market price of Wolverine Worldwide common stock on the date of grant of the respective award and assuming target performance for all performance +periods, with an adjustment to value for the TSR modifier where applicable, all consistent with ASC Topic 718. The target performance unit grant values without accounting adjustments are +as set forth on page 43: ($4,042,500 for Mr. Krueger; $488,400 for Mr. Jeppesen; $502,320 for Mr. Spaletto; $579,120 for Mr. Stornant; and $533,400 for Mr. Zwiers +(all with de minimis differences based on rounding up to the nearest unit)). Assuming maximum payout, the aggregate grant date fair value of performance units awarded in 2019 for each NEO (and, in +parenthesis, the maximum value is combined with the grant date fair value of restricted stock unit awards for 2019) would have been: $26,233,993 ($27,966,522) for Mr. Krueger; $3,169,603 +($3,495,216) for Mr. Jeppesen; $3,758,298 ($4,144,411) for Mr. Stornant; $3,259,963 ($3,594,870) for Mr. Spaletto and $3,461,692 ($3,817,311) for Mr. Zwiers. Restrictions +on such performance unit awards will lapse in the February following the last year of the applicable performance period, if at all, based on the Company's performance for the period (capped at 200%), +potential +/- 25% adjustments for relative TSR performance and target bonus level over the three-year performance period. The actual value of shares that vest is also dependent on the +stock price at the time of vesting. For Mr. Krueger, the amount also includes the incremental fair value ($233,000) calculated in accordance with ASC Topic 718, with respect to the +2017-2019 performance award held by him that was modified to reflect the structure of the performance award program. For additional valuation assumptions, see the Stock-Based Compensation footnote to +Wolverine Worldwide's Consolidated Financial Statements for the fiscal year ended December 28, 2019 included in its Form 10-K for this year. 3 Reflects the sum of +performance bonus and individual bonus amounts, as adjusted by any applicable modifier, earned in 2019, 2018 and 2017, respectively, and paid in +2020, 2019 and 2018 respectively. For Mr. Stornant, includes amounts deferred under the Deferred Compensation Plan. 4 All amounts in this column reflect, where applicable, +the aggregate change in the actuarial present value of the accumulated benefits under the Wolverine Worldwide +Employees' Pension Plan ("Pension Plan") and Wolverine World Wide, Inc. 409A Supplemental Executive Retirement Plan ("SERP") for Messrs. Krueger, Jeppesen, Stornant and Zwiers.The +amounts in the table were determined using assumptions consistent with those used in Wolverine Worldwide's Consolidated Financial Statements for each respective year. See the "Pension Plans and 2019 +Pension Benefits" section starting on page 58. 5 The amounts listed in this column for 2019 include Wolverine Worldwide's contributions to the accounts of the NEOs under Wolverine +Worldwide's 401(k) plans and the +Wolverine Worldwide Deferred Compensation Plan, payments made by Wolverine Worldwide for the premiums on certain life insurance policies, tax and estate planning services and health care +reimbursements in the amounts listed in the table below. +Name +401(k) Match +Tax and Estate Planning +Health +Life Insurance Premiums +Deferred +Compensation Plan +Contribution +Krueger +$8,400 +$8,285 +$18,039 +$1,523 +$0 +Jeppesen +$8,400 +$0 +$20,130 +$711 +$0 +Spaletto +$15,400 +$8,285 +$21,326 +$714 +$21,872 +Stornant +$8,400 +$0 +$19,526 +$3,030 +$0 +Zwiers +$8,400 +$8,285 +$20,130 +$3,022 +$0 +2020 +PROXY +STATEMENT +50 +Table of Contents +Grants of Plan-Based Awards in Fiscal Year 2019 +The +following table provides information concerning each grant of an award made to the NEOs in fiscal year 2019: +2020 +PROXY +STATEMENT +51 +Table of Contents +1 Estimated payout levels relating to the performance bonus and individual bonus. Maximum amount assumes stretch revenue and pretax earnings performance and achievement +of the maximum backlog adjustment. For a description of these bonuses and the payouts under them, see pages 36-40. 2 Estimated payout levels of performance stock units granted +under the Stock Incentive Plan of 2016, as amended (the "Stock Incentive Plan of 2016") for the 2019-2021 +performance period. Restrictions on such performance unit awards will lapse in the February following the last year of the applicable performance period, if at all, based on the Company's performance +for the period (capped at 200%), potential +/- 25% adjustments for relative TSR performance, and target bonus levels over the three-year performance period. The actual value of shares that vest is +also dependent on the stock price at the time of vesting. The Company accrues, but does not pay, dividends on the performance shares during the performance period. At the end of the applicable +performance period, the Company will pay to the NEO the accrued dividends (if any) on the performance units that vest. The target performance unit grant values without accounting adjustments are as +set forth on page 43: ($4,042,500 for Mr. Krueger; $488,400 for Mr. Jeppesen; $502,320 for Mr. Spaletto; $579,120 for Mr. Stornant; and $533,400 for Mr. Zwiers (all +with de minimis differences based on rounding up to the nearest unit)). For a description of the performance units granted in 2019 under the Stock Incentive Plan of 2016, see pages 41-43. 3 The Company awarded service-based restricted stock unit awards under the Stock Incentive Plan of 2016 to all NEOs. 20% of the units received under the awards reflected +in this column vest on each of the first and second anniversaries of the date of grant of the award and 30% on the third and fourth anniversaries of the date of grant of the award. All restricted +stock units vest upon an NEO's death, disability or retirement. Holders of restricted stock units are entitled to receive dividend equivalents on restricted stock units. 4 +Represents the award date fair value for performance stock units and service-based restricted stock unit awards made in fiscal year 2019, determined as described in +footnote 2 to the "Summary Compensation Table." For Mr. Krueger, the amount also includes the incremental fair value ($233,000) calculated in accordance with ASC Topic 718, with +respect to the 2017-2019 performance award held by him that was modified to reflect the structure of the performance award program. +2020 +PROXY +STATEMENT +52 +Table of Contents +Outstanding Equity Awards at 2019 Fiscal Year-End +The +following table provides information concerning options and stock awards that have not vested for each NEO outstanding as of December 28, 2019: +2020 +PROXY +STATEMENT +53 +Table of Contents +2020 +PROXY +STATEMENT +54 +Table of Contents +1 The following table sets forth the vesting dates for the unvested service-based restricted stock or stock unit awards of each NEO as of December 28, +2019: +Named +Executive +Officer +Vesting +Date +Number of Shares to Vest +Krueger +02/06/20 +9,954 +02/07/20 +10,879 +02/08/20 +20,759 +02/10/20 +31,572 +02/11/20 +37,233 +02/07/21 +16,319 +02/06/21 +9,954 +02/08/21 +20,759 +02/10/21 +63,144 +02/06/22 +14,931 +02/07/22 +16,319 +02/06/23 +14,931 +Jeppesen +02/06/20 +1,870 +02/07/20 +2,045 +02/08/20 +3,930 +02/10/20 +8,861 +02/11/20 +4,554 +07/13/20 +2,500 +02/06/21 +1,871 +02/07/21 +3,067 +02/08/21 +3,930 +02/10/21 +17,723 +07/13/21 +5,000 +02/06/22 +2,806 +02/07/22 +3,067 +02/06/23 +2,807 +Spaletto +02/06/20 +1,924 +02/07/20 +2,103 +02/20/20 +4,266 +02/06/21 +1,924 +02/07/21 +3,154 +02/20/21 +4,267 +02/06/22 +2,886 +02/07/22 +3,155 +02/06/23 +2,887 +2020 +PROXY +STATEMENT +55 +Table of Contents +Named +Executive +Officer +Vesting +Date +Number of Shares to Vest +Stornant +02/06/20 +2,218 +02/07/20 +2,462 +02/08/20 +4,671 +02/10/20 +10,270 +02/11/20 +1,983 +06/12/20 +2,138 +02/06/20 +2,218 +02/07/21 +3,692 +02/08/21 +4,671 +02/10/21 +20,539 +02/06/22 +3,328 +02/07/22 +3,693 +02/06/23 +3,328 +Zwiers +02/06/20 +2,043 +02/07/20 +2,233 +02/08/20 +4,664 +02/10/20 +9,788 +02/11/20 +5,647 +02/06/21 +2,043 +02/07/21 +3,349 +02/08/21 +4,665 +02/10/21 +19,576 +02/06/22 +3,065 +02/07/22 +3,350 +02/06/23 +3,065 +2 The dollar values are calculated using a per share stock price of $33.74, the closing price of Wolverine Worldwide common stock on December 27, 2019, the last +business day of fiscal year 2019. 3 Following the end of the applicable three-year performance period, performance units vest depending upon the Company's achievement of the +relevant EPS and BVA +performance criteria. Shares actually vested for the 2017-2019 cycle are included in the "Number of Shares or Units of Stock That Have Not Vested" column. Performance between threshold and target was +assumed for the 2018-2020 cycle and performance below threshold was assumed for the 2019-2021 cycle. +2020 +PROXY +STATEMENT +56 +Table of Contents +Option Exercises and Stock +Vested in Fiscal Year 2019 +Option Awards +Stock Awards +Number of Shares +Acquired on Exercise +(#) +Value Realized +On Exercise +($) +Number of Shares +Acquired on Vesting +(#) +Value Realized +On Vesting 1 +($) +Krueger +- +- +361,780 +$12,679,520 +Jeppesen +- +- +68,167 +$2,287,263 +Spaletto +- +- +33,027 +$1,153,980 +Stornant +- +- +55,601 +$1,932,795 +Zwiers +- +- +63,606 +$2,227,373 +1 The Company calculates the dollar values using the closing price of Wolverine Worldwide common stock on the date of vesting. +2020 +PROXY +STATEMENT +57 +Table of Contents +Pension Plans and 2019 Pension Benefits +Wolverine +Worldwide maintains the following defined benefit retirement plans covering Messrs. Krueger, Jeppesen, Stornant, and Zwiers: (1) the Wolverine Worldwide +Employees' Pension Plan ("Pension Plan"), which is a funded and tax-qualified defined benefit plan under the Internal Revenue Code that covers eligible employees, and (2) the Wolverine World +Wide, Inc. 409A Supplemental Executive Retirement Plan ("SERP"), which is an unfunded, non-qualified plan that covers individuals recommended by the CEO and approved by the Compensation +Committee. Mr. Spaletto does not participate in these plans. +QUALIFIED PENSION PLANS +Participants vest in the Pension Plan after five years of qualifying service. Subject to the limitations imposed by the Internal Revenue Code, +the Pension Plan generally pays a monthly benefit in an amount equal to a percentage of the participant's final average monthly earnings multiplied by his or her number of years of service. For +purposes of this benefits formula, the Pension Plan caps years of service at 25 (30 for non-SERP participants), and the percentages of final average monthly earnings are 2.4% for Mr. Krueger +and 2.0% for Messrs. Jeppesen, Stornant, and Zwiers. "Earnings" as used in this Pension Plan formula generally includes base salary and annual bonus, less Social Security allowance, and for +2019 was capped at $280,000, the IRS limit applicable to tax qualified plans. +Upon +retirement, a participant may elect to receive the benefit in the form of a life annuity, 5 or 10-year certain annuities, or joint and 50%, joint and 75%, or joint and 100% survivor annuities. +The payments are actuarially adjusted based on the participant's election. Any election, other than an election to receive life annuity benefits, reduces the monthly benefit payable. The "normal" age +at which benefits may be drawn under the plan is 65. Messrs. Krueger, Stornant and Zwiers are eligible to begin drawing early retirement benefits under the Pension Plan, as described in the +"Benefits Triggered By Retirement, Death or Permanent Disability" section of this Proxy Statement. +SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN +Messrs. Krueger, Jeppesen, Stornant, and Zwiers participate in the SERP, which provides retirement benefits above amounts available +under the Company's tax qualified Pension Plan. The SERP benefit generally equals the difference between +the participant's retirement benefit under the Pension Plan and the benefits the participant would have received if there were no IRS imposed cap on earnings when calculating the Pension Plan benefit. +The SERP caps years of service at 25 in calculating a participant's benefit. The SERP also allows a retired participant who has five years of service to draw earlier (beginning at age 55) and +on different terms than under the Pension Plan. A participant's earnings percentage multiplier is the same under the SERP as it is under the Pension Plan (2.4% for Mr. Krueger and 2.0% for +Messrs. Jeppesen, Stornant, and Zwiers). The Compensation Committee may grant additional deemed years of service under the SERP to a participant, subject to the cap of 25 years. The full +benefit of any additional years of deemed service is paid under the SERP. Mr. Krueger reached the 25-year cap in 2012. +If +a retired participant draws the SERP benefit prior to age 65, the reduction factor is 0.333% for each month prior to age 60, and 0.1666% for each month between age 60 and age 65. As of the end of +fiscal year 2019, Mr. Krueger was the only NEO eligible to retire and begin drawing early benefits under the SERP. +SERP +benefits are paid monthly, and the SERP has a lump sum payment option in the event of death or termination of employment after a change in control. The SERP also includes a disability benefit and +a death benefit payable to the participant's designated beneficiary if the participant dies before retiring. The SERP provides for lump sum payments equal to 125% of the net present value of accrued +benefits without regard to any reduction for early payment to participants who resign for good reason or are terminated by Wolverine other than for cause or due to death or disability within two years +(Messrs. Jeppesen, Stornant, and Zwiers) or three years (Mr. Krueger) after a change in control. +The +SERP also contains non-competition, confidentiality and employee non-solicitation provisions in favor of Wolverine Worldwide. Under the SERP non-competition provisions, a participant is not +entitled to any benefit payment if the participant enters into certain relationships with a competing business prior to the date on which such benefit payment is due. If the participant's employment +is terminated for serious +2020 +PROXY +STATEMENT +58 +Table of Contents +misconduct, +or if Wolverine Worldwide cannot collect under an insurance policy purchased to fund SERP benefits for certain reasons, the Company may terminate a participant's benefits under the SERP. +Wolverine Worldwide may terminate the SERP or stop further accrual of SERP benefits for a participating NEO at any time, but termination will not affect previously accrued benefits. +PENSION BENEFITS IN FISCAL YEAR 2019 +The following table provides for each NEO certain information concerning each plan that provides for payments or other benefits at, following, +or in connection with retirement: +Plan Name +Number of Years +During Credited +Service Benefit 1 +(#) +Present Value of +Last Fiscal Year +($) +Payments +Accumulated +($) +Krueger +SERP +25 +$19,585,110 2 +- +Pension +24 +$2,415,065 +- +Jeppesen +SERP +8 +$1,364,725 +- +Pension +8 +$568,073 +- +Spaletto 3 +SERP +- +- +- +Pension +- +- +- +Stornant +SERP +23 +$2,928,696 +- +23 +$1,198,296 +- +Zwiers +SERP +22 +$3,271,709 +- +Pension +22 +$1,066,499 +- +1 These values are as of December 28, 2019, and are calculated assuming the participants will commence their benefits at age 65 (in the form of +the annuity elected by the NEO) and use the PRI-2012 mortality tables for males and females (white collar for SERP and no collar for Pension Plan), projected forward from base year +2012 with generational projection using a modified MP-2019 projection scale, with contingent annuitant mortality tables applied after the death of the participant and using the +following discount rates: 3.64% Pension Plan; 3.51% SERP. 2 The present value of Mr. Krueger's accumulated benefit under the SERP is $880,479 greater when taking into account +his deemed years of service. +Mr. Krueger was previously granted three additional service years in 1996 in recognition of his service as a member of Wolverine Worldwide's executive team for three years +before becoming a participant in the SERP, and additional deemed years of service were previously granted as part of Mr. Krueger's CEO compensation. The present value of +Mr. Krueger's SERP benefit would be $18,704,631 if 24 service years were used to calculate his benefit. Mr. Krueger reached 25 years of service in 2012, the +maximum years of service permitted under the SERP, and will not accrue any further years of service under the SERP. 3 Mr. Spaletto does not participate in the SERP or the +Pension Plan. +2020 +PROXY +STATEMENT +59 +Table of Contents +Non-Qualified Deferred Compensation +Wolverine +Worldwide maintains a Deferred Compensation Plan. This unfunded and non-qualified plan allows executives and other eligible senior employees of the Company to elect to +defer all or a portion of their base salary, cash bonus, or other performance-based cash compensation. Wolverine Worldwide may, but need not, credit a participant's account under the plan with +additional discretionary Company contributions, which may be subject to a vesting schedule and which would vest in full on a change in control. Amounts deferred pursuant to the Deferred Compensation +Plan may be invested, at the direction of the participant, in an investment fund, index, or other investment vehicle, as designated by the Compensation Committee to be available under the plan, and +earnings, if any, are credited to the participant's account. +Accounts +are paid out upon the earliest to occur of (i) a qualifying separation from service, (ii) a change in control (as such term is defined in the Deferred Compensation Plan), and +(iii) a termination of the Deferred Compensation Plan. Payment must generally be made, or installment payments must begin (as elected by the participant at the time of deferral), within +60 days of the event triggering payment. +Mr. Stornant +is the only NEO who has elected to defer amounts under the Deferred Compensation Plan. Wolverine Worldwide made a discretionary Company contribution on behalf of +Mr. Spaletto for 2019, as reflected below. +NONQUALIFIED DEFERRED COMPENSATION +Name +Executive +Contributions +in 2019 +($) +Registrant +Contributions +in 2019 +($) +Aggregate Earnings +in 2019 +($) +Aggregate +Withdrawals / +Distributions +($) +Aggregate Balance +at Last FYE +($) +Spaletto +- +$21,872 1 +- +- +- +Stornant +- +- +$220 2 +- +$13,885 +1 Company contributions for 2019 were deposited to Mr. Spaletto's Deferred Compensation Plan in February 2020 and were included in the "All Other +Compensation" column in the Summary Compensation Table. 2 Reflects market-based earnings on amounts credited to Mr. Stornant under the Deferred Compensation +Plan. +2020 +PROXY +STATEMENT +60 +Table of Contents +Potential Payments Upon Termination or Change in Control +Wolverine +Worldwide has entered into an Executive Severance Agreement with each NEO that provides certain rights, including the right to receive payments in the event of a +termination of employment following a change in control. The Company also has entered into an agreement with Mr. Krueger regarding certain termination benefits in the event of termination of +his employment under certain other circumstances described below. +BENEFITS TRIGGERED BY TERMINATION FOR CAUSE OR VOLUNTARY TERMINATION +An NEO is not entitled to receive any additional forms of severance payments or benefits upon termination of employment for Cause or upon the +NEO's voluntary decision, other than for Good Reason, to terminate his employment, as discussed in further detail below. +BENEFITS TRIGGERED BY TERMINATION OTHER THAN FOR CAUSE OR FOR GOOD REASON +Mr. Krueger entered into a Separation Agreement on March 13, 2008, which states that upon termination of his employment by +Wolverine Worldwide without Cause, or termination by Mr. Krueger with Good Reason, as such terms are defined in Mr. Krueger's Separation Agreement, Wolverine Worldwide will pay +Mr. Krueger the following payments in exchange for a general release of claims in favor of Wolverine Worldwide: (1) continued base salary for 18 months (reduced by payments he +receives if he is employed by a Competing Business, as defined in Mr. Krueger's Separation Agreement); (2) the pro rata portion of the annual incentive bonus and the three year bonus for +all uncompleted performance periods based on actual corporate performance for the applicable performance periods; (3) the pro rata portion of the annual individual performance bonus relating to +personal performance objectives; and (4) retiree medical benefits for Mr. Krueger, his spouse and dependents for a period starting on the day after the termination date and ending on the +last day of the 18th month following the month in which the termination date falls. +"Cause" +generally is defined in Mr. Krueger's Separation Agreement to mean: (1) any act or omission knowingly undertaken or omitted with the intent of causing material damage to +Wolverine Worldwide; (2) any intentional act involving fraud, misappropriation or embezzlement, that causes material damage to Wolverine Worldwide; (3) repeated willful failure to +substantially perform any of his significant duties as reasonably directed by the Board of Directors of Wolverine Worldwide; (4) a conviction (including any plea of guilty or nolo contendere) +of any criminal act that (a) results in the executive serving prison time and not being able to perform the normal duties of his position for more than thirty (30) days; or +(b) causes material damage to Wolverine Worldwide; or (5) chronic or habitual use or consumption of drugs or alcohol that causes material damage to Wolverine Worldwide. +"Good +Reason" generally is defined in Mr. Krueger's Separation Agreement to mean: (1) a material reduction in base compensation, including a reduction in base salary or opportunities +under Wolverine Worldwide's bonus plans or equity plans (other than those implemented for the executive team as a whole); (2) a material reduction in authority, duties, or responsibilities; +(3) a requirement to report to a Company officer or employee instead of reporting directly to the Board of Directors; or (4) certain relocations, other than those related to a change in +the location of Wolverine Worldwide's headquarters affecting a majority of the executive team. +BENEFITS TRIGGERED UPON A CHANGE IN CONTROL +Benefits Upon Termination Following a Change in Control. Under the Executive Severance Agreements entered into with the NEOs, payments and benefits are triggered +when employment is terminated without "Cause" or when an executive terminates employment for +2020 +PROXY +STATEMENT +61 +Table of Contents +"Good +Reason" within two years (Messrs. Jeppesen, Spaletto, Stornant, and Zwiers) or three years (Mr. Krueger) following a change in control of Wolverine Worldwide. +Upon +such a qualifying termination, Wolverine Worldwide will pay the lump sum severance payment under the Executive Severance Agreement composed of the following: (1) unpaid base salary and +bonus payments that had been earned; (2) in lieu of a bonus payment under the Annual Bonus Plan, an amount equal to the quotient of the number of days the NEO was employed by Wolverine +Worldwide, or any successor company in the year of termination, divided by the number of days in the year, multiplied by 100% of the greater of either (a) the bonus awarded to the NEO under the +annual bonus plan for the preceding year and (b) the average paid to the NEO over the preceding two year period under the annual bonus plan; (3) in lieu of payments under the various +three year performance periods that remain open on the date of termination, if any, an amount equal to the bonus the NEO would have received based on actual and assumed performance measures, +multiplied by the quotient of the number of days the NEO participated in the performance period prior to the termination, divided by the total number of days in the performance period (in determining +the earnings per share or other performance measures that can be determined annually for any year subsequent to the year of termination, performance will equal the level required to attain the maximum +goal under the three year plan for that year); (4) either two (Messrs. Jeppesen, Spaletto, Stornant, and Zwiers) or three (Mr. Krueger) times the sum of (a) the NEO's +highest annual base salary during the 12 month period prior to termination and (b) the greater of (i) the average amount earned by the NEO during the previous two years under the +annual bonus plan and (ii) the amount earned during the previous year under the Annual Bonus Plan; (5) 100% of the positive spread for any stock options held by the NEO on the date of +termination, whether or not vested; (6) in the case of Messrs. Krueger, and Zwiers, an excise tax gross up adjustment (note: the agreements with Messrs. Jeppesen, Spaletto, and +Stornant were entered into after 2008, and the Committee determined to not provide such gross ups after that date); and (7) in the case of Messrs. Jeppesen, Stornant, and Zwiers, the +present value of an additional three years of deemed service under the Pension Plan and SERP. Upon a termination of employment following a change of control, Wolverine Worldwide or any successor +company will maintain for a period of six months to one year the NEO's benefits under the then current benefit plans, programs or +arrangements that the NEO was entitled to participate in immediately prior to the termination date. In addition, Wolverine Worldwide or any successor company will provide outplacement services through +the last day of the second calendar year following the calendar year of termination. +"Change +in Control" under the Executive Severance Agreements generally means certain changes in composition of the Board of Directors, certain acquisitions of 20% or more of Wolverine Worldwide's +common stock or combined outstanding voting power of Wolverine World Wide, Inc., and other specified reorganizations, mergers, consolidations, liquidations, dissolutions or distributions of +substantial assets (unless such transactions result in the creation of an entity in which at least 50% of the common stock and combined voting power is owned by the owners of record prior to the +transaction, no single shareholder owns more than 20% of the combined voting power and a majority of the board remains unchanged). +"Cause" +is defined under the Executive Severance Agreements to generally mean the willful and continued failure to substantially perform duties or willfully engaging in gross misconduct that is +injurious to the Company. +"Good +Reason" is defined under the Executive Severance Agreements to generally mean: (1) any materially adverse change in position, duties, responsibilities or title, or any removal, +involuntary termination or failure to re-elect an officer; (2) a reduction in annual base salary; (3) any relocation or requirement to substantially increase business travel; +(4) the failure to continue providing any executive incentive plans or bonus plans; (5) the failure to continue any employee benefit plan or compensation plan unless a comparable plan is +available; (6) the failure to pay any salary, bonus, deferred compensation or other compensation; (7) the failure to obtain an assumption agreement from any successor; (8) any +purported termination of the employment which is not effected in a manner prescribed by the Executive Severance Agreement; or (9) any other material breach by Wolverine Worldwide or any +successor company of its obligations under the Executive Severance Agreement. +Benefits Upon a Change in Control Only. For 2017 and future years, the Company adopted double-trigger vesting, meaning that equity vesting only accelerates upon a +qualifying termination of employment after a change in control. For grants prior to 2017, upon a change in control of Wolverine Worldwide, absent a determination by the Compensation Committee to the +contrary, outstanding stock options become immediately exercisable in full and will remain exercisable during their remaining term, regardless of whether the NEO remains an employee of Wolverine +Worldwide, or any successor company. The Committee may determine that one or all of the NEOs shall receive cash in an amount equal to the positive spread amount associated with these options. In +addition, upon a change in control of Wolverine Worldwide, all other outstanding equity incentive awards of the NEOs that were granted prior to 2017, including shares of restricted stock, become +immediately and fully vested and non-forfeitable. To the extent that the Company has made discretionary contributions under the +2020 +PROXY +STATEMENT +62 +Table of Contents +Deferred +Compensation Plan that are subject to a vesting schedule, any unvested portion of these contributions will vest on a change in control. Change in control for this purpose generally means +certain changes in the composition of the Board of Directors, certain acquisitions of 20% of Wolverine Worldwide's common stock (50% in the case of the Deferred Compensation Plan) and other specified +reorganizations, mergers, consolidations, liquidations, dissolutions or dispositions of substantial assets. +Excise Tax Gross Up. The Compensation Committee previously determined that Wolverine Worldwide would not provide excise tax gross up payments in employment +agreements entered into after 2008. Messrs. Krueger and Zwiers are the only NEOs who have excise tax gross up protection in their agreements. +BENEFITS TRIGGERED BY RETIREMENT, DEATH OR PERMANENT DISABILITY +Pension Plan. In the event of death before retirement, the Pension Plan provides the surviving spouse of a vested participant a death benefit equal to the +qualified pre-retirement survivor annuity as defined in the Internal Revenue Code (generally 50% of the participant's accrued normal retirement benefit). This benefit is paid annually to the surviving +spouse beginning when the participant would have turned 60 and continues for the life of the surviving spouse. For participants with at least three years of service as of December 31, 2003, and +who have at least 10 years of service and are employed by the Company at the time of death, the amount of the survivor benefit under the Pension Plan is calculated as though the participant had +continued as an employee of the Company until age 65 at the compensation level as of the date of death and the benefit begins upon the date of death, unreduced for early commencement. The survivor +benefit for participants who meet all the criteria set forth in the preceding sentence, but who die when they are not employed by the Company, are entitled to a joint and survivor benefit commencing +upon the date of death, unreduced for early commencement. +SERP. If a SERP participant dies before beginning to receive benefits under the SERP, the Company must, based on the participant's election, pay the beneficiary +either a monthly annuity or a lump sum death benefit equal to the present value of the benefit computed as if the participant had retired on the date of death, had begun receiving benefits at age 55, +and had continued to receive benefits for the remainder of the participant's life expectancy. If the participant dies after beginning to receive benefit payments, benefits cease unless the participant +was receiving benefits in the form of one of the joint and survivor annuity optional elections under the plan or had elected benefits in a form that provides for a continuation of benefits. +If +a participant becomes disabled (as defined in the SERP), the SERP provides a disability benefit equal to 60% of the normal retirement accrued benefit based upon years of service up to the date that +the participant became disabled through the date the participant reaches age 65 (at which point, the participant would begin drawing full SERP benefits) or is no longer disabled. +Annual Bonus Plan. Upon termination of employment at least six months after the beginning of a fiscal year due to death, disability, or early or normal retirement, +an NEO is entitled to receive a pro rata portion of any annual bonus award earned under the Annual Bonus Plan based on the NEO's service during such fiscal year and actual performance under the Annual +Bonus Plan. The annual bonus is payable at the same time and in the same manner as awards are paid to other NEOs for the fiscal year. +Stock Incentive Plans. Upon death, disability, or voluntary termination of employment after attaining age 59 with ten years of service with the Company +(50 years of age and seven years of service or age 62 for grants prior to 2016), subject to certain conditions, the restrictions applicable to each NEO's shares of restricted stock terminate +and stock options vest in full (prorated for grants prior to 2016). Upon death, disability or voluntary termination of employment after attaining age 59 with ten years of service with the Company +(50 years of age and seven years of service or age 62 for grants prior to 2016), subject to certain conditions, the restrictions on time-vested shares lapse or units vest. +Deferred Compensation Plan. Upon death, disability, or other qualifying separation from service, including retirement, all in accordance with Section 409A +of the Internal Revenue Code, all amounts deferred by the NEOs under the Deferred Compensation Plan, including any vested amounts credited to the NEOs pursuant to a discretionary Company contribution, +shall generally be paid, or commence payment, within 60 days of the termination in accordance with the schedule elected by the NEO at the time of deferral. +2020 +PROXY +STATEMENT +63 +Table of Contents +DESCRIPTION OF RESTRICTIVE COVENANTS THAT APPLY DURING AND AFTER TERMINATION OF EMPLOYMENT +The SERP contains non-competition, confidentiality, and employee non-solicitation provisions in favor of Wolverine Worldwide. Under the +non-competition provisions of the SERP, the participant will not be entitled to any benefit payment if, prior to the date on which such benefit payment is due, the participant enters into certain +relationships with a competing business. +ESTIMATED PAYMENTS ON TERMINATION OR CHANGE IN CONTROL +The following table summarizes the potential payments and benefits payable to each NEO upon a change in control or termination of employment +following each of the triggering events set forth in the table. As required, the amounts in the table assume that the termination of employment or change in control of Wolverine Worldwide took place +on the Company's last day of fiscal year 2019, which was December 28, 2019. The amounts set out below are in addition to benefits that are generally available to the Company's employees such as +distributions under the Company's 401(k) savings plan, disability or life insurance benefits and accrued vacation. Due to the many factors that affect the nature and amount of any benefits provided +upon the termination events discussed below, any actual amounts paid or distributed to NEOs may be different. Factors that may affect these amounts include timing during the year of the occurrence of +the event, Wolverine Worldwide's stock price and the NEO's age and years of service. +The +value of the accelerated vesting of unvested equity-based compensation awards was computed using the closing market price ($33.74) of Wolverine Worldwide's common stock on December 27, +2019, the last business day in fiscal year 2019. The value for unvested restricted stock is computed by multiplying $33.74 by the number of shares of the NEO's restricted stock that would vest as a +result of an event. +Each +of the hypothetical events described in the following table (the highlighted blue headings in the left-hand column) is calculated and reported as a discrete event. For example, the amounts +disclosed under the "Change in Control Only" heading are not cumulative with the amounts disclosed under the "Change in Control/Termination" heading. +2020 +PROXY +STATEMENT +64 +Table of Contents +1 The estimate for Mr. Krueger assumes target performance for the 2018-2020 and 2019-2021 performance periods and actual performance for the 2017-2019 period. +Actual payout or vesting, if any, would be determined and made at the end of those periods. The amount reflected in the table also includes an estimated cost of $19,963 for retiree medical benefits +for 18 months and the estimated cost of $25,000 for outplacement services. 2 Payments would be triggered after termination of employment under certain circumstances within +two years (Messrs. Jeppesen, Spaletto, Stornant, and Zwiers) or +three years (Mr. Krueger) following a change in control. Includes amounts payable in cash under the terms of the Executive Severance Agreement, excluding the value of the cash payout to each +NEO of the option spread for already vested options. The timing of the payment would be delayed to the extent earlier payment would trigger Section 409A of the tax code. The value of +service-based restricted shares or units that vest upon a change in control under the terms of the Company's stock incentive plans are included in the Stock Incentive Plans row. 3 These estimates assume that Wolverine Worldwide, or any successor company, maintains the benefit plans for a period of one year after termination and the outplacement +services for a period beginning with the date of termination and ending on the last day of the second calendar year following the calendar year in which the date of termination occurred. 4 Reflects the value of unvested shares of restricted stock or stock units that would vest because of the event. 5 Reflects the entire lump sum benefit payable to +applicable NEOs, including any accumulated benefit. The timing of the payment would be delayed to the extent earlier +payment would trigger Section 409A of the Tax Code. 6 Reflects the entire lump sum death benefit payable to a participating NEO's beneficiary, including any accumulated +benefit. 7 Amounts reflect the net present value of the annuity paid to the surviving spouse calculated using the same discount rate and mortality assumptions used in the +Pension +Benefits table under the heading "Pension Benefits in Fiscal Year 2019" under the heading "Pension Plans and 2019 Pension Benefits." In accordance with the terms of the Pension Plan, the death benefit +for Messrs. Krueger and Zwiers was calculated as though the NEO had continued as an employee of Wolverine Worldwide until age 65 at the compensation level as of the date of death. 8 Under the Annual Bonus Plan and the terms of performance share awards, each NEO may be eligible to receive a pro rata portion of any award if employment is terminated +as a result of any of the specified events in the table. The amount reported represents (a) actual payout under the Annual Bonus Plan for fiscal year 2019, (b) actual payout under the +2017-2019 performance cycle, and (c) target performance for the 2018-2020 and 2019-2021 performance cycles. Performance units would vest on a prorated basis based on actual Company performance. 9 Reflects the net present value of the annuity using the same discount rate and mortality assumptions used in the Pension Benefits table and assuming the NEO drew the +disability benefit until age 65 followed by the normal retirement benefit. 10 Reflects the net present value of benefits according to actual elections in place and assuming +benefits begin at age 55 (or immediately if older than 55). +2020 +PROXY +STATEMENT +65 +Table of Contents +11 Mr. Krueger is the only NEO eligible for retirement (as defined in the applicable plan) for all awards at fiscal 2019 year-end. Messrs. Jeppesen, +Stornant and Zwiers are eligible for retirement (as defined in the Stock Incentive Plan of 2013) at fiscal 2019 year-end for awards granted prior to 2016. As such, Messrs. Jeppesen, +Stornant and Zwiers are eligible for accelerated vesting of such awards upon retirement. 12 Reflects the value of unvested shares of restricted stock/stock units (including +performance share or unit awards) that would vest because of the event. +CEO PAY RATIO +As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of +Regulation S-K, we are providing the following information about the relationship of the annual total compensation of our employees and the annual total compensation of Blake Krueger, the +Company's Chief Executive Officer. +For +2019, our last completed fiscal year, the annual total compensation of the employee of the Company identified at median was $65,890 and the annual total compensation of the CEO, as reported in the +Summary Compensation Table above, was $9,427,274. +Based +on this information, the 2019 ratio of the annual total compensation of Mr. Krueger to the median of the annual total compensation of all employees was estimated to be 144 to 1. +The +methodology and the material assumptions, adjustments, and estimates that we used to identify the median of the annual total compensation of all our employees, as well as to determine the annual +total compensation of our "median employee" and our CEO, are described below. +• We determined that, as of December 29, 2018, our employee population consisted of approximately 3,691 (2,778 in the U.S. and 913 outside +the U.S.) individuals globally. After excluding employees from India (15 employees), Dominican Republic (5 employees), Mexico (2 employees), Netherlands (35 employees), Thailand (4 employees), and +Vietnam (48 employees) pursuant to the "de minimis" exception provided for in the rules, we used a base of 3,582 employees for purposes of determining the "median employee." We selected +December 29, 2018, as the date upon which we would identify the median employee in order to align with the Company's fiscal year end. +• To identify the median employee from our employee population, we used annual base salary as well as bonus and other cash incentives paid for +the 12-month period ending December 29, 2018 as our consistently applied compensation measure. In making this determination, we annualized the compensation of all newly hired regular employees +during this period. +• We believe there have been no changes in our employee population or our compensation arrangements in 2019 that would result in a material +change in our pay ratio disclosure or our median employee so we used the same median employee for 2019 as used in 2018. +• Once we identified our median employee, we combined all of the elements of such employee's compensation for fiscal 2019 in accordance with the +SEC's rules, resulting in annual total compensation of $65,890. +• With respect to the annual total compensation of our CEO, we used the amount reported in the "Total" column of our 2019 Summary Compensation +Table included in this Proxy Statement. +2020 +PROXY +STATEMENT +66 +Table of Contents +Proposal 2 — Advisory Resolution to +Approve Executive Compensation +The +Company is asking its shareholders to indicate their support for Wolverine Worldwide's NEO compensation, as described in this Proxy Statement. This proposal, commonly known as a +"say-on-pay" proposal, gives the Company's shareholders the opportunity to express their view on compensation for the Company's NEOs. The say-on-pay vote is advisory and, therefore, not binding on the +Company, the Compensation Committee or the Board. Even though non-binding, the Board and Compensation Committee value the opinions of Wolverine Worldwide's shareholders and will review and consider +the voting results when making future decisions regarding the Company's executive compensation program. +At +the 2017 annual meeting of shareholders, the Company also held an advisory vote on the frequency of future say-on-pay votes. Our shareholders voted in favor of an annual say-on-pay vote and the +Company has elected to follow such recommendation. As such, unless the Company modifies its policies on the frequency of say-on-pay votes, it is expected that the next say-on-pay vote will occur at +the 2021 annual meeting of shareholders. Further, in accordance with Rule 14a-21(b) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), shareholders will be asked to vote +again on how frequently the Company should hold future say-on-pay votes at the Company's 2023 annual meeting of shareholders. +The +Company encourages shareholders to read the "Compensation Discussion and Analysis" ("CD&A") section of this Proxy Statement beginning on page 32. As described in the CD&A section, the Compensation +Committee has structured the executive compensation program to achieve the following key objectives: +• Align the interests of NEOs with those of the shareholders through incentives based on achieving performance objectives that enable increased +shareholder value +• Provide incentives for achieving specific, near term corporate, business unit and individual goals and reward the achievement of those goals +• Provide incentives for achieving pre-established, longer-term corporate financial goals and reward achievement of those goals +• Attract and retain talented NEOs who will lead Wolverine Worldwide and drive superior business and financial performance +The +executive compensation program is designed to achieve these objectives, in part, by: +• Weighting at-risk and variable compensation (annual bonuses and long-term incentives) much more heavily than fixed compensation (base salaries) +• Rewarding annual performance while maintaining emphasis on longer-term objectives +• Blending cash, non-cash, long- and short-term compensation components, and current and future compensation components +The +Company encourages shareholders to read the Summary Compensation Table and other related compensation tables and narrative, appearing on pages 49-66, which provide detailed information on the +compensation of the Company's NEOs. +The +Compensation Committee and the Board of Directors believe the Company's compensation program and its policies and procedures articulated in the CD&A section are effective in aligning the interests +of the Company's NEOs with the interests of shareholders, promoting the achievement of the Company's near and long-term objectives, and increasing shareholder value. +In +accordance with the rules under Section 14A of the Exchange Act, and as a matter of good corporate governance, the Company asks shareholders to approve the following advisory resolution at +the 2020 Annual Meeting of Shareholders: +RESOLVED , that the shareholders of Wolverine World Wide, Inc. (the "Company") approve, on an advisory basis, the compensation of the Company's +named executive officers disclosed in the Compensation Discussion and Analysis section, the Summary Compensation Table and the related compensation tables, notes and narrative in the Proxy Statement +for the Company's 2020 Annual Meeting of Shareholders. +BOARD RECOMMENDATION +The Board recommends that you vote "FOR" approval of the advisory resolution to approve executive compensation. +2020 +PROXY +STATEMENT +67 +Table of Contents +Proposal 3 – Ratification of Appointment of +Independent Registered Public Accounting +Firm +Ernst & +Young LLP ("Ernst & Young") was the Company's independent registered public accounting firm for the fiscal year ended December 28, 2019. The Audit +Committee has reappointed Ernst & Young as the Company's independent registered public accounting firm for the current fiscal year. As a matter of good corporate governance, the Audit Committee +has determined to submit its appointment of Ernst & Young to the Company's shareholders for ratification. If this appointment is not ratified by the holders of a majority of shares cast +affirmatively or negatively on the matter, the Audit Committee will review its future selection of +an independent registered public accounting firm. Even if the appointment is ratified, the Audit Committee in its discretion may select a different independent registered public accounting firm any +time during the year if it determines that such a change would be in the best interests of the Company and the Company's shareholders. +The +Audit Committee reviewed Ernst & Young's performance prior to appointing it as the Company's independent registered public accounting firm, and +considered: +• the historical and recent performance of Ernst & Young on the Company's audit, including the quality of the engagement team and +Ernst & Young's experience, client service, responsiveness and technical expertise +• the Public Company Accounting Oversight Board ("PCAOB") report of selected Ernst & Young audits +• the appropriateness of fees charged +• Ernst & Young's familiarity with the Company's accounting policies and practices and internal control over financial reporting +• Ernst & Young's financial strength and performance +Representatives +of Ernst & Young are expected to be present at the Annual Meeting. They will have an opportunity to make a statement if they desire to do so and are expected to be available to +respond to appropriate questions from shareholders. +BOARD RECOMMENDATION +The Board recommends that you vote "FOR" ratification of the Audit Committee's selection of the firm of Ernst & Young LLP as the Company's independent registered public accounting firm +for fiscal year 2020. +2020 +PROXY +STATEMENT +68 +Table of Contents +Audit Committee Report +The +Audit Committee of the Board of Directors consists of five directors who are independent under the Company's Director Independence Standards, the NYSE listed company standards, +and applicable SEC standards. The Audit Committee represents and assists the Board in fulfilling its oversight responsibility regarding the Company's financial statements and the financial reporting +process, the internal control over financial reporting, the performance of the internal audit function and the independent registered public accounting firm, the qualifications and independence of the +independent registered public accounting firm, the annual independent audit of Wolverine Worldwide's financial statements and internal control over financial reporting, and compliance with legal and +regulatory requirements. The Audit Committee is directly responsible for appointing, retaining, compensating, overseeing, evaluating and terminating (if appropriate) Wolverine Worldwide's independent +registered public accounting firm. Wolverine Worldwide's management has primary responsibility for the financial statements and the financial reporting process, including the application of accounting +and financial principles, the preparation, presentation and integrity of the financial statements, and the systems of internal controls and other procedures designed to promote compliance with +accounting standards and applicable laws and regulations. Wolverine Worldwide's independent registered public accounting firm is responsible for expressing an opinion on the conformity of Wolverine +Worldwide's financial statements with generally accepted accounting principles and for auditing the effectiveness of Wolverine Worldwide's internal control over financial reporting. +The +Audit Committee has taken steps to provide assurances regarding Audit Committee composition and procedures, the independence of Wolverine Worldwide's independent registered public accounting firm +and the integrity of Wolverine Worldwide's financial statements and disclosures. These steps include: (i) reviewing the Audit Committee Charter; (ii) reviewing with legal counsel and the +independent registered public accounting firm the Accounting and Finance Code of Ethics; (iii) maintaining financial, accounting and business ethics complaint procedures to allow employees, +shareholders and the public to report concerns regarding Wolverine Worldwide's financial statements, internal controls and disclosures; and (iv) reviewing procedures for the Audit Committee to +pre-approve all audit and non-audit services provided by Wolverine Worldwide's independent registered public accounting firm. +As +part of its supervisory duties, the Audit Committee has reviewed Wolverine Worldwide's audited financial statements for the fiscal year ended December 28, 2019, and has discussed those +financial statements with Wolverine Worldwide's management and internal financial staff, and the internal auditors and independent registered public accounting firm with and without management +present. The Audit Committee has also reviewed and discussed the following with Wolverine Worldwide's management and the financial staff, and with the internal auditors and independent registered +public accounting firm with and without management present: +• Accounting and financial principles and significant assumptions, estimates and matters of judgment used in preparing the financial statements +• Allowances and reserves for accounts receivable, inventories and taxes +• Accounting for acquisitions, pension plans and equity-based compensation plans +• Goodwill and intangible asset impairment analysis +• Other significant financial reporting issues and practices +The +Audit Committee has discussed with Wolverine Worldwide's independent registered public accounting firm the results of its examinations and its judgments concerning the quality, as well as the +acceptability, of Wolverine Worldwide's accounting principles and such other matters that it is required to discuss with the independent registered public accounting firm under applicable rules, +regulations or generally accepted auditing standards, including the matters required to be discussed by the applicable requirements of the PCAOB and the SEC. In addition, the Audit Committee has +received from the independent registered public accounting firm the written disclosures and the letter required by the applicable requirements of the PCAOB regarding the independent registered public +accounting firm's communications with the Audit Committee concerning independence and has discussed their independence from Wolverine Worldwide and Wolverine Worldwide's management with them, +including a consideration of the compatibility of non-audit services with their independence, the scope of the audit and the scope of all fees paid to the independent registered public accounting firm +during the year. After, and in reliance upon the +2020 +PROXY +STATEMENT +69 +Table of Contents +reviews +and discussions described above, the Audit Committee recommended that the audited financial statements for the fiscal year ended December 28, 2019, be included in Wolverine Worldwide's +Annual Report on Form 10-K for the year then ended to be filed with the SEC. +Respectfully +submitted, +Jeffrey +M. Boromisa (Chair) +Roxane Divol +William K. Gerber +Brenda J. Lauderback +Michael A. Volkema +2020 +PROXY +STATEMENT +70 +Table of Contents +Independent Registered Public Accounting Firm +The +Company's Audit Committee has adopted a policy under which the Audit Committee must approve all audit and non-audit services provided by the Company's independent registered +public accounting firm, Ernst & Young LLP, and which prohibits Ernst & Young LLP from providing any non-audit services that are prohibited by the SEC or the PCAOB. The +Company's Audit Committee provides categorical pre-approval for routine and recurring services, with specific service descriptions and budgets. All audit services, internal control related services, +and other services not within the specifically pre-approved service descriptions and budgets require engagement specific pre-approval. With certain exceptions (such as pre-approval of audit services), +the Audit Committee may delegate engagement specific pre-approval to one or more Audit Committee members, and has so delegated in certain instances to the Audit Committee Chairperson. Management must +communicate to the Audit Committee at its next regularly scheduled meeting any services approved by an Audit Committee member. Wolverine Worldwide's Audit Committee pre-approved all fees paid to +Ernst & Young LLP for services performed in 2019 and 2018. The aggregate fees billed by Ernst & Young LLP for audit and non-audit services were: +2019 +2018 +Audit Fees 1 +$ +1,821,800 +$ +1,886,000 +Audit Related Fees +- +- +Total Audit & Audit Related Fees +$ +1,821,800 +$ +1,886,000 +Tax Fees 2 +Tax Compliance +$ +904,300 +$ +1,289,300 +Tax Planning & Advisory +$ +487,900 +$ +190,000 +Tax Planning & Advisory Other +- +- +Total Tax Fees +$ +1,392,200 +$ +1,479,300 +All Other Fees +- +- +TOTAL FEES +$ +3,214,000 +$ +3,365,300 +1 "Audit Fees" are comprised of fees for the annual audit, reviews of the financial statements included in Wolverine Worldwide's Quarterly +Reports on Form 10-Q audit of internal control over financial reporting, foreign statutory audits and consultations concerning accounting matters associated with the +annual audit. 2 "Tax Fees" are comprised of fees for the preparation of domestic and foreign tax returns, tax compliance services, and routine tax advisory +and planning services. +Wolverine +Worldwide's Audit Committee has adopted a policy restricting the Company's hiring of current or former partners or employees of the independent registered public accounting firm retained by +the Company. +2020 +PROXY +STATEMENT +71 +Table of Contents +Related Party Matters +CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS +Since December 30, 2018, the Company has not engaged in any "related person" transactions with its directors, executive officers or +holders of 5% or more of Company voting securities, affiliates or any member of the immediate family of the foregoing persons. +RELATED PERSON TRANSACTIONS POLICY +Wolverine Worldwide's Board adopted written policies and procedures regarding related person transactions. They require the Governance +Committee to review and either approve or disapprove the Company entering into any Interested Transactions (defined below). If advance approval is not feasible, then the Governance Committee must +review and ratify the Interested Transaction at its next meeting. +Interested Transaction +Any transaction, arrangement or relationship or series of similar transactions, arrangements or relationships (including any indebtedness or guarantee of indebtedness) in which: +(1) +the aggregate amount involved is or is expected to exceed $120,000 since the beginning of Wolverine Worldwide's last completed fiscal year; +(2) +Wolverine Worldwide is a participant; and +(3) +any Related Person (defined below) has or will have a direct or indirect interest. +An Interested Transaction does not include: +(1) +any employment compensation paid to an executive officer of the Company if the Compensation Committee approved or recommended to the Board of Directors for approval of such compensation; +(2) +any compensation paid to a director for service as a director of the Company; +(3) +any transaction in which a Related Person has an indirect interest solely as a result of being (i) a director or, together with all other Related Persons, as defined below, a less than 10% beneficial owner of an equity interest in another entity, or +both, or (ii) a limited partner in a partnership in which the Related Person, together with all other Related Persons, has an interest of less than 10%; +(4) +any transaction in which the Related Person's interest arises solely from the ownership of the Company's common stock and all holders of the Company's common stock received the same benefit on a pro rata basis (e.g., a dividend); or +(5) +any transaction with another publicly traded company where the Related Person's interest arises solely from the ownership of more than 5% of the Company's common stock and the ownership of a non-controlling interest in the other publicly traded +company. +Related Person +Any: +(a) +person who is or was at any point during the last fiscal year for which Wolverine Worldwide filed an Annual Report on Form 10-K and Proxy Statement, an executive officer, director or, to the extent information regarding such nominee is being +presented in a proxy or information statement relating to the election of that nominee as a director, nominee for election as a director; +(b) +beneficial owner of greater than five percent of Wolverine Worldwide's common stock; or +(c) +immediate family member* of any of the foregoing. +* Immediate family member is defined as a person's spouse, parents, stepparents, children, stepchildren, siblings, mothers and +fathers-in-law, sons-and daughters-in-law, and brothers- and sisters-in-law, and anyone residing in such person's home (other than a tenant or employee). +The +Governance Committee considers whether the Interested Transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar +circumstances, the extent of the Related Person's interest in the transaction, and other factors that it deems relevant. No director participates in any discussion or approval of an Interested +Transaction for which he or she is a Related Person, except to provide information to the Governance Committee. +2020 +PROXY +STATEMENT +72 +Table of Contents +Additional Information +SHAREHOLDERS LIST +A list of shareholders entitled to vote at the meeting will be available for review by Wolverine Worldwide shareholders at the office of +Secretary, Wolverine World Wide, Inc., 9341 Courtland Drive, N.E., Rockford, Michigan 49351, during ordinary business hours for the 10-day period before the meeting. +DIRECTOR AND OFFICER INDEMNIFICATION +The Company indemnifies its directors and NEOs to the fullest extent permitted by law so that they will be free from undue concern about +personal liability in connection with their service to the Company. +DELINQUENT SECTION 16(a) REPORTS +Section 16(a) of the Exchange Act requires the Company's directors and NEOs, and persons who beneficially own more than 10% of the +outstanding shares of the Company's common stock, to file reports of ownership and changes in ownership of shares of common stock with the SEC. Directors, NEOs and greater than 10% beneficial owners +are required by SEC regulations to furnish Wolverine Worldwide with copies of all Section 16(a) reports they file. Based on its review of the copies of such reports received by it, or written +representations from certain reporting persons, the Company believes that during fiscal year 2019, its officers and directors filed the required reports under Section 16(a) on a timely basis, +except for one transaction for each of Messrs. Boromisa, Gerber, Gromek, Jeppesen, Kollat, Krueger, Long, Spaletto and Volkema and Mses. Boswell, Divol, Klimek and Lauderback, in each case, due +to an administrative error. +SHAREHOLDER PROPOSALS FOR INCLUSION IN NEXT YEAR'S PROXY STATEMENT +Pursuant to SEC Rule 14a-8, some shareholder proposals may be eligible for inclusion in Wolverine Worldwide's 2021 Proxy Statement and +proxy card. Any such shareholder proposals must be submitted in writing to the Secretary of Wolverine Worldwide no later than the close of business on November 26, 2020. You should address all +shareholder proposals to the attention of Secretary, Wolverine World Wide, Inc., 9341 Courtland Drive, N.E., Rockford, Michigan 49351. +OTHER SHAREHOLDER PROPOSALS FOR PRESENTATION AT NEXT YEAR'S ANNUAL MEETING +The Company's By-Laws require that any shareholder proposal that is not submitted for inclusion in next year's Proxy Statement under SEC +Rule 14a-8, but is instead sought to be presented directly at the 2021 Annual Meeting of Shareholders, must be received at the Company's principal executive offices by the close of business not +less than 90 days nor more than 120 days prior to the first anniversary of the 2020 Annual Meeting. As a result, proposals, including director nominations, +submitted pursuant to these provisions of the By-Laws must be received between December 31, 2020, and the close of business on January 30, 2021. You should address a proposal to +Secretary, Wolverine World Wide, Inc., 9341 Courtland Drive N.E., Rockford, Michigan 49351, and include the information and comply with the requirements set forth in those By-Laws, which the +Company has posted on its website. SEC rules permit management to vote proxies in its discretion in certain cases if the shareholder does not comply with this deadline, and in certain other cases +notwithstanding the shareholder's compliance with this deadline. +VOTING SECURITIES +Shareholders of record at the close of business on March 18, 2020, are eligible to vote at the Annual Meeting. The Company's voting +securities consist of its $1.00 par value common stock, and there were 81,069,852 shares outstanding and entitled to vote on the record date. Each share outstanding on the record date will be +entitled to one vote on each director nominee and one vote on each other matter. Treasury shares are not voted. Individual votes of shareholders are kept private, except as appropriate to meet legal +requirements. Access to proxies and +2020 +PROXY +STATEMENT +73 +Table of Contents +other +individual shareholder voting records is limited to the independent inspectors of election and certain employees of the Company and its agents who acknowledge their responsibility to comply with +this policy of confidentiality. +CONDUCT OF BUSINESS +A majority of the outstanding shares of common stock as of the record date must be present at the Annual Meeting in order to hold the Annual +Meeting and conduct business. This is called a "quorum." Your shares are counted as present at the meeting if you are present at the Annual Meeting and vote in person, a proxy card has been properly +submitted by you or on your behalf, or you have submitted your proxy by telephone or by internet, or by completing, signing, dating and returning your proxy form in the enclosed envelope. Both +abstentions and broker non-votes (defined below in " Vote Required for Election and Approval ") are counted as present for the purpose of determining the +presence of a quorum. +VOTE REQUIRED FOR ELECTION AND APPROVAL +For Proposal 1, Election of Directors for Terms Expiring in 2023, directors are elected by a majority of votes cast unless the election is +contested, in which case directors are elected by a plurality of votes cast. A majority of votes cast means that the number of shares voted "for" a Director nominee exceeds the number of votes cast +"against" the Director nominee. If an incumbent director in an uncontested election does not receive a majority of votes cast for his or her election, under the Company's Corporate Governance +Guidelines, the director is required to submit a letter of resignation to the Board for consideration by the Governance Committee. The Governance Committee will then make a recommendation to the Board +as to whether to accept or reject the tendered resignation. The Governance Committee and the Board, in making their decisions, may implement any procedures +they deem appropriate and may consider any factor or other information that they deem relevant. The Board will then act on the tendered resignation, taking into account the Governance Committee's +recommendation, and will publicly disclose its decision regarding the resignation within 90 days after the results of the election are certified. A director whose resignation is under +consideration shall abstain from participating in any recommendation or decision regarding that resignation. If the resignation is not accepted, the director will continue to serve until the next +annual meeting of shareholders at which such director faces re-election and until such director's successor is elected and qualified. +Proposal +2, Advisory Vote to Approve Executive Compensation, is a non-binding, advisory vote. Therefore, there is no required vote that would constitute approval. The Company values the opinions +expressed by its shareholders in this advisory vote, and the Board and Compensation Committee will consider the outcome of these votes when designing compensation programs and making future +compensation decisions for the Company's named executive officers. +Proposal +3, Ratification of Appointment of Independent Registered Public Accounting Firm, requires the affirmative vote of a majority of shares cast affirmatively or negatively on the matter for +approval. +Abstentions +and broker non-votes, if any, will have no effect on the outcome of the election of directors. Generally, broker non-votes occur when shares held by a broker in "street name" for a +beneficial owner are not voted with respect to a particular proposal because (1) the broker has not received voting instructions from the beneficial owner, and (2) the broker lacks +discretionary voting power to vote those shares. Brokers do not have discretionary authority with respect to any of the proposals except for Proposal (3). Abstentions are not counted as affirmative +votes on a matter. +VOTING RESULTS OF THE ANNUAL MEETING +The Company will announce preliminary voting results at the Annual Meeting and publish final results in a Form 8-K within four business +days following the Annual Meeting. If final results are not known within four business days of the Annual Meeting, then the Company will file a Current Report on Form 8-K with the +preliminary results and file an amended Current Report on Form 8-K within four business days of the availability of the final results. +ATTENDING THE ANNUAL MEETING +You may vote shares held directly in your name as the shareholder of record in person at the Annual Meeting. If you choose to vote in person, +please bring the enclosed proxy card and proof of identification. Even if you plan to attend the Annual Meeting in person, Wolverine Worldwide recommends that you vote your shares in advance as +described below so that your vote will be counted if you later decide not to attend the Annual Meeting. You may vote shares held in "street name" through a brokerage account or by a bank or other +nominee in person +2020 +PROXY +STATEMENT +74 +Table of Contents +if +you obtain a proxy from the record holder giving you the right to vote the shares. Each shareholder may appoint only one proxy holder or representative to attend the meeting on his or her behalf. +MANNER FOR VOTING PROXIES +The shares represented by all valid proxies received by telephone, by internet or by mail will be voted in the manner specified. Where the +shareholder has not indicated a specific choice, the shares represented by all valid proxies received will be voted in accordance with the Board's recommendations as follows: (1) for each of +the nominees for directors named earlier in this Proxy Statement, (2) for approval of the advisory resolution to approve executive compensation, and (3) for ratification of the +appointment of the independent registered public accounting firm. The Board has not received timely notice of any other matter that may come before the Annual Meeting. However, should any matter not +described above be properly presented at the Annual Meeting, the persons named in the proxy form will vote in accordance with their judgment, as permitted. +REVOCATION OF PROXIES +A shareholder who gives a proxy may revoke it at any time before it is exercised by voting in person at the Annual Meeting, by delivering a +subsequent proxy or by notifying the inspectors of election in writing of such revocation. If your Wolverine Worldwide shares are held for you in a brokerage, bank or other institutional account, you +must obtain a proxy from that entity and bring it with you to hand in with your ballot, in order to be able to vote your shares at the Annual Meeting. +SOLICITATION OF PROXIES +The Company will pay the expenses of solicitation of proxies for the Annual Meeting. Solicitations may be made in person or by telephone, by +officers and employees of the Company, or by nominees or other fiduciaries who may mail materials to or otherwise communicate with the beneficial owners of shares held by the nominees or other +fiduciaries. These individuals will not be paid any additional compensation for any such solicitation. Upon request, the Company will reimburse brokers, dealers, banks and trustees, or their nominees, +for reasonable expenses incurred by them in forwarding material to beneficial owners of the Company's common stock. The Company has engaged Georgeson Inc. at an estimated cost of $9,500, plus +expenses and disbursements, to assist in solicitation of proxies. +DELIVERY OF DOCUMENTS TO SHAREHOLDERS SHARING AN ADDRESS +If you are the beneficial owner, but not the record holder, of shares of Wolverine Worldwide stock, your broker, bank or other nominee may +only deliver one copy of this Proxy Statement and the Company's 2019 Annual Report to multiple shareholders who share an address, unless that nominee has received contrary instructions from one or +more of the shareholders. The Company will deliver promptly, upon written or oral request, a separate copy of this Proxy Statement and its 2019 Annual Report to a shareholder at a shared address to +which a single copy of the documents was delivered. A shareholder who wishes to receive a separate copy of the Proxy Statement and annual report, now or in the future, or shareholders who share an +address and receive multiple copies of the Proxy Statement and annual report but would like to receive a single copy, should submit this request by writing to Investor Relations, Wolverine World +Wide, Inc., 9341 Courtland Drive N.E., Rockford, Michigan 49351, or by calling (616) 866-5500 and asking for Investor Relations. Beneficial owners sharing an address who are receiving +multiple copies of proxy materials and who wish to receive a single copy of such materials in the future should make a request directly to their broker, bank or other nominee. +ACCESS TO PROXY STATEMENT AND ANNUAL REPORT +Distribution of this Proxy Statement and enclosed proxy card to shareholders is scheduled to begin on or about March 26, 2020. +Wolverine Worldwide's financial statements for the fiscal year ended December 28, 2019, are included in the Company's 2019 Annual Report, which the Company is providing to shareholders at the +same time as this Proxy Statement. Wolverine Worldwide's Proxy Statement for the 2020 Annual Meeting and the Annual Report to Shareholders for the fiscal year ended December 28, 2019, are +available at www.wolverineworldwide.com/2020annualmeeting . If you have not received or do not have access to the 2019 Annual Report, write to: +Wolverine World Wide, Inc., 9341 Courtland Drive N.E., Rockford, Michigan 49351, Attn: Investor Relations or call (616) 866-5500 and ask for Investor Relations, and the Company will send +a copy to you without charge. +2020 +PROXY +STATEMENT +75 +Table of Contents +APPENDIX A +APPENDIX A — Forward-Looking +Statements and Non-GAAP +Reconciliation Tables +2020 +PROXY +STATEMENT +A-1 +Table of Contents +APPENDIX A +FORWARD-LOOKING STATEMENTS +This +document contains "forward-looking statements," which are statements relating to future, not past, events. In this context, forward-looking statements often address management's current beliefs, +assumptions, expectations, estimates and projections about future business and financial performance, national, regional or global political, economic and market conditions, and the Company itself. +Such statements often contain words such as "anticipates," "believes," "estimates," "expects," "forecasts," "intends," "is likely," "plans," "predicts," "projects," "should," "will," variations of +such words, and similar expressions. Forward-looking statements, by their nature, address matters that are, to varying degrees, uncertain. Uncertainties that could cause the Company's performance to +differ materially from what is expressed in forward-looking statements include, but are not limited to, the following: +• changes in general economic conditions, employment rates, business conditions, interest rates, tax policies and other factors affecting +consumer spending in the markets and regions in which the Company's products are sold; +• the inability for any reason to effectively compete in global footwear, apparel and consumer-direct markets; +• the inability to maintain positive brand images and anticipate, understand and respond to changing footwear and apparel trends and consumer +preferences; +• the inability to effectively manage inventory levels; +• increases or changes in duties, tariffs, quotas or applicable assessments in countries of import and export; +• foreign currency exchange rate fluctuations; +• currency restrictions; +• capacity constraints, production disruptions, quality issues, price increases or other risks associated with foreign sourcing; +• the recent coronavirus outbreak and potential effects, including those relating to potential store closures, order cancellations, ability to +ship products, and general economic downturn; +• the cost and availability of raw materials, inventories, services and labor for contract manufacturers; +• labor disruptions, including as a result of the recent coronavirus outbreak; +• changes in relationships with, including the loss of, significant wholesale customers; +• risks related to the significant investment in, and performance of, the Company's consumer-direct operations; +• risks related to expansion into new markets and complementary product categories as well as consumer-direct operations; +• the impact of seasonality and unpredictable weather conditions; +• changes in general economic conditions and/or the credit markets on the Company's distributors, suppliers and retailers, including as a result +of the recent coronavirus outbreak; +• increases in the Company's effective tax rates; +• failure of licensees or distributors to meet planned annual sales goals or to make timely payments to the Company; +• the risks of doing business in developing countries and politically or economically volatile areas; +2020 +PROXY +STATEMENT +A-2 +Table of Contents +APPENDIX A +• the ability to secure and protect owned intellectual property or use licensed intellectual property; +• the impact of regulation, regulatory and legal proceedings and legal compliance risks, including compliance with federal, state and local laws +and regulations relating to the protection of the environment, environmental remediation and other related costs, litigation or other legal proceedings relating to the protection of the environment or +environmental effects on human health and settlements or other dispositions of such litigation or other legal proceedings; +• risks of breach of the Company's databases or other systems, or those of its vendors, which contain certain personal information, payment card +data or proprietary information, due to cyberattack or other causes; +• problems affecting the Company's distribution system, including service interruptions at shipping and receiving ports; +• strategic actions, including new initiatives and ventures, acquisitions and dispositions, and the Company's success in integrating acquired +businesses, and implementing new initiatives and ventures; +• the risk of impairment to goodwill and other intangibles; +• the success of the Company's restructuring and realignment initiatives undertaken from time to time; and +• changes in future pension funding requirements and pension expenses. +These +or other uncertainties could cause a material difference between an actual outcome and a forward-looking statement. The uncertainties included here are not exhaustive and are described in more +detail in Part I, Item 1A: "Risk Factors" of the Company's Annual Report on Form 10-K. Given these risks and uncertainties, investors should not place undue reliance on +forward-looking statements as a prediction of actual results. The Company does not undertake an obligation to update, amend or clarify forward-looking statements, whether as a result of new +information, future events or otherwise. +NON-GAAP RECONCILIATION TABLES +The +following tables contain information regarding the non-GAAP adjustments used by the Company in the presentation of its financial results: +2019 FULL-YEAR RECONCILIATION TABLES +RECONCILIATION OF REPORTED REVENUE +TO ADJUSTED REVENUE ON A CONSTANT CURRENCY BASIS* +(Unaudited) +(In millions) +GAAP Basis 2019 +Foreign +Exchange +Impact +Constant +Currency Basis +2019 +GAAP Basis +2018 +Constant Currency +Growth +(Decline) +Reported Growth +(Decline) +REVENUE +Wolverine Michigan Group +$ +1,299.7 +$ +11.3 +$ +1,311.0 +$ +1,272.2 +3.0 +% +2.2 +% +Wolverine Boston Group +910.9 +5.2 +916.1 +895.5 +2.3 +1.7 +Other +63.1 +0.2 +63.3 +71.5 +(11.5 +) +(11.7 +) +Total +$ +2,273.7 +$ +16.7 +$ +2,290.4 +$ +2,239.2 +2.3 +% +1.5 +% +2020 +PROXY +STATEMENT +A-3 +Table of Contents +APPENDIX A +RECONCILIATION OF REPORTED DILUTED EPS +TO ADJUSTED DILUTED EPS* +(Unaudited) +GAAP Basis +Adjustments (1) +As Adjusted +EPS — Fiscal 2019 +$ +1.44 +$ +0.81 +$ +2.25 +EPS — Fiscal 2018 +$ +2.05 +$ +0.12 +$ +2.17 +(1) 2019 adjustments reflect environmental and other related costs net of a settlement, business development +costs and reorganization costs. Fiscal 2018 adjustments include the impact of environmental and related costs, pension settlement costs and a foreign currency remeasurement gain +recorded in the second quarter. +To +supplement the consolidated condensed financial statements presented in accordance with Generally Accepted Accounting Principles ("GAAP"), the Company describes what certain financial measures +would have been if environmental and other related costs and environmental cost recoveries, business development related costs, reorganization costs, the impact of tax reform updates and a foreign +currency remeasurement gain that is not expected to reoccur were excluded. The Company believes these non-GAAP measures provide useful information to both management and investors to increase +comparability to the prior period by adjusting for certain items that may not be indicative of core operating measures and to better identify trends in our business. The adjusted financial results are +used by management to, and allow investors to, evaluate the operating performance of the Company on a comparable basis. +The +constant currency presentation, which is a non-GAAP measure, excludes the impact of fluctuations in foreign currency exchange rates. The Company believes providing constant currency information +provides valuable supplemental information regarding results of operations, consistent with how the Company evaluates performance. The Company calculates constant currency by converting the +current-period local currency financial results using the prior period exchange rates and comparing these adjusted amounts to our current period reported results. +Management +does not, nor should investors, consider such non-GAAP financial measures in isolation from, or as a substitution for, financial information prepared in accordance with GAAP. A +reconciliation of all non-GAAP measures included in this Proxy Statement, to the most directly comparable GAAP measures are found in the financial tables above. +2020 +PROXY +STATEMENT +A-4 +VOTE BY INTERNET - www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. WOLVERINE WORLD WIDE, INC. 9341 COURTLAND DRIVE, N.E. ROCKFORD, MI 49351 ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: D07042-Z76873 KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. WOLVERINE WORLD WIDE, INC. The Board of Directors recommend a vote FOR all the nominees listed and FOR Proposals 2 and 3. For Against Abstain 1. Election of Directors: ! ! ! ! ! ! ! ! ! ! ! ! 1a. William K. Gerber 1b. Blake W. Krueger 1c. Nicholas T. Long 1d. Michael A. Volkema For Against Abstain ! ! ! ! ! ! 2. An advisory resolution approving compensation for the Company's named executive officers. 3. Proposal to ratify the appointment of Ernst & Young LLP as the Company's independent registered public accounting firm for fiscal year 2020. ! For address changes and/or comments, please check this box and write them on the back where indicated. IMPORTANT - Please sign exactly as your name(s) appear(s) on this Proxy. When signing on behalf of a corporation, partnership, estate or trust, indicate title or capacity of person signing. If shares are held jointly, each holder must sign. Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date +WOLVERINE WORLD WIDE, INC. 9341 Courtland Drive, N.E. Rockford, Michigan 49351 Wolverine World Wide, Inc. will be holding its Annual Meeting of Shareholders on April 30, 2020, at its offices located at 9341 Courtland Drive, N.E. Rockford, MI 49351. The enclosed Notice of 2020 Annual Meeting of Shareholders provides information regarding the matters that are expected to be voted on at the meeting. Your vote is important to us. Even if you plan to attend the meeting, please read the enclosed materials and vote through the internet, by telephone or by mailing the Proxy Card below. Wolverine is actively monitoring the public health and travel concerns relating to the coronavirus (COVID-19) and the protocols that federal, state, and local governments may impose. In the event it is not possible or advisable to hold the Annual Meeting in person, Wolverine will announce alternative arrangements for the meeting, which may include a change in venue or holding the meeting solely by means of remote communication (i.e., a virtual meeting). Please monitor Wolverine’s website where Annual Meeting materials are posted (www.wolverineworldwide.com/2020annualmeeting) for updated information. If you plan to attend the meeting, please check the website regularly prior to the meeting date. As always, Wolverine encourages you to vote these shares before the Annual Meeting. Telephone and Internet Voting On the reverse side of this card are instructions on how to vote through the internet or by telephone. Please consider voting through one of these methods. Your vote is recorded as if you mailed in your Proxy Card. Thank you in advance for your participation in our 2020 Annual Meeting. Wolverine World Wide, Inc. Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice and Proxy Statement, Annual Report and Form 10-K are available at www.proxyvote.com. IF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. D07043-Z76873 WOLVERINE WORLD WIDE, INC. Annual Meeting of Shareholders April 30, 2020 10:00 AM This proxy is solicited by the Board of Directors The undersigned shareholder hereby appoints Blake W. Krueger and Kyle L. Hanson, and each of them, each with full power of substitution, as proxies to represent the undersigned shareholder and to vote all shares of Common Stock of Wolverine World Wide, Inc. that the shareholder would be entitled to vote on all matters that properly come before the Annual Meeting of Shareholders to be held at the Company's offices located at 9341 Courtland Drive, N.E. Rockford, MI 49351, on Thursday, April 30, 2020, at 10:00 a.m. Eastern Daylight Time, and any adjournment of that meeting. If this Proxy is properly executed, the shares represented by this Proxy will be voted as specified. If this Proxy is properly executed but no specification is made, the shares represented by this Proxy will be voted for the election of all nominees named on this Proxy as directors and for approval of Proposals 2 and 3. The shares represented by this Proxy will be voted in the discretion of the proxies on any other matters that may properly come before the meeting. PLEASE DO NOT VOTE BY MORE THAN ONE METHOD. THE LAST VOTE RECEIVED WILL BE THE OFFICIAL VOTE. DO NOT RETURN THIS PROXY IF YOU ARE VOTING BY THE INTERNET OR BY TELEPHONE. (If you noted any Address Changes/Comments above, please mark corresponding box on the reverse side.) (CONTINUED AND TO BE SIGNED ON REVERSE SIDE.) Address Changes/Comments: \ No newline at end of file diff --git a/raw/proxies/0000110471/0001047469-20-001803/proxy_rpt.txt b/raw/proxies/0000110471/0001047469-20-001803/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..4093da2064a6be98495f5669f8227459ff4e03a6 --- /dev/null +++ b/raw/proxies/0000110471/0001047469-20-001803/proxy_rpt.txt @@ -0,0 +1,49 @@ +CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS +Since December 30, 2018, the Company has not engaged in any "related person" transactions with its directors, executive officers or +holders of 5% or more of Company voting securities, affiliates or any member of the immediate family of the foregoing persons. +RELATED PERSON TRANSACTIONS POLICY +Wolverine Worldwide's Board adopted written policies and procedures regarding related person transactions. They require the Governance +Committee to review and either approve or disapprove the Company entering into any Interested Transactions (defined below). If advance approval is not feasible, then the Governance Committee must +review and ratify the Interested Transaction at its next meeting. +Interested Transaction +Any transaction, arrangement or relationship or series of similar transactions, arrangements or relationships (including any indebtedness or guarantee of indebtedness) in which: +(1) +the aggregate amount involved is or is expected to exceed $120,000 since the beginning of Wolverine Worldwide's last completed fiscal year; +(2) +Wolverine Worldwide is a participant; and +(3) +any Related Person (defined below) has or will have a direct or indirect interest. +An Interested Transaction does not include: +(1) +any employment compensation paid to an executive officer of the Company if the Compensation Committee approved or recommended to the Board of Directors for approval of such compensation; +(2) +any compensation paid to a director for service as a director of the Company; +(3) +any transaction in which a Related Person has an indirect interest solely as a result of being (i) a director or, together with all other Related Persons, as defined below, a less than 10% beneficial owner of an equity interest in another entity, or +both, or (ii) a limited partner in a partnership in which the Related Person, together with all other Related Persons, has an interest of less than 10%; +(4) +any transaction in which the Related Person's interest arises solely from the ownership of the Company's common stock and all holders of the Company's common stock received the same benefit on a pro rata basis (e.g., a dividend); or +(5) +any transaction with another publicly traded company where the Related Person's interest arises solely from the ownership of more than 5% of the Company's common stock and the ownership of a non-controlling interest in the other publicly traded +company. +Related Person +Any: +(a) +person who is or was at any point during the last fiscal year for which Wolverine Worldwide filed an Annual Report on Form 10-K and Proxy Statement, an executive officer, director or, to the extent information regarding such nominee is being +presented in a proxy or information statement relating to the election of that nominee as a director, nominee for election as a director; +(b) +beneficial owner of greater than five percent of Wolverine Worldwide's common stock; or +(c) +immediate family member* of any of the foregoing. +* Immediate family member is defined as a person's spouse, parents, stepparents, children, stepchildren, siblings, mothers and +fathers-in-law, sons-and daughters-in-law, and brothers- and sisters-in-law, and anyone residing in such person's home (other than a tenant or employee). +The +Governance Committee considers whether the Interested Transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar +circumstances, the extent of the Related Person's interest in the transaction, and other factors that it deems relevant. No director participates in any discussion or approval of an Interested +Transaction for which he or she is a Related Person, except to provide information to the Governance Committee. +2020 +PROXY +STATEMENT +72 +Table of Contents +Additional Information \ No newline at end of file diff --git a/raw/proxies/0000110471/0001140361-21-010151/proxy.txt b/raw/proxies/0000110471/0001140361-21-010151/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..cc059ae879d7fd75ef0fbff9d2e9d2bee9a8bd9c --- /dev/null +++ b/raw/proxies/0000110471/0001140361-21-010151/proxy.txt @@ -0,0 +1,5585 @@ +DEF 14A +1 +nc10019335x1_def14a.htm +DEF 14A +TABLE OF CONTENTS +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +Washington, D.C. 20549 +SCHEDULE 14A INFORMATION +Proxy Statement Pursuant to Section 14(a) of +the Securities Exchange Act of 1934 (Amendment No.     ) +Filed by the Registrant ☒ +Filed by a party other than the Registrant   ☐ +Check the appropriate box: +☐ +Preliminary Proxy Statement +☐ +Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +☒ +Definitive Proxy Statement +☐ +Definitive Additional Materials +☐ +Soliciting Material under § 240.14a-12 +Wolverine World Wide, Inc. +(Name of Registrant as Specified In Its Charter) +(Name of Person(s) Filing Proxy Statement, if other than the Registrant) +Payment of Filing Fee (Check the appropriate box): +☒ +No fee required. +☐ +Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. +(1) +Title of each class of securities to which transaction applies: +(2) +Aggregate number of securities to which transaction applies: +(3) +Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule +0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): +(4) +Proposed maximum aggregate value of transaction: +(5) +Total fee paid: +☐ +Fee paid previously with preliminary materials. +☐ +Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and +identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. +(1) +Amount Previously Paid: +(2) +Form, Schedule or Registration Statement No.: +(3) +Filing Party: +(4) +Date Filed: +TABLE OF CONTENTS +TABLE OF CONTENTS +LETTER TO SHAREHOLDERS +Wolverine World Wide, Inc. +9341 Courtland Drive, NE +Rockford, Michigan 49351 +March 26, 2021 +Dear Fellow Shareholders, +Thank you for your investment in Wolverine Worldwide. We made significant progress in +2020 on our strategic and financial objectives. Some highlights are listed below. +• +We implemented health and safety best practices but were able to remain operational and “open for business” +• +We focused our strategies and investments on product innovation, direct-to-consumer (DTC) growth and digital capabilities, with a +priority on digital marketing; we grew our owned eCommerce business revenue 50% in 2020 and set a path for growth in 2021 +• +Overall revenue of $1.79 billion reflected better-than-expected results in the face of the substantial headwinds introduced by +the global COVID-19 pandemic, including widespread retail store closures and elevated consumer unemployment +• +Operating cash flow, one of the key priorities for the year that we identified at the onset of the COVID-19 pandemic, +significantly exceeded even our most bullish expectations and totaled $309 million, near all-time record Company performance +In addition to overseeing the Company's execution of key initiatives during 2020, we +focused on other matters critical to the Company's long-term success. These included Board and management succession planning, cybersecurity protection, and brand development, which we describe in greater detail in this Proxy Statement. +During 2021, our team remains focused on global growth opportunities for our portfolio +of leading performance and lifestyle brands, especially in direct-to-consumer, digital and key international channels. We plan to further invest in a variety of initiatives to drive revenue growth and earnings leverage. We hope to receive your +support at this year's annual meeting on May 6, 2021, and encourage you to vote either online, by phone or by mail. +Sincerely, +Blake W. Krueger +Chairman and Chief Executive Officer +2021 PROXY STATEMENT +1 +TABLE OF CONTENTS +NOTICE OF 2021 ANNUAL MEETING OF SHAREHOLDERS +10:00 a.m. EDT, May 6, 2021 +Wolverine World Wide, Inc. +9341 Courtland Drive, NE +Rockford, MI 49351 +March 26, 2021 +To Our Shareholders: +We invite you to attend the 2021 Annual Meeting of Shareholders (the “Annual Meeting”) +of Wolverine World Wide, Inc. (the “Company,” “Wolverine Worldwide” or “Wolverine”). The meeting will be held on May 6, 2021, at 10:00 a.m. EDT in a virtual format designed to provide shareholders the same rights and opportunities to participate +that they would have at an in-person meeting. At the Annual Meeting, shareholders will vote on the following items: +(1) +Election of the three director nominees named in the Proxy Statement for three-year terms expiring in 2024 +(2) +Advisory resolution approving compensation for the Company's named executive officers (“NEOs,” and each an “NEO”) +(3) +Ratification of the Audit Committee's appointment of Ernst & Young LLP as the Company's independent registered public +accounting firm for fiscal year 2021 +(4) +Approval of the Stock Incentive Plan of 2016 (as amended and restated) (the “Plan”) +Shareholders of record as of the close of business on March 8, 2021, the record date, +are entitled to participate in and vote at the Annual Meeting. To participate in the Annual Meeting, including to vote, ask questions, and view the list of registered shareholders as of the record date during the meeting, shareholders of record +should go to the meeting website at www.virtualshareholdermeeting.com/WWW2021, enter the 16-digit control number found on your proxy card or Notice of Internet Availability of Proxy Materials (“Notice of Internet Availability”), and follow the +instructions on the website. If your shares are held in street name and your voting instruction form or Notice of Internet Availability indicates that you may vote those shares through the http://www.proxyvote.com website, then you may access, +participate in, and vote at the annual meeting with the 16-digit access code indicated on that voting instruction form or Notice of Internet Availability. Otherwise, shareholders who hold their shares in street name should contact their bank, +broker or other nominee (preferably at least 5 days before the annual meeting) and obtain a “legal proxy” in order to be able to attend, participate in or vote at the annual meeting. +Whether or not you plan to attend the Annual Meeting, you can ensure that your shares +are represented at the meeting by promptly voting and submitting your proxy by telephone or through the internet, or by completing, signing, dating and returning your proxy card in the enclosed envelope. +Rules for the conduct of the Annual Meeting will be available on the meeting website. +For information about how to view the rules and the list of shareholders entitled to vote at the Annual Meeting during the ten days preceding the Annual Meeting, please visit our 2021 Annual Meeting website at +www.wolverineworldwide.com/2021annualmeeting. If you encounter any difficulties accessing the virtual meeting during check-in or during the meeting, please call the technical support number that will be posted on the virtual shareholder meeting +login page. +2021 PROXY STATEMENT +2 +TABLE OF CONTENTS +This Notice of 2021 Annual Meeting of Shareholders, Proxy Statement, proxy or voting +instruction card and Annual Report for our fiscal year ended January 2, 2021 are being mailed or made available to shareholders starting on or about March 26, 2021. +By Order of the Board of Directors, +Kyle L. Hanson +Secretary +Important Notice Regarding the Availability of Proxy +Materials for the Annual Meeting of Shareholders to be held on May 6, 2021. +Wolverine's Proxy Statement for the 2021 Annual Meeting of +Shareholders and the Annual Report to Shareholders for the fiscal year ended January 2, 2021, are available at: www.wolverineworldwide.com/2021annualmeeting. +2021 PROXY STATEMENT +3 +TABLE OF CONTENTS +Table of Contents +Letter to Shareholders +1 +Notice of 2021 Annual Meeting of Shareholders +2 +Proxy Statement Summary +6 +Our Brand Portfolio +6 +Strategic Focus +6 +Matters to be Voted Upon +6 +Election of Directors for Terms Expiring in 2024 +7 +Board Highlights +7 +Board is Composed of Directors with the Right Mix of Skills +and Experiences +8 +Shareholder Engagement +8 +Corporate Governance Highlights +8 +Corporate Governance +9 +Board of Directors +9 +Board Composition +9 +Board Highlights +9 +Director Nominations +10 +Board Self-Assessment +10 +Risk Oversight +11 +Environmental and Social Highlights +12 +Environmental, Sustainability, and Responsible Sourcing +12 +Diversity, Equity & Inclusion +13 +Community Impact +14 +Code of Business Conduct and Accounting and Finance Code of +Ethics +15 +Shareholder Communications Policy +16 +Proposal 1 – Election of Directors for Terms Expiring in 2024 +17 +Director Nominees with Proposed Terms Expiring in 2024 +18 +Directors with Terms Expiring in 2022 +21 +Directors with Terms Expiring in 2023 +25 +Board Leadership +29 +Director Independence +29 +Board Committees, Meetings and Meeting Attendance +30 +Non-Employee Director Compensation in Fiscal Year 2020 +32 +Non-Employee Director Stock Ownership Guidelines +34 +Securities Ownership of Officers and Directors and Certain +Beneficial Owners +35 +Five Percent Shareholders +35 +Stock Ownership by Management and Others +36 +Compensation Discussion and Analysis +38 +Summary +38 +Compensation Philosophy and Objectives +38 +Compensation Decisions in Context: The Company's Response to +Unprecedented Challenges +38 +2020 Compensation Program Overview +40 +Pay at Risk +40 +Long-Term Incentive Program Mix +41 +Compensation Best Practices +41 +Compensation Discussion and Analysis +42 +2020 Compensation Program Overview +42 +Setting Targets +42 +Base Salary +42 +Annual Bonus +43 +Performance Bonus +43 +Individual Performance Bonus +45 +Backlog Modifier +46 +Long-Term Incentive Compensation +48 +2018-2020 Performance Shares +49 +2020 Performance Share Awards +49 +COVID-19 Impact on 2019-2021 and 2020-2022 Performance +Stock Unit Grants +50 +Restricted Stock and Stock and Stock Unit Awards +51 +Benefits +52 +Retirement, Deferred Compensation and Welfare Plans +52 +Perquisites +52 +Post-Employment Compensation +52 +Say on Pay Advisory Vote +53 +Compensation Setting Process +54 +Setting Targets +54 +Competitive Philosophy and Competitive Market Data +54 +Peer Group +54 +CEO Role +54 +Compensation Consultant Role +54 +Other Compensation Policies and Practices +55 +NEO Stock Ownership Guidelines +55 +Stock Hedging and Pledging Policies +55 +Clawback Policy +55 +Impact of Accounting and Tax Treatments on Compensation +55 +Compensation Committee Report +56 +Summary Compensation Table +57 +Grants of Plan-Based Awards in Fiscal Year 2020 +59 +Outstanding Equity Awards at 2020 Fiscal Year-End +61 +Option Exercises and Stock Vested in Fiscal Year 2020 +65 +Pension Plans and 2020 Pension Benefits +66 +Qualified Pension Plans +66 +Supplemental Executive Retirement Plan +66 +Pension Benefits in Fiscal Year 2020 +67 +Non-Qualified Deferred Compensation +68 +Potential Payments Upon Termination or Change in Control +69 +Benefits Triggered by Termination for Cause or Voluntary +Termination +69 +Benefits Triggered by Termination Other than for Cause or +for Good Reason not in Connection with a Change in Control +69 +Benefits Triggered Upon a Change in Control +70 +Benefits Triggered by Retirement, Death or Permanent +Disability +71 +Description of Restrictive Covenants that Apply During and +After Termination of Employment +72 +Estimated Payments on Termination or Change in Control +72 +CEO Pay Ratio +74 +Proposal 2 – Advisory Resolution to Approve Executive +Compensation +75 +Proposal 3 – Ratification of Appointment of Independent +Registered Public Accounting Firm +76 +Audit Committee Report +77 +Independent Registered Public Accounting Firm +78 +Proposal 4 – Approval of Amended and Restated Stock +Incentive Plan of 2016 +79 +Overview +79 +Key Changes in the Plan +79 +Why You Should Vote for the Plan +79 +Promotion of Good Corporate Governance Practices +80 +Key Data +80 +Section 162(m) of the Code +81 +Plan Summary +81 +Administration +81 +Eligibility +81 +Shares Subject to the Plan and to Awards +81 +Stock Options +82 +Stock Appreciation Rights +82 +Restricted Stock and Restricted Stock Units +82 +Stock Awards +83 +Incentive Bonuses +83 +Deferral of Gains +83 +Qualifying Performance Criteria +83 +2021 PROXY STATEMENT +4 +TABLE OF CONTENTS +Suspension or Termination of Awards +84 +Settlement of Awards +84 +No Repricing Without Shareholder Approval +84 +Amendment and Termination +84 +Change in Control +85 +Adjustments +85 +Transferability +86 +No Right to Company Employment +86 +Effective Date and Termination of the Plan +86 +Federal Income Tax Treatment +86 +Stock Options +86 +Stock Appreciation Rights +87 +Restricted Stock and Restricted Stock Units +87 +Stock Awards +87 +Incentive Bonus +87 +Certain Change in Control Payments +88 +Plan Benefits +88 +Equity Compensation Plan Information +89 +Vote Required and Board Recommendation +90 +Related Party Matters +91 +Certain Relationships and Related Transactions +91 +Related Person Transactions Policy +91 +Additional Information +92 +Shareholders List +92 +Director and Officer Indemnification +92 +Delinquent Section 16(a) Reports +92 +Shareholder Proposals for Inclusion in Next Year's Proxy +Statement +92 +Other Shareholder Proposals for Presentation at Next Year's +Annual Meeting +92 +Voting Securities +92 +Conduct of Business +93 +Vote Required for Election and Approval +93 +Voting Results of the Annual Meeting +93 +Attending the Annual Meeting +93 +Manner for Voting Proxies +94 +Revocation of Proxies +94 +Solicitation of Proxies +94 +Delivery of Documents to Shareholders Sharing an Address +94 +Access to Proxy Statement and Annual Report +94 +Appendix A - Forward-Looking Statements +A-1 +Appendix B - Stock Incentive Plan of 2016, as amended and +restated +B- 1 +2021 PROXY STATEMENT +5 +TABLE OF CONTENTS +Proxy Statement Summary +This summary highlights key information that can be found in greater detail elsewhere in +this Proxy Statement. This summary does not contain all of the information that shareholders should consider, and shareholders should read the entire Proxy Statement before voting. +Our Brand Portfolio +Wolverine Worldwide organized its portfolio of brands into two key operating groups for fiscal 2020 as +illustrated below: +Strategic Focus – Global Growth Agenda +In today’s marketplace, consumers are demanding fresh and innovative product with real +performance and comfort elements, and they are increasingly engaging directly with brands digitally to explore and shop – amplifying the importance of our Global Growth Agenda, which includes: +1. +DTC Focus, Digital Priority – An intense focus on DTC, particularly +digital, while creating pinnacle brand experiences, engaging consumers, and driving meaningful growth +2. +Powerful, Innovative Product Marketing Stories – A continuous flow of +powerful product marketing stories delivering innovative, trend-right product and compelling storytelling +3. +Accelerated International Growth – Strategic investment in key markets to +maximize the global growth opportunity for our brands +Looking ahead, we remain committed to investing behind these three key pillars to build +on the progress made in 2020 and on our momentum. +MATTERS TO BE VOTED UPON +Shareholders are being asked to vote on the following matters at the 2021 Annual Meeting of Shareholders: +PROPOSAL +BOARD VOTE +RECOMMENDATION +PAGE +REFERENCE +1. +Election of Directors for Terms Expiring in 2024 +FOR each Nominee +17 +2. +Advisory Resolution Approving NEO Compensation +FOR +75 +3. +Ratification of Ernst & Young LLP as Auditor for Fiscal Year 2021 +FOR +76 +4. +Approval of the Stock Incentive Plan of 2016 (as amended and restated) +FOR +79 +2021 PROXY STATEMENT +6 +TABLE OF CONTENTS +ELECTION OF DIRECTORS FOR TERMS EXPIRING IN 2024 +The Company's Board consists of 11 directors. The Company's By-Laws establish three +classes of directors with each class being as nearly equal in number as possible and serving three-year terms. +The Board has nominated three directors for election at the Annual Meeting, as outlined +in the table below. Each director nominee has been nominated to serve for a three-year term expiring at the annual meeting of shareholders to be held in 2024. The Board recommends that shareholders vote “FOR” each of the nominees named below. +Age +Director Since +Independent +Other Public Directorships +Committees +Proposed Term +Expiration +Roxane Divol Former +Group Chief Operating Officer of Webhelp, Inc. +48 +2014 +✔ +None +Audit +Governance +2024 +Brenda J. Lauderback +Chair of Denny's Corporation; Retired President of the Wholesale and Retail Group of Nine West Group, Inc. +70 +2003 +✔ +Denny's +Corporation +(Board Chair) +Sleep Number +Corporation +Audit +Governance (Chair) +2024 +David W. McCreight +Retired President of URBN and Retired CEO of Anthropologie Group +58 +2019 +✔ +CarMax, Inc. +Compensation +Governance +2024 +Board Highlights +The following charts illustrate key characteristics of the Company's Board: +2021 PROXY STATEMENT +7 +TABLE OF CONTENTS +Board is Composed of Directors with the Right Mix of Skills +and Experiences +The following chart lists the important experiences and attributes that the Company's Directors possess: +Shareholder Engagement +As part of its ongoing shareholder engagement efforts, the Company reached out in early +2021 to shareholders representing approximately 63% of its outstanding shares and has held or expects to hold telephonic meetings with all shareholders who accepted the Company's invitation (representing close to 10% of outstanding shares). +Discussions to date focused on Company strategy, financial performance, governance and compensation programs. +Corporate Governance Highlights +Wolverine Worldwide is committed to a governance structure that provides strong shareholder rights and +meaningful accountability. +✔  Highly independent Board and Committees +✔  Lead Independent Director with clearly +defined role +✔  Majority voting with director resignation +policy +✔  No supermajority vote requirements +✔  Shareholder right to act by written consent +✔  Annual Board and Committee +self-evaluations +✔  Robust Board and executive succession +planning, including annual written director nominee evaluations +✔  Long-standing commitment to diversity +✔  Director onboarding orientation program +✔  Active shareholder engagement practices +Meeting Information +The Company's Annual Meeting is scheduled to take place virtually, as set forth in the +notice, on May 6, 2021, at 10:00 a.m. EDT. As always, the Company encourages you to vote your shares before the Annual Meeting. +2021 PROXY STATEMENT +8 +TABLE OF CONTENTS +Corporate Governance +Wolverine Worldwide is committed to the highest level of corporate governance, and the +Board has adopted Corporate Governance Guidelines to strengthen management accountability and promote long-term shareholder interests. +BOARD OF DIRECTORS +The shareholders elect directors to serve on the Company's Board of Directors (the +“Board of Directors” or “Board”). The Board oversees the management of the business by the Chief Executive Officer (“CEO”) and senior management. In addition to its general oversight function, the Board's additional responsibilities include, but +are not limited to, the following: +• +Reviewing and approving the Company's key objectives and strategic business plans, and monitoring implementation of those plans +and the Company's success in meeting identified objectives +• +Selecting, evaluating and approving the compensation of the CEO and overseeing CEO succession planning +• +Providing advice and oversight regarding the selection, evaluation, development and compensation of management +• +Overseeing the Company's risk management and mitigation activities +• +Reviewing and monitoring administration of policies and procedures to safeguard the integrity of the Company's business +operations and financial reporting and to promote compliance with applicable laws and regulations +Board Composition +Board Highlights +The Board prides itself on its ability to recruit and retain directors who have high +personal and professional integrity and have demonstrated exceptional ability and judgment to effectively serve shareholders' long-term interests. These skills and attributes will help the Company accomplish its most important strategic +objectives, such as eCommerce and digital growth, brand building, operational excellence and supply chain management, and international growth. The Board also values diversity and considers this an important factor in determining nominees for +appointment and election, as evidenced by the current makeup of the Board. The Board believes that its directors, including the nominees for election as directors at the Annual Meeting, have these characteristics and valuable skills that provide +the Company with the variety and depth of knowledge, judgment and strategic vision necessary to provide effective oversight of the Company. +To help achieve the right mix of experience and expertise, and to assist in succession +planning, the Board, at the recommendation of the Governance Committee, has identified specified skills and attributes it desires its members to possess. The below graphic lists these skills and attributes and indicates which of the directors +possess each. As shown, these skills and attributes are well represented within the Board. +2021 PROXY STATEMENT +9 +TABLE OF CONTENTS +SKILLS & ATTRIBUTES +Totals +Krueger +Kollat +Boromisa +Boswell +Divol +Gerber +Hoffman +Lauderback   +Long +McCreight +Volkema +Active Executive +2 +✔ +✔ +Brand Building +9 +✔ +✔ +✔ +✔ +✔ +✔ +✔ +✔ +✔ +Current or Former CEO +5 +✔ +✔ +✔ +✔ +✔ +Digital/eCommerce/IT +6 +✔ +✔ +✔ +✔ +✔ +✔ +Diversity +3 +✔ +✔ +✔ +Finance +9 +✔ +✔ +✔ +✔ +✔ +✔ +✔ +✔ +✔ +Footwear/Apparel +6 +✔ +✔ +✔ +✔ +✔ +✔ +Global Supply Chain +4 +✔ +✔ +✔ +✔ +International Business +11 +✔ +✔ +✔ +✔ +✔ +✔ +✔ +✔ +✔ +✔ +✔ +Marketing +10 +✔ +✔ +✔ +✔ +✔ +✔ +✔ +✔ +✔ +✔ +Public Company Governance +11 +✔ +✔ +✔ +✔ +✔ +✔ +✔ +✔ +✔ +✔ +✔ +Retail +8 +✔ +✔ +✔ +✔ +✔ +✔ +✔ +✔ +The Governance Committee reviews with the Board on an annual basis the skills and +characteristics desired of Board members in the context of the current makeup of the Board. The Board, with the assistance of the Governance Committee, annually assesses the current composition of the Board across many dimensions. As set forth in +the Company's Corporate Governance Guidelines, which are posted on its website, this assessment addresses the skills and attributes set forth in the table above and the individual performance, experience, age and skills of each director. +Director Nominations +The Board's Governance Committee serves as its nominating committee. The Governance +Committee, in anticipation of upcoming director elections and other potential or expected Board vacancies, evaluates qualified individuals and recommends candidates to the Board. The Governance Committee may retain a search firm or other external +parties to assist it in identifying candidates, and the Governance Committee has the sole authority to select such a firm, approve the search firm's fees and retention terms, and to terminate the firm if necessary. +The Governance Committee considers candidates suggested by directors, senior management +or shareholders. Shareholders may recommend individuals as potential director candidates by communicating with the Governance Committee through one of the Board communication mechanisms described under the heading “ Shareholder Communications Policy .” Shareholders that wish to nominate a director candidate must comply with the procedures set forth in the Company's By-Laws, which are posted on its website. Ultimately, upon the recommendation +of the Governance Committee, the Board selects the director nominees for election at each annual meeting. In selecting director nominees, the Board considers each candidate's performance as a director (which is assessed through an anonymous +written peer evaluation); personal and professional integrity; ability and judgment; and likelihood to be effective, working with the other nominees and directors, in serving the long-term interests of the shareholders. The Governance Committee +also considers candidates' relative skills, attributes, background and characteristics as well as independence under applicable New York Stock Exchange (“NYSE”) listing standards and the Company's Director Independence Standards, potential to +contribute to the composition and culture of the Board, and ability and willingness to actively participate in the Board and committee meetings and to otherwise devote sufficient time to Board duties. +BOARD SELF-ASSESSMENT +As part of an annual self-assessment, each director evaluates the performance of the +Board and any committee on which he or she serves across a number of dimensions. Dr. Kollat, the Lead Independent Director, works with the Governance Committee to review the Board self-assessment with directors following the end of each fiscal +year and to conduct individual director interviews at the end of each year. Committee Chairpersons review the committee self-assessments with their respective committee members and discuss them with the Board. +2021 PROXY STATEMENT +10 +TABLE OF CONTENTS +In addition, the Governance Committee, working with the Lead Independent Director, +develops and implements guidelines for evaluating all directors standing for nomination and election and oversees the evaluation of such nominees. +The Corporate Governance Guidelines (including the Director Independence +Standards), the Charter for each Board standing committee (Audit, Compensation and Governance), the Company's Certificate of Incorporation, By-Laws, Code of Business Conduct, and its Accounting and Finance Code of Ethics all are available +on the Wolverine Worldwide website at: +www.wolverineworldwide.com/investor-relations/corporate-governance/ +The Board and applicable committees annually review these and other key governance +documents. +RISK OVERSIGHT +The Board oversees the Company's risk management and mitigation activities with a focus +on the most significant risks facing the Company, including strategic, operational, financial, environmental, cybersecurity and legal compliance risks. This oversight is conducted through presentations by and discussions with the CEO, President, +Chief Financial Officer (“CFO”), Director of Internal Audit, General Counsel or Associate General Counsel, Chief Information Officer, brand and department leaders and other members of management. The Associate General Counsel and Director of +Internal Audit coordinate management's day-to-day risk management and mitigation efforts, and the Director of Internal Audit reports directly to the Audit Committee. +The Associate General Counsel and Director of Internal Audit review with the Audit +Committee regularly, and with the full Board periodically, management's risk assessment and mitigation strategies. In addition to the above processes, the Board has delegated risk management and mitigation oversight responsibilities to its +standing committees, which meet regularly to review and discuss specific risk topics that align with their core responsibilities. +• The Audit Committee reviews the Company's approach +to risk management generally. The Audit Committee also oversees the Company's risk policies and processes relating to its financial statements and financial reporting processes, credit risks and liquidity risks, as well as the Company's +management of risks related to cybersecurity. The Audit Committee discusses with management and the independent auditors significant risks or exposures and the steps taken by management to address them. +• The Compensation Committee monitors the risks +associated with management resources; organization structure and succession planning, hiring, development and retention processes; and it reviews and evaluates risks associated with the Company's compensation structure and programs. +• The Governance Committee oversees risks related to +the Company's governance structure and processes and potential risks arising from related person transactions. +The Company reviewed its compensation policies and practices to assess whether they are +reasonably likely to have a material adverse effect on the Company. As part of this review, the Company compiled information about the Company's incentive plans, including reviewing the Company's compensation philosophy, evaluating key incentive +plan design features and reviewing historic payout levels and pay mix. With assistance from Company management and its independent compensation consultant, the Compensation Committee reviewed the executive compensation program, and managers from +the Company's human resources and legal departments reviewed the non-executive compensation programs. +2021 PROXY STATEMENT +11 +TABLE OF CONTENTS +ENVIRONMENTAL AND SOCIAL HIGHLIGHTS +Throughout our over 130-year history, the Company has been passionate about +living our Vision, Mission, and Values. These principles are embedded in the governance practices and Code of Business Conduct outlined above, which guide the Board and the Company’s global employees in their actions. Among these, our +core value to “Do the Right Thing – Always” forms the foundation and guiding light of the Company’s environmental, social, and governance (“ESG”) efforts. +The Company’s environmental and social initiatives focus on the environment, +sustainability and responsible sourcing; diversity, equity, and inclusion; and community impact. These initiatives are overseen by the Board because the Company’s growth depends not just on financial performance and new products, but also +on the Company’s impact on our communities, our employees and the planet. +The Board regularly reviews brand footwear collections and launches that have environmental and +social impacts. The Board is also responsible for overseeing the development and disclosure of the Company’s broader ESG initiatives. Some of these ESG initiatives are summarized below, and for more information please see the Company’s +corporate responsibility website at wolverineworldwide.com/about-us/ +responsibility/ and our most recent Global Impact Report at +wolverineworldwide.com/wp-content/uploads/2020/08/18IR.V13.Final_.pdf. 1 +Environmental, Sustainability, and Responsible +Sourcing +Wolverine Worldwide is committedto making the world a better place. Our goal is to reduce and +responsibly manage our environmental impacts, and we believe the steps we take today will reduce our footprint tomorrow. We aim to achieve this goal by actively implementing environmentally-friendly business practices, seeking out +sustainable products and components, and responsibly sourcing our products in accordance with clear and transparent standards. +Environmental +• +ReChaco Program – Chaco strives to keep sandals out of landfills by creating the most durable and repairable products possible. Since 2010, the brand has saved over 246,000 sandals from landfills through the ReChaco Program by allowing +consumers to have their sandals repaired. Every pair of sandals saved represents roughly two pounds of material saved from a landfill. +• +Reducing Waste – We have a variety of recycling programs in place at our facilities, +including paper, plastic, cardboard, batteries, electronics, glass, and other items. These initiatives have prevented hundreds of thousands of pounds of waste from ending up landfills, and have saved hundreds of thousands of gallons of +water from being used for paper production. +• +Reducing Energy Consumption – Over the past few years, we have implemented initiatives to +improve energy efficiency and increase our support of renewable energy, including, but not limited to, purchasing Renewable Energy Credits to offset the energy use at our North America facilities since 2015 and taking steps to achieve +LEED certifications for both our Boston and London campuses. +• +Reducing Water Consumption – We have implemented conservation initiatives at many of our +facilities, including installing motion sensor faucets and no-touch hand driers. +1 +The information on these websites is not, and shall not be deemed to be, a part of this proxy statement or incorporated into any +other filings we make with the SEC. +2021 PROXY STATEMENT +12 +TABLE OF CONTENTS +Sustainability +• +Product Sustainability Standards – Our Product Sustainability Standards establish clear +baseline expectations for all of our brands to promote social responsibility, environmental stewardship, and animal welfare. +• +Sustainable Apparel Coalition – Wolverine +Worldwide is a proud member of the Sustainable Apparel Coalition – the apparel, footwear, and textile industry’s leading alliance for sustainable production. The Coalition developed the Higg Index, a standardized value chain measurement +suite of tools for all industry participants. These tools measure environmental and social labor impacts across the value chain. With this data, we can address inefficiencies, improve sustainability performance, and achieve the +environmental social transparency consumers are demanding. +Responsible Sourcing +• +Production Code of Conduct – Our Production Code of Conduct clarifies the minimum +standards that factories and suppliers with whom Wolverine Worldwide conducts business are required to satisfy when conducting their operations. We routinely conduct social compliance audits through our internal teams and industry-leading +audit firms to monitor compliance with our Production Code of Conduct. +• +Supply Chain Transparency – Wolverine Worldwide is committed to long-term partnerships +rooted in trust, open communication, and a shared vision that fosters continuous improvement and compliance with our Production Code of Conduct. Wolverine Worldwide has a zero-tolerance policy for forced labor, human trafficking, and +slavery or involuntary work of any kind. The Company conducts our own verification and utilizes third-party verification for our finished goods factories to assess risks related to human trafficking, slavery, and other social compliance +metrics. We also engage independent third-party firms to audit direct supplier facilities and require that our direct suppliers, along with their contractors and subcontractors, abide by our Production Code of Conduct. Wolverine Worldwide +maintains an ethics report line for individuals to report violations of the Company’s policies, including the Production Code of Conduct, 24 hours a day from anywhere in the world. +• +Leather Working Group – Wolverine Worldwide has been a member of the Leather Working +Group (“LWG”) since 2006. LWG-certified manufacturers combined save an average of 12.1 billion liters of water and 775 megawatts of energy every year. That is the equivalent annual water usage of nearly 30,000 homes and enough yearly +electricity to light more than half a million homes. +Diversity, Equity & Inclusion +Our corporate culture welcomes people from all backgrounds who share our values of +teamwork, open communications, integrity, respect, and accountability. These are the things that bind us together, making Wolverine Worldwide a great company and a great place to grow. As an expanding global company, diversity is much more than +simply a goal — it’s a part of our DNA. For that reason, the thousands of Wolverine Worldwide employees around the world reflect a diverse range of cultures, religions, ethnicities, and nationalities, as well as varied professional and +educational backgrounds. Because we believe in cultivating a well-rounded, diverse workforce, we continuously seek out individuals who reflect and support our goal of maintaining a diverse corporation. +We aim to foster a diverse, equitable, and inclusive culture through a wide variety of +initiatives, including targeted employee resource groups. Recently, we expanded our efforts by retaining an expert consultant and forming additional groups focused on diversity that are focused on accelerating our efforts in this critical area +• +Employee Resource Groups – Employee Resource Groups at Wolverine Worldwide provide +opportunities for global team members to connect to learn from and support one another as well as help drive meaningful change throughout the Company. +○ +The Change Mob – The Change Mob is a +grassroots network of employees from around the globe, representing every function to help drive and sustain change across the C ompany. This empowered group keeps a pulse on what’s happening at the Company , +shares information with their Company networks, contributes their ideas to drive change and provides valuable feedback +to our leadership team. +○ +Women’s Resource Group – The Women's +Resource Group works to empower and inspire the women of Wolverine Worldwide to +actively engage in the community, provide mentorship opportunities and create a meaningful, professional network. +2021 PROXY STATEMENT +13 +TABLE OF CONTENTS +○ +Wolverine Young Professionals – The +Wolverine Young Professionals ( “ WYP ” ) group is dedicated to providing young professionals the opportunity to network professionally and socially with their co-workers. WYP strives to promote an environment that helps attract and retain the next +generation of business leaders . WYP committed to personal and professional development by contributing to the Company’s workplace community through social activities and volunteer opportunities. +• +Expert Guidance – We have further prioritized our commitment to diversity and inclusion +by hiring expert partner Skot Welch, Principal & Founder of Global Bridgebuilders, to help us build a framework to promote an inclusive environment today and in the future in order to make the Company an even greater place to work. +• +Focused Diversity Workgroups +○ +In 2020, the Company established a Diversity Council focused on creating a framework to accelerate the development of an inclusion, equity, and diversity -oriented culture where all team members are valued and heard . +○ +Also in 2020, the Company established a Diversity Task Force focused on elevating the voice s in our community in order to advance ethnic and racial diversity, equity, and inclusion throughout our culture, provide guidance and +counsel to leaders within the organization, and drive strategic accountability for progress toward diversity efforts. +○ +In March 2021, the Company combine d the Diversity Council and Diversity Task F orce into a +new Diversity Advisory Council , part of the Global Bridgebuilders proven framework. +This new C ouncil provide s leadership for important subcommittees within the Company, each with a specific focus: Leadership & Direction, Organization Development, Communication, External Relations, and Systems Criteria / Process Management. These groups will use employee survey results and focus group feedback to prioritize and build a framework to support a more inclusive, more diverse, and stronger organization . +• +Communication & Learning +○ +A Diversity, Equity, & Inclusion information page was established and promoted on WeConnect, our +employee connection intranet. +○ +Unconscious Bias was one of a variety of learning resources offered virtually to all employees in order to increase awareness and +educate empl o yees. +Community Impact +Wolverine Worldwide has a heritage of engaging with and serving the communities in which +we live and work, as well as our internal community at the Company. As champions for positive change, it is our responsibility to enrich our global communities by giving our time and resources to make the world a better place. +• +COVID-19 Response – At the onset and throughout the COVID-19 pandemic, our brands helped +those in need in the following ways: +○ +Chaco – The brand’s Michigan-based sandal +repair and customization factory, known as ReChaco, manufactured and donated more than 6,400 protective masks for frontline healthcare workers in Grand +Rapids, Michigan, and areas of Oregon. +○ +Hush Puppies – Our digital campaign, “We Heart Grandparents,” provided the opportunity for children and grandchildren to gift a pair of Power Walker shoes to the +grandparents or senior loved ones in their life. The brand also distributed 5,000 pairs through an eCommerce giveaway and donated 500 pairs of Power Walkers to Clark Retirement Community in Grand Rapids, Michigan. +○ +Merrell – Donated $140,000 in products to +frontline workers. +○ +Wolverine – Our “ Wolverine 4 Workers ” initiative recognized the hardworking men and women keeping the world running +during COVID-19 on social media and provided select workers with free product s . +○ +Sperry – Highlighted “Everyday Heroes” going above and beyond to give back during COVID-19 on digital channels and awarded each of them donations to their causes and a free pair of Sperry shoes. +2021 PROXY STATEMENT +14 +TABLE OF CONTENTS +○ +Two Ten Footwear Foundation - Hush Puppies, +Sperry, Keds, Bates, and HYTEST donated more than 13,000 pair s of shoes to Two Ten’s “COVID-19 Share Your Shoes +Campaign.” Donated footwear was converted into cash and distributed to footwear industry families in need. +• +Wolverine Worldwide Foundation – Rooted in our commitment to contribute positively to the +communities where our employees work and live, the Wolverine Worldwide Foundation was founded in 1959 to support our charitable initiatives. Through the Foundation, the Company is actively involved in supporting charitable organizations +with a focus on education, the environment, arts and culture, and human aid and service. +• +United Way – Every year through employee contributions, footwear and apparel sales, and +several employee-led fundraising events, Wolverine Worldwide has consistently given back to the local communities where we live and work. Over the past 6 years, Wolverine Worldwide has donated over $3.1 million to United Way. +CODE OF BUSINESS CONDUCT AND ACCOUNTING +AND FINANCE CODE OF ETHICS +The Board has adopted a Code of Business Conduct for the Company's directors, officers +and employees. The Board also has adopted an Accounting and Finance Code of Ethics (“Accounting and Finance Code”) that focuses on the financial reporting process and applies to the Company's CEO, CFO and Corporate Controller. +The Company discloses amendments to or waivers from its Code of Business Conduct +affecting directors or executive officers and amendments to or waivers from its Accounting and Finance Code on its website at: +www.wolverineworldwide.com/investor-relations/corporate-governance/ +2021 PROXY STATEMENT +15 +TABLE OF CONTENTS +SHAREHOLDER COMMUNICATIONS POLICY +Shareholders and other interested parties may send correspondence to the Board, the +non-employee directors as a group, a specific Board committee or an individual director (including the Lead Director) in the manner described below. +The General Counsel or Associate General Counsel will provide a summary and copies of +all correspondence (other than solicitations for services, products or publications) as applicable at each regularly scheduled Board meeting. +Communications may be sent via email through various links on our website at: +www.wolverineworldwide.com/investor-relations/corporate-governance/ +or by regular mail c/o General Counsel, Wolverine World Wide, Inc., 9341 Courtland Drive, NE, +Rockford, MI 49351. +The General Counsel or Associate General Counsel will alert individual directors if an +item warrants a prompt response from the individual director prior to the next regularly scheduled meeting. Items warranting a prompt response, but not addressed to a specific director, will be routed to the applicable committee Chairperson. +2021 PROXY STATEMENT +16 +TABLE OF CONTENTS +Proposal 1 — Election of +Directors for Terms Expiring +in 2024 +The Company's Board consists of eleven directors. The Company's By-Laws establish three +classes of directors, with each class being as nearly equal in number as possible and serving three-year terms. At each annual meeting, the term of one class expires. The Board has nominated three directors for election at the Annual Meeting: +Roxane Divol, Brenda J. Lauderback and David W. McCreight. Each director has been nominated to serve for a three-year term expiring at the annual meeting of shareholders to be held in 2024 or until his/her successor, if any, has been elected and +is qualified. +All director nominees are independent directors, as determined by the Board under the +applicable NYSE listing standards and the Company's Director Independence Standards. Each director nominee currently serves on the Board. The shareholders most recently elected Mses. Divol and Lauderback at the Company's 2018 Annual Meeting. +Mr. McCreight was appointed to the Board in 2019 on the recommendation of the Company’s Governance Committee after being identified as a potential candidate by a third-party search firm. +The Company is not aware of any nominee who will be unable or unwilling to serve as a +director. However, if a nominee is unable to serve or is otherwise unavailable for election, the incumbent directors may or may not select a substitute nominee. If the directors select a substitute nominee, the proxy holder will vote the shares +represented by all valid proxies for the substitute nominee (unless other instructions are given). +The biographies of the three nominees and the other directors of the Company are below, +along with a discussion of the experience and skills of each director. +2021 PROXY STATEMENT +17 +TABLE OF CONTENTS +Director Nominees with +Proposed Terms Expiring in 2024 +ROXANE DIVOL +Age: 48 +Director since: 2014 +Select Business Experience: +Former Group Chief Operating Officer of Webhelp, Inc. +Board Committees: +Audit +Governance +Other Public Directorships: +None +Career Highlights: +From March to December 2019, Ms. Divol was the +Group Chief Operating Officer for Webhelp, Inc., a European leader in business process and customer experience outsourcing. From February 2017 until January 2018, Ms. Divol was Executive Vice +President and General Manager, Website Security, for Symantec Corporation, a global leader in information security solutions. From 2014 to February 2017, +Ms. Divol was Senior Vice President and General Manager, Website Security for Symantec. From 2013 to 2014, Ms. Divol was Senior Vice President of Alliances with Symantec. Ms. Divol joined +Symantec from McKinsey & Company, a global management consulting firm, where she was a partner in its San Francisco office and led the West Coast marketing and sales practice, with a focus on marketing return on investment and marketing transformation. +Experience and Skills: +Ms. Divol's experience with Webhelp, Inc., +Symantec Corporation and McKinsey & Company provides her with expertise in international business, marketing, cybersecurity, digital/eCommerce and information technology. In 2017, Ms. Divol +was named one of the 50 most powerful women in technology by the National Diversity Council. +2021 PROXY STATEMENT +18 +TABLE OF CONTENTS +BRENDA J. LAUDERBACK +Age: 70 +Director since: 2003 +Select Business Experience: +Chair of Denny's Corporation; Retired President of the Wholesale and Retail Group of Nine West Group, Inc. +Board Committees: +Audit +Governance (Chair) +Other Public Directorships: +Denny's Corporation (Board Chair) Sleep Number Corporation +Career Highlights: +Ms. Lauderback is currently the Chair of the +Board of Denny's Corporation, a restaurant company, and has acted as a Director of Denny's Corporation since 2005 and Sleep Number Corporation, a bed manufacturer and retailer, since 2004. From +1995 until her retirement in 1998, Ms. Lauderback was President of the Wholesale and Retail Group of Nine West Group, Inc., a footwear wholesaler and +distributor. She previously was the President of the Wholesale Division of U.S. Shoe Corporation, a footwear manufacturer and distributor, a position that included responsibility for offices in +China, Italy and Spain, and she was a Vice President/General Merchandise Manager of Dayton Hudson Corporation (now Target Corporation), a retail company. From 1998 to 2015, Ms. Lauderback also was a director of Big Lots, Inc., a retail company. +Experience and Skills: +Ms. Lauderback has more than 25 years of +experience in the retail industry, with more than 20 years in the footwear, apparel, and accessories industries. These senior leadership positions have provided her with strong footwear, +apparel and retail expertise. She also has extensive experience with public company governance and related matters. Ms. Lauderback was named to the National Association of Corporate Directors' (NACD) 2017 Directorship 100 list. +2021 PROXY STATEMENT +19 +TABLE OF CONTENTS +DAVID W. MCCREIGHT +Age: 58 +Director since: 2019 +Select Business Experience: +Retired President of URBN and Retired CEO of Anthropologie Group +Board Committees: +Compensation Governance +Other Public Directorships: +CarMax, Inc. +Career Highlights: +From 2016-2018 Mr. McCreight was President of +URBN, the parent company of multinational lifestyle brands Anthropologie, Urban Outfitters, and Free People. Between 2011 and 2018, Mr. McCreight was the Chief Executive Officer of +Anthropologie Group, the primary brand of which is Anthropologie, a leading multinational and multichannel lifestyle brand. Prior to that, Mr. McCreight was the President of Under Armour, Inc. from 2008 through 2010 and Lands' End, Inc. through 2008. +Experience and Skills: +Through 30 years of senior leadership positions +with leading multinational and multichannel apparel, footwear, accessories, and lifestyle brands, Mr. McCreight has obtained global direct-to-consumer and international business experience. +Mr. McCreight also has strong leadership and business experience from his service on public company boards, including CarMax, Inc. and DavidsTea, Inc., where he served as a director from 2014 to 2018. In 2019, Mr. McCreight became a Governance fellow of the National Association of Corporate Directors. +BOARD RECOMMENDATION +The Board recommends that you vote “FOR” the election of the above +nominees for proposed terms expiring in 2024. +2021 PROXY STATEMENT +20 +TABLE OF CONTENTS +Directors with Terms +Expiring in 2022 +JEFFREY M. BOROMISA +Age: 66 +Director since: 2006 +Select Business Experience: +Retired Executive Vice President of Kellogg International, President of Latin America; Senior Vice President of Kellogg Company +Board Committees: +Audit (Chair) Compensation +Other Public Directorships: +None +Career Highlights: +Mr. Boromisa worked at Kellogg Company, a +global food manufacturing company, and its affiliates from 1981 to 2009. From 2008 through his retirement in May 2009, Mr. Boromisa was Executive Vice President of Kellogg International, +President of Latin America; and Senior Vice President of Kellogg Company. From 2007 until 2008, Mr. Boromisa served as Executive Vice President of Kellogg International, President of Asia Pacific and Senior Vice President of Kellogg Company. From 2004 through 2006, he was Senior Vice President and Chief Financial Officer of Kellogg +Company. In addition, beginning in 2004 and through his retirement, Mr. Boromisa was a member of Kellogg Company's Global Leadership Team. Prior to 2004, Mr. Boromisa occupied various +leadership positions with Kellogg. Mr. Boromisa is also a director at Haworth International, Inc., a privately held, multinational, office furniture design and manufacturing company. +Experience and Skills: +With nearly 30 years of experience at Kellogg +Company, including serving as its Chief Financial Officer and leading various operational business units, Mr. Boromisa has obtained international business, brand building and finance expertise. +2021 PROXY STATEMENT +21 +TABLE OF CONTENTS +GINA R. BOSWELL +Age: 58 +Director since: 2013 +Select Business Experience: +Retired President, Customer Development, Unilever U.S.A. +Board Committees: +Compensation Governance +Other Public Directorships: +ManpowerGroup Inc. +Career Highlights: +From May 2017 until her retirement in October +2019, Ms. Boswell was the President, Customer Development for Unilever U.S.A., one of the largest markets for Unilever PLC / Unilever N.V., a multinational consumer goods company whose products +include Dove, Vaseline, Lipton, and Hellman's. From September 2015 to May 2017, Ms. Boswell served as Executive Vice President and General Manager for +Unilever UK & Ireland. From 2011 to September 2015, Ms. Boswell served as Executive Vice President, Personal Care for Unilever PLC / Unilever N.V. From 2008 to 2011, Ms. Boswell served as +President, Global Brands, for The Alberto Culver Company, a consumer goods company. Ms. Boswell has held numerous other senior leadership positions with other leading global companies, including Avon Products, Inc., Ford Motor Company, and Estee Lauder Companies, Inc. Ms. Boswell is a member of the board of ManpowerGroup Inc., a publicly traded +workforce solutions company. Ms. Boswell has acted as a director for each of Counter Brands, LLC (dB Beautycounter), a beauty products company, and Geltor, Inc., a beauty and nutrition products +company, since 2019, both of which are privately held. +Experience and Skills: +Through senior leadership roles with leading +branded companies, Ms. Boswell has obtained expertise in brand building, international business, marketing, digital/eCommerce and finance, and her service as a director of public companies has +given her experience with public company governance and related matters. +2021 PROXY STATEMENT +22 +TABLE OF CONTENTS +BRENDAN L. HOFFMAN +Age: 52 +Director since: 2020 +Select Business Experience: +President of Wolverine Worldwide +Board Committees: +None +Other Public Directorships: +None +Career Highlights: +Mr. Hoffman was appointed as President of +Wolverine Worldwide effective in September 2020. From 2015 to August 2020, Mr. Hoffman served as the Chief Executive Officer of Vince Holding Corp., a public company and apparel retailer. Prior +to joining Vince, Mr. Hoffman served as the Chief Executive Officer and President of Bon-Ton Stores Inc., a department store chain, from 2012 to 2014. +Previously, he was the Chief Executive Officer and President of Lord & Taylor L.L.C., a department store chain, for more than three years and, before that, he served six years as President +and Chief Executive Officer of Neiman Marcus Direct, an online retailer and a subsidiary of The Neiman Marcus Group Inc., where he oversaw the growth of neimanmarcus.com and the launch and +growth of bergdorfgoodman.com. During the past 5 years, he has served as a director of Vince Holding Corp. and Pier 1 Imports, a home furnishings and +decor retailer. +Experience and Skills: +Mr. Hoffman's more than 15 years in senior +leadership roles with apparel and retail companies have provided him expertise in apparel, retail, international business and finance, and his experience +as a director at Vince Holding Corp, Pier 1 Imports and now the Company has given him extensive experience with public company governance and related +matters. +2021 PROXY STATEMENT +23 +TABLE OF CONTENTS +DAVID T. KOLLAT +Age: 82 +Director since: 1992 +Select Business Experience: +President and Chairman, 22, Inc. +Board Committees: +Independent Lead Director +Other Public Directorships: +None +Career Highlights: +Dr. Kollat has been Chairman and President of +22, Inc., a company specializing in research and management consulting for retailers and consumer goods manufacturers, since 1987. In addition to his marketing and management experience as +Chairman and President of 22, Inc., Dr. Kollat served for 11 years in senior leadership positions at L Brands, Inc., a publicly traded, multinational apparel and retail company, including as Executive Vice President, Marketing; President of Victoria's Secret Direct; and as a member of its executive committee. Dr. Kollat is +Lead Independent Director of Wolverine Worldwide, a position he has held since 2007. Dr. Kollat was a director of L Brands, Inc. from 1976 to 2019 and was a director of Sleep Number +Corporation, a bed manufacturer and retailer, from 1994-2018. +Experience and Skills: +Dr. Kollat's more than 40 years' experience at +L Brands, Inc. and 22, Inc. has provided him with marketing, apparel, international business, brand building, retail and finance expertise. He also has significant experience with company +governance and related matters through service on more than twenty boards of directors, including extensive service on public company boards, and service as a Lead Independent Director and chair of nominating, audit and compensation committees. +2021 PROXY STATEMENT +24 +TABLE OF CONTENTS +Directors with Terms +Expiring in 2023 +WILLIAM K. GERBER +Age: 67 +Director since: 2008 +Select Business Experience: +Managing Director of Cabrillo Point Capital LLC; Retired Executive Vice President and Chief Financial Officer of Kelly Services, Inc. +Board Committees: +Audit +Compensation +Other Public Directorships: +Cleveland-Cliffs, Inc. +Career Highlights: +Mr. Gerber is Managing Director of Cabrillo +Point Capital LLC, a private investment fund. He has held that position since 2008. From 1998 to 2007, Mr. Gerber was Executive Vice President and Chief Financial Officer of Kelly Services, +Inc., a publicly traded global staffing solutions company with operations in more than 35 countries. Mr. Gerber served in various leadership positions with L Brands, Inc., a multinational apparel and retail company, prior to joining Kelly Services, Inc. Mr. Gerber currently serves as director of Cleveland-Cliffs, Inc., a +publicly traded producer of iron ore and steel products, since 2020. From 2007 through 2020, Mr. Gerber was a director of AK Steel Holding Corporation, which merged with Cleveland-Cliffs in +2020. +Experience and Skills: +From his 25 years in senior leadership +positions with L Brands, Inc. and Kelly Services, Inc., Mr. Gerber obtained extensive experience in apparel, retail, international business and finance, and his service as a director of various +public companies has given him experience with public company governance and related matters. +2021 PROXY STATEMENT +25 +TABLE OF CONTENTS +BLAKE W. KRUEGER +Age: 67 +Director since: 2006 +Select Business Experience: +Chairman and Chief Executive Officer of Wolverine Worldwide +Board Committees: +None +Other Public Directorships: +None +Career Highlights: +Mr. Krueger is Chairman of Wolverine Worldwide, +a position he assumed in January 2010, and Chief Executive Officer of Wolverine Worldwide, a position he assumed in April 2007. He also served as President of Wolverine Worldwide from April +2007 until September 2020. From October 2005 until April 2007, Mr. Krueger served as President and Chief Operating Officer of Wolverine Worldwide. From +2004 to October 2005, he served as Executive Vice President and Secretary of Wolverine Worldwide and President of its Heritage Brands Group. From 2003 to 2004, Mr. Krueger served as Executive +Vice President and Secretary of Wolverine Worldwide and President of the Company's Caterpillar Footwear Group. He also previously served as Executive Vice President, General Counsel and Secretary of Wolverine Worldwide with various responsibilities including the human resources, retail, business development, accessory licensing, mergers and +acquisitions and legal areas. Mr. Krueger serves as a director of Bissell Homecare, Inc., a privately held company and leading brand of floor care appliances. +Experience and Skills: +Mr. Krueger's more than 25 years in senior +leadership roles with the Company have provided him expertise in footwear and apparel, retail, international business and finance, and his board experience at the Company and Professionals +Direct, Inc., a former publicly traded insurance company, has given him extensive experience with public company governance and related matters. +2021 PROXY STATEMENT +26 +TABLE OF CONTENTS +NICHOLAS T. LONG +Age: 62 +Director since: 2011 +Select Business Experience: +Managing Partner, Bridger Growth Partners, LLC; Retired Chief Executive Officer of MillerCoors LLC +Board Committees: +Compensation (Chair) Governance +Other Public Directorships: +Amcor Limited +Career Highlights: +Mr. Long has acted as a Managing Partner for +Bridger Growth Partners, LLC, a private investment fund, since 2015. From 2011 until his retirement in 2015, Mr. Long served as Chief Executive Officer of MillerCoors LLC, a joint venture +between two publicly traded beverage companies. From 2008 to 2011, Mr. Long served as President and Chief Commercial Officer of MillerCoors LLC. From 2007 to 2008, Mr. Long served as Chief Executive Officer of Miller Brewing Company, a beverage company, and he served as Chief Marketing Officer of Miller Brewing Company from 2005 to 2007. +Prior to joining Miller Brewing Company, Mr. Long spent 17 years in various senior leadership positions at The Coca-Cola Company, a beverage company, including Vice President of Strategic Marketing, Global Brands; Vice President, Strategic Marketing Research and Trends; President of Coca Cola's Great Britain and Ireland Division; and President of the +Northwest Europe Division. Mr. Long currently serves as a director of Amcor Limited, a publicly-traded packaging solutions company. +Experience and Skills: +Through his more than 20 years in senior +positions at category leading, branded companies, Mr. Long has developed significant marketing, international business and brand building expertise. +2021 PROXY STATEMENT +27 +TABLE OF CONTENTS +MICHAEL A. VOLKEMA +Age: 65 +Director since: 2005 +Select Business Experience: +Chairman of Herman Miller, Inc. +Board Committees: +Audit +Governance +Other Public Directorships: +Herman Miller, Inc. +Career Highlights: +Mr. Volkema has been Chairman of Herman Miller, +Inc., a publicly traded multinational furniture manufacturer, since 2000. Mr. Volkema became President and Chief Executive Officer of Herman Miller in 1995 and held those positions until 2003 +and 2004, respectively. Mr. Volkema also is a director at Milliken & Company, a privately held, innovation-based company serving the textile, chemical, +and floor covering markets. +Experience and Skills: +Mr. Volkema has obtained international business +and brand building expertise from his more than 20 years in senior leadership positions with Herman Miller, Inc. Mr. Volkema also has public company governance and related experience from his +extensive service on public company boards, including more than 20 years as Chairman of Herman Miller, Inc. and service on compensation and audit committees +of boards of publicly traded companies. +2021 PROXY STATEMENT +28 +TABLE OF CONTENTS +BOARD LEADERSHIP +The Company's Corporate Governance Guidelines give the Board the flexibility to +determine the best leadership structure for the Company based upon the Company's evolving needs and opportunities. The Governance Committee periodically reviews the Board's leadership structure, including whether to separate the roles of Chairman +and CEO, based upon the Board and Company's then-current circumstances, and recommends changes to the Board as appropriate. Currently, the Company's CEO also serves as the Chairman of the Board. In addition, since 1993, the independent directors +have annually elected a Lead Independent Director who performs a role in many ways similar to an independent Chairman. The Board continues to believe that this leadership structure is in the best interests of the Company and its shareholders at +this time because it provides the Board with effective independent oversight of management. Specifically, the Lead Independent Director has the following enumerated responsibilities: +• +Serve, as necessary, as a liaison between the Chairman and the independent directors +• +Preside over Board meetings in the absence of the Chairman +• +Review, approve and help develop the agendas and scheduling for Board and committee meetings +• +Review and approve information and meeting materials sent to the Board +• +Preside over executive sessions, with the authority to call executive sessions +• +Work with the Compensation Committee and members of the Board to provide an effective annual performance review of the CEO and +participate in CEO succession planning +• +Oversee, along with the Governance Committee, the annual Board and committee evaluations +• +Be available for consultation and communication with shareholders, as appropriate +DIRECTOR INDEPENDENCE +The Board annually assesses the independence of all directors. To qualify as +“independent,” the Board must affirmatively determine that the director is independent under the Company's Director Independence Standards, which are modeled after the listing standards of the NYSE. Under NYSE listing standards and the Company's +Director Independence Standards, the Board has determined that 9 of the Company's 11 directors are independent. Only Messrs. Krueger and Hoffman are not independent. All of the Board's committees are comprised entirely of independent directors. +The independent directors generally meet in executive session at each regularly scheduled meeting. +The Company's Director Independence Standards define an “Independent Director” as a +director who the Board determines otherwise has no material relationship with the Company (either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company), and who: +• +Is not, and in the past three years has not been, an employee of the Company +• +Does not have, and has not had within the last three years, an immediate family member employed as an executive officer of the +Company +• +Has not received, and does not have an immediate family member who received, during any 12 month period within the last +three years, any direct compensation from the Company in excess of $120,000 (other than compensation for Board service; compensation received by the director for former service as an interim Chairman, CEO or other executive officer; +compensation received by the director's immediate family member for service as a non-executive employee; or pension and other forms of deferred compensation for prior service if such compensation is not contingent in any way on continued +service) +• +Is not a current employee or partner of a firm that is the Company's internal or external auditor +• +Has not been, and does not have an immediate family member who has been, within the last three years, a partner or employee of +the Company's internal or external auditor and personally worked on the Company's audit within that time +2021 PROXY STATEMENT +29 +TABLE OF CONTENTS +• +Does not have an immediate family member who is (i) a current partner of the Company's internal or external auditor, or (ii) a +current employee of the Company's internal or external auditor who personally works on the Company's audit +• +Is not, and has not been within the last three years, part of an interlocking directorate in which a current executive officer of +Wolverine Worldwide serves or served on the compensation committee of another company where the director or the director's immediate family member concurrently serves or served as an executive officer +• +Is not an employee of, and does not have an immediate family member who is an executive officer of, another company that has made +payments to, or received payments from, Wolverine Worldwide for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of $1,000,000 or 2% of the other company's consolidated gross revenues +• +Has not had any other direct or indirect relationship with Wolverine Worldwide that the Board determines is material +BOARD COMMITTEES, MEETINGS AND MEETING ATTENDANCE +The Board has three standing committees: Audit, Compensation and Governance. Each +committee meets periodically throughout the year and reports its recommendations to the Board. The Company expects directors to attend every meeting of the Board and the committees on which they serve and to attend the annual meeting of +shareholders. In 2020, all directors then serving on the Board attended the 2020 Annual Meeting of Shareholders, and all directors attended at least 75% of the meetings of the Board (18 meetings in 2020) and the committees on which they served +held during the period for which he or she served. All directors are typically invited to and attend all committee meetings. +Each committee annually evaluates its performance to determine its effectiveness. The +Board has determined that all committee members are “independent” as defined by NYSE listing standards. Furthermore, each Audit Committee member satisfies the NYSE “financial literacy” requirement. In addition, the Board has determined that +Mr. Boromisa and Mr. Gerber are “audit committee financial experts” under Securities and Exchange Commission (“SEC”) rules. Each committee's charter, with a complete list of the duties and responsibilities, is available on the Company's website +at www.wolverineworldwide.com/investor-relations/corporate-governance/. +AUDIT COMMITTEE +Committee Members +• +Boromisa (Chair) +• +Divol +• +Gerber +• +Lauderback +• +Volkema +Number of Meetings in 2020 +7 +Highlighted Responsibilities +• +Appoints, evaluates and oversees the work of the independent auditors and oversees the internal audit +function +• +Oversees the integrity of the Company's financial statements, financial reporting process and internal +controls +• +Oversees the Company's policies, systems and management of risk assessment and the Company's compliance +with legal and regulatory requirements +2021 PROXY STATEMENT +30 +TABLE OF CONTENTS +COMPENSATION COMMITTEE +Committee Members +• +Long (Chair) +• +Boromisa +• +Boswell +• +Gerber +• +McCreight +Number of Meetings in 2020 +11 +Highlighted Responsibilities +• +Assists the Board in fulfilling its responsibilities relating to executive compensation and the +Company's compensation and benefit policies and programs +• +Oversees the overall compensation structure, policies and programs, including whether the compensation +structure establishes appropriate incentives for management and employees +• +Oversees the Company's management of risks relating to management resources, organization structure and +succession planning, hiring, development and retention processes, as well as those relating to the Company's compensation structure, policies and programs +GOVERNANCE COMMITTEE +Committee Members +• +Lauderback (Chair) +• +Boswell +• +Divol +• +Long +• +McCreight +• +Volkema +Number of Meetings in 2020 +6 +Highlighted Responsibilities +• +Assists the Board in fulfilling its responsibilities on matters and issues related to the Company's +corporate governance practices +• +Working with the Board, establishes qualification standards for membership on the Board and its +committees and recommends qualified individuals to become Board members or serve for election as directors +• +Develops and recommends to the Board for its approval an annual self-evaluation process for the Board +and its committees, and oversees the evaluation process +2021 PROXY STATEMENT +31 +TABLE OF CONTENTS +Non-Employee Director Compensation +in Fiscal Year 2020 +The Company's non-employee director compensation philosophy is to pay compensation that +is competitive with the compensation paid by companies of similar size, in similar industries and with whom Wolverine Worldwide competes for director candidates. The Governance Committee, with input from management and from the Compensation +Committee's independent compensation consultant, reviewed director compensation and compared it to market data, including a comparison to director compensation for the Company's Peer Group, as defined on page 54 , and broader +industry market surveys (FW Cook 2018 Director Compensation Report and NACD 2018-2019 Director Compensation Report). No adjustments were made to 2020 director compensation based on this review. +Director 2020 Fee Cuts +As part of the Company’s overall COVID-19 response, in April 2020, the Board implemented +a twenty-five percent reduction of the annual cash director fee, lead director fee and board committee service and chairperson fees for the remainder of fiscal 2020. The payments in the table below reflect these reductions. +The following table provides information regarding the compensation of the Company's +non-employee directors for fiscal year 2020. Messrs. Krueger and Hoffman receive compensation for their services as the Company's CEO and President, respectively, but do not receive any additional compensation for service as a director or +chairman. +Fees Paid in +Cash +Cash Amounts +Voluntarily +Deferred +Fees Earned or +Paid in Cash 1 +Restricted +Stock Unit +Awards 2 +Totals +Boromisa +- ++ +$103,188 += +$103,188 ++ +$135,019 += +$238,207 +Boswell +$ 80,438 ++ +- += +$ 80,438 ++ +$135,019 += +$215,457 +Divol +$ 82,875 ++ +- += +$ 82,875 ++ +$135,019 += +$217,894 +Gerber +$ 82,875 ++ +- += +$ 82,875 ++ +$135,019 += +$217,894 +Kollat +$109,688 ++ +- += +$109,688 ++ +$170,005 += +$279,693 +Lauderback +$ 89,438 ++ +- += +$ 89,438 ++ +$135,019 += +$224,457 +Long +$ 96,688 ++ +- += +$ 96,688 ++ +$135,019 += +$231,707 +McCreight +$ 69,938 ++ +- += +$ 69,938 ++ +$135,019 += +$204,957 +Volkema +- ++ +$ 90,531 += +$ 90,531 ++ +$135,019 += +$225,550 +1 +Represents cash payments received or deferred by directors for fiscal year 2020. Directors may +defer fees pursuant to the Director Deferred Compensation Plan or Deferred Compensation Plan (each as defined below). The table shows the Fees Earned or Paid in Cash separated into Fees Paid in +Cash and Cash Amounts Voluntarily Deferred. +2 +Represents the aggregate grant date fair value of restricted stock units granted to +non-employee directors in fiscal year 2020, calculated in accordance with Accounting Standard Codification (“ASC”) Topic 718, without regard to estimated forfeitures. These grants represent the +standard annual director restricted stock unit grant made in accordance with the director compensation program; they were neither increased nor decreased as part of the Company’s COVID-19 +response. The chart below lists the aggregate outstanding option awards (granted prior to 2018) and restricted stock units held by non-employee directors at the end of fiscal year 2020. For valuation assumptions, see the Stock Based Compensation footnote to the Company's Consolidated Financial Statements for fiscal year 2020 included in +its Annual Report on Form 10-K for fiscal year 2020. +2021 PROXY STATEMENT +32 +TABLE OF CONTENTS +Name +Option Awards Outstanding at +January 2, 2021 +(#) +Restricted Stock Units held at +January 2, 2021 1 +(#) +Boromisa +49,940 +14,225 +Boswell +44,735 +6,140 +Divol +40,002 +6,140 +Gerber +49,940 +6,140 +Kollat +67,628 +17,957 +Lauderback +49,940 +6,140 +Long +60,642 +14,225 +McCreight +- +6,140 +Volkema +49,940 +14,225 +1 +Includes 8,085, 10,226, 8,085 and 8,085 fully vested restricted stock units held by each of +Mr. Boromisa, Dr. Kollat, Mr. Long and Mr. Volkema, respectively, that were deferred and will be settled on the date elected by the director. +The following table shows the non-employee director compensation program for fiscal +year 2020 prior to the implementation of the twenty-five percent reduction of cash fees in response to the COVID-19 pandemic: +Compensation Plan for 2020 +Component +Cash +Restricted Stock Units 1 +Annual Director Fee +$75,000 +Number of restricted stock units “RSUs” with a grant date value of $135,000. +Audit Committee Annual Fee +$15,000 +Audit Committee Chairperson Annual Fee +$25,000 +Compensation Committee Annual Fee +$12,000 +Compensation Committee Chairperson Annual Fee +$20,000 +Governance Committee Annual Fee +$12,000 +Governance Committee Chairperson Annual Fee +$17,500 +Lead Director Annual Fee +In lieu of the standard Annual Director Fee, the Lead Director was paid a Cash +Retainer of $135,000. +In lieu of the standard RSU grant, the Lead Director received a number of RSUs +with a grant date value of $170,000. +1 +For fiscal year 2020, Messrs. Boromisa, Gerber, Long, McCreight and Volkema and Mses. Boswell, +Divol and Lauderback each received 6,140 restricted stock units, Dr. Kollat received 7,731 restricted stock units. The above restricted stock units were granted in April 2020 under the Stock +Incentive Plan of 2016, as amended, and vest one year from the date of grant. +Director Deferred Compensation Plan. The Company's Amended and Restated Outside Directors' Deferred Compensation Plan (the “Director Deferred Compensation Plan”) is a supplemental nonqualified deferred compensation plan for +non-employee directors. A separate non-employee director deferred compensation plan applies to benefits accrued under that plan before January 1, 2005. The Director Deferred Compensation Plan permits all non-employee directors to voluntarily defer, at their option, 25%, 50%, 75% or 100% of their director fees. The Company establishes a book +account for each non-employee director and credits the director's account with a number of stock units equal to the amounts voluntarily deferred, divided by the closing market price of common stock on +the payment/deferral date. The Company also credits director accounts with dividend equivalents on amounts previously deferred in the form of additional stock units. The amounts credited to director accounts are treated as if invested in Wolverine Worldwide common stock. The number of stock units held in director accounts is set forth under the “Stock +Ownership By Management and Others” table below. +Upon a director's termination of service, or such later date as a director selects, the +Company will distribute the stock units in the director's book account in shares of Wolverine Worldwide common stock in either a single, lump sum distribution or annual installment distributions over a period of up to 20 years (10 years under the +plan for benefits accrued before January 1, 2005) based on the director's election. The Company converts each stock unit to one share of Wolverine Worldwide common stock. +2021 PROXY STATEMENT +33 +TABLE OF CONTENTS +Upon a “change in control,” the Company will distribute to the director, in a single, +lump sum distribution, Wolverine Worldwide common stock in a number of shares equal to the stock units credited to a director's book account. The Deferred Compensation Plan defines “change in control” as any of the following: +• +The acquisition by any person, or by more than one person acting as a group, of more than 50% of either (i) the then outstanding +shares of common stock of Wolverine Worldwide or (ii) the total fair market value of Wolverine Worldwide +• +The acquisition by any person, or more than one person acting as a group, during the 12 month period from and including the date +of the most recent acquisition, of ownership of 30% or more of the outstanding common stock of Wolverine Worldwide +• +The replacement of a majority of the individuals who constitute the Board during any 12 month period by directors whose +appointment or election is not endorsed by a majority of the directors prior to the date of the appointment or election +• +The acquisition, during any 12 month period ending on the date of the most recent acquisition, by any person of assets from +Wolverine Worldwide having a gross fair market value of at least 40% of the gross fair market value of all the assets of Wolverine Worldwide immediately before the acquisition +Deferred Compensation Plan For a +description of the non-qualified Deferred Compensation Plan under which directors may also defer cash fees, please see the “ Non-Qualified +Deferred Compensation ” section on page 68 . +NON-EMPLOYEE DIRECTOR STOCK OWNERSHIP GUIDELINES +Each non-employee director must attain (and maintain) a minimum stock ownership level +(including owned shares, the in-the-money value of stock options, and stock units under the Directors' Deferred Compensation Plan) equal to six times the non-employee director annual cash retainer prior to being able to gift or sell any Company +stock. During 2020, all non-employee directors were in compliance with these guidelines. +2021 PROXY STATEMENT +34 +TABLE OF CONTENTS +Securities Ownership of Officers +and Directors and Certain +Beneficial Owners +FIVE PERCENT SHAREHOLDERS +The following table sets forth information about those holders known by Wolverine +Worldwide to be the beneficial owners of more than five percent of Wolverine Worldwide's outstanding shares of common stock as of March 8, 2021: +Amount and Nature of Beneficial Ownership of Common Stock +Name and Address of +Beneficial Owner +Sole Voting +Power +Sole +Investment +Power +Shared Voting +Power +Shared +Investment +Power +Total +Beneficial +Ownership +Percent +of Class 5 +BlackRock, Inc. 1 +55 East 52nd Street +New York, NY 10055 +12,504,782 +12,679,744 +- +- +12,679,744 +15.35% +Earnest Partners, LLC 2 +1180 Peachtree Street NE +Suite 2300 +Atlanta, GA 30309 +3,472,275 +4,963,147 +- +- +4,963,147 +6.01% +The Vanguard Group 3 +100 Vanguard +Boulevard +Malvern, PA 19355 +- +8,153,554 +80,999 +145,492 +8,299,046 +10.05% +Wellington Management Group LLP 4 +c/o Wellington Management +Company LLP +280 Congress Street +Boston, MA 02210 +- +- +3,793,976 +4,225,785 +4,225,785 +5.11% +1 +Based solely on information set forth in a Schedule 13G filed on January 25, 2021. +2 +Based solely on information set forth in a Schedule 13G filed on February 16, 2021. +3 +Based solely on information set forth in a Schedule 13G/A filed on February 10, 2021. +4 +Based solely on information set forth in a Schedule 13G filed on February 4, 2021 jointly by +Wellington Management Group LLP, Wellington Group Holdings LLP, and Wellington Investment Advisors Holdings LLP. +5 +Based on 82,597,389 shares outstanding as of March 8, 2021. +2021 PROXY STATEMENT +35 +TABLE OF CONTENTS +STOCK OWNERSHIP BY MANAGEMENT AND OTHERS +The following table sets forth the number of shares of common stock beneficially owned +as of March 8, 2021, by each of the Company's directors and named executive officers and all of the Company's directors and executive officers as a group: +Amount and Nature of Beneficial Ownership of Common Stock 1 +Deferred +Stock Units, +Sole Voting +and/or +Investment +Power 2,3 +Shared Voting or +Investment +Power 4 +Stock +Options 5 +Total +Beneficial +Ownership +Percent +of Class 6 +Jeffrey M. Boromisa +65,566 +56,900 +49,940 +172,406 +* +Gina R. Boswell +15,615 +- +44,735 +60,350 +* +Roxane Divol +26,177 +- +40,002 +66,179 +* +William K. Gerber +44,095 +- +49,940 +94,035 +* +Brendan L. Hoffman +3,149 +- +- +3,149 +* +Michael Jeppesen +9,190 +- +51,988 +61,178 +* +David T. Kollat +214,206 +95,350 +62,242 +371,798 +* +Blake W. Krueger +866,109 +34,234 +1,072,126 +1,972,469 +2.39% +Brenda J. Lauderback +73,799 +- +49,940 +123,739 +* +Nicholas T. Long +20,516 +- +60,642 +81,158 +* +David W. McCreight +3,781 +- +- +3,781 +* +Michael D. Stornant +31,419 +139,108 +133,542 +304,069 +* +Michael A. Volkema +66,040 +- +17,158 +83,198 +* +James D. Zwiers +32,566 +76,116 +170,788 +279,470 +* +All directors and executive officers as a group +(18 people) +1,602,651 +401,708 +1,898,753 +3,903,112 +4.73% +∗ +Represents beneficial ownership of less than 1%. +1 +The numbers of shares stated are based on information provided by each person listed and +include shares personally owned of record and shares that, under applicable regulations, are considered to be otherwise beneficially owned. +2 +These numbers include restricted shares held, which are subject to forfeiture if the terms of +the award are not satisfied and also include deferred stock units held by directors under the Directors' Deferred Compensation Plan. +2021 PROXY STATEMENT +36 +TABLE OF CONTENTS +3 +The table does not include the following time-vested restricted stock units and performance units +owned by directors and NEOs as of March 8, 2021: +Restricted +Units +Performance +Units +Boromisa +14,225* +- +Boswell +6,140 +- +Divol +6,140 +- +Gerber +6,140 +- +Hoffman +105,172 +93,397 +Jeppesen +16,610 +28,899 +Kollat +17,957* +- +Krueger +172,755 +226,141 +Lauderback +6,140 +- +Long +14,225* +- +McCreight +6,140 +- +Stornant +34,978 +36,268 +Volkema +14,225* +- +Zwiers +31,130 +31,694 +* +Includes 8,085, 10,226, 8,085 and 8,085 fully vested restricted stock units held by each of Mr. Boromisa, Dr. Kollat, Mr. Long and Mr. Volkema, respectively, that were deferred and will be settled on the date elected by the director. +4 +These numbers include shares over which the listed person is legally entitled to share voting +or investment power by reason of joint ownership, trust or other contract or property right and shares held by spouses, children or other relatives over whom the listed person may have influence +by reason of such relationship. +5 +The numbers represent shares that may be acquired within 60 days after March 8, 2021, by the +exercise of stock options granted under Wolverine's various stock option plans. These numbers are also included in the Total Beneficial Ownership column. +6 +As of March 8, 2021, based on 82,597,389 shares outstanding on that date plus the number of +stock options exercisable by the specified person(s) within 60 days of March 8, 2021, as indicated in the “Stock Options” column. +2021 PROXY STATEMENT +37 +TABLE OF CONTENTS +Compensation Discussion +and Analysis +SUMMARY +The Company's Compensation Discussion and Analysis (“CD&A”) provides an overview and analysis of +the executive compensation program for the Company's named executive officers (“NEOs”). For fiscal year 2020, the Company's NEOs were: +Blake W. Krueger +Chairman and Chief Executive Officer +Brendan L. Hoffman +President, Wolverine Worldwide +Michael Jeppesen +President, Global Operations Group +Michael D. Stornant +Senior Vice President, Chief Financial Officer and Treasurer +James D. Zwiers +Executive Vice President +COMPENSATION PHILOSOPHY AND OBJECTIVES +The Company's compensation philosophy is to provide executives with a competitive +compensation package that is heavily weighted towards performance-based (performance units and annual bonus opportunity) and variable (restricted stock units) compensation in order to encourage superior business and financial performance over the +short and longer term and, by linking compensation with stock price performance, to closely align the interests of the Company's NEOs with those of its shareholders without encouraging excessive risk-taking. The Compensation Committee (the +“Committee”) oversees the Company's executive compensation program. +The executive compensation program has four primary objectives: +• +Attract and retain talented NEOs who will lead Wolverine Worldwide and drive superior business and financial performance +• +Provide incentives for achieving specific pre-established near-term individual, business unit and corporate goals and reward +the attainment of those goals +• +Provide incentives for achieving specific pre-established longer term corporate financial goals and reward the attainment of +those goals +• +Align the interests of NEOs with those of the shareholders through incentives based on achieving performance objectives that +enable increased shareholder value +Compensation Decisions in Context: The Company’s Response to +Unprecedented Challenges +2020 was an unprecedented year, as global economies were shaken and changed by the +global COVID-19 pandemic. Our response was swift, proactive, agile and deliberate, focused on the community, the team and organization, and the financial performance of the Company in the face of a significantly altered economy and retail +marketplace. +• +As the pandemic broke, we +○ +implemented health and safety best practices but were able to remain operational and “open for business , ” +○ +donated more than 35,000 protective masks for use by frontline healthcare workers, +○ +retrofitted our Michigan ReChaco factory to produce additional face masks and other critical +protective equipment for donation to healthcare workers and first responders, +○ +made additional cash and footwear donations to those affected by the pandemic, and +○ +executed plans for the safety of our office, distribution center and store employees. +• +We flattened, streamlined and reorganized our management structure, positioning us to take on a pandemic economy and thrive +post-pandemic. +2021 PROXY STATEMENT +38 +TABLE OF CONTENTS +• +We restructured compensation to conserve cash and enhance liquidity by providing restricted stock awards in lieu of salary (50% +for the CEO and 35% for the other NEOs) for the period from April 2020 through the end of fiscal year 2020. +• +Our non-employee Directors took a 25% cut in cash fees for the period from April 2020 through the end of fiscal year 2020. +• +We focused our strategies and investments around product innovation, direct-to-consumer, and digital capabilities, setting us up +for growth in 2021. +• +We grew our 2020 global eCommerce business revenue by 50% and will strive to reach the aspirational goal of $500 million in +global eCommerce revenue in fiscal year 2021. +• +Revenue of $1.79 billion was better than expected despite the substantial headwinds introduced by the global COVID-19 pandemic, +including widespread retail store closures and elevated consumer unemployment. +• +We took swift action to increase our liquidity and the flexibility of our capital structure, primarily through the amendment of +our Senior Credit Facility, including borrowing $171 million in aggregate principal amount of incremental term loans (paid off at year end) and the sale of $300 million of 6.375% Senior Notes due 2025. +• +We implemented several additional measures to prioritize liquidity, cash preservation, and asset management, including drawing +down the remainder of our revolving credit line at certain points in the year, reducing planned inventory receipts, postponing certain capital expenditures, suspending further share repurchases, and significantly reducing planned +operating expenses for the year. +• +The above cash preservation initiatives allowed the Company to deliver $309 million of operating cash flow in 2020. +These actions, along with the overall strength of our +brands, team, and business, allowed us to perform well for our shareholders. Our total shareholder return for 2020 was at the 59th percentile against our peer group, and in the 77th percentile for the three-year period ending in 2020. We are +proud of our response to the COVID-19 pandemic and of our overall performance in the face of these unprecedented challenges in 2020. +2021 PROXY STATEMENT +39 +TABLE OF CONTENTS +2020 Compensation Program Overview +The Company's executive compensation program consists of base salary, annual bonus +opportunity, long-term incentive compensation and benefits. A breakdown of base salary, annual performance bonus, and long-term incentive compensation is illustrated below: +ELEMENT +COMPONENT +METRICS +WHAT THE PAY ELEMENT REWARDS +Base +Salary +• Cash +• Fixed amount based on responsibilities, experience and market data +• Scope of core responsibilities, years of experience, and potential to +affect the +Company's overall performance +Annual Performance Bonus +• Company/Business +Unit Cash Bonus +• Individual Cash Bonus +•  Backlog Modifier +• 85% revenue and adjusted pretax earnings +• 15% specific individualized performance targets +•  Total payout adjusted up/down up to plus or minus 25% based on year-end +backlog modifier +• Achieving specific corporate business and/or divisional objectives over +which the NEO has reasonable control +• Achieving specific personal objectives +• Achieving key financial metric, consistent with communicated objectives +Long-Term +Incentive Compensation +• Performance share units +• Time-vesting restricted stock units +• Uses the following performance metrics (weighted as indicated) +• 65% Adjusted earnings per share +• 35% Adjusted business value-added +• Relative TSR adjusted total payout up/down up to plus or minus 25% +• Four-year vesting for time-vested restricted stock units +• Balances focus on near-term profitability with longer-term shareholder +value creation +• Achieving long-term corporate objectives +• Driving long-term shareholder value +• Continued, long-term employment at Wolverine Worldwide +• Adjusted to increase (or reduce) payout based on relative TSR performance +Pay at Risk +Under the Company's compensation program, a significant portion of the compensation +awarded to the NEOs generally, and to the CEO in particular, is at risk (contingent upon the attainment of various pre-established short and long-term financial goals) and variable (contingent on the performance of the Company's stock price). NEO +compensation that is significantly at risk and variable incentivizes superior business and financial performance and, by linking compensation with stock price performance, aligns the interests of executives with those of shareholders. +2021 PROXY STATEMENT +40 +TABLE OF CONTENTS +The following graphic illustrates the percentage of 2020 NEO target compensation that is at risk: +Long-Term Incentive Program Mix +The long-term incentive program is heavily weighted to at-risk compensation, with a mix +for February 2020 grants of 70% performance stock units and 30% time vested restricted stock units for the CEO and 60% performance stock units and 40% time vested restricted stock units for the other NEOs. In addition, and as described in more +detail below, the actual salary portion of compensation was reduced for 2020, and additional time-vested grants were made, shifting a higher percentage of total compensation away from fixed base salary. The charts above reflect the original grant +values and salary information from the February 2020 Compensation Committee actions. +Compensation Best Practices +What we do +What we do not do +✔ Vast majority of pay is at risk or +variable, i.e., performance-based or equity-based or both +✔ Stringent share ownership requirements (6x +base salary for CEO) +✔ Broad-based clawback policy +✔ Significant vesting horizon for equity +grants +✔ Double trigger equity acceleration (for +grants in 2017 and beyond) +✔ Independent Compensation Committee +Consultant +✔ Review executive compensation program to +ensure it doesn't promote excessive risk taking +✔ Proactively engage with top shareholders on +compensation and governance issues +✔ Conduct annual say-on-pay votes +✔ Balance short-term and long-term incentives +✗ No dividends or dividend equivalents on +unearned performance shares/units +✗ No repricing or replacing of underwater +stock options +✗ No excessive or unnecessary perquisites +✗ No hedging, pledging or short sales of +Company stock +✗ No excise tax gross-ups in change-in-control +agreements for new officers (hired after 2008) +2021 PROXY STATEMENT +41 +TABLE OF CONTENTS +Compensation Discussion and Analysis +2020 COMPENSATION PROGRAM OVERVIEW +Setting Targets +Each February, the Committee recommends (and the independent directors approve) target +compensation for the CEO for the upcoming year after considering the latest available information, including the Company's TSR and other business and financial performance, information provided by the Committee's compensation consultant regarding +executive compensation trends and compensation paid to other chief executive officers of companies in the compensation peer group (described below), and information provided by management on recent Company performance and the Company's future +business and financial outlook. The Committee's goal is to set the CEO's compensation in line with the anticipated market median compensation for that year. +Given the significant weight the Company's executive compensation program places on at +risk and variable compensation, the compensation realized by the CEO and NEOs can be significantly affected, both positively and negatively, by performance against the various operational and financial performance metrics pre-established by the +Committee and by the performance of the Company's stock. The Board and Committee believe such a compensation program aligns the interests of the CEO and other NEOs with the interests of the shareholders. +The Company's executive compensation program consists of four primary elements: base +salary, annual bonus opportunity, long-term incentive compensation and benefits. These elements are described in greater detail below. +Base Salary +As part of approving an NEO's base salary, the Committee considers a variety of factors +including individual responsibilities, experience, skills, and potential to affect Wolverine Worldwide's overall performance, as well as market surveys and peer group information. The Committee considers these compensation factors subjectively, +and no single factor or combination of factors was determinative in setting base salaries for any NEO for fiscal year 2020. +Based on the above factors, the Committee approved the 2020 base salaries for the NEOs +as noted in the following table. The Committee held CEO salary flat in 2020 for the sixth year in a row and held it flat again in 2021. Base salaries for Messrs. Jeppesen, Stornant and Zwiers were also held flat in 2020. Then, in April 2020 +salaries for all of the NEOs (other than Mr. Hoffman, who was not yet hired) were reduced as part of the Company's COVID-19 response for the remainder of the year as reflected below. +Name +2019 Base Salary +2020 Base Salary +Pay Reduction % +April 2020 Annual Salary +After Pay Reduction +Krueger +$1,150,000 +$1,150,000 +50% +$575,000 +Hoffman +N/A +$ 900,000 +N/A +N/A +Jeppesen +$ 625,000 +$ 625,000 +35% +$406,250 +Stornant +$ 630,000 +$ 630,000 +35% +$409,500 +Zwiers +$ 685,000 +$ 685,000 +35% +$445,250 +2021 PROXY STATEMENT +42 +TABLE OF CONTENTS +Annual Bonus +In 2020, each NEO had the opportunity to earn annual cash incentive compensation +(“annual bonus”), consisting of a performance bonus and an individual performance bonus, and further subject to a modifier: +Key Factors +2020 Company Metrics +Performance Bonus +• +Based on performance measured against Company and/or business unit performance criteria established at +the beginning of 2020 +• +• +Revenue (45%) +Adjusted pretax earnings (55%) +• +Payout determined by comparing performance against four performance levels set for each pre-set +criterion: threshold, target, goal, and stretch +Individual +Performance Bonus +• +Measured against individual performance criteria +• +Vary by each NEO +• +Each NEO's payout was determined by comparing individual performance against specific individual +criteria set at the beginning of 2020 +• +Payouts can range from 0% to 200% depending on the NEO's performance against individual performance +objectives +Modifier +• +Total payout based on the above two components adjusted up or down by up to 25% based on year-end +backlog +• ++/- 25% year-end backlog modifier +A percentage of each NEO's 2020 base salary, as determined in February 2020, was set as +the annual bonus target percentage (the “Target Bonus Percentage”). The Target Bonus Percentage represents the percentage of each NEO's base salary that could be earned as annual incentive compensation at a “target” performance level (100% +payout) for each of the performance bonus and individual performance bonus. Generally, the Committee sets higher Target Bonus Percentages for individuals with greater influence on business strategy, profit or sales. This puts a larger percentage +of an NEO's total potential cash compensation at risk, in line with the NEO's ability to influence these factors. For 2020, the NEOs had the following Target Bonus Percentages: Mr. Krueger 140%, Mr. Hoffman 85%, Mr. Jeppesen 55%, Mr. Stornant +60%, and Mr. Zwiers 55%. +The Committee selected fiscal year 2020 revenue and adjusted pretax earnings as metrics +for the performance bonus because it believes a strong correlation exists between performance on these financial measures and increases in shareholder value. The Committee also continued to include a year-end backlog modifier for 2020 to more +directly align with the Company's focus on go-forward revenue growth. +Performance Bonus +Messrs. Krueger, Stornant, Jeppesen, and Hoffman had significant influence on the +Company's overall business performance and, accordingly, their respective performance bonus opportunity (85% of their total annual bonus opportunity) is based on the Company performance criteria only. Mr. Zwiers was directly responsible for +specific business units and exerted a significant influence on those business units in particular, in addition to influencing Company performance. Accordingly, a large percentage of his overall annual bonus opportunity was based on business unit +performance, as reflected in the table on page 47 . +As shown in the table below, the Committee also set four performance levels for each +criterion: threshold (25% payout for pretax; 50% for revenue), target (100% payout), goal (150% payout) and stretch (200% payout). The Committee set the revenue and pretax earnings goals for these performance levels following a review of the +Company's operating plan, historical performance, and industry and macroeconomic conditions. The performance targets were set aggressively, including setting the revenue performance at target (100%) at the high end of the Company's initial 2020 +guidance. Performance targets required for 100% payout on revenue were set in February 2020 above 2019 performance targets and 2019 actual results. Pretax goals at target (100%) were set above the Company’s actual 2019 pretax results. All 2020 +performance goals were established prior to the onset of the pandemic and reflected the expected business conditions at that time. +2021 PROXY STATEMENT +43 +TABLE OF CONTENTS +Company +Performance Level +(% of Target Payout) 1 +in millions +Revenue +Pretax Earnings +Threshold (25% for pretax; 50% for revenue) +$2,263 +$235.0 +Target (100%) +$2,343 +$246.9 +Goal (150%) +$2,403 +$260.0 +Stretch (200%) +$2,458 +$275.0 +1 +The maximum payout (before the effect of the modifier) an NEO can receive is 200% of his Target +Bonus Percentage, even if performance is above stretch. An NEO would receive 0% of his Target Bonus Percentage if performance is below threshold. An NEO could earn up to an additional 25% of his +overall payout after the modifier. +For each business unit, the Committee sets the revenue and adjusted pretax earnings +goals at substantially similar levels of difficulty as the goals for the Company and with a similar degree of difficulty as in prior years. The below table shows historical weighted performance levels achieved by the business units included as +part of an NEO performance bonus in 2020. +Historical Group Performance +2020 +2019 +2018 +2017 +2016 +International Group +Below Threshold +Between threshold and target +Between target and goal +Between target and goal +Between target and goal +eCommerce +Between threshold and target +Between target and goal +Between threshold and target +Between target and goal +Between threshold and target +To determine a fair and equitable starting point to +assess the performance portion of the bonus plan, the Committee felt it important to consider and understand the significant impact of the pandemic, which was not factored into the targets as originally set, on the outcome of the bonus plan that +includes just over 1,000 employees. If no adjustments were made to acknowledge the impact of the pandemic, no payouts for the performance portion of the bonus plan would have been earned despite the performance being driven by reduced consumer +spending, economic uncertainty, and reduced traffic in brick-and-mortar stores (both the Company’s and third-party retailers selling Company products) due to lockdowns. +To isolate and neutralize the impact of the COVID-19 pandemic, as discussed above, the +Committee used pro-forma results for revenue and pretax earnings for fiscal year 2020 based upon actual Company performance through March 1, 2020, and trends and projected performance for the remainder of the year as existed on March 1, 2020. +These adjustments resulted in pro-forma revenue of $2.362 billion and pretax earnings of $243.9 million for fiscal year 2020 as compared to revenue of $1.791 billion and pretax earnings of $92.4 million without taking into account the COVID-19 +adjustment. +In February 2021, the Committee evaluated the Company’s performance for 2020 against +the criteria set forth above and certified the Company's performance compared to the Company performance criteria described above. The Committee certified that for purposes of the fiscal year 2020 annual performance bonus plan, the Company’s +adjusted revenue was approximately $2.362 billion, and the Company’s adjusted pretax earnings were $243.9 million, which correspond to a blended payout level of 86% of target. In calculating adjusted revenue and adjusted pretax earnings, +consistent with the terms of the annual performance bonus plan, the Committee adjusted the results to exclude the impact of the COVID-19 pandemic on the Company’s fiscal year 2020 performance. +In determining payout levels, however, and despite performance being driven by factors +beyond the Company’s control, the Committee determined that it would use negative discretion to reduce the payouts under the pandemic adjusted performance from 86% of target to 45% of target, with similar adjustments to group performances. In +addition, the Committee used negative discretion to eliminate a 25% increase to the payout that would otherwise have applied under the terms of the plan based on strong Company performance against the order backlog modifier, as described below. +In its deliberations, the Committee took into consideration a number of factors, such as the broad-based application of the bonus plan to over 1,000 employees and the extraordinary nature of the pandemic to arrive at what it believed to be a fair +and balanced outcome. +2020 Performance +Overall Weighted Payout by Group +Wolverine Worldwide +Below Overall Threshold +45% +International Group +Below Overall Threshold +30% +eCommerce +Between Threshold and Target +90% +2021 PROXY STATEMENT +44 +TABLE OF CONTENTS +For 2020, the Company paid the NEOs the following amounts relating to the performance bonus. +Name +Performance Bonus +(as a % of Total Annual +Bonus Opportunity) 1 +Performance Bonus Opportunity +(as a % of an NEO's Target +Percentage) 1 +Performance Bonus +Percentage +Earned 1,2 +Performance +Bonus Paid 1,2 +Krueger +85% +0 - 200% +45% +$615,825 +Hoffman +85% +0 - 200% +45% +$ 84,407 +Jeppesen +85% +0 - 200% +45% +$131,484 +Stornant +85% +0 - 200% +45% +$144,585 +Zwiers +85% +0 - 200% +45% +$169,538 +1 +Not including positive or negative adjustments, if any, based on the backlog modifier discussed +below. +2 +Not including Individual Performance Bonus. +Individual Performance Bonus +At the same time Target Bonus Percentages are set, the CEO approves measurable personal +objectives for each NEO's individual bonus, other than for himself. The CEO submits, and the Committee reviews and approves, with such changes as it considers appropriate, the CEO's personal objectives. Such measurable personal objectives may +include goals such as executing strategies supporting the Company's vision, developing employees, growing new business initiatives, and driving operational excellence. Performance is evaluated by the CEO (or, in the case of the CEO, by the +Committee and the other independent directors) based on qualitative and quantitative factors. +Each personal objective is given a rating from “does not achieve” to “exceptional,” +with weighted performance ratings and payouts consistent with the following table: +Personal Objectives Rating +2020 Payout Level +Exceptional +200% +Far Exceeds +175% +Exceeds +150% +Achieves +100% +Achieves Some But Not All +50% +Does Not Achieve +0% +The CEO recommended, and the Committee approved, the 2020 cumulative weighted personal +objectives scores and payout levels for each of the NEOs other than himself. The Committee and the other independent directors of the Board met with the CEO at the end of the year to evaluate his performance against his personal objectives, +considering various factors. The Committee determined the cumulative weighted personal objectives score for the CEO and recommended to the independent directors of the Board the CEO's payout level. +Summaries of the specific personal objectives for each NEO are outlined in the table +below, along with performance information about each objective in parenthesis, based on the scale set forth above. +NEO +2020 Personal Objectives +Krueger +People (Between Achieves and Exceeds), growth (Between Achieves and Exceeds), and cash flow (Between +Far Exceeds and Exceptional) +Hoffman +Onboarding (Between Achieves and Exceeds) +Jeppesen +Process (Exceeds), personnel (Far Exceeds), sourcing (Exceeds), and cost (Far Exceeds) +Stornant +Financial response to COVID-19 pandemic (Exceptional), growth (Between Achieves and Exceeds), process +(Between Achieves and Exceeds), and personnel (Between Exceeds and Far Exceeds) +Zwiers +eCommerce (Between Exceeds and Far Exceeds), international growth (Between Achieves and Exceeds), and +personnel (Between Achieves and Exceeds) +2021 PROXY STATEMENT +45 +TABLE OF CONTENTS +This year’s personal objectives related to key initiatives intended to drive shareholder value, including: +• +Working toward a smooth CEO transition (Messrs. Krueger and Hoffman) and transition of business units (Messrs. Jeppesen and +Zwiers) +• +Financial response to the pandemic, including preserving and improving cash flow, generating near-record $309 million operating +cash flow for the year (Messrs. Krueger and Stornant) +• +Maintaining minimum revenue disruption and growing eCommerce revenue 50% during a pandemic (Messrs. Krueger, Stornant and Zwiers) +Name +Individual +Performance Bonus +(as a % of Total Annual Bonus +Opportunity) +2020 Individual Bonus +Opportunity +(as a % of an NEO's Target +Percentage) +2020 +Individual Bonus +Percentage Achieved +2020 +Individual +Bonus Paid +Krueger +15% +0 - 200% +129% +$ 312,018 +Hoffman +15% +0 - 200% +148% +$ 48,989 +Jeppesen +15% +0 - 200% +163% +$ 83,789 +Stornant +15% +0 - 200% +155% +$ 87,885 +Zwiers +15% +0 - 200% +142% +$ 80,248 +Backlog Modifier +The Committee maintained a backlog modifier for 2020 to continue to align with the +Company's focus on revenue growth. The Committee set the following backlog modifier for 2020. As described below, the Committee used negative discretion and did not apply a backlog modifier that would have increased payout by 25%. +Company and Brand/Group Backlog 1,2 +Exceeded Backlog Growth Target ++2x +Achieved Backlog Growth Target +No Adjustment +Did Not Achieve Backlog Growth Target +-2x +1 +Times the % increase or decrease in backlog +2 +Modifier adjustments will not fall below -25% or exceed 25% +At the Company and Brand/Group levels, a 2x modification was to be applied to each +percentage increase (positive modification) or decrease (negative modification) above or below a threshold increase level, capped at +/- 25%, based on average backlog at the end of the last three weeks of the 2020 fiscal year compared to the same +periods during the 2019 fiscal year. The Committee determined that backlog performance against the modifier qualified for a 25% increase in annual bonus based on the above factors. The Committee used negative discretion, however, to eliminate the +25% increase that otherwise would have applied based on the backlog modifier. +2021 PROXY STATEMENT +46 +TABLE OF CONTENTS +Each NEO's total annual bonus opportunity for 2020 ranged from 0% to 200% of the +Target Bonus Percentage before applying the backlog modifier. The accompanying table shows the aggregate annual incentive compensation payout earned by each NEO for 2020, as well as the portion of that aggregate number that is attributable to the +performance bonus and individual performance bonus. For Mr. Hoffman, the payout was prorated based on his hire date. +Krueger +140% +15% +85% +$615,825 +$312,018 +$927,843 +58% +Hoffman +85% +15% +85% +$84,407 +$ 48,989 +$133,396 +60% +Jeppesen +55% +15% +85% +$131,484 +$ 83,789 +$215,273 +63% +Stornant +60% +15% +85% +$144,585 +$ 87,885 +$232,470 +62% +Zwiers +55% +15% +30% +55% 2 +$169,538 +$ 80,248 +$249,786 +66% +1 +Based on adjusted revenue and pretax earnings performance criteria for the Company, as described +above under “ Annual Bonus — Performance Bonus .” +2 +Based on revenue and pretax earnings as the performance criteria for: eCommerce (25%), and +International (30%). +3 +The total payout for each NEO was reduced by the following amount based on the Committee's use +of negative discretion applied to pro-forma performance and in not applying the 25% backlog modifier increase: Mr. Krueger $947,875, Mr. Hoffman $131,474, Mr. Jeppesen $206,669, Mr. Stornant +$226,198 and Mr. Zwiers $290,586. +Overall NEO annual bonus paid out below target levels, including for the CEO, in a year +when the Company's TSR performance was at the 59 th percentile of its peer group. Further, the following graph shows the CEO's target bonus opportunity compared to +his actual bonus paid over the last three years, which demonstrates the Company's pay for performance philosophy in action. There is clear directional alignment between the Company's TSR performance and the CEO's annual bonus achievement over +this period, during which the Company's TSR performance was at the 77 th percentile of its current peer group. +2021 PROXY STATEMENT +47 +TABLE OF CONTENTS +LONG-TERM INCENTIVE COMPENSATION +In 2020, each NEO had the opportunity to earn long-term incentive compensation comprised +of a mix of performance share units and time-based restricted stock unit awards. The 2020 grants were initially based on the following: +Key Factors +Performance Share Metrics 1 +Performance Share +Units +• +Performance share units are based on performance criteria covering three-year periods +• +Fully diluted adjusted EPS (65%) +• +Awards balance focus on near term profitability with longer term shareholder value creation +• +Adjusted Business Value Added (“BVA”) 2 (35%) +• +Potential up/down adjustment based relative TSR Measure +• +TSR adjustment for top/bottom quartile TSR vs. Russell 3000 +Time-Based Restricted Stock Unit Awards +• +Encourages employee retention and rewards increases in stock price +1 +EPS is calculated on a fully diluted basis and EPS and BVA are each adjusted to account for and +exclude the effects of acquisitions, divestitures, accounting changes, restructuring, or other similar special charges or extraordinary items excluded by the Committee, including foreign +exchange. +2 +BVA is calculated by starting with operating income determined in accordance with U.S. +generally accepted accounting principles (“GAAP”), and then reducing operating income by (1) an amount for income taxes where the effective tax rate used to calculate the income tax amount is +determined in accordance with GAAP (adjusted consistent with EPS adjustments, as described above), and (2) a capital charge equal to a 14 point average of “net operating assets” during the +fiscal year (with “net operating assets” defined as the net of trade receivables (net of reserves), inventory (net of reserves), other current assets, property, plant and equipment, trade payables and accrued liabilities) multiplied by 10%. +2021 PROXY STATEMENT +48 +TABLE OF CONTENTS +2018-2020 Performance Stock Units +The following table lists the performance levels set by the Committee for performance +stock unit awards granted for the 2018-2020 performance period, the vesting of which occurred on February 9, 2021 following the Committee's certification of 2018-2020 financial results. +Performance Level +(Percentage of Target Payout) +Cumulative EPS for the 2018-2020 period +Cumulative BVA for the 2018-2020 period +(in millions) +Threshold (50%) +$6.24 +$536.4 +Target (100%) +$6.63 +$590.2 +Goal (150%) +$7.02 +$644.0 +Stretch (200%) +$7.41 +$702.8 +In February 2021, the Committee evaluated and certified the Company's performance for +the 2018-2020 performance period against the criteria set forth in the table above, with 2020 results adjusted to isolate and neutralize the impact of the pandemic, using the same methodology and process and for the same reasons described above +on page 44 with respect to the 2020 annual performance bonus. The 2018-2020 PSU payout was 60% of target, reflecting a weighted payout based on the final adjusted 3-year EPS of $6.57 (92% payout x 65% weighting) plus a 0% +weighted payout attributable to the BVA portion of the award due to adjusted BVA of $495.4 million falling below the required threshold (0% payout x 35% weighting). During the 2018-2020 performance period, the Company's TSR performance against +the Russell 3000 Index was at the 49th percentile so no positive or negative TSR adjustment was made. +The blended payout at 60% of target for the 2018-2020 performance period was slightly +lower than the Company’s pre-pandemic performance for the first two fiscal years of the performance period, reinforcing the appropriate nature of the adjustments made with respect to 2020 performance. +The following table lists the number of stock units that vested for each NEO under the +2018-2020 performance stock unit grant. In calculating the number of stock units that vest, the Company uses the stock price on the date of the grant, which results in the NEOs bearing the risk of stock price performance during the performance +period. +Name +Stock Units Vesting (#) +Krueger +76,154 +Hoffman +4,840 +Jeppesen +9,201 +Stornant +10,966 +Zwiers +10,049 +Mr. Hoffman’s award and payout for the 2018-2020 period was prorated based on his hire +date. Upon his hire, Mr. Hoffman was also awarded PSU grants for the 2019-2021 and 2020-2022 performance periods using the same proration method. The Committee determined to make these grants as part of Mr. Hoffman’s initial compensation package +because they provide weighting toward performance-based compensation elements and aligned his goals with other participants for these performance periods, an important factor given the Company’s previously-stated expectation that he will be +promoted to Chief Executive Officer of the Company. Neither the 2019-2021 nor the 2020-2022 PSU awards are currently outstanding, as described below. All current awards relate to periods during which Mr. Hoffman was fully employed by the Company. +2020 Performance Stock Unit Awards +In the beginning of 2020, the Committee evaluated each NEO's long-term incentive target +payout opportunity expressed as a dollar amount at target grant value for the grant of performance shares for the 2020-2022 period. Like performance shares granted for the 2019-2021 performance period, performance units were originally granted as +eligible to vest based on achievement of adjusted constant-currency EPS goals (weighted 65%) and adjusted constant-currency BVA goals (weighted 35%). For the 2020-2022 performance period, the Committee included a relative TSR modifier that +provides a 25% positive adjustment for TSR performance in the top quartile of the Russell 3000 Index and a 25% negative adjustment for performance in the bottom quartile of the Index. +2021 PROXY STATEMENT +49 +TABLE OF CONTENTS +Name +2020-2022 Target 1 +Krueger +$4,042,500 +Hoffman +$1,586,667 +Jeppesen +$488,400 +Stornant +$579,120 +Zwiers +$533,400 +1 +See footnote 3 to the Summary Compensation Table for the grant date fair value of these awards, which reflects an accounting valuation of the effect of the TSR modifier. +The Company accrues, but does not pay, any dividends on any performance units during +the performance period. Once the Committee certifies the Company's performance compared to the pre-determined performance criteria, the restrictions on some, all, none, or multiple of the performance share units awarded to each NEO will vest, and +the NEO will receive accrued dividends only on the shares actually earned. +The Committee goes through a rigorous process in setting performance targets, including +a careful review of the Company's prior year business and financial performance, current year operating plan and future expectations. To achieve target level EPS and BVA performance would require upper-single digit compounded annual growth +percentages over the performance period based on 2019 actual performance. +COVID-19 Impact on 2019-2021 and +2020-2022 Performance Stock Unit Grants +In February 2021, the Compensation Committee reviewed the impact of the COVID-19 +pandemic on the performance stock units previously granted for the 2019-2021 performance period and the 2020-2022 performance period, and determined that, due to global lockdowns and other effects of the pandemic, which were not factored into the +targets as initially set, it is unlikely any payout would be earned under these awards, despite the Company’s extensive and effective COVID-19 mitigation efforts (see pages 38 - 39 for additional detail) +and 77th percentile relative TSR ranking for the 2018-2020 period as compared to its Peer Group. +Given the ongoing impacts of the COVID-19 pandemic, the continued uncertainty of the +effects of the pandemic on the performance metrics originally established for 2021 and 2022, and to ensure alignment between the Company’s NEOs, other plan participants and shareholders, the Committee determined that it was in the best interest +of the Company’s shareholders to cancel the existing 2019-2021 and 2020-2022 awards and issue new awards, with a substantially lower payout opportunity for continuing Plan participants, while still requiring performance conditions be achieved for +any payout. These new awards: +• +are substantially less than the original award potential for the 2019-2021 cycle, vesting based on the achievement of a +performance goal tied to revenue growth in 2021, and with payout generally capped at no greater than 60% of the maximum payout that could have been earned under the original award; +• +are substantially less than the original award potential for the 2020-2022 cycle, vesting based on the achievement of a +performance goal tied to revenue growth in 2021 and 2022, and with payout generally capped at no greater than 60% of the maximum payout that could have been earned under the original award; and +• +will require the named executive officers to hold any shares that are earned under each of the new awards (net of withholding +taxes) for at least 12 months following the vesting date of the applicable award. +In deciding on the approach above, the Committee engaged in extensive discussion and +review, including with advisors, regarding the most appropriate way to balance the following objectives: +• +Acknowledge the impact to shareholders through reduced overall opportunities compared to the original award; +• +Continue motivating and incentivizing the management team and aid in recruiting new talent when a significant portion of the +long-term incentives would generate no payout due to the impact of the pandemic; +• +Ensure stability of the management team during a previously announced CEO transition; and +• +Further focus the Company on revenue growth and capturing market share in the short term after pandemic setbacks that affected +the entire industry. +The Committee believes that the actions described above help to accomplish these +objectives. The new awards are 100% contingent on revenue growth performance goals, with the ultimate payout generally capped at no more than 60% of the previous award maximum. Finally, the +2021 PROXY STATEMENT +50 +TABLE OF CONTENTS +requirement to hold any earned shares enhances retention and alignment with +shareholders. In addition, revenue targets were set aggressively, with 2021 revenue at target (100%) set at 22% above 2020 actual revenue for both the 2021 period and the base year of the 2021-2022 period, with further revenue growth required in +2022 to maintain target performance for the aggregate 2021-2022 period. +The following table sets forth (i) the grant date fair market values of the previous +2019-2021 and 2020-2022 grants that are no longer in effect, (ii) the substantially lower grant date fair values of the new 2021 and 2021-2022 grants that the Committee awarded due to the impact of the COVID-19 pandemic, and (iii) the net +reduction of award opportunity to each NEO. +NEO +Previous 19-21 +Grant +Previous 20-22 +Grant +Total for +Previous 19-21 +and 20-22 +Grants +New 21 Grant +New 21-22 +Grant +Total for New +21 and 21-22 +Grants +Total reduction +in Award +Opportunity +Krueger +$4,042,500 +$4,042,500 +$8,085,000 +$2,425,500 +$2,425,500 +$4,851,000 +$3,234,000 +Hoffman 1 +$972,794 +$1,702,382 +$2,675,176 +$544,000 +$952,000 +$1,496,000 +$1,179,146 +Jeppesen 2 +N/A +N/A +N/A +N/A +N/A +N/A +N/A +Stornant +$579,120 +$579,120 +$1,158,240 +$360,000 +$360,000 +$720,000 +$438,240 +Zwiers +$533,400 +$533,400 +$1,066,800 +$320,000 +$320,000 +$640,000 +$426,800 +* +Amounts in table do not include any applicable actuarial adjustments to grant date fair market +value. +1 +Mr. Hoffman’s grant value differs for the two periods due to proration of the awards based on his +hire date. +2 +Because of Mr. Jeppesen’s previously announced retirement, he did not receive new awards for these +periods, so he is not included in the comparison. +Restricted Stock and Stock Unit Awards +The following table reflects the grant date value of the annual service-based restricted stock unit awards +granted to each NEO. +Name +2020 Time-vested +Restricted Stock Units +Krueger +$1,732,509 +Hoffman +$1,559,353 +Jeppesen +$ 325,609 +Stornant +$ 386,086 +Zwiers +$ 355,601 +The Committee generally grants annual equity awards at its regularly scheduled February +meeting, and the independent directors of the Board approve equity grants to the CEO generally on the same day that the Committee meets. Restricted stock units awarded vest 20% on the first and second anniversaries of the grant and 30% on the +third and fourth anniversaries. For Mr. Hoffman, $1,000,000 of his total time-vested restricted stock unit grant was made as a sign-on grant as part of the process of his recruitment to the position of President, Wolverine Worldwide. The grant +was made in part in view of equity grants of a greater value that Mr. Hoffman forfeited in connection with leaving his then-current employment to become President of Wolverine. These grants were made with standard four-year vesting terms like +other grants. +In April, at the height of the pandemic and with very little certainty regarding the +length and depth of the crisis, as an element of a broader cash conservation strategy, the management team decided to take salary reductions. In connection with these reductions, the Committee granted the following restricted stock awards to the +NEOs in lieu of salary cuts taken. Sixty percent of the shares underlying each restricted stock grant vested if the grant recipient was employed by the Company on December 23, 2020, and the remaining forty percent will vest if the grant recipient +is employed on April 17, 2021. +Name +April 2020 Time- +vested Restricted +Stock Awards +Krueger +$550,995 +Hoffman +N/A +Jeppesen +$209,625 +Stornant +$211,306 +Zwiers +$229,775 +2021 PROXY STATEMENT +51 +TABLE OF CONTENTS +BENEFITS +Retirement, Deferred Compensation and +Welfare Plans +The NEOs participate in Wolverine Worldwide's medical and dental plans and receive life +and disability insurance. In 2020, Messrs. Krueger, Jeppesen, Stornant and Zwiers also participated in the Wolverine Worldwide Employees' Pension Plan (a defined benefit plan) and the Wolverine World Wide, Inc. 409A Supplemental Executive +Retirement Plan (an unfunded, non-qualified plan). For a description of the benefits under Wolverine Worldwide's retirement plans, see “ Pension Plans and 2020 Pension Benefits ” below. +All full-time employees of the Company in the United States, including the NEOs, are +also eligible to participate in one of Wolverine's 401(k) Plans (the “401(k) Plan”). Pursuant to the 401(k) Plan, employees, including the NEOs, may elect to defer a portion of their salary and receive a Company match on eligible deferrals of up +to 3% of salary for 2020 (5.5% for those who do not participate in the Pension Plan), subject to limits set forth in the Internal Revenue Code of 1986, as amended. In 2016, the Company adopted the Wolverine Worldwide Executive Deferred +Compensation Plan (the “Deferred Compensation Plan”). This plan allows directors, executives and other eligible senior employees of the Company to elect to defer a portion of their eligible compensation. Wolverine Worldwide may, but need not, +credit a participant with an additional discretionary Company contribution. The Company adopted the Deferred Compensation Plan as a retention and recruitment tool to facilitate retirement savings and provide financial flexibility for key +employees, and because many of the companies with which it competes for executive talent provide similar plans to their key employees. For a description of the benefits under the Deferred Compensation Plan, see “ Non-qualified +Deferred Compensation ” below. +Perquisites +The Company provides limited perquisites to NEOs. The Company feels the perquisites are +necessary to provide a competitive total compensation package for each NEO. For details on perquisites, see footnote 6 to the “Summary Compensation Table” on page 57 . +POST-EMPLOYMENT COMPENSATION +Each NEO is party to an Executive Severance Agreement that provides for certain payments +and benefits upon termination of employment after a change in control of Wolverine Worldwide. The Board believes Executive Severance Agreements will motivate management to actively pursue a business transaction that is in the best interests of +the shareholders, even if it could ultimately result in his or her job elimination, and also will promote management stability during the transition period accompanying a change in control. Each NEO is eligible to receive compensation if his +employment is terminated within two years (Messrs. Hoffman, Jeppesen, Stornant and Zwiers) or three years (Mr. Krueger) following a change in control of Wolverine Worldwide. Even following a change in control, an NEO does not receive payment +under the Executive Severance Agreement if his employment terminates: +• +Due to death or retirement in accordance with Wolverine Worldwide's policy or as otherwise agreed, +• +For cause or disability, or +• +By resignation of the NEO, other than for “good reason,” which is discussed under the heading “Benefits Triggered by Termination +Other than For Cause or for Good Reason Not in Connection With a Change in Control” and the heading “Benefits Triggered Upon a Change in Control,” both under the heading “Potential Payments Upon Termination or Change in Control” +NEOs may also be eligible under Wolverine Worldwide's retirement plans or equity plans +to receive certain payments and benefits upon termination of employment or in connection with a change in control as described in the “ Potential Payments Upon Termination or Change in Control ” section of this Proxy Statement. +Mr. Krueger is also party to a 2008 Separation Agreement and Mr. Hoffman is also party +to a 2020 Employment Agreement under which each executive is eligible to receive certain payments and benefits if the Company terminates the executive's employment, even if not following a change in control, other than for “cause” or if the +executive terminates his employment for “good reason.” The Committee determined upon appointing Mr. Krueger as CEO and Mr. Hoffman as the President that, given the Company's strategic initiatives the Board asked each executive to lead, it was +appropriate for the Company to enter into such arrangement. +The Company includes accelerated retirement vesting provisions for equity awards, +provided certain conditions are met, and for the payout of a prorated annual bonus for a qualifying retirement more than six months into the fiscal year. Details on these provisions and information on benefits payable to Mr. Krueger under his +Separation Agreement and to each of the NEOs under the Executive Severance Agreements, as well as information on the other retirement and equity plans of Wolverine Worldwide, are included in the “ Potential +Payments Upon Termination or Change in Control ” section of this Proxy Statement. +2021 PROXY STATEMENT +52 +TABLE OF CONTENTS +SAY ON PAY ADVISORY VOTE +We asked shareholders to vote on a “say-on-pay” advisory vote on our executive +compensation in 2020. Shareholders expressed substantial support for the compensation of our named executive officers, with approximately 98% of the votes cast for the “say-on-pay” advisory vote. The Committee carefully evaluated the results of +the 2020 advisory vote. The Committee also considers many other factors in evaluating our executive compensation programs as discussed in this Compensation Discussion and Analysis, including the Committee's assessment of total shareholder return, +the interaction of our compensation programs with our corporate business objectives, evaluations of our programs by external consultants, and review of peer group and survey data, each of which is evaluated in the context of the Committee's +fiduciary duty to act as the directors determine to be in shareholders' best interests. While each factor bore on the Committee's decisions regarding our named executive officers' compensation, the Committee made no changes to our executive +compensation program and policies directly as a result of the 2020 say on pay advisory vote. +2021 PROXY STATEMENT +53 +TABLE OF CONTENTS +COMPENSATION SETTING PROCESS +Setting Targets +The Committee goes through a rigorous process in setting performance targets, including +a careful review of the Company's prior year business and financial performance, current year operating plan, and future expectations. The Committee engages with management in this process over several months leading up to setting final annual +bonus and three-year performance targets in February. +Competitive Philosophy and Competitive Market Data +When making compensation recommendations and decisions, the Committee considers the +CEO's assessment of the performance of each NEO, other than himself; the performance of the individual and the individual's respective business unit or function; the scope of the individual's responsibilities, years of experience with the Company +(or in similar positions with other companies), skills and knowledge; market compensation data; market and economic conditions; Company performance; retention considerations; and Wolverine Worldwide's compensation philosophy (collectively, the +“compensation factors”). The Committee considers these compensation factors both subjectively and objectively, and no single factor or combination of factors is determinative. With respect to CEO compensation, the Committee seeks to set +compensation in line with the anticipated market median for a given year. +The Committee uses market surveys and Peer Group (as defined below) information +provided by its compensation consultant as market reference points. The Committee also considers information the Company learns through recruiting NEOs and the experience levels and responsibilities of NEOs prior to joining the Company as +reference points in setting NEO compensation. +As part of its competitive data review in connection with determining 2020 +compensation, the Committee considered information presented by its consultant Frederic W. Cook & Co. (“FW Cook”) based on publicly-disclosed Peer Group information and on one published survey: the 2019 Willis Towers Watson (WTW) CDB +Executive Compensation Survey Report. +Peer Group +Below is the peer group used in late 2019 and early 2020 in connection with 2020 +compensation decisions. In determining the Peer Group, the Committee considered each potential peer company's industry, channels of distribution, revenue and market capitalization. The Company also considered the typicality of a company's pay +practices, excluding companies whose chief executive may not receive market compensation because of a founder relationship, family ownership position, or other similar relationships. +Abercrombie & Fitch Co. +Chico's FAS, Inc. +Foot Locker, Inc. +Hanesbrands Inc. +The Children's Place, Inc. +American Eagle Outfitters Inc. +Deckers Outdoor Corporation +G-III Apparel Group, Ltd. +Skechers USA, Inc. +Caleres, Inc. +Designer Brands, Inc. +Genesco Inc. +Tapestry, Inc. +Carter's, Inc. +Express, Inc. +Guess?, Inc. +Tailored Brands, Inc. +CEO Role +Within the framework of the Company's executive compensation program, the CEO recommends +the level of base salary, annual bonus, long-term incentive compensation, equity awards and other compensation components for his direct reports, including the other NEOs. The CEO bases his recommendation upon his assessment of the compensation +factors applicable to each NEO. The CEO considers these compensation factors both objectively and subjectively, and no single factor is determinative. The Committee discusses these recommendations with the CEO prior to setting the compensation +for each NEO, other than the CEO. The Committee, however, ultimately determines all compensation for NEOs other than the CEO, whose compensation is determined by the independent directors as a whole. +Compensation Consultant Role +FW Cook was first engaged as the Committee's independent compensation consultant in 2016 +and reports directly to the Committee. The Committee determines the scope of engagement and may replace the consultant or hire additional consultants at any time. The Committee has evaluated FW Cook's independence under the rules established by +the NYSE and has determined that FW Cook is “independent” as defined by NYSE rules. In addition, the Committee has evaluated whether the engagement of FW Cook raised any conflicts of interest and has determined that no such conflicts of interest +exist. +2021 PROXY STATEMENT +54 +TABLE OF CONTENTS +At the Committee's invitation, a representative of FW Cook generally attends all +Committee meetings and also communicates with the Committee Chair and management regularly between meetings. However, the Committee makes all decisions regarding NEO compensation. FW Cook provides various executive compensation services to the +Committee pursuant to a consulting agreement with the Committee. Generally, these services include advising the Committee on the principal aspects of the Company's executive compensation program, evolving industry practices, and providing market +information and analysis regarding the competitiveness of the Company's program design. +During 2020, FW Cook performed the following specific services: +• +Attended Committee meetings, as requested +• +Reviewed the Company's peer group and advised the Committee on the composition of the peer group +• +Reviewed survey data for competitive comparisons +• +Provided market data and recommendations on CEO and other NEO compensation +• +Advised the Committee on market trends related to compensation policies and programs +• +Proactively advised the Committee on best practice approaches for governance features of executive compensation programs +• +Reviewed the Compensation Discussion & Analysis and other executive compensation related disclosures included in the +Company's Proxy Statement +The total fees the Company paid to FW Cook for services to the Committee in 2020 were +$157,497, less than 1% of FW Cook's total consulting income during the same period. The Company did not pay or incur any other fees to or with FW Cook. +OTHER COMPENSATION POLICIES AND PRACTICES +NEO Stock Ownership Guidelines +Each NEO, as well as each non-employee director, must attain (and maintain) a +minimum stock ownership level (including owned shares, a certain level of performance and restricted shares and units, and the in-the-money value of vested stock options) prior to being able to gift or sell any Company stock. During 2020, each +NEO complied with the requirements of these guidelines. +Covered Positions +Guideline +CEO +6x Annual Salary +President +3x Annual Salary +Other NEOs +2x Annual Salary +Non-Employee Directors +6x Annual Cash Retainer +Stock Hedging and Pledging Policies +Under the Company's Insider Trading Policy, all directors, officers and other employees +are prohibited from engaging in any hedging transactions involving Company securities beneficially owned by them. The Company also considers it inappropriate for any such person to engage in speculative transactions in the Company's securities, +including short sales, publicly traded options, margin accounts and pledges and standing and limit orders. Also, all directors, officers and other employees are prohibited from pledging Company securities as collateral for a loan. +Clawback Policy +The Company has adopted a clawback policy which empowers the Board or a committee of the +Board to seek recovery of specified incentive compensation received by executive officers under specific circumstances where there is a material restatement of the Company's financial results that would have led to a lower level of incentive +compensation payout. +Impact of Accounting and Tax Treatments on Compensation +The Tax Cuts and Jobs Act on December 22, 2017 eliminated the Section 162(m) +performance-based compensation exemption, so the grants and awards made in 2020 are not eligible for such exemption. Even prior to the elimination of the performance-based compensation exemption, Wolverine Worldwide did not require all of its +compensation programs, including programs under the Company's equity compensation plans, to fit the performance-based compensation exemption under Section 162(m) because it believes it is important to preserve flexibility in administering +compensation programs in a manner designed to promote varying corporate goals. Wolverine Worldwide has and in the future may continue to pay compensation that is limited in whole or in part as to tax deductibility. +2021 PROXY STATEMENT +55 +TABLE OF CONTENTS +Compensation Committee +Report +The Committee has reviewed and discussed with management the information provided under +the heading “Compensation Discussion and Analysis.” Based on this review and discussion, the Committee recommended to the Board of Directors that the Company include the Compensation Discussion and Analysis section in this Proxy Statement and +incorporate it by reference into the Company's Annual Report on Form 10-K. +Respectfully submitted, +Nicholas T. Long (Chair) +Jeffrey M. Boromisa +Gina R. Boswell +William K. Gerber +David W. McCreight +Compensation Committee Interlocks and Insider Participation. During fiscal year 2020, none of the members of the Compensation Committee was an officer or employee of the Company, was a former officer of the Company, nor had a +relationship with the Company requiring disclosure as a related party transaction under Item 404 of Regulation S-K of the Securities Act of 1933. None of the Company's executive officers served on the compensation committee or board of directors of another entity whose executive officer(s) served as a director on the Company's Board or on the +Compensation Committee. +2021 PROXY STATEMENT +56 +TABLE OF CONTENTS +Summary Compensation Table +Blake W. Krueger +Chairman and CEO +2020 +$ 751,923 +$6,652,134 +$ 927,843 +$1,151,272 +$36,319 +$9,519,491 +2019 +$1,150,000 +$6,338,194 +$ 420,192 +$1,482,641 +$36,247 +$9,427,274 +2018 +$1,150,000 +$6,169,776 +$1,513,758 +— +$36,448 +$8,869,982 +Brendan Hoffman +President, +Wolverine +Worldwide +2020 +$ 259,615 +$300,000 2 +$4,752,955 +$ 133,396 +— +$58,083 +$5,504,049 +Michael Jeppesen +President, Global +Operations Group +2020 +$ 473,558 +$1,063,048 +$ 215,273 +$ 602,259 +$28,653 +$2,382,791 +2019 +$ 621,538 +$ 853,423 +$ 184,111 +$ 555,995 +$29,241 +$2,244,308 +2018 +$ 603,538 +$ 861,715 +$ 326,971 +$ 171,560 +$30,248 +$1,994,032 +Michael D. Stornant +Senior Vice President, +CFO, Treasurer and +Chief Accounting Officer +2020 +$ 477,346 +$1,223,257 +$ 232,470 +$1,113,604 +$31,141 +$3,077,818 +2019 +$ 624,231 +$1,011,951 +$ 105,440 +$1,393,117 +$30,956 +$3,165,695 +2018 +$ 593,077 +$1,037,442 +$ 370,085 +$ 568,381 +$31,850 +$2,600,835 +James D. Zwiers +Executive Vice +President +2020 +$ 519,019 +$1,161,805 +$ 249,786 +$1,253,808 +$39,634 +$3,224,052 +2019 +$ 682,115 +$ 932,050 +$ 166,689 +$1,045,809 +$39,837 +$2,866,500 +2018 +$ 667,692 +$ 941,115 +$ 322,781 +— +$40,386 +$1,971,974 +1 +Includes any amounts deferred under the Company's qualified 401(k) plan or Deferred Compensation +Plan. +2 +Reflects a one-time sign-on bonus paid in connection with recruiting Mr. Hoffman for the +position of President, Wolverine Worldwide, and subject to an obligation to return the bonus under certain conditions described in his employment agreement. +3 +Includes the grant date fair value of restricted stock unit awards, restricted stock awards, and +performance unit awards, as follows for 2020: +Name +Service-based Restricted Stock Unit +Value +April Restricted Stock +Award Grant Value +Performance Unit +Value* +Total +Total, +Excluding +Forfeited +Performance +Unit Grant +Krueger +$1,732,509 +$550,995 +$4,368,630 +$6,652,134 +$2,283,504 +Hoffman +$1,559,353 +— +$3,193,602 +$4,752,955 +$1,559,353 +Jeppesen +$ 325,609 +$209,625 +$ 527,814 +$1,063,048 +N/A +Stornant +$ 386,086 +$211,306 +$ 625,865 +$1,223,257 +$ 597,392 +Zwiers +$ 355,601 +$229,755 +$ 576,449 +$1,161,805 +$ 585,356 +2021 PROXY STATEMENT +57 +TABLE OF CONTENTS +* +These awards were forfeited in 2021 and so have no payout opportunity for this award, as +described more fully in the CD&A section of this proxy statement. Because of Mr. Jeppesen's previously announced retirement, he did not receive new awards. +Restricted stock units and awards were valued using the closing market price of Wolverine +Worldwide common stock on the date of the grant of the respective award. The April Restricted Stock Grant Value column in the table above represents service-based restricted stock awards made in +April 2020 in view of salary cuts taken in 2020 due to the COVID-19 pandemic. These grants were made to incentivize, protect and stabilize a broad management team, including the NEOs, during the +time the Company was working to navigate the impacts of the COVID-19 pandemic. Sixty percent of the shares underlying each such restricted stock grant vested if the grant recipient was employed by the Company on December 23, 2020, and the remaining forty percent will vest if the grant recipient is employed on April 17, 2021. Performance units were valued using the closing market price of Wolverine Worldwide common stock on the date of grant of the respective award and assuming target performance +for all performance periods, with an adjustment to value for the TSR modifier where applicable, all consistent with ASC Topic 718. The target performance unit grant values without accounting +adjustments are as set forth on page 50 : ($4,042,500 for Mr. Krueger, $1,586,667 for Mr. Hoffman; $488,400 for Mr. Jeppesen, $579,120 for Mr. Stornant, and $533,400 for Mr. Zwiers (all with de minimis differences based on rounding up to the nearest unit)). Assuming maximum payout, the aggregate +grant date fair value of performance units awarded in 2020 for each NEO (and, in parenthesis, the maximum value is combined with the grant date fair value of restricted stock unit awards and +restricted stock awards for 2020) would have been: $26,211,780 ($28,495,284) for Mr. Krueger; $19,161,616; ($20,720,971) for Mr. Hoffman; $3,166,884 ($3,722,248) for Mr. Jeppesen; $3,755,190 +($4,141,276) for Mr. Stornant; and $3,458,694 ($4,023,920) for Mr. Zwiers. Restrictions on such performance unit awards will lapse in the February following the last year of the applicable +performance period, if at all, based on the Company's performance for the period (capped at 200%), potential +/- 25% adjustments for relative TSR performance and target bonus level over the +three-year performance period. For Mr. Hoffman, performance unit grants were prorated for each period granted based on his hire date . Mr. Hoffman was +granted prorated awards for open performance periods to align his interests with the rest of the executive team, while adjusting the size of his payout opportunity proportionate to his time +worked during the period. The Committee determined to make these grants as part of Mr. Hoffman’s initial compensation package because they provide weighting toward performance-based compensation elements and aligned his goals with other participants for these performance periods, an important factor given the Company’s previously-stated expectation +that he will be promoted to Chief Executive Officer of the Company. The actual value of shares that vest is also dependent on the stock price at the time of vesting. For additional valuation +assumptions, see the Stock Based Compensation footnote to Wolverine Worldwide's Consolidated Financial Statements for the fiscal year ended January 2, 2021 included in its Form 10-K for this +year. +4 +Reflects the sum of performance bonus and individual bonus amounts, as adjusted by any +applicable modifier, earned in 2020, 2019 and 2018, respectively, and paid in 2021, 2020 and 2019 respectively. For Mr. Hoffman, the 2020 payout was prorated based on his hire date. +5 +All amounts in this column reflect, where applicable, the aggregate change in the actuarial +present value of the accumulated benefits under the Wolverine Worldwide Employees' Pension Plan (“Pension Plan”) and Wolverine World Wide, Inc. 409A Supplemental Executive Retirement Plan +(“SERP”) for Messrs. Krueger, Jeppesen, Stornant and Zwiers. The amounts in the table were determined using assumptions consistent with those used in Wolverine Worldwide's Consolidated Financial +Statements for each respective year. See the “Pension Plans and 2020 Pension Benefits” section starting on page 66 . Mr. Krueger’s increase in pension value is attributable solely to a year-over-year decrease in the actuarial discount rate, and the change in discount rate accounts +for 50-70% of each of the other participating NEO’s increase in pension value amount. +6 +The amounts listed in this column for 2020 include Wolverine Worldwide's contributions to the +accounts of the NEOs under Wolverine Worldwide's 401(k) plans and the Wolverine Worldwide Deferred Compensation Plan, payments made by Wolverine Worldwide for the premiums on certain life +insurance policies, tax, housing/relocation expenses and estate planning services and health care reimbursements in the amounts listed in the table below. The deferred compensation plan contribution to Mr. Hoffman is due to his not being a participant, as the other NEOs are, in the Company's Pension plan. +Name +401(k) Match +Tax and Estate +Planning +Health +Life Insurance +Premiums +Moving/Living +Expenses +Deferred +Compensation +Plan Contribution +Krueger +$8,550 +$8,490 +$17,809 +$1,470 +— +— +Hoffman +$3,019 +$3,520 +$5,114 +$264 +$23,725 1 +$22,441 +Jeppesen +$8,550 +— +$19,388 +$715 +— +— +Stornant +$8,550 +— +$19,321 +$3,270 +— +— +Zwiers +$8,550 +$8,490 +$19,388 +$3,206 +— +— +1 +Temporary housing and costs related to relocation. +2021 PROXY STATEMENT +58 +TABLE OF CONTENTS +Grants of Plan-Based Awards in +Fiscal Year 2020 +The following table provides information concerning each grant of an award made to the NEOs in fiscal year +2020: +Krueger +Annual Bonus +$805,000 +$1,610,000 +$4,025,000 +FY20-FY22 +Performance +Units +02/05/2020 +61,530 +123,060 +738,360 +$4,368,630 +Restricted +Units +02/05/2020 +52,740 +$1,732,509 +Restricted +Awards +04/17/2020 +27,536 +$ 550,995 +Hoffman +Annual Bonus +$110,337 +$ 220,673 +$ 551,683 +FY18-FY20 +Performance +Units 5 +10/26/2020 +4,328 +8,655 +51,930 +$ 266,141 +FY19-FY21 +Performance +Units 5 +10/26/2020 +17,310 +34,619 +207,714 +$1,064,534 +FY20-FY22 +Performance +Units 5 +10/26/2020 +30,292 +60,583 +363,498 +$1,862,927 +Restricted +Units +10/26/2020 +55,493 +$1,559,353 +Jeppesen +Annual Bonus +$171,875 +$ 343,750 +$ 859,375 +FY20-FY22 +Performance +Units +02/05/2020 +7,434 +14,868 +89,208 +$ 527,814 +Restricted +Units +02/05/2020 +9,912 +$ 325,609 +Restricted +Awards +04/17/2020 +10,476 +$ 209,625 +Stornant +Annual Bonus +$189,000 +$ 378,000 +$ 945,000 +FY20-FY22 +Performance +Units +02/05/2020 +8,815 +17,630 +105,780 +$ 625,865 +Restricted +Units +02/05/2020 +11,753 +$ 386,086 +Restricted +Awards +04/17/2020 +10,560 +$ 211,306 +Zwiers +Annual Bonus +$188,375 +$ 376,750 +$ 941,875 +FY20-FY22 +Performance +Units +02/05/2020 +8,119 +16,238 +97,428 +$ 576,449 +Restricted +Units +02/05/2020 +10,825 +$ 355,601 +Restricted +Awards +04/17/2020 +11,482 +$ 229,755 +1 +Estimated payout levels relating to the performance bonus and individual bonus. Maximum amount +assumes stretch revenue and pretax earnings performance and achievement of the maximum backlog adjustment. For a description of these bonuses and the payouts under them, see pages 43 - 48 . +2021 PROXY STATEMENT +59 +TABLE OF CONTENTS +2 +Estimated payout levels as of the grant date of performance stock units granted under the Stock +Incentive Plan of 2016, as amended (the “Stock Incentive Plan of 2016”) for the 2020-2022 performance period, and, for Mr. Hoffman, the 2018-2020 and 2019-2021 periods, as discussed in note 5, +below. Restrictions on such performance unit awards typically lapse in the February following the last year of the applicable performance period, if at all, based on the Company's performance for the period (capped at 200%), potential +/- 25% adjustments for relative TSR performance, and target bonus levels over the three-year performance period. The actual +value of shares that vest is also dependent on the stock price at the time of vesting. The Company accrues, but does not pay, dividends on the performance shares during the performance period. +At the end of the applicable performance period, the Company will pay to the NEO the accrued dividends (if any) on the performance units that vest. The Target performance unit grant values +without accounting adjustments as set forth on page 50 : ($4,042,500 for Mr. Krueger; $1,586,667 for Mr. Hoffman; $488,400 for Mr. Jeppesen; $579,120 for Mr. Stornant; and $533,400 for Mr. Zwiers (all with de minimis differences based on rounding up to the nearest unit)). +For a description of the performance units granted in 2020 under the Stock Incentive Plan of 2016, see pages 49 - 51 . +3 +The Company awarded service-based restricted stock unit awards in February 2020 under the Stock +Incentive Plan of 2016 to all NEOs. 20% of the units received under the awards reflected in this column vest on each of the first and second anniversaries of the date of grant of the award and +30% on the third and fourth anniversaries of the date of grant of the award. All restricted stock units vest upon an NEO's death, disability or retirement. The Company also awarded service-based +restricted stock awards in April 2020 in view of salary cuts taken in 2020 due to the COVID-19 pandemic. These grants were made to incentivize, protect and stabilize a broad management team, including the NEOs, during the time the Company was working to navigate the impacts of the COVID-19 pandemic. Sixty percent of the shares underlying +each restricted stock grant vested if the grant recipient was employed by the Company on December 23, 2020, and the remaining forty percent will vest if the grant recipient is employed on +April 17, 2021. Holders of restricted stock units and awards are entitled to receive dividend equivalents on restricted stock units and awards. +4 +Represents the award date fair value for performance stock units and service-based restricted +stock and restricted stock unit awards made in fiscal year 2020, determined as described in footnote 3 to the +“Summary Compensation Table.” Messrs. Krueger, Hoffman, Stornant and Zwiers forfeited their FY20-FY22 performance unit awards and so have no payout opportunity for this award, as described more +fully in the CD&A section of this proxy statement. +5 +Mr. Hoffman's awards were prorated for each respective period based on his hire date. +Mr. Hoffman was granted prorated awards for open performance periods to align his interests with the rest of the executive team, while adjusting the size of his payout opportunity proportionate +to his time worked during the period. The Committee determined to make these grants as part of Mr. Hoffman’s initial compensation package because they provide weighting toward performance-based +compensation elements and aligned his goals with other participants for these performance periods, an important factor given the Company’s previously-stated expectation that he will be promoted to Chief Executive Officer of the Company. +2021 PROXY STATEMENT +60 +TABLE OF CONTENTS +Outstanding Equity Awards at +2020 Fiscal Year-End +The following table provides information concerning options and stock awards that have +not vested for each NEO outstanding as of January 2, 2021: +Krueger +Various +220,112 +$6,878,500 +Various +76,154 +$2,379,813 +02/06/13 +200,778 +$21.48 +02/05/23 +02/11/14 +225,284 +$27.13 +02/10/24 +02/11/15 +220,988 +$28.00 +02/10/25 +02/10/16 +425,076 +$16.51 +02/09/26 +Hoffman +10/26/20 +55,493 +$1,734,156 +10/26/20 +4,840 +$ 151,250 +Jeppesen +Various +54,373 +$1,699,156 +Various +9,201 +$ 287,531 +02/10/16 +51,988 +$16.51 +02/09/26 +Stornant +Various +57,446 +$1,795,188 +Various +10,966 +$ 342,688 +02/08/12 +12,640 +$19.92 +02/07/22 +02/06/13 +13,590 +$21.48 +02/05/23 +02/11/14 +11,912 +$27.13 +02/10/24 +02/11/15 +11,765 +$28.00 +02/10/25 +06/12/15 +12,687 +$29.31 +06/11/25 +02/10/16 +70,948 +$16.51 +02/09/26 +2021 PROXY STATEMENT +61 +TABLE OF CONTENTS +Zwiers +Various +54,530 +$1,704,063 +Various +10,049 +$314,031 +02/06/13 +38,800 +$21.48 +02/05/23 +02/11/14 +34,009 +$27.13 +02/10/24 +02/11/15 +33,514 +$28.00 +02/10/25 +02/10/16 +64,465 +$16.51 +02/09/26 +2021 PROXY STATEMENT +62 +TABLE OF CONTENTS +1 +The following table sets forth the vesting dates for the unvested service-based restricted stock +or stock unit awards of each NEO as of January 2, 2021: +Named +Executive +Officer +Vesting +Date +Number of Shares to Vest +Krueger +02/05/21 +10,548 +02/06/21 +9,954 +02/07/21 +16,319 +02/08/21 +20,759 +02/10/21 +63,144 +04/17/21 +11,014 +02/05/22 +10,548 +02/06/22 +14,931 +02/07/22 +16,319 +02/05/23 +15,822 +02/06/23 +14,932 +02/05/24 +15,822 +Hoffman +10/26/21 +13,007 +10/26/22 +13,008 +10/26/23 +14,739 +10/26/24 +14,739 +Jeppesen +02/05/21 +1,982 +02/06/21 +1,871 +02/07/21 +3,067 +02/08/21 +3,930 +02/10/21 +7,723 +02/10/21 +10,000 +04/17/21 +4,190 +07/13/21 +5,000 +02/05/22 +1,982 +02/06/22 +2,806 +02/07/22 +3,067 +02/05/23 +2,974 +02/06/23 +2,807 +02/05/24 +2,974 +2021 PROXY STATEMENT +63 +TABLE OF CONTENTS +Named +Executive +Officer +Vesting +Date +Number of Shares to Vest +Stornant +02/05/21 +2,350 +02/06/21 +2,218 +02/07/21 +3,692 +02/08/21 +4,671 +02/10/21 +10,539 +02/10/21 +10,000 +04/17/21 +4,224 +02/05/22 +2,351 +02/06/22 +3,328 +02/07/22 +3,693 +02/05/23 +3,526 +02/06/23 +3,328 +02/05/24 +3,526 +Zwiers +02/05/21 +2,165 +02/06/21 +2,043 +02/07/21 +3,349 +02/08/21 +4,665 +02/10/21 +9,576 +02/10/21 +10,000 +04/17/21 +4,592 +02/05/22 +2,165 +02/06/22 +3,065 +02/07/22 +3,350 +02/05/23 +3,247 +02/06/23 +3,065 +02/05/24 +3,248 +2 +The dollar values are calculated using a per share stock price of $31.25, the closing price of +Wolverine Worldwide common stock on January 1, 2021, the last business day of fiscal year 2020. +3 +Following the end of the applicable three-year performance period, performance units vest +depending upon the Company's achievement of the relevant EPS and BVA performance criteria. Shares actually vested for the 2018-2020 cycle are included in the “Number of Shares or Units of Stock +That Have Not Vested” column. Performance below threshold was assumed for the 2019-2021 cycle and the 2020-2022 cycle. +2021 PROXY STATEMENT +64 +TABLE OF CONTENTS +Option Exercises and Stock +Vested in Fiscal Year 2020 +Option Awards +Stock Awards +Number of Shares +Acquired on Exercise +(#) +Value Realized +On Exercise 1 +($) +Number of Shares +Acquired on Vesting +(#) +Value Realized +On Vesting 2 +($) +Krueger +— +— +470,242 +$15,301,679 +Hoffman +— +— +— +— +Jeppesen +— +— +71,622 +$ 2,292,653 +Stornant +12,300 +$ 79,023 +79,671 +$ 2,564,470 +Zwiers +59,800 +$625,176 +77,912 +$ 2,523,438 +1 +The Company calculates the dollar values by multiplying the number of shares of common stock +acquired upon exercise by the difference between the exercise price and the closing price of the Company common stock on the exercise date. +2 +The Company calculates the dollar values using the closing price of Wolverine Worldwide common +stock on the date of vesting. +2021 PROXY STATEMENT +65 +TABLE OF CONTENTS +Pension Plans and 2020 +Pension Benefits +Wolverine Worldwide maintains the following defined benefit retirement plans covering +Messrs. Krueger, Jeppesen, Stornant and Zwiers: (1) the Wolverine Worldwide Employees' Pension Plan (“Pension Plan”), which is a funded and tax-qualified defined benefit plan under the Internal Revenue Code that covers eligible employees, and (2) +the Wolverine World Wide, Inc. 409A Supplemental Executive Retirement Plan (“SERP”), which is an unfunded, non-qualified plan that covers individuals recommended by the CEO and approved by the Compensation Committee. +QUALIFIED PENSION PLANS +Participants vest in the Pension Plan after five years of qualifying service. Subject to +the limitations imposed by the Internal Revenue Code, the Pension Plan generally pays a monthly benefit in an amount equal to a percentage of the participant's final average monthly earnings multiplied by his or her number of years of service. +For purposes of this benefits formula, the Pension Plan caps years of service at 25 (30 for non-SERP participants), and the percentages of final average monthly earnings are 2.4% for Mr. Krueger and 2.0% for Messrs. Jeppesen, Stornant and Zwiers. +“Earning” as used in this Pension Plan formula generally includes all W-2 compensation other than taxable fringe benefits and deferred compensation, and for 2020 was capped at $285,000, the IRS limit applicable to tax qualified plans. +Upon retirement, a participant may elect to receive the benefit in the form of a life +annuity, 5 or 10-year certain and life annuities, or joint and 50%, joint and 75%, or joint and 100% survivor annuities. The payments are actuarially adjusted based on the participant's election. Any election, other than an election to receive +life annuity benefits, reduces the monthly benefit payable. The “norma” age at which benefits may be drawn under the plan is 65. +SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN +Messrs. Krueger, Jeppesen, Stornant and Zwiers participate in the SERP, which provides +retirement benefits above amounts available under the Company's tax qualified Pension Plan. The SERP benefit generally equals the difference between the participant's retirement benefit under the Pension Plan and the benefits the participant +would have received if there were no IRS imposed cap on earnings when calculating the Pension Plan benefit. The SERP caps years of service at 25 in calculating a participant's benefit. The SERP also allows a retired participant who has five years +of service to draw earlier (beginning at age 55) and on different terms than under the Pension Plan. A participant's earnings percentage multiplier is the same under the SERP as it is under the Pension Plan (2.4% for Mr. Krueger and 2.0% for +Messrs. Jeppesen, Stornant and Zwiers). The Compensation Committee may grant additional deemed years of service under the SERP to a participant, subject to the cap of 25 years. The full benefit of any additional years of deemed service is paid +under the SERP. Mr. Krueger reached the 25-year cap in 2012. +If a retired participant draws the SERP benefit prior to age 65, the reduction factor +is 0.333% for each month prior to age 60, and 0.1666% for each month between age 60 and age 65. As of the end of fiscal year 2020, Mr. Krueger and Mr. Jeppesen are the only NEOs eligible to retire and begin drawing benefits under the SERP. +SERP benefits are paid monthly, and the SERP has a lump sum payment option which may +apply to certain terminations of employment after a change in control or, if elected, upon death. The SERP also includes a disability benefit and a death benefit payable to the participant's designated beneficiary if the participant dies before +retiring. The SERP provides for lump sum payments equal to 125% of the net present value of accrued benefits without regard to any reduction for early payment to participants who resign for good reason or are terminated by Wolverine other than +for cause or due to death or disability within two years (Messrs. Jeppesen, Stornant and Zwiers) or three years (Mr. Krueger) after a change in control. +The SERP also contains non-competition, confidentiality and employee non-solicitation +provisions in favor of Wolverine Worldwide. Under the SERP non-competition provisions, a participant is not entitled to any benefit payment if the participant enters into certain relationships with a competing business prior to the date on which +such benefit payment is due. If the participant's employment is terminated for serious misconduct, or if Wolverine Worldwide cannot collect under an insurance policy purchased to fund SERP benefits for certain reasons, the Company may terminate a +participant's benefits under the SERP. Wolverine Worldwide may terminate the SERP or stop further accrual of SERP benefits for a participating NEO at any time, but termination will not affect previously accrued benefits. +2021 PROXY STATEMENT +66 +TABLE OF CONTENTS +PENSION BENEFITS IN FISCAL YEAR 2020 +The following table provides for each NEO certain information concerning each plan that +provides for payments or other benefits at, following, or in connection with retirement: +Plan Name +Number of Years +Credited Service +(#) +Present Value of +Accumulated Benefit 1 +($) +Payments During +Last Fiscal Year +($) +Krueger +SERP +25 +$20,308,470 2 +- +Pension +25 +$2,842,977 +- +Hoffman 3 +SERP +- +- +- +Pension +- +- +- +Jeppesen +SERP +9 +$1,766,901 +- +Pension +9 +$768,156 +- +Stornant +SERP +24 +$3,691,613 +- +Pension +24 +$1,548,983 +- +Zwiers +SERP +23 +$4,194,657 +- +Pension +23 +$1,397,359 +- +1 +These values are as of January 2, 2021, and are calculated assuming the participants will +commence their benefits at age 65 (or current age if older) in the form according to each participant's 409A election and use the PRI-2012 mortality tables for males and females (white collar +for SERP and no collar for Pension Plan), projected forward from base year 2012 with generational projection using an unmodified MP-2020 projection scale, with contingent annuitant mortality +tables applied after the death of the participant and using the following discount rates: 2.90% Pension Plan; 2.74% SERP. +2 +The present value of Mr. Krueger's SERP benefit using the prior year's 3.51% discount rate would +be $18,632,517. +3 +Mr. Hoffman does not participate in the SERP or Pension plan. +2021 PROXY STATEMENT +67 +TABLE OF CONTENTS +Non-Qualified Deferred +Compensation +Wolverine Worldwide maintains a Deferred Compensation Plan. This unfunded and +non-qualified plan allows executives and other eligible senior employees of the Company to elect to defer all or a portion of their base salary, cash bonus, or other performance-based cash compensation. Wolverine Worldwide may, but need not, +credit a participant's account under the plan with additional discretionary Company contributions, which may be subject to a vesting schedule and which would vest in full on a change in control. Amounts deferred pursuant to the Deferred +Compensation Plan may be invested, at the direction of the participant, in an investment fund, index, or other investment vehicle, as designated by the Compensation Committee to be available under the plan, and earnings, if any, are credited to +the participant's account. +Accounts are paid out upon the earliest to occur of (i) a qualifying separation from +service, (ii) a change in control (as such term is defined in the Deferred Compensation Plan), and (iii) a termination of the Deferred Compensation Plan. Payment must generally be made, or installment payments must begin, (as elected by the +participant at the time of deferral), within 60 days of the event triggering payment. +Mr. Stornant is the only NEO who has elected to defer amounts under the Deferred +Compensation Plan, and Mr. Hoffman is the only NEO who received a Company contribution. +Name +Executive +Contributions +in 2020 +($) +Registrant +Contributions +in 2020 +($) +Aggregate +Earnings +in 2020 +($) +Aggregate +Withdrawals / +Distributions +($) +Aggregate +Balance +at Last FYE +($) +Hoffman +- +$22,441 1 +- +- +- +Stornant +- +- +$69 2 +- +$13,954 +1 +Company contributions for 2020 were deposited to Mr. Hoffman's Deferred Compensation Plan in +February 2021 and were included in the “All Other Compensation” column in the Summary Compensation Table. +2 +Reflects market-based earnings on amounts credited to Mr. Stornant under the Deferred Compensation +Plan. +2021 PROXY STATEMENT +68 +TABLE OF CONTENTS +Potential Payments Upon +Termination or Change in +Control +Wolverine Worldwide has entered into an Executive Severance Agreement with each NEO that +provides certain rights, including the right to receive payments in the event of a termination of employment following a change in control. The Company also has entered into an agreement with each of Mr. Krueger and Mr. Hoffman regarding certain +termination benefits in the event of termination of employment under certain other circumstances described below. +BENEFITS TRIGGERED BY TERMINATION FOR +CAUSE OR VOLUNTARY TERMINATION +An NEO is not entitled to receive any additional forms of severance payments or benefits +upon termination of employment for Cause or upon the NEO's voluntary decision, other than for Good Reason, to terminate his employment, as discussed in further detail below. +BENEFITS TRIGGERED BY TERMINATION OTHER +THAN FOR CAUSE OR FOR GOOD REASON NOT IN CONNECTION WITH A CHANGE IN CONTROL +Mr. Krueger entered into a Separation Agreement on March 13, 2008, which states that +upon termination of his employment by Wolverine Worldwide without Cause, or termination by Mr. Krueger with Good Reason, as such terms are defined in Mr. Krueger's Separation Agreement, Wolverine Worldwide will pay Mr. Krueger the following +payments in exchange for a general release of claims in favor of Wolverine Worldwide: (1) continued base salary for 18 months (reduced by payments he receives if he is employed by a Competing Business, as defined in Mr. Krueger's Separation +Agreement); (2) the pro rata portion of the annual incentive bonus and the three year bonus for all uncompleted performance periods based on actual corporate performance for the applicable performance periods; (3) the pro rata portion of the +annual individual performance bonus relating to personal performance objectives; and (4) retiree medical benefits for Mr. Krueger and his spouse for a period starting on the day after the termination date and ending on the last day of the 18th +month following the month in which the termination date falls. +“Cause” generally is defined in Mr. Krueger's Separation Agreement to mean: (1) any act +or omission knowingly undertaken or omitted with the intent of causing material damage to Wolverine Worldwide; (2) any intentional act involving fraud, misappropriation or embezzlement, that causes material damage to Wolverine Worldwide; (3) +repeated willful failure to substantially perform any of his significant duties as reasonably directed by the Board of Directors of Wolverine Worldwide; (4) a conviction (including any plea of guilty or nolo contendere) of any criminal act that +(a) results in the executive serving prison time and not being able to perform the normal duties of his position for more than thirty (30) days; or (b) causes material damage to Wolverine Worldwide; or (5) chronic or habitual use or consumption +of drugs or alcohol that causes material damage to Wolverine Worldwide. +“Good Reason” generally is defined in Mr. Krueger's Separation Agreement to mean: (1) a +material reduction in base compensation, including a reduction in base salary or opportunities under Wolverine Worldwide's bonus plans or equity plans (other than those implemented for the executive team as a whole); (2) a material reduction in +authority, duties, or responsibilities; (3) a requirement to report to a Company officer or employee instead of reporting directly to the Board of Directors; or (4) certain relocations, other than those related to a change in the location of +Wolverine Worldwide's headquarters affecting a majority of the executive team. +Mr. Hoffman entered into an Employment Agreement on August 7, 2020, which states that +upon termination of his employment by Wolverine Worldwide without Cause, or termination by Mr. Hoffman with Good Reason, as such terms are defined in Mr. Hoffman’s Employment Agreement, Wolverine Worldwide will pay Mr. Hoffman the following +payments in exchange for a general release of claims in favor of Wolverine Worldwide: (1) continued base salary for 12 months (18 months if he resigns because he has not been promoted to Chief Executive Officer by March 8, 2022) offset by the +amount of salary and guaranteed compensation, if any, he is entitled to from another employer; (2) payment of Company COBRA premiums for 12 months (18 months if he resigns because he has not been promoted to Chief Executive +2021 PROXY STATEMENT +69 +TABLE OF CONTENTS +Officer by March 8, 2022), or, if earlier, until eligible for coverage through another +employer; and (3) in the event of a termination without Cause prior to March 8, 2022 or Mr. Hoffman’s resignation because he has not been promoted to Chief Executive Officer by such date, the pro rata portion of Mr. Hoffman’s target bonus +opportunity for the year of termination. +“Cause” generally is defined in Mr. Hoffman’s Employment Agreement to mean: (1) any +intentional act of fraud, embezzlement, theft, dishonesty, misrepresentation or breach of fiduciary duty with respect to the Company or its subsidiaries; (2) gross negligence or willful misconduct in the performance of duties; (3) material +failure or refusal to follow any reasonable directive of the Board or the officer to whom Mr. Hoffman reports, and if such failure and refusal is curable, if such failure or refusal is not cured within ten (10) days after written notice; (4) +breach of any noncompetition, nonsolicitation, confidentiality or other covenant with the Company, material breach of any material written policy of the Company which if curable, is not cured within ten (10) days after the Company’s written +notice of such breach, or material breach of Mr. Hoffman’s Employment Agreement, which if curable, is not cured within ten (10) days after the Company’s written notice of such breach; or (5) conviction of or indictment for or entering of a guilty +plea or plea of no contest or nolo contendere with respect to any felony or any crime involving an act of moral turpitude. +“Good Reason” generally is defined in Mr. Hoffman’s Employment Agreement to mean: (1) a +material diminution in duties or a reduction of title, (ii) a material breach by the Company of the Employment Agreement, (iii) relocation of Mr. Hoffman’s principal place of employment to a location that is more than fifty (50) miles from the +Company’s corporate headquarters or Waltham, Massachusetts office as of September 8, 2020, without Mr. Hoffman’s consent, (iv) the Company’s failure to offer to promote Mr. Hoffman to the position of Chief Executive Officer, with an effective +date on or before March 8, 2022, (v) termination of the Employment Agreement by the Company serving a notice of nonextension or (vi) a reduction in Mr. Hoffman’s base salary, unless such reduction is part of an across the board reduction for +senior executives of the Company. +BENEFITS TRIGGERED UPON A CHANGE IN CONTROL +Benefits Upon Termination Following a Change in Control. Under the Executive Severance Agreements entered into with the NEOs, payments and benefits are triggered when employment is terminated without “Cause” or when an executive +terminates employment for “Good Reason” within two years (Messrs. Hoffman, Jeppesen, Stornant and Zwiers) or three years (Mr. Krueger) following a change in control of Wolverine Worldwide. +Upon such a qualifying termination, Wolverine Worldwide will pay the lump sum severance +payment under the Executive Severance Agreement composed of the following: (1) unpaid base salary and bonus payments that had been earned; (2) in lieu of a bonus payment under the Annual Bonus Plan, an amount equal to the quotient of the number +of days the NEO was employed by Wolverine Worldwide, or any successor company in the year of termination, divided by the number of days in the year, multiplied by 100% of the greater of either (a) the bonus awarded to the NEO under the annual +bonus plan for the preceding year and (b) the average paid to the NEO over the preceding two year period under the annual bonus plan; (3) in lieu of payments under the various three year performance periods that remain open on the date of +termination, if any, an amount equal to the bonus the NEO would have received based on actual and assumed performance measures, multiplied by the quotient of the number of days the NEO participated in the performance period prior to the +termination, divided by the total number of days in the performance period (in determining the earnings per share or other performance measures that can be determined annually for any year subsequent to the year of termination, performance will +equal the level required to attain the maximum goal under the three year plan for that year); (4) either two (Messrs. Hoffman, Jeppesen, Stornant and Zwiers) or three (Mr. Krueger) times the sum of (a) the NEO's highest annual base salary during +the 12 month period prior to termination and (b) the greater of (i) the average amount earned by the NEO during the previous two years under the annual bonus plan and (ii) the amount earned during the previous year under the Annual Bonus Plan; +(5) 100% of the positive spread for any stock options held by the NEO on the date of termination, whether or not vested; (6) in the case of Messrs. Krueger and Zwiers, an excise tax gross up adjustment (note: the agreements with Messrs. Hoffman, +Jeppesen and Stornant were entered into after 2008, and the Committee determined to not provide such gross ups after that date); and (7) in the case of Messrs. Jeppesen, Stornant and Zwiers, the present value of an additional three years of +deemed service under the Pension Plan and SERP (this benefit does not apply to Mr. Hoffman since he does not participate in the Pension Plan or SERP or for Mr. Krueger since he has maximum years of service under these plans). Upon a termination +of employment following a change of control, Wolverine Worldwide or any successor company will maintain for a period of six months to one year the NEO's benefits under the then current benefit plans, programs or arrangements that the NEO was +entitled to participate in immediately prior to the termination date. In addition, Wolverine Worldwide or any successor company will provide outplacement services through the last day of the second calendar year following the calendar year of +termination. +“Change in Control” under the Executive Severance Agreements generally means certain +changes in composition of the Board of Directors, certain acquisitions of 20% or more of Wolverine Worldwide's common stock or combined outstanding voting power of Wolverine World Wide, Inc., and other specified reorganizations, mergers, +consolidations, liquidations, dissolutions or distributions of substantial assets (unless such transactions result in the creation of an entity in which at least 50% of the common stock and combined voting power is owned by the owners of record +prior to the transaction, no single shareholder owns more than 20% of the combined voting power and a majority of the board +2021 PROXY STATEMENT +70 +TABLE OF CONTENTS +remains unchanged). In all cases, an event will not qualify as a change in control +unless it qualifies as “a change in the ownership or effective control” of the Company or “a change in the ownership of a substantial portion of the assets of the Company”, each as determined under the stringent requirements of Section 409A of +the Tax Code. Under this standard, for example, transactions must be consummated, not just approved by shareholders. +“Cause” is defined under the Executive Severance Agreements to generally mean the +willful and continued failure to substantially perform duties or willfully engaging in gross misconduct that is injurious to the Company. +“Good Reason” is defined under the Executive Severance Agreements to generally mean: +(1) any materially adverse change in position, duties, responsibilities or title, or any removal, involuntary termination or failure to re-elect an officer; (2) a reduction in annual base salary; (3) any relocation or requirement to substantially +increase business travel; (4) the failure to continue providing any executive incentive plans or bonus plans; (5) the failure to continue any employee benefit plan or compensation plan unless a comparable plan is available; (6) the failure to pay +any salary, bonus, deferred compensation or other compensation; (7) the failure to obtain an assumption agreement from any successor; (8) any purported termination of the employment which is not effected in a manner prescribed by the Executive +Severance Agreement; or (9) any other material breach by Wolverine Worldwide or any successor company of its obligations under the Executive Severance Agreement. +Benefits Upon a Change in Control Only. For 2017 and future years, the Company adopted double-trigger vesting, meaning that equity vesting only accelerates upon a qualifying termination of employment after a change in control. For +grants prior to 2017, upon a change in control of Wolverine Worldwide, absent a determination by the Compensation Committee to the contrary, outstanding stock options become immediately exercisable in full and will remain exercisable during their remaining term, regardless of whether the NEO remains an employee of Wolverine Worldwide, or any +successor company. The Committee may determine that one or all of the NEOs shall receive cash in an amount equal to the positive spread amount associated with these options. In addition, upon a change +in control of Wolverine Worldwide, all other outstanding equity incentive awards of the NEOs that were granted prior to 2017, including shares of restricted stock, become immediately and fully vested and non-forfeitable. To the extent that the Company has made discretionary contributions under the Deferred Compensation Plan that are subject to +a vesting schedule, any unvested portion of these contributions will vest on a change in control. Change in control for this purpose generally means certain changes in the composition of the Board of +Directors, certain acquisitions of 20% of Wolverine Worldwide's common stock (50% in the case of the Deferred Compensation Plan) and other specified reorganizations, mergers, consolidations, liquidations, dissolutions or dispositions of substantial assets. +Excise Tax Gross Up. The +Compensation Committee previously determined that Wolverine Worldwide would not provide excise tax gross up payments in employment agreements entered into after 2008. Messrs. Krueger and Zwiers are the +only NEOs who have excise tax gross up protection in their agreements. +BENEFITS TRIGGERED BY RETIREMENT, DEATH +OR PERMANENT DISABILITY +Pension Plan. In the event of +death before retirement, the Pension Plan provides the surviving spouse of a vested participant a death benefit equal to the qualified pre-retirement survivor annuity as defined in the Internal Revenue +Code (generally 50% of the participant's accrued normal retirement benefit). This benefit is paid annually to the surviving spouse beginning when the participant would have turned 60 and continues for the life of the surviving spouse. For participants with at least three years of service as of December 31, 2003, and who have at least 10 years of service and +are employed by the Company at the time of death, the amount of the survivor benefit under the Pension Plan is calculated as though the participant had continued as an employee of the Company until age +65 at the compensation level as of the date of death and the benefit begins upon the date of death, unreduced for early commencement. The survivor benefit for participants who meet all the criteria set forth in the preceding sentence, but who die when they are not employed by the Company, are entitled to a joint and survivor benefit commencing upon the date of +death, unreduced for early commencement. +SERP. If a SERP participant dies +before beginning to receive benefits under the SERP, the Company must, based on the participant's election, pay the beneficiary either a monthly annuity or a lump sum death benefit equal to the present +value of the benefit computed as if the participant had retired on the date of death, had begun receiving benefits at age 55, and had continued to receive benefits for the remainder of the participant's life expectancy. If the participant dies after beginning to receive benefit payments, benefits cease unless the participant was receiving benefits in the form +of one of the joint and survivor annuity optional elections under the plan or had elected benefits in a form that provides for a continuation of benefits. +If a participant becomes disabled (as defined in the SERP), the SERP provides a +disability benefit equal to 60% of the normal retirement accrued benefit based upon years of service up to the date that the participant became disabled through the date the participant reaches age 65 (at which point, the participant would begin +drawing full SERP benefits) or is no longer disabled. +2021 PROXY STATEMENT +71 +TABLE OF CONTENTS +Annual Bonus Plan. Upon +termination of employment at least six months after the beginning of a fiscal year due to death, disability, or early or normal retirement, an NEO is entitled to receive a pro rata portion of any annual +bonus award earned under the Annual Bonus Plan based on the NEO's service during such fiscal year and actual performance under the Annual Bonus Plan. The annual bonus is payable at the same time and in the same manner as awards are paid to other NEOs for the fiscal year. +Stock Incentive Plans. Upon +death, disability, or voluntary termination of employment after attaining age 59 with ten years of service with the Company, subject to certain conditions, the restrictions applicable to each NEO's +shares of restricted stock terminate. Upon death, disability or voluntary termination of employment after attaining age 59 with ten years of service with the Company, subject to certain conditions, the +restrictions on time-vested shares lapse or units vest. +Deferred Compensation Plan. Upon +death, disability, or other qualifying separation from service, including retirement, all in accordance with Section 409A of the Internal Revenue Code, all amounts deferred by the NEOs under the +Deferred Compensation Plan, including any vested amounts credited to the NEOs pursuant to a discretionary Company contribution, shall generally be paid, or commence payment, within 60 days of the termination in accordance with the schedule elected by the NEO at the time of deferral. +DESCRIPTION OF RESTRICTIVE COVENANTS +THAT APPLY DURING AND AFTER TERMINATION OF EMPLOYMENT +The SERP contains non-competition, confidentiality, and employee non-solicitation +provisions in favor of Wolverine Worldwide. Under the non-competition provisions of the SERP, the participant will not be entitled to any benefit payment if, prior to the date on which such benefit payment is due, the participant enters into +certain relationships with a competing business. +ESTIMATED PAYMENTS ON TERMINATION OR CHANGE IN CONTROL +The following table summarizes the potential payments and benefits payable to each NEO +upon a change in control or termination of employment following each of the triggering events set forth in the table. As required, the amounts in the table assume that the termination of employment or change in control of Wolverine Worldwide took +place on the Company's last day of fiscal year 2020, which was January 2, 2021. The amounts set out below are in addition to benefits that are generally available to the Company's employees such as distributions under the Company's 401(k) savings +plan, disability or life insurance benefits and accrued vacation. Due to the many factors that affect the nature and amount of any benefits provided upon the termination events discussed below, any actual amounts paid or distributed to NEOs may +be different. Factors that may affect these amounts include timing during the year of the occurrence of the event, Wolverine Worldwide's stock price and the NEO's age and years of service. +The value of the accelerated vesting of unvested equity-based compensation awards was +computed using the closing market price $31.25 of Wolverine Worldwide's common stock on December 31, 2020, the last business day in fiscal year 2020. The value for unvested restricted stock is computed by multiplying $31.25 by the number of +shares of the NEO's restricted stock that would vest as a result of an event. +Each of the hypothetical events described in the following table (the highlighted blue +headings in the left-hand column) is calculated and reported as a discrete event. For example, the amounts disclosed under the “Change in Control Only” heading are not cumulative with the amounts disclosed under the “Change in +Control/Termination” heading. +2021 PROXY STATEMENT +72 +TABLE OF CONTENTS +Termination Event and Payment / Benefits +Krueger +Hoffman +Jeppesen +Stornant +Zwiers +Termination by Company for Cause or Voluntary Termination (other than for Good +Reason or due to Retirement) +- +- +- +- +- +Termination by Company Other Than for Cause or by Executive for Good Reason +$9,033,191 1 +$1,145,804 +- +- +- +Change in Control / Termination +Executive Severance Agreement 2 +$17,782,713 +$5,178,222 +$5,293,162 +$5,991,943 +$9,924,496 +Benefits under Executive Severance Agreement 3 +$43,134 +$47,054 +$41,477 +$39,895 +$39,838 +Stock Incentive Plans 4 +$7,426,579 +$1,872,334 +$1,834,545 +$1,938,228 +$1,839,842 +Lump sum payment under the SERP 5 +$23,491,420 +- +$2,437,034 +$6,993,146 +$7,830,699 +Death +SERP 6 +$20,193,439 +- +$2,687,435 +$4,446,797 +$5,075,068 +Pension Plan 7 +$1,271,460 +- +$383,127 +$1,258,772 +$1,264,121 +Stock Incentive Plans 4 +$7,426,579 +$1,872,334 +$1,834,545 +$1,938,228 +$1,839,842 +Earned Incentive Compensation 8 +$7,350,156 +$1,367,609 +$991,204 +$1,154,278 +$1,097,217 +Disability +SERP 9 +$20,308,470 +- +$1,944,426 +$5,215,911 +$6,326,400 +Stock Incentive Plans 4 +$7,426,579 +$1,872,334 +$1,834,545 +$1,938,228 +$1,839,842 +Earned Incentive Compensation 8 +$7,350,156 +$1,367,609 +$991,204 +$1,154,278 +$1,097,217 +Retirement +SERP 10 +$20,308,470 +- +$2,109,569 +$4,518,438 +$5,084,520 +Pension Plan 10 +$2,842,977 +- +$798,809 +$1,616,505 +$1,454,230 +Stock Incentive Plans 4,11 +$7,426,579 +- +- +- +- +Earned Incentive Compensation 8,11 +$7,350,156 +- +- +- +- +Change in Control Only +Stock Incentive Plans 12 +$2,130,479 +- +$766,674 +$692,986 +$660,494 +1 +The estimate for Mr. Krueger assumes target performance for the 2018-2020 and 2019-2021 +performance periods and actual performance for the 2018-2020 period. Actual payout or vesting, if any, would be determined and made at the end of those periods. The amount reflected in the table +also includes an estimated cost of $20,042 for medical and dental benefits for 18 months and the estimated cost of $9,000 for outplacement services. +2 +Payments would be triggered after termination of employment under certain circumstances within +two years (Messrs. Hoffman, Jeppesen, Stornant and Zwiers) or three years (Mr. Krueger) following a change in control. Includes amounts payable in cash under the terms of the Executive Severance +Agreement, excluding the value of the cash payout to each NEO of the option spread for already vested options. The timing of the payment would be delayed to the extent earlier payment would +trigger Section 409A of the tax code. The value of service-based restricted shares or units that vest upon a change in control under the terms of the Company's stock incentive plans are included in the Stock Incentive Plans row. +3 +These estimates assume that Wolverine Worldwide, or any successor company, maintains the +benefit plans for a period of one year after termination and the outplacement services for a period beginning with the date of termination and ending on the last day of the second calendar year +following the calendar year in which the date of termination occurred. +4 +Reflects the value of unvested shares of restricted stock or stock units that would vest because +of the event. +5 +Reflects the entire lump sum benefit payable to applicable NEOs, including any accumulated +benefit. The timing of the payment would be delayed to the extent earlier payment would trigger Section 409A of the Tax Code. +6 +Reflects the entire lump sum death benefit payable to a participating NEO's beneficiary, including +any accumulated benefit. +7 +Amounts reflect the net present value of the annuity paid to the surviving spouse calculated +using the same discount rate and mortality assumptions used in the Pension Benefits table under the heading “Pension Benefits in Fiscal Year 2020” under the heading “Pension Plans and 2020 +Pension Benefits.” In accordance with the terms of the Pension Plan, the death benefit for Messrs. Krueger, Stornant and Zwiers was calculated as though the NEO had continued as an employee of +Wolverine Worldwide until age 65 at the compensation level as of the date of death. +8 +Under the Annual Bonus Plan and the terms of performance share awards, each NEO may be eligible +to receive a pro rata portion of any award if employment is terminated as a result of any of the specified events in the table. The amount reported represents (a) actual payout under the Annual +Bonus Plan for fiscal year 2020, (b) actual payout under the 2018-2020 performance cycle and (c) target performance for the 2019-2021 and 2020-2022 performance cycles. Performance units would vest on a prorated basis based on actual Company performance. +9 +Reflects the net present value of the annuity using the same discount rate and mortality +assumptions used in the Pension Benefits table and assuming the NEO drew the disability benefit until age 65 followed by the normal retirement benefit. +2021 PROXY STATEMENT +73 +TABLE OF CONTENTS +10 +Reflects the net present value of benefits according to actual elections in place and assuming +SERP benefits begin at age 55 (or immediately if older than 55) and pension benefits as of age 60 with 10 years of service. +11 +Mr. Krueger is the only NEO eligible for retirement (as defined in the applicable plan) at fiscal +2020 year-end. +12 +Reflects the value of unvested shares of restricted stock/stock units (including performance share +or unit awards) that would vest because of the event. +CEO PAY RATIO +As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer +Protection Act and Item 402(u) of Regulation S-K, we are providing the following information about the relationship of the annual total compensation of our employees and the annual total compensation of Blake Krueger, the Company's Chief +Executive Officer. +For 2020, our last completed fiscal year, the annual total compensation of the employee +of the Company identified at median was $59,609 and the annual total compensation of the CEO, as reported in the Summary Compensation Table above, was $9,519,491 +Based on this information, the 2020 ratio of the annual total compensation of +Mr. Krueger to the median of the annual total compensation of all employees was estimated to be 160 to 1. +The methodology and the material assumptions, adjustments and estimates that we used to +identify the median of the annual total compensation of all our employees, as well as to determine the annual total compensation of our “median employee” and our CEO, are described below. +• +We determined that, as of December 31, 2020, our employee population consisted of approximately 3,273 (2,544 in the U.S. and +729 outside the U.S.) individuals globally. After excluding employees from India (12 employees), Dominican Republic (2 employees), Mexico (1 employees), Netherlands (57 employees), Thailand (2 employees) and Vietnam (47 employees) +pursuant to the “de minimis” exception provided for in the rules, we used a base of 3,152 employees for purposes of determining the “median employee.” We selected December 31, 2020, as the date upon which we would identify the median +employee in order to align with year end. +• +To identify the median employee from our employee population, we used annual base salary as well as bonus and other cash +incentives paid for the 12-month period ending December 31, 2020 as our consistently applied compensation measure. In making this determination, we annualized the compensation of all newly hired regular employees during this period. +• +Once we identified our median employee, we combined the elements of such employee's compensation for fiscal 2020 in accordance +with the SEC's rules, resulting in annual total compensation of $59,609. +• +With respect to the annual total compensation of our CEO, we used the amount reported in the “Total” column of our 2020 Summary +Compensation Table included in this Proxy Statement. +2021 PROXY STATEMENT +74 +TABLE OF CONTENTS +Proposal 2 — Advisory Resolution to +Approve Executive Compensation +The Company is asking its shareholders to indicate their support for Wolverine +Worldwide's NEO compensation, as described in this Proxy Statement. This proposal, commonly known as a “say-on-pay” proposal, gives the Company's shareholders the opportunity to express their view on compensation for the Company's NEOs. The +say-on-pay vote is advisory and, therefore, not binding on the Company, the Compensation Committee or the Board. Even though non-binding, the Board and Compensation Committee value the opinions of Wolverine Worldwide's shareholders and will +review and consider the voting results when making future decisions regarding the Company's executive compensation program. +At the 2017 annual meeting of shareholders, the Company also held an advisory vote on +the frequency of future say-on-pay votes. Our shareholders voted in favor of an annual say-on-pay vote and the Company has elected to follow such recommendation. As such, unless the Company modifies its policies on the frequency of say-on-pay +votes, it is expected that the next say-on-pay vote will occur at the 2022 annual meeting of shareholders. Further, in accordance with Rule 14a-21(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), shareholders will be +asked to vote again on how frequently the Company should hold future say-on-pay votes at the Company's 2023 annual meeting of shareholders. +The Company encourages shareholders to read the “Compensation Discussion and Analysis” +(“CD&A”) section of this Proxy Statement beginning on page 38 . As described in the CD&A section, the Compensation Committee has structured the executive compensation program to achieve the following key objectives: +• +Align the interests of NEOs with those of the shareholders through incentives based on achieving performance objectives that +enable increased shareholder value +• +Provide incentives for achieving specific, near term corporate, business unit and individual goals and reward the achievement of +those goals +• +Provide incentives for achieving pre-established, longer-term corporate financial goals and reward achievement of those goals +• +Attract and retain talented NEOs who will lead Wolverine Worldwide and drive superior business and financial performance +The executive compensation program is designed to achieve these objectives, in part, by: +• +Weighting at-risk and variable compensation (annual bonuses and long-term incentives) much more heavily than fixed compensation +(base salaries) +• +Rewarding annual performance while maintaining emphasis on longer-term objectives +• +Blending cash, non-cash, long- and short-term compensation components and current and future compensation components +The Company encourages shareholders to read the Summary Compensation Table and other +related compensation tables and narrative, appearing on pages 57 - 74 , which provide detailed information on the compensation of the Company's NEOs. +The Compensation Committee and the Board of Directors believe the Company's compensation +program and its policies and procedures articulated in the CD&A section are effective in aligning the interests of the Company's NEOs with the interests of shareholders, promoting the achievement of the Company's near and long-term objectives +and increasing shareholder value. +In accordance with the rules under Section 14A of the Exchange Act, and as a matter of +good corporate governance, the Company asks shareholders to approve the following advisory resolution at the 2021 Annual Meeting of Shareholders: +RESOLVED , that the shareholders of +Wolverine World Wide, Inc. (the “Company”) approve, on an advisory basis, the compensation of the Company's named executive officers disclosed in the Compensation Discussion and Analysis section, the +Summary Compensation Table and the related compensation tables, notes and narrative in the Proxy Statement for the Company's 2021 Annual Meeting of Shareholders. +BOARD RECOMMENDATION +The Board recommends that you vote “FOR” approval of the advisory +resolution to approve executive compensation. +2021 PROXY STATEMENT +75 +TABLE OF CONTENTS +Proposal 3 – Ratification of Appointment of Independent Registered Public Accounting Firm +Ernst & Young LLP (“Ernst & Young”) was the Company's independent registered +public accounting firm for the fiscal year ended January 2, 2021. The Audit Committee has reappointed Ernst & Young as the Company's independent registered public accounting firm for the current fiscal year. As a matter of good corporate +governance, the Audit Committee has determined to submit its appointment of Ernst & Young to the Company's shareholders for ratification. If this appointment is not ratified by the holders of a majority of shares cast affirmatively or +negatively on the matter, the Audit Committee will review its future selection of an independent registered public accounting firm. Even if the appointment is ratified, the Audit Committee in its discretion may select a different independent +registered public accounting firm any time during the year if it determines that such a change would be in the best interests of the Company and the Company's shareholders. +The Audit Committee reviewed Ernst & Young's performance prior to appointing it as +the Company's independent registered public accounting firm, and considered: +• +the historical and recent performance of Ernst & Young on the Company's audit, including the quality of the engagement team +and Ernst & Young's experience, client service, responsiveness and technical expertise +• +the Public Company Accounting Oversight Board (“PCAOB”) report of selected Ernst & Young audits +• +the appropriateness of fees charged +• +Ernst & Young's familiarity with the Company's accounting policies and practices and internal control over financial reporting +• +Ernst & Young's financial strength and performance +Representatives of Ernst & Young are expected to be present at the Annual Meeting. +They will have an opportunity to make a statement if they desire to do so and are expected to be available to respond to appropriate questions from shareholders. +BOARD RECOMMENDATION +The Board recommends that you vote “FOR” ratification of the Audit +Committee's selection of the firm of Ernst & Young LLP as the Company's independent registered public accounting firm for fiscal year 2021. +2021 PROXY STATEMENT +76 +TABLE OF CONTENTS +Audit Committee Report +The Audit Committee of the Board of Directors consists of five directors who are +independent under the Company's Director Independence Standards, the NYSE listed company standards and applicable SEC standards. The Audit Committee represents and assists the Board in fulfilling its oversight responsibility regarding the +Company's financial statements and the financial reporting process, the internal control over financial reporting, the performance of the internal audit function and the independent registered public accounting firm, the qualifications and +independence of the independent registered public accounting firm, the annual independent audit of Wolverine Worldwide's financial statements and internal control over financial reporting and compliance with legal and regulatory requirements. The +Audit Committee is directly responsible for appointing, retaining, compensating, overseeing, evaluating and terminating (if appropriate) Wolverine Worldwide's independent registered public accounting firm. Wolverine Worldwide's management has +primary responsibility for the financial statements and the financial reporting process, including the application of accounting and financial principles, the preparation, presentation and integrity of the financial statements and the systems of +internal controls and other procedures designed to promote compliance with accounting standards and applicable laws and regulations. Wolverine Worldwide's independent registered public accounting firm is responsible for expressing an opinion on +the conformity of Wolverine Worldwide's financial statements with generally accepted accounting principles and for auditing the effectiveness of Wolverine Worldwide's internal control over financial reporting. +The Audit Committee has taken steps to provide assurances regarding Audit Committee +composition and procedures, the independence of Wolverine Worldwide's independent registered public accounting firm and the integrity of Wolverine Worldwide's financial statements and disclosures. These steps include: (i) reviewing the Audit +Committee Charter; (ii) reviewing with legal counsel and the independent registered public accounting firm the Accounting and Finance Code of Ethics; (iii) maintaining financial, accounting and business ethics complaint procedures to allow +employees, shareholders and the public to report concerns regarding Wolverine Worldwide's financial statements, internal controls and disclosures; and (iv) reviewing procedures for the Audit Committee to pre-approve all audit and non-audit +services provided by Wolverine Worldwide's independent registered public accounting firm. +As part of its supervisory duties, the Audit Committee has reviewed Wolverine +Worldwide's audited financial statements for the fiscal year ended January 2, 2021, and has discussed those financial statements with Wolverine Worldwide's management and internal financial staff, and the internal auditors and independent +registered public accounting firm with and without management present. The Audit Committee has also reviewed and discussed the following with Wolverine Worldwide's management and the financial staff, and with the internal auditors and independent +registered public accounting firm with and without management present: +• +Accounting and financial principles and significant assumptions, estimates and matters of judgment used in preparing the +financial statements +• +Allowances and reserves for accounts receivable, inventories and taxes +• +Accounting for acquisitions, pension plans and equity-based compensation plans +• +Goodwill and intangible asset impairment analysis +• +Other significant financial reporting issues and practices +The Audit Committee has discussed with Wolverine Worldwide's independent registered +public accounting firm the results of its examinations and its judgments concerning the quality, as well as the acceptability, of Wolverine Worldwide's accounting principles and such other matters that it is required to discuss with the +independent registered public accounting firm under applicable rules, regulations or generally accepted auditing standards, including the matters required to be discussed by the applicable requirements of the PCAOB and the SEC. In addition, the +Audit Committee has received from the independent registered public accounting firm the written disclosures and the letter required by the applicable requirements of the PCAOB regarding the independent registered public accounting firm's +communications with the Audit Committee concerning independence and has discussed their independence from Wolverine Worldwide and Wolverine Worldwide's management with them, including a consideration of the compatibility of non-audit services +with their independence, the scope of the audit and the scope of all fees paid to the independent registered public accounting firm during the year. After, and in reliance upon the reviews and discussions described above, the Audit Committee +recommended to the Board that the audited financial statements for the fiscal year ended January 2, 2021, be included in Wolverine Worldwide's Annual Report on Form 10-K for the year then ended to be filed with the SEC. +Respectfully submitted, +Jeffrey M. Boromisa (Chair) +Roxane Divol +William K. Gerber +Brenda J. Lauderback +Michael A. Volkema +2021 PROXY STATEMENT +77 +TABLE OF CONTENTS +Independent Registered Public +Accounting Firm +The Company's Audit Committee has adopted a policy under which the Audit Committee must +approve all audit and non-audit services provided by the Company's independent registered public accounting firm, Ernst & Young LLP, and which prohibits Ernst & Young LLP from providing any non-audit services that are prohibited by the +SEC or the PCAOB. The Company's Audit Committee provides categorical pre-approval for routine and recurring services, with specific service descriptions and budgets that include sufficient information to confirm the determination that the +provision of such service will not impair the independent registered public accounting firm’s independence. All services not within the specifically pre-approved service descriptions and budgets require engagement specific pre-approval. With +certain exceptions (such as pre-approval of audit services), the Audit Committee may delegate engagement specific pre-approval to one or more Audit Committee members, and has so delegated in certain instances to the Audit Committee Chairperson. +Management must communicate to the Audit Committee at its next regularly scheduled meeting any services approved by an Audit Committee member. Wolverine Worldwide's Audit Committee pre-approved all fees paid to Ernst & Young LLP for services +performed in 2020 and 2019. The aggregate fees billed by Ernst & Young LLP for audit and non-audit services were: +2020 +2019 +Audit Fees 1 +$1,978,000 +$1,821,800 +Audit Related Fees +— +— +Total Audit & Audit Related Fees +$1,978,000 +$1,821,800 +Tax Fees 2 +Tax Compliance +$ 951,200 +$ 904,300 +Tax Planning & Advisory +$ 60,000 +$ 487,900 +Tax Planning & Advisory Other +— +— +Total Tax Fees +$1,011,200 +$1,392,200 +All Other Fees +— +— +TOTAL FEES +$2,989,200 +$3,214,000 +1 +“Audit Fees” are comprised of fees for the annual audit, including the audit of internal +control over financial reporting, interim reviews of the financial statements included in Wolverine Worldwide's Quarterly Reports on Form 10-Q, foreign +statutory audits, consultations concerning accounting matters associated with the annual audit, and audit services performed in connection with registration statements and issuance of comfort +letters and consents. +2 +“Tax Fees” are comprised of fees for the preparation of domestic and foreign tax returns, tax +compliance services, and routine tax advisory and tax planning services. +Wolverine Worldwide's Audit Committee has adopted a policy restricting the Company's +hiring of current or former partners or employees of the independent registered public accounting firm retained by the Company. +2021 PROXY STATEMENT +78 +TABLE OF CONTENTS +Proposal 4 — Approval of Amended and Restated Stock Incentive Plan of 2016 +Overview +On February 9, 2021 (the “Amendment Date”), the Board of Directors unanimously adopted +and approved the Wolverine World Wide, Inc. Stock Incentive Plan of 2016, as amended and restated (the “Plan”), subject to shareholder approval. The Plan amends and restates the Wolverine World Wide, Inc. Stock Incentive Plan of 2016, which was +approved by Company shareholders at the 2016 annual meeting and approved in a restated and amended form by Company shareholders at the 2018 annual meeting (the “Current Plan”). The Plan allows grants of cash awards, stock options, stock +appreciation rights, restricted stock, restricted stock units and stock awards, any of which may be performance-based, and for incentive bonuses. The only other equity plan under which common stock of the Company may be issued is the Outside +Directors’ Deferred Compensation Plan, which authorizes the issuance of shares only to non-employee directors. If shareholders do not approve the Plan, the Current Plan will remain in existence, but the Company will not have sufficient shares +under it to meet its short- or long-term needs. +Key Changes in the Plan +The amendment and restatement of the Plan is generally effective on the Amendment Date +and makes the following changes, as described in more detail under “Plan Summary” below: +• +Increases the shares available under the Plan by 4.9 million shares, subject to shareholder approval; +• +Extends the term of the Plan by approximately three years, from February 7, 2028 to February 8, 2031, subject to shareholder +approval; and +• +Makes other technical changes, including changes based on the repeal of certain provisions of Section 162(m) of the Tax Code. +Notwithstanding the foregoing, the terms of the Plan, as amended and restated on the +Amendment Date, will only apply to awards granted after the Amendment Date. +Why You Should Vote For the Plan +The Board of Directors recommends that the Company’s shareholders approve the Plan +because it believes that equity awards are a critical part of the Company’s compensation program and are essential to the Company’s ability to effectively compete for and appropriately motivate and reward key talent. The Board of Directors +believes that it is in the interests of both the Company and its shareholders to strengthen the Company’s ability to attract, motivate and retain high quality employees, directors and consultants and to incentivize such persons to achieve the +Company’s financial and strategic goals through the issuance of equity and other performance-based awards. The Company is seeking shareholder approval of the Plan because the Board of Directors does not believe that the shares available for +issuance with respect to equity awards under the Current Plan are sufficient to meet the Company’s short- or long-term needs. The Company believes that the availability of an additional 4.9 million shares under the Plan in addition to the +remaining shares under the Current Plan (4,073,139 shares as of February 10, 2021) would provide sufficient additional shares to continue to make awards at historical average rates for 2-3 years. +2021 PROXY STATEMENT +79 +TABLE OF CONTENTS +Promotion of Good Corporate Governance Practices +The Plan includes a number of provisions that we believe promote good corporate +governance and the interests of shareholders. Under the Plan: +• +Stock options and stock appreciation rights may not be granted with exercise prices lower than the fair market value of the +underlying shares on the grant date +• +The administrator may not, without prior approval of the Company’s shareholders, “reprice” any previously granted underwater +stock options or stock appreciation rights +• +Shares subject to an award under the Plan may not again be made available for issuance under the Plan if such shares were: +(i) subject to a stock-settled stock appreciation right and were not issued upon the net settlement or net exercise of such stock appreciation right, (ii) used to pay the exercise price of a stock option or the purchase price, if any, for +an award, (iii) delivered to or withheld by the Company to pay the withholding taxes related to an award, or (iv) repurchased on the open market with the proceeds of a stock option exercise +• +The Plan has a fungible share feature whereby so-called “full value” awards are counted against the share pool at a higher rate +(2.6:1) than stock options or stock appreciations rights +• +Outstanding awards under the Plan may be forfeited in the event a participant engages in an act of misconduct +• +The Plan administrator may recover awards made under the Plan and payments under or gain in respect of any award in accordance +with the Company’s Policy for Recovery of Incentive Compensation or any other clawback policy maintained by the Company +• +Awards generally must be granted with vesting schedules pursuant to which they will not vest or become exercisable for at least +one year +• +The Plan limits the aggregate grant date value of awards that may be granted to non-employee directors +• +No dividends or dividend equivalents will be paid with respect to performance-based restricted stock units or performance-based +restricted stock until the underlying performance awards vest +• +No dividends or dividend equivalents will be paid with respect to shares subject to stock options or stock appreciation rights +• +Awards generally may not be transferred except by will or the laws of descent and distribution or, if approved by the +administrator, to certain family members, family trusts, or family partnerships pursuant to a gift or domestic relations order +• +Awards subject to time-based vesting are subject to “double-trigger” vesting on a change in control of the Company +Key Data +The following table provides information regarding equity awards outstanding and shares +available for future awards under all of the Company’s equity plans as of February 10, 2021 (and without giving effect to approval of the Plan under this Item 4). We have no equity awards outstanding other than stock options, restricted stock, +restricted stock units and performance awards (in the form of both performance restricted stock and performance restricted stock units). +Total shares underlying all outstanding stock options +3,215,971 +Weighted average exercise price of outstanding stock options +$ 22.32 +Weighted average remaining contractual life of outstanding stock options (years) +3.9 +Total shares underlying all outstanding and unvested performance shares and units +620,771 +Total shares underlying all outstanding and unvested restricted stock and units +(excluding performance shares) +1,340,193 +Shares available for future awards that could be issued under Current Plan 1 +4,073,139 +Shares available for future issuance under the Outside Directors’ Deferred +Compensation Plan 1 +110,742 +1 +Upon approval of the Plan, the only additional shares available for future awards will be the +additional 4.9 million shares approved under the Plan. The 110,742 shares available under the Outside Directors’ Deferred Compensation Plan are only for issuance to non-employee directors. No +shares under any other plan will be available for future issuance. +2021 PROXY STATEMENT +80 +TABLE OF CONTENTS +Section 162(m) of the Code +The Tax Cuts and Jobs Act on December 22, 2017 eliminated the Section 162(m) +performance-based compensation exemption, so the grants and awards made under the Plan are not eligible for such exemption from the $1,000,000 cap on deductibility of NEO compensation. +Plan Summary +The following summary of the material terms of the Plan is qualified in its entirety by +reference to the complete statement of the Plan, which is set forth in Appendix B to this proxy statement. +Administration +The Plan will be administered by the Compensation Committee, which is referred to in +this summary in its capacity as administrator of the Plan as the “administrator.” Any power of the Compensation Committee as administrator may also be exercised by the Board of Directors, except to the extent that the grant or exercise of such +authority would cause any award or transaction to become subject to (or lose an exemption under) the short-swing profit recovery provisions of Section 16 of the Exchange Act. Subject to the express provisions of the Plan, the administrator is +authorized and empowered to do all things that it determines to be necessary or appropriate in connection with the administration of the Plan. All decisions, determinations and interpretations by the Compensation Committee regarding the Plan and +awards granted under the Plan will be final and binding on all participants and other persons holding or claiming rights under the Plan or to an award under the Plan. The Compensation Committee may authorize one or more officers of the Company to +perform any or all things that the administrator is authorized and empowered to do or perform under the Plan; provided, however, that no such officer may designate himself or herself as a recipient of any awards granted under the authority +delegated to such officer and that any delegation of the power to grant awards to an officer must otherwise be consistent with the requirements of Section 157(c) of the Delaware General Corporation Law. The Compensation Committee has designated +the Company’s CEO, CFO, general counsel and secretary, and head of the human resource function to assist in administering the Plan and executing award agreements and other documents entered into under the Plan. In addition, the Compensation +Committee may delegate any or all aspects of the day-to-day administration of the Plan to one or more officers or employees of the Company or any subsidiary, and/or to one or more agents. +Eligibility +Any person who is a current or, to the extent consistent with Section 409A of the Code, +prospective officer or employee of the Company or of any Company subsidiary will be eligible for selection by the administrator for the grant of awards under the Plan. In addition, non-employee directors and any service providers who have been +retained to provide consulting, advisory or other services to the Company or to any Company subsidiary will be eligible for the grant of awards under the Plan. Stock options intended to qualify as “incentive stock options” (“ISOs”) within the +meaning of Section 422 of the Code may only be granted to employees of the Company or a Company subsidiary. As of March 8, 2021, approximately 9 executive officers, 411 total employees, and 9 non-employee directors would be eligible to +participate in the Plan. As of this same date, the closing price of a share of common stock of the Company was $36.44. +Shares Subject to the Plan and to Awards +Subject to changes in the Company’s capitalization, the aggregate number of shares of +the Company’s common stock issuable pursuant to all awards under the Plan will not exceed 14,600,000 (the number of shares authorized under the Current Plan), plus an additional 4,900,000 shares, plus any shares of the Company’s common stock +underlying awards granted under the Company’s Stock Incentive Plan of 2013 and the Company’s Stock Incentive Plan of 2010 that on or after the effective date of the Current Plan, cease for any reason to be subject to such awards (other than by +reason of exercise or settlement of the awards to the extent they are exercised for or settled in vested and non-forfeitable shares). Any shares granted under stock options or stock appreciation rights will be counted against this limit on a +one-for-one basis, and any shares granted under any other awards will be counted against this limit as 2.6 shares for every one share subject to such award. The shares issued pursuant to awards granted under the Plan may be shares that are +authorized and unissued or issued shares that were reacquired by the Company, including shares purchased in the open market. No fractional shares will be delivered under the Plan. +For purposes of determining the share limits described in the paragraph above, the +aggregate number of shares issued under the Plan at any time will equal only the number of shares actually issued (as calculated above) upon exercise or settlement of an award. Notwithstanding the foregoing, shares subject to an award under the +Plan may not again be made available for issuance under the Plan if such shares were: (i) subject to a stock-settled stock appreciation right and were not issued upon the net settlement or net exercise of such stock appreciation right, (ii) used +2021 PROXY STATEMENT +81 +TABLE OF CONTENTS +to pay the exercise price of a stock option or the purchase price, if any, for an +award, (iii) delivered to or withheld by the Company to pay the withholding taxes related to an award, or (iv) repurchased on the open market with the proceeds of a stock option exercise. Shares subject to awards that have been canceled, expired, +forfeited or otherwise not issued under an award and shares subject to awards settled in cash will not count as shares issued under the Plan for purposes of the above limit. +Subject to certain adjustments, the aggregate number of shares that may be delivered, +or the value of which could be paid in cash or other property, under awards granted under the Plan during any calendar year to any one participant may not exceed 3,600,000 and the aggregate number of shares that may be issued pursuant to the +exercise of ISOs granted under the Plan may not exceed 3,600,000. The maximum amount payable pursuant to that portion of an incentive bonus granted in any calendar year to any participant under the Plan may not exceed $20,000,000. The aggregate +grant date fair value of awards (computed as of the date of grant in accordance with applicable financial accounting rules) granted under the Plan during any calendar year to any one non-employee director will not exceed $600,000. +In addition, (i) no portion of any grant of restricted stock will be scheduled to vest +prior to the date that is one year following the date the restricted stock is granted; (ii) no portion of any grant of an option or stock appreciation right will be scheduled to become exercisable prior to the date that is one year following the +date the option or stock appreciation right is granted; and (iii) no portion of any grant of a restricted stock unit or incentive bonus will be scheduled to vest or be settled, paid or distributed prior to the date that is one year following the +date the award is granted; provided; however, that awards that result in the issuance of an aggregate of up to 5% of the shares reserved for issuance under the Plan may be granted to eligible persons without regard to the minimum vesting, +exercisability, settlement, payment and distribution provisions described in this paragraph. +Stock Options +Stock options granted under the Plan may either be ISOs or stock options that are not +intended to qualify as ISOs (“nonqualified stock options” or “NQSOs”). The administrator will establish the exercise price per share under each stock option, which will not be less than the fair market value (or 110% of the fair market value in +the case of ISOs granted to individuals who own more than 10% of the Company’s common stock) of a share on the date the stock option is granted, except in certain cases where substitute or replacement awards are granted in connection with a +merger or acquisition. The administrator will establish the term of each stock option, which in no case may exceed a period of 10 years from the date of grant (or five years in the case of ISOs granted to individuals who own more than 10% of the +Company’s common stock). Unless the administrator determines otherwise, (i) upon termination of employment other than due to death, disability, retirement or termination for cause, to the extent vested on the date of such termination, stock +options remain exercisable for three months following such date (or until the expiration date of the stock option, if earlier), (ii) upon death or disability, stock options become fully vested and remain exercisable for one year following such +event (or until the expiration date of the stock option, if earlier), (iii) upon retirement, stock options become fully vested and remain exercisable until their expiration date, and (iv) upon termination of employment for cause, all stock +options are forfeited. +No dividends or dividend equivalents may be paid or granted in respect of shares +subject to stock options or stock appreciation rights and no holder of a stock option is entitled to any dividends with respect to the shares subject to stock options or appreciation rights unless and until such awards have vested and have been +exercised in accordance with the terms of the Plan and the applicable award agreement and such shares are reflected as issued and outstanding. +Stock Appreciation Rights +A stock appreciation right provides the right to receive the monetary equivalent of the +increase in value of a specified number of the shares over a specified period of time after the right is granted. Stock appreciation rights may be granted to participants either in tandem with or as a component of other awards granted under the +Plan (“tandem SARs”) or not in conjunction with other awards (“freestanding SARs”). All freestanding SARs will be granted subject to the same terms and conditions applicable to options as set forth above and in the Plan, and all tandem SARs will +have the same exercise price, vesting, exercisability, forfeiture and termination provisions as the award to which they relate. +Restricted Stock and Restricted Stock Units +Restricted stock is an award or issuance of shares the grant, issuance, retention, +vesting and/or transferability of which is subject during specified periods of time to certain conditions (including continued employment or performance conditions) determined by the administrator. Restricted stock units are awards denominated in +units of shares under which the issuance of shares is subject to such conditions (including continued employment or performance conditions) and terms as the administrator deems appropriate. Notwithstanding the satisfaction of any performance +goals, the number of shares granted, issued, retainable and/or vested under an award of restricted stock or restricted stock units on account of either financial performance or personal performance evaluations may be reduced, but not increased, +by the administrator on the basis of such further consideration as the administrator may determine. +2021 PROXY STATEMENT +82 +TABLE OF CONTENTS +Unless the administrator determines otherwise, (i) upon termination of employment for +any reason other than death, disability or retirement, all restricted stock and restricted stock units still subject to restrictions as of the date of termination will be forfeited, and (ii) upon death, disability or retirement, in general, the +restrictions remaining on a participant’s restricted stock and restricted stock units will lapse, except that any applicable qualifying performance criteria will not lapse upon a participant’s retirement. +Unless otherwise determined by the administrator, participants holding shares of +restricted stock granted under the Plan may exercise full voting rights with respect to those shares during the period of restriction, but participants will have no voting rights with respect to shares underlying restricted stock units unless and +until such shares are reflected as issued and outstanding shares on the Company’s stock ledger. +The administrator will determine the extent to which participants are entitled to +receive dividends or dividend equivalents with respect to restricted stock and shares underlying restricted stock units. Any cash or stock dividends and dividend equivalents with respect to restricted stock and restricted stock units granted as +performance awards, if any, will be withheld by the Company for the participant’s account and will be paid, if at all, (i) in the case of restricted stock, upon the achievement of the applicable performance measure(s) and the satisfaction of any +other restrictions imposed on the restricted stock in respect of which the dividends were paid and (ii) in the case of restricted stock units, at the time the shares and/or cash underlying such restricted stock units is paid, and any dividends +deferred in respect of any restricted stock and restricted stock units granted as performance awards will be forfeited upon the forfeiture of such restricted stock and restricted stock units. Any non-cash dividends or distributions paid with +respect to restricted stock and restricted stock units granted as performance awards will be subject to the same restrictions that apply to the award to which they relate. +Stock Awards +Stock awards may be granted under the Plan with such terms and conditions as determined +by the administrator, consistent with the 5% limit set forth above under “Shares Subject to the Plan and to Awards.” Participants will have all voting, dividend, liquidation and other rights with respect to shares underlying a stock award, but +such awards may be subject to restrictions on transfer as determined by the administrator. +Incentive Bonuses +An incentive bonus will confer upon the participant the opportunity to earn a future +payment, in cash or shares, tied to the level of achievement with respect to one or more performance criteria established for a performance period of not less than one year. The administrator will establish the terms and conditions to which the +award is subject, including performance criteria and the level of achievement of the criteria that will determine the target and maximum amounts payable under an incentive bonus award, which criteria may be based on financial performance and/or +personal performance evaluations. Notwithstanding the satisfaction of any performance goals, the amount paid under an incentive bonus award on account of either financial performance or personal performance evaluations may be adjusted by the +administrator as set forth in the Plan. +Deferral of Gains +The administrator may, in an award agreement or otherwise, provide for the deferred +delivery of shares upon settlement, vesting or other events with respect to restricted stock or restricted stock units, or for the deferred payment or satisfaction of an incentive bonus. However, in no event will any deferral of the delivery of +shares or any other payment with respect to any award be allowed if the administrator determines, in its sole and absolute discretion that the deferral would result in the imposition of the additional tax under Section 409A of the Code. +Notwithstanding the foregoing and to the extent compliant with Section 409A of the Code, if the administrator permits any deferral of shares or any other payment as described above, payment of any vested award that a participant has elected to +defer will be made regardless of any deferral election within thirty (30) days of a change in control or the participant’s separation from service (including death). +Qualifying Performance Criteria +With respect to performance-based awards the administrator may establish performance +criteria and level of achievement of such criteria that will determine the number of shares to be granted, retained, vested, issued or issuable under or in settlement of or the amount payable pursuant to an award, which criteria may be based on +“qualifying performance criteria” (as described below) or other standards of financial performance and/or personal performance evaluations. +For purposes of the Plan, the term “qualifying performance criteria” means an +objectively determinable measure of performance relating to any one or more of the following performance criteria, or derivations of such performance criteria, either individually, alternatively or in any combination, applied to either the +Company as a whole or to a business unit, division, line or subsidiary, either individually, alternatively or in any combination, and measured either annually or cumulatively over a period of years, on an absolute basis or relative to a +pre-established target, to previous years’ results or to an index or indices or a designated comparison group or groups, in each case as specified by the +2021 PROXY STATEMENT +83 +TABLE OF CONTENTS +administrator: (i) net earnings or earnings per share (including earnings before +interest, taxes, depreciation and/or amortization), (ii) income, net income or operating income, (iii) revenues, (iv) net sales, (v) return on sales, (vi) return on equity, (vii) return on capital (including return on total capital or return on +invested capital), (viii) return on assets or net assets, (ix) earnings per share, (x) economic or business value added measurements (xi) return on invested capital, (xii) return on operating revenue, (xiii) cash flow (before or after dividends), +(xiv) stock price, (xv) total shareholder return, (xvi) market capitalization, (xvii) economic value added, (xviii) debt leverage (debt to capital), (xix) operating profit or net operating profit, (xx) operating margin or profit margin, +(xxi) cash from operations, (xxii) market share, (xxiii) product development or release schedules, (xxiv) new product innovation, (xxv) cost reductions, (xxvi) customer acquisition or retention, (xxvii) customer service, (xxviii) customer +satisfaction, or (xxix) other performance criteria selected by the Administrator. +The administrator may adjust performance results for any recapitalization, +reorganization, merger, acquisition, divestiture, consolidation, spin-off, combination, liquidation, dissolution, sale of assets or other similar corporate transaction or event, or any other extraordinary event or circumstance occurs which has +the effect, as determined by the Administrator, in its sole and absolute discretion, of distorting the applicable performance criteria involving the Company. +Suspension or Termination of Awards +Unless otherwise determined by the administrator, (i) if the Company’s chief executive +officer or any other person designated by the administrator reasonably believes that a participant may have committed an act of misconduct (as defined in the Plan), then the participant’s rights to exercise any stock option, vest in any award +and/or receive payment for or shares in settlement of an award may be suspended pending a determination of whether such misconduct has been committed, and (ii) if the administrator, the Company’s chief executive officer or any other person +designated by the administrator determines that a participant has committed an act of misconduct, then the participant (a) may not exercise any stock option or stock appreciation right, vest in any award, have restrictions on an award lapse or +otherwise receive payment of an award, (b) will forfeit all outstanding awards, and (c) may be required, at the discretion of the administrator, to return or repay to the Company any then unvested shares previously issued under the Plan. In +addition, the administrator may seek to recover awards made under the Plan and payments under or gain in respect of any award in accordance with the Company’s Policy for Recovery of Incentive Compensation or any successor or additional clawback +or recoupment policy or as otherwise required by applicable law or applicable stock exchange listing standards. +Settlement of Awards +Awards (other than stock awards), may be settled in shares, cash or a combination thereof, as determined by +the administrator. +No Repricing Without Shareholder Approval +Other than in connection with certain changes in the Company’s capitalization, the +administrator may not, without prior approval of the Company’s shareholders, effect any “repricing” of a previously granted stock option or stock appreciation right that is “underwater” (i.e., the fair market value of the shares underlying such +award is less than the exercise price of such award) by (i) amending or modifying the terms of the award to lower the exercise price; (ii) canceling the underwater award and granting either (A) replacement stock options or stock appreciation +rights, as applicable, having a lower exercise price or (B) restricted stock, restricted stock units, performance awards or stock awards in exchange; or (iii) cancelling or repurchasing the underwater award for cash or other securities. +Amendment and Termination +The Board of Directors may amend, alter or discontinue the Plan, and the administrator +may amend or alter any agreement or other document evidencing an award made under the Plan, except that, unless in connection with a change in the capitalization of the Company or a change in control, no such amendment or alteration may, without +the approval of the shareholders of the Company: (i) increase the maximum number of shares for which awards may be granted under the Plan, (ii) reduce the minimum price set forth in the Plan at which stock options or stock appreciation rights may +be granted, (iii) reduce the exercise price of outstanding stock options or stock appreciation rights, (iv) extend the term of the Plan, (v) change the class of persons eligible to be participants, (vi) otherwise amend the Plan in any manner +requiring shareholder approval by law or under the New York Stock Exchange listing requirements (or the listing requirements of any successor exchange that is the primary stock exchange for trading of the Company’s shares), or (vii) increase the +individual maximum limits set forth in the Plan. +Except as set forth in the Plan, no amendment or alteration to the Plan or an award or +award agreement may be made that would impair the rights of the holder of an award without such holder’s consent. In addition, the Plan may not be amended in any way that causes the Plan to fail to comply with or be exempt from Section 409A of +the Code, unless the Board of Directors expressly determines to amend the Plan to be subject to Section 409A of the Code. +2021 PROXY STATEMENT +84 +TABLE OF CONTENTS +The administrator may, in its sole and absolute discretion, modify the provisions of +the Plan or an award as they pertain to a participant who is employed or providing services outside the United States in order to comply with applicable foreign law or to recognize differences in local law, currency or tax policy. +Change in Control +Awards granted under the Plan that are subject to vesting based on continuous employment +or service, to the extent awards are assumed or substituted by an acquirer in the change in control (as defined in the Plan) awards shall not immediately vest upon the change in control and instead shall continue to vest in accordance with their +terms, provided that if a participant experiences a termination of employment (as defined in the Plan) by the Company without cause (as defined in the Plan) or by the participant for good reason (as defined in the Plan), in each case, within the +twenty-four (24) month period following the change in control, the awards shall immediately vest and become exercisable or shall be settled upon such qualifying termination. If, at any time during the vesting period of an award, a participant is +or becomes eligible to terminate his or her employment with the Company or its Subsidiaries due to retirement, the award shall immediately vest in full upon the change in control. +For awards granted under the Plan that are subject to performance conditions, if a +change in control occurs prior to the end date of a performance period, to the extent the performance award is outstanding immediately prior to such change in control, such award will vest (a) based on actual performance through the date of the +change in control as determined by the administrator (treating the change in control as the end of the applicable performance period) without proration for the time elapsed in such performance period prior to such change in control for purposes +of determining performance, but in the discretion of the administrator, prorated for purposes of elapsed time in a manner consistent with subsection (b) below, (b) assuming that target level of performance is attained and prorated based on the +number of days in the performance period that elapsed prior to the change in control over the total number of days in the performance period, or (c) a combination of (a) and (b) (without double counting). Any portion of the performance award (or +the full award as applicable) that does not vest in connection with a change in control as contemplated herein will automatically terminate upon such change in control. +Subject to and limited by the requirements of the preceding paragraphs, the +administrator shall determine the effect of a change in control (as defined in the Plan) on outstanding awards. These effects, which need not be the same for all participants, may include, but are not limited to (i) substituting for the shares +subject to an outstanding award or portion thereof the stock or securities of the surviving corporation or any successor corporation (or parent or subsidiary thereof), in which event the aggregate exercise price of the award will remain the same, +and/or (ii) converting any outstanding award or portion thereof into a right to receive cash or other property following the consummation of the change in control in an amount equal to the value of the consideration to be received for one share +of the Company’s common stock in connection with such transaction less the purchase or exercise price of the shares subject to the award, if any, multiplied by the number of shares subject to the award or portion thereof. +The administrator may determine that some or all participants holding vested and +exercisable stock options or stock appreciation rights will receive with respect to some or all of the shares subject to such awards cash in an amount equal to the excess of (i) the greater of (a) the highest sales price of the shares on the New +York Stock Exchange (or any successor exchange that is the primary stock exchange for trading of the Company’s shares) on the date immediately prior to the change in control and (b) the highest price per share actually paid in connection with the +change in control, over (ii) the exercise price of the award. +Adjustments +The number and kind of shares available for issuance under the Plan, and the number and +kind of shares subject to the individual and ISO limits set forth under the Plan, will be equitably adjusted by the administrator to reflect any reorganization, reclassification, combination of shares, stock split, reverse stock split, spin-off, +dividend or distribution of securities, property or cash (other than regular, quarterly cash dividends), or any other event or transaction that affects the number or kind of shares of the Company outstanding. The terms of any outstanding award +will also be equitably adjusted by the administrator as to price, number or kind of shares subject to such award and other terms to reflect the foregoing events, which adjustments need not be uniform as between different awards or different types +of awards. +In the event there is a change in the number or kind of outstanding shares under the +Plan as a result of a change of control, other merger, consolidation or otherwise, then the administrator will determine the appropriate and equitable adjustment to be effected. In addition, in the event of such a change, the administrator may +accelerate the time or times at which any award may be exercised (subject to the limitations described above under the “Change in Control” heading) and may provide for cancellation of such accelerated awards that are not exercised within a time +prescribed by the administrator in its sole discretion. +2021 PROXY STATEMENT +85 +TABLE OF CONTENTS +Transferability +Unless the administrator determines otherwise, awards may not be sold, transferred, +pledged, assigned, or otherwise alienated or hypothecated by a participant other than by will or the laws of descent and distribution, and each stock option or stock appreciation right may be exercisable only by the participant during his or her +lifetime. To the extent permitted by the administrator, the person to whom an award is initially granted may transfer awards, in certain limited circumstances, to certain family members, family trusts, or family partnerships. +No Right to Company Employment +Nothing in the Plan or an award agreement will interfere with or limit in any way the +right of the Company, its subsidiaries and/or its affiliates to terminate any participant’s employment, service on the Board of Directors or service for the Company at any time or for any reason not prohibited by law, nor will the Plan or an +award itself confer upon any participant any right to continue his or her employment or service for any specified period of time. Neither an award nor any benefits arising under the Plan will constitute an employment contract with the Company, +any subsidiary and/or its affiliates. +Effective Date and Termination of the Plan +The Plan was adopted by the Board of Directors on February 9, 2021, subject to +shareholder approval. The Plan will remain available for the grant of awards until February 8, 2031, unless earlier terminated by the Board of Directors. If shareholders do not approve this proposal, the Company can continue to make awards under +the Current Plan to the extent of the number of shares authorized under the Current Plan as of immediately prior to the Amendment Date. Any award granted on or after the Amendment Date, to the extent that the number of shares subject to such +award, or portions thereof, exceeds the number of shares authorized under the Current Plan as of the Amendment Date, shall be void as determined by the Administrator if shareholder approval of the Plan is not obtained. +Federal Income Tax Treatment +The following discussion is a general summary as of the date of this Proxy Statement of +the significant U.S. federal income tax consequences to the Company and the participants in the Plan. The discussion is intended solely for general information and does not make specific representations to any participant. The discussion does not +address state, local or foreign income tax rules or other U.S. tax provisions, such as estate or gift taxes. A recipient’s particular situation may be such that some variation of the basic rules is applicable to him or her. In addition, the +federal income tax laws and regulations are frequently revised and may change at any time. Therefore, each recipient is urged to consult a tax advisor before exercising any award or before disposing of any shares acquired under the Plan both with +respect to federal income tax consequences as well as any foreign, state or local tax consequences. The Company does not anticipate that awards granted under the Plan will qualify as performance-based compensation under Section 162(m) of the +Code. +Stock Options +ISOs and NQSOs are treated differently for federal income tax purposes. ISOs are +intended to comply with the requirements of Section 422 of the Code. NQSOs do not comply with such requirements. +In general, a participant is not taxed on the grant or exercise of an ISO. The +difference between the exercise price and the fair market value of the shares on the exercise date may, however, be a preference item for purposes of the alternative minimum tax. If a participant holds the shares acquired upon exercise of an ISO +until the later of two years following the stock option grant date and one year following exercise, the gain, if any, upon a subsequent disposition of such shares will be long-term capital gain. The amount of the gain will be the difference +between the proceeds received on disposition and the participant’s basis in the shares (which generally equals the exercise price). If a participant disposes of stock acquired pursuant to exercise of an ISO before satisfying these holding +periods, the participant will recognize as ordinary income in the year of disposition an amount equal to the excess of the fair market value of the shares at the time of exercise (or, if less, the amount realized on the disposition of the +shares), over the exercise price paid for the shares, and capital gain or loss for any other difference between the sale price and the exercise price. The Company is not entitled to an income tax deduction on the grant or exercise of an ISO or on +the participant’s disposition of the shares after satisfying the holding period requirement described above. If the holding periods are not satisfied, the Company generally will be entitled to a deduction in the year the participant disposes of +the shares in an amount equal to the ordinary income recognized by the participant. +The Company does not guarantee that any option intended to be an ISO will qualify for +the tax treatment of ISOs described above. If an option intended to be an ISO fails to so qualify, it will be taxed as an NQSO, as described below. +2021 PROXY STATEMENT +86 +TABLE OF CONTENTS +In general, a participant is not taxed on the grant of an NQSO. On exercise, the +participant recognizes ordinary income equal to the difference between the exercise price and the fair market value of the shares acquired on the date of exercise. The Company is generally entitled to an income tax deduction in the year of +exercise in the amount recognized by the participant as ordinary income. The participant’s gain (or loss) on subsequent disposition of the shares is long-term capital gain (or loss) if the shares are held for at least one year following exercise, +and otherwise is short-term capital gain (or loss). The Company does not receive a deduction for any such capital gain. +Stock Appreciation Rights +In general, the recipient of a freestanding SAR will not recognize any taxable income at +the time the freestanding SAR is granted. If the freestanding SAR is settled in cash, the cash will be taxable as ordinary income to the recipient at the time that it is received. If the freestanding SAR is settled in shares, the recipient will +recognize ordinary income equal to the excess of the fair market value of the shares on the day the freestanding SAR is exercised over any amounts paid by the recipient for the shares. +With respect to tandem SARs, if a holder elects to surrender the underlying stock +option in exchange for cash or stock equal to the appreciation inherent in the underlying stock option, the tax consequences to the employee will be the same as discussed above relating to freestanding SARs. If the employee elects to exercise the +underlying stock option, the holder will be taxed at the time of exercise as if he or she had exercised an NQSO (discussed above). +The Company generally is entitled to a deduction with respect to a SAR at the same time +the recipient recognizes ordinary income with respect thereto. +Restricted Stock and Restricted +Stock Units +A participant who is awarded or purchases shares subject to a substantial risk of +forfeiture, or restricted stock, generally does not recognize income at the time of the grant. When the risk of forfeiture lapses, the participant generally recognizes ordinary income in an amount equal to the excess of the fair market value of +the shares over the purchase price, if any, and a deduction is generally available to the Company in the same year that the participant recognizes income. However, a participant may make an election under Section 83(b) of the Code to recognize +taxable ordinary income at the time the shares are transferred to the participant, rather than later, when the risk of forfeiture lapses, in an amount equal to the fair market value of the shares at the time of such transfer. Such election must +be made no later than 30 days after the date the shares are transferred to the participant. If the participant makes a timely and effective election, when the restrictions on the shares lapse, the participant will not recognize any additional +income. For purposes of determining capital gain or loss on a sale of shares acquired under a restricted stock award under the Plan, the holding period in the shares begins when the participant recognizes taxable income with respect to the +transfer. The participant’s tax basis in the shares equals the amount paid for the shares plus any income realized with respect to the transfer. If the participant forfeits the shares to the Company (e.g., upon the participant’s termination prior +to vesting), the participant may not claim a deduction with respect to the income recognized as a result of the election. Dividends (if any) paid with respect to unvested shares of restricted stock generally will be taxable as ordinary income to +the participant at the time the dividends are paid, if an effective 83(b) election was not made with respect to the shares. +A participant who is awarded restricted stock units generally does not recognize income +at the time of grant. Instead, the participant is generally taxed upon settlement of the award (and a corresponding deduction is generally available to the Company), unless he or she has made a proper election to defer receipt of the shares (or +cash if the award is cash settled) under Section 409A of the Code. (FICA taxes will apply upon the vesting of the restricted stock unit award.) If the shares delivered are restricted for tax purposes, the participant will instead be subject to +the rules described above for restricted stock. +Stock Awards +A participant who receives a stock award generally is required to recognize ordinary +income in an amount equal to the excess of the fair market value of the shares on the date the shares are granted over the purchase price (if any) paid for the shares. The Company generally will be entitled to a deduction with respect to stock +awards at the same time the recipient recognizes ordinary income with respect thereto. +Incentive Bonuses +A participant will have taxable income at the time an incentive bonus is paid. At that +time, the participant will recognize ordinary income equal to the value of the amount then payable and, the Company generally will be entitled to a corresponding deduction. +2021 PROXY STATEMENT +87 +TABLE OF CONTENTS +Certain Change in Control Payments +Under Section 280G of the Code, the vesting or accelerated exercisability of stock +options or the vesting and payments of other awards in connection with a change in control of a corporation may be required to be valued and taken into account in determining whether participants have received compensatory payments, contingent on +the change in control, in excess of certain limits. If these limits are exceeded, a substantial portion of amounts payable to the participant, including income recognized by reason of the grant, vesting or exercise of awards, may be subject to an +additional 20% federal tax, which is non-deductible to the Company. +Plan Benefits +The benefits that will be awarded or paid under the Plan are not currently determinable. +Awards granted under the Plan are within the discretion of the Compensation Committee. No awards made under the Plan prior to the date of the Annual Meeting were granted subject to shareholder approval. The following table sets forth the number +of PSUs (at target), restricted stock units, restricted stock awards and stock options that have been granted to the named executive officers and the specified groups set forth below since the Plan’s inception: +Grants Under Plan +Name +PSUs +Stock Options +RSUs/RSAs +Blake W. Krueger +Chairman and CEO +527,572 +— +253,639 +Brendan Hoffman +President, Wolverine Worldwide +103,857 +— +55,493 +Michael Jeppesen +President, Global Operations Group +63,883 +51,988 +63,065 +Michael D. Stornant +SVP, CFO, Treasurer and +Chief Accounting Officer +76,084 +70,948 +61,283 +James D. Zwiers +Executive Vice President +71,631 +64,465 +59,236 +All executive officers as a group +956,415 +249,300 +609,792 +All non-employee directors and director nominees as a group +— +181,266 +127,453 +Each associate of the above-mentioned executive officers, directors and director +nominees +— +— +— +Each other person who received or is to receive 5% of such options, warrants or +rights +— +— +— +All employees as a group, excluding executive officers +397,339 +530,228 +1,814,205 +2021 PROXY STATEMENT +88 +TABLE OF CONTENTS +Equity Compensation Plan Information +The following table provides information about the Company’s equity compensation plans +as of January 2, 2021 (and does not include the 4.9 million shares of common stock that are the subject of this Proposal 4): +Plan Category 1 +Number of Securities to be +Issued Upon Exercise of +Outstanding Options, +Warrants and Rights +(a) +Weighted Average +Exercise Price of +Outstanding Options, +Warrants, and Rights +(b) +Number of Securities +Remaining Available for +Future Issuance under +Equity Compensation +Plans (Excluding +Securities Reflected in +Column (a)) +(c) +Equity compensation plans approved by security holders +3,727,498 2 +$22.22 +6,098,065 3 +Equity compensation plans not approved by security holders +— +— +— +Total +3,727,498 +$22.22 +6,098,065 +1 +Each plan for which aggregated information is provided contains customary anti-dilution +provisions that are applicable in the event of a stock split, stock dividend or certain other changes in the Company’s capitalization. +2 +Includes: (i) 3,259,405 stock options awarded to employees under the Amended and Restated Stock +Incentive Plan of 1999, the Amended and Restated Stock Incentive Plan of 2001, the Amended and Restated Stock Incentive Plan of 2003, the Amended and Restated Stock Incentive Plan of 2005, the +Stock Incentive Plan of 2010, the Stock Incentive Plan of 2013 and the Stock Incentive Plan of 2016 (Current Plan); (ii) and 468,093 stock options awarded to non-employee directors under the Amended and Restated Stock Incentive Plan of 2005, the Stock Incentive Plan of 2010, the Stock Incentive Plan of 2013 and the Stock Incentive Plan of 2016 (Current Plan). +Column (a) does not include stock units credited to outside directors’ fee accounts or retirement accounts under the Outside Directors’ Deferred Compensation Plan. Stock units do not have an +exercise price. Each stock unit credited to a director’s fee account and retirement account under the Outside Directors’ Deferred Compensation Plan will be converted into one share of common +stock upon distribution. Column (a) also does not include shares of restricted or unrestricted common stock previously issued under the Company’s equity compensation plans. +3 +Comprised of: (i) 110,742 shares available for issuance under the Outside Directors’ Deferred +Compensation Plan upon the retirement of the current directors or upon a change in control; and (ii) 5,987,323 shares issuable under the Stock Incentive Plan of 2016. +The Outside Directors’ Deferred Compensation Plan is a supplemental, unfunded, +nonqualified deferred compensation plan for non-employee directors. Beginning in 2006, the Company began paying an annual equity retainer to non-management directors in the form of a contribution under the Outside Directors’ Deferred Compensation +Plan. Non-management directors may also voluntarily elect to receive, in lieu of some or all directors’ fees, a number of stock units equal to the amount of the deferred directors’ fees divided by the fair market value of the Company’s common +stock on the date of payment. These stock units are increased by a dividend equivalent based on dividends paid by the Company and the amount of stock units credited to the participating director’s fee account and retirement account. Upon +distribution, the participating directors receive a number of shares of the Company’s common stock equal to the number of stock units to be distributed at that time. Distribution is triggered by termination of service as a director or by a change +in control of the Company and can occur in a lump sum, in installments or on another deferred basis. A total of 345,214 shares have been issued to a trust to satisfy the Company’s obligations and are included in shares the Company reports as +issued and outstanding. +The Stock Incentive Plan of 2016, as previously amended and restated, was most recently +approved by Company shareholders at the 2018 annual meeting and is the subject of this Proposal 4. +Of the total number of shares available under column (c), the number of shares with +respect to the following plans may be issued other than upon the exercise of an option, warrant or right outstanding as of January 2, 2021: +Outside Directors’ Deferred Compensation Plan: 110,742 +Current Plan: 2,302,816 +2021 PROXY STATEMENT +89 +TABLE OF CONTENTS +VOTE REQUIRED AND BOARD RECOMMENDATION +Approval of the Wolverine World Wide, Inc. Stock Incentive Plan of 2016, as amended and +restated, requires the affirmative vote of a majority of shares cast affirmatively or negatively on the matter for approval. +BOARD RECOMMENDATION +The Board of Directors recommends that you vote “FOR” approval of the +Stock Incentive Plan of 2016, as Amended and Restated. +2021 PROXY STATEMENT +90 +TABLE OF CONTENTS +Related Party Matters +CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS +Since December 29, 2019, the Company has not engaged in any “related person” +transactions with its directors, executive officers or holders of 5% or more of Company voting securities, affiliates or any member of the immediate family of the foregoing persons. +RELATED PERSON TRANSACTIONS POLICY +Wolverine Worldwide's Board adopted written policies and procedures regarding related +person transactions. They require the Governance Committee to review and either approve or disapprove the Company entering into any Interested Transactions (defined below). If advance approval is not feasible, then the Governance Committee must +review and ratify the Interested Transaction at its next meeting. +Interested Transaction +Any transaction, arrangement or relationship or series of similar transactions, arrangements or +relationships (including any indebtedness or guarantee of indebtedness) in which: +(1) +the aggregate amount involved is or is expected to exceed $120,000 since the beginning of Wolverine +Worldwide's last completed fiscal year; +(2) +Wolverine Worldwide is a participant; and +(3) +any Related Person (defined below) has or will have a direct or indirect interest. +An Interested Transaction does not include: +(1) +any employment compensation paid to an executive officer of the Company if the Compensation Committee +approved or recommended to the Board of Directors for approval of such compensation; +(2) +any compensation paid to a director for service as a director of the Company; +(3) +any transaction in which a Related Person has an indirect interest solely as a result of being (i) a +director or, together with all other Related Persons, as defined below, a less than 10% beneficial owner of an equity interest in another entity, or both, or (ii) a limited partner in a partnership in which the Related Person, together +with all other Related Persons, has an interest of less than 10%; or +(4) +any transaction in which the Related Person's interest arises solely from the ownership of the +Company's common stock and all holders of the Company's common stock received the same benefit on a pro rata basis (e.g., a dividend). +(5) +any transaction with another publicly traded company where the Related Person's interest arises +solely from the ownership of more than 5% of the Company's common stock and the ownership of a non-controlling interest in the other publicly traded company. +Related Person +Any: +(a) +person who is or was at any point during the last fiscal year for which Wolverine Worldwide filed an +Annual Report on Form 10-K and Proxy Statement, an executive officer, director or, to the extent information regarding such nominee is being presented in a proxy or information statement relating to the election of that nominee as a +director, nominee for election as a director; +(b) +beneficial owner of greater than five percent of Wolverine Worldwide's common stock; or +(c) +immediate family member* of any of the foregoing. +* +Immediate family member is defined as a person's spouse, parents, stepparents, children, stepchildren, siblings, mothers and +fathers-in-law, sons- and daughters-in-law, and brothers- and sisters-in-law, and anyone residing in such person's home (other than a tenant or employee). +The Governance Committee considers whether the Interested Transaction is on terms no +less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances, the extent of the Related Person's interest in the transaction, and other factors that it deems relevant. No director +participates in any discussion or approval of an Interested Transaction for which he or she is a Related Person, except to provide information to the Governance Committee. +2021 PROXY STATEMENT +91 +TABLE OF CONTENTS +Additional Information +SHAREHOLDERS LIST +For information about how to view the list of shareholders entitled to vote at the +Annual Meeting during the ten days preceding the Annual Meeting, please visit our 2021 Annual Meeting website at www.wolverineworldwide.com/2021annualmeeting. To view the list of shareholders entitled to vote at the Annual Meeting during the +meeting, please follow the instructions set forth in the Notice of annual meeting to participate in the annual meeting. +DIRECTOR AND OFFICER INDEMNIFICATION +The Company indemnifies its directors and NEOs to the fullest extent permitted by law so +that they will be free from undue concern about personal liability in connection with their service to the Company. +DELINQUENT SECTION 16(a) REPORTS +Section 16(a) of the Exchange Act requires the Company's directors and executive +officers, and persons who beneficially own more than 10% of the outstanding shares of the Company's common stock, to file reports of ownership and changes in ownership of shares of common stock with the SEC. Directors, executive officers and +greater than 10% beneficial owners are required by SEC regulations to furnish Wolverine Worldwide with copies of all Section 16(a) reports they file. Based on its review of the copies of such reports received by it, or written representations +from certain reporting persons, the Company believes that during fiscal year 2020, its officers and directors filed the required reports under Section 16(a) on a timely basis, except for one transaction for each of Messrs. Hufnagel and Spaletto +and two transactions for Dr. Kollat, in each case, due to an administrative error. +SHAREHOLDER PROPOSALS FOR INCLUSION IN +NEXT YEAR'S PROXY STATEMENT +Pursuant to SEC Rule 14a-8, some shareholder proposals may be eligible for inclusion in +Wolverine Worldwide's 2022 Proxy Statement and proxy card. Any such shareholder proposals must be submitted in writing to the Secretary of Wolverine Worldwide no later than the close of business on November 26, 2021. You should address all +shareholder proposals to the attention of Secretary, Wolverine World Wide, Inc., 9341 Courtland Drive, NE, Rockford, Michigan 49351. +OTHER SHAREHOLDER PROPOSALS FOR +PRESENTATION AT NEXT YEAR'S ANNUAL MEETING +The Company's By-Laws require that any shareholder proposal that is not submitted for +inclusion in next year's Proxy Statement under SEC Rule 14a-8, but is instead sought to be presented directly at the 2022 Annual Meeting of Shareholders, must be received at the Company's principal executive offices by the close of business not +less than 90 days nor more than 120 days prior to the first anniversary of the 2021 Annual Meeting. As a result, proposals, including director nominations, submitted pursuant to these provisions of the By-Laws must be received between January 6, +2022 and the close of business on February 5, 2022. You should address a proposal to Secretary, Wolverine World Wide, Inc., 9341 Courtland Drive NE, Rockford, Michigan 49351, and include the information and comply with the requirements set forth +in those By-Laws, which the Company has posted on its website. SEC rules permit management to vote proxies in its discretion in certain cases if the shareholder does not comply with this deadline, and in certain other cases notwithstanding the +shareholder's compliance with this deadline. +VOTING SECURITIES +Shareholders of record at the close of business on March 8, 2021, are eligible to vote +at the Annual Meeting. The Company's voting securities consist of its $1.00 par value common stock, and there were 82,597,389 shares outstanding and entitled to vote on the record date. Each share outstanding on the record date will be entitled +to one vote on each director nominee and one vote on each other matter. Treasury shares are not voted. Individual votes of shareholders are kept private, except as appropriate to meet legal requirements. Access to proxies and other individual +shareholder voting records is limited to the independent inspectors of election and certain employees of the Company and its agents who acknowledge their responsibility to comply with this policy of confidentiality. +2021 PROXY STATEMENT +92 +TABLE OF CONTENTS +CONDUCT OF BUSINESS +A majority of the outstanding shares of common stock as of the record date must be +present at the Annual Meeting in order to hold the Annual Meeting and conduct business. This is called a “quorum.” Your shares are counted as present at the meeting if you are present at the Annual Meeting and vote, a proxy card has been properly +submitted by you or on your behalf, or you have submitted your proxy by telephone or by internet, or by completing, signing, dating and returning your proxy form in the enclosed envelope. Both abstentions and broker non-votes (defined below in “ Vote Required for Election and Approval ”) are counted as present for the purpose of determining the presence of a quorum. +VOTE REQUIRED FOR ELECTION AND APPROVAL +For Proposal 1, Election of Directors for Terms Expiring in 2024, directors are elected +by a majority of votes cast unless the election is contested, in which case directors are elected by a plurality of votes cast. A majority of votes cast means that the number of shares voted “for” a Director nominee exceeds the number of votes +cast “against” the Director nominee. If an incumbent director in an uncontested election does not receive a majority of votes cast for his or her election, under the Company's Corporate Governance Guidelines, the director is required to submit a +letter of resignation to the Board for consideration by the Governance Committee. The Governance Committee will then make a recommendation to the Board as to whether to accept or reject the tendered resignation. The Governance Committee and the +Board, in making their decisions, may implement any procedures they deem appropriate and may consider any factor or other information that they deem relevant. The Board will then act on the tendered resignation, taking into account the Governance +Committee's recommendation, and will publicly disclose its decision regarding the resignation within 90 days after the results of the election are certified. A director whose resignation is under consideration shall abstain from participating in +any recommendation or decision regarding that resignation. If the resignation is not accepted, the director will continue to serve until the next annual meeting of shareholders at which such director faces re-election and until such director's +successor is elected and qualified. +Proposal 2, Advisory Vote to Approve Executive Compensation, is a non-binding, advisory +vote. Therefore, there is no required vote that would constitute approval. The Company values the opinions expressed by its shareholders in this advisory vote, and the Board and Compensation Committee will consider the outcome of these votes when +designing compensation programs and making future compensation decisions for the Company's named executive officers. +Proposal 3, Ratification of Appointment of Independent Registered Public Accounting +Firm, requires the affirmative vote of a majority of shares cast affirmatively or negatively on the matter for approval. +Proposal 4, Approval of the Stock Incentive Plan of 2016 (as amended and restated), +requires the affirmative vote of a majority of shares cast affirmatively or negatively on the matter for approval. +Abstentions and broker non-votes, if any, will have no effect on the outcome of the +election of directors. Generally, broker non-votes occur when shares held by a broker in “street name” for a beneficial owner are not voted with respect to a particular proposal because (1) the broker has not received voting instructions from the +beneficial owner, and (2) the broker lacks discretionary voting power to vote those shares. Brokers do not have discretionary authority with respect to any of the proposals except for Proposal (3). Abstentions are not counted as affirmative votes +on a matter. +VOTING RESULTS OF THE ANNUAL MEETING +The Company will announce preliminary voting results at the Annual Meeting and publish +final results in a Form 8-K within four business days following the Annual Meeting. If final results are not known within four business days of the Annual Meeting, then the Company will file a Current Report on Form 8-K with the preliminary +results and file an amended Current Report on Form 8-K within four business days of the availability of the final results. +ATTENDING THE ANNUAL MEETING +You may vote shares held directly in your name as the shareholder of record at the +Annual Meeting. If you choose to vote at the meeting, please access instructions as set forth in the Notice of annual meeting. Even if you plan to attend the Annual Meeting, Wolverine Worldwide recommends that you vote your shares in advance as +described below so that your vote will be counted if you later decide not to attend the Annual Meeting. You may vote shares held in “street name” through a brokerage account or by a bank or other nominee if you obtain a proxy from the record +holder giving you the right to vote the shares. Each shareholder may appoint only one proxy holder or representative to attend the meeting on his or her behalf. +2021 PROXY STATEMENT +93 +TABLE OF CONTENTS +MANNER FOR VOTING PROXIES +The shares represented by all valid proxies received by telephone, by internet or by +mail will be voted in the manner specified. Where the shareholder has not indicated a specific choice, the shares represented by all valid proxies received will be voted in accordance with the Board's recommendations as follows: (1) for each of +the nominees for directors named earlier in this Proxy Statement, (2) for approval of the advisory resolution to approve executive compensation, (3) for ratification of the appointment of the independent registered public accounting firm and (4) +for approval of the Stock Incentive Plan of 2016 (as amended and restated). The Board has not received timely notice of any other matter that may come before the Annual Meeting. However, should any matter not described above be properly presented +at the Annual Meeting, the persons named in the proxy form will vote in accordance with their judgment, as permitted. +REVOCATION OF PROXIES +A shareholder who gives a proxy may revoke it at any time before it is exercised by +voting at the Annual Meeting in the manner described in the Notice of 2021 Annual Meeting of Shareholders, by delivering a subsequent proxy or by notifying the inspectors of election in writing of such revocation. +SOLICITATION OF PROXIES +The Company will pay the expenses of solicitation of proxies for the Annual Meeting. +Solicitations may be made in person or by telephone, by officers and employees of the Company, or by nominees or other fiduciaries who may mail materials to or otherwise communicate with the beneficial owners of shares held by the nominees or +other fiduciaries. These individuals will not be paid any additional compensation for any such solicitation. Upon request, the Company will reimburse brokers, dealers, banks and trustees, or their nominees, for reasonable expenses incurred by +them in forwarding material to beneficial owners of the Company's common stock. +DELIVERY OF DOCUMENTS TO SHAREHOLDERS +SHARING AN ADDRESS +If you are the beneficial owner, but not the record holder, of shares of Wolverine +Worldwide stock, your broker, bank or other nominee may only deliver one copy of this Proxy Statement and the Company's 2020 Annual Report to multiple shareholders who share an address, unless that nominee has received contrary instructions from +one or more of the shareholders. The Company will deliver promptly, upon written or oral request, a separate copy of this Proxy Statement and its 2020 Annual Report to a shareholder at a shared address to which a single copy of the documents was +delivered. A shareholder who wishes to receive a separate copy of the Proxy Statement and annual report, now or in the future, or shareholders who share an address and receive multiple copies of the Proxy Statement and annual report but would +like to receive a single copy, should submit this request to Broadridge Financial Solutions, Inc. at 1-866-540-7095 or in writing at Broadridge, Householding Department, 51 Mercedes Way, Edgewood, New York 11717. Beneficial owners sharing an +address who are receiving multiple copies of proxy materials and who wish to receive a single copy of such materials in the future should make a request directly to their broker, bank or other nominee. +ACCESS TO PROXY STATEMENT AND ANNUAL REPORT +Distribution of this Proxy Statement and enclosed proxy card to shareholders is +scheduled to begin on or about March 26, 2021. Wolverine Worldwide's financial statements for the fiscal year ended January 2, 2021, are included in the Company's 2020 Annual Report, which the Company is providing to shareholders at the same time +as this Proxy Statement. Wolverine Worldwide's Proxy Statement for the 2021 Annual Meeting and the Annual Report to Shareholders for the fiscal year ended January 2, 2021 are available at www.wolverineworldwide.com/2021annualmeeting . If you have not received or do not have access to the 2020 Annual Report, write to: Wolverine World Wide, Inc., 9341 Courtland Drive NE, Rockford, Michigan 49351, Attn: +Investor Relations or call (616) 866-5500 and ask for Investor Relations, and the Company will send a copy to you without charge. +2021 PROXY STATEMENT +94 +TABLE OF CONTENTS +APPENDIX A +APPENDIX A – Forward-Looking +Statements +2021 PROXY STATEMENT +A-1 +TABLE OF CONTENTS +APPENDIX A +FORWARD-LOOKING STATEMENTS +This document contains “forward-looking statements,” including statements regarding, our +fiscal year 2021 initiatives and performance, including execution against our global growth agenda and future revenue growth, and our eCommerce revenue goal for fiscal 2021, which are statements relating to future, not past, events. In this +context, forward-looking statements often address management’s current beliefs, assumptions, expectations, estimates and projections about future business and financial performance, national, regional or global political, economic and market +conditions, and the Company itself. Such statements often contain words such as “anticipates,” “believes,” “estimates,” “expects,” “forecasts,” “intends,” “is likely,” “plans,” “predicts,” “projects,” “should,” “will,” variations of such words, +and similar expressions. Forward-looking statements, by their nature, address matters that are, to varying degrees, uncertain. Uncertainties that could cause the Company’s performance to differ materially from what is expressed in forward-looking +statements include, but are not limited to, the following: +• +the potential effects of the COVID-19 pandemic on the Company’s business, operations, financial results and liquidity, including +the duration and magnitude of such effects, which will depend on numerous evolving factors that the Company cannot currently fully predict or assess, including: the duration and scope of the pandemic; the negative impact on global and +regional markets, economies and economic activity, including the duration and magnitude of its impact on unemployment rates, consumer discretionary spending and levels of consumer confidence; actions that governments, businesses and +individuals may take in response to the pandemic; and the effects of the pandemic, including all of the foregoing, on the Company's manufacturers, distributors, suppliers, joint venture partners, wholesale customers, and other +counterparties. The timing and scope of recovery after the pandemic is also uncertain; +• +changes in general economic conditions, employment rates, business conditions, interest rates, tax policies and other factors +affecting consumer spending in the markets and regions in which the Company’s products are sold; +• +the inability for any reason to effectively compete in global footwear, apparel and consumer-direct markets; +• +the inability to maintain positive brand images and anticipate, understand and respond to changing footwear and apparel trends +and consumer preferences; +• +the inability to effectively manage inventory levels; +• +increases or changes in duties, tariffs, quotas or applicable assessments in countries of import and export; +• +foreign currency exchange rate fluctuations; +• +currency restrictions; +• +capacity constraints, production disruptions, quality issues, price increases or other risks associated with foreign sourcing; +• +the cost and availability of raw materials, inventories, services and labor for contract manufacturers; +• +labor disruptions; +• +changes in relationships with, including the loss of, significant wholesale customers; +• +risks related to the significant investment in, and performance of, the Company’s consumer-direct operations; +• +risks related to expansion into new markets and complementary product categories as well as consumer-direct operations; +• +the impact of seasonality and unpredictable weather conditions; +• +the impact of changes in general economic conditions and/or the credit markets on the Company’s manufacturers, distributors, +suppliers, joint venture partners and wholesale customers; +• +changes in the Company’s effective tax rates; +2021 PROXY STATEMENT +A-2 +TABLE OF CONTENTS +• +failure of licensees or distributors to meet planned annual sales goals or to make timely payments to the Company; +• +the risks of doing business in developing countries and politically or economically volatile areas; +• +the ability to secure and protect owned intellectual property or use licensed intellectual property; +• +the impact of regulation, regulatory and legal proceedings and legal compliance risks, including compliance with federal, state +and local laws and regulations relating to the protection of the environment, environmental remediation and other related costs and litigation or other legal proceedings relating to the protection of the environment or environmental +effects on human health; +• +risks of breach of the Company’s databases or other systems, or those of its vendors, which contain certain personal information, +payment card data or proprietary information, due to cyberattack or similar events; +• +problems affecting the Company’s distribution system, including service interruptions at shipping and receiving ports; +• +strategic actions, including new initiatives and ventures, acquisitions and dispositions, and the Company’s success in +integrating acquired businesses and implementing new initiatives and ventures; +• +the risk of impairment to goodwill and other intangibles; +• +the success of the Company’s restructuring and realignment initiatives undertaken from time to time; and +• +changes in future pension funding requirements and pension expenses. +These or other uncertainties could cause a material difference between an actual +outcome and a forward-looking statement. The uncertainties included here are not exhaustive and are described in more detail in Part I, Item 1A: “Risk Factors” of the Company’s Annual Report on Form 10-K. Given these risks and uncertainties, +investors should not place undue reliance on forward-looking statements as a prediction of actual results. The Company does not undertake an obligation to update, amend or clarify forward-looking statements, whether as a result of new +information, future events or otherwise. +2021 PROXY STATEMENT +A-3 +TABLE OF CONTENTS +APPENDIX B +WOLVERINE WORLD WIDE, INC. STOCK INCENTIVE PLAN OF 2016 (AS AMENDED AND +RESTATED AS OF FEBRUARY 9, 2021) +1. Purpose +The purpose of the Wolverine World Wide, Inc. Stock Incentive Plan of +2016 (as amended and restated as of February 9, 2021 (the “Second Amendment Date”) and as it may be further amended or amended and restated from time to time, the “Plan”) is to advance the interests of Wolverine World Wide, Inc. (the “Company”) +by stimulating the efforts of employees, officers, non-employee directors and other service providers, in each case who are selected to be participants, by heightening the desire of such persons to continue working toward and contributing to the +success and progress of the Company. The Plan supersedes the Company's Stock Incentive Plan of 2010 and the Company's Amended and Restated Stock Incentive Plan of 2013 (the “Prior Plans”) with respect to future awards, and provides for the grant +of Incentive and Nonqualified Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units and Stock Awards, any of which may be performance-based, and for Incentive Bonuses, which may be paid in cash or stock or a +combination thereof, as determined by the Administrator. No new awards shall be issued under the Prior Plans after April 21, 2016 (the date the Plan was initially approved by the Company's stockholders). The Plan was first amended and restated on +February 7, 2018 (the “First Amendment Date”). +2. Definitions +As used in the Plan, the following terms shall have the meanings set forth below: +(a)  “Act” means the Securities Exchange Act of 1934, as amended from +time to time and in effect, or any successor statute as from time to time. +(b)  “Act of Misconduct” means an act of embezzlement, fraud, +dishonesty, nonpayment of any obligation owed to the Company or any Subsidiary, breach of fiduciary duty, or deliberate disregard of the Company or Subsidiary rules resulting in loss, damage or injury to the Company or any Subsidiary, or if a +Participant makes an unauthorized disclosure of any Company or Subsidiary trade secret or confidential information, solicits any employee or service provider to leave the employ or cease providing services to the Company or any Subsidiary, +breaches any intellectual property or assignment of inventions covenant, engages in any conduct constituting unfair competition, breaches any non-competition agreement, induces any Company or Subsidiary customer to breach a contract with the +Company or any Subsidiary or to cease doing business with the Company or any Subsidiary, or induces any principal for whom the Company or any Subsidiary acts as agent to terminate such agency relationship in effect. +(c)  “Administrator” means the Administrator of the Plan in accordance with Section 19 of +the Plan. +(d)  “Award” means an Incentive Stock Option, Nonqualified Stock +Option, Stock Appreciation Right, share of Restricted Stock, Restricted Stock Unit, Stock Award or Incentive Bonus granted to a Participant pursuant to the provisions of the Plan, any of which the Administrator may structure to qualify in whole +or in part as a Performance Award. +(e)  “Award Agreement” means a written agreement or other instrument as +may be approved from time to time by the Administrator implementing the grant of each Award. An Agreement may be in the form of an agreement to be executed by both the Participant and the Company (or an authorized representative of the Company) +or certificates, notices or similar instruments (which do not need to be executed) as approved by the Administrator. +(f)  “Board” means the board of directors of the Company. +(g)  “Cause” means, in the case of any Participant who is party to an +employment or severance-benefit agreement that contains a definition of “Cause,” the definition set forth in such agreement will apply with respect to such Participant under the Plan for so long as such agreement remains in effect; if a +Participant is party to multiple such agreements, any Cause determination must meet the standards of all such agreements to qualify as for Cause under this Plan. In the case of any other Participant, “Cause” means (i) a substantial failure of the +Participant to perform the Participant's duties and responsibilities to the Company or its Subsidiaries or substantial negligence in the performance of such duties and responsibilities; (ii) the commission by the Participant of a felony or a +crime involving moral turpitude; (iii) the commission by the Participant of theft, fraud, embezzlement, material breach of trust or any material act of dishonesty involving the Company or any of its Subsidiaries, including, but not limited to, +any Act of Misconduct; (iv) a significant violation by the Participant of the code of conduct of the Company or its Subsidiaries of any material policy of the Company or its +2021 PROXY STATEMENT +B-1 +TABLE OF CONTENTS +Subsidiaries, or of any statutory or common law duty of loyalty to the Company or its +Subsidiaries, including, but not limited to, any Act of Misconduct; or (v) a material breach of any of the terms of the Plan or any Award made under the Plan, or of the terms of any other agreement between the Company or subsidiaries and the +Participant. +(h)  “Change in Control” unless otherwise defined in an Award +Agreement, means (i) the failure of the Continuing Directors at any time to constitute at least a majority of the members of the Board; (ii) the acquisition by any Person other than an Excluded Holder of beneficial ownership (within the meaning +of Rule 13d-3 issued under the Act) of twenty percent (20%) or more of the outstanding Shares or the combined voting power of the Company's outstanding securities entitled to vote generally in the election of directors; (iii) the consummation of +a reorganization, merger, or consolidation of the Company, unless such reorganization, merger or consolidation is with or into a Permitted Successor and clauses (i), (ii), or (iv) of this Section 2(h) have not been triggered; or (iv) a complete +liquidation or dissolution of the Company or the sale or disposition of all or substantially all of the assets of the Company other than to a Permitted Successor. +Notwithstanding the foregoing, in any case where the occurrence of a +Change in Control could affect the vesting of or payment under an Award subject to the requirements of Section 409A of the Code, to the extent required to comply with Section 409A of the Code, the term “Change in Control” shall mean an occurrence +that both (i) satisfies the requirements set forth above in this definition and (ii) is a “change in control event” as that term is defined in the regulations under Section 409A of the Code. +(i)  “Code” means the Internal Revenue Code of 1986, as amended from +time to time and in effect, or any successor statute as from time to time in effect, and the rulings and regulations issued thereunder. +(j)  “Continuing Directors” mean the individuals constituting the Board +as of the date this Plan was adopted and any subsequent directors whose election or nomination for election by the Company's stockholders was approved by a vote of three-quarters ( 3 ∕ 4 ) of the individuals who are then Continuing Directors, but specifically excluding any individual whose initial assumption of office occurs as a result of either an actual or threatened +solicitation subject to Rule 14a-12(c) of Regulation 14A issued under the Act or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board. +(k)  “Company” means Wolverine World Wide, Inc., a Delaware corporation. +(l)  “Determination Period” means the fourteen (14) day period following a Termination of +Employment by a Participant. +(m)  “Disability” has the meaning set forth in the Company's long-term +disability plan. The determination of the Administrator as to an individual's Disability shall be conclusive on all parties. +(n)  “Employee Benefit Plan” means any plan or program established by +the Company or a Subsidiary for the compensation or benefit of employees of the Company or any of its Subsidiaries. +(o)  “Excluded Holder” means (i) any Person who at the time this Plan +was adopted was the beneficial owner of twenty percent (20%) or more of the outstanding Shares; or (ii) the Company, a Subsidiary or any Employee Benefit Plan of the Company or a Subsidiary or any trust holding Shares or other securities pursuant +to the terms of an Employee Benefit Plan. +(p)  “Factors” means such considerations as would result in a +determination by the Administrator that a Termination of Employment does not constitute a Retirement, and shall include the Participant's: (i) inadequate job performance; (ii) inadequate notice of resignation; (iii) intention for comparable +future employment at a third party organization; (iv) intention for future employment or other service or advisory relationship with a competitor of the Company; or (iv) any other similar consideration. +(q)  “Fair Market Value” means, as of any date, the closing price per +share at which the Shares are sold in the regular way on the New York Stock Exchange (or any successor exchange that is the primary stock exchange for trading of Shares) or, if no Shares are traded on the New York Stock Exchange (or any successor +exchange that is the primary stock exchange for trading of Shares) on the date in question, then for the next preceding date for which Shares were traded on the New York Stock Exchange (or any successor exchange that is the primary stock exchange +for trading of Shares). +(r)  “Good Reason” means, in the case of a Participant who is party to +an employment or other severance-benefit agreement that contains a definition of “Good Reason,” the definition set forth in such agreement will apply with respect to such Participant under the Plan so long as such agreement remains in effect; +provided, however, that if the Participant is party to multiple such agreements, “Good Reason” under any such agreement shall count as “Good Reason” for purposes of this Plan. If the Participant is not party to any such agreement, “Good Reason” +shall mean any of the following, with the below notice provision applying: (i) a reduction in the Participant's base salary, annual bonus opportunity, or long-term incentive opportunity below the level in effect immediately prior to a Change in +Control; (ii) failure by the Company or its Subsidiaries to pay amounts owed to the Participant as salary, bonus, deferred compensation or other compensation; (iii) any material adverse change to the Participant's position, duties, +responsibilities, reporting responsibilities or title from that or those in effect immediately prior to a Change in Control; or (iv) any requirement that the Participant be based at a +2021 PROXY STATEMENT +B-2 +TABLE OF CONTENTS +location that is more than twenty-five (25) miles from his or her regular place of +employment immediately prior to a Change in Control, unless such change results in a shorter commute for the Participant. Notwithstanding the foregoing, no Termination of Employment shall be for Good Reason unless (i) such Termination of +Employment occurs during the twenty-four (24) month period following a Change in Control and (ii) the Participant gives the Company written notice within ninety (90) days of the Participant obtaining knowledge of circumstances giving rise to Good +Reason (describing in reasonable detail the circumstances and the Good Reason event that has occurred) and the Company does not remedy these circumstances within thirty (30) days of receipt of such notice and the Participant terminates employment +not later than thirty (30) days thereafter. +(s)  “Incentive Bonus” means a bonus opportunity awarded under Section +10 of the Plan pursuant to which a Participant may become entitled to receive an amount based on satisfaction of such performance criteria as are specified in the Award Agreement or otherwise. +(t)  “Incentive Stock Option” means a stock option that is intended to +qualify as an “incentive stock option” within the meaning of Section 422 of the Code. +(u)  “Nonemployee Director” means each person who is, or is elected to +be, a member of the Board and who is not an employee of the Company or any Subsidiary. +(v)  “Nonqualified Stock Option” means a stock option that is not +intended to qualify as an “incentive stock option” within the meaning of Section 422 of the Code. Each stock option granted pursuant to the Plan will be treated as providing by its terms that it is to be a Nonqualified Stock Option unless, as of +the date of grant, it is expressly designated as an Incentive Stock Option. +(w)  “Option” means an Incentive Stock Option and/or a Nonqualified +Stock Option granted pursuant to Section 6 of the Plan. +(x)  “Participant” means any individual described in Section 3 of the +Plan to whom Awards have been granted from time to time by the Administrator and any authorized transferee of such individual. +(y)  “Permitted Successor” means a company that, immediately following +the consummation of a transaction specified in clauses (iii) and (iv) of the definition of “Change in Control” above, satisfies each of the following criteria: (i) 50% or more of the outstanding common stock of the company and the combined voting +power of the outstanding securities of the company entitled to vote generally in the election of directors (in each case determined immediately following the consummation of the applicable transaction) is beneficially owned, directly or +indirectly, by all or substantially all of the Persons who were the beneficial owners of the Company's outstanding Shares and outstanding securities entitled to vote generally in the election of directors (respectively) immediately prior to the +applicable transaction; (ii) no Person other than an Excluded Holder beneficially owns, directly or indirectly, 20% or more of the outstanding common stock of the company or the combined voting power of the outstanding securities of the company +entitled to vote generally in the election of directors (for these purposes the term Excluded Holder shall include the company, any subsidiary of the company and any employee benefit plan of the company or any such subsidiary or any trust holding +common stock or other securities of the company pursuant to the terms of any such employee benefit plan); and (iii) at least a majority of the board of directors of the company is comprised of Continuing Directors. +(z)  “Person” has the same meaning as set forth in Sections 13(d) and 14(d)(2) of the Act. +(aa)  “Performance Award” means an Award, the grant, issuance, +retention, vesting or settlement of which is subject to satisfaction of one or more performance-based criteria established pursuant to Section 14 of the Plan or otherwise by the Administrator. +(bb)  “Restricted Stock” means Shares granted pursuant to Section 8 of the Plan. +(cc)  “Restricted Stock Unit” means an Award granted to a Participant +pursuant to Section 8 of the Plan that is an unfunded and unsecured promise pursuant to which Shares or cash in lieu thereof may be issued in the future. +(dd)  “Retirement” means the voluntary Termination of Employment by a +Participant after the Participant has attained 59 years of age and ten years of service (as a director and/or an employee of the Company or a Subsidiary, provided, for the avoidance of doubt, that any service by a Participant for a Subsidiary +prior to the time when such Subsidiary is owned directly or indirectly by the Company shall be disregarded for purposes of a “Retirement” determination hereunder), absent a determination to the contrary by the Administrator (after taking into +consideration the Factors) within the Determination Period; Retirement shall be deemed to occur on the date immediately following the last day of the Determination Period in the absence of a determination to the contrary by the Administrator. +(ee)  “Share” means a share of the Company's common stock, par value +$1.00, subject to adjustment as provided in Section 13 of the Plan. +2021 PROXY STATEMENT +B-3 +TABLE OF CONTENTS +(ff)  “Stock Appreciation Right” means a right granted pursuant to +Section 7 of the Plan that entitles the Participant to receive, in cash or Shares or a combination thereof, as determined by the Administrator, value equal to or otherwise based on the excess of (i) the Fair Market Value of a specified number of +Shares at the time of exercise over (ii) the exercise price of the right, as established by the Administrator on the date of grant. +(gg)  “Stock Award” means an award of Shares to a Participant pursuant to Section 9 of the +Plan. +(hh)  “Subsidiary” means any corporation (other than the Company) in an +unbroken chain of corporations beginning with the Company where each of the corporations in the unbroken chain other than the last corporation owns stock possessing at least 50 percent or more of the total combined voting power of all classes of +stock in one of the other corporations in the chain, and if specifically determined by the Administrator in the context other than with respect to Incentive Stock Options, may include an entity in which the Company has a significant ownership +interest or that is directly or indirectly controlled by the Company. +(ii)  “Substitute Awards” means Awards granted or Shares issued by the +Company in assumption of, or in substitution or exchange for, awards previously granted, or the right or obligation to make future awards, by a company acquired by the Company or any Subsidiary or with which the Company or any Subsidiary +combines. +(jj)  “Termination of Employment” means ceasing to serve as a full-time +employee of the Company and its Subsidiaries or, with respect to a Nonemployee Director or other service provider, ceasing to serve as such for the Company, except that with respect to all or any Awards held by a Participant (i) the Administrator +may determine, subject to Section 6(d) of the Plan, that an approved leave of absence or approved employment on a less than full-time basis is not considered a Termination of Employment; (ii) the Administrator may determine that a transition of +employment to service with a partnership, joint venture or corporation not meeting the requirements of a Subsidiary in which the Company or a Subsidiary is an equity owner is not considered a Termination of Employment; (iii) unless otherwise +determined by the Administrator, service as a member of the Board or other service provider shall not constitute continued employment with respect to Awards granted to a Participant while he or she served as an employee; and (iv) service as an +employee of the Company or a Subsidiary shall constitute continued employment with respect to Awards granted to a Participant while he or she served as a member of the Board or other service provider. The Administrator shall determine whether any +corporate transaction, such as a sale or spin-off of a division or subsidiary that employs a Participant, shall be deemed to result in a Termination of Employment with the Company and its Subsidiaries for purposes of any affected Participant's +Awards, and the Administrator's decision shall be final and binding. +3. Eligibility +Any person who is a current or, to the extent consistent with Section +409A of the Code, prospective officer or employee of the Company or of any Subsidiary shall be eligible for selection by the Administrator for the grant of Awards hereunder. In addition, Nonemployee Directors and any other service providers who +have been retained to provide consulting, advisory or other services to the Company or to any Subsidiary shall be eligible for the grant of Awards hereunder as determined by the Administrator. Options intending to qualify as Incentive Stock +Options may only be granted to employees of the Company or any subsidiary of the Company within the meaning of the Code, as selected by the Administrator. Eligibility for Options other than Incentive Stock Options is limited to individuals +described this Section 3 who are providing direct services on the date of grant of the Option (or it is reasonably anticipated that the individuals will begin to provide direct services) to the Company or to a subsidiary of the Company that would +be described in the first sentence of Treasury Regulation §1.409A-1(b)(5)(iii)(E). +4. Effective Date, Amendment Date and Termination of Plan +The Plan was initially adopted by the Board as of February 10, 2016 +(the “Effective Date”) and first amended and restated by the Board on the First Amendment Date, and, in each case, subsequently approved by the Company’s stockholders. With respect to any Award granted on or after the Second Amendment Date, to +the extent that the number of Shares subject to such Awards, or portions thereof, exceeds the number of shares authorized under the Plan as of the Second Amendment Date, such Awards, or portions thereof, shall be subject to, and may not be +exercised before, the approval of this Plan by the stockholders of the Company prior to the first anniversary of the Second Amendment Date by the affirmative vote of the holders of a majority of the outstanding Shares of the Company present, or +represented by proxy, and entitled to vote, at a meeting of the Company's stockholders or by written consent in accordance with the laws of the State of Delaware; and, if such approval is not so obtained, the Awards (or portions thereof) shall by +void as determined by the Administrator. The Plan shall remain available for the grant of Awards until the tenth (10th) anniversary of the Second Amendment Date. Notwithstanding the foregoing, the Plan may be terminated at such earlier time as +the Board may determine. Termination of the Plan will not affect the rights and obligations of the Participants and the Company arising under Awards theretofore granted and then in effect. +2021 PROXY STATEMENT +B-4 +TABLE OF CONTENTS +5. Shares Subject to the Plan and to Awards +(a)  Aggregate Limits. The +aggregate number of Shares issuable pursuant to all Awards shall not exceed 14,600,000 (the aggregate number of Shares authorized under the Plan, as approved by stockholders on April 21, 2016 and May 3, 2018) plus an additional 4,900,000 Shares, +plus any shares subject to outstanding awards under the Prior Plans that on or after the Effective Date, cease for any reason to be subject to such awards (other than by reason of exercise or settlement of the awards to the extent they are +exercised for or settled in vested and nonforfeitable shares); provided, however, that any Shares granted under Options or Stock Appreciation Rights shall be counted against this limit on a one-for-one basis and any Shares granted as Awards other +than Options or Stock Appreciation Rights shall be counted against this limit as two and six tenths (2.6) Shares for every one (1) Share subject to such Award. The aggregate number of Shares available for grant under this Plan and the number of +Shares subject to outstanding Awards shall be subject to adjustment as provided in Section 13 of the Plan. The Shares issued pursuant to Awards granted under this Plan may be shares that are authorized and unissued or shares that were reacquired +by the Company, including shares purchased in the open market. No fractional Shares will be delivered under the Plan. +(b)  Issuance of Shares. For +purposes of Section 5(a) and Section 5(f) of the Plan, the aggregate number of Shares issued under this Plan at any time shall equal only the number of Shares actually issued upon exercise or settlement of an Award. Notwithstanding the foregoing, +Shares subject to an Award under the Plan may not again be made available for issuance under the Plan if such Shares are: (i) Shares that were subject to a stock-settled Stock Appreciation Right and were not issued upon the net settlement or net +exercise of such Stock Appreciation Right; (ii) Shares used to pay the exercise price of an Option or the purchase price, if any, for an Award; (iii) Shares delivered to or withheld by the Company to pay the withholding taxes related an Award; or +(iv) Shares repurchased on the open market with the proceeds of an Option exercise. Shares subject to Awards that have been canceled, expired, forfeited or otherwise not issued under an Award and Shares subject to Awards settled in cash shall not +count as Shares issued under this Plan for purposes of Section 5(a) or Section 5(f) of the Plan. +(c)  Award Limits. The +aggregate number of Shares that may be delivered, or the value of which could be paid in cash or other property, under Awards granted under this Plan during any calendar year to any one Participant shall not exceed 3,600,000, which aggregate +number shall be calculated and adjusted pursuant to Section 13 of the Plan and which number shall not count any tandem SARs (as defined in Section 7 of the Plan). The aggregate number of Shares that may be issued pursuant to the exercise of +Incentive Stock Options granted under this Plan shall not exceed 3,600,000, which aggregate number shall be calculated and adjusted pursuant to Section 13 of the Plan only to the extent that such calculation or adjustment will not affect the +status of any option intended to qualify as an Incentive Stock Option under Section 422 of the Code. The maximum cash amount payable pursuant to that portion of an Incentive Bonus granted in any calendar year to any Participant under this Plan +shall not exceed $20,000,000. +(d)  Director Awards. +Notwithstanding any other provision of the Plan to the contrary, the aggregate grant date fair value of Awards (computed as of the date of grant in accordance with applicable financial accounting rules) granted under this Plan during any calendar +year to any one Nonemployee Director shall not exceed $600,000. +(e)  Substitute Awards. +Substitute Awards shall not reduce the Shares authorized for issuance under the Plan or authorized for grant to a Participant in any calendar year. Additionally, in the event that a company acquired by the Company or any Subsidiary, or with which +the Company or any Subsidiary combines, has shares available under a pre-existing plan approved by stockholders and not adopted in contemplation of such acquisition or combination, the shares available for grant pursuant to the terms of such +pre-existing plan (as adjusted, to the extent appropriate, using the exchange ratio or other adjustment or valuation ratio or formula used in such acquisition or combination to determine the consideration payable to the holders of common stock of +the entities party to such acquisition or combination) may be used for Awards under the Plan and shall not reduce the Shares authorized for issuance under the Plan; provided, however, that Awards using such available shares shall not be made +after the date awards or grants could have been made under the terms of the pre-existing plan, absent the acquisition or combination, and shall only be made to individuals who were employees, directors or other service providers of such acquired +or combined company before such acquisition or combination and shall be subject to such other terms and limitations as required by the stock exchange on which the Shares are then listed or traded. +(f)  Award +Vesting/Exercisability/Distribution Limitations. (i) No portion of any grant of Restricted Stock shall be scheduled to vest prior to the date that is one (1) year following the date the Restricted Stock is granted; (ii) no portion of any +grant of an Option or Stock Appreciation Right shall be scheduled to become exercisable prior to the date that is one (1) year following the date the Option or Stock Appreciation Right is granted; and (iii) no portion of any grant of a Restricted +Stock Unit or Incentive Bonus shall be scheduled to vest or be settled, paid or distributed prior to the date that is one (1) year following the date the applicable Restricted Stock Unit or Incentive Bonus is granted; provided; however, that +Awards that result in the issuance (as determined in accordance with the rules set forth in +2021 PROXY STATEMENT +B-5 +TABLE OF CONTENTS +Section 5(b) of the Plan) of an aggregate of up to 5% of the Shares reserved for +issuance under Section 5(a) of the Plan may be granted to eligible persons without regard to the minimum vesting, exercisability, settlement, payment and distribution provisions of this Section 5(f). As set forth in Section 9(a), Stock Awards may +only be granted consistent with the 5% limit set forth in the preceding sentence. +6. Options +(a)  Option Awards. Options +may be granted at any time and from time to time prior to the termination of the Plan to Participants as determined by the Administrator. No Participant shall have any rights as a stockholder with respect to any Shares subject to Options +hereunder until such Shares have been issued. Each Option shall be evidenced by an Award Agreement. Options granted pursuant to the Plan need not be identical but each Option must contain and be subject to the terms and conditions set forth +below. +(b)  Price. The Administrator +will establish the exercise price per Share under each Option, which in no event will be less than the Fair Market Value of the Shares on the date of grant; provided, however, that the exercise price per Share with respect to an Option that is +granted in connection with a merger or other acquisition as a substitute or replacement award for options held by optionees of the acquired entity may be less than 100% of the Fair Market Value of the Shares on the date such Option is granted if +such exercise price is based on a formula set forth in the terms of the options held by such optionees or in the terms of the agreement providing for such merger or other acquisition. The exercise price of any Option may be paid in Shares, cash +or a combination thereof, as determined by the Administrator, including an irrevocable commitment by a broker to pay over such amount from a sale of the Shares issuable under an Option, the delivery of previously owned Shares and withholding of +Shares deliverable upon exercise, or in such other form as is acceptable to the Administrator. +(c)  No Repricing Without +Stockholder Approval. Other than in connection with a change in the Company's capitalization (as described in Section 13 of the Plan), the Administrator may not, without prior approval of the Company's shareholders, seek to effect any +repricing of any previously granted underwater Option by: (i) amending or modifying the terms of the Option to lower the exercise price; (ii) canceling the underwater Option and granting either (A) replacement Options having a lower exercise +price or (B) Restricted Stock, Restricted Stock Units, Performance Awards or Stock Awards in exchange; or (iii) cancelling or repurchasing the underwater Options for cash or other securities. An Option will be deemed to be “underwater” at any +time when the Fair Market Value of the Shares covered by such Award is less than the exercise price of the Award. +(d)  Provisions Applicable to +Options. The date on which Options become exercisable shall be determined at the sole and absolute discretion of the Administrator and set forth in an Award Agreement. Unless provided otherwise in the applicable Award Agreement, to the +extent that the Administrator determines that an approved leave of absence or employment on a less than full-time basis is not a Termination of Employment, the vesting period and/or exercisability of an Option shall be adjusted by the +Administrator during or to reflect the effects of any period during which the Participant is on an approved leave of absence or is employed on a less than full-time basis. No dividends or dividend equivalents shall be paid or granted in respect +of Shares subject to Options and no holder of an Option shall be entitled to any dividends with respect to the Shares subject to Options unless and until such Options have vested and have been exercised in accordance with the terms of the Plan +and the applicable Award Agreement and such Shares are reflected as issued and outstanding. +(e)  Term of Options and Termination +of Employment. The Administrator shall establish the term of each Option, which in no case shall exceed a period of ten (10) years from the date of grant. Unless an Option earlier expires upon the expiration date established pursuant to +the foregoing sentence, upon the Participant's Termination of Employment, his or her rights to exercise an Option then held shall be only as follows, unless the Administrator specifies otherwise: +(1)  General. If a +Participant's Termination of Employment is for any reason other than the Participant's death, Disability, Retirement or termination for Cause, Options granted to the Participant may continue to be exercised in accordance with their terms for the +lesser of (i) a period of three (3) months after such Termination of Employment or (ii) the period ending on the latest date on which such Options could have been exercised without regard to this Section 6(e)(1), but only to the extent the +Participant was entitled to exercise the Options on the date of such termination. +(2)  Death. If a Participant +dies either while an employee or officer of the Company or a Subsidiary or member of the Board, or after the Termination of Employment other than for Cause but during the time when the Participant could have exercised an Option, the Options +issued to such Participant shall become fully vested (in the case of Termination of Employment due to death) and exercisable by the personal representative of such Participant or other successor to the interest of the Participant for the lesser +of (i) a period of one (1) year after the Participant's death or (ii) the period ending on the latest date on which such Options could have been exercised without regard to this Section 6(e)(2), but only to the extent the Participant was entitled +to exercise the Options on the date of such termination. +2021 PROXY STATEMENT +B-6 +TABLE OF CONTENTS +(3)  Disability. If a +Participant's Termination of Employment is due to Disability, then all of the Participant's Options shall immediately fully vest, and the Options held by the Participant at the time of such Termination of Employment shall be exercisable by the +Participant or the personal representative of such Participant for the lesser of (i) a period of one (1) year after the Participant's Termination of Employment or (ii) the period ending on the latest date on which such Options could have been +exercised without regard to this Section 6(e)(3), but only to the extent the Participant was entitled to exercise the Options on the date of such termination. +(4)  Participant Retirement. +Upon a Participant's Retirement as an employee of the Company and its Subsidiaries or Retirement from service as a member of the Board, then all of the Participant's Options shall immediately fully vest, and the Options held by the Participant at +the time of such Retirement shall be exercisable by the Participant or the personal representative of such Participant during the remaining term of the Options. +(5)  Termination for Cause. +If a Participant is terminated for Cause, the Participant shall have no further right to exercise any Options previously granted. The Administrator or officers designated by the Administrator shall determine, in its or their reasonable +discretion, whether a termination is for Cause. +(f)  Incentive Stock Options. +Notwithstanding anything to the contrary in this Section 6, in the case of the grant of an Option intending to qualify as an Incentive Stock Option: (i) if the Participant owns stock possessing more than 10 percent (10%) of the combined voting +power of all classes of stock of the Company, the exercise price of such Option must be at least 110 percent of the Fair Market Value of the Shares on the date of grant and the Option must expire within a period of not more than five (5) years +from the date of grant and (ii) Termination of Employment will occur when the person to whom an Award was granted ceases to be an employee (as determined in accordance with Section 3401(c) of the Code and the regulations promulgated thereunder) +of the Company and its Subsidiaries. Notwithstanding anything in this Section 6 to the contrary, options designated as Incentive Stock Options shall not be eligible for treatment under the Code as Incentive Stock Options (and will be deemed to be +Nonqualified Stock Options) to the extent that either (a) the aggregate Fair Market Value of Shares (determined as of the time of grant) with respect to which such Options are exercisable for the first time by the Participant during any calendar +year (under all plans of the Company and any Subsidiary) exceeds $100,000, taking Options into account in the order in which they were granted, or (b) such Options otherwise remain exercisable but are not exercised within three (3) months of +Termination of Employment (as defined in this subsection (f)) (or such other period of time provided in Section 422 of the Code). +7. Stock Appreciation Rights +(a)  General. Stock +Appreciation Rights may be granted to Participants from time to time either in tandem with or as a component of other Awards granted under the Plan (“tandem SARs”) or not in conjunction with other Awards (“freestanding SARs”) and may, but need +not, relate to a specific Option granted under Section 6 of the Plan. The provisions of Stock Appreciation Rights need not be the same with respect to each grant or each recipient. Any Stock Appreciation Right granted in tandem with an Award may +be granted at the same time such Award is granted or at any time thereafter before exercise or expiration of such Award. All freestanding SARs shall be granted subject to the same terms and conditions applicable to Options as set forth in Section +6 of the Plan and all tandem SARs shall have the same exercise price, vesting, exercisability, forfeiture and termination provisions as the Award to which they relate. Subject to the provisions of Section 6 of the Plan and the immediately +preceding sentence, the Administrator may impose such other conditions or restrictions on any Stock Appreciation Right as it shall deem appropriate. Stock Appreciation Rights may be settled in Shares, cash or a combination thereof, as determined +by the Administrator and set forth in the applicable Award Agreement. +(b)  No Repricing Without +Stockholder Approval. Other than in connection with a change in the Company's capitalization (as described in Section 13 of the Plan), the Administrator may not, without prior approval of the Company's shareholders, seek to effect any +repricing of any previously granted underwater Stock Appreciation Right by: (i) amending or modifying the terms of the Stock Appreciation Right to lower the exercise price; (ii) canceling the underwater Stock Appreciation Right and granting +either (A) replacement Stock Appreciation Rights having a lower exercise price or (B) Restricted Stock, Restricted Stock Units, Performance Awards or Stock Awards in exchange; or (iii) cancelling or repurchasing the underwater Stock Appreciation +Rights for cash or other securities. A Stock Appreciation Right will be deemed to be “underwater” at any time when the Fair Market Value of the Shares covered by such Award is less than the exercise price of the Award. +8. Restricted Stock and Restricted Stock Units +(a)  Restricted Stock and Restricted +Stock Unit Awards. Restricted Stock and Restricted Stock Units may be granted at any time and from time to time prior to the termination of the Plan to Participants as determined by the Administrator. Restricted Stock is an award or +issuance of Shares the grant, issuance, retention, vesting and/or transferability of which is subject during specified periods of time to such conditions (including continued employment or performance conditions) and terms as the Administrator +deems appropriate. Restricted +2021 PROXY STATEMENT +B-7 +TABLE OF CONTENTS +Stock Units are Awards denominated in units of Shares under which the issuance of +Shares is subject to such conditions (including continued employment or performance conditions) and terms as the Administrator deems appropriate. Each grant of Restricted Stock and Restricted Stock Units shall be evidenced by an Award Agreement. +Unless determined otherwise by the Administrator, each Restricted Stock Unit will be equal to one Share and will entitle a Participant to either the issuance of Shares or payment of an amount of cash determined with reference to the value of +Shares. To the extent determined by the Administrator, Restricted Stock and Restricted Stock Units may be satisfied or settled in Shares, cash or a combination thereof. Restricted Stock and Restricted Stock Units granted pursuant to the Plan need +not be identical but each grant of Restricted Stock and Restricted Stock Units must contain and be subject to the terms and conditions set forth below. +(b)  Contents of Agreement. +Each Award Agreement shall contain provisions regarding (i) the number of Shares or Restricted Stock Units subject to such Award or a formula for determining such number; (ii) the purchase price of the Shares, if any, and the means of payment; +(iii) the performance criteria, if any, and level of achievement versus these criteria that shall determine the number of Shares or Restricted Stock Units granted, issued, retainable and/or vested; (iv) such terms and conditions on the grant, +issuance, vesting and/or forfeiture of the Shares or Restricted Stock Units as may be determined from time to time by the Administrator; (v) the term of the performance period, if any, as to which performance will be measured for determining the +number of such Shares or Restricted Stock Units; and (vi) restrictions on the transferability of the Shares or Restricted Stock Units. Shares issued under a Restricted Stock Award may be issued in the name of the Participant and held by the +Participant or held by the Company, in each case as the Administrator may provide. +(c)  Vesting and Performance +Criteria. The grant, issuance, retention, vesting and/or settlement of shares of Restricted Stock and Restricted Stock Units will occur when and in such installments as the Administrator determines or under criteria the Administrator +establishes, which may include performance-based criteria established pursuant to Section 14 of the Plan or otherwise by the Administrator. +(d)  Termination of Employment. Unless the +Administrator provides otherwise: +(i)  General. In the event +of Termination of Employment for any reason other than death, Disability or Retirement, any Restricted Stock or Restricted Stock Units still subject in full or in part to restrictions at the date of such Termination of Employment shall +automatically be forfeited and returned to the Company. +(ii)  Death, Retirement or +Disability. In the event a Participant's Termination of Employment is because of death, Disability or Retirement, the restrictions remaining on any or all Shares remaining subject to a Restricted Stock or Restricted Stock Unit Award +shall lapse. +(e)  Discretionary Adjustments and +Limits. Notwithstanding the satisfaction of any performance goals, the number of Shares granted, issued, retainable and/or vested under an Award of Restricted Stock or Restricted Stock Units on account of either financial performance or +personal performance evaluations may, to the extent specified in the Award Agreement, be reduced, but not increased, by the Administrator on the basis of such further considerations as the Administrator shall determine. +(f)  Voting Rights. Unless +otherwise determined by the Administrator, Participants holding shares of Restricted Stock granted hereunder may exercise full voting rights with respect to those shares during the period of restriction. Participants shall have no voting rights +with respect to Shares underlying Restricted Stock Units unless and until such Shares are reflected as issued and outstanding shares on the Company's stock ledger. +(g)  Dividends and Distributions . +(i)  Participants in whose name Restricted Stock is granted shall be +entitled to receive dividends and other distributions paid with respect to those Shares only to the extent provided by the Administrator, in which case the Administrator will determine whether any such dividends or distributions will be +automatically reinvested in additional shares of Restricted Stock and subject to the same restrictions on transferability as the Restricted Stock with respect to which they were distributed or whether such dividends or distributions will be paid +in cash. Shares underlying Restricted Stock Units shall be entitled to dividends or dividend equivalents only to the extent provided by the Administrator. +(ii)  Notwithstanding the foregoing Section 8(g)(1), any cash or stock +dividends and dividend equivalents with respect to Restricted Stock and Restricted Stock Units granted as Performance Awards, if any, will be withheld by the Company for the Participant's account and will be paid, if at all, (i) in the case of +Restricted Stock, upon the achievement of the applicable performance measure(s) and the satisfaction of any other restrictions imposed on the Restricted Stock in respect of which the dividends were paid and (ii) in the case of Restricted Stock +Units, at the time the Shares and/or cash underlying such Restricted Stock Units is paid, and any dividends deferred in respect of any Restricted Stock and Restricted Stock Units granted as Performance +2021 PROXY STATEMENT +B-8 +TABLE OF CONTENTS +Awards will be forfeited upon the forfeiture of such Restricted Stock and Restricted +Stock Units. Any noncash dividends or distributions paid with respect to Restricted Stock and Restricted Stock Units granted as Performance Awards shall be subject to the same restrictions as those relating to the Restricted Stock and Restricted +Stock Units. +(h)  Payment of Restricted Stock +Units. In all events, unless payment with respect to a Restricted Stock Unit is deferred in a manner consistent with Section 409A of the Code, the Shares and/or cash underlying such Restricted Stock Unit shall be paid to the Participant +no later than two and one-half months following the end of the year in which the Restricted Stock Unit is no longer subject to a substantial risk of forfeiture. +(i)  Legending of Restricted Stock. +The Administrator may also require that certificates representing shares of Restricted Stock be retained and held in escrow by a designated employee or agent of the Company or any Subsidiary until any restrictions applicable to shares of +Restricted Stock so retained have been satisfied or lapsed. Any certificates evidencing shares of Restricted Stock awarded pursuant to the Plan shall bear the following legend: +The shares represented by this certificate were issued subject to +certain restrictions under the Wolverine World Wide, Inc. Stock Incentive Plan of 2016 (the “Plan”). This certificate is held subject to the terms and conditions contained in a restricted stock agreement that includes a prohibition against the +sale or transfer of the stock represented by this certificate except in compliance with that agreement and that provides for forfeiture upon certain events. Copies of the Plan and the restricted stock agreement are on file in the office of the +Secretary of the Company. +9. Stock Awards +(a)  Grant. Stock Awards may +be granted at any time and from time to time prior to the termination of the Plan to Participants as determined by the Administrator, consistent with the 5% limit set forth in Section 5(f) of the Plan. Stock Awards shall be subject to such terms +and conditions, consistent with the other provisions of the Plan, as may be determined by the Administrator. +(b)  Rights as a Stockholder. +A Participant shall have all voting, dividend, liquidation and other rights with respect to Shares issued to the Participant as a Stock Award under this Section 9 upon the Participant becoming the holder of record of the Shares granted pursuant +to such Stock Award; provided, however, that the Administrator may impose such restrictions on the assignment or transfer of Shares awarded pursuant to a Stock Award as it considers appropriate. +10. Incentive Bonuses +(a)  General. Each Incentive +Bonus Award will confer upon the Participant the opportunity to earn a future payment tied to the level of achievement with respect to one or more performance criteria established for a performance period of not less than one year. +(b)  Incentive Bonus Document. +Unless otherwise determined by the Administrator, the terms of any Incentive Bonus will be set forth in an Award Agreement. Each Award Agreement evidencing an Incentive Bonus shall contain provisions regarding (i) the target and maximum amount +payable to the Participant as an Incentive Bonus; (ii) the performance criteria and level of achievement versus these criteria that shall determine the amount of such payment; (iii) the term of the performance period as to which performance shall +be measured for determining the amount of any payment; (iv) the timing of any payment earned by virtue of performance; (v) restrictions on the alienation or transfer of the Incentive Bonus prior to actual payment; (vi) forfeiture provisions; and +(vii) such further terms and conditions, in each case not inconsistent with this Plan, as may be determined from time to time by the Administrator. +(c)  Performance Criteria. +The Administrator shall establish the performance criteria and level of achievement versus these criteria that shall determine the target and maximum amounts payable under an Incentive Bonus, which criteria may be based on financial performance +and/or personal performance evaluations. +(d)  Timing and Form of Payment. +The Administrator shall determine the timing of payment of any Incentive Bonus. Payment of the amount due under an Incentive Bonus may be made in cash or in Shares, as determined by the Administrator. The Administrator may provide for or, subject +to such terms and conditions as the Administrator may specify, may permit a Participant to elect for the payment of any Incentive Bonus to be deferred to a specified date or event. In all events, unless payment of an Incentive Bonus is deferred +in a manner consistent with Section 409A of the Code, any Incentive Bonus shall be paid to the Participant no later than two and one-half months following the end of the year in which the Incentive Bonus is no longer subject to a substantial risk +of forfeiture. +(e)  Discretionary Adjustments. +Notwithstanding satisfaction of any performance goals, the amount paid under an Incentive Bonus on account of either financial performance or personal performance evaluations may, to the extent specified in the Award Agreement or other document +evidencing the Award, be reduced, but not increased, by the Administrator on the basis of such further considerations as the Administrator shall determine. +2021 PROXY STATEMENT +B-9 +TABLE OF CONTENTS +11. Deferral of Gains +(a)  Deferral of Payment. The +Administrator may, in an Award Agreement or otherwise, provide for the deferred delivery of Shares upon settlement, vesting or other events with respect to Restricted Stock or Restricted Stock Units, or in payment or satisfaction of an Incentive +Bonus. Notwithstanding anything herein to the contrary, in no event will any deferral of the delivery of Shares or any other payment with respect to any Award be allowed if the Administrator determines, in its sole and absolute discretion, that +the deferral would result in the imposition of the additional tax under Section 409A(a)(1)(B) of the Code. No award shall provide for deferral of compensation that does not comply with Section 409A of the Code, unless the Board, at the time of +grant, specifically provides that the Award is not intended to comply with Section 409A of the Code. The Company shall have no liability to a Participant, or any other party, if an Award that is intended to be exempt from, or compliant with, +Section 409A of the Code is not so exempt or compliant or for any action taken by the Administrator or the Board. +(b)  Conditions of Deferral. +Notwithstanding anything herein to the contrary, if the Administrator permits any initial or subsequent deferral elections pursuant to Section 11(a) of this Plan, subject to the requirements of Section 409A of the Code, the terms of this Plan and +the applicable Award Agreement and any applicable deferral election form, the Participant may elect to defer payment (that would otherwise occur upon the lapse of a substantial risk of forfeiture) for a fixed period of time measured from the date +the Award is granted; provided, however, that in each case (i) the deferral election is made before the end of the election period established by the Administrator, and (ii) to the extent compliant with Section 409A of the Code, payment of any +vested Award that the Participant has elected to defer will be made regardless of any deferral election (including any subsequent deferral election) within thirty (30) days of a change in control or the Participant's separation from service +(including death). For purposes of this Section 11, “change in control” and “separation from service” shall be defined in the applicable Award Agreement and have the meanings set forth in Section 409A of the Code and the regulations thereunder +(and, with respect to the definition of “separation from service”, after giving effect to the presumptions contained therein), and, notwithstanding anything herein to the contrary, if the Administrator allows deferral elections under an Award +Agreement subject to Section 409A of the Code, neither Disability nor Retirement shall accelerate the time of payment of any Award (even if it accelerates vesting) unless there has been a “separation from service” or “disability” within the +meaning of Section 409A of the Code and the regulations promulgated thereunder (and, with respect to the definition of “separation from service”, after giving effect to the presumptions contained therein). To the extent applicable, this +provision, the Plan and any Awards hereunder are intended to comply with Section 409A of the Code and shall be interpreted accordingly. +12. Conditions and Restrictions Upon Securities Subject to Awards +The Administrator may provide that the Shares issued upon exercise of +an Option or Stock Appreciation Right or otherwise subject to or issued under an Award shall be subject to such further agreements, restrictions, conditions or limitations as the Administrator in its sole and absolute discretion may specify prior +to the exercise of such Option or Stock Appreciation Right or the grant, vesting or settlement of such Award, including without limitation, conditions on vesting or transferability, forfeiture or repurchase provisions and method of payment for +the Shares issued upon exercise, vesting or settlement of such Award (including the actual or constructive surrender of Shares already owned by the Participant) or payment of taxes arising in connection with an Award. Without limiting the +foregoing, such restrictions may address the timing and manner of any resales by the Participant or other subsequent transfers by the Participant of any Shares issued under an Award, including without limitation (i) restrictions under an insider +trading policy or pursuant to applicable law; (ii) restrictions designed to delay and/or coordinate the timing and manner of sales by Participant and holders of other Company equity compensation arrangements; (iii) restrictions as to the use of a +specified brokerage firm for such resales or other transfers; and (iv) provisions requiring Shares to be sold on the open market or to the Company in order to satisfy tax withholding or other obligations. +13. Adjustment of and Changes in the Stock +(a)  General. The number and +kind of Shares available for issuance under this Plan (including under any Awards then outstanding), and the number and kind of Shares subject to the limits set forth in Section 5 of this Plan, shall be equitably adjusted by the Administrator to +reflect any reorganization, reclassification, combination of shares, stock split, reverse stock split, spin-off, dividend or distribution of securities, property or cash (other than regular, quarterly cash dividends), or any other event or +transaction that affects the number or kind of Shares outstanding. Such adjustment may be designed to comply with Sections 409A and 424 of the Code as applicable, or, except as otherwise expressly provided in Section 5(c) of this Plan, may be +designed to treat the Shares available under the Plan and subject to Awards as if they were all outstanding on the record date for such event or transaction or to increase the number of such Shares to reflect a deemed reinvestment in Shares of +the amount distributed to the Company's security holders. The terms of any outstanding Award shall also be equitably adjusted by the Administrator as to price, number or kind of Shares subject to such Award, vesting and other terms to reflect the +foregoing events, which adjustments need not be uniform as between different Awards or different types of Awards. +2021 PROXY STATEMENT +B-10 +TABLE OF CONTENTS +In the event there shall be any other change in the number or kind +of outstanding Shares, or any stock or other securities into which such Shares shall have been changed, or for which it shall have been exchanged, by reason of a change of control, other merger, consolidation or otherwise, then the Administrator +shall determine the appropriate and equitable adjustment to be effected. In addition, in the event of such change described in this paragraph, the Administrator may accelerate the time or times at which any Award may be exercised and may provide +for cancellation of such accelerated Awards that are not exercised within a time prescribed by the Administrator in its sole and absolute discretion. +No right to purchase fractional shares shall result from any adjustment +in Awards pursuant to this Section 13. In case of any such adjustment, the Shares subject to the Award shall be rounded up to the nearest whole share for Awards other than Options and Stock Appreciation Rights, and shall be rounded down to the +nearest whole Share with respect to Options and Stock Appreciation Rights. The Company shall notify Participants holding Awards subject to any adjustments pursuant to this Section 13 of such adjustment, but (whether or not notice is given) such +adjustment shall be effective and binding for all purposes of the Plan. +(b)  Change in Control. +Subject to and limited by the requirements of subsections (i), (ii) and (iii) below, the Administrator shall determine the effect of a Change in Control on outstanding Awards. Such effects, which need not be the same for every Participant, may +include, without limitation: (x) the substitution for the Shares subject to any outstanding Award, or portion thereof, of stock or other securities of the surviving corporation or any successor corporation to the Company, or a parent or +subsidiary thereof, in which event the aggregate purchase or exercise price, if any, of such Award, or portion thereof, shall remain the same, and/or (y) the conversion of any outstanding Award, or portion thereof, into a right to receive cash or +other property upon or following the consummation of the Change in Control in an amount equal to the value of the consideration to be received by holders of Shares in connection with such transaction for one Share, less the per share purchase or +exercise price of such Award, if any, multiplied by the number of Shares subject to such Award, or a portion thereof. Notwithstanding the foregoing, Awards shall be treated as follows in connection with a Change in Control: +(i)  Acceleration of Vesting. +The following provisions shall apply to Awards granted prior to the First Amendment Date: Without action by the Administrator or the Board: (a) all outstanding Options and Stock Appreciation Rights shall become immediately exercisable in full +and, notwithstanding any other provision of the Plan or the Award Agreement to the contrary and to the extent the Administrator does not determine that a cash payment shall be made with respect to such Options and Stock Appreciation Rights +pursuant to the following Section 13(b)(iv), shall remain outstanding and exercisable during the remaining original terms thereof, regardless of whether the Participants to whom such Options and Stock Appreciation Rights have been granted remain +in the employ or service of the Company or any Subsidiary; and (b) all other outstanding Awards shall become immediately fully vested and exercisable and non-forfeitable; +(ii)  Double-Trigger Acceleration +of Vesting of Time-Based Awards. The following provisions shall apply to Awards granted on or after the First Amendment Date that are subject to vesting based on continuous employment or service: To the extent an Award is assumed or +substituted by an acquiror in connection with a Change in Control as contemplated by Section 13(b) above, such Award shall not immediately vest upon a Change in Control and instead shall continue to vest in accordance with its terms, provided, +however, that if a Participant experiences a Termination of Employment by the Company without Cause or by the Participant for Good Reason, in either case, within the twenty-four- (24-) month period immediately following the Change in Control, the +Award shall immediately vest and become exercisable or shall be settled upon such qualifying termination. The Participant's rights under this Section 13(b)(ii) are in addition to any other rights Participant has in the event of death, Disability +or Retirement. Notwithstanding anything in this Section 13(b)(ii) to the contrary, if, at any time during the vesting period of an Award, the Participant is or becomes eligible to terminate his or her employment with the Company or its +Subsidiaries due to Retirement (without regard to the application of any Factor or any Determination Period) the Award shall immediately vest in full upon the Change in Control. In the event of acceleration in connection with a Termination of +Employment as contemplated by this Section 13(b)(ii), all outstanding Options and Stock Appreciation Rights shall remain outstanding and exercisable during the remaining original terms thereof; +(iii)  Treatment of Performance +Awards. The following provisions shall apply to Awards granted on or after the First Amendment Date: If a Change in Control occurs prior to the end date of a performance period for a Performance Award, to the extent the Performance Award +is outstanding immediately prior to such Change in Control, such Award will vest (A) based on actual performance through the date of the Change in Control as determined by the Administrator (treating the Change in Control as the end of the +applicable performance period), without proration for the time elapsed in such performance period prior to such Change in Control for purposes of determining performance, but, in the discretion of the Administrator, prorated for purposes of +elapsed time in a manner consistent with subsection (B), below, (B) assuming that target level of performance is attained and prorated based on the number of days in the performance period that elapsed prior to the Change in Control over the +total number of days in the performance period, or (C) a combination of (A) and (B) (without double counting). Any portion of the Performance Award (or the full Award, as applicable) that does not vest in connection with a Change in Control as +contemplated herein will automatically terminate upon such Change in Control; and +2021 PROXY STATEMENT +B-11 +TABLE OF CONTENTS +(iv)  Cash Payment for Stock +Options/Stock Appreciation Rights. Without the consent of any Participant affected thereby, the Administrator may determine that some or all Participants holding outstanding vested and exercisable Options and/or Stock Appreciation Rights +shall receive, with respect to some or all of the Shares subject to such Options and/or Stock Appreciation Rights, as of the effective date of any such Change in Control, cash in an amount equal to the greater of the excess of (A) the highest +sales price of the shares on the New York Stock Exchange (or any successor exchange that is the primary stock exchange for trading of Shares) on the date immediately prior to the effective date of such Change in Control or (B) the highest price +per share actually paid in connection with any Change in Control over the exercise price per share of such Options and/or Stock Appreciation Rights. +14. Performance-Based Compensation +(a)  General. The +Administrator may establish performance criteria and level of achievement versus such criteria that shall determine the number of Shares to be granted, retained, vested, issued or issuable under or in settlement of or the amount payable pursuant +to an Award, which criteria may be based on performance criteria established by the Administrator, including, without limitation, standards of financial performance and/or personal performance evaluations. +(b)  Performance Criteria. +For purposes of this Plan, the performance criteria selected by the Administrator may include, without limitation, an objectively determinable measure of performance relating to any one or more of the following performance criteria, or +derivations of such performance criteria, either individually, alternatively or in any combination, applied to either the Company as a whole or to a business unit, division, line or Subsidiary, either individually, alternatively or in any +combination, and measured either annually or cumulatively over a period of years, on an absolute basis or relative to a pre-established target, to previous years' results or to an index or indices or a designated comparison group or groups, in +each case as specified by the Administrator: (i) net earnings or earnings per share (including earnings before interest, taxes, depreciation and/or amortization); (ii) income, net income or operating income; (iii) revenues; (iv) net sales; +(v) return on sales; (vi) return on equity; (vii) return on capital (including return on total capital or return on invested capital); (viii) return on assets or net assets; (ix) earnings per share; (x) economic or business value added +measurements; (xi) return on invested capital; (xii) return on operating revenue; (xiii) cash flow (before or after dividends); (xiv) stock price; (xv) total stockholder return; (xvi) market capitalization; (xvii) economic value added; +(xviii) debt leverage (debt to capital); (xix) operating profit or net operating profit; (xx) operating margin or profit margin; (xxi) cash from operations; (xxii) market share; (xxiii) product development or release schedules; (xxiv) new product +innovation; (xxv) cost reductions; (xxvi) customer acquisition or retention; (xxvii) customer service; (xxviii) customer satisfaction; or (xxix) any other performance target established by the Administrator as it deems appropriate. In the event +that, during any performance period, any recapitalization, reorganization, merger, acquisition, divestiture, consolidation, spin-off, combination, liquidation, dissolution, sale of assets or other similar corporate transaction or event, or any +other extraordinary event or circumstance occurs which has the effect, as determined by the Administrator, in its sole and absolute discretion, of distorting the applicable performance criteria involving the Company, including, without +limitation, changes in accounting standards, the Administrator may adjust or modify, as determined by the Administrator, in its sole and absolute discretion, the calculation of the performance goals, to the extent necessary to prevent reduction +or enlargement of the Participants’ Awards under the Plan for such performance period attributable to such transaction, circumstance or event. All determinations that the Administrator makes shall be conclusive and binding on all persons for all +purposes. The Administrator retains the right to reduce any Award below the maximum amount that could be paid based on the degree to which the performance criteria related to such Award were attained. +15. Transferability +Unless the Administrator determines otherwise, each Award may not be +sold, transferred, pledged, assigned or otherwise alienated or hypothecated by a Participant other than by will or the laws of descent and distribution, and each Option or Stock Appreciation Right shall be exercisable only by the Participant +during his or her lifetime. To the extent permitted by the Administrator, the person to whom an Award is initially granted (the “Grantee”) may transfer an Award to any “family member” of the Grantee (as such term is defined in Section 1(a)(5) of +the General Instructions to Form S-8 under the Securities Act of 1933, as amended (“Form S-8”)), to trusts solely for the benefit of such family members and to partnerships in which such family members and/or trusts are the only partners; +provided, however, that (i) as a condition thereof, the transferor and the transferee must execute a written agreement containing such terms as specified by the Administrator and (ii) the transfer is pursuant to a gift or a domestic relations +order to the extent permitted under the General Instructions to Form S-8. Except to the extent specified otherwise in the agreement the Administrator provides for the Grantee and transferee to execute, all vesting, exercisability and forfeiture +provisions that are conditioned on the Grantee's continued employment or service shall continue to be determined with reference to the Grantee's employment or service (and not to the status of the transferee) after any transfer of an Award +pursuant to this Section 15. +2021 PROXY STATEMENT +B-12 +TABLE OF CONTENTS +16. Suspension, Termination or Recovery of Awards and Payments Thereunder +Except as otherwise provided by the Administrator, if at any time +(including after a notice of exercise has been delivered or an award has vested) the Company's chief executive officer or any other person designated by the Administrator (each such person, an “Authorized Officer”) reasonably believes that a +Participant may have committed an Act of Misconduct as described in this Section 16, the Authorized Officer, Administrator or the Board may suspend the Participant's rights to exercise any Option, to vest in an Award, and/or to receive payment +for or receive Shares in settlement of an Award pending a determination of whether an Act of Misconduct has been committed. +If the Administrator or an Authorized Officer determines a Participant +has committed an Act of Misconduct, then except as otherwise provided by the Administrator, including through any agreement approved by the Administrator, (i) neither the Participant nor his or her estate nor transferee shall be entitled to +exercise any Option or Stock Appreciation Right whatsoever, vest in or have the restrictions on an Award lapse, or otherwise receive payment of an Award, (ii) the Participant will forfeit all outstanding Awards and (iii) the Participant may be +required, at the Administrator's sole and absolute discretion, to return and/or repay to the Company any then unvested Shares previously issued under the Plan. In making such determination, the Administrator or an Authorized Officer shall give +the Participant an opportunity to appear and present evidence on his or her behalf at a hearing before the Administrator or its designee or an opportunity to submit written comments, documents, information and arguments to be considered by the +Administrator. +In addition to the foregoing, the Administrator may recover Awards made +under the Plan and payments under or gain in respect of any Award in accordance with the Company's Policy for Recovery of Incentive Compensation or any successor or additional clawback or recoupment policy, as such policy or policies may be +amended and in effect from time to time, or as otherwise required by applicable law or applicable stock exchange listing standards, including, without limitation, Section 10D of the Act. +17. Compliance with Laws and Regulations +This Plan, the grant, issuance, vesting, exercise and settlement of +Awards thereunder, and the obligation of the Company to sell, issue, deliver or remove any restrictions on Shares under such Awards, shall be subject to all applicable foreign, federal, state and local laws, rules and regulations, stock exchange +rules and regulations, and to such approvals by any governmental or regulatory agency as may be required. The Company shall not be required to register in a Participant's name or deliver any Shares prior to the completion of any registration or +qualification of such shares under any foreign, federal, state or local law or any ruling or regulation of any government body which the Administrator shall determine to be necessary or advisable. To the extent the Company is unable to or the +Administrator deems it infeasible to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company's counsel to be necessary to the lawful issuance and sale of any Shares hereunder, the Company and its +Subsidiaries shall be relieved of any liability with respect to the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained. No Option shall be exercisable and no Shares shall be issued and/or +transferable under any other Award unless a registration statement with respect to the Shares underlying such Option is effective and current or the Company has determined that such registration is unnecessary. +In the event an Award is granted to or held by a Participant who is +employed or providing services outside the United States, the Administrator may, in its sole and absolute discretion, modify the provisions of the Plan or of such Award as they pertain to such individual to comply with applicable foreign law or +to recognize differences in local law, currency or tax policy. The Administrator may also impose conditions on the grant, issuance, exercise, vesting, settlement or retention of Awards in order to comply with such foreign law and/or to minimize +the Company's obligations with respect to tax equalization for Participants employed outside their home country. +18. Withholding +To the extent required by applicable federal, state, local or foreign +law, a Participant shall be required to satisfy, in a manner satisfactory to the Company, any withholding tax obligations that arise by reason of an Option exercise, disposition of Shares issued under an Incentive Stock Option, the grant, vesting +or settlement of an Award, an election pursuant to Section 83(b) of the Code or otherwise with respect to an Award. To the extent a Participant makes an election under Section 83(b) of the Code, within ten days of filing such election with the +Internal Revenue Service, the Participant must notify the Company in writing of such election. The Company and its Subsidiaries shall not be required to issue Shares, make any payment or to recognize the transfer or disposition of Shares until +all such obligations are satisfied. The Administrator may provide for or permit these obligations to be satisfied through the mandatory or elective sale of Shares and/or by having the Company withhold a portion of the Shares that otherwise would +be issued to him or her upon exercise of the Option or the vesting or settlement of an Award, or by tendering Shares previously acquired. +19. Administration of the Plan +(a)  Administrator of the Plan. +The Plan shall be administered by the Administrator who shall be the Compensation Committee of the Board or, in the absence of a Compensation Committee, the Board itself. Any power of the Administrator may also be exercised by the Board, except +to the extent that the grant or exercise of such authority would cause any Award or transaction to become subject to (or lose +2021 PROXY STATEMENT +B-13 +TABLE OF CONTENTS +an exemption under) the short-swing profit recovery provisions of Section 16 of the +Act. To the extent that any permitted action taken by the Board conflicts with action taken by the Administrator, the Board action shall control. The Compensation Committee may by resolution authorize one or more officers of the Company to +perform any or all things that the Administrator is authorized and empowered to do or perform under the Plan, and for all purposes under this Plan, such officer or officers shall be treated as the Administrator; provided, however, that no such +officer shall designate himself or herself as a recipient of any Awards granted under authority delegated to such officer and that any delegation of the power to grant Awards to an officer shall otherwise be consistent with the requirements of +Section 157(c) of the Delaware General Corporation Law. The Compensation Committee hereby designates the Company's chief executive officer, the Company's chief financial officer, the Secretary of the Company, and the head of the Company's human +resource function to assist the Administrator in the administration of the Plan and execute agreements evidencing Awards made under this Plan or other documents entered into under this Plan on behalf of the Administrator or the Company. In +addition, the Compensation Committee may delegate any or all aspects of the day-to-day administration of the Plan to one or more officers or employees of the Company or any Subsidiary and/or to one or more agents. +(b)  Powers of Administrator. +Subject to the express provisions of this Plan, the Administrator shall be authorized and empowered to do all things that it determines to be necessary or appropriate in connection with the administration of this Plan, including, without +limitation: (i) to prescribe, amend and rescind rules and regulations relating to this Plan and to define terms not otherwise defined herein; (ii) to determine which persons are Participants, to which of such Participants, if any, Awards shall be +granted hereunder and the timing of any such Awards; (iii) to grant Awards to Participants and determine the terms and conditions thereof, including the number of Shares subject to Awards and the exercise or purchase price of such Shares and the +circumstances under which Awards become exercisable or vested or are forfeited or expire, which terms may but need not be conditioned upon the passage of time, continued employment, the satisfaction of performance criteria, the occurrence of +certain events, or other factors; (iv) to establish and verify the extent of satisfaction of any performance goals or other conditions applicable to the grant, issuance, exercisability, vesting and/or ability to retain any Award; (v) to prescribe +and amend the terms of the agreements or other documents evidencing Awards made under this Plan (which need not be identical) and the terms of or form of any document or notice required to be delivered to the Company by Participants under this +Plan; (vi) to determine the extent to which adjustments are required pursuant to Section 13 of the Plan; (vii) to interpret and construe this Plan, any rules and regulations under this Plan and the terms and conditions of any Award granted +hereunder, and to make exceptions to any such provisions if the Administrator, in good faith, determines that it is necessary to do so in light of extraordinary circumstances and for the benefit of the Company; (viii) to approve corrections in +the documentation or administration of any Award; and (ix) to make all other determinations deemed necessary or advisable for the administration of this Plan. The Administrator may, in its sole and absolute discretion, without amendment to the +Plan, waive or amend the operation of Plan provisions respecting exercise after termination of employment or service to the Company or an Affiliate and, except as otherwise provided herein, adjust any of the terms of any Award. The Administrator +may also (A) accelerate the date on which any Award granted under the Plan becomes exercisable or (B) accelerate the vesting date or waive or adjust any condition imposed hereunder with respect to the vesting or exercisability of an Award, +provided that the Administrator, in good faith, determines that such acceleration, waiver or other adjustment is necessary or desirable. For the avoidance of doubt, notwithstanding anything in the Plan to the contrary, no Award outstanding under +the Plan may be repriced, re-granted through cancellation or otherwise amended to reduce the exercise price applicable thereto (other than with respect to adjustments made in connection with a transaction or other change in the Company's +capitalization as described in Section 13 of the Plan) without the approval of the Company's stockholders. +(c)  Determinations by the +Administrator. All decisions, determinations and interpretations by the Administrator regarding the Plan, any rules and regulations under the Plan and the terms and conditions of or operation of any Award granted hereunder, shall be +final and binding on all Participants, beneficiaries, heirs, assigns or other persons holding or claiming rights under the Plan or any Award. The Administrator shall consider such factors as it deems relevant, in its sole and absolute discretion, +to making such decisions, determinations and interpretations including, without limitation, the recommendations or advice of any officer or other employee of the Company and such attorneys, consultants and accountants as it may select. +(d)  Subsidiary Awards. In +the case of a grant of an Award to any Participant employed by a Subsidiary, such grant may, if the Administrator so directs, be implemented by the Company issuing any subject Shares to the Subsidiary, for such lawful consideration as the +Administrator may determine, upon the condition or understanding that the Subsidiary will transfer the Shares to the Participant in accordance with the terms of the Award specified by the Administrator pursuant to the provisions of the Plan. +Notwithstanding any other provision hereof, such Award may be issued by and in the name of the Subsidiary and shall be deemed granted on such date as the Administrator shall determine. +(e)  Indemnification of +Administrator. Neither any member nor former member of the Administrator nor any individual to whom authority is or has been delegated shall be personally responsible or liable for any act or omission in connection with the performance +of powers or duties or the exercise of discretion or judgment in the administration and implementation of the Plan. Each person who is or shall have been a member of the Administrator shall be indemnified and held harmless by the Company from and +against any cost, +2021 PROXY STATEMENT +B-14 +TABLE OF CONTENTS +liability or expense imposed or incurred in connection with such person's or the +Administrator's taking or failing to take any action under the Plan. Each such person shall be justified in relying on information furnished in connection with the Plan's administration by any employee, officer, agent or expert employed or +retained by the Administrator or the Company. +20. Amendment of the Plan or Awards +The Board may amend, alter or discontinue this Plan and the +Administrator may amend or alter any agreement or other document evidencing an Award made under this Plan but, except as provided pursuant to the provisions of Section 13 of the Plan, no such amendment shall, without the approval of the +stockholders of the Company: +(a)  increase the maximum number of Shares for which Awards may be granted under this +Plan; +(b)  reduce the price at which Options or Stock Appreciation Rights may +be granted below the price provided for in Section 6(a) of the Plan; +(c)  reduce the exercise price of outstanding Options or Stock Appreciation Rights; +(d)  extend the term of this Plan; +(e)  change the class of persons eligible to be Participants; or +(f)  otherwise amend the Plan in any manner requiring stockholder +approval by law or under the New York Stock Exchange listing requirements (or the listing requirements of any successor exchange that is the primary stock exchange for trading of Shares). +No amendment or alteration to the Plan or an Award or Award Agreement +shall be made which would impair the rights of the holder of an Award, without such holder's consent, provided that no such consent shall be required if the Administrator determines in its sole and absolute discretion and prior to the date of any +Change in Control that such amendment or alteration either is required or advisable in order for the Company, the Plan or the Award to satisfy any law or regulation or to meet the requirements of or avoid adverse financial accounting consequences +under any accounting standard. In addition, the Plan may not be amended in any way that causes the Plan to fail to comply with or be exempt from Section 409A of the Code, unless the Board expressly determines to amend the Plan to be subject to +Section 409A of the Code. +21. No Liability of Company +The Company and any Subsidiary or affiliate which is in existence or +hereafter comes into existence shall not be liable to a Participant or any other person as to: (a) the non-issuance or sale of Shares as to which the Company has been unable to obtain from any regulatory body having jurisdiction the authority +deemed by the Company's counsel to be necessary to the lawful issuance and sale of any Shares hereunder and (b) any tax consequence expected, but not realized, by any Participant or other person due to the grant, receipt, exercise, settlement of +any Award granted hereunder. +22. Non-Exclusivity of Plan +Neither the adoption of this Plan by the Board nor the submission of +this Plan to the stockholders of the Company for approval shall be construed as creating any limitations on the power of the Board or the Administrator to adopt such other incentive arrangements as either may deem desirable, including without +limitation, the granting of restricted stock or stock options otherwise than under this Plan , and such arrangements may be either generally applicable or applicable only in specific cases. +23. Governing Law +This Plan and any agreements or other documents hereunder shall be +interpreted and construed in accordance with the laws of Delaware and applicable federal law. Any reference in this Plan or in the agreement or other document evidencing any Awards to a provision of law or to a rule or regulation shall be deemed +to include any successor law, rule or regulation of similar effect or applicability. +24. Waiver of Jury Trial +By accepting an Award under the Plan, each Participant waives any right +to a trial by jury in any action, proceeding or counterclaim concerning any rights under the Plan and any Award, or under any amendment, waiver, consent, instrument, document or other agreement delivered or which in the future may be delivered in +connection therewith, and agrees that any such action, proceedings or counterclaim will be tried before a court and not before a jury. By accepting an Award under the Plan, each Participant certifies that no officer, representative, or attorney +of the Company has represented, expressly or otherwise, that the Company would not, in the event of any action, proceeding or counterclaim, seek to enforce the foregoing waivers. Notwithstanding anything to the contrary in the Plan, +2021 PROXY STATEMENT +B-15 +TABLE OF CONTENTS +nothing herein is to be construed as limiting the ability of the Company and a +Participant to agree to submit disputes arising under the terms of the Plan or any Award made hereunder to binding arbitration or as limiting the ability of the Company to require any eligible individual to agree to submit such disputes to +binding arbitration as a condition of receiving an Award hereunder. +25. No Right to Employment, Reelection or Continued Service +Nothing in this Plan or an Award Agreement shall interfere with or +limit in any way the right of the Company, its Subsidiaries and/or its affiliates to terminate any Participant's employment, service on the Board or service for the Company at any time or for any reason not prohibited by law, nor shall this Plan +or an Award itself confer upon any Participant any right to continue his or her employment or service for any specified period of time. Neither an Award nor any benefits arising under this Plan shall constitute an employment contract with the +Company, any Subsidiary and/or its affiliates. Subject to Sections 4 and 20 of the Plan, this Plan and the benefits hereunder may be terminated at any time in the sole and exclusive discretion of the Board without giving rise to any liability on +the part of the Company, its Subsidiaries and/or its affiliates. +26. Unfunded Plan +The Plan is intended to be an unfunded plan. Participants are and shall +at all times be general creditors of the Company with respect to their Awards. If the Administrator or the Company chooses to set aside funds in a trust or otherwise for the payment of Awards under the Plan, such funds shall at all times be +subject to the claims of the creditors of the Company in the event of its bankruptcy or insolvency. +Effective as of February 9, 2021 +2021 PROXY STATEMENT +B-16 +TABLE OF CONTENTS +TABLE OF CONTENTS \ No newline at end of file diff --git a/raw/proxies/0000110471/0001140361-21-010151/proxy_rpt.txt b/raw/proxies/0000110471/0001140361-21-010151/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..71083cad2bd97bc6d06815eff245cf4ce405ca66 --- /dev/null +++ b/raw/proxies/0000110471/0001140361-21-010151/proxy_rpt.txt @@ -0,0 +1,49 @@ +CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS +Since December 29, 2019, the Company has not engaged in any “related person” +transactions with its directors, executive officers or holders of 5% or more of Company voting securities, affiliates or any member of the immediate family of the foregoing persons. +RELATED PERSON TRANSACTIONS POLICY +Wolverine Worldwide's Board adopted written policies and procedures regarding related +person transactions. They require the Governance Committee to review and either approve or disapprove the Company entering into any Interested Transactions (defined below). If advance approval is not feasible, then the Governance Committee must +review and ratify the Interested Transaction at its next meeting. +Interested Transaction +Any transaction, arrangement or relationship or series of similar transactions, arrangements or +relationships (including any indebtedness or guarantee of indebtedness) in which: +(1) +the aggregate amount involved is or is expected to exceed $120,000 since the beginning of Wolverine +Worldwide's last completed fiscal year; +(2) +Wolverine Worldwide is a participant; and +(3) +any Related Person (defined below) has or will have a direct or indirect interest. +An Interested Transaction does not include: +(1) +any employment compensation paid to an executive officer of the Company if the Compensation Committee +approved or recommended to the Board of Directors for approval of such compensation; +(2) +any compensation paid to a director for service as a director of the Company; +(3) +any transaction in which a Related Person has an indirect interest solely as a result of being (i) a +director or, together with all other Related Persons, as defined below, a less than 10% beneficial owner of an equity interest in another entity, or both, or (ii) a limited partner in a partnership in which the Related Person, together +with all other Related Persons, has an interest of less than 10%; or +(4) +any transaction in which the Related Person's interest arises solely from the ownership of the +Company's common stock and all holders of the Company's common stock received the same benefit on a pro rata basis (e.g., a dividend). +(5) +any transaction with another publicly traded company where the Related Person's interest arises +solely from the ownership of more than 5% of the Company's common stock and the ownership of a non-controlling interest in the other publicly traded company. +Related Person +Any: +(a) +person who is or was at any point during the last fiscal year for which Wolverine Worldwide filed an +Annual Report on Form 10-K and Proxy Statement, an executive officer, director or, to the extent information regarding such nominee is being presented in a proxy or information statement relating to the election of that nominee as a +director, nominee for election as a director; +(b) +beneficial owner of greater than five percent of Wolverine Worldwide's common stock; or +(c) +immediate family member* of any of the foregoing. +* +Immediate family member is defined as a person's spouse, parents, stepparents, children, stepchildren, siblings, mothers and +fathers-in-law, sons- and daughters-in-law, and brothers- and sisters-in-law, and anyone residing in such person's home (other than a tenant or employee). +The Governance Committee considers whether the Interested Transaction is on terms no +less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances, the extent of the Related Person's interest in the transaction, and other factors that it deems relevant. No director +participates in any discussion or approval of an Interested Transaction for which he or she is a Related Person, except to provide information to the Governance Committee. \ No newline at end of file diff --git a/raw/proxies/0000110471/0001140361-22-010723/proxy.txt b/raw/proxies/0000110471/0001140361-22-010723/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..24ce90c59ac4b9d60c84da2326b1d190e67aa5ca --- /dev/null +++ b/raw/proxies/0000110471/0001140361-22-010723/proxy.txt @@ -0,0 +1,4538 @@ +DEF 14A +1 +ny20001822x1_def14a.htm +DEF 14A +TABLE OF CONTENTS +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +Washington, D.C. 20549 +SCHEDULE 14A INFORMATION +Proxy Statement Pursuant to Section 14(a) of +the Securities Exchange Act of 1934 (Amendment No.   ) +Filed by the Registrant ☒ +Filed by a party other than the Registrant   ☐ +Check the appropriate box: +☐ +Preliminary Proxy Statement +☐ +Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +☒ +Definitive Proxy Statement +☐ +Definitive Additional Materials +☐ +Soliciting Material under §240.14a-12 +Wolverine World Wide, Inc. +(Name of Registrant as Specified In Its Charter) +(Name of Person(s) Filing Proxy Statement, if other than the Registrant) +Payment of Filing Fee (Check the appropriate box): +☒ +No fee required. +☐ +Fee paid previously with preliminary materials. +☐ +Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. +TABLE OF CONTENTS +TABLE OF CONTENTS +LETTER TO SHAREHOLDERS +Wolverine World Wide, Inc. +9341 Courtland Drive, NE +Rockford, Michigan 49351 +March 23, 2022 +Dear Fellow Shareholders, +Thank you for your investment in Wolverine Worldwide. We made significant progress in 2021 on our strategic +and financial objectives, despite supply chain challenges and the continued impacts of the COVID-19 pandemic. Some highlights are listed below: +• +Successful execution of, and investments in, the Company’s three primary growth pillars – (1) Direct to Consumer Focus, Digital Priority; (2) Powerful +Product Engine; and (3) Accelerated International Growth. +• +In August 2021, the Company acquired women’s activewear brand Sweaty Betty, a digitally-native, premium global apparel brand. This acquisition is +expected to fuel growth and enhance the Company’s fast-growing eCommerce business. +• +Annual revenue of $2.41 billion, representing nearly 35% growth over fiscal 2020. Excluding $117 million of revenue from the Sweaty Betty acquisition, +revenue grew 28% in fiscal 2021, exceeding pre-pandemic fiscal 2019 revenue. We refer to our results of operations for fiscal 2021 excluding Sweaty Betty as “organic.” +• +Strong revenue growth across the Company’s four largest brands, with Merrell revenue growing year-over-year by 22%, Saucony by 57%, Sperry by 25%, and +Sweaty Betty by 40% on a pro forma basis, assuming we acquired Sweaty Betty as of the first day of fiscal 2021. Merrell and Saucony achieved record annual revenue. +• +Direct to Consumer revenue grew significantly in fiscal 2021, up 47% including Sweaty Betty and up 23% organically, year-over-year. Direct to Consumer +revenue represented 26% of total revenue in fiscal 2021, up from 15% of revenue in fiscal 2019. +• +The Company continued its excellent track record of strong earnings leverage, with reported diluted earnings per share of $0.81 and adjusted diluted +earnings per share of $2.09. Adjusted diluted earnings per share grew by 125% compared to the prior year, and by 113% organically. +In addition to implementing the Company's growth pillars and other key initiatives during 2021, we +concentrated on other matters critical to our long-term success. These included Board and management succession, highlighted by my appointment at the end of the year as the Company’s President and Chief Executive Officer. Other areas of focus +included digital and direct to consumer expansion, supply chain management, cybersecurity protection, and brand development, which we will describe in greater detail in this proxy statement. +During 2022, our team remains focused on global growth opportunities for our portfolio of leading performance +and lifestyle brands, especially in direct-to-consumer, digital, and key international channels. We will pursue a focused approach to executing against these growth pillars, capitalizing on favorable market conditions in key product categories +and unlocking the potential across our powerful brand portfolio. Consistent with this, we will further invest in a variety of initiatives to drive revenue growth and earnings leverage. +We hope to receive your support at this year’s annual meeting on May 4, 2022, and encourage you to vote either +online, by phone, or by mail. +Sincerely, +Brendan Hoffman +President and Chief Executive Officer +2022 PROXY STATEMENT +1 +TABLE OF CONTENTS +NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS +10:00 a.m. EDT, May 4, 2022 +Wolverine World Wide, Inc. +9341 Courtland Drive, NE +Rockford, MI 49351 +March 23, 2022 +To Our Shareholders: +We invite you to attend the 2022 Annual Meeting of Shareholders (the “Annual Meeting”) of Wolverine World +Wide, Inc. (the “Company,” “Wolverine Worldwide” or “Wolverine”). The meeting will be held on May 4, 2022, at 10:00 a.m. EDT in a virtual format designed to provide shareholders the same rights and opportunities to participate that they would +have at an in-person meeting. At the Annual Meeting, shareholders will vote on the following items: +(1) +Election of the four director nominees named in the Proxy Statement for three-year terms expiring in 2025 +(2) +Advisory resolution approving compensation for the Company's named executive officers (“NEOs,” and each an “NEO”) +(3) +Ratification of the Audit Committee's appointment of Ernst & Young LLP as the Company's independent registered public accounting firm for fiscal +year 2022 +Shareholders of record as of the close of business on March 7, 2022, the record date, are entitled to +participate in and vote at the Annual Meeting. To participate in the Annual Meeting, including to vote, ask questions, and view the list of registered shareholders as of the record date during the meeting, shareholders of record should go to the +meeting website at www.virtualshareholdermeeting.com/WWW2022, enter the 16-digit control number found on your proxy card or Notice of Internet Availability of Proxy Materials (“Notice of Internet Availability”), and follow the instructions on the +website. If your shares are held in street name and your voting instruction form or Notice of Internet Availability indicates that you may vote those shares through the http://www.proxyvote.com website, then you may access, participate in, and +vote at the annual meeting with the 16-digit access code indicated on that voting instruction form or Notice of Internet Availability. Otherwise, shareholders who hold their shares in street name should contact their bank, broker or other nominee +(preferably at least 5 days before the annual meeting) and obtain a “legal proxy” in order to be able to attend, participate in or vote at the annual meeting. +Whether or not you plan to attend the Annual Meeting, you can ensure that your shares are represented at the +meeting by promptly voting and submitting your proxy by telephone or through the internet, or by completing, signing, dating and returning your proxy card in the enclosed envelope. +Rules for the conduct of the Annual Meeting will be available on the meeting website. For information about +how to view the rules and the list of shareholders entitled to vote at the Annual Meeting during the ten days preceding the Annual Meeting, please visit our 2022 Annual Meeting website at www.wolverineworldwide.com/2022annualmeeting. If you +encounter any difficulties accessing the virtual meeting during check-in or during the meeting, please call the technical support number that will be posted on the virtual shareholder meeting login page. +2022 PROXY STATEMENT +2 +TABLE OF CONTENTS +This Notice of 2022 Annual Meeting of Shareholders, Proxy Statement, proxy or voting instruction card and +Annual Report for our fiscal year ended January 1, 2022 are being mailed or made available to shareholders starting on or about March 23, 2022. +By Order of the Board of Directors, +Kyle L. Hanson +Secretary +Important Notice Regarding the Availability of Proxy Materials for the Annual +Meeting of Shareholders to be held on May 4, 2022. +Wolverine's Proxy Statement for the 2022 Annual Meeting of Shareholders and the +Annual Report to Shareholders for the fiscal year ended January 1, 2022, are available at: www.wolverineworldwide.com/2022annualmeeting. +2022 PROXY STATEMENT +3 +TABLE OF CONTENTS +Table of Contents +Letter to Shareholders +1 +Notice of 2022 Annual Meeting of Shareholders +2 +Proxy Statement Summary +6 +Our Brand Portfolio +6 +Strategic Focus +6 +Matters to be Voted Upon +7 +Election of Directors for Terms Expiring in 2025 +8 +Board Highlights +8 +Board is Composed of Directors with the Right Mix of Skills and Experiences +9 +Shareholder Engagement +9 +Corporate Governance Highlights +9 +Meeting Information +9 +Corporate Governance +10 +Board of Directors +10 +Board Composition +10 +Board Highlights +10 +Director Nominations +11 +Board Self-Assessment +11 +Risk Oversight +12 +Environmental and Social Highlights +13 +Environmental, Sustainability, and Responsible Sourcing +13 +Protecting Our Planet +13 +Sustainability +14 +Responsible Sourcing and Supply Chain +14 +Diversity, Equity & Inclusion +14 +Community Impact +15 +Code of Business Conduct and Accounting and Finance Code of Ethics +16 +Shareholder Communications Policy +17 +Proposal 1 – Election of Directors for Terms Expiring in 2025 +18 +Director Nominees with Proposed Terms Expiring in 2025 +19 +Directors with Terms Expiring in 2023 +23 +Directors with Terms Expiring in 2024 +27 +Board Leadership +29 +Director Independence +29 +Board Committees, Meetings and Meeting Attendance +30 +Non-Employee Director Compensation in Fiscal Year 2021 +32 +Non-Employee Director Stock Ownership Guidelines +34 +Securities Ownership of Officers and Directors and Certain Beneficial Owners +35 +Five Percent Shareholders +35 +Stock Ownership by Management and Others +36 +Compensation Discussion and Analysis +38 +Summary +38 +Compensation Philosophy and Objectives +38 +Compensation Decisions in Context: Key 2021 Accomplishments and Financial Highlights +38 +2021 Compensation Program Overview +40 +Pay at Risk +40 +Long-Term Incentive Program Mix +41 +Compensation Best Practices +41 +Compensation Discussion and Analysis +42 +2021 Compensation Program Overview +42 +Setting Targets +42 +Base Salary +42 +Annual Bonus +43 +Performance Bonus +43 +Individual Performance Bonus +44 +eCommerce Revenue Multiplier +46 +Long-Term Incentive Compensation +47 +Impact of the COVID-19 Pandemic on 2019-2021 and 2020-2022 Performance Stock Unit +Grants +47 +2021 Performance Stock Units +48 +Performance Awards for the 2021-2023 Performance Period +49 +Restricted Stock Unit Awards +49 +Benefits +50 +Retirement, Deferred Compensation and Welfare Plans +50 +Perquisites +50 +Post-Employment Compensation +50 +Say on Pay Advisory Vote +51 +CEO Realizable Pay +51 +CEO Transition and 2022 Compensation Update +52 +Compensation Setting Process +53 +Setting Targets +53 +Competitive Philosophy and Competitive Market Data +53 +Peer Group +53 +CEO Role +53 +Compensation Consultant Role +53 +Other Compensation Policies and Practices +54 +NEO Stock Ownership Guidelines +54 +Stock Hedging and Pledging Policies +54 +Clawback Policy +54 +Impact of Accounting and Tax Treatments on Compensation +54 +Compensation Committee Report +55 +Summary Compensation Table +56 +Grants of Plan-Based Awards in Fiscal Year 2021 +58 +Outstanding Equity Awards at 2021 Fiscal Year-End +60 +Option Exercises and Stock Vested in Fiscal Year 2021 +63 +Pension Plans and 2021 Pension Benefits +64 +Qualified Pension Plans +64 +Supplemental Executive Retirement Plan +64 +Pension Benefits in Fiscal Year 2021 +65 +Non-Qualified Deferred Compensation +66 +Potential Payments Upon Termination or Change in Control +67 +Benefits Triggered by Termination for Cause or Voluntary Termination +67 +Benefits Triggered by Termination Other than for Cause or for Good Reason not in +Connection with a Change in Control +67 +Benefits Triggered Upon a Change in Control +68 +Benefits Triggered by Retirement, Death or Permanent Disability +70 +Description of Restrictive Covenants that Apply During and After Termination of +Employment +70 +Estimated Payments on Termination or Change in Control +71 +CEO Pay Ratio +72 +Proposal 2 – Advisory Resolution to Approve Executive Compensation +73 +Proposal 3 – Ratification of Appointment of Independent Registered Public +Accounting Firm +74 +Audit Committee Report +75 +Independent Registered Public Accounting Firm +76 +Related Party Matters +77 +Certain Relationships and Related Transactions +77 +2022 PROXY STATEMENT +4 +TABLE OF CONTENTS +Related Person Transactions Policy +77 +Additional Information +78 +Shareholders List +78 +Director and Officer Indemnification +78 +Delinquent Section 16(a) Reports +78 +Shareholder Proposals for Inclusion in Next Year's Proxy Statement +78 +Other Shareholder Proposals for Presentation at Next Year's Annual Meeting +78 +Voting Securities +78 +Conduct of Business +79 +Vote Required for Election and Approval +79 +Voting Results of the Annual Meeting +79 +Attending the Annual Meeting +80 +Manner for Voting Proxies +80 +Revocation of Proxies +80 +Solicitation of Proxies +80 +Delivery of Documents to Shareholders Sharing an Address +80 +Access to Proxy Statement and Annual Report +80 +Appendix A - Forward-Looking Statements and Non-GAAP Reconciliation Tables +A-1 +2022 PROXY STATEMENT +5 +TABLE OF CONTENTS +Proxy Statement Summary +This summary highlights key information that can be found in greater detail elsewhere in this Proxy Statement. +This summary does not contain all of the information that shareholders should consider, and shareholders should read the entire Proxy Statement before voting. +Our Brand Portfolio +Wolverine Worldwide organized its portfolio of brands into two key operating groups together with an “Other” +category for fiscal 2021 as illustrated below: +Strategic Focus – Growth Pillars +2021 was another successful year for the Company, with further progress on our three primary growth pillars +identified below. These pillars represent our roadmap for global growth, and focused efforts and investments behind them helped build momentum and allowed us to deliver excellent growth and results as we worked to fulfill our vision to “Build a +family of the most admired performance and lifestyle brands on earth.” +1. +Direct to Consumer Focus, Digital Priority – An intense focus on direct to consumer channels and +digital penetration, including the following elements: +• +Engaging consumers with pinnacle brand and shopping experiences online +• +Constant flow of compelling digital content and storytelling +• +Global expansion of our eCommerce platforms +• +Direct consumer dialogue and testing to inform decisions +• +Outpaced growth with third party digital customers and distributors +2. +Powerful Product Engine – A continuous flow of powerful product marketing stories, including the +following elements: +• +Increased supply base capacity to support growth in demand +• +Relentless and frequent introduction of craveable product +• +Stronger consumer insights and use of digital tools to style test products more quickly and effectively +• +Speed-to-market initiatives and deployment of digital product development tools to design and sample products more quickly and efficiently +2022 PROXY STATEMENT +6 +TABLE OF CONTENTS +3. +Accelerated International Growth – Strategic investment in key markets to maximize the global +growth opportunity for our brands, including the following elements: +• +Strengthening regional teams, especially in China +• +Regional merchandising to enhance development of market-right products +• +Expanding network of core partners and continuous evaluation of business models +• +Investing in digital capabilities in new markets +Looking ahead, we remain committed to investing in these three key pillars to build on the progress made in +2021 and increasing our momentum. +MATTERS TO BE VOTED UPON +Shareholders are being asked to vote on the following matters at the 2022 Annual Meeting of Shareholders: +PROPOSAL +BOARD VOTE +RECOMMENDATION +PAGE +REFERENCE +1. +Election of Directors for Terms Expiring in 2025 +FOR each Nominee +18 +2. +Advisory Resolution Approving NEO Compensation +FOR +73 +3. +Ratification of Ernst & Young LLP as Auditor for Fiscal Year 2022 +FOR +74 +2022 PROXY STATEMENT +7 +TABLE OF CONTENTS +ELECTION OF DIRECTORS FOR TERMS EXPIRING IN 2025 +The Company's Board consists of 10 directors. The Company's By-Laws establish three classes of directors with +each class serving three-year terms. +The Board has nominated four directors for election at the Annual Meeting, as outlined in the table below. +Each director nominee has been nominated to serve for a three-year term expiring at the annual meeting of shareholders to be held in 2025. The Board recommends that shareholders vote “FOR” each of the nominees +named below. +Age +Director Since +Independent +Other Public Directorships +Committees +Proposed Term +Expiration +Jeffrey M. Boromisa +Retired Executive Vice President of Kellogg +International, President of Latin America; Senior Vice President of Kellogg Company +67 +2006 +✔ +None +Audit (Chair) +Compensation +2025 +Gina R. Boswell +Retired President, Customer Development, +Unilever U.S.A. +59 +2013 +✔ +ManpowerGroup Inc. +ACCO Brands Corporation +Compensation +Governance +2025 +Brendan L. Hoffman +President and Chief Executive Officer of +Wolverine Worldwide +53 +2020 +None +None +2025 +David T. Kollat +President and Chairman, 22, Inc. +83 +1992 +✔ +None +Independent Lead Director +2025 +Board Highlights +The following charts illustrate key characteristics of the Company's Board: +2022 PROXY STATEMENT +8 +TABLE OF CONTENTS +Board is Composed of Directors with the Right Mix of Skills and Experiences +The following chart lists the important experiences and attributes that the Company's Directors possess: +Shareholder Engagement +As part of its ongoing shareholder engagement efforts, the Company reached out in early 2022 to shareholders +representing holders of approximately 58% of its outstanding shares and has held or expects to hold telephonic meetings with all shareholders who accepted the Company's invitation (representing holders of approximately 12% of the Company's +outstanding shares). Discussions to date focused on Company strategy, financial performance, governance and compensation programs. +Corporate Governance Highlights +Wolverine Worldwide is committed to a governance structure that provides strong shareholder rights and meaningful accountability. +✔  Highly independent Board and Committees +✔  Lead Independent Director with clearly defined role +✔  Majority voting with director resignation policy +✔  No supermajority vote requirements +✔  Shareholder right to act by written consent +✔  Annual Board and Committee self-evaluations +✔  Robust Board and executive +succession planning, including annual written director nominee evaluations +✔  Long-standing commitment to diversity +✔  Director onboarding orientation program and ongoing education +initiatives +✔  Active shareholder engagement practices +Meeting Information +The Company's Annual Meeting is scheduled to take place virtually, as set forth in the notice, on May 4, 2022, +at 10:00 a.m. EDT. As always, the Company encourages you to vote your shares before the Annual Meeting. +2022 PROXY STATEMENT +9 +TABLE OF CONTENTS +Corporate Governance +Wolverine Worldwide is committed to the highest level of corporate governance, and the Board has adopted +Corporate Governance Guidelines to strengthen management accountability and promote long-term shareholder interests. +BOARD OF DIRECTORS +The shareholders elect directors to serve on the Company's Board of Directors (the “Board of Directors” or +“Board”). The Board oversees the management of the business by the Chief Executive Officer (“CEO”) and senior management. In addition to its general oversight function, the Board's responsibilities include, but are not limited to, the following: +• +Reviewing and approving the Company's key objectives and strategic business plans, and monitoring implementation of those plans and the Company's +success in meeting identified objectives +• +Selecting, evaluating and approving the compensation of the CEO and overseeing CEO succession planning +• +Providing advice and oversight regarding the selection, evaluation, development and compensation of management +• +Overseeing the Company's process for assessing and managing risk and mitigation activities +• +Shaping effective corporate governance +• +Reviewing and monitoring administration of policies and procedures to safeguard the integrity of the Company's business operations and financial +reporting and to promote compliance with applicable laws and regulations +Board Composition +Board Highlights +The Board prides itself on its ability to recruit and retain directors who have high personal and professional +integrity and have demonstrated exceptional ability and judgment to effectively serve shareholders' long-term interests. These skills and attributes will help the Company accomplish its most important strategic objectives, such as eCommerce and +digital growth, brand building, operational excellence and supply chain management, and international growth. The Board also values diversity and considers this an important factor in determining nominees for appointment and election, as +evidenced by the current makeup of the Board, which includes three female directors, two of whom are also racial/ethnic minorities. The Board believes that its directors, including the nominees for election as directors at the Annual Meeting, +have characteristics and valuable skills that provide the Company with the variety and depth of knowledge, judgment and strategic vision necessary to provide effective oversight of the Company. +To help achieve the right mix of experience and expertise, and to assist in succession planning, the Board, at +the recommendation of the Governance Committee, has identified specified skills and attributes it desires its members to possess. The below graphic lists these skills and attributes and indicates which of the directors possess each. As shown, +these skills and attributes are well represented within the Board. +2022 PROXY STATEMENT +10 +TABLE OF CONTENTS +SKILLS & ATTRIBUTES +Totals +Boromisa +Boswell +Gerber +Hoffman +Kollat +Krueger +Lauderback +Long +McCreight +Wilson-Thompson +Active Executive +2 +✔ +✔ +Brand Building +9 +✔ +✔ +✔ +✔ +✔ +✔ +✔ +✔ +✔ +Current or Former CEO +4 +✔ +✔ +✔ +✔ +Digital/eCommerce/IT +5 +✔ +✔ +✔ +✔ +✔ +Finance +9 +✔ +✔ +✔ +✔ +✔ +✔ +✔ +✔ +✔ +Footwear/Apparel +6 +✔ +✔ +✔ +✔ +✔ +✔ +Global Supply Chain +4 +✔ +✔ +✔ +✔ +International Business +10 +✔ +✔ +✔ +✔ +✔ +✔ +✔ +✔ +✔ +✔ +Marketing +8 +✔ +✔ +✔ +✔ +✔ +✔ +✔ +✔ +Public Company Governance +10 +✔ +✔ +✔ +✔ +✔ +✔ +✔ +✔ +✔ +✔ +Retail +9 +✔ +✔ +✔ +✔ +✔ +✔ +✔ +✔ +✔ +The Governance Committee reviews with the Board on an annual basis the skills, experience and characteristics +desired of Board members in the context of the current makeup of the Board. The Board, with the assistance of the Governance Committee, annually assesses the current composition of the Board across many dimensions. As set forth in the Company's +Corporate Governance Guidelines, which are posted on its website, this assessment addresses the skills and attributes set forth in the table above and the individual performance, experience, age and skills of each director. +Director Nominations +The Board's Governance Committee serves as its nominating committee. The Governance Committee, in anticipation +of upcoming director elections and other potential or expected Board vacancies, evaluates qualified individuals and recommends candidates to the Board. As part of the search process for each new director, the Governance Committee actively seeks +out women and minority candidates to include in the pool from which Board nominees are chosen. The Governance Committee may retain a search firm or other external parties to assist it in identifying candidates, and the Governance Committee has +the sole authority to select such a firm, approve the search firm's fees and retention terms, and to terminate the firm if necessary. +The Governance Committee considers candidates suggested by directors, senior management or shareholders. +Shareholders may recommend individuals as potential director candidates by communicating with the Governance Committee through one of the Board communication mechanisms described under the heading “ Shareholder +Communications Policy .” Shareholders that wish to nominate a director candidate must comply with the procedures set forth in the Company's By-Laws, which are posted on its website. Ultimately, upon the recommendation of the Governance +Committee, the Board selects the director nominees for election at each annual meeting. In selecting director nominees, the Board considers each candidate's performance as a director (which is assessed through an anonymous written peer +evaluation); personal and professional integrity; ability and judgment; and likelihood to be effective, working with the other nominees and directors, in serving the long-term interests of the shareholders. The Governance Committee also considers +candidates' relative skills, experience, attributes, background and characteristics as well as independence under applicable New York Stock Exchange (“NYSE”) listing standards and the Company's Director Independence Standards, potential to +contribute to the composition and culture of the Board, and ability and willingness to actively participate in the Board and committee meetings and to otherwise devote sufficient time to Board duties. +BOARD SELF-ASSESSMENT +As part of an annual self-assessment, each director evaluates, over a number of dimensions, the performance of +the Board and any committee on which he or she serves. Dr. Kollat, the Lead Independent Director, works with the Governance Committee to review the Board self-assessment with directors following the end of each fiscal year and to conduct +individual director interviews at the end of each year. Committee Chairpersons review the committee self-assessments with their respective committee members and discuss them with the Board. +2022 PROXY STATEMENT +11 +TABLE OF CONTENTS +In addition, the Governance Committee, working with the Lead Independent Director, develops and implements +guidelines for evaluating all directors standing for nomination and election and oversees the evaluation of such nominees. +The Corporate Governance Guidelines (including the Director Independence Standards), the Charter for +each Board standing committee (Audit, Compensation and Governance), the Company's Certificate of Incorporation, By-Laws, Code of Business Conduct, and its Accounting and Finance Code of Ethics all are available on the Wolverine Worldwide +website at: +www.wolverineworldwide.com/investor-relations/corporate-governance/. +The Board and applicable committees annually review these and other key governance documents. +RISK OVERSIGHT +The Board oversees the Company's process for assessing and managing risk and mitigation activities with a focus +on the most significant risks facing the Company, including strategic, operational and supply chain, financial, environmental, cybersecurity, human capital, and legal compliance risks. This oversight is conducted through presentations by and +discussions with the CEO, President, Chief Financial Officer (“CFO”), Director of Internal Audit, General Counsel or Associate General Counsel, Chief Information Officer, Chief Information Security Officer, brand and department leaders and other +members of management. The Associate General Counsel, Senior Risk Manager, and Director of Internal Audit coordinate management's day-to-day risk management and mitigation efforts, and the Director of Internal Audit reports directly to the Audit +Committee. +The Associate General Counsel and Director of Internal Audit review with the Audit Committee regularly, and +with the full Board periodically, management's risk assessment and mitigation strategies. In addition to the above processes, the Board has delegated risk management and mitigation oversight responsibilities to its standing committees, which meet +regularly to review and discuss specific risk topics that align with their core responsibilities. +• The Audit Committee reviews the Company's approach to risk management +generally. The Audit Committee also oversees the Company's risk policies and processes relating to its financial statements and financial reporting processes, credit risks and liquidity risks, as well as the Company's management of risks +related to cybersecurity. The Audit Committee discusses with management and the independent auditors significant risks or exposures and the steps taken by management to mitigate them. +• The Compensation Committee monitors the risks associated with management +resources; organization structure and succession planning, hiring, development and retention processes; and it reviews and evaluates risks associated with the Company's compensation structure, policies and programs. +• The Governance Committee oversees the Company's management of risks related +to the Company's governance structure and processes and potential risks arising from related person transactions. The Governance Committee also oversees the Company’s environmental, social, and governance matters. +The Company reviewed its compensation policies and practices to assess whether they are reasonably likely to +have a material adverse effect on the Company. As part of this review, the Company compiled information about the Company's incentive plans, including reviewing the Company's compensation philosophy, evaluating key incentive plan design features +and reviewing historic payout levels and pay mix. With assistance from Company management and its independent compensation consultant, the Compensation Committee reviewed the executive compensation program, and managers from the Company's human +resources and legal departments reviewed the non-executive compensation programs. +2022 PROXY STATEMENT +12 +TABLE OF CONTENTS +ENVIRONMENTAL AND SOCIAL HIGHLIGHTS +Throughout our over 130-year history, the Company has been passionate about living our Vision, Mission, and Values. These +principles are embedded in the governance practices and Code of Business Conduct outlined below, which guide the Board and the Company’s global employees in their actions. Among these, our core value to “Do the Right Thing – Always” forms +the foundation and guiding light of the Company’s environmental, social, and governance (“ESG”) efforts. +The focus of the Company’s ESG initiatives include the environment, sustainability and responsible sourcing; diversity, +equity, and inclusion (“DE&I”); and community impact. The Company has designated its Governance Committee to oversee and make recommendations to the Board concerning ESG matters, including these initiatives and their integration into +the Company’s business and long-term value creation for the Company and its shareholders. The Governance Committee oversees these initiatives because the Company's growth depends not just on financial performance and new products, but +also on the Company's impact on our communities, our employees and the planet. +The Board regularly reviews brand initiatives and footwear collections and launches that have environmental and social +impacts, and the Board's Governance Committee is responsible for overseeing the development and disclosure of the Company’s broader ESG initiatives. Some of these ESG initiatives are summarized below, and more information is available on +the Company’s corporate responsibility website at wolverineworldwide.com/about-us/responsibility/ and in our most recent Global Impact Report at https://www.wolverineworldwide.com/wp-content/ +uploads/2021/07/2020.IR_.V10.pdf. 1 +Environmental, Sustainability, and Responsible Sourcing +Wolverine Worldwide is committed to making the world a better place. Our goal is to reduce and responsibly manage our +environmental impacts, and we believe the steps we take today will reduce our footprint tomorrow. We aim to achieve this goal by actively implementing environmentally-friendly business practices, seeking out sustainable products and +components, and responsibly sourcing our products in accordance with clear and transparent standards. +Protecting Our Planet +• +ReChaco Program – Chaco strives to keep sandals out of landfills by creating durable and repairable products. +Since 2010, the brand has saved over 271,000 sandals from landfills through the ReChaco Program by allowing consumers to have their sandals repaired. Every pair of sandals saved represents roughly two pounds of material saved from a +landfill. +• +Reducing Waste – We have a variety of recycling programs in place at our facilities, including paper, plastic, +cardboard, batteries, electronics, glass, and other items. These initiatives have prevented hundreds of thousands of pounds of waste from ending up in landfills, and have saved hundreds of thousands of gallons of water from being used for +paper production. +• +Reducing Energy Consumption – Over the past few years, we have implemented initiatives to improve energy +efficiency and increase our support of renewable energy, including purchasing Renewable Energy Credits to offset the energy use at our North America facilities since 2015 and taking steps to achieve LEED-certifications for both our Boston +and London campuses. +• +Reducing Water Consumption – We have implemented conservation initiatives at many of our facilities, including +installing motion sensor faucets and no-touch hand driers. +1 +Website links are provided for convenience, and content on referenced websites is not, and shall not be deemed to be, incorporated by reference into the +proxy statement. +2022 PROXY STATEMENT +13 +TABLE OF CONTENTS +Sustainability +• +Product Sustainability Standards – Our Product Sustainability Standards establish clear baseline expectations +for all of our brands to promote social responsibility, environmental stewardship, and animal welfare. We have been increasing our use of more sustainable materials, such as recycled polyester, natural rubber, organically grown cotton, +algae, and other materials. +• +Sustainable Apparel Coalition – Wolverine Worldwide is a proud member of the Sustainable Apparel Coalition – +the apparel, footwear, and textile industry’s leading alliance for sustainable production. The Coalition developed the Higg Index, a standardized value chain measurement suite of tools for all industry participants. These tools measure +environmental and social labor impacts across the value chain. With this data, we aim to address inefficiencies, improve sustainability performance, and achieve the environmental social transparency consumers are demanding. +Responsible Sourcing & Supply Chain +• +Production Code of Conduct – The Wolverine Worldwide Production Code of Conduct outlines our longtime +commitment to social responsibility. This commitment includes upholding the human rights of workers by treating them with dignity and respect, while improving working conditions within our supply chain. The Production Code of Conduct +clarifies the minimum standards that factories and suppliers with whom Wolverine Worldwide conducts business are required to satisfy when conducting their operations. We routinely conduct social compliance audits through our internal +teams and industry-leading audit firms to monitor compliance with our Production Code of Conduct. +• +Supply Chain Transparency – Wolverine Worldwide is committed to long-term partnerships rooted in trust, open +communication, and a shared vision that fosters continuous improvement and compliance with our Production Code of Conduct. Wolverine Worldwide has a zero-tolerance policy for forced labor, human trafficking, and slavery or involuntary +work of any kind. The Company conducts its own verification and utilizes third-party verification for our finished goods factories to assess risks related to human trafficking, slavery, and other social compliance metrics. We also engage +independent third-party firms to audit direct supplier facilities and require that our direct suppliers, along with their contractors and subcontractors, abide by our Production Code of Conduct. Wolverine Worldwide maintains an ethics +report line for individuals to report violations of the Company’s policies, including the Production Code of Conduct, 24 hours a day from anywhere in the world. +• +Leather Working Group – Wolverine Worldwide joined the Leather Working Group in 2006 to support more responsible +leather manufacturing. +Diversity, Equity & Inclusion +Our corporate culture welcomes people from all backgrounds who share our values of teamwork, open +communications, integrity, respect, and accountability. These are the things that bind us together, making Wolverine Worldwide a great company and a great place to grow. As an expanding global company, diversity is much more than simply a goal — +it’s a part of our DNA. For that reason, the thousands of Wolverine Worldwide employees around the world reflect a diverse range of cultures, religions, ethnicities, and nationalities, as well as varied professional and educational backgrounds. +Because we believe in cultivating a well-rounded, diverse workforce, we continuously seek out individuals who reflect and support our goal of maintaining a diverse corporation. +We aim to foster a diverse, equitable, and inclusive culture through a wide variety of initiatives, including +targeted employee resource groups. Recently, we expanded our efforts by retaining an expert consultant focused on diversity and accelerating our efforts in this critical area. +• +Employee Resource Groups – Employee Resource Groups at Wolverine Worldwide play an important role in fostering +an inclusive culture. These groups provide opportunities for global team members to connect and to learn from and support one another as well as to help drive meaningful change throughout the Company. +○ +The Change Mob – The Change Mob is a grassroots network of +employees from around the globe, representing every function to help drive and sustain change across the Company. This empowered group keeps a pulse on what’s happening at the Company, shares information with their Company networks, +contributes their ideas to drive change and provides valuable feedback to our leadership team. +○ +Womxn’s Resource Group – The Womxn's Resource Group (“WRG”) +works to empower and inspire the women of Wolverine Worldwide to actively engage in the community, provide mentorship opportunities and create a meaningful, professional network. And the ‘x’ in the group’s name isn’t a typo; it +symbolizes that WRG is inclusive to all employees who identify as female. +2022 PROXY STATEMENT +14 +TABLE OF CONTENTS +○ +Wolverine Young Professionals – The Wolverine Young +Professionals (“WYP”) group strives to promote an environment that helps attract and retain the next generation of business leaders. WYP is committed to personal and professional development by contributing to the Company's workplace +community through social activities and volunteer opportunities. +• +Expert Guidance – To help promote a lasting, long-term DE&I framework, we found a partner with expertise in +Skot Welch and his team at Global Bridgebuilders who have provided a framework for and guided the implementation of the Company’s Inclusion Framework. +• +The Diversity Action Council +○ +The Company has established a Diversity Action Council (“DAC”) to lead its DE&I efforts and develop strategies and +actions to help foster a more diverse, equitable, and inclusive culture. DAC members come from all parts of the Company and all around the world, and the DAC provides leadership for important subcommittees within the Company, each with +a specific focus: +• +Leadership & Direction : this subcommittee focuses on the understanding of and commitment to workforce diversity by the Company’s Senior +Management Team. +• +Organizational Processes : this subcommittee focuses on the human resources systems and processes that are in place to support workforce +diversity. +• +Communications : this subcommittee focuses on advocating for diversity to employees, customers, suppliers, and other company stakeholders. +• +External Relationships : this subcommittee focuses on relationships with suppliers and other community organizations to encourage and develop +workforce diversity. +• +Systems Criteria & Process Management : this subcommittee focuses on the impact of tools used to systematize the workforce diversity process. +These groups will use employee survey results and focus group feedback to prioritize and expand a framework +to support a more inclusive, more diverse, and stronger organization. +• +Communication & Learning +○ +To help support the Company’s DE&I initiatives, Wolverine Worldwide provides a Diversity, Equity, and Inclusion +section on WeConnect, our internal employee information and communications platform. +○ +The Company also offers DE&I resources to increase awareness and educate our employees around the world through +unconscious bias and other diversity training, such as Global Bridgebuilders Diversity, Equity & Inclusion 101 training sessions that were first made available to employees in early 2021. +○ +In early 2022, the Company offered increased engagement in our DE&I work via our Inclusion Exchange, an online +platform where employees can develop and share their ideas for creating a more diverse and inclusive culture with members of the DAC subcommittees. +• +Our brands’ Diversity, Equity, and Inclusion Initiatives – The Wolverine Worldwide family of brands have also +amplified their DE&I efforts by supporting meaningful causes, evaluating internal team cultures, and developing actionable goals toward driving systematic change. +Community Impact +Wolverine Worldwide has historically engaged with and served the communities in which we live and work, as well +as our internal community at the Company. As champions for positive change, it is our responsibility to enrich our global communities by giving our time and resources to make the world a better place. +2022 PROXY STATEMENT +15 +TABLE OF CONTENTS +• +Wolverine Worldwide Foundation – Rooted in our commitment to contribute positively to the communities where our +employees work and live, the Wolverine Worldwide Foundation was founded in 1959 to support our charitable initiatives. Through the Foundation, the Company is actively involved in supporting charitable organizations with a focus on +education, the environment, arts and culture, and human aid and service. +• +United Way – Every year through employee contributions, footwear and apparel sales, and several employee-led +fundraising events, Wolverine Worldwide has consistently given back to the local communities where we live and work. Over the past 7 years, Wolverine Worldwide has donated over $3.3 million to United Way. +• +Two Ten Footwear Foundation – Wolverine Worldwide has continued its longstanding support of the Two Ten +Footwear Foundation, which was founded in 1939 and exists to improve the lives and careers of footwear employees and their families through emergency financial assistance, scholarships, and career development opportunities. Wolverine +Worldwide and its brands support Two Ten through financial assistance and product donations. +• +Brand-Supported Initiatives – our brands have been helping those in need in the following ways: +○ +Sweaty Betty – the brand launched the Sweaty Betty Foundation +in 2021, with a mission to empower women and girls from every background to get active, and stay active, for life. The Foundation’s focus is on girls aged 10 to 18, particularly those from disadvantaged backgrounds who face barriers to +being active. +○ +Merrell – in 2021 the brand joined forces with Big Brothers Big +Sisters (BBBS) in a multi-year partnership to harness the power of being outside and make it more accessible to more youth. Merrell is providing financial support and equipment to BBBS and its well-known one-on-one mentoring program +between “Bigs” and “Littles,” to bring awareness and increase equity for youth who may not have adequate access to nature, natural parks, or public trails. +○ +Chaco – Chaco collaborated with Camp Brave Trails in 2021, +helping LGBTQ+ youth find their people, place, and passion through summer camps, family programs, mentorship programs, meet-up groups, and leadership programming. The Chaco X Camp Brave Trails product collaboration launched to celebrate +this partnership, and for each pair of the colorful, limited edition sandals sold, Chaco donated a portion of the proceeds to Camp Brave Trails. +○ +Wolverine – our namesake footwear and apparel brand continued +its long-standing commitment to supporting the next generation of skilled trades workers, by partnering with Metallica’s All Within My Hands Foundation. Their 2021 Wolverine X Metallica Scholars collaboration raised funds for workforce +education programs and community colleges, to provide skills and support to students looking to enter a traditional trade or applied learning program. Since launching the partnership in 2019, Wolverine has contributed more than $300,000 +to the Metallica Scholars Initiative. +CODE OF BUSINESS CONDUCT AND ACCOUNTING AND FINANCE CODE OF +ETHICS +The Board has adopted a Code of Business Conduct for the Company's directors, officers and employees. The Board +also has adopted an Accounting and Finance Code of Ethics (“Accounting and Finance Code”) that focuses on the financial reporting process and applies to the Company's CEO, CFO and Corporate Controller. +The Company discloses amendments to or waivers from its Code of Business Conduct affecting directors or +executive officers and amendments to or waivers from its Accounting and Finance Code on its website at: +www.wolverineworldwide.com/investor-relations/corporate-governance/. +2022 PROXY STATEMENT +16 +TABLE OF CONTENTS +SHAREHOLDER COMMUNICATIONS POLICY +Shareholders and other interested parties may send correspondence to the Board, the non-employee directors as a +group, a specific Board committee or an individual director (including the Lead Director) in the manner described below. +The General Counsel or Associate General Counsel will provide a summary and copies of all correspondence +(other than solicitations for services, products or publications) as applicable at each regularly scheduled Board meeting. +Communications may be sent via email through various links on our website at: +www.wolverineworldwide.com/investor-relations/corporate-governance/ +or by regular mail c/o General Counsel, Wolverine World Wide, Inc., 9341 Courtland Drive, NE, Rockford, MI 49351. +The General Counsel or Associate General Counsel will alert individual directors if an item warrants a prompt +response from the individual director prior to the next regularly scheduled meeting. Items warranting a prompt response, but not addressed to a specific director, will be routed to the applicable committee Chairperson. +2022 PROXY STATEMENT +17 +TABLE OF CONTENTS +Proposal 1 — Election of +Directors for Terms Expiring +in 2025 +The Company's Board consists of ten directors. The Company's By-Laws establish three classes of directors with +each class serving three-year terms. At each annual meeting, the term of one class expires. The Board has nominated four directors for election at the Annual Meeting: Jeffery M. Boromisa, Gina R. Boswell, Brendan L. Hoffman, and David T. Kollat. +Each director has been nominated to serve for a three-year term expiring at the annual meeting of shareholders to be held in 2025 or until his/her successor, if any, has been elected and is qualified. +All director nominees other than Mr. Hoffman are independent directors, as determined by the Board under the +applicable NYSE listing standards and the Company's Director Independence Standards. Each director nominee currently serves on the Board. The shareholders most recently elected Messrs. Boromisa and Kollat and Ms. Boswell at the Company's 2019 +Annual Meeting. Mr. Hoffman was appointed to the Board in 2020 on the recommendation of the Company’s Governance Committee after being hired as the President of the Company. +The Company is not aware of any nominee who will be unable or unwilling to serve as a director. However, if a +nominee is unable to serve or is otherwise unavailable for election, the incumbent directors may or may not select a substitute nominee. If the directors select a substitute nominee, the proxy holder will vote the shares represented by all valid +proxies for the substitute nominee (unless other instructions are given). +The biographies of the four nominees and the other directors of the Company are below, along with a discussion +of the experience and skills of each director. +2022 PROXY STATEMENT +18 +TABLE OF CONTENTS +Director Nominees with +Proposed Terms Expiring in 2025 +JEFFREY M. BOROMISA +Age: 67 +Director since: 2006 +Select Business Experience: +Retired Executive Vice President of Kellogg International, President +of Latin America; Senior Vice President of Kellogg Company +Board Committees: +Audit (Chair) +Compensation +Other Public Directorships: +None +Career Highlights: +Mr. Boromisa worked at Kellogg Company, a global food manufacturing +company, and its affiliates from 1981 to 2009. From 2008 through his retirement in May 2009, Mr. Boromisa was Executive Vice President of Kellogg International, President of Latin America; and Senior Vice President of Kellogg Company. +From 2007 until 2008, Mr. Boromisa served as Executive Vice President of Kellogg International, President of Asia Pacific and Senior Vice President of Kellogg Company. From 2004 through 2006, he was Senior Vice President and Chief +Financial Officer of Kellogg Company. In addition, beginning in 2004 and through his retirement, Mr. Boromisa was a member of Kellogg Company's Global Leadership Team. Prior to 2004, Mr. Boromisa occupied various leadership positions +with Kellogg. Mr. Boromisa is also a director at Haworth International, Inc., a privately held, multinational, office furniture design and manufacturing company. +Experience and Skills: +With nearly 30 years of experience at Kellogg Company, including +serving as its Chief Financial Officer and leading various operational business units, Mr. Boromisa has obtained international business, brand building and finance expertise. +2022 PROXY STATEMENT +19 +TABLE OF CONTENTS +GINA R. BOSWELL +Age: 59 +Director since: 2013 +Select Business Experience: +Retired President, Customer Development, Unilever U.S.A. +Board Committees: +Compensation Governance +Other Public Directorships: +ManpowerGroup Inc. +ACCO Brands Corporation +Career Highlights: +From May 2017 until her retirement in October 2019, Ms. Boswell was +the President, Customer Development for Unilever U.S.A., one of the largest markets for Unilever PLC / Unilever N.V., a multinational consumer goods company whose products include Dove, Vaseline, Lipton, and Hellman's. From September +2015 to May 2017, Ms. Boswell served as Executive Vice President and General Manager for Unilever UK & Ireland. From 2011 to September 2015, Ms. Boswell served as Executive Vice President, Personal Care for Unilever PLC / Unilever +N.V. From 2008 to 2011, Ms. Boswell served as President, Global Brands, for The Alberto Culver Company, a consumer goods company. Ms. Boswell has held numerous other senior leadership positions with other leading global companies, +including Avon Products, Inc., Ford Motor Company, and Estee Lauder Companies, Inc. Ms. Boswell is a member of the board of ManpowerGroup Inc., a publicly traded workforce solutions company, and ACCO Brands Corporation, a publicly +traded academic, consumer and business products company. +Experience and Skills: +Through senior leadership roles with leading branded companies, +Ms. Boswell has obtained expertise in brand building, international business, marketing, digital/eCommerce and finance, and her service as a director of public companies has given her experience with public company governance and +related matters. +2022 PROXY STATEMENT +20 +TABLE OF CONTENTS +BRENDAN L. HOFFMAN +Age: 53 +Director since: 2020 +Select Business Experience: +President and Chief Executive Officer of Wolverine Worldwide +Board Committees: +None +Other Public Directorships: +None +Career Highlights: +Mr. Hoffman was appointed as President of Wolverine Worldwide +effective in September 2020 and has served as the President and Chief Executive Officer of the Company since January 2022. From 2015 to August 2020, Mr. Hoffman served as the President and Chief Executive Officer of Vince Holding Corp., +a public company and apparel retailer. Prior to joining Vince, Mr. Hoffman served as the President and Chief Executive Officer of Bon-Ton Stores Inc., a department store chain, from 2012 to 2014. Previously, he was the President and +Chief Executive Officer of Lord & Taylor L.L.C., a department store chain, for more than three years and, before that, he served for six years as President and Chief Executive Officer of Neiman Marcus Direct, an online retailer and +a subsidiary of The Neiman Marcus Group Inc., where he oversaw the growth of neimanmarcus.com and the launch and growth of bergdorfgoodman.com. During the past 5 years, he has served as a director of Vince Holding Corp. and Pier 1 +Imports, a home furnishings and decor retailer. +Experience and Skills: +Mr. Hoffman's more than 15 years in senior leadership roles with +apparel and retail companies have provided him expertise in apparel, retail, international business and finance, and his experience as a director at Vince Holding Corp., Pier 1 Imports and now the Company has given him extensive +experience with public company governance and related matters. +2022 PROXY STATEMENT +21 +TABLE OF CONTENTS +DAVID T. KOLLAT +Age: 83 +Director since: 1992 +Select Business Experience: +President and Chairman, 22, Inc. +Board Committees: +Independent Lead Director +Other Public Directorships: +None +Career Highlights: +Dr. Kollat has been Chairman and President of 22, Inc., a company +specializing in research and management consulting for retailers and consumer goods manufacturers, since 1987. In addition to his marketing and management experience as Chairman and President of 22, Inc., Dr. Kollat served for 11 years +in senior leadership positions at L Brands, Inc., a publicly traded, multinational apparel and retail company, including as Executive Vice President, Marketing; President of Victoria's Secret Direct; and as a member of its executive +committee. Dr. Kollat is Lead Independent Director of Wolverine Worldwide, a position he has held since 2007. Dr. Kollat was a director of L Brands, Inc. from 1976 to 2019 and was a director of Sleep Number Corporation, a bed +manufacturer and retailer, from 1994-2018. +Experience and Skills: +Dr. Kollat's more than 40 years' experience at L Brands, Inc. and 22, +Inc. has provided him with marketing, apparel, international business, brand building, retail and finance expertise. He also has significant experience with company governance and related matters through service on more than twenty +boards of directors, including extensive service on public company boards, and service as a Lead Independent Director and chair of nominating, audit and compensation committees. +Dr. Kollat offered his resignation pursuant to the requirements of the +Corporate Governance Guidelines because he is older than 72. The Board has determined that it is in the best interests of shareholders for Dr. Kollat to continue to serve as a director and Dr. Kollat is willing to continue to serve as a +director. The Board did not accept Dr. Kollat’s offer to resign and nominated him for an additional three-year term. +BOARD RECOMMENDATION +The Board recommends that you vote “FOR” the election of the above nominees for proposed +terms expiring in 2025. +2022 PROXY STATEMENT +22 +TABLE OF CONTENTS +Directors with Terms +Expiring in 2023 +WILLIAM K. GERBER +Age: 68 +Director since: 2008 +Select Business Experience: +Managing Director of Cabrillo Point Capital LLC; Retired Executive +Vice President and Chief Financial Officer of Kelly Services, Inc. +Board Committees: +Audit +Compensation +Other Public Directorships: +Cleveland-Cliffs, Inc. +Career Highlights: +Mr. Gerber is Managing Director of Cabrillo Point Capital LLC, a +private investment fund. He has held that position since 2008. From 1998 to 2007, Mr. Gerber was Executive Vice President and Chief Financial Officer of Kelly Services, Inc., a publicly traded global staffing solutions company with +operations in more than 35 countries. Mr. Gerber served in various leadership positions with L Brands, Inc., a multinational apparel and retail company, prior to joining Kelly Services, Inc. Mr. Gerber currently serves as director of +Cleveland-Cliffs, Inc., a publicly traded producer of iron ore and steel products, since 2020. From 2007 through 2020, Mr. Gerber was a director of AK Steel Holding Corporation, which merged with Cleveland-Cliffs in 2020. +Experience and Skills: +From his 25 years in senior leadership positions with L Brands, Inc. +and Kelly Services, Inc., Mr. Gerber obtained extensive experience in apparel, retail, international business and finance, and his service as a director of various public companies has given him experience with public company governance +and related matters. +2022 PROXY STATEMENT +23 +TABLE OF CONTENTS +BLAKE W. KRUEGER +Age: 68 +Director since: 2006 +Select Business Experience: +Executive Chairman of Wolverine Worldwide +Board Committees: +None +Other Public Directorships: +None +Career Highlights: +Mr. Krueger is Executive Chairman of Wolverine Worldwide, a position +he assumed in January 2022. Prior to becoming Executive Chairman, Mr. Krueger served as Chief Executive Officer of the Company starting in April 2007 and Chairman of the Board starting in January 2010. He also served as President of +Wolverine Worldwide from April 2007 until September 2020. From October 2005 until April 2007, Mr. Krueger served as President and Chief Operating Officer of Wolverine Worldwide. From 2004 to October 2005, he served as Executive Vice +President and Secretary of Wolverine Worldwide and President of its Heritage Brands Group. From 2003 to 2004, Mr. Krueger served as Executive Vice President and Secretary of Wolverine Worldwide and President of the Company's Caterpillar +Footwear Group. He also previously served as Executive Vice President, General Counsel and Secretary of Wolverine Worldwide with various responsibilities including human resources, retail, business development, accessory licensing, +mergers and acquisitions and legal. Mr. Krueger serves as a director of Bissell Homecare, Inc., a privately held company and leading brand of floor care appliances. +Experience and Skills: +Mr. Krueger's more than 25 years in senior leadership roles with the +Company have provided him expertise in footwear and apparel, retail, international business and finance, and his board experience at the Company and Professionals Direct, Inc., a former publicly traded insurance company, has given him +extensive experience with public company governance and related matters. +2022 PROXY STATEMENT +24 +TABLE OF CONTENTS +NICHOLAS T. LONG +Age: 63 +Director since: 2011 +Select Business Experience: +Managing Partner, Bridger Growth Partners, LLC; Retired Chief +Executive Officer of MillerCoors LLC +Board Committees: +Compensation (Chair) Governance +Other Public Directorships: +Amcor Limited +Career Highlights: +Mr. Long has acted as a Managing Partner for Bridger Growth Partners, +LLC, a private investment fund, since 2015. From 2011 until his retirement in 2015, Mr. Long served as Chief Executive Officer of MillerCoors LLC, a joint venture between two publicly traded beverage companies. From 2008 to 2011, +Mr. Long served as President and Chief Commercial Officer of MillerCoors LLC. From 2007 to 2008, Mr. Long served as Chief Executive Officer of Miller Brewing Company, a beverage company, and he served as Chief Marketing Officer of +Miller Brewing Company from 2005 to 2007. Prior to joining Miller Brewing Company, Mr. Long spent 17 years in various senior leadership positions at The Coca-Cola Company, a beverage company, including Vice President of Strategic +Marketing, Global Brands; Vice President, Strategic Marketing Research and Trends; President of Coca Cola's Great Britain and Ireland Division; and President of the Northwest Europe Division. Mr. Long currently serves as a director of +Amcor Limited, a publicly-traded packaging solutions company. +Experience and Skills: +Through his more than 20 years in senior positions at category +leading, branded companies, Mr. Long has developed significant marketing, international business and brand building expertise. +2022 PROXY STATEMENT +25 +TABLE OF CONTENTS +Kathleen Wilson-Thompson +Age: 64 +Director since: 2021 +Select Business Experience: +Retired Executive Vice President & Global Chief Human Resources +Officer of Walgreens Boots Alliance Inc. +Board Committees: +None +Other Public Directorships: +Tesla, Inc. +McKesson Corporation +Career Highlights: +Ms. Wilson-Thompson previously served as Executive Vice President and +Global Chief Human Resources Officer of Walgreens Boots Alliance, Inc., a global pharmacy and wellbeing company, from December 2014 to January 2021, and as Senior Vice President and Chief Human Resources Officer from January 2010 to +December 2014. Prior to Walgreens, Ms. Wilson-Thompson held various legal and operational roles at Kellogg Company, a food manufacturing company, from July 2005 to December 2009, including most recently as its Senior Vice President, +Global Human Resources. Ms. Wilson-Thompson currently serves as a director of Tesla, Inc., an electric vehicle manufacturer and clean energy company, and McKesson Corporation, a publicly-traded healthcare company. +Experience and Skills: +Through her 15 years of experience at Walgreens and Kellogg, +Ms. Wilson-Thompson developed significant experience in retail, international business, legal, and human capital management, and her service as a director of Tesla and McKesson has given her experience with public company governance and +related matters. +2022 PROXY STATEMENT +26 +TABLE OF CONTENTS +Directors with Terms +Expiring in 2024 +BRENDA J. LAUDERBACK +Age: 71 +Director since: 2003 +Select Business Experience: +Chair of Denny's Corporation; Retired President of the Wholesale and +Retail Group of Nine West Group, Inc. +Board Committees: +Audit +Governance (Chair) +Other Public Directorships: +Denny's Corporation (Board Chair) Sleep Number Corporation +Career Highlights: +Ms. Lauderback is currently the Chair of the Board of Denny's +Corporation, a restaurant company, and has acted as a Director of Denny's Corporation since 2005 and Sleep Number Corporation, a bed manufacturer and retailer, since 2004. From 1995 until her retirement in 1998, Ms. Lauderback was +President of the Wholesale and Retail Group of Nine West Group, Inc., a footwear wholesaler and distributor. She previously was the President of the Wholesale Division of U.S. Shoe Corporation, a footwear manufacturer and distributor, a +position that included responsibility for offices in China, Italy and Spain, and she was a Vice President/General Merchandise Manager of Dayton Hudson Corporation (now Target Corporation), a retail company. From 1998 to 2015, +Ms. Lauderback also was a director of Big Lots, Inc., a retail company. +Experience and Skills: +Ms. Lauderback has more than 25 years of experience in the retail +industry, with more than 20 years in the footwear, apparel, and accessories industries. These senior leadership positions have provided her with strong footwear, apparel and retail expertise. She also has extensive experience with +public company governance and related matters. Ms. Lauderback was named to the National Association of Corporate Directors' (NACD) 2017 Directorship 100 list. +2022 PROXY STATEMENT +27 +TABLE OF CONTENTS +DAVID W. MCCREIGHT +Age: 59 +Director since: 2019 +Select Business Experience: +Chief Executive Officer and Director of Lulu's Fashion Lounge +Holdings, Inc. +Board Committees: +Compensation Governance +Other Public Directorships: +CarMax, Inc. +Lulu's Fashion Lounge Holdings, Inc. +Career Highlights: +Mr. McCreight has served as the Chief Executive Officer and Director +of Lulu's Fashion Lounge Holdings, Inc., an online retail platform for women's apparel and accessories, since April 2021. From 2016-2018 Mr. McCreight was President of URBN, the parent company of multinational lifestyle brands +Anthropologie, Urban Outfitters, and Free People. Between 2011 and 2018, Mr. McCreight was the Chief Executive Officer of Anthropologie Group, the primary brand of which is Anthropologie, a leading multinational and multichannel +lifestyle brand. Prior to that, Mr. McCreight was the President of Under Armour, Inc. from 2008 through 2010 and Lands' End, Inc. through 2008. +Experience and Skills: +Through more than 30 years of senior leadership positions with leading +multinational and multichannel apparel, footwear, accessories, and lifestyle brands, Mr. McCreight has obtained global direct-to-consumer and international business experience. Mr. McCreight also has strong leadership and business +experience from his service on public company boards, including Lulu's Fashion Lounge Holdings, Inc. and CarMax, Inc., as well as DavidsTea, Inc., where he served as a director from 2014 to 2018. In 2019, Mr. McCreight became a +Governance fellow of the National Association of Corporate Directors. +2022 PROXY STATEMENT +28 +TABLE OF CONTENTS +BOARD LEADERSHIP +The Company's Corporate Governance Guidelines give the Board the flexibility to determine the best leadership +structure for the Company based upon the Company's evolving needs and opportunities. The Governance Committee periodically reviews the Board's leadership structure, including whether to separate the roles of Chairman and CEO, based upon the Board +and Company's then-current circumstances, and recommends changes to the Board as appropriate. Currently, the Company's former CEO also serves as the Executive Chairman of the Board. In addition, since 1993, the independent directors have annually +elected a Lead Independent Director who performs a role in many ways similar to an independent Chairman. The Board believes that this leadership structure is in the best interests of the Company and its shareholders at this time because it +provides the Board with effective independent oversight of management. Specifically, the Lead Independent Director has the following enumerated responsibilities: +• +Serve, as necessary, as a liaison between the Executive Chairman and the independent directors +• +Preside over Board meetings in the absence of the Executive Chairman +• +Review, approve and help develop the agendas and scheduling for Board and committee meetings +• +Review and approve information and meeting materials sent to the Board +• +Preside over executive sessions, with the authority to call executive sessions +• +Work with the Compensation Committee and members of the Board to provide an effective annual performance review of the CEO and participate in CEO +succession planning +• +Oversee, along with the Governance Committee, the annual Board and committee evaluations +• +Be available for consultation and communication with shareholders, as appropriate +DIRECTOR INDEPENDENCE +The Board annually assesses the independence of all directors. To qualify as “independent,” the Board must +affirmatively determine that the director is independent under the Company's Director Independence Standards, which are modeled after the listing standards of the NYSE. Under NYSE listing standards and the Company's Director Independence +Standards, the Board has determined that 8 of the Company's 10 directors are independent. Only Messrs. Krueger and Hoffman are not independent. In addition, the Board determined that Roxane Divol and Michael A. Volkema, who served as directors +until May 27, 2021 and May 3, 2021, respectively, were independent during the time they served as directors. All of the Board's committees are comprised entirely of independent directors. The independent directors generally meet in executive +session at each regularly-scheduled meeting. +The Company's Director Independence Standards define an “Independent Director” as a director who the Board +determines otherwise has no material relationship with the Company (either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company), and who: +• +Is not, and in the past three years has not been, an employee of the Company +• +Does not have, and has not had within the last three years, an immediate family member employed as an executive officer of the Company +• +Has not received, and does not have an immediate family member who received, during any 12 month period within the last three years, any direct +compensation from the Company in excess of $120,000 (other than compensation for Board service; compensation received by the director for former service as an interim Chairman, CEO or other executive officer; compensation received by the +director's immediate family member for service as a non-executive employee; or pension and other forms of deferred compensation for prior service if such compensation is not contingent in any way on continued service) +• +Is not a current employee or partner of a firm that is the Company's internal or external auditor +• +Has not been, and does not have an immediate family member who has been, within the last three years, a partner or employee of the Company's internal or +external auditor and personally worked on the Company's audit within that time +2022 PROXY STATEMENT +29 +TABLE OF CONTENTS +• +Does not have an immediate family member who is (i) a current partner of the Company's internal or external auditor, or (ii) a current employee of the +Company's internal or external auditor who personally works on the Company's audit +• +Is not, and has not been within the last three years, part of an interlocking directorate in which a current executive officer of Wolverine Worldwide +serves or served on the compensation committee of another company where the director or the director's immediate family member concurrently serves or served as an executive officer +• +Is not an employee of, and does not have an immediate family member who is an executive officer of, another company that has made payments to, or +received payments from, Wolverine Worldwide for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of $1,000,000 or 2% of the other company's consolidated gross revenues +• +Has not had any other direct or indirect relationship with Wolverine Worldwide that the Board determines is material +BOARD COMMITTEES, MEETINGS AND MEETING ATTENDANCE +The Board has three standing committees: Audit, Compensation and Governance. Each committee meets periodically +throughout the year and reports its recommendations to the Board. The Company expects directors to attend every meeting of the Board and the committees on which they serve and to attend the annual meeting of shareholders. In 2021, all directors +then serving on the Board attended the 2021 Annual Meeting of Shareholders, and all directors attended at least 75% of the meetings of the Board (9 meetings in 2021) and the committees on which they served held during the period for which he or +she served. All directors are typically invited to and attend all committee meetings. +Each committee annually evaluates its performance to determine its effectiveness. The Board has determined +that all committee members are “independent” as defined by NYSE listing standards. Furthermore, each Audit Committee member satisfies the NYSE “financial literacy” requirement. In addition, the Board has determined that Mr. Boromisa and +Mr. Gerber are “audit committee financial experts” under Securities and Exchange Commission (“SEC”) rules. Each committee's charter, with a complete list of the duties and responsibilities, is available on the Company's website at +www.wolverineworldwide.com/investor-relations/corporate-governance/. +AUDIT COMMITTEE +Committee Members +• +Boromisa (Chair) +• +Gerber +• +Lauderback +Number of Meetings in 2021 +7 +Highlighted Responsibilities +• +Appoints, evaluates and oversees the work of the independent auditors and oversees the internal audit function +• +Reviews and discusses the Company's approach to risk management +• +Oversees the Company's policies, systems and management of risk assessment and the Company's compliance with legal and +regulatory requirements +• +Oversees the integrity of the Company's financial statements, financial reporting process and internal controls +2022 PROXY STATEMENT +30 +TABLE OF CONTENTS +COMPENSATION COMMITTEE +Committee Members +• +Long (Chair) +• +Boromisa +• +Boswell +• +Gerber +• +McCreight +Number of Meetings in 2021 +7 +Highlighted Responsibilities +• +Assists the Board in fulfilling its responsibilities relating to executive compensation and the Company's compensation and +benefit policies and programs +• +Oversees the overall compensation structure, policies and programs, including whether the compensation structure establishes +appropriate incentives for management and employees +• +Oversees the Company's management of risks relating to management resources, organization structure and succession planning, +hiring, development and retention processes, as well as those relating to the Company's compensation structure, policies and programs +GOVERNANCE COMMITTEE +Committee Members +• +Lauderback (Chair) +• +Boswell +• +Long +• +McCreight +Number of Meetings in 2021 +6 +Highlighted Responsibilities +• +Assists the Board in fulfilling its responsibilities on matters and issues related to the Company's corporate governance +practices +• +Working with the Board, establishes qualification standards for membership on the Board and its committees and recommends +qualified individuals to become Board members or serve for election as directors +• +Develops and recommends to the Board for its approval an annual self-evaluation process for the Board and its committees, and +oversees the evaluation process +• +Oversees and makes recommendations to the Board regarding environmental, social and governance matters and their integration +into the Company's business and long-term value creation for the Company and its shareholders +2022 PROXY STATEMENT +31 +TABLE OF CONTENTS +Non-Employee Director Compensation +in Fiscal Year 2021 +The Company's non-employee director compensation philosophy is to pay compensation that is competitive with the +compensation paid by companies of similar size, in similar industries and with whom Wolverine Worldwide competes for director candidates. The Governance Committee, with input from management and from the Compensation Committee's independent +compensation consultant, reviewed director compensation and compared it to market data, including a comparison to director compensation for the Company's Peer Group, as defined on page 53 , and broader industry market surveys +(FW Cook 2019 Director Compensation Report and NACD 2019-2020 Director Compensation Report). No adjustments were made to 2021 director compensation based on this review. The Company removed temporary reductions to director cash fees that were +implemented in 2020 as part of the Company’s overall response to the COVID-19 pandemic. +The following table provides information regarding the compensation of the Company's non-employee directors +for fiscal year 2021. In 2021, Messrs. Krueger and Hoffman received compensation for their services as the Company's CEO and President, respectively, but did not receive any additional compensation for service as chairman or as a director. +Fees Paid in +Cash +Cash Amounts +Voluntarily +Deferred +Fees Earned or +Paid in Cash 1 +Restricted +Stock Unit +Awards 2 +Totals +Boromisa +- ++ +$127,000 += +$127,000 ++ +$135,009 += +$262,009 +Boswell +$ 99,000 ++ +- += +$ 99,000 ++ +$135,009 += +$234,009 +Divol +$ 51,000 ++ +- += +$ 51,000 ++ +- += +$ 51,000 +Gerber +$102,000 ++ +- += +$102,000 ++ +$135,009 += +$237,009 +Kollat +$135,000 ++ +- += +$135,000 ++ +$170,039 += +$305,039 +Lauderback +$119,500 ++ +- += +$119,500 ++ +$135,009 += +$254,509 +Long +$119,500 ++ +- += +$119,500 ++ +$135,009 += +$254,509 +McCreight +$ 99,000 ++ +- += +$ 99,000 ++ +$135,009 += +$234,009 +Volkema +$ 25,500 ++ +$ 25,500 += +$ 51,000 ++ +- += +$ 51,000 +Wilson-Thompson +$ 7,500 ++ +$ 41,667 += +$ 49,167 ++ +$135,009 += +$184,176 +1. +Represents cash payments received or deferred by directors for fiscal year 2021. Directors may defer fees pursuant to +the Director Deferred Compensation Plan or Deferred Compensation Plan (each as defined below). The table shows the Fees Earned or Paid in Cash separated into Fees Paid in Cash and Cash Amounts Voluntarily Deferred. +2. +Represents the aggregate grant date fair value of restricted stock units granted to non-employee directors in fiscal +year 2021, calculated in accordance with Accounting Standard Codification (“ASC”) Topic 718, without regard to estimated forfeitures. These grants represent the standard annual director restricted stock unit grant made in accordance +with the director compensation program. The chart below lists the aggregate outstanding option awards (granted prior to 2018) and restricted stock units held by non-employee directors at the end of fiscal year 2021. For valuation +assumptions, see the Stock Based Compensation footnote to the Company's Consolidated Financial Statements for fiscal year 2021 included in its Annual Report on Form 10-K for fiscal year 2021. +2022 PROXY STATEMENT +32 +TABLE OF CONTENTS +Name +Option Awards Outstanding at +January 1, 2022 +(#) +Restricted Stock Units held at +January 1, 2022 1 +(#) +Boromisa +49,940 +17,343 +Boswell +12,854 +3,118 +Divol +- +- +Gerber +44,278 +3,118 +Kollat +62,242 +14,153 +Lauderback +49,940 +3,118 +Long +49,940 +17,343 +McCreight +- +9,258 +Volkema +- +- +Wilson-Thompson +- +3,118 +1. +Includes 14,225, 10,226, 14,225 and 6,140 fully vested restricted stock units held by each of Mr. Boromisa, Dr. +Kollat, Mr. Long and Mr. McCreight, respectively, that were deferred and will be settled on the date elected by the director. +The following table shows the non-employee director compensation program for fiscal year 2021: +Compensation Plan for 2021 +Component +Cash +Restricted Stock Units 1 +Annual Director Fee +$75,000 +Number of restricted stock units “RSUs” with a grant date value of $135,000. +Audit Committee Annual Fee +$15,000 +Audit Committee Chairperson Annual Fee +$25,000 +Compensation Committee Annual Fee +$12,000 +Compensation Committee Chairperson Annual Fee +$20,000 +Governance Committee Annual Fee +$12,000 +Governance Committee Chairperson Annual Fee +$17,500 +Lead Director Annual Fee +In lieu of the standard Annual Director Fee, the Lead Director was paid a Cash Retainer of $135,000. +In lieu of the standard RSU grant, the Lead Director received a number of RSUs with a grant date value of +$170,000. +1. +For fiscal year 2021, Messrs. Boromisa, Gerber, Long, McCreight and Mses. Boswell, Wilson-Thompson and Lauderback each +received 3,118 restricted stock units, and Dr. Kollat received 3,927 restricted stock units. The above restricted stock units were granted in May 2021 under the Stock Incentive Plan of 2016, as amended, and vest one year from the date +of grant. +Director Deferred Compensation Plan. The Company's +Amended and Restated Outside Directors' Deferred Compensation Plan (the “Director Deferred Compensation Plan”) is a supplemental nonqualified deferred compensation plan for non-employee directors. A separate non-employee director deferred +compensation plan applies to benefits accrued under that plan before January 1, 2005. The Director Deferred Compensation Plan permits all non-employee directors to voluntarily defer, at their option, 25%, 50%, 75% or 100% of their director cash +fees. The Company establishes a book account for each non-employee director and credits the director's account with a number of stock units equal to the amounts voluntarily deferred, divided by the closing market price of common stock on the +payment/deferral date. The Company also credits director accounts with dividend equivalents on amounts previously deferred in the form of additional stock units. The amounts credited to director accounts are treated as if invested in Wolverine +Worldwide common stock. The number of stock units held in director accounts is set forth under the “Stock Ownership By Management and Others” table below. +Upon a director's termination of service, or such later date as a director selects, the Company will +distribute the stock units in the director's book account in shares of Wolverine Worldwide common stock in either a single, lump sum distribution or annual installment distributions over a period of up to 20 years (10 years under the plan for +benefits accrued before January 1, 2005) based on the director's election. The Company converts each stock unit to one share of Wolverine Worldwide common stock. +2022 PROXY STATEMENT +33 +TABLE OF CONTENTS +Upon a “change in control,” the Company will distribute to the director, in a single, lump sum distribution, +Wolverine Worldwide common stock in a number of shares equal to the stock units credited to a director's book account. The Deferred Compensation Plan defines “change in control” as any of the following: +• +The acquisition by any person, or by more than one person acting as a group, of more than 50% of either (i) the then outstanding shares of common stock +of Wolverine Worldwide or (ii) the total fair market value of Wolverine Worldwide +• +The acquisition by any person, or more than one person acting as a group, during the 12 month period from and including the date of the most recent +acquisition, of ownership of 30% or more of the outstanding common stock of Wolverine Worldwide +• +The replacement of a majority of the individuals who constitute the Board during any 12 month period by directors whose appointment or election is not +endorsed by a majority of the directors prior to the date of the appointment or election +• +The acquisition, during any 12 month period ending on the date of the most recent acquisition, by any person of assets from Wolverine Worldwide having a +gross fair market value of at least 40% of the gross fair market value of all the assets of Wolverine Worldwide immediately before the acquisition +Deferred Compensation Plan For a description of the +non-qualified Deferred Compensation Plan under which directors may also defer cash fees, please see the “ Non-Qualified Deferred Compensation ” +section on page 66 . +NON-EMPLOYEE DIRECTOR STOCK OWNERSHIP GUIDELINES +Each non-employee director must attain (and maintain) a minimum stock ownership level equal to six times the +non-employee director annual cash retainer prior to being able to gift or sell any Company stock. The equity that qualifies for determining the non-employee directors’ minimum stock ownership level includes owned shares and unvested restricted +stock units that vest based on time (up to a maximum value of 50% of the applicable ownership requirement), but excludes unearned performance shares and units and unexercised options (or any portion thereof, such as the current “in the money” +value). During 2021, all non-employee directors were in compliance with these guidelines. +2022 PROXY STATEMENT +34 +TABLE OF CONTENTS +Securities Ownership of Officers +and Directors and Certain +Beneficial Owners +FIVE PERCENT SHAREHOLDERS +The following table sets forth information about those holders known by Wolverine Worldwide to be the +beneficial owners of more than five percent of Wolverine Worldwide's outstanding shares of common stock as of March 7, 2022: +Amount and Nature of Beneficial Ownership of Common Stock +Name and Address of +Beneficial Owner +Sole Voting +Power +Sole +Investment +Power +Shared Voting +Power +Shared +Investment +Power +Total +Beneficial +Ownership +Percent of +Class 4 +BlackRock, Inc. 1 +55 East 52nd Street +New York, NY 10055 +12,414,723 +12,503,983 +- +- +12,503,983 +15.36% +Earnest Partners, LLC 2 +1180 Peachtree Street NE +Suite 2300 Atlanta, GA 30309 +4,330,221 +5,731,524 +- +- +5,731,524 +7.04% +The Vanguard Group 3 +100 Vanguard +Boulevard +Malvern, PA 19355 +- +8,778,285 +154,683 +228,823 +9,007,108 +11.07% +1. +Based solely on information set forth in a Schedule 13G/A filed on January 27, 2022. +2. +Based solely on information set forth in a Schedule 13G/A filed on February 11, 2022. +3. +Based solely on information set forth in a Schedule 13G/A filed on February 10, 2022. +4. +Based on 81,388,518 shares outstanding as of March 7, 2022. +2022 PROXY STATEMENT +35 +TABLE OF CONTENTS +STOCK OWNERSHIP BY MANAGEMENT AND OTHERS +The following table sets forth the number of shares of common stock beneficially owned as of March 7, 2022, by +each of the Company's directors and named executive officers and all of the Company's directors and executive officers as a group: +Amount and Nature of Beneficial Ownership of Common Stock 1 +Deferred +Stock Units, +Sole Voting +and/or +Investment +Power 2,3 +Shared Voting or +Investment +Power 4 +Stock +Options 5 +Total +Beneficial +Ownership +Percent +of Class 6 +Jeffrey M. Boromisa +64,552 +58,681 +49,940 +173,173 +* +Gina R. Boswell +12,114 +6,140 +12,854 +31,108 +* +William K. Gerber +44,473 +- +44,278 +88,751 +* +Brendan L. Hoffman +29,291 +- +- +29,291 +* +David T. Kollat +215,221 +103,081 +62,242 +380,544 +* +Blake W. Krueger +9 83,817 +18,634 +1,072,126 +2,074,577 +2.50% +Brenda J. Lauderback +81,293 +- +44,278 +125,571 +* +Nicholas T. Long +31,644 +- +44,278 +75,922 +* +David W. McCreight +3,781 +- +- +3,781 +* +Isabel Soriano +11,363 +- +- +11,363 +* +Michael D. Stornant +- +190,999 +107,312 +298,311 +* +Kathleen Wilson-Thompson +- +- +- +— +* +James D. Zwiers +17,270 +23,779 +97,979 +139,028 +* +All directors and executive officers as a group +(16 people) +1,618,746 +401,314 +1,630,282 +3,650,342 +4.40% +* +Represents beneficial ownership of less than 1%. +1. +The numbers of shares stated are based on information provided by each person listed and include shares personally +owned of record and shares that, under applicable regulations, are considered to be otherwise beneficially owned. +2. +These numbers include restricted shares held, which are subject to forfeiture if the terms of the award are not +satisfied and also include deferred stock units held by directors under the Directors' Deferred Compensation Plan. +2022 PROXY STATEMENT +36 +TABLE OF CONTENTS +3. +The table does not include the following time-vested restricted stock units and performance units owned by directors and +NEOs as of March 7, 2022: +Restricted +Units +Performance +Units +Boromisa +17,343* +- +Boswell +3,118 +- +Gerber +3,118 +- +Hoffman +135,524 +201,852 +Kollat +14,153* +- +Krueger +317,634 +155,261 +Lauderback +3,118 +- +Long +17,343* +- +McCreight +9,258 * +- +Soriano +17,249 +16,452 +Stornant +37,987 +48,886 +Wilson-Thompson +3,118 +- +Zwiers +33,646 +42,883 +* +Includes 14,225, 10,226, 14,225, and 6,140 fully vested restricted stock units held by each of Mr. Boromisa, Dr. +Kollat, Mr. Long and Mr. McCreight, respectively, that were deferred and will be settled on the date elected by the director. +4. +These numbers include shares over which the listed person is legally entitled to share voting or investment power by +reason of joint ownership, trust or other contract or property right and shares held by spouses, children or other relatives over whom the listed person may have influence by reason of such relationship. +5. +The numbers represent shares that may be acquired within 60 days after March 7, 2022, by the exercise of stock options +granted under Wolverine's various stock option plans. These numbers are also included in the Total Beneficial Ownership column. +6. +As of March 7, 2022, based on 81,388,518 shares outstanding on that date plus the number of stock options exercisable +by the specified person(s) within 60 days of March 7, 2022, as indicated in the “Stock Options” column. +2022 PROXY STATEMENT +37 +TABLE OF CONTENTS +Compensation Discussion +and Analysis +SUMMARY +The Company's Compensation Discussion and Analysis (“CD&A”) provides an overview and analysis of the executive +compensation program for the Company's named executive officers (“NEOs”). For fiscal year 2021, the Company's NEOs were: +Blake W. Krueger +Executive Chairman, effective January 2, 2022 (Chairman and Chief Executive Officer until January 2, 2022) +Brendan L. Hoffman +President and Chief Executive Officer, effective January 2, 2022 (President until January 2, 2022) +Isabel Soriano +President, International Group +Michael D. Stornant +Senior Vice President, Chief Financial Officer and Treasurer +James D. Zwiers +Executive Vice President and President, Global Operations Group +COMPENSATION PHILOSOPHY AND OBJECTIVES +The Company's compensation philosophy is to provide executives with a competitive compensation package that is +heavily weighted towards performance-based (performance units and annual bonus opportunity) and variable (restricted stock units) compensation in order to encourage superior business and financial performance over the short and longer term and, +by linking compensation with stock price performance, to closely align the interests of the Company's NEOs with those of its shareholders without encouraging excessive risk-taking. The Compensation Committee (the “Committee”) oversees the +Company's executive compensation program. +The executive compensation program has four primary objectives: +• +Attract and retain talented NEOs who will lead Wolverine Worldwide and drive superior business and financial performance +• +Provide incentives for achieving specific pre-established near-term individual, business unit and corporate goals and reward the attainment of those +goals +• +Provide incentives for achieving specific pre-established longer term corporate financial goals and reward the attainment of those goals +• +Align the interests of NEOs with those of the shareholders through incentives based on achieving performance objectives that enable increased +shareholder value +Compensation Decisions in Context: Key 2021 Accomplishments and Financial +Highlights +2021 was a successful year for the Company, as it executed its key growth pillars to fuel strong performance +and consumer demand in the face of supply chain challenges and the continued impacts of the COVID-19 pandemic. Key financial highlights for the Company during fiscal 2021 included the following: +• +Annual revenue of $2.41 billion, representing nearly 35% growth over fiscal 2020. Excluding $117 million of revenue from the Sweaty Betty acquisition, +organic revenue grew 28% in fiscal 2021, exceeding pre-pandemic fiscal 2019 revenue. +• +In August 2021, the Company acquired women’s activewear brand Sweaty Betty, a digitally-native, premium global apparel brand. This acquisition is +expected to fuel growth and enhance the Company’s fast-growing eCommerce business. +• +Strong revenue growth across the Company’s four largest brands, with Merrell revenue growing year-over-year by 22%, Saucony by 57%, Sperry by 25%, and +Sweaty Betty by 40% on a pro forma basis, assuming we acquired Sweaty Betty as of the first day of fiscal 2021. Merrell and Saucony achieved record annual revenue. +• +Direct to Consumer revenue grew significantly in fiscal 2021, up 47% including Sweaty Betty and up 23% organically, year-over-year. Direct to Consumer +revenue represented 26% of total revenue in fiscal 2021, up from 15% of revenue in fiscal 2019. +2022 PROXY STATEMENT +38 +TABLE OF CONTENTS +• +eCommerce revenue grew 40% compared to the prior year, and 109% compared to fiscal 2019. On an organic basis, eCommerce revenue grew 18% compared to the +prior year, and 77% compared to fiscal 2019. +• +The Company continued its excellent track record of strong earnings leverage, with reported diluted earnings per share of $0.81 and adjusted diluted +earnings per share of $2.09. Adjusted diluted earnings per share grew by 125% compared to the prior year, and by 113% organically. +• +Gross margin was 42.6%, compared to 41.1% in the prior year. Adjusted gross margin was 44.1%, compared to 41.5% in the prior year. Excluding Sweaty +Betty, adjusted gross margin was 43.4% compared to 41.5% in the prior year. +• +Operating margin was 6.4%, compared to (7.7)% in the prior year. Adjusted operating margin was 10.6%, compared to 7.5% in the prior year. Excluding +Sweaty Betty, adjusted operating margin was 10.7% compared to 7.5% in the prior year. +2022 PROXY STATEMENT +39 +TABLE OF CONTENTS +2021 Compensation Program Overview +The Company's executive compensation program consists of base salary, annual bonus opportunity, long-term +incentive compensation and benefits. A breakdown of base salary, annual performance bonus, and long-term incentive compensation is illustrated below: +ELEMENT +COMPONENT +METRICS +WHAT THE PAY ELEMENT REWARDS +Base +Salary +• Cash +• Fixed amount based on responsibilities, experience and market data +• Scope of core responsibilities, years of experience, and potential to affect the Company's +overall performance +Annual Performance Bonus +• Company/Business +Unit Cash Bonus +• Individual Cash Bonus +• eCommerce Revenue Multiplier +• 85% revenue and adjusted pretax earnings +• 15% specific individualized performance targets +• Total payout can be adjusted upwards by up to 30% based on eCommerce revenue multiplier +• Achieving specific corporate business and/or divisional objectives over which the NEO has +reasonable control +• Achieving specific personal objectives +• Achieving key financial metrics consistent with communicated objectives +Long-Term +Incentive Compensation +• Performance stock units +• Time-vested restricted stock units +• Uses the following performance metrics (weighted as indicated) +• 65% Adjusted earnings per share +• 35% Adjusted business value added +• Relative TSR adjusted total payout up/down up to plus or minus 25% +• Four-year vesting for time-vested restricted stock units +• Balances focus on near-term profitability with longer-term shareholder value creation +• Achieving long-term corporate objectives +• Driving long-term shareholder value +• Continued, long-term employment at Wolverine Worldwide +• Adjusted to increase (or reduce) payout based on relative TSR performance +• Time-vested restricted stock units reward increases in stock price +Pay at Risk +Under the Company's compensation program, a significant portion of the compensation awarded to the NEOs +generally, and to the CEO in particular, is at risk (contingent upon the attainment of various pre-established short and long-term financial goals) and variable (contingent on the performance of the Company's stock price). NEO compensation that +is significantly at risk and variable incentivizes superior business and financial performance and, by linking compensation with stock price performance, aligns the interests of executives with those of shareholders. +The following graphic illustrates the percentage of 2021 NEO target compensation that is at risk, reflecting +the grant values and salary information from the February 2021 Compensation Committee actions. Ms. Soriano was promoted and became an executive officer midway through 2021 and is therefore not included in the NEO 2021 Target Total Compensation +graphic. +2022 PROXY STATEMENT +40 +TABLE OF CONTENTS +Here and throughout this Proxy Statement, unless explicitly stated, references to CEO +compensation refer to Mr. Krueger’s compensation since he held that role in fiscal 2021. As noted above, effective January 2, 2022, Mr. Krueger transitioned to the role of Executive Chairman and Mr. Hoffman assumed the CEO position. +Long-Term Incentive Program Mix +The long-term incentive program is heavily weighted to at-risk compensation, with a mix +for February 2021 grants of 50% performance stock units and 50% time vested restricted stock units for the NEOs (other than Ms. Soriano who was not an executive officer in February 2021 and thus received 40% performance stock units and 60% time +vested restricted stock units). +2022 LTI Update: +In February 2022, the Committee approved LTI grants featuring performance stock units and +time-vested restricted stock units with similar design features as described above, but more heavily weighted to performance stock units (70% of total LTI for Mr. Hoffman, our CEO, and 60% for the other NEOs), with the remaining amount allocated +to time-vested restricted stock units. The Committee made this change to be more consistent with the Company’s historic practice and better aligned with shareholder expectations. +Compensation Best Practices +What we do +What we do not do +✔ Vast majority of pay is at risk or variable, +i.e., performance-based or equity-based or both +✔ Stringent share ownership requirements (6x base salary for CEO) +✔ Broad-based clawback policy covering both cash and equity +✔ Significant vesting horizon for equity grants +✔ Double trigger equity acceleration +✔ Independent Compensation Committee Consultant +✔ Review executive compensation program to ensure it doesn't promote +excessive risk taking +✔ Proactively engage with top shareholders on compensation and +governance issues +✔ Conduct annual say-on-pay votes +✔ Balance short-term and long-term incentives +✘ No dividends or dividend equivalents on unearned performance +shares/units +✘ No repricing or replacing of underwater stock options +✘ No excessive or unnecessary perquisites +✘ No hedging, pledging or short sales of Company stock +✘ No excise tax gross-ups in change-in-control agreements for new +officers (hired after 2008) +2022 PROXY STATEMENT +41 +TABLE OF CONTENTS +Compensation Discussion and Analysis +2021 COMPENSATION PROGRAM OVERVIEW +Setting Targets +Each February, the Committee recommends (and the independent directors approve) target compensation for the CEO +for the upcoming year after considering the latest available information, including the Company's total shareholder return (“TSR”) and other business and financial performance, information provided by the Committee's compensation consultant +regarding executive compensation trends and compensation paid to other chief executive officers of companies in the compensation peer group (described below), and information provided by management on recent Company performance and the Company's +future business and financial outlook. The Committee's goal is to set the CEO's compensation in line with the anticipated market median compensation for that year. +Given the significant weight the Company's executive compensation program places on at risk and variable +compensation, the compensation realized by the CEO and NEOs can be significantly affected, both positively and negatively, by performance against the various operational and financial performance metrics pre-established by the Committee and by +the performance of the Company's stock. The Board and Committee believe such a compensation program aligns the interests of the CEO and other NEOs with the interests of the shareholders. +The Company's executive compensation program consists of four primary elements: base salary, annual bonus +opportunity, long-term incentive compensation and benefits. These elements are described in greater detail below. +Base Salary +As part of approving an NEO's base salary, the Committee considers a variety of factors including individual +responsibilities, experience, skills, and potential to affect Wolverine Worldwide's overall performance, as well as market surveys and peer group information. The Committee considers these compensation factors subjectively, and no single factor +or combination of factors was determinative in setting base salaries for any NEO for fiscal year 2021. +Based on the above factors, the Committee approved the 2021 base salaries for the NEOs as noted in the +following table. The Committee held CEO salary flat in 2021 for the seventh year in a row. The base salary increases for the other NEOs were based on their performance evaluations as well as consideration of peer group and broad-based industry +compensation data, as described in detail below. Mr. Hoffman's 2020 base salary listed below is an annualized figure, and the actual amount received in 2020 (from his September 2020 start date with the Company through year-end) is included in the +Summary Compensation Table on page 56 . Ms. Soriano first became an executive officer midway through 2021 in connection with her promotion from Managing Director of EMEA to President of International Group. In connection with +the increased responsibilities of her new role, her base salary was increased from $456,570 to $502,341 effective May 31, 2021. She also received a minor increase in March 2021 in connection with the Company’s annual performance evaluation +process. The cash compensation for Ms. Soriano is paid in Pounds Sterling and was converted into U.S. dollars using the fiscal year-end rate of 1.33 here and throughout the CD&A. +Name +2020 Base Salary +2021 Base Salary +Krueger +$1,150,000 +$1,150,000 +Hoffman +$ 900,000 +$ 930,000 +Soriano +$ 439,009 +$ 502,341 +Stornant +$ 630,000 +$ 675,000 +Zwiers +$ 685,000 +$ 695,000 +2022 PROXY STATEMENT +42 +TABLE OF CONTENTS +Annual Bonus +In 2021, each NEO had the opportunity to earn annual cash incentive compensation (“annual bonus”), consisting +of a performance bonus and an individual performance bonus, and further subject to a modifier: +Key Factors +2021 Company Metrics +Performance Bonus +• +Based on performance measured against Company and/or business unit performance criteria established at the beginning of 2021 +• +• +Revenue (50%) +Adjusted pretax earnings (50%) +• +Payout determined by comparing performance against four performance levels set for each pre-set criterion: threshold, target, +goal, and stretch +Individual +Performance Bonus +• +Measured against individual performance criteria +• +Vary for each NEO +• +Each NEO's payout was determined by comparing individual performance against specific individual criteria set at the beginning +of 2021 +• +Payouts can range from 0% to 200% depending on the NEO's performance against individual performance objectives +Modifier +• +Total payout based on the above two components can be adjusted upwards by up to 30% based on eCommerce revenue +• +eCommerce revenue +A percentage of each NEO's 2021 base salary, as determined in February 2021, was set as the annual bonus +target percentage (the “Target Bonus Percentage”). The Target Bonus Percentage represents the percentage of each NEO's base salary that could be earned as annual incentive compensation at a “target” performance level (100% payout) for each of the +performance bonus and individual performance bonus. Generally, the Committee sets higher Target Bonus Percentages for individuals with greater influence on business strategy, profit or sales. This puts a larger percentage of an NEO's total +potential cash compensation at risk, in line with the NEO's ability to influence these factors. For 2021, the NEOs had the following Target Bonus Percentages: Mr. Krueger 150%, Mr. Hoffman 85%, Ms. Soriano 40%, pro-rated for the portion of the +year prior to her appointment as an executive officer, and 50%, pro-rated for the portion of the year following her appointment as an executive officer, Mr. Stornant 65%, and Mr. Zwiers 55%. The less than ten percent increase in annual bonus +opportunity for each of Messrs. Krueger and Stornant was based on their performance evaluations as well as consideration of peer group and broad-based industry compensation data. +The Committee selected fiscal year 2021 revenue and adjusted pretax earnings as metrics for the performance +bonus because it believes a strong correlation exists between performance on these financial measures and increases in shareholder value. The Committee also included an eCommerce revenue growth multiplier for 2021 to more directly align with the +Company's focus on go-forward revenue growth. The Committee adjusted the percentage of the performance bonus determined by revenue from 45% in 2020 to 50% in 2021 (with the remaining 50% determined by pre-tax profit) due to the Company’s focus on +driving revenue growth. The Company changed the modifier from a backlog modifier in 2020 to eCommerce revenue in 2021 to incentivize revenue growth in what the Company views as the most important and profitable revenue channel. The top end of the +eCommerce revenue modifier was set at an aspirational level above Company plan and so only included a potential increase and not a penalty for failure to meet the modifier level. The Company did not meet the eCommerce revenue goals and so no +performance bonus adjustment was made based on the modifier. +Performance Bonus +Messrs. Krueger, Stornant, and Hoffman had significant influence on the Company's overall business performance +and, accordingly, their respective performance bonus opportunity (85% of their total annual bonus opportunity) is based on the Company performance criteria only. Mr. Zwiers and Ms. Soriano were directly responsible for specific business units and +exerted a significant influence on those business units in particular, in addition to influencing Company performance. Accordingly, a large percentage of their overall annual bonus opportunity was based on business unit performance, as reflected +in the table on page 46 . +As shown in the table below, the Committee also set four performance levels for each criterion: threshold (25% +payout for pretax; 50% for revenue), target (100% payout), goal (150% payout) and stretch (200% payout). The Committee set the revenue and pretax earnings goals for these performance levels following a review of the Company's operating plan, +historical performance, and industry and macroeconomic conditions. The performance targets were set aggressively, including setting the revenue performance target required for 100% payout at revenue growth of nearly 22% versus the prior fiscal +year. The performance targets required for 100% payout on pretax goals were also set above the Company’s actual 2020 pretax results. 2021 performance targets were set based on planned performance in 2021 and as compared to actual 2020 results +(rather than results adjusted for the COVID-19 pandemic) due to the continued uncertainty of the retail markets and expected continued effects of the pandemic. +2022 PROXY STATEMENT +43 +TABLE OF CONTENTS +Company +Performance Level +(% of Target Payout) 1 +in millions +Revenue +Pretax Earnings +Threshold (25% for pretax; 50% for revenue) +$2,120 +$187.0 +Target (100%) +$2,185 +$207.5 +Goal (150%) +$2,220 +$214.3 +Stretch (200%) +$2,260 +$224.0 +1. +The maximum payout (before the effect of the modifier) an NEO can receive is 200% of his or her Target Bonus +Percentage, even if performance is above stretch. An NEO would receive 0% of his or her Target Bonus Percentage if performance is below threshold. An NEO could earn up to an additional 30% of his or her overall payout after the +modifier. +For each business unit, the Committee sets the revenue and adjusted pretax earnings goals at substantially +similar levels of difficulty as the goals for the Company and with a similar degree of difficulty as in prior years. The below table shows historical weighted performance levels achieved by the business units included as part of an NEO +performance bonus in 2021. +Historical Group Performance +2021 +2020 +2019 +2018 +2017 +International Group +Between goal and +stretch +Below threshold +Between threshold +and target +Between target and +goal +Between target and +goal +EMEA Total +At goal +Below threshold +Between threshold +and target +Between target and +goal +Between goal and +stretch +2021 Performance +Overall Weighted Payout by Group +Wolverine Worldwide +Between Goal and Stretch +158% +International Group +Between Goal and Stretch +152% +EMEA Total +At Goal +150% +Company revenue performance for 2021 was $2,298 million (excluding revenue attributable to the Sweaty Betty +brand, which was acquired during the 2021 fiscal year) for a 200% payout. This revenue performance exceeded the high end of the Company’s original 2021 revenue guidance. Pre-tax profit performance was $209.8 million for a 116.8% payout, with a +total, weighted Company Performance Bonus payout of 158%. The Compensation Committee used negative discretion to pay out corporate performance at 141% (127% for Mr. Zwiers and 158% for Ms. Soriano) rather than the 158% achieved. The Committee +made this decision in light of overall performance and bonus equity across brand groups. For 2021, the Company paid the NEOs the amounts set forth in the table below relating to the performance bonus. +Name +Performance Bonus +(as a % of Total Annual +Bonus Opportunity) 1 +Performance Bonus Opportunity +(as a % of an NEO's Target +Percentage) 1 +Performance Bonus +Percentage +Earned 1,2 +Performance +Bonus Paid 1,2 +Krueger +85% +0 - 200% +141% +$2,019,889 +Hoffman +85% +0 - 200% +141% +$ 937,931 +Soriano +85% +0 - 200% +152% +$ 286,670 +Stornant +85% +0 - 200% +141% +$ 510,531 +Zwiers +85% +0 - 200% +136% +$ 433,670 +1. +Not including adjustments, if any, based on the eCommerce revenue growth multiplier discussed below. Percentages are +as adjusted by the Committee using negative discretion, as described above. +2. +Not including Individual Performance Bonus. +Individual Performance Bonus +At the same time Target Bonus Percentages are set, the CEO approves measurable personal objectives for each +NEO's individual bonus, other than for himself. The CEO submits, and the Committee reviews and approves, with such changes as it considers appropriate, the CEO's personal objectives. Such measurable personal objectives may include goals such as +executing strategies supporting the Company's vision, developing employees, growing new business initiatives, and driving operational excellence. Performance is evaluated by the CEO (or, in the case of the CEO, by the Committee and the other +independent directors) based on qualitative and quantitative factors. +2022 PROXY STATEMENT +44 +TABLE OF CONTENTS +Each personal objective is given a rating from “does not achieve” to “exceptional,” with weighted performance +ratings and payouts consistent with the following table: +Personal Objectives Rating +2021 Payout Level +Exceptional +200% +Far Exceeds +175% +Exceeds +150% +Achieves +100% +Achieves Some But Not All +50% +Does Not Achieve +0% +The CEO recommended, and the Committee approved, the 2021 cumulative weighted personal objectives scores and +payout levels for each of the NEOs other than himself. The Committee and the other independent directors of the Board met with the CEO at the end of the year to evaluate his performance against his personal objectives, considering various +factors. The Committee determined the cumulative weighted personal objectives score for the CEO and recommended to the independent directors of the Board the CEO's payout level. +Summaries of the specific personal objectives for each NEO are outlined in the table below, along with +performance information about each objective in parentheses, based on the scale set forth above. +NEO +2021 Personal Objectives +Krueger +People (Between Achieves and Exceeds), Growth (Between Achieves Some and Achieves), and Cash Flow (Achieves Some) +Hoffman +Onboarding (Between Exceeds and Far Exceeds), People (Between Achieves and Exceeds), Global Growth (Achieves Some), Cash Flow +(Between Achieves Some and Achieves) +Soriano +International Growth (Between Achieves and Exceeds), Digital (Between Achieves and Exceeds), Key Region Acceleration (Between +Achieves and Exceeds), Brand Growth (Between Achieves and Exceeds), Personnel (Between Achieves and Exceeds) +Stornant +Demand Planning (Between Achieves Some and Achieves), Cash Flow (Between Achieves Some and Achieves), eCommerce (Between +Achieves and Exceeds), Processes (Between Achieves and Exceeds) +Zwiers +Global Operations (Between Achieves Some and Achieves), M&A (Between Achieves and Exceeds), Transition (Between Achieves +Some and Achieves) +This year’s personal objectives related to key initiatives intended to drive shareholder value, including: +• +Working toward a smooth CEO transition (Messrs. Krueger and Hoffman) and transition of business units (Ms. Soriano and Mr. Zwiers) +• +Accelerating the Company’s digital transformation and eCommerce revenue growth (Ms. Soriano and Messrs. Krueger, Hoffman and Stornant) +• +Driving organic growth across the Company’s brand portfolio (Ms. Soriano and Messrs. Krueger and Hoffman), while making strategic acquisitions like that +of Sweaty Betty (Messrs. Krueger, Hoffman and Zwiers) +Name +Individual +Performance Bonus +(as a % of Total Annual Bonus +Opportunity) +2021 Individual Bonus +Opportunity +(as a % of an NEO's Target +Percentage) +2021 +Individual Bonus +Percentage Achieved +2021 +Individual +Bonus Paid +Krueger +15% +0 - 200% +109% +$ 276,614 +Hoffman +15% +0 - 200% +115% +$ 135,515 +Soriano +15% +0 - 200% +120% +$ 39,884 +Stornant +15% +0 - 200% +105% +$ 67,349 +Zwiers +15% +0 - 200% +85% +$ 47,955 +2022 PROXY STATEMENT +45 +TABLE OF CONTENTS +eCommerce Revenue Multiplier +The Committee changed to an eCommerce revenue multiplier for 2021 to continue to align with the Company's focus +on revenue growth and digital transformation. The Committee set the following eCommerce revenue multiplier for 2021. +eCommerce Revenue Goals 1 +$480M ++10% +$500M ++20% +$550M ++30% +1. +Modifier adjustments will not exceed 30%. +The Company did not meet the eCommerce revenue goals for 2021 so the multiplier did not apply to 2021 annual bonus payouts. +Each NEO's total annual bonus opportunity for 2021 ranged from 0% to 200% of the Target Bonus Percentage. The +accompanying table shows the aggregate annual incentive compensation payout earned by each NEO for 2021, as well as the portion of that aggregate number that is attributable to the performance bonus and individual performance bonus. +Krueger +150% +15% +85% +$2,019,889 +$276,614 +$2,296,503 +136% +Hoffman +85% +15% +85% +$937,931 +$135,515 +$1,073,446 +137% +Soriano +50% +15% +20% +65% 2 +$286,670 +$ 39,884 +$ 326,554 +147% +Stornant +65% +15% +85% +$510,531 +$ 67,349 +$ 577,880 +135% +Zwiers +55% +15% +55% +30% 3 +$433,670 +$ 47,955 +$ 481,625 +128% +1. +Based on adjusted revenue and pretax earnings performance criteria for the Company, as described above under “Annual Bonus — Performance Bonus” and reflecting the use of negative discretion by the Committee. +2. +Based on revenue and pretax earnings as the performance criteria for: EMEA (45%), and International (20%). As noted in +the Annual Bonus section above, Ms. Soriano’s Target Bonus Percentage was 40%, pro-rated for the portion of the year prior to her appointment as an executive officer, and 50%, pro-rated for the portion of the year following her +appointment as an executive officer. +3. +Based on revenue and pretax earnings as the performance criteria for International. +2022 PROXY STATEMENT +46 +TABLE OF CONTENTS +LONG-TERM INCENTIVE COMPENSATION +In 2021, each NEO had the opportunity to earn long-term incentive compensation comprised of a mix of +performance stock units and time-based restricted stock unit awards. The 2021 grants were based on the following: +Key Factors +Performance Share Metrics 1 +Performance Stock +Units +• +Performance stock units are based on performance criteria covering three-year periods +• +Fully diluted adjusted EPS (65%) +• +Awards balance focus on near term profitability with longer term shareholder value creation +• +Adjusted Business Value Added (“BVA”) 2 (35%) +• +Potential up/down adjustment based relative TSR Measure +• +TSR adjustment for top/bottom quartile TSR vs. Russell 3000 Consumer Discretionary Index +Time-Based Restricted Stock Unit Awards +• +Encourages employee retention and rewards increases in stock price +1. +EPS is calculated on a fully diluted basis and EPS and BVA are each adjusted to account for and exclude the effects of +acquisitions, divestitures, accounting changes, restructuring, or other similar special charges or extraordinary items excluded by the Committee, including foreign exchange. +2. +BVA is calculated by starting with operating income determined in accordance with U.S. generally accepted accounting +principles (“GAAP”), and then reducing operating income by (1) an amount for income taxes where the effective tax rate used to calculate the income tax amount is determined in accordance with GAAP (adjusted consistent with EPS +adjustments, as described above), and (2) a capital charge equal to a 14 point average of “net operating assets” during the fiscal year (with “net operating assets” defined as the net of trade receivables (net of reserves), inventory +(net of reserves), other current assets, property, plant and equipment, trade payables and accrued liabilities) multiplied by 10%. +Impact of the COVID-19 Pandemic on 2019-2021 and 2020-2022 +Performance Stock Unit Grants +As disclosed in the Company's 2021 proxy statement, in February 2021 the Compensation Committee reviewed the +impact of the COVID-19 pandemic on the performance stock units previously granted for the 2019-2021 performance period and the 2020-2022 performance period, and determined that, due to global lockdowns and other effects of the pandemic, which +were not factored into the targets as initially set, it was unlikely any payout would be earned under these awards. +Given the ongoing impacts of the COVID-19 pandemic, the continued uncertainty of the effects of the pandemic +on the performance metrics originally established for 2021 and 2022, and to ensure alignment between the Company’s NEOs, other plan participants and shareholders, the Committee determined that it was in the best interest of the Company’s +shareholders to cancel the existing 2019-2021 and 2020-2022 awards and issue new awards, with a substantially lower payout opportunity for continuing Plan participants, while still requiring performance conditions be achieved for any payout. +These new awards: +• +Are substantially less than the original award potential for the 2019-2021 cycle, vesting based on the achievement of a performance goal tied to revenue +growth in 2021, and with payout generally capped at no greater than 60% of the maximum payout that could have been earned under the original award; +• +Are substantially less than the original award potential for the 2020-2022 cycle, vesting based on the achievement of a performance goal tied to revenue +growth in 2021 and 2022, and with payout generally capped at no greater than 60% of the maximum payout that could have been earned under the original award; and +• +Will require the named executive officers to hold any shares that are earned under each of the new awards (net of withholding taxes) for at least 12 +months following the vesting date of the applicable award. +In deciding on the approach above, the Committee engaged in extensive discussion and review, including with +advisors, regarding the most appropriate way to balance the following objectives: +• +Acknowledge the impact to shareholders through reduced overall opportunities compared to the original award; +• +Continue motivating and incentivizing the management team and aid in recruiting new talent when a significant portion of the long-term incentives would +generate no payout due to the impact of the pandemic; +• +Ensure stability of the management team during a previously announced CEO transition; and +• +Further focus the Company on revenue growth and capturing market share in the short term after pandemic setbacks that affected the entire industry. +2022 PROXY STATEMENT +47 +TABLE OF CONTENTS +The Committee believes that the actions described above help to accomplish these objectives. The new awards +are 100% contingent on revenue growth performance goals, with the ultimate payout generally capped at no more than 60% of the previous award maximum. Finally, the requirement to hold any earned shares enhances retention and alignment with +shareholders. In addition, revenue targets were set aggressively, with 2021 revenue at target (100%) set at 22% above 2020 actual revenue for both the 2021 period and the base year of the 2021-2022 period, with further revenue growth required in +2022 to maintain target performance for the aggregate 2021-2022 period. +The following table sets forth (i) the target values of the previous 2019-2021 and 2020-2022 grants that are +no longer in effect (not inclusive of the increased grant date fair value due to the accounting valuation of the effect of the TSR modifier), (ii) the substantially lower target values of the new 2021 and 2021-2022 grants (not inclusive of the +increased grant date fair value due to the accounting valuation of the effect of the TSR modifier) that the Committee awarded due to the impact of the COVID-19 pandemic, and (iii) the net reduction of award opportunity to each NEO. +NEO +Previous 19-21 +Grant +Previous 20-22 +Grant +Total for +Previous 19-21 +and 20-22 +Grants +New 21 Grant +New 21-22 +Grant +Total for New +21 and 21-22 +Grants +Total reduction +in Award +Opportunity +Krueger +$4,042,500 +$4,042,500 +$8,085,000 +$2,425,500 +$2,425,500 +$4,851,000 +$3,234,000 +Hoffman 1 +$972,794 +$1,702,382 +$2,675,176 +$544,000 +$952,000 +$1,496,000 +$1,179,176 +Soriano +$180,000 +$180,000 +$360,000 +$120,010 +$120,010 +$240,020 +$119,980 +Stornant +$579,120 +$579,120 +$1,158,240 +$360,000 +$360,000 +$720,000 +$438,240 +Zwiers +$533,400 +$533,400 +$1,066,800 +$320,000 +$320,000 +$640,000 +$426,800 +* +Amounts in table do not include any applicable actuarial adjustments to grant date fair market value. +1. +Mr. Hoffman’s grant value differs for the two periods due to proration of the awards based on his hire date. +2021 Performance Stock Units +As described in detail above and in last year's Proxy Statement, the Company canceled the awards previously +granted for the 2019-2021 performance period and issued new awards at a substantially lower payout opportunity based on 2021 revenue growth. +The following table lists the performance levels set by the Committee for performance stock unit awards +granted for the 2021 performance period, the vesting of which occurred on February 9, 2022 following the Committee's certification of 2021 financial results. The revenue performance target was set aggressively, with the revenue performance target +required for 100% payout requiring revenue growth of nearly 22% versus the prior fiscal year. +Performance Level +(Percentage of Target Payout) +2021 Revenue (in millions) +Threshold (50%) +$2,120.0 +Target (100%) +$2,185.0 +Goal (150%) +$2,220.0 +Stretch (200%) +$2,260.0 +In February 2022, the Committee evaluated and certified the Company's performance for the 2021 performance +period against the criteria set forth in the table above. The 2021 performance stock unit payout was 200% of target, reflecting a payout based on the final revenue of $2,298 million (excluding revenue attributable to the Sweaty Betty brand, which +was acquired during the 2021 fiscal year), which exceeded the high end of the Company's original 2021 revenue guidance. This represents approximately 60% of the maximum payout that could have been earned under the original grants for the +2019-2021 performance period. +2022 PROXY STATEMENT +48 +TABLE OF CONTENTS +The following table lists the number of stock units that vested for each NEO under the 2021 performance stock +unit grant. In calculating the number of stock units that vest, the Company uses the stock price on the date of the grant, which results in the NEOs bearing the risk of stock price performance during the performance period. All stock units (net +of withholding taxes) earned by the NEOs for this performance period are required to be held for 12 months. +Name +Stock Units Vesting +(#) +Krueger +141,760 +Hoffman +31,796 +Soriano +7,389 +Stornant +21,042 +Zwiers +18,704 +Mr. Hoffman’s award and payout for the period was prorated based on his hire date in relation to the initial 2019-2021 period. +Performance Awards for the 2021-2023 Performance Period +In the beginning of 2021, the Committee evaluated each NEO's long-term incentive target payout opportunity +expressed as a dollar amount at target grant value for the grant of performance units for the 2021-2023 period. Performance units are eligible to vest based on achievement of adjusted constant-currency EPS goals (weighted 65%) and adjusted +constant-currency BVA goals (weighted 35%). For the 2021-2023 performance period, the Committee included a relative TSR modifier that provides a 25% positive adjustment for TSR performance in the top quartile of the Russell 3000 Consumer +Discretionary Index and a 25% negative adjustment for performance in the bottom quartile of the Index. +Name +2021-2023 +Target 1 +Krueger +$2,887,500 +Hoffman +$1,700,000 +Soriano +$ 120,010 +Stornant +$ 521,000 +Zwiers +$ 444,500 +1. +See footnote 3 to the Summary Compensation Table for the grant date fair value of these +awards, which reflects an accounting valuation of the effect of the TSR modifier. +The Company accrues, but does not pay, any dividends on any performance units during the performance period. +Once the Committee certifies the Company's performance compared to the pre-determined performance criteria, the restrictions on some, all, none, or multiple of the performance share units awarded to each NEO will vest, and the NEO will receive +accrued dividends only on the shares actually earned. +The Committee goes through a rigorous process in setting performance targets, including a careful review of +the Company's prior year business and financial performance, current year operating plan and future expectations. To achieve target level EPS and BVA for the first year of the performance period would require double digit growth percentages over +2020 actual performance, and to achieve target level EPS and BVA for years two and three of the performance period would require double digit growth percentages over the prior year's actual EPS and BVA results. +Restricted Stock Unit Awards +The following table reflects the grant date value of the annual service-based restricted stock unit awards granted to each NEO. +Name +2021 Time-vested +Restricted +Stock Units +Krueger +$2,887,518 +Hoffman +$1,700,015 +Soriano +$ 223,810 +Stornant +$ 521,034 +Zwiers +$ 444,518 +The Committee generally grants annual equity awards at its regularly scheduled February meeting, and the +independent directors of the Board approve equity grants to the CEO generally on the same day that the Committee meets. Restricted stock units awarded vest 20% on the first and second anniversaries of the grant and 30% on the third and fourth +anniversaries. Ms. Soriano’s grant includes the grant made in February as well as an August grant made in connection with her promotion. +2022 PROXY STATEMENT +49 +TABLE OF CONTENTS +BENEFITS +Retirement, Deferred Compensation and Welfare Plans +The NEOs in the United States participate in Wolverine Worldwide's medical and dental plans and receive life +and disability insurance. In 2021, Messrs. Krueger, Stornant and Zwiers also participated in the Wolverine Worldwide Employees' Pension Plan (a defined benefit plan) and the Wolverine World Wide, Inc. 409A Supplemental Executive Retirement Plan +(an unfunded, non-qualified plan). For a description of the benefits under Wolverine Worldwide's retirement plans, see “ Pension Plans and 2021 Pension Benefits ” below. In 2021, Mr. Hoffman participated in +the Wolverine Worldwide Executive Deferred Compensation Plan (the “Deferred Compensation Plan”). Ms. Soriano is located outside of the United States and participates in local medical, life and disability insurance plans and receives an annual +retirement benefit payment consistent with the benefits generally made available to employees in the UK. +All full-time employees of the Company in the United States, including the NEOs located in the United States, +are also eligible to participate in one of Wolverine's 401(k) Plans (the “401(k) Plan”). Pursuant to the 401(k) Plan, employees, including the NEOs in the United States, may elect to defer a portion of their salary and receive a Company match on +eligible deferrals of up to 3% of salary for 2021 (5.5% for those who do not participate in the Pension Plan), subject to limits set forth in the Internal Revenue Code of 1986, as amended. +In 2016, the Company adopted the Deferred Compensation Plan. This plan allows directors, executives and other +eligible senior employees of the Company to elect to defer a portion of their eligible compensation. Wolverine Worldwide may, but need not, credit a participant with an additional discretionary Company contribution. The Company adopted the +Deferred Compensation Plan as a retention and recruitment tool to facilitate retirement savings and provide financial flexibility for key employees, and because many of the companies with which it competes for executive talent provide similar +plans to their key employees. For a description of the benefits under the Deferred Compensation Plan, see “ Non-Qualified Deferred Compensation ” below. +Perquisites +The Company generally provides limited perquisites to NEOs other than to account for relocation assignments. +The Company feels the perquisites are necessary to provide a competitive total compensation package for each NEO. For details on perquisites, see footnote 6 to the “Summary Compensation Table” on page 56 . Ms. Soriano also +receives benefits generally made available to Company employees located in the U.K., a car and travel allowance, and tax equalization tied to her relocation to the U.K. when she was hired by the company in 2018. +POST-EMPLOYMENT COMPENSATION +Each NEO is party to an Executive Severance Agreement that provides for certain payments and benefits upon +termination of employment after a change in control of Wolverine Worldwide. The Board believes Executive Severance Agreements will motivate management to actively pursue a business transaction that is in the best interests of the shareholders, +even if it could ultimately result in his or her job elimination, and also will promote management stability during the transition period accompanying a change in control. Each NEO is eligible to receive compensation if his or her employment is +terminated within two years (Messrs. Hoffman, Stornant and Zwiers and Ms. Sorioano) or three years (Mr. Krueger) following a change in control of Wolverine Worldwide. Even following a change in control, an NEO does not receive payment under the +Executive Severance Agreement if his or her employment terminates: +• +Due to death or retirement in accordance with Wolverine Worldwide's policy or as otherwise agreed, +• +For cause or disability, or +• +By resignation of the NEO, other than for “good reason,” which is discussed under the heading “Benefits Triggered by Termination Other than For Cause or +for Good Reason Not in Connection With a Change in Control” and the heading “Benefits Triggered Upon a Change in Control,” both under the heading “Potential Payments Upon Termination or Change in Control” +NEOs may also be eligible under Wolverine Worldwide's retirement plans or equity plans to receive certain +payments and benefits upon termination of employment or in connection with a change in control as described in the “ Potential Payments Upon Termination or Change in Control ” section of this Proxy Statement. +Mr. Krueger is also party to a 2008 Separation Agreement and Mr. Hoffman is also party to a 2020 Employment +Agreement (amended on December 17, 2021) under which each executive is eligible to receive certain payments and benefits if the Company terminates the executive's +2022 PROXY STATEMENT +50 +TABLE OF CONTENTS +employment, even if not following a change in control, other than for “cause” or if the executive terminates +his or her employment for “good reason.” The Committee determined upon appointing Mr. Krueger as CEO and Mr. Hoffman as the President (and later as the CEO) that, given the Company's strategic initiatives the Board asked each executive to lead, +it was appropriate for the Company to enter into such arrangement. +The Company includes accelerated retirement vesting provisions for equity awards, provided certain conditions +are met, and for the payout of a prorated annual bonus for a qualifying retirement more than six months into the fiscal year. Details on these provisions and information on benefits payable to Mr. Krueger under his Separation Agreement, to +Mr. Hoffman under his Employment Agreement, and to each of the NEOs under the Executive Severance Agreements, as well as information on the other retirement and equity plans of Wolverine Worldwide, are included in the “ Potential Payments Upon Termination or Change in Control ” section of this Proxy Statement. +SAY ON PAY ADVISORY VOTE +We asked shareholders to vote on a “say-on-pay” advisory vote on our executive compensation in 2021. +Shareholders expressed substantial support for the compensation of our named executive officers, with approximately 94% of the votes cast for the “say-on-pay” advisory vote. The Committee carefully evaluated the results of the 2021 advisory vote. +The Committee also considers many other factors in evaluating our executive compensation programs as discussed in this Compensation Discussion and Analysis, including the Committee's assessment of total shareholder return, the interaction of our +compensation programs with our corporate business objectives, evaluations of our programs by external consultants, and review of peer group and survey data, each of which is evaluated in the context of the Committee's fiduciary duty to act as the +directors determine to be in shareholders' best interests. While each factor bore on the Committee's decisions regarding our named executive officers' compensation, the Committee made no changes to our executive compensation program and policies +directly as a result of the 2021 say-on-pay advisory vote. +CEO REALIZABLE PAY +The following graph shows the CEO’s aggregate target compensation from 2019-2021 compared to his aggregate +realizable compensation (amounts actually earned) over that same period. As the graph shows, realizable compensation was twenty percent less than target compensation for this three-year period. +2022 PROXY STATEMENT +51 +TABLE OF CONTENTS +CEO TRANSITION AND 2022 COMPENSATION UPDATE +As previously announced, Mr. Hoffman succeeded Mr. Krueger as the Company’s CEO effective January 2, 2022. +Mr. Hoffman’s base compensation package as CEO for 2022 is summarized below: +Base Salary +Target Annual +Bonus +Target Long-Term +Incentive +Compensation +Total Target +Compensation +$1,000,000 +$1,200,000 +$4,800,000 +$7,000,000 +Target Annual Bonus is based on current salary and a target of 120%. Actual payout, if any, will depend on +performance and is capped at 200% of the target opportunity, plus or minus the effect of any modifier. Long-Term Incentive Compensation is split between performance units (70% of the opportunity) and time-vesting restricted stock units (30%). +Mr. Hoffman does not participate in the Company’s Pension Plan or SERP. Mr. Hoffman receives an annual Company +contribution to the Company’s Deferred Compensation Plan in an amount equal to 8% of his base salary. +The below graphic compares Mr. Hoffman’s 2022 target CEO compensation to Mr. Krueger’s 2021 target CEO compensation: +2022 PROXY STATEMENT +52 +TABLE OF CONTENTS +COMPENSATION SETTING PROCESS +Setting Targets +The Committee goes through a rigorous process in setting performance targets, including a careful review of the +Company's prior year business and financial performance, current year operating plan, and future expectations. The Committee engages with management in this process over several months leading up to setting final annual bonus and three-year +performance targets in February. +Competitive Philosophy and Competitive Market Data +When making compensation recommendations and decisions, the Committee considers the CEO's assessment of the +performance of each NEO, other than himself; the performance of the individual and the individual's respective business unit or function; the scope of the individual's responsibilities, years of experience with the Company (or in similar +positions with other companies), skills and knowledge; market compensation data; market and economic conditions; Company performance; retention considerations; and Wolverine Worldwide's compensation philosophy (collectively, the “compensation +factors”). The Committee considers these compensation factors both subjectively and objectively, and no single factor or combination of factors is determinative. With respect to CEO compensation, the Committee seeks to set compensation in line +with the anticipated market median for a given year. +The Committee uses market surveys and Peer Group (as defined below) information provided by its compensation +consultant as market reference points. The Committee also considers information the Company learns through recruiting NEOs and the experience levels and responsibilities of NEOs prior to joining the Company as reference points in setting NEO +compensation. +As part of its competitive data review in connection with determining 2021 compensation, the Committee +considered information presented by its consultant Frederic W. Cook & Co. (“FW Cook”) based on publicly-disclosed Peer Group information and on one published survey: the 2020 Willis Towers Watson (WTW) CDB Executive Compensation Survey +Report. +Peer Group +Below is the peer group used in late 2020 and early 2021 in connection with 2021 compensation decisions. In +determining the Peer Group, the Committee considered each potential peer company's industry, channels of distribution, revenue and market capitalization. The Company also considered the typicality of a company's pay practices, excluding companies +whose chief executive may not receive market compensation because of a founder relationship, family ownership position, or other similar relationships. +Abercrombie & Fitch Co. +Chico's FAS, Inc. +G-III Apparel Group, Ltd. +Hanesbrands Inc. +The Children's Place, Inc. +American Eagle Outfitters Inc. +Deckers Outdoor Corporation +Genesco Inc. +Kontoor Brands, Inc. +Caleres, Inc. +Designer Brands, Inc. +Gildan Activewear, Inc. +Skechers USA, Inc. +Carter's, Inc. +Foot Locker, Inc. +Guess?, Inc. +Tapestry, Inc. +CEO Role +Within the framework of the Company's executive compensation program, the CEO recommends the level of base +salary, annual bonus, long-term incentive compensation, equity awards and other compensation components for his direct reports, including the other NEOs. The CEO bases his recommendation upon his assessment of the compensation factors applicable +to each NEO. The CEO considers these compensation factors both objectively and subjectively, and no single factor is determinative. The Committee discusses these recommendations with the CEO prior to setting the compensation for each NEO, other +than the CEO. The Committee, however, ultimately determines all compensation for NEOs other than the CEO, whose compensation is determined by the independent directors as a whole. +Compensation Consultant Role +FW Cook was first engaged as the Committee's independent compensation consultant in 2016 and reports directly +to the Committee. The Committee determines the scope of engagement and may replace the consultant or hire additional consultants at any time. The Committee has evaluated FW Cook's independence under the rules established by the NYSE and has +determined that FW Cook is “independent” as defined by NYSE rules. In addition, the Committee has evaluated whether the engagement of FW Cook raised any conflicts of interest and has determined that no such conflicts of interest exist. +2022 PROXY STATEMENT +53 +TABLE OF CONTENTS +At the Committee's invitation, a representative of FW Cook generally attends all Committee meetings and also +communicates with the Committee Chair and management regularly between meetings. However, the Committee makes all decisions regarding NEO compensation. FW Cook provides various executive compensation services to the Committee pursuant to a +consulting agreement with the Committee. Generally, these services include advising the Committee on the principal aspects of the Company's executive compensation program, evolving industry practices, and providing market information and analysis +regarding the competitiveness of the Company's program design. +During 2021, FW Cook performed the following specific services: +• +Attended Committee meetings, as requested +• +Reviewed the Company's peer group and advised the Committee on the composition of the peer group +• +Reviewed survey data for competitive comparisons +• +Provided market data and recommendations on CEO and other NEO compensation +• +Advised the Committee on market trends related to compensation policies and programs +• +Proactively advised the Committee on best practice approaches for governance features of executive compensation programs +• +Reviewed the Compensation Discussion & Analysis and other executive compensation related disclosures included in the Company's Proxy Statement +The total fees the Company paid to FW Cook for services to the Committee in 2021 were $154,506, less than 1% +of FW Cook's total consulting income during the same period. The Company did not pay or incur any other fees to or with FW Cook. +OTHER COMPENSATION POLICIES AND PRACTICES +NEO Stock Ownership Guidelines +Each NEO, as well as each non-employee director, must attain (and maintain) a minimum stock ownership level +prior to being able to gift or sell any Company stock. The equity that qualifies for determining the NEOs’ minimum stock ownership level includes owned shares and unvested restricted stock units that vest based on time (up to a maximum value of +50% of the applicable ownership requirement), but excludes performance shares and units and unexercised options (or any portion thereof, such as the current “in the money” value). During 2021, each NEO complied with the requirements of these +guidelines. +Covered Positions +Guideline +CEO +6x Annual Salary +President +3x Annual Salary +Other NEOs +2x Annual Salary +Non-Employee Directors +6x Annual Cash Retainer +Stock Hedging and Pledging Policies +Under the Company's Insider Trading Policy, all directors, officers and other employees are prohibited from +engaging in any hedging transactions involving Company securities beneficially owned by them. The Company also considers it inappropriate for any such person to engage in speculative transactions in the Company's securities, including short +sales, publicly traded options, margin accounts and pledges and standing and limit orders. Also, all directors, officers and other employees are prohibited from pledging Company securities as collateral for a loan. +Clawback Policy +The Company has adopted a clawback policy which empowers the Board or a committee of the Board to seek recovery +of specified incentive compensation covering both cash and equity received by executive officers under specific circumstances where there is a material restatement of the Company's financial results that would have led to a lower level of +incentive compensation payout. +Impact of Accounting and Tax Treatments on Compensation +The Tax Cuts and Jobs Act on December 22, 2017 eliminated the Section 162(m) performance-based compensation +exemption, so the grants and awards made in 2021 are not eligible for such exemption. Even prior to the elimination of the performance-based compensation exemption, Wolverine Worldwide did not require all of its compensation programs, including +programs under the Company's equity compensation plans, to fit the performance-based compensation exemption under Section 162(m) because it believes it is important to preserve flexibility in administering compensation programs in a manner +designed to promote varying corporate goals. Wolverine Worldwide has and in the future may continue to pay compensation that is limited in whole or in part as to tax deductibility. +2022 PROXY STATEMENT +54 +TABLE OF CONTENTS +Compensation Committee +Report +The Committee has reviewed and discussed with management the information provided under the heading +“Compensation Discussion and Analysis.” Based on this review and discussion, the Committee recommended to the Board of Directors that the Company include the Compensation Discussion and Analysis section in this Proxy Statement and incorporate it +by reference into the Company's Annual Report on Form 10-K. +Respectfully submitted, +Nicholas T. Long (Chair) +Jeffrey M. Boromisa +Gina R. Boswell +William K. Gerber +David W. McCreight +Compensation Committee Interlocks and Insider Participation. During fiscal year 2021, none of the members of the Compensation Committee was an officer or employee of the Company, was a former officer of the Company, nor had a relationship with the Company requiring disclosure as a related party +transaction under Item 404 of Regulation S-K of the Securities Act of 1933. None of the Company's executive officers served on the compensation committee or board of directors of another entity whose executive officer(s) served as a director on +the Company's Board or on the Compensation Committee. +2022 PROXY STATEMENT +55 +TABLE OF CONTENTS +Summary Compensation Table +Blake W. Krueger +Chairman and CEO +during fiscal 2021 +2021 +$1,127,885 +$10,945,024 +$2,296,503 +- +$ 36,445 +$14,405,857 +$9,554,829 +2020 +$ 751,923 +$ 6,652,134 +$ 927,843 +$1,151,272 +$ 36,319 +$ 9,519,491 +$9,519,491 +2019 +$1,150,000 +$ 6,338,194 +$ 420,192 +$1,482,641 +$ 36,247 +$ 9,427,274 +$9,427,274 +Brendan Hoffman +President, +Wolverine +Worldwide +during fiscal 2021 +2021 +$ 924,231 +$ 5,083,847 +$1,073,446 +- +$ 113,015 +$ 7,194,539 +$5,698,509 +2020 +$ 259,615 +$300,000 2 +$ 4,755,398 +$ 133,396 +- +$ 58,083 +$ 5,506,492 +$5,506,492 +Isabel Soriano 7 +President, +International Group +2021 +$ 480,641 +$ 597,096 +$ 326,554 +- +$1,075,445 +$ 2,479,736 +$2,239,716 +Michael D. Stornant +Senior Vice +President, +CFO, Treasurer and +Chief Accounting Officer +2021 +$ 657,865 +$ 1,819,680 +$ 577,880 +$ 86,187 +$ 30,883 +$ 3,172,495 +$2,452,437 +2020 +$ 477,346 +$ 1,223,257 +$ 232,470 +$1,113,604 +$ 31,141 +$ 3,077,818 +$3,077,818 +2019 +$ 624,231 +$ 1,011,951 +$ 105,440 +$1,393,117 +$ 30,956 +$ 3,165,695 +$3,165,695 +James D. Zwiers +Executive Vice +President and +President, Global +Operations Group +2021 +$ 683,856 +$ 1,578,188 +$ 481,625 +$ 70,550 +$ 38,953 +$ 2,853,172 +$2,213,122 +2020 +$ 519,019 +$ 1,161,805 +$ 249,786 +$1,253,808 +$ 39,634 +$ 3,224,052 +$3,224,052 +2019 +$ 682,115 +$ 932,050 +$ 166,689 +1,045,809 +$ 39,837 +$ 2,866,500 +$2,866,500 +1. +Includes any amounts deferred under the Company's qualified 401(k) plan or Deferred Compensation Plan. +2. +Reflects a one-time sign-on bonus paid in connection with recruiting Mr. Hoffman for the position of President, +Wolverine Worldwide, and subject to an obligation to return the bonus under certain conditions described in his employment agreement. +3. +Includes the grant date fair value of restricted stock unit awards, and performance unit awards, as follows for 2021: +Name +Service-based +Restricted Stock Unit +Value +Performance Unit +Value 21-23 Grant +Performance Unit +Value 21-22 Grant* +Performance Unit +Value 21 Grant* +Total +Krueger +$2,887,518 +$3,206,478 +$2,425,514 +$2,425,514 +$10,945,024 +Hoffman +$1,700,015 +$1,887,802 +$ 952,000 +$ 544,030 +$ 5,083,847 +Soriano +$ 223,810 +$ 133,266 +$ 120,010 +$ 120,010 +$ 597,096 +Stornant +$ 521,034 +$ 578,588 +$ 360,029 +$ 360,029 +$ 1,819,680 +Zwiers +$ 444,518 +$ 493,620 +$ 320,025 +$ 320,025 +$ 1,578,188 +* +For a detailed discussion about these grants and the forfeiture of previous performance unit grants, see the discussion in the CD&A Section under +the heading “Impact of the COVID-19 Pandemic on 2019-2021 and 2020-2022 Performance Stock Unit Grants” . +Restricted stock units were valued using the closing market price of Wolverine Worldwide common stock on the date of +the grant of the respective award. Performance units were valued using the closing market price of Wolverine Worldwide common stock on the date of grant of the respective award and assuming target performance for all performance +periods, with an adjustment to value for the TSR modifier where applicable, all consistent with ASC Topic 718. The target performance unit grant values without accounting adjustments: ($7,738,528 for Mr. Krueger, $3,196,030 for Mr. +Hoffman; $360,030 for Ms. Soriano; $1,241,058 for Mr. Stornant; and $1,084,550 for Mr. Zwiers (all with de minimis differences based on rounding up to the nearest unit)). Assuming maximum payout, the aggregate grant date fair value of +performance units awarded in 2021 for each NEO (and, in parentheses, the maximum value is combined with the grant date fair value of restricted stock unit awards +2022 PROXY STATEMENT +56 +TABLE OF CONTENTS +and restricted stock awards for 2021) would have been: $48,345,032 ($51,232,550) for Mr. +Krueger; $20,302,991; ($22,003,006) for Mr. Hoffman; $2,239,710 ($2,463,520) for Ms. Soriano; $7,791,872 ($8,312,906) for Mr. Stornant; and $6,802,026 ($7,246,544) for Mr. Zwiers. Restrictions on such performance unit awards will lapse in the +February following the last year of the applicable performance period, if at all, based on the Company's performance for the period (capped at 200%), potential +/- 25% adjustments for relative TSR performance and target bonus level over the +three-year performance period. The actual value of shares that vest is also dependent on the stock price at the time of vesting. For additional valuation assumptions, see the Stock Based Compensation footnote to Wolverine Worldwide's Consolidated +Financial Statements for the fiscal year ended January 1, 2022 included in its Form 10-K for this year. +4. +Reflects the sum of performance bonus and individual bonus amounts, as adjusted by any applicable modifier, earned in +2021, 2020 and 2019, respectively, and paid in 2022, 2021 and 2020 respectively. +5. +All amounts in this column reflect, where applicable, the aggregate change in the actuarial present value of the +accumulated benefits under the Wolverine Worldwide Employees' Pension Plan (“Pension Plan”) and Wolverine World Wide, Inc. 409A Supplemental Executive Retirement Plan (“SERP”) for Messrs. Krueger, Stornant and Zwiers. The amounts in the +table were determined using assumptions consistent with those used in Wolverine Worldwide's Consolidated Financial Statements for each respective year. See the “Pension Plans and 2021 Pension Benefits” section starting on page 64 . +6. +The amounts listed in this column for 2021 include Wolverine Worldwide's contributions to the accounts of the NEOs +under Wolverine Worldwide's 401(k) plans (or, in the case of Ms. Soriano, a payment in lieu of a retirement plan contribution) and the Wolverine Worldwide Deferred Compensation Plan, payments made by Wolverine Worldwide for the premiums +on certain life insurance policies, tax, housing/relocation expenses and estate planning services and health care reimbursements in the amounts listed in the table below. Unlike the other NEOs, Mr. Hoffman and Ms. Soriano are not +participants in the Company's Pension Plan, and instead receive either a deferred compensation plan contribution (Mr. Hoffman) or a retirement benefit payment (Ms. Soriano). +Name +401(k) Match +Tax and +Estate +Planning +Health +Life Insurance +Premiums +Moving/Living +Expenses +Deferred +Compensation +Plan +Contribution +Car +Allowance +Tax +Equalization +Other 2 +Krueger +$8,700 +$8,640 +$17,535 +$1,470 +$0 +$0 +$0 +$0 +$100 +Hoffman +$15,950 +$12,496 +$19,066 +$857 +$39,546 1 +$25,000 +$0 +$0 +$100 +Soriano +$38,325 +$39,287 +$13,293 +$1,288 +$134,322 +$0 +$37,403 +$811,430 +$97 +Stornant +$8,700 +$0 +$19,066 +$3,017 +$0 +$0 +$0 +$0 +$100 +Zwiers +$8,700 +$8,640 +$18,522 +$2,991 +$0 +$0 +$0 +$0 +$100 +1. +Temporary housing and costs related to relocation. +2. +Relates to gift cards offerings for NEO. +7. +The cash compensation for Ms. Soriano is paid in Pounds Sterling. Her cash compensation was converted into U.S. dollars +using the fiscal year-end rate of 1.33. +8. +Reflects total compensation, less the value of performance stock unit grants for the 2021 and 2021-2022 performance +period. +2022 PROXY STATEMENT +57 +TABLE OF CONTENTS +Grants of Plan-Based Awards in +Fiscal Year 2021 +The following table provides information concerning each grant of an award made to the NEOs in fiscal year 2021: +Krueger +Annual Bonus +$845,913 +$1,691,827 +$4,398,750 +FY21 +Performance +Units +02/09/2021 +35,440 +70,880 +425,280 +$2,425,514 +FY21-FY22 +Performance +Units +02/09/2021 +35,440 +70,880 +425,280 +$2,425,514 +FY21-FY23 +Performance +Units +02/09/2021 +42,191 +84,381 +506,286 +$3,206,478 +Restricted +Units +02/09/2021 +84,381 +$2,887,518 +Hoffman +Annual Bonus +$392,798 +$ 785,596 +$2,042,550 +FY21 +Performance +Units +02/09/2021 +7,949 +15,898 +95,388 +$ 544,030 +FY21-FY22 +Performance +Units +02/09/2021 +13,910 +27,820 +166,920 +$ 952,000 +FY21-FY23 +Performance +Units +02/09/2021 +24,840 +49,679 +298,074 +$1,887,802 +Restricted +Units +02/09/2021 +49,679 +$1,700,015 +Soriano +Annual Bonus +$110,147 +$ 220,294 +$ 572,764 +FY21 +Performance +Units +02/09/2021 +1,754 +3,507 +21,042 +$ 120,010 +FY21-FY22 +Performance +Units +02/09/2021 +1,754 +3,507 +21,042 +$ 120,010 +FY21-FY23 +Performance +Units +02/09/2021 +1,754 +3,507 +21,042 +$ 133,266 +Restricted +Units +02/09/2021 +5,261 +$ 180,031 +Restricted +Units +08/02/2021 +1,301 +$ 43,779 +2022 PROXY STATEMENT +58 +TABLE OF CONTENTS +Stornant +Annual Bonus +$213,806 +$427,613 +$1,111,793 +FY21 +Performance +Units +02/09/2021 +5,261 +10,521 +63,126 +$360,029 +FY21-FY22 +Performance +Units +02/09/2021 +5,261 +10,521 +63,126 +$360,029 +FY21-FY23 +Performance +Units +02/09/2021 +7,613 +15,226 +91,356 +$578,588 +Restricted +Units +02/09/2021 +15,226 +$521,034 +Zwiers +Annual Bonus +$188,060 +$376,121 +$ 977,914 +FY21 +Performance +Units +02/09/2021 +4,676 +9,352 +56,112 +$320,025 +FY21-FY22 +Performance +Units +02/09/2021 +4,676 +9,352 +56,112 +$320,025 +FY21-FY23 +Performance +Units +02/09/2021 +6,495 +12,990 +77,940 +$493,620 +Restricted +Units +02/09/2021 +12,990 +$444,518 +1. +Estimated payout levels relating to the performance bonus and individual bonus. Maximum amount assumes stretch revenue +and pretax earnings performance and achievement of the maximum eCommerce revenue adjustment. For a description of these bonuses and the payouts under them, see pages 43 - 46 . Ms. Soriano's payout +levels have been converted to U.S. dollars from Pounds Sterling based on the fiscal year-end exchange rate for 2021 of 1.33 U.S. dollars to Pounds Sterling. Payout levels for Ms. Soriano reflects her pro-rated target bonus percentages +due to her mid-year promotion. +2. +Estimated payout levels as of the grant date of performance stock units granted under the Stock Incentive Plan of +2016, as amended (the “Stock Incentive Plan of 2016”). Restrictions on such performance unit awards typically lapse in the February following the last year of the applicable performance period, if at all, based on the Company's +performance for the period (capped at 200%), potential +/- 25% adjustments for relative TSR performance, and target bonus levels over the performance period. The actual value of shares that vest is also dependent on the stock price at +the time of vesting. The Company accrues, but does not pay, dividends on the performance shares during the performance period. At the end of the applicable performance period, the Company will pay to the NEO the accrued dividends (if +any) on the performance units that vest. The Target performance unit grant values without accounting adjustments are: ($7,738,528 for Mr. Krueger; $3,196,030 for Mr. Hoffman; $360,030 for Ms. Soriano; $1,241,058 for Mr. Stornant; and +$1,084,550 for Mr. Zwiers (all with de minimis differences based on rounding up to the nearest unit)). For a description of the performance units granted in 2021 under the Stock Incentive Plan of 2016, see pages 47 - 49 . +3. +The Company awarded service-based restricted stock unit awards in February 2021 under the Stock Incentive Plan of 2016 +to all NEOs. 20% of the units received under the awards reflected in this column vest on each of the first and second anniversaries of the date of grant of the award and 30% on the third and fourth anniversaries of the date of grant of +the award. All restricted stock units vest upon an NEO's death, disability or retirement. Holders of restricted stock units and awards are entitled to receive dividend equivalents on restricted stock units and awards. +4. +Represents the award date fair value for performance stock units and service-based stock unit awards made in fiscal +year 2021, determined as described in footnote 3 to the “Summary Compensation Table.” The grant date fair values reflect a higher amount than the target amounts discussed in the CD&A section due to accounting adjustments to the +grant date fair value relating to the TSR modifier for grants that include the modifier. +2022 PROXY STATEMENT +59 +TABLE OF CONTENTS +Outstanding Equity Awards at +2021 Fiscal Year-End +The following table provides information concerning options and stock awards that have not vested for each NEO +outstanding as of January 1, 2022: +Krueger +Various +172,755 +$4,977,072 +Various +389,587 +$11,224,001 +02/06/13 +200,778 +$21.48 +02/05/23 +02/11/14 +225,284 +$27.13 +02/10/24 +02/11/15 +220,988 +$28.00 +02/10/25 +02/10/16 +425,076 +$16.51 +02/09/26 +Hoffman +Various +92,165 +$2,655,274 +Various +149,883 +$ 4,318,129 +Soriano +Various +13,774 +$ 396,829 +Various +18,811 +$ 541,945 +Stornant +Various +34,978 +$1,007,716 +Various +61,223 +$ 1,763,835 +02/11/14 +11,912 +$27.13 +02/10/24 +02/11/15 +11,765 +$28.00 +02/10/25 +06/12/15 +12,687 +$29.31 +06/11/25 +02/10/16 +70,948 +$16.51 +02/09/26 +Zwiers +Various +31,130 +$ 896,855 +Various +53,736 +$ 1,548,134 +02/11/15 +33,514 +$28.00 +02/10/25 +02/10/16 +64,465 +$16.51 +02/09/26 +2022 PROXY STATEMENT +60 +TABLE OF CONTENTS +1. +The following table sets forth the vesting dates for the unvested service-based restricted stock or stock unit awards of +each NEO as of January 1, 2022: +Named +Executive +Officer +Vesting +Date +Number of Shares to Vest +Krueger +02/05/22 +10,548 +02/06/22 +14,931 +02/07/22 +16,319 +02/09/22 +16,876 +02/05/23 +15,822 +02/06/23 +14,932 +02/09/23 +16,876 +02/05/24 +15,822 +02/09/24 +25,314 +02/09/25 +25,315 +Hoffman +02/09/22 +9,936 +10/26/22 +13,007 +02/09/23 +9,936 +10/26/23 +14,739 +02/09/24 +14,903 +10/26/24 +14,740 +02/09/25 +14,904 +Soriano +02/05/22 +730 +02/06/22 +1,034 +02/09/22 +1,052 +07/30/22 +470 +08/02/22 +260 +11/05/22 +1,750 +02/05/23 +1,096 +02/06/23 +1,035 +02/09/23 +1,052 +08/02/23 +260 +02/05/24 +1,097 +02/09/24 +1,578 +08/02/24 +390 +02/09/25 +1,579 +08/02/25 +391 +2022 PROXY STATEMENT +61 +TABLE OF CONTENTS +Named +Executive +Officer +Vesting +Date +Number of Shares to Vest +Stornant +02/05/22 +2,351 +02/06/22 +3,328 +02/07/22 +3,693 +02/09/22 +3,045 +02/05/23 +3,526 +02/06/23 +3,328 +02/09/23 +3,045 +02/05/24 +3,526 +02/09/24 +4,568 +02/09/25 +4,568 +Zwiers +02/05/22 +2,165 +02/06/22 +3,065 +02/07/22 +3,350 +02/09/22 +2,598 +02/05/23 +3,247 +02/06/23 +3,065 +02/09/23 +2,598 +02/05/24 +3,248 +02/09/24 +3,897 +02/09/25 +3,897 +2. +The dollar values are calculated using a per share stock price of $28.81, the closing price of Wolverine Worldwide +common stock on December 31, 2021, the last business day of fiscal year 2021. +3. +Following the end of the applicable performance period, performance units vest depending upon the Company's +achievement of the relevant performance criteria. Shares actually vested for the 2021 cycle are included in the “Number of Shares or Units of Stock That Have Not Vested” column. Performance at stretch level was assumed for the 2021-2022 +cycle and performance between target and goal was assumed for the 2021-2023 cycle. +2022 PROXY STATEMENT +62 +TABLE OF CONTENTS +Option Exercises and Stock +Vested in Fiscal Year 2021 +Option Awards +Stock Awards +Number of Shares +Acquired on Exercise +(#) +Value Realized +On Exercise 1 +($) +Number of Shares +Acquired on Vesting +(#) +Value Realized +On Vesting 2 +($) +Krueger +- +- +207,892 +$7,050,000 +Hoffman +- +- +17,847 +$ 594,856 +Soriano +- +- +9,539 +$ 336,745 +Stornant +26,230 +$357,195 +48,660 +$1,657,979 +Zwiers +72,809 +$931,535 +46,439 +$1,585,836 +1. +The Company calculates the dollar values by multiplying the number of shares of common stock acquired upon exercise by +the difference between the exercise price and the closing price of the Company common stock on the exercise date. +2. +The Company calculates the dollar values using the closing price of Wolverine Worldwide common stock on the date of +vesting. +2022 PROXY STATEMENT +63 +TABLE OF CONTENTS +Pension Plans and 2021 +Pension Benefits +Wolverine Worldwide maintains the following defined benefit retirement plans covering Messrs. Krueger, Stornant +and Zwiers: (1) the Wolverine Worldwide Employees' Pension Plan (“Pension Plan”), which is a funded and tax-qualified defined benefit plan under the Internal Revenue Code that covers eligible employees, and (2) the Wolverine World Wide, Inc. 409A +Supplemental Executive Retirement Plan (“SERP”), which is an unfunded, non-qualified plan that covers individuals recommended by the CEO and approved by the Compensation Committee. +QUALIFIED PENSION PLANS +Participants vest in the Pension Plan after five years of qualifying service. Subject to the limitations +imposed by the Internal Revenue Code, the Pension Plan generally pays a monthly benefit in an amount equal to a percentage of the participant's final average monthly earnings multiplied by his or her number of years of service. For purposes of +this benefits formula, the Pension Plan caps years of service at 25 (30 for non-SERP participants), and the percentages of final average monthly earnings are 2.4% for Mr. Krueger and 2.0% for Messrs. Stornant and Zwiers. “Earning” as used in this +Pension Plan formula generally includes all W-2 compensation other than taxable fringe benefits and deferred compensation, and for 2021 was capped at $290,000, the IRS limit applicable to tax qualified plans. +Upon retirement, a participant may elect to receive the benefit in the form of a life annuity, 5 or 10-year +certain and life annuities, or joint and 50%, joint and 75%, or joint and 100% survivor annuities. The payments are actuarially adjusted based on the participant's election. Any election, other than an election to receive life annuity benefits, +reduces the monthly benefit payable. The “normal” age at which benefits may be drawn under the plan is 65. +SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN +Messrs. Krueger, Stornant and Zwiers participate in the SERP, which provides retirement benefits above amounts +available under the Company's tax qualified Pension Plan. The SERP benefit generally equals the difference between the participant's retirement benefit under the Pension Plan and the benefits the participant would have received if there were no +IRS imposed cap on earnings when calculating the Pension Plan benefit. The SERP caps years of service at 25 in calculating a participant's benefit. The SERP also allows a retired participant who has five years of service to draw earlier +(beginning at age 55) and on different terms than under the Pension Plan. A participant's earnings percentage multiplier is the same under the SERP as it is under the Pension Plan (2.4% for Mr. Krueger and 2.0% for Messrs. Stornant and Zwiers). +The Compensation Committee may grant additional deemed years of service under the SERP to a participant, subject to the cap of 25 years. The full benefit of any additional years of deemed service is paid under the SERP. Mr. Krueger reached the +25-year cap in 2012. +If a retired participant draws the SERP benefit prior to age 65, the reduction factor is 0.333% for each month +prior to age 60, and 0.1666% for each month between age 60 and age 65. As of the end of fiscal year 2020, Mr. Krueger is the only NEO eligible to retire and begin drawing benefits under the SERP. +SERP benefits are paid monthly, and the SERP has a lump sum payment option which may apply to certain +terminations of employment after a change in control or, if elected, upon death. The SERP also includes a disability benefit and a death benefit payable to the participant's designated beneficiary if the participant dies before retiring. The SERP +provides for lump sum payments equal to 125% of the net present value of accrued benefits without regard to any reduction for early payment to participants who resign for good reason or are terminated by Wolverine other than for cause or due to +death or disability within two years (Messrs. Stornant and Zwiers) or three years (Mr. Krueger) after a change in control. +The SERP also contains non-competition, confidentiality and employee non-solicitation provisions in favor of +Wolverine Worldwide. Under the SERP non-competition provisions, a participant is not entitled to any benefit payment if the participant enters into certain relationships with a competing business prior to the date on which such benefit payment is +due. If the participant's employment is terminated for serious misconduct, or if Wolverine Worldwide cannot collect under an insurance policy purchased to fund SERP benefits for certain reasons, the Company may terminate a participant's benefits +under the SERP. Wolverine Worldwide may terminate the SERP or stop further accrual of SERP benefits for a participating NEO at any time, but termination will not affect previously accrued benefits. +2022 PROXY STATEMENT +64 +TABLE OF CONTENTS +PENSION BENEFITS IN FISCAL YEAR 2021 +The following table provides for each NEO certain information concerning each plan that provides for payments +or other benefits at, following, or in connection with retirement: +Plan Name +Number of Years +Credited Service +(#) +Present Value of +Accumulated Benefit 1 +($) +Payments During +Last Fiscal Year +($) +Krueger +SERP +25 +$19,899,543 +- +Pension +25 +$3,014,744 +- +Hoffman 2 +SERP +- +- +- +Pension +- +- +- +Soriano 2 +SERP +- +- +- +Pension +- +- +- +Stornant +SERP +25 +$3,697,846 +- +Pension +25 +$1,628,937 +- +Zwiers +SERP +24 +$4,195,645 +- +Pension +24 +$1,466,921 +- +1. +These values are as of January 1, 2022, and are calculated assuming the participants will commence their benefits at +age 65 (or current age if older), and that those benefits will be paid in the form according to each participant's 409A election and use the PRI-2012 mortality tables for males and females (white collar for SERP and no collar for +Pension Plan), projected forward from base year 2012 with generational projection using an unmodified MP-2021 projection scale, with contingent annuitant mortality tables applied after the death of the participant and using the +following discount rates: 3.11% Pension Plan; 3.04% SERP. +2. +Neither Mr. Hoffman nor Ms. Soriano participate in the SERP or Pension Plan. +2022 PROXY STATEMENT +65 +TABLE OF CONTENTS +Non-Qualified Deferred +Compensation +Wolverine Worldwide maintains a Deferred Compensation Plan. This unfunded and non-qualified plan allows +executives and other eligible senior employees of the Company to elect to defer all or a portion of their base salary, cash bonus, or other performance-based cash compensation. Wolverine Worldwide may, but need not, credit a participant's account +under the plan with additional discretionary Company contributions, which may be subject to a vesting schedule and which would vest in full on a change in control. Amounts deferred pursuant to the Deferred Compensation Plan may be invested, at +the direction of the participant, in an investment fund, index, or other investment vehicle, as designated by the Compensation Committee to be available under the plan, and earnings, if any, are credited to the participant's account. +Accounts are paid out upon the earliest to occur of (i) a qualifying separation from service, (ii) a change in +control (as such term is defined in the Deferred Compensation Plan), and (iii) a termination of the Deferred Compensation Plan. Payment must generally be made, or installment payments must begin, (as elected by the participant at the time of +deferral), within 60 days of the event triggering payment. +Mr. Stornant is the only NEO who has elected to defer amounts under the Deferred Compensation Plan, and +Mr. Hoffman is the only NEO who received a Company contribution. +Name +Executive +Contributions +in 2021 +($) +Registrant +Contributions +in 2021 +($) +Aggregate +Earnings +in 2021 +($) 2 +Aggregate +Withdrawals / +Distributions +($) +Aggregate +Balance +at Last FYE +($) 3 +Hoffman +- +$25,000 1 +$17 +- +$22,457 +Stornant +- +- +$11 +- +$13,964 +1. +Company contributions for 2021 were deposited to Mr. Hoffman's Deferred Compensation Plan in February 2022 and were +included in the “All Other Compensation” column in the “ Summary Compensation Table” on page 56 . +2. +Reflects market-based earnings on amounts credited to Mr. Stornant and Mr. Hoffman under the Deferred Compensation Plan. +3. +The amounts in this column were previously reported as compensation to Messrs. Hoffman and Stornant in the Summary +Compensation Table for the Company's 2021 Proxy Statement. +2022 PROXY STATEMENT +66 +TABLE OF CONTENTS +Potential Payments Upon +Termination or Change in +Control +Wolverine Worldwide has entered into an Executive Severance Agreement with each NEO that provides certain +rights, including the right to receive payments in the event of a termination of employment following a change in control. The Company also has entered into an agreement with each of Mr. Krueger, Mr. Hoffman and Ms. Soriano regarding certain +termination benefits in the event of termination of employment under certain other circumstances described below. +BENEFITS TRIGGERED BY TERMINATION FOR CAUSE OR VOLUNTARY +TERMINATION +An NEO is not entitled to receive any additional forms of severance payments or benefits upon termination of +employment for Cause or upon the NEO's voluntary decision, other than for Good Reason, to terminate his or her employment, as discussed in further detail below. +BENEFITS TRIGGERED BY TERMINATION OTHER THAN FOR CAUSE OR FOR +GOOD REASON NOT IN CONNECTION WITH A CHANGE IN CONTROL +Mr. Krueger entered into a Separation Agreement on March 13, 2008, which states that upon termination of his +employment by Wolverine Worldwide without Cause, or termination by Mr. Krueger with Good Reason, as such terms are defined in Mr. Krueger's Separation Agreement, Wolverine Worldwide will pay Mr. Krueger the following payments in exchange for a +general release of claims in favor of Wolverine Worldwide: (1) continued base salary for 18 months (reduced by payments he receives if he is employed by a Competing Business, as defined in Mr. Krueger's Separation Agreement); (2) the pro rata +portion of the annual incentive bonus and the three year bonus for all uncompleted performance periods based on actual corporate performance for the applicable performance periods; (3) the pro rata portion of the annual individual performance +bonus relating to personal performance objectives; and (4) retiree medical benefits for Mr. Krueger and his spouse for a period starting on the day after the termination date and ending on the last day of the 18th month following the month in +which the termination date falls. +“Cause” generally is defined in Mr. Krueger's Separation Agreement to mean: (1) any act or omission knowingly +undertaken or omitted with the intent of causing material damage to Wolverine Worldwide; (2) any intentional act involving fraud, misappropriation or embezzlement, that causes material damage to Wolverine Worldwide; (3) repeated willful failure +to substantially perform any of his significant duties as reasonably directed by the Board of Directors of Wolverine Worldwide; (4) a conviction (including any plea of guilty or nolo contendere) of any criminal act that (a) results in the +executive serving prison time and not being able to perform the normal duties of his position for more than thirty (30) days; or (b) causes material damage to Wolverine Worldwide; or (5) chronic or habitual use or consumption of drugs or alcohol +that causes material damage to Wolverine Worldwide. +“Good Reason” generally is defined in Mr. Krueger's Separation Agreement to mean: (1) a material reduction in +base compensation, including a reduction in base salary or opportunities under Wolverine Worldwide's bonus plans or equity plans (other than those implemented for the executive team as a whole); (2) a material reduction in authority, duties, or +responsibilities; (3) a requirement to report to a Company officer or employee instead of reporting directly to the Board of Directors; or (4) certain relocations, other than those related to a change in the location of Wolverine Worldwide's +headquarters affecting a majority of the executive team. +Mr. Hoffman entered into an Employment Agreement on August 7, 2020, which states that upon termination of his +employment by Wolverine Worldwide without Cause, or termination by Mr. Hoffman with Good Reason, as such terms are defined in Mr. Hoffman’s Employment Agreement, Wolverine Worldwide will pay Mr. Hoffman the following payments in exchange for a +general release of claims in favor of Wolverine Worldwide: (1) for a termination that would have occurred prior to the end of the fiscal year, continued base salary for 12 months (18 months if he had resigned due to not having been promoted to +Chief Executive Officer by March 8, 2022, and, in connection with an amendment entered into on December 17, 2021 that became effective following the completion of the fiscal year (the “Amendment”), for terminations occurring after completion of +the fiscal year, the continuation period was increased to 18 months) offset by the amount of salary +2022 PROXY STATEMENT +67 +TABLE OF CONTENTS +and guaranteed compensation, if any, he is entitled to from another employer; (2) for a termination that +would have occurred prior to the end of the fiscal year, payment of Company COBRA premiums for 12 months (18 months if he had resigned due to not having been promoted to Chief Executive Officer by March 8, 2022, and, in connection with the +Amendment, for terminations occurring after completion of the fiscal year, the payment period was increased to 18 months), or, if earlier, until eligible for coverage through another employer; and (3) prior to the Amendment, in the event of a +termination without Cause prior to March 8, 2022 or Mr. Hoffman’s resignation because he has not been promoted to Chief Executive Officer by such date, the pro rata portion of Mr. Hoffman’s target bonus opportunity for the year of termination (in +connection with the Amendment, any termination without Cause or resignation for Good Reason will entitle Mr. Hoffman to the payment of a pro rata target bonus opportunity for the year of termination). +“Cause” generally is defined in Mr. Hoffman’s Employment Agreement to mean: (1) any intentional act of fraud, +embezzlement, theft, dishonesty, misrepresentation or breach of fiduciary duty with respect to the Company or its subsidiaries; (2) gross negligence or willful misconduct in the performance of duties; (3) material failure or refusal to follow any +reasonable directive of the Board or the officer to whom Mr. Hoffman reports, and if such failure and refusal is curable, if such failure or refusal is not cured within ten (10) days after written notice; (4) breach of any noncompetition, +nonsolicitation, confidentiality or other covenant with the Company, material breach of any material written policy of the Company which if curable, is not cured within ten (10) days after the Company’s written notice of such breach, or material +breach of Mr. Hoffman’s Employment Agreement, which if curable, is not cured within ten (10) days after the Company’s written notice of such breach; or (5) conviction of or indictment for or entering of a guilty plea or plea of no contest or nolo +contendere with respect to any felony or any crime involving an act of moral turpitude. +Following the Amendment, “Good Reason” generally is defined in Mr. Hoffman’s Employment Agreement to mean: (i) +a material diminution in duties or a reduction of title, (ii) a material breach by the Company of the Employment Agreement, (iii) relocation of Mr. Hoffman’s principal place of employment to a location that is more than fifty (50) miles from the +Company’s corporate headquarters or Waltham, Massachusetts office as of January 2, 2022, without Mr. Hoffman’s consent, (iv) termination of the Employment Agreement by the Company serving a notice of nonextension or (v) a reduction in +Mr. Hoffman’s base salary, unless such reduction is part of an across the board reduction for senior executives of the Company. Prior to the Amendment, Mr. Hoffman also would have had “Good Reason” to terminate employment if the Company had +failed to promote Mr. Hoffman to the position of Chief Executive Officer by March 8, 2022. +On June 8, 2018, Ms., Soriano entered into a Service Agreement with Wolverine Europe Limited, which is typical +for senior executives based in the United Kingdom. Ms. Soriano’s agreement states that upon certain terminations of her employment by Wolverine Europe Limited, Wolverine Europe Limited will provide Ms. Soriano with written notice nine (9) months +prior to such termination or, alternatively, will pay Ms. Soriano her base salary for such period (or any portion thereof) in lieu of such notice. In addition, upon voluntary termination of Ms. Soriano’s employment by Ms. Soriano for any reason, +she is required to give written notice six (6) months prior to such termination and Wolverine Europe Limited may pay Ms. Soriano her base salary for such period (or any portion thereof) in lieu of such notice. If Wolverine Europe Limited chooses +to pay Ms. Soriano her base salary in lieu of notice, in either case, such amounts will be in full and final settlement of all claims Ms. Soriano may have against Wolverine and its affiliates and, further, such amounts will be reduced by any +income earned from subsequent employment. +For purposes of Ms. Soriano’s Service Agreement, Wolverine Europe Limited will generally not be required to +provide notice to terminate her employment if she (1) commits, repeats or continues any material breach of her Service Agreement or her obligations thereunder, (2) commits an act of gross misconduct or serious/gross incompetence or negligence +including any deliberate act of discrimination or harassment, (3) acts in a manner which prejudices or is likely in the reasonable opinion of the Board to prejudice the interests or reputation of Ms. Soriano, Wolverine or its affiliates, (4) +commits any material breach of the Code of Conduct, (5) commits or is charged or convicted of any criminal offense other than an offense which does not affect her position or any road traffic violation, (6) is declared bankrupt, (7) is prohibited +by law from being a director of a company, (8) is removed as a director of Wolverine Europe Limited or any affiliate for a reason related to misconduct, (9) is in breach of the warranties contained in the Service Agreement, (10) breaches a +material policy of Wolverine or its affiliates, (11) becomes incapacitated and no longer able to perform her duties for a period exceeding 26 weeks in any 12 month period, or (12) ceases to hold any necessary qualification to carry out her duties +and/or is in breach of any rules and regulations or any relevant regulatory body. +BENEFITS TRIGGERED UPON A CHANGE IN CONTROL +Benefits Upon Termination Following a Change in Control. +Under the Executive Severance Agreements entered into with the NEOs, payments and benefits are triggered when employment is terminated without “Cause” or when an executive terminates employment for “Good Reason” within two years (Messrs. +Hoffman, Stornant, and Zwiers and Ms. Soriano) or three years (Mr. Krueger) following a change in control of Wolverine Worldwide. +Upon such a qualifying termination, Wolverine Worldwide will pay the lump sum severance payment under the +Executive Severance Agreement composed of the following: (1) unpaid base salary and bonus payments that had been earned; (2) in lieu of a bonus payment under +2022 PROXY STATEMENT +68 +TABLE OF CONTENTS +the Annual Bonus Plan, an amount equal to the quotient of the number of days the NEO was employed by +Wolverine Worldwide, or any successor company in the year of termination, divided by the number of days in the year; multiplied by 100% of the greater of either (a) the bonus awarded to the NEO under the annual bonus plan for the preceding year +and (b) the average paid to the NEO over the preceding two year period under the annual bonus plan; (3) in lieu of payments under the various three year performance periods that remain open on the date of termination, if any, an amount equal to +the bonus the NEO would have received based on actual and assumed performance measures, multiplied by the quotient of the number of days the NEO participated in the performance period prior to the termination, divided by the total number of days +in the performance period (in determining the earnings per share or other performance measures that can be determined annually for any year subsequent to the year of termination, performance will equal the level required to attain the maximum +goal under the three year plan for that year); (4) either two (Messrs. Hoffman, Stornant, Zwiers and Ms. Soriano) or three (Mr. Krueger) times the sum of (a) the NEO's highest annual base salary during the 12 month period prior to termination and +(b) the greater of (i) the average amount earned by the NEO during the previous two years under the annual bonus plan and (ii) the amount earned during the previous year under the Annual Bonus Plan; (5) 100% of the positive spread for any stock +options held by the NEO on the date of termination, whether or not vested; (6) in the case of Messrs. Krueger and Zwiers, an excise tax gross up adjustment (note: the agreements with Messrs. Hoffman and Stornant and Ms. Soriano were entered into +after 2008, and the Committee determined to not provide such gross ups after that date); and (7) in the case of Messrs. Stornant and Zwiers, the present value of an additional three years of deemed service under the Pension Plan and SERP (this +benefit does not apply to Mr. Hoffman or Ms. Soriano since they do not participate in the Pension Plan or SERP or for Mr. Krueger since he has maximum years of service under these plans). Upon a termination of employment following a change of +control, Wolverine Worldwide or any successor company will maintain for a period of six months to one year the NEO's benefits under the then current benefit plans, programs or arrangements that the NEO was entitled to participate in immediately +prior to the termination date. In addition, Wolverine Worldwide or any successor company will provide outplacement services through the last day of the second calendar year following the calendar year of termination. +“Change in Control” under the Executive Severance Agreements generally means certain changes in composition of +the Board of Directors, certain acquisitions of 20% or more of Wolverine Worldwide's common stock or combined outstanding voting power of Wolverine World Wide, Inc., and other specified reorganizations, mergers, consolidations, liquidations, +dissolutions or distributions of substantial assets (unless such transactions result in the creation of an entity in which at least 50% of the common stock and combined voting power is owned by the owners of record prior to the transaction, no +single shareholder owns more than 20% of the combined voting power and a majority of the board remains unchanged). In all cases, an event will not qualify as a change in control unless it qualifies as “a change in the ownership or effective +control” of the Company or “a change in the ownership of a substantial portion of the assets of the Company,” each as determined under the stringent requirements of Section 409A of the Tax Code. Under this standard, for example, transactions must +be consummated, not just approved by shareholders. +“Cause” is defined under the Executive Severance Agreements to generally mean the willful and continued +failure to substantially perform duties or willfully engaging in gross misconduct that is injurious to the Company. +“Good Reason” is defined under the Executive Severance Agreements to generally mean: (1) any materially +adverse change in position, duties, responsibilities or title, or any removal, involuntary termination or failure to re-elect an officer; (2) a reduction in annual base salary; (3) any relocation or requirement to substantially increase business +travel; (4) the failure to continue providing any executive incentive plans or bonus plans; (5) the failure to continue any employee benefit plan or compensation plan unless a comparable plan is available; (6) the failure to pay any salary, +bonus, deferred compensation or other compensation; (7) the failure to obtain an assumption agreement from any successor; (8) any purported termination of the employment which is not effected in a manner prescribed by the Executive Severance +Agreement; or (9) any other material breach by Wolverine Worldwide or any successor company of its obligations under the Executive Severance Agreement. +Benefits Upon a Change in Control Only. For 2017 and +future years, the Company adopted double-trigger vesting, meaning that equity vesting only accelerates upon a qualifying termination of employment after a change in control. For grants prior to 2017, upon a change in control of Wolverine +Worldwide, absent a determination by the Compensation Committee to the contrary, outstanding stock options become immediately exercisable in full and will remain exercisable during their remaining term, regardless of whether the NEO remains an +employee of Wolverine Worldwide, or any successor company. The Committee may determine that one or all of the NEOs shall receive cash in an amount equal to the positive spread amount associated with these options. In addition, upon a change in +control of Wolverine Worldwide, all other outstanding equity incentive awards of the NEOs that were granted prior to 2017, including shares of restricted stock, become immediately and fully vested and non-forfeitable. To the extent that the +Company has made discretionary contributions under the Deferred Compensation Plan that are subject to a vesting schedule, any unvested portion of these contributions will vest on a change in control. Change in control for this purpose generally +means certain changes in the composition of the Board of Directors, certain acquisitions of 20% of Wolverine Worldwide's common stock (50% in the case of the Deferred Compensation Plan) and other specified reorganizations, mergers, +consolidations, liquidations, dissolutions or dispositions of substantial assets. +2022 PROXY STATEMENT +69 +TABLE OF CONTENTS +Excise Tax Gross Up. The Compensation Committee +previously determined that Wolverine Worldwide would not provide excise tax gross up payments in employment agreements entered into after 2008. Messrs. Krueger and Zwiers are the only NEOs who have excise tax gross up protection in their +agreements. +BENEFITS TRIGGERED BY RETIREMENT, DEATH OR PERMANENT +DISABILITY +Pension Plan. In the event of death before retirement, +the Pension Plan provides the surviving spouse of a vested participant a death benefit equal to the qualified pre-retirement survivor annuity as defined in the Internal Revenue Code (generally 50% of the participant's accrued normal retirement +benefit). This benefit is paid annually to the surviving spouse beginning when the participant would have turned 60 and continues for the life of the surviving spouse. For participants with at least three years of service as of December 31, +2003, and who have at least 10 years of service and are employed by the Company at the time of death, the amount of the survivor benefit under the Pension Plan is calculated as though the participant had continued as an employee of the Company +until age 65 at the compensation level as of the date of death and the benefit begins upon the date of death, unreduced for early commencement. The survivor benefit for participants who meet all the criteria set forth in the preceding sentence, +but who die when they are not employed by the Company, are entitled to a joint and survivor benefit commencing upon the date of death, unreduced for early commencement. +SERP. If a SERP participant dies before beginning to +receive benefits under the SERP, the Company must, based on the participant's election, pay the beneficiary either a monthly annuity or a lump sum death benefit equal to the present value of the benefit computed as if the participant had +retired on the date of death, had begun receiving benefits at age 55, and had continued to receive benefits for the remainder of the participant's life expectancy. If the participant dies after beginning to receive benefit payments, benefits +cease unless the participant was receiving benefits in the form of one of the joint and survivor annuity optional elections under the plan or had elected benefits in a form that provides for a continuation of benefits. +If a participant becomes disabled (as defined in the SERP), the SERP provides a disability benefit equal to +60% of the normal retirement accrued benefit based upon years of service up to the date that the participant became disabled through the date the participant reaches age 65 (at which point, the participant would begin drawing full SERP benefits) +or is no longer disabled. +Annual Bonus Plan. Upon termination of employment at +least six months after the beginning of a fiscal year due to death, disability, or early or normal retirement, an NEO is entitled to receive a pro rata portion of any annual bonus award earned under the Annual Bonus Plan based on the NEO's +service during such fiscal year and actual performance under the Annual Bonus Plan. The annual bonus is payable at the same time and in the same manner as awards are paid to other NEOs for the fiscal year. +Stock Incentive Plans. Upon death, disability, or +voluntary termination of employment after attaining age 59 with ten years of service with the Company, subject to certain conditions, the restrictions applicable to each NEO's shares of restricted stock terminate. Upon death, disability or +voluntary termination of employment after attaining age 59 with ten years of service with the Company, subject to certain conditions, the restrictions on time-vested shares lapse or units vest. +Deferred Compensation Plan. Upon death, disability, or +other qualifying separation from service, including retirement, all in accordance with Section 409A of the Internal Revenue Code, all amounts deferred by the NEOs under the Deferred Compensation Plan, including any vested amounts credited to +the NEOs pursuant to a discretionary Company contribution, shall generally be paid, or commence payment, within 60 days of the termination in accordance with the schedule elected by the NEO at the time of deferral. +DESCRIPTION OF RESTRICTIVE COVENANTS THAT APPLY DURING AND +AFTER TERMINATION OF EMPLOYMENT +The SERP contains non-competition, confidentiality, and employee non-solicitation provisions in favor of +Wolverine Worldwide. Under the non-competition provisions of the SERP, the participant will not be entitled to any benefit payment if, prior to the date on which such benefit payment is due, the participant enters into certain relationships with +a competing business. +2022 PROXY STATEMENT +70 +TABLE OF CONTENTS +ESTIMATED PAYMENTS ON TERMINATION OR CHANGE IN CONTROL +The following table summarizes the potential payments and benefits payable to each NEO upon a change in control +or termination of employment following each of the triggering events set forth in the table. As required, the amounts in the table assume that the termination of employment or change in control of Wolverine Worldwide took place on the Company's +last day of fiscal year 2021, which was January 1, 2022. The amounts set out below are in addition to benefits that are generally available to the Company's employees such as distributions under the Company's 401(k) savings plan, disability or +life insurance benefits and accrued vacation. Due to the many factors that affect the nature and amount of any benefits provided upon the termination events discussed below, any actual amounts paid or distributed to NEOs may be different. Factors +that may affect these amounts include timing during the year of the occurrence of the event, Wolverine Worldwide's stock price and the NEO's age and years of service. +The value of the accelerated vesting of unvested equity-based compensation awards was computed using the +closing market price $28.81 of Wolverine Worldwide's common stock on December 31, 2021, the last business day in fiscal year 2021. The value for unvested restricted stock is computed by multiplying $28.81 by the number of shares of the NEO's +restricted stock that would vest as a result of an event. +Each of the hypothetical events described in the following table (the highlighted blue headings in the +left-hand column) is calculated and reported as a discrete event. For example, the amounts disclosed under the “Change in Control Only” heading are not cumulative with the amounts disclosed under the “Change in Control/Termination” heading. +Termination Event and Payment / Benefits +Krueger +Hoffman +Soriano +Stornant +Zwiers +Termination by Company for Cause or Voluntary Termination (other than for Good Reason or due to Retirement) +- +- +- +- +- +Termination by Company Other Than for Cause or by Executive for Good Reason or In Lieu of Notice +$9,712,547 1 +$1,745,049 +$376,755.75 13 +- +- +Change in Control / Termination +Executive Severance Agreement 2 +$12,564,399 +$6,758,247 +$2,193,124 +$5,982,217 +$10,374,952 +Benefits under Executive Severance Agreement 3 +$1,240 +$47,752 +$31,705 +$47,276 +$40,245 +Stock Incentive Plans 4 +$4,977,072 +$2,655,274 +$396,829 +$1,007,716 +$896,855 +Lump sum payment under the SERP 5 +- +- +- +$7,717,862 +$9,082,621 +Death +SERP 6 +- +- +- +$5,212,177 +$5,883,757 +Pension Plan 7 +- +- +- +$1,229,912 +$1,235,154 +Stock Incentive Plans 4 +$4,977,072 +$2,655,274 +$396,829 +$1,007,716 +$896,855 +Earned Incentive Compensation 8 +$7,070,015 +$3,190,827 +$659,440 +$1,597,797 +$1,382,010 +Disability +SERP 9 +- +- +- +$5,128,887 +$6,227,139 +Stock Incentive Plans 4 +$4,977,072 +$2,655,274 +$396,829 +$1,007,716 +$896,855 +Earned Incentive Compensation 8 +$7,070,015 +$3,190,827 +$659,440 +$1,597,797 +$1,382,010 +Retirement +SERP 10 +- +- +- +$4,667,523 +$5,206,892 +Pension Plan 10 +- +- +- +$1,713,351 +$1,539,049 +Stock Incentive Plans 4,11 +$4,977,072 +- +- +- +- +Earned Incentive Compensation 8,11 +$7,070,015 +- +- +- +- +Change in Control Only +Stock Incentive Plans 12 +- +- +- +- +- +1. +The estimate for Mr. Krueger assumes target performance for the 2021-2022 and 2021-2023 performance periods and actual +performance for the 2021 period. Actual payout or vesting, if any, would be determined and made at the end of those periods. +2022 PROXY STATEMENT +71 +TABLE OF CONTENTS +2. +Payments would be triggered after termination of employment under certain circumstances within two years (Messrs. +Hoffman, Stornant and Zwiers and Ms. Soriano) or three years (Mr. Krueger) following a change in control. Includes amounts payable in cash under the terms of the Executive Severance Agreement, excluding the value of the cash payout to +each NEO of the option spread for already vested options. The timing of the payment would be delayed to the extent earlier payment would trigger Section 409A of the tax code. The value of service-based restricted shares or units that +vest upon a change in control under the terms of the Company's stock incentive plans are included in the Stock Incentive Plans row. +3. +These estimates assume that Wolverine Worldwide, or any successor company, maintains the benefit plans for a period of +one year after termination and the outplacement services for a period beginning with the date of termination and ending on the last day of the second calendar year following the calendar year in which the date of termination occurred. +4. +Reflects the value of unvested shares of restricted stock or stock units that would vest because of the event. +5. +Reflects the entire lump sum benefit payable to applicable NEOs, including any accumulated benefit. The timing of the +payment would be delayed to the extent earlier payment would trigger Section 409A of the Tax Code. +6. +Reflects the entire lump sum death benefit payable to a participating NEO's beneficiary, including any accumulated +benefit. +7. +Amounts reflect the net present value of the annuity paid to the surviving spouse calculated using the same discount +rate and mortality assumptions used in the Pension Benefits table under the heading “Pension Benefits in Fiscal Year 2021” under the heading “Pension Plans and 2021 Pension Benefits.” In accordance with the terms of the Pension Plan, +the death benefit for Messrs. Stornant and Zwiers was calculated as though the NEO had continued as an employee of Wolverine Worldwide until age 65 at the compensation level as of the date of death. +8. +Under the Annual Bonus Plan and the terms of performance share awards, each NEO may be eligible to receive a pro rata +portion of any award if employment is terminated as a result of any of the specified events in the table. The amount reported represents (a) actual payout under the Annual Bonus Plan for fiscal year 2021, (b) actual payout under the +2021 performance cycle and (c) target performance for the 2021-2022 and 2021-2023 performance cycles. Performance units would vest on a prorated basis based on actual Company performance. +9. +Reflects the net present value of the annuity using the same discount rate and mortality assumptions used in the +Pension Benefits table and assuming the NEO drew the disability benefit until age 65 followed by the normal retirement benefit. +10. +Reflects the net present value of benefits according to actual elections in place and assuming SERP benefits begin at +age 55 (or immediately if older than 55) and pension benefits as of age 60 with 10 years of service. +11. +Mr. Krueger is the only NEO eligible for retirement (as defined in the applicable plan) at fiscal 2021 year-end. +12. +Reflects the value of unvested shares of restricted stock/stock units (including performance share or unit awards) that +would vest because of the event. +13. +Represents 9 months of base salary and is the maximum amount payable if the company chooses to terminate her +employment without notice. If Ms. Soriano voluntarily terminates, the maximum payout in lieu of notice is six months of base salary ($251,170). +CEO PAY RATIO +As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection +Act and Item 402(u) of Regulation S-K, we are providing the following information about the relationship of the annual total compensation of our employees and the annual total compensation of Blake Krueger, the Company's Chief Executive Officer +during fiscal year 2021. +For 2021, our last completed fiscal year, the annual total compensation of the employee of +the Company identified at median was $69,949 and the annual total compensation of the CEO, as reported in the Summary Compensation Table above, was $14,405,857. +Based on this information, the 2021 ratio of the annual total compensation of Mr. Krueger +to the median of the annual total compensation of all employees was estimated to be 206 to 1. +The methodology and the material assumptions, adjustments and estimates that we used to +identify the median of the annual total compensation of all our employees, as well as to determine the annual total compensation of our “median employee” and our CEO, are described below. +• +We determined that, as of December 31, 2020, our employee population consisted of approximately 3,273 (2,544 in the U.S. and 729 outside the U.S.) +individuals globally. After excluding employees from India (12 employees), Dominican Republic (2 employees), Mexico (1 employees), Netherlands (57 employees), Thailand (2 employees) and Vietnam (47 employees) pursuant to the “de minimis” +exception provided for in the rules, we used a base of 3,152 employees for purposes of determining the “median employee.” We selected December 31, 2020, as the date upon which we would identify the median employee in order to align with +year-end. +• +To identify the median employee from our employee population, we started with the median employee that was used in 2020. There has not been a change in +employee population or Company compensation arrangements that the Company believers would significantly impact the pay ratio. Since the median employee selected in 2020 no longer works for the Company, we selected another employee whose +compensation is substantially similar to the original median employee's compensation based on the compensation measure used to select the original median employee in 2020. To determine the median employee in 2020 we used annual base +salary as well as bonus and other cash incentives paid for the 12-month period ending December 31, 2020 as our consistently applied compensation measure. In making this determination, we annualized the compensation of all newly hired +regular employees during this period. +• +Once we identified our median employee, we combined the elements of such employee's compensation for fiscal 2021 in accordance with the SEC's rules, +resulting in annual total compensation of $69,949. +• +With respect to the annual total compensation of our CEO, we used the amount reported in the “Total” column of our 2021 Summary Compensation Table +included in this Proxy Statement. +2022 PROXY STATEMENT +72 +TABLE OF CONTENTS +Proposal 2 — Advisory Resolution to +Approve Executive Compensation +The Company is asking its shareholders to indicate their support for Wolverine Worldwide's NEO compensation, as +described in this Proxy Statement. This proposal, commonly known as a “say-on-pay” proposal, gives the Company's shareholders the opportunity to express their view on compensation for the Company's NEOs. The say-on-pay vote is advisory and, +therefore, not binding on the Company, the Compensation Committee or the Board. Even though non-binding, the Board and Compensation Committee value the opinions of Wolverine Worldwide's shareholders and will review and consider the voting results +when making future decisions regarding the Company's executive compensation program. +At the 2017 annual meeting of shareholders, the Company also held an advisory vote on the frequency of future +say-on-pay votes. Our shareholders voted in favor of an annual say-on-pay vote and the Company has elected to follow such recommendation. As such, unless the Company modifies its policies on the frequency of say-on-pay votes, it is expected that +the next say-on-pay vote will occur at the 2023 annual meeting of shareholders. Further, in accordance with Rule 14a-21(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), shareholders will be asked to vote again on how +frequently the Company should hold future say-on-pay votes at the Company's 2023 annual meeting of shareholders. +The Company encourages shareholders to read the “Compensation Discussion and Analysis” (“CD&A”) section of +this Proxy Statement beginning on page 38 . As described in the CD&A section, the Compensation Committee has structured the executive compensation program to achieve the following key objectives: +• +Align the interests of NEOs with those of the shareholders through incentives based on achieving performance objectives that enable increased +shareholder value +• +Provide incentives for achieving specific, near term corporate, business unit and individual goals and reward the achievement of those goals +• +Provide incentives for achieving pre-established, longer-term corporate financial goals and reward achievement of those goals +• +Attract and retain talented NEOs who will lead Wolverine Worldwide and drive superior business and financial performance +The executive compensation program is designed to achieve these objectives, in part, by: +• +Weighting at-risk and variable compensation (annual bonuses and long-term incentives) much more heavily than fixed compensation (base salaries) +• +Rewarding annual performance while maintaining emphasis on longer-term objectives +• +Blending cash, non-cash, long- and short-term compensation components and current and future compensation components +The Company encourages shareholders to read the Summary Compensation Table and other related compensation +tables and narrative, appearing on pages 56 - 72 , which provide detailed information on the compensation of the Company's NEOs. +The Compensation Committee and the Board of Directors believe the Company's compensation program and its +policies and procedures articulated in the CD&A section are effective in aligning the interests of the Company's NEOs with the interests of shareholders, promoting the achievement of the Company's near and long-term objectives and increasing +shareholder value. +In accordance with the rules under Section 14A of the Exchange Act, and as a matter of good corporate +governance, the Company asks shareholders to approve the following advisory resolution at the 2022 Annual Meeting of Shareholders: +RESOLVED , that the shareholders of Wolverine World Wide, +Inc. (the “Company”) approve, on an advisory basis, the compensation of the Company's named executive officers disclosed in the Compensation Discussion and Analysis section, the Summary Compensation Table and the related compensation tables, +notes and narrative in the Proxy Statement for the Company's 2022 Annual Meeting of Shareholders. +BOARD RECOMMENDATION +The Board recommends that you vote “FOR” approval of the advisory resolution to approve +executive compensation. +2022 PROXY STATEMENT +73 +TABLE OF CONTENTS +Proposal 3 – Ratification of Appointment of Independent Registered Public Accounting Firm +Ernst & Young LLP (“Ernst & Young”) was the Company's independent registered public accounting firm for +the fiscal year ended January 1, 2022. The Audit Committee has reappointed Ernst & Young as the Company's independent registered public accounting firm for the current fiscal year. As a matter of good corporate governance, the Audit Committee +has determined to submit its appointment of Ernst & Young to the Company's shareholders for ratification. If this appointment is not ratified by the holders of a majority of shares cast affirmatively or negatively on the matter, the Audit +Committee will review its future selection of an independent registered public accounting firm. Even if the appointment is ratified, the Audit Committee in its discretion may select a different independent registered public accounting firm any +time during the year if it determines that such a change would be in the best interests of the Company and the Company's shareholders. +The Audit Committee reviewed Ernst & Young's performance prior to appointing it as the Company's +independent registered public accounting firm, and considered: +• +The historical and recent performance of Ernst & Young on the Company's audit, including the quality of the engagement team and Ernst & Young's +experience, client service, responsiveness and technical expertise +• +The Public Company Accounting Oversight Board (“PCAOB”) report of selected Ernst & Young audits +• +The appropriateness of fees charged +• +Ernst & Young's familiarity with the Company's accounting policies and practices and internal control over financial reporting +• +Ernst & Young's financial strength and performance +Representatives of Ernst & Young are expected to be present at the Annual Meeting. They will have an +opportunity to make a statement if they desire to do so and are expected to be available to respond to appropriate questions from shareholders. +BOARD RECOMMENDATION +The Board recommends that you vote “FOR” ratification of the Audit Committee's selection of +the firm of Ernst & Young LLP as the Company's independent registered public accounting firm for fiscal year 2022. +2022 PROXY STATEMENT +74 +TABLE OF CONTENTS +Audit Committee Report +The Audit Committee of the Board of Directors consists of three directors who are independent under the +Company's Director Independence Standards, the NYSE listed company standards and applicable SEC standards. The Audit Committee represents and assists the Board in fulfilling its oversight responsibility regarding the Company's financial +statements and the financial reporting process, the internal control over financial reporting, the performance of the internal audit function and the independent registered public accounting firm, the qualifications and independence of the +independent registered public accounting firm, the annual independent audit of Wolverine Worldwide's financial statements and internal control over financial reporting and compliance with legal and regulatory requirements. The Audit Committee is +directly responsible for appointing, retaining, compensating, overseeing, evaluating and terminating (if appropriate) Wolverine Worldwide's independent registered public accounting firm. Wolverine Worldwide's management has primary responsibility +for the financial statements and the financial reporting process, including the application of accounting and financial principles, the preparation, presentation and integrity of the financial statements and the systems of internal controls and +other procedures designed to promote compliance with accounting standards and applicable laws and regulations. Wolverine Worldwide's independent registered public accounting firm is responsible for expressing an opinion on the conformity of +Wolverine Worldwide's financial statements with generally accepted accounting principles and for auditing the effectiveness of Wolverine Worldwide's internal control over financial reporting. +The Audit Committee has taken steps to provide assurances regarding Audit Committee composition and procedures, +the independence of Wolverine Worldwide's independent registered public accounting firm and the integrity of Wolverine Worldwide's financial statements and disclosures. These steps include: (i) reviewing the Audit Committee Charter; +(ii) reviewing with legal counsel and the independent registered public accounting firm the Accounting and Finance Code of Ethics; (iii) maintaining financial, accounting and business ethics complaint procedures to allow employees, shareholders +and the public to report concerns regarding Wolverine Worldwide's financial statements, internal controls and disclosures; and (iv) reviewing procedures for the Audit Committee to pre-approve all audit and non-audit services provided by Wolverine +Worldwide's independent registered public accounting firm. +As part of its supervisory duties, the Audit Committee has reviewed Wolverine Worldwide's audited financial +statements for the fiscal year ended January 1, 2022, and has discussed those financial statements with Wolverine Worldwide's management and internal financial staff, and the internal auditors and independent registered public accounting firm +with and without management present. The Audit Committee has also reviewed and discussed the following with Wolverine Worldwide's management and the financial staff, and with the internal auditors and independent registered public accounting firm +with and without management present: +• +Accounting and financial principles and significant assumptions, estimates and matters of judgment used in preparing the financial statements +• +Allowances and reserves for accounts receivable, inventories and taxes +• +Accounting for acquisitions, pension plans and equity-based compensation plans +• +Goodwill and intangible asset impairment analysis +• +Other significant financial reporting issues and practices +The Audit Committee has discussed with Wolverine Worldwide's independent registered public accounting firm the +results of its examinations and its judgments concerning the quality, as well as the acceptability, of Wolverine Worldwide's accounting principles and such other matters that it is required to discuss with the independent registered public +accounting firm under applicable rules, regulations or generally accepted auditing standards, including the matters required to be discussed by the applicable requirements of the PCAOB and the SEC. In addition, the Audit Committee has received +from the independent registered public accounting firm the written disclosures and the letter required by the applicable requirements of the PCAOB regarding the independent registered public accounting firm's communications with the Audit +Committee concerning independence and has discussed their independence from Wolverine Worldwide and Wolverine Worldwide's management with them, including a consideration of the compatibility of non-audit services with their independence, the +scope of the audit and the scope of all fees paid to the independent registered public accounting firm during the year. After, and in reliance upon the reviews and discussions described above, the Audit Committee recommended to the Board that the +audited financial statements for the fiscal year ended January 1, 2022, be included in Wolverine Worldwide's Annual Report on Form 10-K for the year then ended to be filed with the SEC. +Respectfully submitted, +Jeffrey M. Boromisa (Chair) +William K. Gerber +Brenda J. Lauderback +2022 PROXY STATEMENT +75 +TABLE OF CONTENTS +Independent Registered Public +Accounting Firm +The Company's Audit Committee has adopted a policy under which the Audit Committee must approve all audit and +non-audit services provided by the Company's independent registered public accounting firm, Ernst & Young LLP, and which prohibits Ernst & Young LLP from providing any non-audit services that are prohibited by the SEC or the PCAOB. The +Company's Audit Committee provides categorical pre-approval for routine and recurring services, with specific service descriptions and budgets that include sufficient information to confirm the determination that the provision of such service +will not impair the independent registered public accounting firm’s independence. All services not within the specifically pre-approved service descriptions and budgets require engagement specific pre-approval. With certain exceptions (such as +pre-approval of audit services), the Audit Committee may delegate engagement specific pre-approval to one or more Audit Committee members, and has so delegated in certain instances to the Audit Committee Chairperson. Management must communicate +to the Audit Committee at its next regularly scheduled meeting any services approved by an Audit Committee member. Wolverine Worldwide's Audit Committee pre-approved all fees paid to Ernst & Young LLP for services performed in 2021 and 2020. +The aggregate fees billed by Ernst & Young LLP for audit and non-audit services were: +2021 +2020 +Audit Fees 1 +$2,758,000 +$1,978,000 +Audit-Related Fees 2 +$ 270,000 +— +Total Audit & Audit-Related Fees +$3,028,000 +$1,978,000 +Tax Fees 3 +Tax Compliance +$ 978,400 +$ 951,200 +Tax Planning & Advisory +$ 214,000 +$ 60,000 +Tax Planning & Advisory Other +— +— +Total Tax Fees +$1,192,400 +$1,011,200 +All Other Fees +— +— +TOTAL FEES +$4,220,400 +$2,989,200 +1. +“Audit Fees” are comprised of fees for the annual audit, including the audit of internal control over financial +reporting, interim reviews of the financial statements included in Wolverine Worldwide's Quarterly Reports on Form 10-Q, foreign statutory audits, consultations concerning accounting matters associated with the annual audit, and audit +services performed in connection with registration statements and issuance of comfort letters and consents. +2. +“Audit-Related Fees” consist of due diligence in connection with acquisitions. +3. +“Tax Fees” are comprised of fees for the preparation of domestic and foreign tax returns, tax compliance services, and +routine tax advisory and tax planning services. +Wolverine Worldwide's Audit Committee has adopted a policy restricting the Company's hiring of current or +former partners or employees of the independent registered public accounting firm retained by the Company. +2022 PROXY STATEMENT +76 +TABLE OF CONTENTS +Related Party Matters +CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS +Since January 3, 2021, the Company has not engaged in any “related person” transactions with its directors, +executive officers or holders of 5% or more of Company voting securities, affiliates or any member of the immediate family of the foregoing persons. +RELATED PERSON TRANSACTIONS POLICY +Wolverine Worldwide's Board adopted written policies and procedures regarding related person transactions. They +require the Governance Committee to review and either approve or disapprove the Company entering into any Interested Transactions (defined below). If advance approval is not feasible, then the Governance Committee must review and ratify the +Interested Transaction at its next meeting. +Interested Transaction +Any transaction, arrangement or relationship or series of similar transactions, arrangements or relationships (including any +indebtedness or guarantee of indebtedness) in which: +(1) +The aggregate amount involved is or is expected to exceed $120,000 since the beginning of Wolverine Worldwide's last +completed fiscal year; +(2) +Wolverine Worldwide is a participant; and +(3) +Any Related Person (defined below) has or will have a direct or indirect interest. +An Interested Transaction does not include: +(1) +Any employment compensation paid to an executive officer of the Company if the Compensation Committee approved or +recommended to the Board of Directors for approval of such compensation; +(2) +Any compensation paid to a director for service as a director of the Company; +(3) +Any transaction in which a Related Person has an indirect interest solely as a result of being (i) a director or, together +with all other Related Persons, as defined below, a less than 10% beneficial owner of an equity interest in another entity, or both, or (ii) a limited partner in a partnership in which the Related Person, together with all other Related +Persons, has an interest of less than 10%; +(4) +Any transaction in which the Related Person's interest arises solely from the ownership of the Company's common stock and +all holders of the Company's common stock received the same benefit on a pro rata basis (e.g., a dividend); or +(5) +Any transaction with another publicly traded company where the Related Person's interest arises solely from the ownership of +more than 5% of the Company's common stock and the ownership of a non-controlling interest in the other publicly traded company. +Related Person +Any: +(a) +Person who is or was at any point during the last fiscal year for which Wolverine Worldwide filed an Annual Report on Form +10-K and Proxy Statement, an executive officer, director or, to the extent information regarding such nominee is being presented in a proxy or information statement relating to the election of that nominee as a director, nominee for +election as a director; +(b) +Beneficial owner of greater than five percent of Wolverine Worldwide's common stock; or +(c) +Immediate family member* of any of the foregoing. +* +Immediate family member is defined as a person's spouse, parents, stepparents, children, stepchildren, siblings, mothers and fathers-in-law, sons- and +daughters-in-law, and brothers- and sisters-in-law, and anyone residing in such person's home (other than a tenant or employee). +The Governance Committee considers whether the Interested Transaction is on terms no less favorable than terms +generally available to an unaffiliated third party under the same or similar circumstances, the extent of the Related Person's interest in the transaction, and other factors that it deems relevant. No director participates in any discussion or +approval of an Interested Transaction for which he or she is a Related Person, except to provide information to the Governance Committee. +2022 PROXY STATEMENT +77 +TABLE OF CONTENTS +Additional Information +SHAREHOLDERS LIST +For information about how to view the list of shareholders entitled to vote at the Annual Meeting during the +ten days preceding the Annual Meeting, please visit our 2022 Annual Meeting website at www.wolverineworldwide.com/2022annualmeeting. To view the list of shareholders entitled to vote at the Annual Meeting during the meeting, please follow the +instructions set forth in the Notice of annual meeting to participate in the annual meeting. +DIRECTOR AND OFFICER INDEMNIFICATION +The Company indemnifies its directors and NEOs to the fullest extent permitted by law so that they will be free +from undue concern about personal liability in connection with their service to the Company. +DELINQUENT SECTION 16(a) REPORTS +Section 16(a) of the Exchange Act requires the Company's directors and executive officers, and persons who +beneficially own more than 10% of the outstanding shares of the Company's common stock, to file reports of ownership and changes in ownership of shares of common stock with the SEC. Directors, executive officers and greater than 10% beneficial +owners are required by SEC regulations to furnish Wolverine Worldwide with copies of all Section 16(a) reports they file. Based on its review of the copies of such reports received by it, or written representations from certain reporting persons, +the Company believes that during fiscal year 2021, its officers and directors filed the required reports under Section 16(a) on a timely basis, except for the Form 3 for Ms. Soriano, due to an administrative error. +SHAREHOLDER PROPOSALS FOR INCLUSION IN NEXT YEAR'S PROXY +STATEMENT +Pursuant to SEC Rule 14a-8, some shareholder proposals may be eligible for inclusion in Wolverine Worldwide's +2023 Proxy Statement and proxy card. Any such shareholder proposals must be submitted in writing to the Secretary of Wolverine Worldwide no later than the close of business on November 23, 2022. You should address all shareholder proposals to the +attention of Secretary, Wolverine World Wide, Inc., 9341 Courtland Drive, NE, Rockford, Michigan 49351. +OTHER SHAREHOLDER PROPOSALS FOR PRESENTATION AT NEXT YEAR'S +ANNUAL MEETING +The Company's By-Laws require that any shareholder proposal that is not submitted for inclusion in next year's +Proxy Statement under SEC Rule 14a-8 but is instead sought to be presented directly at the 2023 Annual Meeting of Shareholders, must be received at the Company's principal executive offices by the close of business not less than 90 days nor more +than 120 days prior to the first anniversary of the 2022 Annual Meeting. As a result, proposals, including director nominations submitted pursuant to these provisions of the By-Laws must be received between January 4, 2023 and the close of +business on February 3, 2023. You should address a proposal to Secretary, Wolverine World Wide, Inc., 9341 Courtland Drive NE, Rockford, Michigan 49351, and include the information and comply with the requirements set forth in those By-Laws, +which the Company has posted on its website. SEC rules permit management to vote proxies in its discretion in certain cases if the shareholder does not comply with this deadline, and in certain other cases notwithstanding the shareholder's +compliance with this deadline. In addition to satisfying the deadlines in the advance notice provisions of our By-Laws, a shareholder who intends to solicit proxies in support of nominees submitted under these advance notice provisions of the +By-Laws must provide the notice required under Rule 14a-19 to the Secretary of the Company no later than March 5, 2023. +VOTING SECURITIES +Shareholders of record at the close of business on March 7, 2022, are eligible to vote at the Annual Meeting. +The Company's voting securities consist of its $1.00 par value common stock, and there were 81,388,518 shares outstanding and entitled to vote on the record date. Each share outstanding on the record date will be entitled to one vote on each +director nominee and one vote on each other matter. Treasury shares are not +2022 PROXY STATEMENT +78 +TABLE OF CONTENTS +voted. Individual votes of shareholders are kept private, except as appropriate to meet legal requirements. +Access to proxies and other individual shareholder voting records is limited to the independent inspectors of election and certain employees of the Company and its agents who acknowledge their responsibility to comply with this policy of +confidentiality. +CONDUCT OF BUSINESS +A majority of the outstanding shares of common stock as of the record date must be present at the Annual +Meeting in order to hold the Annual Meeting and conduct business. This is called a “quorum.” Your shares are counted as present at the meeting if you are present at the Annual Meeting and vote, a proxy card has been properly submitted by you or +on your behalf, or you have submitted your proxy by telephone or by internet, or by completing, signing, dating and returning your proxy form in the enclosed envelope. Both abstentions and broker non-votes (explained below in “ Vote Required for Election and Approval ”) are counted as present for the purpose of determining the presence of a quorum. +VOTE REQUIRED FOR ELECTION AND APPROVAL +For Proposal 1, Election of Directors for Terms Expiring in 2025, directors are elected by a majority of votes +cast unless the election is contested, in which case directors are elected by a plurality of votes cast. A majority of votes cast means that the number of shares voted “for” a Director nominee exceeds the number of votes cast “against” the +Director nominee. If an incumbent director in an uncontested election does not receive a majority of votes cast for his or her election, under the Company's Corporate Governance Guidelines, the director is required to submit a letter of +resignation to the Board for consideration by the Governance Committee. The Governance Committee will then make a recommendation to the Board as to whether to accept or reject the tendered resignation. The Governance Committee and the Board, in +making their decisions, may implement any procedures they deem appropriate and may consider any factor or other information that they deem relevant. The Board will then act on the tendered resignation, taking into account the Governance +Committee's recommendation, and will publicly disclose its decision regarding the resignation within 90 days after the results of the election are certified. A director whose resignation is under consideration shall abstain from participating in +any recommendation or decision regarding that resignation. If the resignation is not accepted, the director will continue to serve until the next annual meeting of shareholders at which such director faces re-election and until such director's +successor is elected and qualified. +Proposal 2, Advisory Vote to Approve Executive Compensation, is a non-binding, advisory vote. Therefore, there +is no required vote that would constitute approval. The Company values the opinions expressed by its shareholders in this advisory vote, and the Board and Compensation Committee will consider the outcome of these votes when designing compensation +programs and making future compensation decisions for the Company's named executive officers. +Proposal 3, Ratification of Appointment of Independent Registered Public Accounting Firm, requires the +affirmative vote of a majority of shares cast affirmatively or negatively on the matter for approval. +Abstentions and broker non-votes are not considered “votes cast.” Abstentions and broker non-votes, if any, +will have no effect on the outcome of the election of directors and will have no effect on the outcome of any other matters proposed for a vote at the Annual Meeting. +Generally, broker non-votes occur when shares held by a broker in “street name” for a beneficial owner are not +voted with respect to a particular proposal because (1) the broker has not received voting instructions from the beneficial owner, and (2) the broker lacks discretionary voting power to vote those shares. Brokers do not have discretionary +authority with respect to any of the proposals except for Proposal 3. +VOTING RESULTS OF THE ANNUAL MEETING +The Company will announce preliminary voting results at the Annual Meeting and publish final results in a Form +8-K within four business days following the Annual Meeting. If final results are not known within four business days of the Annual Meeting, then the Company will file a Current Report on Form 8-K with the preliminary results and file an amended +Current Report on Form 8-K within four business days of the availability of the final results. +2022 PROXY STATEMENT +79 +TABLE OF CONTENTS +ATTENDING THE ANNUAL MEETING +You may vote shares held directly in your name as the shareholder of record at the Annual Meeting. If you +choose to vote at the meeting, please access instructions as set forth in the Notice of annual meeting. Even if you plan to attend the Annual Meeting, Wolverine Worldwide recommends that you vote your shares in advance as described below so that +your vote will be counted if you later decide not to attend the Annual Meeting. You may vote shares held in “street name” through a brokerage account or by a bank or other nominee if you obtain a proxy from the record holder giving you the right +to vote the shares. Each shareholder may appoint only one proxy holder or representative to attend the meeting on his or her behalf. +MANNER FOR VOTING PROXIES +The shares represented by all valid proxies received by telephone, by internet or by mail will be voted in the +manner specified. Where the shareholder has not indicated a specific choice, the shares represented by all valid proxies received will be voted in accordance with the Board's recommendations as follows: (1) for each of the nominees for directors +named earlier in this Proxy Statement, (2) for approval of the advisory resolution to approve executive compensation, and (3) for ratification of the appointment of the independent registered public accounting firm. The Board has not received +timely notice of any other matter that may come before the Annual Meeting. However, should any matter not described above be properly presented at the Annual Meeting, the persons named in the proxy form will vote in accordance with their +judgment, as permitted. +REVOCATION OF PROXIES +A shareholder who gives a proxy may revoke it at any time before it is exercised by voting at the Annual +Meeting in the manner described in the Notice of 2022 Annual Meeting of Shareholders, by delivering a subsequent proxy or by notifying the inspectors of election in writing of such revocation. +SOLICITATION OF PROXIES +The Company will pay the expenses of solicitation of proxies for the Annual Meeting. Solicitations may be made +in person or by telephone, by officers and employees of the Company, or by nominees or other fiduciaries who may mail materials to or otherwise communicate with the beneficial owners of shares held by the nominees or other fiduciaries. These +individuals will not be paid any additional compensation for any such solicitation. Upon request, the Company will reimburse brokers, dealers, banks and trustees, or their nominees, for reasonable expenses incurred by them in forwarding material +to beneficial owners of the Company's common stock. +DELIVERY OF DOCUMENTS TO SHAREHOLDERS SHARING AN ADDRESS +If you are the beneficial owner, but not the record holder, of shares of Wolverine Worldwide stock, your +broker, bank or other nominee may only deliver one copy of this Proxy Statement and the Company's 2021 Annual Report to multiple shareholders who share an address, unless that nominee has received contrary instructions from one or more of the +shareholders. The Company will deliver promptly, upon written or oral request, a separate copy of this Proxy Statement and its 2021 Annual Report to a shareholder at a shared address to which a single copy of the documents was delivered. A +shareholder who wishes to receive a separate copy of the Proxy Statement and annual report, now or in the future, or shareholders who share an address and receive multiple copies of the Proxy Statement and annual report but would like to receive +a single copy, should submit this request to Broadridge Financial Solutions, Inc. at 1-866-540-7095 or in writing at Broadridge, Householding Department, 51 Mercedes Way, Edgewood, New York 11717. Beneficial owners sharing an address who are +receiving multiple copies of proxy materials and who wish to receive a single copy of such materials in the future should make a request directly to their broker, bank or other nominee. +ACCESS TO PROXY STATEMENT AND ANNUAL REPORT +Distribution of this Proxy Statement and enclosed proxy card to shareholders is scheduled to begin on or about +March 23, 2022. Wolverine Worldwide's financial statements for the fiscal year ended January 1, 2022, are included in the Company's 2021 Annual Report, which the Company is providing to shareholders at the same time as this Proxy Statement. +Wolverine Worldwide's Proxy Statement for the 2022 Annual Meeting and the Annual Report to Shareholders for the fiscal year ended January 1, 2022 are available at www.wolverineworldwide.com/2022annualmeeting . +If you have not received or do not have access to the 2021 Annual Report, write to: Wolverine World Wide, Inc., 9341 Courtland Drive NE, Rockford, Michigan 49351, Attn: Investor Relations or call (616) 866-5500 and ask for Investor Relations, +and the Company will send a copy to you without charge. +2022 PROXY STATEMENT +80 +TABLE OF CONTENTS +APPENDIX A +APPENDIX A – Forward-Looking +Statements and Non-GAAP Reconciliation Tables +2022 PROXY STATEMENT +A-1 +TABLE OF CONTENTS +APPENDIX A +FORWARD-LOOKING STATEMENTS +This document contains “forward-looking statements,” which are statements relating to future, not past, events. +In this context, forward-looking statements often address management’s current beliefs, assumptions, expectations, estimates and projections about future business and financial performance, national, regional or global political, economic and +market conditions, and the Company itself. Such statements often contain words such as “anticipates,” “believes,” “estimates,” “expects,” “forecasts,” “intends,” “is likely,” “plans,” “predicts,” “projects,” “should,” “will,” variations of such +words, and similar expressions. Forward-looking statements, by their nature, address matters that are, to varying degrees, uncertain. Uncertainties that could cause the Company’s performance to differ materially from what is expressed in +forward-looking statements include, but are not limited to, the following: +• +the potential effects of the COVID-19 pandemic on the Company’s business, operations, financial results and liquidity; +• +changes in general economic conditions, employment rates, business conditions, interest rates, tax policies and other factors affecting consumer +spending in the markets and regions in which the Company’s products are sold; +• +the inability for any reason to effectively compete in global footwear, apparel and consumer-direct markets; +• +the inability to maintain positive brand images and anticipate, understand and respond to changing footwear and apparel trends and consumer preferences; +• +the inability to effectively manage inventory levels; +• +increases or changes in duties, tariffs, quotas or applicable assessments in countries of import and export; +• +foreign currency exchange rate fluctuations; +• +currency restrictions; +• +supply chain and capacity constraints, production disruptions, including reduction in operating hours, labor shortages, and facility closures resulting +in production delays at the Company’s manufacturers due to disruption from the effects of the COVID-19 pandemic, quality issues, price increases or other risks associated with foreign sourcing; +• +the cost, inflationary pressures and availability of raw materials, inventories, services and labor for contract manufacturers; +• +labor disruptions; +• +changes in relationships with, including the loss of, significant wholesale customers; +• +risks related to the significant investment in, and performance of, the Company’s consumer-direct operations; +• +risks related to expansion into new markets and complementary product categories as well as consumer-direct operations; +• +the impact of seasonality and unpredictable weather conditions; +• +the impact of changes in general economic conditions and/or the credit markets on the Company’s manufacturers, distributors, suppliers, joint venture +partners and wholesale customers; +• +changes in the Company’s effective tax rates; +• +failure of licensees or distributors to meet planned annual sales goals or to make timely payments to the Company; +• +the risks of doing business in developing countries and politically or economically volatile areas; +• +the ability to secure and protect owned intellectual property or use licensed intellectual property; +2022 PROXY STATEMENT +A-2 +TABLE OF CONTENTS +APPENDIX A +• +the impact of regulation, regulatory and legal proceedings and legal compliance risks, including compliance with federal, state and local laws and +regulations relating to the protection of the environment, environmental remediation and other related costs, and litigation or other legal proceedings relating to the protection of the environment or environmental effects on human +health; +• +risks of breach of the Company’s databases or other systems, or those of its vendors, which contain certain personal information, payment card data or +proprietary information, due to cyberattack or other similar events; +• +problems affecting the Company's supply chain and distribution system, including service interruptions at shipping and receiving ports; +• +strategic actions, including new initiatives and ventures, acquisitions and dispositions, and the Company’s success in integrating acquired businesses, +including Sweaty Betty ® , and implementing new initiatives and ventures; +• +the risk of impairment to goodwill and other intangibles; +• +the success of the Company’s restructuring and realignment initiatives undertaken from time to time; and +• +changes in future pension funding requirements and pension expenses. +These or other uncertainties could cause a material difference between an actual outcome and a forward-looking +statement. The uncertainties included here are not exhaustive and are described in more detail in Part I, Item 1A: “Risk Factors” of our Annual Report on Form 10-K. Given these risks and uncertainties, investors should not place undue reliance on +forward-looking statements as a prediction of actual results. The Company does not undertake an obligation to update, amend or clarify forward-looking statements, whether as a result of new information, future events or otherwise. +2022 PROXY STATEMENT +A-3 +TABLE OF CONTENTS +APPENDIX A +NON-GAAP RECONCILIATION TABLES +The following tables contain information regarding the non-GAAP adjustments used by the Company in the +presentation of its financial results: +RECONCILIATION OF REPORTED REVENUE +TO ADJUSTED ORGANIC REVENUE* +(Unaudited) +(In millions) +GAAP Basis +Sweaty Betty (1) +Organic Basis +Revenue - Fiscal 2021 +$2,414.9 +$(117.4) +$2,297.5 +(1) +2021 adjustment reflects the Sweaty Betty® results included in the consolidated condensed statement of operations. +RECONCILIATION OF REPORTED eCOMMERCE REVENUE GROWTH +TO ADJUSTED ORGANIC eCOMMERCE REVENUE GROWTH* +(Unaudited) +GAAP Basis +Sweaty Betty (1) +Organic Basis +eCommerce Revenue Growth - Fiscal 2021 +39.7% +21.4% +18.3% +(1) +2021 adjustment reflects the Sweaty Betty® results included in the consolidated condensed statement of operations. +RECONCILIATION OF REPORTED DIRECT TO CONSUMER REVENUE GROWTH +TO ADJUSTED ORGANIC DIRECT TO CONSUMER REVENUE GROWTH* +(Unaudited) +GAAP Basis +Sweaty Betty (1) +Organic Basis +Direct to Consumer Revenue Growth - Fiscal 2021 +47.0% +24.0% +23.0% +(1) +2021 adjustment reflects the Sweaty Betty® results included in the consolidated condensed statement of operations. +RECONCILIATION OF REPORTED DILUTED EPS TO ADJUSTED +DILUTED EPS AND ADJUSTED ORGANIC DILUTED EPS* +(Unaudited) +GAAP Basis +Adjustments (1) +As Adjusted +Sweaty Betty (2) +Organic Basis +EPS - Fiscal 2021 +$ 0.81 +$1.28 +$2.09 +$ (0.11) +$1.98 +EPS - Fiscal 2020 +$(1.70 ) +$2.63 +$0.93 +$— +$0.93 +(1) +2021 adjustments reflect debt extinguishment costs, costs associated with the acquisition of Sweaty Betty® , air +freight and other costs related to production and shipping delays caused by the COVID-19 pandemic, environmental and other related costs net of recoveries and non-cash impairment related to one of the Company's joint ventures. 2020 +adjustments reflect a non-cash impairment of the Sperry® trade name, expenses related to the COVID-19 pandemic, and environmental and other related costs net of recoveries. +(2) +2021 adjustment reflects the Sweaty Betty® results included in the consolidated condensed statement of operations. +2022 PROXY STATEMENT +A-4 +TABLE OF CONTENTS +APPENDIX A +RECONCILIATION OF REPORTED GROSS MARGIN +TO ADJUSTED GROSS MARGIN* +(Unaudited) +(In millions) +GAAP Basis +Adjustments (1) +As Adjusted +Sweaty Betty (2) +Organic Basis +Gross Profit - Fiscal 2021 +$1,029.9 +$35.2 +$1,065.1 +$(67.8) +$997.3 +Gross margin +42.6% +44.1% +43.4% +Gross Profit - Fiscal 2020 +$ 735.6 +$ 8.3 +$ 743.9 +$ — +$ 743.9 +Gross margin +41.1% +41.5% +41.5% +(1) +2021 adjustments reflect $26.1 million of air freight and other charges related to production and shipping delays +caused by the COVID-19 pandemic and $9.1 million of costs associated with the acquisition of Sweaty Betty®. 2020 adjustments reflect expenses related to the COVID-19 pandemic including $4.4 million of inventory charges and $3.9 million +of air freight charges related to production delays. +(2) +2021 adjustment reflects the Sweaty Betty® results included in the consolidated condensed statement of operations. +RECONCILIATION OF REPORTED OPERATING MARGIN +TO ADJUSTED OPERATING MARGIN* +(Unaudited) +(In millions) +GAAP Basis +Adjustments (1) +As Adjusted +Sweaty Betty (2) +Organic Basis +Operating Profit (Loss) - Fiscal 2021 +$ 155.7 +$101.2 +$256.9 +$(11.2) +$245.7 +Operating margin +6.4% +10.6% +10.7% +Operating Profit (Loss) - Fiscal 2020 +$(137.1) +$ 271.0 +$ 133.9 +$ — +$ 133.9 +Operating margin +(7.7)% +7.5% +7.5% +(1) +2021 adjustments reflect $56.4 million of environmental and other related costs net of recoveries, $26.1 million of +air freight charges and other costs related to production and shipping delays caused by the COVID-19 pandemic and $18.7 million of costs associated with the acquisition of Sweaty Betty®. 2020 adjustments reflect $222.2 million for a +non-cash impairment of the Sperry® trade name, $37.7 million of expenses related to the COVID-19 pandemic including $10.9 million of severance expenses, $8.5 million of credit loss expenses, $4.9 million of inventory charges, +$3.9 million of air freight charges related to production delays, $3.6 million of facility exit costs and $5.9 million of other costs, and $11.1 million of environmental and other related costs net of recoveries. +(2) +2021 adjustment reflects the Sweaty Betty® results included in the consolidated condensed statement of operations. +To supplement the consolidated condensed financial statements presented in accordance with Generally Accepted +Accounting Principles (“GAAP”), the Company describes what certain financial measures would have been if, costs associated with the acquisition of the Sweaty Betty® brand, environmental and other related costs net of recoveries, costs related to +the COVID-19 pandemic including air freight costs, credit loss expenses, severance expenses and other related costs, reorganization expenses and debt extinguishment costs were excluded. The Company also describes what certain financial measures +would have been if the previously described financial measures also excluded the results of Sweaty Betty® . The Company believes these non-GAAP measures provide useful information to both management and +investors by increasing comparability to the prior period by adjusting for certain items that may not be indicative of core operating measures and to better identify trends in the Company's business. The adjusted financial results are used by +management to, and allow investors to, evaluate the operating performance of the Company on a comparable basis. +Management does not, nor should investors, consider such non-GAAP financial measures in isolation from, or as +a substitution for, financial information prepared in accordance with GAAP. A reconciliation of all non-GAAP measures included in this proxy statement, to the most directly comparable GAAP measures are found in the financial tables above. +2022 PROXY STATEMENT +A-5 +TABLE OF CONTENTS +TABLE OF CONTENTS \ No newline at end of file diff --git a/raw/proxies/0000110471/0001140361-22-010723/proxy_rpt.txt b/raw/proxies/0000110471/0001140361-22-010723/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..cc31ba20760a971afa0bc0d7c23d612af7876ad5 --- /dev/null +++ b/raw/proxies/0000110471/0001140361-22-010723/proxy_rpt.txt @@ -0,0 +1,49 @@ +CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS +Since January 3, 2021, the Company has not engaged in any “related person” transactions with its directors, +executive officers or holders of 5% or more of Company voting securities, affiliates or any member of the immediate family of the foregoing persons. +RELATED PERSON TRANSACTIONS POLICY +Wolverine Worldwide's Board adopted written policies and procedures regarding related person transactions. They +require the Governance Committee to review and either approve or disapprove the Company entering into any Interested Transactions (defined below). If advance approval is not feasible, then the Governance Committee must review and ratify the +Interested Transaction at its next meeting. +Interested Transaction +Any transaction, arrangement or relationship or series of similar transactions, arrangements or relationships (including any +indebtedness or guarantee of indebtedness) in which: +(1) +The aggregate amount involved is or is expected to exceed $120,000 since the beginning of Wolverine Worldwide's last +completed fiscal year; +(2) +Wolverine Worldwide is a participant; and +(3) +Any Related Person (defined below) has or will have a direct or indirect interest. +An Interested Transaction does not include: +(1) +Any employment compensation paid to an executive officer of the Company if the Compensation Committee approved or +recommended to the Board of Directors for approval of such compensation; +(2) +Any compensation paid to a director for service as a director of the Company; +(3) +Any transaction in which a Related Person has an indirect interest solely as a result of being (i) a director or, together +with all other Related Persons, as defined below, a less than 10% beneficial owner of an equity interest in another entity, or both, or (ii) a limited partner in a partnership in which the Related Person, together with all other Related +Persons, has an interest of less than 10%; +(4) +Any transaction in which the Related Person's interest arises solely from the ownership of the Company's common stock and +all holders of the Company's common stock received the same benefit on a pro rata basis (e.g., a dividend); or +(5) +Any transaction with another publicly traded company where the Related Person's interest arises solely from the ownership of +more than 5% of the Company's common stock and the ownership of a non-controlling interest in the other publicly traded company. +Related Person +Any: +(a) +Person who is or was at any point during the last fiscal year for which Wolverine Worldwide filed an Annual Report on Form +10-K and Proxy Statement, an executive officer, director or, to the extent information regarding such nominee is being presented in a proxy or information statement relating to the election of that nominee as a director, nominee for +election as a director; +(b) +Beneficial owner of greater than five percent of Wolverine Worldwide's common stock; or +(c) +Immediate family member* of any of the foregoing. +* +Immediate family member is defined as a person's spouse, parents, stepparents, children, stepchildren, siblings, mothers and fathers-in-law, sons- and +daughters-in-law, and brothers- and sisters-in-law, and anyone residing in such person's home (other than a tenant or employee). +The Governance Committee considers whether the Interested Transaction is on terms no less favorable than terms +generally available to an unaffiliated third party under the same or similar circumstances, the extent of the Related Person's interest in the transaction, and other factors that it deems relevant. 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www:ChangeInPensionValueReportedInTheSummaryCompensationTableMember ecd:NonPeoNeoMember 2022-01-01 2022-12-31 0000110471 www:ChangeInPensionValueReportedInTheSummaryCompensationTableMember ecd:NonPeoNeoMember 2021-01-01 2021-12-31 0000110471 ecd:NonPeoNeoMember www:ValueOfDividendsOrOtherEarningsPaidOnStockOrOptionAwardsNotOtherwiseReflectedInFairValueOrTotalCompensationMember 2020-01-01 2020-12-31 0000110471 1 2022-01-01 2022-12-31 0000110471 2 2022-01-01 2022-12-31 0000110471 3 2022-01-01 2022-12-31 iso4217:USD +TABLE OF CONTENTS +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +Washington, D.C. 20549 +SCHEDULE 14A INFORMATION +Proxy Statement Pursuant to Section 14(a) of +the Securities Exchange Act of 1934 (Amendment No.  ) +Filed by the Registrant ☒ +Filed by a party other than the Registrant   ☐ +Check the appropriate box: +☐ +Preliminary Proxy Statement +☐ +Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +☒ +Definitive Proxy Statement +☐ +Definitive Additional Materials +☐ +Soliciting Material under § 240.14a-12 +Wolverine World Wide, Inc. +(Name of Registrant as Specified In Its Charter) +(Name of Person(s) Filing Proxy Statement, if other than the Registrant) +Payment of Filing Fee (Check all boxes that apply): +☒ +No fee required +☐ +Fee paid previously with preliminary materials +☐ +Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules +14a-6(i)(1) and 0-11 +TABLE OF CONTENTS +TABLE OF CONTENTS +LETTER TO SHAREHOLDERS +Wolverine World Wide, Inc. +9341 Courtland Drive, NE +Rockford, Michigan 49351 +March 22, 2023 +Dear Fellow Shareholders, +Thank you for your investment in Wolverine Worldwide. We made important progress in 2022 on our strategic +and financial objectives, despite challenges across the industry that quickly shifted the economic environment mid-way through the year and impacted supply chains, inventories, and financial performance. Some highlights are listed below: +• +Annual revenue of $2.685 billion, representing 11.2% growth over fiscal 2021 and growth of over 14% on a constant currency basis. +• +Solid revenue growth across several of the Company’s largest brands, with Merrell revenue growing year-over-year by 18%, Saucony by 6%, and Wolverine +by 9%. Merrell achieved record annual revenue, and was named “Brand of the Year” at the 2022 Footwear News Achievement Awards. +• +Strong revenue growth in the Company’s international business, which grew 42% year-over-year on a constant currency basis. +• +Important strategic steps were taken to become a more disciplined and agile company by simplifying our business and prioritizing areas of investment +and focus. Key actions included: +○ +Changing our brand group structure to create the Active, Work, and Lifestyle Groups, enabling brands with similar +attributes to more easily collaborate and share best practices; +○ +Establishing a permanent Profit Improvement Office to improve efficiency while reducing costs, including redesigning our +supply chain processes; and +○ +Conducting a strategic review of our portfolio to focus resources on the business and brands that will drive the highest +return for our shareholders. +In addition to implementing the Company's strategy and other key initiatives during 2022, we concentrated on +other matters critical to our long-term success. These included Board and management succession and transition, including the completion of my first year as the Company’s President and Chief Executive Officer. Other areas of focus included +supply chain management, cybersecurity protection, and brand development, which we will describe in greater detail in this proxy statement. +During 2023, our team remains focused on global growth opportunities for our portfolio of leading footwear +and apparel brands, especially in direct-to-consumer, digital, and key international channels. We will focus on stabilizing our supply chain and capturing cost and process improvements to chart a path to a 12% operating margin. As we strengthen +our financial position, our priorities are to fuel growth in our Active Group, sustain positive momentum in our Work Group, and address underperforming brands. +We hope to receive your support at this year’s annual meeting on May 3, 2023, and encourage you to vote +either online, by phone, or by mail. +Sincerely, +Brendan Hoffman +President and Chief Executive Officer +2023 PROXY STATEMENT +1 +TABLE OF CONTENTS +NOTICE OF 2023 ANNUAL MEETING OF SHAREHOLDERS +10:00 a.m. EDT, May 3, 2023 +Wolverine World Wide, Inc. +9341 Courtland Drive, NE +Rockford, MI 49351 +March 22, 2023 +To Our Shareholders: +We invite you to attend the 2023 Annual Meeting of Shareholders (the “Annual Meeting”) of Wolverine World +Wide, Inc. (the “Company,” “Wolverine Worldwide” or “Wolverine”). The meeting will be held on May 3, 2023, at 10:00 a.m. EDT in a virtual format designed to provide shareholders with the same rights and opportunities to participate that they +would have at an in-person meeting. At the Annual Meeting, shareholders will vote on the following items: +(1) +Election of the three director nominees named in the Proxy Statement for three-year terms expiring in 2026 +(2) +Advisory resolution approving compensation for the Company's named executive officers (“NEOs,” and each an “NEO”) +(3) +Advisory resolution approving the frequency of future advisory votes to approve compensation of the Company's NEOs +(4) +Ratification of the Audit Committee's appointment of Ernst & Young LLP as the Company's independent registered public accounting firm for fiscal +year 2023 +(5) +Approval of the Stock Incentive Plan of 2016 (as amended and restated) +Shareholders may also transact such other business as may properly come before the Annual Meeting or any +adjournment or postponement thereof. +Shareholders of record as of the close of business on March 6, 2023, the record date, are entitled to +participate in and vote at the Annual Meeting. To participate in the Annual Meeting, including to vote and ask questions, shareholders of record should go to the meeting website at www.virtualshareholdermeeting.com/WWW2023, enter the 16-digit +control number found on your proxy card or Notice of Internet Availability of Proxy Materials (“Notice of Internet Availability”), and follow the instructions on the website. If your shares are held in street name and your voting instruction +form or Notice of Internet Availability indicates that you may vote those shares through the http://www.proxyvote.com website, then you may access, participate in, and vote at the annual meeting with the 16-digit access code indicated on that +voting instruction form or Notice of Internet Availability. Otherwise, shareholders who hold their shares in street name should contact their bank, broker or other nominee (preferably at least 5 days before the annual meeting) and obtain a +“legal proxy” in order to be able to attend, participate in or vote at the annual meeting. +Whether or not you plan to attend the Annual Meeting, you can ensure that your shares are represented at the +meeting by promptly voting and submitting your proxy by telephone or through the internet, or by completing, signing, dating and returning your proxy card in the enclosed envelope. Brokers are not permitted to vote on certain proposals and may +not vote on any of the proposals unless you provide voting instructions. Voting your shares will help to ensure that your interests are represented at the meeting. +Rules for the conduct of the Annual Meeting will be available on the meeting website. For information about +how to view the rules and the list of shareholders entitled to vote at the Annual Meeting during the ten days preceding the Annual Meeting, please visit our 2023 Annual Meeting website at www.wolverineworldwide.com/2023annualmeeting. If you +encounter any difficulties accessing the virtual meeting during check-in or during the meeting, please call the technical support number that will be posted on the virtual shareholder meeting login page. +2023 PROXY STATEMENT +2 +TABLE OF CONTENTS +This Notice of 2023 Annual Meeting of Shareholders, Proxy Statement, proxy or voting instruction card and +Annual Report for our fiscal year ended December 31, 2022 are being mailed or made available to shareholders starting on or about March 22, 2023. +By Order of the Board of Directors, +Reginald M. Rasch +Secretary +Important Notice Regarding the Availability of Proxy Materials for the Annual +Meeting of Shareholders to be held on May 3, 2023. +Wolverine's Proxy Statement for the 2023 Annual Meeting of Shareholders and the +Annual Report to Shareholders for the fiscal year ended December 31, 2022, are available at: www.wolverineworldwide.com/2023annualmeeting. +2023 PROXY STATEMENT +3 +TABLE OF CONTENTS +Table of Contents +Letter to Shareholders +1 +Notice of 2023 Annual Meeting of Shareholders +2 +Proxy Statement Summary +6 +Our Brand Portfolio +6 +Our Strategic Vision and Guiding Principles +7 +Matters to be Voted Upon +7 +Election of Directors for Terms Expiring in 2026 +8 +Board Highlights +8 +Board is Composed of Directors with the Right Mix of Skills and +Experiences +9 +Shareholder Engagement +9 +Corporate Governance Highlights +9 +Meeting Information +9 +Corporate Governance +10 +Board of Directors +10 +Board Composition +10 +Director Nominations +11 +Board Self-Assessment +12 +Risk Oversight +12 +Environmental and Social Highlights +13 +Environmental, Sustainability, and Responsible Sourcing +13 +Protecting Our Planet +13 +Sustainability +13 +Responsible Sourcing & Supply Chain +14 +Diversity, Equity & Inclusion +14 +Our Workforce at a Glance +15 +Diversity Action Council +15 +Employee Resource Groups +16 +Communication & Learning +16 +Our Brands' Diversity, Equity, and Inclusion Initiatives +16 +Supporting our Communities +16 +Code of Business Conduct and Accounting and Finance Code of +Ethics +17 +Shareholder Communications Policy +18 +Proposal 1 – Election of Directors for Terms Expiring in 2026 +19 +Director Nominees with Proposed Terms Expiring in 2026 +20 +Directors with Terms Expiring in 2024 +23 +Directors with Terms Expiring in 2025 +26 +Board Leadership +30 +Director Independence +30 +Board Committees, Meetings and Meeting Attendance +31 +Director Compensation in Fiscal Year 2022 +33 +Non-Employee Director Stock Ownership Guidelines +35 +Securities Ownership of Officers and Directors and Certain +Beneficial Owners +36 +Five Percent Shareholders +36 +Stock Ownership by Management and Others +37 +Compensation Discussion and Analysis +39 +Summary +39 +Compensation Philosophy and Objectives +39 +Compensation Decisions in Context: Key 2022 Accomplishments and +Financial Highlights +39 +2022 Compensation Program Overview +40 +Pay at Risk +40 +Long-Term Incentive Program Mix +41 +Compensation Best Practices +41 +Compensation Discussion and Analysis +42 +2022 Compensation Program Overview +42 +Setting Targets +42 +Base Salary +42 +Annual Bonus +43 +Performance Bonus +43 +Individual Performance Bonus +44 +eCommerce Revenue Multiplier +46 +Long-Term Incentive Compensation +47 +Performance Awards for the 2022-2024 Performance Period +47 +2023-2025 Performance Awards Update +48 +2021-2022 Performance Stock Units +48 +Restricted Stock Unit Awards +49 +Benefits +49 +Retirement, Deferred Compensation and Welfare Plans +49 +Perquisites +49 +Post-Employment Compensation +49 +Say on Pay Advisory Vote +50 +CEO Transition +51 +Compensation Setting Process +52 +Setting Targets +52 +Competitive Philosophy and Competitive Market Data +52 +Peer Group +52 +CEO Role +52 +Compensation Consultant Role +52 +Other Compensation Policies and Practices +53 +NEO Stock Ownership Guidelines +53 +Stock Hedging and Pledging Policies +53 +Clawback Policy +53 +Impact of Accounting and Tax Treatments on Compensation +53 +Compensation Committee Report +54 +Summary Compensation Table +55 +Grants of Plan-Based Awards in Fiscal Year 2022 +57 +Outstanding Equity Awards at 2022 Fiscal Year-End +59 +Option Exercises and Stock Vested in Fiscal Year 2022 +62 +Pension Plans and 2022 Pension Benefits +63 +Qualified Pension Plans +63 +Supplemental Executive Retirement Plan +63 +Pension Benefits in Fiscal Year 2022 +64 +Non-Qualified Deferred Compensation +65 +Potential Payments Upon Termination or Change in Control +66 +Benefits Triggered by Termination for Cause or Voluntary +Termination +66 +Benefits Triggered by Termination Other than for Cause or for +Good Reason not in Connection with a Change in Control +66 +Benefits Triggered Upon a Change in Control +67 +Benefits Triggered by Retirement, Death or Permanent Disability +68 +Description of Restrictive Covenants that Apply During and After +Termination of Employment +69 +Estimated Payments on Termination or Change in Control +70 +CEO Pay Ratio +71 +Pay vs. Performance +72 +Proposal 2 – Advisory Resolution to Approve Executive +Compensation +75 +Proposal 3 – Advisory Vote on the Frequency of Future +Advisory Votes to Approve Executive Compensation +76 +2023 PROXY STATEMENT +4 +TABLE OF CONTENTS +Proposal 4 – Ratification of Appointment of Independent +Registered Public Accounting Firm +77 +Audit Committee Report +78 +Independent Registered Public Accounting Firm +79 +Proposal 5 – Approval of Amended and Restated Stock +Incentive Plan of 2016 +80 +Overview +80 +Key Changes in the Plan +80 +Why You Should Vote For the Plan +80 +Promotion of Good Corporate Governance Practices +80 +Key Data +81 +Section 162(m) of the Code +81 +Plan Summary +81 +Administration +82 +Eligibility +82 +Shares Subject to the Plan and to Awards +82 +Stock Options +83 +Stock Appreciation Rights +83 +Restricted Stock and Restricted Stock Units +83 +Stock Awards +84 +Incentive Bonuses +84 +Deferral of Gains +84 +Qualifying Performance Criteria +84 +Suspension or Termination of Awards +85 +Settlement of Awards +85 +No Repricing Without Shareholder Approval +85 +Amendment and Termination +85 +Change in Control +86 +Adjustments +86 +Transferability +86 +No Right to Company Employment +87 +Effective Date and Termination of the Plan +87 +Federal Income Tax Treatment +87 +Stock Options +87 +Stock Appreciation Rights +88 +Restricted Stock and Restricted Stock Units +88 +Stock Awards +88 +Incentive Bonuses +88 +Certain Change in Control Payments +88 +Plan Benefits +89 +Registration with the SEC +89 +Equity Compensation Plan Information +89 +Vote Required and Board Recommendation +90 +Related Party Matters +91 +Certain Relationships and Related Transactions +91 +Related Person Transactions Policy +91 +Additional Information +92 +Shareholders List +92 +Director and Officer Indemnification +92 +Shareholder Proposals for Inclusion in Next Year's Proxy +Statement +92 +Other Shareholder Proposals for Presentation at Next Year's +Annual Meeting +92 +Voting Securities +92 +Conduct of Business +92 +Vote Required for Election and Approval +93 +Voting Results of the Annual Meeting +93 +Attending the Annual Meeting +93 +Manner for Voting Proxies +94 +Revocation of Proxies +94 +Solicitation of Proxies +94 +Delivery of Documents to Shareholders Sharing an Address +94 +Access to Proxy Statement and Annual Report +94 +Appendix A - Forward-Looking Statements and Non-GAAP +Reconciliation Tables +A-1 +Forward-Looking Statements +A-2 +Non-GAAP Reconciliation Tables +A-4 +Appendix B - Wolverine World Wide, Inc. Stock Incentive Plan +of 2016 (as Amended and Restated as of February 8, 2023) +B- 1 +2023 PROXY STATEMENT +5 +TABLE OF CONTENTS +Proxy Statement Summary +This summary highlights key information that can be found in greater detail elsewhere in this Proxy +Statement. This summary does not contain all the information that shareholders should consider, and shareholders should read the entire Proxy Statement before voting. +Our Brand Portfolio +In 2022, Wolverine Worldwide reorganized its portfolio of brands into the following three operating groups, 1 +with the goal of grouping brands with similar attributes to more easily collaborate and share best practices: +1 +While the Lifestyle Group also included Keds in fiscal 2022, the Company sold the Keds business in February 2023. +2023 PROXY STATEMENT +6 +TABLE OF CONTENTS +Our Strategic Vision and Guiding Principles +The Company made important progress in 2022 on its strategic and financial objectives, despite challenges +across the industry that quickly shifted the economic environment mid-way through the year and impacted supply chains, inventories, and financial performance. During the year, the Company identified the following Strategic Vision and Guiding +Principles to guide its efforts into the future: +MATTERS TO BE VOTED UPON +Shareholders are being asked to vote on the following matters at the 2023 Annual Meeting of Shareholders: +PROPOSAL +BOARD VOTE +RECOMMENDATION +PAGE +REFERENCE +1. +Election of Directors for Terms Expiring in 2026 +FOR each Nominee +19 +2 +Advisory Resolution Approving NEO Compensation +FOR +75 +3. +Advisory Resolution Approving the Frequency of Future Advisory Votes to Approve Compensation of the +Company’s NEOs +ONE YEAR +76 +4. +Ratification of Ernst & Young LLP as Auditor for Fiscal Year 2023 +FOR +77 +5. +Approval of the Stock Incentive Plan of 2016 (as amended and restated) (the “Plan”) +FOR +80 +2023 PROXY STATEMENT +7 +TABLE OF CONTENTS +ELECTION OF DIRECTORS FOR TERMS EXPIRING IN 2026 +The Company’s Board consists of twelve directors. The Company’s By-Laws establish three classes of directors +with each class serving three-year terms. +The Board has nominated three directors for election at the Annual Meeting, as outlined in the table below. +Each director nominee has been nominated to serve for a three-year term expiring at the annual meeting of shareholders to be held in 2026. The Board recommends that shareholders vote “FOR” each of the nominees +named below. +Age +Director Since +Independent +Other Public +Directorships +Committees +Proposed Term +Expiration +William K. Gerber +Managing Director of +Cabrillo Point Capital LLC; Retired Executive Vice President and Chief Financial Officer of Kelly Services, Inc. +69 +2008 +✔ +Cleveland-Cliffs, Inc. +Audit +Compensation +2026 +Nicholas T. Long +Managing Partner, Bridger +Growth Partners, LLC; Retired Chief Executive Officer of MillerCoors LLC +64 +2011 +✔ +Amcor Limited +Independent Lead +Director +2026 +Kathleen Wilson-Thompson +Retired Executive Vice +President & Global Chief Human Resources Officer of Walgreens Boots Alliance Inc. +65 +2021 +✔ +Tesla, Inc. +McKesson Corporation +Compensation (Chair) +Governance +2026 +Board Highlights +The following charts illustrate key characteristics of the Company’s Board: 2 +2 +The Board Highlights charts above and the Skills and Experiences chart below both exclude Blake W. Krueger, who has decided to retire from the Board +effective May 4, 2023, and David W. McCreight, who has decided to resign from the Board effective May 4, 2023. Biographies for Messrs. Krueger and McCreight are available in the Company’s 2022 Proxy Statement. +2023 PROXY STATEMENT +8 +TABLE OF CONTENTS +Board is Composed of Directors with the Right Mix of Skills and +Experiences +The following chart lists the important experiences and attributes that the Company’s directors possess: +Shareholder Engagement +As part of its ongoing shareholder engagement efforts, the Company reached out in early 2023 to shareholders +representing holders of approximately 58% of its outstanding shares held by institutional investors, and has held or expects to hold meetings or calls with all shareholders who accepted the Company’s invitation. Discussions to date focused on +Company strategy, financial performance, governance and compensation programs. +Corporate Governance Highlights +Wolverine Worldwide is committed to a governance structure that provides strong shareholder rights and +meaningful accountability. +✔  Highly independent Board and Committees +✔  Independent Lead Director with clearly +defined role +✔  Majority voting with director resignation +policy +✔  No supermajority vote requirements +✔  Shareholder right to act by written consent +✔  Annual Board and Committee self-evaluations +✔  Robust Board and executive succession +planning, including annual written director nominee evaluations +✔  Long-standing commitment to diversity +✔  Director onboarding orientation program and +ongoing education initiatives +✔  Active shareholder engagement practices +Meeting Information +The Company’s Annual Meeting is scheduled to take place virtually, as set forth in the notice, on May 3, +2023, at 10:00 a.m. EDT. The Company encourages you to vote your shares before the Annual Meeting. +2023 PROXY STATEMENT +9 +TABLE OF CONTENTS +Corporate Governance +Wolverine Worldwide is committed to the highest level of corporate governance, and the Board has adopted +Corporate Governance Guidelines to strengthen management accountability and promote long-term shareholder interests. +BOARD OF DIRECTORS +The shareholders elect directors to serve on the Company’s Board of Directors (the “Board of Directors” or +“Board”). The Board oversees the management of the business by the Chief Executive Officer (“CEO”) and senior management. In addition to its general oversight function, the Board’s responsibilities include, but are not limited to, the +following: +• +Reviewing and approving the Company’s key financial and other objectives and strategic business plans, and monitoring implementation of those plans +and the Company’s success in meeting identified objectives +• +Selecting, evaluating and approving the compensation of the CEO and overseeing CEO succession planning +• +Providing advice and oversight regarding the selection, evaluation, development and compensation of management +• +Overseeing the Company’s process for assessing and managing risk and mitigation activities +• +Nominating the Company’s director candidates and appointing committee members +• +Engaging in succession planning for the Board and key leadership roles on the Board and its committees +• +Shaping effective corporate governance +• +Reviewing and monitoring administration of policies and procedures to safeguard the integrity of the Company’s business operations and financial +reporting and to promote compliance with applicable laws and regulations +Board Composition +Board Highlights +The Board prides itself on its ability to recruit and retain directors who have high personal and +professional integrity and have demonstrated exceptional ability and judgment to effectively serve shareholders’ long-term interests. These skills and attributes will help the Company accomplish its most important strategic objectives, such as +portfolio simplification, investing in the Company’s growth brands, direct-to-consumer and digital growth, powerful product, operational excellence, supply chain management, and international growth. The Board also values diversity (including +with respect to gender, race, ethnic and national background, and sexual orientation) and considers this an important factor in determining nominees for appointment and election, as evidenced by the current makeup of the Board, which includes +four female directors (two of whom are also racial/ethnic minorities) and one other director who is also a racial/ethnic minority. Over the last 10 years, over 70% of the Company’s independent Board hires have been female, and the Governance +Committee’s director search process involves actively seeking out women and minority candidates to include in the pool from which Board nominees are chosen. The Board believes that its directors, including the nominees for election as directors +at the Annual Meeting, have characteristics and valuable skills that provide the Company with the variety and depth of knowledge, judgment and strategic vision necessary to provide effective oversight of the Company. +To help achieve the right mix of experience and expertise, and to assist in succession planning, the Board, +at the recommendation of the Governance Committee, has identified specified skills and attributes it desires its members to possess. The below graphic lists these skills and attributes and indicates which of the directors possess each. As +shown, these skills and attributes are well represented within the Board. 3 +3 +The Skills and Attributes chart below excludes Blake W. Krueger, who has decided to retire from the Board effective May 4, 2023, and David W. +McCreight, who has decided to resign from the Board effective May 4, 2023. +2023 PROXY STATEMENT +10 +TABLE OF CONTENTS +SKILLS & ATTRIBUTES +Totals +Andersen +Boromisa +Bricker +Gerber +Hoffman +Kollat +Lauderback +Long +Price +Wilson-Thompson +Active Executive +3 +✔ +✔ +✔ +Brand Building +9 +✔ +✔ +✔ +✔ +✔ +✔ +✔ +✔ +✔ +Current or Former CEO +4 +✔ +✔ +✔ +✔ +Digital/eCommerce/IT +4 +✔ +✔ +✔ +✔ +Finance +7 +✔ +✔ +✔ +✔ +✔ +✔ +✔ +Footwear/Apparel +6 +✔ +✔ +✔ +✔ +✔ +✔ +Global Supply Chain +5 +✔ +✔ +✔ +✔ +✔ +International Business +10 +✔ +✔ +✔ +✔ +✔ +✔ +✔ +✔ +✔ +✔ +Marketing +7 +✔ +✔ +✔ +✔ +✔ +✔ +✔ +Public Company Governance +7 +✔ +✔ +✔ +✔ +✔ +✔ +✔ +Retail +9 +✔ +✔ +✔ +✔ +✔ +✔ +✔ +✔ +✔ +The Governance Committee reviews with the Board on an annual basis the skills, experience and +characteristics desired of Board members in the context of the current makeup of the Board. The Board, with the assistance of the Governance Committee, annually assesses the current composition of the Board across many dimensions. As set forth +in the Company’s Corporate Governance Guidelines, which are posted on its website, this assessment addresses the skills and attributes set forth in the table above and the individual performance, experience, age and skills of each director. +Director Nominations +The Board’s Governance Committee serves as its nominating committee. The Governance Committee, in +anticipation of upcoming director elections and other potential or expected Board vacancies, evaluates qualified individuals and recommends candidates to the Board. As part of the search process for each new director, the Governance Committee +actively seeks out women and minority candidates to include in the pool from which Board nominees are chosen. The Governance Committee may (and typically does) retain a search firm or other external parties to assist it in identifying +candidates, and the Governance Committee has the sole authority to select such a firm, approve the search firm’s fees and retention terms, and to terminate the firm if necessary. +The Governance Committee considers candidates suggested by directors, senior management or shareholders. +Shareholders may recommend individuals as potential director candidates by communicating with the Governance Committee through one of the Board communication mechanisms described under the heading “ Shareholder +Communications Policy .” Shareholders that wish to nominate a director candidate must comply with the procedures set forth in the Company’s By-Laws, which are posted on its website. The deadline for shareholders to submit notice of +nominations for next year’s annual meeting is set forth under the heading “Other Shareholder Proposals for Presentation at Next Year’s Annual Meeting” in this Proxy Statement. +Ultimately, upon the recommendation of the Governance Committee, the Board selects the Company’s director +nominees for election at each annual meeting. In selecting director nominees, the Board considers each candidate’s performance as a director (which is assessed through an anonymous written peer evaluation) if such candidate is serving or has +served as a director of the Company; personal and professional integrity; ability and judgment; and likelihood to be effective, working with the other nominees and directors, in serving the long-term interests of the shareholders. The +Governance Committee also considers candidates’ relative skills, experience, attributes, background and characteristics as well as independence under applicable New York Stock Exchange (“NYSE”) listing standards and the Company’s Director +Independence Standards, potential to contribute to the composition and culture of the Board, and ability and willingness to actively participate in the Board and committee meetings and to otherwise devote sufficient time to Board duties. +2023 PROXY STATEMENT +11 +TABLE OF CONTENTS +BOARD SELF-ASSESSMENT +As part of an annual self-assessment, each director evaluates over a number of dimensions the performance of +the Board and any committee on which he or she serves. Nicholas T. Long, the Independent Lead Director, works with the Governance Committee to review the Board self-assessment with directors following the end of each fiscal year and to conduct +individual director interviews at the end of each year. Committee Chairpersons review the committee self-assessments with their respective committee members and discuss them with the Board. +In addition, the Governance Committee, working with the Independent Lead Director, develops and implements +guidelines for evaluating all directors standing for nomination and election and oversees the evaluation of such nominees. +The Corporate Governance Guidelines (including the Director Independence Standards), the Charter for +each Board standing committee (Audit, Compensation and Governance), the Company’s Certificate of Incorporation, By-Laws, Code of Business Conduct, and its Accounting and Finance Code of Ethics all are available on the Wolverine +Worldwide website at: +www.wolverineworldwide.com/investor-relations/corporate-governance/. +The Board and applicable committees annually review these and other key governance documents. +RISK OVERSIGHT +The Board oversees the Company’s process for assessing and managing risk and mitigation activities with a +focus on the most significant enterprise risks facing the Company, including strategic, inventory, operational and supply chain, financial, environmental, cybersecurity, human capital, environmental, social, and governance (“ESG”), and legal +compliance risks. This oversight is conducted through quarterly presentations by and discussions with the President and CEO, Chief Financial Officer (“CFO”), Director of Internal Audit, General Counsel, Chief Information Officer, Chief +Information Security Officer, brand and department leaders and other members of management. The Deputy General Counsel, Senior Risk Manager, and Director of Internal Audit coordinate management’s day-to-day risk management and mitigation +efforts, and the Director of Internal Audit reports directly to the Audit Committee. +The Deputy General Counsel, Director of Risk Management, and Director of Internal Audit review with the +Audit Committee regularly, and with the full Board periodically, management’s risk assessment and mitigation strategies. In addition to the above processes, the Board has delegated risk management and mitigation oversight responsibilities to +its standing committees, which meet regularly to review and discuss specific risk topics that align with their core responsibilities. +• The Audit Committee reviews the Company’s approach to risk management +generally. The Audit Committee also oversees the Company’s risk policies and processes relating to its financial statements and financial reporting processes, credit risks and liquidity risks, as well as the Company’s management of +risks related to cybersecurity. The Audit Committee discusses with management and the independent auditors significant risks or exposures and the steps taken by management to mitigate them. +• The Compensation Committee oversees the risks associated with management +resources; organization structure and succession planning, hiring, development and retention processes; and it reviews and evaluates risks associated with the Company’s compensation structure, policies and programs. The Compensation +Committee also oversees the Company’s strategies and policies related to human capital management, including with respect to matters such as diversity, equity and inclusion and workplace environment and culture. +• The Governance Committee oversees the Company’s management of risks +related to the Company’s governance structure and processes and potential risks arising from related person transactions. The Governance Committee also oversees the Company’s environmental, social, and governance matters. +The Company reviewed its compensation policies and practices to assess whether they are reasonably likely to +have a material adverse effect on the Company. As part of this review, the Company compiled information about the Company’s incentive plans, including reviewing the Company’s compensation philosophy, evaluating key incentive plan design +features and reviewing historic payout levels and pay mix. With assistance from Company management and its independent compensation consultant, the Compensation Committee reviewed the executive compensation program, and managers from the +Company’s human resources and legal departments reviewed the non-executive compensation programs. +2023 PROXY STATEMENT +12 +TABLE OF CONTENTS +ENVIRONMENTAL AND SOCIAL HIGHLIGHTS +As a global marketer of branded footwear, apparel and accessories, Wolverine Worldwide leverages a diverse +portfolio making big strides and doing great things since 1883. Our brands continue to think forward and think big as innovators within our communities and our product designs. Our ability to bring about change is grounded in our commitment to +our planet and people and guided by the vision of a better tomorrow. These principles are embedded in the governance practices and Code of Business Conduct outlined below, which guide the Board and the Company’s global employees in their +actions. +The focus of the Company’s ESG initiatives include the environment, sustainability and responsible sourcing; +diversity, equity, and inclusion (“DE&I”); and community impact. The Company has designated its Governance Committee to oversee and make recommendations to the Board concerning ESG matters, including these initiatives and their integration +into the Company’s business and long-term value creation for the Company and its shareholders. These initiatives are critical to the Company because the Company’s growth depends not just on financial performance and new products, but also on +the Company’s impact on our communities, our employees and the planet. +Wolverine’s governance structure enables execution of its policies, strengthens management accountability +and enhances Wolverine’s ability to generate long-term shareholder value. The Board regularly reviews brand initiatives and footwear collections and launches that have environmental and social impacts, and the Board’s Governance Committee is +responsible for overseeing the development and disclosure of the Company’s broader ESG initiatives. +Some of these ESG initiatives are summarized below, and more information is available on the Company’s +corporate responsibility website at wolverineworldwide.com/about-us/responsibility/ and in our most recent Global Impact Report at https://www.wolverineworldwide.com/wp-content/uploads/2022/08/2021.IR_.V9-Final-DIGITAL.pdf. 4 +Environmental, Sustainability, and Responsible Sourcing +Wolverine Worldwide is committed to sustainability. One of our goals is to reduce and responsibly manage our +environmental impact, and we believe the steps we take today can reduce our footprint tomorrow. We aim to achieve this goal by actively implementing more environmentally conscious business practices, seeking out sustainable products and +components and responsibly sourcing our products in accordance with clear and transparent standards. +Protecting Our Planet +• +ReChaco Program – Chaco strives to keep sandals out of landfills by creating durable and repairable products. +Since 2004, the brand has saved over 313,550 sandals from landfills through the ReChaco Program, which repairs consumers’ sandals. Every pair of sandals saved represents roughly two pounds of material saved from a landfill. +• +Reducing Waste – Wolverine Worldwide creates waste throughout our facilities and operations on a daily basis, +so we utilize a variety of recycling programs at many of our buildings to help manage our footprint and reduce our environmental impact. These recycling programs include paper, plastic, cardboard, batteries, electronics, glass, and +other items. These initiatives have prevented hundreds of thousands of pounds of waste from ending up in landfills, recycled an estimated 50,000+ pounds of paper and cardboard, and saved hundreds of thousands of gallons of water from +being used for paper production. +• +Reducing Energy Consumption – Over the past few years, we implemented initiatives to improve energy efficiency +and increase our support of renewable energy, including purchasing Renewable Energy Credits (RECs) to offset the energy use at our North America facilities since 2015. Through the purchase of RECs, Wolverine Worldwide achieved net zero +energy for our electrical consumption in our North America owned and leased operations in 2021. Our Boston campus is LEED-certified, and most Wolverine Worldwide buildings are lit by energy-efficient bulbs, which are generally recycled +at the end of life. +• +Reducing Water Consumption – We implemented conservation initiatives at many of our facilities, including +installing motion sensor faucets and no-touch hand driers. +Sustainability +• +Product Sustainability Standards – Our Product Sustainability Standards establish clear baseline expectations +for our brands to promote social responsibility, environmental stewardship and animal welfare. Additionally, these standards establish best practice +4 +Website references are provided for convenience only, and the content on the referenced websites is not, and shall not be deemed to be, incorporated +by reference into this Proxy Statement. +2023 PROXY STATEMENT +13 +TABLE OF CONTENTS +recommendations, including the use of recycled materials. In 2018, our brands offered approximately 10 styles +made with more sustainable materials than traditionally used materials. In 2021, our brands increased the use of sustainable materials and included them in almost 700 styles. We’ve been consistently increasing our use of more sustainable +materials, such as recycled polyester, organically grown cotton, algae and other sustainable materials. +• +Sustainable Apparel Coalition & the Higg Index – Wolverine Worldwide remains a proud member of the +Sustainable Apparel Coalition (SAC) – a global, multi-stakeholder, non-profit alliance for the consumer goods industry. In partnership with its 250+ global members, the SAC developed the Higg Index, a suite of tools for the standardized +measurement of value chain sustainability. To help assess the environmental and social labor performance across our supply chain, Wolverine Worldwide uses the following Higg tools: (1) the Higg Brand and Retail Module, which helps our +brands identify potential gaps in existing sustainability strategies and design more effective programs moving forward; (2) the Higg Facility Environmental Module, which allows us to make standardized social and environmental +assessments in our supply chain; and (3) the Higg Materials Sustainability Index, which enables us to learn more about the life cycle impacts of each material we use and evaluate the benefits of choosing different materials. We use the +performance measurements from these tools to improve our sustainability performance and increase transparency. +Responsible Sourcing & Supply Chain +• +Production Code of Conduct – The Wolverine Worldwide Production Code of Conduct outlines our longtime +commitment to social responsibility. This commitment includes upholding the human rights of workers by treating them with dignity and respect, while improving working conditions within our supply chain. Our Production Code of Conduct +establishes the minimum standards that factories and suppliers with whom Wolverine Worldwide does business are required to satisfy when conducting their operations. We routinely perform social compliance audits through our internal +teams as well as third parties to monitor compliance with our Production Code of Conduct. In 2022, our internal social compliance team and authorized third parties conducted 124 social compliance audits across our factory base while +navigating COVID-19-related factory closures and travel restrictions, which continued from the prior year. +• +Supply Chain Transparency – Wolverine Worldwide is committed to long-term partnerships rooted in trust, open +communication and a shared vision that fosters continuous improvement and compliance with our Production Code of Conduct. We require that our manufacturers seek to minimize the adverse effects of their manufacturing processes on the +community, environment and natural resources and also work to safeguard the health and safety of the public. These requirements include complying with applicable local and national environmental protection laws. +• +Leather Working Group – Wolverine Worldwide joined the Leather Working Group in 2006 to support more +responsible leather manufacturing. +Diversity, Equity & Inclusion +Our corporate culture welcomes people from all backgrounds who share our values of teamwork, open +communications, integrity, respect and accountability. These are the things that bind us together, making Wolverine Worldwide a great company and a great place to grow. As an expanding global company, diversity is much more than simply a goal – +it’s a part of our DNA. Because we believe in cultivating a well-rounded, diverse workforce, we seek out individuals who reflect and support this goal. Our thousands of employees around the world reflect a diverse range of cultures, religions, +ethnicities and nationalities, as well as varied professional and educational backgrounds. +For more information on the Company’s DE&I initiatives, please see our most recent Global Impact Report, +available at https://www.wolverineworldwide.com/wp-content/uploads/2022/08/2021.IR_.V9-Final-DIGITAL.pdf. 5 +5 +Website references are provided for convenience only, and the content on the referenced websites is not, and shall not be deemed to be, incorporated +by reference into the proxy statement. +2023 PROXY STATEMENT +14 +TABLE OF CONTENTS +Our Workforce at a Glance +Below are metrics for Wolverine Worldwide’s organizational diversity. 6 +Diversity Action Council +During 2022, the Company expanded on its initiative to build a lasting, long-term DE&I framework. This +framework is centered around supporting an inclusive culture through a Diversity Action Council (“DAC”), represented by leaders from across the business and around the world, and we have appointed several senior executives to lead this group. +The DAC is comprised of five committees, each representing a core competency area of our DE&I framework: +• +Leadership : this subcommittee focuses on the understanding of and commitment to workforce diversity by the Company’s Senior Management Team. +• +Organizational Processes : this subcommittee focuses on the human resources systems and processes that are in place to support workforce +diversity. +• +Communications : this subcommittee focuses on advocating for diversity to employees, customers, suppliers, and other company stakeholders. +6 +Ethnicity is reported for U.S. population only. Information provided is as of September 30, 2022. +2023 PROXY STATEMENT +15 +TABLE OF CONTENTS +• +External Relationships : this subcommittee focuses on relationships with suppliers and other community organizations to encourage and develop +workforce diversity. +• +Systems Criteria & Process Management : this subcommittee focuses on the impact of tools used to systematize the workforce diversity +process. +Employee Resource Groups +Employee Resource Groups at Wolverine Worldwide play an important role in fostering an inclusive culture. +These groups provide opportunities for global team members to connect and to learn from and support one another as well as to help drive meaningful change throughout the Company. +• +The Change Mob – The Change Mob is a grassroots network of employees from around the globe, representing every +function to help drive and sustain change across Wolverine Worldwide from the ground up. This empowered group keeps a finger on the pulse of what’s happening at the Company and provides valuable feedback to our leadership team on a +regular basis. +• +Womxn’s Resource Group – The Womxn’s Resource Group works to empower and inspire the women of Wolverine +Worldwide to actively engage in the community, provide mentorship opportunities and create a meaningful, professional network. And the ‘x’ in the group’s name isn’t a typo; it symbolizes that this group is inclusive to all employees who +identify as female. +• +Wolverine Young Professionals – The Wolverine Young Professionals Group strives to promote an environment that +helps attract and retain the next generation of business leaders. This group is committed to personal and professional development by contributing to the Company’s workplace community through social activities and volunteer +opportunities. +Communication & Learning +We offered resources to increase awareness and educate our employees around the world through unconscious +bias and other diversity trainings. To help support these education initiatives, we developed a Diversity, Equity and Inclusion section on WeConnect, our internal employee information and communications platform, to provide team members with +support resources and a dedicated space to learn and work together to achieve a better future. In early 2022, the Company offered increased engagement in our DE&I work via our Inclusion Exchange, an online platform where employees can +develop and share their ideas for creating a more diverse and inclusive culture with members of the DAC committees. +Our Brands’ Diversity, Equity, and Inclusion Initiatives +At Wolverine Worldwide, we’re proud of our family of brands and their individual commitments to the causes +they support. Each brand’s individual role is critical to our combined improvement and success. While they may have different consumers, paths for growth and footprints around the world, they are each committed to supporting meaningful causes, +evaluating internal team cultures, and making a difference for their consumers and communities. Please see the Company’s most recent Global Impact Report for highlights from the many diversity, equity and inclusion efforts led by our family of +brands. +Supporting our Communities +Wolverine Worldwide has historically engaged with and served the communities in which we live and work, as +well as our internal community at the Company. As champions for positive change, it is our responsibility to enrich our global communities by giving our time and resources to make the world a better place. +• +Wolverine Worldwide Foundation – Rooted in our commitment to contribute positively to the communities where +our employees work and live, the Wolverine Worldwide Foundation was founded in 1959 to support our charitable initiatives. Through the Foundation, the Company is actively involved in supporting charitable organizations with a focus on +education, the environment, arts and culture, and human aid and service. +• +United Way – Every year through employee contributions, footwear and apparel sales, and several employee-led +fundraising events, Wolverine Worldwide has consistently given back to the local communities where we live and work. Over the past 8 years, Wolverine Worldwide has donated over $3.4 million to United Way. +2023 PROXY STATEMENT +16 +TABLE OF CONTENTS +• +Two Ten Footwear Foundation – Wolverine Worldwide has continued its longstanding support of the Two Ten +Footwear Foundation, which was founded in 1939 and exists to improve the lives and careers of footwear employees and their families through emergency financial assistance, scholarships, and career development opportunities. Wolverine +Worldwide and its brands support Two Ten through financial assistance and product donations. +• +Brand-Supported Initiatives – our brands have been helping those in need in the following ways: +○ +Sweaty Betty – Through the Sweaty Betty Foundation, in the UK, +Sweaty Betty partnered with the Youth Sport Trust, the UK’s leading charity that aims to improve the education and development of every child through sport and play. In the United States, Sweaty Betty partnered with GLSEN to support +K-12 schools and make sports and physical activity more inclusive and welcoming for LGBTQ+ young people. +○ +Saucony – Existing to inspire and serve all humans to live +their best lives by providing access to running, celebrating self-expression, and creating a better world, Saucony introduced its Run For Good platform. Run For Good was created to educate consumers and fans how Saucony is making +running more diverse. Through its partnerships with Black Girls Run and Black Men Run, Saucony drives meaningful, systemic change through running. +○ +Merrell – Continuing its multi-year partnership with Big +Brothers Big Sisters (“BBBS”), Merrell sponsored a new BBBS program in 2022. The BBBS Rise and Shine walk premiered during Great Outdoors Month with an event and donation to local chapters. Merrell continues to work with the national +one-to-one mentoring organization to create life-changing connections for young people, harnessing the power of being outside and providing access to the outdoors to more youth. +○ +Chaco – In 2022, Chaco collaborated with Diversify Whitewater, +a Colorado-based non-profit organization that focuses on removing barriers to entry in paddlesports that exist for many Black, Indigenous, People of Color and allies and increasing access to watersports like kayaking, canoeing, +rafting, and stand-up paddleboarding. Chaco pledged a monetary donation to Diversify Whitewater based on its Giving Tuesday proceeds. +○ +Wolverine – Our namesake footwear and apparel brand continued +its long-standing commitment to supporting the next generation of skilled trades workers through its partnership with the Ram Truck Brand for a “Built for the Driven” collection. Through this partnership, Wolverine donated $75,000 to +the SkillsUSA Hope Fund, providing equitable access to opportunities for more youth to pursue their skilled trades career. This program extends from Wolverine’s long-standing Project Bootstrap platform. +CODE OF BUSINESS CONDUCT AND ACCOUNTING AND FINANCE CODE OF +ETHICS +The Board has adopted a Code of Business Conduct for the Company’s directors, officers and employees. The +Board also has adopted an Accounting and Finance Code of Ethics (“Accounting and Finance Code”) that focuses on the financial reporting process and applies to the Company’s CEO, CFO and Corporate Controller. +The Company discloses amendments to or waivers from its Code of Business Conduct affecting directors +or executive officers and amendments to or waivers from its Accounting and Finance Code on its website at: +www.wolverineworldwide.com/investor-relations/corporate-governance/. +2023 PROXY STATEMENT +17 +TABLE OF CONTENTS +SHAREHOLDER COMMUNICATIONS POLICY +Shareholders and other interested parties may send correspondence to the Board, the non-employee directors as +a group, a specific Board committee or an individual director (including the Lead Director) in the manner described below. +The General Counsel will provide a summary and copies of all correspondence (other than solicitations for +services, products or publications) as applicable at each regularly scheduled Board meeting. +Communications may be sent via email through various links on our website at: +www.wolverineworldwide.com/investor-relations/corporate-governance/ +or by regular mail c/o General Counsel, Wolverine World Wide, Inc., 9341 Courtland Drive, NE, Rockford, MI 49351. +The General Counsel will alert individual directors if an item warrants a prompt response from the +individual director prior to the next regularly scheduled meeting. Items warranting a prompt response, but not addressed to a specific director, will be routed to the applicable committee Chairperson. +2023 PROXY STATEMENT +18 +TABLE OF CONTENTS +Proposal 1 — Election of +Directors for Terms Expiring +in 2026 +The Company's Board currently consists of twelve directors. As recently announced, Blake W. Krueger has +decided to retire from the Board and as Chairman of the Company, effective May 4, 2023, and David W. McCreight has decided to resign from the Board, effective May 4, 2023. Following their departures from the Board, the Company's Board will +consist of ten directors. +The Company's By-Laws establish three classes of directors with each class serving three-year terms. At each +annual meeting, the term of one class expires. The Board has nominated three directors for election at the Annual Meeting: William K. Gerber, Nicholas T. Long, and Kathleen Wilson-Thompson. Each director has been nominated to serve for a +three-year term expiring at the annual meeting of shareholders to be held in 2026 or until his or her successor, if any, has been elected and is qualified. +All director nominees are independent directors, as determined by the Board under the applicable NYSE +listing standards and the Company's Director Independence Standards. Each director nominee currently serves on the Board. The shareholders most recently elected Messrs. Gerber and Long at the Company's 2020 Annual Meeting. Ms. Wilson-Thompson +was appointed to the Board in 2021 on the recommendation of the Company’s Governance Committee. +The Company is not aware of any nominee who will be unable or unwilling to serve as a director. However, if +a nominee is unable to serve or is otherwise unavailable for election, the incumbent directors may or may not select a substitute nominee. If the directors select a substitute nominee, the proxy holder will vote the shares represented by all +valid proxies for the substitute nominee (unless other instructions are given). +The biographies of the three nominees and the other continuing directors of the Company are below, along +with a discussion of the experience and skills of each director. +2023 PROXY STATEMENT +19 +TABLE OF CONTENTS +Director Nominees with +Proposed Terms Expiring in 2026 +WILLIAM K. GERBER +Age: 69 +Director since: 2008 +Select Business Experience: +Managing Director of Cabrillo Point Capital LLC; +Retired Executive Vice President and Chief Financial Officer of Kelly Services, Inc. +Board Committees: +Audit +Compensation +Other Public Directorships: +Cleveland-Cliffs, Inc. +Career Highlights: +Mr. Gerber is Managing Director of Cabrillo Point +Capital LLC, a private investment fund. He has held that position since 2008. From 1998 to 2007, Mr. Gerber was Executive Vice President and Chief Financial Officer of Kelly Services, Inc., a publicly traded global staffing solutions +company with operations in more than 35 countries. Mr. Gerber served in various leadership positions with L Brands, Inc., a multinational apparel and retail company, prior to joining Kelly Services, Inc. Mr. Gerber currently serves as +director of Cleveland-Cliffs, Inc., a publicly traded producer of iron ore and steel products, since 2020. From 2007 through 2020, Mr. Gerber was a director of AK Steel Holding Corporation, which merged with Cleveland-Cliffs in 2020. +Experience and Skills: +From his 25 years in senior leadership positions +with L Brands, Inc. and Kelly Services, Inc., Mr. Gerber obtained extensive experience in apparel, retail, international business and finance, and his service as a director of various public companies has given him experience with +public company governance and related matters. +2023 PROXY STATEMENT +20 +TABLE OF CONTENTS +NICHOLAS T. LONG (INDEPENDENT LEAD DIRECTOR) +Age: 64 +Director since: 2011 +Select Business Experience: +Managing Partner, Bridger Growth Partners, LLC; +Retired Chief Executive Officer of MillerCoors LLC +Board Committees: +None +Other Public Directorships: +Amcor Limited +Career Highlights: +Mr. Long has acted as a Managing Partner for +Bridger Growth Partners, LLC, a private investment fund, since 2015. From 2011 until his retirement in 2015, Mr. Long served as Chief Executive Officer of MillerCoors LLC, a joint venture between two publicly traded beverage +companies. From 2008 to 2011, Mr. Long served as President and Chief Commercial Officer of MillerCoors LLC. From 2007 to 2008, Mr. Long served as Chief Executive Officer of Miller Brewing Company, a beverage company, and he served as +Chief Marketing Officer of Miller Brewing Company from 2005 to 2007. Prior to joining Miller Brewing Company, Mr. Long spent 17 years in various senior leadership positions at The Coca-Cola Company, a beverage company, including Vice +President of Strategic Marketing, Global Brands; Vice President, Strategic Marketing Research and Trends; President of Coca Cola’s Great Britain and Ireland Division; and President of the Northwest Europe Division. Mr. Long currently +serves as a director of Amcor Limited, a publicly-traded packaging solutions company. Additionally, Mr. Long is the Independent Lead Director of Wolverine Worldwide, a position he has held since November 2022. +Experience and Skills: +Through his more than 20 years in senior positions +at category leading, branded companies, Mr. Long has developed significant marketing, international business and brand building expertise. +2023 PROXY STATEMENT +21 +TABLE OF CONTENTS +KATHLEEN WILSON-THOMPSON +Age: 65 +Director since: 2021 +Select Business Experience: +Retired Executive Vice President & Global +Chief Human Resources Officer of Walgreens Boots Alliance Inc. +Board Committees: +Compensation (Chair) +Governance +Other Public Directorships: +Tesla, Inc. +McKesson Corporation +Career Highlights: +Ms. Wilson-Thompson previously served as Executive +Vice President and Global Chief Human Resources Officer of Walgreens Boots Alliance, Inc., a global pharmacy and wellbeing company, from December 2014 to January 2021, and as Senior Vice President and Chief Human Resources Officer +from January 2010 to December 2014. Prior to Walgreens, Ms. Wilson-Thompson held various legal and operational roles at Kellogg Company, a food manufacturing company, from July 2005 to December 2009, including most recently as its +Senior Vice President, Global Human Resources. Ms. Wilson-Thompson currently serves as a director of Tesla, Inc., an electric vehicle manufacturer and clean energy company, and McKesson Corporation, a publicly-traded healthcare +company. +Experience and Skills: +Through her 15 years of experience at Walgreens +and Kellogg, Ms. Wilson-Thompson developed significant experience in retail, international business, legal, and human capital management, and her service as a director of Tesla and McKesson has given her experience with public company +governance and related matters. +BOARD RECOMMENDATION +The Board recommends that you vote “FOR” the election of the above nominees for proposed +terms expiring in 2026. +2023 PROXY STATEMENT +22 +TABLE OF CONTENTS +Directors with Terms +Expiring in 2024 +BRENDA J. LAUDERBACK +Age: 72 +Director since: 2003 +Select Business Experience: +Chair of Denny’s Corporation; Retired President of +the Wholesale and Retail Group of Nine West Group, Inc. +Board Committees: +Governance (Chair) +Other Public Directorships: +Denny’s Corporation (Board Chair) Sleep Number +Corporation +Career Highlights: +Ms. Lauderback is currently the Chair of the Board +of Denny’s Corporation, a restaurant company, and has acted as a Director of Denny’s Corporation since 2005 and Sleep Number Corporation, a bed manufacturer and retailer, since 2004. From 1995 until her retirement in 1998, +Ms. Lauderback was President of the Wholesale and Retail Group of Nine West Group, Inc., a footwear wholesaler and distributor. She previously was the President of the Wholesale Division of U.S. Shoe Corporation, a footwear +manufacturer and distributor, a position that included responsibility for offices in China, Italy and Spain, and she was a Vice President/General Merchandise Manager of Dayton Hudson Corporation (now Target Corporation), a retail +company. From 1998 to 2015, Ms. Lauderback also was a director of Big Lots, Inc., a retail company. +Experience and Skills: +Ms. Lauderback has more than 25 years of +experience in the retail industry, with more than 20 years in the footwear, apparel, and accessories industries. These senior leadership positions have provided her with strong footwear, apparel and retail expertise. She also has +extensive experience with public company governance and related matters. Ms. Lauderback was named to the National Association of Corporate Directors’ (NACD) 2017 Directorship 100 list. In 2022, Ms. Lauderback received the President’s +Lifetime Achievement Award from the White House for her decades-long commitment to building stronger communities through volunteerism. +2023 PROXY STATEMENT +23 +TABLE OF CONTENTS +STACIA ANDERSEN +Age: 52 +Director since: 2023 +Select Business Experience: +Executive Vice President, Chief Customer Officer +of PetSmart LLC +Board Committees: +Audit +Other Public Directorships: +None +Career Highlights: +Ms. Andersen has served as the Executive Vice +President and Chief Customer Officer of PetSmart LLC, a specialty retailer of products, services, and solutions for pets, since 2022. From 2019 to 2021 Ms. Andersen was PetSmart’s Executive Vice President of Merchandising and Customer +Experience. From 2016 to 2018, Ms. Andersen was Brand President of Abercrombie & Fitch and Abercrombie kids at Abercrombie & Fitch Co., a specialty retailer of apparel and accessories for men, women and kids. Prior to that, +Ms. Andersen held various leadership and operational roles at Target Corporation, a general merchandise retailer. +Experience and Skills: +Through her more than 20 years of experience at +PetSmart, Abercrombie & Fitch, and Target, Ms. Andersen has developed significant experience in apparel and omnichannel retail, marketing, and merchandising. +2023 PROXY STATEMENT +24 +TABLE OF CONTENTS +DEMONTY PRICE +Age: 61 +Director since: 2023 +Select Business Experience: +Former President, Chief Operating, Service and +Values Officer of Restoration Hardware +Board Committees: +Compensation +Other Public Directorships: +None +Career Highlights: +Mr. Price previously served as the President and +Chief Operating, Service and Values Officer of RH, a curator of design, taste and style in the luxury lifestyle market, from 2017 to 2022. From 2016 to 2017, Mr. Price served as the Co-President, Chief Operating Services and Values +Officer at RH, and he served as Chief Service and Values officer from 2015 to 2016. From 2006 to 2015 Mr. Price served as the Senior Vice President of Retail Galleries and Operations, and Chief Values officer at RH. Prior to RH, +Mr. Price was with Williams-Sonoma, Inc. for four years in various field leadership roles, as well as with Gap Inc. and Nike Inc. +Experience and Skills: +Through his more than 35 years of senior +leadership positions, Mr. Price has developed significant retail, human capital management, DE&I, and organization transformation experience. +2023 PROXY STATEMENT +25 +TABLE OF CONTENTS +Directors with Terms +Expiring in 2025 +JEFFREY M. BOROMISA +Age: 68 +Director since: 2006 +Select Business Experience: +Retired Executive Vice President of Kellogg +International, President of Latin America; Senior Vice President of Kellogg Company +Board Committees: +Audit (Chair) +Governance +Other Public Directorships: +None +Career Highlights: +Mr. Boromisa worked at Kellogg Company, a global +food manufacturing company, and its affiliates from 1981 to 2009. From 2008 through his retirement in May 2009, Mr. Boromisa was Executive Vice President of Kellogg International, President of Latin America; and Senior Vice President +of Kellogg Company. From 2007 until 2008, Mr. Boromisa served as Executive Vice President of Kellogg International, President of Asia Pacific and Senior Vice President of Kellogg Company. From 2004 through 2006, he was Senior Vice +President and Chief Financial Officer of Kellogg Company. In addition, beginning in 2004 and through his retirement, Mr. Boromisa was a member of Kellogg Company’s Global Leadership Team. Prior to 2004, Mr. Boromisa occupied various +leadership positions with Kellogg. Mr. Boromisa is also a director at Haworth International, Inc., a privately held, multinational, office furniture design and manufacturing company. +Experience and Skills: +With nearly 30 years of experience at Kellogg +Company, including serving as its Chief Financial Officer and leading various operational business units, Mr. Boromisa has obtained international business, brand building and finance expertise. +2023 PROXY STATEMENT +26 +TABLE OF CONTENTS +BRENDAN L. HOFFMAN +Age: 54 +Director since: 2020 +Select Business Experience: +President and Chief Executive Officer of Wolverine +Worldwide +Board Committees: +None +Other Public Directorships: +None +Career Highlights: +Mr. Hoffman was appointed as President of +Wolverine Worldwide effective in September 2020 and has served as the President and Chief Executive Officer of the Company since January 2022. From 2015 to August 2020, Mr. Hoffman served as the President and Chief Executive Officer +of Vince Holding Corp., a public company and apparel retailer. Prior to joining Vince, Mr. Hoffman served as the President and Chief Executive Officer of Bon-Ton Stores Inc., a department store chain, from 2012 to 2014. Previously, he +was the President and Chief Executive Officer of Lord & Taylor L.L.C., a department store chain, for more than three years, and before that, he served for six years as President and Chief Executive Officer of Neiman Marcus Direct, +an online retailer and a subsidiary of The Neiman Marcus Group Inc., where he oversaw the growth of neimanmarcus.com and the launch and growth of bergdorfgoodman.com. During the past 5 years, he has served as a director of Vince +Holding Corp. and Pier 1 Imports, a home furnishings and decor retailer. +Experience and Skills: +Mr. Hoffman’s more than 15 years in senior +leadership roles with apparel and retail companies have provided him expertise in apparel, retail, international business and finance, and his experience as a director at Vince Holding Corp., Pier 1 Imports and now the Company has +given him extensive experience with public company governance and related matters. +2023 PROXY STATEMENT +27 +TABLE OF CONTENTS +DAVID T. KOLLAT +Age: 84 +Director since: 1992 +Select Business Experience: +President and Chairman, 22, Inc. +Board Committees: +Audit +Compensation +Other Public Directorships: +None +Career Highlights: +Dr. Kollat has been Chairman and President of 22, +Inc., a company specializing in research and management consulting for retailers and consumer goods manufacturers, since 1987. In addition to his marketing and management experience as Chairman and President of 22, Inc., Dr. Kollat +served for 11 years in senior leadership positions at L Brands, Inc., a publicly traded, multinational apparel and retail company, including as Executive Vice President, Marketing; President of Victoria’s Secret Direct; and as a +member of its executive committee. Dr. Kollat served as the Independent Lead Director of Wolverine Worldwide from 2007 until November 2022. Dr. Kollat was a director of L Brands, Inc. from 1976 to 2019 and was a director of Sleep +Number Corporation, a bed manufacturer and retailer, from 1994 to 2018. +Experience and Skills: +Dr. Kollat’s more than 40 years’ experience at L +Brands, Inc. and 22, Inc. has provided him with marketing, apparel, international business, brand building, retail and finance expertise. He also has significant experience with company governance and related matters through service +on more than twenty boards of directors, including extensive service on public company boards, and service as an Independent Lead Director and chair of nominating, audit and compensation committees. Dr. Kollat was selected as one of +the ten outstanding directors in corporate America by the Outstanding Directors Exchange, a New York division of the Financial Times. He has also been recognized as one of the top 100 directors in America by the National Association +of Corporate Directors. +2023 PROXY STATEMENT +28 +TABLE OF CONTENTS +JODI BRICKER +Age: 55 +Director since: 2023 +Select Business Experience: +Chief Executive Officer of Quay Australia +Board Committees: +Governance +Other Public Directorships: +None +Career Highlights: +Ms. Bricker has served as the Chief Executive +Officer of Quay Australia, a global eyewear brand that sells sunglasses and prescription eyewear, since 2019. From 2016 to 2018, Ms. Bricker was the Executive Vice President of Merchandising, Inventory Management and Ecommerce of +Athleta, Inc., a subsidiary of Gap, Inc., a worldwide clothing and accessories retailer. From 2013 to 2016, Ms. Bricker was the Executive Vice President and General Manager of Old Navy, a subsidiary of Gap, Inc. From 2011-2013, +Ms. Bricker was the Senior Vice President and General Manager of OldNavy.com. Prior to joining Gap, Inc., Ms. Bricker held various senior leadership roles at Levi Strauss & Co., an apparel company and a global leader in jeanswear. +Experience and Skills: +Through her more than 20 years of senior +leadership positions with leading multinational apparel, accessories and lifestyle brands, Ms. Bricker has developed significant omnichannel retail, eCommerce, and brand building experience. +2023 PROXY STATEMENT +29 +TABLE OF CONTENTS +BOARD LEADERSHIP +The Company’s Corporate Governance Guidelines give the Board the flexibility to determine the best leadership +structure for the Company based upon the Company’s evolving needs and opportunities. The Governance Committee periodically reviews the Board’s leadership structure, including whether to separate the roles of Chairman and CEO, based upon the +Board and Company’s then-current circumstances, and recommends changes to the Board as appropriate. Currently, the Company’s former CEO also serves as the Chairman of the Board. In addition, since 1993, the independent directors have annually +elected an Independent Lead Director who performs a role in many ways similar to an independent Chairman, including the following enumerated responsibilities: +• +Serve, as necessary, as a liaison between the Chairman and the independent directors +• +Preside over Board meetings in the absence of the Chairman +• +Review, approve and help develop the agendas and scheduling for Board and committee meetings +• +Review and approve information and meeting materials sent to the Board +• +Preside over executive sessions, with the authority to call executive sessions +• +Work with the Compensation Committee and members of the Board to provide an effective annual performance review of the CEO and participate in CEO +succession planning +• +Oversee, along with the Governance Committee, the annual Board and committee evaluations +• +Be available for consultation and communication with shareholders, as appropriate +Effective when Mr. Krueger retires from the Board and as Chairman on May 4, 2023, the Company has appointed +Nicholas T. Long, currently the Company’s Independent Lead Director, as the independent Chairman of the Board. With Mr. Long serving as an independent Chairman, the Board will no longer have a director serving as Independent Lead Director. +DIRECTOR INDEPENDENCE +The Board annually assesses the independence of all directors. To qualify as “independent,” the Board must +affirmatively determine that the director is independent under the Company’s Director Independence Standards, which are modeled after the listing standards of the NYSE. Under NYSE listing standards and the Company’s Director Independence +Standards, the Board has determined that 10 of the Company’s 12 directors are independent. Only Messrs. Hoffman and Krueger are not independent. In addition, the Board determined that Gina Boswell, who served as a director until December 1, +2022 was independent during the time she served as a director. All of the Board’s committees are comprised entirely of independent directors. The independent directors generally meet in executive session at each regularly-scheduled meeting. +The Company’s Director Independence Standards define an “Independent Director” as a director who the Board +determines otherwise has no material relationship with the Company (either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company), and who: +• +Is not, and in the past three years has not been, an employee of the Company +• +Does not have, and has not had within the last three years, an immediate family member employed as an executive officer of the Company +• +Has not received, and does not have an immediate family member who received, during any 12 month period within the last three years, any direct +compensation from the Company in excess of $120,000 (other than compensation for Board service; compensation received by the director for former service as an interim Chairman, CEO or other executive officer; compensation received by +the director’s immediate family member for service as a non-executive employee; and pension and other forms of deferred compensation for prior service if such compensation is not contingent in any way on continued service) +• +Is not a current employee or partner of a firm that is the Company’s internal or external auditor +2023 PROXY STATEMENT +30 +TABLE OF CONTENTS +• +Has not been, and does not have an immediate family member who has been, within the last three years, a partner or employee of the Company’s internal +or external auditor and personally worked on the Company’s audit within that time +• +Does not have an immediate family member who is (i) a current partner of the Company’s internal or external auditor, or (ii) a current employee of the +Company’s internal or external auditor who personally works on the Company’s audit +• +Is not, and has not been within the last three years, part of an interlocking directorate in which a current executive officer of Wolverine Worldwide +serves or served on the compensation committee of another company where the director or the director’s immediate family member concurrently serves or served as an executive officer +• +Is not an employee of, and does not have an immediate family member who is an executive officer of, another company that has made payments to, or +received payments from, Wolverine Worldwide for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of $1,000,000 or 2% of the other company’s consolidated gross revenues +• +Has not had any other direct or indirect relationship with Wolverine Worldwide that the Board determines is material +BOARD COMMITTEES, MEETINGS AND MEETING ATTENDANCE +The Board has three standing committees: Audit, Compensation and Governance. Each committee meets +periodically throughout the year and reports its recommendations to the Board. The Company expects directors to attend every meeting of the Board and the committees on which they serve and to attend the annual meeting of shareholders. In 2022, +all directors then serving on the Board attended the 2022 Annual Meeting of Shareholders, and all directors attended at least 75% of the meetings of the Board (9 meetings in 2022) and the committees on which they served held during the period +for which he or she served. +All directors are typically invited to and attend all committee meetings. Our non-management directors and +independent directors each met regularly in separate executive sessions during fiscal year 2022, all of which were chaired and led by the Independent Lead Director. +Each committee annually evaluates its performance to determine its effectiveness. The Board has determined +that all committee members are “independent” as defined by NYSE listing standards. Furthermore, each Audit Committee member satisfies the NYSE “financial literacy” requirement. In addition, the Board has determined that Mr. Boromisa and +Mr. Gerber are “audit committee financial experts” under Securities and Exchange Commission (“SEC”) rules. Each committee’s charter, with a complete list of the duties and responsibilities, is available on the Company’s website at +www.wolverineworldwide.com/investor-relations/corporate-governance/. +AUDIT COMMITTEE +Committee Members +• +Boromisa (Chair) +• +Andersen +• +Gerber +• +Kollat +Number of Meetings in 2022 +6 +Highlighted Responsibilities +• +Appoints, evaluates and oversees the work of the independent auditors and oversees the internal audit +function +• +Reviews and discusses the Company’s approach to risk management +• +Oversees the Company’s management of risks related to cybersecurity +• +Oversees the Company’s policies, systems and management of risk assessment and the Company’s compliance +with legal and regulatory requirements +• +Oversees the integrity of the Company’s financial statements, financial reporting process and internal +controls +2023 PROXY STATEMENT +31 +TABLE OF CONTENTS +COMPENSATION COMMITTEE +Committee Members +• +Wilson-Thompson (Chair) +• +Gerber +• +Kollat +• +Price +Number of Meetings in 2022 +6 +Highlighted Responsibilities +• +Assists the Board in fulfilling its responsibilities relating to executive compensation and the Company’s +compensation and benefit policies and programs +• +Oversees the overall compensation structure, policies and programs, including whether the compensation +structure establishes appropriate incentives for management and employees +• +Oversees the Company’s management of risks relating to management resources, organization structure and +succession planning, hiring, development and retention processes, as well as those relating to the Company’s compensation structure, policies and programs +• +Oversees the Company’s strategies and policies related to human capital management, including with respect +to matters such as diversity and inclusion and workplace environment and culture +• +The Compensation Committee may delegate its authority to one or more subcommittees of the Compensation +Committee +GOVERNANCE COMMITTEE +Committee Members +• +Lauderback (Chair) +• +Boromisa +• +Bricker +• +Wilson-Thompson +Number of Meetings in 2022 +5 +Highlighted Responsibilities +• +Assists the Board in fulfilling its responsibilities on matters and issues related to the Company’s +corporate governance practices +• +Working with the Board, establishes qualification standards for membership on the Board and its committees +and recommends qualified individuals to become Board members or serve for election as directors +• +Develops and recommends to the Board for its approval an annual self-evaluation process for the Board and +its committees, and oversees the evaluation process +• +Oversees and makes recommendations to the Board regarding environmental, social and governance matters and +their integration into the Company’s business and long-term value creation for the Company and its shareholders +2023 PROXY STATEMENT +32 +TABLE OF CONTENTS +Director Compensation +in Fiscal Year 2022 +The Company’s non-employee director compensation philosophy is to pay compensation that is competitive with +the compensation paid by companies of similar size, in similar industries and with whom Wolverine Worldwide competes for director candidates. The Governance Committee, with input from management and from the Compensation Committee’s independent +compensation consultant, reviewed director compensation and compared it to market data, including a comparison to director compensation for the Company’s Peer Group, as defined on page 52 , and broader industry market surveys +(FW Cook 2020 Director Compensation Report and NACD 2020-2021 Director Compensation Report). Slight increases to cash fees and RSU grants were implemented based on this review in order to align more closely with market median. +The following table provides information regarding the compensation of the Company’s non-employee directors +for fiscal year 2022. The table also includes compensation paid to Mr. Krueger as Executive Chairman of the Board in 2022, a non-officer employee position, as more fully described below under the sub-heading Executive +Chairman Compensation . On January 1, 2023, Mr. Krueger transitioned to the role of Chairman of the Board, with compensation reduced accordingly to reflect the more limited role and responsibilities, as described in more detail below. +As recently announced, Mr. Krueger has decided to retire from the Board and as Chairman of the Company, effective May 4, 2023. In 2022, Mr. Hoffman received compensation for his services as the Company’s President and CEO but did not receive +any additional compensation for service as a director. Mr. Hoffman’s compensation is reflected in the CD&A Section, the Summary Compensation Table, and related tables and disclosures. +Fees Paid in +Cash +Cash Amounts +Voluntarily +Deferred +Fees Earned or +Paid in Cash 1 +Restricted +Stock Unit +Awards 2 +Totals +Non-Employee Directors +Boromisa +- ++ +$132,000 += +$132,000 ++ +$ 145,020 += +$ 277,020 +Boswell 3 +$104,000 ++ +- += +$104,000 ++ +$ 145,020 += +$ 249,020 +Gerber +$107,000 ++ +- += +$107,000 ++ +$ 145,020 += +$ 252,020 +Kollat +$140,000 ++ +- += +$140,000 ++ +$ 180,015 += +$ 320,015 +Lauderback +$127,000 ++ +- += +$127,000 ++ +$ 145,020 += +$ 272,020 +Long +$124,000 ++ +- += +$124,000 ++ +$ 154,191 += +$ 278,191 +McCreight 4 +$104,000 ++ +- += +$104,000 ++ +$ 145,020 += +$ 249,020 +Wilson-Thompson +$ 80,000 ++ +- += +$ 80,000 ++ +$ 145,020 += +$ 225,020 +Executive Chairman +Krueger +$500,000 ++ +- += +$500,000 ++ +$5,500,002 += +$6,000,002 +1. +Represents cash payments received or deferred by non-officer directors for fiscal year 2022. Non-employee directors +may defer fees pursuant to the Director Deferred Compensation Plan or Deferred Compensation Plan (each as defined below). The table shows the Fees Earned or Paid in Cash separated into Fees Paid in Cash and Cash Amounts Voluntarily +Deferred. +2. +Represents the aggregate grant date fair value of restricted stock units granted to non-officer directors in fiscal +year 2022, calculated in accordance with Accounting Standard Codification (“ASC”) Topic 718, without regard to estimated forfeitures. Except with respect to Mr. Krueger, these grants represent the standard annual director restricted +stock unit grant made in accordance with the director compensation program. As described below, Mr. Krueger received a restricted stock unit grant in connection with his service as Executive Chairman for fiscal year 2022. The chart +below lists the aggregate outstanding option awards (granted prior to 2018) and restricted stock units held by non-officer directors at the end of fiscal year 2022. For valuation assumptions, see the Stock Based Compensation footnote +to the Company’s Consolidated Financial Statements for fiscal year 2022 included in its Annual Report on Form 10-K for fiscal year 2022. +3. +Ms. Boswell was a member of Wolverine’s Board of Directors until December 2022. +4. +As recently announced, David W. McCreight has decided to resign from the Board, effective May 4, 2023. +2023 PROXY STATEMENT +33 +TABLE OF CONTENTS +Name +Option Awards Outstanding at +December 31, 2022 +(#) +Restricted Stock Units held at +December 31, 2022 1 +(#) +Boromisa +44,278 +24,508 +Boswell +12,854 +- +Gerber +44,278 +7,165 +Kollat +56,580 +19,120 +Krueger +1,072,126 +317,634 +Lauderback +44,278 +7,165 +Long +44,278 +25,033 +McCreight +- +16,423 +Wilson-Thompson +- +10,283 +1. +Includes 17,343, 10,226, 17,343, 9,258 and 3,118 fully vested restricted stock units held by each of Mr. Boromisa, +Dr. Kollat, Mr. Long, Mr. McCreight and Ms. Wilson-Thompson, respectively, that were deferred and will be settled on the date elected by the director. +The following table shows the non-employee director compensation program for fiscal year 2022: +Compensation Plan for 2022 +Component +Cash +Restricted Stock Units 1 +Annual Director Fee +$80,000 +Number of restricted stock units “RSUs” with a grant date value of $145,000. +Audit Committee Annual Fee +$15,000 +Audit Committee Chairperson Annual Fee +$25,000 +Compensation Committee Annual Fee +$12,000 +Compensation Committee Chairperson Annual Fee +$20,000 +Governance Committee Annual Fee +$12,000 +Governance Committee Chairperson Annual Fee +$20,000 +Lead Director Annual Fee +In lieu of the standard Annual Director Fee, the Lead Director was paid a Cash Retainer of $140,000. +In lieu of the standard RSU grant, the Lead Director received a number of RSUs with a grant date value +of $180,000. +1. +For fiscal year 2022, Messrs. Boromisa, Gerber, McCreight and Mses. Boswell, Wilson-Thompson and Lauderback each +received 7,165 restricted stock units, Dr. Kollat received 8,894 restricted stock units. Mr. Long received 7,690 restricted stock units. The above restricted stock units were granted in May and November 2022 under the Stock Incentive +Plan of 2016, as amended, and vest one year from the date of grant. +Executive Chairman Compensation +In 2022, Mr. Krueger served as Executive Chairman, a one-year, employed, non-officer position that was part +of the overall CEO transition plan as Mr. Hoffman assumed the role of CEO from Mr. Krueger in January 2022. Mr. Krueger’s service as Executive Chairman focused on key international and strategic initiatives. As Executive Chairman, Mr. Krueger +received a salary of $500,000 and a grant of 203,553 restricted stock units in February. The restricted stock units were granted under the Stock Incentive Plan of 2016, as amended, and vest one year from the date of grant. The one-year vesting +period was intended to correlate with the one-year transition period during which Mr. Krueger would serve as Executive Chairman. +In 2023, Mr. Krueger transitioned to the role of Chairman of the Board, a non-employee position. His total +annual 2023 cash and stock compensation as Chairman (in lieu of any other compensation) had been set at $145,000 in cash and $255,000 in restricted stock unit grants. Mr. Krueger recently announced that he is retiring from this position and as +a director effective May 4, 2023. +Director Deferred Compensation Plan. The Company’s +Amended and Restated Outside Directors’ Deferred Compensation Plan (the “Director Deferred Compensation Plan”) is a supplemental nonqualified deferred compensation plan for non-employee directors. A separate non-employee director deferred +compensation plan applies to benefits accrued under that plan before January 1, 2005. The Director Deferred Compensation Plan permits all non-employee directors to voluntarily defer, at their option, 25%, 50%, 75% or 100% of their director +cash fees. The Company establishes a book account for each non-employee director and credits the director’s account with a number of stock units equal to the amounts voluntarily deferred, divided by the closing market price of common stock on +the payment/deferral date. The Company also +2023 PROXY STATEMENT +34 +TABLE OF CONTENTS +credits director accounts with dividend equivalents on amounts previously deferred in the form of +additional stock units. The amounts credited to director accounts are treated as if invested in Wolverine Worldwide common stock. The number of stock units held in director accounts is set forth under the “Stock Ownership By Management and +Others” table below. +Upon a director’s termination of service, or such later date as a director selects, the Company will +distribute the stock units in the director’s book account in shares of Wolverine Worldwide common stock in either a single, lump sum distribution or annual installment distributions over a period of up to 20 years (10 years under the plan for +benefits accrued before January 1, 2005) based on the director’s election. The Company converts each stock unit to one share of Wolverine Worldwide common stock. +Upon a “change in control,” the Company will distribute to the director, in a single, lump sum distribution, +Wolverine Worldwide common stock in a number of shares equal to the stock units credited to a director’s book account. The Deferred Compensation Plan defines “change in control” as any of the following: +• +The acquisition by any person, or by more than one person acting as a group, of more than 50% of either (i) the then outstanding shares of common +stock of Wolverine Worldwide or (ii) the total fair market value of Wolverine Worldwide +• +The acquisition by any person, or more than one person acting as a group, during the 12 month period from and including the date of the most recent +acquisition, of ownership of 30% or more of the outstanding common stock of Wolverine Worldwide +• +The replacement of a majority of the individuals who constitute the Board during any 12 month period by directors whose appointment or election is not +endorsed by a majority of the directors prior to the date of the appointment or election +• +The acquisition, during any 12 month period ending on the date of the most recent acquisition, by any person of assets from Wolverine Worldwide having +a gross fair market value of at least 40% of the gross fair market value of all the assets of Wolverine Worldwide immediately before the acquisition +Deferred Compensation Plan. For a description of the +non-qualified Deferred Compensation Plan under which directors may also defer cash fees, please see the “ Non-Qualified Deferred Compensation ” +section on page 65 . +NON-EMPLOYEE DIRECTOR STOCK OWNERSHIP GUIDELINES +Each non-employee director must attain (and maintain) a minimum stock ownership level equal to six times the +non-employee director annual cash retainer prior to being able to gift or sell any Company stock. The equity that qualifies for determining the non-employee directors’ minimum stock ownership level includes owned shares and unvested restricted +stock units that vest based on time (up to a maximum value of 50% of the applicable ownership requirement), but excludes unearned performance shares and units and unexercised options (or any portion thereof, such as the current “in the money” +value). During 2022, all non-employee directors were in compliance with these guidelines. +2023 PROXY STATEMENT +35 +TABLE OF CONTENTS +Securities Ownership of Officers +and Directors and Certain +Beneficial Owners +FIVE PERCENT SHAREHOLDERS +The following table sets forth information about those holders known by Wolverine Worldwide to be the +beneficial owners of more than five percent of Wolverine Worldwide's outstanding shares of common stock as of March 6, 2023: +Amount and Nature of Beneficial Ownership of Common Stock +Name and Address of +Beneficial Owner +Sole Voting +Power +Sole +Investment +Power +Shared Voting +Power +Shared +Investment +Power +Total +Beneficial +Ownership +Percent of +Class 4 +BlackRock, Inc. 1 +55 East 52nd Street +New York, NY 10055 +12,442,445 +12,533,421 +— +— +12,533,421 +15.78% +Earnest Partners, LLC 2 +1180 Peachtree Street NE +Suite 2300 Atlanta, GA 30309 +4,784,023 +6,453,192 +— +— +6,453,192 +8.13% +The Vanguard Group 3 +100 Vanguard +Boulevard +Malvern, PA 19355 +— +9,055,660 +129,786 +204,010 +9,259,670 +11.66% +1. +Based solely on information set forth in a Schedule 13G filed on January 24, 2023. +2. +Based solely on information set forth in a Schedule 13G/A filed on February 13, 2023. +3. +Based solely on information set forth in a Schedule 13G/A filed on February 9, 2023. +4. +Based on 79,421,316 shares outstanding as of March 6, 2023. +2023 PROXY STATEMENT +36 +TABLE OF CONTENTS +STOCK OWNERSHIP BY MANAGEMENT AND OTHERS +The following table sets forth the number of shares of common stock beneficially owned as of March 6, 2023, +by each of the Company's directors and named executive officers and all of the Company's directors and executive officers as a group: +Amount and Nature of Beneficial Ownership of Common Stock 1 +Deferred +Stock Units, +Sole Voting +and/or +Investment +Power 2 +Shared Voting or +Investment +Power 3 +Stock +Options +and RSUs +Vesting +within 60 +Days 4 +Total +Beneficial +Ownership +Percent +of Class 5 +Jeffrey M. Boromisa +66,826 +158,681 +51,443 +276,950 +* +William K. Gerber +48,282 +— +51,443 +99,725 +* +Brendan L. Hoffman +95,232 +— +— +95,232 +* +Chris Hufnagel +87,301 +— +66,458 +153,759 +* +David T. Kollat +226,663 +103,081 +65,474 +395,218 +* +Blake W. Krueger +1,210,743 +68,634 +871,348 +2,150,725 +2.66% +Brenda J. Lauderback +85,631 +— +51,443 +137,074 +* +Nicholas T. Long +42,073 +— +51,443 +93,516 +* +David W. McCreight +3,781 +— +7,165 +10,946 +* +Isabel Soriano +22,365 +— +— +22,365 +* +Michael D. Stornant +24,545 +193,499 +107,312 +325,356 +* +Kathleen Wilson-Thompson +— +— +7,165 +7,165 +* +James D. Zwiers +38,968 +23,779 +97,979 +160,726 +* +All directors and executive officers as a group +(15 people) +1,996,648 +547,674 +1,457,563 +4,001,885 +4.95% +* +Represents beneficial ownership of less than 1%. +1. +The numbers of shares stated are based on information provided by each person listed and include shares personally +owned of record and shares that, under applicable regulations, are considered to be otherwise beneficially owned. +2023 PROXY STATEMENT +37 +TABLE OF CONTENTS +2. +The “Deferred Stock Units, Sole Voting and/or Investment Power” column of the table above does not include the +following time-vested restricted stock units and performance units owned by directors and NEOs as of March 6, 2023: +Restricted +Units +Performance +Units +Boromisa +24,508* +— +Gerber +7,165 +— +Hoffman +217,384 +443,442 +Hufnagel +34,818 +44,289 +Klimek +24,968 +35,013 +Kollat +19,120* +— +Krueger +— +84,381 +Lauderback +7,165 +— +Long +25,033* +— +McCreight +16,423* +— +Rasch +17,608 +18,912 +Soriano +24,927 +34,843 +Stornant +56,643 +85,824 +Wilson-Thompson +10,283 +— +Zwiers +50,532 +76,332 +* +Includes 17,343, 10,226, 17,343, and 9,258 fully vested restricted stock units held by each of Mr. Boromisa, Dr. +Kollat, Mr. Long and Mr. McCreight, respectively, that were deferred and will be settled on the date elected by the director. +3. +These numbers include shares over which the listed person is legally entitled to share voting or investment power by +reason of joint ownership, trust or other contract or property right and shares held by spouses, children or other relatives over whom the listed person may have influence by reason of such relationship. +4. +The numbers represent shares that may be acquired within 60 days after March 6, 2023, by the exercise of stock +options granted under Wolverine's various stock option plans, or upon the vesting of restricted stock units. These numbers are also included in the Total Beneficial Ownership column. +5. +As of March 6, 2023, based on 79,421,316 shares outstanding on that date plus the number of stock options +exercisable and restricted stock units vesting that are held by the specified person(s) within 60 days of March 6, 2023, as indicated in the “Stock Options and RSUs Vesting Within 60 Days” column. +2023 PROXY STATEMENT +38 +TABLE OF CONTENTS +Compensation Discussion +and Analysis +SUMMARY +The Company’s Compensation Discussion and Analysis (“CD&A”) provides an overview and analysis of the +executive compensation program for the Company’s named executive officers (“NEOs”). For fiscal year 2022, the Company’s NEOs were: +Brendan L. Hoffman +President and Chief Executive Officer +Chris Hufnagel +President, Active Group +Isabel Soriano +President, International Group +Michael D. Stornant +Executive Vice President, Chief Financial Officer and Treasurer +James D. Zwiers +Executive Vice President and President, Global Operations Group +COMPENSATION PHILOSOPHY AND OBJECTIVES +The Company’s compensation philosophy is to provide executives with a competitive compensation package that +is heavily weighted towards performance-based (performance units and annual bonus opportunity) and variable (restricted stock units) compensation in order to encourage superior business and financial performance over the short and longer term +and, by linking compensation with stock price performance, to closely align the interests of the Company’s NEOs with those of its shareholders without encouraging excessive risk-taking. The Compensation Committee (the “Committee”) oversees the +Company’s executive compensation program. +The executive compensation program has four primary objectives: +• +Attract and retain talented NEOs who will lead Wolverine Worldwide and drive superior business and financial performance +• +Provide incentives for achieving specific pre-established near-term individual, business unit and corporate goals and reward the attainment of those +goals +• +Provide incentives for achieving specific pre-established longer-term corporate financial goals and reward the attainment of those goals +• +Align the interests of NEOs with those of the shareholders through incentives based on achieving performance objectives that enable increased +shareholder value +Compensation Decisions in Context: Key 2022 Accomplishments and +Financial Highlights +We made important progress in 2022 on our strategic and financial objectives, despite challenges across the +industry that quickly shifted the economic environment mid-way through the year and impacted supply chains, inventories, and financial performance. Some highlights are listed below: +• +Annual revenue of $2.685 billion, representing 11.2% growth over fiscal 2021 and growth of over 14% on a constant currency basis. +• +Solid revenue growth across several of the Company’s largest brands, with Merrell revenue growing year-over-year by 18%, Saucony by 6%, and Wolverine +by 9%. Merrell achieved record annual revenue, and was named “Brand of the Year” at the 2022 Footwear News Achievement Awards. +• +Strong revenue growth in the Company’s international business, which grew 42% year-over-year on a constant currency basis. +• +Important strategic steps were taken to become a more disciplined and agile company by simplifying our business and prioritizing areas of investment +and focus. Key actions included: +○ +Changing our brand group structure to create the Active, Work, and Lifestyle Groups, enabling brands with similar +attributes to more easily collaborate and share best practices; +2023 PROXY STATEMENT +39 +TABLE OF CONTENTS +○ +Establishing a permanent Profit Improvement Office to improve efficiency while reducing costs, including redesigning our +supply chain processes; and +○ +Conducting a strategic review of our portfolio to focus resources on the business and brands that will drive the highest +return for our shareholders. +2022 Compensation Program Overview +The Company’s executive compensation program consists of base salary, annual bonus opportunity, long-term +incentive compensation and benefits. A breakdown of base salary, annual performance bonus, and long-term incentive compensation is illustrated below: +ELEMENT +COMPONENT +METRICS +WHAT THE PAY ELEMENT REWARDS +Base +Salary +• Cash +• Fixed amount based on responsibilities, experience and market data +• Scope of core responsibilities, years of experience, and potential to affect +the Company’s overall performance +Annual +Performance +Bonus +• Company/Business +Unit Cash Bonus +• Individual Cash Bonus +• eCommerce Revenue Multiplier +• 85% revenue and adjusted pretax earnings +• 15% specific individualized performance targets +• Total payout can be adjusted upwards by up to 30% based on eCommerce revenue +multiplier +• Achieving specific corporate business and/or divisional objectives over +which the NEO has reasonable control +• Achieving specific personal objectives +• Achieving key financial metrics, consistent with communicated objectives +Long-Term +Incentive +Compensation +• Performance stock units +• Time-vested restricted stock units +• Uses the following performance metrics (weighted as indicated) +• 65% Adjusted earnings per share +• 35% Adjusted business value-added +• Relative TSR adjusted total payout up/down up to plus or minus 25% +• Four-year vesting for time-vested restricted stock units +• Balances focus on near-term profitability with longer-term shareholder value +creation +• Achieving long-term corporate objectives +• Driving long-term shareholder value +• Continued, long-term employment at Wolverine Worldwide +• Adjusted to increase (or reduce) payout based on relative TSR performance +• Time-vested restricted stock units reward increases in stock price +Pay at Risk +Under the Company’s compensation program, a significant portion of the compensation awarded to the NEOs +generally, and to the CEO in particular, is at risk (contingent upon the attainment of various pre-established short and long-term financial goals) and variable (contingent on the performance of the Company’s stock price). NEO compensation that +is significantly at risk and variable incentivizes superior business and financial performance and, by linking compensation with stock price performance, aligns the interests of executives with those of shareholders. For more information on the +relation between Company performance and the impact on CEO and other NEO pay, please see the tables and related information under the heading “ Pay Versus Performance ” on page 72 . +2023 PROXY STATEMENT +40 +TABLE OF CONTENTS +The following graphic illustrates the percentage of 2022 NEO target compensation that +is at risk, reflecting the grant values and salary information from the February 2022 Compensation Committee actions. +Long-Term Incentive Program Mix +The long-term incentive program is heavily weighted to at-risk compensation, with a mix +for February 2022 grants of 70% performance stock units and 30% time vested restricted stock units for Mr. Hoffman and 60% performance stock units and 40% time vested restricted stock units for the other NEOs. This 2022 weighting reflects a +shift to a higher percentage of performance stock units compared to time vested restricted stock units for both the CEO and the other NEOs, reflecting the Committee’s desire to place a higher percentage of NEO compensation at increased risk and +subject to performance measures. +Compensation Best Practices +What we do +What we do not do +✔ Vast majority of pay is at risk or variable, +i.e., performance-based or equity-based or both +✔ Stringent share ownership requirements (6x +base salary for CEO) +✔ Broad-based clawback policy covering both cash +and equity +✔ Significant vesting horizon for equity grants +✔ Double trigger equity acceleration +✔ Independent Compensation Committee Consultant +✔ Review executive compensation program to +ensure it doesn’t promote excessive risk taking +✔ Proactively engage with top shareholders on +compensation and governance issues +✔ Conduct annual say-on-pay votes +✔ Balance short-term and long-term incentives +✘ No dividends or dividend equivalents on +unearned performance shares/units +✘ No repricing or replacing of underwater stock +options +✘ No excessive or unnecessary perquisites +✘ No hedging, pledging or short sales of Company +stock +✘ No excise tax gross-ups in change-in-control +agreements for new officers (hired after 2008) +2023 PROXY STATEMENT +41 +TABLE OF CONTENTS +Compensation Discussion and Analysis +2022 COMPENSATION PROGRAM OVERVIEW +Setting Targets +Each February, the Committee recommends (and the independent directors approve) target compensation for the +CEO for the upcoming year after considering the latest available information, including the Company’s total shareholder return (“TSR”) and other business and financial performance, information provided by the Committee’s compensation consultant +regarding executive compensation trends and compensation paid to other chief executive officers of companies in the compensation peer group (described below), and information provided by management on recent Company performance and the +Company’s future business and financial outlook. The Committee’s goal is to set the CEO’s compensation in line with experience and the anticipated market median compensation for that year. +Given the significant weight the Company’s executive compensation program places on at risk and variable +compensation, the compensation realized by the CEO and other NEOs can be significantly affected, both positively and negatively, by performance against the various operational and financial performance metrics pre-established by the Committee +and by the performance of the Company’s stock. The Board and Committee believe such a compensation program aligns the interests of the CEO and other NEOs with the interests of the shareholders. +The Company’s executive compensation program consists of four primary elements: base salary, annual bonus +opportunity, long-term incentive compensation and benefits. These elements are described in greater detail below. +Base Salary +As part of approving an NEO’s base salary, the Committee considers a variety of factors including individual +responsibilities, experience, skills, and potential to affect Wolverine Worldwide’s overall performance, as well as market surveys and peer group information. The Committee considers these compensation factors subjectively, and no single factor +or combination of factors was determinative in setting base salaries for any NEO for fiscal year 2022. +Based on the above factors, the Committee approved the 2022 base salaries for the NEOs as noted in the +following table. The base salary increases for the NEOs were based on their performance evaluations as well as consideration of peer group and broad-based industry compensation data, as described in detail below. The cash compensation for +Ms. Soriano is paid in Pounds Sterling and was converted into U.S. dollars using the fiscal year-end rate (1.20 for fiscal 2022 and 1.33 for fiscal 2021) here and throughout the CD&A and related disclosures. +Name +2021 Base Salary +2022 Base Salary +Hoffman +$930,000 +$1,000,000 +Hufnagel +$592,000 +$ 609,800 +Soriano 1 +$502,341 +$ 465,972 +Stornant +$675,000 +$ 695,250 +Zwiers +$695,000 +$ 716,000 +1. +Ms. Soriano’s 2021 base salary was GBP 377,700, and her 2022 base salary was GBP 388,310. The USD equivalent of +Ms. Soriano’s 2022 base salary amount in the chart above shows a reduction +due to a change in the exchange rate +from the rate used in the Company’s 2022 Proxy Statement. +2023 PROXY STATEMENT +42 +TABLE OF CONTENTS +Annual Bonus +In 2022, each NEO had the opportunity to earn annual cash incentive compensation (“annual bonus”), consisting +of a performance bonus and an individual performance bonus, and further subject to a modifier: +Key Factors +2022 Company Metrics +Performance Bonus +• +Based on performance measured against Company and/or business unit performance criteria established at the +beginning of 2022 +• +• +Revenue (50%) +Adjusted pretax earnings (50%) +• +Payout determined by comparing performance against four performance levels set for each pre-set criterion: +threshold, target, goal, and stretch +Individual +Performance Bonus +• +Measured against individual performance criteria +• +Vary for each NEO +• +Each NEO’s payout was determined by comparing individual performance against specific individual criteria +set at the beginning of 2022 +• +Payouts can range from 0% to 200% depending on the NEO’s performance against individual performance +objectives +Modifier +• +Total payout based on the above two components can be adjusted upwards by up to 30% based on eCommerce +revenue +• +eCommerce revenue +A percentage of each NEO’s 2022 base salary, as determined in February 2022, was set as the annual bonus +target percentage (the “Target Bonus Percentage”). The Target Bonus Percentage represents the percentage of each NEO’s base salary that could be earned as annual incentive compensation at a “target” performance level (100% payout) for each of +the performance bonus and individual performance bonus. Generally, the Committee sets higher Target Bonus Percentages for individuals with greater influence on business strategy, profit or sales. This puts a larger percentage of an NEO’s total +potential cash compensation at risk, in line with the NEO’s ability to influence these factors. For 2022, the NEOs had the following Target Bonus Percentages: Mr. Hoffman 120%, Mr. Hufnagel, 50%, Ms. Soriano 50%, Mr. Stornant 65%, and +Mr. Zwiers 60%. +The Committee selected fiscal year 2022 revenue and adjusted pretax earnings as metrics for the performance +bonus because it believes a strong correlation exists between performance on these financial measures and increases in shareholder value. The Committee also included an eCommerce revenue growth multiplier for 2022 to more directly align with +the Company’s focus on go-forward revenue growth. The top end of the eCommerce revenue modifier was set at an aspirational level above Company plan and so only included a potential increase and not a penalty for failure to meet the modifier +level. The Company did not meet the eCommerce revenue goals and so no performance bonus adjustment was made based on the modifier. +Performance Bonus +Messrs. Hoffman, Stornant and Zwiers had significant influence on the Company’s overall business performance +and, accordingly, their respective performance bonus opportunity (85% of their total annual bonus opportunity) is based on the Company performance criteria only. Mr. Hufnagel and Ms. Soriano were directly responsible for specific business units +and exerted a significant influence on those business units in particular, in addition to influencing Company performance. Accordingly, a large percentage of their overall annual bonus opportunity was based on business unit performance, as +reflected in the table on page 46 . +As shown in the table below, the Committee also set four performance levels for each criterion: threshold +(25% payout for adjusted pretax; 50% for revenue), target (100% payout), goal (150% payout) and stretch (200% payout). The Committee set the revenue and adjusted pretax earnings goals for these performance levels following a review of the +Company’s operating plan, historical performance, and industry and macroeconomic conditions. The performance targets were set aggressively, including setting the revenue performance target required for 100% payout at revenue growth of over 24% +versus the prior fiscal year. The performance targets required for 100% payout on adjusted pretax goals were also set aggressively – at growth of over 30% versus the prior fiscal year’s adjusted pretax results. 2022 performance targets were set +based on planned performance in 2022 and as compared to actual 2021 results. +2023 PROXY STATEMENT +43 +TABLE OF CONTENTS +Company +Performance Level +(% of Target Payout) 1 +in millions +Revenue 2 +Pretax Earnings 2 +Threshold (25% for pretax; 50% for revenue) +$2,910 +$255.6 +Target (100%) +$3,000 +$283.6 +Goal (150%) +$3,050 +$292.9 +Stretch (200%) +$3,100 +$306.2 +1. +The maximum payout (before the effect of the modifier) an NEO can receive is 200% of his or her Target Bonus +Percentage, even if performance is above stretch. An NEO would receive 0% of his or her Target Bonus Percentage if performance is below threshold. An NEO could earn up to an additional 30% of his or her overall payout after the +modifier. +2. +Performance targets include Sweaty Betty results. +For each business unit, the Committee sets the revenue and adjusted pretax earnings goals at substantially +similar levels of difficulty as the goals for the Company and with a similar degree of difficulty as in prior years. The below table shows historical weighted performance levels achieved by the business units included as part of an NEO +performance bonus in 2022. +Historical Group Performance +2022 +2021 +2020 +2019 +2018 +International Group +Between goal and +stretch +Between goal and +stretch +Below threshold +Between threshold +and target +Between target and +goal +Merrell +Between threshold +and target +Between threshold +and target +Below threshold +Between threshold +and target +Between threshold +and target +Kid’s Group +Below threshold +Between threshold +and target +Below threshold +Between threshold +and target +Between goal and +stretch +2022 Performance +Overall Weighted Payout by Group +Wolverine Worldwide +Below Threshold +—% +International Group +Between Goal and Stretch +187% +Merrell +Between Threshold and Target +35% +Kid’s Group +Below Threshold +—% +Company revenue performance for 2022 was $2,685 million, which was below threshold and resulted in no +payout. Company pre-tax profit performance was $133.1 million, which was below threshold and resulted in no payout. For 2022, the Company paid the NEOs the amounts set forth in the table below relating to the performance bonus. +Name +Performance Bonus +(as a % of Total Annual +Bonus Opportunity) 1 +Performance Bonus Opportunity +(as a % of an NEO’s Target +Percentage) 1 +Performance Bonus +Percentage +Earned 1,2 +Performance +Bonus Paid 1,2 +Hoffman +85% +0 - 200% +—% +$ 0 +Hufnagel 3 +85% +0 - 200% +12% +$ 47,704 +Soriano 3 +85% +0 - 200% +94% +$238,643 +Stornant +85% +0 - 200% +—% +$ 0 +Zwiers +85% +0 - 200% +—% +$ 0 +1. +Not including adjustments, if any, based on the eCommerce revenue growth multiplier discussed below. +2. +Not including Individual Performance Bonus. +3. +Mr. Hufnagel and Ms. Soriano’s payout relates exclusively to business unit performance, as detailed further in the +final table in this “Annual Bonus” section and not to Wolverine Worldwide company performance, which was below threshold. +Individual Performance Bonus +At the same time Target Bonus Percentages are set, the CEO approves measurable personal objectives for each +NEO’s individual bonus, other than for himself. The CEO submits, and the Committee reviews and approves, with such changes as it considers appropriate, the CEO’s personal objectives. Such measurable personal objectives may include goals such as +executing strategies supporting the Company’s vision, developing employees, growing new business initiatives, and driving operational excellence. Performance is evaluated by the CEO (or, in the case of the CEO, by the Committee and the other +independent directors) based on qualitative and quantitative factors. +2023 PROXY STATEMENT +44 +TABLE OF CONTENTS +Each personal objective is given a rating from “does not achieve” to “exceptional,” with weighted +performance ratings and payouts consistent with the following table: +Personal Objectives Rating +2022 Payout Level +Exceptional +200% +Far Exceeds +175% +Exceeds +150% +Achieves +100% +Achieves Some But Not All +50% +Does Not Achieve +0% +The CEO recommended, and the Committee approved, the 2022 cumulative weighted personal objectives scores and +payout levels for each of the NEOs other than himself. The Committee and the other independent directors of the Board met with the CEO at the end of the year to evaluate his performance against his personal objectives, considering various +factors. The Committee determined the cumulative weighted personal objectives score for the CEO and recommended to the independent directors of the Board the CEO’s payout level. +Summaries of the specific personal objectives for each NEO are outlined in the table below, along with +performance information about each objective in parentheses, based on the scale set forth above. +NEO +2022 Personal Objectives +Hoffman +Achieve targets and forecast accuracy (Achieves some), Navigate supply chain (Achieves some), Increased +eCom impact (Achieves), China expansion (Achieves), Sweaty Betty growth (Achieves some), Cultural transformation/DE&I (Exceeds), Strategic planning process (Exceeds), Strategy re-launch (Achieves) +Hufnagel +Drive performance leadership (Achieves); Digital transformation (Achieves); Global expansion (Achieves +some); Brand and team development (Exceeds); DE&I (Far Exceeds) +Soriano +International business growth (Exceeds); Large brand growth (Exceeds); Geographic expansion (Exceeds); +Digital transformation and consumer experience (Achieves some); Our team/DE&I (Achieves) +Stornant +TSR Growth (Achieves some); Navigate supply chain (Achieves some); Planning accuracy (Achieves some); +DE&I (Achieves); Engagement with business units (Achieves) +Zwiers +Navigate supply chain (Achieves some); Brand partnership (Achieves); Modernize working methods (Achieves +some); Strategic planning (Achieves); Cultural transformation/DE&I (Achieves) +This year’s personal objectives related to key initiatives intended to drive shareholder value, including: +• +Navigating supply chain challenges (Messrs. Hoffman, Stornant, and Zwiers), while executing digital and business transformation initiatives +(Ms. Soriano and Messrs. Hoffman and Hufnagel) +• +Executing cultural change within the organization, including a focus on the Company’s Diversity, Equity & Inclusion initiatives (Ms. Soriano and +Messrs. Hoffman, Hufnagel, Stornant, and Zwiers) +• +Driving organic growth across the Company’s brand portfolio (Ms. Soriano and Messrs. Hoffman and Hufnagel), including international expansion +(Ms. Soriano and Mr. Hufnagel) +Name +Individual +Performance Bonus +(as a % of Total Annual Bonus +Opportunity) +2022 Individual Bonus +Opportunity +(as a % of an NEO’s Target +Percentage) +2022 +Individual Bonus +Percentage Achieved +2022 +Individual +Bonus Paid +Hoffman +15% +0 - 200% +80% +$144,007 +Hufnagel +15% +0 - 200% +109% +$ 49,458 +Soriano +15% +0 - 200% +120% +$ 41,747 +Stornant +15% +0 - 200% +74% +$ 49,881 +Zwiers +15% +0 - 200% +75% +$ 48,057 +2023 PROXY STATEMENT +45 +TABLE OF CONTENTS +eCommerce Revenue Multiplier +The Committee utilized an eCommerce revenue multiplier for 2022 to continue to align with the Company’s focus +on revenue growth and digital transformation. The Committee set the following eCommerce revenue multiplier for 2022. +eCommerce Revenue Goals 1 +$700M ++10% +$735M ++20% +$775M ++30% +1. +Modifier adjustments will not exceed 30% . +The Company did not meet the eCommerce revenue goals for 2022 so the multiplier did not apply to 2022 annual +bonus payouts. +Each NEO’s total annual bonus opportunity for 2022 ranged from 0% to 200% of the Target Bonus Percentage. +The accompanying table shows the aggregate annual incentive compensation payout earned by each NEO for 2022, as well as the portion of that aggregate number that is attributable to the performance bonus and individual performance bonus. +Hoffman +120% +15% +85% +$— +$144,007 +$144,007 +12% +Hufnagel +50% +15% +30% +55% 2 +$47,704 +$ 49,458 +$ 97,162 +32% +Soriano +50% +15% +30% +55% 3 +$238,643 +$ 41,747 +$280,390 +120% +Stornant +65% +15% +85% +$— +$ 49,881 +$ 49,881 +11% +Zwiers +60% +15% +85% +$— +$ 48,057 +$ 48,057 +11% +1. +Based on revenue and pretax earnings performance criteria for the Company, as described above under “ Annual Bonus — Performance Bonus .” +2. +Based on revenue and pretax earnings as the performance criteria for: Kids Group (10%), and Merrell (45%). +3. +Based on revenue and pretax earnings as the performance criteria for: International Group. +2023 PROXY STATEMENT +46 +TABLE OF CONTENTS +LONG-TERM INCENTIVE COMPENSATION +In 2022, each NEO had the opportunity to earn long-term incentive compensation comprised of a mix of +performance stock units and time-based restricted stock unit awards. The 2022 grants were based on the following: +Key Factors +Performance Share Metrics 1 +Performance Stock Units +• +Performance stock units are based on performance criteria covering three-year periods +• +Fully diluted adjusted EPS (65%) +• +Awards balance focus on near term profitability with longer term shareholder value creation +• +Adjusted Business Value Added (“BVA”) 2 (35%) +• +Potential up/down adjustment based relative TSR Measure +• +TSR adjustment for top/bottom quartile TSR vs. Russell 3000 Consumer Discretionary Index +Time-Based Restricted Stock Unit Awards +• +Encourages employee retention and rewards increases in stock price +1. +EPS is calculated on a fully diluted basis and EPS and BVA are each adjusted to account for and exclude the effects +of acquisitions, divestitures, accounting changes, restructuring, or other similar special charges or extraordinary items excluded by the Committee, including foreign exchange. +2. +BVA is calculated by starting with operating income determined in accordance with U.S. generally accepted accounting +principles (“GAAP”), and then reducing operating income by (1) an amount for income taxes where the effective tax rate used to calculate the income tax amount is determined in accordance with GAAP (adjusted consistent with EPS +adjustments, as described above), and (2) a capital charge equal to a 14 point average of “net operating assets” during the fiscal year (with “net operating assets” defined as the net of trade receivables (net of reserves), inventory +(net of reserves), other current assets, property, plant and equipment, trade payables and accrued liabilities) multiplied by 10%. +Performance Awards for the 2022-2024 +Performance Period +In the beginning of 2022, the Committee evaluated each NEO’s long-term incentive target payout opportunity +expressed as a dollar amount at target grant value for the grant of performance units for the 2022-2024 period. Performance units are eligible to vest based on achievement of adjusted constant-currency EPS goals (weighted 65%) and adjusted +constant-currency BVA goals (weighted 35%). For the 2022-2024 performance period, the Committee included a relative TSR modifier that provides a 25% positive adjustment for TSR performance in the top quartile of the Russell 3000 Consumer +Discretionary Index and a 25% negative adjustment for performance in the bottom quartile of the Index. +Name +2022-2024 +Target 1 +Hoffman +$3,360,000 +Hufnagel +$ 300,000 +Soriano +$ 255,000 +Stornant +$ 625,200 +Zwiers +$ 555,000 +1. +See footnote 3 to the Summary Compensation Table for the grant date fair value of +these awards, which reflects an accounting valuation of the effect of the +TSR modifier. +Target increases compared to 2021 are due in part to a shift in the LTI +program to +put a higher percentage of stock-based compensation into the more at risk +performance units rather than time-vested units. +The Company accrues, but does not pay, any dividends on any performance units during the performance period. +Once the Committee certifies the Company’s performance compared to the pre-determined performance criteria, the restrictions on some, all, none, or multiple of the performance share units awarded to each NEO will vest, and the NEO will receive +accrued dividends only on the shares actually earned. +The Committee goes through a rigorous process in setting performance targets, including a careful review of +the Company’s prior year business and financial performance, current year operating plan and future expectations. To achieve target level EPS and BVA for the first year of the performance period would require double digit growth percentages +over 2021 actual performance, and to achieve target level EPS and BVA for years two and three of the performance period would require double digit growth percentages over the prior year’s actual EPS and BVA results. Wolverine believes +disclosing specific targets while the applicable performance period is ongoing could cause competitive harm. However, such targets will be disclosed once the applicable performance periods have ended as part of our discussion and analysis on +awards earned by the NEOs. +2023 PROXY STATEMENT +47 +TABLE OF CONTENTS +2023-2025 Performance Awards Update +In the beginning of 2023, the Committee evaluated the Company’s use of performance awards and made certain +changes to better align the program with Company strategy and shareholder interests. Under these changes, performance units for the 2023-2025 performance period are eligible to vest based on achievement of constant-currency operating profit +goals (weighted 60%) and the Company’s TSR as compared to the S&P Composite 1500 Consumer Durables & Apparel Index (weighted 40%). Relative TSR will be measured over a three-year period beginning on the grant date, and target payout +will be achieved if the Company’s performance is at the 50 th percentile or higher against the index. If the Company’s absolute TSR over the performance period is negative, then achievement on the relative TSR metric will be capped at +target (100%). +2021-2022 Performance Stock Units +As described in detail in last year’s Proxy Statement, the Company canceled the awards previously granted for +the 2020-2022 performance period and issued new awards at a substantially lower payout opportunity based on 2021-2022 revenue growth. +The following table lists the performance levels set by the Committee for performance stock unit awards +granted for the 2021-2022 performance period, the vesting of which occurred on February 9, 2023 following the Committee’s certification of 2022 financial results. The revenue performance target was set aggressively, with the revenue performance +target required for 100% payout requiring revenue growth of nearly 22% versus the 2020 fiscal year for the base year of the 2021-2022 period, and further revenue growth required in 2022 to maintain target performance. Performance targets and +performance exclude revenue from Sweaty Betty, which was acquired after performance targets were set. +Performance Level +(Percentage of Target Payout) +2021 Revenue (in millions) +2022 Revenue (in millions) +Threshold (50%) +$2,120.0 +$2,321.0 +Target (100%) +$2,185.0 +$2,370.0 +Goal (150%) +$2,220.0 +$2,400.0 +Stretch (200%) +$2,260.0 +$2,436.0 +In February 2023, the Committee evaluated and certified the Company’s performance for the 2021-2022 +performance period against the criteria set forth in the table above. Unlike performance targets for the annual performance bonus, these targets and the related results exclude revenue attributable to the Sweaty Betty brand, which was acquired +during the 2021 fiscal year. The 2021-2022 performance stock unit payout was 200% of target, reflecting a payout based on the final 2021 revenue of $2,298 million and 2022 revenue of $2,471 million. This represents approximately 60% of the +maximum payout that could have been earned under the original grants for the 2020-2022 performance period. +The following table lists the number of stock units that vested for each NEO under the 2021-2022 performance +stock unit grant. In calculating the number of stock units that vest, the Company uses the stock price on the date of the grant, which results in the NEOs bearing the risk of stock price performance during the performance period. All stock +units (net of withholding taxes) earned by the NEOs for the 2021-2022 performance period are required to be held for 12 months. +Name +Stock Units Vesting +(#) +Hoffman +76,369 +Hufnagel +11,141 +Soriano +8,364 +Stornant +21,599 +Zwiers +18,956 +Mr. Hoffman’s award and payout for the period was prorated based on his hire date in relation to the initial +2020-2022 period. +2023 PROXY STATEMENT +48 +TABLE OF CONTENTS +Restricted Stock Unit Awards +The following table reflects the grant date value of the service-based restricted stock unit awards granted to +each NEO. +Name +2022 Time-vested +Restricted +Stock Units +Hoffman +$1,440,004 +Hufnagel +$ 331,452 +Soriano +$ 170,010 +Stornant +$ 416,811 +Zwiers +$ 370,012 +The Committee generally grants annual equity awards at its regularly scheduled February meeting, and the +independent directors of the Board approve equity grants to the CEO generally on the same day that the Committee meets. Restricted stock units awarded vest 20% on the first and second anniversaries of the grant and 30% on the third and fourth +anniversaries. Mr. Hufnagel’s awards include a retention grant of shares with a grant date fair market value of $131,450 that vest 100% on the second anniversary of the date of grant. +BENEFITS +Retirement, Deferred Compensation and +Welfare Plans +The NEOs in the United States participate in Wolverine Worldwide’s medical and dental plans and receive life +and disability insurance. In 2022, Messrs. Hufnagel, Stornant and Zwiers also participated in the Wolverine Worldwide Employees’ Pension Plan (a defined benefit plan) and the Wolverine World Wide, Inc. 409A Supplemental Executive Retirement +Plan (an unfunded, non-qualified plan). For a description of the benefits under Wolverine Worldwide’s retirement plans, see “ Pension Plans and 2022 Pension Benefits ” below. Ms. Soriano is located outside +of the United States and participates in local medical, life and disability insurance plans and receives an annual retirement benefit payment consistent with the benefits generally made available to employees in the UK. +All full-time employees of the Company in the United States, including the NEOs located in the United +States, are also eligible to participate in one of Wolverine’s 401(k) Plans (the “401(k) Plan”). Pursuant to the 401(k) Plan, employees, including the NEOs in the United States, may elect to defer a portion of their salary and receive a Company +match on eligible deferrals of up to 3% of salary for 2022 (5.5% for those who do not participate in the Pension Plan), subject to limits set forth in the Internal Revenue Code of 1986, as amended. +In 2016, the Company adopted the Deferred Compensation Plan. This plan allows directors, executives and +other eligible senior employees of the Company to elect to defer a portion of their eligible compensation. Wolverine Worldwide may, but need not, credit a participant with an additional discretionary Company contribution. The Company adopted +the Deferred Compensation Plan as a retention and recruitment tool to facilitate retirement savings and provide financial flexibility for key employees, and because many of the companies with which it competes for executive talent provide +similar plans to their key employees. For a description of the benefits under the Deferred Compensation Plan, see “ Non-Qualified Deferred Compensation ” below. +Perquisites +The Company generally provides limited perquisites to NEOs other than to account for relocation assignments. +The Company feels the perquisites are necessary to provide a competitive total compensation package for each NEO. For details on perquisites, see footnote 6 to the “Summary Compensation Table” on page 55 . Ms. Soriano also +receives benefits generally made available to Company employees located in the U.K., a car and travel allowance, and tax equalization tied to her relocation to the U.K. when she was hired by the Company in 2018. +POST-EMPLOYMENT COMPENSATION +Each NEO is party to an Executive Severance Agreement that provides for certain payments and benefits upon +termination of employment after a change in control of Wolverine Worldwide. The Board believes Executive Severance Agreements will motivate management to actively pursue a business transaction that is in the best interests of the shareholders, +even if it could ultimately result in his or her job elimination, and also will promote management stability during the transition period accompanying a change in control. Each NEO is eligible to receive compensation if his or her employment is +terminated within two years following a change in control of Wolverine Worldwide. Even following a change in control, an NEO does not receive payment under the Executive Severance Agreement if his or her employment terminates: +• +Due to death or retirement in accordance with Wolverine Worldwide’s policy or as otherwise agreed, +• +For cause or disability, or +2023 PROXY STATEMENT +49 +TABLE OF CONTENTS +• +By resignation of the NEO, other than for “good reason,” which is discussed under the heading “Benefits Triggered by Termination Other than For Cause +or for Good Reason Not in Connection With a Change in Control” and the heading “Benefits Triggered Upon a Change in Control,” both under the heading “ Potential Payments Upon Termination or Change in +Control ” +NEOs may also be eligible under Wolverine Worldwide’s retirement plans or equity plans to receive certain +payments and benefits upon termination of employment or in connection with a change in control as described in the “ Potential Payments Upon Termination or Change in Control ” section of this Proxy +Statement. +Mr. Hoffman is also party to a 2020 Employment Agreement (amended on December 17, 2021) under which the +executive is eligible to receive certain payments and benefits if the Company terminates the executive’s employment, even if not following a change in control, other than for “cause” or if the executive terminates his employment for “good +reason.” The Committee determined upon appointing Mr. Hoffman as the President (and later as the CEO) that, given the Company’s strategic initiatives the Board asked him to lead, it was appropriate for the Company to enter into such +arrangement. +The Company includes accelerated retirement vesting provisions for equity awards, provided certain +conditions are met, and for the payout of a prorated annual bonus for a qualifying retirement more than six months into the fiscal year. Details on these provisions and information on benefits payable to Mr. Hoffman under his Employment +Agreement, and to each of the NEOs under the Executive Severance Agreements, as well as information on the other retirement and equity plans of Wolverine Worldwide, are included in the “ Potential Payments Upon +Termination or Change in Control ” section of this Proxy Statement. +SAY ON PAY ADVISORY VOTE +We asked shareholders to vote on a “say-on-pay” advisory vote on our executive compensation in 2022. +Shareholders expressed substantial support for the compensation of our named executive officers, with approximately 99% of the votes cast for the “say-on-pay” advisory vote. The Committee carefully evaluated the results of the 2022 advisory +vote. The Committee also considers many other factors in evaluating our executive compensation programs as discussed in this Compensation Discussion and Analysis, including the Committee’s assessment of total shareholder return, the interaction +of our compensation programs with our corporate business objectives, evaluations of our programs by external consultants, and review of peer group and survey data, each of which is evaluated in the context of the Committee’s fiduciary duty to +act as the directors determine to be in shareholders’ best interests. While each factor bore on the Committee’s decisions regarding our named executive officers’ compensation, the Committee made no changes to our executive compensation program +and policies directly as a result of the 2022 say-on-pay advisory vote. +2023 PROXY STATEMENT +50 +TABLE OF CONTENTS +CEO TRANSITION +As previously announced, Mr. Hoffman succeeded Mr. Krueger as the Company’s CEO effective January 2, 2022. +Mr. Hoffman’s base compensation package as CEO for 2022 is summarized below: +Base Salary +Target Annual +Bonus +Target Long-Term +Incentive +Compensation +Total Target +Compensation +$1,000,000 +$1,200,000 +$4,800,000 +$7,000,000 +Target Annual Bonus is calculated using Base Salary and a target of 120%. Actual payout depends on +performance and is capped at 200% of the target opportunity, plus or minus the effect of any modifier. For 2022, Mr. Hoffman’s actual payout was $144,007, or twelve percent of his target opportunity. Long-Term Incentive Compensation is split +between performance units (70% of the opportunity) and time-vesting restricted stock units (30%). +Mr. Hoffman does not participate in the Company’s Pension Plan or SERP. Mr. Hoffman receives an annual +Company contribution to the Company’s Deferred Compensation Plan in an amount equal to 8% of eligible compensation under the Plan. +The below graphic compares Mr. Hoffman’s 2022 target CEO compensation to Mr. Krueger’s 2021 target CEO +compensation: +2023 PROXY STATEMENT +51 +TABLE OF CONTENTS +COMPENSATION SETTING PROCESS +Setting Targets +The Committee goes through a rigorous process in setting performance targets, including a careful review of +the Company’s prior year business and financial performance, current year operating plan, and future expectations. The Committee engages with management in this process over several months leading up to setting final annual bonus and three-year +performance targets in February. +Competitive Philosophy and Competitive Market Data +When making compensation recommendations and decisions, the Committee considers the CEO’s assessment of the +performance of each NEO, other than himself; the performance of the individual and the individual’s respective business unit or function; the scope of the individual’s responsibilities, years of experience with the Company (or in similar +positions with other companies), skills and knowledge; market compensation data; market and economic conditions; Company performance; retention considerations; and Wolverine Worldwide’s compensation philosophy (collectively, the “compensation +factors”). The Committee considers these compensation factors both subjectively and objectively, and no single factor or combination of factors is determinative. With respect to CEO compensation, the Committee seeks to set compensation in line +with experience and the anticipated market median for a given year. +The Committee uses market surveys and Peer Group (as defined below) information provided by its compensation +consultant as market reference points. The Committee also considers information the Company learns through recruiting NEOs and the experience levels and responsibilities of NEOs prior to joining the Company as reference points in setting NEO +compensation. +As part of its competitive data review in connection with determining 2022 compensation, the Committee +considered information presented by its consultant Frederic W. Cook & Co. (“FW Cook”) based on publicly-disclosed Peer Group information and on the Willis Towers Watson (WTW) CDB Executive Compensation Survey Report (General Industry and +Retail/Wholesale). +Peer Group +Below is the peer group used in late 2021 and early 2022 in connection with 2022 compensation decisions. In +determining the Peer Group, the Committee considered each potential peer company’s industry, channels of distribution, revenue and market capitalization. The Company also considered the typicality of a company’s pay practices, excluding +companies whose chief executive may not receive market compensation because of a founder relationship, family ownership position, or other similar relationships. +Abercrombie & Fitch Co. +Chico’s FAS, Inc. +G-III Apparel Group, Ltd. +Hanesbrands Inc. +The Children’s Place, Inc. +American Eagle Outfitters Inc. +Deckers Outdoor Corporation +Genesco Inc. +Kontoor Brands, Inc. +Caleres, Inc. +Designer Brands, Inc. +Gildan Activewear, Inc. +Skechers USA, Inc. +Carter’s, Inc. +Foot Locker, Inc. +Guess?, Inc. +Tapestry, Inc. +CEO Role +Within the framework of the Company’s executive compensation program, the CEO recommends the level of base +salary, annual bonus, long-term incentive compensation, equity awards and other compensation components for his direct reports, including the other NEOs. The CEO bases his recommendation upon his assessment of the compensation factors +applicable to each NEO. The CEO considers these compensation factors both objectively and subjectively, and no single factor is determinative. The Committee discusses these recommendations with the CEO prior to setting the compensation for each +NEO, other than the CEO. The Committee, however, ultimately determines all compensation for NEOs other than the CEO, whose compensation is determined by the independent directors as a whole. +Compensation Consultant Role +FW Cook was first engaged as the Committee’s independent compensation consultant in 2016 and reports directly +to the Committee. The Committee determines the scope of engagement and may replace the consultant or hire additional consultants at any time. The Committee has evaluated FW Cook’s independence under the rules established by the NYSE and has +determined that FW Cook is “independent” as defined by NYSE rules. In addition, the Committee has evaluated whether the engagement of FW Cook raised any conflicts of interest and has determined that no such conflicts of interest exist. +2023 PROXY STATEMENT +52 +TABLE OF CONTENTS +At the Committee’s invitation, a representative of FW Cook generally attends all Committee meetings and +also communicates with the Committee Chair and management regularly between meetings. However, the Committee makes all decisions regarding NEO compensation. FW Cook provides various executive compensation services to the Committee pursuant to a +consulting agreement with the Committee. Generally, these services include advising the Committee on the principal aspects of the Company’s executive compensation program, evolving industry practices, and providing market information and +analysis regarding the competitiveness of the Company’s program design. +During 2022, FW Cook performed the following specific services: +• +Attended Committee meetings, as requested +• +Reviewed the Company’s peer group and advised the Committee on the composition of the peer group +• +Reviewed survey data for competitive comparisons +• +Provided market data and recommendations on CEO and other NEO compensation +• +Advised the Committee on market trends related to compensation policies and programs +• +Proactively advised the Committee on best practice approaches for governance features of executive compensation programs +• +Reviewed the Compensation Discussion & Analysis and other executive compensation related disclosures included in the Company’s Proxy Statement +The total fees the Company paid to FW Cook for services to the Committee in 2022 were $113,524, less than 1% +of FW Cook’s total consulting income during the same period. The Company did not pay or incur any other fees to or with FW Cook. +OTHER COMPENSATION POLICIES AND PRACTICES +NEO Stock Ownership Guidelines +Each NEO, as well as each non-employee director, must attain (and maintain) a minimum stock ownership +level prior to being able to gift or sell any Company stock. The equity that qualifies for determining the NEOs’ minimum stock ownership level includes owned shares and unvested restricted stock units that vest based on time (up to a maximum +of value of 50% of the applicable ownership requirement), but excludes performance shares and units and unexercised options (or any portion thereof, such as the current “in the money” value). During 2022, each NEO complied with the +requirements of these guidelines. +Covered Positions +Guideline +CEO +6x Annual Salary +President +3x Annual Salary +Other NEOs +2x Annual Salary +Non-Employee Directors +6x Annual Cash Retainer +Stock Hedging and Pledging Policies +Under the Company’s Insider Trading Policy, all directors, officers and other employees are prohibited from +engaging in any hedging transactions involving Company securities beneficially owned by them. The Company also considers it inappropriate for any such person to engage in speculative transactions in the Company’s securities, including short +sales, publicly traded options, margin accounts and pledges and standing and limit orders. Also, all directors, officers and other employees are prohibited from pledging Company securities as collateral for a loan. +Clawback Policy +The Company has adopted a clawback policy which empowers the Board or a committee of the Board to seek +recovery of specified incentive compensation covering both cash and equity received by executive officers under specific circumstances where there is a material restatement of the Company’s financial results that would have led to a lower level +of incentive compensation payout. +Impact of Accounting and Tax Treatments on Compensation +The Tax Cuts and Jobs Act on December 22, 2017 eliminated the Section 162(m) performance-based compensation +exemption, so the grants and awards made in 2022 are not eligible for such exemption. Even prior to the elimination of the performance-based compensation exemption, Wolverine Worldwide did not require all of its compensation programs, including +programs under the Company’s equity compensation plans, to fit the performance-based compensation exemption under Section 162(m) because it believes it is important to preserve flexibility in administering compensation programs in a manner +designed to promote varying corporate goals. Wolverine Worldwide has and in the future may continue to pay compensation that is limited in whole or in part as to tax deductibility. +2023 PROXY STATEMENT +53 +TABLE OF CONTENTS +Compensation Committee +Report +The Committee has reviewed and discussed with management the information provided under the heading +“Compensation Discussion and Analysis.” Based on this review and discussion, the Committee recommended to the Board of Directors that the Company include the Compensation Discussion and Analysis section in this Proxy Statement and incorporate +it by reference into the Company’s Annual Report on Form 10-K. +Respectfully submitted, +Nicholas T. Long (Chair) +Jeffrey M. Boromisa +William K. Gerber +Kathleen Wilson-Thompson +Compensation Committee Interlocks and Insider Participation. During fiscal year 2022, none of the members of the Compensation Committee was an officer or employee of the Company, was a former officer of the Company, nor had a relationship with the Company requiring disclosure as a related +party transaction under Item 404 of Regulation S-K of the Securities Act of 1933. None of the Company’s executive officers served on the compensation committee or board of directors of another entity whose executive officer(s) served as a +director on the Company’s Board or on the Compensation Committee. +2023 PROXY STATEMENT +54 +TABLE OF CONTENTS +Summary Compensation Table +Brendan Hoffman +President and +CEO, Wolverine +Worldwide +2022 +$997,308 +$5,183,029 +$ 144,007 +$ — +$ 195,310 +$6,519,654 +2021 +$924,231 +$5,083,847 +$1,073,446 +$ — +$ 113,015 +$7,194,539 +2020 +$259,615 +$300,000 2 +$4,755,398 +$ 133,396 +$ — +$ 58,083 +$5,506,492 +Chris Hufnagel +President, Active +Group +2022 +$606,377 +$ 665,652 +$ 97,162 +$ — +$ 43,405 +$1,412,596 +Isabel Soriano 7 +President, +International Group +2022 +$463,850 +$ 454,094 +$ 280,390 +$ — +$ 991,681 +$2,190,015 +2021 +$480,641 +$ 597,096 +$ 326,554 +$ — +$1,075,445 +$2,479,736 +Michael D. Stornant +Executive Vice +President, +CFO, Treasurer and +Chief Accounting Officer +2022 +$691,356 +$1,113,295 +$ 49,881 +$ — +$ 31,931 +$1,886,463 +2021 +$657,865 +$1,819,680 +$ 577,880 +$ 86,187 +$ 30,883 +$3,172,495 +2020 +$477,346 +$1,223,257 +$ 232,470 +$1,113,604 +$ 31,141 +$3,077,818 +James D. Zwiers +Executive Vice +President and +President, Global +Operations Group +2022 +$711,962 +$ 988,296 +$ 48,057 +$ — +$ 37,310 +$1,785,625 +2021 +$683,856 +$1,578,188 +$ 481,625 +$ 70,550 +$ 38,953 +$2,853,172 +2020 +$519,019 +$1,161,805 +$ 249,786 +$1,253,808 +$ 39,634 +$3,224,052 +1. +Includes any amounts deferred under the Company's qualified 401(k) plan or Deferred Compensation Plan. +2. +Reflects a one-time sign-on bonus paid in connection with recruiting Mr. Hoffman for the position of President, +Wolverine Worldwide, and subject to an obligation to return the bonus under certain conditions described in his employment agreement. +3. +Includes the grant date fair value of restricted stock unit awards, and performance unit awards, as follows for 2022: +Name +Service-based Restricted +Stock Unit Value +Performance Unit Value 22-24 +Grant +Total +Hoffman +$1,440,004 +$3,743,025 +$5,183,029 +Hufnagel +$ 331,452 +$ 334,200 +$ 665,652 +Soriano +$ 170,010 +$ 284,084 +$ 454,094 +Stornant +$ 416,811 +$ 696,484 +$1,113,295 +Zwiers +$ 370,012 +$ 618,284 +$ 988,296 +Restricted stock units were valued using the closing market price of Wolverine Worldwide common stock on the date of +the grant of the respective award. Performance units were valued using the closing market price of Wolverine Worldwide common stock on the date of grant of the respective award and assuming target performance for all performance +periods, with an adjustment to value for the TSR modifier where applicable, all consistent with ASC Topic 718. The target performance unit grant values without accounting adjustments: $3,360,000 for Mr. Hoffman; $300,000 for +Mr. Hufnagel, $255,000 for Ms. Soriano; $625,200 for Mr. Stornant; and $555,000 for Mr. Zwiers (all with de minimis differences based on rounding up to the nearest unit)). Assuming maximum payout, the aggregate grant date fair value +of performance units awarded in 2022 for each NEO (and, in parentheses, the maximum value is combined with the grant date fair value of restricted stock unit awards and restricted stock awards for 2022) would have been $22,458,152; +($23,898,156) for Mr. Hoffman; $2,005,202 ($2,336,654) for Mr. Hufnagel, $1,704,503 ($1,874,513) for Ms. Soriano; $4,178,903 ($4,595,714) for Mr. Stornant; and $3,709,705 ($4,079,717) for Mr. Zwiers. Restrictions on such performance +unit awards will lapse in the February following the last year of the performance period, if at all, based on the Company's performance for the period (capped at 200%), potential +/- 25% adjustments for relative TSR performance and +target bonus level over the three-year performance period. The actual value of shares that vest is also dependent on the stock price at the time of vesting. For additional valuation assumptions, see the Stock Based Compensation +footnote to Wolverine Worldwide's Consolidated Financial Statements for the fiscal year ended December 31, 2022 included in its Form 10-K for this year. +2023 PROXY STATEMENT +55 +TABLE OF CONTENTS +4. +Reflects the sum of performance bonus and individual bonus amounts, as adjusted by any applicable modifier, earned +in 2022, 2021 and 2020, respectively, and paid in 2023, 2022 and 2021 respectively. +5. +All amounts in this column reflect, where applicable, the aggregate change in the actuarial present value of the +accumulated benefits under the Wolverine Worldwide Employees' Pension Plan (“Pension Plan”) and Wolverine World Wide, Inc. 409A Supplemental Executive Retirement Plan (“SERP”) for Messrs. Stornant, Hufnagel and Zwiers. The amounts in +the table were determined using assumptions consistent with those used in Wolverine Worldwide's Consolidated Financial Statements for each respective year. See the “Pension Plans and 2022 Pension Benefits” section starting on page 63 . +6. +The amounts listed in this column for 2022 include Wolverine Worldwide's contributions to the accounts of the NEOs +under Wolverine Worldwide's 401(k) plans (or, in the case of Ms. Soriano, a payment in lieu of a retirement plan contribution) and the Wolverine Worldwide Deferred Compensation Plan, payments made by Wolverine Worldwide for the +premiums on certain life insurance policies, tax, housing/relocation expenses and estate planning services and health care reimbursements in the amounts listed in the table below. Unlike the other NEOs, Mr. Hoffman and Ms. Soriano are +not participants in the Company's Pension Plan, and instead receive either a deferred compensation plan contribution (Mr. Hoffman) or a retirement benefit payment (Ms. Soriano). +Name +401(k) Match +Tax and +Estate +Planning +Health +Life Insurance +Premiums +Moving/Living +Expenses +Deferred +Compensation +Plan +Contribution +Car +Allowance +Tax +Equalization +Hoffman +$16,775 +$8,895 +$21,564 +$2,789 +$70,757 1 +$74,530 +$0 +$0 +Hufnagel +$9,150 +$10,230 +$21,795 +$2,230 +$0 +$0 +$0 +$0 +Soriano +$37,108 +$35,720 +$14,393 +$1,364 +$121,193 +$0 +$0 +$781,903 +Stornant +$9,150 +$0 +$19,764 +$3,017 +$0 +$0 +$0 +$0 +Zwiers +$9,150 +$8,895 +$18,488 +$777 +$0 +$0 +$0 +$0 +1. +Temporary housing and costs related to relocation. +7. +The cash compensation for Ms. Soriano is paid in Pounds Sterling. Her cash compensation was converted into U.S. +dollars using the fiscal year-end rate of 1.20 for fiscal year 2022 and 1.33 for fiscal year 2023. +2023 PROXY STATEMENT +56 +TABLE OF CONTENTS +Grants of Plan-Based Awards in +Fiscal Year 2022 +The following table provides information concerning each grant of an award made to the NEOs in fiscal year +2022: +Hoffman +Annual Bonus +$598,385 +$1,196,769 +$3,111,600 +FY22-FY24 +Performance Units +02/09/2022 +62,177 +124,353 +746,118 +$3,743,025 +Restricted Units +02/09/2022 +53,294 +$1,440,004 +Hufnagel +Annual Bonus +$151,594 +$ 303,189 +$ 788,290 +FY22- +FY24 Performance +Units +02/09/2022 +5,552 +11,103 +66,618 +$ 334,200 +Restricted +Units +02/08/2022 +5,000 +$ 131,450 +Restricted Units +02/09/2022 +7,402 +$ 200,002 +Soriano +Annual Bonus +$115,963 +$ 231,925 +$ 603,005 +FY22- +FY24 Performance +Units +02/09/2022 +4,719 +9,438 +56,628 +$ 284,084 +Restricted Units +02/09/2022 +6,292 +$ 170,010 +Stornant +Annual Bonus +$224,691 +$ 449,381 +$1,168,391 +FY22- +FY24 Performance +Units +02/09/2022 +11,570 +23,139 +138,834 +$ 696,484 +Restricted +Units +02/09/2022 +15,426 +$ 416,811 +Zwiers +Annual Bonus +$213,588 +$ 427,177 +$1,110,660 +FY22-FY24 Performance Units +02/09/2022 +10,271 +20,541 +123,246 +$ 618,284 +Restricted Units +02/09/2022 +13,694 +$ 370,012 +1. +Estimated payout levels relating to the performance bonus and individual bonus. Maximum amount assumes stretch +revenue and pretax earnings performance and achievement of the maximum eCommerce revenue adjustment. For a description of these bonuses and the payouts under them, see pages 43 - 46 . +Ms. Soriano's payout levels have been converted to U.S. dollars from Pounds Sterling based on the fiscal year-end exchange rate of 1.20 for fiscal year 2022 and 1.33 for fiscal year 2021. +2. +Estimated payout levels as of the grant date of performance stock units granted under the Stock Incentive Plan of +2016, as amended (the “Stock Incentive Plan of 2016”). Restrictions on such performance unit awards typically lapse in the February following the last year of the performance period, if at all, based on the Company's performance for +the period (capped at 200%), potential +/- 25% adjustments for relative TSR performance, and target bonus levels over the performance period. The actual value of shares that vest is also dependent on the stock price at the time of +vesting. The Company accrues, but does not pay, dividends on the performance shares during the performance period. At the end of the performance period, the Company will pay to the NEO the accrued dividends (if any) on the performance +units that vest. The Target performance unit grant values without accounting adjustments are: ($3,360,000 for Mr. Hoffman; $255,000 for Ms. Soriano; $625,200 for Mr. Stornant; $300,000 for Mr. Hufnagel; and $555,000 for Mr. Zwiers +(all with de minimis differences based on rounding up to the nearest unit)). For a description of the performance units granted in 2022 under the Stock Incentive Plan of 2016, see pages 47 - 48 . +2023 PROXY STATEMENT +57 +TABLE OF CONTENTS +3. +The Company awarded service-based restricted stock unit awards in February 2022 under the Stock Incentive Plan of +2016 to all NEOs. 20% of the units received under the awards reflected in this column vest on each of the first and second anniversaries of the date of grant of the award and 30% on the third and fourth anniversaries of the date of +grant of the award. All restricted stock units vest upon an NEO's death, disability or retirement. Holders of restricted stock units and awards are entitled to receive dividend equivalents on restricted stock units and awards. The +retention grant made to Mr. Hufnagel on February 8, 2022 vests in full on the second anniversary of the grant date. +4. +Represents the award date fair value for performance stock units and service-based stock unit awards made in fiscal +year 2022, determined as described in footnote 3 to the “Summary Compensation Table.” The grant date fair values reflect a higher amount than the target amounts discussed in the CD&A section due to accounting adjustments to the +grant date fair value relating to the TSR modifier for grants that include the modifier. +2023 PROXY STATEMENT +58 +TABLE OF CONTENTS +Outstanding Equity Awards at +2022 Fiscal Year-End +The following table provides information concerning options and stock awards that have not vested for each +NEO outstanding as of December 31, 2022: +Hoffman +Various +122,516 +$1,339,100 +Various +246,895 +$2,698,562 +Hufnagel +Various +23,525 +$ 257,128 +Various +29,200 +$ 319,156 +02/11/14 +17,022 +$27.13 +02/10/24 +02/11/15 +16,789 +$28.00 +02/10/25 +02/10/16 +32,294 +$16.51 +02/09/26 +Soriano +Various +14,769 +$ 161,425 +Various +21,046 +$ 230,033 +Stornant +Various +37,987 +$ 415,198 +Various +59,233 +$ 647,417 +02/11/14 +11,912 +$27.13 +02/10/24 +02/11/15 +11,765 +$28.00 +02/10/25 +06/12/15 +12,687 +$29.31 +06/11/25 +02/10/16 +70,948 +$16.51 +02/09/26 +Zwiers +Various +33,646 +$ 367,751 +Various +51,845 +$ 566,666 +02/11/15 +33,514 +$28.00 +02/10/25 +02/10/16 +64,465 +$16.51 +02/09/26 +2023 PROXY STATEMENT +59 +TABLE OF CONTENTS +1. +The following table sets forth the vesting dates for the unvested service-based restricted stock or stock unit awards +of each NEO as of December 31, 2022: +Named +Executive +Officer +Vesting +Date +Number of Shares to Vest +Hoffman +10/26/23 +14,739 +10/26/24 +14,739 +02/09/23 +20,594 +02/09/24 +25,563 +02/09/25 +30,892 +02/09/26 +15,989 +Hufnagel +02/05/23 +1,553 +02/06/23 +1,466 +02/09/23 +2,941 +04/29/23 +353 +02/05/24 +1,553 +02/09/24 +3,672 +04/29/24 +353 +02/09/25 +4,413 +02/08/24 +5,000 +02/09/26 +2,221 +Soriano +02/05/23 +1,096 +02/06/23 +1,035 +02/09/23 +2,310 +08/02/23 +260 +02/05/24 +1,096 +02/09/24 +2,836 +08/02/24 +390 +02/09/25 +3,467 +08/02/25 +391 +02/09/26 +1,888 +Stornant +02/05/23 +3,526 +02/06/23 +3,328 +02/09/23 +6,130 +02/05/24 +3,526 +02/09/24 +7,653 +02/09/25 +9,196 +02/09/26 +4,628 +2023 PROXY STATEMENT +60 +TABLE OF CONTENTS +Named +Executive +Officer +Vesting +Date +Number of Shares to Vest +Zwiers +02/05/23 +3,247 +02/05/24 +3,248 +02/06/23 +3,065 +02/09/23 +5,336 +02/09/24 +6,636 +02/09/25 +8,005 +02/09/26 +4,109 +2. +The dollar values are calculated using a per share stock price of $10.93, the closing price of Wolverine Worldwide +common stock on December 30, 2022, the last business day of fiscal year 2022. +3. +Following the end of the applicable performance period, performance units vest depending upon the Company's +achievement of the relevant performance criteria. Shares actually vested for the 2021-2022 cycle are included in the “Number of Shares or Units of Stock That Have Not Vested” column. Performance between threshold and target level was +assumed for both the 2021-2023 cycle and the 2022-2024 cycle. +2023 PROXY STATEMENT +61 +TABLE OF CONTENTS +Option Exercises and Stock +Vested in Fiscal Year 2022 +Option Awards +Stock Awards +Number of Shares +Acquired on Exercise +(#) +Value Realized +On Exercise 1 ($) +Number of Shares +Acquired on Vesting +(#) +Value Realized +On Vesting 1 ($) +Hoffman +— +— +54,739 +$1,349,878 +Hufnagel +— +— +15,794 +$ 418,021 +Soriano +— +— +12,686 +$ 319,767 +Stornant +— +— +33,459 +$ 887,971 +Zwiers +— +— +29,882 +$ 792,685 +1. +The Company calculates the dollar values using the closing price of Wolverine Worldwide common stock on the date of +vesting. +2023 PROXY STATEMENT +62 +TABLE OF CONTENTS +Pension Plans and 2022 +Pension Benefits +Wolverine Worldwide maintains the following defined benefit retirement plans covering Messrs. Hufnagel, +Stornant and Zwiers: (1) the Wolverine Worldwide Employees' Pension Plan (“Pension Plan”), which is a funded and tax-qualified defined benefit plan under the Internal Revenue Code that covers eligible employees, and (2) the Wolverine World +Wide, Inc. 409A Supplemental Executive Retirement Plan (“SERP”), which is an unfunded, non-qualified plan that covers individuals recommended by the CEO and approved by the Compensation Committee. +QUALIFIED PENSION PLANS +Participants vest in the Pension Plan after five years of qualifying service. Subject to the limitations +imposed by the Internal Revenue Code, the Pension Plan generally pays a monthly benefit in an amount equal to a percentage of the participant's final average monthly earnings multiplied by his or her number of years of service less a monthly +social security allowance. For purposes of this benefits formula, the Pension Plan caps years of service at 30 (25 for SERP participants), and the percentages of final average monthly earnings are 1.6% (2.0% for SERP participants). “Earnings” +under the Pension Plan generally includes all W-2 compensation and pre-tax benefit plan deferrals other than taxable fringe benefits and deferred compensation, and for 2022 was capped at $305,000, the IRS limit applicable to tax qualified +plans. +Upon retirement, a participant may elect to receive the benefit in the form of a life annuity, 5 or 10-year +certain and life annuities, or joint and 50%, joint and 75%, or joint and 100% survivor annuities. The payments are actuarially adjusted based on the participant's election. Any election, other than an election to receive life annuity benefits, +reduces the monthly benefit payable. The “normal” age at which benefits may be drawn under the plan is 65. +SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN +Messrs. Hufnagel, Stornant and Zwiers participate in the SERP, which provides retirement benefits above +amounts available under the Company's tax qualified Pension Plan. The SERP benefit generally equals the difference between the participant's retirement benefit under the Pension Plan and the benefits the participant would have received if there +were no IRS imposed cap on earnings when calculating the Pension Plan benefit. The SERP caps years of service at 25 in calculating a participant's benefit. The SERP also allows a retired participant who has five years of service to draw earlier +(beginning at age 55) and on different terms than under the Pension Plan. A participant's earnings percentage multiplier is the same under the SERP as it is under the Pension Plan. The Compensation Committee may grant additional deemed years of +service under the SERP to a participant, subject to the cap of 25 years. The full benefit of any additional years of deemed service is paid under the SERP. +If a retired participant draws the SERP benefit prior to age 65, the reduction factor is 0.333% for each +month prior to age 60, and 0.1666% for each month between age 60 and age 65. As of the end of fiscal year 2022, Mr. Stornant is the only NEO eligible to retire and begin drawing benefits under the SERP. +SERP benefits are paid monthly, and the SERP has a lump sum payment option which may apply to certain +terminations of employment after a change in control or, if elected, upon death. The SERP also includes a disability benefit and a death benefit payable to the participant's designated beneficiary if the participant dies before retiring. The +SERP provides for lump sum payments equal to 125% of the net present value of accrued benefits without regard to any reduction for early payment to participants who resign for good reason or are terminated by Wolverine other than for cause or +due to death or disability within two years after a change in control. +The SERP also contains non-competition, confidentiality and employee non-solicitation provisions in favor of +Wolverine Worldwide. Under the SERP non-competition provisions, a participant is not entitled to any benefit payment if the participant enters into certain relationships with a competing business prior to the date on which such benefit payment +is due. If the participant's employment is terminated for serious misconduct, or if Wolverine Worldwide cannot collect under an insurance policy purchased to fund SERP benefits for certain reasons, the Company may terminate a participant's +benefits under the SERP. Wolverine Worldwide may terminate the SERP or stop further accrual of SERP benefits for a participating NEO at any time, but termination will not affect previously accrued benefits. +2023 PROXY STATEMENT +63 +TABLE OF CONTENTS +PENSION BENEFITS IN FISCAL YEAR 2022 +The following table provides for each NEO certain information concerning each plan that provides for payments +or other benefits at, following, or in connection with retirement: +Plan Name +Number of Years +Credited Service +(#) +Present Value of +Accumulated Benefit 1 +($) +Payments During +Last Fiscal Year +($) +Hoffman 2 +SERP +— +— +— +Pension +— +— +— +Hufnagel +SERP +14 +$ 612,244 +— +Pension +14 +$ 453,193 +— +Soriano 2 +SERP +— +— +— +Pension +— +— +— +Stornant +SERP +25 +$2,471,706 +— +Pension +25 +$1,119,922 +— +Zwiers +SERP +25 +$2,698,018 +— +Pension +25 +$1,010,810 +— +1. +These values are as of December 31, 2022, and are calculated assuming the participants will commence their benefits +at age 65 (or current age if older), and that those benefits will be paid in the form according to each participant's 409A election and use the PRI-2012 mortality tables for males and females (white collar for SERP and no collar for +Pension Plan), projected forward from base year 2012 with generational projection using an unmodified MP-2021 projection scale, with contingent annuitant mortality tables applied after the death of the participant and using the +following discount rates: 5.54% Pension Plan; 5.60% SERP. +2. +Neither Mr. Hoffman nor Ms. Soriano participate in the SERP or Pension Plan. +2023 PROXY STATEMENT +64 +TABLE OF CONTENTS +Non-Qualified Deferred +Compensation +Wolverine Worldwide maintains a Deferred Compensation Plan. This unfunded and non-qualified plan allows +executives and other eligible senior employees of the Company to elect to defer all or a portion of their base salary, cash bonus, or other performance-based cash compensation. Wolverine Worldwide may, but need not, credit a participant's +account under the plan with additional discretionary Company contributions, which may be subject to a vesting schedule and which would vest in full on a change in control. Amounts deferred pursuant to the Deferred Compensation Plan may be +invested, at the direction of the participant, in an investment fund, index, or other investment vehicle, as designated by the Compensation Committee to be available under the plan, and earnings, if any, are credited to the participant's +account. +Accounts are paid out upon the earliest to occur of (i) a qualifying separation from service, (ii) a change +in control (as such term is defined in the Deferred Compensation Plan), and (iii) a termination of the Deferred Compensation Plan. Payment must generally be made, or installment payments must begin, (as elected by the participant at the time of +deferral), within 60 days of the event triggering payment. +Mr. Stornant is the only NEO who has elected to defer amounts under the Deferred Compensation Plan, and +Mr. Hoffman is the only NEO who received a Company contribution. +Name +Executive +Contributions in 2022 +($) +Registrant +Contributions in 2022 +($) +Aggregate +Earnings +in 2022 +($) 2 +Aggregate +Withdrawals / +Distributions +($) +Aggregate +Balance +at Last FYE +($) +Hoffman +— +$74,530 1 +$565 +— +$48,023 +Stornant +— +— +$166 +— +$14,131 +1. +Company contributions for 2022 were deposited to Mr. Hoffman's Deferred Compensation Plan in February 2023 and were +included in the “All Other Compensation” column in the “Summary Compensation Table” on page 55 . +2. +Reflects market-based earnings on amounts credited to Mr. Stornant and Mr. Hoffman under the Deferred Compensation +Plan. +2023 PROXY STATEMENT +65 +TABLE OF CONTENTS +Potential Payments Upon +Termination or Change in +Control +Wolverine Worldwide has entered into an Executive Severance Agreement with each NEO that provides certain +rights, including the right to receive payments in the event of a termination of employment following a change in control. The Company also has entered into an agreement with Mr. Hoffman and Ms. Soriano regarding certain termination benefits in +the event of termination of employment under certain other circumstances described below. +BENEFITS TRIGGERED BY TERMINATION FOR CAUSE OR VOLUNTARY +TERMINATION +An NEO is not entitled to receive any additional forms of severance payments or benefits upon termination of +employment for Cause or upon the NEO's voluntary decision, other than for Good Reason, to terminate his or her employment, as discussed in further detail below. +BENEFITS TRIGGERED BY TERMINATION OTHER THAN FOR CAUSE OR +FOR GOOD REASON NOT IN CONNECTION WITH A CHANGE IN CONTROL +Mr. Hoffman entered into an Employment Agreement on August 7, 2020, which was amended on December 17, 2021, +which states that upon termination of his employment by Wolverine Worldwide without Cause, or termination by Mr. Hoffman with Good Reason, as such terms are defined in Mr. Hoffman’s Employment Agreement, Wolverine Worldwide will pay Mr. Hoffman +the following payments in exchange for a general release of claims in favor of Wolverine Worldwide: (1) continued base salary for 18 months offset by the amount of salary and guaranteed compensation, if any, he is entitled to from another +employer; (2) payment of Company COBRA premiums for 18 months, or, if earlier, until eligible for coverage through another employer; and (3) a pro rata target bonus opportunity for the year of termination. +“Cause” generally is defined in Mr. Hoffman’s Employment Agreement to mean: (1) any intentional act of +fraud, embezzlement, theft, dishonesty, misrepresentation or breach of fiduciary duty with respect to the Company or its subsidiaries; (2) gross negligence or willful misconduct in the performance of duties; (3) material failure or refusal to +follow any reasonable directive of the Board or the officer to whom Mr. Hoffman reports, and if such failure and refusal is curable, if such failure or refusal is not cured within ten (10) days after written notice; (4) breach of any +noncompetition, nonsolicitation, confidentiality or other covenant with the Company, material breach of any material written policy of the Company which if curable, is not cured within ten (10) days after the Company’s written notice of such +breach, or material breach of Mr. Hoffman’s Employment Agreement, which if curable, is not cured within ten (10) days after the Company’s written notice of such breach; or (5) conviction of or indictment for or entering of a guilty plea or plea +of no contest or nolo contendere with respect to any felony or any crime involving an act of moral turpitude. +“Good Reason” generally is defined in Mr. Hoffman’s Employment Agreement to mean: (1) a material diminution +in duties or a reduction of title, (2) a material breach by the Company of the Employment Agreement, (3) relocation of Mr. Hoffman’s principal place of employment to a location that is more than fifty (50) miles from the Company’s corporate +headquarters or Waltham, Massachusetts office as of January 2, 2022, without Mr. Hoffman’s consent, (4) termination of the Employment Agreement by the Company serving a notice of nonextension or (5) a reduction in Mr. Hoffman’s base salary, +unless such reduction is part of an across the board reduction for senior executives of the Company. +On June 8, 2018, Ms. Soriano entered into a Service Agreement with Wolverine Europe Limited, which is +typical for senior executives based in the United Kingdom. Ms. Soriano’s agreement states that upon certain terminations of her employment by Wolverine Europe Limited, Wolverine Europe Limited will provide Ms. Soriano with written notice nine +(9) months prior to such termination or, alternatively, will pay Ms. Soriano her base salary for such period (or any portion thereof) in lieu of such notice. In addition, upon voluntary termination of Ms. Soriano’s employment by Ms. Soriano for +any reason, she is required to give written notice six (6) months prior to such termination and +2023 PROXY STATEMENT +66 +TABLE OF CONTENTS +Wolverine Europe Limited may pay Ms. Soriano her base salary for such period (or any portion thereof) in +lieu of such notice. If Wolverine Europe Limited chooses to pay Ms. Soriano her base salary in lieu of notice, in either case, such amounts will be in full and final settlement of all claims Ms. Soriano may have against Wolverine and its +affiliates and, further, such amounts will be reduced by any income earned from subsequent employment. +For purposes of Ms. Soriano’s Service Agreement, Wolverine Europe Limited will generally not be required to +provide notice to terminate her employment if she (1) commits, repeats or continues any material breach of her Service Agreement or her obligations thereunder, (2) commits an act of gross misconduct or serious/gross incompetence or negligence +including any deliberate act of discrimination or harassment, (3) acts in a manner which prejudices or is likely in the reasonable opinion of the Board to prejudice the interests or reputation of Ms. Soriano, Wolverine or its affiliates, (4) +commits any material breach of the Code of Conduct, (5) commits or is charged or convicted of any criminal offense other than an offense which does not affect her position or any road traffic violation, (6) is declared bankrupt, (7) is +prohibited by law from being a director of a company, (8) is removed as a director of Wolverine Europe Limited or any affiliate for a reason related to misconduct, (9) is in breach of the warranties contained in the Service Agreement, (10) +breaches a material policy of Wolverine or its affiliates, (11) becomes incapacitated and no longer able to perform her duties for a period exceeding 26 weeks in any 12 month period, or (12) ceases to hold any necessary qualification to carry +out her duties and/or is in breach of any rules and regulations or any relevant regulatory body. +BENEFITS TRIGGERED UPON A CHANGE IN CONTROL +Benefits Upon Termination Following a Change in Control. +Under the Executive Severance Agreements entered into with the NEOs, payments and benefits are triggered when employment is terminated without “Cause” or when an executive terminates employment for “Good Reason” within two years following a +change in control of Wolverine Worldwide. +Upon such a qualifying termination, Wolverine Worldwide will pay the lump sum severance payment under the +Executive Severance Agreement composed of the following: (1) unpaid base salary and bonus payments that had been earned; (2) in lieu of a bonus payment under the Annual Bonus Plan, an amount equal to the quotient of the number of days the NEO +was employed by Wolverine Worldwide, or any successor company in the year of termination, divided by the number of days in the year; multiplied by 100% of the greater of either (a) the bonus awarded to the NEO under the annual bonus plan for +the preceding year and (b) the average paid to the NEO over the preceding two year period under the annual bonus plan; (3) in lieu of payments under the various three year performance periods that remain open on the date of termination, if any, +an amount equal to the bonus the NEO would have received based on actual and assumed performance measures, multiplied by the quotient of the number of days the NEO participated in the performance period prior to the termination, divided by the +total number of days in the performance period (in determining the earnings per share or other performance measures that can be determined annually for any year subsequent to the year of termination, performance will equal the level required to +attain the maximum goal under the three year plan for that year); (4) two times the sum of (a) the NEO's highest annual base salary during the 12 month period prior to termination and (b) the greater of (i) the average amount earned by the NEO +during the previous two years under the annual bonus plan and (ii) the amount earned during the previous year under the Annual Bonus Plan; (5) 100% of the positive spread for any stock options held by the NEO on the date of termination, whether +or not vested; (6) in the case of Mr. Zwiers, an excise tax gross up adjustment (note: the agreements with Messrs. Hoffman, Hufnagel and Stornant and Ms. Soriano were entered into after 2008, and the Committee determined to not provide such +gross ups after that date); and (7) in the case of Mr. Hufnagel the present value of an additional three years of deemed service under the Pension Plan and SERP (this benefit does not apply to Mr. Hoffman and Ms. Soriano since they do not +participate in the Pension Plan or SERP or to Messrs. Zwiers or Stornant since they have maximum years of service under these plans). Upon a termination of employment following a change of control, Wolverine Worldwide or any successor company +will maintain for a period of six months to one year the NEO's benefits under the then current benefit plans, programs or arrangements that the NEO was entitled to participate in immediately prior to the termination date. In addition, Wolverine +Worldwide or any successor company will provide outplacement services through the last day of the second calendar year following the calendar year of termination. +“Change in Control” under the Executive Severance Agreements generally means certain changes in composition +of the Board of Directors, certain acquisitions of 20% or more of Wolverine Worldwide's common stock or combined outstanding voting power of Wolverine World Wide, Inc., and other specified reorganizations, mergers, consolidations, liquidations, +dissolutions or distributions of substantial assets (unless such transactions result in the creation of an entity in which at least 50% of the common stock and combined voting power is owned by the owners of record prior to the transaction, no +single shareholder owns more than 20% of the combined voting power and a majority of the board remains unchanged). In all cases, an event will not qualify as a change in control unless it qualifies as “a change in the ownership or effective +control” of the Company or “a change in the ownership of a substantial portion of the assets of the Company,” each as determined under the stringent requirements of Section 409A of the Tax Code. Under this standard, for example, transactions +must be consummated, not just approved by shareholders. +“Cause” is defined under the Executive Severance Agreements to generally mean the willful and continued +failure to substantially perform duties or willfully engaging in gross misconduct that is injurious to the Company. +2023 PROXY STATEMENT +67 +TABLE OF CONTENTS +“Good Reason” is defined under the Executive Severance Agreements to generally mean: (1) any materially +adverse change in position, duties, responsibilities or title, or any removal, involuntary termination or failure to re-elect an officer; (2) a reduction in annual base salary; (3) any relocation or requirement to substantially increase +business travel; (4) the failure to continue providing any executive incentive plans or bonus plans; (5) the failure to continue any employee benefit plan or compensation plan unless a comparable plan is available; (6) the failure to pay any +salary, bonus, deferred compensation or other compensation; (7) the failure to obtain an assumption agreement from any successor; (8) any purported termination of the employment which is not effected in a manner prescribed by the Executive +Severance Agreement; or (9) any other material breach by Wolverine Worldwide or any successor company of its obligations under the Executive Severance Agreement. +Benefits Upon a Change in Control Only. For 2017 and +future years, the Company adopted double-trigger equity vesting, meaning that vesting only accelerates upon a qualifying termination of employment after a change in control. For grants prior to 2017, upon a change in control of Wolverine +Worldwide, absent a determination by the Compensation Committee to the contrary, outstanding stock options become immediately exercisable in full and will remain exercisable during their remaining term, regardless of whether the NEO remains +an employee of Wolverine Worldwide, or any successor company. The Committee may determine that one or all of the NEOs shall receive cash in an amount equal to the positive spread amount associated with these options. To the extent that the +Company has made discretionary contributions under the Deferred Compensation Plan that are subject to a vesting schedule, any unvested portion of these contributions will vest on a change in control. Change in control for this purpose +generally means certain changes in the composition of the Board of Directors, certain acquisitions of 20% of Wolverine Worldwide's common stock (50% in the case of the Deferred Compensation Plan) and other specified reorganizations, mergers, +consolidations, liquidations, dissolutions or dispositions of substantial assets. +Excise Tax Gross Up. The Compensation Committee +previously determined that Wolverine Worldwide would not provide excise tax gross up payments in employment agreements entered into after 2008. Mr. Zwiers is the only NEO who has excise tax gross up protection in his agreement. +BENEFITS TRIGGERED BY RETIREMENT, DEATH OR PERMANENT +DISABILITY +Pension Plan. In the event of death before retirement, +the Pension Plan provides the surviving spouse of a vested participant a death benefit equal to the qualified pre-retirement survivor annuity as defined in the Internal Revenue Code (generally 50% of the participant's accrued normal +retirement benefit). This benefit is paid annually to the surviving spouse beginning when the participant would have turned 60 and continues for the life of the surviving spouse. For participants with at least three years of service as of +December 31, 2003, and who have at least 10 years of service and are employed by the Company at the time of death, the amount of the survivor benefit under the Pension Plan is calculated as though the participant had continued as an employee +of the Company until age 65 at the compensation level as of the date of death and the benefit begins upon the date of death, unreduced for early commencement. The survivor benefit for participants who meet all the criteria set forth in the +preceding sentence, but who die when they are not employed by the Company, are entitled to a joint and survivor benefit commencing upon the date of death, unreduced for early commencement. +SERP. If a SERP participant dies before beginning to +receive benefits under the SERP, the Company must, based on the participant's election, pay the beneficiary either a monthly annuity or a lump sum death benefit equal to the present value of the benefit computed as if the participant had +retired on the date of death, had begun receiving benefits at age 55, and had continued to receive benefits for the remainder of the participant's life expectancy. If the participant dies after beginning to receive benefit payments, benefits +cease unless the participant was receiving benefits in the form of one of the joint and survivor annuity optional elections under the plan or had elected benefits in a form that provides for a continuation of benefits. +If a participant becomes disabled (as defined in the SERP), the SERP provides a disability benefit equal to +60% of the normal retirement accrued benefit based upon years of service up to the date that the participant became disabled through the date the participant reaches age 65 (at which point, the participant would begin drawing full SERP +benefits) or is no longer disabled. +Annual Bonus Plan. Upon termination of employment at +least six months after the beginning of a fiscal year due to death, disability, or early or normal retirement, an NEO is entitled to receive a pro rata portion of any annual bonus award earned under the Annual Bonus Plan based on the NEO's +service during such fiscal year and actual performance under the Annual Bonus Plan. The annual bonus is payable at the same time and in the same manner as awards are paid to other NEOs for the fiscal year. +Stock Incentive Plans. Upon death, disability, or +voluntary termination of employment after attaining age 59 with ten years of service with the Company, subject to certain conditions, the restrictions applicable to each NEO's shares of restricted stock terminate. Upon death, disability or +voluntary termination of employment after attaining age 59 with ten years of service with the Company, subject to certain conditions, the restrictions on time-vested shares lapse or units vest. +2023 PROXY STATEMENT +68 +TABLE OF CONTENTS +Deferred Compensation Plan. Upon death, disability, +or other qualifying separation from service, including retirement, all in accordance with Section 409A of the Internal Revenue Code, all amounts deferred by the NEOs under the Deferred Compensation Plan, including any vested amounts credited +to the NEOs pursuant to a discretionary Company contribution, shall generally be paid, or commence payment, within 60 days of the termination in accordance with the schedule elected by the NEO at the time of deferral. +DESCRIPTION OF RESTRICTIVE COVENANTS THAT APPLY DURING AND +AFTER TERMINATION OF EMPLOYMENT +The SERP contains non-competition, confidentiality, and employee non-solicitation provisions in favor of +Wolverine Worldwide. Under the non-competition provisions of the SERP, the participant will not be entitled to any benefit payment if, prior to the date on which such benefit payment is due, the participant enters into certain relationships +with a competing business. +2023 PROXY STATEMENT +69 +TABLE OF CONTENTS +ESTIMATED PAYMENTS ON TERMINATION OR CHANGE IN CONTROL +The following table summarizes the potential payments and benefits payable to each NEO upon a change in +control or termination of employment following each of the triggering events set forth in the table. As required, the amounts in the table assume that the termination of employment or change in control of Wolverine Worldwide took place on the +Company's last day of fiscal year 2022, which was December 31, 2022. The amounts set out below are in addition to benefits that are generally available to the Company's employees such as distributions under the Company's 401(k) savings plan, +disability or life insurance benefits and accrued vacation. Due to the many factors that affect the nature and amount of any benefits provided upon the termination events discussed below, any actual amounts paid or distributed to NEOs may be +different. Factors that may affect these amounts include timing during the year of the occurrence of the event, Wolverine Worldwide's stock price and the NEO's age and years of service. +The value of the accelerated vesting of unvested equity-based compensation awards was computed using the +closing market price $10.93 of Wolverine Worldwide's common stock on December 30, 2022, the last business day in fiscal year 2022. The value for unvested restricted stock is computed by multiplying $10.93 by the number of shares of the NEO's +restricted stock that would vest as a result of an event. +Each of the hypothetical events described in the following table (the highlighted blue headings in the +left-hand column) is calculated and reported as a discrete event. For example, the amounts disclosed under the “Change in Control Only” heading are not cumulative with the amounts disclosed under the “Change in Control/Termination” heading. +Termination Event and Payment / Benefits +Hoffman +Hufnagel +Soriano +Stornant +Zwiers +Termination by Company for Cause or Voluntary Termination (other than for Good Reason +or due to Retirement) +— +— +— +— +— +Termination by Company Other Than for Cause or by Executive for Good Reason or In Lieu +of Notice +$2,141,764 +— +$349,479 11 +— +— +Change in Control / Termination +Executive Severance Agreement 1 +$12,900,842 +$7,584,807 +$2,864,667 +$5,582,539 +$11,250,134 +Benefits under Executive Severance Agreement 2 +$48,379 +$40,488 +$34,801 +$48,391 +$40,961 +Stock Incentive Plans 3 +$1,339,100 +$257,128 +$161,425 +$415,198 +$367,751 +Lump sum payment under the SERP 4 +— +$2,388,449 +— +$7,699,491 +$9,566,147 +Death +SERP 5 +— +$2,518,439 +— +$5,552,802 +$6,007,174 +Pension Plan 6 +— +$249,334 +— +$938,275 +$942,268 +Stock Incentive Plans 3 +$1,339,100 +$257,128 +$161,425 +$415,198 +$367,751 +Earned Incentive Compensation 7 +$3,232,070 +$485,608 +$536,820 +$841,899 +$736,597 +Disability +SERP 8 +— +$1,266,507 +— +$3,729,972 +$4,456,782 +Stock Incentive Plans 3 +$1,339,100 +$257,128 +$161,425 +$415,198 +$367,751 +Earned Incentive Compensation 7 +$3,232,070 +$485,608 +$536,820 +$841,899 +$736,597 +Retirement +SERP 9 +— +$986,392 +— +$3,706,823 +$4,120,819 +Pension Plan 9 +— +$513,223 +— +$1,282,879 +$1,153,898 +Stock Incentive Plans 3 +— +— +— +— +— +Earned Incentive Compensation 7 +— +— +— +— +— +Change in Control Only +Stock Incentive Plans 10 +— +— +— +— +— +1. +Payments would be triggered after termination of employment under certain circumstances within two years following a +change in control. Includes amounts payable in cash under the terms of the Executive Severance Agreement, excluding the value of the cash payout to each NEO of the option spread for already vested options. The timing of the payment +would be delayed to the extent earlier payment would trigger Section 409A of the tax code. The value of service-based restricted shares or units that vest upon a change in control under the terms of the Company's stock incentive plans +are included in the Stock Incentive Plans row. +2023 PROXY STATEMENT +70 +TABLE OF CONTENTS +2. +These estimates assume that Wolverine Worldwide, or any successor company, maintains the benefit plans for a period +of one year after termination and the outplacement services for a period beginning with the date of termination and ending on the last day of the second calendar year following the calendar year in which the date of termination +occurred. +3. +Reflects the value of unvested shares of restricted stock or stock units that would vest because of the event. +4. +Reflects the entire lump sum benefit payable to applicable NEOs, including any accumulated benefit. The timing of +the payment would be delayed to the extent earlier payment would trigger Section 409A of the Tax Code. +5. +Reflects the entire lump sum death benefit payable to a participating NEO's beneficiary, including any accumulated +benefit. +6. +Amounts reflect the net present value of the annuity paid to the surviving spouse calculated using the same discount +rate and mortality assumptions used in the Pension Benefits table under the heading “Pension Benefits in Fiscal Year 2022” under the heading “Pension Plans and 2022 Pension Benefits.” In accordance with the terms of the Pension Plan, +the death benefit for Messrs. Stornant and Zwiers was calculated as though the NEO had continued as an employee of Wolverine Worldwide until age 65 at the compensation level as of the date of death. +7. +Under the Annual Bonus Plan and the terms of performance share awards, each NEO may be eligible to receive a pro +rata portion of any award if employment is terminated as a result of any of the specified events in the table. The amount reported represents (a) actual payout under the Annual Bonus Plan for fiscal year 2022, (b) actual payout under +the 2021-2022 performance cycle and (c) target performance for the 2021-2023 and 2022-2024 performance cycles. Performance units would vest on a prorated basis based on actual Company performance. +8. +Reflects the net present value of the annuity using the same discount rate and mortality assumptions used in the +Pension Benefits table and assuming the NEO drew the disability benefit until age 65 followed by the normal retirement benefit. +9. +Reflects the net present value of benefits according to actual elections in place and assuming SERP benefits begin +at age 55 (or immediately if older than 55) and pension benefits as of age 60 with 10 years of service. +10. +Unvested shares of restricted stock/stock units (including performance share or unit awards) do not vest based on a +change in control only. +11. +Represents 9 months of base salary and is the maximum amount payable if the company chooses to terminate her +employment without notice. If Ms. Soriano voluntarily terminates, the maximum payout in lieu of notice is six months of base salary ($232,986). +CEO PAY RATIO +As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer +Protection Act and Item 402(u) of Regulation S-K, we are providing the following information about the relationship of the annual total compensation of our employees and the annual total compensation of Brendan Hoffman, the Company's Chief +Executive Officer during fiscal year 2022. +For 2022, our last completed fiscal year, the annual total compensation of the employee +of the Company identified at median was $60,287 and the annual total compensation of the CEO, as reported in the Summary Compensation Table above, was $6,519,654 +Based on this information, the 2022 ratio of the annual total compensation of +Mr. Hoffman to the median of the annual total compensation of all employees was estimated to be 108 to 1. +The methodology and the material assumptions, adjustments and estimates that we used to +identify the median of the annual total compensation of all our employees, as well as to determine the annual total compensation of our “median employee” and our CEO, are described below. +• +We determined that, as of December 31, 2020, our employee population consisted of approximately 3,273 (2,544 in the U.S. and 729 outside the U.S.) +individuals globally. After excluding employees from India (12 employees), Dominican Republic (2 employees), Mexico (1 employees), Netherlands (57 employees), Thailand (2 employees) and Vietnam (47 employees) pursuant to the “de +minimis” exception provided for in the rules, we used a base of 3,152 employees for purposes of determining the “median employee.” We selected December 31, 2020, as the date upon which we would identify the median employee in order to +align with year-end. +• +To determine the median employee in 2020 we used annual base salary as well as bonus and other cash incentives paid for the 12-month period ending +December 31, 2020 as our consistently applied compensation measure. In making this determination, we annualized the compensation of all newly hired regular employees during this period. Since the median employee selected in 2020 no +longer works for the Company, an employee was selected whose compensation is substantially similar to the original median employee's compensation based on the compensation measure used to select the original median employee in 2020; +this same employee was used for 2021 and 2022. There has not been a change in employee population or Company compensation arrangements that the Company believes would significantly impact the pay ratio. +• +Once we identified our median employee, we combined the elements of such employee's compensation for fiscal 2022 in accordance with the SEC's rules, +resulting in annual total compensation of $60,287. +• +With respect to the annual total compensation of our CEO, we used the amount reported in the “Total” column of our 2022 Summary Compensation Table +included in this Proxy Statement. +2023 PROXY STATEMENT +71 +TABLE OF CONTENTS +PAY VS. PERFORMANCE +As required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item +402(v) of Regulation S-K, the following information is provided about the relationship between Compensation shown on the Summary Compensation Table (SCT), Compensation Actually Paid (CAP), Total Shareholder Return (TSR), Net Income, and Non-GAAP +Pre-Tax Income as the Company Selected Measure. +For the 2020-2022 measuring period included in the table below, CEO Compensation Actually Paid was +approximately 68% lower than CEO compensation disclosed in the Summary Compensation Table, while for the same period Company TSR was down 66%, demonstrating strong alignment between the CEOs’ realizable compensation and the performance of Company +stock. +Value of Initial Fixed $100 Investment Based On: +Year +Summary +Compensation +Table +Total for +First CEO (a) +Summary +Compensation +Table +Total for +Second +CEO (a) +Compensation +Actually +Paid to First +CEO (a),(b) +Compensation +Actually +Paid to +Second +CEO (a),(b) +Average +Summary +Compensation +Table +Total for +Non-CEO NEOs (a) +Average +Compensation +Actually +Paid to +Non-CEO +NEOs (a),(b) +Total +Shareholder +Return +Peer +Group (c) +Total +Shareholder +Return +Net Income +(in Millions) +Non-GAAP Pre-Tax Income +(in Millions) (d) +2022 +N/A +$ 6,519,654 +N/A +$ 207,454 +$ 1,818,674 +$ 868,826 +$ 34.23 +$ 108.19 +($ 189 ) +$ 133.1 +2021 +$ 14,405,857 +N/A +$ 3,570,244 +N/A +$ 3,924,986 +$ 2,336,212 +$ 87.98 +$ 151.51 +$ 67 +$ 191.5 +2020 +$ 9,519,491 +N/A +$ 5,934,954 +N/A +$ 3,547,178 +$ 2,591,063 +$ 94.28 +$ 120.84 +($ 138.6 ) +$ 92.4 +(a) +NEOs included in these columns reflect the following: +Year +CEO (or Principal +Executive Officer) +Non-CEO NEOs +2022 +Brendan Hoffman +Isabel Soriano, Michael Stornant, James Zwiers, Christopher Hufnagel +2021 +Blake Krueger +Brendan Hoffman, Isabel Soriano, Michael Stornant, James Zwiers +2020 +Blake Krueger +Brendan Hoffman, Michael Jeppesen, Michael Stornant, James Zwiers +(b) +The following table details the adjustment to the Summary Compensation Table Total Pay for our CEO, as well as the average for our other NEOs, to +determine “compensation actually paid”, as computed in accordance with Item 402(v), with dividends accounted for in the change in fair value of the awards. Amounts do not reflect actual compensation earned by or paid to our NEOs during +the applicable year. +CEO +Non-CEO NEO Average +2022 +2021 +2020 +2022 +2021 +2020 +Summary Compensation Table Total +$ 6,519,654 +$ 14,405,857 +$ 9,519,491 +$ 1,818,674 +$ 3,924,986 +$ 3,547,178 +Less: Reported Fair Value of Equity Awards (1) +$ 5,183,029 +$ 10,945,024 +$ 6,652,134 +$ 805,334 +$ 2,269,703 +$ 2,050,266 +Add: Year-End Fair Value of Outstanding and Unvested Equity Awards Granted in the Year (2) +$ 1,925,515 +$ 9,418,773 +$ 5,856,777 +$ 304,048 +$ 1,936,075 +$ 1,838,005 +Add: Year Over Year Change in Fair Value of Equity Awards Granted in Prior Years that +Vested in the Year (2) +($ 208,392 ) +($ 1,101,043 ) +($ 369,878 ) +($ 43,229 ) +($ 300,778 ) +($ 62,688 ) +Add: Year Over Year Change in Fair Value of Outstanding and Unvested Equity Awards +Granted in Prior Years (2) +($ 2,896,168 ) +($ 8,282,156 ) +($ 1,362,942 ) +($ 639,680 ) +($ 1,123,620 ) +($ 172,005 ) +Add: Value of Dividends or Other Earnings Paid on Stock or Option Awards Not Otherwise +Reflected in Fair Value or Total Compensation +$ 49,874 +$ 73,838 +$ 94,912 +$ 10,850 +$ 18,511 +$ 17,586 +Less: Change in Pension Value Reported in the Summary Compensation Table +$ — +$ — +$ 1,151,272 +$ — +$ 39,184 +$ 742,418 +Add: Pension Service Cost for Services Rendered During the Year +$ — +$ — +$ — +$ 223,497 +$ 189,926 +$ 215,671 +Compensation Actually Paid +$ 207,454 +$ 3,570,244 +$ 5,934,954 +$ 868,826 +$ 2,336,212 +$ 2,591,063 +(1) +The amounts reflect the aggregate grant-date fair value reported in the “Stock Awards” columns in the Summary +Compensation Table for the applicable year. +(2) +In accordance with Item 402(v) requirements, the fair values of unvested and outstanding equity awards to our NEOs +were measured as of the end of each fiscal year, and as of each vesting date, during the years displayed in the table above. For performance-based awards, the fair values reflect the probable outcome of the performance vesting +conditions as of each measurement date. Dividends are accounted for in the change in fair value calculations. We did not grant any equity awards that vested in the year of grant. +(c) +Peer Group reflects the same S&P 1500 Consumer Durables & Apparel Index used for the performance graph included in the 10-K as required under +S-K Item 201(e)(1)(ii). +(d) +For a reconciliation of GAAP Pre-tax Income to non-GAAP Pre-tax Income, as used in the third table below, see the Non-GAAP reconciliation table in +Appendix A. +2023 PROXY STATEMENT +72 +TABLE OF CONTENTS +Tabular list of Company Performance Measures +The three measures listed below, in no particular order, represent the most important metrics to link +Compensation Actually Paid for FY 2022 as further described in our Compensation Discussion and Analysis (CD&A) within the sections titled “Short-Term Incentive Compensation” and “Long-Term Incentive Compensation.” +Most Important Performance Measures +Non-GAAP Pre-Tax Income +Revenue +Fully Diluted Adjusted EPS +Compensation Actually Paid versus Total Shareholder Return +As shown in the chart below, the CEO and other NEOs’ Compensation Actually Paid amounts are aligned with the +Company’s TSR. Alignment is primarily due to the Company’s use of equity incentives, which are tied directly to stock price in addition to the Company’s financial performance. The TSR calculation assumes a $100 investment made on +1/1/2020. +2023 PROXY STATEMENT +73 +TABLE OF CONTENTS +Compensation Actually Paid versus Net Income +As shown in the chart below, the Company’s net income increased from 2020 to 2021, followed by a decrease in +2022. The CEO and NEO’s Compensation Actually Paid have varied significantly from these changes in large part due to the significant emphasis the Company places on equity incentives, which are sensitive to changes in stock price. +Compensation Actually Paid versus Non-GAAP Pre-Tax Income +The chart below compares the CEO and other NEOs’ Compensation Actually Paid to our Company Selected Measure, +Non-GAAP Pre-Tax Income. +2023 PROXY STATEMENT +74 +TABLE OF CONTENTS +Proposal 2 — Advisory Resolution to +Approve Executive Compensation +The Company is asking its shareholders to indicate their support for Wolverine Worldwide's NEO compensation, +as described in this Proxy Statement. This proposal, commonly known as a “say-on-pay” proposal, gives the Company's shareholders the opportunity to express their view on compensation for the Company's NEOs. The say-on-pay vote is advisory and, +therefore, not binding on the Company, the Compensation Committee or the Board. Even though non-binding, the Board and Compensation Committee value the opinions of Wolverine Worldwide's shareholders and will review and consider the voting +results when making future decisions regarding the Company's executive compensation program. +At the 2017 annual meeting of shareholders, the Company held an advisory vote on the frequency of future +say-on-pay votes. Our shareholders approved, on an advisory basis, an annual say-on-pay vote, and after consideration of the shareholders’ vote, the Board determined to proceed with an annual say-on-pay vote. After the 2023 Annual Meeting of +Shareholders, our next advisory vote to approve executive compensation will occur at our 2024 annual meeting of shareholders unless the Company announces otherwise following the Board’s consideration of the advisory vote provided in Proposal 3 +of this Proxy Statement regarding the frequency of future advisory votes to approve executive compensation. Further, in accordance with Rule 14a-21(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), shareholders will be +asked to vote again on how frequently the Company should hold future say-on-pay votes at the Company's 2029 annual meeting of shareholders. +The Company encourages shareholders to read the “Compensation Discussion and Analysis” (“CD&A”) section +of this Proxy Statement beginning on page 39 . As described in the CD&A section, the Compensation Committee has structured the executive compensation program to achieve the following key objectives: +• +Align the interests of NEOs with those of the shareholders through incentives based on achieving performance objectives that enable increased +shareholder value +• +Provide incentives for achieving specific, near term corporate, business unit and individual goals and reward the achievement of those goals +• +Provide incentives for achieving pre-established, longer-term corporate financial goals and reward achievement of those goals +• +Attract and retain talented NEOs who will lead Wolverine Worldwide and drive superior business and financial performance +The executive compensation program is designed to achieve these objectives, in part, by: +• +Weighting at-risk and variable compensation (annual bonuses and long-term incentives) much more heavily than fixed compensation (base salaries) +• +Rewarding annual performance while maintaining emphasis on longer-term objectives +• +Blending cash, non-cash, long- and short-term compensation components and current and future compensation components +The Company encourages shareholders to read the Summary Compensation Table and other related compensation +tables and narrative, appearing on pages 55 - 74 , which provide detailed information on the compensation of the Company's NEOs. +The Compensation Committee and the Board of Directors believe the Company's compensation program and its +policies and procedures articulated in the CD&A section are effective in aligning the interests of the Company's NEOs with the interests of shareholders, promoting the achievement of the Company's near and long-term objectives and +increasing shareholder value. +In accordance with the rules under Section 14A of the Exchange Act, and as a matter of good corporate +governance, the Company asks shareholders to approve the following advisory resolution at the 2023 Annual Meeting of Shareholders: +RESOLVED , that the shareholders of Wolverine World +Wide, Inc. (the “Company”) approve, on an advisory basis, the compensation of the Company's named executive officers disclosed in the Compensation Discussion and Analysis section, the Summary Compensation Table and the related compensation +tables, notes and narrative in the Proxy Statement for the Company's 2023 Annual Meeting of Shareholders. +BOARD RECOMMENDATION +The Board recommends that you vote “FOR” approval of the advisory resolution to approve +executive compensation. +2023 PROXY STATEMENT +75 +TABLE OF CONTENTS +Proposal 3 — Advisory Vote on the Frequency of Future Advisory Votes to Approve Executive Compensation +Pursuant to Section 14A of the Exchange Act, the Company is asking its shareholders to cast an advisory vote +on the frequency of future advisory votes to approve executive compensation. Shareholders may specify whether they prefer such votes to occur every year, every two years or every three years, or they may abstain. As noted above, at the 2017 +annual meeting of shareholders, the Company held an advisory vote on the frequency of future say-on-pay votes. Our shareholders approved, on an advisory basis, an annual say-on-pay vote, and after consideration of the shareholders’ vote, the +Board determined to proceed with an annual say-on-pay vote. +Shareholders are not voting to approve or disapprove the Board’s recommendation. This advisory vote on the +frequency of future advisory votes to approve executive compensation is non-binding on the Board of Directors. Notwithstanding the Board’s recommendation and the outcome of the shareholder vote, the Board may decide that it is in the best +interests of the Company’s shareholders and the Company to hold an advisory vote to approve executive compensation on a more or less frequent basis and may vary its practice based on factors such as discussions with shareholders and the +adoption of material changes to compensation programs. +BOARD RECOMMENDATION +The Board recommends that you vote for conducting future advisory votes to approve +executive compensation every “ONE YEAR.” +2023 PROXY STATEMENT +76 +TABLE OF CONTENTS +Proposal 4 — Ratification of Appointment of Independent Registered Public Accounting Firm +Ernst & Young LLP (“Ernst & Young”) was the Company’s independent registered public accounting firm +for the fiscal year ended December 31, 2022. The Audit Committee has reappointed Ernst & Young as the Company’s independent registered public accounting firm for the current fiscal year. As a matter of good corporate governance, the Audit +Committee has determined to submit its appointment of Ernst & Young to the Company’s shareholders for ratification. If this appointment is not ratified by the holders of a majority of votes cast affirmatively or negatively on the matter, +the Audit Committee will review its future selection of an independent registered public accounting firm. Even if the appointment is ratified, the Audit Committee in its discretion may select a different independent registered public accounting +firm any time during the year if it determines that such a change would be in the best interests of the Company and the Company’s shareholders. +The Audit Committee reviewed Ernst & Young’s performance prior to appointing it as the Company’s +independent registered public accounting firm, and considered: +• +The historical and recent performance of Ernst & Young on the Company’s audit, including the quality of the engagement team and Ernst & +Young’s experience, client service, responsiveness and technical expertise +• +The Public Company Accounting Oversight Board (“PCAOB”) report of selected Ernst & Young audits +• +The appropriateness of fees charged +• +Ernst & Young’s familiarity with the Company’s accounting policies and practices and internal control over financial reporting +• +Ernst & Young’s financial strength and performance +Representatives of Ernst & Young are expected to be present at the Annual Meeting. They will have an +opportunity to make a statement if they desire to do so and are expected to be available to respond to appropriate questions from shareholders. +BOARD RECOMMENDATION +The Board recommends that you vote “FOR” ratification of the Audit Committee’s selection of +the firm of Ernst & Young LLP as the Company’s independent registered public accounting firm for fiscal year 2023. +2023 PROXY STATEMENT +77 +TABLE OF CONTENTS +Audit Committee Report +The Audit Committee of the Board of Directors consists of four directors who are independent under the +Company's Director Independence Standards, the NYSE listed company standards and applicable SEC standards. The Audit Committee represents and assists the Board in fulfilling its oversight responsibility regarding the Company's financial +statements and the financial reporting process, the internal control over financial reporting, the performance of the internal audit function and the independent registered public accounting firm, the qualifications and independence of the +independent registered public accounting firm, the annual independent audit of Wolverine Worldwide's financial statements and internal control over financial reporting and compliance with legal and regulatory requirements. The Audit Committee +is directly responsible for appointing, retaining, compensating, overseeing, evaluating and terminating (if appropriate) Wolverine Worldwide's independent registered public accounting firm. Wolverine Worldwide's management has primary +responsibility for the financial statements and the financial reporting process, including the application of accounting and financial principles, the preparation, presentation and integrity of the financial statements and the systems of +internal controls and other procedures designed to promote compliance with accounting standards and applicable laws and regulations. Wolverine Worldwide's independent registered public accounting firm is responsible for expressing an opinion on +the conformity of Wolverine Worldwide's financial statements with generally accepted accounting principles and for auditing the effectiveness of Wolverine Worldwide's internal control over financial reporting. +The Audit Committee has taken steps to provide assurances regarding Audit Committee composition and +procedures, the independence of Wolverine Worldwide's independent registered public accounting firm and the integrity of Wolverine Worldwide's financial statements and disclosures. These steps include: (i) reviewing the Audit Committee Charter; +(ii) reviewing with legal counsel and the independent registered public accounting firm the Accounting and Finance Code of Ethics; (iii) maintaining financial, accounting and business ethics complaint procedures to allow employees, shareholders +and the public to report concerns regarding Wolverine Worldwide's financial statements, internal controls and disclosures; and (iv) reviewing procedures for the Audit Committee to pre-approve all audit and non-audit services provided by +Wolverine Worldwide's independent registered public accounting firm. +As part of its supervisory duties, the Audit Committee has reviewed Wolverine Worldwide's audited financial +statements for the fiscal year ended December 31, 2022, and has discussed those financial statements with Wolverine Worldwide's management and internal financial staff, and the internal auditors and independent registered public accounting firm +with and without management present. The Audit Committee has also reviewed and discussed the following with Wolverine Worldwide's management and the financial staff, and with the internal auditors and independent registered public accounting +firm with and without management present: +• +Accounting and financial principles and significant assumptions, estimates and matters of judgment used in preparing the financial statements +• +Allowances and reserves for accounts receivable, inventories and taxes +• +Accounting for acquisitions, pension plans and equity-based compensation plans +• +Goodwill and intangible asset impairment analysis +• +Other significant financial reporting issues and practices +The Audit Committee has discussed with Wolverine Worldwide's independent registered public accounting firm +the results of its examinations and its judgments concerning the quality, as well as the acceptability, of Wolverine Worldwide's accounting principles and such other matters that it is required to discuss with the independent registered public +accounting firm under applicable rules, regulations or generally accepted auditing standards, including the matters required to be discussed by the applicable requirements of the PCAOB and the SEC. In addition, the Audit Committee has received +from the independent registered public accounting firm the written disclosures and the letter required by the applicable requirements of the PCAOB regarding the independent registered public accounting firm's communications with the Audit +Committee concerning independence and has discussed their independence from Wolverine Worldwide and Wolverine Worldwide's management with them, including a consideration of the compatibility of non-audit services with their independence, the +scope of the audit and the scope of all fees paid to the independent registered public accounting firm during the year. After, and in reliance upon the reviews and discussions described above, the Audit Committee recommended to the Board that +the audited financial statements for the fiscal year ended December 31, 2022, be included in Wolverine Worldwide's Annual Report on Form 10-K for the year then ended to be filed with the SEC. +Respectfully submitted, +Jeffrey M. Boromisa (Chair) +William K. Gerber +David T. Kollat +Brenda J. Lauderback +2023 PROXY STATEMENT +78 +TABLE OF CONTENTS +Independent Registered Public +Accounting Firm +The Company's Audit Committee has adopted a policy under which the Audit Committee must approve all audit and +non-audit services provided by the Company's independent registered public accounting firm, Ernst & Young LLP, and which prohibits Ernst & Young LLP from providing any non-audit services that are prohibited by the SEC or the PCAOB. The +Company's Audit Committee provides categorical pre-approval for routine and recurring services, with specific service descriptions and budgets that include sufficient information to confirm the determination that the provision of such service +will not impair the independent registered public accounting firm’s independence. All services not within the specifically pre-approved service descriptions and budgets require engagement specific pre-approval. With certain exceptions (such as +pre-approval of audit services), the Audit Committee may delegate engagement specific pre-approval to one or more Audit Committee members, and has so delegated in certain instances to the Audit Committee Chairperson. Management must communicate +to the Audit Committee at its next regularly scheduled meeting any services approved by an Audit Committee member. Wolverine Worldwide's Audit Committee pre-approved all fees paid to Ernst & Young LLP for services performed in 2022 and +2021. The aggregate fees billed by Ernst & Young LLP for audit and non-audit services were: +2022 +2021 +Audit Fees 1 +$2,781,300 +$2,758,000 +Audit-Related Fees 2 +$ — +$ 270,000 +Total Audit & Audit-Related Fees +$2,781,300 +$3,028,000 +Tax Fees 3 +Tax Compliance +$1,027,900 +$ 978,400 +Tax Planning & Advisory +$ 211,300 +$ 214,000 +Total Tax Fees +$1,239,200 +$1,192,400 +All Other Fees +— +— +TOTAL FEES +$4,020,500 +$4,220,400 +1 +“Audit Fees” are comprised of fees for the annual audit, including the audit of internal control over financial +reporting, interim reviews of the financial statements included in Wolverine Worldwide's Quarterly Reports on Form 10-Q, foreign statutory audits, consultations concerning accounting matters associated with the annual audit, and audit +services performed in connection with registration statements and issuance of comfort letters and consents. +2 +“Audit-Related Fees” consist of due diligence in connection with acquisitions. +3 +“Tax Fees” are comprised of fees for the preparation of domestic and foreign tax returns, tax compliance services, +and routine tax advisory and tax planning services. +Wolverine Worldwide's Audit Committee has adopted a policy restricting the Company's hiring of current or +former partners or employees of the independent registered public accounting firm retained by the Company. +2023 PROXY STATEMENT +79 +TABLE OF CONTENTS +Proposal 5 — Approval of Amended and Restated Stock Incentive Plan of 2016 +Overview +On February 8, 2023 (the “Amendment Date”), the Board of Directors unanimously adopted and approved the +Wolverine World Wide, Inc. Stock Incentive Plan of 2016, as amended and restated (the “Plan”), subject to shareholder approval. The Plan amends and restates the Wolverine World Wide, Inc. Stock Incentive Plan of 2016, which was approved by +Company shareholders at the 2016 annual meeting and approved in a restated and amended form by Company shareholders at the 2018 annual meeting and again at the 2021 annual meeting (the “Current Plan”). The Plan allows grants of cash awards, +stock options, stock appreciation rights, restricted stock, restricted stock units and stock awards, any of which may be performance-based, and for incentive bonuses. The only other equity plan under which common stock of the Company may be +issued is the Outside Directors’ Deferred Compensation Plan, which authorizes the issuance of shares only to non-employee directors. If shareholders do not approve the Plan, the Current Plan will remain in existence, but the Company will not +have sufficient shares under it to meet its short- or long-term needs. +Key Changes in the Plan +The amendment and restatement of the Plan is generally effective on the Amendment Date and makes the +following changes, as described in more detail under “Plan Summary” below: +• +Increases the shares available under the Plan by 6.1 million shares, subject to shareholder approval; +• +Extends the term of the Plan by approximately two years, from February 8, 2031 to February 7, 2033, subject to shareholder approval; and +• +Makes other technical changes. +Notwithstanding the foregoing, the terms of the Plan, as amended and restated on the Amendment Date, will +only apply to awards granted after the Amendment Date. +Why You Should Vote For the Plan +The Board of Directors recommends that the Company’s shareholders approve the Plan because it believes that +equity awards are a critical part of the Company’s compensation program and are essential to the Company’s ability to effectively compete for and appropriately motivate and reward key talent. The Board of Directors believes that it is in the +interests of both the Company and its shareholders to strengthen the Company’s ability to attract, motivate and retain high quality employees, directors and consultants and to incentivize such persons to achieve the Company’s financial and +strategic goals through the issuance of equity and other performance-based awards. The Company is seeking shareholder approval of the Plan because the Board of Directors does not believe that the shares available for issuance with respect to +equity awards under the Current Plan are sufficient to meet the Company’s short- or long-term needs. The Company believes that the availability of an additional 6.1 million shares under the Plan in addition to the remaining shares under the +Current Plan (approximately 1.1 million shares as of February 9, 2023) would provide sufficient additional shares to continue to make awards at historical average rates for two years. +Promotion of Good Corporate Governance Practices +The Plan includes a number of provisions that we believe promote good corporate governance and the interests +of shareholders. Under the Plan: +• +Stock options and stock appreciation rights may not be granted with exercise prices lower than the fair market value of the underlying shares on the +grant date +• +The administrator may not, without prior approval of the Company’s shareholders, “reprice” any previously granted underwater stock options or stock +appreciation rights +2023 PROXY STATEMENT +80 +TABLE OF CONTENTS +• +Shares subject to an award under the Plan may not again be made available for issuance under the Plan if such shares were: (i) subject to a +stock-settled stock appreciation right and were not issued upon the net settlement or net exercise of such stock appreciation right, (ii) used to pay the exercise price of a stock option or the purchase price, if any, for an award, +(iii) delivered to or withheld by the Company to pay the withholding taxes related to an award, or (iv) repurchased on the open market with the proceeds of a stock option exercise +• +The Plan has a fungible share feature whereby so-called “full value” awards are counted against the share pool at a higher rate (2.6:1) than stock +options or stock appreciations rights +• +Outstanding awards under the Plan may be forfeited in the event a participant engages in an act of misconduct +• +The Plan administrator may recover awards made under the Plan and payments under or gain in respect of any award in accordance with the Company’s +Policy for Recovery of Incentive Compensation or any other clawback policy maintained by the Company +• +Awards generally must be granted with vesting schedules pursuant to which they will not vest or become exercisable for at least one year +• +The Plan limits the aggregate grant date value of awards that may be granted to non-employee directors +• +No dividends or dividend equivalents will be paid with respect to performance-based restricted stock units or performance-based restricted stock until +the underlying performance awards vest +• +No dividends or dividend equivalents will be paid with respect to shares subject to stock options or stock appreciation rights +• +Awards generally may not be transferred except by will or the laws of descent and distribution or, if approved by the administrator, to certain family +members, family trusts, or family partnerships pursuant to a gift or domestic relations order +• +Awards subject to time-based vesting are subject to “double-trigger” vesting on a change in control of the Company +Key Data +The following table provides information regarding equity awards outstanding and shares available for future +awards under all of the Company’s equity plans as of February 9, 2023 (and without giving effect to approval of the Plan under this Proposal 5). We have no equity awards outstanding other than stock options, restricted stock, restricted stock +units and performance awards (in the form of both performance restricted stock and performance restricted stock units). +Total shares underlying all outstanding stock options +2,070,547 +Weighted average exercise price of outstanding stock options +$ 22.55 +Weighted average remaining contractual life of outstanding stock options (years) +2.5 +Total shares underlying all outstanding and unvested performance shares and units +1,245,341 +Total shares underlying all outstanding and unvested restricted stock and units +(excluding performance shares) +1,626,562 +Shares available for future awards that could be issued under Current Plan 1 +1,070,808 +Shares available for future issuance under the Outside Directors’ Deferred Compensation +Plan 1 +104,499 +Section 162(m) of the Code +The Tax Cuts and Jobs Act on December 22, 2017 eliminated the Section 162(m) performance-based compensation +exemption, so the grants and awards made under the Plan are not eligible for such exemption from the $1,000,000 cap on deductibility of NEO compensation. +Plan Summary +The following summary of the material terms of the Plan is qualified in its entirety by reference to the +complete statement of the Plan, which is set forth in Appendix B to this Proxy Statement. +2023 PROXY STATEMENT +81 +TABLE OF CONTENTS +Administration +The Plan will be administered by the Compensation Committee, which is referred to in this summary in its +capacity as administrator of the Plan as the “administrator.” Any power of the Compensation Committee as administrator may also be exercised by the Board of Directors, except to the extent that the grant or exercise of such authority would +cause any award or transaction to become subject to (or lose an exemption under) the short-swing profit recovery provisions of Section 16 of the Exchange Act. Subject to the express provisions of the Plan, the administrator is authorized and +empowered to do all things that it determines to be necessary or appropriate in connection with the administration of the Plan. All decisions, determinations and interpretations by the Compensation Committee regarding the Plan and awards +granted under the Plan will be final and binding on all participants and other persons holding or claiming rights under the Plan or to an award under the Plan. The Compensation Committee may authorize one or more officers of the Company to +perform any or all things that the administrator is authorized and empowered to do or perform under the Plan; provided, however, that no such officer may designate himself or herself as a recipient of any awards granted under the authority +delegated to such officer and that any delegation of the power to grant awards to an officer must otherwise be consistent with the requirements of Section 157(c) of the Delaware General Corporation Law. The Compensation Committee has designated +the Company’s CEO, CFO, general counsel and secretary, and head of the human resource function to assist in administering the Plan and executing award agreements and other documents entered into under the Plan. In addition, the Compensation +Committee may delegate any or all aspects of the day-to-day administration of the Plan to one or more officers or employees of the Company or any subsidiary, and/or to one or more agents. +Eligibility +Any person who is a current or, to the extent consistent with Section 409A of the Code, prospective officer +or employee of the Company or of any Company subsidiary, will be eligible for selection by the administrator for the grant of awards under the Plan. In addition, non-employee directors and any service providers who have been retained to provide +consulting, advisory or other services to the Company or to any Company subsidiary will be eligible for the grant of awards under the Plan. Stock options intended to qualify as “incentive stock options” (“ISOs”) within the meaning of Section +422 of the Code may only be granted to employees of the Company or a Company subsidiary. As of March 6, 2023, approximately 7 executive officers, 468 total employees, and 8 non-employee directors would be eligible to participate in the Plan. As +of this same date, the closing price of a share of common stock of the Company was $16.50. +Shares Subject to the Plan and to Awards +Subject to changes in the Company’s capitalization, as of May 3, 2023, the number of shares of the Company’s +common stock authorized for future grant under the Plan will equal 7,170,808 shares (the number of shares remaining available for grant under the Current Plan as of February 9, 2023, plus an additional 6,100,000 shares), plus any shares of the +Company’s common stock underlying awards outstanding as of February 9, 2023, granted under the Current Plan or the Company’s Stock Incentive Plan of 2013 and the Company’s Stock Incentive Plan of 2010, that after February 9, 2023, cease for any +reason to be subject to such awards (other than by reason of exercise or settlement of the awards to the extent they are exercised for or settled in vested and non-forfeitable shares), less one share for every share that was subject to an +option or stock appreciation right granted after February 9, 2023 and prior to May 3, 2023 under the Current Plan and 2.6 shares for every share subject to an award other than an option or stock appreciation right granted after February 9, 2023 +and prior to May 3, 2023 under the Current Plan. Any shares granted under stock options or stock appreciation rights on or after May 3, 2023 will be counted against this limit on a one-for-one basis, and any shares granted on or after May 3, +2023 under any other awards will be counted against this limit as 2.6 shares for every one share subject to such award. The shares issued pursuant to awards granted under the Plan may be shares that are authorized and unissued or issued shares +that were reacquired by the Company, including shares purchased in the open market. No fractional shares will be delivered under the Plan. +For purposes of determining the share limits described in the paragraph above, the aggregate number of +shares issued under the Plan at any time will equal only the number of shares actually issued (as calculated above) upon exercise or settlement of an award. Notwithstanding the foregoing, shares subject to an award under the Plan may not again +be made available for issuance under the Plan if such shares were: (i) subject to a stock-settled stock appreciation right and were not issued upon the net settlement or net exercise of such stock appreciation right, (ii) used to pay the +exercise price of a stock option or the purchase price, if any, for an award, (iii) delivered to or withheld by the Company to pay the withholding taxes related to an award, or (iv) repurchased on the open market with the proceeds of a stock +option exercise. Shares subject to awards that have been canceled, expired, forfeited or otherwise not issued under an award and shares subject to awards settled in cash will not count as shares issued under the Plan for purposes of the above +limit. +Subject to certain adjustments, the aggregate number of shares that may be delivered, or the value of which +could be paid in cash or other property, under awards granted under the Plan during any calendar year to any one participant may not exceed 3,600,000 and the aggregate number of shares that may be issued pursuant to the exercise of ISOs granted +under the Plan may not exceed 3,600,000. The maximum amount +2023 PROXY STATEMENT +82 +TABLE OF CONTENTS +payable pursuant to that portion of an incentive bonus granted in any calendar year to any participant +under the Plan may not exceed $20,000,000. The aggregate grant date fair value of awards (computed as of the date of grant in accordance with applicable financial accounting rules) granted under the Plan during any calendar year to any one +non-employee director will not exceed $600,000. +In addition, (i) no portion of any grant of restricted stock will be scheduled to vest prior to the date +that is one year following the date the restricted stock is granted; (ii) no portion of any grant of an option or stock appreciation right will be scheduled to become exercisable prior to the date that is one year following the date the option +or stock appreciation right is granted; and (iii) no portion of any grant of a restricted stock unit or incentive bonus will be scheduled to vest or be settled, paid or distributed prior to the date that is one year following the date the award +is granted; provided; however, that awards that result in the issuance of an aggregate of up to 5% of the gross number of shares ever reserved for issuance under the Plan, which gross share reserve will equal 25,600,000 shares, may be granted +to eligible persons without regard to the minimum vesting, exercisability, settlement, payment and distribution provisions described in this paragraph. +Stock Options +Stock options granted under the Plan may either be ISOs or stock options that are not intended to qualify as +ISOs (“nonqualified stock options” or “NQSOs”). The administrator will establish the exercise price per share under each stock option, which will not be less than the fair market value (or 110% of the fair market value in the case of ISOs +granted to individuals who own more than 10% of the Company’s common stock) of a share on the date the stock option is granted, except in certain cases where substitute or replacement awards are granted in connection with a merger or +acquisition. The administrator will establish the term of each stock option, which in no case may exceed a period of 10 years from the date of grant (or five years in the case of ISOs granted to individuals who own more than 10% of the +Company’s common stock). Unless the administrator determines otherwise, (i) upon termination of employment other than due to death, disability, retirement or termination for cause, to the extent vested on the date of such termination, stock +options remain exercisable for three months following such date (or until the expiration date of the stock option, if earlier), (ii) upon death or disability, stock options become fully vested and remain exercisable for one year following such +event (or until the expiration date of the stock option, if earlier), (iii) upon retirement, stock options become fully vested and remain exercisable until their expiration date, and (iv) upon termination of employment for cause, all stock +options are forfeited. +No dividends or dividend equivalents may be paid or granted in respect of shares subject to stock options or +stock appreciation rights and no holder of a stock option is entitled to any dividends with respect to the shares subject to stock options or appreciation rights unless and until such awards have vested and have been exercised in accordance +with the terms of the Plan and the applicable award agreement and such shares are reflected as issued and outstanding. +Stock Appreciation Rights +A stock appreciation right provides the right to receive the monetary equivalent of the increase in value of +a specified number of the shares over a specified period of time after the right is granted. Stock appreciation rights may be granted to participants either in tandem with or as a component of other awards granted under the Plan (“tandem SARs”) +or not in conjunction with other awards (“freestanding SARs”). All freestanding SARs will be granted subject to the same terms and conditions applicable to options as set forth above and in the Plan, and all tandem SARs will have the same +exercise price, vesting, exercisability, forfeiture and termination provisions as the award to which they relate. +Restricted Stock and Restricted Stock Units +Restricted stock is an award or issuance of shares the grant, issuance, retention, vesting and/or +transferability of which is subject during specified periods of time to certain conditions (including continued employment or performance conditions) determined by the administrator. Restricted stock units are awards denominated in units of +shares under which the issuance of shares is subject to such conditions (including continued employment or performance conditions) and terms as the administrator deems appropriate. Notwithstanding the satisfaction of any performance goals, the +number of shares granted, issued, retainable and/or vested under an award of restricted stock or restricted stock units on account of either financial performance or personal performance evaluations may be reduced, but not increased, by the +administrator on the basis of such further consideration as the administrator may determine. +Unless the administrator determines otherwise, (i) upon termination of employment for any reason other than +death, disability or retirement, all restricted stock and restricted stock units still subject to restrictions as of the date of termination will be forfeited, and (ii) upon death, disability or retirement, in general, the restrictions +remaining on a participant’s restricted stock and restricted stock units will lapse, except that any applicable qualifying performance criteria will not lapse upon a participant’s retirement. +Unless otherwise determined by the administrator, participants holding shares of restricted stock granted +under the Plan may exercise full voting rights with respect to those shares during the period of restriction, but participants will have no voting rights with respect to shares underlying restricted stock units unless and until such shares are +reflected as issued and outstanding shares on the Company’s stock ledger. +2023 PROXY STATEMENT +83 +TABLE OF CONTENTS +The administrator will determine the extent to which participants are entitled to receive dividends or +dividend equivalents with respect to restricted stock and shares underlying restricted stock units. Any cash or stock dividends and dividend equivalents with respect to restricted stock and restricted stock units granted as performance awards, +if any, will be withheld by the Company for the participant’s account and will be paid, if at all, (i) in the case of restricted stock, upon the achievement of the applicable performance measure(s) and the satisfaction of any other restrictions +imposed on the restricted stock in respect of which the dividends were paid and (ii) in the case of restricted stock units, at the time the shares and/or cash underlying such restricted stock units is paid, and any dividends deferred in respect +of any restricted stock and restricted stock units granted as performance awards will be forfeited upon the forfeiture of such restricted stock and restricted stock units. Any non-cash dividends or distributions paid with respect to restricted +stock and restricted stock units granted as performance awards will be subject to the same restrictions that apply to the award to which they relate. +Stock Awards +Stock awards may be granted under the Plan with such terms and conditions as determined by the administrator, +consistent with the 5% limit set forth above under “Shares Subject to the Plan and to Awards.” Participants will have all voting, dividend, liquidation and other rights with respect to shares underlying a stock award, but such awards may be +subject to restrictions on transfer as determined by the administrator. +Incentive Bonuses +An incentive bonus will confer upon the participant the opportunity to earn a future payment, in cash or +shares, tied to the level of achievement with respect to one or more performance criteria established for a performance period of not less than one year. The administrator will establish the terms and conditions to which the award is subject, +including performance criteria and the level of achievement of the criteria that will determine the target and maximum amounts payable under an incentive bonus award, which criteria may be based on financial performance and/or personal +performance evaluations. Notwithstanding the satisfaction of any performance goals, the amount paid under an incentive bonus award on account of either financial performance or personal performance evaluations may be adjusted by the +administrator as set forth in the Plan. +Deferral of Gains +The administrator may, in an award agreement or otherwise, provide for the deferred delivery of shares upon +settlement, vesting or other events with respect to restricted stock or restricted stock units, or for the deferred payment or satisfaction of an incentive bonus. However, in no event will any deferral of the delivery of shares or any other +payment with respect to any award be allowed if the administrator determines, in its sole and absolute discretion that the deferral would result in the imposition of the additional tax under Section 409A of the Code. Notwithstanding the +foregoing and to the extent compliant with Section 409A of the Code, if the administrator permits any deferral of shares or any other payment as described above, payment of any vested award that a participant has elected to defer will be made +regardless of any deferral election within thirty (30) days of a change in control or the participant’s separation from service (including death). +Qualifying Performance Criteria +With respect to performance-based awards the administrator may establish performance criteria and level of +achievement of such criteria that will determine the number of shares to be granted, retained, vested, issued or issuable under or in settlement of or the amount payable pursuant to an award, which criteria may be based on “qualifying +performance criteria” (as described below) or other standards of financial performance and/or personal performance evaluations. +For purposes of the Plan, the term “qualifying performance criteria” means an objectively determinable +measure of performance relating to any one or more of the following performance criteria, or derivations of such performance criteria, either individually, alternatively or in any combination, applied to either the Company as a whole or to a +business unit, division, line or subsidiary, either individually, alternatively or in any combination, and measured either annually or cumulatively over a period of years, on an absolute basis or relative to a pre-established target, to +previous years’ results or to an index or indices or a designated comparison group or groups, in each case as specified by the administrator: (i) net earnings or earnings per share (including earnings before interest, taxes, depreciation and/or +amortization), (ii) income, net income or operating income, (iii) revenues, (iv) net sales, (v) return on sales, (vi) return on equity, (vii) return on capital (including return on total capital or return on invested capital), (viii) return on +assets or net assets, (ix) earnings per share, (x) economic or business value added measurements (xi) return on invested capital, (xii) return on operating revenue, (xiii) cash flow (before or after dividends), (xiv) stock price, (xv) total +shareholder return, (xvi) market capitalization, (xvii) economic value added, (xviii) debt leverage (debt to capital), (xix) operating profit or net operating profit, (xx) operating margin or profit margin, (xxi) cash from operations, +(xxii) market share, (xxiii) product development or release schedules, (xxiv) new product innovation, (xxv) cost reductions, (xxvi) customer acquisition or retention, (xxvii) customer service, (xxviii) customer satisfaction, or (xxix) other +performance criteria selected by the Administrator. +2023 PROXY STATEMENT +84 +TABLE OF CONTENTS +The administrator may adjust performance results for any recapitalization, reorganization, merger, +acquisition, divestiture, consolidation, spin-off, combination, liquidation, dissolution, sale of assets or other similar corporate transaction or event, or any other extraordinary event or circumstance occurs which has the effect, as +determined by the Administrator, in its sole and absolute discretion, of distorting the applicable performance criteria involving the Company. +Suspension or Termination of Awards +Unless otherwise determined by the administrator, (i) if the Company’s chief executive officer or any other +person designated by the administrator reasonably believes that a participant may have committed an act of misconduct (as defined in the Plan), then the participant’s rights to exercise any stock option, vest in any award and/or receive payment +for or shares in settlement of an award, may be suspended pending a determination of whether such misconduct has been committed, and (ii) if the administrator, the Company’s chief executive officer or any other person designated by the +administrator determines that a participant has committed an act of misconduct, then the participant (a) may not exercise any stock option or stock appreciation right, vest in any award, have restrictions on an award lapse or otherwise receive +payment of an award, (b) will forfeit all outstanding awards, and (c) may be required, at the discretion of the administrator, to return or repay to the Company any then unvested shares previously issued under the Plan. In addition, the +administrator may seek to recover awards made under the Plan and payments under or gain in respect of any award in accordance with the Company’s Policy for Recovery of Incentive Compensation or any successor or additional clawback or recoupment +policy or as otherwise required by applicable law or applicable stock exchange listing standards. +Settlement of Awards +Awards (other than stock awards), may be settled in shares, cash or a combination thereof, as determined by +the administrator. +No Repricing Without Shareholder Approval +Other than in connection with certain changes in the Company’s capitalization, the administrator may not, +without prior approval of the Company’s shareholders, effect any “repricing” of a previously granted stock option or stock appreciation right that is “underwater” (i.e., the fair market value of the shares underlying such award is less than the +exercise price of such award) by (i) amending or modifying the terms of the award to lower the exercise price; (ii) canceling the underwater award and granting either (a) replacement stock options or stock appreciation rights, as applicable, +having a lower exercise price or (b) restricted stock, restricted stock units, performance awards or stock awards in exchange; or (iii) cancelling or repurchasing the underwater award for cash or other securities. +Amendment and Termination +The Board of Directors may amend, alter or discontinue the Plan, and the administrator may amend or alter any +agreement or other document evidencing an award made under the Plan, except that, unless in connection with a change in the capitalization of the Company or a change in control, no such amendment or alteration may, without the approval of the +shareholders of the Company: (i) increase the maximum number of shares for which awards may be granted under the Plan, (ii) reduce the minimum price set forth in the Plan at which stock options or stock appreciation rights may be granted, +(iii) reduce the exercise price of outstanding stock options or stock appreciation rights, (iv) extend the term of the Plan, (v) change the class of persons eligible to be participants, (vi) otherwise amend the Plan in any manner requiring +shareholder approval by law or under the New York Stock Exchange listing requirements (or the listing requirements of any successor exchange that is the primary stock exchange for trading of the Company’s shares), or (vii) increase the +individual maximum limits set forth in the Plan. +Except as set forth in the Plan, no amendment or alteration to the Plan or an award or award agreement may +be made that would impair the rights of the holder of an award without such holder’s consent. In addition, the Plan may not be amended in any way that causes the Plan to fail to comply with or be exempt from Section 409A of the Code, unless the +Board of Directors expressly determines to amend the Plan to be subject to Section 409A of the Code. +The administrator may, in its sole and absolute discretion, modify the provisions of the Plan or an award as +they pertain to a participant who is employed or providing services outside the United States in order to comply with applicable foreign law or to recognize differences in local law, currency or tax policy. +2023 PROXY STATEMENT +85 +TABLE OF CONTENTS +Change in Control +Awards granted under the Plan that are subject to vesting based on continuous employment or service, to the +extent awards are assumed or substituted by an acquirer in the change in control (as defined in the Plan) awards shall not immediately vest upon the change in control and instead shall continue to vest in accordance with their terms, provided +that if a participant experiences a termination of employment (as defined in the Plan) by the Company without cause (as defined in the Plan) or by the participant for good reason (as defined in the Plan), in each case, within the twenty-four +(24) month period following the change in control, the awards shall immediately vest and become exercisable or shall be settled upon such qualifying termination. If, at any time during the vesting period of an award, a participant is or becomes +eligible to terminate his or her employment with the Company or its Subsidiaries due to retirement, the award shall immediately vest in full upon the change in control. +For awards granted under the Plan that are subject to performance conditions, if a change in control occurs +prior to the end date of a performance period, to the extent the performance award is outstanding immediately prior to such change in control, such award will vest (a) based on actual performance through the date of the change in control as +determined by the administrator (treating the change in control as the end of the applicable performance period) without proration for the time elapsed in such performance period prior to such change in control for purposes of determining +performance, but in the discretion of the administrator, prorated for purposes of elapsed time in a manner consistent with subsection (b) below, (b) assuming that target level of performance is attained and prorated based on the number of days +in the performance period that elapsed prior to the change in control over the total number of days in the performance period, or (c) a combination of (a) and (b) (without double counting). Any portion of the performance award (or the full +award as applicable) that does not vest in connection with a change in control as contemplated herein will automatically terminate upon such change in control. +Subject to and limited by the requirements of the preceding paragraphs, the administrator shall determine +the effect of a change in control (as defined in the Plan) on outstanding awards. These effects, which need not be the same for all participants, may include, but are not limited to (i) substituting for the shares subject to an outstanding +award or portion thereof the stock or securities of the surviving corporation or any successor corporation (or parent or subsidiary thereof), in which event the aggregate exercise price of the award will remain the same, and/or (ii) converting +any outstanding award or portion thereof into a right to receive cash or other property following the consummation of the change in control in an amount equal to the value of the consideration to be received for one share of the Company’s +common stock in connection with such transaction less the purchase or exercise price of the shares subject to the award, if any, multiplied by the number of shares subject to the award or portion thereof. +The administrator may determine that some or all participants holding vested and exercisable stock options +or stock appreciation rights will receive with respect to some or all of the shares subject to such awards cash in an amount equal to the excess of (i) the greater of (a) the highest sales price of the shares on the New York Stock Exchange (or +any successor exchange that is the primary stock exchange for trading of the Company’s shares) on the date immediately prior to the change in control and (b) the highest price per share actually paid in connection with the change in control, +over (ii) the exercise price of the award. +Adjustments +The number and kind of shares available for issuance under the Plan, and the number and kind of shares +subject to the individual and ISO limits set forth under the Plan, will be equitably adjusted by the administrator to reflect any reorganization, reclassification, combination of shares, stock split, reverse stock split, spin-off, dividend or +distribution of securities, property or cash (other than regular, quarterly cash dividends), or any other event or transaction that affects the number or kind of shares of the Company outstanding. The terms of any outstanding award will also be +equitably adjusted by the administrator as to price, number or kind of shares subject to such award and other terms to reflect the foregoing events, which adjustments need not be uniform as between different awards or different types of awards. +In the event there is a change in the number or kind of outstanding shares under the Plan as a result of a +change of control, other merger, consolidation or otherwise, then the administrator will determine the appropriate and equitable adjustment to be effected. In addition, in the event of such a change, the administrator may accelerate the time or +times at which any award may be exercised (subject to the limitations described above under the “Change in Control” heading) and may provide for cancellation of such accelerated awards that are not exercised within a time prescribed by the +administrator in its sole discretion. +Transferability +Unless the administrator determines otherwise, awards may not be sold, transferred, pledged, assigned, or +otherwise alienated or hypothecated by a participant other than by will or the laws of descent and distribution, and each stock option or stock appreciation right may be exercisable only by the participant during his or her lifetime. To the +extent permitted by the administrator, the person to whom an award is initially granted may transfer awards, in certain limited circumstances, to certain family members, family trusts, or family partnerships. +2023 PROXY STATEMENT +86 +TABLE OF CONTENTS +No Right to Company Employment +Nothing in the Plan or an award agreement will interfere with or limit in any way the right of the Company, +its subsidiaries and/or its affiliates to terminate any participant’s employment, service on the Board of Directors or service for the Company at any time or for any reason not prohibited by law, nor will the Plan or an award itself confer upon +any participant any right to continue his or her employment or service for any specified period of time. Neither an award nor any benefits arising under the Plan will constitute an employment contract with the Company, any subsidiary and/or its +affiliates. +Effective Date and Termination of the Plan +The Plan was adopted by the Board of Directors on February 8, 2023, subject to shareholder approval. The Plan +will remain available for the grant of awards until February 7, 2033, unless earlier terminated by the Board of Directors. If shareholders do not approve this proposal, the Company can continue to make awards under the Current Plan to the +extent of the number of shares authorized under the Current Plan as of immediately prior to the Amendment Date. Any award granted on or after the Amendment Date, to the extent that the number of shares subject to such award, or portions +thereof, exceeds the number of shares authorized under the Current Plan as of the Amendment Date, shall be void as determined by the Administrator if shareholder approval of the Plan is not obtained. +Federal Income Tax Treatment +The following discussion is a general summary as of the date of this Proxy Statement of the significant U.S. +federal income tax consequences to the Company and the participants in the Plan. The discussion is intended solely for general information and does not make specific representations to any participant. The discussion does not address state, +local or foreign income tax rules or other U.S. tax provisions, such as estate or gift taxes. A recipient’s particular situation may be such that some variation of the basic rules is applicable to him or her. In addition, the federal income tax +laws and regulations are frequently revised and may change at any time. Therefore, each recipient is urged to consult a tax advisor before exercising any award or before disposing of any shares acquired under the Plan both with respect to +federal income tax consequences as well as any foreign, state or local tax consequences. The Company does not anticipate that awards granted under the Plan will qualify as performance-based compensation under Section 162(m) of the Code. +Stock Options +ISOs and NQSOs are treated differently for federal income tax purposes. ISOs are intended to comply with the +requirements of Section 422 of the Code. NQSOs do not comply with such requirements. +In general, a participant is not taxed on the grant or exercise of an ISO. The difference between the +exercise price and the fair market value of the shares on the exercise date may, however, be a preference item for purposes of the alternative minimum tax. If a participant holds the shares acquired upon exercise of an ISO until the later of +two years following the stock option grant date and one year following exercise, the gain, if any, upon a subsequent disposition of such shares will be long-term capital gain. The amount of the gain will be the difference between the proceeds +received on disposition and the participant’s basis in the shares (which generally equals the exercise price). If a participant disposes of stock acquired pursuant to exercise of an ISO before satisfying these holding periods, the participant +will recognize as ordinary income in the year of disposition an amount equal to the excess of the fair market value of the shares at the time of exercise (or, if less, the amount realized on the disposition of the shares), over the exercise +price paid for the shares, and capital gain or loss for any other difference between the sale price and the exercise price. The Company is not entitled to an income tax deduction on the grant or exercise of an ISO or on the participant’s +disposition of the shares after satisfying the holding period requirement described above. If the holding periods are not satisfied, the Company generally will be entitled to a deduction in the year the participant disposes of the shares in an +amount equal to the ordinary income recognized by the participant. +The Company does not guarantee that any option intended to be an ISO will qualify for the tax treatment of +ISOs described above. If an option intended to be an ISO fails to so qualify, it will be taxed as an NQSO, as described below. +In general, a participant is not taxed on the grant of an NQSO. On exercise, the participant recognizes +ordinary income equal to the difference between the exercise price and the fair market value of the shares acquired on the date of exercise. The Company is generally entitled to an income tax deduction in the year of exercise in the amount +recognized by the participant as ordinary income. The participant’s gain (or loss) on subsequent disposition of the shares is long-term capital gain (or loss) if the shares are held for at least one year following exercise, and otherwise is +short-term capital gain (or loss). The Company does not receive a deduction for any such capital gain. +2023 PROXY STATEMENT +87 +TABLE OF CONTENTS +Stock Appreciation Rights +In general, the recipient of a freestanding SAR will not recognize any taxable income at the time the +freestanding SAR is granted. If the freestanding SAR is settled in cash, the cash will be taxable as ordinary income to the recipient at the time that it is received. If the freestanding SAR is settled in shares, the recipient will recognize +ordinary income equal to the excess of the fair market value of the shares on the day the freestanding SAR is exercised over any amounts paid by the recipient for the shares. +With respect to tandem SARs, if a holder elects to surrender the underlying stock option in exchange for +cash or stock equal to the appreciation inherent in the underlying stock option, the tax consequences to the employee will be the same as discussed above relating to freestanding SARs. If the employee elects to exercise the underlying stock +option, the holder will be taxed at the time of exercise as if he or she had exercised an NQSO (discussed above). +The Company generally is entitled to a deduction with respect to a SAR at the same time the recipient +recognizes ordinary income with respect thereto. +Restricted Stock and Restricted Stock +Units +A participant who is awarded or purchases shares subject to a substantial risk of forfeiture, or restricted +stock, generally does not recognize income at the time of the grant. When the risk of forfeiture lapses, the participant generally recognizes ordinary income in an amount equal to the excess of the fair market value of the shares over the +purchase price, if any, and a deduction is generally available to the Company in the same year that the participant recognizes income. However, a participant may make an election under Section 83(b) of the Code to recognize taxable ordinary +income at the time the shares are transferred to the participant, rather than later, when the risk of forfeiture lapses, in an amount equal to the fair market value of the shares at the time of such transfer. Such election must be made no later +than 30 days after the date the shares are transferred to the participant. If the participant makes a timely and effective election, when the restrictions on the shares lapse, the participant will not recognize any additional income. For +purposes of determining capital gain or loss on a sale of shares acquired under a restricted stock award under the Plan, the holding period in the shares begins when the participant recognizes taxable income with respect to the transfer. The +participant’s tax basis in the shares equals the amount paid for the shares plus any income realized with respect to the transfer. If the participant forfeits the shares to the Company (e.g., upon the participant’s termination prior to +vesting), the participant may not claim a deduction with respect to the income recognized as a result of the election. Dividends (if any) paid with respect to unvested shares of restricted stock generally will be taxable as ordinary income to +the participant at the time the dividends are paid, if an effective 83(b) election was not made with respect to the shares. +A participant who is awarded restricted stock units generally does not recognize income at the time of +grant. Instead, the participant is generally taxed upon settlement of the award (and a corresponding deduction is generally available to the Company), unless he or she has made a proper election to defer receipt of the shares (or cash if the +award is cash settled) under Section 409A of the Code. (FICA taxes will apply upon the vesting of the restricted stock unit award.) If the shares delivered are restricted for tax purposes, the participant will instead be subject to the rules +described above for restricted stock. +Stock Awards +A participant who receives a stock award generally is required to recognize ordinary income in an amount +equal to the excess of the fair market value of the shares on the date the shares are granted over the purchase price (if any) paid for the shares. The Company generally will be entitled to a deduction with respect to stock awards at the same +time the recipient recognizes ordinary income with respect thereto. +Incentive Bonuses +A participant will have taxable income at the time an incentive bonus is paid. At that time, the participant +will recognize ordinary income equal to the value of the amount then payable and, the Company generally will be entitled to a corresponding deduction. +Certain Change in Control Payments +Under Section 280G of the Code, the vesting or accelerated exercisability of stock options or the vesting and +payments of other awards in connection with a change in control of a corporation may be required to be valued and taken into account in determining whether participants have received compensatory payments, contingent on the change in control, +in excess of certain limits. If these limits are exceeded, a substantial portion of amounts payable to the participant, including income recognized by reason of the grant, vesting or exercise of awards, may be subject to an additional 20% +federal tax, which is non-deductible to the Company. +2023 PROXY STATEMENT +88 +TABLE OF CONTENTS +Plan Benefits +The benefits that will be awarded or paid under the Plan are not currently determinable. Awards granted under +the Plan are within the discretion of the Compensation Committee. No awards made under the Plan prior to the date of the Annual Meeting were granted subject to shareholder approval. The following table sets forth the number of PSUs (at target), +restricted stock units, restricted stock awards and stock options that have been granted to the named executive officers and the specified groups set forth below since the Plan’s inception: +Grants Under Plan +Name +PSUs +Stock Options +RSUs/RSAs +Brendan Hoffman +President and CEO, Wolverine Worldwide +321,607 +— +158,466 +Chris Hufnagel +President, Active Group +62,993 +32,294 +56,421 +Isabel Soriano +President, International Group +37,651 +— +34,976 +Michael D. Stornant +EVP, CFO, Treasurer and Chief +Accounting Officer +135,491 +70,948 +94,273 +James D. Zwiers +EVP and President, Global Operations Group +123,866 +64,465 +85,920 +All executive officers as a group +681,608 +167,707 +430,056 +All non-employee directors and director nominees as a group +753,713 +115,431 +701,796 +Each associate of the above-mentioned executive officers, directors and director nominees +— +— +— +Each other person who received or is to receive 5% of such options, warrants or rights +— +— +— +All employees as a group, excluding executive officers +567,109 +440,010 +2,032,412 +Registration with the SEC +The Company intends to file with the SEC a registration statement on Form S-8 covering the new shares +reserved for issuance under the Plan in the second quarter of 2023. +Equity Compensation Plan Information +The following table provides information about the Company’s equity compensation plans as of December 31, +2022 (and does not include the 6.1 million shares of common stock that are the subject of this Proposal 5): +Plan Category 1 +Number of Securities to be +Issued Upon Exercise of +Outstanding Options, +Warrants and Rights +(a) +Weighted Average +Exercise Price of +Outstanding Options, +Warrants, and Rights +(b) +Number of Securities +Remaining Available for +Future Issuance under +Equity Compensation +Plans (Excluding +Securities Reflected in +Column (a)) +(c) +Equity compensation plans approved by security holders +2,333,410 2,3 +$22.43 +5,648,310 4 +Equity compensation plans not approved by security holders +— +— +— +Total +2,333,410 +$22.43 +5,648,310 +1. +Each plan for which aggregated information is provided contains customary anti-dilution provisions that are +applicable in the event of a stock split, stock dividend or certain other changes in the Company’s capitalization. +2. +Includes: (i) 2,086,864 stock options awarded to employees under the Amended and Restated Stock Incentive Plan of +1999, the Amended and Restated Stock Incentive Plan of 2001, the Amended and Restated Stock Incentive Plan of 2003, the Amended and Restated Stock Incentive Plan of 2005, the Stock Incentive Plan of 2010, the Stock Incentive Plan of +2013 and the Stock Incentive Plan of 2016, as amended and restated (Current Plan); (ii) and 246,546 stock options awarded to non-employee directors under the Amended and Restated Stock Incentive Plan of 2005, the Stock Incentive Plan +of 2010, the Stock Incentive Plan of 2013 and the Stock Incentive Plan of 2016 (Current Plan). Column (a) does not include stock units credited to outside directors’ fee accounts or retirement accounts under the Outside Directors’ +Deferred Compensation Plan. Stock units do not have an exercise price. Each stock unit credited to a director’s fee account and retirement account under the Outside Directors’ Deferred Compensation Plan will be converted into one +share of common stock upon distribution. Column (a) also does not include shares of restricted or unrestricted common stock previously issued under the Company’s equity compensation plans. +3. +Of this amount, 36,909 options were not exercisable as of December 31, 2022 due to vesting restrictions. +4. +Comprised of: (i) 104,499 shares available for issuance under the Outside Directors’ Deferred Compensation Plan upon +the retirement of the current directors or upon a change in control; and (ii) 5,543,811 shares issuable under the Stock Incentive Plan of 2016. +2023 PROXY STATEMENT +89 +TABLE OF CONTENTS +The Outside Directors’ Deferred Compensation Plan is a supplemental, unfunded, nonqualified deferred +compensation plan for non-employee directors. Beginning in 2006, the Company began paying an annual equity retainer to non-management directors in the form of a contribution under the Outside Directors’ Deferred Compensation Plan. +Non-management directors may also voluntarily elect to receive, in lieu of some or all directors’ fees, a number of stock units equal to the amount of the deferred directors’ fees divided by the fair market value of the Company’s common stock +on the date of payment. These stock units are increased by a dividend equivalent based on dividends paid by the Company and the amount of stock units credited to the participating director’s fee account and retirement account. Upon +distribution, the participating directors receive a number of shares of the Company’s common stock equal to the number of stock units to be distributed at that time. Distribution is triggered by termination of service as a director or by a +change in control of the Company and can occur in a lump sum, in installments or on another deferred basis. A total of 309,164 shares have been issued to a trust to satisfy the Company’s obligations and are included in shares the Company +reports as issued and outstanding. +The Stock Incentive Plan of 2016, as previously amended and restated, was most recently approved by Company +shareholders at the 2018 annual meeting and at the 2021 annual meeting and is the subject of this Proposal 5. +Of the total number of shares available under column (c), the number of shares with respect to the following +plans may be issued other than upon the exercise of an option, warrant or right outstanding as of December 31, 2022: +Outside Directors’ Deferred Compensation Plan: 104,499 +Current Plan: 2,132,235 +VOTE REQUIRED AND BOARD RECOMMENDATION +Approval of the Wolverine World Wide, Inc. Stock Incentive Plan of 2016, as amended and restated, requires +the affirmative vote of a majority of votes cast affirmatively or negatively on the matter for approval. +BOARD RECOMMENDATION +The Board recommends that you vote “FOR” approval of the Stock Incentive Plan of 2016, as +Amended and Restated. +2023 PROXY STATEMENT +90 +TABLE OF CONTENTS +Related Party Matters +CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS +Since January 2, 2022, the Company has not engaged in any “related person” transactions with any person who +is or was during the last fiscal year a director, executive officer, nominee for director or holder of 5% or more of Company voting securities, affiliate or any member of the immediate family of the foregoing persons. +RELATED PERSON TRANSACTIONS POLICY +Wolverine Worldwide's Board adopted written policies and procedures regarding related person transactions. +They require the Governance Committee to review and either approve or disapprove the Company entering into any Interested Transactions (defined below). If advance approval is not feasible, then the Governance Committee must review and ratify +the Interested Transaction at its next meeting. +Interested Transaction +Any transaction, arrangement or relationship or series of similar transactions, arrangements or +relationships (including any indebtedness or guarantee of indebtedness) in which: +(1) +The aggregate amount involved is or is expected to exceed $120,000 since the beginning of Wolverine +Worldwide's last completed fiscal year; +(2) +Wolverine Worldwide is a participant; and +(3) +Any Related Person (defined below) has or will have a direct or indirect interest. +An Interested Transaction does not include: +(1) +Any employment compensation paid to an executive officer of the Company if the Compensation Committee +approved or recommended to the Board of Directors for approval of such compensation; +(2) +Any compensation paid to a director for service as a director of the Company; +(3) +Any transaction in which a Related Person has an indirect interest solely as a result of being (i) a +director or, together with all other Related Persons, as defined below, a less than 10% beneficial owner of an equity interest in another entity, or both, or (ii) a limited partner in a partnership in which the Related Person, together +with all other Related Persons, has an interest of less than 10%; +(4) +Any transaction in which the Related Person's interest arises solely from the ownership of the Company's +common stock and all holders of the Company's common stock received the same benefit on a pro rata basis (e.g., a dividend); or +(5) +Any transaction with another publicly traded company where the Related Person's interest arises solely +from the ownership of more than 5% of the Company's common stock and the ownership of a non-controlling interest in the other publicly traded company. +Related Person +Any: +(a) +Person who is or was at any point during the last fiscal year for which Wolverine Worldwide filed an +Annual Report on Form 10-K and Proxy Statement, an executive officer, director or, to the extent information regarding such nominee is being presented in a proxy or information statement relating to the election of that nominee as a +director, nominee for election as a director; +(b) +Beneficial owner of greater than five percent of Wolverine Worldwide's common stock; or +(c) +Immediate family member* of any of the foregoing. +* +Immediate family member is defined as a person's spouse, parents, stepparents, children, stepchildren, siblings, +mothers and fathers-in-law, sons- and daughters-in-law, and brothers- and sisters-in-law, and anyone residing in such person's home (other than a tenant or employee). +The Governance Committee considers whether the Interested Transaction is on terms no less favorable than +terms generally available to an unaffiliated third party under the same or similar circumstances, the extent of the Related Person's interest in the transaction, and other factors that it deems relevant. No director participates in any +discussion or approval of an Interested Transaction for which he or she is a Related Person, except to provide information to the Governance Committee. +2023 PROXY STATEMENT +91 +TABLE OF CONTENTS +Additional Information +SHAREHOLDERS LIST +For information about how to view the list of shareholders entitled to vote at the Annual Meeting during the +ten days preceding the Annual Meeting, please visit our 2023 Annual Meeting website at www.wolverineworldwide.com/2023annualmeeting. +DIRECTOR AND OFFICER INDEMNIFICATION +The Company indemnifies its directors and NEOs to the fullest extent permitted by law so that they will be +free from undue concern about personal liability in connection with their service to the Company. +SHAREHOLDER PROPOSALS FOR INCLUSION IN NEXT YEAR'S PROXY +STATEMENT +Pursuant to SEC Rule 14a-8, some shareholder proposals may be eligible for inclusion in Wolverine Worldwide's +2024 Proxy Statement and proxy card. Any such shareholder proposals must be submitted in writing to the Secretary of Wolverine Worldwide no later than the close of business on November 23, 2023. You should address all shareholder proposals to +the attention of Secretary, Wolverine World Wide, Inc., 9341 Courtland Drive, NE, Rockford, Michigan 49351. +OTHER SHAREHOLDER PROPOSALS FOR PRESENTATION AT NEXT YEAR'S +ANNUAL MEETING +The Company's By-Laws require that any shareholder proposal that is not submitted for inclusion in next +year's Proxy Statement under SEC Rule 14a-8, but is instead sought to be presented directly at the 2024 Annual Meeting of Shareholders, must be received at the Company's principal executive offices by the close of business not less than 90 days +nor more than 120 days prior to the first anniversary of the 2023 Annual Meeting. As a result, proposals, including director nominations submitted pursuant to these provisions of the By-Laws, must provide the information set forth in the +By-Laws (which includes information required under Rule 14a-19) and be received no earlier than January 4, 2024 and no later than the close of business on February 3, 2024. You should address a proposal to Secretary, Wolverine World Wide, Inc., +9341 Courtland Drive, NE, Rockford, Michigan 49351, and include the information and comply with the requirements set forth in those By-Laws, which the Company has posted on its website. SEC rules permit management to vote proxies in its +discretion in certain cases if the shareholder does not comply with this deadline, and in certain other cases notwithstanding the shareholder's compliance with this deadline. +VOTING SECURITIES +Shareholders of record at the close of business on March 6, 2023, are eligible to vote at the Annual Meeting. +The Company's voting securities consist of its $1.00 par value common stock, and there were 79,421,316 shares outstanding and entitled to vote on the record date. Each share outstanding on the record date will be entitled to one vote on each +director nominee and one vote on each other matter. Treasury shares are not voted. Individual votes of shareholders are kept private, except as appropriate to meet legal requirements. Access to proxies and other individual shareholder voting +records is limited to the independent inspectors of election and certain employees of the Company and its agents who acknowledge their responsibility to comply with this policy of confidentiality. +CONDUCT OF BUSINESS +A majority of the outstanding shares of common stock as of the record date must be present at the Annual +Meeting in order to hold the Annual Meeting and conduct business. This is called a “quorum.” Your shares are counted as present at the meeting if you are present at the Annual Meeting and vote, a proxy card has been properly submitted by you or +on your behalf, or you have submitted your proxy by telephone or by internet, or by completing, signing, dating and returning your proxy form in the enclosed envelope. Both abstentions and broker non-votes (explained below in “ Vote Required for Election and Approval ”) are counted as present for the purpose of determining the presence of a quorum. +2023 PROXY STATEMENT +92 +TABLE OF CONTENTS +VOTE REQUIRED FOR ELECTION AND APPROVAL +For Proposal 1, Election of Directors for Terms Expiring in 2026, directors are elected by a majority of +votes cast unless the election is contested, in which case directors are elected by a plurality of votes cast. A majority of votes cast means that the number of shares voted “for” a Director nominee exceeds the number of votes cast “against” +the Director nominee. If an incumbent director in an uncontested election does not receive a majority of votes cast for his or her election, under the Company's Corporate Governance Guidelines, the director is required to submit a letter of +resignation to the Board for consideration by the Governance Committee. The Governance Committee will then make a recommendation to the Board as to whether to accept or reject the tendered resignation. The Governance Committee and the Board, in +making their decisions, may implement any procedures they deem appropriate and may consider any factor or other information that they deem relevant. The Board will then act on the tendered resignation, taking into account the Governance +Committee's recommendation, and will publicly disclose its decision regarding the resignation within 90 days after the results of the election are certified. A director whose resignation is under consideration shall abstain from participating +in any recommendation or decision regarding that resignation. If the resignation is not accepted, the director will continue to serve until the next annual meeting of shareholders at which such director faces re-election and until such +director's successor is elected and qualified. +Proposal 2, Advisory Vote to Approve Executive Compensation, requires the affirmative vote of a majority of +votes cast affirmatively or negatively on the matter for approval. +Proposal 3, Advisory Vote on the Frequency of Future Advisory Votes to Approve Executive Compensation, +requires the affirmative vote of a majority of votes cast affirmatively or negatively on the matter for approval. +Proposal 4, Ratification of Appointment of Independent Registered Public Accounting Firm, requires the +affirmative vote of a majority of votes cast affirmatively or negatively on the matter for approval. +Proposal 5, Approval of the Stock Incentive Plan of 2016 (as amended and restated), requires the affirmative +vote of a majority of votes cast affirmatively or negatively on the matter for approval. +Generally, brokers holding shares must vote according to specific instructions they receive from the +beneficial owners of those shares. If brokers do not receive specific instructions, brokers may in some cases vote the shares in their discretion, but are not permitted to vote on certain proposals and may elect not to vote on any of the +proposals unless you provide voting instructions. If you do not provide voting instructions and the broker elects to vote your shares on some but not all matters, it will result in a “broker non-vote” for the matters on which the broker does +not vote. Abstentions occur when you provide voting instructions but instruct the broker to abstain from voting on a particular matter instead of voting for or against the matter. +Abstentions and broker non-votes are not considered “votes cast.” Abstentions and broker non-votes, if any, +will have no effect on the outcome of the election of directors and will have no effect on the outcome of any other matters proposed for a vote at the Annual Meeting. +VOTING RESULTS OF THE ANNUAL MEETING +The Company will announce preliminary voting results at the Annual Meeting and publish final results in a +Form 8-K within four business days following the Annual Meeting. If final results are not known within four business days of the Annual Meeting, then the Company will file a Current Report on Form 8-K with the preliminary results and file an +amended Current Report on Form 8-K within four business days of the availability of the final results. +ATTENDING THE ANNUAL MEETING +You may vote shares held directly in your name as the shareholder of record at the Annual Meeting. If you +choose to vote at the meeting, please access instructions as set forth in the Notice of annual meeting. Even if you plan to attend the Annual Meeting, Wolverine Worldwide recommends that you vote your shares in advance as described below so +that your vote will be counted if you later decide not to attend the Annual Meeting. You may vote shares held in “street name” through a brokerage account or by a bank or other nominee if you obtain a proxy from the record holder giving you the +right to vote the shares. Each shareholder may appoint only one proxy holder or representative to attend the meeting on his or her behalf. +2023 PROXY STATEMENT +93 +TABLE OF CONTENTS +MANNER FOR VOTING PROXIES +The shares represented by all valid proxies received by telephone, by internet or by mail will be voted in +the manner specified. Where the shareholder has not indicated a specific choice, the shares represented by all valid proxies received will be voted in accordance with the Board's recommendations as follows: (1) for each of the nominees for +directors named earlier in this Proxy Statement, (2) for approval of the advisory resolution to approve executive compensation, (3) for one year frequency of advisory votes to approve executive compensation, (4) for ratification of the +appointment of the independent registered public accounting firm and (5) for the approval of the Stock Incentive Plan of 2016 (as amended and restated). The Board has not received timely notice of any other matter that may come before the +Annual Meeting. However, should any matter not described above be properly presented at the Annual Meeting, the persons named in the proxy form will vote in accordance with their judgment, as permitted. +REVOCATION OF PROXIES +A shareholder who gives a proxy may revoke it at any time before it is exercised by voting at the Annual +Meeting in the manner described in the Notice of 2023 Annual Meeting of Shareholders, by delivering a subsequent proxy or by notifying the inspectors of election in writing of such revocation. +SOLICITATION OF PROXIES +The accompanying proxy is solicited by and on behalf of the Board, and the Company will pay the expenses of +solicitation of proxies for the Annual Meeting. Solicitations may be made in person or by telephone, by officers and employees of the Company, or by nominees or other fiduciaries who may mail materials to or otherwise communicate with the +beneficial owners of shares held by the nominees or other fiduciaries. These individuals will not be paid any additional compensation for any such solicitation. Upon request, the Company will reimburse brokers, dealers, banks and trustees, or +their nominees, for reasonable expenses incurred by them in forwarding material to beneficial owners of the Company's common stock. +DELIVERY OF DOCUMENTS TO SHAREHOLDERS SHARING AN ADDRESS +If you are the beneficial owner, but not the record holder, of shares of Wolverine Worldwide stock, your +broker, bank or other nominee may only deliver one copy of this Proxy Statement and the Company's 2022 Annual Report to multiple shareholders who share an address, unless that nominee has received contrary instructions from one or more of the +shareholders. The Company will deliver promptly, upon written or oral request, a separate copy of this Proxy Statement and its 2022 Annual Report to a shareholder at a shared address to which a single copy of the documents was delivered. A +shareholder who wishes to receive a separate copy of the Proxy Statement and annual report, now or in the future, or shareholders who share an address and receive multiple copies of the Proxy Statement and annual report but would like to +receive a single copy, should submit this request to Broadridge Financial Solutions, Inc. at 1-866-540-7095 or in writing at Broadridge, Householding Department, 51 Mercedes Way, Edgewood, New York 11717. Beneficial owners sharing an address +who are receiving multiple copies of proxy materials and who wish to receive a single copy of such materials in the future should make a request directly to their broker, bank or other nominee. +ACCESS TO PROXY STATEMENT AND ANNUAL REPORT +Distribution of this Proxy Statement and enclosed proxy card to shareholders is scheduled to begin on or +about March 22, 2023. Wolverine Worldwide's financial statements for the fiscal year ended December 31, 2022, are included in the Company's 2022 Annual Report, which the Company is providing to shareholders at the same time as this Proxy +Statement. Wolverine Worldwide's Proxy Statement for the 2023 Annual Meeting and the Annual Report to Shareholders for the fiscal year ended December 31, 2022 are available at www.wolverineworldwide.com/2023annualmeeting . +If you have not received or do not have access to the 2022 Annual Report, write to: Wolverine World Wide, Inc., 9341 Courtland Drive, NE, Rockford, Michigan 49351, Attn: Investor Relations or call (616) 866-5500 and ask for Investor +Relations, and the Company will send a copy to you without charge. +2023 PROXY STATEMENT +94 +TABLE OF CONTENTS +APPENDIX A +APPENDIX A – Forward-Looking +Statements and Non-GAAP Reconciliation Tables +2023 PROXY STATEMENT +A-1 +TABLE OF CONTENTS +APPENDIX A +FORWARD-LOOKING STATEMENTS +This document contains “forward-looking statements,” which are statements relating to future, not past, +events. In this context, forward-looking statements often address management’s current beliefs, assumptions, expectations, estimates and projections about future business and financial performance, national, regional or global political, +economic and market conditions, and the Company itself. Such statements often contain words such as “anticipates,” “believes,” “estimates,” “expects,” “forecasts,” “intends,” “is likely,” “plans,” “predicts,” “projects,” “should,” “will,” +variations of such words, and similar expressions. Forward-looking statements, by their nature, address matters that are, to varying degrees, uncertain. Uncertainties that could cause the Company’s performance to differ materially from what is +expressed in forward-looking statements include, but are not limited to, the following: +• +changes in general economic conditions, employment rates, business conditions, interest rates, tax policies and other factors affecting consumer +spending in the markets and regions in which the Company’s products are sold; +• +the inability for any reason to effectively compete in global footwear, apparel and direct-to-consumer markets; +• +the inability to maintain positive brand images and anticipate, understand and respond to changing footwear and apparel trends and consumer +preferences; +• +the inability to effectively manage inventory levels; +• +increases or changes in duties, tariffs, quotas or applicable assessments in countries of import and export; +• +foreign currency exchange rate fluctuations; +• +currency restrictions; +• +supply chain and capacity constraints, production disruptions, including reduction in operating hours, labor shortages, and facility closures +resulting in production delays at the Company’s manufacturers due to disruption from the effects of the COVID-19 pandemic, quality issues, price increases or other risks associated with foreign sourcing; +• +the cost, including the effect of inflationary pressures and availability of raw materials, inventories, services and labor for contract +manufacturers; +• +labor disruptions; +• +changes in relationships with, including the loss of, significant wholesale customers; +• +risks related to the significant investment in, and performance of, the Company’s direct-to-consumer operations; +• +risks related to expansion into new markets and complementary product categories as well as direct-to-consumer operations; +• +the impact of seasonality and unpredictable weather conditions; +• +the impact of changes in general economic conditions and/or the credit markets on the Company’s manufacturers, distributors, suppliers, joint venture +partners and wholesale customers; +• +changes in the Company’s effective tax rates; +• +failure of licensees or distributors to meet planned annual sales goals or to make timely payments to the Company; +• +the risks of doing business in developing countries and politically or economically volatile areas; +• +the ability to secure and protect owned intellectual property or use licensed intellectual property; +2023 PROXY STATEMENT +A-2 +TABLE OF CONTENTS +APPENDIX A +• +the impact of regulation, regulatory and legal proceedings and legal compliance risks, including compliance with federal, state and local laws and +regulations relating to the protection of the environment, environmental remediation and other related costs, and litigation or other legal proceedings relating to the protection of the environment or environmental effects on human +health; +• +risks of breach of the Company’s databases or other systems, or those of its vendors, which contain certain personal information, payment card data or +proprietary information, due to cyberattack or other similar events; +• +problems affecting the Company's supply chain and distribution system, including service interruptions at shipping and receiving ports; +• +strategic actions, including new initiatives and ventures, acquisitions and dispositions, and the Company’s success in integrating acquired +businesses, including Sweaty Betty ® , and implementing new initiatives and ventures; +• +risks related to stockholder activism; +• +the potential effects of the COVID-19 pandemic or future health crises on the Company’s business, operations, financial results and liquidity; +• +the risk of impairment to goodwill and other intangibles; +• +the success of the Company’s restructuring and realignment initiatives undertaken from time to time; and +• +changes in future pension funding requirements and pension expenses. +These or other uncertainties could cause a material difference between an actual outcome and a +forward-looking statement. The uncertainties included here are not exhaustive and are described in more detail in Part I, Item 1A: “Risk Factors” of our Annual Report on Form 10-K. Given these risks and uncertainties, investors should not place +undue reliance on forward-looking statements as a prediction of actual results. The Company does not undertake an obligation to update, amend or clarify forward-looking statements, whether as a result of new information, future events or +otherwise. Any standards of measurement and performance made in reference to our environmental, social, governance and other sustainability plans and goals are developing and based on assumptions, and no assurance can be given that any such +plan, initiative, projection, goal, commitment, expectation or prospect can or will be achieved. Website references throughout this document are provided for convenience only, and the content on the referenced websites is not incorporated by +reference into this document. +2023 PROXY STATEMENT +A-3 +TABLE OF CONTENTS +APPENDIX A +NON-GAAP RECONCILIATION TABLES +The following tables contain information regarding the non-GAAP adjustments used by the Company in the +presentation of its financial results: +RECONCILIATION OF REPORTED REVENUE +TO ADJUSTED REVENUE ON A CONSTANT CURRENCY BASIS* +(Unaudited) +(In millions) +GAAP Basis +2022 +Foreign +Exchange +Impact +Constant +Currency +Basis 2022 +GAAP Basis +2021 +Constant +Currency Growth +Reported +Growth +Revenue +$2,684.8 +$70.0 +$2,754.8 +$2,414.9 +14.1% +11.2% +RECONCILIATION OF REPORTED EARNINGS (LOSS) BEFORE INCOME TAXES +TO ADJUSTED EARNINGS (LOSS) BEFORE INCOME TAXES* +(Unaudited) +(In millions) +GAAP Basis +Adjustments (1) +As Adjusted +Earnings (loss) before income taxes - Fiscal 2022 +$(252.9) +$386.0 +$133.1 +Earnings (loss) before income taxes - Fiscal 2021 +$ 80.3 +$111.2 +$191.5 +Earnings (loss) before income taxes - Fiscal 2020 +$ (184.1 ) +$276.5 +$ 92.4 +1. +2022 adjustments reflect $428.7 million for a non-cash impairment of the Sperry® trade name and the Sweaty Betty® +trade name and goodwill, $9.1 million for reorganization costs, $33.7 million of environmental and other related costs net of recoveries, $3.7 million of costs associated with Sweaty Betty® integration and $0.8 million of receivables +securitization transaction costs, partially offset by $90.0 gain on the sale of the Champion trademarks. 2021 adjustments reflect $56.4 million of environmental and other related costs net of recoveries, $34.3 million of debt +extinguishment costs, $18.7 million of costs associated with the acquisition of Sweaty Betty® and $1.8 million for non-cash impairment related to one of the Company's joint ventures. 2020 adjustments reflect $222.2 million for a +non-cash impairment of the Sperry® trade name, $37.7 million of expenses related to the COVID-19 pandemic including $10.9 million of severance expenses, $8.5 million of credit loss expenses, $4.9 million of inventory charges, +$3.9 million of air freight charges related to production delays, $3.6 million of facility exit costs and $5.9 million of other costs, $5.5 million of debt extinguishment costs and $11.1 million of environmental and other related +costs net of recoveries. +To supplement the consolidated condensed financial statements presented in accordance with Generally +Accepted Accounting Principles (“GAAP”), the Company describes what certain financial measures would have been if, environmental and other related costs net of recoveries, non-cash impairment of the Sperry® +trade name and the Sweaty Betty® trade name and goodwill, Sweaty Betty® integration costs, reorganization costs, receivable securitization transaction costs, Sweaty Betty® acquisition costs, debt extinguishment costs, non-cash impairment related to one of the Company's joint ventures, gain on the sale of the Champion +trademark and costs related to the COVID-19 pandemic including air freight costs, credit loss expenses, severance expenses and other related costs were excluded. The Company believes these non-GAAP measures provide useful information to both +management and investors by increasing comparability to the prior period by adjusting for certain items that may not be indicative of core operating measures and to better identify trends in the Company's business. The adjusted financial +results are used by management to, and allow investors to, evaluate the operating performance of the Company on a comparable basis. +The constant currency presentation, which is a non-GAAP measure, excludes the impact of fluctuations in +foreign currency exchange rates. The Company believes providing constant currency information provides valuable supplemental information regarding results of operations, consistent with how the Company evaluates performance. The Company +calculates constant currency by converting the current-period local currency financial results using the prior period exchange rates and comparing these adjusted amounts to the Company's current period reported results. +Management does not, nor should investors, consider such non-GAAP financial measures in isolation from, or +as a substitution for, financial information prepared in accordance with GAAP. A reconciliation of all non-GAAP measures included in this Proxy Statement, to the most directly comparable GAAP measures are found in the financial tables above. +2023 PROXY STATEMENT +A-4 +TABLE OF CONTENTS +APPENDIX B +APPENDIX B +WOLVERINE WORLD WIDE, INC. STOCK INCENTIVE PLAN OF 2016 (AS AMENDED AND RESTATED AS OF FEBRUARY +8, 2023) +1. Purpose +The purpose of the Wolverine World Wide, Inc. Stock Incentive Plan of 2016 (as amended and restated as of +February 8, 2023 (the “Third Amendment Date”) and as it may be further amended or amended and restated from time to time, the “Plan”) is to advance the interests of Wolverine World Wide, Inc. (the “Company”) by stimulating the efforts of +employees, officers, non-employee directors and other service providers, in each case who are selected to be participants, by heightening the desire of such persons to continue working toward and contributing to the success and progress of the +Company. The Plan supersedes the Company's Stock Incentive Plan of 2010 and the Company's Amended and Restated Stock Incentive Plan of 2013 (the “Prior Plans”) with respect to future awards, and provides for the grant of Incentive and +Nonqualified Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units and Stock Awards, any of which may be performance-based, and for Incentive Bonuses, which may be paid in cash or stock or a combination thereof, as +determined by the Administrator. No new awards shall be issued under the Prior Plans after April 21, 2016 (the date the Plan was initially approved by the Company's stockholders). The Plan was previously amended and restated on February 7, 2018 +(the “First Amendment Date”) and February 9, 2021 (the “Second Amendment Date”). +2. Definitions +As used in the Plan, the following terms shall have the meanings set forth below: +(a) +“Act” means the Securities Exchange Act of 1934, as amended from time to time and in effect, or any successor statute as from time to time. +(b) +“Act of Misconduct” means an act of embezzlement, fraud, dishonesty, nonpayment of any obligation owed to the Company or any Subsidiary, breach of +fiduciary duty, or deliberate disregard of the Company or Subsidiary rules resulting in loss, damage or injury to the Company or any Subsidiary, or if a Participant makes an unauthorized disclosure of any Company or Subsidiary trade +secret or confidential information, solicits any employee or service provider to leave the employ or cease providing services to the Company or any Subsidiary, breaches any intellectual property or assignment of inventions covenant, +engages in any conduct constituting unfair competition, breaches any non-competition agreement, induces any Company or Subsidiary customer to breach a contract with the Company or any Subsidiary or to cease doing business with the +Company or any Subsidiary, or induces any principal for whom the Company or any Subsidiary acts as agent to terminate such agency relationship in effect. +(c) +“Administrator” means the Administrator of the Plan in accordance with Section 19 of the Plan. +(d) +“Award” means an Incentive Stock Option, Nonqualified Stock Option, Stock Appreciation Right, share of Restricted Stock, Restricted Stock Unit, Stock +Award or Incentive Bonus granted to a Participant pursuant to the provisions of the Plan, any of which the Administrator may structure to qualify in whole or in part as a Performance Award. +(e) +“Award Agreement” means a written agreement or other instrument as may be approved from time to time by the Administrator implementing the grant of +each Award. An Agreement may be in the form of an agreement to be executed by both the Participant and the Company (or an authorized representative of the Company) or certificates, notices or similar instruments (which do not need to be +executed) as approved by the Administrator. +(f) +“Board” means the board of directors of the Company. +2023 PROXY STATEMENT +B-1 +TABLE OF CONTENTS +(g) +“Cause” means, in the case of any Participant who is party to an employment or severance-benefit agreement that contains a definition of “Cause,” the +definition set forth in such agreement will apply with respect to such Participant under the Plan for so long as such agreement remains in effect; if a Participant is party to multiple such agreements, any Cause determination must meet +the standards of all such agreements to qualify as for Cause under this Plan. In the case of any other Participant, “Cause” means (i) a substantial failure of the Participant to perform the Participant's duties and responsibilities to +the Company or its Subsidiaries or substantial negligence in the performance of such duties and responsibilities; (ii) the commission by the Participant of a felony or a crime involving moral turpitude; (iii) the commission by the +Participant of theft, fraud, embezzlement, material breach of trust or any material act of dishonesty involving the Company or any of its Subsidiaries, including, but not limited to, any Act of Misconduct; (iv) a significant violation +by the Participant of the code of conduct of the Company or its Subsidiaries of any material policy of the Company or its Subsidiaries, or of any statutory or common law duty of loyalty to the Company or its Subsidiaries, including, but +not limited to, any Act of Misconduct; or (v) a material breach of any of the terms of the Plan or any Award made under the Plan, or of the terms of any other agreement between the Company or subsidiaries and the Participant. +(h) +“Change in Control” unless otherwise defined in an Award Agreement, means (i) the failure of the Continuing Directors at any time to constitute at +least a majority of the members of the Board; (ii) the acquisition by any Person other than an Excluded Holder of beneficial ownership (within the meaning of Rule 13d-3 issued under the Act) of twenty percent (20%) or more of the +outstanding Shares or the combined voting power of the Company's outstanding securities entitled to vote generally in the election of directors; (iii) the consummation of a reorganization, merger, or consolidation of the Company, unless +such reorganization, merger or consolidation is with or into a Permitted Successor and clauses (i), (ii), or (iv) of this Section 2(h) have not been triggered; or (iv) a complete liquidation or dissolution of the Company or the sale or +disposition of all or substantially all of the assets of the Company other than to a Permitted Successor. +Notwithstanding the foregoing, in any case where the occurrence of a Change in Control could affect the +vesting of or payment under an Award subject to the requirements of Section 409A of the Code, to the extent required to comply with Section 409A of the Code, the term “Change in Control” shall mean an occurrence that both (i) satisfies the +requirements set forth above in this definition and (ii) is a “change in control event” as that term is defined in the regulations under Section 409A of the Code. +(i) +“Code” means the Internal Revenue Code of 1986, as amended from time to time and in effect, or any successor statute as from time to time in effect, +and the rulings and regulations issued thereunder. +(j) +“Continuing Directors” mean the individuals constituting the Board as of the date this Plan was adopted and any subsequent directors whose election or +nomination for election by the Company's stockholders was approved by a vote of three-quarters ( 3 ∕ 4 ) of the individuals who are then Continuing Directors, but specifically excluding any +individual whose initial assumption of office occurs as a result of either an actual or threatened solicitation subject to Rule 14a-12(c) of Regulation 14A issued under the Act or other actual or threatened solicitation of proxies or +consents by or on behalf of a Person other than the Board. +(k) +“Company” means Wolverine World Wide, Inc., a Delaware corporation. +(l) +“Determination Period” means the fourteen (14) day period following a Termination of Employment by a Participant. +(m) +“Disability” has the meaning set forth in the Company's long-term disability plan. The determination of the Administrator as to an individual's +Disability shall be conclusive on all parties. +(n) +“Employee Benefit Plan” means any plan or program established by the Company or a Subsidiary for the compensation or benefit of employees of the +Company or any of its Subsidiaries. +(o) +“Excluded Holder” means (i) any Person who at the time this Plan was adopted was the beneficial owner of twenty percent (20%) or more of the +outstanding Shares; or (ii) the Company, a Subsidiary or any Employee Benefit Plan of the Company or a Subsidiary or any trust holding Shares or other securities pursuant to the terms of an Employee Benefit Plan. +(p) +“Factors” means such considerations as would result in a determination by the Administrator that a Termination of Employment does not constitute a +Retirement, and shall include the Participant's: (i) inadequate job performance; (ii) inadequate notice of resignation; (iii) intention for comparable future employment at a third party organization; (iv) intention for future employment +or other service or advisory relationship with a competitor of the Company; or (iv) any other similar consideration. +(q) +“Fair Market Value” means, as of any date, the closing price per share at which the Shares are sold in the regular way on the New York Stock Exchange +(or any successor exchange that is the primary stock exchange for trading of Shares) or, if no Shares are +2023 PROXY STATEMENT +B-2 +TABLE OF CONTENTS +traded on the New York Stock Exchange (or any successor exchange that is the primary stock exchange for +trading of Shares) on the date in question, then for the next preceding date for which Shares were traded on the New York Stock Exchange (or any successor exchange that is the primary stock exchange for trading of Shares). +(r) +“Gross Share Reserve” means, 25,600,000 Shares, the total number of Shares reserved and available for grant and issuance pursuant to this Plan since +the Effective Date (the Plan’s original inception date), subject to adjustment pursuant to Sections 5(b) and 13. +(s) +“Good Reason” means, in the case of a Participant who is party to an employment or other severance-benefit agreement that contains a definition of +“Good Reason,” the definition set forth in such agreement will apply with respect to such Participant under the Plan so long as such agreement remains in effect; provided, however, that if the Participant is party to multiple such +agreements, “Good Reason” under any such agreement shall count as “Good Reason” for purposes of this Plan. If the Participant is not party to any such agreement, “Good Reason” shall mean any of the following, with the below notice +provision applying: (i) a reduction in the Participant's base salary, annual bonus opportunity, or long-term incentive opportunity below the level in effect immediately prior to a Change in Control; (ii) failure by the Company or its +Subsidiaries to pay amounts owed to the Participant as salary, bonus, deferred compensation or other compensation; (iii) any material adverse change to the Participant's position, duties, responsibilities, reporting responsibilities or +title from that or those in effect immediately prior to a Change in Control; or (iv) any requirement that the Participant be based at a location that is more than twenty-five (25) miles from his or her regular place of employment +immediately prior to a Change in Control, unless such change results in a shorter commute for the Participant. Notwithstanding the foregoing, no Termination of Employment shall be for Good Reason unless (i) such Termination of +Employment occurs during the twenty-four (24) month period following a Change in Control and (ii) the Participant gives the Company written notice within ninety (90) days of the Participant obtaining knowledge of circumstances giving +rise to Good Reason (describing in reasonable detail the circumstances and the Good Reason event that has occurred) and the Company does not remedy these circumstances within thirty (30) days of receipt of such notice and the +Participant terminates employment not later than thirty (30) days thereafter. +(t) +“Incentive Bonus” means a bonus opportunity awarded under Section 10 of the Plan pursuant to which a Participant may become entitled to receive an +amount based on satisfaction of such performance criteria as are specified in the Award Agreement or otherwise. +(u) +“Incentive Stock Option” means a stock option that is intended to qualify as an “incentive stock option” within the meaning of Section 422 of the +Code. +(v) +“Nonemployee Director” means each person who is, or is elected to be, a member of the Board and who is not an employee of the Company or any +Subsidiary. +(w) +“Nonqualified Stock Option” means a stock option that is not intended to qualify as an “incentive stock option” within the meaning of Section 422 of +the Code. Each stock option granted pursuant to the Plan will be treated as providing by its terms that it is to be a Nonqualified Stock Option unless, as of the date of grant, it is expressly designated as an Incentive Stock Option. +(x) +“Option” means an Incentive Stock Option and/or a Nonqualified Stock Option granted pursuant to Section 6 of the Plan. +(y) +“Participant” means any individual described in Section 3 of the Plan to whom Awards have been granted from time to time by the Administrator and any +authorized transferee of such individual. +(z) +“Permitted Successor” means a company that, immediately following the consummation of a transaction specified in clauses (iii) and (iv) of the +definition of “Change in Control” above, satisfies each of the following criteria: (i) 50% or more of the outstanding common stock of the company and the combined voting power of the outstanding securities of the company entitled to +vote generally in the election of directors (in each case determined immediately following the consummation of the applicable transaction) is beneficially owned, directly or indirectly, by all or substantially all of the Persons who +were the beneficial owners of the Company's outstanding Shares and outstanding securities entitled to vote generally in the election of directors (respectively) immediately prior to the applicable transaction; (ii) no Person other than +an Excluded Holder beneficially owns, directly or indirectly, 20% or more of the outstanding common stock of the company or the combined voting power of the outstanding securities of the company entitled to vote generally in the +election of directors (for these purposes the term Excluded Holder shall include the company, any subsidiary of the company and any employee benefit plan of the company or any such subsidiary or any trust holding common stock or other +securities of the company pursuant to the terms of any such employee benefit plan); and (iii) at least a majority of the board of directors of the company is comprised of Continuing Directors. +2023 PROXY STATEMENT +B-3 +TABLE OF CONTENTS +(aa) +“Person” has the same meaning as set forth in Sections 13(d) and 14(d)(2) of the Act. +(bb) +“Performance Award” means an Award, the grant, issuance, retention, vesting or settlement of which is subject to satisfaction of one or more +performance-based criteria established pursuant to Section 14 of the Plan or otherwise by the Administrator. +(cc) +“Restricted Stock” means Shares granted pursuant to Section 8 of the Plan. +(dd) +“Restricted Stock Unit” means an Award granted to a Participant pursuant to Section 8 of the Plan that is an unfunded and unsecured promise pursuant +to which Shares or cash in lieu thereof may be issued in the future. +(ee) +“Retirement” means the voluntary Termination of Employment by a Participant after the Participant has attained 59 years of age and ten years of +service (as a director and/or an employee of the Company or a Subsidiary, provided, for the avoidance of doubt, that any service by a Participant for a Subsidiary prior to the time when such Subsidiary is owned directly or indirectly by +the Company shall be disregarded for purposes of a “Retirement” determination hereunder), absent a determination to the contrary by the Administrator (after taking into consideration the Factors) within the Determination Period; +Retirement shall be deemed to occur on the date immediately following the last day of the Determination Period in the absence of a determination to the contrary by the Administrator. +(ff) +“Share” means a share of the Company's common stock, par value $1.00, subject to adjustment as provided in Section 13 of the Plan. +(gg) +“Stock Appreciation Right” means a right granted pursuant to Section 7 of the Plan that entitles the Participant to receive, in cash or Shares or a +combination thereof, as determined by the Administrator, value equal to or otherwise based on the excess of (i) the Fair Market Value of a specified number of Shares at the time of exercise over (ii) the exercise price of the right, as +established by the Administrator on the date of grant. +(hh) +“Stock Award” means an award of Shares to a Participant pursuant to Section 9 of the Plan. +(ii) +“Subsidiary” means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company where each of the +corporations in the unbroken chain other than the last corporation owns stock possessing at least 50 percent or more of the total combined voting power of all classes of stock in one of the other corporations in the chain, and if +specifically determined by the Administrator in the context other than with respect to Incentive Stock Options, may include an entity in which the Company has a significant ownership interest or that is directly or indirectly controlled +by the Company. +(jj) +“Substitute Awards” means Awards granted or Shares issued by the Company in assumption of, or in substitution or exchange for, awards previously +granted, or the right or obligation to make future awards, by a company acquired by the Company or any Subsidiary or with which the Company or any Subsidiary combines. +(kk) +“Termination of Employment” means ceasing to serve as a full-time employee of the Company and its Subsidiaries or, with respect to a Nonemployee +Director or other service provider, ceasing to serve as such for the Company, except that with respect to all or any Awards held by a Participant (i) the Administrator may determine, subject to Section 6(d) of the Plan, that an approved +leave of absence or approved employment on a less than full-time basis is not considered a Termination of Employment; (ii) the Administrator may determine that a transition of employment to service with a partnership, joint venture or +corporation not meeting the requirements of a Subsidiary in which the Company or a Subsidiary is an equity owner is not considered a Termination of Employment; (iii) unless otherwise determined by the Administrator, service as a member +of the Board or other service provider shall not constitute continued employment with respect to Awards granted to a Participant while he or she served as an employee; and (iv) service as an employee of the Company or a Subsidiary shall +constitute continued employment with respect to Awards granted to a Participant while he or she served as a member of the Board or other service provider. The Administrator shall determine whether any corporate transaction, such as a +sale or spin-off of a division or subsidiary that employs a Participant, shall be deemed to result in a Termination of Employment with the Company and its Subsidiaries for purposes of any affected Participant's Awards, and the +Administrator's decision shall be final and binding. +3. Eligibility +Any person who is a current or, to the extent consistent with Section 409A of the Code, prospective officer +or employee of the Company or of any Subsidiary shall be eligible for selection by the Administrator for the grant of Awards hereunder. In addition, Nonemployee Directors and any other service providers who have been retained to provide +consulting, advisory or other services to the Company or to any Subsidiary shall be eligible for the grant of Awards hereunder as determined by the Administrator. Options intending to qualify as Incentive Stock Options may +2023 PROXY STATEMENT +B-4 +TABLE OF CONTENTS +only be granted to employees of the Company or any subsidiary of the Company within the meaning of the +Code, as selected by the Administrator. Eligibility for Options other than Incentive Stock Options is limited to individuals described this Section 3 who are providing direct services on the date of grant of the Option (or it is reasonably +anticipated that the individuals will begin to provide direct services) to the Company or to a subsidiary of the Company that would be described in the first sentence of Treasury Regulation § 1.409A-1(b)(5)(iii)(E). +4. Effective Date, Amendment Date and Termination of Plan +The Plan was initially adopted by the Board as of February 10, 2016 (the “Effective Date”) and previously +amended and restated by the Board on the First Amendment Date and Second Amendment Date, and, in each case, subsequently approved by the Company’s stockholders. With respect to any Award granted on or after the Second Amendment Date, to the +extent that the number of Shares subject to such Awards, or portions thereof, exceeds the number of shares authorized under the Plan as of the Second Amendment Date, such Awards, or portions thereof, shall be subject to, and may not be +exercised before, the approval of this Plan by the stockholders of the Company prior to the first anniversary of the Second Amendment Date by the affirmative vote of the holders of a majority of the outstanding Shares of the Company present, or +represented by proxy, and entitled to vote, at a meeting of the Company's stockholders or by written consent in accordance with the laws of the State of Delaware; and, if such approval is not so obtained, the Awards (or portions thereof) shall +by void as determined by the Administrator. The Plan shall remain available for the grant of Awards until the tenth (10th) anniversary of the Second Amendment Date. Notwithstanding the foregoing, the Plan may be terminated at such earlier time +as the Board may determine. Termination of the Plan will not affect the rights and obligations of the Participants and the Company arising under Awards theretofore granted and then in effect. +5. Shares Subject to the Plan and to Awards +(a) +Aggregate Limits. Subject to adjustment as provided in Sections 5(b) and 13 and as of May 3, 2023, the number +of Shares that shall be authorized for future grant under the Plan shall equal a total of (i) 7,170,808 Shares, as increased pursuant to paragraph (b) of this Section, less (ii) one (1) Share for every one (1) Share that was subject to +an Option or Stock Appreciation Right granted after February 9, 2023 and prior to May 3, 2023 under the Plan and two and six tenths (2.6) Shares for every one (1) Share subject Award other than an Option or Stock Appreciation Right +granted after February 9, 2023 and prior to May 3, 2023 under the Plan. Any Shares granted under Options or Stock Appreciation Rights shall be counted against this limit on a one-for-one basis and any Shares granted as Awards other than +Options or Stock Appreciation Rights shall be counted against this limit as two and six tenths (2.6) Shares for every one (1) Share subject to such Award. The Shares issued pursuant to Awards granted under this Plan may be shares that +are authorized and unissued or shares that were reacquired by the Company, including shares purchased in the open market. No fractional Shares will be delivered under the Plan. +(b) +Issuance of Shares. For purposes of Section 5(a) and Section 5(f) of the Plan, the aggregate number of Shares +issued under this Plan at any time shall equal only the number of Shares actually issued upon exercise or settlement of an Award. If after February 9, 2023, (i) any Shares subject to an Award are forfeited, an Award expires or an Award +is settled for cash (in whole or in part), or (ii) any Shares subject to an award under the Prior Plans are forfeited, or an award under the Prior Plans expires or is settled for cash (in whole or in part), the Shares subject to such +Award or award under the Prior Plans shall, to the extent of such forfeiture, expiration or cash settlement, again be available for future Awards under the Plan. Notwithstanding the foregoing, Shares subject to an Award under the Plan +may not again be made available for issuance under the Plan if such Shares are: (i) Shares that were subject to a stock-settled Stock Appreciation Right (or after the Effective Date, a stock appreciation right granted under a Prior +Plan) and were not issued upon the net settlement or net exercise of such Stock Appreciation Right (or after the Effective Date, a stock appreciation right granted under a Prior Plan); (ii) Shares used to pay the exercise price of an +Option (or after the Effective Date, an option granted under a Prior Plan) or the purchase price, if any, for an Award (or after the Effective Date, an award granted under a Prior Plan); (iii) Shares delivered to or withheld by the +Company to pay the withholding taxes related an Award (or after the Effective Date, an award granted under a Prior Plan); or (iv) Shares repurchased on the open market with the proceeds of an Option (or after the Effective Date, an +option granted under a Prior Plan) exercise. +(c) +Award Limits. The aggregate number of Shares that may be delivered, or the value of which could be paid in +cash or other property, under Awards granted under this Plan during any calendar year to any one Participant shall not exceed 3,600,000, which aggregate number shall be calculated and adjusted pursuant to Section 13 of the Plan and +which number shall not count any tandem SARs (as defined in Section 7 of the Plan). The aggregate number of Shares that may be issued pursuant to the exercise of Incentive Stock Options granted under this Plan shall not exceed +3,600,000, which aggregate number shall be calculated and adjusted pursuant to Section 13 of the Plan only to the extent that such calculation or adjustment will not affect the status of any option intended to qualify as an Incentive +Stock Option under Section 422 of the Code. The maximum cash amount payable pursuant to that portion of an Incentive Bonus granted in any calendar year to any Participant under this Plan shall not exceed $20,000,000. +(d) +Director Awards. Notwithstanding any other provision of the Plan to the contrary, the aggregate grant date +fair value of Awards (computed as of the date of grant in accordance with applicable financial accounting rules) granted under this Plan during any calendar year to any one Nonemployee Director shall not exceed $600,000. +2023 PROXY STATEMENT +B-5 +TABLE OF CONTENTS +(e) +Substitute Awards. Substitute Awards shall not reduce the Shares authorized for issuance under the Plan or +authorized for grant to a Participant in any calendar year. Additionally, in the event that a company acquired by the Company or any Subsidiary, or with which the Company or any Subsidiary combines, has shares available under a +pre-existing plan approved by stockholders and not adopted in contemplation of such acquisition or combination, the shares available for grant pursuant to the terms of such pre-existing plan (as adjusted, to the extent appropriate, +using the exchange ratio or other adjustment or valuation ratio or formula used in such acquisition or combination to determine the consideration payable to the holders of common stock of the entities party to such acquisition or +combination) may be used for Awards under the Plan and shall not reduce the Shares authorized for issuance under the Plan; provided, however, that Awards using such available shares shall not be made after the date awards or grants +could have been made under the terms of the pre-existing plan, absent the acquisition or combination, and shall only be made to individuals who were employees, directors or other service providers of such acquired or combined company +before such acquisition or combination and shall be subject to such other terms and limitations as required by the stock exchange on which the Shares are then listed or traded. +(f) +Award Vesting/Exercisability/Distribution Limitations. Notwithstanding any other provision of the Plan to the +contrary, equity-based Awards granted under the Plan shall vest no earlier than the first anniversary of the date the Award is granted (excluding, for this purpose, any (i) Substitute Awards, (ii) ) Shares delivered in lieu of fully +earned Nonemployee Director cash compensation obligations, and (iii) Awards to Nonemployee Directors that vest on the earlier of the one year anniversary of the date of grant or the next annual meeting of stockholders which is at least +50 weeks after the immediately preceding year’s annual meeting); provided, that, the Administrator may grant equity-based Awards without regard to the foregoing minimum vesting requirement with respect to a maximum of five percent (5%) +of the Gross Share Reserve; and, provided further, for the avoidance of doubt, that the foregoing restriction does not apply to the Administrator’s discretion to provide for accelerated exercisability or vesting of any Award, including +in cases of retirement, death, disability or a Change in Control, in the terms of the Award or otherwise. +6. Options +(a) +Option Awards. Options may be granted at any time and from time to time prior to the termination of the Plan +to Participants as determined by the Administrator. No Participant shall have any rights as a stockholder with respect to any Shares subject to Options hereunder until such Shares have been issued. Each Option shall be evidenced by an +Award Agreement. Options granted pursuant to the Plan need not be identical but each Option must contain and be subject to the terms and conditions set forth below. +(b) +Price. The Administrator will establish the exercise price per Share under each Option, which in no event +will be less than the Fair Market Value of the Shares on the date of grant; provided, however, that the exercise price per Share with respect to an Option that is granted in connection with a merger or other acquisition as a substitute +or replacement award for options held by optionees of the acquired entity may be less than 100% of the Fair Market Value of the Shares on the date such Option is granted if such exercise price is based on a formula set forth in the +terms of the options held by such optionees or in the terms of the agreement providing for such merger or other acquisition. The exercise price of any Option may be paid in Shares, cash or a combination thereof, as determined by the +Administrator, including an irrevocable commitment by a broker to pay over such amount from a sale of the Shares issuable under an Option, the delivery of previously owned Shares and withholding of Shares deliverable upon exercise, or +in such other form as is acceptable to the Administrator. +(c) +No Repricing Without Stockholder Approval. Other than in connection with a change in the Company's +capitalization (as described in Section 13 of the Plan), the Administrator may not, without prior approval of the Company's shareholders, seek to effect any repricing of any previously granted underwater Option by: (i) amending or +modifying the terms of the Option to lower the exercise price; (ii) canceling the underwater Option and granting either (A) replacement Options having a lower exercise price or (B) Restricted Stock, Restricted Stock Units, Performance +Awards or Stock Awards in exchange; or (iii) cancelling or repurchasing the underwater Options for cash or other securities. An Option will be deemed to be “underwater” at any time when the Fair Market Value of the Shares covered by +such Award is less than the exercise price of the Award. +(d) +Provisions Applicable to Options. Subject to Section 5(f), the date on which Options become exercisable shall +be determined at the sole and absolute discretion of the Administrator and set forth in an Award Agreement. Unless provided otherwise in the applicable Award Agreement, to the extent that the Administrator determines that an approved +leave of absence or employment on a less than full-time basis is not a Termination of Employment, the vesting period and/or exercisability of an Option shall be adjusted by the Administrator during or to reflect the effects of any +period during which the Participant is on an approved leave of absence or is employed on a less than full-time basis. No dividends or dividend equivalents shall be paid or granted in respect of Shares subject to Options and no holder of +an Option shall be entitled to any dividends with respect to the Shares subject to Options unless and until such Options have vested and have been exercised in accordance with the terms of the Plan and the applicable Award Agreement and +such Shares are reflected as issued and outstanding. +2023 PROXY STATEMENT +B-6 +TABLE OF CONTENTS +(e) +Term of Options and Termination of Employment. The Administrator shall establish the term of each Option, +which in no case shall exceed a period of ten (10) years from the date of grant. Unless an Option earlier expires upon the expiration date established pursuant to the foregoing sentence, upon the Participant's Termination of Employment, +his or her rights to exercise an Option then held shall be only as follows, unless the Administrator specifies otherwise: +(1) +General. If a Participant's Termination of Employment is for any reason other than the Participant's death, +Disability, Retirement or termination for Cause, Options granted to the Participant may continue to be exercised in accordance with their terms for the lesser of (i) a period of three (3) months after such Termination of Employment or +(ii) the period ending on the latest date on which such Options could have been exercised without regard to this Section 6(e)(1), but only to the extent the Participant was entitled to exercise the Options on the date of such +termination. +(2) +Death. If a Participant dies either while an employee or officer of the Company or a Subsidiary or member of +the Board, or after the Termination of Employment other than for Cause but during the time when the Participant could have exercised an Option, the Options issued to such Participant shall become fully vested (in the case of Termination +of Employment due to death) and exercisable by the personal representative of such Participant or other successor to the interest of the Participant for the lesser of (i) a period of one (1) year after the Participant's death or +(ii) the period ending on the latest date on which such Options could have been exercised without regard to this Section 6(e)(2), but only to the extent the Participant was entitled to exercise the Options on the date of such +termination. +(3) +Disability. If a Participant's Termination of Employment is due to Disability, then all of the Participant's +Options shall immediately fully vest, and the Options held by the Participant at the time of such Termination of Employment shall be exercisable by the Participant or the personal representative of such Participant for the lesser of +(i) a period of one (1) year after the Participant's Termination of Employment or (ii) the period ending on the latest date on which such Options could have been exercised without regard to this Section 6(e)(3), but only to the extent +the Participant was entitled to exercise the Options on the date of such termination. +(4) +Participant Retirement. Upon a Participant's Retirement as an employee of the Company and its Subsidiaries or +Retirement from service as a member of the Board, then all of the Participant's Options shall immediately fully vest, and the Options held by the Participant at the time of such Retirement shall be exercisable by the Participant or the +personal representative of such Participant during the remaining term of the Options. +(5) +Termination for Cause. If a Participant is terminated for Cause, the Participant shall have no further right +to exercise any Options previously granted. The Administrator or officers designated by the Administrator shall determine, in its or their reasonable discretion, whether a termination is for Cause. +(f) +Incentive Stock Options. Notwithstanding anything to the contrary in this Section 6, in the case of the grant +of an Option intending to qualify as an Incentive Stock Option: (i) if the Participant owns stock possessing more than 10 percent (10%) of the combined voting power of all classes of stock of the Company, the exercise price of such +Option must be at least 110 percent of the Fair Market Value of the Shares on the date of grant and the Option must expire within a period of not more than five (5) years from the date of grant and (ii) Termination of Employment will +occur when the person to whom an Award was granted ceases to be an employee (as determined in accordance with Section 3401(c) of the Code and the regulations promulgated thereunder) of the Company and its Subsidiaries. Notwithstanding +anything in this Section 6 to the contrary, options designated as Incentive Stock Options shall not be eligible for treatment under the Code as Incentive Stock Options (and will be deemed to be Nonqualified Stock Options) to the extent +that either (a) the aggregate Fair Market Value of Shares (determined as of the time of grant) with respect to which such Options are exercisable for the first time by the Participant during any calendar year (under all plans of the +Company and any Subsidiary) exceeds $100,000, taking Options into account in the order in which they were granted, or (b) such Options otherwise remain exercisable but are not exercised within three (3) months of Termination of +Employment (as defined in this subsection (f)) (or such other period of time provided in Section 422 of the Code). +7. Stock Appreciation Rights +(a) +General. Stock Appreciation Rights may be granted to Participants from time to time either in tandem with or +as a component of other Awards granted under the Plan (“tandem SARs”) or not in conjunction with other Awards (“freestanding SARs”) and may, but need not, relate to a specific Option granted under Section 6 of the Plan. The provisions +of Stock Appreciation Rights need not be the same with respect to each grant or each recipient. Any Stock Appreciation Right granted in tandem with an Award may be granted at the same time such Award is granted or at any time thereafter +before exercise or expiration of such Award. All freestanding SARs shall be granted subject to the same terms and conditions applicable to Options as set forth in Section 6 of the Plan and all tandem SARs shall have the same +2023 PROXY STATEMENT +B-7 +TABLE OF CONTENTS +exercise price, vesting, exercisability, forfeiture and termination provisions as the Award to which they +relate. Subject to the provisions of Sections 5(f) and 6 of the Plan and the immediately preceding sentence, the Administrator may impose such other conditions or restrictions on any Stock Appreciation Right as it shall deem appropriate. Stock +Appreciation Rights may be settled in Shares, cash or a combination thereof, as determined by the Administrator and set forth in the applicable Award Agreement. +(b) +No Repricing Without Stockholder Approval. Other than in connection with a change in the Company's +capitalization (as described in Section 13 of the Plan), the Administrator may not, without prior approval of the Company's shareholders, seek to effect any repricing of any previously granted underwater Stock Appreciation Right by: +(i) amending or modifying the terms of the Stock Appreciation Right to lower the exercise price; (ii) canceling the underwater Stock Appreciation Right and granting either (A) replacement Stock Appreciation Rights having a lower +exercise price or (B) Restricted Stock, Restricted Stock Units, Performance Awards or Stock Awards in exchange; or (iii) cancelling or repurchasing the underwater Stock Appreciation Rights for cash or other securities. A Stock +Appreciation Right will be deemed to be “underwater” at any time when the Fair Market Value of the Shares covered by such Award is less than the exercise price of the Award. +8. Restricted Stock and Restricted Stock Units +(a) +Restricted Stock and Restricted Stock Unit Awards. Restricted Stock and Restricted Stock Units may be granted +at any time and from time to time prior to the termination of the Plan to Participants as determined by the Administrator. Restricted Stock is an award or issuance of Shares the grant, issuance, retention, vesting and/or transferability +of which is subject during specified periods of time to such conditions (including continued employment or performance conditions) and terms as the Administrator deems appropriate. Restricted Stock Units are Awards denominated in units +of Shares under which the issuance of Shares is subject to such conditions (including continued employment or performance conditions) and terms as the Administrator deems appropriate. Each grant of Restricted Stock and Restricted Stock +Units shall be evidenced by an Award Agreement. Unless determined otherwise by the Administrator, each Restricted Stock Unit will be equal to one Share and will entitle a Participant to either the issuance of Shares or payment of an +amount of cash determined with reference to the value of Shares. To the extent determined by the Administrator, Restricted Stock and Restricted Stock Units may be satisfied or settled in Shares, cash or a combination thereof. Restricted +Stock and Restricted Stock Units granted pursuant to the Plan need not be identical but each grant of Restricted Stock and Restricted Stock Units must contain and be subject to the terms and conditions set forth below. +(b) +Contents of Agreement. Each Award Agreement shall contain provisions regarding (i) the number of Shares or +Restricted Stock Units subject to such Award or a formula for determining such number; (ii) the purchase price of the Shares, if any, and the means of payment; (iii) the performance criteria, if any, and level of achievement versus +these criteria that shall determine the number of Shares or Restricted Stock Units granted, issued, retainable and/or vested; (iv) such terms and conditions on the grant, issuance, vesting and/or forfeiture of the Shares or Restricted +Stock Units as may be determined from time to time by the Administrator; (v) the term of the performance period, if any, as to which performance will be measured for determining the number of such Shares or Restricted Stock Units; and +(vi) restrictions on the transferability of the Shares or Restricted Stock Units. Shares issued under a Restricted Stock Award may be issued in the name of the Participant and held by the Participant or held by the Company, in each case +as the Administrator may provide. +(c) +Vesting and Performance Criteria. Subject to Section 5(f), the grant, issuance, retention, vesting and/or +settlement of shares of Restricted Stock and Restricted Stock Units will occur when and in such installments as the Administrator determines or under criteria the Administrator establishes, which may include performance-based criteria +established pursuant to Section 14 of the Plan or otherwise by the Administrator. +(d) +Termination of Employment. Unless the Administrator provides otherwise: +(i) +General. In the event of Termination of Employment for any reason other than death, Disability or Retirement, +any Restricted Stock or Restricted Stock Units still subject in full or in part to restrictions at the date of such Termination of Employment shall automatically be forfeited and returned to the Company. +(ii) +Death, Retirement or Disability. In the event a Participant's Termination of Employment is because of death, +Disability or Retirement, the restrictions remaining on any or all Shares remaining subject to a Restricted Stock or Restricted Stock Unit Award shall lapse. +(e) +Discretionary Adjustments and Limits. Notwithstanding the satisfaction of any performance goals, the number +of Shares granted, issued, retainable and/or vested under an Award of Restricted Stock or Restricted Stock Units on account of either financial performance or personal performance evaluations may, to the extent specified in the Award +Agreement, be reduced, but not increased, by the Administrator on the basis of such further considerations as the Administrator shall determine. +2023 PROXY STATEMENT +B-8 +TABLE OF CONTENTS +(f) +Voting Rights. Unless otherwise determined by the Administrator, Participants holding shares of Restricted +Stock granted hereunder may exercise full voting rights with respect to those shares during the period of restriction. Participants shall have no voting rights with respect to Shares underlying Restricted Stock Units unless and until +such Shares are reflected as issued and outstanding shares on the Company's stock ledger. +(g) +Dividends and Distributions . +(i) +Participants in whose name Restricted Stock is granted shall be entitled to receive dividends and other distributions paid with respect to those +Shares only to the extent provided by the Administrator, in which case the Administrator will determine whether any such dividends or distributions will be automatically reinvested in additional shares of Restricted Stock and subject to +the same restrictions on transferability as the Restricted Stock with respect to which they were distributed or whether such dividends or distributions will be paid in cash. Shares underlying Restricted Stock Units shall be entitled to +dividends or dividend equivalents only to the extent provided by the Administrator. +(ii) +Notwithstanding the foregoing Section 8(g)(1), any cash or stock dividends and dividend equivalents with respect to Restricted Stock and Restricted +Stock Units granted as Performance Awards, if any, will be withheld by the Company for the Participant's account and will be paid, if at all, (i) in the case of Restricted Stock, upon the achievement of the applicable performance +measure(s) and the satisfaction of any other restrictions imposed on the Restricted Stock in respect of which the dividends were paid and (ii) in the case of Restricted Stock Units, at the time the Shares and/or cash underlying such +Restricted Stock Units is paid, and any dividends deferred in respect of any Restricted Stock and Restricted Stock Units granted as Performance Awards will be forfeited upon the forfeiture of such Restricted Stock and Restricted Stock +Units. Any noncash dividends or distributions paid with respect to Restricted Stock and Restricted Stock Units granted as Performance Awards shall be subject to the same restrictions as those relating to the Restricted Stock and +Restricted Stock Units. +(h) +Payment of Restricted Stock Units. In all events, unless payment with respect to a Restricted Stock Unit is +deferred in a manner consistent with Section 409A of the Code, the Shares and/or cash underlying such Restricted Stock Unit shall be paid to the Participant no later than two and one-half months following the end of the year in which +the Restricted Stock Unit is no longer subject to a substantial risk of forfeiture. +(i) +Legending of Restricted Stock. The Administrator may also require that certificates representing shares of +Restricted Stock be retained and held in escrow by a designated employee or agent of the Company or any Subsidiary until any restrictions applicable to shares of Restricted Stock so retained have been satisfied or lapsed. Any +certificates evidencing shares of Restricted Stock awarded pursuant to the Plan shall bear the following legend: +The shares represented by this certificate were issued subject to certain restrictions under the Wolverine +World Wide, Inc. Stock Incentive Plan of 2016 (the “Plan”). This certificate is held subject to the terms and conditions contained in a restricted stock agreement that includes a prohibition against the sale or transfer of the stock represented +by this certificate except in compliance with that agreement and that provides for forfeiture upon certain events. Copies of the Plan and the restricted stock agreement are on file in the office of the Secretary of the Company. +9. Stock Awards +(a) +Grant. Stock Awards may be granted at any time and from time to time prior to the termination of the Plan to +Participants as determined by the Administrator, consistent with the 5% limit set forth in Section 5(f) of the Plan. Stock Awards shall be subject to such terms and conditions, consistent with the other provisions of the Plan, as may be +determined by the Administrator. +(b) +Rights as a Stockholder. A Participant shall have all voting, dividend, liquidation and other rights with +respect to Shares issued to the Participant as a Stock Award under this Section 9 upon the Participant becoming the holder of record of the Shares granted pursuant to such Stock Award; provided, however, that the Administrator may +impose such restrictions on the assignment or transfer of Shares awarded pursuant to a Stock Award as it considers appropriate. +10. Incentive Bonuses +(a) +General. Each Incentive Bonus Award will confer upon the Participant the opportunity to earn a future payment +tied to the level of achievement with respect to one or more performance criteria established for a performance period of not less than one year. +2023 PROXY STATEMENT +B-9 +TABLE OF CONTENTS +(b) +Incentive Bonus Document. Unless otherwise determined by the Administrator, the terms of any Incentive Bonus +will be set forth in an Award Agreement. Each Award Agreement evidencing an Incentive Bonus shall contain provisions regarding (i) the target and maximum amount payable to the Participant as an Incentive Bonus; (ii) the performance +criteria and level of achievement versus these criteria that shall determine the amount of such payment; (iii) the term of the performance period as to which performance shall be measured for determining the amount of any payment; +(iv) the timing of any payment earned by virtue of performance; (v) restrictions on the alienation or transfer of the Incentive Bonus prior to actual payment; (vi) forfeiture provisions; and (vii) such further terms and conditions, in +each case not inconsistent with this Plan (including Section 5(f), if applicable), as may be determined from time to time by the Administrator. +(c) +Performance Criteria. The Administrator shall establish the performance criteria and level of achievement +versus these criteria that shall determine the target and maximum amounts payable under an Incentive Bonus, which criteria may be based on financial performance and/or personal performance evaluations. +(d) +Timing and Form of Payment. The Administrator shall determine the timing of payment of any Incentive Bonus. +Payment of the amount due under an Incentive Bonus may be made in cash or in Shares, as determined by the Administrator. The Administrator may provide for or, subject to such terms and conditions as the Administrator may specify, may +permit a Participant to elect for the payment of any Incentive Bonus to be deferred to a specified date or event. In all events, unless payment of an Incentive Bonus is deferred in a manner consistent with Section 409A of the Code, any +Incentive Bonus shall be paid to the Participant no later than two and one-half months following the end of the year in which the Incentive Bonus is no longer subject to a substantial risk of forfeiture. +(e) +Discretionary Adjustments. Notwithstanding satisfaction of any performance goals, the amount paid under an +Incentive Bonus on account of either financial performance or personal performance evaluations may, to the extent specified in the Award Agreement or other document evidencing the Award, be reduced, but not increased, by the +Administrator on the basis of such further considerations as the Administrator shall determine. +11. Deferral of Gains +(a) +Deferral of Payment. The Administrator may, in an Award Agreement or otherwise, provide for the deferred +delivery of Shares upon settlement, vesting or other events with respect to Restricted Stock Units, or in payment or satisfaction of an Incentive Bonus. Notwithstanding anything herein to the contrary, in no event will any deferral of +the delivery of Shares or any other payment with respect to any Award be allowed if the Administrator determines, in its sole and absolute discretion, that the deferral would result in the imposition of the additional tax under Section +409A(a)(1)(B) of the Code. No award shall provide for deferral of compensation that does not comply with Section 409A of the Code, unless the Board, at the time of grant, specifically provides that the Award is not intended to comply +with Section 409A of the Code. The Company shall have no liability to a Participant, or any other party, if an Award that is intended to be exempt from, or compliant with, Section 409A of the Code is not so exempt or compliant or for +any action taken by the Administrator or the Board. +(b) +Conditions of Deferral. Notwithstanding anything herein to the contrary, if the Administrator permits any +initial or subsequent deferral elections pursuant to Section 11(a) of this Plan, subject to the requirements of Section 409A of the Code, the terms of this Plan and the applicable Award Agreement and any applicable deferral election +form, the Participant may elect to defer payment (that would otherwise occur upon the lapse of a substantial risk of forfeiture) for a fixed period of time measured from the date the Award is granted; provided, however, that in each +case (i) the deferral election is made before the end of the election period established by the Administrator, and (ii) to the extent compliant with Section 409A of the Code, payment of any vested Award that the Participant has elected +to defer will be made regardless of any deferral election (including any subsequent deferral election) within thirty (30) days of a change in control or the Participant's separation from service (including death). For purposes of this +Section 11, “change in control” and “separation from service” shall be defined in the applicable Award Agreement and have the meanings set forth in Section 409A of the Code and the regulations thereunder (and, with respect to the +definition of “separation from service”, after giving effect to the presumptions contained therein), and, notwithstanding anything herein to the contrary, if the Administrator allows deferral elections under an Award Agreement subject +to Section 409A of the Code, neither Disability nor Retirement shall accelerate the time of payment of any Award (even if it accelerates vesting) unless there has been a “separation from service” or “disability” within the meaning of +Section 409A of the Code and the regulations promulgated thereunder (and, with respect to the definition of “separation from service”, after giving effect to the presumptions contained therein). To the extent applicable, this provision, +the Plan and any Awards hereunder are intended to comply with Section 409A of the Code and shall be interpreted accordingly. Should any payments made in accordance with the Plan to a specified employee, as defined by Section 409A of the +Code, be determined to be payments from a nonqualified deferred compensation plan, as defined by Section 409A of the Code and are payable in connection with a Participant’s separation from service, that are not exempt from +2023 PROXY STATEMENT +B-10 +TABLE OF CONTENTS +Section 409A of the Code as a short-term deferral or otherwise, these payments, to the extent otherwise +payable within six (6) months after the Participant’s date of separation from service, will be paid in a lump sum on the earlier of the date that is six (6) months after the Participant’s date of separation from service or the date of the +Participant’s death, to the extent necessary in order to avoid the imposition of taxes under Section 409A of the Code. +12. Conditions and Restrictions Upon Securities Subject to Awards +The Administrator may provide that the Shares issued upon exercise of an Option or Stock Appreciation Right +or otherwise subject to or issued under an Award shall be subject to such further agreements, restrictions, conditions or limitations as the Administrator in its sole and absolute discretion may specify prior to the exercise of such Option or +Stock Appreciation Right or the grant, vesting or settlement of such Award, including without limitation, conditions on vesting or transferability, forfeiture or repurchase provisions and method of payment for the Shares issued upon exercise, +vesting or settlement of such Award (including the actual or constructive surrender of Shares already owned by the Participant) or payment of taxes arising in connection with an Award. Without limiting the foregoing, such restrictions may +address the timing and manner of any resales by the Participant or other subsequent transfers by the Participant of any Shares issued under an Award, including without limitation (i) restrictions under an insider trading policy or pursuant to +applicable law; (ii) restrictions designed to delay and/or coordinate the timing and manner of sales by Participant and holders of other Company equity compensation arrangements; (iii) restrictions as to the use of a specified brokerage firm +for such resales or other transfers; and (iv) provisions requiring Shares to be sold on the open market or to the Company in order to satisfy tax withholding or other obligations. +13. Adjustment of and Changes in the Stock +(a) +General. The number and kind of Shares available for issuance under this Plan (including under any Awards +then outstanding), and the number and kind of Shares subject to the limits set forth in Section 5 of this Plan, shall be equitably adjusted by the Administrator to reflect any reorganization, reclassification, combination of shares, +stock split, reverse stock split, spin-off, dividend or distribution of securities, property or cash (other than regular, quarterly cash dividends), or any other event or transaction that affects the number or kind of Shares +outstanding. Such adjustment may be designed to comply with Sections 409A and 424 of the Code as applicable, or, except as otherwise expressly provided in Section 5(c) of this Plan, may be designed to treat the Shares available under +the Plan and subject to Awards as if they were all outstanding on the record date for such event or transaction or to increase the number of such Shares to reflect a deemed reinvestment in Shares of the amount distributed to the +Company's security holders. The terms of any outstanding Award shall also be equitably adjusted by the Administrator as to price, number or kind of Shares subject to such Award, vesting and other terms to reflect the foregoing events, +which adjustments need not be uniform as between different Awards or different types of Awards. +In the event there shall be any other change in the number or kind of outstanding Shares, or any stock or +other securities into which such Shares shall have been changed, or for which it shall have been exchanged, by reason of a change of control, other merger, consolidation or otherwise, then the Administrator shall determine the appropriate and +equitable adjustment to be effected. In addition, in the event of such change described in this paragraph, the Administrator may accelerate the time or times at which any Award may be exercised and may provide for cancellation of such +accelerated Awards that are not exercised within a time prescribed by the Administrator in its sole and absolute discretion. +No right to purchase fractional shares shall result from any adjustment in Awards pursuant to this Section +13. In case of any such adjustment, the Shares subject to the Award shall be rounded up to the nearest whole share for Awards other than Options and Stock Appreciation Rights, and shall be rounded down to the nearest whole Share with respect to +Options and Stock Appreciation Rights. The Company shall notify Participants holding Awards subject to any adjustments pursuant to this Section 13 of such adjustment, but (whether or not notice is given) such adjustment shall be effective and +binding for all purposes of the Plan. +(b) +Change in Control. Subject to and limited by the requirements of subsections (i), (ii) and (iii) below, the +Administrator shall determine the effect of a Change in Control on outstanding Awards. Such effects, which need not be the same for every Participant, may include, without limitation: (x) the substitution for the Shares subject to any +outstanding Award, or portion thereof, of stock or other securities of the surviving corporation or any successor corporation to the Company, or a parent or subsidiary thereof, in which event the aggregate purchase or exercise price, if +any, of such Award, or portion thereof, shall remain the same, and/or (y) the conversion of any outstanding Award, or portion thereof, into a right to receive cash or other property upon or following the consummation of the Change in +Control in an amount equal to the value of the consideration to be received by holders of Shares in connection with such transaction for one Share, less the per share purchase or exercise price of such Award, if any, multiplied by the +number of Shares subject to such Award, or a portion thereof. Notwithstanding the foregoing, Awards shall be treated as follows in connection with a Change in Control: +(i) +Acceleration of Vesting. The following provisions shall apply to Awards granted prior to the First Amendment +Date: Without action by the Administrator or the Board: (a) all outstanding Options and Stock Appreciation Rights shall become immediately exercisable +2023 PROXY STATEMENT +B-11 +TABLE OF CONTENTS +in full and, notwithstanding any other provision of the Plan or the Award Agreement to the contrary and to +the extent the Administrator does not determine that a cash payment shall be made with respect to such Options and Stock Appreciation Rights pursuant to the following Section 13(b)(iv), shall remain outstanding and exercisable during the +remaining original terms thereof, regardless of whether the Participants to whom such Options and Stock Appreciation Rights have been granted remain in the employ or service of the Company or any Subsidiary; and (b) all other outstanding Awards +shall become immediately fully vested and exercisable and non-forfeitable; +(ii) +Double-Trigger Acceleration of Vesting of Time-Based Awards. The following provisions shall apply to Awards +granted on or after the First Amendment Date that are subject to vesting based on continuous employment or service: To the extent an Award is assumed or substituted by an acquiror in connection with a Change in Control as contemplated +by Section 13(b) above, such Award shall not immediately vest upon a Change in Control and instead shall continue to vest in accordance with its terms, provided, however, that if a Participant experiences a Termination of Employment by +the Company without Cause or by the Participant for Good Reason, in either case, within the twenty-four- (24-) month period immediately following the Change in Control, the Award shall immediately vest and become exercisable or shall be +settled upon such qualifying termination. The Participant's rights under this Section 13(b)(ii) are in addition to any other rights Participant has in the event of death, Disability or Retirement. Notwithstanding anything in this +Section 13(b)(ii) to the contrary, if, at any time during the vesting period of an Award, the Participant is or becomes eligible to terminate his or her employment with the Company or its Subsidiaries due to Retirement (without regard +to the application of any Factor or any Determination Period) the Award shall immediately vest in full upon the Change in Control. In the event of acceleration in connection with a Termination of Employment as contemplated by this +Section 13(b)(ii), all outstanding Options and Stock Appreciation Rights shall remain outstanding and exercisable during the remaining original terms thereof; +(iii) +Treatment of Performance Awards. The following provisions shall apply to Awards granted on or after the First +Amendment Date: If a Change in Control occurs prior to the end date of a performance period for a Performance Award, to the extent the Performance Award is outstanding immediately prior to such Change in Control, such Award will vest +(A) based on actual performance through the date of the Change in Control as determined by the Administrator (treating the Change in Control as the end of the applicable performance period), without proration for the time elapsed in +such performance period prior to such Change in Control for purposes of determining performance, but, in the discretion of the Administrator, prorated for purposes of elapsed time in a manner consistent with subsection (B), below, (B) +assuming that target level of performance is attained and prorated based on the number of days in the performance period that elapsed prior to the Change in Control over the total number of days in the performance period, or (C) a +combination of (A) and (B) (without double counting). Any portion of the Performance Award (or the full Award, as applicable) that does not vest in connection with a Change in Control as contemplated herein will automatically terminate +upon such Change in Control; and +(iv) +Cash Payment for Stock Options/Stock Appreciation Rights. Without the consent of any Participant affected +thereby, the Administrator may determine that some or all Participants holding outstanding vested and exercisable Options and/or Stock Appreciation Rights shall receive, with respect to some or all of the Shares subject to such Options +and/or Stock Appreciation Rights, as of the effective date of any such Change in Control, cash in an amount equal to the greater of the excess of (A) the highest sales price of the shares on the New York Stock Exchange (or any successor +exchange that is the primary stock exchange for trading of Shares) on the date immediately prior to the effective date of such Change in Control or (B) the highest price per share actually paid in connection with any Change in Control +over the exercise price per share of such Options and/or Stock Appreciation Rights. +14. Performance-Based Compensation +(a) +General. The Administrator may establish performance criteria and level of achievement versus such criteria +that shall determine the number of Shares to be granted, retained, vested, issued or issuable under or in settlement of or the amount payable pursuant to an Award, which criteria may be based on performance criteria established by the +Administrator, including, without limitation, standards of financial performance and/or personal performance evaluations. +(b) +Performance Criteria. For purposes of this Plan, the performance criteria selected by the Administrator may +include, without limitation, an objectively determinable measure of performance relating to any one or more of the following performance criteria, or derivations of such performance criteria, either individually, alternatively or in any +combination, applied to either the Company as a whole or to a business unit, division, line or Subsidiary, either individually, alternatively or in any combination, and measured either annually or cumulatively over a period of years, on +an absolute basis or relative to a pre-established target, to previous years' results or to an index or indices or a designated comparison group or groups, in each case as specified by the Administrator: (i) net earnings or earnings per +share (including earnings before interest, taxes, depreciation and/or amortization); (ii) income, net income or operating income; (iii) revenues; (iv) net sales; (v) return on sales; (vi) return on equity; (vii) return on capital +(including return on total capital or return on invested capital); (viii) return on assets or net assets; (ix) earnings per share; (x) economic or business value added measurements; (xi) return on +2023 PROXY STATEMENT +B-12 +TABLE OF CONTENTS +invested capital; (xii) return on operating revenue; (xiii) cash flow (before or after dividends); +(xiv) stock price; (xv) total stockholder return; (xvi) market capitalization; (xvii) economic value added; (xviii) debt leverage (debt to capital); (xix) operating profit or net operating profit; (xx) operating margin or profit margin; +(xxi) cash from operations; (xxii) market share; (xxiii) product development or release schedules; (xxiv) new product innovation; (xxv) cost reductions; (xxvi) customer acquisition or retention; (xxvii) customer service; (xxviii) customer +satisfaction; or (xxix) any other performance target established by the Administrator as it deems appropriate. In the event that, during any performance period, any recapitalization, reorganization, merger, acquisition, divestiture, +consolidation, spin-off, combination, liquidation, dissolution, sale of assets or other similar corporate transaction or event, or any other extraordinary event or circumstance occurs which has the effect, as determined by the Administrator, in +its sole and absolute discretion, of distorting the applicable performance criteria involving the Company, including, without limitation, changes in accounting standards, the Administrator may adjust or modify, as determined by the +Administrator, in its sole and absolute discretion, the calculation of the performance goals, to the extent necessary to prevent reduction or enlargement of the Participants’ Awards under the Plan for such performance period attributable to +such transaction, circumstance or event. All determinations that the Administrator makes shall be conclusive and binding on all persons for all purposes. The Administrator retains the right to reduce any Award below the maximum amount that +could be paid based on the degree to which the performance criteria related to such Award were attained. +15. Transferability +Unless the Administrator determines otherwise, each Award may not be sold, transferred, pledged, assigned or +otherwise alienated or hypothecated by a Participant other than by will or the laws of descent and distribution, and each Option or Stock Appreciation Right shall be exercisable only by the Participant during his or her lifetime. To the extent +permitted by the Administrator, the person to whom an Award is initially granted (the “Grantee”) may transfer an Award to any “family member” of the Grantee (as such term is defined in Section 1(a)(5) of the General Instructions to Form S-8 +under the Securities Act of 1933, as amended (“Form S-8”)), to trusts solely for the benefit of such family members and to partnerships in which such family members and/or trusts are the only partners; provided, however, that (i) as a condition +thereof, the transferor and the transferee must execute a written agreement containing such terms as specified by the Administrator and (ii) the transfer is pursuant to a gift or a domestic relations order to the extent permitted under the +General Instructions to Form S-8. Except to the extent specified otherwise in the agreement the Administrator provides for the Grantee and transferee to execute, all vesting, exercisability and forfeiture provisions that are conditioned on the +Grantee's continued employment or service shall continue to be determined with reference to the Grantee's employment or service (and not to the status of the transferee) after any transfer of an Award pursuant to this Section 15. +16. Suspension, Termination or Recovery of Awards and Payments Thereunder +Except as otherwise provided by the Administrator, if at any time (including after a notice of exercise has +been delivered or an award has vested) the Company's chief executive officer or any other person designated by the Administrator (each such person, an “Authorized Officer”) reasonably believes that a Participant may have committed an Act of +Misconduct as described in this Section 16, the Authorized Officer, Administrator or the Board may suspend the Participant's rights to exercise any Option, to vest in an Award, and/or to receive payment for or receive Shares in settlement of an +Award pending a determination of whether an Act of Misconduct has been committed. +If the Administrator or an Authorized Officer determines a Participant has committed an Act of Misconduct, +then except as otherwise provided by the Administrator, including through any agreement approved by the Administrator, (i) neither the Participant nor his or her estate nor transferee shall be entitled to exercise any Option or Stock +Appreciation Right whatsoever, vest in or have the restrictions on an Award lapse, or otherwise receive payment of an Award, (ii) the Participant will forfeit all outstanding Awards and (iii) the Participant may be required, at the +Administrator's sole and absolute discretion, to return and/or repay to the Company any then unvested Shares previously issued under the Plan. In making such determination, the Administrator or an Authorized Officer shall give the Participant +an opportunity to appear and present evidence on his or her behalf at a hearing before the Administrator or its designee or an opportunity to submit written comments, documents, information and arguments to be considered by the Administrator. +In addition to the foregoing, the Administrator may recover Awards made under the Plan and payments under or +gain in respect of any Award in accordance with the Company's Policy for Recovery of Incentive Compensation or any successor or additional clawback or recoupment policy, as such policy or policies may be amended and in effect from time to time, +or as otherwise required by applicable law or applicable stock exchange listing standards, including, without limitation, Section 10D of the Act. +2023 PROXY STATEMENT +B-13 +TABLE OF CONTENTS +17. Compliance with Laws and Regulations +This Plan, the grant, issuance, vesting, exercise and settlement of Awards thereunder, and the obligation of +the Company to sell, issue, deliver or remove any restrictions on Shares under such Awards, shall be subject to all applicable foreign, federal, state and local laws, rules and regulations, stock exchange rules and regulations, and to such +approvals by any governmental or regulatory agency as may be required. The Company shall not be required to register in a Participant's name or deliver any Shares prior to the completion of any registration or qualification of such shares under +any foreign, federal, state or local law or any ruling or regulation of any government body which the Administrator shall determine to be necessary or advisable. To the extent the Company is unable to or the Administrator deems it infeasible to +obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company's counsel to be necessary to the lawful issuance and sale of any Shares hereunder, the Company and its Subsidiaries shall be relieved of any +liability with respect to the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained. No Option shall be exercisable and no Shares shall be issued and/or transferable under any other Award unless +a registration statement with respect to the Shares underlying such Option is effective and current or the Company has determined that such registration is unnecessary. +In the event an Award is granted to or held by a Participant who is employed or providing services outside +the United States, the Administrator may, in its sole and absolute discretion, modify the provisions of the Plan or of such Award as they pertain to such individual to comply with applicable foreign law or to recognize differences in local law, +currency or tax policy. The Administrator may also impose conditions on the grant, issuance, exercise, vesting, settlement or retention of Awards in order to comply with such foreign law and/or to minimize the Company's obligations with respect +to tax equalization for Participants employed outside their home country. +18. Withholding +To the extent required by applicable federal, state, local or foreign law, a Participant shall be required to +satisfy, in a manner satisfactory to the Company, any withholding tax obligations that arise by reason of an Option exercise, disposition of Shares issued under an Incentive Stock Option, the grant, vesting or settlement of an Award, an +election pursuant to Section 83(b) of the Code or otherwise with respect to an Award. To the extent a Participant makes an election under Section 83(b) of the Code, within ten days of filing such election with the Internal Revenue Service, the +Participant must notify the Company in writing of such election. The Company and its Subsidiaries shall not be required to issue Shares, make any payment or to recognize the transfer or disposition of Shares until all such obligations are +satisfied. The Administrator may provide for or permit these obligations to be satisfied through the mandatory or elective sale of Shares and/or by having the Company withhold a portion of the Shares that otherwise would be issued to him or her +upon exercise of the Option or the vesting or settlement of an Award, or by tendering Shares previously acquired. +19. Administration of the Plan +(a) +Administrator of the Plan. The Plan shall be administered by the Administrator who shall be the Compensation +Committee of the Board or, in the absence of a Compensation Committee, the Board itself. Any power of the Administrator may also be exercised by the Board, except to the extent that the grant or exercise of such authority would cause +any Award or transaction to become subject to (or lose an exemption under) the short-swing profit recovery provisions of Section 16 of the Act. To the extent that any permitted action taken by the Board conflicts with action taken by +the Administrator, the Board action shall control. The Compensation Committee may by resolution authorize one or more officers of the Company to perform any or all things that the Administrator is authorized and empowered to do or +perform under the Plan, and for all purposes under this Plan, such officer or officers shall be treated as the Administrator; provided, however, that no such officer shall designate himself or herself as a recipient of any Awards +granted under authority delegated to such officer and that any delegation of the power to grant Awards to an officer shall otherwise be consistent with the requirements of Section 157(c) of the Delaware General Corporation Law. The +Compensation Committee hereby designates the Company's chief executive officer, the Company's chief financial officer, the Secretary of the Company, and the head of the Company's human resource function to assist the Administrator in +the administration of the Plan and execute agreements evidencing Awards made under this Plan or other documents entered into under this Plan on behalf of the Administrator or the Company. In addition, the Compensation Committee may +delegate any or all aspects of the day-to-day administration of the Plan to one or more officers or employees of the Company or any Subsidiary and/or to one or more agents. +2023 PROXY STATEMENT +B-14 +TABLE OF CONTENTS +(b) +Powers of Administrator. Subject to the express provisions of this Plan, the Administrator shall be +authorized and empowered to do all things that it determines to be necessary or appropriate in connection with the administration of this Plan, including, without limitation: (i) to prescribe, amend and rescind rules and regulations +relating to this Plan and to define terms not otherwise defined herein; (ii) to determine which persons are Participants, to which of such Participants, if any, Awards shall be granted hereunder and the timing of any such Awards; +(iii) to grant Awards to Participants and determine the terms and conditions thereof, including the number of Shares subject to Awards and the exercise or purchase price of such Shares and the circumstances under which Awards become +exercisable or vested or are forfeited or expire, which terms may but need not be conditioned upon the passage of time, continued employment, the satisfaction of performance criteria, the occurrence of certain events, or other factors; +(iv) to establish and verify the extent of satisfaction of any performance goals or other conditions applicable to the grant, issuance, exercisability, vesting and/or ability to retain any Award; (v) to prescribe and amend the terms of +the agreements or other documents evidencing Awards made under this Plan (which need not be identical) and the terms of or form of any document or notice required to be delivered to the Company by Participants under this Plan; (vi) to +determine the extent to which adjustments are required pursuant to Section 13 of the Plan; (vii) to interpret and construe this Plan, any rules and regulations under this Plan and the terms and conditions of any Award granted hereunder, +and to make exceptions to any such provisions if the Administrator, in good faith, determines that it is necessary to do so in light of extraordinary circumstances and for the benefit of the Company; (viii) to approve corrections in the +documentation or administration of any Award; and (ix) to make all other determinations deemed necessary or advisable for the administration of this Plan. The Administrator may, in its sole and absolute discretion, without amendment to +the Plan, waive or amend the operation of Plan provisions respecting exercise after termination of employment or service to the Company or an Affiliate and, except as otherwise provided herein, adjust any of the terms of any Award. The +Administrator may also (A) accelerate the date on which any Award granted under the Plan becomes exercisable or (B) accelerate the vesting date or waive or adjust any condition imposed hereunder with respect to the vesting or +exercisability of an Award, provided that the Administrator, in good faith, determines that such acceleration, waiver or other adjustment is necessary or desirable. For the avoidance of doubt, notwithstanding anything in the Plan to the +contrary, no Award outstanding under the Plan may be repriced, re-granted through cancellation or otherwise amended to reduce the exercise price applicable thereto (other than with respect to adjustments made in connection with a +transaction or other change in the Company's capitalization as described in Section 13 of the Plan) without the approval of the Company's stockholders. +(c) +Determinations by the Administrator. All decisions, determinations and interpretations by the Administrator +regarding the Plan, any rules and regulations under the Plan and the terms and conditions of or operation of any Award granted hereunder, shall be final and binding on all Participants, beneficiaries, heirs, assigns or other persons +holding or claiming rights under the Plan or any Award. The Administrator shall consider such factors as it deems relevant, in its sole and absolute discretion, to making such decisions, determinations and interpretations including, +without limitation, the recommendations or advice of any officer or other employee of the Company and such attorneys, consultants and accountants as it may select. +(d) +Subsidiary Awards. In the case of a grant of an Award to any Participant employed by a Subsidiary, such grant +may, if the Administrator so directs, be implemented by the Company issuing any subject Shares to the Subsidiary, for such lawful consideration as the Administrator may determine, upon the condition or understanding that the Subsidiary +will transfer the Shares to the Participant in accordance with the terms of the Award specified by the Administrator pursuant to the provisions of the Plan. Notwithstanding any other provision hereof, such Award may be issued by and in +the name of the Subsidiary and shall be deemed granted on such date as the Administrator shall determine. +(e) +Indemnification of Administrator. Neither any member nor former member of the Administrator nor any +individual to whom authority is or has been delegated shall be personally responsible or liable for any act or omission in connection with the performance of powers or duties or the exercise of discretion or judgment in the +administration and implementation of the Plan. Each person who is or shall have been a member of the Administrator shall be indemnified and held harmless by the Company from and against any cost, liability or expense imposed or incurred +in connection with such person's or the Administrator's taking or failing to take any action under the Plan. Each such person shall be justified in relying on information furnished in connection with the Plan's administration by any +employee, officer, agent or expert employed or retained by the Administrator or the Company. +20. Amendment of the Plan or Awards +The Board may amend, alter or discontinue this Plan and the Administrator may amend or alter any agreement or +other document evidencing an Award made under this Plan but, except as provided pursuant to the provisions of Section 13 of the Plan, no such amendment shall, without the approval of the stockholders of the Company: +(a) +increase the maximum number of Shares for which Awards may be granted under this Plan; +2023 PROXY STATEMENT +B-15 +TABLE OF CONTENTS +(b) +reduce the price at which Options or Stock Appreciation Rights may be granted below the price provided for in Section 6(a) of the Plan; +(c) +reduce the exercise price of outstanding Options or Stock Appreciation Rights; +(d) +extend the term of this Plan; +(e) +change the class of persons eligible to be Participants; or +(f) +otherwise amend the Plan in any manner requiring stockholder approval by law or under the New York Stock Exchange listing requirements (or the listing +requirements of any successor exchange that is the primary stock exchange for trading of Shares). +No amendment or alteration to the Plan or an Award or Award Agreement shall be made which would impair the +rights of the holder of an Award, without such holder's consent, provided that no such consent shall be required if the Administrator determines in its sole and absolute discretion and prior to the date of any Change in Control that such +amendment or alteration either is required or advisable in order for the Company, the Plan or the Award to satisfy any law or regulation or to meet the requirements of or avoid adverse financial accounting consequences under any accounting +standard. In addition, the Plan may not be amended in any way that causes the Plan to fail to comply with or be exempt from Section 409A of the Code, unless the Board expressly determines to amend the Plan to be subject to Section 409A of the +Code. +21. No Liability of Company +The Company and any Subsidiary or affiliate which is in existence or hereafter comes into existence shall not +be liable to a Participant or any other person as to: (a) the non-issuance or sale of Shares as to which the Company has been unable to obtain from any regulatory body having jurisdiction the authority deemed by the Company's counsel to be +necessary to the lawful issuance and sale of any Shares hereunder and (b) any tax consequence expected, but not realized, by any Participant or other person due to the grant, receipt, exercise, settlement of any Award granted hereunder. +22. Non-Exclusivity of Plan +Neither the adoption of this Plan by the Board nor the submission of this Plan to the stockholders of the +Company for approval shall be construed as creating any limitations on the power of the Board or the Administrator to adopt such other incentive arrangements as either may deem desirable, including without limitation, the granting of restricted +stock or stock options otherwise than under this Plan , and such arrangements may be either generally applicable or applicable only in specific cases. +23. Governing Law +This Plan and any agreements or other documents hereunder shall be interpreted and construed in accordance +with the laws of Delaware and applicable federal law. Any reference in this Plan or in the agreement or other document evidencing any Awards to a provision of law or to a rule or regulation shall be deemed to include any successor law, rule or +regulation of similar effect or applicability. +24. Waiver of Jury Trial +By accepting an Award under the Plan, each Participant waives any right to a trial by jury in any action, +proceeding or counterclaim concerning any rights under the Plan and any Award, or under any amendment, waiver, consent, instrument, document or other agreement delivered or which in the future may be delivered in connection therewith, and +agrees that any such action, proceedings or counterclaim will be tried before a court and not before a jury. By accepting an Award under the Plan, each Participant certifies that no officer, representative, or attorney of the Company has +represented, expressly or otherwise, that the Company would not, in the event of any action, proceeding or counterclaim, seek to enforce the foregoing waivers. Notwithstanding anything to the contrary in the Plan, nothing herein is to be +construed as limiting the ability of the Company and a Participant to agree to submit disputes arising under the terms of the Plan or any Award made hereunder to binding arbitration or as limiting the ability of the Company to require any +eligible individual to agree to submit such disputes to binding arbitration as a condition of receiving an Award hereunder. +2023 PROXY STATEMENT +B-16 +TABLE OF CONTENTS +25. No Right to Employment, Reelection or Continued Service +Nothing in this Plan or an Award Agreement shall interfere with or limit in any way the right of the Company, +its Subsidiaries and/or its affiliates to terminate any Participant's employment, service on the Board or service for the Company at any time or for any reason not prohibited by law, nor shall this Plan or an Award itself confer upon any +Participant any right to continue his or her employment or service for any specified period of time. Neither an Award nor any benefits arising under this Plan shall constitute an employment contract with the Company, any Subsidiary and/or its +affiliates. Subject to Sections 4 and 20 of the Plan, this Plan and the benefits hereunder may be terminated at any time in the sole and exclusive discretion of the Board without giving rise to any liability on the part of the Company, its +Subsidiaries and/or its affiliates. +26. Unfunded Plan +The Plan is intended to be an unfunded plan. Participants are and shall at all times be general creditors of +the Company with respect to their Awards. If the Administrator or the Company chooses to set aside funds in a trust or otherwise for the payment of Awards under the Plan, such funds shall at all times be subject to the claims of the creditors +of the Company in the event of its bankruptcy or insolvency. +Effective as of February 8, 2023 +2023 PROXY STATEMENT +B-17 +TABLE OF CONTENTS +TABLE OF CONTENTS \ No newline at end of file diff --git a/raw/proxies/0000110471/0001140361-23-013098/proxy_rpt.txt b/raw/proxies/0000110471/0001140361-23-013098/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..83a4fd007f2da63043318d06fdf7d2631bd83328 --- /dev/null +++ b/raw/proxies/0000110471/0001140361-23-013098/proxy_rpt.txt @@ -0,0 +1,49 @@ +CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS +Since January 2, 2022, the Company has not engaged in any “related person” transactions with any person who +is or was during the last fiscal year a director, executive officer, nominee for director or holder of 5% or more of Company voting securities, affiliate or any member of the immediate family of the foregoing persons. +RELATED PERSON TRANSACTIONS POLICY +Wolverine Worldwide's Board adopted written policies and procedures regarding related person transactions. +They require the Governance Committee to review and either approve or disapprove the Company entering into any Interested Transactions (defined below). If advance approval is not feasible, then the Governance Committee must review and ratify +the Interested Transaction at its next meeting. +Interested Transaction +Any transaction, arrangement or relationship or series of similar transactions, arrangements or +relationships (including any indebtedness or guarantee of indebtedness) in which: +(1) +The aggregate amount involved is or is expected to exceed $120,000 since the beginning of Wolverine +Worldwide's last completed fiscal year; +(2) +Wolverine Worldwide is a participant; and +(3) +Any Related Person (defined below) has or will have a direct or indirect interest. +An Interested Transaction does not include: +(1) +Any employment compensation paid to an executive officer of the Company if the Compensation Committee +approved or recommended to the Board of Directors for approval of such compensation; +(2) +Any compensation paid to a director for service as a director of the Company; +(3) +Any transaction in which a Related Person has an indirect interest solely as a result of being (i) a +director or, together with all other Related Persons, as defined below, a less than 10% beneficial owner of an equity interest in another entity, or both, or (ii) a limited partner in a partnership in which the Related Person, together +with all other Related Persons, has an interest of less than 10%; +(4) +Any transaction in which the Related Person's interest arises solely from the ownership of the Company's +common stock and all holders of the Company's common stock received the same benefit on a pro rata basis (e.g., a dividend); or +(5) +Any transaction with another publicly traded company where the Related Person's interest arises solely +from the ownership of more than 5% of the Company's common stock and the ownership of a non-controlling interest in the other publicly traded company. +Related Person +Any: +(a) +Person who is or was at any point during the last fiscal year for which Wolverine Worldwide filed an +Annual Report on Form 10-K and Proxy Statement, an executive officer, director or, to the extent information regarding such nominee is being presented in a proxy or information statement relating to the election of that nominee as a +director, nominee for election as a director; +(b) +Beneficial owner of greater than five percent of Wolverine Worldwide's common stock; or +(c) +Immediate family member* of any of the foregoing. +* +Immediate family member is defined as a person's spouse, parents, stepparents, children, stepchildren, siblings, +mothers and fathers-in-law, sons- and daughters-in-law, and brothers- and sisters-in-law, and anyone residing in such person's home (other than a tenant or employee). +The Governance Committee considers whether the Interested Transaction is on terms no less favorable than +terms generally available to an unaffiliated third party under the same or similar circumstances, the extent of the Related Person's interest in the transaction, and other factors that it deems relevant. No director participates in any +discussion or approval of an Interested Transaction for which he or she is a Related Person, except to provide information to the Governance Committee. \ No newline at end of file diff --git a/raw/proxies/0000110471/0001140361-24-014365/proxy.txt b/raw/proxies/0000110471/0001140361-24-014365/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..d8c9f6a71a1c3dd7852dbe0b7d7459da387a7bc3 --- /dev/null +++ b/raw/proxies/0000110471/0001140361-24-014365/proxy.txt @@ -0,0 +1,6171 @@ +TABLE OF CONTENTS +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +Washington, D.C. 20549 +SCHEDULE 14A INFORMATION +Proxy Statement Pursuant to Section 14(a) of +the Securities Exchange Act of 1934 (Amendment No.  ) +Filed by the Registrant ☒ +Filed by a party other than the Registrant   ☐ +Check the appropriate box: +☐ +Preliminary Proxy Statement +☐ +Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +☒ +Definitive Proxy Statement +☐ +Definitive Additional Materials +☐ +Soliciting Material under § 240.14a-12 +Wolverine World Wide, Inc. +(Name of Registrant as Specified In Its Charter) +(Name of Person(s) Filing Proxy Statement, if other than the Registrant) +Payment of Filing Fee (Check all boxes that apply): +☒ +No fee required +☐ +Fee paid previously with preliminary materials +☐ +Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules +14a-6(i)(1) and 0-11 +TABLE OF CONTENTS +TABLE OF CONTENTS +LETTER FROM THE CHAIRMAN +March 20, 2024 +Dear Fellow Shareholders, +2023 was an important year of change and transition for Wolverine Worldwide. After a difficult first half of +the year, the Board of Directors recognized the need to improve the Company’s product pipeline and marketing strategy, strengthen the balance sheet, and enhance revenue and operating income. A substantial transformation of the business was +necessary, and I am pleased to share that management has been successfully executing on the transformation and building a strong foundation for sustainable long-term growth. +The Company made significant progress in the back half of the year, stabilizing the business and reorienting +as a consumer-focused global brand builder. To drive execution of this strategy, the Board appointed company veteran Chris Hufnagel as President and Chief Executive Officer in August. Chris has extensive brand-building experience and deep +knowledge of our business and industry. Under his leadership the Company is moving swiftly in the right direction, building the talent, marketing skills and product development capabilities necessary to restore luster and power to our storied +brands. +The Board has continued to actively engage with Chris and the management team in developing and overseeing +execution of the Company’s strategy. To ensure the Board is equipped with the right mix of skills and expertise, in 2023 we appointed three new Directors who bring a diverse range of backgrounds and industry experiences that have helped guide and +support the Company’s ongoing turnaround efforts. We are pleased with the progress achieved last year and confident the team will continue to make meaningful progress in the year ahead. +The Board is committed to delivering superior returns for our loyal shareholders, and believes the future is +bright for Wolverine Worldwide. +On behalf of the entire Board of Directors, thank you for your continued support. +Sincerely, +Tom Long +Chairman of the Board +2024 PROXY STATEMENT +1 +TABLE OF CONTENTS +LETTER FROM THE CEO +March 20, 2024 +Dear Fellow Shareholders, +We took fast and bold action in 2023 to set the Company on a better path to deliver greater returns for you, +our shareholders. I was named as Wolverine Worldwide’s new President and Chief Executive Officer in August, and immediately galvanized our team with an actionable path forward and new Vision to become consumer-obsessed, global brand builders. +We took immediate steps to address challenges head-on, particularly in product development and marketing. We +quickly developed a comprehensive turnaround plan to stabilize the Company, transform the organization, and ultimately inflect to growth. As a result of our team’s urgent and effective execution, I am proud and encouraged to say that Wolverine +Worldwide is a much different and stronger company today than it was just a few months ago. +• +A Focused Portfolio – We rationalized our portfolio through a host of significant actions, including the divestiture of the Sperry brand, the Keds +brand, and several other non-core assets. As a result, our portfolio is tightly aligned around brands that design innovative, trend-right apparel and footwear that allow their consumers to live healthier and more productive lives. +• +A Consumer-Obsessed, Brand-Building Organization – In November we completed the largest restructure and redesign in the Company’s history, resulting in +a more efficient and more capable organization aligned with our Vision. We added consumer-focused talent in many of our key brand roles and established The Collective, a center-of-excellence created to elevate consumer insights, market +intelligence, trend monitoring, and innovation. +• +A More Profitable Business – We developed a plan to meaningfully expand operating margin in 2024 and again generate strong cash flow – as our model has +done so effectively in the past – driven by significant gross margin expansion and aggressive profit improvement initiatives executed over the past few months. +• +The Capacity to Invest – Through our profit improvement work, we created the capacity to invest in elevated brand marketing and key strategic +capabilities. We believe these investments are essential to better position our brands for growth, while still taking an important step in our transformation to meaningfully improve profitability – a balanced approach committed to +long-term, sustainable performance and returns. +• +A Healthier Balance Sheet – We aggressively reduced our inventory throughout the year, and our portfolio management actions generated approximately +$380 million of proceeds in 2023 through the first month of 2024. As a result, the Company’s debt level is the lowest in over two and half years, and its balance sheet is much healthier, with line of sight to drive further improvement in +2024. +We are executing on our Vision to become a consumer-obsessed builder of great global brands and are aligning +the organization, top to bottom, around doing three things exceptionally well: +1. +Designing Awesome Products – innovative, trend-right, priced-right, covetable products informed by deep insights that solve for consumers’ wants and +needs. +2. +Telling Amazing Stories – differentiated, meaningful stories that engage and excite consumers. +3. +Driving the Business – a constant and relentless pursuit to build our brands and to be better tomorrow than today. +2024 PROXY STATEMENT +2 +TABLE OF CONTENTS +Our brands sit at the epicenter of these activities, and we are directly investing in our brand talent, +equipping them with best-in-class technology and processes, and facilitating enhanced collaboration between them. Our improved corporate structure enables our brands to focus on their consumers, product, and marketing and provides additional +expertise on key capabilities deemed to be strategically important – including consumer insights, trend, innovation, and brand protection. +Our brands possess incredible, authentic heritages combined with a long legacy of tremendous product +innovation in consumer categories that we believe align well with long-term consumer trends. Our platforms are now more efficent and better aligned to enable our brands to grow. +Our Vision is clear, and our teams are energized – their work has been nothing short of remarkable, and we +have achieved tremendous progress in a very short period of time. I believe our opportunity is significant and the future of Wolverine Worldwide is bright – I couldn’t be more excited about the work ahead. +Thank you for your continued support of the Company. +Sincerely, +Christopher Hufnagel +President and Chief Executive Officer +2024 PROXY STATEMENT +3 +TABLE OF CONTENTS +NOTICE OF 2024 ANNUAL MEETING OF SHAREHOLDERS +10:00 a.m. EDT, May 2, 2024 +Wolverine World Wide, Inc. +9341 Courtland Drive, NE +Rockford, MI 49351 +March 20, 2024 +To Our Shareholders: +We invite you to attend the 2024 Annual Meeting of Shareholders (the “Annual Meeting”) of Wolverine World +Wide, Inc. (“we,” “us,” the “Company,” “Wolverine Worldwide” or “Wolverine”). The meeting will be held on May 2, 2024, at 10:00 a.m. EDT in a virtual format designed to provide shareholders with the same rights and opportunities to participate +that they would have at an in-person meeting. At the Annual Meeting, shareholders will vote on the following items: +(1) +Election of the three director nominees named in the Proxy Statement for three-year terms expiring in 2027 +(2) +Advisory resolution approving compensation for the Company's named executive officers (“NEOs,” and each an “NEO”) +(3) +Ratification of the Audit Committee's appointment of Ernst & Young LLP as the Company's independent registered public accounting firm for fiscal +year 2024 +(4) +Approval of the Stock Incentive Plan of 2024 +Shareholders may also transact such other business as may properly come before the Annual Meeting or any +adjournment or postponement thereof. +Shareholders of record as of the close of business on March 4, 2024, the record date, are entitled to +participate in and vote at the Annual Meeting. To participate in the Annual Meeting, including to vote and ask questions, shareholders of record should go to the meeting website at www.virtualshareholdermeeting.com/WWW2024, enter the 16-digit +control number found on your proxy card or Notice of Internet Availability of Proxy Materials (“Notice of Internet Availability”), and follow the instructions on the website. If your shares are held in street name and your voting instruction form +or Notice of Internet Availability indicates that you may vote those shares through the http://www.proxyvote.com website, then you may access, participate in, and vote at the annual meeting with the 16-digit access code indicated on that voting +instruction form or Notice of Internet Availability. Otherwise, shareholders who hold their shares in street name should contact their bank, broker or other nominee (preferably at least 5 days before the annual meeting) and obtain a “legal proxy” +in order to be able to attend, participate in or vote at the annual meeting. +Whether or not you plan to attend the Annual Meeting, you can ensure that your shares are represented at the +meeting by promptly voting and submitting your proxy by telephone or through the internet, or by completing, signing, dating and returning your proxy card in the enclosed envelope. Brokers are not permitted to vote on certain proposals and may +not vote on any of the proposals unless you provide voting instructions. Voting your shares will help to ensure that your interests are represented at the meeting. +Rules for the conduct of the Annual Meeting will be available on the meeting website. For information about +how to view the rules and the list of shareholders entitled to vote at the Annual Meeting during the ten days preceding the Annual Meeting, please visit our 2024 Annual Meeting website at www.wolverineworldwide.com/2024annualmeeting. If you +encounter any difficulties accessing the virtual meeting during check-in or during the meeting, please call the technical support number that will be posted on the virtual shareholder meeting login page. +2024 PROXY STATEMENT +4 +TABLE OF CONTENTS +This Notice of 2024 Annual Meeting of Shareholders, Proxy Statement, proxy or voting instruction card and +Annual Report for our fiscal year ended December 30, 2023 are being mailed or made available to shareholders starting on or about March 20, 2024. +By Order of the Board of Directors, +David A. Latchana +Secretary +Important Notice Regarding the Availability of Proxy Materials for the Annual +Meeting of Shareholders to be held on May 2, 2024. +Wolverine's Proxy Statement for the 2024 Annual Meeting of Shareholders and the +Annual Report to Shareholders for the fiscal year ended December 30, 2023, are available at: www.wolverineworldwide.com/2024annualmeeting. +2024 PROXY STATEMENT +5 +TABLE OF CONTENTS +Table of Contents +Letter from the Chairman +1 +Letter from the CEO +2 +Notice of 2024 Annual Meeting of Shareholders +4 +Proxy Statement Summary +8 +Our Brand Portfolio +8 +Our Strategic Vision +8 +Matters to be Voted Upon +9 +Election of Directors for Terms Expiring in 2027 +9 +Board Highlights +10 +Board is Composed of Directors with the Right Mix of Skills and +Experiences +10 +Shareholder Engagement +10 +Corporate Governance Highlights +11 +Meeting Information +11 +Corporate Governance +12 +Board of Directors +12 +Board Composition +12 +Director Nominations +13 +Director Onboarding and Ongoing Education Initiatives +14 +Board Self-Assessment +14 +Risk Oversight +14 +Environmental and Social Highlights +15 +Environmental, Sustainability, and Responsible Sourcing +15 +Protecting Our Planet +15 +Sustainability +16 +Responsible Sourcing & Supply Chain +16 +Diversity, Equity & Inclusion +16 +Our Workforce at a Glance +16 +DE&I Initiatives: A Cornerstone of Our Workspace Culture +17 +Employee Resource Groups +17 +Communication & Learning +18 +Supporting our Communities +18 +Code of Business Conduct and Accounting and Finance Code of +Ethics +19 +Shareholder Communications Policy +19 +Proposal 1 – Election of Directors for Terms Expiring in 2027 +20 +Director Nominees with Proposed Terms Expiring in 2027 +21 +Directors with Terms Expiring in 2025 +24 +Directors with Terms Expiring in 2026 +28 +Board Leadership +31 +Director Independence +31 +Board Committees, Meetings and Meeting Attendance +32 +Director Compensation in Fiscal Year 2023 +34 +Non-Employee Director Stock Ownership Guidelines +36 +Securities Ownership of Officers and Directors and Certain +Beneficial Owners +37 +Five Percent Shareholders +37 +Stock Ownership by Management and Others +38 +Compensation Discussion and Analysis +40 +Summary +40 +Compensation Philosophy and Objectives +40 +Compensation Decisions in Context: Key 2023 Accomplishments +40 +2023 Compensation Program Overview +41 +Pay at Risk +41 +Long-Term Incentive Program Mix +42 +Compensation Best Practices +42 +Compensation Discussion and Analysis +43 +2023 Compensation Program Overview +47 +Setting Targets +43 +Base Salary +43 +Annual Bonus +44 +Performance Bonus +44 +Annual Strategy Priorities +45 +Long-Term Incentive Compensation +47 +Performance Awards for the 2023-2025 Performance Period +47 +2021-2023 Performance Stock Units +48 +Restricted Stock Unit Awards +48 +Benefits +49 +Retirement, Deferred Compensation and Welfare Plans +49 +Perquisites +49 +Post-Employment Compensation +49 +Say on Pay Advisory Vote +50 +Compensation Setting Process +50 +Setting Targets +50 +Competitive Philosophy and Competitive Market Data +50 +Peer Group +51 +CEO Role +51 +Compensation Consultant Role +51 +Other Compensation Policies and Practices +52 +NEO Stock Ownership Guidelines +52 +Stock Hedging and Pledging Policies +52 +Clawback Policy +52 +Impact of Accounting and Tax Treatments on Compensation +52 +Compensation Committee Report +53 +Summary Compensation Table +54 +Grants of Plan-Based Awards in Fiscal Year 2023 +56 +Outstanding Equity Awards at 2023 Fiscal Year-End +57 +Option Exercises and Stock Vested in Fiscal Year 2023 +60 +Pension Plans and 2023 Pension Benefits +61 +Qualified Pension Plans +61 +Supplemental Executive Retirement Plan +61 +Pension Benefits in Fiscal Year 2023 +62 +Non-Qualified Deferred Compensation +63 +Potential Payments Upon Termination or Change in Control +64 +Benefits Triggered by Termination for Cause or Voluntary +Termination +64 +Benefits Triggered by Termination Other than for Cause or for +Good Reason not in Connection with a Change in Control +64 +Benefits Triggered Upon a Change in Control +65 +Benefits Triggered by Retirement, Death or Permanent Disability +67 +Description of Restrictive Covenants that Apply During and After +Termination of Employment +67 +Estimated Payments on Termination or Change in Control +68 +CEO Pay Ratio +69 +Pay vs. Performance +70 +Proposal 2 – Advisory Resolution to Approve Executive +Compensation +73 +Proposal 3 – Ratification of Appointment of Independent +Registered Public Accounting Firm +74 +Audit Committee Report +75 +Independent Registered Public Accounting Firm +76 +2024 PROXY STATEMENT +6 +TABLE OF CONTENTS +Proposal 4 – Approval of Stock Incentive Plan of 2024 +77 +Overview +77 +Why You Should Vote For the Plan +77 +Management of Dilution and Burn Rate +77 +Reasonable Annual Grant Levels +78 +Overhang +78 +Promotion of Good Corporate Governance Practices +78 +Plan Summary +79 +Administration +79 +Eligibility +79 +Shares Subject to the Plan and to Awards +80 +Stock Options +80 +Stock Appreciation Rights +81 +Restricted Stock and Restricted Stock Units +81 +Stock Awards +81 +Incentive Bonuses +81 +Deferral of Gains +82 +Performance Criteria +82 +Suspension or Termination of Awards +82 +Settlement of Awards +82 +No Repricing Without Shareholder Approval +83 +Amendment and Termination +83 +Change in Control +83 +Adjustments +84 +Transferability +84 +No Right to Company Employment +84 +Effective Date and Termination of the Plan +84 +Federal Income Tax Treatment +84 +Stock Options +85 +Stock Appreciation Rights +85 +Restricted Stock and Restricted Stock Units +85 +Stock Awards +86 +Incentive Bonuses +86 +Certain Change in Control Payments +86 +Plan Benefits +86 +Registration with the SEC +86 +Equity Compensation Plan Information +86 +Vote Required and Board Recommendation +87 +Related Party Matters +88 +Certain Relationships and Related Transactions +88 +Related Person Transactions Policy +88 +Additional Information +89 +Shareholders List +89 +Director and Officer Indemnification +89 +Delinquent Section 16 Reports +89 +Shareholder Proposals for Inclusion in Next Year's Proxy Statement +89 +Other Shareholder Proposals for Presentation at Next Year's Annual +Meeting +89 +Voting Securities +89 +Conduct of Business +90 +Vote Required for Election and Approval +90 +Voting Results of the Annual Meeting +90 +Attending the Annual Meeting +91 +Manner for Voting Proxies +91 +Revocation of Proxies +91 +Solicitation of Proxies +91 +Delivery of Documents to Shareholders Sharing an Address +91 +Access to Proxy Statement and Annual Report +91 +Appendix A - Forward-Looking Statements and Non-GAAP +Reconciliation Tables +A-1 +Forward-Looking Statements +A-2 +Non-GAAP Reconciliation Tables +A-4 +Appendix B - Wolverine World Wide, Inc. Stock Incentive Plan of +2024 +B-1 +2024 PROXY STATEMENT +7 +TABLE OF CONTENTS +Proxy Statement Summary +This summary highlights key information that can be found in greater detail elsewhere in this Proxy Statement. +This summary does not contain all the information that shareholders should consider, and shareholders should read the entire Proxy Statement before voting. +Our Brand Portfolio +Wolverine Worldwide maintains a diverse portfolio of category-leading brands: +Our Strategic Vision +We are committed to a singular vision – becoming a consumer-obsessed builder of great global brands. Our +portfolio of brands is strategically aligned around designing innovative, trend-right apparel and footwear to allow consumers to live healthier and more productive lives. To grow our brands, we are aligning the organization, top to bottom, around +our Brand Building Model: +1. +Designing Awesome Products – innovative, trend-right, priced-right, covetable products – informed by deep +insights that solve for consumer’s wants and needs. +2. +Telling Amazing Stories – differentiated, meaningful stories – that engage consumers when and where they want to +be engaged. +3. +Driving the Business – a constant and relentless pursuit to build and protect the brand and to be better tomorrow +than today. +Our corporate structure enables our brands to focus on their consumers, product, and marketing by providing +platforms that efficiently drive operations and back-office activities, and centers-of-excellence help to create competitive advantages for the brands on capabilities deemed to be strategically important – including consumer insights, trend, and +innovation. +2024 PROXY STATEMENT +8 +TABLE OF CONTENTS +MATTERS TO BE VOTED UPON +Shareholders are being asked to vote on the following matters at the 2024 Annual Meeting of Shareholders: +PROPOSAL +BOARD VOTE +RECOMMENDATION +PAGE +REFERENCE +1. +Election of Three Directors for Terms Expiring in 2027 +FOR each Nominee +20 +2 +Advisory Resolution Approving NEO Compensation +FOR +73 +3 +Ratification of Ernst & Young LLP as Auditor for Fiscal Year 2024 +FOR +74 +4. +Approval of the Stock Incentive Plan of 2024 (the “Plan”) +FOR +77 +ELECTION OF DIRECTORS FOR TERMS EXPIRING IN 2027 +The Company's Board consists of ten directors. The Company's By-Laws establish three classes of directors with +each class serving three-year terms. +The Board has nominated three directors for election at the Annual Meeting, as outlined in the table below. +Each director nominee has been nominated to serve for a three-year term expiring at the annual meeting of shareholders to be held in 2027. The Board recommends that shareholders vote “ FOR ” each of the nominees named below. +Age +Director Since +Independent +Committees +Proposed Term Expiration +Other Public Company +Directorships +Brenda J. Lauderback +Chair, Denny’s Corporation; +Retired President, Wholesale and Retail Group, Nine West Group, Inc. +73 +2003 +✔ +Governance +(Chair) +2027 +Denny's Corporation +(Chair) +Sleep Number Corporation +Stacia Andersen +Former Executive Vice +President, Chief Customer Officer, PetSmart LLC +53 +2023 +✔ +Audit +2027 +None +DeMonty Price +Former President, Chief +Operating, Service and Values Officer, RH, formerly known as Restoration Hardware +62 +2023 +✔ +Compensation +and Human Capital +2027 +None +Detailed director biographies can be found on pages 21-30 of the Proxy Statement. +2024 PROXY STATEMENT +9 +TABLE OF CONTENTS +Board Highlights +The following charts illustrate key characteristics of the Company's Board as of the date of this Proxy +Statement: +Board is Composed of Directors with the Right Mix of Skills +and Experiences +The following chart lists the important experiences and attributes that the Company's directors possess: +Shareholder Engagement +As part of its ongoing shareholder engagement efforts, the Company reached out in early 2024 to shareholders +representing holders of approximately 73% of its outstanding shares held by institutional investors, and has held or expects to hold meetings or calls with all shareholders who accepted the Company's invitation. Discussions to date focused on +Company strategy, financial performance and governance. +2024 PROXY STATEMENT +10 +TABLE OF CONTENTS +Corporate Governance Highlights +Wolverine Worldwide is committed to a governance structure that provides strong shareholder rights and meaningful +accountability. +✔  Highly independent Board and Committees +✔  Independent Chairman of the Board +✔  Majority voting with director resignation +policy +✔  No supermajority vote requirements +✔  Shareholder right to act by written consent +✔  Annual Board and Committee self-evaluations +✔  Robust Board and executive succession planning, +including annual written director nominee evaluations +✔  Long-standing commitment to diversity +✔  Director onboarding orientation program and +ongoing education initiatives +✔  Active shareholder engagement practices +Meeting Information +The Company's Annual Meeting is scheduled to take place virtually, as set forth in the notice, on May 2, 2024, +at 10:00 a.m. EDT. The Company encourages you to vote your shares before the Annual Meeting. +2024 PROXY STATEMENT +11 +TABLE OF CONTENTS +Corporate Governance +Wolverine Worldwide is committed to the highest level of corporate governance, and the Board has adopted +Corporate Governance Guidelines to strengthen management accountability and promote long-term shareholder interests. +BOARD OF DIRECTORS +The shareholders elect directors to serve on the Company's Board of Directors (the “Board of Directors” or +“Board”). The Board oversees the management of the business by the Chief Executive Officer (“CEO”) and senior management. In addition to its general oversight function, the Board's responsibilities include, but are not limited to, the following: +• +Reviewing and approving the Company's financial and other key objectives and strategic business plans, and monitoring implementation of those plans and +the Company's success in meeting identified objectives +• +Selecting, evaluating and approving the compensation of the CEO and overseeing CEO succession planning +• +Providing advice and oversight regarding the selection, evaluation, development and compensation of management +• +Overseeing the Company's process for assessing and managing risk and mitigation activities +• +Nominating the Company’s director candidates and appointing committee members +• +Engaging in succession planning for the Board and key leadership roles on the Board and its committees +• +Shaping effective corporate governance +• +Reviewing and monitoring administration of policies and procedures to safeguard the integrity of the Company's business operations and financial +reporting and to promote compliance with applicable laws and regulations +Board Composition +Board Highlights +The Board prides itself on its ability to recruit and retain directors who have high personal and professional +integrity and have demonstrated exceptional ability and judgment to effectively serve shareholders' long-term interests. These skills and attributes will help the Company accomplish its most important strategic objectives, such as global +brand-building, investing in the Company's growth brands, direct-to-consumer and digital growth, powerful product, operational excellence, supply chain management, and international growth. The Board also values diversity (including with respect +to gender, race, ethnic and national background, and sexual orientation) and considers this an important factor in determining nominees for appointment and election, as evidenced by the current makeup of the Board, which includes four female +directors (two of whom are also racial/ethnic minorities) and one other director who is also a racial/ethnic minority. The Governance Committee’s director search process involves including women and minority candidates as part of the pool from +which Board nominees are chosen. The Board believes that its directors, including the nominees for election as directors at the Annual Meeting, have characteristics and valuable skills that provide the Company with the variety and depth of +knowledge, judgment and strategic vision necessary to provide effective oversight of the Company. +To help achieve the right mix of experience and expertise, and to assist in succession planning, the Board, at +the recommendation of the Governance Committee, has identified specified skills and attributes it desires its members to possess. The below graphic lists these skills and attributes and indicates which of the directors possess each. As shown, +these skills and attributes are well represented within the Board. +2024 PROXY STATEMENT +12 +TABLE OF CONTENTS +SKILLS & ATTRIBUTES +Totals +Andersen +Boromisa +Bricker +Gerber +Hufnagel +Kollat +Lauderback +Long +Price +Wilson-Thompson +Active Executive +1 +✔ +Brand Building +9 +✔ +✔ +✔ +✔ +✔ +✔ +✔ +✔ +✔ +Current or Former CEO +4 +✔ +✔ +✔ +✔ +Digital/eCommerce/IT +4 +✔ +✔ +✔ +✔ +Finance +6 +✔ +✔ +✔ +✔ +✔ +✔ +Footwear/Apparel +6 +✔ +✔ +✔ +✔ +✔ +✔ +Global Supply Chain +5 +✔ +✔ +✔ +✔ +✔ +International Business +10 +✔ +✔ +✔ +✔ +✔ +✔ +✔ +✔ +✔ +✔ +Marketing +7 +✔ +✔ +✔ +✔ +✔ +✔ +✔ +Public Company Governance +7 +✔ +✔ +✔ +✔ +✔ +✔ +✔ +Retail +9 +✔ +✔ +✔ +✔ +✔ +✔ +✔ +✔ +✔ +The Governance Committee reviews with the Board on an annual basis the skills, experience and characteristics +desired of Board members in the context of the current makeup of the Board. The Board, with the assistance of the Governance Committee, annually assesses the current composition of the Board across many dimensions. As set forth in the Company's +Corporate Governance Guidelines, which are posted on its website, this assessment addresses the skills and attributes set forth in the table above and the individual performance, experience, age and skills of each director. +Director Nominations +The Board's Governance Committee serves as its nominating committee. The Governance Committee, in anticipation +of upcoming director elections and other potential or expected Board vacancies, evaluates qualified individuals and recommends candidates to the Board. As part of the search process for each new director, the Governance Committee includes diverse +candidates as part of the pool from which Board nominees are chosen. The Governance Committee may (and typically does) retain a search firm or other external parties to assist it in identifying candidates, and the Governance Committee has the +sole authority to select such a firm, approve the search firm's fees and retention terms, and to terminate the firm if necessary. +The Governance Committee considers candidates suggested by directors, senior management or shareholders. +Shareholders may recommend individuals as potential director candidates by communicating with the Governance Committee through one of the Board communication mechanisms described under the heading “Shareholder Communications Policy.” Shareholders +that wish to nominate a director candidate must comply with the procedures set forth in the Company's By-Laws, which are posted on its website. The deadline for shareholders to submit notice of nominations for next year’s annual meeting is set +forth under the heading “Other Shareholder Proposals for Presentation at Next Year’s Annual Meeting” in this Proxy Statement. +Ultimately, upon the recommendation of the Governance Committee, the Board selects the Company’s director +nominees for election at each annual meeting. In selecting director nominees, the Board considers each candidate's performance as a director (which is assessed through an anonymous written peer evaluation) if such candidate is serving or has +served as a director of the Company; personal and professional integrity; ability and judgment; and likelihood to be effective, working with the other nominees and directors, in serving the long-term interests of the shareholders. The Governance +Committee also considers candidates' relative skills, experience, attributes, background and characteristics as well as independence under applicable New York Stock Exchange (“NYSE”) listing standards and the Company's Director Independence +Standards, potential to contribute to the composition and culture of the Board, and ability and willingness to actively participate in the Board and committee meetings and to otherwise devote sufficient time to Board duties. +2024 PROXY STATEMENT +13 +TABLE OF CONTENTS +Director Onboarding and Ongoing Education Initiatives +The Board provides onboarding orientation programs to familiarize new Board members with the Company’s business +and the operation of the Board. Directors are encouraged to participate in continuing education programs to assist them in performing their Board responsibilities. The Company supports director education by coordinating continuing education +programs and reimbursing directors for related expenses. +BOARD SELF-ASSESSMENT +As part of an annual Board assessment, each director evaluates over a number of dimensions the performance of +the Board and any committee on which he or she serves. Tom Long, the Chairman of the Board, works with the Governance Committee to review the Board self-assessment with directors following the end of each fiscal year and to conduct individual +director interviews at the end of each year. Committee Chairpersons review the committee self-assessments with their respective committee members and discuss them with the Board. +In addition, the Governance Committee, working with the Chairman of the Board, develops and implements +guidelines for evaluating all directors standing for nomination and election and oversees the evaluation of such nominees. +The Corporate Governance Guidelines (including the Director Independence Standards), the Charter for +each Board committee (Audit, Compensation and Human Capital and Governance), the Company's Certificate of Incorporation, By-Laws, Code of Business Conduct, and its Accounting and Finance Code of Ethics all are available on the Wolverine +Worldwide website at: +www.wolverineworldwide.com/investor-relations/corporate-governance/. +The Board and applicable committees annually review these and other key governance documents. +RISK OVERSIGHT +The Board oversees the Company's process for assessing and managing enterprise risk and mitigation activities +with a focus on the most significant enterprise risks facing the Company, including strategic, inventory, operational and supply chain, financial, environmental, cybersecurity, human capital, environmental, social, and governance (“ESG”), and +legal compliance risks. This oversight is conducted through quarterly presentations by and discussions with the President and CEO, Chief Financial Officer (“CFO”), Director of Internal Audit, General Counsel, Chief Information Officer, Chief +Information Security Officer, brand and department leaders and other members of management. The General Counsel, Senior Risk Manager, and Director of Internal Audit coordinate management's day-to-day risk management and mitigation efforts, and +the Director of Internal Audit reports directly to the Audit Committee. +The General Counsel, Director of Risk Management, and Director of Internal Audit review with the Audit +Committee regularly, and with the full Board periodically, management's risk assessment and mitigation strategies. In addition to the above processes, the Board has delegated risk management and mitigation oversight responsibilities to its +standing committees, which meet regularly to review and discuss specific risk topics that align with their core responsibilities. +• +The Audit Committee reviews the Company's approach to enterprise risk management generally. The Audit Committee also oversees the Company's risk +policies and processes relating to its financial statements and financial reporting processes, credit risks and liquidity risks, major legal and regulatory compliance risk exposures, as well as the Company's management of risks related to +cybersecurity and data privacy. The Audit Committee discusses with management and the independent auditors significant risks or exposures and the steps taken by management to mitigate them. +• +The Board has delegated the primary responsibility to oversee cybersecurity matters to the Audit Committee. The Audit Committee regularly reviews the +measures implemented by the Company to identify and mitigate data protection and cybersecurity risks. As part of such reviews, the Audit Committee receives quarterly reports and presentations from members of the Company’s team responsible +for overseeing the Company’s cybersecurity risk management, including the Chief Information Security Officer, Chief Information Officer, and members of the legal team, which address a wide range of topics including recent developments, +evolving standards, vulnerability assessments, third-party and independent reviews, the threat environment, technological trends and information security considerations arising with respect to the Company’s peers and third parties. The +other members of the Board attend these quarterly reports and presentations to the Audit Committee by members of management. The Company has protocols by which certain cybersecurity incidents that meet established reporting thresholds are +escalated within the Company and, where appropriate, reported promptly to the Board and Audit Committee, as well as ongoing updates regarding any such incident until it has been addressed. +• +The Compensation and Human Capital Committee oversees the risks associated with management resources; organization structure and succession planning, +hiring, development and retention processes; and it reviews and evaluates risks associated with the +2024 PROXY STATEMENT +14 +TABLE OF CONTENTS +Company's compensation structure, policies and programs. The Compensation and Human Capital Committee also +oversees the relevant risks related to human capital management, including with respect to matters such as talent recruiting, development, progression and retention, diversity, equity and inclusion, human health and safety and total rewards and +workplace environment and culture. +• +The Governance Committee oversees the Company's management of risks related to the Company's governance structure and processes and potential risks +arising from related person transactions. The Governance Committee also oversees risks related to the Company’s ESG matters. +The Company reviewed its compensation policies and practices to assess whether they are reasonably likely to +have a material adverse effect on the Company. As part of this review, the Company compiled information about the Company's incentive plans, including reviewing the Company's compensation philosophy, evaluating key incentive plan design features +and reviewing historic payout levels and pay mix. With assistance from Company management and its independent compensation consultant, the Compensation and Human Capital Committee reviewed the executive compensation program, and managers from the +Company's human resources and legal departments reviewed the non-executive compensation programs. +ENVIRONMENTAL AND SOCIAL HIGHLIGHTS +As a global marketer of branded footwear, apparel and accessories, Wolverine Worldwide leverages a diverse +portfolio making big strides and doing great things since 1883. Our brands continue to think forward and think big as innovators within our communities and our product designs. Our ability to bring about change is grounded in our dedication to +our planet and people and guided by the vision of a better tomorrow. These principles are embedded in the governance practices and Code of Business Conduct outlined below, which guide the Board and the Company’s global employees in their actions. +The focus of the Company’s ESG initiatives include the environment, sustainability and responsible sourcing; +diversity, equity, and inclusion (“DE&I”); and community impact. These initiatives are a priority for the Company because we believe the Company will grow not just from financial performance and new products, but also the Company's impact on +our communities, our employees and the planet. The Board regularly reviews brand initiatives and footwear collections and launches that have environmental and social impacts. The Board has delegated responsibility to its Governance Committee to +oversee and make recommendations to it concerning ESG matters, including the Company’s ESG initiatives and their integration into the Company’s business and long-term value creation for the Company and its shareholders. The Governance Committee +is also responsible for overseeing the development and disclosure of the Company’s broader ESG initiatives. +Wolverine’s governance structure is designed to enable execution of its policies, strengthens management +accountability and enhances Wolverine’s ability to generate long-term shareholder value. +Some of the Company's ESG initiatives are summarized below, and more information is available on the Company’s +corporate responsibility website at wolverineworldwide.com/about-us/responsibility/ and in our most recent Global Impact Report at http://tinyurl.com/38b36yzd. 1 +Environmental, Sustainability, and Responsible Sourcing +Wolverine Worldwide strives to support a more sustainable and responsible future. One of our goals is to reduce +and responsibly manage our environmental impact, and we believe the steps we take today can reduce our footprint tomorrow. We aim to achieve this goal by actively implementing environmentally conscious business practices, seeking out additional +sustainable products and components and responsibly sourcing our products in accordance with clear and transparent standards. +Protecting Our Planet +• +ReChaco Program – Chaco strives to keep sandals out of landfills by creating durable and repairable products. +Since 2004, the brand has saved over 376,100 sandals from landfills through the ReChaco Program, which repairs consumers' sandals. Every pair of sandals saved represents roughly two pounds of material saved from a landfill. +• +Reducing Waste – Wolverine Worldwide creates waste throughout our facilities and operations on a daily basis, +so we utilize a variety of recycling programs at many of our buildings to help manage our footprint and reduce our environmental impact. These recycling +1 +Website references are provided for convenience only, and the content on the referenced websites is not, and shall not be deemed to be, incorporated by +reference into this Proxy Statement. +2024 PROXY STATEMENT +15 +TABLE OF CONTENTS +programs include paper, plastic, cardboard, batteries, electronics, glass, and other items. These initiatives +have prevented hundreds of thousands of pounds of waste from ending up in landfills, recycled an estimated 50,000+ pounds of paper and cardboard, and saved hundreds of thousands of gallons of water from being used for paper production. +• +Reducing Energy Consumption – Over the past few years, we have implemented initiatives to improve energy +efficiency and increase our support of renewable energy, including purchasing Renewable Energy Credits to offset the energy use at our North America facilities since 2015. In addition, most Wolverine Worldwide buildings are lit by +energy-efficient bulbs, which are generally recycled at the end of life. +Sustainability +• +Product Sustainability Standards – Our Product Sustainability Standards establish clear baseline expectations +for our brands to promote social responsibility, environmental stewardship and animal welfare. Additionally, these standards incorporate many best practice recommendations, including the use of recycled materials. In 2018, our brands +offered approximately 10 styles made with more sustainable materials than traditionally used materials. In 2023, our brands increased the use of sustainable materials and included them in over 550 styles. We’ve been consistently +increasing our use of more sustainable materials, such as recycled polyester, rubber, and EVA, organically grown cotton, algae and other biobased materials since 2018. +Responsible Sourcing & Supply Chain +• +Production Code of Conduct – The Wolverine Worldwide Production Code of Conduct outlines our longtime focus on +social responsibility. This includes our focus on the human rights of workers and their treatment with dignity and respect, while seeking to improve working conditions within our supply chain. Our Production Code of Conduct establishes +the minimum standards that factories and suppliers with whom Wolverine Worldwide does business are required to satisfy when conducting their operations. We routinely perform social compliance audits through our internal teams as well as +third parties to monitor compliance with our Production Code of Conduct. In 2023, our internal social compliance team and authorized third parties conducted 156 social compliance audits across our factory base. +• +Supply Chain Transparency – Wolverine Worldwide seeks long-term partnerships rooted in trust, open +communication and a shared vision that fosters continued improvement and compliance with our Production Code of Conduct. Under that code, we require that our manufacturers seek to minimize the adverse effects of their manufacturing +processes on the community, environment and natural resources and also work to safeguard the health and safety of the public. These requirements include complying with applicable local and national environmental protection laws. +• +Leather Working Group – Wolverine Worldwide joined the Leather Working Group in 2006 to support more responsible +leather manufacturing. Nearly 100% of the leather sourced by our brands in 2023 came from LWG Gold or Silver-rated tanneries, which earned high ratings from LWG based upon their environmental stewardship. +Diversity, Equity & Inclusion +The Company's corporate culture welcomes people from all backgrounds who share the values of teamwork, open +communications, integrity, respect and accountability. These are the things that bind us together, making Wolverine Worldwide a great company and a great place to grow. As an expanding global company, diversity is much more than simply a goal – +it’s a part of our DNA. Because we believe in cultivating a well-rounded, diverse workforce, we seek out individuals who reflect and support this goal. Our thousands of employees around the world reflect a diverse range of cultures, religions, +ethnicities and nationalities, as well as varied professional and educational backgrounds. +For more information on the Company's DE&I initiatives, please see our most recent Global Impact Report, +available at https://http://tinyurl.com/38b36yzd. 2 +Our Workforce at a Glance +Below are metrics for Wolverine Worldwide's organizational diversity. 3 +2 +Website references are provided for convenience only, and the content on the referenced websites is not, and shall not be deemed to be, incorporated by +reference into the proxy statement. +3 +Ethnicity is reported for U.S. population only. Information provided is as of December 30, 2023. +2024 PROXY STATEMENT +16 +TABLE OF CONTENTS +DE&I Initiatives: A Cornerstone of Our Workplace Culture +Wolverine is focused on fostering an inclusive environment where every employee feels valued, respected, and +empowered. Here are a few of the ways that Wolverine Worldwide made DE&I a focus in the workplace in 2023: +• +Wolverine is a sponsor of the Black Footwear Forum (BFF), which exists to celebrate and safeguard the influence, leadership, and creativity provided by +Black people in the global footwear industry. As a collective of footwear industry professionals and supporters from around the country, BFF encourages collaboration in establishing industry goals that center on developing and advancing +Black talent at all levels. The Forum also works to cultivate community for Black footwear professionals through its national and regional chapter events and activations. +• +Wolverine sponsored four apprentices across two brands from the Pensole Lewis College Masterclass program. The Pensole Lewis College Masterclass program +identifies early career product design talent, while lifting up talented young people who face obstacles in pursuing a career in footwear or footwear design. +• +Wolverine hosted Michal Bornstein, a holocaust survivor, in a widely-attended speaking engagement at our Rockford campus. In addition, Wolverine made a +$10,000 donation to the Auschwitz-Birkenau Memorial Foundation. +In January 2024, we proudly inaugurated our DE&I Office. This strategic move signifies our dedication to +embedding DE&I into the very fabric of our workplace culture. The DE&I Office will continue much of the great work accomplished by the Diversity Action Council in 2023 and prior years. +Employee Resource Groups +In today’s dynamic corporate landscape, fostering an inclusive workplace is a strategic imperative. Employee +Resource Groups (“ERGs”) play a pivotal role in achieving this goal. Wolverine uses ERGs to help amplify voices, foster growth, and create a thriving workplace. ERGs serve as powerful catalysts for diversity and inclusion efforts and our desire +to provide equal employment opportunities. By bringing together employees with shared identities, backgrounds, or interests, ERGs can drive business outcomes. ERGs also help contribute to employee retention, reducing turnover costs, and enhance +innovation by promoting diverse thinking. Wolverine currently has three U.S.-based ERGs: +• +PRIDE@WWW – Dedicated to fostering an inclusive and supportive workplace that celebrates and empowers the +LGBTQIA+ community and allies, its mission is to serve its members and the organization by promoting diversity, equity, and inclusion, while building a visible and vibrant community that encourages belonging, education, and community +impact. +• +Womxn’s Resource Group – A company-wide resource providing enrichment and fulfilling experiences for the womxn +of Wolverine, WRG works to support and empower womxn in the workplace through professional mentorship and networking. +• +Wolverine Young Professionals – Through social activities, networking, functions, and volunteer opportunities, +WYP is building an environment to develop the next generation of business leaders. +2024 PROXY STATEMENT +17 +TABLE OF CONTENTS +Communication & Learning +In 2023, we continued to offer resources to increase awareness and educate our employees around the world +through unconscious bias and other diversity trainings via our global partnership with LinkedIn Learning. To help support these education initiatives, we developed a Diversity, Equity and Inclusion section on WeConnect, our internal employee +information and communications platform, to provide team members with support resources and a dedicated space to learn and work together to achieve a better future. In 2023, the Company offered increased engagement on our DE&I education +through our DE&I Playlist, available to employees on LinkedIn Learning. +Supporting our Communities +Wolverine Worldwide has historically engaged with and served the communities in which we live and work, as well +as our internal community at the Company. As champions for positive change, we believe it is our responsibility to enrich our global communities by giving our time and resources to make the world a better place. At Wolverine Worldwide, we’re +proud of our family of brands and their individual commitments to the causes they support. Each of our brands is committed to supporting meaningful causes, understanding internal team cultures, and making a difference for their consumers and +communities. +• +Wolverine Worldwide Foundation – Rooted in our commitment to contribute positively to the communities where our +employees work and live, the Wolverine Worldwide Foundation was founded in 1959 to support our charitable initiatives. Through the Foundation, the Company is actively involved in supporting charitable organizations with a focus on +education, the environment, arts and culture, and human aid and service. +• +United Way – Every year through employee contributions, footwear and apparel sales, and employee-led +fundraising events, Wolverine Worldwide has consistently given back to the local communities where we live and work. Over the past nine years, Wolverine Worldwide has donated over $3.6 million to United Way. +• +Two Ten Footwear Foundation – Wolverine Worldwide has continued its longstanding support of the Two Ten +Footwear Foundation, which was founded in 1939 and exists to improve the lives and careers of footwear employees and their families through emergency financial assistance, scholarships, and career development opportunities. Wolverine +Worldwide and its brands support Two Ten through financial assistance and product donations. +• +Brand-Supported Initiatives – our brands helped those in need in the following ways: +• +Sweaty Betty – Through the Sweaty Betty Foundation, in the UK, Sweaty Betty has worked with several +organizations to get girls active, including a partnership with the step-counting and rewards app Sweatcoin and This Girls Can Leeds. This partnership designed a 10-week behavior change program with the girls’ input where they gained +rewards and prizes for walking. +• +Saucony – Existing to inspire and serve all humans to live their best lives by providing access to running, +celebrating self-expression, and creating a better world, Saucony created its Run For Good platform. In 2023, Run for Good supported a social initiative dedicated to helping more young people discover the power of running and combat +childhood obesity through Global Running Day. +• +Merrell – Continuing its multi-year partnership with Big Brothers Big Sisters (“BBBS”), Merrell sponsored a new +BBBS program to address the critical need for mentorship and inspire volunteer sign-ups nationwide. The public service announcement is part of BBBS's “It Takes Little to be Big” national campaign that launched in September 2023. Merrell +and BBBS remain committed to their shared goal of breaking down the barriers that many youths face in accessing the outdoors and are taking action so all young people can experience the many mental and physical benefits associated with +open air activities. This impactful partnership also brings awareness to the need for inclusive outdoor experiences, particularly for youth who do not have equitable access to nature, natural parks, or outdoor spaces. +• +CAT – In 2023, CAT Footwear hosted a Back-to-School campaign celebrating students entering the skilled trades in +partnership with Caterpillar Inc.’s ThinkBig Program. ThinkBig is a two-year instructional program that pays students while they train to become a Caterpillar technician. CAT Footwear has been increasingly using their platform to raise +awareness about career opportunities in skilled trades, particularly among women and minorities. +2024 PROXY STATEMENT +18 +TABLE OF CONTENTS +• +Wolverine – Our namesake footwear and apparel brand continued its long-standing commitment to supporting the +next generation of skilled trades workers by starting Project Bootstrap. Through strategic partnerships and initiatives, Project Bootstrap works to break down common misconceptions around the skilled trades industry, while supporting and +inspiring the next generation of skilled trades workers in an effort to close the trades gap. Wolverine Boots has donated over $2 million to advance the skilled trades. +CODE OF BUSINESS CONDUCT AND ACCOUNTING AND FINANCE CODE OF +ETHICS +The Board has adopted a Code of Business Conduct for the Company's directors, officers and employees. The Board +also has adopted an Accounting and Finance Code of Ethics (“Accounting and Finance Code”) that focuses on the financial reporting process and applies to the Company's CEO, CFO and Corporate Controller. +The Company discloses amendments to or waivers from both its Code of Business Conduct and Accounting +and Finance Code granted to directors or executive officers within four business days following the date of the amendment or waiver on its website at: +www.wolverineworldwide.com/investor-relations/corporate-governance/. +SHAREHOLDER COMMUNICATIONS POLICY +Shareholders and other interested parties may send correspondence to the Board, the non-employee directors as a +group, a specific Board committee or an individual director (including the Chairman of the Board) in the manner described below. +The General Counsel will provide a summary and copies of all correspondence (other than solicitations for +services, products or publications) as applicable at each regularly scheduled Board meeting. +Communications may be sent via email through various links on our website at: +www.wolverineworldwide.com/investor-relations/corporate-governance/ +or by regular mail c/o General Counsel, Wolverine World Wide, Inc., 9341 Courtland Drive, NE, Rockford, MI 49351. +The General Counsel will alert individual directors if an item warrants a prompt response from the individual +director prior to the next regularly scheduled meeting. Items warranting a prompt response, but not addressed to a specific director, will be routed to the applicable committee Chairperson. +2024 PROXY STATEMENT +19 +TABLE OF CONTENTS +Proposal 1 — Election of +Directors for Terms Expiring +in 2027 +The Company's Board currently consists of ten directors. The Company's By-Laws establish three classes of +directors with each class serving three-year terms. At each annual meeting, the term of one class expires. The Board has nominated three directors for election at the Annual Meeting: Brenda J. Lauderback, Stacia Andersen and DeMonty Price. Each +director has been nominated to serve for a three-year term expiring at the annual meeting of shareholders to be held in 2027 or until his or her successor, if any, has been elected and is qualified. +All director nominees are independent directors, as determined by the Board under the applicable NYSE listing +standards and the Company's Director Independence Standards. Each director nominee currently serves on the Board. The shareholders most recently elected Ms. Lauderback at the Company's 2021 Annual Meeting. Ms. Andersen and Mr. Price were +appointed to the Board in March 2023 on the recommendation of the Company’s Governance Committee. Ms. Andersen and Mr. Price were recommended to the Company’s Governance Committee by a third-party search firm. +The Company is not aware of any nominee who will be unable or unwilling to serve as a director. However, if a +nominee is unable to serve or is otherwise unavailable for election, the incumbent directors may or may not select a substitute nominee. If the directors select a substitute nominee, the proxy holder will vote the shares represented by all valid +proxies for the substitute nominee (unless other instructions are given). +The biographies of the three nominees and the other continuing directors of the Company are below, along with +a discussion of the experience and skills of each director. +2024 PROXY STATEMENT +20 +TABLE OF CONTENTS +Director Nominees with Proposed Terms +Expiring in 2027 +BRENDA J. LAUDERBACK +Age: 73 +Director since: 2003 +Chair, Denny's Corporation; +Retired President, +Wholesale and Retail +Group, Nine West +Group, Inc. +Board Committees: +Governance (Chair) +Other Public Directorships: +Denny’s Corporation (since 2005), Board Chair (since +2016) +Sleep Number Corporation (since 2004) +Career Highlights: +•  Nine West Inc ., a footwear wholesale retailer and distributor +°  President, Wholesale and Retail Group (1995 – 1998) +•  US Shoe Corporation , a footwear manufacturer, retailer and distributor +°  President, Wholesale and Manufacturing Division, a position that included responsibility for offices in China, Italy and Spain (1993 – 1995) +•  Dayton Hudson Corporation (now Target Corporation), a retail company +°  Held various positions including Vice President, General Manager of shoes, accessories and children’s (1975 – 1993) +Experience and Skills: +•  Footwear/Apparel: Spent more than 25 years in the industry in various positions of increasing responsibility resulting in deep expertise in all aspects of the industry, including merchandising, marketing, product development +and design and manufacturing. +•  Retail: Comprehensive understanding of what is integral to being a successful retail company gained over her career and further developed through her board experience, where she has been intimately involved in the +transformation of retail and consumer preferences to a more digital and technology focus. +•  Public Company +Governance: Extensive experience gained serving as the Chair of Denny’s, a restaurant company, and a Director of Sleep Number Corporation, a bed manufacturer and retailer, and formerly serving on the +board of Big Lots, Inc., a retail company, from 1998 to 2015. +• Ms. Lauderback also +brings marketing, brand building, global supply chain, and international business experience and expertise to the Board. +Education: +• BS, Marketing, Robert Morris University +Other Affiliations and Acknowledgements: +• Named to the National Association of Corporate +Directors (NACD) 2017 Directorship 100 list +2024 PROXY STATEMENT +21 +TABLE OF CONTENTS +STACIA ANDERSEN +Age: 53 +Director since: 2023 +Former Executive Vice +President, Chief Customer +Officer, PetSmart LLC +Board Committees: +Audit +Other Public Directorships: +None +Career Highlights: +•  PetSmart LLC , a specialty retailer of products, services, and solutions for pets +°  Executive Vice President and Chief Customer Officer (2022-2024) +°  Executive Vice President, Merchandising and Customer Experience (2019 - 2021) +•  Abercrombie & Fitch Co. , a specialty retailer of apparel and accessories for men, women and kids +°  Brand President (2016 - 2018) +•  Target Corporation , a general merchandise retailer (1994 – 2015) +°  Held various leadership roles, including Senior Vice President of Merchandising for the Apparel, Accessories and Baby, and Home and Seasonal divisions +Experience and Skills: +•  Brand Building: Impressive history overseeing brand development, including serving as Brand President of Abercrombie & Fitch, where she led the rebuilding and transformation of all aspects of the Abercrombie & +Fitch and abercrombie kids brands. This builds on her experience at Target where she created strong brand strategies for multiple divisions. +•  Digital/eCommerce : Played an instrumental role in overhauling the Abercrombie & Fitch store into a complete omnichannel experience and oversaw the digital and omnichannel transformation at PetSmart. +•  Global Supply +Chain: Extensive experience gained over her 20 years at Target where she served as a buyer, a divisional sourcing manager, Vice President of Global Sourcing, and President of Target Sourcing +Services/Associated Merchandising Corporation, which included responsibility for $30B in annual imports from 40 countries. +• Ms. Andersen also +brings footwear/apparel, international business, retail, and marketing experience and expertise to the Board. +Education: +• BA, Marketing and Communications, Buena Vista +University +2024 PROXY STATEMENT +22 +TABLE OF CONTENTS +DEMONTY PRICE +Age: 62 +Director since: 2023 +Former President, Chief Operating, Service and Values Officer, RH, formerly known as +Restoration Hardware +Board Committees: +Compensation and Human Capital +Other Public Directorships: +None +Career Highlights: +•  RH , a +curator of design, taste and style in the luxury lifestyle market +°  President and Chief Operating, Service and Values Officer (2017 – 2022) +°  Co-President, Chief Operating Services and Values Officer (2016 – 2017) +°  Chief Service and Values Officer (2015 – 2016) +°  Senior Vice President of Retail Galleries and Operations, and Chief Values Officer (2006 – 2015) +°  Vice President of Stores (2003 – 2006) +°  West Regional (2002 – 2003) +•  Williams-Sonoma, Inc . +°  Held various field leadership roles including Northwest District Manager (1999 – 2002) +•  Nike Inc . +°  Director of P.L.A.Y. (1997 – 1999) +•  Gap Inc . +°  District Manager (1993 – 1997) +°  Manager of Diversity (1993 – 1997) +Experience and Skills: +• Retail: Extensive +experience gained over his more than 35 years in senior leadership positions at global leading retailers, where he oversaw all aspects of operations from human resources and store design to supply chain and distribution. +•  Operations: Deep understanding of the complexities involved in maintaining a global supply chain gained as President and Chief Operating, Service and Values Officer with responsibilities for overseeing the supply chain +function, main brand retail stores, outlets, hospitality, human resources, distribution centers, home delivery, customer service and facilities for RH. +•  Brand Building: Strong track record of leading company transformations that drove increased company and shareholder profits, including at Williams-Sonoma, where he rebuilt an underperforming district to become the +top-performing stores for the company in the US, and at RH, where he supported the company’s significant operational restructuring that included the implementation of a new workforce in the RH galleries companywide. +• Mr. Price also brings finance, +human capital management and international business experience and expertise to the Board. +Education: +• BS, Fashion Merchandising, Oregon State University +BOARD RECOMMENDATION +The Board recommends that you vote “FOR” the election of the above nominees for proposed +terms expiring in 2027. +2024 PROXY STATEMENT +23 +TABLE OF CONTENTS +Directors with Terms +Expiring in 2025 +JEFFREY M. BOROMISA +Age: 69 +Director since: 2006 +Retired Executive Vice +President, Kellogg International, +President, Latin America and +Senior Vice President, +Kellogg Company +Board Committees: +Audit (Chair) Governance +Other Public Directorships: +None +Career Highlights: +•  Kellogg Company , a global food manufacturing company (1981 – 2009) +°  Senior Vice President and member of the Global Leadership Team (2004 – 2009) +°  Executive Vice President, Kellogg International (2007 – 2009) +°  President, Latin America (2008 – 2009) +°  President, Asia Pacific (2007 - 2008) +°  Chief Financial Officer (2004 - 2006) +Experience and Skills: +•  Finance: Deep expertise developed during his 25 years serving in financial roles at Kellogg, where he was hired as a senior auditor and promoted to positions with increasing responsibility until being named Chief +Financial Officer. In that role, he had responsibility for the strategic planning, implementation, and management of all finance activities, including business planning, budgeting, forecasting, risk and governance. +•  International +Business: Substantial experience gained through his tenure at Kellogg, a large global company, where early in his career he was Controller for Kellogg de Mexico based in Queretaro, Mexico and later lead +operations for the company’s Asia Pacific and Latin America divisions. +•  Audit Committee +and Governance: Mr. Boromisa is a Board member of Board of Haworth International, Inc. and serves as the Chair of Haworth’s Audit Committee. Mr. Boromisa is also a Trustee of Hawaii Pacific University +and serves at the Vice-Chair of Hawaii Pacific’s Finance and Investment Committee. +• Mr. Boromisa also +brings global supply chain, brand building, marketing, and public company governance experience and expertise to the Board. +Education: +• BA, Accounting, Michigan State University +• Completed graduate courses, Thunderbird, the +American Graduate School of International Management +• CPA and a member of the American Institute of +Certified Public Accountants +2024 PROXY STATEMENT +24 +TABLE OF CONTENTS +CHRISTOPHER E. HUFNAGEL +Age: 51 +Director since: 2023 +President and Chief Executive +Officer, Wolverine Worldwide +Board Committees: +None +Other Public Directorships: +None +Career Highlights: +•  Wolverine World Wide, Inc. (since 2008) +°  President and Chief Executive Officer (since 2023) +°  President (2023) +°  President, Active Group (2022 – 2023) +°  Global Brand President, Merrell (2019 – 2022) +°  Global Brand President, CAT Footwear (2018 – 2019) +°  Senior Vice President & Head of Corporate Strategy (2013 – 2018) +°  President of Direct-to-Consumer (2008 – 2013) +•  Under Armour , an activewear clothing and accessories retailer +°  Vice President of Retail (2007 – 2008) +•  Gap , a +clothing and accessories retailer +°  Vice President of Brand Store Experience (2003 – 2007) +•  Abercrombie & Fitch , a specialty retailer of apparel and accessories for men, women and kids +°  Director of Presentation (1998 – 2003) +Experience and Skills: +•  Footwear/Apparel: +Extensive experience in the sector having spent his career at leading global footwear and apparel companies in positions of leadership and increasing responsibility including business development, +portfolio management, M&A, investor relations, and corporate communications. +•  Brand Building: +Demonstrated track record of successfully building global brands gained over decades of omnichannel brand-building experience that began at Abercrombie & Fitch, where he helped create the look of the +Hollister brand. As Vice President of Brand Store Experience at Gap, a position the company created for him, he led the very successful redesign of Gap stores to be more friendly, approachable and personal, and to ensure that every +aspect of Gap’s stores reinforced how the company wanted its customers to feel about the brand. He further developed this expertise over the past 15 years at Wolverine, where he started the Company’s consumer insights and market +intelligence function to build stronger connections with consumers, he led the Company’s transformation initiative, WOLVERINE WAY FORWARD, to help the organization compete better in the fast-changing global marketplace, and he has led +all of the Company’s footwear brands. +•  Retail: Deep expertise in all aspects of successfully operating a retail company gained at Abercrombie & Fitch and Gap, where he was responsible for in-store presentation, visual merchandising, and marketing, at +Under Armour, where he served as Vice President of Retail and was responsible for the development, execution, and roll-out of the company’s retail strategy, and at Wolverine, where he initially was responsible for all direct-to-consumer +operations, including e-commerce. Due to his keen sense for global trends and consumer desires, and deep understanding of the importance of having good relationships with the Company’s customers, he was promoted to positions of +increasing responsibility including Global Brand President of CAT Footwear, where he took aggressive actions to help the team rapidly evolve its growth and go-to-market strategies. He also served as Global Brand President of Merrell, +where he oversaw the Wolverine Worldwide Kid's Group, as well as Global Licensing for the Company, and as President of the Active Group, with responsibility for Merrell, Saucony, and Chaco. +• Mr. Hufnagel also +brings executive leadership , international business , digital/eCommerce/IT , and global supply chain experience and expertise to the Board. +Education: +• BA, Political Science & History, Alma College +2024 PROXY STATEMENT +25 +TABLE OF CONTENTS +DAVID T. KOLLAT +Age: 85 +Director since: 1992 +President and Chairman, +22, Inc. +Board Committees: +Audit +Compensation and +Human Capital +Other Public Directorships: +None +Career Highlights: +•  22 Inc. , +a company specializing in research and management consulting for retailers and consumer goods manufacturers +°  Chairman and President (since 1987) +•  The Limited, Inc ., a publicly traded, multinational apparel, lingerie, and bath and body retail company that became L Brands +°  Served in senior leadership positions, including as Executive Vice President, Marketing, President of Victoria’s Secret Direct, and as a member of its executive committee +(1976 – 1987) +•  Management Horizons , a research and consulting firm specializing in marketing and retailing for consumer goods companies +°  Executive Vice President (1972 – 1976) +Experience and Skills: +•  Retail: Comprehensive understanding of the industry developed over many years spent researching, consulting and serving in leadership positions, including co-founding the Retail Intelligence System, a syndicated +research program that has served over 200 companies. He developed the first computerized data base of all publicly-held retailing companies; pioneered new demographic, psychographic, and store positioning techniques in retailing; and +adapted strategic and long-range planning systems to retailing. +•  Marketing: Deep expertise first gained while at Management Horizons, where he directed and participated in consulting and research projects for companies in most major sectors of retailing and consumer goods marketing. +This was further developed at Limited, where he, among other things, developed and implemented marketing positioning strategies and marketing departments for Limited Express, Victoria’s Secret and Lane Bryant. This experience informed +the six books and numerous articles he has authored or co-authored on consumer behavior as well as marketing strategy, business strategy and corporate strategy. +•  Public Company +Governance: Significant experience through service on more than 20 boards of directors, including public company boards such as The Limited Inc. and its successor company, L Brands, where he served for +43 years; Sleep Number, a bedding manufacturer and retailer; Big Lots, a general merchandise close-out retailer; Cone Mills, a denim and fabric manufacturer; and Cooker Restaurant Company. He also served as Lead Independent Director of +Wolverine from 2007 until November 2022 and has served as chair of the audit, compensation, and nominating and governance committees of additional publicly held companies. +• Dr. Kollat also brings +executive leadership, footwear/apparel, brand building, digital/eCommerce/IT, finance, and international business experience and expertise to the Board. +Education: +• BBA, MBA, Marketing & Finance, Western +Michigan University – Haworth College of Business +• DBA, Marketing, Finance, Management, Economics, +Psychology, Indiana University – Kelley School of Business +Other Affiliations and Acknowledgements: +• Selected as one of the +ten outstanding directors in corporate America by the Outstanding Directors Exchange, a New York division of the Financial Times +• Recognized as one of the top 100 directors in +America by the National Association of Corporate Directors +2024 PROXY STATEMENT +26 +TABLE OF CONTENTS +JODI BRICKER +Age: 56 +Director since: 2023 +Former Chief Executive +Officer, Quay Australia +Board Committees: +Governance +Other Public Directorships: +None +Career Highlights: +•  Quay Australia , a global eyewear brand that sells sunglasses and prescription eyewear +°  Chief Executive Officer (2019-2023) +•  The Gap, Inc. , a worldwide clothing and accessories retailer +°  Executive Vice President of Merchandising, Inventory Management and eCommerce, Athleta, Inc. (2016 - 2018) +°  Executive Vice President and General Manager, Old Navy (2013 – 2016) +°  Senior Vice President and General Manager, OldNavy.com (2011- 2013) +°  Served in multiple roles for Gap Direct, including Director of Merchandising and then Vice President and General Manager of OldNavy.com (2001 – 2006) +°  Merchant, across various roles including Women's, Men's and Kids divisions, Old Navy (1994 – 2001) +•  Levi Strauss & Co. , an apparel company and a global leader in Jeanswear +°  Held various senior leadership roles, including Vice President, eCommerce/Digital for Levi’s.com and Dockers.com, Interim General Manager, Dockers Retail, and Vice +President, Levi Women's Merchandising (2006 – 2011) +Experience and Skills: +•  Retail: An experienced operator and strategic advisor in the consumer and retail space with a strong track record of driving high growth in vertical retail, ecommerce and wholesale channels across her more than 25+ +years in senior leadership positions leading multinational apparel, accessories and lifestyle brands. +•  Digital/eCommerce: +Deep omni-channel expertise gained over a decade of leading and growing e-commerce channels at Old Navy, where she helped launch the e-commerce channel within Gap, Inc., at Levi’s, a traditional brick +and mortal retail company, where she built a successful global digital culture and led a multi-brand ecommerce division driving growth and expanding the brand’s presence online. And at Athleta, leading and resetting the product and +omnichannel strategy and charting the long-range plan towards achieving 1B in revenue. +•  Brand Building +and Product Expertise: Strong reputation for building brands beginning at Gap, Inc., where she was among a handful of merchants handpicked to launch Old Navy, which became one of the world's fastest +growing retail brands. As CEO of Quay Australia, she led the Company to become one of the fastest growing independent brands in the eyewear industry and has helped expand the brand beyond sunglasses to the broader optical market. She +brings deep expertise and a unique ability to connect consumer, product innovation and brand strategy to deliver growth and create products and brands that people love. +• Ms. Bricker also brings +CEO/executive leadership, footwear/apparel, sustainability, global business, marketing and brand management expertise to the Board. +Education: +• BS, Merchandising, University of Arizona +2024 PROXY STATEMENT +27 +TABLE OF CONTENTS +Directors with Terms +Expiring in 2026 +WILLIAM K. GERBER +Age: 70 +Director since: 2008 +Managing Director, +Cabrillo Point Capital LLC; +Retired EVP and Chief Financial +Officer, Kelly Services, Inc. +Board Committees: +Audit +Compensation and +Human Capital +Other Public Directorships: +Cleveland-Cliffs, Inc. (since 2020) +Career Highlights: +•  Cabrillo Point Capital LLC , a private investment fund +°  Managing Director (since 2008) +•  Kelly Services, Inc. , a publicly traded global staffing solutions company +°  Executive Vice President and Chief Financial Officer (1998 – 2007) +•  L Brands, Inc. , a multinational apparel and retail company +°  Served in various leadership positions (1983-1998), including Vice President, Finance and Vice President, Corporate Controller. +Experience and Skills: +•  Audit Committee +Leadership : Served as Audit Committee Chair for three public companies including AK Steel Holding, Kaydon, and Wolverine Worldwide. +•  Finance: Deep expertise gained over 25 years in senior financial leadership positions that underpin his broad and keen understanding of complex financial and accounting matters and that he utilizes in his current +position leading a private investment fund. +•  International +Business: Experience gained serving at L Brands, a multinational company, and Kelly Services, which has operation in more than 35 countries. +•  Public Company +Governance: Currently serves as a director of Cleveland-Cliffs, Inc., a publicly traded producer of iron ore and steel products, and was on the board of AK Steel Holding Corporation from 2007 until it +merged with Cleveland-Cliffs in 2020. +• Mr. Gerber also brings retail and footwear/apparel experience and expertise to the Board. +Education: +• BS, Economics and Finance, University of +Pennsylvania’s Wharton School +• MBA, Finance, Harvard Business School +2024 PROXY STATEMENT +28 +TABLE OF CONTENTS +TOM LONG +CHAIRMAN OF THE BOARD +Age: 65 +Director since: 2011 +Retired Chief Executive Officer, +MillerCoors LLC +Board Committees: +None +Other Public Directorships: +Amcor PLC (since 2017) +Career Highlights: +•  Bridger Growth Partners, LLC , a private investment fund +°  Managing Partner (since 2015) +•  MillerCoors LLC , a joint venture between SABMiller and Molson Coors, two publicly traded beverage companies +°  Chief Executive Officer (2011 – 2015) +°  President and Chief Commercial Officer (2008 – 2011) +•  Miller Brewing Company , a beverage company +°  Chief Executive Officer (2007 – 2008) +°  Chief Marketing Officer (2005 – 2007) +•  The Coca-Cola Company , a beverage company (1988 – 2005) +°  Various senior leadership positions including Vice President of Strategic Marketing, Global Brands; Vice President, Strategic Marketing Research and Trends; President of +Coca Cola’s Great Britain and Ireland Division; and President of the Northwest Europe Division +Experience and Skills: +•  Brand Building: +Established an impressive reputation for building strong global brands over more than 20 years in senior positions at category leading companies and subsequently serving as MillerCoors’ President and +Chief Commercial Officer, where he played an integral role in building the now recognized brand of what was then a newly formed company. +•  International +Business: Oversaw strategy and operations for multiple large, global companies including Coca-Cola, where he served as President of both the Great Britain and Ireland division and the Northwest Europe +division. +•  Marketing: Developed exceptional marketing acumen and strong and lasting customer relationships at multiple consumer-focused brands. +• Mr. Long also brings executive leadership , retail , and finance experience and expertise to the Board. +Education: +• BA, English, University of North Carolina +• MBA, Harvard Business School +2024 PROXY STATEMENT +29 +TABLE OF CONTENTS +KATHLEEN WILSON-THOMPSON +Age: 66 +Director since: 2021 +Retired Executive Vice President & +Global Chief Human Resources +Officer, Walgreens Boots Alliance Inc. +Board Committees: +Compensation and +Human Capital (Chair) +Governance +Other Public Directorships: +Tesla, Inc. (since 2019) +McKesson Corporation (since 2022) +Career Highlights: +•  Walgreens Boots Alliance, Inc. , a global pharmacy and wellbeing company +°  Executive Vice President and Global Chief Human Resources Officer (2014 – 2021) +°  Senior Vice President and Chief Human Resources Officer (2010 – 2014) +•  Kellogg Company , a food manufacturing company +°  Held various legal and operational roles, including most recently as Senior Vice President, Global Human Resources (1992 – 2010) +Experience and Skills: +•  Retail: Developed +significant experience over her 25 years at two leading retailers. +•  International +Business: Experience cultivated through her management roles and responsibilities at two global companies, in particular her responsibilities for employees worldwide. +•  Public Company +Governance : Experience gained currently serving as a director of Tesla, an electric vehicle manufacturer, clean energy, energy generation and storage company, and McKesson Corporation, a publicly-traded +pharmaceutical distribution and healthcare technology company. +• Ms. Wilson-Thompson +also brings brand building, legal, human capital management and finance experience and expertise to the Board. +Education: +• BA, English Literature, University of Michigan +• JD and LLM, Corporate and Finance Law, Wayne State +University +2024 PROXY STATEMENT +30 +TABLE OF CONTENTS +BOARD LEADERSHIP +The Company's Corporate Governance Guidelines give the Board the flexibility to determine the best leadership +structure for the Company based upon the Company's evolving needs and opportunities. The Governance Committee periodically reviews the Board's leadership structure and considers many factors, including the specific needs of the business and what +is in the best interests of the Company’s stockholders. In May 2023, the Board appointed Tom Long, an independent director, as Chairman of the Board. The Board believes its current leadership structure, in which the roles of Chairman and CEO are +separated, best serves the Company at this time, as it allows the Company’s CEO to focus on executing the Company’s strategy and transformation, while leveraging our independent Chairman’s experience to drive accountability at the Board level. +Prior to Mr. Long’s appointment as Chairman in May 2023, the Company’s former CEO also served as Chairman of +the Board and the independent directors elected Mr. Long as Independent Lead Director, with responsibilities similar to those of an independent Chairman. +DIRECTOR INDEPENDENCE +The Board annually assesses the independence of all directors. To qualify as “independent,” the Board must +affirmatively determine that the director is independent under the Company's Director Independence Standards, which are modeled after the listing standards of the NYSE. Under NYSE listing standards and the Company's Director Independence +Standards, the Board has determined that except for Mr. Hufnagel, who is a Company employee, each of our non-management directors (Stacia Andersen, Jeffrey M. Boromisa, Jodi Bricker, William K. Gerber, Davit T. Kollat, Brenda J. Lauderback, Tom +Long, DeMonty Price, and Kathleen Wilson Thompson) is independent. In addition, the Board determined that David W. McCreight, who served as a director until May 4, 2023, was independent during the time he served as a director. All of the Board's +committees are comprised entirely of independent directors. The independent directors generally meet in executive session at each regularly-scheduled Board meeting. +The Company's Director Independence Standards define an “Independent Director” as a director who the Board +determines otherwise has no material relationship with the Company (either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company), and who: +• +Is not, and in the past three years has not been, an employee of the Company +• +Does not have, and has not had within the last three years, an immediate family member employed as an executive officer of the Company +• +Has not received, and does not have an immediate family member who received, during any 12 month period within the last three years, any direct +compensation from the Company in excess of $120,000 (other than compensation for Board service; compensation received by the director for former service as an interim Chairman, CEO or other executive officer; compensation received by the +director's immediate family member for service as a non-executive employee; and pension and other forms of deferred compensation for prior service if such compensation is not contingent in any way on continued service) +• +Is not a current employee or partner of a firm that is the Company's internal or external auditor +• +Has not been, and does not have an immediate family member who has been, within the last three years, a partner or employee of the Company's internal or +external auditor and personally worked on the Company's audit within that time +• +Does not have an immediate family member who is (i) a current partner of the Company's internal or external auditor, or (ii) a current employee of the +Company's internal or external auditor who personally works on the Company's audit +• +Is not, and has not been within the last three years, part of an interlocking directorate in which a current executive officer of Wolverine Worldwide +serves or served on the compensation committee of another company where the director or the director's immediate family member concurrently serves or served as an executive officer +• +Is not an employee of, and does not have an immediate family member who is an executive officer of, another company that has made payments to, or +received payments from, Wolverine Worldwide for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of $1,000,000 or 2% of the other company's consolidated gross revenues +• +Has not had any other direct or indirect relationship with Wolverine Worldwide that the Board determines is material +2024 PROXY STATEMENT +31 +TABLE OF CONTENTS +BOARD COMMITTEES, MEETINGS AND MEETING ATTENDANCE +The Board has three committees: Audit, Compensation and Human Capital, and Governance. Each committee meets +periodically throughout the year and reports its recommendations to the Board. The Company expects directors to attend every meeting of the Board and the committees on which they serve and to attend the annual meeting of shareholders. In 2023, +all directors then serving on the Board attended the 2023 Annual Meeting of Shareholders, and all directors attended at least 75% of the meetings of the Board (9 meetings in 2023) and the committees on which they served held during the period for +which he or she served. +All directors are typically invited to and attend all committee meetings. Our non-management directors and +independent directors each met regularly in separate executive sessions during fiscal year 2023, all of which were chaired and led by the Independent Lead Director or Independent Chairman of the Board, as applicable. +Each committee annually evaluates its performance to determine its effectiveness. The Board has determined +that all committee members are “independent” as defined by NYSE listing standards. Furthermore, each Audit Committee member satisfies the NYSE “financial literacy” requirement. In addition, the Board has determined that Mr. Boromisa and +Mr. Gerber are “audit committee financial experts” under Securities and Exchange Commission (“SEC”) rules. Each committee's charter, with a complete list of the duties and responsibilities, is available on the Company's website at +www.wolverineworldwide.com/investor-relations/corporate-governance/. +AUDIT COMMITTEE +Committee Members +• +Boromisa (Chair) +• +Andersen +• +Gerber +• +Kollat +Number of Meetings in 2023 +7 +Highlighted Responsibilities +• +Appoints, evaluates and oversees the work of the independent auditors and oversees the internal audit +function +• +Oversees the Company's approach to enterprise risk management, including policies and processes with respect +to enterprise risk management +• +Oversees the Company's cybersecurity and data privacy risks and exposures +• +Oversees the Company's program for promoting and monitoring compliance with applicable legal and regulatory +requirements +• +Oversees the integrity of the Company's financial statements, financial reporting process and internal +controls +• +Coordinates with the Governance Committee and the Compensation and Human Capital Committee on the Company’s +required ESG disclosures +2024 PROXY STATEMENT +32 +TABLE OF CONTENTS +COMPENSATION AND HUMAN CAPITAL COMMITTEE +Committee Members +• +Wilson-Thompson (Chair) +• +Gerber +• +Kollat +• +Price +Number of Meetings in 2023 +10 +Highlighted Responsibilities +• +Assists the Board in fulfilling its responsibilities relating to executive compensation and the Company's +compensation and benefit policies and programs +• +Oversees the overall compensation structure, policies and programs, including whether the compensation +structure establishes appropriate incentives for management and employees +• +Oversees the Company's management of risks relating to the Company's compensation structure, policies and +programs +• +Oversees and reviews the Company’s programs, policies and practices related to human capital management and +related disclosures, including with respect to matters such as talent recruiting, development, progression and retention, diversity, equity and inclusion, human health and safety and total rewards and workplace environment and culture +• +The Compensation and Human Capital Committee may delegate its authority to one or more subcommittees of the +Compensation and Human Capital Committee +• +Coordinates with the Governance Committee and the Audit Committee on the Company’s required ESG disclosures +GOVERNANCE COMMITTEE +Committee Members +• +Lauderback (Chair) +• +Boromisa +• +Bricker +• +Wilson-Thompson +Number of Meetings in 2023 +5 +Highlighted Responsibilities +• +Assists the Board in fulfilling its responsibilities on matters and issues related to the Company's +corporate governance practices +• +Working with the Board, establishes qualification standards for membership on the Board and its committees +and recommends qualified individuals to become Board members or serve for election as directors +• +Develops and recommends to the Board for its approval an annual self-evaluation process for the Board and +its committees, and oversees the evaluation process +• +Oversees and makes recommendations to the Board regarding the Company’s programs, policies, practices, +relevant risks and opportunities, measures, objectives and performance relating to ESG matters and related disclosures and their integration into the Company's business and long-term value creation for the Company and its shareholders +• +Coordinates with the Compensation and Human Capital Committee and the Audit Committee on the Company’s +required ESG disclosures +2024 PROXY STATEMENT +33 +TABLE OF CONTENTS +Director Compensation +in Fiscal Year 2023 +The Company's non-employee director compensation philosophy is to pay compensation that is competitive with the +compensation paid by companies of similar size, in similar industries and with whom Wolverine Worldwide competes for director candidates. The Governance Committee, with input from management and from the Compensation and Human Capital Committee's +independent compensation consultant, reviewed director compensation and compared it to market data, including a comparison to director compensation for the Company's Peer Group, as defined on page 51 , and broader industry +market surveys (FW Cook 2021 Director Compensation Report and NACD 2021-2022 Director Compensation Report). +The following table provides information regarding the compensation of the Company's non-employee directors +for fiscal year 2023. In 2023, Mr. Hoffman and Mr. Hufnagel each received compensation for his services as the Company's President and CEO during their respective times in those positions but did not receive any additional compensation for +service as a director. Their compensation is reflected in the CD&A Section, the Summary Compensation Table, and related tables and disclosures. +Fees Paid in +Cash +Cash Amounts +Voluntarily +Deferred +Fees Earned or +Paid in Cash 1 +Restricted +Stock Unit +Awards 2 +Totals +Andersen +$ 71,250 ++ +— += +$ 71,250 ++ +$145,009 += +$216,259 +Boromisa +— ++ +$132,000 += +$132,000 ++ +$145,009 += +$277,009 +Bricker +$ 69,000 ++ +— += +$ 69,000 ++ +$145,009 += +$214,009 +Gerber +$107,000 ++ +— += +$107,000 ++ +$145,009 += +$252,009 +Kollat +$107,000 ++ +— += +$107,000 ++ +$145,009 += +$252,009 +Krueger 3 +$ 49,944 ++ +— += +$ 49,944 ++ +— += +$ 49,944 +Lauderback +$115,750 ++ +— += +$115,750 ++ +$145,009 += +$260,759 +Long 4 +$144,389 ++ +— += +$144,389 ++ +$255,011 += +$399,400 +McCreight 5 +$ 33,556 ++ +— += +$ 33,556 ++ +— += +$ 33,556 +Price +— ++ +$ 69,000 += +$ 69,000 ++ +$145,009 += +$214,009 +Wilson-Thompson +$119,000 ++ +— += +$119,000 ++ +$145,009 += +$264,009 +1. +Represents cash payments received or deferred by non-officer directors for fiscal year 2023. Non-employee directors +may defer fees pursuant to the Director Deferred Compensation Plan or Deferred Compensation Plan (each as defined below). The table shows the Fees Earned or Paid in Cash separated into Fees Paid in Cash and Cash Amounts Voluntarily +Deferred. +2. +Represents the aggregate grant date fair value of restricted stock units granted to non-officer directors in fiscal +year 2023, calculated in accordance with Accounting Standard Codification (“ASC”) Topic 718, without regard to estimated forfeitures. The chart below lists the aggregate outstanding option awards (granted prior to 2018) and restricted +stock units held by non-officer directors at the end of fiscal year 2023. For valuation assumptions, see the Stock Based Compensation footnote to the Company's Consolidated Financial Statements for fiscal year 2023 included in its +Annual Report on Form 10-K for fiscal year 2023. +3. +Mr. Krueger served as Chairman of the Board of Directors until May 4, 2023. +4. +Mr. Long served as Independent Lead Director through May 4, 2023, when he was appointed as Chairman of the Board. +5. +Mr. McCreight was a member of Wolverine's Board of Directors until May 4, 2023. +2024 PROXY STATEMENT +34 +TABLE OF CONTENTS +Name +Option Awards Outstanding at +December 30, 2023 +(#) +Restricted Stock Units held at +December 30, 2023 1 +(#) +Andersen +— +9,515 +Boromisa +35,794 +34,023 +Bricker +— +9,515 +Gerber +35,794 +9,515 +Kollat +45,458 +14,105 +Krueger +871,348 +— +Lauderback +35,794 +9,515 +Long +35,794 +37,326 +McCreight +— +— +Price +— +9,515 +Wilson-Thompson +— +19,798 +1. +Includes 24,508, 4,590, 20,593 and 10,283 fully vested restricted stock units held by each of Mr. Boromisa, +Dr. Kollat, Mr. Long and Ms. Wilson-Thompson, respectively, that were deferred and will be settled on the date elected by the director. +The following table shows the non-employee director compensation program for fiscal year 2023: +Compensation Plan for 2023 +Component +Cash +Restricted Stock Units 1 +Annual Director Fee +$80,000 +Number of restricted stock units “RSUs” with a grant date value of $145,000. +Audit Committee Annual Fee +$15,000 +Audit Committee Chairperson Annual Fee +$25,000 +Compensation and Human Capital Committee Annual Fee +$12,000 +Compensation and Human Capital Committee Chairperson Annual Fee +$20,000 +Governance Committee Annual Fee +$12,000 +Governance Committee Chairperson Annual Fee +$20,000 +Chairman of the Board Annual Fee 2 +In lieu of the standard Annual Director Fee, the Chairman of the Board was paid a Cash Retainer of +$145,000 +In lieu of the standard RSU grant, the Chairman of the Board received a number of RSUs with a grant date +value of $255,000 +1. +For fiscal year 2023, Messrs. Boromisa, Gerber, Dr. Kollat, Price and Mses. Andersen, Bricker, Wilson-Thompson and +Lauderback each received 9,515 restricted stock units. Mr. Long received 16,733 restricted stock units. The above restricted stock units were granted in May 2023 under the Stock Incentive Plan of 2016, as amended, and vest one year from +the date of grant. +2. +Represents Chairman of the Board compensation set upon Mr. Long's appointment to that position in May 2023. Prior to +May, 2023, the Lead Independent Director's compensation had been set at a $120,000 cash retainer and a number of RSUs with a grant date value of $200,000. +Director Deferred Compensation Plan. The Company's +Amended and Restated Outside Directors' Deferred Compensation Plan (the “Director Deferred Compensation Plan”) is a supplemental nonqualified deferred compensation plan for non-employee directors. A separate non-employee director deferred +compensation plan applies to benefits accrued under that plan before January 1, 2005. The Director Deferred Compensation Plan permits all non-employee directors to voluntarily defer, at their option, 25%, 50%, 75% or 100% of their director cash +fees. The Company establishes a book account for each non-employee director and credits the director's account with a number of stock units equal to the amounts voluntarily deferred, divided by the closing market price of common stock on the +payment/deferral date. The Company also credits director accounts with dividend equivalents on amounts previously deferred in the form of additional stock units. The amounts credited to director accounts are treated as if invested in Wolverine +Worldwide common stock. The number of stock units held in director accounts is set forth under the “Stock Ownership By Management and Others” table below. +Upon a director's termination of service, or such later date as a director selects, the Company will +distribute the stock units in the director's book account in shares of Wolverine Worldwide common stock in either a single, lump sum distribution or annual installment distributions over a period of up to 20 years (10 years under the plan for +benefits accrued before January 1, 2005) based on the director's election. The Company converts each stock unit to one share of Wolverine Worldwide common stock. +2024 PROXY STATEMENT +35 +TABLE OF CONTENTS +Upon a “change in control,” the Company will distribute to the director, in a single, lump sum distribution, +Wolverine Worldwide common stock in a number of shares equal to the stock units credited to a director's book account. The Deferred Compensation Plan defines “change in control” as any of the following: +• +The acquisition by any person, or by more than one person acting as a group, of more than 50% of either (i) the then outstanding shares of common stock +of Wolverine Worldwide or (ii) the total fair market value of Wolverine Worldwide +• +The acquisition by any person, or more than one person acting as a group, during the 12 month period from and including the date of the most recent +acquisition, of ownership of 30% or more of the outstanding common stock of Wolverine Worldwide +• +The replacement of a majority of the individuals who constitute the Board during any 12 month period by directors whose appointment or election is not +endorsed by a majority of the directors prior to the date of the appointment or election +• +The acquisition, during any 12 month period ending on the date of the most recent acquisition, by any person of assets from Wolverine Worldwide having a +gross fair market value of at least 40% of the gross fair market value of all the assets of Wolverine Worldwide immediately before the acquisition +Deferred Compensation Plan For a description of the +non-qualified Deferred Compensation Plan under which directors may also defer cash fees, please see the “ Non-Qualified Deferred Compensation ” +section on page 63 . +NON-EMPLOYEE DIRECTOR STOCK OWNERSHIP GUIDELINES +By the first December 31st following the fifth anniversary of becoming a non-employee director of the Company, +a non-employee director must attain (and maintain) a minimum stock ownership level equal to six times the non-employee director annual cash retainer prior to being able to gift or sell any Company stock. The equity that qualifies for determining +the non-employee directors’ minimum stock ownership level includes owned shares and unvested restricted stock units that vest based on time (up to a maximum value of 50% of the applicable ownership requirement), but excludes unearned performance +shares and units and unexercised options (or any portion thereof, such as the current “in the money” value). During 2023, all non-employee directors were in compliance with these guidelines. +2024 PROXY STATEMENT +36 +TABLE OF CONTENTS +Securities Ownership of Officers +and Directors and Certain +Beneficial Owners +FIVE PERCENT SHAREHOLDERS +The following table sets forth information about those holders known by Wolverine Worldwide to be the +beneficial owners of more than five percent of Wolverine Worldwide's outstanding shares of common stock as of March 4, 2024: +Amount and Nature of Beneficial Ownership of Common Stock +Name and Address of +Beneficial Owner +Sole Voting +Power +Sole +Investment +Power +Shared Voting +Power +Shared +Investment +Power +Total +Beneficial +Ownership +Percent of +Class 5 +BlackRock, Inc. 1 +50 Hudson Yards +New York, NY 10001 +12,451,711 +12,555,342 +— +— +12,555,342 +15.71% +Earnest Partners, LLC 2 +1180 Peachtree Street NE +Suite 2300 +Atlanta, GA 30309 +3,731,937 +5,293,193 +— +— +5,293,193 +6.62% +FMR, LLC 3 +245 Summer Street +Boston, MA 02210 +11,150,039 +11,151,125 +— +— +11,151,125 +13.95% +The Vanguard Group 4 +100 Vanguard Boulevard +Malvern, PA 19355 +— +9,295,773 +172,773 +254,354 +9,550,127 +11.95% +1. +Based solely on information set forth in a Schedule 13G/A filed on January 22, 2024. +2. +Based solely on information set forth in a Schedule 13G/A filed on February 12, 2024. +3. +Based solely on information set forth in a Schedule 13G/A filed on February 9, 2024. +4. +Based solely on information set forth in a Schedule 13G/A filed on February 13, 2024. +5. +Based on 79,910,836 shares outstanding as of March 4, 2024. +2024 PROXY STATEMENT +37 +TABLE OF CONTENTS +STOCK OWNERSHIP BY MANAGEMENT AND OTHERS +The following table sets forth the number of shares of common stock beneficially owned as of March 4, 2024, by +each of the Company's directors and named executive officers and all of the Company's directors and executive officers as a group: +Amount and Nature of Beneficial Ownership of Common Stock 1 +Deferred +Stock Units, +Sole Voting +and/or +Investment +Power 2 +Shared Voting or +Investment +Power 3 +Stock +Options +and RSUs +Vesting +within +60 Days 4 +Total +Beneficial +Ownership +Percent +of Class 5 +Stacia Andersen +— +— +9,515 +9,515 +* +Jeffrey M. Boromisa +69,435 +162,181 +45,309 +276,925 +* +Jodi Bricker +— +— +9,515 +9,515 +* +William K. Gerber +56,733 +— +45,309 +102,042 +* +Brendan L. Hoffman +8,632 +— +— +8,632 +* +Christopher Hufnagel +98,971 +— +49,436 +148,407 +* +Amy Klimek +7,565 +44,238 +28,890 +80,693 +* +David T. Kollat +244,644 +103,081 +54,973 +402,698 +* +Brenda J. Lauderback +92,016 +— +45,309 +137,325 +* +Tom Long +47,311 +— +52,527 +99,838 +* +DeMonty Price +— +— +9,515 +9,515 +* +Isabel Soriano +29,720 +— +— +29,720 +* +Michael D. Stornant +17,554 +221,844 +95,400 +334,798 +* +Kathleen Wilson-Thompson +— +— +9,515 +9,515 +* +James D. Zwiers +15,603 +62,747 +97,979 +176,329 +* +All directors and executive officers as a group +(15 people) +688,183 +594,091 +553,192 +1,835,466 +2.28% +* +Represents beneficial ownership of less than 1%. +1. +The numbers of shares stated are based on information provided by each person listed and include shares personally +owned of record and shares that, under applicable regulations, are considered to be otherwise beneficially owned. +2024 PROXY STATEMENT +38 +TABLE OF CONTENTS +2. +The “Deferred Stock Units, Sole Voting and/or Investment Power” column of the table above does not include the +following time-vested restricted stock units and performance units owned by directors and NEOs as of March 4, 2024: +Restricted +Units +Performance +Units +Andersen +9,515 +— +Boromisa +34,023* +— +Bricker +9,515 +— +Gerber +9,515 +— +Hoffman +— +393,763 +Hufnagel +119,004 +625,364 +Klimek +76,175 +64,689 +Kollat +14,105* +— +Lauderback +9,515 +— +Long +37,326* +— +Price +9,515 +— +Soriano +78,761 +72,128 +Stornant +34,917 +159,004 +Wilson-Thompson +19,798 +— +Zwiers +31,136 +63,342 +* +Includes 24,508, 4,590, and 20,593 fully vested restricted stock units held by each of Mr. Boromisa, Dr. Kollat, and +Mr. Long respectively, that were deferred and will be settled on the date elected by the director. +3. +These numbers include shares over which the listed person is legally entitled to share voting or investment power by +reason of joint ownership, trust or other contract or property right and shares held by spouses, children or other relatives over whom the listed person may have influence by reason of such relationship. +4. +The numbers represent shares that may be acquired within 60 days after March 4, 2024, by the exercise of stock options +granted under Wolverine's various stock option plans, or upon the vesting of restricted stock units. These numbers are also included in the Total Beneficial Ownership column. +5. +As of March 4, 2024, based on 79,910,836 shares outstanding on that date plus the number of stock options exercisable +and restricted stock units vesting that are held by the specified person(s) within 60 days of March 4, 2024, as indicated in the “Stock Options and RSUs Vesting Within 60 Days” column. +2024 PROXY STATEMENT +39 +TABLE OF CONTENTS +Compensation Discussion +and Analysis +SUMMARY +The Company's Compensation Discussion and Analysis (“CD&A”) provides an overview and analysis of the +executive compensation program for the Company's named executive officers (“NEOs”). For fiscal year 2023, the Company's NEOs were: +Christopher Hufnagel +President and Chief Executive Officer +Amy Klimek +Executive Vice President, Chief Human Resources Officer +Isabel Soriano +President, International Group +Michael D. Stornant +Executive Vice President, Chief Financial Officer and Treasurer +James D. Zwiers +Executive Vice President and President, Global Operations Group +Brendan Hoffman +Former President and Chief Executive Officer +COMPENSATION PHILOSOPHY AND OBJECTIVES +The Company's compensation philosophy is to provide executives with a competitive compensation package that is +heavily weighted towards performance-based (performance units and annual bonus opportunity) and variable (restricted stock units) compensation in order to encourage superior business and financial performance over the short and longer term and, +by linking compensation with stock price performance, to closely align the interests of the Company's NEOs with those of its shareholders without encouraging excessive risk-taking. The Compensation and Human Capital Committee (the “Committee”) +oversees the Company's executive compensation program. +The executive compensation program has four primary objectives: +• +Attract and retain talented NEOs who will lead Wolverine Worldwide and drive superior business and financial performance +• +Provide incentives for achieving specific pre-established near-term strategic, business unit and corporate goals and reward the attainment of those +goals +• +Provide incentives for achieving specific pre-established longer-term corporate financial goals and reward the attainment of those goals +• +Align the interests of NEOs with those of the shareholders through incentives based on achieving performance objectives that enable increased +shareholder value +Compensation Decisions in Context: Key 2023 Accomplishments +We took bold and fast action in 2023 to develop a new vision to become consumer-obsessed, global brand +builders, and to develop a comprehensive turnaround plan to stabilize the Company, transform the organization, and ultimately inflect to growth. Some highlights are listed below: +• +A Focused Portfolio – We rationalized our portfolio through a host of significant actions, including the divestiture of the Sperry brand, the Keds +brand, and several other non-core assets. As a result, our portfolio is tightly aligned around brands that design innovative, trend-right apparel and footwear to allow their consumers to live healthier and more productive lives. +• +A Consumer-Obsessed, Brand-Building Organization – We completed the largest restructure and redesign in the Company’s history, resulting in a more +efficient and more capable organization aligned with our Vision to become a consumer-obsessed builder of great global brands. We added consumer-focused talent in many of our key brand roles and established The Collective, a +center-of-excellence created to elevate consumer insights, market intelligence, trend monitoring, and innovation. +• +A More Profitable Business – We developed a plan to meaningfully expand operating margin in 2024 and again generate strong cash flow – as our model has +done so effectively in the past – driven by significant gross margin expansion and aggressive profit improvement initiatives executed over the past few months. +2024 PROXY STATEMENT +40 +TABLE OF CONTENTS +• +The Capacity to Invest – Through our profit improvement work, we created the capacity to invest in elevated brand marketing and key strategic +capabilities. We believe these investments are essential to better position our brands for growth, while still taking an important step in our transformation to meaningfully improve profitability – a balanced approach committed to +long-term, sustainable performance and returns. +• +A Healthier Balance Sheet – We aggressively reduced our inventory throughout the year, and our portfolio management actions generated approximately +$380 million of proceeds in 2023 through the first month of 2024. As a result, the Company’s debt level is the lowest in over two and half years, and its balance sheet is much healthier, with line of sight to drive further improvement in +2024. +2023 Compensation Program Overview +The Company's executive compensation program consists of base salary, annual bonus opportunity, long-term +incentive compensation and benefits. A breakdown of base salary, annual performance bonus, and long-term incentive compensation is illustrated below: +ELEMENT +COMPONENT +METRICS +WHAT THE PAY ELEMENT REWARDS +Base +Salary +• Cash +• Fixed amount based on responsibilities, experience and market data +• Scope of core responsibilities, years of experience, and potential to affect +the Company's overall performance +Annual +Performance +Bonus +• Company/Business Unit Cash Bonus +• 75% revenue and adjusted pretax earnings +• 25% annual strategic performance targets +• Achieving specific corporate business and/or divisional financial objectives +over which the NEO has reasonable control +• Achieving specific annual strategic priorities +Long-Term +Incentive +Compensation +• Performance-based restricted stock units +• Time-vested restricted stock units +• Uses the following performance metrics (weighted as indicated) +• 60% Operating Profit +• 40% Relative Total Shareholder Return +• Three-year vesting for time-vested restricted stock units +• Balances focus on near-term profitability with longer-term shareholder value +creation +• Achieving long-term corporate objectives +• Driving long-term shareholder value +• Continued, long-term employment at Wolverine Worldwide +• Significant weighting on relative TSR performance +• Time-vested restricted stock units reward increases in stock price +Pay at Risk +Under the Company's compensation program, a significant portion of the compensation awarded to the NEOs +generally, and to the CEO in particular, is at risk (contingent upon the attainment of various pre-established short and long-term financial goals) and variable (contingent on the performance of the Company's stock price). NEO compensation that +is significantly at risk and variable incentivizes superior business and financial performance and, by linking compensation with stock price performance, aligns the interests of executives with those of shareholders. For more information on the +relation between Company performance and the impact on CEO and other NEO pay, please see the tables and related information under the heading “ Pay vs. Performance ” on page 70 . +2024 PROXY STATEMENT +41 +TABLE OF CONTENTS +The following graphic illustrates the percentage of 2023 NEO target compensation that is +at risk, reflecting the grant values and salary information for Mr. Hufnagel's regular annual compensation package as CEO (not inclusive of promotion RSU grants), and from the February 2023 Compensation and Human Capital Committee actions for the +other NEOs. +Long-Term Incentive Program Mix +The long-term incentive program is heavily weighted to at-risk compensation, with a mix +for February 2023 grants of 70% performance stock units and 30% time vested restricted stock units for Mr. Hoffman (who was CEO at that time) and 60% performance stock units and 40% time vested restricted stock units for the other NEOs. +Compensation Best Practices +What we do +What we do not do +✔ Vast majority of pay is at risk or variable, +i.e., performance-based or equity-based or both +✔ Stringent share ownership requirements (6x base +salary for CEO) +✔ Broad-based clawback policy covering both cash +and equity +✔ Significant vesting horizon for equity grants +✔ Double trigger equity acceleration +✔ Independent Compensation Committee Consultant +✔ Review executive compensation program to ensure +it doesn't promote excessive risk taking +✔ Proactively engage with top shareholders on +compensation and governance issues +✔ Conduct annual say-on-pay votes +✔ Balance short-term and long-term incentives +✘ No dividends or dividend equivalents on unearned performance +shares/units +✘ No repricing or replacing of underwater stock options +✘ No excessive or unnecessary perquisites +✘ No hedging, pledging or short sales of Company stock +✘ No excise tax gross-ups in change-in-control agreements for new +officers (hired after 2008) +2024 PROXY STATEMENT +42 +TABLE OF CONTENTS +Compensation Discussion and Analysis +2023 COMPENSATION PROGRAM OVERVIEW +Setting Targets +Each February, the Committee recommends (and the independent directors approve) target compensation for the CEO +for the upcoming year after considering the latest available information, including the Company's total shareholder return (“TSR”) and other business and financial performance, information provided by the Committee's compensation consultant +regarding executive compensation trends and compensation paid to other chief executive officers of companies in the compensation peer group (described below), and information provided by management on recent Company performance and the Company's +future business and financial outlook. The Committee's goal is to set the CEO's compensation in line with experience and the anticipated market median compensation for that year. +Given the significant weight the Company's executive compensation program places on at risk and variable +compensation, the compensation realized by the CEO and other NEOs can be significantly affected, both positively and negatively, by performance against the various operational and financial performance metrics pre-established by the Committee and +by the performance of the Company's stock. The Board and Committee believe such a compensation program aligns the interests of the CEO and other NEOs with the interests of the shareholders. +The Company's executive compensation program consists of four primary elements: base salary, annual bonus +opportunity, long-term incentive compensation and benefits. These elements are described in greater detail below. +Base Salary +As part of approving an NEO's base salary, the Committee considers a variety of factors including individual +responsibilities, experience, skills, and potential to affect Wolverine Worldwide's overall performance, as well as market surveys and peer group information. The Committee considers these compensation factors subjectively, and no single factor +or combination of factors was determinative in setting base salaries for any NEO for fiscal year 2023. +Based on the above factors, the Committee approved the 2023 base salaries for the NEOs as noted in the +following table. The base salary increases for the NEOs were based on their performance evaluations as well as consideration of peer group and broad-based industry compensation data, as described in detail below. The cash compensation for +Ms. Soriano is paid in Pounds Sterling and was converted into U.S. dollars using the fiscal year-end rate (1.27 for fiscal 2023 and 1.20 for fiscal 2022) here and throughout the CD&A and related disclosures. +Name +2022 Base Salary +2023 Base Salary +Hufnagel 1 +$ 609,800 +$1,000,000 +Klimek +$ 448,800 +$ 471,240 +Soriano 2 +$ 465,972 +$ 575,017 +Stornant +$ 695,250 +$ 695,250 +Zwiers +$ 716,000 +$ 716,000 +Hoffman +$1,000,000 +$1,000,000 +1. +Mr. Hufnagel's increase is due to his 2023 promotion to President and CEO of the Company. Mr. Hufnagel's 2023 base +salary is reflected in this table as his annualized salary at the end of 2023. +2. +Ms. Soriano’s 2022 base salary was GBP 388,310, and her 2023 base salary was GBP 452,769. +2024 PROXY STATEMENT +43 +TABLE OF CONTENTS +Annual Bonus +In 2023, each NEO had the opportunity to earn annual cash incentive compensation (“annual bonus”), consisting +of a performance bonus and an annual strategic priorities bonus: +Key Factors +2023 Company Metrics +Performance Bonus +(75% weighting) +• +Based on performance measured against Company and/or business unit performance criteria established at the +beginning of 2023 +• +• +Revenue (50%) +Adjusted pretax earnings (50%) +• +Payout determined by comparing performance against three performance levels: threshold, target, and stretch +Annual Strategic +Priorities (ASP) +(25% weighting) +• +Measured against company/function ASP +• +Vary for each NEO +• +Each NEO's payout was determined by comparing performance on ASPs against specific criteria set at the +beginning of 2023 +• +Payouts can range from 0% to 200% depending on the NEO's performance against ASPs +A percentage of each NEO's 2023 base salary, as determined in February 2023, was set as the annual bonus +target percentage (the “Target Bonus Percentage”), or adjusted thereafter. The Target Bonus Percentage represents the percentage of each NEO's base salary that could be earned as annual incentive compensation at a “target” performance level (100% +payout) for each of the performance bonus and annual strategic priorities. Generally, the Committee sets higher Target Bonus Percentages for individuals with greater influence on business strategy, profit or sales. This puts a larger percentage +of an NEO's total potential cash compensation at risk, in line with the NEO's ability to influence these factors. For 2023, the NEOs had the following Target Bonus Percentages: Mr. Hufnagel 120%, Ms. Soriano 55%, Mr. Stornant 65%, Mr. Zwiers 60%, +Ms. Klimek 50% and Mr. Hoffman 120%. +The Committee selected fiscal year 2023 revenue and adjusted pretax earnings as metrics for the performance +bonus because it believes a strong correlation exists between performance on these financial measures and increases in shareholder value. +Performance Bonus +Messrs. Hufnagel, Stornant, Zwiers, and Hoffman, and Ms. Klimek had significant influence on the Company's +overall business performance and, accordingly, their respective performance bonus opportunity (75% of their total annual bonus opportunity) is based on the Company performance criteria only. Ms. Soriano was directly responsible for a specific +business unit and exerted a significant influence on that business unit in particular, in addition to influencing Company performance. Accordingly, a large percentage of her overall annual bonus opportunity was based on business unit performance, +as reflected in the table on page 46 . +As shown in the table below, the Committee also set three performance levels for each criterion: threshold +(25% payout for adjusted pretax; 50% for revenue), target (100% payout), and stretch (200% payout). The Committee set the revenue and adjusted pretax earnings goals for these performance levels following a review of the Company's operating plan, +historical performance, and industry and macroeconomic conditions. The performance targets were set aggressively, including setting the revenue performance target required for 100% payout at revenue growth of over 3% versus the prior fiscal year, +after adjusting for businesses sold or discontinued in 2023 (most notably, the Keds brand business). The performance targets required for 100% payout on adjusted pretax goals were also set aggressively – at growth of over 46% versus the prior +fiscal year’s adjusted pretax results. 2023 performance targets were set based on planned performance in 2023 and as compared to actual 2022 results. +Company +Performance Level +(% of Target Payout) 1 +Revenue (in millions) +Adjusted Pretax Earnings +(in millions) +Threshold (25% for pretax; 50% for revenue) +$2,530 +$172.2 +Target (100%) +$2,590 +$191.0 +Stretch (200%) +$2,700 +$206.0 +1. +The maximum payout an NEO can receive is 200% of his or her Target Bonus Percentage, even if performance is above +stretch. An NEO would receive 0% of his or her Target Bonus Percentage if performance is below threshold. +2024 PROXY STATEMENT +44 +TABLE OF CONTENTS +For each business unit, the Committee sets the revenue and adjusted pretax earnings at substantially similar +levels of difficulty as the goals for the Company and with a similar degree of difficulty as in prior years. The below table shows historical weighted performance levels achieved by the business unit included as part of an NEO performance bonus +in 2023. +Historical Group Performance +2023 +2022 +2021 +2020 +2019 +International Group +Below threshold +Between target and stretch +Between target and stretch +Below threshold +Between threshold and target +2023 Performance +Overall Weighted Payout by Group +Wolverine Worldwide +Below Threshold +—% +International Group +Below Threshold +—% +Company and International Group revenue and pre-tax performance for 2023 was below threshold and resulted in +no payout, as shown in the table below. +Name +Performance Bonus +(as a % of Total Annual +Bonus Opportunity) +Performance Bonus Opportunity +(as a % of an NEO's Target +Percentage) 1 +Performance Bonus +Percentage +Earned 1 +Performance +Bonus Paid 1 +Hufnagel +75% +0 - 200% +—% +$ 0 +Klimek +75% +0 - 200% +—% +$ 0 +Soriano +75% +0 - 200% +—% +$ 0 +Stornant +75% +0 - 200% +—% +$ 0 +Zwiers +75% +0 - 200% +—% +$ 0 +Hoffman 2 +75% +0 - 200% +—% +N/A +1. +Not including Annual Strategic Priorities Bonus. +2. +In connection with his termination of employment, Mr. Hoffman was not eligible for a performance bonus payout and +instead received a pro-rata target bonus in accordance with the terms of his employment agreement. +Annual Strategic Priorities +At the same time Target Bonus Percentages are set, the CEO approves measurable annual strategic priorities for +each NEO's individual bonus, other than for himself. The CEO submits, and the Committee reviews and approves, with such changes as it considers appropriate, the CEO's annual strategic priorities. Such measurable priorities may include goals such +as executing strategies supporting the Company's vision, developing employees, and driving operational excellence. Performance is evaluated by the CEO (or, in the case of the CEO, by the Committee and the other independent directors) based on +qualitative and quantitative factors. +Each strategic priority is given an achievement rating with weighted performance ratings and payouts consistent +with the following table: +Annual Strategic Priority Rating +2023 Payout Level +Stretch +200% +Target +100% +Threshold +50% +The CEO recommended, and the Committee approved, the 2023 cumulative weighted annual strategic priority scores +and payout levels for each of the NEOs other than himself. The Committee and the other independent directors of the Board met with the CEO at the end of the year to evaluate his performance against his strategic priorities, considering various +factors. The Committee determined the cumulative weighted strategic priorities score for the CEO and recommended to the independent directors of the Board the CEO's payout level. +2024 PROXY STATEMENT +45 +TABLE OF CONTENTS +Summaries of the strategic priorities for each NEO are outlined in the table below, along with performance +information about each objective in parentheses, based on the scale set forth above. This year's annual strategic priorities related to key initiatives intended to drive strategic transformation and shareholder value. +NEO +2023 Annual Strategic Priorities +Hufnagel +Stabilization (Target), Transformation (Target), Inflection (Target), People & Culture (Target) +Klimek +Transform culture (Target), Continue DE&I Journey (Threshold), Create an amazing employee experience to +attract and retain talent (Target), Leverage organizational design (Stretch), Create our digital HR journey (Target) +Soriano +Achieve healthy operational basis (Target), Grow with our largest international brands (Below Threshold), +Strategic DTC approach (Below Threshold), Expand penetration of our brands in APAC (Target), People & Culture (Target) +Stornant +Integrate financial forecast, inventory planning, and Q-reviews (Target), PIO Cost Savings (Target), +Normalize working capital and optimize cash flow (Threshold), Improve work-life balance for team members (Target) +Zwiers +Reduce cost and lead times (Stretch), Restore foundational brand health (Stretch), Sourcing Strategy +(Stretch), Digitize Supply Chain (Stretch), People and Culture (Target), Navigate supply chain crisis (Stretch), Modernize distribution platform (Stretch), Modernize logistics platform (Target) +Name +Annual Strategic +Priorities +(as a % of Total Annual Bonus +Opportunity) +2023 Individual Bonus +Opportunity +(as a % of an NEO's Target +Percentage) +2023 +Individual Bonus +Percentage Achieved +2023 +Individual +Bonus Paid +Hufnagel +25% +0 - 200% +100% +$300,000 +Klimek +25% +0 - 200% +115% +$ 66,998 +Soriano +25% +0 - 200% +109% +$ 81,688 +Stornant +25% +0 - 200% +90% +$112,978 +Zwiers +25% +0 - 200% +150% +$161,100 +Hoffman 1 +25% +0 - 200% +N/A +N/A +1. +In connection with his termination of employment, Mr. Hoffman was not eligible for a performance bonus payout and +instead received a pro-rata target bonus in accordance with the terms of his employment agreement. +Each NEO's total annual bonus opportunity for 2023 ranged from 0% to 200% of the Target Bonus Percentage. The +accompanying table shows the aggregate annual incentive compensation payout earned by each NEO for 2023, as well as the portion of that aggregate number that is attributable to the performance bonus and annual strategic priorities bonus. +Hufnagel +120% +25% +75% +$— +$300,000 +$300,000 +25% +Klimek +50% +25% +75% +$— +$ 66,998 +$ 66,998 +28% +Soriano +55% +25% +30% +45% 2 +$— +$ 81,688 +$ 81,688 +26% +Stornant +65% +25% +75% +$— +$112,978 +$112,978 +25% +Zwiers +60% +25% +75% +$— +$161,100 +$161,100 +38% +Hoffman 3 +120% +25% +75% +N/A +N/A +N/A +N/A +2024 PROXY STATEMENT +46 +TABLE OF CONTENTS +1. +Based on revenue and pretax earnings performance criteria for the Company, as described above under “Annual Bonus — +Performance Bonus.” +2. +Based on revenue and pretax earnings as the performance criteria for the International Group. +3. +In connection with his termination of employment, Mr. Hoffman was not eligible for a performance bonus payout and +instead received a pro-rata target bonus in accordance with the terms of his employment agreement. +LONG-TERM INCENTIVE COMPENSATION +In 2023, each NEO had the opportunity to earn long-term incentive compensation comprised of a mix of +performance stock units and time-based restricted stock unit awards. The 2023 grants were based on the following: +Key Factors +Performance Share Metrics +Performance Stock Units +• +Performance stock units are based on performance criteria covering three-year periods +• +Operating Profit (60%) 1 +• +Awards balance focus on near term profitability with longer term shareholder value creation +• +Relative Total Shareholder Return (“TSR”) (40%) 2 +Time-Based Restricted Stock Unit Awards +• +Encourages employee retention and rewards increases in stock price +1. +Operating Profit is the total earnings from the Company’s core business function for a fiscal year after deducting +selling, general and administrative costs. +2. +Relative TSR is as compared to TSR for the S&P Composite 1500 Consumer Durables & Apparel Index. +Performance Awards for the 2023-2025 +Performance Period +In the beginning of 2023, the Committee evaluated each NEO's long-term incentive target payout opportunity +expressed as a dollar amount at target grant value for the grant of performance units for the 2023-2025 period. Performance units are eligible to vest based on achievement of adjusted constant-currency Operating Profit goals (weighted 60%) and +relative total shareholder return goals (weighed 40%). +Name +2023-2025 +Target +Hufnagel +$ 390,000 +Klimek +$ 285,000 +Soriano +$ 330,000 +Stornant +$ 715,200 +Zwiers +$ 645,000 +Hoffman +$4,060,009 +The Company accrues, but does not pay, any dividends on any performance units during the performance period. +Once the Committee certifies the Company's performance compared to the pre-determined performance criteria, the restrictions on some, all, none, or multiple of the performance share units awarded to each NEO will vest, and the NEO will receive +accrued dividends only on the shares actually earned. +The Committee goes through a rigorous process in setting performance targets, including a careful review of +the Company's prior year business and financial performance, current year operating plan and future expectations. To achieve target level Operating Profit for the first year of the performance period would require a more than 30% increase over +2022 actual performance, and to achieve target level Operating Profit for years two and three of the performance period would require double digit growth percentages over the prior year's actual Operating Profit results. Wolverine believes +disclosing specific Operating Profit targets while the applicable performance period is ongoing could cause competitive harm. However, such targets will be disclosed once the applicable performance periods have ended as part of our discussion and +analysis on awards earned by the NEOs. +For the relative TSR metric, threshold was set at the 25th percentile relative to the S&P Composite 1500 +Consumer Durables & Apparel Index, target at the 50th percentile, and stretch at the 75th percentile. In addition, if the Company’s absolute TSR for the three-year period is negative, payouts on this measure are capped at target, regardless +of whether the Company outperformed the Index. +2024 PROXY STATEMENT +47 +TABLE OF CONTENTS +2021-2023 Performance Stock Units +The following tables list the performance levels set by the Committee for performance stock unit awards granted +for the 2021-2023 performance period: +Performance Level +(Percentage of Target Payout) +2021 EPS +2022 EPS (% increase vs. +prior year) +2023 EPS (% increase vs. +prior year) +Threshold (50%) +$1.90 +4.0% +6.8% +Target (100%) +$2.00 +7.7% +11.5% +Goal (150%) +$2.05 +12.0% +17.5% +Stretch (200%) +$2.10 +16.5% +23.5% +Performance Level +(Percentage of Target Payout) +2021 BVA (in +millions) +2022 BVA (% increase vs. +prior year) +2023 BVA (% increase vs. +prior year) +Threshold (50%) +$155 +3.7% +4.5% +Target (100%) +$161 +9.7% +10.8% +Goal (150%) +$169 +14.1% +18.0% +Stretch (200%) +$177 +20.4% +23.6% +In February 2024, the Committee evaluated and certified the Company's performance for the 2021-2023 +performance period against the criteria set forth in the table above. These targets and the related results exclude revenue attributable to the Sweaty Betty brand, which was acquired during the 2021 fiscal year. During the 2021-2023 performance +period, the Company's TSR performance against the Russell 3000 Index was at the 11th percentile so the actual shares vesting was reduced by 25% pursuant to the TSR adjustment mechanism built into the awards. The table below showing shares vested +for each NEO under the 2021-2023 performance stock unit grant reflects this adjustment. After the adjustment, vesting was at 19.3% of target. In calculating the number of stock units that vest, the Company uses the stock price on the date of the +grant, which results in the NEOs bearing the risk of stock price performance during the performance period. +Name +Stock Units Vesting +(#) +Hufnagel +4,716 +Klimek +1,428 +Soriano +1,445 +Stornant +3,494 +Zwiers +3,088 +Hoffman +13,950 1 +1. +Based on actual performance and prorated to reflect Mr. Hoffman's time of +employment during this performance period. +Restricted Stock Unit Awards +The following table reflects the grant date value of the service-based restricted stock unit awards granted to +each NEO: +Name +2023 Time-vested +Restricted +Stock Units +Hufnagel +$1,260,019 +Klimek +$ 690,010 +Soriano +$ 743,353 +Stornant +$ 476,815 +Zwiers +$ 430,007 +Hoffman +$1,740,012 +The Committee generally grants annual equity awards at its regularly scheduled February meeting, and the +independent directors of the Board approve equity grants to the CEO generally on the same day that the Committee meets. Restricted stock units awarded vest one-third on each of the anniversaries. Mr. Hufnagel's amount includes promotion grants of +$1,000,117 in connection with his promotion to President and later in the year, President and CEO. Mses. Klimek's and Soriano's amounts each include a retention grant of $500,008. These grants were made to encourage retention of these key +individuals while the Company was experiencing a CEO transition and beginning a strategic transformation. All promotional and retention grants have the Company’s standard three-year vesting schedule, as described above. +2024 PROXY STATEMENT +48 +TABLE OF CONTENTS +BENEFITS +Retirement, Deferred Compensation and +Welfare Plans +The NEOs in the United States participate in Wolverine Worldwide's medical and dental plans and receive life +and disability insurance. In 2023, Messrs. Hufnagel, Stornant and Zwiers and Ms. Klimek also participated in the Wolverine Worldwide Employees' Pension Plan (a defined benefit plan) and Messrs. Hufnagel, Stornant, and Zwiers participated in the +Wolverine World Wide, Inc. 409A Supplemental Executive Retirement Plan (an unfunded, non-qualified plan). For a description of the benefits under Wolverine Worldwide's retirement plans, see “ Pension Plans and 2023 +Pension Benefits ” below. Ms. Soriano is located outside of the United States and participates in local medical, life and disability insurance plans and receives an annual retirement benefit payment consistent with the benefits generally +made available to employees in the UK. +All full-time employees of the Company in the United States, including the NEOs located in the United States, +are also eligible to participate in one of Wolverine's 401(k) Plans (the “401(k) Plan”). Pursuant to the 401(k) Plan, employees, including the NEOs in the United States, may elect to defer a portion of their salary and receive a Company match on +eligible deferrals of up to 3% of salary for 2023 (5.5% for those who do not participate in the Pension Plan), subject to limits set forth in the Internal Revenue Code of 1986, as amended. +In 2016, the Company adopted the Deferred Compensation Plan. This plan allows directors, executives and other +eligible senior employees of the Company to elect to defer a portion of their eligible compensation. Wolverine Worldwide may, but need not, credit a participant with an additional discretionary Company contribution. The Company adopted the +Deferred Compensation Plan as a retention and recruitment tool to facilitate retirement savings and provide financial flexibility for key employees, and because many of the companies with which it competes for executive talent provide similar +plans to their key employees. For a description of the benefits under the Deferred Compensation Plan, see “ Non-Qualified Deferred Compensation ” below. +Perquisites +The Company generally provides limited perquisites to NEOs other than to account for relocation assignments. +The Company feels the perquisites are necessary to provide a competitive total compensation package for each NEO. For details on perquisites, see footnote 5 to the “Summary Compensation Table” on page 54 . Ms. Soriano also +receives benefits generally made available to Company employees located in the U.K., a car and travel allowance, and tax equalization tied to her relocation to the U.K. when she was hired by the Company in 2018. +POST-EMPLOYMENT COMPENSATION +Each NEO is party to an Executive Severance Agreement that provides for certain payments and benefits upon +termination of employment after a change in control of Wolverine Worldwide. The Board believes Executive Severance Agreements will motivate management to actively pursue a business transaction that is in the best interests of the shareholders, +even if it could ultimately result in his or her job elimination, and also will promote management stability during the transition period accompanying a change in control. Each NEO is eligible to receive compensation if his or her employment is +terminated within two years following a change in control of Wolverine Worldwide. Even following a change in control, an NEO does not receive payment under the Executive Severance Agreement if his or her employment terminates: +• +Due to death or retirement in accordance with Wolverine Worldwide's policy or as otherwise agreed, +• +For cause or disability, or +• +By resignation of the NEO, other than for “good reason,” which is discussed under the heading “Benefits Triggered Upon a Change in Control.” +NEOs may also be eligible under Wolverine Worldwide's retirement plans or equity plans to receive certain +payments and benefits upon termination of employment or in connection with a change in control as described in the “ Potential Payments Upon Termination or Change in Control ” section of this Proxy Statement. +Mr. Hufnagel is also party to an Employment Agreement under which he is eligible to receive certain payments +and benefits if the Company terminates his employment, even if not following a change in control, other than for “cause” or if he terminates his employment for “good reason.” The Committee determined upon appointing Mr. Hufnagel as the President +and CEO that, given the Company's strategic initiatives the Board asked him to lead, it was appropriate for the Company to enter into such arrangement. +2024 PROXY STATEMENT +49 +TABLE OF CONTENTS +The Company includes accelerated retirement vesting provisions for equity awards, provided certain conditions +are met, and for the payout of a prorated annual bonus for a qualifying retirement more than six months into the fiscal year. Details on these provisions and information on benefits payable to Mr. Hufnagel under his Employment Agreement, and to +each of the NEOs under the Executive Severance Agreements, as well as information on the other retirement and equity plans of Wolverine Worldwide, are included in the “ Potential Payments Upon Termination or Change +in Control” section of this Proxy Statement. +Upon termination of his employment with the Company, the Company made payments and offered benefits to +Mr. Hoffman in accordance with his employment agreement; a narrative description of Mr. Hoffman’s employment agreement and actual payments and benefits provided to Mr. Hoffman are reflected in the “Potential +Payments Upon Termination or Change in Control ” section of this Proxy Statement. +SAY ON PAY ADVISORY VOTE +We asked shareholders to vote on a “say-on-pay” advisory vote on our executive compensation in 2023. +Shareholders expressed substantial support for the compensation of our named executive officers, with approximately 98% of the votes cast for the “say-on-pay” advisory vote. The Committee carefully evaluated the results of the 2023 advisory vote. +The Committee also considers many other factors in evaluating our executive compensation programs as discussed in this Compensation Discussion and Analysis, including the Committee's assessment of total shareholder return, the interaction of our +compensation programs with our corporate business objectives, evaluations of our programs by external consultants, and review of peer group and survey data, each of which is evaluated in the context of the Committee's fiduciary duty to act as the +directors determine to be in shareholders' best interests. While each factor bore on the Committee's decisions regarding our named executive officers' compensation, the Committee made no changes to our executive compensation program and policies +directly as a result of the 2023 say-on-pay advisory vote. +COMPENSATION SETTING PROCESS +Setting Targets +The Committee goes through a rigorous process in setting performance targets, including a careful review of the +Company's prior year business and financial performance, current year operating plan, and future expectations. The Committee engages with management in this process over several months leading up to setting final annual bonus and three-year +performance targets in February. +Competitive Philosophy and Competitive Market Data +When making compensation recommendations and decisions, the Committee considers the CEO's assessment of the +performance of each NEO, other than himself; the performance of the individual and the individual's respective business unit or function; the scope of the individual's responsibilities, years of experience with the Company (or in similar +positions with other companies), skills and knowledge; market compensation data; market and economic conditions; Company performance; retention considerations; and Wolverine Worldwide's compensation philosophy (collectively, the “compensation +factors”). The Committee considers these compensation factors both subjectively and objectively, and no single factor or combination of factors is determinative. With respect to CEO compensation, the Committee seeks to set compensation in line +with experience and the anticipated market median for a given year. +The Committee uses market surveys and Peer Group (as defined below) information provided by its compensation +consultant as market reference points. The Committee also considers information the Company learns through recruiting NEOs and the experience levels and responsibilities of NEOs prior to joining the Company as reference points in setting NEO +compensation. +As part of its competitive data review in connection with determining 2023 compensation, the Committee +considered information presented by its consultant Frederic W. Cook & Co. (“FW Cook”) based on publicly-disclosed Peer Group information and on the Willis Towers Watson (WTW) CDB Executive Compensation Survey Report (General Industry and +Retail/Wholesale). +2024 PROXY STATEMENT +50 +TABLE OF CONTENTS +Peer Group +Below is the peer group used in late 2022 and early 2023 in connection with 2023 compensation decisions. In +determining the Peer Group, the Committee considered each potential peer company's industry, channels of distribution, revenue and market capitalization. The Company also considered the typicality of a company's pay practices, excluding companies +whose chief executive may not receive market compensation because of a founder relationship, family ownership position, or other similar relationships. +Abercrombie & Fitch Co. +Chico's FAS, Inc. +G-III Apparel Group, Ltd. +Hanesbrands Inc. +The Children's Place, Inc. +American Eagle Outfitters Inc. +Deckers Outdoor Corporation +Genesco Inc. +Kontoor Brands, Inc. +Caleres, Inc. +Designer Brands, Inc. +Gildan Activewear, Inc. +Skechers USA, Inc. +Carter's, Inc. +Foot Locker, Inc. +Guess?, Inc. +Tapestry, Inc. +CEO Role +Within the framework of the Company's executive compensation program, the CEO recommends the level of base +salary, annual bonus, long-term incentive compensation, equity awards and other compensation components for his direct reports, including the other NEOs. The CEO bases his recommendation upon his assessment of the compensation factors applicable +to each NEO. The CEO considers these compensation factors both objectively and subjectively, and no single factor is determinative. The Committee discusses these recommendations with the CEO prior to setting the compensation for each NEO, other +than the CEO. The Committee, however, ultimately determines all compensation for NEOs other than the CEO, whose compensation is determined by the independent directors as a whole. +Compensation Consultant Role +FW Cook was first engaged as the Committee's independent compensation consultant in 2016 and reports directly +to the Committee. The Committee determines the scope of engagement and may replace the consultant or hire additional consultants at any time. The Committee has evaluated FW Cook's independence under the rules established by the NYSE and has +determined that FW Cook is “independent” as defined by NYSE rules. In addition, the Committee has evaluated whether the engagement of FW Cook raised any conflicts of interest and has determined that no such conflicts of interest exist. +At the Committee's invitation, a representative of FW Cook generally attends all Committee meetings and also +communicates with the Committee Chair and management regularly between meetings. However, the Committee makes all decisions regarding NEO compensation. FW Cook provides various executive compensation services to the Committee pursuant to a +consulting agreement with the Committee. Generally, these services include advising the Committee on the principal aspects of the Company's executive compensation program, evolving industry practices, and providing market information and analysis +regarding the competitiveness of the Company's program design. +During 2023, FW Cook performed the following specific services: +• +Attended Committee meetings, as requested +• +Reviewed the Company's peer group and advised the Committee on the composition of the peer group +• +Reviewed survey data for competitive comparisons +• +Provided market data and recommendations on CEO and other NEO compensation +• +Advised the Committee on market trends related to compensation policies and programs +• +Proactively advised the Committee on best practice approaches for governance features of executive compensation programs +• +Reviewed the Compensation Discussion & Analysis and other executive compensation related disclosures included in the Company's Proxy Statement +The total fees the Company paid to FW Cook for services to the Committee in 2023 were $131,485, less than 1% +of FW Cook's total consulting income during the same period. The Company did not pay or incur any other fees to or with FW Cook. +2024 PROXY STATEMENT +51 +TABLE OF CONTENTS +OTHER COMPENSATION POLICIES AND PRACTICES +NEO Stock Ownership Guidelines +Each NEO, as well as each non-employee director, must attain (and maintain) a minimum stock ownership level +prior to being able to gift or sell any Company stock. The equity that qualifies for determining the NEOs’ minimum stock ownership level includes owned shares and unvested restricted stock units that vest based on time (up to a maximum of value +of 50% of the applicable ownership requirement), but excludes performance shares and units and unexercised options (or any portion thereof, such as the current “in the money” value). During 2023, each NEO complied with the requirements of these +guidelines by not selling or transferring shares while their respective stock ownership levels were below the minimum ownership level. +Covered Positions +Guideline +CEO +6x Annual Salary +President +3x Annual Salary +Other NEOs +2x Annual Salary +Non-Employee Directors +6x Annual Cash Retainer +Stock Hedging and Pledging Policies +Under the Company's Insider Trading Policy, all directors, officers and other employees are prohibited from +engaging in any hedging transactions involving Company securities beneficially owned by them. The Company also considers it inappropriate for any such person to engage in speculative transactions in the Company's securities, including short +sales, publicly traded options, margin accounts and pledges and standing and limit orders. Also, all directors, officers and other employees are prohibited from pledging Company securities as collateral for a loan. +Clawback Policy +The Company has adopted a Policy for Recovery of Incentive Compensation (“Clawback Policy”) which empowers the +Board or a committee of the Board to seek recovery of specified incentive compensation covering both cash and equity received by executive officers under specific circumstances where there is a material restatement of the Company's financial +results that would have led to a lower level of incentive compensation payout. +On July 31, 2023, the Company revised the Clawback Policy to comply with the requirements of NYSE Listing +Standard 303A.14 implementing Rule 10D-1 under the Exchange Act. In the event the Company is required to prepare an accounting restatement of the Company’s financial statements due to material non-compliance with any financial reporting +requirement under the federal securities laws, the Company will recover, on a reasonably prompt basis, the excess incentive-based compensation received by any covered executive, including the NEOs, during the prior three fiscal years that exceeds +the amount that the executive otherwise would have received had the incentive-based compensation been determined based on the restated financial statements. +Impact of Accounting and Tax Treatments on Compensation +As one of the factors in the review of compensation matters, the Committee considers the anticipated tax +treatment to the Company. Under Section 162(m) of the Internal Revenue Code, a limitation exists on the deductibility of compensation paid to certain “covered employees,” including all of our NEOs, in excess of $1 million per year and thus we are +unable to deduct compensation payable to our NEOs in excess of such limit. While the Committee considers the impact of this tax treatment, the primary factors influencing program design are the support of our business objectives and the +Committee’s commitment to structuring the Company’s executive compensation programs in a manner designed to align pay with performance. Accordingly, the Committee retains flexibility to structure our compensation programs in a manner that is not +tax-deductible in order to achieve a strategic result that the Committee determines to be more appropriate. +2024 PROXY STATEMENT +52 +TABLE OF CONTENTS +Compensation and Human Capital Committee +Report +The Committee has reviewed and discussed with management the information provided under the heading +“Compensation Discussion and Analysis.” Based on this review and discussion, the Committee recommended to the Board of Directors that the Company include the Compensation Discussion and Analysis section in this Proxy Statement and incorporate it +by reference into the Company's Annual Report on Form 10-K. +Respectfully submitted, +Kathleen Wilson-Thompson (Chair) +William K. Gerber +David Kollat +DeMonty Price +Compensation and Human Capital Committee Interlocks and Insider Participation. During fiscal year 2023, none of the members of the Compensation and Human Capital Committee was an officer or employee of the Company, was a former officer of the Company, nor had a relationship with the Company +requiring disclosure as a related party transaction under Item 404 of Regulation S-K of the Securities Act of 1933. None of the Company's executive officers served on the compensation committee or board of directors of another entity whose +executive officer(s) served as a director on the Company's Board or on the Compensation and Human Capital Committee. +2024 PROXY STATEMENT +53 +TABLE OF CONTENTS +Summary Compensation Table +Christopher Hufnagel +President and +CEO, Wolverine +Worldwide +2023 +$813,672 +$— +$1,650,032 +$ 300,000 +$366,393 +$ 44,380 +$3,174,477 +2022 +$606,377 +$— +$ 665,652 +$ 97,162 +$ — +$ 43,405 +$1,412,596 +Amy Klimek +Executive Vice +President, Chief +Human Resources +Officer +2023 +$465,199 +$— +$ 975,015 +$ 66,998 +$ 97,489 +$ 37,157 +$1,641,858 +Isabel Soriano 6 +President, +International Group +2023 +$543,831 +$— +$1,073,356 +$ 81,688 +$ — +$1,015,643 +$2,714,518 +2022 +$463,850 +$— +$ 454,094 +$ 280,390 +$ — +$ 991,681 +$2,190,015 +2021 +$480,641 +$— +$ 597,096 +$ 326,554 +$ — +$1,075,445 +$2,479,736 +Michael D. Stornant +Executive Vice +President, +CFO, Treasurer and +Chief Accounting Officer +2023 +$695,250 +$— +$1,192,022 +$ 112,978 +$417,090 +$ 33,304 +$2,450,644 +2022 +$691,356 +$— +$1,113,295 +$ 49,881 +$ — +$ 31,931 +$1,886,463 +2021 +$657,865 +$— +$1,819,680 +$ 577,880 +$ 86,187 +$ 30,883 +$3,172,495 +James D. Zwiers +Executive Vice +President and +President, Global +Operations Group +2023 +$716,000 +$— +$1,075,018 +$ 161,100 +$440,351 +$ 44,047 +$2,436,516 +2022 +$711,962 +$— +$ 988,296 +$ 48,057 +$ — +$ 37,310 +$1,785,625 +2021 +$683,856 +$— +$1,578,188 +$ 481,625 +$ 70,550 +$ 38,953 +$2,853,172 +Brendan Hoffman +Former +President and +CEO, Wolverine +Worldwide +2023 +$634,615 +$— +$5,800,021 +$ — +$ — +$1,144,079 +$7,578,715 +2022 +$997,308 +$— +$5,183,029 +$ 144,007 +$ — +$ 195,310 +$6,519,654 +2021 +$924,231 +$— +$5,083,847 +$1,073,446 +$ — +$ 113,015 +$7,194,539 +1. +Includes any amounts deferred under the Company's qualified 401(k) plan or Deferred Compensation Plan. +2. +Includes the grant date fair value of restricted stock unit awards, and performance unit awards, as follows for 2023: +Name +Service-based Restricted +Stock Unit Value +Performance Unit Value 23-25 +Grant +Total +Hufnagel +$1,260,020 +$ 390,012 +$1,650,032 +Klimek +$ 690,011 +$ 285,004 +$ 975,015 +Soriano +$ 743,353 +$ 330,003 +$1,073,356 +Stornant +$ 476,815 +$ 715,207 +$1,192,022 +Zwiers +$ 430,007 +$ 645,011 +$1,075,018 +Hoffman +$1,740,012 +$4,060,009 +$5,800,021 +Restricted stock units were valued using the closing market price of Wolverine Worldwide common stock on the date of +the grant of the respective award. Performance units were valued using the closing market price of Wolverine Worldwide common stock on the date of grant of the respective award and assuming target performance for all performance +periods. Assuming maximum payout, the aggregate grant date fair value of performance units awarded in 2023 for each NEO (and, in parentheses, the maximum value is combined with the grant date fair value of restricted stock unit awards +and restricted stock awards for 2023) would have been $8,120,017; ($9,860,029) for Mr. Hoffman; $780,023 ($2,040,043) for Mr. Hufnagel, $660,006 ($1,403,359) for Ms. Soriano; $1,430,414 ($1,907,229) for Mr. Stornant; $1,290,022 +2024 PROXY STATEMENT +54 +TABLE OF CONTENTS +($1,720,029) for Mr. Zwiers; and $570,008 ($1,260,019) for Ms. Klimek. Restrictions on +such performance unit awards will lapse in the February following the last year of the performance period, if at all, based on the Company's performance for the period (capped at 200%). The actual value of shares that vest is also dependent on +the stock price at the time of vesting. For additional valuation assumptions, see the Stock Based Compensation footnote to Wolverine Worldwide's Consolidated Financial Statements for the fiscal year ended December 30, 2023 included in its +Form 10-K for this year. +3. +Reflects the sum of performance bonus and individual bonus amounts, as adjusted by any applicable modifier, earned in +2023, 2022 and 2021, respectively, and paid in 2024, 2023 and 2022 respectively. +4. +All amounts in this column reflect, where applicable, the aggregate change in the actuarial present value of the +accumulated benefits under the Wolverine Worldwide Employees' Pension Plan (“Pension Plan”) and Wolverine World Wide, Inc. 409A Supplemental Executive Retirement Plan (“SERP”) for Messrs. Stornant, Hufnagel, Zwiers, and Klimek (Pension +Plan only). The amounts in the table were determined using assumptions consistent with those used in Wolverine Worldwide's Consolidated Financial Statements for each respective year. See the “Pension Plans and 2023 Pension Benefits” +section starting on page 61 . +5. +The amounts listed in this column for 2023 include Wolverine Worldwide's contributions to the accounts of the NEOs +under Wolverine Worldwide's 401(k) plans (or, in the case of Ms. Soriano, a payment in lieu of a retirement plan contribution) and the Wolverine Worldwide Deferred Compensation Plan, payments made by Wolverine Worldwide for the premiums +on certain life insurance policies, tax, housing/relocation expenses and estate planning services and health care reimbursements in the amounts listed in the table below. Unlike the other NEOs, Ms. Soriano is not a participant in the +Company's Pension Plan, and instead received a retirement benefit payment. +Name +401(k) Match +Tax and +Estate +Planning +Health +Life Insurance +Premiums +Moving/Living +Expenses +Deferred +Compensation +Plan +Contribution +Car +Allowance +Tax +Equalization +Other +Hufnagel +$9,900 +$11,000 +$22,625 +$855 +$0 +$0 +$0 +$0 +$0 +Klimek +$9,900 +$11,000 +$15,720 +$537 +$0 +$0 +$0 +$0 +$0 +Soriano +$43,506 +$50,510 +$15,269 +$1,599 +$128,262 +$0 +$0 +$776,497 +$0 +Stornant +$9,900 +$0 +$20,136 +$3,268 +$0 +$0 +$0 +$0 +$0 +Zwiers +$9,900 +$11,204 +$19,740 +$3,203 +$0 +$0 +$0 +$0 +$0 +Hoffman +$0 +$6,570 +$0 +$0 +$7,430 1 +$0 +$0 +$0 +$1,130,079 2 +1. +Temporary housing and costs related to relocation. +2. +Termination payments and benefits paid out under Mr. Hoffman's separation agreement. For details, please see the “ Potential Payments upon +Termination or Change in Control ” section of this Proxy Statement. +6. +The cash compensation for Ms. Soriano is paid in Pounds Sterling. Her cash compensation was converted into U.S. +dollars using the fiscal year-end rate of $1.35 for fiscal year 2021, $1.20 for fiscal year 2022 and 1.27 for fiscal year 2023. +2024 PROXY STATEMENT +55 +TABLE OF CONTENTS +Grants of Plan-Based Awards in +Fiscal Year 2023 +The following table provides information concerning each grant of an award made to the NEOs in fiscal year 2023: +Hufnagel +Annual Bonus +$488,203 +$976,406 +$1,952,812 +FY23-FY25 +Performance Units +02/08/2023 +12,940 +25,880 +51,760 +$ 390,012 +Restricted Units +02/08/2023 +17,253 +$ 260,003 +Restricted Units +07/31/2023 +39,464 +$ 500,009 +Restricted Units +10/30/2023 +61,051 +$ 500,008 +Klimek +Annual Bonus +$116,300 +$232,599 +$ 465,199 +FY23-FY25 +Performance +Units +02/08/2023 +9,456 +18,912 +37,824 +$ 285,004 +Restricted Units +02/08/2023 +12,608 +$ 190,003 +Restricted Units +10/30/2023 +61,051 +$ 500,008 +Soriano +Annual Bonus +$141,310 +$282,621 +$ 565,242 +FY23-FY25 +Performance +Units +02/08/2023 +10,949 +21,898 +43,796 +$ 330,003 +Restricted Units +02/08/2023 +14,599 +$ 220,007 +Restricted Units +07/31/2023 +1,842 +$ 23,338 +Restricted Units +10/30/2023 +61,051 +$ 500,008 +Stornant +Annual Bonus +$225,956 +$451,913 +$ 903,825 +FY23-FY25 +Performance +Units +02/08/2023 +23,730 +47,459 +94,918 +$ 715,207 +Restricted Units +02/08/2023 +31,640 +$ 476,815 +Zwiers +Annual Bonus +$214,800 +$429,600 +$ 859,200 +FY23-FY25 +Performance +Units +02/08/2023 +21,401 +42,801 +85,602 +$ 645,011 +Restricted Units +02/08/2023 +28,534 +$ 430,007 +Hoffman +Annual Bonus +$380,769 +$761,538 +$1,523,077 +FY23-FY25 +Performance +Units +02/08/2023 +134,705 +269,410 +538,820 +$4,060,009 +Restricted Units +02/08/2023 +115,462 +$1,740,012 +1. +Estimated payout levels relating to the performance bonus and strategic priorities bonus. Maximum amount assumes +stretch revenue and pretax earnings performance. For a description of these bonuses and the payouts under them, see pages 44 - 47 . Ms. Soriano's payout levels have been converted to U.S. dollars +from Pounds Sterling based on the fiscal year-end exchange rate of 1.27. +2. +Estimated payout levels as of the grant date of performance stock units granted under the Stock Incentive Plan of +2016, as amended (the “Stock Incentive Plan of 2016”). Restrictions on such performance unit awards typically lapse in the February following the last year of the performance period, if at all, based on the Company's performance for the +period (capped at 200%). The actual value of shares that vest is also dependent on the stock price at the time of vesting. The Company accrues, but does not pay, dividends on the performance shares during the performance period. At the +end of the performance period, the Company will pay to the NEO the accrued dividends (if any) on the performance units that vest. For a description of the performance units granted in 2023 under the Stock Incentive Plan of 2016, see +pages 47 . +3. +The Company awarded service-based restricted stock unit awards in February 2023 under the Stock Incentive Plan of 2016 +to all NEOs. One third of the shares vest on each of the first three anniversaries of the date of grant of the award. All restricted stock units vest upon an NEO's death, disability or retirement. Holders of restricted stock units and +awards are entitled to receive dividend equivalents on restricted stock units and awards. Mr. Hufnagel's grants include promotion grants on July 31, 2023 and October 30, 2023. Mses. Klimek's and Soriano's grants each include an +October 30, 2023 retention grant, and Ms. Soriano's grants include a July 31, 2023 promotion grant. +4. +Represents the award date fair value for performance stock units and service-based stock unit awards made in fiscal +year 2023, determined as described in footnote 2 to the “Summary Compensation Table.” +2024 PROXY STATEMENT +56 +TABLE OF CONTENTS +Outstanding Equity Awards at +2023 Fiscal Year-End +The following table provides information concerning options and stock awards that have not vested for each NEO +outstanding as of December 30, 2023: +Hufnagel +Various +134,980 +$1,199,972 +Various +82,588 +$ 734,207 +02/11/14 +17,022 +$27.13 +02/10/24 +02/11/15 +16,789 +$28.00 +02/10/25 +02/10/16 +32,294 +$16.51 +02/09/26 +Soriano +Various +87,560 +$ 778,408 +Various +29,638 +$ 263,482 +Klimek +Various +86,019 +$ 764,709 +Various +27,376 +$ 243,373 +02/10/16 +10,214 +$16.51 +02/09/26 +07/13/16 +18,676 +$22.92 +07/12/26 +Stornant +Various +56,643 +$ 503,556 +Various +66,387 +$ 590,180 +02/11/14 +11,912 +$27.13 +02/10/24 +02/11/15 +11,765 +$28.00 +02/10/25 +06/12/15 +12,687 +$29.31 +06/11/25 +02/10/16 +70,948 +$16.51 +02/09/26 +Zwiers +Various +50,532 +$ 449,229 +Various +59,590 +$ 529,755 +02/11/15 +33,514 +$28.00 +02/10/25 +02/10/16 +64,465 +$16.51 +02/09/26 +Hoffman +Various +— +$ 0 +Various +366,303 +$3,256,434 +2024 PROXY STATEMENT +57 +TABLE OF CONTENTS +1. +The following table sets forth the vesting dates for the unvested service-based restricted stock or stock unit awards of +each NEO as of December 30, 2023: +Named +Executive +Officer +Vesting +Date +Number of Shares to Vest +Hufnagel +02/05/24 +1,553 +02/08/24 +10,751 +02/09/24 +3,672 +04/29/24 +353 +07/31/24 +13,155 +10/30/24 +20,351 +02/08/25 +5,751 +02/09/25 +4,413 +07/31/25 +13,154 +10/30/25 +20,350 +02/08/26 +5,751 +02/09/26 +2,221 +07/31/26 +13,155 +10/30/26 +20,350 +Klimek +02/05/24 +1,736 +02/08/24 +4,203 +02/09/24 +3,905 +10/30/24 +20,351 +02/08/25 +4,202 +02/09/25 +4,609 +10/30/25 +20,350 +02/08/26 +4,203 +02/09/26 +2,110 +10/30/26 +20,350 +Soriano +02/05/24 +1,096 +02/08/24 +4,867 +02/09/24 +2,836 +07/31/24 +614 +08/02/24 +390 +10/30/24 +20,351 +02/08/25 +4,866 +02/09/25 +3,467 +07/31/25 +614 +08/02/25 +391 +10/30/25 +20,350 +02/08/26 +4,866 +02/09/26 +1,888 +07/31/26 +614 +10/30/26 +20,350 +2024 PROXY STATEMENT +58 +TABLE OF CONTENTS +Named +Executive +Officer +Vesting +Date +Number of Shares to Vest +Stornant +02/05/24 +3,526 +02/08/24 +10,547 +02/09/24 +7,653 +02/08/25 +10,546 +02/09/25 +9,196 +02/08/26 +10,547 +02/09/26 +4,628 +Zwiers +02/05/24 +3,248 +02/08/24 +9,512 +02/09/24 +6,636 +02/08/25 +9,511 +02/09/25 +8,005 +02/08/26 +9,511 +02/09/26 +4,109 +2. +The dollar values are calculated using a per share stock price of $8.89, the closing price of Wolverine Worldwide +common stock on December 29, 2023, the last business day of fiscal year 2023. +3. +Following the end of the applicable performance period, performance units vest depending upon the Company's +achievement of the relevant performance criteria. Shares actually vested for the 2021-2023 cycle are included in the “Number of Shares or Units of Stock That Have Not Vested” column. Performance between threshold and target level was +assumed for the 2022-2024 cycle and performance at target was assumed for the 2023-2025 cycle. For Mr. Hufnagel, shares included for the 2022-2024 cycle were adjusted to reflect the structure of the performance award agreement for that +cycle. +2024 PROXY STATEMENT +59 +TABLE OF CONTENTS +Option Exercises and Stock +Vested in Fiscal Year 2023 +Option Awards +Stock Awards +Number of Shares +Acquired on Exercise +(#) +Value Realized +On Exercise 1 +($) +Number of Shares +Acquired on Vesting +(#) +Value Realized +On Vesting 1 +($) +Hufnagel +— +— +17,454 +$ 260,465 +Klimek +— +— +16,441 +$ 245,386 +Soriano +— +— +13,065 +$ 193,590 +Stornant +— +— +34,583 +$ 515,825 +Zwiers +— +— +30,604 +$ 456,818 +Hoffman +— +— +96,963 +$1,419,538 +1. +The Company calculates the dollar values using the closing price of Wolverine Worldwide common stock on the date of +vesting. +2024 PROXY STATEMENT +60 +TABLE OF CONTENTS +Pension Plans and 2023 +Pension Benefits +Wolverine Worldwide maintains the following defined benefit retirement plans: (1) the Wolverine Worldwide +Employees' Pension Plan (“Pension Plan”), which is a funded and tax-qualified defined benefit plan under the Internal Revenue Code that covers eligible employees, and (2) the Wolverine World Wide, Inc. 409A Supplemental Executive Retirement Plan +(“SERP”), which is an unfunded, non-qualified plan that covers individuals recommended by the CEO and approved by the Compensation and Human Capital Committee. Messrs. Hufnagel, Stornant, and Zwiers participate in the Pension Plan and SERP and +Ms. Klimek participates in the Pension Plan. +QUALIFIED PENSION PLANS +Participants vest in the Pension Plan after five years of qualifying service. Subject to the limitations +imposed by the Internal Revenue Code, the Pension Plan generally pays a monthly benefit in an amount equal to a percentage of the participant's final average monthly earnings multiplied by his or her number of years of service less a monthly +social security allowance. For purposes of this benefits formula, the Pension Plan caps years of service at 30 (25 for SERP participants), and the percentages of final average monthly earnings are 1.6% (2.0% for SERP participants). “Earnings” +under the Pension Plan generally includes all W-2 compensation and pre-tax benefit plan deferrals other than taxable fringe benefits and deferred compensation, and for 2023 was capped at $330,000, the IRS limit applicable to tax qualified plans. +Upon retirement, a participant may elect to receive the benefit in the form of a life annuity, 5 or 10-year +certain and life annuities, or joint and 50%, joint and 75%, or joint and 100% survivor annuities. The payments are actuarially adjusted based on the participant's election. Any election, other than an election to receive life annuity benefits, +reduces the monthly benefit payable. The “normal” age at which benefits may be drawn under the Pension Plan is 65. +SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN +Messrs. Hufnagel, Stornant and Zwiers participate in the SERP, which provides retirement benefits above amounts +available under the Company's tax qualified Pension Plan. The SERP benefit generally equals the difference between the participant's retirement benefit under the Pension Plan and the benefits the participant would have received if there were no +IRS imposed cap on earnings when calculating the Pension Plan benefit. The SERP caps years of service at 25 in calculating a participant's benefit. The SERP also allows a retired participant who has five years of service to draw earlier +(beginning at age 55) and on different terms than under the Pension Plan. A participant's earnings percentage multiplier is the same under the SERP as it is under the Pension Plan. The Compensation and Human Capital Committee may grant additional +deemed years of service under the SERP to a participant, subject to the cap of 25 years. The full benefit of any additional years of deemed service is paid under the SERP. +If a retired participant draws the SERP benefit prior to age 65, the reduction factor is 0.333% for each month +prior to age 60, and 0.1666% for each month between age 60 and age 65. As of the end of fiscal year 2023, Mr. Stornant and Mr. Zwiers are the only NEOs eligible to retire and begin drawing benefits under the SERP. +SERP benefits are paid monthly, and the SERP has a lump sum payment option which may apply to certain +terminations of employment after a change in control or, if elected, upon death. The SERP also includes a disability benefit and a death benefit payable to the participant's designated beneficiary if the participant dies before retiring. The SERP +provides for lump sum payments equal to 125% of the net present value of accrued benefits without regard to any reduction for early payment to participants who resign for good reason or are terminated by Wolverine other than for cause or due to +death or disability within two years after a change in control. +The SERP also contains non-competition, confidentiality and employee non-solicitation provisions in favor of +Wolverine Worldwide. Under the SERP non-competition provisions, a participant is not entitled to any benefit payment if the participant enters into certain relationships with a competing business prior to the date on which such benefit payment is +due. If the participant's employment is terminated for serious misconduct, or if Wolverine Worldwide cannot collect under an insurance policy purchased to fund SERP benefits for certain reasons, the Company may terminate a participant's benefits +under the SERP. Wolverine Worldwide may terminate the SERP or stop further accrual of SERP benefits for a participating NEO at any time, but termination will not affect previously accrued benefits. +2024 PROXY STATEMENT +61 +TABLE OF CONTENTS +PENSION BENEFITS IN FISCAL YEAR 2023 +The following table provides for each NEO certain information concerning each plan that provides for payments +or other benefits at, following, or in connection with retirement: +Plan Name +Number of Years +Credited Service +(#) +Present Value of +Accumulated Benefit 1 +($) +Payments During +Last Fiscal Year +($) +Hufnagel +SERP +15 +$ 864,343 +— +Pension +15 +$ 567,487 +— +Klimek 2 +SERP +— +— +— +Pension +19 +$ 431,656 +— +Soriano 2 +SERP +— +— +— +Pension +— +— +— +Stornant +SERP +25 +$2,719,932 +— +Pension +25 +$1,288,786 +— +Zwiers +SERP +25 +$2,981,468 +— +Pension +25 +$1,167,711 +— +Hoffman 3 +SERP +— +— +— +Pension +— +— +— +1. +These values are as of December 30, 2023, and are calculated assuming the participants will commence their benefits at +age 65 (or current age if older), and that those benefits will be paid in the form according to each participant's 409A election and use the PRI-2012 mortality tables for males and females (white collar for SERP and no collar for +Pension Plan), projected forward from base year 2012 with generational projection using an unmodified MP-2021 projection scale, with contingent annuitant mortality tables applied after the death of the participant and using the +following discount rates: 5.28% Pension Plan; 5.33% SERP. +2. +Ms. Soriano does not participate in the SERP or Pension Plan and Ms. Klimek does not participate in the SERP. +3. +Mr. Hoffman did not participate in the SERP or Pension Plan. +2024 PROXY STATEMENT +62 +TABLE OF CONTENTS +Non-Qualified Deferred +Compensation +Wolverine Worldwide maintains a Deferred Compensation Plan. This unfunded and non-qualified plan allows +executives and other eligible senior employees of the Company to elect to defer all or a portion of their base salary, cash bonus, or other performance-based cash compensation. Wolverine Worldwide may, but need not, credit a participant's account +under the plan with additional discretionary Company contributions, which may be subject to a vesting schedule and which would vest in full on a change in control. Amounts deferred pursuant to the Deferred Compensation Plan may be invested, at +the direction of the participant, in an investment fund, index, or other investment vehicle, as designated by the Compensation and Human Capital Committee to be available under the plan, and earnings, if any, are credited to the participant's +account. +Accounts are paid out upon the earliest to occur of (i) a qualifying separation from service, (ii) a change in +control (as such term is defined in the Deferred Compensation Plan), and (iii) a termination of the Deferred Compensation Plan. Payment must generally be made, or installment payments must begin, (as elected by the participant at the time of +deferral), within 60 days of the event triggering payment. +In 2023, Mr. Hufnagel was the only NEO who elected to defer amounts under the Deferred Compensation Plan and +no NEOs received a Company contribution. Mr. Stornant is the only other NEO who has previously elected to defer amounts under the Deferred Compensation Plan. +Name +Executive +Contributions in 2023 +($) +Registrant +Contributions in 2023 +($) +Aggregate +Earnings +in 2023 +($) 1 +Aggregate +Withdrawals / +Distributions +($) +Aggregate +Balance +at Last FYE +($) +Hufnagel +$74,810 +— +$32,949 +— +$408,028 +Stornant +— +— +$ 643 +— +$ 14,774 +1. +Reflects market-based earnings on amounts credited to Mr. Stornant and Mr. Hufnagel under the Deferred Compensation Plan. +2024 PROXY STATEMENT +63 +TABLE OF CONTENTS +Potential Payments Upon +Termination or Change in +Control +Wolverine Worldwide has entered into an Executive Severance Agreement with each NEO that provides certain +rights, including the right to receive payments in the event of a termination of employment following a change in control. The Company also has entered into an agreement with Messrs. Hufnagel and Hoffman and Ms. Soriano regarding certain +termination benefits in the event of termination of employment under certain other circumstances described below. +BENEFITS TRIGGERED BY TERMINATION FOR CAUSE OR VOLUNTARY +TERMINATION +An NEO is not entitled to receive any additional forms of severance payments or benefits upon termination of +employment for Cause or upon the NEO's voluntary decision, other than for Good Reason, to terminate his or her employment, as discussed in further detail below. +BENEFITS TRIGGERED BY TERMINATION OTHER THAN FOR CAUSE OR FOR +GOOD REASON NOT IN CONNECTION WITH A CHANGE IN CONTROL +Mr. Hufnagel entered into an Employment Agreement upon his appointment as President and CEO of the Company in +August 2023. The Employment Agreement states that upon termination of his employment by Wolverine Worldwide without Cause, or termination by Mr. Hufnagel with Good Reason, as such terms are defined in his Employment Agreement, Wolverine Worldwide +will pay Mr. Hufnagel the following payments in exchange for a general release of claims in favor of Wolverine Worldwide: (1) continued base salary for 24 months; (2) payment of Company COBRA premiums for up to 24 months, or, if earlier, until +eligible for coverage through another employer; (3) a pro rata target bonus opportunity for the year of termination; (4) pro rata vesting of outstanding performance-based equity awards as though Mr. Hufnagel had retired as of the date of +termination, and pro-rata vesting of outstanding time-based equity awards that would have vested over the 12 month period following the date of termination; and (5) 12 months of outplacement assistance. +“Cause” generally is defined in Mr. Hufnagel’s Employment Agreement to mean: (1) any intentional act of fraud, +embezzlement, theft, dishonesty, misrepresentation or breach of fiduciary duty with respect to the Company or its subsidiaries; (2) gross negligence or willful misconduct in the performance of duties; (3) material failure or refusal to follow any +reasonable directive of the Board or the officer to whom Mr. Hufnagel reports, and if such failure and refusal is curable, if not cured within ten (10) days after written notice; (4) material breach of any noncompetition, nonsolicitation, +confidentiality or other covenant with the Company, material breach of any material written policy of the Company which if curable, is not cured within ten (10) days after the Company’s written notice of such breach, or material breach of +Mr. Hufnagel’s Employment Agreement, which if curable, is not cured within ten (10) days after the Company’s written notice of such breach; or (5) conviction of or indictment for or entering of a guilty plea or plea of no contest or nolo +contendere with respect to any felony or any crime involving an act of moral turpitude. +“Good Reason” generally is defined in Mr. Hufnagel’s Employment Agreement to mean: (1) a material diminution +in duties or a reduction of title, (2) a material breach by the Company of the Employment Agreement, (3) relocation of Mr. Hufnagel’s principal place of employment to a location that is more than fifty (50) miles from the Company’s corporate +headquarters without Mr. Hufnagel’s consent, (4) termination of the Employment Agreement by the Company serving a notice of nonextension or (5) a reduction in Mr. Hufnagel’s base salary, unless such reduction is part of an across the board +reduction for senior executives of the Company. +On June 8, 2018, Ms. Soriano entered into a Service Agreement with Wolverine Europe Limited, which is typical +for senior executives based in the United Kingdom. Ms. Soriano’s agreement states that upon certain terminations of her employment by Wolverine Europe Limited, Wolverine Europe Limited will provide Ms. Soriano with written notice nine (9) months +prior to such termination or, alternatively, will pay Ms. Soriano her base salary for such period (or any portion thereof) in lieu of such notice. In addition, upon voluntary termination of Ms. Soriano’s employment by Ms. Soriano for any reason, +she is required to give written notice six (6) months prior to such termination and +2024 PROXY STATEMENT +64 +TABLE OF CONTENTS +Wolverine Europe Limited may pay Ms. Soriano her base salary for such period (or any portion thereof) in lieu +of such notice. If Wolverine Europe Limited chooses to pay Ms. Soriano her base salary in lieu of notice, in either case, such amounts will be in full and final settlement of all claims Ms. Soriano may have against Wolverine and its affiliates +and, further, such amounts will be reduced by any income earned from subsequent employment. +For purposes of Ms. Soriano’s Service Agreement, Wolverine Europe Limited will generally not be required to +provide notice to terminate her employment if she (1) commits, repeats or continues any material breach of her Service Agreement or her obligations thereunder, (2) commits an act of gross misconduct or serious/gross incompetence or negligence +including any deliberate act of discrimination or harassment, (3) acts in a manner which prejudices or is likely in the reasonable opinion of the Board to prejudice the interests or reputation of Ms. Soriano, Wolverine or its affiliates, (4) +commits any material breach of the Code of Conduct, (5) commits or is charged or convicted of any criminal offense other than an offense which does not affect her position or any road traffic violation, (6) is declared bankrupt, (7) is prohibited +by law from being a director of a company, (8) is removed as a director of Wolverine Europe Limited or any affiliate for a reason related to misconduct, (9) is in breach of the warranties contained in the Service Agreement, (10) breaches a +material policy of Wolverine or its affiliates, (11) becomes incapacitated and no longer able to perform her duties for a period exceeding 26 weeks in any 12 month period, or (12) ceases to hold any necessary qualification to carry out her duties +and/or is in breach of any rules and regulations or any relevant regulatory body. +Mr. Hoffman entered into an Employment Agreement on August 7, 2020, which was amended on December 17, 2021, +which states that upon termination of his employment by Wolverine Worldwide without Cause, or termination by Mr. Hoffman with Good Reason, as such terms are defined in Mr. Hoffman’s Employment Agreement, Wolverine Worldwide will pay Mr. Hoffman +the following payments in exchange for a general release of claims in favor of Wolverine Worldwide: (1) continued base salary for 18 months offset by the amount of salary and guaranteed compensation, if any, he is entitled to from another +employer; (2) payment of Company COBRA premiums for 18 months, or, if earlier, until eligible for coverage through another employer; and (3) a pro rata target bonus opportunity for the year of termination. +“Cause” generally is defined in Mr. Hoffman’s Employment Agreement to mean: (1) any intentional act of fraud, +embezzlement, theft, dishonesty, misrepresentation or breach of fiduciary duty with respect to the Company or its subsidiaries; (2) gross negligence or willful misconduct in the performance of duties; (3) material failure or refusal to follow any +reasonable directive of the Board or the officer to whom Mr. Hoffman reports, and if such failure and refusal is curable, if such failure or refusal is not cured within ten (10) days after written notice; (4) breach of any noncompetition, +nonsolicitation, confidentiality or other covenant with the Company, material breach of any material written policy of the Company which if curable, is not cured within ten (10) days after the Company’s written notice of such breach, or material +breach of Mr. Hoffman’s Employment Agreement, which if curable, is not cured within ten (10) days after the Company’s written notice of such breach; or (5) conviction of or indictment for or entering of a guilty plea or plea of no contest or nolo +contendere with respect to any felony or any crime involving an act of moral turpitude. +“Good Reason” generally is defined in Mr. Hoffman’s Employment Agreement to mean: (1) a material diminution in +duties or a reduction of title, (2) a material breach by the Company of the Employment Agreement, (3) relocation of Mr. Hoffman’s principal place of employment to a location that is more than fifty (50) miles from the Company’s corporate +headquarters or Waltham, Massachusetts office as of January 2, 2022, without Mr. Hoffman’s consent, (4) termination of the Employment Agreement by the Company serving a notice of nonextension or (5) a reduction in Mr. Hoffman’s base salary, +unless such reduction is part of an across the board reduction for senior executives of the Company. +Amounts in the table below reflect actual payments and benefits paid or provided to Mr. Hoffman in connection +with the termination of his employment with the Company in August 2023. +BENEFITS TRIGGERED UPON A CHANGE IN CONTROL +Benefits Upon Termination Following a Change in Control. +Under the Executive Severance Agreements entered into with the NEOs, payments and benefits are triggered when employment is terminated without “Cause” or when an executive terminates employment for “Good Reason” within two years following a +change in control of Wolverine Worldwide. +Upon such a qualifying termination, Wolverine Worldwide will pay the lump sum severance payment under the +Executive Severance Agreement composed of the following: (1) unpaid base salary and bonus payments that had been earned; (2) in lieu of a bonus payment under the Annual Bonus Plan, an amount equal to the quotient of the number of days the NEO was +employed by Wolverine Worldwide, or any successor company in the year of termination, divided by the number of days in the year; multiplied by 100% of the greater of either (a) the bonus awarded to the NEO under the annual bonus plan for the +preceding year and (b) the average paid to the NEO over the preceding two year period under the annual bonus plan; (3) in lieu of payments under the various three year performance periods that remain open on the date of termination, if any, an +amount equal to the bonus the NEO would have received based on actual and assumed performance measures, multiplied by the quotient of the number of days the NEO participated in the performance period prior to the termination, divided by the total +number of days in the performance period (in determining the earnings per share or other performance measures that can be +2024 PROXY STATEMENT +65 +TABLE OF CONTENTS +determined annually for any year subsequent to the year of termination, performance will equal the level +required to attain the maximum goal under the three year plan for that year); (4) two times the sum of (a) the NEO's highest annual base salary during the 12 month period prior to termination and (b) the greater of (i) the average amount earned +by the NEO during the previous two years under the annual bonus plan and (ii) the amount earned during the previous year under the Annual Bonus Plan; (5) 100% of the positive spread for any stock options held by the NEO on the date of +termination, whether or not vested; (6) in the case of Mr. Zwiers, an excise tax gross up adjustment (note: the agreements with Messrs. Hoffman, Hufnagel and Stornant, Ms. Soriano and Ms. Klimek were entered into after 2008, and the Committee +determined to not provide such gross ups after that date); and (7) in the case of Mr. Hufnagel, the present value of an additional three years of deemed service under the Pension Plan and SERP (this benefit does not apply to Mr. Hoffman and +Ms. Soriano since they do not participate in the Pension Plan or SERP or to Messrs. Zwiers or Stornant since they have maximum years of service under these plans). Upon a termination of employment following a change of control, Wolverine +Worldwide or any successor company will maintain for a period of six months to one year the NEO's benefits under the then current benefit plans, programs or arrangements that the NEO was entitled to participate in immediately prior to the +termination date. In addition, Wolverine Worldwide or any successor company will provide outplacement services through the last day of the second calendar year following the calendar year of termination. +“Change in Control” under the Executive Severance Agreements generally means certain changes in composition of +the Board of Directors, certain acquisitions of 20% or more of Wolverine Worldwide's common stock or combined outstanding voting power of Wolverine World Wide, Inc., and other specified reorganizations, mergers, consolidations, liquidations, +dissolutions or distributions of substantial assets (unless such transactions result in the creation of an entity in which at least 50% of the common stock and combined voting power is owned by the owners of record prior to the transaction, no +single shareholder owns more than 20% of the combined voting power and a majority of the board remains unchanged). In all cases, an event will not qualify as a change in control unless it qualifies as “a change in the ownership or effective +control” of the Company or “a change in the ownership of a substantial portion of the assets of the Company,” each as determined under the stringent requirements of Section 409A of the Tax Code. Under this standard, for example, transactions must +be consummated, not just approved by shareholders. +“Cause” is defined under the Executive Severance Agreements to generally mean the willful and continued +failure to substantially perform duties or willfully engaging in gross misconduct that is injurious to the Company. +“Good Reason” is defined under the Executive Severance Agreements to generally mean: (1) any materially +adverse change in position, duties, responsibilities or title, or any removal, involuntary termination or failure to re-elect an officer; (2) a reduction in annual base salary; (3) any relocation or requirement to substantially increase business +travel; (4) the failure to continue providing any executive incentive plans or bonus plans; (5) the failure to continue any employee benefit plan or compensation plan unless a comparable plan is available; (6) the failure to pay any salary, +bonus, deferred compensation or other compensation; (7) the failure to obtain an assumption agreement from any successor; (8) any purported termination of the employment which is not effected in a manner prescribed by the Executive Severance +Agreement; or (9) any other material breach by Wolverine Worldwide or any successor company of its obligations under the Executive Severance Agreement. +Benefits Upon a Change in Control Only. The Company has +double-trigger equity vesting upon a change in control, meaning that vesting only accelerates upon a qualifying termination of employment after a change in control. To the extent that the Company has made discretionary contributions under the +Deferred Compensation Plan that are subject to a vesting schedule, any unvested portion of these contributions will vest on a change in control. Change in control for this purpose generally means certain changes in the composition of the Board +of Directors, certain acquisitions of 20% of Wolverine Worldwide's common stock (50% in the case of the Deferred Compensation Plan) and other specified reorganizations, mergers, consolidations, liquidations, dissolutions or dispositions of +substantial assets. +Excise Tax Gross Up. The Compensation and Human Capital +Committee previously determined that Wolverine Worldwide would not provide excise tax gross up payments in employment agreements entered into after 2008. Mr. Zwiers is the only NEO who has excise tax gross up protection in his agreement. +BENEFITS TRIGGERED BY RETIREMENT, DEATH OR PERMANENT +DISABILITY +Pension Plan. In the event of death before retirement, +the Pension Plan provides the surviving spouse of a vested participant a death benefit equal to the qualified pre-retirement survivor annuity as defined in the Internal Revenue Code (generally 50% of the participant's accrued normal retirement +benefit). This benefit is paid annually to the surviving spouse beginning when the participant would have turned 60 and continues for the life of the surviving spouse. For participants with at least three years of service as of December 31, +2003, and who have at least 10 years of service and are employed by the Company at the time of death, the amount of the survivor benefit under the Pension Plan is calculated as though the participant had continued as an employee of the Company +until age 65 at the compensation level as of the date of death +2024 PROXY STATEMENT +66 +TABLE OF CONTENTS +and the benefit begins upon the date of death, unreduced for early commencement. The survivor benefit for +participants who meet all the criteria set forth in the preceding sentence, but who die when they are not employed by the Company, are entitled to a joint and survivor benefit commencing upon the date of death, unreduced for early commencement. +SERP. If a SERP participant dies before beginning to +receive benefits under the SERP, the Company must, based on the participant's election, pay the beneficiary either a monthly annuity or a lump sum death benefit equal to the present value of the benefit computed as if the participant had +retired on the date of death, had begun receiving benefits at age 55, and had continued to receive benefits for the remainder of the participant's life expectancy. If the participant dies after beginning to receive benefit payments, benefits +cease unless the participant was receiving benefits in the form of one of the joint and survivor annuity optional elections under the plan or had elected benefits in a form that provides for a continuation of +benefits. +If a participant becomes disabled (as defined in the SERP), the SERP provides a disability benefit equal to +60% of the normal retirement accrued benefit based upon years of service up to the date that the participant became disabled through the date the participant reaches age 65 (at which point, the participant would begin drawing full SERP benefits) +or is no longer disabled. +Annual Bonus Plan. Upon termination of employment at +least six months after the beginning of a fiscal year due to death, disability, or early or normal retirement, an NEO is entitled to receive a pro rata portion of any annual bonus award earned under the Annual Bonus Plan based on the NEO's +service during such fiscal year and actual performance under the Annual Bonus Plan. The annual bonus is payable at the same time and in the same manner as awards are paid to other NEOs for the fiscal year. +Stock Incentive Plans. Upon death, disability or +voluntary termination of employment after attaining age 59 with ten years of service with the Company, subject to certain conditions, the restrictions on time-vested units vest. Upon death, disability or voluntary termination of employment +after attaining age 59 with ten years of service with the Company, subject to certain conditions, the restrictions on performance units will vest on a prorated basis based on Company performance for each open three-year cycle. +Deferred Compensation Plan. Upon death, disability, or +other qualifying separation from service, including retirement, all in accordance with Section 409A of the Internal Revenue Code, all amounts deferred by the NEOs under the Deferred Compensation Plan, including any vested amounts credited to +the NEOs pursuant to a discretionary Company contribution, shall generally be paid, or commence payment, within 60 days of the termination in accordance with the schedule elected by the NEO at the time of deferral. +DESCRIPTION OF RESTRICTIVE COVENANTS THAT APPLY DURING AND +AFTER TERMINATION OF EMPLOYMENT +The SERP contains non-competition, confidentiality, and employee non-solicitation provisions in favor of +Wolverine Worldwide. Under the non-competition provisions of the SERP, the participant will not be entitled to any benefit payment if, prior to the date on which such benefit payment is due, the participant enters into certain relationships with +a competing business. +2024 PROXY STATEMENT +67 +TABLE OF CONTENTS +ESTIMATED PAYMENTS ON TERMINATION OR CHANGE IN CONTROL +The following table summarizes the potential payments and benefits payable to each NEO upon a change in control +or termination of employment following each of the triggering events set forth in the table. As required, the amounts in the table assume that the termination of employment or change in control of Wolverine Worldwide took place on the Company's +last day of fiscal year 2023, which was December 30, 2023. The amounts set out below are in addition to benefits that are generally available to the Company's employees such as distributions under the Company's 401(k) savings plan, disability or +life insurance benefits and accrued vacation. Due to the many factors that affect the nature and amount of any benefits provided upon the termination events discussed below, any actual amounts paid or distributed to NEOs may be different. Factors +that may affect these amounts include timing during the year of the occurrence of the event, Wolverine Worldwide's stock price and the NEO's age and years of service. +The value of the accelerated vesting of unvested equity-based compensation awards was computed using the +closing market price $8.89 of Wolverine Worldwide's common stock on December 29, 2023, the last business day in fiscal year 2023. The value for unvested restricted stock is computed by multiplying $8.89 by the number of shares of the NEO's +restricted stock that would vest as a result of an event. +Each of the hypothetical events described in the following table (the highlighted blue headings in the +left-hand column) is calculated and reported as a discrete event. For example, the amounts disclosed under the “Change in Control Only” heading are not cumulative with the amounts disclosed under the “Change in Control/Termination” heading. +Notwithstanding the foregoing, the amounts for Mr. Hoffman reflect actual payments and benefits paid or +provided to him under his employment agreement in connection with the termination of his employment with the Company in August 2023. +Termination Event and Payment / Benefits +Hufnagel +Klimek +Soriano +Stornant +Zwiers +Hoffman +Termination by Company for Cause or Voluntary Termination (other than for Good Reason or +due to Retirement) +— +— +— +— +— +— +Termination by Company Other Than for Cause or by Executive for Good Reason or In Lieu of +Notice +$3,967,336 +— +$431,262 11 +— +— +$1,123,412 12 +Change in Control / Termination +Executive Severance Agreement 1 +$5,605,615 +$2,925,759 +$3,293,524 +$4,914,785 +$6,572,165 +— +Benefits under Executive Severance Agreement 2 +$40,704 +$33,073 +$34,868 +$48,160 +$41,065 +— +Stock Incentive Plans 3 +$1,199,963 +$764,725 +$778,394 +$503,550 +$449,218 +— +Lump sum payment under the SERP 4 +$2,008,656 +— +— +$5,366,224 +$6,657,249 +— +Death +SERP 5 +$1,827,497 +— +— +$4,159,565 +$4,465,493 +— +Pension Plan 6 +$309,013 +$192,544 +— +$994,004 +$998,185 +— +Stock Incentive Plans 3 +$1,199,963 +$764,725 +$778,394 +$503,550 +$449,218 +— +Earned Incentive Compensation 7 +$1,877,034 +$364,835 +$428,767 +$839,311 +$455,486 +— +Disability +SERP 8 +$1,628,197 +— +— +$3,800,606 +$4,561,013 +— +Stock Incentive Plans 3 +$1,199,963 +$764,725 +$778,394 +$503,550 +$449,218 +— +Earned Incentive Compensation 7 +$1,877,034 +$364,835 +$428,767 +$839,311 +$455,486 +— +Retirement +SERP 9 +$1,342,553 +— +— +$3,932,037 +$4,416,531 +— +Pension Plan 9 +$637,588 +$486,297 +— +$1,466,000 +$1,323,837 +— +Stock Incentive Plans 3 +— +— +— +— +— +— +Earned Incentive Compensation 7 +— +— +— +— +— +— +Change in Control Only +Stock Incentive Plans 10 +— +— +— +— +— +1. +Payments would be triggered after termination of employment under certain circumstances within two years following a +change in control. Includes amounts payable in cash under the terms of the Executive Severance Agreement, excluding the value of the cash payout to each NEO of the option spread for already vested options. The timing of the payment +would be delayed to the extent earlier payment would trigger Section 409A of the tax code. The value of service-based restricted units that vest upon a change in control under the terms of the Company's stock incentive plans are +included in the Stock Incentive Plans row. +2024 PROXY STATEMENT +68 +TABLE OF CONTENTS +2. +These estimates assume that Wolverine Worldwide, or any successor company, maintains the benefit plans for a period of +one year after termination and the outplacement services for a period beginning with the date of termination and ending on the last day of the second calendar year following the calendar year in which the date of termination occurred. +3. +Reflects the value of unvested shares of restricted stock units that would vest because of the event. +4. +Reflects the entire lump sum benefit payable to applicable NEOs, including any accumulated benefit. The timing of the +payment would be delayed to the extent earlier payment would trigger Section 409A of the Tax Code. +5. +Reflects the entire lump sum death benefit payable to a participating NEO's beneficiary, including any accumulated +benefit. +6. +Amounts reflect the net present value of the annuity paid to the surviving spouse calculated using the same discount +rate and mortality assumptions used in the Pension Benefits table under the heading “Pension Benefits in Fiscal Year 2023” under the heading “Pension Plans and 2023 Pension Benefits.” In accordance with the terms of the Pension Plan, +the death benefit for Messrs. Stornant and Zwiers was calculated as though the NEO had continued as an employee of Wolverine Worldwide until age 65 at the compensation level as of the date of death. +7. +Under the Annual Bonus Plan and the terms of performance unit awards, each NEO may be eligible to receive a pro rata +portion of any award if employment is terminated as a result of any of the specified events in the table. The amount reported represents (a) actual payout under the Annual Bonus Plan for fiscal year 2023, (b) actual payout under the +2021-2023 performance cycle and (c) target performance for the 2022-2024 and 2023-2025 performance cycles. Performance units would vest on a prorated basis based on actual Company performance. +8. +Reflects the net present value of the annuity using the same discount rate and mortality assumptions used in the +Pension Benefits table and assuming the NEO drew the disability benefit until age 65 followed by the normal retirement benefit. +9. +Reflects the net present value of benefits according to actual elections in place and assuming SERP benefits begin at +age 55 (or immediately if older than 55) and pension benefits as of age 60 with 10 years of service. +10. +Unvested restricted stock units (including performance share awards) do not vest based on a change in control only. +11. +Represents 9 months of base salary and is the maximum amount payable if the company chooses to terminate her +employment without notice. If Ms. Soriano voluntarily terminates, the maximum payout in lieu of notice is six months of base salary ($287,508). +12. +Represents actual amounts paid and benefits provided under the terms of Mr. Hoffman's employment agreement in +connection with the termination of Mr. Hoffman's employment in 2023. +CEO PAY RATIO +As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(u) +of Regulation S-K, we are providing the following information about the relationship of the annual total compensation of our employees and the annual total compensation of Christopher Hufnagel, the Company's Chief Executive Officer during fiscal +year 2023. We calculated the CEO's annual total compensation by annualizing the compensation of Mr. Hufnagel, the CEO on the date used to identify the median employee. +For 2023, our last completed fiscal year, the annual total compensation of the employee of the Company +identified at median was $50,238 and the annual total compensation of the CEO utilizing the method outlined above was $3,360,805. +Based on this information, the 2023 ratio of the annual total compensation of Mr. Hufnagel to the median of +the annual total compensation of all employees was estimated to be 67 to 1. +The methodology and the material assumptions, adjustments and estimates that we used to identify the median of +the annual total compensation of all our employees in 2023, as well as to determine the annual total compensation of our “median employee” and our CEO, are described below. +• +We determined that, as of December 30, 2023, our employee population consisted of approximately 4,098 (2,251 in the U.S. and 1,847 outside the U.S.) +individuals globally. After excluding employees from Austria (2), Belgium (1), Cayman Islands (1), Chile (13), Dominican Republic (4), Hong Kong (29), India (8 employees), Ireland (58), and Thailand (1) pursuant to the “de minimis” +exception provided for in the rules, we used a base of 3,981 employees for purposes of determining the “median employee.” We selected December 30, 2023, as the date upon which we would identify the median employee in order to align with +year-end. +• +To identify the median employee from our employee population, we used annual base salary, plus bonus and other cash incentives paid for the 12-month +period ending December 30, 2023 as our consistently applied compensation measure - the same approach used in prior years. +○ +In making this determination, we annualized the compensation of all newly hired regular employees during this period. +○ +Additionally, for our full-time population, we used annualized salary; for our part-time population, we used the hourly +rate of pay multiplied by the regularly scheduled hours expected to work. +• +Once we identified our median employee, we combined the elements of such employee's compensation for fiscal 2023 in accordance with the SEC's rules, +resulting in annual total compensation of $50,238. +• +With respect to the annual total compensation of our CEO, we annualized the compensation of Christopher Hufnagel, our CEO on the date used to identify +the median employee. +2024 PROXY STATEMENT +69 +TABLE OF CONTENTS +PAY VS. PERFORMANCE +As required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(v) +of Regulation S-K, the following information is provided about the relationship between Compensation shown on the Summary Compensation Table (SCT), Compensation Actually Paid (CAP), Total Shareholder Return (TSR), Net Income, and Non-GAAP Pre-Tax +Income as the Company Selected Measure. +Value of Initial Fixed $100 +Investment Based On: +Year +Summary +Comp. +Table Total +for Krueger CEO (a) +Summary +Comp. +Table Total +for Mr. Hoffman +CEO (a) +Summary +Comp. Table +Total for +Mr. Hufnagel +CEO (a) +Comp. +Actually +Paid to +Krueger +CEO (a),(b) +Comp. +Actually +Paid to +Hoffman +CEO (a),(b) +Comp. +Actually +Paid to +Hufnagel +CEO (a),(b) +Average +Summary +Comp. +Table +Total for +Non-CEO +NEOs (a) +Average +Comp. +Actually +Paid to +Non-CEO +NEOs (a),(b) +Wolverine +World Wide +TSR +Peer +Group (c) +TSR +Net Income +(in Millions) +Non-GAAP +Pre-Tax +Income (in +Millions) (d) +2023 +N/A +$ 7,578,715 +$ 3,174,477 +N/A +$ 3,230,490 +$ 2,691,339 +$ 2,310,884 +$ 1,841,974 +$ 28.98 +$ 134.84 +($ 39.2 ) +$ 4.8 +2022 +N/A +$ 6,519,654 +N/A +N/A +$ 207,454 +N/A +$ 1,818,674 +$ 868,826 +$ 34.33 +$ 108.06 +($ 189 ) +$ 133.1 +2021 +$ 14,405,857 +N/A +N/A +$ 3,570,244 +N/A +N/A +$ 3,924,986 +$ 2,336,212 +$ 88.24 +$ 151.33 +$ 67 +$ 191.5 +2020 +$ 9,519,491 +N/A +N/A +$ 5,934,954 +N/A +N/A +$ 3,547,178 +$ 2,591,063 +$ 94.56 +$ 120.70 +($ 138.6 ) +$ 92.4 +(a) +NEOs included in these columns reflect the following: +Year +CEO (or Principal +Executive Officer) +Non-CEO NEOs +2023 +Brendan Hoffman (through 8/5/2023) & +Christopher Hufnagel (through end of year) +Isabel Soriano, Michael Stornant, James Zwiers, Amy Klimek +2022 +Brendan Hoffman +Isabel Soriano, Michael Stornant, James Zwiers, Christopher Hufnagel +2021 +Blake Krueger +Brendan Hoffman, Isabel Soriano, Michael Stornant, James Zwiers +2020 +Blake Krueger +Brendan Hoffman, Michael Jeppesen, Michael Stornant, James Zwiers +(b) +The following table details the adjustment to the Summary Compensation Table Total Pay for our CEO, as well as the average for our other NEOs, to determine “compensation actually paid,” as computed in accordance with Item 402(v), with dividends accounted for in the change in fair value of the awards. Amounts do not reflect actual compensation earned by or paid to our NEOs during 2023. +CEO +NEO Average +Hoffman (2023) +Hufnagel (2023) +2023 +Summary Compensation Table Total +$ 7,578,715 +$ 3,174,477 +$ 2,310,884 +Less: Reported Fair Value of Equity Awards (1) +$ 5,800,021 +$ 1,650,032 +$ 1,078,853 +Add: Year-End Fair Value of Outstanding and Unvested Equity Awards Granted in the Year (2) +$ 2,693,615 +$ 1,323,518 +$ 822,604 +Add: Year Over Year Change in Fair Value of Equity Awards Granted in Prior Years that Vested in the Year (2) +$ 219,399 +$ 55,401 +$ 62,459 +Add: Year Over Year Change in Fair Value of Outstanding and Unvested Equity Awards Granted in Prior Years (2) +($ 464,034 ) +($ 84,675 ) +($ 89,668 ) +Less: Fair Value at the End of Prior Year of Equity Awards that Failed to Meet Vesting Conditions in the Year (2) +$ 1,114,007 +$ — +$ — +Add: Value of Dividends or Other Earnings Paid on Stock or Option Awards Not Otherwise Reflected in Fair Value or Total Compensation +$ 116,824 +$ 25,586 +$ 26,233 +Less: Change in Pension Value Reported in the Summary Compensation Table +$ — +$ 366,393 +$ 330,331 +Add: Pension Service Cost for Services Rendered During the Year +$ — +$ 213,457 +$ 118,647 +Compensation Actually Paid +$ 3,230,490 +$ 2,691,339 +$ 1,841,974 +(1) +The amounts reflect the aggregate grant-date fair value reported in the “Stock Awards” columns in the Summary +Compensation Table for the applicable year. +(2) +In accordance with Item 402(v) requirements, the fair values of unvested and outstanding equity awards to our NEOs +were measured as of the end of each fiscal year, and as of each vesting date, during the years displayed in the table above. For performance-based awards, the fair values reflect the probable outcome of the performance vesting +conditions as of each measurement date. Dividends are accounted for in the change in fair value calculations. We did not grant any equity awards that vested in the year of grant. +(c) +Peer Group reflects the same S&P 1500 Consumer Durables & Apparel Index used for the performance graph included in the 10-K as required under S-K Item 201(e)(1)(ii). +(d) +For a reconciliation of GAAP Pre-tax Income to non-GAAP Pre-tax Income , as used in the third table below, See the Non-GAAP reconciliation table in Appendix A. +2024 PROXY STATEMENT +70 +TABLE OF CONTENTS +Tabular list of Company Performance Measures +The four measures listed below, in no particular order, represent the most important metrics to link +Compensation Actually Paid for FY 2023 as further described in our Compensation Discussion and Analysis (CD&A) within the sections titled “Short-Term Incentive Compensation” and “Long-Term Incentive Compensation.” +Most Important Performance Measures +Non-GAAP Pre-Tax Income +Revenue +Non-GAAP Operating Profit +Relative TSR +Compensation Actually Paid versus Total Shareholder Return +The Chart below compares CEO and other NEOs’ Compensation Actually Paid to the Company’s TSR and Peer Group +TSR. The TSR calculation assumes a $100 investment made on 12/28/2019. +2024 PROXY STATEMENT +71 +TABLE OF CONTENTS +Compensation Actually Paid versus Net Income +The chart below compares the CEO and other NEOs’ Compensation Actually Paid to our Company’s GAAP Net Income. +Compensation Actually Paid versus Non-GAAP Pre-Tax Income +The chart below compares the CEO and other NEOs’ Compensation Actually Paid to our Company Selected Measure, +Non-GAAP Pre-Tax Income. +2024 PROXY STATEMENT +72 +TABLE OF CONTENTS +Proposal 2 — Advisory Resolution to +Approve Executive Compensation +The Company is asking its shareholders to indicate their support for Wolverine Worldwide's NEO compensation, as +described in this Proxy Statement. This proposal, commonly known as a “say-on-pay” proposal, gives the Company's shareholders the opportunity to express their view on compensation for the Company's NEOs. The say-on-pay vote is advisory and, +therefore, not binding on the Company, the Compensation and Human Capital Committee or the Board. Even though non-binding, the Board and Compensation and Human Capital Committee value the opinions of Wolverine Worldwide's shareholders and will +review and consider the voting results when making future decisions regarding the Company's executive compensation program. +At the 2023 annual meeting of shareholders, the Company held an advisory vote on the frequency of future +say-on-pay votes. Our shareholders approved, on an advisory basis, an annual say-on-pay vote, and after consideration of the shareholders’ vote, the Board determined to proceed with an annual say-on-pay vote. After the 2024 Annual Meeting of +Shareholders, our next advisory vote to approve executive compensation will occur at our 2025 annual meeting of shareholders. Further, in accordance with Rule 14a-21(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), +shareholders will be asked to vote again on how frequently the Company should hold future say-on-pay votes at the Company's 2029 annual meeting of shareholders. +The Company encourages shareholders to read the “Compensation Discussion and Analysis” (“CD&A”) section of +this Proxy Statement beginning on page 40 . As described in the CD&A section, the Compensation and Human Capital Committee has structured the executive compensation program to achieve the following key objectives: +• +Align the interests of NEOs with those of the shareholders through incentives based on achieving performance objectives that enable increased +shareholder value +• +Provide incentives for achieving specific, near term corporate, business unit and strategic goals and reward the achievement of those goals +• +Provide incentives for achieving pre-established, longer-term corporate financial goals and reward achievement of those goals +• +Attract and retain talented NEOs who will lead Wolverine Worldwide and drive superior business and financial performance +The executive compensation program is designed to achieve these objectives, in part, by: +• +Weighting at-risk and variable compensation (annual bonuses and long-term incentives) much more heavily than fixed compensation (base salaries) +• +Rewarding annual performance while maintaining emphasis on longer-term objectives +• +Blending cash, non-cash, long- and short-term compensation components and current and future compensation components +The Company encourages shareholders to read the Summary Compensation Table and other related compensation +tables and narrative, appearing on pages 54 - 72 , which provide detailed information on the compensation of the Company's NEOs. +The Compensation and Human Capital Committee and the Board of Directors believe the Company's compensation +program and its policies and procedures articulated in the CD&A section are effective in aligning the interests of the Company's NEOs with the interests of shareholders, promoting the achievement of the Company's near and long-term objectives +and increasing shareholder value. +In accordance with the rules under Section 14A of the Exchange Act, and as a matter of good corporate +governance, the Company asks shareholders to approve the following advisory resolution at the 2024 Annual Meeting of Shareholders: +RESOLVED , that the shareholders of Wolverine World Wide, +Inc. (the “Company”) approve, on an advisory basis, the compensation of the Company's named executive officers disclosed in the Compensation Discussion and Analysis section, the Summary Compensation Table and the related compensation tables, +notes and narrative in the Proxy Statement for the Company's 2024 Annual Meeting of Shareholders. +BOARD RECOMMENDATION +The Board recommends that you vote “FOR” approval of the advisory resolution to approve +executive compensation. +2024 PROXY STATEMENT +73 +TABLE OF CONTENTS +Proposal 3 – Ratification of Appointment of Independent Registered Public Accounting Firm +Ernst & Young LLP (“Ernst & Young”) was the Company's independent registered public accounting firm for +the fiscal year ended December 30, 2023. The Audit Committee has reappointed Ernst & Young as the Company's independent registered public accounting firm for the current fiscal year. As a matter of good corporate governance, the Audit +Committee has determined to submit its appointment of Ernst & Young to the Company's shareholders for ratification. If this appointment is not ratified by the holders of a majority of votes cast affirmatively or negatively on the matter, the +Audit Committee will review its future selection of an independent registered public accounting firm. Even if the appointment is ratified, the Audit Committee in its discretion may select a different independent registered public accounting firm +any time during the year if it determines that such a change would be in the best interests of the Company and the Company's shareholders. +The Audit Committee reviewed Ernst & Young's performance prior to appointing it as the Company's +independent registered public accounting firm, and considered: +• +The historical and recent performance of Ernst & Young on the Company's audit, including the quality of the engagement team and Ernst & Young's +experience, client service, responsiveness and technical expertise +• +The Public Company Accounting Oversight Board (“PCAOB”) report of selected Ernst & Young audits +• +The appropriateness of fees charged +• +Ernst & Young's familiarity with the Company's accounting policies and practices and internal control over financial reporting +• +Ernst & Young's financial strength and performance +Representatives of Ernst & Young are expected to be present at the Annual Meeting. They will have an +opportunity to make a statement if they desire to do so and are expected to be available to respond to appropriate questions from shareholders. +BOARD RECOMMENDATION +The Board recommends that you vote “FOR” ratification of the Audit Committee's selection of +the firm of Ernst & Young LLP as the Company's independent registered public accounting firm for fiscal year 2024. +2024 PROXY STATEMENT +74 +TABLE OF CONTENTS +Audit Committee Report +The Audit Committee of the Board of Directors consists of four directors who are independent under the +Company's Director Independence Standards, the NYSE listed company standards and applicable SEC standards. The Audit Committee represents and assists the Board in fulfilling its oversight responsibility regarding the Company's financial +statements and the financial reporting process, the internal control over financial reporting, the performance of the internal audit function and the independent registered public accounting firm, the qualifications and independence of the +independent registered public accounting firm, the annual independent audit of Wolverine Worldwide's financial statements and internal control over financial reporting and compliance with legal and regulatory requirements. The Audit Committee is +directly responsible for appointing, retaining, compensating, overseeing, evaluating and terminating (if appropriate) Wolverine Worldwide's independent registered public accounting firm. Wolverine Worldwide's management has primary responsibility +for the financial statements and the financial reporting process, including the application of accounting and financial principles, the preparation, presentation and integrity of the financial statements and the systems of internal controls and +other procedures designed to promote compliance with accounting standards and applicable laws and regulations. Wolverine Worldwide's independent registered public accounting firm is responsible for expressing an opinion on the conformity of +Wolverine Worldwide's financial statements with generally accepted accounting principles and for auditing the effectiveness of Wolverine Worldwide's internal control over financial reporting. +The Audit Committee has taken steps to provide assurances regarding Audit Committee composition and procedures, +the independence of Wolverine Worldwide's independent registered public accounting firm and the integrity of Wolverine Worldwide's financial statements and disclosures. These steps include: (i) reviewing the Audit Committee Charter; (ii) +reviewing with legal counsel and the independent registered public accounting firm the Accounting and Finance Code of Ethics; (iii) maintaining financial, accounting and business ethics complaint procedures to allow employees, shareholders and +the public to report concerns regarding Wolverine Worldwide's financial statements, internal controls and disclosures; and (iv) reviewing procedures for the Audit Committee to pre-approve all audit and non-audit services provided by Wolverine +Worldwide's independent registered public accounting firm. +As part of its supervisory duties, the Audit Committee has reviewed Wolverine Worldwide's audited financial +statements for the fiscal year ended December 30, 2023, and has discussed those financial statements with Wolverine Worldwide's management and internal financial staff, and the internal auditors and independent registered public accounting firm +with and without management present. The Audit Committee has also reviewed and discussed the following with Wolverine Worldwide's management and the financial staff, and with the internal auditors and independent registered public accounting firm +with and without management present: +• +Accounting and financial principles and significant assumptions, estimates and matters of judgment used in preparing the financial statements +• +Allowances and reserves for accounts receivable, inventories and taxes +• +Accounting for acquisitions, pension plans and equity-based compensation plans +• +Goodwill and intangible asset impairment analysis +• +Other significant financial reporting issues and practices +The Audit Committee has discussed with Wolverine Worldwide's independent registered public accounting firm the +results of its examinations and its judgments concerning the quality, as well as the acceptability, of Wolverine Worldwide's accounting principles and such other matters that it is required to discuss with the independent registered public +accounting firm under applicable rules, regulations or generally accepted auditing standards, including the matters required to be discussed by the applicable requirements of the PCAOB and the SEC. In addition, the Audit Committee has received +from the independent registered public accounting firm the written disclosures and the letter required by the applicable requirements of the PCAOB regarding the independent registered public accounting firm's communications with the Audit +Committee concerning independence and has discussed their independence from Wolverine Worldwide and Wolverine Worldwide's management with them, including a consideration of the compatibility of non-audit services with their independence, the +scope of the audit and the scope of all fees paid to the independent registered public accounting firm during the year. After, and in reliance upon the reviews and discussions described above, the Audit Committee recommended to the Board that the +audited financial statements for the fiscal year ended December 30, 2023, be included in Wolverine Worldwide's Annual Report on Form 10-K for the year then ended to be filed with the SEC. +Respectfully submitted, +Jeffrey M. Boromisa (Chair) +Stacia Andersen +William K. Gerber +David T. Kollat +2024 PROXY STATEMENT +75 +TABLE OF CONTENTS +Independent Registered Public +Accounting Firm +The Company's Audit Committee has adopted a policy under which the Audit Committee must approve all audit and +non-audit services provided by the Company's independent registered public accounting firm, Ernst & Young LLP, and which prohibits Ernst & Young LLP from providing any non-audit services that are prohibited by the SEC or the PCAOB. The +Company's Audit Committee provides categorical pre-approval for routine and recurring services, with specific service descriptions and budgets that include sufficient information to confirm the determination that the provision of such service +will not impair the independent registered public accounting firm’s independence. All services not within the specifically pre-approved service descriptions and budgets require engagement specific pre-approval. With certain exceptions (such as +pre-approval of audit services), the Audit Committee may delegate engagement specific pre-approval to one or more Audit Committee members, and has so delegated in certain instances to the Audit Committee Chairperson. Management must communicate +to the Audit Committee at its next regularly scheduled meeting any services approved by an Audit Committee member. Wolverine Worldwide's Audit Committee pre-approved all fees paid to Ernst & Young LLP for services performed in 2023 and 2022. +The aggregate fees billed by Ernst & Young LLP for audit and non-audit services were: +2023 +2022 +Audit Fees 1 +$3,027,500 +$2,781,300 +Audit-Related Fees +$ — +$ — +Total Audit & Audit-Related Fees +$3,027,500 +$2,781,300 +Tax Fees 2 +Tax Compliance +$ 596,500 +$1,027,900 +Tax Planning & Advisory +$ 140,500 +$ 211,300 +Total Tax Fees +$ 737,000 +$1,239,200 +All Other Fees +$ — +— +TOTAL FEES +$3,764,500 +$4,020,500 +1 +“Audit Fees” are comprised of fees for the annual audit, including the audit of internal control over financial +reporting, interim reviews of the financial statements included in Wolverine Worldwide's Quarterly Reports on Form 10-Q, foreign statutory audits, consultations concerning accounting matters associated with the annual audit, and audit +services performed in connection with registration statements and issuance of comfort letters and consents. +2 +“Tax Fees” are comprised of fees for the preparation of domestic and foreign tax returns, tax compliance services, and +routine tax advisory and tax planning services. +Wolverine Worldwide's Audit Committee has adopted a policy restricting the Company's hiring of current or +former partners or employees of the independent registered public accounting firm retained by the Company. +2024 PROXY STATEMENT +76 +TABLE OF CONTENTS +Proposal 4 – Approval of Stock Incentive +Plan of 2024 +Overview +On March 7, 2024, the Board unanimously adopted and approved the Wolverine World Wide, Inc. Stock Incentive +Plan of 2024 (the “Plan”), subject to shareholder approval. The Plan supersedes the Wolverine World Wide, Inc. Stock Incentive Plan of 2016, which was approved by Company shareholders at the 2016 annual meeting and approved in a restated and +amended form by Company shareholders at the 2018 annual meeting, at the 2021 annual meeting and again at the 2023 annual meeting (the “Current Plan”). The Plan allows grants of cash awards, stock options, stock appreciation rights, restricted +stock, restricted stock units and stock awards, any of which may be performance-based, and for incentive bonuses. If shareholders approve the Plan, the Company will not grant any additional awards under the Current Plan and the number of shares +remaining available under the Current Plan as of the effective date of the Plan will become available for grant under the Plan. Awards previously granted under the Current Plan would be unaffected by the adoption of the Plan, and they would +remain outstanding under the terms pursuant to which they were previously granted. If shareholders do not approve the Plan, the Current Plan will remain in existence, but the Company will not have sufficient shares to make its anticipated +February 2025 employee grants. +Why You Should Vote For the Plan +The Board recommends that the Company’s shareholders approve the Plan because it believes that equity awards +are a critical part of the Company’s compensation program and are essential to the Company’s ability to effectively compete for and appropriately motivate and reward key talent. The Board believes that it is in the interests of both the Company +and its shareholders to strengthen the Company’s ability to attract, motivate and retain high quality employees and directors to incentivize achievement of the Company’s financial and strategic goals through the issuance of equity and other +performance-based awards. +The Company is seeking shareholder approval of the Plan because the Board does not believe that the shares +available for issuance with respect to equity awards under the Current Plan are sufficient to meet even the Company’s short-term needs. There are not enough shares available under the Current Plan to make anticipated employee grants in +February 2025 in accordance with the Company’s compensation program, as described in connection with NEO compensation in the CD&A Section of this Proxy Statement. The Plan is broad-based, with 377 employees receiving grants under the Current +Plan in February 2024, aligning employee and shareholder interests during a time of significant transformation of the Company. +Equity grants are a key feature of the Company’s compensation program, which has been approved by an average +97% shareholder say-on-pay vote over the last three years. Equity grants include performance share units (PSUs) that tie executive compensation to both the Company’s stock price and the Company’s financial and relative TSR performance. PSUs are +the most at-risk component of executive compensation at the Company and are an effective way to link executive compensation to Company performance. The Company heavily weights CEO and NEO equity awards to this form of grant (70% for the CEO and +60% for other NEOs in 2024). Without shareholder approval of additional shares under the Plan, the Company’s ability to grant shares and focus on at-risk compensation that aligns executive and shareholder interests would be jeopardized at a time +when the Company is seeking to make transformational changes under challenging industry conditions. The Company would also potentially face negative cash-flow, accounting and financial implications if it had to shift its compensation programs to +be more heavily cash weighted because of insufficient available shares. +The Company believes that the availability of 3.3 million shares under the Plan in addition to the remaining +shares under the Current Plan (approximately 1.1 million shares as of the Company’s March 4, 2024 record date) would provide sufficient additional shares to continue to make awards at historical average rates for one year. +Management of Dilution and Burn Rate +The Company has demonstrated responsible use of shares under the Current Plan and reasonable management of +overall dilution. This is explained below in more detail under the “Reasonable Annual Grant Levels” and “Overhang” headings. The Company understands the dilutive effect of equity grants and weighs this effect against the benefits of equity grants +under its executive compensation program. +2024 PROXY STATEMENT +77 +TABLE OF CONTENTS +Reasonable Annual Grant Levels +The Company tracks the number of shares subject to equity awards that it grants annually, commonly referred to +as the burn rate. Burn rate shows how rapidly a company is depleting its shares reserved for equity compensation awards and equals the number of equity awards granted as incentives during the year divided by the weighted average number of shares +of common stock outstanding during the year. Below is the Company’s burn rate for the past three years: +Fiscal Year +Stock Options Granted +Full Value Awards +Weighted Average +Shares Outstanding +Burn Rate Percentage +2023 +— +2,364,879 +79,400,000 +2.98% +2022 +20,171 +1,417,709 +79,700,000 +1.80% +2021 +23,610 +1,285,894 +82,300,000 +1.59% +The above burn rate is reasonably aligned to market levels. +The Company also tracks an alternative burn rate measure that includes PSUs that vest during a year rather +than PSUs that were granted during a year. This measure reflects how many PSUs are earned by executives, providing valuable supplemental information on actual share usage. As the table below shows, when looking at PSU shares earned, the Company’s +burn rates are even lower than under the standard measure: +Fiscal Year +Stock Options Granted +Full Value Awards +Weighted Average +Shares Outstanding +Burn Rate Percentage +2023 +— +1,864,992 +79,400,000 +2.35% +2022 +20,171 +1,323,746 +79,700,000 +1.67% +2021 +23,610 +836,555 +82,300,000 +1.03% +The Company has demonstrated responsible grant rates and share usage. +Overhang +The following table provides information regarding equity awards outstanding and shares available for future +awards under all Company stock incentive plans as of February 29, 2024. +Total shares underlying all outstanding stock options +1,608,079 +Weighted average exercise price of outstanding stock options +$ 21.57 +Weighted average remaining contractual life of outstanding stock options (years) +1.9 +Total shares underlying all outstanding and unvested performance shares and units +2,030,192 +Total shares underlying all outstanding and unvested restricted stock and units +(excluding performance shares and units) +3,145,095 +Shares available for future awards that could be issued under Current Plan +1,090,272 +New shares requested under the Plan +3,300,000 +Total Shares Outstanding +79,900,000 +The Board believes that the additional one-year share request is reasonable in light of the Company’s historic +share usage rates, the importance of supporting the Company’s at-risk compensation philosophy, and the limited request to cover one additional year. The Board requests shareholder approval of the Plan, further details of which are included below. +Promotion of Good Corporate Governance Practices +The Plan includes provisions that we believe promote good corporate governance and the interests of +shareholders. Under the Plan: +• +Stock options and stock appreciation rights may not be granted with exercise prices lower than the fair market value of the underlying shares on the +grant date +• +The administrator may not, without prior approval of the Company’s shareholders, “reprice” any previously granted underwater stock options or stock +appreciation rights +2024 PROXY STATEMENT +78 +TABLE OF CONTENTS +• +No liberal share recycling of stock options or full-value awards +• +The Plan administrator may recover awards made under the Plan and payments under or gain in respect of any award in accordance with the Company’s Policy +for Recovery of Incentive Compensation or any other clawback policy maintained by the Company +• +Awards generally must be granted with vesting schedules pursuant to which they will not vest or become exercisable for at least one year +• +The Plan limits the aggregate grant date value of awards that may be granted to non-employee directors +• +No dividends or dividend equivalents will be paid with respect to restricted stock units or restricted stock, including any performance-based restricted +stock units or restricted stock, until the underlying awards vest or are earned, as applicable +• +No dividends or dividend equivalents will be paid with respect to shares subject to stock options or stock appreciation rights +• +Awards generally may not be transferred except by will or the laws of descent and distribution or, if approved by the administrator, to certain family +members, family trusts, or family partnerships pursuant to a gift or domestic relations order +• +Awards subject to time-based vesting are subject to “double-trigger” vesting on a change in control of the Company +Plan Summary +The following summary of the material terms of the Plan is qualified in its entirety by reference to the +complete statement of the Plan, which is set forth in Appendix B to this Proxy Statement. +Administration +The Plan will be administered by the Compensation and Human Capital Committee, which is referred to in this +summary in its capacity as administrator of the Plan as the “administrator.” Any power of the Compensation and Human Capital Committee as administrator may also be exercised by the Board, except to the extent that the grant or exercise of such +authority would cause any award or transaction to become subject to (or lose an exemption under) the short-swing profit recovery provisions of Section 16 of the Exchange Act. Subject to the express provisions of the Plan, the administrator is +authorized and empowered to do all things that it determines to be necessary or appropriate in connection with the administration of the Plan. All decisions, determinations and interpretations by the Compensation and Human Capital Committee +regarding the Plan and awards granted under the Plan will be final and binding on all participants and other persons holding or claiming rights under the Plan or to an award under the Plan. The Compensation and Human Capital Committee may +authorize one or more officers of the Company to perform any or all things that the administrator is authorized and empowered to do or perform under the Plan; provided, however, that no such officer may designate himself or herself as a recipient +of any awards granted under the authority delegated to such officer and that any delegation of the power to grant awards to an officer must otherwise be consistent with the requirements of Section 157(c) of the Delaware General Corporation Law. +The Compensation and Human Capital Committee has designated the Company’s CEO, CFO, general counsel and secretary, and head of the human resource function to assist in administering the Plan and executing award agreements and other documents +entered into under the Plan. In addition, the Compensation and Human Capital Committee may delegate any or all aspects of the day-to-day administration of the Plan to one or more officers or employees of the Company or any subsidiary, and/or to +one or more agents. +Eligibility +Any person who is a current or, to the extent consistent with Section 409A of the Code, prospective officer or +employee of the Company or of any Company subsidiary, will be eligible for selection by the administrator for the grant of awards under the Plan. In addition, non-employee directors and any service providers who have been retained to provide +consulting, advisory or other services to the Company or to any Company subsidiary will be eligible for the grant of awards under the Plan. Stock options intended to qualify as “incentive stock options” (“ISOs”) within the meaning of Section 422 +of the Code may only be granted to employees of the Company or a Company subsidiary. As of March 4, 2024, approximately 4 executive officers, 377 total employees, and 9 non-employee directors would be eligible to participate in the Plan. As of +this same date, the closing price of a share of common stock of the Company was $9.63. +2024 PROXY STATEMENT +79 +TABLE OF CONTENTS +Shares Subject to the Plan and to Awards +Subject to changes in the Company’s capitalization, as of May 2, 2024 (the “Effective Date”), the number of +shares of the Company’s common stock authorized for future grant under the Plan will equal 3,300,000 shares plus the number of shares remaining available for grant under the Current Plan as of the Effective Date (as of March 4, 2024, such number +is equal to approximately 1.1 million), plus any shares of the Company’s common stock underlying awards outstanding as of the Effective Date granted under the Current Plan or the Company’s Stock Incentive Plan of 2013 and the Company’s Stock +Incentive Plan of 2010 (collectively, the “Prior Plans”), that, after the Effective Date, cease for any reason to be subject to such awards (other than by reason of exercise or settlement of the awards to the extent they are exercised for or +settled in vested and non-forfeitable shares). In addition, if, after the Effective Date, any shares subject to an award granted under the Plan are forfeited, the award expires or is settled for cash (in whole or in part), the shares subject to +such award shall, to the extent of such forfeiture, expiration or cash settlement, again be available for future awards under the Plan. The shares issued pursuant to awards granted under the Plan may be shares that are authorized and unissued or +issued shares that were reacquired by the Company, including shares purchased in the open market. No fractional shares will be delivered under the Plan. +For purposes of determining the share limits described in the paragraph above, the aggregate number of shares +issued under the Plan at any time will equal only the number of shares actually issued (as calculated above) upon exercise or settlement of an award. Notwithstanding the foregoing, shares subject to an award under the Plan or the Prior Plans may +not again be made available for issuance under the Plan if such shares were: (i) subject to a stock-settled stock appreciation right and were not issued upon the net settlement or net exercise of such stock appreciation right, (ii) used to pay +the exercise price of a stock option or the purchase price, if any, for an award, (iii) delivered to or withheld by the Company to pay the withholding taxes related to an award, or (iv) repurchased on the open market with the proceeds of a stock +option exercise. Shares subject to awards that have been canceled, expired, forfeited or otherwise not issued under an award and shares subject to awards settled in cash will not count as shares issued under the Plan for purposes of the above +limit. +Subject to certain adjustments, the aggregate number of shares that may be issued pursuant to the exercise of +ISOs granted under the Plan may not exceed 3,300,000. The aggregate grant date fair value of awards (computed as of the date of grant in accordance with applicable financial accounting rules) granted under the Plan during any calendar year to any +one non-employee director will not exceed $600,000. +In addition, (i) no portion of any grant of restricted stock will be scheduled to vest prior to the date that +is one year following the date the restricted stock is granted; (ii) no portion of any grant of an option or stock appreciation right will be scheduled to become exercisable prior to the date that is one year following the date the option or +stock appreciation right is granted; and (iii) no portion of any grant of a restricted stock unit or incentive bonus will be scheduled to vest or be settled, paid or distributed prior to the date that is one year following the date the award is +granted; provided; however, that awards that result in the issuance of an aggregate of up to 5% of the gross number of shares reserved for issuance under the Plan may be granted to eligible persons without regard to the minimum vesting, +exercisability, settlement, payment and distribution provisions described in this paragraph. +Stock Options +Stock options granted under the Plan may either be ISOs or stock options that are not intended to qualify as +ISOs (“nonqualified stock options” or “NQSOs”). The administrator will establish the exercise price per share under each stock option, which will not be less than the fair market value (or 110% of the fair market value in the case of ISOs granted +to individuals who own more than 10% of the Company’s common stock) of a share on the date the stock option is granted, except in certain cases where substitute or replacement awards are granted in connection with a merger or acquisition. The +administrator will establish the term of each stock option, which in no case may exceed a period of 10 years from the date of grant (or five years in the case of ISOs granted to individuals who own more than 10% of the Company’s common stock). +Unless the administrator determines otherwise, (i) upon termination of employment other than due to death, disability, retirement or termination for cause, to the extent vested on the date of such termination, stock options remain exercisable for +three months following such date (or until the expiration date of the stock option, if earlier), (ii) upon death or disability, stock options become fully vested and remain exercisable for one year following such event (or until the expiration +date of the stock option, if earlier), (iii) upon retirement, stock options become fully vested and remain exercisable until their expiration date, and (iv) upon termination of employment for cause, all stock options are forfeited. +No dividends or dividend equivalents may be paid or granted in respect of shares subject to stock options or +stock appreciation rights and no holder of a stock option is entitled to any dividends with respect to the shares subject to stock options or appreciation rights unless and until such awards have vested and have been exercised in accordance with +the terms of the Plan and the applicable award agreement and such shares are reflected as issued and outstanding. +2024 PROXY STATEMENT +80 +TABLE OF CONTENTS +Stock Appreciation Rights +A stock appreciation right provides the right to receive the monetary equivalent of the increase in value of a +specified number of the shares over a specified period of time after the right is granted. Stock appreciation rights may be granted to participants either in tandem with or as a component of other awards granted under the Plan (“tandem SARs”) or +not in conjunction with other awards (“freestanding SARs”). All freestanding SARs will be granted subject to the same terms and conditions applicable to options as set forth above and in the Plan, and all tandem SARs will have the same exercise +price, vesting, exercisability, forfeiture and termination provisions as the award to which they relate. +Restricted Stock and Restricted Stock Units +Restricted stock is an award or issuance of shares the grant, issuance, retention, vesting and/or +transferability of which is subject during specified periods of time to certain conditions (including continued employment or performance conditions) determined by the administrator. Restricted stock units are awards denominated in units of +shares under which the issuance of shares is subject to such conditions (including continued employment or performance conditions) and terms as the administrator deems appropriate. Notwithstanding the satisfaction of any performance goals, the +number of shares granted, issued, retainable and/or vested under an award of restricted stock or restricted stock units on account of either financial performance or personal performance evaluations may be reduced, but not increased, by the +administrator on the basis of such further consideration as the administrator may determine. +Unless the administrator determines otherwise, (i) upon termination of employment for any reason other than +death, disability or retirement, all restricted stock and restricted stock units still subject to restrictions as of the date of termination will be forfeited, and (ii) upon death, disability or retirement, in general, the restrictions remaining +on a participant’s restricted stock and restricted stock units will lapse, except that any applicable performance criteria will not lapse upon a participant’s retirement. +Unless otherwise determined by the administrator, participants holding shares of restricted stock granted +under the Plan may exercise full voting rights with respect to those shares during the period of restriction, but participants will have no voting rights with respect to shares underlying restricted stock units unless and until such shares are +reflected as issued and outstanding shares on the Company’s stock ledger. +The administrator will determine the extent to which participants are entitled to receive dividends or +dividend equivalents with respect to restricted stock and shares underlying restricted stock units. Any cash or stock dividends and dividend equivalents with respect to restricted stock and restricted stock units, if any, will be withheld by the +Company for the participant’s account and will be paid, if at all, (i) in the case of restricted stock, upon the satisfaction of any restrictions imposed on the restricted stock in respect of which the dividends were paid (including, if +applicable, the achievement of applicable performance measure(s)) and (ii) in the case of restricted stock units, at the time the shares and/or cash underlying such restricted stock units is paid, and any dividends deferred in respect of any +restricted stock and restricted stock units will be forfeited upon the forfeiture of such restricted stock and restricted stock units. Any non-cash dividends or distributions paid with respect to restricted stock and restricted stock units will +be subject to the same restrictions that apply to the award to which they relate. +Stock Awards +Stock awards may be granted under the Plan with such terms and conditions as determined by the administrator, +consistent with the 5% limit set forth above under “Shares Subject to the Plan and to Awards.” Participants will have all voting, dividend, liquidation and other rights with respect to shares underlying a stock award upon becoming a shareholder +of record, but such awards may be subject to restrictions on transfer as determined by the administrator. +Incentive Bonuses +An incentive bonus will confer upon the participant the opportunity to earn a future payment, in cash or +shares, tied to the level of achievement with respect to one or more performance criteria established for a performance period of not less than one year. The administrator will establish the terms and conditions to which the award is subject, +including performance criteria and the level of achievement of the criteria that will determine the target and maximum amounts payable under an incentive bonus award, which criteria may be based on financial performance and/or personal +performance evaluations. Notwithstanding the satisfaction of any performance goals, the amount paid under an incentive bonus award on account of either financial performance or personal performance evaluations may be adjusted by the administrator +as set forth in the Plan. +2024 PROXY STATEMENT +81 +TABLE OF CONTENTS +Deferral of Gains +The administrator may, in an award agreement or otherwise, provide for the deferred delivery of shares upon +settlement, vesting or other events with respect to restricted stock or restricted stock units, or for the deferred payment or satisfaction of an incentive bonus. However, in no event will any deferral of the delivery of shares or any other +payment with respect to any award be allowed if the administrator determines, in its sole and absolute discretion that the deferral would result in the imposition of the additional tax under Section 409A of the Code. Notwithstanding the foregoing +and to the extent compliant with Section 409A of the Code, if the administrator permits any deferral of shares or any other payment as described above, payment of any vested award that a participant has elected to defer will be made regardless of +any deferral election within thirty (30) days of a change in control or the participant’s separation from service (including death). +Performance Criteria +With respect to performance-based awards the administrator may establish performance criteria and level of +achievement of such criteria that will determine the number of shares to be granted, retained, vested, issued or issuable under or in settlement of or the amount payable pursuant to an award, which criteria may be based on “performance criteria” +(as described below) or other standards of financial performance and/or personal performance evaluations. +For purposes of the Plan, the term “performance criteria” means an objectively determinable measure of +performance relating to any one or more of the following performance criteria, or derivations of such performance criteria, either individually, alternatively or in any combination, applied to either the Company as a whole or to a business unit, +division, line or subsidiary, either individually, alternatively or in any combination, and measured either annually or cumulatively over a period of years, on an absolute basis or relative to a pre-established target, to previous years’ results +or to an index or indices or a designated comparison group or groups, in each case as specified by the administrator: (i) net earnings or earnings per share (including earnings before interest, taxes, depreciation and/or amortization), (ii) +income, net income or operating income, (iii) revenues, (iv) net sales, (v) return on sales, (vi) return on equity, (vii) return on capital (including return on total capital or return on invested capital), (viii) return on assets or net assets, +(ix) earnings per share, (x) economic or business value added measurements (xi) return on invested capital, (xii) return on operating revenue, (xiii) cash flow (before or after dividends), (xiv) stock price, (xv) total shareholder return, (xvi) +market capitalization, (xvii) economic value added, (xviii) debt leverage (debt to capital), (xix) operating profit or net operating profit, (xx) operating margin or profit margin, (xxi) cash from operations, (xxii) market share, (xxiii) product +development or release schedules, (xxiv) new product innovation, (xxv) cost reductions, (xxvi) customer acquisition or retention, (xxvii) customer service, (xxviii) customer satisfaction, or (xxix) other performance criteria selected by the +Administrator. +The administrator may adjust performance results for any recapitalization, reorganization, merger, +acquisition, divestiture, consolidation, spin-off, combination, liquidation, dissolution, sale of assets or other similar corporate transaction or event, or any other extraordinary event or circumstance occurs which has the effect, as determined +by the Administrator, in its sole and absolute discretion, of distorting the applicable performance criteria involving the Company. +Suspension or Termination of Awards +Unless otherwise determined by the administrator, (i) if the Company’s chief executive officer or any other +person designated by the administrator reasonably believes that a participant may have committed an act of misconduct (as defined in the Plan), then the participant’s rights to exercise any stock option, vest in any award and/or receive payment +for or shares in settlement of an award, may be suspended pending a determination of whether such misconduct has been committed, and (ii) if the administrator, the Company’s chief executive officer or any other person designated by the +administrator determines that a participant has committed an act of misconduct, then the participant (a) may not exercise any stock option or stock appreciation right, vest in any award, have restrictions on an award lapse or otherwise receive +payment of an award, (b) will forfeit all outstanding awards, and (c) may be required, at the discretion of the administrator, to return or repay to the Company any then unvested shares previously issued under the Plan. In addition, the +administrator may seek to recover awards made under the Plan and payments under or gain in respect of any award in accordance with the Company’s Policy for Recovery of Incentive Compensation or any successor or additional clawback or recoupment +policy or as otherwise required by applicable law or applicable stock exchange listing standards. +Settlement of Awards +Awards (other than stock awards), may be settled in shares, cash or a combination thereof, as determined by the +administrator. +2024 PROXY STATEMENT +82 +TABLE OF CONTENTS +No Repricing Without Shareholder Approval +Other than in connection with certain changes in the Company’s capitalization, the administrator may not, +without prior approval of the Company’s shareholders, effect any “repricing” of a previously granted stock option or stock appreciation right that is “underwater” (i.e., the fair market value of the shares underlying such award is less than the +exercise price of such award) by (i) amending or modifying the terms of the award to lower the exercise price; (ii) canceling the underwater award and granting either (a) replacement stock options or stock appreciation rights, as applicable, +having a lower exercise price or (b) restricted stock, restricted stock units, performance awards or stock awards in exchange; or (iii) cancelling or repurchasing the underwater award for cash or other securities. +Amendment and Termination +The Board may amend, alter or discontinue the Plan, and the administrator may amend or alter any agreement or +other document evidencing an award made under the Plan, except that, unless in connection with a change in the capitalization of the Company or a change in control, no such amendment or alteration may, without the approval of the shareholders of +the Company: (i) increase the maximum number of shares for which awards may be granted under the Plan, (ii) reduce the minimum price set forth in the Plan at which stock options or stock appreciation rights may be granted, (iii) reduce the +exercise price of outstanding stock options or stock appreciation rights, (iv) extend the term of the Plan, (v) change the class of persons eligible to be participants, (vi) otherwise amend the Plan in any manner requiring shareholder approval by +law or under the New York Stock Exchange listing requirements (or the listing requirements of any successor exchange that is the primary stock exchange for trading of the Company’s shares), or (vii) increase the individual maximum limits set +forth in the Plan. +Except as set forth in the Plan, no amendment or alteration to the Plan or an award or award agreement may be +made that would impair the rights of the holder of an award without such holder’s consent. In addition, the Plan may not be amended in any way that causes the Plan to fail to comply with or be exempt from Section 409A of the Code, unless the +Board expressly determines to amend the Plan to be subject to Section 409A of the Code. +The administrator may, in its sole and absolute discretion, modify the provisions of the Plan or an award as +they pertain to a participant who is employed or providing services outside the United States in order to comply with applicable foreign law or to recognize differences in local law, currency or tax policy. +Change in Control +Awards granted under the Plan that are subject to vesting based on continuous employment or service, to the +extent awards are assumed or substituted by an acquirer in the change in control (as defined in the Plan) awards shall not immediately vest upon the change in control and instead shall continue to vest in accordance with their terms, provided +that if a participant experiences a termination of employment (as defined in the Plan) by the Company without cause (as defined in the Plan) or by the participant for good reason (as defined in the Plan), in each case, within the twenty-four (24) +month period following the change in control, the awards shall immediately vest and become exercisable or shall be settled upon such qualifying termination. If, at any time during the vesting period of an award, a participant is or becomes +eligible to terminate his or her employment with the Company or its Subsidiaries due to retirement, the award shall immediately vest in full upon the change in control. +For awards granted under the Plan that are subject to performance conditions, if a change in control occurs +prior to the end date of a performance period, to the extent the performance award is outstanding immediately prior to such change in control, such award will vest (a) based on actual performance through the date of the change in control as +determined by the administrator (treating the change in control as the end of the applicable performance period) without proration for the time elapsed in such performance period prior to such change in control for purposes of determining +performance, but in the discretion of the administrator, prorated for purposes of elapsed time in a manner consistent with subsection (b) below, (b) assuming that target level of performance is attained and prorated based on the number of days in +the performance period that elapsed prior to the change in control over the total number of days in the performance period, or (c) a combination of (a) and (b) (without double counting). Any portion of the performance award (or the full award as +applicable) that does not vest in connection with a change in control as contemplated herein will automatically terminate upon such change in control. +Subject to and limited by the requirements of the preceding paragraphs, the administrator shall determine the +effect of a change in control (as defined in the Plan) on outstanding awards. These effects, which need not be the same for all participants, may include, but are not limited to (i) substituting for the shares subject to an outstanding award or +portion thereof the stock or securities of the surviving corporation or any successor corporation (or parent or subsidiary thereof), in which event the aggregate exercise price of the award will remain the same, and/or +2024 PROXY STATEMENT +83 +TABLE OF CONTENTS +(ii) converting any outstanding award or portion thereof into a right to receive cash or other property +following the consummation of the change in control in an amount equal to the value of the consideration to be received for one share of the Company’s common stock in connection with such transaction less the purchase or exercise price of the +shares subject to the award, if any, multiplied by the number of shares subject to the award or portion thereof. +The administrator may determine that some or all participants holding vested and exercisable stock options or +stock appreciation rights will receive with respect to some or all of the shares subject to such awards cash in an amount equal to the excess of (i) the greater of (a) the highest sales price of the shares on the New York Stock Exchange (or any +successor exchange that is the primary stock exchange for trading of the Company’s shares) on the date immediately prior to the change in control and (b) the highest price per share actually paid in connection with the change in control, over +(ii) the exercise price of the award. +Adjustments +The number and kind of shares available for issuance under the Plan, and the number and kind of shares subject +to the individual and ISO limits set forth under the Plan, will be equitably adjusted by the administrator to reflect any reorganization, reclassification, combination of shares, stock split, reverse stock split, spin-off, dividend or +distribution of securities, property or cash (other than regular, quarterly cash dividends), or any other event or transaction that affects the number or kind of shares of the Company outstanding. The terms of any outstanding award will also be +equitably adjusted by the administrator as to price, number or kind of shares subject to such award and other terms to reflect the foregoing events, which adjustments need not be uniform as between different awards or different types of awards. +In the event there is a change in the number or kind of outstanding shares under the Plan as a result of a +change of control, other merger, consolidation or otherwise, then the administrator will determine the appropriate and equitable adjustment to be effected. In addition, in the event of such a change, the administrator may accelerate the time or +times at which any award may be exercised (subject to the limitations described above under the “Change in Control” heading) and may provide for cancellation of such accelerated awards that are not exercised within a time prescribed by the +administrator in its sole discretion. +Transferability +Unless the administrator determines otherwise, awards may not be sold, transferred, pledged, assigned, or +otherwise alienated or hypothecated by a participant other than by will or the laws of descent and distribution, and each stock option or stock appreciation right may be exercisable only by the participant during his or her lifetime. To the +extent permitted by the administrator, the person to whom an award is initially granted may transfer awards, in certain limited circumstances, to certain family members, family trusts, or family partnerships. +No Right to Company Employment +Nothing in the Plan or an award agreement will interfere with or limit in any way the right of the Company, its +subsidiaries and/or its affiliates to terminate any participant’s employment, service on the Board or service for the Company at any time or for any reason not prohibited by law, nor will the Plan or an award itself confer upon any participant +any right to continue his or her employment or service for any specified period of time. Neither an award nor any benefits arising under the Plan will constitute an employment contract with the Company, any subsidiary and/or its affiliates. +Effective Date and Termination of the Plan +The Plan was adopted by the Board on March 7, 2024, subject to shareholder approval. The Plan will remain +available for the grant of awards until March 6, 2034, unless earlier terminated by the Board. If shareholders do not approve this proposal, the Company can continue to make awards under the Current Plan to the extent of the number of shares +authorized and remaining available under the Current Plan. +Federal Income Tax Treatment +The following discussion is a general summary as of the date of this Proxy Statement of the significant U.S. +federal income tax consequences to the Company and the participants in the Plan. The discussion is intended solely for general information and does not make specific representations to any participant. The discussion does not address state, local +or foreign income tax rules or other U.S. tax provisions, such as estate or gift taxes. A recipient’s particular situation may be such that some variation of the basic rules is applicable to him or her. In addition, the federal income tax laws +and regulations are frequently revised and may change at any time. Therefore, each recipient is urged to consult a +2024 PROXY STATEMENT +84 +TABLE OF CONTENTS +tax advisor before exercising any award or before disposing of any shares acquired under the Plan both with +respect to federal income tax consequences as well as any foreign, state or local tax consequences. The Company does not anticipate that awards granted under the Plan will qualify as performance-based compensation under Section 162(m) of the +Code. +Stock Options +ISOs and NQSOs are treated differently for federal income tax purposes. ISOs are intended to comply with the +requirements of Section 422 of the Code. NQSOs do not comply with such requirements. +In general, a participant is not taxed on the grant or exercise of an ISO. The difference between the exercise +price and the fair market value of the shares on the exercise date may, however, be a preference item for purposes of the alternative minimum tax. If a participant holds the shares acquired upon exercise of an ISO until the later of two years +following the stock option grant date and one year following exercise, the gain, if any, upon a subsequent disposition of such shares will be long-term capital gain. The amount of the gain will be the difference between the proceeds received on +disposition and the participant’s basis in the shares (which generally equals the exercise price). If a participant disposes of stock acquired pursuant to exercise of an ISO before satisfying these holding periods, the participant will recognize +as ordinary income in the year of disposition an amount equal to the excess of the fair market value of the shares at the time of exercise (or, if less, the amount realized on the disposition of the shares), over the exercise price paid for the +shares, and capital gain or loss for any other difference between the sale price and the exercise price. The Company is not entitled to an income tax deduction on the grant or exercise of an ISO or on the participant’s disposition of the shares +after satisfying the holding period requirement described above. If the holding periods are not satisfied, the Company generally will be entitled to a deduction in the year the participant disposes of the shares in an amount equal to the ordinary +income recognized by the participant. +The Company does not guarantee that any option intended to be an ISO will qualify for the tax treatment of +ISOs described above. If an option intended to be an ISO fails to so qualify, it will be taxed as an NQSO, as described below. +In general, a participant is not taxed on the grant of an NQSO. On exercise, the participant recognizes +ordinary income equal to the difference between the exercise price and the fair market value of the shares acquired on the date of exercise. The Company is generally entitled to an income tax deduction in the year of exercise in the amount +recognized by the participant as ordinary income. The participant’s gain (or loss) on subsequent disposition of the shares is long-term capital gain (or loss) if the shares are held for at least one year following exercise, and otherwise is +short-term capital gain (or loss). The Company does not receive a deduction for any such capital gain. +Stock Appreciation Rights +In general, the recipient of a freestanding SAR will not recognize any taxable income at the time the +freestanding SAR is granted. If the freestanding SAR is settled in cash, the cash will be taxable as ordinary income to the recipient at the time that it is received. If the freestanding SAR is settled in shares, the recipient will recognize +ordinary income equal to the excess of the fair market value of the shares on the day the freestanding SAR is exercised over any amounts paid by the recipient for the shares. +With respect to tandem SARs, if a holder elects to surrender the underlying stock option in exchange for cash +or stock equal to the appreciation inherent in the underlying stock option, the tax consequences to the employee will be the same as discussed above relating to freestanding SARs. If the employee elects to exercise the underlying stock option, +the holder will be taxed at the time of exercise as if he or she had exercised an NQSO (discussed above). +The Company generally is entitled to a deduction with respect to a SAR at the same time the recipient +recognizes ordinary income with respect thereto. +Restricted Stock and Restricted Stock Units +A participant who is awarded or purchases shares subject to a substantial risk of forfeiture, or restricted +stock, generally does not recognize income at the time of the grant. When the risk of forfeiture lapses, the participant generally recognizes ordinary income in an amount equal to the excess of the fair market value of the shares over the +purchase price, if any, and a deduction is generally available to the Company in the same year that the participant recognizes income. However, a participant may make an election under Section 83(b) of the Code to recognize taxable ordinary +income at the time the shares are transferred to the participant, rather than later, when the risk of forfeiture lapses, in an amount equal to the fair market value of the shares at the time of such transfer. Such election must be made no later +than 30 days after the date the shares are transferred to the participant. If the participant makes a timely and effective election, when the restrictions on the shares lapse, the participant will not recognize any additional income. For purposes +of determining capital gain or loss on a sale of shares acquired under a restricted stock award under the Plan, the holding period in the shares begins when the participant recognizes taxable income with respect to the transfer. The participant’s +tax basis in the shares equals the amount paid for the shares plus any income realized with respect to the transfer. If the participant +2024 PROXY STATEMENT +85 +TABLE OF CONTENTS +forfeits the shares to the Company (e.g., upon the participant’s termination prior to vesting), the +participant may not claim a deduction with respect to the income recognized as a result of the election. Dividends (if any) paid with respect to unvested shares of restricted stock generally will be taxable as ordinary income to the participant +at the time the dividends are paid, if an effective 83(b) election was not made with respect to the shares. +A participant who is awarded restricted stock units generally does not recognize income at the time of grant. +Instead, the participant is generally taxed upon settlement of the award (and a corresponding deduction is generally available to the Company), unless he or she has made a proper election to defer receipt of the shares (or cash if the award is +cash settled) under Section 409A of the Code. (FICA taxes will apply upon the vesting of the restricted stock unit award.) If the shares delivered are restricted for tax purposes, the participant will instead be subject to the rules described +above for restricted stock. +Stock Awards +A participant who receives a stock award generally is required to recognize ordinary income in an amount equal +to the excess of the fair market value of the shares on the date the shares are granted over the purchase price (if any) paid for the shares. The Company generally will be entitled to a deduction with respect to stock awards at the same time the +recipient recognizes ordinary income with respect thereto. +Incentive Bonuses +A participant will have taxable income at the time an incentive bonus is paid. At that time, the participant +will recognize ordinary income equal to the value of the amount then payable and, the Company generally will be entitled to a corresponding deduction. +Certain Change in Control Payments +Under Section 280G of the Code, the vesting or accelerated exercisability of stock options or the vesting and +payments of other awards in connection with a change in control of a corporation may be required to be valued and taken into account in determining whether participants have received compensatory payments, contingent on the change in control, in +excess of certain limits. If these limits are exceeded, a substantial portion of amounts payable to the participant, including income recognized by reason of the grant, vesting or exercise of awards, may be subject to an additional 20% federal +tax, which is non-deductible to the Company. +Plan Benefits +The benefits that will be awarded or paid under the Plan are not currently determinable. Awards granted under +the Plan are within the discretion of the Compensation and Human Capital Committee. Information about awards granted in fiscal year 2023 under the Current Plan to the Company’s named executive officers can be found in the table under the heading +“G rants of Plan-Based Awards in Fiscal Year 2023 ” on page 56 of this proxy statement. As of December 29, 2023, the closing price of a share of Wolverine common stock on the NYSE was $8.89. +Registration with the SEC +The Company intends to file with the SEC a registration statement on Form S-8 covering the new shares reserved +for issuance under the Plan in the second quarter of 2024. +Equity Compensation Plan Information +The following table provides information about the Company’s equity compensation plans as of December 30, 2023 +(and does not include the 3.3 million shares of common stock that are the subject of this Proposal 4): +Plan Category 1 +Number of Securities to be +Issued Upon Exercise of +Outstanding Options, +Warrants and Rights +(a) +Weighted Average +Exercise Price of +Outstanding Options, +Warrants, and Rights +(b) +Number of Securities +Remaining Available for +Future Issuance under +Equity Compensation +Plans (Excluding +Securities Reflected in +Column (a)) +(c) +Equity compensation plans approved by security holders +1,961,016 2,3 +$22.56 +8,085,425 4 +Equity compensation plans not approved by security holders +— +— +— +Total +1,961,016 +$22.56 +8,085,425 +1. +Each plan for which aggregated information is provided contains customary anti-dilution provisions that are applicable +in the event of a stock split, stock dividend or certain other changes in the Company’s capitalization. +2. +Includes: (i) 1,772,382 stock options awarded to employees under the Stock Incentive Plan of 2013 and the Stock +Incentive Plan of 2016, as amended and restated; and (ii) and 188,634 stock options awarded to non-employee directors under the Stock Incentive Plan of 2013 and the Stock Incentive Plan of 2016, as amended and +2024 PROXY STATEMENT +86 +TABLE OF CONTENTS +restated. Column (a) does not include stock units credited to outside directors’ fee +accounts or retirement accounts under the Outside Directors’ Deferred Compensation Plan. Stock units do not have an exercise price. Each stock unit credited to a director’s fee account and retirement account under the Outside Directors’ Deferred +Compensation Plan will be converted into one share of common stock upon distribution. Column (a) also does not include shares of restricted or unrestricted common stock previously issued under the Company’s equity compensation plans. +3. +Of this amount, 10,959 options were not exercisable as of December 30, 2023 due to vesting restrictions. +4. +Comprised of: (i) 93,742 shares available for issuance under the Outside Directors’ Deferred Compensation Plan upon +the retirement of the current directors or upon a change in control; and (ii) 7,991,683 shares issuable under the Stock Incentive Plan of 2016, as amended and restated. +The Outside Directors’ Deferred Compensation Plan is a supplemental, unfunded, nonqualified deferred +compensation plan for non-employee directors. Beginning in 2006, the Company began paying an annual equity retainer to non-management directors in the form of a contribution under the Outside Directors’ Deferred Compensation Plan. Non-management +directors may also voluntarily elect to receive, in lieu of some or all directors’ fees, a number of stock units equal to the amount of the deferred directors’ fees divided by the fair market value of the Company’s common stock on the date of +payment. These stock units are increased by a dividend equivalent based on dividends paid by the Company and the amount of stock units credited to the participating director’s fee account and retirement account. Upon distribution, the +participating directors receive a number of shares of the Company’s common stock equal to the number of stock units to be distributed at that time. Distribution is triggered by termination of service as a director or by a change in control of the +Company and can occur in a lump sum, in installments or on another deferred basis. A total of 303,702 shares have been issued to a trust to satisfy the Company’s obligations when distribution is triggered and are included in shares the Company +reports as issued and outstanding. +The Stock Incentive Plan of 2016, as amended and restated, is an equity-based incentive plan for officers, key +employees, and directors. Such plan authorizes awards of stock options, restricted common stock, common stock, restricted stock units and/or stock appreciation rights. The Stock Incentive Plan of 2016, as amended and restated, provides that each +share of restricted or unrestricted common stock and each restricted stock unit issued under the plan is counted as 2.6 shares against the total number of shares authorized for issuance under the plan. The number of securities listed as remaining +available in column (c) of the table assumes only stock options will be issued under the plan in the future; each stock option counts as only one share against the total number of shares authorized for issuance under the plan. Actual shares +available under the plan will be less to the extent that the Company awards restricted common stock, unrestricted common stock or restricted stock units under the plan. The numbers provided in this footnote and in column (c) will increase to the +extent that options relating to the number of shares listed in column (a) of the table or other outstanding awards (e.g., shares of restricted or unrestricted stock, restricted stock units or stock appreciation rights) previously issued under the +plan are canceled, surrendered, modified, exchanged for substitutes, expire or terminate prior to exercise or vesting because the number of shares underlying any such awards will again become available for issuance under the plan under which the +award was granted. +Of the total number of shares available under column (c), the number of shares with respect to the following +plans may be issued other than upon the exercise of an option, warrant or right outstanding as of December 30, 2023: +• +Outside Directors’ Deferred Compensation Plan: 93,742 +• +Stock Incentive Plan of 2016, as amended and restated: 3,073,724 +VOTE REQUIRED AND BOARD RECOMMENDATION +Approval of the Wolverine World Wide, Inc. Stock Incentive Plan of 2024, requires the affirmative vote of a +majority of votes cast affirmatively or negatively on the matter for approval. +BOARD RECOMMENDATION +The Board recommends that you vote “FOR” approval of the Stock Incentive Plan of 2024. +2024 PROXY STATEMENT +87 +TABLE OF CONTENTS +Related Party Matters +CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS +Since January 1, 2023, the Company has not engaged in any “related person” transactions with any person who is +or was during the last fiscal year a director, executive officer, nominee for director or holder of 5% or more of Company voting securities, affiliate or any member of the immediate family of the foregoing persons. +RELATED PERSON TRANSACTIONS POLICY +Wolverine Worldwide's Board adopted written policies and procedures regarding related person transactions. They +require the Governance Committee to review and either approve or disapprove the Company entering into any Interested Transactions (defined below). If advance approval is not feasible, then the Governance Committee must review and ratify the +Interested Transaction at its next meeting. +Interested Transaction +Any transaction, arrangement or relationship or series of similar transactions, arrangements or +relationships (including any indebtedness or guarantee of indebtedness) in which: +(1) +The aggregate amount involved exceeds or is expected to exceed $120,000 since the beginning of Wolverine +Worldwide's last completed fiscal year; +(2) +The Company or any of its subsidiaries is a participant; and +(3) +Any Related Person (defined below) has or will have a direct or indirect interest. +An Interested Transaction does not include: +(1) +Any employment compensation paid to an executive officer of the Company if the Compensation Committee +approved or recommended to the Board of Directors for approval of such compensation; +(2) +Any compensation paid to a director for service as a director of the Company; +(3) +Any transaction in which a Related Person has an indirect interest solely as a result of being (i) a +director or, together with all other Related Persons, as defined below, a less than 10% beneficial owner of an equity interest in another entity, or both, or (ii) a limited partner in a partnership in which the Related Person, together +with all other Related Persons, has an interest of less than 10%; +(4) +Any transaction in which the Related Person's interest arises solely from the ownership of the Company's +common stock and all holders of the Company's common stock received the same benefit on a pro rata basis (e.g., a dividend); or +(5) +Any transaction with another publicly traded company where the Related Person's interest arises solely +from the ownership of more than 5% of the Company's common stock and the ownership of a non-controlling interest in the other publicly traded company. +Related Person +Any: +(a) +Person who is or was (at any time since the beginning of the Company’s last completed fiscal year even if +they do not presently serve in that role), an executive officer, a director or, to the extent information regarding such nominee is being presented in a proxy or information statement relating to the election of that nominee as a +director, a nominee for election as a director; +(b) +Beneficial owner of greater than five percent of Wolverine Worldwide's common stock; or +(c) +Immediate family member* of any of the foregoing. +* +Immediate family member is defined as a person's spouse, parents, stepparents, children, stepchildren, siblings, +mothers and fathers-in-law, sons- and daughters-in-law, and brothers- and sisters-in-law, and anyone residing in such person's home (other than a tenant or employee). +The Governance Committee considers whether the Interested Transaction is on terms no less favorable than terms +generally available to an unaffiliated third party under the same or similar circumstances, the extent of the Related Person's interest in the transaction, and other factors that it deems relevant. No director participates in any discussion or +approval of an Interested Transaction for which he or she is a Related Person, except to provide information to the Governance Committee. +2024 PROXY STATEMENT +88 +TABLE OF CONTENTS +Additional Information +SHAREHOLDERS LIST +For information about how to view the list of shareholders entitled to vote at the Annual Meeting during the +ten days preceding the Annual Meeting, please visit our 2024 Annual Meeting website at www.wolverineworldwide.com/2024annualmeeting. +DIRECTOR AND OFFICER INDEMNIFICATION +The Company indemnifies its directors and NEOs to the fullest extent permitted by law so that they will be free +from undue concern about personal liability in connection with their service to the Company. +DELINQUENT SECTION 16 REPORTS +Section 16(a) of the Exchange Act requires the Company’s directors and executive officers, and persons who +beneficially own more than 10% of the outstanding shares of the Company’s common stock, to file reports of ownership and changes in ownership of shares of common stock with the SEC. Directors, executive officers and greater than 10% beneficial +owners are required by SEC regulations to furnish Wolverine Worldwide with copies of all Section 16(a) reports they file. Based on its review of the copies of such reports received by it, or written representations from certain reporting persons, +the Company believes that during fiscal year 2023, its officers and directors filed the required reports under Section 16(a) on a timely basis, except two transactions each for Mr. Rasch, Ms. Klimek, Mr. Stornant and Mr. Zwiers, due to +administrative errors. +SHAREHOLDER PROPOSALS FOR INCLUSION IN NEXT YEAR'S PROXY +STATEMENT +Pursuant to SEC Rule 14a-8, some shareholder proposals may be eligible for inclusion in Wolverine Worldwide's +2024 Proxy Statement and proxy card. Any such shareholder proposals must be submitted in writing to the Secretary of Wolverine Worldwide no later than the close of business on November 20, 2024. You should address all shareholder proposals to the +attention of Secretary, Wolverine World Wide, Inc., 9341 Courtland Drive, NE, Rockford, Michigan 49351. +OTHER SHAREHOLDER PROPOSALS FOR PRESENTATION AT NEXT YEAR'S +ANNUAL MEETING +The Company's By-Laws require that any shareholder proposal that is not submitted for inclusion in next year's +Proxy Statement under SEC Rule 14a-8, but is instead sought to be presented directly at the 2025 Annual Meeting of Shareholders, must be received at the Company's principal executive offices by the close of business not less than 90 days nor more +than 120 days prior to the first anniversary of the 2024 Annual Meeting. As a result, proposals, including director nominations submitted pursuant to these provisions of the By-Laws, must provide the information set forth in the By-Laws (which +includes information required under Rule 14a-19) and be received no earlier than January 2, 2025 and no later than the close of business on February 1, 2025. You should address a proposal to Secretary, Wolverine World Wide, Inc., 9341 Courtland +Drive, NE, Rockford, Michigan 49351, and include the information and comply with the requirements set forth in those By-Laws, which the Company has posted on its website. SEC rules permit management to vote proxies in its discretion in certain +cases if the shareholder does not comply with this deadline, and in certain other cases notwithstanding the shareholder's compliance with this deadline. +VOTING SECURITIES +Shareholders of record at the close of business on March 4, 2024, are eligible to vote at the Annual Meeting. +The Company's voting securities consist of its $1.00 par value common stock, and there were 79,910,836 shares outstanding and entitled to vote on the record date. Each share outstanding on the record date will be entitled to one vote on each +director nominee and one vote on each other matter. Treasury shares are not voted. Individual votes of shareholders are kept private, except as appropriate to meet legal requirements. Access to proxies and other individual shareholder voting +records is limited to the independent inspectors of election and certain employees of the Company and its agents who acknowledge their responsibility to comply with this policy of confidentiality. +2024 PROXY STATEMENT +89 +TABLE OF CONTENTS +CONDUCT OF BUSINESS +A majority of the outstanding shares of common stock as of the record date must be present at the Annual +Meeting in order to hold the Annual Meeting and conduct business. This is called a “quorum.” Your shares are counted as present at the meeting if you are present at the Annual Meeting and vote, a proxy card has been properly submitted by you or +on your behalf, or you have submitted your proxy by telephone or by internet, or by completing, signing, dating and returning your proxy form in the enclosed envelope. Both abstentions and broker non-votes (explained below in “ Vote Required for Election and Approval ”) are counted as present for the purpose of determining the presence of a quorum. +VOTE REQUIRED FOR ELECTION AND APPROVAL +For Proposal 1, Election of Directors for Terms Expiring in 2027, directors are elected by a majority of votes +cast unless the election is contested, in which case directors are elected by a plurality of votes cast. A majority of votes cast means that the number of shares voted “for” a Director nominee exceeds the number of votes cast “against” the +Director nominee. If an incumbent director in an uncontested election does not receive a majority of votes cast for his or her election, under the Company's Corporate Governance Guidelines, the director is required to submit a letter of +resignation to the Board for consideration by the Governance Committee. The Governance Committee will then make a recommendation to the Board as to whether to accept or reject the tendered resignation. The Governance Committee and the Board, in +making their decisions, may implement any procedures they deem appropriate and may consider any factor or other information that they deem relevant. The Board will then act on the tendered resignation, taking into account the Governance +Committee's recommendation, and will publicly disclose its decision regarding the resignation within 90 days after the results of the election are certified. A director whose resignation is under consideration shall abstain from participating in +any recommendation or decision regarding that resignation. If the resignation is not accepted, the director will continue to serve until the next annual meeting of shareholders at which such director faces re-election and until such director's +successor is elected and qualified. +Proposal 2, Advisory Vote to Approve Executive Compensation, requires the affirmative vote of a majority of +votes cast affirmatively or negatively on the matter for approval. +Proposal 3, Ratification of Appointment of Independent Registered Public Accounting Firm, requires the +affirmative vote of a majority of votes cast affirmatively or negatively on the matter for approval. +Proposal 4, Approval of the Stock Incentive Plan of 2024, requires the affirmative vote of a majority of votes +cast affirmatively or negatively on the matter for approval. +Generally, brokers holding shares must vote according to specific instructions they receive from the +beneficial owners of those shares. If brokers do not receive specific instructions, brokers may in some cases vote the shares in their discretion, but are not permitted to vote on certain proposals and may elect not to vote on any of the +proposals unless you provide voting instructions. If you do not provide voting instructions and the broker elects to vote your shares on some but not all matters, it will result in a “broker non-vote” for the matters on which the broker does not +vote. Abstentions occur when you provide voting instructions but instruct the broker to abstain from voting on a particular matter instead of voting for or against the matter. +Abstentions and broker non-votes are not considered “votes cast.” Abstentions and broker non-votes, if any, +will have no effect on the outcome of the election of directors and will have no effect on the outcome of any other matters proposed for a vote at the Annual Meeting. +VOTING RESULTS OF THE ANNUAL MEETING +The Company will announce preliminary voting results at the Annual Meeting and publish final results in a +Form 8-K within four business days following the Annual Meeting. If final results are not known within four business days of the Annual Meeting, then the Company will file a Current Report on Form 8-K with the preliminary results and file an +amended Current Report on Form 8-K within four business days of the availability of the final results. +2024 PROXY STATEMENT +90 +TABLE OF CONTENTS +ATTENDING THE ANNUAL MEETING +You may vote shares held directly in your name as the shareholder of record at the Annual Meeting. If you +choose to vote at the meeting, please access instructions as set forth in the Notice of annual meeting. Even if you plan to attend the Annual Meeting, Wolverine Worldwide recommends that you vote your shares in advance as described below so that +your vote will be counted if you later decide not to attend the Annual Meeting. You may vote shares held in “street name” through a brokerage account or by a bank or other nominee if you obtain a proxy from the record holder giving you the right +to vote the shares. Each shareholder may appoint only one proxy holder or representative to attend the meeting on his or her behalf. +MANNER FOR VOTING PROXIES +The shares represented by all valid proxies received by telephone, by internet or by mail will be voted in the +manner specified. Where the shareholder has not indicated a specific choice, the shares represented by all valid proxies received will be voted in accordance with the Board's recommendations as follows: (1) for each of the nominees for directors +named earlier in this Proxy Statement, (2) for approval of the advisory resolution to approve executive compensation, (3) for ratification of the appointment of the independent registered public accounting firm and (4) for the approval of the +Stock Incentive Plan of 2024. The Board has not received timely notice of any other matter that may come before the Annual Meeting. However, should any matter not described above be properly presented at the Annual Meeting, the persons named in +the proxy form will vote in accordance with their judgment, as permitted. +REVOCATION OF PROXIES +A shareholder who gives a proxy may revoke it at any time before it is exercised by voting at the Annual +Meeting in the manner described in the Notice of 2024 Annual Meeting of Shareholders, by delivering a subsequent proxy or by notifying the inspectors of election in writing of such revocation. +SOLICITATION OF PROXIES +The accompanying proxy is solicited by and on behalf of the Board, and the Company will pay the expenses of +solicitation of proxies for the Annual Meeting. Solicitations may be made in person or by telephone, by officers and employees of the Company, or by nominees or other fiduciaries who may mail materials to or otherwise communicate with the +beneficial owners of shares held by the nominees or other fiduciaries. These individuals will not be paid any additional compensation for any such solicitation. Upon request, the Company will reimburse brokers, dealers, banks and trustees, or +their nominees, for reasonable expenses incurred by them in forwarding material to beneficial owners of the Company's common stock. +DELIVERY OF DOCUMENTS TO SHAREHOLDERS SHARING AN ADDRESS +If you are the beneficial owner, but not the record holder, of shares of Wolverine Worldwide stock, your +broker, bank or other nominee may only deliver one copy of this Proxy Statement and the Company's 2023 Annual Report to multiple shareholders who share an address, unless that nominee has received contrary instructions from one or more of the +shareholders. The Company will deliver promptly, upon written or oral request, a separate copy of this Proxy Statement and its 2023 Annual Report to a shareholder at a shared address to which a single copy of the documents was delivered. A +shareholder who wishes to receive a separate copy of the Proxy Statement and annual report, now or in the future, or shareholders who share an address and receive multiple copies of the Proxy Statement and annual report but would like to receive +a single copy, should submit this request to Broadridge Financial Solutions, Inc. at 1-866-540-7095 or in writing at Broadridge, Householding Department, 51 Mercedes Way, Edgewood, New York 11717. Beneficial owners sharing an address who are +receiving multiple copies of proxy materials and who wish to receive a single copy of such materials in the future should make a request directly to their broker, bank or other nominee. +ACCESS TO PROXY STATEMENT AND ANNUAL REPORT +Distribution of this Proxy Statement and enclosed proxy card to shareholders is scheduled to begin on or about +March 20, 2024. Wolverine Worldwide's financial statements for the fiscal year ended December 30, 2023, are included in the Company's 2023 Annual Report, which the Company is providing to shareholders at the same time as this Proxy Statement. +Wolverine Worldwide's Proxy Statement for the 2024 Annual Meeting and the Annual Report to Shareholders for the fiscal year ended December 30, 2023 are available at www.wolverineworldwide.com/2024annualmeeting . +If you have not received or do not have access to the 2023 Annual Report, write to: Wolverine World Wide, Inc., 9341 Courtland Drive, NE, Rockford, Michigan 49351, Attn: Investor Relations or call (616) 866-5500 and ask for Investor Relations, +and the Company will send a copy to you without charge. +2024 PROXY STATEMENT +91 +TABLE OF CONTENTS +APPENDIX A +APPENDIX A – Forward-Looking +Statements and Non-GAAP Reconciliation Tables +2024 PROXY STATEMENT +A-1 +TABLE OF CONTENTS +APPENDIX A +FORWARD-LOOKING STATEMENTS +This document contains “forward-looking statements,” which are statements relating to future, not past, events, +including without limitation, statements relating to: the Company's plans to build a foundation for sustainable growth, expand operating margin, generate strong cash flow, invest in elevated brand marketing and key strategic capabilities, and +improve profitability; and the benefits of the Company’s corporate structure. In this context, forward-looking statements often address management’s current beliefs, assumptions, expectations, estimates and projections about future business and +financial performance, national, regional or global political, economic and market conditions, and the Company itself. Such statements often contain words such as “anticipates,” “believes,” “estimates,” “expects,” “forecasts,” “intends,” “is +likely,” “plans,” “predicts,” “projects,” “should,” “will,” variations of such words, and similar expressions. Forward-looking statements, by their nature, address matters that are, to varying degrees, uncertain. Uncertainties that could cause +the Company’s performance to differ materially from what is expressed in forward-looking statements include, but are not limited to, the following: +• +changes in general economic conditions, employment rates, business conditions, interest rates, tax policies and other factors affecting consumer +spending in the markets and regions in which the Company’s products are sold; +• +the inability for any reason to effectively compete in global footwear, apparel and direct-to-consumer markets; +• +the inability to maintain positive brand images and anticipate, understand and respond to changing footwear and apparel trends and consumer preferences; +• +the inability to effectively manage inventory levels; +• +increases or changes in duties, tariffs, quotas or applicable assessments in countries of import and export; +• +foreign currency exchange rate fluctuations; +• +currency restrictions; +• +supply chain and capacity constraints, production disruptions, including reduction in operating hours, labor shortages, and facility closures resulting +in production delays at the Company’s manufacturers, quality issues, price increases or other risks associated with foreign sourcing; +• +the cost, including the effect of inflationary pressures and availability of raw materials, inventories, services and labor for contract manufacturers; +• +labor disruptions; +• +changes in relationships with, including the loss of, significant wholesale customers; +• +risks related to the significant investment in, and performance of, the Company’s direct-to-consumer operations; +• +risks related to expansion into new markets and complementary product categories as well as direct-to-consumer operations; +• +the impact of seasonality and unpredictable weather conditions; +• +the impact of changes in general economic conditions and/or the credit markets on the Company’s manufacturers, distributors, suppliers, joint venture +partners and wholesale customers; +• +changes in the Company’s effective tax rates; +• +failure of licensees or distributors to meet planned annual sales goals or to make timely payments to the Company; +• +the risks of doing business in developing countries and politically or economically volatile areas; +• +the ability to secure and protect owned intellectual property or use licensed intellectual property; +2024 PROXY STATEMENT +A-2 +TABLE OF CONTENTS +APPENDIX A +• +the impact of regulation, regulatory and legal proceedings and legal compliance risks, including compliance with federal, state and local laws and +regulations relating to the protection of the environment, environmental remediation and other related costs, and litigation or other legal proceedings relating to the protection of the environment or environmental effects on human +health; +• +risks of breach of the Company’s databases or other systems, or those of its vendors, which contain certain personal information, payment card data or +proprietary information, due to cyberattack or other similar events; +• +problems affecting the Company's supply chain and distribution system, including service interruptions at shipping and receiving ports; +• +strategic actions, including new initiatives and ventures, acquisitions and dispositions, and the Company’s success in integrating acquired businesses, +including Sweaty Betty®, and implementing new initiatives and ventures; +• +risks related to stockholder activism; +• +the potential effects of outbreaks of COVID-19 or future health crises on the Company’s business, operations, financial results and liquidity; +• +the risk of impairment to goodwill and other intangibles; +• +the success of the Company’s restructuring and realignment initiatives undertaken from time to time; and +• +changes in future pension funding requirements and pension expenses. +These or other uncertainties could cause a material difference between an actual outcome and a forward-looking +statement. The uncertainties included here are not exhaustive and are described in more detail in Part I, Item 1A: “Risk Factors” of the Annual Report on Form 10-K. Given these risks and uncertainties, investors should not place undue reliance on +forward-looking statements as a prediction of actual results. The Company does not undertake an obligation to update, amend or clarify forward-looking statements, whether as a result of new information, future events or otherwise. Any standards +of measurement and performance made in reference to our environmental, social, governance and other sustainability plans and goals are developing and based on assumptions, and no assurance can be given that any such plan, initiative, projection, +goal, commitment, expectation or prospect can or will be achieved. +2024 PROXY STATEMENT +A-3 +TABLE OF CONTENTS +APPENDIX A +NON-GAAP RECONCILIATION TABLES +The following table contains information regarding the non-GAAP adjustments used by the Company in the +presentation of its financial results: +RECONCILIATION OF REPORTED EARNINGS (LOSS) BEFORE INCOME TAXES +TO ADJUSTED EARNINGS (LOSS) BEFORE INCOME TAXES (PRE-TAX INCOME)* +(Unaudited) +(In millions) +GAAP Basis +Adjustments (1) +As Adjusted +Earnings (loss) before income taxes - Fiscal 2023 +$(134.2) +$139.0 +$ 4.8 +Earnings (loss) before income taxes - Fiscal 2022 +$ (252.9 ) +$386.0 +$133.1 +Earnings (loss) before income taxes - Fiscal 2021 +$ 80.3 +$111.2 +$191.5 +Earnings (loss) before income taxes - Fiscal 2020 +$ (184.1 ) +$276.5 +$ 92.4 +(1) +2023 adjustments reflect $185.3 million for non-cash impairments of long-lived assets, $50.8 million +of reorganization costs, $5.5 million of costs associated with divestitures, partially offset by $90.4 million gain on the sale of businesses, trademarks and long-lived assets, $10.4 million of environmental and other related costs net +of recoveries, $1.0 million SERP curtailment gain and $0.8 million earnings associated with the Keds business and Wolverine Leathers business results included in the consolidated condensed statement of operations. 2022 adjustments +reflect $428.7 million for a non-cash impairment of the Sperry® trade name and the Sweaty Betty® trade +name and goodwill, $9.1 million for reorganization costs, $33.7 million of environmental and other related costs net of recoveries, $3.7 million of costs associated with Sweaty +Betty® integration and $0.8 million of receivables securitization transaction costs, partially offset by $90.0 gain on the sale of the Champion trademarks. 2021 adjustments reflect $56.4 million of environmental and other related costs net of recoveries, $34.3 million of debt extinguishment costs, $18.7 million of costs associated with the acquisition +of Sweaty Betty® and $1.8 million for non-cash impairment related to one of the Company's joint ventures. 2020 adjustments reflect +$222.2 million for a non-cash impairment of the Sperry® trade name, $37.7 million of expenses related to the COVID-19 pandemic including +$10.9 million of severance expenses, $8.5 million of credit loss expenses, $4.9 million of inventory charges, $3.9 million of air freight charges related to production delays, $3.6 million of facility exit costs and $5.9 million of +other costs, $5.5 million of debt extinguishment costs and $11.1 million of environmental and other related costs net of recoveries. +To supplement the consolidated condensed financial statements presented in accordance with Generally Accepted +Accounting Principles (“GAAP”), the Company describes what earnings would have been if environmental and other related costs net of recoveries, non-cash impairments of assets and goodwill, SERP curtailment gain, earnings associated with the Keds +and Wolverine Leathers businesses included in the 2023 consolidated condensed statement of operation, Sweaty Betty® integration costs, reorganization costs, receivable securitization transaction costs, +costs associated with acquisitions and divestitures, debt extinguishment costs, non-cash impairment related to one of the Company's joint ventures, gains on the sale of businesses and assets and costs related to the COVID-19 pandemic including +air freight costs, credit loss expenses, severance expenses and other related costs were excluded. The Company believes this non-GAAP measure provides useful information to both management and investors by increasing comparability to the prior +period by adjusting for certain items that may not be indicative of core operating measures and to better identify trends in the Company's business. The adjusted financial results are used by management to, and allow investors to, evaluate the +operating performance of the Company on a comparable basis. +Management does not, nor should investors, consider non-GAAP financial measures in isolation from, or as a +substitution for, financial information prepared in accordance with GAAP. A reconciliation of all non-GAAP measures included in this Proxy Statement, to the most directly comparable GAAP measures are found in the financial tables above. +2024 PROXY STATEMENT +A-4 +TABLE OF CONTENTS +APPENDIX B +APPENDIX B +WOLVERINE WORLD WIDE, INC. STOCK INCENTIVE PLAN OF 2024 (EFFECTIVE AS OF MAY 2, 2024) +1. Purpose +The purpose of the Wolverine World Wide, Inc. Stock Incentive Plan of 2024 (as it may be amended or amended and +restated from time to time, the “Plan”) is to advance the interests of Wolverine World Wide, Inc. (the “Company”) by stimulating the efforts of employees, officers, non-employee directors and other service providers, in each case who are selected +to be participants, by heightening the desire of such persons to continue working toward and contributing to the success and progress of the Company. The Plan supersedes the Company's Stock Incentive Plan of 2010 (the “2010 Plan”), the Company's +Amended and Restated Stock Incentive Plan of 2013 (the “2013 Plan”), and the Company’s Stock Incentive Plan of 2016, as amended and restated (the “2016 Plan” and together with the 2010 Plan and the 2013 Plan, the “Prior Plans”), with respect to +future awards, and provides for the grant of Incentive and Nonqualified Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units and Stock Awards, any of which may be performance-based, and for Incentive Bonuses, which +may be paid in cash or stock or a combination thereof, as determined by the Administrator. No new awards shall be issued under the Prior Plans after the date the Plan is approved by the Company's stockholders. +2. Definitions +As used in the Plan, the following terms shall have the meanings set forth below: +(a) +“Act” means the Securities Exchange Act of 1934, as amended from time to time and in effect, or any successor statute as from time to time. +(b) +“Act of Misconduct” means an act of embezzlement, fraud, dishonesty, nonpayment of any obligation owed to the Company or any Subsidiary, breach of +fiduciary duty, or deliberate disregard of the Company or Subsidiary rules resulting in loss, damage or injury to the Company or any Subsidiary, or if a Participant makes an unauthorized disclosure of any Company or Subsidiary trade +secret or confidential information, solicits any employee or service provider to leave the employ or cease providing services to the Company or any Subsidiary, breaches any intellectual property or assignment of inventions covenant, +engages in any conduct constituting unfair competition, breaches any non-competition agreement (to the extent enforceable under applicable law), induces any Company or Subsidiary customer to breach a contract with the Company or any +Subsidiary or to cease doing business with the Company or any Subsidiary, or induces any principal for whom the Company or any Subsidiary acts as agent to terminate such agency relationship in effect. +(c) +“Administrator” means the Administrator of the Plan in accordance with Section 19 of the Plan. +(d) +“Award” means an Incentive Stock Option, Nonqualified Stock Option, Stock Appreciation Right, share of Restricted Stock, Restricted Stock Unit, Stock +Award or Incentive Bonus granted to a Participant pursuant to the provisions of the Plan, any of which the Administrator may structure to qualify in whole or in part as a Performance Award. +(e) +“Award Agreement” means a written agreement or other instrument as may be approved from time to time by the Administrator implementing the grant of each +Award. An Award Agreement may be in the form of an agreement to be executed by both the Participant and the Company (or an authorized representative of the Company) or certificates, notices or similar instruments (which do not need to be +executed) as approved by the Administrator +(f) +“Board” means the board of directors of the Company. +2024 PROXY STATEMENT +B-1 +TABLE OF CONTENTS +(g) +“Cause” means, in the case of any Participant who is party to an employment or severance-benefit agreement that contains a definition of “Cause,” the +definition set forth in such agreement will apply with respect to such Participant under the Plan for so long as such agreement remains in effect; if a Participant is party to multiple such agreements, any Cause determination must meet +the standards of all such agreements to qualify as for Cause under this Plan. In the case of any other Participant, “Cause” means (i) a substantial failure of the Participant to perform the Participant's duties and responsibilities to the +Company or its Subsidiaries or substantial negligence in the performance of such duties and responsibilities; (ii) the commission by the Participant of a felony or a crime involving moral turpitude; (iii) the commission by the Participant +of theft, fraud, embezzlement, material breach of trust or any material act of dishonesty involving the Company or any of its Subsidiaries, including, but not limited to, any Act of Misconduct; (iv) a significant violation by the +Participant of the code of conduct of the Company or its Subsidiaries of any material policy of the Company or its Subsidiaries, or of any statutory or common law duty of loyalty to the Company or its Subsidiaries, including, but not +limited to, any Act of Misconduct; or (v) a material breach of any of the terms of the Plan or any Award made under the Plan, or of the terms of any other agreement between the Company or subsidiaries and the Participant. +(h) +“Change in Control” unless otherwise defined in an Award Agreement, means (i) the failure of the Continuing Directors at any time to constitute at least +a majority of the members of the Board; (ii) the acquisition by any Person other than an Excluded Holder of beneficial ownership (within the meaning of Rule 13d-3 issued under the Act) of twenty percent (20%) or more of the outstanding +Shares or the combined voting power of the Company's outstanding securities entitled to vote generally in the election of directors; (iii) the consummation of a reorganization, merger, or consolidation of the Company, unless such +reorganization, merger or consolidation is with or into a Permitted Successor and clauses (i), (ii), or (iv) of this Section 2(h) have not been triggered; or (iv) a complete liquidation or dissolution of the Company or the sale or +disposition of all or substantially all of the assets of the Company other than to a Permitted Successor. +Notwithstanding the foregoing, in any case where the occurrence of a Change in Control could affect the +vesting of or payment under an Award subject to the requirements of Section 409A of the Code, to the extent required to comply with Section 409A of the Code, the term “Change in Control” shall mean an occurrence that both (i) satisfies the +requirements set forth above in this definition and (ii) is a “change in control event” as that term is defined in the regulations under Section 409A of the Code. +(i) +“Code” means the Internal Revenue Code of 1986, as amended from time to time and in effect, or any successor statute as from time to time in effect, and +the rulings and regulations issued thereunder. +(j) +“Company” means Wolverine World Wide, Inc., a Delaware corporation. +(k) +“Continuing Directors” mean the individuals constituting the Board as of the date this Plan was adopted and any subsequent directors whose election or +nomination for election by the Company's stockholders was approved by a vote of three-quarters ( 3 ∕ 4 ) of the individuals who are then Continuing Directors, but specifically excluding any +individual whose initial assumption of office occurs as a result of either an actual or threatened solicitation subject to Rule 14a-12(c) of Regulation 14A issued under the Act or other actual or threatened solicitation of proxies or +consents by or on behalf of a Person other than the Board. +(l) +“Determination Period” means the fourteen (14) day period following a Termination of Employment by a Participant. +(m) +“Disability” has the meaning set forth in the Company's long-term disability plan. The determination of the Administrator as to an individual's +Disability shall be conclusive on all parties. +(n) +“Employee Benefit Plan” means any plan or program established by the Company or a Subsidiary for the compensation or benefit of employees of the Company +or any of its Subsidiaries. +(o) +“Excluded Holder” means (i) any Person who at the time this Plan was adopted was the beneficial owner of twenty percent (20%) or more of the outstanding +Shares; or (ii) the Company, a Subsidiary or any Employee Benefit Plan of the Company or a Subsidiary or any trust holding Shares or other securities pursuant to the terms of an Employee Benefit Plan. +(p) +“Factors” means such considerations as would result in a determination by the Administrator that a Termination of Employment does not constitute a +Retirement, and shall include the Participant's: (i) inadequate job performance; (ii) inadequate notice of resignation; (iii) intention for comparable future employment at a third party organization; (iv) intention for future employment +or other service or advisory relationship with a competitor of the Company; or (iv) any other similar consideration. +(q) +“Fair Market Value” means, as of any date, the closing price per share at which the Shares are sold in the regular way on the New York Stock Exchange +(or any successor exchange that is the primary stock exchange for trading of Shares) or, if no Shares are +2024 PROXY STATEMENT +B-2 +TABLE OF CONTENTS +traded on the New York Stock Exchange (or any successor exchange that is the primary stock exchange for +trading of Shares) on the date in question, then for the next preceding date for which Shares were traded on the New York Stock Exchange (or any successor exchange that is the primary stock exchange for trading of Shares). +(r) +“Good Reason” means, in the case of a Participant who is party to an employment or other severance-benefit agreement that contains a definition of “Good +Reason,” the definition set forth in such agreement will apply with respect to such Participant under the Plan so long as such agreement remains in effect; provided, however, that if the Participant is party to multiple such agreements, +“Good Reason” under any such agreement shall count as “Good Reason” for purposes of this Plan. If the Participant is not party to any such agreement, “Good Reason” shall mean any of the following, with the below notice provision applying: +(i) a reduction in the Participant's base salary, annual bonus opportunity, or long-term incentive opportunity below the level in effect immediately prior to a Change in Control; (ii) failure by the Company or its Subsidiaries to pay +amounts owed to the Participant as salary, bonus, deferred compensation or other compensation; (iii) any material adverse change to the Participant's position, duties, responsibilities, reporting responsibilities or title from that or +those in effect immediately prior to a Change in Control; or (iv) any requirement that the Participant be based at a location that is more than twenty-five (25) miles from his or her regular place of employment immediately prior to a +Change in Control, unless such change results in a shorter commute for the Participant. Notwithstanding the foregoing, no Termination of Employment shall be for Good Reason unless (i) such Termination of Employment occurs during the +twenty-four (24) month period following a Change in Control and (ii) the Participant gives the Company written notice within ninety (90) days of the Participant obtaining knowledge of circumstances giving rise to Good Reason (describing +in reasonable detail the circumstances and the Good Reason event that has occurred) and the Company does not remedy these circumstances within thirty (30) days of receipt of such notice and the Participant terminates employment not later +than thirty (30) days thereafter. +(s) +“Gross Share Reserve” means the total number of Shares reserved and available for grant and issuance pursuant to Section 5(a) of this Plan, subject to +adjustment pursuant to Sections 5(b) and 13. +(t) +“Incentive Bonus” means a bonus opportunity awarded under Section 10 of the Plan pursuant to which a Participant may become entitled to receive an +amount based on satisfaction of such performance criteria as are specified in the Award Agreement or otherwise. +(u) +“Incentive Stock Option” means a stock option that is intended to qualify as an “incentive stock option” within the meaning of Section 422 of the Code. +(v) +“Nonemployee Director” means each person who is, or is elected to be, a member of the Board and who is not an employee of the Company or any Subsidiary. +(w) +“Nonqualified Stock Option” means a stock option that is not intended to qualify as an “incentive stock option” within the meaning of Section 422 of the +Code. Each stock option granted pursuant to the Plan will be treated as providing by its terms that it is to be a Nonqualified Stock Option unless, as of the date of grant, it is expressly designated as an Incentive Stock Option. +(x) “Option” means an Incentive Stock Option and/or a Nonqualified Stock Option granted pursuant to Section 6 of +the Plan. +(y) +“Participant” means any individual described in Section 3 of the Plan to whom Awards have been granted from time to time by the Administrator and any +authorized transferee of such individual. +(z) +“Performance Award” means an Award, the grant, issuance, retention, vesting or settlement of which is subject to satisfaction of one or more +performance-based criteria established pursuant to Section 14 of the Plan or otherwise by the Administrator. +(aa) +“Permitted Successor” means a company that, immediately following the consummation of a transaction specified in clauses (iii) and (iv) of the +definition of “Change in Control” above, satisfies each of the following criteria: (i) 50% or more of the outstanding common stock of the company and the combined voting power of the outstanding securities of the company entitled to vote +generally in the election of directors (in each case determined immediately following the consummation of the applicable transaction) is beneficially owned, directly or indirectly, by all or substantially all of the Persons who were the +beneficial owners of the Company's outstanding Shares and outstanding securities entitled to vote generally in the election of directors (respectively) immediately prior to the applicable transaction; (ii) no Person other than an Excluded +Holder beneficially owns, directly or indirectly, 20% or more of the outstanding common stock of the company or the combined voting power of the outstanding securities of the company entitled to vote generally in the election of directors +(for these purposes the term Excluded Holder shall +2024 PROXY STATEMENT +B-3 +TABLE OF CONTENTS +include the company, any subsidiary of the company and any employee benefit plan of the company or any such +subsidiary or any trust holding common stock or other securities of the company pursuant to the terms of any such employee benefit plan); and (iii) at least a majority of the board of directors of the company is comprised of Continuing Directors. +(bb) +“Person” has the same meaning as set forth in Sections 13(d) and 14(d)(2) of the Act. +(cc) +“Restricted Stock” means Shares granted pursuant to Section 8 of the Plan. +(dd) +“Restricted Stock Unit” means an Award granted to a Participant pursuant to Section 8 of the Plan that is an unfunded and unsecured promise pursuant to +which Shares or cash in lieu thereof may be issued in the future. +(ee) +“Retirement” means the voluntary Termination of Employment by a Participant after the Participant has attained 59 years of age and ten years of service +(as a director and/or an employee of the Company or a Subsidiary, provided, for the avoidance of doubt, that any service by a Participant for a Subsidiary prior to the time when such Subsidiary is owned directly or indirectly by the +Company shall be disregarded for purposes of a “Retirement” determination hereunder), absent a determination to the contrary by the Administrator (after taking into consideration the Factors) within the Determination Period; Retirement +shall be deemed to occur on the date immediately following the last day of the Determination Period in the absence of a determination to the contrary by the Administrator. +(ff) +“Share” means a share of the Company's common stock, par value $1.00, subject to adjustment as provided in Section 13 of the Plan. +(gg) +“Stock Appreciation Right” means a right granted pursuant to Section 7 of the Plan that entitles the Participant to receive, in cash or Shares or a +combination thereof, as determined by the Administrator, value equal to or otherwise based on the excess of (i) the Fair Market Value of a specified number of Shares at the time of exercise over (ii) the exercise price of the right, as +established by the Administrator on the date of grant. +(hh) +“Stock Award” means an award of Shares to a Participant pursuant to Section 9 of the Plan. +(ii) +“Subsidiary” means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company where each of the +corporations in the unbroken chain other than the last corporation owns stock possessing at least 50 percent or more of the total combined voting power of all classes of stock in one of the other corporations in the chain, and if +specifically determined by the Administrator in the context other than with respect to Incentive Stock Options, may include an entity in which the Company has a significant ownership interest or that is directly or indirectly controlled +by the Company. +(jj) +“Substitute Awards” means Awards granted or Shares issued by the Company in assumption of, or in substitution or exchange for, awards previously +granted, or the right or obligation to make future awards, by a company acquired by the Company or any Subsidiary or with which the Company or any Subsidiary combines. +(kk) +“Termination of Employment” means ceasing to serve as a full-time employee of the Company and its Subsidiaries or, with respect to a Nonemployee +Director or other service provider, ceasing to serve as such for the Company, except that with respect to all or any Awards held by a Participant (i) the Administrator may determine, subject to Section 6(d) of the Plan, that an approved +leave of absence or approved employment on a less than full-time basis is not considered a Termination of Employment; (ii) the Administrator may determine that a transition of employment to service with a partnership, joint venture or +corporation not meeting the requirements of a Subsidiary in which the Company or a Subsidiary is an equity owner is not considered a Termination of Employment; (iii) unless otherwise determined by the Administrator, service as a member of +the Board or other service provider shall not constitute continued employment with respect to Awards granted to a Participant while he or she served as an employee; and (iv) service as an employee of the Company or a Subsidiary shall +constitute continued employment with respect to Awards granted to a Participant while he or she served as a member of the Board or other service provider. The Administrator shall determine whether any corporate transaction, such as a sale +or spin-off of a division or subsidiary that employs a Participant, shall be deemed to result in a Termination of Employment with the Company and its Subsidiaries for purposes of any affected Participant's Awards, and the Administrator's +decision shall be final and binding. +3. Eligibility +Any person who is a current or, to the extent consistent with Section 409A of the Code, prospective officer or +employee of the Company or of any Subsidiary shall be eligible for selection by the Administrator for the grant of Awards hereunder. In addition, Nonemployee Directors and any other service providers who have been retained to provide consulting, +advisory or other services to the Company or to any Subsidiary shall +2024 PROXY STATEMENT +B-4 +TABLE OF CONTENTS +be eligible for the grant of Awards hereunder as determined by the Administrator. Options intending to +qualify as Incentive Stock Options may only be granted to employees of the Company or any subsidiary of the Company within the meaning of the Code, as selected by the Administrator. Eligibility for Options other than Incentive Stock Options is +limited to individuals described this Section 3 who are providing direct services on the date of grant of the Option (or it is reasonably anticipated that the individuals will begin to provide direct services) to the Company or to a subsidiary of +the Company that would be described in the first sentence of Treasury Regulation § 1.409A-1(b)(5)(iii)(E). +4. Effective Date, Approval Date and Termination of Plan +The Plan was adopted by the Board on March 7, 2024 (the “Approval Date”), subject to approval by the Company’s +stockholders. The Plan will become effective upon the approval of this Plan by the stockholders of the Company at the Company’s Annual Meeting of Shareholders scheduled for May 2, 2024 (if so approved, the “Effective Date”) by the affirmative +vote of the holders of a majority of the outstanding Shares of the Company present, or represented by proxy, and entitled to vote, at such meeting or by written consent in accordance with the laws of the State of Delaware; and, if such approval +is not so obtained, the Plan shall be terminated and no Awards will be issued hereunder. The Plan shall remain available for the grant of Awards until the tenth (10th) anniversary of the Approval Date. Notwithstanding the foregoing, the Plan may +be terminated at such earlier time as the Board may determine. Termination of the Plan will not affect the rights and obligations of the Participants and the Company arising under Awards theretofore granted and then in effect. +5. Shares Subject to the Plan and to Awards +(a) +Aggregate Limits. Subject to adjustment as provided in Sections 5(b) and 13, the number of Shares that shall be +authorized for grant under the Plan shall equal a total of (i) 3,300,000 Shares, plus (ii) any Shares that, as of the Effective Date, remain available for future grant (and not subject to outstanding awards) under the 2016 Plan. Any +Shares granted under Awards shall be counted against this limit on a one-for-one basis. The Shares issued pursuant to Awards granted under this Plan may be shares that are authorized and unissued or shares that were reacquired by the +Company, including shares purchased in the open market. No fractional Shares will be delivered under the Plan. The aggregate number of Shares that may be issued pursuant to the exercise of Incentive Stock Options granted under this Plan +shall not exceed 3,300,000, which aggregate number shall be calculated and adjusted pursuant to Section 13 of the Plan only to the extent that such calculation or adjustment will not affect the status of any option intended to qualify as +an Incentive Stock Option under Section 422 of the Code. +(b) +Issuance of Shares. For purposes of Section 5(a) and Section 5(e) of the Plan, the aggregate number of Shares +issued under this Plan at any time shall equal only the number of Shares actually issued upon exercise or settlement of an Award. If after the Effective Date (i) any Shares subject to an Award are forfeited, an Award expires or an Award +is settled for cash (in whole or in part), or (ii) any Shares subject to an award under the Prior Plans are forfeited, or an award under the Prior Plans expires or is settled for cash (in whole or in part), the Shares subject to such +Award or award under the Prior Plans shall, to the extent of such forfeiture, expiration or cash settlement, again be available for future Awards under the Plan. Notwithstanding the foregoing, Shares subject to an Award under the Plan may +not again be made available for issuance under the Plan if such Shares are: (i) Shares that were subject to a stock-settled Stock Appreciation Right (or after the Effective Date, a stock appreciation right granted under a Prior Plan) and +were not issued upon the net settlement or net exercise of such Stock Appreciation Right (or after the Effective Date, a stock appreciation right granted under a Prior Plan); (ii) Shares used to pay the exercise price of an Option (or +after the Effective Date, an option granted under a Prior Plan) or the purchase price, if any, for an Award (or after the Effective Date, an award granted under a Prior Plan); (iii) Shares delivered to or withheld by the Company to pay +the withholding taxes related an Award (or after the Effective Date, an award granted under a Prior Plan); or (iv) Shares repurchased on the open market with the proceeds of an Option (or after the Effective Date, an option granted under +a Prior Plan) exercise. +(c) +Director Awards. Notwithstanding any other provision of the Plan to the contrary, the aggregate grant date fair +value of Awards (computed as of the date of grant in accordance with applicable financial accounting rules) granted under this Plan during any calendar year to any one Nonemployee Director shall not exceed $600,000. +(d) +Substitute Awards. Substitute Awards shall not reduce the Shares authorized for issuance under the Plan or +authorized for grant to a Participant in any calendar year. Additionally, in the event that a company acquired by the Company or any Subsidiary, or with which the Company or any Subsidiary combines, has shares available under a +pre-existing plan approved by stockholders and not adopted in contemplation of such acquisition or combination, the shares available for grant pursuant to the terms of such pre-existing plan (as adjusted, to the extent appropriate, using +the exchange ratio or other adjustment or valuation ratio or formula used in such acquisition or combination to determine the consideration payable to the holders of common stock of the entities party to such acquisition or combination) +may be used for Awards under the Plan and shall not reduce the Shares authorized for issuance under the Plan; provided, however, that Awards using such available shares shall not be made after the date awards or grants could have been +made under the terms +2024 PROXY STATEMENT +B-5 +TABLE OF CONTENTS +of the pre-existing plan, absent the acquisition or combination, and shall only be made to individuals who +were employees, directors or other service providers of such acquired or combined company before such acquisition or combination and shall be subject to such other terms and limitations as required by the stock exchange on which the Shares are +then listed or traded. +(e) +Award Vesting/Exercisability/Distribution Limitations. Notwithstanding any other provision of the Plan to the +contrary, equity-based Awards granted under the Plan shall vest no earlier than the first anniversary of the date the Award is granted (excluding, for this purpose, any (i) Substitute Awards, (ii) Shares delivered in lieu of fully earned +Nonemployee Director cash compensation obligations, and (iii) Awards to Nonemployee Directors that vest on the earlier of the one year anniversary of the date of grant or the next annual meeting of stockholders which is at least 50 weeks +after the immediately preceding year’s annual meeting); provided, that, the Administrator may grant equity-based Awards without regard to the foregoing minimum vesting requirement with respect to a maximum of five percent (5%) of the +Gross Share Reserve; and, provided further, for the avoidance of doubt, that the foregoing restriction does not apply to the Administrator’s discretion to provide for accelerated exercisability or vesting of any Award, including in cases +of retirement, death, disability or a Change in Control, in the terms of the Award or otherwise. +6. Options +(a) +Option Awards. Options may be granted at any time and from time to time prior to the termination of the Plan to +Participants as determined by the Administrator. No Participant shall have any rights as a stockholder with respect to any Shares subject to Options hereunder until such Shares have been issued. Each Option shall be evidenced by an Award +Agreement. Options granted pursuant to the Plan need not be identical but each Option must contain and be subject to the terms and conditions set forth below. +(b) +Price. The Administrator will establish the exercise price per Share under each Option, which in no event will +be less than the Fair Market Value of the Shares on the date of grant; provided, however, that the exercise price per Share with respect to an Option that is granted in connection with a merger or other acquisition as a substitute or +replacement award for options held by optionees of the acquired entity may be less than 100% of the Fair Market Value of the Shares on the date such Option is granted if such exercise price is based on a formula set forth in the terms of +the options held by such optionees or in the terms of the agreement providing for such merger or other acquisition. The exercise price of any Option may be paid in Shares, cash or a combination thereof, as determined by the Administrator, +including an irrevocable commitment by a broker to pay over such amount from a sale of the Shares issuable under an Option, the delivery of previously owned Shares and withholding of Shares deliverable upon exercise, or in such other form +as is acceptable to the Administrator. +(c) +No Repricing Without Stockholder Approval. Other than in connection with a change in the Company's +capitalization (as described in Section 13 of the Plan), the Administrator may not, without prior approval of the Company's shareholders, seek to effect any repricing of any previously granted underwater Option by: (i) amending or +modifying the terms of the Option to lower the exercise price; (ii) canceling the underwater Option and granting either (A) replacement Options having a lower exercise price or (B) Restricted Stock, Restricted Stock Units, Performance +Awards or Stock Awards in exchange; or (iii) cancelling or repurchasing the underwater Options for cash or other securities. An Option will be deemed to be “underwater” at any time when the Fair Market Value of the Shares covered by such +Award is less than the exercise price of the Award. +(d) +Provisions Applicable to Options. Subject to Section 5(e), the date on which Options become exercisable shall +be determined at the sole and absolute discretion of the Administrator and set forth in an Award Agreement. Unless provided otherwise in the applicable Award Agreement, to the extent that the Administrator determines that an approved +leave of absence or employment on a less than full-time basis is not a Termination of Employment, the vesting period and/or exercisability of an Option shall be adjusted by the Administrator during or to reflect the effects of any period +during which the Participant is on an approved leave of absence or is employed on a less than full-time basis. No dividends or dividend equivalents shall be paid or granted in respect of Shares subject to Options and no holder of an +Option shall be entitled to any dividends with respect to the Shares subject to Options unless and until such Options have vested and have been exercised in accordance with the terms of the Plan and the applicable Award Agreement and such +Shares are reflected as issued and outstanding. +(e) +Term of Options and Termination of Employment. The Administrator shall establish the term of each Option, which +in no case shall exceed a period of ten (10) years from the date of grant. Unless an Option earlier expires upon the expiration date established pursuant to the foregoing sentence, upon the Participant's Termination of Employment, his or +her rights to exercise an Option then held shall be only as follows, unless the Administrator specifies otherwise: +2024 PROXY STATEMENT +B-6 +TABLE OF CONTENTS +(1) +General. If a Participant's Termination of Employment is for any reason other than the Participant's death, +Disability, Retirement or termination for Cause, Options granted to the Participant may continue to be exercised in accordance with their terms for the lesser of (i) a period of three (3) months after such Termination of Employment or +(ii) the period ending on the latest date on which such Options could have been exercised without regard to this Section 6(e)(1), but only to the extent the Participant was entitled to exercise the Options on the date of such termination. +(2) +Death. If a Participant dies either while an employee or officer of the Company or a Subsidiary or member of +the Board, or after the Termination of Employment other than for Cause but during the time when the Participant could have exercised an Option, the Options issued to such Participant shall become fully vested (in the case of Termination +of Employment due to death) and exercisable by the personal representative of such Participant or other successor to the interest of the Participant for the lesser of (i) a period of one (1) year after the Participant's death or (ii) the +period ending on the latest date on which such Options could have been exercised without regard to this Section 6(e)(2), but only to the extent the Participant was entitled to exercise the Options on the date of such termination. +(3) +Disability. If a Participant's Termination of Employment is due to Disability, then all of the Participant's +Options shall immediately fully vest, and the Options held by the Participant at the time of such Termination of Employment shall be exercisable by the Participant or the personal representative of such Participant for the lesser of (i) a +period of one (1) year after the Participant's Termination of Employment or (ii) the period ending on the latest date on which such Options could have been exercised without regard to this Section 6(e)(3), but only to the extent the +Participant was entitled to exercise the Options on the date of such termination. +(4) +Participant Retirement. Upon a Participant's Retirement as an employee of the Company and its Subsidiaries or +Retirement from service as a member of the Board, then all of the Participant's Options shall immediately fully vest, and the Options held by the Participant at the time of such Retirement shall be exercisable by the Participant or the +personal representative of such Participant during the remaining term of the Options. +(5) +Termination for Cause. If a Participant is terminated for Cause, the Participant shall have no further right to +exercise any Options previously granted. The Administrator or officers designated by the Administrator shall determine, in its or their reasonable discretion, whether a termination is for Cause. +(f) +Incentive Stock Options. Notwithstanding anything to the contrary in this Section 6, in the case of the grant +of an Option intending to qualify as an Incentive Stock Option: (i) if the Participant owns stock possessing more than 10 percent (10%) of the combined voting power of all classes of stock of the Company, the exercise price of such Option +must be at least 110 percent of the Fair Market Value of the Shares on the date of grant and the Option must expire within a period of not more than five (5) years from the date of grant and (ii) Termination of Employment will occur when +the person to whom an Award was granted ceases to be an employee (as determined in accordance with Section 3401(c) of the Code and the regulations promulgated thereunder) of the Company and its Subsidiaries. Notwithstanding anything in +this Section 6 to the contrary, options designated as Incentive Stock Options shall not be eligible for treatment under the Code as Incentive Stock Options (and will be deemed to be Nonqualified Stock Options) to the extent that either +(a) the aggregate Fair Market Value of Shares (determined as of the time of grant) with respect to which such Options are exercisable for the first time by the Participant during any calendar year (under all plans of the Company and any +Subsidiary) exceeds $100,000, taking Options into account in the order in which they were granted, or (b) such Options otherwise remain exercisable but are not exercised within three (3) months of Termination of Employment (as defined in +this subsection (f)) (or such other period of time provided in Section 422 of the Code). +7. Stock Appreciation Rights +(a) +General. Stock Appreciation Rights may be granted to Participants from time to time either in tandem with or as +a component of other Awards granted under the Plan (“tandem SARs”) or not in conjunction with other Awards (“freestanding SARs”) and may, but need not, relate to a specific Option granted under Section 6 of the Plan. The provisions of +Stock Appreciation Rights need not be the same with respect to each grant or each recipient. Any Stock Appreciation Right granted in tandem with an Award may be granted at the same time such Award is granted or at any time thereafter +before exercise or expiration of such Award. All freestanding SARs shall be granted subject to the same terms and conditions applicable to Options as set forth in Section 6 of the Plan and all tandem SARs shall have the same exercise +price, vesting, exercisability, forfeiture and termination provisions as the Award to which they relate. Subject to the provisions of Sections 5(e) and 6 of the Plan and the immediately preceding sentence, the Administrator may impose +such other conditions or restrictions on any Stock Appreciation Right as it shall deem appropriate. Stock Appreciation Rights may be settled in Shares, cash or a combination thereof, as determined by the Administrator and set forth in the +applicable Award Agreement. +2024 PROXY STATEMENT +B-7 +TABLE OF CONTENTS +(b) +No Repricing Without Stockholder Approval. Other than in connection with a change in the Company's +capitalization (as described in Section 13 of the Plan), the Administrator may not, without prior approval of the Company's shareholders, seek to effect any repricing of any previously granted underwater Stock Appreciation Right by: (i) +amending or modifying the terms of the Stock Appreciation Right to lower the exercise price; (ii) canceling the underwater Stock Appreciation Right and granting either (A) replacement Stock Appreciation Rights having a lower exercise +price or (B) Restricted Stock, Restricted Stock Units, Performance Awards or Stock Awards in exchange; or (iii) cancelling or repurchasing the underwater Stock Appreciation Rights for cash or other securities. A Stock Appreciation Right +will be deemed to be “underwater” at any time when the Fair Market Value of the Shares covered by such Award is less than the exercise price of the Award. +8. Restricted Stock and Restricted Stock Units +(a) +Restricted Stock and Restricted Stock Unit Awards. Restricted Stock and Restricted Stock Units may be granted +at any time and from time to time prior to the termination of the Plan to Participants as determined by the Administrator. Restricted Stock is an award or issuance of Shares the grant, issuance, retention, vesting and/or transferability +of which is subject during specified periods of time to such conditions (including continued employment or performance conditions) and terms as the Administrator deems appropriate. Restricted Stock Units are Awards denominated in units of +Shares under which the issuance of Shares is subject to such conditions (including continued employment or performance conditions) and terms as the Administrator deems appropriate. Each grant of Restricted Stock and Restricted Stock Units +shall be evidenced by an Award Agreement. Unless determined otherwise by the Administrator, each Restricted Stock Unit will be equal to one Share and will entitle a Participant to either the issuance of Shares or payment of an amount of +cash determined with reference to the value of Shares. To the extent determined by the Administrator, Restricted Stock and Restricted Stock Units may be satisfied or settled in Shares, cash or a combination thereof. Restricted Stock and +Restricted Stock Units granted pursuant to the Plan need not be identical but each grant of Restricted Stock and Restricted Stock Units must contain and be subject to the terms and conditions set forth below. +(b) +Contents of Agreement. Each Award Agreement shall contain provisions regarding (i) the number of Shares or +Restricted Stock Units subject to such Award or a formula for determining such number; (ii) the purchase price of the Shares, if any, and the means of payment; (iii) the performance criteria, if any, and level of achievement versus these +criteria that shall determine the number of Shares or Restricted Stock Units granted, issued, retainable and/or vested; (iv) such terms and conditions on the grant, issuance, vesting and/or forfeiture of the Shares or Restricted Stock +Units as may be determined from time to time by the Administrator; (v) the term of the performance period, if any, as to which performance will be measured for determining the number of such Shares or Restricted Stock Units; and +(vi) restrictions on the transferability of the Shares or Restricted Stock Units. Shares issued under a Restricted Stock Award may be issued in the name of the Participant and held by the Participant or held by the Company, in each case +as the Administrator may provide. +(c) +Vesting and Performance Criteria. Subject to Section 5(e), the grant, issuance, retention, vesting and/or +settlement of shares of Restricted Stock and Restricted Stock Units will occur when and in such installments as the Administrator determines or under criteria the Administrator establishes, which may include performance-based criteria +established pursuant to Section 14 of the Plan or otherwise by the Administrator. +(d) +Termination of Employment. Unless the Administrator provides otherwise: +(i) +General. In the event of Termination of Employment for any reason other than death, Disability or Retirement, +any Restricted Stock or Restricted Stock Units still subject in full or in part to restrictions at the date of such Termination of Employment shall automatically be forfeited and returned to the Company. +(ii) +Death, Retirement or Disability. In the event a Participant's Termination of Employment is because of death, +Disability or Retirement, the restrictions remaining on any or all Shares remaining subject to a Restricted Stock or Restricted Stock Unit Award shall lapse. +(e) +Discretionary Adjustments and Limits. Notwithstanding the satisfaction of any performance goals, the number of +Shares granted, issued, retainable and/or vested under an Award of Restricted Stock or Restricted Stock Units on account of either financial performance or personal performance evaluations may, to the extent specified in the Award +Agreement, be reduced, but not increased, by the Administrator on the basis of such further considerations as the Administrator shall determine. +(f) +Voting Rights. Unless otherwise determined by the Administrator, Participants holding shares of Restricted +Stock granted hereunder may exercise full voting rights with respect to those shares during the period of restriction. Participants shall have no voting rights with respect to Shares underlying Restricted Stock Units unless and until such +Shares are reflected as issued and outstanding shares on the Company's stock ledger. +2024 PROXY STATEMENT +B-8 +TABLE OF CONTENTS +(g) +Dividends and Distributions . +(i) +Participants in whose name Restricted Stock is granted shall be entitled to receive dividends and other distributions paid with respect to those Shares +only to the extent provided by the Administrator, in which case the Administrator will determine whether any such dividends or distributions will be automatically reinvested in additional shares of Restricted Stock and subject to the same +restrictions on transferability as the Restricted Stock with respect to which they were distributed or whether such dividends or distributions will be paid in cash. Shares underlying Restricted Stock Units shall be entitled to dividends +or dividend equivalents only to the extent provided by the Administrator. +(ii) +Notwithstanding the foregoing Section 8(g)(1), any cash or stock dividends and dividend equivalents with respect to Restricted Stock and Restricted +Stock Units will be withheld by the Company for the Participant's account and will be paid, if at all, (i) in the case of Restricted Stock, upon the satisfaction of any restrictions imposed on the Restricted Stock in respect of which the +dividends were paid (including, if applicable, the achievement of applicable performance measure(s)) and (ii) in the case of Restricted Stock Units, at the time the Shares and/or cash underlying such Restricted Stock Units is paid, and +any dividends deferred in respect of any Restricted Stock and Restricted Stock Units will be forfeited upon the forfeiture of such Restricted Stock and Restricted Stock Units. Any noncash dividends or distributions paid with respect to +Restricted Stock and Restricted Stock Units shall be subject to the same restrictions as those relating to the Restricted Stock and Restricted Stock Units. +(h) +Payment of Restricted Stock Units. In all events, unless payment with respect to a Restricted Stock Unit is +deferred in a manner consistent with Section 409A of the Code, the Shares and/or cash underlying such Restricted Stock Unit shall be paid to the Participant no later than two and one-half months following the end of the year in which the +Restricted Stock Unit is no longer subject to a substantial risk of forfeiture. +(i) +Legending of Restricted Stock. The Administrator may also require that certificates representing shares of +Restricted Stock be retained and held in escrow by a designated employee or agent of the Company or any Subsidiary until any restrictions applicable to shares of Restricted Stock so retained have been satisfied or lapsed. Any certificates +evidencing shares of Restricted Stock awarded pursuant to the Plan shall bear the following legend: +The shares represented by this certificate were issued subject to certain restrictions under the Wolverine +World Wide, Inc. Stock Incentive Plan of 2024 (the “Plan”). This certificate is held subject to the terms and conditions contained in a restricted stock agreement that includes a prohibition against the sale or transfer of the stock represented +by this certificate except in compliance with that agreement and that provides for forfeiture upon certain events. Copies of the Plan and the restricted stock agreement are on file in the office of the Secretary of the Company. +9. Stock Awards +(a) +Grant. Stock Awards may be granted at any time and from time to time prior to the termination of the Plan to +Participants as determined by the Administrator, consistent with the 5% limit set forth in Section 5(e) of the Plan. Stock Awards shall be subject to such terms and conditions, consistent with the other provisions of the Plan, as may be +determined by the Administrator. +(b) +Rights as a Stockholder. A Participant shall have all voting, dividend, liquidation and other rights with +respect to Shares issued to the Participant as a Stock Award under this Section 9 upon the Participant becoming the holder of record of the Shares granted pursuant to such Stock Award (and shall have no rights to dividends or dividend +equivalents prior to such time); provided, however, that the Administrator may impose such restrictions on the assignment or transfer of Shares awarded pursuant to a Stock Award as it considers appropriate. +10. Incentive Bonuses +(a) +General. Each Incentive Bonus Award will confer upon the Participant the opportunity to earn a future payment +tied to the level of achievement with respect to one or more performance criteria established for a performance period of not less than one year. +(b) +Incentive Bonus Document. Unless otherwise determined by the Administrator, the terms of any Incentive Bonus +will be set forth in an Award Agreement. Each Award Agreement evidencing an Incentive Bonus shall contain provisions regarding (i) the target and maximum amount payable to the Participant as an Incentive Bonus; (ii) the performance +criteria and level of achievement versus these criteria that shall determine the amount of such payment; (iii) the term of the performance period as to which performance shall be +2024 PROXY STATEMENT +B-9 +TABLE OF CONTENTS +measured for determining the amount of any payment; (iv) the timing of any payment earned by virtue of +performance; (v) restrictions on the alienation or transfer of the Incentive Bonus prior to actual payment; (vi) forfeiture provisions; and (vii) such further terms and conditions, in each case not inconsistent with this Plan (including +Section 5(e), if applicable), as may be determined from time to time by the Administrator. +(c) +Performance Criteria. The Administrator shall establish the performance criteria and level of achievement +versus these criteria that shall determine the target and maximum amounts payable under an Incentive Bonus, which criteria may be based on financial performance and/or personal performance evaluations. +(d) +Timing and Form of Payment. The Administrator shall determine the timing of payment of any Incentive Bonus. +Payment of the amount due under an Incentive Bonus may be made in cash or in Shares (with any such Share payment subject to the dividend and dividend equivalent limitations as set forth in section 8(g)(ii)), as determined by the +Administrator. The Administrator may provide for or, subject to such terms and conditions as the Administrator may specify, may permit a Participant to elect for the payment of any Incentive Bonus to be deferred to a specified date or +event. In all events, unless payment of an Incentive Bonus is deferred in a manner consistent with Section 409A of the Code, any Incentive Bonus shall be paid to the Participant no later than two and one-half months following the end of +the year in which the Incentive Bonus is no longer subject to a substantial risk of forfeiture. +(e) +Discretionary Adjustments. Notwithstanding satisfaction of any performance goals, the amount paid under an +Incentive Bonus on account of either financial performance or personal performance evaluations may, to the extent specified in the Award Agreement or other document evidencing the Award, be reduced, but not increased, by the Administrator +on the basis of such further considerations as the Administrator shall determine. +11. Deferral of Gains +(a) +Deferral of Payment. The Administrator may, in an Award Agreement or otherwise, provide for the deferred +delivery of Shares upon settlement, vesting or other events with respect to Restricted Stock Units, or in payment or satisfaction of an Incentive Bonus. Notwithstanding anything herein to the contrary, in no event will any deferral of the +delivery of Shares or any other payment with respect to any Award be allowed if the Administrator determines, in its sole and absolute discretion, that the deferral would result in the imposition of the additional tax under +Section 409A(a)(1)(B) of the Code. No award shall provide for deferral of compensation that does not comply with Section 409A of the Code, unless the Board, at the time of grant, specifically provides that the Award is not intended to +comply with Section 409A of the Code. The Company shall have no liability to a Participant, or any other party, if an Award that is intended to be exempt from, or compliant with, Section 409A of the Code is not so exempt or compliant or +for any action taken by the Administrator or the Board. +(b) +Conditions of Deferral. Notwithstanding anything herein to the contrary, if the Administrator permits any +initial or subsequent deferral elections pursuant to Section 11(a) of this Plan, subject to the requirements of Section 409A of the Code, the terms of this Plan and the applicable Award Agreement and any applicable deferral election form, +the Participant may elect to defer payment (that would otherwise occur upon the lapse of a substantial risk of forfeiture) for a fixed period of time measured from the date the Award is granted; provided, however, that in each case (i) +the deferral election is made before the end of the election period established by the Administrator, and (ii) to the extent compliant with Section 409A of the Code, payment of any vested Award that the Participant has elected to defer +will be made regardless of any deferral election (including any subsequent deferral election) within thirty (30) days of a change in control or the Participant's separation from service (including death). For purposes of this Section 11, +“change in control” and “separation from service” shall be defined in the applicable Award Agreement and have the meanings set forth in Section 409A of the Code and the regulations thereunder (and, with respect to the definition of +“separation from service”, after giving effect to the presumptions contained therein), and, notwithstanding anything herein to the contrary, if the Administrator allows deferral elections under an Award Agreement subject to Section 409A +of the Code, neither Disability nor Retirement shall accelerate the time of payment of any Award (even if it accelerates vesting) unless there has been a “separation from service” or “disability” within the meaning of Section 409A of the +Code and the regulations promulgated thereunder (and, with respect to the definition of “separation from service”, after giving effect to the presumptions contained therein). To the extent applicable, this provision, the Plan and any +Awards hereunder are intended to comply with Section 409A of the Code and shall be interpreted accordingly. Should any payments made in accordance with the Plan to a specified employee, as defined by Section 409A of the Code, be +determined to be payments from a nonqualified deferred compensation plan, as defined by Section 409A of the Code and are payable in connection with a Participant’s separation from service, that are not exempt from Section 409A of the Code +as a short-term deferral or otherwise, these payments, to the extent otherwise payable within six (6) months after the Participant’s date of separation from service, will be paid in a lump sum on the earlier of the date that is six (6) +months after the Participant’s date of separation from service or the date of the Participant’s death, to the extent necessary in order to avoid the imposition of taxes under Section 409A of the Code. +2024 PROXY STATEMENT +B-10 +TABLE OF CONTENTS +12. Conditions and Restrictions Upon Securities Subject to Awards +The Administrator may provide that the Shares issued upon exercise of an Option or Stock Appreciation Right or +otherwise subject to or issued under an Award shall be subject to such further agreements, restrictions, conditions or limitations as the Administrator in its sole and absolute discretion may specify prior to the exercise of such Option or Stock +Appreciation Right or the grant, vesting or settlement of such Award, including without limitation, conditions on vesting or transferability, forfeiture or repurchase provisions and method of payment for the Shares issued upon exercise, vesting +or settlement of such Award (including the actual or constructive surrender of Shares already owned by the Participant) or payment of taxes arising in connection with an Award. Without limiting the foregoing, such restrictions may address the +timing and manner of any resales by the Participant or other subsequent transfers by the Participant of any Shares issued under an Award, including without limitation (i) restrictions under an insider trading policy or pursuant to applicable law; +(ii) restrictions designed to delay and/or coordinate the timing and manner of sales by Participant and holders of other Company equity compensation arrangements; (iii) restrictions as to the use of a specified brokerage firm for such resales or +other transfers; and (iv) provisions requiring Shares to be sold on the open market or to the Company in order to satisfy tax withholding or other obligations. +13. Adjustment of and Changes in the Stock +(a) +General. The number and kind of Shares available for issuance under this Plan (including under any Awards then +outstanding), and the number and kind of Shares subject to the limits set forth in Section 5 of this Plan, shall be equitably adjusted by the Administrator to reflect any reorganization, reclassification, combination of shares, stock +split, reverse stock split, spin-off, dividend or distribution of securities, property or cash (other than regular, quarterly cash dividends), or any other event or transaction that affects the number or kind of Shares outstanding. Such +adjustment may be designed to comply with Sections 409A and 424 of the Code as applicable, or may be designed to treat the Shares available under the Plan and subject to Awards as if they were all outstanding on the record date for such +event or transaction or to increase the number of such Shares to reflect a deemed reinvestment in Shares of the amount distributed to the Company's security holders. The terms of any outstanding Award shall also be equitably adjusted by +the Administrator as to price, number or kind of Shares subject to such Award, vesting and other terms to reflect the foregoing events, which adjustments need not be uniform as between different Awards or different types of Awards. +In the event there shall be any other change in the number or kind of outstanding Shares, or any stock or +other securities into which such Shares shall have been changed, or for which it shall have been exchanged, by reason of a change of control, other merger, consolidation or otherwise, then the Administrator shall determine the appropriate and +equitable adjustment to be effected. In addition, in the event of such change described in this paragraph, the Administrator may accelerate the time or times at which any Award may be exercised and may provide for cancellation of such accelerated +Awards that are not exercised within a time prescribed by the Administrator in its sole and absolute discretion. +No right to purchase fractional shares shall result from any adjustment in Awards pursuant to this +Section 13. In case of any such adjustment, the Shares subject to the Award shall be rounded up to the nearest whole share for Awards other than Options and Stock Appreciation Rights, and shall be rounded down to the nearest whole Share with +respect to Options and Stock Appreciation Rights. The Company shall notify Participants holding Awards subject to any adjustments pursuant to this Section 13 of such adjustment, but (whether or not notice is given) such adjustment shall be +effective and binding for all purposes of the Plan. +(b) +Change in Control. Subject to and limited by the requirements of subsections (i) and (ii) below, the +Administrator shall determine the effect of a Change in Control on outstanding Awards. Such effects, which need not be the same for every Participant, may include, without limitation: (x) the substitution for the Shares subject to any +outstanding Award, or portion thereof, of stock or other securities of the surviving corporation or any successor corporation to the Company, or a parent or subsidiary thereof, in which event the aggregate purchase or exercise price, if +any, of such Award, or portion thereof, shall remain the same, and/or (y) the conversion of any outstanding Award, or portion thereof, into a right to receive cash or other property upon or following the consummation of the Change in +Control in an amount equal to the value of the consideration to be received by holders of Shares in connection with such transaction for one Share, less the per share purchase or exercise price of such Award, if any, multiplied by the +number of Shares subject to such Award, or a portion thereof. Notwithstanding the foregoing, Awards shall be treated as follows in connection with a Change in Control: +(i) +Double-Trigger Acceleration of Vesting of Time-Based Awards. The following provisions shall apply to Awards +that are subject to vesting based on continuous employment or service: To the extent an Award is assumed or substituted by an acquiror in connection with a Change in Control as contemplated by Section 13(b) above, such Award shall not +immediately vest upon a Change in Control and instead shall continue to vest in accordance with its terms, provided, however, that if a Participant experiences a Termination of Employment by the Company without Cause or by the Participant +for Good Reason, in either case, within the twenty-four- (24-) month period immediately following the Change in Control, the Award shall immediately vest and become exercisable or shall be settled upon such qualifying termination. The +Participant's rights under this Section 13(b)(i) are in addition +2024 PROXY STATEMENT +B-11 +TABLE OF CONTENTS +to any other rights Participant has in the event of death, Disability or Retirement. Notwithstanding +anything in this Section 13(b)(i) to the contrary, if, at any time during the vesting period of an Award, the Participant is or becomes eligible to terminate his or her employment with the Company or its Subsidiaries due to Retirement (without +regard to the application of any Factor or any Determination Period) the Award shall immediately vest in full upon the Change in Control. In the event of acceleration in connection with a Termination of Employment as contemplated by this +Section 13(b)(i), all outstanding Options and Stock Appreciation Rights shall remain outstanding and exercisable during the remaining original terms thereof; +(ii) +Treatment of Performance Awards. The following provisions shall apply to Awards not covered by +Section 13(b)(i): If a Change in Control occurs prior to the end date of a performance period for a Performance Award, to the extent the Performance Award is outstanding immediately prior to such Change in Control, such Award will vest +(A) based on actual performance through the date of the Change in Control as determined by the Administrator (treating the Change in Control as the end of the applicable performance period), without proration for the time elapsed in such +performance period prior to such Change in Control for purposes of determining performance, but, in the discretion of the Administrator, prorated for purposes of elapsed time in a manner consistent with subsection (B), below, (B) assuming +that target level of performance is attained and prorated based on the number of days in the performance period that elapsed prior to the Change in Control over the total number of days in the performance period, or (C) a combination of +(A) and (B) (without double counting). Any portion of the Performance Award (or the full Award, as applicable) that does not vest in connection with a Change in Control as contemplated herein will automatically terminate upon such Change +in Control; and +(iv) +Cash Payment for Stock Options/Stock Appreciation Rights. Without the consent of any Participant affected +thereby, the Administrator may determine that some or all Participants holding outstanding vested and exercisable Options and/or Stock Appreciation Rights shall receive, with respect to some or all of the Shares subject to such Options +and/or Stock Appreciation Rights, as of the effective date of any such Change in Control, cash in an amount equal to the greater of the excess of (A) the highest sales price of the shares on the New York Stock Exchange (or any successor +exchange that is the primary stock exchange for trading of Shares) on the date immediately prior to the effective date of such Change in Control or (B) the highest price per share actually paid in connection with any Change in Control +over the exercise price per share of such Options and/or Stock Appreciation Rights. +14. Performance-Based Compensation +(a) +General. The Administrator may establish performance criteria and level of achievement versus such criteria +that shall determine the number of Shares to be granted, retained, vested, issued or issuable under or in settlement of or the amount payable pursuant to an Award, which criteria may be based on performance criteria established by the +Administrator, including, without limitation, standards of financial performance and/or personal performance evaluations. +(b) +Performance Criteria. For purposes of this Plan, the performance criteria selected by the Administrator may +include, without limitation, an objectively determinable measure of performance relating to any one or more of the following performance criteria, or derivations of such performance criteria, either individually, alternatively or in any +combination, applied to either the Company as a whole or to a business unit, division, line or Subsidiary, either individually, alternatively or in any combination, and measured either annually or cumulatively over a period of years, on +an absolute basis or relative to a pre-established target, to previous years' results or to an index or indices or a designated comparison group or groups, in each case as specified by the Administrator: (i) net earnings or earnings per +share (including earnings before interest, taxes, depreciation and/or amortization); (ii) income, net income or operating income; (iii) revenues; (iv) net sales; (v) return on sales; (vi) return on equity; (vii) return on capital +(including return on total capital or return on invested capital); (viii) return on assets or net assets; (ix) earnings per share; (x) economic or business value added measurements; (xi) return on invested capital; (xii) return on +operating revenue; (xiii) cash flow (before or after dividends); (xiv) stock price; (xv) total stockholder return; (xvi) market capitalization; (xvii) economic value added; (xviii) debt leverage (debt to capital); (xix) operating profit +or net operating profit; (xx) operating margin or profit margin; (xxi) cash from operations; (xxii) market share; (xxiii) product development or release schedules; (xxiv) new product innovation; (xxv) cost reductions; (xxvi) customer +acquisition or retention; (xxvii) customer service; (xxviii) customer satisfaction; or (xxix) any other performance target established by the Administrator as it deems appropriate. In the event that, during any performance period, any +recapitalization, reorganization, merger, acquisition, divestiture, consolidation, spin-off, combination, liquidation, dissolution, sale of assets or other similar corporate transaction or event, or any other extraordinary event or +circumstance occurs which has the effect, as determined by the Administrator, in its sole and absolute discretion, of distorting the applicable performance criteria involving the Company, including, without limitation, changes in +accounting standards, the Administrator may adjust or modify, as determined by the Administrator, in its sole and absolute discretion, the calculation of the performance goals, to the extent necessary to prevent reduction or enlargement +of the Participants’ Awards under the Plan for such performance period attributable to such transaction, circumstance or event. All determinations that the Administrator makes shall be conclusive and binding on all persons for all +purposes. The Administrator retains the right to reduce any Award below the maximum amount that could be paid based on the degree to which the performance criteria related to such Award were attained. +2024 PROXY STATEMENT +B-12 +TABLE OF CONTENTS +15. Transferability +Unless the Administrator determines otherwise, each Award may not be sold, transferred, pledged, assigned or +otherwise alienated or hypothecated by a Participant other than by will or the laws of descent and distribution, and each Option or Stock Appreciation Right shall be exercisable only by the Participant during his or her lifetime. To the extent +permitted by the Administrator, the person to whom an Award is initially granted (the “Grantee”) may transfer an Award to any “family member” of the Grantee (as such term is defined in Section 1(a)(5) of the General Instructions to Form S-8 under +the Securities Act of 1933, as amended (“Form S-8”)), to trusts solely for the benefit of such family members and to partnerships in which such family members and/or trusts are the only partners; provided, however, that (i) as a condition +thereof, the transferor and the transferee must execute a written agreement containing such terms as specified by the Administrator and (ii) the transfer is pursuant to a gift or a domestic relations order to the extent permitted under the +General Instructions to Form S-8. Except to the extent specified otherwise in the agreement the Administrator provides for the Grantee and transferee to execute, all vesting, exercisability and forfeiture provisions that are conditioned on the +Grantee's continued employment or service shall continue to be determined with reference to the Grantee's employment or service (and not to the status of the transferee) after any transfer of an Award pursuant to this Section 15. +16. Suspension, Termination or Recovery of Awards and Payments Thereunder +Except as otherwise provided by the Administrator, if at any time (including after a notice of exercise has +been delivered or an award has vested) the Company's chief executive officer or any other person designated by the Administrator (each such person, an “Authorized Officer”) reasonably believes that a Participant may have committed an Act of +Misconduct as described in this Section 16, the Authorized Officer, Administrator or the Board may suspend the Participant's rights to exercise any Option, to vest in an Award, and/or to receive payment for or receive Shares in settlement of an +Award pending a determination of whether an Act of Misconduct has been committed. +If the Administrator or an Authorized Officer determines a Participant has committed an Act of Misconduct, +then except as otherwise provided by the Administrator, including through any agreement approved by the Administrator, (i) neither the Participant nor his or her estate nor transferee shall be entitled to exercise any Option or Stock Appreciation +Right whatsoever, vest in or have the restrictions on an Award lapse, or otherwise receive payment of an Award, (ii) the Participant will forfeit all outstanding Awards and (iii) the Participant may be required, at the Administrator's sole and +absolute discretion, to return and/or repay to the Company any then unvested Shares previously issued under the Plan. In making such determination, the Administrator or an Authorized Officer shall give the Participant an opportunity to appear and +present evidence on his or her behalf at a hearing before the Administrator or its designee or an opportunity to submit written comments, documents, information and arguments to be considered by the Administrator. +In addition to the foregoing, the Administrator may recover Awards made under the Plan and payments under or +gain in respect of any Award in accordance with the Company's Policy for Recovery of Incentive Compensation or any successor or additional clawback or recoupment policy, as such policy or policies may be amended and in effect from time to time, +or as otherwise required by applicable law or applicable stock exchange listing standards, including, without limitation, Section 10D of the Act. +17. Compliance with Laws and Regulations +This Plan, the grant, issuance, vesting, exercise and settlement of Awards thereunder, and the obligation of +the Company to sell, issue, deliver or remove any restrictions on Shares under such Awards, shall be subject to all applicable foreign, federal, state and local laws, rules and regulations, stock exchange rules and regulations, and to such +approvals by any governmental or regulatory agency as may be required. The Company shall not be required to register in a Participant's name or deliver any Shares prior to the completion of any registration or qualification of such shares under +any foreign, federal, state or local law or any ruling or regulation of any government body which the Administrator shall determine to be necessary or advisable. To the extent the Company is unable to or the Administrator deems it infeasible to +obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company's counsel to be necessary to the lawful issuance and sale of any Shares hereunder, the Company and its Subsidiaries shall be relieved of any +liability with respect to the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained. No Option shall be exercisable and no Shares shall be issued and/or transferable under any other Award unless a +registration statement with respect to the Shares underlying such Option is effective and current or the Company has determined that such registration is unnecessary. +In the event an Award is granted to or held by a Participant who is employed or providing services outside the +United States, the Administrator may, in its sole and absolute discretion, modify the provisions of the Plan or of such Award as they pertain to such individual to comply with applicable foreign law or to recognize differences in local law, +currency or tax policy. The Administrator may also impose conditions on the grant, issuance, exercise, vesting, settlement or retention of Awards in order to comply with such foreign law and/or to minimize the Company's obligations with respect +to tax equalization for Participants employed outside their home country. +2024 PROXY STATEMENT +B-13 +TABLE OF CONTENTS +18. Withholding +To the extent required by applicable federal, state, local or foreign law, a Participant shall be required to +satisfy, in a manner satisfactory to the Company, any withholding tax obligations that arise by reason of an Option exercise, disposition of Shares issued under an Incentive Stock Option, the grant, vesting or settlement of an Award, an election +pursuant to Section 83(b) of the Code or otherwise with respect to an Award. To the extent a Participant makes an election under Section 83(b) of the Code, within ten days of filing such election with the Internal Revenue Service, the Participant +must notify the Company in writing of such election. The Company and its Subsidiaries shall not be required to issue Shares, make any payment or to recognize the transfer or disposition of Shares until all such obligations are satisfied. The +Administrator may provide for or permit these obligations to be satisfied through the mandatory or elective sale of Shares and/or by having the Company withhold a portion of the Shares that otherwise would be issued to him or her upon exercise of +the Option or the vesting or settlement of an Award, or by tendering Shares previously acquired. +19. Administration of the Plan +(a) +Administrator of the Plan. The Plan shall be administered by the Administrator who shall be the Compensation +Committee of the Board or, in the absence of a Compensation Committee, the Board itself. Any power of the Administrator may also be exercised by the Board, except to the extent that the grant or exercise of such authority would cause any +Award or transaction to become subject to (or lose an exemption under) the short-swing profit recovery provisions of Section 16 of the Act. To the extent that any permitted action taken by the Board conflicts with action taken by the +Administrator, the Board action shall control. The Compensation Committee may by resolution authorize one or more officers of the Company to perform any or all things that the Administrator is authorized and empowered to do or perform +under the Plan, and for all purposes under this Plan, such officer or officers shall be treated as the Administrator; provided, however, that no such officer shall designate himself or herself as a recipient of any Awards granted under +authority delegated to such officer and that any delegation of the power to grant Awards to an officer shall otherwise be consistent with the requirements of Section 157(c) of the Delaware General Corporation Law. The Compensation +Committee hereby designates the Company's chief executive officer, the Company's chief financial officer, the Secretary of the Company, and the head of the Company's human resource function to assist the Administrator in the +administration of the Plan and execute agreements evidencing Awards made under this Plan or other documents entered into under this Plan on behalf of the Administrator or the Company. In addition, the Compensation Committee may delegate +any or all aspects of the day-to-day administration of the Plan to one or more officers or employees of the Company or any Subsidiary and/or to one or more agents. +(b) +Powers of Administrator. Subject to the express provisions of this Plan, the Administrator shall be authorized +and empowered to do all things that it determines to be necessary or appropriate in connection with the administration of this Plan, including, without limitation: (i) to prescribe, amend and rescind rules and regulations relating to this +Plan and to define terms not otherwise defined herein; (ii) to determine which persons are Participants, to which of such Participants, if any, Awards shall be granted hereunder and the timing of any such Awards; (iii) to grant Awards to +Participants and determine the terms and conditions thereof, including the number of Shares subject to Awards and the exercise or purchase price of such Shares and the circumstances under which Awards become exercisable or vested or are +forfeited or expire, which terms may but need not be conditioned upon the passage of time, continued employment, the satisfaction of performance criteria, the occurrence of certain events, or other factors; (iv) to establish and verify +the extent of satisfaction of any performance goals or other conditions applicable to the grant, issuance, exercisability, vesting and/or ability to retain any Award; (v) to prescribe and amend the terms of the agreements or other +documents evidencing Awards made under this Plan (which need not be identical) and the terms of or form of any document or notice required to be delivered to the Company by Participants under this Plan; (vi) to determine the extent to +which adjustments are required pursuant to Section 13 of the Plan; (vii) to interpret and construe this Plan, any rules and regulations under this Plan and the terms and conditions of any Award granted hereunder, and to make exceptions to +any such provisions if the Administrator, in good faith, determines that it is necessary to do so in light of extraordinary circumstances and for the benefit of the Company; (viii) to approve corrections in the documentation or +administration of any Award; and (ix) to make all other determinations deemed necessary or advisable for the administration of this Plan. The Administrator may, in its sole and absolute discretion, without amendment to the Plan, waive or +amend the operation of Plan provisions respecting exercise after termination of employment or service to the Company or an affiliate and, except as otherwise provided herein, adjust any of the terms of any Award. The Administrator may +also (A) accelerate the date on which any Award granted under the Plan becomes exercisable or (B) accelerate the vesting date or waive or adjust any condition imposed hereunder with respect to the vesting or exercisability of an Award, +provided that the Administrator, in good faith, determines that such acceleration, waiver or other adjustment is necessary or desirable. For the avoidance of doubt, notwithstanding anything in the Plan to the contrary, no Award +outstanding under the Plan may be repriced, re-granted through cancellation or otherwise amended to reduce the exercise price applicable thereto (other than with respect to adjustments made in connection with a transaction or other change +in the Company's capitalization as described in Section 13 of the Plan) without the approval of the Company's stockholders. +2024 PROXY STATEMENT +B-14 +TABLE OF CONTENTS +(c) +Determinations by the Administrator. All decisions, determinations and interpretations by the Administrator +regarding the Plan, any rules and regulations under the Plan and the terms and conditions of or operation of any Award granted hereunder, shall be final and binding on all Participants, beneficiaries, heirs, assigns or other persons +holding or claiming rights under the Plan or any Award. The Administrator shall consider such factors as it deems relevant, in its sole and absolute discretion, to making such decisions, determinations and interpretations including, +without limitation, the recommendations or advice of any officer or other employee of the Company and such attorneys, consultants and accountants as it may select. +(d) +Subsidiary Awards. In the case of a grant of an Award to any Participant employed by a Subsidiary, such grant +may, if the Administrator so directs, be implemented by the Company issuing any subject Shares to the Subsidiary, for such lawful consideration as the Administrator may determine, upon the condition or understanding that the Subsidiary +will transfer the Shares to the Participant in accordance with the terms of the Award specified by the Administrator pursuant to the provisions of the Plan. Notwithstanding any other provision hereof, such Award may be issued by and in +the name of the Subsidiary and shall be deemed granted on such date as the Administrator shall determine. +(e) +Indemnification of Administrator. Neither any member nor former member of the Administrator nor any individual +to whom authority is or has been delegated shall be personally responsible or liable for any act or omission in connection with the performance of powers or duties or the exercise of discretion or judgment in the administration and +implementation of the Plan. Each person who is or shall have been a member of the Administrator shall be indemnified and held harmless by the Company from and against any cost, liability or expense imposed or incurred in connection with +such person's or the Administrator's taking or failing to take any action under the Plan. Each such person shall be justified in relying on information furnished in connection with the Plan's administration by any employee, officer, agent +or expert employed or retained by the Administrator or the Company. +20. Amendment of the Plan or Awards +The Board may amend, alter or discontinue this Plan and the Administrator may amend or alter any agreement or +other document evidencing an Award made under this Plan but, except as provided pursuant to the provisions of Section 13 of the Plan, no such amendment shall, without the approval of the stockholders of the Company: +(a) +increase the maximum number of Shares for which Awards may be granted under this Plan; +(b) +reduce the price at which Options or Stock Appreciation Rights may be granted below the price provided for in Section 6(a) of the Plan; +(c) +reduce the exercise price of outstanding Options or Stock Appreciation Rights; +(d) +extend the term of this Plan; +(e) +change the class of persons eligible to be Participants; or +(f) +otherwise amend the Plan in any manner requiring stockholder approval by law or under the New York Stock Exchange listing requirements (or the listing +requirements of any successor exchange that is the primary stock exchange for trading of Shares). +No amendment or alteration to the Plan or an Award or Award Agreement shall be made which would impair the +rights of the holder of an Award, without such holder's consent, provided that no such consent shall be required if the Administrator determines in its sole and absolute discretion and prior to the date of any Change in Control that such +amendment or alteration either is required or advisable in order for the Company, the Plan or the Award to satisfy any law or regulation or to meet the requirements of or avoid adverse financial accounting consequences under any accounting +standard. In addition, the Plan may not be amended in any way that causes the Plan to fail to comply with or be exempt from Section 409A of the Code, unless the Board expressly determines to amend the Plan to be subject to Section 409A of the +Code. +21. No Liability of Company +The Company and any Subsidiary or affiliate which is in existence or hereafter comes into existence shall not +be liable to a Participant or any other person as to: (a) the non-issuance or sale of Shares as to which the Company has been unable to obtain from any regulatory body having jurisdiction the authority deemed by the Company's counsel to be +necessary to the lawful issuance and sale of any Shares hereunder and (b) any tax consequence expected, but not realized, by any Participant or other person due to the grant, receipt, exercise, settlement of any Award granted hereunder. +2024 PROXY STATEMENT +B-15 +TABLE OF CONTENTS +22. Non-Exclusivity of Plan +Neither the adoption of this Plan by the Board nor the submission of this Plan to the stockholders of the +Company for approval shall be construed as creating any limitations on the power of the Board or the Administrator to adopt such other incentive arrangements as either may deem desirable, including without limitation, the granting of restricted +stock or stock options otherwise than under this Plan, and such arrangements may be either generally applicable or applicable only in specific cases. +23. Governing Law +This Plan and any agreements or other documents hereunder shall be interpreted and construed in accordance with +the laws of Delaware and applicable federal law. Any reference in this Plan or in the agreement or other document evidencing any Awards to a provision of law or to a rule or regulation shall be deemed to include any successor law, rule or +regulation of similar effect or applicability. +24. Waiver of Jury Trial +By accepting an Award under the Plan, each Participant waives any right to a trial by jury in any action, +proceeding or counterclaim concerning any rights under the Plan and any Award, or under any amendment, waiver, consent, instrument, document or other agreement delivered or which in the future may be delivered in connection therewith, and agrees +that any such action, proceedings or counterclaim will be tried before a court and not before a jury. By accepting an Award under the Plan, each Participant certifies that no officer, representative, or attorney of the Company has represented, +expressly or otherwise, that the Company would not, in the event of any action, proceeding or counterclaim, seek to enforce the foregoing waivers. Notwithstanding anything to the contrary in the Plan, nothing herein is to be construed as limiting +the ability of the Company and a Participant to agree to submit disputes arising under the terms of the Plan or any Award made hereunder to binding arbitration or as limiting the ability of the Company to require any eligible individual to agree +to submit such disputes to binding arbitration as a condition of receiving an Award hereunder. +25. No Right to Employment, Reelection or Continued Service +Nothing in this Plan or an Award Agreement shall interfere with or limit in any way the right of the Company, +its Subsidiaries and/or its affiliates to terminate any Participant's employment, service on the Board or service for the Company at any time or for any reason not prohibited by law, nor shall this Plan or an Award itself confer upon any +Participant any right to continue his or her employment or service for any specified period of time. Neither an Award nor any benefits arising under this Plan shall constitute an employment contract with the Company, any Subsidiary and/or its +affiliates. Subject to Sections 4 and 20 of the Plan, this Plan and the benefits hereunder may be terminated at any time in the sole and exclusive discretion of the Board without giving rise to any liability on the part of the Company, its +Subsidiaries and/or its affiliates. +26. Unfunded Plan +The Plan is intended to be an unfunded plan. Participants are and shall at all times be general creditors of +the Company with respect to their Awards. If the Administrator or the Company chooses to set aside funds in a trust or otherwise for the payment of Awards under the Plan, such funds shall at all times be subject to the claims of the creditors of +the Company in the event of its bankruptcy or insolvency. +Effective as of May 2, 2024 +2024 PROXY STATEMENT +B-16 +TABLE OF CONTENTS +TABLE OF CONTENTS +Wolverine World Wide, Inc. +false +DEF 14A +0000110471 +0000110471 +2023-01-01 +2023-12-30 +0000110471 +www:BrendanHoffmanMember +2023-01-01 +2023-12-30 +0000110471 +www:ChristopherHufnagelMember +2023-01-01 +2023-12-30 +0000110471 +www:BrendanHoffmanMember +2022-01-02 +2022-12-31 +0000110471 +2022-01-02 +2022-12-31 +0000110471 +www:BlakeKruegerMember +2021-01-03 +2022-01-01 +0000110471 +2021-01-03 +2022-01-01 +0000110471 +www:BlakeKruegerMember +2019-12-29 +2021-01-02 +0000110471 +2019-12-29 +2021-01-02 +0000110471 +2023-01-01 +2023-08-05 +0000110471 +2023-08-06 +2023-12-30 +0000110471 +www:ReportedFairValueOfEquityAwardsMember 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They +require the Governance Committee to review and either approve or disapprove the Company entering into any Interested Transactions (defined below). If advance approval is not feasible, then the Governance Committee must review and ratify the +Interested Transaction at its next meeting. +Interested Transaction +Any transaction, arrangement or relationship or series of similar transactions, arrangements or +relationships (including any indebtedness or guarantee of indebtedness) in which: +(1) +The aggregate amount involved exceeds or is expected to exceed $120,000 since the beginning of Wolverine +Worldwide's last completed fiscal year; +(2) +The Company or any of its subsidiaries is a participant; and +(3) +Any Related Person (defined below) has or will have a direct or indirect interest. +An Interested Transaction does not include: +(1) +Any employment compensation paid to an executive officer of the Company if the Compensation Committee +approved or recommended to the Board of Directors for approval of such compensation; +(2) +Any compensation paid to a director for service as a director of the Company; +(3) +Any transaction in which a Related Person has an indirect interest solely as a result of being (i) a +director or, together with all other Related Persons, as defined below, a less than 10% beneficial owner of an equity interest in another entity, or both, or (ii) a limited partner in a partnership in which the Related Person, together +with all other Related Persons, has an interest of less than 10%; +(4) +Any transaction in which the Related Person's interest arises solely from the ownership of the Company's +common stock and all holders of the Company's common stock received the same benefit on a pro rata basis (e.g., a dividend); or +(5) +Any transaction with another publicly traded company where the Related Person's interest arises solely +from the ownership of more than 5% of the Company's common stock and the ownership of a non-controlling interest in the other publicly traded company. +Related Person +Any: +(a) +Person who is or was (at any time since the beginning of the Company’s last completed fiscal year even if +they do not presently serve in that role), an executive officer, a director or, to the extent information regarding such nominee is being presented in a proxy or information statement relating to the election of that nominee as a +director, a nominee for election as a director; +(b) +Beneficial owner of greater than five percent of Wolverine Worldwide's common stock; or +(c) +Immediate family member* of any of the foregoing. +* +Immediate family member is defined as a person's spouse, parents, stepparents, children, stepchildren, siblings, +mothers and fathers-in-law, sons- and daughters-in-law, and brothers- and sisters-in-law, and anyone residing in such person's home (other than a tenant or employee). +The Governance Committee considers whether the Interested Transaction is on terms no less favorable than terms +generally available to an unaffiliated third party under the same or similar circumstances, the extent of the Related Person's interest in the transaction, and other factors that it deems relevant. No director participates in any discussion or +approval of an Interested Transaction for which he or she is a Related Person, except to provide information to the Governance Committee. \ No newline at end of file diff --git a/raw/proxies/0000110471/0001140361-25-009454/proxy.txt b/raw/proxies/0000110471/0001140361-25-009454/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..21bfbb59dcc2e6694f8dc11b7b205834529ba186 --- /dev/null +++ b/raw/proxies/0000110471/0001140361-25-009454/proxy.txt @@ -0,0 +1,4149 @@ +TABLE OF CONTENTS +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +Washington, D.C. 20549 +SCHEDULE 14A INFORMATION +Proxy Statement Pursuant to Section 14(a) of +the Securities Exchange Act of 1934 (Amendment No.   ) +Filed by the Registrant ☒ +Filed by a party other than the Registrant   ☐ +Check the appropriate box: +☐ +Preliminary Proxy Statement +☐ +Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +☒ +Definitive Proxy Statement +☐ +Definitive Additional Materials +☐ +Soliciting Material under § 240.14a-12 +Wolverine World Wide, Inc. +(Name of Registrant as Specified In Its Charter) +(Name of Person(s) Filing Proxy Statement, if other than the Registrant) +Payment of Filing Fee (Check all boxes that apply): +☒ +No fee required +☐ +Fee paid previously with preliminary materials +☐ +Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11 +TABLE OF CONTENTS +TABLE OF CONTENTS +LETTER FROM THE CHAIRMAN +March 19, 2025 +Dear Fellow Shareholders, +2024 was an important year in the transformation of Wolverine Worldwide. +I’m pleased to report that in 2024 the Company delivered on its plan for its shareholders, driven by significantly stronger financial performance, substantial improvement in talent and capabilities, and a stronger foundation for sustainable long-term growth. The Board will continue to actively engage with the management team in developing and overseeing execution of the Company’s clear strategy, taking into account volatile market conditions. +We would like to extend special thanks to Dave Kollat and Jodi Bricker for their valuable contributions over the years. They are not standing for reelection this year, and we will miss them. To ensure the Board continues to be equipped with the right mix of skills and experiences, we plan to fill these seats with new directors who bring a powerful range of backgrounds and relevant growth-oriented industry expertise. +We are confident Wolverine will make meaningful progress in the year ahead. +On behalf of the entire Board of Directors, thank you for your continued support. +Sincerely, +Tom Long +Chairman of the Board +2025 PROXY STATEMENT +1 +TABLE OF CONTENTS +LETTER FROM THE CEO +Delivering an Ambitious Turnaround +Entering 2024, we had outlined a three-phase plan to turn around Wolverine Worldwide – focused on stabilizing the Company, transforming the organization, and ultimately inflecting to growth – and our team delivered across all aspects of this effort. We successfully completed the stabilization phase and strengthened the balance sheet, finishing the year with less than half the debt we held 24 months earlier and the cleanest inventory position since the pandemic. We also meaningfully improved the business’ profitability, achieving record gross margin and delivering earnings per share nearly six times greater than the prior year. Finally, and importantly, the Company inflected to growth in the final quarter of 2024 – establishing momentum for the year ahead. +Accelerating Growth +While it’s early in our inflection phase, Wolverine Worldwide is indeed growing again – with the Saucony brand leading the way, which is expected to deliver a mid-teens increase in 2025. Our growth is due in large part to the good progress we’ve made to transform the Company and begin to once again build our tremendous brands around the world. We reshaped our portfolio for enhanced focus, and we’ve developed stronger capabilities to execute our Brand-building Model – intent on building awesome products, telling amazing stories, and driving the business. To underpin our model, we bolstered consumer and trend insights. To complement our product engine, we added new talent, implemented advanced tools for greater effectiveness and efficiency, and opened our first-ever Innovation Hub in downtown Boston to tap into the concentration of exceptional talent in the region. To strengthen our marketing capabilities, we recruited new marketing leadership across our brands and created an in-house studio for nimble asset creation to engage today’s always-on consumers. Finally, to help drive the business in the marketplace, we deployed brand protection measures and more disciplined distribution management, developed more strategic relationships with our partners domestically and internationally, and established a compelling platform to activate our brands with impact through our key city initiative – beginning in Tokyo and London. Wolverine Worldwide is a meaningfully different company today than it was a year ago, now poised to enable the profitable growth of our brands. +The Opportunity Ahead +Our brands are originals and leaders in attractive performance markets that we believe are aligned with long-term, macro consumer trends and provide a sizeable opportunity for penetration into broader lifestyle wearing occasions. We believe their potential is significant, and we are seeing our efforts begin to deliver results – giving us confidence in our strategy. In 2025 and beyond, we intend to take a balanced approach to further expand profitability while investing in our brands and capabilities to drive sustainable growth – all with a focus on maximizing returns and value for our shareholders. +Looking to the future, we are firmly focused as an organization on a new vision for Wolverine Worldwide: +Make. +We make great things… +Every Day. +Every day matters… +Better. +Our consumers are moved to live… +Our team is proud of the work we’ve done, but we are not satisfied. We are driven by a vision to Make. Every Day. Better. for our consumers, our communities, and for you – our shareholders. The next chapter in our Company’s 142-year history – one fixated on growth – is undoubtedly the most important one yet. We can’t wait to deliver once again. +As always, thank you for your continued support of Wolverine Worldwide. +Be Well and Be Safe, +Christopher Hufnagel +President and Chief Executive Officer +2025 PROXY STATEMENT +2 +TABLE OF CONTENTS +NOTICE OF 2025 ANNUAL MEETING OF SHAREHOLDERS +10:00 a.m. EDT, May 1, 2025 +To Our Shareholders: +We invite you to attend the 2025 Annual Meeting of Shareholders (the “Annual Meeting”) of Wolverine World Wide, Inc. (“we,” “us,” the “Company,” “Wolverine Worldwide” or “Wolverine”). The meeting will be held on May 1, 2025, at 10:00 a.m. EDT in a virtual format designed to provide shareholders with the same rights and opportunities to participate that they would have at an in-person meeting. At the Annual Meeting, shareholders will vote on the following items: +PROPOSAL +BOARD VOTE +RECOMMENDATION +PAGE +REFERENCE +1 +Election of the Two Directors Named in the Proxy Statement for Terms Expiring in 2028 +✔ +FOR each Nominee +18 +2 +Advisory Resolution to Approve Executive Compensation +✔ +FOR +73 +3 +Ratification of the Appointment of Ernst & Young LLP as the Company's Independent Registered Public Accounting Firm for Fiscal Year 2025 +✔ +FOR +75 +4 +Shareholder Proposal, if properly presented at the Annual Meeting +✘ +AGAINST +76 +Shareholders may also transact such other business as may properly come before the Annual Meeting or any adjournment or postponement thereof. +Shareholders of record as of the close of business on March 3, 2025, the record date, are entitled to participate in and vote at the Annual Meeting. To participate in the Annual Meeting, including to vote and ask questions, shareholders of record should go to the meeting website at www.virtualshareholdermeeting.com/WWW2025, enter the 16-digit control number found on your proxy card or Notice of Internet Availability of Proxy Materials (“Notice of Internet Availability”), and follow the instructions on the website. If your shares are held in street name and your voting instruction form or Notice of Internet Availability indicates that you may vote those shares through the http://www.proxyvote.com website, then you may access, participate in, and vote at the annual meeting with the 16-digit access code indicated on that voting instruction form or Notice of Internet Availability. Otherwise, shareholders who hold their shares in street name should contact their bank, broker or other nominee (preferably at least 5 days before the Annual Meeting) and obtain a “legal proxy” in order to be able to attend, participate in or vote at the Annual Meeting. +Whether or not you plan to attend the Annual Meeting, you can ensure that your shares are represented at the meeting by promptly voting and submitting your proxy by telephone or through the internet, or by completing, signing, dating and returning your proxy card in the enclosed envelope. Brokers are not permitted to vote on certain proposals and may not vote on any of the proposals unless you provide voting instructions. Voting your shares will help to ensure that your interests are represented at the meeting. +Rules for the conduct of the Annual Meeting will be available on the meeting website. For information about how to view the rules and the list of shareholders entitled to vote at the Annual Meeting during the ten days preceding the Annual Meeting, please visit our 2025 Annual Meeting website at www.wolverineworldwide.com/2025annualmeeting. If you encounter any difficulties accessing the virtual meeting during check-in or during the meeting, please call the technical support number that will be posted on the virtual shareholder meeting login page. +2025 PROXY STATEMENT +3 +TABLE OF CONTENTS +This Notice of 2025 Annual Meeting of Shareholders, Proxy Statement, proxy or voting instruction card and Annual Report for our fiscal year ended December 28, 2024 are being mailed or made available to shareholders starting on or about March 19, 2025. +By Order of the Board of Directors, +David A. Latchana +Chief Legal Officer and Secretary +Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to be held on May 1, 2025. +Wolverine's Proxy Statement for the 2025 Annual Meeting of Shareholders and the Annual Report to Shareholders for the fiscal year ended December 28, 2024, are available at: www.wolverineworldwide.com/2025annualmeeting. +2025 PROXY STATEMENT +4 +TABLE OF CONTENTS +Table of Contents +Proxy Statement Summary +6 +Matters to be Voted Upon +7 +Election of Directors for Terms Expiring in 2028 +7 +Corporate Governance +10 +Board of Directors +10 +Board Composition +10 +Board Skills and Experience +11 +Director Nominations +11 +Director Onboarding and Ongoing Education Initiatives +12 +Board Self-Assessment +12 +Risk Oversight +12 +Environmental, Social and Governance Highlights +14 +Code of Business Conduct and Accounting and Finance Code of Ethics +16 +Shareholder Communications Policy +17 +Proposal 1 – Election of Directors for Terms Expiring in 2028 +18 +Director Nominees with Proposed Terms Expiring in 2028 +19 +Directors with Terms Expiring in 2025 Not Seeking Reelection +21 +Directors with Terms Expiring in 2026 +23 +Directors with Terms Expiring in 2027 +26 +Board Leadership +29 +Director Independence +29 +Board Committees, Meetings and Meeting Attendance +30 +Director Compensation in Fiscal Year 2024 +32 +Non-Employee Director Stock Ownership Guidelines +34 +Securities Ownership of Officers and Directors and Certain Beneficial Owners +35 +Five Percent Shareholders +35 +Stock Ownership by Management and Others +36 +Compensation Discussion and Analysis +38 +Summary +38 +Compensation Discussion and Analysis +41 +2024 Compensation Program Overview +41 +Setting Targets +41 +Base Salary +41 +Annual Bonus +42 +Long-Term Incentive Compensation +45 +Benefits +47 +Post-Employment Compensation +48 +Say on Pay Advisory Vote +48 +Compensation Setting Process +49 +Setting Targets +49 +Competitive Philosophy and Competitive Market Data +49 +Peer Group +49 +CEO Role +49 +Compensation Consultant Role +50 +Other Compensation Policies and Practices +51 +NEO Stock Ownership Guidelines +51 +Insider Trading Policy +51 +Stock Hedging and Pledging Policies +51 +Equity Award Grant Practices +51 +Clawback Policy +51 +Impact of Accounting and Tax Treatments on Compensation +52 +Compensation and Human Capital Committee Report +53 +Summary Compensation Table +54 +Grants of Plan-Based Awards in Fiscal Year 2024 +56 +Outstanding Equity Awards at 2024 Fiscal Year-End +57 +Option Exercises and Stock Vested in Fiscal Year 2024 +60 +Pension Plans and 2024 Pension Benefits +61 +Qualified Pension Plans +61 +Supplemental Executive Retirement Plan +61 +Pension Benefits in Fiscal Year 2024 +62 +Non-Qualified Deferred Compensation +63 +Potential Payments Upon Termination or Change in Control +64 +Estimated Payments on Termination or Change in Control +67 +CEO Pay Ratio +69 +Pay vs. Performance +70 +Proposal 2 – Advisory Resolution to Approve Executive Compensation +73 +Proposal 3 – Ratification of Appointment of Independent Registered Public Accounting Firm +75 +Proposal 4 — Shareholder Proposal +76 +Board Response +77 +Audit Committee Report +79 +Independent Registered Public Accounting Firm +81 +Related Party Matters +82 +Additional Information +83 +Shareholders List +83 +Director and Officer Indemnification +83 +Shareholder Proposals for Inclusion in Next Year's Proxy Statement +83 +Other Shareholder Proposals for Presentation at Next Year's Annual Meeting +83 +Voting Securities +83 +Conduct of Business +83 +Vote Required for Election and Approval +84 +Voting Results of the Annual Meeting +84 +Attending the Annual Meeting +84 +Manner for Voting Proxies +85 +Revocation of Proxies +85 +Solicitation of Proxies +85 +Delivery of Documents to Shareholders Sharing an Address +85 +Access to Proxy Statement and Annual Report +85 +Appendix A - Forward-Looking Statements and Non-GAAP Reconciliation Tables +A-1 +2025 PROXY STATEMENT +5 +TABLE OF CONTENTS +Proxy Statement Summary +This summary highlights key information that can be found in greater detail elsewhere in this Proxy Statement. This summary does not contain all the information that shareholders should consider, and shareholders should read the entire Proxy Statement before voting. +Our Brand Portfolio +Wolverine Worldwide maintains a diverse portfolio of category-leading brands: +Our Strategic Direction +We are driven by a new vision for Wolverine Worldwide: +Make. +We make great things… +Every Day. +Every day matters… +Better. +Our consumers are moved to live… +Our portfolio is strategically focused on brands that are originals and leaders in attractive performance categories that we believe are aligned with long-term, macro consumer trends. Consistent with the Company’s vision, each brand in our portfolio endeavors to make their consumers’ lives better – healthier, happier, and more productive. +Building differentiated, purpose-led brands capable of exciting consumers and delivering healthy margins is fundamental to our strategy. To do so, we are building capabilities and aligning the organization around our global Brand-building Model, prioritizing: +1.  +Designing Awesome Products – Innovative, trend-right, priced-right, covetable products informed by deep insights that solve for consumer’s wants and needs +2.  +Telling Amazing Stories – Differentiated, meaningful stories that reach consumers when and where they want to engage +3.  +Driving the Business – A constant pursuit to build and protect our brands in the marketplace +2025 PROXY STATEMENT +6 +TABLE OF CONTENTS +Our corporate structure enables our brands to focus on consumers, product, and marketing by providing platforms and centers-of-excellence that efficiently drive operations and back-office activities. This helps create competitive advantages based on capabilities deemed to be strategically important – including consumer insights, trend, and innovation. +MATTERS TO BE VOTED UPON +Shareholders are being asked to vote on the following matters at the 2025 Annual Meeting of Shareholders: +PROPOSAL +BOARD VOTE +RECOMMENDATION +PAGE +REFERENCE +1 +Election of the Two Directors Named in the Proxy Statement for Terms Expiring in 2028 +✔ +FOR each Nominee +18 +2 +Advisory Resolution to Approve Executive Compensation +✔ +FOR +73 +3 +Ratification of the Appointment of Ernst & Young LLP as the Company’s Independent Registered Public Accounting Firm for Fiscal Year 2025 +✔ +FOR +75 +4 +Shareholder Proposal, if properly presented at the Annual Meeting +✘ +AGAINST +76 +ELECTION OF DIRECTORS FOR TERMS EXPIRING IN 2028 +The Board currently consists of ten directors. The Company's By-Laws establish three classes of directors with each class serving three-year terms. +The Board has nominated two directors for election at the Annual Meeting, as outlined in the table below. Each director nominee has been nominated to serve for a three-year term expiring at the annual meeting of shareholders to be held in 2028. The Board recommends that shareholders vote “ FOR ” each of the nominees named below. +Age +Director +Since +Independent +Committees +Proposed Term +Expiration +Other Public +Directorships +Jeffrey M. Boromisa +Retired Executive Vice President, +Kellogg International, President, +Latin America and Senior Vice +President, Kellogg Company +70 +2006 +✔ +Audit (Chair) +Governance +2028 +None +Christopher E. Hufnagel +President and Chief Executive +Officer, Wolverine Worldwide +52 +2023 +None +2028 +None +Detailed director biographies can be found on pages 19 - 28 of the Proxy Statement. +2025 PROXY STATEMENT +7 +TABLE OF CONTENTS +Board Highlights +The following charts illustrate key characteristics of the Board as of the date of this Proxy Statement: +Board is Composed of Directors with the Right Mix of Skills and Experiences +The following chart lists the important skills and experiences that the Company's directors possess: +2025 PROXY STATEMENT +8 +TABLE OF CONTENTS +Shareholder Engagement +As part of its ongoing shareholder engagement efforts, the Company reached out in early 2025 to shareholders representing holders of approximately 78% of its outstanding shares held by institutional investors, and has held or expects to hold meetings or calls with all shareholders who accepted the Company's invitation. Discussions to date focused on Company strategy, corporate responsibility, financial performance and governance. +Corporate Governance Highlights +Wolverine Worldwide is committed to a governance structure that provides strong shareholder rights and meaningful accountability. +✔ +Highly independent Board and Committees +✔ +Annual Board and Committee self-evaluations +✔ +Independent Chairman of the Board +✔ +Robust Board and executive succession planning process, including annual written director nominee evaluations +✔ +Majority voting with director resignation policy +✔ +Long-standing commitment to inclusion +✔ +Director onboarding orientation program and ongoing education initiatives +✔ +No supermajority vote requirements +✔ +Shareholder right to act by written consent +✔ +Active shareholder engagement practices +Meeting Information +The Company's Annual Meeting is scheduled to take place virtually, as set forth in the notice, on May 1, 2025, at 10:00 a.m. EDT. The Company encourages you to vote your shares before the Annual Meeting. +2025 PROXY STATEMENT +9 +TABLE OF CONTENTS +Corporate Governance +Wolverine Worldwide is committed to the highest level of corporate governance, and the Board has adopted Corporate Governance Guidelines to strengthen management accountability and promote long-term shareholder interests. +BOARD OF DIRECTORS +The shareholders elect directors to serve on the Company's Board of Directors (the “Board of Directors” or “Board”). The Board oversees the management of the business by the Chief Executive Officer (“CEO”) and senior management. In addition to its general oversight function, the Board's responsibilities include, but are not limited to, the following: +• +Reviewing and approving the Company's financial and other key objectives and strategic business plans, and monitoring implementation of those plans and the Company's success in meeting identified objectives +• +Selecting, evaluating and approving the compensation of the CEO and overseeing CEO succession planning +• +Providing advice and oversight regarding the selection, evaluation, development and compensation of management +• +Overseeing the Company's process for assessing and managing risk and mitigation activities +• +Nominating the Company’s director candidates and appointing committee members +• +Engaging in succession planning for the Board and key leadership roles on the Board and its committees +• +Shaping effective corporate governance +• +Reviewing and monitoring administration of policies and procedures to safeguard the integrity of the Company's business operations and financial reporting and to promote compliance with applicable laws and regulations +Board Composition +Board Highlights +The Board prides itself on its ability to recruit and retain directors who have high personal and professional integrity and have demonstrated exceptional ability and judgment to effectively serve shareholders' long-term interests. These skills and experience will help the Company accomplish its most important strategic objectives, such as global brand-building, investing in the Company's growth brands, direct-to-consumer and digital growth, powerful product, operational excellence, supply chain management, and international growth. The Board also values a diversity of backgrounds, experiences, and perspectives and considers this an important factor in identifying and considering nominees for appointment and election. The Board believes that its directors, including the nominees for election as directors at the Annual Meeting, have characteristics and valuable skills that provide the Company with the variety and depth of knowledge, judgment and strategic vision necessary to provide effective oversight of the Company. +To help achieve the right mix of experience and expertise, and to assist in succession planning, the Board, at the recommendation of the Governance Committee, has identified specified skills and experience it desires its members to possess. The below graphic lists these skills and experience and indicates which of the directors possess each. As shown, these skills and experience are well represented within the Board. +2025 PROXY STATEMENT +10 +TABLE OF CONTENTS +BOARD SKILLS AND EXPERIENCE +Totals +Andersen +Boromisa +Bricker +Gerber +Hufnagel +Kollat +Lauderback +Long +Price +Wilson-Thompson +Active Executive +1 +✔ +Brand Building +9 +✔ +✔ +✔ +✔ +✔ +✔ +✔ +✔ +✔ +Current or Former CEO +4 +✔ +✔ +✔ +✔ +Digital/eCommerce/IT +4 +✔ +✔ +✔ +✔ +Finance +6 +✔ +✔ +✔ +✔ +✔ +✔ +Footwear/Apparel +6 +✔ +✔ +✔ +✔ +✔ +✔ +Global Supply Chain +5 +✔ +✔ +✔ +✔ +✔ +International Business +10 +✔ +✔ +✔ +✔ +✔ +✔ +✔ +✔ +✔ +✔ +Marketing +7 +✔ +✔ +✔ +✔ +✔ +✔ +✔ +Public Company Governance +7 +✔ +✔ +✔ +✔ +✔ +✔ +✔ +Retail +9 +✔ +✔ +✔ +✔ +✔ +✔ +✔ +✔ +✔ +The Governance Committee reviews with the Board on an annual basis the skills, experience and characteristics desired of Board members in the context of the current makeup of the Board. The Board, with the assistance of the Governance Committee, annually assesses the current composition of the Board across many dimensions. As set forth in the Company's Corporate Governance Guidelines, which are posted on its website, this assessment addresses the skills and experience set forth in the table above and the individual performance, experience, age and skills of each director. +Director Nominations +The Board's Governance Committee serves as its nominating committee. The Governance Committee, in anticipation of upcoming director elections and other potential or expected Board vacancies, evaluates qualified individuals and recommends candidates to the Board. As part of the search process for each new director, the Governance Committee endeavors to include qualified women and minority candidates as part of the pool from which Board nominees are chosen. The Governance Committee may (and typically does) retain a search firm or other external parties to assist it in identifying candidates, and the Governance Committee has the sole authority to select such a firm, approve the search firm's fees and retention terms, and to terminate the firm if necessary. +The Governance Committee considers candidates suggested by directors, senior management or shareholders. Shareholders may recommend individuals as potential director candidates by communicating with the Governance Committee through one of the Board communication mechanisms described under the heading “Shareholder Communications Policy.” Shareholders that wish to nominate a director candidate must comply with the procedures set forth in the Company's By-Laws, which are posted on its website. The deadline for shareholders to submit notice of nominations for next year’s annual meeting is set forth under the heading “Other Shareholder Proposals for Presentation at Next Year’s Annual Meeting” in this Proxy Statement. +Ultimately, upon the recommendation of the Governance Committee, the Board selects the Company’s director nominees for election at each annual meeting. In selecting director nominees, the Board considers each candidate's performance as a director (which is assessed through an anonymous written peer evaluation) if such candidate is serving or has served as a director of the Company; personal and professional integrity; ability and judgment; and likelihood to be effective, working with the other nominees and directors, in serving the long-term interests of the shareholders. The Governance Committee also considers candidates' relative skills, experience, attributes, background and characteristics as well as independence under applicable New York Stock Exchange (“NYSE”) listing standards and the Company's Director Independence Standards, potential to contribute to the composition and culture of the Board, ability and willingness to actively participate in the Board and committee meetings and to otherwise devote sufficient time to Board duties. +2025 PROXY STATEMENT +11 +TABLE OF CONTENTS +Director Onboarding and Ongoing Education Initiatives +The Board provides onboarding orientation programs to familiarize new Board members with the Company’s business and the operation of the Board. Directors are encouraged to participate in continuing education programs to assist them in performing their Board responsibilities. The Company supports director education by coordinating continuing education programs and reimbursing directors for related expenses. +BOARD SELF-ASSESSMENT +As part of an annual Board assessment, each director evaluates over a number of dimensions the performance of the Board and any committee on which he or she serves. Tom Long, the Chairman of the Board, works with the Governance Committee to review the Board self-assessment with directors following the end of each fiscal year and to conduct individual director interviews at the end of each year. Committee Chairpersons review the committee self-assessments with their respective committee members and discuss them with the Board. The Company has also used a third-party facilitator to elicit feedback from directors as part of the Board assessment process. +In addition, the Governance Committee, working with the Chairman of the Board, develops and implements guidelines for evaluating all directors standing for nomination and election and oversees the evaluation of such nominees. +The Corporate Governance Guidelines (including the Director Independence Standards), the Charter for each Board committee (Audit, Compensation and Human Capital and Governance), the Company's Certificate of Incorporation, By-Laws, Code of Business Conduct, and its Accounting and Finance Code of Ethics all are available on the Wolverine Worldwide website at: www.wolverineworldwide.com/investor-relations/corporate-governance/. +The Board and applicable committees annually review these and other key governance documents. +RISK OVERSIGHT +The Board oversees the Company's process for assessing and managing enterprise risk and mitigation activities with a focus on the most significant enterprise risks facing the Company, including strategic, inventory, operational and supply chain, financial, cybersecurity, human capital, environmental, social, and governance (“ESG”) and legal compliance risks. This oversight is conducted through quarterly presentations by and discussions with the President and CEO, Chief Financial Officer (“CFO”), Director of Internal Audit, Chief Legal Officer, Chief Information Officer, Chief Information Security Officer, brand and department leaders and other members of management. The Chief Legal Officer, Risk Manager, and Director of Internal Audit coordinate management's day-to-day risk management and mitigation efforts, and the Director of Internal Audit reports directly to the Audit Committee. +The Chief Legal Officer, Risk Manager, and Director of Internal Audit review with the Audit Committee regularly, and with the full Board periodically, management's risk assessment and mitigation strategies. In addition to the above processes, the Board has delegated risk management and mitigation oversight responsibilities to its standing committees, which meet regularly to review and discuss specific risk topics that align with their core responsibilities. +• +The Audit Committee reviews the Company's approach to enterprise risk management generally. The Audit Committee also oversees the Company's risk policies and processes relating to its financial statements and financial reporting processes, credit risks and liquidity risks, major legal and regulatory compliance risk exposures, as well as the Company's management of risks related to cybersecurity and data privacy. The Audit Committee discusses with management and the independent auditors significant risks or exposures and the steps taken by management to mitigate them. +• +The Board has delegated the primary responsibility to oversee cybersecurity matters to the Audit Committee. The Audit Committee regularly reviews the measures implemented by the Company to identify and mitigate data protection and cybersecurity risks. As part of such reviews, the Audit Committee receives quarterly reports and presentations from members of the Company’s team responsible for overseeing the Company’s cybersecurity risk management, including the Chief Information Security Officer, Chief Information Officer, and members of the legal team, which address a wide range of topics including recent developments, evolving standards, vulnerability assessments, third-party and independent reviews, the threat environment, technological trends and information security considerations arising with respect to the Company’s peers and third parties. The other members of the Board receive these quarterly reports and +2025 PROXY STATEMENT +12 +TABLE OF CONTENTS +attend presentations to the Audit Committee provided by members of management. The Company has protocols by which certain cybersecurity incidents that meet established reporting thresholds are escalated within the Company and, where appropriate, reported promptly to the Board and Audit Committee, as well as ongoing updates regarding any such incident until it has been addressed. +• +The Audit Committee reviews artificial intelligence (“AI”) exposures, risks and Company policies. The Board regularly receives updates from members of management on the Company’s policies, practices, and initiatives relating to the use of technology, including AI, across our operations. +• +The Compensation and Human Capital Committee oversees the risks associated with management resources; organization structure and succession planning, hiring, development and retention processes; and it reviews and evaluates risks associated with the Company's compensation structure, policies and programs. The Compensation and Human Capital Committee also oversees the relevant risks related to human capital management, including with respect to matters such as talent recruiting, development, progression and retention, inclusion, human health and safety and total rewards and workplace environment and culture. +• +The Governance Committee oversees the Company's management of risks related to the Company's governance structure and processes and potential risks arising from related person transactions. The Governance Committee also oversees risks related to the Company’s ESG matters. +Each year, the Company reviews its compensation policies and practices to assess whether they are reasonably likely to have a material adverse effect on the Company. As part of this review, the Company compiled information about the Company's incentive plans, including reviewing the Company's compensation philosophy, evaluating key incentive plan design features and reviewing historic payout levels and pay mix. With assistance from Company management and its independent compensation consultant, the Compensation and Human Capital Committee reviewed the executive compensation program, and managers from the Company's human resources and legal departments reviewed the non-executive compensation programs. +2025 PROXY STATEMENT +13 +TABLE OF CONTENTS +ENVIRONMENTAL, SOCIAL AND GOVERNANCE HIGHLIGHTS +As Wolverine Worldwide begins its next chapter in its 142-year history, we are proud to move forward a stabilized company focused on transforming product innovation and pursuing a vision of building consumer-obsessed global brands. Our dedicated and talented team of employees continue to advance a portfolio of brands that are designed to enable customers to live healthier and more physically and mentally productive and fulfilled lives. Our ability to bring about change is grounded in our dedication to our planet and people and guided by the vision of a better tomorrow. These principles are embedded in the governance practices and Code of Business Conduct outlined below, which guide the Board and the Company’s global employees in their actions. +The focus of the Company’s ESG initiatives include the environment and climate, sustainability and responsible sourcing, inclusivity and community impact. These initiatives are a priority for the Company because we believe the Company will grow not just from solid financial performance and new products, but also the Company's positive impact on our communities, our employees and the planet. +In addition, Wolverine Worldwide’s governance structure is designed to enable execution of its policies, strengthens management accountability and enhances Wolverine Worldwide’s ability to generate long-term shareholder value. +Some of the Company's ESG initiatives are summarized below, and more information is available on the Company’s corporate responsibility website at wolverineworldwide.com/about-us/responsibility/ and in our most recent Global Impact Report at https://www.wolverineworldwide.com/wp-content/uploads/2025/01/2023WWW-Global-Impact-Report-FINAL.pdf. 1 +Environmental +Wolverine Worldwide aims to reduce and responsibly manage our environmental impact by measuring our Greenhouse Gas (GHG) emissions, actively implementing environmentally conscious business practices, reducing energy use at our offices and distribution centers, seeking out sustainable products and components, and responsibly sourcing our products in accordance with clear and transparent standards. +• +In 2023, Wolverine Worldwide conducted an assessment of the Company's climate-related programs and practices and established a Climate Action Plan, which identifies key milestones, workstreams and a timeline for the Company's internal climate program and disclosures. +• +In early 2024, Wolverine Worldwide engaged a third-party to conduct an Emissions Gap Assessment in order to establish a comprehensive GHG emissions inventory in alignment with key climate standards. +• +Wolverine Worldwide conducted a GHG emissions inventory on Scope 1 and Scope 2 emissions for 2023 and plans to report on these emissions in 2025, and annually thereafter. The Company is currently conducting a relevancy assessment and data collection with regard to Scope 3 GHG emissions categories. +• +Our brands continue to expand the use of recycled and innovative materials in their products designed to decrease environmental impacts. +Social +We believe that our global team members are critical to helping our business evolve and flourish. We work to maximize the engagement and contribution of our workforce and to attract the best talent available, while providing opportunities for growth and development for team members. Wolverine Worldwide strives to be a champion and driver of positive change within the global communities in which we live and work. +• +We offer our employees an array of opportunities for self-development and continued learning, including an annual Global Careers Conference, the Harvard Leadership Essentials series for people leaders, E-learning options and a coaching office to help our people develop, grow and become great leaders and team members. +1 +Website references are provided for convenience only, and the content on the referenced websites is not, and shall not be deemed to be, incorporated by reference into this Proxy Statement. +2025 PROXY STATEMENT +14 +TABLE OF CONTENTS +• +Our 2024 pulse survey, which we use to collect feedback on employees’ job satisfaction, loyalty and engagement, had a Global Engagement Score of 7.5 which reflects results that are well within benchmark of the Consumer Durables & Apparel sector, with a 76% overall participation rate. Our entire employee population was invited to take part in the pulse survey. +• +In 2024, we hosted our first annual Global Day of Purpose as part of WOLVER1NE Week, during which we served the communities in which we live and work across the globe by donating 1000+ hours with partner nonprofit organizations. +• +We also realigned the mission of the Wolverine Worldwide Foundation, our charitable arm, to better represent our brands, consumers and employees and to enhance our commitment to promote the Foundation's three pillars: Healthy Lives and Outdoors, Diversifying Trades and Talent and Industry and Community Giving. +• +In 2024, 96% of our direct manufacturing base completed social compliance audits to assess whether our factory partners are upholding the employment, safety and other standards in our Production Code of Conduct. The social audits cover topics such as human trafficking and forced labor, harassment, abuse and discrimination, child labor and pregnant workers, wages and legal benefits, working hours, recruitment and contracts management, safety, occupational and health management and the environment. +Governance +Wolverine Worldwide is committed to a governance structure that provides strong shareholder rights and meaningful accountability. The Board regularly reviews brand initiatives, product collections and launches that have environmental and social impacts. The Board has delegated responsibility to its Governance Committee to oversee and make recommendations to it concerning ESG matters, including the Company’s ESG initiatives and their integration into the Company’s business and long-term value creation for the Company and its shareholders. The Governance Committee is also responsible for overseeing the development and disclosure of the Company’s broader ESG initiatives. +Our governance structure features: +• +Independent Board (except our CEO) and fully independent committees +• +Independent Board Chairman +• +Majority vote standard with director resignation policy +• +No supermajority vote requirements +• +Shareholder right to act by written consent +• +Annual Board and Committee self-evaluations +• +Robust Board and executive succession planning process, including annual written director nominee evaluations +• +Long-standing commitment to inclusion +• +Director onboarding orientation program and ongoing education initiatives +• +Active shareholder engagement practices +Inclusion & Belonging +With thousands of employees across the globe, Wolverine Worldwide's workforce represents a truly diverse range of cultures, religions, ethnicities, nationalities, backgrounds, and beliefs. Wolverine Worldwide is focused on fostering an inclusive environment where every team member feels valued, respected, and empowered. We believe cultivating a well-rounded, inclusive workforce is critical to serving the diverse needs of our global customer base. Inclusion is a focal point of our corporate culture, and we provide resources and programs to our team members to facilitate a sense of belonging. Our Board of Directors, through the Compensation and Human Capital Committee, oversees the Company’s Human Capital strategies and policies, and our Chief Human Resources Officer provides the Committee with regular updates on Company initiatives. +2025 PROXY STATEMENT +15 +TABLE OF CONTENTS +In 2024, UN1TED was created to strategize and launch the Company's inclusion and belonging initiatives, including to: +• +Create and maintain connections and key partnerships within our communities +• +Grow and leverage Wolverine Worldwide employee resource groups, which are open to all employees +• +Nurture a culture and environment of belonging and inclusion through cross-promotional events, guest speakers, recognition of cultural events and observances and actions following the insights received from employee pulse surveys +For more information on the Company's inclusion and belonging initiatives, please see our most recent Global Impact Report, available at https://www.wolverineworldwide.com/wp-content/uploads/2025/01/2023WWW-Global-Impact-Report-FINAL.pdf. 2 +Our Workforce at a Glance +Below are metrics for Wolverine Worldwide's organizational diversity. 3 +CODE OF BUSINESS CONDUCT AND ACCOUNTING AND FINANCE CODE OF ETHICS +The Board has adopted a Code of Business Conduct for the Company's directors, officers and employees. The Board also has adopted an Accounting and Finance Code of Ethics (“Accounting and Finance Code”) that focuses on the financial reporting process and applies to the Company's CEO, CFO and Corporate Controller. +The Company discloses amendments to or waivers made with respect to directors or executive officers under both its Code of Business Conduct and Accounting and Finance Code within four business days following the date of the amendment or waiver on its website at: www.wolverineworldwide.com/investor-relations/corporate-governance/. +2 +Website references are provided for convenience only, and the content on the referenced websites is not, and shall not be deemed to be, incorporated by reference into this Proxy Statement. +3 +Ethnicity is reported for U.S. population only. Information provided is as of December 28, 2024. +2025 PROXY STATEMENT +16 +TABLE OF CONTENTS +SHAREHOLDER COMMUNICATIONS POLICY +Shareholders and other interested parties may send correspondence to the Board, the non-employee directors as a group, a specific Board committee or an individual director (including the Chairman of the Board) in the manner described below. +The Chief Legal Officer will provide a summary and copies of all correspondence (other than solicitations for services, products or publications) as applicable at each regularly scheduled Board meeting. +Communications may be sent via email through various links on our website at: +www.wolverineworldwide.com/investor-relations/corporate-governance/ +or by regular mail c/o Chief Legal Officer, Wolverine World Wide, Inc., 9341 Courtland Drive, NE, Rockford, Michigan 49351. +The Chief Legal Officer will alert individual directors if an item warrants a prompt response from the individual director prior to the next regularly scheduled meeting. Items warranting a prompt response, but not addressed to a specific director, will be routed to the applicable committee Chairperson. +2025 PROXY STATEMENT +17 +TABLE OF CONTENTS +Proposal 1 — Election of Directors +for Terms Expiring in 2028 +The Board currently consists of ten directors. As recently announced, David T. Kollat and Jodi Bricker are departing from the Board at this year’s Annual Meeting. The Board thanks Mr. Kollat and Ms. Bricker for their many contributions to the Company over the years. Effective as of the Annual Meeting, the size of the Board will be reduced to eight directors. The Governance Committee is actively conducting a new director search. +The Company's By-Laws establish three classes of directors with each class serving staggered three-year terms. At each annual meeting, the term of one class expires. The Board has nominated two directors for election at the Annual Meeting: Jeffrey M. Boromisa and Christopher E. Hufnagel. Each director has been nominated to serve for a three-year term expiring at the annual meeting of shareholders to be held in 2028 or until his successor, if any, has been elected and is qualified. +Mr. Boromisa is an independent director, as determined by the Board under the applicable NYSE listing standards and the Company's Director Independence Standards. As the Company's President and CEO, Mr. Hufnagel is not an independent director. Each director nominee currently serves on the Board. The shareholders most recently elected Mr. Boromisa at the Company's 2022 Annual Meeting. Mr. Hufnagel was appointed to the Board in 2023 on the recommendation of the Company’s Governance Committee. +The Company is not aware of any nominee who will be unable or is unwilling to serve as a director. However, if a nominee is unable to serve or is otherwise unavailable for election, the incumbent directors may or may not select a substitute nominee. If the directors select a substitute nominee, the proxy holder will vote the shares represented by all valid proxies for the substitute nominee (unless other instructions are given). +The biographies of the two nominees, the two directors not seeking re-election and the other continuing directors of the Company are below, along with a discussion of the experience and skills of each director. +2025 PROXY STATEMENT +18 +TABLE OF CONTENTS +Director Nominees with +Proposed Terms Expiring in 2028 +JEFFREY M. BOROMISA +Retired Executive Vice President, Kellogg International, +President, Latin America and Senior Vice President Kellogg Company +Career Highlights: +•  +Kellogg Company , a global food manufacturing company (1981 – 2009) +°   +Senior Vice President and member of the Global Leadership Team (2004 – 2009) +°   +Executive Vice President, Kellogg International (2007 – 2009) +°   +President, Latin America (2008 – 2009) +°   +President, Asia Pacific (2007 – 2008) +°   +Chief Financial Officer (2004 – 2006) +Experience and Skills: +•  +Finance: Deep expertise developed during his 25 years serving in financial roles at Kellogg, where he was hired as a senior auditor and promoted to positions with increasing responsibility until being named Chief Financial Officer. In that role, he had responsibility for the strategic planning, implementation, and management of all finance activities, including business planning, budgeting, forecasting, risk and governance. +•  +International Business: Substantial experience gained through his tenure at Kellogg, a large global company, where early in his career he was Controller for Kellogg de Mexico based in Queretaro, Mexico and later led operations for the company’s Asia Pacific and Latin America divisions. +•  +Audit Committee Leadership and Governance: Mr. Boromisa is a member of the Board of Haworth International, Inc. and serves as the Chair of Haworth’s Audit Committee. Mr. Boromisa is also a Trustee of Hawaii Pacific University and serves at the Vice-Chair of Hawaii Pacific’s Finance and Investment Committee. +•  +Mr. Boromisa also brings global supply chain , brand building , marketing , and public company governance experience and expertise to the Board. +Education: +•  +BA, Accounting, Michigan State University +•  +Completed graduate courses, Thunderbird, the American Graduate School of International Management +•  +CPA and a member of the American Institute of Certified Public Accountants +Age: 70 +Director since: 2006  +Board Committees: +Audit (Chair) +Governance +Other Public Directorships: +None +2025 PROXY STATEMENT +19 +TABLE OF CONTENTS +CHRISTOPHER E. HUFNAGEL +President and Chief Executive Officer, Wolverine Worldwide +Career Highlights: +•  +Wolverine World Wide, Inc. (since 2008) +°   +President and Chief Executive Officer (since 2023) +°   +President (2023) +°   +President, Active Group (2022 – 2023) +°   +Global Brand President, Merrell (2019 – 2022) +°   +Global Brand President, CAT Footwear (2018 – 2019) +°   +Senior Vice President & Head of Corporate Strategy (2013 – 2018) +°   +President of Direct-to-Consumer (2008 – 2013) +•  +Under Armour, Inc. , an activewear clothing and accessories retailer +°  Vice President of Retail (2007 – 2008) +•  +The Gap, Inc. , a clothing and accessories retailer +°  Vice President of Brand Store Experience (2003 – 2007) +•  +Abercrombie & Fitch Co. , a specialty retailer of apparel and accessories for men, women and kids +°   +Director of Presentation (1998 – 2003) +Experience and Skills: +•  +Footwear/Apparel: Extensive experience in the sector having spent his career at leading global footwear and apparel companies in positions of leadership and increasing responsibility including business development, portfolio management, M&A, investor relations, and corporate communications. +•  +Brand Building: Demonstrated track record of successfully building global brands gained over decades of omnichannel brand-building experience that began at Abercrombie & Fitch, where he helped create the look of the Hollister brand. As Vice President of Brand Store Experience at Gap, a position the company created for him, he led the very successful redesign of Gap stores to be more friendly, approachable and personal, and to ensure that every aspect of Gap’s stores reinforced how the company wanted its customers to feel about the brand. He further developed this expertise over the past 15 years at Wolverine, where he started the Company’s consumer insights and market intelligence function to build stronger connections with consumers, he led the Company’s transformation initiative, WOLVERINE WAY FORWARD, to help the organization compete better in the fast-changing global marketplace, and he has led all of the Company’s footwear brands. +•  +Retail: Deep expertise in all aspects of successfully operating a retail company gained at Abercrombie & Fitch and Gap, where he was responsible for in-store presentation, visual merchandising, and marketing, at Under Armour, where he served as Vice President of Retail and was responsible for the development, execution, and roll-out of the company’s retail strategy, and at Wolverine, where he initially was responsible for all direct-to-consumer operations, including e-commerce. Due to his keen sense for global trends and consumer desires, and deep understanding of the importance of having good relationships with the Company’s customers, he was promoted to positions of increasing responsibility including Global Brand President of CAT Footwear, where he took aggressive actions to help the team rapidly evolve its growth and go-to-market strategies. He also served as Global Brand President of Merrell, where he oversaw the Wolverine Worldwide Kid’s Group, as well as Global Licensing for the Company, and as President of the Active Group, with responsibility for Merrell, Saucony, and Chaco. +•  +Mr. Hufnagel also brings executive leadership , international business , digital/eCommerce/IT , and global supply chain experience and expertise to the Board. +Education: +•  +BA, Political Science & History, Alma College +Age: 52 +Director since: 2023   +Board Committees: +None +Other Public Directorships: +None +BOARD RECOMMENDATION +The Board recommends that you vote “FOR” the election of the above nominees for proposed terms expiring in 2028. +2025 PROXY STATEMENT +20 +TABLE OF CONTENTS +Directors with Terms +Expiring in 2025 not Seeking Reelection +DAVID T. KOLLAT +President and Chairman, 22, Inc. +Career Highlights: +•  +22 Inc. , a company specializing in research and management consulting for retailers and consumer goods manufacturers +°   +Chairman and President (since 1987) +•  +The Limited, Inc. , a publicly traded, multinational apparel, lingerie, and bath and body retail company that became L Brands +°   +Served in senior leadership positions, including as Executive Vice President, Marketing, President of Victoria’s Secret Direct, and as a member of its executive committee +(1976 – 1987) +•  +Management Horizons , a research and consulting firm specializing in marketing and retailing for consumer goods companies +°   +Executive Vice President (1972 – 1976) +Experience and Skills: +•  +Retail: Comprehensive understanding of the industry developed over many years spent researching, consulting and serving in leadership positions, including co-founding the Retail Intelligence System, a syndicated research program that has served over 200 companies. He developed the first computerized data base of all publicly-held retailing companies; pioneered new demographic, psychographic, and store positioning techniques in retailing; and adapted strategic and long-range planning systems to retailing. +•  +Marketing: Deep expertise first gained while at Management Horizons, where he directed and participated in consulting and research projects for companies in most major sectors of retailing and consumer goods marketing. This was further developed at Limited, where he, among other things, developed and implemented marketing positioning strategies and marketing departments for Limited Express, Victoria’s Secret and Lane Bryant. This experience informed the six books and numerous articles he has authored or co-authored on consumer behavior as well as marketing strategy, business strategy and corporate strategy. +•  +Public Company Governance: Significant experience through service on more than 20 boards of directors, including public company boards such as The Limited Inc. and its successor company, L Brands, where he served for 43 years; Sleep Number, a bedding manufacturer and retailer; Big Lots, a general merchandise close-out retailer; Cone Mills, a denim and fabric manufacturer; and Cooker Restaurant Company. He also served as Lead Independent Director of Wolverine from 2007 until November 2022 and has served as chair of the audit, compensation, and nominating and governance committees of additional publicly held companies. +•  +Dr. Kollat also brings executive leadership , footwear/apparel , brand building , digital/eCommerce/IT , finance , and international business experience and expertise to the Board. +Education: +•  +BBA, MBA, Marketing & Finance, Western Michigan University – Haworth College of Business +•  +DBA, Marketing, Finance, Management, Economics, Psychology, Indiana University – Kelley School of Business +Other Affiliations and Acknowledgements: +•  +Selected as one of the ten outstanding directors in corporate America by the Outstanding Directors Exchange, a New York division of the Financial Times +•  +Recognized as one of the top 100 directors in America by the National Association of Corporate Directors +Age: 86 +Director since: 1992 +Board Committees: +Audit +Compensation and Human Capital +Other Public Directorships: +None +2025 PROXY STATEMENT +21 +TABLE OF CONTENTS +JODI BRICKER +Strategic Advisor, Luminary Impact Fund; +Former Chief Executive Officer of Quay Australia +President, Big Bend, LLC +Career Highlights: +•  +Quay Australia , a global eyewear brand that sells sunglasses and prescription eyewear +°  Chief Executive Officer (2019 – 2023) +•  +The Gap, Inc. , a worldwide clothing and accessories retailer +°   +Executive Vice President of Merchandising, Inventory Management and eCommerce, Athleta, Inc. (2016 - 2018) +°   +Executive Vice President and General Manager, Old Navy (2013 – 2016) +°   +Senior Vice President and General Manager, OldNavy.com (2011 – 2013) +°   +Served in multiple roles for Gap Direct, including Director of Merchandising and then Vice President and General Manager of OldNavy.com (2001 – 2006) +°   +Merchant, across various roles including Women's, Men's and Kids divisions, Old Navy +(1994 – 2001) +•  +Levi Strauss & Co. , an apparel company and a global leader in Jeanswear +°   +Held various senior leadership roles, including Vice President, eCommerce/Digital for Levi’s.com and Dockers.com, Interim General Manager, Dockers Retail, and Vice President, Levi Women's Merchandising (2006 – 2011) +Experience and Skills: +•  +Retail: An experienced operator and strategic advisor in the consumer and retail space with a strong track record of driving high growth in vertical retail, ecommerce and wholesale channels across her more than 25+ years in senior leadership positions leading multinational apparel, accessories and lifestyle brands. +•  +Digital/eCommerce: Deep omni-channel expertise gained over a decade of leading and growing e-commerce channels at Old Navy, where she helped launch the e-commerce channel within Gap, Inc., at Levi’s, a traditional brick and mortal retail company, where she built a successful global digital culture and led a multi-brand ecommerce division driving growth and expanding the brand’s presence online. And at Athleta, leading and resetting the product and omnichannel strategy and charting the long-range plan towards achieving 1B in revenue. +•  +Brand Building and Product Expertise: Strong reputation for building brands beginning at Gap, Inc., where she was among a handful of merchants handpicked to launch Old Navy, which became one of the world's fastest growing retail +brands. As CEO of Quay Australia, she led the Company to become one of the fastest growing independent brands in the eyewear industry and has helped expand the brand beyond sunglasses to the broader optical market. She brings deep expertise and a unique ability to connect consumer, product innovation and brand strategy to deliver growth and create products and brands that people love. +•  +Ms. Bricker also brings CEO/executive leadership , footwear/apparel , sustainability , global business , marketing and brand management expertise to the Board. +Education: +•  +BS, Merchandising, University of Arizona +Age: 57 +Director since: 2023 +Board Committees: +Governance +Other Public Directorships: +None +2025 PROXY STATEMENT +22 +TABLE OF CONTENTS +Directors with Terms +Expiring in 2026 +WILLIAM K. GERBER +Managing Director, Cabrillo Point Capital LLC; +Retired EVP and Chief Financial Officer, Kelly Services, Inc. +Career Highlights: +•  +Cabrillo Point Capital LLC , a private investment fund +°   +Managing Director (since 2008) +•  +Kelly Services, Inc. , a publicly traded global staffing solutions company +°  Executive Vice President and Chief Financial Officer (1998 – 2007) +•  +L Brands, Inc. , a multinational apparel and retail company +°   +Served in various leadership positions (1983 – 1998), including Vice President, Finance and Vice President, Corporate Controller. +Experience and Skills: +•  +Audit Committee Leadership: Served as Audit Committee Chair for three public companies including AK Steel Holding, Kaydon, and Wolverine Worldwide. +•  +Finance: Deep expertise gained over 25 years in senior financial leadership positions that underpin his broad and keen understanding of complex financial and accounting matters and that he utilizes in his current position leading a private investment fund. +•  +International Business: Experience gained serving at L Brands, a multinational company, and Kelly Services, which has operation in more than 35 countries. +•  +Public Company Governance: Served as a director of Cleveland-Cliffs, Inc., the largest flat-rolled steel producer in North America from 2020 to 2024, and was on the board of AK Steel Holding Corporation from 2007 until it merged with Cleveland-Cliffs in 2020. +•  +Mr. Gerber also brings retail and footwear/apparel experience and expertise to the Board. +Education: +•  +BS, Economics and Finance, University of Pennsylvania’s Wharton School +•  +MBA, Finance, Harvard Business School +Age: 71 +Director since: 2008 +Board Committees: +Audit +Compensation and +Human Capital +Other Public Directorships: +None +2025 PROXY STATEMENT +23 +TABLE OF CONTENTS +TOM LONG +CHAIRMAN OF THE BOARD +Retired Chief Executive Officer, MillerCoors LLC +Career Highlights: +•  +Bridger Growth Partners, LLC , a private investment fund +°   +Managing Partner (since 2015) +•  +MillerCoors LLC , a joint venture between SABMiller and Molson Coors, two publicly traded beverage companies +°   +Chief Executive Officer (2011 – 2015) +°   +President and Chief Commercial Officer (2008 – 2011) +•  +Miller Brewing Company , a beverage company +°   +Chief Executive Officer (2007 – 2008) +°   +Chief Marketing Officer (2005 – 2007) +•  +The Coca-Cola Company , a beverage company (1988 – 2005) +°   +Various senior leadership positions including Vice President of Strategic Marketing, Global Brands; Vice President, Strategic Marketing Research and Trends; President of Coca Cola’s Great Britain and Ireland Division; and President of the Northwest Europe Division +Experience and Skills: +•  +Brand Building: Established an impressive reputation for building strong global brands over more than 20 years in senior positions at category leading companies and subsequently serving as MillerCoors’ President and Chief Commercial Officer, where he played an integral role in building the now recognized brand of what was then a newly formed company. +•  +International Business: Oversaw strategy and operations for multiple large, global companies including Coca-Cola, where he served as President of both the Great Britain and Ireland division and the Northwest Europe division. +•  +Marketing: Developed exceptional marketing acumen and strong and lasting customer relationships at multiple consumer-focused brands. +•  +Mr. Long also brings executive leadership , retail , and finance experience and expertise to the Board. +Education: +•  +BA, English, University of North Carolina +•  +MBA, Harvard Business School +Age: 66 +Director since: 2011 +Board Committees: +None +Other Public Directorships: +Amcor PLC (since 2017) +2025 PROXY STATEMENT +24 +TABLE OF CONTENTS +KATHLEEN WILSON-THOMPSON +Retired Executive Vice President and Global Chief Human Resources Officer, +Walgreens Boots Alliance, Inc. +Career Highlights: +•  +Walgreens Boots Alliance, Inc. , a global pharmacy and wellbeing company +°   +Executive Vice President and Global Chief Human Resources Officer (2014 – 2021) +°   +Senior Vice President and Chief Human Resources Officer (2010 – 2014) +•  +Kellogg Company , a food manufacturing company +°   +Held various legal and operational roles, including most recently as Senior Vice President, Global Human Resources (1992 – 2010) +Experience and Skills: +•  +Retail: Developed significant experience over her 25 years at two leading retailers. +•  +International Business: Experience cultivated through her management roles and responsibilities at two global companies, in particular her responsibilities for employees worldwide. +•  +Public Company Governance : Experience gained currently serving as a director of Tesla, an electric vehicle manufacturer, clean energy, energy generation and storage company, and McKesson Corporation, a publicly-traded pharmaceutical distribution and healthcare technology company. +•  +Ms. Wilson-Thompson also brings brand building , legal , human capital management and finance experience and expertise to the Board. +Education: +•  +BA, English Literature, University of Michigan +•  +JD and LLM, Corporate and Finance Law, Wayne State University +Age: 67 +Director since: 2021 +Board Committees: +Compensation and Human Capital (Chair) +Governance +Other Public Directorships: +Tesla, Inc. (since 2019) +McKesson Corporation (since 2022) +2025 PROXY STATEMENT +25 +TABLE OF CONTENTS +Directors with Terms +Expiring in 2027 +BRENDA J. LAUDERBACK +Chair, Denny’s Corporation; Retired President, +Wholesale and Retail Group, Nine West Group, Inc. +Career Highlights: +•  +Nine West Group, Inc. , a footwear wholesale retailer and distributor +°  President, Wholesale and Retail Group (1995 – 1998) +•  +US Shoe Corporation , a footwear manufacturer, retailer and distributor +°   +President, Wholesale and Manufacturing Division, a position that included responsibility for offices in China, Italy and Spain (1993 – 1995) +•  +Dayton Hudson Corporation (now Target Corporation) a retail company +°   +Held various positions including Vice President, General Manager of shoes, accessories and children’s (1975 – 1993) +Experience and Skills: +•  +Footwear/Apparel: Spent more than 25 years in the industry in various positions of increasing responsibility resulting in deep expertise in all aspects of the industry, including merchandising, marketing, product development and design and manufacturing. +•  +Retail: Comprehensive understanding of what is integral to being a successful retail company gained over her career and further developed through her board experience, where she has been intimately involved in the transformation of retail and consumer preferences to a more digital and technology focus. +•  +Public Company Governance: Extensive experience gained serving as the Chair of Denny’s, a restaurant company, and a Director of Sleep Number Corporation, a bed manufacturer and retailer, and formerly serving on the board of Big Lots, Inc., a retail company, from 1998 to 2015. +•  +Ms. Lauderback also brings marketing , brand building , global supply chain , and international business experience and expertise to the Board. +Education: +•  +BS, Marketing, Robert Morris University +Other Affiliations and Acknowledgements: +•  +Named to the National Association of Corporate Directors (NACD) 2017 Directorship 100 list +Age: 74 +Director since: 2003 +Board Committees: +Audit +Governance (Chair) +Other Public Directorships: +Denny’s Corporation (since 2005), Board Chair (since 2016) +Sleep Number Corporation (since 2004) +2025 PROXY STATEMENT +26 +TABLE OF CONTENTS +STACIA ANDERSEN +Former Executive Vice President and Chief Customer Officer, PetSmart LLC +Career Highlights: +•  +PetSmart LLC , a specialty retailer of products, services, and solutions for pets +°   +Executive Vice President and Chief Customer Officer (2022 – 2024) +°   +Executive Vice President, Merchandising and Customer Experience (2019 – 2021) +•  +Abercrombie & Fitch Co ., a specialty retailer of apparel and accessories for men, women and kids +°   +Brand President (2016 – 2018) +•  +Target Corporation , a general merchandise retailer (1994 – 2015) +°   +Held various leadership roles, including Senior Vice President of Merchandising for the Apparel, Accessories and Baby, and Home and Seasonal divisions +Experience and Skills: +•  +Brand Building: Impressive history overseeing brand development, including serving as Brand President of Abercrombie & Fitch, where she led the rebuilding and transformation of all aspects of the Abercrombie & Fitch and abercrombie kids brands. This builds on her experience at Target where she created strong brand strategies for multiple divisions. +•  +Digital/eCommerce: Played an instrumental role in overhauling the Abercrombie & Fitch store into a complete omnichannel experience and oversaw the digital and omnichannel transformation at PetSmart. +•  +Global Supply Chain: Extensive experience gained over her 20 years at Target where she served as a buyer, a divisional sourcing manager, Vice President of Global Sourcing, and President of Target Sourcing Services/Associated Merchandising Corporation, which included responsibility for $30B in annual imports from 40 countries. +•  +Ms. Andersen also brings footwear/apparel , international business , retail , and marketing experience and expertise to the Board. +Education: +•  +BA, Marketing and Communications, Buena Vista University +Age: 54 +Director since: 2023 +Board Committees: +Audit +Other Public Directorships: +None +2025 PROXY STATEMENT +27 +TABLE OF CONTENTS +DEMONTY PRICE +Former President, Chief Operating, Service and Values Officer, RH, +formerly known as Restoration Hardware +Career Highlights: +•  +RH , a curator of design, taste and style in the luxury lifestyle market +°   +President and Chief Operating, Service and Values Officer (2017 – 2022) +°   +Co-President, Chief Operating Services and Values Officer (2016 – 2017) +°   +Chief Service and Values Officer (2015 – 2016) +°   +Senior Vice President of Retail Galleries and Operations, and Chief Values Officer +(2006 – 2015) +°   +Vice President of Stores (2003 – 2006) +°   +West Regional (2002 – 2003) +•  +Williams-Sonoma, Inc. +°   +Held various field leadership roles including Northwest District Manager (1999 – 2002) +•  +NIKE, Inc. +°   +Director of P.L.A.Y. (1997 – 1999) +•  +The Gap, Inc. +°   +District Manager (1993 – 1997) +°   +Manager of Diversity (1993 – 1997) +Experience and Skills: +•  +Retail: Extensive experience gained over his more than 35 years in senior leadership positions at global leading retailers, where he oversaw all aspects of operations from human resources and store design to supply chain and distribution. +•  +Operations: Deep understanding of the complexities involved in maintaining a global supply chain gained as President and Chief Operating, Service and Values Officer with responsibilities for overseeing the supply chain function, main brand retail stores, outlets, hospitality, human resources, distribution centers, home delivery, customer service and facilities for RH. +•  +Brand Building: Strong track record of leading company transformations that drove increased company and shareholder profits, including at Williams-Sonoma, where he rebuilt an underperforming district to become the top-performing stores for the company in the US, and at RH, where he supported the company’s significant operational restructuring that included the implementation of a new workforce in the RH galleries companywide. +•  +Mr. Price also brings finance , human capital management and international business experience and expertise to the Board. +Education: +•  +BS, Fashion Merchandising, Oregon State University +Age: 63 +Director since: 2023 +Board Committees: +Compensation and Human Capital +Other Public Directorships: +None +2025 PROXY STATEMENT +28 +TABLE OF CONTENTS +BOARD LEADERSHIP +The Company’s Corporate Governance Guidelines give the Board the flexibility to determine the best leadership structure for the Company based upon the Company’s evolving needs and opportunities. The Governance Committee periodically reviews the Board’s leadership structure and considers many factors, including the specific needs of the business and what is in the best interests of the Company’s shareholders. In May 2023, the Board appointed Tom Long, an independent director, as Chairman of the Board. The Board believes its current leadership structure, in which the roles of Chairman and CEO are separated, best serves the Company at this time, as it allows the Company’s CEO to focus on executing the Company’s strategy and transformation, while leveraging our independent Chairman’s experience to drive accountability at the Board level. +DIRECTOR INDEPENDENCE +The Board annually assesses the independence of all directors. To qualify as “independent,” the Board must affirmatively determine that the director is independent under the Company’s Director Independence Standards, which are modeled after the listing standards of the NYSE. Under NYSE listing standards and the Company’s Director Independence Standards, the Board has determined that except for Mr. Hufnagel, who is a Company employee, each of our non-management directors (Stacia Andersen, Jeffrey M. Boromisa, Jodi Bricker, William K. Gerber, David T. Kollat, Brenda J. Lauderback, Tom Long, DeMonty Price, and Kathleen Wilson-Thompson) is independent. All of the Board’s committees are comprised entirely of independent directors. The independent directors generally meet in executive session at each regularly-scheduled Board meeting. +The Company’s Director Independence Standards define an “Independent Director” as a director who the Board determines otherwise has no material relationship with the Company (either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company), and who: +• +Is not, and in the past three years has not been, an employee of the Company +• +Does not have, and has not had within the last three years, an immediate family member employed as an executive officer of the Company +• +Has not received, and does not have an immediate family member who received, during any 12 month period within the last three years, any direct compensation from the Company in excess of $120,000 (other than compensation for Board service; compensation received by the director for former service as an interim Chairman, CEO or other executive officer; compensation received by the director’s immediate family member for service as a non-executive employee; and pension and other forms of deferred compensation for prior service if such compensation is not contingent in any way on continued service) +• +Is not a current employee or partner of a firm that is the Company’s internal or external auditor +• +Has not been, and does not have an immediate family member who has been, within the last three years, a partner or employee of the Company’s internal or external auditor and personally worked on the Company’s audit within that time +• +Does not have an immediate family member who is (i) a current partner of the Company’s internal or external auditor, or (ii) a current employee of the Company’s internal or external auditor who personally works on the Company’s audit +• +Is not, and has not been within the last three years, part of an interlocking directorate in which a current executive officer of Wolverine Worldwide serves or served on the compensation committee of another company where the director or the director’s immediate family member concurrently serves or served as an executive officer +• +Is not an employee of, and does not have an immediate family member who is an executive officer of, another company that has made payments to, or received payments from, Wolverine Worldwide for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of $1,000,000 or 2% of the other company’s consolidated gross revenues +• +Has not had any other direct or indirect relationship with Wolverine Worldwide that the Board determines is material +2025 PROXY STATEMENT +29 +TABLE OF CONTENTS +BOARD COMMITTEES, MEETINGS AND MEETING ATTENDANCE +The Board has three committees: Audit, Compensation and Human Capital, and Governance. Each committee meets periodically throughout the year and reports its recommendations to the Board. The Company expects directors to attend every meeting of the Board and the committees on which they serve and to attend the annual meeting of shareholders. In 2024, all directors then serving on the Board attended the 2024 Annual Meeting of Shareholders, and all directors attended at least 75% of the meetings of the Board (6 meetings in 2024) and the committees on which they served held during the period for which he or she served. +All directors are typically invited to attend all committee meetings, but only committee members are required to attend meetings of their respective committees. Our independent directors met regularly in separate executive sessions during fiscal year 2024, all of which were chaired and led by the Independent Chairman of the Board. +Each committee annually evaluates its performance to determine its effectiveness. The Board has determined that all committee members are “independent” as defined by NYSE listing standards. Furthermore, each Audit Committee member satisfies the NYSE “financial literacy” requirement. In addition, the Board has determined that Mr. Boromisa and Mr. Gerber are “audit committee financial experts” under Securities and Exchange Commission (“SEC”) rules. Each committee’s charter, with a complete list of the duties and responsibilities, is available on the Company’s website at www.wolverineworldwide.com/investor-relations/corporate-governance/. +AUDIT COMMITTEE +Committee Members +• +Boromisa (Chair) +• +Andersen +• +Gerber +• +Kollat +• +Lauderback +Number of Meetings in 2024 +6 +Highlighted Responsibilities +• +Appoints, evaluates and oversees the work of the independent auditors and oversees the internal audit function +• +Oversees the Company’s approach to enterprise risk management, including policies and processes with respect to enterprise risk management +• +Oversees the Company’s cybersecurity and data privacy risks and exposures +• +Oversees the Company’s program for promoting and monitoring compliance with applicable legal and regulatory requirements +• +Oversees the integrity of the Company’s financial statements, financial reporting process and internal controls +• +Coordinates with the Governance Committee and the Compensation and Human Capital Committee on the Company’s required ESG disclosures +2025 PROXY STATEMENT +30 +TABLE OF CONTENTS +COMPENSATION AND HUMAN CAPITAL COMMITTEE +Committee Members +• +Wilson-Thompson (Chair) +• +Gerber +• +Kollat +• +Price +Number of Meetings in 2024 +7 +Highlighted Responsibilities +• +Assists the Board in fulfilling its responsibilities relating to executive compensation and the Company’s compensation and benefit policies and programs +• +Oversees the overall compensation structure, policies and programs, including whether the compensation structure establishes appropriate incentives for management and employees +• +Oversees the Company’s management of risks relating to the Company’s compensation structure, policies and programs +• +Oversees and reviews the Company’s programs, policies and practices related to human capital management and related disclosures, including with respect to matters such as talent recruiting, development, progression and retention, inclusion, human health and safety and total rewards and workplace environment and culture +• +The Compensation and Human Capital Committee may delegate its authority to one or more subcommittees of the Compensation and Human Capital Committee +• +Coordinates with the Governance Committee and the Audit Committee on the Company’s required ESG disclosures +GOVERNANCE COMMITTEE +Committee Members +• +Lauderback (Chair) +• +Boromisa +• +Bricker +• +Wilson-Thompson +Number of Meetings in 2024 +5 +Highlighted Responsibilities +• +Assists the Board in fulfilling its responsibilities on matters and issues related to the Company's corporate governance practices +• +Working with the Board, establishes qualification standards for membership on the Board and its committees and recommends nominees for election or re-election by the shareholders at the annual meeting +• +Develops and recommends to the Board for its approval an annual self-evaluation process for the Board, its committees and individual directors, and oversees the evaluation process +• +Oversees and reviews periodically the Company’s programs, policies, practices, relevant risks and opportunities, measures, objectives and performance relating to ESG matters and related disclosures, and makes recommendations to the Board regarding their integration into the Company's business strategy and operations +• +Coordinates with the Compensation and Human Capital Committee and the Audit Committee on the Company’s required ESG disclosures +2025 PROXY STATEMENT +31 +TABLE OF CONTENTS +Director Compensation in Fiscal Year 2024 +The Company's non-employee director compensation philosophy is to pay compensation that is competitive with the compensation paid by companies of similar size, in similar industries and with whom Wolverine Worldwide competes for director candidates. The Governance Committee, with input from management and from the Compensation and Human Capital Committee's independent compensation consultant, reviewed director compensation and compared it to market data, including a comparison to director compensation for the Company's Peer Group, as defined on page 49 , and broader industry market surveys (FW Cook Director Compensation Report and NACD Director Compensation Report). +The following table provides information regarding the compensation of the Company's non-employee directors for fiscal year 2024. In 2024, Mr. Hufnagel received compensation for his services as the Company's President and CEO but did not receive any additional compensation for service as a director. His compensation is reflected in the Compensation Discussion and Analysis section, the Summary Compensation Table, and related tables and disclosures. +Fees Paid in +Cash +Cash Amounts +Voluntarily +Deferred +Fees Earned or +Paid in Cash 1 +Restricted +Stock Unit +Awards 2 +Totals +Andersen +$ 95,000 ++ +— += +$ 95,000 ++ +$145,000 += +$240,000 +Boromisa +— ++ +$132,000 += +$132,000 ++ +$145,000 += +$277,000 +Bricker +$ 92,000 ++ +— += +$ 92,000 ++ +$145,000 += +$237,000 +Gerber +$107,000 ++ +— += +$107,000 ++ +$145,000 += +$252,000 +Kollat +$107,000 ++ +— += +$107,000 ++ +$145,000 += +$252,000 +Lauderback +$122,000 ++ +— += +$122,000 ++ +$145,000 += +$267,000 +Long +$145,000 ++ +— += +$145,000 ++ +$255,000 += +$400,000 +Price +— ++ +$ 92,000 += +$ 92,000 ++ +$145,000 += +$237,000 +Wilson-Thompson +$124,000 ++ +— += +$124,000 ++ +$145,000 += +$269,000 +1. +Represents cash payments received or deferred by non-employee directors for fiscal year 2024. Non-employee directors may defer fees pursuant to the Director Deferred Compensation Plan or Deferred Compensation Plan (each as defined below). The table shows the Fees Earned or Paid in Cash separated into Fees Paid in Cash and Cash Amounts Voluntarily Deferred. +2. +Represents the aggregate grant date fair value of restricted stock units granted to non-employee directors in fiscal year 2024, calculated in accordance with Accounting Standard Codification (“ASC”) Topic 718, without regard to estimated forfeitures. The chart below lists the aggregate outstanding option awards (granted prior to 2018) and restricted stock units held by non-employee directors at the end of fiscal year 2024. For valuation assumptions, see the Stock-Based Compensation footnote to the Company's Consolidated Financial Statements for fiscal year 2024 included in its Annual Report on Form 10-K for fiscal year 2024. +Name +Option Awards Outstanding at +December 28, 2024 +(#) +Restricted Stock Units held at +December 28, 2024 1 +(#) +Andersen +— +22,830 +Boromisa +28,795 +47,338 +Bricker +— +13,315 +Gerber +28,795 +13,315 +Kollat +36,282 +13,315 +Lauderback +28,795 +13,315 +Long +28,795 +40,364 +Price +— +22,830 +Wilson-Thompson +— +33,113 +1. +Includes 34,023, 9,515, 16,948, 9,515 and 19,798 fully vested restricted stock units held by each of Mr. Boromisa, Ms. Andersen, Mr. Long, Mr. Price and Ms. Wilson-Thompson, respectively, that were deferred and will be settled on the date elected by the director. +2025 PROXY STATEMENT +32 +TABLE OF CONTENTS +The following table shows the non-employee director compensation program for fiscal year 2024, which remained unchanged from fiscal year 2023: +Compensation Plan for 2024 +Component +Cash +Restricted Stock Units 1 +Annual Director Fee +$80,000 +Number of restricted stock units “RSUs” with a grant date value of $145,000. +Audit Committee Annual Fee +$15,000 +Audit Committee Chairperson Annual Fee +$25,000 +Compensation and Human Capital Committee Annual Fee +$12,000 +Compensation and Human Capital Committee Chairperson Annual Fee +$20,000 +Governance Committee Annual Fee +$12,000 +Governance Committee Chairperson Annual Fee +$20,000 +Chairman of the Board Annual Fee +In lieu of the standard Annual Director Fee, the Chairman of the Board was paid a Cash Retainer of $145,000 +In lieu of the standard RSU grant, the Chairman of the Board received a number of RSUs with a grant date value of $255,000 +1. +For fiscal year 2024, Messrs. Boromisa, Gerber, Kollat and Price and Mses. Andersen, Bricker, Wilson-Thompson and Lauderback each received 13,315 restricted stock units. Mr. Long received 23,416 restricted stock units. The above restricted stock units were granted in May 2024 under the Stock Incentive Plan of 2016, as amended, and vest one year from the date of grant. Directors may defer settlement of these restricted stock unit awards upon vesting. +Director Deferred Compensation Plan. The Company's Amended and Restated Outside Directors' Deferred Compensation Plan (the “Director Deferred Compensation Plan”) is a supplemental nonqualified deferred compensation plan for non-employee directors. A separate non-employee director deferred compensation plan applies to benefits accrued under that plan before January 1, 2005. The Director Deferred Compensation Plan permits all non-employee directors to voluntarily defer, at their option, 25%, 50%, 75% or 100% of their director cash fees. The Company establishes a book account for each non-employee director and credits the director's account with a number of stock units equal to the amounts voluntarily deferred, divided by the closing market price of common stock on the payment/deferral date. The Company also credits director accounts with dividend equivalents on amounts previously deferred in the form of additional stock units. The amounts credited to director accounts are treated as if invested in Wolverine Worldwide common stock. The number of stock units held in director accounts is set forth under the “Stock Ownership By Management and Others” table below. +Upon a director's termination of service, or such later date as a director selects, the Company will distribute the stock units in the director's book account in shares of Wolverine Worldwide common stock in either a single, lump sum distribution or annual installment distributions over a period of up to 20 years (10 years under the plan for benefits accrued before January 1, 2005) based on the director's election. The Company converts each stock unit to one share of Wolverine Worldwide common stock. +Upon a “change in control,” the Company will distribute to the director, in a single, lump sum distribution, Wolverine Worldwide common stock in a number of shares equal to the stock units credited to a director's book account. The Deferred Compensation Plan defines “change in control” as any of the following: +• +The acquisition by any person, or by more than one person acting as a group, of more than 50% of either (i) the then outstanding shares of common stock of Wolverine Worldwide or (ii) the total fair market value of Wolverine Worldwide +• +The acquisition by any person, or more than one person acting as a group, during the 12 month period from and including the date of the most recent acquisition, of ownership of 30% or more of the outstanding common stock of Wolverine Worldwide +• +The replacement of a majority of the individuals who constitute the Board during any 12 month period by directors whose appointment or election is not endorsed by a majority of the directors prior to the date of the appointment or election +• +The acquisition, during any 12 month period ending on the date of the most recent acquisition, by any person of assets from Wolverine Worldwide having a gross fair market value of at least 40% of the gross fair market value of all the assets of Wolverine Worldwide immediately before the acquisition +Deferred Compensation Plan For a description of the non-qualified Deferred Compensation Plan under which directors may also defer cash fees, please see the “ Non-Qualified Deferred Compensation ” section on page 63 . +2025 PROXY STATEMENT +33 +TABLE OF CONTENTS +NON-EMPLOYEE DIRECTOR STOCK OWNERSHIP GUIDELINES +By the first December 31st following the fifth anniversary of becoming a non-employee director of the Company, a non-employee director must attain (and maintain) a minimum stock ownership level equal to six times the non-employee director annual cash retainer prior to being able to gift or sell any Company stock, other than a limited exception for gifts or sales of up to fifty percent of the net, after-tax number of shares obtained through any Company equity plans or other equity awards. The equity that qualifies for determining the non-employee directors’ minimum stock ownership level includes owned shares and unvested restricted stock units that vest based on time (up to a maximum value of 50% of the applicable ownership requirement), but excludes unearned performance shares and units and unexercised options (or any portion thereof, such as the current “in the money” value). During 2024, all non-employee directors were in compliance with these guidelines. +2025 PROXY STATEMENT +34 +TABLE OF CONTENTS +Securities Ownership of Officers and Directors +and Certain Beneficial Owners +FIVE PERCENT SHAREHOLDERS +The following table sets forth information about those holders known by Wolverine Worldwide to be the beneficial owners of more than five percent of Wolverine Worldwide's outstanding shares of common stock as of March 3, 2025: +Amount and Nature of Beneficial Ownership of Common Stock +Name and Address +of Beneficial Owner +Sole Voting +Power +Sole +Investment +Power +Shared Voting +Power +Shared +Investment +Power +Total +Beneficial +Ownership +Percent of +Class 5 +BlackRock, Inc. 1 +50 Hudson Yards +New York, NY 10001 +12,451,711 +12,555,342 +— +— +12,555,342 +15.49% +Earnest Partners, LLC 2 +1180 Peachtree Street NE +Suite 2300 +Atlanta, GA 30309 +3,731,937 +5,293,193 +— +— +5,293,193 +6.53% +FMR, LLC 3 +245 Summer Street +Boston, MA 02210 +11,150,039 +11,151,125 +— +— +11,151,125 +13.76% +The Vanguard Group 4 +100 Vanguard Boulevard +Malvern, PA 19355 +— +9,295,773 +172,773 +254,354 +9,550,127 +11.79% +1. +Based solely on information set forth in a Schedule 13G/A filed on January 22, 2024. +2. +Based solely on information set forth in a Schedule 13G/A filed on February 12, 2024. +3. +Based solely on information set forth in a Schedule 13G/A filed on February 9, 2024. +4. +Based solely on information set forth in a Schedule 13G/A filed on February 13, 2024. +5. +Based on 81,034,798 shares outstanding as of March 3, 2025. +2025 PROXY STATEMENT +35 +TABLE OF CONTENTS +STOCK OWNERSHIP BY MANAGEMENT AND OTHERS +The following table sets forth the number of shares of common stock beneficially owned as of March 3, 2025, by each of the Company's directors and named executive officers and all of the Company's directors and executive officers as a group: +Amount and Nature of Beneficial Ownership of Common Stock 1 +Deferred +Stock Units, +Sole Voting +and/or +Investment +Power 2 +Shared Voting or +Investment +Power 3 +Stock +Options +and RSUs +Vesting +within +60 Days 4 +Total +Beneficial +Ownership +Percent +of Class 5 +Stacia Andersen +— +— +13,315 +13,315 +* +Jeffrey M. Boromisa +71,355 +162,181 +42,110 +275,646 +* +Jodi Bricker +9,515 +— +13,315 +22,830 +* +William K. Gerber +67,194 +— +13,315 +80,509 +* +Christopher Hufnagel +224,107 +— +32,294 +256,401 +* +Amy Klimek +35,751 +20,238 +18,676 +74,665 +* +David T. Kollat +261,289 +103,081 +49,597 +413,967 +* +David A. Latchana +22,383 +— +2,610 +24,993 +* +Brenda J. Lauderback +103,201 +— +42,110 +145,311 +* +Tom Long +68,276 +— +52,211 +120,487 +* +Taryn Miller +10,772 +— +178 +10,950 +* +DeMonty Price +35,000 +— +13,315 +48,315 +* +Isabel Soriano +52,356 +— +— +52,356 +* +Michael D. Stornant +32,908 +219,398 +83,635 +335,941 +* +Kathleen Wilson-Thompson +— +— +13,315 +13,315 +* +All directors and executive officers as a group +(16 people) +994,924 +504,898 +389,996 +1,889,818 +2.32% +* +Represents beneficial ownership of less than 1%. +1. +The numbers of shares stated are based on information provided by each person listed and include shares personally owned of record and shares that, under applicable regulations, are considered to be otherwise beneficially owned. +2025 PROXY STATEMENT +36 +TABLE OF CONTENTS +2. +The “Deferred Stock Units, Sole Voting and/or Investment Power” column of the table above does not include the following time-vested restricted stock units and performance units owned by directors and NEOs, as defined on page 38 , as of March 3, 2025: +Restricted +Units +Performance +Units +Andersen +22,830* +— +Boromisa +47,338* +— +Bricker +13,315 +— +Gerber +13,315 +— +Hufnagel +243,090 +797,227 +Klimek +62,670 +66,985 +Kollat +13,315 +— +Latchana +14,898 +46,420 +Lauderback +13,315 +— +Long +40,364* +— +Miller +32,617 +84,861 +Price +22,830* +— +Soriano +67,203 +77,562 +Stornant +54,466 +135,865 +Wilson-Thompson +33,113* +— +* +Includes 34,023, 16,948, 9,515, 9,515 and 19,798 fully vested restricted stock units held by each of Mr. Boromisa, Mr. Long, Ms. Andersen, Mr. Price, and Ms. Wilson-Thompson respectively, that were deferred and will be settled on the date elected by the director. +3. +These numbers include shares over which the listed person is legally entitled to share voting or investment power by reason of joint ownership, trust or other contract or property right and shares held by spouses, children or other relatives over whom the listed person may have influence by reason of such relationship. +4. +The numbers represent shares that may be acquired within 60 days after March 3, 2025, by the exercise of stock options granted under Wolverine's various stock option plans, or upon the vesting of restricted stock units. These numbers are also included in the Total Beneficial Ownership column. +5. +As of March 3, 2025, based on 81,034,798 shares outstanding on that date plus the number of stock options exercisable and restricted stock units vesting that are held by the specified person(s) within 60 days of March 3, 2025, as indicated in the “Stock Options and RSUs Vesting Within 60 Days” column. +2025 PROXY STATEMENT +37 +TABLE OF CONTENTS +Compensation Discussion and Analysis +SUMMARY +The Company's Compensation Discussion and Analysis (“CD&A”) provides an overview and analysis of the executive compensation program for the Company's named executive officers (“NEOs”). For fiscal year 2024, the Company's NEOs were: +Christopher Hufnagel +President and Chief Executive Officer +Amy Klimek +Chief Human Resources Officer +David A. Latchana +Chief Legal Officer and Corporate Secretary +Taryn Miller +Chief Financial Officer and Treasurer (Appointed in May 2024) +Isabel Soriano 1 +President, International Group +Michael D. Stornant +Executive Vice President (Chief Financial Officer and Treasurer until May 2024) +1 +As publicly announced by the Company on March 6, 2025, the Company and Ms. Soriano agreed that her employment as the Company's President, International Group would end on March 3, 2026 due to the elimination of Ms. Soriano's position. +COMPENSATION PHILOSOPHY AND OBJECTIVES +The Company's compensation philosophy is to provide executives with a competitive compensation package that is heavily weighted towards performance-based (performance units and annual bonus opportunity) and variable (restricted stock units) compensation in order to encourage superior business and financial performance over the short and longer term and, by linking compensation with stock price performance, to closely align the interests of the Company's NEOs with those of its shareholders without encouraging excessive risk-taking. The Compensation and Human Capital Committee (the “Committee”) oversees the Company's executive compensation program. +The executive compensation program has four primary objectives: +• +Attract and retain talented NEOs who will lead Wolverine Worldwide and drive superior business and financial performance +• +Provide incentives for achieving specific pre- established near-term strategic, business unit and corporate goals and reward the attainment of those goals +• +Provide incentives for achieving specific pre- established longer-term corporate financial goals and reward the attainment of those goals +• +Align the interests of NEOs with those of the shareholders through incentives based on achieving performance objectives that enable increased shareholder value +Compensation Decisions in Context: Key 2024 Accomplishments +Entering 2024, we had outlined a three-phase plan to turnaround Wolverine Worldwide which our team delivered on: +1. +Stabilizing the Company +2. +Transforming the organization +3. +Inflecting to growth   +Some highlights from 2024 are listed below: +• +We successfully completed the stabilization phase and strengthened the balance sheet, finishing the year with less than half the debt we held 24 months earlier and the cleanest inventory position since the pandemic. +• +We also meaningfully improved the business’ profitability, achieving record gross margin and delivering earnings per share nearly six times greater than the prior year.  +• +Finally, the Company inflected to growth in the final quarter of 2024 – establishing momentum for the year ahead. +2025 PROXY STATEMENT +38 +TABLE OF CONTENTS +2024 Compensation Program Overview +The Company's executive compensation program consists of base salary, annual bonus opportunity, long-term incentive compensation and benefits. A breakdown of base salary, annual performance bonus, and long-term incentive compensation is illustrated below: +ELEMENT +COMPONENT +METRICS +WHAT THE PAY ELEMENT REWARDS +Base +Salary +•  +Cash +•  +Fixed amount based on responsibilities, experience and market data +•  +Scope of core responsibilities, years of experience, and potential to affect the Company's overall performance +Annual +Performance +Bonus +•  +Company/Business Unit Cash Bonus +•  +75% revenue and adjusted pretax earnings +•  +25% business priorities +•  +Achieving specific corporate business and/or divisional financial objectives over which the NEO has reasonable control +•  +Achieving specific business priorities +Long-Term +Incentive +Compensation +•  +Performance-based restricted stock units +•  +Time-vested restricted stock units +•  +Uses the following performance metrics (weighted as indicated) +•  +60% Operating Profit +•  +40% Relative Total Shareholder Return +•  +Three-year vesting for time-vested restricted stock units +•  +Balances focus on near-term profitability with longer-term shareholder value creation +•  +Achieving long-term corporate objectives +•  +Driving long-term shareholder value +•  +Continued, long-term employment at Wolverine Worldwide +•  +Significant weighting on relative TSR performance +•  +Time-vested restricted stock units reward increases in stock price +Pay at Risk +Under the Company's compensation program, a significant portion of the compensation awarded to the NEOs generally, and to the CEO in particular, is at risk (contingent upon the attainment of various pre-established short and long-term financial goals) and variable (contingent on the performance of the Company's stock price). NEO compensation that is significantly at risk and variable incentivizes superior business and financial performance and, by linking compensation with stock price performance, aligns the interests of executives with those of shareholders. For more information on the relation between Company performance and the impact on CEO and other NEO pay, please see the tables and related information under the heading “ Pay vs. Performance ” on page 70 . +2025 PROXY STATEMENT +39 +TABLE OF CONTENTS +The following graphic illustrates the percentage of 2024 NEO target compensation that is at risk, reflecting the grant values and salary information for Mr. Hufnagel's regular annual compensation package as CEO (not inclusive of one-time grants relating to his CEO designation and early Company strategic transformation efforts), and from the February 2024 Compensation and Human Capital Committee actions for the other NEOs, or actions approved thereafter for Ms. Miller and Mr. Latchana. +Long-Term Incentive Program Mix +The long-term incentive program is heavily weighted to at-risk compensation, with a mix for February 2024 grants of 70% performance stock units and 30% time vested restricted stock units for Mr. Hufnagel and 60% performance stock units and 40% time vested restricted stock units for the other NEOs. +Compensation Best Practices +What we do +What we do not do +✔ +Vast majority of pay is at risk or variable, i.e., performance-based or equity-based or both +✔ +Stringent share ownership requirements (6x base salary for CEO) +✔ +Broad-based clawback policy covering both cash and equity +✔ +Significant vesting horizon for equity grants +✔ +Double trigger equity acceleration +✔ +Independent Compensation Committee Consultant +✔ +Review executive compensation program to ensure it doesn't promote excessive risk taking +✔ +Proactively engage with top shareholders on compensation and governance issues +✔ +Conduct annual say-on-pay votes +✔ +Balance short-term and long-term incentives +✘ +No dividends or dividend equivalents on unearned performance shares/units or time-vested shares/units granted under the Stock Incentive Plan of 2024 +✘ +No repricing or replacing of underwater stock options +✘ +No excessive or unnecessary perquisites +✘ +No hedging, pledging or short sales of Company stock +✘ +No excise tax gross-ups in change-in-control agreements +2025 PROXY STATEMENT +40 +TABLE OF CONTENTS +Compensation Discussion and Analysis +2024 COMPENSATION PROGRAM OVERVIEW +Setting Targets +Each February, the Committee recommends (and the independent directors approve) target compensation for the CEO for the upcoming year after considering the latest available information, including the Company's total shareholder return (“TSR”) and other business and financial performance, information provided by the Committee's compensation consultant regarding executive compensation trends and compensation paid to other chief executive officers of companies in the compensation peer group (described below), and information provided by management on recent Company performance and the Company's future business and financial outlook. The Committee's goal is to set the CEO's compensation in line with experience and the anticipated market median compensation for that year. +Given the significant weight the Company's executive compensation program places on at-risk and variable compensation, the compensation realized by the CEO and other NEOs can be significantly affected, both positively and negatively, by performance against the various operational and financial performance metrics pre-established by the Committee and by the performance of the Company's stock. The Board and Committee believe such a compensation program aligns the interests of the CEO and other NEOs with the interests of the shareholders. +The Company's executive compensation program consists of four primary elements: base salary, annual bonus opportunity, long-term incentive compensation and benefits. These elements are described in greater detail below. +Base Salary +As part of approving an NEO's base salary, the Committee considers a variety of factors including individual responsibilities, experience, skills, and potential to affect Wolverine Worldwide's overall performance, as well as market surveys and peer group information. The Committee considers these compensation factors subjectively, and no single factor or combination of factors was determinative in setting base salaries for any NEO for fiscal year 2024. +Based on the above factors, and the stabilization efforts taken by the Company, the Committee approved to maintain 2023 base salaries for 2024 for the NEOs, as noted in the following table, with the exception of Mr. Latchana, whose salary was increased in connection with his promotion to Chief Legal Officer and Corporate Secretary. Mr. Latchana's 2023 base salary was reflective of his role as Vice President of Executive Compensation, Global Benefits and Corporate Communication prior to his appointment of Chief Legal Officer and Corporate Secretary on April 30, 2024. The cash compensation for Ms. Soriano is paid in Pounds Sterling and was converted into U.S. dollars using the fiscal year-end rate (1.26 for fiscal year 2024 and 1.27 for fiscal 2023 here and throughout the CD&A and related disclosures). +Name +2023 Base Salary +2024 Base Salary +Hufnagel +$1,000,000 +$1,000,000 +Klimek +$ 471,240 +$ 471,240 +Latchana +$ 364,000 +$ 490,000 +Miller +N/A +$ 650,000 +Soriano 1 +$ 575,017 +$ 570,489 +Stornant +$ 695,250 +$ 695,250 +1. +Ms. Soriano’s 2023 base salary was GBP 452,769, and her 2024 base salary remained GBP 452,769. +2025 PROXY STATEMENT +41 +TABLE OF CONTENTS +Annual Bonus +In 2024, each NEO had the opportunity to earn annual cash incentive compensation (“annual bonus”), consisting of a performance bonus and business priorities bonus: +Key Factors +2024 Company Metrics +Performance Bonus +(75% weighting) +• +Based on performance measured against Company and/or business unit performance criteria established at the beginning of 2024 +• +• +Revenue (50%) +Pretax earnings (50%) +• +Payout determined by comparing performance against three performance levels: threshold, target, and stretch +Business Priorities (BP) +(25% weighting) +• +Measured against company/function BP +• +Vary for each NEO +• +Each NEO's payout was determined by comparing performance on BPs against specific criteria set at the beginning of 2024 +• +Payouts can range from 0% to 200% depending on the NEO's performance against BPs +A percentage of each NEO's 2024 base salary, as determined in February 2024, was set as the annual bonus target percentage (the “Target Bonus Percentage”), or adjusted thereafter. The Target Bonus Percentage represents the percentage of each NEO's base salary that could be earned as annual incentive compensation at a “target” performance level (100% payout) for each of the performance bonus and business priorities. Generally, the Committee sets higher Target Bonus Percentages for individuals with greater influence on business strategy, profit or sales. This puts a larger percentage of an NEO's total potential cash compensation at risk, in line with the NEO's ability to influence these factors. For 2024, the NEOs had the following Target Bonus Percentages: Mr. Hufnagel 120%, Ms. Klimek 50%, Mr. Latchana 50%, Ms. Miller 60%, Ms. Soriano 55% and Mr. Stornant 65%. Mr. Latchana’s opportunity was prorated based on his April 2024 promotion date. Ms. Miller's opportunity was prorated based on her May 2024 hire date. +The Committee selected fiscal year 2024 revenue and adjusted pretax earnings as metrics for the performance bonus because it believes a strong correlation exists between performance on these financial measures and increases in shareholder value. +Performance Bonus +Messrs. Hufnagel, Latchana and Stornant, and Mses. Miller and Klimek had significant influence on the Company's overall business performance and, accordingly, their respective performance bonus opportunity (75% of their total annual bonus opportunity) is based on the Company performance criteria only. Ms. Soriano was directly responsible for the International Group and exerted a significant influence on that business unit in particular, in addition to influencing Company performance. Accordingly, 45% of her annual bonus opportunity was based on International Group performance, and 30% was based on Company performance. +The Committee set the revenue and adjusted pretax earnings goals for these performance levels following a review of the Company's operating plan, historical performance, and industry and macroeconomic conditions. The performance targets for a 100% payout on revenue were set below 2023 revenue, considering the businesses sold or licensed along with other business model changes between 2023 and 2024. The performance targets required for 100% payout on adjusted pretax goals were set very aggressively – at growth of $102 million over the prior fiscal year’s adjusted pretax results. 2024 performance targets were set based on planned performance in 2024 and as compared to actual 2023 results. +Company +Performance Level +(% of Target Payout) 1 +Revenue (in millions) +Adjusted Pretax Earnings +(in millions) +Threshold (50%) +$1,681 +$ 92 +Target (100%) +$1,726 +$113 +Stretch (200%) +$1,971 +$144 +1. +The maximum payout an NEO can receive is 200% of his or her Target Bonus Percentage, even if performance is above stretch. An NEO would receive 0% of his or her Target Bonus Percentage if performance is below threshold. +2025 PROXY STATEMENT +42 +TABLE OF CONTENTS +The Committee sets the revenue and adjusted pretax earnings for the International Group at substantially similar levels of difficulty as the goals for the Company and with a similar degree of difficulty as in prior years. The below table shows historical weighted performance levels achieved by the International Group. +Historical Group Performance +2024 +2023 +2022 +2021 +2020 +International Group +Between target and stretch +Below threshold +Between target and stretch +Between target and stretch +Below threshold +2024 Performance +Overall Weighted Payout by Group +Wolverine Worldwide +Between threshold and target +81.2% +International Group +Between target and stretch +164.6% +Company revenue performance for 2024 was $1,751 million for a 110.2% payout. Adjusted pre-tax earnings performance was $93 million for a 52.2% payout, with a total, weighted Company performance bonus payout of 81.2%. +Based on the factors described above, the performance bonus earned and paid for each NEO is set forth below. +Name +Performance Bonus +Percentage +Earned +Performance +Bonus Paid +Hufnagel +81.2% +$730,665 +Klimek +81.2% +$143,466 +Latchana +81.2% +$122,862 +Miller +81.2% +$155,715 +Soriano +131.3% +$308,857 +Stornant +81.2% +$275,164 +Business Priorities +At the same time Target Bonus Percentages are set, the CEO approves measurable business priorities for each NEO's individual bonus, other than for himself; these business priorities were formerly known as annual strategic priorities. The CEO submits, and the Committee reviews and approves, with such changes as it considers appropriate, the CEO's business priorities. Such measurable priorities may include goals such as executing strategies supporting the Company's vision, developing employees, and driving operational excellence. Performance is evaluated by the CEO (or, in the case of the CEO, by the Committee and the other independent directors) based on qualitative and quantitative factors. +Each business priority is given an achievement rating with weighted performance ratings and payouts at threshold (50%), target (100%), and stretch (200%). No payout is made for performance below threshold. +The CEO recommended, and the Committee approved, the 2024 cumulative weighted business priority scores and payout levels for each of the NEOs other than himself. The Committee and the other independent directors of the Board met with the CEO at the end of the year to evaluate his performance against his business priorities, considering various factors. The Committee determined the cumulative weighted business priorities score for the CEO and recommended to the independent directors of the Board the CEO's payout level. +2025 PROXY STATEMENT +43 +TABLE OF CONTENTS +Summaries of the business priorities, achievement, and payout for each NEO are outlined in the table below. This year's business priorities related to key initiatives intended to drive strategic transformation and shareholder value. +NEO +2024 Business Priorities +2024 +Individual Bonus +Percentage +Achieved +2024 +Business Priority Bonus +Paid +Hufnagel +Develop new WWW Vision and Strategy; Build industry-leading consumer-obsessed, brand-building capabilities and repeatable processes that drive growth; Build strong order book that supports 2024 and 2025 revenue plans; Accelerate DTC recovery leading to second half inflection. +120% +$360,000 +Klimek +Design and implement pay for performance incentive compensation programs; Drive a winning mindset in our growth brands; Continue optimization of organizational design; Execute seamless office closures and moves; “New City Same Sole Campaign”; International payroll launch and Sweaty Betty HR integration; Talent Management and succession process redefined; Address gaps in talent and capabilities with key hires; Create community connections and key partnerships; Create an amazing place to work through inclusive and engaging employee experiences. +110% +$64,796 +Latchana +Develop and execute cross-functional, enterprise-wide ESG strategy; Unlock intellectual property as strategic growth catalyst; Drive and accelerate brand protection and fraud detection efforts; Leverage technology to advance legal operations and functionality with business partners; Continue integrating Sweaty Betty; Continue building WOLVER1NE culture and “winning” mindset, aligning department to enterprise-wide vision and strategy; Grow and develop talent in the group, and enable career empowerment. +110% +$55,490 +Miller +Accelerate DTC recovery leading to second half inflection; Generate cash through disciplined management of the P&L, balance sheet, and PIO initiatives to enable future investment; Optimize the efficiency of the business in providing a return to its shareholders; Align to the new enterprise vision, strategy and value creation model; Build industry-leading consumer obsessed, brand-building capabilities and repeatable processes that drive growth by supporting incremental investment initiatives and developing standardized marketing ROI models; Continue to build WOLVER1NE culture and “winning” mindset and align the organization to the vision and strategy to enable execution with distinction; Address work life balance by implementing an intentional PTO calendar for all team members. +110% +$70,328 +Soriano +London and Tokyo Key City strategy; Build strong order book that supports the 2024 and 2025 revenue plans and enables a more predictable business; Brand health tracker in strategic markets; Margin improvement; Continue building WOLVER1NE culture and “winning” mindset; To be a place where each individual does their greatest work. +125% +$98,053 +Stornant +Accelerate DTC recovery leading to second half inflection; Generate cash through disciplined management of the P&L, balance sheet, and PIO initiatives to enable future investment; Optimize the efficiency of the business in providing a return to its shareholders; Align to the new enterprise vision, strategy and value creation model; Build industry-leading consumer obsessed, brand-building capabilities and repeatable processes that drive growth by supporting incremental investment initiatives and developing standardized marketing ROI models; Continue to build WOLVER1NE culture and “winning” mindset and align the organization to the vision and strategy to enable execution with distinction; Address work life balance by implementing an intentional PTO calendar for all team members. +110% +$124,276 +2025 PROXY STATEMENT +44 +TABLE OF CONTENTS +Below is a summary of total annual bonus payouts to each NEO. +Name +2024 Target +Percentage +2024 Performance +Bonus +2024 Business +Priorities Bonus +Total 2024 Annual +Bonus Compensation +% of 2024 Actual +Incentive Target +Hufnagel +120% +$730,665 +$360,000 +$1,090,665 +90.9% +Klimek +50% +$143,466 +$64,796 +$208,262 +88.4% +Latchana +50% +$122,862 +$55,490 +$178,352 +88.4% +Miller +60% +$155,715 +$70,328 +$226,043 +88.4% +Soriano +55% +$308,857 +$98,053 +$406,910 +129.7% +Stornant +65% +$275,164 +$124,276 +$399,440 +88.4% +LONG-TERM INCENTIVE COMPENSATION +In 2024, each NEO had the opportunity to earn long-term incentive compensation comprised of a mix of performance stock units and time-based restricted stock unit awards. The 2024 grants were based on the following: +Key Factors +Performance Share Metrics +Performance Stock Units +• +Performance stock units are based on performance criteria covering three-year periods +• +Operating Profit (60%) 1 +• +Awards balance focus on near term profitability with longer term shareholder value creation +• +Relative Total Shareholder Return (“TSR”) (40%) 2 +Time-Based Restricted +Stock Unit Awards +• +Encourages employee retention and rewards increases in stock price +1. +Operating Profit is the total earnings from the Company’s core business function for a fiscal year after deducting selling, general and administrative costs. +2. +Relative TSR as compared to TSR for the S&P Composite 1500 Consumer Durables & Apparel Index. +Performance Awards for the 2024-2026 Performance Period +The Committee evaluated each NEO's long-term incentive target payout opportunity expressed as a dollar amount at target grant value for the grant of performance units for the 2024-2026 period. Performance units are eligible to vest based on achievement of adjusted constant-currency Operating Profit goals (weighted 60%) and relative total shareholder return goals (weighed 40%). +Name +2024-2026 +Target +Hufnagel +$4,760,000 +Klimek +$ 285,000 +Latchana +$ 264,000 +Miller +$ 480,000 +Soriano +$ 330,000 +Stornant +$ 715,200 +The Company accrues, but does not pay, any dividends on any performance units during the performance period. Once the Committee certifies the Company's performance compared to the pre-determined performance criteria, the restrictions on some, all, or none of the performance share units awarded to each NEO will vest, and the NEO will receive accrued dividends only on the shares actually earned. Mr. Hufnagel's amount includes $700,000 granted in recognition of his promotion to President and CEO and for his leadership in achieving significant progress implementing the Company's strategic transformation efforts during the first four months of his tenure. This portion of the grant has the same terms as the standard grant, as described above, and was part of an overall grant in recognition of Mr. Hufnagel's efforts that was heavily weighted to performance share units (70%) compared to time-vested units (30%), consistent with the overall mix of long-term CEO compensation that is heavily weighted toward at-risk compensation. +The Committee goes through a rigorous process in setting performance targets, including a careful review of the Company's prior year business and financial performance, current year operating plan and future expectations. To achieve target level Operating Profit for the first year of the performance period would require a more than 100% increase over 2023 actual performance, and to achieve target level Operating Profit for years two and three of the performance period would require +2025 PROXY STATEMENT +45 +TABLE OF CONTENTS +double digit growth percentages over the prior year's actual Operating Profit results. Wolverine believes disclosing specific Operating Profit targets while the applicable performance period is ongoing could cause competitive harm. However, such targets will be disclosed once the applicable performance periods have ended as part of our discussion and analysis on awards earned by the NEOs. +For the relative TSR metric, threshold was set at the 25th percentile relative to the S&P Composite 1500 Consumer Durables & Apparel Index, target at the 50th percentile, and stretch at the 75th percentile. In addition, if the Company’s absolute TSR for the three-year period is negative, payouts on this measure are capped at target, regardless of whether the Company outperformed the Index. +2022-2024 Performance Stock Units +The following tables list the performance levels set by the Committee for performance stock unit awards granted for the 2022-2024 performance period: +Performance Level +(Percentage of Target Payout) +2022 EPS +2023 EPS (% increase vs. +prior year) +2024 EPS (% increase vs. +prior year) +Threshold (50%) +$2.60 +15.6% +11.2% +Target (100%) +$2.70 +22.2% +15.3% +Goal (150%) +$2.80 +28.9% +19.0% +Stretch (200%) +$2.90 +33.9% +24.0% +Performance Level +(Percentage of Target Payout) +2022 BVA +(in millions) +2023 BVA (% increase vs. +prior year) +2024 BVA (% increase vs. +prior year) +Threshold (50%) +$190 +18.4% +14.6% +Target (100%) +$200 +24.3% +20.7% +Goal (150%) +$208 +30.2% +26.2% +Stretch (200%) +$215 +35.2% +31.2% +In February 2025, the Committee evaluated and certified the Company's performance for the 2022-2024 performance period against the criteria set forth in the tables above. For 2022 and 2023 both Business Value Added (“BVA”) and Earnings Per Share (“EPS”) measures were below threshold. 2024 BVA and EPS performance increased over 2023 at percentages greater than stretch level, for weighted average vesting at 66.7% of target for the three-year period. The Company's TSR performance against the Russell 3000 Consumer Discretionary Index during the period was at the 52nd percentile. Since the TSR modifier only increases or decreases vesting levels for top- or bottom-quartile performance, no adjustment was made to the vesting percentage based on the modifier. +The table below shows shares that vested for each NEO for the 2022-2024 performance period based on the factors described above. In calculating the number of stock units that vest, the Company uses the stock price on the date of the grant, which results in the NEOs bearing the risk of stock price performance during the performance period. +Name +Stock Units Vesting +(#) +Hufnagel +57,778 +Klimek +7,033 +Latchana +3,159 +Miller 1 +5,931 +Soriano +7,814 +Stornant +16,906 +1. +Ms. Miller was awarded prorated PSU grants for each open performance period upon hire. +2025 PROXY STATEMENT +46 +TABLE OF CONTENTS +Restricted Stock Unit Awards +The following table reflects the grant date value of the service-based restricted stock unit awards granted to each NEO. +Name +2024 Time-vested +Restricted +Stock Units +Hufnagel +$2,040,007 +Klimek +$ 190,002 +Latchana +$ 148,013 +Miller 1 +$ 440,003 +Soriano +$ 220,008 +Stornant +$ 476,800 +1. +Includes additional stock units received by Ms. Miller as part of her sign-on awards. +The Committee generally grants annual equity awards at its regularly scheduled February meeting, and the independent directors of the Board approve equity grants to the CEO generally on the same day that the Committee meets. Restricted stock units awarded vest one-third on each of the anniversaries. Mr. Hufnagel's amount includes $300,000 granted in recognition of his promotion to President and CEO and for his leadership in achieving significant progress implementing the Company's strategic transformation efforts during the first four months of his tenure. This portion of the grant has the Company’s standard three-year vesting schedule, as described above, and was part of an overall grant in recognition of Mr. Hufnagel's efforts that was heavily weighted to performance share units (70%) compared to time-vested units (30%), consistent with the overall mix of long-term CEO compensation that is heavily weighted toward at-risk compensation. +BENEFITS +Retirement, Deferred Compensation and Welfare Plans +The NEOs in the United States participate in Wolverine Worldwide's medical and dental plans and receive life and disability insurance. In 2024, Messrs. Hufnagel, Latchana, and Stornant, and Ms. Klimek also participated in the Wolverine Worldwide Employees' Pension Plan (a defined benefit plan) and Messrs. Hufnagel and Stornant participated in the Wolverine World Wide, Inc. 409A Supplemental Executive Retirement Plan (an unfunded, non-qualified plan). For a description of the benefits under Wolverine Worldwide's retirement plans, see “ Pension Plans and 2024 Pension Benefits ” below. Ms. Soriano is located outside of the United States and participates in local medical, life and disability insurance plans and receives an annual retirement benefit payment consistent with the benefits generally made available to employees in the U.K. +All full-time employees of the Company in the United States, including the NEOs located in the United States, are also eligible to participate in one of Wolverine's 401(k) Plans (the “401(k) Plan”). Pursuant to the 401(k) Plan, employees, including the NEOs in the United States, may elect to defer a portion of their salary and receive a Company match on eligible deferrals of up to 3% of salary for 2024 (5.5% for those who do not participate in the Pension Plan), subject to limits set forth in the Internal Revenue Code of 1986, as amended. +The Company has a Deferred Compensation Plan that allows directors, executives and other eligible senior employees of the Company to elect to defer a portion of their eligible compensation. Wolverine Worldwide may, but need not, credit a participant with an additional discretionary Company contribution. The Company adopted the Deferred Compensation Plan as a retention and recruitment tool to facilitate retirement savings and provide financial flexibility for key employees, and because many of the companies with which it competes for executive talent provide similar plans to their key employees. For a description of the benefits under the Deferred Compensation Plan, see “ Non-Qualified Deferred Compensation ” below. +Perquisites +The Company generally provides limited perquisites to NEOs other than to account for relocation assignments. The Company feels the perquisites are necessary to provide a competitive total compensation package for each NEO. For details on perquisites, see footnote 5 to the “Summary Compensation Table” on page 54 . Ms. Soriano also receives benefits generally made available to Company employees located in the U.K., as well as a car and travel allowance, and tax equalization tied to her relocation to the U.K. when she was hired by the Company. +2025 PROXY STATEMENT +47 +TABLE OF CONTENTS +POST-EMPLOYMENT COMPENSATION +Each NEO is party to an Executive Severance Agreement that provides for certain payments and benefits upon termination of employment after a change in control of Wolverine Worldwide. The Board believes Executive Severance Agreements will motivate management to actively pursue a business transaction that is in the best interests of the shareholders, even if it could ultimately result in his or her job elimination, and also will promote management stability during the transition period accompanying a change in control. Each NEO is eligible to receive compensation if his or her employment is terminated within two years following a change in control of Wolverine Worldwide. Even following a change in control, an NEO does not receive payment under the Executive Severance Agreement if his or her employment terminates: +• +Due to death or retirement in accordance with Wolverine Worldwide's policy or as otherwise agreed, +• +For cause or disability, or +• +By resignation of the NEO, other than for “good reason,” which is discussed in the “ Potential Payments Upon Termination or Change in Control ” section of this Proxy Statement. +NEOs may also be eligible under Wolverine Worldwide's retirement plans or equity plans to receive certain payments and benefits upon termination of employment or in connection with a change in control as described in the “ Potential Payments Upon Termination or Change in Control ” section of this Proxy Statement. +Mr. Hufnagel is also party to an Employment Agreement under which he is eligible to receive certain payments and benefits if the Company terminates his employment, even if not following a change in control, other than for “cause” or if he terminates his employment for “good reason.” The Committee determined upon appointing Mr. Hufnagel as the President and CEO that, given the Company's strategic initiatives the Board asked him to lead, it was appropriate for the Company to enter into such arrangement. +Ms. Soriano is also a party to a Service Agreement with Wolverine Europe Limited which provides certain payments and benefits if the Company terminates her employment, even if not following a change in control. Such agreements are typical for senior executives based in the U.K. On March 3, 2025, in connection with Ms. Soriano's planned termination on March 3, 2026 (the “Termination Date”), the Company entered into a settlement agreement (the “Settlement Agreement”) providing for (i) releases of Ms. Soriano’s claims against the Company as of the Termination Date, (ii) a cash payment to Ms. Soriano from the Company in an amount equal to one year of her base salary, to be paid following the Termination Date, (iii) Ms. Soriano’s agreement to comply with covenants restricting her ability to compete with the Company and to solicit and hire the Company’s employees for seven months and one year, respectively, following the Termination Date, (iv) a repatriation payment from the Company to Ms. Soriano in the amount of £300,000, to be paid following the Termination Date, (v) continued vesting of the portion of the unvested equity awards granted to Ms. Soriano for eight months after the Termination Date, and (vi) the Company’s ability, in its discretion, to require that Ms. Soriano take leave for any period prior to the Termination Date, during which period she will continue to receive her base salary and benefits and remain eligible to receive bonus payments and vesting of equity awards. +The Company includes accelerated retirement vesting provisions for equity awards, provided certain conditions are met, and for the payout of a prorated annual bonus for a qualifying retirement more than six months into the fiscal year. Details on these provisions and information on benefits payable to Mr. Hufnagel under his Employment Agreement and Ms. Soriano under her Service Agreement, and to each of the NEOs under the Executive Severance Agreements, as well as information on the other retirement and equity plans of Wolverine Worldwide, are included in the “ Potential Payments Upon Termination or Change in Control” section of this Proxy Statement. +SAY ON PAY ADVISORY VOTE +We asked shareholders to vote on a “say-on-pay” advisory vote on our executive compensation in 2024. Shareholders expressed substantial support for the compensation of our NEOs, with approximately 94% of the votes cast for the “say-on-pay” advisory vote. The Committee carefully evaluated the results of the 2024 advisory vote. The Committee also considers many other factors in evaluating our executive compensation programs as discussed in this Compensation Discussion and Analysis, including the Committee's assessment of total shareholder return, the interaction of our compensation programs with our corporate business objectives, evaluations of our programs by external consultants, and review of peer +2025 PROXY STATEMENT +48 +TABLE OF CONTENTS +group and survey data, each of which is evaluated in the context of the Committee's fiduciary duty to act as the directors determine to be in shareholders' best interests. While each factor bore on the Committee's decisions regarding our NEOs' compensation, the Committee made no changes to our executive compensation program and policies directly as a result of the 2024 say-on-pay advisory vote. +COMPENSATION SETTING PROCESS +Setting Targets +The Committee goes through a rigorous process in setting performance targets, including a careful review of the Company's prior year business and financial performance, current year operating plan, and future expectations. The Committee engages with management in this process over several months leading up to setting final annual bonus and three-year performance targets in February. +Competitive Philosophy and Competitive Market Data +When making compensation recommendations and decisions, the Committee considers the CEO's assessment of the performance of each NEO, other than himself; the performance of the individual and the individual's respective business unit or function; the scope of the individual's responsibilities, years of experience with the Company (or in similar positions with other companies), skills and knowledge; market compensation data; market and economic conditions; Company performance; retention considerations; and Wolverine Worldwide's compensation philosophy (collectively, the “compensation factors”). The Committee considers these compensation factors both subjectively and objectively, and no single factor or combination of factors is determinative. With respect to CEO compensation, the Committee seeks to set compensation in line with experience and the anticipated market median for a given year. +The Committee uses market surveys and Peer Group (as defined below) information provided by its compensation consultant as market reference points. The Committee also considers information the Company learns through recruiting NEOs and the experience levels and responsibilities of NEOs prior to joining the Company as reference points in setting NEO compensation. +As part of its competitive data review in connection with determining 2024 compensation, the Committee considered information presented by its consultant Frederic W. Cook & Co. (“FW Cook”) based on publicly-disclosed Peer Group information and on the Willis Towers Watson (WTW) CDB Executive Compensation Survey Report (General Industry and Retail/Wholesale). +Peer Group +Below is the peer group used in late 2023 and early 2024 in connection with 2024 compensation decisions. In determining the Peer Group, the Committee considered each potential peer company's industry, channels of distribution, revenue and market capitalization. The Company also considered the typicality of a company's pay practices, excluding companies whose chief executive may not receive market compensation because of a founder relationship, family ownership position, or other similar relationships. +Abercrombie & Fitch Co. +Carter's, Inc. +Designer Brands, Inc. +Guess?, Inc. +The Children's Place, Inc. +American Eagle Outfitters Inc. +Chico's FAS, Inc. +G-III Apparel Group, Ltd. +Kontoor Brands, Inc. +Under Armour, Inc. +Boot Barn Holdings, Inc. +Crocs, Inc. +Genesco Inc. +Oxford Industries, Inc. +Caleres, Inc. +Deckers Outdoor Corporation +Gildan Activewear, Inc. +Skechers USA, Inc. +CEO Role +Within the framework of the Company's executive compensation program, the CEO recommends the level of base salary, annual bonus, long-term incentive compensation, equity awards and other compensation components for his direct reports, including the other NEOs. The CEO bases his recommendation upon his assessment of the compensation factors applicable to each NEO. The CEO considers these compensation factors both objectively and subjectively, and no single factor is determinative. The Committee discusses these recommendations with the CEO prior to setting the compensation for each NEO, other than the CEO. The Committee, however, ultimately determines all compensation for NEOs other than the CEO, whose compensation is determined by the independent directors as a whole. +2025 PROXY STATEMENT +49 +TABLE OF CONTENTS +Compensation Consultant Role +FW Cook was first engaged as the Committee's independent compensation consultant in 2016 and reports directly to the Committee. The Committee determines the scope of engagement and may replace the consultant or hire additional consultants at any time. The Committee has evaluated FW Cook's independence under the rules established by the NYSE and has determined that FW Cook is “independent” as defined by NYSE rules. In addition, the Committee has evaluated whether the engagement of FW Cook raised any conflicts of interest and has determined that no such conflicts of interest exist. +At the Committee's invitation, a representative of FW Cook generally attends all Committee meetings and also communicates with the Committee Chair and management regularly between meetings. However, the Committee makes all decisions regarding NEO compensation. FW Cook provides various executive compensation services to the Committee pursuant to a consulting agreement with the Committee. Generally, these services include advising the Committee on the principal aspects of the Company's executive compensation program, evolving industry practices, and providing market information and analysis regarding the competitiveness of the Company's program design. +During 2024, FW Cook performed the following specific services: +• +Attended Committee meetings, as requested +• +Reviewed the Company's peer group and advised the Committee on the composition of the peer group +• +Reviewed survey data for competitive comparisons +• +Provided market data and recommendations on CEO and other NEO compensation +• +Advised the Committee on market trends related to compensation policies and programs +• +Proactively advised the Committee on best practice approaches for governance features of executive compensation programs +• +Reviewed the Compensation Discussion & Analysis and other executive compensation related disclosures included in the Company's Proxy Statement +The total fees the Company paid to FW Cook for services to the Committee in 2024 were $151,039, less than 1% of FW Cook's total consulting income during the same period. The Company did not pay or incur any other fees to or with FW Cook. +2025 PROXY STATEMENT +50 +TABLE OF CONTENTS +OTHER COMPENSATION POLICIES AND PRACTICES +NEO Stock Ownership Guidelines +Each NEO, as well as each non-employee director, must attain (and maintain) a minimum stock ownership level prior to being able to gift or sell any Company stock, with a limited exception to being able to gift or sell up to fifty percent of the net, after-tax number of shares obtained through any Company equity plans or other equity awards. The equity that qualifies for determining the NEOs’ minimum stock ownership level includes owned shares and unvested restricted stock units that vest based on time (up to a maximum of value of 50% of the applicable ownership requirement), but excludes performance shares and units and unexercised options (or any portion thereof, such as the current “in the money” value). During 2024, each NEO complied with the requirements of these guidelines. +Covered Positions +Guideline +CEO +6x Annual Salary +President (if different than CEO) +3x Annual Salary +Other NEOs +2x Annual Salary +Non-Employee Directors +6x Annual Cash Retainer +Insider Trading Policy +The Board adopted an insider trading policy (the “Insider Trading Policy”), which governs the purchase, sale and other dispositions of Company securities by directors, officers and employees (including, as applicable, their family members and controlled entities, in each case, as defined in the Insider Trading Policy) and the Company, and is designed to promote compliance with insider trading laws, rules and regulations, and the NYSE listing standards. Among other things, the Insider Trading Policy prohibits the purchase and sale of the Company’s securities while an individual is aware of material non-public information or inside information about the Company or its securities and provides for trading windows and pre-clearance processes that apply to certain covered individuals. The foregoing summary of the Insider Trading Policy does not purport to be complete and is qualified in its entirety by reference to the full text of the Insider Trading Policy, which is included as Exhibit 19 to our Annual Report on Form 10-K for fiscal 2024 filed with the SEC on February 20, 2025. +Stock Hedging and Pledging Policies +Under the Company's Insider Trading Policy, all directors, officers and other employees are prohibited from engaging in any hedging transactions involving Company securities beneficially owned by them. The Company also considers it inappropriate for any such person to engage in speculative transactions in the Company's securities, including short sales, publicly traded options, margin accounts and pledges and standing and limit orders. Also, all directors, officers and other employees are prohibited from pledging Company securities as collateral for a loan. +Equity Award Grant Practices +The Company’s equity compensation programs do not currently include annual or periodic stock option awards, but the Committee has in the past granted stock options to its executives and other employees. During 2024, the Committee did not consider material nonpublic information when determining the timing or terms of equity awards to its executives , and the Company did not time the disclosure of material nonpublic information for the purpose of affecting the value of executive compensation. +Clawback Policy +The Company has adopted a Policy for Recovery of Incentive Compensation (“Clawback Policy”) which empowers the Board or a committee of the Board to seek recovery of specified incentive compensation covering both cash and equity received by executive officers under specific circumstances where there is a material restatement of the Company's financial results that would have led to a lower level of incentive compensation payout. +The Clawback Policy complies with the requirements of NYSE Listing Standard 303A.14 implementing Rule 10D-1 under the Exchange Act and provides that, in the event the Company is required to prepare an accounting restatement of the Company’s financial statements due to material non-compliance with any financial reporting requirement under the federal securities laws, +2025 PROXY STATEMENT +51 +TABLE OF CONTENTS +the Company will recover, on a reasonably prompt basis, the excess incentive-based compensation received by any covered executive, including the NEOs, during the prior three fiscal years that exceeds the amount that the executive otherwise would have received had the incentive-based compensation been determined based on the restated financial statements. +In addition, the Company’s Stock Incentive Plan of 2024 provides that awards granted thereunder (whether time-based or performance-based) and shares issued in respect thereof may be subject to recoupment or forfeiture in the event a participant engages in an Act of Misconduct (as defined in the plan). +Impact of Accounting and Tax Treatments on Compensation +As one of the factors in the review of compensation matters, the Committee considers the anticipated tax treatment to the Company. Under Section 162(m) of the Internal Revenue Code, a limitation exists on the deductibility of compensation paid to certain “covered employees,” including all of our NEOs, in excess of $1 million per year and thus we are unable to deduct compensation payable to our NEOs in excess of such limit. While the Committee considers the impact of this tax treatment, the primary factors influencing program design are the support of our business objectives and the Committee’s commitment to structuring the Company’s executive compensation programs in a manner designed to align pay with performance. Accordingly, the Committee retains flexibility to structure our compensation programs in a manner that is not tax-deductible in order to achieve a strategic result that the Committee determines to be more appropriate. +2025 PROXY STATEMENT +52 +TABLE OF CONTENTS +Compensation and Human Capital Committee Report +The Committee has reviewed and discussed with management the information provided under the heading “Compensation Discussion and Analysis.” Based on this review and discussion, the Committee recommended to the Board of Directors that the Company include the Compensation Discussion and Analysis section in this Proxy Statement and incorporate it by reference into the Company's Annual Report on Form 10-K. +Respectfully submitted, +Kathleen Wilson-Thompson (Chair) +William K. Gerber +David Kollat +DeMonty Price +Compensation and Human Capital Committee Interlocks and Insider Participation. During fiscal year 2024, none of the members of the Compensation and Human Capital Committee was an officer or employee of the Company, was a former officer of the Company, nor had a relationship with the Company requiring disclosure as a related party transaction under Item 404 of Regulation S-K of the Securities Act of 1933. None of the Company's executive officers served on the compensation committee or board of directors of another entity whose executive officer(s) served as a director on the Board or on the Compensation and Human Capital Committee. +2025 PROXY STATEMENT +53 +TABLE OF CONTENTS +Summary Compensation Table +Name and +Principal Position +Year +Salary 1 +Bonus +Stock +Awards 2 +Non-Equity +Incentive +Plan +Compensation 3 +Change in +Pension Value +and +Nonqualified +Deferred +Compensation +Earnings 4 +All Other +Compensation 5 +Total +Christopher Hufnagel +President and +CEO, Wolverine +Worldwide +2024 +$1,000,000 +$— +$6,800,009 +$1,090,665 +$438,706 +$ 42,687 +$9,372,067 +2023 +$ 813,672 +$— +$1,650,032 +$ 300,000 +$366,393 +$ 44,380 +$3,174,477 +2022 +$ 606,377 +$— +$ 665,652 +$ 97,162 +$ — +$ 43,405 +$1,412,596 +Amy Klimek +Chief Human +Resources Officer +2024 +$ 471,240 +$— +$ 475,005 +$ 208,262 +$ 20,274 +$ 35,569 +$1,210,350 +2023 +$ 465,199 +$— +$ 975,015 +$ 66,998 +$ 97,489 +$ 37,157 +$1,641,858 +Dave Latchana +Chief Legal +Officer and +Corporate Secretary +2024 +$ 481,052 +$— +$ 412,027 +$ 178,352 +$ 9,719 +$ 42,013 +$1,123,163 +Taryn Miller +Chief Financial +Officer and +Treasurer +2024 +$ 400,000 +$— +$1,340,016 +$ 226,043 +$ — +$ 191,629 +$2,157,688 +Isabel Soriano 6 +President, +International Group +2024 +$ 570,489 +$— +$ 550,015 +$ 406,910 +$ — +$1,045,876 +$2,573,290 +2023 +$ 543,831 +$— +$1,073,356 +$ 81,688 +$ — +$1,015,643 +$2,714,518 +2022 +$ 463,850 +$— +$ 454,094 +$ 280,390 +$ — +$ 991,681 +$2,190,015 +Michael D. Stornant +Executive Vice +President, Former +CFO and Treasurer +2024 +$ 695,250 +$— +$1,192,005 +$ 399,440 +$ — +$ 37,255 +$2,323,950 +2023 +$ 695,250 +$— +$1,192,022 +$ 112,978 +$417,090 +$ 33,304 +$2,450,644 +2022 +$ 691,356 +$— +$1,113,295 +$ 49,881 +$ — +$ 31,931 +$1,886,463 +1. +Includes any amounts deferred under the Company's qualified 401(k) plan or Deferred Compensation Plan. +2. +Includes the grant date fair value of restricted stock unit awards, and performance unit awards, as follows for 2024: +Name +Service-based Restricted +Stock Unit Value +Performance Unit Value 24-26 +Grant +Total +Hufnagel +$2,040,007 +$4,760,002 +$6,800,009 +Klimek +$ 190,002 +$ 285,003 +$ 475,005 +Latchana +$ 148,013 +$ 264,014 +$ 412,027 +Miller +$ 440,004 +$ 900,012 +$1,340,016 +Soriano +$ 220,008 +$ 330,007 +$ 550,015 +Stornant +$ 476,800 +$ 715,205 +$1,192,005 +Restricted stock units were valued using the closing market price of Wolverine Worldwide common stock on the date of the grant of the respective award. Performance units were valued using the closing market price of Wolverine Worldwide common stock on the date of grant of the respective award and assuming target performance for all performance periods. Assuming maximum payout, the aggregate grant date fair value of performance units awarded in 2024 for each NEO (and, in parentheses, the maximum value is combined with the grant date fair value of restricted stock unit awards and restricted stock awards for 2024) would have been $9,520,005 ($11,560,012) for Mr. Hufnagel, $660,015 ($880,023) for Ms. Soriano; $1,430,409 ($1,907,209) for Mr. Stornant, $528,029 ($676,042) for Mr. Latchana; $1,800,024 ( $2,240,028 ) for Ms. Miller, and $570,005 ($760,007) for Ms. Klimek. Restrictions on such performance unit awards will lapse in the February following the last year of the performance period, if at all, based on the Company's performance for the period (capped at 200%). The actual value of shares that vest is also dependent on the stock price at the time of vesting. For additional valuation assumptions, see the Stock-Based Compensation footnote to Wolverine Worldwide's Consolidated Financial Statements for the fiscal year ended December 28, 2024 included in its Form 10-K for fiscal 2024. Mr. Hufnagel's amount includes $700,000 in performance units and $300,000 in time-vested units granted in recognition of his promotion to President and CEO and for his leadership in achieving significant progress implementing the Company's strategic transformation efforts during the first four months of his tenure. +3. +Reflects the sum of performance bonus and business priority amounts earned in 2024, 2023 and 2022, respectively, and paid in 2025, 2024 and 2023 respectively. +2025 PROXY STATEMENT +54 +TABLE OF CONTENTS +4. +All amounts in this column reflect, where applicable, the aggregate change in the actuarial present value of the accumulated benefits under the Wolverine Worldwide Employees' Pension Plan (“Pension Plan”) and Wolverine World Wide, Inc. 409A Supplemental Executive Retirement Plan ("SERP") for NEOs participating in one or both of these plans. The amounts in the table were determined using assumptions consistent with those used in Wolverine Worldwide's Consolidated Financial Statements for each respective year. See the “Pension Plans and 2024 Pension Benefits” section starting on page 61 . +5. +The amounts listed in this column for 2024 include Wolverine Worldwide's contributions to the accounts of the NEOs under Wolverine Worldwide's 401(k) plans (or, in the case of Ms. Soriano, a payment in lieu of a retirement plan contribution), payments made by Wolverine Worldwide for the premiums on certain life insurance policies, tax, housing/relocation expenses and estate planning services and health care reimbursements in the amounts listed in the table below. Ms. Soriano is not a participant in the Company's Pension Plan, and instead received a retirement benefit payment. Ms. Miller’s moving/living expenses related to her relocation to Michigan upon her hire in 2024. +Name +401(k) Match +Tax and +Estate +Planning +Health +Life Insurance +Premiums +Moving/Living +Expenses +Car +Allowance +Tax +Equalization +Hufnagel +$10,350 +$7,625 +$23,855 +$857 +$0 +$0 +$0 +Klimek +$10,350 +$7,625 +$17,055 +$539 +$0 +$0 +$0 +Latchana +$10,350 +$7,525 +$23,635 +$503 +$0 +$0 +$0 +Miller +$18,975 +$0 +$16,301 +$457 +$155,896 +$0 +$0 +Soriano +$43,164 +$40,058 +$16,239 +$1,652 +$127,252 +$47,128 +$770,383 +Stornant +$10,350 +$0 +$23,635 +$3,270 +$0 +$0 +$0 +6. +The cash compensation for Ms. Soriano is paid in Pounds Sterling. Her cash compensation was converted into U.S. dollars using the fiscal year-end rate of 1.20 for fiscal year 2022, 1.27 for fiscal year 2023 and 1.26 for 2024. +2025 PROXY STATEMENT +55 +TABLE OF CONTENTS +Grants of Plan-Based Awards in Fiscal Year 2024 +The following table provides information concerning each grant of an award made to the NEOs in fiscal year 2024: +Estimated Future Payouts Under Non- +Equity Incentive Plan Awards 1 +Estimated Future Payments Under +Equity Incentive Plan Awards 2 +All Other +Stock +Awards: +Number of +Shares of +Stock or +Units 3 +(#) +Grant Date +Fair Value of +Stock and +Option +Awards 4 +($) +Name +Award type +Grant Date +Threshold +($) +Target +($) +Maximum +($) +Threshold +(#) +Target +(#) +Maximum +(#) +Hufnagel +Annual Bonus +$600,000 +$1,200,000 +$2,400,000 +FY24-FY26 Performance Units +02/07/2024 +294,191 +588,381 +1,176,762 +$4,760,002 +Restricted Units +02/07/2024 +252,164 +$2,040,007 +Klimek +Annual Bonus +$117,810 +$ 235,620 +$ 471,240 +FY24-FY26 Performance Units +02/07/2024 +17,615 +35,229 +70,458 +$ 285,003 +Restricted Units +02/07/2024 +23,486 +$ 190,002 +Latchana +Annual Bonus +$100,891 +$ 201,781 +$ 403,563 +FY24-FY26 Performance Units +02/07/2024 +5,934 +11,867 +23,734 +$ 96,004 +FY24-FY26 Performance Units +04/29/2024 +7,829 +15,658 +31,316 +$ 168,010 +Restricted Units +02/07/2024 +7,912 +$ 64,008 +Restricted Units +04/29/2024 +7,829 +$ 84,005 +Miller +Annual Bonus +$127,862 +$ 255,723 +$ 511,446 +FY22-FY24 Performance Units +05/10/2024 +4,448 +8,896 +17,792 +$ 120,007 +FY23-FY25 Performance Units +05/10/2024 +11,120 +22,239 +44,478 +$ 300,004 +FY24-FY26 Performance Units +05/10/2024 +17,791 +35,582 +71,164 +$ 480,001 +Restricted Units +05/10/2024 +17,791 +$ 240,001 +Restricted Units +05/10/2024 +14,826 +$ 200,003 +Soriano +Annual Bonus +$156,884 +$ 313,769 +$ 627,538 +FY24-FY26 Performance Units +02/07/2024 +20,396 +40,792 +81,584 +$ 330,007 +Restricted Units +02/07/2024 +27,195 +$ 220,008 +Stornant +Annual Bonus +$225,956 +$ 451,913 +$ 903,825 +FY24-FY26 Performance Units +02/07/2024 +44,203 +88,406 +176,812 +$ 715,205 +Restricted Units +02/07/2024 +58,937 +$ 476,800 +1. +Estimated payout levels relating to the performance bonus and business priorities bonus. Maximum amount assumes stretch revenue and pretax earnings performance and stretch business priorities performance. For a description of these bonuses and the payouts under them, see pages 42 - 45 . Mr. Latchana's payout levels have been prorated to reflect his promotion and related compensation changes in 2024. Ms. Miller's payout levels are prorated based on her May 2024 hire date. +2. +Estimated payout levels as of the grant date of performance stock units granted under the Stock Incentive Plan of 2016, as amended (the “Stock Incentive Plan of 2016”) and for shares granted after May 2, 2024 granted under the Stock Incentive Plan of 2024. Restrictions on such performance unit awards typically lapse in the February following the last year of the performance period, if at all, based on the Company's performance for the period (capped at 200%). The actual value of shares that vest is also dependent on the stock price at the time of vesting. The Company accrues, but does not pay, dividends on the performance shares during the performance period. At the end of the performance period, the Company will pay to the NEO the accrued dividends (if any) on the performance units that vest. For a description of the performance units granted in 2024, see pages 45 - 46 . +3. +The Company awarded service-based restricted stock unit awards in February 2024 under the Stock Incentive Plan of 2016 to all NEOs employed at the time as well as a promotion grant to Mr. Latchana in April 2024 and a grant made upon Ms. Miller’s hire in May 2024 under the Stock Incentive Plan of 2024. One third of the shares vest on each of the first three anniversaries of the date of grant of the award, with the exception of the sign-on portion of Ms. Miller's award, which vests on the first and second anniversary of the date of grant. All restricted stock units vest upon an NEO's death, disability or retirement. Holders of restricted stock units and awards granted under the Stock Incentive Plan of 2016 are entitled to receive dividend equivalents on restricted stock units and awards. The Company accrues, but does not pay, dividends on the restricted stock units during the service period for units granted under the Stock Incentive Plan of 2024. At the end of the service period, the Company will pay to the NEO the accrued dividends (if any) on the restricted stock units that vest. +4. +Represents the award date fair value for performance stock units and service-based stock unit awards made in fiscal year 2024, determined as described in footnote 2 to the “Summary Compensation Table.” Mr. Hufnagel's amount includes $700,000 in performance units and $300,000 in time-vested units granted in recognition of his promotion to President and CEO and for his leadership in achieving significant progress implementing the Company's strategic transformation efforts during the first four months of his tenure. +2025 PROXY STATEMENT +56 +TABLE OF CONTENTS +Outstanding Equity Awards at 2024 Fiscal Year-End +The following table provides information concerning options and stock awards that have not vested for each NEO outstanding as of December 28, 2024: +Option Awards +Stock Awards +Name +Grant Date +Number of +Securities +Underlying +Unexercised +Options +Exercisable +(#) +Options +Exercise +Price +($) +Options +Expiration +Date +Numbers +of Shares +or Units of +Stock That +Have Not +Vested 1 +(#) +Market +Value of +Shares or +Units Of +Stock That +Have Not +Vested 2 +($) +Equity Incentive +Plan Awards: +Number of +Unearned +Shares, +Units or Other +Rights That +Have Not +Vested 3 +(#) +Equity Incentive +Plan Awards: +Market or +Payout Value of +Unearned +Shares, Units or +Other Rights +That Have Not +Vested 2 +($) +Hufnagel +Various +337,309 +$7,582,706 +Various +443,502 +$9,969,925 +02/11/15 +16,789 +$28.00 +02/10/25 +02/10/16 +32,294 +$16.51 +02/09/26 +Klimek +Various +79,310 +$1,782,889 +Various +47,366 +$1,064,788 +07/13/16 +18,676 +$22.92 +07/12/26 +Latchana +Various +20,041 +$ 450,522 +Various +25,340 +$ 569,643 +02/11/15 +4,007 +$28.00 +02/10/25 +Miller +Various +32,617 +$ 733,230 +Various +49,785 +$1,119,167 +Soriano +Various +84,601 +$1,901,830 +Various +54,518 +$1,225,565 +Stornant +Various +93,854 +$2,109,838 +Various +96,249 +$2,163,678 +02/11/15 +11,765 +$28.00 +02/10/25 +06/12/15 +12,687 +$29.31 +06/11/25 +02/10/16 +70,948 +$16.51 +02/09/26 +2025 PROXY STATEMENT +57 +TABLE OF CONTENTS +1. +The following table sets forth the vesting dates for the unvested service-based restricted stock or stock unit awards of each NEO as of December 28, 2024: +Named +Executive +Officer +Vesting +Date +Number of Shares to Vest +Hufnagel +02/07/25 +84,055 +02/08/25 +5,751 +02/09/25 +4,413 +07/31/25 +13,154 +10/30/25 +20,350 +02/07/26 +84,054 +02/08/26 +5,751 +02/09/26 +2,221 +07/31/26 +13,155 +10/30/26 +20,350 +02/07/27 +84,055 +Klimek +02/07/25 +7,829 +02/08/25 +4,202 +02/09/25 +4,609 +10/30/25 +20,350 +02/07/26 +7,828 +02/08/26 +4,203 +02/09/26 +2,110 +10/30/26 +20,350 +02/07/27 +7,829 +Latchana +02/07/25 +2,638 +02/08/25 +1,194 +02/09/25 +1,311 +04/29/25 +2,610 +02/07/26 +2,637 +02/08/26 +1,195 +02/09/26 +600 +04/29/26 +2,609 +02/07/27 +2,637 +04/29/27 +2,610 +Miller +05/10/25 +13,344 +05/10/26 +13,343 +05/10/27 +5,930 +2025 PROXY STATEMENT +58 +TABLE OF CONTENTS +Named +Executive +Officer +Vesting +Date +Number of Shares to Vest +Soriano +02/07/25 +9,065 +02/08/25 +4,866 +02/09/25 +3,467 +07/31/25 +614 +08/02/25 +391 +10/30/25 +20,350 +02/07/26 +9,065 +02/08/26 +4,866 +02/09/26 +1,888 +07/31/26 +614 +10/30/26 +20,350 +02/07/27 +9,065 +Stornant +02/07/25 +19,646 +02/08/25 +10,546 +02/09/25 +9,196 +02/07/26 +19,645 +02/08/26 +10,547 +02/09/26 +4,628 +02/07/27 +19,646 +2. +The dollar values are calculated using a per share stock price of $22.48, the closing price of Wolverine Worldwide common stock on December 27, 2024, the last business day of fiscal year 2024. +3. +Following the end of the applicable performance period, performance units vest depending upon the Company's achievement of the relevant performance criteria. Shares actually vested for the 2022-2024 cycle are included in the “Number of Shares or Units of Stock That Have Not Vested” column. Performance between threshold and target level was assumed for the 2023-2025 cycle and performance between zero and threshold was assumed for the 2024-2026 cycle. For Mr. Hufnagel, shares included for the 2022-2024 cycle were adjusted to reflect the structure of the performance award agreement for that cycle. +2025 PROXY STATEMENT +59 +TABLE OF CONTENTS +Option Exercises and Stock Vested +in Fiscal Year 2024 +Option Awards +Stock Awards +Number of Shares +Acquired on Exercise +(#) +Value Realized +On Exercise 1 +($) +Number of Shares +Acquired on Vesting +(#) +Value Realized +On Vesting 1 +($) +Hufnagel +— +— +54,551 +$698,858 +Klimek +10,214 +$36,755 +31,623 +$417,676 +Latchana +7,706 +$ 3,962 +7,387 +$125,770 +Miller +— +— +— +— +Soriano +— +— +31,599 +$423,104 +Stornant +— +— +25,220 +$219,503 +1. +The Company calculates the dollar values using the closing price of Wolverine Worldwide common stock on the date of vesting. +2025 PROXY STATEMENT +60 +TABLE OF CONTENTS +Pension Plans and 2024 Pension Benefits +Wolverine Worldwide maintains the following defined benefit retirement plans: (1) the Wolverine Worldwide Employees' Pension Plan (“Pension Plan”), which is a funded and tax-qualified defined benefit plan under the Internal Revenue Code that covers eligible employees, and (2) the Wolverine World Wide, Inc. 409A Supplemental Executive Retirement Plan (“SERP”), which is an unfunded, non-qualified plan that covers individuals recommended by the CEO and approved by the Compensation and Human Capital Committee. Messrs. Hufnagel and Stornant participate in the Pension Plan and SERP and Ms. Klimek and Mr. Latchana participate in the Pension Plan. +QUALIFIED PENSION PLANS +Participants vest in the Pension Plan after five years of qualifying service. Subject to the limitations imposed by the Internal Revenue Code, the Pension Plan generally pays a monthly benefit in an amount equal to a percentage of the participant's final average monthly earnings multiplied by his or her number of years of service less a monthly social security allowance. For purposes of this benefits formula, the Pension Plan caps years of service at 30 (25 for SERP participants), and the percentages of final average monthly earnings are 1.6% (2.0% for SERP participants). “Earnings” under the Pension Plan generally includes all W-2 compensation and pre-tax benefit plan deferrals other than taxable fringe benefits and deferred compensation, and for 2024 was capped at $345,000, the IRS limit applicable to tax qualified plans. +Upon retirement, a participant may elect to receive the benefit in the form of a life annuity, 5 or 10-year certain and life annuities, or joint and 50%, joint and 75%, or joint and 100% survivor annuities. The payments are actuarially adjusted based on the participant's election. Any election, other than an election to receive life annuity benefits, reduces the monthly benefit payable. The “normal” age at which benefits may be drawn under the Pension Plan is 65. +SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN +Messrs. Hufnagel and Stornant participate in the SERP, which provides retirement benefits above amounts available under the Company's tax qualified Pension Plan. The SERP benefit generally equals the difference between the participant's retirement benefit under the Pension Plan and the benefits the participant would have received if there were no IRS imposed cap on earnings when calculating the Pension Plan benefit. The SERP caps years of service at 25 in calculating a participant's benefit. The SERP also allows a retired participant who has five years of service to draw earlier (beginning at age 55) and on different terms than under the Pension Plan. A participant's earnings percentage multiplier is the same under the SERP as it is under the Pension Plan. The Compensation and Human Capital Committee may grant additional deemed years of service under the SERP to a participant, subject to the cap of 25 years. The full benefit of any additional years of deemed service is paid under the SERP. +If a retired participant draws the SERP benefit prior to age 65, the reduction factor is 0.333% for each month prior to age 60, and 0.1666% for each month between age 60 and age 65. As of the end of fiscal year 2024, Mr. Stornant is the only NEOs eligible to retire and begin drawing benefits under the SERP. +SERP benefits are paid monthly, and the SERP has a lump sum payment option which may apply to certain terminations of employment after a change in control or, if elected, upon death. The SERP also includes a disability benefit and a death benefit payable to the participant's designated beneficiary if the participant dies before retiring. The SERP provides for lump sum payments equal to 125% of the net present value of accrued benefits without regard to any reduction for early payment to participants who resign for good reason or are terminated by Wolverine other than for cause or due to death or disability within two years after a change in control. +The SERP also contains non-competition, confidentiality and employee non-solicitation provisions in favor of Wolverine Worldwide. Under the SERP non-competition provisions, a participant is not entitled to any benefit payment if the participant enters into certain relationships with a competing business prior to the date on which such benefit payment is due. If the participant's employment is terminated for serious misconduct, or if Wolverine Worldwide cannot collect under an insurance policy purchased to fund SERP benefits for certain reasons, the Company may terminate a participant's benefits under the SERP. Wolverine Worldwide may terminate the SERP or stop further accrual of SERP benefits for a participating NEO at any time, but termination will not affect previously accrued benefits. +2025 PROXY STATEMENT +61 +TABLE OF CONTENTS +PENSION BENEFITS IN FISCAL YEAR 2024 +The following table provides for each NEO certain information concerning each plan that provides for payments or other benefits at, following, or in connection with retirement: +Plan Name +Number of Years +Credited Service +(#) +Present Value of +Accumulated Benefit 1 +($) +Payments During +Last Fiscal Year +($) +Hufnagel +SERP +16 +$1,214,773 +— +Pension +16 +$ 655,765 +— +Klimek 2 +SERP +— +— +— +Pension +20 +$ 451,930 +— +Latchana 2 +SERP +— +— +— +Pension +17 +$ 292,318 +— +Miller 2 +SERP +— +— +— +Pension +— +— +— +Soriano 2 +SERP +— +— +— +Pension +— +— +— +Stornant +SERP +25 +$2,505,320 +— +Pension +25 +$1,441,893 +— +1. +These values are as of December 28, 2024, and are calculated assuming the participants will commence their benefits at age 65, and that those benefits will be paid in the form according to each participant's 409A election and use the PRI-2012 mortality tables for males and females (white collar for SERP and no collar for Pension Plan), projected forward from base year 2012 with generational projection using an unmodified MP-2021 projection scale, with contingent annuitant mortality tables applied after the death of the participant and using the following discount rates: 5.28% Pension Plan; 5.33% SERP. +2. +Ms. Soriano and Ms. Miller do not participate in the SERP or Pension Plan and Ms. Klimek and Mr. Latchana do not participate in the SERP. +2025 PROXY STATEMENT +62 +TABLE OF CONTENTS +Non-Qualified Deferred Compensation +Wolverine Worldwide maintains a Deferred Compensation Plan. This unfunded and non-qualified plan allows executives and other eligible senior employees of the Company to elect to defer all or a portion of their base salary, cash bonus, or other performance-based cash compensation. Wolverine Worldwide may, but need not, credit a participant's account under the plan with additional discretionary Company contributions, which may be subject to a vesting schedule and which would vest in full on a change in control. Amounts deferred pursuant to the Deferred Compensation Plan may be invested, at the direction of the participant, in an investment fund, index, or other investment vehicle, as designated by the Compensation and Human Capital Committee to be available under the plan, and earnings, if any, are credited to the participant's account. +Accounts are paid out upon the earliest to occur of (i) a qualifying separation from service, (ii) a change in control (as such term is defined in the Deferred Compensation Plan), and (iii) a termination of the Deferred Compensation Plan. Payment must generally be made, or installment payments must begin, (as elected by the participant at the time of deferral), within 60 days of the event triggering payment. +In 2024, none of the NEOs elected to defer amounts under the Deferred Compensation Plan and no NEOs received a Company contribution. Mr. Hufnagel and Mr. Stornant are the only NEOs who have previously elected to defer amounts under the Deferred Compensation Plan. +Name +Executive +Contributions +in 2024 +($) +Registrant +Contributions +in 2024 +($) +Aggregate +Earnings +in 2024 +($) 1 +Aggregate +Withdrawals / +Distributions +($) +Aggregate +Balance +at Last FYE +($) +Hufnagel +— +— +$19,990 +— +$428,019 +Stornant +— +— +$ 693 +— +$ 15,467 +1. +Reflects market-based earnings on amounts credited to Mr. Stornant and Mr. Hufnagel under the Deferred Compensation Plan. +2025 PROXY STATEMENT +63 +TABLE OF CONTENTS +Potential Payments Upon +Termination or Change in Control +Wolverine Worldwide has entered into an Executive Severance Agreement with each NEO that provides certain rights, including the right to receive payments in the event of a termination of employment following a change in control. The Company also has entered into an agreement with each of Mr. Hufnagel and Ms. Soriano regarding termination benefits in the event of termination of employment under the circumstances described below. +BENEFITS TRIGGERED BY TERMINATION FOR CAUSE OR VOLUNTARY TERMINATION +An NEO is not entitled to receive any additional forms of severance payments or benefits upon termination of employment for Cause or upon the NEO's voluntary decision, other than for Good Reason, to terminate his or her employment, as discussed in further detail below. +BENEFITS TRIGGERED BY TERMINATION OTHER THAN FOR CAUSE OR FOR GOOD REASON NOT IN CONNECTION WITH A CHANGE IN CONTROL +Mr. Hufnagel entered into an Employment Agreement upon his appointment as President and CEO of the Company in August 2023. The Employment Agreement states that upon termination of his employment by Wolverine Worldwide without Cause, or termination by Mr. Hufnagel with Good Reason, as such terms are defined in his Employment Agreement, Wolverine Worldwide will pay Mr. Hufnagel the following payments in exchange for a general release of claims in favor of Wolverine Worldwide: (1) continued base salary for 24 months; (2) payment of Company COBRA premiums for up to 24 months, or, if earlier, until eligible for coverage through another employer; (3) a pro rata target bonus opportunity for the year of termination; (4) pro rata vesting of outstanding performance-based equity awards as though Mr. Hufnagel had retired as of the date of termination, and pro-rata vesting of outstanding time-based equity awards that would have vested over the 12 month period following the date of termination; and (5) 12 months of outplacement assistance. +“Cause” generally is defined in Mr. Hufnagel’s Employment Agreement to mean: (1) any intentional act of fraud, embezzlement, theft, dishonesty, misrepresentation or breach of fiduciary duty with respect to the Company or its subsidiaries; (2) gross negligence or willful misconduct in the performance of duties; (3) material failure or refusal to follow any reasonable directive of the Board or the officer to whom Mr. Hufnagel reports, and if such failure and refusal is curable, if not cured within ten (10) days after written notice; (4) material breach of any noncompetition, nonsolicitation, confidentiality or other covenant with the Company, material breach of any material written policy of the Company which if curable, is not cured within ten (10) days after the Company’s written notice of such breach, or material breach of Mr. Hufnagel’s Employment Agreement, which if curable, is not cured within ten (10) days after the Company’s written notice of such breach; or (5) conviction of or indictment for or entering of a guilty plea or plea of no contest or nolo contendere with respect to any felony or any crime involving an act of moral turpitude. +“Good Reason” generally is defined in Mr. Hufnagel’s Employment Agreement to mean: (1) a material diminution in duties or a reduction of title, (2) a material breach by the Company of the Employment Agreement, (3) relocation of Mr. Hufnagel’s principal place of employment to a location that is more than fifty (50) miles from the Company’s corporate headquarters without Mr. Hufnagel’s consent, (4) termination of the Employment Agreement by the Company serving a notice of nonextension or (5) a reduction in Mr. Hufnagel’s base salary, unless such reduction is part of an across the board reduction for senior executives of the Company. +On June 8, 2018, Ms. Soriano entered into a Service Agreement with Wolverine Europe Limited, which is typical for senior executives based in the United Kingdom. Ms. Soriano’s agreement states that upon certain terminations of her employment by Wolverine Europe Limited, Wolverine Europe Limited will provide Ms. Soriano with written notice nine (9) months prior to such termination or, alternatively, will pay Ms. Soriano her base salary for such period (or any portion thereof) in lieu of such notice. In addition, upon voluntary termination of Ms. Soriano’s employment by Ms. Soriano for any reason, she is required to give written notice six (6) months prior to such termination and Wolverine Europe Limited may pay Ms. Soriano her base salary for such +2025 PROXY STATEMENT +64 +TABLE OF CONTENTS +period (or any portion thereof) in lieu of such notice. If Wolverine Europe Limited chooses to pay Ms. Soriano her base salary in lieu of notice, in either case, such amounts will be in full and final settlement of all claims Ms. Soriano may have against Wolverine and its affiliates and, further, such amounts will be reduced by any income earned from subsequent employment. +For purposes of Ms. Soriano’s Service Agreement, Wolverine Europe Limited will generally not be required to provide notice to terminate her employment if she (1) commits, repeats or continues any material breach of her Service Agreement or her obligations thereunder, (2) commits an act of gross misconduct or serious/gross incompetence or negligence including any deliberate act of discrimination or harassment, (3) acts in a manner which prejudices or is likely in the reasonable opinion of the Board to prejudice the interests or reputation of Ms. Soriano, Wolverine or its affiliates, (4) commits any material breach of the Code of Conduct, (5) commits or is charged or convicted of any criminal offense other than an offense which does not affect her position or any road traffic violation, (6) is declared bankrupt, (7) is prohibited by law from being a director of a company, (8) is removed as a director of Wolverine Europe Limited or any affiliate for a reason related to misconduct, (9) is in breach of the warranties contained in the Service Agreement, (10) breaches a material policy of Wolverine or its affiliates, (11) becomes incapacitated and no longer able to perform her duties for a period exceeding 26 weeks in any 12 month period, or (12) ceases to hold any necessary qualification to carry out her duties and/or is in breach of any rules and regulations or any relevant regulatory body. +In addition, on March 3, 2025, in connection with Ms. Soriano's planned termination on March 3, 2026 (the “Termination Date”), the Company entered into the Settlement Agreement with Ms. Soriano providing for (i) releases of Ms. Soriano’s claims against the Company as of the Termination Date, (ii) a cash payment to Ms. Soriano from the Company in an amount equal to one year of her base salary, to be paid following the Termination Date, (iii) Ms. Soriano’s agreement to comply with covenants restricting her ability to compete with the Company and to solicit and hire the Company’s employees for seven months and one year, respectively, following the Termination Date, (iv) a repatriation payment from the Company to Ms. Soriano in the amount of £300,000, to be paid following the Termination Date, (v) continued vesting of the portion of the unvested equity awards granted to Ms. Soriano for eight months after the Termination Date, and (vi) the Company’s ability, in its discretion, to require that Ms. Soriano take leave for any period prior to the Termination Date, during which period she will continue to receive her base salary and benefits and remain eligible to receive bonus payments and vesting of equity awards. +BENEFITS TRIGGERED UPON A CHANGE IN CONTROL +Benefits Upon Termination Following a Change in Control. Under the Executive Severance Agreements entered into with the NEOs, payments and benefits are triggered when employment is terminated without “Cause” or when an executive terminates employment for “Good Reason” within two years following a change in control of Wolverine Worldwide. +Upon such a qualifying termination, Wolverine Worldwide will pay the lump sum severance payment under the Executive Severance Agreement composed of the following: (1) unpaid base salary and bonus payments that had been earned; (2) in lieu of a bonus payment under the annual bonus plan, an amount equal to the quotient of the number of days the NEO was employed by Wolverine Worldwide, or any successor company in the year of termination, divided by the number of days in the year; multiplied by 100% of the greater of either (a) the bonus awarded to the NEO under the annual bonus plan for the preceding year and (b) the average paid to the NEO over the preceding two year period under the annual bonus plan; (3) in lieu of payments under the various three year performance periods that remain open on the date of termination, if any, an amount equal to the bonus the NEO would have received based on actual and assumed performance measures, multiplied by the quotient of the number of days the NEO participated in the performance period prior to the termination, divided by the total number of days in the performance period (in determining the earnings per share or other performance measures that can be determined annually for any year subsequent to the year of termination, performance will equal the level required to attain the maximum goal under the three year plan for that year); (4) two times the sum of (a) the NEO's highest annual base salary during the 12 month period prior to termination and (b) the greater of (i) the average amount earned by the NEO during the previous two years under the annual bonus plan and (ii) the amount earned during the previous year under the annual bonus plan; (5) 100% of the positive spread for any stock options held by the NEO on the date of termination, whether or not vested; and (6) in the case of Mr. Hufnagel, the present value of an additional three years of deemed service under the Pension Plan and SERP and for Mr. Latchana and Ms. Klimek, the present value of an additional three years of deemed service under the Pension Plan Upon a termination of employment following a change of control, Wolverine Worldwide or any successor company will maintain for a period of six months to one year the NEO's benefits under the then current benefit plans, programs or arrangements that the NEO was entitled to participate in immediately prior to the termination date. In addition, Wolverine Worldwide or any successor company will provide outplacement services through the last day of the second calendar year following the calendar year of termination. +2025 PROXY STATEMENT +65 +TABLE OF CONTENTS +“Change in Control” under the Executive Severance Agreements generally means certain changes in composition of the Board of Directors, certain acquisitions of 20% or more of Wolverine Worldwide's common stock or combined outstanding voting power of Wolverine World Wide, Inc., and other specified reorganizations, mergers, consolidations, liquidations, dissolutions or distributions of substantial assets (unless such transactions result in the creation of an entity in which at least 50% of the common stock and combined voting power is owned by the owners of record prior to the transaction, no single shareholder owns more than 20% of the combined voting power and a majority of the board remains unchanged). In all cases, an event will not qualify as a change in control unless it qualifies as “a change in the ownership or effective control” of the Company or “a change in the ownership of a substantial portion of the assets of the Company,” each as determined under the stringent requirements of Section 409A of the Tax Code. Under this standard, for example, transactions must be consummated, not just approved by shareholders. +“Cause” is defined under the Executive Severance Agreements to generally mean the willful and continued failure to substantially perform duties or willfully engaging in gross misconduct that is injurious to the Company. +“Good Reason” is defined under the Executive Severance Agreements to generally mean: (1) any materially adverse change in position, duties, responsibilities or title, or any removal, involuntary termination or failure to re-elect an officer; (2) a reduction in annual base salary; (3) any relocation or requirement to substantially increase business travel; (4) the failure to continue providing any executive incentive plans or bonus plans; (5) the failure to continue any employee benefit plan or compensation plan unless a comparable plan is available; (6) the failure to pay any salary, bonus, deferred compensation or other compensation; (7) the failure to obtain an assumption agreement from any successor; (8) any purported termination of the employment which is not effected in a manner prescribed by the Executive Severance Agreement; or (9) any other material breach by Wolverine Worldwide or any successor company of its obligations under the Executive Severance Agreement. +Benefits Upon a Change in Control Only. The Company has double-trigger equity vesting upon a change in control, meaning that vesting only accelerates upon a qualifying termination of employment after a change in control. To the extent that the Company has made discretionary contributions under the Deferred Compensation Plan that are subject to a vesting schedule, any unvested portion of these contributions will vest on a change in control. Change in control for this purpose generally means certain changes in the composition of the Board of Directors, certain acquisitions of 20% of Wolverine Worldwide's common stock (50% in the case of the Deferred Compensation Plan) and other specified reorganizations, mergers, consolidations, liquidations, dissolutions or dispositions of substantial assets. +Excise Tax Gross Up. The Compensation and Human Capital Committee previously determined that Wolverine Worldwide would not provide excise tax gross up payments in employment agreements entered into after 2008. +BENEFITS TRIGGERED BY RETIREMENT, DEATH OR PERMANENT DISABILITY +Pension Plan. In the event of death before retirement, the Pension Plan provides the surviving spouse of a vested participant a death benefit equal to the qualified pre-retirement survivor annuity as defined in the Internal Revenue Code (generally 50% of the participant's accrued normal retirement benefit). This benefit is paid annually to the surviving spouse beginning when the participant would have turned 60 and continues for the life of the surviving spouse. For participants with at least three years of service as of December 31, 2003, and who have at least 10 years of service and are employed by the Company at the time of death, the amount of the survivor benefit under the Pension Plan is calculated as though the participant had continued as an employee of the Company until age 65 at the compensation level as of the date of death and the benefit begins upon the date of death, unreduced for early commencement. The survivor benefit for participants who meet all the criteria set forth in the preceding sentence, but who die when they are not employed by the Company, are entitled to a joint and survivor benefit commencing upon the date of death, unreduced for early commencement. +SERP. If a SERP participant dies before beginning to receive benefits under the SERP, the Company must, based on the participant's election, pay the beneficiary either a monthly annuity or a lump sum death benefit equal to the present value of the benefit computed as if the participant had retired on the date of death, had begun receiving benefits at age 55, and had continued to receive benefits for the remainder of the participant's life expectancy. If the participant dies after beginning to receive benefit payments, benefits cease unless the participant was receiving benefits in the form of one of the joint and survivor annuity optional elections under the plan or had elected benefits in a form that provides for a continuation of benefits. +2025 PROXY STATEMENT +66 +TABLE OF CONTENTS +If a participant becomes disabled (as defined in the SERP), the SERP provides a disability benefit equal to 60% of the normal retirement accrued benefit based upon years of service up to the date that the participant became disabled through the date the participant reaches age 65 (at which point, the participant would begin drawing full SERP benefits) or is no longer disabled. +Annual Bonus Plan. Upon termination of employment at least six months after the beginning of a fiscal year due to death, disability, or early or normal retirement, an NEO is entitled to receive a pro rata portion of any annual bonus award earned under the annual bonus plan based on the NEO's service during such fiscal year and actual performance under the annual bonus plan. The annual bonus is payable at the same time and in the same manner as awards are paid to other NEOs for the fiscal year. +Stock Incentive Plans. Upon death, disability or voluntary termination of employment after attaining age 59 with ten years of service with the Company, subject to certain conditions, the restrictions on time-vested units vest. Upon death, disability or voluntary termination of employment after attaining age 59 with ten years of service with the Company, subject to certain conditions, the restrictions on performance units will vest on a prorated basis based on Company performance for each open three-year cycle. +Deferred Compensation Plan. Upon death, disability, or other qualifying separation from service, including retirement, all in accordance with Section 409A of the Internal Revenue Code, all amounts deferred by the NEOs under the Deferred Compensation Plan, including any vested amounts credited to the NEOs pursuant to a discretionary Company contribution, shall generally be paid, or commence payment, within 60 days of the termination in accordance with the schedule elected by the NEO at the time of deferral. +DESCRIPTION OF RESTRICTIVE COVENANTS THAT APPLY DURING AND AFTER TERMINATION OF EMPLOYMENT +The SERP contains non-competition, confidentiality, and employee non-solicitation provisions in favor of Wolverine Worldwide. Under the non-competition provisions of the SERP, the participant will not be entitled to any benefit payment if, prior to the date on which such benefit payment is due, the participant enters into certain relationships with a competing business. +ESTIMATED PAYMENTS ON TERMINATION OR CHANGE IN CONTROL +The following table summarizes the potential payments and benefits payable to each NEO upon a change in control or termination of employment following each of the triggering events set forth in the table. As required, the amounts in the table assume that the termination of employment or change in control of Wolverine Worldwide took place on the Company's last day of fiscal year 2024, which was December 28, 2024. The amounts set out below are in addition to benefits that are generally available to the Company's employees such as distributions under the Company's 401(k) savings plan, disability or life insurance benefits and accrued vacation. Due to the many factors that affect the nature and amount of any benefits provided upon the termination events discussed below, any actual amounts paid or distributed to NEOs may be different. Factors that may affect these amounts include timing during the year of the occurrence of the event, Wolverine Worldwide's stock price and the NEO's age and years of service. +The value of the accelerated vesting of unvested equity-based compensation awards was computed using the closing market price $22.48 of Wolverine Worldwide's common stock on December 27, 2024, the last business day in fiscal year 2024. The value for unvested restricted stock is computed by multiplying $22.48 by the number of shares of the NEO's restricted stock that would vest as a result of an event. +2025 PROXY STATEMENT +67 +TABLE OF CONTENTS +Each of the hypothetical events described in the following table (the highlighted headings in the left-hand column) is calculated and reported as a discrete event. For example, the amounts disclosed under the “Change in Control Only” heading are not cumulative with the amounts disclosed under the “Change in Control/Termination” heading. +Termination Event and Payment / Benefits +Hufnagel +Klimek +Latchana +Miller +Soriano +Stornant +Termination by Company for Cause or Voluntary Termination (other than for Good Reason or due to Retirement) +— +— +— +— +— +— +Termination by Company Other Than for Cause or by Executive for Good Reason or In Lieu of Notice +$7,469,020 +— +— +— +$427,867 11 +— +Change in Control / Termination +Executive Severance Agreement 1 +$5,181,330 +$1,830,244 +$1,826,704 +$2,402,086 +$2,525,287 +$2,884,630 +Benefits under Executive Severance Agreement 2 +$40,704 +$38,876 +$42,353 +$34,856 +$36,023 +$54,515 +Stock Incentive Plans 3 +$7,582,706 +$1,782,893 +$450,512 +$733,230 +$1,901,811 +$2,109,832 +Lump sum payment under the SERP 4 +$3,309,970 +— +— +— +— +$5,191,371 +Death +SERP 5 +$2,815,314 +— +— +— +— +$4,435,062 +Pension Plan 6 +$364,837 +$206,711 +$160,503 +— +— +$1,067,627 +Stock Incentive Plans 3 +$7,582,706 +$1,782,893 +$450,512 +$733,230 +$1,901,811 +$2,109,832 +Earned Incentive Compensation 7 +$4,236,181 +$651,364 +$391,366 +$386,043 +$912,569 +$1,176,820 +Disability +SERP 8 +$2,262,606 +— +— +— +— +$3,397,398 +Stock Incentive Plans 3 +$7,582,706 +$1,782,893 +$450,512 +$733,230 +$1,901,811 +$2,109,832 +Earned Incentive Compensation 7 +$4,236,181 +$651,364 +$391,366 +$386,043 +$912,569 +$1,176,820 +Retirement +SERP 9 +$1,927,265 +— +— +— +— +$3,652,717 +Pension Plan 9 +$750,844 +$518,405 +$332,410 +— +— +$1,674,257 +Stock Incentive Plans 3 +$7,582,706 +$1,782,893 +$450,512 +$733,230 +$1,901,811 +$2,109,832 +Earned Incentive Compensation 7 +$4,236,181 +$651,364 +$391,366 +$386,043 +$912,569 +$1,176,820 +Change in Control Only +Stock Incentive Plans 10 +— +— +— +— +— +— +1. +Payments would be triggered after termination of employment under certain circumstances within two years following a change in control. Includes amounts payable in cash under the terms of the Executive Severance Agreement, excluding the value of the cash payout to each NEO of the option spread for already vested options. The timing of the payment would be delayed to the extent earlier payment would trigger Section 409A of the tax code. The value of service-based restricted units that vest upon a change in control under the terms of the Company's stock incentive plans are included in the Stock Incentive Plans row. +2. +These estimates assume that Wolverine Worldwide, or any successor company, maintains the benefit plans for a period of one year after termination and the outplacement services for a period beginning with the date of termination and ending on the last day of the second calendar year following the calendar year in which the date of termination occurred. +3. +Reflects the value of unvested shares of restricted stock units that would vest because of the event. +4. +Reflects the entire lump sum benefit payable to applicable NEOs, including any accumulated benefit. The timing of the payment would be delayed to the extent earlier payment would trigger Section 409A of the Tax Code. +5. +Reflects the entire lump sum death benefit payable to a participating NEO's beneficiary, including any accumulated benefit. +6. +Amounts reflect the net present value of the annuity paid to the surviving spouse calculated using the same discount rate and mortality assumptions used in the Pension Benefits table under the heading “Pension Benefits in Fiscal Year 2024” under the heading “Pension Plans and 2024 Pension Benefits.” In accordance with the terms of the Pension Plan, the death benefit for Mr. Stornant was calculated as though the NEO had continued as an employee of Wolverine Worldwide until age 65 at the compensation level as of the date of death. +7. +Under the Annual Bonus Plan and the terms of performance unit awards, each NEO may be eligible to receive a pro rata portion of any award if employment is terminated as a result of any of the specified events in the table. The amount reported represents (a) actual payout under the Annual Bonus Plan for fiscal year 2024, (b) actual payout under the 2022-2024 performance cycle and (c) target performance for the 2023-2025 and 2024-2026 performance cycles. Performance units would vest on a prorated basis based on actual Company performance. +8. +Reflects the net present value of the annuity using the same discount rate and mortality assumptions used in the Pension Benefits table and assuming the NEO drew the disability benefit until age 65 followed by the normal retirement benefit. +9. +Reflects the net present value of benefits according to actual elections in place and assuming SERP benefits begin at age 55 (or immediately if older than 55) and pension benefits as of age 60 with 10 years of service. +10. +Unvested restricted stock units (including performance share awards) do not vest based on a change in control only. +11. +Represents 9 months of base salary and is the maximum amount payable if the Company chooses to terminate her employment without notice. If Ms. Soriano voluntarily terminates, the maximum payout in lieu of notice is six months of base salary ($285,245). +2025 PROXY STATEMENT +68 +TABLE OF CONTENTS +CEO PAY RATIO +As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(u) of Regulation S-K, we are providing the following information about the relationship of the annual total compensation of our employees and the annual total compensation of Christopher Hufnagel, the Company's Chief Executive Officer. +For 2024, our last completed fiscal year, the annual total compensation of the employee of the Company identified at median was $52,621 and the annual total compensation of the CEO, as reported in the Summary Compensation Table above was $9,372,067. +Based on this information, the 2024 ratio of the annual total compensation of Mr. Hufnagel to the median of the annual total compensation of all employees was estimated to be 178 to 1. +The methodology and the material assumptions, adjustments and estimates that we used to identify the median of the annual total compensation of all our employees, as well as to determine the annual total compensation of our “median employee” are described below. +• +We determined that, as of December 30, 2023, our employee population consisted of approximately 4,098 (2,251 in the U.S. and 1,847 outside the U.S.) individuals globally. After excluding employees from Austria (2), Belgium (1), Cayman Islands (1), Chile (13), Dominican Republic (4), Hong Kong (29), India (8 employees), Ireland (58), and Thailand (1) pursuant to the “de minimis” exception provided for in the rules, we used a base of 3,981 employees for purposes of determining the “median employee.” We selected December 30, 2023, as the date upon which we would identify the median employee in order to align with year-end. We believe there have been no changes in our employee population or our compensation arrangements in 2024 that would result in a material change in our pay ratio disclosure or our median employee, and therefore used the same median employee as in last year’s pay ratio disclosure. +• +To identify the median employee from our employee population, we used annual base salary, plus bonus and other cash incentives paid for the 12-month period ending December 30, 2023 as our consistently applied compensation measure - the same approach used in prior years. +○ +In making this determination, we annualized the compensation of all newly hired regular employees during this period. +○ +Additionally, for our full-time population, we used annualized salary; for our part-time population, we used the hourly rate of pay multiplied by the regularly scheduled hours expected to work. +• +Once we identified our median employee, we combined the elements of such employee's compensation for fiscal 2024 in accordance with the SEC's rules, resulting in annual total compensation of $52,621. +2025 PROXY STATEMENT +69 +TABLE OF CONTENTS +PAY VS. PERFORMANCE +As required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(v) of Regulation S-K, the following information is provided about the relationship between compensation shown in the Summary Compensation Table (SCT), Compensation Actually Paid (CAP), Total Shareholder Return (TSR), Net Income, and Non-GAAP Pre-Tax Income as the Company Selected Measure. +As shown in the table below, the CEO and other NEOs’ Compensation Actually Paid amounts are aligned with the Company’s TSR. Compensation Actually Paid has meaningfully decreased when the stock price has decreased (e.g., 2022), and Compensation Actually Paid has meaningfully increased when the stock price has increased (e.g., 2024). Alignment is primarily due to the Company’s use of equity incentives, which are tied directly to stock price in addition to the Company’s financial performance. +Value of Initial Fixed $100 +Investment Based On: +Year +Summary +Comp. +Table Total +for Krueger +CEO (a) +Summary +Comp. +Table Total +for +Mr. Hoffman +CEO (a) +Summary +Comp. +Table Total +for +Mr. Hufnagel +CEO (a) +Comp. +Actually +Paid to +Krueger +CEO (a), (b) +Comp. +Actually +Paid to +Hoffman +CEO (a), (b) +Comp. +Actually +Paid to +Hufnagel +CEO (a), (b) +Average +Summary +Comp. +Table +Total for +Non-CEO +NEOs (a) +Average +Comp. +Actually +Paid to +Non-CEO +NEOs (a), (b) +Wolverine +World Wide +TSR +Peer +Group (c) +TSR +Net Income +(in Millions) +Non-GAAP +Pre-Tax +Income (in +Millions) (d) +2024 +N/A +N/A +$ 9,372,067 +N/A +N/A +$ 28,578,673 +$ 1,877,688 +$ 4,434,728 +$ 74.93 +$ 130.36 +$ 51.5 +$ 92.5 +2023 +N/A +$ 7,578,715 +$ 3,174,477 +N/A +$ 3,230,490 +$ 2,691,339 +$ 2,310,884 +$ 1,841,974 +$ 28.98 +$ 134.84 +($ 39.2 ) +$ 4.8 +2022 +N/A +$ 6,519,654 +N/A +N/A +$ 207,454 +N/A +$ 1,818,674 +$ 868,826 +$ 34.33 +$ 108.06 +($ 189.1 ) +$ 133.1 +2021 +$ 14,405,857 +N/A +N/A +$ 3,570,244 +N/A +N/A +$ 3,924,986 +$ 2,336,212 +$ 88.24 +$ 151.33 +$ 67.0 +$ 191.5 +2020 +$ 9,519,491 +N/A +N/A +$ 5,934,954 +N/A +N/A +$ 3,547,178 +$ 2,591,063 +$ 94.56 +$ 120.70 +($ 138.6 ) +$ 92.4 +(a) +NEOs included in these columns reflect the following: +Year +CEO (or Principal Executive Officer) +Non-CEO NEOs +2024 +Christopher Hufnagel +Amy Klimek, David Latchana, Taryn Miller, Isabel Soriano, Michael Stornant +2023 +Brendan Hoffman (through 8/5/2023) & +Christopher Hufnagel (through end of year) +Isabel Soriano, Michael Stornant, James Zwiers, Amy Klimek +2022 +Brendan Hoffman +Isabel Soriano, Michael Stornant, James Zwiers, Christopher Hufnagel +2021 +Blake Krueger +Brendan Hoffman, Isabel Soriano, Michael Stornant, James Zwiers +2020 +Blake Krueger +Brendan Hoffman, Michael Jeppesen, Michael Stornant, James Zwiers +(b) +The following table details the adjustment to the Summary Compensation Table Total Pay for our CEO, as well as the average for our other NEOs, to determine “compensation actually paid,” as computed in accordance with Item 402(v), with dividends accounted for in the change in fair value of the awards. Amounts do not reflect actual compensation earned by or paid to our NEOs during 2024. +CEO +NEO Average +Hufnagel (2024) +2024 +Summary Compensation Table Total +$ 9,372,067 +$ 1,877,688 +Less: Reported Fair Value of Equity Awards (1) +$ 6,800,009 +$ 793,814 +Add: Year-End Fair Value of Outstanding and Unvested Equity Awards Granted in the Year (2) +$ 23,953,175 +$ 2,317,940 +Add: Change in Fair Value from prior Year-End to Vesting Date of Equity Awards Granted in Prior Years that Vested in the Year (2) +$ 224,381 +$ 69,837 +Add: Year Over Year Change in Fair Value of Outstanding and Unvested Equity Awards Granted in Prior Years (2) +$ 1,884,203 +$ 957,513 +Less: Fair Value at the End of Prior Year of Equity Awards that Failed to Meet Vesting Conditions in the Year (2) +$ 17,269 +$ 25,459 +Add: Value of Dividends or Other Earnings Paid on Stock or Option Awards Not Otherwise Reflected in Fair Value or Total Compensation +$ 132,880 +$ 26,780 +Less: Change in Pension Value Reported in the Summary Compensation Table +$ 438,706 +$ 5,999 +Add: Pension Service Cost for Services Rendered During the Year +$ 267,951 +$ 10,241 +Compensation Actually Paid +$ 28,578,673 +$ 4,434,728 +(1) +The amounts reflect the aggregate grant-date fair value reported in the “Stock Awards” columns in the Summary Compensation Table for the applicable year. +(2) +In accordance with Item 402(v) requirements, the fair values of unvested and outstanding equity awards to our NEOs were measured as of the end of each fiscal year, and as of each vesting date, during the years displayed in the table above. For performance-based awards, the fair values reflect the probable outcome of the performance vesting conditions as of each measurement date. Dividends are accounted for in the change in fair value calculations. We did not grant any equity awards that vested in the year of grant. +(c) +Peer Group reflects the same S&P 1500 Consumer Durables & Apparel Index used for the performance graph included in the 10-K as required under S-K Item 201(e)(1)(ii). +(d) +For a reconciliation of GAAP Pre-tax Income to non-GAAP Pre-tax Income , as used in the third table below, see the Non-GAAP reconciliation table in Appendix A. +2025 PROXY STATEMENT +70 +TABLE OF CONTENTS +Tabular list of Company Performance Measures +The four measures listed below, in no particular order, represent the most important metrics to link Compensation Actually Paid for FY 2024 as further described in our Compensation Discussion and Analysis (CD&A) within the sections titled “Short-Term Incentive Compensation” and “Long-Term Incentive Compensation.” +Most Important Performance Measures +Non-GAAP Pre-Tax Income +Revenue +Non-GAAP Operating Profit +Relative TSR +Compensation Actually Paid versus Total Shareholder Return +As shown in the chart below, the CEO and other NEOs’ Compensation Actually Paid amounts are aligned with the Company’s TSR. Alignment is primarily due to the Company’s use of equity incentives, which are tied directly to stock price in addition to the Company’s financial performance. The TSR calculation assumes a $100 investment made on 12/28/2019. +A $100 investment in Wolverine since the announcement of Mr. Hufnagel’s appointment to CEO (on August 10, 2023) would be worth $268.34 at the end of fiscal year 2024 (168% appreciation) and Mr. Hufnagel’s Compensation Actually Paid is 149% higher than his Compensation disclosed in the Summary Compensation Table for fiscal years 2023 and 2024, demonstrating alignment between our current CEO’s realizable compensation and the performance of our Company Stock during Mr. Hufnagel’s CEO tenure. +2025 PROXY STATEMENT +71 +TABLE OF CONTENTS +Compensation Actually Paid versus Net Income +The chart below compares the CEO and other NEOs’ Compensation Actually Paid to our Company’s GAAP Net Income. +Compensation Actually Paid versus Non-GAAP Pre-Tax Income +The chart below compares the CEO and other NEOs’ Compensation Actually Paid to our Company Selected Measure, Non-GAAP Pre-Tax Income. +2025 PROXY STATEMENT +72 +TABLE OF CONTENTS +Proposal 2 – Advisory Resolution to +Approve Executive Compensation +The Company is asking its shareholders to indicate their support for Wolverine Worldwide's NEO compensation, as described in this Proxy Statement. This proposal, commonly known as a “say-on-pay” proposal, gives the Company's shareholders the opportunity to express their view on compensation for the Company's NEOs. The say-on-pay vote is advisory and, therefore, not binding on the Company, the Compensation and Human Capital Committee or the Board. Even though non-binding, the Board and Compensation and Human Capital Committee value the opinions of Wolverine Worldwide's shareholders and will review and consider the voting results when making future decisions regarding the Company's executive compensation program. +At the 2023 annual meeting of shareholders, the Company held an advisory vote on the frequency of future say-on-pay votes. Our shareholders approved, on an advisory basis, an annual say-on-pay vote, and after consideration of the shareholders’ vote, the Board determined to proceed with an annual say-on-pay vote. After the 2025 Annual Meeting of Shareholders, our next advisory vote to approve executive compensation will occur at our 2026 annual meeting of shareholders. Further, in accordance with Rule 14a-21(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), shareholders will be asked to vote again on how frequently the Company should hold future say-on-pay votes at the Company's 2029 annual meeting of shareholders. +The Company encourages shareholders to read the “Compensation Discussion and Analysis” (“CD&A”) section of this Proxy Statement beginning on page 38 . As described in the CD&A section, the Compensation and Human Capital Committee has structured the executive compensation program to achieve the following key objectives: +• +Align the interests of NEOs with those of the shareholders through incentives based on achieving performance objectives that enable increased shareholder value +• +Provide incentives for achieving specific pre-established near-term strategic, business unit and corporate goals and reward the attainment of those goals +• +Provide incentives for achieving specific pre-established longer-term corporate financial goals and reward the attainment of those goals +• +Attract and retain talented NEOs who will lead Wolverine Worldwide and drive superior business and financial performance +The executive compensation program is designed to achieve these objectives, in part, by: +• +Weighting at-risk and variable compensation (annual bonuses and long-term incentives) much more heavily than fixed compensation (base salaries) +• +Rewarding annual performance while maintaining emphasis on longer-term objectives +• +Blending cash, non-cash, long- and short-term compensation components and current and future compensation components +The Company encourages shareholders to read the Summary Compensation Table and other related compensation tables and narrative, appearing on pages 54 - 72 , which provide detailed information on the compensation of the Company's NEOs. +The Compensation and Human Capital Committee and the Board of Directors believe the Company's compensation program and its policies and procedures articulated in the CD&A section are effective in aligning the interests of the Company's NEOs with the interests of shareholders, promoting the achievement of the Company's near- and long-term objectives and increasing shareholder value. +In accordance with the rules under Section 14A of the Exchange Act, and as a matter of good corporate governance, the Company asks shareholders to approve the following advisory resolution at the 2025 Annual Meeting of Shareholders: +2025 PROXY STATEMENT +73 +TABLE OF CONTENTS +RESOLVED , that the shareholders of Wolverine World Wide, Inc. (the “Company”) approve, on an advisory basis, the compensation of the Company's named executive officers disclosed in the Compensation Discussion and Analysis section, the Summary Compensation Table and the related compensation tables, notes and narrative in the Proxy Statement for the Company's 2025 Annual Meeting of Shareholders. +BOARD RECOMMENDATION +The Board recommends that you vote “FOR” approval of the advisory resolution to approve executive compensation. +2025 PROXY STATEMENT +74 +TABLE OF CONTENTS +Proposal 3 – Ratification of the Appointment of Independent Registered Public Accounting Firm +Ernst & Young LLP (“Ernst & Young”) was the Company's independent registered public accounting firm for the fiscal year ended December 28, 2024. The Audit Committee has reappointed Ernst & Young as the Company's independent registered public accounting firm for the current fiscal year. As a matter of good corporate governance, the Audit Committee has determined to submit its appointment of Ernst & Young to the Company's shareholders for ratification. If this appointment is not ratified by the holders of a majority of votes cast affirmatively or negatively on the matter, the Audit Committee will review its future selection of an independent registered public accounting firm. Even if the appointment is ratified, the Audit Committee in its discretion may select a different independent registered public accounting firm any time during the year if it determines that such a change would be in the best interests of the Company and the Company's shareholders. +The Audit Committee reviewed Ernst & Young's performance prior to appointing it as the Company's independent registered public accounting firm, and considered: +• +The historical and recent performance of Ernst & Young on the Company's audit, including the quality of the engagement team and Ernst & Young's experience, client service, responsiveness and technical expertise +• +The Public Company Accounting Oversight Board (“PCAOB”) report of selected Ernst & Young audits +• +The appropriateness of fees charged +• +Ernst & Young's familiarity with the Company's accounting policies and practices and internal control over financial reporting +• +Ernst & Young's financial strength and performance +Representatives of Ernst & Young are expected to be present at the Annual Meeting. They will have an opportunity to make a statement if they desire to do so and are expected to be available to respond to appropriate questions from shareholders. +BOARD RECOMMENDATION +The Board recommends that you vote “FOR” ratification of the Audit Committee's selection of the firm of Ernst & Young LLP as the Company's independent registered public accounting firm for fiscal year 2025. +2025 PROXY STATEMENT +75 +TABLE OF CONTENTS +Proposal 4 – Shareholder Proposal +Green Century Capital Management, Inc., on behalf of the Green Century Equity Fund, 114 State St., Suite 200, Boston, MA 02109, has submitted the following proposal. Green Century Equity Fund is the beneficial owner of at least $25,000 worth of shares of the Company’s common stock. The proponent is solely responsible for the contents of this proposal and its supporting statement. +If properly presented at the Annual Meeting by or on behalf of the proponent, the Board of Directors recommends a vote AGAINST this proposal. +Resolution Regarding Emissions Disclosures and Targets +Whereas: The Intergovernmental Panel on Climate Change has advised that greenhouse gas (GHG) emissions must be halved by 2030 and reach net zero by 2050 to limit global warming to 1.5 °C. Each 1 °C temperature rise will reduce global GDP by as much as 12% and entail increasingly severe physical, transition, and systemic risks for companies and investors alike. 4 +The Science Based Targets initiative (SBTi) advises the apparel and footwear industry to reduce emissions at least 4.2% per year to stay on a 1.5°C pathway. 5 Yet, an analysis of the largest retailers reporting to the Carbon Disclosure Project (CDP) found that 63% will need to accelerate action to reach their 2030 goals. 6 Without action, the industry’s emissions are expected to increase by nearly 30% by 2030. 7 +In its 10-K, Wolverine World Wide, Inc. (Wolverine) acknowledges that “severe weather due to climate change” may result in higher costs and “extreme weather conditions can... adversely impact the Company’s business, results of operations and financial position.” Furthermore, climate change will produce more intense and frequent weather-related events in Wolverine’s critical manufacturing countries, including Vietnam and China. 8 By 2030, extreme weather will jeopardize nearly $65 billion worth of exports in the footwear and apparel industry. 9 +Although Wolverine’s 10-K claims that “sustainability is important to our customers and a competitive advantage for our business,” the Company has yet to disclose any GHG emissions data or set GHG emissions reduction targets. Without data regarding Wolverine’s GHG emissions and plans to reduce them, investors are left uncertain about the extent to which Wolverine is exposed to the climate risks outlined in its 10-K and if, or how, the Company intends to mitigate them. +Wolverine lags its peers in the footwear and apparel industry. Competitors Croes, Deckers Outdoor Corp., VF Corp., Puma, Under Armour, New Balance, Adidas, and Steve Madden Ltd. have all disclosed their full value chain emissions, among others. These companies are also among the 563 textiles, apparel, and footwear companies with SBTi verified emissions reduction targets or commitments to establish them. 10 New Balance, Adidas, and Puma have also published detailed climate transition plans disclosing how they will achieve their GHG emissions reduction goals. +RESOLVED: Shareholders request that Wolverine disclose its current GHG emissions as well as short-, medium- and long-term targets for measurably reducing them—and that Wolverine report annually on its progress toward those targets. +SUPPORTING STATEMENT: Proponents recommend, at the board and management’s discretion, that the disclosures include: +• +The full range of Wolverine’s operational and supply chain emissions; +• +A transition plan for achieving the Company’s goals; +• +Consideration of frameworks, benchmarks and processes developed by credible third parties such as SBTi, IPCC, Transition Plan Taskforce, and Task Force for Climate-Related Financial Disclosures. +4 +https://www.weforum.org/agenda/2024/06/nature-climate-news-global-warming-hurricanes/. +5 +https://sciencebasedtargets.org/resources/legacy/2019/06/SBT_App_Guide_final_0718.pdf. +6 +https://www.mckinsey.com/industries/retail/our-insights/sustainable-style-how-fashion-can-afford-and-accelerate-decarbonization#/. +7 +https://www.mckinsey.com/industries/retail/our-insights/sustainable-style-how-fashion-can-afford-and-accelerate-decarbonization. +8 +https://www.mckinsey.com/industries/retail/our-insights/sustainable-style-how-fashion-can-afford-and-accelerate-decarbonization. +9 +https://www.mckinsey.com/industries/retail/our-insights/state-of-fashion, 10. +10 +https://sciencebasedtargets.org/companies-taking-action#dashboard. +2025 PROXY STATEMENT +76 +TABLE OF CONTENTS +Board Response +Following careful review and consideration of the proposal, the Board has determined that the proposal is unnecessary and not in the best interests of the Company’s shareholders for the reasons set forth below. +Wolverine Worldwide has committed to reporting Scope 1 and Scope 2 greenhouse gas (“GHG”) emissions in 2025 and expects to begin reporting on Scope 3 GHG emissions in 2026 as we continue to accelerate our emissions data collection and disclosure. +As highlighted in our most recent Global Impact Report, our efforts to transform our business include sharpening our enterprise-wide commitment to innovation and sustainability in our products, our processes, and our global footprint. We have executed a wide swath of important corporate responsibility initiatives in recent years and are focused on progressing our efforts to help reduce our environmental impact. Understanding and measuring our footprint and preparing for climate disclosure were key priorities for the Company in 2023 and 2024 and are expected to remain a focus in 2025. +• +In 2023, we directed an assessment of our climate-related programs and practices, the relevant expectations of our stakeholders, and future mandatory climate-related reporting obligations to which we may be subject. Following this review, the Company adopted a Climate Action Plan (the “Plan”) designed to inform the future progression of our climate-related governance, disclosures, and practices, including key milestones and recommended workstreams. +• +In 2024, we directed an emissions gap assessment to help us begin establishing a comprehensive GHG emissions inventory aligned with key climate standards and in advance of third-party assurance and disclosure. Based on the assessment’s results, and consistent with the Plan, we engaged a third party specialist with significant experience in GHG emissions assessment and climate-related disclosure to create our first Scope 1 and 2 GHG emissions inventory aligned with the GHG Protocol Corporate Accounting and Reporting Standard. We also began a relevancy assessment of Scope 3 GHG emissions categories. +As a result of that work, we plan to begin annual reporting our Scope 1 and 2 GHG emissions for the first time in 2025. In addition, we have completed our relevancy assessment for Scope 3 GHG emissions and are working on related data collection. We currently expect to begin reporting our Scope 3 GHG emissions in 2026. +Our existing GHG emissions and climate-related reporting priorities are appropriately tailored to our business, market position, and evolving reporting obligations. +Wolverine Worldwide is focused on preparing an accurate, reliable emissions inventory that will inform and respond to the interests of our investors, customers, and other stakeholders. At the same time, we expect to also need this data to satisfy mandatory reporting regimes in the United States and the European Union. These standards are complex and vary in their expectations for GHG emissions and climate-related reporting. They are also subject to change in the near-term due to ongoing litigation, forthcoming regulations, and recently proposed legislative reforms. We believe our current emissions reporting strategy is appropriate because it enables us to continue enhancing our voluntary sustainability reporting while also preparing for mandatory disclosures beginning as early as 2026. Our approach supports the efficient allocation of our capital and internal resources. +We expect our strategy will ultimately enable us to review our operational and value chain footprint with year-over-year comparisons and then to assess next steps on our sustainability journey, including the appropriateness of emission reduction targets and related plans as requested by the proposal. That said, we believe establishing science-based emission reduction targets and adopting a climate transition plan are premature at this time and an inappropriate use of Company resources while we are still preparing for our first year of GHG emission reporting. +As our emissions reporting progresses, we continue to monitor and assess our energy usage, including by looking for additional opportunities to increase our energy efficiency and decrease energy consumption. Wolverine Worldwide has purchased renewable energy credits to offset the energy use at our North America facilities since 2015, and in 2023, offset its consumption through the purchase of 20,000 megawatts of such credits. In 2023, we also reduced our electricity usage by 12% over 2022. We undertook initiatives to help reduce waste in our U.S. office facilities, including updating HVAC systems in approximately 830,000 +2025 PROXY STATEMENT +77 +TABLE OF CONTENTS +square feet of our U.S. office buildings, replacing 40% of the boilers in our U.S. office buildings, retrofitting existing boiler pumps, and upgrading approximately 95% of all lighting in our North America locations to LED, among others actions. In Europe, we successfully converted 10 vehicles to electric, progressing on our goal to convert 100% of our vehicles to EV by 2030 in the UK, Netherlands, Germany, and France. +Through our shareholder engagement efforts, we actively seek to understand their priorities and perspectives, and expectations for our initiatives. Of the shareholders with whom we engage (representing 78% of our shares outstanding, as disclosed in the Shareholder Engagement section of this proxy statement), those that inquired about our corporate responsibility efforts have been pleased with our progress and strategy. This view is reinforced by feedback from one of our largest shareholders who expressed satisfaction with our existing climate strategy. We shared this view in our multiple meetings with the proponent to hear its perspective on these topics, share our progress, and seek to find common ground related to the proposal. We also offered to set a meeting with the proponent after we first disclose our Scope 1, 2, and 3 GHG emissions so that we could further discuss our progress and hear the proponent’s views on establishing targets. +The Company’s strategy is also consistent with our compensation peer group, a collection of companies selected by our Compensation and Human Capital Committee as relevant comparisons to the Company based on their industry, channels of distribution, revenue, and market capitalization, among other factors. As of January 2025, only slightly more than half of that peer group (or 56%) had set a Science-Based Targets initiative (SBTi)-approved target related to GHG emissions. Approximately 80% of those target-setting companies had annual revenues in excess of our revenues. The examples cited in the proposal, by contrast, are not appropriate comparisons, as Adidas, VF Corp, Puma, and New Balance are not compensation peers and have annual revenues approximately 3 to 10 times greater than the Company’s annual revenues. 11 +The Company continues to invest in and report on corporate responsibility topics of interest to our stakeholders. +We have published global impact reports that highlight our annual corporate responsibility initiatives and priorities since 2021. This commitment to transparency allows us to showcase our efforts to protect the planet, support our teams, serve our communities, and maintain responsible sourcing and supply chains. These efforts are supported by strong corporate governance structures, including a cross-functional team overseen by our Board through its committees. +BOARD RECOMMENDATION +In light of our existing progress and strategy for GHG emissions reporting, which is appropriately tailored to our business and includes inaugural Scope 1 and 2 GHG emissions disclosure in 2025, the Board recommends that you vote “AGAINST” this shareholder proposal. +11 +Based on an analysis of the Company’s fiscal year 2023 revenues against net revenues or sales for the most recently completed fiscal year reported in an annual report on Form 10-K or comparable annual report available as of February 10, 2025. +2025 PROXY STATEMENT +78 +TABLE OF CONTENTS +Audit Committee Report +The Audit Committee of the Board of Directors consists of five directors who are independent under the Company's Director Independence Standards, the NYSE listed company standards and applicable SEC standards. The Audit Committee represents and assists the Board in fulfilling its oversight responsibility regarding the Company's financial statements and the financial reporting process, the internal control over financial reporting, the performance of the internal audit function and the independent registered public accounting firm, the qualifications and independence of the independent registered public accounting firm, the annual independent audit of Wolverine Worldwide's financial statements and internal control over financial reporting and compliance with legal and regulatory requirements. The Audit Committee is directly responsible for appointing, retaining, compensating, overseeing, evaluating and terminating (if appropriate) Wolverine Worldwide's independent registered public accounting firm. Wolverine Worldwide's management has primary responsibility for the financial statements and the financial reporting process, including the application of accounting and financial principles, the preparation, presentation and integrity of the financial statements and the systems of internal controls and other procedures designed to promote compliance with accounting standards and applicable laws and regulations. Wolverine Worldwide's independent registered public accounting firm is responsible for expressing an opinion on the conformity of Wolverine Worldwide's financial statements with generally accepted accounting principles and for auditing the effectiveness of Wolverine Worldwide's internal control over financial reporting. +The Audit Committee has taken steps to provide assurances regarding Audit Committee composition and procedures, the independence of Wolverine Worldwide's independent registered public accounting firm and the integrity of Wolverine Worldwide's financial statements and disclosures. These steps include: (i) reviewing the Audit Committee Charter; (ii) reviewing with legal counsel and the independent registered public accounting firm the Accounting and Finance Code of Ethics; (iii) maintaining financial, accounting and business ethics complaint procedures to allow employees, shareholders and the public to report concerns regarding Wolverine Worldwide's financial statements, internal controls and disclosures; and (iv) reviewing procedures for the Audit Committee to pre-approve all audit and non-audit services provided by Wolverine Worldwide's independent registered public accounting firm. +As part of its supervisory duties, the Audit Committee has reviewed Wolverine Worldwide's audited financial statements for the fiscal year ended December 28, 2024, and has discussed those financial statements with Wolverine Worldwide's management and internal financial staff, and the internal auditors and independent registered public accounting firm with and without management present. The Audit Committee has also reviewed and discussed the following with Wolverine Worldwide's management and the financial staff, and with the internal auditors and independent registered public accounting firm with and without management present: +• +Accounting and financial principles and significant assumptions, estimates and matters of judgment used in preparing the financial statements +• +Allowances and reserves for accounts receivable, inventories and taxes +• +Accounting for acquisitions, pension plans and equity-based compensation plans +• +Goodwill and intangible asset impairment analysis +• +Other significant financial reporting issues and practices +The Audit Committee has discussed with Wolverine Worldwide's independent registered public accounting firm the results of its examinations and its judgments concerning the quality, as well as the acceptability, of Wolverine Worldwide's accounting principles and such other matters that it is required to discuss with the independent registered public accounting firm under applicable rules, regulations or generally accepted auditing standards, including the matters required to be discussed by the applicable requirements of the PCAOB and the SEC. In addition, the Audit Committee has received from the independent registered public accounting firm the written disclosures and the letter required by the applicable requirements of the PCAOB regarding the independent registered public accounting firm's communications with the Audit Committee concerning independence and has discussed their independence from Wolverine Worldwide and Wolverine Worldwide's management with them, including a consideration of the compatibility of non-audit services with their independence, the scope of the audit and the +2025 PROXY STATEMENT +79 +TABLE OF CONTENTS +scope of all fees paid to the independent registered public accounting firm during the year. After, and in reliance upon the reviews and discussions described above, the Audit Committee recommended to the Board that the audited financial statements for the fiscal year ended December 28, 2024, be included in Wolverine Worldwide's Annual Report on Form 10-K for the year then ended to be filed with the SEC. +Respectfully submitted, +Jeffrey M. Boromisa (Chair) +Stacia Andersen +William K. Gerber +David T. Kollat +Brenda J. Lauderback +2025 PROXY STATEMENT +80 +TABLE OF CONTENTS +Independent Registered Public Accounting Firm +The Audit Committee has adopted a policy under which the Audit Committee must approve all audit and non-audit services provided by the Company's independent registered public accounting firm, Ernst & Young LLP, and which prohibits Ernst & Young LLP from providing any non-audit services that are prohibited by the SEC or the PCAOB. The Audit Committee provides categorical pre-approval for routine and recurring services, with specific service descriptions and budgets that include sufficient information to confirm the determination that the provision of such service will not impair the independent registered public accounting firm’s independence. All services not within the specifically pre-approved service descriptions and budgets require engagement specific pre-approval. With certain exceptions (such as pre-approval of audit services), the Audit Committee may delegate engagement specific pre-approval to one or more Audit Committee members, and has so delegated in certain instances to the Audit Committee Chairperson. Management must communicate to the Audit Committee at its next regularly scheduled meeting any services approved by an Audit Committee member. The Audit Committee pre-approved all fees paid to Ernst & Young LLP for services performed in 2024 and 2023. The aggregate fees billed by Ernst & Young LLP for audit and non-audit services were: +2024 +2023 +Audit Fees 1 +$ 2,767,100 +$ 3,027,500 +Audit-Related Fees +$ — +$ — +Total Audit & Audit-Related Fees +$ 2,767,100 +$ 3,027,500 +Tax Fees 2 +Tax Compliance +$ 710,600 +$ 596,500 +Tax Planning & Advisory +$ 138,400 +$ 140,500 +Total Tax Fees +$ 849,000 +$ 737,000 +All Other Fees +$ — +$ — +TOTAL FEES +$ 3,616,100 +$ 3,764,500 +1 +“Audit Fees” are comprised of fees for the annual audit, including the audit of internal control over financial reporting, interim reviews of the financial statements included in Wolverine Worldwide's Quarterly Reports on Form 10-Q, foreign statutory audits, consultations concerning accounting matters associated with the annual audit, and audit services performed in connection with registration statements and issuance of comfort letters and consents. +2 +“Tax Fees” are comprised of fees for the preparation of domestic and foreign tax returns, tax compliance services, and routine tax advisory and tax planning services. +The Audit Committee has adopted a policy restricting the Company's hiring of current or former partners or employees of the independent registered public accounting firm retained by the Company. +2025 PROXY STATEMENT +81 +TABLE OF CONTENTS +Related Party Matters +CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS +Since December 31, 2023, the Company has not engaged in any “related person” transactions with any person who is or was during the last fiscal year a director, executive officer, nominee for director or holder of 5% or more of Company voting securities, affiliate or any member of the immediate family of the foregoing persons. +RELATED PERSON TRANSACTIONS POLICY +The Board adopted written policies and procedures regarding related person transactions. They require the Governance Committee to review and either approve or disapprove the Company entering into any Interested Transactions (defined below). If advance approval is not feasible, then the Governance Committee must review and ratify the Interested Transaction at its next meeting. +Interested Transaction +Any transaction, arrangement or relationship or series of similar transactions, arrangements or relationships (including any indebtedness or guarantee of indebtedness) in which: +(1) +The aggregate amount involved exceeds or is expected to exceed $120,000 since the beginning of Wolverine Worldwide's last completed fiscal year; +(2) +The Company or any of its subsidiaries is a participant; and +(3) +Any Related Person (defined below) has or will have a direct or indirect interest. +An Interested Transaction does not include: +(1) +Any employment compensation paid to an executive officer of the Company if the Compensation and Human Capital Committee approved or recommended to the Board of Directors for approval of such compensation; +(2) +Any compensation paid to a director for service as a director of the Company; +(3) +Any transaction in which a Related Person has an indirect interest solely as a result of being (i) a director or, together with all other Related Persons, as defined below, a less than 10% beneficial owner of an equity interest in another entity, or both, or (ii) a limited partner in a partnership in which the Related Person, together with all other Related Persons, has an interest of less than 10%; +(4) +Any transaction in which the Related Person's interest arises solely from the ownership of the Company's common stock and all holders of the Company's common stock received the same benefit on a pro rata basis (e.g., a dividend); or +(5) +Any transaction with another publicly traded company where the Related Person's interest arises solely from the ownership of more than 5% of the Company's common stock and the ownership of a non-controlling interest in the other publicly traded company. +Related Person +Any: +(a) +Person who is or was at any time since the beginning of the Company's last completed fiscal year even if they do not presently serve in that role, an executive officer, a director or, to the extent information regarding such nominee is being presented in a proxy or information statement relating to the election of that nominee as a director, a nominee for election as a director; +(b) +Beneficial owner of greater than five percent of Wolverine Worldwide's common stock; or +(c) +Immediate family member* of any of the foregoing. +* +Immediate family member is defined as a person's spouse, parents, stepparents, children, stepchildren, siblings, mothers and fathers-in-law, sons- and daughters-in-law, and brothers- and sisters-in-law, and anyone residing in such person's home (other than a tenant or employee). +The Governance Committee considers whether the Interested Transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances, the extent of the Related Person's interest in the transaction, and other factors that it deems relevant. No director participates in any discussion or approval of an Interested Transaction for which he or she is a Related Person, except to provide information to the Governance Committee. +2025 PROXY STATEMENT +82 +TABLE OF CONTENTS +Additional Information +SHAREHOLDERS LIST +For information about how to view the list of shareholders entitled to vote at the Annual Meeting during the ten days preceding the Annual Meeting, please visit our 2025 Annual Meeting website at www.wolverineworldwide.com/2025annualmeeting. +DIRECTOR AND OFFICER INDEMNIFICATION +The Company indemnifies its directors and NEOs to the fullest extent permitted by law so that they will be free from undue concern about personal liability in connection with their service to the Company. +SHAREHOLDER PROPOSALS FOR INCLUSION IN NEXT YEAR'S PROXY STATEMENT +Pursuant to SEC Rule 14a-8, some shareholder proposals may be eligible for inclusion in Wolverine Worldwide's 2026 Proxy Statement and proxy card. Any such shareholder proposals must be submitted in writing to the Secretary of Wolverine Worldwide no later than the close of business on November 19, 2025. You should address all shareholder proposals to the attention of Secretary, Wolverine World Wide, Inc., 9341 Courtland Drive, NE, Rockford, Michigan 49351. +OTHER SHAREHOLDER PROPOSALS FOR PRESENTATION AT NEXT YEAR'S ANNUAL MEETING +The Company's By-Laws require that any shareholder proposal that is not submitted for inclusion in next year's Proxy Statement under SEC Rule 14a-8, but is instead sought to be presented directly at the 2026 Annual Meeting of Shareholders, must be received at the Company's principal executive offices by the close of business not less than 90 days nor more than 120 days prior to the first anniversary of the 2025 Annual Meeting. As a result, proposals, including director nominations submitted pursuant to these provisions of the By-Laws, must provide the information set forth in the By-Laws (which includes information required under Rule 14a-19) and be received no earlier than January 1, 2026 and no later than the close of business on January 31, 2026. You should address a proposal to Secretary, Wolverine World Wide, Inc., 9341 Courtland Drive, NE, Rockford, Michigan 49351, and include the information and comply with the requirements set forth in those By-Laws, which the Company has posted on its website. SEC rules permit management to vote proxies in its discretion in certain cases if the shareholder does not comply with this deadline, and in certain other cases notwithstanding the shareholder's compliance with this deadline. +VOTING SECURITIES +Shareholders of record at the close of business on March 3, 2025, are eligible to vote at the Annual Meeting. The Company's voting securities consist of its $1.00 par value common stock, and there were 81,034,798 shares outstanding and entitled to vote on the record date. Each share outstanding on the record date will be entitled to one vote on each director nominee and one vote on each other matter. Treasury shares are not voted. Individual votes of shareholders are kept private, except as appropriate to meet legal requirements. Access to proxies and other individual shareholder voting records is limited to the independent inspectors of election and certain employees of the Company and its agents who acknowledge their responsibility to comply with this policy of confidentiality. +CONDUCT OF BUSINESS +A majority of the outstanding shares of common stock as of the record date must be present at the Annual Meeting in order to hold the Annual Meeting and conduct business. This is called a “quorum.” Your shares are counted as present at the meeting if you are present at the Annual Meeting and entitled to vote, a proxy card has already been properly submitted by you or on your behalf, or you have submitted your proxy by telephone or by internet, or by completing, signing, dating and returning the accompanying proxy card or voting instruction form by mail in the enclosed envelope. Both abstentions and broker non-votes (explained below in “ Vote Required for Election and Approval ”) are counted as present for the purpose of determining the presence of a quorum. +2025 PROXY STATEMENT +83 +TABLE OF CONTENTS +VOTE REQUIRED FOR ELECTION AND APPROVAL +For Proposal 1, Election of Directors for Terms Expiring in 2028, directors are elected by a majority of votes cast unless the election is contested, in which case directors are elected by a plurality of votes cast. A majority of votes cast means that the number of shares voted “for” a Director nominee exceeds the number of votes cast “against” the Director nominee. If an incumbent director in an uncontested election does not receive a majority of votes cast for his or her election, under the Company's Corporate Governance Guidelines, the director is required to submit a letter of resignation to the Board for consideration by the Governance Committee. The Governance Committee will then make a recommendation to the Board as to whether to accept or reject the tendered resignation. The Governance Committee and the Board, in making their decisions, may implement any procedures they deem appropriate and may consider any factor or other information that they deem relevant. The Board will then act on the tendered resignation, taking into account the Governance Committee's recommendation, and will publicly disclose its decision regarding the resignation within 90 days after the results of the election are certified. A director whose resignation is under consideration shall abstain from participating in any recommendation or decision regarding that resignation. If the resignation is not accepted, the director will continue to serve until the next annual meeting of shareholders at which such director faces re-election and until such director's successor is elected and qualified. +Proposal 2, Advisory Resolution to Approve Executive Compensation, requires the affirmative vote of a majority of votes cast affirmatively or negatively on the matter. +Proposal 3, Ratification of Appointment of Independent Registered Public Accounting Firm, requires the affirmative vote of a majority of votes cast affirmatively or negatively on the matter. +Proposal 4, Shareholder Proposal regarding greenhouse gas emissions disclosures and targets, requires the affirmative vote of a majority of votes cast affirmatively or negatively on the matter. +Generally, brokers holding shares must vote according to specific instructions they receive from the beneficial owners of those shares. If brokers do not receive specific instructions, brokers may in some cases vote the shares in their discretion, but are not permitted to vote on certain proposals and may elect not to vote on any of the proposals unless you provide voting instructions. If you do not provide voting instructions and the broker elects to vote your shares on some but not all matters, it will result in a “broker non-vote” for the matters on which the broker does not vote. Abstentions occur when you provide voting instructions but instruct the broker to abstain from voting on a particular matter instead of voting for or against the matter. +Abstentions and broker non-votes are not considered “votes cast.” Abstentions and broker non-votes, if any, will have no effect on the outcome of the election of directors and will have no effect on the outcome of any other matters proposed for a vote at the Annual Meeting. +VOTING RESULTS OF THE ANNUAL MEETING +The Company will announce preliminary voting results at the Annual Meeting and publish final results in a Form 8-K within four business days following the Annual Meeting. If final results are not known within four business days of the Annual Meeting, then the Company will file a Current Report on Form 8-K with the preliminary results and file an amended Current Report on Form 8-K within four business days of the availability of the final results. +ATTENDING THE ANNUAL MEETING +You may vote shares held directly in your name as the shareholder of record at the Annual Meeting. If you choose to vote at the meeting, please access instructions as set forth in the Notice of annual meeting. Even if you plan to attend the Annual Meeting, Wolverine Worldwide recommends that you vote your shares in advance as described below so that your vote will be counted if you later decide not to attend the Annual Meeting. You may vote shares held in “street name” through a brokerage account or by a bank or other nominee if you obtain a proxy from the record holder giving you the right to vote the shares. Each shareholder may appoint only one proxy holder or representative to attend the meeting on his or her behalf. +2025 PROXY STATEMENT +84 +TABLE OF CONTENTS +MANNER FOR VOTING PROXIES +The shares represented by all valid proxies received by telephone, by internet or by mail will be voted in the manner specified. Where the shareholder has not indicated a specific choice, the shares represented by all valid proxies received will be voted in accordance with the Board's recommendations as follows: (1) for each of the nominees for directors named earlier in this Proxy Statement, (2) for approval of the advisory resolution to approve executive compensation, (3) for ratification of the appointment of the independent registered public accounting firm and (4) against the shareholder proposal regarding greenhouse gas emissions disclosures and targets. The Board has not received timely notice of any other matter that may come before the Annual Meeting. However, should any matter not described above be properly presented at the Annual Meeting, the persons named in the proxy form will vote in accordance with their judgment, as permitted. +REVOCATION OF PROXIES +A shareholder who gives a proxy may revoke it at any time before it is exercised by voting at the Annual Meeting in the manner described in the Notice of 2025 Annual Meeting of Shareholders, by delivering a subsequent proxy or by notifying the inspectors of election in writing of such revocation. +SOLICITATION OF PROXIES +The accompanying proxy is solicited by and on behalf of the Board, and the Company will pay the expenses of solicitation of proxies for the Annual Meeting. Solicitations may be made in person or by telephone, by officers and employees of the Company, or by nominees or other fiduciaries who may mail materials to or otherwise communicate with the beneficial owners of shares held by the nominees or other fiduciaries. These individuals will not be paid any additional compensation for any such solicitation. Upon request, the Company will reimburse brokers, dealers, banks and trustees, or their nominees, for reasonable expenses incurred by them in forwarding material to beneficial owners of the Company's common stock. +DELIVERY OF DOCUMENTS TO SHAREHOLDERS SHARING AN ADDRESS +If you are the beneficial owner, but not the record holder, of shares of Wolverine Worldwide stock, your broker, bank or other nominee may only deliver one copy of this Proxy Statement and the Company's 2024 Annual Report to multiple shareholders who share an address, unless that nominee has received contrary instructions from one or more of the shareholders. The Company will deliver promptly, upon written or oral request, a separate copy of this Proxy Statement and its 2024 Annual Report to a shareholder at a shared address to which a single copy of the documents was delivered. A shareholder who wishes to receive a separate copy of the Proxy Statement and annual report, now or in the future, or shareholders who share an address and receive multiple copies of the Proxy Statement and annual report but would like to receive a single copy, should submit this request to Broadridge Financial Solutions, Inc. at 1-866-540-7095 or in writing at Broadridge, Householding Department, 51 Mercedes Way, Edgewood, New York 11717. Beneficial owners sharing an address who are receiving multiple copies of proxy materials and who wish to receive a single copy of such materials in the future should make a request directly to their broker, bank or other nominee. +ACCESS TO PROXY STATEMENT AND ANNUAL REPORT +Distribution of this Proxy Statement and enclosed proxy card to shareholders is scheduled to begin on or about March 19, 2025. Wolverine Worldwide's financial statements for the fiscal year ended December 28, 2024, are included in the Company's 2024 Annual Report, which the Company is providing to shareholders at the same time as this Proxy Statement. Wolverine Worldwide's Proxy Statement for the 2025 Annual Meeting and the Annual Report to Shareholders for the fiscal year ended December 28, 2024 are available at www.wolverineworldwide.com/2025annualmeeting . If you have not received or do not have access to the 2024 Annual Report, write to: Wolverine World Wide, Inc., 9341 Courtland Drive, NE, Rockford, Michigan 49351, Attn: Investor Relations or call (616) 866-5500 and ask for Investor Relations, and the Company will send a copy to you without charge. +2025 PROXY STATEMENT +85 +TABLE OF CONTENTS +APPENDIX A +APPENDIX A – Forward Looking +Statements and Non-GAAP Reconciliation Tables +2025 PROXY STATEMENT +A-1 +TABLE OF CONTENTS +APPENDIX A +FORWARD-LOOKING STATEMENTS +This document contains “forward-looking statements,” which are statements relating to future, not past, events, including, without limitation, statements relating to: the Company's expectations regarding Saucony revenue in 2025; the potential profitable growth of the Company's brands and sustainable long-term growth; future director appointments, background and expertise; the opportunities for our brands; and our approach in 2025 and beyond to expand profitability while investing to drive sustainable growth and focusing on maximizing shareholder returns and value. In this context, forward-looking statements often address management’s current beliefs, assumptions, expectations, estimates and projections about future business and financial performance, national, regional or global political, economic and market conditions, and the Company itself. Such statements often contain words such as “anticipates,” “believes,” “estimates,” “expects,” “forecasts,” “intends,” “is likely,” “plans,” “predicts,” “projects,” “should,” “will,” variations of such words, and similar expressions. Forward-looking statements, by their nature, address matters that are, to varying degrees, uncertain. Uncertainties that could cause the Company’s performance to differ materially from what is expressed in forward-looking statements include, but are not limited to, the following: +• +changes in general economic conditions, employment rates, business conditions, interest rates, tax policies and other factors affecting consumer spending in the markets and regions in which the Company’s products are sold; +• +the inability for any reason to effectively compete in global footwear, apparel and direct-to-consumer markets; +• +the inability to maintain positive brand images and anticipate, understand and respond to changing footwear and apparel trends and consumer preferences; +• +the inability to effectively manage inventory levels; +• +increases or changes in duties, tariffs, quotas or applicable assessments in countries of import and export; +• +foreign currency exchange rate fluctuations and currency restrictions; +• +supply chain and capacity constraints, production and distribution disruptions, including service interruptions at shipping and receiving ports, reduction in operating hours, labor shortages, and facility closures resulting in production delays at the Company’s manufacturers, quality issues, price increases or other risks associated with foreign sourcing; +• +the cost, including the effect of inflationary pressures and availability of raw materials, inventories, services and labor for contract manufacturers; +• +changes in relationships with, including the loss of, significant wholesale customers; +• +risks related to the significant investment in, and performance of, the Company’s direct-to-consumer operations; +• +risks related to expansion into new markets and complementary product categories; +• +the impact of seasonality and unpredictable weather conditions; +• +the impact of changes in general economic conditions and/or the credit markets on the Company’s manufacturers, distributors, suppliers, joint venture partners and wholesale customers; +• +changes in the Company’s effective tax rates; +• +failure of licensees or distributors to meet planned annual sales goals or to make timely payments to the Company; +• +the risks of doing business in developing countries and politically or economically volatile areas; +• +the ability to secure and protect owned intellectual property or use licensed intellectual property; +• +legal compliance and litigation risks, including with respect to federal, state and local laws and regulations relating to the protection of the environment, environmental remediation and other related costs, and environmental effects on human health; +2025 PROXY STATEMENT +A-2 +TABLE OF CONTENTS +APPENDIX A +• +risks of breach of the Company’s databases or other systems, or those of its vendors, which contain certain personal information, payment card data or proprietary information, due to cyberattack or other similar events; +• +strategic actions, including new initiatives and ventures, acquisitions and dispositions, and the Company’s success in integrating acquired businesses, including Sweaty Betty®; +• +risks related to stockholder activism; +• +the risk of impairment to goodwill and other intangibles; +• +the success of the Company's restructuring and realignment initiatives undertaken from time to time; and +• +changes in future pension funding requirements and pension expenses. +These or other uncertainties could cause a material difference between an actual outcome and a forward-looking statement. The uncertainties included here are not exhaustive and are described in more detail in Part I, Item 1A: “Risk Factors” of the Annual Report on Form 10-K. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. The Company does not undertake an obligation to update, amend or clarify forward looking statements, whether as a result of new information, future events or otherwise. Any standards of measurement and performance made in reference to our environmental, social, governance and other sustainability plans and goals are developing and based on assumptions, and no assurance can be given that any such plan, initiative, projection, goal, commitment, expectation or prospect can or will be achieved. +2025 PROXY STATEMENT +A-3 +TABLE OF CONTENTS +APPENDIX A +NON-GAAP RECONCILIATION TABLES +The following table contains information regarding the non-GAAP adjustments used by the Company in the presentation of its financial results: +RECONCILIATION OF REPORTED EARNINGS (LOSS) BEFORE INCOME TAXES +TO ADJUSTED EARNINGS (LOSS) BEFORE INCOME TAXES (PRE-TAX INCOME)* +(Unaudited) +(In millions) +GAAP Basis +Adjustments (1) +As Adjusted +Earnings (loss) before income taxes - Fiscal 2024 +$ 61.6 +$ 30.9 +$ 92.5 +Earnings (loss) before income taxes - Fiscal 2023 +$ (134.2 ) +$ 139.0 +$ 4.8 +Earnings (loss) before income taxes - Fiscal 2022 +$ (252.9 ) +$ 386.0 +$ 133.1 +Earnings (loss) before income taxes - Fiscal 2021 +$ 80.3 +$ 111.2 +$ 191.5 +Earnings (loss) before income taxes - Fiscal 2020 +$ (184.1 ) +$ 276.5 +$ 92.4 +(1) +2024 adjustments reflect $28.6 million of reorganization costs, $10.8 million loss associated with Sperry business and Wolverine Leathers business results included in the consolidated condensed statement of operations, $9.3 million for non-cash impairments of long-lived assets and $1.0 million of pension settlement costs, partially offset by $8.5 million gain on the sale of businesses, trademarks and long-lived assets and $10.3 million of environmental and other related costs net of recoveries.. 2023 adjustments reflect $185.3 million for non-cash impairments of long-lived assets, $50.8 million of reorganization costs, $5.5 million of costs associated with divestitures, partially offset by $90.4 million gain on the sale of businesses, trademarks and long-lived assets, $10.4 million of environmental and other related costs net of recoveries, $1.0 million SERP curtailment gain and $0.8 million earnings associated with the Keds business and Wolverine Leathers business results included in the consolidated condensed statement of operations. 2022 adjustments reflect $428.7 million for a non-cash impairment of the Sperry® trade name and the Sweaty Betty® trade name and goodwill, $9.1 million for reorganization costs, $33.7 million of environmental and other related costs net of recoveries, $3.7 million of costs associated with Sweaty Betty® integration and $0.8 million of receivables securitization transaction costs, partially offset by $90.0 million gain on the sale of the Champion trademarks. 2021 adjustments reflect $56.4 million of environmental and other related costs net of recoveries, $34.3 million of debt extinguishment costs, $18.7 million of costs associated with the acquisition of Sweaty Betty® and $1.8 million for non-cash impairment related to one of the Company's joint ventures. 2020 adjustments reflect $222.2 million for a non-cash impairment of the Sperry® trade name, $37.7 million of expenses related to the COVID-19 pandemic including $10.9 million of severance expenses, $8.5 million of credit loss expenses, $4.9 million of inventory charges, $3.9 million of air freight charges related to production delays, $3.6 million of facility exit costs and $5.9 million of other costs, $5.5 million of debt extinguishment costs and $11.1 million of environmental and other related costs net of recoveries. +* To supplement the consolidated condensed financial statements presented in accordance with Generally Accepted Accounting Principles (“GAAP”), the Company describes what earnings would have been if environmental and other related costs net of recoveries, non-cash impairments of assets and goodwill, pension settlement costs, SERP curtailment gain, loss associated with the Sperry and Wolverine Leathers businesses included in the 2024 consolidated condensed statement of operation, earnings associated with the Keds and Wolverine Leathers businesses included in the 2023 consolidated condensed statement of operation, Sweaty Betty® integration costs, reorganization costs, receivable securitization transaction costs, costs associated with acquisitions and divestitures, debt extinguishment costs, non-cash impairment related to one of the Company's joint ventures, gains on the sale of businesses and assets and costs related to the COVID-19 pandemic including air freight costs, credit loss expenses, severance expenses and other related costs were excluded. The Company believes this non-GAAP measure provides useful information to both management and investors by increasing comparability to the prior period by adjusting for certain items that may not be indicative of core operating measures and to better identify trends in the Company's business. The adjusted financial results are used by management to, and allow investors to, evaluate the operating performance of the Company on a comparable basis. +Management does not, nor should investors, consider non-GAAP financial measures in isolation from, or as a substitution for, financial information prepared in accordance with GAAP. A reconciliation of all non-GAAP measures included in this Proxy Statement, to the most directly comparable GAAP measures are found in the financial tables above. +2025 PROXY STATEMENT +A-4 +TABLE OF CONTENTS +TABLE OF CONTENTS +DEF 14A +0000110471 +false +0000110471 +2023-12-31 +2024-12-28 +0000110471 +www:ChristopherHufnagelMember +2023-12-31 +2024-12-28 +0000110471 +www:BrendanHoffmanMember +2023-01-01 +2023-12-30 +0000110471 +www:ChristopherHufnagelMember +2023-01-01 +2023-12-30 +0000110471 +2023-01-01 +2023-12-30 +0000110471 +www:BrendanHoffmanMember +2022-01-02 +2022-12-31 +0000110471 +2022-01-02 +2022-12-31 +0000110471 +www:BlakeKruegerMember +2021-01-03 +2022-01-01 +0000110471 +2021-01-03 +2022-01-01 +0000110471 +www:BlakeKruegerMember +2019-12-29 +2021-01-02 +0000110471 +2019-12-29 +2021-01-02 +0000110471 +2023-01-01 +2023-08-05 +0000110471 +2023-08-06 +2023-12-30 +0000110471 +ecd:EqtyAwrdsInSummryCompstnTblForAplblYrMember +ecd:PeoMember +www:ChristopherHufnagelMember +2023-12-31 +2024-12-28 +0000110471 +ecd:EqtyAwrdsInSummryCompstnTblForAplblYrMember +ecd:NonPeoNeoMember +2023-12-31 +2024-12-28 +0000110471 +ecd:YrEndFrValOfEqtyAwrdsGrntdInCvrdYrOutsdngAndUnvstdMember +ecd:PeoMember +www:ChristopherHufnagelMember +2023-12-31 +2024-12-28 +0000110471 +ecd:YrEndFrValOfEqtyAwrdsGrntdInCvrdYrOutsdngAndUnvstdMember +ecd:NonPeoNeoMember +2023-12-31 +2024-12-28 +0000110471 +ecd:ChngInFrValAsOfVstngDtOfPrrYrEqtyAwrdsVstdInCvrdYrMember +ecd:PeoMember +www:ChristopherHufnagelMember +2023-12-31 +2024-12-28 +0000110471 +ecd:ChngInFrValAsOfVstngDtOfPrrYrEqtyAwrdsVstdInCvrdYrMember +ecd:NonPeoNeoMember +2023-12-31 +2024-12-28 +0000110471 +ecd:ChngInFrValOfOutsdngAndUnvstdEqtyAwrdsGrntdInPrrYrsMember +ecd:PeoMember +www:ChristopherHufnagelMember +2023-12-31 +2024-12-28 +0000110471 +ecd:ChngInFrValOfOutsdngAndUnvstdEqtyAwrdsGrntdInPrrYrsMember +ecd:NonPeoNeoMember +2023-12-31 +2024-12-28 +0000110471 +ecd:FrValAsOfPrrYrEndOfEqtyAwrdsGrntdInPrrYrsFldVstngCondsDrngCvrdYrMember +ecd:PeoMember +www:ChristopherHufnagelMember +2023-12-31 +2024-12-28 +0000110471 +ecd:FrValAsOfPrrYrEndOfEqtyAwrdsGrntdInPrrYrsFldVstngCondsDrngCvrdYrMember +ecd:NonPeoNeoMember +2023-12-31 +2024-12-28 +0000110471 +ecd:DvddsOrOthrErngsPdOnEqtyAwrdsNtOthrwsRflctdInTtlCompForCvrdYrMember +ecd:PeoMember +www:ChristopherHufnagelMember +2023-12-31 +2024-12-28 +0000110471 +ecd:DvddsOrOthrErngsPdOnEqtyAwrdsNtOthrwsRflctdInTtlCompForCvrdYrMember +ecd:NonPeoNeoMember +2023-12-31 +2024-12-28 +0000110471 +ecd:AggtChngPnsnValInSummryCompstnTblForAplblYrMember +ecd:PeoMember +www:ChristopherHufnagelMember +2023-12-31 +2024-12-28 +0000110471 +ecd:AggtChngPnsnValInSummryCompstnTblForAplblYrMember +ecd:NonPeoNeoMember +2023-12-31 +2024-12-28 +0000110471 +ecd:PnsnAdjsSvcCstMember +ecd:PeoMember +www:ChristopherHufnagelMember +2023-12-31 +2024-12-28 +0000110471 +ecd:PnsnAdjsSvcCstMember +ecd:NonPeoNeoMember +2023-12-31 +2024-12-28 +0000110471 +1 +2023-12-31 +2024-12-28 +0000110471 +2 +2023-12-31 +2024-12-28 +0000110471 +3 +2023-12-31 +2024-12-28 +0000110471 +4 +2023-12-31 +2024-12-28 +iso4217:USD \ No newline at end of file diff --git a/raw/proxies/0000110471/0001140361-25-009454/proxy_rpt.txt b/raw/proxies/0000110471/0001140361-25-009454/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..9a6b39ca888835dbc15d1d5f9b56be3124f12efa --- /dev/null +++ b/raw/proxies/0000110471/0001140361-25-009454/proxy_rpt.txt @@ -0,0 +1,34 @@ +CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS +Since December 31, 2023, the Company has not engaged in any “related person” transactions with any person who is or was during the last fiscal year a director, executive officer, nominee for director or holder of 5% or more of Company voting securities, affiliate or any member of the immediate family of the foregoing persons. +RELATED PERSON TRANSACTIONS POLICY +The Board adopted written policies and procedures regarding related person transactions. They require the Governance Committee to review and either approve or disapprove the Company entering into any Interested Transactions (defined below). If advance approval is not feasible, then the Governance Committee must review and ratify the Interested Transaction at its next meeting. +Interested Transaction +Any transaction, arrangement or relationship or series of similar transactions, arrangements or relationships (including any indebtedness or guarantee of indebtedness) in which: +(1) +The aggregate amount involved exceeds or is expected to exceed $120,000 since the beginning of Wolverine Worldwide's last completed fiscal year; +(2) +The Company or any of its subsidiaries is a participant; and +(3) +Any Related Person (defined below) has or will have a direct or indirect interest. +An Interested Transaction does not include: +(1) +Any employment compensation paid to an executive officer of the Company if the Compensation and Human Capital Committee approved or recommended to the Board of Directors for approval of such compensation; +(2) +Any compensation paid to a director for service as a director of the Company; +(3) +Any transaction in which a Related Person has an indirect interest solely as a result of being (i) a director or, together with all other Related Persons, as defined below, a less than 10% beneficial owner of an equity interest in another entity, or both, or (ii) a limited partner in a partnership in which the Related Person, together with all other Related Persons, has an interest of less than 10%; +(4) +Any transaction in which the Related Person's interest arises solely from the ownership of the Company's common stock and all holders of the Company's common stock received the same benefit on a pro rata basis (e.g., a dividend); or +(5) +Any transaction with another publicly traded company where the Related Person's interest arises solely from the ownership of more than 5% of the Company's common stock and the ownership of a non-controlling interest in the other publicly traded company. +Related Person +Any: +(a) +Person who is or was at any time since the beginning of the Company's last completed fiscal year even if they do not presently serve in that role, an executive officer, a director or, to the extent information regarding such nominee is being presented in a proxy or information statement relating to the election of that nominee as a director, a nominee for election as a director; +(b) +Beneficial owner of greater than five percent of Wolverine Worldwide's common stock; or +(c) +Immediate family member* of any of the foregoing. +* +Immediate family member is defined as a person's spouse, parents, stepparents, children, stepchildren, siblings, mothers and fathers-in-law, sons- and daughters-in-law, and brothers- and sisters-in-law, and anyone residing in such person's home (other than a tenant or employee). +The Governance Committee considers whether the Interested Transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances, the extent of the Related Person's interest in the transaction, and other factors that it deems relevant. No director participates in any discussion or approval of an Interested Transaction for which he or she is a Related Person, except to provide information to the Governance Committee. \ No newline at end of file diff --git a/raw/proxies/0000110471/0001140361-26-011157/proxy.txt b/raw/proxies/0000110471/0001140361-26-011157/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..1c09c7245c41ae67b801d578f500523088be18ec --- /dev/null +++ b/raw/proxies/0000110471/0001140361-26-011157/proxy.txt @@ -0,0 +1,4002 @@ +TABLE OF CONTENTS +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +Washington, D.C. 20549 +SCHEDULE 14A INFORMATION +Proxy Statement Pursuant to Section 14(a) of +the Securities Exchange Act of 1934 (Amendment No.  ) +Filed by the Registrant ☒ +Filed by a party other than the Registrant   ☐ +Check the appropriate box: +☐ +Preliminary Proxy Statement +☐ +Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +☒ +Definitive Proxy Statement +☐ +Definitive Additional Materials +☐ +Soliciting Material under § 240.14a-12 +Wolverine World Wide, Inc. +(Name of Registrant as Specified In Its Charter) +(Name of Person(s) Filing Proxy Statement, if other than the Registrant) +Payment of Filing Fee (Check all boxes that apply): +☒ +No fee required +☐ +Fee paid previously with preliminary materials +☐ +Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11 +TABLE OF CONTENTS +TABLE OF CONTENTS +Letter from the Chairman +2025 marked a year of significant progress for Wolverine Worldwide, marked by renewed growth, improved profitability, and sharper operational execution. Management delivered high-quality performance amid a dynamic business environment, led by strong results from the Company’s two largest brands — Merrell and Saucony — and enabled by a focused strategy and the development of key capabilities. This progress culminated in the Company earning the Great Place To Work Certification™ and being named 2025 Company of the Year by Footwear News — recognition that underscores Wolverine Worldwide’s transformation, innovation, and performance. +2025 built on the momentum established since 2023, when the Board appointed new leadership and worked closely with management to guide a deliberate reset and transformation of the Company. This initially included making fast and bold decisions to stabilize the business and strengthen the balance sheet then, as these actions took hold, transforming the organization to inflect to growth and deliver improved, consistent financial performance. This disciplined approach, grounded in our Value Creation Model and supported by strong brand-building capabilities, has now positioned Wolverine Worldwide for sustainable, profitable growth. +Over the past year the Board also enhanced its capabilities with the addition of two new directors, Cheryl Abel-Hodges, CEO of Tommy John, and Jack Boyle, who recently retired from Fanatics. Their deep expertise in global consumer brands, retail, and omnichannel strategy brings valuable perspective as the Company enters its next phase of growth. +As we look ahead, the Board is confident in the direction of the Company and in management’s ability to build on this year’s performance. Importantly, the Company has delivered against the commitments outlined at the outset of the transformation, and we believe it is well-positioned to accelerate its trajectory. We are encouraged by the alignment across the organization and the shared commitment to growth, operational excellence, and disciplined execution — foundational to delivering long-term value for shareholders. +On behalf of the entire Board of Directors of Wolverine Worldwide, thank you for your continued support, confidence, and partnership. +Tom Long +Chairman of the Board +2026 PROXY STATEMENT +1 +TABLE OF CONTENTS +Letter from the CEO +DELIVERING ON OUR STRATEGY +As we entered 2025, Wolverine Worldwide was emerging from a pivotal turnaround year. Our objectives were clear — accelerate growth, continue to expand profitability, and responsibly invest to drive the future success of our brands and business. By executing with focus, pace, and discipline I’m proud to share that we delivered on all three objectives. +We delivered full-year revenue of $1.87 billion — an increase of 7% compared to 2024 — led by our two largest brands, Merrell and Saucony. Merrell extended its momentum to six consecutive quarters of growth, while Saucony increased revenue by just over 30%, achieving record annual revenue. +We also took action to strengthen underperforming parts of the business, and by year-end we saw tangible improvements, further confirming the effectiveness of our brand-building playbook. Combined with disciplined, thoughtful investments across the organization, these achievements enabled us to exceed our financial expectations for the year and set a stronger foundation for the road ahead. +Finally, we continued to improve the balance sheet, reducing net debt by $81 million in 2025, building on the $246 million reduction achieved in 2024. Operating free cash flow was $126 million for the year, and we paid dividends totaling $33 million. +ACCELERATING PROFITABLE GROWTH AND ADVANCING OUR BRAND-BUILDING MODEL +Our revenue growth in 2025 was matched by a meaningful improvement in profitability. Operating margin expanded 240 basis points and adjusted operating margin expanded 170 basis points, and earnings per share and adjusted earnings per share increased 107% and 53% compared to 2024, respectively. These results reflect structural enhancements in our operating model, healthier inventory, product cost savings, and a higher mix of full-price sales. These improvements now position us to further expand profitability, while scaling the business with intention. +At the same time, we continued to invest in our brands, talent, and capabilities. We increased marketing and demand creation efforts, recruited new key talent and leadership, and deployed advanced technologies — including AI-driven capabilities — to help our teams move faster and smarter. We also improved execution across our wholesale and direct-to-consumer channels to help our brands connect with consumers more effectively and consistently, led by our Global Key City initiative. +Underpinning and providing a framework for this progress is our Brand-Building Model — focused squarely on building awesome products, telling amazing stories, and driving the business every day. +POISED FOR SUSTAINABLE GROWTH AHEAD +We enter 2026 from a stronger position, with the company expected to deliver mid-single-digit revenue and constant currency revenue growth, consistent with our Value Creation Model. Merrell and Saucony remain strong and are expected to deliver mid-single-digit and mid-teens revenue growth, respectively (mid-single-digit and low-to-mid-teens constant currency revenue growth, respectively). Across the balance of our portfolio, performance is on a path toward greater consistency, bolstered by the actions we’ve taken. +Looking ahead, our brands are aligned with long-term macro consumer trends at their core and are well-positioned to extend into broader adjacent lifestyle opportunities. At the same time, our organization is more agile, more engaged and aligned, and better equipped to deliver sustainable, profitable growth. +With a healthier balance sheet and greater financial flexibility, we expect to continue investing in the opportunities ahead — from product innovation and consumer insights to digital capabilities and marketing. Our disciplined capital allocation strategy — investing in the business, further reducing debt, and maintaining the dividend — remains focused on driving long-term value for our shareholders. +I’m incredibly proud of what our global team accomplished in 2025 — and even more excited by what’s ahead. With the heavy lift of the turnaround behind us — we’ve built a stronger foundation, revitalized our brands, and aligned our team around a shared Vision to — Make. Every Day. Better. — for our consumers, our partners, our communities, and for you, our shareholders. +As always, thank you for your continued support of Wolverine Worldwide. Be well, be safe... +Christopher Hufnagel +President and Chief Executive Officer +2026 PROXY STATEMENT +2 +TABLE OF CONTENTS +Notice of 2026 Annual Meeting of Shareholders +11:00 a.m. EDT, May 7, 2026 +To Our Shareholders: +We invite you to attend the 2026 Annual Meeting of Shareholders (the “Annual Meeting”) of Wolverine World Wide, Inc. (“we,” “us,” the “Company,” “Wolverine Worldwide” or “Wolverine”). The meeting will be held on May 7, 2026, at 11:00 a.m. EDT in a virtual format designed to provide shareholders with the same rights and opportunities to participate that they would have at an in-person meeting. At the Annual Meeting, shareholders will vote on the following items: +PROPOSAL +BOARD VOTE +RECOMMENDATION +PAGE +REFERENCE +1 +Election of the Four Directors Named in the Proxy Statement for Terms Expiring in 2029 +✔ +FOR each Nominee +17 +2 +Advisory Resolution to Approve Executive Compensation +✔ +FOR +71 +3 +Ratification of the Appointment of Ernst & Young LLP as the Company’s Independent Registered Public Accounting Firm for Fiscal Year 2026 +✔ +FOR +73 +4 +Shareholder Proposal, if properly presented at the Annual Meeting +✘ +AGAINST +74 +Shareholders may also transact such other business as may properly come before the Annual Meeting or any adjournment or postponement thereof. +Shareholders of record as of the close of business on March 9, 2026, the record date, are entitled to participate in and vote at the Annual Meeting. To participate in the Annual Meeting, including to vote and ask questions, shareholders of record should go to the meeting website at www.virtualshareholdermeeting.com/WWW2026, enter the 16-digit control number found on your proxy card or Notice of Internet Availability of Proxy Materials (“Notice of Internet Availability”), and follow the instructions on the website. If you encounter any difficulties accessing the virtual meeting during check-in or during the meeting, please call the technical support number that will be posted on the virtual shareholder meeting login page. If your shares are held in street name and your voting instruction form or Notice of Internet Availability indicates that you may vote those shares through the http://www.proxyvote.com website, then you may access, participate in, and vote at the annual meeting with the 16-digit access code indicated on that voting instruction form or Notice of Internet Availability. Otherwise, shareholders who hold their shares in street name should contact their bank, broker or other nominee (preferably at least 5 days before the Annual Meeting) and obtain a “legal proxy” in order to be able to attend, participate in or vote at the Annual Meeting. +Whether or not you plan to attend the Annual Meeting, you can ensure that your shares are represented at the meeting by promptly voting and submitting your proxy by telephone or through the internet, or by completing, signing, dating and returning your proxy card in the enclosed envelope. Brokers are not permitted to vote on certain proposals and may not vote on any of the proposals unless you provide voting instructions. Voting your shares will help to ensure that your interests are represented at the meeting. +Rules for the conduct of the Annual Meeting will be available on the meeting website. For information about how to view the rules and the list of shareholders entitled to vote at the Annual Meeting during the ten days preceding the Annual Meeting, please visit our 2026 Annual Meeting website at www.wolverineworldwide.com/2026annualmeeting. +2026 PROXY STATEMENT +3 +TABLE OF CONTENTS +This Notice of 2026 Annual Meeting of Shareholders, Proxy Statement, proxy or voting instruction card and Annual Report for our fiscal year ended January 3, 2026 are being mailed or made available to shareholders starting on or about March 25, 2026. +By Order of the Board of Directors, +David A. Latchana +Chief Legal Officer and Secretary +Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to be held on May 7, 2026. +Wolverine’s Proxy Statement for the 2026 Annual Meeting of Shareholders and the Annual Report to Shareholders for the fiscal year ended January 3, 2026, are available at: www.wolverineworldwide.com/2026annualmeeting. +2026 PROXY STATEMENT +4 +TABLE OF CONTENTS +Table of Contents +Proxy Statement Summary +6 +Matters to be Voted Upon +7 +Election of Directors for Terms Expiring in 2029 +7 +Corporate Governance +10 +Board of Directors +10 +Board Self-Assessment +12 +Risk Oversight +12 +Environmental, Social and Governance Highlights +14 +Code of Business Conduct and Accounting and Finance Code of Ethics +16 +Shareholder Communications Policy +16 +Proposal 1 – Election of Directors for Terms Expiring +in 2029 +17 +Director Nominees with Proposed Terms Expiring in 2029 +18 +Directors with Terms Expiring in 2027 +22 +Directors with Terms Expiring in 2028 +25 +Board Leadership +28 +Director Independence +28 +Board Committees, Meetings and Meeting Attendance +29 +Director Compensation in Fiscal Year 2025 +31 +Non-Employee Director Stock Ownership Guidelines +33 +Securities Ownership of Officers and Directors and Certain Beneficial Owners +34 +Five Percent Shareholders +34 +Stock Ownership by Management and Others +35 +Compensation Discussion and Analysis +37 +Summary +37 +Compensation Discussion and Analysis +40 +2025 Compensation Program Overview +40 +Long-Term Incentive Compensation +44 +Benefits +46 +Post-Employment Compensation +46 +Say on Pay Advisory Vote +47 +Compensation Setting Process +47 +Other Compensation Policies and Practices +49 +Compensation and Human Capital Committee Report +51 +Summary Compensation Table +52 +Grants of Plan-Based Awards in Fiscal Year 2025 +54 +Outstanding Equity Awards at 2025 Fiscal Year-End +55 +Option Exercises and Stock Vested in Fiscal Year 2025 +58 +Pension Plans and 2025 Pension Benefits +59 +Non-Qualified Deferred Compensation +61 +Potential Payments Upon Termination or Change in Control +62 +CEO Pay Ratio +67 +Pay vs. Performance +68 +Proposal 2 – Advisory Resolution to Approve Executive Compensation +71 +Proposal 3 – Ratification of Appointment of Independent Registered Public Accounting Firm +73 +Proposal 4 –Shareholder Proposal +74 +Audit Committee Report +77 +Independent Registered Public Accounting Firm +79 +Related Party Matters +80 +Additional Information +81 +Appendix A - Forward-Looking Statements and Non-GAAP Reconciliation Tables +A-1 +2026 PROXY STATEMENT +5 +TABLE OF CONTENTS +Proxy Statement Summary +This summary highlights key information that can be found in greater detail elsewhere in this Proxy Statement. This summary does not contain all the information that shareholders should consider, and shareholders should read the entire Proxy Statement before voting. +Our Brand Portfolio +Wolverine Worldwide maintains a diverse portfolio of category-leading brands: +Our Strategic Direction +We are driven by a new vision for Wolverine Worldwide: +Make. +We make great things… +Every Day. +Every day matters… +Better. +Our consumers are moved to live… +Our portfolio is strategically focused on brands that are originals and leaders in attractive performance categories that we believe are aligned with long-term, macro consumer trends. Consistent with the Company’s vision, each brand in our portfolio endeavors to make their consumers’ lives better – healthier, happier and more productive. +Differentiated, purpose-led brands that excite consumers and deliver healthy margins are fundamental to our strategy. To this end, we are building capabilities and aligning the organization around our global Brand-building Model, prioritizing: +1.  +Designing Awesome Products – Innovative, trend-right, priced-right, covetable products informed by deep insights that solve for consumer’s wants and needs +2.  +Telling Amazing Stories – Differentiated, meaningful stories that reach consumers when and where they want to engage +3.  +Driving the Business – A constant pursuit to build and protect our brands in the marketplace +2026 PROXY STATEMENT +6 +TABLE OF CONTENTS +Our corporate structure enables our brands to focus on their consumers, product, and marketing by providing platforms that efficiently drive operations and back-office activities and centers-of-excellence that help create competitive advantages for the brands on capabilities deemed to be strategically important – including consumer insights, trend, and innovation. +Matters to Be Voted Upon +Shareholders are being asked to vote on the following matters at the 2026 Annual Meeting of Shareholders: +PROPOSAL +BOARD VOTE +RECOMMENDATION +PAGE +REFERENCE +1 +Election of the Four Directors Named in the Proxy Statement for Terms Expiring in 2029 +✔ +FOR each Nominee +17 +2 +Advisory Resolution to Approve Executive Compensation +✔ +FOR +71 +3 +Ratification of the Appointment of Ernst & Young LLP as the Company’s Independent Registered Public Accounting Firm for Fiscal Year 2026 +✔ +FOR +73 +4 +Shareholder Proposal, if properly presented at the Annual Meeting +✘ +AGAINST +74 +Election of Directors for Terms Expiring in 2029 +The Board currently consists of ten directors. The Company’s By-Laws establish three classes of directors with each class serving three-year terms. +The Board has nominated four directors for election at the Annual Meeting, as outlined in the table below. The Board recommends that shareholders vote “FOR” each of the nominees named below. +Age +Director +Since +Independent +Committees +Proposed Term +Expiration +Other Public +Directorships +Cheryl Abel-Hodges +Chief Executive Officer, +Tommy John, Inc. +62 +2025 +✔ +Audit +2029 +None +William K. Gerber +Managing Director, Cabrillo Point Capital LLC; +Retired EVP and +Chief Financial Officer, +Kelly Services, Inc. +72 +2008 +✔ +Audit (Chair) +Compensation and +Human Capital +2029 +None +Nicholas T. Long +Chairman of the Board, +Wolverine Worldwide; +Retired Chief Executive Officer, MillerCoors LLC +67 +2011 +✔ +None +2029 +Amcor PLC +Kathleen Wilson-Thompson +Retired Executive Vice President and Global Chief Human Resources Officer, Walgreens Boots Alliance, Inc. +68 +2021 +✔ +Compensation and +Human Capital +(Chair) +Governance +2029 +Tesla, Inc. +McKesson Corporation +Detailed director biographies can be found on pages 18 - 27 of the Proxy Statement. +2026 PROXY STATEMENT +7 +TABLE OF CONTENTS +Board is Composed of Directors with the Right Mix of Characteristics, Skills and Experiences +The following charts illustrate key characteristics of the Board as of the date of this Proxy Statement: +The following chart lists the important skills and experiences that the Company’s directors possess: +2026 PROXY STATEMENT +8 +TABLE OF CONTENTS +Shareholder Engagement +As part of its ongoing shareholder engagement efforts, in fiscal year 2025, the Company reached out to shareholders representing approximately 78% of its outstanding shares held by institutional investors, and has held or offered to hold meetings or calls with all shareholders who accepted the Company’s invitation. Discussions focused on Company strategy, financial performance, corporate responsibility and governance. +Corporate Governance Highlights +Wolverine Worldwide is committed to a governance structure that provides strong shareholder rights and meaningful accountability. +✔ +Highly independent Board and Committees +✔ +Annual Board and Committee self-evaluations +✔ +Independent Chairman of the Board +✔ +Robust Board and executive succession planning process, including annual written director nominee evaluations +✔ +Majority voting with director resignation policy +✔ +Long-standing commitment to inclusion +✔ +Director onboarding orientation program and ongoing education initiatives +✔ +No supermajority vote requirements +✔ +Shareholder right to act by written consent +✔ +Active shareholder engagement practices +Meeting Information +The Company’s Annual Meeting is scheduled to take place virtually, as set forth in the notice, on May 7, 2026, at 11:00 a.m. EDT. The Company encourages you to vote your shares before the Annual Meeting. +2026 PROXY STATEMENT +9 +TABLE OF CONTENTS +Corporate Governance +Wolverine Worldwide is committed to the highest level of corporate governance, and the Board has adopted Corporate Governance Guidelines to strengthen management accountability and promote long-term shareholder interests. +Board of Directors +The shareholders elect directors to serve on the Company’s Board of Directors (the “Board of Directors” or “Board”). The Board oversees the management of the business by the Chief Executive Officer (“CEO”) and senior management. In addition to its general oversight function, the Board’s responsibilities include, but are not limited to, the following: +• +Reviewing and approving the Company’s financial and other key objectives and strategic business plans, and monitoring implementation of those plans and the Company’s success in meeting identified objectives +• +Selecting, evaluating and approving the compensation of the CEO and overseeing CEO succession planning +• +Providing advice and oversight regarding the selection, evaluation, development and compensation of management +• +Overseeing the Company’s process for assessing and managing risk and mitigation activities +• +Nominating the Company’s director candidates and appointing committee members +• +Engaging in succession planning for the Board and key leadership roles on the Board and its committees +• +Shaping effective corporate governance +• +Reviewing and monitoring administration of policies and procedures to safeguard the integrity of the Company’s business operations and financial reporting and to promote compliance with applicable laws and regulations +Board Composition +Board Highlights +The Board prides itself on its ability to recruit and retain directors who have high personal and professional integrity and have demonstrated exceptional ability and judgment to effectively serve shareholders’ long-term interests. These skills and experience will help the Company accomplish its most important strategic objectives, such as global brand-building, investing in the Company’s growth brands, direct-to-consumer and digital growth, powerful product, operational excellence, supply chain management, and international growth. The Board also values a diversity of backgrounds, experiences, and perspectives and considers this an important factor in identifying and considering nominees for appointment and election. The Board believes that its directors, including the nominees for election as directors at the Annual Meeting, have characteristics and valuable skills that provide the Company with the variety and depth of knowledge, judgment and strategic vision necessary to provide effective oversight of the Company. +The Board, with the assistance of the Governance Committee, annually assesses the current composition of the Board across many dimensions to help achieve the right mix of experience and expertise and to assist in succession planning. This assessment addresses the individual performance, experience, age and skills of each director. As part of this process the Board has identified specified skills and experience it desires its members to collectively possess. The below graphic lists these skills and experience and indicates which of the directors possess each. As shown, these skills and experience are well represented within the Board. +2026 PROXY STATEMENT +10 +TABLE OF CONTENTS +Board Skills and Experience +Totals +Abel-Hodges +Andersen +Boromisa +Boyle +Gerber +Hufnagel +Lauderback +Long +Price +Wilson-Thompson +Active Executive +2 +✔ +✔ +Brand Building +9 +✔ +✔ +✔ +✔ +✔ +✔ +✔ +✔ +✔ +Current or Former CEO +3 +✔ +✔ +✔ +Digital/e-commerce/IT +4 +✔ +✔ +✔ +✔ +Finance +5 +✔ +✔ +✔ +✔ +✔ +Footwear/Apparel +6 +✔ +✔ +✔ +✔ +✔ +✔ +Global Supply Chain +5 +✔ +✔ +✔ +✔ +✔ +International Business +10 +✔ +✔ +✔ +✔ +✔ +✔ +✔ +✔ +✔ +✔ +Marketing +6 +✔ +✔ +✔ +✔ +✔ +✔ +Public Company Governance +7 +✔ +✔ +✔ +✔ +✔ +✔ +✔ +Retail +9 +✔ +✔ +✔ +✔ +✔ +✔ +✔ +✔ +✔ +Director Nominations +The Board’s Governance Committee serves as its nominating committee. The Governance Committee, in anticipation of upcoming director elections and other potential or expected Board vacancies, evaluates qualified individuals and recommends candidates to the Board. The Governance Committee may (and typically does) retain a search firm or other external parties to assist it in identifying candidates, and the Governance Committee has the sole authority to select such a firm, approve the search firm’s fees and retention terms, and to terminate the firm if necessary. +The Governance Committee considers candidates suggested by directors, senior management or shareholders. Shareholders may recommend individuals as potential director candidates by communicating with the Governance Committee through one of the Board communication mechanisms described under the heading “ Shareholder Communications Policy .” Shareholders that wish to nominate a director candidate must comply with the procedures set forth in the Company’s By-Laws, which are posted on its website. The deadline for shareholders to submit notice of nominations for next year’s annual meeting is set forth under the heading “ Other Shareholder Proposals for Presentation at Next Year’s Annual Meeting ” in this Proxy Statement. +Ultimately, upon the recommendation of the Governance Committee, the Board selects the Company’s director nominees for election at each annual meeting. In selecting director nominees, the Board considers each candidate’s performance as a director (which is assessed through an anonymous written peer evaluation) if such candidate is serving or has served as a director of the Company; personal and professional integrity; ability and judgment; and likelihood to be effective, working with the other nominees and directors, in serving the long-term interests of the shareholders. The Governance Committee also considers candidates’ relative skills, experience, attributes, background and characteristics as well as independence under applicable New York Stock Exchange (“NYSE”) listing standards and the Company’s Director Independence Standards, potential to contribute to the composition and culture of the Board, ability and willingness to actively participate in the Board and committee meetings and to otherwise devote sufficient time to Board duties. +2026 PROXY STATEMENT +11 +TABLE OF CONTENTS +Director Onboarding and Ongoing Education Initiatives +The Board provides onboarding orientation programs to familiarize new Board members with the Company’s business and the operation of the Board. Directors are encouraged to participate in continuing education programs to assist them in performing their Board responsibilities. The Company supports director education by coordinating continuing education programs and reimbursing directors for related expenses. +Board Self-Assessment +As part of an annual Board assessment, each director evaluates over a number of dimensions the performance of the Board and any committee on which he or she serves. Tom Long, the Chairman of the Board, works with the Governance Committee to review the Board self-assessment with directors following the end of each fiscal year and to conduct individual director interviews at the end of each year. Committee Chairpersons review the committee self-assessments with their respective committee members and discuss them with the Board. The Company has also used a third-party facilitator to elicit feedback from directors as part of the Board assessment process. +In addition, the Governance Committee, working with the Chairman of the Board, develops and implements guidelines for evaluating all directors standing for nomination and election and oversees the evaluation of such nominees. +The Corporate Governance Guidelines (including the Director Independence Standards), the Charter for each Board committee (Audit, Compensation and Human Capital and Governance), the Company’s Certificate of Incorporation, By-Laws, Code of Business Conduct, and its Accounting and Finance Code of Ethics all are available on the Wolverine Worldwide website at: www.wolverineworldwide.com/investor-relations/corporate-governance/. +The Board and applicable committees annually review these and other key governance documents. +Risk Oversight +The Board oversees the Company’s process for assessing and managing enterprise risk and mitigation activities with a focus on the most significant enterprise risks facing the Company, including strategic, inventory, operational and supply chain, financial, cybersecurity, human capital, environmental, social, and governance (“ESG”) and legal compliance risks. This oversight is conducted through quarterly presentations by and discussions with the President and CEO, Chief Financial Officer (“CFO”), Director of Internal Audit, Chief Legal Officer, Chief Information Officer, Chief Information Security Officer, brand and department leaders and other members of management. The Chief Legal Officer, Risk Manager, and Director of Internal Audit coordinate management’s day-to-day risk management and mitigation efforts, and the Director of Internal Audit reports directly to the Audit Committee. +The Chief Legal Officer, Risk Manager, and Director of Internal Audit review with the Audit Committee regularly, and with the full Board periodically, management’s risk assessment and mitigation strategies. In addition to the above processes, the Board has delegated risk management and mitigation oversight responsibilities to its standing committees, which meet regularly to review and discuss specific risk topics that align with their core responsibilities. +• +The Audit Committee reviews the Company’s approach to enterprise risk management generally. The Audit Committee also oversees the Company’s risk policies and processes relating to its financial statements and financial reporting processes, credit risks and liquidity risks, major legal and regulatory compliance risk exposures, as well as the Company’s management of risks related to cybersecurity and data privacy. The Audit Committee discusses with management and the independent auditors significant risks or exposures and the steps taken by management to mitigate them. +• +The Board has delegated the primary responsibility to oversee cybersecurity matters to the Audit Committee. The Audit Committee regularly reviews the measures implemented by the Company to identify and mitigate data protection and cybersecurity risks. As part of such reviews, the Audit Committee receives quarterly reports and presentations from members of the Company’s team responsible for overseeing the Company’s cybersecurity risk management, including the Chief Information Security Officer, Chief Information Officer, and members of the legal team, which address a wide range of topics including recent developments, evolving standards, vulnerability assessments, third-party and independent reviews, the threat environment, technological trends and information security considerations arising with respect to the Company’s peers and third parties. The other members of the Board +2026 PROXY STATEMENT +12 +TABLE OF CONTENTS +receive these quarterly reports and attend presentations to the Audit Committee provided by members of management. The Company has protocols by which certain cybersecurity incidents that meet established reporting thresholds are escalated within the Company and, where appropriate, reported promptly to the Board and Audit Committee, as well as ongoing updates regarding any such incident until it has been addressed. +• +The Audit Committee reviews artificial intelligence (“AI”) exposures, risks and Company policies. The Board regularly receives updates from members of management on the Company’s policies, practices, and initiatives relating to the use of technology, including AI, across its operations. +• +The Compensation and Human Capital Committee oversees the risks associated with management resources; organization structure and succession planning, hiring, development and retention processes; and it reviews and evaluates risks associated with the Company’s compensation structure, policies and programs. The Compensation and Human Capital Committee also oversees the relevant risks related to human capital management, including with respect to matters such as talent recruiting, development, progression and retention, inclusion, human health and safety and total rewards and workplace environment and culture. +• +The Governance Committee oversees the Company’s management of risks related to the Company’s governance structure and processes and potential risks arising from related person transactions. The Governance Committee also oversees risks related to the Company’s ESG matters. +Each year, the Company reviews its compensation policies and practices to assess whether they are reasonably likely to have a material adverse effect on the Company. As part of this review, the Company compiled information about the Company’s incentive plans, including reviewing the Company’s compensation philosophy, evaluating key incentive plan design features and reviewing historic payout levels and pay mix. With assistance from Company management and its independent compensation consultant, the Compensation and Human Capital Committee reviewed the executive compensation program, and managers from the Company’s human resources and legal departments reviewed the non-executive compensation programs. +2026 PROXY STATEMENT +13 +TABLE OF CONTENTS +Environmental, Social and Governance Highlights +At Wolverine Worldwide, we believe every day is an opportunity to build better – better products, better experiences, and better communities. By embedding sustainability principles into our products and operations, we aim to create value for our stakeholders, consumers, employees, the planet and the communities where we live and work. We strive to reduce our environmental footprint, foster inclusive workplaces, and support vibrant communities while continuing to deliver innovative products that empower people to live healthier, more active, and more fulfilling lives. +Some of the Company’s sustainability and governance initiatives are summarized below, and more information is available in our most recent Global Impact Report available on our website at https://www.wolverineworldwide.com/about-us/responsibility/. 1 +Planet +Wolverine Worldwide seeks to reduce and responsibly manage our environmental impact by annually measuring our greenhouse gas (GHG) emissions, actively implementing environmentally conscious business practices across our value chain and reducing energy use at our offices and distribution centers. We intend to continue integrating climate considerations into risk management, business planning, and strategy. +• +Building on our climate strategy established in 2023, we've taken meaningful steps to further understand the Company’s climate footprint by measuring and disclosing our Scope 1 and 2 emissions for 2023 aligned with the GHG Protocol, and plan to disclose our Scope 1 and 2 emissions for 2024 later this year. +• +We have conducted a relevancy assessment for Scope 3 categories and completed our first inventory of Scope 3 value chain emissions. We anticipate disclosing 2024 Scope 3 data later this year. +• +We have worked to strengthen our governance and risk management by regular oversight and quarterly review of climate-related risks and opportunities by the Board and management quarterly. +• +Through formalized risk assessment processes, such as our Double Materiality Assessment, which evaluated the relevance of ESG topics based on their actual or potential impacts to the environment and society as well as our financial performance, and our assessment of our compliance with the original European Sustainability Reporting Standards, the Company has worked to better understand the potential climate-related risks and opportunities of various actions. +• +Each year since 2015, we have purchased Renewable Energy Credits (RECs) to match the energy use at our North America facilities. In 2024, we matched our electricity consumption in our North America operations through the purchase of 17,000 MWh of RECs, enabling us to reduce those emissions in our inventory. +Product +Furthering our mission to make more sustainable products, our brands seek to use plant-based, recycled, organic and biobased materials wherever we determine possible. Recently we evaluated different transparency and traceability solutions in order to map our supply chain, improve our understanding of supply chain data, and facilitate our compliance with regulatory requirements and industry standards. In 2025, we selected and began implementation of a supply chain traceability software to unify supplier data, automate compliance and certification tracking, and gain real-time visibility into the value chain. This will enable us to more effectively collect information across Tier 2 and Tier 3 suppliers, identify and manage risks, and promote supply chain transparency at every stage. +1 +Website references are provided for convenience only, and the content on the referenced websites is not, and shall not be deemed to be, incorporated by reference into this Proxy Statement. +2026 PROXY STATEMENT +14 +TABLE OF CONTENTS +People +We believe that our global team members are critical to helping our business evolve and flourish. We work to maximize the engagement and contribution of our workforce and to attract the best talent available, while providing opportunities for growth and development for team members. Wolverine Worldwide strives to be a champion and driver of positive change within the global communities in which we live and work. +• +We offer our employees an array of opportunities for self-development and continued learning, including an annual Global Careers Conference, the Harvard Leadership Essentials series for people leaders, e-learning options and a coaching office to help our people develop, grow and become great leaders and team members. +• +Our 2025 pulse survey, which we use to collect feedback on employees’ job satisfaction, loyalty and engagement, had a Global Engagement Score of 7.7 on a 10 point scale, which reflects results that are well within benchmark of the Consumer Durables & Apparel sector, with an 83% overall participation rate for 2025. +• +With thousands of employees across the globe, Wolverine Worldwide’s workforce represents a wide range of cultures, religions, ethnicities, nationalities, backgrounds, and beliefs. Wolverine Worldwide is focused on fostering an inclusive environment where every team member feels valued, respected, and empowered. +Our Workforce at a Glance +Below are metrics for Wolverine Worldwide’s organization. 2 +Purpose +In 2025, we hosted our second annual Global Day of Purpose as part of WOLVER1NE Week, during which we served the communities in which we live and work across the globe by donating 1000+ hours with partner nonprofit organizations. In addition to our employees giving back to their local communities, the Wolverine Worldwide Foundation, our charitable arm, represents our commitment to societal betterment, based on the idea that intentional support fosters stronger communities and more inclusive futures. Through dedicated volunteer time and contributions, we promote the Foundation’s three pillars: Healthy Lives and Outdoors, Diversifying Trades and Talent and Industry and Community Giving. +Governance +Wolverine Worldwide is committed to a governance structure that provides strong shareholder rights and meaningful accountability. The Board regularly reviews brand initiatives, product collections and launches that have environmental and social impacts. The Board has delegated responsibility to its Governance Committee to oversee and make recommendations concerning ESG matters, including the Company’s ESG initiatives and their integration into the Company’s business and long-term value creation for the Company and its shareholders. The Governance Committee is also responsible for overseeing +2 +Ethnicity is reported for U.S. population only. Information provided is as of January 3, 2026. +2026 PROXY STATEMENT +15 +TABLE OF CONTENTS +the development and disclosure of the Company’s broader ESG initiatives. The Board, through the Compensation and Human Capital Committee, oversees the Company’s human capital strategies and policies, and our Chief Human Resources Officer provides the Committee with quarterly updates on Company human resources-related initiatives. +Code of Business Conduct and Accounting and Finance Code of Ethics +The Company discloses amendments to, and waivers made with respect to directors or executive officers under both its Code of Business Conduct and Accounting and Finance Code within four business days following the date of the amendment or waiver on its website at: www.wolverineworldwide.com/investor-relations/corporate-governance/. +Shareholder Communications Policy +Shareholders and other interested parties may send correspondence to the Board, the non-employee directors as a group, a specific Board committee or an individual director (including the Chairman of the Board) in the manner described below. +The Chief Legal Officer will provide a summary and copies of all correspondence (other than solicitations for services, products or publications) as applicable at each regularly scheduled Board meeting. +Communications may be sent via email through various links on our website at: www.wolverineworldwide.com/investor-relations/corporate-governance/ +or by regular mail c/o Chief Legal Officer, Wolverine World Wide, Inc., 9341 Courtland Drive, NE, Rockford, Michigan 49351. +The Chief Legal Officer will alert individual directors if an item warrants a prompt response from the individual director prior to the next regularly scheduled meeting. Items warranting a prompt response, but not addressed to a specific director, will be routed to the applicable committee Chairperson. +2026 PROXY STATEMENT +16 +TABLE OF CONTENTS +Proposal 1 — Election of Directors +for Terms Expiring in 2029 +The Board currently consists of ten directors. The Company’s By-Laws establish three classes of directors with each class serving staggered three-year terms. At each annual meeting, the term of one class expires. The Board has nominated four directors for election at the Annual Meeting: Cheryl Abel-Hodges, William K. Gerber, Nicholas T. Long and Kathleen Wilson-Thompson. Each director has been nominated to serve for a three-year term expiring at the annual meeting of shareholders to be held in 2029 or until a successor, if any, has been elected and is qualified. +All director nominees are independent directors, as determined by the Board under the applicable NYSE listing standards and the Company’s Director Independence Standards. Each director nominee currently serves on the Board. The shareholders most recently elected Messrs. Gerber and Long and Ms. Wilson-Thompson at the Company’s 2023 Annual Meeting. Ms. Abel-Hodges was appointed to the Board in 2025 on the recommendation of the Company’s Governance Committee after having been identified as a candidate by a third-party search firm. +The Company is not aware of any nominee who will be unable or is unwilling to serve as a director. However, if a nominee is unable to serve or is otherwise unavailable for election, the incumbent directors may or may not select a substitute nominee. If the directors select a substitute nominee, the proxy holder will vote the shares represented by all valid proxies for the substitute nominee (unless other instructions are given). +The biographies of the four nominees and the other continuing directors of the Company are below, along with a discussion of the experience and skills of each director. +2026 PROXY STATEMENT +17 +TABLE OF CONTENTS +Director Nominees with +Proposed Terms Expiring in 2029 +CHERYL ABEL-HODGES +Chief Executive Officer, Tommy John, Inc. +Career Highlights: +•  +Tommy John, Inc. a manufacturer and marketer of sleepwear/loungewear and underwear for men and women +°   +Chief Executive Officer (since 2023) +•  +PVH Corp., a global apparel company that designs, manufactures and markets apparel brands. +°   +Chief Executive Officer, Calvin Klein (2019-2021) +°   +Group President, Calvin Klein North America and The Underwear Group (2015-2019) +°   +President, Global Calvin Klein Underwear (2014-2015) +°   +President, Wholesale Sportswear, IZOD (2006-2014) +Experience and Skills: +•  +Brand Building: Strong track record of building global brands through over 30 years in senior leadership positions at category leading global companies, including as CEO of Calvin Klein where she built the creative brand leadership team and led accelerated digital growth. +•  +Footwear/Apparel: Extensive experience in the apparel industry resulting in deep expertise in strategy, product development, marketing and commercial operations. +•  +Retail: Comprehensive understanding of retail operations, including during her time leading Calvin Klein’s wholesale and retail business in North America, setting the brand’s strategic direction and driving a consumer centric approach. +•  +Ms. Abel-Hodges also brings CEO/executive leadership, e-commerce, global and marketing experience and expertise to the Board. +Education: +•  +BS, Political Science, State University of New York at Albany +Age: 62 +Director Since: 2025 +Board Committees: +Audit +Other Public Directorships: +None +2026 PROXY STATEMENT +18 +TABLE OF CONTENTS +WILLIAM K. GERBER +Managing Director, Cabrillo Point Capital LLC; +Retired EVP and Chief Financial Officer, Kelly Services, Inc. +Career Highlights: +•  +Cabrillo Point Capital LLC, a private investment fund +°   +Managing Director (since 2008) +•  +Kelly Services, Inc., a publicly traded global staffing solutions company +°  Executive Vice President and Chief Financial Officer (1998 – 2007) +•  +L Brands, Inc., a multinational apparel and retail company +°   +Served in various leadership positions (1983 – 1998), including Vice President, Finance and Vice President, Corporate Controller. +Experience and Skills: +•  +Audit Committee Leadership: Served as Audit Committee Chair for three public companies including AK Steel Holding, Kaydon, and Wolverine Worldwide. +•  +Finance: Deep expertise gained over 25 years in senior financial leadership positions that underpin his broad and keen understanding of complex financial and accounting matters and that he utilizes in his current position leading a private investment fund. +•  +International Business: Experience gained serving at L Brands, a multinational company, and Kelly Services, which has operation in more than 35 countries. +•  +Public Company Governance: Served as a director of Cleveland-Cliffs, Inc., the largest flat-rolled steel producer in North America from 2020 to 2024, and was on the board of AK Steel Holding Corporation from 2007 until it merged with Cleveland-Cliffs in 2020. +•  +Mr. Gerber also brings retail and footwear/apparel experience and expertise to the Board. +Education: +•  +BS, Economics and Finance, University of Pennsylvania’s Wharton School +•  +MBA, Finance, Harvard Business School +Age: 72 +Director Since: 2008 +Board Committees: +Audit (Chair) +Compensation and +Human Capital +Other Public Directorships: +Cleveland-Cliffs, Inc. (2020-2024) +2026 PROXY STATEMENT +19 +TABLE OF CONTENTS +TOM LONG +CHAIRMAN OF THE BOARD +Retired Chief Executive Officer, MillerCoors LLC +Career Highlights: +•  +Bridger Growth Partners, LLC, a private investment fund +°   +Managing Partner (since 2015) +•  +MillerCoors LLC , a joint venture between SABMiller and Molson Coors, two publicly traded beverage companies +°   +Chief Executive Officer (2011 – 2015) +°   +President and Chief Commercial Officer (2008 – 2011) +•  +Miller Brewing Company , a beverage company +°   +Chief Executive Officer (2007 – 2008) +°   +Chief Marketing Officer (2005 – 2007) +•  +The Coca-Cola Company, a beverage company (1988 – 2005) +°   +Various senior leadership positions including Vice President of Strategic Marketing, Global Brands; Vice President, Strategic Marketing Research and Trends; President of Coca Cola’s Great Britain and Ireland Division; and President of the Northwest Europe Division +Experience and Skills: +•  +Brand Building: Established an impressive reputation for building strong global brands over more than 20 years in senior positions at category leading companies and subsequently serving as MillerCoors’ President and Chief Commercial Officer, where he played an integral role in building the now recognized brand of what was then a newly formed company. +•  +International Business: Oversaw strategy and operations for multiple large, global companies including Coca-Cola, where he served as President of both the Great Britain and Ireland division and the Northwest Europe division. +•  +Marketing: Developed exceptional marketing acumen and strong and lasting customer relationships at multiple consumer-focused brands. +•  +Mr. Long also brings executive leadership, retail, and finance experience and expertise to the Board. +Education: +•  +BA, English, University of North Carolina +•  +MBA, Harvard Business School +Age: 67 +Director Since : 2011 +Board Committees: +None +Other Public Directorships: +Amcor PLC (since 2017) +2026 PROXY STATEMENT +20 +TABLE OF CONTENTS +KATHLEEN WILSON-THOMPSON +Retired Executive Vice President and Global Chief Human Resources Officer, +Walgreens Boots Alliance, Inc. +Career Highlights: +•  +Walgreens Boots Alliance, Inc., a global pharmacy and wellbeing company +°   +Executive Vice President and Global Chief Human Resources Officer (2014 – 2021) +°   +Senior Vice President and Chief Human Resources Officer (2010 – 2014) +•  +Kellogg Company , a food manufacturing company +°   +Held various legal and operational roles, including most recently as Senior Vice President, Global Human Resources (1992 – 2010) +Experience and Skills: +•  +Retail: Developed significant experience over her 25 years at two leading retailers. +•  +International Business: Experience cultivated through her management roles and responsibilities at two global companies, in particular her responsibilities for employees worldwide. +•  +Public Company Governance: Experience gained currently serving as a director of Tesla, an electric vehicle manufacturer, clean energy, energy generation and storage company, and McKesson Corporation, a publicly-traded pharmaceutical distribution and healthcare technology company. +•  +Ms. Wilson-Thompson also brings brand building, legal, human capital management and finance experience and expertise to the Board. +Education: +•  +BA, English Literature, University of Michigan +•  +JD and LLM, Corporate and Finance Law, Wayne State University +Age: 68 +Director Since: 2021 +Board Committees: +Compensation and Human Capital (Chair) +Governance +Other Public Directorships: +Tesla, Inc. (since 2018) +McKesson Corporation (since 2022) +BOARD RECOMMENDATION +The Board recommends that you vote “FOR” the election of the above nominees for proposed terms expiring in 2029. +2026 PROXY STATEMENT +21 +TABLE OF CONTENTS +Directors with Terms Expiring in 2027 +STACIA ANDERSEN +Former Executive Vice President and Chief Customer Officer, PetSmart LLC +Career Highlights: +•  +PetSmart LLC, a specialty retailer of products, services, and solutions for pets +°   +Executive Vice President and Chief Customer Officer (2022 – 2024) +°   +Executive Vice President, Merchandising and Customer Experience (2019 – 2021) +•  +Abercrombie & Fitch Co. , a specialty retailer of apparel and accessories for men, women and kids +°   +Brand President (2016 – 2018) +•  +Target Corporation, a general merchandise retailer (1994 – 2015) +°   +Held various leadership roles, including Senior Vice President of Merchandising for the Apparel, Accessories and Baby, and Home and Seasonal divisions +Experience and Skills: +•  +Brand Building: Impressive history overseeing brand development, including serving as Brand President of Abercrombie & Fitch, where she led the rebuilding and transformation of all aspects of the Abercrombie & Fitch and abercrombie kids brands. This builds on her experience at Target where she created strong brand strategies for multiple divisions. +•  +Digital/e-commerce: Played an instrumental role in overhauling the Abercrombie & Fitch store into a complete omnichannel experience and oversaw the digital and omnichannel transformation at PetSmart. +•  +Global Supply Chain: Extensive experience gained over her 20 years at Target where she served as a buyer, a divisional sourcing manager, Vice President of Global Sourcing, and President of Target Sourcing Services/Associated Merchandising Corporation, which included responsibility for $30B in annual imports from 40 countries. +•  +Ms. Andersen also brings footwear/apparel, international business, retail, and marketing experience and expertise to the Board. +Education: +•  +BA, Marketing and Communications, Buena Vista University +Age: 55 +Director Since: 2023 +Board Committees: +Audit +Governance +Other Public Directorships: +None +2026 PROXY STATEMENT +22 +TABLE OF CONTENTS +BRENDA J. LAUDERBACK +Retired President, Wholesale and Retail Group, Nine West Group, Inc. +Career Highlights: +•  +Nine West Group, Inc., a footwear wholesale retailer and distributor +°  President, Wholesale and Retail Group (1995 – 1998) +•  +US Shoe Corporation, a footwear manufacturer, retailer and distributor +°   +President, Wholesale and Manufacturing Division, a position that included responsibility for offices in China, Italy and Spain (1993 – 1995) +•  +Dayton Hudson Corporation (now Target Corporation) a retail company +°   +Held various positions including Vice President, General Manager of shoes, accessories and children’s (1975 – 1993) +Experience and Skills: +•  +Footwear/Apparel: Spent more than 25 years in the industry in various positions of increasing responsibility resulting in deep expertise in all aspects of the industry, including merchandising, marketing, product development and design and manufacturing. +•  +Retail: Comprehensive understanding of what is integral to being a successful retail company gained over her career and further developed through her board experience, where she has been intimately involved in the transformation of retail and consumer preferences to a more digital and technology focus. +•  +Public Company Governance: Extensive experience gained previously serving as the Chair of Denny’s, a restaurant company, and a Director of Sleep Number Corporation, a bed manufacturer and retailer, and formerly serving on the board of Big Lots, Inc., a retail company, from 1998 to 2015. +•  +Ms. Lauderback also brings marketing, brand building, global supply chain , and international business experience and expertise to the Board. +Education: +•  +BS, Marketing, Robert Morris University +Other Affiliations and Acknowledgements: +•  +Named to the National Association of Corporate Directors (NACD) 2017 Directorship 100 list +Age: 75 +Director Since: 2003 +Board Committees: +Audit +Governance (Chair) +Other Public Directorships: +Denny’s Corporation (2005-2025) +Former Board Chair +Sleep Number Corporation (2004-2025) +2026 PROXY STATEMENT +23 +TABLE OF CONTENTS +DEMONTY PRICE +Former President, Chief Operating, Service and Values Officer, RH, +formerly known as Restoration Hardware +Career Highlights: +•  +RH, a curator of design, taste and style in the luxury lifestyle market +°   +President and Chief Operating, Service and Values Officer (2017 – 2022) +°   +Co-President, Chief Operating Services and Values Officer (2016 – 2017) +°   +Chief Service and Values Officer (2015 – 2016) +°   +Senior Vice President of Retail Galleries and Operations, and Chief Values Officer (2006 – 2015) +°   +Vice President of Stores (2003 – 2006) +°   +West Regional (2002 – 2003) +•  +Williams-Sonoma, Inc. +°   +Held various field leadership roles including Northwest District Manager (1999 – 2002) +•  +NIKE, Inc. +°   +Director of P.L.A.Y. (1997 – 1999) +•  +The Gap, Inc. +°   +District Manager (1993 – 1997) +°   +Manager of Diversity (1993 – 1997) +Experience and Skills: +•  +Retail: Extensive experience gained over his more than 35 years in senior leadership positions at global leading retailers, where he oversaw all aspects of operations from human resources and store design to supply chain and distribution. +•  +Operations: Deep understanding of the complexities involved in maintaining a global supply chain gained as President and Chief Operating, Service and Values Officer with responsibilities for overseeing the supply chain function, main brand retail stores, outlets, hospitality, human resources, distribution centers, home delivery, customer service and facilities for RH. +•  +Brand Building: Strong track record of leading company transformations that drove increased company and shareholder profits, including at Williams-Sonoma, where he rebuilt an underperforming district to become the top-performing stores for the company in the US, and at RH, where he supported the company’s significant operational restructuring that included the implementation of a new workforce in the RH galleries companywide. +•  +Mr. Price also brings finance, human capital management and international business experience and expertise to the Board. +Education: +•  +BS, Fashion Merchandising, Oregon State University +Age: 64 +Director Since: 2023 +Board Committees: +Compensation and Human Capital +Governance +Other Public Directorships: +None +2026 PROXY STATEMENT +24 +TABLE OF CONTENTS +Directors with +Terms Expiring in 2028 +JEFFREY M. BOROMISA +Retired Executive Vice President, Kellogg International, +President, Latin America and Senior Vice President Kellogg Company +Career Highlights: +•  +Kellogg Company, a global food manufacturing company (1981 – 2009) +°   +Senior Vice President and member of the Global Leadership Team (2004 – 2009) +°   +Executive Vice President, Kellogg International (2007 – 2009) +°   +President, Latin America (2008 – 2009) +°   +President, Asia Pacific (2007 – 2008) +°   +Chief Financial Officer (2004 – 2006) +Experience and Skills: +•  +Finance: Deep expertise developed during his 25 years serving in financial roles at Kellogg, where he was hired as a senior auditor and promoted to positions with increasing responsibility until being named Chief Financial Officer. In that role, he had responsibility for the strategic planning, implementation, and management of all finance activities, including business planning, budgeting, forecasting, risk and governance. +•  +International Business: Substantial experience gained through his tenure at Kellogg, a large global company, where early in his career he was Controller for Kellogg de Mexico based in Queretaro, Mexico and later led operations for the company’s Asia Pacific and Latin America divisions. +•  +Audit Committee Leadership and Governance: Mr. Boromisa is a member of the Board of Haworth International, Inc. and serves as the Chair of Haworth’s Audit Committee. Mr. Boromisa is also a Trustee of Hawaii Pacific University and serves at the Vice-Chair of Hawaii Pacific’s Finance and Investment Committee. +•  +Mr. Boromisa also brings global supply chain, brand building, marketing, and public company governance experience and expertise to the Board. +Education: +•  +BA, Accounting, Michigan State University +•  +Completed graduate courses, Thunderbird, the American Graduate School of International Management +•  +CPA and a member of the American Institute of Certified Public Accountants +Age: 71 +Director Since: 2006 +Board Committees: +Audit +Governance +Other Public Directorships: +None +2026 PROXY STATEMENT +25 +TABLE OF CONTENTS +JACK BOYLE +Managing Partner, FamBam Sports Group; +Former President, Buying and North America, Fanatics Commerce +Career Highlights: +•  +FamBam Sports Group, a diversified holding company that invests in professional sports, lifestyle, and consumer business +°   +Managing Partner (since 2017) +•  +Fanatics Holdings, Inc. , a retail and sports merchandise and e-commerce Store +°   +President, Buying and North America, Fanatics Commerce (2024-2025) +°   +Co-President, Global Direct-to-consumer (2019-2024) +°   +Co-President, North America, Direct-to-Consumer (2017-2019) +°   +President, Merchandising (2012-2017) +•  +Kohl’s Corporation, a department store retail chain +°   +Executive Vice President, General Merchandise Manager, Women’s and Intimate Apparel (2005-2012) +°   +Senior Vice President, Divisional Merchandise Manager, Women’s Apparel (2003-2005) +Experience and Skills: +•  +Retail: Extensive expertise in merchandising and brand management, through over 20 years in senior leadership positions with a reputation for driving growth, scaling consumer business and creating value for shareholders. +•  +Footwear/Apparel: Deep omni-channel expertise through oversight in strategy, merchandising and global expansion in industry leading brands, including during his time at Fanatics Holdings, Inc., where he helped transform the company into the world’s leading digital sports platform. +•  +Public Company Governance: Serves as a director of Destination XL Group, Inc., the largest integrated-commerce specialty leader of big and tall men’s clothing and footwear, since 2017. +•  +Mr. Boyle also brings brand building, global supply-chain and digital transformation experience and expertise to the Board. +Education: +•  +BS, Finance and Banking, University of Missouri +Age: 58 +Director Since: 2025 +Board Committees: +Compensation and Human Capital +Other Public Directorships: +Destination XL Group, Inc. +(since 2017) +2026 PROXY STATEMENT +26 +TABLE OF CONTENTS +CHRISTOPHER E. HUFNAGEL +President and Chief Executive Officer, Wolverine Worldwide +Career Highlights: +•  +Wolverine World Wide, Inc. (since 2008) +°   +President and Chief Executive Officer (since 2023) +°   +President (2023) +°   +President, Active Group (2022 – 2023) +°   +Global Brand President, Merrell (2019 – 2022) +°   +Global Brand President, CAT Footwear (2018 – 2019) +°   +Senior Vice President & Head of Corporate Strategy (2013 – 2018) +°   +President of Direct-to-Consumer (2008 – 2013) +•  +Under Armour, Inc., an activewear clothing and accessories retailer +°  Vice President of Retail (2007 – 2008) +•  +The Gap, Inc., a clothing and accessories retailer +°  Vice President of Brand Store Experience (2003 – 2007) +•  +Abercrombie & Fitch Co., a specialty retailer of apparel and accessories +°   +Director of Presentation (1998 – 2003) +Experience and Skills: +•  +Footwear/Apparel: Extensive experience in the sector having spent his career at leading global footwear and apparel companies in positions of leadership and increasing responsibility including business development, portfolio management, M&A, investor relations, and corporate communications. +•  +Brand Building: Demonstrated track record of successfully building global brands gained over decades of omnichannel brand-building experience that began at Abercrombie & Fitch, where he helped create the look of the Hollister brand. As Vice President of Brand Store Experience at Gap, a position the company created for him, he led the very successful redesign of Gap stores to be more friendly, approachable and personal, and to ensure that every aspect of Gap’s stores reinforced how the company wanted its customers to feel about the brand. He further developed this expertise over the past 15 years at Wolverine, where he started the Company’s consumer insights and market intelligence function to build stronger connections with consumers. He led the Company’s transformation initiative, WOLVERINE WAY FORWARD, to help the organization compete better in the fast-changing global marketplace, and he has led all of the Company’s footwear brands. +•  +Retail: Deep expertise in all aspects of successfully operating a retail company gained at Abercrombie & Fitch and Gap, where he was responsible for in-store presentation, visual merchandising, and marketing, at Under Armour, where he served as Vice President of Retail and was responsible for the development, execution, and roll-out of the company’s retail strategy, and at Wolverine, where he initially was responsible for all direct-to-consumer operations, including e-commerce. Due to his keen sense for global trends and consumer desires, and deep understanding of the importance of having good relationships with the Company’s customers, he was promoted to positions of increasing responsibility including Global Brand President of CAT Footwear, where he took aggressive actions to help the team rapidly evolve its growth and go-to-market strategies. He also served as Global Brand President of Merrell, where he oversaw the Wolverine Worldwide Kid’s Group, as well as Global Licensing for the Company, and as President of the Active Group, with responsibility for Merrell, Saucony, and Chaco. +•  +Mr. Hufnagel also brings executive leadership, international business, digital/e-commerce/IT, and global supply chain experience and expertise to the Board. +Education: +•  +BA, Political Science & History, Alma College +Age: 53 +Director Since: 2023 +Board Committees: +None +Other Public Directorships: +None +2026 PROXY STATEMENT +27 +TABLE OF CONTENTS +Board Leadership +The Company’s Corporate Governance Guidelines give the Board the flexibility to determine the best leadership structure for the Company based upon the Company’s evolving needs and opportunities. The Governance Committee periodically reviews the Board’s leadership structure and considers many factors, including the specific needs of the business and what is in the best interests of the Company’s shareholders. The Board believes its current leadership structure, in which the roles of Chairman and CEO are separated, best serves the Company at this time, as it allows the Company’s CEO to focus on executing the Company’s strategy and transformation, while leveraging our independent Chairman’s experience to drive accountability at the Board level. +Director Independence +The Board annually assesses the independence of all directors. To qualify as “independent,” the Board must affirmatively determine that the director is independent under the Company’s Director Independence Standards, which are modeled after the listing standards of the NYSE. Under NYSE listing standards and the Company’s Director Independence Standards, the Board has determined that except for Mr. Hufnagel, who is a Company employee, each of our non-management directors (Cheryl Abel-Hodges, Stacia Andersen, Jeffrey M. Boromisa, Jack Boyle, William K. Gerber, Brenda J. Lauderback, Tom Long, DeMonty Price, and Kathleen Wilson-Thompson) is independent. In addition, the Board determined that David Kollat and Jodi Bricker, each of whom served as director until May 1, 2025, were independent during the time they served as directors. All of the Board’s committees are comprised entirely of independent directors. The independent directors generally meet in executive session at each regularly-scheduled Board meeting. +The Company’s Director Independence Standards define an “Independent Director” as a director who the Board determines otherwise has no material relationship with the Company (either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company), and who: +• +Is not, and in the past three years has not been, an employee of the Company +• +Does not have, and has not had within the last three years, an immediate family member employed as an executive officer of the Company +• +Has not received, and does not have an immediate family member who received, during any 12-month period within the last three years, any direct compensation from the Company in excess of $120,000 (other than compensation for Board service; compensation received by the director for former service as an interim Chairman, CEO or other executive officer; compensation received by the director’s immediate family member for service as a non-executive employee; and pension and other forms of deferred compensation for prior service if such compensation is not contingent in any way on continued service) +• +Is not a current employee or partner of a firm that is the Company’s internal or external auditor +• +Has not been, and does not have an immediate family member who has been, within the last three years, a partner or employee of the Company’s internal or external auditor and personally worked on the Company’s audit within that time +• +Does not have an immediate family member who is (i) a current partner of the Company’s internal or external auditor, or (ii) a current employee of the Company’s internal or external auditor who personally works on the Company’s audit +• +Is not, and has not been within the last three years, part of an interlocking directorate in which a current executive officer of Wolverine Worldwide serves or served on the compensation committee of another company where the director or the director’s immediate family member concurrently serves or served as an executive officer +• +Is not an employee of, and does not have an immediate family member who is an executive officer of, another company that has made payments to, or received payments from, Wolverine Worldwide for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of $1,000,000 or 2% of the other company’s consolidated gross revenues +• +Has not had any other direct or indirect relationship with Wolverine Worldwide that the Board determines is material +2026 PROXY STATEMENT +28 +TABLE OF CONTENTS +Board Committees, Meetings and Meeting Attendance +The Board has three committees: Audit, Compensation and Human Capital, and Governance. Each committee meets periodically throughout the year and reports its recommendations to the Board. The Company expects directors to attend every meeting of the Board and the committees on which they serve and to attend the annual meeting of shareholders. In 2025, all directors then serving on the Board attended the 2025 Annual Meeting of Shareholders, and all directors attended at least 75% of the meetings of the Board (6 meetings in 2025) and the committees on which they served held during the period for which he or she served. +All directors are typically invited to attend all committee meetings, but only committee members are required to attend meetings of their respective committees. Our independent directors met regularly in separate executive sessions during fiscal year 2025, all of which were chaired and led by the Independent Chairman of the Board. +Each committee annually evaluates its performance to determine its effectiveness. The Board has determined that all committee members are “independent” as defined by NYSE listing standards. Furthermore, each Audit Committee member satisfies the NYSE “financial literacy” requirement. In addition, the Board has determined that Mr. Boromisa and Mr. Gerber are “audit committee financial experts” under Securities and Exchange Commission (“SEC”) rules. Each committee’s charter, with a complete list of the duties and responsibilities, is available on the Company’s website at www.wolverineworldwide.com/investor-relations/corporate-governance/. +Audit Committee +Number of Meetings in 2025: 6 +Committee Members +Gerber (Chair) +Abel-Hodges +Andersen +Boromisa +Lauderback +Highlighted Responsibilities +•  +Appoints, evaluates and oversees the work of the independent auditors and oversees the internal audit function +•  +Oversees the Company’s approach to enterprise risk management, including policies and processes with respect to enterprise risk management +•  +Oversees the Company’s cybersecurity, artificial intelligence and data privacy policies, risks and exposures +•  +Oversees the Company’s program for promoting and monitoring compliance with applicable legal and regulatory requirements +•  +Oversees the integrity of the Company’s financial statements, financial reporting process and internal controls +•  +Coordinates with the Governance Committee and the Compensation and Human Capital Committee on the Company’s required ESG disclosures +2026 PROXY STATEMENT +29 +TABLE OF CONTENTS +Compensation and Human Capital Committee +Number of Meetings in 2025: 6 +Committee Members +Wilson-Thompson (Chair) +Boyle +Gerber +Price +Highlighted Responsibilities +•  +Assists the Board in fulfilling its responsibilities relating to the compensation of the Company’s executives and the Company’s compensation and benefit programs and policies generally. +•  +Oversees the overall compensation structure, policies and programs, including whether the compensation structure establishes appropriate incentives for management and employees +•  +Oversees the Company’s management of risks relating to the Company’s compensation structure, policies and programs +•  +Oversees and reviews the Company’s programs, policies and practices related to human capital management and related disclosures, including with respect to matters such as talent recruiting, development, progression and retention, inclusion, human health and safety and total rewards and workplace environment and culture +•  +Coordinates with the Governance Committee and the Audit Committee on the Company’s required ESG disclosures +Governance Committee +Number of Meetings in 2025: 5 +Committee Members +Lauderback (Chair) +Andersen +Boromisa +Price +Wilson-Thompson +Highlighted Responsibilities +•  +Assists the Board in fulfilling its responsibilities on matters and issues related to the Company’s corporate governance practices +•  +Working with the Board, establishes qualification standards for membership on the Board and its committees and recommends nominees for election or re-election by the shareholders at the annual meeting +•  +Develops and recommends to the Board for its approval an annual self-evaluation process for the Board, its committees and individual directors, and oversees the evaluation process +•  +Oversees and reviews periodically the Company’s programs, policies, practices, relevant risks and opportunities, measures, objectives and performance relating to ESG matters and related disclosures, and makes recommendations to the Board regarding their integration into the Company’s business strategy and operations +•  +Coordinates with the Compensation and Human Capital Committee and the Audit Committee on the Company’s required ESG disclosures +2026 PROXY STATEMENT +30 +TABLE OF CONTENTS +Director Compensation in Fiscal Year 2025 +The Company’s non-employee director compensation philosophy is to pay compensation that is competitive with the compensation paid by companies of similar size, in similar industries and with whom Wolverine Worldwide competes for director candidates. The Governance Committee, with input from management and from the Compensation and Human Capital Committee’s independent compensation consultant, reviewed director compensation and compared it to market data, including a comparison to director compensation for the Company’s Peer Group, as defined on page 48 , and broader industry market surveys (FW Cook Director Compensation Report and NACD Director Compensation Report). +The following table provides information regarding the compensation of the Company’s non-employee directors for fiscal year 2025. In 2025, Mr. Hufnagel received compensation for his services as the Company’s President and CEO but did not receive any additional compensation for service as a director. His compensation is reflected in the Compensation Discussion and Analysis section, the Summary Compensation Table, and related tables and disclosures. +Fees Paid in +Cash +Cash Amounts +Voluntarily +Deferred +Fees Earned or +Paid in Cash 1 +Restricted +Stock Unit +Awards 2 +Totals +Abel-Hodges +$ 35,624 ++ +$ 11,876 += +$ 47,500 ++ +$145,003 += +$192,503 +Andersen +$100,000 ++ +— += +$100,000 ++ +$145,005 += +$245,005 +Boromisa +— ++ +$119,500 += +$ 119,500 ++ +$145,005 += +$264,505 +Boyle +$ 46,000 ++ +— += +$ 46,000 ++ +$145,003 += +$191,003 +Bricker +$ 30,922 ++ +— += +$ 30,922 ++ +— += +$ 30,922 +Gerber +$ 119,500 ++ +— += +$ 119,500 ++ +$145,005 += +$264,505 +Kollat +$ 35,964 ++ +— += +$ 35,964 ++ +— += +$ 35,964 +Lauderback +$127,000 ++ +— += +$127,000 ++ +$145,005 += +$272,005 +Long +$145,000 ++ +— += +$145,000 ++ +$255,005 += +$400,005 +Price +— ++ +$ 97,000 += +$ 97,000 ++ +$145,005 += +$242,005 +Wilson-Thompson +$124,000 ++ +— += +$124,000 ++ +$145,005 += +$269,005 +1. +Represents cash payments received or deferred by non-employee directors for fiscal year 2025. Non-employee directors may defer fees pursuant to the Director Deferred Compensation Plan or Deferred Compensation Plan (each as defined below). The table shows the Fees Earned or Paid in Cash separated into Fees Paid in Cash and Cash Amounts Voluntarily Deferred. +2. +Represents the aggregate grant date fair value of restricted stock units granted to non-employee directors in fiscal year 2025, calculated in accordance with Accounting Standard Codification (“ASC”) Topic 718, without regard to estimated forfeitures. The chart below lists the aggregate outstanding option awards (granted prior to 2018) and restricted stock units held by non-officer directors at the end of fiscal year 2025. For valuation assumptions, see the Stock-Based Compensation footnote to the Company’s Consolidated Financial Statements for fiscal year 2025 included in its Annual Report on Form 10-K for fiscal year 2025. +Name +Option Awards Outstanding at +January 3, 2026 +(#) +Restricted Stock Units held at +January 3, 2026 1 +(#) +Abel-Hodges +— +7,459 +Andersen +— +33,857 +Boromisa +21,945 +58,365 +Boyle +— +7,459 +Bricker +— +— +Gerber +9,091 +11,027 +Kollat +27,651 +— +Lauderback +9,091 +11,027 +Long +9,091 +30,200 +Price +— +33,857 +Wilson-Thompson +— +44,140 +1. +Includes 47,338, 22,830, 10,808, 22,830 and 33,113 fully vested restricted stock units held by each of Mr. Boromisa, Ms. Andersen, Mr. Long, Mr. Price and Ms. Wilson-Thompson respectively, that were deferred and will be settled on the date elected by the director. +2026 PROXY STATEMENT +31 +TABLE OF CONTENTS +The following table shows the non-employee director compensation program for fiscal year 2025, which remained unchanged from fiscal year 2024: +Compensation Plan for 2025 +Component +Cash +Restricted Stock Units 1 +Annual Director Fee +$80,000 +Number of restricted stock units “RSUs” with +a grant date value of $145,000. +Audit Committee Annual Fee +$15,000 +Audit Committee Chairperson Annual Fee +$25,000 +Compensation and Human Capital Committee Annual Fee +$12,000 +Compensation and Human Capital Committee Chairperson Annual Fee +$20,000 +Governance Committee Annual Fee +$12,000 +Governance Committee Chairperson Annual Fee +$20,000 +Chairman of the Board Annual Fee +In lieu of the standard Annual Director Fee, the Chairman of the Board was paid a +Cash Retainer of $145,000 +In lieu of the standard RSU grant, the Chairman of the Board received a number of +RSUs with a grant date value of $255,000 +1. +For fiscal year 2025, Messrs. Boromisa, Gerber and Price and Mses. Andersen, Wilson-Thompson and Lauderback each received 11,027 restricted stock units. Mr. Long received 19,392 restricted stock units. Mr. Boyle and Ms. Abel-Hodges each received 7,459 restricted stock units. The above restricted stock units were granted under the Stock Incentive Plan of 2024, and vest one year from the date of grant. Restricted stock units were granted in May 2025, except for grants to Mr. Boyle and Ms. Abel-Hodges, which were made in July 2025 after their appointment to the Board. Directors may defer settlement of these restricted stock unit awards upon vesting. +Director Deferred Compensation Plan . The Company’s Amended and Restated Outside Directors’ Deferred Compensation Plan (the “Director Deferred Compensation Plan”) is a supplemental nonqualified deferred compensation plan for non-employee directors. A separate non-employee director deferred compensation plan applies to benefits accrued under that plan before January 1, 2005. The Director Deferred Compensation Plan permits all non-employee directors to voluntarily defer, at their option, 25%, 50%, 75% or 100% of their director cash fees. The Company establishes a book account for each non-employee director and credits the director’s account with a number of stock units equal to the amounts voluntarily deferred, divided by the closing market price of common stock on the payment/deferral date. The Company also credits director accounts with dividend equivalents on amounts previously deferred in the form of additional stock units. The amounts credited to director accounts are treated as if invested in Wolverine Worldwide common stock. The number of stock units held in director accounts is set forth under the “Stock Ownership by Management and Others” table below. +Upon a director’s termination of service, or such later date as a director selects, the Company will distribute the stock units in the director’s book account in shares of Wolverine Worldwide common stock in either a single, lump sum distribution or annual installment distributions over a period of up to 20 years (10 years under the plan for benefits accrued before January 1, 2005) based on the director’s election. The Company converts each stock unit to one share of Wolverine Worldwide common stock. +Upon a “change in control,” the Company will distribute to the director, in a single, lump sum distribution, Wolverine Worldwide common stock in a number of shares equal to the stock units credited to a director’s book account. The Deferred Compensation Plan defines “change in control” as any of the following: +• +The acquisition by any person, or by more than one person acting as a group, of more than 50% of either (i) the then outstanding shares of common stock of Wolverine Worldwide or (ii) the total fair market value of Wolverine Worldwide +• +The acquisition by any person, or more than one person acting as a group, during the 12-month period from and including the date of the most recent acquisition, of ownership of 30% or more of the outstanding common stock of Wolverine Worldwide +• +The replacement of a majority of the individuals who constitute the Board during any 12-month period by directors whose appointment or election is not endorsed by a majority of the directors prior to the date of the appointment or election +• +The acquisition, during any 12-month period ending on the date of the most recent acquisition, by any person of assets from Wolverine Worldwide having a gross fair market value of at least 40% of the gross fair market value of all the assets of Wolverine Worldwide immediately before the acquisition +2026 PROXY STATEMENT +32 +TABLE OF CONTENTS +Deferred Compensation Plan . For a description of the non-qualified Deferred Compensation Plan under which directors may also defer cash fees, please see the “ Non-Qualified Deferred Compensation ” section on page 61 . +Non-Employee Director Stock Ownership Guidelines +By the first December 31st following the fifth anniversary of becoming a non-employee director of the Company, a non-employee director must attain (and maintain) a minimum stock ownership level equal to six times the non-employee director annual cash retainer prior to being able to gift or sell any Company stock, other than a limited exception for gifts or sales of up to fifty percent of the net, after-tax number of shares obtained through any Company equity plans or other equity awards. The equity that qualifies for determining the non-employee directors’ minimum stock ownership level includes owned shares and unvested restricted stock units that vest based on time (up to a maximum value of 50% of the applicable ownership requirement), but excludes unearned performance shares and units and unexercised options (or any portion thereof, such as the current “in the money” value). During 2025, all non-employee directors were in compliance with these guidelines. +2026 PROXY STATEMENT +33 +TABLE OF CONTENTS +Securities Ownership of Officers and Directors +and Certain Beneficial Owners +Five Percent Shareholders +The following table sets forth information about those holders known by Wolverine Worldwide to be the beneficial owners of more than five percent of Wolverine Worldwide’s outstanding shares of common stock as of March 9, 2026: +Amount and Nature of Beneficial Ownership of Common Stock +Name and Address +of Beneficial Owner +Sole Voting +Power +Sole +Investment +Power +Shared Voting +Power +Shared +Investment +Power +Total +Beneficial +Ownership +Percent of +Class 4 +BlackRock, Inc. 1 +50 Hudson Yards +New York, NY 10001 +11,778,482 +11,873,760 +— +— +11,873,760 +14.48% +FMR, LLC 2 +245 Summer Street +Boston, MA 02210 +12,099,122 +12,110,159 +— +— +12,110,159 +14.77 % +The Vanguard Group 3 +100 Vanguard Boulevard +Malvern, PA 19355 +— +8,547,794 +118,406 +198,028 +8,745,822 +10.67 % +1. +Based solely on information set forth in a Schedule 13G/A filed on April 30, 2025. +2. +Based solely on information set forth in a Schedule 13G/A filed on February 5, 2026. +3. +Based solely on information set forth in a Schedule 13G/A filed on July 29, 2025. +4. +Based on 81,980,999 shares outstanding as of March 9, 2026. +2026 PROXY STATEMENT +34 +TABLE OF CONTENTS +Stock Ownership by Management and Others +The following table sets forth the number of shares of common stock beneficially owned as of March 9, 2026, by each of the Company’s directors and named executive officers and all of the Company’s directors and executive officers as a group: +Amount and Nature of Beneficial Ownership of Common Stock 1 +Deferred +Stock Units, +Sole Voting +and/or +Investment +Power 2 +Shared Voting or +Investment +Power 3 +Stock +Options +and RSUs +Vesting +within +60 Days 4 +Total +Beneficial +Ownership +Percent +of Class 5 +Cheryl Abel-Hodges +— +— +— +— +* +Stacia Andersen +— +— +11,027 +11,027 +* +Jeffrey M. Boromisa +72,924 +162,181 +32,972 +268,077 +* +Jack Boyle +6,250 +— +— +6,250 +* +William K. Gerber +81,283 +— +20,118 +101,401 +* +Christopher Hufnagel +328,715 +— +— +328,715 +* +Amy Klimek +23,188 +35,989 +— +59,177 +* +Susie Kuhn +16,484 +— +— +16,484 +* +David A. Latchana +28,071 +— +2,609 +30,680 +* +Brenda J. Lauderback +111,382 +— +20,118 +131,500 +* +Tom Long +100,313 +— +28,483 +128,796 +* +Taryn Miller +39,840 +— +— +39,840 +* +DeMonty Price +75,000 +— +11,027 +86,027 +* +Isabel Soriano +49,070 +— +— +49,070 +* +Kathleen Wilson-Thompson +— +— +11,027 +11,027 +* +All directors and executive officers as a group +(16 people) +932,520 +198,170 +137,381 +1,268,071 +1.50% +* +Represents beneficial ownership of less than 1%. +1. +The numbers of shares stated are based on information provided by each person listed and include shares personally owned of record and shares that, under applicable regulations, are considered to be otherwise beneficially owned. +2026 PROXY STATEMENT +35 +TABLE OF CONTENTS +2. +The “Deferred Stock Units, Sole Voting and/or Investment Power” column of the table above does not include the following time-vested restricted stock units and performance units owned by directors and NEOs, as defined on page 37 , as of March 9, 2026: +Restricted +Units +Performance +Units +Abel-Hodges +7,459 +— +Andersen +33,857* +— +Boromisa +58,365* +— +Boyle +7,459 +— +Gerber +11,027 +— +Hufnagel +270,847 +1,007,038 +Klimek +44,550 +64,067 +Kuhn +31,019 +78,744 +Latchana +25,089 +57,881 +Lauderback +11,027 +— +Long +30,200* +— +Miller +53,738 +96,293 +Price +33,857* +— +Soriano +20,964 +— +Wilson-Thompson +44,140* +— +* +Includes 47,338, 10,808, 22,830, 22,830 and 33,113 fully vested restricted stock units held by each of Mr. Boromisa, Mr. Long, Ms. Andersen, Mr. Price, and Ms. Wilson-Thompson respectively, that were deferred and will be settled on the date elected by the director. +3. +These numbers include shares over which the listed person is legally entitled to share voting or investment power by reason of joint ownership, trust or other contract or property right and shares held by spouses, children or other relatives over whom the listed person may have influence by reason of such relationship. +4. +The numbers represent shares that may be acquired within 60 days after March 9, 2026, by the exercise of stock options granted under Wolverine’s various stock option plans, or upon the vesting of restricted stock units. These numbers are also included in the Total Beneficial Ownership column. +5. +As of March 9, 2026, based on 81,980,999 shares outstanding on that date plus the number of stock options exercisable and restricted stock units vesting that are held by the specified person(s) within 60 days of March 9, 2026, as indicated in the “Stock Options and RSUs Vesting Within 60 Days” column. +2026 PROXY STATEMENT +36 +TABLE OF CONTENTS +Compensation Discussion and Analysis +Summary +The Company’s Compensation Discussion and Analysis (“CD&A”) provides an overview and analysis of the executive compensation program for the Company’s named executive officers (“NEOs”). For fiscal year 2025, the Company’s NEOs were: +Christopher Hufnagel +President and Chief Executive Officer +Amy Klimek +Chief Human Resources Officer +Susie Kuhn +President, Active Group +David Latchana +Chief Legal Officer and Corporate Secretary +Taryn Miller +Chief Financial Officer +Isabel Soriano +President, International Group* +* +Ms. Soriano ceased serving as an executive officer as of July 30, 2025, but continued performing her duties as President, International Group through September 1, 2025, and terminated employment on March 3, 2026. +Compensation Philosophy and Objectives +The Company’s compensation philosophy is to provide executives with a competitive compensation package that is heavily weighted towards performance-based (performance units and annual bonus opportunity) and variable (restricted stock units) compensation in order to encourage superior business and financial performance over the short and longer term and, by linking compensation with stock price performance, to closely align the interests of the Company’s NEOs with those of its shareholders without encouraging excessive risk-taking. The Compensation and Human Capital Committee (the “Committee”) oversees the Company’s executive compensation program. +The executive compensation program has four primary objectives: +• +Attract and retain talented NEOs who will lead Wolverine Worldwide and drive superior business and financial performance +• +Provide incentives for achieving specific pre-established near-term strategic, business unit and corporate goals and reward the attainment of those goals +• +Provide incentives for achieving specific pre-established longer-term corporate financial goals and reward the attainment of those goals +• +Align the interests of NEOs with those of the shareholders through incentives based on achieving performance objectives that enable increased shareholder value +Compensation Decisions in Context: Key 2025 Accomplishments +In 2025, we focused on continuing our work to transform the Company and build our brands, while accelerating revenue growth. Some key highlights include: +• +We drove high-single-digit revenue growth as a company, in line with our value creation model aspiration. +• +We achieved record gross margin behind the power of our brands and delivered an earnings per share and adjusted earnings per share increase of 107% and 53% compared to 2024, respectively. +• +We invested in building our brands through product innovation and enhanced marketing, strengthening brand health and taking share in key categories. +2026 PROXY STATEMENT +37 +TABLE OF CONTENTS +2025 Compensation Program Overview +The Company’s executive compensation program consists of base salary, annual bonus opportunity, long-term incentive compensation and benefits. A breakdown of base salary, annual performance bonus, and long-term incentive compensation is illustrated below: +ELEMENT +COMPONENT +METRICS +WHAT THE PAY ELEMENT REWARDS +Base +Salary +•  +Cash +•  +Fixed amount based on responsibilities, experience and market data +•  +Scope of core responsibilities, years of experience, and potential to affect the Company’s overall performance +Annual +Performance +Bonus +•  +Company/Business Unit Cash Bonus +•  +75% revenue and adjusted pretax earnings +•  +25% business priorities +•  +Achieving specific corporate business and/or divisional financial objectives over which the NEO has reasonable control +•  +Achieving specific business priorities +Long-Term +Incentive +Compensation +•  +Performance-based restricted stock units +•  +Time-vested restricted stock units +•  +60% operating profit +•  +40% relative total shareholder return +•  +Three-year vesting for time-vested restricted stock units +•  +Achieving both absolute profitability and relative shareholder value creation over a longer-term period +•  +Driving stock price growth +•  +Continued, long-term employment at Wolverine Worldwide +Pay at Risk +Under the Company’s compensation program, a significant portion of the compensation awarded to the NEOs generally, and to the CEO in particular, is at risk (contingent upon the attainment of various pre-established short and long-term goals) and variable (contingent on the performance of the Company’s stock price). NEO compensation that is significantly at risk and variable incentivizes superior business and financial performance and, by linking compensation with stock price performance, aligns the interests of executives with those of shareholders. For more information on the relation between Company performance and the impact on CEO and other NEO pay, please see the tables and related information under the heading “ Pay vs. Performance ” on page 68 . +2026 PROXY STATEMENT +38 +TABLE OF CONTENTS +The following graphic illustrates the percentage of 2025 NEO target compensation that is at risk, reflecting the regular annual compensation packages for Mr. Hufnagel as President and CEO and the other NEOs as approved at the February 2025 Board of Directors and Compensation and Human Capital Committee meetings. +Long-Term Incentive Program Mix +The long-term incentive program is heavily weighted to at-risk compensation, with a mix for February 2025 grants of 70% performance stock units and 30% time vested restricted stock units for Mr. Hufnagel and 60% performance stock units and 40% time vested restricted stock units for the other NEOs. +Compensation Best Practices +What we do +What we do not do +✔ +Vast majority of pay is at risk or variable, i.e., performance-based or equity-based or both +✔ +Stringent share ownership requirements (6x base salary for CEO) +✔ +Broad-based clawback policy covering both cash and equity +✔ +Significant vesting horizon for equity grants +✔ +Double trigger equity acceleration +✔ +Independent Compensation Committee Consultant +✔ +Review executive compensation program to ensure it doesn't promote excessive risk taking +✔ +Proactively engage with top shareholders on compensation and governance issues +✔ +Conduct annual say-on-pay votes +✔ +Balance short-term and long-term incentives +✘ +No dividends or dividend equivalents on unearned performance shares/units +✘ +No repricing or replacing of underwater stock options +✘ +No excessive or unnecessary perquisites +✘ +No hedging, pledging or short sales of Company stock +✘ +No excise tax gross-ups in change-in-control agreements +2026 PROXY STATEMENT +39 +TABLE OF CONTENTS +Compensation Discussion and Analysis +2025 Compensation Program Overview +Setting Targets +Each February, the Committee recommends (and the independent directors approve) target compensation for the CEO for the upcoming year after considering the latest available information, including the Company’s total shareholder return (“TSR”) and other business and financial performance, information provided by the Committee’s compensation consultant regarding executive compensation trends and compensation paid to other chief executive officers of companies in the compensation peer group (described below), and information provided by management on recent Company performance and the Company’s future business and financial outlook. The Committee’s goal is to set the CEO’s compensation in line with experience and the anticipated market median compensation for that year. +Given the significant weight the Company’s executive compensation program places on at-risk and variable compensation, the compensation realized by the CEO and other NEOs can be significantly affected, both positively and negatively, by performance against the various operational and financial performance metrics pre-established by the Committee and by the performance of the Company’s stock. The Board and Committee believe such a compensation program aligns the interests of the CEO and other NEOs with the interests of the shareholders. +The Company’s executive compensation program consists of four primary elements: base salary, annual bonus opportunity, long-term incentive compensation and benefits. These elements are described in greater detail below. +Base Salary +As part of approving an NEO’s base salary, the Committee considers a variety of factors including individual responsibilities, experience, skills, and potential to affect Wolverine Worldwide’s overall performance, as well as market surveys and peer group information. The Committee considers these compensation factors subjectively, and no single factor or combination of factors was determinative in setting base salaries for any NEO for fiscal year 2025. +Based on the above factors, the Committee approved base salary increases in 2025 for the NEOs, as noted in the following table. The cash compensation for Ms. Soriano is paid in Pounds Sterling and was converted into U.S. dollars using the fiscal year-end rate (1.35 for fiscal year 2025 and 1.26 for fiscal year 2024 here and throughout the CD&A and related disclosures). +Name +2024 Base Salary +2025 Base Salary +Hufnagel 1 +$1,000,000 +$1,200,000 +Klimek +$ 471,240 +$ 486,000 +Kuhn +$ 575,000 +$ 593,000 +Latchana +$ 490,000 +$ 505,000 +Miller +$ 650,000 +$ 676,000 +Soriano 2 +$ 570,489 +$ 629,575 +1. +In approving Mr. Hufnagel’s increase for 2025, the Committee and Independent Directors considered, among other factors, his success in driving the Company’s turnaround plan, the median salary of CEOs in our Peer Group, and the fact that he did not receive a salary increase for 2024. +2. +Ms. Soriano’s 2024 base salary was GBP 452,769, and her 2025 base salary was GBP 466,352. +2026 PROXY STATEMENT +40 +TABLE OF CONTENTS +Annual Bonus +In 2025, each NEO had the opportunity to earn annual cash incentive compensation (“annual bonus”), consisting of a performance bonus and business priorities bonus: +Key Factors +2025 Company Metrics +Performance Bonus +(75% weighting) +• +Based on performance measured against Company and/or business unit performance criteria established at the beginning of 2025 +• +• +Revenue (50%) +Pretax earnings (50%) +• +Payout determined by comparing performance against three performance levels: threshold, target, and stretch +Business Priorities (BP) +(25% weighting) +• +Measured against company/function BP +• +Vary for each NEO +• +Each NEO’s payout was determined by comparing performance on BPs against specific criteria set at the beginning of 2025 +• +Payouts can range from 0% to 200% depending on the NEO’s performance against BPs +A percentage of each NEO’s 2025 base salary, as determined in February 2025, was set as the annual bonus target percentage (the “Target Bonus Percentage”), or adjusted thereafter. The Target Bonus Percentage represents the percentage of each NEO’s base salary that could be earned as annual incentive compensation at a “target” performance level (100% payout) for each of the performance bonus and business priorities. Generally, the Committee sets higher Target Bonus Percentages for individuals with greater influence on business strategy, profit or sales. This puts a larger percentage of an NEO’s total potential cash compensation at risk, in line with the NEO’s ability to influence these factors. For 2025, the NEOs had the following Target Bonus Percentages: Mr. Hufnagel 150%, Ms. Klimek 55%, Mr. Latchana 55%, Ms. Miller 60%, Ms. Soriano 55% and Ms. Kuhn 55%. +The Committee selected fiscal year 2025 revenue and adjusted pretax earnings as metrics for the performance bonus because it believes a strong correlation exists between performance on these financial measures and increases in shareholder value. +Performance Bonus +Messrs. Hufnagel and Latchana, and Mses. Miller and Klimek, had significant influence on the Company’s overall business performance and, accordingly, their respective performance bonus opportunity (75% of their total annual bonus opportunity) is based on the Company performance criteria only. Ms. Soriano was directly responsible for the International Group while Ms. Kuhn was responsible for the Active Group and both exerted a significant influence on their business unit in particular, in addition to influencing Company performance. Accordingly, 45% of Mses. Soriano and Kuhn’s annual bonus opportunity was their business unit performance, and 30% was based on Company performance. +The Committee set the revenue and adjusted pretax earnings goals following a review of the Company’s operating plan, historical performance, and industry and macroeconomic conditions. The performance targets required for 100% payout for the Company performance bonus metrics were set using aggressive year-over-year growth of $74 million in revenue and $36 million in pretax earnings. +Company +Performance Level +(% of Target Payout) 1 +Revenue (in millions) +Adjusted Pretax Earnings +(in millions) +Threshold (50%) +$1,750 +$ 113 +Target (100%) +$1,825 +$129 +Stretch (200%) +$1,900 +$144 +1. +The maximum payout an NEO can receive is 200% of his or her Target Bonus Percentage, even if performance is above stretch. An NEO would receive 0% of his or her Target Bonus Percentage if performance is below threshold. +2026 PROXY STATEMENT +41 +TABLE OF CONTENTS +Company revenue performance for 2025 was $1,874 million for a 165.7% payout. Adjusted pre-tax earnings performance was $141 million for a 179.1% payout, with a total, weighted Company performance bonus payout of 172.4%. The International Group and Active Group performed at stretch level. +2025 Performance +Overall Weighted Payout by Group +Wolverine Worldwide +Between target and stretch +172.4% +International Group +At stretch +200% +Active Group +At stretch +200% +The Committee sets the revenue and adjusted pretax earnings for the International Group and Active Group at substantially similar levels of difficulty as the goals for the Company and with a similar degree of difficulty as in prior years. The below table shows historical weighted performance levels achieved by the International Group and Active Group. +Historical Group Performance +2025 +2024 +2023 +2022 +2021 +International Group +At stretch +Between target +and stretch +Below threshold +Between target +and stretch +Between target +and stretch +Active Group +At stretch +Between target +and stretch +Below threshold +Below threshold +Between target +and stretch +Based on the factors described above, the performance bonus earned and paid for each NEO is set forth below. +Name +Performance Bonus +Percentage +Earned +Performance +Bonus Paid +Hufnagel +172.4 % +$2,155,048 +Klimek +172.4 % +$ 336,499 +Kuhn +189.0% +$ 459,091 +Latchana +172.4 % +$ 349,703 +Miller +172.4 % +$ 519,919 +Soriano +189.0% +$ 487,189 +Business Priorities +At the same time Target Bonus Percentages are set, the CEO approves measurable business priorities for each NEO’s individual bonus, other than for himself. The CEO submits, and the Committee reviews and approves, with such changes as it considers appropriate, the CEO’s business priorities. Such measurable priorities may include goals such as executing strategies supporting the Company’s vision, developing employees, and driving operational excellence. Performance is evaluated by the CEO (or, in the case of the CEO, by the Committee and the other independent directors) based on qualitative and quantitative factors. +Each business priority is given an achievement rating with weighted performance ratings and payouts at threshold (50%), target (100%), and stretch (200%). No payout is made for performance below threshold. +The CEO recommended, and the Committee approved, the 2025 cumulative weighted business priority scores and payout levels for each of the NEOs other than himself. The Committee and the other independent directors of the Board met with the CEO at the end of the year to evaluate his performance against his business priorities, considering various factors. The Committee determined the cumulative weighted business priorities score for the CEO and recommended to the independent directors of the Board the CEO’s payout level. +2026 PROXY STATEMENT +42 +TABLE OF CONTENTS +Summaries of the business priorities, achievement, and payout for each NEO are outlined in the table below. This year’s business priorities related to key initiatives intended to drive strategic transformation and shareholder value. +NEO +2025 Business Priorities +2025 +Individual Bonus +Percentage +Achieved +2025 +Business Priority +Bonus Paid +Hufnagel +Optimize cash flow management, Successfully complete debt financing, Continue to adopt global supply chain footprint, Accelerate DTC, Build strong order book, Implementation of first phase of eCommerce Platform modernization, Continue to drive profit improvement through further optimization of operating expense structure and gross margin expansion, Generate cash through disciplined management of the P&L and balance sheet, Optimize efficiency of the organization in providing a stronger return for shareholders, Establish and institutionalize the Acceleration Office, Alignment with Board on WWWx2030, Mitigate the impact of tariffs, Successful launch and activation of Enterprise Strategy and Vision and Values, Successfully recruit and onboard key leaders, Advance UN1TED initiatives +122% +$508,806 +Klimek +Advance People Leadership development programs and continue to develop and acquire key capabilities, Drive eCommerce growth, Optimize Organizational Design and continue to create efficiencies, including 2025 SG&A levers, Complete global benchmarking studies in Benefits, Development and Career Ladders project, Continue to modernize HR systems, Support AO set up and tariff mitigation workstreams and initiatives, Successful launch and activation of Enterprise Strategy and Vision and Values, Successfully recruit and onboard key leaders, Create an Amazing Place to work with an inclusive and engaging employee experience +111% +$72,225 +Kuhn +Accelerate DTC, Build strong order book, Partner with Acceleration Office on gross margin enhancements, Deepen consumer and market connectivity, Improve brand profitability, Optimize GTM process, Mitigate the impact of tariffs, Successful launch and activation of Enterprise Strategy and Vision and Values, Successfully recruit and onboard key leaders +121% +$98,247 +Latchana +Activate ESG - build cross-functional teams and strategy, update RSL, and advance regulatory disclosures, Accelerate Brand Protection, Support Key City initiatives, platinum partner development, APM, and business evolution model, Expand MAP program, Grow IP infringement program, Accelerate fraud investigations to protect margins, Improve business processes for SB agreements, UK records retention, and intragroup agreements, With GSC improve supply chain transparency and reporting through traceability, HIGG, and audits, Mitigate the impact of tariffs, Pulse engagement scores, Recruiting and onboarding key talent, Stay curious through growth and development of all team members +120% +$81,145 +Miller +Ensure sufficient liquidity in uncertain environment, Establish an investment approval and review process, Alignment with Board on WWWx2030, Drive profit improvement through optimization of gross margin and expense structure, Generate cash through disciplined management of the P&L and balance sheet, Mitigate risks with proactive corporate finance planning-Refinance/Capital, Establish and institutionalize the Acceleration Office, Support successful integration of Sweaty Betty systems to Wolverine platform, Mitigate the impact of tariffs, Successful launch and activation of new Enterprise Strategy and Vision & Values, Successfully complete Pulse action plans including the recruitment of key leaders +135% +$135,722 +Soriano +Accelerate DTC, Build strong order book, Generate cash through disciplined management of the P&L and balance sheet, Successful implementation of Key City Strategy, Mitigate the impact of tariffs, Successful launch and activation of Enterprise Strategy and Vision and Values, Successfully recruit and onboard key leaders +160% +$137,082 +2026 PROXY STATEMENT +43 +TABLE OF CONTENTS +Below is a summary of total annual bonus payouts to each NEO. +Name +2025 Target +Percentage +2025 Performance +Bonus +2025 Business +Priorities Bonus +Total 2025 Annual +Bonus Compensation +% of 2025 Actual +Incentive Target +Hufnagel +150% +$2,155,048 +$508,806 +$2,663,854 +159.8% +Klimek +55% +$336,499 +$72,225 +$408,724 +157.0% +Kuhn +55% +$459,091 +$98,247 +$557,338 +172.0% +Latchana +55% +$349,703 +$81,145 +$430,848 +159.3% +Miller +60% +$519,919 +$135,722 +$655,641 +163.0% +Soriano +55% +$487,189 +$137,082 +$624,271 +181.6% +Long-Term Incentive Compensation +In 2025, each NEO had the opportunity to earn long-term incentive compensation comprised of a mix of performance stock units and time-based restricted stock unit awards. The 2025 grants were based on the following: +Key Factors +Performance Share Metrics +Performance Stock Units +• +Performance stock units are based on performance criteria covering three-year periods +• +Operating Profit (60%) 1 +• +Awards balance focus on absolute profitability with relative shareholder value creation +• +Relative Total Shareholder Return (“TSR”) (40%) 2 +Time-Based Restricted +Stock Unit Awards +• +Encourages employee retention and rewards increases in stock price +1. +Operating Profit is the total earnings from the Company’s core business function for a fiscal year after deducting selling, general and administrative costs. +2. +Relative TSR as compared to TSR for the S&P Composite 1500 Consumer Durables & Apparel Index. +Performance Awards for the 2025-2027 Performance Period +The Committee evaluated each NEO’s long-term incentive target payout opportunity expressed as a dollar amount at target grant value for the grant of performance units for the 2025-2027 period. Performance units are eligible to vest based on achievement of adjusted constant-currency Operating Profit goals (weighted 60%) and relative total shareholder return goals (weighed 40%). +Name +2025-2027 +Target +Hufnagel +$4,060,000 +Klimek +$ 285,000 +Kuhn +$ 540,000 +Latchana +$ 300,000 +Miller +$ 600,000 +Soriano +$ 330,000 +The Company accrues, but does not pay, dividends on performance units during the performance period. Once the Committee certifies the Company’s performance compared to the pre-determined performance criteria, the restrictions on some, all, or none of the performance share units awarded to each NEO will lapse, and the NEO will receive accrued dividends only on the shares actually earned. +The Committee goes through a rigorous process in setting performance targets, including a careful review of the Company’s prior year business and financial performance, current year operating plan and future expectations. To achieve target level Operating Profit for the first year of the performance period would require a 17% increase over 2024 actual performance, and to achieve target level Operating Profit for years two and three of the performance period would require double digit growth percentages over the prior year’s actual Operating Profit results. Wolverine believes disclosing specific Operating Profit targets while the applicable performance period is ongoing could cause competitive harm. However, such targets will be disclosed once the applicable performance periods have ended as part of our discussion and analysis on awards earned by the NEOs. +2026 PROXY STATEMENT +44 +TABLE OF CONTENTS +For the relative TSR metric, threshold was set at the 25th percentile relative to the S&P Composite 1500 Consumer Durables & Apparel Index, target at the 50th percentile, and stretch at the 75th percentile. In addition, if the Company’s absolute TSR for the three-year period is negative, payouts on this measure are capped at target, regardless of whether the Company outperformed the Index. +2023-2025 Performance Stock Units +The following table lists the operating profit performance levels set by the Committee for performance stock unit awards granted for the 2023-2025 performance period: +Performance Level +(Percentage of Target Payout) +2023 Operating +Profit (in millions) +(OP) +2024 OP (% increase vs. +prior year) +2025 OP (% increase vs. +prior year) +Threshold (50%) +$232.00 +33.3% +10.3% +Target (100%) +$239.60 +47.3% +15.3% +Stretch (200%) +$254.00 +57.4 % +22.7 % +For the relative TSR metric, threshold was set at the 25th percentile relative to the S&P Composite 1500 Consumer Durables & Apparel Index, target at the 50th percentile, and stretch at the 75th percentile. In addition, if the Company’s absolute TSR for the three-year period is negative, payouts on this measure are capped at target, regardless of whether the Company outperformed the Index. +In February 2026, the Committee evaluated and certified the Company’s performance for the 2023-2025 performance period against operating profit (60% weighting) and relative TSR (40% weighting). For 2023, operating profit performance was below threshold. For each of 2024 and 2025, operating profit increased over the prior year at percentages greater than stretch level, resulting in performance for this metric of 133%. Relative TSR performance was at approximately the 57th percentile, resulting in vesting on this measure at 128%. This resulted in an overall weighted payout of 131%. +The table below shows shares that vested for each NEO for the 2023-2025 performance period based on the factors described above. In calculating the number of stock units that vest, the Company uses the stock price on the date of the grant, which results in the NEOs bearing the risk of stock price performance during the performance period. +Name +Stock Units Vesting +(#) +Hufnagel +33,898 +Klimek +24,771 +Kuhn 1 +17,000 +Latchana +7,042 +Miller 1 +29,129 +Soriano +28,682 +1. +Ms. Kuhn and Ms. Miller were awarded prorated PSU grants for each open performance period upon hire. +Restricted Stock Unit Awards +The following table reflects the grant date value of the service-based restricted stock unit awards granted to each NEO. +Name +2025 Time-vested +Restricted +Stock Units +Hufnagel +$1,740,007 +Klimek +$ 190,013 +Kuhn +$ 360,011 +Latchana +$ 200,021 +Miller +$ 400,019 +Soriano +$ 220,014 +The Committee generally grants annual equity awards at its regularly scheduled February meeting, and the independent directors of the Board approve equity grants to the CEO generally on the same day that the Committee meets. Restricted stock units awarded vest one-third on each of the first three anniversaries of the date of grant. +2026 PROXY STATEMENT +45 +TABLE OF CONTENTS +Benefits +Retirement, Deferred Compensation and Welfare Plans +The NEOs in the United States participate in Wolverine Worldwide’s medical and dental plans and receive life and disability insurance. In 2025, Messrs. Hufnagel and Latchana, and Ms. Klimek participated in the Wolverine Worldwide Employees’ Pension Plan (a defined benefit plan) and Mr. Hufnagel participated in the Wolverine World Wide, Inc. 409A Supplemental Executive Retirement Plan (an unfunded, non-qualified plan). For a description of the benefits under Wolverine Worldwide’s retirement plans, see “ Pension Plans and 2025 Pension Benefits ” below. Ms. Soriano is located outside of the United States and participates in local medical, life and disability insurance plans and receives an annual retirement benefit payment consistent with the benefits generally made available to employees in the U.K. +All full-time employees of the Company in the United States, including the NEOs located in the United States, are also eligible to participate in one of Wolverine’s 401(k) Plans (the “401(k) Plan”). Pursuant to the 401(k) Plan, employees, including the NEOs in the United States, may elect to defer a portion of their salary and receive a Company match on eligible deferrals of up to 3% of salary for 2025 (5.5% for those who do not participate in the Pension Plan), subject to limits set forth in the Internal Revenue Code of 1986, as amended. +The Company has a Deferred Compensation Plan that allows directors, executives and other eligible senior employees of the Company to elect to defer a portion of their eligible compensation. Wolverine Worldwide may, but need not, credit a participant with an additional discretionary Company contribution. The Company adopted the Deferred Compensation Plan as a retention and recruitment tool to facilitate retirement savings and provide financial flexibility for key employees, and because many of the companies with which it competes for executive talent provide similar plans to their key employees. For a description of the benefits under the Deferred Compensation Plan, see “ Non-Qualified Deferred Compensation ” below. +Perquisites +The Company generally provides limited perquisites to NEOs other than to account for relocation assignments. The Company feels the perquisites are necessary to provide a competitive total compensation package for each NEO. For details on perquisites, see footnote 5 to the “ Summary Compensation Table ” on page 52 . Ms. Soriano also receives benefits generally made available to Company employees located in the U.K., as well as a car and travel allowance, and tax equalization tied to her relocation to the U.K. when she was hired by the Company. +Post-Employment Compensation +Each NEO is party to an Executive Severance Agreement that provides for certain payments and benefits upon termination of employment after a change in control of Wolverine Worldwide. The Board believes Executive Severance Agreements will motivate management to actively pursue a business transaction that is in the best interests of the shareholders, even if it could ultimately result in his or her job elimination, and also will promote management stability during the transition period accompanying a change in control. Each NEO is eligible to receive compensation if his or her employment is terminated within two years following a change in control of Wolverine Worldwide. Even following a change in control, an NEO does not receive payment under the Executive Severance Agreement if his or her employment terminates: +• +Due to death or retirement in accordance with Wolverine Worldwide’s policy or as otherwise agreed, +• +For cause or disability, or +• +By resignation of the NEO, other than for “good reason,” which is discussed in the “ Potential Payments Upon Termination or Change in Control ” section of this Proxy Statement. +NEOs may also be eligible under Wolverine Worldwide’s retirement plans or equity plans to receive certain payments and benefits upon termination of employment or in connection with a change in control as described in the “ Potential Payments Upon Termination or Change in Control ” section of this Proxy Statement. +Mr. Hufnagel is also party to an Employment Agreement under which he is eligible to receive certain payments and benefits if the Company terminates his employment, even if not following a change in control, other than for “cause” or if he terminates his employment for “good reason.” The Committee determined upon appointing Mr. Hufnagel as the President and CEO that, given the Company’s strategic initiatives the Board asked him to lead, it was appropriate for the Company to enter into such arrangement. +2026 PROXY STATEMENT +46 +TABLE OF CONTENTS +Ms. Soriano is also a party to a Service Agreement with Wolverine Europe Limited which provides certain payments and benefits if the Company terminates her employment, even if not following a change in control. Such agreements are typical for senior executives based in the U.K. In connection with her termination of employment, she became entitled to receive a cash payment equal to one year of her base salary, a repatriation payment from the Company to Ms. Soriano in the amount of £300,000, and continued vesting of the portion of the unvested equity awards granted to Ms. Soriano for eight months after her termination date, pursuant to the settlement agreement entered into between Ms. Soriano and Wolverine Europe Limited on March 3, 2025 (the “Settlement Agreement”) in exchange for a release of claims in favor of the Company and her agreement to comply with covenants restricting her ability to compete with the Company and to solicit and hire the Company’s employees for seven months and one year, respectively. +The Company includes accelerated retirement vesting provisions for equity awards, provided certain conditions are met, and for the payout of a prorated annual bonus for a qualifying retirement more than six months into the fiscal year. Details on these provisions and information on benefits payable to Mr. Hufnagel under his Employment Agreement and Ms. Soriano under her Service Agreement, and to each of the NEOs under the Executive Severance Agreements, as well as information on the other retirement and equity plans of Wolverine Worldwide, are included in the “ Potential Payments Upon Termination or Change in Control ” section of this Proxy Statement. +Say on Pay Advisory Vote +We asked shareholders to vote on a “say-on-pay” advisory vote on our executive compensation in 2025. Shareholders expressed substantial support for the compensation of our NEOs, with approximately 92% of the votes cast for the “say-on-pay” advisory vote. The Committee carefully evaluated the results of the 2025 advisory vote. The Committee also considers many other factors in evaluating our executive compensation programs as discussed in this Compensation Discussion and Analysis, including the Committee’s assessment of total shareholder return, the interaction of our compensation programs with our corporate business objectives, evaluations of our programs by external consultants, and review of peer group and survey data, each of which is evaluated in the context of the Committee’s fiduciary duty to act as the directors determine to be in shareholders’ best interests. While each factor bore on the Committee’s decisions regarding our NEOs’ compensation, the Committee made no changes to our executive compensation program and policies directly as a result of the 2025 say-on-pay advisory vote. +Compensation Setting Process +Setting Targets +The Committee goes through a rigorous process in setting performance targets, including a careful review of the Company’s prior year business and financial performance, current year operating plan, and future expectations. The Committee engages with management in this process over several months leading up to setting final annual bonus and three-year performance targets in February. +Competitive Philosophy and Competitive Market Data +When making compensation recommendations and decisions, the Committee considers the CEO’s assessment of the performance of each NEO, other than himself; the performance of the individual and the individual’s respective business unit or function; the scope of the individual’s responsibilities, years of experience with the Company (or in similar positions with other companies), skills and knowledge; market compensation data; market and economic conditions; Company performance; retention considerations; and Wolverine Worldwide’s compensation philosophy (collectively, the “compensation factors”). The Committee considers these compensation factors both subjectively and objectively, and no single factor or combination of factors is determinative. With respect to CEO compensation, the Committee seeks to set compensation in line with experience and the anticipated market median for a given year. +The Committee uses market surveys and Peer Group (as defined below) information provided by its compensation consultant as market reference points. The Committee also considers information the Company learns through recruiting NEOs and the experience levels and responsibilities of NEOs prior to joining the Company as reference points in setting NEO compensation. +As part of its competitive data review in connection with determining 2025 compensation, the Committee considered information presented by its consultant Frederic W. Cook & Co. (“FW Cook”) based on publicly-disclosed Peer Group information and relevant survey data. +2026 PROXY STATEMENT +47 +TABLE OF CONTENTS +Peer Group +Below is the peer group used in late 2024 and early 2025 in connection with 2025 compensation decisions. In determining the Peer Group, the Committee considered each potential peer company’s industry, channels of distribution, revenue and market capitalization. The Company also considered the typicality of a company’s pay practices, excluding companies whose chief executive may not receive market compensation because of a founder relationship, family ownership position, or other similar relationships. +Abercrombie & Fitch Co. +Carter’s, Inc. +Genesco Inc. +Oxford Industries, Inc. +The Children’s Place, Inc. +American Eagle Outfitters Inc. +Crocs, Inc. +G-III Apparel Group, Ltd. +Shoe Carnival, Inc. +Under Armour, Inc. +Boot Barn Holdings, Inc. +Deckers Outdoor Corporation +Guess?, Inc. +Steven Madden, Ltd. +Caleres, Inc. +Designer Brands, Inc. +Kontoor Brands, Inc. +The Buckle, Inc. +CEO Role +Within the framework of the Company’s executive compensation program, the CEO recommends the level of base salary, annual bonus, long-term incentive compensation, equity awards and other compensation components for his direct reports, including the other NEOs. The CEO bases his recommendation upon his assessment of the compensation factors applicable to each NEO. The CEO considers these compensation factors both objectively and subjectively, and no single factor is determinative. The Committee discusses these recommendations with the CEO prior to setting the compensation for each NEO, other than the CEO. The Committee, however, ultimately determines all compensation for NEOs other than the CEO, whose compensation is determined by the independent directors as a whole. +Compensation Consultant Role +FW Cook was first engaged as the Committee’s independent compensation consultant in 2016 and reports directly to the Committee. The Committee determines the scope of engagement and may replace the consultant or hire additional consultants at any time. The Committee has evaluated FW Cook’s independence under the rules established by the NYSE and has determined that FW Cook is “independent” as defined by NYSE rules. In addition, the Committee has evaluated whether the engagement of FW Cook raised any conflicts of interest and has determined that no such conflicts of interest exist. +At the Committee’s invitation, a representative of FW Cook generally attends all Committee meetings and also communicates with the Committee Chair and management regularly between meetings. However, the Committee makes all decisions regarding NEO compensation. FW Cook provides various executive compensation services to the Committee pursuant to a consulting agreement with the Committee. Generally, these services include advising the Committee on the principal aspects of the Company’s executive compensation program, evolving industry practices, and providing market information and analysis regarding the competitiveness of the Company’s program design. +During 2025, FW Cook performed the following specific services: +• +Attended Committee meetings, as requested +• +Reviewed the Company’s peer group and advised the Committee on the composition of the peer group +• +Reviewed survey data for competitive comparisons +• +Provided market data and guidance on CEO and other NEO compensation +• +Advised the Committee on market trends related to compensation policies and programs +• +Proactively advised the Committee on best practice approaches for governance features of executive compensation programs +• +Reviewed the Compensation Discussion & Analysis and other executive compensation related disclosures included in the Company’s Proxy Statement +The total fees the Company paid to FW Cook for services to the Committee in 2025 were $132,960, less than 1% of FW Cook’s total consulting income during the same period. The Company did not pay or incur any other fees to or with FW Cook. +2026 PROXY STATEMENT +48 +TABLE OF CONTENTS +Other Compensation Policies and Practices +NEO Stock Ownership Guidelines +Each NEO, as well as each non-employee director, must attain (and maintain) a minimum stock ownership level prior to being able to gift or sell any Company stock, with a limited exception to being able to gift or sell up to fifty percent of the net, after-tax number of shares obtained through any Company equity plans or other equity awards. The equity that qualifies for determining the NEOs’ minimum stock ownership level includes owned shares and unvested restricted stock units that vest based on time (up to a maximum of value of 50% of the applicable ownership requirement), but excludes performance shares and units and unexercised options (or any portion thereof, such as the current “in the money” value). During 2025, each NEO complied with the requirements of these guidelines. +Covered Positions +Guideline +CEO +6x Annual Salary +President (if different than CEO) +3x Annual Salary +Other NEOs +2x Annual Salary +Non-Employee Directors +6x Annual Cash Retainer +Insider Trading Policy +The Board adopted an insider trading policy (the “Insider Trading Policy”), which governs the purchase, sale and other dispositions of Company securities by directors, officers and employees (including, as applicable, their family members and controlled entities, in each case, as defined in the Insider Trading Policy) and the Company, and is designed to promote compliance with insider trading laws, rules and regulations, and the NYSE listing standards. Among other things, the Insider Trading Policy prohibits the purchase and sale of the Company’s securities while an individual is aware of material non-public information or inside information about the Company or its securities and provides for trading windows and pre-clearance processes that apply to certain covered individuals. The foregoing summary of the Insider Trading Policy does not purport to be complete and is qualified in its entirety by reference to the full text of the Insider Trading Policy, which is included as Exhibit 19 to our Annual Report on Form 10-K for fiscal year 2025 filed with the SEC on February 27, 2026 (the “2025 Annual Report”). +Stock Hedging and Pledging Policies +Under the Company’s Insider Trading Policy, all directors, officers and other employees are prohibited from engaging in any hedging transactions involving Company securities beneficially owned by them. The Company also considers it inappropriate for any such person to engage in speculative transactions in the Company’s securities, including short sales, publicly traded options, margin accounts and pledges and standing and limit orders. Also, all directors, officers and other employees are prohibited from pledging Company securities as collateral for a loan. +Equity Award Grant Practices +The Company’s equity compensation programs do not currently include annual or periodic stock option awards, but the Committee has in the past granted stock options to its executives and other employees. During 2025, the Committee did not time the disclosure of material nonpublic information for the purpose of affecting the value of executive compensation . +Clawback Policy +The Company has adopted a Policy for Recovery of Incentive Compensation (“Clawback Policy”) which empowers the Board or a committee of the Board to seek recovery of specified incentive compensation covering both cash and equity received by executive officers under specific circumstances where there is a material restatement of the Company’s financial results that would have led to a lower level of incentive compensation payout. +The Clawback Policy complies with the requirements of NYSE Listing Standard 303A.14 implementing Rule 10D-1 under the Exchange Act and provides that, in the event the Company is required to prepare an accounting restatement of the Company’s financial statements due to material non-compliance with any financial reporting requirement under the federal securities +2026 PROXY STATEMENT +49 +TABLE OF CONTENTS +laws, the Company will recover, on a reasonably prompt basis, the excess incentive-based compensation received by any covered executive, including the NEOs, during the prior three fiscal years that exceeds the amount that the executive otherwise would have received had the incentive-based compensation been determined based on the restated financial statements. +In addition, the Company’s Stock Incentive Plan of 2024 goes beyond the requirements of NYSE Listing Standard 303A.14 implementing Rule 10D-1 under the Exchange Act and provides that awards granted thereunder (whether time-based or performance-based) and shares issued in respect thereof may be subject to recoupment or forfeiture in the event a participant engages in an Act of Misconduct (as defined in the plan). +Impact of Accounting and Tax Treatments on Compensation +As one of the factors in the review of compensation matters, the Committee considers the anticipated tax treatment to the Company. Under Section 162(m) of the Internal Revenue Code, a limitation exists on the deductibility of compensation paid to certain “covered employees,” including all of our NEOs, in excess of $1 million per year and thus we are unable to deduct compensation payable to our NEOs in excess of such limit. While the Committee considers the impact of this tax treatment, the primary factors influencing program design are the support of our business objectives and the Committee’s commitment to structuring the Company’s executive compensation programs in a manner designed to align pay with performance. Accordingly, the Committee retains flexibility to structure our compensation programs in a manner that is not tax-deductible in order to achieve a strategic result that the Committee determines to be more appropriate. +2026 PROXY STATEMENT +50 +TABLE OF CONTENTS +Compensation and Human Capital Committee Report +The Committee has reviewed and discussed with management the information provided under the heading “Compensation Discussion and Analysis.” Based on this review and discussion, the Committee recommended to the Board of Directors that the Company include the Compensation Discussion and Analysis section in this Proxy Statement and incorporate it by reference into the Company’s Annual Report on Form 10-K. +Respectfully submitted, +Kathleen Wilson-Thompson (Chair) +Jack Boyle +William K. Gerber +DeMonty Price +Compensation and Human Capital Committee Interlocks and Insider Participation . During fiscal year 2025, none of the members of the Compensation and Human Capital Committee was an officer or employee of the Company, was a former officer of the Company, nor had a relationship with the Company requiring disclosure as a related party transaction under Item 404 of Regulation S-K of the Securities Act of 1933. None of the Company’s executive officers served on the compensation committee or board of directors of another entity whose executive officer(s) served as a director on the Board or on the Compensation and Human Capital Committee. +2026 PROXY STATEMENT +51 +TABLE OF CONTENTS +Summary Compensation Table +Name and +Principal Position +Year +Salary 1 +Bonus +Stock +Awards 2 +Non-Equity +Incentive +Plan +Compensation 3 +Change in +Pension Value +and +Nonqualified +Deferred +Compensation +Earnings 4 +All Other +Compensation 5 +Total +Christopher Hufnagel +President and CEO +2025 +$1,192,308 +$— +$5,800,023 +$2,663,854 +$1,131,678 +$ 66,866 +$10,854,729 +2024 +$1,000,000 +$— +$6,800,009 +$1,090,665 +$ 438,706 +$ 42,687 +$ 9,372,067 +2023 +$ 813,672 +$— +$1,650,032 +$ 300,000 +$ 366,393 +$ 44,380 +$ 3,174,477 +Amy Klimek +Chief Human +Resources Officer +2025 +$ 500,719 +$— +$ 475,021 +$ 408,724 +$ 57,111 +$ 37,050 +$ 1,478,625 +2024 +$ 471,240 +$— +$ 475,005 +$ 208,262 +$ 20,274 +$ 35,569 +$ 1,210,350 +2023 +$ 465,199 +$— +$ 975,015 +$ 66,998 +$ 97,489 +$ 37,157 +$ 1,641,858 +Susie Kuhn +President, Active Group +2025 +$ 610,962 +$— +$ 900,027 +$ 557,338 +$ — +$ 110,986 +$ 2,179,313 +Dave Latchana +Chief Legal Officer +and Corporate Secretary +2025 +$ 520,385 +$— +$ 500,030 +$ 430,848 +$ 38,616 +$ 43,859 +$ 1,533,738 +2024 +$ 481,052 +$— +$ 412,027 +$ 178,352 +$ 9,719 +$ 42,013 +$ 1,123,163 +Taryn Miller +Chief Financial Officer +2025 +$ 695,000 +$— +$1,000,037 +$ 655,641 +$ 449 +$ 119,825 +$ 2,470,952 +2024 +$ 400,000 +$— +$1,340,016 +$ 226,043 +$ — +$ 191,629 +$ 2,157,688 +Isabel Soriano 6 +Former President, +International Group +2025 +$ 624,991 +$— +$ 550,024 +$ 624,271 +$ — +$1,385,263 +$ 3,184,549 +2024 +$ 570,489 +$— +$ 550,015 +$ 406,910 +$ — +$1,045,876 +$ 2,573,290 +2023 +$ 543,831 +$— +$1,073,356 +$ 81,688 +$ — +$1,015,643 +$ 2,714,518 +1. +Includes any amounts deferred under the Company’s qualified 401(k) plan or Deferred Compensation Plan. +2. +Includes the grant date fair value of restricted stock unit awards, and performance unit awards, as follows for 2025: +Name +Service-based Restricted +Stock Unit Value +Performance Unit Value 25-27 +Grant +Total +Hufnagel +$1,740,007 +$4,060,016 +$5,800,023 +Klimek +$ 190,013 +$ 285,008 +$ 475,021 +Kuhn +$ 360,011 +$ 540,016 +$ 900,027 +Latchana +$ 200,021 +$ 300,009 +$ 500,030 +Miller +$ 400,019 +$ 600,018 +$1,000,037 +Soriano +$ 220,014 +$ 330,010 +$ 550,024 +Restricted stock units were valued using the closing market price of Wolverine Worldwide common stock on the date of the grant of the respective award. Performance units were valued using the closing market price of Wolverine Worldwide common stock on the date of grant of the respective award and assuming target performance for all performance periods. Assuming maximum payout, the aggregate grant date fair value of performance units awarded in 2025 for each NEO (and, in parentheses, the maximum value is combined with the grant date fair value of restricted stock unit awards and restricted stock awards for 2025) would have been $8,120,031 ($9,860,038) for Mr. Hufnagel; $660,019 ($880,033) for Ms. Soriano; $600,018 ($800,039) for Mr. Latchana; $1,200,035 ($1,600,054) for Ms. Miller; $570,017 ($760,030) for Ms. Klimek; and $1,080,032 ($1,440,043) for Ms. Kuhn. Restrictions on such performance unit awards will lapse in the February following the last year of the performance period, if at all, based on the Company’s performance for the period (capped at 200%). The actual value of shares that vest is also dependent on the stock price at the time of vesting. For additional valuation assumptions, see the Stock-Based Compensation footnote to Wolverine Worldwide’s Consolidated Financial Statements for the fiscal year ended January 3, 2026 included in its Form 10-K for fiscal 2025. +3. +Reflects the sum of performance bonus and business priority amounts, earned in 2025, 2024 and 2023, respectively, and paid in 2026, 2025 and 2024 respectively. +4. +Amounts in this column include, where applicable, the aggregate change in the actuarial present value of the accumulated benefits under the Wolverine Worldwide Employees’ Pension Plan (“Pension Plan”) and Wolverine World Wide, Inc. 409A Supplemental Executive Retirement Plan (“SERP”) for NEOs participating in one or both of these plans. The amounts in the table were determined using assumptions consistent with those used in Wolverine Worldwide’s Consolidated Financial Statements for each respective year. See the “Pension Plans and 2025 Pension Benefits” section starting on page 59 . Amounts in this column for Ms. Miller reflect 2025 non-qualified deferred compensation plan earnings in 2025. Amounts for Mr. Hufnagel reflect both non-qualified deferred compensation plan earnings and change in actuarial present value under the Pension Plan and SERP. +2026 PROXY STATEMENT +52 +TABLE OF CONTENTS +5. +The amounts listed in this column for 2025 include Wolverine Worldwide’s contributions to the accounts of the NEOs under Wolverine Worldwide’s 401(k) plans (or, in the case of Ms. Soriano, a payment in lieu of a retirement plan contribution), payments made by Wolverine Worldwide for the premiums on certain life insurance policies, tax, housing/relocation expenses and estate planning services and health care reimbursements in the amounts listed in the table below. Ms. Soriano is not a participant in the Company’s Pension Plan, and instead received a retirement benefit payment. Moving/living expenses for Mses. Kuhn and Miller related to their respective relocations to Michigan upon being hired. +Name +401(k) +Match +DC Plan +Company +Contribution +Tax and +Estate +Planning +Health +Life Insurance +Premiums +Moving/Living +Expenses +Tax +Equalization +Other +Hufnagel +$10,500 +$ 0 +$ 7,970 +$25,062 +$ 857 +$ 0 +$ 0 +$22,477* +Klimek +$10,500 +$ 0 +$ 7,970 +$18,024 +$ 556 +$ 0 +$ 0 +$ 0 +Kuhn +$16,981 +$ 0 +$ 0 +$ 9,947 +$ 678 +$ 83,380 +$ 0 +$ 0 +Latchana +$10,500 +$ 0 +$ 7,970 +$24,831 +$ 558 +$ 0 +$ 0 +$ 0 +Miller +$19,250 +$5,750 +$ 0 +$25,062 +$ 773 +$ 68,990 +$ 0 +$ 0 +Soriano +$49,999 +$ 0 +$49,714 +$17,435 +$1,555 +$136,342 +$1,130,218 +$ 0 +* +Personal Security Benefits. +6. +The cash compensation for Ms. Soriano is paid in Pounds Sterling. Her cash compensation was converted into U.S. dollars using the fiscal year-end rate of 1.27 for fiscal year 2023, 1.26 for 2024 and 1.35 for fiscal year 2025. +2026 PROXY STATEMENT +53 +TABLE OF CONTENTS +Grants of Plan-Based Awards in Fiscal Year 2025 +The following table provides information concerning each grant of an award made to the NEOs in fiscal year 2025: +Estimated Future Payouts Under Non- +Equity Incentive Plan Awards 1 +Estimated Future Payments Under +Equity Incentive Plan Awards 2 +All Other +Stock +Awards: +Number of +Shares of +Stock or +Units 3 +(#) +Grant Date +Fair Value of +Stock and +Option +Awards 4 +($) +Name +Award type +Grant Date +Threshold +($) +Target +($) +Maximum +($) +Threshold +(#) +Target +(#) +Maximum +(#) +Hufnagel +Annual Bonus +$833,425 +$1,666,849 +$3,333,699 +FY25-FY27 Performance Units +02/05/2025 +91,483 +182,966 +365,932 +$4,060,016 +Restricted Units +02/05/2025 +78,414 +$1,740,007 +Klimek +Annual Bonus +$130,135 +$ 260,270 +$ 520,539 +FY25-FY27 Performance Units +02/05/2025 +6,422 +12,844 +25,688 +$ 285,008 +Restricted Units +02/05/2025 +8,563 +$ 190,013 +Kuhn +Annual Bonus +$161,977 +$ 323,953 +$ 647,906 +FY25-FY27 Performance Units +02/05/2025 +12,168 +24,336 +48,672 +$ 540,016 +Restricted Units +02/05/2025 +16,224 +$ 360,011 +Latchana +Annual Bonus +$135,241 +$ 270,482 +$ 540,964 +FY25-FY27 Performance Units +02/05/2025 +6,760 +13,520 +27,040 +$ 300,009 +Restricted Units +02/05/2025 +9,014 +$ 200,021 +Miller +Annual Bonus +$201,069 +$ 402,138 +$ 804,276 +FY25-FY27 Performance Units +02/05/2025 +13,520 +27,040 +54,080 +$ 600,018 +Restricted Units +02/05/2025 +18,027 +$ 400,019 +Soriano +Annual Bonus +$171,890 +$ 343,779 +$ 687,559 +FY25-FY27 Performance Units +02/05/2025 +7,436 +14,872 +29,744 +$ 330,010 +Restricted Units +02/05/2025 +9,915 +$ 220,014 +1. +Estimated payout levels relating to the performance bonus and business priorities bonus. Maximum amount assumes stretch revenue and pretax earnings performance and stretch business priorities performance. For a description of these bonuses and the payouts under them, see pages 41 - 44 . +2. +Estimated payout levels as of the grant date of performance stock units granted under the Stock Incentive Plan of 2024. Restrictions on such performance unit awards typically lapse in the February following the last year of the performance period, if at all, based on the Company’s performance for the period (capped at 200%). The actual value of shares that vest is also dependent on the stock price at the time of vesting. The Company accrues, but does not pay, dividends on the performance shares during the performance period. At the end of the performance period, the Company will pay to the NEO the accrued dividends (if any) on the performance units that vest. For a description of the performance units granted in 2025, see pages 44 - 45 . +3. +The Company awarded service-based restricted stock unit awards in February 2025 under the Stock Incentive Plan of 2024 to all NEOs employed at the time. One third of the shares vest on each of the first three anniversaries of the date of grant of the award. All restricted stock units vest upon an NEO’s death, disability or retirement. The Company accrues, but does not pay, dividends on the restricted stock units during the service period for units granted under the Stock Incentive Plan of 2024, including those reflected in this table. At the end of the service period, the Company will pay to the NEO the accrued dividends (if any) on the restricted stock units that vest. +4. +Represents the award date fair value for performance stock units and service-based stock unit awards made in fiscal year 2025, determined as described in footnote 2 to the “Summary Compensation Table”. +2026 PROXY STATEMENT +54 +TABLE OF CONTENTS +Outstanding Equity Awards at 2025 Fiscal Year-End +The following table provides information concerning unvested stock awards for each NEO as of January 3, 2026. As of this date, none of the NEOs held any outstanding options. +Stock Awards +Name +Grant Date +Numbers of Shares or +Units of Stock That +Have Not Vested 1 +(#) +Market Value of +Shares or Units Of +Stock That Have +Not Vested 2 +($) +Equity Incentive +Plan Awards: +Number of +Unearned Shares, +Units or Other +Rights That +Have Not Vested 3 +(#) +Equity Incentive +Plan Awards: +Market or Payout +Value of Unearned +Shares, Units or Other +Rights That +Have Not Vested 2 +($) +Hufnagel +Various +288,000 +$5,244,480 +Various +988,152 +$17,994,248 +Klimek +Various +50,883 +$ 926,579 +Various +85,689 +$ 1,560,397 +Kuhn +Various +16,224 +$ 295,439 +Various +89,776 +$ 1,634,821 +Latchana +Various +21,302 +$ 387,909 +Various +61,607 +$ 1,121,863 +Miller +Various +37,300 +$ 679,233 +Various +118,791 +$ 2,163,184 +Soriano +Various +55,763 +$1,015,444 +Various +99,218 +$ 1,806,760 +2026 PROXY STATEMENT +55 +TABLE OF CONTENTS +1. +The following table sets forth the vesting dates for the unvested service-based restricted stock or stock unit awards of each NEO as of January 3, 2026: +Named +Executive +Officer +Vesting +Date +Number of Shares to Vest +Hufnagel +02/05/26 +26,138 +02/07/26 +84,054 +02/08/26 +5,751 +02/09/26 +2,221 +07/31/26 +13,155 +10/30/26 +20,350 +02/05/27 +26,138 +02/07/27 +84,055 +02/05/28 +26,138 +Klimek +02/05/26 +2,855 +02/07/26 +7,828 +02/08/26 +4,203 +02/09/26 +2,110 +10/30/26 +20,350 +02/05/27 +2,854 +02/07/27 +7,829 +02/05/28 +2,854 +Kuhn +02/05/26 +5,408 +02/05/27 +5,408 +02/05/28 +5,408 +Latchana +02/05/26 +3,005 +02/07/26 +2,637 +02/08/26 +1,195 +02/09/26 +600 +04/29/26 +2,609 +02/05/27 +3,004 +02/07/27 +2,637 +04/29/27 +2,610 +02/05/28 +3,005 +Miller +02/05/26 +6,009 +05/10/26 +13,343 +02/05/27 +6,009 +05/10/27 +5,930 +02/05/28 +6,009 +2026 PROXY STATEMENT +56 +TABLE OF CONTENTS +Named +Executive +Officer +Vesting +Date +Number of Shares to Vest +Soriano +02/05/26 +3,305 +02/07/26 +9,065 +02/08/26 +4,866 +02/09/26 +1,888 +07/31/26 +614 +10/30/26 +20,350 +02/05/27 +3,305 +02/07/27 +9,065 +02/05/28 +3,305 +2. +The dollar values are calculated using a per share stock price of $18.21, the closing price of Wolverine Worldwide common stock on January 2, 2026, the last business day of fiscal year 2025. +3. +Following the end of the applicable performance period, performance units vest depending upon the Company’s achievement of the relevant performance criteria. Shares actually vested for the 2023-2025 cycle are included as unearned shares in the “Equity Incentive Plan Awards” column. Performance at target level was assumed for the 2024-2026 cycle and performance at stretch was assumed for the 2025-2027 cycle. +2026 PROXY STATEMENT +57 +TABLE OF CONTENTS +Option Exercises and Stock Vested +in Fiscal Year 2025 +Option Awards +Stock Awards +Number of Shares +Acquired on Exercise +(#) +Value Realized +On Exercise 1 +($) +Number of Shares +Acquired on Vesting +(#) +Value Realized +On Vesting 2 +($) +Hufnagel +32,294 +$497,167 +185,501 +$3,948,902 +Klimek +18,676 +$102,502 +44,023 +$ 964,780 +Kuhn +— +$ — +1,237 +$ 25,903 +Latchana +— +$ — +10,912 +$ 208,061 +Miller +— +$ — +19,275 +$ 328,225 +Soriano +— +$ — +46,567 +$1,019,535 +1. +The Company calculates the dollar values by multiplying the number of shares of common stock acquired upon exercise by the difference between the exercise price and the closing price of the Company common stock on the exercise date. +2 +The Company calculates the dollar values using the closing price of Wolverine Worldwide common stock on the date of vesting. +2026 PROXY STATEMENT +58 +TABLE OF CONTENTS +Pension Plans and 2025 Pension Benefits +Wolverine Worldwide maintains the following defined benefit retirement plans: (1) the Wolverine Worldwide Employees’ Pension Plan (“Pension Plan”), which is a funded and tax-qualified defined benefit plan under the Internal Revenue Code that covers eligible employees, and (2) the Wolverine World Wide, Inc. 409A Supplemental Executive Retirement Plan (“SERP”), which is an unfunded, non-qualified plan that covers individuals recommended by the CEO and approved by the Compensation and Human Capital Committee. Mr. Hufnagel participates in the Pension Plan and SERP and Ms. Klimek and Mr. Latchana participate in the Pension Plan. +Effective as of December 31, 2025, Wolverine froze benefits under the Pension Plan, meaning that participants (including Messrs. Hufnagel and Latchana and Ms. Klimek) will not accrue any further benefits under the plan, including additional years of service. +Qualified Pension Plans +Participants vest in the Pension Plan after five years of qualifying service. Subject to the limitations imposed by the Internal Revenue Code, the Pension Plan generally pays a monthly benefit in an amount equal to a percentage of the participant’s final average monthly earnings multiplied by his or her number of years of service less a monthly social security allowance. For purposes of this benefits formula, the Pension Plan caps years of service at 30 (25 for SERP participants), and the percentages of final average monthly earnings are 1.6% (2.0% for SERP participants). “Earnings” under the Pension Plan generally includes all W-2 compensation and pre-tax benefit plan deferrals other than taxable fringe benefits and deferred compensation, and for 2025 was capped at $350,000, the IRS limit applicable to tax qualified plans. +Upon retirement, a participant may elect to receive the benefit in the form of a life annuity, 5 or 10-year certain and life annuities, or joint and 50%, joint and 75%, or joint and 100% survivor annuities. The payments are actuarially adjusted based on the participant’s election. Any election, other than an election to receive life annuity benefits, reduces the monthly benefit payable. The “normal” age at which benefits may be drawn under the Pension Plan is 65. +Supplemental Executive Retirement Plan +Mr. Hufnagel participates in the SERP, which provides retirement benefits above amounts available under the Company’s tax qualified Pension Plan. The SERP benefit generally equals the difference between the participant’s retirement benefit under the Pension Plan and the benefits the participant would have received if there were no IRS imposed cap on earnings when calculating the Pension Plan benefit. The SERP caps years of service at 25 in calculating a participant’s benefit. The SERP also allows a retired participant who has five years of service to draw earlier (beginning at age 55) and on different terms than under the Pension Plan. A participant’s earnings percentage multiplier is the same under the SERP as it is under the Pension Plan. The Compensation and Human Capital Committee may grant additional deemed years of service under the SERP to a participant, subject to the cap of 25 years. The full benefit of any additional years of deemed service is paid under the SERP. +If a retired participant draws the SERP benefit prior to age 65, the reduction factor is 0.333% for each month prior to age 60, and 0.1666% for each month between age 60 and age 65. +SERP benefits are paid monthly, and the SERP has a lump sum payment option which may apply to certain terminations of employment after a change in control or, if elected, upon death. The SERP also includes a disability benefit and a death benefit payable to the participant’s designated beneficiary if the participant dies before retiring. The SERP provides for lump sum payments equal to 125% of the net present value of accrued benefits without regard to any reduction for early payment to participants who resign for good reason or are terminated by Wolverine other than for cause or due to death or disability within two years after a change in control. +The SERP also contains non-competition, confidentiality and employee non-solicitation provisions in favor of Wolverine Worldwide. Under the SERP non-competition provisions, a participant is not entitled to any benefit payment if the participant enters into certain relationships with a competing business prior to the date on which such benefit payment is due. If the participant’s employment is terminated for serious misconduct, or if Wolverine Worldwide cannot collect under an insurance policy purchased to fund SERP benefits for certain reasons, the Company may terminate a participant’s benefits under the SERP. Wolverine Worldwide may terminate the SERP or stop further accrual of SERP benefits for a participating NEO at any time, but termination will not affect previously accrued benefits. +2026 PROXY STATEMENT +59 +TABLE OF CONTENTS +Pension Benefits in Fiscal Year 2025 +The following table provides for each NEO certain information concerning each plan that provides for payments or other benefits at, following, or in connection with retirement: +Plan Name +Number of Years +Credited Service +(#) +Present Value of +Accumulated Benefit 1 +($) +Payments During +Last Fiscal Year +($) +Hufnagel +SERP +17 +$2,213,085 +— +Pension +17 +$ 748,950 +— +Klimek 2 +SERP +— +— +— +Pension +21 +$ 509,041 +— +Kuhn 2 +SERP +— +— +— +Pension +— +— +— +Latchana 2 +SERP +— +— +— +Pension +18 +$ 330,934 +— +Miller 2 +SERP +— +— +— +Pension +— +— +— +Soriano 2 +SERP +— +— +— +Pension +— +— +— +1. +These values are as of January 3, 2026, and are calculated assuming the participants will commence their benefits at age 65, and that those benefits will be paid in the form according to each participant’s 409A election and use the PRI-2012 mortality tables for males and females (white collar for SERP and no collar for Pension Plan), projected forward from base year 2012 with generational projection using an unmodified MP-2021 projection scale, with contingent annuitant mortality tables applied after the death of the participant and using the following discount rates: 5.75% Pension Plan; 5.63% SERP. +2. +Ms. Soriano, Ms. Miller and Ms. Kuhn do not participate in the SERP or Pension Plan and Ms. Klimek and Mr. Latchana do not participate in the SERP. Pension Plan benefits were frozen for all plan participants as of December 31, 2025, including Messrs. Hufnagel and Latchana and Ms. Klimek. +2026 PROXY STATEMENT +60 +TABLE OF CONTENTS +Non-Qualified Deferred Compensation +Wolverine Worldwide maintains a Deferred Compensation Plan. This unfunded and non-qualified plan allows executives and other eligible senior employees of the Company to elect to defer all or a portion of their base salary, cash bonus, or other performance-based cash compensation. Wolverine Worldwide may, but need not, credit a participant’s account under the plan with additional discretionary Company contributions, which may be subject to a vesting schedule and which would vest in full on a change in control. Amounts deferred pursuant to the Deferred Compensation Plan may be invested, at the direction of the participant, in an investment fund, index, or other investment vehicle, as designated by the Compensation and Human Capital Committee to be available under the plan, and earnings, if any, are credited to the participant’s account. +Accounts are paid out upon the earliest to occur of (i) a qualifying separation from service, (ii) a change in control (as such term is defined in the Deferred Compensation Plan), and (iii) a termination of the Deferred Compensation Plan. Payment must generally be made, or installment payments must begin, (as elected by the participant at the time of deferral), within 6 months of the event triggering payment. +In 2025, none of the NEOs elected to defer amounts under the Deferred Compensation Plan and Ms. Miller was the only NEO that received a Company contribution. Mr. Hufnagel is the only NEO who has previously elected to defer amounts under the Deferred Compensation Plan. +Name +Executive +Contributions +in 2025 +($) +Registrant +Contributions +in 2025 +($) 2 +Aggregate +Earnings +in 2025 +($) 1 +Aggregate +Withdrawals / +Distributions +($) +Aggregate +Balance +at Last FYE +($) +Hufnagel +— +— +$40,181 +— +$468,200 +Miller +— +$5,750 +$ 449 +— +$ 3,473 +1. +Reflects market-based earnings on amounts credited to Mr. Hufnagel and Ms. Miller under the Deferred Compensation Plan. +2. +Company contributions for 2025 were deposited to Ms. Miller’s Deferred Compensation Plan in February 2026 and were included in the “All Other Compensation” column in the “Summary Compensation Table” on page 52 . +2026 PROXY STATEMENT +61 +TABLE OF CONTENTS +Potential Payments Upon +Termination or Change in Control +Wolverine Worldwide has entered into an Executive Severance Agreement with each NEO that provides certain rights, including the right to receive payments in the event of a termination of employment following a change in control. The Company also has entered into an agreement with each of Mr. Hufnagel and Ms. Soriano regarding termination benefits in the event of termination of employment under the circumstances described below. +Benefits Triggered by Termination for Cause or Voluntary Termination +An NEO is not entitled to receive any additional forms of severance payments or benefits upon termination of employment for Cause or upon the NEO’s voluntary decision, other than for Good Reason, to terminate his or her employment, as discussed in further detail below. +Benefits Triggered by Termination Other Than for Cause or for Good Reason Not in Connection with a Change in Control +Mr. Hufnagel entered into an Employment Agreement upon his appointment as President and CEO of the Company in August 2023. The Employment Agreement states that upon termination of his employment by Wolverine Worldwide without Cause, or termination by Mr. Hufnagel with Good Reason, as such terms are defined in his Employment Agreement, Wolverine Worldwide will pay Mr. Hufnagel the following payments in exchange for a general release of claims in favor of Wolverine Worldwide: (1) continued base salary for 24 months; (2) payment of Company COBRA premiums for up to 24 months, or, if earlier, until eligible for coverage through another employer; (3) a pro rata target bonus opportunity for the year of termination; (4) pro rata vesting of outstanding performance-based equity awards as though Mr. Hufnagel had retired as of the date of termination, and pro-rata vesting of outstanding time-based equity awards that would have vested over the 12-month period following the date of termination; and (5) 12 months of outplacement assistance. +“Cause” generally is defined in Mr. Hufnagel’s Employment Agreement to mean: (1) any intentional act of fraud, embezzlement, theft, dishonesty, misrepresentation or breach of fiduciary duty with respect to the Company or its subsidiaries; (2) gross negligence or willful misconduct in the performance of duties; (3) material failure or refusal to follow any reasonable directive of the Board or the officer to whom Mr. Hufnagel reports, and if such failure and refusal is curable, if not cured within ten (10) days after written notice; (4) material breach of any noncompetition, nonsolicitation, confidentiality or other covenant with the Company, material breach of any material written policy of the Company which if curable, is not cured within ten (10) days after the Company’s written notice of such breach, or material breach of Mr. Hufnagel’s Employment Agreement, which if curable, is not cured within ten (10) days after the Company’s written notice of such breach; or (5) conviction of or indictment for or entering of a guilty plea or plea of no contest or nolo contendere with respect to any felony or any crime involving an act of moral turpitude. +“Good Reason” generally is defined in Mr. Hufnagel’s Employment Agreement to mean: (1) a material diminution in duties or a reduction of title, (2) a material breach by the Company of the Employment Agreement, (3) relocation of Mr. Hufnagel’s principal place of employment to a location that is more than fifty (50) miles from the Company’s corporate headquarters without Mr. Hufnagel’s consent, (4) termination of the Employment Agreement by the Company serving a notice of nonextension or (5) a reduction in Mr. Hufnagel’s base salary, unless such reduction is part of an across the board reduction for senior executives of the Company. +On June 8, 2018, Ms. Soriano entered into a Service Agreement with Wolverine Europe Limited, which is typical for senior executives based in the United Kingdom. Ms. Soriano’s agreement states that upon certain terminations of her employment by Wolverine Europe Limited, Wolverine Europe Limited will provide Ms. Soriano with written notice nine (9) months prior to such termination or, alternatively, will pay Ms. Soriano her base salary for such period (or any portion thereof) in lieu of such notice. In addition, upon voluntary termination of Ms. Soriano’s employment by Ms. Soriano for any reason, she is required to give written notice six (6) months prior to such termination and Wolverine Europe Limited may pay Ms. Soriano her base salary for such period (or any portion thereof) in lieu of such notice. If Wolverine Europe Limited chooses to pay Ms. Soriano her base salary in lieu of notice, in either case, such amounts will be in full and final settlement of all claims Ms. Soriano may have against Wolverine and its affiliates and, further, such amounts will be reduced by any income earned from subsequent employment. +2026 PROXY STATEMENT +62 +TABLE OF CONTENTS +In connection with her termination, she entered into the Settlement Agreement which provided for 12 months notice in lieu of nine (9) months (the “Notice Period”). Ms. Soriano’s employment was terminated on March 3, 2026. In connection with her termination, pursuant to the Settlement Agreement, she became entitled to receive a cash payment equal to one year of her base salary, a repatriation payment from the Company to Ms. Soriano in the amount of £300,000, and continued vesting of the portion of the unvested equity awards granted to Ms. Soriano for eight months after her termination date in exchange for a release of claims in favor of the Company and her agreement to comply with covenants restricting her ability to compete with the Company and to solicit and hire the Company’s employees for seven months and one year, respectively. +Benefits Triggered Upon a Change in Control +Benefits Upon Termination Following a Change in Control . Under the Executive Severance Agreements entered into with the NEOs, payments and benefits are triggered when employment is terminated without “Cause” or when an executive terminates employment for “Good Reason” within two years following a change in control of Wolverine Worldwide. +Upon such a qualifying termination, Wolverine Worldwide will pay the lump sum severance payment under the Executive Severance Agreement composed of the following: (1) unpaid base salary and bonus payments that had been earned; (2) in lieu of a bonus payment under the annual bonus plan, an amount equal to the quotient of the number of days the NEO was employed by Wolverine Worldwide, or any successor company in the year of termination, divided by the number of days in the year; multiplied by 100% of the greater of either (a) the bonus awarded to the NEO under the annual bonus plan for the preceding year and (b) the average paid to the NEO over the preceding two year period under the annual bonus plan; (3) in lieu of payments under the various three year performance periods that remain open on the date of termination, if any, an amount equal to the bonus the NEO would have received based on actual and assumed performance measures, multiplied by the quotient of the number of days the NEO participated in the performance period prior to the termination, divided by the total number of days in the performance period (in determining the earnings per share or other performance measures that can be determined annually for any year subsequent to the year of termination, performance will equal the level required to attain the maximum goal under the three year plan for that year); (4) two times the sum of (a) the NEO’s highest annual base salary during the 12-month period prior to termination and (b) the greater of (i) the average amount earned by the NEO during the previous two years under the annual bonus plan and (ii) the amount earned during the previous year under the annual bonus plan; (5) 100% of the positive spread for any stock options held by the NEO on the date of termination, whether or not vested; and (6) in the case of Mr. Hufnagel, the present value of an additional three years of deemed service under the Pension Plan and SERP and for Mr. Latchana and Ms. Klimek, the present value of an additional three years of deemed service under the Pension Plan. Upon a termination of employment following a change of control, Wolverine Worldwide or any successor company will maintain for a period of six months to one year the NEO’s benefits under the then current benefit plans, programs or arrangements that the NEO was entitled to participate in immediately prior to the termination date. In addition, Wolverine Worldwide or any successor company will provide outplacement services through the last day of the second calendar year following the calendar year of termination. +“Change in Control” under the Executive Severance Agreements generally means certain changes in composition of the Board of Directors, certain acquisitions of 20% or more of Wolverine Worldwide’s common stock or combined outstanding voting power of Wolverine World Wide, Inc., and other specified reorganizations, mergers, consolidations, liquidations, dissolutions or distributions of substantial assets (unless such transactions result in the creation of an entity in which at least 50% of the common stock and combined voting power is owned by the owners of record prior to the transaction, no single shareholder owns more than 20% of the combined voting power and a majority of the board remains unchanged). In all cases, an event will not qualify as a change in control unless it qualifies as “a change in the ownership or effective control” of the Company or “a change in the ownership of a substantial portion of the assets of the Company,” each as determined under the stringent requirements of Section 409A of the Tax Code. Under this standard, for example, transactions must be consummated, not just approved by shareholders. +“Cause” is defined under the Executive Severance Agreements to generally mean the willful and continued failure to substantially perform duties or willfully engaging in gross misconduct that is injurious to the Company. +“Good Reason” is defined under the Executive Severance Agreements to generally mean: (1) any materially adverse change in position, duties, responsibilities or title, or any removal, involuntary termination or failure to re-elect an officer; (2) a reduction in annual base salary; (3) any relocation or requirement to substantially increase business travel; (4) the failure to continue providing any executive incentive plans or bonus plans; (5) the failure to continue any employee benefit plan or compensation plan unless a comparable plan is available; (6) the failure to pay any salary, bonus, deferred compensation or other +2026 PROXY STATEMENT +63 +TABLE OF CONTENTS +compensation; (7) the failure to obtain an assumption agreement from any successor; (8) any purported termination of the employment which is not effected in a manner prescribed by the Executive Severance Agreement; or (9) any other material breach by Wolverine Worldwide or any successor company of its obligations under the Executive Severance Agreement. +Benefits Upon a Change in Control Only . The Company has double-trigger equity vesting upon a change in control, meaning that vesting only accelerates upon a qualifying termination of employment after a change in control. To the extent that the Company has made discretionary contributions under the Deferred Compensation Plan that are subject to a vesting schedule, any unvested portion of these contributions will vest on a change in control. Change in control for this purpose generally means certain changes in the composition of the Board of Directors, certain acquisitions of 20% of Wolverine Worldwide’s common stock (50% in the case of the Deferred Compensation Plan) and other specified reorganizations, mergers, consolidations, liquidations, dissolutions or dispositions of substantial assets. +Excise Tax Gross Up . The Compensation and Human Capital Committee previously determined that Wolverine Worldwide would not provide excise tax gross up payments in employment agreements entered into after 2008. The Company does not have any employment agreements that provide for tax gross up payments. +Benefits Triggered by Retirement, Death or Permanent Disability +Pension Plan . In the event of death before retirement, the Pension Plan provides the surviving spouse of a vested participant a death benefit equal to the qualified pre-retirement survivor annuity as defined in the Internal Revenue Code (generally 50% of the participant’s accrued normal retirement benefit). This benefit is paid annually to the surviving spouse beginning when the participant would have turned 60 and continues for the life of the surviving spouse. +SERP . If a SERP participant dies before beginning to receive benefits under the SERP, the Company must, based on the participant’s election, pay the beneficiary either a monthly annuity or a lump sum death benefit equal to the present value of the benefit computed as if the participant had retired on the date of death, had begun receiving benefits at age 55, and had continued to receive benefits for the remainder of the participant’s life expectancy. If the participant dies after beginning to receive benefit payments, benefits cease unless the participant was receiving benefits in the form of one of the joint and survivor annuity optional elections under the plan or had elected benefits in a form that provides for a continuation of benefits. +If a participant becomes disabled (as defined in the SERP), the SERP provides a disability benefit equal to 60% of the normal retirement accrued benefit based upon years of service up to the date that the participant became disabled through the date the participant reaches age 65 (at which point, the participant would begin drawing full SERP benefits) or is no longer disabled. +Annual Bonus Plan . Upon termination of employment at least six months after the beginning of a fiscal year due to death, disability, or early or normal retirement, an NEO is entitled to receive a pro rata portion of any annual bonus award earned under the annual bonus plan based on the NEO’s service during such fiscal year and actual performance under the annual bonus plan. The annual bonus is payable at the same time and in the same manner as awards are paid to other NEOs for the fiscal year. +Stock Incentive Plans . Upon death, disability or voluntary termination of employment after attaining age 59 with ten years of service with the Company, subject to certain conditions, the restrictions on time-vested units vest. Upon death, disability or voluntary termination of employment after attaining age 59 with ten years of service with the Company, subject to certain conditions, the restrictions on performance units will vest on a prorated basis based on Company performance for each open three-year cycle. +Deferred Compensation Plan . Upon death, disability, or other qualifying separation from service, including retirement, all in accordance with Section 409A of the Internal Revenue Code, all amounts deferred by the NEOs under the Deferred Compensation Plan, including any vested amounts credited to the NEOs pursuant to a discretionary Company contribution, shall generally be paid, or commence payment, within 60 days of the termination in accordance with the schedule elected by the NEO at the time of deferral. +2026 PROXY STATEMENT +64 +TABLE OF CONTENTS +Description of Restrictive Covenants That Apply During and After Termination Of Employment +The SERP contains non-competition, confidentiality, and employee non-solicitation provisions in favor of Wolverine Worldwide. Under the non-competition provisions of the SERP, the participant will not be entitled to any benefit payment if, prior to the date on which such benefit payment is due, the participant enters into certain relationships with a competing business. +Estimated Payments on Termination or Change in Control +The following table summarizes the potential payments and benefits payable to each NEO upon a change in control or termination of employment following each of the triggering events set forth in the table. As required, the amounts in the table assume that the termination of employment or change in control of Wolverine Worldwide took place on the Company’s last day of fiscal year 2025, which was January 3, 2026. The amounts set out below are in addition to benefits that are generally available to the Company’s employees such as distributions under the Company’s 401(k) savings plan, disability or life insurance benefits and accrued vacation. Due to the many factors that affect the nature and amount of any benefits provided upon the termination events discussed below, any actual amounts paid or distributed to NEOs may be different. Factors that may affect these amounts include timing during the year of the occurrence of the event, Wolverine Worldwide’s stock price and the NEO’s age and years of service. +The value of the accelerated vesting of unvested equity-based compensation awards was computed using the closing market price $18.21 of Wolverine Worldwide’s common stock on January 2, 2026, the last business day in fiscal year 2025. The value for unvested restricted stock is computed by multiplying $18.21 by the number of shares of the NEO’s restricted stock that would vest as a result of an event. +Each of the hypothetical events described in the following table (the highlighted headings in the left-hand column) is calculated and reported as a discrete event. For example, the amounts disclosed under the “Change in Control Only” heading are not cumulative with the amounts disclosed under the “ Change in Control/Termination ” heading. +Termination Event and Payment / Benefits +Hufnagel +Klimek +Kuhn +Latchana +Miller +Soriano +Termination by Company Other Than for Cause or by +Executive for Good Reason or In Lieu of Notice +$17,793,485 +— +— +— +— +$ 451,931 11 +Change in Control / Termination +Executive Severance Agreement 1 +$ 7,727,709 +$1,789,448 +$1,186,000 +$1,871,696 +$2,663,282 +$2,498,366 +Benefits under Executive Severance Agreement 2 +$ 47,609 +$ 39,327 +$ 28,783 +$ 43,566 +$ 43,992 +$ 36,900 +Stock Incentive Plans 3 +$ 5,244,479 +$ 926,578 +$ 295,439 +$ 387,922 +$ 679,245 +$1,015,449 +Lump sum payment under the SERP 4 +$ 5,773,124 +— +— +— +— +— +Death +SERP 5 +$ 4,379,585 +— +— +— +— +— +Pension Plan 6 +$ 416,337 +$ 232,864 +— +$ 181,516 +— +— +Stock Incentive Plans 3 +$ 5,244,479 +$ 926,578 +$ 295,439 +$ 387,922 +$ 679,245 +$1,015,449 +Earned Incentive Compensation 7 +$12,102,794 +$1,429,804 +$1,796,908 +$1,123,083 +$2,266,080 +$1,806,588 +Disability +SERP 8 +$ 3,870,744 +— +— +— +— +— +Stock Incentive Plans 3 +$ 5,244,479 +$ 926,578 +$ 295,439 +$ 387,922 +$ 679,245 +$1,015,449 +Earned Incentive Compensation 7 +$12,102,794 +$1,429,804 +$1,796,908 +$1,123,083 +$2,266,080 +$1,806,588 +Retirement +SERP 9 +$ 3,364,590 +— +— +— +— +— +Pension Plan 9 +$ 858,894 +$ 512,110 +— +$ 376,719 +— +— +Stock Incentive Plans 3 +$ 5,244,479 +$ 926,578 +$ 295,439 +$ 387,922 +$ 379,245 +$1,015,449 +Earned Incentive Compensation 7 +$12,102,794 +$1,429,804 +$1,796,908 +$1,123,083 +$2,266,080 +$1,806,588 +Change in Control Only +Stock Incentive Plans 10 +— +— +— +— +— +— +2026 PROXY STATEMENT +65 +TABLE OF CONTENTS +1. +Payments would be triggered after termination of employment under certain circumstances within two years following a change in control. Includes amounts payable in cash under the terms of the Executive Severance Agreement. The timing of the payment would be delayed to the extent earlier payment would trigger Section 409A of the tax code. The value of service-based restricted units that vest upon a change in control under the terms of the Company’s stock incentive plans are included in the Stock Incentive Plans row. +2. +These estimates assume that Wolverine Worldwide, or any successor company, maintains the benefit plans for a period of one year after termination and the outplacement services for a period of two years. +3. +Reflects the value of unvested shares of restricted stock units that would vest because of the event. +4. +Reflects the entire lump sum benefit payable to applicable NEOs, including any accumulated benefit. The timing of the payment would be delayed to the extent earlier payment would trigger Section 409A of the Tax Code. +5. +Reflects the entire lump sum death benefit payable to a participating NEO’s beneficiary, including any accumulated benefit. +6. +Amounts reflect the net present value of the annuity paid to the surviving spouse calculated using the same discount rate and mortality assumptions used in the Pension Benefits table under the heading “Pension Benefits in Fiscal Year 2025” under the heading “Pension Plans and 2025 Pension Benefits.” +7. +Under the Annual Bonus Plan and the terms of performance unit awards, each NEO may be eligible to receive a pro rata portion of any award if employment is terminated as a result of any of the specified events in the table. The amount reported represents (a) actual payout under the Annual Bonus Plan for fiscal year 2025, (b) actual payout under the 2023-2025 performance cycle and (c) target performance for the 2024-2026 and 2025-2027 performance cycles. Performance units would vest on a prorated basis based on actual Company performance. +8. +Reflects the net present value of the annuity using the same discount rate and mortality assumptions used in the Pension Benefits table and assuming the NEO drew the disability benefit until age 65 followed by the normal retirement benefit. +9. +Reflects the net present value of benefits according to actual elections in place and assuming SERP benefits begin at age 55 (or immediately if older than 55) and pension benefits as of age 60 with 10 years of service. +10. +Unvested restricted stock units (including performance share awards) do not vest based on a change in control only. +11. +Represents 9 months of base salary and is the maximum amount payable if the Company chooses to terminate her employment without notice. If Ms. Soriano voluntarily terminates, the maximum payout in lieu of notice is six months of base salary ($314,788). +2026 PROXY STATEMENT +66 +TABLE OF CONTENTS +CEO Pay Ratio +As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(u) of Regulation S-K, we are providing the following information about the relationship of the annual total compensation of our employees and the annual total compensation of Christopher Hufnagel, the Company’s Chief Executive Officer. +For 2025, our last completed fiscal year, the annual total compensation of the employee of the Company identified at median was $57,074 and the annual total compensation of the CEO, as reported in the Summary Compensation Table above was $10,854,729. +Based on this information, the 2025 ratio of the annual total compensation of Mr. Hufnagel to the median of the annual total compensation of all employees was estimated to be 190 to 1. +The methodology and the material assumptions, adjustments and estimates that we used to identify the median of the annual total compensation of all our employees, as well as to determine the annual total compensation of our “median employee” are described below. +• +We determined that, as of December 30, 2023, our employee population consisted of approximately 4,098 (2,251 in the U.S. and 1,847 outside the U.S.) individuals globally. After excluding employees from Austria (2), Belgium (1), Cayman Islands (1), Chile (13), Dominican Republic (4), Hong Kong (29), India (8 employees), Ireland (58), and Thailand (1) pursuant to the “de minimis” exception provided for in the rules, we used a base of 3,981 employees for purposes of determining the “median employee.” We selected December 30, 2023, as the date upon which we would identify the median employee in order to align with year-end. We believe there have been no changes in our employee population or our compensation arrangements in 2025 that would result in a material change in our pay ratio disclosure or our median employee, and therefore used the same median employee as in last year’s pay ratio disclosure. +• +To identify the median employee from our employee population, we used annual base salary, plus bonus and other cash incentives paid for the 12-month period ending December 30, 2023 as our consistently applied compensation measure - the same approach used in prior years. +○ +In making this determination, we annualized the compensation of all newly hired regular employees during this period. +○ +Additionally, for our full-time population, we used annualized salary; for our part-time population, we used the hourly rate of pay multiplied by the regularly scheduled hours expected to work. +• +Once we identified our median employee, we combined the elements of such employee’s compensation for fiscal 2025 in accordance with the SEC’s rules, resulting in annual total compensation of $57,074. +2026 PROXY STATEMENT +67 +TABLE OF CONTENTS +Pay vs. Performance +As required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(v) of Regulation S-K, the following information is provided about the relationship between Compensation shown on the Summary Compensation Table (SCT), Compensation Actually Paid (CAP), Total Shareholder Return (TSR), Net Income, and Non-GAAP Pre-Tax Income as the Company Selected Measure. +As shown in the table below, the CEO and other NEOs’ Compensation Actually Paid amounts are aligned with the Company’s TSR. Compensation Actually Paid has meaningfully decreased when the stock price has decreased (e.g., 2025), and Compensation Actually Paid has meaningfully increased when the stock price has increased (e.g., 2024). Alignment is primarily due to the Company’s use of equity incentives, which are tied directly to stock price in addition to the Company’s financial performance. +Value of Initial Fixed $100 +Investment Based On: +Year +Summary +Comp. +Table Total +for Krueger +CEO (a) +Summary +Comp. +Table Total +for +Mr. Hoffman +CEO (a) +Summary +Comp. +Table Total +for +Mr. Hufnagel +CEO (a) +Comp. +Actually +Paid to +Krueger +CEO (a), (b) +Comp. +Actually +Paid to +Hoffman +CEO (a), (b) +Comp. +Actually +Paid to +Hufnagel +CEO (a), (b) +Average +Summary +Comp. +Table +Total for +Non-CEO +NEOs (a) +Average +Comp. +Actually +Paid to +Non-CEO +NEOs (a), (b) +Wolverine +World Wide +TSR +Peer +Group (c) +TSR +Net Income +(in Millions) (d) +Non-GAAP +Pre-Tax +Income (in +Millions) (e) +2025 +N/A +N/A +$ 10,854,729 +N/A +N/A +$ 6,240,366 +$ 2,169,435 +$ 1,650,878 +$ 65.91 +$ 101.72 +$ 101.0 +$ 141.0 +2024 +N/A +N/A +$ 9,372,067 +N/A +N/A +$ 28,578,673 +$ 1,877,688 +$ 4,434,728 +$ 74.93 +$ 130.36 +$ 48.8 +$ 92.5 +2023 +N/A +$ 7,578,715 +$ 3,174,477 +N/A +$ 3,230,490 +$ 2,691,339 +$ 2,310,884 +$ 1,841,974 +$ 28.98 +$ 134.84 +$( 38.1 ) +$ 4.8 +2022 +N/A +$ 6,519,654 +N/A +N/A +$ 207,454 +N/A +$ 1,818,674 +$ 868,826 +$ 34.33 +$ 108.06 +$( 189.1 ) +$ 133.1 +2021 +$ 14,405,857 +N/A +N/A +$ 3,570,244 +N/A +N/A +$ 3,924,986 +$ 2,336,212 +$ 88.24 +$ 151.33 +$ 67.0 +$ 191.5 +(a) +NEOs included in these columns reflect the following: +Year +CEO (or Principal Executive Officer) +Non-CEO NEOs +2025 +Christopher Hufnagel +Amy Klimek, Susan Kuhn, David Latchana, Taryn Miller, Isabel Soriano +2024 +Christopher Hufnagel +Amy Klimek, David Latchana, Taryn Miller, Isabel Soriano, Michael Stornant +2023 +Brendan Hoffman (through 8/5/2023) & +Christopher Hufnagel (through end of year) +Isabel Soriano, Michael Stornant, James Zwiers, Amy Klimek +2022 +Brendan Hoffman +Isabel Soriano, Michael Stornant, James Zwiers, Christopher Hufnagel +2021 +Blake Krueger +Brendan Hoffman, Isabel Soriano, Michael Stornant, James Zwiers +(b) +The following table details the adjustment to the Summary Compensation Table Total Pay for our CEO, as well as the average for our other NEOs, to determine “compensation actually paid,” as computed in accordance with Item 402(v), with dividends accounted for in the change in fair value of the awards. Amounts do not reflect actual compensation earned by or paid to our NEOs during 2025. +CEO +NEO Average +Hufnagel (2025) +2025 +Summary Compensation Table Total +$ 10,854,729 +$ 2,169,435 +Less: Reported Fair Value of Equity Awards (1) +$ 5,800,023 +$ 685,028 +Add: Year-End Fair Value of Outstanding and Unvested Equity Awards Granted in the Year (2) +$ 5,165,182 +$ 603,207 +Add: Change in Fair Value from Prior Year End to Vesting Date of Equity Awards Granted in Prior Years that Vested in the Year (2) +$ 828,094 +$ ( 93,063 ) +Add: Year Over Year Change in Fair Value of Outstanding and Unvested Equity Awards Granted in Prior Years (2) +$ ( 4,260,721 ) +$ ( 352,941 ) +Less: Fair Value at the End of Prior Year of Equity Awards that Failed to Meet Vesting Conditions in the Year (2) +$ — +$ — +Add: Value of Dividends or Other Earnings Paid on Stock or Option Awards Not Otherwise Reflected in Fair Value or Total Compensation +$ 174,676 +$ 18,277 +Less: Change in Pension Value Reported in the Summary Compensation Table +$ 1,131,678 +$ 19,145 +Add: Pension Service Cost for Services Rendered During the Year +$ 410,107 +$ 10,136 +Compensation Actually Paid +$ 6,240,366 +$ 1,650,878 +(1) +The amounts reflect the aggregate grant-date fair value reported in the “Stock Awards” columns in the Summary Compensation Table for the applicable year. +(2) +In accordance with Item 402(v) requirements, the fair values of unvested and outstanding equity awards to our NEOs were measured as of the end of the fiscal year, and as of each vesting date, during the year displayed in the table above. For performance-based awards, the fair values reflect the probable outcome of the performance vesting conditions as of each measurement date. Dividends are accounted for in the change in fair value calculations. We did not grant any equity awards that vested in the year of grant. +2026 PROXY STATEMENT +68 +TABLE OF CONTENTS +(c) +Peer Group reflects the same S&P 1500 Consumer Durables & Apparel Index used for the performance graph included in the 10-K as required under S-K Item 201(e)(1)(ii). +(d) +Refer to Note 1 in the 2025 Annual Report for additional information regarding the change in accounting principle applied retrospectively to fiscal years 2024 and 2023. +(e) +For a reconciliation of GAAP Pre-tax Income to non-GAAP Pre-tax Income , as used in the third table below, see the Non-GAAP reconciliation table in Appendix A. +Tabular List of Company Performance Measures +The four measures listed below, in no particular order, represent the most important metrics to link Compensation Actually Paid for FY 2025 as further described in our Compensation Discussion and Analysis (CD&A) within the sections titled “Annual Bonus” and “Long-Term Incentive Compensation.” +Most Important Performance Measures +Non-GAAP Pre-Tax Income +Revenue +Non-GAAP Operating Profit +Relative TSR +Compensation Actually Paid versus Total Shareholder Return +As shown in the chart below, the CEO and other NEOs’ Compensation Actually Paid amounts are aligned with the Company’s TSR. Alignment is primarily due to the Company’s use of equity incentives, which are tied directly to stock price in addition to the Company’s financial performance. The TSR calculation assumes a $100 investment made on 1/2/2021. +2026 PROXY STATEMENT +69 +TABLE OF CONTENTS +Compensation Actually Paid versus Net Income +The chart below compares the CEO and other NEOs’ Compensation Actually Paid to our Company’s GAAP Net Income. +Compensation Actually Paid versus Non-GAAP Pre-Tax Income +The chart below compares the CEO and other NEOs’ Compensation Actually Paid to our Company Selected Measure, Non-GAAP Pre-Tax Income. +2026 PROXY STATEMENT +70 +TABLE OF CONTENTS +Proposal 2 – Advisory Resolution to +Approve Executive Compensation +The Company is asking its shareholders to indicate their support for Wolverine Worldwide’s NEO compensation, as described in this Proxy Statement. This proposal, commonly known as a “say-on-pay” proposal, gives the Company’s shareholders the opportunity to express their view on compensation for the Company’s NEOs. The say-on-pay vote is advisory and, therefore, not binding on the Company, the Compensation and Human Capital Committee or the Board. Even though non-binding, the Board and Compensation and Human Capital Committee value the opinions of Wolverine Worldwide’s shareholders and will review and consider the voting results when making future decisions regarding the Company’s executive compensation program. +At the 2023 annual meeting of shareholders, the Company held an advisory vote on the frequency of future say-on-pay votes. Our shareholders approved, on an advisory basis, an annual say-on-pay vote, and after consideration of the shareholders’ vote, the Board determined to proceed with an annual say-on-pay vote. After the 2026 Annual Meeting of Shareholders, our next advisory vote to approve executive compensation will occur at our 2027 annual meeting of shareholders. Further, in accordance with Rule 14a-21(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), shareholders will be asked to vote again on how frequently the Company should hold future say-on-pay votes at the Company’s 2029 annual meeting of shareholders. +The Company encourages shareholders to read the “Compensation Discussion and Analysis” (“CD&A”) section of this Proxy Statement beginning on page 37 . As described in the CD&A section, the Compensation and Human Capital Committee has structured the executive compensation program to achieve the following key objectives: +• +Align the interests of NEOs with those of the shareholders through incentives based on achieving performance objectives that enable increased shareholder value +• +Provide incentives for achieving specific pre-established near-term strategic, business unit and corporate goals and reward the attainment of those goals +• +Provide incentives for achieving specific pre-established longer-term corporate financial goals and reward the attainment of those goals +• +Attract and retain talented NEOs who will lead Wolverine Worldwide and drive superior business and financial performance +The executive compensation program is designed to achieve these objectives, in part, by: +• +Weighting at-risk and variable compensation (annual bonuses and long-term incentives) much more heavily than fixed compensation (base salaries) +• +Rewarding annual performance while maintaining emphasis on longer-term objectives +• +Blending cash, non-cash, long- and short-term compensation components and current and future compensation components +The Company encourages shareholders to read the Summary Compensation Table and other related compensation tables and narrative, appearing on pages 52 - 70 , which provide detailed information on the compensation of the Company’s NEOs. +The Compensation and Human Capital Committee and the Board of Directors believe the Company’s compensation program and its policies and procedures articulated in the CD&A section are effective in aligning the interests of the Company’s NEOs with the interests of shareholders, promoting the achievement of the Company’s near- and long-term objectives and increasing shareholder value. +2026 PROXY STATEMENT +71 +TABLE OF CONTENTS +In accordance with the rules under Section 14A of the Exchange Act, and as a matter of good corporate governance, the Company asks shareholders to approve the following advisory resolution at the 2026 Annual Meeting of Shareholders: +RESOLVED, that the shareholders of Wolverine World Wide, Inc. (the “Company”) approve, on an advisory basis, the compensation of the Company’s named executive officers disclosed in the Compensation Discussion and Analysis section, the Summary Compensation Table and the related compensation tables, notes and narrative in the Proxy Statement for the Company’s 2026 Annual Meeting of Shareholders. +BOARD RECOMMENDATION +The Board recommends that you vote “FOR” approval of the advisory resolution to approve executive compensation. +2026 PROXY STATEMENT +72 +TABLE OF CONTENTS +Proposal 3 – Ratification of Appointment of +Independent Registered Public Accounting Firm +Ernst & Young LLP (“Ernst & Young”) was the Company’s independent registered public accounting firm for the fiscal year ended January 3, 2026. The Audit Committee has reappointed Ernst & Young as the Company’s independent registered public accounting firm for the current fiscal year. As a matter of good corporate governance, the Audit Committee has determined to submit its appointment of Ernst & Young to the Company’s shareholders for ratification. If this appointment is not ratified by the holders of a majority of votes cast affirmatively or negatively on the matter, the Audit Committee will review its future selection of an independent registered public accounting firm. Even if the appointment is ratified, the Audit Committee in its discretion may select a different independent registered public accounting firm any time during the year if it determines that such a change would be in the best interests of the Company and the Company’s shareholders. +The Audit Committee reviewed Ernst & Young’s performance prior to appointing it as the Company’s independent registered public accounting firm, and considered: +• +The historical and recent performance of Ernst & Young on the Company’s audit, including the quality of the engagement team and Ernst & Young’s experience, client service, responsiveness and technical expertise +• +The Public Company Accounting Oversight Board (“PCAOB”) report of selected Ernst & Young audits +• +The appropriateness of fees charged +• +Ernst & Young’s familiarity with the Company’s accounting policies and practices and internal control over financial reporting +• +Ernst & Young’s financial strength and performance +Representatives of Ernst & Young are expected to be present at the Annual Meeting. They will have an opportunity to make a statement if they desire to do so and are expected to be available to respond to appropriate questions from shareholders. +BOARD RECOMMENDATION +The Board recommends that you vote “FOR” ratification of the Audit Committee’s selection of the firm of Ernst & Young LLP as the Company’s independent registered public accounting firm for fiscal year 2026. +2026 PROXY STATEMENT +73 +TABLE OF CONTENTS +Proposal 4 – Shareholder Proposal +Green Century Capital Management, Inc., on behalf of the Green Century Equity Fund, 114 State St., Suite 200, Boston, MA 02109, has submitted the following proposal. Green Century Equity Fund is the beneficial owner of at least $25,000 worth of shares of the Company’s common stock. The proponent is solely responsible for the contents of this proposal and its supporting statement. +If properly presented at the Annual Meeting by or on behalf of the proponent, the Board of Directors recommends a vote AGAINST this proposal. +Resolution Regarding New Climate Change Policies or Practices +Whereas: Climate change poses macroeconomic risks that can depress returns for long-term diversified investors. Studies expect warming of 2"C to cost over $38 trillion annually by 2049. [1] +In its 10-K, Wolverine Worldwide, Inc. (Wolverine) acknowledges that climate change “could have a long-term adverse impact on the Company’s business and results of operation by increasing... ‘Unseasonable or extreme weather conditions”’ and “the cost of certain raw materials.” [2] Climate change will also produce more intense and frequent extreme weather in Wolverine’s critical manufacturing countries. [3] +While Wolverine has adopted initiatives to reduce energy consumption and waste, the Company has yet to set climate-related targets. [4] Wolverine has disclosed its 2023 Scope 1 and 2 greenhouse gas (GHG) emissions inventory and made progress collecting 2024 data. It will report 2025 Scope 1 and 2 emissions in 2026 in compliance with California legislation. [5] Wolverine notes that “as data quality improves and risks become clearer, [the Company] will use these insights to guide decision-making and develop appropriate emission reduction targets,” including “whether and how to set future goals for reducing emissions.” [6] +Given the continuing enterprise and macroeconomic risks of climate change, Wolverine should not defer action but instead establish goals concurrent with improved data gathering. +Wolverine lags peers in mitigation efforts. Competitors Crocs, Deckers Outdoor Corp., VF Corp., Puma, lululemon and Adidas have set Science-Based Targets initiative (SBTi) verified emissions reduction targets and supporting goals for products, materials, employee travel, suppliers, and renewable energy. [7] Many of these peers refine their emissions inventories while pursuing climate goals. +Wolverine recognizes that “operating results could be adversely affected if it is unable to maintain its brands’ positive image,” especially while operating in competitive industries and markets. [8] Wolverine aims to appeal to outdoor consumers and “[share] the simple power of being outside.” [9] The Company’s failure to keep pace with competitors and signal forward-looking ambitions to address climate change misaligns this brand image with its customer base. +To appropriately respond to climate-related risks and opportunities, protect shareholders from macroeconomic risks, and remain competitive in its market, the proponent believes Wolverine should take additional action. +RESOLVED: Shareholders request that Wolverine report, at reasonable cost and omitting proprietary information, any new policies or practices that that [sic] will increase its ambitions and goals to reduce its impact on climate change, above and beyond existing efforts. +[1] +https://www.nature.com/articles/s41586-024-07219-0 +[2] +https://www.wolverineworldwide.com/wp-content/uploads/2025/03/2024-WWW-Annual-Report.pdf, 15 +[3] +https://www.wolverineworldwide.com/wp-content/uploads/2025/10/2024WWW-Global-Impact-Report_2.pdf, 35; +https://wmo.int/news/media-centre/climate-change-and-extreme-weather-impacts-hit-asia-hard +[4] +https://www.wolverineworldwide.com/wp-content/uploads/2025/10/2024WWW-Global-Impact-Report_2.pdf, 72 +[5] +https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=202320240SB253 +[6] +https://www.wolverineworldwide.com/wp-content/uploads/2025/10/2024WWW-Global-Impact-Report_2.pdf, 70, 72. +[7] +https://sciencebasedtargets.org/target-dashboard +[8] +https://www.wolverineworldwide.com/wp-content/uploads/2025/03/2024-WWW-Annual-Report.pdf, 10, 15 +[9] +https://www.wolverineworldwide.com/wp-content/uploads/2025/03/2024-WWW-Annual-Report.pdf, 5 +2026 PROXY STATEMENT +74 +TABLE OF CONTENTS +SUPPORTING STATEMENT: Proponents recommend, at board and management discretion: +• +Adopting GHG reduction targets or goals for renewable energy, energy efficiency, fleet electrification, supply chain engagement, or other measures; +• +Taking into consideration criteria of advisory groups like SBTi; +• +Developing a transition plan demonstrating how the Company plans to meet any goals, while considering criteria used by advisory groups such as the Transition Plan Taskforce and CDP. +Board Response +Following careful review and consideration of the proposal, the Board has determined that the proposal is unnecessary and not in the best interests of the Company’s shareholders. For the reasons set forth below, the Board recommends that you vote “AGAINST” this shareholder proposal. +Wolverine Worldwide continues to steadily execute its emissions data collection and previously disclosed reporting strategy. +Our sustainability strategy is focused on expanding data collection, reporting on our GHG emissions performance, and identifying opportunities to reduce our GHG emissions. We have strengthened our climate data capabilities and engaged external experts to support emissions measurement, executing the plans we shared with stakeholders last year in our proxy statement and Global Impact Report. In 2025, we began reporting our first Scope 1 and 2 greenhouse gas (“GHG”) emissions inventory (for 2023 emissions) aligned with the GHG Protocol Corporate Accounting and Reporting Standard. As disclosed in our Global Impact Report, in 2025, we advanced our work toward reporting our Scope 3 GHG emissions by initiating data gathering efforts, completing a category relevance screening and disclosing the screening’s results for each of the 15 Scope 3 categories. We currently intend to continue our annual reporting by disclosing our 2024 Scope 1 and 2 emissions, as well as disclosing our baseline Scope 3 emissions, later this year. Most recently, in 2026, to prepare for future climate regulations, we signed an agreement for GHG emissions reporting software with a third-party service provider who is also capable of assisting us with setting sustainability goals and reduction targets. +Our GHG emissions and climate-related reporting priorities are appropriately tailored to our business, stakeholders, and operating environment. +As we move forward and expand emissions tracking across our operations and value chain, we aim to gain insight into year-over-year comparisons for our emissions performance. We expect that this improved visibility will help us decide on the right next steps for our climate strategy, including whether and how to set future goals for reducing emissions, in alignment with the interests of our investors, customers, and other stakeholders. That said, we operate in a challenging geopolitical and macroeconomic environment and an industry constrained by an evolving, high-rate tariff framework. These realities require that we pursue our emissions reporting priorities consistent with our capital allocation and other strategies, resource constraints, and capital availability. We believe this balanced approach best provides ongoing clarity and responsiveness to our stakeholders with a clear focus on delivering business results. By contrast, we believe this shareholder proposal ignores these realities by demanding that Wolverine Worldwide commit to new, undefined actions beyond our current strategy. +Shareholders soundly rejected a similar proposal last year. That request from the same proponent asked the Company to adopt short-, medium-, and long-term reduction targets and GHG emissions reporting, and it received only 16.3% support. Of the shareholders with whom we engage (representing 78% of our shares outstanding, as disclosed in the Shareholder Engagement section of this proxy statement), those that inquired about our corporate responsibility efforts have been pleased with our progress and strategy. We shared this view in our multiple meetings with the proponent to hear its perspective on these topics, share our progress, and seek to find common ground related to the proposal. +2026 PROXY STATEMENT +75 +TABLE OF CONTENTS +The Company continues to invest in and report on corporate responsibility topics of interest to our stakeholders. +We have published global impact reports that highlight our annual corporate responsibility initiatives and priorities since 2021. This commitment to transparency allows us to highlight our efforts to help protect the planet, support our teams, serve our communities, and maintain responsible sourcing and supply chains. These efforts are supported by strong corporate governance structures, including a cross-functional team overseen by our Board through its committees. +BOARD RECOMMENDATION +In light of our continued progress and tailored strategy for GHG emissions reporting, the Board recommends that you vote “AGAINST” this shareholder proposal. +2026 PROXY STATEMENT +76 +TABLE OF CONTENTS +Audit Committee Report +The Audit Committee of the Board of Directors consists of five directors who are independent under the Company’s Director Independence Standards, the NYSE listed company standards and applicable SEC standards. The Audit Committee represents and assists the Board in fulfilling its oversight responsibility regarding the Company’s financial statements and the financial reporting process, the internal control over financial reporting, the performance of the internal audit function and the independent registered public accounting firm, the qualifications and independence of the independent registered public accounting firm, the annual independent audit of Wolverine Worldwide’s financial statements and internal control over financial reporting and compliance with legal and regulatory requirements. The Audit Committee is directly responsible for appointing, retaining, compensating, overseeing, evaluating and terminating (if appropriate) Wolverine Worldwide’s independent registered public accounting firm. Wolverine Worldwide’s management has primary responsibility for the financial statements and the financial reporting process, including the application of accounting and financial principles, the preparation, presentation and integrity of the financial statements and the systems of internal controls and other procedures designed to promote compliance with accounting standards and applicable laws and regulations. Wolverine Worldwide’s independent registered public accounting firm is responsible for expressing an opinion on the conformity of Wolverine Worldwide’s financial statements with generally accepted accounting principles and for auditing the effectiveness of Wolverine Worldwide’s internal control over financial reporting. +The Audit Committee has taken steps to provide assurances regarding Audit Committee composition and procedures, the independence of Wolverine Worldwide’s independent registered public accounting firm and the integrity of Wolverine Worldwide’s financial statements and disclosures. These steps include: (i) reviewing the Audit Committee Charter; (ii) reviewing with legal counsel and the independent registered public accounting firm the Accounting and Finance Code of Ethics; (iii) maintaining financial, accounting and business ethics complaint procedures to allow employees, shareholders and the public to report concerns regarding Wolverine Worldwide’s financial statements, internal controls and disclosures; and (iv) reviewing procedures for the Audit Committee to pre-approve all audit and non-audit services provided by Wolverine Worldwide’s independent registered public accounting firm. +As part of its supervisory duties, the Audit Committee has reviewed Wolverine Worldwide’s audited financial statements for the fiscal year ended January 3, 2026, and has discussed those financial statements with Wolverine Worldwide’s management and internal financial staff, and the internal auditors and independent registered public accounting firm with and without management present. The Audit Committee has also reviewed and discussed the following with Wolverine Worldwide’s management and the financial staff, and with the internal auditors and independent registered public accounting firm with and without management present: +• +Accounting and financial principles and significant assumptions, estimates and matters of judgment used in preparing the financial statements +• +Allowances and reserves for accounts receivable, inventories and taxes +• +Accounting for acquisitions, pension plans and equity-based compensation plans +• +Goodwill and intangible asset impairment analysis +• +Other significant financial reporting issues and practices +The Audit Committee has discussed with Wolverine Worldwide’s independent registered public accounting firm the results of its examinations and its judgments concerning the quality, as well as the acceptability, of Wolverine Worldwide’s accounting principles and such other matters that it is required to discuss with the independent registered public accounting firm under applicable rules, regulations or generally accepted auditing standards, including the matters required to be discussed by the applicable requirements of the PCAOB and the SEC. In addition, the Audit Committee has received from the independent registered public accounting firm the written disclosures and the letter required by the applicable requirements of the PCAOB regarding the independent registered public accounting firm’s communications with the Audit Committee concerning independence and has discussed their independence from Wolverine Worldwide and Wolverine Worldwide’s management with them, including a consideration of the compatibility of non-audit services with their independence, the scope of the audit and the scope of all fees paid to the independent registered public +2026 PROXY STATEMENT +77 +TABLE OF CONTENTS +accounting firm during the year. After, and in reliance upon the reviews and discussions described above, the Audit Committee recommended to the Board that the audited financial statements for the fiscal year ended January 3, 2026, be included in Wolverine Worldwide’s Annual Report on Form 10-K for the year then ended to be filed with the SEC. +Respectfully submitted, +William K. Gerber (Chair) +Cheryl Abel-Hodges +Stacia Andersen +Jeffrey M. Boromisa +Brenda J. Lauderback +2026 PROXY STATEMENT +78 +TABLE OF CONTENTS +Independent Registered Public Accounting Firm +The Audit Committee has adopted a policy under which the Audit Committee must approve all audit and non-audit services provided by the Company’s independent registered public accounting firm, Ernst & Young LLP, and which prohibits Ernst & Young LLP from providing any non-audit services that are prohibited by the SEC or the PCAOB. The Audit Committee provides categorical pre-approval for routine and recurring services, with specific service descriptions and budgets that include sufficient information to confirm the determination that the provision of such service will not impair the independent registered public accounting firm’s independence. All services not within the specifically pre-approved service descriptions and budgets require engagement specific pre-approval. With certain exceptions (such as pre-approval of audit services), the Audit Committee may delegate engagement specific pre-approval to one or more Audit Committee members, and has so delegated in certain instances to the Audit Committee Chairperson. Management must communicate to the Audit Committee at its next regularly scheduled meeting any services approved by an Audit Committee member. The Audit Committee pre-approved all fees paid to Ernst & Young LLP for services performed in 2025 and 2024. The aggregate fees billed by Ernst & Young LLP for audit and non-audit services were: +2025 +2024 +Audit Fees 1 +$3,032,300 +$2,767,100 +Audit-Related Fees +$ — +$ — +Total Audit & Audit-Related Fees +$3,032,300 +$2,767,100 +Tax Fees 2 +Tax Compliance +$ 638,400 +$ 710,600 +Tax Planning & Advisory +$ 97,600 +$ 138,400 +Total Tax Fees +$ 736,000 +$ 849,000 +All Other Fees +$ — +$ — +TOTAL FEES +$3,768,300 +$3,616,100 +1 +“Audit Fees” are comprised of fees for the annual audit, including the audit of internal control over financial reporting, interim reviews of the financial statements included in Wolverine Worldwide’s Quarterly Reports on Form 10-Q, foreign statutory audits, consultations concerning accounting matters associated with the annual audit, and audit services performed in connection with registration statements and issuance of comfort letters and consents. +2 +“Tax Fees” are comprised of fees for the preparation of domestic and foreign tax returns, tax compliance services, and routine tax advisory and tax planning services. +The Audit Committee has adopted a policy restricting the Company’s hiring of current or former partners or employees of the independent registered public accounting firm retained by the Company. +2026 PROXY STATEMENT +79 +TABLE OF CONTENTS +Related Party Matters +Certain Relationships and Related Transactions +Since December 29, 2024, the Company has not engaged in any “related person” transactions with any person who is or was during the last fiscal year a director, executive officer, nominee for director or holder of 5% or more of Company voting securities, affiliate or any member of the immediate family of the foregoing persons. +Related Person Transactions Policy +The Board adopted written policies and procedures regarding related person transactions. They require the Governance Committee to review and either approve or disapprove the Company entering into any Interested Transactions (defined below). If advance approval is not feasible, then the Governance Committee must review and ratify the Interested Transaction at its next meeting. +Interested Transaction +Any transaction, arrangement or relationship or series of similar transactions, arrangements or relationships (including any indebtedness or guarantee of indebtedness) in which: +(1) +The aggregate amount involved exceeds or is expected to exceed $120,000 since the beginning of Wolverine Worldwide’s last completed fiscal year; +(2) +The Company or any of its subsidiaries is a participant; and +(3) +Any Related Person (defined below) has or will have a direct or indirect interest. +An Interested Transaction does not include: +(1) +Any employment compensation paid to an executive officer of the Company if the Compensation and Human Capital Committee approved or recommended to the Board of Directors for approval of such compensation; +(2) +Any compensation paid to a director for service as a director of the Company; +(3) +Any transaction in which a Related Person has an indirect interest solely as a result of being (i) a director or, together with all other Related Persons, as defined below, a less than 10% beneficial owner of an equity interest in another entity, or both, or (ii) a limited partner in a partnership in which the Related Person, together with all other Related Persons, has an interest of less than 10%; +(4) +Any transaction in which the Related Person’s interest arises solely from the ownership of the Company’s common stock and all holders of the Company’s common stock received the same benefit on a pro rata basis (e.g., a dividend); or +(5) +Any transaction with another publicly traded company where the Related Person’s interest arises solely from the ownership of more than 5% of the Company’s common stock and the ownership of a non-controlling interest in the other publicly traded company. +Related Person +Any: +(a) +Person who is or was at any time since the beginning of the Company’s last completed fiscal year even if they do not presently serve in that role, an executive officer, a director or, to the extent information regarding such nominee is being presented in a proxy or information statement relating to the election of that nominee as a director, a nominee for election as a director; +(b) +Beneficial owner of greater than five percent of Wolverine Worldwide’s common stock; or +(c) +Immediate family member* of any of the foregoing. +* +Immediate family member is defined as a person’s spouse, parents, stepparents, children, stepchildren, siblings, mothers and fathers-in-law, sons- and daughters-in-law, and brothers- and sisters-in-law, and anyone residing in such person’s home (other than a tenant or employee). +The Governance Committee considers whether the Interested Transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances, the extent of the Related Person’s interest in the transaction, and other factors that it deems relevant. No director participates in any discussion or approval of an Interested Transaction for which he or she is a Related Person, except to provide information to the Governance Committee. +2026 PROXY STATEMENT +80 +TABLE OF CONTENTS +Additional Information +Shareholders List +For information about how to view the list of shareholders entitled to vote at the Annual Meeting during the ten days preceding the Annual Meeting, please visit our 2026 Annual Meeting website at www.wolverineworldwide.com/2026annualmeeting. +Director and Officer Indemnification +The Company indemnifies its directors and NEOs to the fullest extent permitted by law so that they will be free from undue concern about personal liability in connection with their service to the Company. +Delinquent Section 16 Reports +Section 16(a) of the Exchange Act requires the Company’s directors and executive officers, and persons who beneficially own more than 10% of the outstanding shares of the Company’s common stock, to file reports of ownership and changes in ownership of shares of common stock with the SEC. Directors, executive officers and greater than 10% beneficial owners are required by SEC regulations to furnish Wolverine Worldwide with copies of all Section 16(a) reports they file. Based on its review of the copies of such reports received by it, or written representations from certain reporting persons, the Company believes that during fiscal year 2025, its officers and directors filed the required reports under Section 16(a) on a timely basis, except one transaction each for Ms. Soriano, Ms. Abel-Hodges, and Mr. Cupps, and a Form 3 for Ms. Abel-Hodges, due to administrative errors. +Shareholder Proposals for Inclusion in Next Year’s Proxy Statement +Pursuant to SEC Rule 14a-8, some shareholder proposals may be eligible for inclusion in Wolverine Worldwide’s 2027 Proxy Statement and proxy card. Any such shareholder proposals must be submitted in writing to the Secretary of Wolverine Worldwide no later than the close of business on November 25, 2026. You should address all shareholder proposals to the attention of Secretary, Wolverine World Wide, Inc., 9341 Courtland Drive, NE, Rockford, Michigan 49351. +Other Shareholder Proposals for Presentation at Next Year’s Annual Meeting +The Company’s By-Laws require that any shareholder proposal that is not submitted for inclusion in next year’s Proxy Statement under SEC Rule 14a-8, but is instead sought to be presented directly at the 2027 Annual Meeting of Shareholders, must be received at the Company’s principal executive offices by the close of business not less than 90 days nor more than 120 days prior to the first anniversary of the 2026 Annual Meeting. As a result, proposals, including director nominations submitted pursuant to these provisions of the By-Laws, must provide the information set forth in the By-Laws (which includes information required under Rule 14a-19) and be received no earlier than January 7, 2027 and no later than the close of business on February 8, 2027. You should address a proposal to Secretary, Wolverine World Wide, Inc., 9341 Courtland Drive, NE, Rockford, Michigan 49351, and include the information and comply with the requirements set forth in those By-Laws, which the Company has posted on its website. SEC rules permit management to vote proxies in its discretion in certain cases if the shareholder does not comply with this deadline, and in certain other cases notwithstanding the shareholder’s compliance with this deadline. +Voting Securities +Shareholders of record at the close of business on March 9, 2026, are eligible to vote at the Annual Meeting. The Company’s voting securities consist of its $1.00 par value common stock, and there were 81,980,999 shares outstanding and entitled to vote on the record date. Each share outstanding on the record date will be entitled to one vote on each director nominee and +2026 PROXY STATEMENT +81 +TABLE OF CONTENTS +one vote on each other matter. Treasury shares are not voted. Individual votes of shareholders are kept private, except as appropriate to meet legal requirements. Access to proxies and other individual shareholder voting records is limited to the independent inspectors of election and certain employees of the Company and its agents who acknowledge their responsibility to comply with this policy of confidentiality. +Conduct of Business +A majority of the outstanding shares of common stock as of the record date must be present at the Annual Meeting in order to hold the Annual Meeting and conduct business. This is called a “quorum.” Your shares are counted as present at the meeting if you are present at the Annual Meeting and entitled to vote, a proxy card has already been properly submitted by you or on your behalf, or you have submitted your proxy by telephone or by internet, or by completing, signing, dating and returning the accompanying proxy card or voting instruction form by mail in the enclosed envelope. Both abstentions and broker non-votes (explained below in “Vote Required for Election and Approval” ) are counted as present for the purpose of determining the presence of a quorum. +Vote Required for Election and Approval +For Proposal 1, Election of Directors for Terms Expiring in 2029, directors are elected by a majority of votes cast unless the election is contested, in which case directors are elected by a plurality of votes cast. A majority of votes cast means that the number of shares voted “for” a Director nominee exceeds the number of votes cast “against” the Director nominee. If an incumbent director in an uncontested election does not receive a majority of votes cast for his or her election, under the Company’s Corporate Governance Guidelines, the director is required to submit a letter of resignation to the Board for consideration by the Governance Committee. The Governance Committee will then make a recommendation to the Board as to whether to accept or reject the tendered resignation. The Governance Committee and the Board, in making their decisions, may implement any procedures they deem appropriate and may consider any factor or other information that they deem relevant. The Board will then act on the tendered resignation, taking into account the Governance Committee’s recommendation, and will publicly disclose its decision regarding the resignation within 90 days after the results of the election are certified. A director whose resignation is under consideration shall abstain from participating in any recommendation or decision regarding that resignation. If the resignation is not accepted, the director will continue to serve until the next annual meeting of shareholders at which such director faces re-election and until such director’s successor is elected and qualified. +Proposal 2, Advisory Resolution to Approve Executive Compensation, requires the affirmative vote of a majority of votes cast affirmatively or negatively on the matter. +Proposal 3, Ratification of Appointment of Independent Registered Public Accounting Firm, requires the affirmative vote of a majority of votes cast affirmatively or negatively on the matter. +Proposal 4, Shareholder Proposal regarding new climate change policies or practices, requires the affirmative vote of a majority of votes cast affirmatively or negatively on the matter. +Generally, brokers holding shares must vote according to specific instructions they receive from the beneficial owners of those shares. If brokers do not receive specific instructions, brokers may in some cases vote the shares in their discretion, but are not permitted to vote on certain proposals and may elect not to vote on any of the proposals unless you provide voting instructions. If you do not provide voting instructions and the broker elects to vote your shares on some but not all matters, it will result in a “broker non-vote” for the matters on which the broker does not vote. Abstentions occur when you provide voting instructions but instruct the broker to abstain from voting on a particular matter instead of voting for or against the matter. +Abstentions and broker non-votes are not considered “votes cast.” Abstentions and broker non-votes, if any, will have no effect on the outcome of the election of directors and will have no effect on the outcome of any other matters proposed for a vote at the Annual Meeting. +2026 PROXY STATEMENT +82 +TABLE OF CONTENTS +Voting Results of the Annual Meeting +The Company will announce preliminary voting results at the Annual Meeting and publish final results in a Form 8-K within four business days following the Annual Meeting. If final results are not known within four business days of the Annual Meeting, then the Company will file a Current Report on Form 8-K with the preliminary results and file an amended Current Report on Form 8-K within four business days of the availability of the final results. +Attending the Annual Meeting +You may vote shares held directly in your name as the shareholder of record at the Annual Meeting. If you choose to vote at the meeting, please access instructions as set forth in the Notice of annual meeting. Even if you plan to attend the Annual Meeting, Wolverine Worldwide recommends that you vote your shares in advance as described below so that your vote will be counted if you later decide not to attend the Annual Meeting. You may vote shares held in “street name” through a brokerage account or by a bank or other nominee if you obtain a proxy from the record holder giving you the right to vote the shares. Each shareholder may appoint only one proxy holder or representative to attend the meeting on his or her behalf. +Manner for Voting Proxies +The shares represented by all valid proxies received by telephone, by internet or by mail will be voted in the manner specified. Where the shareholder has not indicated a specific choice, the shares represented by all valid proxies received will be voted in accordance with the Board’s recommendations as follows: (1) for each of the nominees for directors named earlier in this Proxy Statement, (2) for approval of the advisory resolution to approve executive compensation, (3) for ratification of the appointment of the independent registered public accounting firm and (4) against the shareholder proposal regarding new climate change policies or practices. The Board has not received timely notice of any other matter that may come before the Annual Meeting. However, should any matter not described above be properly presented at the Annual Meeting, the persons named in the proxy form will vote in accordance with their judgment, as permitted. +Revocation of Proxies +A shareholder who gives a proxy may revoke it at any time before it is exercised by voting at the Annual Meeting in the manner described in the Notice of 2026 Annual Meeting of Shareholders, by delivering a subsequent proxy or by notifying the inspectors of election in writing of such revocation. +Solicitation of Proxies +The accompanying proxy is solicited by and on behalf of the Board, and the Company will pay the expenses of solicitation of proxies for the Annual Meeting. Solicitations may be made in person or by telephone, by officers and employees of the Company, or by nominees or other fiduciaries who may mail materials to or otherwise communicate with the beneficial owners of shares held by the nominees or other fiduciaries. These individuals will not be paid any additional compensation for any such solicitation. Upon request, the Company will reimburse brokers, dealers, banks and trustees, or their nominees, for reasonable expenses incurred by them in forwarding material to beneficial owners of the Company’s common stock. +Delivery of Documents to Shareholders Sharing an Address +If you are the beneficial owner, but not the record holder, of shares of Wolverine Worldwide stock, your broker, bank or other nominee may only deliver one copy of this Proxy Statement and the Company’s 2025 Annual Report to multiple shareholders who share an address, unless that nominee has received contrary instructions from one or more of the shareholders. The Company will deliver promptly, upon written or oral request, a separate copy of this Proxy Statement and its 2025 Annual Report to a shareholder at a shared address to which a single copy of the documents was delivered. A shareholder who wishes to receive a separate copy of the Proxy Statement and annual report, now or in the future, or shareholders who share an address and receive multiple copies of the Proxy Statement and annual report but would like to receive a single copy, should submit this request to Broadridge Financial Solutions, Inc. at 1-866-540-7095 or in writing at Broadridge, Householding Department, 51 Mercedes Way, Edgewood, New York 11717. Beneficial owners sharing an address who are receiving multiple copies of proxy materials and who wish to receive a single copy of such materials in the future should make a request directly to their broker, bank or other nominee. +2026 PROXY STATEMENT +83 +TABLE OF CONTENTS +Access to Proxy Statement and Annual Report +Distribution of this Proxy Statement and enclosed proxy card to shareholders is scheduled to begin on or about March 25, 2026. Wolverine Worldwide’s financial statements for the fiscal year ended January 3, 2026, are included in the Company’s 2025 Annual Report, which the Company is providing to shareholders at the same time as this Proxy Statement. Wolverine Worldwide’s Proxy Statement for the 2026 Annual Meeting and the Annual Report to Shareholders for the fiscal year ended January 3, 2026 are available at www.wolverineworldwide.com/2026annualmeeting . If you have not received or do not have access to the 2025 Annual Report, write to: Wolverine World Wide, Inc., 9341 Courtland Drive, NE, Rockford, Michigan 49351, Attn: Investor Relations or call (616) 866-5500 and ask for Investor Relations, and the Company will send a copy to you without charge. +2026 PROXY STATEMENT +84 +TABLE OF CONTENTS +APPENDIX A +Appendix A – Forward Looking +Statements and Non-GAAP Reconciliation Tables +2026 PROXY STATEMENT +A-1 +TABLE OF CONTENTS +APPENDIX A +Forward-Looking Statements +This document contains “forward-looking statements,” which are statements relating to future, not past, events including, without limitation, statements relating to: the Company’s future profitability, expectations regarding Merrell and Saucony 2026 revenue growth, plans to scale the Company’s business and expand into broader adjacent lifestyle opportunities, investment plans, strategies, priorities, objectives, sustainability goals, and plans to disclose GHG emissions. In this context, forward-looking statements often address management’s current beliefs, assumptions, expectations, estimates and projections about future business and financial performance, national, regional or global political, economic and market conditions, and the Company itself. Such statements often contain words such as “anticipates,” “believes,” “estimates,” “expects,” “forecasts,” “intends,” “is likely,” “plans,” “predicts,” “projects,” “should,” “will,” variations of such words, and similar expressions. Forward-looking statements, by their nature, address matters that are, to varying degrees, uncertain. Uncertainties that could cause the Company’s performance to differ materially from what is expressed in forward-looking statements include, but are not limited to, the following: +• +changes in general economic conditions, employment rates, business conditions, interest rates, tax policies and other factors affecting consumer spending in the markets and regions in which the Company’s products are sold; +• +the inability for any reason to effectively compete in global footwear, apparel and direct-to-consumer markets; +• +the inability to maintain positive brand images and anticipate, understand and respond to changing footwear and apparel trends and consumer preferences; +• +the inability to effectively manage inventory levels; +• +increases or changes in duties, tariffs, quotas or applicable assessments in countries of import and export; +• +foreign currency exchange rate fluctuations and currency restrictions; +• +supply chain and capacity constraints, production and distribution disruptions, including service interruptions at shipping and receiving ports, reduction in operating hours, labor shortages, and facility closures resulting in production delays at the Company’s manufacturers, quality issues, price increases or other risks associated with foreign sourcing; +• +the cost, including the effect of inflationary pressures and availability of raw materials, inventories, services and labor for contract manufacturers; +• +changes in relationships with, including the loss of, significant wholesale customers; +• +risks related to the significant investment in, and performance of, the Company’s direct-to-consumer operations; +• +risks related to expansion into new markets and complementary product categories; +• +the impact of seasonality and unpredictable weather conditions; +• +the impact of changes in general economic conditions and/or the credit markets on the Company’s manufacturers, distributors, suppliers, joint venture partners and wholesale customers; +• +changes in the Company’s effective tax rates; +• +failure of licensees or distributors to meet planned annual sales goals or to make timely payments to the Company; +• +the risks of doing business in developing countries and politically or economically volatile areas; +• +the ability to secure and protect owned intellectual property or use licensed intellectual property; +2026 PROXY STATEMENT +A-2 +TABLE OF CONTENTS +APPENDIX A +• +legal compliance and litigation risks, including with respect to federal, state and local laws and regulations relating to the protection of the environment, environmental remediation and other related costs, and environmental effects on human health; +• +risks of breach of the Company’s databases or other systems, or those of its vendors, which contain certain personal information, payment card data or proprietary information, due to cyberattack or other similar events; +• +strategic actions, including new initiatives and ventures, acquisitions and dispositions, and the Company’s success in integrating acquired businesses; +• +risks related to stockholder activism; +• +the risk of impairment to goodwill and other intangibles; +• +the success of the Company’s restructuring and realignment initiatives undertaken from time to time; and +• +changes in future pension funding requirements and pension expenses. +These or other uncertainties could cause a material difference between an actual outcome and a forward-looking statement. The uncertainties included here are not exhaustive and are described in more detail in Part I, Item 1A: “Risk Factors” of the 2025 Annual Report. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. The Company does not undertake an obligation to update, amend or clarify forward looking statements, whether as a result of new information, future events or otherwise. Any standards of measurement and performance made in reference to our environmental, social, governance and other sustainability plans and goals are developing and based on assumptions, and no assurance can be given that any such plan, initiative, projection, goal, commitment, expectation or prospect can or will be achieved. +2026 PROXY STATEMENT +A-3 +TABLE OF CONTENTS +APPENDIX A +Non-GAAP Reconcilliation Tables +The following table contains information regarding the non-GAAP adjustments used by the Company in the presentation of its financial results: +OF REPORTED OPERATING MARGIN +TO ADJUSTED OPERATING MARGIN* +(Unaudited) +(In millions) +GAAP Basis +Adjustments (1) +Divestitures (2) +As Adjusted +Operating Profit - Fiscal 2025 +$150.2 +$18.9 +$ — +$169.1 +Operating margin +8.0% +9.0% +Operating Profit - Fiscal 2024 +$ 97.5 +$19.1 +$10.8 +$127.4 +Operating margin +5.6% +7.3% +(1) +2025 adjustments reflect $11.5 million of reorganization costs, $6.6 million of environmental and other related costs net of recoveries and $0.8 million of other costs not related to the Company's ongoing business. 2024 adjustments reflect $28.6 million of reorganization costs and $9.3 million for non-cash impairments of long-lived assets, partially offset by an $8.5 million gain on the sale of businesses, trademarks and long-lived assets and $10.3 million of environmental and other related costs net of recoveries. +(2) +2024 adjustments reflect the Sperry business results included in the consolidated condensed statement of operations. +RECONCILIATION OF REPORTED DILUTED EPS +TO ADJUSTED DILUTED EPS* +(Unaudited) +GAAP Basis +Adjustments (1) +Divestitures (2) +As Adjusted +EPS - Fiscal 2025 +$1.14 +$0.21 +$ — +$1.35 +EPS - Fiscal 2024 +$0.55 +$0.21 +$0.12 +$0.88 +(1) +2025 adjustments reflect reorganization costs, environmental and other related costs net of recoveries, other costs not related to the Company's ongoing business, and financing transaction costs, partially offset by pension gain. 2024 adjustments reflect reorganization costs, non-cash impairments of long-lived assets, and pension settlement costs, partially offset by gain on the sale of businesses, trademarks and long-lived assets and environmental and other related costs net of recoveries. +(2) +2024 adjustments reflect the Sperry business results included in the consolidated condensed statement of operations. +RECONCILIATION OF CASH PROVIDED BY OPERATING ACTIVITIES +TO OPERATING FREE CASH FLOWS* +(Unaudited) +(In millions) +Fiscal Year 2025 +Net cash provided by operating activities +$140.0 +Additions to property, plant and equipment +(14.5) +Operating free cash flows +$125.5 +2026 PROXY STATEMENT +A-4 +TABLE OF CONTENTS +APPENDIX A +RECONCILIATION OF REPORTED EARNINGS (LOSS) BEFORE INCOME TAXES +TO ADJUSTED EARNINGS (LOSS) BEFORE INCOME TAXES (PRE-TAX INCOME)* +(Unaudited) +(In millions) +GAAP Basis +Adjustments (1) +Change in +Accounting +Principle (2) +As Adjusted +Earnings (loss) before income taxes - Fiscal 2025 +$ 121.5 +$ 19.5 +$— +$141.0 +Earnings (loss) before income taxes - Fiscal 2024 +$ 58.1 +$ 30.9 +$ 3.5 +$ 92.5 +Earnings (loss) before income taxes - Fiscal 2023 +$(132.8) +$139.0 +$(1.4) +$ 4.8 +Earnings (loss) before income taxes - Fiscal 2022 +$(252.9) +$386.0 +$ — +$133.1 +Earnings (loss) before income taxes - Fiscal 2021 +$ 80.3 +$ 111.2 +$ — +$191.5 +(1) +2025 adjustments reflect $11.5 million of reorganization costs, $6.6 million of environmental and other related costs net of recoveries, $1.1 million of financing transaction costs, and $0.8 million of other costs not related to the Company’s ongoing business, partially offset by $0.5 million of pension gain. 2024 adjustments reflect $28.6 million of reorganization costs, $10.8 million loss associated with Sperry business and Wolverine Leathers business results included in the consolidated condensed statement of operations, $9.3 million for non-cash impairments of long-lived assets and $1.0 million of pension loss, partially offset by $8.5 million gain on the sale of businesses, trademarks and long-lived assets and $10.3 million of environmental and other related costs net of recoveries. 2023 adjustments reflect $185.3 million for non-cash impairments of long-lived assets, $50.8 million of reorganization costs, $5.5 million of costs associated with divestitures, partially offset by $90.4 million gain on the sale of businesses, trademarks and long-lived assets, $10.4 million of environmental and other related costs net of recoveries, $1.0 million SERP curtailment gain and $0.8 million earnings associated with the Keds business and Wolverine Leathers business results included in the consolidated condensed statement of operations. 2022 adjustments reflect $428.7 million for a non-cash impairment of the Sperry® trade name and the Sweaty Betty® trade name and goodwill, $9.1 million for reorganization costs, $33.7 million of environmental and other related costs net of recoveries, $3.7 million of costs associated with Sweaty Betty® integration and $0.8 million of receivables securitization transaction costs, partially offset by $90.0 million gain on the sale of the Champion trademarks. 2021 adjustments reflect $56.4 million of environmental and other related costs net of recoveries, $34.3 million of debt extinguishment costs, $18.7 million of costs associated with the acquisition of Sweaty Betty® and $1.8 million for non-cash impairment related to one of the Company’s joint ventures. +(2) +Refer to Note 1 in the 2025 Annual Report for additional information regarding the change in accounting principle applied retrospectively to fiscal years 2024 and 2023. +* To supplement the consolidated condensed financial statements presented in accordance with Generally Accepted Accounting Principles (“GAAP”), the Company describes what earnings would have been if environmental and other related costs net of recoveries, non-cash impairments of long-lived assets, pension gains and losses, SERP curtailment gain, loss associated with the Sperry and Wolverine Leathers businesses included in the 2024 consolidated condensed statement of operation, earnings associated with the Keds and Wolverine Leathers businesses included in the 2023 consolidated condensed statement of operation, Sweaty Betty® integration costs, reorganization costs, receivable securitization transaction costs, costs associated with acquisitions and divestitures, debt extinguishment costs, non-cash impairment related to one of the Company’s joint ventures, gains on the sale of businesses and assets, financing transaction costs, and other costs not related to the Company’s ongoing business were excluded. The Company believes this non-GAAP measure provides useful information to both management and investors by increasing comparability to the prior period by adjusting for certain items that may not be indicative of core operating measures and to better identify trends in the Company’s business. The adjusted financial results are used by management to, and allow investors to, evaluate the operating performance of the Company on a comparable basis. +Management does not, nor should investors, consider non-GAAP financial measures in isolation from, or as a substitution for, financial information prepared in accordance with GAAP. A reconciliation of all non-GAAP measures included in this Proxy Statement, to the most directly comparable GAAP measures are found in the financial tables above. +2026 PROXY STATEMENT +A-5 +TABLE OF CONTENTS +TABLE OF CONTENTS +DEF 14A +0000110471 +false +0000110471 +2024-12-29 +2026-01-03 +0000110471 +www:ChristopherHufnagelMember +2024-12-29 +2026-01-03 +0000110471 +www:ChristopherHufnagelMember +2023-12-31 +2024-12-28 +0000110471 +2023-12-31 +2024-12-28 +0000110471 +www:BrendanHoffmanMember +2023-01-01 +2023-12-30 +0000110471 +www:ChristopherHufnagelMember +2023-01-01 +2023-12-30 +0000110471 +2023-01-01 +2023-12-30 +0000110471 +www:BrendanHoffmanMember +2022-01-02 +2022-12-31 +0000110471 +2022-01-02 +2022-12-31 +0000110471 +www:BlakeKruegerMember +2021-01-03 +2022-01-01 +0000110471 +2021-01-03 +2022-01-01 +0000110471 +2023-01-01 +2023-08-05 +0000110471 +2023-08-06 +2023-12-30 +0000110471 +ecd:EqtyAwrdsInSummryCompstnTblForAplblYrMember +ecd:PeoMember +www:ChristopherHufnagelMember +2024-12-29 +2026-01-03 +0000110471 +ecd:EqtyAwrdsInSummryCompstnTblForAplblYrMember +ecd:NonPeoNeoMember +2024-12-29 +2026-01-03 +0000110471 +ecd:YrEndFrValOfEqtyAwrdsGrntdInCvrdYrOutsdngAndUnvstdMember +ecd:PeoMember +www:ChristopherHufnagelMember +2024-12-29 +2026-01-03 +0000110471 +ecd:YrEndFrValOfEqtyAwrdsGrntdInCvrdYrOutsdngAndUnvstdMember +ecd:NonPeoNeoMember +2024-12-29 +2026-01-03 +0000110471 +ecd:ChngInFrValAsOfVstngDtOfPrrYrEqtyAwrdsVstdInCvrdYrMember +ecd:PeoMember +www:ChristopherHufnagelMember +2024-12-29 +2026-01-03 +0000110471 +ecd:ChngInFrValAsOfVstngDtOfPrrYrEqtyAwrdsVstdInCvrdYrMember +ecd:NonPeoNeoMember +2024-12-29 +2026-01-03 +0000110471 +ecd:ChngInFrValOfOutsdngAndUnvstdEqtyAwrdsGrntdInPrrYrsMember +ecd:PeoMember +www:ChristopherHufnagelMember +2024-12-29 +2026-01-03 +0000110471 +ecd:ChngInFrValOfOutsdngAndUnvstdEqtyAwrdsGrntdInPrrYrsMember +ecd:NonPeoNeoMember +2024-12-29 +2026-01-03 +0000110471 +ecd:FrValAsOfPrrYrEndOfEqtyAwrdsGrntdInPrrYrsFldVstngCondsDrngCvrdYrMember +ecd:PeoMember +www:ChristopherHufnagelMember +2024-12-29 +2026-01-03 +0000110471 +ecd:FrValAsOfPrrYrEndOfEqtyAwrdsGrntdInPrrYrsFldVstngCondsDrngCvrdYrMember +ecd:NonPeoNeoMember +2024-12-29 +2026-01-03 +0000110471 +ecd:DvddsOrOthrErngsPdOnEqtyAwrdsNtOthrwsRflctdInTtlCompForCvrdYrMember +ecd:PeoMember +www:ChristopherHufnagelMember +2024-12-29 +2026-01-03 +0000110471 +ecd:DvddsOrOthrErngsPdOnEqtyAwrdsNtOthrwsRflctdInTtlCompForCvrdYrMember +ecd:NonPeoNeoMember +2024-12-29 +2026-01-03 +0000110471 +ecd:AggtChngPnsnValInSummryCompstnTblForAplblYrMember +ecd:PeoMember +www:ChristopherHufnagelMember +2024-12-29 +2026-01-03 +0000110471 +ecd:AggtChngPnsnValInSummryCompstnTblForAplblYrMember +ecd:NonPeoNeoMember +2024-12-29 +2026-01-03 +0000110471 +ecd:PnsnAdjsSvcCstMember +ecd:PeoMember +www:ChristopherHufnagelMember +2024-12-29 +2026-01-03 +0000110471 +ecd:PnsnAdjsSvcCstMember +ecd:NonPeoNeoMember +2024-12-29 +2026-01-03 +0000110471 +1 +2024-12-29 +2026-01-03 +0000110471 +2 +2024-12-29 +2026-01-03 +0000110471 +3 +2024-12-29 +2026-01-03 +0000110471 +4 +2024-12-29 +2026-01-03 +iso4217:USD \ No newline at end of file diff --git a/raw/proxies/0000110471/0001140361-26-011157/proxy_rpt.txt b/raw/proxies/0000110471/0001140361-26-011157/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..4ae925a33cf2007d534c1c4a065be6b6b30f5e87 --- /dev/null +++ b/raw/proxies/0000110471/0001140361-26-011157/proxy_rpt.txt @@ -0,0 +1,34 @@ +Certain Relationships and Related Transactions +Since December 29, 2024, the Company has not engaged in any “related person” transactions with any person who is or was during the last fiscal year a director, executive officer, nominee for director or holder of 5% or more of Company voting securities, affiliate or any member of the immediate family of the foregoing persons. +Related Person Transactions Policy +The Board adopted written policies and procedures regarding related person transactions. They require the Governance Committee to review and either approve or disapprove the Company entering into any Interested Transactions (defined below). If advance approval is not feasible, then the Governance Committee must review and ratify the Interested Transaction at its next meeting. +Interested Transaction +Any transaction, arrangement or relationship or series of similar transactions, arrangements or relationships (including any indebtedness or guarantee of indebtedness) in which: +(1) +The aggregate amount involved exceeds or is expected to exceed $120,000 since the beginning of Wolverine Worldwide’s last completed fiscal year; +(2) +The Company or any of its subsidiaries is a participant; and +(3) +Any Related Person (defined below) has or will have a direct or indirect interest. +An Interested Transaction does not include: +(1) +Any employment compensation paid to an executive officer of the Company if the Compensation and Human Capital Committee approved or recommended to the Board of Directors for approval of such compensation; +(2) +Any compensation paid to a director for service as a director of the Company; +(3) +Any transaction in which a Related Person has an indirect interest solely as a result of being (i) a director or, together with all other Related Persons, as defined below, a less than 10% beneficial owner of an equity interest in another entity, or both, or (ii) a limited partner in a partnership in which the Related Person, together with all other Related Persons, has an interest of less than 10%; +(4) +Any transaction in which the Related Person’s interest arises solely from the ownership of the Company’s common stock and all holders of the Company’s common stock received the same benefit on a pro rata basis (e.g., a dividend); or +(5) +Any transaction with another publicly traded company where the Related Person’s interest arises solely from the ownership of more than 5% of the Company’s common stock and the ownership of a non-controlling interest in the other publicly traded company. +Related Person +Any: +(a) +Person who is or was at any time since the beginning of the Company’s last completed fiscal year even if they do not presently serve in that role, an executive officer, a director or, to the extent information regarding such nominee is being presented in a proxy or information statement relating to the election of that nominee as a director, a nominee for election as a director; +(b) +Beneficial owner of greater than five percent of Wolverine Worldwide’s common stock; or +(c) +Immediate family member* of any of the foregoing. +* +Immediate family member is defined as a person’s spouse, parents, stepparents, children, stepchildren, siblings, mothers and fathers-in-law, sons- and daughters-in-law, and brothers- and sisters-in-law, and anyone residing in such person’s home (other than a tenant or employee). +The Governance Committee considers whether the Interested Transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances, the extent of the Related Person’s interest in the transaction, and other factors that it deems relevant. No director participates in any discussion or approval of an Interested Transaction for which he or she is a Related Person, except to provide information to the Governance Committee. \ No newline at end of file diff --git a/raw/proxies/0000320187/0000320187-15-000116/proxy.txt b/raw/proxies/0000320187/0000320187-15-000116/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..86bab6340ff3d0ca87138528976905e8bb12282f --- /dev/null +++ b/raw/proxies/0000320187/0000320187-15-000116/proxy.txt @@ -0,0 +1,2489 @@ +DEF 14A +1 +nke-2015xdef14a.htm +DEF 14A +NKE - 2015 - DEF14A +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +Washington, D.C. 20549 +SCHEDULE 14A INFORMATION +Proxy Statement Pursuant to Section 14(a) of the +Securities Exchange Act of 1934 +(Amendment No. ) +Filed by the Registrant x Filed by a Party other than the Registrant ¨ +Check the appropriate box: +o +Preliminary Proxy Statement +¨ +Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +x +Definitive Proxy Statement +¨ +Definitive Additional Materials +¨ +Soliciting Material under §240.14a-12 +NIKE, INC. +(Name of registrant as specified in its charter) +(Name of person(s) filing proxy statement, if other than the registrant) +Payment of Filing Fee (Check the appropriate box): +x +No fee required +¨ +Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11 +(1) +Title of each class of securities to which transaction applies: +(2) +Aggregate number of securities to which transaction applies: +(3) +Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): +(4) +Proposed maximum aggregate value of transaction: +(5) +Total fee paid: +¨ +Fee paid previously with preliminary materials. +¨ +Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. +(1) +Amount Previously Paid: +(2) +Form, Schedule or Registration Statement No.: +(3) +Filing Party: +(4) +Date Filed: +To Our Shareholders: +You are cordially invited to attend the annual meeting of shareholders of NIKE, Inc. to be held at the Tiger Woods Conference Center, One Bowerman Drive, Beaverton, Oregon 97005-6453, on Thursday, September 17, 2015, at 10:00 A.M. Pacific Time. Registration will begin at 9:00 A.M. +The meeting will consist of a brief presentation followed by the business items listed on the attached notice. +Whether or not you plan to attend, the prompt execution and return of your proxy card will both assure that your shares are represented at the meeting and minimize the cost of proxy solicitation. +Sincerely, +Philip H. Knight +Chairman of the Board +July 27, 2015 +Notice of Annual Meeting +of Shareholders +September 17, 2015 +To the Shareholders of NIKE, Inc. +The annual meeting of shareholders of NIKE, Inc., an Oregon corporation, will be held on Thursday, September 17, 2015, at 10:00 A.M., at the Tiger Woods Conference Center, One Bowerman Drive, Beaverton, Oregon 97005-6453, for the following purposes: +1. To elect a Board of Directors for the ensuing year. +2. To approve executive compensation by an advisory vote. +3. To amend the Articles of Incorporation to increase the number of authorized shares of common stock. +4. To re-approve the Executive Performance Sharing Plan as amended. +5. To approve the amended and restated Stock Incentive Plan. +6. To consider a shareholder proposal as described in the accompanying proxy statement, if properly presented at the meeting. +7. To ratify the appointment of PricewaterhouseCoopers LLP as independent registered public accounting firm. +8. To transact such other business as may properly come before the meeting. +All shareholders are invited to attend the meeting. Shareholders of record at the close of business on July 20, 2015, the record date fixed by the Board of Directors, are entitled to notice of and to vote at the meeting. You must present your proxy, voter instruction card, or meeting notice for admission. +By Order of the Board of Directors, +John F. Coburn III +Vice President and Corporate Secretary +Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders To Be Held on September 17, 2015. The proxy statement and NIKE, Inc.'s 2015 Annual Report to Shareholders is available electronically at www.investorvote.com or www.proxyvote.com, for registered and beneficial owners, respectively. +Whether or not you intend to be present at the meeting, please sign and date the enclosed proxy and return it in the enclosed envelope, or vote by telephone or online following the instructions on the proxy. +CORPORATE GOVERNANCE +Proxy Statement +Proxy Statement +We are furnishing proxy materials to our shareholders primarily via the Internet, instead of mailing printed copies of those materials to each shareholder. The Company expects to first provide notice and electronic delivery of this proxy statement and the enclosed proxy to shareholders on or about August 6, 2015. If you would prefer to receive a paper copy of our proxy materials, please follow the instructions included in the notice. If you have previously elected to receive our proxy materials electronically, you will continue to receive access to these materials electronically unless you elect otherwise. +The enclosed proxy is solicited by the Board of Directors of NIKE, Inc. (“NIKE” or the “Company”) for use at the annual meeting of shareholders to be held on September 17, 2015, and at any adjournment thereof (the “Annual Meeting”). Shareholders may submit a proxy via the Internet to vote at the Annual Meeting by following the instructions on the notice. +The Company will bear the cost of soliciting proxies. In addition to soliciting proxies by mail, certain officers and employees of the Company, without extra compensation, may also solicit proxies personally or by telephone. Copies of proxy solicitation materials will be furnished to fiduciaries, custodians and brokerage houses for forwarding to the beneficial owners of shares held in their names. +All valid proxies properly executed and received by the Company prior to the Annual Meeting will be voted in accordance with the instructions specified in such proxies. Where no instructions are given, shares will be voted “FOR” the election of each of the named nominees for director (Proposal No. 1), “FOR” the proposal regarding an advisory vote to approve executive compensation (Proposal No. 2), "FOR" the amendment of the Articles of Incorporation to increase the number of authorized shares of common stock (Proposal No. 3), "FOR" the re-approval of the Executive Performance Sharing Plan as amended (Proposal No. 4), "FOR" the approval of the amended and restated Stock Incentive Plan (Proposal No. 5), "AGAINST" the shareholder proposal regarding political contributions disclosure (Proposal No. 6), and “FOR” the ratification of the appointment of PricewaterhouseCoopers LLP as independent registered public accounting firm (Proposal No. 7). +A shareholder giving the enclosed proxy has the power to revoke it at any time before it is exercised by affirmatively electing to vote in person at the meeting or by delivering to John F. Coburn III, Vice President and Corporate Secretary of NIKE, either an instrument of revocation or an executed proxy bearing a later date. +Voting Securities and Vote Required +Holders of record of NIKE’s Class A Common Stock (“Class A Stock”) and holders of record of NIKE’s Class B Common Stock (“Class B Stock”) at the close of business on July 20, 2015 will be entitled to vote at the Annual Meeting. On that date, 177,457,876 shares of Class A Stock and 677,926,177 shares of Class B Stock were issued and outstanding. Neither class of Common Stock has cumulative voting rights. +Each share of Class A Stock and each share of Class B Stock is entitled to one vote on every matter submitted to the shareholders at the Annual Meeting. +A majority of the votes entitled to be cast on Proposal No. 1, the election of directors, by each of Class A Stock and Class B Stock separately constitutes a quorum of Class A Stock and Class B Stock, respectively, for action on Proposal No. 1. The holders of Class A Stock and the holders of Class B Stock will vote separately on Proposal No. 1. Holders of Class B Stock are currently entitled to elect 25 percent of the total Board, rounded up to the next whole number. Holders of Class A Stock are currently entitled to elect the remaining directors. Under this formula, holders of Class B Stock, voting separately, will elect four directors, and holders of Class A Stock, voting separately, will elect nine directors. Under Oregon law, if a quorum of each class of common stock is present at the meeting, the four director nominees who receive the greatest number of votes cast by holders of Class B Stock and the nine director nominees who receive the greatest number of votes cast by holders of Class A Stock will be elected directors. +A majority of the votes entitled to be cast on Proposal Nos. 2, 4, 5, 6, and 7, by both Class A Stock and Class B Stock together constitutes a quorum for action on those proposals. Holders of Class A Stock and holders of Class B Stock will vote together as one class on Proposal Nos. 2, 4, 5, 6, and 7. A majority of the votes entitled to be cast on Proposal 3 of each of the Class A Stock and Class B Stock separately will constitute a quorum for Proposal No. 3. Holders of Class A Stock and holders of Class B Stock will vote separately on Proposal No. 3. If a quorum is present at the meeting, Proposal Nos. 2, 3, 4, 5, 6, and 7 will be approved if the votes cast in favor of the proposal exceeds the votes cast against the proposal. +Abstentions and broker non-votes are counted for purposes of determining whether a quorum exists. Abstentions and broker non-votes are not included as votes cast and will not affect the outcome of any of the proposals . +CORPORATE GOVERNANCE +Board of Directors +The Board of Directors is currently composed of eleven independent directors and four directors who are not independent under the New York Stock Exchange (the "NYSE") listing rules. There were five meetings of the Board of Directors during fiscal 2015. During fiscal 2015, all but one director attended at least 75 percent of the total number of meetings of the Board of Directors and committees on which he or she served. John R. Thompson, Jr. attended 60 percent of the meetings of the Board of Directors and committee (Corporate Responsibility and Sustainability) on which he served. Mr. Thompson was excused from two meetings due to illness and two meetings to attend the private funeral of legendary University of North Carolina at Chapel Hill basketball coach, Dean Smith, a dear friend of Mr. Thompson and endorser of NIKE. The Company encourages all directors to attend each annual meeting of shareholders, and all directors serving at the time of the 2014 Annual Meeting attended the 2014 Annual Meeting. +NIKE, INC. Ÿ 2015 Notice of Annual Meeting 1 +CORPORATE GOVERNANCE +Board of Directors +Board Committees +The Board’s current standing committees are an Audit Committee, a Compensation Committee, a Nominating and Corporate Governance Committee, a Finance Committee, a Corporate Responsibility and Sustainability Committee, and an Executive Committee. The Board may also appoint other committees from time to time. Each standing committee has a written charter; all such charters, as well as the Company’s corporate governance guidelines, are available at the Company’s corporate website (http://investors.nike.com ) and will be provided in print to any shareholder who submits a request in writing to NIKE Investor Relations, One Bowerman Drive, Beaverton, Oregon 97005-6453. +The Executive Committee is authorized to act on behalf of the Board on all corporate actions for which applicable law does not require participation by the full Board. In practice, the Executive Committee acts in place of the full Board only when emergency issues or scheduling conflicts make it difficult or impracticable to assemble the full Board. All actions taken by the Executive Committee must be reported at the next Board meeting. The Executive Committee held no formal meetings during fiscal 2015, but took action pursuant to written consent resolutions. +The Audit Committee is responsible for the engagement or discharge of the independent registered public accountants, reviews and approves services provided by the independent registered public accountants, and reviews with the independent registered public accountants the scope and results of their annual audit of the Company’s consolidated financial statements and any recommendations they may have. The Audit Committee also reviews the Company’s procedures with respect to maintaining books and records, the adequacy and implementation of internal auditing, accounting, disclosure, and financial controls, the Company’s policies concerning financial reporting and business practices, and the Company's information security and data protection procedures. The Board has determined that each member of the Audit Committee meets all applicable independence and financial literacy requirements under the NYSE listing standards and applicable regulations adopted by the U.S. Securities and Exchange Commission (the “SEC”). The Board has also determined that Mr. Graf is an “audit committee financial expert” as defined in regulations adopted by the SEC. +The Nominating and Corporate Governance Committee identifies individuals qualified to become Board members, recommends director nominees for election at each annual shareholder meeting, and develops and recommends corporate governance guidelines and standards for business conduct and ethics. The Committee also oversees the annual self-evaluations of the Board and its committees and makes recommendations to the Board concerning the structure and membership of the other Board committees. The Board has determined that each member of the Nominating and Corporate Governance Committee meets all applicable independence requirements under the NYSE listing standards. +The Finance Committee reviews the Company's annual operating budget and recommends approval to the Board, considers long-term financing options, long-range tax, financial regulatory and foreign currency issues facing the Company, and management recommendations concerning capital deployment strategy, major capital expenditures and material acquisitions or divestitures. +The Corporate Responsibility and Sustainability Committee reviews significant strategies, activities and policies regarding sustainability (including labor practices), community impact and charitable activities, and makes recommendations to the Board of Directors. +The Compensation Committee evaluates the performance of the Chief Executive Officer ("CEO"), oversees the performance evaluations of our other Named Executive Officers, and recommends their compensation for approval by the independent members of the Board of Directors (other than the incentive compensation approved solely by the Compensation Committee as described below). The Compensation Committee also grants equity incentive awards under the NIKE, Inc. Stock Incentive Plan, and determines targets and awards under the NIKE, Inc. Executive Performance Sharing Plan and the NIKE, Inc. Long-Term Incentive Plan. The Committee also makes recommendations to the Board regarding other executive incentive compensation arrangements and profit sharing plan contributions. The Board has determined that each member of the Compensation Committee meets all applicable independence requirements under the NYSE listing standards. +The table below provides information regarding the current membership of each standing Board committee and meetings held during fiscal 2015: +NIKE, INC. Ÿ 2015 Notice of Annual Meeting 2 +CORPORATE GOVERNANCE +Board of Directors +Director Name +Audit +Compensation +Nominating and +Corporate Governance +Corporate +Responsibility +Finance +Executive +Elizabeth J. Comstock +ü +ü +John G. Connors +ü +ü +Timothy D. Cook +Chair +ü +John J. Donahoe +ü +ü +Alan B. Graf, Jr. +Chair +Chair +Douglas G. Houser* +ü +ü +ü +Philip H. Knight +Chair +Travis A. Knight** +John C. Lechleiter +ü +ü +Mark G. Parker +ü +Michelle A. Peluso +ü +ü +Johnathan A. Rodgers +ü +ü +Orin C. Smith* +ü +Chair +John R. Thompson, Jr. +ü +Phyllis M. Wise +ü +Chair +Meetings in Fiscal 2015 +13 +5 +5 +5 +5 +- +* Messrs. Houser and Smith will retire from the Board of Directors effective September 17, 2015. +** Mr. Travis Knight was elected to the Board of Directors effective June 30, 2015. +Director Independence +Pursuant to NYSE rules, in order for a director to qualify as “independent,” the Board of Directors must affirmatively determine that the director has no material relationship with the Company that would impair the director’s independence. The Board affirmatively determined that commercial or charitable relationships below the following thresholds will not be considered material relationships that impair a director’s independence: (i) if a NIKE director or immediate family member is an executive officer of another company that does business with NIKE and the annual sales to, or purchases from, NIKE are less than one percent of the annual revenues of the other company; and (ii) if a NIKE director or immediate family member serves as an officer, director or trustee of a charitable organization, and NIKE’s contributions to the organization are less than one percent of that organization’s total annual charitable receipts. After applying this categorical standard, the Board of Directors has determined that all directors have no material relationship with the Company and, therefore, are independent, except for Messrs. Philip Knight, Travis Knight, Parker, and Thompson. Mr. Philip Knight and Mr. Parker are executive officers of the Company. Mr. Travis Knight, appointed to the Board on June 30, 2015, is not independent pursuant to NYSE rules as he is Mr. Philip Knight's son. Mr. Thompson is not independent pursuant to NYSE rules, because the Company has a contract with his son, who is the head basketball coach at Georgetown University, to provide endorsement and consulting services to the Company, under which the Company paid him more than $120,000 during fiscal 2015. +Director Nominations +The Nominating and Corporate Governance Committee identifies potential director candidates through a variety of means, including recommendations from members of the Committee or the Board, suggestions from Company management, and shareholder recommendations. The Committee also may, in its discretion, engage director search firms to identify candidates. Travis Knight was appointed to the Board of Directors on June 30, 2015. Travis Knight was identified for appointment to the Board in connection with the succession planning for our Board of Directors. Shareholders may recommend director candidates for consideration by the Nominating and Corporate Governance Committee by submitting a written recommendation to the Committee, c/o John F. Coburn III, Vice President and Corporate Secretary, NIKE, Inc., One Bowerman Drive, Beaverton, Oregon 97005-6453. The recommendation should include the candidate’s name, age, qualifications (including principal occupation and employment history), and written consent to be named as a nominee in the Company’s proxy statement and to serve as a director, if elected. +The Board of Directors has adopted qualification standards for the selection of non-management nominees for director, which can be found at our corporate website: http://investors.nike.com . As provided in these standards and the Company’s Corporate Governance Guidelines, nominees for director are selected on the basis of, among other things, distinguished business experience or other non-business achievements; education; significant knowledge of international business, finance, marketing, technology, law, or other fields which are complementary to, and balance the knowledge of, other Board members; a desire to represent the interests of all shareholders; independence; character; ethics; good judgment; diversity; and ability to devote substantial time to discharge Board responsibilities. +The Nominating and Corporate Governance Committee identifies qualified potential candidates without regard to their age, gender, race, national origin, sexual orientation, or religion. While the Board has no policy regarding Board member diversity, the Nominating and Corporate Governance Committee considers and discusses diversity in selecting director nominees and in the re-nomination of an incumbent director. The Committee views diversity broadly, including gender, ethnicity, differences of viewpoint, geographic location, skills, education, and professional and industry experience, among others. The Board believes that a variety and balance of perspectives on the Board can result in more thoughtful deliberations. +NIKE, INC. Ÿ 2015 Notice of Annual Meeting 3 +CORPORATE GOVERNANCE +Board of Directors +In considering the re-nomination of an incumbent director, the Nominating and Corporate Governance Committee reviews the director’s overall service to the Company during his or her term, including the number of meetings attended, level of participation and quality of performance, as well as any special skills, experience or diversity that such director brings to the Board. All potential new director candidates, whether recommended by shareholders or identified by other means, are initially screened by the Chair of the Nominating and Corporate Governance Committee, who may seek additional information about the background and qualifications of the candidate, and who may determine that a candidate does not have qualifications that merit further consideration by the full Committee. With respect to new director candidates who pass the initial screening, the Nominating and Corporate Governance Committee meets to discuss and consider each candidate’s qualifications and potential contributions to the Board, and determines by majority vote whether to recommend such candidates to the Board of Directors. The final decision to either appoint a candidate to fill a vacancy between Annual Meetings or include a candidate on the slate of nominees proposed at an Annual Meeting is made by the Board. +It is the general policy of the Board that directors first elected after the fiscal year ended May 31, 1993 will not stand for re-election after reaching the age of 72. Messrs. Houser and Smith, who have served on the Board since 1970 and 2004, respectively, have announced their retirement and will not stand for re-election to the Board at the Annual Meeting. +Shareholder Communications with Directors +Shareholders or interested parties desiring to communicate directly with the Board of Directors, with the non-management directors or with any individual director may do so in writing addressed to the intended recipient or recipients, c/o John F. Coburn III, Vice President and Corporate Secretary, NIKE, Inc., One Bowerman Drive, Beaverton, Oregon 97005-6453. All such communications will be reviewed, compiled as necessary, and then forwarded to the designated recipient or recipients in a timely manner. +Board Leadership Structure +NIKE’s governance documents provide the Board with flexibility to select the appropriate leadership structure of the Company. In determining the leadership structure, the Board considers many factors, including the specific needs of the business, fulfilling the duties of the Board, and the best interests of the Company’s shareholders. In 2004, the Board of Directors chose to separate the position of Chairman of the Board from the position of President and CEO, although this is not a permanent policy of the Board. The Chairman, Mr. Philip Knight, presides over meetings of the Board of Directors and shareholders. The President and CEO, Mr. Parker, is in charge of the general supervision, direction, and control of the business and affairs of the Company, subject to the overall direction and supervision of the Board of Directors and its committees. +Given the particular experience and tenure of Mr. Philip Knight and Mr. Parker, the Board believes this leadership structure is appropriate for the Company because it separates the leadership of the Board from the duties of day-to-day leadership of the Company. This structure permits Mr. Parker to primarily focus his time and attention to the business, while Mr. Philip Knight directs his attention to the broad strategic issues considered by the Board of Directors. Further, with his significant Company experience and ownership of Common Stock, Mr. Philip Knight is particularly well-suited as Chairman, helping to align the Board with the interests of shareholders. This structure works particularly well given the talent, experience and professional relationship of Messrs. Parker and Knight, but is not a permanent policy of the Board. Given the succession planning for the Board in general, and NIKE's co-founder and Chairman in particular, the Board may choose to re-evaluate this structure in the future. +The chairs of Board committees play an active role in the leadership structure of the Board. The Nominating and Corporate Governance Committee and the Board endeavor to select independent committee chairs who will provide strong leadership to guide the important work of the Board committees. Committee chairs work with the Company's senior executives to ensure the committees are discussing the key strategic risks and opportunities for the Company. +The Nominating and Corporate Governance Committee has determined that given the current separation of the positions of Chairman and CEO, and the strong leadership of experienced chairs of each of the Board committees, a lead director would not improve the effectiveness of the Board at this time. A presiding director is appointed to chair executive sessions of non-management directors (consisting of all directors other than Messrs. Philip Knight and Parker). The position of presiding director is rotated among the chairs of the various Board committees, other than the Executive Committee. The current presiding director at the executive sessions is Mr. Cook. Executive sessions are regularly scheduled and held at least once each year. For all of these reasons, the Board believes this leadership structure is optimal and has worked well for many years. +The Board’s Role in Risk Oversight +While the Company’s management is responsible for day-to-day management of the various risks facing the Company, the Board of Directors takes an active role in the oversight of the management of critical business risks. The Board does not view risk in isolation. Risks are considered in virtually every business decision and as part of NIKE’s business strategy. The Board recognizes it is neither possible nor prudent to eliminate all risk. Purposeful and appropriate risk-taking is essential for the Company to be competitive on a global basis and to achieve its strategic objectives. +The Board implements its risk oversight function both as a whole and through committees, which play a significant role in carrying out risk oversight. While the Audit Committee is responsible for oversight of management’s risk management policies, oversight responsibility for particular areas of risk is allocated among the Board committees according to the committee’s area of responsibility as reflected in the committee charters. In particular: +NIKE, INC. Ÿ 2015 Notice of Annual Meeting 4 +CORPORATE GOVERNANCE +Board of Directors +• +The Audit Committee oversees risks related to the Company’s financial statements, the financial reporting process, accounting, legal matters, information security, and data protection. The Committee oversees the internal audit function, reviews a risk-based plan of internal audits, and reviews a risk-based integrated audit of internal controls over financial reporting. The Committee meets separately with each of the Vice President of Corporate Audit, representatives of the independent registered public accountants, and senior management. +• +The Compensation Committee oversees risks and rewards associated with the Company’s compensation philosophy and programs, management succession plans, and executive development. +• +The Finance Committee oversees financial matters and risks relating to budgeting, investments, access to capital, capital deployment, acquisitions and divestitures, currency risk and hedging programs, and significant capital projects. +• +The Corporate Responsibility and Sustainability Committee oversees issues that involve reputational risk to the Company, including community engagement, and sustainability innovation relating to the Company's products, its supply chain, including labor practices, and the environment. +• +The Nominating and Corporate Governance Committee oversees risks associated with company governance, including NIKE’s code of business conduct and ethics, compliance programs, and the structure and performance of the Board and its committees. +Each committee chair works with the senior executive assigned to assist the committee to develop agendas for the year and for each meeting, paying particular attention to areas of business risk identified by management, Board members, internal and external auditors, and in their committee charter, and to schedule agenda topics, presentations, and discussions periodically regarding business risks within their area of responsibility. At meetings, the committees discuss areas of business risk, the potential impact, and management’s initiatives to manage business risk, often within the context of important business decisions. Through this process key business risk areas are reviewed at appropriate times, with some topics reviewed on several occasions throughout the year. At every Board meeting each committee chair provides a report to the full Board outlining its discussions and actions, including those affecting the oversight of various risks. +The Company believes its leadership structure, discussed in detail above, supports the risk oversight function of the Board. Strong directors chair the various committees involved in risk oversight, there is open communication between management and directors, and all directors are involved in the risk oversight function. +Code of Business Conduct and Ethics +The NIKE Code of Ethics (“Code”) is available at the Company’s corporate website (http://investors.nike.com ) and will be provided in print without charge to any shareholder who submits a request in writing to NIKE Investor Relations, One Bowerman Drive, Beaverton, Oregon 97005-6453. The Code applies to all of the Company’s employees and directors, including our chief executive officer, senior financial officers, and all other officers. The Code provides that any waiver of the Code may be made only by the Board. Any such waiver in favor of a director or executive officer will be publicly disclosed. The Company plans to disclose amendments to, and waivers from, the Code on the Company’s corporate website: http://investors.nike.com. +Proposal 1 +Election of Directors +A Board of 13 directors will be elected at the Annual Meeting. All of the nominees other than Mr. Travis Knight were elected at the 2014 annual meeting of shareholders. Directors will hold office until the next annual meeting of shareholders or until their successors are elected and qualified. +Mr. Alan B. Graf, Jr., Dr. John C. Lechleiter, Ms. Michelle A. Peluso, and Dr. Phyllis M. Wise are nominated by the Board of Directors for election by the holders of Class B Stock. The other nine nominees are nominated by the Board of Directors for election by the holders of Class A Stock. +Under Oregon law, if a quorum of each class of shareholders is present at the Annual Meeting, the nine director nominees who receive the greatest number of votes cast by holders of Class A Stock and the four director nominees who receive the greatest number of votes cast by holders of Class B Stock will be elected directors. Abstentions and broker non-votes will have no effect on the results of the vote. Unless otherwise instructed, proxy holders will vote the proxies they receive for the nominees listed below. If any nominee becomes unable to serve, the holders of the proxies may, in their discretion, vote the shares for a substitute nominee or nominees designated by the Board of Directors. +The Bylaws and the Corporate Governance Guidelines of the Company provide that any nominee for director in an uncontested election who receives a greater number of votes “withheld” from his or her election than votes “for” such election shall tender his or her resignation for consideration by the Nominating and Corporate Governance Committee. The Committee will recommend to the Board the action to be taken with respect to the resignation. The Board will publicly disclose its decision within 90 days of the certification of the election results. +Background information on the nominees as of July 20, 2015, including some of the attributes that led to their selection, appears below. The Nominating and Corporate Governance Committee has determined that each director meets the qualification standards described in the section entitled “Director Nominations” above. In addition, the Board firmly believes that the experience, attributes, and skills of any single director should not be viewed in isolation, but rather in the context of the experience, attributes, and skills that all director nominees bring to the Board as a whole, each of which contributes to the function of an effective Board. +Nominees for Election by Class A Shareholders +NIKE, INC. Ÿ 2015 Notice of Annual Meeting 5 +CORPORATE GOVERNANCE +PROPOSAL 1 +Elizabeth J. Comstock +Ms. Comstock, 54, a director since 2011, is CEO of the GE Business Innovation division and Chief Marketing Officer of General Electric Company (“GE”). Ms. Comstock oversees GE Lighting, GE Ventures, & Licensing and the sales marketing functions. At GE, she was appointed Vice President, Communications, NBC News Communications in 1994, Senior Vice President, NBC Corporate Communications in 1996, Vice President of Corporate Communications in 1998, Corporate Vice President and Chief Marketing Officer in 2003, President, NBC Universal Integrated Media in 2006, and Senior Vice President and Chief Marketing Officer in 2008. Prior to joining GE in 1994, Ms. Comstock held a succession of positions at NBC, CBS, and Turner Broadcasting. Ms. Comstock is a trustee of the Smithsonian’s Cooper-Hewitt National Design Museum. Ms. Comstock was selected to serve on the Board because her broad experience in, and understanding of, media, marketing and innovation aligns well with the Company’s business model, which involves a great deal of each. +John G. Connors +Mr. Connors, 56, a director since 2005, is a partner in Ignition Partners LLC, a Seattle-area venture capital firm. Mr. Connors served as Senior Vice President and Chief Financial Officer of Microsoft Corporation from December 1999 to May 2005. He joined Microsoft in 1989 and held various management positions, including Corporate Controller from 1994 to 1996, Vice President, Worldwide Enterprise Group in 1999, and Chief Information Officer from 1996 to 1999. Mr. Connors is currently a member of the board of directors of Splunk, Inc. and privately held companies Chef, Inc., Motif Investing, Inc., FiREapps, Inc., Xamarin, Inc., DataSphere Technologies, Inc., the Washington Policy Center, and the University of Washington Tyee Club. Mr. Connors was selected to serve on the Board because his experience and skills in accounting, financial leadership, venture capital, technology, and international operations enable him to make valuable contributions to NIKE’s Audit Committee and Finance Committee. +Timothy D. Cook +Mr. Cook, 54, a director since 2005, is the Chief Executive Officer of Apple, Inc. Mr. Cook joined Apple in March 1998 as Senior Vice President of Worldwide Operations and also served as its Executive Vice President, Worldwide Sales and Operations and Chief Operating Officer. Mr. Cook was Vice President, Corporate Materials for Compaq Computer Corporation from 1997 to 1998. Previous to his work at Compaq, Mr. Cook served in the positions of Senior Vice President Fulfillment and Chief Operating Officer of the Reseller Division at Intelligent Electronics from 1994 to 1997. Mr. Cook also worked for International Business Machines Corporation from 1983 to 1994, most recently as Director of North American Fulfillment. Mr. Cook is currently a member of the Board of Directors of the National Football Foundation and Apple, Inc. Mr. Cook was selected to serve on the Board because his operational executive experience and his knowledge of technology, marketing, and international business allow him to provide the Board with valuable perspectives and insights. +NIKE, INC. Ÿ 2015 Notice of Annual Meeting 6 +CORPORATE GOVERNANCE +John J. Donahoe II +Mr. Donahoe, 55, a director since June 2014, is Chairman of PayPal Holdings, Inc. From 2008 through 2015, Mr. Donahoe served as President and Chief Executive Officer of eBay, Inc. ("eBay"), provider of the global eBay.com online marketplace and PayPal digital payments platform. Mr. Donahoe joined eBay in 2005 as President of eBay Marketplaces, responsible for eBay's global e-Commerce businesses, and was appointed President and Chief Executive Officer in 2008. He has also served on eBay's Board of Directors since 2008. Prior to joining eBay, Mr. Donahoe was the CEO and Worldwide Managing Director of Bain & Company from 1999 to 2005, and a Managing Director from 1992 to 1999. Mr. Donahoe also serves on the Board of Directors of Intel Corporation and is a member of the President's Export Council. Mr. Donahoe was selected to serve on the Board because of his experience in executive and financial management, strategic planning, branding, technology, and digital commerce, which allow him to provide valued perspectives on each of these areas of the Company's business. +Philip H. Knight +Mr. Knight, 77, a director since 1968, is Chairman of the Board of Directors of NIKE. Mr. Knight is a co-founder of the Company and, except for the period from June 1983 through September 1984, served as its President from 1968 to 1990, and from June 2000 to December 2004. Prior to 1968, Mr. Knight was a certified public accountant with Price Waterhouse and Coopers & Lybrand and was an Assistant Professor of Business Administration at Portland State University. Mr. Knight led NIKE from a small partnership founded on a handshake to the world’s largest athletic footwear, apparel, and equipment company. He has extensive knowledge of and experience in Company operations, sports marketing, manufacturing, management, accounting, and financial matters, which make him uniquely qualified to serve as Chairman of the Board. +Travis A. Knight +Mr. Knight, 41, a director since June 2015, is the President and Chief Executive Officer of the animation studio, LAIKA, LLC, which specializes in feature-length films. He has been involved in all principal creative and business decisions at LAIKA since its founding in 2003, serving in successive management positions as Lead Animator, Vice President of Animation, and then as President and CEO in 2009. Mr, Knight has served as Producer and Lead Animator on Academy Award-nominated feature-length films The Boxtrolls (2014) and ParaNorman (2012, for which he won an Annie Award for Outstanding Achievement in Character Animation), and Lead Animator for Coraline (2009). Prior to his work at LAIKA, Mr. Knight held various animation positions at Will Vinton Studios from 1998 to 2002, as a stop-motion animator for television series, commercials, and network promotions. He has been recognized for his work on the Emmy Award-winning stop-motion animated television series The PJs. Mr. Knight serves on the Board of Directors of LAIKA, LLC. He is the son of NIKE Board Chairman Philip Knight. +NIKE, INC. Ÿ 2015 Notice of Annual Meeting 7 +CORPORATE GOVERNANCE +PROPOSAL 1 +Mark G. Parker +Mr. Parker, 59, has been President and Chief Executive Officer and a director since 2006. He has been employed by NIKE since 1979 with primary responsibilities in product research, design and development, marketing, and brand management. Mr. Parker was appointed divisional Vice President in charge of product development in 1987, corporate Vice President in 1989, General Manager in 1993, Vice President of Global Footwear in 1998, and President of the NIKE Brand in 2001. He has extensive knowledge and experience regarding Company operations, sports marketing, manufacturing, research, design, development, and management, and is an effective leader of NIKE. His position as Chief Executive Officer makes his participation on the Board critical. +Johnathan A. Rodgers +Mr. Rodgers, 69, a director since 2006, is a retired broadcast and cable television executive. Mr. Rodgers retired as the founding President and Chief Executive Officer of TV One, LLC in July 2011. Prior to joining TV One, LLC in March 2003, Mr. Rodgers was President of the Discovery Networks from 1996 to 2003. Prior to his work at Discovery Communications, Mr. Rodgers had a 20-year career at CBS, Inc. where he held a variety of executive positions, including President, CBS Television Stations Division and CBS News Executive Producer. Mr. Rodgers is currently a member of the Board of Directors of Comcast Corporation. Mr. Rodgers previously served as a director of Procter & Gamble. Mr. Rodgers has been inducted into both the Advertising Hall of Fame and the Broadcasting and Cable Hall of Fame. Mr. Rodgers was selected to serve on the Board because his experience and knowledge in media, broadcasting, and telecommunications, his skills in executive leadership, and his knowledge of multicultural media allows him to provide valuable insights to the Board regarding corporate responsibility, diversity, compensation, and marketing. +John R. Thompson, Jr. +Mr. Thompson, 73, a director since 1991, was head coach of the Georgetown University men’s basketball team from 1972 until 1998. Mr. Thompson was head coach of the 1988 United States Olympic basketball team. He hosted a sports radio talk show in Washington, D.C. for 13 years, and he is a nationally broadcast sports analyst for Turner Network Television (TNT) and Dial Global, Inc. He serves as Assistant to the President of Georgetown University for Urban Affairs, and he is a past President of the National Association of Basketball Coaches and presently serves on its Board of Governors. Mr. Thompson has honorary doctorate degrees from Wheeling Jesuit University, Georgetown University, University of the District of Columbia, and St. Peter's College. Mr. Thompson was selected to serve on the Board because his extensive experience and knowledge of education, college and professional sports, media, broadcasting, and knowledge of urban issues allow him to provide valuable insights to the Board regarding sports marketing, corporate responsibility and diversity. +Board Recommendation +The Board of Directors recommends that the Class A Shareholders vote FOR the election of nominees above to the Board of Directors. +NIKE, INC. Ÿ 2015 Notice of Annual Meeting 8 +CORPORATE GOVERNANCE +Nominees for Election by Class B Shareholders +Alan B. Graf, Jr. +Mr. Graf, 61, a director since 2002, is the Executive Vice President and Chief Financial Officer of FedEx Corporation, a position he has held since 1998, and is a member of FedEx Corporation’s Executive Committee. Mr. Graf joined FedEx Corporation in 1980 and was Senior Vice President and Chief Financial Officer for FedEx Express, FedEx’s predecessor, from 1991 to 1998. He previously served on the boards of directors of Kimball International Inc., Storage USA, Inc. and Arkwright Mutual Insurance Co., and he is currently a director of Mid-America Apartment Communities, Inc., Methodist Le Bonheur Healthcare, and the Indiana University Foundation. Mr. Graf was selected to serve on the Board because his experience and skills in auditing, accounting, financial management, executive leadership, and international operations enable him to effectively lead NIKE’s Audit Committee, serving as its Chair and financial expert, and the Nominating and Corporate Governance Committee. +John C. Lechleiter +Dr. Lechleiter, 61, a director since 2009, is Chairman of the Board, President, and Chief Executive Officer of Eli Lilly and Company (“Lilly”). He has served as President and Chief Executive Officer since April 1, 2008. He has been a member of Lilly’s Board of Directors since 2005 and was named Chairman on January 1, 2009. Dr. Lechleiter began work at Lilly as a senior organic chemist in Lilly’s process research and development division in 1979. He is a member of the American Chemical Society and Business Roundtable. He serves on the board of Pharmaceutical Research and Manufacturers of America. He also serves as Chairman of the U.S. Japan Business Council and of United Way Worldwide, and on the boards of the Life Sciences Foundation, the Central Indiana Corporate Partnership, and Ford Motor Company. Dr. Lechleiter was selected to serve on NIKE’s Board because his operational executive experience and his knowledge of science, marketing, management, and international business allow him to provide the Board with significant contributions in those strategic areas. +Michelle A. Peluso +Ms. Peluso, 43, a director since April 2014, is Chief Executive Officer of online shopping destination Gilt. Prior to joining Gilt in 2013, she served as Global Consumer Chief Marketing and Internet Officer of Citigroup Inc. from 2009 to 2013, and from 2002 to 2009, Ms. Peluso held senior management positions at Travelocity.com LP, being appointed Chief Operating Officer in 2003, and President and Chief Executive Officer in December 2003. Prior to joining Travelocity, in 1999 she founded Site59, an online travel site, serving as its Chief Executive Officer until its acquisition by Travelocity in 2002. Ms. Peluso has been a director of Gilt since 2009, and was also a director of OpenTable, Inc. from 2008 to 2012. Ms. Peluso was selected to serve on the Board because of her extensive experience in, and understanding of, online retail, marketing, branding, and digital connections with consumers, which are integral components of the Company's growth strategy. +NIKE, INC. Ÿ 2015 Notice of Annual Meeting 9 +CORPORATE GOVERNANCE +PROPOSAL 1 +Phyllis M. Wise +Dr. Wise, 70, a director since 2009, is Chancellor of the University of Illinois, at Urbana-Champaign. She joined the University of Maryland School of Medicine as an assistant professor in 1976, was appointed associate professor in 1982, and professor in 1987. Dr. Wise was appointed a professor and chair of the department of physiology at the University of Kentucky in 1993, and was appointed dean of the division of biological sciences and distinguished professor of neurobiology at the University of California-Davis in 2002. In 2005, she was appointed Provost and Vice President for Academic Affairs at the University of Washington, and served as Provost and Executive Vice President from 2007 to 2010, and interim President until July 2011, where she was also professor of physiology and biophysics, biology, and obstetrics and gynecology. During her tenure, she led the establishment of the College of the Environment, the mission of which is to provide solutions to developing a sustainable healthy environment through research and teaching. Dr. Wise has a doctorate in zoology from the University of Michigan and an honorary doctorate from Swarthmore College, and she is an elected member of the Institute of Medicine and the American Academy of Arts and Sciences. Dr. Wise is currently a member of the Board of Directors of RAND Health and the Robert Wood Johnson Foundation Board of Directors, as well as the Busey Bank Board of Directors. Dr. Wise was selected to serve on the Board because her extensive experience in medical science, health, higher education, and societal issues allow her to provide valuable contributions to the Board’s deliberations of strategic importance. +Board Recommendation +The Board of Directors recommends that the Class B Shareholders vote FOR the election of nominees above to the Board of Directors. +Director Compensation for Fiscal 2015 +Name +Fees Earned or Paid in Cash ($) +Stock Award (1) ($) +Option Awards (2) ($) +Change in Pension Value and +Nonqualified Deferred Compensation +Earnings (3) ($) +All Other +Compensation (4) +($) +Total +($) +Elizabeth J. Comstock +85,000 +160,005 +— +— +1,093 +246,098 +John G. Connors +90,000 +160,005 +— +— +21,093 +271,098 +Timothy D. Cook +95,000 +160,005 +— +— +21,093 +276,098 +John J. Donahoe II (5) +80,842 +320,060 +— +17,786 +418,688 +Alan B. Graf, Jr. +115,000 +160,005 +— +— +1,093 +276,098 +Douglas G. Houser +85,000 +160,005 +16,430 +5,760 +21,093 +288,288 +John C. Lechleiter +85,000 +160,005 +— +— +21,093 +266,098 +Michelle A. Peluso +90,000 +160,005 +— +— +21,262 +271,267 +Johnathan A. Rodgers +85,000 +160,005 +— +— +16,093 +261,098 +Orin C. Smith +100,000 +160,005 +— +— +21,093 +281,098 +John R. Thompson, Jr. +67,000 +160,005 +— +— +44,234 +271,239 +Phyllis M. Wise +95,000 +160,005 +— +— +21,093 +276,098 +(1) +Represents the grant date fair value of restricted stock awards granted in fiscal 2015 computed in accordance with accounting guidance applicable to stock-based compensation. The grant date fair value is based on the closing market price of our Class B Stock on the grant date. As of May 31, 2015, non-employee directors held the following numbers of shares of unvested restricted stock: Ms. Comstock, 1,952; Mr. Connors, 1,952; Mr. Cook, 1,952; Mr. Donahoe, 4,068; Mr. Graf, 1,952; Mr. Houser, 1,952; Dr. Lechleiter, 1,952; Ms. Peluso, 1,952; Mr. Rodgers, 1,952; Mr. Smith, 1,952; Mr. Thompson, 1,952; and Dr. Wise, 1,952. +(2) +Represents the grant date fair value of annual director options granted in fiscal 2015 computed in accordance with accounting guidance applicable to stock-based compensation. The grant date fair value of the options was estimated using the Black-Scholes option pricing model. On September 18, 2014, Mr. Houser was granted an option for 1,000 shares with an exercise price of $81.97 per share. The assumptions made in determining the grant date fair values of options under applicable accounting guidance are disclosed in Note 11 of Notes to the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended May 31, 2015. As of May 31, 2015, non-employee directors held outstanding options for the following numbers of shares of our Class B Stock: Ms. Comstock, 45,000; Mr. Connors, 45,000; Mr. Cook, 85,000; Mr. Graf, 33,000; Mr. Houser, 53,000; Dr. Lechleiter, 63,000; Mr. Rodgers, 89,000; Mr. Smith, 45,000; Mr. Thompson, 21,000; and Dr. Wise, 55,000. +NIKE, INC. Ÿ 2015 Notice of Annual Meeting 10 +CORPORATE GOVERNANCE +(3) +Represents above-market earnings credited during fiscal 2015 to the account of Mr. Houser under our prior Executive Deferred Compensation Plan adopted in 1983 (the “1983 DCP”). While deferrals under the 1983 DCP were discontinued in 1990, earnings have continued to accrue on the 1983 DCP account balances. Under the terms of the 1983 DCP, Mr. Houser received a guaranteed return equal to the current monthly rate of Moody’s seasoned corporate bonds index, plus 4%, which paid an average interest rate of 8.18% in fiscal 2015. +(4) +Includes medical and life insurance premiums paid by us of $23,141 for Mr. Thompson. Also includes matched contributions to charities in the following amounts: Messrs Connors, Cook, Houser, Smith, Thompson, and Dr. Lechleiter, $20,000; Mr. Donahoe, $15,000; Ms. Peluso, $17,920; Mr. Rodgers, $15,000; and Dr. Wise, $20,000. Also includes dividends paid on restricted stock in the following amounts: $1,093 for Ms. Comstock, Messrs. Connors, Cook, Graf, Houser, Rodgers, Smith, and Thompson, and Drs. Lechleiter and Wise; $2,786 for Mr. Donahoe; and $3,342 for Ms. Peluso. +(5) +Mr. Donahoe was appointed to the Board of Directors on June 19, 2014. In addition to the items described above, his compensation includes an initial restricted stock award valued at $160,054 and a pro-rated retainer fee of $80,842 for Board service in fiscal 2015. +Director Fees and Arrangements +Effective for fiscal 2015, we changed the annual equity award included in our standard director compensation program by replacing the option to purchase 7,000 shares of our Class B Stock with a restricted stock award valued at $160,000 on the date of grant. We made the changes to our director equity awards to maintain the competitiveness of NIKE’s director compensation program and to reinforce our directors’ ability to meet our stock ownership guidelines described below. All other components of our standard director compensation program remained unchanged. +Commencing with fiscal 2015, non-employee directors annually receive: +• +An annual retainer of $85,000 per year. +• +A restricted stock award valued at $160,000 on the date of grant, generally, the date of each annual meeting of shareholders. The restricted stock award is subject to forfeiture in the event that service as a director terminates prior to the next annual meeting. +• +For chairs of board committees (other than the Executive Committee), an annual retainer of $10,000 for each committee chaired ($15,000 for the chair of the Audit Committee). +• +For Audit Committee members, an additional annual retainer of $5,000 per year. +• +Payment or reimbursement of travel and other expenses incurred in attending board meetings. +• +Matching charitable contributions under the NIKE Matching Gift Program, under which directors are eligible to contribute to qualified charitable organizations and we provide a matching contribution to the charities in an equal amount, up to $20,000 in the aggregate for each director annually. +• +If a director does not attend 75% of the total fiscal year board and committee meetings, the fourth quarter payment of the annual retainers is forfeited. +Mses. Comstock and Peluso, Messrs. Connors, Cook, Donahoe, Graf, Travis Knight, Rodgers and Smith, and Drs. Lechleiter and Wise participate in our standard director compensation program. +Mr. Houser also participates in our standard program, except that, in exchange for electing in fiscal 2000 to participate in the standard program when it was first instituted, he receives an annual option to purchase 1,000 shares of our Class B Stock, in addition to his restricted stock award. +Mr. Thompson does not participate in our standard director compensation program. Pursuant to his election made in fiscal 2000, Mr. Thompson receives an annual retainer of $67,000 per year (instead of the $85,000 annual retainer fee paid under our standard program). Pursuant to his election, Mr. Thompson also receives medical insurance and $500,000 of life insurance coverage paid for by the Company. Additionally, on the date of each annual meeting of shareholders, Mr. Thompson receives an annual restricted stock award valued at $160,000 on the date of grant on the same terms as apply to the restricted stock awards granted pursuant to our standard program. Although Mr. Thompson attended less than 75% of the total meetings in fiscal 2015, the Board elected to waive the forfeiture of the fourth quarter retainer as his absences were excused due to reasons described earlier on page 1. +Mr. Philip Knight, as the Chairman of our Board of Directors, is one of our executive officers, but is not a Named Executive Officer. Mr. Philip Knight does not receive any additional compensation for services provided as a director. +Effective April 17, 2014, we also changed the initial equity award included in our standard director compensation program. Upon election to the Board, a newly appointed non-employee director is now granted a restricted stock award valued at $160,000 on the date of grant. The restricted stock award is subject to forfeiture in the event that service as a director terminates prior to the first anniversary of the grant. Prior to April 17, 2014, newly appointed non-employee directors received initial awards of stock options to purchase 7,000 shares of our Class B Stock. +Mr. Travis Knight was appointed to our Board of Directors on June 30, 2015. In connection with his appointment and consistent with the standard director compensation program described above, Mr. Travis Knight was granted an initial equity award of restricted stock valued at $160,000 on June 30, 2015. Mr. Travis Knight will participate in the standard director compensation program. +Stock Ownership Guidelines for Directors +On June 20, 2013, the Board of Directors adopted stock ownership guidelines for all non-management directors. Under these guidelines, directors are required to hold NIKE stock valued at five times their annual cash retainer. Directors elected prior to June 20, 2013 are required to attain these ownership levels by June 20, 2018 and new directors within five years of their election to the Board. +NIKE, INC. Ÿ 2015 Notice of Annual Meeting 11 +CORPORATE GOVERNANCE +PROPOSAL 1 +Director Participation in Deferred Compensation Plan +Under our Deferred Compensation Plan, non-employee directors may elect in advance to defer up to 100 percent of the director fees paid by us. For a description of the plan, see “Non-Qualified Deferred Compensation in Fiscal 2015” below. In addition, in fiscal 2000, Messrs. Houser and Thompson received credits to a fully vested NIKE stock account under the Deferred Compensation Plan in exchange for their waiver of rights to future payments under a former non-employee director retirement program. The Class B Stock credited to these directors’ accounts is distributed to them upon their retirement from the Board, and the accounts are credited with quarterly dividends until distributed. +Stock Holdings of Certain Owners and Management +The following table sets forth the number of shares of each class of NIKE securities beneficially owned, as of June 30, 2015, by (i) each person known to the Company to be the beneficial owner of more than 5 percent of any class of the Company’s securities, (ii) each of the directors and nominees for director, (iii) each executive officer listed in the Summary Compensation Table (“Named Executive Officers”), and (iv) all nominees, Named Executive Officers, and other executive officers as a group. Because Class A Stock is convertible into Class B Stock on a share-for-share basis, each beneficial owner of Class A Stock is deemed by the SEC to be a beneficial owner of the same number of shares of Class B Stock. Therefore, in indicating a person’s beneficial ownership of shares of Class B Stock in the table, it has been assumed that such person has converted into Class B Stock all shares of Class A Stock of which such person is a beneficial owner. For these reasons the table contains substantial duplications in the numbers of shares and percentages of Class A and Class B Stock shown for Mr. Philip Knight and for all directors and officers as a group. In addition, unless otherwise indicated, all persons named below can be reached at c/o John F. Coburn III, Vice President and Corporate Secretary, NIKE, Inc., One Bowerman Drive, Beaverton, Oregon 97005. +Title of Class +Shares Beneficially Owned (1) +Percent of Class (2) +Elizabeth J. Comstock +Class B +46,952 +(3) +— +John G. Connors +Class B +59,872 +(3) +— +Timothy D. Cook +Class B +86,952 +(3) +— +John J. Donahoe II +Class B +4,068 +— +Alan B. Graf, Jr +Class B +121,767 +(3) +— +Douglas G. Houser +Class B +385,467 +(3)(4) +— +Philip H. Knight +Class A +17,369,030 +(5) +9.8 +% +One Bowerman Drive, Beaverton, Oregon 97005 +Class B +17,384,510 +(5) +2.5 +% +Travis A. Knight +Class B +4,682 +John C. Lechleiter +Class B +72,452 +(3) +— +Mark G. Parker (6) +Class B +2,820,898 +(3)(7) +0.4 +% +Michelle A. Peluso +Class B +4,114 +— +Johnathan A. Rodgers +Class B +90,952 +(3) +— +Orin C. Smith +Class B +52,352 +(3) +— +John R. Thompson, Jr +Class B +54,965 +(3)(4) +— +Phyllis M. Wise +Class B +56,952 +(3) +— +Donald W. Blair (6) +Class B +600,199 +(3)(7) +0.1 +% +Trevor A. Edwards (6) +Class B +1,042,570 +(3)(7) +0.2 +% +Eric D. Sprunk (6) +Class B +569,211 +(3)(7) +0.1 +% +Jeanne P. Jackson (6) +Class B +369,931 +(3)(7) +— +Sojitz Corporation of America +1211 S.W. 5th Ave, Pacwest Center, Ste. 2220, Portland, OR 97204 +Preferred (8) +300,000 +100.0 +% +Swoosh, LLC +Class A +128,500,000 +(9) +72.4 +% +One Bowerman Drive, Beaverton, OR 97005 +Class B +128,500,000 +16.0 +% +The Vanguard Group +100 Vanguard Blvd., Malvern, PA 19355 +Class B +40,786,952 +(10) +6.1 +% +BlackRock, Inc. +40 East 57th Street, New York, NY 10022 +Class B +36,645,620 +(11) +5.4 +% +All directors and executive officers as a group (22 persons) +Class A +17,369,030 +9.8 +% +Class B +25,016,410 +(3) +3.7 +% +(1) +A person is considered to beneficially own any shares: (a) over which the person exercises sole or shared voting or investment power, or (b) of which the person has the right to acquire beneficial ownership at any time within 60 days (such as through conversion of securities or exercise of stock options). Unless otherwise indicated, voting and investment power relating to the above shares is exercised solely by the beneficial owner or shared by the owner and the owner’s spouse or children. +(2) +Omitted if less than 0.1 percent. +NIKE, INC. Ÿ 2015 Notice of Annual Meeting 12 +CORPORATE GOVERNANCE +(3) +These amounts include the right to acquire, pursuant to the exercise of stock options, within 60 days after June 30, 2015, the following numbers of shares: 45,000 shares for Ms. Comstock, 45,000 shares for Mr. Connors, 85,000 shares for Mr. Cook, 33,000 shares for Mr. Graf, 52,000 shares for Mr. Houser, 63,000 shares for Dr. Lechleiter, 2,371,250 shares for Mr. Parker, 89,000 shares for Mr. Rodgers, 45,000 shares for Mr. Smith, 21,000 shares for Mr. Thompson, 55,000 shares for Dr. Wise, 446,250 shares for Mr. Blair, 876,845 shares for Mr. Edwards, 540,684 shares for Mr. Sprunk, 346,250 shares for Ms. Jackson, and 6,200,154 shares for the executive officer and director group. +(4) +Includes shares credited to accounts under the NIKE, Inc. Deferred Compensation Plan in the following amounts: 20,767 for Mr. Houser, and 16,013 for Mr. Thompson. +(5) +Does not include: (a) 260,896 shares of Class A Stock that are owned by Mr. Philip Knight’s spouse, (b) 15,978,151 shares of Class A Stock held by four grantor annuity trusts for the benefit of Mr. Philip Knight’s children, (c) 1,880,290 shares of Class B Stock held by the Knight Foundation, a charitable foundation in which Mr. Philip Knight and his spouse are directors, (d) 1,237,928 shares of Class B Stock held by Jasper Ridge Strategic Partners, L.P., a limited partnership in which a company owned by Mr. Philip Knight is a limited partner. Mr. Philip Knight has disclaimed ownership of all such shares, and (e) 128,500,000 shares of Class A Stock that are owned by Swoosh, LLC, a limited liability company in which Mr. Philip Knight is a director. +(6) +Named executive officer listed in the Summary Compensation Table. +(7) +Includes shares held in accounts under the NIKE, Inc. 401(k) and Profit Sharing Plan for Messrs. Parker, Blair, Edwards, Sprunk, and Ms. Jackson in the amounts of 17,266, 5,833, 9,127, 563 and 843 shares, respectively. +(8) +Preferred Stock does not have general voting rights except as provided by law, and under certain circumstances as provided in the Company’s Restated Articles of Incorporation, as amended. +(9) +Information provided as of June 30, 2015 in Schedule 13D filed by the shareholder. +(10) +Information provided as of February 9, 2015 in Schedule 13G filed by the shareholder. +(11) +Information provided as of February 9, 2015 in Schedule 13G filed by the shareholder. +Section 16(a) Beneficial Ownership Reporting Compliance +Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s directors and executive officers, and persons who own more than 10 percent of a registered class of the Company’s equity securities, to file with the SEC and the NYSE initial reports of ownership and reports of changes in ownership of Common Stock and other equity securities of the Company. Officers, directors and greater than 10 percent shareholders are required by the regulations of the SEC to furnish the Company with copies of all Section 16(a) forms they file. To the Company’s knowledge, based solely on review of the copies of such reports furnished to the Company and written representations that no other reports were required, during fiscal 2015 all Section 16(a) filing requirements applicable to its officers, directors and greater than 10 percent beneficial owners were complied with. +Transactions with Related Persons +Mr. Howard S. Slusher, the father of John Slusher, Executive Vice President of Sports Marketing, and the Company are parties to a Consulting Agreement pursuant to which Howard Slusher manages the planning, design, and construction of new buildings at, and improvements to, NIKE's World Headquarters. Howard Slusher was selected due to his deep history and experience with the Company, as he has managed several significant construction projects for the Company, including the original World Headquarters construction and later expansions. In addition, Howard Slusher's previous engagement with the Company garnered the trust of management and makes him uniquely qualified to oversee the project. During fiscal 2015, the Company paid Howard Slusher $2,825,000 for these services. +Pursuant to the terms of a past consulting agreement with the Company, the Company agreed to pay for health and life insurance policies for Howard Slusher following expiration of the agreement. During fiscal 2015, the Company paid $129,160 for health and life insurance premiums. +Three of Mr. Parker’s siblings, each with over 25 years of service to the Company, were employed by the Company in non-executive roles in fiscal 2015. Ann Parker was an Executive Talent Scout, Bob Parker was a Marketplace Director, and Stephen Parker held Vice President roles with Converse. During fiscal 2015, the Company paid aggregate compensation to each of Ann Parker, Bob Parker and Stephen Parker in the amounts of $313,398, $387,434, and $540,582, respectively, comprising salary, bonuses, the grant date fair value of stock options granted during the fiscal year estimated using the Black-Scholes pricing model, profit sharing and matching contributions to Company-sponsored retirement plans. The compensation and benefits received by each of Mr. Parker's siblings were consistent with compensation paid to other employees holding similar positions. +Mr. Thompson’s son, John Thompson III, head basketball coach at Georgetown University, and the Company are parties to a contract pursuant to which Mr. Thompson III provides certain endorsement and consulting services to the Company. The terms of this agreement, effective August 2014 through August 2019, provide for annual base compensation of $200,000, and up to $112,000 per year of product and merchandise, for use by him, the basketball staff and team. In addition, there are annual incentive payments based upon his team's performance of up to $100,000. +The Company’s written policy requires the Nominating and Corporate Governance Committee to review any transaction or proposed transaction with a related person that would be required to be reported under Item 404(a) of Regulation S-K, and to determine whether to ratify or approve the transaction, with ratification or approval to occur only if the Committee determines that the transaction is fair to the Company or that approval or ratification of the transaction is in the interest of the Company. +NIKE, INC. Ÿ 2015 Notice of Annual Meeting 13 +CORPORATE GOVERNANCE +PROPOSAL 1 +Compensation Committee Interlocks and Insider Participation +The members of the Compensation Committee of the Board of Directors during fiscal 2015 were Timothy D. Cook, Elizabeth J. Comstock, John C. Lechleiter, and Johnathan A. Rodgers. The Committee is composed solely of independent, non-employee directors. No member of the Compensation Committee has been an executive officer of the Company, and no member of the Compensation Committee had any relationships requiring disclosure by the Company under the SEC’s rules requiring disclosure of certain relationships and related-party transactions. None of the Company’s executive officers served as a director or member of a compensation committee (or other committee serving an equivalent function) of any other entity, the executive officers of which served as a director or member of the Compensation Committee of the Company during fiscal 2015. +NIKE, INC. Ÿ 2015 Notice of Annual Meeting 14 +COMPENSATION DISCUSSION AND ANALYSIS +COMPENSATION DISCUSSION AND ANALYSIS +Executive Summary +This Compensation Discussion and Analysis explains our compensation philosophy, summarizes our compensation programs and reviews compensation decisions for the executives identified as Named Executive Officers in the Summary Compensation Table on page 26. The Named Executive Officers for fiscal 2015 were: +• +Mark G. Parker, President and Chief Executive Officer +• +Donald W. Blair, Executive Vice President and Chief Financial Officer +• +Trevor A. Edwards, President, NIKE Brand +• +Eric D. Sprunk, Chief Operating Officer +• +Jeanne P. Jackson, President, Product and Merchandising +On February 12, 2015, the Company announced Mr. Blair will retire in October 2015. As part of a planned transition, Mr. Blair will remain Executive Vice President and Chief Financial Officer through July 31, 2015, and will remain with the company through October 31, 2015 in support of the transition. Effective August 1, 2015, Mr. Blair will be succeeded by Andrew Campion, currently our Senior Vice President, Finance, Strategy and Investor Relations. +The Compensation Committee of the Board of Directors (the “Committee”) is comprised of Timothy D. Cook (Chairman), Elizabeth J. Comstock, John C. Lechleiter, and Johnathan A. Rodgers, each of whom is an independent director under applicable NYSE listing standards. +Our executive compensation program, similar to our non-executive compensation programs, is aligned with our business strategy and culture to attract and retain top talent, reward business results and individual performance, and most importantly, maximize shareholder value. Our total compensation program for the Named Executive Officers is highly incentive-based and competitive in the marketplace, with Company performance determining a significant portion of total compensation. +Executive Compensation Governance Practices +To achieve the objectives of our executive compensation program and emphasize pay-for-performance principles, the Compensation Committee has continued to employ strong governance practices, including: +We Do +We Don't Do +ü Base a majority of total compensation on performance and retention incentives +ü Set annual and long-term incentive targets based on clearly disclosed, objective performance measures +ü Mitigate undue risk associated with compensation by using multiple performance targets, caps on potential incentive payments and a clawback policy +ü Require executive officers and non-employee directors to hold NIKE stock through published stock ownership guidelines +ü Vest equity awards over time to promote retention +ü Provide double-trigger change-in-control equity acceleration +ü Require executive officers and directors to obtain pre-approval to pledge NIKE stock +ü Conduct annual “say-on-pay” advisory votes +û Retirement acceleration for restricted stock or restricted stock units (RSUs) +û Dividends or dividend equivalents on unearned RSUs +û Repricing of options without shareholder approval +û Hedging transactions or short sales by executive officers or directors +û Significant perquisites +û Tax gross-ups for perquisites +û Pension or supplemental executive retirement plan (SERP) +û Employment contracts +û Cash-based change-in-control benefits +û Excise tax gross-ups upon change of control +Consideration of Say-on-Pay Vote Results +NIKE, INC. Ÿ 2015 Notice of Annual Meeting 15 +COMPENSATION DISCUSSION AND ANALYSIS +The non-binding advisory proposal regarding compensation of the Named Executive Officers submitted to shareholders at our 2014 Annual Meeting was approved by over 98% of the votes cast. The Committee believes this favorable outcome conveyed our shareholders' support of our executive compensation program and the Committee's decisions. After considering the shareholder vote and other factors in its annual review of our total executive compensation programs, the Committee made no material changes in the structure of our compensation programs. The Committee will continue to consider the outcome of the Company's say-on-pay votes when conducting its regular practice of evaluating the program and making future compensation decisions for the Named Executive Officers. +Financial Highlights under Incentive Plans +NIKE delivered strong performance in fiscal 2015. The charts below set forth certain key financial results that were used in determining payouts under our incentive compensation plans for fiscal 2015. The measures below are based on NIKE's comparable publicly reported financial results, but may differ based on plan terms, including adjustments to account for the divestitures of the Cole Haan and Umbro businesses in fiscal 2013, as described in the footnotes to the charts below and in “Elements of our Compensation Program.” +1 Revenues and EPS exclude all Cole Haan and Umbro revenues and expenses, all divestiture-related charges and gains, and any amounts associated with the transfer of Umbro sports marketing sponsorships to NIKE. The Cole Haan and Umbro businesses were divested February 1, 2013 and November 30, 2012, respectively. +2 Pre-tax income excludes all Cole Haan and Umbro revenues and expenses, all divestiture-related charges and gains, and any amounts associated with the transfer of Umbro sports marketing sponsorships to NIKE. +Executive Compensation Highlights +The total compensation for each of the Named Executive Officers is shown in the Summary Compensation Table on page 26. While we describe executive compensation in greater detail throughout this Compensation Discussion and Analysis, actions the Committee took in fiscal 2015 are highlighted below: +• +Base Salary. Based on the recommendation by the Committee, which was approved by the independent members of the Board, base salaries remained the same as it was determined that they were appropriately aligned with the market. +• +Performance-Based Annual Incentive Plan. Target awards remained the same, except in the case of Mr. Parker, who received a target increase from 170% to 180% of base salary. The Committee established an increased target award for Mr. Parker to align with market. Based on financial performance goals set by the Committee in June 2014 and actual performance results, each executive officer's bonus for fiscal 2015 was paid out at 145.03% of target. +• +Performance-Based Long-Term Incentive Plan. The target awards for the fiscal 2015-2017 performance period remained the same. Based on long-term financial performance goals set by the Committee in June 2012 and actual performance results, each executive officer received a payout for the fiscal 2013-2015 performance period of 120.16% of target. +• +Stock Options. Annual awards remained the same, except in the case of Messrs. Edwards and Sprunk, who each received 80,000 shares compared to 75,000 shares in the prior year. Each award vests equally over four years. +• +Restricted Stock. Annual awards remained the same. Each award vests equally over three years. +• +Peer Group. For purposes of setting executive compensation in fiscal 2015, eBay Inc., Kohl's Corp., and Mondelez International, Inc. were added to our peer group, and General Mills Inc. and J.C. Penney Company Inc. were removed. +Fiscal 2016 CEO Performance-Based Retention Award +NIKE, INC. Ÿ 2015 Notice of Annual Meeting 16 +COMPENSATION DISCUSSION AND ANALYSIS +In view of the Company’s strong performance under Mr. Parker’s leadership and to provide an incentive for Mr. Parker to stay for at least the next five years, on June 30, 2015, the Committee granted to Mr. Parker the opportunity to earn a restricted stock unit (“RSU”) award with a target value of $30,000,000, representing 277,727 shares of our Class B Stock based on the closing price on the grant date. 60% of the award’s maximum value is based on the Company’s performance, and also will not be earned unless Mr. Parker remains employed with the Company through a five-year vesting period ending on June 30, 2020. 40% of the award is subject only to time vesting and will be earned if Mr. Parker remains employed with the Company through June 30, 2020. The Committee views the award as a long-term retention incentive for compensation over the five-year vesting and performance periods and not solely as compensation for fiscal 2016. The terms of Mr. Parker’s award are further described in “Restricted Stock Unit (RSU) Retention Awards.” +Operation of the Compensation Committee +The Compensation Committee of the Board of Directors (the “Committee”) evaluates the performance of the CEO against goals and objectives set by the Committee. Based on the evaluation, the Committee Chair discusses the CEO's performance and recommended compensation with the independent members of the Board of Directors. The CEO's base salary and the base salaries of the other Named Executive Officers are approved by the independent members of the Board of Directors based on the Committee's recommendation. The Committee has sole responsibility for all other elements of Named Executive Officer compensation. The Committee also oversees the performance evaluation of those officers and the administration of our executive compensation programs. The Committee receives recommendations from the CEO as to compensation of other Named Executive Officers, and the CEO participates in Committee discussions regarding the compensation of those officers. The Committee meets in executive session without the CEO to determine his compensation. The Committee is comprised of Timothy D. Cook (Chairman), Elizabeth J. Comstock, John C. Lechleiter, and Johnathan A. Rodgers, each of whom is an independent director under applicable NYSE listing standards. The Committee operates pursuant to a written charter that is available on our website at: http://investors.nike.com . +Each year, the Committee reviews our executive total compensation program to ensure it continues to reflect the Committee's commitment to align the objectives and rewards of our executive officers with the creation of value for our shareholders. Similar to our non-executive compensation programs, the program has been designed to reinforce our pay-for-performance philosophy by delivering total compensation that motivates and rewards short-and long-term financial performance to maximize shareholder value, and to be externally competitive to attract and retain outstanding and diverse executive talent. This is done much in the same way our human resources staff designs our non-executive compensation programs, to ensure they are market competitive, offer performance-based financial incentives, and provide opportunities to share in total Company success through competitive benefits, stock purchase discount programs, and broad-based profit sharing. In conducting its annual review, the Committee considers information provided by our human resources staff. Our human resources staff retains independent compensation consulting firms to provide surveys and reports containing competitive market data. These consultants do not formulate executive compensation strategies for NIKE or recommend individual executive compensation. The human resources staff uses the surveys and reports to make recommendations to the Committee concerning executive compensation. The Committee relies on its collective experience and judgment along with the recommendations prepared by our human resources staff to set executive compensation. The Committee has the authority, in its sole discretion, to retain compensation consultants to assist the Committee in evaluating the compensation of executive officers, but chose to not retain any such consultants in fiscal 2015, with the exception as described below. +In June 2015, the Committee retained Mercer (a wholly owned subsidiary of Marsh & McLennan Companies, Inc.), a well-recognized employee benefits and compensation consulting firm, as its independent compensation consultant for the purpose of providing an objective analysis of, and counsel on, a retention award for Mr. Parker that would include specific performance criteria. Mercer evaluated management’s analysis and proposal for the award, including reasonableness of the business case, size of the award, performance metrics, performance period, terms and conditions, and governance considerations, and reviewed their findings with the Committee. +In connection with its engagement of Mercer, the Committee considered various factors bearing upon Mercer’s independence, including the factors specified in Section 303A.05(c) of the NYSE Listed Company Manual, and determined that Mercer was independent and that its engagement did not present any conflicts of interest. Mercer also determined that it was independent from management and confirmed this in a written statement delivered to the Committee. The fees for Mercer’s engagement by the Committee were $44,423. In addition, Mercer provided certain services to the Company during fiscal 2015 at the request of management consisting of information regarding our Stock Incentive Plan and employee benefits consulting services, inclusive of compensation and benefits surveys. The fees for such additional services were approximately $83,920 and $2,744,403, respectively. +Use of Market Survey Data +To help establish competitive ranges of base salary, incentive compensation opportunities, and target total compensation for the purpose of making recommendations to the Committee, our human resources staff uses competitive market data from surveys and reports prepared by Aon Hewitt Associates and Towers Watson. We consider market survey data from a peer group of companies which have similar revenue size, have similar products or markets, or reflect the companies with which we compete for executive talent. In addition, we consider market data across many industries, focusing on companies with revenues of $10 billion or more. +In November 2013, we conducted our regular periodic review of our peer group. In reviewing the factors described above, we determined that for purposes of setting executive compensation for fiscal 2015, the peer group should be refined to include eBay Inc., Kohl's Corp., and Mondelez International, Inc. and to remove General Mills Inc. and J.C. Penney Company Inc. The fiscal 2015 peer group was: +NIKE, INC. Ÿ 2015 Notice of Annual Meeting 17 +COMPENSATION DISCUSSION AND ANALYSIS +Company +Reported +Fiscal Year +Revenue +(in millions) +The Coca-Cola Company +12/14 +$45,998.0 +Colgate-Palmolive Company +12/14 +17,277.0 +eBay, Inc. +12/14 +17,902.0 +FedEx Corp. +05/15 +47,453.0 +Gap Inc. +01/15 +16,435.0 +Google Inc. +12/14 +66,001.0 +Kellogg Co. +12/14 +14,580.0 +Kimberly-Clark Corporation +12/14 +19,724.0 +Kohl's Corp. +01/15 +19,023.0 +Limited Brands Inc. +01/15 +11,454.1 +Macy’s, Inc. +01/15 +28,105.0 +McDonald’s Corporation +12/14 +27,441.3 +Mondelez International, Inc. +12/14 +34,244.0 +PepsiCo, Inc. +12/14 +66,683.0 +Starbucks Corp. +09/14 +16,447.8 +Time Warner Inc. +12/14 +27,359.0 +The Walt Disney Company +09/14 +48,813.0 +The surveys that our human resources staff reviews show percentile compensation levels for various executive positions with comparable job responsibilities. The staff also analyzes market data regarding compensation mix among base salary, annual incentive and long-term incentives such as performance-based cash awards, stock options, restricted stock and restricted stock unit awards. The Committee reviews this mix analysis when evaluating the separate compensation elements for each executive. The Committee does not endeavor to set executive compensation at or near any particular percentile, and it considers target total compensation to be competitive if it is generally within a reasonable range of the market median. Market data is one of many factors that the Committee considers in the determination of executive compensation levels. Other factors include internal pay equity, level of responsibility, the individual's performance, expectations regarding the individual's future potential contributions, succession planning and retention strategies, budget considerations, and the Company's performance. +Objectives and Elements of Our Compensation Program +As noted in the Executive Summary, our executive compensation program is aligned with our business strategy and culture to attract and retain top talent, reward business results and individual performance, and most importantly, maximize shareholder value. Our total compensation program for the Named Executive Officers is highly incentive-based and competitive in the marketplace, with Company performance determining a significant portion of total compensation. Our program consists of the following elements: +• +Base salary that reflects the executive’s accountabilities, skills, experience, performance, and future potential +• +Annual performance-based incentive cash bonus based on Company financial results under our Executive Performance Sharing Plan +• +A portfolio approach to long-term incentive compensation to provide a balanced mix of performance-based cash incentives and equity, including: +◦ +Performance-based long-term incentive cash awards based on Company financial results to encourage attainment of long-term Company financial objectives +◦ +Stock options to align the interests of executives with those of shareholders +◦ +Restricted stock awards and restricted stock unit retention awards to provide incentives consistent with driving shareholder value, and to provide strong retention incentives +• +Benefits +◦ +Profit sharing contributions to defined contribution retirement plans +◦ +Post-termination payments under non-competition agreements +◦ +Executives are generally eligible for the same competitive benefits as other employees in the United States, including medical, dental, and vision insurance, paid time off, 401(k) plan, and Company-provided life and disability insurance. Employees outside of the United States are offered locally competitive benefits. +◦ +Employee Stock Purchase Plan +NIKE, INC. Ÿ 2015 Notice of Annual Meeting 18 +COMPENSATION DISCUSSION AND ANALYSIS +In determining the award levels for each of the elements in our total compensation program, our philosophy is to "pay for performance." As a result, we place relatively greater emphasis on the incentive components of compensation (annual incentive award, performance-based long-term cash incentive award, and stock options) to align the interests of our executives with shareholders, and motivate them to maximize shareholder value. This is balanced with retention incentives provided by base salary, restricted stock awards, and restricted stock unit awards. +We look to the experience and judgment of the Committee to determine what it believes to be the appropriate target compensation mix for each Named Executive Officer. We do not apply fixed ratios or formulas, or rely solely on market data or quantitative measures. In allocating compensation among the various elements, the Committee considers market data, Company performance and budget, the impact of the executive's position in the Company, individual past performance, expectations for future performance, experience in the position, any recent or anticipated changes in the individual's responsibilities, internal pay equity for comparable positions, and retention incentives for succession planning. As shown in the charts below, incentive components accounted for 90% of the CEO's target compensation and approximately 81% of the other Named Executive Officers' target compensation in fiscal 2015. +Elements of Our Compensation Program +Base Salary +When making recommendations to the Committee concerning base salary levels for our Named Executive Officers, our human resources staff follows a similar process to how they evaluate non-executive base salary levels. We consider the individual's performance in the prior year, expectations regarding the individual's future performance, experience in the position, any recent or anticipated changes in the individual's responsibilities, internal pay equity for comparable positions, succession planning strategies, our annual salary budget, other elements of the individual's compensation, and the market data described in “Use of Market Survey Data.” The Committee reviews these factors each year and adjusts base salary levels to ensure that we are appropriately rewarding performance. +The Committee generally reviews base salaries of the Named Executive Officers annually based on a review of individual performance at a meeting in June, with salary adjustments becoming effective for the first pay period ending in August. During the salary review in June 2014, the Committee recommended, and the independent members of the Board approved, maintaining the base salaries for Messrs. Parker, Blair, Edwards, and Sprunk and Ms. Jackson at $1,550,000, $850,000, $935,000, $935,000, and $885,000, respectively, based on the determination that the base salaries were appropriately aligned with comparable positions in the market. +In setting a Named Executive Officer's overall compensation package, the Committee places a relatively greater emphasis on the incentive components of compensation described below. +Performance-Based Annual Incentive Bonus +Annual awards are paid to the Named Executive Officers under our Executive Performance Sharing Plan (“PSP”). Our “pay for performance” philosophy for awards is simple and applies to all global employees who are eligible to share in the Company's success through incentive bonuses: if we exceed our financial objectives, we will pay more; if we fail to reach them, we will pay less or nothing at all. The PSP for all executives is based 100% on overall corporate performance each year against a target based on the Company's annual financial objective, as measured by income before income taxes (“PTI”), excluding the effect of any acquisitions, divestitures or accounting changes. The Committee selected PTI as the performance measure as it aligns with the Company's operational financial targets for the individual fiscal year. By focusing +NIKE, INC. Ÿ 2015 Notice of Annual Meeting 19 +COMPENSATION DISCUSSION AND ANALYSIS +on driving strong operational performance each year, the plan supports our goal of delivering sustainable, profitable growth. The Committee retains the discretion to reduce or eliminate PSP award payouts based on individual or Company performance. Basing our annual incentive award program for all executives on overall corporate performance is intended to foster teamwork and send the message to each executive that his or her role is to help ensure overall organizational success and maximize shareholder value. +Each year the Committee establishes a PSP target award for each Named Executive Officer based on its judgment of the impact of the position in the Company and what it believes to be competitive against market data as described in “Use of Market Survey Data,” while considering internal pay equity for comparable positions. The fiscal 2015 target awards were: +Named Executive Officer +Fiscal 2015 PSP Target Award +(% of base salary) +Mr. Parker +180% +Mr. Edwards +100% +Mr. Blair +90% +Mr. Sprunk +90% +Ms. Jackson +90% +For fiscal 2015, the Committee increased Mr. Parker's target from 170% to 180% to align with market. The targets for Messrs. Edwards, Blair and Sprunk and Ms. Jackson remained unchanged. +In June 2014, the Committee established performance goals for the fiscal 2015 PSP based on its evaluation of our business plan and prospects for the year. The table below summarizes the fiscal 2015 PSP performance goals established by the Committee. For fiscal 2015, NIKE achieved a PTI of $4,205 million, an 18.7% increase over fiscal 2014 continuing operations PTI of $3,544 million. This achievement was above the target performance goal established by the Committee. As a result, each executive officer's award was paid out at 145.03% of the target award. +(Dollars in millions) +Fiscal 2015 PSP Performance Goal +Threshold Performance +Threshold % Payout +Target Performance +Target % Payout +Maximum Performance +Maximum % Payout +Actual Performance +Actual % Payout +PTI +$3,609 1 +50% +$3,923 2 +100% +$4,237 3 +150% +$4,205 +145.03% 4 +1 Threshold performance represents 1.8% increase above fiscal 2014 continuing operations PTI. +2 Target performance represents 10.7% increase above fiscal 2014 continuing operations PTI. +3 Maximum performance represents 19.6% increase above fiscal 2014 continuing operations PTI. +4 Prorated for performance between payout levels. +Performance-Based Long-Term Incentive Plan +The first component in our long-term portfolio mix is performance-based awards payable in cash under our Long-Term Incentive Plan (“LTIP”). As with the performance-based annual incentive, the LTIP follows our “pay for performance” philosophy. If we exceed our targets, we will pay more; if we fall short, we will pay less or nothing at all. This program focuses executives on overall, long-term financial performance, and is intended to reward them for delivering revenue growth and diluted earnings per share (“EPS”) growth over a three-year performance period. At the beginning of each fiscal year, the Committee establishes performance goals and potential cash payouts for the next three fiscal years for all executives under the LTIP. LTIP measures for all executives are based 50% on cumulative revenues for the three-year performance period and 50% on cumulative EPS for the period, in each case excluding generally the effect of acquisitions, divestitures and accounting changes. The Committee selected revenue and EPS as LTIP performance measures to encourage executives to focus on delivering profitable, sustainable growth. Strong revenue growth is the foundation of the Company’s financial strategy, requiring investments in key business drivers to sustain growth. EPS growth is essential to delivering value for our shareholders, requiring investments be targeted to those areas with the highest potential for return. By balancing revenue growth and EPS growth, the plan supports the Company’s objective of delivering long-term shareholder value. The Committee retains the discretion to reduce or eliminate LTIP award payouts based on individual or Company performance. +During the compensation review in June 2014, the Committee approved LTIP target awards for all Named Executive Officers for the fiscal 2015-2017 performance period. The Committee set these targets based on its judgment of what it believes to be a desirable mix of long-term compensation, the impact of the position in the Company, and what it finds to be competitive against market data as described in “Use of Market Survey Data,” while maintaining internal pay equity for comparable positions. For the fiscal 2015-2017 performance period, the Committee maintained the targets for all Named Executive Officers as follows: +Named Executive Officer +Fiscal 2015-2017 LTIP Award Target ($) +Mr. Parker +$3,500,000 +Mr. Edwards +900,000 +Mr. Sprunk +750,000 +Ms. Jackson +750,000 +Mr. Blair +500,000 +NIKE, INC. Ÿ 2015 Notice of Annual Meeting 20 +COMPENSATION DISCUSSION AND ANALYSIS +In June 2014, the Committee established performance goals for the fiscal 2015-2017 LTIP. The Committee considered our long-term financial goals of high single-digit revenue growth and mid-teens EPS growth in setting performance goals for the target award payout level. The total payout percentage will be the average of the payout percentages determined for cumulative revenues and cumulative EPS, respectively. Payout below the threshold payout level may occur if either the revenue or EPS related percentage achievement is less than 50%. If both revenue and EPS fall below the threshold level, there is no payment. The table below summarizes the fiscal 2015-2017 LTIP performance goals. +(Dollars in millions, except per share data) +Fiscal 2015-2017 Performance Goals +Threshold Performance 1 +Threshold % Payout +Target Performance 2 +Target % Payout +Maximum Performance 3 +Maximum % Payout +Revenue +$95,627 +50% +$99,329 +100% +$107,021 +200% +EPS +$10.61 +50% +$11.43 +100% +$13.20 +200% +__________________________________________________________ +1 Threshold payout for revenue requires cumulative revenues corresponding to a 7% compound annual growth rate (“CAGR”) from fiscal 2014 continuing operations revenue of $27,799 million. Threshold payout for EPS requires cumulative EPS corresponding to a 9% CAGR from fiscal 2014 continuing operations EPS of $2.97. +2 Target revenue payout requires a 9% CAGR and target EPS payout requires a 13% CAGR. +3 Maximum revenue payout requires a 13% CAGR and maximum EPS payout requires a 21% CAGR. +For fiscal 2015, executive officers were eligible to receive LTIP award payouts based on performance targets set in June 2012 covering the fiscal 2013-15 performance period. As a result of the divestiture of the Cole Haan and Umbro businesses on February 1, 2013 and November 30, 2012, respectively, fiscal 2013-2015 award terms exclude all Cole Haan and Umbro revenues and expenses, all divestiture-related charges and gains, and any amounts associated with the transfer of Umbro sports marketing sponsorships to NIKE. In June 2015, the Committee determined a payout of 120.16% under these awards was earned based on the average of the payout percentages for cumulative adjusted revenues and cumulative adjusted EPS for the performance period shown in the table below: +(Dollars in millions, except per share data) +Fiscal 2013-2015 Performance Goals +Threshold Performance +Threshold % Payout +Target Performance +Target % Payout +Maximum Performance +Maximum % Payout +Actual Performance +Actual % Payout +Revenue 1,2 +$78,733 +50% +$81,801 +100% +$88,176 +200% +$83,570 +128.10% +EPS 2,3 +$8.58 +50% +$9.24 +100% +$10.67 +200% +$9.41 +112.22% +Total Payout +120.16% +1 Cumulative revenues for fiscal 2013, fiscal 2014 and fiscal 2015. +2 Revenues and EPS exclude all Cole Haan and Umbro revenues and expenses, all divestiture-related charges and gains, and any amounts associated with the transfer of Umbro sports marketing sponsorships to NIKE. The Cole Haan and Umbro businesses were divested February 1, 2013 and November 30, 2012, respectively. +3 Cumulative EPS for fiscal 2013, fiscal 2014 and fiscal 2015. +Stock Options +The second component in our long-term portfolio mix is stock options. Stock options are designed to align the interests of the Company's executives with those of shareholders by encouraging executives to enhance the value of the Company and, hence, the price of the Class B Stock. This is true “pay for performance”: executives are rewarded only if the market price of our stock rises, and they get nothing if the price does not rise or goes down. When determining the grants, the Committee generally focuses on the number of shares, while considering the value for accounting purposes. Our approach is based on our desire to carefully control annual share usage and avoid fluctuations in grant levels due to share price changes. The Committee awards stock options to each executive based on its judgment. The Committee considers a number of factors including the individual's performance, management succession, competitive market data as described in “Use of Market Survey Data,” internal pay equity for comparable positions, and a desirable mix of long-term incentives. Our human resources staff periodically tests the reasonableness of our stock option grants against competitive market data and may make recommendations to the Committee. Options are generally granted annually to selected employees, including the Named Executive Officers, in July of each year under our shareholder-approved Stock Incentive Plan. Stock options for fiscal 2015 were granted by the Committee on July 18, 2014 with an exercise price equal to the closing market price of our stock on that date. +In July 2014, the Committee granted options to Mr. Parker for 165,000 shares, the same number of stock options granted to him in July 2013. Messrs. Edwards, and Sprunk each received 80,000 shares, an increase of 5,000 shares to each of them from July 2013. Mr. Blair and Ms. Jackson each received 75,000 shares, the same number of stock options granted to them in July 2013. The Committee, in its judgment, set these award levels based on the factors described above. +Options granted by the Company generally vest over a four-year period. To promote executive retention, unvested options generally are forfeited if the employee leaves before vesting occurs and must be exercised within three months after termination of employment. All options granted after July 2010 provide for a limited retirement provision designed to encourage employees to delay retirement, thus enhancing retention. Only those employees with a minimum of five years of service who are age 55 and above at the time of termination of employment are eligible for the provision. +NIKE, INC. Ÿ 2015 Notice of Annual Meeting 21 +COMPENSATION DISCUSSION AND ANALYSIS +Under the provision, only unvested stock options that have been granted for at least one full year to employees between the ages of 55 to 59 at the time of termination of employment will continue to vest, and may be exercised for up to four years after termination. If an employee is age 60 or older and has at least five years of service at termination, unvested stock options that have been granted for at least one full year will receive accelerated vesting and may be exercised for up to four years after termination. The features related to accelerated vesting are described in “Potential Payments upon Termination or Change-in-Control.” Based on their ages and years of service, as of May 31, 2015, Messrs. Parker and Blair could terminate employment at any time and receive continued vesting of their options granted in July 2011, 2012, and 2013. As of May 31, 2015, Ms. Jackson could terminate employment at any time and receive accelerated vesting of her options granted in July 2011, 2012, and 2013. +Restricted Stock Awards +The third component in our long-term portfolio mix is restricted stock awards. Stock ownership and stock-based incentive awards align the interests of our Named Executive Officers with the interests of our shareholders, as the value of this incentive rises and falls with the stock price. Restricted stock awards are generally granted annually to selected employees, including the Named Executive Officers, in July at the same meeting at which stock options are granted under our shareholder-approved Stock Incentive Plan. Awards generally vest in three equal installments on each of the first three anniversaries of the grant date. The awards promote executive retention, as unvested shares held at the time the executive's employment is terminated are forfeited. Award recipients receive dividends on the full number of restricted shares awarded at the same time dividends are paid to other shareholders. +The Committee, in its judgment, sets restricted stock award levels based on several factors, including what the Committee believes to be a desirable mix of long-term compensation, their determination of an appropriate weighting of potential future contribution to the Company, retention incentives, and competitive grants based on competitive market data. In July 2014, the Committee granted a restricted stock award to Mr. Parker valued at $3,500,000, representing 45,150 shares of our Class B Stock, based on the closing price on the grant date. This was the same value of restricted stock granted to Mr. Parker in July 2013. Mr. Edwards received an award valued at $750,000, representing 9,675 shares of our Class B Stock based on the closing price on the grant date. This was the same value of restricted stock granted to Mr. Edwards in July 2013. Messrs. Blair and Sprunk and Ms. Jackson each received an award valued at $625,000, representing 8,063 shares of our Class B Stock based on the closing price on the grant date. This was the same value granted to Messrs. Blair and Sprunk and Ms. Jackson in July 2013. +Restricted Stock Unit (RSU) Retention Awards +From time to time, the Committee also grants restricted stock units (“RSUs”) that vest based on continued service through a future service date with the Company, for the specific purpose of further promoting retention. These RSU awards accumulate dividend equivalents that are only paid in cash upon full vesting. The awards have no value to the executive unless the executive remains employed with the Company for the full vesting period, and will be canceled if the executive terminates or retires within the vesting period. None of our Named Executive Officers received RSUs in fiscal 2015. +In view of the Company’s strong performance under Mr. Parker’s leadership and to provide an incentive for Mr. Parker to stay for at least the next five years, on June 30, 2015, the Committee granted to Mr. Parker the opportunity to earn an RSU award with a target value of $30,000,000, representing 277,727 shares of our Class B Stock based on the closing price on the grant date. +60% of the award, or a target number of 166,636 shares, is subject to performance vesting based on cumulative revenue growth and cumulative EPS growth over a five-year performance period of fiscal 2016 through fiscal 2020 (the “Performance-Based RSUs”). The performance goals are equally weighted, and both measures exclude the effect of any acquisitions, divestitures or accounting changes. For Mr. Parker to earn the maximum payout for the Performance-Based RSUs (100% of the target number of shares), the Company must achieve a 9% compound CAGR from fiscal 2015 for cumulative revenues over the five-year performance period, and a 13% CAGR from fiscal 2015 for cumulative EPS. For Mr. Parker to earn a threshold payout of 50% of the target number of shares, the Company must achieve cumulative revenues corresponding to a 7% CAGR, and for EPS, cumulative EPS corresponding to a 9% CAGR. These are the same CAGRs established by the Committee for target and threshold payouts under the LTIP for the fiscal 2015-2017 performance period. Payout may occur at 25% of the target number of shares if either the revenue or EPS related percentage achievement is less than threshold. Additional shares will be earned for the Performance-Based RSUs pro rata for performance between the threshold and maximum levels. If performance does not achieve the threshold level for either target, no shares will be earned for the Performance-Based RSUs. The Performance-Based RSUs are also subject to time vesting and will not be earned unless Mr. Parker remains employed with the Company through June 30, 2020. 40% of the award, or 111,091 shares, is subject only to time vesting and will be earned if Mr. Parker remains employed with the Company through June 30, 2020 (“Time-Based RSUs”). The vesting of Mr. Parker’s Performance-Based RSUs will accelerate fully in the event of a “double trigger” change in control, but will vest at the threshold levels in the event of his death or disability. The vesting of Mr. Parker’s Time-Based RSUs will accelerate fully in the event of his death, disability or a "double trigger” change in control. +Based on the Committee’s business judgment and experience, the Committee’s assessment of Mr. Parker’s strong performance, the importance of retaining Mr. Parker, a review of Mr. Parker’s accumulated vested and unvested awards, and consultation with Mercer as its independent compensation consultant, the Committee determined the RSU award amount and terms. The Committee believes the balancing of revenue growth and EPS growth supports the Company’s objective of delivering long-term shareholder value. The Committee views the award as a long-term retention incentive for compensation over the five-year vesting and performance periods and not solely as compensation for fiscal 2016. The RSU award has no value to Mr. Parker unless he remains employed with the Company for the full five-year vesting and performance periods, and 60% of its value requires achievement of the specified performance goals. +NIKE, INC. Ÿ 2015 Notice of Annual Meeting 22 +COMPENSATION DISCUSSION AND ANALYSIS +Profit Sharing and Retirement Plans +Our 401(k) Savings and Profit Sharing Plan is a U.S. tax qualified retirement savings plan pursuant to which all eligible U.S. employees, including the Named Executive Officers, are able to make pre-tax contributions and after-tax contributions from their cash compensation. We make matching contributions for all participants each year equal to 100% of their pre-tax contributions up to 5% of their total eligible compensation. We also make annual profit sharing contributions to the accounts of eligible U.S. employees under the 401(k) Savings and Profit Sharing Plan. The contributions are allocated among eligible employees based on a percentage of their total salary and annual incentive award for the year. The total profit sharing contribution and the percentage of salary and annual incentive award contributed for each employee is determined each year by the Board of Directors. For fiscal 2015, the Board of Directors approved a profit sharing contribution for each eligible employee equal to 4.13% of the employee's total eligible salary and annual incentive award. +The Internal Revenue Code limits the amount of compensation that can be deferred under our 401(k) Savings and Profit Sharing Plan, and also limits the amount of salary and annual incentive award ($260,000 for fiscal 2015) that may be taken into account when determining contributions under that plan. Accordingly, we provide our Named Executive Officers and other highly compensated employees with the opportunity to defer their compensation, including amounts in excess of the tax law limit, under our nonqualified Deferred Compensation Plan. We also make profit sharing contributions under the Deferred Compensation Plan with respect to salary and annual incentive award of any eligible employee that exceeds the tax law limit, and for fiscal 2015 these contributions were equal to 4.13% of the total salary and annual incentive award of each Named Executive Officer in excess of $260,000. These contributions under the Deferred Compensation Plan allow our Named Executive Officers and other highly compensated employees to receive profit sharing contributions in the same percentage as our other employees. We do not match deferrals to the Deferred Compensation Plan. Balances in the Deferred Compensation Plan, including the balances of the Named Executive Officers, are unsecured and at-risk, meaning the balances may be forfeited in the event of the Company's financial distress such as bankruptcy. Our matching and profit sharing contributions for fiscal 2015 to the accounts of the Named Executive Officers under the qualified and nonqualified plans are included in the All Other Compensation column in the Summary Compensation Table on page 26. +Employee Stock Purchase Plan +Our Employee Stock Purchase Plan allows all employees who work at least 20 hours per week in the United States and in many countries outside of the United States to purchase NIKE Class B Stock, through payroll deductions, at a 15% discount to the market price on the first or last trading day of the six-month purchase period, depending on which day the stock price was lower. No plan participant is allowed to purchase more than $25,000 in market value of our stock under the plan in any calendar year. In fiscal 2015, all Named Executive Officers participated in our Employee Stock Purchase Plan, with the exception of Mr. Parker. +Post-termination Payments under Non-competition Agreements +In exchange for non-competition agreements from all of our Named Executive Officers, we have agreed to provide, during the non-competition period, the monthly payments described in “Potential Payments upon Termination or Change-in-Control,” some of which are at the election of the Company. We believe that it is appropriate to compensate individuals to refrain from working with competitors following termination, and that compensation enhances the enforceability of such agreements. +Stock Ownership Guidelines +On June 20, 2013, the Board of Directors adopted stock ownership guidelines for executive officers. These guidelines are designed to further align the long-term interests of our executive officers with those of our shareholders. Under the guidelines, the CEO and other executive officers are required to hold NIKE stock valued at the following multiple of their annual base salary: +Position +Ownership Level +Chief Executive Officer +6X Base Salary +Named Executive Officers +3X Base Salary +Other Executive Officers +2X Base Salary +Executive officers appointed prior to June 20, 2013 are required to attain these ownership levels by June 20, 2018 and new officers within five years of their appointment. +Hedging and Pledging +The Company's black-out and pre-clearance policy (which supplements our insider trading policy) prohibits directors, executive officers and other designated insiders from engaging in transactions involving hedging, monetization or short sales of NIKE stock, including zero-cost collars and forward sale contracts. The policy also requires directors, executive officers and designated insiders to obtain pre-approval from the Company's Corporate Secretary before pledging NIKE stock. Before granting approval of any pledge, the Corporate Secretary considers the size of the pledge relative to the individual's other holdings, both direct and indirect, and NIKE's shares outstanding; the risk of foreclosure given the nature of the associated transaction; protections against the appearance of insider trading, including prohibitions on sales during trading black-outs; and the ability to timely report sales on Form 4. +NIKE, INC. Ÿ 2015 Notice of Annual Meeting 23 +COMPENSATION DISCUSSION AND ANALYSIS +Change-in-Control Provisions +All unvested stock option, restricted stock, and restricted stock unit awards are subject to accelerated change-in-control vesting only when two events (a “double trigger”) occur. Vesting of grants is generally accelerated only if there is a change in control of the Company and either the acquiring entity fails to assume the awards or the employee's employment is terminated by the acquirer without cause or by the employee for good reason within two years following a change in control. This double trigger was adopted to encourage executive retention through a period of uncertainty and a subsequent integration with an acquirer. The Committee believes that this approach will enhance shareholder value in the context of an acquisition, and align executives with the interests of investors. The effects of change-in-control transactions on stock option, restricted stock, and restricted stock unit awards are described further in “Potential Payments Upon Termination or Change-in-Control.” +Clawback Policy +Since June 2010 the company has had a policy for recoupment of incentive compensation (the “clawback policy”), and in June 2015, the Committee and Board of Directors approved amendments to our incentive compensation plans to cover additional circumstances in which the Company may clawback awards. Under the clawback policy, an executive officer who is involved in wrongful conduct that results in a restatement of the Company's financial statements must repay to the Company up to the full amount of any incentive compensation based on the financial statements that were subsequently restated. The clawback policy covers the annual PSP award, LTIP payout, profit sharing contributions to the Deferred Compensation Plan, and excess proceeds from sales of stock acquired under stock option, restricted stock, and restricted stock unit awards that occurred prior to the restatement. The recent amendments to our Executive Performance Sharing Plan, Long-Term Incentive Plan and Stock Incentive Plan clarify that for all participants in those plans the Committee may apply additional clawback policies to awards, or add clawback terms to award agreements or notices, and that any clawback requirements of applicable law and regulation will apply to the plans. +Risk Assessment +At the Committee's request, in fiscal 2015 management prepared and discussed with the Committee an assessment of potential risk associated with the Company's compensation programs, including any risk that would be reasonably likely to have a material adverse effect on the Company. This included an assessment of risks associated with each element of employee compensation. The assessment considered certain design features of the compensation programs that reduce the likelihood of excessive risk taking, such as reasonable performance targets, capped payouts of incentive compensation, a balance of short- and long-term incentives, a balance of cash and equity incentives, vesting of awards over time, and the potential for clawback of incentive compensation. In addition, for equity compensation, in recent years the Committee and the Board have adopted stock ownership guidelines, limited accelerated vesting of stock options upon termination of employment, and implemented double-trigger accelerated vesting for all equity awards upon change in control (each as described above). +Tax Deductibility of Executive Compensation +Section 162(m) of the Internal Revenue Code generally disallows a tax deduction to public companies for annual compensation over $1 million paid to their chief executive officer and the next three most highly compensated executive officers (other than the principal financial officer). The Internal Revenue Code generally excludes from the calculation of the $1 million cap compensation that is based on the attainment of pre-established, objective performance goals established under a shareholder-approved plan. The Committee considers, among other things, the impact of this exclusion for performance-based compensation when developing and implementing our executive compensation programs. Annual awards under our Executive Performance Sharing Plan, long-term incentive awards under our Long-Term Incentive Plan and stock options under our Stock Incentive Plan generally are designed in a manner that is intended to meet the requirements under the exclusion. However, due to the complex nature of the requirements that must be met, we cannot guarantee that such awards will qualify as performance-based compensation under Section 162(m). +While the Committee seeks to preserve tax deductibility in developing and implementing our compensation program, the Committee also believes that it is important to maintain flexibility in administering compensation programs in a manner designed to promote varying corporate goals. Accordingly, we have not adopted a policy that all compensation must qualify as deductible for tax purposes. Therefore, amounts paid under any of our executive compensation programs may not qualify as performance-based compensation that is excluded from the Section 162(m) limitation on deductibility. +NIKE, INC. Ÿ 2015 Notice of Annual Meeting 24 +COMPENSATION COMMITTEE REPORT +COMPENSATION COMMITTEE REPORT +The Compensation Committee of the Board of Directors (the “Committee”) has reviewed and discussed with management the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K. Based on the review and discussions, the Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement. +Members of the Compensation Committee: +• +Timothy D. Cook, Chairman +• +Elizabeth J. Comstock +• +John C. Lechleiter +• +Johnathan A. Rodgers +NIKE, INC. Ÿ 2015 Notice of Annual Meeting 25 +EXECUTIVE COMPENSATION +EXECUTIVE COMPENSATION +Summary Compensation Table +The following table sets forth information concerning compensation for fiscal 2013-2015 paid to or earned by our Chief Executive Officer, our Chief Financial Officer and our next three most highly compensated executive officers who were serving as executive officers on May 31, 2015. These individuals are referred to throughout this proxy statement as the “Named Executive Officers.” +Name and Principal +Position +Year +Salary (1) +($) +Stock +Awards (2) +($) +Option +Awards (3) +($) +Non-Equity +Incentive Plan +Compensation (4) +($) +All Other +Compensation (5) +($) +Total +($) +Mark G. Parker +2015 +1,550,000 +3,500,028 +2,791,800 +8,251,937 +725,965 +16,819,730 +President and Chief +2014 +1,550,000 +3,500,024 +2,451,174 +6,538,177 +638,974 +14,678,349 +Executive Officer +2013 +1,609,615 +3,500,087 +4,199,250 +5,522,466 +594,190 +15,425,608 +Donald W. Blair +2015 +850,000 +625,044 +1,269,000 +1,710,280 +180,238 +4,634,562 +Executive Vice President +2014 +850,000 +625,011 +1,114,170 +1,399,303 +158,219 +4,146,703 +and Chief Financial Officer +2013 +882,692 +3,625,093 +1,527,000 +1,584,715 +138,932 +7,758,432 +Trevor A. Edwards +2015 +935,000 +750,006 +1,353,600 +1,956,831 +236,637 +5,232,074 +President, NIKE Brand +2014 +935,000 +750,001 +1,114,170 +1,560,837 +204,920 +4,564,928 +2013 +961,346 +5,625,103 +1,527,000 +1,660,430 +169,552 +9,943,431 +Eric D. Sprunk +2015 +935,000 +625,044 +1,353,600 +1,821,228 +217,309 +4,952,181 +Chief Operating Officer +2014 +935,000 +625,011 +1,114,170 +1,471,993 +203,559 +4,349,733 +2013 +961,346 +5,625,103 +1,527,000 +1,660,430 +170,055 +9,943,934 +Jeanne P. Jackson +2015 +885,000 +625,044 +1,269,000 +1,755,964 +168,378 +4,703,386 +President, Product and +2014 +885,000 +625,011 +1,114,170 +1,429,234 +159,979 +4,213,394 +Merchandising +(1) +Reflects 26 pay periods during fiscal 2015 and 2014 and 27 pay periods during fiscal 2013. +(2) +Represents the grant date fair value of restricted stock and restricted stock unit awards granted in the applicable year computed in accordance with accounting guidance applicable to stock-based compensation. The grant date fair value is based on the closing market price of our Class B Stock on the grant date. +(3) +Represents the grant date fair value of options granted in the applicable year computed in accordance with accounting guidance applicable to stock-based compensation. The grant date fair value of the options was estimated using the Black-Scholes option pricing model. The assumptions made in determining the grant date fair values of options under applicable accounting guidance are disclosed in Note 11 of Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended May 31, 2015. +(4) +Non-Equity Incentive Plan Compensation consists of the following: +Name +Fiscal Year +Annual Incentive +Compensation +($) +Long-Term Incentive +Compensation +($) +Total +($) +Mark G. Parker +2015 +4,046,337 +4,205,600 +8,251,937 +2014 +2,503,777 +4,034,400 +6,538,177 +2013 +2,582,466 +2,940,000 +5,522,466 +Donald W. Blair +2015 +1,109,480 +600,800 +1,710,280 +2014 +726,903 +672,400 +1,399,303 +2013 +849,715 +735,000 +1,584,715 +Trevor A. Edwards +2015 +1,356,031 +600,800 +1,956,831 +2014 +888,437 +672,400 +1,560,837 +2013 +925,430 +735,000 +1,660,430 +Eric D.Sprunk +2,015 +1,220,428 +600,800 +1,821,228 +2014 +799,593 +672,400 +1,471,993 +2013 +925,430 +735,000 +1,660,430 +Jeanne P. Jackson +2015 +1,155,164 +600,800 +1,755,964 +2014 +756,834 +672,400 +1,429,234 +NIKE, INC. Ÿ 2015 Notice of Annual Meeting 26 +EXECUTIVE COMPENSATION +Amounts shown in the Annual Incentive Compensation column were earned for performance in the applicable fiscal year under our Executive Performance Sharing Plan. Amounts shown in the Long-Term Incentive Compensation column were earned for performance during the three -year period ending with the applicable fiscal year under our Long-Term Incentive Plan. +(5) +For fiscal 2015 for each of the Named Executive Officers, this includes profit-sharing contributions by us to the 401(k) Savings and Profit Sharing Plan in the amount of $10,750 and matching contributions by us to the 401(k) Savings and Profit Sharing Plan in the amount of $13,000 for Messrs. Parker, Blair, Edwards and Sprunk, and Ms. Jackson. Also includes profit-sharing contributions by us to the Deferred Compensation Plan in the following amounts: $156,860 for Mr. Parker, $54,449 for Mr. Blair, $64,643 for Mr. Edwards, $60,969 for Mr. Sprunk, and $57,134 for Ms. Jackson. Includes dividends paid on restricted stock and dividend equivalents credited (but not paid) on unvested restricted stock units in the following amounts: $511,578 for Mr. Parker, $87,809 for Mr. Blair, $135,405 for Mr. Edwards, $132,590 for Mr. Sprunk, and $87,494 for Ms. Jackson. Also includes the cost of daily residential security patrols at primary residences provided by the Company in the following amounts: $13,321 for Mr. Parker, and $8,210 for Messrs. Blair, Edwards and Sprunk. Includes a $10,000 35th anniversary service award for Mr. Parker and a $10,387 tax gross-up on the award. Under our Valued Service Award program, all employees receive $10,000 cash awards, grossed up for taxes, in recognition of their 30th anniversary of employment with the Company, and on each 5-year anniversary thereafter. Includes NIKE product and gifts for Messrs. Parker and Edwards. +NIKE, INC. Ÿ 2015 Notice of Annual Meeting 27 +EXECUTIVE COMPENSATION +Grants of Plan-Based Awards in Fiscal 2015 +The following table sets forth information concerning the long-term incentive bonus opportunities, annual incentive bonus opportunities, restricted stock and restricted stock unit awards and stock options granted to the Named Executive Officers in fiscal 2015. +Estimated Possible Payouts Under +Non-Equity Incentive Plan Awards +Threshold +Target +Maximum +All Other Stock Awards: +Number of Shares of +Stock (3) +All Other +Option Awards: +Number of +Shares +Underlying +Options (4) +Exercise +or Base Price +of Option +Awards +Grant Date +Fair Value +of Stock +and Option +Awards (5) +Name +Grant Date +($) +($) +($) +(#) +(#) +($/Sh) +($) +Mark +6/18/2014 +1,395,000 (1) +2,790,000 (1) +4,185,000 (1) +G. Parker +6/18/2014 +1,750,000 (2) +3,500,000 (2) +7,000,000 (2) +7/18/2014 +45,150 +3,500,028 +7/18/2014 +165,000 +77.52 +2,791,800 +Donald +6/18/2014 +382,500 (1) +765,000 (1) +1,147,500 (1) +W. Blair +6/18/2014 +250,000 (2) +500,000 (2) +1,000,000 (2) +7/18/2014 +8,063 +625,044 +7/18/2014 +75,000 +77.52 +1,269,000 +Trevor +6/18/2014 +467,500 (1) +935,000 (1) +1,402,500 (1) +A. Edwards +6/18/2014 +450,000 (2) +900,000 (2) +1,800,000 (2) +7/18/2014 +9,675 +750,006 +7/18/2014 +80,000 +77.52 +1,353,600 +Eric +6/18/2014 +420,750 (1) +841,500 (1) +1,262,250 (1) +D. Sprunk +6/18/2014 +375,000 (2) +750,000 (2) +1,500,000 (2) +7/18/2014 +8,063 +625,044 +7/18/2014 +80,000 +77.52 +1,353,600 +Jeanne +6/18/2014 +398,250 (1) +796,500 (1) +1,194,750 (1) +P. Jackson +6/18/2014 +375,000 (2) +750,000 (2) +1,500,000 (2) +7/18/2014 +8,063 +625,044 +7/18/2014 +75,000 +77.52 +1,269,000 +(1) +These amounts represent the potential bonuses payable for performance during fiscal 2015 under our Executive Performance Sharing Plan. Under this plan, the Compensation Committee approved target awards for fiscal 2015 based on a percentage of the executive’s base salary paid during fiscal 2015 as follows: Mr. Parker, 180%; Mr. Blair, 90%; Mr. Edwards, 100%; Mr. Sprunk, 90%; and Ms. Jackson, 90%. The Committee also established a series of performance targets based on our income before income taxes (“PTI”) for fiscal 2015 (excluding the effect of acquisitions, divestitures and accounting changes) corresponding to award payouts ranging from 50% to 150% of the target awards. The PTI for fiscal 2015 required to earn the target award payout was $3,923 million. The PTI for fiscal 2015 required to earn the 150% maximum payout was $4,237 million. The PTI for fiscal 2015 required to earn the 50% threshold payout was $3,609 million. Participants receive a payout at the percentage level at which the performance target is met, subject to the Committee’s discretion to reduce or eliminate any award based on Company or individual performance. Actual award payouts earned in fiscal 2015 and paid in fiscal 2016 are shown in footnote 4 to the Non-Equity Incentive Plan Compensation column in the Summary Compensation Table. +(2) +These amounts represent the potential long-term incentive awards payable for performance during the three-year period consisting of fiscal 2015-2017 under our Long-Term Incentive Plan. Under this plan, the Compensation Committee approved target awards for the performance period and also established a series of performance targets based on our cumulative revenues and cumulative diluted earnings per common share (“EPS”) for the performance period (excluding the effect of acquisitions, divestitures and accounting changes not reflected in our business plan at the time of approval of the target awards) corresponding to award payouts ranging from 50% to 200% of the target awards. Participants will receive a payout at the average of the percentage levels at which the two performance targets are met, subject to the Committee’s discretion to reduce or eliminate any award based on Company or individual performance. For cumulative revenues over the performance period, the target payout requires revenues of $99,329 million, the 50% threshold payout requires revenues of $95,627 million, and the 200% maximum payout requires revenues of $107,021 million. For cumulative EPS over the performance period, the target payout requires EPS of $11.43, the 50% threshold payout requires EPS of $10.61, and the 200% maximum payout requires EPS of $13.20. Under the terms of the awards, on the first payroll period ending in August 2017 we will issue the award payout to each participant, provided that the participant is employed by us on the last day of the performance period. +(3) +All amounts reported in this column represent grants of restricted stock under our Stock Incentive Plan. Restricted stock generally vests in three equal installments on the first three anniversaries of the grant date. Vesting will be accelerated in certain circumstances as described below under “Potential Payments Upon Termination or Change-in-Control.” Dividends are payable on restricted stock at the same rate paid on all other outstanding shares of our Class B Stock. +(4) +All amounts reported in this column represent options granted under our Stock Incentive Plan. Options generally become exercisable for option shares in four equal installments on the first four anniversaries of the grant date. Options will become fully exercisable in certain circumstances as described below under “Potential Payments Upon Termination or Change-in-Control.” Each option has a maximum term of 10 years, subject to earlier termination in the event of the optionee’s termination of employment. +NIKE, INC. Ÿ 2015 Notice of Annual Meeting 28 +EXECUTIVE COMPENSATION +(5) +For stock awards, represents the value of restricted shares granted based on the closing market price of our Class B Stock on the grant date. For option awards, represents the grant date fair value of options granted based on a value of $16.92 per share calculated using the Black-Scholes option pricing model. These are the same values for these equity awards used under accounting guidance applicable to stock-based compensation. The assumptions made in determining option values are disclosed in Note 11 of Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended May 31, 2015. +NIKE, INC. Ÿ 2015 Notice of Annual Meeting 29 +EXECUTIVE COMPENSATION +Outstanding Equity Awards at May 31, 2015 +The following table sets forth information concerning outstanding stock options and unvested restricted stock and restricted stock units held by the Named Executive Officers at May 31, 2015. +Option Awards +Stock Awards +Name +Number of Securities Underlying Unexercised Options Exercisable (#) +Number of +Securities +Underlying +Unexercised +Options (#) (1) +Option Exercise Price ($) +Option Expiration Date +Number of Shares That Have Not Vested (#) +Market Value of Shares That Have Not Vested ($) +Mark G. Parker +500,000 +— +21.0700 +2/16/2016 +270,000 +— +29.2600 +7/20/2017 +270,000 +— +29.1000 +7/18/2018 +300,000 +— +26.2200 +7/17/2019 +330,000 +— +34.4800 +7/16/2020 +247,500 +82,500 +(2) +45.8500 +7/15/2021 +165,000 +165,000 +(3) +46.5400 +7/20/2022 +41,250 +123,750 +(4) +63.3500 +7/19/2023 +— +165,000 +(5) +77.5200 +7/18/2024 +486,414 (6) +49,453,711 +Donald W. Blair +100,000 +— +29.1000 +7/18/2018 +100,000 +— +34.4800 +7/16/2020 +75,000 +25,000 +(2) +45.8500 +7/15/2021 +60,000 +60,000 +(3) +46.5400 +7/20/2022 +18,750 +56,250 +(4) +63.3500 +7/19/2023 +75,000 +(5) +77.5200 +7/18/2024 +83,578 (7) +8,497,375 +Trevor A. Edwards +97,345 +— +21.9000 +7/15/2015 +132,000 +— +19.6900 +7/14/2016 +100,000 +— +29.2600 +7/20/2017 +100,000 +— +29.1000 +7/18/2018 +100,000 +— +26.2200 +7/17/2019 +100,000 +— +34.4800 +7/16/2020 +75,000 +25,000 +(2) +45.8500 +7/15/2021 +60,000 +60,000 +(3) +46.5400 +7/20/2022 +18,750 +56,250 +(4) +63.3500 +7/19/2023 +— +80,000 +(5) +77.5200 +7/18/2024 +129,479 (8) +13,164,130 +Eric D. Sprunk +46,000 +— +19.6900 +7/14/2016 +34,136 +— +29.2600 +7/20/2017 +57,146 +— +29.1000 +7/18/2018 +67,882 +— +26.2200 +7/17/2019 +88,020 +— +34.4800 +7/16/2020 +75,000 +25,000 +(2) +45.8500 +7/15/2021 +60,000 +60,000 +(3) +46.5400 +7/20/2022 +18,750 +56,250 +(4) +63.3500 +7/19/2023 +— +80,000 +(5) +77.5200 +7/18/2024 +126,552 (9) +12,866,542 +Jeanne P. Jackson +16,000 +— +26.2200 +7/17/2019 +100,000 +— +34.4800 +7/16/2020 +75,000 +25,000 +(2) +45.8500 +7/15/2021 +60,000 +60,000 +(3) +46.5400 +7/20/2022 +18,750 +56,250 +(4) +63.3500 +7/19/2023 +— +75,000 +(5) +77.5200 +7/18/2024 +83,400 (10) +8,479,278 +(1) +Stock options generally become exercisable for option shares in four equal installments on each of the first four anniversaries of the grant date. +(2) +100% of these shares vested on July 15, 2015. +(3) +50% of these shares vested on July 20, 2015 and 50% will vest on July 20, 2016. +(4) +33.3% of these shares vested on July 19, 2015, 33.3% will vest on July 19, 2016, and 33.3% will vest on July 19, 2017. +(5) +25% of these shares vested on July 18, 2015, 25% will vest on July 18, 2016, 25% will vest on July 18, 2017, and 25% will vest on July 18, 2018. +NIKE, INC. Ÿ 2015 Notice of Annual Meeting 30 +EXECUTIVE COMPENSATION +(6) +15,050 of these shares vested on July 18, 2015, 15,050 of these shares will vest on July 18, 2016, and 15,050 of these shares will vest on July 18, 2017. 18,416 of these shares vested on July 19, 2015, and 18,416 of these shares will vest on July 19, 2016. 25,068 of these shares vested on July 20, 2015. 379,364 of these shares will vest on May 18, 2017. +(7) +2,688 of these shares vested on July 18, 2015, 2,688 of these shares will vest on July 18, 2016, and 2,687 of these shares will vest on July 18, 2017. 3,289 of these shares vested on July 19, 2015, and 3,288 of these shares will vest on July 19, 2016. 4,476 of these shares vested on July 20, 2015. 64,462 of these shares vested on July 20, 2015. +(8) +3,225 of these shares vested on July 18, 2015, 3,225 of these shares will vest on July 18, 2016 and July 18, 2017. 3,946 of these shares vested on July 19, 2015, and 3,946 of these shares will vest on July 19, 2016. 4,476 of these shares vested on July 20, 2015. 107,436 of these shares will vest on July 20, 2017. +(9) +2,688 of these shares vested on July 18, 2015, 2,688 of these shares will vest on July 18, 2016, and 2,687 of these shares will vest on July 18, 2017. 3,289 of these shares vested on July 19, 2015, and 3,288 of these shares will vest on July 19, 2016. 4,476 of these shares vested on July 20, 2015. 107,436 of these shares will vest on July 20, 2017. +(10) +2,688 of these shares vested on July 18, 2015, 2,688 of these shares will vest on July 18, 2016, and 2,687 of these shares will vest on July 18, 2017. 3,289 of these shares vested on July 19, 2015, and 3,288 of these shares will vest on July 19, 2016. 4,298 of these shares vested on July 20, 2015. 64,462 of these shares will vest on July 20, 2017. +Option Exercises and Stock Vested During Fiscal 2015 +The following table sets forth information concerning stock option exercises and vesting of restricted stock during fiscal 2015 for each of the Named Executive Officers on an aggregated basis. +Option Awards +Stock Awards +Name +Number of Shares +Acquired on Exercise +(#) +Value Realized +on Exercise +($) +Number of Shares +Acquired on Vesting +(#) +Value Realized +on Vesting +($) +Mark G. Parker +280,000 +20,132,969 +68,931 +5,356,508 +Donald W. Blair +332,000 +21,586,081 +11,764 +913,984 +Trevor A. Edwards +166,655 +10,616,245 +12,786 +993,395 +Eric D. Sprunk +276,816 +19,325,237 +12,128 +942,387 +Jeanne P. Jackson +100,000 +7,266,691 +11,222 +871,783 +Non-Qualified Deferred Compensation in Fiscal 2015 +Name +Plan +Name +Executive +Contributions +in Fiscal 2015 (1) +NIKE Contributions +in Fiscal 2015 (1) +Aggregate Earnings +in Fiscal 2015 +Aggregate +Withdrawals/ +Distributions in +Fiscal 2015 +Aggregate +Balance +at 5/31/2015 (1) +Mark G. Parker +DCP +$1,291,696 +$151,006 +$151,388 +— +$10,865,465 +Donald W. Blair +DCP +1,901,979 +56,264 +119,968 +— +13,153,113 +Trevor A. Edwards +DCP +1,344,498 +62,523 +989,892 +— +13,586,480 +Eric D. Sprunk +DCP +399,797 +62,523 +533,299 +— +6,813,002 +Jeanne Jackson +DCP +— +58,989 +106,580 +— +1,234,384 +(1) +All amounts reported in the Executive Contributions column are also included in amounts reported in the Summary Compensation Table. The amounts reported in the NIKE Contributions column represent profit sharing contributions made by us in early fiscal 2015 based on fiscal 2014 results; these amounts are also included in amounts reported for fiscal 2014 in the All Other Compensation column of the Summary Compensation Table. Of the amounts reported in the Aggregate Balance column, the following amounts have been reported in the Summary Compensation Tables in this proxy statement or in prior year proxy statements: Mr. Parker, $9,900,256; Mr. Blair, $9,325,737; Mr. Edwards, $6,365,538; Mr. Sprunk, $2,016,484; and Ms. Jackson, $116,038. +Non-Qualified Deferred Compensation Plans +The Named Executive Officers are eligible to participate in our Deferred Compensation Plan (the “DCP”). Participants in the DCP may elect in advance to defer up to 100 percent of their annual base salary, bonus and long-term incentive payments. +Each year, we share profits with our employees in the form of profit sharing contributions to defined contribution retirement plans. The contributions are allocated among eligible employees based on a percentage of their total salary and bonus for the year. To the fullest extent permitted under Internal Revenue Code limitations, these contributions are made to employees’ accounts under our qualified 401(k) Savings and +NIKE, INC. Ÿ 2015 Notice of Annual Meeting 31 +EXECUTIVE COMPENSATION +Profit Sharing Plan. Contributions based on salary and bonus in excess of the tax law limit ($260,000 for fiscal 2015) are made as NIKE contributions under the DCP. +Amounts deferred under the DCP are credited to a participant’s account under the DCP. Each participant may allocate his or her account among any combination of the investment funds available under the DCP. Participants’ accounts are adjusted to reflect the investment performance of the funds selected by the participants. Participants can change the allocation of their account balances daily. The funds available under the DCP consist of 16 mutual funds with a variety of investment objectives. The investment funds had annual returns in fiscal 2015 ranging from -8.51% to 16.25%. Amounts credited to participants’ accounts are invested by us in actual investments matching the investment options selected by the participants to ensure that we do not bear any investment risk related to participants’ investment choices. +The portion of a participant’s account attributable to elective deferrals, including investment returns, is fully vested at all times. The portion of a participant’s account attributable to NIKE contributions, including investment returns, is fully vested after the participant has been employed by us for five years. All of the Named Executive Officers are fully vested in their NIKE contributions. +Each time they elect to defer compensation, participants make an election regarding distribution of the compensation deferred under the election (as adjusted to reflect investment performance). A participant may elect for distribution to be made in a lump sum at the beginning of a predetermined year while the participant is still employed or in service (but no sooner than the fourth year after the year in which the distribution election is submitted). Alternatively, a participant may elect for distribution to be made in a lump sum or in quarterly installments over five, ten or fifteen years after termination of employment or service. Participants have limited rights to change their distribution elections. Participants may make a hardship withdrawal under certain circumstances. Subject to certain limitations, a participant may also at any time request to withdraw amounts from his or her account balance that were vested as of December 31, 2004 (and any subsequent investment returns on such amount). If such request is approved, the participant may withdraw 90% of the amount requested, and the remaining 10% will be permanently forfeited. +Potential Payments Upon Termination or Change-in-Control +Change-in-Control Compensation — Acceleration of Equity Awards +All unvested stock option, restricted stock, and restricted stock unit ("RSU") awards are subject to accelerated vesting upon the occurrence of two events (a “double trigger”): there is a “change in control” and the Named Executive Officer’s employment is terminated by us without “cause” or by the Named Executive Officer for “good reason,” in each case on or before the second anniversary of the change in control. In addition, for stock options granted since July 2010, the standard period for exercising options following termination of employment is extended from three months to four years, but not beyond each option’s original 10-year term. A double trigger with respect to vesting of stock options and RSUs will also occur if we are acquired and the acquiring company does not assume the outstanding options or RSUs. In our agreements, “change in control” is generally defined to include: +• +the acquisition by any person of 50% or more of our outstanding Class A Stock or, if the Class A Stock no longer elects a majority of directors, the acquisition by any person of 30% or more of our total outstanding Common Stock, +• +the nomination (and subsequent election) in a two-year period of a majority of our directors by persons other than the incumbent directors, and a sale of all or substantially all of our assets, or an acquisition of NIKE through a merger, consolidation or share exchange. +In our agreements, “cause” generally includes willful and continued failure to substantially perform assigned duties and willful engagement in illegal conduct materially injurious to us. In our agreements, “good reason” generally includes a material diminution in position or duties, a salary reduction or material reduction in other benefits, and a home office relocation of over 50 miles. +The following table shows the estimated benefits that would have been received by the Named Executive Officers if a double trigger had occurred on May 31, 2015, when the most recent closing price of our Class B Stock was $101.67 per share. +Name +Stock Award +Acceleration (1) +Stock Option +Acceleration (2) +Total +Mark G. Parker +$ +49,453,711.00 +$ +23,194,769 +$ +72,648,480 +Donald W. Blair +8,497,375 +9,018,377 +17,515,752 +Trevor A. Edwards +13,164,130 +9,160,388 +22,324,518 +Eric D. Sprunk +12,866,542 +9,160,388 +22,026,930 +Jeanne P. Jackson +8,479,278 +9,018,377 +17,497,655 +(1) +Information regarding unvested restricted stock and restricted stock units held by each Named Executive Officer is set forth in the Outstanding Equity Awards table above. The award agreements provide that all shares will immediately vest upon the occurrence of a double trigger. The amounts in the table above represent the number of unvested restricted shares multiplied by the closing price of our Class B Stock as of May 31, 2015. +(2) +Information regarding outstanding unexercisable options held by each Named Executive Officer is set forth in the Outstanding Equity Awards table above. The agreements governing unvested stock options provide that upon the occurrence of a double trigger all unexercisable options will immediately become fully exercisable and the standard three-month period for exercising options following termination of employment will be extended to four years, but not beyond each option’s original 10-year term. Amounts in the table above represent the sum of (i) for each Named Executive Officer’s outstanding unexercisable options, the aggregate value as of May 31, 2015 of those options assuming a four-year remaining term and otherwise calculated using the Black-Scholes option pricing model with assumptions consistent with those used by us for valuing our options under accounting guidance applicable to stock-based compensation, plus (ii) for each Named Executive Officer’s outstanding exercisable options granted since July 2010, the increase in value of those options resulting from the extension of the post-termination exercise period from three months to four years, with the option values for three-month and four-year remaining terms calculated using the Black-Scholes option pricing model with assumptions consistent with those used for valuing our options under accounting guidance applicable to stock-based compensation. +Benefits Triggered on Certain Employment Terminations +Stock Option Acceleration and Extension +As of May 31, 2015, each Named Executive Officer held options to purchase Class B Stock as listed in the Outstanding Equity Awards table above. Under the terms of the stock options granted to each Named Executive Officer before July 2010, upon the death or disability of the officer, the standard three-month period for exercising options following termination of employment is extended to 12 months, but not beyond each option’s original 10-year term. Under the terms of the stock options granted to each Named Executive Officer since July 2010, upon the death or disability of the officer, all unexercisable options become fully exercisable and the standard three-month period for exercising options following termination of employment is extended to four years, but not beyond each option’s original 10-year term. If death or disability of a Named Executive Officer had occurred on May 31, 2015, the sum of (i) for outstanding unexercisable options that would have become exercisable, the aggregate value as of May 31, 2015 of those options assuming a four-year remaining term, in the case of options granted since July 2010, and otherwise calculated using the Black-Scholes option pricing model with assumptions consistent with those used by us for valuing our options under accounting guidance applicable to stock-based compensation, plus (ii) for outstanding exercisable options, the increase in value, if any, of those options resulting from the extension of the post-termination exercise period from three months to 12 months, in the case of options granted before July 2010, and from three months to four years, in the case of options granted since July 2010, with the option values as of May 31, 2015 for three-month, 12-month and four-year remaining terms calculated using the Black-Scholes option pricing model with assumptions consistent with those used by us for valuing our options under accounting guidance applicable to stock-based compensation, is $23,194,769 for Mr. Parker, $9,160,388 for Messrs. Edwards and Sprunk and $9,018,377 for Mr. Blair and Ms. Jackson. +Under the terms of the unvested stock options granted to Named Executive Officers since July 2010, vesting of options that have been outstanding for at least one year will be accelerated if the holder retires after reaching age 60 with at least 5 years of service, and vesting of options that have been outstanding for at least one year will continue notwithstanding termination of employment if the holder retires after reaching age 55 with at least 5 years of service. In addition, for any holder who retires after reaching age 55 with at least 5 years of service, the standard three-month period for exercising these options following termination of employment will be extended to four years, but not beyond the option’s original 10-year term. If termination of employment of a Named Executive Officer (other than due to death or disability) had occurred on May 31, 2015, the sum of (i) for outstanding unexercisable options that would have become exercisable, the aggregate value as of May 31, 2015 of those options assuming a four-year remaining term and otherwise calculated using the Black-Scholes option pricing model with assumptions consistent with those used by us for valuing our options under accounting guidance applicable to stock-based compensation, plus (ii) for outstanding exercisable options granted since July 2010, the increase in value, if any, of those options resulting from the extension of the post-termination exercise period from three months to four years, with the option values as of May 31, 2015 for three-month and four-year remaining terms calculated using the Black-Scholes option pricing model with assumptions consistent with those used by us for valuing our options under accounting guidance applicable to stock-based compensation, is $18,508,395 for Mr. Parker and $6,888,207 for Mr. Blair and Ms. Jackson. The value for Messrs. Sprunk and Edwards is zero because neither has reached age 55. +Stock Award Acceleration +As of May 31, 2015, each Named Executive Officer held unvested restricted stock and restricted stock units as set forth in the Outstanding Equity Awards table above. Under the terms of their award agreements, all unvested restricted shares and restricted stock units will immediately vest upon the death or disability of the officer. The value of the unvested restricted shares and restricted stock units held by each Named Executive Officer as of May 31, 2015 that would have become vested if death or disability had occurred on that date is as set forth in the “Stock Award Acceleration” column of the Change-in-Control Compensation — Acceleration of Equity Awards table above. +Payments Under Noncompetition Agreements +We have an agreement with Mr. Parker that contains a covenant not to compete that extends for two years following the termination of his employment with us. The agreement provides that if Mr. Parker's employment is terminated by us, we will make monthly payments to him during the two-year noncompetition period in an amount equal to one-twelfth of his then current annual salary and target Performance Sharing Plan bonus (“Annual NIKE Income”). The agreement provides further that if Mr. Parker voluntarily resigns, we will make monthly payments to him during the two-year noncompetition period in an amount equal to one-twenty-fourth of his then current Annual NIKE Income. However, commencement of the above-described monthly payments will be delayed until after the six-month period following Mr. Parker's separation from service, and all payments that he would otherwise have received during that period will be paid in a lump sum promptly following the end of the period, together with interest at the prime rate. If employment is terminated without cause, the parties may mutually agree to waive the covenant not to compete, and if employment is terminated for cause, we may unilaterally waive the covenant. If the covenant is waived, we will not be required to make the payments described above for the months as to which the waiver applies. If the employment of Mr. Parker had been terminated by us on May 31, 2015 and assuming the covenant is not waived, we would have been required to pay Mr. Parker $361,667 per month for the 24-month period ending May 31, 2017. If Mr. Parker had voluntarily resigned on May 31, 2015 and assuming the covenant is not waived, we would have been required to pay Mr. Parker $180,833 per month for the 24-month period ending May 31, 2017. +We have noncompetition agreements with Messrs. Blair, Sprunk and Edwards, and Ms. Jackson on the same terms, except that the noncompetition period is one year instead of two years, the six-month delay for commencement of payments does not apply and we may unilaterally waive the covenant in all cases including termination without cause. In addition, for Messrs. Blair, Sprunk and Edwards, and Ms. Jackson, the monthly payments are one-twelfth or one-twenty-fourth of their current annual salaries, instead of their Annual NIKE Income. If the employment of these officers had been terminated by us on May 31, 2015 and assuming the covenant is not waived, we would have been required to pay Mr. Blair $70,833 per month, Messrs. Sprunk and Edwards $77,917 per month, and Ms. Jackson $73,750 for the 12-month +NIKE, INC. Ÿ 2015 Notice of Annual Meeting 32 +EXECUTIVE COMPENSATION +period ending May 31, 2016. If these officers had voluntarily resigned on May 31, 2015 and assuming the covenant is not waived, we would have been required to pay Mr. Blair $35,417 per month, Messrs. Sprunk and Edwards $38,959 per month, and Ms. Jackson $36,875 for the 12-month period ending May 31, 2016. +Proposal 2 +Shareholder Advisory Vote to Approve +Executive Compensation +We are submitting to shareholders our annual "say-on-pay proposal," an advisory vote to approve the compensation of our Named Executive Officers as described in this proxy statement. +At the Company’s 2014 annual meeting of shareholders, 98% of the votes cast on the say-on-pay proposal were voted in favor of the proposal. The Compensation Committee believes this affirms shareholders’ support of the Company’s approach to executive compensation. +As discussed in the Compensation Discussion and Analysis, our compensation philosophy is designed to attract and retain highly talented individuals, provide rewards for strong business results and individual performance, and motivate executives to maximize long-term shareholder value. The program is competitive in the marketplace, highly incentive-based to align interests of executives with those of shareholders, and balanced across incentives to appropriately mitigate risk. +To achieve the objectives of our executive compensation program and emphasize pay-for-performance principles, the Compensation Committee has continued to employ the strong governance practices described in “Executive Compensation Governance Practices” on page 15, including: +• +basing a majority of total compensation on performance and retention incentives; +• +setting annual and long-term incentive targets based on clearly disclosed, objective performance measures and the Company's performance goals; +• +mitigating undue risk associated with compensation by using multiple performance targets, caps on potential incentive payments and a clawback policy; and +• +requiring executive officers and non-employee directors to hold NIKE stock through published stock ownership guidelines. +Because your vote is advisory, it will not be binding on the Board. However, the Board values shareholder opinions, and the Compensation Committee will take into account the outcome of the vote when considering future executive compensation arrangements. +Board Recommendation +The Board of Directors recommends that shareholders vote FOR approval of the compensation paid to the Named Executive Officers as disclosed pursuant to the SEC's compensation disclosure rules (which disclosure includes the Compensation Discussion and Analysis, the compensation tables, and the narrative disclosures that accompany the compensation tables). +NIKE, INC. Ÿ 2015 Notice of Annual Meeting 33 +PROPOSAL 3 +Proposal 3 +Amend the Articles of Incorporation to increase the number of authorized shares of common stock +The Board of Directors recommends that shareholders of the Company approve an amendment to Article IV of the Company’s Restated Articles of Incorporation, as amended, to increase the Company’s authorized Class A Stock from 200,000,000 to 400,000,000 shares and the authorized Class B Stock from 1,200,000,000 shares to 2,400,000,000 shares. As of June 30, 2015, (a) a total of 177,457,876 shares of Class A Stock and 677,081,822 shares of Class B Stock were outstanding, (b) 177,457,876 shares of Class B Stock were reserved for issuance upon conversion of outstanding shares of Class A Stock, (c) 58,985,218 shares of Class B Stock were reserved for issuance upon exercise of outstanding stock options and stock appreciation rights and upon vesting of outstanding restricted stock unit awards, and (d) a total of 34,622,773 shares of Class B Stock were reserved for future option grants and other issuances under the Company’s amended and restated Stock Incentive Plan and Employee Stock Purchase Plans. Accordingly, as of July 20, 2015, the Company had 22,542,124 unreserved Class A shares and 251,825,459 unreserved Class B shares available for issuance for other purposes. As of our record date, July 20, 2015, the Company had 68,369,322 shares of Class B Stock reserved for issuance upon exercise of outstanding stock options and stock appreciation rights and upon vesting of outstanding restricted stock unit awards, and a total of 24,421,166 shares of Class B Stock reserved for future option grants and other issuances under the Company’s 1990 Stock Incentive Plan and Employee Stock Purchase Plans. +The reason for this amendment is to permit the Company to effect one or more stock splits by means of stock dividends. The Board of Directors has not approved such a split, but believes it to be desirable to have that flexibility in the future if the Board determines at such time that such action would be in the best interests of the Company. +While the proposed amendment is intended to facilitate future stock splits or stock dividends, the shares could also be used for other purposes such as financings, compensation plans, business acquisitions and other general corporate purposes. The shares could be issued from time to time for such purposes as the Board may approve and, unless required by applicable law or stock exchange rules, no further vote of the shareholders will be required. The Board has no present plans, proposals or arrangements to issue any of the additional shares to be authorized under this Proposal 3 for any of those purposes. +The authorization of additional shares of Common Stock could have an anti-takeover effect, although that is not the intention of this proposal. For example, without further shareholder approval, the Board of Directors could sell Common Stock in a private transaction to purchasers who would oppose a takeover, thereby potentially preventing a transaction favored by a majority of independent shareholders under which shareholders would have received a premium for their shares over then current market prices. Other existing provisions applicable to the Company that might have a material anti-takeover effect include (a) the right of holders of the Class A Stock (over 72% of which is held by Swoosh, LLC) to elect a majority of the Company’s directors, which right continues to apply as long as the Class A Stock represents at least 12.5% of the total outstanding Common Stock; (b) the Oregon Control Share Act, which under certain circumstances would operate to deprive a person or group that acquires more than 20% of the outstanding Common Stock of voting rights with respect to those shares; (c) the Oregon Business Combination statute, which places restrictions on business combination transactions with persons or groups that own 15% or more of the outstanding Common Stock, unless the transaction is approved by the Board of Directors; and (d) provisions of outstanding employee and director options and stock awards that accelerate vesting of options upon the occurrence of a change of control of the Company. The Board has no knowledge of any present efforts to accumulate shares of the Company’s Common Stock in the market or to gain control of the Company, and has no present intention to adopt any other provisions or enter into any other arrangements that would have a material anti-takeover effect. +The additional shares of Common Stock for which authorization is sought would be identical to the shares of Common Stock the Company now has authorized. Holders of Common Stock do not have preemptive rights to subscribe to additional securities which may be issued by the Company. +The Board of Directors considers this amendment advisable to provide flexibility for future stock splits, stock dividends and capital requirements. Approval of this amendment by the shareholders at the Annual Meeting may avoid the expensive procedure of calling and holding a special meeting of shareholders for such a purpose at a later date. +Board Recommendation +The Board of Directors recommends voting FOR the amendment to the Articles of Incorporation to increase the authorized Common Stock of the Company. +NIKE, INC. Ÿ 2015 Notice of Annual Meeting 34 +PROPOSAL 4 +Proposal 4 +Re-approve the Executive Performance Sharing Plan as amended +Summary of Proposal +The Board of Directors and our shareholders originally approved the Company’s Executive Performance Sharing Plan (the “PSP”) in 1995, and shareholders subsequently re-approved the PSP as amended from time to time, most recently at the 2010 annual meeting. Our Board of Directors is now seeking shareholder re-approval of the PSP as amended for purposes of Section 162(m) of the Internal Revenue Code (the “Code”). +Section 162(m) of the Code prevents a publicly held corporation from claiming federal income tax deductions for compensation in excess of $1 million per year paid to any of its chief executive officer or three other most highly compensated executive officers (other than the chief financial officer). However, if certain conditions are met, compensation that qualifies as “performance-based” is excluded for purposes of calculating the amount of compensation subject to the $1 million limit. In general, one of the requirements that must be satisfied to qualify as performance-based compensation under Section 162(m) of the Code is that the material terms of the performance goals under which the compensation may be paid must be disclosed to and re-approved by our shareholders every five years. Thus, shareholders are being asked to approve this proposal to ensure that the Compensation Committee of the Board of Directors (the “Compensation Committee”) has the flexibility to grant awards under the PSP that are intended to qualify as performance-based compensation under Section 162(m) of the Code. +The PSP will terminate at the first shareholder meeting that occurs in the fifth fiscal year after the Company’s shareholders last approved the PSP, or September 17, 2015. Accordingly, if our shareholders do not approve this proposal, the PSP will terminate at the Annual Meeting, and the Compensation Committee will make a determination in its business judgment as to the appropriate compensation for eligible participants under the PSP taking into account considerations important to the Company’s success and the benefits and costs to the Company, including the additional costs arising from the Company’s inability to deduct all or a portion of the compensation paid to covered employees. If our shareholders re-approve the PSP as amended, the PSP will be extended for an additional five years, until the 2020 annual meeting. In addition, on June 18, 2015 the Board of Directors approved amendments to the PSP, subject to shareholder approval, to (a) change the class of eligible participants under the PSP to executive officers as defined by the general periodic reporting requirements of the Securities Exchange Act of 1934, instead of all corporate officers and (b) to increase the maximum cash bonus opportunity for an eligible participant in any year from $5 million to $10 million. The Board of Directors believes that the increased limit recognizes changes in executive compensation practices and provides flexibility to offer higher rewards for higher levels of performance. +Description of the Executive Performance Sharing Plan +The following is a summary of the material provisions of the PSP as proposed to be amended (including the material terms of the performance goals) and is qualified in its entirety by reference to the terms of the PSP, a copy of which is attached to this Proxy Statement as Exhibit A and incorporated by reference into this Proxy Statement in its entirety. +Eligible Participants. All officers of the Company who are “executive officers” for purposes of Rule 3b-7 promulgated under the Securities Exchange Act of 1934 are eligible to receive awards under the PSP. These officers currently comprise a total of 9 persons. +Administration. Grants of awards under the PSP and all other decisions regarding the administration of the PSP are made by the Compensation Committee. +Target Award; Maximum Bonus Opportunity. Within 90 days of the beginning of each fiscal year of the Company, the Committee establishes for each participant the performance target or targets and related target cash awards payable upon achievement of the performance targets for the year. The maximum cash bonus opportunity for an eligible participant in any year is $10 million. +Performance Targets . Performance targets must be expressed as an objectively determinable level of performance of the Company or any subsidiary, division or other unit of the Company, based on one or more of the following: net income, net income before taxes, operating income, earnings before interest and taxes, revenues, return on sales, return on equity, earnings per share, total shareholder return, or any of the foregoing before the effect of acquisitions, divestitures, accounting changes, restructuring, or other special charges, as determined by the Committee at the time of establishing the performance target. +Determination of Award Payouts. At the conclusion of each fiscal year and prior to the payment of any award under the PSP, the Committee certifies the attainment of the performance targets established for that fiscal year and the calculation of the payouts of awards under the PSP. No award shall be paid if the related performance target is not met. The Committee may, in its discretion, reduce or eliminate a participant’s calculated award based on circumstances relating to the performance of the Company or the participant. +Clawback Policy. All awards under the PSP will be subject to the Company’s Policy for Recoupment of Incentive Compensation (the “Policy”). The Policy generally requires executive officers who are involved in wrongful conduct that results in a restatement of the Company’s financial statements to repay to the Company up to the full amount of the bonus received for any year that was restated, as determined by the Board of Directors. All awards under the PSP will also be subject to such other policy regarding clawback or recoupment of incentive compensation as may be subsequently approved by the Committee from time to time or set forth in any agreement or notice evidencing an award, as well as the requirements of applicable law and regulation regarding clawback or recoupment of incentive compensation. By acceptance of any payment under the PSP a participant expressly agrees to repay to the Company any amount that may be required to be repaid under these provisions. +NIKE, INC. Ÿ 2015 Notice of Annual Meeting 35 +PROPOSAL 4 +Amendment and Termination. The PSP may be amended by the Committee, with the approval of the Board of Directors, at any time except to the extent that shareholder approval would be required under Section 162(m) of the Code. Unless again re-approved by our shareholders, the PSP will terminate at the 2020 annual meeting. However, no amendment or termination shall affect the payment of awards previously established by the Compensation Committee. +Fiscal 2016 Target Awards. In June 2015, the Committee established performance targets and target awards under the PSP for participants for fiscal 2016. The actual amounts to be paid under those awards cannot be determined at this time, as such amounts are dependent upon the Company’s performance for the current fiscal year. However, the actual bonus compensation received by the Named Executive Officers under the PSP in fiscal 2015 is shown in the Summary Compensation Table on page 26. All participants as a group, including the Named Executive Officers, received bonus compensation under the PSP for fiscal 2015 of $11,585,442. +Board Recommendation +The Board of Directors recommends that shareholders vote FOR re-approval of the PSP as amended. +NIKE, INC. Ÿ 2015 Notice of Annual Meeting 36 +PROPOSAL 5 +Proposal 5 +Approval of amended and restated Stock Incentive Plan +The Board of Directors is asking our shareholders to approve an amendment and restatement of the Company’s 1990 Stock Incentive Plan, renamed the Stock Incentive Plan (the “Plan”). The Board and our shareholders initially approved the Plan in 1990, and shareholders subsequently re-approved the Plan as amended from time to time, most recently at the 2010 annual meeting. On June 18, 2015, the Compensation Committee recommended to the Board and the Board adopted the Plan as amended and restated, subject to shareholder approval at the Annual Meeting. +The amendments to the Plan that are subject to approval by our shareholders will: +• +increase the number of shares of Class B Stock authorized for issuance under the Plan by 33,000,000 shares; +• +increase individual award limits for purposes of Section 162(m) of the Code; +• +limit the amount of equity awards that may be granted to any non-employee director in any fiscal year; and +• +extend the term of the Plan to September 17, 2025. +The Plan as amended and restated also (a) imposes minimum one-year vesting requirements with certain limitations, (b) extends the prohibition on repricing stock options without shareholder approval to include SARs, (c) expands the types of events for which adjustments will be made in the event of changes in capital structure, (d) expands the scope of the Company’s clawback policy, and (e) contains certain clarifying, administrative and technical changes. +As discussed under the heading “Section 162(m) Re-Approval” beginning on page 39, approval of the Plan as amended and restated is also intended to constitute re-approval of the material terms of the performance goals under the Plan for purposes of Section 162(m) of the Code. +If our shareholders do not approve the Plan as amended and restated, new awards may be granted to eligible participants (other than covered employees under the Plan) only up to the number of shares currently authorized and available for issuance under the Plan, and the Compensation Committee will make a determination in its business judgment as to the appropriate compensation for covered employees, taking into account considerations important to the Company’s success and the benefits and costs to the Company, including the additional costs arising from the Company’s inability to deduct all or a portion of the compensation paid to covered employees. +Purpose of the Plan +As discussed in the Compensation Discussion and Analysis beginning on page 15, the availability of stock options, restricted stock and other stock-based incentives under the Plan is an important part of the Company’s overall incentive compensation program, which consists of annual performance-based cash incentive awards under the shareholder-approved Executive Performance Sharing Plan, long-term performance-based cash incentive awards under the shareholder-approved Long-Term Incentive Plan, and long-term equity awards under the Plan that are tied to the performance of the Class B Stock. The Board of Directors believes that equity awards granted under the Plan are essential to the Company’s ability to attract and retain experienced officers, directors, employees and other service providers and to provide an incentive for them to exert their best efforts on behalf of the Company. +Key Features of the Plan +The Plan includes several features that are consistent with the interests of our shareholders and sound corporate governance practices, including the following: +• +Fungible share pool. Shares issued in connection with restricted stock and other “full-value” stock awards will count against the number of shares authorized for issuance under the Plan at a higher rate than shares issued upon exercise of stock options and SARs after a threshold for full-value awards is exceeded. +• +No automatic share replenishment or “evergreen” provision. There is no evergreen feature pursuant to which the shares authorized for issuance under the Plan can be automatically replenished. +• +No discounted options or SARs. Stock options and stock appreciation rights (SARs) may not be granted with an exercise or grant price lower than the fair market value of the underlying shares on the date of grant. +• +No repricing of options or SARs without shareholder approval. The Plan prohibits the direct or indirect repricing of stock options or SARs without prior shareholder approval. +• +No liberal share counting or “recycling” of shares from exercised stock options or SARs . Shares withheld by or delivered to the Company to satisfy the exercise or grant price of stock options and SARs or tax withholding obligations upon such exercise will not be available for future grants . +• +No liberal change-in-control definition . Change in control benefits are triggered only by the occurrence, rather than shareholder approval, of a merger or other change in control event . +• +Double-trigger change-in-control vesting . If awards are assumed by a successor company in connection with a change in control, such awards will not automatically vest and pay out solely as a result of the change in control . +NIKE, INC. Ÿ 2015 Notice of Annual Meeting 37 +PROPOSAL 5 +• +Minimum vesting requirements. Awards are required to meet minimum vesting requirements of at least one year with limited exceptions. Historically it has been the Company’s practice to grant stock options that generally vest over a four-year period and stock awards that generally vest over a three-year period. +• +Limit on non-employee director awards. The Plan establishes a maximum amount of shares that may be granted to a non-employee director in any fiscal year. +• +No dividends on unearned performance-based awards. Dividends or dividend equivalents may not be paid on unearned performance-based awards. +• +Awards subject to clawback policy. Awards granted under the Plan are subject to the Company’s clawback policy. +• +No excise tax gross-ups on change in control. The Plan does not provide for any excise tax gross-ups. +• +No transferability. Awards generally may not be transferred, except by will or the laws of descent and distribution, unless the transfer is approved by the Compensation Committee and is for no consideration. +Background for Requested Share Authorization +The Board of Directors is asking shareholders to approve the amendment and restatement of the Plan to authorize an additional 33,000,000 shares of Class B Stock for the Plan, thereby increasing the total number of shares reserved for issuance under the Plan from 326,000,000 (post-December 2012 stock split) to 359,000,000 shares. +In setting the proposed increase in the number of shares authorized for issuance under the Plan, the Compensation Committee and the Board of Directors considered a number of factors, which are discussed further below, including: +• +The shares available and total outstanding equity awards under the Plan and how long the shares available are expected to last. +• +Historical equity award granting practices, including the Company’s three-year average share usage rate, or burn rate. +• +The expected value transfer and dilution. +Shares Available and Outstanding Equity Awards under the Plan . In setting the number of shares authorized for issuance under the Plan, we considered the shares available and total outstanding equity awards under the Plan and how long the shares available are expected to last. Under the heading “Equity Compensation Plan Information” beginning on page 43, as required by SEC rules, we provide information about shares of Class B Stock that may be issued under our equity compensation plans as of May 31, 2015, the end of fiscal 2015. To facilitate the approval of the Plan, set forth below is certain additional information as of the record date, July 20, 2015. +As of July 20, 2015, we had 855,384,053 shares of Class A Stock and Class B Stock issued and outstanding. The closing price of the Class B Stock as reported on the New York Stock Exchange on July 20, 2015 was $113.13. +As described in more detail in the table below, under the Plan (and without giving effect to approval of the proposed share increase), as of July 20, 2015: +• +Out of the total of 326,000,000 shares of Class B Stock authorized for issuance under the Plan, only 20,122,341 shares remained available for grant as of July 20, 2015. The Board of Directors believes additional shares will be needed under the Plan to provide appropriate incentives to key employees and other service providers. +• +66,315,194 stock options (vested and unvested) were outstanding with a weighted-average exercise price of $57.48 per share and a weighted-average remaining term of 6.56 years. +• +2,054,128 shares underlying full-value awards (such as restricted stock and restricted stock units) were outstanding. +Total shares underlying outstanding options +66,315,194 +Weighted-average exercise price of outstanding options +$57.48 +Weighted-average remaining contractual life of outstanding options +6.56 years +Total shares underlying outstanding unvested restricted stock units +1,717,950 +Total issued shares underlying outstanding restricted stock subject to forfeiture +336,178 +Total shares currently available for grant +20,122,341 +Historical Equity Award Granting Practices. In setting the number of shares authorized for issuance under the Plan, we considered the number of equity awards granted under the Plan in the past three fiscal years. In fiscal 2013, fiscal 2014 and fiscal 2015, the Company granted equity awards representing a total of approximately 16,184,317 shares, 8,378,559 shares and 9,516,163 shares, respectively, as follows: +Fiscal 2013 +Fiscal 2014 +Fiscal 2015 +Stock options granted +14,592,926 +8,086,449 +9,261,310 +Restricted stock and restricted stock units granted +1,591,391 +292,110 +254,853 +Weighted-average common shares outstanding during the fiscal year (Class A and Class B) +897,300,000 +883,400,000 +861,700,000 +Burn rate +1.80 +0.95 +1.10 +We also considered our three-year average burn rate (fiscal 2013, fiscal 2014 and fiscal 2015) of 1.28%.This rate is lower than the industry thresholds established by certain major proxy advisory firms . +NIKE, INC. Ÿ 2015 Notice of Annual Meeting 38 +PROPOSAL 5 +Our future burn rate will depend on a number of factors, including the number of participants in the Plan, the price per share of the Class B Stock, any changes to our compensation strategy, changes in business practices or industry standards, changes in our capital structure due to stock splits or similar events, the compensation practices of our competitors or changes in compensation practices in the market generally, and the methodology used to establish the equity award mix. +Expected Value Transfer and Potential Dilution. In setting the number of shares authorized for issuance under the Plan, we also considered the expected shareholder value transfer and potential dilution that would result by approval of the increase in shares authorized for the Plan, including the policies of certain institutional investors and major proxy advisory firms. The actual dilution will depend on several factors, including the types of awards made under the Plan, as well as the Plan’s fungible share provision, which is described under Description of the Plan--Share Counting and Fungible Pool on page 40. +As of July 20, 2015, our dilution, or equity overhang (the number of shares subject to outstanding equity awards plus the number of shares available to be granted (“Total Award Shares”), divided by total outstanding Class A Stock and Class B Stock) under the Plan was 10%. If the proposed share increase is approved, the potential dilution will be 14%. On a fully diluted basis (Total Award Shares divided by total outstanding Class A Stock and Class B Stock plus Total Award Shares), the potential dilution was 9%. If the proposed share increase is approved, the potential dilution on a fully diluted basis will be 12%. +Section 162(m) Re-Approval +Section 162(m) of the Code prevents a publicly held corporation from claiming federal income tax deductions for compensation in excess of $1 million per year paid to any of its chief executive officer or three other most highly compensated executive officers (other than the chief financial officer). However, if certain conditions are met, compensation that qualifies as “performance-based” is excluded for purposes of calculating the amount of compensation subject to the $1 million limit. In general, one of the requirements that must be satisfied to qualify as performance-based compensation under Section 162(m) of the Code is that the material terms of the performance goals under which the compensation may be paid must be disclosed to and re-approved by our shareholders every five years. Thus, our shareholders are being asked to approve this Proposal 5 to ensure that the Compensation Committee has the flexibility to grant awards under the Plan that are intended to qualify as performance-based compensation under Section 162(m) of the Code. +If our shareholders do not approve the Plan as amended and restated, no new awards will be granted to covered employees under the Plan, and the Compensation Committee will make a determination in its business judgment as to the appropriate compensation for such employees, taking into account considerations important to the Company’s success and the benefits and costs to the Company, including the additional costs arising from the Company’s inability to deduct all or a portion of the compensation paid to covered employees. +Summary of the Plan +The complete text of the Plan is attached to this proxy statement as Exhibit B. The following description of the Plan is a summary of certain provisions of the Plan as proposed to be amended (including the material terms of the performance goals for purposes of Section 162(m) of the Code), and is qualified in its entirety by reference to Exhibit B. +Description of the Plan +Eligibility. All employees, officers and directors of the Company and any parent or subsidiary corporation of the Company, as well as consultants, advisors and independent contractors to the Company, are eligible to be selected for awards under the Plan. As of July 20, 2015, the number of persons eligible to receive awards under the Plan was approximately 4,817. As of that date, approximately 2,923 persons held stock options, restricted stock and restricted stock units under the Plan. +Administration. The Plan is administered by the Compensation Committee. The Committee may promulgate rules and regulations for the operation of the Plan and related agreements and generally supervises the administration of the Plan. The Committee determines the individuals to whom awards are made under the Plan, the amount of the awards, and the other terms and conditions of the awards, except that the Committee has delegated to a board committee consisting of the Chief Executive Officer the authority to grant awards with respect to a maximum of 100,000 shares to any eligible individual who is not at the time of such grant subject to the reporting requirements of Section 16 of the Securities Exchange Act of 1934 and the regulations thereunder. The Committee may also advance any waiting period, accelerate any exercise date, or waive or modify any restriction with respect to an award. +Term of Plan. The Plan will continue until all shares available for issuance under the Plan have been issued and all restrictions on such shares have lapsed. No awards may be made under the Plan on or after the tenth anniversary of shareholder approval of the Plan as amended and restated. Approval of this Proposal 5 accordingly will extend the term in which awards may be made under the Plan to September 17, 2025. The Board of Directors has the power to suspend, terminate, modify or amend the Plan at any time. +Shares Subject to the Plan and Maximum Awards. Subject to adjustment as provided in the Plan as proposed to be amended, the aggregate number of shares of Class B Stock reserved and authorized for issuance pursuant to awards granted under the Plan is 359,000,000. +Subject to adjustment as provided in the Plan as proposed to be amended, for awards intended to be qualified as performance-based compensation under Section 162(m) of the Code, the aggregate maximum number of shares of Class B Stock underlying awards granted under the Plan during any one fiscal year to any one participant may not exceed (i) 1,000,000 shares, plus an additional aggregate of 1,000,000 shares for one-time awards to newly hired or newly promoted individuals for options and SARs, and (ii) 1,000,000 shares, plus an additional aggregate +NIKE, INC. Ÿ 2015 Notice of Annual Meeting 39 +PROPOSAL 5 +of 1,000,000 shares for one-time awards to newly hired or newly promoted individuals, for stock awards, including restricted stock, restricted stock units and performance-based awards. +Directors who are not employees of the Company may not be granted any award or awards denominated in shares that exceed in the aggregate $500,000 in value in any fiscal year, plus an additional $500,000 in value for one-time awards to a newly appointed or elected non-employee director. +Subject to adjustment as provided in the Plan as proposed to be amended, a maximum of 359,000,000 shares of Class B Stock is available for issuance under incentive stock options. +Share Counting and Fungible Pool. Shares underlying awards that expire, terminate or are canceled or forfeited to the Company may be reused for subsequent awards, except that the following shares may not be reused: (i) shares tendered to the Company or withheld by the Company to pay the exercise price of an option, (ii) shares that were subject to stock-settled SARs and were not issued upon the net settlement or net exercise of such SARs or (iii) shares tendered to or withheld by the Company to pay the withholding taxes with respect to the exercise or settlement of an option or SAR. Shares tendered to or withheld by the Company to satisfy tax withholding obligations with respect to the vesting or settlement of stock awards and performance-based awards may be reused for subsequent awards. +The Plan includes a limitation on the grant of full value stock awards and performance-based awards (“full-value awards”). If the net number of shares issued pursuant to full value awards after July 16, 2010 exceeds 7,000,000 shares (adjusted for the December 2012 stock split), plus the number of shares forfeited or withheld to satisfy tax withholding obligations under stock awards outstanding as of that date, any excess shares issued under such awards will be counted against the shares available under the Plan as 2.8 shares for each share issued. The number of shares issued pursuant to stock awards and performance-based awards that are forfeited to the Company or withheld to satisfy tax withholding obligations will become available for future grants under the Plan, except that if any stock awards or performance-based awards are counted against the shares available as 2.8 shares for each share issued, an equal number of forfeitures and tax withholdings will be counted as 2.8 shares in determining the number of shares that again become available under the Plan. Upon the exercise of an option, the number of shares subject to the option and the number of shares available for issuance under the Plan will be reduced by the number of shares issued upon exercise of the option, plus the number of shares, if any, withheld upon exercise to satisfy required tax withholding. +Types of Awards. The Plan authorizes the award of stock options, SARs, restricted stock, restricted stock units, and performance-based awards. +Stock Options . The Committee may grant stock options to eligible individuals under the Plan. The Committee will determine the individuals to whom options will be granted, the exercise price of each option, the number of shares to be covered by each option, the period of each option, the times at which each option may be exercised and whether each option is an incentive stock option (intended to meet all of the requirements of an incentive stock option as defined in Section 422 of the Code) or a non-statutory stock option. The exercise price of each option may not be less than 100 percent of the fair market value of the underlying shares on the date of grant. +Options may be granted for varying periods established at the time of grant, not to exceed 10 years from the date of grant. The Committee has discretion to allow non-statutory stock options to be transferred for no consideration to immediate family members of the optionee. Options will be exercisable in accordance with the terms of an option agreement entered into at the time of the grant. In the event of the death or other termination of an optionee’s employment with the Company, the Plan provides that, unless otherwise determined by the Committee, the optionee’s options may be exercised for specified periods thereafter (four years in the case of termination by reason of retirement (after reaching age 55 with 5 years of service), death or disability and three months in the case of termination for any other reason). The Plan also provides that upon any termination of employment, the Committee may extend the exercise period for any period up to the expiration date of the option and may increase the portion of the option that is exercisable. +The purchase price for shares purchased pursuant to the exercise of options must be paid in cash or, with the consent of the Committee, in whole or in part in shares of Class B Stock. With the consent of the Committee, an optionee may request the Company to withhold shares from the exercise to cover the exercise price or minimum required tax withholding. +Stock Appreciation Rights . The Committee may grant stock appreciation rights (SARs) to eligible individuals under the Plan. SARs may, but need not, be granted in connection with an option. An SAR gives the holder the right to payment from the Company of an amount equal in value to the excess of the fair market value on the date of exercise of one share of Class B Stock over its fair market value on the date of grant (or, if granted in connection with an option, the exercise price per share under the option to which the SAR relates), multiplied by the number of shares covered by the portion of the SAR or option that is surrendered. +An SAR is exercisable only at the time or times established by the Committee, but not after 10 years from the date of grant. If an SAR is granted in connection with an option, it is exercisable only to the extent and on the same conditions that the related option is exercisable. Payment by the Company upon exercise of an SAR may be made in shares of Class B Stock valued at fair market value, or in cash, or partly in stock and partly in cash, as determined by the Committee. +Repricing Prohibition . The Plan provides that, unless shareholder approval is obtained, no stock option or SAR right may be (a) amended to reduce the exercise or grant price or (b) canceled in exchange for cash, another award or any other consideration at a time when the exercise or grant price of the option or SAR exceeds the fair market value of the Class B Stock. +Stock Awards, Including Restricted Stock and Restricted Stock Units . The Committee may grant shares of Class B Stock to eligible individuals as stock awards under the Plan. The Committee will determine the individuals to receive stock awards, the number of shares to be awarded and the time of the award. Stock awards will be subject to the terms, conditions and restrictions determined by the Committee. Restrictions may include restrictions concerning transferability, forfeiture of the shares issued, or such other restrictions as the Committee may determine. Stock awards subject to restrictions may be either restricted stock awards under which shares are issued immediately upon grant subject to forfeiture if vesting conditions are not satisfied, or restricted stock unit awards under which shares are not issued until after vesting conditions are satisfied. +NIKE, INC. Ÿ 2015 Notice of Annual Meeting 40 +PROPOSAL 5 +Performance-Based Awards . The Committee may grant performance-based awards denominated in shares of Class B Stock. All or part of the shares of Class B Stock subject to the awards will be earned if performance targets established by the Committee for the period covered by the award are met and the recipient satisfies any other restrictions established by the Committee. +Section 162(m) Award Performance Measures. The Committee may intend that certain stock awards and performance-based awards described above qualify as “performance-based compensation” for purposes of Section 162(m) of the Code. Such awards must be conditioned upon the attainment of performance goals that are based on one or more of the following objective measures with respect to the Company or any subsidiary, division or other unit of the Company: net income, net income before taxes, operating income, earnings before interest and taxes, revenues, return on sales, return on equity, earnings per share, total shareholder return, or any of the foregoing before the effect of acquisitions, divestitures, accounting changes, restructuring or other special charges. +Acceleration in Certain Events. The Plan does not provide for single-trigger acceleration if an acquiring company assumes outstanding options, SARs and restricted stock units awards in a change in control. The Plan generally provides that, unless otherwise determined by the Committee, vesting of options, SARs and stock awards granted under the Plan will be accelerated if, within two years after a change in control, a participant’s employment is terminated by the Company without cause or by the participant for good reason. Vesting will also be accelerated if the Company is acquired and the acquiring company does not assume outstanding options, SARs and restricted stock units. A “change in control” is generally defined to include (i) completion of a sale of all or substantially all of the assets of the Company or an acquisition of the Company through a merger, consolidation or share exchange, (ii) the nomination (and subsequent election) in a two-year period of a majority of our directors by persons other than the incumbent directors, (iii) the acquisition by any person of more than 50% of the outstanding Class A Stock while the Class A Stock elects a majority of our directors, and (iv) if the Class A Stock ceases to elect a majority of our directors, the acquisition by any person of more than 30% of the total outstanding Class A Stock and Class B Stock. +The Plan also provides that, unless otherwise determined by the Committee, vesting of all options will be accelerated if the optionee’s employment is terminated by reason of death or disability, and vesting of all options outstanding for at least one year will be accelerated if the optionee retires after reaching age 60 with 5 years of service. Unless otherwise determined by the Committee, if an optionee retires after reaching age 55 with 5 years of service, his or her options granted at least one year prior to retirement will continue to vest according to their vesting schedules notwithstanding termination of employment. +Clawback Policy. Awards under the Plan are subject to the Company’s Policy for Recoupment of Incentive Compensation. This clawback policy generally requires executive officers who are involved in wrongful conduct that results in a restatement of the Company’s financial statements and who, after the initial release of the financial statements and prior to the announcement of the restatement, sell any shares acquired under the Plan, to repay to the Company the amount determined by the Board of Directors to be the excess amount received from such sales. Awards under the Plan will also be subject to such other policy regarding clawback or recoupment of incentive compensation as may be subsequently approved by the Committee from time to time or set forth in any agreement or notice evidencing an award, as well as the requirements of applicable law and regulation regarding clawback or recoupment of incentive compensation. By acceptance of any awards under the Plan, a participant expressly agrees to repay to the Company any amount that may be required to be repaid under these provisions. +Corporate Mergers. The Committee may make awards under the Plan that have terms and conditions that vary from those specified in the Plan when such awards are granted in substitution for, or in connection with the assumption of, existing awards made by another corporation and assumed or otherwise agreed to be provided for by the Company in connection with a corporate merger or other similar transaction to which the Company or an affiliated company is a party. +Award Information +Plan Benefits . All awards to employees, officers, directors and consultants under the Plan are made at the discretion of the Board of Directors and its delegates. Therefore, the benefits and amounts that will be received or allocated under the Plan are not determinable at this time. Please refer to the description of grants made to the Named Executive Officers in the last fiscal year described in the Fiscal 2015 Grants of Plan-Based Awards table on page 28. Grants made to our non-employee directors in the last fiscal year are described in Director Compensation for Fiscal 2015 on page 10. +Aggregate Past Grants Under the Plan. The following table sets forth information with respect to options and other awards previously granted under the Plan: +Name and Position +Number of Shares Covered by Options +Number of Shares Covered by Other Awards +Mark G. Parker +7,844,232 +1,710,435 +Donald W. Blair +2,310,000 +363,645 +Trevor A. Edwards +1,691,000 +360,050 +Eric D. Sprunk +1,727,000 +313,218 +Jeanne P. Jackson +759,000 +162,584 +All current executive officers as a group +16,525,132 +3,438,087 +All non-employee directors as a group +1,760,000 +71,916 +Non-executive officer employee group +156,715,993 +2,155,177 +NIKE, INC. Ÿ 2015 Notice of Annual Meeting 41 +PROPOSAL 5 +U.S. Federal Income Tax Information +The following is a general summary of the U.S. federal income tax consequences of awards under the Plan to the Company and to participants in the Plan who are citizens or residents of the United States for U.S. federal tax purposes. The summary is based on the Code, applicable Treasury Regulations and administrative and judicial interpretations thereof, each as in effect on the date of this proxy statement and is, therefore, subject to future changes in the law, possibly with retroactive effect. The summary is general in nature and does not purport to be legal or tax advice. Furthermore, the summary does not address issues relating to any U.S. gift or estate tax consequences or the consequences of any state, local or foreign tax laws. +Stock Options +Nonqualified Stock Options . A participant generally will not recognize taxable income upon the grant or vesting of a nonqualified stock option with an exercise price at least equal to the fair market value of the Class B Stock on the date of grant and no additional deferral feature. Upon the exercise of a nonqualified stock option, a participant generally will recognize compensation taxable as ordinary income in an amount equal to the difference between the fair market value of the shares underlying the option on the date of exercise and the option exercise price. When a participant sells the shares acquired upon exercise, the participant generally will have short-term or long-term capital gain or loss, as the case may be, equal to the difference between the amount the participant received from the sale and the tax basis of the shares sold. The tax basis of the shares generally will be equal to the greater of the fair market value of the shares on the exercise date or the option exercise price. +Incentive Stock Options . A participant generally will not recognize taxable income upon the grant of an incentive stock option. If a participant exercises an incentive stock option during employment as an employee or within three months after his or her employment ends (12 months in the case of permanent and total disability), the participant will not recognize taxable income at the time of exercise for regular U.S. federal income tax purposes (although the participant generally will have taxable income for alternative minimum tax purposes at that time as if the option were a nonqualified stock option). If a participant sells or otherwise disposes of the shares acquired upon exercise of an incentive stock option after the later of (a) one year from the date the participant exercised the option and (b) two years from the grant date of the option, the participant generally will recognize long-term capital gain or loss equal to the difference between the amount the participant received in the disposition and the option exercise price. If a participant sells or otherwise disposes of shares acquired upon exercise of an incentive stock option before these holding period requirements are satisfied, the disposition will constitute a “disqualifying disposition,” and the participant generally will recognize ordinary income in the year of disposition equal to the excess of the fair market value of the shares on the date of exercise over the option exercise price (or, if less, the excess of the amount realized on the disposition of the shares over the option exercise price). The balance of the participant’s gain on a disqualifying disposition, if any, will be taxed as short-term or long-term capital gain, as the case may be. +With respect to both nonqualified stock options and incentive stock options, special rules apply if a participant uses shares of the Class B Stock already held by the participant to pay the exercise price or if the shares received upon exercise of the option are subject to a substantial risk of forfeiture by the participant. +Stock Appreciation Rights +A participant generally will not recognize taxable income upon the grant or vesting of an SAR with a base value at least equal to the fair market value of the Class B Stock on the date of grant and no additional deferral feature. Upon the exercise of an SAR, a participant generally will recognize compensation taxable as ordinary income in an amount equal to the difference between the fair market value of the shares underlying the SAR on the date of exercise and the base value of the SAR. When a participant sells any shares acquired upon exercise, the participant generally will have short-term or long-term capital gain or loss, as the case may be, equal to the difference between the amount the participant received from the sale and the tax basis of the shares sold. The tax basis of the shares generally will be equal to the greater of the fair market value of the shares on the exercise date or the total base value. +Restricted Stock Awards +A recipient of a restricted stock award generally will recognize compensation taxable as ordinary income when the shares cease to be subject to restrictions in an amount equal to the excess of the fair market value of the shares on the date the restrictions lapse over the amount, if any, paid by the participant with respect to the shares. +Instead of postponing the federal income tax consequences of a restricted stock award until the restrictions lapse, the participant may elect to recognize compensation taxable as ordinary income in the year of the award in an amount equal to the fair market value of the shares at the time of receipt. This election is made under Section 83(b) of the Code. A Section 83(b) election is made by filing a written notice with the Internal Revenue Service office with which the participant files his or her federal income tax return. The notice must be filed within 30 days of the date of grant of the restricted stock award for which the election is made and must meet certain technical requirements. +The tax treatment of a subsequent disposition of restricted stock will depend upon whether the participant has made a timely and proper Section 83(b) election. If the participant makes a timely and proper Section 83(b) election, when the participant sells the restricted shares, the participant will have short-term or long-term capital gain or loss, as the case may be, equal to the difference between the amount the participant received from the sale and the tax basis of the shares sold. If no Section 83(b) election is made, any disposition after the restrictions lapse generally will result in short-term or long-term capital gain or loss, as the case may be, equal to the difference between the amount the participant received from the sale and the tax basis of the shares sold. The tax basis of the shares generally will be equal to the amount, if any, paid by the participant with respect to the shares, plus the amount of taxable ordinary income recognized by the participant either at the time the restrictions lapsed or at the time of the Section 83(b) election, as the case may be. If the participant forfeits the shares to the Company (e.g., upon the participant’s termination prior to expiration of the restriction period), the participant may not claim a deduction with respect to the income recognized as a result of making a Section 83(b) election. +Any dividends paid with respect to shares of restricted stock generally will be taxable as ordinary income to the participant at the time the dividends are received. +NIKE, INC. Ÿ 2015 Notice of Annual Meeting 42 +PROPOSAL 5 +Restricted Stock Units +A participant generally will not recognize income at the time a restricted stock unit is granted. When any part of a restricted stock unit is issued or paid, the participant generally will recognize compensation taxable as ordinary income at the time of such issuance or payment in an amount equal to the cash and then fair market value of any shares the participant receives. +Other Awards +The U.S. federal income tax consequences of other awards under the Plan will depend upon the specific terms of each award. +Tax Consequences to the Company +In the foregoing cases, the Company generally will be entitled to a deduction at the same time and in the same amount as a participant recognizes ordinary income, subject to certain limitations imposed under the Code. +Section 409A +We intend that awards granted under the Plan comply with, or otherwise be exempt from, Section 409A of the Code. +Tax Withholding +The Company is authorized to deduct or withhold from any award granted or payment due under the Plan, or require a participant to remit to the Company, the amount of any withholding taxes due in respect of the award or payment. Tendering shares held by the participant or share withholding for taxes is permitted. +Board Recommendation +The Board of Directors recommends that shareholders vote FOR approval of the amendment and restatement of the Plan. +Equity Compensation Plan Information +The following table summarizes information regarding outstanding options and shares available for future issuance under equity compensation plans approved by shareholders and equity compensation plans that were not approved by shareholders as of May 31, 2015. The table does not reflect issuances made during fiscal 2016, nor does it give effect to the proposed amendment and restatement of the Stock Incentive Plan. +Plan Category +(a) +Number of Securities +to be Issued Upon Exercise of +Outstanding Options, Warrants and Rights +(b) +Weighted-Average Exercise +Price of Outstanding +Options, Warrants and Rights (3) +(c) +Number of Securities +Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column(a)) +Equity compensation plans approved by shareholders +59,732,408 (1) +$47.03 +33,793,639 +Equity compensation plans not approved by shareholders (2) +— +— +908,296 +Total +59,732,408 +$47.03 +34,701,935 +(1) +Includes 59,732,408 shares subject to awards of options, restricted stock units and stock appreciation rights outstanding under the Stock Incentive Plan. Includes 30,402,878 shares available for future issuance under the Stock Incentive Plan, and 3,390,761 shares available for future issuance under the Employee Stock Purchase Plan. +(2) Includes 908,296 shares available for future issuance under the Foreign Subsidiary Employee Stock Purchase Plan, pursuant to which shares are offered and sold to employees of selected non-U.S. subsidiaries of the Company on substantially the same terms as those offered to U.S. employees under the shareholder-approved Employee Stock Purchase Plan. +(3) These weighted-average exercise prices do not reflect the shares that will be issued upon the payment of outstanding awards of restricted stock units. +NIKE, INC. Ÿ 2015 Notice of Annual Meeting 43 +PROPOSAL 6 +Proposal 6 +Consider a shareholder proposal regarding political contributions disclosure +The following shareholder proposal (the "Proposal") will be voted on at the annual meeting only if properly presented by or on behalf of the shareholder proponent. Mercy A. Rome, c/o Investor Voice, 1033 - 12th Ave. N.W., Seattle, WA 98177, a holder of 38 shares of Class B Stock, and Green Century Equity Fund, 114 State Street, Suite 200, Boston, MA 02109, a holder of 11,889 shares of Class B Stock, submitted the the Proposal. The Board of Directors recommends a vote AGAINST the Proposal and asks shareholders to read through NIKE’s response which follows the shareholder proposal. +RESOLVED : Shareholders request that NIKE, Inc. (“NIKE”) provide a report, updated semiannually, that discloses NIKE’s: +1. +Policies and procedures for making, with corporate funds or assets, direct or indirect contributions and expenditures to: (a) participate or intervene in any political campaign on behalf of (or in opposition to) any candidate for public office, or (b) influence the general public, or any segment thereof, with respect to an election or referendum. +2. +Monetary and non-monetary contributions and expenditures (direct and indirect) used in the manner described in section 1 above, including: +a. +The identity of the recipient as well as the amount paid to each; and +b. +The title(s) of person(s) at NIKE responsible for decision-making. +The report shall be presented to the Board or relevant Board committee, and posted on NIKE’s website. +Supporting Statement +As long-term shareholders, we support transparency and accountability in corporate spending on political activities. Disclosure is in the best interest of shareholders, and is critical for NIKE’s compliance with federal ethics laws. Gaps in transparency and accountability expose NIKE to reputational and business risks that could threaten shareholder value. +NIKE has a policy statement regarding political contributions; however, we believe this policy has the following significant gaps: +• +It requires senior-executive approval of contributions only when amounts aggregate more than $100,000 annually to an entity. This threshold is too high to ensure meaningful stewardship. +• +Its description of what NIKE will disclose is confusing and includes a $100,000 threshold for reporting, which is far too high to ensure adequate transparency. +• +It does not address payments to any third-party group, including trade associations and 501(c)(4) organizations. +• +NIKE pledged in 2011 to make disclosures annually, but a 2013 disclosure (the first to be released, covering 2012) reports on a single state: Oregon. It appears that NIKE’s criteria for reporting (“…direct political cash contributions in any U.S. state where more than 50% of NIKE’s total annual contributions were made…”), ensures that there will never be more than a single state reported on, and in some cases there may not be any. +NIKE contributed at least $1.97 million in corporate funds since the 2004 election cycle (CQ: www.politicalmoneyline.com and National Institute on Money in State Politics : www.followthemoney.org). +However, publicly available data does not provide a complete picture of NIKE’s political spending. For example, NIKE’s payments to trade associations used for political activities are entirely undisclosed and unknown. +This common-sense governance proposal asks NIKE to disclose all of its political spending, including payments to trade associations and other tax exempt organizations that are used for political purposes. This would bring NIKE in line with a growing number of leading companies - including Exelon, Merck, and Microsoft - that are transparent about their political activity and disclosure this information on their websites. +NIKE’s Board and its shareholders need comprehensive disclosure in order to fully evaluate the political use of corporate assets. Therefore, we urge your support FOR this critical governance reform. +NIKE, INC. Ÿ 2015 Notice of Annual Meeting 44 +PROPOSAL 6 +The Company's Statement in Opposition to Proposal 6 +The Board of Directors opposes this shareholder proposal because: +• +Our current policies and disclosures already address many of the items requested by the proposal; +• +In the Board's judgment, more disclosure than we already make would not be in the best interests of shareholders; and +• +In 2012 and 2013, virtually identical proposals were rejected by approximately 78% and 82%, respectively, of shares voting at the meeting. +Frankly, we agree with our shareholders. +NIKE has strong governance practices and accountability in corporate spending on political activities, and we have a level of transparency that we believe allows shareholders to have the information they need to make informed decisions. The Proposal is unnecessary to achieve these objectives, and the proponent offers no new compelling evidence or arguments in support of the proposal. +NIKE’s Political Contributions Policy (the “Policy”) is designed to give shareholders confidence that there is proper oversight of political activity, and to allow shareholders to assess any risks associated with significant contributions. All of our political contributions and expenditures are made in accordance with the Policy, and our objective is to strictly comply with all public reporting laws. Our Policy ensures that political contributions, trade group memberships, and policy statements are made in a manner consistent with NIKE's core values to protect or enhance shareholder value, without regard to the private political preferences of our corporate officers. Our Policy describes the policies and procedures for making corporate political contributions, how they are approved, who must approve them, and how they are reported to the Board's independent Nominating and Corporate Governance Committee. We disclose our Policy on our website at http://investors.nike.com/investors/corporate-governance. +Consistent with our Policy, we also annually disclose on our website all direct political contributions to any candidate, political party, or ballot initiative in any year that exceeds $100,000, and all political contributions in any U.S. state where we make more than 50% of our political contributions in any year. We believe these disclosures provide shareholders meaningful information to assess any risks posed by significant political contributions. Our disclosures are simple, accurate, and clear. And we have posted them for every year starting with 2012. +Our Policy also requires that management annually report to the Board's independent Nominating and Corporate Governance Committee on compliance with our Policy, and to review the strategic priorities for political contributions and trade association affiliations, to ensure they align with the long-term business objectives of the Company. +The expanded disclosure requested in this proposal could place NIKE at a competitive disadvantage by revealing strategies and priorities designed to protect the economic future of NIKE, its employees, and shareholders. Because parties with interests adverse to NIKE also participate in the political process to their business advantage, any unilateral expanded disclosure could benefit them, while harming the interests of NIKE and its shareholders. +In summary, the Board of Directors believes the proposal is unnecessary because NIKE already complies with a comprehensive policy for oversight and disclosure of political contributions. The proposal would create unnecessary administrative costs, as well as expose NIKE to competitive harm, without commensurate benefit to our shareholders. Our shareholders have understandably rejected this proposal twice before. +Board Recommendation +The Board of Directors recommends a vote AGAINST the shareholder proposal. +NIKE, INC. Ÿ 2015 Notice of Annual Meeting 45 +PROPOSAL 7 +Proposal 7 +Ratification of Independent Registered Public +Accounting Firm +The Audit Committee of the Board of Directors has sole authority to retain, with shareholder ratification, the Company’s independent registered public accounting firm. The Audit Committee directly oversees the firm’s work with respect to the annual audit of the Company’s consolidated financial statements and internal control over financial reporting and approves all audit engagement fees and terms. At least annually, the Audit Committee evaluates the independent registered public accounting firm’s qualifications, performance, and independence, including a review and evaluation of its lead partner. The Audit Committee is also involved in the selection of the new lead engagement partner following mandated rotation of the firm’s lead partner, and is responsible for considering the benefits of rotation of the Company’s independent registered public accounting firm. +The Audit Committee has appointed PricewaterhouseCoopers LLP to audit the Company’s consolidated financial statements and internal control over financial reporting for the fiscal year ending May 31, 2016 and to render other professional services as required. +PricewaterhouseCoopers LLP has served as the Company's independent registered public accounting firm for many years. The Audit Committee and the Board of Directors believe that the continued retention of PricewaterhouseCoopers LLP as the independent registered public accounting firm is in the best interests of the Company and its shareholders. +Accordingly, the Audit Committee is submitting the appointment of PricewaterhouseCoopers LLP to shareholders for ratification. If the appointment is not ratified by our shareholders, the Audit Committee may reconsider whether it should appoint another independent registered public accounting firm. +Representatives of PricewaterhouseCoopers LLP will be present at the Annual Meeting, will have the opportunity to make a statement if they desire to do so, and are expected to be available to respond to questions. +Aggregate fees billed by the Company’s independent registered public accounting firm, PricewaterhouseCoopers LLP, for audit services related to the most recent two fiscal years, and for other professional services incurred in the most recent two fiscal years, were as follows: +Type of Service +2015 +2014 +Audit Fees (1) +$ +19.4 +million +$ +13.6 +million +Audit-Related Fees (2) +0.1 +million +0.1 +million +Tax Fees (3) +1.9 +million +2.1 +million +All Other Fees (4) +0.1 +million +0.7 +million +Total +$ +21.5 +million +$ +16.5 +million +(1) +Comprises the audits of the Company’s annual financial statements and internal controls over financial reporting and reviews of the Company’s quarterly financial statements, as well as statutory audits of Company subsidiaries, attest services and consents to SEC filings. +(2) +Comprises employee benefit plan audits and consultations regarding financial accounting and reporting. +(3) +Comprises services for tax compliance, tax planning and tax advice. Tax compliance includes services for compliance related tax advice, as well as the preparation and review of both original and amended tax returns for the Company and its consolidated subsidiaries. Tax compliance related fees represented $1.0 million and $1.7 million of the tax fees for fiscal 2015 and 2014, respectively. The remaining tax fees primarily include tax advice. +(4) +Comprises other miscellaneous services. +In accordance with the Sarbanes-Oxley Act of 2002, the Audit Committee established policies and procedures under which all audit and non-audit services performed by the Company’s independent registered public accounting firm must be approved in advance by the Audit Committee. During fiscal 2015, fees totaling $29,900, or less than 0.2% of total fees, were paid to PricewaterhouseCoopers LLP for three engagements that were not pre-approved. Additionally, fees totaling $1,400 paid to PricewaterhouseCoopers LLP in fiscal 2014 and representing less than 0.1% of total fiscal 2014 fees for one engagement were identified as not pre-approved. All such services were approved by the Audit Committee promptly after their inadvertent omission from pre-approval was noticed. During fiscal 2015 and 2014 all other services performed by, and fees paid to, PricewaterhouseCoopers LLP were approved in advance. +Board Recommendation +The Board of Directors recommends that shareholders vote FOR ratification of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for the fiscal year ending May 31, 2016. +Report of the Audit Committee +The Audit Committee has: +• +Reviewed and discussed the audited financial statements with management. +• +Discussed with the independent auditors the matters required to be discussed by Public Company Accounting Oversight Board (“PCAOB”) Statement on Auditing Standards No. 16 Communications with Audit Committees. +NIKE, INC. Ÿ 2015 Notice of Annual Meeting 46 +PROPOSAL 7 +• +Received the written disclosures and the letter from the independent accountants required by applicable requirements of the PCAOB regarding the independent accountants’ communications concerning independence, and has discussed with the independent accountant the independent accountant’s independence. +• +Based on the review and discussions above, recommended to the Board of Directors that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the last fiscal year for filing with the Securities and Exchange Commission. +Members of the Audit Committee: +• +Alan B. Graf, Jr., Chairman +• +John G. Connors +• +Michelle A. Peluso +• +Orin C. Smith +NIKE, INC. Ÿ 2015 Notice of Annual Meeting 47 +OTHER MATTERS / SHAREHOLDER PROPOSALS +Other Matters +As of the time this proxy statement was printed, management was unaware of any proposals to be presented for consideration at the Annual Meeting other than those set forth herein, but if other matters do properly come before the Annual Meeting, the persons named in the proxy will vote the shares represented by such proxy according to their best judgment. +Shareholder Proposals +A proposal by a shareholder for inclusion in the Company’s proxy statement and form of proxy for the 2016 annual meeting of shareholders must be received by John F. Coburn III, Vice President and Corporate Secretary of NIKE, at One Bowerman Drive, Beaverton, Oregon 97005-6453, on or before April 9, 2016 to be eligible for inclusion. Rules under the Securities Exchange Act of 1934 describe standards as to the submission of shareholder proposals. In addition, the Company’s bylaws require that any shareholder wishing to make a nomination for Director, or wishing to introduce a proposal or other business at a shareholder meeting must give the Company at least 60 days’ advance written notice, which for the 2016 annual meeting of shareholders is July 19, 2016, and that notice must meet certain other requirements described in the bylaws. +For the Board of Directors, +John F. Coburn III +Vice President and Corporate Secretary +NIKE, INC. Ÿ 2015 Notice of Annual Meeting 48 +EXHIBIT A +Exhibit A +NIKE, Inc. Executive Performance Sharing Plan +This is the Executive Performance Sharing Plan of NIKE, Inc. for the payment of incentive compensation to designated employees. +Section 1. Definitions. +The following terms have the following meanings: +Board : The Board of Directors of the Company. +Code : The Internal Revenue Code of 1986, as amended. +Committee : The Compensation Committee of the Board, provided however, if the Compensation Committee of the Board is not composed entirely of Outside Directors, the “Committee” shall mean a committee composed entirely of at least two Outside Directors appointed by the Board from time to time. +Company : NIKE, Inc. +Exchange Act : The Securities Exchange Act of 1934, as amended. +Executive Officer: The meaning ascribed to this term by Rule 3b-7 promulgated under the Exchange Act. +Outside Directors : The meaning ascribed to this term in Section 162(m) of the Code and the regulations proposed or adopted thereunder. +Performance Target : An objectively determinable level of performance as selected by the Committee to measure performance of the Company or any subsidiary, division, or other unit of the Company for the Year based on one or more of the following: net income, net income before taxes, operating income, earnings before interest and taxes, revenues, return on sales, return on equity, earnings per share, total shareholder return, or any of the foregoing before the effect of acquisitions, divestitures, accounting changes, restructuring, or other special charges, as determined by the Committee at the time of establishing a Performance Target. +Plan : The Executive Performance Sharing Plan of the Company. +Target Award : An amount of cash compensation to be paid to a Plan participant based on achievement of a particular Performance Target level established by the Committee, expressed as a percentage of the participant’s base salary at the beginning of the Year, determined in accordance with guidelines established by the Committee. +Year : The fiscal year of the Company. +Section 2. Objectives . +The objectives of the Plan are to: +(a) recognize and reward on an annual basis the Company’s Executive Officers for their contributions to the overall profitability and performance of the Company; and +(b) qualify compensation under the Plan as “performance-based compensation” within the meaning of Section 162(m) of the Code and the regulations promulgated thereunder. +Section 3. Administration . +The Plan will be administered by the Committee. Subject to the provisions of the Plan, the Committee will have full authority to interpret the Plan, to establish and amend rules and regulations relating to it, to determine the terms and provisions for making awards and to make all other determinations necessary or advisable for the administration of the Plan. +Section 4. Participation . +Participation in the Plan shall be limited to individuals who are designated as Executive Officers of the Company. +Section 5. Determination of the Performance Targets and Awards . +The Committee shall determine, in its sole discretion, the Performance Targets and Target Award opportunities for each participant, within 90 days of the beginning of each Year. The Committee may establish (i) several Performance Target levels for each participant, each corresponding to a different Target Award opportunity, and (ii) different Performance Targets and Target Award opportunities for each participant in the Plan. The maximum Target Award opportunity under the Plan for a participant in any Year shall be $10 million. +Section 6. Determination of Plan Awards . +At the conclusion of the Year, in accordance with Section 162(m)(4)(C)(iii) of the Code, prior to the payment of any award under the Plan, the Committee shall certify in the Committee’s internal meeting minutes the attainment of the Performance Targets for the Year and the calculation of the awards. No award shall be paid if the related Performance Target is not met. In no event shall an award to any participant exceed $10 million. The Committee may, in its sole discretion, reduce or eliminate any participant’s calculated award based on circumstances relating to the performance of the Company or the participant. Awards will be paid in cash as soon as practicable following the Committee’s certification of the awards. +Section 7. Termination of Employment . +NIKE, INC. Ÿ 2015 Notice of Annual Meeting 49 +EXHIBIT A +The terms of a Target Award may provide that in the event of a participant’s termination of employment for any reason during a Year, the participant (or his or her beneficiary) will receive, at the time provided in Section 6, all or any portion of the award to which the participant would otherwise have been entitled. +Section 8. Clawback Policy . +Unless otherwise provided at the time of establishing a Target Award, all awards under the Plan shall be subject to (a) any applicable securities, tax and stock exchange laws, rules, regulations and requirements relating to the recoupment or clawback of incentive compensation, (b) the NIKE, Inc. Policy for Recoupment of Incentive Compensation as approved by the Committee and in effect at the time the Target Award is established, (c) such other policy for clawback or recoupment of incentive compensation as may subsequently be approved from time to time by the Committee and (d) any clawback or recoupment provisions set forth in any agreement or notice evidencing the participant’s Target Award. By acceptance of any payment under the Plan, a participant expressly agrees to repay to the Company any amount that may be required to be repaid under the applicable policy. +Section 9. Miscellaneous . +(a) Amendment and Termination of the Plan . The Committee with the approval of the Board may amend, modify or terminate the Plan at any time and from time to time except insofar as approval by the Company’s shareholders is required pursuant to Section 162(m)(4)(C)(ii) of the Code. The Plan shall terminate at the first shareholder meeting that occurs in the fifth Year after the Company’s shareholders approve the Plan. Notwithstanding the foregoing, no such amendment, modification or termination shall affect the payment of Target Awards previously established. +(b) No Assignment . Except as otherwise required by applicable law, no interest, benefit, payment, claim or right of any participant under the Plan shall be subject in any manner to any claims of any creditor of any participant or beneficiary, nor to alienation by anticipation, sale, transfer, assignment, bankruptcy, pledge, attachment, charge or encumbrance of any kind, and any attempt to take any such action shall be null and void. +(c) No Rights to Employment . Nothing contained in the Plan shall give any person the right to be retained in the employment of the Company or any of its subsidiaries. The Company reserves the right to terminate a participant at any time for any reason notwithstanding the existence of the Plan. +(d) Beneficiary Designation . The Committee shall establish such procedures as it deems necessary for a participant to designate a beneficiary to whom any amounts would be payable in the event of a participant’s death. +(e) Plan Unfunded . The entire cost of the Plan shall be paid from the general assets of the Company. The rights of any person to receive benefits under the Plan shall be only those of a general unsecured creditor, and neither the Company nor the Board nor the Committee shall be responsible for the adequacy of the general assets of the Company to meet and discharge Plan liabilities, nor shall the Company be required to reserve or otherwise set aside funds for the payment of its obligations hereunder. +(f) Choice of Law and Venue. The Plan, all awards granted thereunder and all determinations made and actions taken pursuant thereto, to the extent not otherwise governed by the laws of the United States, shall be governed by the laws of the State of Oregon. For purposes of litigating any dispute that arises under the Plan, all awards granted thereunder and all determinations made and actions taken pursuant thereto, the parties hereby submit to and consent to the jurisdiction of, and agree that such litigation shall be conducted in, the courts of Washington County, Oregon or the United States District Court for the District of Oregon, where this Agreement is made and/or to be performed. +NIKE, INC. Ÿ 2015 Notice of Annual Meeting 50 +EXHIBIT B +Exhibit B +NIKE, INC. STOCK INCENTIVE PLAN As amended and restated as of June 18, 2015 +1. Purpose . The purpose of this Stock Incentive Plan (the “ Plan ”) is to enable NIKE, Inc. (the “ Company ”) to attract and retain as directors, officers, employees, consultants, advisors and independent contractors people of initiative and ability and to provide additional incentives to such persons. +2. Shares Subject to the Plan . +(a) Shares Authorized . Subject to adjustment as provided below and in paragraph 10, the shares to be offered under the Plan shall consist of Class B Common Stock of the Company (“ Shares ”), and the total number of Shares that may be issued under the Plan shall not exceed three hundred fifty-nine million (359,000,000) Shares (the “ Plan Limit ”). +(b) Share Usage . If an option or stock appreciation right granted under the Plan expires, terminates or is canceled, the unissued Shares subject to such option or stock appreciation right shall again be available under the Plan. If any Shares issued pursuant to a Stock Award (as defined in paragraph 7) or a Performance-Based Award (as defined in paragraph 8) are forfeited to the Company, or the award expires, terminates or is canceled, the number of Shares forfeited or unissued shall again be available under the Plan. Upon the exercise of an option, the number of Shares reserved for issuance under the Plan shall be reduced by the number of Shares issued upon exercise of the options, plus the number of Shares, if any, withheld upon exercise as full or partial payment of the exercise price or to satisfy the tax withholding amount. Upon the exercise of a stock appreciation right for Shares, the number of Shares reserved for issuance under the Plan shall be reduced by the number of Shares covered by the stock appreciation right. Cash payments of stock appreciation rights shall not reduce the number of Shares reserved for issuance under the Plan. Upon the issuance of Shares under a Stock Award or a Performance-Based Award, the number of Shares reserved for issuance under the Plan shall be reduced by the number of Shares issued. For all purposes of this paragraph 2(b), the number of Shares “issued” pursuant to a Stock Award or a Performance-Based Award shall be net of any Shares withheld to satisfy tax withholding obligations with respect to the award. The number of Shares available for issuance under the Plan shall not be reduced to reflect any dividends or dividend equivalents that are reinvested into additional Shares or credited as additional Shares subject or paid with respect to an award. +(c) Fungible Share Provision . Any Shares subject to an option or stock appreciation right granted under the Plan shall be counted against the Plan Limit as one Share for every one Share subject to such option or stock appreciation right, except that a stock appreciation right payable solely in cash shall not be counted against the Plan Limit. Any Shares issued pursuant to a Stock Award or a Performance-Based Award shall be counted against the Plan Limit as one Share for every one Share so issued; provided, however, that if the aggregate number of Shares issued pursuant to Stock Awards and Performance-Based Awards granted after July 16, 2010 exceeds the Full Value Limit (as defined below), any excess Shares issued under those awards shall be counted against the Plan Limit as two and eight-tenths (2.8) Shares for every one Share so issued. If any Shares issued pursuant to a Stock Award or a Performance-Based Award are counted against the Plan Limit as two and eight-tenths (2.8) Shares as provided above, and any Shares issued pursuant to a Stock Award or a Performance-Based Award are subsequently forfeited to the Company, the number of Shares that again become available under the Plan shall be equal to the number of Shares forfeited (up to the aggregate number of Shares previously counted against the Plan Limit as two and eight-tenths (2.8) Shares) multiplied by two and eight-tenths (2.8). Subject to adjustment as provided in paragraph 10, the “ Full Value Limit ” shall equal seven million (7,000,000) Shares plus the number of Shares issued pursuant to Stock Awards granted on or before July 16, 2010 that are forfeited to the Company or withheld to satisfy tax withholding obligations after July 16, 2010. +(d) Award Limits . +(i) Incentive Stock Options . Subject to adjustment under paragraph 10, a maximum of three hundred fifty-nine million (359,000,000) Shares shall be available for issuance under Incentive Stock Options. +(ii) Individual Award Limits for Section 162(m) . Subject to adjustment under paragraph 10, the maximum number of each type of award intended to constitute “performance-based compensation” under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “ Code ”), granted to any individual in any fiscal year shall not exceed the following: (A) options and stock appreciation rights: an aggregate of one million (1,000,000) Shares, plus an additional aggregate of one million (1,000,000) Shares for one-time awards to newly hired or newly promoted individuals, +NIKE, INC. Ÿ 2015 Notice of Annual Meeting 51 +EXHIBIT B +and (B) Stock Awards (including restricted stock and restricted stock units) that are Performance-Based Awards: one million (1,000,000) Shares, plus an additional aggregate of one million (1,000,000) Shares for one-time awards to newly hired or newly promoted individuals. +(iii) Limits on Awards to Non-Employee Directors . No Non-Employee Director may be granted any award or awards denominated in Shares that exceed in the aggregate $500,000 in value (such value computed as of the date of grant in accordance with applicable financial accounting rules) in any fiscal year, plus an additional $500,000 in value for one-time awards to a newly appointed or elected Non-Employee Director. A “ Non-Employee Director ” is any member of the Board of Directors who is not an employee of the Company. +(e) Dividends . Participants in the Plan may, if the Committee (as defined in paragraph 4) so determines, be credited with dividends or dividend equivalents for dividends paid with respect to Shares underlying an award in a manner determined by the Committee in its sole discretion, provided that with respect to awards that are subject to achievement of performance goals, any such credited dividends or dividend equivalents may only be paid with respect to the portion of such awards that is actually earned. The Committee may apply any restrictions to the dividends or dividend equivalents that the Committee deems appropriate. The Committee, in its sole discretion, may determine the form of payment of dividends or dividend equivalents, including cash, shares of the Class B Common Stock, restricted stock or restricted stock units. +3. Duration of Plan . The Plan shall continue in effect until all Shares available for issuance under the Plan have been issued and all restrictions on such Shares have lapsed; provided, however, that no awards shall be made under the Plan on or after the 10th anniversary of the last action by the shareholders approving any amendment to the Plan or amendment and restatement of the Plan to increase the number of Shares available for issuance under the Plan. The Board of Directors may suspend or terminate the Plan at any time except with respect to awards and Shares subject to restrictions then outstanding under the Plan. Termination shall not affect any outstanding awards or the forfeitability of Shares issued under the Plan. +4. Administration . +The Plan shall be administered by a committee appointed by the Board of Directors of the Company consisting of not less than two directors (the “ Committee ”), which shall determine and designate from time to time the individuals to whom awards shall be made, the amount of the awards and the other terms and conditions of the awards, except that only the Board of Directors may amend or terminate the Plan as provided in paragraphs 3 and 14. Subject to the provisions of the Plan, the Committee may from time to time adopt and amend rules and regulations relating to administration of the Plan, adopt forms of award agreements setting out the terms and conditions of the awards, advance the lapse of any waiting period, accelerate any exercise date, waive or modify any restriction applicable to Shares (except those restrictions imposed by law) and make all other determinations in the judgment of the Committee necessary or desirable for the administration of the Plan. The interpretation and construction of the provisions of the Plan and related agreements by the Committee shall be final and conclusive. The Committee may correct any defect or supply any omission or reconcile any inconsistency in the Plan or in any related agreement in the manner and to the extent it shall deem expedient to carry the Plan into effect, and it shall be the sole and final judge of such expediency. +Notwithstanding anything to the contrary contained in this paragraph 4, the Board of Directors may delegate to the Chief Executive Officer of the Company, as a one-member committee of the Board of Directors, the authority to grant awards with respect to a maximum of 100,000 Shares to any eligible individual who is not, at the time of such grant, subject to the reporting requirements and liability provisions contained in Section 16 of the Securities Exchange Act of 1934 (the “ Exchange Act ”) and the regulations thereunder, provided that such committee may not grant awards pursuant to paragraph 8, and provided that any award so granted is made pursuant to the form of agreement approved by the Committee for such award. Notwithstanding anything to the contrary contained in this paragraph 4, the Board of Directors may delegate to the Chief Executive Officer of the Company, as a one-member committee of the Board of Directors, the authority to approve award terms for recipients of awards residing outside of the United States to the extent such terms are necessary or desirable to ensure compliance with applicable laws. +5. Types of Awards; Eligibility; General Terms of Awards . +(a) Awards . The Committee may, from time to time, take the following actions, separately or in combination, under the Plan: (i) grant Incentive Stock Options, as defined in Section 422 of the Code as provided in paragraph 6(b); (ii) grant options other than Incentive Stock Options (“ Non-Statutory Stock Options ”) as provided in paragraph 6(c); (iii) grant Stock Awards, including restricted stock and restricted stock units, as provided in paragraph 7; (iv) grant Performance-Based Awards as provided in paragraph 8; and (v) grant stock appreciation rights as provided in paragraph 9. +NIKE, INC. Ÿ 2015 Notice of Annual Meeting 52 +EXHIBIT B +(b) Eligibility . Any such awards may be made to employees, including employees who are officers or directors, of the Company or any parent or subsidiary corporation of the Company and to other individuals described in paragraph 1 who the Committee believes have made or will make an important contribution to the Company or its subsidiaries; provided, however, that only employees of the Company shall be eligible to receive Incentive Stock Options under the Plan. The Committee shall select the individuals to whom awards shall be made. The Committee shall specify the action taken with respect to each individual to whom an award is made under the Plan. +(c) Termination of Service . For purposes of the Plan, service means service as a Non-Employee Director, consultant, advisor or independent contractor of the Company or a parent or subsidiary corporation of the Company and termination of service means termination of employment or service. +(d) Vesting Limitations . Notwithstanding any other provision of the Plan to the contrary, and subject to adjustment as provided in paragraph 10, the aggregate number of Shares that may be issued pursuant to awards granted under the Plan that either contain no restrictions or contain restrictions based solely on continuous employment or service over less than one year shall not exceed two million six hundred forty thousand (2,640,000) Shares . The above limitation will not, however, apply in the following situations: (1) a Change in Control (as defined in paragraph 11(b); (2) termination of service due to death or disability; and (3) a substitute award granted pursuant to paragraph 12. +6. Option Grants . +(a) Grant . The Committee may grant options under the Plan. With respect to each option grant, the Committee shall determine the number of Shares subject to the option, the option price, the period of the option, the time or times at which the option may be exercised and whether the option is an Incentive Stock Option or a Non-Statutory Stock Option. +(b) Incentive Stock Options . Incentive Stock Options shall be subject to the following terms and conditions: +(i) An Incentive Stock Option may be granted under the Plan to an employee possessing more than 10 percent of the total combined voting power of all classes of stock of the Company or of any parent or subsidiary of the Company only if the option price is at least 110 percent of the fair market value of the Shares subject to the option on the date it is granted, as described in paragraph 6(b)(iii), and the option by its terms is not exercisable after the expiration of five years from the date it is granted. +(ii) Subject to paragraphs 6(b)(i) and 6(d), Incentive Stock Options granted under the Plan shall continue in effect for the period fixed by the Committee, except that no Incentive Stock Option shall be exercisable after the expiration of 10 years from the date it is granted. +(iii) The option price per share shall be determined by the Committee at the time of grant. Subject to paragraph 6(b)(i), the option price shall not be less than 100 percent of the fair market value of the Shares covered by the Incentive Stock Option at the date the option is granted. The fair market value shall be deemed to be the closing price of the Class B Common Stock of the Company as reported in the New York Stock Exchange Composite Transactions in the Wall Street Journal on the date the option is granted, or if there has been no sale on that date, on the last preceding date on which a sale occurred, or such other reported value of the Class B Common Stock of the Company as shall be specified by the Committee. +(iv) No Incentive Stock Option shall be granted on or after the tenth anniversary of the last action by the Board of Directors approving an increase in the number of Shares available for issuance under the Plan, which action was subsequently approved within 12 months by the shareholders. +(c) Non-Statutory Stock Options . The option price for Non-Statutory Stock Options shall be determined by the Committee at the time of grant. The option price may not be less than 100 percent of the fair market value of the Shares covered by the Non-Statutory Stock Option on the date the option is granted. The fair market value of Shares covered by a Non-Statutory Stock Option shall be determined pursuant to paragraph 6(b)(iii). No Non-Statutory Stock Option shall be exercisable after the expiration of 10 years from the date it is granted. +(d) Exercise of Options . Except as provided in paragraph 6(f), no option granted under the Plan may be exercised unless at the time of such exercise the optionee is employed by or providing services to the Company or any parent or subsidiary corporation of the Company and shall have been so employed or providing services continuously since the date such option was granted. Absence on leave or on account of illness or disability under rules established by the Committee shall not, however, be deemed an interruption of employment or service for this purpose. Except as +NIKE, INC. Ÿ 2015 Notice of Annual Meeting 53 +EXHIBIT B +provided in paragraphs 6(f), 10 and 11, options granted under the Plan may be exercised from time to time over the period stated in each option in such amounts and at such times as shall be prescribed by the Committee, provided that options shall not be exercised for fractional Shares. Unless otherwise determined by the Committee, if the optionee does not exercise an option in any one year with respect to the full number of Shares to which the optionee is entitled in that year, the optionee’s rights shall be cumulative and the optionee may purchase those Shares in any subsequent year during the term of the option. +(e) Nontransferability . Except as provided below, each stock option granted under the Plan by its terms shall be nonassignable and nontransferable by the optionee, either voluntarily or by operation of law, and each option by its terms shall be exercisable during the optionee’s lifetime only by the optionee. A stock option may be transferred by will or by the laws of descent and distribution of the state or country of the optionee’s domicile at the time of death. A Non-Statutory Stock Option shall also be transferable pursuant to a qualified domestic relations order as defined under the Code or Title I of the Employee Retirement Income Security Act. The Committee may, in its discretion, authorize all or a portion of a Non-Statutory Stock Option granted to an optionee to be on terms which permit transfer by the optionee to (i) the spouse, children or grandchildren of the optionee (“ Immediate Family Members ”), (ii) a trust or trusts for the exclusive benefit of Immediate Family Members, or (iii) a partnership in which Immediate Family Members are the only partners, provided that (x) there may be no consideration for any transfer, (y) the option agreement pursuant to which the options are granted must expressly provide for transferability in a manner consistent with this paragraph, and (z) subsequent transfers of transferred options shall be prohibited except by will or by the laws of descent and distribution. Following any transfer, options shall continue to be subject to the same terms and conditions as were applicable immediately prior to transfer, provided that for purposes of paragraphs 6(d), 6(g), 10 and 11 the term “optionee” shall be deemed to refer to the transferee. The events of termination of service of paragraph 6(f), shall continue to be applied with respect to the original optionee, following which the options shall be exercisable by the transferee only to the extent, and for the periods specified, and all other references to employment or service, termination of service, life or death of the optionee, shall continue to be applied with respect to the original optionee. +(f) Termination of Service or Death . +(i) Unless otherwise provided at the time of grant, in the event of termination of the optionee’s service with the Company or a parent or subsidiary corporation of the Company for any reason other than because of normal retirement, early retirement, physical disability or death, the option may be exercised at any time prior to the expiration date of the option or the expiration of three months after the date of such termination of service, whichever is the shorter period, but only if and to the extent the optionee was entitled to exercise the option at the date of such termination. +(ii) Unless otherwise provided at the time of grant, in the event of termination of the optionee’s service with the Company or a parent or subsidiary corporation of the Company as a result of the optionee’s normal retirement, any option granted to the optionee less than one year prior to the date of such termination of service shall immediately terminate, and any option granted to the optionee at least one year prior to the date of such termination of service may be exercised by the optionee free of the limitations on the amount that may be purchased in any one year specified in the option agreement at any time prior to the expiration date of the option or the expiration of four years after the date of such termination of service, whichever is the shorter period. For purposes of this paragraph 6(f), “normal retirement” means a termination of service that occurs at a time when (A) the optionee’s age is at least 60 years, and (B) the optionee has at least five full years of employment or service with the Company or a parent or subsidiary corporation of the Company. +(iii) Unless otherwise provided at the time of grant, in the event of termination of the optionee’s service with the Company or a parent or subsidiary corporation of the Company terminates as a result of the optionee’s early retirement, any option granted to the optionee less than one year prior to the date of such termination of service shall immediately terminate, and any option granted to the optionee at least one year prior to the date of such termination of service may be exercised by the optionee in the amounts and according to the schedule specified in the option agreement with no forfeiture of any portion of the option resulting from such termination of service, except that the option may not be exercised after the earlier of the expiration date of the option or the expiration of four years after the date of such termination of service. For purposes of this paragraph 6(f), “early retirement” means a termination of service that occurs at a time when (A) the optionee’s age is at least 55 years and less than 60 years, and (B) the optionee has at least five full years of employment or service with the Company or a parent or subsidiary corporation of the Company. +(iv) Unless otherwise provided at the time of grant, in the event of termination of the optionee’s service with the Company or a parent or subsidiary corporation of the Company because the optionee becomes disabled (within the meaning of Section 22(e)(3) of the Code), the option +NIKE, INC. Ÿ 2015 Notice of Annual Meeting 54 +EXHIBIT B +may be exercised by the optionee free of the limitations on the amount that may be purchased in any one year specified in the option agreement at any time prior to the expiration date of the option or the expiration of four years after the date of such termination, whichever is the shorter period. +(v) Unless otherwise provided at the time of grant, in the event of the death of the optionee while in the employ or service of the Company or a parent or subsidiary corporation of the Company, the option may be exercised free of the limitations on the amount that may be purchased in any one year specified in the option agreement at any time prior to the expiration date of the option or the expiration of four years after the date of such death, whichever is the shorter period, but only by the person or persons to whom such optionee’s rights under the option shall pass by the optionee’s will or by the laws of descent and distribution of the state or country of domicile at the time of death. +(vi) The Committee, at the time of grant or at any time thereafter, may extend the three-month and four-year expiration periods any length of time not later than the original expiration date of the option, and may increase the portion of an option that is exercisable, subject to such terms and conditions as the Committee may determine. +(vii) To the extent that the option of any deceased optionee or of any optionee whose service terminates is not exercised within the applicable period, all further rights to purchase Shares pursuant to such option shall cease and terminate. +(g) Purchase of Shares . Unless the Committee determines otherwise, Shares may be acquired pursuant to an option granted under the Plan only upon receipt by the Company of notice from the optionee of the optionee’s intention to exercise, specifying the number of Shares as to which the optionee desires to exercise the option and the date on which the optionee desires to complete the transaction, and if required in order to comply with the Securities Act of 1933, as amended, containing a representation that it is the optionee’s present intention to acquire the Shares for investment and not with a view to distribution. Unless the Committee determines otherwise, on or before the date specified for completion of the purchase of Shares pursuant to an option, the optionee must have paid the Company the full purchase price of such Shares in cash or with the consent of the Committee, in whole or in part, in Class B Common Stock of the Company valued at fair market value, or by having the Company withhold shares of Class B Common Stock of the Company that would otherwise be issued on exercise of the option that have an aggregate fair market value equal to the aggregate purchase price of the Shares being purchased under the option. The fair market value of Class B Common Stock of the Company provided in payment of the purchase price shall be the closing price of the Class B Common Stock of the Company as reported in the New York Stock Exchange Composite Transactions in the Wall Street Journal or such other reported value of the Class B Common Stock of the Company as shall be specified by the Committee, on the date the option is exercised, or if such date is not a trading day, then on the immediately preceding trading day. No Shares shall be issued until full payment therefor has been made. With the consent of the Committee, an optionee may request the Company to apply automatically the Shares to be received upon the exercise of a portion of a stock option (even though stock certificates have not yet been issued) to satisfy the purchase price for additional portions of the option. Each optionee who has exercised an option shall immediately upon notification of the amount due, if any, pay to the Company in cash amounts necessary to satisfy any applicable federal, state and local tax withholding requirements. If additional withholding is or becomes required beyond any amount deposited before delivery of the certificates, the optionee shall pay such amount to the Company on demand. If the optionee fails to pay the amount demanded, the Company may withhold that amount from other amounts payable by the Company to the optionee, including salary, subject to applicable law. With the consent of the Committee, an optionee may satisfy the minimum statutory withholding obligation, in whole or in part, by having the Company withhold from the Shares to be issued upon the exercise that number of Shares that would satisfy the withholding amount due or by delivering Class B Common Stock of the Company to the Company to satisfy the withholding amount. +(h) No Repricing . Except for actions approved by the shareholders of the Company or adjustments made pursuant to paragraph 10, the option price for an outstanding option granted under the Plan may not be decreased after the date of grant nor may the Company grant a new option or pay any cash or other consideration (including another award under the Plan) in exchange for any outstanding option granted under the Plan at a time when the option price of the outstanding option exceeds the fair market value of the Shares covered by the option. +7. Stock Awards, Including Restricted Stock and Restricted Stock Units . The Committee may grant Shares as stock awards under the Plan (“ Stock Awards ”). Stock Awards shall be subject to the terms, conditions, and restrictions determined by the Committee. The restrictions may include restrictions concerning transferability and forfeiture of the Shares awarded, together with such other restrictions as may be determined by the Committee. Stock Awards subject to restrictions may be either restricted stock awards under which Shares are issued immediately upon grant subject to forfeiture if vesting conditions are not satisfied, or restricted stock unit awards under which Shares are not issued until after vesting conditions are satisfied. The Committee may require the recipient to sign an agreement as a condition of the award, but may not require the recipient to pay any monetary consideration other than amounts necessary to satisfy tax withholding requirements. The agreement may contain any terms, +NIKE, INC. Ÿ 2015 Notice of Annual Meeting 55 +EXHIBIT B +conditions, restrictions, representations and warranties required by the Committee. The certificates representing the Shares awarded shall bear any legends required by the Committee. The Company may require any recipient of a Stock Award to pay to the Company in cash upon demand amounts necessary to satisfy any applicable federal, state or local tax withholding requirements. If the recipient fails to pay the amount demanded, the Company may withhold that amount from other amounts payable by the Company to the recipient, including salary, subject to applicable law. With the consent of the Committee, a recipient may satisfy the minimum statutory withholding obligation, in whole or in part, by having the Company withhold from the awarded Shares that number of Shares that would satisfy the withholding amount due or by delivering Class B Common Stock of the Company to the Company to satisfy the withholding amount. +8. Performance-Based Awards . The Committee may grant awards denominated in Shares intended to qualify as qualified performance-based compensation under Section 162(m) of the Code and the regulations thereunder (“ Performance-Based Awards ”). Performance-Based Awards shall be subject to the following terms and conditions: +(a) Award Period . The Committee shall determine the period of time for which a Performance-Based Award is made (the “ Award Period ”). +(b) Performance Targets and Payment . The Committee shall establish in writing objectives (“ Performance Targets ”) that must be met by the Company or any subsidiary, division or other unit of the Company (“ Business Unit ”) during the Award Period as a condition to payment being made under the Performance-Based Award. The Performance Targets for each award shall be one or more targeted levels of performance with respect to one or more of the following objective measures with respect to the Company or any Business Unit: net income, net income before taxes, operating income, earnings before interest and taxes, revenues, return on sales, return on equity, earnings per share, total shareholder return, or any of the foregoing before the effect of acquisitions, divestitures, accounting changes, restructuring or other special charges, as determined by the Committee at the time of establishing a Performance Target. The Committee shall also establish the number of Shares to be issued under a Performance-Based Award if the Performance Targets are met or exceeded, including the fixing of a maximum number of Shares (subject to paragraph 2(d)(ii)). The Committee may establish other restrictions to payment under a Performance-Based Award, such as a continued employment requirement, in addition to satisfaction of the Performance Targets. Some or all of the Shares subject to a Performance-Based Award may be issued at the time of the award as restricted Shares subject to forfeiture in whole or in part if Performance Targets or, if applicable, other restrictions are not satisfied. +(c) Computation of Payment . During or after an Award Period, the performance of the Company or Business Unit, as applicable, during the period shall be measured against the Performance Targets. If the Performance Targets are not met, no payment shall be made under a Performance-Based Award. If the Performance Targets are met or exceeded, the Committee shall certify that fact in writing and certify the number of Shares earned under the terms of the Performance-Based Award. +(d) Tax Withholding . The Company may require any recipient of a Performance-Based Award to pay to the Company in cash upon demand amounts necessary to satisfy any applicable federal, state or local tax withholding requirements. If the recipient fails to pay the amount demanded, the Company may withhold that amount from other amounts payable by the Company to the recipient, including salary, subject to applicable law. With the consent of the Committee, a recipient may satisfy the minimum statutory withholding obligation, in whole or in part, by having the Company withhold from the awarded Shares that number of Shares that would satisfy the withholding amount due or by delivering Class B Common Stock of the Company to the Company to satisfy the withholding amount. +9. Stock Appreciation Rights . +(a) Grant . Stock appreciation rights may be granted under the Plan by the Committee, subject to such rules, terms, and conditions as the Committee prescribes. +(b) Exercise . +(i) A stock appreciation right shall be exercisable only at the time or times established by the Committee, except that no stock appreciation right shall be exercisable after the expiration of 10 years from the date it is granted. If a stock appreciation right is granted in connection with an option, the stock appreciation right shall be exercisable only to the extent and on the same conditions that the related option could be exercised. Upon exercise of a stock appreciation right, any option or portion thereof to which the stock appreciation right relates terminates. If a stock appreciation +NIKE, INC. Ÿ 2015 Notice of Annual Meeting 56 +EXHIBIT B +right is granted in connection with an option, upon exercise of the option, the stock appreciation right or portion thereof to which the option relates terminates. +(ii) The Committee may withdraw any stock appreciation right granted under the Plan at any time and may impose any conditions upon the exercise of a stock appreciation right or adopt rules and regulations from time to time affecting the rights of holders of stock appreciation rights. Such rules and regulations may govern the right to exercise stock appreciation rights granted before adoption or amendment of such rules and regulations as well as stock appreciation rights granted thereafter. +(iii) Each stock appreciation right shall entitle the holder, upon exercise, to receive from the Company in exchange therefor an amount equal in value to the excess of the fair market value on the date of exercise of one share of Class B Common Stock of the Company over its fair market value on the date of grant or such higher amount as the Committee may determine (or, in the case of a stock appreciation right granted in connection with an option, the option price per Share under the option to which the stock appreciation right relates), multiplied by the number of Shares covered by the stock appreciation right or the option, or portion thereof, that is surrendered. Payment by the Company upon exercise of a stock appreciation right may be made in Shares valued at fair market value, in cash, or partly in Shares and partly in cash, all as determined by the Committee. +(iv) For purposes of this paragraph 9, the fair market value of the Class B Common Stock of the Company on the date a stock appreciation right is exercised shall be the closing price of the Class B Common Stock of the Company as reported in the New York Stock Exchange Composite Transactions in the Wall Street Journal, or such other reported value of the Class B Common Stock of the Company as shall be specified by the Committee, on the date the stock appreciation right is exercised, or if such date is not a trading day, then on the immediately preceding trading day. +(v) No fractional Shares shall be issued upon exercise of a stock appreciation right. In lieu thereof, cash shall be paid in an amount equal to the value of the fractional share. +(vi) Each stock appreciation right granted under the Plan by its terms shall be nonassignable and nontransferable by the holder, either voluntarily or by operation of law, except by will or by the laws of descent and distribution of the state or county of the holder’s domicile at the time of death, and each stock appreciation right by its terms shall be exercisable during the holder’s lifetime only by the holder; provided, however, that a stock appreciation right not granted in connection with an Incentive Stock Option shall also be transferable pursuant to a qualified domestic relations order as defined under the Code or Title I of the Employee Retirement Income Security Act. +(vii) Each participant who has exercised a stock appreciation right shall, upon notification of the amount due, pay to the Company in cash amounts necessary to satisfy any applicable federal, state or local tax withholding requirements. If the participant fails to pay the amount demanded, the Company may withhold that amount from other amounts payable by the Company to the participant including salary, subject to applicable law. With the consent of the Committee a participant may satisfy the minimum statutory obligation, in whole or in part, by having the Company withhold from any Shares to be issued upon the exercise that number of Shares that would satisfy the withholding amount due or by delivering Class B Common Stock of the Company to the Company to satisfy the withholding amount. +(c) No Repricing . Except for actions approved by the shareholders of the Company or adjustments made pursuant to paragraph 10, the grant price for an outstanding stock appreciation right granted under the Plan may not be decreased after the date of grant nor may the Company grant a new stock appreciation right or pay any cash or other consideration (including another award under the Plan) in exchange for any outstanding stock appreciation right granted under the Plan at a time when the grant price of the outstanding stock appreciation right exceeds the fair market value of the Shares covered by the stock appreciation right. +10. Changes in Capital Structure . If the outstanding shares of Class B Common Stock of the Company are hereafter increased or decreased or changed into or exchanged for a different number or kind of shares or other securities of the Company by reason of any recapitalization, reclassification, stock split, combination of shares, dividend payable in shares, or large nonrecurring cash dividend, the authorization limits under paragraphs 2(a), 2(c), 2(d)(i) and 2(d)(ii) shall be adjusted proportionately. In addition, the number and kind of shares subject to outstanding awards, and the exercise price of outstanding options and stock appreciation rights shall be adjusted, to the end that the recipient’s proportionate interest is maintained as before the occurrence of such event. The Committee may also require that any securities issued in respect of or exchanged for Shares issued hereunder that are subject to restrictions be subject to similar restrictions. Notwithstanding the foregoing, the Committee shall have no obligation to effect any adjustment that would or might result in the issuance of fractional shares, and any fractional shares resulting from any adjustment may be disregarded or provided for in any manner determined by the Committee. Any adjustments made pursuant to this paragraph 10 shall be conclusive. +NIKE, INC. Ÿ 2015 Notice of Annual Meeting 57 +EXHIBIT B +11. Sale of the Company; Change in Control . +(a) Sale of the Company . Unless otherwise provided at the time of grant, if during the term of an option, stock appreciation right or restricted stock unit award, there shall occur a merger, consolidation or plan of exchange involving the Company pursuant to which outstanding Shares are converted into cash or other stock, securities or property, or a sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, the assets of the Company, then either: +(i) the option, stock appreciation right or restricted stock unit award shall be converted into an option, stock appreciation right or restricted stock unit award to acquire stock of the surviving or acquiring corporation in the applicable transaction for a total purchase price equal to the total price applicable to the unexercised portion of the option, stock appreciation right or restricted stock unit award, and with the amount and type of shares subject thereto and exercise price per share thereof to be conclusively determined by the Committee, taking into account the relative values of the companies involved in the applicable transaction and the exchange rate, if any, used in determining shares of the surviving corporation to be held by holders of Shares following the applicable transaction, and disregarding fractional shares; or +(ii) all unissued Shares subject to restricted stock unit awards shall be issued immediately prior to the consummation of such transaction, all options and stock appreciation rights will become exercisable for 100 percent of the Shares subject to the option or stock appreciation right effective as of the consummation of such transaction, and the Committee shall approve some arrangement by which holders of options and stock appreciation rights shall have a reasonable opportunity to exercise all such options and stock appreciation rights effective as of the consummation of such transaction or otherwise realize the value of these awards, as determined by the Committee. Any option or stock appreciation right that is not exercised in accordance with procedures approved by the Committee shall terminate. +(b) Change in Control . Unless otherwise provided at the time of grant, if paragraph 11(a)(ii) does not apply, all options and stock appreciation rights granted under the Plan shall become exercisable in full for a remaining term extending until the earlier of the expiration date of the applicable option or stock appreciation right or the expiration of four years after the date of termination of service, and all Stock Awards shall become fully vested, if a Change in Control occurs and at any time after the earlier of Shareholder Approval (as defined below), if any, or the Change in Control and on or before the second anniversary of the Change in Control, (i) the award holder’s service is terminated by the Company (or its successor) without Cause (as defined below), or (ii) the award holder’s service is terminated by the award holder for Good Reason (as defined below). +(i) For purposes of the Plan, a “ Change in Control ” of the Company shall mean the occurrence of any of the following events: +(A) At any time during a period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors of the Company (“ Incumbent Directors ”) shall cease for any reason to constitute at least a majority thereof; provided, however, that the term “Incumbent Director” shall also include each new director elected during such two-year period whose nomination or election was approved by two-thirds of the Incumbent Directors then in office; +(B) At any time that the holders of the Class A Common Stock of the Company have the right to elect (voting as a separate class) a majority of the members of the Board of Directors, any “person” or “group” (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act) shall, as a result of a tender or exchange offer, open market purchases or privately negotiated purchases from anyone other than the Company, have become the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act), directly or indirectly, of more than 50 percent of the then outstanding Class A Common Stock of the Company; +(C) At any time after such time as the holders of the Class A Common Stock of the Company cease to have the right to elect (voting as a separate class) a majority of the members of the Board of Directors, any “person” or “group” (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act) shall, as a result of a tender or exchange offer, open market purchases or privately negotiated purchases from anyone other than the Company, have become the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company ordinarily having the right to vote for the election of directors (“ Voting Securities ”) representing 30 percent or more of the combined voting power of the then outstanding Voting Securities; +(D) A consolidation, merger or plan of exchange involving the Company (“ Merger ”) as a result of which the holders of outstanding Voting Securities immediately prior to the Merger do not continue to hold at least 50 percent of the combined voting power of the outstanding Voting +NIKE, INC. Ÿ 2015 Notice of Annual Meeting 58 +EXHIBIT B +Securities of the surviving corporation or a parent corporation of the surviving corporation immediately after the Merger, disregarding any Voting Securities issued to or retained by such holders in respect of securities of any other party to the Merger; or +(E) A sale, lease, exchange, or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Company. +(ii) For purposes of the Plan, “ Shareholder Approval ” shall mean approval by the shareholders of the Company of a transaction, the consummation of which would be a Change in Control. +(iii) For purposes of this Plan, “Cause” shall mean (A) the willful and continued failure to perform substantially the award holder’s reasonably assigned duties with the Company (other than any such failure resulting from incapacity due to physical or mental illness) after a demand for substantial performance is delivered to the award holder by the Company which specifically identifies the manner in which the Company believes that the award holder has not substantially performed the award holder’s duties, or (B) the willful engagement in illegal conduct which is materially and demonstrably injurious to the Company. No act, or failure to act, shall be considered “willful” if the award holder reasonably believed that the action or omission was in, or not opposed to, the best interests of the Company. +(iv) For purposes of the Plan, “ Good Reason ” shall mean (A) the assignment of a different title, job or responsibilities that results in a decrease in the level of responsibility of the award holder after Shareholder Approval, if applicable, or the Change in Control when compared to the award holder’s level of responsibility for the Company’s operations prior to Shareholder Approval, if applicable, or the Change in Control; provided that Good Reason shall not exist if the award holder continues to have the same or a greater general level of responsibility for Company operations after the Change in Control as the award holder had prior to the Change in Control even if the Company operations are a subsidiary or division of the surviving company, (B) a reduction in the award holder’s base pay as in effect immediately prior to Shareholder Approval, if applicable, or the Change in Control, (C) a material reduction in the total package of benefits available to the award holder under cash incentive, stock incentive and other employee benefit plans after Shareholder Approval, if applicable, or the Change in Control compared to the total package of such benefits as in effect prior to Shareholder Approval, if applicable, or the Change in Control, or (D) the award holder is required to be based more than 50 miles from where the award holder’s office is located immediately prior to Shareholder Approval, if applicable, or the Change in Control except for required travel on company business to an extent substantially consistent with the business travel obligations which the award holder undertook on behalf of the Company prior to Shareholder Approval, if applicable, or the Change in Control. +12. Corporate Mergers, Acquisitions, etc . The Committee may also grant options, stock appreciation rights and Stock Awards under the Plan having terms, conditions and provisions that vary from those specified in the Plan, provided that any such awards are granted in substitution for, or in connection with the assumption of, existing options, stock appreciation rights or Stock Awards issued by another corporation and assumed or otherwise agreed to be provided for by the Company pursuant to or by reason of a transaction involving a corporate merger, consolidation, plan of exchange, acquisition of property or stock, separation, reorganization or liquidation to which the Company or a parent or subsidiary corporation of the Company is a party. +13. Clawback Policy . Unless otherwise provided at the time of grant, all awards under the Plan shall be subject to (a) any applicable securities, tax and stock exchange laws, rules and regulations relating to the recoupment or clawback of incentive compensation, (b) the NIKE, Inc. Policy for Recoupment of Incentive Compensation as approved by the Committee and in effect at the time of grant, (c) such other policy for clawback or recoupment of incentive compensation as may subsequently be approved from time to time by the Committee, and (d) any clawback or recoupment provisions set forth in the agreement evidencing the award. +14. Amendment of Plan . The Board of Directors may at any time, and from time to time, modify or amend the Plan in such respects as it shall deem advisable because of changes in the law while the Plan is in effect or for any other reason. Except as provided in paragraphs 6(f), 9, 10 and 11, however, no change in an award already granted shall be made without the written consent of the holder of such award. +15. Approvals . The obligations of the Company under the Plan are subject to the approval of state and federal authorities or agencies with jurisdiction in the matter. The Company will use its best efforts to take steps required by state or federal law or applicable regulations, including rules and regulations of the Securities and Exchange Commission and any stock exchange or trading system on which the Company’s shares may then be listed or admitted for trading, in connection with the grants under the Plan. The foregoing notwithstanding, the Company shall not be obligated to issue or deliver Class B Common Stock under the Plan if such issuance or delivery would violate applicable state or federal securities laws. +NIKE, INC. Ÿ 2015 Notice of Annual Meeting 59 +EXHIBIT B +16. Employment and Service Rights . Nothing in the Plan or any award pursuant to the Plan shall (a) confer upon any participant any right to be continued in the employment of or service with the Company or any parent or subsidiary corporation of the Company or interfere in any way with the right of the Company or any parent or subsidiary corporation of the Company by whom such participant is employed or to whom such participant is providing services to terminate such participant’s employment or service at any time, for any reason, with or without cause, or to increase or decrease such participant’s compensation or benefits, or (b) confer upon any person engaged by the Company any right to be employed or retained by the Company or to the continuation, extension, renewal, or modification of any compensation, contract, or arrangement with or by the Company. +17. Rights as a Shareholder . The recipient of any award under the Plan shall have no rights as a shareholder with respect to any Shares until the date of issue to the recipient of a stock certificate for such Shares. Except as otherwise expressly provided in the Plan, no adjustment shall be made for dividends or other rights for which the record date is prior to the date such stock certificate is issued. +18. Choice of Law and Venue . The Plan, all awards granted thereunder and all determinations made and actions taken pursuant thereto, to the extent not otherwise governed by the laws of the United States, shall be governed by the laws of the State of Oregon. For purposes of litigating any dispute that arises under the Plan, all awards granted thereunder and all determinations made and actions taken pursuant thereto, the parties hereby submit to and consent to the jurisdiction of, and agree that such litigation shall be conducted in, the courts of Washington County, Oregon or the United States District Court for the District of Oregon, where this Agreement is made and/or to be performed. +NIKE, INC. Ÿ 2015 Notice of Annual Meeting 60 +ANNUAL +MEETING +AND +PROXY STATEMENT +September 17, 2015 +Beaverton, Oregon +Whether or not you intend to be present at the meeting, please sign and date the enclosed proxy and return it in the enclosed envelope, or vote by telephone or online following the instructions on the proxy. +Electronic Voting Instructions +Available 24 hours a day, 7 days a week! +Instead of mailing your proxy, you may choose one of the voting methods outlined below to vote your proxy. +VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR. +Proxies submitted by the Internet or telephone must be received by 1:00 a.m., Central Time, on September 15, 2015. +Vote by Internet +• Go to www.investorvote.com +• Or scan the QR code with your smartphone +• Follow the steps outlined on the secure website +Vote by telephone +• Call toll free 1-800-652-VOTE (8683) within the USA, US territories & Canada on a touch tone telephone +• Follow the instructions provided by the recorded message +Using a black ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas. +x +q IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q +A +Proposals — The Board of Directors recommends a vote FOR all the nominees listed, a vote for FOR Proposals 2, 3, 4, 5 and 7, and a vote AGAINST Proposal 6. +1. +Class A director nominees: To elect a Board of Directors for the ensuing year. +» +For +Withhold +For +Withhold +For +Withhold +01 - Elizabeth J. Comstock +¨ +¨ +02 - John G. Connors +¨ +¨ +03 - Timothy D. Cook +¨ +¨ +04 - John J. Donahoe II +¨ +¨ +05 - Philip H. Knight +¨ +¨ +06 - Travis A. Knight +¨ +¨ +07 - Mark G. Parker +¨ +¨ +08 - Johnathan A. Rodgers +¨ +¨ +09 - John R. Thompson, Jr. +¨ +¨ +For +Against +Abstain +For +Against +Abstain +2. +To approve executive compensation by an advisory vote. +¨ +¨ +¨ +3. +To amend the Articles of Incorporation to increase the number of authorized shares of common stock. +¨ +¨ +¨ +4. +To re-approve the Executive Performance Sharing Plan as amended. +¨ +¨ +¨ +5. +To approve the amended and restated Stock Incentive Plan. +¨ +¨ +¨ +6. +To consider a shareholder proposal regarding political contributions disclosure. +¨ +¨ +¨ +7. +To ratify the appointment of PricewaterhouseCoopers LLP as independent registered public accounting firm. +¨ +¨ +¨ +8. +To transact such other business as may properly come before the meeting. +B +Non-Voting Items +Change of Address — Please print new address below. +C +Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below +Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title. +Date (mm/dd/yyyy) — Please print date below. +Signature 1 — Please keep signature within the box. +Signature 2 — Please keep signature within the box. +/ / +Meeting Information +2015 Annual Meeting of Shareholders +for Shareholders as of July 20, 2015 +September 17, 2015 +10:00 A.M. PDT +Meeting Location: +Tiger Woods Conference Center +One Bowerman Drive +Beaverton, OR 97005 +Meeting Directions: +From I-5 South of Portland: +I-5 North to 217 North. Follow to Hwy 26 West. +From I-5 North of Portland: +I-5 South to I-405 South. Follow to Hwy 26 West. +From I-84 East of Portland: +I-84 West to I-5 South to I-405 North. Follow to Hwy 26 West. +Exit Hwy 26 at Murray Blvd, turn left and drive one mile. Turn right on SW Jenkins Road, right on SW Jay Street, and then take the second right on SW Burlington Drive into Lot 3 (1343 SW Burlington Drive). Due to construction on the NIKE campus, a shuttle will be provided to the Tiger Woods Conference Center. Shareholders should allow an extra 10 minutes for the shuttle service. Please note that the NIKE Campus is a non-smoking location and smoking is not permitted on NIKE property. +Ç IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. Ç +NIKE, INC. +CLASS A COMMON STOCK PROXY +SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS +FOR THE 2015 MEETING OF SHAREHOLDERS +SEPTEMBER 17, 2015 +The undersigned hereby appoints Philip H. Knight, Mark G. Parker and Douglas G. Houser, and each of them, proxies with full power of substitution, to vote, as designated on the reverse side, on behalf of the undersigned, all shares of Class A Common Stock which the undersigned may be entitled to vote at the Annual Meeting of Shareholders of NIKE, Inc. on September 17, 2015, and any adjournments thereof, with all powers that the undersigned would possess if personally present. A majority of the proxies or substitutes present at the meeting may exercise all powers granted hereby. +THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS SPECIFIED, BUT IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE NOMINEES FOR DIRECTOR, FOR PROPOSALS 2, 3, 4, 5, AND 7, AND AGAINST PROPOSAL 6. THE PROXIES MAY VOTE IN THEIR DISCRETION AS TO OTHER MATTERS WHICH MAY COME BEFORE THE MEETING. +YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS’ RECOMMENDATIONS. THE PROXIES CANNOT VOTE THESE SHARES UNLESS YOU SIGN AND RETURN THIS CARD OR PROPERLY VOTE BY PHONE OR INTERNET. +Electronic Voting Instructions +Available 24 hours a day, 7 days a week! +Instead of mailing your proxy, you may choose one of the voting methods outlined below to vote your proxy. +VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR. +Proxies submitted by the Internet or telephone must be received by 1:00 a.m., Central Time, on September 17, 2015. +Vote by Internet +• Go to www.investorvote.com +• Or scan the QR code with your smartphone +• Follow the steps outlined on the secure website +Vote by telephone +• Call toll free 1-800-652-VOTE (8683) within the USA, US territories & Canada on a touch tone telephone +• Follow the instructions provided by the recorded message +Using a black ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas. +x +q IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q +A +Proposals — The Board of Directors recommends a vote FOR all the nominees listed, a vote for FOR Proposals 2, 3, 4, 5 and 7, and a vote AGAINST Proposal 6. +1. +Class B director nominees: To elect a Board of Directors for the ensuing year. +» +For +Withhold +For +Withhold +For +Withhold +01 - Alan B. Graf, Jr. +¨ +¨ +02 - John C. Lechleiter +¨ +¨ +03 - Michelle A. Peluso +¨ +¨ +04 - Phyllis M. Wise +¨ +¨ +For +Against +Abstain +For +Against +Abstain +2. +To approve executive compensation by an advisory vote. +¨ +¨ +¨ +3. +To amend the Articles of Incorporation to increase the number of authorized shares of common stock. +¨ +¨ +¨ +4. +To re-approve the Executive Performance Sharing Plan as amended. +¨ +¨ +¨ +5. +To approve the amended and restated Stock Incentive Plan. +¨ +¨ +¨ +6. +To consider a shareholder proposal regarding political contributions disclosure. +¨ +¨ +¨ +7. +To ratify the appointment of PricewaterhouseCoopers LLP as independent registered public accounting firm. +¨ +¨ +¨ +8. +To transact such other business as may properly come before the meeting. +B +Non-Voting Items +Change of Address — Please print new address below. +C +Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below +Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title. +Date (mm/dd/yyyy) — Please print date below. +Signature 1 — Please keep signature within the box. +Signature 2 — Please keep signature within the box. +/ / +Meeting Information +2015 Annual Meeting of Shareholders +for Shareholders as of July 20, 2015 +September 17, 2015 +10:00 A.M. PDT +Meeting Location: +Tiger Woods Conference Center +One Bowerman Drive +Beaverton, OR 97005 +Meeting Directions: +From I-5 South of Portland: +I-5 North to 217 North. Follow to Hwy 26 West. +From I-5 North of Portland: +I-5 South to I-405 South. Follow to Hwy 26 West. +From I-84 East of Portland: +I-84 West to I-5 South to I-405 North. Follow to Hwy 26 West. +Exit Hwy 26 at Murray Blvd, turn left and drive one mile. Turn right on SW Jenkins Road, right on SW Jay Street, and then take the second right on SW Burlington Drive into Lot 3 (1343 SW Burlington Drive). Due to construction on the NIKE campus, a shuttle will be provided to the Tiger Woods Conference Center. Shareholders should allow an extra 10 minutes for the shuttle service. Please note that the NIKE Campus is a non-smoking location and smoking is not permitted on NIKE property. +Ç IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. Ç +NIKE, INC. +CLASS B COMMON STOCK PROXY +SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS +FOR THE 2015 MEETING OF SHAREHOLDERS +SEPTEMBER 17, 2015 +The undersigned hereby appoints Philip H. Knight, Mark G. Parker and Douglas G. Houser, and each of them, proxies with full power of substitution, to vote, as designated on the reverse side, on behalf of the undersigned, all shares of Class B Common Stock which the undersigned may be entitled to vote at the Annual Meeting of Shareholders of NIKE, Inc. on September 17, 2015, and any adjournments thereof, with all powers that the undersigned would possess if personally present. A majority of the proxies or substitutes present at the meeting may exercise all powers granted hereby. +THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS SPECIFIED, BUT IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE NOMINEES FOR DIRECTOR, FOR PROPOSALS 2, 3, 4, 5, AND 7, AND AGAINST PROPOSAL 6. THE PROXIES MAY VOTE IN THEIR DISCRETION AS TO OTHER MATTERS WHICH MAY COME BEFORE THE MEETING. +YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS’ RECOMMENDATIONS. THE PROXIES CANNOT VOTE THESE SHARES UNLESS YOU SIGN AND RETURN THIS CARD OR PROPERLY VOTE BY PHONE OR INTERNET. \ No newline at end of file diff --git a/raw/proxies/0000320187/0000320187-15-000116/proxy_rpt.txt b/raw/proxies/0000320187/0000320187-15-000116/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..e3c093e48c433da493743afa49a979ae9eee76b6 --- /dev/null +++ b/raw/proxies/0000320187/0000320187-15-000116/proxy_rpt.txt @@ -0,0 +1,7 @@ +Transactions with Related Persons +Mr. Howard S. Slusher, the father of John Slusher, Executive Vice President of Sports Marketing, and the Company are parties to a Consulting Agreement pursuant to which Howard Slusher manages the planning, design, and construction of new buildings at, and improvements to, NIKE's World Headquarters. Howard Slusher was selected due to his deep history and experience with the Company, as he has managed several significant construction projects for the Company, including the original World Headquarters construction and later expansions. In addition, Howard Slusher's previous engagement with the Company garnered the trust of management and makes him uniquely qualified to oversee the project. During fiscal 2015, the Company paid Howard Slusher $2,825,000 for these services. +Pursuant to the terms of a past consulting agreement with the Company, the Company agreed to pay for health and life insurance policies for Howard Slusher following expiration of the agreement. During fiscal 2015, the Company paid $129,160 for health and life insurance premiums. +Three of Mr. Parker’s siblings, each with over 25 years of service to the Company, were employed by the Company in non-executive roles in fiscal 2015. Ann Parker was an Executive Talent Scout, Bob Parker was a Marketplace Director, and Stephen Parker held Vice President roles with Converse. During fiscal 2015, the Company paid aggregate compensation to each of Ann Parker, Bob Parker and Stephen Parker in the amounts of $313,398, $387,434, and $540,582, respectively, comprising salary, bonuses, the grant date fair value of stock options granted during the fiscal year estimated using the Black-Scholes pricing model, profit sharing and matching contributions to Company-sponsored retirement plans. The compensation and benefits received by each of Mr. Parker's siblings were consistent with compensation paid to other employees holding similar positions. +Mr. Thompson’s son, John Thompson III, head basketball coach at Georgetown University, and the Company are parties to a contract pursuant to which Mr. Thompson III provides certain endorsement and consulting services to the Company. The terms of this agreement, effective August 2014 through August 2019, provide for annual base compensation of $200,000, and up to $112,000 per year of product and merchandise, for use by him, the basketball staff and team. In addition, there are annual incentive payments based upon his team's performance of up to $100,000. +The Company’s written policy requires the Nominating and Corporate Governance Committee to review any transaction or proposed transaction with a related person that would be required to be reported under Item 404(a) of Regulation S-K, and to determine whether to ratify or approve the transaction, with ratification or approval to occur only if the Committee determines that the transaction is fair to the Company or that approval or ratification of the transaction is in the interest of the Company. +NIKE, INC. Ÿ 2015 Notice of Annual Meeting 13 \ No newline at end of file diff --git a/raw/proxies/0000320187/0000320187-16-000339/proxy.txt b/raw/proxies/0000320187/0000320187-16-000339/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..d5d6c015c9a4ce631a5deb835d7f0fa1e377bf35 --- /dev/null +++ b/raw/proxies/0000320187/0000320187-16-000339/proxy.txt @@ -0,0 +1,2192 @@ +DEF 14A +1 +nke-2016xdef14a.htm +DEF 14A +Document +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +Washington, D.C. 20549 +SCHEDULE 14A INFORMATION +Proxy Statement Pursuant to Section 14(a) of the +Securities Exchange Act of 1934 +(Amendment No. ) +Filed by the Registrant x Filed by a Party other than the Registrant ¨ +Check the appropriate box: +o +Preliminary Proxy Statement +¨ +Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +x +Definitive Proxy Statement +¨ +Definitive Additional Materials +¨ +Soliciting Material under §240.14a-12 +NIKE, INC. +(Name of registrant as specified in its charter) +(Name of person(s) filing proxy statement, if other than the registrant) +Payment of Filing Fee (Check the appropriate box): +x +No fee required +¨ +Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11 +(1) +Title of each class of securities to which transaction applies: +(2) +Aggregate number of securities to which transaction applies: +(3) +Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): +(4) +Proposed maximum aggregate value of transaction: +(5) +Total fee paid: +¨ +Fee paid previously with preliminary materials. +¨ +Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. +(1) +Amount Previously Paid: +(2) +Form, Schedule or Registration Statement No.: +(3) +Filing Party: +(4) +Date Filed: +To Our Shareholders: +You are cordially invited to attend the annual meeting of shareholders of NIKE, Inc. to be held at the Tiger Woods Conference Center, One Bowerman Drive, Beaverton, Oregon 97005-6453, on Thursday, September 22, 2016, at 10:00 A.M. Pacific Time. Registration will begin at 9:00 A.M. +The meeting will consist of a brief presentation followed by the business items listed on the attached notice. +Whether or not you plan to attend, the prompt execution and return of your proxy card will both assure that your shares are represented at the meeting and minimize the cost of proxy solicitation. +Sincerely, +Mark G. Parker +Chairman of the Board +July 25, 2016 +Notice of Annual Meeting +of Shareholders +September 22, 2016 +To the Shareholders of NIKE, Inc. +The annual meeting of shareholders of NIKE, Inc., an Oregon corporation, will be held on Thursday, September 22, 2016, at 10:00 A.M., at the Tiger Woods Conference Center, One Bowerman Drive, Beaverton, Oregon 97005-6453, for the following purposes: +1. To elect the 12 directors named in the accompanying proxy statement for the ensuing year. +2. To approve executive compensation by an advisory vote. +3. To approve an amendment to the NIKE, Inc. Employee Stock Purchase Plan to increase the number of shares authorized under the plan. +4. To consider a shareholder proposal regarding political contributions disclosure as described in the accompanying proxy statement, if properly presented at the meeting. +5. To ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm. +6. To transact such other business as may properly come before the meeting. +All shareholders are invited to attend the meeting. Shareholders of record at the close of business on July 22, 2016, the record date fixed by the Board of Directors, are entitled to notice of and to vote at the meeting. You must present your proxy, voter instruction card, or meeting notice for admission. +By Order of the Board of Directors, +John F. Coburn III +Vice President and Corporate Secretary +Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders To Be Held on September 22, 2016. The proxy statement and NIKE, Inc.’s 2016 Annual Report to Shareholders are available electronically at www.investorvote.com or www.proxyvote.com, for registered and beneficial owners, respectively. +Whether or not you intend to be present at the meeting, please sign and date the enclosed proxy and return it in the enclosed envelope, or vote by telephone or online following the instructions on the proxy. +CORPORATE GOVERNANCE +Proxy Statement +Proxy Statement +We are furnishing proxy materials to our shareholders primarily via the Internet by mailing a Notice of Internet Availability of Proxy Materials, or “Notice”, instead of mailing printed copies of those materials to each shareholder. The Notice directs shareholders to a website where they can access our proxy materials, including our proxy statement and our annual report, and view instructions on how to vote via the Internet or by telephone. If you would prefer to receive a paper copy of our proxy materials, please follow the instructions included in the Notice. If you have previously elected to receive our proxy materials electronically, you will continue to receive access to these materials electronically unless you elect otherwise. +The enclosed proxy is solicited by the Board of Directors of NIKE, Inc. (“NIKE” or the “Company”) for use at the annual meeting of shareholders to be held on September 22, 2016, and at any adjournment thereof (the “Annual Meeting”). Our principal executive offices are located at One Bowerman Drive, Beaverton, Oregon 97005-6453. This proxy statement is first being made available to shareholders on or about August 4, 2016. Shareholders may submit a proxy to vote at the Annual Meeting by following the instructions on the Notice, via the Internet, by telephone, or (if they have received paper copies of the proxy materials) by returning a proxy card. +The Company will bear the cost of soliciting proxies. In addition to soliciting proxies by mail, certain officers and employees of the Company, without extra compensation, may also solicit proxies personally or by telephone. Copies of proxy solicitation materials will be furnished to fiduciaries, custodians and brokerage houses for forwarding to the beneficial owners of shares held in their names. +Shares that are properly voted via the Internet or by telephone or for which proxy cards are properly executed and received by the Company prior to the Annual Meeting will be voted in accordance with the instructions specified in such proxies. Where no instructions are given, shares will be voted “FOR” the election of each of the named nominees for director (Proposal 1), “FOR” the proposal regarding an advisory vote to approve executive compensation (Proposal 2), “FOR” the amendment of the NIKE, Inc. Employee Stock Purchase Plan to increase the number of shares authorized under the plan (Proposal 3), “AGAINST” the shareholder proposal regarding political contributions (Proposal 4), and “FOR” the ratification of the appointment of PricewaterhouseCoopers LLP as independent registered public accounting firm (Proposal 5). +A shareholder giving the enclosed proxy has the power to revoke it at any time before it is exercised by affirmatively electing to vote in person at the meeting or by delivering to John F. Coburn III, Vice President and Corporate Secretary of NIKE, either an instrument of revocation or an executed proxy bearing a later date. +Voting Securities and Vote Required +Holders of record of NIKE’s Class A Common Stock (“Class A Stock”) and holders of record of NIKE’s Class B Common Stock (“Class B Stock”) at the close of business on July 22, 2016 will be entitled to vote at the Annual Meeting. On that date, 329,251,752 shares of Class A Stock and 1,348,661,333 shares of Class B Stock were issued and outstanding. Neither class of Common Stock has cumulative voting rights. +Each share of Class A Stock and each share of Class B Stock is entitled to one vote on every matter submitted to the shareholders at the Annual Meeting. +A majority of the votes entitled to be cast on Proposal 1, the election of directors, by each of Class A Stock and Class B Stock separately constitutes a quorum of Class A Stock and Class B Stock, respectively, for action on Proposal 1. The holders of Class A Stock and the holders of Class B Stock will vote separately on Proposal 1. Holders of Class B Stock are currently entitled to elect 25 percent of the total Board, rounded up to the next whole number. Holders of Class A Stock are currently entitled to elect the remaining directors. Under this formula, holders of Class B Stock, voting separately, will elect three directors, and holders of Class A Stock, voting separately, will elect nine directors. Under Oregon law, if a quorum of each class of common stock is present at the meeting, the three director nominees who receive the greatest number of votes cast by holders of Class B Stock and the nine director nominees who receive the greatest number of votes cast by holders of Class A Stock will be elected directors. +A majority of the votes entitled to be cast on Proposals 2, 3, 4 and 5 by both Class A Stock and Class B Stock together constitutes a quorum for action on those proposals. Holders of Class A Stock and holders of Class B Stock will vote together as one class on Proposal 2, 3, 4 and 5. If a quorum is present at the meeting, Proposals 2, 3, 4 and 5 will be approved if the votes cast in favor of the proposal exceeds the votes cast against the proposal. +Abstentions and broker non-votes are counted for purposes of determining whether a quorum exists. Abstentions and broker non-votes are not included as votes cast and will not affect the outcome of any of the proposals. Broker non-votes occur when a person holding shares in street name, such as through a brokerage firm, does not provide instructions as to how to vote those shares and the broker does not then vote those shares on the shareholder’s behalf. +NIKE, INC. Ÿ 2016 Notice of Annual Meeting 1 +CORPORATE GOVERNANCE +Board of Directors +CORPORATE GOVERNANCE +Board of Directors +The Board of Directors is currently composed of nine independent directors and three directors who are not independent under the New York Stock Exchange (the “NYSE”) listing rules. During fiscal 2016, there were five meetings of the Board and all directors attended at least 75 percent of the total number of meetings of the Board and committees on which he or she served. The Company encourages all directors to attend each annual meeting of shareholders, and all directors serving at the time of the 2015 Annual Meeting attended the 2015 Annual Meeting. +Board Committees +The Board’s current standing committees are an Audit Committee, a Compensation Committee, a Nominating and Corporate Governance Committee, a Finance Committee, a Corporate Responsibility and Sustainability Committee, and an Executive Committee. The Board may also appoint other committees from time to time. Each standing committee has a written charter; all such charters, as well as the Company’s corporate governance guidelines, are available at the Company’s corporate website (http://investors.nike.com ) and will be provided in print to any shareholder who submits a request in writing to NIKE Investor Relations, One Bowerman Drive, Beaverton, Oregon 97005-6453. +The Executive Committee is authorized to act on behalf of the Board on all corporate actions for which applicable law does not require participation by the full Board. In practice, the Executive Committee acts in place of the full Board only when emergency issues or scheduling conflicts make it difficult or impracticable to assemble the full Board. All actions taken by the Executive Committee must be reported at the next Board meeting. The Executive Committee held no formal meetings during fiscal 2016, but took action pursuant to written consent resolutions. +The Audit Committee is responsible for the engagement or discharge of the independent registered public accountants, reviews and approves services provided by the independent registered public accountants, and reviews with the independent registered public accountants the scope and results of their annual audit of the Company’s consolidated financial statements and any recommendations they may have. The Audit Committee also reviews the Company’s procedures with respect to maintaining books and records, the adequacy and implementation of internal auditing, accounting, disclosure, and financial controls, the Company’s policies concerning financial reporting and business practices, and the Company’s information security and data protection procedures. The Board has determined that each member of the Audit Committee meets all applicable independence and financial literacy requirements under the NYSE listing standards and applicable regulations adopted by the U.S. Securities and Exchange Commission (the “SEC”). The Board has also determined that Mr. Graf is an “audit committee financial expert” as defined in regulations adopted by the SEC. +The Compensation Committee evaluates the performance of the Chief Executive Officer (“CEO”), oversees the performance evaluations of our other Named Executive Officers, and recommends their compensation for approval by the independent members of the Board (other than the incentive compensation approved solely by the Compensation Committee as described below). The Compensation Committee also grants equity incentive awards under the NIKE, Inc. Stock Incentive Plan, and determines targets and awards under the NIKE, Inc. Executive Performance Sharing Plan and the NIKE, Inc. Long-Term Incentive Plan. The Committee also makes recommendations to the Board regarding other executive incentive compensation arrangements and profit sharing plan contributions. The Board has determined that each member of the Compensation Committee meets all applicable independence requirements under the NYSE listing standards. +The Nominating and Corporate Governance Committee identifies individuals qualified to become Board members, recommends director nominees for election at each annual shareholder meeting, and develops and recommends corporate governance guidelines and standards for business conduct and ethics. The Committee also oversees the annual self-evaluations of the Board and its committees and makes recommendations to the Board concerning the structure and membership of the other Board committees. The Board has determined that each member of the Nominating and Corporate Governance Committee meets all applicable independence requirements under the NYSE listing standards. +The Finance Committee reviews the Company’s annual operating budget and recommends approval to the Board, considers long-term financing options, long-range tax, financial regulatory and foreign currency issues facing the Company, and management recommendations concerning capital deployment strategy, major capital expenditures and material acquisitions or divestitures. +The Corporate Responsibility and Sustainability Committee reviews significant strategies, activities and policies regarding sustainability (including labor practices), community impact and charitable activities, and makes recommendations to the Board. +The table below provides information regarding the current membership of each standing Board committee and meetings held during fiscal 2016: +NIKE, INC. Ÿ 2016 Notice of Annual Meeting 2 +CORPORATE GOVERNANCE +Board of Directors +Director Name +Audit +Compensation +Nominating and +Corporate Governance +Corporate +Responsibility and Sustainability +Finance +Executive +Elizabeth J. Comstock +ü +ü +John G. Connors +ü +Chair +Timothy D. Cook +Chair +ü +John J. Donahoe +ü +ü +ü +Alan B. Graf, Jr. +Chair +ü +Philip H. Knight* +Chair +Travis A. Knight +ü +ü +John C. Lechleiter +ü +Chair +ü +Mark G. Parker** +ü +Michelle A. Peluso +ü +ü +Johnathan A. Rodgers +ü +ü +John R. Thompson, Jr. +ü +Phyllis M. Wise +ü +Chair +Meetings in Fiscal 2016 +11 +6 +3 +4 +5 +- +* Effective June 30, 2016, Mr. Philip Knight retired from the Board. +** Effective June 30, 2016, Mr. Parker was appointed Chairman of the Board and Chair of the Executive Committee. +Director Independence +Pursuant to NYSE rules, in order for a director to qualify as “independent,” the Board of Directors must affirmatively determine that the director has no material relationship with the Company that would impair the director’s independence. The Board affirmatively determined that commercial or charitable relationships below the following thresholds will not be considered material relationships that impair a director’s independence: (i) if a NIKE director or immediate family member is an executive officer of another company that does business with NIKE and the annual sales to, or purchases from, NIKE are less than one percent of the annual revenues of the other company; and (ii) if a NIKE director or immediate family member serves as an officer, director or trustee of a charitable organization, and NIKE’s contributions to the organization are less than one percent of that organization’s total annual charitable receipts. After applying this categorical standard, the Board has determined that the following directors who served during fiscal 2016 - Elizabeth J. Comstock, John G. Connors, Timothy D. Cook, John J. Donahoe II, Alan B. Graf, Jr., Douglas G. Houser, John C. Lechleiter, Michelle A. Peluso, Johnathan A. Rodgers, Orin C. Smith, and Phyllis M. Wise - have no material relationship with the Company and, therefore, are independent. Messrs. Philip Knight, Travis Knight, Parker, and Thompson were not independent pursuant to the NYSE rules. Messrs. Philip Knight and Parker were not independent pursuant to the NYSE rules because they were both executive officers of the Company during fiscal 2016. Mr. Travis Knight was not independent pursuant to NYSE rules because he is the son of NIKE’s co-founder and former Chairman of the Board, Mr. Philip Knight, who currently serves the Company as Chairman Emeritus. Mr. Thompson was not independent pursuant to NYSE rules because the Company has a contract with his son, John Thompson III, who is the head basketball coach at Georgetown University, to provide endorsement and consulting services to the Company. The compensation paid to Messrs. Philip Knight and John Thompson III is described under “Transactions with Related Persons” below. +Director Nominations +The Nominating and Corporate Governance Committee identifies potential director candidates through a variety of means, including recommendations from members of the Committee or the Board, suggestions from Company management, and shareholder recommendations. The Committee also may, in its discretion, engage director search firms to identify candidates. Shareholders may recommend director candidates for consideration by the Nominating and Corporate Governance Committee by submitting a written recommendation to the Committee, c/o John F. Coburn III, Vice President and Corporate Secretary, NIKE, Inc., One Bowerman Drive, Beaverton, Oregon 97005-6453. The recommendation should include the candidate’s name, age, qualifications (including principal occupation and employment history), and written consent to be named as a nominee in the Company’s proxy statement and to serve as a director, if elected. +NIKE, INC. Ÿ 2016 Notice of Annual Meeting 3 +CORPORATE GOVERNANCE +Board of Directors +The Board of Directors has adopted qualification standards for the selection of non-management nominees for director, which can be found at our corporate website: http://investors.nike.com . As provided in these standards and the Company’s Corporate Governance Guidelines, nominees for director are selected on the basis of, among other things, distinguished business experience or other non-business achievements; education; significant knowledge of international business, finance, marketing, technology, law, or other fields which are complementary to, and balance the knowledge of, other Board members; a desire to represent the interests of all shareholders; independence; character; ethics; good judgment; diversity; and ability to devote substantial time to discharge Board responsibilities. +The Nominating and Corporate Governance Committee identifies qualified potential candidates without regard to their age, gender, race, national origin, sexual orientation, or religion. While the Board has no policy regarding Board member diversity, the Nominating and Corporate Governance Committee considers and discusses diversity in selecting director nominees and in the re-nomination of an incumbent director. The Committee views diversity broadly, including gender, ethnicity, differences of viewpoint, geographic location, skills, education, and professional and industry experience, among others. The Board believes that a variety and balance of perspectives on the Board can result in more thoughtful deliberations. +In considering the re-nomination of an incumbent director, the Nominating and Corporate Governance Committee reviews the director’s overall service to the Company during his or her term, including the number of meetings attended, level of participation and quality of performance, as well as any special skills, experience or diversity that such director brings to the Board. All potential new director candidates, whether recommended by shareholders or identified by other means, are initially screened by the Chair of the Nominating and Corporate Governance Committee, who may seek additional information about the background and qualifications of the candidate, and who may determine that a candidate does not have qualifications that merit further consideration by the full Committee. With respect to new director candidates who pass the initial screening, the Nominating and Corporate Governance Committee meets to discuss and consider each candidate’s qualifications and potential contributions to the Board, and determines by majority vote whether to recommend such candidates to the Board. The final decision to either appoint a candidate to fill a vacancy between annual meetings or include a candidate on the slate of nominees proposed at an Annual Meeting is made by the Board. +It is the general policy of the Board that directors first elected after the fiscal year ended May 31, 1993 will not stand for re-election after reaching the age of 72. +Shareholder Communications with Directors +Shareholders or interested parties desiring to communicate directly with the Board of Directors, with the non-management directors or with any individual director may do so in writing addressed to the intended recipient or recipients, c/o John F. Coburn III, Vice President and Corporate Secretary, NIKE, Inc., One Bowerman Drive, Beaverton, Oregon 97005-6453. All such communications will be reviewed, compiled as necessary, and then forwarded to the designated recipient or recipients in a timely manner. +Board Leadership Structure +NIKE’s governance documents provide the Board of Directors with flexibility to select the appropriate leadership structure of the Company. In determining the leadership structure, the Board considers many factors, including the specific needs of the business, fulfilling the duties of the Board, and the best interests of the Company’s shareholders. In 2004, the Board chose to separate the position of Chairman of the Board from the position of President and CEO, although this was not a permanent policy of the Board. On June 30, 2016, the Company announced that the Chairman, Mr. Philip Knight, retired from the Board and that the Board appointed Mr. Mark Parker, the Company’s President and CEO since 2006, to the additional position of Chairman of the Board. As Chairman, he presides over meetings of the Board and shareholders. As President and CEO, Mr. Parker is in charge of the general supervision, direction, and control of the business and affairs of the Company, subject to the overall direction and supervision of the Board and its committees. This is the completion of the planned transition that was initiated over a year ago. +Given Mr. Philip Knight’s retirement and, as the Company’s President and CEO since 2006, Mr. Parker’s unique knowledge of the Company’s business, particular experience, talent and tenure, the Board believes this leadership structure is appropriate for the Company. This structure permits Mr. Parker, by serving as both Chairman and CEO, to draw on his knowledge of the operations of the business, industry developments, customers, shareholders and employees in providing leadership on the broad strategic issues considered by the Board. +The Nominating and Corporate Governance Committee has determined that given the appointment of Mr. Parker as Chairman in addition to his positions of President and CEO, a lead independent director should be appointed to ensure strong independent leadership of the Board. On June 30, 2016, the Company announced that the Board appointed Mr. Tim Cook, CEO of Apple, Inc., as Lead Independent Director of the Board to serve for a term of three years. As Lead Independent Director, Mr. Cook will: +• +serve as a liaison between the Chairman and the independent directors; +• +approve the meeting agendas for the Board; +• +advise the Chairman/CEO regarding the sufficiency, quality, quantity and timeliness of information provided to the Board; +• +ensure that meeting schedules permit sufficient time for discussion of all agenda items; +• +be available for consultation and direct communication with major shareholders, if requested; +• +preside at meetings of the Board at which the Chairman/CEO is not present, including executive sessions; and +• +perform other duties specified in the Lead Independent Director Charter. +The chairs of Board committees also play an active role in the leadership structure of the Board. The Nominating and Corporate Governance Committee and the Board endeavor to select independent committee chairs who will provide strong leadership to guide the important work of the Board committees. Committee chairs work with the Company’s senior executives to ensure the committees are discussing the key strategic risks and opportunities for the Company. In the absence of a lead independent director, a presiding director is appointed to chair executive sessions of non-management directors (consisting of all directors other than Mr. Parker). The position of presiding director is rotated among the chairs of the various Board committees, other than the Executive Committee. Executive sessions are regularly scheduled and held at least once each year. +NIKE, INC. Ÿ 2016 Notice of Annual Meeting 4 +CORPORATE GOVERNANCE +Board of Directors +The Board also believes that it will benefit from the valuable experience and insights of the former Chairman of the Board. Accordingly, the Board has appointed Mr. Philip Knight to the position of Chairman Emeritus, with a standing invitation to attend meetings of the Board and its committees as a non-voting observer. +For all of these reasons, the Board believes this leadership structure is optimal. +The Board’s Role in Risk Oversight +While the Company’s management is responsible for day-to-day management of the various risks facing the Company, the Board of Directors takes an active role in the oversight of the management of critical business risks. The Board does not view risk in isolation. Risks are considered in virtually every business decision and as part of NIKE’s business strategy. The Board recognizes it is neither possible nor prudent to eliminate all risk. Purposeful and appropriate risk-taking is essential for the Company to be competitive on a global basis and to achieve its strategic objectives. +The Board implements its risk oversight function both as a whole and through committees, which play a significant role in carrying out risk oversight. While the Audit Committee is responsible for oversight of management’s risk management policies, oversight responsibility for particular areas of risk is allocated among the Board committees according to the committee’s area of responsibility as reflected in the committee charters. In particular: +• +The Audit Committee oversees risks related to the Company’s financial statements, the financial reporting process, accounting, legal matters, information security, and data protection. The Committee oversees the internal audit function, reviews a risk-based plan of internal audits, and reviews a risk-based integrated audit of internal controls over financial reporting. The Committee meets separately with each of the Vice President of Corporate Audit, representatives of the independent registered public accountants, and senior management. +• +The Compensation Committee oversees risks and rewards associated with the Company’s compensation philosophy and programs, management succession plans, and executive development. +• +The Finance Committee oversees financial matters and risks relating to budgeting, investments, access to capital, capital deployment, acquisitions and divestitures, currency risk and hedging programs, and significant capital projects. +• +The Corporate Responsibility and Sustainability Committee oversees issues that involve reputational risk to the Company, including community engagement, and sustainability innovation relating to the Company’s products, its supply chain, including labor practices, and the environment. +• +The Nominating and Corporate Governance Committee oversees risks associated with company governance, including NIKE’s code of business conduct and its ethics, compliance programs, and the structure and performance of the Board and its committees. +Each committee chair works with the senior executive assigned to assist the committee to develop agendas for the year and for each meeting, paying particular attention to areas of business risk identified by management, Board members, internal and external auditors, and in their committee charter, and to schedule agenda topics, presentations, and discussions periodically regarding business risks within their area of responsibility. At meetings, the committees discuss areas of business risk, the potential impact, and management’s initiatives to manage business risk, often within the context of important business decisions. Through this process key business risk areas are reviewed at appropriate times, with some topics reviewed on several occasions throughout the year. At every Board meeting each committee chair provides a report to the full Board outlining its discussions and actions, including those affecting the oversight of various risks. +The Company believes its leadership structure, discussed in detail above, supports the risk oversight function of the Board. Strong directors chair the various committees involved in risk oversight, there is open communication between management and directors, and all directors are involved in the risk oversight function. +Code of Business Conduct and Ethics +The NIKE Code of Ethics (“Ethics Code”) is available at the Company’s corporate website (http://investors.nike.com ) and will be provided in print without charge to any shareholder who submits a request in writing to NIKE Investor Relations, One Bowerman Drive, Beaverton, Oregon 97005-6453. The Ethics Code applies to all of the Company’s employees and directors, including our chief executive officer, senior financial officers, and all other officers. The Ethics Code provides that any waiver of the Ethics Code may be made only by the Board. Any such waiver in favor of a director or executive officer will be publicly disclosed. The Company plans to disclose amendments to, and waivers from, the Ethics Code on the Company’s corporate website: http://investors.nike.com. +NIKE, INC. Ÿ 2016 Notice of Annual Meeting 5 +CORPORATE GOVERNANCE +PROPOSAL 1 +Proposal 1 +Election of Directors +A Board of 12 directors will be elected at the Annual Meeting. All of the nominees were elected at the 2015 annual meeting of shareholders. Directors will hold office until the next annual meeting of shareholders or until their successors are elected and qualified. +Mr. Alan B. Graf, Jr., Ms. Michelle A. Peluso, and Dr. Phyllis M. Wise are nominated by the Board of Directors for election by the holders of Class B Stock. The other nine nominees are nominated by the Board for election by the holders of Class A Stock. +Under Oregon law, if a quorum of each class of shareholders is present at the Annual Meeting, the nine director nominees who receive the greatest number of votes cast by holders of Class A Stock and the three director nominees who receive the greatest number of votes cast by holders of Class B Stock will be elected directors. Abstentions and broker non-votes will have no effect on the results of the vote. Unless otherwise instructed, proxy holders will vote the proxies they receive for the nominees listed below. If any nominee becomes unable to serve, the holders of the proxies may, in their discretion, vote the shares for a substitute nominee or nominees designated by the Board. +The Bylaws and the Corporate Governance Guidelines of the Company provide that any nominee for director in an uncontested election who receives a greater number of votes “withheld” from his or her election than votes “for” such election shall tender his or her resignation for consideration by the Nominating and Corporate Governance Committee. The Committee will recommend to the Board the action to be taken with respect to the resignation. The Board will publicly disclose its decision within 90 days of the certification of the election results. +Background information on the nominees as of July 22, 2016, including some of the attributes that led to their selection, appears below. The Nominating and Corporate Governance Committee has determined that each director meets the qualification standards described in the section entitled “Director Nominations” above. In addition, the Board firmly believes that the experience, attributes, and skills of any single director should not be viewed in isolation, but rather in the context of the experience, attributes, and skills that all director nominees bring to the Board as a whole, each of which contributes to the function of an effective Board. +Nominees for Election by Class A Shareholders +Elizabeth J. Comstock +Ms. Comstock, 55, a director since 2011, is Vice Chair of General Electric Company (“GE”). Ms. Comstock oversees new growth and innovation and leads the new energy company, Current, as well as GE Lighting, GE Ventures & Licensing and the sales and marketing functions. At GE, she was appointed Vice President, Communications, NBC News Communications in 1994, Senior Vice President, NBC Corporate Communications in 1996, Vice President of Corporate Communications in 1998, Corporate Vice President and Chief Marketing Officer in 2003, President, NBC Universal Integrated Media in 2006, and Senior Vice President and Chief Marketing Officer in 2008. Prior to joining GE in 1994, Ms. Comstock held a succession of positions at NBC, CBS, and Turner Broadcasting. Ms. Comstock is a trustee of the Smithsonian’s Cooper-Hewitt National Design Museum. Ms. Comstock was selected to serve on the Board because her broad experience in, and understanding of, media, marketing, and innovation aligns well with the Company’s business model, which involves a great deal of each. +John G. Connors +Mr. Connors, 57, a director since 2005, is a partner in Ignition Partners LLC, a Seattle-area venture capital firm. Mr. Connors served as Senior Vice President and Chief Financial Officer of Microsoft Corporation from December 1999 to May 2005. He joined Microsoft in 1989 and held various management positions, including Corporate Controller from 1994 to 1996, Chief Information Officer from 1996 to 1999, and Vice President, Worldwide Enterprise Group in 1999. Mr. Connors is currently a member of the board of directors of Splunk, Inc. and privately held companies Chef, Inc., Motif Investing, Inc., FiREapps, Inc., ICERTIS, Inc., Tempered Networks Inc., Azuqua, Inc., DataSphere Technologies, Inc., the Washington Policy Center, and the University of Washington Tyee Club. Mr. Connors was selected to serve on the Board because his experience and skills in accounting, financial leadership, venture capital, technology, and international operations enable him to make valuable contributions to NIKE’s Audit Committee and Finance Committee. +NIKE, INC. Ÿ 2016 Notice of Annual Meeting 6 +CORPORATE GOVERNANCE +Timothy D. Cook +Mr. Cook, 55, a director since 2005, is the Lead Independent Director of the Board of Directors of the Company and is the Chief Executive Officer of Apple, Inc. Mr. Cook joined Apple in March 1998 as Senior Vice President of Worldwide Operations and also served as its Executive Vice President, Worldwide Sales and Operations and Chief Operating Officer. Mr. Cook was Vice President, Corporate Materials for Compaq Computer Corporation from 1997 to 1998. Previous to his work at Compaq, Mr. Cook served in the positions of Senior Vice President Fulfillment and Chief Operating Officer of the Reseller Division at Intelligent Electronics from 1994 to 1997. Mr. Cook also worked for International Business Machines Corporation from 1983 to 1994, most recently as Director of North American Fulfillment. Mr. Cook is currently a member of the Board of Directors of the National Football Foundation and Apple, Inc. Mr. Cook was selected to serve on the Board because his operational executive experience and his knowledge of technology, marketing, and international business allow him to provide the Board with valuable perspectives and insights. +John J. Donahoe II +Mr. Donahoe, 56, a director since June 2014, is Chairman of PayPal Holdings, Inc. From 2008 through 2015, Mr. Donahoe served as President and Chief Executive Officer of eBay, Inc. (“eBay”), provider of the global eBay.com online marketplace and PayPal digital payments platform. Mr. Donahoe joined eBay in 2005 as President of eBay Marketplaces, responsible for eBay’s global e-Commerce businesses, and was appointed President and Chief Executive Officer in 2008. He has also served on eBay’s Board of Directors since 2008. Prior to joining eBay, Mr. Donahoe was the Chief Executive Officer and Worldwide Managing Director of Bain & Company from 1999 to 2005, and a Managing Director from 1992 to 1999. Mr. Donahoe also serves on the Board of Directors of Intel Corporation and is a member of the President’s Export Council. Mr. Donahoe was selected to serve on the Board because his experience in executive and financial management, strategic planning, branding, technology, and digital commerce, allow him to provide valued perspectives on each of these areas of the Company’s business. +Travis A. Knight +Mr. Knight, 42, a director since June 2015, is the President and Chief Executive Officer of the animation studio, LAIKA, LLC, which specializes in feature-length films. He has been involved in all principal creative and business decisions at LAIKA since its founding in 2003, serving in successive management positions as Lead Animator, Vice President of Animation, and then as President and Chief Executive Officer in 2009. Mr. Knight has served as Producer and Lead Animator on Academy Award-nominated feature-length films The Boxtrolls (2014) and ParaNorman (2012, for which he won an Annie Award for Outstanding Achievement in Character Animation), and Lead Animator for Coraline (2009). Prior to his work at LAIKA, Mr. Knight held various animation positions at Will Vinton Studios from 1998 to 2002, as a stop-motion animator for television series, commercials, and network promotions. He has been recognized for his work on the Emmy Award-winning stop-motion animated television series The PJs. Mr. Knight serves on the Board of Directors of LAIKA, LLC. He is the son of NIKE’s co-founder and former Chairman of the Board, Mr. Philip Knight, who is currently serves as Chairman Emeritus. In addition, Mr. Travis Knight has a significant role in the management of the Class A shares owned by Swoosh, LLC, strengthening the alignment of the Board with the interests of NIKE shareholders. +NIKE, INC. Ÿ 2016 Notice of Annual Meeting 7 +CORPORATE GOVERNANCE +PROPOSAL 1 +John C. Lechleiter +Dr. Lechleiter, 62, a director since 2009, is Chairman of the Board, President, and Chief Executive Officer of Eli Lilly and Company (“Lilly”). He has served as President and Chief Executive Officer since April 1, 2008. He has been a member of Lilly’s board of directors since 2005 and was named Chairman on January 1, 2009. Dr. Lechleiter began work at Lilly as a senior organic chemist in Lilly’s process research and development division in 1979 and became head of that department in 1982. He later held roles in project management, regulatory affairs, product development, and pharmaceutical operations. He was named President and Chief Operating Officer in 2005. He is a member of the American Chemical Society. He serves on the board of Pharmaceutical Research and Manufacturers of America. He also serves as Chairman of the U.S.-Japan Business Council and of United Way Worldwide, and on the boards of the Chemical Heritage Foundation, the Central Indiana Corporate Partnership, and Ford Motor Company. Dr. Lechleiter was selected to serve on the Board because his operational executive experience and his knowledge of science, marketing, management, and international business allow him to provide the Board with significant contributions in those strategic areas. +Mark G. Parker +Mr. Parker, 60, is Chairman of the Board of Directors of the Company, and has served as President and Chief Executive Officer and a director since 2006. He was named Chairman of the Board on June 30, 2016. He has been employed by NIKE since 1979 with primary responsibilities in product research, design and development, marketing, and brand management. Mr. Parker was appointed divisional Vice President in charge of product development in 1987, corporate Vice President in 1989, General Manager in 1993, Vice President of Global Footwear in 1998, and President of the NIKE Brand in 2001. He has extensive knowledge and experience regarding Company operations, sports marketing, manufacturing, research, design, development, and management, and is an effective leader of NIKE. His position as Chief Executive Officer makes his position as Chairman of the Board critical. +Johnathan A. Rodgers +Mr. Rodgers, 70, a director since 2006, is a retired broadcast and cable television executive. Mr. Rodgers retired as the founding President and Chief Executive Officer of TV One, LLC in July 2011. Prior to joining TV One, LLC in March 2003, Mr. Rodgers was President of the Discovery Networks from 1996 to 2003. Prior to his work at Discovery Communications, Mr. Rodgers had a 20-year career at CBS, Inc. where he held a variety of executive positions, including President, CBS Television Stations Division and CBS News Executive Producer. Mr. Rodgers is currently a member of the Board of Directors of Comcast Corporation. Mr. Rodgers previously served as a director of Procter & Gamble. Mr. Rodgers has been inducted into both the Advertising Hall of Fame and the Broadcasting and Cable Hall of Fame. Mr. Rodgers was selected to serve on the Board because his experience and knowledge in media, broadcasting, and telecommunications, his skills in executive leadership, and his knowledge of multicultural media allows him to provide valuable insights to the Board regarding corporate responsibility, diversity, compensation, and marketing. +NIKE, INC. Ÿ 2016 Notice of Annual Meeting 8 +CORPORATE GOVERNANCE +John R. Thompson, Jr. +Mr. Thompson, 74, a director since 1991, was head coach of the Georgetown University men’s basketball team from 1972 until 1998. Mr. Thompson was head coach of the 1988 United States Olympic basketball team. He hosted a sports radio talk show in Washington, D.C. for 13 years, and is a nationally broadcast sports analyst for Turner Network Television (TNT) and Dial Global, Inc. He serves as Assistant to the President of Georgetown University for Urban Affairs and he is a past President of the National Association of Basketball Coaches and presently serves on its Board of Governors. Mr. Thompson has honorary doctorate degrees from Wheeling Jesuit University, Georgetown University, University of the District of Columbia, and St. Peter’s College. Mr. Thompson was selected to serve on the Board because his extensive experience and knowledge of education, college and professional sports, media, broadcasting, and knowledge of urban issues allow him to provide valuable insights to the Board regarding sports marketing, corporate responsibility and diversity. +Board Recommendation +The Board of Directors recommends that the Class A Shareholders vote FOR the election of nominees above to the Board of Directors. +NIKE, INC. Ÿ 2016 Notice of Annual Meeting 9 +CORPORATE GOVERNANCE +PROPOSAL 1 +Nominees for Election by Class B Shareholders +Alan B. Graf, Jr. +Mr. Graf, 62, a director since 2002, is the Executive Vice President and Chief Financial Officer of FedEx Corporation, a position he has held since 1998, and is a member of FedEx Corporation’s Executive Committee. Mr. Graf joined FedEx Corporation in 1980 and was Senior Vice President and Chief Financial Officer for FedEx Express, FedEx’s predecessor, from 1991 to 1998. He previously served on the board of directors of Kimball International Inc., Storage USA, Inc., and Arkwright Mutual Insurance Co., and he is currently a director of Mid-America Apartment Communities, Inc., Methodist Le Bonheur Healthcare, and the Indiana University Foundation. Mr. Graf was selected to serve on the Board because his experience and skills in auditing, accounting, financial management, executive leadership, and international operations enable him to effectively lead NIKE’s Audit Committee, serving as its Chair and financial expert, and the Nominating and Corporate Governance Committee. +Michelle A. Peluso +Ms. Peluso, 44, a director since April 2014, is a Venture Partner at Technology Crossover Ventures. She served as Chief Executive Officer of online shopping destination Gilt Groupe, Inc. (“Gilt”) from 2013 until its sale to Hudson’s Bay Company in February 2016, and was on Gilt’s board of directors from 2009 to 2016. Prior to joining Gilt in 2013, she served as Global Consumer Chief Marketing and Internet Officer of Citigroup Inc. from 2009 to 2013, and from 2002 to 2009, Ms. Peluso held senior management positions at Travelocity.com LP, being appointed Chief Operating Officer in 2003, and President and Chief Executive Officer in December 2003. Prior to joining Travelocity, in 1999 she founded Site59, an online travel site, serving as its Chief Executive Officer until its acquisition by Travelocity in 2002. Ms. Peluso was a director of OpenTable, Inc. from 2008 to 2012 and is a director of the nonprofit Technosense. Ms. Peluso was selected to serve on the Board because of her extensive experience in, and understanding of, online retail, marketing, branding, and digital connections with consumers, which are integral components of the Company’s growth strategy. +Phyllis M. Wise +Dr. Wise, 71, a director since 2009, is currently a faculty member at the University of Illinois, at Urbana-Champaign, where she was Chancellor from 2011-2015. She was appointed assistant professor at the University of Maryland School of Medicine in 1976. Dr. Wise became a professor and chair of the department of physiology at the University of Kentucky in 1993, and was appointed dean of the division of biological sciences and distinguished professor of neurobiology at the University of California-Davis in 2002. In 2005, she was appointed Provost and Vice President for Academic Affairs at the University of Washington, and served as Provost and Executive Vice President from 2007 to 2010, and interim President until July 2011. During her tenure, she led the establishment of the College of the Environment, the mission of which is to provide solutions to developing a sustainable healthy environment through research and teaching. Dr. Wise has a doctorate in zoology from the University of Michigan and an honorary doctorate from Swarthmore College and the University of Birmingham (UK), and she is an elected member of the Institute of Medicine and the American Academy of Arts and Sciences. Dr. Wise is currently a member of the Board of Directors of RAND Health and the Robert Wood Johnson Foundation Board of Directors, as well as the First Busey Bank Board of Directors. Dr. Wise was selected to serve on the Board because her extensive experience in medical science, health, higher education, and societal issues allow her to provide valuable contributions to the Board’s deliberations of strategic importance. +NIKE, INC. Ÿ 2016 Notice of Annual Meeting 10 +CORPORATE GOVERNANCE +Board Recommendation +The Board of Directors recommends that the Class B Shareholders vote FOR the election of nominees above to the Board of Directors. +Director Compensation for Fiscal 2016 +Name +Fees Earned or Paid in Cash ($) +Equity Award (1)(2) ($) +Change in Pension Value and +Nonqualified Deferred Compensation +Earnings (3) ($) +All Other +Compensation (4) +($) +Total +($) +Elizabeth J. Comstock +85,000 +160,110 +— +21,982 +267,092 +John G. Connors +97,033 +160,110 +— +21,982 +279,125 +Timothy D. Cook +95,000 +160,110 +— +21,982 +277,092 +John J. Donahoe II +88,516 +160,110 +— +21,982 +270,608 +Alan B. Graf, Jr. +107,967 +160,110 +— +1,982 +270,059 +Douglas G. Houser +25,220 +— +304 +521,093 +546,617 +Travis A. Knight (5) +78,302 +320,196 +— +3,346 +401,844 +John C. Lechleiter +92,033 +160,110 +— +21,982 +274,125 +Michelle A. Peluso +90,000 +160,110 +— +19,982 +270,092 +Johnathan A. Rodgers +85,000 +160,110 +— +21,982 +267,092 +Orin C. Smith +29,671 +— +— +521,207 +550,878 +John R. Thompson, Jr. +67,000 +160,110 +— +44,316 +271,426 +Phyllis M. Wise +95,000 +160,110 +— +21,982 +277,092 +(1) +Represents the grant date fair value of restricted stock awards granted in fiscal 2016 computed in accordance with accounting guidance applicable to stock-based compensation. The grant date fair value is based on the closing market price of our Class B Stock on the grant date. As of May 31, 2016, non-employee directors held the following numbers of shares of unvested restricted stock: Ms. Comstock, 2,778; Mr. Connors, 2,778; Mr. Cook, 2,778; Mr. Donahoe, 2,778; Mr. Graf, 2,778; Mr. Travis Knight, 5,742; Dr. Lechleiter, 2,778; Ms. Peluso, 2,778; Mr. Rodgers, 2,778; Mr. Thompson, 2,778; and Dr. Wise, 2,778. +(2) +As of May 31, 2016, non-employee directors held outstanding options for the following numbers of shares of our Class B Stock: Ms. Comstock, 90,000; Mr. Connors, 90,000; Mr. Cook, 90,000; Dr. Lechleiter, 126,000; Mr. Rodgers, 178,000; Mr. Smith, 90,000; Mr. Thompson, 14,000; and Dr. Wise, 110,000. +(3) +Represents above-market earnings credited during fiscal 2016 to the account of Mr. Houser under our prior Executive Deferred Compensation Plan adopted in 1983 (the “1983 DCP”). While deferrals under the 1983 DCP were discontinued in 1990, earnings have continued to accrue on the 1983 DCP account balances. Under the terms of the 1983 DCP, Mr. Houser received a guaranteed return equal to the current monthly rate of Moody’s seasoned corporate bonds index, plus 4%, which paid an average interest rate of 8.54% in fiscal 2016. +(4) +Includes medical and life insurance premiums paid by us of $22,334 for Mr. Thompson. Also includes matched contributions to charities in the following amounts: Ms. Comstock, Messrs. Connors, Cook, Donahoe, Houser, Rodgers, Smith, and Thompson, and Drs. Wise and Lechleiter, $20,000 and Ms. Peluso, $18,000. Also includes the annual costs of payments to charitable institutions in a director’s name upon retirement from the Board in the following amounts: Messrs. Houser and Smith, $500,000. Also includes dividends paid on restricted stock in the following amounts: $1,982 for Mses. Comstock and Peluso, Messrs. Connors, Cook, Donahoe, Graf, Rodgers, and Thompson, and Drs. Lechleiter and Wise; $3,346 for Mr. Travis Knight; and $1,093 for Messrs. Houser and Smith. +(5) +Mr. Travis Knight was appointed to the Board of Directors on June 30, 2015. In addition to the items described above, his compensation includes an initial restricted stock award valued at $160,086. +Director Fees and Arrangements +Under our standard director compensation program in effect for fiscal 2016, non-employee directors annually receive: +• +An annual retainer of $85,000, paid quarterly. +• +A restricted stock award valued at $160,000 on the date of grant, generally, the date of each annual meeting of shareholders. The restricted stock award is subject to forfeiture in the event that service as a director terminates prior to the next annual meeting. +• +For chairs of board committees (other than the Executive Committee), an annual retainer of $10,000 for each committee chaired ($15,000 for the chair of the Audit Committee), paid quarterly. +• +For Audit Committee members, an additional annual retainer of $5,000 per year, paid quarterly. +• +Payment or reimbursement of travel and other expenses incurred in attending board meetings. +NIKE, INC. Ÿ 2016 Notice of Annual Meeting 11 +CORPORATE GOVERNANCE +PROPOSAL 1 +• +Matching charitable contributions under the NIKE Matching Gift Program, under which directors are eligible to contribute to qualified charitable organizations and we provide a matching contribution to the charities in an equal amount, up to $20,000 in the aggregate for each director annually. +Mses. Comstock and Peluso, Messrs. Connors, Cook, Donahoe, Graf, Travis Knight, and Rodgers, and Drs. Lechleiter and Wise participate in our standard director compensation program. +Effective June 1, 2016, we changed the standard director compensation program for fiscal 2017 by increasing the annual retainer to $90,000 per year, increasing the value of the restricted stock award to $165,000 on the date of grant, increasing the value of the restricted stock award to $165,000 on the date of grant for newly appointed non-employee directors upon election to the Board, increasing the annual retainer for chairs of board committees (other than the Executive Committee and Audit Committee) to $15,000 each, and increasing the annual retainer for the chair of the Audit Committee to $20,000. The Lead Independent Director shall receive an annual retainer of $25,000. We made these changes to our director compensation program to maintain the competitiveness of the Company’s director compensation program and to reinforce our directors’ ability to meet our stock ownership guidelines described below. +Mr. Thompson does not participate in our standard director compensation program. Pursuant to his election made in fiscal 2000, Mr. Thompson receives an annual retainer of $67,000 per year (instead of the $85,000 annual retainer fee paid under our standard program). Pursuant to his election, Mr. Thompson also receives medical insurance and $500,000 of life insurance coverage paid for by the Company. Additionally, on the date of each annual meeting of shareholders, Mr. Thompson receives an annual restricted stock award valued at $160,000 on the date of grant on the same terms as apply to the restricted stock awards granted pursuant to our standard program. Effective June 1, 2016, Mr. Thompson will receive an annual retainer of $72,000. +Mr. Philip Knight, as the former Chairman of our Board of Directors, was one of our executive officers, but was not a Named Executive Officer during fiscal 2016. He did not receive any additional compensation for services provided as a director in fiscal 2016. As announced on June 30, 2016, Mr. Philip Knight retired from the Board of Directors. Effective immediately upon his retirement, the Board has appointed him to the employed position of Chairman Emeritus, which provides a standing invitation for him to attend meetings of the Board and its committees as a non-voting observer. Pursuant to serving as the Chairman Emeritus, Mr. Knight will receive medical and dental insurance coverage available to employees and will receive an annual salary of $500,000. +Stock Ownership Guidelines for Directors +On June 20, 2013, the Board of Directors adopted stock ownership guidelines for all non-management directors. Under these guidelines, directors are required to hold NIKE stock valued at five times their annual cash retainer. Directors elected prior to June 20, 2013 are required to attain these ownership levels by June 20, 2018 and new directors within five years of their election to the Board. +Director Participation in Deferred Compensation Plan +Under our Deferred Compensation Plan, non-employee directors may elect in advance to defer up to 100 percent of the director fees paid by us. For a description of the plan, see “Non-Qualified Deferred Compensation in Fiscal 2016” below. In addition, in fiscal 2000, Mr. Thompson received credits to a fully vested NIKE stock account under the Deferred Compensation Plan in exchange for his waiver of rights to future payments under a former non-employee director retirement program. The Class B Stock credited to Mr. Thompson’s account is distributed to him upon his retirement from the Board and the account is credited with quarterly dividends until distributed. +NIKE, INC. Ÿ 2016 Notice of Annual Meeting 12 +CORPORATE GOVERNANCE +Stock Holdings of Certain Owners and Management +The following table sets forth the number of shares of each class of NIKE securities beneficially owned, as of June 30, 2016, after giving effect to any transactions that occurred on such date, by (i) each person known to the Company to be the beneficial owner of more than 5 percent of any class of the Company’s securities, (ii) each of the directors and nominees for director, (iii) each executive officer listed in the Summary Compensation Table (“Named Executive Officers”), and (iv) all nominees, Named Executive Officers, and other executive officers as a group. Because Class A Stock is convertible into Class B Stock on a share-for-share basis, each beneficial owner of Class A Stock is deemed by the SEC to be a beneficial owner of the same number of shares of Class B Stock. Therefore, in indicating a person’s beneficial ownership of shares of Class B Stock in the table, it has been assumed that such person has converted into Class B Stock all shares of Class A Stock of which such person is a beneficial owner. For these reasons the table contains substantial duplications in the numbers of shares and percentages of Class A and Class B Stock shown for Swoosh, LLC and the Travis A. Knight 2009 Irrevocable Trust II. In addition, unless otherwise indicated, all persons named below can be reached at c/o John F. Coburn III, Vice President and Corporate Secretary, NIKE, Inc., One Bowerman Drive, Beaverton, Oregon 97005-6453. +Title of Class +Shares Beneficially Owned (1) +Percent of Class (2) +Elizabeth J. Comstock +Class B +96,682 +(3) +— +John G. Connors +Class B +122,552 +(3) +— +Timothy D. Cook +Class B +102,682 +(3) +— +John J. Donahoe II +Class B +10,914 +— +Alan B. Graf, Jr +Class B +189,634 +(3) +— +Travis A. Knight +Class B +12,142 +(5) +— +John C. Lechleiter +Class B +148,682 +(3) +— +Mark G. Parker (6) +Class B +4,938,660 +(3)(7) +0.4 +% +Michelle A. Peluso +Class B +11,018 +— +Johnathan A. Rodgers +Class B +184,682 +(3) +— +John R. Thompson, Jr +Class B +85,030 +(3)(4) +— +Phyllis M. Wise +Class B +116,682 +(3) +— +Andrew Campion (6) +Class B +450,228 +(3)(7) +— +Donald W. Blair (6) +Class B +995,865 +(3)(7) +0.1 +% +Trevor A. Edwards (6) +Class B +1,813,246 +(3)(7) +0.1 +% +Eric D. Sprunk (6) +Class B +886,082 +(3)(7) +0.1 +% +Jeanne P. Jackson (6) +Class B +717,098 +(3)(7) +0.1 +% +Sojitz Corporation of America +1211 S.W. 5th Ave, Pacwest Center, Ste. 2220, Portland, OR 97204 +Preferred (8) +300,000 +100.0 +% +Swoosh, LLC +Class A +257,000,000 +(9) +78.1 +% +22990 NW Bennett Street, Hillsboro, OR 97124 +Class B +257,000,000 +16.0 +% +Travis A. Knight 2009 Irrevocable Trust II +Class A +38,656,369 +(10) +11.7 +% +22990 NW Bennett Street, Hillsboro, OR 97124 +Class B +38,656,369 +(10) +2.8 +% +The Vanguard Group +100 Vanguard Blvd., Malvern, PA 19355 +Class B +85,903,718 +(11) +6.4 +% +FMR LLC +245 Summer Street, Boston, MA 02210 +Class B +83,582,120 +(12) +6.2 +% +BlackRock, Inc. +40 East 57th Street, New York, NY 10022 +Class B +79,242,404 +(13) +5.9 +% +All directors and executive officers as a group (22 persons) +Class B +52,234,047 +(3) +3.9 +% +(1) +A person is considered to beneficially own any shares: (a) over which the person exercises sole or shared voting or investment power, or (b) of which the person has the right to acquire beneficial ownership at any time within 60 days (such as through conversion of securities or exercise of stock options). Unless otherwise indicated, voting and investment power relating to the above shares is exercised solely by the beneficial owner or shared by the owner and the owner’s spouse or children. +(2) +Omitted if less than 0.1 percent. +(3) +These amounts include the right to acquire, pursuant to the exercise of stock options, within 60 days after June 30, 2016, the following numbers of shares: 90,000 shares for Ms. Comstock, 90,000 shares for Mr. Connors, 90,000 shares for Mr. Cook, 126,000 shares for Dr. Lechleiter, 4,034,300 shares for Mr. Parker, 178,000 shares for Mr. Rodgers, 14,000 shares for Mr. Thompson, 110,000 shares for Dr. Wise, 428,000 shares for Mr. Campion, 827,500 shares for Mr. Blair, 1,477,500 shares for Mr. Edwards, 848,540 shares for Mr. Sprunk, 670,000 shares for Ms. Jackson, and 11,403,340 shares for the executive officer and director group. +(4) +Includes shares credited to accounts under the NIKE, Inc. Deferred Compensation Plan in the following amounts: 32,348 for Mr. Thompson. +(5) +Mr. Knight is the Trustee of the Trust (as defined in footnote (10) below) and he and members of his immediate family are among the beneficiaries of the Trust. Mr. Knight disclaims beneficial ownership of the Companies’ securities held directly and indirectly by the Trust, including all shares held by Subsidiary and Indirect Sub (each as defined in footnote (10) below) except to the extent of his pecuniary interest therein. On June +NIKE, INC. Ÿ 2016 Notice of Annual Meeting 13 +CORPORATE GOVERNANCE +PROPOSAL 1 +30, 2016, Subsidiary acquired all of the voting units (“Class X Units”) in Swoosh, LLC. Mr. Knight disclaims beneficial ownership of all securities held by Swoosh, LLC. +(6) +Named executive officer listed in the Summary Compensation Table. +(7) +Includes shares held in accounts under the NIKE, Inc. 401(k) and Profit Sharing Plan for Messrs. Parker, Edwards, and Ms. Jackson in the amounts of 34,874, 18,435 and 1,703 shares, respectively. +(8) +Preferred Stock does not have general voting rights except as provided by law, and under certain circumstances as provided in the Company’s Restated Articles of Incorporation, as amended. +(9) +Information provided as of July 1, 2016 in Schedule 13D filed by the shareholder. +(10) +Includes 19,513,989 shares held directly by the Travis A. Knight 2009 Irrevocable Trust II (the “Trust”). This number also includes 19,142,380 shares the Trust contributed to a wholly-owned subsidiary (“Subsidiary”), which Subsidiary then contributed to its wholly-owned subsidiary (“Indirect Sub”). +(11) +Information provided as of February 10, 2016 in Schedule 13G filed by the shareholder. +(12) +Information provided as of February 12, 2016 in Schedule 13G filed by the shareholder. +(13) +Information provided as of January 22, 2016 in Schedule 13G filed by the shareholder. +Section 16(a) Beneficial Ownership Reporting Compliance +Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s directors and executive officers, and persons who own more than 10 percent of a registered class of the Company’s equity securities, to file with the SEC and the NYSE initial reports of ownership and reports of changes in ownership of Common Stock and other equity securities of the Company. Officers, directors and greater than 10 percent shareholders are required by the regulations of the SEC to furnish the Company with copies of all Section 16(a) forms they file. To the Company’s knowledge, based solely on review of the copies of such reports furnished to the Company and written representations that no other reports were required, during fiscal 2016 all Section 16(a) filing requirements applicable to its officers, directors and greater than 10 percent beneficial owners were complied with. +Transactions with Related Persons +Mr. Howard S. Slusher, the father of John Slusher, Executive Vice President of Sports Marketing, and the Company are parties to a Consulting Agreement pursuant to which Howard Slusher manages the planning, design, and construction of new buildings at, and improvements to, NIKE’s World Headquarters. Howard Slusher was selected due to his deep history and experience with the Company, as he has managed several significant construction projects for the Company, including the original World Headquarters construction and later expansions. In addition, Howard Slusher’s previous engagement with the Company garnered the trust of management and makes him uniquely qualified to oversee the project. During fiscal 2016, the Company paid Howard Slusher $3,408,837 for these services. +Pursuant to the terms of a past consulting agreement with the Company, the Company agreed to pay for health and life insurance policies for Howard Slusher following expiration of the agreement. During fiscal 2016, the Company paid $123,574 for life insurance premiums. +Three of Mr. Parker’s siblings, each with over 25 years of service to the Company, were employed by the Company in non-executive roles in fiscal 2016. Ann Parker was an Executive Talent Scout, Bob Parker was a Marketplace Director, and Stephen Parker held a Vice President role with Converse. During fiscal 2016, the Company paid aggregate compensation to each of Ann Parker and Stephen Parker in the amounts of $317,642 and $525,491, respectively, comprising of salary, bonuses, the grant date fair value of stock options granted during the fiscal year estimated using the Black-Scholes pricing model, profit sharing and matching contributions to Company-sponsored retirement plans. Additionally, the Company paid aggregate compensation to Bob Parker in the amount of approximately $506,948, comprising of approximately $504,144 paid in connection with his termination of services as well as the compensation components listed above. The compensation and benefits received by each of Mr. Parker’s siblings, including the separation benefits received by Bob Parker, were consistent with compensation paid to other employees holding similar positions. +Mr. Thompson’s son, John Thompson III, head basketball coach at Georgetown University, and the Company are parties to a contract pursuant to which Mr. Thompson III provides certain endorsement and consulting services to the Company. The terms of this agreement, effective August 2014 through August 2019, provide for annual base compensation of $200,000, and up to $112,500 per year of product and merchandise, for use by him, the basketball staff and team. In addition, there are annual incentive payments based upon his team’s performance of up to $100,000. +Ms. Lindsay A. Jackson, the daughter of Jeanne Jackson, President of Product and Merchandising during fiscal 2016, was employed by the Company in a non-executive role in fiscal 2016 as a Brand Director. During fiscal 2016, the Company paid aggregate compensation to Ms. Lindsay Jackson of $152,861, comprising salary, bonuses, the grant date fair value of stock options granted during the fiscal year estimated using the Black-Scholes pricing model, profit sharing and matching contributions to Company-sponsored retirement plans. The compensation and benefits received by Ms. Lindsay Jackson was consistent with compensation paid to other employees holding similar positions. +On June 30, 2016 Mr. Philip Knight, the father of NIKE director Travis Knight, retired from the Board of Directors. Effective immediately upon his retirement, the Board has appointed Mr. Philip Knight to the position of Chairman Emeritus, which provides a standing invitation for Mr. Philip Knight to attend meetings of the Board and its committees as a non-voting observer. Pursuant to serving as the Chairman Emeritus, Mr. Knight will receive medical and dental insurance coverage available to employees and will receive an annual salary of $500,000. +The Company’s written policy requires the Nominating and Corporate Governance Committee to review any transaction or proposed transaction with a related person that would be required to be reported under Item 404(a) of Regulation S-K, and to determine whether to ratify or approve the transaction, with ratification or approval to occur only if the Committee determines that the transaction is fair to the Company or that approval or ratification of the transaction is in the interest of the Company. +NIKE, INC. Ÿ 2016 Notice of Annual Meeting 14 +CORPORATE GOVERNANCE +Compensation Committee Interlocks and Insider Participation +The members of the Compensation Committee of the Board of Directors during fiscal 2016 were Timothy D. Cook, Elizabeth J. Comstock, John C. Lechleiter, and Johnathan A. Rodgers. The Committee is composed solely of independent, non-employee directors. No member of the Compensation Committee has been an executive officer of the Company, and no member of the Compensation Committee had any relationships requiring disclosure by the Company under the SEC’s rules requiring disclosure of certain relationships and related-party transactions. None of the Company’s executive officers served as a director or member of a compensation committee (or other committee serving an equivalent function) of any other entity, the executive officers of which served as a director or member of the Compensation Committee of the Company during fiscal 2016. +NIKE, INC. Ÿ 2016 Notice of Annual Meeting 15 +COMPENSATION DISCUSSION AND ANALYSIS +COMPENSATION DISCUSSION AND ANALYSIS +Executive Summary +This Compensation Discussion and Analysis explains our compensation philosophy, summarizes our compensation programs and reviews compensation decisions for the executives identified as Named Executive Officers in the Summary Compensation Table on page 32. The Named Executive Officers for fiscal 2016 were: +• +Mark G. Parker, Chairman, President and Chief Executive Officer +• +Andrew Campion, Executive Vice President and Chief Financial Officer +• +Trevor A. Edwards, President, NIKE Brand +• +Eric D. Sprunk, Chief Operating Officer +• +Jeanne P. Jackson, President, Product and Merchandising +• +Donald W. Blair, Former Executive Vice President and Chief Financial Officer +As announced on February 12, 2015, after 16 years of service with the Company, Donald W. Blair retired from his position as Executive Vice President and Chief Financial Officer effective July 31, 2015, and from the Company on October 31, 2015. Mr. Blair was succeeded by Andrew Campion, who assumed the role of Executive Vice President and Chief Financial Officer, effective August 1, 2015. Mr. Blair remained with the Company through October 31, 2015 in support of the Company’s planned transition of the role. +As announced on June 30, 2016, Mr. Philip Knight retired from the Board of Directors and Mr. Parker, NIKE’s President and Chief Executive Officer since 2006, was appointed to the additional position of Chairman of the Board. This is the completion of the planned transition that was initiated a year ago. The Compensation Committee of the Board (the “Committee”) is comprised of Timothy D. Cook (Chairman), Elizabeth J. Comstock, John C. Lechleiter, and Johnathan A. Rodgers, each of whom is an independent director under applicable NYSE listing standards. +Our executive compensation program, similar to our non-executive compensation programs, is aligned with our business strategy and culture to attract and retain top talent, reward business results and individual performance, and most importantly, maximize shareholder value. Our total compensation program for the Named Executive Officers is highly incentive-based and competitive in the marketplace, with Company performance determining a significant portion of total compensation. +Executive Compensation Governance Practices +To achieve the objectives of our executive compensation program and emphasize pay-for-performance principles, the Compensation Committee employs strong governance practices as outlined in the table below. +We Do +We Don’t Do +ü Base a majority of total compensation on performance and retention incentives +ü Set annual and long-term incentive targets based on clearly disclosed, objective performance measures +ü Mitigate undue risk associated with compensation by using multiple performance targets, caps on potential incentive payments and a clawback policy +ü Require executive officers and non-employee directors to hold NIKE stock through published stock ownership guidelines +ü Vest equity awards over time to promote retention with a minimum of one year vesting +ü Provide double-trigger change-in-control equity acceleration +ü Require executive officers and directors to obtain pre-approval to pledge NIKE stock +ü Conduct annual “say-on-pay” advisory votes +û Retirement acceleration for restricted stock or restricted stock units (RSUs) +û Payments of accumulated dividends on unearned RSUs until and unless shares are earned +û Repricing of options without shareholder approval +û Hedging transactions or short sales by executive officers or directors +û Significant perquisites +û Tax gross-ups for perquisites +û Pension or supplemental executive retirement plan (SERP) +û Employment contracts +û Cash-based change-in-control benefits +û Excise tax gross-ups upon change of control +Consideration of Say-on-Pay Vote Results +The non-binding advisory proposal regarding compensation of the Named Executive Officers submitted to shareholders at our 2015 Annual Meeting was approved by over 89% of the votes cast. The Committee believes this favorable outcome conveyed our shareholders’ support of our executive compensation program and the Committee’s decisions. After considering the shareholder vote and other factors in its annual review of our total executive compensation programs, the Committee made no material changes in the structure of our compensation programs. The Committee will continue to consider the outcome of the Company’s say-on-pay votes when conducting its regular practice of evaluating the program and making future compensation decisions for the Named Executive Officers. +NIKE, INC. Ÿ 2016 Notice of Annual Meeting 16 +COMPENSATION DISCUSSION AND ANALYSIS +Financial Highlights under Incentive Plans +NIKE delivered strong performance in fiscal 2016. The charts below set forth certain key financial results that were used in determining payouts under our incentive compensation plans for fiscal 2016. The measures below are based on NIKE’s comparable publicly reported financial results. +1 All periods restated to reflect the December 23, 2015 two-for-one stock split. +Executive Compensation Highlights +The total compensation for each of the Named Executive Officers is shown in the Summary Compensation Table on page 32. While we describe executive compensation in greater detail throughout this Compensation Discussion and Analysis, actions the Committee took in fiscal 2016 are highlighted below: +• +Base Salary. Based on the recommendation by the Committee, which was approved by the independent members of the Board, Mr. Parker’s base salary remained the same and base salaries for Messrs. Edwards and Sprunk and Ms. Jackson increased to $1,000,000, $1,000,000, and $930,000, respectively. Mr. Campion’s base salary was set at $830,000 in connection with his promotion to Executive Vice President and Chief Financial Officer. Mr Blair did not receive a base salary increase due to his retirement. +• +Performance-Based Annual Incentive Plan. The target award for Mr. Parker remained the same. Mr. Edwards’ target award increased from 100% to 110% of base salary and target awards increased for Mr. Sprunk and Ms. Jackson from 90% to 100% of base salary. Mr. Campion’s target award was set at 100% of base salary in connection with his promotion to Executive Vice President and Chief Financial Officer. Based on financial performance goals set by the Committee in June 2015 and actual performance results, each executive officer’s bonus for fiscal 2016 was paid out at 92.38% of target. Mr. Blair did not receive an award due to his retirement. +• +Performance-Based Long-Term Incentive Plan. The target awards for the fiscal 2016-2018 performance period for Messrs. Parker and Sprunk and Ms. Jackson remained the same, and Mr. Edwards’ target award was increased from $900,000 to $1,000,000. The target award for Mr. Campion was set at $750,000 in connection with his promotion to Executive Vice President and Chief Financial Officer. Based on long-term financial performance goals set by the Committee in June 2013 and actual performance results, each executive officer received a payout for the fiscal 2014-2016 performance period of 135.10% of target. Mr. Blair did not receive an award due to his retirement. +• +Stock Options. Annual awards remained the same for Messrs. Parker and Sprunk. Annual awards for Mr. Edwards and Ms. Jackson increased to 180,000 and 170,000 shares, respectively, as adjusted for the December 23, 2015 two-for-one stock split. Mr. Campion was awarded 120,000 shares, as adjusted for the December 23, 2015 two-for-one stock split, in connection with his promotion to Executive Vice President and Chief Financial Officer. Each award vests equally over four years. Mr. Blair did not receive an award due to his retirement. +• +Restricted Stock. The annual award for Mr. Parker remained the same. Annual awards for Messrs. Edwards and Sprunk increased to $875,000 and $750,000, respectively, and decreased to $500,000 for Ms. Jackson. Mr. Campion’s award was set at $625,000 in connection with his promotion to Executive Vice President and Chief Financial Officer. Each award vests equally over three years. Mr. Blair did not receive an award due to his retirement. +• +Peer Group. For purposes of setting executive compensation in fiscal 2016, the companies in the peer group were unchanged from fiscal 2015. +Fiscal 2016 CEO Performance-Based Retention Award +In view of the Company’s strong performance under Mr. Parker’s leadership, the Committee’s belief that the continued service and retention of Mr. Parker is critical to the Company’s continued success, and the potential for Mr. Parker to succeed Mr. Philip Knight as Chairman of the Company’s Board of Directors upon Mr. Knight’s retirement, on June 30, 2015, the Committee granted to Mr. Parker the opportunity to earn a restricted stock unit (“RSU”) award with a target value of $30,000,000. On that date, this represented 277,727 shares of our Class B Stock based on the closing price on the grant date. The number of shares was adjusted to 555,454 shares to reflect the December 23, 2015 two-for-one stock split. 60% of the award’s maximum value is based on the Company’s performance and 40% of the award is subject only to time vesting. Neither the performance nor the time-based portion of the award will be earned unless Mr. Parker remains employed with the Company through June 30, 2020. The Committee views the award as a long-term retention incentive for compensation over the five-year vesting and performance periods and not solely as compensation for fiscal 2016. The terms of Mr. Parker’s award are further described in “Restricted Stock Unit (RSU) Retention Awards.” +NIKE, INC. Ÿ 2016 Notice of Annual Meeting 17 +COMPENSATION DISCUSSION AND ANALYSIS +Operation of the Compensation Committee +The Compensation Committee of the Board of Directors (the “Committee”) evaluates the performance of the CEO against goals and objectives set by the Committee. Based on the evaluation, the Committee Chair discusses the CEO’s performance and recommended compensation with the independent members of the Board. The CEO’s base salary and the base salaries of the other Named Executive Officers are approved by the independent members of the Board based on the Committee’s recommendation. The Committee has sole responsibility for all other elements of Named Executive Officer compensation. The Committee also oversees the performance evaluation of those officers and the administration of our executive compensation programs. The Committee receives recommendations from the CEO as to compensation of other Named Executive Officers, and the CEO participates in Committee discussions regarding the compensation of those officers. The Committee meets in executive session without the CEO to determine his compensation. The Committee is comprised of Timothy D. Cook (Chairman), Elizabeth J. Comstock, John C. Lechleiter, and Johnathan A. Rodgers, each of whom is an independent director under applicable NYSE listing standards. The Committee operates pursuant to a written charter that is available on our website at: http://investors.nike.com . +Each year, the Committee reviews our executive total compensation program to ensure it continues to reflect the Committee’s commitment to align the objectives and rewards of our executive officers with the creation of value for our shareholders. Similar to our non-executive compensation programs, the program has been designed to reinforce our pay-for-performance philosophy by delivering total compensation that motivates and rewards short- and long-term financial performance to maximize shareholder value, and to be externally competitive to attract and retain outstanding and diverse executive talent. This is done much in the same way our human resources staff designs our non-executive compensation programs, to ensure they are market competitive, offer performance-based financial incentives, and provide opportunities to share in total Company success through competitive benefits, stock purchase discount programs, and broad-based profit sharing. In conducting its annual review, the Committee considers information provided by our human resources staff. Our human resources staff retains independent compensation consulting firms to provide surveys and reports containing competitive market data. These consultants do not formulate executive compensation strategies for NIKE or recommend individual executive compensation. The human resources staff uses the surveys and reports to make recommendations to the Committee concerning executive compensation. The Committee relies on its collective experience and judgment along with the recommendations prepared by our human resources staff to set executive compensation. The Committee has the authority, in its sole discretion, to retain compensation consultants to assist the Committee in evaluating the compensation of executive officers, but chose to not retain any such consultants in fiscal 2016, with the exception as described below. +In June 2015, the Committee retained Mercer (a wholly owned subsidiary of Marsh & McLennan Companies, Inc.), a well-recognized employee benefits and compensation consulting firm, as its independent compensation consultant for the purpose of providing an objective analysis of, and counsel on, a retention award for Mr. Parker that would include specific performance criteria. Mercer evaluated management’s analysis and proposal for the award, including reasonableness of the business case, size of the award, performance metrics, performance period, terms and conditions, and governance considerations, and reviewed their findings with the Committee. +In connection with its engagement of Mercer, the Committee considered various factors bearing upon Mercer’s independence, including the factors specified in Section 303A.05(c) of the NYSE Listed Company Manual, and determined that Mercer was independent and that its engagement did not present any conflicts of interest. Mercer also determined that it was independent from management and confirmed this in a written statement delivered to the Committee. During fiscal 2016, the fees for Mercer’s engagement by the Committee were $7,743. In addition, Mercer provided certain services to the Company during fiscal 2016 at the request of management consisting of information regarding our Stock Incentive Plan and employee benefits consulting services, inclusive of compensation and benefits surveys. The fees for such additional services were approximately $5,500 and $1,431,075, respectively. +Use of Market Survey Data +To help establish competitive ranges of base salary, incentive compensation opportunities, and target total compensation for the purpose of making recommendations to the Committee, our human resources staff uses competitive market data from surveys and reports prepared by Aon Hewitt Associates and Willis Towers Watson. We consider market survey data from a peer group of companies which have similar revenue size, have similar products or markets, or reflect the companies with which we compete for executive talent. In addition, we consider market data across many industries, focusing on companies with revenues of $10 billion or more. +For purposes of setting executive compensation for fiscal 2016, the companies in our peer group were unchanged from fiscal 2015 and consisted of the following: +Alphabet Inc. +Kellogg Company +Mondelez International, Inc. +The Coca-Cola Company +Kimberly-Clark Corporation +Pepsico, Inc. +Colgate-Palmolive Company +Kohl’s Corporation +Starbucks Corporation +eBay Inc. +L Brands, Inc. +Time Warner Inc. +FedEx Corporation +Macy’s, Inc. +The Walt Disney Company +The Gap, Inc. +McDonald’s Corporation +The surveys that our human resources staff reviews show percentile compensation levels for various executive positions with comparable job responsibilities. The staff also analyzes market data regarding compensation mix among base salary, annual incentive and long-term incentives such as performance-based cash awards, stock options, restricted stock and restricted stock unit awards. The Committee reviews this mix analysis when evaluating the separate compensation elements for each executive. The Committee does not endeavor to set executive compensation at or +NIKE, INC. Ÿ 2016 Notice of Annual Meeting 18 +COMPENSATION DISCUSSION AND ANALYSIS +near any particular percentile, and it considers target total compensation to be competitive if it is generally within a reasonable range of the market median. Market data is one of many factors that the Committee considers in the determination of executive compensation levels. Other factors include internal pay equity, level of responsibility, the individual’s performance, expectations regarding the individual’s future potential contributions, succession planning and retention strategies, budget considerations, and the Company’s performance. +In November 2015, we conducted our regular periodic review of our peer group. Based on the criteria described above, along with expanded criteria to include market capitalization and brand value, we determined that for purposes of setting executive compensation in fiscal 2017, the peer group above should be refined to include Procter & Gamble Company, Target Corporation and TJX Companies, Inc. and to remove Kohl’s Corporation and L Brands, Inc. +Objectives and Elements of Our Compensation Program +As noted in the Executive Summary, our executive compensation program is aligned with our business strategy and culture to attract and retain top talent, reward business results and individual performance, and most importantly, maximize shareholder value. Our total compensation program for the Named Executive Officers is highly incentive-based and competitive in the marketplace, with Company performance determining a significant portion of total compensation. Our program consists of the following elements: +• +Base salary that reflects the executive’s accountabilities, skills, experience, performance, and future potential +• +Annual performance-based incentive cash bonus based on Company financial results under our Executive Performance Sharing Plan +• +A portfolio approach to long-term incentive compensation to provide a balanced mix of performance-based cash incentives and equity, including: +◦ +Performance-based long-term incentive cash awards based on Company financial results to encourage attainment of long-term Company financial objectives +◦ +Stock options to align the interests of executives with those of shareholders +◦ +Restricted stock awards and restricted stock unit retention awards to provide incentives consistent with driving shareholder value, and to provide strong retention incentives +• +Benefits +◦ +Executives are generally eligible for the same competitive benefits as other employees in the United States, including medical, dental, and vision insurance, paid time off, 401(k) plan, and Company-provided life and disability insurance. Employees outside of the United States are offered locally competitive benefits. +◦ +Profit sharing contributions to defined contribution retirement plans +◦ +Employee Stock Purchase Plan +◦ +Post-termination payments under non-competition agreements +In determining the award levels for each of the elements in our total compensation program, our philosophy is to “pay for performance.” As a result, we place relatively greater emphasis on the incentive components of compensation (annual incentive award, performance-based long-term cash incentive award, and stock options) to align the interests of our executives with shareholders, and motivate them to maximize shareholder value. This is balanced with retention incentives provided by base salary, restricted stock awards, and restricted stock unit awards. +We look to the experience and judgment of the Committee to determine what it believes to be the appropriate target compensation mix for each Named Executive Officer. We do not apply fixed ratios or formulas, or rely solely on market data or quantitative measures. In allocating compensation among the various elements, the Committee considers market data, Company performance and budget, the impact of the executive’s position in the Company, individual past performance, expectations for future performance, experience in the position, any recent or anticipated changes in the individual’s responsibilities, internal pay equity for comparable positions, and retention incentives for succession planning. As shown in the charts below, incentive components accounted for 90% of the CEO’s target compensation and approximately 81% of the other Named Executive Officers’ target compensation in fiscal 2016. For purposes of this analysis, RSU retention awards, which were granted to the CEO in fiscal 2016, are excluded to reflect the compensation mix targeted by the Committee on an annual basis. +NIKE, INC. Ÿ 2016 Notice of Annual Meeting 19 +COMPENSATION DISCUSSION AND ANALYSIS +Elements of Our Compensation Program +Base Salary +When making recommendations to the Committee concerning base salary levels for our Named Executive Officers, our human resources staff follows a similar process to how they evaluate non-executive base salary levels. We consider the individual’s performance in the prior year, expectations regarding the individual’s future performance, experience in the position, any recent or anticipated changes in the individual’s responsibilities, internal pay equity for comparable positions, succession planning strategies, our annual salary budget, other elements of the individual’s compensation, and the market data described in “Use of Market Survey Data.” The Committee reviews these factors each year and adjusts base salary levels to ensure that we are appropriately rewarding performance. +The Committee generally reviews base salaries of the Named Executive Officers annually based on a review of individual performance at a meeting in June, with salary adjustments becoming effective for the first pay period ending in August. During the salary review in June 2015, the Committee, based on the factors described above, recommended, and the independent members of the Board approved, the base salaries for the Named Executive Officers. Mr. Campion’s base salary was set in connection with his promotion to Executive Vice President and Chief Financial Officer. Mr. Blair did not receive a salary increase due to his retirement. The base salaries for the Named Executive Officers were: +Named Executive Officer +Fiscal 2016 Base Salary +% Change +Mark G. Parker +$1,550,000 +0.0% +Andrew Campion +$830,000 +n/a +Donald W. Blair +$850,000 +0.0% +Trevor A. Edwards +$1,000,000 +7.0% +Eric D. Sprunk +$1,000,000 +7.0% +Jeanne P. Jackson +$930,000 +5.1% +In setting a Named Executive Officer’s overall compensation package, the Committee places a relatively greater emphasis on the incentive components of compensation described below. +Performance-Based Annual Incentive Bonus +Annual awards are paid to the Named Executive Officers under our Executive Performance Sharing Plan (“PSP”). Our “pay for performance” philosophy for awards is simple and applies to all global employees who are eligible to share in the Company’s success through incentive bonuses: if we exceed our financial objectives, we will pay more; if we fail to reach them, we will pay less or nothing at all. The PSP for all executives is based 100% on overall corporate performance each year against a target based on the Company’s annual financial objective, as measured by income before income taxes (“PTI”), excluding the effect of any acquisitions, divestitures or accounting changes. The Committee selected PTI as the performance measure as it aligns with the Company’s operational financial targets for the individual fiscal year. By focusing on driving strong operational performance each year, the plan supports our goal of delivering sustainable, profitable growth. The Committee retains the discretion to reduce or eliminate PSP award payouts based on individual or Company performance. Basing our annual incentive award program for all executives +NIKE, INC. Ÿ 2016 Notice of Annual Meeting 20 +COMPENSATION DISCUSSION AND ANALYSIS +on overall corporate performance is intended to foster teamwork and send the message to each executive that his or her role is to help ensure overall organizational success and maximize shareholder value. +Each year the Committee establishes a PSP target award for each Named Executive Officer based on its judgment of the impact of the position in the Company and what it believes to be competitive against market data as described in “Use of Market Survey Data,” while considering internal pay equity for comparable positions. For fiscal 2016, the Committee maintained Mr. Parker’s target award. Mr. Edwards’ target award was increased from 100% to 110% and target awards for Mr. Sprunk and Ms. Jackson were increased from 90% to 100%. Mr. Campion’s target was set at 100% in connection with his promotion to Executive Vice President and Chief Financial Officer. Mr. Blair did not receive an award due to his retirement. The fiscal 2016 target awards were: +Named Executive Officer +Fiscal 2016 PSP Target Award +(% of base salary) +Mark G. Parker +180% +Andrew Campion +100% +Trevor A. Edwards +110% +Eric D.Sprunk +100% +Jeanne P. Jackson +100% +In June 2015, the Committee established performance goals for the fiscal 2016 PSP based on its evaluation of our business plan and prospects for the year. The table below summarizes the fiscal 2016 PSP performance goals established by the Committee. For fiscal 2016, NIKE achieved a PTI of $4,623 million, a 9.9% increase over fiscal 2015 continuing operations PTI of $4,205 million. This achievement was below the target performance goal established by the Committee. As a result, each executive officer’s award was paid out at 92.38% of the target award. +(Dollars in millions) +Fiscal 2016 PSP Performance Goal +Threshold Performance +Threshold % Payout +Target Performance +Target % Payout +Maximum Performance +Maximum % Payout +Actual Performance +Actual % Payout +PTI +$4,306 1 +50% +$4,680 2 +100% +$5,054 3 +150% +$4,623 +92.38% 4 +1 Threshold performance represents 2.4% increase above fiscal 2015 continuing operations PTI. +2 Target performance represents 11.3% increase above fiscal 2015 continuing operations PTI. +3 Maximum performance represents 20.2% increase above fiscal 2015 continuing operations PTI. +4 Prorated for performance between payout levels. +Performance-Based Long-Term Incentive Plan +The first component in our long-term portfolio mix is performance-based awards payable in cash under our Long-Term Incentive Plan (“LTIP”). As with the performance-based annual incentive, the LTIP follows our “pay for performance” philosophy. If we exceed our targets, we will pay more; if we fall short, we will pay less or nothing at all. This program focuses executives on overall, long-term financial performance, and is intended to reward them for delivering revenue growth and diluted earnings per share (“EPS”) growth over a three-year performance period. At the beginning of each fiscal year, the Committee establishes performance goals and potential cash payouts for the next three fiscal years for all executives under the LTIP. LTIP performance measures for all executives are based 50% on cumulative revenues for the three-year performance period and 50% on cumulative EPS for the period, in each case excluding generally the effect of acquisitions, divestitures and accounting changes. The Committee selected revenue and EPS as LTIP performance measures to encourage executives to focus on delivering profitable, sustainable growth. Strong revenue growth is the foundation of the Company’s financial strategy, requiring investments in key business drivers to sustain growth. EPS growth is essential to delivering value for our shareholders, requiring investments be targeted to those areas with the highest potential for return. By balancing revenue growth and EPS growth, the plan supports the Company’s objective of delivering long-term shareholder value. The Committee retains the discretion to reduce or eliminate LTIP award payouts based on individual or Company performance. +During the compensation review in June 2015, the Committee approved LTIP target awards for all Named Executive Officers for the fiscal 2016-2018 performance period. The Committee set these targets based on its judgment of what it believes to be a desirable mix of long-term compensation, the impact of the position in the Company, and what it finds to be competitive against market data as described in “Use of Market Survey Data,” while maintaining internal pay equity for comparable positions. For the fiscal 2016-2018 performance period, the Committee maintained the targets for Messrs. Parker and Sprunk and Ms. Jackson, and increased Mr. Edwards’ target from $900,000 to $1,000,000. Mr. Campion’s target was set at $750,000 in connection with his promotion to Executive Vice President and Chief Financial Officer. Mr. Blair did not receive an award due to his retirement. The target awards for the fiscal 2016-2018 performance period are as follows: +Named Executive Officer +Fiscal 2016-2018 LTIP Award Target ($) +Mark G. Parker +3,500,000 +Andrew Campion +750,000 +Trevor A. Edwards +1,000,000 +Eric D. Sprunk +750,000 +Jeanne P. Jackson +750,000 +NIKE, INC. Ÿ 2016 Notice of Annual Meeting 21 +COMPENSATION DISCUSSION AND ANALYSIS +In June 2015, the Committee established performance goals for the fiscal 2016-2018 LTIP. In setting the performance goals for the target award payout level, the Committee considered our long-term financial goals and the impact of the strengthening dollar and foreign exchange volatility on future business over the following three fiscal years. The total payout percentage will be the average of the payout percentages determined for cumulative revenues and cumulative EPS, respectively. Payout below the threshold payout level may occur if either the revenue or EPS related percentage achievement is less than 50%. If both revenue and EPS fall below the threshold level, there is no payout. The table below summarizes the fiscal 2016-2018 LTIP performance goals. +(Dollars in millions, except per share data) +Fiscal 2016-2018 Performance Goals 1 +Threshold Performance 2 +Threshold % Payout +Target Performance 3 +Target % Payout +Maximum Performance 4 +Maximum % Payout +Revenue +$101,293 +50% +$105,266 +100% +$113,521 +200% +EPS +$6.61 +50% +$7.12 +100% +$8.225 +200% +__________________________________________________________ +1 EPS goals reflect the December 23, 2015 two-for-one stock split. +2 Threshold payout for revenue requires cumulative revenues corresponding to a 5% compound annual growth rate (“CAGR”) from fiscal 2015 continuing operations revenue of $30,601 million. Threshold payout for EPS requires cumulative EPS corresponding to a 9% CAGR from fiscal 2015 continuing operations EPS of $1.85. +3 Target revenue payout requires a 7% CAGR and target EPS payout requires a 13% CAGR. +4 Maximum revenue payout requires an 11% CAGR and maximum EPS payout requires a 21% CAGR. +For fiscal 2016, executive officers were eligible to receive LTIP award payouts based on performance targets set in June 2013 covering the fiscal 2014-16 performance period. In June 2016, the Committee determined a payout of 135.10% under these awards was earned based on the average of the payout percentages for cumulative revenues and cumulative EPS for the performance period shown in the table below: +(Dollars in millions, except per share data) +Fiscal 2014-2016 Performance Goals +Threshold Performance +Threshold % Payout +Target Performance +Target % Payout +Maximum Performance +Maximum % Payout +Actual Performance +Actual % Payout +Revenue 1 +$85,422 +50% +$88,750 +100% +$95,666 +200% +$90,776 +129.67% +EPS 2 +$4.805 +50% +$5.18 +100% +$5.98 +200% +$5.495 +140.54% +Total Payout +135.10% +1 Cumulative revenues for fiscal 2014, fiscal 2015 and fiscal 2016. +2 Cumulative EPS for fiscal 2014, fiscal 2015 and fiscal 2016. All periods restated to reflect the December 23, 2015 two-for-one stock split. +Stock Options +The second component in our long-term portfolio mix is stock options. Stock options are designed to align the interests of the Company’s executives with those of shareholders by encouraging executives to enhance the value of the Company and, hence, the price of the Class B Stock. This is true “pay for performance”: executives are rewarded only if the market price of our stock rises, and they get nothing if the price does not rise or goes down. When determining the grants, the Committee generally focuses on the number of shares, while considering the value for accounting purposes. Our approach is based on our desire to carefully control annual share usage and avoid fluctuations in grant levels due to share price changes. The Committee awards stock options to each executive based on its judgment. The Committee considers a number of factors including the individual’s performance, management succession, competitive market data as described in “Use of Market Survey Data,” internal pay equity for comparable positions, and a desirable mix of long-term incentives. Our human resources staff periodically tests the reasonableness of our stock option grants against competitive market data and may make recommendations to the Committee. Options are generally granted annually to selected employees, including the Named Executive Officers, in July of each year under our shareholder-approved Stock Incentive Plan. Stock options for fiscal 2016 were granted by the Committee on July 17, 2015 with an exercise price equal to the closing market price of our stock on that date. These grants have been adjusted to reflect the December 23, 2015 two-for-one stock split. +In July 2015, the Committee granted options to Mr. Parker for 330,000 shares and to Mr. Sprunk for 160,000 shares, the same number of split-adjusted stock options granted to them in July 2014. Mr. Edwards received 180,000 shares and Ms. Jackson received 170,000 shares, an increase of 20,000 shares to each of them from July 2014, adjusted for the stock-split. Mr. Campion received 120,000 shares, adjusted for the stock split, in connection with his promotion to Executive Vice President and Chief Financial Officer. Mr. Blair did not receive an award due to his retirement. The Committee, in its judgment, set these award levels based on the factors described above. +Options granted by the Company generally vest over a four-year period. To promote executive retention, unvested options generally are forfeited if the employee leaves before vesting occurs and must be exercised within three months after termination of employment. Options provide for a limited retirement provision designed to encourage employees to delay retirement, thus enhancing retention. Only those employees with a minimum of five years of service who are age 55 and above at the time of termination of employment are eligible for the provision. Under the provision, only unvested stock options that have been granted for at least one full year to employees between the ages of 55 to 59 at the time of termination of employment will continue to vest, and may be exercised for up to four years after termination. If an employee is age 60 or older and has at least five years of service at termination, unvested stock options that have been granted for at least one full year will receive accelerated vesting and may be exercised for up to four years after termination. The features related to accelerated vesting are described in “Potential Payments upon Termination or Change-in-Control.” Based on their ages and years of service, as of May 31, 2016, Mr. Parker and Ms. Jackson could terminate employment at any time and receive accelerated vesting of their options granted in July 2012, 2013, and 2014. +NIKE, INC. Ÿ 2016 Notice of Annual Meeting 22 +COMPENSATION DISCUSSION AND ANALYSIS +Restricted Stock Awards +The third component in our long-term portfolio mix is restricted stock awards. Stock ownership and stock-based incentive awards align the interests of our Named Executive Officers with the interests of our shareholders, as the value of this incentive rises and falls with the stock price. Restricted stock awards are generally granted annually to selected employees, including the Named Executive Officers, in July at the same meeting at which stock options are granted under our shareholder-approved Stock Incentive Plan. Awards generally vest in three equal installments on each of the first three anniversaries of the grant date. The awards promote executive retention, as unvested shares held at the time the executive’s employment is terminated are forfeited. Award recipients receive dividends on the full number of restricted shares awarded at the same time dividends are paid to other shareholders. +The Committee, in its judgment, sets restricted stock award levels based on several factors, including what the Committee believes to be a desirable mix of long-term compensation, their determination of an appropriate weighting of potential future contribution to the Company, retention incentives, and competitive market data as described in “Use of Market Survey Data”. In July 2015, the Committee granted a restricted stock award to Mr. Parker valued at $3,500,000, representing 62,058 shares of our Class B Stock, based on the closing price on the grant date and as adjusted for the December 23, 2015 two-for-one stock split. This was the same value of restricted stock granted to Mr. Parker in July 2014. Messrs. Edwards and Sprunk and Ms. Jackson received awards valued at $875,000, $750,000, and $500,000, respectively. This represented 15,516 shares of our Class B Stock for Mr. Edwards, 13,298 shares of our Class B Stock for Mr. Sprunk and 8,866 shares of our Class B Stock for Ms. Jackson, based on the closing price on the grant date and as adjusted for the stock split. This was an increase of $125,000 for Messrs. Edwards and Sprunk, and a decrease of $125,000 for Ms. Jackson. In connection with his promotion to Executive Vice President and Chief Financial Officer, Mr. Campion received an award valued at $625,000, representing 11,082 of our Class B Stock based on the closing price on the grant date and as adjusted for the stock split. Mr. Blair did not receive an award due to his retirement. +Restricted Stock Unit (RSU) Retention Awards +From time to time, the Committee also grants restricted stock units (“RSUs”) that vest based on continued service through a future service date with the Company, for the specific purpose of further promoting retention. These RSU awards accumulate dividend equivalents that are only paid in cash upon full vesting. The awards have no value to the executive unless the executive remains employed with the Company for the full vesting period, and will be canceled if the executive terminates or retires within the vesting period. Other than Mr. Parker, none of our Named Executive Officers received RSUs in fiscal 2016. +In view of the Company’s strong performance under Mr. Parker’s leadership, the Committee’s belief that the continued service and retention of Mr. Parker is critical to the Company’s continued success, and the potential for Mr. Parker to succeed Mr. Philip Knight as Chairman of the Company’s Board of Directors upon Mr. Knight’s retirement, on June 30, 2015, the Committee granted to Mr. Parker the opportunity to earn an RSU award with a target value of $30,000,000. On that date, this represented 277,727 shares of our Class B Stock based on the closing price on the grant date. The number of shares was adjusted to 555,454 shares to reflect the December 23, 2015 two-for-one stock split. +60% of the award, or a target number of 333,272 shares, is subject to performance vesting based on cumulative revenue growth and cumulative EPS growth over a five-year performance period of fiscal 2016 through fiscal 2020 (the “Performance-Based RSUs”). The performance goals are equally weighted, and both measures exclude the effect of any acquisitions, divestitures or accounting changes. For Mr. Parker to earn the maximum payout for the Performance-Based RSUs (100% of the target number of shares), the Company must achieve a 9% compound annual growth rate (“CAGR”) from fiscal 2015 for cumulative revenues over the five-year performance period, and a 13% CAGR from fiscal 2015 for cumulative EPS. For Mr. Parker to earn a threshold payout of 50% of the target number of shares, the Company must achieve cumulative revenues corresponding to a 7% CAGR, and for EPS, cumulative EPS corresponding to a 9% CAGR. These are higher CAGRs for revenue and the same CAGRs for EPS established by the Committee for target and threshold payouts under the LTIP for the fiscal 2016-2018 performance period. Payout may occur at 25% of the target number of shares if either the revenue or EPS related percentage achievement is less than threshold. Additional shares will be earned for the Performance-Based RSUs pro rata for performance between the threshold and maximum levels. If performance does not achieve the threshold level for either target, no shares will be earned for the Performance-Based RSUs. The Performance-Based RSUs are also subject to time vesting and will not be earned unless Mr. Parker remains employed with the Company through June 30, 2020. 40% of the award, or 222,182 shares, is subject only to time vesting and will be earned if Mr. Parker remains employed with the Company through June 30, 2020 (“Time-Based RSUs”). The vesting of Mr. Parker’s Performance-Based RSUs will accelerate fully in the event of a “double trigger” change in control, but will vest at the threshold levels in the event of his death or disability. The vesting of Mr. Parker’s Time-Based RSUs will accelerate fully in the event of his death, disability or a “double trigger” change in control. +Based on the Committee’s business judgment and experience, the Committee’s assessment of Mr. Parker’s strong performance, the importance of retaining Mr. Parker, a review of Mr. Parker’s accumulated vested and unvested awards, and consultation with Mercer as its independent compensation consultant, the Committee determined the RSU award amount and terms. The Committee believes the balancing of revenue growth and EPS growth supports the Company’s objective of delivering long-term shareholder value. The Committee views the award as a long-term retention incentive for compensation over the five-year vesting and performance periods and not solely as compensation for fiscal 2016. The RSU award has no value to Mr. Parker unless he remains employed with the Company for the full five-year vesting and performance periods, and 60% of its value requires achievement of the specified performance goals. In accordance with applicable SEC rules, the full award value is included in the Summary Compensation Table on page 32, the Grants of Plan-Based Awards in Fiscal 2016 table on page 34 and the Outstanding Equity Awards at May 31, 2016 table on page 36. +NIKE, INC. Ÿ 2016 Notice of Annual Meeting 23 +COMPENSATION DISCUSSION AND ANALYSIS +Profit Sharing and Retirement Plans +Our 401(k) Savings and Profit Sharing Plan is a U.S. tax qualified retirement savings plan pursuant to which all eligible U.S. employees, including the Named Executive Officers, are able to make pre-tax contributions and after-tax contributions from their cash compensation. We make matching contributions for all participants each year equal to 100% of their pre-tax contributions up to 5% of their total eligible compensation. We also make annual profit sharing contributions to the accounts of eligible U.S. employees under the 401(k) Savings and Profit Sharing Plan. The contributions are allocated among eligible employees based on a percentage of their total salary and annual incentive award for the year. The total profit sharing contribution and the percentage of salary and annual incentive award contributed for each employee is determined each year by the Board of Directors. For fiscal 2016, the Board of Directors approved a profit sharing contribution for each eligible employee equal to 3.92% of the employee’s total eligible salary and annual incentive award. +The Internal Revenue Code limits the amount of compensation that can be deferred under our 401(k) Savings and Profit Sharing Plan, and also limits the amount of salary and annual incentive award ($265,000 for fiscal 2016) that may be taken into account when determining contributions under that plan. Accordingly, we provide our Named Executive Officers and other highly compensated employees with the opportunity to defer their compensation, including amounts in excess of the tax law limit, under our nonqualified Deferred Compensation Plan. We also make profit sharing contributions under the Deferred Compensation Plan with respect to salary and annual incentive award of any eligible employee that exceeds the tax law limit, and for fiscal 2016 these contributions were equal to 3.92% of the total salary and annual incentive award of each Named Executive Officer in excess of $265,000. These contributions under the Deferred Compensation Plan allow our Named Executive Officers and other highly compensated employees to receive profit sharing contributions in the same percentage as our other employees. We do not match deferrals to the Deferred Compensation Plan. Balances in the Deferred Compensation Plan, including the balances of the Named Executive Officers, are unsecured and at-risk, meaning the balances may be forfeited in the event of the Company’s financial distress such as bankruptcy. Our matching and profit sharing contributions for fiscal 2016 to the accounts of the Named Executive Officers under the qualified and nonqualified plans are included in the All Other Compensation column in the Summary Compensation Table on page 32. +Employee Stock Purchase Plan +Our Employee Stock Purchase Plan allows all employees who work at least 20 hours per week in the United States and in many countries outside of the United States to purchase NIKE Class B Stock, through payroll deductions, at a 15% discount to the market price on the first or last trading day of the six-month purchase period, depending on which day the stock price was lower. No plan participant is allowed to purchase more than $25,000 in market value of our stock under the plan in any calendar year or more than 500 shares in any six-month offering period. In fiscal 2016, all Named Executive Officers participated in our Employee Stock Purchase Plan, with the exception of Mr. Parker. +NIKE, INC. Ÿ 2016 Notice of Annual Meeting 24 +COMPENSATION DISCUSSION AND ANALYSIS +Post-termination Payments under Non-competition Agreements +In exchange for non-competition agreements from all of our Named Executive Officers, we have agreed to provide, during the non-competition period, the monthly payments described in “Potential Payments upon Termination or Change-in-Control,” some of which are at the election of the Company. We believe that it is appropriate to compensate individuals to refrain from working with competitors following termination, and that compensation enhances the enforceability of such agreements. +Stock Ownership Guidelines +On June 20, 2013, the Board of Directors adopted stock ownership guidelines for executive officers. These guidelines are designed to further align the long-term interests of our executive officers with those of our shareholders. Under the guidelines, the CEO and other executive officers are required to hold NIKE stock valued at the following multiple of their annual base salary: +Position +Ownership Level +Chief Executive Officer +6X Base Salary +Named Executive Officers +3X Base Salary +Other Executive Officers +2X Base Salary +Executive officers appointed prior to June 20, 2013 are required to attain these ownership levels by June 20, 2018 and new officers within five years of their appointment. +Hedging and Pledging +The Company’s black-out and pre-clearance policy (which supplements our insider trading policy) prohibits directors, executive officers and other designated insiders from engaging in transactions involving hedging, monetization or short sales of NIKE stock, including zero-cost collars and forward sale contracts. The policy also requires directors, executive officers and designated insiders to obtain pre-approval from the Company’s Corporate Secretary before pledging NIKE stock. Before granting approval of any pledge, the Corporate Secretary considers the size of the pledge relative to the individual’s other holdings, both direct and indirect, and NIKE’s shares outstanding; the risk of foreclosure given the nature of the associated transaction; protections against the appearance of insider trading, including prohibitions on sales during trading black-outs; and the ability to timely report sales on Form 4. +NIKE, INC. Ÿ 2016 Notice of Annual Meeting 25 +COMPENSATION DISCUSSION AND ANALYSIS +Change-in-Control Provisions +All unvested stock option, restricted stock, and restricted stock unit awards are subject to accelerated change-in-control vesting only when two events (a “double trigger”) occur. Vesting of grants is generally accelerated only if there is a change in control of the Company and either the acquiring entity fails to assume the awards or the employee’s employment is terminated by the acquirer without cause or by the employee for good reason within two years following a change in control. This double trigger was adopted to encourage executive retention through a period of uncertainty and a subsequent integration with an acquirer. The Committee believes that this approach will enhance shareholder value in the context of an acquisition, and align executives with the interests of investors. The effects of change-in-control transactions on stock option, restricted stock, and restricted stock unit awards are described further in “Potential Payments Upon Termination or Change-in-Control.” +Clawback Policy +Since June 2010 the company has had a policy for recoupment of incentive compensation (the “clawback policy”). In June 2015, the Committee and Board of Directors approved amendments to our incentive compensation plans to cover additional circumstances in which the Company may clawback awards. Under the clawback policy, an executive officer who is involved in wrongful conduct that results in a restatement of the Company’s financial statements must repay to the Company up to the full amount of any incentive compensation based on the financial statements that were subsequently restated. The clawback policy covers the annual PSP award, LTIP payout, profit sharing contributions to the Deferred Compensation Plan, and excess proceeds from sales of stock acquired under stock option, restricted stock, and restricted stock unit awards that occurred prior to the restatement. The recent amendments to our Executive Performance Sharing Plan, Long-Term Incentive Plan and Stock Incentive Plan clarify that for all participants in those plans the Committee may apply additional clawback policies to awards, or add clawback terms to award agreements or notices, and that any clawback requirements of applicable law and regulation will apply to the plans. +Risk Assessment +At the Committee’s request, in fiscal 2016 management prepared and discussed with the Committee an assessment of potential risk associated with the Company’s compensation programs, including any risk that would be reasonably likely to have a material adverse effect on the Company. This included an assessment of risks associated with each element of employee compensation. The assessment considered certain design features of the compensation programs that reduce the likelihood of excessive risk taking, such as reasonable performance targets, capped payouts of incentive compensation, a balance of short- and long-term incentives, a balance of cash and equity incentives, vesting of awards over time, and the potential for clawback of incentive compensation. In addition, for equity compensation, in recent years the Committee and the Board have adopted stock ownership guidelines, limited accelerated vesting of stock options upon termination of employment, and implemented double-trigger accelerated vesting for all equity awards upon change in control (each as described above). +Tax Deductibility of Executive Compensation +Section 162(m) of the Internal Revenue Code generally disallows a tax deduction to public companies for annual compensation over $1 million paid to their chief executive officer and the next three most highly compensated executive officers (other than the principal financial officer). The Internal Revenue Code generally excludes from the calculation of the $1 million cap compensation that is based on the attainment of pre-established, objective performance goals established under a shareholder-approved plan. The Committee considers, among other things, the impact of this exclusion for performance-based compensation when developing and implementing our executive compensation programs. Annual awards under our Executive Performance Sharing Plan, long-term incentive awards under our Long-Term Incentive Plan and stock options under our Stock Incentive Plan generally are designed in a manner that is intended to meet the requirements under the exclusion. However, due to the complex nature of the requirements that must be met, we cannot guarantee that such awards will qualify as performance-based compensation under Section 162(m). +While the Committee seeks to preserve tax deductibility in developing and implementing our compensation program, the Committee also believes that it is important to maintain flexibility in administering compensation programs in a manner designed to promote varying corporate goals. Accordingly, we have not adopted a policy that all compensation must qualify as deductible for tax purposes. Therefore, amounts paid under any of our executive compensation programs may not qualify as performance-based compensation that is excluded from the Section 162(m) limitation on deductibility. +NIKE, INC. Ÿ 2016 Notice of Annual Meeting 26 +COMPENSATION COMMITTEE REPORT +COMPENSATION COMMITTEE REPORT +The Compensation Committee of the Board of Directors (the “Committee”) has reviewed and discussed with management the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K. Based on the review and discussions, the Committee recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement. +Members of the Compensation Committee: +• +Timothy D. Cook, Chair +• +Elizabeth J. Comstock +• +John C. Lechleiter +• +Johnathan A. Rodgers +NIKE, INC. Ÿ 2016 Notice of Annual Meeting 27 +EXECUTIVE COMPENSATION +EXECUTIVE COMPENSATION +Summary Compensation Table +The following table sets forth information concerning compensation for fiscal 2014-2016 paid to or earned by our Chief Executive Officer, our current and former Chief Financial Officer and our next three most highly compensated executive officers who were serving as executive officers on May 31, 2016. These individuals are referred to throughout this proxy statement as the “Named Executive Officers.” +Name and Principal +Position +Year +Salary +($) +Stock +Awards (1) +($) +Option +Awards (2) +($) +Non-Equity +Incentive Plan +Compensation (3) +($) +All Other +Compensation (4) +($) +Total +($) +Mark G. Parker +2016 +1,550,000 +33,500,142 +4,179,450 +7,305,902 +1,079,808 +47,615,302 +Chairman, President and Chief +2015 +1,550,000 +3,500,028 +2,791,800 +8,251,937 +725,965 +16,819,730 +Executive Officer +2014 +1,550,000 +3,500,024 +2,451,174 +6,538,177 +638,974 +14,678,349 +Andrew Campion +Executive Vice President +and Chief Financial Officer +2016 +822,306 +625,025 +1,519,800 +1,772,897 +105,479 +4,845,507 +Donald W. Blair +2016 +359,615 +— +— +— +245,422 +605,037 +Former Executive Vice President +2015 +850,000 +625,044 +1,269,000 +1,710,280 +180,238 +4,634,562 +and Chief Financial Officer +2014 +850,000 +625,011 +1,114,170 +1,399,303 +158,219 +4,146,703 +Trevor A. Edwards +2016 +990,000 +875,102 +2,279,700 +2,221,919 +270,440 +6,637,161 +President, NIKE Brand +2015 +935,000 +750,006 +1,353,600 +1,956,831 +236,637 +5,232,074 +2014 +935,000 +750,001 +1,114,170 +1,560,837 +204,920 +4,564,928 +Eric D. Sprunk +2016 +990,000 +750,007 +2,026,400 +1,927,813 +335,126 +6,029,346 +Chief Operating Officer +2015 +935,000 +625,044 +1,353,600 +1,821,228 +217,309 +4,952,181 +2014 +935,000 +625,011 +1,114,170 +1,471,993 +203,559 +4,349,733 +Jeanne P. Jackson +2016 +923,077 +500,042 +2,153,050 +1,865,989 +189,511 +5,631,669 +President, Product and +2015 +885,000 +625,044 +1,269,000 +1,755,964 +168,378 +4,703,386 +Merchandising +2014 +885,000 +625,011 +1,114,170 +1,429,234 +159,979 +4,213,394 +(1) +Represents the grant date fair value of restricted stock and restricted stock unit awards granted in the applicable year computed in accordance with accounting guidance applicable to stock-based compensation. The grant date fair value is based on the closing market price of our Class B Stock on the grant date. +(2) +Represents the grant date fair value of options granted in the applicable year computed in accordance with accounting guidance applicable to stock-based compensation. The grant date fair value of the options was estimated using the Black-Scholes option pricing model. The assumptions made in determining the grant date fair values of options under applicable accounting guidance are disclosed in Note 11 of Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended May 31, 2016. +(3) +Non-Equity Incentive Plan Compensation consists of the following: +NIKE, INC. Ÿ 2016 Notice of Annual Meeting 28 +EXECUTIVE COMPENSATION +Name +Fiscal Year +Annual Incentive +Compensation +($) +Long-Term Incentive +Compensation +($) +Total +($) +Mark G. Parker +2016 +2,577,402 +4,728,500 +7,305,902 +2015 +4,046,337 +4,205,600 +8,251,937 +2014 +2,503,777 +4,034,400 +6,538,177 +Andrew Campion +2016 +759,647 +1,013,250 +1,772,897 +Donald W. Blair +2016 +— +— +— +2015 +1,109,480 +600,800 +1,710,280 +2014 +726,903 +672,400 +1,399,303 +Trevor A. Edwards +2016 +1,006,019 +1,215,900 +2,221,919 +2015 +1,356,031 +600,800 +1,956,831 +2014 +888,437 +672,400 +1,560,837 +Eric D.Sprunk +2016 +914,563 +1,013,250 +1,927,813 +2015 +1,220,428 +600,800 +1,821,228 +2014 +799,593 +672,400 +1,471,993 +Jeanne P. Jackson +2016 +852,739 +1,013,250 +1,865,989 +2015 +1,155,164 +600,800 +1,755,964 +2014 +756,834 +672,400 +1,429,234 +Amounts shown in the Annual Incentive Compensation column were earned for performance in the applicable fiscal year under our Executive Performance Sharing Plan. Amounts shown in the Long-Term Incentive Compensation column were earned for performance during the three -year period ending with the applicable fiscal year under our Long-Term Incentive Plan. +(4) +For fiscal 2016 for each of the Named Executive Officers except for Mr. Blair, this includes profit-sharing contributions by us to the 401(k) Savings and Profit Sharing Plan in the amount of $10,399 and matching contributions by us to the 401(k) Savings and Profit Sharing Plan in the amount of $13,250 for Messrs. Parker, Campion, Edwards and Sprunk, and Ms. Jackson and $7,094 for Mr. Blair. Also includes profit-sharing contributions by us to the Deferred Compensation Plan in the following amounts: $209,215 for Mr. Parker, $57,009 for Mr. Campion, $81,665 for Mr. Edwards, $76,344 for Mr. Sprunk, and $71,156 for Ms. Jackson. Includes dividends paid on restricted stock and dividend equivalents credited (but not paid) on unvested restricted stock units in the following amounts: $813,901 for Mr. Parker, $12,341 for Mr. Campion, $25,827 for Mr. Blair, $151,797 for Mr. Edwards, $148,363 for Mr. Sprunk, and $94,705 for Ms. Jackson. This amount includes $5,388 for Mr. Campion and $4,425 for Mr. Edwards for Financial Advisory Services. Also includes the cost of daily residential security, including monitoring, patrols, and installation at primary residences provided by the Company in the following amounts: $17,808 for Mr. Parker, $7,093 for Mr. Campion, $8,904 for Mr. Edwards, and $86,770 for Mr. Sprunk. For Mr. Blair, this amount includes $212,500 in non-compete payments. For Mr. Parker, this amount includes the aggregate incremental cost to the Company for his personal use of the Company’s aircraft for travel to and from the board and shareholder meetings of an outside company for which Mr. Parker serves as a director. The aggregate incremental cost is determined based on the variable operating cost to the Company including the cost of fuel, maintenance, crew travel expenses, landing fees, parking fees, in-flight food and beverage and other smaller variable costs associated with each flight. This amount excludes the aggregate incremental cost to the Company for Mr. Parker’s personal use of the Company’s aircraft for which Mr. Parker reimbursed the Company in accordance with a time sharing agreement and as allowed under Federal Aviation Regulation 91.501(c) and (d). +NIKE, INC. Ÿ 2016 Notice of Annual Meeting 29 +EXECUTIVE COMPENSATION +Grants of Plan-Based Awards in Fiscal 2016 +The following table sets forth information concerning the long-term incentive bonus opportunities, annual incentive bonus opportunities, restricted stock and restricted stock unit awards and stock options granted to the Named Executive Officers in fiscal 2016. +Estimated Possible Payouts Under +Non-Equity Incentive Plan Awards +Threshold +Target +Maximum +Estimated Possible Payout Under Equity Incentive Plan Awards (3) +All Other Stock Awards: +Number of Shares of +Stock (5) +All Other +Option Award: +Number of +Shares +Underlying +Options (6) +Exercise +or Base Price +of Option +Awards +Grant Date +Fair Value +of Stock +and Option +Awards (7) +Name +Grant Date +($) +($) +($) +(#) +(#) +(#) +($/Sh) +($) +Mark G. +6/18/2015 +1,395,000 (1) +2,790,000 (1) +4,185,000 (1) +Parker +6/18/2015 +1,750,000 (2) +3,500,000 (2) +7,000,000 (2) +6/30/2015 +333,272 +222,182 (4) +30,000,071 +7/17/2015 +62,058 +3,500,071 +7/17/2015 +330,000 +56.40 +4,179,450 +Andrew +6/18/2015 +415,000 (1) +830,000 (1) +1,245,000 (1) +Campion +6/18/2015 +375,000 (2) +750,000 (2) +1,500,000 (2) +7/17/2015 +11,082 +625,025 +7/17/2015 +120,000 +56.40 +1,519,800 +Trevor A. +6/18/2015 +550,000 (1) +1,100,000 (1) +1,650,000 (1) +Edwards +6/18/2015 +500,000 (2) +1,000,0000 (2) +2,000,000 (2) +7/17/2015 +15,516 +875,102 +7/17/2015 +180,000 +56.40 +2,279,700 +Eric D. +6/18/2015 +500,000 (1) +1,000,000 (1) +1,500,000 (1) +Sprunk +6/18/2015 +375,000 (2) +750,000 (2) +1,500,000 (2) +7/17/2015 +13,298 +750,007 +7/17/2015 +160,000 +56.40 +2,026,400 +Jeanne P. +6/18/2015 +465,000 (1) +930,000 (1) +1,395,000 (1) +Jackson +6/18/2015 +375,000 (2) +750,000 (2) +1,500,000 (2) +7/17/2015 +8,866 +500,042 +7/17/2015 +170,000 +56.40 +2,153,050 +(1) +These amounts represent the potential bonuses payable for performance during fiscal 2016 under our Executive Performance Sharing Plan. Under this plan, the Compensation Committee approved target awards for fiscal 2016 based on a percentage of the executive’s base salary paid during fiscal 2016 as follows: Mr. Parker, 180%; Mr. Campion, 100%; Mr. Edwards, 110%; Mr. Sprunk, 100%; and Ms. Jackson, 100%. The Committee also established a series of performance targets based on our income before income taxes (“PTI”) for fiscal 2016 (excluding the effect of acquisitions, divestitures and accounting changes) corresponding to award payouts ranging from 50% to 150% of the target awards. The PTI for fiscal 2016 required to earn the target award payout was $4,680 million. The PTI for fiscal 2016 required to earn the 150% maximum payout was $5,054 million. The PTI for fiscal 2016 required to earn the 50% threshold payout was $4,306 million. Participants receive a payout at the percentage level at which the performance target is met, subject to the Committee’s discretion to reduce or eliminate any award based on Company or individual performance. Actual award payouts earned in fiscal 2016 and paid in fiscal 2017 are shown in footnote 4 to the Non-Equity Incentive Plan Compensation column in the Summary Compensation Table. +(2) +These amounts represent the potential long-term incentive awards payable for performance during the three-year period consisting of fiscal 2016-2018 under our Long-Term Incentive Plan. Under this plan, the Compensation Committee approved target awards for the performance period and also established a series of performance targets based on our cumulative revenues and cumulative diluted earnings per common share (“EPS”) for the performance period (excluding the effect of acquisitions, divestitures and accounting changes not reflected in our business plan at the time of approval of the target awards) corresponding to award payouts ranging from 50% to 200% of the target awards. Participants will receive a payout at the average of the percentage levels at which the two performance targets are met, subject to the Committee’s discretion to reduce or eliminate any award based on Company or individual performance. For cumulative revenues over the performance period, the target payout requires revenues of $105,266 million, the 50% threshold payout requires revenues of $101,293 million, and the 200% maximum payout requires revenues of $113,521 million. For cumulative EPS over the performance period, the target payout requires EPS of $7.12, the 50% threshold payout requires EPS of $6.61, and the 200% maximum payout requires EPS of $8.225. Under the terms of the awards, on the first payroll period ending in August 2018 we will issue the award payout to each participant, provided that the participant is employed by us on the last day of the performance period. +NIKE, INC. Ÿ 2016 Notice of Annual Meeting 30 +EXECUTIVE COMPENSATION +(3) +This amount represents the grant of performance-based restricted stock units (“Performance-Based RSUs”) to Mr. Parker under our Stock Incentive Plan, based on the Company’s performance during the five-year period consisting of fiscal 2016-2020. This Performance-Based RSU award represents 60% of a retention RSU award granted to Mr. Parker on June 30, 2015, with an additional 40% subject only to time vesting (the “Time-Based RSUs” described in footnote (4) below). Under this Performance-Based RSU award, a target number of 333,272 shares, are subject to performance vesting based on our cumulative revenue growth and cumulative EPS growth for the performance period (excluding the effect of acquisitions, divestitures and accounting changes not reflected in our business plan at the time of approval of the target awards). For Mr. Parker to earn the maximum payout for the Performance-Based RSUs (100% of the target number of shares), the Company must achieve a 9% compound annual growth rate (“CAGR”) from fiscal 2015 for cumulative revenues over the five-year performance period, and a 13% CAGR from fiscal 2015 for cumulative EPS. For Mr. Parker to earn a threshold payout of 50% of the target number of shares of the Performance-Based RSUs, the Company must achieve cumulative revenues corresponding to a 7% CAGR, and for EPS, cumulative EPS corresponding to a 9% CAGR. These are higher CAGRs for revenue and the same CAGRs for EPS established by the Committee for target and threshold payouts under the LTIP for the fiscal 2016-2018 performance period. Payout may occur at 25% of the target number of shares of the Performance-Based RSUs if either the revenue or EPS related percentage achievement is less than threshold, but percentage achievement of the other target is at the threshold level. Additional shares will be earned for the Performance-Based RSUs pro rata for performance between the threshold and maximum levels. If performance is not achieved at the threshold level for either target, no shares will be earned for the Performance-Based RSUs. The Performance-Based RSUs are also subject to time vesting and will not be earned unless Mr. Parker remains employed with the Company through June 30, 2020. In addition, the vesting of the Performance-Based RSUs will accelerate fully in the event of a “double trigger” change in control, but will vest at threshold levels in the event of his death or disability. The terms “change in control”, and “double trigger” are as defined in the Company’s current form of Restricted Stock Unit Agreement. Mr. Parker’s Performance-Based RSU award is otherwise subject to the other terms of the Company’s current Restricted Stock Unit Agreement, as modified by the Committee to expand the Company’s ability to recoup issued RSUs in the event of breach of confidentiality or violation of other specified obligations to the Company, including breach of any covenant not to compete and non-solicitation of non-disclosure agreement, or material breach of any other agreement with the Company. +(4) +The Time-Based RSU portion of Mr. Parker’s June 30, 2015 retention RSU award, or 222,182 shares, is subject only to time vesting and will be earned if Mr. Parker remains employed with the Company through June 30, 2020. The vesting of Mr. Parker’s Time-Based RSUs will accelerate fully in the event of his death, disability or a “double trigger” change in control. The terms “change in control,” “double trigger” are as defined in the Company’s current form of Restricted Stock Unit Agreement. Mr. Parker’s Time-Based RSU award is otherwise subject to the other terms of the Company’s current form of Restricted Stock Unit Agreement, as modified by the Committee to expand the Company’s ability to recoup issued RSUs in the event of breach of confidentiality or violation of other specified obligations to the Company, including breach of any covenant not to compete and non-solicitation or non-disclosure agreement, or material breach of any other agreement with the Company. +(5) +All amounts reported in this column represent grants of restricted stock under our Stock Incentive Plan. Restricted stock generally vests in three equal installments on the first three anniversaries of the grant date. Vesting will be accelerated in certain circumstances as described below under “Potential Payments Upon Termination or Change-in-Control.” Dividends are payable on restricted stock at the same rate paid on all other outstanding shares of our Class B Stock. +(6) +All amounts reported in this column represent options granted under our Stock Incentive Plan. Options generally become exercisable for option shares in four equal installments on the first four anniversaries of the grant date. Options will become fully exercisable in certain circumstances as described below under “Potential Payments Upon Termination or Change-in-Control.” Each option has a maximum term of 10 years, subject to earlier termination in the event of the optionee’s termination of employment. +(7) +For stock awards, represents the value of restricted shares granted based on the closing market price of our Class B Stock on the grant date. For option awards, represents the grant date fair value of options granted based on a value of $12.665 per share calculated using the Black-Scholes option pricing model. These are the same values for these equity awards used under accounting guidance applicable to stock-based compensation. The assumptions made in determining option values are disclosed in Note 11 of Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended May 31, 2016. +NIKE, INC. Ÿ 2016 Notice of Annual Meeting 31 +EXECUTIVE COMPENSATION +Outstanding Equity Awards at May 31, 2016 +The following table sets forth information concerning outstanding stock options and unvested restricted stock and restricted stock units held by the Named Executive Officers at May 31, 2016. +Option Awards +Stock Awards +Name +Number of Securities Underlying Unexercised Options Exercisable (#) +Number of +Securities +Underlying +Unexercised +Options (#) (1) +Option Exercise Price ($) +Option Expiration Date +Number of Shares That Have Not Vested (#) +Market Value of Shares That Have Not Vested ($) +Mark G. Parker +419,300 +— +14.6300 +7/20/2017 +540,000 +— +14.5500 +7/18/2018 +600,000 +— +13.1100 +7/17/2019 +660,000 +— +17.2400 +7/16/2020 +660,000 +— +22.9250 +7/15/2021 +495,000 +165,000 +(2) +23.2700 +7/20/2022 +165,000 +165,000 +(3) +31.6750 +7/19/2023 +82,500 +247,500 +(4) +38.7600 +7/18/2024 +— +330,000 +(5) +56.4000 +7/17/2025 +1,473,272 (6) +81,354,080 +Andrew Campion +20,000 +— +13.1100 +7/17/2019 +70,000 +— +17.2400 +7/16/2020 +103,000 +— +22.9250 +7/15/2021 +90,000 +30,000 +(2) +23.2700 +7/20/2022 +30,000 +30,000 +(3) +31.6750 +7/19/2023 +20,000 +60,000 +(4) +38.7600 +7/18/2024 +— +120,000 +(5) +56.4000 +7/17/2025 +21,023 (7) +1,160,890 +Donald W. Blair +200,000 +— +17.2400 +7/16/2020 +200,000 +— +22.9250 +7/15/2021 +180,000 +60,000 +(2) +23.2700 +7/20/2022 +75,000 +75,000 +(3) +31.6750 +7/19/2023 +37,500 +112,500 +(4) +38.7600 +7/18/2024 +Trevor A. Edwards +200,000 +— +14.6300 +7/20/2017 +200,000 +— +14.5500 +7/18/2018 +200,000 +— +13.1100 +7/17/2019 +200,000 +— +17.2400 +7/16/2020 +200,000 +— +22.9250 +7/15/2021 +180,000 +60,000 +(2) +23.2700 +7/20/2022 +75,000 +75,000 +(3) +31.6750 +7/19/2023 +40,000 +120,000 +(4) +38.7600 +7/18/2024 +251,180 (8) +13,870,160 +— +180,000 +(5) +56.4000 +7/17/2025 +Eric D. Sprunk +176,040 +— +17.2400 +7/16/2020 +200,000 +— +22.9250 +7/15/2021 +180,000 +60,000 +(2) +23.2700 +7/20/2022 +75,000 +75,000 +(3) +31.6750 +7/19/2023 +40,000 +120,000 +(4) +38.7600 +7/18/2024 +— +160,000 +(5) +56.4000 +7/17/2025 +245,497 (9) +13,556,344 +Jeanne P. Jackson +200,000 +— +22.9250 +7/15/2021 +180,000 +60,000 +(2) +23.2700 +7/20/2022 +75,000 +75,000 +(3) +31.6750 +7/19/2023 +37,500 +112,500 +(4) +38.7600 +7/18/2024 +— +170,000 +(5) +56.4000 +7/17/2025 +155,117 (10) +8,565,561 +(1) +Stock options generally become exercisable for option shares in four equal installments on each of the first four anniversaries of the grant date. +(2) +100% of these shares vested on July 20, 2016. +(3) +50% of these shares vested on July 19, 2016 and 50% will vest on July 19, 2017. +(4) +33.3% of these shares vested on July 18, 2016, 33.3% will vest on July 18, 2017, and 33.3% will vest on July 18, 2018. +(5) +25% of these shares vested on July 17, 2016, 25% will vest on July 17, 2017, 25% will vest on July 17, 2018, and 25% will vest on July 17, 2019. +NIKE, INC. Ÿ 2016 Notice of Annual Meeting 32 +EXECUTIVE COMPENSATION +(6) +20,686 of these shares vested on July 17, 2016, 20,686 of these shares will vest on July 17, 2017, and 20,686 of these shares will vest on July 17, 2018. 30,100 of these shares vested on July 18, 2016, and 30,100 of these shares will vest on July 18, 2017. 36,832 of these shares vested on July 19, 2016. 758,728 of these shares will vest on May 18, 2017. 555,454 of these shares will vest on June 30, 2020. +(7) +3,694 of these shares vested on July 17, 2016, 3,694 of these shares will vest on July 17, 2017, and 3,694 of these shares will vest on July 17, 2018. 3,655 of these shares vested on July 18, 2016, and 3,655 of these shares will vest on July 18, 2017. 2,631 of these shares vested on July 19, 2016. +(8) +5,172 of these shares vested on July 17, 2016, 5,172 of these shares will vest on July 17, 2017, and 5,172 of these shares will vest on July 17, 2018. 6,450 of these shares vested on July 18, 2016, and 6,450 of these shares will vest on July 18, 2017. 7,892 of these shares vested on July 19, 2016. 214,872 of these shares will vest on July 20, 2017. +(9) +4,433 of these shares vested on July 17, 2016, 4,433 of these shares will vest on July 17, 2017, and 4,432 of these shares will vest on July 17,2018. 5,375 of these shares will vest on July 18, 2016, and 5,375 of these shares will vest on July 18, 2017. 6,577 of these shares vested on July 19, 2016., 214,872 of these shares will vest on July 20, 2017. +(10) +2,956 of these shares vested on July 17, 2016, 2,955 of these shares will vest on July 17, 2017, and 2,955 of these shares will vest on July 17, 2018. 5,375 of these shares vested on July 18, 2016, and 5,375 of these shares will vest on July 18, 2017. 6,577 of these shares vested on July 19, 2016. 128,924 of these shares will vest on July 20, 2017. +Option Exercises and Stock Vested During Fiscal 2016 +The following table sets forth information concerning stock option exercises and vesting of restricted stock during fiscal 2016 for each of the Named Executive Officers on an aggregated basis. +Option Awards +Stock Awards +Name +Number of Shares +Acquired on Exercise +(#) +Value Realized +on Exercise +($) +Number of Shares +Acquired on Vesting +(#) +Value Realized +on Vesting +($) +Mark G. Parker +1,120,700 +53,650,260 +117,068 +6,610,908 +Andrew Campion +— +— +9,152 +516,645 +Donald W. Blair +200,000 +9,549,000 +149,829 +8,473,105 +Trevor A. Edwards +458,690 +23,129,098 +23,294 +1,315,259 +Eric D. Sprunk +410,328 +20,382,636 +20,906 +1,180,575 +Jeanne P. Jackson +232,000 +9,602,539 +20,550 +1,160,438 +Equity Compensation Plan Information +The following table summarizes information regarding outstanding options and shares available for future issuance under equity compensation plans approved by shareholders and equity compensation plans that were not approved by shareholders as of May 31, 2016. The table does not reflect issuances made during fiscal 2017. +Plan Category +(a) +Number of Securities +to be Issued Upon Exercise of +Outstanding Options, Warrants and Rights +(b) +Weighted-Average Exercise +Price of Outstanding +Options, Warrants and Rights (3) +(c) +Number of Securities +Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column(a)) +Equity compensation plans approved by shareholders (1) +115,276,056 +$30.3829 +113,043,579 +Equity compensation plans not approved by shareholders (2) +— +— +1,332,945 +Total +115,276,056 +$30.3829 +114,376,524 +(1) +Includes 115,276,056 shares subject to awards of options, restricted stock units and stock appreciation rights outstanding under the Stock Incentive Plan. Includes 108,263,326 shares available for future issuance under the Stock Incentive Plan, and 4,780,253 shares available for future issuance under the Employee Stock Purchase Plan. Includes the full award value of RSUs granted to Mr. Parker of 333,272 shares subject to five-year and performance vesting. +(2) Includes 1,332,945 shares available for future issuance under the Foreign Subsidiary Employee Stock Purchase Plan, pursuant to which shares are offered and sold to employees of selected non-U.S. subsidiaries of the Company on substantially the same terms as those offered to U.S. employees under the shareholder-approved Employee Stock Purchase Plan. +(3) These weighted-average exercise prices do not reflect the shares that will be issued upon the payment of outstanding awards of restricted stock units. +NIKE, INC. Ÿ 2016 Notice of Annual Meeting 33 +EXECUTIVE COMPENSATION +Non-Qualified Deferred Compensation in Fiscal 2016 +Name +Plan +Name +Executive +Contributions +in Fiscal 2016 (1) +NIKE Contributions +in Fiscal 2016 (1) +Aggregate Earnings +in Fiscal 2016 +Aggregate +Withdrawals/ +Distributions in +Fiscal 2016 +Aggregate +Balance +at 5/31/2016 (1) +Mark G. Parker +DCP +$1,617,328 +$156,860 +$16,211 +— +$12,655,863 +Andrew Campion +DCP +164,461 +44,389 +17,458 +— +679,600 +Donald W. Blair +DCP +1,877,139 +54,449 +(240,815) +94,297 +14,749,589 +Trevor A. Edwards +DCP +1,442,759 +64,643 +6,058 +— +15,099,939 +Eric D. Sprunk +DCP +760,414 +60,969 +(147,378) +— +7,487,007 +Jeanne P. Jackson +DCP +— +57,134 +(41,888) +— +1,249,630 +(1) +All amounts reported in the Executive Contributions column are also included in amounts reported in the Summary Compensation Table. The amounts reported in the NIKE Contributions column represent profit sharing contributions made by us in early fiscal 2016 based on fiscal 2015 results; these amounts are also included in amounts reported for fiscal 2015 in the All Other Compensation column of the Summary Compensation Table. Of the amounts reported in the Aggregate Balance column, the following amounts have been reported in the Summary Compensation Tables in this proxy statement or in prior year proxy statements: Mr. Parker, $11,674,444; Mr. Campion, $208,850, Mr. Blair, $11,257,325; Mr. Edwards, $7,872,940; Mr. Sprunk, $2,837,867; and Ms. Jackson, $173,172. +Non-Qualified Deferred Compensation Plans +The Named Executive Officers are eligible to participate in our Deferred Compensation Plan (the “DCP”). Participants in the DCP may elect in advance to defer up to 100 percent of their annual base salary, bonus and long-term incentive payments. +Each year, we share profits with our employees in the form of profit sharing contributions to defined contribution retirement plans. The contributions are allocated among eligible employees based on a percentage of their total salary and bonus for the year. To the fullest extent permitted under Internal Revenue Code limitations, these contributions are made to employees’ accounts under our qualified 401(k) Savings and Profit Sharing Plan. Contributions based on salary and bonus in excess of the tax law limit ($265,000 for fiscal 2016) are made as NIKE contributions under the DCP. +Amounts deferred under the DCP are credited to a participant’s account under the DCP. Each participant may allocate his or her account among any combination of the investment funds available under the DCP. Participants’ accounts are adjusted to reflect the investment performance of the funds selected by the participants. Participants can change the allocation of their account balances daily. The funds available under the DCP consist of 16 mutual funds with a variety of investment objectives. The investment funds had annual returns in fiscal 2016 ranging from -14.59% to 10.44%. Amounts credited to participants’ accounts are invested by us in actual investments matching the investment options selected by the participants to ensure that we do not bear any investment risk related to participants’ investment choices. +The portion of a participant’s account attributable to elective deferrals, including investment returns, is fully vested at all times. The portion of a participant’s account attributable to NIKE contributions, including investment returns, is fully vested after the participant has been employed by us for five years. All of the Named Executive Officers are fully vested in their NIKE contributions. +Each time they elect to defer compensation, participants make an election regarding distribution of the compensation deferred under the election (as adjusted to reflect investment performance). A participant may elect for distribution to be made in a lump sum at the beginning of a predetermined year while the participant is still employed or in service (but no sooner than the fourth year after the year in which the distribution election is submitted). Alternatively, a participant may elect for distribution to be made in a lump sum or in quarterly installments over five, ten or fifteen years after termination of employment or service. Participants have limited rights to change their distribution elections. Participants may make a hardship withdrawal under certain circumstances. Subject to certain limitations, a participant may also at any time request to withdraw amounts from his or her account balance that were vested as of December 31, 2004 (and any subsequent investment returns on such amount). If such request is approved, the participant may withdraw 90% of the amount requested, and the remaining 10% will be permanently forfeited. +Potential Payments Upon Termination or Change-in-Control +Change-in-Control Compensation — Acceleration of Equity Awards +All unvested stock option, restricted stock, and restricted stock unit (“RSU”) awards are subject to accelerated vesting upon the occurrence of two events (a “double trigger”): there is a “change in control” and the Named Executive Officer’s employment is terminated by us without “cause” or by the Named Executive Officer for “good reason,” in each case on or before the second anniversary of the change in control. In addition, for stock options granted since July 2010, the standard period for exercising options following termination of employment is extended from three months to four years, but not beyond each option’s original 10-year term. A double trigger with respect to vesting of stock options and RSUs will also occur if we are acquired and the acquiring company does not assume the outstanding options or RSUs. In our agreements, “change in control” is generally defined to include: +• +the acquisition by any person of 50% or more of our outstanding Class A Stock or, if the Class A Stock no longer elects a majority of directors, the acquisition by any person of 30% or more of our total outstanding Common Stock, +• +the nomination (and subsequent election) in a two-year period of a majority of our directors by persons other than the incumbent directors, and a sale of all or substantially all of our assets, or an acquisition of NIKE through a merger, consolidation or share exchange. +NIKE, INC. Ÿ 2016 Notice of Annual Meeting 34 +EXECUTIVE COMPENSATION +In our agreements, “cause” generally includes willful and continued failure to substantially perform assigned duties and willful engagement in illegal conduct materially injurious to us. In our agreements, “good reason” generally includes a material diminution in position or duties, a salary reduction or material reduction in other benefits, and a home office relocation of over 50 miles. +The following table shows the estimated benefits that would have been received by the Named Executive Officers if a double trigger had occurred on May 31, 2016, when the closing price of our Class B Stock was $55.22 per share. +Name +Stock Award +Acceleration (1) +Stock Option +Acceleration (2) +Total +Mark G. Parker +$ +81,354,080 +$ +17,785,717 +$ +99,139,797 +Andrew Campion +1,160,890 +4,171,433 +5,332,323 +Donald W. Blair +— +6,014,004 +6,014,004 +Trevor A. Edwards +13,870,160 +8,074,000 +21,944,160 +Eric D. Sprunk +13,556,344 +7,861,845 +21,418,189 +Jeanne P. Jackson +8,565,561 +7,817,322 +16,382,883 +(1) +Information regarding unvested restricted stock and restricted stock units held by each Named Executive Officer is set forth in the Outstanding Equity Awards table above. The award agreements provide that all shares will immediately vest upon the occurrence of a double trigger. The amounts in the table above represent the number of unvested restricted shares and RSUs multiplied by the closing price of our Class B Stock on May 31, 2016. +(2) +Information regarding outstanding unexercisable options held by each Named Executive Officer is set forth in the Outstanding Equity Awards table above. The agreements governing unvested stock options provide that upon the occurrence of a double trigger all unexercisable options will immediately become fully exercisable and the standard three-month period for exercising options following termination of employment will be extended to four years, but not beyond each option’s original 10-year term. Amounts in the table above represent the sum of (i) for each Named Executive Officer’s outstanding unexercisable options, the aggregate value as of May 31, 2016 of those options assuming a four-year remaining term and otherwise calculated using the Black-Scholes option pricing model with assumptions consistent with those used by us for valuing our options under accounting guidance applicable to stock-based compensation, plus (ii) for each Named Executive Officer’s outstanding exercisable options granted since July 2010, the increase in value of those options resulting from the extension of the post-termination exercise period from three months to four years, with the option values for three-month and four-year remaining terms calculated using the Black-Scholes option pricing model with assumptions consistent with those used for valuing our options under accounting guidance applicable to stock-based compensation. +Benefits Triggered on Certain Employment Terminations +Stock Option Acceleration and Extension +As of May 31, 2016, each Named Executive Officer held options to purchase Class B Stock as listed in the Outstanding Equity Awards table above. Under the terms of the stock options granted to each Named Executive Officer before July 2010, upon the death or disability of the officer, the standard three-month period for exercising options following termination of employment is extended to 12 months, but not beyond each option’s original 10-year term. Under the terms of the stock options granted to each Named Executive Officer since July 2010, upon the death or disability of the officer, all unexercisable options become fully exercisable and the standard three-month period for exercising options following termination of employment is extended to four years, but not beyond each option’s original 10-year term. If death or disability of a Named Executive Officer had occurred on May 31, 2016, the sum of (i) for outstanding unexercisable options that would have become exercisable, the aggregate value as of May 31, 2016 of those options assuming a four-year remaining term, in the case of options granted since July 2010, and otherwise calculated using the Black-Scholes option pricing model with assumptions consistent with those used by us for valuing our options under accounting guidance applicable to stock-based compensation, plus (ii) for outstanding exercisable options, the increase in value, if any, of those options resulting from the extension of the post-termination exercise period from three months to 12 months, in the case of options granted before July 2010, and from three months to four years, in the case of options granted since July 2010, with the option values as of May 31, 2016 for three-month, 12-month and four-year remaining terms calculated using the Black-Scholes option pricing model with assumptions consistent with those used by us for valuing our options under accounting guidance applicable to stock-based compensation, is $17,627,886 for Mr. Parker, $8,002,259 for Mr. Edwards, $7,790,104 for Mr. Sprunk, $7,745,580 for Ms. Jackson, $5,942,263 for Mr. Blair and $4,142,737 for Mr. Campion. +Under the terms of the unvested stock options granted to Named Executive Officers since July 2010, vesting of options that have been outstanding for at least one year will be accelerated if the holder retires after reaching age 60 with at least 5 years of service, and vesting of options that have been outstanding for at least one year will continue notwithstanding termination of employment if the holder retires after reaching age 55 with at least 5 years of service. In addition, for any holder who retires after reaching age 55 with at least 5 years of service, the standard three-month period for exercising these options following termination of employment will be extended to four years, but not beyond the option’s original 10-year term. If termination of employment of a Named Executive Officer (other than due to death or disability) had occurred on May 31, 2016, the sum of (i) for outstanding unexercisable options that would have become exercisable, the aggregate value as of May 31, 2016 of those options assuming a four-year remaining term and otherwise calculated using the Black-Scholes option pricing model with assumptions consistent with those used by us for valuing our options under accounting guidance applicable to stock-based compensation, plus (ii) for outstanding exercisable options granted since July 2010, the increase in value, if any, of those options resulting from the extension of the post-termination exercise period from three months to four years, with the option values as of May 31, 2016 for three-month and four-year remaining terms calculated using the Black-Scholes option pricing model with assumptions consistent with those used by us for valuing our options under accounting guidance applicable to stock-based compensation, is $14,127,329 for Mr. Parker and $5,942,263 for Mr. Blair and Ms. Jackson. The value for Messrs. Sprunk, Campion and Edwards is zero because they have not reached age 55. +NIKE, INC. Ÿ 2016 Notice of Annual Meeting 35 +EXECUTIVE COMPENSATION +Stock Award Acceleration +As of May 31, 2016, each Named Executive Officer held unvested restricted stock and restricted stock units as set forth in the Outstanding Equity Awards table above. Under the terms of their award agreements, all unvested restricted shares and restricted stock units will immediately vest fully upon the death or disability of the officer, except that Performance-Based RSUs held by Mr. Parker will vest at the threshold amount. The value of the unvested restricted shares and restricted stock units held by each Named Executive Officer as of May 31, 2016 that would have become vested if death or disability had occurred on that date is as set forth in the “Stock Award Acceleration” column of the Change-in-Control Compensation — Acceleration of Equity Awards table above, except that the amount for Mr. Parker would be $72,152,440. +Payments Under Noncompetition Agreements +We have an agreement with Mr. Parker that contains a covenant not to compete that extends for two years following the termination of his employment with us. The agreement provides that if Mr. Parker’s employment is terminated by us, we will make monthly payments to him during the two-year noncompetition period in an amount equal to one-twelfth of his then current annual salary and target Performance Sharing Plan bonus (“Annual NIKE Income”). The agreement provides further that if Mr. Parker voluntarily resigns, we will make monthly payments to him during the two-year noncompetition period in an amount equal to one-twenty-fourth of his then current Annual NIKE Income. However, commencement of the above-described monthly payments will be delayed until after the six-month period following Mr. Parker’s separation from service, and all payments that he would otherwise have received during that period will be paid in a lump sum promptly following the end of the period, together with interest at the prime rate. If employment is terminated without cause, the parties may mutually agree to waive the covenant not to compete, and if employment is terminated for cause, we may unilaterally waive the covenant. If the covenant is waived, we will not be required to make the payments described above for the months as to which the waiver applies. If the employment of Mr. Parker had been terminated by us on May 31, 2016 and assuming the covenant is not waived, we would have been required to pay Mr. Parker $361,667 per month for the 24-month period ending May 31, 2018. If Mr. Parker had voluntarily resigned on May 31, 2016 and assuming the covenant is not waived, we would have been required to pay Mr. Parker $180,833 per month for the 24-month period ending May 31, 2018. +We have noncompetition agreements with Messrs. Campion, Sprunk and Edwards, and Ms. Jackson on the same terms, except that the noncompetition period is one year instead of two years, the six-month delay for commencement of payments does not apply and we may unilaterally waive the covenant in all cases including termination without cause. In addition, for Messrs. Campion, Sprunk and Edwards, and Ms. Jackson, the monthly payments are one-twelfth or one-twenty-fourth of their current annual salaries, instead of their Annual NIKE Income. If the employment of these officers had been terminated by us on May 31, 2016 and assuming the covenant is not waived, we would have been required to pay Mr. Campion $69,167 per month, Messrs. Sprunk and Edwards $83,833 per month, and Ms. Jackson $77,500 for the 12-month period ending May 31, 2017. If these officers had voluntarily resigned on May 31, 2015 and assuming the covenant is not waived, we would have been required to pay Mr. Campion $34,583 per month, Messrs. Sprunk and Edwards $41,667 per month, and Ms. Jackson $38,750 per month for the 12-month period ending May 31, 2017. Mr. Blair had non-competition agreement on the same terms as those set forth in this paragraph and as a result of his retirement effective July 31, 2015, received $212,500 in noncompetition payments. +NIKE, INC. Ÿ 2016 Notice of Annual Meeting 36 +PROPOSAL 2 +Proposal 2 +Shareholder Advisory Vote to Approve +Executive Compensation +We are submitting to shareholders our annual “say-on-pay proposal,” an advisory vote to approve the compensation of our Named Executive Officers as described in this proxy statement. +At the Company’s 2015 annual meeting of shareholders, 89% of the votes cast on the say-on-pay proposal were voted in favor of the proposal. The Compensation Committee believes this affirms shareholders’ support of the Company’s approach to executive compensation. +As discussed in the Compensation Discussion and Analysis, our compensation philosophy is designed to attract and retain highly talented individuals, provide rewards for strong business results and individual performance, and motivate executives to maximize long-term shareholder value. The program is competitive in the marketplace, highly incentive-based to align interests of executives with those of shareholders, and balanced across incentives to appropriately mitigate risk. +To achieve the objectives of our executive compensation program and emphasize pay-for-performance principles, the Compensation Committee has continued to employ the strong governance practices described in “Executive Compensation Governance Practices” on page 16, including: +• +basing a majority of total compensation on performance and retention incentives; +• +setting annual and long-term incentive targets based on clearly disclosed, objective performance measures and the Company’s performance goals; +• +mitigating undue risk associated with compensation by using multiple performance targets, caps on potential incentive payments and a clawback policy; and +• +requiring executive officers and non-employee directors to hold NIKE stock through published stock ownership guidelines. +Because your vote is advisory, it will not be binding on the Board. However, the Board values shareholder opinions, and the Compensation Committee will take into account the outcome of the vote when considering future executive compensation arrangements. +Board Recommendation +The Board of Directors recommends that shareholders vote FOR approval of the compensation paid to the Named Executive Officers as disclosed pursuant to the SEC’s compensation disclosure rules (which disclosure includes the Compensation Discussion and Analysis, the compensation tables, and the narrative disclosures that accompany the compensation tables). +NIKE, INC. Ÿ 2016 Notice of Annual Meeting 37 +PROPOSAL 3 +Proposal 3 +Approval of Amendment to the NIKE, Inc. Employee Stock Purchase Plan to Increase the Number of Shares Authorized Under the Plan +The Company’s Employee Stock Purchase Plan (the “ESPP”) was adopted by the Board of Directors and shareholders in 2001. The ESPP is intended to qualify as an “employee stock purchase plan” under Section 423 of the Internal Revenue Code of 1986, as amended (the “Code”). The ESPP is intended to provide a convenient and practical means by which employees may participate in stock ownership of the Company. An aggregate of 40,000,000 shares of Class B Stock (as adjusted to reflect the two-for-one stock split of Class B Stock effected on December 23, 2015) has been reserved for issuance under the ESPP. As of May 31, 2016, only 6,113,198 shares of Class B Stock were available for purchase under the ESPP. +The Board of Directors believes that the ESPP promotes the interests of the Company and its shareholders by encouraging employees of the Company and participating subsidiaries to become shareholders, and therefore promotes the Company’s growth and success. The Board also believes that the opportunity to acquire a proprietary interest in the success of the Company through the acquisition of shares of Class B Stock pursuant to the ESPP is an important aspect of the Company’s ability to attract and retain highly qualified and motivated employees. The Board believes that it is desirable and in the best interests of the Company and its shareholders to continue to provide employees of the Company and its participating subsidiaries with benefits under the ESPP and that additional shares must be reserved for use under the ESPP. Accordingly, on April 21, 2016, the Board approved, subject to shareholder approval, an amendment to the ESPP to reserve an additional 11,000,000 shares of Class B Stock for issuance under the ESPP. A copy of the ESPP, as proposed to be amended, is attached to this proxy statement as Exhibit A. +The following description of the ESPP is a summary of certain provisions and is qualified in its entirety by reference to Exhibit A. +Description of the ESPP +Eligibility . All active employees of the Company and its participating subsidiaries are eligible to participate in the ESPP, except for the following: (a) any employee who has been employed less than one month when an offering commences, (b) any employee whose customary employment is less than 20 hours per week, and (c) any employee who would, immediately after an offering, and after including the number of shares that could be purchased in that offering, own or be deemed to own five percent or more of the voting power or value of all classes of stock of the Company or any subsidiary of the Company. Approximately 20,879 employees are currently eligible to participate in the ESPP. +Administration . The Board of Directors has delegated to the Company’s senior human resources executive (the “Authorized Officer”) all authority for administration of the ESPP. The Authorized Officer may promulgate rules and regulations, adopt forms, decide any question of interpretation or rights arising under, and generally supervises the administration of, the ESPP. The Company pays all expenses of the ESPP. +ESPP Offerings . The ESPP is implemented by a series of six-month offerings, with a new offering commencing on April 1 and October 1 of each year. The first day of each offering is the “offering date” for that offering, and the last day of each offering is the “purchase date” for that offering. An employee may purchase shares only through payroll deductions permitted under the ESPP. Payroll deductions must be not less than 1% nor more than 10% of the participant’s eligible compensation. +The maximum number of shares that any employee may purchase in any single offering is 500 shares. In addition, the terms of an offering may not allow an employee’s right to purchase shares under all stock purchase plans of the Company and its subsidiaries to which Section 423 of the Code applies to accrue at a rate that exceeds $25,000 of fair market value of shares, as determined on the offering date, in any calendar year. +An employee may terminate participation in the ESPP by written notice to the Company submitted no later than the “change deadline” for that offering, which is the number of days before the purchase date established by the Authorized Officer. An employee may not reinstate participation in the ESPP with respect to a particular offering after once terminating participation in the ESPP with respect to that offering, but may participate in subsequent offerings. Generally, upon termination of an employee’s participation in the ESPP, all amounts deducted from the employee’s pay that had not yet been used to purchase shares shall be returned to the employee. The rights of employees under the ESPP are not transferable. +Purchase Price . The price at which shares may be purchased in an offering is the lower of (a) 85 percent of the fair market value of a share of Class B Stock on the offering date of the offering or (b) 85 percent of the fair market value of a share of Class B Stock on the purchase date of the offering. The fair market value of a share of Class B Stock on any date is the closing price on the immediately preceding trading day of the Class B Stock on the New York Stock Exchange or, if the Class B Stock is not traded on the New York Stock Exchange, such other reported value of the Class B Stock as may be specified by the Board of Directors. +Custodian . Shares purchased under the ESPP are delivered to and held in the custody of a custodian (the “Custodian”), which is an investment or financial firm appointed by the Authorized Officer. By appropriate instructions to the Custodian, an employee may from time to time sell all or part of the shares held by the Custodian for the participant’s account in the public market at the market price at the time the order is executed. Also by appropriate instructions, the employee may transfer all or part of the shares held for that employee by the Custodian to the employee or to a regular individual brokerage account in the employee’s own name, except that no shares may be so transferred until two years after the offering date of the offering in which the shares were purchased. +Termination and Amendment . The ESPP will terminate when all of the shares reserved for purposes of the ESPP have been purchased, provided that the Board of Directors or the Authorized Officer in their sole discretion may terminate the ESPP at any time with respect to any participating subsidiary and the Board of Directors in its sole discretion may at any time terminate the ESPP completely. +The Board or the Authorized Officer may at any time amend the ESPP in any and all respects, except that only the Board may change (a) the number of shares reserved for the ESPP, (b) the maximum percentage of an employee’s eligible compensation that may be deducted from an employee’s paycheck during an offering, (c) the purchase price of shares offered pursuant to the ESPP, (d) the maximum number of shares that any participant may purchase in any single offering or certain other purchase limitations, or (e) certain other terms of the ESPP relating to the offering and purchase dates. Notwithstanding the foregoing, the Board may not without shareholder approval increase the number of shares reserved for the ESPP (except for adjustments in the event of stock dividends, reverse or forward stock splits, combinations of shares, recapitalizations or other changes in the outstanding Class B Stock) or decrease the purchase price of shares offered pursuant to the ESPP. +NIKE, INC. Ÿ 2016 Notice of Annual Meeting 38 +PROPOSAL 3 +Tax Consequences +The ESPP is intended to qualify as an “employee stock purchase plan” within the meaning of Section 423 of the Code. Under the Code, employees will not recognize taxable income or gain with respect to shares purchased under the ESPP either at the offering date or the purchase date of an offering. If an employee disposes of shares purchased under the ESPP more than two years after the offering date, or in the event of the employee’s death at any time, the employee or the employee’s estate generally will be required to report as ordinary compensation income for the taxable year of disposition or death an amount equal to the lesser of (a) the excess of the fair market value of the shares at the time of disposition or death over the applicable purchase price, or (b) 15 percent of the fair market value of the shares on the offering date. In the case of such a disposition or death, the Company will not be entitled to any deduction from income. Any gain on the disposition in excess of the amount treated as ordinary compensation income generally will be capital gain. +If an employee disposes of shares purchased under the ESPP within two years after the offering date, the employee generally will be required to report the excess of the fair market value of the shares on the purchase date over the applicable purchase price as ordinary compensation income for the year of disposition. If the disposition is by sale, any difference between the fair market value of the shares on the purchase date and the disposition price generally will be capital gain or loss. In the event of a disposition within two years after the offering date, subject to certain limitations such as the $1,000,000 cap on deductibility under Section 162(m) of the Code, the Company generally will be entitled to a deduction from income in the year of such disposition equal to the amount the employee is required to report as ordinary compensation income. +Foreign Subsidiary Employee Stock Purchase Plan +The Company also operates a Foreign Subsidiary Employee Stock Purchase Plan (the “Foreign ESPP” and, when referred to herein collectively with the ESPP, the “Plans”) pursuant to which selected groups of employees of the Company’s foreign subsidiaries are provided an opportunity to purchase shares of Class B Stock that is similar to the opportunity to purchase shares afforded under the ESPP. An aggregate of 8,000,000 shares of Class B Stock has been reserved for issuance under the Foreign ESPP. +Purchases Under the ESPP and the Foreign ESPP +The following table indicates shares purchased under the Plans during the last fiscal year by the Named Executive Officers, by all executive officers as a group and by all employees (excluding executive officers) as a group: +Shares Purchased in Fiscal 2016 +Name and Position +Dollar Value (1) +Number of Shares +Mark G. Parker, President and Chief Executive Officer +— +— +Andrew Campion, Executive Vice President and Chief Executive Officer +$3,977 +407 +Donald W. Blair, Former Executive Vice President and Chief Executive Officer +— +— +Trevor A. Edwards, President, NIKE Brand +$6,670 +470 +Eric D. Sprunk, Chief Operating Officer +$6,670 +470 +Jeanne P. Jackson, President, Product and Merchandising +$6,741 +469 +All Executive Officers (10 persons) +$48,631 +3,610 +All Employees, excluding Executive Officers +$35,013,602 +2,475,431 +(1) “Dollar Value” equals the difference between the price paid for the shares purchased under the Plans and the fair market value of the share on the date the shares were purchased. +Board Recommendation +The Board of Directors recommends voting FOR approval of the amendment to the NIKE, Inc. Employee Stock Purchase Plan. +NIKE, INC. Ÿ 2016 Notice of Annual Meeting 39 +PROPOSAL 4 +Proposal 4 +Shareholder proposal regarding political contributions disclosure +The following shareholder proposal (the “Proposal”) will be voted on at the annual meeting only if properly presented by or on behalf of the shareholder proponent. Mercy A. Rome, c/o Newground Social Investment, 10033 - 12th Ave. N.W., Seattle, WA 98177, a holder of 76 shares of Class B Stock submitted the the Proposal. The Board of Directors recommends a vote AGAINST the Proposal and asks shareholders to read through NIKE’s response which follows the shareholder proposal. +RESOLVED : Shareholders request that NIKE, Inc. (“NIKE”) provide a report, updated semiannually, that discloses NIKE’s: +1. +Policies and procedures for making, with corporate funds or assets, direct or indirect contributions and expenditures to: (a) participate or intervene in any political campaign on behalf of (or in opposition to) any candidate for public office, or (b) influence the general public, or any segment thereof, with respect to an election or referendum. +2. +Monetary and non-monetary contributions and expenditures (direct and indirect) used in the manner described in section 1 above, including: +a. +The identity of the recipient as well as the amount paid to each; and +b. +The title(s) of person(s) at NIKE responsible for decision-making. +The report shall be presented to the Board or relevant Board committee, and posted on NIKE’s website. +Supporting Statement +Long-term shareholders support transparency and accountability in corporate spending on political activities, both because it is in our best interest and because it is critical for NIKE’s compliance with federal ethics laws. Gaps in reporting keep shareholders in the dark and expose NIKE to reputational and business risks that could threaten shareholder value. +NIKE’s current policy regarding political spending has a number of significant gaps: +• +In 2011 NIKE pledged annual disclosures, but the 2013 and 2014 reports (the first released) reported only on Oregon, and the 2015 report only included California. NIKE’s disclosure policy is stated in a fashion that is the most convoluted and difficult to understand of all the political spending policies that we have examined. +The language seems to ensure that only one state per year will ever be reported on, and that NIKE will only report “direct” (not indirect) or “cash” (not in-kind) payments. This leaves quite a lot to be desired - and potentially significant amounts of shareholder dollars unaccounted for. +• +The policy requires senior-executive approval of contributions only when amounts total more than $100,000 annually to an entity - which creates significant gaps, inadequate transparency, and is too high a threshold to ensure meaningful stewardship. +• +It does not address payments to any third-party groups - neither to trade associations nor 501(c)(4)s - which are the ‘dark money’ conduits by which hidden corporate cash enters the political system. +According to reputable public sources, NIKE has contributed at least $2.46 million in corporate funds since the 2004 election cycle. However, public data does not provide a complete picture and NIKE does not report on the most important avenue of hidden corporate money into politics: Payments to trade associations and 501(c)(4)s. +In order to fully evaluate the risk posed by political use of corporate assets, NIKE’s Board and shareholders need comprehensive disclosure that includes payments to trade associations and other tax exempt organizations. Doing so would bring NIKE in line with its northwest peers: Boeing, Microsoft, Nordstrom, Starbucks, and the former WaMu. +The Company’s Statement in Opposition to Proposal 4 +The Board of Directors recommends that shareholders vote AGAINST this shareholder proposal because: +• +Our current policies and public disclosures already address many of the items requested by the proposal; +• +In the Board’s judgment, more disclosure than we already provide would not be in the best interests of shareholders; and +• +In 2012, 2013, and 2015, virtually identical proposals were rejected by approximately 78%, 82%, and 73%, respectively, of shares voted. +Frankly, we agree with our shareholders. +NIKE, INC. Ÿ 2016 Notice of Annual Meeting 40 +PROPOSAL 4 +NIKE has strong governance practices and accountability in corporate spending on political activities, and we have a level of transparency that we believe allows shareholders to have the information they need to make informed decisions. The Proposal is unnecessary to achieve these objectives, and the proponent offers no new compelling evidence or arguments in support of the proposal. +NIKE’s Political Contributions Policy (the “Policy”) is designed to give shareholders confidence that there is proper oversight of political activity, and to allow shareholders to assess any risks associated with significant contributions. All of our political contributions and expenditures are made in accordance with the Policy and our objective is to strictly comply with all public reporting laws. Our Policy ensures that political contributions, trade group memberships, and policy statements are made in a manner consistent with NIKE’s core values to protect or enhance shareholder value, without regard to the private political preferences of our corporate officers. Our Policy describes the policies and procedures for making corporate political contributions, how they are approved, who must approve them, and how they are reported to the Board’s independent Nominating and Corporate Governance Committee. We disclose our Policy on our website at http://investors.nike.com/investors/corporate-governance. +Consistent with our Policy, we also annually disclose on our website all direct political contributions to any candidate, political party, or ballot initiative in any year that exceeds $100,000, and all political contributions in any U.S. state where we make more than 50% of our political contributions in any year. We believe these disclosures provide shareholders meaningful information to assess any risks posed by significant political contributions. Our disclosures are simple, accurate, and clear. And we have posted them for every year starting with 2012. +Our Policy also requires that management annually report to the Board’s independent Nominating and Corporate Governance Committee on compliance with our Policy, and to review the strategic priorities for political contributions and trade association affiliations, to ensure they align with the long-term business objectives of the Company. +The additional disclosure requested in this proposal could place NIKE at a competitive disadvantage by revealing strategies and priorities designed to protect the economic future of NIKE, its employees, and shareholders. Because parties with interests adverse to NIKE also participate in the political process to their business advantage, any unilateral expanded disclosure could benefit them, while harming the interests of NIKE and its shareholders. +In summary, the Board of Directors believes the proposal is unnecessary because NIKE has for years followed a comprehensive policy for oversight and disclosure of political contributions. The proposal would create unnecessary administrative costs, as well as expose NIKE to competitive harm, without commensurate benefit to our shareholders. Our shareholders have understandably rejected this proposal three times before. +Board Recommendation +The Board of Directors recommends a vote AGAINST the shareholder proposal. +NIKE, INC. Ÿ 2016 Notice of Annual Meeting 41 +PROPOSAL 5 +Proposal 5 +Ratification of Appointment of Independent Registered Public Accounting Firm +The Audit Committee of the Board of Directors has sole authority to retain, with shareholder ratification, the Company’s independent registered public accounting firm. The Audit Committee directly oversees the firm’s work with respect to the annual audit of the Company’s consolidated financial statements and internal control over financial reporting and approves all audit engagement fees and terms. At least annually, the Audit Committee evaluates the independent registered public accounting firm’s qualifications, performance, and independence, including a review and evaluation of its lead partner. The Audit Committee is also involved in the selection of the new lead engagement partner following mandated rotation of the firm’s lead partner, and is responsible for considering the benefits of rotation of the Company’s independent registered public accounting firm. +The Audit Committee has appointed PricewaterhouseCoopers LLP to audit the Company’s consolidated financial statements and internal control over financial reporting for the fiscal year ending May 31, 2017 and to render other professional services as required. +PricewaterhouseCoopers LLP has served as the Company’s independent registered public accounting firm for many years. The Audit Committee and the Board of Directors believe that the continued retention of PricewaterhouseCoopers LLP as the independent registered public accounting firm is in the best interests of the Company and its shareholders. +Accordingly, the Audit Committee is submitting the appointment of PricewaterhouseCoopers LLP to shareholders for ratification. If the appointment is not ratified by our shareholders, the Audit Committee may reconsider whether it should appoint another independent registered public accounting firm. +Representatives of PricewaterhouseCoopers LLP will be present at the Annual Meeting, will have the opportunity to make a statement if they desire to do so, and are expected to be available to respond to questions. +Aggregate fees billed by the Company’s independent registered public accounting firm, PricewaterhouseCoopers LLP, for audit services related to the most recent two fiscal years, and for other professional services incurred in the most recent two fiscal years, were as follows: +Type of Service +2016 +2015 +Audit Fees (1) +$ +21.9 +million +$ +20.5 +million +Audit-Related Fees (2) +— +million +0.1 +million +Tax Fees (3) +1.5 +million +1.9 +million +All Other Fees (4) +0.1 +million +0.1 +million +Total +$ +23.5 +million +$ +22.6 +million +(1) +Comprises the audits of the Company’s annual financial statements and internal controls over financial reporting and reviews of the Company’s quarterly financial statements, as well as statutory audits of Company subsidiaries, attest services and consents to SEC filings. +(2) +Comprises employee benefit plan audits and consultations regarding financial accounting and reporting. +(3) +Comprises services for tax compliance, tax planning and tax advice. Tax compliance includes services for compliance related tax advice, as well as the preparation and review of both original and amended tax returns for the Company and its consolidated subsidiaries. Tax compliance related fees represented $0.7 million and $1.0 million of the tax fees for fiscal 2016 and 2015, respectively. The remaining tax fees primarily include tax advice. +(4) +Comprises other miscellaneous services. +In accordance with the Sarbanes-Oxley Act of 2002, the Audit Committee established policies and procedures under which all audit and non-audit services performed by the Company’s independent registered public accounting firm must be approved in advance by the Audit Committee. During fiscal 2016, all such services performed by, and fees paid to, PricewaterhouseCoopers LLP were approved in advance. During fiscal 2015, fees totaling $29,900, or less than 0.2% of total fees, were paid to PricewaterhouseCoopers LLP for three engagements that were not pre-approved. All such services were approved by the Audit Committee promptly after their inadvertent omission from pre-approval was noticed. During fiscal 2015 all other services performed by, and fees paid to, PricewaterhouseCoopers LLP were approved in advance. +Board Recommendation +The Board of Directors recommends that shareholders vote FOR ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for the fiscal year ending May 31, 2017. +Report of the Audit Committee +The Audit Committee has: +• +Reviewed and discussed the audited financial statements with management. +• +Discussed with the independent auditors the matters required to be discussed by Public Company Accounting Oversight Board (“PCAOB”) Statement on Auditing Standards No. 16 Communications with Audit Committees. +NIKE, INC. Ÿ 2016 Notice of Annual Meeting 42 +PROPOSAL 5 +• +Received the written disclosures and the letter from the independent accountants required by applicable requirements of the PCAOB regarding the independent accountants’ communications concerning independence, and has discussed with the independent accountant the independent accountant’s independence. +• +Based on the review and discussions above, recommended to the Board of Directors that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the last fiscal year for filing with the Securities and Exchange Commission. +Members of the Audit Committee: +• +Alan B. Graf, Jr., Chairman +• +John G. Connors +• +John J. Donahoe +• +Michelle A. Peluso +NIKE, INC. Ÿ 2016 Notice of Annual Meeting 43 +OTHER MATTERS / SHAREHOLDER PROPOSALS +Other Matters +As of the time this proxy statement was printed, management was unaware of any proposals to be presented for consideration at the Annual Meeting other than those set forth herein, but if other matters do properly come before the Annual Meeting, the persons named in the proxy will vote the shares represented by such proxy according to their best judgment. +Shareholder Proposals +A proposal by a shareholder for inclusion in the Company’s proxy statement and form of proxy for the 2017 annual meeting of shareholders must be received by John F. Coburn III, Vice President and Corporate Secretary of NIKE, at One Bowerman Drive, Beaverton, Oregon 97005-6453, on or before April 6, 2017 to be eligible for inclusion. Rules under the Securities Exchange Act of 1934 describe standards as to the submission of shareholder proposals. In addition, the Company’s bylaws require that any shareholder wishing to make a nomination for Director, or wishing to introduce a proposal or other business at a shareholder meeting must give the Company at least 60 days’ advance written notice, which for the 2017 annual meeting of shareholders is July 20, 2017, and that notice must meet certain other requirements described in the bylaws. +For the Board of Directors, +John F. Coburn III +Vice President and Corporate Secretary +NIKE, INC. Ÿ 2016 Notice of Annual Meeting 44 +ANNUAL +MEETING +AND +PROXY STATEMENT +September 22, 2016 +Beaverton, Oregon +Whether or not you intend to be present at the meeting, please sign and date the enclosed proxy and return it in the enclosed envelope, or vote by telephone or online following the instructions on the proxy. +Electronic Voting Instructions +Available 24 hours a day, 7 days a week! +Instead of mailing your proxy, you may choose one of the voting methods outlined below to vote your proxy. +VALIDATION DETAILS ARE LOCATED IN THE TITLE BAR BELOW. +Proxies submitted by the Internet or telephone must be received by 1:00 a.m., Central Time, on September 22, 2016. +Vote by Internet +• Go to www.investorvote.com +• Or scan the QR code with your smartphone +• Follow the steps outlined on the secure website +Vote by telephone +• Call toll free 1-800-652-VOTE (8683) within the USA, US territories & Canada on a touch tone telephone +• Follow the instructions provided by the recorded message +Using a black ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas. +x +q IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q +A +Proposals — The Board of Directors recommends a vote FOR all the nominees listed, a vote FOR Proposals 2, 3 and 5, and a vote AGAINST Proposal 4. +1. +Class A director nominees: To elect a Board of Directors for the ensuing year. +» +For +Withhold +For +Withhold +For +Withhold +01 - Elizabeth J. Comstock +¨ +¨ +02 - John G. Connors +¨ +¨ +03 - Timothy D. Cook +¨ +¨ +04 - John J. Donahoe II +¨ +¨ +05 - Travis A. Knight +¨ +¨ +06 - John C. Lechleiter +¨ +¨ +07 - Mark G. Parker +¨ +¨ +08 - Johnathan A. Rodgers +¨ +¨ +09 - John R. Thompson, Jr. +¨ +¨ +For +Against +Abstain +For +Against +Abstain +2. +To approve executive compensation by an advisory vote. +¨ +¨ +¨ +3. +To approve an amendment to the NIKE, Inc. Employee Stock Purchase Plan to increase authorized shares. +¨ +¨ +¨ +4. +Shareholder proposal regarding political contributions disclosure. +¨ +¨ +¨ +5. +To ratify the appointment of PricewaterhouseCoopers LLP as independent registered public accounting firm. +¨ +¨ +¨ +6. +To transact such other business as may properly come before the meeting. +B +Non-Voting Items +Change of Address — Please print new address below. +C +Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below +Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title. +Date (mm/dd/yyyy) — Please print date below. +Signature 1 — Please keep signature within the box. +Signature 2 — Please keep signature within the box. +/ / +Meeting Information +2016 Annual Meeting of Shareholders +for Shareholders as of July 22, 2016 +September 22, 2016 +10:00 A.M. PDT +Meeting Location: +Tiger Woods Conference Center +One Bowerman Drive +Beaverton, OR 97005 +Meeting Directions: +From I-5 South of Portland: +I-5 North to 217 North. Follow to Hwy 26 West. +From I-5 North of Portland: +I-5 South to I-405 South. Follow to Hwy 26 West. +From I-84 East of Portland: +I-84 West to I-5 South to I-405 North. Follow to Hwy 26 West. +Exit Hwy 26 at Murray Blvd, turn left and drive one mile. Turn right on SW Jenkins Road, right on SW Jay Street, and then take the second right on SW Burlington Drive into Lot 3 (1343 SW Burlington Drive). Due to construction on the NIKE campus, a shuttle will be provided to the Tiger Woods Conference Center. Shareholders should allow an extra 20 minutes for the shuttle service. Please note that the NIKE Campus is a non-smoking location and smoking is not permitted on NIKE property. +Ç IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. Ç +NIKE, INC. +CLASS A COMMON STOCK PROXY +SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS +FOR THE 2016 MEETING OF SHAREHOLDERS +SEPTEMBER 22, 2016 +The undersigned hereby appoints Mark G. Parker, Travis A. Knight and John C. Lechleiter, and each of them, proxies with full power of substitution, to vote, as designated on the reverse side, on behalf of the undersigned, all shares of Class A Common Stock which the undersigned may be entitled to vote at the Annual Meeting of Shareholders of NIKE, Inc. on September 22, 2016, and any adjournments thereof, with all powers that the undersigned would possess if personally present. A majority of the proxies or substitutes present at the meeting may exercise all powers granted hereby. +THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS SPECIFIED, BUT IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE NOMINEES FOR DIRECTOR, FOR PROPOSALS 2, 3, AND 5, AND AGAINST PROPOSAL 4. THE PROXIES MAY VOTE IN THEIR DISCRETION AS TO OTHER MATTERS WHICH MAY COME BEFORE THE MEETING. +YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS’ RECOMMENDATIONS. THE PROXIES CANNOT VOTE THESE SHARES UNLESS YOU SIGN AND RETURN THIS CARD OR PROPERLY VOTE BY PHONE OR INTERNET. +Electronic Voting Instructions +Available 24 hours a day, 7 days a week! +Instead of mailing your proxy, you may choose one of the voting methods outlined below to vote your proxy. +VALIDATION DETAILS ARE LOCATED IN THE TITLE BAR BELOW. +Proxies submitted by the Internet or telephone must be received by 1:00 a.m., Central Time, on September 22, 2016. +Vote by Internet +• Go to www.investorvote.com +• Or scan the QR code with your smartphone +• Follow the steps outlined on the secure website +Vote by telephone +• Call toll free 1-800-652-VOTE (8683) within the USA, US territories & Canada on a touch tone telephone +• Follow the instructions provided by the recorded message +Using a black ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas. +x +q IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q +A +Proposals — The Board of Directors recommends a vote FOR all the nominees listed, a vote FOR Proposals 2, 3 and 5, and a vote AGAINST Proposal 4. +1. +Class B director nominees: To elect a Board of Directors for the ensuing year. +» +For +Withhold +For +Withhold +For +Withhold +01 - Alan B. Graf, Jr. +¨ +¨ +02 - Michelle A. Peluso +¨ +¨ +03 - Phyllis M. Wise +¨ +¨ +For +Against +Abstain +For +Against +Abstain +2. +To approve executive compensation by an advisory vote. +¨ +¨ +¨ +3. +To approve an amendment to the NIKE, Inc. Employee Stock Purchase Plan to increase authorized shares. +¨ +¨ +¨ +4. +Shareholder proposal regarding political contributions disclosure. +¨ +¨ +¨ +5. +To ratify the appointment of PricewaterhouseCoopers LLP as independent registered public accounting firm. +¨ +¨ +¨ +6. +To transact such other business as may properly come before the meeting. +B +Non-Voting Items +Change of Address — Please print new address below. +C +Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below +Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title. +Date (mm/dd/yyyy) — Please print date below. +Signature 1 — Please keep signature within the box. +Signature 2 — Please keep signature within the box. +/ / +Meeting Information +2016 Annual Meeting of Shareholders +for Shareholders as of July 22, 2016 +September 22, 2016 +10:00 A.M. PDT +Meeting Location: +Tiger Woods Conference Center +One Bowerman Drive +Beaverton, OR 97005 +Meeting Directions: +From I-5 South of Portland: +I-5 North to 217 North. Follow to Hwy 26 West. +From I-5 North of Portland: +I-5 South to I-405 South. Follow to Hwy 26 West. +From I-84 East of Portland: +I-84 West to I-5 South to I-405 North. Follow to Hwy 26 West. +Exit Hwy 26 at Murray Blvd, turn left and drive one mile. Turn right on SW Jenkins Road, right on SW Jay Street, and then take the second right on SW Burlington Drive into Lot 3 (1343 SW Burlington Drive). Due to construction on the NIKE campus, a shuttle will be provided to the Tiger Woods Conference Center. Shareholders should allow an extra 20 minutes for the shuttle service. Please note that the NIKE Campus is a non-smoking location and smoking is not permitted on NIKE property. +Ç IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. Ç +NIKE, INC. +CLASS B COMMON STOCK PROXY +SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS +FOR THE 2016 MEETING OF SHAREHOLDERS +SEPTEMBER 22, 2016 +The undersigned hereby appoints Mark G. Parker, Travis A. Knight and John C. Lechleiter, and each of them, proxies with full power of substitution, to vote, as designated on the reverse side, on behalf of the undersigned, all shares of Class B Common Stock which the undersigned may be entitled to vote at the Annual Meeting of Shareholders of NIKE, Inc. on September 22, 2016, and any adjournments thereof, with all powers that the undersigned would possess if personally present. A majority of the proxies or substitutes present at the meeting may exercise all powers granted hereby. +THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS SPECIFIED, BUT IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE NOMINEES FOR DIRECTOR, FOR PROPOSALS 2, 3, AND 5, AND AGAINST PROPOSAL 4. THE PROXIES MAY VOTE IN THEIR DISCRETION AS TO OTHER MATTERS WHICH MAY COME BEFORE THE MEETING. +YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS’ RECOMMENDATIONS. THE PROXIES CANNOT VOTE THESE SHARES UNLESS YOU SIGN AND RETURN THIS CARD OR PROPERLY VOTE BY PHONE OR INTERNET. \ No newline at end of file diff --git a/raw/proxies/0000320187/0000320187-16-000339/proxy_rpt.txt b/raw/proxies/0000320187/0000320187-16-000339/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..4e76a695213609e8179341015c1648a2c5629db2 --- /dev/null +++ b/raw/proxies/0000320187/0000320187-16-000339/proxy_rpt.txt @@ -0,0 +1,9 @@ +Transactions with Related Persons +Mr. Howard S. Slusher, the father of John Slusher, Executive Vice President of Sports Marketing, and the Company are parties to a Consulting Agreement pursuant to which Howard Slusher manages the planning, design, and construction of new buildings at, and improvements to, NIKE’s World Headquarters. Howard Slusher was selected due to his deep history and experience with the Company, as he has managed several significant construction projects for the Company, including the original World Headquarters construction and later expansions. In addition, Howard Slusher’s previous engagement with the Company garnered the trust of management and makes him uniquely qualified to oversee the project. During fiscal 2016, the Company paid Howard Slusher $3,408,837 for these services. +Pursuant to the terms of a past consulting agreement with the Company, the Company agreed to pay for health and life insurance policies for Howard Slusher following expiration of the agreement. During fiscal 2016, the Company paid $123,574 for life insurance premiums. +Three of Mr. Parker’s siblings, each with over 25 years of service to the Company, were employed by the Company in non-executive roles in fiscal 2016. Ann Parker was an Executive Talent Scout, Bob Parker was a Marketplace Director, and Stephen Parker held a Vice President role with Converse. During fiscal 2016, the Company paid aggregate compensation to each of Ann Parker and Stephen Parker in the amounts of $317,642 and $525,491, respectively, comprising of salary, bonuses, the grant date fair value of stock options granted during the fiscal year estimated using the Black-Scholes pricing model, profit sharing and matching contributions to Company-sponsored retirement plans. Additionally, the Company paid aggregate compensation to Bob Parker in the amount of approximately $506,948, comprising of approximately $504,144 paid in connection with his termination of services as well as the compensation components listed above. The compensation and benefits received by each of Mr. Parker’s siblings, including the separation benefits received by Bob Parker, were consistent with compensation paid to other employees holding similar positions. +Mr. Thompson’s son, John Thompson III, head basketball coach at Georgetown University, and the Company are parties to a contract pursuant to which Mr. Thompson III provides certain endorsement and consulting services to the Company. The terms of this agreement, effective August 2014 through August 2019, provide for annual base compensation of $200,000, and up to $112,500 per year of product and merchandise, for use by him, the basketball staff and team. In addition, there are annual incentive payments based upon his team’s performance of up to $100,000. +Ms. Lindsay A. Jackson, the daughter of Jeanne Jackson, President of Product and Merchandising during fiscal 2016, was employed by the Company in a non-executive role in fiscal 2016 as a Brand Director. During fiscal 2016, the Company paid aggregate compensation to Ms. Lindsay Jackson of $152,861, comprising salary, bonuses, the grant date fair value of stock options granted during the fiscal year estimated using the Black-Scholes pricing model, profit sharing and matching contributions to Company-sponsored retirement plans. The compensation and benefits received by Ms. Lindsay Jackson was consistent with compensation paid to other employees holding similar positions. +On June 30, 2016 Mr. Philip Knight, the father of NIKE director Travis Knight, retired from the Board of Directors. Effective immediately upon his retirement, the Board has appointed Mr. Philip Knight to the position of Chairman Emeritus, which provides a standing invitation for Mr. Philip Knight to attend meetings of the Board and its committees as a non-voting observer. Pursuant to serving as the Chairman Emeritus, Mr. Knight will receive medical and dental insurance coverage available to employees and will receive an annual salary of $500,000. +The Company’s written policy requires the Nominating and Corporate Governance Committee to review any transaction or proposed transaction with a related person that would be required to be reported under Item 404(a) of Regulation S-K, and to determine whether to ratify or approve the transaction, with ratification or approval to occur only if the Committee determines that the transaction is fair to the Company or that approval or ratification of the transaction is in the interest of the Company. +NIKE, INC. Ÿ 2016 Notice of Annual Meeting 14 \ No newline at end of file diff --git a/raw/proxies/0000320187/0000320187-17-000127/proxy.txt b/raw/proxies/0000320187/0000320187-17-000127/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..418e5d591d989e1df986d7b03235464ebf1c25d6 --- /dev/null +++ b/raw/proxies/0000320187/0000320187-17-000127/proxy.txt @@ -0,0 +1,2229 @@ +DEF 14A +1 +nke-2017xdef14a.htm +DEF 14A +Document +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +Washington, D.C. 20549 +SCHEDULE 14A INFORMATION +Proxy Statement Pursuant to Section 14(a) of the +Securities Exchange Act of 1934 +(Amendment No. ) +Filed by the Registrant x Filed by a Party other than the Registrant ¨ +Check the appropriate box: +o +Preliminary Proxy Statement +¨ +Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +x +Definitive Proxy Statement +¨ +Definitive Additional Materials +¨ +Soliciting Material under §240.14a-12 +NIKE, INC. +(Name of registrant as specified in its charter) +(Name of person(s) filing proxy statement, if other than the registrant) +Payment of Filing Fee (Check the appropriate box): +x +No fee required +¨ +Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11 +(1) +Title of each class of securities to which transaction applies: +(2) +Aggregate number of securities to which transaction applies: +(3) +Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): +(4) +Proposed maximum aggregate value of transaction: +(5) +Total fee paid: +¨ +Fee paid previously with preliminary materials. +¨ +Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. +(1) +Amount Previously Paid: +(2) +Form, Schedule or Registration Statement No.: +(3) +Filing Party: +(4) +Date Filed: +To Our Shareholders: +You are cordially invited to attend the annual meeting of shareholders of NIKE, Inc. to be held at the Tiger Woods Conference Center, One Bowerman Drive, Beaverton, Oregon 97005-6453, on Thursday, September 21, 2017, at 10:00 A.M. Pacific Time. Registration will begin at 9:00 A.M. +The meeting will consist of a brief presentation followed by the business items listed on the attached notice. +Whether or not you plan to attend, the prompt execution and return of your proxy card will both assure that your shares are represented at the meeting and minimize the cost of proxy solicitation. +Sincerely, +Mark G. Parker +Chairman of the Board +July 25, 2017 +Notice of Annual Meeting +of Shareholders +September 21, 2017 +To the Shareholders of NIKE, Inc. +The annual meeting of shareholders of NIKE, Inc., an Oregon corporation, will be held on Thursday, September 21, 2017, at 10:00 A.M., at the Tiger Woods Conference Center, One Bowerman Drive, Beaverton, Oregon 97005-6453, for the following purposes: +1. To elect the 11 directors named in the accompanying proxy statement for the ensuing year. +2. To approve executive compensation by an advisory vote. +3. To hold an advisory vote on the frequency of advisory votes on executive compensation. +4. To approve the NIKE, Inc. Long-Term Incentive Plan, as amended. +5. To consider a shareholder proposal regarding political contributions disclosure as described in the accompanying proxy statement, if properly presented at the meeting. +6. To ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm. +7. To transact such other business as may properly come before the meeting. +All shareholders are invited to attend the meeting. Shareholders of record at the close of business on July 21, 2017, the record date fixed by the Board of Directors, are entitled to notice of and to vote at the meeting. You must present your proxy, voter instruction card, or meeting notice for admission. +By Order of the Board of Directors, +Whether or not you intend to be present at the meeting, please sign and date the enclosed proxy and return it in the enclosed envelope, or vote by telephone or online following the instructions on the proxy. +Ann M. Miller +Vice President and Corporate Secretary +Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders To Be Held on September 21, 2017. The proxy statement and NIKE, Inc.’s 2017 Annual Report to Shareholders are available electronically at www.investorvote.com or www.proxyvote.com, for registered and beneficial owners, respectively. +Whether or not you intend to be present at the meeting, please sign and date the enclosed proxy and return it in the enclosed envelope, or vote by telephone or online following the instructions on the proxy. +CORPORATE GOVERNANCE +Proxy Statement +Proxy Statement +We are furnishing proxy materials to our shareholders primarily via the Internet by mailing a Notice of Internet Availability of Proxy Materials, or “Notice”, instead of mailing printed copies of those materials to each shareholder. The Notice directs shareholders to a website where they can access our proxy materials, including our proxy statement and our annual report, and view instructions on how to vote via the Internet or by telephone. If you would prefer to receive a paper copy of our proxy materials, please follow the instructions included in the Notice. If you have previously elected to receive our proxy materials electronically, you will continue to receive access to these materials electronically unless you elect otherwise. +The enclosed proxy is solicited by the Board of Directors of NIKE, Inc. (“NIKE” or the “Company”) for use at the annual meeting of shareholders to be held on September 21, 2017, and at any adjournment thereof (the “Annual Meeting”). Our principal executive offices are located at One Bowerman Drive, Beaverton, Oregon 97005-6453. This proxy statement is first being made available to shareholders on or about August 4, 2017. Shareholders may submit a proxy to vote at the Annual Meeting by following the instructions on the Notice, via the Internet, by telephone, or (if they have received paper copies of the proxy materials) by returning a proxy card. +The Company will bear the cost of soliciting proxies. In addition to soliciting proxies by mail, certain officers and employees of the Company, without extra compensation, may also solicit proxies personally or by telephone. Copies of proxy solicitation materials will be furnished to fiduciaries, custodians and brokerage houses for forwarding to the beneficial owners of shares held in their names. +Shares that are properly voted via the Internet or by telephone or for which proxy cards are properly executed and received by the Company prior to the Annual Meeting will be voted in accordance with the instructions specified in such proxies. Where no instructions are given, shares will be voted “FOR” the election of each of the named nominees for director (Proposal 1), “FOR” the proposal regarding an advisory vote to approve executive compensation (Proposal 2), “EVERY YEAR” for the proposal regarding an advisory vote on the frequency of advisory votes on executive compensation (Proposal 3), “FOR” the approval of the NIKE, Inc. Long-Term Incentive Plan, as amended (Proposal 4), “AGAINST” the shareholder proposal regarding political contributions (Proposal 5), and “FOR” the ratification of the appointment of PricewaterhouseCoopers LLP as independent registered public accounting firm (Proposal 6). +A shareholder giving the enclosed proxy has the power to revoke it at any time before it is exercised by affirmatively electing to vote in person at the meeting or by delivering to Ann M. Miller, Vice President and Corporate Secretary of NIKE, either an instrument of revocation or an executed proxy bearing a later date. +Voting Securities and Vote Required +Holders of record of NIKE’s Class A Common Stock (“Class A Stock”) and holders of record of NIKE’s Class B Common Stock (“Class B Stock”) at the close of business on July 21, 2017 will be entitled to vote at the Annual Meeting. On that date, 329,245,752 shares of Class A Stock and 1,312,148,057 shares of Class B Stock were issued and outstanding. Neither class of Common Stock has cumulative voting rights. +Each share of Class A Stock and each share of Class B Stock is entitled to one vote on every matter submitted to the shareholders at the Annual Meeting. +A majority of the votes entitled to be cast on Proposal 1, the election of directors, by each of the Class A Stock and Class B Stock separately constitutes a quorum of Class A Stock and Class B Stock, respectively, for action on Proposal 1. The holders of Class A Stock and the holders of Class B Stock will vote separately on Proposal 1. Holders of Class B Stock are currently entitled to elect 25 percent of the total Board, rounded up to the next whole number. Holders of Class A Stock are currently entitled to elect the remaining directors. Under this formula, holders of Class B Stock, voting separately, will elect three directors, and holders of Class A Stock, voting separately, will elect eight directors. Under Oregon law, if a quorum of each class of common stock is present at the meeting, the three director nominees who receive the greatest number of votes cast by holders of Class B Stock and the eight director nominees who receive the greatest number of votes cast by holders of Class A Stock will be elected directors. +A majority of the votes entitled to be cast on Proposals 2, 3, 4, 5 and 6 by both Class A Stock and Class B Stock together constitutes a quorum for action on those proposals. Holders of Class A Stock and holders of Class B Stock will vote together as one class on Proposals 2, 3, 4, 5 and 6. If a quorum is present at the meeting, Proposals 2, 3, 4, 5 and 6 will be approved if the votes cast in favor of the proposal exceeds the votes cast against the proposal. +Abstentions and broker non-votes are counted for purposes of determining whether a quorum exists. Abstentions and broker non-votes are not included as votes cast and will not affect the outcome of any of the proposals. Broker non-votes occur when a person holding shares in street name, such as through a brokerage firm, does not provide instructions as to how to vote those shares and the broker does not then vote those shares on the shareholder’s behalf. +NIKE, INC. Ÿ 2017 Notice of Annual Meeting 1 +CORPORATE GOVERNANCE +Board of Directors +CORPORATE GOVERNANCE +Board of Directors +The Board of Directors is currently composed of nine independent directors and three directors who are not independent under the New York Stock Exchange (the “NYSE”) listing rules. During fiscal 2017, there were five meetings of the Board and all directors attended at least 75 percent of the total number of meetings of the Board and committees on which he or she served. The Company encourages all directors to attend each annual meeting of shareholders, and all directors serving at the time of the 2016 annual meeting attended the 2016 annual meeting. +Board Committees +The Board’s current standing committees are an Audit Committee, a Compensation Committee, a Nominating and Corporate Governance Committee, a Finance Committee, a Corporate Responsibility and Sustainability Committee, and an Executive Committee. The Board may also appoint other committees from time to time. Each standing committee has a written charter; all such charters, as well as the Company’s corporate governance guidelines, are available at the Company’s corporate website: http://investors.nike.com and will be provided in print to any shareholder who submits a request in writing to NIKE Investor Relations, One Bowerman Drive, Beaverton, Oregon 97005-6453. +The Executive Committee is authorized to act on behalf of the Board on all corporate actions for which applicable law does not require participation by the full Board. In practice, the Executive Committee acts in place of the full Board only when emergency issues or scheduling conflicts make it difficult or impracticable to assemble the full Board. All actions taken by the Executive Committee must be reported at the next Board meeting. The Executive Committee held no formal meetings during fiscal 2017, but took action pursuant to written consent resolutions. +The Audit Committee is responsible for the engagement or discharge of the independent registered public accountants, reviews and approves services provided by the independent registered public accountants, and reviews with the independent registered public accountants the scope and results of their annual audit of the Company’s consolidated financial statements and any recommendations they may have. The Audit Committee also reviews the Company’s procedures with respect to maintaining books and records, the adequacy and implementation of internal auditing, accounting, disclosure, and financial controls, the Company’s policies concerning financial reporting and business practices, and the Company’s information security and data protection procedures. The Board has determined that each member of the Audit Committee meets all applicable independence and financial literacy requirements under the NYSE listing standards and applicable regulations adopted by the U.S. Securities and Exchange Commission (the “SEC”). The Board has also determined that Mr. Alan B. Graf, Jr. is an “audit committee financial expert” as defined in regulations adopted by the SEC. +The Compensation Committee evaluates the performance of the Chief Executive Officer (“CEO”), reviews the performance evaluations of our other Named Executive Officers, and recommends their compensation for approval by the independent members of the Board (other than the incentive compensation approved solely by the Compensation Committee as described below). The Compensation Committee also grants equity incentive awards under the NIKE, Inc. Stock Incentive Plan, and determines targets and awards under the NIKE, Inc. Executive Performance Sharing Plan and the NIKE, Inc. Long-Term Incentive Plan. The Committee also makes recommendations to the Board regarding other executive incentive compensation arrangements and profit sharing plan contributions. The Board has determined that each member of the Compensation Committee meets all applicable independence requirements under the NYSE listing standards. +The Nominating and Corporate Governance Committee identifies individuals qualified to become Board members, recommends director nominees for election at each annual shareholder meeting, and develops and recommends corporate governance guidelines and standards for business conduct and ethics. The Committee also oversees the annual self-evaluations of the Board and its committees and makes recommendations to the Board concerning the structure and membership of the other Board committees. The Board has determined that each member of the Nominating and Corporate Governance Committee meets all applicable independence requirements under the NYSE listing standards. +The Finance Committee reviews the Company’s annual operating budget and recommends approval of the budget to the Board, considers long-term financing options, long-range tax, financial regulatory and foreign currency issues facing the Company, and management recommendations concerning capital deployment strategy, major capital expenditures and material acquisitions or divestitures. +The Corporate Responsibility and Sustainability Committee reviews significant strategies, activities and policies regarding sustainability (including labor practices), community impact and charitable activities, and makes recommendations regarding the same to the Board. +NIKE, INC. Ÿ 2017 Notice of Annual Meeting 2 +CORPORATE GOVERNANCE +Board of Directors +The table below provides information regarding the current membership of each standing Board committee and meetings held during fiscal 2017: +Director Name +Audit +Compensation +Nominating and +Corporate Governance +Corporate +Responsibility and Sustainability +Finance +Executive +Elizabeth J. Comstock +ü +ü +John G. Connors +ü +Chair +Timothy D. Cook* +Chair +ü +John J. Donahoe II +ü +ü +ü +Alan B. Graf, Jr. +Chair +ü +Travis A. Knight +ü +ü +John C. Lechleiter +ü +Chair +ü +Mark G. Parker** +Chair +Michelle A. Peluso +ü +ü +Johnathan A. Rodgers +ü +ü +John R. Thompson, Jr. +ü +Phyllis M. Wise +ü +Chair +Meetings in Fiscal 2017 +14 +5 +5 +5 +5 +- +* Effective June 30, 2016, Mr. Cook was appointed Lead Independent Director of the Board. +** Effective June 30, 2016, Mr. Parker was appointed Chairman of the Board and Chair of the Executive Committee. +Director Independence +Pursuant to NYSE rules, in order for a director to qualify as “independent,” the Board of Directors must affirmatively determine that the director has no material relationship with the Company that would impair the director’s independence. The Board affirmatively determined that commercial or charitable relationships below the following thresholds will not be considered material relationships that impair a director’s independence: (i) if a NIKE director or immediate family member is an executive officer of another company that does business with NIKE and the annual sales to, or purchases from, NIKE are less than one percent of the annual revenues of the other company; and (ii) if a NIKE director or immediate family member serves as an officer, director or trustee of a charitable organization, and NIKE’s contributions to the organization are less than one percent of that organization’s total annual charitable receipts. After applying this categorical standard, the Board has determined that the following directors who served during fiscal 2017 - Elizabeth J. Comstock, John G. Connors, Timothy D. Cook, John J. Donahoe II, Alan B. Graf, Jr., John C. Lechleiter, Michelle A. Peluso, Johnathan A. Rodgers, and Phyllis M. Wise - have no material relationship with the Company and, therefore, are independent. Messrs. Knight, Parker, and Thompson were not independent pursuant to NYSE rules. Mr. Parker was not independent pursuant to NYSE rules because he was an executive officer of the Company during fiscal 2017. Mr. Travis Knight was not independent pursuant to NYSE rules because he is the son of NIKE’s co-founder and former Chairman of the Board, Mr. Philip Knight, who was an executive officer of the Company and currently serves as Chairman Emeritus. Mr. Thompson was not independent pursuant to NYSE rules because the Company has a contract with his son, John Thompson III, who was head basketball coach at Georgetown University during fiscal 2017, to provide endorsement and consulting services to the Company. The compensation paid to Messrs. Philip Knight and John Thompson III is described under “Transactions with Related Persons” below. +Director Nominations +The Nominating and Corporate Governance Committee identifies potential director candidates through a variety of means, including recommendations from members of the Committee or the Board, suggestions from Company management, and shareholder recommendations. The Committee also may, in its discretion, engage director search firms to identify candidates. Shareholders may recommend director candidates for consideration by the Nominating and Corporate Governance Committee by submitting a written recommendation to the Committee, c/o Ann M. Miller, Vice President and Corporate Secretary, NIKE, Inc., One Bowerman Drive, Beaverton, Oregon 97005-6453. The recommendation should include the candidate’s name, age, qualifications (including principal occupation and employment history), and written consent to be named as a nominee in the Company’s proxy statement and to serve as a director, if elected. +NIKE, INC. Ÿ 2017 Notice of Annual Meeting 3 +CORPORATE GOVERNANCE +Board of Directors +The Board of Directors has adopted qualification standards for the selection of non-management nominees for director, which can be found at our corporate website: http://investors.nike.com . As provided in these standards and the Company’s Corporate Governance Guidelines, nominees for director are selected on the basis of, among other things, distinguished business experience or other non-business achievements; education; significant knowledge of international business, finance, marketing, technology, law, or other fields which are complementary to, and balance the knowledge of, other Board members; a desire to represent the interests of all shareholders; independence; character; ethics; good judgment; diversity; and ability to devote substantial time to discharge Board responsibilities. +The Nominating and Corporate Governance Committee identifies qualified potential candidates without regard to their age, gender, race, national origin, sexual orientation, or religion. While the Board has no policy regarding Board member diversity, the Nominating and Corporate Governance Committee considers and discusses diversity in selecting director nominees and in the re-nomination of an incumbent director. The Committee views diversity broadly, including gender, ethnicity, differences of viewpoint, geographic location, skills, education, and professional and industry experience, among others and believes that the Board is diverse across all spectrums. The Board believes that a variety and balance of perspectives on the Board results in more thoughtful deliberations. +In considering the re-nomination of an incumbent director, the Nominating and Corporate Governance Committee reviews the director’s overall service to the Company during his or her term, including the number of meetings attended, level of participation and quality of performance, as well as any special skills, experience or diversity that such director brings to the Board. All potential new director candidates, whether recommended by shareholders or identified by other means, are initially screened by the Chair of the Nominating and Corporate Governance Committee, who may seek additional information about the background and qualifications of the candidate, and who may determine that a candidate does not have qualifications that merit further consideration by the full Committee. With respect to new director candidates who pass the initial screening, the Nominating and Corporate Governance Committee meets to discuss and consider each candidate’s qualifications and potential contributions to the Board, and determines by majority vote whether to recommend such candidates to the Board. The final decision to either appoint a candidate to fill a vacancy between annual meetings or include a candidate on the slate of nominees proposed at an annual meeting is made by the Board. +It is the general policy of the Board that directors first elected after the fiscal year ended May 31, 1993 will not stand for re-election after reaching the age of 72. Dr. Wise, who has served on the Board since 2009, has announced her retirement and will not stand for re-election to the Board at the 2017 Annual Meeting. +Shareholder Communications with Directors +Shareholders or interested parties desiring to communicate directly with the Board of Directors, with the non-management directors or with any individual director may do so in writing addressed to the intended recipient or recipients, c/o Ann M. Miller, Vice President and Corporate Secretary, NIKE, Inc., One Bowerman Drive, Beaverton, Oregon 97005-6453. All such communications will be reviewed, compiled as necessary, and then forwarded to the designated recipient or recipients in a timely manner. +Board Leadership Structure +NIKE’s governing documents provide the Board of Directors with flexibility to select the appropriate leadership structure of the Company. In determining the leadership structure, the Board considers many factors, including the specific needs of the business, fulfilling the duties of the Board, and the best interests of the Company’s shareholders. In 2004, the Board chose to separate the position of Chairman of the Board from the position of President and CEO; this was not a permanent policy of the Board. On June 30, 2016, the Company announced that the Chairman, Philip Knight, retired from the Board and that the Board appointed Mark Parker, the Company’s President and CEO since 2006, to the additional position of Chairman of the Board. As Chairman, Mr. Parker presides over meetings of the Board and shareholders. As President and CEO, Mr. Parker is in charge of the general supervision, direction, and control of the business and affairs of the Company, subject to the overall direction and supervision of the Board and its committees. +Given Mr. Philip Knight’s retirement and, as the Company’s President and CEO since 2006, Mr. Parker’s unique knowledge of the Company’s business, particular experience, talent and tenure, the Board believes this leadership structure is appropriate for the Company. The structure permits Mr. Parker, by serving as both Chairman and CEO, to draw on his knowledge of the operations of the business, industry developments, customers, shareholders and employees in providing leadership on the broad strategic issues considered by the Board. +The Nominating and Corporate Governance Committee determined that given the appointment of Mr. Parker as Chairman in addition to his positions of President and CEO, a lead independent director would ensure strong independent leadership of the Board. On June 30, 2016, the Company announced that the Board appointed Tim Cook, CEO of Apple, Inc., as Lead Independent Director of the Board to serve for a term of three years. As Lead Independent Director, Mr. Cook executes the following functions: +• +serves as a liaison between the Chairman and the independent directors; +• +approves the meeting agendas for the Board; +• +advises the Chairman/CEO regarding the sufficiency, quality, quantity and timeliness of information provided to the Board; +• +ensures that meeting schedules permit sufficient time for discussion of all agenda items; +• +provides consultation and direct communication with major shareholders, if requested; +• +presides at meetings of the Board at which the Chairman/CEO is not present, including executive sessions; and +• +performs other duties specified in the Lead Independent Director Charter. +The chairs of Board committees also play an active role in the leadership structure of the Board. The Nominating and Corporate Governance Committee and the Board endeavor to select independent committee chairs who will provide strong leadership to guide the important work of the Board committees. Committee chairs work with the Company’s senior executives to ensure the committees are discussing the key strategic risks and opportunities of the Company. In the absence of the lead independent director, a presiding director is appointed to chair executive sessions of +NIKE, INC. Ÿ 2017 Notice of Annual Meeting 4 +CORPORATE GOVERNANCE +Board of Directors +non-management directors (consisting of all directors other than Mr. Parker). The position of presiding director is rotated among the chairs of the various Board committees, other than the Executive Committee. Executive sessions are regularly scheduled and held at least once each year. +On June 30, 2016, the Board appointed Mr. Philip Knight to the position of Chairman Emeritus, with a standing invitation to attend meetings of the Board and its committees as a non-voting observer. The Board believed and continues to believe that it will benefit from the valuable experience and insights of the former Chairman of the Board. +For all of these reasons, the Board believes this leadership structure is optimal. +The Board’s Role in Risk Oversight +While the Company’s management is responsible for day-to-day management of the various risks facing the Company, the Board of Directors takes an active role in the oversight of the management of critical business risks. The Board does not view risk in isolation. Risks are considered in virtually every business decision and as part of NIKE’s business strategy. The Board recognizes it is neither possible nor prudent to eliminate all risk. Purposeful and appropriate risk-taking is essential for the Company to be competitive on a global basis and to achieve its strategic objectives. +The Board implements its risk oversight function both as a whole and through committees, which play a significant role in carrying out risk oversight. While the Audit Committee is responsible for oversight of management’s risk management policies, oversight responsibility for particular areas of risk is allocated among the Board committees according to the committee’s area of responsibility as reflected in the committee charters. In particular: +• +The Audit Committee oversees risks related to the Company’s financial statements, the financial reporting process, accounting, legal matters, information security, and data protection. The Audit Committee oversees the internal audit function, reviews a risk-based plan of internal audits, and reviews a risk-based integrated audit of internal controls over financial reporting. The Audit Committee meets separately with the Vice President of Corporate Audit and Chief Risk Officer, representatives of the independent registered public accountants, and senior management. +• +The Compensation Committee oversees risks and rewards associated with the Company’s compensation philosophy and programs, management succession plans, and executive development. +• +The Finance Committee oversees financial matters and risks relating to budgeting, investments, access to capital, capital deployment, acquisitions and divestitures, currency risk and hedging programs, and significant capital projects. +• +The Corporate Responsibility and Sustainability Committee oversees issues that involve reputational risk to the Company, including community engagement, and sustainability innovation relating to the Company’s products, its supply chain, including labor practices, and the environment. +• +The Nominating and Corporate Governance Committee oversees risks associated with company governance, including NIKE’s code of business conduct and its ethics, compliance programs, and the structure and performance of the Board and its committees. +Each committee chair works with the senior executive assigned to assist the committee to develop agendas for the year and for each meeting, paying particular attention to areas of business risk identified by management, Board members, internal and external auditors, and in their committee charter, and to schedule agenda topics, presentations, and discussions periodically regarding business risks within their area of responsibility. At meetings, the committees discuss areas of business risk, the potential impact, and management’s initiatives to manage business risk, often within the context of important business decisions. Through this process key business risk areas are reviewed at appropriate times, with some topics reviewed on several occasions throughout the year. At every Board meeting each committee chair provides a report to the full Board outlining its discussions and actions, including those affecting the oversight of various risks. +The Company believes its leadership structure, discussed in detail above, supports the risk oversight function of the Board. Strong directors chair the various committees involved in risk oversight, there is open communication between management and directors, and all directors are involved in the risk oversight function. +Code of Business Conduct and Ethics +The NIKE Code of Ethics (“Ethics Code”) is available at the Company’s corporate website: http://investors.nike.com and will be provided in print without charge to any shareholder who submits a request in writing to NIKE Investor Relations, One Bowerman Drive, Beaverton, Oregon 97005-6453. The Ethics Code applies to all of the Company’s employees and directors, including our chief executive officer and all other executive officers. The Ethics Code provides that any waiver of the Ethics Code may be made only by the Board. Any such waiver in favor of a director or executive officer will be publicly disclosed. The Company plans to disclose amendments to, and waivers from, the Ethics Code on the Company’s corporate website: http://investors.nike.com. +NIKE, INC. Ÿ 2017 Notice of Annual Meeting 5 +CORPORATE GOVERNANCE +PROPOSAL 1 +Proposal 1 +Election of Directors +A Board of 11 directors will be elected at the Annual Meeting. All of the nominees were elected at the 2016 annual meeting of shareholders. Directors will hold office until the next annual meeting of shareholders or until their successors are elected and qualified. +Mr. Alan B. Graf, Jr., Dr. John C. Lechleiter, and Ms. Michelle A. Peluso are nominated by the Board of Directors for election by the holders of Class B Stock. The other eight nominees are nominated by the Board for election by the holders of Class A Stock. +Under Oregon law, if a quorum of each class of shareholders is present at the Annual Meeting, the eight director nominees who receive the greatest number of votes cast by holders of Class A Stock and the three director nominees who receive the greatest number of votes cast by holders of Class B Stock will be elected directors. Abstentions and broker non-votes will have no effect on the results of the vote. Unless otherwise instructed, proxy holders will vote the proxies they receive for the nominees listed below. If any nominee becomes unable to serve, the holders of the proxies may, in their discretion, vote the shares for a substitute nominee or nominees designated by the Board. +The Bylaws and the Corporate Governance Guidelines of the Company provide that any nominee for director in an uncontested election who receives a greater number of votes “withheld” from his or her election than votes “for” such election shall tender his or her resignation for consideration by the Nominating and Corporate Governance Committee. The Committee will recommend to the Board the action to be taken with respect to the resignation. The Board will publicly disclose its decision within 90 days of the certification of the election results. +Background information on the nominees as of July 21, 2017, including some of the attributes that led to their selection, appears below. The Nominating and Corporate Governance Committee has determined that each director meets the qualification standards described in the section entitled “Director Nominations” above. In addition, the Board firmly believes that the experience, attributes, and skills of any single director should not be viewed in isolation, but rather in the context of the experience, attributes, and skills that all director nominees bring to the Board as a whole, each of which contributes to the function of an effective Board. +Nominees for Election by Class A Shareholders +Elizabeth J. Comstock +Ms. Comstock, 56, a director since 2011, is Vice Chair of General Electric Company (“GE”). Ms. Comstock leads GE’s efforts to accelerate new growth and operates GE Business Innovations, which includes Current, GE Lighting, GE Ventures & Licensing and GE sales, marketing and communications. At GE, she was appointed Vice President, Communications, NBC News Communications in 1994, Senior Vice President, NBC Corporate Communications in 1996, Vice President of Corporate Communications in 1998, Corporate Vice President and Chief Marketing Officer in 2003, President, NBC Universal Integrated Media in 2006, and Senior Vice President, Chief Marketing and Commercial Officer in 2008. Prior to joining GE in 1994, Ms. Comstock held a succession of positions at NBC, CBS, and Turner Broadcasting. Ms. Comstock is a trustee of the Cooper Hewitt, Smithsonian Design Museum. Ms. Comstock was selected to serve on the Board because her broad experience in, and understanding of, media, marketing, and innovation aligns well with the Company’s business model, which involves a great deal of each. +John G. Connors +Mr. Connors, 58, a director since 2005, is a partner in Ignition Partners LLC, a Seattle-area venture capital firm. Mr. Connors served as Senior Vice President and Chief Financial Officer of Microsoft Corporation from December 1999 to May 2005. He joined Microsoft in 1989 and held various management positions, including Corporate Controller from 1994 to 1996, Chief Information Officer from 1996 to 1999, and Vice President, Worldwide Enterprise Group in 1999. Mr. Connors is currently a member of the board of directors of Splunk, Inc. and privately held companies Chef, Inc., Motif Investing, Inc., FiREapps, Inc., ICERTIS, Inc., Tempered Networks Inc., Azuqua, Inc., DataSphere Technologies, Inc., KenSci, the Washington Policy Center, and the University of Washington Tyee Club. Mr. Connors was selected to serve on the Board because his experience and skills in accounting, financial leadership, venture capital, technology, and international operations enable him to make valuable contributions to the Board. +NIKE, INC. Ÿ 2017 Notice of Annual Meeting 6 +CORPORATE GOVERNANCE +PROPOSAL 1 +Timothy D. Cook +Mr. Cook, 56, a director since 2005, is the Lead Independent Director of the Board of Directors of the Company and is the Chief Executive Officer of Apple, Inc. Mr. Cook joined Apple in March 1998 as Senior Vice President of Worldwide Operations and also served as its Executive Vice President, Worldwide Sales and Operations and Chief Operating Officer. Mr. Cook was Vice President, Corporate Materials for Compaq Computer Corporation from 1997 to 1998. Previous to his work at Compaq, Mr. Cook served in the positions of Senior Vice President Fulfillment and Chief Operating Officer of the Reseller Division at Intelligent Electronics from 1994 to 1997. Mr. Cook also worked for International Business Machines Corporation from 1983 to 1994, most recently as Director of North American Fulfillment. Mr. Cook is currently a member of the Board of Directors of the National Football Foundation and Apple, Inc. Mr. Cook also currently serves on the Board of Trustees for Duke University. Mr. Cook was selected to serve on the Board because his operational executive experience and his knowledge of technology, marketing, and international business allow him to provide the Board with valuable perspectives and insights. +John J. Donahoe II +Mr. Donahoe, 57, a director since June 2014, is President and Chief Executive Officer of ServiceNow, Inc. and also serves on its Board of Directors. Mr. Donahoe also serves as Chairman of PayPal Holdings, Inc. From 2008 through 2015, Mr. Donahoe served as President and Chief Executive Officer of eBay, Inc. (“eBay”), provider of the global eBay.com online marketplace and PayPal digital payments platform. Mr. Donahoe joined eBay in 2005 as President of eBay Marketplaces, responsible for eBay’s global e-Commerce businesses, and was appointed President and Chief Executive Officer in 2008. He also served on eBay’s Board of Directors from 2008 to 2015. Prior to joining eBay, Mr. Donahoe was the Chief Executive Officer and Worldwide Managing Director of Bain & Company from 1999 to 2005, and a Managing Director from 1992 to 1999. Mr. Donahoe currently serves on the Board of Trustees for The Bridgespan Group. He served on the Board of Directors of Intel Corporation from March 2009 until May 2017. He is also a member of the President’s Export Council. Mr. Donahoe was selected to serve on the Board because his experience in executive and financial management, strategic planning, branding, technology, and digital commerce, allow him to provide valued perspectives on each of these areas of the Company’s business. +Travis A. Knight +Mr. Knight, 43, a director since June 2015, is the President and Chief Executive Officer of the animation studio, LAIKA, LLC (“LAIKA”), which specializes in feature-length films. He has been involved in all principal creative and business decisions at LAIKA since its founding in 2003, serving in successive management positions as Lead Animator, Vice President of Animation, and then as President and Chief Executive Officer in 2009. Mr. Knight was Producer and Director of the feature film Kubo and the Two Strings (2017) which was nominated for an Academy Award and winner of the BAFTA award for Best Animated Film. Mr. Knight has served as Producer and Lead Animator on Academy Award-nominated feature-length films The Boxtrolls (2014) and ParaNorman (2012, for which he won an Annie Award for Outstanding Achievement in Character Animation), and Lead Animator for Coraline (2009). Prior to his work at LAIKA, Mr. Knight held various animation positions at Will Vinton Studios from 1998 to 2002, as a stop-motion animator for television series, commercials, and network promotions. He has been recognized for his work on the Emmy Award-winning stop-motion animated television series The PJs. Mr. Knight serves on the Board of Directors of LAIKA. He is the son of NIKE’s co-founder and former Chairman of the Board, Mr. Philip Knight, who currently serves as Chairman Emeritus. In addition, Mr. Travis Knight has a significant +NIKE, INC. Ÿ 2017 Notice of Annual Meeting 7 +CORPORATE GOVERNANCE +PROPOSAL 1 +role in the management of the Class A shares owned by Swoosh, LLC, strengthening the alignment of the Board with the interests of NIKE shareholders. +Mark G. Parker +Mr. Parker, 61, is Chairman of the Board of Directors of the Company, and has served as President and Chief Executive Officer and a director since 2006. He was named Chairman of the Board on June 30, 2016. He has been employed by NIKE since 1979 with primary responsibilities in product research, design and development, marketing, and brand management. Mr. Parker was appointed divisional Vice President in charge of product development in 1987, corporate Vice President in 1989, General Manager in 1993, Vice President of Global Footwear in 1998, and President of the NIKE Brand in 2001. Mr. Parker is currently a member of the Board of Directors of The Walt Disney Company. He has extensive knowledge and experience regarding Company operations, sports marketing, manufacturing, research, design, development, and management, and is an effective leader of NIKE. His position as Chief Executive Officer makes his position as Chairman of the Board critical. +Johnathan A. Rodgers +Mr. Rodgers, 71, a director since 2006, is a retired broadcast and cable television executive. Mr. Rodgers retired as the founding President and Chief Executive Officer of TV One, LLC in July 2011. Prior to joining TV One, LLC in March 2003, Mr. Rodgers was President of the Discovery Networks from 1996 to 2003. Prior to his work at Discovery Communications, Mr. Rodgers had a 20-year career at CBS, Inc. where he held a variety of executive positions, including President, CBS Television Stations Division and CBS News Executive Producer. Mr. Rodgers is currently a member of the Board of Directors of Comcast Corporation. Mr. Rodgers previously served as a director of Procter & Gamble and the National Cable & Telecommunications Association. Mr. Rodgers has been inducted into both the Advertising Hall of Fame and the Broadcasting and Cable Hall of Fame. Mr. Rodgers was selected to serve on the Board because his experience and knowledge in media, broadcasting, and telecommunications, his skills in executive leadership, and his knowledge of multicultural media allows him to provide valuable insights to the Board regarding corporate responsibility, diversity, compensation, and marketing. +John R. Thompson, Jr. +Mr. Thompson, 75, a director since 1991, was head coach of the Georgetown University men’s basketball team from 1972 until 1998. Mr. Thompson was head coach of the 1988 United States Olympic basketball team. He hosted a sports radio talk show in Washington, D.C. for 13 years, and is a nationally broadcast sports analyst for Turner Network Television (TNT) and Dial Global, Inc. He serves as Assistant to the President of Georgetown University for Urban Affairs and he is a past President of the National Association of Basketball Coaches and presently serves on its Board of Governors. Mr. Thompson has honorary doctorate degrees from Wheeling Jesuit University, Georgetown University, University of the District of Columbia, and St. Peter’s College. Mr. Thompson was selected to serve on the Board because his extensive experience and knowledge of education, college and professional sports, media, broadcasting, and knowledge of urban issues allow him to provide valuable insights to the Board regarding sports marketing, corporate responsibility and diversity. +Board Recommendation +The Board of Directors recommends that the Class A Shareholders vote FOR the election of nominees above to the Board of Directors. +NIKE, INC. Ÿ 2017 Notice of Annual Meeting 8 +CORPORATE GOVERNANCE +PROPOSAL 1 +Nominees for Election by Class B Shareholders +Alan B. Graf, Jr. +Mr. Graf, 63, a director since 2002, is the Executive Vice President and Chief Financial Officer of FedEx Corporation (“FedEx”), a position he has held since 1998, and is a member of FedEx’s Executive Committee. Mr. Graf joined FedEx in 1980 and was Senior Vice President and Chief Financial Officer for FedEx Express, FedEx’s predecessor, from 1991 to 1998. He previously served on the board of directors of Kimball International Inc., Storage USA, Inc., and Arkwright Mutual Insurance Co., and he is currently a director of Mid-America Apartment Communities, Inc., Methodist Le Bonheur Healthcare, and the Indiana University Foundation. In March 2017, Mr. Graf was selected as the Chairman of the University of Memphis Board of Trustees. Mr. Graf was selected to serve on the Board because his experience and skills in auditing, accounting, financial management, executive leadership, and international operations enable him to effectively provide the Board with valuable perspectives and insights. +John C. Lechleiter +Dr. Lechleiter, 63, a director since 2009, is the former Chairman of the Board, President, and Chief Executive Officer of Eli Lilly and Company (“Lilly”). He served as President and Chief Executive Officer from April 1, 2008 until December 2016. He served as a member of Lilly’s board of directors from 2005 to May 2017 and as Chairman of Lilly’s board from January 2009 to May 2017. Dr. Lechleiter began work at Lilly as a senior organic chemist in Lilly’s process research and development division in 1979 and became head of that department in 1982. He later held roles in project management, regulatory affairs, product development, and pharmaceutical operations. He was named President and Chief Operating Officer in 2005. He is a member of the American Chemical Society. He served on the board of Pharmaceutical Research and Manufacturers of America from February 2008 until December 2016. He also served as Chairman of the U.S.-Japan Business Council until November 2016. He serves on the board of United Way Worldwide, and on the boards of the Chemical Heritage Foundation and Ford Motor Company. He is a member emeritus of the board of the Central Indiana Corporate Partnership. Dr. Lechleiter was selected to serve on the Board because his operational executive experience and his knowledge of science, marketing, management, and international business allow him to provide the Board with significant contributions in those strategic areas. +Michelle A. Peluso +Ms. Peluso, 45, a director since April 2014, is Chief Marketing Officer at IBM. She served as Chief Executive Officer of online shopping destination Gilt Groupe, Inc. (“Gilt”) from 2013 until its sale to Hudson’s Bay Company in February 2016, and was on Gilt’s board of directors from 2009 to 2016. Prior to joining Gilt in 2013, she served as Global Consumer Chief Marketing and Internet Officer of Citigroup Inc. from 2009 to 2013, and from 2002 to 2009, Ms. Peluso held senior management positions at Travelocity.com LP, being appointed Chief Operating Officer in 2003, and President and Chief Executive Officer in December 2003. Prior to joining Travelocity, in 1999 she founded Site59, an online travel site, serving as its Chief Executive Officer until its acquisition by Travelocity in 2002. Ms. Peluso was a director of OpenTable, Inc. from 2008 to 2012 and is a director of the nonprofit Technosense and Tech:NYC. She also is a Strategic Advisor at Technology Crossover Ventures. Ms. Peluso was selected to serve on the Board because of her extensive experience in, and understanding of, online retail, marketing, branding, and digital connections with consumers, which are integral components of the Company’s growth strategy. +Board Recommendation +The Board of Directors recommends that the Class B Shareholders vote FOR the election of nominees above to the Board of Directors. +NIKE, INC. Ÿ 2017 Notice of Annual Meeting 9 +CORPORATE GOVERNANCE +PROPOSAL 1 +Director Compensation for Fiscal 2017 +Name +Fees Earned or Paid in Cash ($) +Stock Awards (1)(2) ($) +Change in Pension Value and +Nonqualified Deferred Compensation +Earnings ($) +All Other +Compensation (3) +($) +Total +($) +Elizabeth J. Comstock +90,000 +165,011 +— +16,961 +271,972 +John G. Connors +110,000 +165,011 +— +21,961 +296,972 +Timothy D. Cook +128,030 +165,011 +— +21,961 +315,002 +John J. Donahoe II +95,000 +165,011 +— +21,961 +281,972 +Alan B. Graf, Jr. +115,000 +165,011 +— +1,961 +281,972 +Travis A. Knight +90,000 +165,011 +— +2,435 +257,446 +John C. Lechleiter +105,000 +165,011 +— +21,961 +291,972 +Michelle A. Peluso +95,000 +165,011 +— +18,711 +278,722 +Johnathan A. Rodgers +90,000 +165,011 +— +14,461 +269,472 +John R. Thompson, Jr. +72,000 +165,011 +— +44,215 +281,226 +Phyllis M. Wise +105,000 +165,011 +— +21,961 +291,972 +(1) +Represents the grant date fair value of restricted stock awards granted in fiscal 2017 computed in accordance with accounting guidance applicable to stock-based compensation. The grant date fair value is based on the closing market price of our Class B Stock on the grant date. As of May 31, 2017, non-employee directors held the following number of outstanding shares of unvested restricted stock: Ms. Comstock, 2,978; Mr. Connors, 2,978; Mr. Cook, 2,978; Mr. Donahoe, 2,978; Mr. Graf, 2,978; Mr. Knight, 2,978; Dr. Lechleiter, 2,978; Ms. Peluso, 2,978; Mr. Rodgers, 2,978; Mr. Thompson, 2,978; and Dr. Wise, 2,978. +(2) +As of May 31, 2017, non-employee directors held outstanding options for the following numbers of shares of our Class B Stock: Ms. Comstock, 90,000; Mr. Connors, 90,000; Mr. Cook, 90,000; Dr. Lechleiter, 126,000; Mr. Rodgers, 138,000; and Dr. Wise, 110,000. +(3) +Includes matched contributions to charities in the following amounts: Ms. Comstock, $15,000; Mr. Connors, $20,000; Mr. Cook, $20,000; Mr. Donahoe, $20,000; Dr. Lechleiter, $20,000; Ms. Peluso, $16,750; Mr. Rodgers, $12,500; Mr. Thompson, $20,000; and Dr. Wise $20,000 and dividends paid on restricted stock of $2,435 to Mr. Knight and $1,961 to all other non-employee directors. Also includes medical and life insurance premiums paid by the Company of $22,254 for Mr. Thompson. +Director Fees and Arrangements +Under our standard director compensation program in effect for fiscal 2017, non-employee directors annually receive: +• +An annual retainer of $90,000, paid quarterly. +• +A restricted stock award valued at $165,000 on the date of grant, generally, the date of each annual meeting of shareholders. The restricted stock award is subject to forfeiture in the event that service as a director terminates prior to the next annual meeting. +• +For the Lead Independent Director, an annual retainer of $25,000, paid quarterly. +• +For chairs of board committees (other than the Executive Committee), an annual retainer of $15,000 for each committee chaired ($20,000 for the chair of the Audit Committee), paid quarterly. +• +For Audit Committee members, an additional annual retainer of $5,000, paid quarterly. +• +Payment or reimbursement of travel and other expenses incurred in attending board meetings. +• +Matching charitable contributions under the NIKE Matching Gift Program, under which directors are eligible to contribute to qualified charitable organizations and we provide a matching contribution to the charities in an equal amount, up to $20,000 in the aggregate for each director annually. +Mses. Comstock and Peluso, Messrs. Connors, Cook, Donahoe, Graf, Knight, and Rodgers, and Drs. Lechleiter and Wise participate in our standard director compensation program as described above. +Mr. Thompson does not participate in our standard director compensation program. Pursuant to his election made in fiscal 2000, Mr. Thompson receives an annual retainer of $72,000 per year (instead of the $90,000 annual retainer fee paid under our standard program). Pursuant to his election, Mr. Thompson also receives medical insurance and $500,000 of life insurance coverage paid for by the Company. Additionally, on the date of each annual meeting of shareholders, Mr. Thompson receives an annual restricted stock award valued at $165,000 on the date of grant on the same terms as apply to the restricted stock awards granted pursuant to our standard program. He is also eligible for payment or reimbursement of board-related expenses and participation in the NIKE Matching Gift Program on the same basis as other directors. +Stock Ownership Guidelines for Directors +On June 20, 2013, the Board of Directors adopted stock ownership guidelines for all non-employee directors. Under these guidelines, directors are required to hold NIKE stock valued at five times their annual cash retainer. Directors elected prior to June 20, 2013 are required to attain these ownership levels by June 20, 2018 and new directors within five years of their election to the Board. +NIKE, INC. Ÿ 2017 Notice of Annual Meeting 10 +CORPORATE GOVERNANCE +PROPOSAL 1 +Director Participation in Deferred Compensation Plan +Under our Deferred Compensation Plan, non-employee directors may elect in advance to defer up to 100 percent of the director fees paid by the Company. For a description of the plan, see “Non-Qualified Deferred Compensation in fiscal 2017” below. In addition, in fiscal 2000, Mr. Thompson received credits to a fully vested NIKE stock account under the Deferred Compensation Plan in exchange for his waiver of rights to future payments under a former non-employee director retirement program. The Class B Stock credited to Mr. Thompson’s account is distributed to him upon his retirement from the Board and the account is credited with quarterly dividends until distributed. +NIKE, INC. Ÿ 2017 Notice of Annual Meeting 11 +CORPORATE GOVERNANCE +Stock Holdings of Certain Owners and Management +The following table sets forth the number of shares of the class of NIKE securities beneficially owned, as of June 30, 2017, after giving effect to any transactions that occurred on such date, by (i) each person known to the Company to be the beneficial owner of more than 5 percent of any class of the Company’s securities, (ii) each of the directors and nominees for director, (iii) each executive officer listed in the Summary Compensation Table (“Named Executive Officers”), and (iv) all nominees, Named Executive Officers, and other executive officers as a group. Because Class A Stock is convertible into Class B Stock on a share-for-share basis, each beneficial owner of Class A Stock is deemed by the SEC to be a beneficial owner of the same number of shares of Class B Stock. Therefore, in indicating a person’s beneficial ownership of shares of Class B Stock in the table, it has been assumed that such person has converted into Class B Stock all shares of Class A Stock of which such person is a beneficial owner. For these reasons the table contains substantial duplications in the numbers of shares and percentages of Class A and Class B Stock shown for Swoosh, LLC, Philip H. Knight, the Travis A. Knight 2009 Irrevocable Trust II and Travis A. Knight in his capacity as the Trustee of such Trusts. In addition, unless otherwise indicated, all persons named below can be reached at c/o Ann M. Miller, Vice President and Corporate Secretary, NIKE, Inc., One Bowerman Drive, Beaverton, Oregon 97005-6453. +Title of Class +Shares Beneficially Owned (1) +Percent of Class (2) +Elizabeth J. Comstock +Class B +99,660 +(3) +— +John G. Connors +Class B +125,500 +(3) +— +Timothy D. Cook +Class B +105,660 +(3) +— +John J. Donahoe II +Class B +13,892 +— +Alan B. Graf, Jr. +Class B +192,612 +— +Travis A. Knight +Class A +38,656,369 +(5) +11.7 +% +Class B +38,671,489 +(5) +2.9 +% +John C. Lechleiter +Class B +154,660 +(3) +— +Mark G. Parker (6) +Class B +5,196,545 +(3)(7) +0.4 +% +Michelle A. Peluso +Class B +13,996 +— +Johnathan A. Rodgers +Class B +147,660 +(3) +— +John R. Thompson, Jr. +Class B +74,420 +(4) +— +Phyllis M. Wise +Class B +119,660 +(3) +— +Andrew Campion (6) +Class B +447,438 +(3) +— +Trevor A. Edwards (6) +Class B +2,183,175 +(3)(7) +0.2 +% +Eric D. Sprunk (6) +Class B +1,089,644 +(3) +— +Michael Spillane (6) +Class B +265,876 +(3) +— +Sojitz Corporation of America +1211 S.W. 5th Ave, Pacwest Center, Ste. 2220, Portland, OR 97204 +Preferred (8) +300,000 +100.0 +% +Philip H. Knight +Class A +24,254,487 +7.4 +% +One Bowerman Drive, Beaverton, Oregon 97005 +Class B +46,093,139 +(9) +3.5 +% +Swoosh, LLC +Class A +257,000,000 +(10) +78.1 +% +22990 NW Bennett Street, Hillsboro, OR 97124 +Class B +257,000,000 +16.4 +% +Travis A. Knight 2009 Irrevocable Trust II +Class A +38,656,369 +(5) +11.7 +% +22990 NW Bennett Street, Hillsboro, OR 97124 +Class B +38,656,369 +(5) +2.9 +% +The Vanguard Group +100 Vanguard Blvd., Malvern, PA 19355 +Class B +93,227,021 +(11) +7.0 +% +BlackRock, Inc. +40 East 57th Street, New York, NY 10022 +Class B +78,991,425 +(12) +5.9 +% +All directors and executive officers as a group (20 persons) +Class A +38,656,369 +(5)(13) +11.7 +% +Class B +51,151,596 +(3)(5)(13) +3.9 +% +(1) +A person is considered to beneficially own any shares: (a) over which the person exercises sole or shared voting or investment power, or (b) of which the person has the right to acquire beneficial ownership at any time within 60 days (such as through conversion of securities or exercise of stock options). Unless otherwise indicated, voting and investment power relating to the above shares is exercised solely by the beneficial owner or shared by the owner and the owner’s spouse or children. +(2) +Omitted if less than 0.1 percent. +(3) +These amounts include the right to acquire, pursuant to the exercise of stock options, within 60 days after June 30, 2017, the following numbers of shares: 90,000 shares for Ms. Comstock, 90,000 shares for Mr. Connors, 90,000 shares for Mr. Cook, 126,000 shares for Dr. Lechleiter, 3,903,750 shares for Mr. Parker, 138,000 shares for Mr. Rodgers, 110,000 shares for Dr. Wise, 421,750 shares for Mr. Campion, 1,625,000 shares for Mr. Edwards, 837,290 shares for Mr. Sprunk, 212,500 shares for Mr. Spillane, and 7,644,290 shares for the executive officer and director group. These amounts also reflect the vesting of 214,872 Restricted Stock Units each for Messrs. Edwards and Sprunk. +(4) +Includes shares credited to accounts under the NIKE, Inc. Deferred Compensation Plan in the following amounts: 32,760 for Mr. Thompson. +NIKE, INC. Ÿ 2017 Notice of Annual Meeting 12 +CORPORATE GOVERNANCE +(5) +Includes 19,513,989 Class A shares held directly by the Travis A. Knight 2009 Irrevocable Trust II (the “Trust”), of which Mr. Travis Knight is the Trustee, and 19,142,380 Class A shares held by an indirect subsidiary of the Trust. Mr. Knight and members of his immediate family are among the beneficiaries of the Trust. Mr. Knight disclaims beneficial ownership of the Company’s securities held directly and indirectly by the Trust, except to the extent of his pecuniary interest therein. On June 30, 2016, a wholly owned subsidiary of the Trust acquired all of the voting units in Swoosh, LLC. Mr. Knight disclaims beneficial ownership of all securities held by Swoosh, LLC. +(6) +Named executive officer listed in the Summary Compensation Table. +(7) +Includes shares held in accounts under the NIKE, Inc. 401(k) and Profit Sharing Plan for Messrs. Parker and Edwards in the amounts of 35,205 and 18,610, respectively. +(8) +Preferred Stock does not have general voting rights except as provided by law, and under certain circumstances as provided in the Company’s Restated Articles of Incorporation, as amended. +(9) +Does not include: (a) 521,792 shares of Class A Stock that are owned by Mr. Philip Knight’s spouse, (b) 4,357,855 shares of Class B Stock held by the Knight Foundation, a charitable foundation in which Mr. Philip Knight and his spouse are directors, (c) 2,334,094 shares of Class B Stock held by Jasper Ridge Strategic Partners, L.P., a limited partnership in which a company owned by Mr. Philip Knight is a limited partner. Mr. Philip Knight has disclaimed ownership of all such shares. Mr. Philip Knight retired from the Board on June 30, 2016, and is Chairman Emeritus with a standing invitation to attend all meetings of the Board as a non-voting observer. +(10) +Information provided as of July 1, 2016 in Schedule 13D filed by the shareholder. +(11) +Information provided as of February 9, 2017 in Schedule 13G filed by the shareholder. +(12) +Information provided as of January 25, 2017 in Schedule 13G filed by the shareholder. +(13) These amounts do not include shares owned by Mr. Philip Knight who retired from the Board on June 30, 2016. +Section 16(a) Beneficial Ownership Reporting Compliance +Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s directors and executive officers, and persons who own more than 10 percent of a registered class of the Company’s equity securities, to file with the SEC and the NYSE initial reports of ownership and reports of changes in ownership of Common Stock and other equity securities of the Company. Officers, directors and greater than 10 percent shareholders are required by the regulations of the SEC to furnish the Company with copies of all Section 16(a) forms they file. To the Company’s knowledge, based solely on review of the copies of such reports furnished to the Company and written representations that no other reports were required, during fiscal 2017 all Section 16(a) filing requirements applicable to its officers, directors and greater than 10 percent beneficial owners were complied with. +Transactions with Related Persons +During fiscal 2017, Howard S. Slusher, the father of John Slusher, Executive Vice President of Sports Marketing, and the Company were parties to a Consulting Agreement pursuant to which Howard Slusher managed the planning, design, and construction of new buildings at, and improvements to, NIKE’s World Headquarters. Howard Slusher was selected due to his deep history and experience with the Company, as he managed several significant construction projects for the Company, including the original World Headquarters construction and later expansions. During fiscal 2017, the Company paid Howard Slusher $2,024,592 for these services. +Pursuant to the terms of a past consulting agreement with the Company, the Company agreed to pay for health and life insurance policies for Howard Slusher following expiration of the agreement. During fiscal 2017, the Company paid $71,970 for life insurance premiums. +Two of Mr. Parker’s siblings, each with over 25 years of service to the Company, were employed by the Company in non-executive roles in fiscal 2017. Ann Parker was a Design Talent Scout, and Stephen Parker held a Vice President role with Converse. During fiscal 2017, the Company paid aggregate compensation to each of Ann Parker and Stephen Parker in the amounts of $289,894 and $540,820, respectively, comprising of salary, bonuses, the grant date fair value of stock options granted during the fiscal year estimated using the Black-Scholes pricing model, profit sharing and matching contributions to Company-sponsored retirement plans. The compensation and benefits received by each of Mr. Parker’s siblings, were consistent with compensation paid to other employees holding similar positions. +Mr. Thompson’s son, John Thompson III, former head basketball coach at Georgetown University, and the Company are parties to a contract pursuant to which Mr. Thompson III provides certain endorsement and consulting services to the Company. The terms of this agreement, effective August 2014 through August 2019, provide for annual base compensation of $200,000, and up to $112,500 per year of product and merchandise. In addition, there are annual incentive payments based upon team performance. +On June 30, 2016, Philip H. Knight, the father of NIKE director Travis A. Knight, retired from the Board of Directors. Effective immediately upon his retirement, the Board has appointed Philip H. Knight to the position of Chairman Emeritus, which provides a standing invitation for Philip H. Knight to attend meetings of the Board and its committees as a non-voting observer. As the Chairman Emeritus, Mr. Knight receives medical and dental insurance coverage available to employees and receives an annual salary of $500,000. Philip H. Knight received $567,172 in salary and profit sharing and matching contributions to Company-sponsored retirement plans. +The Company’s written policy requires the Nominating and Corporate Governance Committee to review any transaction or proposed transaction with a related person that would be required to be reported under Item 404(a) of Regulation S-K, and to determine whether to ratify or approve the transaction, with ratification or approval to occur only if the Committee determines that the transaction is fair to the Company or that approval or ratification of the transaction is in the interest of the Company. +NIKE, INC. Ÿ 2017 Notice of Annual Meeting 13 +CORPORATE GOVERNANCE +Compensation Committee Interlocks and Insider Participation +The members of the Compensation Committee of the Board of Directors during fiscal 2017 were Timothy D. Cook, Elizabeth J. Comstock, John C. Lechleiter, and Johnathan A. Rodgers. The Committee is composed solely of independent, non-employee directors. No member of the Compensation Committee has been an executive officer of the Company, and no member of the Compensation Committee had any relationships requiring disclosure by the Company under the SEC’s rules requiring disclosure of certain relationships and related-party transactions. None of the Company’s executive officers served as a director or member of a compensation committee (or other committee serving an equivalent function) of any other entity, the executive officers of which served as a director or member of the Compensation Committee of the Company during fiscal 2017. +NIKE, INC. Ÿ 2017 Notice of Annual Meeting 14 +COMPENSATION DISCUSSION AND ANALYSIS +COMPENSATION DISCUSSION AND ANALYSIS +Executive Summary +This Compensation Discussion and Analysis explains our compensation philosophy, summarizes our compensation programs and reviews compensation decisions for the executives identified as Named Executive Officers in the Summary Compensation Table on page 26. The Named Executive Officers for fiscal 2017 were: +• +Mark G. Parker, Chairman, President and Chief Executive Officer +• +Andrew Campion, Executive Vice President and Chief Financial Officer +• +Trevor A. Edwards, President, NIKE Brand +• +Eric D. Sprunk, Chief Operating Officer +• +Michael Spillane, President, Categories and Product +Michael Spillane was promoted to the role of President, Product and Merchandising effective June 1, 2016. In connection with the Company’s new Consumer Direct Offense, Michael Spillane assumed the role of President, Categories and Product effective May 31, 2017. +The Compensation Committee of the Board (the “Committee”) is comprised of Timothy D. Cook (Chairman), Elizabeth J. Comstock, John C. Lechleiter, and Johnathan A. Rodgers, each of whom is an independent director under applicable NYSE listing standards. +Our executive compensation program, similar to our non-executive compensation programs, is aligned with our business strategy and culture to attract and retain top talent, reward business results and individual performance, and most importantly, maximize shareholder value. Our total compensation program for the Named Executive Officers is highly incentive-based and competitive in the marketplace, with Company performance determining a significant portion of total compensation. +Executive Compensation Governance Practices +To achieve the objectives of our executive compensation program and emphasize pay-for-performance principles, the Compensation Committee employs strong governance practices as outlined in the table below. +We Do +We Don’t Do +ü Base a majority of total compensation on performance and retention incentives +ü Set annual and long-term incentive targets based on clearly disclosed, objective performance measures +ü Mitigate undue risk associated with compensation by using multiple performance targets, caps on potential incentive payments and a clawback policy +ü Require executive officers and non-employee directors to hold NIKE stock through published stock ownership guidelines +ü Vest equity awards over time to promote retention with a minimum of one year vesting +ü Provide double-trigger change-in-control equity acceleration +ü Require executive officers and directors to obtain pre-approval to pledge NIKE stock +ü Conduct annual “say-on-pay” advisory votes +û Retirement acceleration for restricted stock or restricted stock units (RSUs) +û Payments of accumulated dividends on unearned RSUs until and unless shares are earned +û Repricing of options without shareholder approval +û Hedging transactions or short sales by executive officers or directors +û Significant perquisites +û Tax gross-ups for perquisites +û Pension or supplemental executive retirement plan (SERP) +û Employment contracts +û Cash-based change-in-control benefits +û Excise tax gross-ups upon change of control +Consideration of Say-on-Pay Vote Results +The non-binding advisory proposal regarding compensation of the Named Executive Officers submitted to shareholders at our 2016 annual meeting was approved by 86% of the votes cast. The Committee believes this favorable outcome conveyed our shareholders’ support of our executive compensation program and the Committee’s decisions. After considering the shareholder vote and other factors in its annual review of our total executive compensation programs, the Committee made no material changes in the structure of our compensation programs. The Committee will continue to consider the outcome of the Company’s say-on-pay votes when conducting its regular practice of evaluating the executive compensation program and making future compensation decisions for the Named Executive Officers. +NIKE, INC. Ÿ 2017 Notice of Annual Meeting 15 +COMPENSATION DISCUSSION AND ANALYSIS +Financial Highlights under Incentive Plans +NIKE delivered solid performance in fiscal 2017. The charts below set forth certain key financial results that were used in determining payouts under our incentive compensation plans for fiscal 2017. The measures below are based on NIKE’s comparable publicly reported financial results. +1 2015 and 2016 restated to reflect the December 23, 2015 two-for-one stock split. +Executive Compensation Highlights +The total compensation for each of the Named Executive Officers is shown in the Summary Compensation Table on page 26. While we describe executive compensation in greater detail throughout this Compensation Discussion and Analysis, actions the Committee took in fiscal 2017 are highlighted below: +• +Base Salary. Based on the recommendation by the Committee, which was approved by the independent members of the Board, Messrs. Parker and Spillane’s base salaries remained the same at $1,550,000 and $901,000, respectively. Base salaries for Messrs. Campion, Edwards, and Sprunk increased to $900,000, $1,050,000, and $1,050,000, respectively. +• +Performance-Based Annual Incentive Plan. Target awards for Messrs. Parker, Campion, Edwards, and Sprunk remained the same, and Mr. Spillane’s target award was set at 100% of base salary. Based on financial performance goals set by the Committee in June 2016 and actual performance results, each Named Executive Officer’s bonus for fiscal 2017 was paid out at 58.86% of target. +• +Performance-Based Long-Term Incentive Plan. The target awards for the fiscal 2017-2019 performance period for Messrs. Parker, Campion, Edwards, and Sprunk remained the same, and Mr. Spillane’s target award was set at $750,000. Based on long-term financial performance goals set by the Committee in June 2014 and actual performance results, each executive officer received a payout for the fiscal 2015-2017 performance period of 131.97% of target. +• +Stock Options. The annual award for Mr. Parker remained the same. Annual awards for Messrs. Campion, Edwards, and Sprunk increased to 75,000, 100,000, and 85,000 option shares, respectively. Mr. Spillane was awarded 50,000 option shares. Each award vests in equal annual installments over four years. +• +Restricted Stock. The annual awards for Messrs. Parker, Edwards, and Sprunk remained the same. The annual award for Mr. Campion increased to $750,000. Mr. Spillane’s award was set at $500,000. Each award vests in equal annual installments over three years. +• +Peer Group. For purposes of setting executive compensation in fiscal 2017, Procter & Gamble Company, Target Corporation, and TJX Companies were added to our peer group, and Kohl’s Corporation and L Brands, Inc. were removed. +Operation of the Compensation Committee +The Compensation Committee of the Board of Directors (the “Committee”) evaluates the performance of the CEO against goals and objectives reviewed and approved by the Committee. Based on the evaluation, the Committee Chair discusses the CEO’s performance and recommended compensation with the independent members of the Board. The CEO’s base salary and the base salaries of the other Named Executive Officers are approved by the independent members of the Board based on the Committee’s recommendation. The Committee has sole responsibility for all other elements of Named Executive Officer compensation. The Committee also reviews the performance evaluation of those officers and the administration of our executive compensation programs. The Committee receives recommendations from the CEO as to compensation of other Named Executive Officers, and the CEO participates in Committee discussions regarding the compensation of those officers. The Committee meets in executive session without the CEO to determine his compensation. The Committee is comprised of Timothy D. Cook (Chairman), Elizabeth J. Comstock, John C. Lechleiter, and Johnathan A. Rodgers, each of whom is an independent director under applicable NYSE listing standards. The Committee operates pursuant to a written charter that is available on our website at: http://investors.nike.com . +Each year, the Committee reviews our executive total compensation program to ensure it continues to reflect the Committee’s commitment to align the objectives and rewards of our executive officers with the creation of value for our shareholders. Similar to our non-executive compensation programs, the program has been designed to reinforce our pay-for-performance philosophy by delivering total compensation that motivates and rewards short- and long-term financial performance to maximize shareholder value, and to be externally competitive to attract and retain outstanding +NIKE, INC. Ÿ 2017 Notice of Annual Meeting 16 +COMPENSATION DISCUSSION AND ANALYSIS +and diverse executive talent. This is done much in the same way our human resources staff designs our non-executive compensation programs, to ensure they are market competitive, offer performance-based financial incentives, and provide opportunities to share in total Company success through competitive benefits, stock purchase discount programs, and broad-based profit sharing. In conducting its annual review, the Committee considers information provided by our human resources staff. Our human resources staff retains independent compensation consulting firms to provide surveys and reports containing competitive market data. These consultants do not formulate executive compensation strategies for NIKE or recommend individual executive compensation. The human resources staff uses the surveys and reports to make recommendations to the Committee concerning executive compensation. The Committee relies on its collective experience and judgment along with the recommendations prepared by our human resources staff to set executive compensation. The Committee has the authority, in its sole discretion, to retain compensation consultants to assist the Committee in evaluating the compensation of executive officers, but chose to not retain any such consultants in fiscal 2017. +Use of Market Survey Data +To help establish competitive ranges of base salary, incentive compensation opportunities, and target total compensation for the purpose of making recommendations to the Committee, our human resources staff uses competitive market data from surveys and reports prepared by Aon Hewitt and Willis Towers Watson. Historically, we consider market survey data from a peer group of companies which have similar revenue size, have similar products or markets, or reflect the companies with which we compete for executive talent. For fiscal 2017, we expanded these criteria to include market capitalization and brand value. In addition, we consider market data across many industries, focusing on companies with revenues of $10 billion or more. +In November 2015, we conducted our regular periodic review of our peer group. Based on the criteria described above, we determined that for the purposes of setting executive compensation for fiscal 2017, the peer group should be refined to include Procter & Gamble Company, Target Corporation and TJX Companies, Inc. and to remove Kohl’s Corporation and L Brands, Inc. The fiscal 2017 peer group was: +Alphabet Inc. +Kellogg Company +Procter & Gamble Company +The Coca-Cola Company +Kimberly-Clark Corporation +Starbucks Corporation +Colgate-Palmolive Company +Macy’s, Inc. +Target Corporation +eBay Inc. +McDonald’s Corporation +Time Warner Inc. +FedEx Corporation +Mondelez International, Inc. +TJX Companies +The Gap, Inc. +Pepsico, Inc. +The Walt Disney Company +The surveys that our human resources staff reviews show percentile compensation levels for various executive positions with comparable job responsibilities. The staff also analyzes market data regarding compensation mix among base salary, annual incentive and long-term incentives such as performance-based cash awards, stock options, restricted stock and restricted stock unit awards. The Committee reviews this mix analysis when evaluating the separate compensation elements for each executive. The Committee does not endeavor to set executive compensation at or near any particular percentile, and it considers target total compensation to be competitive if it is generally within a reasonable range of the market median. Market data is one of many factors that the Committee considers in the determination of executive compensation levels. Other factors include internal pay equity, level of responsibility, the individual’s performance, expectations regarding the individual’s future potential contributions, succession planning and retention strategies, budget considerations, and the Company’s performance. +Objectives and Elements of Our Compensation Program +As noted in the Executive Summary, our executive compensation program is aligned with our business strategy and culture to attract and retain top talent, reward business results and individual performance, and most importantly, maximize shareholder value. Our total compensation program for the Named Executive Officers is highly incentive-based and competitive in the marketplace, with Company performance determining a significant portion of total compensation. Our program consists of the following elements: +• +Base salary that reflects the executive’s accountabilities, skills, experience, performance, and future potential +• +Performance-based annual cash incentive based on Company financial results under our Executive Performance Sharing Plan +• +A portfolio approach to long-term incentive compensation to provide a balanced mix of performance-based cash incentives and equity, including: +◦ +Performance-based long-term cash incentive based on Company financial results to encourage attainment of long-term Company financial objectives +◦ +Stock options to align the interests of executives with those of shareholders +◦ +Restricted stock awards and restricted stock unit retention awards to provide incentives consistent with driving shareholder value, and to provide strong retention incentives +• +Benefits +◦ +Executives are generally eligible for the same competitive benefits as other employees in the United States, including medical, dental, and vision insurance, paid time off, 401(k) plan, and Company-provided life and disability insurance; employees outside of the United States are offered locally competitive benefits. +NIKE, INC. Ÿ 2017 Notice of Annual Meeting 17 +COMPENSATION DISCUSSION AND ANALYSIS +◦ +Profit sharing contributions to defined contribution retirement plans +◦ +Employee Stock Purchase Plan +◦ +Post-termination payments under non-competition agreements +In determining the award levels for each of the elements in our total compensation program, our philosophy is to “pay for performance.” As a result, we place relatively greater emphasis on the incentive components of compensation (performance-based annual cash incentive award, performance-based long-term cash incentive award, and stock options) to align the interests of our executives with shareholders, and motivate them to maximize shareholder value. This is balanced with retention incentives provided by base salary, restricted stock awards, and restricted stock unit awards. +We look to the experience and judgment of the Committee to determine what it believes to be the appropriate target compensation mix for each Named Executive Officer. We do not apply fixed ratios or formulas, or rely solely on market data or quantitative measures. In allocating compensation among the various elements, the Committee considers market data, Company performance and budget, the impact of the executive’s position in the Company, individual past performance, expectations for future performance, experience in the position, any recent or anticipated changes in the individual’s responsibilities, internal pay equity for comparable positions, and retention incentives for succession planning. As shown in the charts below, incentive components accounted for 90% of the CEO’s target compensation and approximately 81% of the other Named Executive Officers’ target compensation in fiscal 2017. +Elements of Our Compensation Program +Base Salary +When making recommendations to the Committee concerning base salary levels for our Named Executive Officers, our human resources staff follows a similar process to how they evaluate non-executive base salary levels. We consider the individual’s performance in the prior year, expectations regarding the individual’s future performance, experience in the position, any recent or anticipated changes in the individual’s responsibilities, internal pay equity for comparable positions, succession planning strategies, our annual salary budget, other elements of the individual’s compensation, and the market data described in “Use of Market Survey Data.” The Committee reviews these factors each year and adjusts base salary levels to ensure that we are appropriately rewarding performance. +The Committee generally reviews base salaries of the Named Executive Officers annually based on a review of individual performance at a meeting in June, with salary adjustments becoming effective for the first pay period ending in August. During the salary review in June 2016, the Committee recommended, based on the factors described above, and the independent members of the Board approved, the following base salaries for the Named Executive Officers. +Named Executive Officer +Fiscal 2017 Base Salary +% Change +Mark G. Parker +$1,550,000 +0.0% +Andrew Campion +$900,000 +8.4% +Trevor A. Edwards +$1,050,000 +5.0% +Eric D. Sprunk +$1,050,000 +5.0% +Michael Spillane +$901,000 +N/A +In setting a Named Executive Officer’s overall compensation package, the Committee places a relatively greater emphasis on the incentive components of compensation described below. +NIKE, INC. Ÿ 2017 Notice of Annual Meeting 18 +COMPENSATION DISCUSSION AND ANALYSIS +Performance-Based Annual Cash Incentive +Annual awards are paid to the Named Executive Officers under our Executive Performance Sharing Plan (“PSP”). Our “pay for performance” philosophy for such awards is simple and applies to all global employees who are eligible to share in the Company’s success through incentive bonuses: if we exceed our financial objectives, we will pay more; if we fail to reach them, we will pay less or nothing at all. The PSP for all executives is based 100% on overall corporate performance each year against a target based on the Company’s annual financial objective, as measured by income before income taxes (“PTI”), excluding the effect of any acquisitions, divestitures or accounting changes. The Committee selected PTI as the performance measure as it aligns with the Company’s operational financial targets for the individual fiscal year. By focusing on driving strong operational performance each year, the plan supports our goal of delivering sustainable, profitable growth. The Committee retains the discretion to reduce or eliminate PSP award payouts based on individual or Company performance. Basing our annual cash incentive award program for all executives on overall corporate performance is intended to foster teamwork and send the message to each executive that his or her role is to help ensure overall organizational success and maximize shareholder value. +Each year the Committee establishes a PSP target award for each Named Executive Officer based on its judgment of the impact of the position in the Company and what it believes to be competitive against market data as described in “Use of Market Survey Data,” while considering internal pay equity for comparable positions. For fiscal 2017, the Committee maintained Messrs. Parker, Campion, Edwards, and Sprunk’s target awards. Mr. Spillane’s target award was set at 100%. The fiscal 2017 PSP target awards were: +Named Executive Officer +Fiscal 2017 PSP Target Award +(% of base salary) +Mark G. Parker +180% +Andrew Campion +100% +Trevor A. Edwards +110% +Eric D.Sprunk +100% +Michael Spillane +100% +In June 2016, the Committee established performance goals for the fiscal 2017 PSP awards based on its evaluation of our business plan and prospects for the year. The table below summarizes the fiscal 2017 PSP performance goals established by the Committee. For fiscal 2017, NIKE achieved a PTI of $4,886 million, a 5.7% increase over fiscal 2016 continuing operations PTI of $4,623 million. This achievement was below the target performance goal established by the Committee. As a result, each executive officer’s award was paid out at 58.86% of the target award. +(Dollars in millions) +Fiscal 2017 PSP Performance Goal +Threshold Performance +Threshold % Payout +Target Performance +Target % Payout +Maximum Performance +Maximum % Payout +Actual Performance +Actual % Payout +PTI +$4,813 1 +50% +$5,231 2 +100% +$5,649 3 +150% +$4,886 +58.86% 4 +1 Threshold performance represents 4.1% increase above fiscal 2016 continuing operations PTI. +2 Target performance represents 13.2% increase above fiscal 2016 continuing operations PTI. +3 Maximum performance represents 22.2% increase above fiscal 2016 continuing operations PTI. +4 Prorated for performance between payout levels. +Performance-Based Long-Term Cash Incentive +The first component in our long-term portfolio mix is performance-based awards payable in cash under our Long-Term Incentive Plan (“LTIP”). As with the performance-based annual cash incentive, the LTIP follows our “pay for performance” philosophy. If we exceed our targets, we will pay more; if we fall short, we will pay less or nothing at all. This program focuses executives on overall, long-term financial performance, and is intended to reward them for delivering revenue growth and diluted earnings per share (“EPS”) growth over a three-year performance period. At the beginning of each fiscal year, the Committee establishes performance goals and potential cash payouts for the next three fiscal years for all executives under the LTIP. LTIP performance measures for all executives are based 50% on cumulative revenues for the three-year performance period and 50% on cumulative EPS for the period, in each case excluding generally the effect of acquisitions, divestitures and accounting changes. The Committee selected revenue and EPS as LTIP performance measures to encourage executives to focus on delivering profitable, sustainable growth. Strong revenue growth is the foundation of the Company’s financial strategy, requiring investments in key business drivers to sustain growth. EPS growth is essential to delivering value for our shareholders, requiring investments be targeted to those areas with the highest potential for return. By balancing revenue growth and EPS growth, the plan supports the Company’s objective of delivering long-term shareholder value. The Committee retains the discretion to reduce or eliminate LTIP award payouts based on individual or Company performance. +During the compensation review in June 2016, the Committee approved LTIP target awards for all Named Executive Officers for the fiscal 2017-2019 performance period. The Committee set these targets based on its judgment of what it believes to be a desirable mix of long-term compensation, the impact of the position in the Company, and what it finds to be competitive against market data as described in “Use of Market Survey Data,” while maintaining internal pay equity for comparable positions. For the fiscal 2017-2019 performance period, the Committee maintained the targets for Messrs. Parker, Campion, Edwards, and Sprunk. Mr. Spillane’s target was set at $750,000. The target awards for the fiscal 2017-2019 performance period are as follows: +NIKE, INC. Ÿ 2017 Notice of Annual Meeting 19 +COMPENSATION DISCUSSION AND ANALYSIS +Named Executive Officer +Fiscal 2017-2019 LTIP Award Target ($) +Mark G. Parker +3,500,000 +Andrew Campion +750,000 +Trevor A. Edwards +1,000,000 +Eric D. Sprunk +750,000 +Michael Spillane +750,000 +In June 2016, the Committee established performance goals for the fiscal 2017-2019 LTIP. The Committee considered our long-term financial goals of high single-digit revenue growth and mid-teens EPS growth in setting performance goals for the target award payout level. The total payout percentage will be the average of the payout percentages determined for cumulative revenues and cumulative EPS, respectively. Payout below the threshold payout level may occur if either the revenue or EPS related percentage achievement is less than 50%. If both revenue and EPS fall below the threshold level, there is no payout. The table below summarizes the fiscal 2017-2019 LTIP performance goals. +(Dollars in millions, except per share data) +Fiscal 2017-2019 Performance Goals +Threshold Performance 1 +Threshold % Payout +Target Performance 2 +Target % Payout +Maximum Performance 3 +Maximum % Payout +Revenue +$111,372 +50% +$115,684 +100% +$124,641 +200% +EPS +$7.72 +50% +$8.32 +100% +$9.60 +200% +__________________________________________________________ +1 Threshold payout for revenue requires cumulative revenues corresponding to a 7% compound annual growth rate (“CAGR”) from fiscal 2016 continuing operations revenue of $32,376 million. Threshold payout for EPS requires cumulative EPS corresponding to a 9% CAGR from fiscal 2016 continuing operations EPS of $2.16. +2 Target revenue payout requires a 9% CAGR and target EPS payout requires a 13% CAGR. +3 Maximum revenue payout requires a 13% CAGR and maximum EPS payout requires a 21% CAGR. +For fiscal 2017, executive officers were eligible to receive LTIP award payouts based on performance targets set in June 2014 covering the fiscal 2015-17 performance period. In June 2017, the Committee determined a payout of 131.97% under these awards was earned based on the average of the payout percentages for cumulative revenues and cumulative EPS for the performance period shown in the table below: +(Dollars in millions, except per share data) +Fiscal 2015-2017 Performance Goals +Threshold Performance +Threshold % Payout +Target Performance +Target % Payout +Maximum Performance +Maximum % Payout +Actual Performance +Actual % Payout +Revenue 1 +$95,627 +50% +$99,329 +100% +$107,021 +200% +$97,327 +72.96% +EPS 2 +$5.305 +50% +$5.715 +100% +$6.60 +200% +$6.52 +190.97% +Total Payout +131.97% +1 Cumulative revenues for fiscal 2015, fiscal 2016 and fiscal 2017. +2 Cumulative EPS for fiscal 2015, fiscal 2016 and fiscal 2017. Fiscal 2015 and 2016 restated to reflect the December 23, 2015 two-for-one stock split. +Stock Options +The second component in our long-term portfolio mix is stock options. Stock options are designed to align the interests of the Company’s executives with those of shareholders by encouraging executives to enhance the value of the Company and, hence, the price of the Class B Stock. This is true “pay for performance,” executives are rewarded only if the market price of our stock rises, and they get nothing if the price does not rise or goes down. When determining the grants, the Committee generally focuses on the number of shares, while considering the value for accounting purposes. Our approach is based on our desire to carefully control annual share usage and avoid fluctuations in grant levels due to share price changes. The Committee awards stock options to each executive based on its judgment. The Committee considers a number of factors including the individual’s performance, management succession, competitive market data as described in “Use of Market Survey Data,” internal pay equity for comparable positions, and a desirable mix of long-term incentives. Our human resources staff periodically tests the reasonableness of our stock option grants against competitive market data and may make recommendations to the Committee. Options are generally granted annually to selected employees, including the Named Executive Officers, in July under our shareholder-approved Stock Incentive Plan. Stock options for fiscal 2017 were granted by the Committee on July 15, 2016 with an exercise price equal to the closing market price of our stock on that date. +In July 2016, the Committee granted options to Mr. Parker for 165,000 option shares, the same number of stock options granted to him in July 2015 before adjustment for the December 23, 2015 two-for-one stock split. Messrs. Campion, Edwards, and Sprunk received 75,000, 100,000, and 85,000 option shares, respectively, an increase of 15,000 shares for Mr. Campion, 10,000 shares for Mr. Edwards, and 5,000 shares for Mr. Sprunk from July 2015 before adjustment for the December 23, 2015 two-for-one stock split. Mr. Spillane received 50,000 option shares. The Committee, in its judgment, set these award levels based on the factors described above. +Options granted by the Company generally vest in equal annual installments over a four-year period. To promote executive retention, unvested options generally are forfeited if the employee leaves before vesting occurs and must be exercised within three months after termination of employment. Options provide for a limited retirement provision designed to encourage employees to delay retirement, thus enhancing retention. Only those employees with a minimum of five years of service who are age 55 and above at the time of termination of employment are eligible for the provision. Under the provision, for employees between the ages of 55 to 59 at the time of termination of employment, only unvested stock +NIKE, INC. Ÿ 2017 Notice of Annual Meeting 20 +COMPENSATION DISCUSSION AND ANALYSIS +options that have been granted for at least one full year will continue to vest, and may be exercised for up to four years after termination. If an employee is age 60 or older and has at least five years of service at termination, unvested stock options that have been granted for at least one full year will receive accelerated vesting and may be exercised for up to four years after termination. The features related to accelerated vesting are described in “Potential Payments upon Termination or Change-in-Control.” Based on their ages and years of service, as of May 31, 2017, Mr. Parker was eligible for accelerated vesting and Mr. Spillane was eligible for continued vesting of their options granted in July 2013, 2014, and 2015. +Restricted Stock Awards +The third component in our long-term portfolio mix is restricted stock awards. Stock ownership and stock-based incentive awards align the interests of our Named Executive Officers with the interests of our shareholders, as the value of this incentive rises and falls with the stock price. Restricted stock awards are generally granted annually to selected employees, including the Named Executive Officers, in July at the same meeting at which stock options are granted under our shareholder-approved Stock Incentive Plan. Awards generally vest in three equal installments on each of the first three anniversaries of the grant date. The awards promote executive retention, as unvested shares held at the time the executive’s employment is terminated are forfeited. Award recipients receive dividends on the full number of restricted shares awarded at the same time dividends are paid to other shareholders. +The Committee, in its judgment, sets restricted stock award levels based on several factors, including what the Committee believes to be a desirable mix of long-term compensation, their determination of an appropriate weighting of potential future contribution to the Company, retention incentives, and competitive market data as described in “Use of Market Survey Data”. In July 2016, the Committee granted a restricted stock award to Mr. Parker valued at $3,500,000, representing 60,481 shares of our Class B Stock, based on the closing price on the grant date. This was the same value of restricted stock granted to Mr. Parker in July 2015. Messrs. Campion, Edwards and Sprunk received awards valued at $750,000, $875,000, and $750,000, respectively. This represented 12,961 shares of our Class B Stock for Mr. Campion, 15,121 shares of our Class B Stock for Mr. Edwards and 12,961 shares of our Class B Stock for Mr. Sprunk, based on the closing price on the grant date. This was an increase of $125,000 for Mr. Campion and the same value for Messrs. Edwards and Sprunk. Mr. Spillane received an award valued at $500,000, representing 8,641 of our Class B Stock based on the closing price on the grant date. +Restricted Stock Unit (RSU) Retention Awards +From time to time, the Committee also grants restricted stock units (“RSUs”) that vest based on continued service with the Company through a future service date, for the specific purpose of further promoting retention. These RSU awards accumulate dividend equivalents that are only paid in cash upon full vesting. The awards have no value to the executive unless the executive remains employed with the Company for the full vesting period, and will be canceled if the executive terminates or retires within the vesting period. None of our Named Executive Officers received RSUs in fiscal 2017. +NIKE, INC. Ÿ 2017 Notice of Annual Meeting 21 +COMPENSATION DISCUSSION AND ANALYSIS +Profit Sharing and Retirement Plans +Our 401(k) Savings and Profit Sharing Plan is a U.S. tax qualified retirement savings plan pursuant to which all eligible U.S. employees, including the Named Executive Officers, are able to make pre-tax contributions and after-tax contributions from their cash compensation. We make matching contributions for all participants each year equal to 100% of their pre-tax contributions up to 5% of their total eligible compensation. We also make annual profit sharing contributions to the accounts of eligible U.S. employees under the 401(k) Savings and Profit Sharing Plan. The contributions are allocated among eligible employees based on a percentage of their total salary and annual cash incentive award for the year. The total profit sharing contribution and the percentage of salary and annual cash incentive award contributed for each employee is determined each year by the Board of Directors. For fiscal 2017, the Board of Directors approved a profit sharing contribution for each eligible employee equal to 3.85% of the employee’s total eligible salary and annual cash incentive award. +The Internal Revenue Code limits the amount of compensation that can be deferred under our 401(k) Savings and Profit Sharing Plan, and also limits the amount of salary and annual cash incentive award ($265,000 for fiscal 2017) that may be taken into account when determining contributions under that plan. Accordingly, we provide our Named Executive Officers and other highly compensated employees with the opportunity to defer their compensation, including amounts in excess of the tax law limit, under our nonqualified Deferred Compensation Plan. We also make profit sharing contributions under the Deferred Compensation Plan with respect to salary and annual cash incentive award of any eligible employee that exceeds the tax law limit, and for fiscal 2017 these contributions were equal to 3.85% of the total salary and annual cash incentive award of each Named Executive Officer in excess of $265,000. These contributions under the Deferred Compensation Plan allow our Named Executive Officers and other highly compensated employees to receive profit sharing contributions in the same percentage as our other employees. We do not match deferrals to the Deferred Compensation Plan. Balances in the Deferred Compensation Plan, including the balances of the Named Executive Officers, are unsecured and at-risk, meaning the balances may be forfeited in the event of the Company’s financial distress such as bankruptcy. Our matching and profit sharing contributions for fiscal 2017 to the accounts of the Named Executive Officers under the qualified and nonqualified plans are included in the All Other Compensation column in the Summary Compensation Table on page 26. +Employee Stock Purchase Plan +Our Employee Stock Purchase Plan allows all employees who work at least 20 hours per week in the United States and in many countries outside of the United States to purchase NIKE Class B Stock, through payroll deductions, at a 15% discount to the market price on the first or last trading day of the six-month purchase period, depending on which day the stock price was lower. No plan participant is allowed to purchase more than $25,000 in market value of our stock under the plan in any calendar year or more than 500 shares in any six-month offering period. In fiscal 2017, all Named Executive Officers participated in our Employee Stock Purchase Plan, with the exception of Mr. Parker. +NIKE, INC. Ÿ 2017 Notice of Annual Meeting 22 +COMPENSATION DISCUSSION AND ANALYSIS +Post-termination Payments under Non-competition Agreements +In exchange for non-competition agreements from all of our Named Executive Officers, we have agreed to provide, during the non-competition period, the monthly payments described in “Potential Payments upon Termination or Change-in-Control,” some of which are at the election of the Company. We believe that it is appropriate to compensate individuals to refrain from working with competitors following termination, and that compensation enhances the enforceability of such agreements. +Stock Ownership Guidelines +On June 20, 2013, the Board of Directors adopted stock ownership guidelines for executive officers. These guidelines are designed to further align the long-term interests of our executive officers with those of our shareholders. Under the guidelines, the CEO and other executive officers are required to hold NIKE stock valued at the following multiple of their annual base salary: +Position +Ownership Level +Chief Executive Officer +6X Base Salary +Other Named Executive Officers +3X Base Salary +Other Executive Officers +2X Base Salary +Executive officers appointed prior to June 20, 2013 are required to attain these ownership levels by June 20, 2018 and new officers within five years of their appointment. +Hedging and Pledging +The Company’s Blackout and Pre-clearance Policy (which supplements our Insider Trading Policy) prohibits directors, executive officers and other designated insiders from engaging in transactions involving hedging, monetization or short sales of NIKE stock, including zero-cost collars and forward sale contracts. The policy also requires directors, executive officers and designated insiders to obtain pre-approval from the Company’s Corporate Secretary before pledging NIKE stock. Before granting approval of any pledge, the Corporate Secretary considers the size of the pledge relative to the individual’s other holdings, both direct and indirect, and NIKE’s shares outstanding; the risk of foreclosure given the nature of the associated transaction; protections against the appearance of insider trading, including prohibitions on sales during trading black-outs; and the ability to timely report sales on Form 4. +Change-in-Control Provisions +All unvested stock option, restricted stock, and restricted stock unit awards are subject to accelerated change-in-control vesting only when two events (a “double trigger”) occur. Vesting of grants is generally accelerated only if there is a change in control of the Company and either the acquiring entity fails to assume the awards or the employee’s employment is terminated by the acquirer without cause or by the employee for good reason within two years following a change in control. This double trigger was adopted to encourage executive retention through a period of uncertainty and a subsequent integration with an acquirer. The Committee believes that this approach will enhance shareholder value in the context of an acquisition, and align executives with the interests of investors. The effects of change-in-control transactions on stock option, restricted stock, and restricted stock unit awards are described further in “Potential Payments Upon Termination or Change-in-Control.” +Clawback Policy +Since June 2010, the Company has had a policy for recoupment of incentive compensation (the “clawback policy”). In June 2015, the Committee and Board of Directors approved amendments to our incentive compensation plans to cover additional circumstances in which the Company may clawback awards. Under the clawback policy, an executive officer who is involved in wrongful conduct that results in a restatement of the Company’s financial statements must repay to the Company up to the full amount of any incentive compensation based on the financial statements that were subsequently restated. The clawback policy covers the annual cash incentive award, long-term cash incentive award, profit sharing contributions to the Deferred Compensation Plan, and excess proceeds from sales of stock acquired under stock option, restricted stock, and restricted stock unit awards that occurred prior to the restatement. The recent amendments to our Executive Performance Sharing Plan, Long-Term Incentive Plan and Stock Incentive Plan clarify that for all participants in those plans the Committee may apply additional clawback policies to awards, or add clawback terms to award agreements or notices, and that any clawback requirements of applicable law and regulation will apply to the plans. +Risk Assessment +At the Committee’s request, in fiscal 2017 management prepared and discussed with the Committee an assessment of potential risk associated with the Company’s compensation programs, including any risk that would be reasonably likely to have a material adverse effect on the Company. This included an assessment of risks associated with each element of employee compensation. The assessment considered certain design features of the compensation programs that reduce the likelihood of excessive risk taking, such as reasonable performance targets, capped payouts of incentive compensation, a balance of short- and long-term incentives, a balance of cash and equity incentives, vesting of awards over time, and the potential for clawback of incentive compensation. In addition, for equity compensation, the Committee and the Board have adopted stock ownership guidelines, limited accelerated vesting of stock options upon termination of employment, and implemented double-trigger accelerated vesting for all equity awards upon change in control (each as described above). +NIKE, INC. Ÿ 2017 Notice of Annual Meeting 23 +Tax Deductibility of Executive Compensation +Section 162(m) of the Internal Revenue Code generally disallows a tax deduction to public companies for annual compensation over $1 million paid to their chief executive officer and the next three most highly compensated executive officers (other than the principal financial officer). The Internal Revenue Code generally excludes from the calculation of the $1 million cap compensation that is based on the attainment of pre-established, objective performance goals established under a shareholder-approved plan. The Committee considers, among other things, the impact of this exclusion for performance-based compensation when developing and implementing our executive compensation programs. Annual cash incentive awards under our Executive Performance Sharing Plan, long-term cash incentive awards under our Long-Term Incentive Plan, and stock options under our Stock Incentive Plan generally are designed in a manner that is intended to meet the requirements under the exclusion. However, due to the complex nature of the requirements that must be met, we cannot guarantee that such awards will qualify as performance-based compensation under Section 162(m). +While the Committee seeks to preserve tax deductibility in developing and implementing our compensation program, the Committee also believes that it is important to maintain flexibility in administering compensation programs in a manner designed to promote varying corporate goals. Accordingly, we have not adopted a policy that all compensation must qualify as deductible for tax purposes. Therefore, amounts paid under any of our executive compensation programs may not qualify as performance-based compensation that is excluded from the Section 162(m) limitation on deductibility. +NIKE, INC. Ÿ 2017 Notice of Annual Meeting 24 +COMPENSATION COMMITTEE REPORT +COMPENSATION COMMITTEE REPORT +The Compensation Committee of the Board of Directors (the “Committee”) has reviewed and discussed with management the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K. Based on the review and discussions, the Committee recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement. +Members of the Compensation Committee: +• +Timothy D. Cook, Chair +• +Elizabeth J. Comstock +• +John C. Lechleiter +• +Johnathan A. Rodgers +NIKE, INC. Ÿ 2017 Notice of Annual Meeting 25 +EXECUTIVE COMPENSATION +EXECUTIVE COMPENSATION +Summary Compensation Table +The following table sets forth information concerning compensation for fiscal 2015-2017 paid to or earned by our Chief Executive Officer, our Chief Financial Officer, and our next three most highly compensated executive officers who were serving as executive officers on May 31, 2017. These individuals are referred to throughout this proxy statement as the “Named Executive Officers.” +Name and Principal +Position +Year +Salary +($) +Stock +Awards (1) +($) +Option +Awards (2) +($) +Non-Equity +Incentive Plan +Compensation (3) +($) +All Other +Compensation (4) +($) +Total +($) +Mark G. Parker +2017 +1,550,000 +3,500,035 +1,542,750 +6,261,144 +997,570 +13,851,499 +Chairman, President, and Chief +2016 +1,550,000 +33,500,142 +4,179,450 +7,305,902 +1,079,808 +47,615,302 +Executive Officer +2015 +1,550,000 +3,500,028 +2,791,800 +8,251,937 +725,965 +16,819,730 +Andrew Campion (5) +2017 +889,231 +750,053 +701,250 +1,513,176 +92,546 +3,946,256 +Executive Vice President +2016 +822,306 +625,025 +1,519,800 +1,772,897 +105,479 +4,845,507 +and Chief Financial Officer +Trevor A. Edwards +2017 +1,042,308 +875,052 +935,000 +1,862,583 +271,389 +4,986,332 +President, NIKE Brand +2016 +990,000 +875,102 +2,279,700 +2,221,919 +270,440 +6,637,161 +2015 +935,000 +750,006 +1,353,600 +1,956,831 +236,637 +5,232,074 +Eric D. Sprunk +2017 +1,042,308 +750,053 +794,750 +1,603,277 +253,713 +4,444,101 +Chief Operating Officer +2016 +990,000 +750,007 +2,026,400 +1,927,813 +335,126 +6,029,346 +2015 +935,000 +625,044 +1,353,600 +1,821,228 +217,309 +4,952,181 +Michael Spillane (5) +2017 +901,000 +500,055 +467,500 +1,520,104 +122,568 +3,511,227 +President, Categories and +Product +(1) +Represents the grant date fair value of restricted stock and restricted stock unit awards granted in the applicable fiscal year computed in accordance with accounting guidance applicable to stock-based compensation. The grant date fair value is based on the closing market price of our Class B Stock on the grant date. +(2) +Represents the grant date fair value of options granted in the applicable fiscal year computed in accordance with accounting guidance applicable to stock-based compensation. The grant date fair value of the options was estimated using the Black-Scholes option pricing model. The assumptions made in determining the grant date fair values of options under applicable accounting guidance are disclosed in Note 11 of Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended May 31, 2017. +(3) +Non-Equity Incentive Plan Compensation consists of the following: +Name +Fiscal Year +Annual Incentive +Compensation (a) +($) +Long-Term Incentive +Compensation (b) +($) +Total +($) +Mark G. Parker +2017 +1,642,194 +4,618,950 +6,261,144 +2016 +2,577,402 +4,728,500 +7,305,902 +2015 +4,046,337 +4,205,600 +8,251,937 +Andrew Campion +2017 +523,401 +989,775 +1,513,176 +2016 +759,647 +1,013,250 +1,772,897 +Trevor A. Edwards +2017 +674,853 +1,187,730 +1,862,583 +2016 +1,006,019 +1,215,900 +2,221,919 +2015 +1,356,031 +600,800 +1,956,831 +Eric D.Sprunk +2017 +613,502 +989,775 +1,603,277 +2016 +914,563 +1,013,250 +1,927,813 +2015 +1,220,428 +600,800 +1,821,228 +Michael Spillane +2017 +530,329 +989,775 +1,520,104 +(a) +Amounts shown were earned for performance in the applicable fiscal year under our Executive Performance Sharing Plan. +(b) +Amounts shown were earned for performance during the three-year period ending with the applicable fiscal year under our Long-Term Incentive Plan. +NIKE, INC. Ÿ 2017 Notice of Annual Meeting 26 +EXECUTIVE COMPENSATION +(4) +For fiscal 2017 for each of the Named Executive Officers, this includes (a) profit-sharing contributions by us to the 401(k) Savings and Profit Sharing Plan in the amount of $10,198; (b) matching contributions by us to the 401(k) Savings and Profit Sharing Plan in the amount of $13,250, and (c) profit-sharing contributions by us to the Deferred Compensation Plan in the following amounts: $148,636 for Mr. Parker, $53,256 for Mr. Campion, $68,628 for Mr. Edwards, $65,108 for Mr. Sprunk, and $51,868 for Mr. Spillane. Includes dividends paid on restricted stock and dividend equivalents credited (but not paid) on unvested restricted stock units in the following amounts: $694,771 for Mr. Parker, $15,842 for Mr. Campion, $168,518 for Mr. Edwards, $165,157 for Mr. Sprunk, and $47,253 for Mr. Spillane. Also includes the cost of daily residential security, including monitoring, patrols, and installation at primary residences provided by the Company of $17,808 for Mr. Parker and $8,904 for Mr. Edwards, and $1,891 in NIKE product and gifts for Mr. Edwards. For Mr. Parker, this amount includes $112,907 in aggregate incremental cost to the Company for his personal use of the Company’s aircraft and actual cost of chartered flights for travel to and from the board and shareholder meetings of an outside company for which Mr. Parker serves as a director. The aggregate incremental cost is determined based on the variable operating cost to the Company including the cost of fuel, maintenance, crew travel expenses, landing fees, parking fees, in-flight food and beverage, and other smaller variable costs associated with each flight. This amount excludes the aggregate incremental cost to the Company for Mr. Parker’s personal use of the Company’s aircraft for which Mr. Parker reimbursed the Company in accordance with a time sharing agreement and as allowed under Federal Aviation Regulation 91.501(c) and (d). +(5) +Because Mr. Campion was only a Named Executive Officer for fiscal 2017 and fiscal 2016 and Mr. Spillane was only a Named Executive Officer for fiscal 2017, no disclosure is included as to Mr. Campion for fiscal 2015 or as to Mr. Spillane for fiscal 2016 or fiscal 2015. +NIKE, INC. Ÿ 2017 Notice of Annual Meeting 27 +EXECUTIVE COMPENSATION +Grants of Plan-Based Awards in Fiscal 2017 +The following table sets forth information concerning the performance-based annual cash incentive opportunities, performance-based long-term cash incentive opportunities, restricted stock and restricted stock unit awards and stock options granted to the Named Executive Officers in fiscal 2017. +Estimated Future Payouts Under +Non-Equity Incentive Plan Awards +Threshold +Target +Maximum +All Other Stock Awards: +Number of Shares of +Stock or Units (3) +All Other +Option Awards: +Number of +Securities +Underlying +Options (4) +Exercise +or Base Price +of Option +Awards +Grant Date +Fair Value +of Stock +and Option +Awards (5) +Name +Grant Date +($) +($) +($) +(#) +(#) +($/Sh) +($) +Mark G. Parker +6/15/2016 +1,395,000 (1) +2,790,000 (1) +4,185,000 (1) +6/15/2016 +1,750,000 (2) +3,500,000 (2) +7,000,000 (2) +7/15/2016 +60,481 +3,500,035 +7/15/2016 +165,000 +57.87 +1,542,750 +Andrew Campion +6/15/2016 +450,000 (1) +900,000 (1) +1,350,000 (1) +6/15/2016 +375,000 (2) +750,000 (2) +1,500,000 (2) +7/15/2016 +12,961 +750,053 +7/15/2016 +75,000 +57.87 +701,250 +Trevor A. Edwards +6/15/2016 +577,500 +1,155,000 (1) +1,732,500 (1) +6/15/2016 +500,000 (2) +1,000,000 (2) +2,000,000 (2) +7/15/2016 +15,121 +875,052 +7/15/2016 +100,000 +57.87 +935,000 +Eric D. Sprunk +6/15/2016 +525,000 (1) +1,050,000 (1) +1,575,000 (1) +6/15/2016 +375,000 (2) +750,000 (2) +1,500,000 (2) +7/15/2016 +12,961 +750,053 +7/15/2016 +85,000 +57.87 +794,750 +Michael Spillane +6/15/2016 +450,500 (1) +901,000 (1) +1,351,500 (1) +6/15/2016 +375,000 (2) +750,000 (2) +1,500,000 (2) +7/15/2016 +8,641 +500,055 +7/15/2016 +50,000 +57.87 +467,500 +(1) +These amounts represent the potential performance-based annual cash incentive awards payable for performance during fiscal 2017 under our Executive Performance Sharing Plan. Under this plan, the Compensation Committee approved target awards for fiscal 2017 based on a percentage of the executive’s base salary paid during fiscal 2017 as follows: Mr. Parker, 180%; Mr. Campion, 100%; Mr. Edwards, 110%; Mr. Sprunk, 100%; and Mr. Spillane, 100%. The Committee also established a series of performance targets based on our income before income taxes (“PTI”) for fiscal 2017 (excluding the effect of acquisitions, divestitures and accounting changes not reflected in our business plan at the time of approval of the target awards) corresponding to award payouts ranging from 50% to 150% of the target awards. The PTI for fiscal 2017 required to earn the target award payout was $5,231 million. The PTI for fiscal 2017 required to earn the 150% maximum payout was $5,649 million. The PTI for fiscal 2017 required to earn the 50% threshold payout was $4,813 million. Participants receive a payout at the percentage level at which the performance target is met, subject to the Committee’s discretion to reduce or eliminate any award based on Company or individual performance. Actual award payouts earned in fiscal 2017 and paid in fiscal 2018 are shown in footnote 4 to the Non-Equity Incentive Plan Compensation column in the Summary Compensation Table. +(2) +These amounts represent the potential performance-based long-term cash incentive awards payable for performance during the three-year period consisting of fiscal 2017-2019 under our Long-Term Incentive Plan. Under this plan, the Compensation Committee approved target awards for the performance period and also established a series of performance targets based on our cumulative revenues and cumulative diluted earnings per common share (“EPS”) for the performance period (excluding the effect of acquisitions, divestitures and accounting changes not reflected in our business plan at the time of approval of the target awards) corresponding to award payouts ranging from 50% to 200% of the target awards. Participants will receive a payout at the average of the percentage levels at which the two performance targets are met, subject to the Committee’s discretion to reduce or eliminate any award based on Company or individual performance. For cumulative revenues over the performance period, the target payout requires revenues of $115,684 million, the 50% threshold payout requires revenues of $111,372 million, and the 200% maximum payout requires revenues of $124,641 million. For cumulative EPS over the performance period, the target payout requires EPS of $8.32, the 50% threshold payout requires EPS of $7.72, and the 200% maximum payout requires EPS of $9.60. Under the terms of the awards, on the first payroll period ending in August 2019 we will issue the award payout to each participant, provided that the participant is employed by us on the last day of the performance period. +(3) +All amounts reported in this column represent grants of restricted stock under our Stock Incentive Plan which vests in three equal installments on the first three anniversaries of the grant date. Vesting will be accelerated in certain circumstances as described below under “Potential Payments Upon Termination or Change-in-Control.” Dividends are payable on restricted stock at the same rate paid on all other outstanding shares of our Class B Stock. +NIKE, INC. Ÿ 2017 Notice of Annual Meeting 28 +EXECUTIVE COMPENSATION +(4) +All amounts reported in this column represent options granted under our Stock Incentive Plan which become exercisable for option shares in four equal installments on the first four anniversaries of the grant date. Options will become fully exercisable in certain circumstances as described below under “Potential Payments Upon Termination or Change-in-Control.” Each option has a maximum term of 10 years, subject to earlier termination in the event of the optionee’s termination of employment. +(5) +For stock awards, represents the value of restricted stock granted based on the closing market price of our Class B Stock on the grant date. For option awards, represents the grant date fair value of options granted based on a value of $9.35 per share calculated using the Black-Scholes option pricing model. These are the same values for these equity awards used under accounting guidance applicable to stock-based compensation. The assumptions made in determining option values are disclosed in Note 11 of Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended May 31, 2017. +NIKE, INC. Ÿ 2017 Notice of Annual Meeting 29 +EXECUTIVE COMPENSATION +Outstanding Equity Awards at May 31, 2017 +The following table sets forth information concerning outstanding stock options and unvested restricted stock and restricted stock units held by the Named Executive Officers at May 31, 2017. +Option Awards +Stock Awards +Name +Number of Securities Underlying Unexercised Options Exercisable (#) +Number of +Securities +Underlying +Unexercisable +Options (#) (1) +Option Exercise Price ($) +Option Expiration Date +Number of Shares or Units of Stock That Have Not Vested (#) +Market Value of Shares or Units of Stock That Have Not Vested ($) +Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) +Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) +Mark G. Parker +69,300 +— +14.6300 +7/20/2017 +540,000 +— +14.5500 +7/18/2018 +600,000 +— +13.1100 +7/17/2019 +660,000 +— +17.2400 +7/16/2020 +660,000 +— +22.9250 +7/15/2021 +660,000 +— +23.2700 +7/20/2022 +247,500 +82,500 +(2) +31.6750 +7/19/2023 +165,000 +165,000 +(3) +38.7600 +7/18/2024 +82,500 +247,500 +(4) +56.4000 +7/17/2025 +— +165,000 +(5) +57.8700 +7/15/2026 +354,135 (7) +18,765,614 +333,272 (12) +13,245,062 (13) +Andrew Campion +20,000 +— +13.1100 +7/17/2019 +70,000 +— +17.2400 +7/16/2020 +103,000 +— +22.9250 +7/15/2021 +120,000 +— +23.2700 +7/20/2022 +45,000 +15,000 +(2) +31.6750 +7/19/2023 +40,000 +40,000 +(3) +38.7600 +7/18/2024 +30,000 +90,000 +(4) +56.4000 +7/17/2025 +— +75,000 +(5) +57.8700 +7/15/2026 +24,004 (8) +1,271,972 +Trevor A. Edwards +200,000 +— +14.6300 +7/20/2017 +200,000 +— +14.5500 +7/18/2018 +200,000 +— +13.1100 +7/17/2019 +200,000 +— +17.2400 +7/16/2020 +200,000 +— +22.9250 +7/15/2021 +240,000 +— +23.2700 +7/20/2022 +112,500 +37,500 +(2) +31.6750 +7/19/2023 +80,000 +80,000 +(3) +38.7600 +7/18/2024 +45,000 +135,000 +(4) +56.4000 +7/17/2025 +— +100,000 +(5) +57.8700 +7/15/2026 +246,787 (9) +13,077,243 +Eric D. Sprunk +76,040 +— +17.2400 +7/16/2020 +200,000 +— +22.9250 +7/15/2021 +240,000 +— +23.2700 +7/20/2022 +112,500 +37,500 +(2) +31.6750 +7/19/2023 +80,000 +80,000 +(3) +38.7600 +7/18/2024 +40,000 +120,000 +(4) +56.4000 +7/17/2025 +— +85,000 +(5) +57.8700 +7/15/2026 +242,073 (10) +12,827,448 +Michael Spillane +85,000 +— +23.2700 +7/20/2022 +52,500 +17,500 +(2) +31.6750 +7/19/2023 +35,000 +35,000 +(3) +38.7600 +7/18/2024 +20,000 +60,000 +(4) +56.4000 +7/17/2025 +12,500 +37,500 +(6) +59.6200 +4/20/2026 +— +50,000 +(5) +57.8700 +7/15/2026 +69,914 (11) +3,704,743 +(1) +Stock options generally become exercisable for option shares in four equal installments on each of the first four anniversaries of the grant date. +NIKE, INC. Ÿ 2017 Notice of Annual Meeting 30 +EXECUTIVE COMPENSATION +(2) +100% of these options vested on July 19, 2017. +(3) +50% of these options vested on July 18, 2017 and 50% will vest on July 18, 2018. +(4) +33.3% of these options vested on July 17, 2017, 33.3% will vest on July 17, 2018, and 33.3% will vest on July 17, 2019. +(5) +25% of these options vested on July 15, 2017, 25% will vest on July 15, 2018, 25% will vest on July 15, 2019, and 25% will vest on July 15, 2020. +(6) +33.3% of these options will vest on April 20, 2018, 33.3% will vest on April 20, 2019, and 33.3% will vest on April 20, 2020. +(7) +20,161 of these restricted shares vested on July 15, 2017, 20,160 of these restricted shares will vest on July 15, 2018, and 20,160 of these restricted shares will vest on July 15, 2019. 20,686 of these restricted shares vested on July 17, 2017, and 20,686 of these restricted shares will vest on July 17, 2018. 30,100 of these restricted shares vested on July 18, 2017. 222,182 of these RSUs will vest on June 30, 2020. +(8) +4,321 of these restricted shares vested on July 15, 2017, 4,320 of these restricted shares will vest on July 15, 2018, and 4,320 of these restricted shares will vest on July 15, 2019. 3,694 of these restricted shares vested on July 17, 2017, and 3,694 of these restricted shares will vest on July 17, 2018. 3,655 of these restricted shares vested on July 18, 2017. +(9) +5,041 of these restricted shares vested on July 15, 2017, 5,040 of these restricted shares will vest on July 15, 2018, and 5,040 of these restricted shares will vest on July 15, 2019. 5,172 of these restricted shares vested on July 17, 2017, and 5,172 of these restricted shares will vest on July 17, 2018. 6,450 of these restricted shares vested on July 18, 2017. 214,872 of these RSUs vested on July 20, 2017. +(10) +4,321 of these restricted shares vested on July 15, 2017, 4,320 of these restricted shares will vest on July 15, 2018, and 4,320 of these restricted shares will vest on July 15, 2019. 4,433 of these restricted shares vested on July 17, 2017, and 4,432 of these restricted shares will vest on July 17,2018. 5,375 of these restricted shares vested on July 18, 2017. 214,872 of these RSUs vested on July 20, 2017. +(11) +2,881 of these restricted shares vested on July 15, 2017, 2,880 of these restricted shares will vest on July 15, 2018, and 2,880 of these restricted shares will vest on July 15, 2019. 2,069 of these restricted shares vested on July 17, 2017, and 2,068 of these restricted shares will vest on July 17, 2018. 2,150 of these restricted shares vested on July 18, 2017. 54,986 of these RSUs will vest on February 13, 2018. +(12) +This figure represents a maximum target of 333,272 RSUs which may vest on June 30, 2020, subject to performance vesting based on cumulative revenue growth and cumulative EPS growth over a five-year performance period. +(13) +Assumes Company financial performance at 75% of maximum target. Actual payout will depend on actual performance, which could range from 0 to 100%. +Option Exercises and Stock Vested During Fiscal 2017 +The following table sets forth information concerning stock option exercises and vesting of restricted stock during fiscal 2017 for each of the Named Executive Officers on an aggregated basis. +Option Awards +Stock Awards +Name +Number of Shares +Acquired on Exercise +(#) +Value Realized +on Exercise +($) +Number of Shares +Acquired on Vesting +(#) +Value Realized +on Vesting +($) +Mark G. Parker +350,000 +13,191,164 +846,346 +44,273,552 +Andrew Campion +— +— +9,980 +576,778 +Trevor A. Edwards +— +— +19,514 +1,127,569 +Eric D. Sprunk +100,000 +3,909,692 +16,385 +946,778 +Michael Spillane +— +— +6,850 +395,841 +Equity Compensation Plan Information +The following table summarizes information regarding outstanding options and shares available for future issuance under equity compensation plans approved by shareholders and equity compensation plans that were not approved by shareholders as of May 31, 2017. The table does not reflect issuances made during fiscal 2018. +Plan Category +(a) +Number of Securities +to be Issued Upon Exercise of +Outstanding Options, Warrants and Rights +(b) +Weighted-Average Exercise +Price of Outstanding +Options, Warrants and Rights (1) +(c) +Number of Securities +Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column(a)) +Equity compensation plans approved by shareholders +107,366,542 (2) +$34.7951 +112,081,862 (3) +Equity compensation plans not approved by shareholders +— +— +7,535,768 (4) +Total +107,366,542 +$34.7951 +119,617,630 +(1) +Weighted-average exercise prices do not reflect the shares that will be used upon the payment of outstanding awards of restricted stock units. +NIKE, INC. Ÿ 2017 Notice of Annual Meeting 31 +EXECUTIVE COMPENSATION +(2) +Includes 107,366,542 shares subject to awards of options, restricted stock units and stock appreciation rights outstanding under the Stock Incentive Plan (including the maximum number of Performance-Based RSUs granted to Mr. Parker). +(3) +Includes 98,589,881 shares available for future issuance under the Stock Incentive Plan and 13,491,981 shares available for future issuance under the Employee Stock Purchase Plan. +(4) Includes 7,535,768 shares available for future issuance under the Foreign Subsidiary Employee Stock Purchase Plan, pursuant to which shares are offered and sold to employees of selected non-U.S. subsidiaries of the Company on substantially the same terms as those offered to U.S. employees under the shareholder-approved Employee Stock Purchase Plan as described above under “Employee Stock Purchase Plan” on page 22. +Non-Qualified Deferred Compensation in Fiscal 2017 +Name +Plan +Name +Executive +Contributions +in Fiscal 2017 (1) +NIKE Contributions +in Fiscal 2017 (1) +Aggregate Earnings +in Fiscal 2017 +Aggregate +Withdrawals/ +Distributions in +Fiscal 2017 +Aggregate +Balance +at 5/31/2017 (1) +Mark G. Parker +DCP +$1,848,681 +$209,215 +$616,994 +— +$15,330,754 +Andrew Campion +DCP +177,846 +57,009 +99,504 +— +1,013,959 +Trevor A. Edwards +DCP +1,632,076 +81,665 +2,337,650 +— +19,151,330 +Eric D. Sprunk +DCP +963,907 +76,344 +1,340,757 +— +9,868,014 +Michael Spillane +DCP +— +67,070 +1,056 +— +257,263 +(1) +All amounts reported in the Executive Contributions column are also included in amounts reported in the Summary Compensation Table. The amounts reported in the NIKE Contributions column represent profit sharing contributions made by us in early fiscal 2017 based on fiscal 2016 results; these amounts are also included in amounts reported for fiscal 2016 in the All Other Compensation column of the Summary Compensation Table. Of the amounts reported in the Aggregate Balance column, the following amounts have been reported in the Summary Compensation Tables in this proxy statement or in prior year proxy statements: Mr. Parker, $13,732,340; Mr. Campion, $443,705; Mr. Edwards, $9,586,681; Mr. Sprunk, $3,878,118; and Mr Spillane, $67,070. +Non-Qualified Deferred Compensation Plans +The Named Executive Officers are eligible to participate in our Deferred Compensation Plan (the “DCP”). Participants in the DCP may elect in advance to defer up to 100 percent of their annual base salary, bonus, and long-term incentive payments. +Each year, we share profits with our employees in the form of profit sharing contributions to defined contribution retirement plans. The contributions are allocated among eligible employees based on a percentage of their total salary and bonus for the year. To the fullest extent permitted under Internal Revenue Code limitations, these contributions are made to employees’ accounts under our qualified 401(k) Savings and Profit Sharing Plan. Contributions based on salary and bonus in excess of the tax law limit ($265,000 for fiscal 2017) are made as NIKE contributions under the DCP. +Amounts deferred under the DCP are credited to a participant’s account under the DCP. Each participant may allocate his or her account among any combination of the investment funds available under the DCP. Participants’ accounts are adjusted to reflect the investment performance of the funds selected by the participants. Participants can change the allocation of their account balances daily. The funds available under the DCP consist of 16 mutual funds with a variety of investment objectives. The investment funds had annual returns in fiscal 2017 ranging from 0.41% to 27.07%. Amounts credited to participants’ accounts are invested by us in actual investments matching the investment options selected by the participants to ensure that we do not bear any investment risk related to participants’ investment choices. +The portion of a participant’s account attributable to elective deferrals, including investment returns, is fully vested at all times. The portion of a participant’s account attributable to NIKE contributions, including investment returns, is fully vested after the participant has been employed by us for five years. All of the Named Executive Officers are fully vested in their NIKE contributions. +Each time they elect to defer compensation, participants make an election regarding distribution of the compensation deferred under the election (as adjusted to reflect investment performance). A participant may elect for distribution to be made in a lump sum at the beginning of a predetermined year while the participant is still employed or in service (but no sooner than the fourth year after the year in which the distribution election is submitted). Alternatively, a participant may elect for distribution to be made in a lump sum or in quarterly installments over five, ten or fifteen years after termination of employment or service. Participants have limited rights to change their distribution elections. Participants may make a hardship withdrawal under certain circumstances. Subject to certain limitations, a participant may also at any time request to withdraw amounts from his or her account balance that were vested as of December 31, 2004 (and any subsequent investment returns on such amount). If such request is approved, the participant may withdraw 90% of the amount requested, and the remaining 10% will be permanently forfeited. +Potential Payments Upon Termination or Change-in-Control +Change-in-Control Compensation — Acceleration of Equity Awards +All unvested stock option, restricted stock, and restricted stock unit (“RSU”) awards are subject to accelerated vesting upon the occurrence of two events (a “double trigger”): there is a “change in control”; and the Named Executive Officer’s employment is terminated by us without “cause” or by +NIKE, INC. Ÿ 2017 Notice of Annual Meeting 32 +EXECUTIVE COMPENSATION +the Named Executive Officer for “good reason,” in each case on or before the second anniversary of the change in control. Double-trigger accelerated vesting of all awards will also occur if the Named Executive Officer’s employment is terminated without “cause” or for “good reason” between shareholder approval of the change in control and the occurrence of the change in control (and, for restricted stock and RSUs, the change in control occurs within one year following the termination). In addition, for stock options granted since July 2010, the standard period for exercising options following termination of employment is extended from three months to four years, but not beyond each option’s original 10-year term. Accelerated vesting of stock options and RSUs will also occur if we are acquired and the acquiring company does not assume the outstanding options or RSUs. In our agreements, “change in control” is generally defined to include: +• +the acquisition by any person of 50% or more of our outstanding Class A Stock or, if the Class A Stock no longer elects a majority of directors, the acquisition by any person of 30% or more of our total outstanding Common Stock, +• +the nomination (and subsequent election) in a two-year period of a majority of our directors by persons other than the incumbent directors, +• +a sale of all or substantially all of our assets, and +• +an acquisition of NIKE through a merger, consolidation or share exchange. +In our agreements, “cause” generally includes willful and continued failure to substantially perform assigned duties and willful engagement in illegal conduct materially injurious to us. In our agreements, “good reason” generally includes a material diminution in position or duties, a salary reduction or material reduction in other benefits, and a home office relocation of over 50 miles. +The following table shows the estimated benefits that would have been received by the Named Executive Officers if double-trigger accelerated vesting had occurred on May 31, 2017, when the closing price of our Class B Stock was $52.99 per share. +Name +Stock Award +Acceleration (1) +Stock Option +Acceleration (2) +Total +Mark G. Parker +$ +36,425,697 +$ +8,928,511 +$ +45,354,208 +Andrew Campion +1,271,972 +2,643,749 +3,915,721 +Trevor A. Edwards +13,077,243 +4,587,581 +17,664,824 +Eric D. Sprunk +12,827,448 +4,311,162 +17,138,610 +Michael Spillane +3,704,743 +2,445,902 +6,150,645 +(1) +Information regarding unvested restricted stock and restricted stock units held by each Named Executive Officer is set forth in the Outstanding Equity Awards table above. The award agreements provide for full double-trigger accelerated vesting as described above (for Performance-Based RSUs granted to Mr. Parker, assuming such awards are earned at 100%). The amounts in the table above represent the number of unvested restricted shares and RSUs multiplied by the closing price of our Class B Stock on May 31, 2017. +(2) +Information regarding outstanding unexercisable options held by each Named Executive Officer is set forth in the Outstanding Equity Awards table above. The agreements governing unvested stock options provide for full double-trigger accelerated vesting and an extended post-termination exercise period as described above. Amounts in the table above represent the sum of (i) for each Named Executive Officer’s outstanding unexercisable options, the aggregate value as of May 31, 2017 of those options assuming a four-year remaining term and otherwise calculated using the Black-Scholes option pricing model with assumptions consistent with those used by us for valuing our options under accounting guidance applicable to stock-based compensation, plus (ii) for each Named Executive Officer’s outstanding exercisable options granted since July 2010, the increase in value of those options resulting from the extension of the post-termination exercise period from three months to four years, with the option values for three-month and four-year remaining terms calculated using the Black-Scholes option pricing model with assumptions consistent with those used for valuing our options under accounting guidance applicable to stock-based compensation. +Benefits Triggered on Certain Employment Terminations +Stock Option Acceleration and Extension +As of May 31, 2017, each Named Executive Officer held options to purchase Class B Stock as listed in the Outstanding Equity Awards table above. Under the terms of the stock options granted to each Named Executive Officer before July 2010, upon the death or disability of the officer, the standard three-month period for exercising options following termination of employment is extended to 12 months, but not beyond each option’s original 10-year term. Under the terms of the stock options granted to each Named Executive Officer since July 2010, upon the death or disability of the officer, all unexercisable options become fully exercisable and the standard three-month period for exercising options following termination of employment is extended to four years, but not beyond each option’s original 10-year term. If death or disability of a Named Executive Officer had occurred on May 31, 2017, the sum of (i) for outstanding unexercisable options that would have become exercisable, the aggregate value as of May 31, 2017 of those options assuming a four-year remaining term and otherwise calculated using the Black-Scholes option pricing model with assumptions consistent with those used by us for valuing our options under accounting guidance applicable to stock-based compensation, plus (ii) for outstanding exercisable options, the increase in value, if any, of those options resulting from the extension of the post-termination exercise period from three months to 12 months, in the case of options granted before July 2010, and from three months to four years, in the case of options granted since July 2010, with the option values as of May 31, 2017 for three-month, twelve-month and four-year remaining terms calculated using the Black-Scholes option pricing model with assumptions consistent with those used by us for valuing our options under accounting guidance applicable to stock-based compensation, is $8,928,511 for Mr. Parker, $4,587,581 for Mr. Edwards, $4,311,162 for Mr. Sprunk, $2,445,902 for Mr. Spillane, and $2,643,749 for Mr. Campion. +Under the terms of the unvested stock options granted to Named Executive Officers since July 2010, vesting of options that have been outstanding for at least one year will be accelerated if the holder retires after reaching age 60 with at least 5 years of service, and vesting of options that have been outstanding for at least one year will continue notwithstanding termination of employment if the holder retires after reaching age 55 with at least 5 years of service. In addition, for any holder who retires after reaching age 55 (but before reaching age 60) with at least 5 years of service, the standard three-month period for exercising these options following termination of employment will be extended to four years, but not beyond the option’s original ten-year term. If termination of employment of a Named Executive Officer (other than due to death or disability) had occurred on May 31, 2017, the sum of (i) for outstanding unexercisable options that would have become exercisable, the aggregate value as of May 31, +NIKE, INC. Ÿ 2017 Notice of Annual Meeting 33 +EXECUTIVE COMPENSATION +2017 of those options assuming a four-year remaining term and otherwise calculated using the Black-Scholes option pricing model with assumptions consistent with those used by us for valuing our options under accounting guidance applicable to stock-based compensation, plus (ii) for outstanding exercisable options granted since July 2010, the increase in value, if any, of those options resulting from the extension of the post-termination exercise period from three months to four years, with the option values as of May 31, 2017 for three-month and four-year remaining terms calculated using the Black-Scholes option pricing model with assumptions consistent with those used by us for valuing our options under accounting guidance applicable to stock-based compensation, is $7,642,920 for Mr. Parker and $2,056,329 for Mr. Spillane. The value for Messrs. Sprunk, Campion and Edwards is zero because they have not reached age 55. +Stock Award Acceleration +As of May 31, 2017, each Named Executive Officer held unvested restricted stock and/or restricted stock units as set forth in the Outstanding Equity Awards table above. Under the terms of their award agreements, all unvested restricted shares and restricted stock units will immediately vest fully upon the death or disability of the officer, except that Performance-Based RSUs held by Mr. Parker will vest at the threshold amount. The value of the unvested restricted shares and restricted stock units held by each Named Executive Officer as of May 31, 2017 that would have become vested if death or disability had occurred on that date is as set forth in the “Stock Award Acceleration” column of the Change-in-Control Compensation — Acceleration of Equity Awards table above, except that the amount for Mr. Parker would be $27,595,655. +Payments Under Noncompetition Agreements +We have an agreement with Mr. Parker that contains a covenant not to compete that extends for two years following the termination of his employment with us. The agreement provides that if Mr. Parker’s employment is terminated by us, we will make monthly payments to him during the two-year noncompetition period in an amount equal to one-twelfth of his then current annual salary and target Performance Sharing Plan bonus (“Annual NIKE Income”). The agreement provides further that if Mr. Parker voluntarily resigns, we will make monthly payments to him during the two-year noncompetition period in an amount equal to one-twenty-fourth of his then current Annual NIKE Income. However, commencement of the above-described monthly payments will be delayed until after the six-month period following Mr. Parker’s separation from service, and all payments that he would otherwise have received during that period will be paid in a lump sum promptly following the end of the period, together with interest at the prime rate. If employment is terminated without “cause”, the parties may mutually agree to waive the covenant not to compete, and if employment is terminated for “cause”, we may unilaterally waive the covenant. Under Mr. Parker’s noncompetition agreement, “cause” means continual and repeated neglect of duties or acts of dishonesty. If the covenant is waived, we will not be required to make the payments described above for the months as to which the waiver applies. If the employment of Mr. Parker had been terminated by us on May 31, 2017, and assuming the covenant is not waived, we would have been required to pay Mr. Parker $361,667 per month for the 24-month period ending May 31, 2019. If Mr. Parker had voluntarily resigned on May 31, 2017, and assuming the covenant is not waived, we would have been required to pay Mr. Parker $180,833 per month for the 24-month period ending May 31, 2019. +We have noncompetition agreements with Messrs. Campion, Sprunk, Edwards and Spillane on the same terms, except that the noncompetition period is one year instead of two years, payments may commence on termination, and we may unilaterally waive the covenant in all cases including termination without cause (in which case payments would cease). In addition, for Messrs. Campion, Sprunk, Edwards and Spillane, the monthly payments are one-twelfth or one-twenty-fourth of their then current annual salaries, instead of their Annual NIKE Income. If the employment of these officers had been terminated by us on May 31, 2017 and assuming the covenant is not waived, we would have been required to pay Mr. Campion $75,000 per month, Messrs. Sprunk and Edwards $87,500 per month, and Mr. Spillane $75,083 for the 12-month period ending May 31, 2018. If these officers had voluntarily resigned on May 31, 2017 and assuming the covenant is not waived, we would have been required to pay Mr. Campion $37,500 per month, Messrs. Sprunk and Edwards $43,750 per month, and Mr. Spillane $37,542 per month for the 12-month period ending May 31, 2018. +NIKE, INC. Ÿ 2017 Notice of Annual Meeting 34 +PROPOSAL 2 +Proposal 2 +Shareholder Advisory Vote to Approve +Executive Compensation +In accordance with the requirements of Section 14A of the Securities Exchange Act of 1934, we are submitting to shareholders our annual “say-on-pay proposal,” an advisory vote to approve the compensation of our Named Executive Officers as described in this proxy statement. +At the Company’s 2011 annual meeting of shareholders, we provided shareholders with an advisory vote with respect to how often we should hold a say-on-pay proposal vote, and shareholders voted in favor of holding such a vote annually. Consistent with the voting results, we have held an advisory vote each year. At our 2017 Annual Meeting, in addition to this say-on-pay proposal, we will hold an advisory vote on say-on-pay proposal frequency. For information regarding the advisory vote on say-on-pay proposal frequency, see Proposal 3 below on page 36. +At the Company’s 2016 annual meeting of shareholders, 86% of the votes cast on the say-on-pay proposal were voted in favor of the proposal. The Compensation Committee believes this affirms shareholders’ support of the Company’s approach to executive compensation. +As discussed in the Compensation Discussion and Analysis, our compensation philosophy is designed to attract and retain highly talented individuals, provide rewards for strong business results and individual performance, and motivate executives to maximize long-term shareholder value. The program is competitive in the marketplace, highly incentive-based to align interests of executives with those of shareholders, and balanced across incentives to appropriately mitigate risk. +To achieve the objectives of our executive compensation program and emphasize pay-for-performance principles, the Compensation Committee has continued to employ the strong governance practices described in “Executive Compensation Governance Practices” on page 15, including: +• +basing a majority of total compensation on performance and retention incentives; +• +setting annual and long-term incentive targets based on clearly disclosed, objective performance measures and the Company’s performance goals; +• +mitigating undue risk associated with compensation by using multiple performance targets, caps on potential incentive payments and a clawback policy; and +• +requiring executive officers and non-employee directors to hold NIKE stock through published stock ownership guidelines. +Because your vote is advisory, it will not be binding on the Board. However, the Board values shareholder opinions, and the Compensation Committee will take into account the outcome of the vote when considering future executive compensation arrangements. +Board Recommendation +The Board of Directors recommends that shareholders vote FOR approval of the following resolution: +RESOLVED, that the shareholders approve the fiscal 2017 compensation paid to the Named Executive Officers as disclosed in this proxy statement pursuant to the SEC’s compensation disclosure rules (which disclosure includes the Compensation Discussion and Analysis, the compensation tables, and the narrative disclosures that accompany the compensation tables). +NIKE, INC. Ÿ 2017 Notice of Annual Meeting 35 +PROPOSAL 3 +Proposal 3 +Frequency of Advisory Votes on Executive Compensation +In addition to providing our shareholders with the opportunity to cast an advisory vote on executive compensation, in accordance with the requirements of Section 14A of the Securities Exchange Act of 1934, we are also submitting to an advisory shareholder vote how frequently advisory votes on executive compensation should occur. Shareholders are voting on the following resolution: +RESOLVED, that a non-binding advisory vote of the shareholders to approve the compensation of the Company’s named executive officers should be held (1) every year, (2) every two years, or (3) every three years, as determined by the alternative that receives the highest number of votes cast for it. +After careful consideration and consistent with past practice, the Board of Directors recommends an annual vote. The Board believes in the value of the opportunity for shareholders to voice their opinion annually on the Company’s executive compensation. +Because your vote is advisory, it will not be binding on the Board. However, the Board values shareholder opinions, and will give significant weight to shareholder preferences on this matter. +Board Recommendation +The Board of Directors recommends that shareholders vote for future shareholder advisory votes on executive compensation to be held EVERY YEAR. Holders of Class A Stock and Class B Stock will vote together as a single class on Proposal 3. The option of every year, every two years, or every three years that receives the highest number of votes cast by shareholders will be the frequency approved by shareholders. Abstentions and broker non-votes are counted for the purposes of determining whether a quorum exists, but have no effect on the results of the vote. +NIKE, INC. Ÿ 2017 Notice of Annual Meeting 36 +PROPOSAL 4 +Proposal 4 +Approval of the NIKE, Inc. Long-Term Incentive Plan, as Amended +In 1997, the Board of Directors adopted, and the shareholders approved, our Long-Term Incentive Plan (the “Plan”). The Plan gives us broad authority to make long-term incentive awards payable in cash and to permit qualification of certain awards (“162(m) Awards”) as “performance-based compensation” as defined under Section 162(m) of the Internal Revenue Code of 1986 (the “Code”), thereby permitting full deductibility of amounts paid under the Plan to the Named Executive Officers. +The Code requires that the material terms of the performance targets under the Plan be approved by shareholders every five years in order for 162(m) Awards under the Plan to continue to qualify as performance-based compensation. See “162(m) Approval” below on page 38. The shareholders last approved the Plan in 2012. Unless the shareholders again approve the Plan as requested in this proposal, the Plan will terminate at the 2017 Annual Shareholder Meeting. If the shareholders approve the Plan, the Plan will be extended for an additional five years until the first shareholder meeting in 2022. +The Board of Directors has adopted amendments to the Plan, subject to shareholder approval, including, but not limited to, increasing the maximum amount payable to any participant under the Plan for performance periods ending in any year from $12,000,000 to $15,000,000 and expanding the number of performance targets. The Board of Directors believes that the increased limit recognizes changes in executive compensation practices and provides flexibility with respect to multi-year performance periods ending in the same year. The Board of Directors believes that flexibility in performance targets is advisable given the evolution of the Company’s business and the metrics by which it judges its performance. +The complete text of the Plan, marked to show the proposed amendments, is attached to this proxy statement as Exhibit A. The following description of the proposed amended Plan is a summary of certain provisions and is qualified in its entirety by reference to Exhibit A. +Description of the Plan +Eligible Participants. The Plan provides that all of our employees and the employees of our subsidiaries are eligible to receive awards under the Plan. Although this group currently consists of approximately 75,000 persons, our current intent is to grant awards under the Plan to approximately 420 current officers and senior managers. +Administration. The Plan is administered by the Compensation Committee (the “Committee”) which is composed solely of “outside directors” as that term is defined in regulations under Section 162(m) of the Code. The Committee may promulgate rules and regulations for the operation of the Plan and related agreements and generally supervises the administration of the Plan. The Committee determines the individuals to whom awards are made under the Plan, the amount of the awards, and the other terms and conditions of the awards. +Target Awards. The Committee may grant target awards payable in cash and shall make 162(m) Awards within 90 days after the commencement of the period covered by the award (the “Performance Period”), or before 25% of the Performance Period has elapsed if the Performance Period is less than one year. All or part of the awards will be earned if performance targets established by the Committee for the Performance Period are met and the participant satisfies any other restrictions or goals established by the Committee. Performance targets must be expressed as an objectively determinable level of our performance or the performance of any of our subsidiaries, divisions or other units, based on one or more of the following: net income; net income before taxes; operating income; revenues; return on sales; return on equity; earnings per share; total shareholder return; return on capital; return on invested capital; return on assets; return on operating revenue earnings before any one or more of: interest, taxes, depreciation, amortization or stock-based compensation expense; stock price; cash flow; operating margin or profit margin; market share; or any of the foregoing with such objectively determinable adjustments, modifications or amendments as the Committee may determine appropriate at the time of establishing the performance target. The Committee shall not establish target award opportunities for any participant such that the maximum amount payable under target awards which have Performance Periods ending in any single fiscal year exceeds $15,000,000. +Determination of Award Payouts. At the end of each Performance Period, the Committee will determine and certify for 162(m) Awards, the attainment of the performance targets and the calculation of the payouts of the related target awards. No 162(m) Award shall be paid if the related performance targets are not met. The Committee may also, in its discretion, reduce or eliminate a participant’s calculated award based on circumstances relating to our performance or the performance of the participant. +Clawback Policy. Awards under the Plan are subject to the Company’s Policy for Recoupment of Incentive Compensation. This clawback policy generally requires executive officers who are involved in wrongful conduct that results in a restatement of the Company’s financial statements to repay to the Company the full amount of any payout received by the executive officer that was calculated in whole or in part based on the financial statements that were subsequently misstated. Awards under the Plan will also be subject to such other policy regarding clawback or recoupment of incentive compensation as may be subsequently approved by the Committee from time to time or set forth in any agreement or notice evidencing an award, as well as the requirements of applicable law and regulation regarding clawback or recoupment of incentive compensation. By accepting any awards under the Plan, a participant expressly agrees to repay to the Company any amount that may be required to be repaid under these provisions. +Amendment and Termination. The Plan, and awards made or outstanding under the Plan (including awards currently outstanding under the Plan), may be amended by the Committee with the approval of the Board of Directors, at any time except that (i) no modification shall adversely affect the payment of a target award without the participant’s consent and (ii) no modification shall be made to the extent that shareholder approval would be required to maintain the qualification of 162(m) Awards as performance-based compensation. Unless again approved by the shareholders, the Plan will terminate at the 2022 Annual Shareholder Meeting. +NIKE, INC. Ÿ 2017 Notice of Annual Meeting 37 +PROPOSAL 4 +162(m) Approval +Section 162(m) of the Code prevents a publicly held corporation from claiming federal income tax deductions for compensation in excess of $1 million per year paid to any of its chief executive officer or three other most highly compensated executive officers (other than the chief financial officer). However, if certain conditions are met, compensation that qualifies as “performance-based” is excluded for purposes of calculating the amount of compensation subject to the $1 million limit. In general, one of the requirements that must be satisfied to qualify as performance-based compensation under Section 162(m) of the Code is that the material terms of the performance goals under which the compensation may be paid must be disclosed to and approved by our shareholders every five years. Thus, our shareholders are being asked to approve this Proposal 4 to ensure that the Committee has the flexibility to grant awards under the Plan, as amended, that are intended to qualify as performance-based compensation under Section 162(m) of the Code. +If our shareholders do not approve the Plan as amended, no new awards will be granted to covered employees under the Plan, and the Committee will make a determination in its business judgment as to the appropriate compensation for such employees, taking into account considerations important to the Company’s success and the benefits and costs to the Company, including the additional costs arising from the Company’s inability to deduct all or a portion of the compensation paid to covered employees. +Plan Benefits +The actual amount of compensation to be paid to participants under the Plan is not determinable in advance because awards granted under the Plan will be subject to the Committee’s discretion, and the Committee has not determined future amounts or who might receive them. In June 2016, the Committee made target awards under the Plan for the fiscal 2017-2019 Performance Period which are summarized in the following table, and which would not have changed had the Plan, as proposed here, been in place instead of the current Long-Term Incentive Plan. Since the Plan was adopted in 1997, similar target awards have been made for the three-year Performance Periods commencing each year. The payout for the fiscal 2015-2017 Performance Period (the most recently completed Performance Period) was 131.97% of target. The actual compensation received by the Named Executive Officers under the Plan for fiscal 2015-2017 is shown in footnote 3 to the Non-Equity Incentive Plan Compensation column in the Summary Compensation Table. The actual compensation received by all current executive officers (including the Named Executive Officers) as a group under the Plan for fiscal 2015-2017 was $10.8 million. The actual compensation received by all other employees as a group under the Plan for fiscal 2015-2017 was $63.8 million. +Long-Term Incentive Plan (2) +Dollar Value ($) +Name and Position (1) +Threshold +Target +Maximum +Mark G. Parker +Chairman, President, and Chief Executive Officer +$ +1,750,000 +$ +3,500,000 +$ +7,000,000 +Andrew Campion +Executive Vice President and Chief Financial Officer +$ +375,000 +$ +750,000 +$ +1,500,000 +Trevor A. Edwards +President, NIKE Brand +$ +500,000 +$ +1,000,000 +$ +2,000,000 +Eric D. Sprunk +Chief Operating Officer +$ +375,000 +$ +750,000 +$ +1,500,000 +Michael Spillane +President, Categories and Product +$ +375,000 +$ +750,000 +$ +1,500,000 +Executive Officer Group (includes above 5 officers) +$ +4,125,000 +$ +8,250,000 +$ +16,500,000 +Non-Executive Officer Employee Group +$ +27,400,000 +$ +54,800,000 +$ +109,600,000 +(1) +All awards are cash-based. Non-employee directors are not eligible to participate in the Plan; accordingly, they are omitted from the table. +(2) +The Committee established a series of performance targets based on revenues and earnings per share for the three-year period consisting of fiscal 2017-2019 corresponding to award payouts ranging from 50% to 200% of the target awards. +Board Recommendation +The Board of Directors recommends that shareholders vote FOR approval of the Plan as amended. Holders of Class A Stock and Class B Stock will vote together as a single class on Proposal 4. If a quorum is present at the Annual Meeting, Proposal 4 will be approved if the number of shares voted in favor of the proposal exceeds the number of shares voting against the proposal. Abstentions and broker non-votes are counted for purposes of determining whether a quorum exists, but are not counted as voting either for or against and therefore have no effect on the results of the vote. +NIKE, INC. Ÿ 2017 Notice of Annual Meeting 38 +PROPOSAL 5 +Proposal 5 +Shareholder Proposal Regarding Political Contributions Disclosure +The following shareholder proposal (the “Proposal”) will be voted on at the Annual Meeting only if properly presented by or on behalf of the shareholder proponent. Mercy A. Rome, c/o Investor Voice, SPC, 111 Queen Anne Ave N, Suite 500, Seattle, WA 98109, a holder of 76 shares of Class B Stock submitted the Proposal. The Board of Directors recommends a vote AGAINST the Proposal and asks shareholders to read through NIKE’s response which follows the shareholder proposal. +THEREFORE, BE IT RESOLVED : Shareholders request that Nike, Inc. provide a report, updated annually, to disclose Nike’s: +1. +Policies for making direct or indirect contributions and payments with corporate funds to: +• Participate or intervene in any political campaign on behalf of (or in opposition to) a candidate for public office, or +• Influence the general public, or any segment thereof, with respect to an election or referendum. +2. +Monetary and non-monetary contributions and expenditures (direct and indirect) used in the manner described in section 1 above, including: +• +The identity of the recipient as well as the amount paid to each; and +• +The title(s) of person(s) at Nike responsible for decision-making or oversight. +The report shall be presented to the Board or relevant Board committee, and posted on Nike’s public website. +Supporting Statement +Long-term shareowners support transparency and accountability in corporate spending on political activities, both because it is in our best interest and because it is critical for Nike’s compliance with federal ethics laws. Gaps in reporting disserve shareowners and expose Nike to reputational and business risks that can harm shareowner value. +Nike’s current political spending policy has a number of significant gaps: +1. +In 2011 Nike pledged annual disclosures, but the 2013 and 2014 reports (the first released) reported only on Oregon, and the 2015 report only included California. A 2016 report has not yet been posted to the company’s website. +Nike’s disclosure policy is contorted and difficult to understand. Its convoluted and legalistic language seems crafted to ensure: (A) that only one State per year will be reported on, and (B) that Nike will only report “direct” (not indirect) or “cash” (not in-kind) payments. Indirect payments are often the largest and most risky type of contribution or payment - they need to be accounted for and reported to shareowners. +2. +The policy requires senior-executive approval of contributions only when amounts to a single entity are in excess of $100,000 - which creates significant gaps, too little oversight, and levels of risk that do not reflect appropriate Board stewardship or oversight. +3. +The policy ignores payments to third-party groups - whether trade associations or 501(c)(4) entities - which are the major ‘dark money’ conduits by which corporate cash enters the political system. +According to reliable public sources, Nike has contributed at least $2,460,000 ($2.46 million) in corporate funds since the 2004 election cycle. However, public data only provides a partial picture and Nike does not report on payments it makes to trade associations and 501(c)(4)s, which are the most questionable and risky forms of payments. +In order for shareowners to be able to evaluate these risks, and for the Board to adequately fulfill its fiduciary duty to shareowners, the Company must make comprehensive disclosures that include payments to trade associations and other tax-exempt organizations. +Doing so would bring Nike in line with Northwest corporate peers that embrace comprehensive disclosure: +• +Boeing +• +Microsoft +• +Nordstrom +• +Starbucks +The Company’s Statement in Opposition to Proposal 5 +The Board of Directors recommends that shareholders vote AGAINST this shareholder proposal because: +• +Our current policies and public disclosures already address many of the items requested by the proposal; +• +In the Board’s judgment, more disclosure than we already provide would not be in the best interests of shareholders; and +• +In 2012, 2013, 2015, and 2016 virtually identical proposals were rejected by approximately 78%, 82%, 73%, and 71%, respectively, of shares voted. +NIKE, INC. Ÿ 2017 Notice of Annual Meeting 39 +PROPOSAL 5 +Frankly, we agree with our shareholders. +NIKE has strong governance practices and accountability in corporate spending on political activities, and we have a level of transparency that we believe allows shareholders to have the information they need to make informed decisions. The Proposal is unnecessary to achieve these objectives, and the proponent offers no new compelling evidence or arguments in support of the proposal. +NIKE’s Political Contributions Policy (the “Policy”) is designed to give shareholders confidence that there is proper oversight of political activity, and to allow shareholders to assess any risks associated with significant contributions. All of our political contributions and expenditures are made in accordance with the Policy and our objective is to strictly comply with all public reporting laws. Our Policy ensures that political contributions, trade group memberships, and policy statements are made in a manner consistent with NIKE’s core values to protect or enhance shareholder value, without regard to the private political preferences of our corporate officers. Our Policy describes the policies and procedures for making corporate political contributions, how they are approved, who must approve them, and how they are reported to the Board’s independent Nominating and Corporate Governance Committee. We disclose our Policy on our website at http://investors.nike.com/investors/corporate-governance. +Consistent with our Policy, we also annually disclose on our website all direct political contributions to any candidate, political party, or ballot initiative in any year that exceeds $100,000, and all political contributions in any U.S. state where we make more than 50% of our political contributions in any year. We believe these disclosures provide shareholders meaningful information to assess any risks posed by significant political contributions. Our disclosures are simple, accurate, and clear. And we have posted them for every year starting with 2012. +Our Policy also requires that management annually report to the Board’s independent Nominating and Corporate Governance Committee on compliance with our Policy, and to review the strategic priorities for political contributions and trade association affiliations, to ensure they align with the long-term business objectives of the Company. +The additional disclosure requested in this proposal could place NIKE at a competitive disadvantage by revealing strategies and priorities designed to protect the economic future of NIKE, its employees, and shareholders. Because parties with interests adverse to NIKE also participate in the political process to their business advantage, any unilateral expanded disclosure could benefit them, while harming the interests of NIKE and its shareholders. +In summary, the Board of Directors believes the proposal is unnecessary because NIKE has for years followed a comprehensive policy for oversight and disclosure of political contributions. The proposal would create unnecessary administrative costs, as well as expose NIKE to competitive harm, without commensurate benefit to our shareholders. Our shareholders have understandably rejected this proposal four times before. +Board Recommendation +The Board of Directors recommends a vote AGAINST the shareholder proposal. +NIKE, INC. Ÿ 2017 Notice of Annual Meeting 40 +PROPOSAL 6 +Proposal 6 +Ratification of Appointment of Independent Registered Public Accounting Firm +The Audit Committee of the Board of Directors has sole authority to retain, with shareholder ratification, the Company’s independent registered public accounting firm. The Audit Committee directly oversees the firm’s work with respect to the annual audit of the Company’s consolidated financial statements and internal control over financial reporting and approves all audit engagement fees and terms. At least annually, the Audit Committee evaluates the independent registered public accounting firm’s qualifications, performance, and independence, including a review and evaluation of its lead partner. The Audit Committee is also involved in the selection of the new lead engagement partner following mandated rotation of the firm’s lead partner, and is responsible for considering the benefits of rotation of the Company’s independent registered public accounting firm. +The Audit Committee has appointed PricewaterhouseCoopers LLP to audit the Company’s consolidated financial statements and internal control over financial reporting for the fiscal year ending May 31, 2018 and to render other professional services as required. +PricewaterhouseCoopers LLP has served as the Company’s independent registered public accounting firm for many years. The Audit Committee and the Board of Directors believe that the continued retention of PricewaterhouseCoopers LLP as the independent registered public accounting firm is in the best interests of the Company and its shareholders. +Accordingly, the Audit Committee is submitting the appointment of PricewaterhouseCoopers LLP to shareholders for ratification. If the appointment is not ratified by our shareholders, the Audit Committee may reconsider whether it should appoint another independent registered public accounting firm. +Representatives of PricewaterhouseCoopers LLP will be present at the Annual Meeting, will have the opportunity to make a statement if they desire to do so, and are expected to be available to respond to questions. +Aggregate fees billed by the Company’s independent registered public accounting firm, PricewaterhouseCoopers LLP, for audit services related to the most recent two fiscal years, and for other professional services incurred in the most recent two fiscal years, were as follows: +Type of Service +2017 +2016 +Audit Fees (1) +$ +20.6 +million +$ +21.5 +million +Audit-Related Fees (2) +— +million +— +million +Tax Fees (3) +1.6 +million +1.5 +million +All Other Fees (4) +0.1 +million +0.1 +million +Total +$ +22.3 +million +$ +23.1 +million +(1) +Comprises the audits of the Company’s annual financial statements and internal controls over financial reporting and reviews of the Company’s quarterly financial statements, as well as statutory audits of Company subsidiaries, attest services and consents to SEC filings. +(2) +Comprises employee benefit plan audits and consultations regarding financial accounting and reporting. +(3) +Comprises services for tax compliance, tax planning and tax advice. Tax compliance includes services for compliance related tax advice, as well as the preparation and review of both original and amended tax returns for the Company and its consolidated subsidiaries. Tax compliance-related fees represented $0.3 million and $0.7 million of the tax fees for fiscal 2017 and 2016, respectively. The remaining tax fees primarily include tax advice. +(4) +Comprises other miscellaneous services. +In accordance with the Sarbanes-Oxley Act of 2002, the Audit Committee established policies and procedures under which all audit and non-audit services performed by the Company’s independent registered public accounting firm must be approved in advance by the Audit Committee. During fiscal 2017, fees totaling $4,080, or less than 0.1% of total fees, were paid to PricewaterhouseCoopers LLP for two engagements that were not pre-approved. All such services were approved by the Audit Committee promptly after their inadvertent omission from pre-approval was noticed. During fiscal 2016, all such services performed by, and fees paid to, PricewaterhouseCoopers LLP were approved in advance. +Board Recommendation +The Board of Directors recommends that shareholders vote FOR ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for the fiscal year ending May 31, 2018. +NIKE, INC. Ÿ 2017 Notice of Annual Meeting 41 +PROPOSAL 6 +Report of the Audit Committee +The Audit Committee has: +• +Reviewed and discussed the audited financial statements with management. +• +Discussed with the independent auditors the matters required to be discussed by Public Company Accounting Oversight Board (“PCAOB”) Statement on Auditing Standards No. 16 Communications with Audit Committees. +• +Received the written disclosures and the letter from the independent accountants required by applicable requirements of the PCAOB regarding the independent accountants’ communications concerning independence, and has discussed with the independent accountant the independent accountant’s independence. +• +Based on the review and discussions above, recommended to the Board of Directors that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the last fiscal year for filing with the Securities and Exchange Commission. +Members of the Audit Committee: +• +Alan B. Graf, Jr., Chairman +• +John G. Connors +• +John J. Donahoe +• +Michelle A. Peluso +NIKE, INC. Ÿ 2017 Notice of Annual Meeting 42 +OTHER MATTERS / SHAREHOLDER PROPOSALS +Other Matters +As of the time this proxy statement was printed, management was unaware of any proposals to be presented for consideration at the Annual Meeting other than those set forth herein, but if other matters do properly come before the Annual Meeting, the persons named in the proxy will vote the shares represented by such proxy according to their best judgment. +Shareholder Proposals +A proposal by a shareholder for inclusion in the Company’s proxy statement and form of proxy for the 2018 annual meeting of shareholders must be received by Ann M. Miller, Vice President and Corporate Secretary of NIKE, at One Bowerman Drive, Beaverton, Oregon 97005-6453, on or before April 5, 2018 to be eligible for inclusion. Rules under the Securities Exchange Act of 1934 describe standards as to the submission of shareholder proposals. In addition, the Company’s bylaws require that any shareholder wishing to make a nomination for Director, or wishing to introduce a proposal or other business at a shareholder meeting must give the Company at least 60 days’ advance written notice, which for the 2018 annual meeting of shareholders is July 22, 2018, and that notice must meet certain other requirements described in the bylaws. +For the Board of Directors, +Ann M. Miller +Vice President and Corporate Secretary +NIKE, INC. Ÿ 2017 Notice of Annual Meeting 43 +EXHIBIT A +EXHIBIT A +NIKE, INC. AMENDED AND RESTATED LONG-TERM INCENTIVE PLAN +This is the Amended and Restated Long-Term Incentive Plan of NIKE, Inc. for the payment of incentive compensation to designated employees. +Section 1. Definitions. +The following terms have the following meanings: +Board: The Board of Directors of the Company. +Code: The Internal Revenue Code of 1986, as amended, and all regulations, interpretations, and administrative guidance issued thereunder. +Committee: The Compensation Committee of the Board, provided however, if the Compensation Committee of the Board is not composed entirely of Outside Directors, the “Committee” shall mean a committee composed entirely of at least two Outside Directors appointed by the Board from time to time. +Company: NIKE, Inc. +Outside Directors: The meaning ascribed to this term in Section 162(m) of the Code. +Performance Period: The period of time for which Company performance is measured for purposes of a Target Award. +Performance Target: An objectively determinable level of performance as selected by the Committee to measure performance of the Company or any subsidiary, division, or other unit of the Company for the Performance Period based on one or more of the following: (a) net income, (b) net income before taxes, (c) operating income, (d) revenues, (e) return on sales, (f) return on equity, (g) earnings per share, (h) total shareholder return, (i) return on capital, (j) return on invested capital, (k) return on assets, (l) return on operating revenue, (m) earnings before any one or more of: interest, taxes, depreciation, amortization or stock-based compensation expense, (n) stock price, (o) cash flow, (p) operating margin or profit margin, (q) market share, or any of the foregoing before the effect of acquisitions, with such objectively determinable adjustments, modifications or amendments, as the Committee may determine appropriate (including, but not limited to, for one or more of the items of gain, loss, profit or expense: (i) related to a change in tax law or accounting principles; (ii) determined to be extraordinary or unusual in nature or infrequent in occurrence; (iii) acquisitions; or (iv) divestitures , accounting changes, restructuring, or other special changes ), as determined by the Committee at the time of establishing a Performance Target. +Plan: The Amended and Restated Long-Term Incentive Plan of the Company. +Section 162(m) Award: An award under the Plan that is intended to qualify as “performance-based compensation” within the meaning of Section 162(m) of the Code. +Section 162(m) Exemption: The exemption from the limitation on deductibility imposed by Section 162(m) of the Code as set forth in Section 162(m)(4)(C) of the Code and the applicable rulings and regulations thereunder. +Target Award: An amount of compensation to be paid in cash to a Plan participant based on achievement of a particular Performance Target level, as established by the Committee. +Year: The fiscal year of the Company. +Section 2. Objectives. +The objectives of the Plan are to: +(a) recognize and reward on a long-term basis selected employees of the Company and its subsidiaries for their contributions to the overall profitability and performance of the Company; and +(b) qualify permit compensation under the Plan to qualify as “performance-based compensation” within the meaning of Section 162(m) of the Code. +Section 3. Administration. +The Plan will be administered by the Committee. Subject to the provisions of the Plan, the Committee will have full authority to interpret the Plan, to establish and amend rules and regulations relating to it, to determine the terms and provisions for making awards and to make all other determinations necessary or advisable for the administration of the Plan. +Section 4. Participation. +Target Awards may be granted under the Plan only to any employee of the Company or a subsidiary of the Company who, in the discretion of the Committee, is likely to be a “covered employee” under Section 162(m) of the Code for the year in which such award is payable and any other individuals selected by the Committee who are employees of the Company or a subsidiary of the Company. +* Matters in bold and underline are new; matters in italics and strikeout are to be deleted +NIKE, INC. Ÿ 2017 Notice of Annual Meeting 44 +EXHIBIT A +Section 5. Determination of the Performance Targets and Awards. +(a) Performance Targets and Awards. The Committee shall may grant awards to participants and establish i n writing Performance Targets and Target Award opportunities in its sole discretion , the . With respect to Section 162(m) Awards, the Committee shall establish Performance Targets and Target Award opportunities for each participant, in writing within 90 days of the beginning of the applicable Performance Period. The Committee may establish (i) several Performance Target levels for each participant, each corresponding to a different Target Award opportunity, and (ii) different Performance Targets and Target Award opportunities for each participant in the Plan. +(b) Other Terms and Restrictions. The Committee may establish other restrictions to payment under a Target Award, such as a continued employment requirement, in addition to satisfaction of the Performance Targets. The Committee may also establish other subjective or objective goals, including individual Performance Targets, which it deems appropriate for determining an award; provided that, for any Section 162(m) Award, such goals may only be used for purposes of applying negative discretion in determining the award amount. +(c) Maximum Awards. The Committee shall not establish Target Award opportunities for any participant such that the maximum amount payable under Target Awards which have Performance Periods ending in any single Year exceeds $15,000,000. +Section 6. Determination of Plan Awards. +At (a) With respect to any award that is not a Section 162(m) Award, at the conclusion of the Performance Period, the Committee shall determine the attainment of the Performance Targets for the Performance Period, the satisfaction of any other material terms of the awards and the calculation of the awards, in each case, in its discretion. Awards will be paid in accordance with the terms of the awards as soon as practicable following such determination. +(b) Section 162(m) Awards. With respect to Section 162(m) Awards, in accordance with Section 162(m)(4)(C)(iii) of the Code, at the conclusion of the Performance Period and prior to the payment of any award under the Plan, the Committee shall certify in writing the attainment of the Performance Targets for the Performance Period, and satisfaction of any other material terms of the awards, and the calculation of the awards. No award Section 162(m) Award shall be paid if the related Performance Target is not met, unless provided by the Committee where the participant’s employment terminates due to the participant’s death or disability, or upon or following a change in ownership or control, to the extent permitted under Section 162(m) of the Code. 1 The Committee may, in its sole discretion, reduce or eliminate (but not increase) any participant’s calculated award Section 162(m) Award based on circumstances relating to the performance of the Company or the participant. Section 162(m) Awards will be paid in accordance with the terms of the awards as soon as practicable following the Committee’s certification of the awards. +Section 7. Termination of Employment. +The terms of a Target Award that is not a Section 162(m) Award may provide that in the event of a participant’s termination of employment for any reason during a Performance Period, the participant (or his or her beneficiary) will may receive, at the time provided in Section 6, 6 or such other time or times as the Committee may determine, all or any portion of the award to which the participant would otherwise have been entitled. Further, the Committee, in its sole discretion, may provide for payment at such time or times as the Committee may determine of all or a portion of a Target Award that is a Section 162(m) Award to a participant who terminates employment during a Performance Period due to the participant’s death or disability, or upon or following a change in ownership or control. +Section 8. Clawback Policy . +Unless otherwise provided at the time of establishing a Target Award, all awards under the Plan shall be subject to (a) any applicable securities, tax and stock exchange laws, rules, regulations and requirements relating to the recoupment or clawback of incentive compensation, (b) the NIKE, Inc. Policy for Recoupment of Incentive Compensation as approved by the Committee and in effect at the time the Target Award is established, (c) such other policy for clawback or recoupment of incentive compensation as may subsequently be approved from time to time by the Committee and (d) any clawback or recoupment provisions set forth in any agreement or notice evidencing the participant’s Target Award. By acceptance of any payment under the Plan, a participant expressly agrees to repay to the Company any amount that may be required to be repaid under the applicable policy, agreement or legal requirement. +Section 9. Miscellaneous. +(a) Amendment and Termination of the Plan. The Committee , with the approval of the Board , may amend, modify or terminate the Plan or any award hereunder (including, for the avoidance of doubt, any award outstanding at the time of the amendment and restatement of the Long-Term Incentive Plan of the Company) at any time and from time to time except insofar as approval by ; provided that (i) no such amendment, modification or termination shall adversely affect the payment of a Target Award without the participant’s consent and (ii) no such amendment, modification or termination may be effective without approval of the Company’s shareholders is required pursuant to if such approval is necessary to comply with the requirements of the Section 162(m) (4)(C)(ii) of the Code Exemption . The Plan shall terminate at the first shareholder meeting that occurs in the fifth year after the Company’s shareholders approve the Plan, unless it is again approved by the shareholders at such shareholder meeting. Notwithstanding the foregoing, no such amendment, modification or termination shall affect the payment of Target Awards previously established. +(b) No Assignment. Except as otherwise required by applicable law, no interest, benefit, payment, claim or right of any participant under the plan shall be subject in any manner to any claims of any creditor of any participant or beneficiary, nor to alienation by anticipation, sale, transfer, assignment, bankruptcy, pledge, attachment, charge or encumbrance of any kind, and any attempt to take any such action shall be null and void. +(c) No Rights to Employment. Nothing contained in the Plan shall give any person the right to be retained in the employment of the Company or any of its subsidiaries. The Company reserves the right to terminate a participant at any time for any reason notwithstanding the existence of the Plan. +NIKE, INC. Ÿ 2017 Notice of Annual Meeting 45 +EXHIBIT A +(d) Beneficiary Designation. The Committee shall establish such procedures as it deems necessary for a participant to designate a beneficiary to whom any amounts would be payable in the event of a participant’s death. +(e) Plan Unfunded. The entire cost of the Plan shall be paid from the general assets of the Company. The rights of any person to receive benefits under the Plan shall be only those of a general unsecured creditor, and neither the Company nor the Board nor the Committee shall be responsible for the adequacy of the general assets of the Company to meet and discharge Plan liabilities, nor shall the Company be required to reserve or otherwise set aside funds for the payment of its obligations hereunder. +(f) Applicable Law. The Plan and all rights thereunder shall be governed by and construed in accordance with the laws of the State of Oregon, without giving effect to the conflict of laws principles thereof. +(g) Other Payments or Awards . Nothing contained in the Plan will be deemed in any way to limit or restrict the Company from making any award or payment to any person under any other plan, arrangement or understanding, whether now existing or hereafter in effect. +(h) Tax Withholding . The Company shall have the right to deduct from all cash payments made to a Participant under the Plan or, if deemed necessary by the Company, from wages or other cash compensation paid to the participant by the Company and/or a subsidiary, any applicable taxes (including social contributions or similar payments) required to be withheld with respect to such payments. +(i) Severability . If any provision of this Plan is held unenforceable, the remainder of the Plan shall continue in full force and effect without regard to such unenforceable provision and shall be applied as though the unenforceable provision were not contained in the Plan. +unenforceable provision were not contained in the Plan. +NIKE, INC. Ÿ 2017 Notice of Annual Meeting 46 +ANNUAL +MEETING +AND +PROXY STATEMENT +September 21, 2017 +Beaverton, Oregon +Whether or not you intend to be present at the meeting, please sign and date the enclosed proxy and return it in the enclosed envelope, or vote by telephone or online following the instructions on the proxy. +Electronic Voting Instructions +Available 24 hours a day, 7 days a week! +Instead of mailing your proxy, you may choose one of the voting methods outlined below to vote your proxy. +VALIDATION DETAILS ARE LOCATED IN THE TITLE BAR BELOW. +Proxies submitted by the Internet or telephone must be received by 1:00 a.m., Central Time, on September 21, 2017. +Vote by Internet +• Go to www.investorvote.com +• Or scan the QR code with your smartphone +• Follow the steps outlined on the secure website +Vote by telephone +• Call toll free 1-800-652-VOTE (8683) within the USA, US territories & Canada on a touch tone telephone +• Follow the instructions provided by the recorded message +Using a black ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas. +x +q IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q +A +Proposals — The Board of Directors recommends a vote FOR all the nominees listed in Proposal 1, a vote FOR Proposals 2, 4, and 6, a vote for EVERY YEAR for Proposal 3, and a vote AGAINST Proposal 5. +1. +Class A director nominees: To elect a Board of Directors for the ensuing year. +» +For +Withhold +For +Withhold +For +Withhold +01 - Elizabeth J. Comstock +¨ +¨ +02 - John G. Connors +¨ +¨ +03 - Timothy D. Cook +¨ +¨ +04 - John J. Donahoe II +¨ +¨ +05 - Travis A. Knight +¨ +¨ +06 - Mark G. Parker +¨ +¨ +07 - Johnathan A. Rodgers +¨ +¨ +08 - John R. Thompson,Jr. +¨ +¨ +For +Against +Abstain +1Yr +2Yrs +3Yrs +Abstain +2. +To approve executive compensation by an advisory vote. +¨ +¨ +¨ +3. +To approve the frequency of advisory votes on executive compensation by an advisory vote. +¨ +¨ +¨ +¨ +For +Against +Abstain +4. +To approve the NIKE, Inc. Long-Term Incentive Plan, as amended. +¨ +¨ +¨ +5. +Shareholder proposal regarding political contributions disclosure. +¨ +¨ +¨ +6. +To ratify the appointment of PricewaterhouseCoopers LLP as independent registered public accounting firm. +¨ +¨ +¨ +7. +To transact such other business as may properly come before the meeting. +B +Non-Voting Items +Change of Address — Please print new address below. +C +Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below +Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title. +Date (mm/dd/yyyy) — Please print date below. +Signature 1 — Please keep signature within the box. +Signature 2 — Please keep signature within the box. +/ / +Meeting Information +2017 Annual Meeting of Shareholders +for Shareholders as of July 21, 2017 +September 21, 2017 +10:00 A.M. PDT +Meeting Location: +Tiger Woods Conference Center +One Bowerman Drive +Beaverton, OR 97005 +Meeting Directions: +From I-5 South of Portland: +I-5 North to 217 North. Follow to Hwy 26 West. +From I-5 North of Portland: +I-5 South to I-405 South. Follow to Hwy 26 West. +From I-84 East of Portland: +I-84 West to I-5 South to I-405 North. Follow to Hwy 26 West. +Exit Hwy 26 at Murray Blvd, turn left and drive one mile. Turn right on SW Bowerman Drive into the NIKE World Headquarters (WHQ). Keep right at the entry and go directly to the parking structure. Follow posted signs to The Tiger Woods Conference Center, which is located directly ahead of the parking structure. Please note that the NIKE Campus is a non-smoking location and smoking is not permitted on NIKE property. +Ç IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. Ç +NIKE, INC. +CLASS A COMMON STOCK PROXY +SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS +FOR THE 2017 MEETING OF SHAREHOLDERS +SEPTEMBER 21, 2017 +The undersigned hereby appoints Mark G. Parker, Travis A. Knight and John C. Lechleiter, and each of them, proxies with full power of substitution, to vote, as designated on the reverse side, on behalf of the undersigned, all shares of Class A Common Stock which the undersigned may be entitled to vote at the Annual Meeting of Shareholders of NIKE, Inc. on September 21, 2017, and any adjournments thereof, with all powers that the undersigned would possess if personally present. A majority of the proxies or substitutes present at the meeting may exercise all powers granted hereby. +THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS SPECIFIED, BUT IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE NOMINEES FOR DIRECTOR FOR PROPOSAL 1, FOR PROPOSALS 2, 4, AND 6, AND EVERY YEAR FOR PROPOSAL 3, AND AGAINST PROPOSAL 5. THE PROXIES MAY VOTE IN THEIR DISCRETION AS TO OTHER MATTERS WHICH MAY COME BEFORE THE MEETING. +YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS’ RECOMMENDATIONS. THE PROXIES CANNOT VOTE THESE SHARES UNLESS YOU SIGN AND RETURN THIS CARD OR PROPERLY VOTE BY PHONE OR INTERNET. +Electronic Voting Instructions +Available 24 hours a day, 7 days a week! +Instead of mailing your proxy, you may choose one of the voting methods outlined below to vote your proxy. +VALIDATION DETAILS ARE LOCATED IN THE TITLE BAR BELOW. +Proxies submitted by the Internet or telephone must be received by 1:00 a.m., Central Time, on September 21, 2017. +Vote by Internet +• Go to www.investorvote.com +• Or scan the QR code with your smartphone +• Follow the steps outlined on the secure website +Vote by telephone +• Call toll free 1-800-652-VOTE (8683) within the USA, US territories & Canada on a touch tone telephone +• Follow the instructions provided by the recorded message +Using a black ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas. +x +q IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q +A +Proposals — The Board of Directors recommends a vote FOR all the nominees listed in Proposal 1, a vote FOR Proposals 2, 4, and 6, a vote for EVERY YEAR for Proposal 3, and a vote AGAINST Proposal 5. +1. +Class B director nominees: To elect a Board of Directors for the ensuing year. +» +For +Withhold +For +Withhold +For +Withhold +01 - Alan B. Graf, Jr. +¨ +¨ +02 - John C. Lechleiter +¨ +¨ +03 - Michelle A. Peluso +¨ +¨ +For +Against +Abstain +1Yr +2Yrs +3Yrs +Abstain +2. +To approve executive compensation by an advisory vote. +¨ +¨ +¨ +3. +To approve the frequency of advisory votes on executive compensation by an advisory vote. +¨ +¨ +¨ +¨ +For +Against +Abstain +4. +To approve the NIKE, Inc. Long-Term Incentive Plan, as amended. +¨ +¨ +¨ +5. +Shareholder proposal regarding political contributions disclosure. +¨ +¨ +¨ +6. +To ratify the appointment of PricewaterhouseCoopers LLP as independent registered public accounting firm. +¨ +¨ +¨ +7. +To transact such other business as may properly come before the meeting. +B +Non-Voting Items +Change of Address — Please print new address below. +C +Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below +Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title. +Date (mm/dd/yyyy) — Please print date below. +Signature 1 — Please keep signature within the box. +Signature 2 — Please keep signature within the box. +/ / +Meeting Information +2017 Annual Meeting of Shareholders +for Shareholders as of July 21, 2017 +September 21, 2017 +10:00 A.M. PDT +Meeting Location: +Tiger Woods Conference Center +One Bowerman Drive +Beaverton, OR 97005 +Meeting Directions: +From I-5 South of Portland: +I-5 North to 217 North. Follow to Hwy 26 West. +From I-5 North of Portland: +I-5 South to I-405 South. Follow to Hwy 26 West. +From I-84 East of Portland: +I-84 West to I-5 South to I-405 North. Follow to Hwy 26 West. +Exit Hwy 26 at Murray Blvd, turn left and drive one mile. Turn right on SW Bowerman Drive into the NIKE World Headquarters (WHQ). Keep right at the entry and go directly to the parking structure. Follow posted signs to The Tiger Woods Conference Center, which is located directly ahead of the parking structure. Please note that the NIKE Campus is a non-smoking location and smoking is not permitted on NIKE property. +Ç IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. Ç +NIKE, INC. +CLASS B COMMON STOCK PROXY +SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS +FOR THE 2017 MEETING OF SHAREHOLDERS +SEPTEMBER 21, 2017 +The undersigned hereby appoints Mark G. Parker, Travis A. Knight and John C. Lechleiter, and each of them, proxies with full power of substitution, to vote, as designated on the reverse side, on behalf of the undersigned, all shares of Class B Common Stock which the undersigned may be entitled to vote at the Annual Meeting of Shareholders of NIKE, Inc. on September 21, 2017, and any adjournments thereof, with all powers that the undersigned would possess if personally present. A majority of the proxies or substitutes present at the meeting may exercise all powers granted hereby. +THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS SPECIFIED, BUT IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE NOMINEES FOR DIRECTOR FOR PROPOSAL 1, FOR PROPOSALS 2, 4, AND 6, AND EVERY YEAR FOR PROPOSAL 3, AND AGAINST PROPOSAL 5. THE PROXIES MAY VOTE IN THEIR DISCRETION AS TO OTHER MATTERS WHICH MAY COME BEFORE THE MEETING. +YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS’ RECOMMENDATIONS. THE PROXIES CANNOT VOTE THESE SHARES UNLESS YOU SIGN AND RETURN THIS CARD OR PROPERLY VOTE BY PHONE OR INTERNET. \ No newline at end of file diff --git a/raw/proxies/0000320187/0000320187-17-000127/proxy_rpt.txt b/raw/proxies/0000320187/0000320187-17-000127/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..dc5c1f1579b32adabb81ac1c4d25833bd8913986 --- /dev/null +++ b/raw/proxies/0000320187/0000320187-17-000127/proxy_rpt.txt @@ -0,0 +1,8 @@ +Transactions with Related Persons +During fiscal 2017, Howard S. Slusher, the father of John Slusher, Executive Vice President of Sports Marketing, and the Company were parties to a Consulting Agreement pursuant to which Howard Slusher managed the planning, design, and construction of new buildings at, and improvements to, NIKE’s World Headquarters. Howard Slusher was selected due to his deep history and experience with the Company, as he managed several significant construction projects for the Company, including the original World Headquarters construction and later expansions. During fiscal 2017, the Company paid Howard Slusher $2,024,592 for these services. +Pursuant to the terms of a past consulting agreement with the Company, the Company agreed to pay for health and life insurance policies for Howard Slusher following expiration of the agreement. During fiscal 2017, the Company paid $71,970 for life insurance premiums. +Two of Mr. Parker’s siblings, each with over 25 years of service to the Company, were employed by the Company in non-executive roles in fiscal 2017. Ann Parker was a Design Talent Scout, and Stephen Parker held a Vice President role with Converse. During fiscal 2017, the Company paid aggregate compensation to each of Ann Parker and Stephen Parker in the amounts of $289,894 and $540,820, respectively, comprising of salary, bonuses, the grant date fair value of stock options granted during the fiscal year estimated using the Black-Scholes pricing model, profit sharing and matching contributions to Company-sponsored retirement plans. The compensation and benefits received by each of Mr. Parker’s siblings, were consistent with compensation paid to other employees holding similar positions. +Mr. Thompson’s son, John Thompson III, former head basketball coach at Georgetown University, and the Company are parties to a contract pursuant to which Mr. Thompson III provides certain endorsement and consulting services to the Company. The terms of this agreement, effective August 2014 through August 2019, provide for annual base compensation of $200,000, and up to $112,500 per year of product and merchandise. In addition, there are annual incentive payments based upon team performance. +On June 30, 2016, Philip H. Knight, the father of NIKE director Travis A. Knight, retired from the Board of Directors. Effective immediately upon his retirement, the Board has appointed Philip H. Knight to the position of Chairman Emeritus, which provides a standing invitation for Philip H. Knight to attend meetings of the Board and its committees as a non-voting observer. As the Chairman Emeritus, Mr. Knight receives medical and dental insurance coverage available to employees and receives an annual salary of $500,000. Philip H. Knight received $567,172 in salary and profit sharing and matching contributions to Company-sponsored retirement plans. +The Company’s written policy requires the Nominating and Corporate Governance Committee to review any transaction or proposed transaction with a related person that would be required to be reported under Item 404(a) of Regulation S-K, and to determine whether to ratify or approve the transaction, with ratification or approval to occur only if the Committee determines that the transaction is fair to the Company or that approval or ratification of the transaction is in the interest of the Company. +NIKE, INC. Ÿ 2017 Notice of Annual Meeting 13 \ No newline at end of file diff --git a/raw/proxies/0000320187/0000320187-18-000144/proxy.txt b/raw/proxies/0000320187/0000320187-18-000144/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..6a292161cae0860f2ef935d0764055412134b925 --- /dev/null +++ b/raw/proxies/0000320187/0000320187-18-000144/proxy.txt @@ -0,0 +1,2259 @@ +DEF 14A +1 +nke-2018xdef14a.htm +DEF 14A +Document +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +Washington, D.C. 20549 +SCHEDULE 14A INFORMATION +Proxy Statement Pursuant to Section 14(a) of the +Securities Exchange Act of 1934 +(Amendment No. ) +Filed by the Registrant x Filed by a Party other than the Registrant ¨ +Check the appropriate box: +¨ +Preliminary Proxy Statement +¨ +Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +x +Definitive Proxy Statement +¨ +Definitive Additional Materials +¨ +Soliciting Material under §240.14a-12 +NIKE, INC. +(Name of registrant as specified in its charter) +(Name of person(s) filing proxy statement, if other than the registrant) +Payment of Filing Fee (Check the appropriate box): +x +No fee required +¨ +Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11 +(1) +Title of each class of securities to which transaction applies: +(2) +Aggregate number of securities to which transaction applies: +(3) +Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): +(4) +Proposed maximum aggregate value of transaction: +(5) +Total fee paid: +¨ +Fee paid previously with preliminary materials. +¨ +Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. +(1) +Amount Previously Paid: +(2) +Form, Schedule or Registration Statement No.: +(3) +Filing Party: +(4) +Date Filed: +To Our Shareholders: +You are cordially invited to attend the annual meeting of shareholders of NIKE, Inc. to be held at the Tiger Woods Conference Center, One Bowerman Drive, Beaverton, Oregon 97005-6453, on Thursday, September 20, 2018, at 10:00 A.M. Pacific Time. Registration will begin at 9:00 A.M. +The meeting will consist of a brief presentation followed by the business items listed on the included notice. +Whether or not you plan to attend, the prompt execution and return of your proxy card will both assure that your shares are represented at the meeting and minimize the cost of proxy solicitation. +Sincerely, +Mark G. Parker +Chairman of the Board +July 24, 2018 +Notice of Annual Meeting +of Shareholders +September 20, 2018 +To the Shareholders of NIKE, Inc. +The Annual Meeting of Shareholders of NIKE, Inc., an Oregon corporation, will be held at the Tiger Woods Conference Center, One Bowerman Drive, Beaverton, Oregon 97005-6453, on Thursday, September 20, 2018, at 10:00 A.M. Pacific Time, for the following purposes: +1. To elect the 12 directors named in the accompanying proxy statement for the ensuing year. +2. To approve executive compensation by an advisory vote. +3. To consider a shareholder proposal regarding political contributions disclosure as described in the accompanying proxy statement, if properly presented at the meeting. +4. To ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm. +5. To transact such other business as may properly come before the meeting. +All shareholders are invited to attend the meeting. Shareholders of record at the close of business on July 20, 2018, the record date fixed by the Board of Directors, are entitled to notice of and to vote at the meeting. You must present your proxy, voter instruction card, or meeting notice for admission. +By Order of the Board of Directors, +Ann M. Miller +Vice President, Corporate Secretary & Chief Compliance Officer +Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders To Be Held on September 20, 2018. The proxy statement and NIKE, Inc.’s 2018 Annual Report to Shareholders are available online at www.investorvote.com or www.proxyvote.com, for registered and beneficial owners, respectively. +Whether or not you plan to attend the meeting, please sign and date the enclosed proxy card and return it in the enclosed envelope, or vote online or by telephone following the instructions on the proxy card. +CORPORATE GOVERNANCE +Proxy Statement +Proxy Statement +We are furnishing proxy materials to our shareholders primarily via the Internet by mailing a Notice of Internet Availability of Proxy Materials, or “Notice”, instead of mailing printed copies of those materials to each shareholder. The Notice directs shareholders to a website where they can access our proxy materials, including our proxy statement and our annual report, and view instructions on how to vote online or by telephone. If you would prefer to receive a paper copy of our proxy materials, please follow the instructions included in the Notice. If you have previously elected to receive our proxy materials electronically, you will continue to receive access to these materials electronically unless you elect otherwise. +The enclosed proxy is solicited by the Board of Directors (the “Board”) of NIKE, Inc. (“NIKE” or the “Company”) for use at the annual meeting of shareholders to be held on September 20, 2018, and at any adjournment thereof (the “Annual Meeting”). Our principal executive offices are located at One Bowerman Drive, Beaverton, Oregon 97005-6453. This proxy statement is first being made available to shareholders on or about August 8, 2018. Shareholders may submit a proxy to vote at the Annual Meeting by following the instructions on the Notice, online or by telephone, or (if they have received paper copies of the proxy materials) by returning a proxy card. +The Company will bear the cost of soliciting proxies. In addition to soliciting proxies by mail, certain officers and employees of the Company, without extra compensation, may also solicit proxies personally or by telephone. Copies of proxy solicitation materials will be furnished to fiduciaries, custodians, and brokerage houses for forwarding to the beneficial owners of shares held in their names. +Shares that are properly voted online or by telephone or for which proxy cards are properly executed and received by the Company prior to the Annual Meeting will be voted in accordance with the instructions specified in such proxies. Where no instructions are given, shares will be voted “FOR” the election of each of the named nominees for director (Proposal 1), “FOR” the proposal regarding an advisory vote to approve executive compensation (Proposal 2), “AGAINST” the shareholder proposal regarding political contributions (Proposal 3), and “FOR” the ratification of the appointment of PricewaterhouseCoopers LLP as independent registered public accounting firm (Proposal 4). +A shareholder giving the enclosed proxy has the power to revoke it at any time before it is exercised by affirmatively electing to vote in person at the meeting or by delivering to Ann M. Miller, Vice President, Corporate Secretary & Chief Compliance Officer of NIKE, Inc., either an instrument of revocation or an executed proxy bearing a later date. +Voting Securities and Vote Required +Holders of record of NIKE’s Class A Common Stock (“Class A Stock”) and holders of record of NIKE’s Class B Common Stock (“Class B Stock”) at the close of business on July 20, 2018 will be entitled to vote at the Annual Meeting. On that date, 320,065,752 shares of Class A Stock and 1,280,488,786 shares of Class B Stock were issued and outstanding. Neither class of Common Stock has cumulative voting rights. +Each share of Class A Stock and each share of Class B Stock is entitled to one vote on every matter submitted to the shareholders at the Annual Meeting. +A majority of the votes entitled to be cast on Proposal 1, the election of directors, by each of the Class A Stock and Class B Stock separately constitutes a quorum of Class A Stock and Class B Stock, respectively, for action on Proposal 1. The holders of Class A Stock and the holders of Class B Stock will vote separately on Proposal 1. Holders of Class B Stock are currently entitled to elect 25 percent of the Board, rounded up to the next whole number. Holders of Class A Stock are currently entitled to elect the remaining directors. Under this formula, holders of Class B Stock, voting separately, will elect three directors, and holders of Class A Stock, voting separately, will elect nine directors. Under our Bylaws, if a quorum of each class of Common Stock is present at the meeting, the three director nominees who receive the greatest number of votes cast by holders of Class B Stock and the nine director nominees who receive the greatest number of votes cast by holders of Class A Stock will be elected directors. +A majority of the votes entitled to be cast on Proposals 2, 3, and 4 by both Class A Stock and Class B Stock together constitutes a quorum for action on those proposals. Holders of Class A Stock and holders of Class B Stock will vote together as one class on Proposals 2, 3, and 4. If a quorum is present at the meeting, Proposals 2, 3, and 4 will be approved if the votes cast in favor of the proposal exceeds the votes cast against the proposal. +Abstentions and broker non-votes are counted for purposes of determining whether a quorum exists. Abstentions and broker non-votes are not included as votes cast and will not affect the outcome of any of the proposals. Broker non-votes occur when a person holding shares in street name, such as through a brokerage firm, does not provide instructions as to how to vote those shares and the broker does not then vote those shares on the shareholder’s behalf. +NIKE, INC. Ÿ 2018 Notice of Annual Meeting 1 +CORPORATE GOVERNANCE +Board of Directors +CORPORATE GOVERNANCE +Board of Directors +The Board is currently composed of ten independent directors and three directors who are not independent under the New York Stock Exchange (the “NYSE”) listing rules. During fiscal 2018, there were five meetings of the Board and all of our then serving directors attended at least 75 percent of the total number of meetings of the Board and committees on which he or she served. The Company encourages all directors to attend each annual meeting of shareholders and, with the exception of Travis A. Knight, all directors serving at the time of the 2017 annual meeting attended the 2017 annual meeting. +Board Committees +On November 16, 2017, to allow for flexibility to implement evolving governance best practices, the Board elected to restructure from six to four committees. As a result, the Board’s current standing committees are an Audit & Finance Committee; a Compensation Committee; a Corporate Responsibility, Sustainability & Governance Committee; and an Executive Committee. The Board may appoint other committees from time to time. Each standing committee has a written charter; all such charters, as well as the Company’s corporate governance guidelines, are available at the Company’s corporate website: http://investors.nike.com and will be provided in print to any shareholder who submits a request in writing to NIKE Investor Relations, One Bowerman Drive, Beaverton, Oregon 97005-6453. +The Audit & Finance Committee consolidated the prior Audit Committee and Finance Committee. The Audit & Finance Committee provides assistance to the Board in fulfilling its legal and fiduciary obligations with respect to matters involving the Company’s accounting, auditing, financial reporting, internal controls, information security (including those risks related to cyber security), data protection, and oversees the financial policies and activities of the Company that may have a material impact on the results of operations or the financial position of the Company. The Audit & Finance Committee is also responsible for overseeing the integrity of the Company’s financial statements, the compliance with legal and regulatory requirements, the independent auditor’s qualifications and independence, and the performance of the Company’s internal audit function and independent auditor. The Audit & Finance Committee also considers long-term financing options, long-range tax, financial regulatory and foreign currency issues facing the Company, and management’s recommendations concerning capital deployment strategy, major capital expenditures, and material acquisitions or divestitures. The Board has determined that each member of the Audit & Finance Committee meets all independence and financial literacy requirements applicable to audit committees under the NYSE listing standards and applicable regulations adopted by the U.S. Securities and Exchange Commission (the “SEC”). The Board has also determined that Mr. Alan B. Graf, Jr. is an “audit committee financial expert” as defined in regulations adopted by the SEC. +The Compensation Committee evaluates the performance of the Chief Executive Officer (“CEO”), reviews the performance evaluations of our other Named Executive Officers, and recommends their compensation for approval by the independent members of the Board (other than the incentive compensation approved solely by the Compensation Committee as described below). The Compensation Committee also grants equity incentive awards under the NIKE, Inc. Stock Incentive Plan, and determines targets and awards under the NIKE, Inc. Executive Performance Sharing Plan and the NIKE, Inc. Long-Term Incentive Plan. The Compensation Committee also makes recommendations to the Board regarding other executive incentive compensation arrangements and profit sharing plan contributions. The Board has determined that each member of the Compensation Committee meets all independence requirements applicable to compensation committees under the NYSE listing standards. +The Corporate Responsibility, Sustainability & Governance Committee consolidated the prior Nominating & Corporate Governance Committee and the Corporate Responsibility & Sustainability Committee. The Corporate Responsibility, Sustainability & Governance Committee identifies individuals qualified to become Board members, recommends director nominees for election at each annual shareholder meeting, and develops and recommends corporate governance guidelines and standards for business conduct and ethics. The Corporate Responsibility, Sustainability & Governance Committee also reviews significant strategies, activities and policies regarding sustainability (including labor practices), community impact and charitable activities, and makes recommendations regarding the same to the Board. The Corporate Responsibility, Sustainability & Governance Committee also oversees the annual self-evaluations of the Board and its committees and makes recommendations to the Board concerning the structure and membership of the other Board committees. The Board has determined that each member of the Corporate Responsibility, Sustainability & Governance Committee meets all independence requirements applicable to nominating/corporate governance committees under the NYSE listing standards. +The Executive Committee is authorized to act on behalf of the Board on all corporate actions for which applicable law does not require participation by the full Board. In practice, the Executive Committee acts in place of the full Board only when emergency issues or scheduling conflicts make it difficult or impracticable to assemble the full Board. All actions taken by the Executive Committee must be reported at the next Board meeting, or as soon thereafter as practicable. The Executive Committee held no formal meetings during fiscal 2018, but took action by unanimous written consent. +NIKE, INC. Ÿ 2018 Notice of Annual Meeting 2 +CORPORATE GOVERNANCE +Board of Directors +The table below provides information regarding the current membership of each standing Board committee and denotes the number of standing Board committee meetings held during fiscal 2018: +Director Name +Audit & Finance* +Compensation +Corporate Responsibility, Sustainability & Governance* +Executive +Cathleen A. Benko** +Elizabeth J. Comstock +ü +John G. Connors +ü +Timothy D. Cook +Chair +John J. Donahoe II +ü +Alan B. Graf, Jr. +Chair +Peter B. Henry*** +ü +Travis A. Knight +ü +John C. Lechleiter +Chair +Mark G. Parker +Chair +Michelle A. Peluso +ü +Johnathan A. Rodgers +ü +John R. Thompson, Jr. +Phyllis M. Wise**** +Meetings in Fiscal 2018 +15 +5 +7 +- +* Represents total meetings of restructured committees inclusive of predecessor committees. +** Ms. Benko was elected to the Board of Directors effective July 12, 2018. +*** Mr. Henry was elected to the Board of Directors effective February 14, 2018. +**** Effective September 21, 2017, Dr. Wise retired from the Board. +Director Independence +Pursuant to NYSE rules, in order for a director to qualify as “independent”, the Board of Directors must affirmatively determine that the director has no material relationship with the Company that would impair the director’s independence. The Board affirmatively determined that commercial or charitable relationships below the following thresholds will not be considered material relationships that impair a director’s independence: (i) if a NIKE director or immediate family member is an executive officer of another company that does business with NIKE and the annual sales to, or purchases from, NIKE are less than one percent of the annual revenues of the other company; and (ii) if a NIKE director or immediate family member serves as an officer, director or trustee of a charitable organization, and NIKE’s contributions to the organization are less than one percent of that organization’s total annual charitable receipts. After applying this categorical standard, the Board has determined that the following directors who served during fiscal 2018 — Elizabeth J. Comstock, John G. Connors, Timothy D. Cook, John J. Donahoe II, Alan B. Graf, Jr., Peter B. Henry, John C. Lechleiter, Michelle A. Peluso, Johnathan A. Rodgers, and Phyllis M. Wise — have no material relationship with the Company and, therefore, are independent. Ms. Benko did not serve in fiscal 2018 but has been determined independent by the Board. Messrs. Travis A. Knight, Mark G. Parker, and John R. Thompson, Jr. were not independent pursuant to NYSE rules. Mr. Parker was not independent pursuant to NYSE rules because he was an executive officer of the Company during fiscal 2018. Mr. Knight was not independent pursuant to NYSE rules because he is the son of NIKE’s co-founder and former Chairman of the Board, Mr. Philip Knight, who received compensation in excess of the threshold set forth in applicable NYSE rules (the “NYSE threshold”) for his position as Chairman Emeritus. Mr. Thompson was not independent pursuant to NYSE rules because the Company had a, now terminated, contract with his son, John Thompson III, former head basketball coach at Georgetown University, to provide endorsement and consulting services to the Company with compensation in excess of the NYSE threshold. The compensation paid to Mr. Philip Knight is described under “Transactions with Related Persons” below. +Director Nominations +The Corporate Responsibility, Sustainability & Governance Committee identifies potential director candidates through a variety of means, including recommendations from members of the Corporate Responsibility, Sustainability & Governance Committee or the Board, suggestions from Company management, and shareholder recommendations. The Committee also may, in its discretion, engage director search firms to identify candidates. Shareholders may recommend director candidates for consideration by the Corporate Responsibility, Sustainability & Governance Committee by submitting a written recommendation to the Committee, c/o Ann M. Miller, Vice President, Corporate Secretary & Chief Compliance Officer, NIKE, Inc., One Bowerman Drive, Beaverton, Oregon 97005-6453. The recommendation should include the candidate’s name, age, qualifications (including principal occupation and employment history), and written consent to be named as a nominee in the Company’s proxy statement and to serve as a director, if elected. +The Board of Directors has adopted qualification standards for the selection of non-management nominees for director, which can be found at our corporate website: http://investors.nike.com . As provided in these standards and the Company’s corporate governance guidelines, nominees for director are selected on the basis of, among other things, distinguished business experience or other non-business achievements; education; significant knowledge of international business, finance, marketing, technology, human resources, diversity & inclusion, law, or other fields which are complementary to, and balance the knowledge of, other Board members; a desire to represent the interests of all shareholders; independence; character; ethics; good judgment; diversity; and ability to devote substantial time to discharge Board responsibilities. +NIKE, INC. Ÿ 2018 Notice of Annual Meeting 3 +CORPORATE GOVERNANCE +Board of Directors +The Corporate Responsibility, Sustainability & Governance Committee identifies qualified potential candidates without regard to their age, gender, race, national origin, sexual orientation, or religion. While the Board has no policy regarding Board member diversity, the Corporate Responsibility, Sustainability & Governance Committee considers and discusses diversity in selecting nominees for director and in the re-nomination of an incumbent director. The Committee views diversity broadly, including gender, ethnicity, differences of viewpoint, geographic location, skills, education, and professional and industry experience, among others. The Board believes that a variety and balance of perspectives on the Board results in more thoughtful and robust deliberations. +In considering the re-nomination of an incumbent director, the Corporate Responsibility, Sustainability & Governance Committee reviews the director’s overall service to the Company during his or her term, including the number of meetings attended, level of participation and quality of performance, as well as any special skills, experience or diversity that such director brings to the Board. All potential new director candidates, whether recommended by shareholders or identified by other means, are initially screened by the Chair of the Corporate Responsibility, Sustainability & Governance Committee, who may seek additional information about the background and qualifications of the candidate, and who may determine that a candidate does not have qualifications that merit further consideration by the full Committee. With respect to new director candidates who pass the initial screening, the Corporate Responsibility, Sustainability & Governance Committee meets to discuss and consider each candidate’s qualifications and potential contributions to the Board, and determines by majority vote whether to recommend such candidates to the Board. The final decision to either appoint a candidate to fill a vacancy between annual meetings or include a candidate on the slate of nominees proposed at an annual meeting is made by the Board. +It is the general policy of the Board that directors first elected after the fiscal year ended May 31, 1993 will not stand for re-election after reaching the age of 72. Mr. Rodgers, who has served on the Board since 2006, has announced his retirement and will not stand for re-election to the Board at the 2018 Annual Meeting. +Shareholder Communications with Directors +Shareholders or interested parties desiring to communicate directly with the Board, with the non-management directors or with any individual director may do so in writing addressed to the intended recipient or recipients, c/o Ann M. Miller, Vice President, Corporate Secretary & Chief Compliance Officer, NIKE, Inc., One Bowerman Drive, Beaverton, Oregon 97005-6453. All such communications will be reviewed, compiled as necessary, and then forwarded to the designated recipient or recipients in a timely manner. +Board Leadership Structure +NIKE’s governing documents provide the Board with flexibility to select the appropriate leadership structure of the Company. In determining the leadership structure, the Board considers many factors, including the specific needs of the business, fulfilling the duties of the Board, and the best interests of the Company’s shareholders. Mr. Parker, the Company’s President and CEO since 2006, also serves as the Chairman of the Board, a position he has held since 2016. As Chairman, Mr. Parker presides over meetings of the Board and shareholders. As President and CEO, Mr. Parker is in charge of the general supervision, direction, and control of the business and affairs of the Company, subject to the overall direction and supervision of the Board and its committees. +The Board believes this leadership structure is appropriate for the Company due to Mr. Parker’s intimate knowledge of the Company’s business, his unique experience, talent, tenure, and effective leadership. The structure permits Mr. Parker, by serving as both Chairman and CEO, to draw on his knowledge of the operations of the business, industry developments, customers, shareholders, and employees in providing leadership on the broad strategic issues considered by the Board. +The Corporate Responsibility, Sustainability & Governance Committee determined that given Mr. Parker’s position as Chairman, President and CEO, a lead independent director would ensure strong independent leadership of the Board and simultaneous with Mr. Parker’s appointment as Chairman in 2016, the Board appointed Tim Cook as Lead Independent Director to serve for a term of three years. As Lead Independent Director, Mr. Cook executes the following functions: +• +serves as a liaison between the Chairman/CEO and the independent directors; +• +approves the meeting agendas for the Board; +• +advises the Chairman/CEO regarding the sufficiency, quality, quantity, and timeliness of information provided to the Board; +• +ensures that meeting schedules permit sufficient time for discussion of all agenda items; +• +provides consultation and direct communication with major shareholders, if requested; +• +presides at meetings of the Board at which the Chairman/CEO is not present, including executive sessions; and +• +performs other duties specified in the Lead Independent Director Charter. +The chairs of Board committees also play an active role in the leadership structure of the Board. The Corporate Responsibility, Sustainability & Governance Committee and the Board endeavor to select independent committee chairs who will provide strong leadership to guide the important work of the Board committees. Committee chairs work with the Company’s senior executives to ensure the committees are discussing the key strategic risks and opportunities of the Company. In the absence of the lead independent director, a presiding director is appointed to chair executive sessions of non-management directors (consisting of all directors other than Mr. Parker). The position of presiding director is rotated among the chairs of the various Board committees, other than the Executive Committee. Executive sessions are regularly scheduled and held at least once each year. +Mr. Philip Knight, co-founder and former Chairman of the Company, serves as Chairman Emeritus, with a standing invitation to attend meetings of the Board and its committees as a non-voting observer. The Board believes that it benefits from the valuable experience and insights of the Company’s co-founder and former Chairman of the Board. +For all of these reasons, the Board believes this leadership structure is optimal. +NIKE, INC. Ÿ 2018 Notice of Annual Meeting 4 +CORPORATE GOVERNANCE +Board of Directors +The Board’s Role in Risk Oversight +While the Company’s management is responsible for day-to-day management of the various risks facing the Company, the Board takes an active role in the oversight of the management of critical business risks. The Board does not view risk in isolation. Risks are considered in virtually every business decision and as part of NIKE’s business strategy. The Board recognizes it is neither possible nor prudent to eliminate all risk. Purposeful and appropriate risk-taking is essential for the Company to be competitive on a global basis and to achieve its strategic objectives. +The Board implements its risk oversight function both as a whole and through committees, which play a significant role in carrying out risk oversight. While the Audit & Finance Committee is responsible for oversight of management’s risk management policies, oversight responsibility for particular areas of risk is allocated among the Board committees according to the committee’s area of responsibility as reflected in the committee charters. In particular: +• +The Audit & Finance Committee oversees risks related to the Company’s financial statements, the financial reporting process, accounting, legal matters, investments, access to capital and capital deployment, currency risk and hedging programs, information security (including those risks related to cyber security), and data protection. The Committee oversees the internal audit function, reviews a risk-based plan of internal audits, and reviews a risk-based integrated audit of internal controls over financial reporting. The Committee meets separately with the Vice President of Corporate Audit and Chief Risk Officer, representatives of the independent registered public accountants, and senior management. +• +The Compensation Committee oversees risks and rewards associated with the Company’s compensation philosophy and programs, management succession plans, and executive development. +• +The Corporate Responsibility, Sustainability & Governance Committee oversees risks associated with company governance, including NIKE’s code of business conduct and its ethics, compliance programs, and the structure and performance of the Board and its committees. The Committee also oversees issues that involve reputational risk to the Company, including community engagement, and sustainability innovation relating to the Company’s products, its supply chain (including labor practices), and the environment. +Each committee chair works with one or more senior executives assigned to assist the committee in: developing agendas for the year and for each meeting, paying particular attention to areas of business risk identified by management, Board members, internal and external auditors, and in their committee charter; and scheduling agenda topics, presentations, and discussions regarding business risks within their area of responsibility. At meetings, the committees discuss areas of business risk, the potential impact, and management’s initiatives to manage business risk, often within the context of important business decisions. Through this process key business risk areas are reviewed at appropriate times, with some topics reviewed on several occasions throughout the year. At every Board meeting each committee chair provides a report to the full Board outlining its discussions and actions, including those affecting the oversight of various risks. +The Company believes its leadership structure, discussed in detail above, supports the risk oversight function of the Board. Strong directors chair the various committees involved in risk oversight, there is open communication between management and directors, and all directors are involved in the risk oversight function. +Code of Business Conduct and Ethics +The NIKE Code of Ethics (“Ethics Code”) is available at the Company’s corporate website: http://investors.nike.com and will be provided in print without charge to any shareholder who submits a request in writing to NIKE Investor Relations, One Bowerman Drive, Beaverton, Oregon 97005-6453. The Ethics Code applies to all of the Company’s employees and directors, including our CEO and all other executive officers. The Ethics Code provides that any waiver of the Ethics Code may be made only by the Board. Any such waiver in favor of a director or executive officer will be publicly disclosed. The Company plans to disclose amendments to, and waivers from, the Ethics Code on the Company’s corporate website: http://investors.nike.com. +NIKE, INC. Ÿ 2018 Notice of Annual Meeting 5 +CORPORATE GOVERNANCE +PROPOSAL 1 +Proposal 1 +Election of Directors +A Board of 12 directors will be elected at the Annual Meeting. All of the nominees other than Ms. Cathleen A. Benko and Mr. Peter B. Henry were elected at the 2017 annual meeting of shareholders. Directors will hold office until the next annual meeting of shareholders or until their successors are elected and qualified. +Mr. Alan B. Graf, Jr., Dr. John C. Lechleiter, and Ms. Michelle A. Peluso are nominated by the Board of Directors for election by the holders of Class B Stock. The other nine nominees are nominated by the Board for election by the holders of Class A Stock. +Under Oregon law and our Bylaws, if a quorum of each class of shareholders is present at the Annual Meeting, the nine director nominees who receive the greatest number of votes cast by holders of Class A Stock and the three director nominees who receive the greatest number of votes cast by holders of Class B Stock will be elected directors. Abstentions and broker non-votes will have no effect on the results of the vote. Unless otherwise instructed, proxy holders will vote the proxies they receive for the nominees listed below. If any nominee becomes unable to serve, the holders of the proxies may, in their discretion, vote the shares for a substitute nominee or nominees designated by the Board. +The Bylaws and the Corporate Governance Guidelines of the Company provide that any nominee for director in an uncontested election who receives a greater number of votes “withheld” from his or her election than votes “for” such election shall tender his or her resignation for consideration by the Corporate Responsibility, Sustainability & Governance Committee. The Committee will recommend to the Board the action to be taken with respect to the resignation. The Board will publicly disclose its decision within 90 days of the certification of the election results. +Background information on the nominees as of July 20, 2018, including some of the attributes that led to their selection, appear below. The Corporate Responsibility, Sustainability & Governance Committee has determined that each director meets the qualification standards described in the section entitled “Director Nominations” above. In addition, the Board firmly believes that the experience, attributes, and skills of any single director nominee should not be viewed in isolation, but rather in the context of the experience, attributes, and skills that all director nominees bring to the Board as a whole, each of which contributes to the function of an effective Board. +Nominees for Election by Class A Shareholders +Cathleen A. Benko +Ms. Benko, 59, a director since July 2018, is Vice Chairman and Managing Principal of Deloitte LLP ("Deloitte"), an organization that, through its subsidiaries and as part of a network of member firms, provides audit, consulting, tax, and advisory services to clients throughout the world. During her nearly 30-year career with Deloitte, Ms. Benko held many leadership roles, some concurrent with her most recent position as Vice Chairman and Managing Principal, a position she has held since 2011. From 2015 to 2018 she served as Senior Partner working with digital giants where she was the lead advisory partner for several digital-native companies. From 2010 to 2014, Ms. Benko served as Chief Digital, Brand, and Communications Officer. Previous to this role as Chief Digital, Brand, and Communications Officer she held multiple technology and talent management roles including serving as the company’s first Vice Chairman and Chief Talent Officer from 2006 to 2010, its Chief Inclusion Officer from 2008 to 2010, and as Managing Principal, Initiative for the Retention and Advancement of Women, from 2003 to 2009. Ms. Benko led Deloitte’s technology sector from 2003 to 2007 and was previously Deloitte’s first Global e-Business Leader, a position she held from 1998 to 2002. Ms. Benko serves as a member of Catalyst’s Board of Advisors and is chair of the Harvard Business School Advisory Council. Ms. Benko was selected to serve on the Board because her experience developing digital platforms, and working in the technology industry, and expertise in talent management and development, specifically within diversity and inclusion, make her a valuable addition to the Board. +Elizabeth J. Comstock +Ms. Comstock, 57, a director since 2011, is the former Vice Chair of General Electric Company (“GE”). Ms. Comstock led GE’s efforts to accelerate new growth and operated GE Business Innovations, which included Current, GE Lighting, GE Ventures & Licensing and GE sales, marketing and communications. At GE, she was appointed Vice President, Communications, NBC News Communications in 1994, Senior Vice President, NBC Corporate Communications in 1996, Vice President of Corporate Communications in 1998, Corporate Vice President and Chief Marketing Officer +NIKE, INC. Ÿ 2018 Notice of Annual Meeting 6 +CORPORATE GOVERNANCE +PROPOSAL 1 +in 2003, President, NBC Universal Integrated Media in 2006, and Senior Vice President, Chief Marketing and Commercial Officer in 2008. Prior to joining GE in 1994, Ms. Comstock held a succession of positions at NBC, CBS, and Turner Broadcasting. Ms. Comstock is a trustee of The National Geographic Society. Ms. Comstock was selected to serve on the Board because her broad experience in, and understanding of, media, marketing, and innovation aligns well with the Company’s business model, which involves a great deal of each. +John G. Connors +Mr. Connors, 59, a director since 2005, is a partner in Ignition Partners LLC, a Seattle-area venture capital firm. Mr. Connors served as Senior Vice President and Chief Financial Officer of Microsoft Corporation (“Microsoft”) from December 1999 to May 2005. He joined Microsoft in 1989 and held various management positions, including Corporate Controller from 1994 to 1996, Chief Information Officer from 1996 to 1999, and Vice President, Worldwide Enterprise Group in 1999. Mr. Connors is currently a member of the board of directors of Splunk, Inc. and privately held companies Chef, Inc., Motif Investing, Inc., FiREapps, Inc., ICERTIS, Inc., Tempered Networks Inc., Azuqua, Inc., LiveStories Inc., and KenSci Inc., and is on the Board of the Washington Policy Center and the University of Washington Tyee Club. Mr. Connors was selected to serve on the Board because his experience and skills in accounting, financial management, venture capital, technology, and international operations enable him to make valuable contributions to the Board. +Timothy D. Cook +Mr. Cook, 57, a director since 2005, is the Company’s Lead Independent Director and is the Chief Executive Officer of Apple, Inc. (“Apple”). Mr. Cook joined Apple in March 1998 as Senior Vice President of Worldwide Operations and also served as its Executive Vice President, Worldwide Sales and Operations and Chief Operating Officer. Mr. Cook was Vice President, Corporate Materials for Compaq Computer Corporation from 1997 to 1998. Previous to his work at Compaq, Mr. Cook served in the positions of Senior Vice President Fulfillment and Chief Operating Officer of the Reseller Division at Intelligent Electronics from 1994 to 1997. Mr. Cook also worked for International Business Machines Corporation from 1983 to 1994, most recently as Director of North American Fulfillment. Mr. Cook is currently a member of the Board of Directors of the National Football Foundation and Apple. Mr. Cook also currently serves on the Board of Trustees for Duke University. Mr. Cook was selected to serve on the Board because his operational executive experience and his knowledge of technology, cyber security, marketing, and international business allow him to provide the Board with valuable perspectives and insights. +John J. Donahoe II +Mr. Donahoe, 58, a director since 2014, is President and Chief Executive Officer of ServiceNow, Inc. and also serves on its Board of Directors. Mr. Donahoe also serves as Chairman of PayPal Holdings, Inc. From 2008 through 2015, Mr. Donahoe served as President and Chief Executive Officer of eBay, Inc. (“eBay”), provider of the global eBay.com online marketplace and PayPal digital payments platform. Mr. Donahoe joined eBay in 2005 as President of eBay Marketplaces, responsible for eBay’s global e-Commerce businesses, and was appointed President and Chief Executive Officer in 2008. Prior to joining eBay, Mr. Donahoe was the Chief Executive Officer and Worldwide Managing Director of Bain & Company from 1999 to 2005, and a Managing Director from 1992 to 1999. Mr. Donahoe currently serves on the Board of Trustees for The Bridgespan Group. He served on the Board of Directors of Intel Corporation from March 2009 until May 2017. Mr. Donahoe was selected to serve on the Board because his experience in executive and financial management, strategic planning, branding, technology, cyber security, and digital commerce allow him to provide valued perspectives on each of these areas of the Company’s business. +NIKE, INC. Ÿ 2018 Notice of Annual Meeting 7 +CORPORATE GOVERNANCE +PROPOSAL 1 +Peter B. Henry +Mr. Henry, 48, a director since February 2018, is Dean Emeritus of New York University’s Leonard N. Stern School of Business and William R. Berkley Professor of Economics and Finance. Mr. Henry assumed the Deanship of the Stern School of Business in January 2010 and served through December 2017. Prior to joining Stern, he was the Konosuke Matsushita Professor of International Economics at the Stanford University Graduate School of Business. In 2008, he led Barack Obama’s Presidential Transition Team in its review of international lending agencies such as the IMF and the World Bank. In June 2009, President Obama appointed Mr. Henry to the President’s Commission on White House Fellowships. Mr. Henry also serves on the Board of Directors of Citigroup, the National Bureau of Economic Research, and the Economic Club of New York and served on the Board of Directors of General Electric from July 2016 until April 2018. He is also a member of the Council of Foreign Relations and the Economic Advisory Panel of the Federal Reserve Bank of New York. Mr. Henry was selected to serve on the Board because of his extensive experience in economics, international finance and emerging markets, academia and governance, which allow him to provide valued perspectives on each of these areas of the Company’s business. +Travis A. Knight +Mr. Knight, 44, a director since 2015, is the President and Chief Executive Officer of the animation studio, LAIKA, LLC (“LAIKA”), which specializes in feature-length films. He has been involved in all principal creative and business decisions at LAIKA since its founding in 2003, serving in successive management positions as Lead Animator, Vice President of Animation, and then as President and Chief Executive Officer in 2009. Mr. Knight was Producer and Director of the feature film Kubo and the Two Strings (2017) which was nominated for an Academy Award and winner of the BAFTA award for Best Animated Film. Mr. Knight has served as Producer and Lead Animator on Academy Award-nominated feature-length films The Boxtrolls (2014) and ParaNorman (2012, for which he won an Annie Award for Outstanding Achievement in Character Animation), and Lead Animator for Coraline (2009). Prior to his work at LAIKA, Mr. Knight held various animation positions at Will Vinton Studios from 1998 to 2002, as a stop-motion animator for television series, commercials, and network promotions. He has been recognized for his work on the Emmy Award-winning stop-motion animated television series The PJs. Mr. Knight serves on the Board of Directors of LAIKA. He is the son of NIKE’s co-founder, Mr. Philip Knight, who currently serves as Chairman Emeritus. Mr. Travis Knight was selected to serve on the Board because of his creative and management experience, and because he has a significant role in the management of the Class A Stock owned by Swoosh, LLC, strengthening the alignment of the Board with the interests of NIKE shareholders. +Mark G. Parker +Mr. Parker, 62, is Chairman of the Board of Directors of the Company, and has served as President and CEO, and a director since 2006. He was named Chairman of the Board on June 30, 2016. Mr. Parker has been employed by NIKE since 1979 with primary responsibilities in product research, design and development, marketing, and brand management. He was appointed divisional Vice President in charge of product development in 1987, corporate Vice President in 1989, General Manager in 1993, Vice President of Global Footwear in 1998, and President of the NIKE Brand in 2001. Mr. Parker is currently a member of the Board of Directors of The Walt Disney Company. Mr. Parker was selected to serve on the Board because he has extensive knowledge and experience regarding Company operations, sports marketing, manufacturing, research, design, development, and management, and is an effective leader of NIKE. His position as CEO makes his position as Chairman of the Board critical. +NIKE, INC. Ÿ 2018 Notice of Annual Meeting 8 +CORPORATE GOVERNANCE +PROPOSAL 1 +John R. Thompson, Jr. +Mr. Thompson, 76, a director since 1991, was head coach of the Georgetown University men’s basketball team from 1972 until 1998. Mr. Thompson was head coach of the 1988 United States Olympic basketball team. He hosted a sports radio talk show in Washington, D.C. for 13 years, and is a nationally broadcast sports analyst for Turner Network Television (TNT) and Dial Global, Inc. He serves as Assistant to the President of Georgetown University for Urban Affairs and he is a past President of the National Association of Basketball Coaches and presently serves on its Board of Governors. Mr. Thompson has honorary doctorate degrees from Wheeling Jesuit University, Georgetown University, University of the District of Columbia, and St. Peter’s College. Mr. Thompson was selected to serve on the Board because his extensive experience and knowledge of education, college and professional sports, media, broadcasting, and knowledge of urban issues allow him to provide valuable insights to the Board regarding sports marketing, corporate responsibility and diversity. +Board Recommendation +The Board of Directors recommends that the Class A Shareholders vote FOR the election of nominees above to the Board of Directors. +NIKE, INC. Ÿ 2018 Notice of Annual Meeting 9 +CORPORATE GOVERNANCE +PROPOSAL 1 +Nominees for Election by Class B Shareholders +Alan B. Graf, Jr. +Mr. Graf, 64, a director since 2002, is the Executive Vice President and Chief Financial Officer of FedEx Corporation (“FedEx”), a position he has held since 1998, and is a member of FedEx’s Executive Committee. Mr. Graf joined FedEx in 1980 and was Senior Vice President and Chief Financial Officer for FedEx Express, FedEx’s predecessor, from 1991 to 1998. He previously served on the board of directors of Kimball International Inc., Storage USA, Inc., and Arkwright Mutual Insurance Co., and he is currently a director of Mid-America Apartment Communities, Inc., Methodist Le Bonheur Healthcare, and the Indiana University Foundation. In March 2017, Mr. Graf was selected as the Chairman of the University of Memphis Board of Trustees. Mr. Graf was selected to serve on the Board because his experience and skills in auditing, accounting, financial management, executive leadership, and international operations enable him to effectively provide the Board with valuable perspectives and insights. +John C. Lechleiter +Dr. Lechleiter, 64, a director since 2009, is the Chairman Emeritus of Eli Lilly and Company (“Lilly”). He served as President and Chief Executive Officer of Lilly from 2008 until his retirement in December 2016. He also served as a member of Lilly’s board from 2005 to May 2017 and as Chairman of Lilly’s board from January 2009 to May 2017. Dr. Lechleiter began work at Lilly as a senior organic chemist in Lilly’s process research and development division in 1979 and became head of that department in 1982. He later held roles in project management, regulatory affairs, product development, and pharmaceutical operations. In 2005, he was named President and Chief Operating Officer and joined the Lilly board of directors. He became President and Chief Executive Officer in 2008 and became Chairman of the Board in 2009. He is a member of the American Chemical Society. He is a member emeritus of the board of the Central Indiana Corporate Partnership. He also serves on the boards of Ford Motor Company, the Indiana Economic Development Corporation and United Way Worldwide. Dr. Lechleiter was selected to serve on the Board because his operational executive experience and his knowledge of science, marketing, management, and international business allow him to provide the Board with significant contributions in those strategic areas. +Michelle A. Peluso +Ms. Peluso, 46, a director since 2014, is Senior Vice President and Chief Marketing Officer at IBM. She served as Chief Executive Officer of online shopping destination Gilt Groupe, Inc. (“Gilt”) from 2013 until its sale to Hudson’s Bay Company in February 2016, and was on Gilt’s board of directors from 2009 to 2016. Prior to joining Gilt in 2013, she served as Global Consumer Chief Marketing and Internet Officer of Citigroup Inc. from 2009 to 2013, and from 2002 to 2009, Ms. Peluso held senior management positions at Travelocity.com LP, being appointed Chief Operating Officer in 2003, and President and Chief Executive Officer in December 2003. Prior to joining Travelocity, in 1999 she founded Site59, an online travel site, serving as its Chief Executive Officer until its acquisition by Travelocity in 2002. Ms. Peluso was a director of OpenTable, Inc. from 2008 to 2012 and is a director of the nonprofit TechnoServe and Tech:NYC. She also is a Strategic Advisor at Technology Crossover Ventures. Ms. Peluso was selected to serve on the Board because of her extensive experience in, and understanding of, online retail, marketing, branding, and digital connections with consumers, which are integral components of the Company’s growth strategy. +Board Recommendation +The Board of Directors recommends that the Class B Shareholders vote FOR the election of nominees above to the Board of Directors. +NIKE, INC. Ÿ 2018 Notice of Annual Meeting 10 +CORPORATE GOVERNANCE +Director Compensation for Fiscal 2018 +Name +Fees Earned or Paid in Cash ($) +Stock Awards (1)(2) ($) +Change in Pension Value and +Nonqualified Deferred Compensation +Earnings ($) +All Other +Compensation (3) +($) +Total +($) +Elizabeth J. Comstock +90,000 +165,049 +— +— +255,049 +John G. Connors +101,882 +165,049 +— +20,000 +286,931 +Timothy D. Cook +130,000 +165,049 +— +20,000 +315,049 +John J. Donahoe II +95,000 +165,049 +— +— +260,049 +Alan B. Graf, Jr. +115,000 +165,049 +— +— +280,049 +Peter B. Henry +26,250 +(4) +165,013 +— +— +191,263 +Travis A. Knight +90,000 +165,049 +— +— +255,049 +John C. Lechleiter +105,000 +165,049 +— +20,000 +290,049 +Michelle A. Peluso +92,294 +165,049 +— +14,285 +271,628 +Johnathan A. Rodgers +90,000 +165,049 +— +— +255,049 +John R. Thompson, Jr. +72,000 +165,049 +— +41,984 +279,033 +Phyllis M. Wise +32,308 +(5) +— +— +20,000 +52,308 +(1) +Represents the grant date fair value of restricted stock awards granted in fiscal 2018 computed in accordance with accounting guidance applicable to stock-based compensation. The grant date fair value is based on the closing market price of our Class B Stock on the grant date. As of May 31, 2018, non-employee directors held the following number of outstanding shares of unvested restricted stock: Ms. Comstock, 3,103; Mr. Connors, 3,103; Mr. Cook, 3,103; Mr. Donahoe, 3,103; Mr. Graf, 3,103; Mr. Henry, 2,416; Mr. Knight, 3,103; Dr. Lechleiter, 3,103; Ms. Peluso, 3,103; Mr. Rodgers, 3,103; and Mr. Thompson, 3,103. +(2) +As of May 31, 2018, non-employee directors held outstanding options for the following number of shares of our Class B Stock: Ms. Comstock, 90,000; Mr. Connors, 90,000; Mr. Cook, 90,000; Dr. Lechleiter, 126,000; and Mr. Rodgers, 122,000. +(3) +Includes matched contributions to charities in the following amounts: Mr. Connors, $20,000; Mr. Cook, $20,000; Dr. Lechleiter, $20,000; Ms. Peluso, $14,285; Mr. Thompson, $20,000; and Dr. Wise, $20,000. Also includes medical and life insurance premiums paid by the Company of $21,984 for Mr. Thompson. +(4) +Mr. Henry was appointed to the Board of Directors on February 14, 2018 (includes prorated annual retainer payments). +(5) +Dr. Wise did not stand for re-election at our 2017 annual meeting of shareholders and retired effective September 21, 2017 (includes prorated annual retainer payments). +Director Fees and Arrangements +Under our standard director compensation program in effect for fiscal 2018, non-employee directors received: +• +An annual retainer of $90,000, paid in quarterly installments. +• +Upon appointment, a one-time, sign-on restricted stock award valued at $165,000 on the date of grant, generally, the date of appointment. The one-time, sign-on restricted stock award is subject to forfeiture in the event that service as a director terminates prior to anniversary of the date of grant. +• +An annual restricted stock award valued at $165,000 on the date of grant, generally, the date of each annual meeting of shareholders. The annual restricted stock award is subject to forfeiture in the event that service as a director terminates prior to the next annual meeting. +• +For the Lead Independent Director, an annual retainer of $25,000, paid in quarterly installments. +• +For chairs of board committees (other than the Executive Committee), an annual retainer of $15,000 for each committee chaired ($20,000 for the chair of the Audit & Finance Committee), paid in quarterly installments. +• +For Audit & Finance Committee members, an additional annual retainer of $5,000, paid in quarterly installments. +• +Payment or reimbursement of travel and other expenses incurred in attending Board meetings. +• +Matching charitable contributions under the NIKE Matching Gift Program, under which directors are eligible to contribute to qualified charitable organizations and the Company provides a matching contribution to the charities in an equal amount, up to $20,000 in the aggregate, for each director annually. +In fiscal 2018, Mses. Comstock and Peluso, Messrs. Connors, Cook, Donahoe, Graf, Henry, Knight, and Rodgers, and Dr. Lechleiter participated in our standard director compensation program as described above, and Dr. Wise participated in our standard director compensation program prior to her retirement. Mr. Parker does not receive any compensation for his Board service or his position as Chairman of the Board. +Mr. Thompson does not participate in our standard director compensation program. In fiscal 2018, pursuant to his election made in fiscal 2000, Mr. Thompson received an annual retainer of $72,000 (instead of the $90,000 annual retainer fee paid under our standard program), medical insurance, and $500,000 of life insurance coverage paid for by the Company. Additionally, on September 21, 2017, the date of the 2017 annual meeting of shareholders, Mr. Thompson received an annual restricted stock award valued at $165,000 on the same terms as apply to the restricted stock awards granted pursuant to our standard program. He is also eligible for payment or reimbursement of board-related expenses, and participation in the NIKE Matching Gift Program on the same basis as other directors. +NIKE, INC. Ÿ 2018 Notice of Annual Meeting 11 +CORPORATE GOVERNANCE +Effective June 1, 2018, the Company changed the standard director compensation program by increasing the annual retainer to $100,000 per year, increasing the value of the annual restricted stock award to $175,000 on the date of grant, increasing the value of the one-time, sign-on restricted stock award to $175,000 on the date of grant for newly appointed non-employee directors, and increasing the annual leadership retainers for the Lead Independent Director and the chairs of Board committees (other than the chair of the Executive Committee) by $5,000, resulting in the following annual leadership retainers: Lead Independent Director, $30,000; Audit & Finance Committee Chair, $25,000; Compensation Committee Chair, $20,000; and Corporate Responsibility, Sustainability & Governance Committee Chair, $20,000. The Company made these changes to the director compensation program to maintain the competitiveness of the Company’s director compensation program and to reinforce our directors’ ability to meet the stock ownership guidelines described below. +Effective June 1, 2018, and in connection with the changes to the standard director compensation program described above, Mr. Thompson’s annual retainer increased to $82,000 and the value of his annual restricted stock award increased to $175,000 on the date of the grant. His other compensation, including medical and life insurance, payment or reimbursement of board-related expenses, and participation in the NIKE Matching Gift Program remain unchanged. +Stock Ownership Guidelines for Directors +NIKE maintains stock ownership guidelines for all non-employee directors. Under these guidelines, directors are required to hold NIKE stock valued at five times their annual cash retainer. New directors are required to attain these ownership levels within five years of their election to the Board. Each of our directors has met or is on track to meet the specified ownership level. +Director Participation in Deferred Compensation Plan +Under our Deferred Compensation Plan, non-employee directors may elect in advance to defer up to 100 percent of the director fees paid by the Company. For a description of the plan, see “Non-Qualified Deferred Compensation in Fiscal 2018” below. In addition, in fiscal 2000, Mr. Thompson received credits to a fully vested NIKE stock account under the Deferred Compensation Plan in exchange for his waiver of rights to future payments under a former non-employee director retirement program. The Class B Stock credited to Mr. Thompson’s account is distributed to him upon his retirement from the Board and the account is credited with quarterly dividends until distributed. +NIKE, INC. Ÿ 2018 Notice of Annual Meeting 12 +CORPORATE GOVERNANCE +Stock Holdings of Certain Owners and Management +The following table sets forth the number of shares of the classes of NIKE securities beneficially owned, as of June 30, 2018, after giving effect to any transactions that occurred on such date, by (i) each person known to the Company to be the beneficial owner of more than 5 percent of any class of the Company’s securities, (ii) each of the directors and nominees for director, (iii) each executive officer listed in the Summary Compensation Table (“Named Executive Officers”), and (iv) all nominees, Named Executive Officers, and other executive officers as a group. Because Class A Stock is convertible into Class B Stock on a share-for-share basis, each beneficial owner of Class A Stock is deemed by the SEC to be a beneficial owner of the same number of shares of Class B Stock. Therefore, in indicating a person’s beneficial ownership of shares of Class B Stock in the table, it has been assumed that such person has converted into Class B Stock all shares of Class A Stock of which such person is a beneficial owner. For these reasons the table contains substantial duplications in the numbers of shares and percentages of Class A and Class B Stock shown for Swoosh, LLC, Philip H. Knight, the Travis A. Knight 2009 Irrevocable Trust II, and Travis A. Knight in his capacity as the Trustee of such Trusts. In addition, unless otherwise indicated, all persons named below can be reached c/o Ann M. Miller, Vice President, Corporate Secretary & Chief Compliance Officer, NIKE, Inc., One Bowerman Drive, Beaverton, Oregon 97005-6453. +Title of Class +Shares Beneficially Owned (1) +Percent of Class (2) +Cathleen A. Benko +Class B +— +(3) +— +Elizabeth J. Comstock +Class B +102,763 +(4) +— +John G. Connors +Class B +128,603 +(4) +— +Timothy D. Cook +Class B +108,763 +(4) +— +John J. Donahoe II +Class B +16,995 +— +Alan B. Graf, Jr. +Class B +195,715 +— +Peter B. Henry +Class B +2,416 +— +Travis A. Knight +Class A +38,856,369 +(6) +11.8 +% +Class B +38,874,592 +(6) +3.0 +% +John C. Lechleiter +Class B +157,763 +(4) +— +Mark G. Parker (7) +Class B +4,927,444 +(4)(8) +0.4 +% +Michelle A. Peluso +Class B +17,099 +— +Johnathan A. Rodgers +Class B +134,763 +(4) +— +John R. Thompson, Jr. +Class B +77,946 +(5) +— +Andrew Campion (7) +Class B +437,191 +— +Eric D. Sprunk (7) +Class B +384,187 +(4) +— +Hilary K. Krane (7) +Class B +492,390 +(4)(8) +— +John F. Slusher (7) +Class B +899,067 +(4)(8) +— +Trevor A. Edwards (7) +Class B +1,796,180 +(4)(8) +0.1 +% +Sojitz Corporation of America +1211 S.W. 5th Ave, Pacwest Center, Ste. 2220, Portland, OR 97204 +Preferred (8) +300,000 +100.0 +% +Philip H. Knight +Class A +26,054,487 +7.9 +% +One Bowerman Drive, Beaverton, OR 97005 +Class B +45,065,174 +(10) +3.5 +% +Swoosh, LLC +Class A +255,000,000 +(11) +77.5 +% +22990 NW Bennett Street, Hillsboro, OR 97124 +Class B +255,000,000 +16.7 +% +Travis A. Knight 2009 Irrevocable Trust II +Class A +38,856,369 +(6) +11.8 +% +22990 NW Bennett Street, Hillsboro, OR 97124 +Class B +38,856,369 +(6) +3.0 +% +The Vanguard Group +100 Vanguard Blvd., Malvern, PA 19355 +Class B +101,511,950 +(12) +7.8 +% +BlackRock, Inc. +40 East 57th Street, New York, NY 10022 +Class B +79,221,723 +(13) +6.1 +% +All directors and executive officers as a group (21 persons) +Class A +38,856,369 +(6)(14) +11.8 +% +Class B +49,430,605 +(4)(6)(14) +3.9 +% +(1) +A person is considered to beneficially own any shares: (a) over which the person exercises sole or shared voting or investment power, or (b) of which the person has the right to acquire beneficial ownership at any time within 60 days (such as through conversion of securities or exercise of stock options). Unless otherwise indicated, voting and investment power relating to the above shares is exercised solely by the beneficial owner or shared by the owner and the owner’s spouse or children. +(2) +Omitted if less than 0.1 percent. +(3) +Ms. Benko received a one-time, sign-on restricted stock award valued at $175,000 effective July 12, 2018, the date of her appointment to the Board. This award is consistent with the Company’s standard director compensation program in effect for fiscal 2019. +NIKE, INC. Ÿ 2018 Notice of Annual Meeting 13 +CORPORATE GOVERNANCE +(4) +These amounts include the right to acquire, pursuant to the exercise of stock options, within 60 days after June 30, 2018, the following numbers of shares: 90,000 shares for Ms. Comstock, 90,000 shares for Mr. Connors, 90,000 shares for Mr. Cook, 126,000 shares for Dr. Lechleiter, 3,611,250 shares for Mr. Parker, 122,000 shares for Mr. Rodgers, 406,250 shares for Mr. Campion, 343,750 shares for Mr. Sprunk, 370,000 shares for Ms. Krane, 785,000 shares for Mr. Slusher, 1,335,000 shares for Mr. Edwards, and 7,394,250 shares for the executive officer and director group. +(5) +Includes 33,183 shares credited to Mr. Thompson’s account under the NIKE, Inc. Deferred Compensation Plan. +(6) +Includes 19,713,989 shares of Class A Stock held directly by the Travis A. Knight 2009 Irrevocable Trust II (the “Trust”), of which Mr. Travis Knight is the Trustee, and 19,142,380 shares of Class A Stock held by an indirect subsidiary of the Trust. Mr. Knight and members of his immediate family are among the beneficiaries of the Trust. Mr. Knight disclaims beneficial ownership of the Company’s securities held directly and indirectly by the Trust, except to the extent of his pecuniary interest therein. On June 30, 2016, a wholly owned subsidiary of the Trust acquired all of the voting units in Swoosh, LLC. Mr. Knight disclaims beneficial ownership of all securities held by Swoosh, LLC. +(7) +Named Executive Officer listed in the Summary Compensation Table. +(8) +Includes shares held in accounts under the NIKE, Inc. 401(k) and Profit Sharing Plan for Messrs. Parker, Slusher, Edwards, and Ms. Krane in the amounts of 35,640, 2,747, 18,840, and 116, respectively. +(9) +Preferred Stock does not have general voting rights except as provided by law, and under certain circumstances as provided in the Company’s Restated Articles of Incorporation, as amended. +(10) +Does not include: (a) 521,792 shares of Class A Stock that are owned by Mr. Philip Knight’s spouse, and (b) 2,836,056 shares of Class B Stock held by the Knight Foundation, a charitable foundation in which Mr. Philip Knight and his spouse are directors. Mr. Philip Knight has disclaimed ownership of all such shares. Mr. Philip Knight holds the position Chairman Emeritus, and has a standing invitation to attend all meetings of the Board as a non-voting observer. +(11) +Information provided as of July 7, 2017 in the Form 4 filed by the shareholder. +(12) +Information provided as of February 9, 2018 in Schedule 13G filed by the shareholder. +(13) +Information provided as of February 8, 2018 in Schedule 13G filed by the shareholder. +(14) These amounts do not include shares owned by Mr. Philip Knight who retired from the Board in 2016. +Section 16(a) Beneficial Ownership Reporting Compliance +Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s directors and executive officers, and persons who own more than 10 percent of a registered class of the Company’s equity securities, to file with the SEC and the NYSE, initial reports of ownership and reports of changes in ownership of Common Stock and other equity securities of the Company. Officers, directors, and greater than 10 percent shareholders are required by the regulations of the SEC to furnish the Company with copies of all Section 16(a) forms they file. To the Company’s knowledge, based solely on review of the copies of such reports furnished to the Company and written representations that no other reports were required, during fiscal 2018 all Section 16(a) filing requirements applicable to its officers, directors, and greater than 10 percent beneficial owners were complied with. +Transactions with Related Persons +In fiscal 2018, two of Mr. Parker’s siblings, each with over 25 years of service to the Company, were employed by the Company in non-executive roles. Ann Parker was a Design Talent Scout, and Stephen Parker held a Vice President role with Converse. During fiscal 2018, the Company paid aggregate compensation to Stephen Parker in the amount of $486,535, comprised of salary, bonuses, the value of stock awards granted during the fiscal year, a valued service award and associated tax reimbursement, profit sharing and matching contributions to Company-sponsored retirement plans. Additionally, the Company paid aggregate compensation to Ann Parker in the amount of approximately $487,367, comprised of approximately $306,037 paid in connection with her termination of service as well as the compensation components listed above. The compensation and benefits received by each of Mr. Parker’s siblings, including the separation benefits received by Ann Parker and the 30th anniversary service award received by Stephen Parker, were consistent with compensation paid to other similarly situated employees. +Eric Sprunk’s daughter, Nicole Sprunk, was employed by the Company in a non-executive role in fiscal 2018 as a Brand Director. During fiscal 2018, the Company paid aggregate compensation to Nicole Sprunk of $196,748, comprised of salary, bonus, the value of stock granted, profit sharing and matching contributions to the Company-sponsored retirement plan. The compensation and benefits received by Nicole Sprunk were consistent with compensation paid to other employees holding similar positions. +Philip H. Knight, the father of NIKE director Travis A. Knight, serves as Chairman Emeritus, which provides a standing invitation for Philip H. Knight to attend meetings of the Board and its committees as a non-voting observer. As Chairman Emeritus, Mr. Knight receives an annual salary of $500,000, and medical and dental insurance coverage generally available to employees. In fiscal 2018, Philip H. Knight received $516,819, comprised of salary, profit sharing and matching contributions to Company-sponsored retirement plans. +The Company’s written policy requires the Corporate Responsibility, Sustainability & Governance Committee to review any transaction or proposed transaction with a related person that would be required to be reported under Item 404(a) of Regulation S-K, and to determine whether to ratify or approve the transaction, with ratification or approval to occur only if the Committee determines that the transaction is fair to the Company or that approval or ratification of the transaction is in the interest of the Company. +NIKE, INC. Ÿ 2018 Notice of Annual Meeting 14 +CORPORATE GOVERNANCE +Compensation Committee Interlocks and Insider Participation +The members of the Compensation Committee of the Board of Directors during fiscal 2018 were Timothy D. Cook, Elizabeth J. Comstock, John C. Lechleiter, and Johnathan A. Rodgers. The Committee is composed solely of independent, non-employee directors. No member of the Compensation Committee has been an executive officer of the Company, and no member of the Compensation Committee had any relationships requiring disclosure by the Company under the SEC’s rules requiring disclosure of certain relationships and related-party transactions. None of the Company’s executive officers served as a director or member of a compensation committee (or other committee serving an equivalent function) of any other entity, the executive officers of which served as a director or member of the Compensation Committee of the Company during fiscal 2018. +NIKE, INC. Ÿ 2018 Notice of Annual Meeting 15 +COMPENSATION DISCUSSION AND ANALYSIS +COMPENSATION DISCUSSION AND ANALYSIS +Executive Summary +This Compensation Discussion and Analysis explains our compensation philosophy, summarizes our compensation programs, and reviews compensation decisions for our Chief Executive Officer, our Chief Financial Officer, our next three most highly compensated executive officers who were serving as executive officers on May 31, 2018 (collectively, the “Continuing Officers”), and one former executive officer who would have been one of the three most highly compensated executive officers if he was serving as an executive officer on May 31, 2018. These individuals are referred to throughout this proxy statement as the “Named Executive Officers”. The Named Executive Officers for fiscal 2018 were: +• +Mark G. Parker, Chairman, President and Chief Executive Officer +• +Andrew Campion, Executive Vice President and Chief Financial Officer +• +Eric D. Sprunk, Chief Operating Officer +• +Hilary K. Krane, Executive Vice President, Chief Administrative Officer and General Counsel +• +John F. Slusher, Executive Vice President, Global Sports Marketing +• +Trevor A. Edwards, Former President, NIKE Brand +Mr. Edwards resigned as President, NIKE Brand, effective March 15, 2018, and will retire from the Company in August 2018. +Our executive compensation program, similar to our non-executive compensation programs, is aligned with our business strategy and our culture and is designed to attract and retain top talent, reward business results and performance, viewed holistically, and most importantly, maximize shareholder value. Our total compensation program for the Named Executive Officers is highly incentive-based and competitive in the marketplace, with Company performance determining a significant portion of total compensation. +Executive Compensation Governance Practices +To achieve the objectives of our executive compensation program and emphasize pay-for-performance principles, the Compensation Committee of the Board of Directors (the “Committee”) employs strong governance practices as outlined in the table below. +We Do +We Don’t Do +ü Base a majority of total compensation on performance and retention incentives +ü Set annual and long-term incentive targets based on clearly disclosed, objective performance measures +ü Mitigate undue risk associated with compensation by using multiple performance targets, caps on potential incentive payments, and a clawback policy +ü Require executive officers to hold NIKE stock through stock ownership guidelines +ü Vest equity awards over time to promote retention with a minimum of one year vesting +ü Provide double-trigger change-in-control equity acceleration +ü Conduct annual “say-on-pay” advisory votes +û Retirement acceleration for restricted stock or restricted stock units (“RSUs”) +û Payments of accumulated dividends on unearned RSUs until and unless shares are earned +û Repricing of options without shareholder approval +û Permit hedging transactions or short sales by executive officers +û Significant perquisites +û Tax gross-ups for perquisites +û Pension or supplemental executive retirement plan +û Employment contracts +û Cash-based change-in-control benefits +û Excise tax gross-ups upon change of control +Consideration of Say-on-Pay Vote Results +The non-binding advisory proposal regarding compensation of the Named Executive Officers submitted to shareholders at our 2017 annual meeting was approved by 94% of the votes cast. The Committee believes this favorable outcome conveyed our shareholders’ support of our executive compensation program and the Committee’s decisions. After considering the shareholder vote and other factors in its annual review of our total executive compensation programs, the Committee made no material changes in the structure of our compensation programs. The Committee will continue to consider the outcome of the Company’s say-on-pay votes when conducting its regular practice of evaluating the executive compensation program and making future compensation decisions for the Named Executive Officers. +NIKE, INC. Ÿ 2018 Notice of Annual Meeting 16 +COMPENSATION DISCUSSION AND ANALYSIS +Financial Highlights +NIKE delivered solid performance in fiscal 2018. Earnings per share, however, was impacted by the Tax Cuts and Jobs Act. The charts below set forth certain key financial results that were used in connection with determining payouts for our Named Executive Officers under our incentive compensation plans for fiscal 2018. The measures below are based on NIKE’s comparable publicly reported financial results. +1 Excluded from the 2018 result was the income tax benefit ($0.14 per share) from adoption of a stock compensation accounting change in the first quarter of fiscal 2018 (Financial Accounting Standards Board (“FASB”) Accounting Standard Update 2016-09). +Executive Compensation Highlights +The total compensation for each of the Named Executive Officers is shown in the Summary Compensation Table on page 28. While we describe executive compensation in greater detail throughout this Compensation Discussion and Analysis, key actions the Committee took in fiscal 2018 are highlighted below: +• +Base Salary. Based on the recommendation by the Committee, which was approved by the independent members of the Board in June 2017, Mr. Parker’s base salary remained the same at $1,550,000. Base salaries for Messrs. Campion and Sprunk increased to $975,000 and $1,100,000, respectively. Base salaries for Ms. Krane and Mr. Slusher were each set at $900,000. Mr. Edwards’ base salary increased to $1,200,000. +• +Performance-Based Annual Incentive Plan. Target awards for Messrs. Parker, Campion, and Sprunk remained the same. Target awards for Ms. Krane and Mr. Slusher were each set at 90%. Mr. Edwards’ target remained the same. Based on financial performance goals set by the Committee in June 2017 and actual performance results, no Named Executive Officer was paid an annual cash incentive award for fiscal 2018. +• +Performance-Based Long-Term Incentive Plan. The target awards for the fiscal 2018-2020 performance period were set in June 2017. The target award for Mr. Parker remained the same at $3,500,000, and target awards for Messrs. Campion and Sprunk each increased to $1,000,000. Target awards for Ms. Krane and Mr. Slusher were each set at $700,000. Mr. Edward’s target award increased to $1,500,000. Based on long-term financial performance goals set by the Committee in June 2015 and actual performance results, each Named Executive Officer received a payout for the fiscal 2016-2018 performance period of 37% of target. In addition, each Continuing Officer received a discretionary cash bonus equal to 37% of his or her performance-based LTIP target, as further described in “Elements of Our Compensation Program - Performance-Based Long Term Cash Incentive”. +• +Stock Options. The annual awards for Messrs. Parker, Campion, and Sprunk remained the same at 165,000, 75,000, and 85,000 option shares, respectively. Ms. Krane and Mr. Slusher were each awarded 70,000 option shares. Each award vests in equal annual installments over four years. Mr. Edwards’ annual award remained the same at 100,000 option shares and will be eligible for continued vesting upon Mr. Edwards’ retirement in August 2018, based on his age and years of service, as further described in “Stock Options”. +• +Restricted Stock. The annual award value for Mr. Parker remained the same, and award values for Messrs. Campion and Sprunk increased to $1,000,000. Ms. Krane’s award value was set at $850,000. Mr. Slusher’s award value was set at $750,000. Mr. Edwards’ annual award value increased to $1,200,000. Each award vests in equal annual installments over three years. This award will not fully vest for Mr. Edwards given his retirement in August 2018. +• +Restricted Stock Unit Retention Awards. In July 2017, Messrs. Campion and Sprunk each received a retention award of restricted stock units (“RSUs”) in the amount of $6,000,000. Ms. Krane and Mr. Slusher each received a retention award of RSUs in the amount of $4,000,000. Mr. Edwards received a retention award of RSUs in the amount of $6,000,000. Mr. Parker did not receive any retention award. These awards are intended to further promote retention of key leaders while simultaneously providing incentives consistent with driving shareholder value. They are scheduled to vest in full on the third anniversary of the grant date. The awards have no value to the recipients unless they remain employed with the Company for the full vesting period. Mr. Edwards’ retention award will be forfeited in full as his retirement in August 2018 will precede the vesting date. +NIKE, INC. Ÿ 2018 Notice of Annual Meeting 17 +COMPENSATION DISCUSSION AND ANALYSIS +Operation of the Compensation Committee +The Committee evaluates the performance of the CEO against goals and objectives reviewed and approved by the Committee. Based on the evaluation, the Committee Chair discusses the CEO’s performance and recommended compensation with the independent members of the Board. The CEO’s base salary and the base salaries of the other Named Executive Officers are approved by the independent members of the Board based on the Committee’s recommendation. The Committee has sole responsibility for all other elements of Named Executive Officer compensation. The Committee also reviews the performance evaluation of each Named Executive Officer and oversees the administration of our executive compensation programs. The Committee receives recommendations from the CEO as to compensation of other Named Executive Officers, and the CEO participates in Committee discussions regarding the compensation of those officers. The Committee meets in executive session without the CEO to determine his compensation. The Committee is currently comprised of Timothy D. Cook (Chairman), Elizabeth J. Comstock, and Johnathan A. Rodgers, each of whom is an independent director under applicable NYSE listing standards. The Committee operates pursuant to a written charter that is available on our website at: http://investors.nike.com . +Each year, the Committee reviews our executive compensation program to ensure it continues to reflect the Committee’s commitment to align the objectives and rewards of our executive officers with the creation of value for our shareholders. Similar to our non-executive compensation programs, the program has been designed to reinforce our pay-for-performance philosophy by delivering total compensation that motivates and rewards short- and long-term financial performance to maximize shareholder value, and to be externally competitive to attract and retain outstanding and diverse executive talent. This is done much in the same way our human resources staff designs our non-executive compensation programs, to ensure they are market competitive, offer performance-based financial incentives, and provide opportunities to share in total Company success through competitive benefits, employee stock purchase programs, and broad-based profit sharing. In conducting its annual review, the Committee considers information provided by our human resources staff. Our human resources staff retains independent compensation consulting firms to provide surveys and reports containing competitive market data. These consultants do not formulate executive compensation strategies for NIKE or recommend individual executive compensation. The human resources staff uses the surveys and reports to make recommendations to the Committee concerning executive compensation. The Committee relies on its collective experience and judgment along with the recommendations prepared by our human resources staff to set executive compensation. The Committee has the authority, in its sole discretion, to retain compensation consultants to assist the Committee in evaluating the compensation of executive officers, but chose to not retain any such consultants in fiscal 2018. +Use of Market Survey Data +To help establish competitive ranges of base salary, incentive compensation opportunities, and target total compensation for the purpose of making recommendations to the Committee, our human resources staff uses competitive market data from surveys and reports prepared by Aon Hewitt and Willis Towers Watson. We consider market survey data from a peer group of companies that have similar revenue size, market capitalization, brand value, products, or markets, or with which we compete for executive talent. For purposes of setting executive compensation for fiscal 2018, the companies in our peer group were unchanged from fiscal 2017 and consisted of the following: +Alphabet Inc. +Kellogg Company +Procter & Gamble Company +The Coca-Cola Company +Kimberly-Clark Corporation +Starbucks Corporation +Colgate-Palmolive Company +Macy’s, Inc. +Target Corporation +eBay Inc. +McDonald’s Corporation +Time Warner Inc. +FedEx Corporation +Mondelez International, Inc. +TJX Companies +The Gap, Inc. +Pepsico, Inc. +The Walt Disney Company +The surveys that our human resources staff reviews show percentile compensation levels for various executive positions with comparable job responsibilities. The staff also analyzes market data regarding compensation mix among base salary, annual incentive and long-term incentives such as performance-based cash awards, stock options, restricted stock and restricted stock unit awards. The Committee reviews this mix analysis when evaluating the separate compensation elements for each executive. The Committee does not endeavor to set executive compensation at or near any particular percentile, and it considers target total compensation to be competitive if it is generally within a reasonable range of the market median. Market data is one of many factors that the Committee considers in the determination of executive compensation levels. Other factors include internal pay equity, level of responsibility, the individual’s performance viewed holistically, expectations regarding the individual’s future potential contributions, ability to drive the Company’s culture and ethics with integrity, succession planning and retention strategies, budget considerations, and the Company’s performance. +In November 2017, we conducted our regular periodic review of our peer group. Based on the criteria described above, we determined that for purposes of setting executive compensation for fiscal 2019, the peer group above should be refined to include Microsoft Corporation and Comcast Corporation, and to remove Alphabet Inc. and eBay Inc. +NIKE, INC. Ÿ 2018 Notice of Annual Meeting 18 +COMPENSATION DISCUSSION AND ANALYSIS +Objectives and Elements of Our Compensation Program +As noted in the Executive Summary, our executive compensation program is aligned with our business strategy and our culture and is designed to attract and retain top talent, reward business results and performance, viewed holistically, and most importantly, maximize shareholder value. Our holistic view of performance considers the individual’s ability to deliver business results, engage and motivate our employees, their leadership capacity, ability to drive the Company’s culture and ethics with integrity, and commitment to diversity and inclusion. Our total compensation program for the Named Executive Officers is highly incentive-based and competitive in the marketplace, with Company performance determining a significant portion of total compensation. The key elements of our program consist of the following: +• +Base salary that reflects the executive’s accountabilities, skills, experience, performance, and future potential +• +Performance-based annual cash incentive based on Company financial results under our Executive Performance Sharing Plan +• +A portfolio approach to long-term incentive compensation to provide a balanced mix of performance-based cash incentives and equity, including: +◦ +Performance-based long-term cash incentive based on Company financial results to encourage attainment of long-term Company financial objectives +◦ +Stock options to align the interests of executives with those of shareholders +◦ +Restricted stock awards and restricted stock unit retention awards to provide incentives consistent with driving shareholder value, and to provide strong retention incentives +• +Benefits +◦ +Executives are generally eligible for the same competitive benefits as other employees in the United States, including medical, dental, and vision insurance, paid time off, 401(k) plan, and Company-provided life and disability insurance; employees outside of the United States are offered locally competitive benefits +◦ +Profit sharing contributions to defined contribution retirement plans +◦ +Employee Stock Purchase Plan +◦ +Post-termination payments under non-competition agreements +In determining the award levels for each of the elements in our total compensation program, our philosophy is to “pay for performance”. As a result, we place relatively greater emphasis on the performance incentive components of compensation (performance-based annual cash incentive award, performance-based long-term cash incentive award, and stock options) to align the interests of our executives with shareholders, and motivate them to maximize shareholder value. This is balanced with retention incentives provided by base salary, restricted stock awards, and RSU awards. +We look to the experience and judgment of the Committee to determine what it believes to be the appropriate target compensation mix for each Named Executive Officer. We do not apply fixed ratios or formulas, or rely solely on market data or quantitative measures. In allocating compensation among the various elements, the Committee considers market data, Company performance and budget, the impact of the executive’s position in the Company, past performance, viewed holistically, expectations for future performance, experience in the position, any recent or anticipated changes in the individual’s responsibilities, internal pay equity for comparable positions, and retention incentives for succession planning. As shown in the charts below, incentive components accounted for nearly 90% of the CEO’s target compensation and approximately 80% of the other Named Executive Officers’ target compensation in fiscal 2018. For purposes of this analysis, RSU retention awards, which were granted to Mr. Campion, Mr. Sprunk, Ms. Krane, Mr. Slusher, and Mr. Edwards in fiscal 2018, are excluded to reflect the compensation mix targeted by the Committee on an annual basis. +NIKE, INC. Ÿ 2018 Notice of Annual Meeting 19 +COMPENSATION DISCUSSION AND ANALYSIS +Elements of Our Compensation Program +Base Salary +When making recommendations to the Committee concerning base salary levels for our Named Executive Officers, our human resources staff follows a similar process to how they evaluate non-executive base salary levels. We consider the individual’s performance in the prior year, expectations regarding the individual’s future performance, experience in the position, any recent or anticipated changes in the individual’s responsibilities, internal pay equity for comparable positions, succession planning strategies, our annual salary budget, other elements of the individual’s compensation, and the market data described in “Use of Market Survey Data”. The Committee reviews these factors each year and adjusts base salary levels to ensure that we are appropriately rewarding performance, viewed holistically. +The Committee generally reviews base salaries of the Named Executive Officers annually based on a review of individual performance at a meeting in June, with salary adjustments becoming effective for the first pay period ending in August. During the salary review in June 2017, the Committee recommended, based on the factors described above, and the independent members of the Board approved, the following base salaries for the Named Executive Officers. +Named Executive Officer +Fiscal 2018 Base Salary +% Change +Mark G. Parker +$1,550,000 +0.0% +Andrew Campion +$975,000 +8.3% +Eric D. Sprunk +$1,100,000 +4.8% +Hilary K. Krane +$900,000 +N/A +John F. Slusher +$900,000 +N/A +Trevor A. Edwards +$1,200,000 +14.3% +In setting a Named Executive Officer’s overall compensation package, the Committee places a relatively greater emphasis on the incentive components of compensation described below. +Performance-Based Annual Cash Incentive +Annual awards are paid to the Named Executive Officers under our Executive Performance Sharing Plan (“PSP”). Our “pay for performance” philosophy for such awards is simple and applies to all global employees who are eligible to share in the Company’s success through incentive bonuses: if we exceed our financial objectives, we will pay more; if we fail to reach them, we will pay less or nothing at all. The PSP for all executives is based 100% on overall corporate performance each year against a target based on the Company’s annual financial objective, as measured by income before income taxes (“PTI”), excluding the effect of any acquisitions, divestitures, accounting changes, restructurings or other extraordinary, unusual or infrequently occurring items in accordance with the PSP terms and conditions. The Committee selected PTI as the performance measure as it aligns with the Company’s operational financial targets for the individual fiscal year. By focusing on driving strong operational performance each year, the plan supports our goal of delivering sustainable, profitable growth. In support of our culture, the Committee retains the discretion to reduce or eliminate PSP award payouts based on individual or Company performance. Basing our annual cash incentive award program for all executives on overall corporate performance is intended to foster teamwork and send the message to each executive that his or her role is to help ensure overall organizational success and maximize shareholder value. +Each year the Committee establishes a PSP target award for each Named Executive Officer based on its judgment of the impact of the position in the Company and what it believes to be competitive against market data as described in “Use of Market Survey Data”, while considering internal pay equity for comparable positions. For fiscal 2018, the Committee maintained Messrs. Parker, Campion, and Sprunk’s target awards. Ms. Krane’s and Mr. Slusher’s target awards were set at 90%. Mr. Edwards’ target award remained the same. The fiscal 2018 PSP target awards were: +Named Executive Officer +Fiscal 2018 PSP Target Award +(% of base salary) +Mark G. Parker +180% +Andrew Campion +100% +Eric D. Sprunk +100% +Hilary K. Krane +90% +John F. Slusher +90% +Trevor A. Edwards +110% +NIKE, INC. Ÿ 2018 Notice of Annual Meeting 20 +COMPENSATION DISCUSSION AND ANALYSIS +In June 2017, the Committee established performance goals for the fiscal 2018 PSP awards based on its evaluation of our business plan and prospects for the year. When setting these goals, the Committee considered evolving business dynamics, achievability to support engagement, and appropriate stretch to drive growth consistent with NIKE’s long-term financial model. The target for fiscal 2018 was set at $4,717 million. The table below summarizes the fiscal 2018 PSP performance goals established by the Committee. For fiscal 2018, NIKE achieved a PTI of $4,325 million, which was below the threshold performance goal established by the Committee. As a result, no executive officer was paid an annual cash incentive award for fiscal 2018. +(Dollars in millions) +Fiscal 2018 PSP Performance Goal +Threshold Performance +Threshold % Payout +Target Performance +Target % Payout +Maximum Performance +Maximum % Payout +Actual Performance +Actual % Payout +PTI +$4,528 +50% +$4,717 +100% +$5,094 +150% +$4,325 +0% +Performance-Based Long-Term Cash Incentive +The first component in our long-term portfolio mix is performance-based awards payable in cash under our Long-Term Incentive Plan (“LTIP”). As with the performance-based annual cash incentive, the LTIP follows our “pay for performance” philosophy. If we exceed our targets, we will pay more; if we fall short, we will pay less or nothing at all. This program focuses executives on overall, long-term financial performance, and is intended to reward them for delivering revenue growth and diluted earnings per share (“EPS”) growth over a three-year performance period. At the beginning of each fiscal year, the Committee establishes performance goals and potential cash payouts for the next three fiscal years for all executives under the LTIP. LTIP performance measures for all executives are based 50% on cumulative revenues and 50% on cumulative EPS for the three-year performance period, in each case excluding generally the effect of acquisitions, divestitures, accounting changes and other extraordinary, unusual or infrequently occurring items. The Committee selected revenue and EPS as LTIP performance measures to encourage executives to focus on delivering profitable, sustainable growth. Strong revenue growth is the foundation of the Company’s financial strategy, requiring investments in key business drivers to sustain growth. EPS growth is essential to delivering value for our shareholders, requiring investments be targeted to those areas with the highest potential for return. By balancing revenue growth and EPS growth, the plan supports the Company’s objective of delivering long-term shareholder value. In support of our culture, the Committee retains the discretion to reduce or eliminate LTIP award payouts based on individual or Company performance. +During the compensation review in June 2017, the Committee approved LTIP target awards for all Named Executive Officers for the fiscal 2018-2020 performance period. The Committee set these targets based on its judgment of what it believes to be a desirable mix of long-term compensation, the impact of the position in the Company, and what it finds to be competitive against market data as described in “Use of Market Survey Data”, while maintaining internal pay equity for comparable positions. For the fiscal 2018-2020 performance period, the Committee maintained the target for Mr. Parker and increased the targets for each of Messrs. Campion and Sprunk to $1,000,000. Ms. Krane’s and Mr. Slusher’s targets were set at $700,000. Mr. Edwards’ target increased to $1,500,000. The target awards for the fiscal 2018-2020 performance period are as follows: +Named Executive Officer +Fiscal 2018-2020 LTIP Award Target ($) +Mark G. Parker +3,500,000 +Andrew Campion +1,000,000 +Eric D. Sprunk +1,000,000 +Hilary K. Krane +700,000 +John F. Slusher +700,000 +Trevor A. Edwards +1,500,000 +In June 2017, the Committee established performance goals for the fiscal 2018-2020 LTIP. The Committee considered our long-term financial goals of high single-digit revenue growth and continued EPS growth in setting performance goals for the target award payout level. Additionally, goals were set to provide appropriate stretch to drive growth while balancing sustained engagement over the performance period. The total payout percentage will be the average of the payout percentages determined for cumulative revenues and cumulative EPS, respectively. Payout below the threshold payout level may occur if either the revenue or EPS related percentage achievement is less than 50%. If both revenue and EPS fall below the threshold level, there is no payout. The table below summarizes the fiscal 2018-2020 LTIP performance goals. +(Dollars in millions, except per share data) +Fiscal 2018-2020 Performance Goals +Threshold Performance +Threshold % Payout +Target Performance +Target % Payout +Maximum Performance +Maximum % Payout +Revenue +$113,703 +50% +$118,162 +100% +$127,430 +200% +EPS +$7.53 +50% +$8.15 +100% +$9.49 +200% +For fiscal 2018, executive officers were eligible to receive LTIP award payouts based on performance targets set in June 2015 covering the fiscal 2016-18 performance period. In June 2018, the Committee determined a payout of 37% under these awards was earned based on the average of the payout percentages for cumulative revenues and cumulative EPS for the performance period shown in the table below. For non-executive officers, the Committee adjusted the payout to 74% primarily to offset the impact of the Tax Cuts and Jobs Act, which negatively impacted EPS. +NIKE, INC. Ÿ 2018 Notice of Annual Meeting 21 +COMPENSATION DISCUSSION AND ANALYSIS +(Dollars in millions, except per share data) +Fiscal 2016-2018 Performance Goals +Threshold Performance +Threshold % Payout +Target Performance +Target % Payout +Maximum Performance +Maximum % Payout +Actual Performance +Actual % Payout +Revenue 1 +$101,293 +50% +$105,266 +100% +$113,521 +200% +$103,123 +73% +EPS 2 +$6.61 +50% +$7.12 +100% +$8.23 +200% +$5.70 +0% +Total Payout +37% +1 Cumulative revenues for fiscal 2016, fiscal 2017, and fiscal 2018. +2 Cumulative EPS for fiscal 2016, fiscal 2017, and fiscal 2018 adjusted for adoption of stock compensation accounting change in the first quarter of fiscal 2018 (FASB Accounting Standard Update 2016-09). +In July of 2018, in connection with the determination of the payout for the fiscal 2016-2018 LTIP, the Committee elected to normalize the payouts for the non-executive officers and the Continuing Officers by awarding a discretionary cash bonus to each of the Continuing Officers equal to 37% of their individual award target. The adjustment for the Continuing Officers was structured in the form of a discretionary cash bonus rather than a LTIP adjustment as the terms of the Company’s LTIP, as applicable to the Named Executive Officers, did not contemplate the impact of the Tax Cuts and Jobs Act. The Committee viewed these awards as integral to its efforts to drive sustained performance, viewed holistically, engagement, retention, and motivation of the Continuing Officers. +Stock Options +The second component in our long-term portfolio mix is stock options. Stock options are designed to align the interests of the Company’s executives with those of shareholders by encouraging executives to enhance the value of the Company and, hence, the price of the Class B Stock. This is true “pay for performance”, executives are rewarded only if the market price of our stock rises, and they get nothing if the price does not rise or goes down. When determining the grants, the Committee generally focuses on the number of shares, while considering the value for accounting purposes. Our approach is designed to carefully avoid fluctuations in grant levels due to share price changes and control annual share usage. The Committee awards stock options to each executive based on its judgment. The Committee considers a number of factors including performance, viewed holistically, management succession, competitive market data as described in “Use of Market Survey Data”, internal pay equity for comparable positions, and a desirable mix of long-term incentives. Our human resources staff periodically tests the reasonableness of our stock option grants against competitive market data and may make recommendations to the Committee. Options are generally granted annually to selected employees, including the Named Executive Officers, in July under our shareholder-approved Stock Incentive Plan. Stock options for fiscal 2018 were granted by the Committee on July 20, 2017 with an exercise price equal to the closing market price of our stock on that date. +In July 2017, the Committee granted Messrs. Parker, Campion, and Sprunk 165,000, 75,000, and 85,000 option shares, respectively, the same number of stock options granted in July 2016. Ms. Krane and Mr. Slusher each received 70,000 option shares. Mr. Edwards received 100,000 option shares, the same number of stock options granted in July 2016. As described below and pursuant to the terms of the stock option agreement generally applicable to all stock option recipients, this award is eligible for continued vesting upon Mr. Edwards’ retirement in August 2018, based on his age and years of service. The Committee, in its judgment, set these award levels based on the factors described above. +Options granted by the Company generally vest in equal annual installments over a four-year period. To promote executive retention, unvested options generally are forfeited if the employee leaves the Company before vesting occurs and vested options must be exercised within three months after termination of employment. Options provide for a limited retirement provision designed to encourage employees to delay retirement, thus enhancing retention. Only those employees with a minimum of five years of service who are age 55 and above at the time of termination of employment are eligible for the provision. Under the provision, for employees between the ages of 55 to 59 at the time of termination of employment, unvested stock options that were granted at least one full year prior to termination will continue to vest, and vested options may be exercised for up to four years after termination. If an employee is age 60 or older and has at least five years of service at termination, unvested stock options that were granted at least one full year prior to termination will receive accelerated vesting, and vested options may be exercised for up to four years after termination. The features related to accelerated vesting are described in “Potential Payments upon Termination or Change-in-Control”. Based on their ages and years of service, as of May 31, 2018, Mr. Parker was eligible for accelerated vesting and Mr. Edwards was eligible for continued vesting of their options granted in July 2014, 2015, and 2016. Upon Mr. Edwards’ retirement in August 2018, he will be eligible for continued vesting of his options granted in July 2017. +Restricted Stock Awards +The third component in our long-term portfolio mix is restricted stock awards. Stock ownership and stock-based incentive awards align the interests of our Named Executive Officers with the interests of our shareholders, as the value of this incentive rises and falls with the stock price. Restricted stock awards are generally granted annually to selected employees, including the Named Executive Officers, in July at the same meeting at which stock options are granted under our shareholder-approved Stock Incentive Plan. Awards generally vest in three equal installments on each of the first three anniversaries of the grant date. The awards promote executive retention, as unvested shares held at the time the executive’s employment is terminated are forfeited. Award recipients receive dividends on the full number of restricted shares awarded at the same time dividends are paid to other shareholders. +The Committee, in its judgment, sets restricted stock award levels based on several factors, including what the Committee believes to be a desirable mix of long-term compensation, their determination of an appropriate weighing of potential future contribution to the Company, retention incentives, and competitive market data as described in “Use of Market Survey Data”. In July 2017, the Committee granted a restricted stock award to Mr. Parker valued at $3,500,000, representing 59,222 shares of our Class B Stock based on the closing price on the grant date. This was the same value of restricted stock granted to Mr. Parker in July 2016. Messrs. Campion and Sprunk received awards valued at $1,000,000, representing 16,921 shares of our Class B Stock based on the closing price on the grant date. This was an increase of $250,000 for each of Messrs. Campion and Sprunk. Ms. Krane received an award valued at $850,000, representing 14,383 of our Class B Stock based on the closing price on the grant date. Mr. Slusher received an award valued at $750,000, representing 12,691 of our Class B Stock based on the closing price on the grant date. Mr. Edwards received +NIKE, INC. Ÿ 2018 Notice of Annual Meeting 22 +COMPENSATION DISCUSSION AND ANALYSIS +an award valued at $1,200,000, representing 20,305 shares of our Class B Stock based on the closing price on the grant date. This was an increase of $325,000 for Mr. Edwards. This award will not fully vest for Mr. Edwards given his retirement in August 2018. +Restricted Stock Unit (RSU) Retention Awards +From time to time, the Committee also grants RSUs that vest based on continued service with the Company through a future service date, for the specific purpose of further promoting retention. These RSU awards accumulate dividend equivalents that are only paid in cash upon full vesting. The awards have no value to the executive unless the executive remains employed with the Company for the full vesting period, and will be forfeited if the executive terminates or retires within the vesting period. While RSU awards are intended as a retention incentive, as equity-based awards they have the additional benefit of further aligning the interests of our Named Executive Officers with the interests of our shareholders, as the value of these awards rises and falls with the stock price. +On July 20, 2017, the Committee approved grants of RSUs to Messrs. Campion and Sprunk each valued at $6,000,000, and grants of RSUs to Ms. Krane and Mr. Slusher each valued at $4,000,000. Mr. Edwards received a grant valued at $6,000,000. Based on the closing price of our Class B Stock on the grant date, this represented 101,523 RSUs for each of Messrs. Campion and Sprunk; 67,682 RSUs for each of Ms. Krane and Mr. Slusher; and 101,523 RSUs for Mr. Edwards. The RSUs are scheduled to vest in full on the third anniversary of the grant date. Mr. Edwards’ retention award will be forfeited in full as his retirement in August 2018 will precede the vesting date. In determining the award amounts, the Committee considered business continuity during a period of transformational change to support the Consumer Direct Offense. The Committee utilized its business judgment and experience as it reviewed the Company’s succession and retention strategy, accumulated vested and unvested awards, and individual performance, viewed holistically. As these awards are intended as a retention incentive they were viewed by the Committee as compensation over the vesting period and not solely as compensation for fiscal 2018. +NIKE, INC. Ÿ 2018 Notice of Annual Meeting 23 +COMPENSATION DISCUSSION AND ANALYSIS +Profit Sharing and Retirement Plans +Our 401(k) Savings and Profit Sharing Plan is a U.S. tax qualified retirement savings plan pursuant to which all eligible U.S. employees, including the Named Executive Officers, are able to make pre-tax contributions and after-tax contributions from their cash compensation. We make matching contributions for all participants each year equal to 100% of their pre-tax contributions up to 5% of their total eligible compensation. We also make annual profit sharing contributions to the accounts of eligible U.S. employees under the 401(k) Savings and Profit Sharing Plan. The contributions are allocated among eligible employees based on a percentage of their total salary and annual cash incentive award for the year. The total profit sharing contribution and the percentage of salary and annual cash incentive award contributed for each employee is determined each year by the Board of Directors. For fiscal 2018, the Board of Directors approved a profit sharing contribution for each eligible employee equal to 3.4% of the employee’s total eligible salary and annual cash incentive award. +The Internal Revenue Code limits the amount of compensation that can be deferred under our 401(k) Savings and Profit Sharing Plan, and also limits the amount of salary and annual cash incentive award ($270,000 for fiscal 2018) that may be taken into account when determining contributions under that plan. Accordingly, we provide our Named Executive Officers and other highly compensated employees with the opportunity to defer their compensation, including amounts in excess of the tax law limit, under our nonqualified Deferred Compensation Plan. We also make profit sharing contributions under the Deferred Compensation Plan with respect to salary and annual cash incentive award of any eligible employee that exceeds the tax law limit, and for fiscal 2018 these contributions were equal to 3.4% of the total salary and annual cash incentive award of each Named Executive Officer in excess of $270,000. These contributions under the Deferred Compensation Plan allow our Named Executive Officers and other highly compensated employees to receive profit sharing contributions in the same percentage as our other employees. We do not match deferrals to the Deferred Compensation Plan. Balances in the Deferred Compensation Plan, including the balances of the Named Executive Officers, are unsecured and at-risk, meaning the balances may be forfeited in the event of the Company’s financial distress such as bankruptcy. Our matching and profit sharing contributions for fiscal 2018 to the accounts of the Named Executive Officers under the qualified and nonqualified plans are included in the All Other Compensation column in the Summary Compensation Table on page 28. +Employee Stock Purchase Plan +Our Employee Stock Purchase Plan allows all employees who work at least 20 hours per week in the United States and in many countries outside of the United States to purchase NIKE Class B Stock, through payroll deductions, at a 15% discount to the market price on the first or last trading day of the six-month purchase period, depending on which day the stock price was lower. No plan participant is allowed to purchase more than $25,000 in market value of our stock under the plan in any calendar year or more than 500 shares in any six-month offering period. In fiscal 2018, all Named Executive Officers participated in our Employee Stock Purchase Plan, with the exception of Messrs. Parker and Campion. +NIKE, INC. Ÿ 2018 Notice of Annual Meeting 24 +COMPENSATION DISCUSSION AND ANALYSIS +Post-termination Payments under Non-competition Agreements +In exchange for non-competition agreements from all of our Named Executive Officers, we have agreed to provide, during the non-competition period, the monthly payments described in “Potential Payments upon Termination or Change-in-Control”, some of which are at the election of the Company. We believe that it is appropriate to compensate individuals to refrain from working with competitors following termination, and that compensation enhances the enforceability of such agreements. +Stock Ownership Guidelines +NIKE maintains the following stock ownership guidelines for executive officers. These guidelines are designed to further align the long-term interests of our executive officers with those of our shareholders. Under the guidelines, the CEO and other executive officers are required to hold NIKE stock valued at the following multiple of their annual base salary: +Position +Ownership Level +Chief Executive Officer +6X Base Salary +Other Named Executive Officers +3X Base Salary +Other Executive Officers +2X Base Salary +New officers are required to attain these ownership levels within five years of their appointment. As of May 31, 2018, each of our executive officers has met or is on track to meet the applicable ownership guideline within the requisite period. +Hedging and Pledging +The Company’s Blackout and Pre-clearance Policy (which supplements our Insider Trading Policy) prohibits directors, executive officers, and other designated insiders from engaging in transactions involving hedging, monetization or short sales of NIKE stock, including zero-cost collars and forward sale contracts. The policy also requires directors, executive officers, and designated insiders to obtain pre-approval from the Company’s Clearance Director before pledging NIKE stock. Before granting approval of any pledge, the Clearance Director considers the size of the pledge relative to the individual’s other holdings, both direct and indirect, and NIKE’s shares outstanding; the risk of foreclosure given the nature of the associated transaction; protections against the appearance of insider trading, including prohibitions on sales during trading black-outs; and the ability to timely report sales on Form 4. +Change-in-Control Provisions +LTIP awards are not subject to accelerated change-in-control vesting. All unvested stock option, restricted stock, and restricted stock unit awards are subject to accelerated change-in-control vesting only when two events (a “double-trigger”) occur. Vesting of grants is generally accelerated only if there is a change-in-control of the Company and either the acquiring entity fails to assume the awards or the employee’s employment is terminated by the acquirer without cause or by the employee for good reason within two years following a change-in-control. This double-trigger was adopted to encourage executive retention through a period of uncertainty and a subsequent integration with an acquirer. The Committee believes that this approach will enhance shareholder value in the context of an acquisition, and align executives with the interests of investors. The effects of change-in-control transactions on stock option, restricted stock, and restricted stock unit awards are described further in “Potential Payments Upon Termination or Change-in-Control”. +Clawback Policy +Since June 2010, the Company has had a policy for recoupment of incentive compensation (the “clawback policy”). In June 2015, the Committee and Board of Directors approved amendments to our incentive compensation plans to cover additional circumstances in which the Company may clawback awards. Under the clawback policy, an executive officer who is involved in wrongful conduct that results in a restatement of the Company’s financial statements must repay to the Company up to the full amount of any incentive compensation based on the financial statements that were subsequently restated. The clawback policy covers the annual cash incentive award, long-term cash incentive award, profit sharing contributions to the Deferred Compensation Plan, and excess proceeds from sales of stock acquired under stock option, restricted stock, and RSU awards that occurred prior to the restatement. The 2015 amendments to our Executive Performance Sharing Plan, Long-Term Incentive Plan and Stock Incentive Plan clarify that for all participants in those plans the Committee may apply additional clawback policies to awards, or add clawback terms to award agreements or notices, and that any clawback requirements of applicable law and regulation will apply to the plans. +Risk Assessment +At the Committee’s request, in fiscal 2018 management prepared and discussed with the Committee an assessment of potential risk associated with the Company’s compensation programs, including any risk that would be reasonably likely to have a material adverse effect on the Company. This included an assessment of risks associated with each element of employee compensation. The assessment considered certain design features of the compensation programs that reduce the likelihood of excessive risk taking, such as reasonable performance targets, capped payouts of +NIKE, INC. Ÿ 2018 Notice of Annual Meeting 25 +COMPENSATION DISCUSSION AND ANALYSIS +incentive compensation, a balance of short- and long-term incentives, a balance of cash and equity incentives, vesting of awards over time, and the potential for clawback of incentive compensation. In addition, for equity compensation, the Committee and the Board have adopted stock ownership guidelines, limited accelerated vesting of stock options upon termination of employment, and implemented double-trigger accelerated vesting for all equity awards upon change-in-control (each as described above). +Tax Deductibility of Executive Compensation +Section 162(m) of the Internal Revenue Code generally disallows a tax deduction to public companies for annual compensation over $1 million paid to “covered employees”. Prior to the Tax Cuts and Jobs Act of December 2017, the Internal Revenue Code provided an exception that generally excluded from the calculation of the $1 million cap compensation that was based on the attainment of pre-established, objective performance goals established under a shareholder-approved plan. Historically, the Committee has considered, among other things, the impact of this exclusion for performance-based compensation when developing and implementing our executive compensation programs. Annual cash incentive awards under our Executive Performance Sharing Plan, long-term cash incentive awards under our Long-Term Incentive Plan, and stock options under our Stock Incentive Plan have generally been designed in a manner intended to meet the requirements under the exclusion, although we could not guarantee such treatment given the complex nature of the performance-based compensation requirements. +The new tax legislation removed the exception for performance-based compensation (unless the compensation qualifies for certain transition relief, the scope of which is currently uncertain) for taxable years beginning after December 31, 2017. The definition of “covered employees” was also expanded to include a company’s chief financial officer (in addition to the chief executive officer and three other most highly paid executive officers), plus any individual who has been a “covered employee” in any taxable year beginning after December 31, 2016. +While the Committee seeks to preserve tax deductibility in developing and implementing our compensation program, the Committee also believes that it is important to maintain flexibility in administering compensation programs in a manner designed to promote varying corporate goals. Accordingly, we have not adopted a policy that all compensation must qualify as deductible for tax purposes and retain the ability to provide compensation that may not qualify as deductible under Section 162(m). +NIKE, INC. Ÿ 2018 Notice of Annual Meeting 26 +COMPENSATION COMMITTEE REPORT +COMPENSATION COMMITTEE REPORT +The Compensation Committee of the Board of Directors (the “Committee”) has reviewed and discussed with management the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K. Based on the review and discussions, the Committee recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement. +Members of the Compensation Committee: +• +Timothy D. Cook, Chair +• +Elizabeth J. Comstock +• +Johnathan A. Rodgers +NIKE, INC. Ÿ 2018 Notice of Annual Meeting 27 +EXECUTIVE COMPENSATION +EXECUTIVE COMPENSATION +Summary Compensation Table +The following table sets forth information concerning compensation for fiscal 2016-2018 paid to or earned by our Named Executive Officers. +Name and Principal +Position +Year +Salary +($) +Bonus (1) +($) +Stock +Awards (2) +($) +Option +Awards (3) +($) +Non-Equity +Incentive Plan +Compensation (4) +($) +All Other +Compensation (5) +($) +Total +($) +Mark G. Parker +Chairman, President and Chief Executive Officer +2018 +1,550,000 +1,295,000 +3,500,020 +1,618,650 +1,295,000 +208,790 +9,467,460 +2017 +1,550,000 +3,500,035 +1,542,750 +6,261,144 +997,570 +13,851,499 +2016 +1,550,000 +33,500,142 +4,179,450 +7,305,902 +1,079,808 +47,615,302 +Andrew Campion +Executive Vice President and Chief +Financial Officer +2018 +963,462 +277,500 +7,000,040 +735,750 +277,500 +63,514 +9,317,766 +2017 +889,231 +750,053 +701,250 +1,513,176 +92,546 +3,946,256 +2016 +822,306 +625,025 +1,519,800 +1,772,897 +105,479 +4,845,507 +Eric D. Sprunk +Chief Operating Officer +2018 +1,092,308 +277,500 +7,000,040 +833,850 +277,500 +80,560 +9,561,758 +2017 +1,042,308 +750,053 +794,750 +1,603,277 +253,713 +4,444,101 +2016 +990,000 +750,007 +2,026,400 +1,927,813 +335,126 +6,029,346 +Hilary K. Krane (6) +Executive Vice President, Chief Administrative Officer & General Counsel +2018 +892,308 +185,000 +4,850,042 +686,700 +185,000 +58,524 +6,857,574 +John F. Slusher (6) +Executive Vice President, Global Sports Marketing +2018 +900,000 +185,000 +4,750,044 +686,700 +185,000 +59,715 +6,766,459 +Trevor A. Edwards (7) +Former President, NIKE Brand +2018 +1,176,923 +7,200,035 +981,000 +370,000 +101,075 +9,829,033 +2017 +1,042,308 +875,052 +935,000 +1,862,583 +271,389 +4,986,332 +2016 +990,000 +875,102 +2,279,700 +2,221,919 +270,440 +6,637,161 +(1) +In July of 2018, the Committee elected to award a discretionary cash bonus equal to 37% of the 2016-2018 LTIP target award to each of the Continuing Officers. In connection with the determination of the payout for the fiscal 2016-2018 LTIP, the Committee elected to adjust the LTIP payout for non-executive officers primarily to offset the impact of the Tax Cuts and Jobs Act (which negatively impacted EPS, one of the two Performance Goals which determine the LTIP payout). The LTIP terms, as applicable to the Named Executive Officers, did not contemplate the impact of the Tax Cuts and Jobs Act. The Committee viewed these special cash bonuses as integral to its efforts to drive sustained performance, viewed holistically, engagement, retention and motivation of the Continuing Officers. +(2) +Represents the grant date fair value of restricted stock and restricted stock unit awards granted in the applicable fiscal year computed in accordance with accounting guidance applicable to stock-based compensation. The grant date fair value is based on the closing market price of our Class B Stock on the grant date. +(3) +Represents the grant date fair value of options granted in the applicable fiscal year computed in accordance with accounting guidance applicable to stock-based compensation. The grant date fair value of the options was estimated using the Black-Scholes option pricing model. The assumptions made in determining the grant date fair values of options under applicable accounting guidance are disclosed in Note 11 of Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended May 31, 2018. +(4) +Non-Equity Incentive Plan Compensation consists of the following: +NIKE, INC. Ÿ 2018 Notice of Annual Meeting 28 +EXECUTIVE COMPENSATION +Name +Fiscal Year +Annual Incentive +Compensation (a) +($) +Long-Term Incentive +Compensation (b) +($) +Total +($) +Mark G. Parker +2018 +— +1,295,000 +1,295,000 +2017 +1,642,194 +4,618,950 +6,261,144 +2016 +2,577,402 +4,728,500 +7,305,902 +Andrew Campion +2018 +— +277,500 +277,500 +2017 +523,401 +989,775 +1,513,176 +2016 +759,647 +1,013,250 +1,772,897 +Eric D.Sprunk +2018 +— +277,500 +277,500 +2017 +613,502 +989,775 +1,603,277 +2016 +914,563 +1,013,250 +1,927,813 +Hilary Krane +2018 +— +185,000 +185,000 +John Slusher +2018 +— +185,000 +185,000 +Trevor A. Edwards +2018 +— +370,000 +370,000 +2017 +674,853 +1,187,730 +1,862,583 +2016 +1,006,019 +1,215,900 +2,221,919 +(a) +Amounts shown were earned for performance in the applicable fiscal year under our Executive Performance Sharing Plan. +(b) +Amounts shown were earned for performance during the three-year period ending with the applicable fiscal year under our Long-Term Incentive Plan. +(5) +For fiscal 2018 for each of the Named Executive Officers, this includes (a) profit-sharing contributions by us to the 401(k) Savings and Profit Sharing Plan in the amount of $9,082; (b) matching contributions by us to the 401(k) Savings and Profit Sharing Plan in the amount of $13,500, and (c) profit-sharing contributions by us to the Deferred Compensation Plan in the following amounts: $98,296 for Mr. Parker, $40,932 for Mr. Campion, $48,297 for Mr. Sprunk, $35,942 for Ms. Krane, $37,133 for Mr. Slusher, and $53,207 for Mr. Edwards. For Messrs. Sprunk and Edwards, also includes $5,000 in compensation in recognition of 25 years of service with the Company, and associated tax reimbursement in the amount of $4,681 and $5,194, respectively, pursuant to our Valued Service Award Program, under which all employees receive cash awards and associated tax reimbursements in recognition of their significant service anniversaries with the Company. Includes the cost of daily residential security, including monitoring, patrols, and installation at primary residences provided by the Company of $18,948 for Mr. Parker and $8,488 for Mr. Edwards. For Mr. Parker, includes a nominal gift card and Company-related merchandise. For Mr. Edwards, includes a nominal gift card and attire for a Company-related function. For Mr. Parker, this amount includes $68,831 in aggregate incremental cost to the Company for his personal use of the Company’s aircraft and actual cost of chartered flights for travel to and from the board and shareholder meetings of an outside company for which Mr. Parker serves as a director. The aggregate incremental cost is determined based on the variable operating cost to the Company including the cost of fuel, maintenance, crew travel expenses, landing fees, parking fees, in-flight food and beverage, and other smaller variable costs associated with each flight. This amount excludes the aggregate incremental cost to the Company for Mr. Parker’s personal use of the Company’s aircraft for which Mr. Parker reimbursed the Company in accordance with a time sharing agreement and as allowed under Federal Aviation Regulation 91.501(c) and (d). +(6) +Because Ms. Krane and Mr. Slusher were only Named Executive Officers for fiscal 2018, no disclosure is included as to Ms. Krane and Mr. Slusher for fiscal 2017 and 2016. +(7) +Upon his retirement in August 2018, Mr. Edwards will forfeit the RSU Retention Award of $6,000,000 granted July 2017 in full as his retirement will precede the vesting date. Mr. Edwards will also forfeit two-thirds of the $1,200,000 restricted stock award granted July 2017, and one-third of the $875,000 restricted stock award granted in July 2016 in connection with his retirement. Excluding the awards granted in July 2017 subject to forfeiture upon his retirement, Mr. Edwards’ total compensation for fiscal 2018 was $3,029,046. +NIKE, INC. Ÿ 2018 Notice of Annual Meeting 29 +EXECUTIVE COMPENSATION +Grants of Plan-Based Awards in Fiscal 2018 +The following table sets forth information concerning the performance-based annual cash incentive opportunities, performance-based long-term cash incentive opportunities, restricted stock and restricted stock unit awards, and stock options granted to the Named Executive Officers in fiscal 2018. +Estimated Future Payouts Under +Non-Equity Incentive Plan Awards +Threshold +Target +Maximum +All Other Stock Awards: +Number of Shares of +Stock or Units +All Other +Option Awards: +Number of +Securities +Underlying +Options (5) +Exercise +or Base Price +of Option +Awards +Grant Date +Fair Value +of Stock +and Option +Awards (6) +Name +Grant Date +($) +($) +($) +(#) +(#) +($/Sh) +($) +Mark G. Parker +6/21/2017 +1,395,000 (1) +2,790,000 (1) +4,185,000 (1) +6/21/2017 +1,750,000 (2) +3,500,000 (2) +7,000,000 (2) +7/20/2017 +59,222 (3) +3,500,020 +7/20/2017 +165,000 +59.10 +1,618,650 +Andrew Campion +6/21/2017 +487,500 (1) +975,000 (1) +1,462,500 (1) +6/21/2017 +500,000 (2) +1,000,000 (2) +2,000,000 (2) +7/20/2017 +16,921 (3) +1,000,031 +7/20/2017 +101,523 (4) +6,000,009 +7/20/2017 +75,000 +59.10 +735,750 +Eric D. Sprunk +6/21/2017 +550,000 (1) +1,100,000 (1) +1,650,000 (1) +6/21/2017 +500,000 (2) +1,000,000 (2) +2,000,000 (2) +7/20/2017 +16,921 (3) +1,000,031 +7/20/2017 +101,523 (4) +6,000,009 +7/20/2017 +85,000 +59.10 +833,850 +Hilary K. Krane +6/21/2017 +405,000 (1) +810,000 (1) +1,215,000 (1) +6/21/2017 +350,000 (2) +700,000 (2) +1,400,000 (2) +7/20/2017 +14,383 (3) +850,035 +7/20/2017 +67,682 (4) +4,000,006 +7/20/2017 +70,000 +59.10 +686,700 +John F. Slusher +6/21/2017 +405,000 (1) +810,000 (1) +1,215,000 (1) +6/21/2017 +350,000 (2) +700,000 (2) +1,400,000 (2) +7/20/2017 +12,691 (3) +750,038 +7/20/2017 +67,682 (4) +4,000,006 +7/20/2017 +70,000 +59.10 +686,700 +Trevor A. Edwards (7) +6/21/2017 +660,000 (1) +1,320,000 (1) +1,980,000 (1) +6/21/2017 +750,000 (2) +1,500,000 (2) +3,000,000 (2) +7/20/2017 +20,305 (3) +1,200,026 +7/20/2017 +101,523 (4) +6,000,009 +7/20/2017 +100,000 +59.10 +981,000 +(1) +These amounts represent the potential performance-based annual cash incentive awards payable for performance during fiscal 2018 under our Executive Performance Sharing Plan. Under this plan, the Compensation Committee approved target awards for fiscal 2018 based on a percentage of the executive’s base salary paid during fiscal 2018 as follows: Mr. Parker, 180%; Mr. Campion, 100%; Mr. Sprunk, 100%; Ms. Krane, 90%; Mr. Slusher, 90%, and Mr. Edwards, 110%. The Committee also established a series of performance targets based on our income before income taxes (“PTI”) for fiscal 2018 (excluding the effect of acquisitions, divestitures, accounting changes not reflected in our business plan at the time of approval of the target awards) corresponding to award payouts ranging from 50% to 150% of the target awards. The PTI for fiscal 2018 required to earn the target award payout was $4,717 million. The PTI for fiscal 2018 required to earn the 150% maximum payout was $5,094 million. The PTI for fiscal 2018 required to earn the 50% threshold payout was $4,528 million. Participants receive a payout at the percentage level at which the performance target is met, subject to the Committee’s discretion to reduce or eliminate any award based on Company or individual performance, viewed holistically. Actual award payouts earned in fiscal 2018 and paid in fiscal 2019 are shown in footnote 4 to the Non-Equity Incentive Plan Compensation column in the Summary Compensation Table. +NIKE, INC. Ÿ 2018 Notice of Annual Meeting 30 +EXECUTIVE COMPENSATION +(2) +These amounts represent the potential performance-based long-term cash incentive awards payable for performance during the three-year period consisting of fiscal 2018-2020 under our Long-Term Incentive Plan. Under this plan, the Compensation Committee approved target awards for the performance period and also established a series of performance targets based on our cumulative revenues and cumulative diluted earnings per common share (“EPS”) for the performance period (excluding the effect of acquisitions, divestitures, and accounting changes not reflected in our business plan at the time of approval of the target awards) corresponding to award payouts ranging from 50% to 200% of the target awards. Participants will receive a payout at the average of the percentage levels at which the two performance targets are met, subject to the Committee’s discretion to reduce or eliminate any award based on Company or individual performance, viewed holistically. For cumulative revenues over the performance period, the target payout requires revenues of $118,162 million, the 50% threshold payout requires revenues of $113,703 million, and the 200% maximum payout requires revenues of $127,430 million. For cumulative EPS over the performance period, the target payout requires EPS of $8.15, the 50% threshold payout requires EPS of $7.53, and the 200% maximum payout requires EPS of $9.49. Under the terms of the awards, on the first payroll period ending in August 2020 we will issue the award payout to each participant, provided that the participant is employed by us on the last day of the performance period. +(3) +These amounts represent grants of restricted stock under our Stock Incentive Plan which vest in three equal installments on the first three anniversaries of the grant date. Vesting will be accelerated in certain circumstances as described below under “Potential Payments Upon Termination or Change-in-Control”. Dividends are payable on restricted stock at the same rate paid on all other outstanding shares of our Class B Stock. +(4) +These amounts represent grants of restricted stock units under the Stock Incentive Plan which vest in full on the third anniversary of the grant date. Vesting will be accelerated in certain circumstances as described in the section “Potential Payments Upon Termination or Change-in-Control”. The restricted stock units accumulate cash dividend equivalents that are only paid upon vesting. +(5) +All amounts reported in this column represent options granted under our Stock Incentive Plan which become exercisable for option shares in four equal installments on the first four anniversaries of the grant date. Options will become fully exercisable in certain circumstances as described below under “Potential Payments Upon Termination or Change-in-Control”. Each option has a maximum term of 10 years, subject to earlier termination in the event of the optionee’s termination of employment. +(6) +For stock awards, represents the value of restricted stock granted based on the closing market price of our Class B Stock on the grant date. For option awards, represents the grant date fair value of options granted based on a value of $9.81 per share calculated using the Black-Scholes option pricing model. These are the same values for these equity awards used under accounting guidance applicable to stock-based compensation. The assumptions made in determining option values are disclosed in Note 11 of Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended May 31, 2018. +(7) +Mr. Edwards resigned as President, NIKE Brand, effective March 15, 2018, and will retire from the Company in August 2018. As a result of Mr. Edwards’ retirement, he will not fully vest in his restricted stock grant and will forfeit the restricted stock unit retention award. Pursuant to the form of stock option agreement generally applicable to stock options awards, Mr. Edwards will be eligible for continued vesting of his stock option grant based on his age and years of service. The features related to continued vesting are described in “Stock Options”. +NIKE, INC. Ÿ 2018 Notice of Annual Meeting 31 +EXECUTIVE COMPENSATION +Outstanding Equity Awards at May 31, 2018 +The following table sets forth information concerning outstanding stock options and unvested restricted stock and restricted stock units held by the Named Executive Officers at May 31, 2018. +Option Awards +Stock Awards +Name +Number of Securities Underlying Unexercised Options Exercisable (#) +Number of +Securities +Underlying +Unexercisable +Options (#) (1) +Option Exercise Price ($) +Option Expiration Date +Number of Shares or Units of Stock That Have Not Vested (#) +Market Value of Shares or Units of Stock That Have Not Vested ($) +Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) +Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) +Mark G. Parker +135,000 +— +14.5500 +7/18/2018 +600,000 +— +13.1100 +7/17/2019 +660,000 +— +17.2400 +7/16/2020 +660,000 +— +22.9250 +7/15/2021 +660,000 +— +23.2700 +7/20/2022 +330,000 +— +31.6750 +7/19/2023 +247,500 +82,500 +(2 +) +38.7600 +7/18/2024 +165,000 +165,000 +(3 +) +56.4000 +7/17/2025 +41,250 +123,750 +(4 +) +57.8700 +7/15/2026 +— +165,000 +(5 +) +59.1000 +7/20/2027 +342,410 (6) +24,585,038 +166,636 (12) +11,964,465 +Andrew Campion +103,000 +— +22.9250 +7/15/2021 +120,000 +— +23.2700 +7/20/2022 +60,000 +— +31.6750 +7/19/2023 +60,000 +20,000 +(2 +) +38.7600 +7/18/2024 +60,000 +60,000 +(3 +) +56.4000 +7/17/2025 +18,750 +56,250 +(4 +) +57.8700 +7/15/2026 +— +75,000 +(5 +) +59.1000 +7/20/2027 +130,778 (7) +9,389,860 +Eric D. Sprunk +45,000 +— +23.2700 +7/20/2022 +150,000 +— +31.6750 +7/19/2023 +120,000 +40,000 +(2 +) +38.7600 +7/18/2024 +80,000 +80,000 +(3 +) +56.4000 +7/17/2025 +21,250 +63,750 +(4 +) +57.8700 +7/15/2026 +— +85,000 +(5 +) +59.1000 +7/20/2027 +131,516 (8) +9,442,849 +Hilary K. Krane +110,000 +— +31.6750 +7/19/2023 +82,500 +27,500 +(2 +) +38.7600 +7/18/2024 +65,000 +65,000 +(3 +) +56.4000 +7/17/2025 +17,500 +52,500 +(4 +) +57.8700 +7/15/2026 +— +70,000 +(5 +) +59.1000 +7/20/2027 +91,651 (9) +6,580,542 +John F. Slusher +200,000 +— +22.925 +7/15/2021 +220,000 +— +23.2700 +7/20/2022 +110,000 +— +31.6750 +7/19/2023 +86,250 +28,750 +(2 +) +38.7600 +7/18/2024 +60,000 +60,000 +(3 +) +56.4000 +7/17/2025 +16,250 +48,750 +(4 +) +57.8700 +7/15/2026 +— +70,000 +(5 +) +59.1000 +7/20/2027 +89,959 (10) +6,459,056 +Trevor A. Edwards +200,000 +— +13.1100 +7/17/2019 +200,000 +— +17.2400 +7/16/2020 +200,000 +— +22.9250 +7/15/2021 +240,000 +— +23.2700 +7/20/2022 +150,000 +— +31.6750 +7/19/2023 +120,000 +40,000 +(2 +) +38.7600 +7/18/2024 +90,000 +90,000 +(3 +) +56.4000 +7/17/2025 +25,000 +75,000 +(4 +) +57.8700 +7/15/2026 +— +100,000 +(5 +) +59.1000 +7/20/2027 +137,080 (11) +9,842,344 +(1) +Stock options generally become exercisable for option shares in four equal installments on each of the first four anniversaries of the grant date. +(2) +100% of these options vested on July 18, 2018. +NIKE, INC. Ÿ 2018 Notice of Annual Meeting 32 +EXECUTIVE COMPENSATION +(3) +50% of these options vested on July 17, 2018 and 50% will vest on July 17, 2019. +(4) +33.3% of these options vested on July 15, 2018, 33.3% will vest on July 15, 2019, and 33.3% will vest on July 15, 2020. +(5) +25% of these options vested on July 20, 2018, 25% will vest on July 20, 2019, 25% will vest on July 20, 2020, and 25% will vest on July 20, 2021. +(6) +20,160 of these restricted shares vested on July 15, 2018, and 20,160 of these restricted shares will vest on July 15, 2019. 20,686 of these restricted shares vested on July 17, 2018. 19,741 of these restricted shares vested on July 20, 2018, 19,741 of these restricted shares will vest on July 20, 2019, and 19,740 of these restricted shares will vest on July 20, 2020. 222,182 of these RSUs will vest on June 30,2020. +(7) +4,320 of these restricted shares vested on July 15, 2018, and 4,320 of these restricted shares will vest on July 15, 2019. 3,694 of these restricted shares vested on July 17, 2018. 5,641 of these restricted shares vested on July 20, 2017, 5,640 of these restricted shares will vest on July 20, 2019, and 5,640 of these shares will vest on July 20, 2020. 101,523 of these RSUs will vest on July 20, 2020. +(8) +4,320 of these restricted shares vested on July 15, 2018, and 4,320 of these restricted shares will vest on July 15, 2019. 4,432 of these restricted shares vested on July 17, 2018. 5,641 of these restricted shares vested on July 20, 2018, 5,640 of these restricted shares will vest on July 20, 2019, and 5,640 of these shares will vest on July 20, 2020. 101,523 of these RSUs will vest on July 20, 2020. +(9) +3,168 of these restricted shares vested on July 15, 2018, and 3,168 of these restricted shares will vest on July 15, 2019. 3,250 of these restricted shares vested on July 17, 2018. 4,795 of these restricted shares vested on July 20, 2018, 4,794 of these restricted shares will vest on July 20, 2019, and 4,794 of these shares will vest on July 20, 2020. 67,682 of these RSUs vested on July 20, 2020. +(10) +3,168 of these restricted shares vested on July 15, 2018, and 3,168 of these restricted shares will vest on July 15, 2019. 3,250 of these restricted shares vested on July 17, 2018. 4,231 of these restricted shares vested on July 20, 2018, 4,230 of these restricted shares will vest on July 20, 2019, and 4,230 of these shares will vest on July 20, 2020. 67,682 of these RSUs vested on July 20, 2020. +(11) +5,040 of these restricted shares vested on July 15, 2018, and 5,040 of these restricted shares shall be forfeited to the Company upon the expected retirement in August 2018. 5,172 of these restricted shares vested on July 17, 2018. 6,769 of these restricted shares vested on July 20, 2018, and 13,536 of these restricted shares shall be forfeited to the Company upon the expected retirement in August 2018. 101,523 of these RSUs shall be forfeited to the Company upon the expected retirement in August 2018. +(12) +This figure represents performance at threshold, 50% of target. These RSUs may vest on June 30, 2020, subject to performance vesting based on cumulative revenue growth and cumulative EPS growth over a five-year performance period. Actual payout will depend on actual performance, which could range from 0 to 100%. +Option Exercises and Stock Vested During Fiscal 2018 +The following table sets forth information concerning stock option exercises and vesting of restricted stock during fiscal 2018 for each of the Named Executive Officers on an aggregated basis. +Option Awards +Stock Awards +Name +Number of Shares +Acquired on Exercise +(#) +Value Realized +on Exercise +($) +Number of Shares +Acquired on Vesting +(#) +Value Realized +on Vesting +($) +Mark G. Parker +474,300 +22,411,144 +70,947 +4,108,605 +Andrew Campion +90,000 +3,625,000 +11,670 +676,092 +Eric D. Sprunk +471,040 +20,284,387 +229,001 +13,517,288 +Hilary K. Krane +— +— +140,074 +8,265,115 +John F. Slusher +200,000 +9,249,153 +140,074 +8,265,115 +Trevor A. Edwards +400,000 +19,488,995 +231,535 +13,664,035 +NIKE, INC. Ÿ 2018 Notice of Annual Meeting 33 +EXECUTIVE COMPENSATION +Equity Compensation Plan Information +The following table summarizes information regarding outstanding options and shares available for future issuance under equity compensation plans approved by shareholders and equity compensation plans that were not approved by shareholders as of May 31, 2018. The table does not reflect issuances made during fiscal 2019. +Plan Category +(a) +Number of Securities +to be Issued Upon Exercise of +Outstanding Options, Warrants and Rights +(b) +Weighted-Average Exercise +Price of Outstanding +Options, Warrants and Rights (1) +(c) +Number of Securities +Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column(a)) +Equity compensation plans approved by shareholders +95,482,201 (2) +$40.7351 +96,790,885 (3) +Equity compensation plans not approved by shareholders +— +— +6,728,713 (4) +Total +95,482,201 +$40.7351 +103,519,598 +(1) +Weighted-average exercise prices do not reflect the shares that will be used upon the payment of outstanding awards of restricted stock units. +(2) +Includes 95,482,201 shares subject to awards of options, restricted stock units, and stock appreciation rights outstanding under the Stock Incentive Plan (including the maximum number of Performance-Based RSUs granted to Mr. Parker). +(3) +Includes 85,555,568 shares available for future issuance under the Stock Incentive Plan and 11,235,317 shares available for future issuance under the Employee Stock Purchase Plan. +(4) +Includes 6,728,713 shares available for future issuance under the Foreign Subsidiary Employee Stock Purchase Plan, pursuant to which shares are offered and sold to employees of selected non-U.S. subsidiaries of the Company on substantially the same terms as those offered to U.S. employees under the shareholder-approved Employee Stock Purchase Plan as described above under “Employee Stock Purchase Plan” on page 24. +Non-Qualified Deferred Compensation in Fiscal 2018 +Name +Plan +Name +Executive +Contributions +in Fiscal 2018 (1) +NIKE Contributions +in Fiscal 2018 (1) +Aggregate Earnings +in Fiscal 2018 +Aggregate +Withdrawals/ +Distributions in +Fiscal 2018 +Aggregate +Balance +at 5/31/2018 (1) +Mark G. Parker +DCP +$1,639,729 +$148,636 +$614,151 +— +$17,733,270 +Andrew Campion +DCP +$213,317 +$53,256 +$84,504 +— +$1,365,036 +Eric D. Sprunk +DCP +$801,639 +$65,108 +$1,356,969 +— +$12,091,730 +Hilary K. Krane +DCP +$399,672 +$47,567 +$495,756 +— +$4,453,111 +John F. Slusher +DCP +$1,075,323 +$51,733 +$1,623,651 +— +$10,030,443 +Trevor A. Edwards +DCP +$1,345,376 +$68,628 +$2,303,967 +— +$22,869,300 +(1) +All amounts reported in the Executive Contributions column are also included in amounts reported in the Summary Compensation Table. The amounts reported in the NIKE Contributions column represent profit sharing contributions made by us in early fiscal 2018 based on fiscal 2017 results; these amounts are also included in amounts reported for fiscal 2017 in the All Other Compensation column of the Summary Compensation Table. Of the amounts reported in the Aggregate Balance column, the following amounts have been reported in the Summary Compensation Tables in this proxy statement or in prior year proxy statements: Mr. Parker, $15,520,705; Mr. Campion, $710,278; Mr. Sprunk, $4,744,865; Ms. Krane, $447,239; Mr. Slusher, $1,127,056; and Mr. Edwards, $11,000,685. +Non-Qualified Deferred Compensation Plans +The Named Executive Officers are eligible to participate in our Deferred Compensation Plan (the “DCP”). Participants in the DCP may elect in advance to defer up to 100 percent of their annual base salary, bonus, and long-term incentive payments. +Each year, we share profits with our employees in the form of profit sharing contributions to defined contribution retirement plans. The contributions are allocated among eligible employees based on a percentage of their total salary and bonus for the year. To the fullest extent permitted under Internal Revenue Code limitations, these contributions are made to employees’ accounts under our qualified 401(k) Savings and Profit Sharing Plan. Contributions based on salary and bonus in excess of the tax law limit ($270,000 for fiscal 2018) are made as NIKE contributions under the DCP. +Amounts deferred under the DCP are credited to a participant’s account under the DCP. Each participant may allocate his or her account among any combination of the investment funds available under the DCP. Participants’ accounts are adjusted to reflect the investment performance of the funds selected by the participants. Participants can change the allocation of their account balances daily. The funds available under the DCP consist of 18 mutual funds with a variety of investment objectives. The investment funds had annual returns in fiscal 2018 ranging from -.68% to 23.66%. +NIKE, INC. Ÿ 2018 Notice of Annual Meeting 34 +Amounts credited to participants’ accounts are invested by us in actual investments matching the investment options selected by the participants to ensure that we do not bear any investment risk related to participants’ investment choices. +The portion of a participant’s account attributable to elective deferrals, including investment returns, is fully vested at all times. The portion of a participant’s account attributable to NIKE contributions, including investment returns, is fully vested after the participant has been employed by us for five years. All of the Named Executive Officers are fully vested in their NIKE contributions. +Each time they elect to defer compensation, participants make an election regarding distribution of the compensation deferred under the election (as adjusted to reflect investment performance). A participant may elect for distribution to be made in a lump sum at the beginning of a predetermined year while the participant is still employed or in service (but no sooner than the fourth year after the year in which the distribution election is submitted). Alternatively, a participant may elect for distribution to be made in a lump sum or in quarterly installments over five, ten or fifteen years after termination of employment or service. Participants have limited rights to change their distribution elections. Participants may make a hardship withdrawal under certain circumstances. Subject to certain limitations, a participant may also at any time request to withdraw amounts from his or her account balance that were vested as of December 31, 2004 (and any subsequent investment returns on such amount). If such request is approved, the participant may withdraw 90% of the amount requested, and the remaining 10% will be permanently forfeited. +Potential Payments Upon Termination or Change-in-Control +Change-in-Control Compensation — Acceleration of Equity Awards +All unvested stock option, restricted stock, and restricted stock unit (“RSU”) awards are subject to accelerated vesting upon the occurrence of two events (a “double-trigger”): there is a “change-in-control”; and the Named Executive Officer’s employment is terminated by us without “cause” or by the Named Executive Officer for “good reason”, in each case on or before the second anniversary of the change in control. Double-trigger accelerated vesting of all awards will also occur if the Named Executive Officer’s employment is terminated without “cause” or for “good reason” between shareholder approval of the change-in-control and the occurrence of the change-in-control (and, for restricted stock and RSUs, the change-in-control occurs within one year following the termination). In addition, for stock options granted since July 2010, the standard period for exercising options following termination of employment is extended from three months to four years, but not beyond each option’s original 10-year term. Accelerated vesting of stock options and RSUs will also occur if we are acquired and the acquiring company does not assume the outstanding options or RSUs. In our agreements, “change-in-control” is generally defined to include: +• +the acquisition by any person of 50% or more of our outstanding Class A Stock or, if the Class A Stock no longer elects a majority of directors, the acquisition by any person of 30% or more of our total outstanding Common Stock, +• +the nomination (and subsequent election) in a two-year period of a majority of our directors by persons other than the incumbent directors, +• +a sale of all or substantially all of our assets, and +• +an acquisition of NIKE through a merger, consolidation or share exchange. +In our agreements, “cause” generally includes willful and continued failure to substantially perform assigned duties and willful engagement in illegal conduct materially injurious to us. In our agreements, “good reason” generally includes a material diminution in position or duties, a salary reduction or material reduction in other benefits, and a home office relocation of over 50 miles. +The following table shows the estimated benefits that would have been received by the Named Executive Officers if double-trigger accelerated vesting had occurred on May 31, 2018, when the closing price of our Class B Stock was $71.80 per share. +Name +Stock Award +Acceleration (1) +Stock Option +Acceleration (2) +Total +Mark G. Parker +$ +48,513,968 +$ +9,086,138 +$ +57,600,106 +Andrew Campion +$ +9,389,860 +$ +3,320,863 +$ +12,710,723 +Eric D. Sprunk +$ +9,442,849 +$ +4,521,138 +$ +13,963,987 +Hilary K. Krane +$ +6,580,542 +$ +3,529,925 +$ +10,110,467 +John F. Slusher +$ +6,459,056 +$ +3,441,988 +$ +9,901,044 +Trevor A. Edwards +$ +9,842,344 +$ +5,022,350 +$ +14,864,694 +(1) +Information regarding unvested restricted stock and restricted stock units held by each Named Executive Officer is set forth in the Outstanding Equity Awards table above. The award agreements provide for full double-trigger accelerated vesting as described above (for Performance-Based RSUs granted to Mr. Parker, assuming such awards are earned at 100%). The amounts in the table above represent the number of unvested restricted shares and RSUs multiplied by the closing price of our Class B Stock on May 31, 2018. +(2) +Information regarding outstanding unvested options held by each Named Executive Officer is set forth in the Outstanding Equity Awards table above. The agreements governing unvested stock options provide for full double-trigger accelerated vesting and an extended post-termination exercise period as described above. Amounts in the table above represent the aggregate value as of May 31, 2018 of those options using the excess of the per share closing price of our Class B Stock on May 31, 2018 over the per share exercise price, multiplied by the number of unvested option shares for each Named Executive Officer. +Benefits Triggered on Certain Employment Terminations +Stock Option Acceleration and Extension +As of May 31, 2018, each Named Executive Officer held options to purchase Class B Stock as listed in the Outstanding Equity Awards table above. Under the terms of the stock options granted to each Named Executive Officer before July 2010, upon the death or disability of the officer, the standard three-month period for exercising options following termination of employment is extended to 12 months, but not beyond each option’s original 10-year term. Under the terms of the stock options granted to each Named Executive Officer since July 2010, upon the death or disability +NIKE, INC. Ÿ 2018 Notice of Annual Meeting 35 +EXECUTIVE COMPENSATION +of the officer, all unvested options become fully exercisable and the standard three-month period for exercising options following termination of employment is extended to four years, but not beyond each option’s original 10-year term. If death or disability of a Named Executive Officer had occurred on May 31, 2018, the aggregate value of those options would have been $9,086,138 for Mr. Parker, $3,320,863 for Mr. Campion, $4,521,138 for Mr. Sprunk, $3,529,925 for Ms. Krane, $3,441,988 for Mr. Slusher, and $5,022,350 for Mr. Edwards. +Under the terms of the unvested stock options granted to Named Executive Officers since July 2010, vesting of options that have been outstanding for at least one year will be accelerated if the holder retires after reaching age 60 with at least 5 years of service, and vesting of options that have been outstanding for at least one year will continue notwithstanding termination of employment if the holder retires after reaching age 55 with at least 5 years of service. In addition, for any holder who retires after reaching age 55 (but before reaching age 60) with at least 5 years of service, the standard three-month period for exercising these options following termination of employment will be extended to four years, but not beyond the option’s original ten-year term. If termination of employment of a Named Executive Officer (other than due to death or disability) had occurred on May 31, 2018, the aggregate value of those options would have been $6,990,638 for Mr. Parker and $3,752,350 for Mr. Edwards. The value for Mr. Sprunk, Mr. Campion, Ms. Krane, and Mr. Slusher is zero because they have not reached age 55. +Stock Award Acceleration +As of May 31, 2018, each Named Executive Officer held unvested restricted stock and/or restricted stock units as set forth in the Outstanding Equity Awards table above. Under the terms of their award agreements, all unvested restricted shares and restricted stock units will immediately vest fully upon the death or disability of the officer, except that Performance-Based RSUs held by Mr. Parker will vest at the threshold amount. The value of the unvested restricted shares and restricted stock units held by each Named Executive Officer as of May 31, 2018 that would have become vested if death or disability had occurred on that date is as set forth in the “Stock Award Acceleration” column of the Change-in-Control Compensation — Acceleration of Equity Awards table above, except that the amount for Mr. Parker would be $36,549,503. +Payments Under Noncompetition Agreements +We have an agreement with Mr. Parker that contains a covenant not to compete that extends for two years following the termination of his employment with us. The agreement provides that if Mr. Parker’s employment is terminated by us, we will make monthly payments to him during the two-year noncompetition period in an amount equal to one-twelfth of his then current annual salary and target Executive Performance Sharing Plan bonus (“Annual NIKE Income”). The agreement provides further that if Mr. Parker voluntarily resigns, we will make monthly payments to him during the two-year noncompetition period in an amount equal to one-twenty-fourth of his then current Annual NIKE Income. However, commencement of the above-described monthly payments will be delayed until after the six-month period following Mr. Parker’s separation from service, and all payments that he would otherwise have received during that period will be paid in a lump sum promptly following the end of the period, together with interest at the prime rate. If employment is terminated without “cause”, the parties may mutually agree to waive the covenant not to compete, and if employment is terminated for “cause”, we may unilaterally waive the covenant. Under Mr. Parker’s noncompetition agreement, “cause” means continual and repeated neglect of duties or acts of dishonesty. If the covenant is waived, we will not be required to make the payments described above for the months as to which the waiver applies. If the employment of Mr. Parker had been terminated by us on May 31, 2018, and assuming the covenant is not waived, we would have been required to pay Mr. Parker $361,667 per month for the 24-month period ending May 31, 2020. If Mr. Parker had voluntarily resigned on May 31, 2018, and assuming the covenant is not waived, we would have been required to pay Mr. Parker $180,833 per month for the 24-month period ending May 31, 2020. +We have noncompetition agreements with Mr. Campion, Mr. Sprunk, Ms. Krane, Mr. Slusher, and Mr. Edwards on the same terms, except that the noncompetition period is one year instead of two years, payments may commence on termination, and we may unilaterally waive the covenant in all cases including termination without cause (in which case payments would cease). In addition, for Mr. Campion, Mr. Sprunk, Ms. Krane, Mr. Slusher, and Mr. Edwards, the monthly payments are one-twelfth or one-twenty-fourth of their then current annual salaries, instead of their Annual NIKE Income. If the employment of these officers had been terminated by us on May 31, 2018, and assuming the covenant is not waived, we would have been required to pay Mr. Campion $81,250, Mr. Sprunk $91,667, Ms. Krane $75,000, Mr. Slusher $75,000, and Mr. Edwards $100,000 each on monthly basis for the 12-month period ending May 31, 2019. If these officers had voluntarily resigned on May 31, 2018 and assuming the covenant is not waived, we would have been required to pay Mr. Campion $40,625, Mr. Sprunk $45,833, Ms. Krane $37,500, Mr. Slusher $37,500, and Mr. Edwards $50,000 each on a monthly basis for the 12-month period ending May 31, 2019. +Mr. Edwards resigned as President, NIKE Brand, effective March 15, 2018, and will retire from the Company in August 2018. In accordance with the noncompetition agreement described above, we will pay him $50,000 per month for the 12-month period ending August 2019. +NIKE, INC. Ÿ 2018 Notice of Annual Meeting 36 +EXECUTIVE COMPENSATION +CEO Pay Ratio +NIKE strives to provide competitive base pay, market-leading benefits, and an exceptional work environment that collectively create a premium employee experience. Our pay and benefit programs are designed to attract and engage talent, and reward performance, viewed holistically across individual, team, and business results. Our programs are administered to be equitable relative to employees’ performance, experience, and level within the Company. +The executive compensation program is highly incentive-based with Company performance determining a significant portion of total compensation. It is designed to motivate and maximize shareholder value by achieving both short- and long-term goals. +In accordance with the Dodd-Frank Act, the SEC adopted a rule that requires companies to disclose the ratio of CEO compensation to that of the median employee’s. +This section discloses our CEO Pay Ratio and provides information on how the ratio was derived. +For fiscal 2018, our last completed fiscal year: +• +The employee identified at the median of all NIKE employees (other than our CEO) was a retail store employee in the United States; +• +The annual total compensation of the median employee was $24,955; +• +The annual total compensation of our CEO, Mr. Parker, was $9,467,460; and +• +The estimated ratio of the annual total compensation of our CEO to the median annual total compensation of all NIKE employees was 379 to 1. +This pay ratio is a reasonable estimate calculated in a manner consistent with SEC rules based on our payroll and employment records and the methodology described below. The SEC rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their compensation practices. As such, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies may have different employment and compensation practices and may utilize different methodologies, exclusions, estimates, and assumptions in calculating their own pay ratios. +Methodology +To allow sufficient time to collect data across our global operations, we selected May 1, 2018 as the date to determine the “median employee”. At that time, we had approximately 72,997 employees globally. We applied the “de minimis exemption” under SEC rules, which permits us to exclude non-U.S. employees accounting for 5% or less of our total employee population. After applying the de minimis exemption to exclude the 3,606 employees in the jurisdictions identified below, our employee population consisted of approximately 69,391 employees. +Finland +1 +New Zealand +71 +Portugal +166 +Slovenia +3 +Norway +73 +Israel +168 +United Arab Emirates +4 +Sweden +78 +Thailand +177 +Sri Lanka +12 +Denmark +89 +Austria +182 +Slovakia +14 +India +89 +Greece +185 +Philippines +24 +Czech Republic +96 +Vietnam +188 +Macao +33 +Switzerland +102 +South Africa +216 +Croatia +45 +Indonesia +115 +Poland +235 +Hungary +60 +Ireland +118 +Hong Kong +408 +Uruguay +64 +Malaysia +151 +Singapore +439 +Of the 69,391 employees included in the CEO Pay Ratio calculation, approximately 66% were full-time, 57% were in retail jobs, and 54% were located in the United States. +To identify our “median employee” we calculated target annual compensation for fiscal 2018 based on base salary or hourly wages, as applicable. For the majority of our employees, base salary or hourly wages comprise the majority of their compensation. To determine wages for hourly employees, we used each individual’s pay rate and estimated scheduled hours in the applicable Human Resources system of record. +After determining the target annual compensation for our employee population as described above, we identified a subset of approximately 100 individuals representing the potential median employee population. For this subset, we calculated each employee’s annual total compensation in U.S dollars for the fiscal year based on the Summary Compensation Table rules used for our Named Executive Officers (in accordance with Item 402(c)(2)(x) of Regulation S-K). Compensation for permanent employees hired during the fiscal year was annualized and the median employee was then selected from the subset to determine the CEO Pay Ratio. +NIKE, INC. Ÿ 2018 Notice of Annual Meeting 37 +PROPOSAL 2 +Proposal 2 +Shareholder Advisory Vote to Approve +Executive Compensation +In accordance with the requirements of Section 14A of the Securities Exchange Act of 1934, we are submitting to shareholders our annual “say-on-pay proposal”, an advisory vote to approve the compensation of our Named Executive Officers as described in this proxy statement. +At the Company’s 2017 annual meeting of shareholders, we provided shareholders with an advisory vote with respect to how often we should hold a say-on-pay proposal vote, and shareholders voted in favor of holding such a vote annually. Consistent with the voting results, we will hold an advisory vote each year. +At the Company’s 2017 annual meeting of shareholders, 94% of the votes cast on the say-on-pay proposal were voted in favor of the proposal. The Compensation Committee believes this affirms shareholders’ support of the Company’s approach to executive compensation. +As discussed in the Compensation Discussion and Analysis, our compensation philosophy is designed to attract and retain top talent, reward business results and performance, viewed holistically, and motivate executives to maximize long-term shareholder value. The program is competitive in the marketplace, highly incentive-based to align interests of executives with those of shareholders, and balanced across incentives to appropriately mitigate risk. +To achieve the objectives of our executive compensation program and emphasize pay-for-performance principles, the Compensation Committee has continued to employ the strong governance practices described in “Executive Compensation Governance Practices” on page 16, including: +• +basing a majority of total compensation on performance and retention incentives; +• +setting annual and long-term incentive targets based on clearly disclosed, objective performance measures; +• +mitigating undue risk associated with compensation by using multiple performance targets, caps on potential incentive payments, and a clawback policy; and +• +requiring executive officers to hold NIKE stock through published stock ownership guidelines. +Because your vote is advisory, it will not be binding on the Board. However, the Board values shareholder opinions, and the Compensation Committee will take into account the outcome of the vote when considering future executive compensation arrangements. +Board Recommendation +The Board of Directors recommends that shareholders vote FOR approval of the following resolution: +RESOLVED, that the shareholders approve the fiscal 2018 compensation paid to the Named Executive Officers as disclosed in this proxy statement pursuant to the SEC’s compensation disclosure rules (which disclosure includes the Compensation Discussion and Analysis, the compensation tables, and the narrative disclosures that accompany the compensation tables). +NIKE, INC. Ÿ 2018 Notice of Annual Meeting 38 +PROPOSAL 3 +Proposal 3 +Shareholder Proposal Regarding Political Contributions Disclosure +The following shareholder proposal (the “Proposal”) will be voted on at the Annual Meeting only if properly presented by or on behalf of the shareholder proponent. Mercy A. Rome, c/o Investor Voice, SPC, 111 Queen Anne Ave N, Suite 500, Seattle, WA 98109, a holder of 76 shares of Class B Stock submitted the Proposal. The Board of Directors recommends a vote AGAINST the Proposal and asks shareholders to read through NIKE’s response which follows the Proposal. +BE IT RESOLVED : The shareholders of NIKE, Inc. (“NIKE” or “Company”) hereby request that the Company provide a report, updated semiannually, to disclose the Company’s : +1. Policies and procedures for making, with corporate funds or assets, direct or indirect contributions and expenditures to: +a. participate or intervene in any campaign on behalf of (or in opposition to) any candidate for public office, or +b. influence the general public, or any segment thereof, with respect to an election or referendum. +2. Monetary and non-monetary contributions and expenditures (direct and indirect) used in the manner described in section 1 above, including: +a. the identity of the recipient as well as the amount paid to each; and +b. the title(s) of the person(s) in the Company responsible for oversight and decision-making. +The report shall be presented to the Board of Directors or relevant board committee and posted on the Company’s website within 12 months from the date of the annual meeting. This Proposal is not to encompass lobbying spending. +Supporting Statement +As long-term shareholders of NIKE, we support transparency and accountability in corporate electoral spending. This includes any activity considered intervention in a political campaign under the Internal Revenue Code, such as direct and indirect contributions to political candidates, parties, or organizations, along with independent expenditures or electioneering communications on behalf of Federal, State, or local candidates. +Disclosure is in the best interest of the Company and its shareholders. The U.S. Supreme Court recognized this in its 2010 Citizens United decision, which said: “[D]isclosure permits citizens and shareholders to react to the speech of corporate entities in a proper way. This transparency enables the electorate to make informed decisions and give proper weight to different speakers and messages.” +Public records show NIKE has contributed at least $2,106,738 in corporate funds since the 2010 election cycle (CQMoneyLine: http://moneyline.cq.com; National Institute on Money in State Politics: http://www.followthemoney.org). +However, relying on publicly available data does not provide a complete picture of the Company’s electoral spending. For example: undisclosed and unknown are any Company payments to trade associations that are used for election-related activities. +Concerned shareholders ask the Company to disclose all of its electoral spending – including payments to trade associations and other tax-exempt organizations – which may be used for electoral purposes. This would bring our Company in line with a growing number of leading companies in the consumer discretionary sector – including Ralph Lauren Corp. and Tiffany & Co. – which present this information on their public websites. +The Company’s Board and shareholders need comprehensive disclosure to fully assess and regulate the use of corporate assets in elections. +THEREFORE: We urge your vote FOR this critical governance enhancement. +The Company’s Statement in Opposition to Proposal 3 +The Board of Directors recommends that shareholders vote AGAINST this Proposal because: +• +Our current policies and public disclosures already address many of the items requested by the Proposal; +• +In the Board’s judgment, more disclosure than we already provide would not be in the best interests of shareholders; and +• +NIKE received virtually identical proposals for its Annual Meetings in 2012, 2013, 2015, 2016, and 2017, and the proposals were rejected by approximately 78%, 82%, 73%, 71%, and 70%, respectively, of shares voted. +Frankly, we agree with our shareholders. +NIKE is committed to the highest ethical standards when engaging in political activities. We have strong governance practices and accountability in corporate spending on political activities, and maintain a level of transparency that we believe allows shareholders to have the information they need to make informed decisions. This Proposal is unnecessary to achieve these objectives and the proponent offers no new compelling evidence or arguments in support of the Proposal. +NIKE’s Political Contributions Policy (the “Policy”) is designed to give shareholders confidence that there is proper oversight of political activity and to allow shareholders to assess any risks associated with significant contributions. All of our political contributions and expenditures are made in accordance with the Policy and our objective is to strictly comply with all public reporting laws. Our Policy ensures that political +NIKE, INC. Ÿ 2018 Notice of Annual Meeting 39 +PROPOSAL 3 +contributions, trade group memberships, and policy statements are made in a manner consistent with NIKE's core values to protect or enhance shareholder value, without regard to the private political preferences of our corporate officers. Our Policy describes the policies and procedures for making corporate political contributions, how they are approved, who must approve them, and how they are reported to the Board’s Corporate Responsibility, Sustainability & Governance Committee. Our Policy is available on our website at http://investors.nike.com/investors/corporate-governance. +Consistent with our Policy, we also annually disclose on our website all direct political contributions to any candidate, political party, or ballot initiative in any year that exceed $100,000, and all political contributions in any U.S. state where we make more than 50% of our political contributions in any year. We believe these disclosures provide shareholders meaningful information to assess any risks posed by significant political contributions. Our disclosures are simple, accurate, and clear and we have published them for every year since 2012. +Our Policy also requires that management annually report on compliance with our Policy to the Board’s Corporate Responsibility, Sustainability & Governance Committee, and review the strategic priorities for political contributions and trade association affiliations, to ensure they align with the long-term business objectives of the Company. +The additional disclosure requested in this Proposal could place NIKE at a competitive disadvantage by revealing strategies and priorities designed to protect the economic future of NIKE, its employees and its shareholders. Given that parties with interests adverse to NIKE also participate in the political process for their business advantage, any unilateral expanded disclosure could benefit them, while harming the interests of NIKE and its shareholders. +In summary, the Board of Directors believes the Proposal is unnecessary because NIKE has followed a comprehensive policy for oversight and disclosure of political contributions for many years. If adopted, the Proposal would cause NIKE to incur undue cost and administrative burden, as well as competitive harm, without commensurate benefit to our shareholders. Our shareholders have understandably rejected this Proposal five times before. +Board Recommendation +The Board of Directors recommends a vote AGAINST the shareholder proposal. +NIKE, INC. Ÿ 2018 Notice of Annual Meeting 40 +PROPOSAL 4 +Proposal 4 +Ratification of Appointment of Independent Registered Public Accounting Firm +The Audit & Finance Committee of the Board of Directors has sole authority to retain, with shareholder ratification, the Company’s independent registered public accounting firm. The Audit & Finance Committee directly oversees the firm’s work with respect to the annual audit of the Company’s consolidated financial statements and internal control over financial reporting and approves all audit engagement fees and terms. At least annually, the Audit & Finance Committee evaluates the independent registered public accounting firm’s qualifications, performance, and independence, including a review and evaluation of its lead partner. The Audit & Finance Committee is also involved in the selection of the new lead engagement partner following mandated rotation of the firm’s lead partner, and is responsible for considering the benefits of rotation of the Company’s independent registered public accounting firm. +The Audit & Finance Committee has appointed PricewaterhouseCoopers LLP to audit the Company’s consolidated financial statements and internal control over financial reporting for the fiscal year ending May 31, 2019 and to render other professional services as required. +PricewaterhouseCoopers LLP has served as the Company’s independent registered public accounting firm for many years. The Audit & Finance Committee and the Board of Directors believe that the continued retention of PricewaterhouseCoopers LLP as the independent registered public accounting firm is in the best interests of the Company and its shareholders. +Accordingly, the Audit & Finance Committee is submitting the appointment of PricewaterhouseCoopers LLP to shareholders for ratification. If the appointment is not ratified by our shareholders, the Audit & Finance Committee may reconsider whether it should appoint another independent registered public accounting firm. +Representatives of PricewaterhouseCoopers LLP will be present at the Annual Meeting, will have the opportunity to make a statement if they desire to do so, and are expected to be available to respond to questions. +Aggregate fees billed by the Company’s independent registered public accounting firm, PricewaterhouseCoopers LLP, for audit services related to the most recent two fiscal years, and for other professional services incurred in the most recent two fiscal years, were as follows: +Type of Service +2018 +2017 +Audit Fees (1) +$ +20.3 +million +$ +20.1 +million +Audit-Related Fees (2) +— +million +— +million +Tax Fees (3) +1.3 +million +1.6 +million +All Other Fees (4) +0.1 +million +0.1 +million +Total +$ +21.7 +million +$ +21.8 +million +(1) +Comprises the audits of the Company’s annual financial statements and internal controls over financial reporting, and reviews of the Company’s quarterly financial statements, as well as statutory audits of Company subsidiaries, attest services and consents to SEC filings. +(2) +Comprises services including consultations regarding financial accounting and reporting. +(3) +Comprises services for tax compliance, tax planning and tax advice. Tax compliance includes services for compliance related tax advice, as well as the preparation and review of both original and amended tax returns for the Company and its consolidated subsidiaries. Tax compliance related fees represented $0.1 million and $0.3 million of the tax fees for fiscal 2018 and 2017, respectively. The remaining tax fees primarily include tax advice. +(4) +Comprises other miscellaneous services. +In accordance with the Sarbanes-Oxley Act of 2002, the Audit & Finance Committee established policies and procedures under which all audit and non-audit services performed by the Company’s independent registered public accounting firm must be approved in advance by the Audit & Finance Committee. During fiscal 2018, all such services performed by, and fees paid to, PricewaterhouseCoopers LLP were approved in advance. During fiscal 2017, fees totaling $4,080, or less than 0.1% of total fees, were paid to PricewaterhouseCoopers LLP for two engagements that were not pre-approved. All such services were approved by the Audit & Finance Committee promptly after their inadvertent omission from pre-approval was noticed. +Board Recommendation +The Board of Directors recommends that shareholders vote FOR ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for the fiscal year ending May 31, 2019. +NIKE, INC. Ÿ 2018 Notice of Annual Meeting 41 +PROPOSAL 4 +Report of the Audit & Finance Committee +The Audit & Finance Committee has: +• +Reviewed and discussed the audited financial statements with management. +• +Discussed with the independent auditors the matters required to be discussed by Public Company Accounting Oversight Board (“PCAOB”) Statement on Auditing Standards No. 16 Communications with Audit Committees. +• +Received the written disclosures and the letter from the independent accountants required by applicable requirements of the PCAOB regarding the independent accountants’ communications concerning independence, and has discussed with the independent accountant the independent accountant’s independence. +• +Based on the review and discussions above, recommended to the Board of Directors that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the last fiscal year for filing with the Securities and Exchange Commission. +Members of the Audit & Finance Committee: +• +Alan B. Graf, Jr., Chairman +• +John G. Connors +• +John J. Donahoe II +NIKE, INC. Ÿ 2018 Notice of Annual Meeting 42 +OTHER MATTERS / SHAREHOLDER PROPOSALS +Other Matters +As of the time this proxy statement was printed, management was unaware of any proposals to be presented for consideration at the Annual Meeting other than those set forth herein, but if other matters do properly come before the Annual Meeting, the persons named in the proxy will vote the shares represented by such proxy according to their best judgment. +Shareholder Proposals +A proposal by a shareholder for inclusion in the Company’s proxy statement and form of proxy for the 2019 annual meeting of shareholders must be received by Ann M. Miller, Vice President, Corporate Secretary & Chief Compliance Officer of NIKE, Inc. at One Bowerman Drive, Beaverton, Oregon 97005-6453, on or before April 4, 2019 to be eligible for inclusion. Rules under the Securities Exchange Act of 1934, as amended, describe standards as to the submission of shareholder proposals. In addition, the Company’s Bylaws require that any shareholder wishing to make a nomination for director, or wishing to introduce a proposal or other business at a shareholder meeting must give the Company at least 60 days’ advance written notice, which for the 2019 annual meeting of shareholders is July 21, 2019, and that notice must meet certain other requirements described in the Bylaws. +For the Board of Directors, +Ann M. Miller +Vice President, Corporate Secretary & Chief Compliance Officer +NIKE, INC. Ÿ 2018 Notice of Annual Meeting 43 +ANNUAL +MEETING +AND +PROXY STATEMENT +September 20, 2018 +Beaverton, Oregon +Whether or not you plan to attend the meeting, please sign and date the enclosed proxy card and return it in the enclosed envelope, or vote online or by telephone following the instructions on the proxy card. +Electronic Voting Instructions +Available 24 hours a day, 7 days a week! +Instead of mailing your proxy, you may choose one of the voting methods outlined below to vote your proxy. +VALIDATION DETAILS ARE LOCATED IN THE TITLE BAR BELOW. +Proxies submitted online or by telephone must be received by 1:00 a.m., Central Time, on September 20, 2018. +Vote Online +• Go to www.investorvote.com +• Or scan the QR code with your smartphone +• Follow the steps outlined on the secure website +Vote by telephone +• Call toll free 1-800-652-VOTE (8683) within the USA, US territories & Canada on a touch tone telephone +• Follow the instructions provided by the recorded message +Using a black ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas. +x +q IF YOU HAVE NOT VOTED ONLINE OR BY TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q +A +Proposals — The Board of Directors recommends a vote FOR all the nominees listed in Proposal 1, a vote FOR Proposals 2 and 4, and a vote AGAINST Proposal 3. +1. Class A director nominees: To elect a Board of Directors for the ensuing year. +» +For +Withhold +For +Withhold +For +Withhold +01 - Cathleen A. Benko +¨ +¨ +02 - Elizabeth J. Comstock +¨ +¨ +03 - John G. Connors +¨ +¨ +04 - Timothy D. Cook +¨ +¨ +05 - John J. Donahoe II +¨ +¨ +06 - Peter B. Henry +¨ +¨ +07 - Travis A. Knight +¨ +¨ +08 - Mark G. Parker +¨ +¨ +09 - John R. Thompson, Jr. +¨ +¨ +For +Against +Abstain +For +Against +Abstain +2. +To approve executive compensation by an advisory vote. +¨ +¨ +¨ +3. +Shareholder proposal regarding political contributions disclosure. +¨ +¨ +¨ +4. +To ratify the appointment of PricewaterhouseCoopers LLP as independent registered public accounting firm. +¨ +¨ +¨ +5. +To transact such other business as may properly come before the meeting. +B +Non-Voting Items +Change of Address — Please print new address below. +C +Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below +Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title. +Date (mm/dd/yyyy) — Please print date below. +Signature 1 — Please keep signature within the box. +Signature 2 — Please keep signature within the box. +/ / +Meeting Information +2018 Annual Meeting of Shareholders +for Shareholders as of July 20, 2018 +September 20, 2018 +10:00 A.M. PDT +Meeting Location: +Tiger Woods Conference Center +One Bowerman Drive +Beaverton, OR 97005 +Meeting Directions: +From I-5 South of Portland: +I-5 North to 217 North. Follow to Hwy 26 West. +From I-5 North of Portland: +I-5 South to I-405 South. Follow to Hwy 26 West. +From I-84 East of Portland: +I-84 West to I-5 South to I-405 North. Follow to Hwy 26 West. +Exit Hwy 26 at Murray Blvd, turn left, and drive one mile. Turn right on SW Bowerman Drive into the NIKE World Headquarters (WHQ). Keep right at the entry and go directly to the parking structure. Follow posted signs to The Tiger Woods Conference Center, which is located directly ahead of the parking structure. Please note that the NIKE Campus is a non-smoking location and smoking is not permitted on NIKE property. +Ç IF YOU HAVE NOT VOTED ONLINE OR BY TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. Ç +NIKE, INC. +CLASS A COMMON STOCK PROXY +SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS +FOR THE 2018 ANNUAL MEETING OF SHAREHOLDERS +SEPTEMBER 20, 2018 +The undersigned hereby appoints Mark G. Parker, Travis A. Knight and John C. Lechleiter, and each of them, proxies with full power of substitution, to vote, as designated on the reverse side, on behalf of the undersigned, all shares of Class A Common Stock which the undersigned may be entitled to vote at the Annual Meeting of Shareholders of NIKE, Inc. on September 20, 2018, and any adjournments thereof, with all powers that the undersigned would possess if personally present. A majority of the proxies or substitutes present at the meeting may exercise all powers granted hereby. +THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS SPECIFIED, BUT IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE NOMINEES FOR DIRECTOR FOR PROPOSAL 1, FOR PROPOSALS 2 AND 4, AND AGAINST PROPOSAL 3. THE PROXIES MAY VOTE IN THEIR DISCRETION AS TO OTHER MATTERS WHICH MAY COME BEFORE THE MEETING. +YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS’ RECOMMENDATIONS. THE PROXIES CANNOT VOTE THESE SHARES UNLESS YOU SIGN AND RETURN THIS CARD OR PROPERLY VOTE ONLINE OR BY TELEPHONE. +Electronic Voting Instructions +Available 24 hours a day, 7 days a week! +Instead of mailing your proxy, you may choose one of the voting methods outlined below to vote your proxy. +VALIDATION DETAILS ARE LOCATED IN THE TITLE BAR BELOW. +Proxies submitted online or by telephone must be received by 1:00 a.m., Central Time, on September 20, 2018. +Vote Online +• Go to www.investorvote.com +• Or scan the QR code with your smartphone +• Follow the steps outlined on the secure website +Vote by telephone +• Call toll free 1-800-652-VOTE (8683) within the USA, US territories & Canada on a touch tone telephone +• Follow the instructions provided by the recorded message +Using a black ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas. +x +q IF YOU HAVE NOT VOTED ONLINE OR BY TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q +A +Proposals — The Board of Directors recommends a vote FOR all the nominees listed in Proposal 1, a vote FOR Proposals 2 and 4, and a vote AGAINST Proposal 3. +1. +Class B director nominees: To elect a Board of Directors for the ensuing year. +» +For +Withhold +For +Withhold +For +Withhold +01 - Alan B. Graf, Jr. +¨ +¨ +02 - John C. Lechleiter +¨ +¨ +03 - Michelle A. Peluso +¨ +¨ +For +Against +Abstain +For +Against +Abstain +2. +To approve executive compensation by an advisory vote. +¨ +¨ +¨ +3. +Shareholder proposal regarding political contributions disclosure. +¨ +¨ +¨ +4. +To ratify the appointment of PricewaterhouseCoopers LLP as independent registered public accounting firm. +¨ +¨ +¨ +5. +To transact such other business as may properly come before the meeting. +B +Non-Voting Items +Change of Address — Please print new address below. +C +Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below +Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title. +Date (mm/dd/yyyy) — Please print date below. +Signature 1 — Please keep signature within the box. +Signature 2 — Please keep signature within the box. +/ / +Meeting Information +2018 Annual Meeting of Shareholders +for Shareholders as of July 20, 2018 +September 20, 2018 +10:00 A.M. PDT +Meeting Location: +Tiger Woods Conference Center +One Bowerman Drive +Beaverton, OR 97005 +Meeting Directions: +From I-5 South of Portland: +I-5 North to 217 North. Follow to Hwy 26 West. +From I-5 North of Portland: +I-5 South to I-405 South. Follow to Hwy 26 West. +From I-84 East of Portland: +I-84 West to I-5 South to I-405 North. Follow to Hwy 26 West. +Exit Hwy 26 at Murray Blvd, turn left, and drive one mile. Turn right on SW Bowerman Drive into the NIKE World Headquarters (WHQ). Keep right at the entry and go directly to the parking structure. Follow posted signs to The Tiger Woods Conference Center, which is located directly ahead of the parking structure. Please note that the NIKE Campus is a non-smoking location and smoking is not permitted on NIKE property. +Ç IF YOU HAVE NOT VOTED ONLINE OR BY TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. Ç +NIKE, INC. +CLASS B COMMON STOCK PROXY +SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS +FOR THE 2018 ANNUAL MEETING OF SHAREHOLDERS +SEPTEMBER 20, 2018 +The undersigned hereby appoints Mark G. Parker, Travis A. Knight and John C. Lechleiter, and each of them, proxies with full power of substitution, to vote, as designated on the reverse side, on behalf of the undersigned, all shares of Class B Common Stock which the undersigned may be entitled to vote at the Annual Meeting of Shareholders of NIKE, Inc. on September 20, 2018, and any adjournments thereof, with all powers that the undersigned would possess if personally present. A majority of the proxies or substitutes present at the meeting may exercise all powers granted hereby. +THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS SPECIFIED, BUT IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE NOMINEES FOR DIRECTOR FOR PROPOSAL 1, FOR PROPOSALS 2 AND 4, AND AGAINST PROPOSAL 3. THE PROXIES MAY VOTE IN THEIR DISCRETION AS TO OTHER MATTERS WHICH MAY COME BEFORE THE MEETING. +YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS’ RECOMMENDATIONS. THE PROXIES CANNOT VOTE THESE SHARES UNLESS YOU SIGN AND RETURN THIS CARD OR PROPERLY VOTE ONLINE OR BY TELEPHONE. \ No newline at end of file diff --git a/raw/proxies/0000320187/0000320187-18-000144/proxy_rpt.txt b/raw/proxies/0000320187/0000320187-18-000144/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..1eae6e75c3cad6132f8d845841f9872b0d21fbeb --- /dev/null +++ b/raw/proxies/0000320187/0000320187-18-000144/proxy_rpt.txt @@ -0,0 +1,6 @@ +Transactions with Related Persons +In fiscal 2018, two of Mr. Parker’s siblings, each with over 25 years of service to the Company, were employed by the Company in non-executive roles. Ann Parker was a Design Talent Scout, and Stephen Parker held a Vice President role with Converse. During fiscal 2018, the Company paid aggregate compensation to Stephen Parker in the amount of $486,535, comprised of salary, bonuses, the value of stock awards granted during the fiscal year, a valued service award and associated tax reimbursement, profit sharing and matching contributions to Company-sponsored retirement plans. Additionally, the Company paid aggregate compensation to Ann Parker in the amount of approximately $487,367, comprised of approximately $306,037 paid in connection with her termination of service as well as the compensation components listed above. The compensation and benefits received by each of Mr. Parker’s siblings, including the separation benefits received by Ann Parker and the 30th anniversary service award received by Stephen Parker, were consistent with compensation paid to other similarly situated employees. +Eric Sprunk’s daughter, Nicole Sprunk, was employed by the Company in a non-executive role in fiscal 2018 as a Brand Director. During fiscal 2018, the Company paid aggregate compensation to Nicole Sprunk of $196,748, comprised of salary, bonus, the value of stock granted, profit sharing and matching contributions to the Company-sponsored retirement plan. The compensation and benefits received by Nicole Sprunk were consistent with compensation paid to other employees holding similar positions. +Philip H. Knight, the father of NIKE director Travis A. Knight, serves as Chairman Emeritus, which provides a standing invitation for Philip H. Knight to attend meetings of the Board and its committees as a non-voting observer. As Chairman Emeritus, Mr. Knight receives an annual salary of $500,000, and medical and dental insurance coverage generally available to employees. In fiscal 2018, Philip H. Knight received $516,819, comprised of salary, profit sharing and matching contributions to Company-sponsored retirement plans. +The Company’s written policy requires the Corporate Responsibility, Sustainability & Governance Committee to review any transaction or proposed transaction with a related person that would be required to be reported under Item 404(a) of Regulation S-K, and to determine whether to ratify or approve the transaction, with ratification or approval to occur only if the Committee determines that the transaction is fair to the Company or that approval or ratification of the transaction is in the interest of the Company. +NIKE, INC. Ÿ 2018 Notice of Annual Meeting 14 \ No newline at end of file diff --git a/raw/proxies/0000320187/0000320187-19-000053/proxy.txt b/raw/proxies/0000320187/0000320187-19-000053/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..17d3454a9932d742f23ada05789a5d41c2349e78 --- /dev/null +++ b/raw/proxies/0000320187/0000320187-19-000053/proxy.txt @@ -0,0 +1,2710 @@ +DEF 14A +1 +nike2019proxy.htm +DEF 14A +Document +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +Washington, D.C. 20549 +SCHEDULE 14A INFORMATION +Proxy Statement Pursuant to Section 14(a) of the +Securities Exchange Act of 1934 +(Amendment No. ) +Filed by the Registrant x Filed by a Party other than the Registrant ¨ +Check the appropriate box: +¨ +Preliminary Proxy Statement +¨ +Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +x +Definitive Proxy Statement +¨ +Definitive Additional Materials +¨ +Soliciting Material under §240.14a-12 +NIKE, INC. +(Name of registrant as specified in its charter) +(Name of person(s) filing proxy statement, if other than the registrant) +Payment of Filing Fee (Check the appropriate box): +x +No fee required +¨ +Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11 +(1) +Title of each class of securities to which transaction applies: +(2) +Aggregate number of securities to which transaction applies: +(3) +Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): +(4) +Proposed maximum aggregate value of transaction: +(5) +Total fee paid: +¨ +Fee paid previously with preliminary materials. +¨ +Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. +(1) +Amount Previously Paid: +(2) +Form, Schedule or Registration Statement No.: +(3) +Filing Party: +(4) +Date Filed: +MESSAGE FROM OUR +CHAIRMAN +DEAR FELLOW SHAREHOLDERS: +At Nike, we strive to bring innovation and inspiration to every athlete in the world. As a company, we have passion for sport, for authenticity, and for relentless self-improvement. And as a Board, we bring that same passion to corporate governance. Because strong governance helps us to ensure that Nike is creating long-term value for shareholders - responsibly and sustainably. +We are on the offense always at Nike. From a corporate governance perspective, that means we are committed to assessing and refreshing the Board and its committees on an ongoing basis. That’s why we added three new independent directors to the Board in the last two fiscal years. These individuals bring a wide range of strengths, including financial expertise, digital fluency, background in academia, and human resources and governance experience. +In fiscal 2019, we also assessed and enhanced our committee charters. Specifically, we updated our Corporate Responsibility, Sustainability & Governance Committee charter to more explicitly highlight the committee’s continuing oversight of our integrated Purpose Offense, a unified approach to our focus on and commitment to sustainability, social and community impact, and diversity and inclusion. +You may notice a new look to this year’s proxy statement. For example, we have added a director skills matrix to highlight the diverse and complementary experiences and backgrounds of our director nominees, in addition to formatting updates to make the proxy statement easier to read. This is the first step in a multi-year process intended to enhance communication with our shareholders through our annual report. +We are pleased to invite you to attend the Annual Meeting of Shareholders of NIKE, Inc. to be held at the Tiger Woods Conference Center, One Bowerman Drive, Beaverton, Oregon 97005-6453, on Thursday, September 19, 2019, at 10:00 A.M. Pacific Time. Registration will begin at 9:00 A.M. We look forward to welcoming many of you at our annual meeting. Whether or not you plan to attend, the prompt execution and return of your proxy card will both assure that your shares are represented at the meeting and minimize the cost of proxy solicitation. Thank you for your continued support. +Sincerely, +MARK G. PARKER, CHAIRMAN +“As a company, we +have passion for +sport, for authenticity, +and for relentless +self-improvement. +And as a Board, +we bring that same +passion to corporate +governance.” +July 23, 2019 +2019 PROXY STATEMENT 1 +NOTICE OF ANNUAL MEETING +OF SHAREHOLDERS +September 19, 2019 +TO THE SHAREHOLDERS OF NIKE, INC. +You are cordially invited to the Annual Meeting of Shareholders of NIKE, Inc., an Oregon corporation: +DATE AND TIME: +Thursday, September 19, 2019, +at 10:00 A.M. Pacific Time +LOCATION: +Tiger Woods Conference Center +One Bowerman Drive +Beaverton, Oregon 97005-6453 +ITEMS OF BUSINESS: +PROPOSAL +PAGE REFERENCE +1 To elect the 12 directors named in the accompanying proxy statement for the ensuing year. +Page 5 +Class A +Will elect nine directors. +Class B +Will elect three directors. +Holders of Class A Stock and holders of Class B Stock will vote together as one class all other proposals. +2 To approve executive compensation by an advisory vote. +Page 27 +3 To ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm. +Page 47 +4 To transact such other business as may properly come before the meeting. +All shareholders are invited to attend the meeting. Shareholders of record at the close of business on July 19, 2019, the record date fixed by the Board of Directors, are entitled to notice of and to vote at the meeting. You must present identification and your proxy, voter instruction card, or meeting notice for admission. +By Order of the Board of Directors, +Ann M. Miller +Vice President, Corporate Secretary, and Chief Ethics & Compliance Officer +Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders To Be Held on September 19, 2019. The proxy statement and NIKE, Inc.’s 2019 Annual Report to Shareholders are available online at www.investorvote.com or www.proxyvote.com, for registered and beneficial owners, respectively. +2 NIKE, INC. +TABLE OF CONTENTS +PAGE +NOTICE OF ANNUAL MEETING OF SHAREHOLDERS +2 +Proxy Statement +4 +Voting Securities and Vote Required +4 +CORPORATE GOVERNANCE +5 +PROPOSAL 1 +Election of Directors +5 +NIKE, Inc. Board of Directors +6 +Individual Board Skills Matrix +19 +Board Structure and Responsibilities +21 +Director Compensation for Fiscal 2019 +25 +COMPENSATION DISCUSSION AND ANALYSIS +27 +PROPOSAL 2 +Shareholder Advisory Vote to Approve Executive Compensation +27 +Executive Summary +28 +Operation of the Compensation Committee +30 +Objectives and Elements of Our Compensation Program +31 +Elements of Our Compensation Program +32 +Stock Ownership Guidelines +37 +Hedging and Pledging +37 +Change-in-Control Provisions +37 +Clawback Policy +37 +Risk Assessment +38 +Tax Deductibility of Executive Compensation +38 +Compensation Committee Report +38 +Executive Compensation Tables +39 +AUDIT MATTERS +47 +PROPOSAL 3 +Ratification of Appointment of Independent Registered Public Accounting Firm +47 +Report of the Audit & Finance Committee +48 +STOCK OWNERSHIP INFORMATION +49 +Stock Holdings of Certain Owners and Management +49 +Transactions with Related Persons +51 +OTHER MATTERS +52 +Shareholder Proposals +52 +2019 PROXY STATEMENT 3 +NOTICE OF ANNUAL MEETING OF SHAREHOLDERS +PROXY STATEMENT +We are furnishing proxy materials to our shareholders primarily via the Internet by mailing a Notice of Internet Availability of Proxy Materials, or “Notice”, instead of mailing printed copies of those materials to each shareholder. The Notice directs shareholders to a website where they can access our proxy materials, including our proxy statement and our annual report, and view instructions on how to vote online or by telephone. If you would prefer to receive a paper copy of our proxy materials, please follow the instructions included in the Notice. If you have previously elected to receive our proxy materials electronically, you will continue to receive access to these materials electronically unless you elect otherwise. +The enclosed proxy is solicited by the Board of Directors (the “Board”) of NIKE, Inc. (“NIKE” or the “Company”) for use at the annual meeting of shareholders to be held on September 19, 2019, and at any adjournment thereof (the “Annual Meeting”). Our principal executive offices are located at One Bowerman Drive, Beaverton, Oregon 97005-6453. This proxy statement is first being made available to shareholders on or about August 9, 2019. Shareholders may submit a proxy to vote at the Annual Meeting by following the instructions on the Notice, online or by telephone, or (if they have received paper copies of the proxy materials) by returning a proxy card. +The Company will bear the cost of soliciting proxies. In addition to soliciting proxies by mail, certain officers and employees of the Company, without extra compensation, may also solicit proxies personally or by telephone. Copies of proxy solicitation materials will be furnished to fiduciaries, custodians, and brokerage houses for forwarding to the beneficial owners of shares held in their names. +Shares that are properly voted online or by telephone or for which proxy cards are properly executed and received by the Company prior to the Annual Meeting will be voted in accordance with the instructions specified in such proxies. Where no instructions are given, shares will be voted “FOR” the election of each of the named nominees for director (Proposal 1), “FOR” the proposal regarding an advisory vote to approve executive compensation (Proposal 2), and “FOR” the ratification of the appointment of PricewaterhouseCoopers LLP as independent registered public accounting firm (Proposal 3). +A shareholder giving the enclosed proxy has the power to revoke it at any time before it is exercised by affirmatively electing to vote in person at the meeting or by delivering to Ann M. Miller, Vice President, Corporate Secretary, and Chief Ethics & Compliance Officer of NIKE, Inc., either an instrument of revocation or an executed proxy bearing a later date. +VOTING SECURITIES AND VOTE REQUIRED +Holders of record of NIKE’s Class A Common Stock (“Class A Stock”) and holders of record of NIKE’s Class B Common Stock (“Class B Stock” and together with the Class A Stock, the “Common Stock”) at the close of business on July 19, 2019 will be entitled to vote at the Annual Meeting. On that date, 315,024,752 shares of Class A Stock and 1,251,863,621 shares of Class B Stock were issued and outstanding. Neither class of Common Stock has cumulative voting rights. +Each share of Class A Stock and each share of Class B Stock is entitled to one vote on every matter submitted to the shareholders at the Annual Meeting. +A majority of the votes entitled to be cast on Proposal 1, the election of directors, by each of the Class A Stock and Class B Stock separately constitutes a quorum of Class A Stock and Class B Stock, respectively, for action on Proposal 1. The holders of Class A Stock and the holders of Class B Stock will vote separately on Proposal 1. Holders of Class B Stock are currently entitled to elect 25 percent of the Board, rounded up to the next whole number. Holders of Class A Stock are currently entitled to elect the remaining directors. Under this formula, holders of Class B Stock, voting separately, will elect three directors, and holders of Class A Stock, voting separately, will elect nine directors. Under Oregon Law and our Bylaws, if a quorum of each class of Common Stock is present at the meeting, the three director nominees who receive the greatest number of votes cast by holders of Class B Stock and the nine director nominees who receive the greatest number of votes cast by holders of Class A Stock will be elected directors. +A majority of the votes entitled to be cast on Proposals 2 and 3 by both Class A Stock and Class B Stock together constitutes a quorum for action on those proposals. Holders of Class A Stock and holders of Class B Stock will vote together as one class on Proposals 2 and 3. If a quorum is present at the meeting, Proposals 2 and 3 will be approved if the votes cast in favor of the proposal exceeds the votes cast against the proposal. +Abstentions and broker non-votes are counted for purposes of determining whether a quorum exists. Abstentions and broker non-votes are not included as votes cast and will not affect the outcome of any of the proposals. Broker non-votes occur when a person holding shares in street name, such as through a brokerage firm, does not provide instructions as to how to vote those shares and the broker does not then vote those shares on the shareholder’s behalf. +4 NIKE, INC. +CORPORATE GOVERNANCE +PROPOSAL 1 +ELECTION OF DIRECTORS +A Board of 12 directors will be elected at the Annual Meeting. Directors will hold office until the next annual meeting of shareholders or until their successors are elected and qualified. With the exception of Mr. John W. Rogers, Jr., all of the nominees were elected at the 2018 annual meeting of shareholders. Mr. Rogers was recommended to the Corporate Responsibility, Sustainability & Governance Committee for consideration by a third-party director search firm. +Mr. Alan B. Graf, Jr., Mr. Peter B. Henry, and Ms. Michelle A. Peluso are nominated by the Board of Directors for election by the holders of Class B Stock. The other nine nominees are nominated by the Board for election by the holders of Class A Stock. +Under Oregon law and our Bylaws, if a quorum of each class of shareholders is present at the Annual Meeting, the nine director nominees who receive the greatest number of votes cast by holders of Class A Stock and the three director nominees who receive the greatest number of votes cast by holders of Class B Stock will be elected directors. Abstentions and broker non-votes will have no effect on the results of the vote. Unless otherwise instructed, proxy holders will vote the proxies they receive for the nominees listed below. If any nominee becomes unable to serve, the holders of the proxies may, in their discretion, vote the shares for a substitute nominee or nominees designated by the Board. +The Bylaws and the Corporate Governance Guidelines of the Company provide that any nominee for director in an uncontested election who receives a greater number of votes “withheld” from his or her election than votes “for” such election shall tender his or her resignation for consideration by the Corporate Responsibility, Sustainability & Governance Committee. The committee will recommend to the Board the action to be taken with respect to the resignation. The Board will publicly disclose its decision within 90 days of the certification of the election results. +Background information on the nominees as of July 23, 2019, including some of the attributes that led to their selection, appears below. The Corporate Responsibility, Sustainability & Governance Committee has determined that each director meets the qualification standards described below under “Individual Board Skills Matrix - Director Nominations”. In addition, the Board firmly believes that the experience, attributes, and skills of any single director nominee should not be viewed in isolation, but rather in the context of the experience, attributes, and skills that all director nominees bring to the Board as a whole, each of which contributes to the function of an effective Board. +BOARD RECOMMENDATION +The Board of Directors recommends that the Class A Shareholders vote FOR the election of nominees to the Board of Directors +The Board of Directors recommends that the Class B Shareholders vote FOR the election of nominees to the Board of Directors +2019 PROXY STATEMENT 5 +CORPORATE GOVERNANCE +NIKE, INC. BOARD OF DIRECTORS +BOARD OVERVIEW +GENDER DIVERSITY +GENDER/ETHNIC DIVERSITY +AGE +TENURE +BOARD SKILLS & EXPERIENCE DIVERSITY +DIVERSITY 6 /12 +Representation of a range of perspectives expands the Board’s understanding of the needs and viewpoints of consumers, employees, and other stakeholders worldwide. +FINANCIAL EXPERTISE 9 /12 +Financial expertise assists our Board in overseeing our financial statements, capital structure and internal controls. +CEO EXPERIENCE 6 / 12 +CEO experience brings leadership qualifications and skills that help our Board to capably advise, support, and oversee our management team, including regarding our strategy to drive long-term value. +INTERNATIONAL 9 / 12 +International exposure yields an understanding of diverse business environments, economic conditions, and cultural perspectives that informs our global business and strategy and enhances oversight of our multinational operations. +DIGITAL/TECHNOLOGY 6 /12 +Technology experience helps our Board oversee cybersecurity and advise our management team as we seek to enhance the consumer experience and further develop our multi-channel strategy. +RETAIL INDUSTRY 4 /12 +Retail experience brings a deep understanding of factors affecting our industry, operations, business needs, and strategic goals. +MEDIA 3 /12 +Media experience provides the Board with insight about connecting with consumers and other stakeholders in a timely and impactful manner. +ACADEMIA 2 /12 +Academia provides organizational management experience and knowledge of current issues in academia and thought leadership. +HR/TALENT MANAGEMENT 6 /12 +HR and talent management experience assists our Board in overseeing executive compensation, succession planning, and employee engagement. +GOVERNANCE 8 /12 +Public company board experience provides insight into new and best practices which informs our commitment to excellence in corporate governance. +CORPORATE GOVERNANCE HIGHLIGHTS +ü 10 out of 12 directors are expected to be independent as of the Annual Meeting +ü Lead Independent Director with clearly defined role +ü Refreshed Board and committee structure, with 3 new independent directors added in last two fiscal years +ü Full Board elected annually +ü Retirement policy generally requires that directors do not stand for election after reaching the age of 72 +6 NIKE, INC. +CORPORATE GOVERNANCE +NOMINEES FOR ELECTION BY CLASS A SHAREHOLDERS +CATHLEEN A. BENKO +AGE +DIRECTOR SINCE +COMMITTEE +OTHER CURRENT +PUBLIC DIRECTORSHIPS +FAVORITE NIKE PRODUCT(S) +61 +2018 +Compensation +None +Converse All Star +Platform Low Top and +Nike AeroLayer Jacket +SKILLS AND QUALIFICATIONS +DIVERSITY +DIGITAL/TECHNOLOGY +HR/TALENT MANAGEMENT +INTERNATIONAL +Ms. Benko is a former Vice Chairman and Managing Principal of Deloitte LLP (“Deloitte”), an organization that, through its subsidiaries and network of member firms, provides audit, consulting, tax, and advisory services to clients globally. During her nearly 30-year career with Deloitte, Ms. Benko held many leadership roles, several concurrent with her appointment as Vice Chairman and Managing Principal in 2011. +• +From 2015 to 2018, Ms. Benko served as Senior Partner working within the firm's “Digital Giants” practice where she was the lead advisory partner for several digital-native companies. +• +From 2010 to 2014, Ms. Benko served as Chief Digital, Brand, and Communications Officer. +• +Previous to her role as Chief Digital, Brand, and Communications Officer, Ms. Benko held multiple technology and talent management roles, including serving as the company’s first Vice Chairman and Chief Talent Officer from 2006 to 2010, its Chief Inclusion Officer from 2008 to 2010, and as Managing Principal, Initiative for the Retention and Advancement of Women, from 2003 to 2009. +• +Ms. Benko led Deloitte’s technology sector from 2003 to 2007 and was previously Deloitte’s first Global e-Business Leader, a position she held from 1998 to 2002. +Ms. Benko is chair of a Harvard Business School Advisory Council. +2019 PROXY STATEMENT 7 +CORPORATE GOVERNANCE +ELIZABETH J. COMSTOCK +AGE +DIRECTOR SINCE +COMMITTEE +OTHER CURRENT +PUBLIC DIRECTORSHIPS +FAVORITE NIKE PRODUCT(S) +58 +2011 +Compensation +None +Nike Cortez and NikeLab +SKILLS AND QUALIFICATIONS +DIVERSITY +DIGITAL/TECHNOLOGY +MEDIA +INTERNATIONAL +Ms. Comstock is the former Vice Chair of General Electric Company (“GE”). She led GE’s efforts to accelerate new growth and operated GE Business Innovations, which included Current, GE Lighting, GE Ventures & Licensing and GE sales, marketing and communications. +• +At GE, Ms. Comstock was appointed: +• +Senior Vice President, Chief Marketing and Commercial Officer in 2008, +• +President, NBC Universal Integrated Media in 2006, +• +Corporate Vice President and Chief Marketing Officer in 2003, +• +Vice President of Corporate Communications in 1998, +• +Senior Vice President, NBC Corporate Communications in 1996, and +• +Vice President, Communications, NBC News Communications in 1994. +• +Prior to joining GE in 1994, Ms. Comstock held a succession of positions at NBC, CBS, and Turner Broadcasting. +Ms. Comstock is a trustee of The National Geographic Society. +8 NIKE, INC. +CORPORATE GOVERNANCE +JOHN G. CONNORS +AGE +DIRECTOR SINCE +COMMITTEE +OTHER CURRENT +PUBLIC DIRECTORSHIPS +FAVORITE NIKE PRODUCT(S) +60 +2005 +Audit & Finance +Splunk, Inc. +Nike React +SKILLS AND QUALIFICATIONS +FINANCIAL EXPERTISE +DIGITAL/TECHNOLOGY +GOVERNANCE +INTERNATIONAL +Mr. Connors is a partner in Ignition Partners LLC, a Seattle-area venture capital firm. +• +Mr. Connors served as Senior Vice President and Chief Financial Officer of Microsoft Corporation (“Microsoft”) from December 1999 to May 2005. +• +Mr. Connors joined Microsoft in 1989 and held various management positions, including: +• +Vice President, Worldwide Enterprise Group in 1999, +• +Chief Information Officer from 1996 to 1999, and +• +Corporate Controller from 1994 to 1996. +Mr. Connors is a member of the Board of Directors of Splunk, Inc. In addition to this public company board service, he is also a member of the Board of Directors of privately held companies Chef, Inc., Motif Investing, Inc., ICERTIS, Inc., Tempered Networks Inc., LiveStories Inc., and KenSci Inc., and is on the Board of the Washington Policy Center. +2019 PROXY STATEMENT 9 +CORPORATE GOVERNANCE +TIMOTHY D. COOK, LEAD INDEPENDENT DIRECTOR +AGE +DIRECTOR SINCE +COMMITTEE +OTHER CURRENT +PUBLIC DIRECTORSHIPS +FAVORITE NIKE PRODUCT(S) +58 +2005 +Compensation, Chair +Apple, Inc. +Nike React Element and +Nike Sportswear Tech +Pack Hoodie +SKILLS AND QUALIFICATIONS +FINANCIAL EXPERTISE +DIGITAL/TECHNOLOGY +HR/TALENT MANAGEMENT +CEO EXPERIENCE +RETAIL INDUSTRY +GOVERNANCE +INTERNATIONAL +Mr. Cook is the Company’s Lead Independent Director and is the Chief Executive Officer of Apple, Inc. (“Apple”). +• +Mr. Cook joined Apple in March 1998 as Senior Vice President of Worldwide Operations and also served as its Executive Vice President, Worldwide Sales and Operations and Chief Operating Officer. +• +Mr. Cook was Vice President, Corporate Materials for Compaq Computer Corporation from 1997 to 1998. +• +Previous to his work at Compaq, Mr. Cook served in the positions of Senior Vice President Fulfillment and Chief Operating Officer of the Reseller Division at Intelligent Electronics from 1994 to 1997. +• +Mr. Cook also worked for International Business Machines Corporation from 1983 to 1994, most recently as Director of North American Fulfillment. +Mr. Cook is a member of the Board of Directors of Apple. In addition to this public company board service, he is also a member of the Board of Directors of the National Football Foundation. +10 NIKE, INC. +CORPORATE GOVERNANCE +JOHN J. DONAHOE II +AGE +DIRECTOR SINCE +COMMITTEE +OTHER CURRENT +PUBLIC DIRECTORSHIPS +FAVORITE NIKE PRODUCT(S) +59 +2014 +Audit & Finance +ServiceNow, Inc. and +PayPal Holdings, Inc. +Nike Free RN Flyknit and +Nike Flex Golf Pants +SKILLS AND QUALIFICATIONS +FINANCIAL EXPERTISE +DIGITAL/TECHNOLOGY +HR/TALENT MANAGEMENT +CEO EXPERIENCE +RETAIL INDUSTRY +GOVERNANCE +INTERNATIONAL +Mr. Donahoe is President and Chief Executive Officer of ServiceNow, Inc. +• +From 2008 through 2015, Mr. Donahoe served as President and Chief Executive Officer of eBay, Inc. (“eBay”), provider of the global eBay.com online marketplace and PayPal digital payments platform. +• +Mr. Donahoe joined eBay in 2005 as President of eBay Marketplaces, responsible for eBay’s global e-Commerce businesses. +• +Prior to joining eBay, Mr. Donahoe was the Chief Executive Officer and Worldwide Managing Director of Bain & Company from 1999 to 2005, and a Managing Director from 1992 to 1999. +Mr. Donahoe is a member of the Board of Directors of ServiceNow, Inc. and Chairman of PayPal Holdings, Inc. In addition to this public company board service, he also serves on the Board of Trustees for The Bridgespan Group. Mr. Donahoe served on the Board of Directors of Intel Corporation from March 2009 until May 2017. +2019 PROXY STATEMENT 11 +CORPORATE GOVERNANCE +TRAVIS A. KNIGHT +AGE +DIRECTOR SINCE +COMMITTEE +OTHER CURRENT +PUBLIC DIRECTORSHIPS +FAVORITE NIKE PRODUCT(S) +45 +2015 +Executive +None +Nike Air Presto +SKILLS AND QUALIFICATIONS +FINANCIAL EXPERTISE +CEO EXPERIENCE +MEDIA +Mr. Knight is the President and Chief Executive Officer of the animation studio, LAIKA, LLC (“LAIKA”), which specializes in feature-length films. +• +Mr. Knight has been involved in all principal creative and business decisions at LAIKA since its founding in 2003, serving in successive management positions as Lead Animator, Vice President of Animation, and then as President and Chief Executive Officer in 2009. +• +Mr. Knight was Producer and Director of the feature film Kubo and the Two Strings (2017) which was nominated for an Academy Award and winner of the BAFTA award for Best Animated Film. +• +Mr. Knight has served as Producer and Lead Animator on Academy Award-nominated feature-length films The Boxtrolls (2014) and ParaNorman (2012), for which he won an Annie Award for Outstanding Achievement in Character Animation, and Lead Animator for Coraline (2009). +• +Prior to his work at LAIKA, Mr. Knight held various animation positions at Will Vinton Studios from 1998 to 2002, as a stop-motion animator for television series, commercials, and network promotions. He has been recognized for his work on the Emmy Award-winning stop-motion animated television series The PJs. +Mr. Knight serves on the Board of Directors of LAIKA. He is the son of NIKE’s co-founder, Mr. Philip Knight, who currently serves as Chairman Emeritus. In addition to his skills and qualifications described above, Mr. Travis Knight was selected to serve on the Board because he has a significant role in the management of the Class A Stock owned by Swoosh, LLC, strengthening the alignment of the Board with the interests of NIKE shareholders. +12 NIKE, INC. +CORPORATE GOVERNANCE +MARK G. PARKER, CHAIRMAN OF THE BOARD +AGE +DIRECTOR SINCE +COMMITTEE +OTHER CURRENT +PUBLIC DIRECTORSHIPS +FAVORITE NIKE PRODUCT(S) +63 +2006 +Executive, Chair +The Walt Disney Company +Couldn’t possibly pick just one +SKILLS AND QUALIFICATIONS +FINANCIAL EXPERTISE +INTERNATIONAL +HR/TALENT MANAGEMENT +CEO EXPERIENCE +RETAIL INDUSTRY +GOVERNANCE +Mr. Parker is Chairman of the Board of Directors of the Company, and has served as President and Chief Executive Officer and a director since 2006. He was named Chairman of the Board in fiscal 2017. +• +Mr. Parker has been employed by NIKE since 1979 with primary responsibilities in product research, design and development, marketing, and brand management. +• +Mr. Parker was appointed: +• +President of the NIKE Brand in 2001, +• +Vice President of Global Footwear in 1998, +• +General Manager in 1993, +• +Corporate Vice President in 1989, and +• +Divisional Vice President in charge of product development in 1987. +Mr. Parker is a member of the Board of Directors of The Walt Disney Company. In addition to his skills and qualifications described above, Mr. Parker was selected to serve on the Board because his position as Chief Executive Officer makes his position as Chairman of the Board critical. +2019 PROXY STATEMENT 13 +CORPORATE GOVERNANCE +JOHN W. ROGERS, JR. +AGE +DIRECTOR SINCE +COMMITTEE +OTHER CURRENT +PUBLIC DIRECTORSHIPS +FAVORITE NIKE PRODUCT(S) +61 +2018 +Corporate Responsibility, +Sustainability & Governance +McDonald’s Corporation and The New York Times Company +Nike KD Sneakers +SKILLS AND QUALIFICATIONS +DIVERSITY +CEO EXPERIENCE +GOVERNANCE +FINANCIAL EXPERTISE +Mr. Rogers is Chairman, Chief Executive Officer and Chief Investment Officer of Ariel Investments, LLC, a privately-held money management firm he founded in 1983, which serves individual and institutional investors through its mutual funds and separate accounts. Mr. Rogers is a Trustee of Ariel Investment Trust, the investment company consisting of the six mutual funds his firm manages. +• +In 2008, Mr. Rogers was awarded Princeton University’s highest honor, the Woodrow Wilson Award, presented each year to the alumnus whose career embodies a commitment to national service. +• +Mr. Rogers served as co-chair for the Presidential Inaugural Committee 2009, and more recently, joined the Barack Obama Foundation’s Board of Directors. +Mr. Rogers is a member of the Board of Directors of McDonald’s Corporation and The New York Times Company. In addition to this public company board service, he also serves as trustee of the University of Chicago, Rush University Medical Center, the Robert F. Kennedy Center for Justice and Human Rights, the National Association of Basketball Coaches (NABC) Foundation, Inc., and is a life trustee of the Chicago Symphony Orchestra. Mr. Rogers served on the Board of Directors of Exelon Corporation from October 2000 until April 2019. +14 NIKE, INC. +CORPORATE GOVERNANCE +JOHN R. THOMPSON, JR. +AGE +DIRECTOR SINCE +COMMITTEE +OTHER CURRENT +PUBLIC DIRECTORSHIPS +FAVORITE NIKE PRODUCT(S) +77 +1991 +None +None +Nike Air Force 1 +SKILLS AND QUALIFICATIONS +DIVERSITY +ACADEMIA +HR/TALENT MANAGEMENT +MEDIA +Mr. Thompson was head coach of the Georgetown University men’s basketball team from 1972 until 1998. +• +Mr. Thompson serves as Assistant to the President of Georgetown University for Urban Affairs and he is a past President of the National Association of Basketball Coaches and presently serves on its Board of Governors. +• +Mr. Thompson hosted a sports radio talk show in Washington, D.C. for 13 years, and is a nationally broadcast sports analyst for Turner Network Television (TNT) and Dial Global, Inc. +• +Mr. Thompson was head coach of the 1988 United States Olympic basketball team. +Mr. Thompson has honorary doctorate degrees from Wheeling Jesuit University, Georgetown University, University of the District of Columbia, and St. Peter’s College. +BOARD RECOMMENDATION +The Board of Directors recommends that the Class A Shareholders vote FOR the election of the nominees above to the Board of Directors. +2019 PROXY STATEMENT 15 +CORPORATE GOVERNANCE +NOMINEES FOR ELECTION BY CLASS B SHAREHOLDERS +ALAN B. GRAF, JR. +AGE +DIRECTOR SINCE +COMMITTEE +OTHER CURRENT +PUBLIC DIRECTORSHIPS +FAVORITE NIKE PRODUCT(S) +65 +2002 +Audit & Finance, Chair +Mid-America Apartment Communities, Inc. +Nike Air Max 270 +SKILLS AND QUALIFICATIONS +FINANCIAL EXPERTISE +INTERNATIONAL +GOVERNANCE +Mr. Graf is the Executive Vice President and Chief Financial Officer of FedEx Corporation (“FedEx”), a position he has held since 1998, and is a member of FedEx’s Executive Committee. +• +Mr. Graf joined FedEx in 1980 and was Senior Vice President and Chief Financial Officer for FedEx Express, FedEx’s predecessor, from 1991 to 1998. +• +Mr. Graf previously served on the Board of Directors of Kimball International Inc., Storage USA, Inc., and Arkwright Mutual Insurance Co. +Mr. Graf is a member of the Board of Directors of Mid-America Apartment Communities, Inc. In addition to this public company board service, he is also a director of the Indiana University Foundation and Methodist Le Bonheur Healthcare, and Chairman of the University of Memphis Board of Trustees. +16 NIKE, INC. +CORPORATE GOVERNANCE +PETER B. HENRY +AGE +DIRECTOR SINCE +COMMITTEE +OTHER CURRENT +PUBLIC DIRECTORSHIPS +FAVORITE NIKE PRODUCT(S) +49 +2018 +Corporate Responsibility, +Sustainability & Governance +Citigroup Inc. +Nike Epic React +SKILLS AND QUALIFICATIONS +DIVERSITY +INTERNATIONAL +GOVERNANCE +FINANCIAL EXPERTISE +ACADEMIA +Mr. Henry is Dean Emeritus of New York University’s Leonard N. Stern School of Business and William R. Berkley Professor of Economics and Finance. +• +Mr. Henry assumed the Deanship of the Stern School of Business in January 2010 and served through December 2017. +• +Prior to joining Stern, Mr. Henry was the Konosuke Matsushita Professor of International Economics at the Stanford University Graduate School of Business. +• +In June 2009, President Obama appointed Mr. Henry to the President’s Commission on White House Fellowships. +• +In 2008, Mr. Henry led Barack Obama’s Presidential Transition Team in its review of international lending agencies such as the IMF and the World Bank. +Mr. Henry is a member of the Board of Directors of Citigroup Inc. In addition to this public company board service, he also serves on the Board of Directors of the National Bureau of Economic Research and the Economic Club of New York and is a member of the Council of Foreign Relations and the Economic Advisory Panel of the Federal Reserve Bank of New York. Mr. Henry served on the Board of Directors of General Electric from July 2016 until April 2018 and Kraft Foods Group, Inc. and its predecessor, Kraft Foods Inc., from May 2011 until July 2015. +2019 PROXY STATEMENT 17 +CORPORATE GOVERNANCE +MICHELLE A. PELUSO +AGE +DIRECTOR SINCE +COMMITTEE +OTHER CURRENT +PUBLIC DIRECTORSHIPS +FAVORITE NIKE PRODUCT(S) +47 +2014 +Corporate Responsibility, +Sustainability & Governance, Chair +None +Nike Dunk Sky Hi Wedge and Nike Elevate Shorts +SKILLS AND QUALIFICATIONS +DIVERSITY +INTERNATIONAL +HR/TALENT MANAGEMENT +FINANCIAL EXPERTISE +DIGITAL/TECHNOLOGY +GOVERNANCE +CEO EXPERIENCE +RETAIL INDUSTRY +Ms. Peluso is Senior Vice President Digital Sales and Chief Marketing Officer at IBM. +• +Ms. Peluso served as Chief Executive Officer of online shopping destination Gilt Groupe, Inc. (“Gilt”) from 2013 until its sale to Hudson’s Bay Company in February 2016, and was on Gilt’s Board of Directors from 2009 to 2016. +• +Prior to joining Gilt in 2013, Ms. Peluso served as Global Consumer Chief Marketing and Internet Officer of Citigroup Inc. from 2009 to 2013. +• +From 2002 to 2009, Ms. Peluso held senior management positions at Travelocity.com LP (“Travelocity”), being appointed Chief Operating Officer in 2003, and President and Chief Executive Officer in December 2003. +• +Prior to joining Travelocity, in 1999 Ms. Peluso founded Site59, an online travel site, serving as its Chief Executive Officer until its acquisition by Travelocity in 2002. +Ms. Peluso is a director of the nonprofit TechnoServe. +BOARD RECOMMENDATION +The Board of Directors recommends that the Class B Shareholders vote FOR the election of the nominees above to the Board of Directors. +18 NIKE, INC. +CORPORATE GOVERNANCE +INDIVIDUAL BOARD SKILLS MATRIX +EXPERIENCE, EXPERTISE, OR ATTRIBUTES +BENKO +COMSTOCK +CONNORS +COOK +DONAHOE +GRAF +HENRY +KNIGHT +PARKER +PELUSO +ROGERS +THOMPSON +DIVERSITY +Representation of a range of perspectives expands the Board’s understanding of the needs and viewpoints of consumers, employees, and other stakeholders worldwide. +ü +ü +ü +ü +ü +ü +FINANCIAL EXPERTISE +Financial expertise assists our Board in overseeing our financial statements, capital structure and internal controls. +ü +ü +ü +ü +ü +ü +ü +ü +ü +CEO EXPERIENCE +CEO experience brings leadership qualifications and skills that help our Board to capably advise, support, and oversee our management team, including regarding our strategy to drive long-term value. +ü +ü +ü +ü +ü +ü +INTERNATIONAL +International exposure yields an understanding of diverse business environments, economic conditions, and cultural perspectives that informs our global business and strategy and enhances oversight of our multinational operations. +ü +ü +ü +ü +ü +ü +ü +ü +ü +DIGITAL/TECHNOLOGY +Technology experience helps our Board oversee cybersecurity and advise our management team as we seek to enhance the consumer experience and further develop our multi-channel strategy. +ü +ü +ü +ü +ü +ü +RETAIL INDUSTRY +Retail experience brings a deep understanding of factors affecting our industry, operations, business needs, and strategic goals. +ü +ü +ü +ü +MEDIA +Media experience provides the Board with insight about connecting with consumers and other stakeholders in a timely and impactful manner. +ü +ü +ü +ACADEMIA +Academia provides organizational management experience and knowledge of current issues in academia and thought leadership. +ü +ü +HR/TALENT MANAGEMENT +HR and talent management experience assists our Board in overseeing executive compensation, succession planning, and employee engagement. +ü +ü +ü +ü +ü +ü +GOVERNANCE +Public company board experience provides insight into new and best practices which informs our commitment to excellence in corporate governance. +ü +ü +ü +ü +ü +ü +ü +ü +2019 PROXY STATEMENT 19 +CORPORATE GOVERNANCE +DIRECTOR NOMINATIONS +The Corporate Responsibility, Sustainability & Governance Committee identifies potential director candidates through a variety of means, including recommendations from members of the Corporate Responsibility, Sustainability & Governance Committee or the Board, suggestions from Company management, and shareholder recommendations. The committee also may, in its discretion, engage director search firms to identify candidates. Shareholders may recommend director candidates for consideration by the Corporate Responsibility, Sustainability & Governance Committee by submitting a written recommendation to the committee, c/o Ann M. Miller, Vice President, Corporate Secretary, and Chief Ethics & Compliance Officer, NIKE, Inc., One Bowerman Drive, Beaverton, Oregon 97005-6453. The recommendation should include the candidate’s name, age, qualifications (including principal occupation and employment history), and written consent to be named as a nominee in the Company’s proxy statement and to serve as a director, if elected. +The Board of Directors has adopted qualification standards for the selection of non-management nominees for director, which can be found at our corporate website: http://investors.nike.com. As provided in these standards and the Company’s corporate governance guidelines, nominees for director are selected on the basis of, among other things, distinguished business experience or other non-business achievements; education; significant knowledge of international business, finance, marketing, technology, human resources, diversity & inclusion, law, or other fields which are complementary to, and balance the knowledge of, other Board members; a desire to represent the interests of all shareholders; independence; character; ethics; good judgment; diversity; and ability to devote substantial time to discharge Board responsibilities. +The Corporate Responsibility, Sustainability & Governance Committee identifies qualified potential candidates without regard to their age, gender, race, national origin, sexual orientation, or religion. While the Board has no policy regarding Board member diversity, the Corporate Responsibility, Sustainability & Governance Committee considers and discusses diversity in selecting nominees for director and in the re-nomination of an incumbent director. The committee views diversity broadly to include, among other things, differences in backgrounds, qualifications, experiences, viewpoint, geographic location, education, skills and expertise (including financial, accounting, compliance, corporate social responsibility, public policy, cybersecurity or other expertise relevant to service on the Board), professional and industry experience, and personal characteristics (including gender, ethnicity/race and sexual orientation). The Board believes that a variety and balance of perspectives on the Board results in more thoughtful and robust deliberations. +In considering the re-nomination of an incumbent director, the Corporate Responsibility, Sustainability & Governance Committee reviews the director’s overall service to the Company during his or her term, including the number of meetings attended, level of participation and quality of performance, as well as any special skills, experience or diversity that such director brings to the Board. All potential new director candidates, whether recommended by shareholders or identified by other means, are initially screened by the Chair of the Corporate Responsibility, Sustainability & Governance Committee, who may seek additional information about the background and qualifications of the candidate, and who may determine that a candidate does not have qualifications that merit further consideration by the full committee. With respect to new director candidates who pass the initial screening, the Corporate Responsibility, Sustainability & Governance Committee meets to discuss and consider each candidate’s qualifications and potential contributions to the Board, and determines by majority vote whether to recommend such candidates to the Board. The final decision to either appoint a candidate to fill a vacancy between annual meetings or include a candidate on the slate of nominees proposed at an annual meeting is made by the Board. +It is the general policy of the Board that directors first elected after the fiscal year ended May 31, 1993 will not stand for re‑election after reaching the age of 72. Dr. Lechleiter, who has served on the Board since 2009, has announced that he will not stand for re-election to the Board at the 2019 Annual Meeting. +DIRECTOR INDEPENDENCE +Pursuant to NYSE rules, in order for a director to qualify as “independent”, the Board of Directors must affirmatively determine that the director has no material relationship with the Company that would impair the director’s independence. The Board affirmatively determined that commercial or charitable relationships below the following thresholds will not be considered material relationships that impair a director’s independence: (i) if a NIKE director or immediate family member is an executive officer of another company that does business with NIKE and the annual sales to, or purchases from, NIKE are less than one percent of the annual revenues of the other company; and (ii) if a NIKE director or immediate family member serves as an officer, director or trustee of a charitable organization, and NIKE’s contributions to the organization are less than one percent of that organization’s total annual charitable receipts. After applying this categorical standard, the Board has determined that the following directors who served during fiscal 2019 — Cathleen A. Benko, Elizabeth J. Comstock, John G. Connors, Timothy D. Cook, John J. Donahoe II, Alan B. Graf, Jr., Peter B. Henry, John C. Lechleiter, Michelle A. Peluso, Johnathan A. Rodgers, and John W. Rogers, Jr. — have no material relationship with the Company and, therefore, are independent. Messrs. Travis A. Knight and Mark G. Parker were not independent pursuant to NYSE rules. Mr. Knight was not independent pursuant to NYSE rules because he is the son of NIKE’s co-founder and former Chairman of the Board, Mr. Philip Knight, who received compensation in excess of the +20 NIKE, INC. +CORPORATE GOVERNANCE +threshold set forth in applicable NYSE rules (the “NYSE threshold”) for his position as Chairman Emeritus. The compensation paid to Mr. Philip Knight is described in the section below titled “Transactions with Related Persons”. Mr. Parker was not independent pursuant to NYSE rules because he was an executive officer of the Company during fiscal 2019. As of the date of this proxy statement, Mr. Thompson was not independent pursuant to NYSE rules because the Company had a, now terminated, contract with his son, John Thompson III, former head basketball coach at Georgetown University, to provide endorsement and consulting services to the Company with compensation during the prior three years in excess of the NYSE threshold. However, the Board of Directors has also determined that Mr. Thompson will be independent beginning September 1, 2019. +BOARD STRUCTURE AND RESPONSIBILITIES +The Board is currently composed of ten independent directors and three directors who are not independent under the New York Stock Exchange (the “NYSE”) listing rules. Mr. Thompson, who is currently not independent under the NYSE listing rules, will be independent as of September 1, 2019, and Dr. Lechleiter, who is independent, will not stand for re-election to the Board at the 2019 Annual Meeting. During fiscal 2019, there were five meetings of the Board and all of our then serving directors attended at least 75 percent of the total number of meetings of the Board and committees on which he or she served. The Company encourages all directors to attend each annual meeting of shareholders, and all directors serving at the time of the 2018 annual meeting attended the 2018 annual meeting. +BOARD LEADERSHIP STRUCTURE +NIKE’s governing documents provide the Board with flexibility to select the appropriate leadership structure of the Company. In determining the leadership structure, the Board considers many factors, including the specific needs of the business, fulfilling the duties of the Board, and the best interests of the Company’s shareholders. Mr. Parker, the Company’s President and Chief Executive Officer (“CEO”) since 2006, also serves as the Chairman of the Board, a position he has held since 2016. As Chairman, Mr. Parker presides over meetings of the Board and shareholders. As President and CEO, Mr. Parker is in charge of the general supervision, direction, and control of the business and affairs of the Company, subject to the overall direction and supervision of the Board and its committees. +The Board believes this leadership structure is appropriate for the Company due to Mr. Parker’s intimate knowledge of the Company’s business, his unique experience, talent, tenure, and effective leadership. The structure permits Mr. Parker, by serving as both Chairman and CEO, to draw on his knowledge of the operations of the business, industry developments, customers, consumers, shareholders, and employees in providing leadership on the broad strategic issues considered by the Board. +The Corporate Responsibility, Sustainability & Governance Committee determined that given Mr. Parker’s position as Chairman, President and CEO, a lead independent director would ensure strong independent leadership of the Board. Therefore, simultaneous with Mr. Parker’s appointment as Chairman in 2016, the Board created the position of Lead Independent Director to execute the following functions: +• +serve as a liaison between the Chairman/CEO and the independent directors; +• +approve the meeting agendas for the Board; +• +advise the Chairman/CEO regarding the sufficiency, quality, quantity, and timeliness of information provided to the Board; +• +ensure that meeting schedules permit sufficient time for discussion of all agenda items; +• +provide consultation and direct communication with major shareholders, if requested; +• +preside at meetings of the Board at which the Chairman/CEO is not present, including executive sessions; and +• +perform other duties specified in the Lead Independent Director Charter. +In June 2019, the Board re-appointed Tim Cook to serve as Lead Independent Director for a term of three years. +The chairs of Board committees also play an active role in the leadership structure of the Board. The Corporate Responsibility, Sustainability & Governance Committee and the Board endeavor to select independent committee chairs who will provide strong leadership to guide the important work of the Board committees. Committee chairs work with the Company’s senior executives to ensure the committees are discussing the key strategic risks and opportunities of the Company. In the absence of the Lead Independent Director, a presiding director is appointed to chair executive sessions of non-management directors (consisting of all directors other than Mr. Parker). The position of presiding director is rotated among the chairs of the various Board committees, other than the Executive Committee. Executive sessions are regularly scheduled and held at least once each year. +2019 PROXY STATEMENT 21 +CORPORATE GOVERNANCE +Mr. Philip Knight, co-founder and former Chairman of the Company, serves as Chairman Emeritus, with a standing invitation to attend meetings of the Board and its committees as a non-voting observer. The Board believes that it benefits from the valuable experience and insights of the Company’s co-founder and former Chairman of the Board. +For all of these reasons, the Board believes this leadership structure is optimal. +BOARD COMMITTEES +The Board’s current standing committees are an Audit & Finance Committee; a Compensation Committee; a Corporate Responsibility, Sustainability & Governance Committee; and an Executive Committee. The Board may appoint other committees from time to time. Each standing committee has a written charter; all such charters, as well as the Company’s corporate governance guidelines, are available at the Company’s corporate website: http://investors.nike.com and will be provided in print to any shareholder who submits a request in writing to NIKE Investor Relations, One Bowerman Drive, Beaverton, Oregon 97005-6453. +AUDIT & FINANCE COMMITTEE +MEMBERS: +John G. Connors +John J. Donahoe II +Alan B. Graf, Jr., Chair +MEETINGS IN FY ’19: 13 +ROLES AND RESPONSIBILITIES: +The Audit & Finance Committee provides assistance to the Board in fulfilling its legal and fiduciary obligations with respect to: +• Matters involving the Company’s accounting, auditing, financial reporting, internal controls, information security (including risks related to cyber security), data protection, and overseeing the financial policies and activities of the Company that may have a material impact on the results of operations or the financial position of the Company; +• The integrity of the Company’s financial statements, the compliance with legal and regulatory requirements, the independent auditor’s qualifications and independence, and the performance of the Company’s internal audit function and independent auditor; and +• Considering long-term financing options, long-range tax, financial regulatory and foreign currency issues facing the Company, and management’s recommendations concerning capital deployment strategy, major capital expenditures, and material acquisitions or divestitures. +The Board has determined that each member of the Audit & Finance Committee meets all independence and financial literacy requirements applicable to audit committees under the NYSE listing standards and applicable regulations adopted by the U.S. Securities and Exchange Commission (the “SEC”). The Board has also determined that Mr. Alan B. Graf, Jr. is an “audit committee financial expert” as defined in regulations adopted by the SEC. +COMPENSATION COMMITTEE +MEMBERS: +Cathleen A. Benko +Elizabeth J. Comstock +Timothy D. Cook, Chair +MEETINGS IN FY ’19: 5 +ROLES AND RESPONSIBILITIES: +In fiscal 2019, the Company revised the Charter of the Compensation Committee. Under its revised charter, the committee’s duties include the following: +• Evaluate the performance of the CEO; +• Review and approve the compensation of each executive officer; +• Grant equity incentive awards under the NIKE, Inc. Stock Incentive Plan, and determine targets and awards under the NIKE, Inc. Executive Performance Sharing Plan and the NIKE, Inc. Long-Term Incentive Plan; +• Review and provide guidance to management regarding Company policies, programs and practices related to talent management and development for executive officers and senior management; and +• Make recommendations to the Board regarding the compensation of directors. +The Board has determined that each member of the Compensation Committee meets all independence requirements applicable to compensation committees under the NYSE listing standards. +22 NIKE, INC. +CORPORATE GOVERNANCE +CORPORATE RESPONSIBILITY, SUSTAINABILITY & GOVERNANCE COMMITTEE +MEMBERS: +Peter B. Henry +John C. Lechleiter* +Michelle A. Peluso, Chair +John W. Rogers, Jr.** +MEETINGS IN FY ’19: 6 +ROLES AND RESPONSIBILITIES: +In fiscal 2019, the Company revised the Charter of the Corporate Responsibility, Sustainability & Governance Committee in connection with the Company’s Purpose Offense. NIKE’s Purpose Offense is organized around three primary pillars: Sustainability, Social and Community Impact, and Diversity & Inclusion. Under its revised charter, the committee’s duties have been restated to include the following: +• Review and evaluate NIKE’s significant strategies, activities, policies, investments and programs regarding social purpose, corporate responsibility and sustainability; +• Provide oversight of management’s efforts to ensure that the Company’s dedication to sustainability is reflected in its business operations; +• Monitor the Company’s progress towards its diversity and inclusion objectives and compliance with the Company’s responsibilities as an equal opportunity employer; +• Review and evaluate the social, political and environmental impact, trends and issues in connection with the Company’s business activities and make recommendations to the Board; +• Provide oversight of the Company’s community and social impact efforts; +• Oversee protection of the Company’s corporate reputation and other matters of importance to the Company and its stakeholders; +• Continue to identify individuals qualified to become Board members and recommend director nominees for election at each annual shareholder meeting; +• Develop and recommend to the Board corporate governance guidelines and a code of business conduct and ethics; and +• Oversee the annual self-evaluations of the Board and its committees and make recommendations to the Board concerning the structure and membership of the other Board committees. +The Board has determined that each member of the Corporate Responsibility, Sustainability & Governance Committee meets all independence requirements applicable to +nominating/corporate governance committees under the NYSE listing standards. +* Dr. Lechleiter will not stand for re-election to the Board of Directors at the 2019 Annual Meeting. +** Mr. Rogers was elected to the Board of Directors effective November 15, 2018. +EXECUTIVE COMMITTEE +MEMBERS: +Travis A. Knight +Mark G. Parker, Chair +MEETINGS IN FY ’19: None +ROLES AND RESPONSIBILITIES: +The Executive Committee is authorized to act on behalf of the Board on all corporate actions for which applicable law does not require participation by the full Board. +• In practice, the Executive Committee acts in place of the full Board only when emergency issues or scheduling conflicts make it difficult or impracticable to assemble the full Board. +• All actions taken by the Executive Committee must be reported at the next Board meeting, or as soon thereafter as practicable. +The Executive Committee held no formal meetings during fiscal 2019, but took action by unanimous written consent. +2019 PROXY STATEMENT 23 +CORPORATE GOVERNANCE +THE BOARD’S ROLE IN RISK OVERSIGHT +While the Company’s management is responsible for day-to-day management of the various risks facing the Company, the Board takes an active role in the oversight of the management of critical business risks. The Board does not view risk in isolation. Risks are considered in virtually every business decision and as part of NIKE’s business strategy. The Board recognizes it is neither possible nor prudent to eliminate all risk. Purposeful and appropriate risk-taking is essential for the Company to be competitive on a global basis and to achieve its strategic objectives. +THE BOARD OF DIRECTORS +The Board implements its risk oversight function both as a whole and through committees, which play a significant role in carrying out risk oversight. While the Audit & Finance Committee is responsible for oversight of management’s risk management policies, oversight responsibility for particular areas of risk is allocated among the Board committees according to the committee’s area of responsibility as reflected in the committee charters. +q +BOARD COMMITTEES +The AUDIT & FINANCE COMMITTEE oversees risks related to the Company’s financial statements, the financial reporting process, accounting, legal matters, investments, access to capital and capital deployment, currency risk and hedging programs, information security (including risks related to cyber security), and data protection. The committee oversees the internal audit function, reviews a risk-based plan of internal audits, and reviews a risk-based integrated audit of internal controls over financial reporting. The committee meets separately with the Vice President of Corporate Audit and Chief Risk Officer, representatives of the independent registered public accountants, and senior management. +The COMPENSATION COMMITTEE oversees risks and rewards associated with the Company’s compensation philosophy and programs, management succession plans, and executive development. +The CORPORATE RESPONSIBILITY, SUSTAINABILITY & GOVERNANCE COMMITTEE oversees risks associated with corporate social purpose and company governance, including NIKE’s Code of Conduct and its compliance programs, and the structure and performance of the Board and its committees. The committee also oversees protection of the Company’s corporate reputation including issues that involve social and community engagement, workplace diversity and inclusion, and sustainability innovation relating to the Company’s products, its supply chain (including labor practices), and the environment. +q +EXECUTIVE LEADERSHIP TEAM +Each committee chair works with one or more senior executives assigned to assist the committee in: developing agendas for the year and for each meeting, paying particular attention to areas of business risk identified by management, Board members, internal and external auditors, and in their committee charter; and scheduling agenda topics, presentations, and discussions regarding business risks within their area of responsibility. At meetings, the committees discuss areas of business risk, the potential impact, and management’s initiatives to manage business risk, often within the context of important business decisions. Through this process key business risk areas are reviewed at appropriate times, with some topics reviewed on several occasions throughout the year. At every Board meeting each committee chair provides a report to the full Board outlining its discussions and actions, including those affecting the oversight of various risks. +The Company believes its leadership structure, discussed in detail above, supports the risk oversight function of the Board. Strong directors chair the various committees involved in risk oversight, there is open communication between management and directors, and all directors are involved in the risk oversight function. +24 NIKE, INC. +CORPORATE GOVERNANCE +SHAREHOLDER COMMUNICATIONS WITH DIRECTORS +Shareholders or interested parties desiring to communicate directly with the Board, with non-management directors, or with any individual director may do so in writing addressed to the intended recipient or recipients, c/o Ann M. Miller, Vice President, Corporate Secretary, and Chief Ethics & Compliance Officer, NIKE, Inc., One Bowerman Drive, Beaverton, Oregon 97005-6453. All such communications will be reviewed, compiled as necessary, and then forwarded to the designated recipient or recipients in a timely manner. +CODE OF CONDUCT +The NIKE Code of Conduct, which was refreshed in 2019, is available at the Company’s corporate website: http://investors.nike.com and will be provided in print without charge to any shareholder who submits a request in writing to NIKE Investor Relations, One Bowerman Drive, Beaverton, Oregon 97005-6453. The Code of Conduct applies to all of the Company’s employees and directors, including our CEO and all other executive officers. The Code of Conduct provides that any waiver of the Code of Conduct for executive officers or directors may be made only by the Board or a committee of the Board. Any such waiver will be publicly disclosed, when required by law. The Company plans to disclose amendments to, and waivers from, the Code of Conduct on the Company’s corporate website: http://investors.nike.com. +DIRECTOR COMPENSATION FOR FISCAL 2019 +NAME +FEES EARNED OR +PAID IN CASH +($) +STOCK +AWARDS (1)(2) +($) +CHANGE IN +PENSION VALUE AND +NONQUALIFIED DEFERRED +COMPENSATION EARNINGS +($) +ALL OTHER +COMPENSATION (3) +($) +TOTAL +($) +Cathleen A. Benko +88,859 +(4) +350,042 +— +14,000 +452,901 +Elizabeth J. Comstock +100,000 +175,009 +— +20,000 +295,009 +John G. Connors +105,000 +175,009 +— +20,000 +300,009 +Timothy D. Cook +150,000 +175,009 +— +20,000 +345,009 +John J. Donahoe II +105,000 +175,009 +— +— +280,009 +Alan B. Graf, Jr. +130,000 +175,009 +— +— +305,009 +Peter B. Henry +100,000 +175,009 +— +— +275,009 +Travis A. Knight +100,000 +175,009 +— +— +275,009 +John C. Lechleiter +120,000 +175,009 +— +20,000 +315,009 +Michelle A. Peluso +100,000 +175,009 +— +20,000 +295,009 +Johnathan A. Rodgers +30,495 +(5) +— +— +12,500 +42,995 +John W. Rogers, Jr. +54,396 +(6) +175,047 +— +20,000 +249,443 +John R. Thompson, Jr. +82,000 +175,009 +— +22,266 +279,275 +(1) +Represents the grant date fair value of restricted stock awards granted in fiscal 2019 computed in accordance with accounting guidance applicable to stock-based compensation. The grant date fair value is based on the closing market price of our Class B Stock on the grant date. As of May 31, 2019, non-employee directors held the following number of outstanding shares of unvested restricted stock: Ms. Benko, 4,312; Ms. Comstock, 2,050; Mr. Connors, 2,050; Mr. Cook, 2,050; Mr. Donahoe, 2,050; Mr. Graf, 2,050; Mr. Henry, 2,050; Mr. Knight, 2,050; Dr. Lechleiter, 2,050; Ms. Peluso, 2,050; Mr. Rogers, 2,355; and Mr. Thompson, 2,050. +(2) +As of May 31, 2019, non-employee directors held outstanding options for the following number of shares of our Class B Stock: Ms. Comstock, 90,000; Mr. Connors, 90,000; Mr. Cook, 90,000; Dr. Lechleiter, 90,000; and Mr. Rodgers, 90,000. +(3) +Includes matched contributions to charities in the following amounts: Ms. Benko, $14,000; Ms. Comstock, $20,000; Mr. Connors, $20,000; Mr. Cook, $20,000; Dr. Lechleiter, $20,000; Ms. Peluso, $20,000; Mr. Rodgers, $12,500; and Mr. Rogers, $20,000. For Mr. Thompson, includes medical and life insurance premiums of $22,266 paid by the Company. +(4) +Ms. Benko was appointed to the Board of Directors on July 12, 2018 (includes prorated annual retainer payments). +(5) +Mr. Rodgers did not stand for re-election at our 2018 annual meeting of shareholders and retired effective September 20, 2018 (includes prorated annual retainer payments). +(6) +Mr. Rogers was appointed to the Board of Directors on November 15, 2018 (includes prorated annual retainer payments). +2019 PROXY STATEMENT 25 +CORPORATE GOVERNANCE +DIRECTOR FEES AND ARRANGEMENTS +Under our standard director compensation program in effect for fiscal 2019, non-employee directors receive: +• +An annual retainer of $100,000, paid in quarterly installments. +• +Upon appointment to the Board, a one-time, sign-on restricted stock award valued at $175,000 on the date of grant, generally, the date of appointment. The one-time, sign-on restricted stock award is subject to forfeiture in the event that service as a director terminates prior to the anniversary of the date of grant. +• +An annual restricted stock award valued at $175,000 on the date of grant, generally, the date of each annual meeting of shareholders. The annual restricted stock award is subject to forfeiture in the event that service as a director terminates prior to the earlier of the next annual meeting and the anniversary of the date of grant. +• +For the Lead Independent Director, an annual retainer of $30,000, paid in quarterly installments. +• +For chairs of Board committees (other than the Executive Committee), an annual retainer of $20,000 for each committee chaired ($25,000 for the chair of the Audit & Finance Committee), paid in quarterly installments. +• +For Audit & Finance Committee members, an additional annual retainer of $5,000, paid in quarterly installments. +• +Payment or reimbursement of travel and other expenses incurred in attending Board meetings. +• +Matching charitable contributions under the NIKE Matching Gift Program, under which directors are eligible to contribute to qualified charitable organizations and the Company provides a matching contribution to the charities in an equal amount, up to $20,000 in the aggregate, for each director annually. +In fiscal 2019, Mses. Benko, Comstock, and Peluso, Messrs. Connors, Cook, Donahoe, Graf, Henry, Knight, and Rogers, and Dr. Lechleiter participated in our standard director compensation program as described above, and Mr. Rodgers participated in our standard director compensation program prior to his retirement. Mr. Parker does not receive any compensation for his Board service or his position as Chairman of the Board. +Mr. Thompson does not participate in our standard director compensation program, pursuant to his election made in fiscal 2000. In fiscal 2019, Mr. Thompson received an annual retainer of $82,000 (instead of the $100,000 annual retainer fee paid under our standard program), medical insurance, and $500,000 of life insurance coverage paid for by the Company. Additionally, on September 20, 2018, the date of the 2018 annual meeting of shareholders, Mr. Thompson received an annual restricted stock award valued at $175,000 on the same terms that apply to the restricted stock awards granted pursuant to our standard program. He is also eligible for payment or reimbursement of Board-related expenses, and participation in the NIKE Matching Gift Program on the same basis as other directors. +STOCK OWNERSHIP GUIDELINES FOR DIRECTORS +NIKE maintains stock ownership guidelines for all non-employee directors. Under these guidelines, directors are required to hold NIKE stock valued at five times their annual cash retainer. New directors are required to attain these ownership levels within five years of their election to the Board. Each of our directors has met or is on track to meet the specified ownership level. +DIRECTOR PARTICIPATION IN DEFERRED COMPENSATION PLAN +Under our Deferred Compensation Plan, non-employee directors may elect in advance to defer up to 100 percent of the director fees paid by the Company. For a description of the plan, see the section below titled “Executive Compensation Tables - Non-Qualified Deferred Compensation in Fiscal 2019 - Non-Qualified Deferred Compensation Plans”. In addition, in fiscal 2000, Mr. Thompson received credits to a fully vested NIKE stock account under the Deferred Compensation Plan in exchange for his waiver of rights to future payments under a former non-employee director retirement program. The Class B Stock credited to Mr. Thompson’s account will be distributed to him upon his retirement from the Board and the account is credited with quarterly dividends until distributed. +26 NIKE, INC. +COMPENSATION DISCUSSION AND ANALYSIS +PROPOSAL 2 +SHAREHOLDER ADVISORY VOTE TO APPROVE +EXECUTIVE COMPENSATION +In accordance with the requirements of Section 14A of the Securities Exchange Act of 1934, we are submitting to shareholders our annual “say-on-pay proposal”, an advisory vote to approve the compensation of our Named Executive Officers as described in this proxy statement. +At the Company’s 2018 annual meeting of shareholders, 97% of the votes cast on the say-on-pay proposal were voted in favor of the proposal. The Compensation Committee believes this affirms shareholders’ support of the Company’s approach to executive compensation and the Compensation Committee’s decisions. +As discussed in this section, our compensation philosophy is designed to attract and retain top talent, reward business results and performance, viewed holistically, and motivate executives to maximize long-term shareholder value. The program is competitive in the marketplace, highly incentive-based to align interests of executives with those of shareholders, and balanced across incentives to appropriately mitigate risk. +To achieve the objectives of our executive compensation program and emphasize pay-for-performance principles, the Compensation Committee has continued to employ the strong governance practices described in “Executive Compensation Governance Practices” on page 28, including: +• basing a majority of total compensation on performance and retention incentives; +• setting annual and long-term incentive targets based on clearly disclosed, objective performance measures; +• mitigating undue risk associated with compensation by using multiple performance targets, caps on potential incentive payments, and a clawback policy; and +• requiring executive officers to hold NIKE stock through published stock ownership guidelines. +Because your vote is advisory, it will not be binding on the Board. However, the Board values shareholder opinions, and the Compensation Committee will take into account the outcome of the vote when considering future executive compensation arrangements. +BOARD RECOMMENDATION +The Board of Directors recommends that shareholders vote FOR approval of the following resolution: +RESOLVED, that the shareholders approve the fiscal 2019 compensation paid to the Named Executive Officers as disclosed in this proxy statement pursuant to the SEC’s compensation disclosure rules (which disclosure includes the Compensation Discussion and Analysis, the compensation tables, and the narrative disclosures that accompany the compensation tables). +2019 PROXY STATEMENT 27 +COMPENSATION DISCUSSION AND ANALYSIS +EXECUTIVE SUMMARY +This Compensation Discussion and Analysis explains our compensation philosophy, summarizes our compensation programs, and reviews compensation decisions for our Chief Executive Officer, our Chief Financial Officer, and our next three most highly compensated executive officers who were serving as executive officers on May 31, 2019. These individuals are referred to throughout this proxy statement as the “Named Executive Officers”. The Named Executive Officers for fiscal 2019 were: +• +Mark G. Parker, Chairman, President, and Chief Executive Officer +• +Andrew Campion, Executive Vice President, and Chief Financial Officer +• +Eric D. Sprunk, Chief Operating Officer +• +Elliott J. Hill, President, Consumer and Marketplace +• +Hilary K. Krane, Executive Vice President, Chief Administrative Officer, and General Counsel +Our executive compensation program, similar to our non-executive compensation programs, is aligned with our business strategy and our culture and is designed to attract and retain top talent, reward business results and performance, viewed holistically, and most importantly, maximize shareholder value. Our total compensation program for the Named Executive Officers is highly incentive-based and competitive in the marketplace, with Company performance determining a significant portion of total compensation. +EXECUTIVE COMPENSATION GOVERNANCE PRACTICES +To achieve the objectives of our executive compensation program and emphasize pay-for-performance principles, the Compensation Committee of the Board of Directors (the “Committee”) employs strong governance practices as outlined in the table below. +WE DO +WE DON’T DO +ü Base a majority of total compensation on performance and retention incentives +ü Mitigate undue risk associated with compensation by using multiple performance targets, caps on potential incentive payments, and a clawback policy +ü Set annual and long-term incentive targets based on clearly disclosed, objective performance measures +ü Require executive officers to hold NIKE stock through stock ownership guidelines +ü Vest equity awards over time to promote retention with a minimum of one year vesting +ü Provide only double-trigger change-in-control equity acceleration +ü Conduct annual “say-on-pay” advisory votes +û Retirement acceleration for restricted stock units (“RSUs”) +û Payments of accumulated dividends on unearned RSUs until and unless shares are earned +û Repricing of options without shareholder approval +û Permit hedging transactions or short sales by executive officers +û Pension or supplemental executive retirement plan +û Significant perquisites +û Tax gross-ups for perquisites +û Employment contracts +û Cash-based change-in-control benefits +û Excise tax gross-ups upon change of control +CONSIDERATION OF SAY-ON-PAY VOTE RESULTS +The non-binding advisory proposal regarding compensation of the Named Executive Officers submitted to shareholders at our 2018 annual meeting was approved by 97% of the votes cast. The Committee believes this favorable outcome conveyed our shareholders’ support of our executive compensation program and the Committee’s decisions. After considering the shareholder vote and other factors in its annual review of our total executive compensation programs, the Committee made no material changes in the structure of our compensation programs. The Committee will continue to consider the outcome of the Company’s say-on-pay votes when conducting its regular practice of evaluating the executive compensation program and making future compensation decisions for the Named Executive Officers. +28 NIKE, INC. +COMPENSATION DISCUSSION AND ANALYSIS +FINANCIAL HIGHLIGHTS +NIKE delivered solid performance in fiscal 2019. The charts below set forth certain key financial results that were used in connection with determining payouts for our Named Executive Officers under our incentive compensation plans for fiscal 2019. The measures below are based on NIKE’s comparable publicly reported financial results. +REVENUE +EPS (1) +EBIT +In $ millions +In $/share +In $ millions +(1) +Excluded from the 2018 and 2019 results was the income tax benefit ($0.14 per share and $.07 per share, respectively) from adoption of a stock compensation accounting change in the first quarter of fiscal 2018 (Financial Accounting Standards Board (“FASB”) Accounting Standards Update 2016-09). +EXECUTIVE COMPENSATION HIGHLIGHTS +The total compensation for each of the Named Executive Officers is shown in the Summary Compensation Table on page 39. While we describe executive compensation in greater detail throughout this Compensation Discussion and Analysis, key actions the Committee took in fiscal 2019 are highlighted below: +• +Base Salary. Based on the recommendation by the Committee, which was approved by the independent members of the Board in June 2018, Mr. Parker’s base salary increased to $1,700,000. Base salaries for Messrs. Campion and Sprunk increased to $1,050,000 and $1,150,000, respectively. Mr. Hill’s base salary was set at $1,150,000 and Ms. Krane’s base salary increased to $1,050,000. +• +Performance-Based Annual Incentive Plan. The target award for Mr. Parker increased to 200%. Target awards for Messrs. Campion, and Sprunk remained the same. The target award for Mr. Hill was set at 100% of base salary. The target award for Ms. Krane increased to 100%. Based on financial performance goals set by the Committee in June 2018 and actual performance results, each Named Executive Officer’s bonus for fiscal 2019 was paid out at 122% of target. +• +Performance-Based Long-Term Incentive Plan. The target awards for the fiscal 2019-2021 performance period were set in June 2018. The target award for Mr. Parker increased to $5,000,000. Target awards for Messrs. Campion and Sprunk remained the same at $1,000,000. The target award for Mr. Hill was set at $1,000,000. The target award for Ms. Krane increased to $1,000,000. Based on long-term financial performance goals set by the Committee in June 2016 and actual performance results, each Named Executive Officer received a payout for the fiscal 2017-2019 performance period of 0% of target. +• +Stock Options. The annual awards for Messrs. Parker, Campion and Sprunk increased to 175,000, 80,000, and 90,000 option shares, respectively. Mr. Hill was awarded 90,000 option shares. Ms. Krane’s award increased to 80,000 option shares. Each award vests in equal annual installments over four years. +• +Restricted Stock Unit (RSU) Awards. The annual award for Messrs. Parker, Campion, and Sprunk increased to $5,000,000, $1,150,000, and $1,250,000, respectively. The annual award value for Mr. Hill was set at $1,250,000. Ms. Krane’s award value increased to $1,150,000. Each award vests in equal annual installments over three years. +2019 PROXY STATEMENT 29 +COMPENSATION DISCUSSION AND ANALYSIS +OPERATION OF THE COMPENSATION COMMITTEE +The Committee evaluates the performance of the CEO against goals and objectives reviewed and approved by the Committee. For fiscal 2019, the Committee Chair discussed the CEO’s performance and recommended base salary with the independent members of the Board, who approved the CEO’s salary. With respect to the other Named Executive Officers for fiscal 2019, their base salaries were also approved by the independent members of the Board based on the Committee’s recommendation. The Committee had sole responsibility for all other elements of the Named Executive Officers’ compensation for fiscal 2019. In connection with the revision of the Compensation Committee’s duties under its revised charter, for fiscal 2020 and forward, the Committee has the authority to review and approve the compensation of each executive officer, including the Named Executive Officers. +The Committee also reviews the performance evaluation of each Named Executive Officer and oversees the administration of our executive compensation programs. The Committee receives recommendations from the CEO as to compensation of other Named Executive Officers, and the CEO participates in Committee discussions regarding the compensation of those officers. The Committee meets in executive session without the CEO to determine his compensation. The Committee is currently comprised of Timothy D. Cook (Chairman), Cathleen A. Benko, and Elizabeth J. Comstock, each of whom is an independent director under applicable NYSE listing standards. The Committee operates pursuant to a written charter that is available on our website at: http://investors.nike.com. +Each year, the Committee reviews our executive compensation program to ensure it continues to reflect the Committee’s commitment to align the objectives and rewards of our executive officers with the creation of value for our shareholders. Similar to our non-executive compensation programs, the program has been designed to reinforce our pay-for-performance philosophy by delivering total compensation that motivates and rewards short- and long-term financial performance to maximize shareholder value, and to be externally competitive to attract and retain outstanding and diverse executive talent. This is done much in the same way our human resources staff designs our non-executive compensation programs, to ensure they are market competitive, offer performance-based financial incentives, and provide opportunities to share in total Company success through competitive benefits, employee stock purchase programs, and broad-based profit sharing. In conducting its annual review, the Committee considers information provided by our human resources staff. Our human resources staff retains outside compensation consulting firms to provide surveys and reports containing competitive market data, but these consultants do not formulate executive compensation strategies for NIKE or recommend individual executive compensation. The human resources staff uses the surveys and reports to make recommendations to the Committee concerning executive compensation. The Committee relies on its collective experience and judgment along with the recommendations prepared by our human resources staff to set executive compensation. The Committee has the authority, in its sole discretion, to retain compensation consultants to assist the Committee in evaluating the compensation of executive officers. In February 2019, the Committee retained Mercer as a consultant to provide independent analytical and evaluative advice regarding the Company’s current or proposed compensation arrangements for senior executives, succession planning and related market practices. +In connection with its engagement of Mercer, the Committee performed an independence assessment of Mercer in accordance with SEC and NYSE rules and standards and determined that Mercer is an independent adviser. In performing this assessment, the Committee took into consideration a written statement from Mercer confirming its independence based on factors set forth in the SEC and NYSE rules for compensation committee advisers. The fees for Mercer’s engagement by the Committee relating to the amount or form of executive compensation were approximately $82,000. During fiscal 2019, Mercer also provided certain services to the Company at the request of management, including advice regarding our employee benefits consulting services and compensation and benefits surveys. The fees for such additional services were approximately $1.5 million. +USE OF MARKET SURVEY DATA +To help establish competitive ranges of base salary, incentive compensation opportunities, and target total compensation for the purpose of making recommendations to the Committee, our human resources staff uses competitive market data from surveys and reports prepared by Aon Hewitt and Willis Towers Watson. We consider market survey data from a peer group of companies that have similar revenue size, market capitalization, brand value, products, or markets, or with which we compete for executive talent. +30 NIKE, INC. +COMPENSATION DISCUSSION AND ANALYSIS +Based on the criteria described above, we determined that for purposes of setting executive compensation for fiscal 2019, our peer group should be refined to include Microsoft Corporation and Comcast Corporation, and to remove Alphabet Inc., eBay Inc., and Time Warner Inc. after its merger with AT&T Inc. Our revised peer group consists of the following companies: +The Coca-Cola Company +Kimberly-Clark Corporation +Procter & Gamble Company +Colgate-Palmolive Company +Macy’s, Inc. +Starbucks Corporation +Comcast Corporation +McDonald’s Corporation +Target Corporation +FedEx Corporation +Microsoft Corporation +TJX Companies +The Gap, Inc. +Mondelez International, Inc. +The Walt Disney Company +Kellogg Company +Pepsico, Inc. +The surveys that our human resources staff reviews show percentile compensation levels for various executive positions with comparable job responsibilities. The staff also analyzes market data regarding compensation mix among base salary, annual incentive and long-term incentives such as performance-based cash awards, stock options, and RSU awards. The Committee reviews this mix analysis when evaluating the separate compensation elements for each executive. The Committee does not endeavor to set executive compensation at or near any particular percentile, and it considers target total compensation to be competitive if it is generally within a reasonable range of the market median. Market data is one of many factors that the Committee considers in the determination of executive compensation levels. Other factors include internal pay equity, level of responsibility, the individual’s performance viewed holistically, expectations regarding the individual’s future potential contributions, ability to drive the Company’s culture and ethics with integrity, succession planning and retention strategies, budget considerations, and the Company’s performance. +OBJECTIVES AND ELEMENTS OF OUR COMPENSATION PROGRAM +As noted in the Executive Summary, our executive compensation program is aligned with our business strategy and our culture and is designed to attract and retain top talent, reward business results and performance, viewed holistically, and most importantly, maximize shareholder value. Our holistic view of performance considers the individual’s ability to deliver business results, engage and motivate our employees, their leadership capacity, ability to drive the Company’s culture and ethics with integrity, and commitment to diversity and inclusion. Our total compensation program for the Named Executive Officers is highly incentive-based and competitive in the marketplace, with Company performance determining a significant portion of total compensation. The key elements of our program consist of the following: +• +Base salary that reflects the executive’s accountabilities, skills, experience, performance, and potential +• +Performance-based annual cash incentive based on Company financial results under our Executive Performance Sharing Plan +• +A portfolio approach to long-term incentive compensation to provide a balanced mix of performance-based cash incentives and equity, including: +• +Performance-based long-term cash incentive based on Company financial results to encourage attainment of long-term Company financial objectives +• +Stock options to align the interests of executives with those of shareholders +• +RSU awards and RSU retention awards to provide incentives consistent with driving shareholder value, and to provide strong retention incentives +• +Benefits +• +Executives are generally eligible for the same competitive benefits as other employees in the United States, including medical, dental, and vision insurance, paid time off, 401(k) plan, and Company-provided life and disability insurance; employees outside of the United States are offered locally competitive benefits +• +Profit sharing contributions to defined contribution retirement plans +• +Employee Stock Purchase Plan +• +Post-termination payments under non-competition agreements +In determining the award levels for each of the elements in our total compensation program, our philosophy is to “pay for performance”. As a result, we place relatively greater emphasis on the performance incentive components of compensation (performance-based annual cash incentive award, performance-based long-term cash incentive award, and stock options) to align the interests of our executives with shareholders, and motivate them to maximize shareholder value. This is balanced with retention incentives provided by base salary and RSU awards. +2019 PROXY STATEMENT 31 +COMPENSATION DISCUSSION AND ANALYSIS +We look to the experience and judgment of the Committee to determine what it believes to be the appropriate target compensation mix for each Named Executive Officer. We do not apply fixed ratios or formulas, or rely solely on market data or quantitative measures. In allocating compensation among the various elements, the Committee considers market data, Company performance and budget, the impact of the executive’s position in the Company, past performance, viewed holistically, expectations for future performance, experience in the position, any recent or anticipated changes in the individual’s responsibilities, internal pay equity for comparable positions, retention incentives for succession planning, and other factors the Committee deems appropriate. As shown in the charts below, incentive components accounted for 90% of the CEO’s target compensation and approximately 81% of the other Named Executive Officers’ target compensation in fiscal 2019. +CEO 2019 TOTAL DIRECT COMPENSATION MIX +OTHER NEOs 2019 TOTAL DIRECT COMPENSATION MIX +ELEMENTS OF OUR COMPENSATION PROGRAM +BASE SALARY +When making recommendations to the Committee concerning base salary levels for our Named Executive Officers, our human resources staff follows a similar process to how they evaluate non-executive base salary levels. We consider the individual’s performance in the prior year, expectations regarding the individual’s future performance, experience in the position, any recent or anticipated changes in the individual’s responsibilities, internal pay equity for comparable positions, succession planning strategies, our annual salary budget, other elements of the individual’s compensation, and the market data described in “Use of Market Survey Data”. The Committee reviews these factors each year and adjusts base salary levels to ensure that we are appropriately rewarding performance, viewed holistically. +The Committee generally reviews base salaries of the Named Executive Officers annually based on a review of individual performance at a meeting in June, with salary adjustments becoming effective for the first pay period ending in August. During the salary review in June 2018, the Committee recommended, based on the factors described above, and the independent members of the Board approved, the following base salaries for the Named Executive Officers. +NAMED EXECUTIVE OFFICER +FISCAL 2019 BASE SALARY +% CHANGE +Mark G. Parker +$1,700,000 +9.7% +Andrew Campion +$1,050,000 +7.7% +Eric D. Sprunk +$1,150,000 +4.5% +Elliott J. Hill +$1,150,000 +N/A +Hilary K. Krane +$1,050,000 +16.7% +In setting a Named Executive Officer’s overall compensation package, the Committee places a relatively greater emphasis on the incentive components of compensation described below. +PERFORMANCE-BASED ANNUAL CASH INCENTIVE +Annual awards are paid to the Named Executive Officers under our Executive Performance Sharing Plan (“PSP”). Our “pay for performance” philosophy for such awards is simple and applies to all global employees who are eligible to share in the Company’s success through incentive bonuses: if we exceed our financial objectives, we will pay more; if we fail to reach them, we will pay less or nothing at all. For fiscal 2019 PSP, the Committee decided to select earnings before interest and taxes +32 NIKE, INC. +COMPENSATION DISCUSSION AND ANALYSIS +(“EBIT”) instead of income before taxes (“PTI”) as the measure of Company performance, aligning all eligible employees under a single plan, reinforcing our one-team culture, and sending the message to each executive that his or her role is to help ensure overall organizational success and to maximize shareholder value. While both EBIT and PTI drive operational performance, EBIT represents the key measure used internally to manage financial performance. +In accordance with the PSP terms and conditions, EBIT will be calculated excluding the effect of any acquisitions, divestitures, accounting changes, restructurings or other extraordinary, unusual or infrequently occurring items. In support of our culture, the Committee retains the discretion to reduce or eliminate PSP award payouts based on individual or Company performance. +Each year the Committee establishes a PSP target award for each Named Executive Officer based on its judgment of the impact of the position in the Company and what it believes to be competitive against market data as described in “Use of Market Survey Data”, while considering internal pay equity for comparable positions. For fiscal 2019, the Committee increased the target award for Mr. Parker to 200%. Target awards for Messrs. Campion and Sprunk remained the same. Mr. Hill’s target award was set at 100%. Ms. Krane’s target award increased to 100%. The fiscal 2019 PSP target awards were: +NAMED EXECUTIVE OFFICER +FISCAL 2019 PSP TARGET AWARD +(% OF BASE SALARY) +Mark G. Parker +200% +Andrew Campion +100% +Eric D. Sprunk +100% +Elliott J. Hill +100% +Hilary K. Krane +100% +In June 2018, the Committee established performance goals for the fiscal 2019 PSP awards based on its evaluation of our business plan and prospects for the year. When setting these goals, the Committee considered evolving business dynamics, achievability to support engagement, and appropriate stretch to drive growth consistent with NIKE’s long-term financial model. The target for fiscal 2019 was set at $4,685 million. The table below summarizes the fiscal 2019 PSP performance goals established by the Committee. For fiscal 2019, NIKE achieved EBIT of $4,850 million, an 11% increase over the fiscal 2018 continuing operations EBIT of $4,379. This achievement was above the target performance goal established by the Committee. As a result, each Named Executive Officer’s award was paid out at 122% of the target award. +FISCAL 2019 PSP PERFORMANCE GOAL +(Dollars in millions) +% PAYOUT +THRESHOLD +50% +TARGET +100% +MAXIMUM +150% +EBIT +PERFORMANCE-BASED LONG-TERM CASH INCENTIVE +The first component in our long-term portfolio mix is performance-based awards payable in cash under our Long-Term Incentive Plan (“LTIP”). As with the performance-based annual cash incentive, the LTIP follows our “pay for performance” philosophy. If we exceed our targets, we will pay more; if we fall short, we will pay less or nothing at all. This program focuses executives on overall, long-term financial performance, and is intended to reward them for delivering revenue growth and diluted earnings per share (“EPS”) growth over a three-year performance period. At the beginning of each fiscal year, the Committee establishes performance goals and potential cash payouts for the next three fiscal year-period for all executives under the LTIP. LTIP performance measures for all executives are based 50% on cumulative revenues and 50% on cumulative EPS for the three-year performance period, in each case excluding generally the effect of acquisitions, divestitures, accounting changes and other extraordinary, unusual or infrequently occurring items. The Committee selected revenue and EPS as LTIP performance measures to encourage executives to focus on delivering profitable, sustainable growth. Strong revenue growth is the foundation of the Company’s financial strategy, requiring investments in key business drivers to sustain growth. EPS growth is essential to delivering value for our shareholders, requiring investments be targeted to those areas with the highest potential for return. By balancing revenue growth and EPS growth, the plan supports the Company’s objective of delivering long-term shareholder value. In support of our culture, the Committee retains the discretion to reduce or eliminate LTIP award payouts based on individual or Company performance. +2019 PROXY STATEMENT 33 +COMPENSATION DISCUSSION AND ANALYSIS +During the compensation review in June 2018, the Committee approved LTIP target award amounts for all Named Executive Officers for the fiscal 2019-2021 performance period. The Committee set these targets based on its judgment of what it believes to be a desirable mix of long-term compensation, the impact of the position in the Company, and what it finds to be competitive against market data as described in “Use of Market Survey Data”, while maintaining internal pay equity for comparable positions. For the fiscal 2019-2021 performance period, the Committee increased the target for Mr. Parker to $5,000,000. Targets for each of Messrs. Campion and Sprunk remained the same. Mr. Hill’s target was set at $1,000,000. Ms. Krane’s target was increased to $1,000,000. The target awards for the fiscal 2019-2021 performance period are as follows: +NAMED EXECUTIVE OFFICER +FISCAL 2019-2021 LTIP +AWARD TARGET ($) +Mark G. Parker +5,000,000 +Andrew Campion +1,000,000 +Eric D. Sprunk +1,000,000 +Elliott J. Hill +1,000,000 +Hilary K. Krane +1,000,000 +In June 2018, the Committee also established performance goals for the fiscal 2019-2021 LTIP. The Committee considered our long-term financial goals of high single-digit revenue growth and continued EPS growth in setting performance goals for the target award payout level. Additionally, goals were set to provide appropriate stretch to drive growth while balancing sustained engagement over the performance period. The total payout percentage will be the average of the payout percentages determined for cumulative revenues and cumulative EPS, respectively. Payout below the threshold payout level may occur if either the revenue or EPS related percentage achievement is less than 50%. If both revenue and EPS fall below the threshold level, there is no payout. The table below summarizes the fiscal 2019-2021 LTIP performance goals. +FISCAL 2019-2021 PERFORMANCE GOALS +(Dollars in millions, except per share data) +% PAYOUT +THRESHOLD +50% +TARGET +100% +MAXIMUM +200% +Revenue +EPS +For fiscal 2019, the Named Executive Officers were eligible to receive LTIP award payouts based on performance targets set in June 2016 covering the fiscal 2017-2019 performance period. In June 2019, the Committee determined a payout of 0% under these awards was earned based on the average of the payout percentages for cumulative revenues and cumulative EPS for the performance period shown in the table below. +FISCAL 2017-2019 PERFORMANCE GOALS +(Dollars in millions, except per share data) +% PAYOUT +THRESHOLD +50% +TARGET +100% +MAXIMUM +200% +Revenue 1 +TOTAL PAYOUT: +0% +EPS 2 +(1) +Cumulative revenues for fiscal 2017, fiscal 2018, and fiscal 2019. +(2) +Cumulative EPS for fiscal 2017, fiscal 2018, and fiscal 2019 adjusted for adoption of stock compensation accounting change in the first quarter of fiscal 2018 (FASB Accounting Standards Update 2016-09). +34 NIKE, INC. +COMPENSATION DISCUSSION AND ANALYSIS +STOCK OPTIONS +The second component in our long-term portfolio mix is stock options. Stock options are designed to align the interests of the Company’s executives with those of shareholders by encouraging executives to enhance the value of the Company and, hence, the price of the Class B Stock. This is true “pay for performance”, executives are rewarded only if the market price of our stock rises, and they get nothing if the price does not rise or goes down. When determining the grants, the Committee generally focuses on the number of shares, while considering the value for accounting purposes. This approach is designed to manage fluctuations in grant levels due to share price changes and to enhance predictability of annual share usage. The Committee awards stock options to each executive based on its judgment. The Committee considers a number of factors including performance, viewed holistically, management succession, competitive market data as described in “Use of Market Survey Data”, internal pay equity for comparable positions, and a desirable mix of long-term incentives. Our human resources staff periodically tests the reasonableness of our stock option grants against competitive market data and may make recommendations to the Committee. Options are generally granted in August to executive officers, including our Named Executive Officers, and in September to selected employees, under our shareholder-approved Stock Incentive Plan. Stock options for fiscal 2019 were granted by the Committee on August 1, 2018 with an exercise price equal to the closing market price of our stock on that date. +In August 2018, the Committee granted Mr. Parker 175,000 option shares, an increase of 10,000 shares from the stock options granted in July 2017. Mr. Campion received 80,000 option shares and Mr. Sprunk received 90,000 option shares, an increase of 5,000 shares to each from the stock options granted in July 2017. Mr. Hill received 90,000 option shares. Ms. Krane received 80,000 option shares, an increase of 10,000 shares from the stock options granted in July 2017. All stock options granted to our Named Executive Officers in fiscal 2019 vest in equal installments over four years. The Committee, in its judgment, set these award levels based on the factors described above. +Options granted to our Named Executive Officers have time-based vesting schedules that require continuous service over multiple years. To promote executive retention, unvested options generally are forfeited if the employee leaves the Company before vesting occurs and vested options must be exercised within three months after termination of employment. Options provide for a limited retirement provision designed to encourage employees to delay retirement, thus enhancing retention. Only those employees with a minimum of five years of service who are age 55 and above at the time of termination of employment are eligible for the provision. Under the provision, for employees between the ages of 55 to 59 at the time of termination of employment, unvested stock options that were granted at least one full year prior to termination will continue to vest, and vested options may be exercised for up to four years after termination. If an employee is age 60 or older and has at least five years of service at termination, unvested stock options that were granted at least one full year prior to termination will receive accelerated vesting, and vested options may be exercised for up to four years after termination. The features related to accelerated vesting are described in the section below titled “Executive Compensation Tables - Potential Payments upon Termination or Change-in-Control”. Based on his age and years of service, as of May 31, 2019, Mr. Parker was eligible for accelerated vesting of his options granted in July 2015, 2016, and 2017. Based on their ages and years of service, Messrs. Sprunk and Hill and Ms. Krane were eligible for continued vesting of their options granted in July 2015, 2016, and 2017. +ANNUAL RESTRICTED STOCK UNIT (RSU) AWARDS +The third component in our long-term portfolio mix is RSU awards. Stock ownership and stock-based incentive awards align the interests of our Named Executive Officers with the interests of our shareholders, as the value of this incentive rises and falls with the stock price. RSUs are generally granted in August to executive officers, including our Named Executive Officers, and in September to selected employees, under our shareholder-approved Stock Incentive Plan. Awards granted to our Named Executive Officers have time-based vesting schedules that require continuous service over multiple years. The awards promote executive retention, as unvested shares held at the time the executive’s employment is terminated are forfeited. These RSU awards accumulate dividend equivalents that are paid in cash only upon vesting. +The Committee, in its judgment, sets RSU award levels based on several factors, including what the Committee believes to be a desirable mix of long-term compensation, their determination of an appropriate weighing of potential future contribution to the Company, retention incentives, and competitive market data as described in “Use of Market Survey Data”. In August 2018, the Committee granted RSUs to Mr. Parker valued at $5,000,000, representing 64,483 shares of our Class B Stock based on the closing price on the grant date. This was an increase of $1,500,000 for Mr. Parker. Messrs. Campion and Sprunk received RSUs valued at $1,150,000 and $1,250,000, respectively, representing 14,832 and 16,121 shares of our Class B Stock based on the closing price on the grant date. This was an increase of $150,000 and $250,000 for each of Messrs. Campion and Sprunk. Mr. Hill received an award valued at $1,250,000, representing 16,121 of our Class B Stock based on the closing price on the grant date. Ms. Krane received an award valued at $1,150,000, representing 14,832 of our Class B Stock based on the closing price on the grant date. This was an increase of $300,000 for Ms. Krane. All RSUs granted to our Named Executive Officers in fiscal 2019 vest in equal installments over three years. +2019 PROXY STATEMENT 35 +COMPENSATION DISCUSSION AND ANALYSIS +RESTRICTED STOCK UNIT (RSU) RETENTION AWARDS +From time to time, the Committee also grants RSUs that vest based on continued service with the Company through a future service date, for the specific purpose of further promoting retention. These RSU awards accumulate dividend equivalents that are paid in cash only upon full vesting. The awards have no value to the executive unless the executive remains employed with the Company for the full vesting period, and will be forfeited if the executive terminates or retires within the vesting period. While RSU awards are intended as a retention incentive, as equity-based awards they have the additional benefit of further aligning the interests of our Named Executive Officers with the interests of our shareholders, as the value of these awards rises and falls with the stock price. None of our Named Executive Officers received RSU retention awards in fiscal 2019. +PROFIT SHARING AND RETIREMENT PLANS +Our 401(k) Savings and Profit Sharing Plan is a U.S. tax qualified retirement savings plan pursuant to which all eligible U.S. employees, including the Named Executive Officers, are able to make pre-tax contributions and after-tax contributions from their cash compensation. We make matching contributions for all participants each year equal to 100% of their pre-tax contributions up to 5% of their total eligible compensation. We also make annual profit sharing contributions to the accounts of eligible U.S. employees under the 401(k) Savings and Profit Sharing Plan. The contributions are allocated among eligible employees based on a percentage of their total salary and annual cash incentive award for the year. The total profit sharing contribution and the percentage of salary and annual cash incentive award contributed for each employee is determined each year by the Board of Directors. For fiscal 2019, the Board of Directors approved a profit sharing contribution for each eligible employee equal to 1.8% of the employee’s total eligible salary and annual cash incentive award. +The Internal Revenue Code limits the amount of compensation that can be deferred under our 401(k) Savings and Profit Sharing Plan, and also limits the amount of salary and annual cash incentive award ($275,000 for fiscal 2019) that may be taken into account when determining contributions under that plan. Accordingly, we provide our Named Executive Officers and other highly compensated employees with the opportunity to defer their compensation, including amounts in excess of the tax law limit, under our nonqualified Deferred Compensation Plan. We also make profit sharing contributions under the Deferred Compensation Plan with respect to salary and annual cash incentive award of any eligible employee that exceeds the tax law limit, and for fiscal 2019 these contributions were equal to 1.8% of the total salary and annual cash incentive award of each Named Executive Officer in excess of $275,000. These contributions under the Deferred Compensation Plan allow our Named Executive Officers and other highly compensated employees to receive profit sharing contributions in the same percentage as our other employees. We do not match deferrals to the Deferred Compensation Plan. Balances in the Deferred Compensation Plan, including the balances of the Named Executive Officers, are unsecured and at-risk, meaning the balances may be forfeited in the event of the Company’s financial distress such as bankruptcy. Our matching and profit sharing contributions for fiscal 2019 to the accounts of the Named Executive Officers under the qualified and nonqualified plans are included in the All Other Compensation column in the Summary Compensation Table on page 39. +EMPLOYEE STOCK PURCHASE PLAN +Our Employee Stock Purchase Plan allows all employees who work at least 20 hours per week in the United States and in many countries outside of the United States to purchase NIKE Class B Stock, through payroll deductions, at a 15% discount to the market price on the first or last trading day of the six-month purchase period, depending on which day the stock price was lower. No plan participant is allowed to purchase more than $25,000 in market value of our stock under the plan in any calendar year or more than 500 shares in any six-month offering period. In fiscal 2019, all Named Executive Officers participated in our Employee Stock Purchase Plan, with the exception of Messrs. Parker and Campion. +POST-TERMINATION PAYMENTS UNDER NON-COMPETITION AGREEMENTS +In exchange for non-competition agreements from all of our Named Executive Officers, we have agreed to provide, during the non-competition period, the monthly payments described in the section below titled “Executive Compensation Tables - Potential Payments upon Termination or Change-in-Control”, some of which are at the election of the Company. We believe that it is appropriate to compensate individuals to refrain from working with competitors following termination, and that compensation enhances the enforceability of such agreements. +36 NIKE, INC. +COMPENSATION DISCUSSION AND ANALYSIS +STOCK OWNERSHIP GUIDELINES +NIKE maintains the following stock ownership guidelines for executive officers. These guidelines are designed to further align the long-term interests of our executive officers with those of our shareholders. Under the guidelines, the CEO and other executive officers are required to hold NIKE stock valued at the following multiple of their annual base salary: +POSITION +OWNERSHIP LEVEL +Chief Executive Officer +6X Base Salary +Other Named Executive Officers +3X Base Salary +Other Executive Officers +2X Base Salary +New officers are required to attain these ownership levels within five years of their appointment. As of May 31, 2019, each of our executive officers has met or is on track to meet the applicable ownership guideline within the requisite period. +HEDGING AND PLEDGING +The Company’s Blackout and Pre-clearance Policy (which supplements our Insider Trading Policy) prohibits directors, executive officers, and other designated insiders from engaging in transactions involving hedging, monetization or short sales of NIKE stock, including zero-cost collars and forward sale contracts. The policy also requires directors, executive officers, and designated insiders to obtain pre-approval from the Company’s Clearance Director before pledging NIKE stock. Before granting approval of any pledge, the Clearance Director considers the size of the pledge relative to the individual’s other holdings, both direct and indirect, and NIKE’s shares outstanding; the risk of foreclosure given the nature of the associated transaction; protections against the appearance of insider trading, including prohibitions on sales during trading black-outs; and the ability to timely report sales on Form 4. +CHANGE-IN-CONTROL PROVISIONS +LTIP awards are not subject to accelerated change-in-control vesting. All unvested stock option, restricted stock, and RSU awards are subject to accelerated change-in-control vesting only when two events (a “double-trigger”) occur. Vesting of grants is generally accelerated only if there is a change-in-control of the Company and either the acquiring entity fails to assume the awards or the employee’s employment is terminated by the acquirer without cause or by the employee for good reason within two years following a change-in-control. This double-trigger was adopted to encourage executive retention through a period of uncertainty and a subsequent integration with an acquirer. The Committee believes that this approach will enhance shareholder value in the context of an acquisition, and align executives with the interests of investors. The effects of change-in-control transactions on stock option, restricted stock, and RSU awards are described further in the section below titled “Executive Compensation Tables - Potential Payments Upon Termination or Change-in-Control”. +CLAWBACK POLICY +The Company maintains a policy for recoupment of incentive compensation (the “clawback policy”), and through its incentive compensation plans, addresses additional circumstances under which the Company may clawback awards. Under the clawback policy, an executive officer who is involved in wrongful conduct that results in a restatement of the Company’s financial statements must repay to the Company up to the full amount of any incentive compensation based on the financial statements that were subsequently restated. The clawback policy covers the annual cash incentive award, long-term cash incentive award, profit sharing contributions to the Deferred Compensation Plan, and excess proceeds from sales of stock acquired under stock option, restricted stock, and RSU awards that occurred prior to the restatement. Our Executive Performance Sharing Plan, Long-Term Incentive Plan and Stock Incentive Plan contain provisions that clarify that for all participants in those plans the Committee may apply additional clawback policies to awards, or add clawback terms to award agreements or notices, and that any clawback requirements of applicable law and regulation will apply to the plans. +2019 PROXY STATEMENT 37 +COMPENSATION DISCUSSION AND ANALYSIS +RISK ASSESSMENT +At the Committee’s request, in fiscal 2019 management prepared and discussed with the Committee an assessment of potential risk associated with the Company’s compensation programs, including any risk that would be reasonably likely to have a material adverse effect on the Company. This included an assessment of risks associated with each element of employee compensation. The assessment considered certain design features of the compensation programs that reduce the likelihood of excessive risk taking, such as reasonable performance targets, capped payouts of incentive compensation, a balance of short-and long-term incentives, a balance of cash and equity incentives, vesting of awards over time, and the potential for clawback of incentive compensation. In addition, for equity compensation, the Committee and the Board have adopted stock ownership guidelines, limited accelerated vesting of stock options upon termination of employment, and implemented double-trigger accelerated vesting for all equity awards upon change-in-control (each as described above). +TAX DEDUCTIBILITY OF EXECUTIVE COMPENSATION +Section 162(m) of the Internal Revenue Code generally places a $1 million limit on the amount of compensation a company can deduct in any one year on compensation paid to “covered employees”. Prior to the adoption of the Tax Cuts and Jobs Act, which was enacted on December 22, 2017 (the “TCJA”), the Internal Revenue Code provided an exception that generally excluded performance-based compensation from the calculation of the $1 million limit on deductible compensation to the extent that such compensation was based upon the attainment of pre-established, objective performance goals established under a shareholder-approved plan. The TCJA repealed this exclusion, and, as a result, compensation paid to “covered employees” in excess of $1 million will no longer be deductible, even if performance-based, other than with respect to certain arrangements in place on November 2, 2017. Prior to the TCJA, the Committee considered, among other things, the impact of the exclusion for performance-based compensation when developing and implementing our executive compensation programs. Annual cash incentive awards under our Executive Performance Sharing Plan, long-term cash incentive awards under our Long-Term Incentive Plan, and stock options under our Stock Incentive Plan were designed in a manner intended to meet the requirements under the exclusion, although we could not guarantee such treatment given the complex nature of the performance-based compensation requirements. +While the Committee seeks to preserve tax deductibility in developing and implementing our compensation program, the Committee also believes that it is important to maintain flexibility in administering compensation programs in a manner designed to promote varying corporate goals. Accordingly, we have not adopted a policy that all compensation must qualify as deductible for tax purposes and retain the ability to provide compensation that may not qualify as deductible under Section 162(m). +COMPENSATION COMMITTEE REPORT +The Compensation Committee of the Board of Directors (the “Committee”) has reviewed and discussed with management the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K. Based on the review and discussions, the Committee recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement. +Members of the Compensation Committee: +• +Timothy D. Cook, Chair +• +Cathleen A. Benko +• +Elizabeth J. Comstock +38 NIKE, INC. +COMPENSATION DISCUSSION AND ANALYSIS +EXECUTIVE COMPENSATION TABLES +SUMMARY COMPENSATION TABLE +The following table sets forth information concerning compensation for fiscal 2017-2019 paid to or earned by our Named Executive Officers. +NAME AND PRINCIPAL +POSITION +YEAR +SALARY +($) +BONUS (1) +($) +STOCK +AWARDS (2) +($) +OPTION +AWARDS (3) +($) +NON-EQUITY +INCENTIVE PLAN +COMPENSATION (4) +($) +ALL OTHER +COMPENSATION (5) +($) +TOTAL +($) +Mark G. Parker +Chairman, President and +Chief Executive Officer +2019 +1,676,923 +— +5,000,012 +3,052,000 +4,091,695 +147,392 +13,968,022 +2018 +1,550,000 +1,295,000 +3,500,020 +1,618,650 +1,295,000 +208,790 +9,467,460 +2017 +1,550,000 +— +3,500,035 +1,542,750 +6,261,144 +997,570 +13,851,499 +Andrew Campion +Executive Vice +President and +Chief Financial Officer +2019 +1,038,461 +— +1,150,073 +1,395,200 +1,266,925 +32,049 +4,882,708 +2018 +963,462 +277,500 +7,000,040 +735,750 +277,500 +63,514 +9,317,766 +2017 +889,231 +— +750,053 +701,250 +1,513,176 +92,546 +3,946,256 +Eric D. Sprunk +Chief Operating Officer +2019 +1,142,308 +— +1,250,022 +1,569,600 +1,393,620 +33,879 +5,389,429 +2018 +1,092,308 +277,500 +7,000,040 +833,850 +277,500 +80,560 +9,561,758 +2017 +1,042,308 +— +750,053 +794,750 +1,603,277 +253,713 +4,444,101 +Elliott J. Hill (6) +President, Consumer & Marketplace +2019 +1,119,738 +— +1,250,022 +1,569,600 +1,366,085 +69,968 +5,375,413 +Hilary K. Krane (6) +Executive Vice President, Chief Administrative Officer & General Counsel +2019 +1,026,923 +— +1,150,073 +1,395,200 +1,252,850 +31,846 +4,856,892 +2018 +892,308 +185,000 +4,850,042 +686,700 +185,000 +58,524 +6,857,574 +(1) +Represents one-time, discretionary cash bonuses awarded to certain executive officers for fiscal 2018 to normalize their compensation to that of non-executive officers. The non-executive officers had received a higher payout under the 2016-2018 LTIP because their payout was able to be adjusted for the impact of the Tax Cuts and Jobs Act. +(2) +Represents the grant date fair value of restricted stock and restricted stock unit awards granted in the applicable fiscal year computed in accordance with accounting guidance applicable to stock-based compensation. The grant date fair value is based on the closing market price of our Class B Stock on the grant date. +(3) +Represents the grant date fair value of options granted in the applicable fiscal year computed in accordance with accounting guidance applicable to stock-based compensation. The grant date fair value of the options was estimated using the Black-Scholes option pricing model. The assumptions made in determining the grant date fair values of options under applicable accounting guidance are disclosed in Note 11 of Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended May 31, 2019. +(4) +Non-Equity Incentive Plan Compensation consists of the following: +NAME +FISCAL YEAR +ANNUAL INCENTIVE +COMPENSATION (a) +($) +LONG-TERM INCENTIVE +COMPENSATION (b) +($) +TOTAL +($) +Mark G. Parker +2019 +4,091,695 +— +4,091,695 +2018 +— +1,295,000 +1,295,000 +2017 +1,642,194 +4,618,950 +6,261,144 +Andrew Campion +2019 +1,266,925 +— +1,266,925 +2018 +— +277,500 +277,500 +2017 +523,401 +989,775 +1,513,176 +Eric D. Sprunk +2019 +1,393,620 +— +1,393,620 +2018 +— +277,500 +277,500 +2017 +613,502 +989,775 +1,603,277 +Elliott J. Hill +2019 +1,366,085 +— +1,366,085 +Hilary K. Krane +2019 +1,252,850 +— +1,252,850 +2018 +— +185,000 +185,000 +(a) +Amounts shown were earned for performance in the applicable fiscal year under our Executive Performance Sharing Plan. +(b) +Amounts shown were earned for performance during the three-year period ending with the applicable fiscal year under our Long-Term Incentive Plan. +(5) +For fiscal 2019 for each of the Named Executive Officers, this includes (a) profit-sharing contributions by us to the 401(k) Savings and Profit Sharing Plan in the amount of $4,846; (b) matching contributions by us to the 401(k) Savings and Profit Sharing Plan in the amount of $13,750, and (c) profit‑sharing contributions by us to the Deferred Compensation Plan in the following amounts: $24,704 for Mr. Parker, $13,453 for Mr. Campion, $15,283 for Mr. Sprunk, $25,764 for Mr. Hill, and $13,250 for Ms. Krane. For Mr. Hill also includes $10,000 in compensation in recognition of 30 years of service with the Company, and associated tax reimbursement in the amount of $5,004, pursuant to our Valued Service Award Program, under which all employees receive cash awards and associated tax reimbursements in recognition of their significant service anniversaries with the Company. The amount for Mr. Hill also includes spousal travel and attendance at a Company-sponsored function, Company-related merchandise, and financial advisory services. For Mr. Parker, includes the cost of daily residential security, including monitoring, patrols, and installation at primary residence provided by the +2019 PROXY STATEMENT 39 +COMPENSATION DISCUSSION AND ANALYSIS +Company of $34,188. The amount for Mr. Parker also includes $69,904 in aggregate incremental cost to the Company for his personal use of the Company’s aircraft and actual cost of chartered flights for travel to and from the board and shareholder meetings of an outside company for which Mr. Parker serves as a director. The aggregate incremental cost is determined based on the variable operating cost to the Company including the cost of fuel, maintenance, crew travel expenses, landing fees, parking fees, in-flight food and beverage, and other smaller variable costs associated with each flight. This amount excludes the aggregate incremental cost to the Company for Mr. Parker’s personal use of the Company’s aircraft for which Mr. Parker reimbursed the Company in accordance with a time sharing agreement and as allowed under Federal Aviation Regulation 91.501(c) and (d). +(6) +Because Mr. Hill was only a Named Executive Officer for fiscal 2019 and Ms. Krane was only a Named Executive Officer for fiscal 2019 and 2018, no disclosure is included as to Mr. Hill for fiscal 2018 or fiscal 2017 or as to Ms. Krane for fiscal 2017. +GRANTS OF PLAN-BASED AWARDS IN FISCAL 2019 +The following table sets forth information concerning the performance-based annual cash incentive opportunities, performance-based long-term cash incentive opportunities, restricted stock and restricted stock unit awards, and stock options granted to the Named Executive Officers in fiscal 2019. +ESTIMATED FUTURE PAYOUTS UNDER +NON-EQUITY INCENTIVE PLAN AWARDS +ALL OTHER +STOCK AWARDS: +NUMBER OF +SHARES OF +STOCK OR +UNITS (3) +ALL OTHER OPTION +AWARDS: NUMBER +OF SECURITIES +UNDERLYING +OPTIONS (4) +EXERCISE +OR BASE +PRICE OF +OPTION +AWARDS +GRANT DATE +FAIR VALUE +OF STOCK +AND OPTION +AWARDS (5) +THRESHOLD +TARGET +MAXIMUM +NAME +GRANT DATE +($) +($) +($) +(#) +(#) +($/SH) +($) +Mark G. Parker +6/20/2018 +1,700,000 +(1) +3,400,000 +(1) +5,100,000 +(1) +6/20/2018 +2,500,000 +(2) +5,000,000 +(2) +10,000,000 +(2) +8/1/2018 +64,483 +5,000,012 +8/1/2018 +175,000 +77.54 +3,052,000 +Andrew Campion +6/20/2018 +525,000 +(1) +1,050,000 +(1) +1,575,000 +(1) +6/20/2018 +500,000 +(2) +1,000,000 +(2) +2,000,000 +(2) +8/1/2018 +14,832 +1,150,073 +8/1/2018 +80,000 +77.54 +1,395,200 +Eric D. Sprunk +6/20/2018 +575,000 +(1) +1,150,000 +(1) +1,725,000 +(1) +6/20/2018 +500,000 +(2) +1,000,000 +(2) +2,000,000 +(2) +8/1/2018 +16,121 +1,250,022 +8/1/2018 +90,000 +77.54 +1,569,600 +Elliott J. Hill +6/20/2018 +575,000 +(1) +1,150,000 +(1) +1,725,000 +(1) +6/20/2018 +500,000 +(2) +1,000,000 +(2) +2,000,000 +(2) +8/1/2018 +16,121 +1,250,022 +8/1/2018 +90,000 +77.54 +1,569,600 +Hilary K. Krane +6/20/2018 +525,000 +(1) +1,050,000 +(1) +1,575,000 +(1) +6/20/2018 +500,000 +(2) +1,000,000 +(2) +2,000,000 +(2) +8/1/2018 +14,832 +1,150,073 +8/1/2018 +80,000 +77.54 +1,395,200 +(1) +These amounts represent the potential performance-based annual cash incentive awards payable for performance during fiscal 2019 under our Executive Performance Sharing Plan. Under this plan, the Compensation Committee approved target awards for fiscal 2019 based on a percentage of the executive’s base salary paid during fiscal 2019 as follows: Mr. Parker, 200%; Mr. Campion, 100%; Mr. Sprunk, 100%; Mr. Hill, 100%; and Ms. Krane, 100%. The Committee also established a series of performance targets based on our earnings before interest and taxes (“EBIT”) for fiscal 2019 (excluding the effect of acquisitions, divestitures, or accounting changes not reflected in our business plan at the time of approval of the target awards) corresponding to award payouts ranging from 50% to 150% of the target awards. The EBIT for fiscal 2019 required to earn the target award payout was $4,685 million. The EBIT for fiscal 2019 required to earn the 150% maximum payout was $5,060 million. The EBIT for fiscal 2019 required to earn the 50% threshold payout was $4,310 million. Participants receive a payout at the percentage level at which the performance target is met, subject to the Committee’s discretion to reduce or eliminate any award based on Company or individual performance, viewed holistically. Actual award payouts earned in fiscal 2019 and paid in fiscal 2020 are shown in footnote 4 to the Non-Equity Incentive Plan Compensation column in the Summary Compensation Table. +(2) +These amounts represent the potential performance-based long-term cash incentive awards payable for performance during the three-year period consisting of fiscal 2019-2021 under our Long-Term Incentive Plan. Under this plan, the Compensation Committee approved target awards for the performance period and also established a series of performance targets based on our cumulative revenues and cumulative diluted earnings per common share (“EPS”) for the performance period (excluding the effect of acquisitions, divestitures, and accounting changes not reflected in our business plan at the time of approval of the target awards) corresponding to award payouts ranging from 50% to 200% of the target awards. Participants will receive a payout at the average of the percentage levels at which the two performance targets are met, subject to the Committee’s discretion to reduce or eliminate any award based on Company or individual performance, viewed holistically. For cumulative revenues over the performance period, the target payout requires revenues of $122,826 million, the 50% threshold payout requires revenues of $118,162 million, and the 200% maximum payout requires revenues of $132,521 million. For cumulative EPS over the performance period, the target payout requires EPS of $8.11, the 50% threshold payout requires EPS of $7.51, and the 200% maximum payout requires EPS of $9.40. Under the terms of the awards, on the first payroll period ending in August 2021 we will issue the award payout to each participant, provided that the participant is employed by us on the last day of the performance period. +(3) +These amounts represent grants of restricted stock units under our Stock Incentive Plan which vest in three equal installments on the first three anniversaries of the grant date. Vesting will be accelerated in certain circumstances as described in the section below titled “Potential Payments Upon Termination or Change-in-Control”. Dividends are payable on restricted stock units only upon vesting. +40 NIKE, INC. +COMPENSATION DISCUSSION AND ANALYSIS +(4) +All amounts reported in this column represent options granted under our Stock Incentive Plan which become exercisable for option shares in four equal installments on the first four anniversaries of the grant date. Options will become fully exercisable in certain circumstances as described in the section below titled “Potential Payments Upon Termination or Change-in-Control”. Each option has a maximum term of 10 years, subject to earlier termination in the event of the optionee’s termination of employment. +(5) +For stock awards, represents the value of restricted stock units granted based on the closing market price of our Class B Stock on the grant date. For option awards, represents the grant date fair value of options granted based on a value of $17.44 per share calculated using the Black-Scholes option pricing model. These are the same values for these equity awards used under accounting guidance applicable to stock-based compensation. The assumptions made in determining option values are disclosed in Note 11 of Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended May 31, 2019. +OUTSTANDING EQUITY AWARDS AT MAY 31, 2019 +The following table sets forth information concerning outstanding stock options and unvested restricted stock and restricted stock units held by the Named Executive Officers at May 31, 2019. +OPTION AWARDS +STOCK AWARDS +NAME +NUMBER OF +SECURITIES +UNDERLYING +UNEXERCISED +OPTIONS +EXERCISABLE +(#) +NUMBER OF +SECURITIES +UNDERLYING +UNEXERCISABLE +OPTIONS +(#) (1) +OPTION +EXERCISE +PRICE +($) +OPTION +EXPIRATION +DATE +NUMBER OF +SHARES OR +UNITS OF +STOCK THAT +HAVE NOT +VESTED +(#) +MARKET +VALUE OF +SHARES OR +UNITS OF +STOCK THAT +HAVE NOT +VESTED +($) +EQUITY +INCENTIVE +PLAN AWARDS: +NUMBER OF +UNEARNED +SHARES, +UNITS OR +OTHER +RIGHTS THAT +HAVE NOT +VESTED +(#) +EQUITY +INCENTIVE +PLAN AWARDS: +MARKET OR +PAYOUT VALUE +OF UNEARNED +SHARES, UNITS +OR OTHER +RIGHTS THAT +HAVE NOT +VESTED +($) +Mark G. Parker +660,000 +— +17.2400 +7/16/2020 +660,000 +— +22.9250 +7/15/2021 +660,000 +— +23.2700 +7/20/2022 +330,000 +— +31.6750 +7/19/2023 +330,000 +— +38.7600 +7/18/2024 +247,500 +82,500 +(2) +56.4000 +7/17/2025 +82,500 +82,500 +(3) +57.8700 +7/15/2026 +41,250 +123,750 +(4) +59.1000 +7/20/2027 +— +175,000 +(5) +77.5400 +8/1/2028 +346,306 +(6) +26,714,045 +166,636 +(11) +12,854,301 +Andrew Campion +120,000 +— +23.2700 +7/20/2022 +60,000 +— +31.6750 +7/19/2023 +80,000 +— +38.7600 +7/18/2024 +90,000 +30,000 +(2) +56.4000 +7/17/2025 +37,500 +37,500 +(3) +57.8700 +7/15/2026 +18,750 +56,250 +(4) +59.1000 +7/20/2027 +— +80,000 +(5) +77.5400 +8/1/2028 +131,955 +(7) +10,179,009 +Eric D. Sprunk +120,000 +— +38.7600 +7/18/2024 +120,000 +40,000 +(2) +56.4000 +7/17/2025 +42,500 +42,500 +(3) +57.8700 +7/15/2026 +21,250 +63,750 +(4) +59.1000 +7/20/2027 +— +90,000 +(5) +77.5400 +8/1/2028 +133,244 +(8) +10,278,442 +Elliott J. Hill +34,100 +— +23.2700 +7/20/2022 +90,000 +— +31.6750 +7/19/2023 +90,000 +— +38.7600 +7/18/2024 +67,500 +22,500 +(2) +56.4000 +7/17/2025 +25,000 +25,000 +(3) +57.8700 +7/15/2026 +12,500 +37,500 +(4) +59.1000 +7/20/2027 +— +90,000 +(5) +77.5400 +8/1/2028 +114,423 +(9) +8,826,590 +Hilary K. Krane +110,000 +— +31.6750 +7/19/2023 +110,000 +— +38.7600 +7/18/2024 +97,500 +32,500 +(2) +56.4000 +7/17/2025 +35,000 +35,000 +(3) +57.8700 +7/15/2026 +17,500 +52,500 +(4) +59.1000 +7/20/2027 +— +80,000 +(5) +77.5400 +8/1/2028 +95,270 +(10) +7,349,128 +(1) +Stock options generally become exercisable for option shares in four equal installments on each of the first four anniversaries of the grant date. +2019 PROXY STATEMENT 41 +COMPENSATION DISCUSSION AND ANALYSIS +(2) +100% of these options vested on July 17, 2019. +(3) +50% of these options vested on July 15, 2019 and 50% will vest on July 15, 2020. +(4) +33.3% of these options vested on July 20, 2019, 33.3% will vest on July 20, 2020, and 33.3% will vest on July 20, 2021. +(5) +25% of these options will vest on August 1, 2019, 25% will vest on August 1, 2020, 25% will vest on August 1, 2021, and 25% will vest on August 1, 2022. +(6) +20,160 of these restricted shares vested on July 15, 2019. An additional 19,741 of these restricted shares vested on July 20, 2019 and 19,740 of these restricted shares will vest on July 20, 2020. 21,495 of these RSUs will vest on August 1, 2019, 21,494 of these RSUs will vest on August 1, 2020, and 21,494 of these RSUs will vest on August 1, 2021. An additional 222,182 of these RSUs will vest on June 30, 2020. +(7) +4,320 of these restricted shares vested on July 15, 2019. An additional 5,640 of these restricted shares vested on July 20, 2019 and 5,640 of these restricted shares will vest on July 20, 2020. 4,944 of these RSUs will vest on August 1, 2019, 4,944 of these RSUs will vest on August 1, 2020, and 4,944 of these RSUs will vest on August 1, 2021. An additional 101,523 of these RSUs will vest on July 20, 2020. +(8) +4,320 of these restricted shares vested on July 15, 2019. An additional 5,640 of these restricted shares vested on July 20, 2019 and 5,640 of these restricted shares will vest on July 20, 2020. 5,374 of these RSUs will vest on August 1, 2019, 5,374 of these RSUs will vest on August 1, 2020, and 5,373 of these RSUs will vest on August 1, 2021. An additional 101,523 of these RSUs will vest on July 20, 2020. +(9) +2,880 of these restricted shares vested on July 15, 2019. An additional 3,384 of these restricted shares vested on July 20, 2019 and 3,384 of these restricted shares will vest on July 20, 2020. 5,374 of these RSUs will vest on August 1, 2019, 5,374 of these RSUs will vest on August 1, 2020, and 5,373 of these RSUs will vest on August 1, 2021. An additional 88,654 of these RSUs will vest on July 17, 2020. +(10) +3,168 of these restricted shares vested on July 15, 2019. An additional 4,794 of these restricted shares vested on July 20, 2019 and 4,794 of these restricted shares will vest on July 20, 2020. 4,944 of these RSUs will vest on August 1, 2019, 4,944 of these RSUs will vest on August 1, 2020, and 4,944 of these RSUs will vest on August 1, 2021. An additional 67,682 of these RSUs will vest on July 20, 2020. +(11) +This figure represents performance at threshold, 50% of target. These RSUs may vest on June 30, 2020, subject to performance vesting based on cumulative revenue growth and cumulative EPS growth over a five-year performance period. Actual payout will depend on actual performance, which could range from 0 to 100%. +OPTION EXERCISES AND STOCK VESTED DURING FISCAL 2019 +The following table sets forth information concerning stock option exercises and vesting of restricted stock during fiscal 2019 for each of the Named Executive Officers on an aggregated basis. +OPTION AWARDS +STOCK AWARDS +NAME +NUMBER OF +SHARES ACQUIRED +ON EXERCISE +(#) +VALUE +REALIZED +ON EXERCISE +($) +NUMBER OF +SHARES ACQUIRED +ON VESTING +(#) +VALUE +REALIZED +ON VESTING +($) +Mark G. Parker +735,000 +47,080,061 +60,587 +4,687,585 +Andrew Campion +103,000 +5,879,392 +13,655 +1,055,621 +Eric D. Sprunk +235,000 +11,354,503 +14,393 +1,113,001 +Elliott J. Hill +— +— +8,629 +667,165 +Hilary K. Krane +— +— +11,213 +866,851 +EQUITY COMPENSATION PLAN INFORMATION +The following table summarizes information regarding outstanding options and shares available for future issuance under equity compensation plans approved by shareholders and equity compensation plans that were not approved by shareholders as of May 31, 2019. The table does not reflect issuances made during fiscal 2020. +NUMBER OF SECURITIES +TO BE ISSUED UPON +EXERCISE OF OUTSTANDING +OPTIONS, WARRANTS AND +RIGHTS +WEIGHTED- +AVERAGE EXERCISE +PRICE OF OUTSTANDING +OPTIONS, WARRANTS +AND RIGHTS (1) +NUMBER OF SECURITIES +REMAINING AVAILABLE FOR +FUTURE ISSUANCE UNDER +EQUITY COMPENSATION +PLANS (EXCLUDING SECURITIES +REFLECTED IN COLUMN (a)) +PLAN CATEGORY +(a) +(b) +(c) +Equity compensation plans approved by shareholders +95,526,269 +(2) +$50.5684 +76,725,162 +(3) +Equity compensation plans not approved by shareholders +— +— +6,108,688 +(4) +Total +95,526,269 +$50.5684 +82,833,850 +(1) +Weighted-average exercise prices do not reflect the shares that will be used upon the payment of outstanding awards of restricted stock units. +(2) +Includes 95,526,269 shares subject to awards of options, restricted stock units, and stock appreciation rights outstanding under the Stock Incentive Plan (including the maximum number of Performance-Based RSUs granted to Mr. Parker). +(3) +Includes 67,321,612 shares available for future issuance under the Stock Incentive Plan and 9,403,550 shares available for future issuance under the Employee Stock Purchase Plan. +42 NIKE, INC. +COMPENSATION DISCUSSION AND ANALYSIS +(4) +Includes 6,108,688 shares available for future issuance under the Foreign Subsidiary Employee Stock Purchase Plan, pursuant to which shares are offered and sold to employees of selected non-U.S. subsidiaries of the Company on substantially the same terms as those offered to U.S. employees under the shareholder-approved Employee Stock Purchase Plan as described above under “Elements of Our Compensation Program - Employee Stock Purchase Plan”. +NON-QUALIFIED DEFERRED COMPENSATION IN FISCAL 2019 +NAME +PLAN +NAME +EXECUTIVE +CONTRIBUTIONS +IN FISCAL 2019 (1) +NIKE CONTRIBUTIONS +IN FISCAL 2019 (1) +AGGREGATE EARNINGS +IN FISCAL 2019 +AGGREGATE +WITHDRAWALS/ +DISTRIBUTIONS IN +FISCAL 2019 +AGGREGATE +BALANCE AT +5/31/2019 (1) +Mark G. Parker +DCP +$ +937,231 +$ +98,296 +$ +299,041 +— +$ +19,067,838 +Andrew Campion +DCP +$ +259,615 +$ +40,932 +$ +82,398 +— +$ +1,747,982 +Eric D. Sprunk +DCP +$ +277,500 +$ +48,297 +$ +72,040 +— +$ +12,489,567 +Elliott J. Hill +DCP +$ +— +$ +40,978 +$ +455,295 +— +$ +7,866,496 +Hilary K. Krane +DCP +$ +279,385 +$ +35,942 +$ +96,234 +— +$ +4,864,672 +(1) +All amounts reported in the Executive Contributions column are also included in amounts reported in the Summary Compensation Table. The amounts reported in the NIKE Contributions column represent profit sharing contributions made by us in early fiscal 2019 based on fiscal 2018 results; these amounts are also included in amounts reported for fiscal 2018 in the All Other Compensation column of the Summary Compensation Table. Of the amounts reported in the Aggregate Balance column, the following amounts have been reported in the Summary Compensation Tables in this proxy statement or in prior year proxy statements: Mr. Parker, $16,556,232; Mr. Campion, $1,010,825; Mr. Sprunk, $5,070,662; Mr. Hill, $40,978; and Ms. Krane, $762,566. +NON-QUALIFIED DEFERRED COMPENSATION PLANS +The Named Executive Officers are eligible to participate in our Deferred Compensation Plan (the “DCP”). Participants in the DCP may elect in advance to defer up to 100 percent of their annual base salary, bonus, and long-term incentive payments. +Each year, we share profits with our employees in the form of profit sharing contributions to defined contribution retirement plans. The contributions are allocated among eligible employees based on a percentage of their total salary and bonus for the year. To the fullest extent permitted under Internal Revenue Code limitations, these contributions are made to employees’ accounts under our qualified 401(k) Savings and Profit Sharing Plan. Contributions based on salary and bonus in excess of the tax law limit ($275,000 for fiscal 2019) are made as NIKE contributions under the DCP. +Amounts deferred under the DCP are credited to a participant’s account under the DCP. Each participant may allocate his or her account among any combination of the investment funds available under the DCP. Participants’ accounts are adjusted to reflect the investment performance of the funds selected by the participants. Participants can change the allocation of their account balances daily. The funds available under the DCP consist of 18 mutual funds with a variety of investment objectives. The investment funds had annual returns in fiscal 2019 ranging from -11.58% to 14.70%. Amounts credited to participants’ accounts are invested by us in actual investments matching the investment options selected by the participants to ensure that we do not bear any investment risk related to participants’ investment choices. +The portion of a participant’s account attributable to elective deferrals, including investment returns, is fully vested at all times. The portion of a participant’s account attributable to NIKE contributions, including investment returns, is fully vested after the participant has been employed by us for five years. All of the Named Executive Officers are fully vested in their NIKE contributions. +Each time they elect to defer compensation, participants make an election regarding distribution of the compensation deferred under the election (as adjusted to reflect investment performance). A participant may elect for distribution to be made in a lump sum at the beginning of a predetermined year while the participant is still employed or in service (but no sooner than the fourth year after the year in which the distribution election is submitted). Alternatively, a participant may elect for distribution to be made in a lump sum or in quarterly installments over five, ten or fifteen years after termination of employment or service. Participants have limited rights to change their distribution elections. Participants may make a hardship withdrawal under certain circumstances. Subject to certain limitations, a participant may also at any time request to withdraw amounts from his or her account balance that were vested as of December 31, 2004 (and any subsequent investment returns on such amount). If such request is approved, the participant may withdraw 90% of the amount requested, and the remaining 10% will be permanently forfeited. +2019 PROXY STATEMENT 43 +COMPENSATION DISCUSSION AND ANALYSIS +POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE-IN-CONTROL +CHANGE-IN-CONTROL COMPENSATION — ACCELERATION OF EQUITY AWARDS +All unvested stock option, restricted stock, and restricted stock unit (“RSU”) awards are subject to accelerated vesting upon the occurrence of two events (a “double-trigger”): there is a “change-in-control”; and the Named Executive Officer’s employment is terminated by us without “cause” or by the Named Executive Officer for “good reason”, in each case on or before the second anniversary of the change in control. Double-trigger accelerated vesting of all awards will also occur if the Named Executive Officer’s employment is terminated without “cause” or for “good reason” between shareholder approval of the change-in-control and the occurrence of the change-in-control (and, for restricted stock and RSUs, the change-in-control occurs within one year following the termination). In addition, for stock options granted since July 2010, the standard period for exercising options following termination of employment is extended from three months to four years, but not beyond each option’s original 10-year term. Accelerated vesting of stock options and RSUs will also occur if we are acquired and the acquiring company does not assume the outstanding options or RSUs. In our agreements, “change-in-control” is generally defined to include: +• +the acquisition by any person of 50% or more of our outstanding Class A Stock or, if the Class A Stock no longer elects a majority of directors, the acquisition by any person of 30% or more of our total outstanding Common Stock, +• +the nomination (and subsequent election) in a two-year period of a majority of our directors by persons other than the incumbent directors, +• +a sale of all or substantially all of our assets, and +• +an acquisition of NIKE through a merger, consolidation or share exchange. +In our agreements, “cause” generally includes willful and continued failure to substantially perform assigned duties and willful engagement in illegal conduct materially injurious to us. In our agreements, “good reason” generally includes a material diminution in position or duties, a salary reduction or material reduction in other benefits, and a home office relocation of over 50 miles. +The following table shows the estimated benefits that would have been received by the Named Executive Officers if double-trigger accelerated vesting had occurred on May 31, 2019, when the closing price of our Class B Stock was $77.14 per share. +NAME +STOCK AWARD +ACCELERATION (1) +STOCK OPTION +ACCELERATION (2) +TOTAL +Mark G. Parker +$ +52,422,647 +$ +5,533,275 +$ +57,955,922 +Andrew Campion +$ +10,179,009 +$ +2,359,575 +$ +12,538,584 +Eric D. Sprunk +$ +10,278,442 +$ +2,798,625 +$ +13,077,067 +Elliott J. Hill +$ +8,826,590 +$ +1,624,900 +$ +10,451,490 +Hilary K. Krane +$ +7,349,128 +$ +2,295,600 +$ +9,644,728 +(1) +Information regarding unvested restricted stock and restricted stock units held by each Named Executive Officer is set forth in the Outstanding Equity Awards table above. The award agreements provide for full double-trigger accelerated vesting as described above (for Performance-Based RSUs granted to Mr. Parker, assuming such awards are earned at 100%). The amounts in the table above represent the number of unvested restricted shares and RSUs multiplied by the closing price of our Class B Stock on May 31, 2019. +(2) +Information regarding outstanding unvested options held by each Named Executive Officer is set forth in the Outstanding Equity Awards table above. The agreements governing unvested stock options provide for full double-trigger accelerated vesting and an extended post-termination exercise period as described above. Amounts in the table above represent the aggregate value as of May 31, 2019 of those options using the excess of the per share closing price of our Class B Stock on May 31, 2019 over the per share exercise price, multiplied by the number of unvested option shares for each Named Executive Officer. +BENEFITS TRIGGERED ON CERTAIN EMPLOYMENT TERMINATIONS +STOCK OPTION ACCELERATION AND EXTENSION +As of May 31, 2019, each Named Executive Officer held options to purchase Class B Stock as listed in the Outstanding Equity Awards table above. Under the terms of the stock options granted to each Named Executive Officer, upon the death or disability of the officer, all unvested options become fully exercisable and the standard three-month period for exercising options following termination of employment is extended to four years, but not beyond each option’s original 10-year term. If death or disability of a Named Executive Officer had occurred on May 31, 2019, the aggregate value of those options would have been $5,533,275 for Mr. Parker, $2,359,575 for Mr. Campion, $2,798,625 for Mr. Sprunk, $1,624,900 for Mr. Hill, and $2,295,600 for Ms. Krane. +Under the terms of the unvested stock options granted to Named Executive Officers, vesting of options that have been outstanding for at least one year will be accelerated if the holder retires after reaching age 60 with at least 5 years of service, and vesting of options that have been outstanding for at least one year will continue notwithstanding termination of employment if the holder retires after reaching age 55 with at least 5 years of service. In addition, for any holder who retires after reaching age 55 (but before reaching age 60) with at least 5 years of service, the standard three-month period for exercising these options +44 NIKE, INC. +COMPENSATION DISCUSSION AND ANALYSIS +following termination of employment will be extended to four years, but not beyond the option’s original ten-year term. If termination of employment of a Named Executive Officer (other than due to death or disability) had occurred on May 31, 2019, the aggregate value of those options would have been $5,533,275 for Mr. Parker, $2,798,625 for Mr. Sprunk, $1,624,900 for Mr. Hill, and $2,295,600 for Ms. Krane. The value for Mr. Campion is zero because he has not reached age 55. +STOCK AWARD ACCELERATION +As of May 31, 2019, each Named Executive Officer held unvested restricted stock and/or restricted stock units as set forth in the Outstanding Equity Awards table above. Under the terms of their award agreements, all unvested restricted shares and restricted stock units will immediately vest fully upon the death or disability of the officer, except that Performance-Based RSUs held by Mr. Parker will vest at the threshold amount. The value of the unvested restricted shares and restricted stock units held by each Named Executive Officer as of May 31, 2019 that would have become vested if death or disability had occurred on that date is as set forth in the “Stock Award Acceleration” column of the Change-in-Control Compensation — Acceleration of Equity Awards table above, except that the amount for Mr. Parker would be $39,568,346. +PAYMENTS UNDER NONCOMPETITION AGREEMENTS +We have an agreement with Mr. Parker that contains a covenant not to compete that extends for two years following the termination of his employment with us. The agreement provides that if Mr. Parker’s employment is terminated by us, we will make monthly payments to him during the two-year noncompetition period in an amount equal to one-twelfth of his then current annual salary and target Executive Performance Sharing Plan bonus (“Annual NIKE Income”). The agreement provides further that if Mr. Parker voluntarily resigns, we will make monthly payments to him during the two-year noncompetition period in an amount equal to one-twenty-fourth of his then current Annual NIKE Income. However, commencement of the above-described monthly payments will be delayed until after the six-month period following Mr. Parker’s separation from service, and all payments that he would otherwise have received during that period will be paid in a lump sum promptly following the end of the period, together with interest at the prime rate. If employment is terminated without “cause”, the parties may mutually agree to waive the covenant not to compete, and if employment is terminated for “cause”, we may unilaterally waive the covenant. Under Mr. Parker’s noncompetition agreement, “cause” means continual and repeated neglect of duties or acts of dishonesty. If the covenant is waived, we will not be required to make the payments described above for the months as to which the waiver applies. If the employment of Mr. Parker had been terminated by us on May 31, 2019, and assuming the covenant is not waived, we would have been required to pay Mr. Parker $425,000 per month for the 24-month period ending May 31, 2021. If Mr. Parker had voluntarily resigned on May 31, 2019, and assuming the covenant is not waived, we would have been required to pay Mr. Parker $212,500 per month for the 24-month period ending May 31, 2021. +We have noncompetition agreements with Mr. Campion, Mr. Sprunk, Mr. Hill, and Ms. Krane on the same terms, except that the noncompetition period is one year instead of two years, payments may commence on termination, and we may unilaterally waive the covenant in all cases including termination without cause (in which case payments would cease). In addition, for Mr. Campion, Mr. Sprunk, Mr. Hill, and Ms. Krane, the monthly payments are one-twelfth or one-twenty-fourth of their then current annual salaries, instead of their Annual NIKE Income. If the employment of these officers had been terminated by us on May 31, 2019, and assuming the covenant is not waived, we would have been required to pay Mr. Campion $87,500, Mr. Sprunk $95,833, Mr. Hill $95,833, and Ms. Krane $87,500, each on a monthly basis for the 12-month period ending May 31, 2020. If these officers had voluntarily resigned on May 31, 2019, and assuming the covenant is not waived, we would have been required to pay Mr. Campion $43,750, Mr. Sprunk $47,917, Mr. Hill $47,917, and Ms. Krane $43,750, each on a monthly basis for the 12-month period ending May 31, 2020. +CEO PAY RATIO +NIKE strives to provide competitive base pay, market-leading benefits, and an exceptional work environment that collectively create a premium employee experience. Our pay and benefit programs are designed to attract and engage talent, and reward performance, viewed holistically across individual, team, and business results. Our programs are administered to be equitable relative to employees’ performance, experience, and level within the Company. +The executive compensation program is highly incentive-based with Company performance determining a significant portion of total compensation. It is designed to maximize shareholder value by motivating executives to achieve both short- and long-term goals. +2019 PROXY STATEMENT 45 +COMPENSATION DISCUSSION AND ANALYSIS +For fiscal 2019, our last completed fiscal year: +• +The employee identified at the median of all NIKE employees (other than our CEO) was a retail store employee in the United States; +• +The annual total compensation of the median employee was $25,386; +• +The annual total compensation of our CEO, Mr. Parker, was $13,968,022; and +• +The estimated ratio of the annual total compensation of our CEO to the median annual total compensation of all other NIKE employees was 550 to 1. +This pay ratio is a reasonable estimate calculated in a manner consistent with SEC rules based on the methodology described below. The SEC rules for identifying the median compensated employee and calculating the pay ratio allow companies to adopt a variety of methodologies, apply certain exclusions, and make reasonable estimates and assumptions that reflect their compensation practices. As such, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies may utilize different methodologies, exclusions, estimates, and assumptions in calculating their own pay ratios. +METHODOLOGY +We selected May 1, 2019 as the date to determine the median employee. At that time, we had approximately 75,109 employees globally. After applying the “de minimis exemption” under the SEC rules, which permits us to exclude non-U.S. employees accounting for 5% or less of our total employee population, we excluded the 3,752 employees in the jurisdictions identified below, and our employee population consisted of approximately 71,357 employees. +Slovakia +1 +Hungary +74 +Vietnam +193 +Slovenia +1 +Sweden +83 +Greece +201 +United Arab Emirates +5 +Indonesia +88 +Israel +204 +Sri Lanka +6 +Czech Republic +89 +Austria +205 +Philippines +23 +Denmark +90 +Portugal +209 +Croatia +25 +India +99 +South Africa +212 +Macao +34 +Switzerland +112 +Poland +238 +New Zealand +53 +Ireland +121 +Turkey +445 +Uruguay +67 +Malaysia +167 +Hong Kong +454 +Norway +71 +Thailand +182 +Of the 71,357 employees included in the CEO Pay Ratio calculation, approximately 72% were full-time, 53% were in retail jobs, and 51% were located in the United States. +To identify our median employee we calculated annual compensation for fiscal 2019 based on base salary or hourly wages, as applicable. For the majority of our employees, base salary or hourly wages comprise the majority of their compensation. To determine wages for hourly employees, we used each individual’s pay rate and estimated scheduled hours in the applicable Human Resources system of record. +After determining the annual compensation for our employee population as described above, we identified a subset of approximately 100 individuals representing the potential median employee population. For this subset, we calculated each employee’s annual total compensation in U.S. dollars for fiscal 2019 based on the Summary Compensation Table rules used for our Named Executive Officers (in accordance with Item 402(c)(2)(x) of Regulation S-K). Compensation for permanent employees hired during the fiscal year was annualized and the median employee was then selected from the subset to determine the CEO Pay Ratio. +46 NIKE, INC. +AUDIT MATTERS +PROPOSAL 3 +RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM +The Audit & Finance Committee of the Board of Directors has sole authority to retain, with shareholder ratification, the Company’s independent registered public accounting firm. The Audit & Finance Committee directly oversees the firm’s work with respect to the annual audit of the Company’s consolidated financial statements and internal control over financial reporting and approves all audit engagement fees and terms. At least annually, the Audit & Finance Committee evaluates the independent registered public accounting firm’s qualifications, performance, and independence, including a review and evaluation of its lead partner. The Audit & Finance Committee is also involved in the selection of the new lead engagement partner following mandated rotation of the firm’s lead partner, and is responsible for considering the benefits of rotation of the Company’s independent registered public accounting firm. +The Audit & Finance Committee has appointed PricewaterhouseCoopers LLP to audit the Company’s consolidated financial statements and internal control over financial reporting for the fiscal year ending May 31, 2020 and to render other professional services as required. +PricewaterhouseCoopers LLP has served as the Company’s independent registered public accounting firm for many years. The Audit & Finance Committee and the Board of Directors believe that the continued retention of PricewaterhouseCoopers LLP as the independent registered public accounting firm is in the best interests of the Company and its shareholders. +Accordingly, the Audit & Finance Committee is submitting the appointment of PricewaterhouseCoopers LLP to shareholders for ratification. If the appointment is not ratified by our shareholders, the Audit & Finance Committee may reconsider whether it should appoint another independent registered public accounting firm. +Representatives of PricewaterhouseCoopers LLP will be present at the Annual Meeting, will have the opportunity to make a statement if they desire to do so, and are expected to be available to respond to questions. +Aggregate fees billed by the Company’s independent registered public accounting firm, PricewaterhouseCoopers LLP, for audit services related to the most recent two fiscal years, and for other professional services incurred in the most recent two fiscal years, were as follows: +TYPE OF SERVICE +2019 +2018 +Audit Fees (1) +$22.1 million +$20.3 million +Audit-Related Fees (2) +0.1 million +— million +Tax Fees (3) +1.4 million +1.3 million +All Other Fees (4) +0.3 million +0.1 million +Total +$23.9 million +$21.7 million +(1) Comprises the audits of the Company’s annual financial statements and internal controls over financial reporting, and reviews of the Company’s quarterly financial statements, as well as statutory audits of Company subsidiaries, attest services and consents to SEC filings. +(2) Comprises services including consultations regarding financial accounting and reporting. +(3) Comprises services for tax compliance, tax planning and tax advice. Tax compliance includes services for compliance related tax advice, as well as the preparation and review of both original and amended tax returns for the Company and its consolidated subsidiaries. Tax compliance related fees represented $0.2 million and $0.1 million of the tax fees for fiscal 2019 and 2018, respectively. The remaining tax fees primarily include tax advice. +(4) Comprises other miscellaneous services. +In accordance with the Sarbanes-Oxley Act of 2002, the Audit & Finance Committee established policies and procedures under which all audit and non-audit services performed by the Company’s independent registered public accounting firm must be approved in advance by the Audit & Finance Committee. During fiscal 2019, PricewaterhouseCoopers LLP was engaged to be paid fees totaling $2,500, or less than 0.1% of total fees, for one service that was not pre-approved. During fiscal 2018, fees totaling $2,500, or less than 0.1% of total fees, were paid to PricewaterhouseCoopers LLP for one engagement that was not pre-approved. All such services were approved by the Audit & Finance Committee promptly after their inadvertent omission from pre-approval was noticed. +BOARD RECOMMENDATION +The Board of Directors recommends that shareholders vote FOR ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for the fiscal year ending May 31, 2020. +2019 PROXY STATEMENT 47 +AUDIT MATTERS +REPORT OF THE AUDIT & FINANCE COMMITTEE +The Audit & Finance Committee has: +• +Reviewed and discussed the audited financial statements with management. +• +Discussed with the independent auditors the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board (“PCAOB”) Statement on Auditing Standards No. 16 Communications with Audit Committees and the SEC. +• +Received the written disclosures and the letter from the independent accountants required by applicable requirements of the PCAOB regarding the independent accountants’ communications concerning independence, and has discussed with the independent accountant the independent accountant’s independence. +• +Based on the review and discussions above, recommended to the Board of Directors that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the last fiscal year for filing with the Securities and Exchange Commission. +Members of the Audit & Finance Committee: +• +Alan B. Graf, Jr., Chairman +• +John G. Connors +• +John J. Donahoe II +48 NIKE, INC. +STOCK OWNERSHIP INFORMATION +STOCK HOLDINGS OF CERTAIN OWNERS AND MANAGEMENT +The following table sets forth the number of shares of the classes of NIKE securities beneficially owned, as of June 30, 2019, after giving effect to any transactions that occurred on such date, by (i) each person known to the Company to be the beneficial owner of more than 5 percent of any class of the Company’s securities, (ii) each of the directors and nominees for director, (iii) each executive officer listed in the Summary Compensation Table (“Named Executive Officers”), and (iv) all directors, Named Executive Officers, and other executive officers as a group. Because Class A Stock is convertible into Class B Stock on a share-for-share basis, each beneficial owner of Class A Stock is deemed by the SEC to be a beneficial owner of the same number of shares of Class B Stock. Therefore, in indicating a person’s beneficial ownership of shares of Class B Stock in the table, it has been assumed that such person has converted into Class B Stock all shares of Class A Stock of which such person is a beneficial owner. For these reasons the table contains substantial duplications in the numbers of shares and percentages of Class A and Class B Stock shown for Swoosh, LLC, Philip H. Knight, the Travis A. Knight 2009 Irrevocable Trust II, and Travis A. Knight in his capacity as the Trustee of such Trust. In addition, unless otherwise indicated, all persons named below can be reached c/o Ann M. Miller, Vice President, Corporate Secretary, and Chief Ethics & Compliance Officer, NIKE, Inc., One Bowerman Drive, Beaverton, Oregon 97005-6453. +TITLE OF CLASS +SHARES BENEFICIALLY +OWNED (1) +PERCENT OF +CLASS (2) +Cathleen A. Benko +Class B +4,312 +— +Elizabeth J. Comstock +Class B +104,813 +(3) +— +John G. Connors +Class B +130,653 +(3) +— +Timothy D. Cook +Class B +110,813 +(3) +— +John J. Donahoe II +Class B +19,045 +— +Alan B. Graf, Jr. +Class B +197,765 +— +Peter B. Henry +Class B +4,466 +— +Travis A. Knight +Class A +39,856,369 +(4) +12.7 +% +Class B +39,876,642 +(4) +3.1 +% +John C. Lechleiter +Class B +153,051 +(3) +— +Mark G. Parker (5) +Class B +4,528,704 +(3)(6) +0.4 +% +Michelle A. Peluso +Class B +19,149 +— +John W. Rogers, Jr. +Class B +7,355 +— +John R. Thompson, Jr. +Class B +80,347 +(7) +— +Andrew Campion (5) +Class B +515,980 +(3) +— +Eric D. Sprunk (5) +Class B +438,990 +(3) +— +Elliott J. Hill (5) +Class B +406,590 +(3) +— +Hilary K. Krane (5) +Class B +536,065 +(3)(6) +— +2019 PROXY STATEMENT 49 +STOCK OWNERSHIP INFORMATION +TITLE OF CLASS +SHARES BENEFICIALLY +OWNED (1) +PERCENT OF +CLASS (2) +Sojitz Corporation of America +Preferred +(8) +300,000 +100.0 +% +1211 S.W. 5th Ave, Pacwest Center, Ste. 2220, +Portland, OR 97204 +Philip H. Knight +One Bowerman Drive, Beaverton, OR 97005 +Class A +21,054,487 +(9) +6.7 +% +Class B +32,440,174 +(10) +2.6 +% +Swoosh, LLC +22990 NW Bennett Street, Hillsboro, OR 97124 +Class A +245,000,000 +(11) +77.7 +% +Class B +245,000,000 +16.3 +% +Travis A. Knight 2009 Irrevocable Trust II +22990 NW Bennett Street, Hillsboro, OR 97124 +Class A +39,856,369 +(4) +12.7 +% +Class B +39,856,369 +(4) +3.1 +% +The Vanguard Group +100 Vanguard Blvd., Malvern, PA 19355 +Class B +104,935,348 +(12) +8.2 +% +BlackRock, Inc. +55 East 52nd Street, New York, NY 10055 +Class B +86,268,224 +(13) +6.8 +% +Capital World Investors +333 South Hope Street, Los Angeles, CA 90071 +Class B +63,881,684 +(14) +5.0 +% +All directors and executive officers as a group (19 persons) +Class A +39,856,369 +(4) +12.7 +% +Class B +48,071,714 +(3)(4) +3.8 +% +(1) +A person is considered to beneficially own any shares: (a) over which the person exercises sole or shared voting or investment power, or (b) of which the person has the right to acquire beneficial ownership at any time within 60 days (such as through conversion of securities or exercise of stock options). Unless otherwise indicated, voting and investment power relating to the above shares is exercised solely by the beneficial owner or shared by the owner and the owner’s spouse or children. +(2) +Omitted if less than 0.1 percent. +(3) +These amounts include the right to acquire the following numbers of shares within 60 days after June 30, 2019 pursuant to the exercise of stock options: 90,000 shares for Ms. Comstock, 90,000 shares for Mr. Connors, 90,000 shares for Mr. Cook, 90,000 shares for Dr. Lechleiter, 3,011,250 shares for Mr. Parker, 406,250 shares for Mr. Campion, 303,750 shares for Mr. Sprunk, 319,100 shares for Mr. Hill, 370,000 shares for Ms. Krane, and 6,118,850 shares for the executive officer and director group. +(4) +Includes 20,713,989 shares of Class A Stock held directly by the Travis A. Knight 2009 Irrevocable Trust II (the “Trust”), of which Mr. Travis Knight is the Trustee, and 19,142,380 shares of Class A Stock held by an indirect subsidiary of the Trust. Mr. Knight and members of his immediate family are among the beneficiaries of the Trust. Mr. Knight disclaims beneficial ownership of the Company’s securities held directly and indirectly by the Trust, except to the extent of his pecuniary interest therein. On June 30, 2016, a wholly owned subsidiary of the Trust acquired all of the voting units in Swoosh, LLC. Mr. Knight disclaims beneficial ownership of all securities held by Swoosh, LLC. +(5) +Named Executive Officer listed in the Summary Compensation Table. +(6) +Includes shares held in accounts under the NIKE, Inc. 401(k) Savings and Profit Sharing Plan for Mr. Parker and Ms. Krane in the amounts of 36,011 and 117, respectively. +(7) +Includes 33,534 shares credited to Mr. Thompson’s account under the NIKE, Inc. Deferred Compensation Plan. +(8) +Preferred Stock does not have general voting rights except as provided by law, and under certain circumstances as provided in the Company’s Restated Articles of Incorporation, as amended. +(9) +Does not include 521,792 shares of Class A Stock that are owned by Mr. Philip Knight’s spouse. Mr. Philip Knight has disclaimed ownership of all such shares. Mr. Philip Knight holds the position Chairman Emeritus, and has a standing invitation to attend all meetings of the Board as a non-voting observer. +(10) +Does not include: (a) 521,792 shares of Class A Stock that are owned by Mr. Philip Knight’s spouse, and (b) 22,336,056 shares of Class B Stock held by the Knight Foundation, a charitable foundation in which Mr. Philip Knight and his spouse are directors. Mr. Philip Knight has disclaimed ownership of all such shares. Mr. Philip Knight holds the position Chairman Emeritus, and has a standing invitation to attend all meetings of the Board as a non-voting observer. +(11) +Information provided as of July 18, 2018 in the Form 4 filed by the shareholder. +(12) +Information provided as of February 11, 2019 in Schedule 13G filed by the shareholder. +(13) +Information provided as of February 5, 2019 in Schedule 13G filed by the shareholder. +(14) +Information provided as of February 12, 2019 in Schedule 13B filed by the shareholder. +50 NIKE, INC. +STOCK OWNERSHIP INFORMATION +TRANSACTIONS WITH RELATED PERSONS +Mr. Parker’s sibling Stephen Parker was employed by the Company in a non-executive role in fiscal 2019 as a Vice President with Converse. During fiscal 2019, the Company paid aggregate compensation to Stephen Parker in the amount of $657,635, comprised of salary, matching contributions to Company-sponsored retirement plans, and $556,708 paid in connection with his termination of service. Additionally, during fiscal 2019 the Company paid Mr. Parker’s sibling Ann Parker, a former non-executive employee of the Company, $133,207 in connection with her termination of service in fiscal 2018. The compensation and benefits, including separation benefits, received by each of Mr. Parker’s siblings were consistent with compensation paid to other similarly situated employees. +Eric Sprunk’s daughter, Nicole Sprunk, was employed by the Company in a non-executive role in fiscal 2019 as a Brand Director. During fiscal 2019, the Company paid aggregate compensation to Nicole Sprunk of $243,774, comprised of salary, bonus, the value of stock granted, and profit sharing and matching contributions to the Company-sponsored retirement plan. The compensation and benefits received by Nicole Sprunk were consistent with compensation paid to other employees holding similar positions. +Philip H. Knight, the father of NIKE director Travis A. Knight, serves as Chairman Emeritus, which provides a standing invitation for Philip H. Knight to attend meetings of the Board and its committees as a non-voting observer. As Chairman Emeritus, Mr. Knight receives an annual salary of $500,000, and medical and dental insurance coverage generally available to employees. In fiscal 2019, Philip H. Knight received $508,811, comprised of salary and profit sharing contributions to Company-sponsored retirement plans. +The Company’s written policy requires the Corporate Responsibility, Sustainability & Governance Committee to review any transaction or proposed transaction with a related person that would be required to be reported under Item 404(a) of Regulation S-K, and to determine whether to ratify or approve the transaction, with ratification or approval to occur only if the committee determines that the transaction is fair to the Company or that approval or ratification of the transaction is in the interest of the Company. +COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION +The members of the Compensation Committee of the Board of Directors during fiscal 2019 were Timothy D. Cook, Cathleen A. Benko, Elizabeth J. Comstock, and Johnathan A. Rodgers. The committee is composed solely of independent, non-employee directors. No member of the Compensation Committee has been an executive officer of the Company, and no member of the Compensation Committee had any relationships requiring disclosure by the Company under the SEC’s rules requiring disclosure of certain relationships and related-party transactions. None of the Company’s executive officers served as a director or member of a compensation committee (or other committee serving an equivalent function) of any other entity, the executive officers of which served as a director or member of the Compensation Committee of the Company during fiscal 2019. +2019 PROXY STATEMENT 51 +OTHER MATTERS +As of the time this proxy statement was printed, management was unaware of any proposals to be presented for consideration at the Annual Meeting other than those set forth herein, but if other matters do properly come before the Annual Meeting, the persons named in the proxy will vote the shares represented by such proxy according to their best judgment. +SHAREHOLDER PROPOSALS +A proposal by a shareholder for inclusion in the Company’s proxy statement and form of proxy for the 2020 annual meeting of shareholders must be received by Ann M. Miller, Vice President, Corporate Secretary, and Chief Ethics & Compliance Officer of NIKE, Inc. at One Bowerman Drive, Beaverton, Oregon 97005-6453, on or before April 11, 2020 to be eligible for inclusion. Rules under the Securities Exchange Act of 1934, as amended, describe standards as to the submission of shareholder proposals. In addition, the Company’s Bylaws require that any shareholder wishing to make a nomination for director, or wishing to introduce a proposal or other business at a shareholder meeting must give the Company at least 60 days’ advance written notice, which for the 2020 annual meeting of shareholders is July 19, 2020, and that notice must meet certain other requirements described in the Bylaws. +For the Board of Directors, +Ann M. Miller +Vice President, Corporate Secretary, and Chief Ethics & Compliance Officer +52 NIKE, INC. +ANNUAL +MEETING +AND +PROXY STATEMENT +September 19, 2019 +Beaverton, Oregon +Whether or not you plan to attend the meeting, please sign and date the enclosed proxy card and return it in the enclosed envelope, or vote online or by telephone following the instructions on the proxy card. +Your vote matters - here's how to vote! +You may vote online or by phone instead of mailing this card. +Votes submitted electronically must be received by 11:59 P.M., Eastern Time, on September 18, 2019. +Online +Go to www.edocumentview.com/NKE or scan the QR code — login details are located in the shaded bar below. +Phone +Call toll free 1-800-652-VOTE (8683) within the USA, US territories and Canada +Save paper, time and money! Sign up for electronic delivery at www.envisionreports.com/NKE +Using a black ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas. +x +Annual Meeting Proxy Card +IF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. +A +Proposals — The Board of Directors recommends a vote FOR all the nominees listed in Proposal 1 and a vote FOR Proposals 2 and 3. +1. Class A director nominees: To elect a Board of Directors for the ensuing year. +For +Withhold +For +Withhold +For +Withhold +01 - Cathleen A. Benko +☐ +☐ +02 - Elizabeth J. Comstock +☐ +☐ +03 - John G. Connors +☐ +☐ +04 - Timothy D. Cook +☐ +☐ +05 - John J. Donahoe II +☐ +☐ +06 - Travis A. Knight +☐ +☐ +07 - Mark G. Parker +☐ +☐ +08 - John W. Rogers, Jr. +☐ +☐ +09 - John R. Thompson, Jr. +☐ +☐ +For +Against +Abstain +For +Against +Abstain +2. +To approve executive compensation by an advisory vote. +☐ +☐ +☐ +3. +To ratify the appointment of PricewaterhouseCoopers LLP as independent registered public accounting firm. +☐ +☐ +☐ +4. +To transact such other business as may properly come before the meeting. +B +Authorized Signatures — This section must be completed for your vote to count. Please date and sign below. +Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title. +Date (mm/dd/yyyy) — Please print date below. +Signature 1 — Please keep signature within the box. +Signature 2 — Please keep signature within the box. +/ / +Meeting Information +2019 Annual Meeting of Shareholders +for Shareholders as of July 19, 2019 +September 19, 2019 +10:00 A.M. PDT +Meeting Location: +Tiger Woods Conference Center +One Bowerman Drive +Beaverton, OR 97005 +Meeting Directions +From I-5 South of Portland: +I-5 North to 217 North. Follow to Hwy 26 West. +From I-5 North of Portland: +I-5 South to I-405 South. Follow to Hwy 26 West. +From I-84 East of Portland: +I-84 West to I-5 South to I-405 North. Follow to Hwy 26 West. +Exit Hwy 26 at Murray Blvd, turn left, and drive 2.4 miles. Turn right on SW Bowerman Drive into the NIKE World Headquarters (WHQ). Keep right at the entry and go directly to the parking structure. Follow posted signs to the Tiger Woods Conference Center, which is located directly ahead of the parking structure. Please note that the NIKE Campus is a non-smoking location and smoking is not permitted on NIKE property. +Small steps make an impact. +Help the environment by consenting to receive electronic delivery, sign up at www.envisionreports.com/NKE +IF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. +Proxy — NIKE, INC. +CLASS A COMMON STOCK PROXY +SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS +FOR THE 2019 ANNUAL MEETING OF SHAREHOLDERS +SEPTEMBER 19, 2019 +The undersigned hereby appoints Mark G. Parker, Travis A. Knight and Michelle A. Peluso, and each of them, proxies with full power of substitution, to vote, as designated on the reverse side, on behalf of the undersigned, all shares of Class A Common Stock which the undersigned may be entitled to vote at the Annual Meeting of Shareholders of NIKE, Inc. on September 19, 2019, and any adjournments thereof, with all powers that the undersigned would possess if personally present. A majority of the proxies or substitutes present at the meeting may exercise all powers granted hereby. +THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS SPECIFIED, BUT IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE NOMINEES FOR DIRECTOR FOR PROPOSAL 1 AND FOR PROPOSALS 2 AND 3. THE PROXIES MAY VOTE IN THEIR DISCRETION AS TO OTHER MATTERS WHICH MAY COME BEFORE THE MEETING. +YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS’ RECOMMENDATIONS. +THE PROXIES CANNOT VOTE THESE SHARES UNLESS YOU SIGN AND RETURN THIS CARD OR PROPERLY VOTE BY PHONE OR INTERNET. +C +Non-Voting Items +Change of Address — Please print new address below. +Your vote matters - here's how to vote! +You may vote online or by phone instead of mailing this card. +Votes submitted electronically must be received by 11:59 P.M., Eastern Time, on September 18, 2019. +Online +Go to www.edocumentview.com/NKE or scan the QR code — login details are located in the shaded bar below. +Phone +Call toll free 1-800-652-VOTE (8683) within the USA, US territories and Canada +Save paper, time and money! Sign up for electronic delivery at www.envisionreports.com/NKE +Using a black ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas. +x +Annual Meeting Proxy Card +IF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. +A +Proposals — The Board of Directors recommends a vote FOR all the nominees listed in Proposal 1 AND a vote FOR Proposals 2 and 3. +1. +Class B director nominees: To elect a Board of Directors for the ensuing year. +For +Withhold +For +Withhold +For +Withhold +01 - Alan B. Graf, Jr. +☐ +☐ +02 - Peter B. Henry +☐ +☐ +03 - Michelle A. Peluso +☐ +☐ +For +Against +Abstain +For +Against +Abstain +2. +To approve executive compensation by an advisory vote. +☐ +☐ +☐ +3. +To ratify the appointment of PricewaterhouseCoopers LLP as independent registered public accounting firm. +☐ +☐ +☐ +4. +To transact such other business as may properly come before the meeting. +B +Authorized Signatures — This section must be completed for your vote to count. Please date and sign below. +Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title. +Date (mm/dd/yyyy) — Please print date below. +Signature 1 — Please keep signature within the box. +Signature 2 — Please keep signature within the box. +/ / +Meeting Information +2019 Annual Meeting of Shareholders +for Shareholders as of July 19, 2019 +September 19, 2019 +10:00 A.M. PDT +Meeting Location: +Tiger Woods Conference Center +One Bowerman Drive +Beaverton, OR 97005 +Meeting Directions +From I-5 South of Portland: +I-5 North to 217 North. Follow to Hwy 26 West. +From I-5 North of Portland: +I-5 South to I-405 South. Follow to Hwy 26 West. +From I-84 East of Portland: +I-84 West to I-5 South to I-405 North. Follow to Hwy 26 West. +Exit Hwy 26 at Murray Blvd, turn left and drive 2.4 miles. Turn right on SW Bowerman Drive into the NIKE World Headquarters (WHQ). Keep right at the entry and go directly to the parking structure. Follow posted signs to the Tiger Woods Conference Center, which is located directly ahead of the parking structure. Please note that the NIKE Campus is a non-smoking location and smoking is not permitted on NIKE property. +Small steps make an impact. +Help the environment by consenting to receive electronic delivery, sign up at www.envisionreports.com/NKE +IF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN TH ENCLOSED ENVELOPE. +Proxy — NIKE, INC. +CLASS B COMMON STOCK PROXY +SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS +FOR THE 2019 ANNUAL MEETING OF SHAREHOLDERS +SEPTEMBER 19, 2019 +The undersigned hereby appoints Mark G. Parker, Travis A. Knight and Michelle A. Peluso, and each of them, proxies with full power of substitution, to vote, as designated on the reverse side, on behalf of the undersigned, all shares of Class B Common Stock which the undersigned may be entitled to vote at the Annual Meeting of Shareholders of NIKE, Inc. on September 19, 2019, and any adjournments thereof, with all powers that the undersigned would possess if personally present. A majority of the proxies or substitutes present at the meeting may exercise all powers granted hereby. +THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS SPECIFIED, BUT IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE NOMINEES FOR DIRECTOR FOR PROPOSAL 1 AND FOR PROPOSALS 2 AND 3. THE PROXIES MAY VOTE IN THEIR DISCRETION AS TO OTHER MATTERS WHICH MAY COME BEFORE THE MEETING. +YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS’ RECOMMENDATIONS. +THE PROXIES CANNOT VOTE THESE SHARES UNLESS YOU SIGN AND RETURN THIS CARD OR PROPERLY VOTE BY PHONE OR INTERNET. +. +C +Non-Voting Items +Change of Address — Please print new address below. \ No newline at end of file diff --git a/raw/proxies/0000320187/0000320187-19-000053/proxy_rpt.txt b/raw/proxies/0000320187/0000320187-19-000053/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..68e93879153abdab8ac58ed56098ca40b68b572a --- /dev/null +++ b/raw/proxies/0000320187/0000320187-19-000053/proxy_rpt.txt @@ -0,0 +1,5 @@ +TRANSACTIONS WITH RELATED PERSONS +Mr. Parker’s sibling Stephen Parker was employed by the Company in a non-executive role in fiscal 2019 as a Vice President with Converse. During fiscal 2019, the Company paid aggregate compensation to Stephen Parker in the amount of $657,635, comprised of salary, matching contributions to Company-sponsored retirement plans, and $556,708 paid in connection with his termination of service. Additionally, during fiscal 2019 the Company paid Mr. Parker’s sibling Ann Parker, a former non-executive employee of the Company, $133,207 in connection with her termination of service in fiscal 2018. The compensation and benefits, including separation benefits, received by each of Mr. Parker’s siblings were consistent with compensation paid to other similarly situated employees. +Eric Sprunk’s daughter, Nicole Sprunk, was employed by the Company in a non-executive role in fiscal 2019 as a Brand Director. During fiscal 2019, the Company paid aggregate compensation to Nicole Sprunk of $243,774, comprised of salary, bonus, the value of stock granted, and profit sharing and matching contributions to the Company-sponsored retirement plan. The compensation and benefits received by Nicole Sprunk were consistent with compensation paid to other employees holding similar positions. +Philip H. Knight, the father of NIKE director Travis A. Knight, serves as Chairman Emeritus, which provides a standing invitation for Philip H. Knight to attend meetings of the Board and its committees as a non-voting observer. As Chairman Emeritus, Mr. Knight receives an annual salary of $500,000, and medical and dental insurance coverage generally available to employees. In fiscal 2019, Philip H. Knight received $508,811, comprised of salary and profit sharing contributions to Company-sponsored retirement plans. +The Company’s written policy requires the Corporate Responsibility, Sustainability & Governance Committee to review any transaction or proposed transaction with a related person that would be required to be reported under Item 404(a) of Regulation S-K, and to determine whether to ratify or approve the transaction, with ratification or approval to occur only if the committee determines that the transaction is fair to the Company or that approval or ratification of the transaction is in the interest of the Company. \ No newline at end of file diff --git a/raw/proxies/0000320187/0000320187-20-000049/proxy.txt b/raw/proxies/0000320187/0000320187-20-000049/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..27b86a1024a68d02558753d55b8d93cffdd36c01 --- /dev/null +++ b/raw/proxies/0000320187/0000320187-20-000049/proxy.txt @@ -0,0 +1,3567 @@ +DEF 14A +1 +nike2020proxy.htm +DEF 14A +Document +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +Washington, D.C. 20549 +SCHEDULE 14A INFORMATION +Proxy Statement Pursuant to Section 14(a) of the +Securities Exchange Act of 1934 +(Amendment No. ) +Filed by the Registrant x Filed by a Party other than the Registrant ¨ +Check the appropriate box: +¨ +Preliminary Proxy Statement +¨ +Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +x +Definitive Proxy Statement +¨ +Definitive Additional Materials +¨ +Soliciting Material under §240.14a-12 +NIKE, INC. +(Name of registrant as specified in its charter) +(Name of person(s) filing proxy statement, if other than the registrant) +Payment of Filing Fee (Check the appropriate box): +x +No fee required +¨ +Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11 +(1) +Title of each class of securities to which transaction applies: +(2) +Aggregate number of securities to which transaction applies: +(3) +Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): +(4) +Proposed maximum aggregate value of transaction: +(5) +Total fee paid: +¨ +Fee paid previously with preliminary materials. +¨ +Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. +(1) +Amount Previously Paid: +(2) +Form, Schedule or Registration Statement No.: +(3) +Filing Party: +(4) +Date Filed: +2 NIKE, INC. +MESSAGE FROM OUR +EXECUTIVE CHAIRMAN +To Our Shareholders: +Human potential, and the power of the human spirit to come back against almost insurmountable odds drives all that we do here at NIKE. We've seen it from our athletes. From LeBron James and Tiger Woods to Michael Jordan and Serena Williams. This grounding philosophy has been, and will be necessary, in the days, months, and years ahead. Constant evolution and improvement is core to our beliefs and impacts everything from the products we create, and our impact on the communities in which we live, work and play, to our commitment to sound corporate governance. At no time is this more important than now, a time when challenges are arising at an unprecedented pace, frequency, and scale. +In fiscal 2020 we demonstrated that we remain committed to fielding the best team to guide the Company in its pursuit of long-term value for our stakeholders. We continued our evolution and refreshment of the Company’s Board of Directors, evaluating the Board’s leadership structure, aligning committee membership, welcoming new and saying fond farewell to members of our Board, while always maintaining a focus on the optimal stewardship of our Company. This has resulted in increased gender diversity, lowered average age and moderated tenure, ushering in new, fresh perspectives, experiences, and expertise to our boardroom. +During fiscal 2020, the Board executed against one of its most important duties, a CEO transition. In John Donahoe, NIKE has a leader with deep knowledge of, and affinity for, all that makes us special, and extensive understanding of the capabilities essential to our future growth. John's appointment was accompanied by thoughtful transitions in certain of our senior management ranks, ensuring continuity of leadership and a skilled executive team to guide us towards NIKE’s next phase of long-term sustainable growth under the Consumer Direct Acceleration. +As we look to our Annual Meeting of Shareholders, we are pleased to share our proxy statement with you. We have maintained the changes first presented last year, including the director skills matrix and expanded director biographies, and have completely revamped the Compensation Discussion and Analysis section of this document to better ground our shareholders and constituents in our compensation philosophy, clarify disclosure, and present a more readable document generally. +We are pleased to invite you to attend the Annual Meeting of Shareholders of NIKE, Inc. to be held virtually, on Thursday, September 17, 2020, at 10:00 A.M. Pacific Time. Whether or not you plan to attend, the prompt execution and return of your proxy card will both assure that your shares are represented at the meeting and minimize the cost of proxy solicitation. Thank you for your continued support. +Sincerely, +"Constant evolution and improvement is core to our beliefs and impacts everything from the products we create, and our impact on the communities in which we live, work and play, to our commitment to sound corporate governance." +MARK G. PARKER, EXECUTIVE CHAIRMAN +July 24, 2020 +2020 PROXY STATEMENT 1 +NOTICE OF ANNUAL MEETING +OF SHAREHOLDERS +September 17, 2020 +TO THE SHAREHOLDERS OF NIKE, INC. +You are cordially invited to the Annual Meeting of Shareholders of NIKE, Inc., an Oregon corporation: +DATE AND TIME: +Thursday, September 17, 2020, +at 10:00 A.M. Pacific Time +LOCATION: +This year's meeting will be a virtual Annual Meeting at www.virtualshareholdermeeting.com/NKE2020 +ITEMS OF BUSINESS: +PROPOSAL +PAGE REFERENCE +1 To elect the 12 directors named in the accompanying proxy statement for the ensuing year. +Page 6 +Class A +Will elect nine directors. +Class B +Will elect three directors. +Holders of Class A Stock and holders of Class B Stock will vote together as one class on all other proposals. +2 To approve executive compensation by an advisory vote. +Page 28 +3 To ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm. +Page 54 +4 To approve the NIKE, Inc. Stock Incentive Plan, as amended and restated. +Page 56 +5 To consider a shareholder proposal regarding political contributions disclosure as described in the accompanying proxy statement, if properly presented at the meeting. +Page 62 +6 To transact such other business as may properly come before the meeting. +Due to the public health impact of the COVID-19 pandemic and to support the well-being of our employees and shareholders, we have decided to hold this year's Annual Meeting in a virtual format only. Shareholders of record at the close of business on July 17, 2020, the record date fixed by the Board of Directors, may attend the Annual Meeting, vote, and submit questions in advance of and during the meeting. To attend, vote at, and submit questions during, the Annual Meeting, visit www.virtualshareholdermeeting.com/NKE2020 and enter the 16-digit control number included in your Notice Regarding the Availability of Proxy Materials, voting instructions form, or proxy card. Questions may be submitted in advance of the Annual Meeting by visiting www.proxyvote.com and entering your 16-digit control number. +By Order of the Board of Directors, +Ann M. Miller +Vice President, Corporate Secretary, and Chief Ethics & Compliance Officer +Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders To Be Held on September 17, 2020. The proxy statement and NIKE, Inc.’s 2020 Annual Report to Shareholders are available online at www.investorvote.com or www.proxyvote.com, for registered and beneficial owners, respectively. +2 NIKE, INC. +TABLE OF CONTENTS +PAGE +NOTICE OF ANNUAL MEETING OF SHAREHOLDERS +2 +Proxy Statement +4 +Virtual Meeting +4 +Voting Securities and Vote Required +4 +CORPORATE GOVERNANCE +6 +PROPOSAL 1 +Election of Directors +6 +NIKE, Inc. Board of Directors +7 +Individual Board Skills Matrix +20 +Board Structure and Responsibilities +22 +Director Compensation for Fiscal 20 20 +26 +COMPENSATION DISCUSSION AND ANALYSIS +28 +PROPOSAL 2 +Shareholder Advisory Vote to Approve Executive Compensation +28 +Introduction +29 +Executive Summary +29 +Leadership Transitions +31 +Compensation of Our Named Executive Officers +32 +Our Compensation Process +39 +Other Compensation Practices +40 +Compensation Committee Report +42 +Executive Compensation Tables +43 +AUDIT MATTERS +54 +PROPOSAL 3 +Ratification of Appointment of Independent Registered Public Accounting Firm +54 +Report of the Audit & Finance Committee +55 +STOCK INCENTIVE PLAN +56 +PROPOSAL 4 +To approve the NIKE, Inc. Stock Incentive Plan, as amended and restated +56 +Summary of the Stock Incentive Plan +57 +SHAREHOLDER PROPOSAL +62 +PROPOSAL 5 +To Consider a Shareholder Proposal Regarding Political Contributions Disclosure +62 +STOCK OWNERSHIP INFORMATION +63 +Stock Holdings of Certain Owners and Management +64 +Transactions with Related Persons +66 +OTHER MATTERS +67 +Shareholder Proposals +67 +EXHIBIT A — NIKE, INC. STOCK INCENTIVE PLAN +68 +2020 PROXY STATEMENT 3 +PROXY STATEMENT +We are furnishing proxy materials to our shareholders primarily via the Internet, by mailing a Notice Regarding the Availability of Proxy Materials, or "Notice", instead of mailing printed copies of those materials to each shareholder. The Notice directs shareholders to a website where they can access our proxy materials, including our proxy statement and our annual report, and view instructions on how to vote online or by telephone. If you would prefer to receive a paper copy of our proxy materials, please follow the instructions included in the Notice. If you have previously elected to receive our proxy materials electronically, you will continue to receive access to these materials electronically unless you elect otherwise. +The enclosed proxy is solicited by the Board of Directors (the "Board") of NIKE, Inc. ("NIKE" or the "Company") for use at the annual meeting of shareholders to be held on September 17, 2020, and at any adjournment thereof (the "Annual Meeting"). Our principal executive offices are located at One Bowerman Drive, Beaverton, Oregon 97005-6453. This proxy statement is first being made available to shareholders on or about August 6, 2020. Shareholders may submit a proxy to vote at the Annual Meeting by following the instructions on the Notice, online or by telephone, or (if they have received paper copies of the proxy materials) by returning a proxy card. +The Company will bear the cost of soliciting proxies. In addition to soliciting proxies by mail, certain officers and employees of the Company, without extra compensation, may also solicit proxies personally or by telephone. Copies of proxy solicitation materials will be furnished to fiduciaries, custodians, and brokerage houses for forwarding to the beneficial owners of shares held in their names. We may retain Georgeson, Inc. to solicit proxies at a cost we anticipate will not exceed $17,500. +Shares that are properly voted online or by telephone or for which proxy cards are properly executed and received by the Company prior to the Annual Meeting will be voted in accordance with the instructions specified in such proxies. Where no instructions are given, shares will be voted "FOR" the election of each of the named nominees for director (Proposal 1), "FOR" the proposal regarding an advisory vote to approve executive compensation (Proposal 2), "FOR" the ratification of the appointment of PricewaterhouseCoopers LLP as independent registered public accounting firm (Proposal 3), "FOR" the approval of the NIKE, Inc. Stock Incentive Plan, as amended and restated (Proposal 4), and "AGAINST" the shareholder proposal regarding political contributions disclosure (Proposal 5). +A shareholder giving the enclosed proxy has the power to revoke it at any time before it is exercised by affirmatively electing to vote at the meeting or by delivering to Ms. Ann M. Miller, Vice President, Corporate Secretary, and Chief Ethics & Compliance Officer of NIKE, Inc., either an instrument of revocation or an executed proxy bearing a later date. +VIRTUAL MEETING +Due to the public health impact of the COVID-19 pandemic and to support the well-being of our employees and shareholders, we have decided to hold this year’s Annual Meeting in a virtual meeting format only. Shareholders of record at the close of business on July 17, 2020 may attend the Annual Meeting, vote, and submit questions in advance of and during the meeting. To attend, vote at, and submit questions during the Annual Meeting, visit www.virtualshareholdermeeting.com/NKE2020 and enter the 16-digit control number included in your Notice, voting instructions form, or proxy card. Online access to the webcast will open approximately 15 minutes prior to the start of the Annual Meeting to allow time for you to log in and test the computer audio system. To submit questions in advance of the Annual Meeting, visit www.proxyvote.com before 11:59 P.M. Eastern Time on September 16, 2020 and enter the 16-digit control number included in your Notice, voting instructions form, or proxy card. +VOTING SECURITIES AND VOTE REQUIRED +Holders of record of NIKE’s Class A Common Stock ("Class A Stock") and holders of record of NIKE’s Class B Common Stock ("Class B Stock" and together with the Class A Stock, the "Common Stock") at the close of business on July 17, 2020 will be entitled to vote at the Annual Meeting. On that date, 315,017,252 shares of Class A Stock and 1,244,871,297 shares of Class B Stock were issued and outstanding. Neither class of Common Stock has cumulative voting rights. +Each share of Class A Stock and each share of Class B Stock is entitled to one vote on every matter submitted to the applicable shareholders at the Annual Meeting. +A majority of the votes entitled to be cast on Proposal 1, the election of directors, by each of the Class A Stock and Class B Stock separately constitutes a quorum of Class A Stock and Class B Stock, respectively, for action on Proposal 1. The holders of Class A Stock and the holders of Class B Stock will vote separately on Proposal 1. Holders of Class B Stock are currently entitled to elect 25 percent of the Board, rounded up to the next whole number. Holders of Class A Stock are currently entitled to elect the remaining directors. Under this formula, holders of Class B Stock, voting separately, will elect three directors, and holders of Class A Stock, voting separately, will elect nine directors. Under Oregon Law and our Bylaws, if a quorum of each class of Common Stock is present at the meeting, the three director nominees who receive the greatest number of votes cast by holders +4 NIKE, INC. +of Class B Stock and the nine director nominees who receive the greatest number of votes cast by holders of Class A Stock will be elected directors. +A majority of the votes entitled to be cast on Proposals 2, 3, 4, and 5 by both Class A Stock and Class B Stock together constitutes a quorum for action on those proposals. Holders of Class A Stock and holders of Class B Stock will vote together as one class on Proposals 2, 3, 4, and 5. If a quorum is present at the meeting, Proposals 2, 3, 4, and 5 will be approved if the votes cast in favor of the proposal exceed the votes cast against the proposal. +Abstentions and broker non-votes are counted for purposes of determining whether a quorum exists. Abstentions and broker non-votes are not included as votes cast and will not affect the outcome of any of the proposals. Broker non-votes occur when a person holding shares in street name, such as through a brokerage firm, does not provide instructions as to how to vote those shares and the broker does not then vote those shares on the shareholder’s behalf. +2020 PROXY STATEMENT 5 +CORPORATE GOVERNANCE +PROPOSAL 1 +ELECTION OF DIRECTORS +A Board of 12 directors will be elected at the Annual Meeting. Directors will hold office until the next annual meeting of shareholders or until their successors are elected and qualified. With the exception of Ms. Thasunda B. Duckett, all of the nominees were elected at the 2019 annual meeting of shareholders. Ms. Duckett was recommended to the Corporate Responsibility, Sustainability & Governance Committee for consideration by a third-party director search firm. +Mr. Alan B. Graf, Jr., Mr. Peter B. Henry, and Ms. Michelle A. Peluso are nominated by the Board of Directors for election by the holders of Class B Stock. The other nine nominees are nominated by the Board for election by the holders of Class A Stock. +Under Oregon law and our Bylaws, if a quorum of each class of shareholders is present at the Annual Meeting, the nine director nominees who receive the greatest number of votes cast by holders of Class A Stock and the three director nominees who receive the greatest number of votes cast by holders of Class B Stock will be elected directors. Abstentions and broker non-votes will have no effect on the results of the vote. Unless otherwise instructed, proxy holders will vote the proxies they receive for the nominees listed below. If any nominee becomes unable to serve, the holders of the proxies may, in their discretion, vote the shares for a substitute nominee or nominees designated by the Board. +The Bylaws and the Corporate Governance Guidelines of the Company provide that any nominee for director in an uncontested election who receives a greater number of votes "withheld" from his or her election than votes "for" such election shall tender his or her resignation for consideration by the Corporate Responsibility, Sustainability & Governance Committee. The committee will recommend to the Board the action to be taken with respect to the resignation. The Board will publicly disclose its decision within 90 days of the certification of the election results. +Background information on the nominees as of July 24, 2020, including some of the attributes that led to their selection, appears below. The Corporate Responsibility, Sustainability & Governance Committee has determined that each director meets the qualification standards described below under "Individual Board Skills Matrix—Director Nominations". In addition, the Board firmly believes that the experience, attributes, and skills of any single director nominee should not be viewed in isolation, but rather in the context of the experience, attributes, and skills that all director nominees bring to the Board as a whole, each of which contributes to the function of an effective Board. +BOARD RECOMMENDATION +The Board of Directors recommends that the Class A Shareholders vote FOR the election of nominees to the Board of Directors +The Board of Directors recommends that the Class B Shareholders vote FOR the election of nominees to the Board of Directors +6 NIKE, INC. +NIKE, INC. BOARD OF DIRECTORS +BOARD OVERVIEW +Our Board is currently comprised of twelve individuals selected on the basis of numerous criteria, including experience and achievements; fields of significant knowledge; good character; sound judgment; and diversity. We view the effectiveness of our Board both through an individual and collective lens and believe that our Board is optimized to support and guide the Company. +GENDER DIVERSITY +GENDER/ETHNIC DIVERSITY +AGE +TENURE +BOARD SKILLS, EXPERIENCES, AND QUALIFICATIONS +DIVERSITY 6 /12 +Gender or ethnic diversity that adds a range of perspectives and expands the Board’s understanding of the needs and viewpoints of consumers, employees, and other stakeholders worldwide. +FINANCIAL EXPERTISE 10 /12 +Financial expertise assists our Board in overseeing our financial statements, capital structure, and internal controls. +CEO EXPERIENCE 7 / 12 +CEO experience brings leadership qualifications and skills that help our Board to capably advise, support, and oversee our management team, including regarding our strategy to drive long-term value. +INTERNATIONAL 9 / 12 +International exposure yields an understanding of diverse business environments, economic conditions, and cultural perspectives that informs our global business and strategy and enhances oversight of our multinational operations. +DIGITAL/TECHNOLOGY 6 /12 +Technology experience helps our Board oversee cybersecurity and advise our management team as we seek to enhance the consumer experience and further develop our multi-channel strategy. +RETAIL INDUSTRY 5 /12 +Retail experience brings a deep understanding of factors affecting our industry, operations, business needs, and strategic goals. +MEDIA 2 /12 +Media experience provides the Board with insight about connecting with consumers and other stakeholders in a timely and impactful manner. +ACADEMIA 1 /12 +Academia provides organizational management experience and knowledge of current issues in academia and thought leadership. +HR/TALENT MANAGEMENT 6 /12 +HR and talent management experience assists our Board in overseeing executive compensation, succession planning, and employee engagement. +GOVERNANCE 8 /12 +Public company board experience provides insight into new and best practices which informs our commitment to excellence in corporate governance. +CORPORATE GOVERNANCE HIGHLIGHTS +ü 9 out of 12 directors are independent +ü Separate Chairman, CEO, and Lead Independent Director positions with clearly defined roles +ü Refreshed Board and committee structure, with 4 new independent directors added in last three fiscal years +ü Retirement policy generally requires that directors do not stand for election after reaching the age of 72 +2020 PROXY STATEMENT 7 +NOMINEES FOR ELECTION BY CLASS A SHAREHOLDERS +CATHLEEN A. BENKO +AGE +DIRECTOR SINCE +COMMITTEE +OTHER CURRENT +PUBLIC DIRECTORSHIPS +FAVORITE NIKE PRODUCT(S) +62 +2018 +Compensation +None +Converse All Star Platform Low Top and Nike AeroLayer Jacket +SKILLS, EXPERIENCES AND QUALIFICATIONS +DIVERSITY +DIGITAL/TECHNOLOGY +HR/TALENT MANAGEMENT +INTERNATIONAL +Ms. Benko is a former Vice Chairman and Managing Principal of Deloitte LLP ("Deloitte"), an organization that, through its subsidiaries and network of member firms, provides audit, consulting, tax, and advisory services to clients globally. During her nearly 30-year career with Deloitte, Ms. Benko held many leadership roles, several concurrent with her appointment as Vice Chairman and Managing Principal in 2011. +• +From 2015 to 2018, Ms. Benko served as Senior Partner working within the firm's "Digital Giants" practice where she was the senior advisory partner for several digital-native companies. +• +From 2010 to 2014, Ms. Benko served as Chief Digital, Brand, and Communications Officer. +• +Previous to her role as Chief Digital, Brand, and Communications Officer, Ms. Benko held multiple technology and talent management roles, including serving as the company’s first Vice Chairman and Chief Talent Officer from 2006 to 2010, its Chief Inclusion Officer from 2008 to 2010, and as Managing Principal, Initiative for the Retention and Advancement of Women, from 2003 to 2009. +• +Ms. Benko led Deloitte’s technology sector from 2003 to 2007 and was previously Deloitte’s first Global e-Business Leader, a position she held from 1998 to 2002. +Ms. Benko is chair of a Harvard Business School Advisory Council and a member of the Board of nonprofit organization American Corporate Partners. +8 NIKE, INC. +ELIZABETH J. COMSTOCK +AGE +DIRECTOR SINCE +COMMITTEE +OTHER CURRENT +PUBLIC DIRECTORSHIPS +FAVORITE NIKE PRODUCT(S) +59 +2011 +Compensation +None +Nike Air Force 1 and Nike Air Satin Jacket +SKILLS, EXPERIENCES AND QUALIFICATIONS +DIVERSITY +DIGITAL/TECHNOLOGY +MEDIA +INTERNATIONAL +Ms. Comstock is the former Vice Chair of General Electric Company ("GE"). She led GE’s efforts to accelerate new growth and operated GE Business Innovations, which included Current, GE Lighting, GE Ventures & Licensing and GE sales, marketing and communications. +• +At GE, Ms. Comstock was appointed: +• +Senior Vice President, Chief Marketing and Commercial Officer in 2008, +• +President, NBC Universal Integrated Media in 2006, +• +Corporate Vice President and Chief Marketing Officer in 2003, +• +Vice President of Corporate Communications in 1998, +• +Senior Vice President, NBC Corporate Communications in 1996, and +• +Vice President, Communications, NBC News Communications in 1994. +• +Prior to joining GE in 1994, Ms. Comstock held a succession of positions at NBC, CBS, and Turner Broadcasting. +Ms. Comstock is a trustee of The National Geographic Society and Visiting Scholar at the Columbia University Center for Science and Society. +2020 PROXY STATEMENT 9 +JOHN G. CONNORS +AGE +DIRECTOR SINCE +COMMITTEE +OTHER CURRENT +PUBLIC DIRECTORSHIPS +FAVORITE NIKE PRODUCT(S) +61 +2005 +Audit & Finance +Splunk, Inc. +Nike React and Nike SFB Boots +SKILLS, EXPERIENCES AND QUALIFICATIONS +FINANCIAL EXPERTISE +DIGITAL/TECHNOLOGY +GOVERNANCE +INTERNATIONAL +Mr. Connors is a partner in Ignition Partners LLC, a Seattle-area venture capital firm. +• +Mr. Connors served as Senior Vice President and Chief Financial Officer of Microsoft Corporation ("Microsoft") from December 1999 to May 2005. +• +Mr. Connors joined Microsoft in 1989 and held various management positions, including: +• +Vice President, Worldwide Enterprise Group in 1999, +• +Chief Information Officer from 1996 to 1999, and +• +Corporate Controller from 1994 to 1996. +Mr. Connors is a member of the Board of Directors of Splunk, Inc. In addition to this public company board service, he is also a member of the Board of Directors of privately held companies Chef, Inc., ICERTIS, Inc., Maka Autonomous Robotic Systems Inc., Tempered Networks Inc., LiveStories Inc., and KenSci Inc., and is on the Board of the Washington Policy Center. +10 NIKE, INC. +TIMOTHY D. COOK, LEAD INDEPENDENT DIRECTOR +AGE +DIRECTOR SINCE +COMMITTEE +OTHER CURRENT +PUBLIC DIRECTORSHIPS +FAVORITE NIKE PRODUCT(S) +59 +2005 +Compensation, Chair +Apple Inc. +Nike Epic React and Nike Flex +SKILLS, EXPERIENCES AND QUALIFICATIONS +FINANCIAL EXPERTISE +DIGITAL/TECHNOLOGY +HR/TALENT MANAGEMENT +CEO EXPERIENCE +RETAIL INDUSTRY +GOVERNANCE +INTERNATIONAL +Mr. Cook is the Company’s Lead Independent Director and is the Chief Executive Officer of Apple Inc. ("Apple"). +• +Mr. Cook joined Apple in March 1998 as Senior Vice President of Worldwide Operations and also served as its Executive Vice President, Worldwide Sales and Operations and Chief Operating Officer. +• +Mr. Cook was Vice President, Corporate Materials for Compaq Computer Corporation from 1997 to 1998. +• +Previous to his work at Compaq, Mr. Cook served in the positions of Senior Vice President Fulfillment and Chief Operating Officer of the Reseller Division at Intelligent Electronics from 1994 to 1997. +• +Mr. Cook also worked for International Business Machines Corporation from 1983 to 1994, most recently as Director of North American Fulfillment. +Mr. Cook is a member of the Board of Directors of Apple. In addition to this public company board service, he is also a member of the Board of Directors of the National Football Foundation and Duke University Board of Trustees. +2020 PROXY STATEMENT 11 +JOHN J. DONAHOE II +AGE +DIRECTOR SINCE +COMMITTEE +OTHER CURRENT +PUBLIC DIRECTORSHIPS +FAVORITE NIKE PRODUCT(S) +60 +2014 +Executive +PayPal Holdings, Inc. +Nike Phantom Epic React and Jordan Jumpman Hoodie +SKILLS, EXPERIENCES AND QUALIFICATIONS +FINANCIAL EXPERTISE +DIGITAL/TECHNOLOGY +HR/TALENT MANAGEMENT +CEO EXPERIENCE +RETAIL INDUSTRY +GOVERNANCE +INTERNATIONAL +Mr. Donahoe is President and Chief Executive Officer of NIKE, Inc. and has been a director since 2014. +• +From 2017 to 2019, Mr. Donahoe served as President and Chief Executive Officer of ServiceNow, Inc. ("ServiceNow"), provider of enterprise cloud computing services for global enterprises. +• +From 2008 to 2015, Mr. Donahoe served as President and Chief Executive Officer of eBay, Inc. ("eBay"), provider of the global eBay.com online marketplace and PayPal digital payments platform. +• +Mr. Donahoe joined eBay in 2005 as President of eBay Marketplaces, responsible for eBay’s global e-Commerce businesses. +• +Prior to joining eBay, Mr. Donahoe was the Chief Executive Officer and Worldwide Managing Director of Bain & Company from 1999 to 2005, and a Managing Director from 1992 to 1999. +Mr. Donahoe is Chairman and a member of the Board of Directors of PayPal Holdings, Inc. In addition to this public company board service, he also serves on the Board of Trustees for The Bridgespan Group. Mr. Donahoe served on the Board of Directors of Intel Corporation from March 2009 to May 2017, and ServiceNow from March 2017 to June 2020. +12 NIKE, INC. +THASUNDA B. DUCKETT +AGE +DIRECTOR SINCE +COMMITTEE +OTHER CURRENT +PUBLIC DIRECTORSHIPS +FAVORITE NIKE PRODUCT(S) +47 +2019 +Corporate Responsibility, Sustainability & Governance +None +Air Jordans, Nike Air Force 1, and Nike Air Max 270 +SKILLS, EXPERIENCES AND QUALIFICATIONS +DIVERSITY +FINANCIAL EXPERTISE +CEO EXPERIENCE +RETAIL INDUSTRY +HR/TALENT MANAGEMENT +Ms. Duckett is the Chief Executive Officer of Chase Consumer Banking at JPMorgan Chase & Co. ("JPMorgan Chase"). +• From 2013 to 2016, Ms. Duckett served as the Chief Executive Officer of Chase Auto Finance. +• From 2004 to 2013, Ms. Duckett held multiple management and consumer lending roles with JPMorgan Chase. +• Prior to joining JPMorgan Chase, Ms. Duckett was Director of Emerging Markets at the Federal National Mortgage Association, or Fannie Mae. +Ms. Duckett is chair of the Otis and Rosie Brown Foundation and a member of the Board of Directors of the Children’s Learning Center of Fairfax County. Additionally she is on the Board of The Robert F. Kennedy Human Rights Foundation. +2020 PROXY STATEMENT 13 +TRAVIS A. KNIGHT +AGE +DIRECTOR SINCE +COMMITTEE +OTHER CURRENT +PUBLIC DIRECTORSHIPS +FAVORITE NIKE PRODUCT(S) +46 +2015 +Executive +None +Nike Air Zoom Pegasus +SKILLS, EXPERIENCES AND QUALIFICATIONS +FINANCIAL EXPERTISE +CEO EXPERIENCE +MEDIA +Mr. Knight is the President and Chief Executive Officer of the animation studio, LAIKA, LLC ("LAIKA"), which specializes in feature-length films. +• +Mr. Knight has been involved in all principal creative and business decisions at LAIKA since its founding in 2003, serving in successive management positions as Lead Animator, Vice President of Animation, and then as President and Chief Executive Officer in 2009. +• +Mr. Knight was Producer and Director of the feature film Kubo and the Two Strings (2017) which was nominated for an Academy Award and winner of the BAFTA award for Best Animated Film. +• +Mr. Knight has served as Producer and Lead Animator on Academy Award-nominated feature-length films The Boxtrolls (2014) and ParaNorman (2012), for which he won an Annie Award for Outstanding Achievement in Character Animation, and Lead Animator for Coraline (2009). +• +Prior to his work at LAIKA, Mr. Knight held various animation positions at Will Vinton Studios from 1998 to 2002, and as a stop-motion animator for television series, commercials, and network promotions. He has been recognized for his work on the Emmy Award-winning stop-motion animated television series The PJs. +Mr. Knight serves on the Board of Directors of LAIKA. He is the son of NIKE’s co-founder, Mr. Philip Knight, who currently serves as Chairman Emeritus. In addition to his skills and qualifications described above, Mr. Travis Knight was selected to serve on the Board because he has a significant role in the management of the Class A Stock owned by Swoosh, LLC, strengthening the alignment of the Board with the interests of NIKE shareholders. +14 NIKE, INC. +MARK G. PARKER, EXECUTIVE CHAIRMAN OF THE BOARD +AGE +DIRECTOR SINCE +COMMITTEE +OTHER CURRENT +PUBLIC DIRECTORSHIPS +FAVORITE NIKE PRODUCT +64 +2006 +Executive, Chair +The Walt Disney Company +Still can't pick just one +SKILLS, EXPERIENCES AND QUALIFICATIONS +FINANCIAL EXPERTISE +INTERNATIONAL +HR/TALENT MANAGEMENT +CEO EXPERIENCE +RETAIL INDUSTRY +GOVERNANCE +Mr. Parker is Executive Chairman of the Board of Directors of the Company. He served as President and Chief Executive Officer of the Company from 2006 to January 2020. +• +Mr. Parker has been employed by NIKE since 1979 with primary responsibilities in product research, design and development, marketing, and brand management. +• +Mr. Parker was appointed: +• +President and Chief Executive Officer in 2006, +• +President of the NIKE Brand in 2001, +• +Vice President of Global Footwear in 1998, +• +General Manager in 1993, +• +Corporate Vice President in 1989, and +• +Divisional Vice President in charge of product development in 1987. +Mr. Parker is a member of the Board of Directors of The Walt Disney Company. In addition to his skills and qualifications described above, Mr. Parker was selected to serve on the Board because the experience gained while serving as the Company's Chief Executive Officer makes his position as Executive Chairman of the Board instrumental. +2020 PROXY STATEMENT 15 +JOHN W. ROGERS, JR. +AGE +DIRECTOR SINCE +COMMITTEE +OTHER CURRENT +PUBLIC DIRECTORSHIPS +FAVORITE NIKE PRODUCT(S) +62 +2018 +Corporate Responsibility, +Sustainability & Governance +McDonald’s Corporation and The New York Times Company +Nike KD and Nike LeBron Basketball Shoes +SKILLS, EXPERIENCES AND QUALIFICATIONS +DIVERSITY +CEO EXPERIENCE +GOVERNANCE +FINANCIAL EXPERTISE +Mr. Rogers is Chairman, Co-CEO and Chief Investment Officer of Ariel Investments, LLC, a privately-held money management firm he founded in 1983, which serves individual and institutional investors through its mutual funds and separate accounts. +• +In 2008, Mr. Rogers was awarded Princeton University’s highest honor, the Woodrow Wilson Award, presented each year to the alumnus whose career embodies a commitment to national service. +• +Mr. Rogers served as co-chair for the Presidential Inaugural Committee 2009, and more recently, joined the Barack Obama Foundation’s Board of Directors. +Mr. Rogers is a member of the Board of Directors of McDonald’s Corporation and The New York Times Company. In addition to this public company board service, he also serves as trustee of the University of Chicago, the Robert F. Kennedy Center for Justice and Human Rights, the National Association of Basketball Coaches (NABC) Foundation, Inc., and is a life trustee of the Chicago Symphony Orchestra. Mr. Rogers served on the Board of Directors of Exelon Corporation from October 2000 until April 2019. +BOARD RECOMMENDATION +The Board of Directors recommends that the Class A Shareholders vote FOR the election of the nominees above to the Board of Directors. +16 NIKE, INC. +NOMINEES FOR ELECTION BY CLASS B SHAREHOLDERS +ALAN B. GRAF, JR. +AGE +DIRECTOR SINCE +COMMITTEE +OTHER CURRENT +PUBLIC DIRECTORSHIPS +FAVORITE NIKE PRODUCT(S) +66 +2002 +Audit & Finance, Chair +Mid-America Apartment Communities, Inc. +Nike Air Max 270, Nike Air Max, and Nike Polos +SKILLS, EXPERIENCES AND QUALIFICATIONS +FINANCIAL EXPERTISE +INTERNATIONAL +GOVERNANCE +Mr. Graf is the Executive Vice President and Chief Financial Officer of FedEx Corporation ("FedEx"), a position he has held since 1998, and is a member of FedEx’s Executive Committee. +• +Mr. Graf joined FedEx in 1980 and was Senior Vice President and Chief Financial Officer for FedEx Express, FedEx’s predecessor, from 1991 to 1998. +• +Mr. Graf previously served on the Board of Directors of Kimball International Inc., Storage USA, Inc., and Arkwright Mutual Insurance Co. +Mr. Graf is a member of the Board of Directors of Mid-America Apartment Communities, Inc. In addition to this public company board service, he is also a director of the Indiana University Foundation and a Trustee of the University of Memphis. While Mr. Mr. Graf has announced his intention to retire from his position as CFO of FedEx, NIKE stands behind his seat on our Board and believes that he has provided, and will continue to provide, exemplary guidance and advice, and gives the necessary attention and dedication to his role as a Board member and as a committee chair. +2020 PROXY STATEMENT 17 +PETER B. HENRY +AGE +DIRECTOR SINCE +COMMITTEE +OTHER CURRENT +PUBLIC DIRECTORSHIPS +FAVORITE NIKE PRODUCT(S) +50 +2018 +Audit & Finance +Citigroup Inc. +Nike Epic React +SKILLS, EXPERIENCES AND QUALIFICATIONS +DIVERSITY +INTERNATIONAL +GOVERNANCE +FINANCIAL EXPERTISE +ACADEMIA +Mr. Henry is Dean Emeritus of New York University’s Leonard N. Stern School of Business and the William R. Berkley Professor of Economics and Finance. +• +Mr. Henry assumed the Deanship of the Stern School of Business in January 2010 and served through December 2017. +• +Prior to joining Stern, Mr. Henry was the Konosuke Matsushita Professor of International Economics at the Stanford University Graduate School of Business. +• +In June 2009, President Obama appointed Mr. Henry to the President’s Commission on White House Fellowships. +• +In 2008, Mr. Henry led Barack Obama’s Presidential Transition Team in its review of international lending agencies such as the IMF and the World Bank. +Mr. Henry is a member of the Board of Directors of Citigroup Inc. In addition to this public company board service, he also serves on the Board of Directors of the National Bureau of Economic Research and the Economic Club of New York and serves on the Advisory Board for Protiviti. Mr. Henry is a member of the Council of Foreign Relations and the Economic Advisory Panel of the Federal Reserve Bank of New York. Mr. Henry served on the Board of Directors of General Electric from July 2016 until April 2018 and Kraft Foods Group, Inc. and its predecessor, Kraft Foods Inc., from May 2011 until July 2015. +18 NIKE, INC. +MICHELLE A. PELUSO +AGE +DIRECTOR SINCE +COMMITTEE +OTHER CURRENT +PUBLIC DIRECTORSHIPS +FAVORITE NIKE PRODUCT(S) +48 +2014 +Corporate Responsibility, +Sustainability & Governance, Chair +None +Nike React Infinity Run, Nike Air Satin Jacket, and Nike Air Max Tailwind IV +SKILLS, EXPERIENCES AND QUALIFICATIONS +DIVERSITY +INTERNATIONAL +HR/TALENT MANAGEMENT +FINANCIAL EXPERTISE +DIGITAL/TECHNOLOGY +GOVERNANCE +CEO EXPERIENCE +RETAIL INDUSTRY +Ms. Peluso is Senior Vice President Digital Sales and Chief Marketing Officer at IBM. +• +Ms. Peluso served as Chief Executive Officer of online shopping destination Gilt Groupe, Inc. ("Gilt") from 2013 until its sale to Hudson’s Bay Company in February 2016, and was on Gilt’s Board of Directors from 2009 to 2016. +• +Prior to joining Gilt in 2013, Ms. Peluso served as Global Consumer Chief Marketing and Internet Officer of Citigroup Inc. from 2009 to 2013. +• +From 2002 to 2009, Ms. Peluso held senior management positions at Travelocity.com LP ("Travelocity"), being appointed Chief Operating Officer in 2003, and President and Chief Executive Officer in December 2003. +• +Prior to joining Travelocity, in 1999 Ms. Peluso founded Site59, an online travel site, serving as its Chief Executive Officer until its acquisition by Travelocity in 2002. +Ms. Peluso is a director of the nonprofit TechnoServe. +BOARD RECOMMENDATION +The Board of Directors recommends that the Class B Shareholders vote FOR the election of the nominees above to the Board of Directors. +2020 PROXY STATEMENT 19 +INDIVIDUAL BOARD SKILLS MATRIX +EXPERIENCE, EXPERTISE, OR ATTRIBUTES +BENKO +COMSTOCK +CONNORS +COOK +DONAHOE +DUCKETT +GRAF +HENRY +KNIGHT +PARKER +PELUSO +ROGERS +DIVERSITY +Gender or ethnic diversity that adds a range of perspectives and expands the Board’s understanding of the needs and viewpoints of consumers, employees, and other stakeholders worldwide. +ü +ü +ü +ü +ü +ü +FINANCIAL EXPERTISE +Financial expertise assists our Board in overseeing our financial statements, capital structure, and internal controls. +ü +ü +ü +ü +ü +ü +ü +ü +ü +ü +CEO EXPERIENCE +CEO experience brings leadership qualifications and skills that help our Board to capably advise, support, and oversee our management team, including regarding our strategy to drive long-term value. +ü +ü +ü +ü +ü +ü +ü +INTERNATIONAL +International exposure yields an understanding of diverse business environments, economic conditions, and cultural perspectives that informs our global business and strategy and enhances oversight of our multinational operations. +ü +ü +ü +ü +ü +ü +ü +ü +ü +DIGITAL/TECHNOLOGY +Technology experience helps our Board oversee cybersecurity and advise our management team as we seek to enhance the consumer experience and further develop our multi-channel strategy. +ü +ü +ü +ü +ü +ü +RETAIL INDUSTRY +Retail experience brings a deep understanding of factors affecting our industry, operations, business needs, and strategic goals. +ü +ü +ü +ü +ü +MEDIA +Media experience provides the Board with insight about connecting with consumers and other stakeholders in a timely and impactful manner. +ü +ü +ACADEMIA +Academia provides organizational management experience and knowledge of current issues in academia and thought leadership. +ü +HR/TALENT MANAGEMENT +HR and talent management experience assists our Board in overseeing executive compensation, succession planning, and employee engagement. +ü +ü +ü +ü +ü +ü +GOVERNANCE +Public company board experience provides insight into new and best practices which informs our commitment to excellence in corporate governance. +ü +ü +ü +ü +ü +ü +ü +ü +20 NIKE, INC. +DIRECTOR NOMINATIONS +The Corporate Responsibility, Sustainability & Governance Committee identifies potential director candidates through a variety of means, including recommendations from members of the Corporate Responsibility, Sustainability & Governance Committee or the Board, suggestions from Company management, and shareholder recommendations. The committee also may, in its discretion, engage director search firms to identify candidates. Shareholders may recommend director candidates for consideration by the Corporate Responsibility, Sustainability & Governance Committee by submitting a written recommendation to the committee, c/o Ann M. Miller, Vice President, Corporate Secretary, and Chief Ethics & Compliance Officer, NIKE, Inc., One Bowerman Drive, Beaverton, Oregon 97005-6453. The recommendation should include the candidate’s name, age, qualifications (including principal occupation and employment history), and written consent to be named as a nominee in the Company’s proxy statement and to serve as a director, if elected. +The Board of Directors has adopted qualification standards for the selection of non-management nominees for director, which can be found at our corporate website: http://investors.nike.com. As provided in these standards and the Company’s corporate governance guidelines, nominees for director are selected on the basis of, among other things, distinguished business experience or other non-business achievements; education; significant knowledge of international business, finance, marketing, technology, human resources, diversity & inclusion, law, or other fields which are complementary to, and balance the knowledge of, other Board members; a desire to represent the diverse interests of all stakeholders; independence; good character; ethics; sound judgment; diversity; and ability to devote substantial time to discharge Board responsibilities. +The Corporate Responsibility, Sustainability & Governance Committee identifies qualified potential candidates without regard to their age, gender, race, national origin, sexual orientation, or religion. While the Board has no policy regarding Board member diversity, the Corporate Responsibility, Sustainability & Governance Committee considers and discusses diversity in selecting nominees for director and in the re-nomination of an incumbent director. The committee views diversity broadly to include, among other things, differences in backgrounds, qualifications, experiences, viewpoint, geographic location, education, skills and expertise (including financial, accounting, compliance, corporate social responsibility, public policy, cybersecurity, or other expertise relevant to service on the Board), professional and industry experience, and personal characteristics (including gender, ethnicity/race, and sexual orientation). The Board believes that a variety and balance of perspectives on the Board results in more thoughtful and robust deliberations, and ultimately, better decisions. +In considering the re-nomination of an incumbent director, the Corporate Responsibility, Sustainability & Governance Committee reviews the director’s overall service to the Company during his or her term, including the number of meetings attended, level of participation, and quality of performance, as well as any special skills, experience, or diversity that such director brings to the Board. All potential new director candidates, whether recommended by shareholders or identified by other means, are initially screened by the Chair of the Corporate Responsibility, Sustainability & Governance Committee, who may seek additional information about the background and qualifications of the candidate, and who may determine that a candidate does not have qualifications that merit further consideration by the full committee. With respect to new director candidates who pass the initial screening, the Corporate Responsibility, Sustainability & Governance Committee meets to discuss and consider each candidate’s qualifications and potential contributions to the Board, and determines by majority vote whether to recommend such candidates to the Board. The final decision to either appoint a candidate to fill a vacancy between annual meetings or include a candidate on the slate of nominees proposed at an annual meeting is made by the Board. +It is the general policy of the Board that directors will not stand for re‑election after reaching the age of 72. +DIRECTOR INDEPENDENCE +Pursuant to New York Stock Exchange ("NYSE") listing rules, in order for a director to qualify as "independent", the Board of Directors must affirmatively determine that the director has no material relationship with the Company that would impair the director’s independence. The Board affirmatively determined that commercial or charitable relationships below the following thresholds will not be considered material relationships that impair a director’s independence: (i) if a NIKE director or immediate family member is an executive officer of another company that does business with NIKE and the annual sales to, or purchases from, NIKE are less than one percent of the annual revenues of the other company; and (ii) if a NIKE director or immediate family member serves as an officer, director, or trustee of a charitable organization, and NIKE’s contributions to the organization are less than one percent of that organization’s total annual charitable receipts. After applying this categorical standard and the applicable NYSE independence standards, the Board has determined that the following directors who served during fiscal 2020 — Cathleen A. Benko, Elizabeth J. Comstock, John G. Connors, Timothy D. Cook, Thasunda B. Duckett, Alan B. Graf, Jr., Peter B. Henry, John C. Lechleiter, Michelle A. Peluso, and John W. Rogers, Jr. — have no material relationship with the Company and, therefore, are independent. Messrs. John J. Donahoe II, Travis A. Knight, and Mark G. Parker were not independent pursuant to NYSE rules. Messrs. Donahoe and Parker were not independent pursuant to NYSE rules because they were employed by the Company during fiscal 2020. Mr. Knight was not independent pursuant to NYSE rules because he is the son of NIKE’s co-founder and former Chairman of the Board, Mr. Philip H. Knight, who received compensation in excess of the +2020 PROXY STATEMENT 21 +threshold set forth in applicable NYSE rules (the "NYSE threshold") for his position as Chairman Emeritus. The compensation paid to Mr. Philip H. Knight is described in the section below titled "Stock Ownership Information—Transactions with Related Persons". Mr. John R. Thompson, Jr., former head basketball coach at Georgetown University, was determined to be independent from September 1, 2019 until his retirement from the Board on May 31, 2020. Effective June 1, 2020, the Company and Mr. Thompson entered into a consulting agreement the terms of which are described in the section below titled "Stock Ownership Information—Transactions with Related Persons". +BOARD STRUCTURE AND RESPONSIBILITIES +The Board is currently composed of nine independent directors and three directors who are not independent under the NYSE listing rules. During fiscal 2020, there were six meetings of the Board and all of our currently serving directors attended at least 75 percent of the total number of meetings of the Board and committees on which he or she served. Mr. Thompson attended less than 75 percent of such meetings. The Company encourages all directors to attend each annual meeting of shareholders. With the exception of Mr. Thompson, all directors serving at the time of the 2019 annual meeting attended the 2019 annual meeting. +BOARD LEADERSHIP STRUCTURE +NIKE’s governing documents provide the Board with flexibility to select the appropriate leadership structure of the Company. In determining the leadership structure, the Board considers many factors, including the specific needs of the business, fulfilling the duties of the Board, and the best interests of the Company’s shareholders. Effective January 2020, the Company separated the position of Chairman of the Board from the position of President and CEO, although this is not a permanent policy of the Board. The Executive Chairman, Mr. Mark G. Parker, presides over meetings of the Board of Directors and shareholders. The President and CEO, Mr. John J. Donahoe II, appointed to his position effective January 2020, is in charge of the general supervision, direction, and control of the business and affairs of the Company, subject to the overall direction and supervision of the Board and its committees. +Given the particular experience and tenure of Messrs. Parker and Donahoe, the Board believes this leadership structure is appropriate for the Company because it separates the leadership of the Board from the duties of day-to-day leadership of the Company. This structure permits Mr. Donahoe to primarily focus his time and attention on the business, while Mr. Parker directs his attention to the broad strategic issues considered by the Board of Directors. This structure works particularly well given the talent, experience and professional relationship of Messrs. Donahoe and Parker established during Mr. Donahoe's service on the Board beginning in 2014. +In 2016, the Corporate Responsibility, Sustainability & Governance Committee established the position of lead independent director to ensure strong independent leadership of the Board. The position of Lead Independent Director is entrusted to execute the following functions: +• +serve as a liaison between the Chairman, CEO, and the independent directors; +• +approve the meeting agendas for the Board; +• +advise the Chairman and CEO regarding the sufficiency, quality, quantity, and timeliness of information provided to the Board; +• +ensure that meeting schedules permit sufficient time for discussion of all agenda items; +• +provide consultation and direct communication with major shareholders, if requested; +• +preside at meetings of the Board at which the Chairman is not present, including executive sessions; and +• +perform other duties specified in the Lead Independent Director Charter. +In June 2019, the Board re-appointed Mr. Tim Cook to serve as Lead Independent Director for a term of three years. Mr. Cook will continue to serve as Lead Independent Director of the Company working in collaboration with Messrs. Parker and Donahoe. +The chairs of Board committees also play an active role in the leadership structure of the Board. The Corporate Responsibility, Sustainability & Governance Committee and the Board endeavor to select independent committee chairs who will provide strong leadership to guide the important work of the Board committees. Committee chairs work with the Company’s senior executives to ensure the committees are discussing the key strategic risks and opportunities of the Company. In the absence of the Lead Independent Director, a presiding director is appointed to chair executive sessions of non-management directors (consisting of all directors other than Messrs. Parker and Donahoe). The position of presiding director is rotated among the chairs of the various Board committees, other than the Executive Committee. Executive sessions are regularly scheduled and held at least once each year. +Mr. Philip H. Knight, co-founder and former Chairman of the Company, serves as Chairman Emeritus, with a standing invitation to attend meetings of the Board and its committees as a non-voting observer. Mr. John R. Thompson, Jr., former Georgetown University basketball coach and Board member, serves as Director Emeritus, and has a standing invitation to attend meetings of +22 NIKE, INC. +the Board and its committees as a non-voting observer. The Board believes that it benefits from the valuable experience and insights of the Company’s co-founder and former Chairman of the Board, and from Mr. Thompson given his tenure on the Board and intimate knowledge of matters related to product, marketing, and elite athlete relationships. +For all of these reasons, the Board believes this leadership structure is optimal. +BOARD COMMITTEES +The Board’s current standing committees are an Audit & Finance Committee; a Compensation Committee; a Corporate Responsibility, Sustainability & Governance Committee; and an Executive Committee. The Board may appoint other committees from time to time. Each standing committee has a written charter and all such charters, as well as the Company’s corporate governance guidelines, are available at the Company’s corporate website, http://investors.nike.com, and will be provided in print to any shareholder who submits a request in writing to NIKE Investor Relations, One Bowerman Drive, Beaverton, Oregon 97005-6453. +AUDIT & FINANCE COMMITTEE +MEMBERS: +John G. Connors +Peter B. Henry +Alan B. Graf, Jr., Chair +MEETINGS IN FY ’20: 13 +ROLES AND RESPONSIBILITIES: +The Audit & Finance Committee provides assistance to the Board in fulfilling its legal and fiduciary obligations with respect to: +• Matters involving the Company’s accounting, auditing, financial reporting, internal controls, information security (including risks related to cyber security), data protection, and overseeing the financial policies and activities of the Company that may have a material impact on the results of operations or the financial position of the Company; +• The integrity of the Company’s financial statements, the compliance with legal and regulatory requirements, the independent auditor’s qualifications and independence, and the performance of the Company’s internal audit function and independent auditor; and +• Considering long-term financing options, long-range tax, financial regulatory and foreign currency issues facing the Company, and management’s recommendations concerning capital deployment strategy, major capital expenditures, and material acquisitions or divestitures. +The Board has determined that each member of the Audit & Finance Committee meets all independence and financial literacy requirements applicable to audit committees under the NYSE listing standards and applicable regulations adopted by the U.S. Securities and Exchange Commission (the "SEC"). The Board has also determined that Mr. Alan B. Graf, Jr. is an "audit committee financial expert" as defined in regulations adopted by the SEC. +COMPENSATION COMMITTEE +MEMBERS: +Cathleen A. Benko +Elizabeth J. Comstock +Timothy D. Cook, Chair +MEETINGS IN FY ’20: 5 +ROLES AND RESPONSIBILITIES: +The Compensation Committee discharges the Board's responsibilities regarding executive and director compensation and senior leadership succession, and its duties include the following: +• Evaluate the performance of the CEO; +• Review and approve the compensation of each executive officer; +• Grant equity incentive awards under the NIKE, Inc. Stock Incentive Plan, and determine targets and awards under the NIKE, Inc. Executive Performance Sharing Plan and the NIKE, Inc. Long-Term Incentive Plan; +• Review and provide guidance to management regarding Company policies, programs, and practices related to talent management and development for executive officers and senior management; and +• Make recommendations to the Board regarding the compensation of directors. +The Board has determined that each member of the Compensation Committee meets all independence requirements applicable to compensation committees under the NYSE listing standards. +2020 PROXY STATEMENT 23 +CORPORATE RESPONSIBILITY, SUSTAINABILITY & GOVERNANCE COMMITTEE +MEMBERS: +Thasunda B. Duckett* +Michelle A. Peluso, Chair +John W. Rogers, Jr. +MEETINGS IN FY ’20: 5 +ROLES AND RESPONSIBILITIES: +The Corporate Responsibility, Sustainability & Governance Committee sets the tone and pace for corporate governance and oversees the Company's Purpose Offense. Its duties include the following: +• Review and evaluate NIKE’s significant strategies, activities, policies, investments, and programs regarding social purpose, corporate responsibility, and sustainability; +• Provide oversight of management’s efforts to ensure that the Company’s dedication to sustainability is reflected in its business operations; +• Monitor the Company’s progress towards its diversity and inclusion objectives and compliance with the Company’s responsibilities as an equal opportunity employer; +• Review and evaluate the social, political, and environmental impact, trends, and issues in connection with the Company’s business activities and make recommendations to the Board; +• Provide oversight of the Company’s community and social impact efforts; +• Oversee protection of the Company’s corporate reputation and other matters of importance to the Company and its stakeholders; +• Continue to identify individuals qualified to become Board members and recommend director nominees for election at each annual shareholder meeting; +• Develop and recommend to the Board corporate governance guidelines and a code of business conduct and ethics; and +• Oversee the annual self-evaluations of the Board and its committees and make recommendations to the Board concerning the structure and membership of the other Board committees. +The Board has determined that each member of the Corporate Responsibility, Sustainability & Governance Committee meets all independence requirements applicable to +nominating/corporate governance committees under the NYSE listing standards. +* Ms. Duckett was elected to the Board of Directors effective November 14, 2019. +EXECUTIVE COMMITTEE +MEMBERS: +John J. Donahoe II +Travis A. Knight +Mark G. Parker, Chair +MEETINGS IN FY ’20: 1 +ROLES AND RESPONSIBILITIES: +The Executive Committee is authorized to act on behalf of the Board on all corporate actions for which applicable law does not require participation by the full Board. +• In practice, the Executive Committee acts in place of the full Board only when emergency issues or scheduling conflicts make it difficult or impracticable to assemble the full Board. +• All actions taken by the Executive Committee must be reported at the next Board meeting, or as soon thereafter as practicable. +The Executive Committee held one formal meeting during fiscal 2020, and took action by unanimous written consent. +24 NIKE, INC. +THE BOARD’S ROLE IN RISK OVERSIGHT +While the Company’s management team is responsible for day-to-day management of the various risks facing the Company, the Board takes an active role in the oversight of the management of critical business risks. The Board does not view risk in isolation. Risks are considered in virtually every business decision and as part of NIKE’s business strategy. The Board recognizes it is neither possible nor prudent to eliminate all risk. Purposeful and appropriate risk-taking is essential for the Company to be competitive on a global basis and to achieve its strategic objectives. +THE BOARD OF DIRECTORS +The Board implements its risk oversight function both as a whole and through committees, which play a significant role in carrying out risk oversight. While the Audit & Finance Committee is responsible for oversight of management’s risk management policies, oversight responsibility for particular areas of risk is allocated among the Board committees according to the committee’s area of responsibility as reflected in the committee charters. +BOARD COMMITTEES +The AUDIT & FINANCE COMMITTEE oversees risks related to the Company’s financial statements, the financial reporting process, accounting, legal matters, investments, access to capital and capital deployment, currency risk and hedging programs, information security (including risks related to cyber security), and data protection. The committee oversees the internal audit function, reviews a risk-based plan of internal audits, and reviews a risk-based integrated audit of internal controls over financial reporting. The committee meets separately with the Vice President of Corporate Audit and Chief Risk Officer, representatives of the independent registered public accountants, and senior management. +The COMPENSATION COMMITTEE oversees risks associated with the Company’s compensation philosophy and programs, management succession plans, and executive development. +The CORPORATE RESPONSIBILITY, SUSTAINABILITY & GOVERNANCE COMMITTEE oversees risks associated with corporate social purpose and company governance, including NIKE’s Code of Conduct and its compliance programs, and the structure and performance of the Board and its committees. The committee also oversees protection of the Company’s corporate reputation including issues that involve social and community engagement, workplace diversity and inclusion, and sustainability innovation relating to the Company’s products, its supply chain (including labor practices), and the environment. +EXECUTIVE LEADERSHIP TEAM +Each committee chair works with one or more senior executives assigned to assist the committee in: developing agendas for the year and for each meeting, paying particular attention to areas of business risk identified by management, Board members, internal and external auditors, and in their committee charter; and scheduling agenda topics, presentations, and discussions regarding business risks within their area of responsibility. At meetings, the committees discuss areas of business risk, the potential impact, and management’s initiatives to manage business risk, often within the context of important business decisions. Through this process key business risk areas are reviewed at appropriate times, with some topics reviewed on several occasions throughout the year. At every Board meeting each committee chair provides a report to the full Board outlining its discussions and actions, including those affecting the oversight of various risks. +The Company believes its leadership structure, discussed in detail above, supports the risk oversight function of the Board. Strong directors chair the various committees involved in risk oversight, there is open communication between management and directors, and all directors are involved in the risk oversight function. +2020 PROXY STATEMENT 25 +SHAREHOLDER COMMUNICATIONS WITH DIRECTORS +Shareholders or interested parties desiring to communicate directly with the Board, with non-management directors, or with any individual director may do so in writing addressed to the intended recipient or recipients, c/o Ann M. Miller, Vice President, Corporate Secretary, and Chief Ethics & Compliance Officer, NIKE, Inc., One Bowerman Drive, Beaverton, Oregon 97005-6453. All such communications will be reviewed, compiled as necessary, and then forwarded to the designated recipient or recipients in a timely manner. +CODE OF CONDUCT +The NIKE Code of Conduct, which was refreshed in 2019, is available at the Company’s corporate website, http://investors.nike.com, and will be provided in print without charge to any shareholder who submits a request in writing to NIKE Investor Relations, One Bowerman Drive, Beaverton, Oregon 97005-6453. The Code of Conduct applies to all of the Company’s employees and directors, including our CEO and all other executive officers. The Code of Conduct provides that any waiver of the Code of Conduct for executive officers or directors may be made only by the Board or a committee of the Board. Any such waiver will be publicly disclosed, when required by law. The Company plans to disclose amendments to, and waivers from, the Code of Conduct on the Company’s corporate website: http://investors.nike.com. +DIRECTOR COMPENSATION FOR FISCAL 2020 +NAME +FEES EARNED OR +PAID IN CASH +($) +STOCK +AWARDS (1)(2) +($) +CHANGE IN +PENSION VALUE AND +NONQUALIFIED DEFERRED +COMPENSATION EARNINGS +($) +ALL OTHER +COMPENSATION (3) +($) +TOTAL +($) +Cathleen A. Benko +100,000 +175,049 +— +20,000 +295,049 +Elizabeth J. Comstock +100,000 +175,049 +— +20,000 +295,049 +John G. Connors +105,000 +175,049 +— +20,000 +300,049 +Timothy D. Cook +150,000 +175,049 +— +20,000 +345,049 +Thasunda B. Duckett +54,670 +(4) +175,056 +— +— +229,726 +Alan B. Graf, Jr. +130,000 +175,049 +— +— +305,049 +Peter B. Henry +103,118 +175,049 +— +5,000 +283,167 +Travis A. Knight +100,000 +175,049 +— +— +275,049 +John C. Lechleiter +31,253 +(5) +— +— +20,000 +51,253 +Michelle A. Peluso +118,967 +175,049 +— +20,000 +314,016 +John W. Rogers, Jr. +100,000 +175,049 +— +20,000 +295,049 +John R. Thompson, Jr. +82,000 +(6) +175,049 +— +22,536 +279,585 +(1) +Represents the grant date fair value of restricted stock awards granted in fiscal 2020 computed in accordance with accounting guidance applicable to stock-based compensation. The grant date fair value is based on the closing market price of our Class B Stock on the grant date. As of May 31, 2020, non-employee directors held the following number of outstanding shares of unvested restricted stock: Ms. Benko, 1,996; Ms. Comstock, 1,996; Mr. Connors, 1,996; Mr. Cook, 1,996; Ms. Duckett, 1,918; Mr. Graf, 1,996; Mr. Henry, 1,996; Mr. Knight, 1,996; Ms. Peluso, 1,996; Mr. Rogers, 1,996; and Mr. Thompson, 1,996. +(2) +As of May 31, 2020, non-employee directors held outstanding options for the following number of shares of our Class B Stock: Ms. Comstock, 42,000; Mr. Connors, 66,000; Mr. Cook, 66,000; and Dr. Lechleiter, 66,000. +(3) +Includes matched contributions to charities in the following amounts: Ms. Benko, $20,000; Ms. Comstock, $20,000; Mr. Connors, $20,000; Mr. Cook, $20,000; Mr. Henry, $5,000; Dr. Lechleiter, $20,000; Ms. Peluso, $20,000; and Mr. Rogers, $20,000. For Mr. Thompson, includes medical and life insurance premiums of $22,536 paid by the Company. +(4) +Ms. Duckett was appointed to the Board of Directors on November 14, 2019 (includes prorated annual retainer payments). +(5) +Dr. Lechleiter did not stand for re-election at our 2019 annual meeting of shareholders and retired effective September 19, 2019 (includes prorated annual retainer payments). +(6) +Mr. Thompson retired from the Board effective May 31, 2020 and transitioned to the role of Director Emeritus. +26 NIKE, INC. +DIRECTOR FEES AND ARRANGEMENTS +Under our standard director compensation program in effect for fiscal 2020, non-employee directors receive: +• +An annual retainer of $100,000, paid in quarterly installments. +• +Upon appointment to the Board, a one-time, sign-on restricted stock award valued at $175,000 on the date of grant, generally, the date of appointment. The one-time, sign-on restricted stock award is subject to forfeiture in the event that service as a director terminates prior to the anniversary of the date of grant. +• +An annual restricted stock award valued at $175,000 on the date of grant, generally, the date of each annual meeting of shareholders. The annual restricted stock award is subject to forfeiture in the event that service as a director terminates prior to the earlier of the next annual meeting and the anniversary of the date of grant. +• +For the Lead Independent Director, an annual retainer of $30,000, paid in quarterly installments. +• +For chairs of Board committees (other than the Executive Committee), an annual retainer of $20,000 for each committee chaired ($25,000 for the chair of the Audit & Finance Committee), paid in quarterly installments. +• +For Audit & Finance Committee members, an additional annual retainer of $5,000, paid in quarterly installments. +• +Payment or reimbursement of travel and other expenses incurred in attending Board meetings. +• +Matching charitable contributions under the NIKE Matching Gift Program, under which directors are eligible to contribute to qualified charitable organizations and the Company provides a matching contribution to the charities in an equal amount, up to $20,000 in the aggregate, for each director annually. +In fiscal 2020, Mses. Benko, Comstock, Duckett and Peluso, Messrs. Connors, Cook, Graf, Henry, Knight, and Rogers, and Dr. Lechleiter participated in our standard director compensation program as described above, and Mr. Donahoe participated in our standard director compensation program prior to his appointment as President and Chief Executive Officer, effective January 2020. Mr. Parker does not receive any additional compensation for services provided as a director. +Mr. Thompson did not participate in our standard director compensation program, pursuant to his election made in fiscal 2000. In fiscal 2020, Mr. Thompson received an annual retainer of $82,000 (instead of the $100,000 annual retainer fee paid under our standard program), medical insurance, and $500,000 of life insurance coverage paid for by the Company. Additionally, on September 19, 2019, the date of the 2019 annual meeting of shareholders, Mr. Thompson received an annual restricted stock award valued at $175,000 on the same terms that apply to the restricted stock awards granted pursuant to our standard program. He was also eligible for payment or reimbursement of Board-related expenses, and participation in the NIKE Matching Gift Program on the same basis as other directors. +Effective June 1, 2020, the Company changed the standard director compensation program by increasing the value of the annual restricted stock award to $185,000 and increasing the value of the one-time, sign-on restricted stock award to $185,000 for newly appointed non-employee directors. All other components of director compensation remain the same. +STOCK OWNERSHIP GUIDELINES FOR DIRECTORS +NIKE maintains stock ownership guidelines for all non-employee directors. Under these guidelines, directors are required to hold NIKE stock valued at five times their annual cash retainer. New directors are required to attain these ownership levels within five years of their election to the Board. Each of our directors has met or is on track to meet the specified ownership level. +DIRECTOR PARTICIPATION IN DEFERRED COMPENSATION PLAN +Under our Deferred Compensation Plan, non-employee directors may elect in advance to defer up to 100 percent of the director fees paid by the Company. For a description of the plan, see the section below titled "Compensation Discussion and Analysis—Executive Compensation Tables—Non-Qualified Deferred Compensation in Fiscal 2020—Non-Qualified Deferred Compensation Plans". In addition, in fiscal 2000, Mr. Thompson received credits to a fully vested NIKE stock account under the Deferred Compensation Plan in exchange for his waiver of rights to future payments under a former non-employee director retirement program. The Class B Stock credited to Mr. Thompson’s account will be distributed to him upon termination of his service as Director Emeritus and the account is credited with quarterly dividends until distributed. +2020 PROXY STATEMENT 27 +COMPENSATION DISCUSSION AND ANALYSIS +PROPOSAL 2 +SHAREHOLDER ADVISORY VOTE TO APPROVE +EXECUTIVE COMPENSATION +In accordance with the requirements of Section 14A of the Securities Exchange Act of 1934, we are submitting to shareholders our annual "say-on-pay proposal", an advisory vote to approve the compensation of our Named Executive Officers as described in this proxy statement. +At the Company’s 2019 annual meeting of shareholders, approximately 97% of the votes cast on the say-on-pay proposal were voted in favor of the proposal. The Compensation Committee believes this affirms shareholders’ support of the Company’s approach to executive compensation and the committee’s decisions. +As discussed in this section, our executive compensation program is designed to attract and retain top-tier talent and maximize shareholder value. To achieve the objectives of our executive compensation program and emphasize pay-for-performance principles, the Compensation Committee has continued to employ strong governance practices, including: +• basing a majority of total compensation on performance and retention incentives; +• setting annual and long-term cash incentive award targets based on clearly disclosed, objective performance measures; +• mitigating undue risk associated with compensation by using multiple performance targets, caps on potential incentive payments, and a clawback policy; and +• requiring executive officers to hold NIKE stock through published stock ownership guidelines. +Because your vote is advisory, it will not be binding on the Board. However, the Board values shareholder opinions, and the Compensation Committee will take into account the outcome of the vote when considering future executive compensation arrangements. +BOARD RECOMMENDATION +The Board of Directors recommends that shareholders vote FOR approval of the following resolution: +RESOLVED, that the shareholders approve the fiscal 2020 compensation paid to the Named Executive Officers as disclosed in this proxy statement pursuant to the SEC’s compensation disclosure rules (which disclosure includes the Compensation Discussion and Analysis, the compensation tables, and the narrative disclosures that accompany the compensation tables). +28 NIKE, INC. +INTRODUCTION +This Compensation Discussion and Analysis ("CD&A") describes our compensation program, philosophy, decisions, and process for the compensation of our "Named Executive Officers" (also referred to as our "NEOs") for fiscal 2020: +NAMED EXECUTIVE OFFICER +TITLE +John J. Donahoe II +President and Chief Executive Officer (since January 13, 2020) +Mark G. Parker +Executive Chairman (since January 13, 2020) +Chairman, President, and Chief Executive Officer (until January 12, 2020) +Matthew Friend +Executive Vice President and Chief Financial Officer (since April 1, 2020) +Andrew Campion +Chief Operating Officer (since April 1, 2020) +Executive Vice President and Chief Financial Officer (until March 31, 2020) +Hilary K. Krane +Executive Vice President, Chief Administrative Officer and General Counsel +Monique Matheson +Executive Vice President, Global Human Resources +John F. Slusher +Executive Vice President, Global Sports Marketing +Elliott J. Hill +President, Consumer and Marketplace (until March 31, 2020) +Eric D. Sprunk +Chief Operating Officer (until March 31, 2020) +This CD&A is organized into five sections: +• +Executive Summary (page 29) +• +Leadership Transitions (page 31) +• +Compensation of Our Named Executive Officers (page 32) +• +Our Compensation Process (page 39) +• +Other Compensation Practices (page 40) +EXECUTIVE SUMMARY +GUIDING PRINCIPLES +• +To drive business results and maximize shareholder value, our executive compensation is highly incentive-based. +• +To emphasize long-term performance, increase alignment between executives and shareholders, and support retention, incentive compensation is weighted towards long-term awards. +• +To foster teamwork and ensure internal pay equity, we utilize a cohort approach by aligning compensation across certain executive roles. +• +To ensure that our executive compensation program supports our business strategy and talent plan, we determine cohort compensation levels by holistically considering factors relating to our business, the market for top-tier talent, and the applicable executives. +2020 PROXY STATEMENT 29 +ANNUAL DIRECT COMPENSATION ELEMENTS +NIKE's annual direct compensation for the Named Executive Officers generally consists of the following elements: +ELEMENT +KEY CHARACTERISTICS +PURPOSE +Base Salary +Fixed cash compensation +Provides market competitive baseline compensation to attract and retain top-tier talent +Annual Cash Incentive Award - Executive Performance Sharing Plan ("PSP") +Variable cash incentive compensation earned at 0% – 150% based on Company performance over a 1-year performance period +Motivates and rewards achievement of sustainable and profitable growth +Long-Term Incentive Awards +Cash +Long-Term Incentive Plan ("LTIP") +Variable cash incentive compensation earned at 0% – 200% based on Company performance over a 3-year performance period +Motivates and rewards achievement of long-term shareholder value and growth +Stock +Stock Options +Stock-based incentive compensation that generally vests in 4 equal annual installments; only provides value if our stock price appreciates +Aligns NEOs' interests with those of our shareholders by rewarding achievement of upside potential; promotes retention +Restricted Stock Units ("RSUs") +Stock-based incentive compensation that generally vests in 3 equal annual installments; value tied to our stock price +Aligns NEOs' interests with those of our shareholders by rewarding long-term value creation; promotes retention +EXECUTIVE COMPENSATION GOVERNANCE PRACTICES +WHAT WE DO +WHAT WE DON’T DO +ü Base a majority of total compensation on performance and retention incentives +ü Mitigate undue risk by using multiple performance periods and metrics, incentive payment caps, and a clawback policy +ü Base annual and long-term cash incentive awards on clearly disclosed, objective performance goals +ü Maintain robust stock ownership guidelines +ü Vest stock-based awards over time to promote long-term performance and retention +ü Provide only double-trigger change-in-control acceleration for stock-based awards +û No retirement acceleration for RSUs +û No dividend equivalents paid on RSUs unless and until shares are earned +û No repricing of stock options +û No hedging transactions or short sales permitted +û No pension or supplemental executive retirement plan +û No tax gross-ups for perquisites +û No cash-based change-in-control benefits +û No excise tax gross-ups upon change of control +FISCAL 2020 DEVELOPMENTS +Fiscal 2020 was a year of transformation, both at NIKE and around the world. For NIKE, fiscal 2020 brought key changes to our leadership team. In January 2020, our long-time President and CEO, Mr. Mark G. Parker, transitioned into the role of Executive Chairman while Mr. John J. Donahoe II, a tenured director of the Company, stepped into the roles of President and CEO. Additional executive officer transitions occurred in April 2020, in accordance with our succession planning offense. Around the same time, the world was being transformed as a result of COVID-19. First identified in December 2019, and subsequently declared a pandemic by the World Health Organization, COVID-19 has significantly impacted the health, safety, and livelihood of people around the world, and brought economic challenges on a global scale to countries, companies and financial markets. Because NIKE's fiscal year ended on May 31, 2020, fiscal 2020 included a period of strong pre-pandemic performance followed by a shorter period which was significantly impacted by COVID-19. The Compensation Committee's actions addressing each of these key developments—our leadership transitions and the COVID-19 pandemic—and the resulting impacts on fiscal 2020 executive compensation are discussed in detail throughout the CD&A. +30 NIKE, INC. +LEADERSHIP TRANSITIONS +During fiscal 2020, we made significant changes to our executive team intended to build on our solid foundation and enable our next phase of sustainable growth. On January 13, 2020, Mr. Donahoe became President and CEO of NIKE and Mr. Parker—our President and CEO since 2006—became Executive Chairman. Mr. Elliott J. Hill and Mr. Eric D. Sprunk announced their retirements as President of Consumer and Marketplace and Chief Operating Officer, respectively, on February 12, 2020. On April 1, 2020, Mr. Andrew Campion succeeded Mr. Sprunk as Chief Operating Officer and Mr. Matthew Friend succeeded Mr. Campion as Chief Financial Officer. These executive transitions were executed in accordance with the Company’s succession planning offense to establish the executive team that will set the pace for the Company. In connection with, and in support of, these transitions, the Compensation Committee approved certain compensation arrangements and one-time awards, as described below. +In connection with the CEO transition, the Compensation Committee approved compensation arrangements for each of Messrs. Donahoe and Parker. The compensation package for Mr. Donahoe was designed to tie his pay to Company performance and align his long-term economic interests with those of our shareholders. Mr. Donahoe's annual direct compensation is consistent with our executive compensation program and competitive in light of the market for top-tier talent. Mr. Donahoe's fiscal 2020 annual direct compensation is discussed in more detail below in the section titled "Compensation of Our Named Executive Officers". As illustrated below, the Compensation Committee also made certain one-time grants to Mr. Donahoe, consisting of a cash incentive award and sign-on stock-based awards under our Stock Incentive Plan. These one-time CEO transition grants are intended to immediately align Mr. Donahoe's incentives with the Company's ongoing and long-term success and to make Mr. Donahoe whole for a portion of compensation that he forfeited from his prior employer in connection with his appointment as NIKE's CEO: +ONE-TIME CEO TRANSITION GRANTS FOR MR. DONAHOE +Transition-Period Cash Incentive Award +• Cash incentive award granted to support a smooth and effective transition +• Earned based on the achievement of qualitative, transition-related performance metrics over the performance period of January 13, 2020 to May 31, 2021 +Sign-On Performance Options +• Vesting conditioned on (1) a 20% increase in the value of our Class B Stock from the value on the grant date and (2) Mr. Donahoe's continued service with the Company for at least 3 years +Sign-On RSUs +• Vest in equal annual installments over 3 years +• Accumulate dividend equivalents that are paid only upon vesting +To support a smooth and effective CEO transition, the Compensation Committee granted Mr. Parker a one-time, transition-period cash incentive award with a target value of $10,000,000, which will be earned based on the achievement of qualitative, transition-related performance metrics over the performance period of January 13, 2020 to May 31, 2021. +The Compensation Committee approved annual direct compensation for Mr. Friend in connection with his transition into the role of Chief Financial Officer. The Compensation Committee had previously approved annual direct compensation for Mr. Campion in his role as Chief Financial Officer and determined to maintain that compensation for the remainder of the fiscal year. Fiscal 2020 annual direct compensation for each of these executives is consistent with our executive compensation program and is discussed in more detail below in the section titled "Compensation of Our Named Executive Officers". +The Compensation Committee also approved one-time grants of stock-based transition awards to Messrs. Campion and Friend in the amounts of $10,000,000 and $6,000,000, respectively, to support business and leadership continuity during this transitional period. These awards are in the form of RSUs that vest in equal annual installments over four years and accumulate dividend equivalents that are paid only upon vesting. To further support business and leadership continuity during this executive transition period, and to promote the ongoing engagement of the continuing members of our senior leadership team, the Compensation +2020 PROXY STATEMENT 31 +Committee also approved one-time grants of stock-based retention awards in the amount of $4,000,000 to each of Ms. Hilary K. Krane, Ms. Monique Matheson, and Mr. John F. Slusher. These awards are in the form of RSUs that cliff vest at the end of the three-year retention period and accumulate dividend equivalents that are paid only upon vesting. The transition and retention awards were granted on June 1, 2020 and therefore will be reflected in next year's Summary Compensation Table as part of fiscal 2021 compensation. +COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS +COMPENSATION OBJECTIVES AND STRUCTURE +Our executive compensation program is designed to attract and retain top-tier talent in a competitive marketplace and to maximize shareholder value by rewarding NEOs for strong Company performance. The program generally consists of annual direct compensation, with a focus on incentive compensation, and competitive benefits that are generally consistent with the benefits offered to our other U.S.-based employees. During fiscal 2020, the Compensation Committee also approved special one-time grants of incentive-based and stock-based compensation to certain NEOs in connection with senior leadership changes to support continuity during a key transitional period, as described in the section above titled "Leadership Transitions". In addition, in response to the COVID-19 pandemic, the Compensation Committee made certain determinations with respect to fiscal 2020 incentive compensation to recognize strong performance prior to the pandemic, ensure sustained engagement, and drive key business results, as described in the sections below titled "Long-Term Cash Incentive—Fiscal 2020 – 2022 LTIP Award Grants" and "Cash Bonus". +We structure our executive compensation program in the context of our business strategy and talent plan. To foster teamwork and ensure internal pay equity, we utilize a cohort approach that aligns compensation across certain executive roles. Cohort compensation levels are determined by holistically considering factors such as future potential, individual performance, market insights, succession planning, retention, and leadership continuity. New executives are phased into a cohort by taking into consideration their relative experience, expected contributions, and market position. +Our philosophy is to "pay for performance" in order to drive business results and maximize shareholder value. As a result, executive compensation is highly incentive-based and weighted towards long-term awards to emphasize long-term performance and support retention. Our executive compensation program as a whole, and in particular annual direct compensation, balances performance incentives using performance metrics and performance periods, with a mixture of cash- and stock-based compensation elements. Stock-based compensation is also structured to pay for performance and is delivered 60% in the form of stock options and 40% in the form of RSUs. The following charts illustrate the mix of components that make up fiscal 2020 target annual direct compensation for our NEOs. +* +Represents the average for Messrs. Donahoe and Parker. +** +Represents the average for Messrs. Friend, Campion, Slusher, Hill, and Sprunk and Mses. Krane and Matheson. +32 NIKE, INC. +BASE SALARY +Base salary is a fixed element of compensation that serves to attract and retain top-tier talent. The Compensation Committee generally reviews and determines base salaries for our Named Executive Officers in June, with any adjustments becoming effective in August of the same year. For fiscal 2020, the Compensation Committee granted increases for each of Messrs. Campion, Slusher, Hill, and Sprunk and Ms. Krane to ensure that their salary levels remain positioned competitively relative to the market. Mr. Parker's base salary remained unchanged compared to fiscal 2019. The Compensation Committee determined base salaries for Messrs. Donahoe and Friend in connection with their appointment as President and CEO, and Chief Financial Officer, respectively, and for Ms. Matheson during its yearly review of executive annual direct compensation. +NAMED EXECUTIVE OFFICER +FISCAL 2020 BASE SALARY +% CHANGE (1) +John J. Donahoe II +$1,500,000 +N/A +Mark G. Parker +$1,700,000 +0% +Matthew Friend +$875,000 +N/A +Andrew Campion +$1,100,000 +4.8% +Hilary K. Krane +$1,100,000 +4.8% +Monique Matheson +$1,100,000 +N/A +John F. Slusher +$1,100,000 +18.9% +Elliott J. Hill +$1,200,000 +4.3% +Eric D. Sprunk +$1,200,000 +4.3% +(1) +Represents the change in base salary compared to fiscal 2019. +ANNUAL CASH INCENTIVE +Annual cash incentive awards are paid to the Named Executive Officers under our Executive Performance Sharing Plan ("PSP"). PSP awards reflect our "pay for performance" philosophy: they are earned between 0% and 150% of target based on Company performance during the fiscal year. The Compensation Committee retains discretion to reduce or eliminate PSP award payouts based on individual or Company performance. To align employees and reinforce our one-team culture, the same compensation philosophy, structure, and metrics that underlie our PSP awards apply to all global employees who are eligible to participate in the Company's success through incentive bonuses. +The Compensation Committee increased the PSP target award for each of Messrs. Campion, Slusher, Hill, and Sprunk and Ms. Krane from 100% of base salary to 120% for fiscal 2020 to strengthen the competitiveness of their total direct compensation while ensuring that their compensation remains highly incentive-based. Mr. Parker's PSP target award remained the same as in fiscal 2019. The Compensation Committee determined PSP target awards for Messrs. Donahoe and Friend in connection with their appointment as President and CEO, and Chief Financial Officer, respectively, and for Ms. Matheson during its yearly review of executive annual direct compensation. The fiscal 2020 PSP target awards are: +NAMED EXECUTIVE OFFICER +FISCAL 2020 PSP TARGET AWARD +(% OF BASE SALARY) +John J. Donahoe II +200% +Mark G. Parker +200% +Matthew Friend +120% +Andrew Campion +120% +Hilary K. Krane +120% +Monique Matheson +120% +John F. Slusher +120% +Elliott J. Hill +120% +Eric D. Sprunk +120% +The metric for fiscal 2020 PSP awards was "Adjusted EBIT", calculated as earnings before interest and taxes ("EBIT") adjusted to exclude the effect of acquisitions, divestitures, accounting changes, restructurings, unanticipated exchange rate fluctuations and other extraordinary, unusual, or infrequently occurring items. The Compensation Committee selected Adjusted EBIT as the measure of Company performance because EBIT represents the key measure used internally to manage financial performance and drive operational performance, and adjusting EBIT to exclude the impact of certain non-operational events helps to drive and reward organic growth. The elimination of unanticipated foreign exchange volatility was added to the set of EBIT adjustments for +2020 PROXY STATEMENT 33 +fiscal 2020 awards because such volatility is disconnected from actual operating results, and this adjustment enables PSP to more precisely reward achievement of sustainable, profitable growth. +In June 2019, the Compensation Committee established challenging performance goals, as illustrated below, to drive growth consistent with NIKE's long-term financial model while supporting executives' continued engagement. For fiscal 2020, NIKE achieved annual Adjusted EBIT of $3,633 million. This achievement was below the threshold performance goal, and as a result, each Named Executive Officer’s PSP award paid out at 0%. +FISCAL 2020 PSP PERFORMANCE GOAL +(Dollars in millions) +% PAYOUT +THRESHOLD +50% +TARGET +100% +MAXIMUM +150% +Adjusted EBIT +LONG-TERM CASH INCENTIVE +Long-term cash incentive awards are paid to the Named Executive Officers under our Long-Term Incentive Plan ("LTIP"). Like the PSP awards, LTIP awards reflect our "pay for performance" philosophy: they are earned between 0% and 200% of target based on Company performance during a three-year performance period. The Compensation Committee retains discretion to adjust LTIP award payouts based on individual or Company performance. +At the beginning of each fiscal year, the Compensation Committee sets target award amounts for our executive officers, selects LTIP award metrics, and determines performance goals. The Compensation Committee then determines the applicable payout percentage at the end of the three-year performance period. +In connection with Mr. Donahoe's appointment as President and CEO, the Compensation Committee granted Mr. Donahoe LTIP awards with respect to each outstanding tranche of LTIP awards, consistent with our practice for individuals newly eligible for LTIP awards. Mr. Donahoe's fiscal 2018 – 2020 LTIP target award and fiscal 2019 – 2021 LTIP target award were each set at $5,000,000. The terms and performance metrics of these awards are discussed in our 2018 and 2019 proxy statements, respectively. Mr. Donahoe's fiscal 2020 – 2022 LTIP award is described immediately below. +FISCAL 2020 – 2022 LTIP AWARD GRANTS +For each of Messrs. Parker, Campion, Slusher, Hill, and Sprunk and Ms. Krane, the Compensation Committee maintained fiscal 2020 – 2022 LTIP target awards at the same level as was set for LTIP awards granted in fiscal 2019. The Compensation Committee determined fiscal 2020 – 2022 LTIP target awards for Messrs. Donahoe and Friend in connection with their appointment as President and CEO, and Chief Financial Officer, respectively, and for Ms. Matheson during its yearly review of executive annual direct compensation. The fiscal 2020 – 2022 LTIP target awards were: +NAMED EXECUTIVE OFFICER +FISCAL 2020 – 2022 LTIP +TARGET AWARD +John J. Donahoe II +$5,000,000 +Mark G. Parker +$5,000,000 +Matthew Friend +$1,000,000 +Andrew Campion +$1,000,000 +Hilary K. Krane +$1,000,000 +Monique Matheson +$1,000,000 +John F. Slusher +$1,000,000 +Elliott J. Hill +$1,000,000 +Eric D. Sprunk +$1,000,000 +In June 2019, the Compensation Committee selected, and set performance goals for, two equally weighted performance metrics for the fiscal 2020 – 2022 LTIP awards: (1) revenues and (2) diluted earnings per share ("EPS"), in each case excluding generally the effect of acquisitions, divestitures, accounting changes, changes in tax law, and other extraordinary, unusual, or infrequently occurring items (respectively, "Adjusted Revenue" and "Adjusted EPS"). In June 2020, in response to the COVID-19 pandemic, the Compensation Committee modified the performance metrics for these awards to ensure sustained engagement and drive key business results during a dynamic and unprecedented period for the Company. As modified, the fiscal 2020 – 2022 LTIP awards +34 NIKE, INC. +are earned based on the Company's total shareholder return ("Absolute TSR") for fiscal 2020 – 2022 relative to total shareholder return over the same period for the other companies in the S&P 500 ("Relative TSR"), as shown in the table below: +FISCAL 2020 – 2022 PERFORMANCE GOAL +% PAYOUT +THRESHOLD +25% +TARGET +100% +MAXIMUM +200% +Relative TSR 1 +(1) +Relative TSR for fiscal years 2020, 2021, and 2022, calculated using the 20-trading day average stock price and assuming that dividends paid during the performance period are reinvested in the applicable company’s stock. +LTIP award payout based on Relative TSR performance is subject to a cap of 100% of target if Absolute TSR for the performance period is negative. The Compensation Committee selected three-year Relative TSR as the performance metric because it is an objective and transparent measure of long-term shareholder value, especially in the context of a volatile market. Furthermore, the cap on payout if Absolute TSR is negative incentivizes NEOs to pursue long-term growth. +FISCAL 2018 – 2020 LTIP AWARD RESULTS +For fiscal 2020, the Named Executive Officers were eligible to receive payout of their fiscal 2018 – 2020 LTIP awards. These awards were earned based on three-year cumulative Adjusted Revenue and Adjusted EPS performance targets for fiscal years 2018 – 2020 that were set in June 2017. In June 2020, the Compensation Committee determined that a payout of 0% under these awards was earned by each NEO based on the average of the cumulative Adjusted Revenue and cumulative Adjusted EPS achievements as shown in the table below. +FISCAL 2018 – 2020 PERFORMANCE GOALS +(Dollars in millions, except per share data) +% PAYOUT +THRESHOLD +50% +TARGET +100% +MAXIMUM +200% +Adjusted Revenue 1 +TOTAL PAYOUT: +0% +Adjusted EPS 1 +(1) +Cumulative Adjusted Revenue and cumulative Adjusted EPS for fiscal years 2018, 2019, and 2020. +LONG-TERM STOCK INCENTIVE +Stock-based incentive awards reward long-term Company performance and align executives' interests with those of our shareholders. Such awards form the largest component of our NEOs' annual direct compensation, constituting on average 49% of fiscal 2020 total target compensation for Messrs. Donahoe and Parker (43% for our other NEOs) and 66% of fiscal 2020 total long-term incentive compensation for Messrs. Donahoe and Parker (72% for our other NEOs). +We grant stock-based incentive awards under our Stock Incentive Plan in the form of stock options and RSUs. Historically, the Compensation Committee has determined stock option grants for our NEOs as a number of shares and RSU grants as a dollar value. For fiscal 2020, the Compensation Committee determined both stock option grants and RSUs as dollar values. This change eliminates the impact of stock price volatility on stock option grants and enables the committee to more precisely balance the mixture of stock-based compensation elements. Accordingly, for each of our NEOs, the stock portion of incentive compensation was granted 60% in the form of stock options and 40% in the form of RSUs. +2020 PROXY STATEMENT 35 +The fiscal 2020 stock-based incentive awards were: +NAMED EXECUTIVE OFFICER +STOCK OPTIONS +RSUs +TOTAL FISCAL 2020 STOCK-BASED INCENTIVE AWARDS +John J. Donahoe II +$5,400,000 +$3,600,000 +$9,000,000 +Mark G. Parker +$6,000,000 +$4,000,000 +$10,000,000 +Matthew Friend +$600,000 +$400,000 +$1,000,000 +Andrew Campion +$1,740,000 +$1,160,000 +$2,900,000 +Hilary K. Krane +$1,740,000 +$1,160,000 +$2,900,000 +Monique Matheson +$1,740,000 +$1,160,000 +$2,900,000 +John F. Slusher +$1,740,000 +$1,160,000 +$2,900,000 +Elliott J. Hill +$1,950,000 +$1,300,000 +$3,250,000 +Eric D. Sprunk +$1,950,000 +$1,300,000 +$3,250,000 +For fiscal 2020, the Compensation Committee increased the total value of stock-based incentive awards for Mr. Parker by $1,948,000 compared to his awards granted in fiscal 2019 (based on the grant date fair value of fiscal 2019 stock options as reported in last year's proxy statement and the award value of fiscal 2019 RSUs). Due to the change to a 60% / 40% mixture of stock options and RSUs, this resulted in an increase in the stock option award value of $2,948,000 and a decrease in the RSU award value of $1,000,000. Compared to fiscal 2019 awards, the Compensation Committee increased the total value of fiscal 2020 stock-based incentive awards for each of Mr. Campion and Ms. Krane by $354,800 (consisting of a stock option increase of $344,800 and a RSU increase of $10,000), for Mr. Slusher by $742,000 (consisting of a stock option increase of $432,000 and a RSU increase of $310,000), and for each of Messrs. Hill and Sprunk by $430,400 (consisting of a stock option increase of $380,400 and a RSU increase of $50,000). In each case, the increase in the total value of fiscal 2020 stock-based incentive awards reflects the Compensation Committee's consideration of multiple factors, including performance, succession planning, our cohort compensation approach, and the desired mix for stock-based incentive awards. The Compensation Committee determined the value of stock-based incentive awards for Mr. Donahoe in connection with his appointment as President and CEO and for Ms. Matheson during its yearly review of executive annual direct compensation. For Mr. Friend, the value of stock-based incentive awards for fiscal 2020 was determined by the Company in connection with his previous role, prior to his appointment as an executive officer. +STOCK OPTIONS +Stock options align our Named Executive Officers' interests with those of our shareholders by rewarding the achievement of upside potential, and they reflect our "pay for performance" philosophy because they provide value to the NEOs only if the price of our Class B Stock appreciates. +The number of stock options granted to each NEO for fiscal 2020 was determined by dividing the NEO's award value by the Black-Scholes value (calculated based on a twenty-day average stock price and the available five-year and seven-year interest rates) of a stock option on the date of grant. Options granted to the Named Executive Officers vest in equal annual installments over four years and have an exercise price equal to the closing market price of our stock on the date of grant. To promote retention, stock options generally provide that if a Named Executive Officer leaves the Company, he or she forfeits any unvested stock options. Forfeiture is subject to a limited retirement provision designed to encourage executives to delay retirement (as described in the section below titled "Executive Compensation Tables—Potential Payments Upon Termination or Change-in-Control"). +RSU AWARDS +RSUs align our Named Executive Officers' interests with those of our shareholders by rewarding the achievement of long-term value creation, and they reflect our "pay for performance" philosophy because their value is directly tied to our Class B Stock price. +The number of RSUs granted to each NEO for fiscal 2020 was determined by dividing the NEO's award value by the closing market price of our Class B Stock on the date of grant. RSUs granted to the Named Executive Officers vest in equal annual installments over three years and accumulate dividend equivalents that are paid only upon vesting. To promote retention, RSU awards generally provide that any unvested RSUs are forfeited if the Named Executive Officer leaves the Company. +CASH BONUS +As described above, our Named Executive Officers received 0% payouts for both the fiscal 2020 PSP and the fiscal 2018 – 2020 LTIP. Overall performance was below threshold for each plan due to the significant impact of the COVID-19 pandemic on our incentive plans during the final quarter of the applicable performance period. Prior to the fourth quarter of fiscal 2020, Adjusted +36 NIKE, INC. +EBIT was on track to yield an above-target payout for the PSP, and Adjusted Revenue and Adjusted EPS were on track to yield an LTIP payout between threshold and target levels. +Consistent with our "pay for performance" philosophy, the Compensation Committee and the Company determined to recognize the Company's strong pre-pandemic performance for all employees, both to reward strong pre-pandemic performance and to ensure sustained employee engagement and retention, and drive business results during an unprecedented period of transition. Therefore, with respect to each incentive-eligible employee who is not an executive officer, the annual bonus payout was adjusted from 0% to 100% to approximate Adjusted EBIT performance during the first three quarters of the one-year performance period for the fiscal 2020 PSP, and the LTIP payout was adjusted from 0% to 75% to approximate Adjusted Revenue and Adjusted EPS performance during the first eleven quarters of the three-year performance period for the fiscal 2018 – 2020 LTIP. To approximate the short- and long-term cash incentive payouts that were received by all other eligible employees, the Compensation Committee granted discretionary cash bonuses to each of our Named Executive Officers. The discretionary cash bonus award to each of our NEOs was as follows: +NAMED EXECUTIVE OFFICER +DISCRETIONARY CASH BONUS +John J. Donahoe II +$6,750,000 +Mark G. Parker +$6,025,000 +Matthew Friend +$1,576,800 +Andrew Campion +$2,070,000 +Hilary K. Krane +$2,070,000 +Monique Matheson +$2,070,000 +John F. Slusher +$2,070,000 +Elliott J. Hill +$2,190,000 +Eric D. Sprunk +$2,190,000 +MR. PARKER'S 2015 PERFORMANCE-BASED RSU AWARD +As previously disclosed in our 2016 proxy statement, in June 2015 the Compensation Committee granted Mr. Parker performance-based RSUs ("PSUs") that were to be earned between 0% and 100% of target based on cumulative revenue growth and cumulative EPS growth, each equally weighted, over the five-year performance period of fiscal 2016 through fiscal 2020 (subject to Mr. Parker's continued employment with the Company until June 30, 2020). In June 2020, the Compensation Committee determined that cumulative revenue growth over the performance period was approximately $179,781,000, corresponding to an earnout of 0%, and cumulative EPS growth over the performance period (which was not adjusted for the December 2015 stock split, in order to align with the pre-stock split targets) was $22.18, corresponding to an earnout of 0%. Accordingly, the Compensation Committee determined that the PSUs were earned at 0%. +OTHER COMPENSATION +PROFIT SHARING AND RETIREMENT PLANS +We maintain a U.S. tax qualified retirement savings plan—the 401(k) Savings and Profit Sharing Plan for Employees of NIKE, Inc. (the "401(k) Plan")—under which all eligible U.S. employees, including the Named Executive Officers, are able to make pre-tax and after-tax contributions from their cash compensation. We make annual matching contributions for all participants equal to 100% of their pre-tax contributions up to 5% of their total eligible compensation. +We also generally make annual profit sharing contributions to the accounts of eligible U.S. employees, including the Named Executive Officers, under the 401(k) Plan. The aggregate profit sharing contribution amount, if any, is determined each year by the Board of Directors. This aggregate contribution is allocated among eligible employees based on an equal percentage of their total salary and annual cash incentive award for the year. For fiscal 2020, the profit sharing contribution percentage for each eligible employee was 0%. +The Internal Revenue Code limits the amount of compensation that can be deferred under the 401(k) Plan, and also limits the amount of salary and annual cash incentive award ($280,000 for fiscal 2020) that may be taken into account when determining contributions under that plan. Accordingly, we provide our Named Executive Officers and other highly compensated employees with the opportunity to defer their compensation, including amounts in excess of the tax law limit, under our nonqualified Deferred Compensation Plan. We also make profit sharing contributions under the Deferred Compensation Plan with respect to salary and annual cash incentive award of any eligible employee that exceeds the tax law limit, and for fiscal 2020 these contributions were equal to 0% of the total salary and annual cash incentive award of each Named Executive Officer in excess of $280,000. These contributions under the Deferred Compensation Plan allow our Named Executive Officers and other highly compensated employees to receive profit sharing contributions in the same percentage as our other employees. We do not match deferrals to +2020 PROXY STATEMENT 37 +the Deferred Compensation Plan. Balances in the Deferred Compensation Plan, including the balances of the Named Executive Officers, are unsecured and at-risk, meaning that the balances may be forfeited in the event of the Company’s financial distress, such as bankruptcy. Fiscal 2020 matching and profit sharing contributions to the Named Executive Officers under the qualified and nonqualified plans are included in the All Other Compensation column in the Summary Compensation Table on page 43. +EMPLOYEE STOCK PURCHASE PLAN +Our Employee Stock Purchase Plan allows eligible employees in the United States and in many countries outside of the United States, including the Named Executive Officers, to purchase Class B Stock through payroll deductions at a 15% discount to the market price on the first or last trading day of the six-month purchase period, depending on which day the stock price was lower. In fiscal 2020, all of our Named Executive Officers participated in our Employee Stock Purchase Plan, with the exception of Messrs. Donahoe and Parker. +PERQUISITES AND OTHER BENEFITS +Our executive compensation program includes limited perquisites and other personal benefits for our Named Executive Officers, which generally consist of home security and financial planning services. In addition, our CEO and Executive Chairman are entitled to limited personal use of Company aircraft, primarily pursuant to time sharing agreements, which is intended to increase the security, availability, and productivity of these individuals, and enhanced charitable gift matching under our Employee Matching Gift Program, with an annual contribution limit of $1,000,000 and Company matching on a 4:1 basis. Finally, given the nature of our business, from time to time certain Company employees, including certain executive officers, may receive Company product, event tickets, or travel benefits that are not generally offered to all employees. We do not provide any tax gross-ups on perquisites to our executive officers. Greater detail about the perquisites and personal benefits provided to our Named Executive Officers in fiscal 2020 is provided in the footnotes to the Summary Compensation Table on page 43. +NON-COMPETITION AGREEMENTS +In exchange for non-competition agreements from each of our Named Executive Officers, we have agreed to provide monthly payments during the non-compete period following termination of employment, as described in the section below titled "Executive Compensation Tables—Potential Payments upon Termination or Change-in-Control". We believe that it is appropriate to compensate individuals to refrain from working with competitors following termination, and that compensation enhances the enforceability of such agreements. +LETTER AGREEMENTS +In connection with the CEO transition, we entered into letter agreements with each of Mr. Donahoe and Mr. Parker. Other than these two letter agreements, we do not have employment contracts with any of our executive officers. +Mr. Donahoe's letter agreement sets forth the terms of his target annual direct compensation—consisting of a base salary of $1,500,000, a PSP target award of $3,000,000, and a long-term incentive target award of $14,000,000 in the forms and on the terms determined by the Compensation Committee from time to time—and his enhanced charitable gift matching under our Employee Matching Gift Program as described in the section above titled "Perquisites and Other Benefits". In addition, the letter agreement specifies that, for fiscal 2020, Mr. Donahoe's long-term incentive award will consist of the LTIP and long-term stock-based incentive awards described above in the sections titled "Long-Term Cash Incentive" and "Long-Term Stock Incentive". Mr. Donahoe's letter agreement also provides for the one-time incentive-based transition grants and sign-on awards described in the section above titled "Leadership Transitions". +Mr. Parker's letter agreement provides for the one-time transition-period cash incentive award described in the section above titled "Leadership Transitions" and the enhanced charitable gift matching under our Employee Matching Gift Program as described in the section above titled "Perquisites and Other Benefits". His letter agreement also states that his fiscal 2020 target annual direct compensation would remain unchanged following his transition to the role of Executive Chairman. +38 NIKE, INC. +OUR COMPENSATION PROCESS +COMPENSATION COMMITTEE +The Compensation Committee oversees our executive compensation program, including determining the value and composition of the compensation package for each of our executive officers and setting annual performance goals for the CEO. In addition to any special actions the Compensation Committee may take throughout the year, the committee generally acts with respect to compensation for our Named Executive Officers during the fiscal year as follows: +During fiscal 2020, the Compensation Committee also determined certain compensation arrangements and special one-time grants of incentive-based and stock-based compensation in connection with executive team changes, as described in the sections above titled "Leadership Transitions" and "Compensation of Our Named Executive Officers—Other Compensation—Letter Agreements". In addition, in the first quarter of fiscal 2021, the Compensation Committee made certain determinations with respect to incentive compensation in response to the COVID-19 pandemic, as described in the sections above titled "Compensation of Our Named Executive Officers—Long-Term Cash Incentive—Fiscal 2020 – 2022 LTIP Award Grants" and "Compensation of Our Named Executive Officers—Cash Bonus". The Compensation Committee will continue to monitor the impact of COVID-19 and, if applicable, consider whether further changes are appropriate. +SAY-ON-PAY RESULTS +In making determinations regarding our executive compensation program, including the compensation of our Named Executive Officers, the Compensation Committee considers shareholders' response to the non-binding advisory proposal regarding NEO compensation (the "say-on-pay proposal"). At the 2019 annual meeting, the say-on-pay proposal was approved by approximately 97% of votes cast. The Compensation Committee believes that this affirms shareholders' support of our executive compensation program and the committee's decisions. +PEER GROUP +Given the competitive market for top-tier talent, the Compensation Committee uses a peer group (consisting of companies with similar revenue size, market capitalization, brand value, products, or markets, or with which we compete for executive talent) to provide a reference for assessing executive compensation levels and practices. The following companies constituted our fiscal 2020 peer group: +2020 PROXY STATEMENT 39 +The Coca-Cola Company +Kimberly-Clark Corporation +Procter & Gamble Company +Colgate-Palmolive Company +Macy’s, Inc. +Starbucks Corporation +Comcast Corporation +McDonald’s Corporation +Target Corporation +FedEx Corporation +Microsoft Corporation +TJX Companies +The Gap, Inc. +Mondelez International, Inc. +The Walt Disney Company +Kellogg Company +Pepsico, Inc. +In November 2019, we conducted our regular periodic peer group review. Based on the criteria described above, we determined that for purposes of setting fiscal 2021 executive compensation, the peer group above should be revised to include American Express, Best Buy, and Oracle, and to remove FedEx and Macy’s. +In addition to considering our peer group, the Compensation Committee also uses market survey data from third parties, including Aon Hewitt and Willis Towers Watson, about a broader range of companies. The Compensation Committee generally does not set executive compensation at or near any particular percentile of peer group, or market, compensation. Instead, the committee considers compensation to be competitive if it is generally within a reasonable range of market median. +ROLE OF MANAGEMENT +The CEO makes compensation recommendations to, and participates in discussions with, the Compensation Committee regarding the compensation of each executive officer other than himself. In addition, our human resources staff regularly provides data, analysis, and recommendations to the committee regarding executive compensation. +The Compensation Committee meets regularly in executive session without the CEO or other management present to discuss our executive compensation program. Such executive sessions include discussions about, among other topics, the CEO's performance and compensation and the design and operation of our executive compensation plans. +ROLE OF COMPENSATION CONSULTANT +The Compensation Committee has the authority, in its sole discretion, to retain compensation consultants to assist the committee in overseeing our executive compensation program. For fiscal 2020, the Compensation Committee retained Mercer as a consultant to provide independent analytical and evaluative advice regarding the Company's current or proposed compensation arrangements for senior executives, succession planning, and related market practices, including with respect to the CEO transition and Mr. Donahoe's annual and transition-related compensation. The committee assessed Mercer's independence in connection with this engagement, including considering a written statement from Mercer confirming its independence based on factors specified in SEC and NYSE rules, and determined that Mercer is an independent adviser. The fees for Mercer’s engagement by the Compensation Committee relating to the amount or form of executive compensation were approximately $25,000. During fiscal 2020, Mercer also provided certain services to the Company at the request of management, including investment consulting, employee benefits consulting, and various compensation and benefits surveys. The fees for such additional services were approximately $935,000. +In addition, our human resources staff obtains surveys and reports containing competitive market data from Aon Hewitt and Willis Towers Watson. This information is used by the Compensation Committee and management to supplement peer group data in connection with executive compensation program analysis and decision making. +OTHER COMPENSATION PRACTICES +STOCK OWNERSHIP GUIDELINES +We maintain stock ownership guidelines for executive officers that are designed to further align the interests of our executive officers with those of our shareholders. Under the guidelines, each executive officer is required to hold NIKE stock valued at the following multiple of their annual base salary: +POSITION +OWNERSHIP LEVEL +Chief Executive Officer +6X Base Salary +Other Named Executive Officers +3X Base Salary +Other Executive Officers +2X Base Salary +40 NIKE, INC. +New officers are required to attain these ownership levels within five years of their appointment. As of May 31, 2020, the CEO, each other Named Executive Officer, and each of our other executive officers has met or is on track to meet the applicable ownership guideline within the requisite period. +HEDGING AND PLEDGING +The Company’s Blackout and Pre-clearance Policy (which supplements our Insider Trading Policy) prohibits directors, executive officers, and other designated insiders (based on seniority and department) from engaging in transactions involving hedging, monetization or short sales of NIKE stock, including zero-cost collars and forward sale contracts. The policy also requires directors, executive officers, and designated insiders to obtain pre-approval from the Company’s Clearance Director before pledging NIKE stock. Before granting approval of any pledge, the Clearance Director considers the size of the pledge relative to the individual’s other holdings, both direct and indirect, and NIKE’s shares outstanding; the risk of foreclosure given the nature of the associated transaction; protections against the appearance of insider trading, including prohibitions on sales during trading black-outs; and the ability to timely report sales on Form 4. +CHANGE-IN-CONTROL PROVISIONS +Neither PSP nor LTIP awards are subject to acceleration upon a change in control. Stock option, RSU, and restricted stock awards are subject only to "double-trigger" accelerated change-in-control vesting, meaning that vesting is accelerated only if there is a change in control of the Company, and within the following two years, either the acquiring entity fails to assume the awards or the employee’s employment is terminated by the acquirer without cause or by the employee for good reason. This double-trigger acceleration is intended to encourage executive retention through a period of uncertainty. The Compensation Committee believes that this approach will enhance shareholder value in the context of an acquisition and align executives' interests with those of investors. The effect of change-in-control transactions on stock-based awards is described further in the section below titled "Executive Compensation Tables—Potential Payments Upon Termination or Change-in-Control". +CLAWBACK +We maintain a clawback policy for the recoupment of incentive compensation. Under the clawback policy, an executive officer who is involved in wrongful conduct that results in a restatement of the Company’s financial statements must repay to the Company up to the full amount of any incentive compensation that was paid based on the financial statements that were subsequently restated. The clawback policy covers PSP awards, LTIP awards, stock-based awards (based on excess proceeds from pre-restatement sales of stock acquired pursuant to the stock-based awards), and profit sharing contributions to the Deferred Compensation Plan. In addition to the clawback policy, the PSP, LTIP and Stock Incentive Plan also specify that the Committee may apply further clawback requirements to awards through additional clawback policies or award agreement provisions, and that all awards are subject to clawback requirements under applicable law and regulation. +RISK ASSESSMENT +At the Compensation Committee’s request, in fiscal 2020, management prepared and discussed with the committee an assessment of potential risk associated with the Company’s compensation programs, including any risk that would be reasonably likely to have a material adverse effect on the Company. This included an assessment of risks associated with each element of employee compensation. The assessment considered certain design features of the compensation program that reduce the likelihood of excessive risk taking, such as reasonable performance targets, capped incentive compensation payouts, a balance of short- and long-term incentives, a balance of cash- and stock-based incentives, vesting of awards over time, and the potential for clawback of incentive compensation. In addition, for stock-based compensation, we have adopted stock ownership guidelines, provided for limited accelerated vesting of stock options (and no accelerated vesting of RSUs) upon termination of employment, and provided for only double-trigger accelerated vesting of stock-based awards upon a change in control. +TAX DEDUCTIBILITY OF EXECUTIVE COMPENSATION +Section 162(m) of the Internal Revenue Code generally places a $1 million limit on the amount of compensation a company can deduct in any one year for "covered employees". Prior to the adoption of the Tax Cuts and Jobs Act (the "TCJA") in 2017, the Internal Revenue Code provided an exception to this limit for compensation constituting "qualified performance-based compensation". Except with respect to certain arrangements in place on November 2, 2017, the TCJA repealed this exclusion, and therefore compensation paid to "covered employees" in excess of $1 million generally will no longer be deductible. Prior to the TCJA, the Compensation Committee considered, among other things, the impact of the exclusion for "qualified performance- +2020 PROXY STATEMENT 41 +based compensation" when developing and implementing our executive compensation program. Annual cash incentive awards under our PSP, long-term cash incentive awards under our LTIP, and stock option awards under our Stock Incentive Plan were designed in a manner intended to meet the requirements under the exclusion, although we could not guarantee such treatment given the complex nature of the performance-based compensation requirements. +While the Compensation Committee seeks to preserve tax deductibility in developing and implementing our compensation program, the committee also believes that it is important to maintain flexibility in administering compensation programs in a manner designed to promote varying corporate goals. Accordingly, we have not adopted a policy that all compensation must qualify as deductible for tax purposes and retain the ability to provide compensation that may not qualify as deductible under Section 162(m). +COMPENSATION COMMITTEE REPORT +The Compensation Committee of the Board of Directors has reviewed and discussed with management the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K. Based on the review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement. +Members of the Compensation Committee: +• +Timothy D. Cook, Chair +• +Cathleen A. Benko +• +Elizabeth J. Comstock +42 NIKE, INC. +EXECUTIVE COMPENSATION TABLES +SUMMARY COMPENSATION TABLE +The following table sets forth information concerning compensation for fiscal 2018-2020 paid to or earned by our Named Executive Officers. +NAME AND PRINCIPAL +POSITION +YEAR +SALARY +($) +BONUS (1) +($) +STOCK +AWARDS (2) +($) +OPTION +AWARDS (3) +($) +NON-EQUITY +INCENTIVE PLAN +COMPENSATION (4) +($) +ALL OTHER +COMPENSATION (5) +($) +TOTAL +($) +John J. Donahoe II (6) +President and Chief Executive Officer +2020 +548,077 +6,750,000 +21,275,073 +23,241,515 +— +1,685,315 +53,499,980 +Mark G. Parker +Executive Chairman and Former President and Chief Executive Officer +2020 +1,700,000 +6,025,000 +4,000,067 +5,540,572 +— +930,634 +18,196,273 +2019 +1,676,923 +— +5,000,012 +3,052,000 +4,091,695 +147,392 +13,968,022 +2018 +1,550,000 +1,295,000 +3,500,020 +1,618,650 +1,295,000 +208,790 +9,467,460 +Matthew Friend (6) +Executive Vice President and Chief Financial Officer +2020 +659,092 +1,576,800 +400,057 +661,621 +— +14,000 +3,311,570 +Andrew Campion +Chief Operating Officer and Former Chief Financial Officer +2020 +1,092,308 +2,070,000 +1,160,023 +1,606,771 +— +9,375 +5,938,477 +2019 +1,038,461 +— +1,150,073 +1,395,200 +1,266,925 +32,049 +4,882,708 +2018 +963,462 +277,500 +7,000,040 +735,750 +277,500 +63,514 +9,317,766 +Hilary K. Krane +Executive Vice President, Chief Administrative Officer & General Counsel +2020 +1,092,308 +2,070,000 +1,160,023 +1,606,771 +— +14,000 +5,943,102 +2019 +1,026,923 +— +1,150,073 +1,395,200 +1,252,850 +31,846 +4,856,892 +2018 +892,308 +185,000 +4,850,042 +686,700 +185,000 +58,524 +6,857,574 +Monique Matheson (6) +Executive Vice President, Global Human Resources +2020 +1,073,077 +2,070,000 +1,160,023 +1,606,771 +— +14,000 +5,923,871 +John F. Slusher +Executive Vice President, Global Sports Marketing +2020 +1,073,077 +2,070,000 +1,160,023 +1,606,771 +— +14,000 +5,923,871 +2019 +921,154 +— +850,071 +1,308,000 +1,123,810 +33,862 +4,236,897 +2018 +900,000 +185,000 +4,750,044 +686,700 +185,000 +59,715 +6,766,459 +Elliott J. Hill (6) +Former President, Consumer & Marketplace +2020 +1,192,308 +2,190,000 +1,300,080 +1,800,684 +— +33,506 +6,516,578 +2019 +1,119,738 +— +1,250,022 +1,569,600 +1,366,085 +69,968 +5,375,413 +Eric D. Sprunk +Former Chief Operating Officer +2020 +1,192,308 +2,190,000 +1,300,080 +1,800,684 +— +14,000 +6,497,072 +2019 +1,142,308 +— +1,250,022 +1,569,600 +1,393,620 +33,879 +5,389,429 +2018 +1,092,308 +277,500 +7,000,040 +833,850 +277,500 +80,560 +9,561,758 +(1) +For fiscal 2020, represents discretionary cash bonuses awarded to executive officers to approximate the short- and long-term cash incentive payouts received by non-executive officers. Due to the impact of COVID-19 on our incentive plans, the executive officers received 0% payouts under each of the fiscal 2020 PSP and fiscal 2018-2020 LTIP, while non-executive officers received higher payouts under the fiscal 2020 annual bonus plan and fiscal 2018-2020 LTIP to approximate Company performance during the pre-pandemic portion of the applicable performance period. For fiscal 2018, represents discretionary cash bonuses awarded to certain executive officers to normalize their compensation to that of non-executive officers. The non-executive officers received a higher payout under the fiscal 2016-2018 LTIP because their payout was able to be adjusted for the impact of the Tax Cuts and Jobs Act. +(2) +Represents the grant date fair value of restricted stock and RSU awards granted in the applicable fiscal year computed in accordance with accounting guidance applicable to stock-based compensation. The grant date fair value is based on the closing market price of our Class B Stock on the grant date. +(3) +Represents the grant date fair value of options granted in the applicable fiscal year computed in accordance with accounting guidance applicable to stock-based compensation. The grant date fair value of the options was estimated using the Black-Scholes option pricing model. The assumptions made in determining the grant date fair values of options under applicable accounting guidance are disclosed in Note 11 of Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended May 31, 2020. +(4) +Non-Equity Incentive Plan Compensation consists of the following: +2020 PROXY STATEMENT 43 +NAME +FISCAL YEAR +ANNUAL INCENTIVE +COMPENSATION (a) +($) +LONG-TERM INCENTIVE +COMPENSATION (b) +($) +TOTAL +($) +John J. Donahoe II +2020 +— +— +— +Mark. G Parker +2020 +— +— +— +2019 +4,091,695 +— +4,091,695 +2018 +— +1,295,000 +1,295,000 +Matthew Friend +2020 +— +— +— +Andrew Campion +2020 +— +— +— +2019 +1,266,925 +— +1,266,925 +2018 +— +277,500 +277,500 +Hilary K. Krane +2020 +— +— +— +2019 +1,252,850 +— +1,252,850 +2018 +— +185,000 +185,000 +Monique Matheson +2020 +— +— +— +John F. Slusher +2020 +— +— +— +2019 +1,123,810 +— +1,123,810 +2018 +— +185,000 +185,000 +Elliott J. Hill +2020 +— +— +— +2019 +1,366,085 +— +1,366,085 +Eric D. Sprunk +2020 +— +— +— +2019 +1,393,620 +— +1,393,620 +2018 +— +277,500 +277,500 +(a) +Amounts shown were earned for performance in the applicable fiscal year under our Executive Performance Sharing Plan. +(b) +Amounts shown were earned for performance during the three-year period ending with the applicable fiscal year under our Long-Term Incentive Plan. +(5) +For fiscal 2020, includes Company matching contributions to the 401(k) Plan in the amount of $9,375 for Mr. Campion and $14,000 for each of the other Named Executive Officers. For Mr. Donahoe, includes $63,695 in director fees for his service on our Board as a non-employee director through January 12, 2020. The amount for Mr. Donahoe also includes $1,500,000 in charitable matching contributions made by the Company, as well as relocation-related expenses, reimbursement for legal fees and expenses in connection with his offer letter, a security assessment, and Company-related merchandise. For Mr. Parker, includes $10,000 in compensation in recognition of 40 years of service with the Company, and associated tax reimbursement in the amount of $9,399, pursuant to our Valued Service Award Program, under which all employees receive cash awards and associated tax reimbursements in recognition of their significant service anniversaries with the Company. The amount for Mr. Parker also includes $800,000 in charitable matching contributions made by the Company, as well as daily residential security, including monitoring and patrols provided by the Company, and a site-visit gift. The amounts for Mr. Donahoe and Mr. Parker also include $23,515 and $78,618, respectively, in aggregate incremental cost to the Company for personal use of the Company's aircraft and actual cost of chartered flights for travel to and from the board and shareholder meetings of outside companies for which Mr. Donahoe and Mr. Parker serve as directors. The aggregate incremental cost is determined based on the variable operating cost to the Company, including the cost of fuel, maintenance, crew travel expenses, landing fees, parking fees, in-flight food and beverage, and other smaller variable costs associated with each flight. These amounts exclude the aggregate incremental cost to the Company for personal use of the Company’s aircraft for which Mr. Donahoe or Mr. Parker, as applicable, reimbursed the Company in accordance with a time sharing agreement and as allowed under Federal Aviation Regulation 91.501(c) and (d). The amount for Mr. Hill includes financial advisory services, spousal travel to and attendance at Company-sponsored functions, Company-related merchandise, a dinner, and a project-completion gift. +(6) +Because Mr. Donahoe, Mr. Friend, and Ms. Matheson were only Named Executive Officers for fiscal 2020, and Mr. Hill was only a Named Executive Officer for fiscal 2020 and fiscal 2019, no disclosure is included as to Mr. Donahoe, Mr. Friend, and Ms. Matheson for fiscal 2019 or fiscal 2018, or as to Mr. Hill for fiscal 2018. +44 NIKE, INC. +GRANTS OF PLAN-BASED AWARDS IN FISCAL 2020 +The following table sets forth information concerning the performance-based annual cash incentive opportunities, performance-based long-term cash incentive opportunities, restricted stock and RSU awards, and stock options granted to the Named Executive Officers in fiscal 2020. +ESTIMATED FUTURE PAYOUTS UNDER +NON-EQUITY INCENTIVE PLAN AWARDS +ESTIMATED FUTURE PAYOUTS +UNDER EQUITY +INCENTIVE PLAN AWARDS +ALL OTHER +STOCK AWARDS: +NUMBER OF +SHARES OF +STOCK OR +UNITS (4) +ALL OTHER OPTION +AWARDS: NUMBER +OF SECURITIES +UNDERLYING +OPTIONS (5) +EXERCISE +OR BASE +PRICE OF +OPTION +AWARDS +GRANT DATE +FAIR VALUE +OF STOCK +AND OPTION +AWARDS (6) +THRESHOLD +TARGET +MAXIMUM +TARGET +NAME +GRANT DATE +($) +($) +($) +(#) +(#) +(#) +($/SH) +($) +John J. Donahoe II +1/13/2020 +1,500,000 +(1) +3,000,000 +(1) +4,500,000 +(1) +1/13/2020 +2,500,000 +(2) +5,000,000 +(2) +10,000,000 +(2) +9/19/2019 +1,996 +175,049 +1/13/2020 +35,239 +3,600,016 +1/13/2020 +171,300 +17,500,008 +1/13/2020 +236,843 +102.16 +5,480,547 +1/13/2020 +767,544 +(3) +102.16 +17,760,968 +Mark G. Parker +6/19/2019 +1,700,000 +(1) +3,400,000 +(1) +5,100,000 +(1) +6/19/2019 +2,500,000 +(2) +5,000,000 +(2) +10,000,000 +(2) +8/1/2019 +48,124 +4,000,067 +8/1/2019 +302,268 +83.12 +5,540,572 +Matthew Friend +6/19/2019 +525,000 +(1) +1,050,000 +(1) +1,575,000 +(1) +6/19/2019 +500,000 +(2) +1,000,000 +(2) +2,000,000 +(2) +8/1/2019 +4,813 +400,057 +8/1/2019 +36,095 +83.12 +661,621 +Andrew Campion +6/19/2019 +660,000 +(1) +1,320,000 +(1) +1,980,000 +(1) +6/19/2019 +500,000 +(2) +1,000,000 +(2) +2,000,000 +(2) +8/1/2019 +13,956 +1,160,023 +8/1/2019 +87,658 +83.12 +1,606,771 +Hilary K. Krane +6/19/2019 +660,000 +(1) +1,320,000 +(1) +1,980,000 +(1) +6/19/2019 +500,000 +(2) +1,000,000 +(2) +2,000,000 +(2) +8/1/2019 +13,956 +1,160,023 +8/1/2019 +87,658 +83.12 +1,606,771 +Monique Matheson +6/19/2019 +660,000 +(1) +1,320,000 +(1) +1,980,000 +(1) +6/19/2019 +500,000 +(2) +1,000,000 +(2) +2,000,000 +(2) +8/1/2019 +13,956 +1,160,023 +8/1/2019 +87,658 +83.12 +1,606,771 +John F. Slusher +6/19/2019 +660,000 +(1) +1,320,000 +(1) +1,980,000 +(1) +6/19/2019 +500,000 +(2) +1,000,000 +(2) +2,000,000 +(2) +8/1/2019 +13,956 +1,160,023 +8/1/2019 +87,658 +83.12 +1,606,771 +Elliott J. Hill +6/19/2019 +720,000 +(1) +1,440,000 +(1) +2,160,000 +(1) +6/19/2019 +500,000 +(2) +1,000,000 +(2) +2,000,000 +(2) +8/1/2019 +15,641 +1,300,080 +8/1/2019 +98,237 +83.12 +1,800,684 +Eric D. Sprunk +6/19/2019 +720,000 +(1) +1,440,000 +(1) +2,160,000 +(1) +6/19/2019 +500,000 +(2) +1,000,000 +(2) +2,000,000 +(2) +8/1/2019 +15,641 +1,300,080 +8/1/2019 +98,237 +83.12 +1,800,684 +(1) +These amounts represent the potential performance-based annual cash incentive awards payable for performance during fiscal 2020 under our PSP. Under this plan, the Compensation Committee approved target awards for fiscal 2020 based on a percentage of the executive’s base salary paid during fiscal 2020 as follows: Mr. Donahoe, 200%; Mr. Parker, 200%; Mr. Friend, 120%; Mr. Campion, 120%; Ms. Krane, 120%; Ms. Matheson, 120%; Mr. Slusher 120%; Mr. Hill, 120%; Mr. Sprunk, 120%. The Compensation Committee also established a series of performance targets based on our Adjusted +2020 PROXY STATEMENT 45 +EBIT for fiscal 2020 (earnings before interest and taxes, excluding the effect of acquisitions, divestitures, accounting changes, restructurings, unanticipated exchange rate fluctuations and other extraordinary, unusual, or infrequently occurring items) corresponding to award payouts ranging from 50% to 150% of the target awards. The fiscal 2020 Adjusted EBIT required to earn the 50% threshold payout level, 100% target payout level, or 150% maximum payout level was $4,736 million, $5,263 million, or $5,789 million, respectively. Participants receive a payout at the percentage level at which the performance target is met, subject to the Compensation Committee’s discretion to reduce or eliminate any award based on Company or individual performance. Actual award payouts earned in fiscal 2020 and paid in fiscal 2021 are shown in footnote 4 to the Non-Equity Incentive Plan Compensation column in the Summary Compensation Table. +(2) +These amounts represent the potential performance-based long-term cash incentive awards payable for performance during the three-year period consisting of fiscal 2020-2022 under our LTIP. Under this plan, the Compensation Committee approved target awards for the performance period and also established a series of performance targets and corresponding award payouts, which were modified by the Compensation Committee in June 2020 in response to the COVID-19 pandemic. The participants will receive a payout based on the Company's total shareholder return ("Absolute TSR") for fiscal 2020-2022 relative to total shareholder return over the same period for the other companies in the S&P 500 ("Relative TSR"). This payout is subject to a cap of 100% of the target award if Absolute TSR for the performance period is negative. To earn the 25% threshold payout level, 100% target payout level, or 200% maximum payout level, the Company's fiscal 2020-2022 Relative TSR must be at the 25th percentile, 55th percentile, or 85th percentile, respectively. Fiscal 2020-2022 LTIP awards will be paid in August 2022, provided that the participant is employed by the Company on the last day of the performance period. +(3) +Represents performance-based stock options granted under our Stock Incentive Plan which vest based on (a) a 20% increase in the value of our Class B Stock from the value on the grant date (based on a 30-trading day average closing price divided by the closing price of a share on the grant date) and (b) continued employment, generally for three years from the grant date. The award has a maximum term of ten years, subject to earlier termination in the event of termination of employment. +(4) +For Mr. Donahoe, the amount represents grants under our Stock Incentive Plan of (a) restricted stock granted in connection with his service as a non-employee director, which vests on the first anniversary of the grant date (or the date of the next annual meeting of shareholders, if earlier) and (b) RSUs which vest in three equal installments on the first three anniversaries of the grant date. For each other Named Executive Officer, the amount represents grants of RSUs under our Stock Incentive Plan which vest in three equal installments on the first three anniversaries of the grant date. Vesting of RSUs will be accelerated in certain circumstances as described in the section below titled "Potential Payments Upon Termination or Change-in-Control". Dividends are payable on RSUs only upon vesting. +(5) +Amounts reported in this column represent stock options granted under our Stock Incentive Plan which become exercisable in four equal installments on the first four anniversaries of the grant date. Options may otherwise become fully exercisable in certain circumstances as described in the section below titled "Potential Payments Upon Termination or Change-in-Control". Each option has a maximum term of 10 years, subject to earlier termination in the event of the optionee’s termination of employment. +(6) +For stock awards, represents the value of restricted stock and RSUs granted based on the closing market price of our Class B Stock on the grant date. For option awards, represents the grant date fair value of stock options granted based on a value of $18.33 per share for the August 1, 2019 grants and $23.14 per share for the January 13, 2020 grants, calculated using the Black-Scholes option pricing model. These are the same values for these equity awards used under accounting guidance applicable to stock-based compensation. The assumptions made in determining option values are disclosed in Note 11 of Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended May 31, 2020. +OUTSTANDING EQUITY AWARDS AT MAY 31, 2020 +The following table sets forth information concerning outstanding stock options and unvested restricted stock and RSUs held by the Named Executive Officers at May 31, 2020. +OPTION AWARDS +STOCK AWARDS +NAME +NUMBER OF +SECURITIES +UNDERLYING +UNEXERCISED +OPTIONS +EXERCISABLE +(#) +NUMBER OF +SECURITIES +UNDERLYING +UNEXERCISABLE +OPTIONS +(#) (1) +EQUITY +INCENTIVE PLAN: +NUMBER OF +SECURITIES +UNDERLYING +UNEXERCISED +UNEARNED +OPTIONS +(#) +OPTION +EXERCISE +PRICE +($) +OPTION +EXPIRATION +DATE +NUMBER OF +SHARES OR +UNITS OF +STOCK THAT +HAVE NOT +VESTED +(#) +MARKET VALUE OF +SHARES OR UNITS OF +STOCK THAT HAVE +NOT VESTED +($) +John J. Donahoe II +— +236,843 +(2) +102.1600 +1/13/2030 +— +— +767,544 +(3) +102.1600 +1/13/2030 +208,535 +(8) +20,557,380 +Mark G. Parker +165,000 +— +17.2400 +7/16/2020 +660,000 +— +22.9250 +7/15/2021 +660,000 +— +23.2700 +7/20/2022 +330,000 +— +31.6750 +7/19/2023 +330,000 +— +38.7600 +7/18/2024 +330,000 +— +56.4000 +7/17/2025 +123,750 +41,250 +(4) +57.8700 +7/15/2026 +82,500 +82,500 +(5) +59.1000 +7/20/2027 +43,750 +131,250 +(6) +77.5400 +8/1/2028 +— +302,268 +(7) +83.1200 +8/1/2029 +333,034 +(9) +32,830,492 +Matthew Friend +34,700 +— +31.6750 +7/19/2023 +41,000 +— +38.7600 +7/18/2024 +43,000 +— +56.4000 +7/17/2025 +17,250 +5,750 +(4) +57.8700 +7/15/2026 +46 NIKE, INC. +OPTION AWARDS +STOCK AWARDS +NAME +NUMBER OF +SECURITIES +UNDERLYING +UNEXERCISED +OPTIONS +EXERCISABLE +(#) +NUMBER OF +SECURITIES +UNDERLYING +UNEXERCISABLE +OPTIONS +(#) (1) +EQUITY +INCENTIVE PLAN: +NUMBER OF +SECURITIES +UNDERLYING +UNEXERCISED +UNEARNED +OPTIONS +(#) +OPTION +EXERCISE +PRICE +($) +OPTION +EXPIRATION +DATE +NUMBER OF +SHARES OR +UNITS OF +STOCK THAT +HAVE NOT +VESTED +(#) +MARKET VALUE OF +SHARES OR UNITS OF +STOCK THAT HAVE +NOT VESTED +($) +15,000 +15,000 +(5) +59.1000 +7/20/2027 +8,750 +26,250 +(6) +77.5400 +8/1/2028 +— +36,095 +(7) +83.1200 +8/1/2029 +24,011 +(10) +2,367,004 +Andrew Campion +80,000 +— +38.7600 +7/18/2024 +120,000 +— +56.4000 +7/17/2025 +56,250 +18,750 +(4) +57.8700 +7/15/2026 +37,500 +37,500 +(5) +59.1000 +7/20/2027 +20,000 +60,000 +(6) +77.5400 +8/1/2028 +— +87,658 +(7) +83.1200 +8/1/2029 +131,007 +(11) +12,914,670 +Hilary K. Krane +38,500 +— +31.6750 +7/19/2023 +110,000 +— +38.7600 +7/18/2024 +130,000 +— +56.4000 +7/17/2025 +52,500 +17,500 +(4) +57.8700 +7/15/2026 +35,000 +35,000 +(5) +59.1000 +7/20/2027 +20,000 +60,000 +(6) +77.5400 +8/1/2028 +— +87,658 +(7) +83.1200 +8/1/2029 +96,320 +(12) +9,495,226 +Monique Matheson +16,500 +— +23.2700 +7/20/2022 +22,500 +— +31.6750 +7/19/2023 +38,000 +— +38.7600 +7/18/2024 +40,000 +— +56.4000 +7/17/2025 +15,000 +5,000 +(4) +57.8700 +7/15/2026 +20,000 +20,000 +(5) +59.1000 +7/20/2027 +18,750 +56,250 +(6) +77.5400 +8/1/2028 +— +87,658 +(7) +83.1200 +8/1/2029 +80,218 +(13) +7,907,890 +John F. Slusher +115,000 +— +38.7600 +7/18/2024 +120,000 +— +56.4000 +7/17/2025 +48,750 +16,250 +(4) +57.8700 +7/15/2026 +35,000 +35,000 +(5) +59.1000 +7/20/2027 +18,750 +56,250 +(6) +77.5400 +8/1/2028 +— +87,658 +(7) +83.1200 +8/1/2029 +93,176 +(14) +9,185,290 +Elliott J. Hill +90,000 +— +56.4000 +7/17/2025 +37,500 +12,500 +(4) +57.8700 +7/15/2026 +25,000 +25,000 +(5) +59.1000 +7/20/2027 +22,500 +67,500 +(6) +77.5400 +8/1/2028 +— +98,237 +(7) +83.1200 +8/1/2029 +118,426 +(15) +11,674,435 +Eric D. Sprunk +160,000 +— +56.4000 +7/17/2025 +63,750 +21,250 +(4) +57.8700 +7/15/2026 +42,500 +42,500 +(5) +59.1000 +7/20/2027 +22,500 +67,500 +(6) +77.5400 +8/1/2028 +— +98,237 +(7) +83.1200 +8/1/2029 +133,551 +(16) +13,165,458 +(1) +Stock options generally become exercisable in four equal installments on each of the first four anniversaries of the grant date. +(2) +25% of these options will vest on January 13, 2021, 25% will vest on January 13, 2022, 25% will vest on January 13, 2023, and 25% will vest on January 13, 2024. +(3) +Subject to satisfaction of the performance vesting condition based on a 20% increase in the value of our Class B Stock from the value on the grant date (based on a 30-trading day average closing price divided by the closing price of a share on the grant date), 33.3% of these options will vest on January 13, 2021, 33.3% will vest on January 13, 2022, and 33.3% will vest on January 13, 2023. If the performance vesting condition has not been satisfied as of a tranche's vesting date, that tranche will instead vest upon satisfaction of the performance vesting condition. +(4) +100% of these options vested on July 15, 2020. +2020 PROXY STATEMENT 47 +(5) +50% of these options vested on July 20, 2020 and 50% will vest on July 20, 2021. +(6) +33.3% of these options will vest on August 1, 2020, 33.3% will vest on August 1, 2021, and 33.3% will vest on August 1, 2022. +(7) +25% of these options will vest on August 1, 2020, 25% will vest on August 1, 2021, 25% will vest on August 1, 2022, and 25% will vest on August 1, 2023. +(8) +1,996 of these restricted shares will vest on September 17, 2020. 68,848 of these RSUs will vest on January 13, 2021, 68,846 of these RSUs will vest on January 13, 2022, and 68,845 of these RSUs will vest on January 13, 2023. +(9) +19,740 of these restricted shares vested on July 20, 2020. An additional 21,494 of these RSUs will vest on August 1, 2020 and 21,494 of these restricted shares will vest on August 1, 2021. 16,042 of these RSUs will vest on August 1, 2020, and 16,041 of these RSUs will vest on August 1, 2021, and 16,041 of these RSUs will vest on August 1, 2022. An additional 222,182 of these RSUs vested on June 30, 2020. Includes 0 RSUs in respect of the performance-based RSUs that were earned at 0% based on fiscal 2016-2020 revenue growth and EPS growth and would have vested on June 30, 2020. +(10) +1,128 of these restricted shares vested on July 20, 2020. 2,354 of these RSUs will vest on November 15, 2020. 13,352 of these RSUs will vest on June 10, 2021. 1,182 of these RSUs will vest on August 1, 2020, and 1,182 of these RSUs will vest on August 1, 2021. 1,605 of these RSUs will vest on August 1, 2020, 1,604 of these RSUs will vest on August 1, 2021, and 1,604 of these RSUs will vest on August 1, 2022. 15,070 of these RSUs will vest on June 1, 2021, 15,070 of these RSUs will vest on June 1, 2022, 15,069 of these RSUs will vest on June 1, 2023, and 15,069 of these RSUs will vest on June 1, 2024. +(11) +5,640 of these restricted shares vested on July 20, 2020. 101,523 of these RSUs vested on July 20, 2020. 4,944 of these RSUs will vest on August 1, 2020, and 4,944 of these RSUs will vest on August 1, 2021. 4,653 of these RSUs will vest on August 1, 2020, 4,652 of these RSUs will vest on August 1, 2021 and 4,651 of these RSUs will vest on August 1, 2022. 25,116 of these RSUs will vest on June 1, 2021, 25,116 of these shares will vest on June 1, 2022, 25,116 of these RSUs will vest on June 1, 2023, and 25,115 of these RSUs will vest on June 1, 2024. +(12) +4,794 of these restricted shares vested on July 20, 2020. 67,682 of these RSUs vested on July, 20, 2020. 4,944 of these RSUs will vest on August 1, 2020, and 4,944 of these RSUs will vest on August 1, 2021. 4,653 of these RSUs will vest on August 1, 2020, 4,652 of these RSUs will vest on August 1, 2021 and 4,651 of these RSUs will vest on August 1, 2022. An additional 40,185 of these RSUs will vest on June 1, 2023. +(13) +3,243 of these restricted shares vested on July 20, 2020. 3,654 of these RSUs will vest on August 1, 2020, and 3,654 of these RSUs will vest on August 1, 2021. 4,653 of these RSUs will vest on August 1, 2020, 4,652 of these RSUs will vest on August 1, 2021 and 4,651 of these RSUs will vest on August 1, 2022. An additional 55,711 of these RSUs will vest on May 31, 2021, and 40,185 will vest on June 1, 2023. +(14) +4,230 of these restricted shares vested on July 20, 2020. 67,682 of these RSUs vested on July, 20, 2020. 3,654 of these RSUs will vest on August 1, 2020, and 3,654 of these RSUs will vest on August 1, 2021. 4,653 of these RSUs will vest on August 1, 2020, 4,652 of these RSUs will vest on August 1, 2021 and 4,651 of these RSUs will vest on August 1, 2022. An additional 40,185 of these RSUs will vest on June 1, 2023. +(15) +3,384 of these restricted shares vested on July 20, 2020. 88,654 of these RSUs vested on July, 17, 2020. 5,374 of these RSUs will vest on August 1, 2020, and 5,373 of these RSUs will vest on August 1, 2021. 5,214 of these RSUs will vest on August 1, 2020, 5,214 of these RSUs will vest on August 1, 2021, and 5,213 of these RSUs will vest on August 1, 2022. +(16) +5,640 of these restricted shares vested on July 20, 2020. 101,523 of these RSUs vested on July, 17, 2020. 5,374 of these RSUs will vest on August 1, 2020, and 5,373 of these RSUs will vest on August 1, 2021. 5,214 of these RSUs will vest on August 1, 2020, 5,214 of these RSUs will vest on August 1, 2021, and 5,213 of these RSUs will vest on August 1, 2022. +OPTION EXERCISES AND STOCK VESTED DURING FISCAL 2020 +The following table sets forth information concerning stock option exercises and vesting of restricted stock during fiscal 2020 for each of the Named Executive Officers on an aggregated basis. +OPTION AWARDS +STOCK AWARDS +NAME +NUMBER OF +SHARES ACQUIRED +ON EXERCISE +(#) +VALUE +REALIZED +ON EXERCISE +($) +NUMBER OF +SHARES ACQUIRED +ON VESTING +(#) +VALUE +REALIZED +ON VESTING +($) +John J. Donahoe II +— +— +2,050 +175,009 +Mark G. Parker +495,000 +37,335,095 +61,396 +5,287,715 +Matthew Friend +30,000 +2,119,014 +5,386 +478,840 +Andrew Campion +180,000 +12,227,100 +14,904 +1,282,370 +Hilary K. Krane +71,500 +4,454,945 +12,906 +1,106,558 +Monique Matheson +58,500 +4,350,961 +7,762 +659,915 +John F. Slusher +220,000 +14,472,776 +11,053 +950,929 +Elliott J. Hill +214,100 +13,429,041 +11,638 +995,312 +Eric D. Sprunk +120,000 +7,359,396 +15,334 +1,318,111 +48 NIKE, INC. +EQUITY COMPENSATION PLAN INFORMATION +The following table summarizes information regarding outstanding options and shares available for future issuance under equity compensation plans approved by shareholders and equity compensation plans that were not approved by shareholders as of May 31, 2020. The table does not reflect issuances made during fiscal 2021. +NUMBER OF SECURITIES +TO BE ISSUED UPON +EXERCISE OF OUTSTANDING +OPTIONS, WARRANTS AND +RIGHTS +WEIGHTED- +AVERAGE EXERCISE +PRICE OF OUTSTANDING +OPTIONS, WARRANTS +AND RIGHTS (1) +NUMBER OF SECURITIES +REMAINING AVAILABLE FOR +FUTURE ISSUANCE UNDER +EQUITY COMPENSATION +PLANS (EXCLUDING SECURITIES +REFLECTED IN COLUMN (a)) +PLAN CATEGORY +(a) +(b) +(c) +Equity compensation plans approved by shareholders +94,763,732 +(2) +$60.9754 +53,814,523 +(3) +Equity compensation plans not approved by shareholders +— +— +5,431,497 +(4) +Total +94,763,732 +$60.9754 +59,246,020 +(1) +Weighted-average exercise prices do not reflect the shares that will be used upon the payment of outstanding awards of RSUs. +(2) +Includes 94,763,732 shares subject to awards of options, RSUs, and stock appreciation rights outstanding under the Stock Incentive Plan (including the maximum number of performance-based RSUs granted to Mr. Parker). +(3) +Includes 46,441,872 shares available for future issuance under the Stock Incentive Plan and 7,372,651 shares available for future issuance under the Employee Stock Purchase Plan. +(4) +Includes 5,431,497 shares available for future issuance under the Foreign Subsidiary Employee Stock Purchase Plan, pursuant to which shares are offered and sold to employees of selected non-U.S. subsidiaries of the Company on substantially the same terms as those offered to U.S. employees under the shareholder-approved Employee Stock Purchase Plan as described above under "Compensation of our Named Executive Officers—Other Compensation—Employee Stock Purchase Plan". +NON-QUALIFIED DEFERRED COMPENSATION IN FISCAL 2020 +NAME +PLAN +NAME +EXECUTIVE +CONTRIBUTIONS +IN FISCAL 2020 (1) +NIKE CONTRIBUTIONS +IN FISCAL 2020 (1) +AGGREGATE EARNINGS +IN FISCAL 2020 +AGGREGATE +WITHDRAWALS/ +DISTRIBUTIONS IN +FISCAL 2020 +AGGREGATE +BALANCE AT +MAY, 31 2020 (1) +John J. Donahoe II +DCP +$ +63,695 +$ +— +$ +35,211 +— +$ +625,733 +Mark G. Parker +DCP +$ +1,243,339 +$ +24,704 +$ +516,549 +— +$ +20,852,430 +Matthew Friend +DCP +$ +— +$ +9,503 +$ +35,400 +— +$ +461,523 +Andrew Campion +DCP +$ +273,077 +$ +13,453 +$ +152,737 +— +$ +2,187,249 +Hilary K. Krane +DCP +$ +469,032 +$ +13,250 +$ +459,082 +— +$ +5,806,035 +Monique Matheson +DCP +$ +606,098 +$ +11,319 +$ +208,050 +— +$ +2,362,053 +John F. Slusher +DCP +$ +1,111,127 +$ +11,386 +$ +926,048 +— +$ +12,757,055 +Elliott J. Hill +DCP +$ +380,769 +$ +25,764 +$ +417,213 +— +$ +8,690,241 +Eric D. Sprunk +DCP +$ +— +$ +15,283 +$ +975,107 +— +$ +13,479,957 +(1) +All amounts reported in the Executive Contributions column are also included in amounts reported in the Summary Compensation Table. The amounts reported in the NIKE Contributions column represent profit sharing contributions made by us in early fiscal 2020 based on fiscal 2019 results; these amounts are also included in amounts reported for fiscal 2019 in the All Other Compensation column of the Summary Compensation Table. Of the amounts reported in the Aggregate Balance column, the following amounts have been reported in the Summary Compensation Tables in this proxy statement or in prior year proxy statements: Mr. Donahoe, $63,695; Mr. Parker, $17,824,275; Mr. Friend, $9,503; Mr. Campion, $1,297,355; Ms. Krane, $1,244,848; Ms. Matheson, $617,417; Mr. Slusher, $2,794,490; Mr. Hill, $447,511; and Mr. Sprunk, $5,085,945. +NON-QUALIFIED DEFERRED COMPENSATION PLANS +The Named Executive Officers are eligible to participate in our Deferred Compensation Plan (the "DCP"). Participants in the DCP may elect in advance to defer up to 100 percent of their annual base salary, bonus, and long-term incentive payments. +Generally, we make annual profit sharing contributions to defined contribution retirement plans. The contributions are allocated among eligible employees based on a percentage of their total salary and bonus for the year. To the fullest extent permitted under Internal Revenue Code limitations, these contributions are made to employees’ accounts under our qualified 401(k) Savings and Profit Sharing Plan. Contributions based on salary and bonus in excess of the tax law limit ($280,000 for fiscal 2020) are made as NIKE contributions under the DCP. +2020 PROXY STATEMENT 49 +Amounts deferred under the DCP are credited to a participant’s account under the DCP. Each participant may allocate his or her account among any combination of the investment funds available under the DCP. Participants’ accounts are adjusted to reflect the investment performance of the funds selected by the participants. Participants can change the allocation of their account balances daily. The funds available under the DCP consist of 18 mutual funds with a variety of investment objectives. The investment funds had annual returns in fiscal 2020 ranging from -14.51% to 21.62%. Amounts credited to participants’ accounts are invested by us in actual investments matching the investment options selected by the participants to ensure that we do not bear any investment risk related to participants’ investment choices. +The portion of a participant’s account attributable to elective deferrals, including investment returns, is fully vested at all times. The portion of a participant’s account attributable to NIKE contributions, including investment returns, is fully vested after the participant has been employed by us for five years. All of the Named Executive Officers, other than Mr. Donahoe, are fully vested in their NIKE contributions. +Each time they elect to defer compensation, participants make an election regarding distribution of the compensation deferred under the election (as adjusted to reflect investment performance). A participant may elect for distribution to be made in a lump sum at the beginning of a predetermined year while the participant is still employed or in service (but no sooner than the fourth year after the year in which the distribution election is submitted). Alternatively, a participant may elect for distribution to be made in a lump sum or in quarterly installments over five, ten or fifteen years after termination of employment or service. Participants have limited rights to change their distribution elections. Participants may make a hardship withdrawal under certain circumstances. Subject to certain limitations, a participant may also at any time request to withdraw amounts from his or her account balance that were vested as of December 31, 2004 (and any subsequent investment returns on such amount). If such request is approved, the participant may withdraw 90% of the amount requested, and the remaining 10% will be permanently forfeited. +POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE-IN-CONTROL +CHANGE-IN-CONTROL COMPENSATION — ACCELERATION OF EQUITY AWARDS +All unvested stock option, restricted stock, and RSU awards are subject to accelerated vesting upon the occurrence of two events (a "double-trigger"): there is a "change-in-control"; and the Named Executive Officer’s employment is terminated by us without "cause" or by the Named Executive Officer for "good reason", in each case between the change-in-control (or shareholder approval of the change-in-control, if earlier) and the second anniversary of the change-in-control. Stock options will be exercisable for four years following termination of employment, but not beyond each option’s original 10-year term. Accelerated vesting of stock options and RSUs will also occur if we are acquired and the acquiring company does not assume the outstanding options or RSUs. For purposes of our stock awards, "change-in-control" is generally defined to include: +• +the acquisition by any person of 50% or more of our outstanding Class A Stock or, if the Class A Stock no longer elects a majority of directors, the acquisition by any person of 30% or more of our total outstanding Common Stock, +• +the nomination (and subsequent election) in a two-year period of a majority of our directors by persons other than the incumbent directors, +• +a sale of all or substantially all of our assets, and +• +an acquisition of NIKE through a merger, consolidation or share exchange. +For purposes of our stock awards, "cause" generally includes willful and continued failure to substantially perform assigned duties and willful engagement in illegal conduct materially injurious to us, and "good reason" generally includes a material diminution in position or duties, a salary reduction or material reduction in other benefits, and a home office relocation of over 50 miles. +50 NIKE, INC. +The following table shows the estimated benefits that would have been received by the Named Executive Officers if double-trigger accelerated vesting had occurred on May 31, 2020, when the closing price of our Class B Stock was $98.58 per share. +NAME +STOCK AWARD +ACCELERATION (1) +STOCK OPTION +ACCELERATION (2) +TOTAL +John J. Donahoe II +$ +20,360,615 +$ +— +$ +20,360,615 +Mark G. Parker +$ +65,684,447 +$ +12,370,952 +$ +78,055,399 +Matthew Friend +$ +2,367,004 +$ +1,936,611 +$ +4,303,615 +Andrew Campion +$ +12,914,670 +$ +4,861,406 +$ +17,776,076 +Hilary K. Krane +$ +9,495,226 +$ +4,711,818 +$ +14,207,044 +Monique Matheson +$ +7,907,891 +$ +3,531,843 +$ +11,439,734 +John F. Slusher +$ +9,185,290 +$ +4,582,031 +$ +13,767,321 +Elliott J. Hill +$ +11,674,435 +$ +4,434,819 +$ +16,109,254 +Eric D. Sprunk +$ +13,165,458 +$ +5,481,932 +$ +18,647,390 +(1) +Information regarding unvested restricted stock and RSUs held by each Named Executive Officer is set forth in the Outstanding Equity Awards table above. The amounts in the table above represent the number of unvested restricted shares and RSUs (with Mr. Parker's Performance-Based RSUs calculated at 100% of target) multiplied by the closing price of our Class B Stock on May 31, 2020. +(2) +Information regarding outstanding unvested stock options held by each Named Executive Officer is set forth in the Outstanding Equity Awards table above. The amounts in the table above represent the aggregate value as of May 31, 2020 of those options using the excess of the per share closing price of our Class B Stock on May 31, 2020 over the per share exercise price, multiplied by the number of unvested option shares for each Named Executive Officer. +BENEFITS TRIGGERED ON CERTAIN EMPLOYMENT TERMINATIONS +STOCK OPTION ACCELERATION AND EXTENSION +As of May 31, 2020, each Named Executive Officer held stock options as listed in the Outstanding Equity Awards table above. Under the terms of Mr. Donahoe's performance-based stock options, upon his death, disability, or termination without "cause", unvested options are deemed to have satisfied any continued employment requirement and have two years following termination of employment to vest relative to the performance metric, and vested options are exercisable for four years following termination of employment, but not beyond the original 10-year term. Under the terms applicable to all other stock options held by the Named Executive Officers, upon the death or disability of the holder, all unvested options vest and are exercisable for four years following termination of employment, but not beyond each option’s original 10-year term. If death or disability (or with respect to Mr. Donahoe's performance-based stock options, a termination without "cause") of a Named Executive Officer had occurred on May 31, 2020, the aggregate value of those options would have been $0 for Mr. Donahoe, $12,370,952 for Mr. Parker, $1,936,611 for Mr. Friend, $4,861,406 for Mr. Campion, $4,711,818 for Ms. Krane, $3,531,843 for Ms. Matheson, $4,582,031 for Mr. Slusher, $4,434,819 for Mr. Hill, and $5,481,932 for Mr. Sprunk. +Under the terms of Mr. Donahoe's performance-based stock options, if he retires with at least 5 years of service (disregarding his years of service as a non-employee director prior to his employment), unvested options will be forfeited and vested options will be exercisable for four years following termination of employment, but not beyond the option’s original 10-year term. Under the terms applicable to all other stock options held by the Named Executive Officers, options that have been outstanding for at least one year will be subject to continued vesting if the holder retires after reaching age 55 with at least 5 years of service (or accelerated vesting if the holder retires after reaching age 60 with at least 5 years of service), and vested options will be exercisable for four years following termination of employment, but not beyond each option’s original 10-year term. If the Named Executive Officers had retired on May 31, 2020, the aggregate value of stock options would have been $0 for Mr. Donahoe, $7,697,888 for Mr. Parker, $3,356,625 for Ms. Krane, $2,916,075 for Mr. Hill, and $3,963,188 for Mr. Sprunk. Messrs. Friend, Campion, and Slusher and Ms. Matheson are not eligible for retirement vesting because these Named Executive Officers have not reached age 55. +STOCK AWARD ACCELERATION +As of May 31, 2020, each Named Executive Officer held unvested restricted stock and/or RSUs as set forth in the Outstanding Equity Awards table above. Under the terms of their award agreements, all unvested restricted shares and RSUs will immediately vest fully upon the death or disability of the holder, except that performance-based RSUs held by Mr. Parker would vest at the threshold amount. The value of the unvested restricted shares and RSUs held by each Named Executive Officer as of May 31, 2020 that would have become vested if death or disability had occurred on that date is as set forth in the "Stock Award Acceleration" column of the Change-in-Control Compensation — Acceleration of Equity Awards table above, except that the amount for Mr. Parker would be $49,257,470. +PAYMENTS UNDER NONCOMPETITION AGREEMENTS +We have a noncompetition agreement with Mr. Donahoe that extends for eighteen months following the termination of his employment with us and a noncompetition agreement with Mr. Parker that extends for two years following the termination of his +2020 PROXY STATEMENT 51 +employment with us. Under these agreements, if Mr. Donahoe's employment is terminated by us without "cause" (as defined in his agreement), or if Mr. Parker’s employment is terminated by us, we will make monthly payments to the executive during the noncompetition period in an amount equal to one-twelfth of his then current annual salary and target PSP award ("Annual NIKE Income"). The agreements provide further that if the executive voluntarily resigns, we will make monthly payments to him during the noncompetition period in an amount equal to one-twenty-fourth of his then current Annual NIKE Income. However, commencement of the above-described monthly payments will be delayed until after the six-month period following the executive's separation from service, and all payments that he would otherwise have received during that period will be paid in a lump sum promptly following the end of the period, together with interest at the prime rate. If employment is terminated without "cause" (as defined in the applicable agreement), the parties may mutually agree to waive the covenant not to compete, and if employment is terminated for "cause", we may unilaterally waive the covenant. If the covenant is waived, we will not be required to make the payments described above for the months as to which the waiver applies. Assuming that Mr. Donahoe's employment had been terminated on May 31, 2020 and the covenant was not waived, during the 18-month period ending November 30, 2021 we would have been required to pay Mr. Donahoe $375,000 per month if the termination was by us without "cause", or $187,500 per month if he had voluntarily resigned. Assuming that Mr. Parker's employment had been terminated on May 31, 2020 and the covenant was not waived, during the 24-month period ending May 31, 2022 we would have been required to pay Mr. Parker $425,000 per month if the termination was by us, or $212,500 per month if he had voluntarily resigned. +We have noncompetition agreements with each of the other Named Executive Officers on generally the same terms as Mr. Donahoe, except that the noncompetition period is one year, we may unilaterally waive the covenant in all cases (including a termination without "cause"), the monthly payments are one-twelfth or one-twenty-fourth of the executive's then current annual salary (instead of their Annual NIKE Income), and payments may commence on termination. Assuming that the employment of each of these Named Executive Officers had been terminated by us without "cause" on May 31, 2020 and the covenants were not waived, we would have been required to pay Mr. Friend $72,917, Mr. Campion $91,667, Ms. Krane $91,667, Ms. Matheson $91,667, Mr. Slusher $91,667, Mr. Hill $100,000, and Mr. Sprunk $100,000, each on a monthly basis for the 12-month period ending May 31, 2021. Assuming that each of these Named Executive Officers had voluntarily resigned on May 31, 2020 and the covenants were not waived, we would have been required to pay Mr. Friend $36,458, Mr. Campion $45,833, Ms. Krane $45,833, Ms. Matheson $45,833, Mr. Slusher $45,833, Mr. Hill $50,000, and Mr. Sprunk $50,000, each on a monthly basis for the 12-month period ending May 31, 2021. +CEO PAY RATIO +NIKE's pay and benefits are designed to be competitive and equitable, meet the diverse needs of our global teammates, and reinforce our values. We pay for performance and impact by linking incentive pay to company performance and seek to invest in positive experiences that have the greatest impact on the engagement and wellbeing of our employees. The executive compensation program is highly incentive-based and weighted towards long-term awards to emphasize long-term performance and support retention. Our executive compensation program is designed to attract and retain top-tier talent in a competitive market and to "pay for performance" in order to drive business results and maximize shareholder value. +For fiscal 2020, our last completed fiscal year: +• +The employee identified at the median of all NIKE employees (other than our CEO) was a retail store employee in the United States; +• +The annual total compensation of the median employee was $28,142; +• +The annual total compensation of our CEO, Mr. Donahoe, was $54,451,903; and +• +The estimated ratio of the annual total compensation of our CEO to the median annual total compensation of all other NIKE employees was 1935 to 1. +This pay ratio is a reasonable estimate calculated in a manner consistent with SEC rules based on the methodology described below. The SEC rules for identifying the median compensated employee and calculating the pay ratio allow companies to adopt a variety of methodologies, apply certain exclusions, and make reasonable estimates and assumptions that reflect their compensation practices. As such, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies may utilize different methodologies, exclusions, estimates, and assumptions in calculating their own pay ratios. +CEO +Mr. Donahoe became President and CEO of NIKE on January 13, 2020. As permitted by SEC rules, in calculating this pay ratio we annualized Mr. Donahoe's fiscal 2020 compensation by utilizing his annual base salary. No other adjustments were made to Mr. Donahoe's fiscal 2020 compensation as reported in the Summary Compensation Table. +52 NIKE, INC. +MEDIAN EMPLOYEE +For purposes of calculating this pay ratio, we used the same median employee that was identified in fiscal 2019, as we believe there has been no change in our employee population, our compensation arrangements, or our median employee's circumstances that would significantly affect our pay ratio disclosure. The determination of the median employee was made in fiscal 2019 using the methodology described below, and the median employee's fiscal 2020 annual total compensation was calculated based on the Summary Compensation Table rules used for our Named Executive Officers (in accordance with Item 402(c)(2)(x) of Regulation S-K). +2019 METHODOLOGY +We selected May 1, 2019 as the date to determine the median employee. At that time, we had approximately 75,109 employees globally. After applying the "de minimis exemption" under the SEC rules, which permits us to exclude non-U.S. employees accounting for 5% or less of our total employee population, we excluded the 3,752 employees in the jurisdictions identified below, and our employee population consisted of approximately 71,357 employees. +Slovakia +1 +Hungary +74 +Vietnam +193 +Slovenia +1 +Sweden +83 +Greece +201 +United Arab Emirates +5 +Indonesia +88 +Israel +204 +Sri Lanka +6 +Czech Republic +89 +Austria +205 +Philippines +23 +Denmark +90 +Portugal +209 +Croatia +25 +India +99 +South Africa +212 +Macao +34 +Switzerland +112 +Poland +238 +New Zealand +53 +Ireland +121 +Turkey +445 +Uruguay +67 +Malaysia +167 +Hong Kong +454 +Norway +71 +Thailand +182 +Of the 71,357 employees included in the CEO Pay Ratio calculation, approximately 72% were full-time, 53% were in retail jobs, and 51% were located in the United States. +To identify our median employee we calculated annual compensation for fiscal 2019 based on base salary or hourly wages, as applicable. For the majority of our employees, base salary or hourly wages comprise the majority of their compensation. To determine wages for hourly employees, we used each individual’s pay rate and estimated scheduled hours in the applicable Human Resources system of record. +After determining the annual compensation for our employee population as described above, we identified a subset of approximately 100 individuals representing the potential median employee population. For this subset, we calculated each employee’s annual total compensation in U.S. dollars for fiscal 2019 based on the Summary Compensation Table rules used for our Named Executive Officers (in accordance with Item 402(c)(2)(x) of Regulation S-K). Compensation for permanent employees hired during the fiscal year was annualized and the median employee was then selected from the subset to determine the CEO Pay Ratio. +2020 PROXY STATEMENT 53 +AUDIT MATTERS +PROPOSAL 3 +RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM +The Audit & Finance Committee of the Board of Directors has sole authority to retain, with shareholder ratification, the Company’s independent registered public accounting firm. The Audit & Finance Committee directly oversees the firm’s work with respect to the annual audit of the Company’s consolidated financial statements and internal control over financial reporting and approves all audit engagement fees and terms. At least annually, the Audit & Finance Committee evaluates the independent registered public accounting firm’s qualifications, performance, and independence, including a review and evaluation of its lead partner. The Audit & Finance Committee is also involved in the selection of the new lead engagement partner following mandated rotation of the firm’s lead partner, and is responsible for considering the benefits of rotation of the Company’s independent registered public accounting firm. +The Audit & Finance Committee has appointed PricewaterhouseCoopers LLP to audit the Company’s consolidated financial statements and internal control over financial reporting for the fiscal year ending May 31, 2021 and to render other professional services as required. +PricewaterhouseCoopers LLP has served as the Company’s independent registered public accounting firm for many years. The Audit & Finance Committee and the Board of Directors believe that the continued retention of PricewaterhouseCoopers LLP as the independent registered public accounting firm is in the best interests of the Company and its shareholders. +Accordingly, the Audit & Finance Committee is submitting the appointment of PricewaterhouseCoopers LLP to shareholders for ratification. If the appointment is not ratified by our shareholders, the Audit & Finance Committee may reconsider whether it should appoint another independent registered public accounting firm. +Representatives of PricewaterhouseCoopers LLP will be present at the Annual Meeting, will have the opportunity to make a statement if they desire to do so, and are expected to be available to respond to questions. +Aggregate fees billed by the Company’s independent registered public accounting firm, PricewaterhouseCoopers LLP, for audit services related to the most recent two fiscal years, and for other professional services incurred in the most recent two fiscal years, were as follows: +TYPE OF SERVICE +2020 +2019 +Audit Fees (1) +$21.0 million +$21.8 million +Audit-Related Fees (2) +0.1 million +0.1 million +Tax Fees (3) +0.6 million +1.4 million +All Other Fees (4) +0.7 million +0.3 million +Total +$22.4 million +$23.6 million +(1) Comprises the audits of the Company’s annual financial statements and internal controls over financial reporting, and reviews of the Company’s quarterly financial statements, as well as statutory audits of Company subsidiaries, attest services and consents to SEC filings. +(2) Comprises services including consultations regarding financial accounting and reporting. +(3) Comprises services for tax compliance, tax planning and tax advice. Tax compliance includes services for compliance related tax advice, as well as the preparation and review of both original and amended tax returns for the Company and its consolidated subsidiaries. Tax compliance related fees represented $0.2 million of the tax fees for both fiscal 2020 and 2019. The remaining tax fees primarily include tax advice. +(4) Comprises other miscellaneous services. +In accordance with the Sarbanes-Oxley Act of 2002, the Audit & Finance Committee established policies and procedures under which all audit and non-audit services performed by the Company’s independent registered public accounting firm must be approved in advance by the Audit & Finance Committee. During fiscal 2020, all such services performed by, and fees paid to, PricewaterhouseCoopers LLP were approved in advance. During fiscal 2019, PricewaterhouseCoopers LLP was engaged to be paid fees totaling $2,500, or less than 0.1% of total fees, for one service that was not pre-approved. Such service was approved by the Audit & Finance Committee promptly after its inadvertent omission from pre-approval was noticed. +BOARD RECOMMENDATION +The Board of Directors recommends that shareholders vote FOR ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for the fiscal year ending May 31, 2021. +54 NIKE, INC. +REPORT OF THE AUDIT & FINANCE COMMITTEE +The Audit & Finance Committee has: +• +Reviewed and discussed the audited financial statements with management. +• +Discussed with the independent auditors the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board ("PCAOB") and the SEC. +• +Received the written disclosures and the letter from the independent accountants required by applicable requirements of the PCAOB regarding the independent accountants’ communications concerning independence, and has discussed with the independent accountant the independent accountant’s independence. +• +Based on the review and discussions above, recommended to the Board of Directors that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the last fiscal year for filing with the Securities and Exchange Commission. +Members of the Audit & Finance Committee: +• +Alan B. Graf, Jr., Chair +• +John G. Connors +• +Peter B. Henry +2020 PROXY STATEMENT 55 +STOCK INCENTIVE PLAN +PROPOSAL 4 +APPROVAL OF STOCK INCENTIVE PLAN +The Board of Directors is asking our shareholders to approve an amendment and restatement of the NIKE, Inc. Stock Incentive Plan (the "Amended Plan"). The Stock Incentive Plan was originally adopted by the Board and approved by shareholders in 1990 as the 1990 Stock Incentive Plan, and an amended and restated version was most recently adopted by the Board and approved by shareholders in 2015 (the "Current Plan"). On the recommendation of the Compensation Committee, the Board unanimously adopted the Amended Plan on June 17, 2020, subject to shareholder approval at the Annual Meeting. +If this proposal is approved by our shareholders, the Amended Plan will replace the Current Plan with respect to awards granted after the Annual Meeting. If this proposal is not approved, the Current Plan will remain in effect. +We recommend that shareholders approve the Amended Plan to permit the continued use of stock-based compensation. Stock-based compensation is an important part of our compensation structure and serves the best interests of our shareholders by: +• rewarding long-term Company performance; +• aligning employees' interests with those of our shareholders; and +• enabling us to attract and retain top-tier talent in a competitive marketplace. +As of our record date, July 17, 2020, only 46,144,669 of the 718,000,000 shares authorized under the Current Plan remained available for future grants, a number that the Compensation Committee and the Board believe is insufficient to meet our future needs. Therefore, if the Amended Plan is not approved, we may need to replace the stock-based components of our compensation with cash, which may increase compensation expense, reduce compensation alignment with shareholder interests, and impede our ability to attract and retain talent. +BOARD RECOMMENDATION +The Board of Directors recommends that shareholders vote FOR approval of the following resolution: +RESOLVED, that the shareholders approve the NIKE, Inc. Stock Incentive Plan as amended and restated. +56 NIKE, INC. +SUMMARY OF THE STOCK INCENTIVE PLAN +The following summary of the Amended Plan is qualified in its entirety by reference to the complete text of the Amended Plan, which is attached to this proxy statement as Exhibit A. Capitalized terms used in this proposal that are not otherwise defined have the meanings given to them in the Amended Plan. +BEST PRACTICES +The Amended Plan includes several features designed to protect the interests of our shareholders and reflect sound corporate governance practices and our compensation philosophy, including the following: +• +Fungible share pool. Shares issued in connection with "full value" stock awards, including restricted stock and restricted stock units ("RSUs"), will count against the number of shares authorized for issuance under the Amended Plan at a higher rate than shares issued upon exercise of stock options and stock appreciation rights ("SARs") after a threshold for full value awards is exceeded. +• +No "evergreen" provision. There is no evergreen feature pursuant to which the shares authorized for issuance under the Amended Plan can be automatically replenished. +• +No discounted options or SARs, and no repricing. Stock options and SARs may not be granted with an exercise or grant price lower than the fair market value of the underlying shares on the date of grant, and the Amended Plan prohibits the direct or indirect repricing of underwater stock options or SARs without prior shareholder approval. +• +Double-trigger change-in-control vesting . If awards are assumed by a successor company in connection with a change in control (which is triggered only by the occurrence, rather than shareholder approval, of a merger or other change-in-control event), such awards will not automatically vest and pay out solely as a result of the change in control. +• +Awards subject to clawback policy. Awards granted under the Amended Plan are subject to the Company’s clawback policy. +• +No transferability. Awards generally may not be transferred, except by will or the laws of descent and distribution, unless the transfer is approved by the Compensation Committee and is for no consideration. +BURN RATE AND POTENTIAL DILUTION +The Amended Plan will increase the number of shares of Class B Stock authorized for issuance under the Stock Incentive Plan by 80,000,000 shares, from 718,000,000 shares to 798,000,000 shares. We believe this will provide sufficient shares for the Company's stock-based compensation needs through the 2024 annual meeting of shareholders. This estimate is based on our historical share usage, adjusted for growth and to allow for flexibility around types of awards used, though actual issuances could be materially different from this estimate. +In setting the number of shares authorized for issuance under the Amended Plan, we considered our historic burn rate, which measures annual share utilization. As shown in the following table, the Company's three-year average burn rate was 1.3%, which is below the benchmarks applied to our industry by certain major proxy advisory firms. +FISCAL YEAR +STOCK OPTIONS AND SARS GRANTED +(in millions) +FULL VALUE AWARDS GRANTED +(in millions) +TOTAL GRANTED +(in millions) +WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING (CLASS A AND CLASS B) +(in millions) +BURN RATE +(%) +2020 +19.1 +3.8 +22.9 +1,559 +1.5 +2019 +18.1 +2.5 +20.6 +1,580 +1.3 +2018 +16.8 +1.8 +18.6 +1,624 +1.1 +Average +— +— +— +— +1.3 +We also considered overhang, which measures potential shareholder dilution, in setting the number of additional shares authorized for issuance under the Amended Plan. As of our record date of July 17, 2020, there were 1,559,888,549 shares of Class A Stock and Class B Stock outstanding, 92,331,425 shares of Class B Stock were subject to outstanding stock-based awards, and 46,144,669 shares were available for future awards under the Current Plan. Therefore, as of July 17, 2020, our overhang (calculated as the number of shares subject to outstanding awards plus the number of shares available to be granted ("Total Award Shares"), divided by the total number of outstanding shares of Class A Stock and Class B Stock) was 9%. Had the 80 million additional shares being requested under the Amended Plan been available for grant as of the record date, our overhang would have increased to 14%. +2020 PROXY STATEMENT 57 +KEY TERMS +PURPOSE +The purpose of the Amended Plan is to enable the Company to attract and retain experienced individuals to serve as employees, officers, directors, consultants, advisors, and independent contractors, and to provide incentives for them to apply their best efforts on behalf of the Company. +ELIGIBILITY +Participants under the Amended Plan may include employees, officers, and directors of the Company and any parent or subsidiary corporation of the Company, as well as consultants, advisors, and independent contractors to the Company (and any parent or subsidiary corporation of the Company). As of July 17, 2020, it is anticipated that approximately 6,500 employees, including 8 officers, and all of our non-employee directors (12 as of July 17, 2020) will be eligible to receive awards under the Amended Plan. +ADMINISTRATION +The Amended Plan generally will be administered by a committee appointed by the Board (the "Committee"), which will be the Compensation Committee. Among other actions, the Committee may adopt rules, regulations, and award agreements for the Amended Plan and will determine the individuals to whom awards are made, the amount of the awards, and the other terms and conditions of the awards. The Committee may also advance any waiting period, accelerate any exercise date, or waive or modify any restriction with respect to an award. The Committee may delegate its authority under the Amended Plan within limits it establishes. +SHARES SUBJECT TO THE AMENDED PLAN +The Amended Plan provides that the aggregate number of shares of Class B Stock authorized for issuance is 798,000,000. Each share that is subject to a stock option or SAR will be counted against the shares available under the Amended Plan as one share, except that SARs payable solely in cash will not be counted against the number of shares available under the Amended Plan. Shares subject to "full value" Stock Awards generally will be counted against the shares available under the Amended Plan as one share for each share issued. However, if the aggregate number of shares issued pursuant to Stock Awards and Performance-Based Awards granted after July 16, 2010 exceeds 25,000,000 shares, plus the number of shares forfeited or withheld to satisfy tax withholding obligations under Stock Awards outstanding as of July 16, 2010, then any shares issued under such awards in excess of that number will be counted against the shares available under the Amended Plan as 2.8 shares for each share issued. +Shares underlying awards that expire, terminate, are canceled, or are forfeited to the Company may be reused for subsequent awards, except that shares withheld upon exercise of stock options or SARs in full or partial satisfaction of the exercise price or tax withholding amount may not be reused. Shares tendered to, or withheld by, the Company to satisfy tax withholding obligations with respect to the vesting or settlement of stock awards may be reused for subsequent awards. +MAXIMUM AWARDS +The Amended Plan provides that the maximum number of shares of Class B Stock authorized for issuance as incentive stock options is 798,000,000. No non-employee director may be granted any award or awards denominated in shares in excess of $500,000 in the aggregate in any fiscal year, plus an additional $500,000 in value for one-time awards to a newly appointed or elected non-employee director. +DIVIDENDS +Awards under the Amended Plan may be credited with dividends or dividend equivalents, and the Committee may apply any restrictions to the dividends or dividend equivalents that it deems appropriate. For awards under the Amended Plan that are subject to performance goals, no dividends or dividend equivalents may be paid with respect to any unearned portion of the award. +TYPES OF AWARDS +The Amended Plan authorizes the award of stock options, SARs, and Stock Awards: +• +Stock Options. Stock options may be granted as incentive stock options (within the meaning of Section 422 of the Code) or non-statutory stock options. A stock option entitles the recipient to purchase up to a specified total number of shares of Class B Stock at a specified exercise price per share. The exercise price per share will be determined by the Committee, but may not +58 NIKE, INC. +be less than 100% of the fair market value of a share of Class B Stock on the date of grant. Fair market value generally will be the closing price of the Class B Common Stock on the date of grant. No stock option can be exercised more than 10 years after the date of grant. Except as approved by shareholders, or in connection with a change in the Company’s capitalization or similar event, no stock option may be amended to reduce its exercise price, or canceled in exchange for cash, another award, or any other consideration at a time when the exercise price exceeds the fair market value of the Class B Stock. The Committee has discretion to allow stock options to be transferred for no consideration to immediate family members of the grantee. +• +Stock Appreciation Rights. A SAR entitles the recipient to receive shares of Class B Stock or cash, or a mixture of shares and cash, equal in value to the appreciation of a share of Class B Stock over its fair market value on the date of grant (or for SARs granted in connection with an option, the applicable option exercise price). SARs may, but need not, be granted in connection with an option. If a SAR is granted in connection with an option, it is exercisable only to the extent, and on the same conditions, that the related option is exercisable. No SAR can be exercised more than 10 years after the date of grant. Except as approved by shareholders, or in connection with a change in the Company’s capitalization or similar event, no SAR may be amended to reduce its grant price, or canceled in exchange for cash, another award, or any other consideration at a time when the grant price exceeds the fair market value of the Class B Stock. +• +Stock Awards. Stock Awards are shares of Class B Stock granted under the Amended Plan, which may be subject to such restrictions as the Committee may determine, including time-based and performance-based vesting conditions. Stock Awards subject to restrictions may be granted as either restricted stock awards (which are shares of Class B Stock that are subject to forfeiture if vesting conditions are not satisfied) or RSUs (which are unfunded, unsecured rights to receive a share of Class B Stock after vesting conditions are satisfied). +CHANGE IN CONTROL +The Amended Plan does not provide for "single-trigger" acceleration if an acquiring company assumes the outstanding awards. Except as otherwise provided in an award agreement, the Amended Plan generally provides for "double-trigger" acceleration of stock options, SARs, and RSUs if there is a Change in Control and the participant’s employment is terminated without Cause or for Good Reason between the occurrence of the Change in Control (or Shareholder Approval, if earlier), and the second anniversary of the Change in Control. Vesting will also be accelerated if the Company is acquired and the acquiring company does not assume the outstanding options, SARs and RSUs. +CLAWBACK +Except as otherwise provided in an award agreement, awards under the Amended Plan will be subject to: (1) the Company’s Policy for Recoupment of Incentive Compensation as in effect at the time of grant, (2) such other policies regarding clawback or recoupment of incentive compensation as may be subsequently approved by the Committee, (3) any clawback or recoupment provisions set forth in any award agreement, and (4) the requirements of applicable laws and regulations regarding clawback or recoupment of incentive compensation. +CORPORATE MERGERS +The Committee may make awards under the Amended Plan that have terms and conditions that vary from those specified in the Amended Plan when such awards are granted in substitution for, or in connection with the assumption of, existing awards made by another corporation and assumed, or otherwise agreed to be provided for, by the Company in connection with a merger or other similar transaction. Awards granted in substitution for awards of an acquired company will not be counted against shares available under the Amended Plan. +AMENDMENT AND TERMINATION +The Amended Plan will continue until all shares available for issuance under the Stock Incentive Plan have been issued and all restrictions on such shares have lapsed. No awards may be made under the Amended Plan on or after the tenth anniversary of the last shareholder approval increasing the number of shares available for issuance under the Amended Plan. Accordingly, approval of the Amended Plan will extend the term in which awards may be made under the Stock Incentive Plan to September 17, 2030. The Board has the power to suspend, terminate, modify, or amend the Amended Plan at any time, provided that an amendment requires shareholder approval if such approval is required by the rules of any stock exchange on which our Class B Stock is traded. +NEW PLAN BENEFITS +Awards granted under the Amended Plan will be subject to the Committee's discretion, and the Committee has not determined future awards or who might receive them. As a result, the benefits that will be awarded under the Amended Plan are not +2020 PROXY STATEMENT 59 +determinable at this time. The awards granted for fiscal 2020, which would not have changed if the Amended Plan had been in place instead of the Current Plan, are set forth in the following table: +NAME AND POSITION +DOLLAR VALUE ($) +NUMBER OF SHARES / UNITS +John J. Donahoe II +President and Chief Executive Officer +44,516,498 +1,212,922 +Mark G. Parker +Executive Chairman, and former President and Chief Executive Officer +9,540,639 +350,392 +Matthew Friend +Executive Vice President and Chief Financial Officer +1,061,678 +40,908 +Andrew Campion +Executive Vice President and Chief Operating Officer, and former Chief Financial Officer +2,766,794 +101,614 +Hilary K. Krane +Executive Vice President, Chief Administrative Officer, and General Counsel +2,766,794 +101,614 +Monique Matheson +Executive Vice President, Global Human Resources +2,766,794 +101,614 +John F. Slusher +Executive Vice President, Global Sports Marketing +2,766,794 +101,614 +Elliott J. Hill +Former President, Consumer and Marketplace +3,100,764 +113,878 +Eric D. Sprunk +Former Chief Operating Officer +3,100,764 +113,878 +Current executive officers, as a group +65,223,931 +1,978,605 +Non-employee directors, as a group +1,925,546 +21,877 +Non-executive officer employees, as a group +1,770,773,706 +20,852,608 +U.S. FEDERAL INCOME TAX INFORMATION +The following is a general summary of the U.S. federal income tax consequences of awards under the Amended Plan to the Company and to participants in the Amended Plan who are citizens or residents of the United States for U.S. federal tax purposes. The summary is based on the Internal Revenue Code of 1986, as amended (the "Code"), applicable Treasury Regulations and administrative and judicial interpretations thereof, each as in effect on the date of this proxy statement and is, therefore, subject to future changes in the law, possibly with retroactive effect. The summary is general in nature and does not purport to be legal or tax advice. Furthermore, the summary does not address issues relating to any U.S. gift or estate tax consequences or the consequences of any state, local or foreign tax laws. +STOCK OPTIONS +• +Nonstatutory Stock Options. A participant receiving nonstatutory stock options should not recognize taxable income at the time of grant. A participant should generally recognize ordinary compensation income in an amount equal to the excess, if any, of the fair market value of the option shares on exercise of the nonstatutory stock options over the exercise price thereof. In general, we will be entitled to deduct from our taxable income the amount that the individual is required to include in ordinary income at the time of such inclusion. Additional special rules apply if a participant exercises a nonstatutory stock option by paying the exercise price, in whole or in part, by the transfer of shares of common stock to the Company. +• +Incentive Stock Options. A participant granted an incentive stock option will not generally recognize taxable income at the time of grant or, subject to certain conditions, at the time of exercise, although he or she may be subject to alternative minimum tax. If the participant holds the shares acquired upon exercise of an incentive stock option for at least two years after the grant date and for at least one year after the exercise date, upon disposition of the shares by the participant, the difference, if any, between the sale price of the shares and the exercise price of the option will be treated as long-term capital gain or loss. In general, if a disqualifying disposition should occur (i.e., the shares acquired upon exercise of the stock option are disposed of within the later of two years from the date of grant or one year from the date of exercise), a participant will generally recognize ordinary compensation income in the year of disposition in an amount equal to the excess, if any, of the fair market value of the option shares at the time of exercise (or, if less, the amount realized on disposition), over the exercise price thereof. We are not entitled to any deduction on account of the grant of incentive stock options or the participant’s exercise of the option to acquire common stock. However, in the event of a subsequent disqualifying disposition of such shares of common stock acquired pursuant to the exercise of an incentive stock option under circumstances resulting in taxable compensation to the participant, in general, we should be entitled to a tax deduction equal to the amount treated as taxable compensation to the +60 NIKE, INC. +participant. Additional special rules apply if a participant exercises an incentive stock option by paying the exercise price, in whole or in part, by the transfer of shares of common stock to the Company. +STOCK APPRECIATION RIGHTS +No income will be realized by a participant upon grant of a stock appreciation right. Upon the exercise of a stock appreciation right, the participant will recognize ordinary compensation income in an amount equal to the fair market value of the payment received in respect of the stock appreciation right. We will be able to deduct this same amount for U.S. federal income tax purposes. +RESTRICTED STOCK AWARDS +A recipient of a restricted stock award generally will recognize compensation taxable as ordinary income when the shares cease to be subject to restrictions in an amount equal to the excess of the fair market value of the shares on the date the restrictions lapse over the amount, if any, paid by the participant with respect to the shares. +Instead of postponing the federal income tax consequences of a restricted stock award until the restrictions lapse, the participant may elect to recognize compensation taxable as ordinary income in the year of the award in an amount equal to the fair market value of the shares at the time of receipt. This election is made under Section 83(b) of the Code. A Section 83(b) election is made by filing a written notice with the Internal Revenue Service office with which the participant files his or her federal income tax return. The notice must be filed within 30 days of the date of grant of the restricted stock award for which the election is made and must meet certain technical requirements. +The tax treatment of a subsequent disposition of restricted stock will depend upon whether the participant has made a timely and proper Section 83(b) election. If the participant makes a timely and proper Section 83(b) election, when the participant sells the restricted shares, the participant will have short-term or long-term capital gain or loss, as the case may be, equal to the difference between the amount the participant received from the sale and the tax basis of the shares sold. If no Section 83(b) election is made, any disposition after the restrictions lapse generally will result in short-term or long-term capital gain or loss, as the case may be, equal to the difference between the amount the participant received from the sale and the tax basis of the shares sold. The tax basis of the shares generally will be equal to the amount, if any, paid by the participant with respect to the shares, plus the amount of taxable ordinary income recognized by the participant either at the time the restrictions lapsed or at the time of the Section 83(b) election, as the case may be. If the participant forfeits the shares to the Company (e.g., upon the participant’s termination prior to expiration of the restriction period), the participant may not claim a deduction with respect to the income recognized as a result of making a Section 83(b) election. +Any dividends paid with respect to shares of restricted stock generally will be taxable as ordinary income to the participant at the time the dividends are received. +RESTRICTED STOCK UNITS +A participant generally will not recognize income at the time a restricted stock unit is granted. When any part of a restricted stock unit is issued or paid, the participant generally will recognize compensation taxable as ordinary income at the time of such issuance or payment in an amount equal to the cash and then fair market value of any shares the participant receives. +OTHER AWARDS +The U.S. federal income tax consequences of other awards under the Plan will depend upon the specific terms of each award. +TAX CONSEQUENCES TO THE COMPANY +In the foregoing cases, the Company generally will be entitled to a deduction at the same time and in the same amount as a participant recognizes ordinary income, subject to certain limitations imposed under the Code. +SECTION 409A +We intend that awards granted under the Plan comply with, or otherwise be exempt from, Section 409A of the Code. +TAX WITHHOLDING +The Company is authorized to deduct or withhold from any award granted or payment due under the Plan, or require a participant to remit to the Company, the amount of any withholding taxes due in respect of the award or payment. Tendering shares held by the participant or share withholding for taxes is permitted. +2020 PROXY STATEMENT 61 +SHAREHOLDER PROPOSAL +PROPOSAL 5 +TO CONSIDER A SHAREHOLDER PROPOSAL REGARDING POLITICAL CONTRIBUTIONS DISCLOSURE +The following shareholder proposal (the "Proposal") will be voted on at the Annual Meeting only if properly presented by or on behalf of the shareholder proponent. Mercy A. Rome, c/o Newground Social Investment, 111 Queen Anne Ave N, Suite 500, Seattle, WA 98109, a beneficial owner of 33 shares of Class B Stock submitted the Proposal. The Board of Directors recommends a vote AGAINST the Proposal and asks shareholders to read through NIKE’s response which follows the shareholder proposal. +RESOLVED: That the shareholders of NIKE, Inc. ("NIKE" or "Company") hereby request that the Company provide a report, updated semiannually, disclosing the Company’s: +1. Policies and procedures for making, with corporate funds or assets, contributions and expenditures (direct or indirect) to: (a) participate or intervene in any campaign on behalf of (or in opposition to) any candidate for public office, or: (b) influence the +general public, or any segment thereof, with respect to an election or referendum. +2. Monetary and non-monetary contributions and expenditures (direct and indirect) used in the manner described in section 1 above, including: +a. The identity of the recipient as well as the amount paid to each; and +b. The title(s) of the person(s) in the Company responsible for decision-making. +The report shall be presented to the board of directors or relevant board committee and posted on the Company's website within 12 months from the date of the annual meeting. This proposal does not encompass lobbying spending. +SUPPORTING STATEMENT +As long-term shareholders of NIKE, we support transparency and accountability in corporate electoral spending. This includes any activity considered intervention in a political campaign under the Internal Revenue Code, such as direct and indirect contributions to political candidates, parties, or organizations, and independent expenditures or electioneering communications on behalf of federal, state, or local candidates. +Disclosure is in the best interest of the company and its shareholders. The Supreme Court recognized this in its 2010 Citizens United decision, which said, "[D]isclosure permits citizens and shareholders to react to the speech of corporate entities in a proper way. This transparency enables the electorate to make informed decisions and give proper weight to different speakers and messages." +Publicly available records show NIKE has contributed at least $2.1 million in corporate funds since the 2010 election cycle (CQMoneyLine: http://moneyline.cq.com; National Institute on Money in State Politics: http://www.followthemoney.org). +However, relying on publicly available data does not provide a complete picture the Company's electoral spending. For example, the Company's payments to trade associations and other tax-exempt groups that may be used for election-related activities are undisclosed and unknown. This proposal asks the Company to disclose all of its electoral spending, including payments to trade associations and other tax-exempt organizations, which may be used for electoral purposes. This would bring our Company in line with a growing number of leading companies, including The Coca-Cola Company, Microsoft Corporation, and Kellogg Company, which present this information on their websites. +The Company's Board and shareholders need comprehensive disclosure to fully evaluate the use of corporate assets in elections. +THEREFORE: Please vote FOR this critical governance reform. +62 NIKE, INC. +OPPOSITION STATEMENT +The Board of Directors recommends that shareholders vote AGAINST this Proposal because: +• +Our current policies and public disclosures already address many of the items requested by the Proposal; +• +In the Board’s judgment, more disclosure than we already provide would not be in the best interests of shareholders; and +• +NIKE received virtually identical proposals for its Annual Meetings in 2012, 2013, 2015, 2016, 2017, and 2018 and the proposals were rejected by approximately 78%, 82%, 73%, 71%, 70%, and 73%, respectively, of shares voted. +Frankly, we agree with our shareholders. +NIKE is committed to the highest ethical standards when engaging in political activities. We have strong governance practices and accountability in corporate spending on political activities, and maintain a level of transparency that we believe allows shareholders to have the information they need to make informed decisions. This Proposal is unnecessary to achieve these objectives and the proponent offers no new compelling evidence or arguments in support of the Proposal. +NIKE’s Political Contributions Policy (the "Policy") is designed to give shareholders confidence that there is proper oversight of political activity and to allow shareholders to assess any risks associated with significant contributions. All of our political contributions and expenditures are made in accordance with the Policy and our objective is to strictly comply with all public reporting laws. Our Policy ensures that political contributions, trade group memberships, and policy statements are made in a manner consistent with NIKE's core values to protect or enhance shareholder value, without regard to the private political preferences of our corporate officers. Our Policy describes the policies and procedures for making corporate political contributions, how they are approved, who must approve them, and how they are reported to the Board’s Corporate Responsibility, Sustainability & Governance Committee. Our Policy is available on our website at http://investors.nike.com/investors/corporate-governance. +Consistent with our Policy, we also annually disclose on our website all direct political contributions to any candidate, political party, or ballot initiative in any year that exceed $100,000, and all political contributions in any U.S. state where we make more than 50% of our political contributions in any year. We believe these disclosures provide shareholders meaningful information to assess any risks posed by significant political contributions. Our disclosures are simple, accurate, and clear and we have published them for every year since 2012. +Our Policy also requires that management annually report on compliance with our Policy to the Board’s Corporate Responsibility, Sustainability & Governance Committee, and review the strategic priorities for political contributions and trade association affiliations, to ensure they align with the long-term business objectives of the Company. +The additional disclosure requested in this Proposal could place NIKE at a competitive disadvantage by revealing strategies and priorities designed to protect the economic future of NIKE, its employees and its shareholders. Given that parties with interests adverse to NIKE also participate in the political process for their business advantage, any unilateral expanded disclosure could benefit them, while harming the interests of NIKE and its shareholders. +In summary, the Board of Directors believes the Proposal is unnecessary because NIKE has followed a comprehensive policy for oversight and disclosure of political contributions for many years. If adopted, the Proposal would cause NIKE to incur undue cost and administrative burden, as well as competitive harm, without commensurate benefit to our shareholders. Our shareholders have understandably rejected this Proposal six times before. +BOARD RECOMMENDATION +X +The Board of Directors recommends that shareholders vote AGAINST the shareholder proposal. +2020 PROXY STATEMENT 63 +STOCK OWNERSHIP INFORMATION +STOCK HOLDINGS OF CERTAIN OWNERS AND MANAGEMENT +The following table sets forth the number of shares of the classes of NIKE securities beneficially owned, as of June 30, 2020, after giving effect to any transactions that occurred on such date, by (i) each person known to the Company to be the beneficial owner of more than 5 percent of any class of the Company’s securities, (ii) each of the directors and nominees for director, (iii) each executive officer listed in the Summary Compensation Table ("Named Executive Officers"), and (iv) all directors, Named Executive Officers, and other executive officers as a group. Because Class A Stock is convertible into Class B Stock on a share-for-share basis, each beneficial owner of Class A Stock is deemed by the SEC to be a beneficial owner of the same number of shares of Class B Stock. Therefore, in indicating a person’s beneficial ownership of shares of Class B Stock in the table, it has been assumed that such person has converted into Class B Stock all shares of Class A Stock of which such person is a beneficial owner. For these reasons the table contains substantial duplications in the numbers of shares and percentages of Class A and Class B Stock shown for Swoosh, LLC, Philip H. Knight, the Travis A. Knight 2009 Irrevocable Trust II, and Travis A. Knight in his capacity as the Trustee of such Trust. In addition, unless otherwise indicated, all persons named below can be reached c/o Ann M. Miller, Vice President, Corporate Secretary, and Chief Ethics & Compliance Officer, NIKE, Inc., One Bowerman Drive, Beaverton, Oregon 97005-6453. +TITLE OF CLASS +SHARES BENEFICIALLY +OWNED (1) +PERCENT OF +CLASS (2) +Cathleen A. Benko +Class B +6,308 +— +Elizabeth J. Comstock +Class B +58,809 +(3) +— +John G. Connors +Class B +110,890 +(3) +— +Timothy D. Cook +Class B +95,809 +(3) +— +John J. Donahoe II (5) +Class B +21,041 +— +Thasunda B. Duckett +Class B +1,918 +— +Alan B. Graf, Jr. +Class B +190,801 +— +Peter B. Henry +Class B +4,046 +— +Travis A. Knight +Class A +40,756,369 +(4) +12.9 +% +Class B +40,778,638 +(4) +3.2 +% +Mark G. Parker (5) +Class B +4,437,366 +(3)(6) +0.4 +% +Michelle A. Peluso +Class B +21,143 +— +John W. Rogers, Jr. +Class B +12,851 +— +John R. Thompson, Jr. +Class B +82,693 +(7) +— +Andrew Campion (5) +Class B +517,251 +(3) +— +Matthew Friend (5) +Class B +196,033 +(3) +— +Hilary K. Krane (5) +Class B +596,172 +(3)(6) +— +Monique Matheson (5) +Class B +273,039 +(3)(6) +— +John F. Slusher (5) +Class B +595,335 +(3)(6) +— +Elliott J. Hill (5) +Class B +355,838 +(3) +— +Eric D. Sprunk (5) +Class B +517,664 +(3) +— +64 NIKE, INC. +TITLE OF CLASS +SHARES BENEFICIALLY +OWNED (1) +PERCENT OF +CLASS (2) +Sojitz Corporation of America +Preferred +(8) +300,000 +100.0 +% +1211 S.W. 5th Ave, Pacwest Center, Ste. 2220, +Portland, OR 97204 +Philip H. Knight +One Bowerman Drive, Beaverton, OR 97005 +Class A +29,154,487 +(9) +9.3 +% +Class B +40,540,174 +(10) +3.2 +% +Swoosh, LLC +22990 NW Bennett Street, Hillsboro, OR 97124 +Class A +236,000,000 +(11) +74.9 +% +Class B +236,000,000 +15.9 +% +Travis A. Knight 2009 Irrevocable Trust II +22990 NW Bennett Street, Hillsboro, OR 97124 +Class A +40,756,369 +(4) +12.9 +% +Class B +40,756,369 +(4) +3.2 +% +The Vanguard Group +100 Vanguard Blvd., Malvern, PA 19355 +Class B +106,539,047 +(12) +8.6 +% +BlackRock, Inc. +55 East 52nd Street, New York, NY 10055 +Class B +89,487,665 +(13) +7.2 +% +All directors and executive officers as a group (17 persons) +Class A +40,756,369 +(4) +12.9 +% +Class B +47,520,773 +(3)(4) +3.8 +% +(1) +A person is considered to beneficially own any shares: (a) over which the person exercises sole or shared voting or investment power, or (b) of which the person has the right to acquire beneficial ownership at any time within 60 days (such as through conversion of securities or exercise of stock options). Unless otherwise indicated, voting and investment power relating to the above shares is exercised solely by the beneficial owner or shared by the owner and the owner’s spouse or children. +(2) +Omitted if less than 0.1 percent. +(3) +These amounts include the right to acquire the following numbers of shares within 60 days after June 30, 2020 pursuant to the exercise of stock options: 42,000 shares for Ms. Comstock, 66,000 shares for Mr. Connors, 66,000 shares for Mr. Cook, 2,560,000 shares for Mr. Parker, 313,750 shares for Mr. Campion, 159,700 shares for Mr. Friend, 386,000 shares for Ms. Krane, 173,750 shares for Ms. Matheson, 337,500 shares for Mr. Slusher, 175,000 shares for Mr. Hill, 288,750 shares for Mr. Sprunk, and 3,915,200 shares for the executive officer and director group. +(4) +Includes 21,613,989 shares of Class A Stock held directly by the Travis A. Knight 2009 Irrevocable Trust II (the "Trust"), of which Mr. Travis Knight is the Trustee, and 19,142,380 shares of Class A Stock held by an indirect subsidiary of the Trust. Mr. Travis Knight and members of his immediate family are among the beneficiaries of the Trust. Mr. Travis Knight disclaims beneficial ownership of the Company’s securities held directly and indirectly by the Trust, except to the extent of his pecuniary interest therein. On June 30, 2016, a wholly owned subsidiary of the Trust acquired all of the voting units in Swoosh, LLC. Mr. Travis Knight disclaims beneficial ownership of all securities held by Swoosh, LLC. +(5) +Named Executive Officer listed in the Summary Compensation Table. +(6) +Includes shares held in accounts under the NIKE, Inc. 401(k) Savings and Profit Sharing Plan: 36,390 shares for Mr. Parker, 119 shares for Ms. Krane, 11,521 shares for Ms. Matheson, and 2,805 shares for Mr. Slusher. +(7) +Includes 33,884 shares credited to Mr. Thompson’s account under the NIKE, Inc. Deferred Compensation Plan. +(8) +Preferred Stock does not have general voting rights except as provided by law, and under certain circumstances as provided in the Company’s Restated Articles of Incorporation, as amended. +(9) +Does not include 521,792 shares of Class A Stock that are owned by Mr. Philip Knight’s spouse. Mr. Philip Knight has disclaimed ownership of all such shares. Mr. Philip Knight holds the position Chairman Emeritus, and has a standing invitation to attend all meetings of the Board as a non-voting observer. +(10) +Does not include: (a) 521,792 shares of Class A Stock that are owned by Mr. Philip Knight’s spouse, and (b) 22,336,056 shares of Class B Stock held by the Knight Foundation, a charitable foundation in which Mr. Philip Knight and his spouse are directors. Mr. Philip Knight has disclaimed ownership of all such shares. +(11) +Information provided as of October 29, 2019 in the Form 4 filed by the shareholder. +(12) +Information provided as of February 12, 2020 in Schedule 13G filed by the shareholder. +(13) +Information provided as of February 5, 2020 in Schedule 13G filed by the shareholder. +2020 PROXY STATEMENT 65 +TRANSACTIONS WITH RELATED PERSONS +Philip H. Knight, the father of NIKE director Travis A. Knight, serves as Chairman Emeritus, which provides a standing invitation for Philip H. Knight to attend meetings of the Board and its committees as a non-voting observer. In fiscal 2020, as Chairman Emeritus, Mr. Knight received an annual salary of $500,000, and medical and dental insurance coverage generally available to employees. +In connection with his retirement and in recognition of his substantial service and unique insights and experience, the Company entered into a consulting agreement with John R. Thompson, Jr., a member of the Company's Board in fiscal 2020. Pursuant to the terms of the agreement, effective June 1, 2020, Mr. Thompson serves as Director Emeritus of the Company and, when and as required by the Board, provides consulting services and advice to the Board and other officers of the Company as the Board may specify until such time as either party terminates the agreement by providing 30 days' written notice. As Director Emeritus, Mr. Thompson is eligible to attend meetings of the Board and certain committees as a non-voting observer. For his services and commitment, the Company will pay Mr. Thompson the same compensation and benefits he would have been eligible to receive for his service as a non-employee director as of June 1, 2020, which equals approximately $267,000, and reimburse him for reasonable expenses incurred in connection with his services. +Eric Sprunk’s daughter, Nicole Sprunk, was employed by the Company in a non-executive role in fiscal 2020 as a Brand Director. During fiscal 2020, the Company paid aggregate compensation to Nicole Sprunk of $330,113, comprised of salary, bonus, the value of stock granted, certain maternity leave benefits and matching contributions to the Company-sponsored retirement plan. The compensation and benefits received by Nicole Sprunk were consistent with compensation paid to other employees holding similar positions. +The Company’s written policy requires the Corporate Responsibility, Sustainability & Governance Committee to review any transaction or proposed transaction with a related person that would be required to be reported under Item 404(a) of Regulation S-K, and to determine whether to ratify or approve the transaction, with ratification or approval to occur only if the committee determines that the transaction is fair to the Company or that approval or ratification of the transaction is in the interest of the Company. +COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION +The members of the Compensation Committee of the Board of Directors during fiscal 2020 were Timothy D. Cook, Cathleen A. Benko, and Elizabeth J. Comstock. The committee is composed solely of independent, non-employee directors. No member of the Compensation Committee has been an executive officer of the Company, and no member of the Compensation Committee had any relationships requiring disclosure by the Company under the SEC’s rules requiring disclosure of certain relationships and related-party transactions. None of the Company’s executive officers served as a director or member of a compensation committee (or other committee serving an equivalent function) of any other entity, the executive officers of which served as a director or member of the Compensation Committee of the Company during fiscal 2020. +66 NIKE, INC. +OTHER MATTERS +As of the time this proxy statement was printed, management was unaware of any proposals to be presented for consideration at the Annual Meeting other than those set forth herein, but if other matters do properly come before the Annual Meeting, the persons named in the proxy will vote the shares represented by such proxy according to their best judgment. +SHAREHOLDER PROPOSALS +A proposal by a shareholder for inclusion in the Company’s proxy statement and form of proxy for the 2021 annual meeting of shareholders must be received by Ann M. Miller, Vice President, Corporate Secretary, and Chief Ethics & Compliance Officer of NIKE, Inc. at One Bowerman Drive, Beaverton, Oregon 97005-6453, on or before April 8, 2021 to be eligible for inclusion. Rules under the Securities Exchange Act of 1934, as amended, describe standards as to the submission of shareholder proposals. In addition, the Company’s Bylaws require that any shareholder wishing to make a nomination for director, or wishing to introduce a proposal or other business at a shareholder meeting must give the Company at least 60 days’ advance written notice, which for the 2021 annual meeting of shareholders is July 18, 2021, and that notice must meet certain other requirements described in the Bylaws. +For the Board of Directors, +Ann M. Miller +Vice President, Corporate Secretary, and Chief Ethics & Compliance Officer +2020 PROXY STATEMENT 67 +EXHIBIT A +NIKE, INC. STOCK INCENTIVE PLAN +As amended as of June 17, 2020 +1. Purpose . The purpose of this Stock Incentive Plan (the “ Plan ”) is to enable NIKE, Inc. (the “ Company ”) to attract and retain experienced officers, directors, employees, consultants, advisors, and independent contractors and to provide an incentive for them to apply their best efforts on behalf of the Company. +2. Shares Subject to the Plan . +(a) Shares Authorized . Subject to adjustment as provided below and in paragraph 9, the shares to be offered under the Plan shall consist of Class B Common Stock of the Company (“ Shares ”), and the total number of Shares that may be issued under the Plan shall not exceed seven hundred ninety-eight million (798,000,000) Shares (the “ Plan Limit ”). +(b) Share Usage . If an option or stock appreciation right granted under the Plan expires, terminates or is canceled, the unissued Shares subject to such option or stock appreciation right shall again be available under the Plan. If any Shares issued pursuant to a Stock Award (as defined in paragraph 7) are forfeited to the Company, or the award expires, terminates or is canceled, the number of Shares forfeited or unissued shall again be available under the Plan. Upon the exercise of an option or stock appreciation right, the number of Shares reserved for issuance under the Plan shall be reduced by the number of Shares issued upon such exercise, plus the number of Shares, if any, withheld upon exercise as full or partial payment of the exercise price or to satisfy the tax withholding amount. Cash payments of stock appreciation rights shall not reduce the number of Shares reserved for issuance under the Plan. Upon the issuance of Shares under a Stock Award, the number of Shares reserved for issuance under the Plan shall be reduced by the number of Shares issued. For all purposes of this paragraph 2(b), the number of Shares “issued” pursuant to a Stock Award shall be net of any Shares withheld to satisfy tax withholding obligations with respect to the award. The number of Shares available for issuance under the Plan shall not be reduced to reflect any dividends or dividend equivalents that are reinvested into additional Shares or credited as additional Shares subject or paid with respect to an award. +(c) Fungible Share Provision . Any Shares subject to an option or stock appreciation right granted under the Plan shall be counted against the Plan Limit as one Share for every one Share subject to such option or stock appreciation right, except that a stock appreciation right payable solely in cash shall not be counted against the Plan Limit. Any Shares issued pursuant to a Stock Award shall be counted against the Plan Limit as one Share for every one Share so issued; provided, however, that if the aggregate number of Shares issued pursuant to Stock Awards and Share-denominated awards intended to qualify as qualified performance-based compensation under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “ Code ”), and the regulations thereunder (“ Performance-Based Awards ”) granted after July 16, 2010 exceeds the Full Value Limit (as defined below), any excess Shares issued under those awards shall be counted against the Plan Limit as two and eight-tenths (2.8) Shares for every one Share so issued. If any Shares issued pursuant to a Stock Award or a Performance-Based Award are counted against the Plan Limit as two and eight-tenths (2.8) Shares as provided above, and any Shares issued pursuant to a Stock Award or a Performance-Based Award are subsequently forfeited to the Company, the number of Shares that again become available under the Plan shall be equal to the number of Shares forfeited (up to the aggregate number of Shares previously counted against the Plan Limit as two and eight-tenths (2.8) Shares) multiplied by two and eight-tenths (2.8). Subject to adjustment as provided in paragraph 9, the “ Full Value Limit ” shall equal twenty-five million (25,000,000) Shares plus the number of Shares issued pursuant to Stock Awards granted on or before July 16, 2010 that are forfeited to the Company or withheld to satisfy tax withholding obligations after July 16, 2010. +(d) Award Limits . +(i) Incentive Stock Options . Subject to adjustment under paragraph 9, a maximum of seven hundred ninety-eight million (798,000,000) Shares shall be available for issuance under incentive stock options as defined in Section 422 of the Code (“ Incentive Stock Options ”). +(ii) Limits on Awards to Non-Employee Directors . No Non-Employee Director may be granted any award or awards denominated in Shares that exceed in the aggregate $500,000 in value (such value computed as of the date of grant in accordance with applicable financial accounting rules) in any fiscal year, plus an additional $500,000 in value for one-time awards to a newly appointed or elected Non-Employee Director. A “ Non-Employee Director ” is any member of the Board of Directors who is not an employee of the Company. +(e) Dividends . Participants in the Plan may, if the Committee (as defined in paragraph 4) so determines, be credited with dividends or dividend equivalents for dividends paid with respect to Shares underlying an award in a manner determined by the Committee in its sole discretion, provided that with respect to awards that are subject to achievement of performance goals, any such credited dividends or dividend equivalents may only be paid with respect to the portion of such awards that is actually earned. +68 NIKE, INC. +The Committee may apply any restrictions to the dividends or dividend equivalents that the Committee deems appropriate. The Committee, in its sole discretion, may determine the form of payment of dividends or dividend equivalents, including cash, shares of the Class B Common Stock, restricted stock or restricted stock units. +3. Duration of Plan . The Plan shall continue in effect until all Shares available for issuance under the Plan have been issued and all restrictions on such Shares have lapsed; provided, however, that no awards shall be made under the Plan on or after the 10th anniversary of the last action by the shareholders approving any amendment to the Plan or amendment and restatement of the Plan to increase the number of Shares available for issuance under the Plan. The Board of Directors may suspend or terminate the Plan at any time except with respect to awards and Shares subject to restrictions then outstanding under the Plan. Termination shall not affect any outstanding awards or the forfeitability of Shares issued under the Plan. +4. Administration . The Plan shall be administered by a committee appointed by the Board of Directors of the Company consisting of not less than two directors (the “ Committee ”), which shall determine and designate from time to time the individuals to whom awards shall be made, the amount of the awards and the other terms and conditions of the awards, except that only the Board of Directors may amend or terminate the Plan as provided in paragraphs 3 and 13. Subject to the provisions of the Plan, the Committee may from time to time adopt and amend rules and regulations relating to administration of the Plan, adopt forms of award agreements setting out the terms and conditions of the awards, advance the lapse of any waiting period, accelerate any exercise date, waive or modify any restriction applicable to Shares (except those restrictions imposed by law) and make all other determinations in the judgment of the Committee necessary or desirable for the administration of the Plan. The interpretation and construction of the provisions of the Plan and related agreements by the Committee shall be final and conclusive. The Committee may correct any defect or supply any omission or reconcile any inconsistency in the Plan or in any related agreement in the manner and to the extent it shall deem expedient to carry the Plan into effect, and it shall be the sole and final judge of such expediency. The Committee may allocate among its members and delegate to any person who is not a member of the Committee any of its powers, responsibilities or duties. +5. Types of Awards; Eligibility; General Terms of Awards . +(a) Awards . The Committee may, from time to time, take the following actions, separately or in combination, under the Plan: (i) grant Incentive Stock Options as provided in paragraph 6(b); (ii) grant options other than Incentive Stock Options (“ Non-Statutory Stock Options ”) as provided in paragraph 6(c); (iii) grant Stock Awards, including restricted stock and restricted stock units, as provided in paragraph 7; and (iv) grant stock appreciation rights as provided in paragraph 8. +(b) Eligibility . Any such awards may be made to employees, including employees who are officers or directors, of the Company or any parent or subsidiary corporation of the Company and to other individuals described in paragraph 1; provided, however, that only employees of the Company shall be eligible to receive Incentive Stock Options under the Plan. The Committee shall select the individuals to whom awards shall be made. The Committee shall specify the action taken with respect to each individual to whom an award is made under the Plan. +(c) Termination of Service . For purposes of the Plan, service means service as a Non-Employee Director, consultant, advisor or independent contractor of the Company or a parent or subsidiary corporation of the Company and termination of service means termination of employment or service. +6. Option Grants . +(a) Grant . The Committee may grant options under the Plan. With respect to each option grant, the Committee shall determine the number of Shares subject to the option, the option price, the period of the option, the time or times at which the option may be exercised and whether the option is an Incentive Stock Option or a Non-Statutory Stock Option. +(b) Incentive Stock Options . Incentive Stock Options shall be subject to the following terms and conditions: +(i) An Incentive Stock Option may be granted under the Plan to an employee possessing more than 10 percent of the total combined voting power of all classes of stock of the Company or of any parent or subsidiary of the Company only if the option price is at least 110 percent of the fair market value of the Shares subject to the option on the date it is granted, as described in paragraph 6(b)(iii), and the option by its terms is not exercisable after the expiration of five years from the date it is granted. +(ii) Subject to paragraphs 6(b)(i) and 6(d), Incentive Stock Options granted under the Plan shall continue in effect for the period fixed by the Committee, except that no Incentive Stock Option shall be exercisable after the expiration of 10 years from the date it is granted. +2020 PROXY STATEMENT 69 +(iii) The option price per share shall be determined by the Committee at the time of grant. Subject to paragraph 6(b)(i), the option price shall not be less than 100 percent of the fair market value of the Shares covered by the Incentive Stock Option at the date the option is granted. The fair market value shall be deemed to be the closing price of the Class B Common Stock of the Company as reported in the New York Stock Exchange Composite Transactions in the Wall Street Journal on the date the option is granted, or if there has been no sale on that date, on the last preceding date on which a sale occurred, or such other reported value of the Class B Common Stock of the Company as shall be specified by the Committee. +(iv) No Incentive Stock Option shall be granted on or after the tenth anniversary of the last action by the Board of Directors approving an increase in the number of Shares available for issuance under the Plan, which action was subsequently approved within 12 months by the shareholders. +(c) Non-Statutory Stock Options . The option price for Non-Statutory Stock Options shall be determined by the Committee at the time of grant. The option price may not be less than 100 percent of the fair market value of the Shares covered by the Non-Statutory Stock Option on the date the option is granted. The fair market value of Shares covered by a Non-Statutory Stock Option shall be determined pursuant to paragraph 6(b)(iii). No Non-Statutory Stock Option shall be exercisable after the expiration of 10 years from the date it is granted. +(d) Exercise of Options . Except as provided in the applicable award agreement, no option granted under the Plan may be exercised unless at the time of such exercise the optionee is employed by or providing services to the Company or any parent or subsidiary corporation of the Company and shall have been so employed or providing services continuously since the date such option was granted. Absence on leave or on account of illness or disability under rules established by the Committee shall not, however, be deemed an interruption of employment or service for this purpose. Except as provided in paragraphs 9 and 10, options granted under the Plan may be exercised from time to time over the period stated in each option in such amounts and at such times as shall be prescribed by the Committee, provided that options shall not be exercised for fractional Shares. Unless otherwise determined by the Committee, if the optionee does not exercise an option in any one year with respect to the full number of Shares to which the optionee is entitled in that year, the optionee’s rights shall be cumulative and the optionee may purchase those Shares in any subsequent year during the term of the option. +(e) Nontransferability . Except as provided below, each stock option granted under the Plan by its terms shall be nonassignable and nontransferable by the optionee, either voluntarily or by operation of law, and each option by its terms shall be exercisable during the optionee’s lifetime only by the optionee. A stock option may be transferred by will or by the laws of descent and distribution of the state or country of the optionee’s domicile at the time of death. A Non-Statutory Stock Option shall also be transferable pursuant to a qualified domestic relations order as defined under the Code or Title I of the Employee Retirement Income Security Act. The Committee may, in its discretion, authorize all or a portion of a Non-Statutory Stock Option granted to an optionee to be on terms which permit transfer by the optionee to (i) the spouse, children or grandchildren of the optionee (“ Immediate Family Members ”), (ii) a trust or trusts for the exclusive benefit of Immediate Family Members, or (iii) a partnership in which Immediate Family Members are the only partners, provided that (x) there may be no consideration for any transfer, (y) the option agreement pursuant to which the options are granted must expressly provide for transferability in a manner consistent with this paragraph, and (z) subsequent transfers of transferred options shall be prohibited except by will or by the laws of descent and distribution. Following any transfer, options shall continue to be subject to the same terms and conditions as were applicable immediately prior to transfer, provided that for purposes of paragraphs 6(d), 6(f), 9 and 10 the term “optionee” shall be deemed to refer to the transferee. The events of termination of service as set forth in the applicable award agreement shall continue to be applied with respect to the original optionee, following which the options shall be exercisable by the transferee only to the extent, and for the periods specified, and all other references to employment or service, termination of service, life or death of the optionee, shall continue to be applied with respect to the original optionee. +(f) Purchase of Shares . Unless the Committee determines otherwise, Shares may be acquired pursuant to an option granted under the Plan only upon receipt by the Company of notice from the optionee of the optionee’s intention to exercise, specifying the number of Shares as to which the optionee desires to exercise the option and the date on which the optionee desires to complete the transaction, and if required in order to comply with the Securities Act of 1933, as amended, containing a representation that it is the optionee’s present intention to acquire the Shares for investment and not with a view to distribution. Unless the Committee determines otherwise, on or before the date specified for completion of the purchase of Shares pursuant to an option, the optionee must have paid the Company the full purchase price of such Shares in cash or with the consent of the Committee, in whole or in part, in Class B Common Stock of the Company valued at fair market value, or by having the Company withhold shares of Class B Common Stock of the Company that would otherwise be issued on exercise of the option that have an aggregate fair market value equal to the aggregate purchase price of the Shares being purchased under the option. The fair market value of Class B Common Stock of the Company provided in payment of the purchase price shall be the closing price of the Class B Common Stock of the Company as reported in the New York Stock Exchange Composite Transactions in the Wall Street Journal or such other reported value of the Class B Common Stock of the Company as shall be specified by the Committee, on the date the option is exercised, or if such date is not a trading day, then on the immediately preceding trading day. No Shares shall be issued until full payment +70 NIKE, INC. +therefor has been made. With the consent of the Committee, an optionee may request the Company to apply automatically the Shares to be received upon the exercise of a portion of a stock option to satisfy the purchase price for additional portions of the option. Each optionee who has exercised an option shall immediately upon notification of the amount due, if any, pay to the Company in cash amounts necessary to satisfy any applicable federal, state and local tax withholding requirements. If additional withholding is or becomes required beyond any amount deposited before delivery of the Shares, the optionee shall pay such amount to the Company on demand. If the optionee fails to pay the amount demanded, the Company may withhold that amount from other amounts payable by the Company to the optionee, including salary, subject to applicable law. With the consent of the Committee, an optionee may satisfy the minimum statutory withholding obligation, in whole or in part, by having the Company withhold from the Shares to be issued upon the exercise that number of Shares that would satisfy the withholding amount due or by delivering Class B Common Stock of the Company to the Company to satisfy the withholding amount. +(g) No Repricing . Except for actions approved by the shareholders of the Company or adjustments made pursuant to paragraph 9, the option price for an outstanding option granted under the Plan may not be decreased after the date of grant nor may the Company grant a new option or pay any cash or other consideration (including another award under the Plan) in exchange for any outstanding option granted under the Plan at a time when the option price of the outstanding option exceeds the fair market value of the Shares covered by the option. +7. Stock Awards . The Committee may grant Shares as stock awards under the Plan (“ Stock Awards ”). Stock Awards shall be subject to the terms, conditions, and restrictions determined by the Committee, including time-based and performance-based vesting conditions. The restrictions may include restrictions concerning transferability and forfeiture of the Shares awarded, together with such other restrictions as may be determined by the Committee. Stock Awards subject to restrictions may be either restricted stock awards under which Shares are issued immediately upon grant subject to forfeiture if vesting conditions are not satisfied, or restricted stock unit awards under which Shares are not issued until after vesting conditions are satisfied. Restricted stock awards may be evidenced in such manner as the Committee deems appropriate, in its sole discretion, including book-entry registration (in which case the restrictions shall be placed on the book-entry registration) or issuance of one or more stock certificates (in which case the certificates shall bear any legends required by the Committee). The Committee may require the recipient to sign an agreement as a condition of the award, but may not require the recipient to pay any monetary consideration other than amounts necessary to satisfy tax withholding requirements. The agreement may contain any terms, conditions, restrictions, representations and warranties required by the Committee. The Company may require any recipient of a Stock Award to pay to the Company in cash upon demand amounts necessary to satisfy any applicable federal, state or local tax withholding requirements. If the recipient fails to pay the amount demanded, the Company may withhold that amount from other amounts payable by the Company to the recipient, including salary, subject to applicable law. With the consent of the Committee, a recipient may satisfy the minimum statutory withholding obligation, in whole or in part, by having the Company withhold from the awarded Shares that number of Shares that would satisfy the withholding amount due or by delivering Class B Common Stock of the Company to the Company to satisfy the withholding amount. +8. Stock Appreciation Rights . +(a) Grant . Stock appreciation rights may be granted under the Plan by the Committee, subject to such rules, terms, and conditions as the Committee prescribes. +(b) Exercise . +(i) A stock appreciation right shall be exercisable only at the time or times established by the Committee, except that no stock appreciation right shall be exercisable after the expiration of 10 years from the date it is granted. If a stock appreciation right is granted in connection with an option, the stock appreciation right shall be exercisable only to the extent and on the same conditions that the related option could be exercised. Upon exercise of a stock appreciation right, any option or portion thereof to which the stock appreciation right relates terminates. If a stock appreciation right is granted in connection with an option, upon exercise of the option, the stock appreciation right or portion thereof to which the option relates terminates. +(ii) The Committee may withdraw any stock appreciation right granted under the Plan at any time and may impose any conditions upon the exercise of a stock appreciation right or adopt rules and regulations from time to time affecting the rights of holders of stock appreciation rights. Such rules and regulations may govern the right to exercise stock appreciation rights granted before adoption or amendment of such rules and regulations as well as stock appreciation rights granted thereafter. +(iii) Each stock appreciation right shall entitle the holder, upon exercise, to receive from the Company in exchange therefor an amount equal in value to the excess of the fair market value on the date of exercise of one Share over its fair market value on the date of grant or such higher amount as the Committee may determine (or, in the case of a stock appreciation right granted in connection with an option, the option price per Share under the option to which the stock appreciation right relates), multiplied by the number of Shares covered by the stock appreciation right or the option, or portion thereof, that is +2020 PROXY STATEMENT 71 +surrendered. Payment by the Company upon exercise of a stock appreciation right may be made in Shares valued at fair market value, in cash, or partly in Shares and partly in cash, all as determined by the Committee. +(iv) For purposes of this paragraph 8, the fair market value of the Class B Common Stock of the Company on the date a stock appreciation right is exercised shall be the closing price of the Class B Common Stock of the Company as reported in the New York Stock Exchange Composite Transactions in the Wall Street Journal, or such other reported value of the Class B Common Stock of the Company as shall be specified by the Committee, on the date the stock appreciation right is exercised, or if such date is not a trading day, then on the immediately preceding trading day. +(v) No fractional Shares shall be issued upon exercise of a stock appreciation right. In lieu thereof, cash shall be paid in an amount equal to the value of the fractional share. +(vi) Each stock appreciation right granted under the Plan by its terms shall be nonassignable and nontransferable by the holder, either voluntarily or by operation of law, except by will or by the laws of descent and distribution of the state or country of the holder’s domicile at the time of death, and each stock appreciation right by its terms shall be exercisable during the holder’s lifetime only by the holder; provided, however, that a stock appreciation right not granted in connection with an Incentive Stock Option shall also be transferable pursuant to a qualified domestic relations order as defined under the Code or Title I of the Employee Retirement Income Security Act. +(vii) Each participant who has exercised a stock appreciation right shall, upon notification of the amount due, pay to the Company in cash amounts necessary to satisfy any applicable federal, state or local tax withholding requirements. If the participant fails to pay the amount demanded, the Company may withhold that amount from other amounts payable by the Company to the participant including salary, subject to applicable law. With the consent of the Committee a participant may satisfy the minimum statutory obligation, in whole or in part, by having the Company withhold from any Shares to be issued upon the exercise that number of Shares that would satisfy the withholding amount due or by delivering Class B Common Stock of the Company to the Company to satisfy the withholding amount. +(c) No Repricing . Except for actions approved by the shareholders of the Company or adjustments made pursuant to paragraph 9, the grant price for an outstanding stock appreciation right granted under the Plan may not be decreased after the date of grant nor may the Company grant a new stock appreciation right or pay any cash or other consideration (including another award under the Plan) in exchange for any outstanding stock appreciation right granted under the Plan at a time when the grant price of the outstanding stock appreciation right exceeds the fair market value of the Shares covered by the stock appreciation right. +9. Changes in Capital Structure . If the outstanding Shares are hereafter increased or decreased or changed into or exchanged for a different number or kind of shares or other securities of the Company by reason of any recapitalization, reclassification, stock split, combination of shares, dividend payable in shares, or large nonrecurring cash dividend, the authorization limits under paragraphs 2(a), 2(c) and 2(d)(i) shall be adjusted proportionately. In addition, the number and kind of shares subject to outstanding awards, and the exercise price of outstanding options and stock appreciation rights shall be adjusted, to the end that the recipient’s proportionate interest is maintained as before the occurrence of such event. The Committee may also require that any securities issued in respect of or exchanged for Shares issued hereunder that are subject to restrictions be subject to similar restrictions. Notwithstanding the foregoing, the Committee shall have no obligation to effect any adjustment that would or might result in the issuance of fractional shares, and any fractional shares resulting from any adjustment may be disregarded or provided for in any manner determined by the Committee. Any adjustments made pursuant to this paragraph 9 shall be conclusive. +10. Sale of the Company; Change in Control . +(a) Sale of the Company . Unless otherwise provided in the applicable award agreement, if during the term of an option, stock appreciation right or restricted stock unit award, there shall occur a merger, consolidation or plan of exchange involving the Company pursuant to which outstanding Shares are converted into cash or other stock, securities or property, or a sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, the assets of the Company, then either: +(i) the option, stock appreciation right or restricted stock unit award shall be converted into an option, stock appreciation right or restricted stock unit award to acquire stock of the surviving or acquiring corporation in the applicable transaction for a total purchase price equal to the total price applicable to the unexercised portion of the option, stock appreciation right or restricted stock unit award, and with the amount and type of shares subject thereto and exercise price per share thereof to be conclusively determined by the Committee, taking into account the relative values of the companies involved in the applicable transaction and the exchange rate, if any, used in determining shares of the surviving corporation to be held by holders of Shares following the applicable transaction, and disregarding fractional shares; or +72 NIKE, INC. +(ii) all unissued Shares subject to restricted stock unit awards shall be issued immediately prior to the consummation of such transaction, all options and stock appreciation rights will become exercisable for 100 percent of the Shares subject to the option or stock appreciation right effective as of the consummation of such transaction, and the Committee shall approve some arrangement by which holders of options and stock appreciation rights shall have a reasonable opportunity to exercise all such options and stock appreciation rights effective as of the consummation of such transaction or otherwise realize the value of these awards, as determined by the Committee. Any option or stock appreciation right that is not exercised in accordance with procedures approved by the Committee shall terminate. +(b) Change in Control . Unless otherwise provided in the applicable award agreement, if paragraph 10(a)(ii) does not apply, all options and stock appreciation rights granted under the Plan shall become exercisable in full for a remaining term extending until the earlier of the expiration date of the applicable option or stock appreciation right or the expiration of four years after the date of termination of service, and all Stock Awards shall become fully vested , if a Change in Control occurs and at any time after the earlier of Shareholder Approval (as defined below), if any, or the Change in Control and on or before the second anniversary of the Change in Control, (i) the award holder’s service is terminated by the Company (or its successor) without Cause (as defined below), or (ii) the award holder’s service is terminated by the award holder for Good Reason (as defined below). +(i) For purposes of the Plan, a “ Change in Control ” of the Company shall mean the occurrence of any of the following events: +(A) At any time during a period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors of the Company (“ Incumbent Directors ”) shall cease for any reason to constitute at least a majority thereof; provided, however, that the term “Incumbent Director” shall also include each new director elected during such two-year period whose nomination or election was approved by two-thirds of the Incumbent Directors then in office; +(B) At any time that the holders of the Class A Common Stock of the Company have the right to elect (voting as a separate class) a majority of the members of the Board of Directors, any “person” or “group” (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act) shall, as a result of a tender or exchange offer, open market purchases or privately negotiated purchases from anyone other than the Company, have become the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act), directly or indirectly, of more than 50 percent of the then outstanding Class A Common Stock of the Company; +(C) At any time after such time as the holders of the Class A Common Stock of the Company cease to have the right to elect (voting as a separate class) a majority of the members of the Board of Directors, any “person” or “group” (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act) shall, as a result of a tender or exchange offer, open market purchases or privately negotiated purchases from anyone other than the Company, have become the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company ordinarily having the right to vote for the election of directors (“ Voting Securities ”) representing 30 percent or more of the combined voting power of the then outstanding Voting Securities; +(D) A consolidation, merger or plan of exchange involving the Company (“ Merger ”) as a result of which the holders of outstanding Voting Securities immediately prior to the Merger do not continue to hold at least 50 percent of the combined voting power of the outstanding Voting Securities of the surviving corporation or a parent corporation of the surviving corporation immediately after the Merger, disregarding any Voting Securities issued to or retained by such holders in respect of securities of any other party to the Merger; or +(E) A sale, lease, exchange, or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Company. +(ii) For purposes of the Plan, “ Shareholder Approval ” shall mean approval by the shareholders of the Company of a transaction, the consummation of which would be a Change in Control. +(iii) For purposes of this Plan, “ Cause ” shall mean (A) the willful and continued failure to perform substantially the award holder’s reasonably assigned duties with the Company (other than any such failure resulting from incapacity due to physical or mental illness) after a demand for substantial performance is delivered to the award holder by the Company which specifically identifies the manner in which the Company believes that the award holder has not substantially performed the award holder’s duties, or (B) the willful engagement in illegal conduct which is materially and demonstrably injurious to the Company. No act, or failure to act, shall be considered “willful” if the award holder reasonably believed that the action or omission was in, or not opposed to, the best interests of the Company. +2020 PROXY STATEMENT 73 +(iv) For purposes of the Plan, “ Good Reason ” shall mean (A) the assignment of a different title, job or responsibilities that results in a material decrease in the level of responsibility of the award holder after Shareholder Approval, if applicable, or the Change in Control when compared to the award holder’s level of responsibility for the Company’s operations prior to Shareholder Approval, if applicable, or the Change in Control; provided that Good Reason shall not exist if the award holder continues to have the same or a greater general level of responsibility for Company operations after the Change in Control as the award holder had prior to the Change in Control even if the Company operations are a subsidiary or division of the surviving company, (B) a reduction in the award holder’s base pay as in effect immediately prior to Shareholder Approval, if applicable, or the Change in Control, (C) a material reduction in the total package of benefits available to the award holder under cash incentive, stock incentive and other employee benefit plans after Shareholder Approval, if applicable, or the Change in Control compared to the total package of such benefits as in effect prior to Shareholder Approval, if applicable, or the Change in Control, or (D) the award holder is required to be based more than 50 miles from where the award holder’s office is located immediately prior to Shareholder Approval, if applicable, or the Change in Control except for required travel on company business to an extent substantially consistent with the business travel obligations which the award holder undertook on behalf of the Company prior to Shareholder Approval, if applicable, or the Change in Control. Notwithstanding any provision in this Plan to the contrary, a termination of an employment or other service relationship by the award holder will not be for Good Reason unless (1) the award holder notifies the Company in writing of the existence of the condition that the award holder believes constitutes Good Reason within thirty (30) days of the initial existence of such condition (which notice specifically identifies such condition), (2) the Company fails to remedy such condition within thirty (30) days after the date that it receives such notice (the “ Remedial Period ”), and (3) the award holder actually terminates the award holder’s employment or other service relationship within thirty (30) days after the expiration of the Remedial Period. If the award holder terminates his or her employment or other service relationship before the expiration of the Remedial Period or after the Company remedies the condition, then the award holder’s termination will not be considered to be for Good Reason. +11. Corporate Mergers, Acquisitions, etc . The Committee may also grant options, stock appreciation rights and Stock Awards under the Plan having terms, conditions and provisions that vary from those specified in the Plan, provided that any such awards are granted in substitution for, or in connection with the assumption of, existing options, stock appreciation rights or Stock Awards issued by another corporation and assumed or otherwise agreed to be provided for by the Company pursuant to or by reason of a transaction involving a corporate merger, consolidation, plan of exchange, acquisition of property or stock, separation, reorganization or liquidation to which the Company or a parent or subsidiary corporation of the Company is a party. The number of Shares available for issuance under the Plan shall not be reduced to reflect any awards granted in substitution for awards of an acquired company. +12. Clawback Policy . Unless otherwise provided in the applicable award agreement, all awards under the Plan shall be subject to (a) any applicable securities, tax and stock exchange laws, rules and regulations relating to the recoupment or clawback of incentive compensation, (b) the NIKE, Inc. Policy for Recoupment of Incentive Compensation as approved by the Committee and in effect at the time of grant, (c) such other policy for clawback or recoupment of incentive compensation as may subsequently be approved from time to time by the Committee, and (d) any clawback or recoupment provisions set forth in the agreement evidencing the award. +13. Amendment of Plan . The Board of Directors may at any time, and from time to time, modify or amend the Plan in such respects as it shall deem advisable because of changes in the law while the Plan is in effect or for any other reason, provided that no amendment of the Plan shall be made without shareholder approval if shareholder approval of the amendment is at the time required by the rules of any stock exchange on which the Class B Stock may then be listed. Except as provided in paragraphs 8, 9 and 10, however, no change in an award already granted shall be made without the written consent of the holder of such award. +14. Approvals . The obligations of the Company under the Plan are subject to the approval of state and federal authorities or agencies with jurisdiction in the matter. The Company will use its best efforts to take steps required by state or federal law or applicable regulations, including rules and regulations of the Securities and Exchange Commission and any stock exchange or trading system on which the Company’s shares may then be listed or admitted for trading, in connection with the grants under the Plan. The foregoing notwithstanding, the Company shall not be obligated to issue or deliver Class B Common Stock under the Plan if such issuance or delivery would violate applicable state or federal securities laws. +15. Employment and Service Rights . Nothing in the Plan or any award pursuant to the Plan shall (a) confer upon any participant any right to be continued in the employment of or service with the Company or any parent or subsidiary corporation of the Company or interfere in any way with the right of the Company or any parent or subsidiary corporation of the Company by whom such participant is employed or to whom such participant is providing services to terminate such participant’s employment or service at any time, for any reason, with or without cause, or to increase or decrease such participant’s compensation or benefits, or (b) confer upon any person engaged by the Company any right to be employed or retained by the Company or to the continuation, extension, renewal, or modification of any compensation, contract, or arrangement with or by the Company. +74 NIKE, INC. +16. Rights as a Shareholder . The recipient of any award under the Plan shall have no rights as a shareholder with respect to any Shares until the date such Shares are actually issued to the recipient. Except as otherwise expressly provided in the Plan, no adjustment shall be made for dividends or other rights for which the record date is prior to the date of such issuance. +17. Choice of Law and Venue . The Plan, all awards granted thereunder and all determinations made and actions taken pursuant thereto, to the extent not otherwise governed by the laws of the United States, shall be governed by the laws of the State of Oregon. For purposes of litigating any dispute that arises under the Plan, all awards granted thereunder and all determinations made and actions taken pursuant thereto, the parties hereby submit to and consent to the jurisdiction of, and agree that such litigation shall be conducted in, the courts of Washington County, Oregon or the United States District Court for the District of Oregon, where this Agreement is made and/or to be performed. +18. Section 409A . +(a) All awards made under the Plan that are intended to be “deferred compensation” subject to Section 409A of the Code (“ Section 409A ”) will be interpreted, administered and construed to comply with Section 409A, and all awards made under the Plan that are intended to be exempt from Section 409A will be interpreted, administered and construed to comply with and preserve such exemption. The Board of Directors and the Committee will have full authority to give effect to the intent of the foregoing sentence. To the extent necessary to give effect to this intent, in the case of any conflict or potential inconsistency between this paragraph 18 of the Plan and a provision of any award or award agreement with respect to an award, this paragraph 18 of the Plan will govern. +(b) Without limiting the generality of paragraph 18(a), with respect to any award made under the Plan that is intended to be “deferred compensation” subject to Section 409A: +(i) any payment due upon a recipient’s termination of employment will be paid only upon such recipient’s separation from service from the Company within the meaning of Section 409A ; +(ii) any payment due upon a change in control of the Company will be paid only if such change in control constitutes a “change in ownership” or “change in effective control” within the meaning of Section 409A, and in the event that such change in control does not constitute a “change in the ownership” or “change in the effective control” within the meaning of Section 409A, such award will vest upon the change in control and any payment will be delayed until the first compliant date under Section 409A; +(iii) any payment to be made with respect to any award (or any other payment under this Plan) that would be subject to the limitations in Section 409A(a)(2)(B) of the Code will be delayed until six months after the recipient’s separation from service (or earlier death) in accordance with the requirements of Section 409A; +(iv) to the extent necessary to comply with Section 409A, any other securities, other awards or other property that the Company may deliver in lieu of Shares in respect of an award will not have the effect of deferring delivery or payment beyond the date on which such delivery or payment would occur with respect to the Shares that would otherwise have been deliverable (unless the Committee elects a later date for this purpose in accordance with the requirements of Section 409A); +(v) if the award includes a “series of installment payments” (within the meaning of Section 1.409A-2(b)(2)(iii) of the Treasury Regulations), the recipient’s right to the series of installment payments will be treated as a right to a series of separate payments and not as a right to a single payment; +(vi) if the award includes “dividend equivalents” (within the meaning of Section 1.409A-3(e) of the Treasury Regulations), the recipient’s right to the dividend equivalents will be treated separately from the right to other amounts under the award; and +(vii) for purposes of determining whether the recipient has experienced a separation from service from the Company within the meaning of Section 409A, “subsidiary” will mean a corporation or other entity in a chain of corporations or other entities in which each corporation or other entity, starting with the Company, has a controlling interest in another corporation or other entity in the chain, ending with such corporation or other entity. For purposes of the preceding sentence, the term “controlling interest” has the same meaning as provided in Section 1.414(c)-2(b)(2)(i) of the Treasury Regulations, provided that the language “at least 20 percent” is used instead of “at least 80 percent” each place it appears in Section 1.414(c)-2(b)(2)(i) of the Treasury Regulations. +2020 PROXY STATEMENT 75 +ANNUAL +MEETING +AND +PROXY STATEMENT +September 17, 2020 +Whether or not you plan to attend the meeting, please sign and date the enclosed proxy card and return it in the enclosed envelope, or vote online or by telephone following the instructions on the proxy card. +76 NIKE, INC. +VOTE BY INTERNET +Before The Meeting - Go to www.proxyvote.com +Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Time on September 16, 2020. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. +During The Meeting - Go to www.virtualshareholdermeeting.com/NKE2020 +You may attend the meeting via the Internet and vote during the meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions. +VOTE BY PHONE - 1-800-690-6903 +Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time on September 16, 2020. Have your proxy card in hand when you call and then follow the instructions. +VOTE BY MAIL +Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. +NIKE, INC. +ANN M. MILLER +ONE BOWERMAN DRIVE +BEAVERTON, OR 97005-6453 +TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: +D21035-P43098 +KEEP THIS PORTION FOR YOUR RECORDS +DETACH AND RETURN THIS PORTION ONLY +THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. +NIKE, INC. +The Board of Directors recommends a vote FOR all the nominees listed in Proposal 1, a vote FOR Proposals 2, 3, and 4, and a vote AGAINST Proposal 5. +1. +Class A director nominees: To elect a Board of Directors for the ensuing year. +For +Withhold +1a. +Cathleen A. Benko +☐ +☐ +For +Against +Abstain +1b. +Elizabeth J. Comstock +☐ +☐ +2. +To approve executive compensation by an advisory vote. +☐ +☐ +☐ +1c. +John G. Connors +☐ +☐ +3. +To ratify the appointment of PricewaterhouseCoopers LLP as independent registered public accounting firm. +☐ +☐ +☐ +1d. +Timothy D. Cook +☐ +☐ +4. +To approve the Nike, Inc. Stock Incentive Plan, as amended and restated. +☐ +☐ +☐ +1e. +John J. Donahoe II +☐ +☐ +5. +To consider a shareholder proposal regarding political contributions disclosure. +☐ +☐ +☐ +1f. +Thasunda B. Duckett +☐ +☐ +6. +To transact such other business as may properly come before the meeting. +1g. +Travis A. Knight +☐ +☐ +1h. +Mark G. Parker +☐ +☐ +1i. +John W. Rogers, Jr. +☐ +☐ +Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title. +Signature [PLEASE SIGN WITHIN BOX] +Date +Signature (Joint Owners) +Date +2020 PROXY STATEMENT 77 +Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: +The proxy materials for the Annual Meeting are available at www.proxyvote.com. +D21036-P43098 +Proxy - NIKE, INC. +CLASS A COMMON STOCK PROXY +SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS +FOR THE 2020 ANNUAL MEETING OF SHAREHOLDERS +SEPTEMBER 17, 2020 +The undersigned hereby appoints Mark G. Parker, Travis A. Knight, and Michelle A. Peluso, and each of them, proxies with full power of substitution, to vote, as designated on the reverse side, on behalf of the undersigned, all shares of Class A Common Stock which the undersigned may be entitled to vote at the Annual Meeting of Shareholders of NIKE, Inc. on September 17, 2020, and any adjournments thereof, with all powers that the undersigned would possess if personally present. A majority of the proxies or substitutes present at the meeting may exercise all powers granted hereby. +THE SHARES REPRESENTED BY THE PROXY WILL BE VOTED AS SPECIFIED, BUT IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE NOMINEES FOR DIRECTOR FOR PROPOSAL 1, FOR PROPOSALS 2, 3, AND 4, AND AGAINST PROPOSAL 5. THE PROXIES MAY VOTE IN THEIR DISCRETION AS TO OTHER MATTERS WHICH MAY COME BEFORE THE MEETING. +YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. THE PROXIES CANNOT VOTE THESE SHARES UNLESS YOU SIGN AND RETURN THIS CARD OR PROPERLY VOTE BY PHONE OR INTERNET. +Continued and to be signed on reverse side +78 NIKE, INC. +VOTE BY INTERNET +Before The Meeting - Go to www.proxyvote.com +Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Time on September 16, 2020. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. +During The Meeting - Go to www.virtualshareholdermeeting.com/NKE2020 +You may attend the meeting via the Internet and vote during the meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions. +VOTE BY PHONE - 1-800-690-6903 +Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time on September 16, 2020. Have your proxy card in hand when you call and then follow the instructions. +VOTE BY MAIL +Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. +NIKE, INC. +ANN M. MILLER +ONE BOWERMAN DRIVE +BEAVERTON, OR 97005-6453 +TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: +D21037-P43098 +KEEP THIS PORTION FOR YOUR RECORDS +DETACH AND RETURN THIS PORTION ONLY +THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. +NIKE, INC. +The Board of Directors recommends a vote FOR all the nominees listed in Proposal 1, a vote FOR Proposals 2, 3, and 4, and a vote AGAINST Proposal 5. +1. +Class B director nominees: To elect a Board of Directors for the ensuing year. +For +Withhold +1a. +Alan B. Graf, Jr. +☐ +☐ +1b. +Peter B. Henry +☐ +☐ +1c. +Michelle A. Peluso +☐ +☐ +For +Against +Abstain +2. +To approve executive compensation by an advisory vote. +☐ +☐ +☐ +3. +To ratify the appointment of PricewaterhouseCoopers LLP as independent registered public accounting firm. +☐ +☐ +☐ +4. +To approve the Nike, Inc. Stock Incentive Plan, as amended and restated. +☐ +☐ +☐ +5. +To consider a shareholder proposal regarding political contributions disclosure. +☐ +☐ +☐ +6. +To transact such other business as may properly come before the meeting. +Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title. +Signature [PLEASE SIGN WITHIN BOX] +Date +Signature (Joint Owners) +Date +2020 PROXY STATEMENT 79 +Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: +The proxy materials for the Annual Meeting are available at www.proxyvote.com. +D21038-P43098 +Proxy - NIKE, INC. +CLASS B COMMON STOCK PROXY +SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS +FOR THE 2020 ANNUAL MEETING OF SHAREHOLDERS +SEPTEMBER 17, 2020 +The undersigned hereby appoints Mark G. Parker, Travis A. Knight, and Michelle A. Peluso, and each of them, proxies with full power of substitution, to vote, as designated on the reverse side, on behalf of the undersigned, all shares of Class B Common Stock which the undersigned may be entitled to vote at the Annual Meeting of Shareholders of NIKE, Inc. on September 17, 2020, and any adjournments thereof, with all powers that the undersigned would possess if personally present. A majority of the proxies or substitutes present at the meeting may exercise all powers granted hereby. +THE SHARES REPRESENTED BY THE PROXY WILL BE VOTED AS SPECIFIED, BUT IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE NOMINEES FOR DIRECTOR FOR PROPOSAL 1, FOR PROPOSALS 2, 3, AND 4, AND AGAINST PROPOSAL 5. THE PROXIES MAY VOTE IN THEIR DISCRETION AS TO OTHER MATTERS WHICH MAY COME BEFORE THE MEETING. +YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. THE PROXIES CANNOT VOTE THESE SHARES UNLESS YOU SIGN AND RETURN THIS CARD OR PROPERLY VOTE BY PHONE OR INTERNET. +Continued and to be signed on reverse side +80 NIKE, INC. \ No newline at end of file diff --git a/raw/proxies/0000320187/0000320187-20-000049/proxy_rpt.txt b/raw/proxies/0000320187/0000320187-20-000049/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..8812ea20fc8439a77e7b18aba61504918008d679 --- /dev/null +++ b/raw/proxies/0000320187/0000320187-20-000049/proxy_rpt.txt @@ -0,0 +1,5 @@ +TRANSACTIONS WITH RELATED PERSONS +Philip H. Knight, the father of NIKE director Travis A. Knight, serves as Chairman Emeritus, which provides a standing invitation for Philip H. Knight to attend meetings of the Board and its committees as a non-voting observer. In fiscal 2020, as Chairman Emeritus, Mr. Knight received an annual salary of $500,000, and medical and dental insurance coverage generally available to employees. +In connection with his retirement and in recognition of his substantial service and unique insights and experience, the Company entered into a consulting agreement with John R. Thompson, Jr., a member of the Company's Board in fiscal 2020. Pursuant to the terms of the agreement, effective June 1, 2020, Mr. Thompson serves as Director Emeritus of the Company and, when and as required by the Board, provides consulting services and advice to the Board and other officers of the Company as the Board may specify until such time as either party terminates the agreement by providing 30 days' written notice. As Director Emeritus, Mr. Thompson is eligible to attend meetings of the Board and certain committees as a non-voting observer. For his services and commitment, the Company will pay Mr. Thompson the same compensation and benefits he would have been eligible to receive for his service as a non-employee director as of June 1, 2020, which equals approximately $267,000, and reimburse him for reasonable expenses incurred in connection with his services. +Eric Sprunk’s daughter, Nicole Sprunk, was employed by the Company in a non-executive role in fiscal 2020 as a Brand Director. During fiscal 2020, the Company paid aggregate compensation to Nicole Sprunk of $330,113, comprised of salary, bonus, the value of stock granted, certain maternity leave benefits and matching contributions to the Company-sponsored retirement plan. The compensation and benefits received by Nicole Sprunk were consistent with compensation paid to other employees holding similar positions. +The Company’s written policy requires the Corporate Responsibility, Sustainability & Governance Committee to review any transaction or proposed transaction with a related person that would be required to be reported under Item 404(a) of Regulation S-K, and to determine whether to ratify or approve the transaction, with ratification or approval to occur only if the committee determines that the transaction is fair to the Company or that approval or ratification of the transaction is in the interest of the Company. \ No newline at end of file diff --git a/raw/proxies/0000320187/0000320187-21-000035/proxy.txt b/raw/proxies/0000320187/0000320187-21-000035/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..57b8bb16ee3359944193ab8db835bf7fd62864ac --- /dev/null +++ b/raw/proxies/0000320187/0000320187-21-000035/proxy.txt @@ -0,0 +1,1979 @@ +DEF 14A +1 +nike2021proxy.htm +DEF 14A +Document +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +Washington, D.C. 20549 +SCHEDULE 14A INFORMATION +Proxy Statement Pursuant to Section 14(a) of the +Securities Exchange Act of 1934 +(Amendment No. ) +Filed by the Registrant x Filed by a Party other than the Registrant ¨ +Check the appropriate box: +¨ Preliminary Proxy Statement +¨ +Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +x +Definitive Proxy Statement +¨ +Definitive Additional Materials +¨ +Soliciting Material under §240.14a-12 +NIKE, INC. +(Name of registrant as specified in its charter) +(Name of person(s) filing proxy statement, if other than the registrant) +Payment of Filing Fee (Check the appropriate box): +x +No fee required +¨ +Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11 +(1) +Title of each class of securities to which transaction applies: +(2) +Aggregate number of securities to which transaction applies: +(3) +Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): +(4) +Proposed maximum aggregate value of transaction: +(5) Total fee paid: +¨ +Fee paid previously with preliminary materials. +¨ +Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. +(1) +Amount Previously Paid: +(2) +Form, Schedule or Registration Statement No.: +(3) +Filing Party: +(4) +Date Filed: +MESSAGE FROM OUR +EXECUTIVE CHAIRMAN +To Our Shareholders: +Fiscal 2021 was an unprecedented year that required us to navigate with agility and resiliency. At NIKE, even in the midst of disruption, we are on the offense, and we believe that challenging times present the opportunity to focus on our unique advantages and emerge even stronger. As a Board, we bring that attitude and focus to corporate governance, because strong governance helps us execute against the complexities and create long-term value for shareholders — responsibly and sustainably. +During fiscal 2021, the Board oversaw the implementation of our Consumer Direct Acceleration strategy, which focuses on investing in and aligning against our biggest growth opportunities, including creating more premium and seamless consumer experiences while operating under a simple consumer construct. The Board also oversaw the transition of John Donahoe’s first full fiscal year as President and CEO, in which he and the rest of NIKE’s executive team skillfully guided NIKE through a year unlike any other. +As we look to our Annual Meeting of Shareholders, we are pleased to share our proxy statement with you. We are continuing with the format adopted in prior years, including the director skills matrix and expanded director biographies. Additionally, we have expanded our disclosures in the Compensation Discussion and Analysis section to update our shareholders on how we responded to their feedback following last year’s say-on-pay vote, and to enable our shareholders and constituents to understand our compensation philosophy, further enhance and clarify our disclosures, and present a more readable document generally. +We are pleased to invite you to attend the Annual Meeting of Shareholders of NIKE, Inc. to be held virtually on Wednesday, October 6, 2021, at 10:00 A.M. Pacific Time. Whether or not you plan to attend, the prompt execution and return of your proxy card will both assure that your shares are represented at the meeting and minimize the cost of proxy solicitation. Thank you for your continued support. +Sincerely, +"At NIKE, even in the midst of disruption, we are on the offense, and we believe that challenging times present the opportunity to focus on our unique advantages and emerge even stronger." +MARK G. PARKER, EXECUTIVE CHAIRMAN +August 9, 2021 +1 NIKE, INC. +NOTICE OF ANNUAL MEETING +OF SHAREHOLDERS +TO THE SHAREHOLDERS OF NIKE, INC. +You are cordially invited to the Annual Meeting of Shareholders of NIKE, Inc., an Oregon corporation: +DATE AND TIME: +Wednesday, October 6, 2021, +at 10:00 A.M. Pacific Time +LOCATION: +This year's meeting will be a virtual Annual Meeting at www.virtualshareholdermeeting.com/NKE2021 +ITEMS OF BUSINESS: +PROPOSAL +PAGE REFERENCE +1 To elect the 12 directors named in the accompanying proxy statement for the ensuing year. +Page 7 +Class A +Will elect nine directors. +Class B +Will elect three directors. +Holders of Class A Stock and holders of Class B Stock will vote together as one class on all other proposals. +2 To approve executive compensation by an advisory vote. +Page 29 +3 To ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm. +Page 55 +4 To consider a shareholder proposal regarding political contributions disclosure as described in the accompanying proxy statement, if properly presented at the meeting. +Page 57 +5 To consider a shareholder proposal regarding a human rights impact assessment as described in the accompanying proxy statement, if properly presented at the meeting. +Page 59 +6 To consider a shareholder proposal regarding supplemental pay equity disclosure as described in the accompanying proxy statement, if properly presented at the meeting. +Page 62 +7 To consider a shareholder proposal regarding diversity and inclusion efforts reporting as described in the accompanying proxy statement, if properly presented at the meeting. +Page 65 +8 To transact such other business as may properly come before the meeting. +Due to the public health impact of the COVID pandemic and to support the well-being of our employees and shareholders, we have decided to hold this year's Annual Meeting in a virtual format only. Shareholders of record at the close of business on August 6, 2021, the record date fixed by the Board of Directors, may attend the Annual Meeting, vote, and submit questions in advance of and during the meeting. To attend, vote at, and submit questions during, the Annual Meeting, visit www.virtualshareholdermeeting.com/NKE2021 and enter the 16-digit control number included in your Notice Regarding the Availability of Proxy Materials, voting instructions form, or proxy card. Questions may be submitted in advance of the Annual Meeting by visiting www.proxyvote.com and entering your 16-digit control number. +By Order of the Board of Directors, +Ann M. Miller +Vice President, Corporate Secretary, and Chief Ethics & Compliance Officer +Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders To Be Held on October 6, 2021. The proxy statement and NIKE, Inc.’s 2021 Annual Report to Shareholders are available online at www.investorvote.com or www.proxyvote.com, for registered and beneficial owners, respectively. +2021 PROXY STATEMENT 2 +TABLE OF CONTENTS +PAGE +NOTICE OF ANNUAL MEETING OF SHAREHOLDERS +2 +Proxy Statement +5 +Virtual Meeting +5 +Voting Securities and Vote Required +5 +CORPORATE GOVERNANCE +7 +PROPOSAL 1 +Election of Directors +7 +NIKE, Inc. Board of Directors +8 +Individual Board Skills Matrix +21 +Board Structure and Responsibilities +23 +Director Compensation for Fiscal 20 21 +27 +COMPENSATION DISCUSSION AND ANALYSIS +29 +PROPOSAL 2 +Shareholder Advisory Vote to Approve Executive Compensation +29 +Introduction +30 +Executive Summary +30 +Compensation of Our Named Executive Officers +34 +Our Compensation Process +44 +Other Compensation Practices +45 +Compensation Committee Report +46 +Executive Compensation Tables +47 +AUDIT MATTERS +55 +PROPOSAL 3 +Ratification of Appointment of Independent Registered Public Accounting Firm +55 +Report of the Audit & Finance Committee +56 +SHAREHOLDER PROPOSAL +57 +PROPOSAL 4 +To Consider a Shareholder Proposal Regarding Political Contributions Disclosure +57 +SHAREHOLDER PROPOSAL +59 +PROPOSAL 5 +To Consider a Shareholder Proposal Regarding a Human Rights Impact Assessment +59 +SHAREHOLDER PROPOSAL +62 +PROPOSAL 6 +To Consider a Shareholder Proposal Regarding Supplemental Pay Equity Disclosure +62 +SHAREHOLDER PROPOSAL +65 +PROPOSAL 7 +To Consider a Shareholder Proposal Regarding Diversity and Inclusion Efforts Reporting +65 +STOCK OWNERSHIP INFORMATION +68 +Stock Holdings of Certain Owners and Management +68 +3 NIKE, INC. +Delinquent Section 16(A) Reports +69 +Transactions with Related Persons +70 +OTHER MATTERS +70 +Shareholder Proposals +70 +2021 PROXY STATEMENT 4 +PROXY STATEMENT +We are furnishing proxy materials to our shareholders primarily via the Internet, by mailing a Notice Regarding the Availability of Proxy Materials, or "Notice", instead of mailing printed copies of those materials to each shareholder. The Notice directs shareholders to a website where they can access our proxy materials, including our proxy statement and our annual report, and view instructions on how to vote online or by telephone. If you would prefer to receive a paper copy of our proxy materials, please follow the instructions included in the Notice. If you have previously elected to receive our proxy materials electronically, you will continue to receive access to these materials electronically unless you elect otherwise. +The enclosed proxy is solicited by the Board of Directors (the "Board") of NIKE, Inc. ("NIKE" or the "Company") for use at the annual meeting of shareholders to be held on October 6, 2021, and at any adjournment thereof (the "Annual Meeting"). Our principal executive offices are located at One Bowerman Drive, Beaverton, Oregon 97005-6453. This proxy statement is first being made available to shareholders on or about August 17, 2021. Shareholders may submit a proxy to vote at the Annual Meeting by following the instructions on the Notice, online or by telephone, or (if they have received paper copies of the proxy materials) by returning a proxy card. +The Company will bear the cost of soliciting proxies. In addition to soliciting proxies by mail, certain officers and employees of the Company, without extra compensation, may also solicit proxies personally or by telephone. Copies of proxy solicitation materials will be furnished to fiduciaries, custodians, and brokerage houses for forwarding to the beneficial owners of shares held in their names. We may retain Georgeson, Inc. to solicit proxies at a cost we anticipate will not exceed $17,500. +Shares that are properly voted online or by telephone or for which proxy cards are properly executed and received by the Company prior to the Annual Meeting will be voted in accordance with the instructions specified in such proxies. Where no instructions are given, shares will be voted "FOR" the election of each of the named nominees for director (Proposal 1), "FOR" the proposal regarding an advisory vote to approve executive compensation (Proposal 2), "FOR" the ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm (Proposal 3), "AGAINST" the shareholder proposal regarding political contributions disclosure (Proposal 4), "AGAINST" the shareholder proposal regarding a human rights impact assessment (Proposal 5), "AGAINST" the shareholder proposal regarding supplemental pay equity disclosure (Proposal 6), and "AGAINST" the shareholder proposal regarding diversity and inclusion efforts reporting (Proposal 7). +A shareholder giving the enclosed proxy has the power to revoke it at any time before it is exercised by affirmatively electing to vote at the meeting or by delivering to Ms. Ann M. Miller, Vice President, Corporate Secretary, and Chief Ethics & Compliance Officer of NIKE, Inc., either an instrument of revocation or an executed proxy bearing a later date. +VIRTUAL MEETING +Due to the public health impact of the COVID pandemic and to support the well-being of our employees and shareholders, we have decided to hold this year’s Annual Meeting in a virtual meeting format only. Shareholders of record at the close of business on August 6, 2021 may attend the Annual Meeting, vote, and submit questions in advance of and during the meeting. To attend, vote at, and submit questions during the Annual Meeting, visit www.virtualshareholdermeeting.com/NKE2021 and enter the 16-digit control number included in your Notice, voting instructions form, or proxy card. Online access to the webcast will open approximately 15 minutes prior to the start of the Annual Meeting to allow time for you to log in and test the computer audio system. To submit questions in advance of the Annual Meeting, visit www.proxyvote.com before 11:59 P.M. Eastern Time on October 5, 2021 and enter the 16-digit control number included in your Notice, voting instructions form, or proxy card. +VOTING SECURITIES AND VOTE REQUIRED +Holders of record of NIKE’s Class A Common Stock ("Class A Stock") and holders of record of NIKE’s Class B Common Stock ("Class B Stock" and together with the Class A Stock, the "Common Stock") at the close of business on August 6, 2021 will be entitled to vote at the Annual Meeting. On that date, 305,011,252 shares of Class A Stock and 1,278,086,797 shares of Class B Stock were issued and outstanding. Neither class of Common Stock has cumulative voting rights. +Each share of Class A Stock and each share of Class B Stock is entitled to one vote on every matter submitted to the applicable shareholders at the Annual Meeting. +A majority of the votes entitled to be cast on Proposal 1, the election of directors, by each of the Class A Stock and Class B Stock separately constitutes a quorum of Class A Stock and Class B Stock, respectively, for action on Proposal 1. The holders of Class A Stock and the holders of Class B Stock will vote separately on Proposal 1. Holders of Class B Stock are currently entitled to elect 25 percent of the Board, rounded up to the next whole number. Holders of Class A Stock are currently entitled to elect the remaining directors. Under this formula, holders of Class B Stock, voting separately, will elect three directors, and holders of Class A Stock, voting separately, will elect nine directors. Under Oregon law and our Bylaws, if a quorum of each class of Common Stock is present at the meeting, the three director nominees who receive the greatest number of votes cast by holders +5 NIKE, INC. +of Class B Stock and the nine director nominees who receive the greatest number of votes cast by holders of Class A Stock will be elected directors. +A majority of the votes entitled to be cast on Proposals 2, 3, 4, 5, 6, and 7 by both Class A Stock and Class B Stock together constitutes a quorum for action on those proposals. Holders of Class A Stock and holders of Class B Stock will vote together as one class on Proposals 2, 3, 4, 5, 6, and 7. If a quorum is present at the meeting, Proposals 2, 3, 4, 5, 6, and 7 will be approved if the votes cast in favor of the proposal exceed the votes cast against the proposal. +Abstentions and broker non-votes are counted for purposes of determining whether a quorum exists. Abstentions and broker non-votes are not included as votes cast and will not affect the outcome of any of the proposals. Broker non-votes occur when a person holding shares in street name, such as through a brokerage firm, does not provide instructions as to how to vote those shares and the broker does not then vote those shares on the shareholder’s behalf. +2021 PROXY STATEMENT 6 +CORPORATE GOVERNANCE +PROPOSAL 1 +ELECTION OF DIRECTORS +A Board of 12 directors will be elected at the Annual Meeting. Directors will hold office until the next annual meeting of shareholders or until their successors are elected and qualified. All of the nominees were elected at the 2020 annual meeting of shareholders. +Mr. Alan B. Graf, Jr., Dr. Peter B. Henry, and Ms. Michelle A. Peluso are nominated by the Board for election by the holders of Class B Stock. The other nine nominees are nominated by the Board for election by the holders of Class A Stock. +Under Oregon law and our Bylaws, if a quorum of each class of shareholders is present at the Annual Meeting, the nine director nominees who receive the greatest number of votes cast by holders of Class A Stock and the three director nominees who receive the greatest number of votes cast by holders of Class B Stock will be elected directors. Abstentions and broker non-votes will have no effect on the results of the vote. Unless otherwise instructed, proxy holders will vote the proxies they receive for the nominees listed below. If any nominee becomes unable to serve, the holders of the proxies may, in their discretion, vote the shares for a substitute nominee or nominees designated by the Board. +The Bylaws and the Corporate Governance Guidelines of the Company provide that any nominee for director in an uncontested election who receives a greater number of votes "withheld" from his or her election than votes "for" such election shall tender his or her resignation for consideration by the Corporate Responsibility, Sustainability & Governance Committee. The committee will recommend to the Board the action to be taken with respect to the resignation. The Board will publicly disclose its decision within 90 days after the certification of the election results. +Background information on the nominees as of August 9, 2021, including certain of the attributes that led to their selection, appears below. The Corporate Responsibility, Sustainability & Governance Committee has determined that each director meets the qualification standards described below under "Individual Board Skills Matrix—Director Nominations". In addition, the Board firmly believes that the experience, attributes, and skills of any single director nominee should not be viewed in isolation, but rather in the context of the experience, attributes, and skills that all director nominees bring to the Board as a whole, each of which contributes to the function of an effective Board. +BOARD RECOMMENDATION +The Board of Directors recommends that the Class A Shareholders vote FOR the election of nominees to the Board of Directors +The Board of Directors recommends that the Class B Shareholders vote FOR the election of nominees to the Board of Directors +7 NIKE, INC. +NIKE, INC. BOARD OF DIRECTORS +BOARD OVERVIEW +Our Board is currently comprised of 12 individuals selected on the basis of numerous criteria, including experience and achievements, fields of significant knowledge, good character, sound judgment, and diversity. We view the effectiveness of our Board both through an individual and collective lens and believe that our Board is optimized to support and guide the Company. +GENDER DIVERSITY +GENDER/ETHNIC DIVERSITY +AGE +TENURE +BOARD SKILLS, EXPERIENCES, AND QUALIFICATIONS +DIVERSITY 6 /12 +Gender or ethnic diversity that adds a range of perspectives and expands the Board’s understanding of the needs and viewpoints of consumers, employees, and other stakeholders worldwide. +FINANCIAL EXPERTISE 10 /12 +Financial expertise assists our Board in overseeing our financial statements, capital structure, and internal controls. +CEO EXPERIENCE 7 / 12 +CEO experience brings leadership qualifications and skills that help our Board to capably advise, support, and oversee our management team, including regarding our strategy to drive long-term value. +INTERNATIONAL 9 / 12 +International exposure yields an understanding of diverse business environments, economic conditions, and cultural perspectives that informs our global business and strategy and enhances oversight of our multinational operations. +DIGITAL/TECHNOLOGY 6 /12 +Technology experience helps our Board oversee cybersecurity and advise our management team as we seek to enhance the consumer experience and further develop our multi-channel strategy. +RETAIL INDUSTRY 5 /12 +Retail experience brings a deep understanding of factors affecting our industry, operations, business needs, and strategic goals. +MEDIA 2 /12 +Media experience provides the Board with insight about connecting with consumers and other stakeholders in a timely and impactful manner. +ACADEMIA 1 /12 +Academia provides organizational management experience and knowledge of current issues in academia and thought leadership. +HR/TALENT MANAGEMENT 6 /12 +HR and talent management experience assists our Board in overseeing executive compensation, succession planning, and employee engagement. +GOVERNANCE 8 /12 +Public company board experience provides insight into new and best practices which informs our commitment to excellence in corporate governance. +CORPORATE GOVERNANCE HIGHLIGHTS +ü 9 out of 12 directors are independent +ü Separate Chairman, CEO, and Lead Independent Director positions with clearly defined roles +ü Refreshed Board and committee structure, with 4 new independent directors added in last 4 fiscal years +ü Retirement policy generally requires that directors do not stand for election after reaching the age of 72 +2021 PROXY STATEMENT 8 +NOMINEES FOR ELECTION BY CLASS A SHAREHOLDERS +CATHLEEN A. BENKO +AGE +DIRECTOR SINCE +COMMITTEE +OTHER CURRENT +PUBLIC DIRECTORSHIPS +FAVORITE NIKE PRODUCT(S) +63 2018 +Compensation +Prime Impact Capital +Converse All Star Platform, Nike Space Hippie, Nike VaporMax, and Nike AeroLoft Jacket +SKILLS, EXPERIENCES AND QUALIFICATIONS +DIVERSITY +DIGITAL/TECHNOLOGY +HR/TALENT MANAGEMENT +INTERNATIONAL +Ms. Benko is a former Vice Chairman and Managing Principal of Deloitte LLP ("Deloitte"), an organization that, through its subsidiaries and network of member firms, provides audit, consulting, tax, and advisory services to clients globally. During her nearly 30-year career with Deloitte, Ms. Benko held many leadership roles, several concurrent with her appointment as Vice Chairman and Managing Principal in 2011. +• From 2015 to 2018, Ms. Benko served as Senior Partner working within the firm's "Digital Giants" practice where she was the senior advisory partner for several digital-native companies. +• From 2010 to 2014, Ms. Benko served as Chief Digital, Brand, and Communications Officer. +• Previous to her role as Chief Digital, Brand, and Communications Officer, Ms. Benko held multiple technology and talent management roles, including serving as the company’s first Vice Chairman and Chief Talent Officer from 2006 to 2010, its Chief Inclusion Officer from 2008 to 2010, and as Managing Principal, Initiative for the Retention and Advancement of Women, from 2003 to 2009. +• Ms. Benko led Deloitte’s technology sector from 2003 to 2007 and was previously Deloitte’s first Global e-Business Leader, a position she held from 1998 to 2002. +Ms. Benko is a member of the Board of Directors of Prime Impact Capital. In addition to this public company board service, she also holds board positions at nonprofits Stanford Institute for Research in the Social Sciences, the International Women's Forum, American Corporate Partners, and the National Association of Corporate Directors. She is also on the board of WorkBoard, a privately-held company. Ms. Benko is chair of Harvard Business School/NC’s Advisory Council. +9 NIKE, INC. +ELIZABETH J. COMSTOCK +AGE +DIRECTOR SINCE +COMMITTEE +OTHER CURRENT +PUBLIC DIRECTORSHIPS +FAVORITE NIKE PRODUCT(S) +60 2011 +Compensation +EVgo Inc. +Nike Air Force 1, Nike React, and Nike Lab +SKILLS, EXPERIENCES AND QUALIFICATIONS +DIVERSITY +DIGITAL/TECHNOLOGY +MEDIA +INTERNATIONAL +Ms. Comstock is a Co-Founder and Chief Commercial Officer of Climate Real Impact Solutions (“CRIS”), which is a climate-focused investment company and advisor to several emerging companies. +• Previously, Ms. Comstock was the Vice Chair of General Electric Company (“GE”). She led GE’s efforts to accelerate new growth and operated GE Business Innovations, which included Current, GE Lighting, GE Ventures & Licensing and GE sales, marketing and communications. Before her appointment as Vice Chair, Ms. Comstock was appointed to various management positions at GE: +• Senior Vice President, Chief Marketing and Commercial Officer in 2008, +• President, NBC Universal Integrated Media in 2006, +• Corporate Vice President and Chief Marketing Officer in 2003, +• Vice President of Corporate Communications in 1998, +• Senior Vice President, NBC Corporate Communications in 1996, and +• Vice President, Communications, NBC News Communications in 1994. +• Prior to joining GE in 1994, Ms. Comstock held a succession of positions at NBC, CBS, and Turner Broadcasting. +Ms. Comstock is a member of the Board of Directors of EVgo Inc. In addition to this public company board service, she is also a trustee of The National Geographic Society and Visiting Scholar at the Columbia University Center for Science and Society. +2021 PROXY STATEMENT 10 +JOHN G. CONNORS +AGE +DIRECTOR SINCE +COMMITTEE +OTHER CURRENT +PUBLIC DIRECTORSHIPS +FAVORITE NIKE PRODUCT(S) +62 2005 +Audit & Finance +None +Nike Epic React +SKILLS, EXPERIENCES AND QUALIFICATIONS +FINANCIAL EXPERTISE +DIGITAL/TECHNOLOGY +GOVERNANCE +INTERNATIONAL +Mr. Connors is a partner in Ignition Partners LLC, a Seattle-area venture capital firm. +• Mr. Connors served as Senior Vice President and Chief Financial Officer of Microsoft Corporation ("Microsoft") from December 1999 to May 2005. +• Mr. Connors joined Microsoft in 1989 and held various management positions, including: +• Vice President, Worldwide Enterprise Group in 1999, +• Chief Information Officer from 1996 to 1999, and +• Corporate Controller from 1994 to 1996. +Mr. Connors is a member of the Board of Directors of privately held companies ICERTIS, Inc., Tempered Networks Inc., Symend Inc., KenSci Inc., Carbon Robotics, and Traceable, Inc., and is on the Board of the Washington Policy Center. He served on the Board of Directors of Splunk Inc. from April 2012 until May 2021. +11 NIKE, INC. +TIMOTHY D. COOK, LEAD INDEPENDENT DIRECTOR +AGE +DIRECTOR SINCE +COMMITTEE +OTHER CURRENT +PUBLIC DIRECTORSHIPS +FAVORITE NIKE PRODUCT(S) +60 2005 +Compensation, Chair +Apple Inc. +Nike Epic React and Nike Flex Golf Shorts +SKILLS, EXPERIENCES AND QUALIFICATIONS +FINANCIAL EXPERTISE +DIGITAL/TECHNOLOGY +HR/TALENT MANAGEMENT +CEO EXPERIENCE +RETAIL INDUSTRY +GOVERNANCE +INTERNATIONAL +Mr. Cook is the Company’s Lead Independent Director and is the Chief Executive Officer of Apple Inc. ("Apple"). +• Mr. Cook joined Apple in March 1998 as Senior Vice President of Worldwide Operations and also served as its Executive Vice President, Worldwide Sales and Operations and Chief Operating Officer. +• Mr. Cook was Vice President, Corporate Materials for Compaq Computer Corporation from 1997 to 1998. +• Previous to his work at Compaq, Mr. Cook served in the positions of Senior Vice President Fulfillment and Chief Operating Officer of the Reseller Division at Intelligent Electronics from 1994 to 1997. +• Mr. Cook also worked for International Business Machines Corporation from 1983 to 1994, most recently as Director of North American Fulfillment. +Mr. Cook is a member of the Board of Directors of Apple. In addition to this public company board service, he is also a member of the Board of Directors of the National Football Foundation and Duke University Board of Trustees. +2021 PROXY STATEMENT 12 +JOHN J. DONAHOE II +AGE +DIRECTOR SINCE +COMMITTEE +OTHER CURRENT +PUBLIC DIRECTORSHIPS +FAVORITE NIKE PRODUCT(S) +61 2014 +Executive +PayPal Holdings, Inc. +Jordan ADG 2 and Nike Tech Pack Hoodie +SKILLS, EXPERIENCES AND QUALIFICATIONS +FINANCIAL EXPERTISE +DIGITAL/TECHNOLOGY +HR/TALENT MANAGEMENT +CEO EXPERIENCE +RETAIL INDUSTRY +GOVERNANCE +INTERNATIONAL +Mr. Donahoe is President and Chief Executive Officer of NIKE, Inc. and has been a director since 2014. +• From 2017 to 2019, Mr. Donahoe served as President and Chief Executive Officer of ServiceNow, Inc. ("ServiceNow"), provider of enterprise cloud computing services for global enterprises. +• From 2008 to 2015, Mr. Donahoe served as President and Chief Executive Officer of eBay, Inc. ("eBay"), provider of the global eBay.com online marketplace and PayPal digital payments platform. +• Mr. Donahoe joined eBay in 2005 as President of eBay Marketplaces, responsible for eBay’s global e-Commerce businesses. +• Prior to joining eBay, Mr. Donahoe was the Chief Executive Officer and Worldwide Managing Director of Bain & Company from 1999 to 2005, and a Managing Director from 1992 to 1999. +Mr. Donahoe is Chairman and a member of the Board of Directors of PayPal Holdings, Inc. In addition to this public company board service, he also serves on the Board of Trustees for The Bridgespan Group. Mr. Donahoe served on the Board of Directors of Intel Corporation from March 2009 to May 2017, and ServiceNow from March 2017 to June 2020. +13 NIKE, INC. +THASUNDA B. DUCKETT +AGE +DIRECTOR SINCE +COMMITTEE +OTHER CURRENT +PUBLIC DIRECTORSHIPS +FAVORITE NIKE PRODUCT(S) +48 2019 +Corporate Responsibility, Sustainability & Governance +None +Air Jordans, Nike Air Force 1, and Nike Pegasus +SKILLS, EXPERIENCES AND QUALIFICATIONS +DIVERSITY +FINANCIAL EXPERTISE +CEO EXPERIENCE +RETAIL INDUSTRY +HR/TALENT MANAGEMENT +Ms. Duckett is President and Chief Executive Officer of the Teachers Insurance and Annuity Association of America ("TIAA"), a leading provider of financial services in the academic, research, medical, cultural and governmental fields. +• Prior to joining TIAA, Ms. Duckett was Chief Executive Officer of Chase Consumer Banking at JPMorgan Chase & Co. ("JPMorgan Chase") from 2016 to 2021. Before that appointment, Ms. Duckett was appointed to various management positions at JPMorgan Chase, including: +• From 2013 to 2016, Ms. Duckett served as the Chief Executive Officer of Chase Auto Finance, and +• From 2004 to 2013, Ms. Duckett held multiple management and consumer lending roles. +• Prior to joining JPMorgan Chase, Ms. Duckett was Director of Emerging Markets at the Federal National Mortgage Association, or Fannie Mae. +Ms. Duckett is chair of the Otis and Rosie Brown Foundation and a member of the Board of Directors of the Children’s Learning Center of Fairfax County and the Robert F. Kennedy Human Rights. +2021 PROXY STATEMENT 14 +TRAVIS A. KNIGHT +AGE +DIRECTOR SINCE +COMMITTEE +OTHER CURRENT +PUBLIC DIRECTORSHIPS +FAVORITE NIKE PRODUCT(S) +47 2015 +Executive +None +Nike Air Zoom Pegasus +SKILLS, EXPERIENCES AND QUALIFICATIONS +FINANCIAL EXPERTISE +CEO EXPERIENCE +MEDIA +Mr. Knight is the President and Chief Executive Officer of the animation studio, LAIKA, LLC ("LAIKA"), which specializes in feature-length films. +• Mr. Knight has been involved in all principal creative and business decisions at LAIKA since its founding in 2003, serving in successive management positions as Lead Animator, Vice President of Animation, and then as President and Chief Executive Officer in 2009. +• Mr. Knight was Producer and Director of the feature film Kubo and the Two Strings (2017) which was nominated for an Academy Award and winner of the BAFTA award for Best Animated Film. +• Mr. Knight has served as Producer and Lead Animator on Academy Award-nominated feature-length films The Boxtrolls (2014) and ParaNorman (2012), for which he won an Annie Award for Outstanding Achievement in Character Animation, and Lead Animator for Coraline (2009). +• Prior to his work at LAIKA, Mr. Knight held various animation positions at Will Vinton Studios from 1998 to 2002, and as a stop-motion animator for television series, commercials, and network promotions. He has been recognized for his work on the Emmy Award-winning stop-motion animated television series The PJs. +Mr. Knight serves on the Board of Directors of LAIKA. He is the son of NIKE’s co-founder, Mr. Philip Knight, who currently serves as Chairman Emeritus. In addition to his skills and qualifications described above, Mr. Travis Knight was selected to serve on the Board because he has a significant role in the management of the Class A Stock owned by Swoosh, LLC, strengthening the alignment of the Board with the interests of NIKE shareholders. +15 NIKE, INC. +MARK G. PARKER, EXECUTIVE CHAIRMAN OF THE BOARD +AGE +DIRECTOR SINCE +COMMITTEE +OTHER CURRENT +PUBLIC DIRECTORSHIPS +FAVORITE NIKE PRODUCT +65 2006 +Executive, Chair +The Walt Disney Company +Nike Pegasus, Nike Air Max, and Nike React Infinity Run +SKILLS, EXPERIENCES AND QUALIFICATIONS +FINANCIAL EXPERTISE +INTERNATIONAL +HR/TALENT MANAGEMENT +CEO EXPERIENCE +RETAIL INDUSTRY +GOVERNANCE +Mr. Parker is Executive Chairman of the Board of Directors of the Company. He served as President and Chief Executive Officer of the Company from 2006 to January 2020. +• Mr. Parker has been employed by NIKE since 1979 with primary responsibilities in product research, design and development, marketing, and brand management. +• Mr. Parker was appointed: +• President and Chief Executive Officer in 2006, +• President of the NIKE Brand in 2001, +• Vice President of Global Footwear in 1998, +• General Manager in 1993, +• Corporate Vice President in 1989, and +• Divisional Vice President in charge of product development in 1987. +Mr. Parker is a member of the Board of Directors of The Walt Disney Company. In addition to his skills and qualifications described above, Mr. Parker was selected to serve on the Board because the experience gained while serving as the Company's Chief Executive Officer makes his position as Executive Chairman of the Board instrumental. +2021 PROXY STATEMENT 16 +JOHN W. ROGERS, JR. +AGE +DIRECTOR SINCE +COMMITTEE +OTHER CURRENT +PUBLIC DIRECTORSHIPS +FAVORITE NIKE PRODUCT(S) +63 2018 +Corporate Responsibility, +Sustainability & Governance +McDonald’s Corporation and The New York Times Company +Nike KD and Nike LeBron Basketball Shoes +SKILLS, EXPERIENCES AND QUALIFICATIONS +DIVERSITY +CEO EXPERIENCE +GOVERNANCE +FINANCIAL EXPERTISE +Mr. Rogers is Chairman, Co-Chief Executive Officer, and Chief Investment Officer of Ariel Investments, LLC, a privately-held money management firm he founded in 1983, which serves individual and institutional investors through its mutual funds and separate accounts. Mr. Rogers is a Trustee of Ariel Investment Trust, the investment company consisting of the five mutual funds his firm manages. +• In 2008, Mr. Rogers was awarded Princeton University’s highest honor, the Woodrow Wilson Award, presented each year to the alumnus whose career embodies a commitment to national service. +• Mr. Rogers served as co-chair for the Presidential Inaugural Committee 2009, and more recently, joined the Barack Obama Foundation’s Board of Directors. +Mr. Rogers is a member of the Board of Directors of McDonald’s Corporation and The New York Times Company. In addition to this public company board service, he also serves as trustee of the University of Chicago, a member of the Board of Directors of the Robert F. Kennedy Human Rights, and the National Association of Basketball Coaches (NABC) Foundation, Inc., and a life trustee of the Chicago Symphony Orchestra. Mr. Rogers served on the Board of Directors of Exelon Corporation from October 2000 until April 2019. +BOARD RECOMMENDATION +The Board of Directors recommends that the Class A Shareholders vote FOR the election of the nominees above to the Board of Directors. +17 NIKE, INC. +NOMINEES FOR ELECTION BY CLASS B SHAREHOLDERS +ALAN B. GRAF, JR. +AGE +DIRECTOR SINCE +COMMITTEE +OTHER CURRENT +PUBLIC DIRECTORSHIPS +FAVORITE NIKE PRODUCT(S) +67 2002 +Audit & Finance, Chair +Mid-America Apartment Communities, Inc. +Nike Revolution +SKILLS, EXPERIENCES AND QUALIFICATIONS +FINANCIAL EXPERTISE +INTERNATIONAL +GOVERNANCE +Mr. Graf is the former Executive Vice President and Chief Financial Officer of FedEx Corporation ("FedEx"), a position he held from 1998 until his retirement in December 2020. +• Mr. Graf joined FedEx in 1980 and was Senior Vice President and Chief Financial Officer for FedEx Express, FedEx’s predecessor, from 1991 to 1998. +Mr. Graf is a member of the Board of Directors of Mid-America Apartment Communities, Inc. In addition to this public company board service, he is also a director of the Indiana University Foundation and Methodist Le Bonheur Healthcare, and a trustee of the University of Memphis. Mr. Graf previously served on the Board of Directors of Kimball International Inc., Storage USA, Inc., and Arkwright Mutual Insurance Co. +2021 PROXY STATEMENT 18 +PETER B. HENRY +AGE +DIRECTOR SINCE +COMMITTEE +OTHER CURRENT +PUBLIC DIRECTORSHIPS +FAVORITE NIKE PRODUCT(S) +52 2018 +Audit & Finance +Citigroup Inc. +Nike Epic React +SKILLS, EXPERIENCES AND QUALIFICATIONS +DIVERSITY +INTERNATIONAL +GOVERNANCE +FINANCIAL EXPERTISE +ACADEMIA +Dr. Henry is Dean Emeritus of New York University’s Leonard N. Stern School of Business and the William R. Berkley Professor of Economics and Finance. +• Dr. Henry assumed the Deanship of the Stern School of Business in January 2010 and served through December 2017. +• Prior to joining Stern, Dr. Henry was the Konosuke Matsushita Professor of International Economics at the Stanford University Graduate School of Business. +• In June 2009, President Obama appointed Dr. Henry to the President’s Commission on White House Fellowships. +• In 2008, Dr. Henry led Barack Obama’s Presidential Transition Team in its review of international lending agencies such as the IMF and the World Bank. +Dr. Henry is a member of the Board of Directors of Citigroup Inc. In addition to this public company board service, he also serves on the Board of Directors of the National Bureau of Economic Research and the Economic Club of New York and serves on the Advisory Board for Protiviti. Dr. Henry is a member of the Council of Foreign Relations and the Economic Advisory Panel of the Federal Reserve Bank of New York. Dr. Henry served on the Board of Directors of General Electric from July 2016 until April 2018 and Kraft Foods Group, Inc. and its predecessor, Kraft Foods Inc., from May 2011 until July 2015. +19 NIKE, INC. +MICHELLE A. PELUSO +AGE +DIRECTOR SINCE +COMMITTEE +OTHER CURRENT +PUBLIC DIRECTORSHIPS +FAVORITE NIKE PRODUCT(S) +49 2014 +Corporate Responsibility, +Sustainability & Governance, Chair +None +Nike React Infinity Run, Nike Space Hippie, Nike ESC, and Nike Epic Luxe Run Tights +SKILLS, EXPERIENCES AND QUALIFICATIONS +DIVERSITY +INTERNATIONAL +HR/TALENT MANAGEMENT +FINANCIAL EXPERTISE +DIGITAL/TECHNOLOGY +GOVERNANCE +CEO EXPERIENCE +RETAIL INDUSTRY +Ms. Peluso is Executive Vice President and Chief Customer Officer at CVS Health, a diversified health services company, and has direct oversight for CVS Health’s marketing and brand strategy, digital transformation, and the end-to-end consumer experience. +• Prior to joining CVS Health, Ms. Peluso was Senior Vice President, Digital Sales and Chief Marketing Officer at IBM from 2016 to 2021. She oversaw marketing and brand strategy and execution, digital sales, and the commercial business, globally. She was also responsible for the company's client experience. +• Prior to her work at IBM, Ms. Peluso served as Chief Executive Officer of online shopping destination Gilt Groupe, Inc. (“Gilt”) from 2013 until its sale to Hudson’s Bay Company in February 2016 and was on Gilt’s Board of Directors from 2009 to 2016. +• From 2009 to 2013, Ms. Peluso served as Global Consumer Chief Marketing and Internet Officer of Citigroup Inc. +• From 2002 to 2009, Ms. Peluso held senior management positions at Travelocity.com LP ("Travelocity"), being appointed Chief Operating Officer in March 2003, and President and Chief Executive Officer in December 2003. +• Prior to joining Travelocity, in 1999 Ms. Peluso founded Site59, an online travel site, serving as its Chief Executive Officer until its acquisition by Travelocity in 2002. +Ms. Peluso is a member of the Board of Directors at the Ad Council and is on the Executive Council of the Board of Directors of the Association of National Advertisers. She is also a director of the nonprofit TechnoServe. +BOARD RECOMMENDATION +The Board of Directors recommends that the Class B Shareholders vote FOR the election of the nominees above to the Board of Directors. +2021 PROXY STATEMENT 20 +INDIVIDUAL BOARD SKILLS MATRIX +EXPERIENCE, EXPERTISE, OR ATTRIBUTES +BENKO +COMSTOCK +CONNORS +COOK +DONAHOE +DUCKETT +GRAF +HENRY +KNIGHT +PARKER +PELUSO +ROGERS +DIVERSITY +Gender or ethnic diversity that adds a range of perspectives and expands the Board’s understanding of the needs and viewpoints of consumers, employees, and other stakeholders worldwide. +ü +ü +ü +ü +ü +ü +FINANCIAL EXPERTISE +Financial expertise assists our Board in overseeing our financial statements, capital structure, and internal controls. +ü +ü +ü +ü +ü +ü +ü +ü +ü +ü +CEO EXPERIENCE +CEO experience brings leadership qualifications and skills that help our Board to capably advise, support, and oversee our management team, including regarding our strategy to drive long-term value. +ü +ü +ü +ü +ü +ü +ü +INTERNATIONAL +International exposure yields an understanding of diverse business environments, economic conditions, and cultural perspectives that informs our global business and strategy and enhances oversight of our multinational operations. +ü +ü +ü +ü +ü +ü +ü +ü +ü +DIGITAL/TECHNOLOGY +Technology experience helps our Board oversee cybersecurity and advise our management team as we seek to enhance the consumer experience and further develop our multi-channel strategy. +ü +ü +ü +ü +ü +ü +RETAIL INDUSTRY +Retail experience brings a deep understanding of factors affecting our industry, operations, business needs, and strategic goals. +ü +ü +ü +ü +ü +MEDIA +Media experience provides the Board with insight about connecting with consumers and other stakeholders in a timely and impactful manner. +ü +ü +ACADEMIA +Academia provides organizational management experience and knowledge of current issues in academia and thought leadership. +ü +HR/TALENT MANAGEMENT +HR and talent management experience assists our Board in overseeing executive compensation, succession planning, and employee engagement. +ü +ü +ü +ü +ü +ü +GOVERNANCE +Public company board experience provides insight into new and best practices which informs our commitment to excellence in corporate governance. +ü +ü +ü +ü +ü +ü +ü +ü +21 NIKE, INC. +DIRECTOR NOMINATIONS +The Board of Directors takes an "evergreen" approach to Board refreshment, cultivating relationships with top talent on an ongoing basis. The Corporate Responsibility, Sustainability & Governance Committee identifies potential director candidates through a variety of means, including recommendations from members of the Corporate Responsibility, Sustainability & Governance Committee or the Board, suggestions from Company management, and shareholder recommendations. The committee may, in its discretion, engage director search firms to identify candidates. Shareholders may recommend director candidates for consideration by the Corporate Responsibility, Sustainability & Governance Committee by submitting a written recommendation to the committee, c/o Ann M. Miller, Vice President, Corporate Secretary, and Chief Ethics & Compliance Officer, NIKE, Inc., One Bowerman Drive, Beaverton, Oregon 97005-6453. The recommendation should include the candidate’s name, age, qualifications (including principal occupation and employment history), and written consent to be named as a nominee in the Company’s proxy statement and to serve as a director, if elected. +The Board of Directors has adopted qualification standards for the selection of non-management nominees for director, which can be found at our corporate website: http://investors.nike.com. As provided in these standards and the Company’s corporate governance guidelines, nominees for director are selected on the basis of, among other things, distinguished business experience or other non-business achievements; education; significant knowledge of international business, finance, marketing, technology, human resources, diversity & inclusion, law, or other fields which are complementary to, and balance the knowledge of, other Board members; a desire to represent the diverse interests of all stakeholders; independence; good character; ethics; sound judgment; diversity; and ability to devote substantial time to discharge Board responsibilities. +The Corporate Responsibility, Sustainability & Governance Committee identifies qualified potential candidates without regard to their age, gender, race, national origin, sexual orientation, or religion. While the Board has no policy regarding Board member diversity, the Corporate Responsibility, Sustainability & Governance Committee considers and discusses diversity in selecting nominees for director and in the re-nomination of an incumbent director. The committee views diversity broadly to include, among other things, differences in backgrounds, qualifications, experiences, viewpoint, geographic location, education, skills and expertise (including financial, accounting, compliance, corporate social responsibility, public policy, cybersecurity, or other expertise relevant to service on the Board), professional and industry experience, and personal characteristics (including gender, ethnicity/race, and sexual orientation). The Board believes that a variety and balance of perspectives on the Board results in more thoughtful and robust deliberations, and ultimately, better decisions. +In considering the re-nomination of an incumbent director, the Corporate Responsibility, Sustainability & Governance Committee reviews the director’s overall service to the Company during his or her term, including the number of meetings attended, level of participation, and quality of performance, as well as any special skills, experience, or diversity that such director brings to the Board. All potential new director candidates, whether recommended by shareholders or identified by other means, are initially screened by the Chair of the Corporate Responsibility, Sustainability & Governance Committee, who may seek additional information about the background and qualifications of the candidate, and who may determine that a candidate does not have qualifications that merit further consideration by the full committee. With respect to new director candidates who pass the initial screening, the Corporate Responsibility, Sustainability & Governance Committee meets to discuss and consider each candidate’s qualifications and potential contributions to the Board, and determines by majority vote whether to recommend such candidates to the Board. The final decision to either appoint a candidate to fill a vacancy between annual meetings or include a candidate on the slate of nominees proposed at an annual meeting is made by the Board. +It is the general policy of the Board that directors will not stand for re‑election after reaching the age of 72. +DIRECTOR INDEPENDENCE +Pursuant to New York Stock Exchange ("NYSE") listing rules, in order for a director to qualify as "independent", the Board of Directors must affirmatively determine that the director has no material relationship with the Company that would impair the director’s independence. The Board affirmatively determined that commercial or charitable relationships below the following thresholds will not be considered material relationships that impair a director’s independence: (1) if a NIKE director or immediate family member is an executive officer of another company that does business with NIKE and the annual sales to, or purchases from, NIKE are less than one percent of the annual revenues of the other company; and (2) if a NIKE director or immediate family member serves as an officer, director, or trustee of a charitable organization, and NIKE’s contributions to the organization are less than one percent of that organization’s total annual charitable receipts. After applying this categorical standard and the applicable NYSE independence standards, the Board has determined that the following directors who served during fiscal 2021—Cathleen A. Benko, Elizabeth J. Comstock, John G. Connors, Timothy D. Cook, Thasunda B. Duckett, Alan B. Graf, Jr., Peter B. Henry, Michelle A. Peluso, and John W. Rogers, Jr.—have no material relationship with the Company and, therefore, are independent. Messrs. John J. Donahoe II, Travis A. Knight, and Mark G. Parker were not independent pursuant to NYSE rules. Messrs. Donahoe and Parker were not independent pursuant to NYSE rules because they were employed by the Company during fiscal 2021. Mr. Knight was not independent pursuant to NYSE rules because he is the son of NIKE’s co-founder and former Chairman +2021 PROXY STATEMENT 22 +of the Board, Mr. Philip H. Knight, who received compensation in excess of the threshold set forth in applicable NYSE rules (the "NYSE threshold") for his position as Chairman Emeritus. The compensation paid to Mr. Philip H. Knight is described in the section below titled "Stock Ownership Information—Transactions with Related Persons". +BOARD STRUCTURE AND RESPONSIBILITIES +The Board is currently composed of nine independent directors and three directors who are not independent under the NYSE listing rules. During fiscal 2021, there were five meetings of the Board and all of our directors attended at least 75 percent of the total number of meetings of the Board and committees on which he or she served. The Company encourages all directors to attend each annual meeting of shareholders, and all directors attended the 2020 annual meeting. +BOARD LEADERSHIP STRUCTURE +NIKE’s governing documents provide the Board with flexibility to select the appropriate leadership structure of the Company. In determining the leadership structure, the Board considers many factors, including the specific needs of the business, fulfilling the duties of the Board, and the best interests of the Company’s shareholders. Effective January 2020, the Company separated the position of Chairman of the Board from the position of President and CEO, although this is not a permanent policy of the Board. The Executive Chairman, Mr. Mark G. Parker, presides over meetings of the Board of Directors and shareholders. The President and CEO, Mr. John J. Donahoe II, is in charge of the general supervision, direction, and control of the business and affairs of the Company, subject to the overall direction and supervision of the Board and its committees. +Given the particular experience and tenure of Messrs. Parker and Donahoe, the Board believes this leadership structure is appropriate for the Company because it separates the leadership of the Board from the duties of day-to-day leadership of the Company. This structure permits Mr. Donahoe to primarily focus his time and attention on the business, while Mr. Parker directs his attention to the broad strategic issues considered by the Board of Directors. This structure works particularly well given the talent, experience and professional relationship of Messrs. Donahoe and Parker established during Mr. Donahoe's service on the Board beginning in 2014. +In 2016, the Corporate Responsibility, Sustainability & Governance Committee established the position of lead independent director to ensure strong independent leadership of the Board. The position of Lead Independent Director is entrusted to execute the following functions: +• serve as a liaison between the Chairman, CEO, and the independent directors; +• approve the meeting agendas for the Board; +• advise the Chairman and CEO regarding the sufficiency, quality, quantity, and timeliness of information provided to the Board; +• ensure that meeting schedules permit sufficient time for discussion of all agenda items; +• provide consultation and direct communication with major shareholders, if requested; +• preside at meetings of the Board at which the Chairman is not present, including executive sessions; and +• perform other duties specified in the Lead Independent Director Charter. +In June 2019, the Board re-appointed Mr. Tim Cook to serve as Lead Independent Director for a term of three years. Mr. Cook continues to serve as Lead Independent Director of the Company working in collaboration with Messrs. Parker and Donahoe. +The chairs of Board committees also play an active role in the leadership structure of the Board. The Corporate Responsibility, Sustainability & Governance Committee and the Board endeavor to select independent committee chairs who will provide strong leadership to guide the important work of the Board committees. Committee chairs work with the Company’s senior executives to ensure the committees are discussing the key strategic risks and opportunities of the Company. In the absence of the Lead Independent Director, a presiding director is appointed to chair executive sessions of non-management directors (consisting of all directors other than Messrs. Parker and Donahoe). The position of presiding director is rotated among the chairs of the various Board committees, other than the Executive Committee. Executive sessions are regularly scheduled and held at least once each year. +Mr. Philip H. Knight, co-founder and former Chairman of the Company, serves as Chairman Emeritus, with a standing invitation to attend meetings of the Board and its committees as a non-voting observer. The Board believes that it benefits from the valuable experience and insights of the Company’s co-founder and former Chairman of the Board. +For all of these reasons, the Board believes this leadership structure is optimal. +23 NIKE, INC. +BOARD COMMITTEES +The Board’s current standing committees are an Audit & Finance Committee; a Compensation Committee; a Corporate Responsibility, Sustainability & Governance Committee; and an Executive Committee. The Board may appoint other committees from time to time. Each standing committee has a written charter and all such charters, as well as the Company’s corporate governance guidelines, are available at the Company’s corporate website, http://investors.nike.com, and will be provided in print to any shareholder who submits a request in writing to NIKE Investor Relations, One Bowerman Drive, Beaverton, Oregon 97005-6453. +AUDIT & FINANCE COMMITTEE +MEMBERS: +John G. Connors +Alan B. Graf, Jr., Chair +Peter B. Henry +MEETINGS IN FY ’21: 13 +ROLES AND RESPONSIBILITIES: +The Audit & Finance Committee provides assistance to the Board in fulfilling its legal and fiduciary obligations with respect to: +• Matters involving the Company’s accounting, auditing, financial reporting, internal controls, information security (including risks related to cyber security), data protection, and overseeing the financial policies and activities of the Company that may have a material impact on the results of operations or the financial position of the Company; +• The integrity of the Company’s financial statements, the compliance with legal and regulatory requirements, the independent auditor’s qualifications and independence, and the performance of the Company’s internal audit function and independent auditor; and +• Considering long-term financing options, long-range tax, financial regulatory and foreign currency issues facing the Company, and management’s recommendations concerning capital deployment strategy, major capital expenditures, and material acquisitions or divestitures. +The Board has determined that each member of the Audit & Finance Committee meets all independence and financial literacy requirements applicable to audit committees under the NYSE listing standards and applicable regulations adopted by the U.S. Securities and Exchange Commission (the "SEC"). The Board has also determined that Mr. Alan B. Graf, Jr. is an "audit committee financial expert" as defined in regulations adopted by the SEC. +COMPENSATION COMMITTEE +MEMBERS: +Cathleen A. Benko +Elizabeth J. Comstock +Timothy D. Cook, Chair +MEETINGS IN FY ’21: 4 +ROLES AND RESPONSIBILITIES: +The Compensation Committee discharges the Board's responsibilities regarding executive and director compensation and senior leadership succession, and its duties include the following: +• Evaluate the performance of the CEO; +• Review and approve the compensation of each executive officer; +• Grant equity incentive awards under the NIKE, Inc. Stock Incentive Plan, and determine targets and awards under the NIKE, Inc. Executive Performance Sharing Plan and the NIKE, Inc. Long-Term Incentive Plan; +• Review and provide guidance to management regarding Company policies, programs, and practices related to talent management and development for executive officers and senior management; and +• Make recommendations to the Board regarding the compensation of directors. +The Board has determined that each member of the Compensation Committee meets all independence requirements applicable to compensation committees under the NYSE listing standards. +2021 PROXY STATEMENT 24 +CORPORATE RESPONSIBILITY, SUSTAINABILITY & GOVERNANCE COMMITTEE +MEMBERS: +Thasunda B. Duckett +Michelle A. Peluso, Chair +John W. Rogers, Jr. +MEETINGS IN FY ’21: 5 +ROLES AND RESPONSIBILITIES: +The Corporate Responsibility, Sustainability & Governance Committee sets the tone and pace for corporate governance and oversees the Company's Purpose Offense. Its duties include the following: +• Review and evaluate NIKE’s significant strategies, activities, policies, investments, and programs regarding social purpose, corporate responsibility, and sustainability; +• Provide oversight of management’s efforts to ensure that the Company’s dedication to sustainability is reflected in its business operations; +• Monitor the Company’s progress towards its diversity and inclusion objectives and compliance with the Company’s responsibilities as an equal opportunity employer; +• Review and evaluate the social, political, and environmental impact, trends, and issues in connection with the Company’s business activities and make recommendations to the Board; +• Provide oversight of the Company’s community and social impact efforts; +• Oversee protection of the Company’s corporate reputation and other matters of importance to the Company and its stakeholders; +• Continue to identify individuals qualified to become Board members and recommend director nominees for election at each annual shareholder meeting; +• Develop and recommend to the Board corporate governance guidelines and a code of business conduct and ethics; and +• Oversee the annual self-evaluations of the Board and its committees and make recommendations to the Board concerning the structure and membership of the other Board committees. +The Board has determined that each member of the Corporate Responsibility, Sustainability & Governance Committee meets all independence requirements applicable to +nominating/corporate governance committees under the NYSE listing standards. +EXECUTIVE COMMITTEE +MEMBERS: +John J. Donahoe II +Travis A. Knight +Mark G. Parker, Chair +MEETINGS IN FY ’21: 0 +ROLES AND RESPONSIBILITIES: +The Executive Committee is authorized to act on behalf of the Board on all corporate actions for which applicable law does not require participation by the full Board. +• In practice, the Executive Committee acts in place of the full Board only when emergency issues or scheduling conflicts make it difficult or impracticable to assemble the full Board. +• All actions taken by the Executive Committee must be reported at the next Board meeting, or as soon thereafter as practicable. +The Executive Committee held no formal meetings during fiscal 2021, but took action by unanimous written consent. +25 NIKE, INC. +THE BOARD’S ROLE IN RISK OVERSIGHT +While the Company’s management team is responsible for day-to-day management of the various risks facing the Company, the Board takes an active role in the oversight of the management of critical business risks. The Board does not view risk in isolation. Risks are considered in virtually every business decision and as part of NIKE’s business strategy. The Board recognizes it is neither possible nor prudent to eliminate all risk. Purposeful and appropriate risk-taking is essential for the Company to be competitive on a global basis and to achieve its strategic objectives. +THE BOARD OF DIRECTORS +The Board implements its risk oversight function both as a whole and through committees, which play a significant role in carrying out risk oversight. While the Audit & Finance Committee is responsible for oversight of management’s risk management policies, oversight responsibility for particular areas of risk is allocated among the Board committees according to the committee’s area of responsibility as reflected in the committee charters. +BOARD COMMITTEES +The AUDIT & FINANCE COMMITTEE oversees risks related to the Company’s financial statements, the financial reporting process, accounting, legal matters, investments, access to capital and capital deployment, currency risk and hedging programs, information security (including risks related to cyber security), and data protection. The committee oversees the internal audit function, reviews a risk-based plan of internal audits, and reviews a risk-based integrated audit of internal controls over financial reporting. The committee meets separately with the Vice President of Global Audit and Chief Risk Officer, representatives of the independent registered public accountants, and senior management. +The COMPENSATION COMMITTEE oversees risks associated with the Company’s compensation philosophy and programs, management succession plans, and executive development. +The CORPORATE RESPONSIBILITY, SUSTAINABILITY & GOVERNANCE COMMITTEE oversees risks associated with corporate social purpose and company governance, including NIKE’s Code of Conduct and its compliance programs, and the structure and performance of the Board and its committees. The committee also oversees protection of the Company’s corporate reputation including issues that involve social and community engagement, workplace diversity and inclusion, and sustainability relating to the Company’s products, its supply chain (including labor practices), and the environment. +EXECUTIVE LEADERSHIP TEAM +Each committee chair works with one or more senior executives assigned to assist the committee in: developing agendas for the year and for each meeting, paying particular attention to areas of business risk identified by management, Board members, internal and external auditors, and in their committee charter; and scheduling agenda topics, presentations, and discussions regarding business risks within their area of responsibility. At meetings, the committees discuss areas of business risk, the potential impact, and management’s initiatives to manage business risk, often within the context of important business decisions. Through this process, key business risk areas are reviewed at appropriate times, with some topics reviewed on several occasions throughout the year. At every Board meeting each committee chair provides a report to the full Board outlining its discussions and actions, including those affecting the oversight of various risks. +The Company believes its leadership structure, discussed in detail above, supports the risk oversight function of the Board. Strong directors chair the various committees involved in risk oversight, there is open communication between management and directors, and all directors are involved in the risk oversight function. +2021 PROXY STATEMENT 26 +SHAREHOLDER COMMUNICATIONS WITH DIRECTORS +Shareholders or interested parties desiring to communicate directly with the Board, with non-management directors, or with any individual director may do so in writing addressed to the intended recipient or recipients, c/o Ann M. Miller, Vice President, Corporate Secretary, and Chief Ethics & Compliance Officer, NIKE, Inc., One Bowerman Drive, Beaverton, Oregon 97005-6453. All such communications will be reviewed, compiled as necessary, and then forwarded to the designated recipient or recipients in a timely manner. +CODE OF CONDUCT +The NIKE Code of Conduct is available at the Company’s corporate website, http://investors.nike.com, and will be provided in print without charge to any shareholder who submits a request in writing to NIKE Investor Relations, One Bowerman Drive, Beaverton, Oregon 97005-6453. The Code of Conduct applies to all of the Company’s employees and directors, including our CEO and all other executive officers. The Code of Conduct provides that any waiver of the Code of Conduct for executive officers or directors may be made only by the Board or a committee of the Board. Any such waiver will be publicly disclosed, when required by law. The Company plans to disclose amendments to, and waivers from, the Code of Conduct on the Company’s corporate website: http://investors.nike.com. +DIRECTOR COMPENSATION FOR FISCAL 2021 +NAME FEES EARNED OR +PAID IN CASH +($) +STOCK +AWARDS (1)(2) +($) +CHANGE IN +PENSION VALUE AND +NONQUALIFIED DEFERRED +COMPENSATION EARNINGS +($) +ALL OTHER +COMPENSATION (3) +($) +TOTAL +($) +Cathleen A. Benko 100,000 188,969 — 19,690 308,659 +Elizabeth J. Comstock 100,000 188,969 — 20,000 308,969 +John G. Connors 105,000 188,969 — 20,000 313,969 +Timothy D. Cook 150,000 188,969 — 20,000 358,969 +Thasunda B. Duckett 100,000 188,969 — 20,000 308,969 +Alan B. Graf, Jr. 130,000 188,969 — — 318,969 +Peter B. Henry 105,000 188,969 — 7,500 301,469 +Travis A. Knight 100,000 188,969 — — 288,969 +Michelle A. Peluso 120,000 188,969 — 20,000 328,969 +John W. Rogers, Jr. 100,000 188,969 — — 288,969 +(1) Represents the grant date fair value of restricted stock awards granted in fiscal 2021 computed in accordance with accounting guidance applicable to stock-based compensation. The grant date fair value is based on the closing market price of our Class B Stock on the grant date. As of May 31, 2021, each non-employee director held 1,624 shares of unvested restricted stock. +(2) As of May 31, 2021, non-employee directors held outstanding options for the following number of shares of our Class B Stock: Ms. Comstock, 14,000; Mr. Connors, 66,000; and Mr. Cook, 14,000. +(3) Includes matched contributions to charities in the following amounts: Ms. Benko, $19,690; Ms. Comstock, $20,000; Mr. Connors, $20,000; Mr. Cook, $20,000; Ms. Duckett, $20,000; Dr. Henry, $7,500; and Ms. Peluso, $20,000. +27 NIKE, INC. +DIRECTOR FEES AND ARRANGEMENTS +Under our director compensation program in effect for fiscal 2021, non-employee directors receive: +• An annual retainer of $100,000, paid in quarterly installments. +• Upon appointment to the Board, a one-time, sign-on restricted stock award valued at $185,000 on the date of grant, generally, the date of appointment. The one-time, sign-on restricted stock award is subject to forfeiture in the event that service as a director terminates prior to the anniversary of the date of grant. +• An annual restricted stock award valued at $185,000 on the date of grant, generally, the date of each annual meeting of shareholders. The number of restricted shares granted to each director for fiscal 2021 was determined by dividing the director’s award value by the average closing price of our Class B Stock for the 20-trading day period ending on the date of grant. The annual restricted stock award is subject to forfeiture in the event that service as a director terminates prior to the earlier of the next annual meeting and the anniversary of the date of grant. +• For the Lead Independent Director, an annual retainer of $30,000, paid in quarterly installments. +• For chairs of Board committees (other than the Executive Committee), an annual retainer of $20,000 for each committee chaired ($25,000 for the chair of the Audit & Finance Committee), paid in quarterly installments. +• For Audit & Finance Committee members, an additional annual retainer of $5,000, paid in quarterly installments. +• Payment or reimbursement of travel and other expenses incurred in attending Board meetings. +• Matching charitable contributions under the NIKE Matching Gift Program, under which directors are eligible to contribute to qualified charitable organizations and the Company provides a matching contribution to the charities in an equal amount, up to $20,000 in the aggregate, for each director annually. +Neither Mr. Donahoe nor Mr. Parker received any additional compensation for services provided as a director in fiscal 2021. +STOCK OWNERSHIP GUIDELINES FOR DIRECTORS +NIKE maintains stock ownership guidelines for all non-employee directors. Under these guidelines, directors are required to hold NIKE stock valued at five times their annual cash retainer. New directors are required to attain these ownership levels within five years of their election to the Board. Each of our directors has met or is on track to meet the specified ownership level. +DIRECTOR PARTICIPATION IN DEFERRED COMPENSATION PLAN +Under our Deferred Compensation Plan, non-employee directors may elect in advance to defer up to 100 percent of the director fees paid by the Company. For a description of the plan, see the section below titled "Compensation Discussion and Analysis—Executive Compensation Tables—Non-Qualified Deferred Compensation in Fiscal 2021—Non-Qualified Deferred Compensation Plans". +2021 PROXY STATEMENT 28 +COMPENSATION DISCUSSION AND ANALYSIS +PROPOSAL 2 +SHAREHOLDER ADVISORY VOTE TO APPROVE +EXECUTIVE COMPENSATION +In accordance with the requirements of Section 14A of the Securities Exchange Act of 1934, we are submitting to shareholders our annual "say-on-pay proposal", an advisory vote to approve the compensation of our Named Executive Officers as described in this proxy statement. +At our 2020 annual meeting of shareholders, 54% of the votes cast on the say-on-pay proposal were voted in favor of the proposal, which was much lower than our historical approval rate. Therefore, as further described in this section, during fiscal 2021 members of management and the Board conducted a broad outreach to, and engagement with, shareholders to better understand and address the concerns of our shareholders. +As discussed in this section, our executive compensation program is designed to attract and retain top-tier talent and maximize shareholder value. To achieve the objectives of our executive compensation program and emphasize pay-for-performance principles, the Compensation Committee has continued to employ strong governance practices, including: +• basing a majority of total compensation on performance and retention incentives; +• setting incentive award targets based on clearly disclosed, objective performance measures; +• mitigating undue risk associated with compensation by using multiple performance targets, caps on potential incentive payments, and a clawback policy; and +• requiring executive officers to hold NIKE stock through published stock ownership guidelines. +In addition to our typical executive compensation considerations, our program for fiscal 2021 (June 1, 2020 through May 31, 2021) also reflected our targeted response to two significant events: the COVID pandemic, which began in fiscal 2020 and continued throughout fiscal 2021, and the leadership transitions that occurred in late fiscal 2020. We discuss the impact of each of these events on our fiscal 2021 executive compensation program below. +Because your vote is advisory, it will not be binding on the Board. However, the Board values shareholder opinions, and the Compensation Committee will take into account the outcome of the vote when considering future executive compensation arrangements. +BOARD RECOMMENDATION +The Board of Directors recommends that shareholders vote FOR approval of the following resolution: +RESOLVED, that the shareholders approve the fiscal 2021 compensation paid to the Named Executive Officers as disclosed in this proxy statement pursuant to the SEC’s compensation disclosure rules (which disclosure includes the Compensation Discussion and Analysis, the compensation tables, and the narrative disclosures that accompany the compensation tables). +29 NIKE, INC. +INTRODUCTION +This Compensation Discussion and Analysis ("CD&A") describes our compensation program, philosophy, decisions, and process for the compensation of our "Named Executive Officers" (also referred to as our "NEOs") for fiscal 2021: +NAMED EXECUTIVE OFFICER TITLE +John Donahoe II President and Chief Executive Officer +Mark Parker Executive Chairman +Matthew Friend Executive Vice President and Chief Financial Officer +Andrew Campion Chief Operating Officer +Heidi O'Neill President, Consumer and Marketplace +This CD&A is organized into four sections: +• Executive Summary (page 30) +• Compensation of Our Named Executive Officers (page 34) +• Our Compensation Process (page 44) +• Other Compensation Practices (page 45) +EXECUTIVE SUMMARY +SAY-ON-PAY RESULTS AND RESPONSE +Our annual say-on-pay vote is one of our opportunities to receive feedback from shareholders regarding our executive compensation program, and as such is taken very seriously by the Compensation Committee and Board. In 2020, our executive compensation program received the support of 54% of the total votes cast at our annual meeting of shareholders. As a result of this decline in support compared to historically strong votes (which averaged over 90% support during the prior five years), we actively sought feedback from shareholders, reaching out to shareholders owning approximately 37% of outstanding shares of our Class B Stock and speaking with shareholders owning approximately 33% of outstanding shares of our Class B Stock, to better understand what motivated their votes and attempt to address any ongoing concerns. Our Lead Independent Director and Compensation Committee Chair, Timothy D. Cook, and our Corporate Responsibility, Sustainability & Governance Committee Chair, Michelle A. Peluso, participated in several of these conversations with shareholders owning approximately 15% of outstanding shares of our Class B Stock. All feedback was shared with the Board and helped to shape the changes made to our executive compensation program and related disclosure, as laid out in this year's CD&A. +SCOPE OF OUTREACH & ENGAGEMENT +Engaged with +100% +of our top 15 institutional shareholders +Through this engagement, we learned that shareholders were largely supportive of the design of the underlying executive compensation program for fiscal 2020. However, shareholders expressed support for additional disclosure regarding the COVID-related adjustments made to payouts in order to more meaningfully assess fiscal 2020 compensation. During these conversations, we shared additional detail regarding the Compensation Committee's approach to determining fiscal 2020 executive compensation, including the magnitude that the onset of the pandemic had on the Company's fourth quarter, which began in March 2020, and the committee's desire to appropriately compensate the management team for strong performance in the first three quarters and the resilience with which they operated during this unprecedented time while maintaining our pay-for-performance philosophy. Shareholders appreciated this additional information regarding COVID-related adjustments for fiscal 2020 and expressed no ongoing concerns regarding these decisions. +2021 PROXY STATEMENT 30 +These engagements also provided an opportunity to discuss considerations the Compensation Committee took into account in designing the executive compensation program for fiscal 2021, which began on June 1, 2020 in the midst of an unprecedented economic and social environment. Shareholders were broadly supportive of the fiscal 2021 program design and provided useful feedback regarding proxy disclosure they would find helpful to inform their analysis of our program, which we have integrated in the following discussion of our fiscal 2021 executive compensation program. Shareholders also shared feedback regarding our executive compensation program structure more broadly, including a preference for stock-based long-term incentive compensation and general considerations for using retention and sign-on awards. We are incorporating this feedback, and are replacing cash long-term incentive awards with performance-based restricted stock units ("PSUs") beginning in fiscal 2022, as described in the section below titled "Compensation of our Named Executive Officers—Fiscal 2022 Long-Term Incentive Compensation Changes". +During these engagements we also had an opportunity to discuss our strategic transformation, driven by our Consumer Direct Acceleration strategy which is focused on creating more premium, consistent, and seamless consumer experiences while operating under a simple consumer construct. As part of this conversation, shareholders provided feedback related to Mr. Donahoe's fiscal 2020 sign-on awards, with some expressing concern over the quantum of the awards. We explained that Mr. Donahoe forfeited approximately $79 million in incentive awards upon resigning as the President and CEO at ServiceNow in 2019 to become NIKE's CEO, which our shareholders noted mitigated their concerns around these awards. Shareholders also expressed a desire for disclosure explaining how a successful CEO transition would be measured with respect to Messrs. Donahoe's and Parker's transition-period cash incentive awards. We have included this disclosure, including key quantitative and qualitative achievements, in the section below titled "Compensation of our Named Executive Officers—Fiscal 2020 Leadership Transition Awards—Transition-Period Cash Incentive Awards". Finally, as a part of this discussion, we discussed with shareholders the restricted stock unit ("RSU") awards which were approved during fiscal 2020 and granted to the management team on June 1, 2020 in order to support continuity of leadership during a key transitional period for the Company that includes our CEO succession and the launch of our Consumer Direct Acceleration strategy. Shareholders broadly understood the rationale behind the RSU awards and were supportive of granting them (as initially disclosed in the 2020 proxy statement, and discussed in the section below titled "Compensation of our Named Executive Officers—Fiscal 2020 Leadership Transition Awards—Stock-Based Transition Awards") given the extensive transformation NIKE is undergoing and the importance of leadership continuity. +The Board and Compensation Committee greatly values these engagements with shareholders and is committed to maintaining ongoing dialogue and incorporating shareholder feedback into the design of the executive compensation program going forward. +The following table summarizes feedback themes we heard from shareholders and actions taken to be responsive: +WHAT WE HEARD HOW WE RESPONDED +Executive Compensation Program Disclosure +Last year's proxy disclosure did not clearly describe the rationale or methodology underlying the COVID-related adjustments to the fiscal 2020 executive compensation program payouts +• During shareholder engagement, provided additional context and clarification regarding adjustments made to the fiscal 2020 executive compensation program due to COVID +• In this proxy statement, provided robust disclosure regarding fiscal 2021 annual bonuses to clearly communicate our design rationale given the ongoing impact of COVID +Last year's proxy disclosure did not clearly describe the rationale for Mr. Donahoe's sign-on awards +• During shareholder engagement, provided additional context regarding the sign-on awards, including that Mr. Donahoe forfeited approximately $79 million in incentive awards from his prior employer to become NIKE's CEO +• In this proxy statement, provided robust disclosure regarding the performance goals and achievements related to earning the transition-related cash incentive awards +Fiscal 2021 Executive Compensation Program Design +Long-term incentive compensation should not be adjusted to eliminate the impact of the COVID pandemic +• No adjustment to the fiscal 2019 – 2021 LTIP awards, which paid out at 90% due to the impact of the COVID pandemic +Support for flexible fiscal 2021 annual cash incentive award design given ongoing COVID-related uncertainty +• Structured fiscal 2021 bonus to be earned based on rigorous semi-annual goals targeted to support our COVID response and strategic priorities +Support for incorporating ESG metrics into executive compensation program +• Added a "People & Planet" modifier to the fiscal 2021 – 2023 LTIP awards to support our commitment to our long-term Purpose goals +Preference for stock-based long-term incentive compensation instead of cash-based long-term incentive compensation +• Replaced cash LTIP awards with PSUs beginning with fiscal 2022 compensation +31 NIKE, INC. +Stock ownership guidelines should be increased +• For fiscal 2022, increased stock ownership guidelines for CEO from 6 times base salary to 8 times base salary, and extended NEO ownership requirement of 3 times base salary to all executive officers +Retention awards should be used sparingly +• As initially disclosed in last year's proxy statement, RSU awards granted to management team in fiscal 2021 were one-time awards to support leadership continuity during a key transitional period for the Company +• Any future retention awards will be evaluated on a case-by-case basis and granted only in limited circumstances +Sign-on awards should be used sparingly and accompanied by robust disclosure providing rationale for award and structure +• No new executive officers hired in fiscal 2021 +• Any future new hire awards will be evaluated on a case-by-case basis and will take shareholder engagement feedback into consideration +• Newly hired executive officers will not be eligible for LTIP or PSU awards that are in the final year of their performance period +COVID RESPONSE +NIKE has been, and continues to be, committed to supporting our employees all over the world during the COVID pandemic. For example, throughout the pandemic we provided pay continuity for our retail, Air MI manufacturing, and distribution center employees—employees who were particularly affected by closures and reduced hours in fiscal 2020 and fiscal 2021. To support employee well-being, we expanded our mental health offerings and our leave policies, including providing additional paid leave for employees with COVID-related physical or mental health impacts or who need time off to care for a household family member. We have also taken precautions to provide a safe working environment, encouraging and supporting work-from-home whenever possible and instituting protective policies and procedures for when remote work is not possible. +GUIDING COMPENSATION PRINCIPLES +• To drive business results and maximize shareholder value, our executive compensation is highly incentive-based. +• To emphasize long-term performance, increase alignment between executives and shareholders, and support retention, incentive compensation is weighted towards long-term awards. +• To foster teamwork and ensure internal pay equity, we utilize a cohort approach by aligning compensation across certain executive roles. +• To ensure that our executive compensation program supports our business strategy and talent plan, we determine cohort compensation levels by holistically considering factors relating to our business, the competitive market for top-tier talent, and the applicable executives. +2021 PROXY STATEMENT 32 +ANNUAL DIRECT COMPENSATION ELEMENTS +NIKE's annual direct compensation for the Named Executive Officers generally consists of the following elements: +ELEMENT KEY CHARACTERISTICS PURPOSE FISCAL 2021 CONSIDERATIONS +Base Salary Fixed cash compensation Provides market competitive baseline compensation to attract and retain top-tier talent Generally kept base salaries flat across all employee levels +Annual Cash Incentive Award Variable cash incentive compensation earned at 0% – 150% based on Company performance during the fiscal year Motivates and rewards achievement of sustainable and profitable growth To enable a flexible, targeted approach during volatile period, bonus earned based on rigorous semi-annual goals targeted to support our COVID response and strategic priorities +Long-Term Incentive Awards Cash Long-Term Incentive Plan ("LTIP") Variable cash incentive compensation earned at 0% – 200% based on Company performance over a 3-year performance period Motivates and rewards achievement of long-term shareholder value and growth New "People & Planet" modifier supports progress on DE&I and sustainability goals; no LTIP target award increases, and no COVID-related payout adjustment +Stock Stock Options Stock-based incentive compensation that generally vests in 4 equal annual installments; only provides value if our stock price appreciates Aligns NEOs' interests with those of our shareholders by rewarding achievement of upside potential; promotes retention No increase in executive cohort level stock awards +Restricted Stock Units ("RSUs") Stock-based incentive compensation that generally vests in 3 equal annual installments; value tied to our stock price Aligns NEOs' interests with those of our shareholders by rewarding long-term value creation; promotes retention +Beginning in fiscal 2022, the cash component of our long-term incentive awards will be replaced with PSUs, as discussed in the section below titled "Compensation of our Named Executive Officers—Fiscal 2022 Long-Term Incentive Compensation Changes". +EXECUTIVE COMPENSATION GOVERNANCE PRACTICES +WHAT WE DO +WHAT WE DON’T DO +ü Base a majority of total compensation on performance and retention incentives +ü Mitigate undue risk by using multiple performance periods and metrics, incentive payment caps, and a clawback policy +ü Base incentive awards on clearly disclosed, objective performance goals +ü Maintain robust stock ownership guidelines +ü Vest stock-based awards over time to promote long-term performance and retention +ü Provide only double-trigger change-in-control acceleration for stock-based awards +û No retirement acceleration for RSUs +û No dividend equivalents paid on RSUs unless and until shares are earned +û No repricing of stock options +û No hedging transactions or short sales permitted +û No pension or supplemental executive retirement plan +û No tax gross-ups for perquisites +û No cash-based change-in-control benefits +û No excise tax gross-ups upon change of control +33 NIKE, INC. +COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS +COMPENSATION OBJECTIVES AND STRUCTURE +Our executive compensation program is designed to attract and retain top-tier talent in a competitive marketplace and to maximize shareholder value by rewarding NEOs for strong Company performance. The program generally consists of annual direct compensation, with a focus on incentive compensation, and competitive benefits that are generally consistent with the benefits offered to our other U.S.-based employees. In connection with the senior leadership changes that occurred in late fiscal 2020, and to support continuity of our highly recruitable leadership team during a key period, in fiscal 2020 the Compensation Committee also approved special transition-related awards to be paid or granted during fiscal 2021, as previously described in our 2020 proxy statement and further described in the section below titled "Fiscal 2020 Leadership Transitions". +We structure our executive compensation program in the context of our business strategy and talent plan. To foster teamwork and ensure internal pay equity, we utilize a segmented cohort approach that aligns compensation across certain executive roles. Cohort compensation levels are determined by holistically considering factors such as future potential, individual performance, market insights, succession planning, retention, and leadership continuity. New executives are phased into a cohort by taking into consideration their relative experience, expected contributions, and market position. +Our philosophy is to "pay for performance" in order to drive business results and maximize shareholder value. As a result, executive compensation is highly incentive-based and weighted towards long-term awards to emphasize long-term performance and support retention. For fiscal 2021, to balance continued adherence to our "pay for performance" philosophy with the need for flexibility to respond to the ongoing COVID pandemic, the Compensation Committee determined to grant annual cash incentive awards in the form of annual bonuses based on objective financial metrics targeted at driving our recovery and emergence from the impacts of COVID. These bonuses are described in the section below titled "Annual Cash Incentive". +Our executive compensation program balances performance incentives, including by using different performance metrics and performance periods, and through a mixture of cash- and stock-based compensation elements. Stock-based compensation is also structured to pay for performance and is generally delivered 60% in the form of stock options and 40% in the form of RSUs. The following charts illustrate the mix of components that make up fiscal 2021 target annual direct compensation for our CEO. +BASE SALARY +Base salary is a fixed element of compensation that serves to attract and retain top-tier talent. The Compensation Committee generally reviews and determines base salaries for our Named Executive Officers in June, with any adjustments becoming effective in August of the same year. +In response to the COVID pandemic, the Company committed to ensuring pay continuity for our retail, NIKE Air MI manufacturing, and distribution center employees—employees who were particularly affected by closures and reduced hours in fiscal 2020 and fiscal 2021. To support our pay continuity commitment, the Company generally kept fiscal 2021 base salaries flat across all employee levels, including our NEOs. +2021 PROXY STATEMENT 34 +NAMED EXECUTIVE OFFICER FISCAL 2021 BASE SALARY +% CHANGE (1) +John Donahoe II $1,500,000 0% +Mark Parker $1,700,000 0% +Matthew Friend $875,000 0% +Andrew Campion $1,100,000 0% +Heidi O'Neill $1,100,000 N/A +(1) Represents the change in base salary compared to fiscal 2020. +ANNUAL CASH INCENTIVE +Historically, we have paid annual cash incentive awards to the Named Executive Officers under our Executive Performance Sharing Plan ("PSP"), with payouts determined based on Company earnings before interest and taxes (as adjusted to exclude the impact of certain non-operational events, "Adjusted EBIT") measured over the entire fiscal year. To align employees and reinforce our one-team culture, the same compensation philosophy, structure, and metrics underlying our PSP awards were also applied to all other global employees eligible to participate in the Company's success through incentive bonuses. The Compensation Committee generally set the PSP metric, performance goal, and target awards for our Named Executive Officers at the start of the fiscal year in June, and would determine the payout following completion of the fiscal year. +In June 2020, the disruption and uncertainty caused by the ongoing COVID pandemic, including uncertainty regarding the pace of marketplace recovery and quarantine measures throughout the different geographic regions in which we operate, made it very difficult to set an appropriate year-long Adjusted EBIT goal. Furthermore, recognizing the dynamic nature of the pandemic, the Compensation Committee determined that an annual incentive award structure that provided more flexibility than the PSP would better enable the committee to challenge and motivate executives as the Company moved from the volatility created by the COVID pandemic through a period of recovery and into a period of continued growth. Therefore, the Compensation Committee decided to grant fiscal 2021 annual cash incentive awards in the form of annual bonuses rather than PSP awards. Staying true to our "pay for performance" philosophy, the Compensation Committee structured these annual bonuses to be earned between 0% and 150% of target based on achievement of objective financial metrics set for each of two equally-weighted, six-month performance periods, with the final payout to be determined by the committee taking into consideration the Company's fiscal 2021 revenue performance. As described in further detail below, the financial metrics for each performance period were selected to support our COVID response and strategic priorities during that period. +In setting fiscal 2021 annual bonus target awards, the Compensation Committee decreased Mr. Parker's award from 200% of base salary to 100% to reflect the change in his responsibilities following his appointment as Executive Chairman. The Compensation Committee decided not to increase target awards for any of the other Named Executive Officers due to the continuing uncertainty and financial impact of COVID. Therefore, the fiscal 2021 annual bonus target awards were: +NAMED EXECUTIVE OFFICER FISCAL 2021 ANNUAL BONUS TARGET AWARD (% OF BASE SALARY) +John Donahoe II 200% +Mark Parker 100% +Matthew Friend 120% +Andrew Campion 120% +Heidi O'Neill 120% +ANNUAL CASH INCENTIVE GOALS +For the first six-month performance period ("1H"), which covered June 2020 through November 2020, three metrics and corresponding performance goals were established in June 2020 with a focus on driving our strategic priorities and managing the impact of the pandemic. The 1H metrics consisted of: (1) revenue generated through sales on digital platforms ("Digital Revenue") of Nike Brand and Jordan Brand products, to support digital growth in connection with our Consumer Direct Acceleration strategy; (2) selling, general, and administrative expenses ("SG&A"), to encourage tight management of discretionary expenses; and (3) units of Nike Brand and Jordan Brand product ("Inventory Units") at Company distribution centers or Company-owned stores, or in transit to Company distribution centers, to incentivize strategic management of excess inventory accumulated as a result of the COVID pandemic. +The performance goal for each 1H metric was set as a range, rather than as a discrete value, in light of forecasting uncertainties caused by COVID. Each performance goal range was designed to be challenging in order to drive performance without encouraging excessive risk-taking. Performance goals were set taking into consideration many factors, including prior-year results and the complex and volatile market conditions resulting from the COVID pandemic. The Digital Revenue performance goal range represented an increase of 28% to 42% compared to actual results during the same period of fiscal 2020 ("Prior Year 1H"); the SG&A performance goal represented a decrease in spending of 6% to 12% compared to Prior Year 1H; and the Inventory Units +35 NIKE, INC. +performance goal range represented a decrease in inventory levels of 1% to 15% compared to Prior Year 1H, reflecting our drive to quickly clear excess inventory accumulated due to COVID and return to healthy inventory levels. Earnout levels were established based on the number of 1H performance goals achieved or exceeded. Certain achievements corresponded to an earnout range rather than a fixed earnout percentage, with the final 1H earnout to be determined within the designated range, if applicable, based on the quality of the Company's 1H performance. The 1H performance goals and earnout levels were as follows: +(1) 1H revenue generated through sales of Nike Brand and Jordan Brand products on NIKE digital platforms. +(2) 1H selling, general, and administrative expenses, excluding the impact of non-operational events including acquisitions, divestitures, restructurings, and unanticipated foreign exchange volatility. +(3) Units of Nike Brand and Jordan Brand product at Company distribution centers or Company-owned stores, or in transit to Company distribution centers, as of November 30, 2020. +The Compensation Committee maintained the same nimble and targeted approach to goal-setting for the second six-month performance period ("2H"), which covered December 2020 through May 2021. 2H metrics, and corresponding performance goals, were established in November 2020 with a focus on driving strategic priorities and sustainable profitability and continuing to manage the pandemic's impact. We eliminated Inventory Units as a 2H metric due to 1H improvements in inventory levels. We also re-introduced our historical Adjusted EBIT metric, because EBIT is a key measure used internally to manage financial performance and drive operational performance, and adjusting EBIT to exclude the impact of certain non-operational events helps to drive and reward organic growth. As a result, the 2H metrics consisted of: (1) Digital Revenue of Nike Brand, Jordan Brand, and Converse products, to support continued digital growth in connection with our ongoing Consumer Direct Acceleration strategy; (2) SG&A, to encourage continued tight management of discretionary expenses; and (3) Adjusted EBIT, to drive sustainable, profitable growth. +Like the 1H goals, the performance goal for each 2H metric was set as a range designed to be appropriately challenging in light of factors including prior year results and the uncertainty surrounding evolving market conditions. The Digital Revenue performance goal represented an increase of 25% to 45% compared to actual results during the same period of fiscal 2020 ("Prior Year 2H"); the SG&A performance goal represented an increase of 5% to a decrease of 1% compared to Prior Year 2H, reflecting a balance between tight cost management and strategic investment in our business; and the Adjusted EBIT performance goal range represented a decrease of 2% to an increase of 17% compared to actual results during the same period of fiscal 2019 ("FY19 2H"), reflecting a return to pre-COVID levels of achievement and growth. The same earnout levels were established based on the number of 2H performance goals achieved or exceeded (and if applicable, the final 2H earnout would again be determined within the designated earnout range based on the quality of the Company's 2H performance). The 2H performance goals and earnout levels were as follows: +2021 PROXY STATEMENT 36 +(1) 2H revenue generated through sales of Nike Brand, Jordan Brand, and Converse products on NIKE digital platforms. +(2) 2H selling, general, and administrative expenses, excluding the impact of non-operational events including acquisitions, divestitures, restructurings, and unanticipated foreign exchange volatility. +(3) 2H earnings before interest and taxes, excluding the impact of non-operational events including acquisitions, divestitures, restructurings, and unanticipated foreign exchange volatility. +ANNUAL CASH INCENTIVE RESULTS +For 1H, our actual Digital Revenue was $4.3 billion, SG&A (adjusted to exclude the impact of one-time charges related to acquisitions, divestitures, and restructurings, and the impact of unanticipated foreign exchange volatility) was $6.0 billion, and Inventory Units were 399 million units. This resulted in the Company achieving target performance for two of the 1H metrics and above-target performance for the third 1H metric, which corresponded to a 1H earnout range of 100% – 150%. The Compensation Committee then considered the quality of the Company's 1H performance, specifically: Digital Revenue results exceeded 125% of the upper limit of the performance goal range, reflecting strong increases in digital sales across all geographies; SG&A results equaled the upper limit of the performance goal range even as we continued investing in digital capabilities to support our Consumer Direct Acceleration strategy; and Company 1H revenues exceeded internal budget. Based on these factors, the committee set the 1H earnout at 120%. +For 2H, our actual Digital Revenue was $4.8 billion, SG&A (adjusted to exclude the impact of one-time charges related to acquisitions, divestitures, and restructurings, and the impact of unanticipated foreign exchange volatility) was $6.6 billion, and Adjusted EBIT (adjusted to exclude the impact of one-time charges related to acquisitions, divestitures, and restructurings, and the impact of unanticipated foreign exchange volatility) was $3.6 billion. This resulted in the Company achieving target performance for two of the 2H metrics and above-target performance for the third 2H metric, which corresponded to a 2H earnout range of 100% – 150%. The Compensation Committee then considered the quality of the Company's 2H performance, specifically: Digital Revenue results were at the upper limit of the performance goal range, with continued momentum across all geographies; SG&A results were at the middle of the performance goal range, reflecting both tight management of discretionary costs and prioritization of strategic investments; and Adjusted EBIT results were 120% of the upper limit of the performance goal range due to strong revenue growth and margin expansion. Based on these factors, the committee set the 2H earnout at 120%. +The two equally-weighted performance period earnouts were averaged together to calculate a fiscal 2021 earnout of 120%. The Compensation Committee then considered the Company's strong fiscal 2021 revenue performance of $44.5 billion, which exceeded budget by approximately 4%. In support of our one-team culture and historical practice of aligning annual incentive payouts for all eligible employees, the committee also considered that the payout for the fiscal 2021 annual bonus for employees below the executive officer level—which used a similar structure, metrics, and performance goals—was 120%. Based on these factors, and as illustrated in the graphic below, the Compensation Committee determined a fiscal 2021 annual cash incentive payout of 120% for each of the NEOs. +37 NIKE, INC. +FISCAL 2022 ANNUAL CASH INCENTIVE AWARDS +In June 2021, the Compensation Committee decided to begin transitioning annual cash incentive awards back to our historical structure. Accordingly, fiscal 2022 awards to the Named Executive Officers will be paid under the PSP. They will be earned between 0% and 150% of target based on achievement of multiple, equally-weighted metrics selected to support our strategic priorities and drive sustainable, profitable growth. The Compensation Committee set one-year target, threshold, and maximum performance goals for each metric, and the earnout for achievement between these goals will be calculated by linear interpolation. This structure, including the metrics and goals, is consistent with the structure underlying fiscal 2022 annual incentive bonuses for eligible employees below the executive officer level, reinforcing our one-team culture. +LONG-TERM CASH INCENTIVE +Long-term cash incentive awards are paid to the Named Executive Officers under our Long-Term Incentive Plan ("LTIP"). Like our annual cash incentive awards, LTIP awards reflect our "pay for performance" philosophy: they are earned between 0% and 200% of target based on Company performance during a three-year performance period. The Compensation Committee retains discretion to adjust LTIP award payouts based on individual or Company performance. +At the beginning of each fiscal year, the Compensation Committee sets target award amounts for our executive officers, selects the LTIP award metric, and determines the performance goal. The Compensation Committee then determines the applicable payout percentage at the end of the three-year performance period. +2021 PROXY STATEMENT 38 +FISCAL 2021 – 2023 LTIP AWARD GRANTS +In response to the continuing uncertainty and financial impact of COVID, the Compensation Committee determined not to increase the LTIP target award for any NEO for fiscal 2021. Furthermore, the Compensation Committee did not grant an LTIP award to Mr. Parker in fiscal 2021 in light of the change in his responsibilities following his appointment as Executive Chairman and the retention strength of his outstanding LTIP awards. Therefore, the fiscal 2021 – 2023 LTIP target awards were: +NAMED EXECUTIVE OFFICER FISCAL 2021 – 2023 LTIP TARGET AWARD +John Donahoe II $5,000,000 +Mark Parker — +Matthew Friend $1,000,000 +Andrew Campion $1,000,000 +Heidi O'Neill $1,000,000 +In June 2020, the Compensation Committee selected as the metric for the fiscal 2021 – 2023 LTIP awards the Company's total shareholder return ("Absolute TSR") for fiscal 2021 – 2023 relative to total shareholder return over the same period for the other companies in the S&P 500 ("Relative TSR"), as shown in the table below: +FISCAL 2021 – 2023 PERFORMANCE GOAL +% PAYOUT +THRESHOLD +25% +TARGET +100% +MAXIMUM +200% +Relative TSR 1 +(1) Relative TSR for fiscal years 2021, 2022, and 2023, calculated using the 20-trading day average stock price and assuming that dividends paid during the performance period are reinvested in the applicable company’s stock. +LTIP awards will pay out at 100% of target if the Company's Relative TSR for the performance period is at the 55th percentile, and will pay out at 0% if the Company's Relative TSR for the performance period is below the 25th percentile. LTIP award payout based on Relative TSR performance is subject to a cap of 100% of target if Absolute TSR for the performance period is negative. The Compensation Committee selected three-year Relative TSR as the performance metric because it is an objective and transparent measure of long-term shareholder value, especially in the context of a volatile market. Furthermore, the cap on payout if Absolute TSR is negative incentivizes NEOs to pursue long-term growth. +The fiscal 2021 – 2023 LTIP awards also contain a "People & Planet" modifier designed to support our commitment to our Purpose Offense, which is a key component of our long-term strategy. If Relative TSR meets or exceeds the threshold performance goal, the "People & Planet" modifier permits the Compensation Committee to increase the award payout by up to 25 percentage points (subject to both the 200% maximum earnout and the 100% Absolute TSR cap) based on a holistic assessment of the Company's performance with respect to employee engagement and inclusion, leadership diversity, and sustainability. Structuring the modifier as a holistic assessment ensures that the final payout comprehensively balances these broad and disparate issues and appropriately reflects the spirit of our Purpose Offense. In determining the "People & Planet" modifier for fiscal 2021 – 2023 LTIP awards, the Compensation Committee will consider the Company's progress towards achieving certain of the five-year Purpose goals described in our 2020 Impact Report, including goals regarding increasing representation of women in our global corporate workforce and leadership positions; increasing representation of U.S. racial and ethnic minorities in our U.S. corporate workforce and at the Director level and above; employee feedback with respect to engagement and inclusion; foundational expectations related to responsible manufacturing in our supply chain; and operating more sustainably with respect to carbon, waste, water, and chemistry. +FISCAL 2019 – 2021 LTIP AWARD RESULTS +For fiscal 2021, the Named Executive Officers were eligible to receive payout of their fiscal 2019 – 2021 LTIP awards. In June 2018, the Compensation Committee set three-year cumulative performance targets for two equally-weighted metrics: revenues and diluted earnings per share ("EPS"), in each case excluding generally the effect of acquisitions, divestitures, accounting changes, changes in tax law, and other extraordinary, unusual, or infrequently occurring items (respectively, "Adjusted Revenue" and "Adjusted EPS"). In June 2021, the Compensation Committee determined that a payout of 90% under these awards was earned by each NEO based on the average of the cumulative Adjusted Revenue and cumulative Adjusted EPS achievements as shown in the table below. +39 NIKE, INC. +FISCAL 2019 – 2021 PERFORMANCE GOALS +(Dollars in millions, except per share data) +% PAYOUT +THRESHOLD +50% +TARGET +100% +MAXIMUM +200% +Adjusted Revenue 1 +TOTAL PAYOUT: +90% +Adjusted EPS 1 +(1) Cumulative Adjusted Revenue and cumulative Adjusted EPS for fiscal years 2019, 2020, and 2021. +LONG-TERM STOCK INCENTIVE +Stock-based incentive awards reward long-term Company performance and align executives' interests with those of our shareholders. Such awards form the largest component of our Named Executive Officers' annual direct compensation, constituting 49% of fiscal 2021 total target compensation for Mr. Donahoe (51% on average for our other NEOs) and 64% of fiscal 2021 total long-term incentive compensation for Mr. Donahoe (81% on average for our other NEOs). We grant stock-based incentive awards under our Stock Incentive Plan in the form of stock options and RSUs. The Compensation Committee determines awards as dollar values, and generally grants the stock portion of incentive compensation 60% in the form of stock options and 40% in the form of RSUs. +In response to the continuing uncertainty and financial impact of COVID, the Compensation Committee determined not to increase the value of fiscal 2021 stock-based incentive awards from fiscal 2020 values for any executive officer cohort. As a result, the award values for each of Messrs. Donahoe and Campion remained unchanged from fiscal 2020. Consistent with our cohort approach to compensation, Mr. Friend and Ms. O'Neill each received stock-based incentive awards equal in value to Mr. Campion's awards. While the cohort award value remained flat year-over-year, this represented an increase for each of Mr. Friend and Ms. O'Neill, whose fiscal 2020 award values were set by the Company before they became executive officers in April 2020. Finally, in light of the change in Mr. Parker's responsibilities following his appointment as Executive Chairman and the retention strength of his outstanding stock awards, the Compensation Committee determined to eliminate the RSU component of Mr. Parker's fiscal 2021 stock-based incentive award and maintain the stock option component at the same value as his fiscal 2020 award. Therefore, the fiscal 2021 stock-based incentive awards for our NEOs were: +NAMED EXECUTIVE OFFICER STOCK OPTIONS RSUs TOTAL FISCAL 2021 STOCK-BASED INCENTIVE AWARDS +John Donahoe II $5,400,000 $3,600,000 $9,000,000 +Mark Parker $6,000,000 — $6,000,000 +Matthew Friend $1,740,000 $1,160,000 $2,900,000 +Andrew Campion $1,740,000 $1,160,000 $2,900,000 +Heidi O'Neill $1,740,000 $1,160,000 $2,900,000 +STOCK OPTIONS +Stock options align our Named Executive Officers' interests with those of our shareholders by rewarding the achievement of upside potential, and they reflect our "pay for performance" philosophy because they provide value to the NEOs only if the price of our Class B Stock appreciates. +The number of stock options granted to each NEO for fiscal 2021 was determined by dividing the NEO's award value by the Black-Scholes value (calculated based on a twenty-day average stock price and the available five-year and seven-year interest rates) of a stock option on the date of grant. Options granted to the Named Executive Officers vest in equal annual installments over four years and have an exercise price equal to the closing market price of our stock on the date of grant. To promote retention, stock options generally provide that if a Named Executive Officer leaves the Company, they forfeit any unvested stock options. Forfeiture is subject to a limited retirement provision designed to encourage executives to delay retirement and partial accelerated vesting upon termination of employment in connection with a divestiture or reduction in force (each as described in the section below titled "Executive Compensation Tables—Potential Payments Upon Termination or Change-in-Control"). +2021 PROXY STATEMENT 40 +RSU AWARDS +RSUs align our Named Executive Officers' interests with those of our shareholders by rewarding the achievement of long-term value creation, and they reflect our "pay for performance" philosophy because their value is directly tied to our Class B Stock price. +The number of RSUs granted to each NEO for fiscal 2021 was determined by dividing the NEO's award value by the average closing price of our Class B Stock for the 20-trading day period ending on the date of grant. RSUs granted to the Named Executive Officers as part of our stock-based incentive award vest in equal annual installments over three years and accumulate dividend equivalents that are paid only upon vesting. To promote retention, RSU awards generally provide that any unvested RSUs are forfeited if the Named Executive Officer leaves the Company. Forfeiture is subject to partial accelerated vesting upon termination of employment in connection with a divestiture or reduction in force (as described in the section below titled "Executive Compensation Tables—Potential Payments Upon Termination or Change-in-Control"). +FISCAL 2022 LONG-TERM INCENTIVE COMPENSATION CHANGES +Historically, we have structured our long-term incentive compensation to include a mix of cash-based awards (consisting of awards under our LTIP) and stock-based awards (consisting of stock options and RSUs under our Stock Incentive Plan). After considering shareholder feedback, including feedback received during our extensive shareholder engagement, and evolving market practice, the Compensation Committee determined to replace cash-based long-term incentive awards with performance-based restricted stock units (“PSUs”) beginning in fiscal 2022. Like the historical cash LTIP awards, PSUs will be earned between 0% and 200% of target based on Company performance during a three-year performance period. The fiscal 2022 – 2024 PSU awards also contain a "People & Planet" modifier, which is the same as the 2021 – 2023 LTIP award modifier except that it permits the PSU award earnout to be either increased or decreased by up to 20 percentage points. The Compensation Committee believes that this shift to PSUs reflects our "pay for performance" philosophy, because the number of PSUs earned will be determined by long-term Company performance and the value of the awards upon vesting will be directly tied to our Class B Stock price. +FISCAL 2020 LEADERSHIP TRANSITION AWARDS +During fiscal 2020, we made changes to our executive team which impacted each of our fiscal 2021 Named Executive Officers. These changes included our CEO transition, through which Mr. Donahoe was appointed President and CEO and Mr. Parker became Executive Chairman. In addition, Mr. Campion transitioned from being CFO to COO, Mr. Friend succeeded Mr. Campion as CFO, and Ms. O'Neill became President of Consumer and Marketplace. In connection with these leadership transitions, and as previously disclosed in last year's proxy statement, in fiscal 2020 the Compensation Committee approved special transition-related awards to be granted or earned during fiscal 2021. These awards are described below. +TRANSITION-PERIOD CASH INCENTIVE AWARDS +In fiscal 2020, the Compensation Committee granted each of Messrs. Donahoe and Parker a transition-period cash incentive award with a value of $10,000,000 designed to support a smooth and effective CEO transition. The awards were subject to the achievement of the following transition-related performance goals over the performance period of January 13, 2020 to May 31, 2021: +PERFORMANCE GOALS +People & Culture Continue progress with respect to DE&I and employee engagement +Leadership & Continuity Transition leadership while minimizing business disruption and maintaining senior leadership continuity +Expertise JOHN DONAHOE II MARK PARKER +Accelerate digital transformation and develop enterprise-wide technology strategy +Advise on matters relating to product, including innovation, design, and marketing +Shared Engagement Work together to ensure clarity of responsibilities, expectations, and decision-making +To assess the performance of each of Messrs. Donahoe and Parker with respect to these goals, the Compensation Committee considered input from a variety of sources, including feedback from the Board, the executive team, and Messrs. Donahoe and Parker. Board feedback was obtained through a detailed survey provided to each member of the Board other than Messrs. Donahoe and Parker. Feedback from the executive team was obtained through confidential interviews with a third-party consultant. Feedback from Messrs. Donahoe and Parker themselves was obtained through their annual self-assessments. +In determining achievement of the transition-related performance goals, the Compensation Committee specifically considered the following: +41 NIKE, INC. +PERFORMANCE GOALS SELECT ACHIEVEMENTS +People & Culture +• Extended progress with respect to DE&I throughout the transition period, including: +◦ Continued improvement in representation of women in our global workforce, including a 2% increase at both the Director and above and VP levels during calendar year 2020 +◦ Continued improvement in representation of racial and ethnic minorities in our U.S. workforce, including a 2% increase at the Director and above level and 8% increase at the VP level during calendar year 2020 +• Despite the impact of the COVID pandemic, employee engagement remained steady throughout the transition period, as reflected in our 2021 employee Engagement Survey; our Engagement Index score of 80% represented a 1 percentage point year-over-year decline, and our Inclusion Index score of 79% (excluding new questions that were not comparable to the prior year index) represented a 2 percentage point year-over-year improvement +• Supported employee physical and mental well-being throughout the COVID pandemic, including by providing pay continuity, enhancing mental health offerings, expanding leave policies, supporting work-from-home whenever possible, and instituting protective measures for when remote work is not possible +Leadership & Continuity +• Launched the Consumer Direct Acceleration to accelerate and empower NIKE's strategy of unlocking long-term growth and profitability through deep, direct consumer relationships +• Sustained strong business performance and momentum despite COVID-related challenges, including achieving above-budget fiscal 2021 revenues of $44.5 billion +• Executive team feedback described strong, clear leadership throughout the transition period +• Board feedback emphasized that strong Company performance during the transition period reflected the effectiveness of the transition +Expertise JOHN DONAHOE II MARK PARKER +• Achieved digital sales of 30% as percentage of total sales mix approximately 3 years faster than target +• Accelerated digital fulfillment capacity by 3-4x in North America and EMEA since the beginning of the COVID pandemic +• Increased active and buying member growth and digital engagement +• Expanded online-to-offline offerings by scaling existing capabilities and activating new capabilities +• Product innovation pipeline remained robust and cadence of innovation launches remained stable throughout transition despite COVID-related challenges +• Increased investment in innovation focused on driving more inclusive and sustainable innovation, as well as unlocking growth potential in Women's segment +Shared Engagement +• Executive team feedback described clarity regarding CEO and Executive Chair roles, including with respect to authority, responsibilities, goals, and decision-making +• Board feedback unanimously described a collaborative partnership that enabled a seamless transition +• Board reported that the management of the transition exceeded expectations despite the unprecedented challenges presented by the COVID pandemic +Based on a holistic assessment of the collected feedback, including the specific achievements noted above, the Compensation Committee determined that each of Messrs. Donahoe and Parker satisfied the applicable performance goals and earned his transition-period cash incentive award. +STOCK-BASED TRANSITION AWARDS +In fiscal 2020, the Compensation Committee approved stock-based transition awards to Messrs. Campion and Friend and Ms. O'Neill in the amounts of $10,000,000, $6,000,000, and $6,000,000, respectively. In determining the size of the awards, the Compensation Committee considered the increased responsibilities of the NEOs in their new roles, particularly in connection with the launch of the Consumer Direct Acceleration and Company reorganization during fiscal 2021; the need to support business and leadership continuity during this transitional period; and the fact that we operate in a highly competitive talent marketplace and these individuals are particularly recruitable. The transition awards are in the form of RSUs that vest in equal annual installments over four years and accumulate dividend equivalents that are paid only upon vesting. The Compensation Committee granted the awards in the form of time-vesting stock awards because time-vesting awards are best structured to support the goal of retaining the leadership team during a key transitional period while also tying the ultimate value of the awards to performance of our Class B Stock price. Although approved in fiscal 2020, the transition awards were granted on June 1, 2020 and therefore are reflected in this year's Summary Compensation Table. +OTHER COMPENSATION +PROFIT SHARING AND RETIREMENT PLANS +We maintain a U.S. tax qualified retirement savings plan—the 401(k) Savings and Profit Sharing Plan for Employees of NIKE, Inc. (the "401(k) Plan")—under which all eligible U.S. employees, including the Named Executive Officers, are able to make pre-tax and after-tax contributions from their cash compensation. We make annual matching contributions for all participants equal to 100% of their pre-tax contributions up to 5% of their total eligible compensation. +2021 PROXY STATEMENT 42 +We also generally make annual profit sharing contributions to the accounts of eligible U.S. employees, including the Named Executive Officers, under the 401(k) Plan. The aggregate profit sharing contribution amount, if any, is determined each year by the Board of Directors. This aggregate contribution is allocated among eligible employees based on an equal percentage of their total salary and annual cash incentive award for the year. For fiscal 2021, the profit sharing contribution percentage for each eligible employee was 0%. +The Internal Revenue Code limits the amount of compensation that can be deferred under the 401(k) Plan, and also limits the amount of salary and annual cash incentive award ($285,000 for fiscal 2021) that may be taken into account when determining contributions under that plan. Accordingly, we provide our Named Executive Officers and other highly compensated employees with the opportunity to defer their compensation, including amounts in excess of the tax law limit, under our nonqualified Deferred Compensation Plan. We also make profit sharing contributions under the Deferred Compensation Plan with respect to salary and annual cash incentive award of any eligible employee that exceeds the tax law limit, and for fiscal 2021 these contributions were equal to 0% of the total salary and annual cash incentive award of each Named Executive Officer in excess of $285,000. These contributions under the Deferred Compensation Plan allow our Named Executive Officers and other highly compensated employees to receive profit sharing contributions in the same percentage as our other employees. We do not match deferrals to the Deferred Compensation Plan. Balances in the Deferred Compensation Plan, including the balances of the Named Executive Officers, are unsecured and at-risk, meaning that the balances may be forfeited in the event of the Company’s financial distress, such as bankruptcy. Fiscal 2021 matching and profit sharing contributions to the Named Executive Officers under the qualified and nonqualified plans are included in the All Other Compensation column in the Summary Compensation Table on page 47. +EMPLOYEE STOCK PURCHASE PLAN +Our Employee Stock Purchase Plan allows eligible employees in the United States and in many countries outside of the United States, including the Named Executive Officers, to purchase Class B Stock through payroll deductions at a 15% discount to the market price on the first or last trading day of the six-month purchase period, depending on which day the stock price was lower. In fiscal 2021, all of our Named Executive Officers participated in our Employee Stock Purchase Plan, with the exception of Messrs. Donahoe and Parker. +PERQUISITES AND OTHER BENEFITS +Our executive compensation program includes limited perquisites and other personal benefits for our Named Executive Officers, which generally consist of home security and financial planning services. In addition, our CEO and Executive Chairman are entitled to limited personal use of Company aircraft, primarily pursuant to time sharing agreements, which is intended to increase the security, availability, and productivity of these individuals, and enhanced charitable gift matching under our Employee Matching Gift Program, with an annual executive contribution limit of $1,000,000 and Company matching on a 4:1 basis. Finally, given the nature of our business, from time to time certain Company employees, including certain executive officers, may receive Company product, event tickets, or travel benefits that are not generally offered to all employees. We do not provide any tax gross-ups on perquisites to our executive officers. Greater detail about the perquisites and personal benefits provided to our Named Executive Officers in fiscal 2021 is provided in the footnotes to the Summary Compensation Table on page 47. +NON-COMPETITION AGREEMENTS +In exchange for non-competition agreements from each of our Named Executive Officers, we have agreed to provide monthly payments during the non-compete period following termination of employment, as described in the section below titled "Executive Compensation Tables—Potential Payments upon Termination or Change-in-Control". We believe that it is appropriate to compensate individuals to refrain from working with competitors following termination, and that compensation enhances the enforceability of such agreements. +LETTER AGREEMENTS +In connection with the CEO transition in fiscal 2020, we entered into letter agreements with each of Messrs. Donahoe and Parker. Other than these two letter agreements, we do not have employment contracts with any of our executive officers. +Mr. Donahoe's letter agreement sets forth the terms of his target annual direct compensation—consisting of a base salary of $1,500,000, a PSP target award of $3,000,000, and a long-term incentive target award of $14,000,000 in the forms and on the terms determined by the Compensation Committee from time to time—and his enhanced charitable gift matching under our Employee Matching Gift Program as described in the section above titled "Perquisites and Other Benefits". Mr. Donahoe's letter agreement also provides for the transition-period cash incentive award described in the section above titled "Fiscal 2020 Leadership Transition Awards—Transition-Period Cash Incentive Awards". +Mr. Parker's letter agreement provides for the transition-period cash incentive award described in the section above titled "Fiscal 2020 Leadership Transition Awards—Transition-Period Cash Incentive Awards" and the enhanced charitable gift matching under our Employee Matching Gift Program as described in the section above titled "Perquisites and Other Benefits". +43 NIKE, INC. +OUR COMPENSATION PROCESS +COMPENSATION COMMITTEE +The Compensation Committee oversees our executive compensation program, including determining the value and composition of the compensation package for each of our executive officers and setting annual performance goals for the CEO. In addition to any special actions the Compensation Committee may take throughout the year, the committee generally acts with respect to compensation for our Named Executive Officers during the fiscal year as follows: +PEER GROUP +Given the competitive market for top-tier talent, the Compensation Committee uses a peer group (consisting of companies with similar revenue size, market capitalization, brand value, products, or markets, or with which we compete for executive talent) to provide a reference for assessing executive compensation levels and practices. Based on the criteria, we determined that for purposes of setting fiscal 2021 executive compensation, our peer group should be refined to include American Express, Best Buy, and Oracle, and to remove FedEx and Macy's. Our revised peer group consists of the following companies: +American Express Company Kellogg Company Pepsico, Inc. +Best Buy Company, Inc. Kimberly-Clark Corporation Procter & Gamble Company +The Coca-Cola Company McDonald’s Corporation Starbucks Corporation +Colgate-Palmolive Company Microsoft Corporation Target Corporation +Comcast Corporation Mondelez International, Inc. TJX Companies +The Gap, Inc. Oracle Corporation The Walt Disney Company +In addition to considering our peer group, the Compensation Committee also uses market survey data from third parties, including Aon, Willis Towers Watson, and Mercer, about a broader range of companies. The Compensation Committee generally does not set executive compensation at or near any particular percentile of peer group, or market, compensation. Instead, the committee considers compensation to be competitive if it is generally within a reasonable range of market median. +2021 PROXY STATEMENT 44 +ROLE OF MANAGEMENT +The CEO makes compensation recommendations to, and participates in discussions with, the Compensation Committee regarding the compensation of each executive officer other than himself. In addition, our human resources staff regularly provides data, analysis, and recommendations to the committee regarding executive compensation. +The Compensation Committee meets regularly in executive session without the CEO or other management present to discuss our executive compensation program. Such executive sessions include discussions about, among other topics, the CEO's performance and compensation and the design and operation of our executive compensation plans. +ROLE OF COMPENSATION CONSULTANT +The Compensation Committee has the authority, in its sole discretion, to retain compensation consultants to assist the committee in overseeing our executive compensation program. The Compensation Committee chose not to retain any such consultants in fiscal 2021. However, in connection with the committee's analysis and decision-making regarding the fiscal 2021 executive compensation program, the Compensation Committee supplemented peer group data with information from surveys and reports containing competitive market data from Aon, Willis Towers Watson, and Mercer, which are obtained by our human resources staff. +OTHER COMPENSATION PRACTICES +STOCK OWNERSHIP GUIDELINES +We maintain stock ownership guidelines for executive officers that are designed to further align the interests of our executive officers with those of our shareholders. Under the guidelines, for fiscal 2021 each executive officer was required to hold NIKE stock valued at the following multiple of their annual base salary: +POSITION OWNERSHIP LEVEL +Chief Executive Officer +6X Base Salary +Other Named Executive Officers +3X Base Salary +Other Executive Officers +2X Base Salary +New officers are required to attain these ownership levels within five years of their appointment. As of May 31, 2021, the CEO, each other Named Executive Officer, and each of our other executive officers has met or is on track to meet the applicable ownership guideline within the requisite period. +In response to shareholder feedback received as part of our extensive shareholder engagement efforts, the Board revised the stock ownership guidelines for fiscal 2022 to require that the CEO hold NIKE stock valued at eight times base salary, and that each other executive officer hold NIKE stock valued at three times base salary. New officers are still required to attain these revised ownership levels within five years of their appointment. As of May 31, 2021, each of our executive officers, including each Named Executive Officer, has met or is on track to meet the applicable revised ownership guideline within the requisite period. +HEDGING AND PLEDGING +The Company’s Blackout and Pre-clearance Policy (which supplements our Insider Trading Policy) prohibits directors, executive officers, and other designated insiders (based on seniority and department) from engaging in transactions involving hedging, monetization or short sales of NIKE stock, including zero-cost collars and forward sale contracts. The policy also requires directors, executive officers, and designated insiders to obtain pre-approval from the Company’s Clearance Director before pledging NIKE stock. Before granting approval of any pledge, the Clearance Director considers the size of the pledge relative to the individual’s other holdings, both direct and indirect, and NIKE’s shares outstanding; the risk of foreclosure given the nature of the associated transaction; protections against the appearance of insider trading, including prohibitions on sales during trading black-outs; and the ability to timely report sales on Form 4. +45 NIKE, INC. +CHANGE-IN-CONTROL PROVISIONS +Neither PSP nor LTIP awards are subject to acceleration upon a change in control. Stock option, RSU, and restricted stock awards are subject only to "double-trigger" accelerated change-in-control vesting, meaning that vesting is accelerated only if there is a change in control of the Company, and within the following two years, either the acquiring entity fails to assume the awards or the employee’s employment is terminated by the acquirer without cause or by the employee for good reason. This double-trigger acceleration is intended to encourage executive retention through a period of uncertainty. The Compensation Committee believes that this approach will enhance shareholder value in the context of an acquisition and align executives' interests with those of investors. The effect of change-in-control transactions on stock-based awards is described further in the section below titled "Executive Compensation Tables—Potential Payments Upon Termination or Change-in-Control". +CLAWBACK +We maintain a clawback policy for the recoupment of incentive compensation. Under the clawback policy, an executive officer who is involved in wrongful conduct that results in a restatement of the Company’s financial statements must repay to the Company up to the full amount of any incentive compensation that was paid based on the financial statements that were subsequently restated. The clawback policy covers PSP awards, LTIP awards, stock-based awards (based on excess proceeds from pre-restatement sales of stock acquired pursuant to the stock-based awards), and profit sharing contributions to the Deferred Compensation Plan. In addition to the clawback policy, the PSP, LTIP and Stock Incentive Plan also specify that the Committee may apply further clawback requirements to awards through additional clawback policies or award agreement provisions, and that all awards are subject to clawback requirements under applicable law and regulation. +RISK ASSESSMENT +At the Compensation Committee’s request, in fiscal 2021, management prepared and discussed with the committee an assessment of potential risk associated with the Company’s compensation programs, including any risk that would be reasonably likely to have a material adverse effect on the Company. This included an assessment of risks associated with each element of employee compensation. The assessment considered certain design features of the compensation program that reduce the likelihood of excessive risk taking, such as reasonable performance targets, capped incentive compensation payouts, a balance of short- and long-term incentives, a balance of cash- and stock-based incentives, vesting of awards over time, and the potential for clawback of incentive compensation. In addition, for stock-based compensation, we have adopted stock ownership guidelines, provided for limited accelerated vesting of stock options and RSUs upon termination of employment, and provided for only double-trigger accelerated vesting of stock-based awards upon a change in control. +TAX DEDUCTIBILITY OF EXECUTIVE COMPENSATION +Section 162(m) of the Internal Revenue Code generally places a $1 million limit on the amount of compensation a company can deduct in any one year for "covered employees". While the Compensation Committee seeks to preserve tax deductibility in developing and implementing our compensation program, the committee also believes that it is important to maintain flexibility in administering compensation programs in a manner designed to promote varying corporate goals and the interests of our shareholders. Accordingly, we have not adopted a policy that all compensation must qualify as deductible for tax purposes and retain the ability to provide compensation that may not qualify as deductible under Section 162(m). +COMPENSATION COMMITTEE REPORT +The Compensation Committee of the Board of Directors has reviewed and discussed with management the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K. Based on the review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement. +Members of the Compensation Committee: +• Timothy D. Cook, Chair +• Cathleen A. Benko +• Elizabeth J. Comstock +2021 PROXY STATEMENT 46 +EXECUTIVE COMPENSATION TABLES +SUMMARY COMPENSATION TABLE +The following table sets forth information concerning compensation for fiscal 2019-2021 paid to or earned by our Named Executive Officers. +NAME AND PRINCIPAL +POSITION YEAR SALARY +($) +BONUS (1) +($) +STOCK +AWARDS (2) +($) +OPTION +AWARDS (3) +($) +NON-EQUITY +INCENTIVE PLAN +COMPENSATION (4) +($) +ALL OTHER +COMPENSATION (5) +($) +TOTAL +($) +John Donahoe II (6) +President and Chief Executive Officer +2021 1,500,000 13,600,000 3,602,980 5,402,416 4,500,000 4,315,312 32,920,708 +2020 548,077 6,750,000 21,275,073 23,241,515 — 1,685,315 53,499,980 +Matthew Friend (6) +Executive Vice President and Chief Financial Officer +2021 875,000 1,260,000 7,161,045 1,740,792 900,000 14,250 11,951,087 +2020 659,092 1,576,800 400,057 661,621 — 14,000 3,311,570 +Andrew Campion +Chief Operating Officer +2021 1,100,000 1,584,000 11,161,060 1,740,792 900,000 14,250 16,500,102 +2020 1,092,308 2,070,000 1,160,023 1,606,771 — 9,375 5,938,477 +2019 1,038,461 — 1,150,073 1,395,200 1,266,925 32,049 4,882,708 +Heidi O'Neill (6) +President, Consumer and Marketplace +2021 1,100,000 1,584,000 7,161,045 1,740,792 900,000 14,250 12,500,087 +Mark Parker +Executive Chairman +2021 1,700,000 12,040,000 — 6,002,675 4,500,000 3,235,307 27,477,982 +2020 1,700,000 6,025,000 4,000,067 5,540,572 — 930,634 18,196,273 +2019 1,676,923 — 5,000,012 3,052,000 4,091,695 147,392 13,968,022 +(1) For fiscal 2021, represents annual cash incentive awards which were paid at 120% of target to each executive officer. In light of the disruption and uncertainty caused by the ongoing COVID pandemic, the Compensation Committee structured these awards as cash bonuses to provide flexibility to challenge and motivate executives as the Company moved from the volatility created by the COVID pandemic through a period of recovery and into a period of continued growth, as described above under "Compensation of our Named Executive Officers—Annual Cash Incentive". For Mr. Donahoe and Mr. Parker, fiscal 2021 amounts also include the transition-period cash incentive awards. For fiscal 2020, represents discretionary cash bonuses awarded to executive officers to approximate the short- and long-term cash incentive payouts received by non-executive officers. +(2) Represents the grant date fair value of RSU awards and restricted stock granted in the applicable fiscal year computed in accordance with accounting guidance applicable to stock-based compensation. The grant date fair value is based on the closing market price of our Class B Stock on the grant date. +(3) Represents the grant date fair value of options granted in the applicable fiscal year computed in accordance with accounting guidance applicable to stock-based compensation. The grant date fair value of the options was estimated using the Black-Scholes option pricing model. The assumptions made in determining the grant date fair values of options under applicable accounting guidance are disclosed in Note 11 of Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended May 31, 2021. +(4) Non-Equity Incentive Plan Compensation consists of the following: +NAME FISCAL YEAR +ANNUAL INCENTIVE +COMPENSATION (a) +($) +LONG-TERM INCENTIVE +COMPENSATION (b) +($) +TOTAL +($) +John Donahoe II 2021 — 4,500,000 4,500,000 +2020 — — — +Matthew Friend 2021 — 900,000 900,000 +2020 — — — +Andrew Campion 2021 — 900,000 900,000 +2020 — — — +2019 1,266,925 — 1,266,925 +Heidi O'Neill 2021 — 900,000 900,000 +Mark Parker 2021 — 4,500,000 4,500,000 +2020 — — — +2019 4,091,695 — 4,091,695 +(a) Amounts shown were earned for performance in the applicable fiscal year under our Executive Performance Sharing Plan. +(b) Amounts shown were earned for performance during the three-year period ending with the applicable fiscal year under our Long-Term Incentive Plan. +(5) For fiscal 2021, includes Company matching contributions to the 401(k) Plan in the amount of $14,250 for each of the Named Executive Officers. The amount for Mr. Donahoe also includes $4,290,000 in charitable matching contributions made by the Company, in addition to Company-related merchandise and wellness-related products. The amount for Mr. Parker also includes $3,200,000 in charitable matching contributions made by the Company, as well as Company-related merchandise, and daily residential security, including monitoring and patrols provided by the Company. The amount for Mr. Donahoe also includes $9,057 in aggregate incremental cost to the Company for personal use of the Company’s aircraft. The aggregate +47 NIKE, INC. +incremental cost is determined based on the variable operating cost to the Company, including the cost of fuel, maintenance, crew travel expenses, landing fees, parking fees, in-flight food and beverage, and other smaller variable costs associated with each flight. The amounts for Mr. Donahoe and Mr. Parker exclude the aggregate incremental cost to the Company for personal use of the Company’s aircraft for which Mr. Donahoe or Mr. Parker, as applicable, reimbursed the Company in accordance with a time sharing agreement and as allowed under Federal Aviation Regulation 91.501(c) and (d). +(6) Because Mr. Donahoe and Mr. Friend were Named Executive Officers for only fiscal 2021 and 2020, and Ms. O'Neill for only fiscal 2021, no disclosure is included as to Mr. Donahoe or Mr. Friend for fiscal 2019, or as to Ms. O'Neill for fiscal 2020 and fiscal 2019. +GRANTS OF PLAN-BASED AWARDS IN FISCAL 2021 +The following table sets forth information concerning the performance-based annual cash incentive opportunities, performance-based long-term cash incentive opportunities, and RSU awards and stock options granted to the Named Executive Officers in fiscal 2021. +ESTIMATED FUTURE PAYOUTS UNDER +NON-EQUITY INCENTIVE PLAN AWARDS +ALL OTHER +STOCK AWARDS: +NUMBER OF +SHARES OF +STOCK OR +UNITS (2) +ALL OTHER OPTION +AWARDS: NUMBER +OF SECURITIES +UNDERLYING +OPTIONS (3) +EXERCISE +OR BASE +PRICE OF +OPTION +AWARDS +GRANT DATE +FAIR VALUE +OF STOCK +AND OPTION +AWARDS (4) +THRESHOLD TARGET MAXIMUM +NAME GRANT DATE ($) ($) ($) (#) (#) ($/SH) ($) +John Donahoe II 6/17/2020 1,250,000 +(1) +5,000,000 +(1) +10,000,000 +(1) +8/1/2020 36,912 3,602,980 +8/1/2020 239,575 97.61 5,402,416 +Matthew Friend 6/17/2020 250,000 +(1) +1,000,000 +(1) +2,000,000 +(1) +6/1/2020 60,278 6,000,072 +8/1/2020 11,894 1,160,973 +8/1/2020 77,197 97.61 1,740,792 +Andrew Campion 6/17/2020 250,000 +(1) +1,000,000 +(1) +2,000,000 +(1) +6/1/2020 100,463 10,000,087 +8/1/2020 11,894 1,160,973 +8/1/2020 77,197 97.61 1,740,792 +Heidi O'Neill 6/17/2020 250,000 +(1) +1,000,000 +(1) +2,000,000 +(1) +6/1/2020 60,278 6,000,072 +8/1/2020 11,894 1,160,973 +8/1/2020 77,197 97.61 1,740,792 +Mark Parker 6/17/2020 — +(1) +— +(1) +— +(1) +8/1/2020 — — +8/1/2020 266,194 97.61 6,002,675 +(1) These amounts represent the potential performance-based long-term cash incentive awards payable for performance during the three-year period consisting of fiscal 2021-2023 under our LTIP. Under this plan, the Compensation Committee approved target awards for the performance period and also established performance targets based on the Company's total shareholder return ("Absolute TSR") for fiscal 2021-2023 relative to the total shareholder return over the same period for other companies in the S&P 500 ("Relative TSR"). This payout is subject to a cap of 100% of the target award if Absolute TSR for the performance period is negative. To earn the 25% threshold payout level, 100% target payout level, or 200% maximum payout level, the Company's fiscal 2021-2023 Relative TSR must be at the 25th percentile, 55th percentile, or 85th percentile, respectively. If Relative TSR is at or above the threshold performance target, the Committee may adjust the payout upwards by up to 25 percentage points based on a holistic assessment of the Company's performance during the performance period with respect to employee engagement and inclusion, representation of diverse individuals in leadership positions, and sustainability. Fiscal 2021-2023 LTIP awards will be paid in August 2023, provided that the participant is employed by the Company on the last day of the performance period. +(2) Amounts awarded on June 1, 2020 represent grants of RSUs under the Stock Incentive Plan which vest in four equal installments on the first four anniversaries of the grant date. Amounts awarded on August 1, 2020 represent grants of RSUs under the Stock Incentive Plan which vest in three equal installments on the first three anniversaries of the grant date. Vesting will be accelerated in certain circumstances as described in the section "Potential Payouts Upon Termination or Change-in-Control". The RSUs accumulate cash dividend equivalents that are only paid upon vesting. +(3) Amounts reported in this column represent stock options granted under the Stock Incentive Plan which become exercisable in four equal installments on the first four anniversaries of the grant date. Options become exercisable in certain circumstances as described in the section "Potential Payouts Upon Termination or Change-in-Control". Each option has a maximum term of 10 years, subject to earlier termination in the event of the optionee's termination of employment. +(4) For stock awards, represents the value of RSUs based on the closing market price of our Class B Stock on the grant date. For option awards, represents the grant date fair value of stock options granted based on a value of $22.55 per share, calculated using the Black-Scholes option pricing model. These are the same values for the equity awards under accounting guidance applicable to stock-based compensation. The assumptions made in determining option values are disclosed in Note 11 to Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended May 31, 2021. +2021 PROXY STATEMENT 48 +OUTSTANDING EQUITY AWARDS AT MAY 31, 2021 +The following table sets forth information concerning outstanding stock options and RSUs held by the Named Executive Officers at May 31, 2021. +OPTION AWARDS STOCK AWARDS +NAME NUMBER OF +SECURITIES +UNDERLYING +UNEXERCISED +OPTIONS +EXERCISABLE +(#) +NUMBER OF +SECURITIES +UNDERLYING +UNEXERCISABLE +OPTIONS +(#) (1) +OPTION +EXERCISE +PRICE +($) OPTION +EXPIRATION +DATE NUMBER OF +SHARES OR +UNITS OF +STOCK THAT +HAVE NOT +VESTED +(#) MARKET VALUE OF +SHARES OR UNITS OF +STOCK THAT HAVE +NOT VESTED +($) +John Donahoe II 59,211 177,632 +(2) +102.1600 1/13/2030 +255,849 511,695 +(3) +102.1600 1/13/2030 +— 239,575 +(4) +97.6100 8/1/2030 174,603 +(8) +23,826,325 +Matthew Friend 43,000 — 56.4000 7/17/2025 +23,000 — 57.8700 7/15/2026 +22,500 7,500 +(5) +59.1000 7/20/2027 +17,500 17,500 +(6) +77.5400 8/1/2028 +9,024 27,071 +(7) +83.1200 8/1/2029 +— 77,197 +(4) +97.6100 8/1/2030 89,914 +(9) +12,269,664 +Andrew Campion 75,000 — 57.8700 7/15/2026 +56,250 18,750 +(5) +59.1000 7/20/2027 +40,000 40,000 +(6) +77.5400 8/1/2028 +21,915 65,743 +(7) +83.1200 8/1/2029 +— 77,197 +(4) +97.6100 8/1/2030 126,604 +(10) +17,276,382 +Heidi O'Neill — 7,500 +(5) +59.1000 7/20/2027 +25,000 25,000 +(6) +77.5400 8/1/2028 +15,340 46,020 +(7) +83.1200 8/1/2029 +— 77,197 +(4) +97.6100 8/1/2030 124,985 +(11) +17,055,453 +Mark Parker 660,000 — 23.2700 7/20/2022 +330,000 — 31.6750 7/19/2023 +330,000 — 38.7600 7/18/2024 +330,000 — 56.4000 7/17/2025 +165,000 — 57.8700 7/15/2026 +123,750 41,250 +(5) +59.1000 7/20/2027 +87,500 87,500 +(6) +77.5400 8/1/2028 +75,567 226,701 +(7) +83.1200 8/1/2029 +— 266,194 +(4) +97.6100 8/1/2030 53,576 +(12) +7,310,981 +(1) Stock options generally become exercisable in four equal installments on each of the first four anniversaries of the grant date. +(2) 33.3% will vest on January 13, 2022, 33.3% will vest on January 13, 2023, and 33.3% will vest on January 13, 2024. +(3) Represents sign-on performance stock options scheduled to vest in three equal installments on each of the first three anniversaries of the grant date, subject to satisfaction of a performance condition based on a 20% increase in the value of our Class B Stock from the value on the grant date (based on a 30-trading day average closing price divided by the closing price of a share on the grant date). The performance condition was satisfied in fiscal 2021. 50% will vest on January 13, 2022 and 50% will vest on January 13, 2023. +(4) 25% of these options vested on August 1, 2021, 25% will vest on August 1, 2022, 25% will vest on August 1, 2023, and 25% will vest on August 1, 2024. +(5) 100% of these options vested on July 20, 2020. +(6) 50% of these options vested on August 1, 2021 and 50% will vest on August 1, 2022. +(7) 33.3% of these options vested on August 1, 2021, 33.3% will vest on August 1, 2022, and 33.3% will vest on August 1, 2023. +(8) 12,305 of these RSUs vested on August 1, 2021,68,846 of these RSUs will vest on January 13, 2022, 12,304 of these RSUs will vest on August 1, 2022, 68,845 of these RSUs will vest on January 13, 2023, and 12,303 of these RSUs will vest on August 1, 2023. +(9) 15,070 of these RSUs vested on June 1, 2021, 13,352 vested on June 10, 2021, 6,751 vested on August 1, 2021, 15,070 will vest on June 1, 2022, 5,569 will vest on August 1, 2022, 15,069 will vest on June 1, 2023, 3,964 will vest on August 1, 2023, and 15,069 will vest on June 1, 2024. +(10) 25,116 of these RSUs vested on June 1, 2021, 13,561 vested on August 1, 2021, 25,116 will vest on June 1, 2022, 8,616 will vest on August 1, 2022, 25,116 will vest on June 1, 2023, 3,964 will vest on August 1, 2023, and 25,115 will vest on June 1, 2024. +(11) 15,070 of these RSUs vested on June 1, 2021, 8,734 vested on August 1, 2021, 45,318 will vest on April 18, 2022, 15,070 will vest on June 1, 2022, 6,691 will vest on August 1, 2022, 15,069 will vest on June 1, 2023, 3,964 will vest on August 1, 2023, and 15,069 will vest on June 1, 2024. +(12) 37,535 of these RSUs vested on August 1, 2021, and 16,041 will vest on August 1, 2022. +49 NIKE, INC. +OPTION EXERCISES AND STOCK VESTED DURING FISCAL 2021 +The following table sets forth information concerning stock option exercises and vesting of RSUs and restricted stock during fiscal 2021 for each of the Named Executive Officers on an aggregated basis. +OPTION AWARDS STOCK AWARDS +NAME NUMBER OF +SHARES ACQUIRED +ON EXERCISE +(#) VALUE +REALIZED +ON EXERCISE +($) NUMBER OF +SHARES ACQUIRED +ON VESTING +(#) VALUE +REALIZED +ON VESTING +($) +John Donahoe II — — 70,844 10,023,067 +Matthew Friend 75,700 6,373,008 6,269 688,218 +Andrew Campion 200,000 16,977,416 116,760 11,193,814 +Heidi O'Neill 150,500 10,972,000 6,180 603,901 +Mark Parker 825,000 84,593,205 279,458 27,363,991 +EQUITY COMPENSATION PLAN INFORMATION +The following table summarizes information regarding outstanding options and shares available for future issuance under equity compensation plans approved by shareholders and equity compensation plans that were not approved by shareholders as of May 31, 2021. The table does not reflect issuances made during fiscal 2022. +NUMBER OF SECURITIES +TO BE ISSUED UPON +EXERCISE OF OUTSTANDING +OPTIONS, WARRANTS AND +RIGHTS +WEIGHTED- +AVERAGE EXERCISE +PRICE OF OUTSTANDING +OPTIONS, WARRANTS +AND RIGHTS (1) +NUMBER OF SECURITIES +REMAINING AVAILABLE FOR +FUTURE ISSUANCE UNDER +EQUITY COMPENSATION +PLANS (EXCLUDING SECURITIES +REFLECTED IN COLUMN (a)) +PLAN CATEGORY (a) (b) (c) +Equity compensation plans approved by shareholders 84,850,492 +(2) +$72.8762 119,706,390 +(3) +Equity compensation plans not approved by shareholders — — 4,749,690 +(4) +Total 84,850,492 $72.8762 124,456,080 +(1) Weighted-average exercise prices do not reflect the shares that will be used upon the payment of outstanding awards of RSUs. +(2) Includes 84,850,492 shares subject to awards of options, RSUs, and stock appreciation rights outstanding under the Stock Incentive Plan. +(3) Includes 114,183,323 shares available for future issuance under the Stock Incentive Plan and 5,523,067 shares available for future issuance under the Employee Stock Purchase Plan. +(4) Includes 4,749,690 shares available for future issuance under the Foreign Subsidiary Employee Stock Purchase Plan, pursuant to which shares are offered and sold to employees of selected non-U.S. subsidiaries of the Company on substantially the same terms as those offered to U.S. employees under the shareholder-approved Employee Stock Purchase Plan as described above under "Compensation of our Named Executive Officers—Other Compensation—Employee Stock Purchase Plan". +NON-QUALIFIED DEFERRED COMPENSATION IN FISCAL 2021 +NAME PLAN +NAME +EXECUTIVE +CONTRIBUTIONS +IN FISCAL 2021 (1) +AGGREGATE EARNINGS +IN FISCAL 2021 AGGREGATE +WITHDRAWALS/ +DISTRIBUTIONS IN +FISCAL 2021 +AGGREGATE +BALANCE AT +MAY, 31 2021 (1) +John Donahoe II +DCP +— $306,052 — $931,785 +Matthew Friend +DCP +— $157,568 — $619,091 +Andrew Campion +DCP +$296,154 $593,325 — $3,076,728 +Heidi O'Neill DCP $342,806 $1,454,021 — $4,049,573 +Mark Parker +DCP +$1,630,000 $2,851,670 — $25,334,100 +(1) All amounts reported in the Executive Contributions column are also included in amounts reported in the Summary Compensation Table. Of the amounts reported in the Aggregate Balance column, the following amounts have been reported in the Summary Compensation Tables in this proxy statement or in prior year proxy statements: Mr. Donahoe, $63,695; Mr. Parker, $19,454,275; Mr. Friend, $9,503; Mr. Campion, $1,593,509; and Ms. O'Neill, $342,806. +2021 PROXY STATEMENT 50 +NON-QUALIFIED DEFERRED CO MPENSATION PLANS +The Named Executive Officers are eligible to participate in our Deferred Compensation Plan (the "DCP"). Participants in the DCP may elect in advance to defer up to 75 percent of their annual base salary, and up to 100 percent of their bonus and long-term cash incentive payments. +Generally, we make annual profit sharing contributions to defined contribution retirement plans. The contributions are allocated among eligible employees based on a percentage of their total salary and bonus for the year. To the fullest extent permitted under Internal Revenue Code limitations, these contributions are made to employees’ accounts under our qualified 401(k) Savings and Profit Sharing Plan. Contributions based on salary and bonus in excess of the tax law limit ($285,000 for fiscal 2021) are made as NIKE contributions under the DCP. +Amounts deferred under the DCP are credited to a participant’s account under the DCP. Each participant may allocate his or her account among any combination of the investment options available under the DCP. Participants’ accounts are adjusted to reflect the investment performance of the investment options selected by the participants. Participants can change the allocation of their account balances daily. The investment options available under the DCP consist of 18 mutual funds with a variety of investment objectives and five risk-based portfolios. The investment options had annual returns in fiscal 2021 ranging from -.50% to 72.06%. Amounts credited to participants’ accounts are invested by us in actual investments matching the investment options selected by the participants to ensure that we do not bear any investment risk related to participants’ investment choices. +The portion of a participant’s account attributable to elective deferrals, including investment returns, is fully vested at all times. The portion of a participant’s account attributable to NIKE contributions, including investment returns, is fully vested after the participant has been employed by us for five years. All of the Named Executive Officers, other than Mr. Donahoe, are fully vested in their NIKE contributions. +Each time they elect to defer compensation, participants make an election regarding distribution of the compensation deferred under the election (as adjusted to reflect investment performance). A participant may elect for distribution to be made in a lump sum at the beginning of a predetermined year while the participant is still employed or in service (but no sooner than the fourth year after the year in which the distribution election is submitted). Alternatively, a participant may elect for distribution to be made in a lump sum or in quarterly installments over five, ten or fifteen years after termination of employment or service. Participants have limited rights to change their distribution elections. Participants may make a hardship withdrawal under certain circumstances. Subject to certain limitations, a participant may also at any time request to withdraw amounts from his or her account balance that were vested as of December 31, 2004 (and any subsequent investment returns on such amount). If such request is approved, the participant may withdraw 90% of the amount requested, and the remaining 10% will be permanently forfeited. +POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE-IN-CONTROL +CHANGE-IN-CONTROL COMPENSATION — ACCELERATION OF EQUITY AWARDS +All unvested stock option and RSU awards are subject to accelerated vesting upon the occurrence of two events (a "double-trigger"): there is a "change-in-control"; and the Named Executive Officer’s employment is terminated by us without "cause" or by the Named Executive Officer for "good reason", in each case between the change-in-control (or shareholder approval of the change-in-control, if earlier) and the second anniversary of the change-in-control. Stock options will be exercisable for four years following termination of employment, but not beyond each option’s original 10-year term. Accelerated vesting of stock options and RSUs will also occur if we are acquired and the acquiring company does not assume the outstanding options or RSUs. For purposes of our stock awards, "change-in-control" is generally defined to include: +• the acquisition by any person of 50% or more of our outstanding Class A Stock or, if the Class A Stock no longer elects a majority of directors, the acquisition by any person of 30% or more of our total outstanding Common Stock, +• the nomination (and subsequent election) in a two-year period of a majority of our directors by persons other than the incumbent directors, +• a sale of all or substantially all of our assets, and +• an acquisition of NIKE through a merger, consolidation or share exchange. +For purposes of our stock awards, "cause" generally includes willful and continued failure to substantially perform assigned duties and willful engagement in illegal conduct materially injurious to us, and "good reason" generally includes a material diminution in position or duties, a salary reduction or material reduction in other benefits, and a home office relocation of over 50 miles. +The following table shows the estimated benefits that would have been received by the Named Executive Officers if double-trigger accelerated vesting had occurred on May 31, 2021, when the closing price of our Class B Stock was $136.46 per share. +51 NIKE, INC. +NAME +STOCK AWARD +ACCELERATION (1) +STOCK OPTION +ACCELERATION (2) +TOTAL +John Donahoe II $23,826,326 $32,951,406 $56,777,732 +Matthew Friend $12,269,665 $6,054,370 $18,324,035 +Andrew Campion $17,276,381 $10,313,135 $27,589,516 +Heidi O'Neill $17,055,452 $7,507,010 $24,562,462 +Mark Parker $7,310,981 $30,780,468 $38,091,449 +(1) Information regarding unvested RSUs held by each Named Executive Officer is set forth in the Outstanding Equity Awards table above. The amounts in the table above represent the number of unvested RSUs multiplied by the closing price of our Class B Stock on May 31, 2021. +(2) Information regarding outstanding unvested stock options held by each Named Executive Officer is set forth in the Outstanding Equity Awards table above. The amounts in the table above represent the aggregate value as of May 31, 2021 of those options using the excess of the per share closing price of our Class B Stock on May 31, 2021 over the per share exercise price, multiplied by the number of unvested option shares for each Named Executive Officer. +BENEFITS TRIGGERED ON CERTAIN EMPLOYMENT TERMINATIONS +STOCK OPTION ACCELERATION AND EXTENSION +As of May 31, 2021, each Named Executive Officer held stock options as listed in the Outstanding Equity Awards table above. Under the terms of the stock options held by each Named Executive Officer, upon the death or disability of the holder (or with respect to Mr. Donahoe's performance-based stock options, his termination without "cause"), all unvested options will vest and will be exercisable for four years following termination of employment, but not beyond each option’s original 10-year term. If death or disability (or with respect to Mr. Donahoe's performance-based stock options, a termination without "cause") of a Named Executive Officer had occurred on May 31, 2021, the aggregate value of those options is as set forth in the “Stock Option Acceleration” column of the Change-in-Control Compensation – Acceleration of Equity Awards table above. +Under the terms of the stock options held by each Named Executive Officer that were granted after fiscal 2020, upon a termination of employment due to a "divestiture" or "reduction in force" that occurs at least six months following the grant date, and subject to the holder signing a general waiver and release of claims, options that are scheduled to vest within one year following the termination will vest and all vested options will be exercisable for one year following termination of employment, but not beyond each option’s original 10-year term. The value of the unvested stock options held by each Named Executive Officer as of May 31, 2021 that would have become vested if a termination due to a "divestiture" or "reduction in force" had occurred on that date is $2,326,882 for Mr. Donahoe, $749,805 for each of Messrs. Friend and Campion and Ms. O'Neill, and $2,585,429 for Mr. Parker. +Under the terms of Mr. Donahoe's performance-based stock options, if he retires with at least 5 years of service (disregarding his years of service as a non-employee director prior to his employment), unvested options will be forfeited and vested options will be exercisable for four years following termination of employment, but not beyond the option’s original 10-year term. Under the terms applicable to all other stock options held by the Named Executive Officers, options that have been outstanding for at least one year will be subject to continued vesting if the holder retires after reaching age 55 with at least 5 years of service (or accelerated vesting if the holder retires after reaching age 60 with at least 5 years of service), and vested options will be exercisable for four years following termination of employment, but not beyond each option’s original 10-year term. If the Named Executive Officers had retired on May 31, 2021, the aggregate value of stock options subject to retirement vesting would have been $6,092,778 for Mr. Donahoe, $4,507,907 for Ms. O'Neill, and $20,438,831 for Mr. Parker. Messrs. Friend and Campion are not eligible for retirement vesting because these Named Executive Officers have not reached age 55. +STOCK AWARD ACCELERATION +As of May 31, 2021, each Named Executive Officer held unvested RSUs as set forth in the Outstanding Equity Awards table above. Under the terms of their award agreements, all unvested RSUs will immediately vest fully upon the death or disability of the holder. The value of the unvested RSUs held by each Named Executive Officer as of May 31, 2021 that would have become vested if death or disability had occurred on that date is as set forth in the "Stock Award Acceleration" column of the Change-in-Control Compensation — Acceleration of Equity Awards table above. +Under the terms of the RSUs held by each Named Executive Officer that were granted after fiscal 2020 (excluding the stock-based transition awards granted to Messrs. Friend and Campion and Ms. O'Neill), upon a termination of employment due to a "divestiture" or "reduction in force" that occurs at least six months following the grant date, and subject to the holder signing a general waiver and release of claims, RSUs that are scheduled to vest within one year following the termination will vest. The value of the unvested RSUs held by each Named Executive Officer as of May 31, 2021 that would have become vested if a termination due to a "divestiture" or "reduction in force" had occurred on that date is $1,679,140 for Mr. Donahoe and $541,064 for each of Messrs. Friend and Campion and Ms. O'Neill. +2021 PROXY STATEMENT 52 +PAYMENTS UNDER NONCOMPETITION AGREEMENTS +We have a noncompetition agreement with Mr. Donahoe that extends for eighteen months following the termination of his employment with us and a noncompetition agreement with Mr. Parker that extends for two years following the termination of his employment with us. Under these agreements, if Mr. Donahoe's employment is terminated by us without "cause" (as defined in his agreement), or if Mr. Parker’s employment is terminated by us, we will make monthly payments to the executive during the noncompetition period in an amount equal to one-twelfth of his then current annual salary and target PSP award ("Annual NIKE Income"). The agreements provide further that if the executive voluntarily resigns, we will make monthly payments to him during the noncompetition period in an amount equal to one-twenty-fourth of his then current Annual NIKE Income. However, commencement of the above-described monthly payments will be delayed until after the six-month period following the executive's separation from service, and all payments that he would otherwise have received during that period will be paid in a lump sum promptly following the end of the period, together with interest at the prime rate. If employment is terminated without "cause" (as defined in the applicable agreement), the parties may mutually agree to waive the covenant not to compete, and if employment is terminated for "cause", we may unilaterally waive the covenant. If the covenant is waived, we will not be required to make the payments described above for the months as to which the waiver applies. Assuming that Mr. Donahoe's employment had been terminated on May 31, 2021 and the covenant was not waived, during the 18-month period ending November 30, 2022 we would have been required to pay Mr. Donahoe $375,000 per month if the termination was by us without "cause", or $187,500 per month if he had voluntarily resigned. Assuming that Mr. Parker's employment had been terminated on May 31, 2021 and the covenant was not waived, during the 24-month period ending May 31, 2023 we would have been required to pay Mr. Parker $283,333 per month if the termination was by us, or $141,667 per month if he had voluntarily resigned. +We have noncompetition agreements with each of the other Named Executive Officers on generally the same terms as Mr. Donahoe, except that the noncompetition period is one year, we may unilaterally waive the covenant in all cases (including a termination without "cause"), the monthly payments are one-twelfth or one-twenty-fourth of the executive's then current annual salary (instead of their Annual NIKE Income), and payments may commence on termination. Assuming that the employment of each of these Named Executive Officers had been terminated by us without "cause" on May 31, 2021 and the covenants were not waived, we would have been required to pay Mr. Friend $72,917, Mr. Campion $91,667, and Ms. O'Neill $91,667, each on a monthly basis for the 12-month period ending May 31, 2022. Assuming that each of these Named Executive Officers had voluntarily resigned on May 31, 2021 and the covenants were not waived, we would have been required to pay Mr. Friend $36,458, Mr. Campion $45,833, and Ms. O'Neill $45,833, each on a monthly basis for the 12-month period ending May 31, 2022. +CEO PAY RATIO +NIKE's pay and benefits are designed to be competitive and equitable, meet the diverse needs of our global teammates, and reinforce our values. We pay for performance and impact by linking incentive pay to Company performance and seek to invest in positive experiences that have the greatest impact on the engagement and well-being of our employees. The executive compensation program is highly incentive-based and weighted towards long-term awards to emphasize long-term performance and support retention. Our executive compensation program is designed to attract and retain top-tier talent in a competitive market and to "pay for performance" in order to drive business results and maximize shareholder value. +For fiscal 2021, our last completed fiscal year: +• The employee identified at the median of all NIKE employees (other than our CEO) was a retail store employee in the United States; +• The annual total compensation of the median employee was $36,077; +• The annual total compensation of our CEO, Mr. Donahoe, was $32,920,708; and +• The estimated ratio of the annual total compensation of our CEO to the median annual total compensation of all other NIKE employees was 913 to 1. +This pay ratio is a reasonable estimate calculated in a manner consistent with SEC rules based on the methodology described below. The SEC rules for identifying the median compensated employee and calculating the pay ratio allow companies to adopt a variety of methodologies, apply certain exclusions, and make reasonable estimates and assumptions that reflect their compensation practices. As such, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies may utilize different methodologies, exclusions, estimates, and assumptions in calculating their own pay ratios. +53 NIKE, INC. +METHODOLOGY +Consistent with our past practice, we used the first business day in May as the date to determine the median employee. In prior years the first business day was May 1, although this year it was May 3, 2021. At that time, we had approximately 72,645 employees globally. After applying the "de minimis exemption" under the SEC rules, which permits us to exclude non-U.S. employees accounting for 5% or less of our total employee population, we excluded the 3,533 employees in the jurisdictions identified below, and our employee population consisted of approximately 69,112 employees. +Slovenia 1 Brazil 74 Thailand 207 +Sri Lanka 5 Hungary 80 Malaysia 215 +United Arab Emirates 5 Indonesia 81 Poland 236 +Philippines 19 Czech Republic 85 Vietnam 251 +Croatia 23 Denmark 93 India 268 +Macau 42 Ireland 103 South Africa 288 +New Zealand 45 Switzerland 105 Israel 299 +Sweden 60 Greece 154 Chile 322 +Norway 62 Portugal 155 +Uruguay 63 Austria 192 +Of the 69,112 employees included in the CEO Pay Ratio calculation, approximately 75% were full-time, 51% were in retail jobs, and 50% were located in the United States. +To identify our median employee we calculated annual compensation for fiscal 2021 based on base salary or hourly wages, as applicable. For the majority of our employees, base salary or hourly wages comprise the majority of their compensation. To determine wages for hourly employees, we used each individual’s pay rate and estimated scheduled hours in the applicable Human Resources system of record. +After determining the annual compensation for our employee population as described above, we identified a subset of approximately 100 individuals representing the potential median employee population. For this subset, we calculated each employee’s annual total compensation in U.S. dollars for fiscal 2021 based on the Summary Compensation Table rules used for our Named Executive Officers (in accordance with Item 402(c)(2)(x) of Regulation S-K). Compensation for permanent employees hired during the fiscal year was annualized, compensation for non-U.S. employees was converted into U.S. dollars using the applicable currency conversion rate as of the median employee determination date, and the median employee was then selected from this subset. +2021 PROXY STATEMENT 54 +AUDIT MATTERS +PROPOSAL 3 +RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM +The Audit & Finance Committee of the Board of Directors has sole authority to retain, with shareholder ratification, the Company’s independent registered public accounting firm. The Audit & Finance Committee directly oversees the firm’s work with respect to the annual audit of the Company’s consolidated financial statements and internal control over financial reporting and approves all audit engagement fees and terms. At least annually, the Audit & Finance Committee evaluates the independent registered public accounting firm’s qualifications, performance, and independence, including a review and evaluation of its lead partner. The Audit & Finance Committee is also involved in the selection of the new lead engagement partner following mandated rotation of the firm’s lead partner, and is responsible for considering the benefits of rotation of the Company’s independent registered public accounting firm. +The Audit & Finance Committee has appointed PricewaterhouseCoopers LLP to audit the Company’s consolidated financial statements and internal control over financial reporting for the fiscal year ending May 31, 2022 and to render other professional services as required. +PricewaterhouseCoopers LLP has served as the Company’s independent registered public accounting firm for many years. The Audit & Finance Committee and the Board of Directors believe that the continued retention of PricewaterhouseCoopers LLP as the independent registered public accounting firm is in the best interests of the Company and its shareholders. +Accordingly, the Audit & Finance Committee is submitting the appointment of PricewaterhouseCoopers LLP to shareholders for ratification. If the appointment is not ratified by our shareholders, the Audit & Finance Committee may reconsider whether it should appoint another independent registered public accounting firm. +Representatives of PricewaterhouseCoopers LLP will be present at the Annual Meeting, will have the opportunity to make a statement if they desire to do so, and are expected to be available to respond to questions. +Aggregate fees billed by the Company’s independent registered public accounting firm, PricewaterhouseCoopers LLP, for audit services related to the most recent two fiscal years, and for other professional services incurred in the most recent two fiscal years, were as follows: +TYPE OF SERVICE +2021 2020 +Audit Fees (1) +$19.2 million $21.0 million +Audit-Related Fees (2) +0.4 million 0.1 million +Tax Fees (3) +0.1 million 0.6 million +All Other Fees (4) +0.3 million 0.7 million +Total +$20.0 million $22.4 million +(1) Comprises the audits of the Company’s annual financial statements and internal controls over financial reporting, and reviews of the Company’s quarterly financial statements, as well as statutory audits of Company subsidiaries, attest services and consents to SEC filings. +(2) Comprises services including consultations regarding financial accounting and reporting. +(3) Comprises services for tax compliance, tax planning and tax advice. Tax compliance includes services for compliance related tax advice, as well as the preparation and review of both original and amended tax returns for the Company and its consolidated subsidiaries. Tax compliance related fees represented $0.1 million of the tax fees for fiscal 2021 and $0.2 million of the tax fees for fiscal 2020. The remaining tax fees primarily include tax advice. +(4) Comprises other miscellaneous services. +In accordance with the Sarbanes-Oxley Act of 2002, the Audit & Finance Committee established policies and procedures under which all audit and non-audit services performed by the Company’s independent registered public accounting firm must be approved in advance by the Audit & Finance Committee. During fiscal 2021 and fiscal 2020, all such services performed by, and fees paid to, PricewaterhouseCoopers LLP were approved in advance. +BOARD RECOMMENDATION +The Board of Directors recommends that shareholders vote FOR ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for the fiscal year ending May 31, 2022. +55 NIKE, INC. +REPORT OF THE AUDIT & FINANCE COMMITTEE +The Audit & Finance Committee has: +• Reviewed and discussed the audited financial statements with management. +• Discussed with the independent auditors the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board ("PCAOB") and the SEC. +• Received the written disclosures and the letter from the independent accountants required by applicable requirements of the PCAOB regarding the independent accountants’ communications concerning independence, and has discussed with the independent accountant the independent accountant’s independence. +• Based on the review and discussions above, recommended to the Board of Directors that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the last fiscal year for filing with the Securities and Exchange Commission. +Members of the Audit & Finance Committee: +• Alan B. Graf, Jr., Chair +• John G. Connors +• Peter B. Henry +2021 PROXY STATEMENT 56 +SHAREHOLDER PROPOSAL +PROPOSAL 4 +TO CONSIDER A SHAREHOLDER PROPOSAL REGARDING POLITICAL CONTRIBUTIONS DISCLOSURE +The following shareholder proposal will be voted on at the Annual Meeting only if properly presented by or on behalf of the shareholder proponent. Mercy Rome, c/o Newground Social Investment, 111 Queen Anne Ave N, Suite 500, Seattle, WA 98109, a beneficial owner of more than $2,000 of Class B Stock, submitted the proposal. The Board of Directors recommends a vote AGAINST the proposal and asks shareholders to read through NIKE’s response which follows the shareholder proposal. +RESOLVED: That the shareholders of Nike, Inc. ("Nike" or "Company") hereby request that the Company provide a report, updated semiannually, to disclose the Company’s: +1. Policies and procedures for making contributions and expenditures (direct or indirect) with corporate funds or assets: ( a ) to participate or intervene in campaigns on behalf of or opposing any candidate for public office, or: ( b ) to influence any segment of the general public with respect to an election or referendum. +2. Monetary and non-monetary contributions and expenditures (direct and indirect) used in the manner described in section 1 above, including: +a. The identity of the recipient and the amount paid to each; +b. The title(s) of the person(s) in the Company responsible for decision-making. +This report, which does not encompass expenditures on lobbying, shall be presented to the board of directors or relevant board committee and posted on the Company’s website within 12 months from the date of the annual meeting. +SUPPORTING STATEMENT +Especially since the 1/6/2021 insurrectionist attack on our nation’s Capitol, transparency and accountability for political speech and actions are paramount. Nike recognized this when it announced its PAC will not support any member of Congress who voted to decertify the Electoral College results. +Long-term Nike shareholders support transparency and accountability in corporate electoral spending. This should encompass any activity considered intervention in a political campaign under the Internal Revenue Code, such as: ( a ) direct and indirect contributions to political candidates, parties, or organizations, and: ( b ) independent expenditures or electioneering communications on behalf of federal, state, or local candidates. +Disclosure is in the best interest of both the Company and shareholders. The Supreme Court recognized this in its 2010 Citizens United decision, which states: “[D]isclosure permits citizens and shareholders to react to the speech of corporate entities in a proper way. This transparency enables the electorate to make informed decisions and [to] give proper weight to different speakers and messages.” +Public records show Nike has spent more than $3.15 million in corporate funds since the 2010 election cycle ( CQMoneyLine : http://moneyline.cq.com; National Institute on Money in State Politics : http://www.followthemoney.org). +However, public data does not begin to paint a complete picture of a company’s electoral spending. For example, Nike’s payments to trade associations and other tax-exempt “Dark Money” groups – that can be easily and secretly diverted into election-related activities – are undisclosed and are unknown. This proposal asks Nike to disclose all its electoral spending – including payments to trade associations and other tax-exempt organizations – which may be used for electoral purposes. This would bring our Company in line with a growing number of leading companies, including Coca-Cola, Microsoft, Mondelez International, and Kellogg, which present this information on their websites. +The Company’s Board, shareholders, and American democracy need comprehensive disclosure to properly evaluate the use of corporate assets in our electoral process. +THEREFORE: We urge a vote FOR this critical governance reform. +57 NIKE, INC. +OPPOSITION STATEMENT +The Board of Directors recommends that shareholders vote AGAINST this proposal because: +• The Board recently approved updates to the Company’s Policy on Corporate Political Contributions, Industry Associations, Public Policy Statements, and Lobbying, which will become effective and be posted on the Company’s website January 2022, to further increase transparency and oversight of the Company’s advocacy of policies that support our business objectives; +• Our updated policy enhances the granularity of disclosures related to political contributions and trade association memberships that we annually disclose on our website to our stakeholders in a manner that we believe will address the underlying objectives of the proposal; +• NIKE has previously received virtually identical proposals seven times in the past nine years, and each time shareholders have rejected the proposal; and +• In the Board’s judgment, more disclosure beyond the enhanced disclosures that we will provide under our updated policy would not be in the best interests of shareholders. +NIKE is committed to the highest ethical standards when engaging in political activities. We have strong governance practices and accountability in corporate spending on political activities, and maintain a level of transparency that we believe allows shareholders to have the information they need to make informed decisions. In fact, NIKE’s Corporate Responsibility, Sustainability & Governance Committee and the Board of Directors updated the Company’s Policy on Corporate Political Contributions, Industry Associations, Public Policy Statements, and Lobbying (the “Policy”) this spring to further increase transparency and oversight of the Company’s advocacy for public policies that support our business objectives. The updated Policy will go into effect January 1, 2022 and will fully satisfy the fundamental objectives of this proposal. +NIKE’s Policy is designed to give shareholders confidence that there is appropriate oversight of political activity and to allow shareholders to assess any risks associated with significant contributions. All of our political contributions and expenditures are made in accordance with the Policy and our objective is to strictly comply with all public reporting laws. Our Policy ensures that political contributions, trade group memberships, and policy statements are made in a manner consistent with NIKE's core values to protect or enhance shareholder value, without regard to the private political preferences of our corporate officers. Our Policy describes the policies and procedures for making corporate political contributions, how they are approved, who must approve them, how they are disclosed, and how they are reported to and reviewed by the Board’s Corporate Responsibility, Sustainability & Governance Committee. Our current Policy is available on our website at http://investors.nike.com/investors/corporate-governance, and our updated Policy will be available at the same location when it becomes effective in January 2022. +We make annual disclosures on our website regarding our political contributions. Consistent with our updated Policy, beginning in January 2022 these disclosures will include all cash political contributions to candidates, political organizations, or ballot initiatives on a disaggregated basis. We will also annually disclose on our website in-kind or product donations that aggregate to more than USD $25,000 in retail value in a calendar year. We believe these disclosures provide shareholders meaningful information to assess any risks posed by significant political contributions. Our enhanced disclosures will continue to be simple, accurate, and clear. +Our updated Policy continues to require that management annually report on compliance with our Policy to the Corporate Responsibility, Sustainability & Governance Committee. The committee will also review all political contributions made by the Company, and any membership fees or contributions to an industry association that aggregate to more than $25,000 in a calendar year, to ensure they align with the long-term business objectives of the Company. These industry association contributions will also be disclosed on our website. Any policy statements that make commitments regarding matters involving Board responsibilities or public reporting will also be reported to and reviewed by the Corporate Responsibility, Sustainability & Governance Committee. +The Board believes that the updated Policy addresses the fundamental objectives of this proposal and that the disclosure requested in this proposal is largely duplicative of the information that NIKE will provide going forward. Further, after careful consideration, the Board determined that some of the requested disclosures, such as reporting in kind or product donations that aggregate to less than USD $25,000, would be an undue administrative burden for a company the size and with the global reach of NIKE. +In summary, the Board of Directors believes the proposal is unnecessary because NIKE has followed a comprehensive policy for oversight and disclosure of political contributions for many years, which was recently enhanced to provide additional oversight and transparency. If adopted, the proposal would not be meaningfully additive to NIKE’s existing Policy. +BOARD RECOMMENDATION +X +The Board of Directors recommends that shareholders vote AGAINST the shareholder proposal. +2021 PROXY STATEMENT 58 +SHAREHOLDER PROPOSAL +PROPOSAL 5 +TO CONSIDER A SHAREHOLDER PROPOSAL REGARDING A HUMAN RIGHTS IMPACT ASSESSMENT +The following shareholder proposal will be voted on at the Annual Meeting only if properly presented by or on behalf of the shareholder proponent. Domini Impact Equity Fund, 180 Maiden Ln, Ste. 1302, New York, NY 10038, a beneficial owner of 44,949 shares of Class B Stock, submitted the Proposal together with co-filers Northwest & Ethical Investments L.P. (151 Yonge Street, Suite 1200, Toronto, ON M5C 2W7, beneficial owner of 29,682 shares of Class B Stock), Seeds Trust (c/o We Are Stardust, LP, P.O. Box 540205 Houston, TX 77254, beneficial owner of 5,356 shares of Class B Stock), Trillium ESG Global Equity Fund (c/o Trillium Asset Management LLC, 721 NW Ninth Ave, Suite 250 Portland, OR 97209, beneficial owner of 70,000 shares of Class B Stock), and IA Clarington Inhance Canadian Equity SRI Fund (c/o Vancity Investment Management, 700 815 West Hastings Street, Vancouver, BC V6C 1B4, beneficial owner of 19,654 shares of Class B Stock). The Board of Directors recommends a vote AGAINST the proposal and asks shareholders to read through NIKE’s response which follows the shareholder proposal. +RESOLVED: Shareholders request that Nike, Inc. ("Nike" or "the Company") publish a Human Rights Impact Assessment, at reasonable cost and omitting proprietary/confidential information, examining the actual and potential human rights impacts of its cotton sourcing practices, throughout the full supply chain. +SUPPORTING STATEMENT: +Nike has demonstrated leadership in supply chain transparency since it first disclosed its independent factories, contracted to make NIKE products since 2005. It has become increasingly clear, however , that some of companies' most significant and adverse social impacts occur at the very end of the supply chain, often related to the sourcing of raw materials. Recent events have increased human rights risks associated with cotton sourcing, a significant input in Nike ' s products. Unfortunately, the Company's current disclosures do not provide visibility on that level and efforts to engage the Company directly have not yielded meaningful dialogue. +Concerns about forced labor in cotton supply chains have led to significant media attention and regulatory and legislative action. For example, pursuant to US federal laws, on January 2021, the US government issued Withhold Release Orders against cotton and their downstream products produced in whole or in part in the Xinjiang region, including downstream products produced outside the Xinjiang region that incorporate these inputs. Supply chain disruptions like these may have material impacts on the Company's costs, gross margins and profitability. +The lack of transparency on cotton sourcing also introduces challenges for investors seeking to fulfill their commitments to conduct robust human rights due diligence, under the UN Guiding Principles on Business and Human Rights ("UNGPs") and in support of the UN Sustainable Development Goals ("SDGs" ). Principle 13 of the UNGPs states: "The responsibility to respect human rights requires that business enterprises... seek to prevent or mitigate adverse human rights impacts that are directly linked to their operations, products or services by their business relationships, even if they have not contributed to those impacts." +Recent legislative developments, particularly in the EU, support this level of transparency. The French Duty of Vigilance Law as well as child labor due diligence laws in the Netherlands are current examples of mandatory human rights due diligence . The European Parliament is currently consider i ng mandatory human rights due diligence at the enterprise level. The EU Regulation on Disclosures ("SFDR") may also require asset managers to conduct due diligence on the principa l adverse impacts of their investment decisions. +59 NIKE, INC. +OPPOSITION STATEMENT +The Board of Directors recommends that shareholders vote AGAINST this proposal because: +• NIKE is committed to respecting human rights and sustainability innovation. That is why our approach to Responsible Sourcing focuses on foundational expectations; gender equity; health & safety; worker engagement and well-being; and environmental responsibility; +• The Corporate Responsibility, Sustainability & Governance Committee provides oversight of management’s efforts to ensure that the Company’s dedication to sustainability innovation is reflected in its business operations; +• NIKE runs our business in an ethical way, and that commitment extends to the contract manufacturers who make our products. We collaborate with suppliers who share our commitment to responsible manufacturing, as measured by compliance with the standards laid out in our Supplier Code of Conduct and Code Leadership Standards, which can be found on our website; +• NIKE is committed to the responsible and sustainable sourcing of the materials used in our products. NIKE is increasing the use of recycled materials in our products and 100% of our cotton is sustainably sourced 1 . We collaborate with organizations such as the Better Cotton Initiative to develop best practices, and work with and within our industry to develop an approach to sourcing raw materials responsibly, protecting human rights and reducing our environmental impact; and +• Our current initiatives, which are discussed further on our website, already address the underlying rationale for the proposal and provide our shareholders with more relevant information about NIKE’s commitment to human rights and responsible sourcing than the requested measure. +We are committed to respecting human rights and responsible sourcing in our supply chain. NIKE is focused on running our business in an ethical way and that extends to our supply chain and the contract manufacturers who make our products. We collaborate with manufacturing suppliers who share our commitment to making products responsibly and sustainably. NIKE expects all suppliers to share our commitment to respecting the rights of workers and advancing their welfare, with particular care for people with unique vulnerabilities such as women, migrants, and temporary workers. We also expect suppliers to use natural resources responsibly and efficiently. We are strengthening long-term relationships with strategic suppliers and sourcing from fewer factories, focusing on those that are committed to our standards of sustainability, product excellence, and compliance with local laws. +In order to ensure that NIKE’s products are produced responsibly throughout the supply chain, we require our finished goods suppliers to verify they are sourcing materials from vendors that are compliant with NIKE’s Restricted Substances List (RSL) and NIKE’s Code of Conduct for suppliers (the “Supplier Code”). NIKE’s Supply Agreements also explicitly require suppliers to comply with all local and country-specific labor laws and NIKE’s Supplier Code and Code Leadership Standards. +Over the past five years, NIKE has increased our use of sustainable materials for apparel by scaling sustainable alternatives in high-volume products. As of fiscal 2020, 100% of the cotton we use across our entire product line is certified organic, recycled, or Better Cotton sourced through the Better Cotton Initiative (“BCI”). In addition, NIKE recycles more than 1.5 million pounds of cotton each year while caring for soil health and natural habitats, without fossil fuel-derived pesticides or synthetic fertilizers, and while respecting the rights of workers and farmers. We collaborate—including as members of BCI, through serving on the board of Textile Exchange, and by working with and within our industry—to develop best practices and an approach to sourcing raw materials responsibly, protecting human rights and reducing our environmental impact. While NIKE does not directly source cotton, or other raw materials, traceability at the raw materials level is an area of ongoing focus. We are working closely with our suppliers, industry associations, brands, and other stakeholders to pilot traceability approaches and map material sources so we can have confidence that the materials in our products are responsibly produced. +NIKE’s commitment to ethical practices in our own operations and our supply chain begins at the highest level. The Board’s Corporate Responsibility, Sustainability & Governance Committee reviews and evaluates the Company’s significant strategies, activities, policies, investments, and programs regarding corporate purpose, including corporate responsibility, sustainability, human rights, global community and social impact, and diversity and inclusion, and provides oversight of management’s efforts to ensure that the Company’s dedication to sustainability (including environmental sustainability and human rights) is reflected in our business operations. +NIKE is committed to sharing with our stakeholders how we manage social and environmental issues and impacts. At NIKE we set open goals and implement transparent policies to promote human rights and ensure our products are ethically produced, as well as to share our progress and learnings along the way. NIKE’s annual Impact Report sets out how we manage social and environmental issues and impacts, as well as our targets for addressing these issues, and reports progress against them. For example, in our most recent Impact Report, we shared that in fiscal 2020 94% of NIKE’s sourcing came from factories that meet our definition of sustainable. +NIKE’s policies take seriously and support national and international efforts to promote human rights throughout the supply chain, including by ending forced labor. +1 Certified organic, Better Cotton (cotton grown according to the Better Cotton Standard System), or recycled. +2021 PROXY STATEMENT 60 +• NIKE’s Supplier Code lays out the minimum standards we expect each supplier facility to meet. The Supplier Code includes requirements around forced and child labor, excessive overtime, compensation, workplace safety, and freedom of association, among other worker protections. These minimum standards are integral to NIKE’s supplier strategies—how we evaluate baseline performance and determine the suppliers with which NIKE will continue to engage and grow our business. As a condition of doing business with NIKE, the supplier must implement and integrate the Supplier Code, accompanying Code Leadership Standards (discussed below), and local law into its business, including the development of effective management systems, and submit to verification and monitoring. NIKE will investigate any non-compliance and work with factory managers to see that corrective actions are taken, and that problems are remediated. Should a supplier fail to remediate issues, it will be subject to review and sanctions, including termination of the supply agreement. When NIKE chooses to end a relationship with a supplier, it aims to do so responsibly, reducing the risk to the suppliers’ workers, local community, and the environment. +• NIKE’s Code Leadership Standards (“CLS”) specify how contract manufacturers should implement the Supplier Code. The document also articulates how we measure factories’ compliance efforts and progress against our Supplier Code, including specific requirements on the management of key forced labor risks. +• The NIKE, Inc. Statement on Forced Labor, Human Trafficking and Modern Slavery for FY 2020 discusses NIKE’s global business practices to address forced labor. In addition to the Supplier Code and CLS, we have developed risk evaluation, auditing and remediation tools and local partnerships to help to advance responsible recruitment and employment practices across the sector and deeper within our supply chain. NIKE is working towards mapping these risks further up the supply chain and prioritizing our work on forced labor risks to focus on suppliers employing foreign migrant workers, a key vulnerable worker population. +• NIKE’s Environment, Health, and Safety Policy knits together a number of NIKE policies and programs to provide safe working conditions and promote a culture of safety and wellness for our own employees and workers at our contract manufacturers through implementing our Supplier Code, providing training, tools, and equipment to work safely, setting goals and assessing performance in these areas, and promoting sustainable development. NIKE-owned and operated facilities and Tier 1 finished goods contract manufacturers undergo external audits and internal assessments. When those processes reveal gaps in the implementation of our standards, we develop management skills and implement tools designed to fix those problems. We also consider those audits and assessments as we evaluate contract manufacturers and choose whom we work with as our business grows. +NIKE continues to prioritize fair labor and environmental sustainability in our supply chain and has set the following ambitious targets for 2025: +• NIKE aims for 100% of our strategic suppliers to build world-class, safe, and healthy workplaces for the people making our products; +• NIKE aims for 100% of facilities in our extended supply chain to meet NIKE’s foundational labor, health, safety, and environmental standards and demonstrate respect for the rights of their workers and communities where they operate; +• NIKE aims to have 100% of women in the supply chain have increased access to career opportunities and upward mobility by developing tools that measure where suppliers can strengthen and improve gender advancement, working with the right organizations, such as the International Center for Research on Women, and identifying ways our suppliers can develop strong internal career pathways and more equitable talent pipelines; and +• NIKE aims for 100% of our waste to be diverted from landfills in our extended supply chain, with at least 80% recycled back into NIKE products and other goods. +NIKE collaborates with stakeholders to support the needs of workers in our supply chain . NIKE continues to expand our work with our peers, NGOs, and other organizations to increase respect for human rights and to accelerate positive impact in the countries where we and our suppliers operate. NIKE developed relationships with the Fair Labor Association and Better Work, a joint program of the International Labour Organization, and the International Finance Corporation, to help support the needs of workers through building sustainable business practices and addressing human rights risks, including forced labor. +In fiscal 2020, NIKE, joined the Better Cotton Initiative Task Force on Forced Labor, a group of representatives from civil society, brands, and consultancies with expertise in human rights and forced labor risks to conduct a holistic review of BCI’s approach to ensure decent work and forced labor conditions. The work resulted in a public report with specific recommendations to enhance BCI’s approach to addressing decent work and forced labor risks in the cotton supply chain and will be reviewed and evaluated for implementation into the program. +More information about our key initiatives and policies on sustainable sourcing are available in the Foundational Sourcing Expectations section of our website and in our fiscal 2020 Impact Report, which is available on the Purpose section of our website. +In summary, NIKE has already publicly disclosed our initiatives and policies around sustainable sourcing, which are responsive to the underlying objective of this proposal and provides our shareholders with more meaningful insight into our progress in this area. The Board of Directors believes that the Company’s policies effectively articulate our long-standing support for, and continued commitment to, human rights and sustainable sourcing, rendering the proposal duplicative and unnecessary. +BOARD RECOMMENDATION +X +The Board of Directors recommends that shareholders vote AGAINST the shareholder proposal. +61 NIKE, INC. +SHAREHOLDER PROPOSAL +PROPOSAL 6 +TO CONSIDER A SHAREHOLDER PROPOSAL REGARDING SUPPLEMENTAL PAY EQUITY DISCLOSURE +The following shareholder proposal will be voted on at the Annual Meeting only if properly presented by or on behalf of the shareholder proponent. Elaine Alexander, c/o Arjuna Capital, 1 Elm Street, Manchester, MA 01944, a beneficial owner of 82 shares of Class B Stock, submitted the Proposal. The Board of Directors recommends a vote AGAINST the proposal and asks shareholders to read through NIKE’s response which follows the shareholder proposal. +Pay Equity +Whereas: Pay inequity persists across race and gender. Black workers' hourly median earnings have fallen 3.6 percent since 2000, representing 75.6 percent of white wages. The median income for women working full time in the United States is 82 percent that of men. Intersecting race, African American women make 62 cents on the dollar, Native women 60 cents, and Latina women 54 cents. At the current rate, women will not reach pay equity until 2059, African American women until 2130, and Latina women until 2224. +Citigroup estimates closing minority and gender wage gaps 20 years ago could have generated 12 trillion dollars in additional national income. McKinsey projects closing the racial wealth gap could net the United States economy 1.1 to 1.5 trillion by 2028. PwC estimates closing the gender pay gap could boost Organization for Economic Cooperation and Development (OECD) countries' economies by 2 trillion dollars annually. +Diversity is linked to superior stock performance and return on equity. Actively managing pay equity is associated with improved representation. Of note, 23.9 percent of Nike employees are black, but black employees represent only 5.3 percent of employees above director level. Women account for 49.5 percent of Nike' s workforce and 42.5 percent of employees above director level. +Pay gaps are literally defined as the median pay of minorities and women compared to the median pay of non-minorities and men, considered the valid way of measuring gender pay inequity by the United States Census Bureau, Department of Labor, OECD, and International Labor Organization. +Best practice pay equity reporting consists of two parts: +1. unadjusted med i an pay gaps, assess i ng " equal opportunity" to high pay i ng roles +2. statistically adjusted gaps, assessing pay for workers performing similar roles +Nike reports parity for statistically adjusted gaps but ignores unadjusted median gaps. +The Equal Employment and Opportunity Commission now mandates pay data reporting, across race and gender, as workforce diversity data alone is insufficient to assess pay inequity. The United Kingdom mandates disclosure of median gender pay gaps and is considering race and ethnicity reporting. Nike reported a four percent median gender base pay gap and a 25 percent bonus gap for United Kingdom employees. +Resolved: Shareholders request Nike report on median pay gaps across race and gender, including associated policy, reputational, competitive, and operational risks, and risks related to recruiting and retaining diverse talent. The report should be prepared at reasonable cost, omitting proprietary information, litigation strategy and legal compliance information. +Racial/gender pay gaps are defined as the difference between minority and non-minority/female and male median earnings expressed as a percentage of non-minority/male earnings (Wikipedia/OECD, respectively). +Supporting Statement: An annual report adequate for investors to assess performance could, with board discretion, integrate base, bonus and equity compensation to calculate: +• percentage median gender pay gap, globally and/or by country, where appropriate +• percentage median racial/minority/ethnicity pay gap, US and/or by country, where appropriate +2021 PROXY STATEMENT 62 +OPPOSITION STATEMENT +The Board of Directors recommends that shareholders vote AGAINST this proposal because +• We are committed to the principle of equal pay for equal work and to enhancing the representation of diverse individuals at all levels of the Company; +• The requested median pay gap measure is not a meaningful or accurate metric for our shareholders; and +• Our current initiatives and public disclosures, including the pay equity data published in our annual Impact Report, already address the underlying rationale for the proposal and provide our shareholders with more relevant information about NIKE’s commitment to pay equity and increasing diversity, equity, and inclusion (“DE&I”) at all levels of the Company than the requested measure. +We are committed to pay equity and increasing diversity at all levels of the Company. NIKE is focused on fostering a diverse, equitable, and inclusive culture by focusing on representation, education, development, and community. We believe that diversity is a key component of innovation and strive to build a creative and inclusive environment, where all voices are welcomed and heard. In particular, we are focused on increasing representation of women globally and racial and ethnic minorities in the United States at all levels of the Company, including at the most senior levels, and ensuring that all of our employees are compensated fairly and equitably. +Our pay equity ratio, which is disclosed annually in our Impact Report, reflects our commitment to deliver equal pay for equal work. NIKE defines pay equity as equal compensation for women and men of all races and ethnicities who undertake the same work at the same level, location, experience, and performance. We have achieved a global pay equity ratio of 1:1 for men to women and a 1:1 pay equity ratio for white employees to racial and ethnic minorities in the United States. NIKE’s compensation and benefits are designed to be competitive and equitable, meet the diverse needs of our global teammates, and reinforce our values. We regularly monitor this data and annually review our compensation and promotion practices across all geographies, functions, and business units with the goal of ensuring we continue to achieve pay equity every year. +In addition to our commitment to achieving pay equity, we are also committed to increasing gender and racial diversity throughout the Company, including among our leadership ranks. In our annual Impact Report we disclose the actual percentage representation of women globally and racial and ethnic minorities in the United States and its trend over time to enable our shareholders to track the progress that we have made in advancing diversity in our workforce generally as well as specifically in senior leadership roles. For example, as of calendar year 2020, women now make up 50% of our total employee base. We increased VP-level representation for women globally to 41% (a 14% increase from 2015) and for racial and ethnic minorities in the United States to 29% (a 13% increase from 2015). Women also hold 43% of the positions at the Director level and above globally, while racial and ethnic minorities in the United States hold 27% of these leadership positions. NIKE has also committed to disclose the Federal Employer Information Report EEO-1 Data beginning with data for 2021, although we do not use the EEO-1 Data to measure progress or believe it is appropriate to do so. The EEO-1 Data will be available on the Company’s website. And at the Board level, NIKE has adopted a set of qualification standards for director nominees, which includes, among other things, diversity and inclusion as a factor. +Although we have made good progress with respect to DE&I, we know there is more work to be done and will continue to focus on recruitment, promotion, and retention to drive increased representation, including at the most senior levels. The FY20 NIKE, Inc. Impact Report sets out specific 2025 targets related to pay equity and diversity and inclusion at the Company. For example, we have committed to maintain a focus on pay equity and designing benefits that meet the needs of our diverse workforce, and to continue supporting our suppliers in developing their strategic compensation capabilities. In addition, by 2025, we have targeted achieving 45% representation of women globally at the VP level, 30% representation of racial and ethnic minorities at the Director level and above in the United States, and 35% representation of racial and ethnic minorities in our U.S. corporate workforce. +We have also increased programming to recruit, develop, and retain diverse employees. We scaled up our efforts to recruit the best and the brightest talent through traditional executive and campus recruiting channels and by expanding and deepening our relationships with Historically Black Colleges and Universities and Hispanic-Serving Institutions. We have also launched innovative programs, such as the Serena Design Crew, an eight-month apprenticeship program designed to bring diverse, talented individuals together to work on a Serena-inspired collection, and Women in Nike (W.I.N), a two-year program to provide relevant and dynamic work experience for retired or retiring WNBA players. +NIKE has also elevated diversity, equity, and inclusion to the heart of our People and Culture strategy, by combining our Talent and D&I teams under a single leader so that DE&I is now integrated into the entire Talent agenda from the very beginning of the employee experience, with measurement and leadership accountability throughout each employee’s career. Finally, NIKE supports our recruitment, promotion, and retention efforts through investments in DE&I education for all employees, to ensure that our people have the awareness and understanding necessary to build and retain diverse and inclusive teams; professional development programs and experiences, to empower and enable employees to grow their careers at NIKE; and our eight employee networks, to ensure an ecosystem of belonging and access for our internal communities. +63 NIKE, INC. +The requested median pay gap measure is not a meaningful or accurate metric for our shareholders. This measure seeks to compare the pay of two employees whose compensation happens to fall at the midpoint of the pay range among those employees sharing the relevant gender, racial, or ethnic characteristic, without adjusting for relevant factors that can explain differences in pay, such as their different role, skills, performance, experience, tenure, or location. Although the proposal is aimed at providing transparency with respect to pay equity and equal opportunity, this statistic does not demonstrate whether our women and racial and ethnic minority employees are being paid fairly for the roles that they are doing nor does it accurately depict female or racial and ethnic representation at NIKE’s different locations around the globe. Moreover, our shareholders do not need a surrogate measurement of pay equity and the percentage representation of women and racial and ethnic minority employees in senior leadership positions as we already provide the actual information on our website and in our annual Impact Report. As a result, the median pay ratios requested in the proposal provide no meaningful supplemental information to our shareholders. +We maintain robust policies and programs to advance our diversity, equity, and inclusion goals throughout the Company by ensuring a diverse breadth of talent in our pipeline and developing and supporting our female and U.S. racial and ethnic minority employees. Some highlights of our efforts to enhance the recruitment, development, and retention of diverse talent at all levels of the Company include: +• Increasing our focus on diversity recruitment programs, including by expanding and deepening our relationships with Historically Black Colleges and Universities and Hispanic-Serving Institutions. +• Innovative programs aimed at building a pipeline of exceptional and diverse candidates, such as our Serena Design Crew apprenticeship for diverse and talented individuals and our Women in Nike (W.I.N) initiative for retired or retiring WNBA players. +• Strategies to attract and select diverse candidates for our intern program through inclusive intern hiring and full-time employee conversion. +• Eight employee-formed and managed networks that help build community for a diverse spectrum of individuals across the Company, such as the Black Employee Network and Friends, Latino & Friends Network, Native American Network & Friends, PRIDE Network and Women of Nike & Friends. +• A new digital mentoring program for members of our employee networks. +• Development programs for high-potential employees, including programs for Senior Director-level and Director-level employees that have each maintained 50% representation of female participants and 30% representation of U.S. racial and ethnic minorities. +• Unconscious Bias Awareness training, which has been completed by close to 70% of our global workforce. +• Inclusive leadership education and certification program, in collaboration with Northwestern University, for all VPs. +• Our Board of Director’s ongoing oversight of the Company’s diversity, equity, and inclusion policies and decision-making at the Board and senior management levels, as well as the Corporate Responsibility, Sustainability & Governance Committee’s annual review and evaluation of significant DE&I strategies, activities, policies, investments, and programs. +• Benefits that are responsive to our employees’ diverse needs, including fertility and adoption benefits, a surrogacy benefit, and a new benefit for families caring for children with learning, social, or behavioral challenges in the United States. +Our long-standing commitment to and support of gender and racial equality has been affirmed by many organizations. For example, NIKE has earned the title of Best Place to Work for LGBTQ Equality for the 19 th year in a row, with a perfect score on the 2021 Corporate Equality Index, and Forbes named NIKE as one of the Best Employers for Diversity in 2021 and one of the Best Employers for Women in 2020. We have also joined the inaugural 2020 World Benchmarking Alliance Gender Equity & Women’s Empowerment Benchmark and the newly launched MLT Black Equity at Work certification. +More information about our key initiatives and diversity metrics is available in the DE&I Strategy section of our website and in our FY20 NIKE, Inc. Impact Report, both of which are available through the Purpose section of our website. +In summary, the Board of Directors believes the proposal is unnecessary because the information NIKE already publicly discloses with respect to our initiatives and pay equity and diversity metrics is responsive to the underlying objective of the proposal and provides our shareholders with more meaningful insight into our progress in this area. +BOARD RECOMMENDATION +X +The Board of Directors recommends that shareholders vote AGAINST the shareholder proposal. +2021 PROXY STATEMENT 64 +SHAREHOLDER PROPOSAL +PROPOSAL 7 +TO CONSIDER A SHAREHOLDER PROPOSAL REGARDING DIVERSITY AND INCLUSION EFFORTS REPORTING +The following shareholder proposal will be voted on at the Annual Meeting only if properly presented by or on behalf of the shareholder proponent. Wynnette LaBosse Tr, c/o As You Sow, 1200 Fitzgerald Drive, Pinole, CA 94564, a beneficial owner of 84 shares of Class B Stock, submitted the proposal. The Board of Directors recommends a vote AGAINST the proposal and asks shareholders to read through NIKE’s response which follows the shareholder proposal. +Resolved : Shareholders request that Nike Inc. ("Nike") publish, at reasonable expense and excluding proprietary information, annual reporting assessing the Company's diversity and inclusion efforts. At a minimum reporting should include: +• the Board process for assessing the effectiveness of its diversity, equity, and inclusion programs, +• the Board's assessment of program effectiveness, as reflected in any goals, metrics, and trends related to its promotion, recruitment, and retention of protected classes of employees. +Supporting Statement : Investors seek quantitative, comparable data to understand the effectiveness of diversity, equity, and inclusion programs within and between companies. +Whereas : Studies have pointed to the corporate benefits of a diverse workforce, including: +• Companies with the strongest racial and ethnic diversity are 35 percent more likely to have financial returns above industry medians. +• Companies in the top quartile for gender diversity are 21 percent more likely to outperform on profitability and 27 percent more likely to have superior value creation. 1 +• A study of the S&P 500 found that the most diverse companies had an average annual five year stock return 5.8 percent higher than the least-diverse companies. 2 +Nike has extensive brand advertising that speaks to race and justice issues, including featuring Colin Kaepernick in advertising campaigns, and an advertisement which states, "Don't pretend there's not a problem in America. Don't turn your back on racism." +In the wake of George Floyd's death, Nike's CEO, John Donahoe, wrote "...our most important priority is to get our own house in order.... Nike needs to be better than society as a whole. Our aspiration is to be a leader. While we have made some progress over the past couple of years, we have a long way to go." 3 +Mr. Donahoe also said, "Our brand would not be what it is today without the powerful contributions of Black athletes and Black culture." 4 +Yet, despite these statements and goals, Nike has faced damaging allegations of harassment and discrimination on the basis of gender, race, and gender identity. Reports of a toxic workplace have continued even after allegations of sexual harassment and gender discrimination led to significant turnover of male executives in 2018. In July 2020, an anonymous employee wrote to Business Insider accusing the company of "performative allyship" and said of Black employees at Nike: "Many have been suffering in silence, alone. Many have been laid off due to retaliation. Many feel like they should just shut up and work..." 5 +Nike provides insufficient quantitative data for investors to determine the effectiveness of its human capital management program as it relates to workplace diversity. Unlike 71 percent of S&P 100 companies, Nike does not release its EEO-1 form, the best practice for sharing workforce composition. Nor does the company release meaningful data related to the hiring, retention, or promotion of its diverse employees. +1 McKinsey & Company, "Delivering through Diversity", January 2018 +(https://www.mckinsey.com/~/media/mckinsey/business%20functions/organization/ our%20insights/ delivering%20through%2 0diversity/delivering-through-diversity_fuII-report.ashx) +2 Holger, Dieter, "The business case for more diversity" Wall Street Journal, October 26, 2019 +(https://www.wsj.com/articles/the-business-case- for-more-diversity-11572091200) +3 https://www.kicksonfire.com/nike-anti-racism-Ietter-to-employees-prioritizes-getting-our-own-house-i n-order/ +4 https://purpose. n ike . com/ceo-letter +5 https : // www . busines s ins i de r .com/black-nike- em p l oyees-aIlege -r acism-at-company -i n - istagram-account-2020 - 7 +65 NIKE, INC. +OPPOSITION STATEMENT +The Board of Directors recommends that shareholders vote AGAINST this proposal because: +• We are committed to advancing diversity, equity, and inclusion (“DE&I”) at NIKE, including enhancing the representation of diverse individuals at all levels of the Company; +• We continue to increase resources devoted to building a more diverse and inclusive workforce by scaling up our efforts to recruit, develop, and retain diverse talent. This includes expanding our recruitment programs and partnerships, increasing funding and support for our eight employee networks, elevating DE&I to sit at the heart of the Company’s People & Culture strategy, and developing leadership training and accountability for our senior leaders; and +• Our current initiatives and public disclosures, including NIKE’s global gender and U.S. racial and ethnic minority representation data in our annual Impact Report, and the Board of Director’s ongoing commitment to monitor the effectiveness of our DE&I policies and programs already address the essential objective of the proposal and provide our shareholders with detailed information about NIKE’s commitment to increasing diversity, equity, and inclusion at all levels of the Company. +We are committed to fostering a diverse and inclusive team and increasing diversity at all levels of the Company . NIKE strives to foster a diverse, equitable, and inclusive culture by focusing on representation, education, development, and community. Our focus on improving diverse representation at all levels of the Company, which starts with women globally and racial and ethnic minorities in the United States, includes setting and striving for clear and ambitious targets and reporting our progress towards achieving them in our annual Impact Report, which is available on the Purpose section of our website. Improving representation requires expanding our efforts to recruit, retain, and promote diverse talent. We continue to enhance our efforts to recruit diverse talent both through traditional channels, such as our relationships with Historically Black Colleges and Universities and Hispanic-Serving Institutions, and by launching innovative new recruitment initiatives. And our retention and promotion efforts are supported by our investments in DE&I education for all employees, to ensure that our people have the awareness and understanding necessary to build and retain diverse and inclusive teams; professional development programs and experiences, to empower and enable employees to grow their careers at NIKE; and eight employee networks, to ensure an ecosystem of belonging and access for our internal communities. Furthermore, to create structural support for our work improving diverse representation throughout NIKE, in fiscal 2021 we combined our DE&I and Talent teams under a single leader. +Our commitment to diversity and inclusion begins at the top. We have adopted a set of qualification standards for nominees to our Board of Directors which includes, among other things, diversity and inclusion as a factor. Our Board monitors the effectiveness of our DE&I policies and programs both at the Board and senior management levels. In addition, our Board committees play key roles in overseeing and promoting DE&I at the Company. For example, the Corporate Responsibility, Sustainability & Governance Committee reviews and evaluates the Company’s significant strategies, activities, policies, investments and programs regarding corporate purpose, including diversity and inclusion, and monitors the Company’s progress towards its DE&I objectives. In addition, the Compensation Committee reviews and provides guidance to management regarding our policies, programs, and practices related to talent management and development for executive officers and senior management, including with respect to employee engagement and workplace DE&I. +Transparency is one of the key drivers of our DE&I work. Each year in our Impact Report we disclose the actual percentage representation of women globally and racial and ethnic minorities in the United States, as well as year-over-year changes to enable our shareholders to track the progress that we have made in advancing diversity in our workforce generally as well as specifically in senior leadership roles. For example, as of calendar year 2020, women now make up 50% of our total employee base. We increased VP-level representation for women globally to 41% (a 14% increase from 2015) and for racial and ethnic minorities in the United States to 29% (a 13% increase from 2015). Women also hold 43% of the positions at the Director level and above globally, while racial and ethnic minorities in the United States hold 27% of these leadership positions. NIKE has also committed to disclose the Federal Employer Information Report EEO-1 Data beginning with data for 2021, although we do not use the EEO-1 Data to measure progress or believe it is appropriate to do so. The EEO-1 Data will be available on the Company’s website. +2021 PROXY STATEMENT 66 +Although we have made good progress with respect to DE&I, we know there is more work to be done and will continue to focus on recruitment, promotion, and retention to drive increased representation, including at the senior levels of the Company. The FY20 NIKE, Inc. Impact Report sets out specific 2025 targets for DE&I, including achieving 45% representation of women globally at the VP level, 30% representation of racial and ethnic minorities at the Director level and above in the United States, and 35% representation of racial and ethnic minorities in our U.S. corporate workforce. In addition to disclosing these targets, we also report on the work we are doing to achieve them both in our annual Impact Report and on the DE&I Strategy section of our website. This includes our increased programming to recruit, develop, and retain diverse employees. For example, we have scaled up our efforts to recruit the best and the brightest talent through traditional executive and campus recruiting channels and by expanding and deepening our relationships with Historically Black Colleges and Universities and Hispanic-Serving Institutions. We have also launched innovative programs, such as the Serena Design Crew, an eight-month apprenticeship program designed to bring diverse, talented individuals together to work on a Serena-inspired collection, and Women in Nike (W.I.N), a two-year program to provide relevant and dynamic work experience for retired or retiring WNBA players. +We maintain robust policies and programs to advance our diversity, equity, and inclusion goals throughout the Company by ensuring a diverse breadth of talent in our pipeline and developing and supporting our female and U.S. racial and ethnic minority employees. Some highlights of our efforts to enhance the recruitment, development and retention of diverse talent at all levels of the Company include: +• Increasing our focus on diversity recruitment programs, including by expanding and deepening our relationships with Historically Black Colleges and Universities and Hispanic-Serving Institutions. +• Innovative programs aimed at building a pipeline of exceptional and diverse candidates, such as our Serena Design Crew apprenticeship for diverse and talented individuals and our Women in Nike (W.I.N) initiative for retired or retiring WNBA players. +• Strategies to attract and select diverse candidates for our intern program through inclusive intern hiring and full-time employee conversion. +• Eight employee-formed and managed networks that help build community for a diverse spectrum of individuals across the Company, such as the Black Employee Network and Friends, Latino & Friends Network, Native American Network & Friends, PRIDE Network and Women of Nike & Friends. +• A new digital mentoring program for members of our employee networks. +• Development programs for high-potential employees, including programs for Senior Director-level and Director-level employees that have each maintained 50% representation of female participants and 30% representation of U.S. racial and ethnic minorities. +• Unconscious Bias Awareness training, which has been completed by close to 70% of our global workforce. +• Inclusive leadership education and certification program, in collaboration with Northwestern University, for all VPs. +• Our Board of Director’s ongoing oversight of the Company’s diversity, equity, and inclusion policies and decision-making at the Board and senior management levels, as well as the Corporate Responsibility, Sustainability & Governance Committee’s annual review and evaluation of significant DE&I strategies, activities, policies, investments, and programs. +• Benefits that are responsive to our employees’ diverse needs, including fertility and adoption benefits, a surrogacy benefit, and a new benefit for families caring for children with learning, social, or behavioral challenges in the United States. +Our long-standing commitment to and support of gender and racial equality has been affirmed by many organizations. For example, NIKE has earned the title of Best Place to Work for LGBTQ Equality for the 19 th year in a row, with a perfect score on the 2021 Corporate Equality Index, and Forbes named NIKE as one of the Best Employers for Diversity in 2021 and one of the Best Employers for Women in 2020. We have also joined the inaugural 2020 World Benchmarking Alliance Gender Equity & Women’s Empowerment Benchmark and the newly launched MLT Black Equity at Work certification. +More information about our key initiatives and diversity metrics is available in the DE&I Strategy section of our website and in our FY20 NIKE, Inc. Impact Report, both of which are available through the Purpose section of our website. +In summary, the Board of Directors believes the proposal is unnecessary because the information NIKE already publicly discloses with respect to our initiatives and diversity metrics is responsive to the essential objective of the proposal and provides our shareholders with meaningful insight into our progress in this area. +BOARD RECOMMENDATION +X +The Board of Directors recommends that shareholders vote AGAINST the shareholder proposal. +67 NIKE, INC. +STOCK OWNERSHIP INFORMATION +STOCK HOLDINGS OF CERTAIN OWNERS AND MANAGEMENT +The following table sets forth the number of shares of the classes of NIKE securities beneficially owned, as of June 30, 2021, after giving effect to any transactions that occurred on such date, by (1) each person known to the Company to be the beneficial owner of more than 5 percent of any class of the Company’s securities, (2) each of the directors and nominees for director, (3) each executive officer listed in the Summary Compensation Table ("Named Executive Officers"), and (4) all directors, Named Executive Officers, and other executive officers as a group. Because Class A Stock is convertible into Class B Stock on a share-for-share basis, each beneficial owner of Class A Stock is deemed by the SEC to be a beneficial owner of the same number of shares of Class B Stock. Therefore, in indicating a person’s beneficial ownership of shares of Class B Stock in the table, it has been assumed that such person has converted into Class B Stock all shares of Class A Stock of which such person is a beneficial owner. For these reasons the table contains substantial duplications in the numbers of shares and percentages of Class A and Class B Stock shown for Swoosh, LLC, Philip H. Knight, the Travis A. Knight 2009 Irrevocable Trust II, and Travis A. Knight in his capacity as the Trustee of such Trust. In addition, unless otherwise indicated, all persons named below can be reached c/o Ann M. Miller, Vice President, Corporate Secretary, and Chief Ethics & Compliance Officer, NIKE, Inc., One Bowerman Drive, Beaverton, Oregon 97005-6453. +TITLE OF CLASS +SHARES BENEFICIALLY +OWNED (1) +PERCENT OF +CLASS (2) +Cathleen A. Benko Class B 7,932 — +Elizabeth J. Comstock Class B 31,633 +(3) +— +John G. Connors Class B 112,514 +(3) +— +Timothy D. Cook Class B 45,433 +(3) +— +John J. Donahoe II (5) +Class B 445,575 +(3)(6) +— +Thasunda B. Duckett Class B 3,542 — +Alan B. Graf, Jr. Class B 192,425 — +Peter B. Henry Class B 2,282 — +Travis A. Knight Class A 41,006,369 +(4) +13.4 % +Class B 41,030,262 +(4) +3.1 % +Mark G. Parker (5) +Class B 3,773,209 +(3)(6) +0.3 % +Michelle A. Peluso Class B 22,767 — +John W. Rogers, Jr. Class B 14,475 — +Andrew Campion (5) +Class B 288,879 +(3) +— +Matthew Friend (5) +Class B 170,694 +(3) +— +Heidi O'Neill (5) +Class B 91,755 +(3) +— +2021 PROXY STATEMENT 68 +TITLE OF CLASS +SHARES BENEFICIALLY +OWNED (1) +PERCENT OF +CLASS (2) +Sojitz Corporation of America Preferred +(7) +300,000 100.0 % +1211 S.W. 5th Ave, Pacwest Center, Ste. 2220, +Portland, OR 97204 +Philip H. Knight +One Bowerman Drive, Beaverton, OR 97005 +Class A 21,404,487 +(8) +7.0 % +Class B 34,740,174 +(9) +2.7 % +Swoosh, LLC +22990 NW Bennett Street, Hillsboro, OR 97124 +Class A 233,500,000 +(10) +76.6 % +Class B 233,500,000 15.5 % +Travis A. Knight 2009 Irrevocable Trust II +22990 NW Bennett Street, Hillsboro, OR 97124 +Class A 41,006,369 +(4) +13.4 % +Class B 41,006,369 +(4) +3.1 % +The Vanguard Group +100 Vanguard Blvd., Malvern, PA 19355 +Class B 103,945,154 +(11) +8.3 % +(11) +BlackRock, Inc. +55 East 52nd Street, New York, NY 10055 +Class B 93,108,691 +(12) +7.3 % +(12) +All directors and executive officers as a group (17 persons) +Class A 41,006,369 +(4) +13.4 % +Class B 47,010,491 +(3)(4)(6) +3.7 % +(1) A person is considered to beneficially own any shares: (a) over which the person exercises sole or shared voting or investment power, or (b) of which the person has the right to acquire beneficial ownership at any time within 60 days (such as through conversion of securities or exercise of stock options). Unless otherwise indicated, voting and investment power relating to the above shares is exercised solely by the beneficial owner or shared by the owner and the owner’s spouse or children. +(2) Omitted if less than 0.1 percent. +(3) These amounts include the right to acquire the following numbers of shares within 60 days after June 30, 2021 pursuant to the exercise of stock options: 14,000 shares for Ms. Comstock, 66,000 shares for Mr. Connors, 14,000 shares for Mr. Cook, 374,954 shares for Mr. Donahoe, 2,328,933 shares for Mr. Parker, 273,130 shares for Mr. Campion, 159,598 shares for Mr. Friend, 69,980 shares for Ms. O'Neill, and 3,932,605 shares for the executive officer and director group. +(4) Includes 21,863,989 shares of Class A Stock held directly by the Travis A. Knight 2009 Irrevocable Trust II (the "Trust"), of which Mr. Travis Knight is the Trustee, and 19,142,380 shares of Class A Stock held by an indirect subsidiary of the Trust. Mr. Travis Knight and members of his immediate family are among the beneficiaries of the Trust. Mr. Travis Knight disclaims beneficial ownership of the Company’s securities held directly and indirectly by the Trust, except to the extent of his pecuniary interest therein. On June 30, 2016, a wholly owned subsidiary of the Trust acquired all of the voting units in Swoosh, LLC. Mr. Travis Knight disclaims beneficial ownership of all securities held by Swoosh, LLC. +(5) Named Executive Officer listed in the Summary Compensation Table. +(6) Includes shares held in accounts under the NIKE, Inc. 401(k) Savings and Profit Sharing Plan: 75 shares for Mr. Donahoe, 36,682 shares for Mr. Parker, and 48,489 shares for the executive officer and director group.. +(7) Preferred Stock does not have general voting rights except as provided by law, and under certain circumstances as provided in the Company’s Restated Articles of Incorporation, as amended. +(8) Does not include 521,792 shares of Class A Stock that are owned by Mr. Philip Knight’s spouse. Mr. Philip Knight has disclaimed ownership of all such shares. Mr. Philip Knight holds the position Chairman Emeritus, and has a standing invitation to attend all meetings of the Board as a non-voting observer. +(9) Does not include: (a) 521,792 shares of Class A Stock that are owned by Mr. Philip Knight’s spouse, and (b) 29,586,056 shares of Class B Stock held by the Knight Foundation, a charitable foundation in which Mr. Philip Knight and his spouse are directors. Mr. Philip Knight has disclaimed ownership of all such shares. +(10) Information provided as of July 17, 2020 in the Form 4 filed by the shareholder. +(11) Information provided as of December 31, 2020 in Schedule 13G filed by the shareholder. +(12) Information provided as of December 31, 2020 in Schedule 13G filed by the shareholder. +DELINQUENT SECTION 16(A) REPORTS +Section 16(a) of the Securities Exchange Act of 1934 requires our directors and executive officers, and holders of more than 10 percent of a registered class of the Company's equity securities, to file with the SEC reports regarding their ownership and changes in ownership of Common Stock and other equity securities of the Company. Directors, officers, and greater than 10 percent shareholders are required by the regulations of the SEC to furnish the Company with copies of all Section 16(a) forms they file. To the Company's knowledge, based solely on a review of such reports furnished to the Company and written representations that no other reports were required, during the fiscal year ended May 31, 2021 all Section 16(a) filing requirements applicable to its directors, officers, and greater than 10 percent shareholders were complied with, except that one report relating to one transaction on November 16, 2020 by Matthew Friend was filed one day late due to an administrative error. +69 NIKE, INC. +TRANSACTIONS WITH RELATED PERSONS +Philip H. Knight, the father of NIKE director Travis A. Knight, serves as Chairman Emeritus, which provides a standing invitation for Philip H. Knight to attend meetings of the Board and its committees as a non-voting observer. In fiscal 2021, as Chairman Emeritus, Mr. Knight received an annual salary of $500,000, and medical and dental insurance coverage generally available to employees. +The Company’s written policy requires the Corporate Responsibility, Sustainability & Governance Committee to review any transaction or proposed transaction with a related person that would be required to be reported under Item 404(a) of Regulation S-K, and to determine whether to ratify or approve the transaction, with ratification or approval to occur only if the committee determines that the transaction is fair to the Company or that approval or ratification of the transaction is in the interest of the Company. +COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION +The members of the Compensation Committee of the Board of Directors during fiscal 2021 were Timothy D. Cook, Cathleen A. Benko, and Elizabeth J. Comstock. The committee is composed solely of independent, non-employee directors. No member of the Compensation Committee has been an executive officer of the Company, and no member of the Compensation Committee had any relationships requiring disclosure by the Company under the SEC’s rules requiring disclosure of certain relationships and related-party transactions. None of the Company’s executive officers served as a director or member of a compensation committee (or other committee serving an equivalent function) of any other entity, the executive officers of which served as a director or member of the Compensation Committee of the Company during fiscal 2021. +OTHER MATTERS +As of the time this proxy statement was printed, management was unaware of any proposals to be presented for consideration at the Annual Meeting other than those set forth herein, but if other matters do properly come before the Annual Meeting, the persons named in the proxy will vote the shares represented by such proxy according to their best judgment. +SHAREHOLDER PROPOSALS +A shareholder proposal (other than a proxy access nomination) intended for inclusion in the Company’s proxy statement and form of proxy for the 2022 annual meeting of shareholders must be received by Ann M. Miller, Vice President, Corporate Secretary, and Chief Ethics & Compliance Officer of NIKE, Inc. at One Bowerman Drive, Beaverton, Oregon 97005-6453, on or before April 19, 2022. Rules under the Securities Exchange Act of 1934, as amended, describe standards as to the submission of shareholder proposals. A shareholder proxy access nomination intended for inclusion in the Company’s proxy statement and form of proxy for the 2022 annual meeting of shareholders must be received, along with the other information required by the Company's Bylaws, by Ann M. Miller, Vice President, Corporate Secretary, and Chief Ethics & Compliance Officer of NIKE, Inc. at One Bowerman Drive, Beaverton, Oregon 97005-6453, no earlier than March 20, 2022 and no later than April 19, 2022. +In addition, the Company’s Bylaws require that any shareholder wishing to make a nomination for director or introduce a proposal or other business at a shareholder meeting must give the Company at least 60 days’ advance written notice, which for the 2021 annual meeting of shareholders is August 7, 2021, and that notice must meet certain other requirements described in the Bylaws. +For the Board of Directors, +Ann M. Miller +Vice President, Corporate Secretary, and Chief Ethics & Compliance Officer +2021 PROXY STATEMENT 70 +ANNUAL +MEETING +AND +PROXY STATEMENT +October 6, 2021 +Whether or not you plan to attend the meeting, please sign and date the enclosed proxy card and return it in the enclosed envelope, or vote online or by telephone following the instructions on the proxy card. +71 NIKE, INC. +VOTE BY INTERNET +Before The Meeting - Go to www.proxyvote.com +Use the Internet to transmit your voting instructions and for electronic delivery of information. Vote by 11:59 p.m. Eastern Time on October 5, 2021 for shares held directly and by 11:59 p.m. Eastern Time on October 3, 2021 for shares held in a Plan. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. +During The Meeting - Go to www.virtualshareholdermeeting.com/NKE2021 +You may attend the meeting via the Internet and vote during the meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions. +VOTE BY PHONE - 1-800-690-6903 +Use any touch-tone telephone to transmit your voting instructions. Vote by 11:59 p.m. Eastern Time on October 5, 2021 for shares held directly and by 11:59 p.m. Eastern Time on October 3, 2021 for shares held in a Plan. Have your proxy card in hand when you call and then follow the instructions. +VOTE BY MAIL +Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. +NIKE, INC. +ONE BOWERMAN DRIVE +BEAVERTON, OR 97005-6453 +TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: +D21035-P43098 KEEP THIS PORTION FOR YOUR RECORDS +DETACH AND RETURN THIS PORTION ONLY +THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. +NIKE, INC. +The Board of Directors recommends a vote FOR all the nominees listed in Proposal 1, a vote FOR Proposals 2 and 3, and a vote AGAINST Proposal 4, 5, 6, and 7. +1 Class A director nominees: To elect a Board of Directors for the ensuing year. For Withhold +1a. Cathleen A. Benko ☐ ☐ For Against Abstain +1b. Elizabeth J. Comstock ☐ ☐ 2 To approve executive compensation by an advisory vote. ☐ ☐ ☐ +1c. John G. Connors ☐ ☐ 3 To ratify the appointment of PricewaterhouseCoopers LLP as independent registered public accounting firm. ☐ ☐ ☐ +1d. Timothy D. Cook ☐ ☐ 4 To consider a shareholder proposal regarding political contributions disclosure, if properly presented at the meeting. ☐ ☐ ☐ +1e. John J. Donahoe II ☐ ☐ 5 To consider a shareholder proposal regarding a human rights impact assessment, if properly presented at the meeting. ☐ ☐ ☐ +1f. Thasunda B. Duckett ☐ ☐ 6 To consider a shareholder proposal regarding supplemental pay equity disclosure, if properly presented at the meeting.. ☐ ☐ ☐ +1g. Travis A. Knight ☐ ☐ 7 To consider a shareholder proposal regarding diversity and inclusion efforts reporting, if properly presented at the meeting. ☐ ☐ ☐ +1h. Mark G. Parker ☐ ☐ 8 To transact such other business as may properly come before the meeting. +1i. John W. Rogers, Jr. ☐ ☐ +Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title. +Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date +2021 PROXY STATEMENT 72 +Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders To Be Held on October 6, 2021: +The Proxy Statement and NIKE, Inc.'s 2021 Annual Report to Shareholders are available online at www.investorvote.com or www.proxyvote.com, for registered and beneficial owners, respectively. +D21036-P43098 +Proxy - NIKE, INC. +CLASS A COMMON STOCK PROXY +SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS +FOR THE 2021 ANNUAL MEETING OF SHAREHOLDERS +October 6, 2021 +The undersigned hereby appoints Mark G. Parker, Travis A. Knight, and Michelle A. Peluso, and each of them, proxies with full power of substitution, to vote, as designated on the reverse side, on behalf of the undersigned, all shares of Class A Common Stock which the undersigned may be entitled to vote at the Annual Meeting of Shareholders of NIKE, Inc. on October 6, 2021, and any adjournments thereof, with all powers that the undersigned would possess if personally present. A majority of the proxies or substitutes present at the meeting may exercise all powers granted hereby. +THE SHARES REPRESENTED BY THE PROXY WILL BE VOTED AS SPECIFIED, BUT IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE NOMINEES FOR DIRECTOR FOR PROPOSAL 1, FOR PROPOSALS 2 AND 3, AND AGAINST PROPOSAL 4, 5, 6, AND 7. THE PROXIES MAY VOTE IN THEIR DISCRETION AS TO OTHER MATTERS WHICH MAY COME BEFORE THE MEETING. +YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. THE PROXIES CANNOT VOTE THESE SHARES UNLESS YOU SIGN AND RETURN THIS CARD OR PROPERLY VOTE BY PHONE OR INTERNET. +Continued and to be signed on reverse side +73 NIKE, INC. +VOTE BY INTERNET +Before The Meeting - Go to www.proxyvote.com +Use the Internet to transmit your voting instructions and for electronic delivery of information. Vote by 11:59 p.m. Eastern Time on October 5, 2021 for shares held directly and by 11:59 p.m. Eastern Time on October 3, 2021 for shares held in a Plan. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. +During The Meeting - Go to www.virtualshareholdermeeting.com/NKE2021 +You may attend the meeting via the Internet and vote during the meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions. +VOTE BY PHONE - 1-800-690-6903 +Use any touch-tone telephone to transmit your voting instructions. Vote by 11:59 p.m. Eastern Time on October 5, 2021 for shares held directly and by 11:59 p.m. Eastern Time on October 3, 2021 for shares held in a Plan. Have your proxy card in hand when you call and then follow the instructions. +VOTE BY MAIL +Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. +NIKE, INC. +ONE BOWERMAN DRIVE +BEAVERTON, OR 97005-6453 +TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: +D21037-P43098 KEEP THIS PORTION FOR YOUR RECORDS +DETACH AND RETURN THIS PORTION ONLY +THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. +NIKE, INC. +The Board of Directors recommends a vote FOR all the nominees listed in Proposal 1, a vote FOR Proposals 2 and 3, and a vote AGAINST Proposal 4, 5, 6, and 7. +1 +Class B director nominees: To elect a Board of Directors for the ensuing year. +For Withhold +1a. Alan B. Graf, Jr. ☐ ☐ +1b. Peter B. Henry ☐ ☐ +1c. Michelle A. Peluso ☐ ☐ For Against Abstain +2 To approve executive compensation by an advisory vote. ☐ ☐ ☐ +3 To ratify the appointment of PricewaterhouseCoopers LLP as independent registered public accounting firm. ☐ ☐ ☐ +4 To consider a shareholder proposal regarding political contributions disclosure, if properly presented at the meeting. ☐ ☐ ☐ +5 To consider a shareholder proposal regarding a human rights impact assessment, if properly presented at the meeting. ☐ ☐ ☐ +6 To consider a shareholder proposal regarding supplemental pay equity disclosure, if properly presented at the meeting. ☐ ☐ ☐ +7 To consider a shareholder proposal regarding diversity and inclusion efforts reporting, if properly presented at the meeting. ☐ ☐ ☐ +8 To transact such other business as may properly come before the meeting. +Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title. +Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date +2021 PROXY STATEMENT 74 +Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders To Be Held on October 6, 2021: +The Proxy Statement and NIKE, Inc.'s 2021 Annual Report to Shareholders are available online at www.investorvote.com or www.proxyvote.com, for registered and beneficial owners, respectively. +D21038-P43098 +Proxy - NIKE, INC. +CLASS B COMMON STOCK PROXY +SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS +FOR THE 2021 ANNUAL MEETING OF SHAREHOLDERS +OCTOBER 6, 2021 +The undersigned hereby appoints Mark G. Parker, Travis A. Knight, and Michelle A. Peluso, and each of them, proxies with full power of substitution, to vote, as designated on the reverse side, on behalf of the undersigned, all shares of Class B Common Stock which the undersigned may be entitled to vote at the Annual Meeting of Shareholders of NIKE, Inc. on October 6, 2021, and any adjournments thereof, with all powers that the undersigned would possess if personally present. A majority of the proxies or substitutes present at the meeting may exercise all powers granted hereby. +THE SHARES REPRESENTED BY THE PROXY WILL BE VOTED AS SPECIFIED, BUT IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE NOMINEES FOR DIRECTOR FOR PROPOSAL 1, FOR PROPOSALS 2 AND 3, AND AGAINST PROPOSAL 4, 5, 6, AND 7. THE PROXIES MAY VOTE IN THEIR DISCRETION AS TO OTHER MATTERS WHICH MAY COME BEFORE THE MEETING. +YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. THE PROXIES CANNOT VOTE THESE SHARES UNLESS YOU SIGN AND RETURN THIS CARD OR PROPERLY VOTE BY PHONE OR INTERNET. +Continued and to be signed on reverse side +75 NIKE, INC. \ No newline at end of file diff --git a/raw/proxies/0000320187/0000320187-21-000035/proxy_rpt.txt b/raw/proxies/0000320187/0000320187-21-000035/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..5c6194dbf5a47cb317a3117011386c9a325e4223 --- /dev/null +++ b/raw/proxies/0000320187/0000320187-21-000035/proxy_rpt.txt @@ -0,0 +1,3 @@ +TRANSACTIONS WITH RELATED PERSONS +Philip H. Knight, the father of NIKE director Travis A. Knight, serves as Chairman Emeritus, which provides a standing invitation for Philip H. Knight to attend meetings of the Board and its committees as a non-voting observer. In fiscal 2021, as Chairman Emeritus, Mr. Knight received an annual salary of $500,000, and medical and dental insurance coverage generally available to employees. +The Company’s written policy requires the Corporate Responsibility, Sustainability & Governance Committee to review any transaction or proposed transaction with a related person that would be required to be reported under Item 404(a) of Regulation S-K, and to determine whether to ratify or approve the transaction, with ratification or approval to occur only if the committee determines that the transaction is fair to the Company or that approval or ratification of the transaction is in the interest of the Company. \ No newline at end of file diff --git a/raw/proxies/0000320187/0000320187-22-000041/proxy.txt b/raw/proxies/0000320187/0000320187-22-000041/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..77779f0aecf544af23576c19b4835f0b2b0681f5 --- /dev/null +++ b/raw/proxies/0000320187/0000320187-22-000041/proxy.txt @@ -0,0 +1,1862 @@ +DEF 14A +1 +nike2022proxy.htm +DEF 14A +Document +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +Washington, D.C. 20549 +SCHEDULE 14A INFORMATION +Proxy Statement Pursuant to Section 14(a) of the +Securities Exchange Act of 1934 +(Amendment No. ) +Filed by the Registrant x Filed by a Party other than the Registrant ¨ +Check the appropriate box: +¨ Preliminary Proxy Statement +¨ +Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +x +Definitive Proxy Statement +¨ +Definitive Additional Materials +¨ +Soliciting Material under §240.14a-12 +NIKE, Inc. +(Name of registrant as specified in its charter) +(Name of person(s) filing proxy statement, if other than the registrant) +Payment of Filing Fee (Check the appropriate box): +x +No fee required +¨ +Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11 +(1) +Title of each class of securities to which transaction applies: +(2) +Aggregate number of securities to which transaction applies: +(3) +Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): +(4) +Proposed maximum aggregate value of transaction: +(5) Total fee paid: +¨ +Fee paid previously with preliminary materials. +¨ +Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. +(1) +Amount Previously Paid: +(2) +Form, Schedule or Registration Statement No.: +(3) +Filing Party: +(4) +Date Filed: +MESSAGE FROM OUR +EXECUTIVE CHAIRMAN +To Our Shareholders: +Fiscal 2022 was a pivotal year at NIKE. The Board of Directors oversaw significant transformations in support of the Consumer Direct Acceleration strategy, which NIKE executed in a dynamic operating environment. Through COVID-related disruptions, geopolitical tensions, and more, NIKE continued to deliver strong results and champion athletes and sport. And as many employees returned to the workplace, the Board celebrated NIKE's 50 th anniversary by honoring the Company's past and overseeing its growth for the future. +The Board brought that same spirit of growth to corporate governance. We know that strong governance helps create long-term value for NIKE's shareholders —enabling responsible, sustainable growth, even in complex conditions. During fiscal 2022, the Board holistically assessed and enhanced our governance documents, including our Corporate Governance Guidelines and committee charters. We also continued to evolve as a Board, aligning committee rosters and refreshing our membership as we continue maintaining an appropriate balance of tenure, experience, and perspectives. +As we look ahead to our Annual Meeting of Shareholders, we are pleased to share our proxy statement with you. We continue to further enhance our disclosures in pursuit of transparency, clarity, and readability and in response to shareholder feedback. Changes this year include increased detail on director diversity, a new section highlighting Board oversight of ESG, and the addition of the Fiscal 2022 Annual Direct Compensation Table. This addition, which can be found in the Compensation Discussion and Analysis section, clarifies how we view executive compensation in light of our evolved long-term incentive compensation program. +We are pleased to invite you to attend the Annual Meeting of Shareholders of NIKE, Inc. to be held virtually on Friday, September 9, 2022, at 10:00 A.M. Pacific Time. Whether or not you plan to attend, the prompt execution and return of your proxy card will both assure that your shares are represented at the meeting and minimize the cost of proxy solicitation. Thank you for your continued support. +Sincerely, +"...the Board celebrated NIKE's 50 th anniversary by honoring the Company's past and overseeing its growth for the future." +MARK G. PARKER, EXECUTIVE CHAIRMAN +July 21, 2022 +1 NIKE, INC. +NOTICE OF ANNUAL MEETING +OF SHAREHOLDERS +TO THE SHAREHOLDERS OF NIKE, INC. +You are cordially invited to the Annual Meeting of Shareholders of NIKE, Inc., an Oregon corporation: +DATE AND TIME: +Friday, September 9, 2022, +at 10:00 A.M. Pacific Time +LOCATION: +This year's meeting will be a virtual Annual Meeting at www.virtualshareholdermeeting.com/NKE2022 +ITEMS OF BUSINESS: +PROPOSAL +PAGE REFERENCE +1 To elect the 10 directors named in the accompanying proxy statement for the ensuing year. +Page 7 +Class A +Will elect seven directors. +Class B +Will elect three directors. +Holders of Class A Stock and holders of Class B Stock will vote together as one class on all other proposals. +2 To approve executive compensation by an advisory vote. +Page 27 +3 To ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm. +Page 52 +4 To approve the amendment of the NIKE, Inc. Employee Stock Purchase Plan to increase the number of authorized shares. +Page 54 +5 To consider a shareholder proposal regarding a policy on China sourcing, as described in the accompanying proxy statement, if properly presented at the meeting. +Page 58 +6 To transact such other business as may properly come before the meeting. +Due to the public health impact of the COVID pandemic and to support the well-being of our employees and shareholders, we have decided to hold this year's Annual Meeting in a virtual format only. Shareholders of record at the close of business on July 8, 2022, the record date fixed by the Board of Directors, may attend the Annual Meeting, vote, and submit questions in advance of and during the meeting. To attend, vote at, and submit questions during the Annual Meeting, visit www.virtualshareholdermeeting.com/NKE2022 and enter the 16-digit control number included in your Notice Regarding the Availability of Proxy Materials, voting instructions form, or proxy card. Questions may be submitted in advance of the Annual Meeting by visiting www.proxyvote.com and entering your 16-digit control number. +By Order of the Board of Directors, +Mary I. Hunter +Vice President, Corporate Secretary +Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders To Be Held on September 9, 2022. The proxy statement and NIKE, Inc.'s 2022 Annual Report to Shareholders are available online at www.investorvote.com or www.proxyvote.com, for registered and beneficial owners, respectively. +2022 PROXY STATEMENT 2 +TABLE OF CONTENTS +PAGE +NOTICE OF ANNUAL MEETING OF SHAREHOLDERS +2 +Proxy Statement +5 +Virtual Meeting +5 +Voting Securities and Vote Required +5 +CORPORATE GOVERNANCE +7 +PROPOSAL 1 +Election of Directors +7 +NIKE, Inc. Board of Directors +8 +Individual Board Skills Matrix +19 +Board Structure and Responsibilities +21 +Director Compensation for Fiscal 20 22 +25 +COMPENSATION DISCUSSION AND ANALYSIS +27 +PROPOSAL 2 +Shareholder Advisory Vote to Approve Executive Compensation +27 +Introduction +28 +Executive Summary +28 +Compensation of Our Named Executive Officers +32 +Our Compensation Process +39 +Other Compensation Practices +40 +Compensation Committee Report +41 +E XECUTIVE COM PENSATION TABLES +42 +Summary Compensation Table +42 +Grant of Plan-Based Awards in Fiscal 2022 +43 +Outstanding Equity Awards at May 31, 2022 +44 +Option Exercises and Stock Vested During Fiscal 2022 +46 +Equity Compensation Plan Information +46 +Non-Qualified Deferred Compensation in Fiscal 2022 +47 +Potential Payments Upon Termination or Change-In-Control +48 +CEO Pay Ratio +50 +AUDIT MATTERS +52 +PROPOSAL 3 +Ratification of Appointment of Independent Registered Public Accounting Firm +52 +Report of the Audit & Finance Committee +53 +E MPLOYEE STOCK PURCHASE PLAN +54 +PROPOSAL 4 +Approval of Amendm ent of NI KE, Inc. Employee Stock Purchase Plan to Increase Authorized Shares +54 +Summary of the Employee Stock Purchase Plan +54 +SHAREHOLDER PROPOSAL +58 +PROPOSAL 5 +To Consider a Shareholder Proposal Regarding a Policy on China Sourcing +58 +3 NIKE, INC. +STOCK OWNERSHIP INFORMATION +61 +Stock Holdings of Certain Owners and Management +61 +Transactions with Related Persons +63 +OTHER MATTERS +63 +Shareholder Proposals +63 +EXHIBIT A - NIKE, I NC. EMPLOYEE STOCK PURCHASE PLAN +64 +2022 PROXY STATEMENT 4 +PROXY STATEMENT +We are furnishing proxy materials to our shareholders primarily via the Internet, by mailing a Notice Regarding the Availability of Proxy Materials, or "Notice", instead of mailing printed copies of those materials to each shareholder. The Notice directs shareholders to a website where they can access our proxy materials, including our proxy statement and our annual report, and view instructions on how to vote online or by telephone. If you would prefer to receive a paper copy of our proxy materials, please follow the instructions included in the Notice. If you have previously elected to receive our proxy materials electronically, you will continue to receive access to these materials electronically unless you elect otherwise. +The enclosed proxy is solicited by the Board of Directors (the "Board") of NIKE, Inc. ("NIKE" or the "Company") for use at the annual meeting of shareholders to be held on September 9, 2022, and at any adjournment thereof (the "Annual Meeting"). Our principal executive offices are located at One Bowerman Drive, Beaverton, Oregon 97005-6453. This proxy statement is first being made available to shareholders on or about July 28, 2022. Shareholders may submit a proxy to vote at the Annual Meeting by following the instructions on the Notice, online or by telephone, or (if they have received paper copies of the proxy materials) by returning a proxy card. +The Company will bear the cost of soliciting proxies. In addition to soliciting proxies by mail, certain officers and employees of the Company, without extra compensation, may also solicit proxies personally or by telephone. Copies of proxy solicitation materials will be furnished to fiduciaries, custodians, and brokerage houses for forwarding to the beneficial owners of shares held in their names. We may retain Georgeson, Inc. to solicit proxies at a cost we anticipate will not exceed $17,500. +Shares that are properly voted online or by telephone or for which proxy cards are properly executed and received by the Company prior to the Annual Meeting will be voted in accordance with the instructions specified in such proxies. Where no instructions are given, shares will be voted "FOR" the election of each of the named nominees for director (Proposal 1), "FOR" the proposal regarding an advisory vote to approve executive compensation (Proposal 2), "FOR" the ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm (Proposal 3), "FOR" the approval of the amendment of the NIKE, Inc. Employee Stock Purchase Plan to increase the authorized shares (Proposal 4), and "AGAINST" the shareholder proposal regarding a policy on China sourcing (Proposal 5). +A shareholder giving the enclosed proxy has the power to revoke it at any time before it is exercised by affirmatively electing to vote at the meeting or by delivering to the Corporate Secretary of NIKE, Inc. either an instrument of revocation or an executed proxy bearing a later date. +VIRTUAL MEETING +Due to the public health impact of the COVID pandemic and to support the well-being of our employees and shareholders, we have decided to hold this year's Annual Meeting in a virtual meeting format only. Shareholders of record at the close of business on July 8, 2022 may attend the Annual Meeting, vote, and submit questions in advance of and during the meeting. To attend, vote at, and submit questions during the Annual Meeting, visit www.virtualshareholdermeeting.com/NKE2022 and enter the 16-digit control number included in your Notice, voting instructions form, or proxy card. Online access to the webcast will open approximately 15 minutes prior to the start of the Annual Meeting to allow time for you to log in and test the computer audio system. To submit questions in advance of the Annual Meeting, visit www.proxyvote.com before 11:59 P.M. Eastern Time on September 8, 2022 and enter the 16-digit control number included in your Notice, voting instructions form, or proxy card. +VOTING SECURITIES AND VOTE REQUIRED +Holders of record of NIKE's Class A Common Stock ("Class A Stock") and holders of record of NIKE's Class B Common Stock ("Class B Stock" and together with the Class A Stock, the "Common Stock") at the close of business on July 8, 2022 will be entitled to vote at the Annual Meeting. On that date, 304,903,252 shares of Class A Stock and 1,263,652,653 shares of Class B Stock were issued and outstanding. Neither class of Common Stock has cumulative voting rights. +Each share of Class A Stock and each share of Class B Stock is entitled to one vote. The holders of our Common Stock will vote together on all matters at the Annual Meeting except for the election of directors, for which the holders of Class A Stock and holders of Class B Stock will vote separately. Holders of Class B Stock are currently entitled to elect 25 percent of the Board, rounded up to the next whole number, and holders of Class A Stock are currently entitled to elect the remaining directors. Under this formula, holders of Class B Stock will elect three directors at the Annual Meeting and holders of Class A Stock will elect seven directors. +For Proposal 1, the election of directors, a majority of the votes entitled to be cast by each of the Class A Stock and Class B Stock separately constitutes a quorum of Class A Stock and Class B Stock, respectively. Under Oregon law and our Bylaws, if a quorum of each class of Common Stock is present at the meeting, the three director nominees who receive the greatest number of votes cast by holders of Class B Stock and the seven director nominees who receive the greatest number of votes cast by +5 NIKE, INC. +holders of Class A Stock will be elected directors. For Proposals 2, 3, 4, and 5, a majority of the votes entitled to be cast by both of the Class A Stock and Class B Stock together constitutes a quorum. If a quorum is present at the meeting, Proposals 2, 3, 4, and 5 will be approved if the votes cast in favor of the proposal exceed the votes cast against the proposal. +Abstentions and broker non-votes are counted for purposes of determining whether a quorum exists. Abstentions and broker non-votes are not included as votes cast and will not affect the outcome of any of the proposals. Broker non-votes occur when a person holding shares in street name, such as through a brokerage firm, does not provide instructions as to how to vote those shares and the broker does not then vote those shares on the shareholder's behalf. +2022 PROXY STATEMENT 6 +CORPORATE GOVERNANCE +PROPOSAL 1 +ELECTION OF DIRECTORS +A Board of 10 directors will be elected at the Annual Meeting. Directors will hold office until the next annual meeting of shareholders or until their successors are elected and qualified. All of the nominees were elected at the 2021 annual meeting of shareholders. +Mr. Alan B. Graf, Jr., Dr. Peter B. Henry, and Ms. Michelle A. Peluso are nominated by the Board for election by the holders of Class B Stock. The other seven nominees are nominated by the Board for election by the holders of Class A Stock. +Under Oregon law and our Bylaws, if a quorum of each class of shareholders is present at the Annual Meeting, the seven director nominees who receive the greatest number of votes cast by holders of Class A Stock and the three director nominees who receive the greatest number of votes cast by holders of Class B Stock will be elected directors. Abstentions and broker non-votes will have no effect on the results of the vote. Unless otherwise instructed, proxy holders will vote the proxies they receive for the nominees listed below. If any nominee becomes unable to serve, the holders of the proxies may, in their discretion, vote the shares for a substitute nominee or nominees designated by the Board. +The Bylaws and the Corporate Governance Guidelines of the Company provide that any nominee for director in an uncontested election who receives a greater number of votes "withheld" from his or her election than votes "for" such election shall tender his or her resignation for consideration by the Corporate Responsibility, Sustainability & Governance Committee. The committee will recommend to the Board the action to be taken with respect to the resignation. The Board will publicly disclose its decision within 90 days after the certification of the election results. +Background information on the nominees as of July 21, 2022, including certain of the attributes that led to their selection, appears below. The Corporate Responsibility, Sustainability & Governance Committee has determined that each director meets the qualification standards described below under "Individual Board Skills Matrix—Director Nominations". In addition, the Board firmly believes that the experience, attributes, and skills of any single director nominee should not be viewed in isolation, but rather in the context of the experience, attributes, and skills that all director nominees bring to the Board as a whole, each of which contributes to the function of an effective Board. +BOARD RECOMMENDATION +The Board of Directors recommends that the Class A Shareholders vote FOR the election of nominees to the Board of Directors +The Board of Directors recommends that the Class B Shareholders vote FOR the election of nominees to the Board of Directors +7 NIKE, INC. +NIKE, INC. BOARD OF DIRECTORS +BOARD OVERVIEW +Our director nominees consist of 10 individuals selected on the basis of numerous criteria, including experience and achievements, fields of significant knowledge, good character, sound judgment, and diversity. We view the effectiveness of our Board both through an individual and collective lens and believe that our Board is optimized to support and guide the Company. +DIVERSITY +AGE +TENURE +BOARD SKILLS, EXPERIENCES, AND QUALIFICATIONS +DIVERSITY 5 /10 +Gender or racial or ethnic diversity that adds a range of perspectives and expands the Board's understanding of the needs and viewpoints of consumers, employees, and other stakeholders worldwide. +FINANCIAL EXPERTISE 10 /10 +Financial expertise assists our Board in overseeing our financial statements, capital structure, and internal controls. +CEO EXPERIENCE 7 / 10 +CEO experience brings leadership qualifications and skills that help our Board to capably advise, support, and oversee our management team, including regarding our strategy to drive long-term value. +INTERNATIONAL 7 / 10 +International exposure yields an understanding of diverse business environments, economic conditions, and cultural perspectives that informs our global business and strategy and enhances oversight of our multinational operations. +DIGITAL/TECHNOLOGY 4 /10 +Technology experience helps our Board oversee cybersecurity and advise our management team as we seek to enhance the consumer experience and further develop our multi-channel strategy. +RETAIL INDUSTRY 5 /10 +Retail experience brings a deep understanding of factors affecting our industry, operations, business needs, and strategic goals. +MEDIA 1 /10 +Media experience provides the Board with insight about connecting with consumers and other stakeholders in a timely and impactful manner. +ACADEMIA 1 /10 +Academia provides organizational management experience and knowledge of current issues in academia and thought leadership. +HR/TALENT MANAGEMENT 6 /10 +HR and talent management experience assists our Board in overseeing executive compensation, succession planning, and employee engagement. +GOVERNANCE 7 /10 +Public company board experience provides insight into new and best practices which informs our commitment to excellence in corporate governance. +CORPORATE GOVERNANCE HIGHLIGHTS +ü 7 out of 10 director nominees are independent +ü Separate Chair, CEO, and Lead Independent Director positions with clearly defined roles +ü "Evergreen" approach to Board refreshment, with 3 new independent directors added in last 4 fiscal years +ü Director nominees selected based on robust qualification standards, including the desire to represent and serve the interests of all shareholders, and a holistic approach to Board composition +ü Retirement policy generally requires that directors do not stand for election after reaching the age of 72 +2022 PROXY STATEMENT 8 +NOMINEES FOR ELECTION BY CLASS A SHAREHOLDERS +CATHLEEN A. BENKO +AGE +DIRECTOR SINCE +COMMITTEES +OTHER CURRENT +PUBLIC DIRECTORSHIPS +FAVORITE NIKE PRODUCTS +64 2018 +Audit & Finance; +Compensation +SolarWinds Corporation +Nike Air Max and Nike Epic Lux Leggings +SKILLS, EXPERIENCES AND QUALIFICATIONS +DIVERSITY +FINANCIAL EXPERTISE +DIGITAL/TECHNOLOGY +HR/TALENT MANAGEMENT +INTERNATIONAL +Ms. Benko is a former Vice Chairman and Managing Principal of Deloitte LLP ("Deloitte"), an organization that, through its subsidiaries and network of member firms, provides audit, consulting, tax, and advisory services to clients globally. During her nearly 30-year career with Deloitte, Ms. Benko held many leadership roles, several concurrent with her appointment as Vice Chairman and Managing Principal in 2011. +• From 2015 to 2018, Ms. Benko served as Senior Partner working within the firm's "Digital Giants" practice where she was the senior advisory partner for several digital-native companies. +• From 2010 to 2014, Ms. Benko served as Chief Digital, Brand, and Communications Officer. +• Previous to her role as Chief Digital, Brand, and Communications Officer, Ms. Benko held multiple technology and talent management roles, including serving as the company's first Vice Chairman and Chief Talent Officer from 2006 to 2010, its Chief Inclusion Officer from 2008 to 2010, and as Managing Principal, Initiative for the Retention and Advancement of Women, from 2003 to 2009. +• Ms. Benko led Deloitte's technology sector from 2003 to 2007 and was previously Deloitte's first Global e-Business Leader, a position she held from 1998 to 2002. +Ms. Benko is a member of the Board of Directors of SolarWinds Corporation. In addition to this public company board service, she also holds board positions at nonprofits Stanford Institute for Research in the Social Sciences, the International Women's Forum, American Corporate Partners, and the National Association of Corporate Directors. She is also on the board of WorkBoard, a privately-held company. Ms. Benko is chair of Harvard Business School/NC's Advisory Council. +9 NIKE, INC. +TIMOTHY D. COOK, LEAD INDEPENDENT DIRECTOR +AGE +DIRECTOR SINCE +COMMITTEE +OTHER CURRENT +PUBLIC DIRECTORSHIPS +FAVORITE NIKE PRODUCTS +61 2005 +Compensation, Chair +Apple Inc. +Nike Epic React, Nike Tech Pack Hoodie, and Nike Air Max 270 +SKILLS, EXPERIENCES AND QUALIFICATIONS +FINANCIAL EXPERTISE +DIGITAL/TECHNOLOGY +HR/TALENT MANAGEMENT +CEO EXPERIENCE +RETAIL INDUSTRY +GOVERNANCE +INTERNATIONAL +Mr. Cook is the Company's Lead Independent Director and is the Chief Executive Officer of Apple Inc. ("Apple"). +• Mr. Cook joined Apple in March 1998 as Senior Vice President of Worldwide Operations and also served as its Executive Vice President, Worldwide Sales and Operations and Chief Operating Officer. +• Mr. Cook was Vice President, Corporate Materials for Compaq Computer Corporation from 1997 to 1998. +• Previous to his work at Compaq, Mr. Cook served in the positions of Senior Vice President Fulfillment and Chief Operating Officer of the Reseller Division at Intelligent Electronics from 1994 to 1997. +• Mr. Cook also worked for International Business Machines Corporation from 1983 to 1994, most recently as Director of North American Fulfillment. +Mr. Cook is a member of the Board of Directors of Apple. In addition to this public company board service, he is also a member of the Board of Directors of the National Football Foundation and Duke University Board of Trustees. +2022 PROXY STATEMENT 10 +JOHN J. DONAHOE II +AGE +DIRECTOR SINCE +COMMITTEE +OTHER CURRENT +PUBLIC DIRECTORSHIPS +FAVORITE NIKE PRODUCTS +62 2014 +Executive +PayPal Holdings, Inc. +Nike ZoomX Invincible Run +SKILLS, EXPERIENCES AND QUALIFICATIONS +FINANCIAL EXPERTISE +DIGITAL/TECHNOLOGY +HR/TALENT MANAGEMENT +CEO EXPERIENCE +RETAIL INDUSTRY +GOVERNANCE +INTERNATIONAL +Mr. Donahoe is President and Chief Executive Officer of NIKE, Inc. and has been a director since 2014. +• From 2017 to 2019, Mr. Donahoe served as President and Chief Executive Officer of ServiceNow, Inc. ("ServiceNow"), provider of enterprise cloud computing services for global enterprises. +• From 2008 to 2015, Mr. Donahoe served as President and Chief Executive Officer of eBay, Inc. ("eBay"), provider of the global eBay.com online marketplace and PayPal digital payments platform. +• Mr. Donahoe joined eBay in 2005 as President of eBay Marketplaces, responsible for eBay's global e-Commerce businesses. +• Prior to joining eBay, Mr. Donahoe was the Chief Executive Officer and Worldwide Managing Director of Bain & Company from 1999 to 2005, and a Managing Director from 1992 to 1999. +Mr. Donahoe is Chairman and a member of the Board of Directors of PayPal Holdings, Inc. In addition to this public company board service, he also serves on the Board of Trustees for The Bridgespan Group. Mr. Donahoe served on the Board of Directors of Intel Corporation from March 2009 to May 2017, and ServiceNow from March 2017 to June 2020. +11 NIKE, INC. +THASUNDA B. DUCKETT +AGE +DIRECTOR SINCE +COMMITTEE +OTHER CURRENT +PUBLIC DIRECTORSHIPS +FAVORITE NIKE PRODUCTS +48 2019 +Corporate Responsibility, Sustainability & Governance +None +Nike Air Force 1 +SKILLS, EXPERIENCES AND QUALIFICATIONS +DIVERSITY +FINANCIAL EXPERTISE +CEO EXPERIENCE +RETAIL INDUSTRY +HR/TALENT MANAGEMENT +Ms. Duckett is President and Chief Executive Officer of the Teachers Insurance and Annuity Association of America ("TIAA"), a leading provider of financial services in the academic, research, medical, cultural and governmental fields. +• Prior to joining TIAA, Ms. Duckett was Chief Executive Officer of Chase Consumer Banking at JPMorgan Chase & Co. ("JPMorgan Chase") from 2016 to 2021. Before that appointment, Ms. Duckett was appointed to various management positions at JPMorgan Chase, including: +• From 2013 to 2016, Ms. Duckett served as the Chief Executive Officer of Chase Auto Finance, and +• From 2004 to 2013, Ms. Duckett held multiple management and consumer lending roles. +• Prior to joining JPMorgan Chase, Ms. Duckett was Director of Emerging Markets at the Federal National Mortgage Association, or Fannie Mae. +Ms. Duckett is chair of the Otis and Rosie Brown Foundation and serves on the Board of Directors of Brex, National Medal of Honor Museum, and the Robert F. Kennedy Human Rights. She also serves on the Board of Trustees for Sesame Workshop. +2022 PROXY STATEMENT 12 +TRAVIS A. KNIGHT +AGE +DIRECTOR SINCE +COMMITTEE +OTHER CURRENT +PUBLIC DIRECTORSHIPS +FAVORITE NIKE PRODUCTS +48 2015 +Executive +None +Nike Pegasus +SKILLS, EXPERIENCES AND QUALIFICATIONS +FINANCIAL EXPERTISE +CEO EXPERIENCE +MEDIA +Mr. Knight is the President and Chief Executive Officer of the animation studio, LAIKA, LLC ("LAIKA"), which specializes in feature-length films. +• Mr. Knight has been involved in all principal creative and business decisions at LAIKA since its founding in 2003, serving in successive management positions as Lead Animator, Vice President of Animation, and then as President and Chief Executive Officer in 2009. +• Mr. Knight was Producer and Director of the feature film Kubo and the Two Strings (2017) which was nominated for an Academy Award and winner of the BAFTA award for Best Animated Film. +• Mr. Knight has served as Producer and Lead Animator on Academy Award-nominated feature-length films The Boxtrolls (2014) and ParaNorman (2012), for which he won an Annie Award for Outstanding Achievement in Character Animation, and Lead Animator for Coraline (2009). +• Prior to his work at LAIKA, Mr. Knight held various animation positions at Will Vinton Studios from 1998 to 2002, and as a stop-motion animator for television series, commercials, and network promotions. He has been recognized for his work on the Emmy Award-winning stop-motion animated television series The PJs. +Mr. Knight serves on the Board of Directors of LAIKA. He is the son of NIKE's co-founder, Mr. Philip Knight, who currently serves as Chairman Emeritus. In addition to his skills and qualifications described above, Mr. Travis Knight was selected to serve on the Board because he has a significant role in the management of the Class A Stock owned by Swoosh, LLC, strengthening the alignment of the Board with the interests of NIKE shareholders. +13 NIKE, INC. +MARK G. PARKER, EXECUTIVE CHAIRMAN OF THE BOARD +AGE +DIRECTOR SINCE +COMMITTEE +OTHER CURRENT +PUBLIC DIRECTORSHIPS +FAVORITE NIKE PRODUCTS +66 2006 +Executive, Chair +The Walt Disney Company +Nike Pegasus, Nike Air Max, and Nike React Infinity Run +SKILLS, EXPERIENCES AND QUALIFICATIONS +FINANCIAL EXPERTISE +INTERNATIONAL +HR/TALENT MANAGEMENT +CEO EXPERIENCE +RETAIL INDUSTRY +GOVERNANCE +Mr. Parker is Executive Chairman of the Board of Directors of the Company. He served as President and Chief Executive Officer of the Company from 2006 to January 2020. +• Mr. Parker has been employed by NIKE since 1979 with primary responsibilities in product research, design and development, marketing, and brand management. +• Mr. Parker was appointed: +• President and Chief Executive Officer in 2006, +• President of the NIKE Brand in 2001, +• Vice President of Global Footwear in 1998, +• General Manager in 1993, +• Corporate Vice President in 1989, and +• Divisional Vice President in charge of product development in 1987. +Mr. Parker is a member of the Board of Directors of The Walt Disney Company. In addition to his skills and qualifications described above, Mr. Parker was selected to serve on the Board because the experience gained while serving as the Company's Chief Executive Officer makes his position as Executive Chairman of the Board instrumental. +2022 PROXY STATEMENT 14 +JOHN W. ROGERS, JR. +AGE +DIRECTOR SINCE +COMMITTEE +OTHER CURRENT +PUBLIC DIRECTORSHIPS +FAVORITE NIKE PRODUCTS +64 2018 +Corporate Responsibility, +Sustainability & Governance +McDonald's Corporation, The New York Times Company, and Ryan Specialty Group Holdings, Inc. +Nike KD and Nike LeBron Basketball Shoes +SKILLS, EXPERIENCES AND QUALIFICATIONS +DIVERSITY +CEO EXPERIENCE +GOVERNANCE +FINANCIAL EXPERTISE +Mr. Rogers is Chairman, Co-Chief Executive Officer, and Chief Investment Officer of Ariel Investments, LLC, a privately-held money management firm he founded in 1983, which serves individual and institutional investors through its mutual funds and separate accounts. Mr. Rogers is a Trustee of Ariel Investment Trust, the investment company consisting of the five mutual funds his firm manages. +• In 2008, Mr. Rogers was awarded Princeton University's highest honor, the Woodrow Wilson Award, presented each year to the alumnus whose career embodies a commitment to national service. +• Mr. Rogers served as co-chair for the Presidential Inaugural Committee 2009, and more recently, joined the Barack Obama Foundation's Board of Directors. +Mr. Rogers is a member of the Board of Directors of McDonald's Corporation, The New York Times Company, and Ryan Specialty Group Holdings, Inc. In addition to this public company board service, he also serves as trustee of the University of Chicago, a member of the Board of Directors of the Robert F. Kennedy Human Rights, and the National Association of Basketball Coaches (NABC) Foundation, Inc., and a life trustee of the Chicago Symphony Orchestra. Mr. Rogers served on the Board of Directors of Exelon Corporation from October 2000 until April 2019. +BOARD RECOMMENDATION +The Board of Directors recommends that the Class A Shareholders vote FOR the election of the nominees above to the Board of Directors. +15 NIKE, INC. +NOMINEES FOR ELECTION BY CLASS B SHAREHOLDERS +ALAN B. GRAF, JR. +AGE +DIRECTOR SINCE +COMMITTEE +OTHER CURRENT +PUBLIC DIRECTORSHIPS +FAVORITE NIKE PRODUCTS +68 2002 +Audit & Finance, Chair +Mid-America Apartment Communities, Inc. +Nike ZoomX Invincible Run and Nike Dri-Fit Apparel +SKILLS, EXPERIENCES AND QUALIFICATIONS +FINANCIAL EXPERTISE +INTERNATIONAL +GOVERNANCE +Mr. Graf is the former Executive Vice President and Chief Financial Officer of FedEx Corporation ("FedEx"), a position he held from 1998 until his retirement in December 2020. +• Mr. Graf joined FedEx in 1980 and was Senior Vice President and Chief Financial Officer for FedEx Express, FedEx's predecessor, from 1991 to 1998. +Mr. Graf is a member of the Board of Directors of Mid-America Apartment Communities, Inc. In addition to this public company board service, he is also a director of the Indiana University Foundation and a member of the University of Memphis Board of Trustees. Mr. Graf previously served on the Board of Directors of Kimball International Inc., Storage USA, Inc., and Arkwright Mutual Insurance Co. +2022 PROXY STATEMENT 16 +PETER B. HENRY +AGE +DIRECTOR SINCE +COMMITTEE +OTHER CURRENT +PUBLIC DIRECTORSHIPS +FAVORITE NIKE PRODUCTS +52 2018 +Audit & Finance +Citigroup Inc. +Nike Epic React +SKILLS, EXPERIENCES AND QUALIFICATIONS +DIVERSITY +INTERNATIONAL +GOVERNANCE +FINANCIAL EXPERTISE +ACADEMIA +Dr. Henry is Dean Emeritus of New York University's Leonard N. Stern School of Business and the William R. Berkley Professor of Economics and Finance. +• Dr. Henry assumed the Deanship of the Stern School of Business in January 2010 and served through December 2017. +• Prior to joining Stern, Dr. Henry was the Konosuke Matsushita Professor of International Economics at the Stanford University Graduate School of Business. +• In June 2009, President Obama appointed Dr. Henry to the President's Commission on White House Fellowships. +• In 2008, Dr. Henry led Barack Obama's Presidential Transition Team in its review of international lending agencies such as the IMF and the World Bank. +Dr. Henry is a member of the Board of Directors of Citigroup Inc. In addition to this public company board service, he also serves on the Board of Directors of the National Bureau of Economic Research and the Economic Club of New York and serves on the Advisory Board for Protiviti and Biospring Partners. Dr. Henry is a member of the Council of Foreign Relations and the Economic Advisory Panel of the Federal Reserve Bank of New York. Dr. Henry served on the Board of Directors of General Electric from July 2016 until April 2018 and Kraft Foods Group, Inc. and its predecessor, Kraft Foods Inc., from May 2011 until July 2015. +17 NIKE, INC. +MICHELLE A. PELUSO +AGE +DIRECTOR SINCE +COMMITTEE +OTHER CURRENT +PUBLIC DIRECTORSHIPS +FAVORITE NIKE PRODUCTS +50 2014 +Corporate Responsibility, +Sustainability & Governance, Chair +None +Air Jordan 1 Low, Nike React Infinity Run, Nike Air Force 1, and Nike Epic Luxe Leggings +SKILLS, EXPERIENCES AND QUALIFICATIONS +DIVERSITY +INTERNATIONAL +HR/TALENT MANAGEMENT +FINANCIAL EXPERTISE +DIGITAL/TECHNOLOGY +GOVERNANCE +CEO EXPERIENCE +RETAIL INDUSTRY +Ms. Peluso is Executive Vice President and Chief Customer Officer at CVS Health, a diversified health services company, and has direct oversight for CVS Health's marketing and brand strategy, digital transformation, and the end-to-end consumer experience. +• Prior to joining CVS Health, Ms. Peluso was Senior Vice President, Digital Sales and Chief Marketing Officer at IBM from 2016 to 2021. She oversaw marketing and brand strategy and execution, digital sales, and the commercial business, globally. She was also responsible for the company's client experience. +• Prior to her work at IBM, Ms. Peluso served as Chief Executive Officer of online shopping destination Gilt Groupe, Inc. (“Gilt”) from 2013 until its sale to Hudson's Bay Company in February 2016 and was on Gilt's Board of Directors from 2009 to 2016. +• From 2009 to 2013, Ms. Peluso served as Global Consumer Chief Marketing and Internet Officer of Citigroup Inc. +• From 2002 to 2009, Ms. Peluso held senior management positions at Travelocity.com LP ("Travelocity"), being appointed Chief Operating Officer in March 2003, and President and Chief Executive Officer in December 2003. +• Prior to joining Travelocity, in 1999 Ms. Peluso founded Site59, an online travel site, serving as its Chief Executive Officer until its acquisition by Travelocity in 2002. +Ms. Peluso is a member of the Board of Directors at the Ad Council and is on the Executive Council of the Board of Directors of the Association of National Advertisers. She is also a director of the nonprofit TechnoServe. +BOARD RECOMMENDATION +The Board of Directors recommends that the Class B Shareholders vote FOR the election of the nominees above to the Board of Directors. +2022 PROXY STATEMENT 18 +INDIVIDUAL BOARD SKILLS MATRIX +EXPERIENCE, EXPERTISE, OR ATTRIBUTES +BENKO +COOK +DONAHOE +DUCKETT +GRAF +HENRY +KNIGHT +PARKER +PELUSO +ROGERS +DIVERSITY +Gender or racial or ethnic diversity that adds a range of perspectives and expands the Board's understanding of the needs and viewpoints of consumers, employees, and other stakeholders worldwide. +ü +ü +ü +ü +ü +FINANCIAL EXPERTISE +Financial expertise assists our Board in overseeing our financial statements, capital structure, and internal controls. +ü +ü +ü +ü +ü +ü +ü +ü +ü +ü +CEO EXPERIENCE +CEO experience brings leadership qualifications and skills that help our Board to capably advise, support, and oversee our management team, including regarding our strategy to drive long-term value. +ü +ü +ü +ü +ü +ü +ü +INTERNATIONAL +International exposure yields an understanding of diverse business environments, economic conditions, and cultural perspectives that informs our global business and strategy and enhances oversight of our multinational operations. +ü +ü +ü +ü +ü +ü +ü +DIGITAL/TECHNOLOGY +Technology experience helps our Board oversee cybersecurity and advise our management team as we seek to enhance the consumer experience and further develop our multi-channel strategy. +ü +ü +ü +ü +RETAIL INDUSTRY +Retail experience brings a deep understanding of factors affecting our industry, operations, business needs, and strategic goals. +ü +ü +ü +ü +ü +MEDIA +Media experience provides the Board with insight about connecting with consumers and other stakeholders in a timely and impactful manner. +ü +ACADEMIA +Academia provides organizational management experience and knowledge of current issues in academia and thought leadership. +ü +HR/TALENT MANAGEMENT +HR and talent management experience assists our Board in overseeing executive compensation, succession planning, and employee engagement. +ü +ü +ü +ü +ü +ü +GOVERNANCE +Public company board experience provides insight into new and best practices which informs our commitment to excellence in corporate governance. +ü +ü +ü +ü +ü +ü +ü +19 NIKE, INC. +DIRECTOR NOMINATIONS +The Board of Directors takes an "evergreen" approach to Board refreshment, cultivating relationships with top talent on an ongoing basis. The Corporate Responsibility, Sustainability & Governance Committee identifies potential director candidates through a variety of means, including recommendations from members of the Corporate Responsibility, Sustainability & Governance Committee or the Board, suggestions from Company management, and shareholder recommendations. The committee may, in its discretion, engage director search firms to identify candidates. Shareholders may recommend director candidates for consideration by the Corporate Responsibility, Sustainability & Governance Committee by submitting a written recommendation to the committee, c/o Corporate Secretary, NIKE, Inc., One Bowerman Drive, Beaverton, Oregon 97005-6453. The recommendation should include the candidate's name, age, qualifications (including principal occupation and employment history), and written consent to be named as a nominee in the Company's proxy statement and to serve as a director, if elected. +The Board of Directors has adopted qualification standards for the selection of non-management nominees for director, which can be found at our corporate website: http://investors.nike.com. As provided in these standards and the Company's corporate governance guidelines, nominees for director are selected on the basis of, among other things, distinguished business experience or other non-business achievements; education; significant knowledge of international business, finance, marketing, technology, human resources, diversity & inclusion, law, or other fields which are complementary to, and balance the knowledge of, other Board members; a desire to represent and serve the interests of all shareholders; independence; good character; ethics; sound judgment; diversity; and ability to devote substantial time to discharge Board responsibilities. +The Corporate Responsibility, Sustainability & Governance Committee identifies qualified potential candidates without regard to their age, gender, race, national origin, sexual orientation, or religion. While the Board has no policy regarding Board member diversity, the Corporate Responsibility, Sustainability & Governance Committee considers and discusses diversity in selecting nominees for director and in the re-nomination of an incumbent director. The committee views diversity broadly to include, among other things, differences in backgrounds, qualifications, experiences, viewpoint, geographic location, education, skills and expertise (including financial, accounting, compliance, corporate social responsibility, public policy, cybersecurity, or other expertise relevant to service on the Board), professional and industry experience, and personal characteristics (including gender, ethnicity/race, and sexual orientation). The Board believes that a variety and balance of perspectives on the Board results in more thoughtful and robust deliberations, and ultimately, better decisions. +In considering the re-nomination of an incumbent director, the Corporate Responsibility, Sustainability & Governance Committee reviews the director's overall service to the Company during his or her term, including the number of meetings attended, level of participation, and quality of performance, as well as any special skills, experience, or diversity that such director brings to the Board. All potential new director candidates, whether recommended by shareholders or identified by other means, are initially screened by the Chair of the Corporate Responsibility, Sustainability & Governance Committee, who may seek additional information about the background and qualifications of the candidate, and who may determine that a candidate does not have qualifications that merit further consideration by the full committee. With respect to new director candidates who pass the initial screening, the Corporate Responsibility, Sustainability & Governance Committee meets to discuss and consider each candidate's qualifications and potential contributions to the Board, and determines by majority vote whether to recommend such candidate to the Board. The final decision to either appoint a candidate to fill a vacancy between annual meetings or include a candidate on the slate of nominees proposed at an annual meeting is made by the Board. Ms. Comstock, who has served on the Board since 2011, has announced that she will not stand for re-election to the Board at the Annual Meeting. +It is the general policy of the Board that directors will not stand for re‑election after reaching the age of 72. +DIRECTOR INDEPENDENCE +Pursuant to New York Stock Exchange ("NYSE") listing rules, in order for a director to qualify as "independent", the Board of Directors must affirmatively determine that the director has no material relationship with the Company that would impair the director's independence. The Board affirmatively determined that commercial or charitable relationships below the following thresholds will not be considered material relationships that impair a director's independence: (1) if a NIKE director or immediate family member is an executive officer of another company that does business with NIKE and the annual sales to, or purchases from, NIKE are less than one percent of the annual revenues of the other company; and (2) if a NIKE director or immediate family member serves as an officer, director, or trustee of a charitable organization, and NIKE's contributions to the organization are less than one percent of that organization's total annual charitable receipts. After applying this categorical standard and the applicable NYSE independence standards, the Board has determined that the following directors who served during fiscal 2022—Cathleen A. Benko, Elizabeth J. Comstock, John G. Connors, Timothy D. Cook, Thasunda B. Duckett, Alan B. Graf, Jr., Peter B. Henry, Michelle A. Peluso, and John W. Rogers, Jr.—have no material relationship with the Company and, therefore, are independent. Messrs. John J. Donahoe II, Travis A. Knight, and Mark G. Parker were not independent pursuant to NYSE rules. Messrs. Donahoe and Parker were not independent pursuant to NYSE rules because they were employed by the Company during fiscal 2022. Mr. Knight was not independent pursuant to NYSE rules because he is the son of NIKE's co-founder and former Chairman +2022 PROXY STATEMENT 20 +of the Board, Mr. Philip Knight, who received compensation in excess of the threshold set forth in applicable NYSE rules for his position as Chairman Emeritus. The compensation paid to Mr. Philip Knight is described in the section below titled "Stock Ownership Information—Transactions with Related Persons". +BOARD STRUCTURE AND RESPONSIBILITIES +The Board is currently composed of eight independent directors and three directors who are not independent under the NYSE listing rules. Ms. Comstock, who is independent, will not stand for re-election to the Board at the Annual Meeting. During fiscal 2022, there were six meetings of the Board and all of our directors attended at least 75 percent of the total number of meetings of the Board and committees on which he or she served. The Company encourages all directors to attend each annual meeting of shareholders, and 11 of the 12 directors then standing for election attended the 2021 annual meeting. +BOARD LEADERSHIP STRUCTURE +NIKE's governing documents provide the Board with flexibility to select the appropriate leadership structure of the Company. In determining the leadership structure, the Board considers many factors, including the specific needs of the business, fulfilling the duties of the Board, and the best interests of the Company's shareholders. Effective January 2020, the Company separated the position of Chair of the Board from the position of President and CEO, although this is not a permanent policy of the Board. The Executive Chairman, Mr. Mark G. Parker, presides over meetings of the Board of Directors and shareholders. The President and CEO, Mr. John J. Donahoe II, is in charge of the general supervision, direction, and control of the business and affairs of the Company, subject to the overall direction and supervision of the Board and its committees. +Given the particular experience and tenure of Messrs. Parker and Donahoe, the Board believes this leadership structure is appropriate for the Company because it separates the leadership of the Board from the duties of day-to-day leadership of the Company. This structure permits Mr. Donahoe to primarily focus his time and attention on the business, while Mr. Parker directs his attention to the broad strategic issues considered by the Board of Directors. This structure works particularly well given the talent, experience and professional relationship of Messrs. Donahoe and Parker established during Mr. Donahoe's service on the Board beginning in 2014. +In 2016, the Corporate Responsibility, Sustainability & Governance Committee established the position of lead independent director to ensure strong independent leadership of the Board. The position of Lead Independent Director is entrusted to execute the following functions: +• serve as a liaison between the Chair and the independent directors; +• approve the meeting agendas for the Board; +• advise the Chair regarding the sufficiency, quality, quantity, and timeliness of information provided to the Board; +• ensure that meeting schedules permit sufficient time for discussion of all agenda items; +• provide consultation and direct communication with major shareholders, if requested; +• preside at meetings of the Board at which the Chair is not present, including executive sessions; and +• perform other duties specified in the Lead Independent Director Charter. +In June 2022, the Board re-appointed Mr. Tim Cook to serve as Lead Independent Director for a term of three years. Mr. Cook continues to serve as Lead Independent Director of the Company working in collaboration with Messrs. Parker and Donahoe. +The chairs of Board committees also play an active role in the leadership structure of the Board. The Corporate Responsibility, Sustainability & Governance Committee and the Board endeavor to select independent committee chairs who will provide strong leadership to guide the important work of the Board committees. Committee chairs work with the Company's senior executives to ensure the committees are discussing the key strategic risks and opportunities of the Company. In the absence of the Lead Independent Director, a presiding director is appointed to chair executive sessions of non-management directors (consisting of all directors other than Messrs. Parker and Donahoe). The position of presiding director is rotated among the chairs of the various Board committees, other than the Executive Committee. Executive sessions are regularly scheduled and held at least once each year. +Mr. Philip Knight, co-founder and former Chairman of the Company, serves as Chairman Emeritus, with a standing invitation to attend meetings of the Board and its committees as a non-voting observer. The Board believes that it benefits from the valuable experience and insights of the Company's co-founder and former Chairman of the Board. +For all of these reasons, the Board believes this leadership structure is optimal. +21 NIKE, INC. +BOARD COMMITTEES +The Board's current standing committees are an Audit & Finance Committee; a Compensation Committee; a Corporate Responsibility, Sustainability & Governance Committee; and an Executive Committee. The Board may appoint other committees from time to time. Each standing committee has a written charter and all such charters, as well as the Company's corporate governance guidelines, are available at the Company's corporate website, http://investors.nike.com, and will be provided in print to any shareholder who submits a request in writing to NIKE Investor Relations, One Bowerman Drive, Beaverton, Oregon 97005-6453. +AUDIT & FINANCE COMMITTEE +MEMBERS: +Cathleen A. Benko* +Alan B. Graf, Jr., Chair +Peter B. Henry +MEETINGS IN FY ’22: 12 +ROLES AND RESPONSIBILITIES: +The Audit & Finance Committee provides assistance to the Board in fulfilling its legal and fiduciary obligations with respect to: +• Matters involving the Company's accounting, auditing, financial reporting, and internal controls, information security (including risks related to cyber security), data protection, and overseeing the Company's financial policies and activities; +• The integrity of the Company's financial statements and activities of the Company that may have a material impact on the financial position of the Company; +• The Company's compliance with legal and regulatory requirements; +• The independent auditor's qualifications and independence, and the performance of the Company's internal audit function and independent auditor; +• The Company's risk assessment and risk management processes and practices; and +• Considering long-term financing options, long-range tax, financial regulatory and foreign currency issues facing the Company, and management's recommendations concerning capital deployment strategy, major capital expenditures, and material acquisitions or divestitures. +The Board has determined that each member of the Audit & Finance Committee meets all independence and financial literacy requirements applicable to audit committees under the NYSE listing standards and applicable regulations adopted by the U.S. Securities and Exchange Commission (the "SEC"). The Board has also determined that Mr. Alan B. Graf, Jr. is an "audit committee financial expert" as defined in regulations adopted by the SEC. +* Ms. Benko was appointed to the Audit & Finance Committee effective January 1, 2022, following the retirement of John Connors from the Board effective December 31, 2021. +COMPENSATION COMMITTEE +MEMBERS: +Cathleen A. Benko +Elizabeth J. Comstock* +Timothy D. Cook, Chair +MEETINGS IN FY ’22: 3 +ROLES AND RESPONSIBILITIES: +The Compensation Committee discharges the Board's responsibilities regarding executive and director compensation and senior leadership succession, and its duties include the following: +• Evaluate the performance of the CEO; +• Review and approve the compensation of each executive officer; +• Grant equity incentive awards under the NIKE, Inc. Stock Incentive Plan, and determine targets and awards under the NIKE, Inc. Executive Performance Sharing Plan and the NIKE, Inc. Long-Term Incentive Plan; +• Review and provide guidance to management regarding Company policies, programs, and practices related to talent management and development for executive officers and senior management; and +• Make recommendations to the Board regarding the compensation of directors. +The Board has determined that each member of the Compensation Committee meets all independence requirements applicable to compensation committees under the NYSE listing standards. +* Ms. Comstock will not stand for re-election to the Board at the Annual Meeting. +2022 PROXY STATEMENT 22 +CORPORATE RESPONSIBILITY, SUSTAINABILITY & GOVERNANCE COMMITTEE +MEMBERS: +Thasunda B. Duckett +Michelle A. Peluso, Chair +John W. Rogers, Jr. +MEETINGS IN FY ’22: 4 +ROLES AND RESPONSIBILITIES: +The Corporate Responsibility, Sustainability & Governance Committee sets the tone and pace for corporate governance and oversees our Purpose, which consists of the three pillars of People, Planet, and Play. Its duties include the following: +• Review and evaluate NIKE's significant strategies, activities, policies, investments, and programs regarding social purpose, corporate responsibility, and sustainability; +• Provide oversight of management's efforts to ensure that the Company's dedication to sustainability is reflected in its business operations; +• Monitor the Company's progress towards its diversity, equity and inclusion objectives and compliance with the Company's responsibilities as an equal opportunity employer; +• Review and evaluate the social, political, and environmental impact, trends, and issues in connection with the Company's business activities and make recommendations to the Board; +• Provide oversight of the Company's community and social impact efforts; +• Oversee protection of the Company's corporate reputation and other matters of importance to the Company and its stakeholders; +• Continue to identify individuals qualified to become Board members and recommend director nominees for election at each annual shareholder meeting; +• Review and reassess the Company's corporate governance framework, and make recommendations to the Board regarding proposed changes; and +• Oversee the annual self-evaluations of the Board and its committees and make recommendations to the Board concerning the structure and membership of the Board committees. +The Board has determined that each member of the Corporate Responsibility, Sustainability & Governance Committee meets all independence requirements applicable to +nominating/corporate governance committees under the NYSE listing standards. +EXECUTIVE COMMITTEE +MEMBERS: +John J. Donahoe II +Travis A. Knight +Mark G. Parker, Chair +MEETINGS IN FY ’22: 0 +ROLES AND RESPONSIBILITIES: +The Executive Committee is authorized to act on behalf of the Board on all corporate actions for which applicable law does not require participation by the full Board. +• In practice, the Executive Committee acts in place of the full Board only when emergency issues or scheduling conflicts make it difficult or impracticable to assemble the full Board. +• All actions taken by the Executive Committee must be reported at the next Board meeting, or as soon thereafter as practicable. +The Executive Committee held no formal meetings during fiscal 2022, but took action by unanimous written consent. +23 NIKE, INC. +THE BOARD’S ROLE IN RISK OVERSIGHT +While the Company's management team is responsible for day-to-day management of the various risks facing the Company, the Board takes an active role in the oversight of the management of critical business risks. The Board does not view risk in isolation. Risks are considered in virtually every business decision and as part of NIKE's business strategy. The Board recognizes it is neither possible nor prudent to eliminate all risk. Purposeful and appropriate risk-taking is essential for the Company to be competitive on a global basis and to achieve its strategic objectives. +THE BOARD OF DIRECTORS +The Board implements its risk oversight function both as a whole and through committees, which play a significant role in carrying out risk oversight. While the Audit & Finance Committee is responsible for oversight of management's risk management policies, oversight responsibility for particular areas of risk is allocated among the Board committees according to the committee's area of responsibility as reflected in the committee charters. +BOARD COMMITTEES +The AUDIT & FINANCE COMMITTEE oversees risks related to the Company's financial statements, the financial reporting process, accounting, legal matters, investments, access to capital and capital deployment, currency risk and hedging programs, information security (including risks related to cyber security), and data protection. The committee oversees the internal audit function, reviews a risk-based plan of internal audits, and reviews a risk-based integrated audit of internal controls over financial reporting. The committee meets separately with the Vice President of Global Audit and Chief Risk Officer, representatives of the independent registered public accountants, and senior management. +The COMPENSATION COMMITTEE oversees risks associated with the Company's compensation philosophy and programs and executive succession and development. +The CORPORATE RESPONSIBILITY, SUSTAINABILITY & GOVERNANCE COMMITTEE oversees risks associated with corporate social purpose and company governance, including NIKE's Code of Conduct and its compliance programs, and the structure and performance of the Board and its committees. The committee also oversees protection of the Company's corporate reputation including issues that involve social and community engagement, workplace diversity, equity, and inclusion, and sustainability relating to the Company's products, its supply chain (including labor practices), and the environment. +EXECUTIVE LEADERSHIP TEAM +Each committee chair works with one or more senior executives assigned to assist the committee in: developing agendas for the year and for each meeting, paying particular attention to areas of business risk identified by management, Board members, internal and external auditors, and in their committee charter; and scheduling agenda topics, presentations, and discussions regarding business risks within their area of responsibility. At meetings, the committees discuss areas of business risk, the potential impact, and management's initiatives to manage business risk, often within the context of important business decisions. Through this process, key business risk areas are reviewed at appropriate times, with some topics reviewed on multiple occasions throughout the year. At every Board meeting, each committee chair provides a report to the full Board outlining the committee's discussions and actions, including those affecting the oversight of various risks. +The Company believes its leadership structure, discussed in detail above, supports the risk oversight function of the Board. Strong directors chair the various committees involved in risk oversight, there is open communication between management and directors, and all directors are involved in the risk oversight function. +THE BOARD’S ROLE IN ESG OVERSIGHT +The Board takes an active role overseeing NIKE's commitment to, and progress on, environmental, social, and governance ("ESG") matters. The Board oversees ESG matters primarily through the Corporate Responsibility, Sustainability & Governance +2022 PROXY STATEMENT 24 +Committee. In addition to overseeing corporate governance (generally, the "G" in "ESG"), this committee also oversees the risks and opportunities associated with NIKE's Purpose work, which covers the three pillars of People, Planet, and Play (generally, the "E" and "S" in "ESG"). The committee's responsibilities include reviewing and providing guidance to management regarding significant Purpose strategies, activities, policies, investments, and programs; reviewing the development of NIKE's five-year Purpose targets and long-term sustainability targets, and monitoring the Company's progress towards those targets; and reviewing and providing guidance to management regarding NIKE's annual Impact Report, which describes our progress towards our Purpose targets for our shareholders and other stakeholders. The Compensation Committee also plays a key role with respect to ESG by overseeing talent management and development for executive officers and senior management, including with respect to employee engagement and workplace diversity, equity, and inclusion. More information about Purpose, including NIKE's annual Impact Report, is available on the Impact section of our website. +SHAREHOLDER COMMUNICATIONS WITH DIRECTORS +Shareholders or interested parties desiring to communicate directly with the Board or with any individual director may do so in writing addressed to the intended recipient or recipients, c/o Corporate Secretary, NIKE, Inc., One Bowerman Drive, Beaverton, Oregon 97005-6453. The Office of the Corporate Secretary reviews all such communications and refers relevant correspondence directly to a director, as appropriate. In addition, the Office of the Corporate Secretary regularly summarizes for the Board all communications that relate to the functions of the Board or its committees or that otherwise warrant Board attention. +CODE OF CONDUCT +The NIKE Code of Conduct is available at the Company's corporate website, http://investors.nike.com, and will be provided in print without charge to any shareholder who submits a request in writing to NIKE Investor Relations, One Bowerman Drive, Beaverton, Oregon 97005-6453. The Code of Conduct applies to all of the Company's employees and directors, including our CEO and all other executive officers. The Code of Conduct provides that any waiver of the Code of Conduct for executive officers or directors may be made only by the Board or a committee of the Board. Any such waiver will be publicly disclosed, when required by law. The Company plans to disclose amendments to, and waivers from, the Code of Conduct on the Company's corporate website: http://investors.nike.com. +DIRECTOR COMPENSATION FOR FISCAL 2022 +NAME FEES EARNED OR +PAID IN CASH +($) +STOCK +AWARDS (1)(2) +($) +CHANGE IN +PENSION VALUE AND +NONQUALIFIED DEFERRED +COMPENSATION EARNINGS +($) +ALL OTHER +COMPENSATION (3) +($) +TOTAL +($) +Cathleen A. Benko (4) +102,069 179,453 — 20,000 301,522 +Elizabeth J. Comstock 100,000 179,453 — 20,000 299,453 +John G. Connors (5) +61,542 179,453 — — 240,995 +Timothy D. Cook 150,000 179,453 — 20,000 349,453 +Thasunda B. Duckett 100,000 179,453 — 20,000 299,453 +Alan B. Graf, Jr. 130,000 179,453 — — 309,453 +Peter B. Henry 105,000 179,453 — 12,500 296,953 +Travis A. Knight 100,000 179,453 — — 279,453 +Michelle A. Peluso 120,000 179,453 — 20,000 319,453 +John W. Rogers, Jr. 100,000 179,453 — 20,000 299,453 +(1) Represents the grant date fair value of restricted stock awards granted in fiscal 2022 computed in accordance with accounting guidance applicable to stock-based compensation. The grant date fair value is based on the closing market price of our Class B Stock on the grant date. As of May 31, 2022, Mr. Connors held 0 shares of unvested restricted stock and each other non-employee director held 1,206 shares of unvested restricted stock. +(2) As of May 31, 2022, Mr. Cook held options for 14,000 shares of our Class B Stock, and no other non-employee director held outstanding options. +(3) Consists of matched contributions to charities in the following amounts: Ms. Benko, $20,000; Ms. Comstock, $20,000; Mr. Cook, $20,000; Ms. Duckett, $20,000; Dr. Henry, $12,500; Ms. Peluso, $20,000; and Mr. Rogers $20,000. +(4) Ms. Benko was appointed to the Audit & Finance Committee effective January 1, 2022, therefore her annual retainer for Audit & Finance Committee membership was prorated. +(5) Mr. Connors retired from the Board effective December 31, 2021. Amounts reflect pro-rated annual retainer payments. Mr. Connors' stock award was forfeited upon his retirement. +25 NIKE, INC. +DIRECTOR FEES AND ARRANGEMENTS +Under our director compensation program in effect for fiscal 2022, non-employee directors receive: +• An annual retainer of $100,000, paid in quarterly installments. +• Upon appointment to the Board, a one-time, sign-on restricted stock award valued at $185,000 on the date of grant, generally, the date of appointment. The one-time, sign-on restricted stock award is subject to forfeiture in the event that service as a director terminates prior to the first anniversary of the date of grant. +• An annual restricted stock award valued at $185,000 on the date of grant, generally, the date of each annual meeting of shareholders. The number of restricted shares granted to each director for fiscal 2022 was determined by dividing the director's award value by the average closing price of our Class B Stock for the 20-trading day period ending on the date of grant. The annual restricted stock award is subject to forfeiture in the event that service as a director terminates prior to the earlier of the next annual meeting and the last day of the 12 th full calendar month following the date of grant. +• For the Lead Independent Director, an annual retainer of $30,000, paid in quarterly installments. +• For chairs of Board committees (other than the Executive Committee), an annual retainer of $20,000 for each committee chaired ($25,000 for the chair of the Audit & Finance Committee), paid in quarterly installments. +• For Audit & Finance Committee members, an additional annual retainer of $5,000, paid in quarterly installments. +• Payment or reimbursement of travel and other expenses incurred in attending Board meetings. +• Matching charitable contributions under the NIKE Matching Gift Program, under which directors are eligible to contribute to qualified charitable organizations and the Company provides a matching contribution to the charities in an equal amount, up to $20,000 in the aggregate, for each director annually. +Neither Mr. Donahoe nor Mr. Parker received any additional compensation for services provided as a director in fiscal 2022. +Effective June 1, 2022, the Company updated the director compensation program for non-employee directors by increasing the value of each of the annual restricted stock award and the one-time, sign-on restricted stock award to $200,000, increasing the Lead Independent Director annual retainer to $40,000, and increasing the Audit & Finance Committee chair annual retainer to $30,000 and the Compensation Committee chair and Corporate Responsibility, Sustainability & Governance Committee chair annual retainers to $25,000. All other components of director compensation remain the same. +STOCK OWNERSHIP GUIDELINES FOR DIRECTORS +NIKE maintains stock ownership guidelines for all non-employee directors. Under these guidelines, directors are required to hold NIKE stock valued at five times their annual cash retainer. New directors are required to attain these ownership levels within five years of their election to the Board. Each of our directors has met or is on track to meet the specified ownership level. +DIRECTOR PARTICIPATION IN DEFERRED COMPENSATION PLAN +Under our Deferred Compensation Plan, non-employee directors may elect in advance to defer up to 100 percent of the director fees paid by the Company. For a description of the plan, see the section below titled "Executive Compensation Tables—Non-Qualified Deferred Compensation in Fiscal 2022—Non-Qualified Deferred Compensation Plans". +2022 PROXY STATEMENT 26 +COMPENSATION DISCUSSION AND ANALYSIS +PROPOSAL 2 +SHAREHOLDER ADVISORY VOTE TO APPROVE +EXECUTIVE COMPENSATION +In accordance with the requirements of Section 14A of the Securities Exchange Act of 1934, we are submitting to shareholders our annual "say-on-pay proposal", an advisory vote to approve the compensation of our Named Executive Officers as described in this proxy statement. +At our 2021 annual meeting of shareholders, approximately 72% of the votes cast on the say-on-pay proposal were voted in favor of the proposal, which was an improvement from our 2020 vote, but indicated that there was an opportunity to further understand our shareholders' feedback and take action to be responsive. Therefore, as further described in this section, during fiscal 2022 members of management and the Board continued to engage with shareholders to better understand and address their concerns. +As discussed in this section, our executive compensation program is designed to attract and retain top-tier talent and maximize shareholder value. To achieve the objectives of our executive compensation program and emphasize pay-for-performance principles, the Compensation Committee has continued to employ strong governance practices, including: +• basing a majority of total compensation on performance and retention incentives; +• setting incentive award targets based on clearly disclosed, objective performance measures; +• mitigating undue risk associated with compensation by using multiple performance targets, caps on potential incentive payments, and a clawback policy; and +• requiring executive officers to hold NIKE stock through published stock ownership guidelines. +Because your vote is advisory, it will not be binding on the Board. However, the Board values shareholder opinions, and the Compensation Committee will take into account the outcome of the vote when considering future executive compensation arrangements. +BOARD RECOMMENDATION +The Board of Directors recommends that shareholders vote FOR approval of the following resolution: +RESOLVED, that the shareholders approve the fiscal 2022 compensation paid to the Named Executive Officers as disclosed in this proxy statement pursuant to the SEC's compensation disclosure rules (which disclosure includes the Compensation Discussion and Analysis, the compensation tables, and the narrative disclosures that accompany the compensation tables). +27 NIKE, INC. +INTRODUCTION +This Compensation Discussion and Analysis ("CD&A") describes our compensation program, philosophy, decisions, and process for the compensation of our "Named Executive Officers" (also referred to as our "NEOs") for fiscal 2022: +NAMED EXECUTIVE OFFICER TITLE +John Donahoe II President and Chief Executive Officer +Mark Parker Executive Chairman +Matthew Friend Executive Vice President and Chief Financial Officer +Andrew Campion Chief Operating Officer +Heidi O'Neill President, Consumer and Marketplace +This CD&A is organized into four sections: +• Executive Summary (page 28) +• Compensation of Our Named Executive Officers (page 32) +• Our Compensation Process (page 39) +• Other Compensation Practices (page 40) +EXECUTIVE SUMMARY +SAY-ON-PAY RESULTS AND RESPONSE +Our annual say-on-pay vote is one of our opportunities to receive feedback from shareholders regarding our executive compensation program, and as such is taken very seriously by the Compensation Committee and Board. In 2021, our executive compensation program received the support of approximately 72% of the total votes cast at our annual meeting of shareholders. This reflected an increase in support compared to the 2020 say-on-pay vote, but indicated that there was an opportunity to further understand our shareholders' feedback and take action to be responsive. As a result, we continued to actively seek feedback from shareholders and build on our record of responsiveness, reaching out to shareholders owning approximately 51% of outstanding shares of our Class B Stock and speaking with shareholders owning approximately 49% of outstanding shares of our Class B Stock, to better understand what motivated their votes and attempt to address any ongoing concerns. Our Lead Independent Director and Compensation Committee Chair, Timothy D. Cook, and our Corporate Responsibility, Sustainability & Governance Committee Chair, Michelle A. Peluso, participated in conversations with shareholders owning approximately 13% of outstanding shares of our Class B Stock. All feedback was shared with the Board and helped to shape the changes made to our executive compensation program and related disclosure, as set forth in this year's CD&A. +SCOPE OF OUTREACH & ENGAGEMENT +Engaged with +100% +of our top 15 institutional shareholders +Through this engagement, we learned that shareholders were largely supportive of the executive compensation program design for fiscal 2021. Furthermore, shareholders appreciated the Company's responsiveness to their feedback regarding the 2020 say-on-pay vote, especially the replacement of cash-based incentive awards under the Long-Term Incentive Plan ("LTIP") with performance-based restricted stock units ("PSUs") and the enhanced disclosures regarding fiscal 2021 payout determinations and the annual incentive structure. However, shareholders wanted to further understand Mr. Parker's total fiscal 2021 compensation following his transition into the Executive Chairman role in fiscal 2020. During these conversations, we discussed the components of Mr. Parker's compensation, including the payout of the fiscal 2019 – 2021 LTIP award and the transition-period cash incentive award that was granted in connection with the fiscal 2020 CEO transition, and the ongoing evolution of Mr. Parker's compensation since transitioning into the Executive Chairman role. As of fiscal 2022, Mr. Parker did not have any further +2022 PROXY STATEMENT 28 +outstanding awards related to the CEO transition. His fiscal 2020 – 2022 LTIP award, which is reflected in this year's Summary Compensation Table, was granted to Mr. Parker when he was NIKE's CEO. Furthermore, in light of Mr. Parker's reduced responsibilities as Executive Chairman, the Compensation Committee significantly decreased Mr. Parker's compensation over the course of fiscal years 2021 and 2022 by not granting him any new LTIP or PSU awards and by reducing each other component of his annual direct compensation. +We also discussed with shareholders the structure of our long-term incentive program in light of replacing cash-based LTIP awards with stock-based PSU awards beginning in fiscal 2022 for the fiscal 2022 – 2024 performance period. We confirmed that the fiscal 2022 PSU awards maintain the same general features and structure as the fiscal 2021 cash-based LTIP awards, including the same performance metric and a similar "People & Planet" modifier. The fiscal 2022 PSUs are described in the section below titled "Compensation of our Named Executive Officers—Long-Term Incentive—Fiscal 2022 Award Grants—Fiscal 2022 – 2024 PSUs". While shareholders supported the design of the PSU awards, they recommended increasing the proportion of total long-term incentive compensation granted in the form of PSUs. We are incorporating this feedback by evolving the long-term incentive compensation mix to be delivered 50% in the form of PSUs for all executive officers. This change will be phased in over multiple years, beginning with fiscal 2023 award grants. +These shareholder engagements also provided an opportunity to highlight the short-term disclosure impact of replacing cash-based LTIP awards with PSUs beginning in fiscal 2022. Because SEC rules require that we report cash-based incentive awards in the Summary Compensation Table for the year earned but report stock-based incentive awards in the Summary Compensation Table for the year granted, for fiscal 2022 the Summary Compensation Table reflects both the payout of LTIP awards for the 2020 – 2022 performance period (which were awarded as part of fiscal 2020 annual compensation) and the grant of PSUs for the 2022 – 2024 performance period (which were awarded as part of fiscal 2022 annual compensation). Shareholders recognized that the shift to PSUs would temporarily and artificially inflate values in the Summary Compensation Table, and supported the evolution of our long-term incentive program structure despite the short-term disclosure complications. +The Board and Compensation Committee greatly value these engagements with shareholders and are committed to maintaining ongoing dialogue and incorporating shareholder feedback into the design of the executive compensation program going forward. +The following table summarizes feedback themes we heard from shareholders and actions taken to be responsive: +WHAT WE HEARD HOW WE RESPONDED +Shareholders were supportive of replacing the cash-based LTIP awards with PSUs and understood that doing so would artificially inflate fiscal 2022 values in the Summary Compensation Table due to SEC rules +• Beginning in fiscal 2022, replaced the cash-based LTIP awards with PSUs +• In this proxy statement, provided enhanced disclosure in the Fiscal 2022 Annual Direct Compensation Table to clearly communicate how the Compensation Committee views compensation awarded for fiscal 2022 +Shareholders recommended increasing PSUs as a proportion of the total long-term incentive mix (PSUs, stock options, and RSUs) +• Evolving the long-term incentive compensation mix for all executive officers by committing to increase the percentage of the total award delivered in the form of PSUs to 50%, phased in over multiple years beginning with fiscal 2023 award grants +Shareholders expressed support for incorporating the "People & Planet" modifier into long-term incentive awards beginning with the fiscal 2021 – 2023 LTIP awards, and expressed interest in understanding the rationale and methodology underlying long-term incentive award payout determinations +• Continued incorporating "People & Planet" modifier in fiscal 2022 – 2024 PSU awards +• Commitment to provide robust disclosure regarding the rationale and methodology underlying payout determinations in proxy statements (beginning with the 2023 proxy statement) +Shareholders shared their expectation that Executive Chairman compensation should be decreased to correspond with reduced responsibilities +• Actions taken to significantly decrease Executive Chairman's compensation over the course of fiscal years 2021 and 2022 +• No new LTIP or PSU awards were granted to Mr. Parker in fiscal 2021 or 2022 +• Each component of Mr. Parker's annual direct compensation was decreased in fiscal 2022 +• Mr. Parker's target total annual direct compensation for fiscal 2022 was $3 million, approximately 32% of his fiscal 2021 target total annual direct compensation +29 NIKE, INC. +GUIDING COMPENSATION PRINCIPLES +• To drive business results and maximize shareholder value, our executive compensation is highly incentive-based. +• To emphasize long-term performance, increase alignment between executives and shareholders, and support retention, incentive compensation is weighted towards long-term awards. +• To foster teamwork and ensure internal pay equity, we utilize a cohort approach by aligning compensation across certain executive roles. +• To ensure that our executive compensation program supports our business strategy and talent plan, we determine cohort compensation levels by holistically considering factors relating to our business, the competitive market for top-tier talent, and the applicable executives. +ANNUAL DIRECT COMPENSATION ELEMENTS +NIKE's annual direct compensation for the Named Executive Officers generally consists of the following elements: +ELEMENT KEY CHARACTERISTICS PURPOSE +Base Salary Fixed cash compensation Provides market competitive baseline compensation to attract and retain top-tier talent +Annual Cash Incentive Award – Executive Performance Sharing Plan ("PSP") Variable cash incentive compensation earned at 0% – 150% based on Company performance over a 1-year performance period Motivates and rewards achievement of sustainable and profitable growth +Long-Term Incentive Awards – Stock Incentive Plan ("SIP") +*NEW* +Performance-Based Restricted Stock Units ("PSUs") (1) +Variable stock-based incentive compensation earned at 0% – 200% based on Company performance over a 3-year performance period; value dependent upon achievement of performance metrics and our stock price Aligns NEOs' interests with those of our shareholders by motivating and rewarding achievement of long-term shareholder value and growth; promotes retention +Stock Options Stock-based incentive compensation that generally vests in 4 equal annual installments; only provides value if our stock price appreciates Aligns NEOs' interests with those of our shareholders by rewarding achievement of upside potential; promotes retention +Restricted Stock Units ("RSUs") Stock-based incentive compensation that generally vests in 3 equal annual installments; value tied to our stock price Aligns NEOs' interests with those of our shareholders by rewarding long-term value creation; promotes retention +(1) Prior to fiscal year 2022, this portion of annual direct compensation was delivered in the form of cash-based awards under our Long-Term Incentive Plan ("LTIP"). LTIP awards granted in fiscal 2020 were earned based on Company performance over fiscal years 2020 – 2022; their payout is described in the section below titled "Compensation of our Named Executive Officers—Long-Term Incentive—Fiscal 2020 Award Results" and included in the Summary Compensation Table as part of fiscal 2022 compensation due to SEC rules. LTIP awards granted in fiscal 2021 will be earned based on Company performance over fiscal years 2021 – 2023; their payout will be described in next year's proxy statement and included in next year's Summary Compensation Table as part of fiscal 2023 compensation due to SEC rules. There are no other outstanding LTIP awards. +FISCAL 2022 ANNUAL DIRECT COMPENSATION TABLE +Beginning in fiscal 2022, the Compensation Committee replaced the cash-based LTIP award portion of the long-term incentive compensation mix with PSUs. Both types of awards are earned based on Company performance over a three-year performance period. Because SEC rules require that we report cash-based incentive awards in the Summary Compensation Table for the year earned but report stock-based incentive awards in the Summary Compensation Table for the year granted, for fiscal 2022 the Summary Compensation Table reflects both the payout of LTIP awards for the fiscal 2020 – 2022 performance period (which were awarded as part of fiscal 2020 annual compensation) and the grant of PSUs for the fiscal 2022 – 2024 performance period (which were awarded as part of fiscal 2022 annual compensation). The table below supplements the Summary Compensation +2022 PROXY STATEMENT 30 +Table, which appears on page 42. By excluding (1) the payout of LTIP awards for the fiscal 2020 – 2022 performance period and (2) perquisites, including the enhanced charitable match benefits provided to Messrs. Donahoe and Parker that are not actually received by these executives, we believe that the table below more accurately reflects how the Compensation Committee views annual direct compensation awarded for fiscal 2022. +NAME (1) +SALARY +PSP (2) +PSUs (3) +RSUs (4) +STOCK OPTIONS (4) +TOTAL +John Donahoe II $1,500,000 — $7,727,491 $4,334,321 $6,782,995 $20,344,807 +Mark Parker $1,134,615 — — — $2,153,362 $3,287,977 +Matthew Friend +$1,056,731 $ 1,056,000 $1,545,548 $1,238,401 $1,938,030 $6,834,710 +Andrew Campion $1,221,154 $ 1,200,000 $1,545,548 $1,444,774 $2,261,028 $7,672,504 +Heidi O'Neill $1,221,154 $ 1,200,000 $1,545,548 $1,444,774 $2,261,028 $7,672,504 +(1) The above table is not a substitute for the Summary Compensation Table set forth on page 42 of this proxy statement. The amounts in this table differ from the amounts determined under SEC rules as reported for fiscal 2022 in the Summary Compensation Table. +(2) Reflects fiscal 2022 awards under our Executive Performance Sharing Plan, which were paid based on Company performance during fiscal 2022. As described in the section below titled "Compensation of our Named Executive Officers—Annual Cash Incentive", Mr. Donahoe's PSP award was paid at 0%, Mr. Parker did not receive a fiscal 2022 PSP award due to the evolution of his responsibilities as Executive Chairman, and the PSP award for each other NEO was paid at 80%. +(3) Reflects fiscal 2022 grants of PSUs, computed in accordance with accounting guidance applicable to stock-based compensation using a Monte Carlo simulation based on the probable outcome of the performance condition as of the grant date. As described in the section below titled "Compensation of our Named Executive Officers—Long-Term Incentive—Fiscal 2022 Award Grants", the Compensation Committee determined PSU awards as a dollar value which was then converted into a target number of shares by dividing the award dollar value by the average closing price of our Class B Stock for the 20-trading day period ending on the date of grant. Fiscal 2022 PSUs will be earned between 0% and 200% of target based on Company performance during the fiscal 2022 – 2024 performance period. +(4) Reflects fiscal 2022 grants of RSUs and stock options, in each case computed in accordance with accounting guidance applicable to stock-based compensation. As described in the section below titled "Compensation of our Named Executive Officers—Long-Term Incentive—Fiscal 2022 Award Grants", the Compensation Committee determined stock-based awards as a dollar value which was then converted into a number of shares (for RSUs, by dividing the award dollar value by the average closing price of our Class B Stock for the 20-trading day period ending on the date of grant, and for stock options, by dividing the award dollar value by the Black-Scholes value). +EXECUTIVE COMPENSATION GOVERNANCE PRACTICES +WHAT WE DO +WHAT WE DON’T DO +ü Base a majority of total compensation on performance and retention incentives +ü Mitigate undue risk by using multiple performance periods and metrics, incentive payment caps, and a clawback policy +ü Base incentive awards on clearly disclosed, objective performance goals +ü Maintain robust stock ownership guidelines +ü Vest stock-based awards over time to promote long-term performance and retention +ü Provide only double-trigger change-in-control acceleration for stock-based awards +û No retirement acceleration for PSUs or RSUs +û No dividend equivalents paid on PSUs or RSUs unless and until shares are earned +û No repricing of stock options +û No hedging transactions or short sales permitted +û No pension or supplemental executive retirement plan +û No tax gross-ups for perquisites +û No cash-based change-in-control benefits +û No excise tax gross-ups upon change of control +31 NIKE, INC. +COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS +COMPENSATION OBJECTIVES AND STRUCTURE +Our executive compensation program is designed to attract and retain top-tier talent in a competitive marketplace and to maximize shareholder value by rewarding NEOs for strong Company performance. The program generally consists of annual direct compensation, with a focus on incentive compensation, and competitive benefits that are generally consistent with the benefits offered to our other U.S.-based employees. +We structure our executive compensation program in the context of our business strategy and talent plan. To foster teamwork and ensure internal pay equity, we utilize a segmented cohort approach that aligns compensation across certain executive roles. Cohort compensation levels are determined by holistically considering factors such as future potential, individual performance, market insights, succession planning, retention, and leadership continuity. New executives are phased into a cohort by taking into consideration their relative experience, expected contributions, and market position. +Our philosophy is to "pay for performance" in order to drive business results and maximize shareholder value. As a result, executive compensation is highly incentive-based and weighted towards long-term awards to emphasize long-term performance and support retention. Our executive compensation program balances performance incentives, including by using different performance metrics and performance periods, and through a mixture of cash- and stock-based compensation elements. Stock-based compensation—which consists of PSUs, stock options, and RSUs—is also structured to pay for performance by linking the majority of each NEO's target total annual direct compensation directly to our stock price. The following chart illustrates the mix of components that make up fiscal 2022 target total annual direct compensation for our CEO. +BASE SALARY +Base salary is a fixed element of compensation that serves to attract and retain top-tier talent. Generally, the Compensation Committee reviews and determines base salaries for our Named Executive Officers in June, with any adjustments becoming effective in August of the same year. After generally keeping base salaries flat across all employee levels, including our NEOs, for fiscal 2021, the Company returned to permitting base salary increases for fiscal 2022. Therefore, for fiscal 2022 the Compensation Committee granted a base salary increase to each of Messrs. Friend and Campion and Ms. O'Neill to ensure that their base salary levels remain positioned competitively relative to the market. The Compensation Committee also decreased Mr. Parker's base salary to reflect his reduced responsibilities as Executive Chair. Mr. Donahoe's base salary remained unchanged compared to fiscal 2021. +2022 PROXY STATEMENT 32 +NAMED EXECUTIVE OFFICER FISCAL 2022 BASE SALARY +% CHANGE (1) +John Donahoe II $1,500,000 0% +Mark Parker $1,000,000 -41.2% +Matthew Friend $1,100,000 25.7% +Andrew Campion $1,250,000 13.6% +Heidi O'Neill $1,250,000 13.6% +(1) Represents the change in base salary compared to fiscal 2021. +ANNUAL CASH INCENTIVE +Annual cash incentive awards are paid to the Named Executive Officers under our Executive Performance Sharing Plan ("PSP"). PSP awards reflect our "pay for performance" philosophy: they are earned between 0% and 150% of target based on Company performance during the fiscal year. The Compensation Committee retains discretion to adjust PSP metrics and award payouts based on individual or Company performance. To align employees and reinforce our one-team culture, the same compensation philosophy and metrics that underlie our PSP awards generally apply to all global employees who are eligible to participate in the Company's success through annual incentive bonuses. +Historically, PSP awards were earned based on Company earnings before interest and taxes (as adjusted to exclude the impact of certain non-operational events) measured over the fiscal year. In response to the disruption and uncertainty caused by the COVID pandemic, for fiscal 2021 the Compensation Committee implemented a more flexible annual incentive award structure based on two equally-weighted, six-month performance periods, each with multiple metrics, and taking into consideration the Company's year-long revenue performance. For fiscal 2022, the Compensation Committee transitioned the annual cash incentive awards back to our historical structure and set year-long targets for multiple, equally-weighted metrics selected to support our strategic priorities and drive sustainable, profitable growth, as described in further detail below. +In setting fiscal 2022 PSP target awards, the Compensation Committee considered the evolution of Mr. Parker's responsibilities as Executive Chairman and determined not to grant Mr. Parker a PSP award. With respect to each other Named Executive Officer, the Compensation Committee maintained the fiscal 2022 PSP target award at the same level as his or her fiscal 2021 annual cash incentive target award. Therefore, the fiscal 2022 PSP target awards were: +NAMED EXECUTIVE OFFICER FISCAL 2022 PSP TARGET AWARD +(% OF BASE SALARY) +John Donahoe II 200% +Mark Parker 0% +Matthew Friend 120% +Andrew Campion 120% +Heidi O'Neill 120% +In June 2021, the Compensation Committee selected three equally-weighted metrics and corresponding performance goals for the fiscal 2022 PSP awards. The metrics consisted of: (1) Company revenue ("Revenue"), to drive topline income; (2) Company revenue generated through sales on NIKE digital platforms ("Digital Revenue"), to support digital growth in connection with our Consumer Direct Acceleration strategy; and (3) earnings before interest and taxes ("EBIT"), to manage overall profitability. To help drive and reward organic growth, each metric excluded the impact of the following non-operational events: acquisitions, divestitures, changes in accounting principles, unanticipated restructurings, unanticipated exchange rate fluctuations, and other extraordinary, unusual, or infrequently occurring items (we refer to these metrics, as adjusted, as "Adjusted Revenue", "Adjusted Digital Revenue", and "Adjusted EBIT", respectively). +As illustrated below, the Compensation Committee set challenging performance goals for each metric at levels designed to incentivize strong growth over fiscal 2021 performance. The Adjusted Revenue target goal represented an increase of 15% compared to actual fiscal 2021 Revenue and the Adjusted EBIT target goal represented an increase of 16% compared to actual fiscal 2021 EBIT, in each case with threshold and maximum goals set equidistant from the target goal to balance stretch and risk. The Adjusted Digital Revenue goal represented an increase of 31% compared to actual fiscal 2021 Digital Revenue, with additional stretch built into the maximum goal in light of momentum in our digital business and continued growth potential. +In June 2022, at the end of our fiscal year, the Compensation Committee considered the Company's performance for fiscal 2022 in light of two unexpected and extraordinary COVID-related challenges. First, during the first quarter, government-mandated factory closures in Vietnam and Indonesia resulted in the Company losing approximately three months of production. This production loss reduced available for sale inventory supply during the second, third, and fourth quarters, which impacted fiscal 2022 Revenue. Then, during the fourth quarter, widespread COVID-related lockdowns in China impacted physical retail traffic, which resulted in lower fourth quarter Revenue and EBIT. The Compensation Committee first considered actual achievement for fiscal 2022 Adjusted Revenue, Adjusted Digital Revenue, and Adjusted EBIT, as illustrated below: +33 NIKE, INC. +FISCAL 2022 PERFORMANCE GOALS +(Dollars in millions) +% PAYOUT +THRESHOLD +50% +TARGET +100% +MAXIMUM +150% +Adjusted Revenue +Adjusted Digital Revenue +Adjusted EBIT +Each metric was achieved below the designated threshold, resulting in an overall achievement of 0% of target. Notwithstanding the below-threshold performance, the Compensation Committee noted that achievement still represented year-over-year growth for each metric compared to actual fiscal 2021 results (6% for Adjusted Revenue, 19% for Adjusted Digital Revenue, and 1% for Adjusted EBIT). The committee therefore considered Company performance excluding the impact of the COVID-related Vietnam and Indonesia factory closures and China lockdowns. +To adjust for these discrete, extraordinary events, the performance period was split into two equally-weighted, six-month periods. For the first six-month period (June 2021 – December 2021, "1H"), performance was calculated at 28% of target based on 1H achievement of Adjusted Revenue, Adjusted Digital Revenue, and Adjusted EBIT compared to targets equal to half of the year-long performance goals established in June 2021. For the second six-month period (January 2022 – May 2022, "2H"), performance was calculated at 139% of target based on 2H achievement (adjusted to exclude the impact of COVID-related lockdowns in China during the fourth quarter) of Adjusted Revenue, Adjusted Digital Revenue, and Adjusted EBIT compared to targets based on mid-year forecasting that reflected the 1H factory closures in Vietnam and Indonesia. Averaging together 1H and 2H performance resulted in performance of 83.5% of target, which the Compensation Committee rounded down to 80%—consistent with the payout of the similarly-structured annual bonus for employees below the executive officer level. +The Compensation Committee considered the strength of the Company's performance under both the unadjusted and adjusted scenarios as well as our one-team culture. For Mr. Donahoe, the Compensation Committee determined a fiscal 2022 PSP payout of 0%, reflecting the highest level of accountability for the Chief Executive Officer despite strong performance during extraordinary challenges. For each of Messrs. Friend and Campion and Ms. O'Neill, the committee determined a fiscal 2022 PSP payout of 80%, reflecting strong Company performance despite extraordinary challenges and aligned with the annual bonus for employees below the executive officer level to reinforce our one-team culture. As described above, Mr. Parker was not granted a fiscal 2022 PSP award. +LONG-TERM INCENTIVE +Long-term incentive compensation incentivizes and rewards long-term Company performance, aligns executives' interests with those of our shareholders, and promotes retention in a highly competitive talent marketplace. Therefore, this element of our executive compensation program forms the largest portion of our Named Executive Officers' annual direct compensation, constituting 78% of fiscal 2022 target total annual direct compensation for Mr. Donahoe (67% for Mr. Parker, and 62% for each other NEO). For fiscal 2022, long-term incentive compensation consisted of three components: performance-based restricted stock units ("PSUs"), stock options, and restricted stock units ("RSUs"), each granted under our Stock Incentive Plan. We consider PSUs and stock options to be performance-based awards, because PSUs are not earned unless performance conditions are satisfied, and stock options have no value unless our stock price increases. Consistent with our "pay for performance" philosophy, we deliver a majority of each NEO's long-term incentive compensation in the form of performance-based awards (73% for Mr. Donahoe, 100% for Mr. Parker, 70% for Mr. Friend, and 69% for Mr. Campion and Ms. O'Neill). +The Compensation Committee introduced PSUs as a new vehicle for our long-term incentive compensation in fiscal 2022. Prior to fiscal 2022, this component of executive compensation was delivered in the form of cash-based awards under our Long-Term Incentive Plan ("LTIP"). In recognition of the significant shift from cash-based awards to stock-based awards, the Compensation Committee determined to otherwise maintain stability for this component, including keeping target award values the same and retaining a similar award structure, including metrics and performance goals. +2022 PROXY STATEMENT 34 +FISCAL 2022 AWARD GRANTS +The Compensation Committee determined the fiscal 2022 long-term incentive awards in June 2021. As noted above, the Compensation Committee determined to keep fiscal 2022 – 2024 PSU target award values at the same level as fiscal 2021 – 2023 LTIP target awards for each Named Executive Officer, to maintain consistency for this component in light of the shift from cash-based to stock-based awards. With respect to stock option and RSU award values, the Compensation Committee considered multiple factors, including performance, evolving responsibilities, our cohort compensation approach, the highly competitive talent marketplace, and the fact that cohort-level long-term incentive awards were not increased in fiscal 2021. Accordingly, the Compensation Committee decreased Mr. Parker's stock option award by $4,000,000 and maintained his RSU award at $0. For each other Named Executive Officer, the Compensation Committee determined to increase the stock option award (by $900,000 for Mr. Donahoe, $60,000 for Mr. Friend, and $360,000 for each of Mr. Campion and Ms. O'Neill) and the RSU award (by $600,000 for Mr. Donahoe, $40,000 for Mr. Friend, and $240,000 for each of Mr. Campion and Ms. O'Neill). The fiscal 2022 long-term incentive award values were: +NAMED EXECUTIVE OFFICER TARGET PSUs STOCK OPTIONS RSUs TOTAL FISCAL 2022 +LONG-TERM INCENTIVE AWARDS +John Donahoe II $5,000,000 $6,300,000 $4,200,000 $15,500,000 +Mark Parker — $2,000,000 — $2,000,000 +Matthew Friend $1,000,000 $1,800,000 $1,200,000 $4,000,000 +Andrew Campion $1,000,000 $2,100,000 $1,400,000 $4,500,000 +Heidi O'Neill $1,000,000 $2,100,000 $1,400,000 $4,500,000 +FISCAL 2022 – 2024 PSUs +PSUs align our Named Executive Officers' interests with those of our shareholders by motivating and rewarding achievement of long-term shareholder value and growth. PSU awards reflect our "pay for performance" philosophy: they are earned between 0% and 200% of target based on Company performance during a three-year performance period. +In June 2021, the Compensation Committee selected the metric, corresponding performance goals, and award terms for the fiscal 2022 – 2024 PSU awards. As noted above, the committee chose to keep the structure of these awards similar to the structure of the 2021 – 2023 LTIP awards to maintain consistency for this component in light of the shift from cash-based to stock-based awards. The Compensation Committee will determine the earnout of the fiscal 2022 – 2024 PSU awards following the completion of the three-year performance period, and any PSUs that are earned will vest on August 1, 2024. +The Compensation Committee selected as the metric for the fiscal 2022 – 2024 PSU awards the Company's total shareholder return ("Absolute TSR") for fiscal 2022 – 2024 relative to total shareholder return over the same period for the other companies in the S&P 500 ("Relative TSR"), and continued to target above-median performance as shown in the table below: +FISCAL 2022 – 2024 PERFORMANCE GOALS +% PAYOUT +THRESHOLD +25% +TARGET +100% +MAXIMUM +200% +Relative TSR 1 +(1) Relative TSR for fiscal years 2022, 2023, and 2024, calculated using the 20-trading day average stock price and assuming that dividends paid during the performance period are reinvested in the applicable company's stock. +PSUs will be earned at 100% of target if the Company's Relative TSR for the performance period is at the 55 th percentile, and will be earned at 0% if the Company's Relative TSR for the performance period is below the 25 th percentile. PSU earnout based on Relative TSR performance is subject to a cap of 100% of target if Absolute TSR for the performance period is negative. The Compensation Committee selected three-year Relative TSR as the performance metric because it is an objective and transparent measure of long-term shareholder value, especially in the context of a volatile market. Furthermore, the cap on payout if Absolute TSR is negative incentivizes NEOs to pursue long-term growth. +The fiscal 2022 – 2024 PSU awards also contain a "People & Planet" modifier designed to support our commitment to Purpose, which is a key component of our long-term strategy. If Relative TSR meets or exceeds the threshold performance goal, the "People & Planet" modifier permits the Compensation Committee to adjust the earnout upwards or downwards by up to 20 percentage points (subject to both the 200% maximum earnout and the 100% Absolute TSR cap) based on a holistic assessment of the Company's performance with respect to employee engagement and inclusion, leadership diversity, and sustainability. Structuring the modifier as a holistic assessment ensures that the final earnout comprehensively balances these broad and disparate issues and appropriately reflects the spirit of our Purpose commitment. In determining the "People & Planet" modifier, +35 NIKE, INC. +the Compensation Committee will consider the Company's progress towards achieving certain of the five-year Purpose goals described in our fiscal 2021 Impact Report, including goals regarding increasing representation of women in our global corporate workforce and leadership positions; increasing representation of U.S. racial and ethnic minorities in our U.S. corporate workforce and at the Director level and above; employee feedback with respect to engagement and inclusion; foundational expectations related to responsible manufacturing in our supply chain; and operating more sustainably with respect to carbon, waste, water, and chemistry. +The target number of PSUs granted to each Named Executive Officer for fiscal 2022 was determined by dividing the NEO's target award value by the average closing price of our Class B Stock for the 20-trading day period ending on the date of grant. PSUs accumulate dividend equivalents that are paid only when, and to the extent, they vest. To promote retention, PSU awards generally provide that any unvested PSUs are forfeited if the Named Executive Officer leaves the Company. Forfeiture is subject to partial accelerated vesting upon termination of employment in connection with a divestiture or reduction in force (as described in the section below titled "Executive Compensation Tables—Potential Payments Upon Termination or Change-in-Control"). +STOCK OPTIONS +Stock options align our Named Executive Officers' interests with those of our shareholders by rewarding the achievement of upside potential, and they reflect our "pay for performance" philosophy because they provide value to the NEOs only if the price of our Class B Stock appreciates. +The number of stock options granted to each NEO for fiscal 2022 was determined by dividing the NEO's award value by the Black-Scholes value (calculated based on a twenty-day average stock price and the available five-year and seven-year interest rates) of a stock option on the date of grant. Options granted to the Named Executive Officers vest in equal annual installments over four years and have an exercise price equal to the closing market price of our stock on the date of grant (or the trading day immediately prior to the grant date, if the grant date is not a trading day). To promote retention, stock options generally provide that if a Named Executive Officer leaves the Company, they forfeit any unvested stock options. Forfeiture is subject to a limited retirement provision designed to encourage executives to delay retirement and partial accelerated vesting upon termination of employment in connection with a divestiture or reduction in force (each as described in the section below titled "Executive Compensation Tables—Potential Payments Upon Termination or Change-in-Control"). +RSUs +RSUs align our Named Executive Officers' interests with those of our shareholders by rewarding the achievement of long-term value creation, and they reflect our "pay for performance" philosophy because their value is directly tied to our Class B Stock price. +The number of RSUs granted to each NEO for fiscal 2022 was determined by dividing the NEO's award value by the average closing price of our Class B Stock for the 20-trading day period ending on the date of grant. RSUs granted to the Named Executive Officers as part of long-term incentive compensation vest in equal annual installments over three years and accumulate dividend equivalents that are paid only upon vesting. To promote retention, RSU awards generally provide that any unvested RSUs are forfeited if the Named Executive Officer leaves the Company. Forfeiture is subject to partial accelerated vesting upon termination of employment in connection with a divestiture or reduction in force (as described in the section below titled "Executive Compensation Tables—Potential Payments Upon Termination or Change-in-Control"). +FISCAL 2020 AWARD RESULTS +As previously disclosed in our 2020 proxy statement, the fiscal 2020 – 2022 LTIP awards granted in June 2019 were to be earned between 0% and 200% of target based on Relative TSR over a three-year performance period (subject to a payout cap of 100% if Absolute TSR was negative). As illustrated below, NIKE's Relative TSR for fiscal years 2020 – 2022 was at the 50 th percentile, corresponding to an earnout of 89%, and Absolute TSR for that period was positive. Relative TSR was calculated in comparison to the companies that were included in the S&P 500 as of May 31, 2022, using the 20-trading day average stock price and assuming that dividends paid during the performance period were reinvested in the applicable company's stock. In June 2022, the Compensation Committee determined that a payout of 89% under these awards was earned by each NEO. +FISCAL 2020 – 2022 PERFORMANCE RESULTS +% PAYOUT +THRESHOLD +25% +TARGET +100% +MAXIMUM +200% +Relative TSR +TOTAL PAYOUT: +89% +2022 PROXY STATEMENT 36 +FISCAL 2023 LONG-TERM INCENTIVE COMPENSATION CHANGES +For fiscal 2023 the Compensation Committee reviewed the total mix of long-term incentive compensation components—PSUs, stock options, and RSUs. After considering shareholder feedback, including feedback received during our extensive shareholder engagement, and evolving market practice, the Compensation Committee determined to increase the proportion of total long-term incentive compensation granted in the form of PSUs to 50% for all executive officers, which change will be phased in over multiple years, beginning with fiscal 2023 awards. +OTHER COMPENSATION +PROFIT SHARING AND RETIREMENT PLANS +We maintain a U.S. tax qualified retirement savings plan—the 401(k) Savings and Profit Sharing Plan for Employees of NIKE, Inc. (the "401(k) Plan")—under which all eligible U.S. employees, including the Named Executive Officers, are able to make pre-tax and after-tax contributions from their cash compensation. We make annual matching contributions for all participants equal to 100% of their pre-tax contributions up to 5% of their total eligible compensation. +We also may make annual profit sharing contributions to the accounts of eligible U.S. employees, including the Named Executive Officers, under the 401(k) Plan. The aggregate profit sharing contribution amount, if any, is determined each year by the Board of Directors. This aggregate contribution is allocated among eligible employees based on an equal percentage of their total salary and annual cash incentive award for the year. For fiscal 2022, the profit sharing contribution percentage for each eligible employee was 0%. +The Internal Revenue Code limits the amount of compensation that can be deferred under the 401(k) Plan, and also limits the amount of salary and annual cash incentive award ($290,000 for fiscal 2022) that may be taken into account when determining contributions under that plan. Accordingly, we provide our Named Executive Officers and other highly compensated employees with the opportunity to defer their compensation, including amounts in excess of the tax law limit, under our nonqualified Deferred Compensation Plan. We do not match deferrals to the Deferred Compensation Plan. If we make an annual profit sharing contribution under the 401(k) Plan, we also make equivalent profit sharing contributions under the Deferred Compensation Plan with respect to salary and annual cash incentive award of any eligible employee that exceeds the tax law limit; these contributions under the Deferred Compensation Plan allow our Named Executive Officers and other highly compensated employees to receive profit sharing contributions in the same percentage as our other employees. Because we did not make a profit sharing contribution under the 401(k) Plan for fiscal 2022, we did not make any profit sharing contributions under the Deferred Compensation Plan either. Balances in the Deferred Compensation Plan, including the balances of the Named Executive Officers, are unsecured and at-risk, meaning that the balances may be forfeited in the event of the Company's financial distress, such as bankruptcy. +Fiscal 2022 matching and profit sharing contributions to the Named Executive Officers under the qualified and nonqualified plans are included in the All Other Compensation column in the Summary Compensation Table on page 42. +EMPLOYEE STOCK PURCHASE PLAN +Our Employee Stock Purchase Plan allows eligible employees in the United States and in many countries outside of the United States, including the Named Executive Officers, to purchase Class B Stock through payroll deductions at a 15% discount to the market price on the first or last trading day of the six-month purchase period, depending on which day the stock price was lower. In fiscal 2022, all of our Named Executive Officers participated in our Employee Stock Purchase Plan, with the exception of Messrs. Donahoe and Parker. +PERQUISITES AND OTHER BENEFITS +Our executive compensation program includes limited perquisites and other personal benefits for our Named Executive Officers, which generally consist of home security and financial planning services. Given the nature of our business, from time to time certain Company employees, including certain executive officers, may also receive Company product, event tickets, or travel benefits that are not generally offered to all employees. +In addition, Mr. Donahoe and Mr. Parker are entitled to limited personal use of Company aircraft, primarily pursuant to time sharing agreements, which is intended to increase the security, availability, and productivity of these individuals, and enhanced charitable gift matching under our Employee Matching Gift Program, with an annual executive contribution limit of $1,000,000 and Company matching on a 4:1 basis. Our Employee Matching Gift Program does not match employee contributions that benefit the employee, including contributions to the employee's personal or family foundation or to a non-profit organization that is managed or led by, or provides compensation or assistance to, the employee or a member of their family. For fiscal 2022, Mr. Donahoe and Mr. Parker each donated to a range of charitable causes. +We do not provide any tax gross-ups on perquisites to our executive officers. Greater detail about the perquisites and personal benefits provided to our Named Executive Officers in fiscal 2022 is provided in the footnotes to the Summary Compensation Table on page 42. +37 NIKE, INC. +NON-COMPETITION AGREEMENTS +In exchange for non-competition agreements from each of our Named Executive Officers, we have agreed to provide monthly payments during the non-compete period following termination of employment, as described in the section below titled "Executive Compensation Tables—Potential Payments upon Termination or Change-in-Control". We believe that it is appropriate to compensate individuals to refrain from working with competitors following termination, and that compensation enhances the enforceability of such agreements. +LETTER AGREEMENTS +In connection with the CEO transition in fiscal 2020, we entered into letter agreements with each of Messrs. Donahoe and Parker that provide, among other things, for the enhanced charitable gift matching under our Employee Matching Gift Program as described in the section above titled "Perquisites and Other Benefits". Other than these two letter agreements, we do not have employment contracts with any of our executive officers. +2022 PROXY STATEMENT 38 +OUR COMPENSATION PROCESS +COMPENSATION COMMITTEE +The Compensation Committee oversees our executive compensation program, including determining the value and composition of the compensation package for each of our executive officers and setting annual performance goals for the CEO. In addition to any special actions the Compensation Committee may take throughout the year, the committee generally acts with respect to compensation for our Named Executive Officers during the fiscal year as follows: +PEER GROUP +Given the competitive market for top-tier talent, the Compensation Committee uses a peer group (consisting of companies with similar revenue size, market capitalization, brand value, products, or markets, or with which we compete for executive talent, or which are aligned with our evolving business and talent strategies) to provide a reference for assessing executive compensation levels and practices. Based on the criteria, the following peer group was considered for purposes of setting fiscal 2022 executive compensation: +American Express Company Kellogg Company Pepsico, Inc. +Best Buy Company, Inc. Kimberly-Clark Corporation Procter & Gamble Company +The Coca-Cola Company McDonald's Corporation Starbucks Corporation +Colgate-Palmolive Company Microsoft Corporation Target Corporation +Comcast Corporation Mondelez International, Inc. TJX Companies +The Gap, Inc. Oracle Corporation The Walt Disney Company +In November 2021, the Compensation Committee further refined our peer group for purposes of setting fiscal 2023 executive compensation to include Lowe's Companies, Inc., Netflix, Inc., salesforce.com, inc., and Walmart Inc., and to remove Colgate-Palmolive Company, Comcast Corporation, The Gap, Inc., and Kellogg Company. +39 NIKE, INC. +In addition to considering our peer group, the Compensation Committee also uses market survey data from third parties, including Aon, Willis Towers Watson, and Mercer, about a broader range of companies. The Compensation Committee generally does not set executive compensation at or near any particular percentile of peer group, or market, compensation. Instead, the committee considers compensation to be competitive if it is generally within a reasonable range of market median. +ROLE OF MANAGEMENT +The CEO makes compensation recommendations to, and participates in discussions with, the Compensation Committee regarding the compensation of each executive officer other than himself. In addition, our human resources staff regularly provides data, analysis, and recommendations to the committee regarding executive compensation. +The Compensation Committee meets regularly in executive session without the CEO or other management present to discuss our executive compensation program. Such executive sessions include discussions about, among other topics, the CEO's performance and compensation and the design and operation of our executive compensation plans. +ROLE OF COMPENSATION CONSULTANT +The Compensation Committee has the authority, in its sole discretion, to retain compensation consultants to assist the committee in overseeing our executive compensation program. The Compensation Committee chose not to retain any such consultants in fiscal 2022. However, in connection with the committee's analysis and decision-making regarding the fiscal 2022 executive compensation program, the Compensation Committee supplemented peer group data with information from surveys and reports containing competitive market data from Aon, Willis Towers Watson, and Mercer, which are obtained by our human resources staff. +OTHER COMPENSATION PRACTICES +STOCK OWNERSHIP GUIDELINES +We maintain stock ownership guidelines for executive officers that are designed to further align the interests of our executive officers with those of our shareholders. Under the guidelines, for fiscal 2022 each executive officer was required to hold NIKE stock valued at the following multiple of their annual base salary: +POSITION OWNERSHIP LEVEL +Chief Executive Officer +8X Base Salary +Other Executive Officers (including NEOs) +3X Base Salary +New executive officers are required to attain these ownership levels within five years of their appointment. As of May 31, 2022, the CEO and each of our other executive officers, including each other Named Executive Officer, has met or is on track to meet the applicable ownership guideline within the requisite period. +HEDGING AND PLEDGING +The Company's Blackout and Pre-clearance Policy (which supplements our Insider Trading Policy) prohibits directors, executive officers, and other designated insiders (based on seniority and department) from engaging in transactions involving hedging, monetization, or short sales of NIKE stock, including zero-cost collars and forward sale contracts. The policy also requires directors and executive officers, along with members of their families and households, to obtain pre-approval from the Company's Chairman or CEO before pledging NIKE stock. Before any such approval is granted, the Company's Clearance Director considers the size of the pledge relative to the individual's other holdings, both direct and indirect, and NIKE's shares outstanding; the risk of foreclosure given the nature of the associated transaction; protections against the appearance of insider trading, including prohibitions on sales during trading blackouts; and the ability to timely report sales on Form 4. +2022 PROXY STATEMENT 40 +CHANGE-IN-CONTROL PROVISIONS +Neither PSP nor LTIP awards are subject to acceleration upon a change in control. PSU, stock option, and RSU awards are subject only to "double-trigger" accelerated change-in-control vesting (with PSUs vesting at 100% of target), meaning that vesting is accelerated only if there is a change in control of the Company, and within the following two years, either the acquiring entity fails to assume the awards or the employee's employment is terminated by the acquirer without cause or by the employee for good reason. This double-trigger acceleration is intended to encourage executive retention through a period of uncertainty. The Compensation Committee believes that this approach will enhance shareholder value in the context of an acquisition and align executives' interests with those of investors. The effect of change-in-control transactions on stock-based awards is described further in the section below titled "Executive Compensation Tables—Potential Payments Upon Termination or Change-in-Control". +CLAWBACK +We maintain a clawback policy for the recoupment of incentive compensation. Under the clawback policy, an executive officer who is involved in wrongful conduct that results in a restatement of the Company's financial statements must repay to the Company up to the full amount of any incentive compensation that was paid based on the financial statements that were subsequently restated. The clawback policy covers PSP awards, LTIP awards, stock-based awards (based on excess proceeds from pre-restatement sales of stock acquired pursuant to the stock-based awards), and profit sharing contributions to the Deferred Compensation Plan. In addition to the clawback policy, the PSP, LTIP and Stock Incentive Plan also specify that the Committee may apply further clawback requirements to awards through additional clawback policies or award agreement provisions, and that all awards are subject to clawback requirements under applicable law and regulation. +RISK ASSESSMENT +At the Compensation Committee's request, in fiscal 2022, management prepared and discussed with the committee an assessment of potential risks associated with the Company's compensation programs, including any risk that would be reasonably likely to have a material adverse effect on the Company. This included an assessment of risks associated with each element of employee compensation. The assessment considered certain design features of the compensation program that reduce the likelihood of excessive risk taking, such as reasonable performance targets, capped incentive compensation payouts, a balance of short- and long-term incentives, a balance of cash- and stock-based incentives, vesting of awards over time, and the potential for clawback of incentive compensation. In addition, for stock-based compensation, we have adopted stock ownership guidelines, provided for limited accelerated vesting of PSUs, stock options, and RSUs upon termination of employment, and provided for only double-trigger accelerated vesting of stock-based awards upon a change in control. +TAX DEDUCTIBILITY OF EXECUTIVE COMPENSATION +Section 162(m) of the Internal Revenue Code generally places a $1 million limit on the amount of compensation a company can deduct in any one year for "covered employees". While the Compensation Committee seeks to preserve tax deductibility in developing and implementing our executive compensation program, the committee also believes that it is important to maintain flexibility in administering compensation programs in a manner designed to promote varying corporate goals and the interests of our shareholders. Accordingly, we have not adopted a policy that all compensation must qualify as deductible for tax purposes and retain the ability to provide compensation that may not qualify as deductible under Section 162(m). +COMPENSATION COMMITTEE REPORT +The Compensation Committee of the Board of Directors has reviewed and discussed with management the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K. Based on the review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement. +Members of the Compensation Committee: +• Timothy D. Cook, Chair +• Cathleen A. Benko +• Elizabeth J. Comstock +41 NIKE, INC. +EXECUTIVE COMPENSATION TABLES +SUMMARY COMPENSATION TABLE +The following table sets forth information concerning the total compensation of each Named Executive Officer for fiscal years 2022, 2021, and 2020. +NAME AND PRINCIPAL +POSITION YEAR SALARY +($) +BONUS (1) +($) +STOCK +AWARDS (2) +($) +OPTION +AWARDS (3) +($) +NON-EQUITY +INCENTIVE PLAN +COMPENSATION (4) +($) +ALL OTHER +COMPENSATION (5) +($) +TOTAL (6) +($) +John Donahoe II +President and Chief Executive Officer +2022 1,500,000 — 12,061,812 6,782,995 4,450,000 4,043,253 28,838,060 +2021 1,500,000 13,600,000 3,602,980 5,402,416 4,500,000 4,315,312 32,920,708 +2020 548,077 6,750,000 21,275,073 23,241,515 — 1,685,315 53,499,980 +Matthew Friend +Executive Vice President and Chief Financial Officer +2022 1,056,731 1,056,000 2,783,949 1,938,030 890,000 14,500 7,739,210 +2021 875,000 1,260,000 7,161,045 1,740,792 900,000 14,250 11,951,087 +2020 659,092 1,576,800 400,057 661,621 — 14,000 3,311,570 +Andrew Campion +Chief Operating Officer +2022 1,221,154 1,200,000 2,990,322 2,261,028 890,000 15,241 8,577,745 +2021 1,100,000 1,584,000 11,161,060 1,740,792 900,000 14,250 16,500,102 +2020 1,092,308 2,070,000 1,160,023 1,606,771 — 9,375 5,938,477 +Heidi O'Neill (7) +President, Consumer and Marketplace +2022 1,221,154 1,200,000 2,990,322 2,261,028 890,000 26,618 8,589,122 +2021 1,100,000 1,584,000 7,161,045 1,740,792 900,000 14,250 12,500,087 +Mark Parker +Executive Chairman +2022 1,134,615 — — 2,153,362 4,450,000 4,096,391 11,834,368 +2021 1,700,000 12,040,000 — 6,002,675 4,500,000 3,235,307 27,477,982 +2020 1,700,000 6,025,000 4,000,067 5,540,572 — 930,634 18,196,273 +(1) For fiscal 2022, represents awards under our Executive Performance Sharing Plan which were earned based on Company performance during fiscal 2022. As described in the section titled "Compensation Discussion and Analysis—Compensation of our Named Executive Officers—Annual Cash Incentive", Mr. Donahoe's PSP award was paid at 0%, Mr. Parker did not receive a fiscal 2022 PSP award in light of his reduced responsibilities as Executive Chairman, and the PSP award for each other NEO was paid at 80%. For fiscal 2021, represents annual cash incentive awards which were paid at 120% of target to each executive officer, as well as transition-period cash incentive awards paid to Messrs. Donahoe and Parker. For fiscal 2020, represents cash bonuses awarded to executive officers to approximate the short- and long-term cash incentive payouts received by non-executive officers. +(2) Represents the grant date fair value of RSU and PSU awards granted in fiscal 2022, and RSU awards granted in fiscal 2021 and 2020, in each case computed in accordance with accounting guidance applicable to stock-based compensation. For RSUs, the grant date fair value was computed based on the closing market price of our Class B Stock on the grant date. For PSUs, the grant date fair value was computed using a Monte Carlo simulation based on the probable outcome of the performance condition as of the grant date. The assumptions made in determining the grant date fair value of PSUs under applicable accounting guidance are disclosed in Note 11 of Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended May 31, 2022. For fiscal 2022, the grant date fair value of the PSU awards was: $7,727,491 for Mr. Donahoe; $1,545,548 for Messrs. Friend and Campion and Ms. O'Neill; and $0 for Mr. Parker. Assuming that the maximum level of performance conditions is achieved, the PSU award values would be: $10,319,956 for Mr. Donahoe; $2,064,058 for Messrs. Friend and Campion and Ms. O'Neill; and $0 for Mr. Parker. +(3) Represents the grant date fair value of options granted in the applicable fiscal year computed in accordance with accounting guidance applicable to stock-based compensation. The grant date fair value of the options was estimated using the Black-Scholes option pricing model. The assumptions made in determining the grant date fair value of options under applicable accounting guidance are disclosed in Note 11 of Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended May 31, 2022. +(4) Represents awards under our Long-Term Incentive Plan which were earned for Company performance during the three-year period ending with the applicable fiscal year. +(5) For fiscal 2022, includes Company matching contributions to the 401(k) Plan in the amount of $14,500 for each of the Named Executive Officers. The amount for Mr. Donahoe also includes $4,000,000 in charitable matching contributions made by the Company, $27,472 in aggregate incremental cost to the Company for personal use of the Company's aircraft, as well as the value of Company-related merchandise, security services, food and beverage, and books. The amount for Ms. O'Neill also includes the incremental cost to the Company for personal use of the Company's aircraft as well as the value of security services, financial advisory services, and books. The amount for Mr. Parker also includes $4,000,000 in charitable matching contributions made by the Company, $61,574 in aggregate incremental cost to the Company for personal use of the Company' aircraft, as well as the value of Company-related merchandise, security services, and books. The aggregate incremental cost for personal use of the Company's aircraft is determined based on the variable operating cost to the Company, including the cost of fuel, maintenance, crew travel expenses, landing fees, parking fees, in-flight food and beverage, and other smaller variable costs associated with each flight. The amounts for Mr. Donahoe and Mr. Parker exclude the aggregate incremental cost to the Company for personal use of the Company's aircraft for which Mr. Donahoe or Mr. Parker, as applicable, reimbursed the Company in accordance with a time sharing agreement and as allowed under Federal Aviation Regulation 91.501(c) and (d). +(6) Includes the value of both the grant of PSUs for the fiscal 2022 – 2024 performance period (which were awarded as part of fiscal 2022 compensation) and the payout of LTIP awards for the fiscal 2020 – 2022 performance period (which were awarded as part of fiscal 2020 compensation). +(7) Because Ms. O'Neill was a Named Executive Officer for only fiscal 2022 and 2021, no disclosure is included as to Ms. O'Neill for fiscal 2020. +2022 PROXY STATEMENT 42 +GRANTS OF PLAN-BASED AWARDS IN FISCAL 2022 +The following table sets forth information concerning the performance-based annual cash incentive opportunities and PSUs, RSUs, and stock options granted to the Named Executive Officers in fiscal 2022. +ESTIMATED FUTURE PAYOUTS UNDER +NON-EQUITY INCENTIVE PLAN AWARDS ESTIMATED FUTURE PAYOUTS UNDER +EQUITY INCENTIVE PLAN AWARDS +ALL OTHER +STOCK AWARDS: +NUMBER OF +SHARES OF +STOCK OR +UNITS (3) +ALL OTHER OPTION +AWARDS: NUMBER +OF SECURITIES +UNDERLYING +OPTIONS (4) +EXERCISE +OR BASE +PRICE OF +OPTION +AWARDS +GRANT DATE +FAIR VALUE +OF STOCK +AND OPTION +AWARDS (5) +THRESHOLD TARGET MAXIMUM THRESHOLD TARGET MAXIMUM +NAME GRANT DATE ($) ($) ($) (#) (#) (#) (#) (#) ($/SH) ($) +John Donahoe II 6/16/2021 +1,500,000 (1) +3,000,000 (1) +4,500,000 (1) +8/1/2021 +7,701 (2) +30,804 (2) +61,608 (2) +7,727,491 +8/1/2021 25,875 4,334,321 +8/1/2021 152,839 167.51 6,782,995 +Matthew Friend 6/16/2021 +660,000 (1) +1,320,000 (1) +1,980,000 (1) +8/1/2021 +1,540 (2) +6,161 (2) +12,322 (2) +1,545,548 +8/1/2021 7,393 1,238,401 +8/1/2021 43,669 167.51 1,938,030 +Andrew Campion 6/16/2021 +750,000 (1) +1,500,000 (1) +2,250,000 (1) +8/1/2021 +1,540 (2) +6,161 (2) +12,322 (2) +1,545,548 +8/1/2021 8,625 1,444,774 +8/1/2021 50,947 167.51 2,261,028 +Heidi O'Neill 6/16/2021 +750,000 (1) +1,500,000 (1) +2,250,000 (1) +8/1/2021 +1,540 (2) +6,161 (2) +12,322 (2) +1,545,548 +8/1/2021 8,625 1,444,774 +8/1/2021 50,947 167.51 2,261,028 +Mark Parker 6/16/2021 +— (1) +— (1) +— (1) +— +8/1/2021 +— (2) +— (2) +— (2) +— +8/1/2021 — — +8/1/2021 48,521 167.51 2,153,362 +(1) These amounts represent the potential performance-based annual cash incentive awards payable for performance during fiscal 2022 under our PSP. Under this plan, the Compensation Committee approved target awards for fiscal 2022 based on a percentage of the executive's base salary paid during fiscal 2022 as follows: Mr. Donahoe, 200%; Mr. Friend, 120%; Mr. Campion, 120%; Ms. O'Neill, 120%; and Mr. Parker, 0%. Fiscal 2022 PSP awards are earned between 0% and 150% of target based on Company performance on three equally-weighted metrics—Adjusted Revenue, Adjusted Digital Revenue, and Adjusted EBIT—during fiscal 2022. Actual award payouts earned in fiscal 2022 and paid in fiscal 2023 are shown in the Summary Compensation Table. +(2) These amounts represent grants of PSUs under the Stock Incentive Plan which are earned between 0% and 200% of target based on Relative TSR for fiscal 2022 – 2024, subject to a cap of 100% of target if Absolute TSR for the performance period is negative. If Relative TSR is at or above the threshold performance goal, the Compensation Committee may adjust the earnout upwards or downwards by up to 20 percentage points based on a holistic assessment of the Company's performance during the three-year performance period with respect to employee engagement and inclusion, representation of diverse individuals in leadership positions, and sustainability. Earned PSUs will vest in August 2024 and are generally subject to continued employment through the vesting date. Vesting will be accelerated in certain circumstances as described in the section "Potential Payouts Upon Termination or Change-in-Control". The PSUs accumulate cash dividend equivalents that are paid only when, and to the extent, they vest. +(3) Amounts reported in this column represent grants of RSUs under the Stock Incentive Plan which vest in three equal installments on the first three anniversaries of the grant date. Vesting will be accelerated in certain circumstances as described in the section "Potential Payouts Upon Termination or Change-in-Control". The RSUs accumulate cash dividend equivalents that are only paid upon vesting. +(4) Amounts reported in this column represent stock options granted under the Stock Incentive Plan which become exercisable in four equal installments on the first four anniversaries of the grant date. Options become exercisable in certain circumstances as described in the section "Potential Payouts Upon Termination or Change-in-Control". Each option has a maximum term of 10 years, subject to earlier termination in the event of the optionee's termination of employment. +(5) For stock awards, represents the grant date fair value of (a) RSUs based on the closing market price of our Class B Stock on the grant date and (b) PSUs computed using a Monte Carlo simulation based on the probable outcome of the performance condition as of the grant date. For option awards, represents the grant date fair value of stock options granted based on a value of $44.38 per share, calculated using the Black-Scholes option pricing model. These are the same values for the equity awards under accounting guidance applicable to stock-based compensation. The assumptions made in determining PSU and option values are disclosed in Note 11 to Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended May 31, 2022. +43 NIKE, INC. +OUTSTANDING EQUITY AWARDS AT MAY 31, 2022 +The following table sets forth information concerning outstanding stock options, PSUs, and RSUs held by the Named Executive Officers at May 31, 2022. +OPTION AWARDS STOCK AWARDS +NAME NUMBER OF +SECURITIES +UNDERLYING +UNEXERCISED +OPTIONS +EXERCISABLE +(#) +NUMBER OF +SECURITIES +UNDERLYING +UNEXERCISABLE +OPTIONS +(#) (1) +OPTION +EXERCISE +PRICE +($) OPTION +EXPIRATION +DATE +NUMBER OF SHARES OR UNITS OF STOCK THAT HAVE NOT VESTED +(#) (2) +MARKET VALUE OF SHARES OR UNITS OF STOCK THAT HAVE NOT VESTED +($) +EQUITY INCENTIVE PLAN AWARDS: NUMBER OF UNEARNED SHARES, UNITS OR OTHER RIGHTS THAT HAVE NOT VESTED +(#) (3) +EQUITY INCENTIVE PLAN AWARDS: MARKET OR PAYOUT VALUE OF UNEARNED SHARES, UNITS OR OTHER RIGHTS THAT HAVE NOT VESTED +($) +John Donahoe II 118,422 +118,421 (4) +102.1600 1/13/2030 +511,697 +255,847 (5) +102.1600 1/13/2030 +59,894 +179,681 (6) +97.6100 8/1/2030 +— +152,839 (7) +167.5100 8/1/2031 119,327 14,182,014 30,804 3,661,055 +Matthew Friend 23,000 — 57.8700 7/15/2026 +30,000 — 59.1000 7/20/2027 +26,250 +8,750 (8) +77.5400 8/1/2028 +18,048 +18,047 (9) +83.1200 8/1/2029 +19,300 +57,897 (6) +97.6100 8/1/2030 +— +43,669 (7) +167.5100 8/1/2031 62,134 7,384,626 6,161 732,235 +Andrew Campion 75,000 — 57.8700 7/15/2026 +75,000 — 59.1000 7/20/2027 +60,000 +20,000 (8) +77.5400 8/1/2028 +43,830 +43,828 (9) +83.1200 8/1/2029 +19,300 +57,897 (6) +97.6100 8/1/2030 +— +50,947 (7) +167.5100 8/1/2031 96,552 11,475,205 6,161 732,235 +Heidi O'Neill 12,500 +12,500 (8) +77.5400 8/1/2028 +30,680 +30,680 (9) +83.1200 8/1/2029 +19,300 +57,897 (6) +97.6100 8/1/2030 +— +50,947 (7) +167.5100 8/1/2031 64,488 7,664,399 6,161 732,235 +Mark Parker 330,000 — 31.6750 7/19/2023 +330,000 — 38.7600 7/18/2024 +330,000 — 56.4000 7/17/2025 +165,000 — 57.8700 7/15/2026 +165,000 — 59.1000 7/20/2027 +131,250 +43,750 (8) +77.5400 8/1/2028 +151,134 +151,134 (9) +83.1200 8/1/2029 +66,549 +199,645 (6) +97.6100 8/1/2030 +— +48,521 (7) +167.5100 8/1/2031 16,041 1,906,473 — — +(1) Stock options generally become exercisable in four equal installments on each of the first four anniversaries of the grant date. +2022 PROXY STATEMENT 44 +(2) Reflects RSUs that vest as described in the table below: +NAME FISCAL YEAR OF GRANT NUMBER OF UNVESTED UNITS VESTING SCHEDULE +John Donahoe II 2022 25,875 RSUs subject to three-year pro-rata vesting on 8/1/2022, 8/1/2023, and 8/1/2024 +2021 24,607 RSUs subject to three-year pro-rata vesting, 50% of the remaining units vest on 8/1/2022 and 50% vest on 8/1/2023 +2020 68,845 RSUs subject to three-year pro-rata vesting, 100% of the remaining units vest on 1/13/2023 +Matthew Friend 2022 7,393 RSUs subject to three-year pro-rata vesting on 8/1/2022, 8/1/2023, and 8/1/2024 +2021 7,929 RSUs subject to three-year pro-rata vesting, 50% of the remaining units vest on 8/1/2022 and 50% vest on 8/1/2023 +2021 45,208 RSUs subject to four-year pro-rata vesting, 33.3% of the remaining units vested on 6/1/2022, 33.3% vest on 6/1/2023, and 33.3% vest on 6/1/2024 +2020 1,604 RSUs subject to three-year pro-rata vesting, 100% of the remaining units vest on 8/1/2022 +Andrew Campion 2022 8,625 RSUs subject to three-year pro-rata vesting on 8/1/2022, 8/1/2023, and 8/1/2024 +2021 7,929 RSUs subject to three-year pro-rata vesting, 50% of the remaining units vest on 8/1/2022 and 50% vest on 8/1/2023 +2021 75,347 RSUs subject to four-year pro-rata vesting, 33.3% of the remaining units vested on 6/1/2022, 33.3% vest on 6/1/2023, and 33.3% vest on 6/1/2024 +2020 4,651 RSUs subject to three-year pro-rata vesting, 100% of the remaining units vest on 8/1/2022 +Heidi O'Neill 2022 8,625 RSUs subject to three-year pro-rata vesting on 8/1/2022, 8/1/2023, and 8/1/2024 +2021 7,929 RSUs subject to three-year pro-rata vesting, 50% of the remaining units vest on 8/1/2022 and 50% vest on 8/1/2023 +2021 45,208 RSUs subject to four-year pro-rata vesting, 33.3% of the remaining units vested on 6/1/2022, 33.3% vest on 6/1/2023, and 33.3% vest on 6/1/2024 +2020 2,726 RSUs subject to three-year pro-rata vesting, 100% of the remaining units vest on 8/1/2022 +Mark Parker 2020 16,041 RSUs subject to three-year pro-rata vesting, 100% of the remaining units vest on 8/1/2022 +(3) Reflects PSUs that vest as described in the table below. PSUs will be earned between 0% and 200% based on Relative TSR and subject to the People & Planet modifier, each over the applicable three-year performance period. +NAME FISCAL YEAR OF PERFORMANCE PERIOD NUMBER OF UNVESTED UNITS VESTING SCHEDULE +John Donahoe II 2022 – 2024 30,804 Earned units will cliff vest on 8/1/2024 +Matthew Friend 2022 – 2024 6,161 Earned units will cliff vest on 8/1/2024 +Andrew Campion 2022 – 2024 6,161 Earned units will cliff vest on 8/1/2024 +Heidi O'Neill 2022 – 2024 6,161 Earned units will cliff vest on 8/1/2024 +(4) 50% will vest on January 13, 2023, and 50% will vest on January 13, 2024. +(5) Represents sign-on performance stock options scheduled to vest in three equal installments on each of the first three anniversaries of the grant date, subject to satisfaction of a performance condition based on a 20% increase in the value of our Class B Stock from the value on the grant date (based on a 30-trading day average closing price divided by the closing price of a share on the grant date). The performance condition was satisfied in fiscal 2021. 100% will vest on January 13, 2023. +(6) 33.3% of these options will vest on August 1, 2022, 33.3% will vest on August 1, 2023, and 33.3% will vest on August 1, 2024. +(7) 25% of these options will vest on August 1, 2022, 25% will vest on August 1, 2023, 25% will vest on August 1, 2024, and 25% will vest on August 1, 2025. +(8) 100% of these options will vest on August 1, 2022. +(9) 50% of these options will vest on August 1, 2022 and 50% will vest on August 1, 2023. +45 NIKE, INC. +OPTION EXERCISES AND STOCK VESTED DURING FISCAL 2022 +The following table sets forth information concerning stock option exercises and vesting of RSUs during fiscal 2022 for each of the Named Executive Officers on an aggregated basis. +OPTION AWARDS STOCK AWARDS +NAME NUMBER OF +SHARES ACQUIRED +ON EXERCISE +(#) VALUE +REALIZED +ON EXERCISE +($) NUMBER OF +SHARES ACQUIRED +ON VESTING +(#) VALUE +REALIZED +ON VESTING +($) +John Donahoe II — — 81,151 12,375,142 +Matthew Friend 43,000 4,884,800 35,173 4,915,142 +Andrew Campion — — 38,677 5,666,772 +Heidi O'Neill 32,500 2,693,250 69,122 9,466,137 +Mark Parker 660,000 88,788,655 37,535 6,334,031 +EQUITY COMPENSATION PLAN INFORMATION +The following table summarizes information regarding outstanding awards and shares available for future issuance under equity compensation plans approved by shareholders and equity compensation plans that were not approved by shareholders as of May 31, 2022. The table does not reflect issuances made during fiscal 2023. +NUMBER OF SECURITIES +TO BE ISSUED UPON +EXERCISE OF OUTSTANDING +OPTIONS, WARRANTS AND +RIGHTS +WEIGHTED- +AVERAGE EXERCISE +PRICE OF OUTSTANDING +OPTIONS, WARRANTS +AND RIGHTS (1) +NUMBER OF SECURITIES +REMAINING AVAILABLE FOR +FUTURE ISSUANCE UNDER +EQUITY COMPENSATION +PLANS (EXCLUDING SECURITIES +REFLECTED IN COLUMN (a)) +PLAN CATEGORY (a) (b) (c) +Equity compensation plans approved by shareholders 74,715,806 +(2) +$88.6637 109,975,651 +(3) +Equity compensation plans not approved by shareholders — — 4,218,758 +(4) +Total 74,715,806 $88.6637 114,194,409 +(1) Weighted-average exercise prices do not reflect the shares that will be used upon the payment of outstanding awards of RSUs. +(2) Consists of 74,715,806 shares subject to awards of options, RSUs, PSUs (based on performance at 100% of target), and stock appreciation rights outstanding under the Stock Incentive Plan. +(3) Includes 105,885,427 shares available for future issuance under the Stock Incentive Plan and 4,090,224 shares available for future issuance under the Employee Stock Purchase Plan. +(4) Consists of 4,218,758 shares available for future issuance under the Foreign Subsidiary Employee Stock Purchase Plan, pursuant to which shares are offered and sold to employees of selected non-U.S. subsidiaries of the Company on substantially the same terms as those offered to U.S. employees under the shareholder-approved Employee Stock Purchase Plan as described above under "Compensation Discussion and Analysis—Compensation of our Named Executive Officers—Other Compensation—Employee Stock Purchase Plan". +2022 PROXY STATEMENT 46 +NON-QUALIFIED DEFERRED COMPENSATION IN FISCAL 2022 +NAME PLAN +NAME +EXECUTIVE +CONTRIBUTIONS +IN FISCAL 2022 (1) +AGGREGATE EARNINGS +IN FISCAL 2022 AGGREGATE +WITHDRAWALS/ +DISTRIBUTIONS IN +FISCAL 2022 +AGGREGATE +BALANCE AT +MAY, 31 2022 (1) +John Donahoe II +DCP +— $(143,890) — $787,895 +Matthew Friend +DCP +— $(40,228) — $578,864 +Andrew Campion +DCP +$390,385 $(103,813) — $3,363,300 +Heidi O'Neill DCP $462,600 $(333,225) — $4,178,948 +Mark Parker +DCP +$1,591,654 $(64,163) — $26,861,591 +(1) All amounts reported in the Executive Contributions column are also included in amounts reported in the Summary Compensation Table. Of the amounts reported in the Aggregate Balance column, the following amounts have been reported in the Summary Compensation Tables in this proxy statement or in prior year proxy statements: Mr. Donahoe, $63,695; Mr. Parker, $21,045,929; Mr. Friend, $9,503; Mr. Campion, $1,983,894; and Ms. O'Neill, $805,406. +NON-QUALIFIED DEFERRED COMPENSATION PLANS +The Named Executive Officers are eligible to participate in our Deferred Compensation Plan (the "DCP"). Participants in the DCP may elect in advance to defer up to 75 percent of their annual base salary, and up to 100 percent of their bonus and long-term cash incentive payments. +We may make annual profit sharing contributions to defined contribution retirement plans. The contributions are allocated among eligible employees based on a percentage of their total salary and bonus for the year. To the fullest extent permitted under Internal Revenue Code limitations, these contributions are made to employees' accounts under our qualified 401(k) Savings and Profit Sharing Plan. Contributions based on salary and bonus in excess of the tax law limit ($290,000 for fiscal 2022) are made as NIKE contributions under the DCP. +Amounts deferred under the DCP are credited to a participant's account under the DCP. Each participant may allocate his or her account among any combination of the investment options available under the DCP. Participants' accounts are adjusted to reflect the investment performance of the investment options selected by the participants. Participants can change the allocation of their account balances daily. The investment options available under the DCP consist of 18 mutual funds with a variety of investment objectives and five risk-based portfolios. The investment options had annual returns in fiscal 2022 ranging from -28.55% to 8.12%. Amounts credited to participants' accounts are invested by us in actual investments matching the investment options selected by the participants to ensure that we do not bear any investment risk related to participants' investment choices. +The portion of a participant's account attributable to elective deferrals, including investment returns, is fully vested at all times. The portion of a participant's account attributable to NIKE contributions, including investment returns, is fully vested after the participant has been employed by us for five years. All of the Named Executive Officers, other than Mr. Donahoe, are fully vested in their NIKE contributions. +Each time they elect to defer compensation, participants make an election regarding distribution of the compensation deferred under the election (as adjusted to reflect investment performance). A participant may elect for distribution to be made in a lump sum at the beginning of a predetermined year while the participant is still employed or in service (but no sooner than the fourth year after the year in which the distribution election is submitted). Alternatively, a participant may elect for distribution to be made in a lump sum or in quarterly installments over five, ten or fifteen years after termination of employment or service. Participants have limited rights to change their distribution elections. Participants may make a hardship withdrawal under certain circumstances. Subject to certain limitations, a participant may also at any time request to withdraw amounts from his or her account balance that were vested as of December 31, 2004 (and any subsequent investment returns on such amount). If such request is approved, the participant may withdraw 90% of the amount requested, and the remaining 10% will be permanently forfeited. +47 NIKE, INC. +POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE-IN-CONTROL +CHANGE-IN-CONTROL COMPENSATION — ACCELERATION OF EQUITY AWARDS +All unvested stock option, RSU, and PSU awards are subject to accelerated vesting upon the occurrence of two events (a "double-trigger"): there is a "change-in-control"; and the Named Executive Officer's employment is terminated by us without "cause" or by the Named Executive Officer for "good reason", in each case between the change-in-control (or shareholder approval of the change-in-control, if earlier) and the second anniversary of the change-in-control. Stock options will be exercisable for four years following termination of employment, but not beyond each option's original 10-year term. PSUs will vest at 100% of target. Accelerated vesting of stock options, RSUs, and PSUs will also occur if we are acquired and the acquiring company does not assume the outstanding options, RSUs, or PSUs. For purposes of our stock awards, "change-in-control" is generally defined to include: +• the acquisition by any person of 50% or more of our outstanding Class A Stock or, if the Class A Stock no longer elects a majority of directors, the acquisition by any person of 30% or more of our total outstanding Common Stock, +• the nomination (and subsequent election) in a two-year period of a majority of our directors by persons other than the incumbent directors, +• a sale of all or substantially all of our assets, and +• an acquisition of NIKE through a merger, consolidation or share exchange. +For purposes of our stock awards, "cause" generally includes willful and continued failure to substantially perform assigned duties and willful engagement in illegal conduct materially injurious to us, and "good reason" generally includes a material diminution in position or duties, a salary reduction or material reduction in other benefits, and a home office relocation of over 50 miles. +The following table shows the estimated benefits that would have been received by the Named Executive Officers if double-trigger accelerated vesting had occurred on May 31, 2022, when the closing price of our Class B Stock was $118.85 per share. +NAME +STOCK AWARD +ACCELERATION (1) +STOCK OPTION +ACCELERATION (2) +TOTAL +John Donahoe II $17,843,069 $10,062,956 $27,906,025 +Matthew Friend $8,116,861 $2,236,014 $10,352,875 +Andrew Campion $12,207,440 $3,621,906 $15,829,346 +Heidi O'Neill $8,396,634 $2,842,303 $11,238,937 +Mark Parker $1,906,473 $11,447,791 $13,354,264 +(1) Information regarding unvested RSUs and PSUs held by each Named Executive Officer is set forth in the Outstanding Equity Awards table above. The amounts in the table above represent the number of unvested RSUs and PSUs (at 100% of target) multiplied by the closing price of our Class B Stock on May 31, 2022. +(2) Information regarding outstanding unvested stock options held by each Named Executive Officer is set forth in the Outstanding Equity Awards table above. The amounts in the table above represent the aggregate value as of May 31, 2022 of those options using the excess of the per share closing price of our Class B Stock on May 31, 2022 over the per share exercise price, multiplied by the number of unvested option shares for each Named Executive Officer. +BENEFITS TRIGGERED ON CERTAIN EMPLOYMENT TERMINATIONS +STOCK OPTION ACCELERATION AND EXTENSION +As of May 31, 2022, each Named Executive Officer held stock options as listed in the Outstanding Equity Awards table above. Under the terms of the stock options held by each Named Executive Officer, upon the death or disability of the holder (or with respect to Mr. Donahoe's performance-based stock options, his termination without "cause"), all unvested options will vest and will be exercisable for four years following termination of employment, but not beyond each option's original 10-year term. If death or disability (or with respect to Mr. Donahoe's performance-based stock options, a termination without "cause") of a Named Executive Officer had occurred on May 31, 2022, the aggregate value of those options is as set forth in the "Stock Option Acceleration" column of the Change-in-Control Compensation – Acceleration of Equity Awards table above. +2022 PROXY STATEMENT 48 +Under the terms of the stock options held by each Named Executive Officer that were granted after fiscal 2020, upon a termination of employment due to a "divestiture" or "reduction in force" that occurs at least six months following the grant date, and subject to the holder signing a general waiver and release of claims, options that are scheduled to vest within one year following the termination will vest and all vested options will be exercisable for one year following termination of employment, but not beyond each option's original 10-year term. The value of the unvested stock options held by each Named Executive Officer as of May 31, 2022 that would have become vested if a termination due to a "divestiture" or "reduction in force" had occurred on that date is $1,272,149 for Mr. Donahoe, $409,911 for each of Messrs. Friend and Campion and Ms. O'Neill, and $1,413,501 for Mr. Parker. +Under the terms of Mr. Donahoe's performance-based stock options, if he retires with at least 5 years of service (disregarding his years of service as a non-employee director prior to his employment), unvested options will be forfeited and vested options will be exercisable for four years following termination of employment, but not beyond the option's original 10-year term. Under the terms applicable to all other stock options held by the Named Executive Officers, options that have been outstanding for at least one year will be subject to continued vesting if the holder retires after reaching age 55 with at least 5 years of service (or accelerated vesting if the holder retires after reaching age 60 with at least 5 years of service), and vested options will be exercisable for four years following termination of employment, but not beyond each option's original 10-year term. If the Named Executive Officers had retired on May 31, 2022, the aggregate value of stock options subject to retirement vesting would have been $5,792,870 for Mr. Donahoe, $2,842,303 for Ms. O'Neill, and $11,447,791 for Mr. Parker. Messrs. Friend and Campion are not eligible for retirement vesting because these Named Executive Officers have not reached age 55. +STOCK AWARD ACCELERATION +As of May 31, 2022, the Named Executive Officers held unvested RSUs and PSUs as set forth in the Outstanding Equity Awards table above. Under the terms of their award agreements, all unvested RSUs and PSUs will immediately vest upon the death or disability of the holder, with PSUs vesting at 100% of target. The value of the unvested RSUs and PSUs held by each Named Executive Officer as of May 31, 2022 that would have become vested if death or disability had occurred on that date is as set forth in the "Stock Award Acceleration" column of the Change-in-Control Compensation — Acceleration of Equity Awards table above. +Under the terms of the RSUs that were granted to the Named Executive Officers after fiscal 2020 (excluding the stock-based transition awards granted to Messrs. Friend and Campion and Ms. O'Neill) and all PSUs held by the Named Executive Officers, upon a termination of employment due to a "divestiture" or "reduction in force" that occurs at least six months following the grant date, and subject to the holder signing a general waiver and release of claims, RSUs and PSUs that are scheduled to vest within one year following the termination will vest, with PSUs vesting at 100% of target. The value of the unvested RSUs and PSUs held by each Named Executive Officer as of May 31, 2022 that would have become vested if a termination due to a "divestiture" or "reduction in force" had occurred on that date is $2,487,530 for Mr. Donahoe, $764,205 for Mr. Friend, $813,053 for each of Mr. Campion and Ms. O'Neill, and $0 for Mr. Parker. +PAYMENTS UNDER NONCOMPETITION AGREEMENTS +We have a noncompetition agreement with Mr. Donahoe that extends for eighteen months following the termination of his employment with us and a noncompetition agreement with Mr. Parker that extends for two years following the termination of his employment with us. Under these agreements, if Mr. Donahoe's employment is terminated by us without "cause" (as defined in his agreement), or if Mr. Parker's employment is terminated by us, we will make monthly payments to the executive during the noncompetition period in an amount equal to one-twelfth of his then current annual salary and target PSP award ("Annual NIKE Income"). The agreements provide further that if the executive voluntarily resigns, we will make monthly payments to him during the noncompetition period in an amount equal to one-twenty-fourth of his then current Annual NIKE Income. However, commencement of the above-described monthly payments will be delayed until after the six-month period following the executive's separation from service, and all payments that he would otherwise have received during that period will be paid in a lump sum promptly following the end of the period, together with interest at the prime rate. If employment is terminated without "cause" (as defined in the applicable agreement), the parties may mutually agree to waive the covenant not to compete, and if employment is terminated for "cause", we may unilaterally waive the covenant. If the covenant is waived, we will not be required to make the payments described above for the months as to which the waiver applies. Assuming that Mr. Donahoe's employment had been terminated on May 31, 2022 and the covenant was not waived, during the 18-month period ending November 30, 2023 we would have been required to pay Mr. Donahoe $375,000 per month if the termination was by us without "cause", or $187,500 per month if he had voluntarily resigned. Assuming that Mr. Parker's employment had been terminated on May 31, 2022 and the covenant was not waived, during the 24-month period ending May 31, 2024 we would have been required to pay Mr. Parker $83,333 per month if the termination was by us, or $41,667 per month if he had voluntarily resigned. +We have noncompetition agreements with each of the other Named Executive Officers on generally the same terms as Mr. Donahoe, except that the noncompetition period is one year, we may unilaterally waive the covenant in all cases (including a termination without "cause"), the monthly payments are one-twelfth or one-twenty-fourth of the executive's then current annual +49 NIKE, INC. +salary (instead of their Annual NIKE Income), and payments may commence on termination. Assuming that the employment of each of these Named Executive Officers had been terminated by us without "cause" on May 31, 2022 and the covenants were not waived, we would have been required to pay Mr. Friend $91,667, Mr. Campion $104,167, and Ms. O'Neill $104,167, each on a monthly basis for the 12-month period ending May 31, 2023. Assuming that each of these Named Executive Officers had voluntarily resigned on May 31, 2022 and the covenants were not waived, we would have been required to pay Mr. Friend $45,833, Mr. Campion $52,083, and Ms. O'Neill $52,083, each on a monthly basis for the 12-month period ending May 31, 2023. +CEO PAY RATIO +NIKE's pay and benefits are designed to be competitive and equitable, meet the diverse needs of our global teammates, and reinforce our values. We pay for performance and impact by linking incentive pay to Company performance and seek to invest in positive experiences that have the greatest impact on the engagement and well-being of our employees. The executive compensation program is highly incentive-based and weighted towards long-term awards to emphasize long-term performance and support retention. Our executive compensation program is designed to attract and retain top-tier talent in a competitive market and to "pay for performance" in order to drive business results and maximize shareholder value. +For fiscal 2022, our last completed fiscal year: +• The employee identified at the median of all NIKE employees (other than our CEO) was a retail store employee in Canada; +• The annual total compensation of the median employee was $37,410; +• The annual total compensation of our CEO, Mr. Donahoe, was $28,838,060; and +• The estimated ratio of the annual total compensation of our CEO to the median annual total compensation of all other NIKE employees was 771 to 1. +This pay ratio is a reasonable estimate calculated in a manner consistent with SEC rules based on the methodology described below. The SEC rules for identifying the median compensated employee and calculating the pay ratio allow companies to adopt a variety of methodologies, apply certain exclusions, and make reasonable estimates and assumptions that reflect their compensation practices. As such, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies may utilize different methodologies, exclusions, estimates, and assumptions in calculating their own pay ratios. +METHODOLOGY +Consistent with our past practice, we used the first business day in May as the date to determine the median employee. This year, the first business day in May was May 2, 2022. At that time, we had approximately 77,239 employees globally. After applying the "de minimis exemption" under the SEC rules, which permits us to exclude non-U.S. employees accounting for 5% or less of our total employee population, we excluded the 3,656 employees in the jurisdictions identified below, and our employee population consisted of approximately 73,583 employees. +Slovenia 1 Denmark 68 Malaysia 206 +Sri Lanka 4 Uruguay 71 Thailand 206 +United Arab Emirates 5 Czech Republic 73 South Africa 207 +Croatia 6 Hungary 82 Vietnam 252 +Philippines 19 Indonesia 85 Israel 266 +Macau 42 Ireland 87 Poland 276 +New Zealand 44 Switzerland 113 Chile 285 +Norway 45 Greece 135 Hong Kong 323 +Sweden 55 Portugal 148 Turkey 340 +Brazil 61 Austria 151 +Of the 73,583 employees included in the CEO Pay Ratio calculation, approximately 75% were full-time, 49% were in retail jobs, and 51% were located in the United States. +To identify our median employee we calculated annual compensation for fiscal 2022 based on base salary or hourly wages, as applicable. For the majority of our employees, base salary or hourly wages comprise the majority of their compensation. To determine wages for hourly employees, we used each individual's pay rate and estimated scheduled hours in the applicable Human Resources system of record. +2022 PROXY STATEMENT 50 +After determining the annual compensation for our employee population as described above, we identified a subset of approximately 100 individuals representing the potential median employee population. For this subset, we calculated each employee's annual total compensation in U.S. dollars for fiscal 2022 based on the Summary Compensation Table rules used for our Named Executive Officers (in accordance with Item 402(c)(2)(x) of Regulation S-K). Compensation for permanent employees hired during the fiscal year was annualized, compensation for non-U.S. employees was converted into U.S. dollars using the applicable currency conversion rate as reported in the Human Resources system of record for the median employee determination date, and the median employee was then selected from this subset. +51 NIKE, INC. +AUDIT MATTERS +PROPOSAL 3 +RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM +The Audit & Finance Committee of the Board of Directors has sole authority to retain, with shareholder ratification, the Company's independent registered public accounting firm. The Audit & Finance Committee directly oversees the firm's work with respect to the annual audit of the Company's consolidated financial statements and internal control over financial reporting and approves all audit engagement fees and terms. At least annually, the Audit & Finance Committee evaluates the independent registered public accounting firm's qualifications, performance, and independence, including a review and evaluation of its lead partner. The Audit & Finance Committee is also involved in the selection of the new lead engagement partner following mandated rotation of the firm’s lead partner, and is responsible for considering the benefits of rotation of the Company’s independent registered public accounting firm. +The Audit & Finance Committee has appointed PricewaterhouseCoopers LLP to audit the Company's consolidated financial statements and internal control over financial reporting for the fiscal year ending May 31, 2023 and to render other professional services as required. +PricewaterhouseCoopers LLP has served as the Company’s independent registered public accounting firm for many years. The Audit & Finance Committee and the Board of Directors believe that the continued retention of PricewaterhouseCoopers LLP as the independent registered public accounting firm is in the best interests of the Company and its shareholders. +Accordingly, the Audit & Finance Committee is submitting the appointment of PricewaterhouseCoopers LLP to shareholders for ratification. If the appointment is not ratified by our shareholders, the Audit & Finance Committee may reconsider whether it should appoint another independent registered public accounting firm. +Representatives of PricewaterhouseCoopers LLP will be present at the Annual Meeting, will have the opportunity to make a statement if they desire to do so, and are expected to be available to respond to questions. +Aggregate fees billed by the Company’s independent registered public accounting firm, PricewaterhouseCoopers LLP, for audit services related to the most recent two fiscal years, and for other professional services incurred in the most recent two fiscal years, were as follows: +TYPE OF SERVICE +2022 2021 +Audit Fees (1) +$18.1 million $19.3 million +Audit-Related Fees (2) +0.3 million 0.4 million +Tax Fees (3) +0.1 million 0.1 million +All Other Fees (4) +0.8 million 0.3 million +Total +$19.3 million $20.1 million +(1) Comprises the audits of the Company's annual financial statements and internal controls over financial reporting, and reviews of the Company's quarterly financial statements, as well as statutory audits of Company subsidiaries, attest services and consents to SEC filings. +(2) Comprises services including consultations regarding financial accounting and reporting. +(3) Comprises services for tax compliance, tax planning and tax advice. Tax compliance includes services for compliance related tax advice, as well as the preparation and review of both original and amended tax returns for the Company and its consolidated subsidiaries. Tax compliance related fees represented $0.1 million of the tax fees for fiscal 2022 and $0.1 million of the tax fees for fiscal 2021. The remaining tax fees primarily include tax advice. +(4) Comprises other miscellaneous services. +In accordance with the Sarbanes-Oxley Act of 2002, the Audit & Finance Committee established policies and procedures under which all audit and non-audit services performed by the Company's independent registered public accounting firm must be approved in advance by the Audit & Finance Committee. During fiscal 2022 and fiscal 2021, all such services performed by, and fees paid to, PricewaterhouseCoopers LLP were approved in advance. +BOARD RECOMMENDATION +The Board of Directors recommends that shareholders vote FOR ratification of the appointment of PricewaterhouseCoopers LLP as the Company's independent registered public accounting firm for the fiscal year ending May 31, 2023. +2022 PROXY STATEMENT 52 +REPORT OF THE AUDIT & FINANCE COMMITTEE +The Audit & Finance Committee has: +• Reviewed and discussed the audited financial statements with management. +• Discussed with the independent auditors the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board ("PCAOB") and the SEC. +• Received the written disclosures and the letter from the independent accountants required by applicable requirements of the PCAOB regarding the independent accountants' communications concerning independence, and has discussed with the independent accountant the independent accountant's independence. +• Based on the review and discussions above, recommended to the Board of Directors that the audited financial statements be included in the Company's Annual Report on Form 10-K for the last fiscal year for filing with the Securities and Exchange Commission. +Members of the Audit & Finance Committee: +• Alan B. Graf, Jr., Chair +• Cathleen A. Benko +• Peter B. Henry +53 NIKE, INC. +EMPLOYEE STOCK PURCHASE PLAN +PROPOSAL 4 +APPROVAL OF AMENDMENT OF NIKE, INC. EMPLOYEE STOCK PURCHASE PLAN TO INCREASE AUTHORIZED SHARES +The Board of Directors is asking our shareholders to approve an amended and restated version of the NIKE, Inc. Employee Stock Purchase Plan (the "ESPP"). The ESPP was initially adopted by the Board and shareholders in 2001 and was most recently amended in 2016 (the "Current ESPP"). On the recommendation of the Compensation Committee, the Board unanimously approved an amended and restated version of the ESPP (the "Amended ESPP") on June 16, 2022, subject to shareholder approval at the Annual Meeting. The Amended ESPP would increase the number of shares of Class B Stock ("Shares") authorized for issuance thereunder by 11 million Shares to a total of 62 million Shares. +The ESPP is intended to provide a convenient and practical means by which employees may participate in stock ownership of the Company. The ESPP serves the best interests of our shareholders by: +• aligning employees' interests with those of our shareholders; +• reinforcing a culture of ownership; and +• enhancing the Company's ability to attract and retain highly qualified and motivated employees in a competitive marketplace. +We recommend that shareholders approve the Amended ESPP to ensure that the number of Shares available for issuance under the ESPP is sufficient in light of the expected levels of ongoing participation and to help the Company meet the goals of its compensation strategy. +BOARD RECOMMENDATION +The Board of Directors recommends that shareholders vote FOR approval of the following resolution: +RESOLVED, that the shareholders approve the NIKE, Inc. Employee Stock Purchase Plan as amended and restated. +SUMMARY OF THE EMPLOYEE STOCK PURCHASE PLAN +The following summary of the Amended ESPP is qualified in its entirety by reference to the complete text of the Amended ESPP, which is attached to this proxy statement as Exhibit A. The Amended ESPP is intended to qualify as an "employee stock purchase plan" under Section 423 of the Internal Revenue Code of 1986, as amended (the "Code"). +The Amended ESPP increases the number of Shares authorized for issuance thereunder by 11 million Shares to 62 million Shares; it does not make any other changes to the Current ESPP. If this proposal is rejected by shareholders, the total number of Shares authorized and reserved for issuance under the ESPP will remain at 51 million, of which approximately 4,090,538 remained available for issuance as of July 8, 2022. Based on our current forecasts and estimated participation rates, if the Amended ESPP is not approved, it is anticipated that the Current ESPP will run out of available Shares in approximately fiscal year 2024. +We believe that the ESPP furthers the interests of the Company and our shareholders by aligning employees' interests with those of our shareholders, reinforcing a culture of ownership, and enhancing the Company's ability to attract and retain highly qualified and motivated employees in a competitive marketplace. To continue to provide employees with benefits under the ESPP, we believe that additional Shares must be authorized because the number of Shares remaining available for issuance under the Current ESPP will not be sufficient in light of the expected levels of ongoing participation. +In considering its recommendation to seek shareholder approval for the addition of 11 million Shares to the ESPP, the Board considered the historical number of Shares purchased under the ESPP in the past 5 fiscal years. The Board also considered the Company’s expectation that the additional Shares should last through approximately fiscal year 2027. However, the additional +2022 PROXY STATEMENT 54 +Shares could last for a longer or shorter period of time based on various factors which cannot be predicted, including the growth of our employee population, future ESPP offering practices, our Share price, and prevailing market conditions. In the event that more Shares are required for the ESPP in the future, the prior approval of our shareholders will be required. +DESCRIPTION OF THE AMENDED ESPP +ELIGIBILITY +The Amended ESPP is a broad-based plan in which almost all active employees of the Company and its participating subsidiaries are eligible to participate, except for the following: (a) any employee who has been employed less than one month when an offering commences, (b) any employee whose customary employment is less than 20 hours per week, and (c) any employee who would, immediately after the purchase right grant for an offering, own or be deemed to own stock (including any stock the employee may purchase under outstanding purchase rights) representing five percent or more of the total combined voting power or value of all classes of stock of the Company or any subsidiary of the Company. As of July 8, 2022, approximately 36,540 employees, including all 7 executive officers, were eligible to participate in the ESPP. +SHARES AUTHORIZED FOR ISSUANCE +As noted above, if shareholders approve this proposal, the total number of Shares authorized and reserved for issuance under the Amended ESPP will be 62 million Shares. Such number of Shares is subject to adjustment in the event of any stock dividend, stock split, combination of shares, recapitalization, or other change in the outstanding Shares. As of July 8, 2022, the closing price of our Shares on the New York Stock Exchange was $107.93 per Share. +ADMINISTRATION +The Board has delegated to the Company's senior human resources executive (the "Authorized Officer") all authority for administration of the Amended ESPP and such Authorized Officer may delegate some or all of his or her duties and authority to one or more Company employees. The Authorized Officer may promulgate rules and regulations, adopt forms for use in connection with the Amended ESPP, decide any question of interpretation or rights arising under, and generally supervises the administration of, the Amended ESPP. Unless otherwise determined by the Board, all determinations and decisions of the Authorized Officer or the Board will be conclusive. The Company pays all expenses of the Amended ESPP. +OFFERINGS +The Amended ESPP is implemented by a series of six-month offerings, with a new offering commencing on April 1 and October 1 of each year. The first day of each offering is the "offering date" for that offering, and the last day of each offering is the "purchase date" for that offering. An eligible employee who joins the Amended ESPP (a "participant") may purchase Shares only through payroll deductions permitted under the Amended ESPP. Payroll deductions must be not less than 1% nor more than 10% of the participant's eligible compensation. +The maximum number of Shares that any participant may purchase in any single offering is 500 Shares. In addition, the terms of an offering may not allow a participant's right to purchase Shares under all stock purchase plans of the Company and its subsidiaries to which Section 423 of the Code applies to accrue at a rate that exceeds $25,000 of fair market value of Shares, as determined on the offering date, in any calendar year. +Eligible employees voluntarily elect whether or not to enroll in the Amended ESPP by submitting a subscription and payroll deduction authorization to the Company or its agent in a form and manner and by the deadline set by the Authorized Officer. A participant may terminate participation in the Amended ESPP by written notice to the Company submitted no later than the "change deadline" for that offering, which is the number of days before the purchase date established by the Authorized Officer. Participation in the Amended ESPP will also terminate when a participant ceases to be an eligible employee for any reason, including death or retirement. An employee may not reinstate participation in the Amended ESPP with respect to a particular offering after terminating participation in the Amended ESPP with respect to that offering, but may participate in subsequent offerings. Generally, upon termination of a participant's participation in the Amended ESPP, all amounts deducted from the participant's pay that had not yet been used to purchase Shares will be returned to the employee. The rights of participants under the Amended ESPP are not transferable. +PURCHASE PRICE +The price at which Shares may be purchased in an offering is the lower of (a) 85 percent of the fair market value of a Share on the offering date of the offering or (b) 85 percent of the fair market value of a Share on the purchase date of the offering. The fair market value of a Share on any date is the closing price on the immediately preceding trading day of the Share on the New York +55 NIKE, INC. +Stock Exchange or, if the Share is not traded on the New York Stock Exchange, such other reported value of the Share as may be specified by the Board. +PURCHASE OF SHARES; CUSTODIAN +All participant payroll deductions will be credited to the participant's account under the Amended ESPP. No interest will be paid on such accounts, unless otherwise determined by the Authorized Officer. On each purchase date, the amount of the account of each participant will be applied to the purchase of Shares (including fractional Shares) by such participant from the Company at the purchase price (described above). Any cash balance remaining in a participant's account after a purchase date will be repaid to the participant. Shares purchased under the Amended ESPP are delivered to and held in the custody of a custodian (the "Custodian"), which is an investment or financial firm appointed by the Authorized Officer. By appropriate instructions to the Custodian, a participant may from time to time sell all or part of the Shares held by the Custodian for the participant's account in the public market at the market price at the time the order is executed. Also by appropriate instructions, the participant may transfer all or part of the Shares held for that participant by the Custodian to the participant or to a regular individual brokerage account in the participant's own name, except that no Shares may be so transferred until two years after the offering date of the offering in which the Shares were purchased. +DIVIDENDS AND OTHER DISTRIBUTIONS; REINVESTMENT +Stock dividends and other distributions in Shares, with respect to Shares held by the Custodian, will be issued to the Custodian and held by it for the account of the respective participants entitled to such dividends or other distributions. Cash distributions other than dividends, if any, on Shares held by the Custodian will be paid currently to the participants entitled to such distributions. Cash dividends, if any, on Shares held by the Custodian may be reinvested in Shares on behalf of the participants entitled to such dividends. The Custodian will establish a separate account for each participant for the purpose of holding any Shares acquired through reinvestment of participants' dividends. +TERMINATION AND AMENDMENT +The Amended ESPP will terminate when all of the Shares reserved for purposes of the Amended ESPP have been purchased, provided that the Board or the Authorized Officer in their sole discretion may terminate the Amended ESPP at any time with respect to any participating subsidiary and the Board in its sole discretion may at any time terminate the Amended ESPP completely. +The Board or the Authorized Officer may at any time amend the Amended ESPP in any and all respects, except that only the Board may change (a) the number of Shares reserved for the Amended ESPP, (b) the maximum percentage of a participant's eligible compensation that may be deducted from a participant's paycheck during an offering, (c) the purchase price of Shares offered pursuant to the Amended ESPP, (d) the maximum number of Shares that any participant may purchase in any single offering or certain other purchase limitations, or (e) certain other terms of the Amended ESPP relating to the offering and purchase dates. Notwithstanding the foregoing, the Board may not without shareholder approval increase the number of Shares reserved for the Amended ESPP (except for certain capital adjustments, described above under "Shares Authorized for Issuance") or decrease the purchase price of Shares offered pursuant to the Amended ESPP. +FUTURE ESPP BENEFITS +Participation in the Amended ESPP is voluntary and dependent on each eligible employee's election to participate and his or her determination as to the level of payroll deductions. Further, the number of Shares that may be purchased under the Amended ESPP is determined, in part, by the price of our Shares on the first and last day of each offering. Accordingly, the actual number of Shares that may be purchased by any eligible individual in the future is not determinable. +SUMMARY OF U.S. FEDERAL INCOME TAX CONSEQUENCES +The following is a general summary under current law of the material U.S. federal income tax consequences to participants in the Amended ESPP. This summary deals with the general tax principles that apply and is provided only for general information. Certain types of taxes, such as state and local income taxes, are not discussed. Tax laws are complex and subject to change and may vary depending on individual circumstances and from locality to locality. The summary does not discuss all aspects of income taxation that may be relevant to a participant in light of his or her personal investment circumstances. This summarized tax information is not tax advice. +The Amended ESPP is intended to qualify as an "employee stock purchase plan" within the meaning of Section 423 of the Code. Under the Code, employees will not recognize taxable income or gain with respect to Shares purchased under the Amended ESPP either at the offering date or the purchase date of an offering. If an employee disposes of Shares purchased under the +2022 PROXY STATEMENT 56 +Amended ESPP more than two years after the offering date, or in the event of the employee's death at any time, the employee or the employee's estate generally will be required to report as ordinary compensation income for the taxable year of disposition or death an amount equal to the lesser of (a) the excess of the fair market value of the Shares at the time of disposition or death over the applicable purchase price, or (b) 15 percent of the fair market value of the Shares on the offering date. In the case of such a disposition or death, the Company will not be entitled to any deduction from income. Any gain on the disposition in excess of the amount treated as ordinary compensation income generally will be capital gain. +If an employee disposes of Shares purchased under the Amended ESPP within two years after the offering date, the employee generally will be required to report the excess of the fair market value of the Shares on the purchase date over the applicable purchase price as ordinary compensation income for the year of disposition. If the disposition is by sale, any difference between the fair market value of the Shares on the purchase date and the disposition price generally will be capital gain or loss. In the event of a disposition within two years after the offering date, the Company generally will be entitled to a deduction (subject to applicable limits under the Code) from income in the year of such disposition equal to the amount the employee is required to report as ordinary compensation income. +PURCHASES UNDER THE ESPP +The table below provides information on the number of Shares purchased by the following employees and groups since the inception of the ESPP through July 8, 2022. Non-employee directors are not eligible for participation in the ESPP. No associate of a non-employee director, nominee for election as a director or executive officer has purchased shares under the ESPP and no participating employee has purchased five percent or more of the total amount of Shares purchased under the ESPP. +NAME AND POSITION NUMBER OF SHARES PURCHASED +John Donahoe II +President and Chief Executive Officer +— +Mark Parker +Executive Chairman +— +Matthew Friend +Executive Vice President and Chief Financial Officer +3,892 +Andrew Campion +Chief Operating Officer +4,523 +Heidi O'Neill +President, Consumer and Marketplace +5,823 +All current executive officers as a group 23,780 +All non-employee directors as a group — +All employees (including all current officers who are not executive officers) as a group 46,933,242 +57 NIKE, INC. +SHAREHOLDER PROPOSAL +PROPOSAL 5 +TO CONSIDER A SHAREHOLDER PROPOSAL REGARDING A POLICY ON CHINA SOURCING +The following shareholder proposal will be voted on at the Annual Meeting only if properly presented by or on behalf of the shareholder proponent. Domini Impact Equity Fund, 180 Maiden Lane, Suite 1302, New York, NY 10038, a beneficial owner of at least $25,000 of Class B Stock, submitted the Proposal together with co-filer Vancity Investment Management Canadian Equity Fund (700 815 West Hastings Street, Vancouver, BC V6C 1B4, beneficial owner of 7,105 shares of Class B Stock). The Board of Directors recommends a vote AGAINST the proposal and asks shareholders to read through NIKE's response which follows the shareholder proposal. +SUPPORTING STATEMENT: +It has been reported that as many as 1.8 million Uyghur people, a Muslim ethnic minority group in China, have been arbitrarily detained and forced to endure severe human rights abuses, including forced labor, torture, and political indoctrination in the Xinjiang Uyghur Autonomous Region (Uyghur Region) since 2017 by the Government of the People’s Republic of China. Reports indicate they have been subjected to forced labor at virtually all workplaces, including in the cotton supply chain. 1 The Uyghur Region produces approximately 85% of China's cotton, and Nike's manufacturing data suggests that about 30% of its materials were from Chinese factories. 2 +Traditional supply chain risk mitigation measures, such as worker interviews and third-party audits, are unreliable or not effective in this unique, high-risk, conflict affected context. 3 International labor auditors that conduct site visits and audits have been threatened, had their offices raided and closed, or been forced to leave the region. 4 +Companies may face legal, regulatory, and business continuity risk associated with China and the Uyghur Region. Global leaders understand the urgency of this issue and are acting on it. For example, the Uyghur Forced Labor Prevention Act (UFLPA), prohibiting importation to the United States of goods produced in the Uyghur Region, will enter into force in June 2022. The UFLPA covers goods produced with forced labor in China, not limited to the Uyghur Region, showing that this risk extends beyond the region. The U.S. State Department and other agencies issued the Xinjiang Supply Chain Business Advisory ("Business Advisory") due to the severity and extent of forced labor and other human rights abuses, noting the risks to businesses that do not exit the region. 5 +Nike's long leadership in supply chain transparency is evidenced by its manufacturing map, robust policies, and industry collaboration. The company has acknowledged concerns regarding reports of forced labor in the Uyghur Region, stated it does not directly source from there and highlighted cotton traceability at the raw materials level as an area of focus. 6 However, in this unique context, Nike's efforts are inadequate. Its supply chain transparency covers primarily its "Tier 1" direct suppliers, and forced labor risks extend to raw material sourcing and manufacturing at further tiers. Sourcing and manufacturing cotton from China, not limited solely to the Uyghur Region, exposes Nike to legal and reputational risk. Nike has been named in a criminal complaint filed in the Netherlands in 2021 and various reports relating to the issue. 7 Other companies have not only stopped sourcing from the Uyghur Region, but eliminated cotton from China throughout their supply chain to fulfill supply chain commitments prohibiting forced labor. 8 Nike's current actions leave shareholders concerned that cotton produced with forced labor may be in Nike's products. +Resolved: Shareholders request that Nike adopt a policy to pause sourcing of cotton and other raw materials from China until the U.S. government Business Advisory is lifted or rescinded. +1 https://www.shu.ac.uk/helena-kennedy-centre-international-justice/research-and-projects/all-projects/laundered-cotton +2 https://www.rfa.org/english/news/uyghur/cotton-12152020155916.html; https://manufacturingmap.nikeinc.com/ +3 https://www.cecc.gov/sites/chinacommission.house.gov/files/documents/CECC%20Staff%20Report%20March%202020%20-%20Global%20Supply%20Chains%2C%20Forced%20Labor%2C%20and%20the%20Xinjiang%20Uyghur%20Autonomous%20Region.pdf +4 https://www.business-humanrights.org/fr/derni%C3%A8res-actualit%C3%A9s/china-closes-us-labour-auditor-as-tensions-mount-over-forced-labour-allegations/ +5 https://www.state.gov/wp-content/uploads/2021/07/Xinjiang-Business-Advisory-13July2021-1.pdf +6 https://purpose.nike.com/statement-on-xinjiang +7 https://www.scmp.com/news/china/article/3158093/nike-patagonia-ca-named-dutch-criminal-filing-chinese-forced-labour; https://acrobat.adobe.com/link/track?uri=urn:aaid:scds:US:e38ce54f-684d-4d55-8e62-ddc7ea20d9c9#pageNum=18; https://www.aspi.org.au/report/uyghurs-sale +8 https://enduyghurforcedlabour.org/fashion/; +https://www.llbean.com/dept_resources/shared/L.L.Bean_Statement_on_Chinese_Cotton.pdf?nav=C3tbX- +518056&qs=3080290_tv2R4u9rImY-IDPF4dKPdDwGVPlS_q_etw&cvosrc=Affiliate.linkshare.tv2R4u9rImY +2022 PROXY STATEMENT 58 +OPPOSITION STATEMENT +The Board of Directors recommends that shareholders vote AGAINST this proposal because: +• NIKE does not directly source cotton or raw materials, and we are committed to responsibly and sustainably sourcing our products, including the materials used throughout our supply chain, in a manner that respects human rights and promotes sustainable innovation. That is why our sourcing approach focuses on foundational expectations; gender equity; health & safety; worker engagement and well-being; and environmental responsibility; +• The Corporate Responsibility, Sustainability & Governance Committee provides oversight of management's efforts to ensure that the Company's dedication to sustainability innovation (including environmental sustainability and human rights) is reflected in its business operations; +• NIKE runs our business in an ethical way, and that commitment extends to the contract manufacturers who make our products. We collaborate with suppliers who share our commitment to responsible manufacturing, as measured by compliance with the standards laid out in our Supplier Code of Conduct and Code Leadership Standards, which can be found on our website; and +• Our current initiatives, which are discussed further on our website, help to drive changes throughout NIKE's supply chain and promote human rights and responsible manufacturing. NIKE expects all our suppliers to share our commitment to respecting the rights of workers and advancing their welfare, with particular care for people with unique vulnerabilities such as women, migrants, and temporary workers. While we have worked hard to develop and implement policies and procedures that bring our commitment to life, we are always looking to evolve and improve. We believe that these efforts are a better approach to promoting human rights and sustainability than prohibiting sourcing with respect to any particular country. +NIKE is deeply committed to ethical and responsible manufacturing. NIKE's approach to sourcing begins with building long-term relationships with manufacturing suppliers who share our commitment to making products responsibly and sustainably. The majority of Nike footwear and branded apparel is made by supplier groups that we have worked with for over 15 years. NIKE's code of conduct for suppliers ("Supplier Code") and Code Leadership Standards ("CLS"), which are publicly available on our website and translated into 15 languages, set strong expectations for our manufacturing partners, as well as procedures for ensuring compliance with such expectations. +We monitor compliance with the Supplier Code and CLS through regular audits, both announced and unannounced, to track the environmental and social performance of our manufacturing partners against those expectations. In the event of noncompliance, we investigate immediately. If improvements are required, we take a collaborative approach to working with suppliers to verify corrective actions are taken, problems are remediated, and managers have onsite verification. Should a supplier fail to remediate issues identified by an audit, it is subject to review and sanctions, including potential termination of the supplier relationship. +NIKE's commitment to ethical practices in our own operations and our supply chain begins at the highest level. The Board's Corporate Responsibility, Sustainability & Governance Committee reviews and evaluates the Company's significant strategies, activities, policies, investments, and programs regarding corporate purpose, including corporate responsibility, sustainability, human rights, and global community and social impact, and provides oversight of management's efforts to ensure that the Company's dedication to sustainability (including environmental sustainability and human rights) is reflected in our business operations. +While NIKE does not directly source cotton or raw materials, traceability at the raw materials level is an area of ongoing focus and board oversight. We are working closely with our suppliers, industry associations, brands and other stakeholders to pilot traceability approaches and map material sources to more proactively manage risks and opportunities and better track our sustainability efforts. +NIKE continues to evolve and strengthen our expectations and practices. NIKE continues to refine its approach to supplier sustainability. We continue to adopt new strategies to ensure that our suppliers grow with our business in a sustainable and safe way. We develop five-year targets to enhance NIKE's sustainable sourcing practices, which are disclosed to shareholders in our Impact Report. Historically we have set an ambitious target of sourcing 100% from facilities that meet our foundational labor, health, safety, and environmental standards, focusing on finished goods manufacturing partners that we contract with directly. For our 2025 targets, we expanded the scope of this target to include key material suppliers (supplying approximately 90% of our footwear uppers and apparel materials) and focus distribution centers (representing at least 80% of volume). As of fiscal 2021, 85% of the facilities in our extended supply chain, including 100% of finished good suppliers, are in compliance with our foundational expectations. Our Impact Report includes a roadmap to get this number to 100% by 2025. +In addition, in fiscal year 2021, we updated our Supplier Code to better reflect our priorities across labor, health and safety and the environment, drive consistency across the NIKE supply chain and meet our 2025 targets. As part of these changes, we added a new requirement for suppliers to develop and share their own internal Code of Conduct. This supports our expectation that suppliers will fully integrate our standards into their own business practices and compliance policies. We also strengthened expectations on identifying and addressing forced labor, child labor and freedom of association by elevating key risks of forced labor beyond recruitment fees to include freedom of movement, debt bondage and building sufficient systems to manage employment relationship of vulnerable worker groups like foreign workers. We clarified examples of hazardous work to align with the minimum working age and elevated requirements around non-retaliation or interference/intimidation to prevent right to freely associate. +59 NIKE, INC. +As always, we plan to support our suppliers as we work together to meet our aggressive targets and implement the changes in our Supplier Code. We have transitioned to common industry assessments on environment, labor, and health and safety to reduce duplication and audit fatigue for suppliers working with multiple brands, and to ensure that we work with others in the industry to drive impact with a unified voice. We have also enhanced supplier access to training and capacity building to improve management systems, adopt technical improvements in environmental, labor, health and safety standards, and to sustain those improvements. +NIKE is committed to sharing with our stakeholders how we manage social and environmental issues and impacts. At NIKE, we set open goals and implement transparent policies to promote human rights and ensure our products are ethically produced, while sharing our progress and learnings along the way. Our annual Impact Report contains robust disclosure regarding our foundational expectations and five-year targets. Each year's report highlights our progress towards our targets and describes the work undertaken to support that progress. +The Responsible Sourcing page of our website goes into further detail, including our updated Supplier Code, a description of the changes we made to our code in fiscal 2021, and our CLS, which specifies how contract manufacturers should implement the Supplier Code and articulates how we measure supplier compliance efforts and progress against our Supplier Code, including specific requirements on the management of key forced labor risks. +Finally, we published the NIKE, Inc. Statement on Forced Labor, Human Trafficking and Modern Slavery for Fiscal Year 2021 on our website . The statement describes NIKE's commitment to ethical and responsible manufacturing, our ongoing supplier diligence and monitoring to identify and assess potential forced labor risks, how we engage with suppliers to prioritize the well-being of their workers, and our partnerships with various organizations to drive collaborative efforts to address critical human rights risks, such as forced labor. +In summary, NIKE continues to work tirelessly to ensure that respect for people and the planet is integrated throughout NIKE's entire supply chain and to disclose our initiatives and policies around sustainable sourcing so our shareholders have meaningful insight into our progress in this area. We believe that our decades of commitment to these issues have led to more effective and impactful solutions than would be accomplished by prohibiting sourcing from any particular country. The Board of Directors believes that the Company's policies effectively articulate our long-standing support for, and continued commitment to, human rights and sustainable sourcing, rendering the proposal ineffective and unnecessary. +BOARD RECOMMENDATION +X +The Board of Directors recommends that shareholders vote AGAINST the shareholder proposal. +2022 PROXY STATEMENT 60 +STOCK OWNERSHIP INFORMATION +STOCK HOLDINGS OF CERTAIN OWNERS AND MANAGEMENT +The following table sets forth the number of shares of the classes of NIKE securities beneficially owned, as of June 30, 2022, after giving effect to any transactions that occurred on such date, by (1) each person known to the Company to be the beneficial owner of more than 5 percent of any class of the Company's securities, (2) each of the directors and nominees for director, (3) each executive officer listed in the Summary Compensation Table ("Named Executive Officers"), and (4) all directors, Named Executive Officers, and other executive officers as a group. Because Class A Stock is convertible into Class B Stock on a share-for-share basis, each beneficial owner of Class A Stock is deemed by the SEC to be a beneficial owner of the same number of shares of Class B Stock. Therefore, in indicating a person's beneficial ownership of shares of Class B Stock in the table, it has been assumed that such person has converted into Class B Stock all shares of Class A Stock of which such person is a beneficial owner. For these reasons the table contains substantial duplications in the numbers of shares and percentages of Class A and Class B Stock shown for Swoosh, LLC, Philip Knight, and the Travis A. Knight 2009 Irrevocable Trust II. In addition, unless otherwise indicated, all persons named below can be reached c/o Corporate Secretary, NIKE, Inc., One Bowerman Drive, Beaverton, Oregon 97005-6453. +TITLE OF CLASS +SHARES BENEFICIALLY +OWNED (1) +PERCENT OF +CLASS (2) +Cathleen A. Benko Class B 9,138 — +Elizabeth J. Comstock Class B 18,839 +— +Timothy D. Cook Class B 46,639 +(3) +— +John J. Donahoe II (4) +Class B 910,325 +(3)(5) +— +Thasunda B. Duckett Class B 4,748 — +Alan B. Graf, Jr. Class B 193,631 — +Peter B. Henry Class B 1,701 — +Travis A. Knight Class B 25,099 +(6) +— +Mark G. Parker (4) +Class B 3,309,749 +(3)(5) +0.3 % +Michelle A. Peluso Class B 23,973 — +John W. Rogers, Jr. Class B 25,681 — +Andrew Campion (4) +Class B 360,932 +(3) +— +Matthew Friend (4) +Class B 177,140 +(3) +— +Heidi O'Neill (4) +Class B 164,318 +(3) +— +61 NIKE, INC. +TITLE OF CLASS +SHARES BENEFICIALLY +OWNED (1) +PERCENT OF +CLASS (2) +Sojitz Corporation of America Preferred +(7) +300,000 100.0 % +1211 S.W. 5th Ave, Pacwest Center, Ste. 2220, +Portland, OR 97204 +Philip H. Knight +One Bowerman Drive, Beaverton, OR 97005 +Class A 21,404,487 +(8) +7.0 % +Class B 34,740,174 +(9) +2.7 % +Swoosh, LLC +22990 NW Bennett Street, Hillsboro, OR 97124 +Class A 233,500,000 +(10) +76.6 % +Class B 233,500,000 15.6 % +Travis A. Knight 2009 Irrevocable Trust II +22990 NW Bennett Street, Hillsboro, OR 97124 +Class A 41,006,369 +(11) +13.5 % +Class B 41,006,369 +(11) +3.1 % +The Vanguard Group +100 Vanguard Blvd., Malvern, PA 19355 +Class B 106,359,777 +(12) +8.3 % +(12) +BlackRock, Inc. +55 East 52nd Street, New York, NY 10055 +Class B 89,983,773 +(13) +7.0 % +(13) +All directors and executive officers as a group (16 persons) +Class B 5,612,297 +(3)(5) +0.4 % +(1) A person is considered to beneficially own any shares: (a) over which the person exercises sole or shared voting or investment power, or (b) of which the person has the right to acquire beneficial ownership at any time within 60 days (such as through conversion of securities or exercise of stock options). Unless otherwise indicated, voting and investment power relating to the above shares is exercised solely by the beneficial owner or shared by the owner and the owner's spouse or children. +(2) Omitted if less than 0.1 percent. +(3) These amounts include the right to acquire the following numbers of shares within 60 days after June 30, 2022 pursuant to the exercise of stock options: 14,000 shares for Mr. Cook, 788,117 shares for Mr. Donahoe, 1,866,930 shares for Mr. Parker, 347,080 shares for Mr. Campion, 164,589 shares for Mr. Friend, 122,356 shares for Ms. O'Neill, and 3,587,473 shares for the executive officer and director group. +(4) Named Executive Officer listed in the Summary Compensation Table. +(5) Includes shares held in accounts under the NIKE, Inc. 401(k) Savings and Profit Sharing Plan: 107 shares for Mr. Donahoe, 36,995 shares for Mr. Parker, and 51,533 shares for the executive officer and director group. +(6) Does not include 233,500,000 shares of Class A Stock that are owned by Swoosh, LLC. Mr. Travis Knight has disclaimed beneficial ownership of all such shares. +(7) Preferred Stock does not have general voting rights except as provided by law, and under certain circumstances as provided in the Company's Restated Articles of Incorporation, as amended. +(8) Does not include 521,792 shares of Class A Stock that are owned by Mr. Philip Knight's spouse. Mr. Philip Knight has disclaimed ownership of all such shares. Mr. Philip Knight holds the position Chairman Emeritus, and has a standing invitation to attend all meetings of the Board as a non-voting observer. +(9) Does not include: (a) 521,792 shares of Class A Stock that are owned by Mr. Philip Knight's spouse, and (b) 29,586,056 shares of Class B Stock held by the Knight Foundation, a charitable foundation in which Mr. Philip Knight and his spouse are directors. Mr. Philip Knight has disclaimed ownership of all such shares. +(10) Information provided as of July 17, 2020 in the Form 4 filed by the shareholder. +(11) Includes 21,863,989 shares of Class A Stock held directly by the Travis A. Knight 2009 Irrevocable Trust II (the "Trust") and 19,142,380 shares of Class A Stock held by an indirect subsidiary of the Trust. Mr. Travis Knight and members of his immediate family are among the beneficiaries of the Trust. Mr. Travis Knight disclaims beneficial ownership of the Company's securities held directly and indirectly by the Trust, except to the extent of his pecuniary interest therein. +(12) Information provided as of December 31, 2021 in Schedule 13G filed by the shareholder. +(13) Information provided as of December 31, 2021 in Schedule 13G filed by the shareholder. +2022 PROXY STATEMENT 62 +TRANSACTIONS WITH RELATED PERSONS +Philip Knight, the father of NIKE director Travis Knight, serves as Chairman Emeritus, which provides a standing invitation for Philip Knight to attend meetings of the Board and its committees as a non-voting observer. In fiscal 2022, as Chairman Emeritus, Mr. Knight received an annual salary of $500,000, and medical and dental insurance coverage generally available to employees. +The Company's written policy requires the Corporate Responsibility, Sustainability & Governance Committee to review any transaction or proposed transaction with a related person that would be required to be reported under Item 404(a) of Regulation S-K, and to determine whether to ratify or approve the transaction, with ratification or approval to occur only if the committee determines that the transaction is fair to the Company or that approval or ratification of the transaction is in the interest of the Company. +COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION +The members of the Compensation Committee of the Board of Directors during fiscal 2022 were Timothy D. Cook, Cathleen A. Benko, and Elizabeth J. Comstock. The committee is composed solely of independent, non-employee directors. No member of the Compensation Committee has been an executive officer of the Company, and no member of the Compensation Committee had any relationships requiring disclosure by the Company under the SEC's rules requiring disclosure of certain relationships and related-party transactions. None of the Company's executive officers served as a director or member of a compensation committee (or other committee serving an equivalent function) of any other entity, the executive officers of which served as a director or member of the Compensation Committee of the Company during fiscal 2022. +OTHER MATTERS +As of the time this proxy statement was printed, management was unaware of any proposals to be presented for consideration at the Annual Meeting other than those set forth herein, but if other matters do properly come before the Annual Meeting, the persons named in the proxy will vote the shares represented by such proxy according to their best judgment. +SHAREHOLDER PROPOSALS +A shareholder proposal (other than a proxy access nomination) intended for inclusion in the Company's proxy statement and form of proxy for the 2023 annual meeting of shareholders must be received by the Corporate Secretary of NIKE, Inc. at shareholder.proposals@Nike.com on or before March 30, 2023. Rules under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), describe standards as to the submission of shareholder proposals. A shareholder proxy access nomination intended for inclusion in the Company's proxy statement and form of proxy for the 2023 annual meeting of shareholders must be received, along with the other information required by the Company's Bylaws, by the Corporate Secretary of NIKE, Inc. at One Bowerman Drive, Beaverton, Oregon 97005-6453, no earlier than February 28, 2023 and no later than March 30, 2023. +In addition, the Company's Bylaws require that any shareholder wishing to make a nomination for director or introduce a proposal or other business at a shareholder meeting must give the Company at least 60 days' advance written notice (which for the 2022 annual meeting of shareholders was July 11, 2022) and that notice must meet certain other requirements described in the Bylaws. +In addition to satisfying the foregoing requirements under the Company's Bylaws, to comply with the universal proxy rules, shareholders who intend to solicit proxies in support of director nominees other than the Company's nominees for the 2023 annual meeting of shareholders must provide notice that sets forth the information required by Rule 14a-19 under the Exchange Act no later than July 11, 2023. +For the Board of Directors, +Mary I. Hunter +Vice President, Corporate Secretary +63 NIKE, INC. +EXHIBIT A +NIKE, INC. +EMPLOYEE STOCK PURCHASE PLAN +(As amended as of June 16, 2022) +1. Purpose of the Plan . NIKE, Inc. (the “ Company ”) believes that ownership of shares of its common stock by employees of the Company and its Participating Subsidiaries (as defined below) is desirable as an incentive to better performance and improvement of profits, and as a means by which employees may share in the rewards of growth and success. The purpose of the Company’s Employee Stock Purchase Plan (the “ Plan ”) is to provide a convenient means by which employees of the Company and Participating Subsidiaries may purchase the Company’s shares through payroll deductions and a method by which the Company may assist and encourage such employees to become share owners. The Company operates a Foreign Subsidiary Employee Stock Purchase Plan (as amended from time to time, the “ Foreign ESPP ”) pursuant to which selected groups of employees of the Company’s foreign subsidiaries (“ Foreign Subsidiaries ”) are provided a similar opportunity to purchase Company shares. Such groups of employees designated as participating groups for purposes of the Foreign ESPP are hereinafter referred to as “ Participating Foreign ESPP Groups .” +2. Shares Reserved for the Plan . There are 62,000,000 shares of the Company’s authorized but unissued or reacquired Class B Common Stock reserved for purposes of the Plan. The number of shares reserved for the Plan is subject to adjustment in the event of any stock dividend, stock split, combination of shares, recapitalization or other change in the outstanding Class B Common Stock of the Company. The determination of whether an adjustment shall be made and the manner of any such adjustment shall be made by the Board of Directors of the Company (the “ Board ”), which determination shall be conclusive. +3. Administration of the Plan . The Board has delegated to the Vice President of Global Human Resources of the Company (or, if the officer who is the Company’s senior human resources executive shall have a title other than Vice President of Global Human Resources, then such other officer) all authority for administration of the Plan and, in connection with such delegation and unless otherwise determined by the Board, the Plan shall be administered by or under the direction of such officer (the “ Authorized Officer ”), who may delegate some or all of his or her duties and authority to one or more Company employees. The Authorized Officer may promulgate rules and regulations for the operation of the Plan, adopt forms for use in connection with the Plan, and decide any question of interpretation of the Plan or rights arising thereunder. The Authorized Officer may consult with counsel for the Company on any matter arising under the Plan. Unless otherwise determined by the Board, all determinations and decisions of the Authorized Officer or the Board shall be conclusive. +4. Eligible Employees . The Board hereby authorizes the purchase of shares of Class B Common Stock pursuant to the Plan by employees of the Company and of each corporate subsidiary of the Company, but has delegated to the Authorized Officer the authority to designate from time to time those subsidiaries which shall be participants in the Plan (each such participating subsidiary being hereinafter called a “Participating Subsidiary”). All Eligible Employees (as defined below) of the Company and all Eligible Employees of each Participating Subsidiary are eligible to participate in the Plan. An “Eligible Employee” is an employee of the Company or a Participating Subsidiary who has been employed by the Company or a Participating Subsidiary for at least one full month prior to the Offering Date (as defined below) excluding, however, (a) any employee whose customary employment is less than 20 hours per week and (b) any employee who would, after a purchase of shares under the Plan, own or be deemed (under Section 424(d) of the Internal Revenue Code of 1986, as amended (the “Code”)) to own stock (including stock subject to any outstanding options held by the employee) possessing 5 percent or more of the total combined voting power or value of all classes of stock of the Company or any parent or subsidiary of the Company. The Board and Authorized Officer shall have the sole discretion to determine whether an individual satisfies the definition of Eligible Employee under this Section 4 and any such determination shall be final and binding on all parties. Notwithstanding the foregoing, any individual retroactively determined to be an Eligible Employee by the Company, a court, or a governmental agency will be permitted to participate only prospectively from the date of such determination, unless it is determined that the Company’s decision was made in bad faith. +5. Offerings . +a. Offering and Purchase Dates . The plan shall be implemented by a series of six-month offerings (the “Offerings”), with a new Offering commencing on April 1 and October 1 of each year. Each Offering commencing on April 1 of any year shall end on September 30 of that year, and each Offering commencing on October 1 of each year of any +2022 PROXY STATEMENT 64 +year shall end on March 31 of the following year. The first day of each Offering is the “ Offering Date ” for that Offering and the last day of each Offering is the “ Purchase Date ” for that Offering. +b. Grants; Limitations. On each Offering Date, each Eligible Employee shall be granted an option under the Plan to purchase shares of Class B Common Stock on the Purchase Date for the Offering for the price determined under paragraph 7 of the Plan exclusively through payroll deductions authorized under paragraph 6 of the Plan; provided, however, that (i) no option shall permit the purchase of more than 500 shares, and (ii) no option may be granted under the Plan that would allow an employee’s right to purchase shares under all stock purchase plans of the Company and its parents and subsidiaries to which Section 423 of the Code applies to accrue at a rate that exceeds $25,000 of fair market value of shares (determined at the date of grant) in any calendar year. +6. Participation in the Plan . +a. Initiating Participation . An Eligible Employee may participate in an Offering under the Plan by submitting to the Company or its agent a subscription and payroll deduction authorization in the form specified by the Company. The subscription and payroll deduction authorization must be submitted no later than the “ Subscription Deadline ,” which shall be a number of days prior to the Offering Date with the exact number of days being established from time to time by the Authorized Officer by written notice to Eligible Employees. Once submitted, a subscription and payroll deduction authorization shall remain in effect unless amended or terminated, and upon the expiration of an Offering the participants in that Offering will be automatically enrolled in the new Offering starting the following day. The payroll deduction authorization will authorize the employing corporation to make payroll deductions in an amount designated by the participant from each of the participant’s paychecks during the Offering. The designated amount to be deducted from each paycheck must be a whole percentage of not less than one percent or more than 10 percent of the participant’s Compensation (as defined below) for the period covered by the paycheck; provided, however, that the amount actually deducted from any paycheck shall not exceed the amount remaining after deduction of all other required or elective withholdings and deductions from that paycheck. If payroll deductions are made by a Participating Subsidiary, that corporation will promptly remit the amount of the deductions to the Company. +b. Definition of Compensation . “ Compensation ” means amounts received by the participant from the Company or Participating Subsidiary to the extent that the amounts are subject to federal income tax withholding on wages under Section 3401(a) of the Code, determined without regard to any limitations based on the nature or location of the employment or the services performed, and adjusted as follows: +i. Before-tax contributions to a non-qualified deferred compensation arrangement, contributions to a plan qualified under Section 401(k) of the Code, and any amounts set aside by the participant from otherwise taxable pay under a welfare benefit plan qualified under Section 125 of the Code or for qualified transportation fringe benefits under Section 132 of the Code shall be included. +ii. Taxable expense reimbursements, any amount paid in lieu of unused paid-time off (before or after termination of employment), moving expenses, welfare benefits, payments from a nonqualified deferred compensation plan, amounts realized from the exercise of a stock option or lapse of restrictions on restricted property, payments made in any form under the Company’s Long Term Incentive Plan (or similar long term incentive arrangements maintained by a Participating Subsidiary), and adjustments for overseas employment (other than any transfer premium) shall be excluded. +c. Amending Participation . After a participant has begun participating in the Plan by initiating payroll deductions, the participant may amend the payroll deduction authorization (i) once during any Offering to decrease the amount of payroll deductions, and (ii) effective for the first paycheck of a new Offering to either increase or decrease the amount of payroll deductions. A request for a decrease in payroll deductions during an Offering must be submitted to the Company in the form specified by the Company no later than the Change Deadline (as defined below) for that Offering, and shall be effective for any paycheck only if the request is received by the Company at least 10 business days prior to the payday for that paycheck. A request for an increase or decrease in payroll deductions effective for the first paycheck of a new Offering must be submitted to the Company in the form specified by the Company no later than the Subscription Deadline for the new Offering. In addition, if the amount of payroll deductions from any participant during an Offering exceeds the maximum amount that can be applied to purchase shares in that Offering under the limitations set forth in paragraph 5(b) above, then (x) payroll deductions from the participant shall cease and all such excess amounts shall be refunded to the participant, and (y) payroll deductions from the participant shall restart as of the commencement of the next Offering at the rate set forth in the participant’s then effective payroll deduction authorization. +65 NIKE, INC. +d. Terminating Participation . After a participant has begun participating in the Plan by initiating payroll deductions, the participant may terminate participation in the Plan by notice to the Company in the form specified by the Company. To be effective to terminate participation in an Offering, a notice of termination must be submitted no later than the “ Change Deadline, ” which shall be a number of days prior to the Purchase Date for that Offering with the exact number of days being established from time to time by the Authorized Officer by written notice to participants. Participation in the Plan shall also terminate when a participant ceases to be an Eligible Employee for any reason, including death or retirement. A participant may not reinstate participation in the Plan with respect to a particular Offering after once terminating participation in the Plan with respect to that Offering. Upon termination of a participant’s participation in the Plan, all amounts deducted from the participant’s Compensation and not previously used to purchase shares under the Plan shall be returned to the participant; provided, however, that, if an employee’s participation in the Plan terminates because he or she has become an employee in a Participating Foreign ESPP Group (and has therefore ceased to be an Eligible Employee), then, if such event occurs during an offering under the Foreign ESPP (but after the offering date for that offering), (i) such amounts shall not be returned to the participant, but shall instead be contributed and applied to the purchase of shares under the Foreign ESPP, subject to the terms and conditions of the Foreign ESPP, and (ii) the employee shall otherwise participate in the Foreign ESPP, subject to the terms and conditions of the Foreign ESPP. +7. Option Price. The price at which shares shall be purchased in an Offering shall be the lower of (a) 85% of the fair market value of a share of Class B Common Stock on the Offering Date of the Offering or (b) 85% of the fair market value of a share of Class B Common Stock on the Purchase Date of the Offering. The fair market value of a share of Class B Common Stock on any date shall be the closing price on the immediately preceding trading day of the Class B Common Stock on the New York Stock Exchange or, if the Class B Common Stock is not traded on the New York Stock Exchange, such other reported value of the Class B Common Stock as shall be specified by the Board. +8. Purchase of Shares . All amounts withheld from the Compensation of a participant shall be credited to his or her account under the Plan. No interest will be paid on such accounts, unless otherwise determined by the Authorized Officer. On each Purchase Date, the amount of the account of each participant will be applied to the purchase of shares (including fractional shares) by such participant from the Company at the price determined under paragraph 7 above. Any cash balance remaining in a participant’s account after a Purchase Date as a result of the limitations set forth in paragraph 5(b) above shall be repaid to the participant. +9. Delivery and Custody of Shares . Shares purchased by participants pursuant to the Plan will be delivered to and held in the custody of such investment or financial firm (the “ Custodian ”) as shall be appointed by the Authorized Officer. The Custodian may hold in nominee or street name certificates for shares purchased pursuant to the Plan, and may commingle shares in its custody pursuant to the Plan in a single account without identification as to individual participants. By appropriate instructions to the Custodian, a participant may from time to time sell all or part of the shares held by the Custodian for the participant’s account at the market price at the time the order is executed. If a participant desires to sell all of the shares in his or her account, the Custodian or the Company will purchase any fraction of a share in the account at the same price per share that the whole shares are sold on the market. By appropriate instructions to the Custodian, a participant may obtain (a) transfer into the participant’s own name of all or part of the whole shares held by the Custodian for the participant’s account and delivery of such whole shares to the participant, or (b) transfer of all or part of the whole shares held for the participant’s account by the Custodian to a regular individual brokerage account in the participant’s own name, either with the firm then acting as Custodian or with another firm; provided, however, that no shares may be transferred under (a) or (b) until two years after the Offering Date of the Offering in which the shares were purchased. +10. Records and Statements . The Custodian will maintain the records of the Plan. As soon as practicable after each Purchase Date each participant will receive a statement showing the activity of his or her account since the preceding Purchase Date and the balance on the Purchase Date as to both cash and shares. Participants will be furnished such other reports and statements, and at such intervals, as the Authorized Officer shall determine from time to time. +11. Expense of the Plan . The Company will pay all expenses incident to operation of the Plan, including costs of record keeping, accounting fees, legal fees, commissions and issue or transfer taxes on purchases pursuant to the Plan, on dividend reinvestments and on delivery of shares to a participant or into his or her brokerage account. Unless otherwise provided by the Board or the Authorized Officer in its discretion, the Company will not pay expenses, commissions or taxes incurred in connection with sales of shares by the Custodian at the request of a participant. Expenses to be paid by a participant will be deducted from the proceeds of sale prior to remittance. +2022 PROXY STATEMENT 66 +12. Rights Not Transferable . The right to purchase shares under this Plan is not transferable by a participant, and such right is exercisable during the participant’s lifetime only by the participant. Upon the death of a participant, any cash withheld and not previously applied to purchase shares, together with any shares held by the Custodian for the participant’s account shall be transferred to the persons entitled thereto under the laws of the state of domicile of the participant upon a proper showing of authority. +13. Dividends and Other Distributions; Reinvestment . Stock dividends and other distributions in shares of Class B Common Stock of the Company on shares held by the Custodian shall be issued to the Custodian and held by it for the account of the respective participants entitled thereto. Cash distributions other than dividends, if any, on shares held by the Custodian will be paid currently to the participants entitled thereto. Cash dividends, if any, on shares held by the Custodian may be reinvested in Class B Common Stock on behalf of the participants entitled thereto. The Custodian shall establish a separate account for each participant for the purpose of holding any shares acquired through reinvestment of participants’ dividends. On each dividend payment date, the Custodian shall receive from the Company the aggregate amount of dividends payable with respect to all shares held by the Custodian for participants’ accounts under the Plan. As soon as practicable thereafter, the Custodian shall use such portion of the funds designated for reinvestment to purchase shares of Class B Common Stock in the public market, and shall then allocate such shares (including fractional shares) among the dividend reinvestment accounts of the participants pro rata based on the amount of dividends reinvested for such participants. For those participants receiving cash dividends, the Custodian shall allocate the remainder of such funds among the accounts of such participants pro rata based upon the amount of dividends received. A participant may sell or transfer shares in the participant’s dividend reinvestment account in accordance with paragraph 9 above, except that there shall be no holding period required for a transfer from a dividend reinvestment account. +14. Voting and Shareholder Communications . In connection with voting on any matter submitted to the shareholders of the Company, the Custodian will cause the shares held by the Custodian for each participant’s accounts to be voted in accordance with instructions from the participant or, if requested by a participant, furnish to the participant a proxy authorizing the participant to vote the shares held by the Custodian for his or her accounts. Copies of all general communications to shareholders of the Company will be sent to participants in the Plan. +15. Tax Withholding. Each participant who has purchased shares under the Plan shall immediately upon notification of the amount due, if any, pay to the Company in cash amounts necessary to satisfy any applicable federal, state and local tax withholding determined by the Company to be required. If the Company determines that additional withholding is required beyond any amount deposited at the time of purchase, the participant shall pay such amount to the Company on demand. If the participant fails to pay the amount demanded, the Company may withhold that amount from other amounts payable by the Company to the participant, including salary, subject to applicable law. +16. Responsibility and Indemnity . Neither the Company, the Board, the Custodian, any Participating Subsidiary, any Foreign Subsidiary, nor any member, officer, agent, or employee of any of them, shall be liable to any participant under the Plan for any mistake of judgment or for any omission or wrongful act unless resulting from gross negligence, willful misconduct or intentional misfeasance. The Company will indemnify and save harmless the Board, the Custodian and any such member, officer, agent or employee against any claim, loss, liability or expense arising out of the Plan, except such as may result from the gross negligence, willful misconduct or intentional misfeasance of such entity or person. +17. Conditions and Approvals . The obligations of the Company under the Plan shall be subject to compliance with all applicable state and federal laws and regulations, compliance with the rules of any stock exchange on which the Company’s securities may be listed, and approval of such federal and state authorities or agencies as may have jurisdiction over the Plan or the Company. The Company will use its best effort to comply with such laws, regulations and rules and to obtain such approvals. +18. Amendment of the Plan . Unless otherwise determined by the Board, the Board or the Authorized Officer may from time to time amend the Plan in any and all respects; provided, however, that only the Board may change (a) the number of shares reserved for purposes of the Plan, (b) the purchase price of shares offered pursuant to the Plan, (c) the terms of paragraph 5 above, or (d) in paragraph 6(a) above the maximum percentage of a participant’s Compensation that may be deducted from a participant’s paycheck during an Offering. Notwithstanding the foregoing, the Board may not without the approval of the shareholders of the Company increase the number of shares reserved for purposes of the Plan (except for adjustments authorized in paragraph 2 above) or decrease the purchase price of shares offered pursuant to the Plan. +19. Termination of the Plan . The Plan shall terminate when all of the shares reserved for purposes of the Plan have been purchased, provided that (a) the Board or the Authorized Officer in their sole discretion may at any time terminate the +67 NIKE, INC. +Plan with respect to any Participating Subsidiary, without any obligation on account of such termination, except as set forth in the following sentence, and (b) the Board in its sole discretion may at any time terminate the Plan completely, without any obligation on account of such termination, except as set forth in the following sentence. Upon any such termination, the cash and shares, if any, held in the accounts of each participant to whom the termination applies shall forthwith be distributed to the participant or to the participant’s order, provided that if prior to such termination, the Board and shareholders of the Company shall have adopted and approved a substantially similar plan, the Board may in its discretion determine that the accounts of each participant under this Plan to whom the termination applies shall be carried forward and continued as the accounts of such participant under such other plan, subject to the right of any participant to request distribution of the cash and shares, if any, held for his or her accounts. +2022 PROXY STATEMENT 68 +ANNUAL +MEETING +AND +PROXY STATEMENT +September 9, 2022 +Whether or not you plan to attend the meeting, please sign and date the enclosed proxy card and return it in the enclosed envelope, or vote online or by telephone following the instructions on the proxy card. +69 NIKE, INC. +VOTE BY INTERNET +Before The Meeting - Go to www.proxyvote.com +Use the Internet to transmit your voting instructions and for electronic delivery of information. Vote by 11:59 p.m. Eastern Time on September 8, 2022 for shares held directly and by 11:59 p.m. Eastern Time on September 6, 2022 for shares held in a Plan. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. +During The Meeting - Go to www.virtualshareholdermeeting.com/NKE2022 +You may attend the meeting via the Internet and vote during the meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions. +VOTE BY PHONE - 1-800-690-6903 +Use any touch-tone telephone to transmit your voting instructions. Vote by 11:59 p.m. Eastern Time on September 8, 2022 for shares held directly and by 11:59 p.m. Eastern Time on September 6, 2022 for shares held in a Plan. Have your proxy card in hand when you call and then follow the instructions. +VOTE BY MAIL +Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. +NIKE, INC. +ONE BOWERMAN DRIVE +BEAVERTON, OR 97005-6453 +TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: +D21035-P43098 KEEP THIS PORTION FOR YOUR RECORDS +DETACH AND RETURN THIS PORTION ONLY +THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. +NIKE, INC. +The Board of Directors recommends a vote FOR all the nominees listed in Proposal 1, a vote FOR Proposals 2, 3, and 4, and a vote AGAINST Proposal 5. +1 Class A director nominees: To elect a Board of Directors for the ensuing year. For Withhold +1a. Cathleen A. Benko ☐ ☐ For Against Abstain +1b. Timothy D. Cook ☐ ☐ 2 To approve executive compensation by an advisory vote. ☐ ☐ ☐ +1c. John J. Donahoe II ☐ ☐ 3 To ratify the appointment of PricewaterhouseCoopers LLP as independent registered public accounting firm. ☐ ☐ ☐ +1d. Thasunda B. Duckett ☐ ☐ 4 To approve the amendment of the NIKE, Inc. Employee Stock Purchase Plan to increase authorized shares. ☐ ☐ ☐ +1e. Travis A. Knight ☐ ☐ 5 To consider a shareholder proposal regarding a policy on China sourcing, if properly presented at the meeting. ☐ ☐ ☐ +1f. Mark G. Parker ☐ ☐ 6 To transact such other business as may properly come before the meeting. +1g. John W. Rogers, Jr. ☐ ☐ +Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title. +Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date +2022 PROXY STATEMENT 70 +Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders To Be Held on September 9, 2022: +The Proxy Statement and NIKE, Inc.'s 2022 Annual Report to Shareholders are available online at www.investorvote.com or www.proxyvote.com, for registered and beneficial owners, respectively. +D21036-P43098 +Proxy - NIKE, INC. +CLASS A COMMON STOCK PROXY +SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS +FOR THE 2022 ANNUAL MEETING OF SHAREHOLDERS +September 9, 2022 +The undersigned hereby appoints Mark G. Parker, Travis A. Knight, and Michelle A. Peluso, and each of them, proxies with full power of substitution, to vote, as designated on the reverse side, on behalf of the undersigned, all shares of Class A Common Stock which the undersigned may be entitled to vote at the Annual Meeting of Shareholders of NIKE, Inc. on September 9, 2022, and any adjournments thereof, with all powers that the undersigned would possess if personally present. A majority of the proxies or substitutes present at the meeting may exercise all powers granted hereby. +THE SHARES REPRESENTED BY THE PROXY WILL BE VOTED AS SPECIFIED, BUT IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE NOMINEES FOR DIRECTOR FOR PROPOSAL 1, FOR PROPOSALS 2, 3, AND 4, AND AGAINST PROPOSAL 5. THE PROXIES MAY VOTE IN THEIR DISCRETION AS TO OTHER MATTERS WHICH MAY COME BEFORE THE MEETING. +YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. THE PROXIES CANNOT VOTE THESE SHARES UNLESS YOU SIGN AND RETURN THIS CARD OR PROPERLY VOTE BY PHONE OR INTERNET. +Continued and to be signed on reverse side +71 NIKE, INC. +VOTE BY INTERNET +Before The Meeting - Go to www.proxyvote.com +Use the Internet to transmit your voting instructions and for electronic delivery of information. Vote by 11:59 p.m. Eastern Time on September 8, 2022 for shares held directly and by 11:59 p.m. Eastern Time on September 6, 2022 for shares held in a Plan. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. +During The Meeting - Go to www.virtualshareholdermeeting.com/NKE2022 +You may attend the meeting via the Internet and vote during the meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions. +VOTE BY PHONE - 1-800-690-6903 +Use any touch-tone telephone to transmit your voting instructions. Vote by 11:59 p.m. Eastern Time on September 8, 2022 for shares held directly and by 11:59 p.m. Eastern Time on September 6, 2022 for shares held in a Plan. Have your proxy card in hand when you call and then follow the instructions. +VOTE BY MAIL +Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. +NIKE, INC. +ONE BOWERMAN DRIVE +BEAVERTON, OR 97005-6453 +TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: +D21037-P43098 KEEP THIS PORTION FOR YOUR RECORDS +DETACH AND RETURN THIS PORTION ONLY +THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. +NIKE, INC. +The Board of Directors recommends a vote FOR all the nominees listed in Proposal 1, a vote FOR Proposals 2, 3, and 4, and a vote AGAINST Proposal 5. +1 +Class B director nominees: To elect a Board of Directors for the ensuing year. +For Withhold +1a. Alan B. Graf, Jr. ☐ ☐ +1b. Peter B. Henry ☐ ☐ +1c. Michelle A. Peluso ☐ ☐ For Against Abstain +2 To approve executive compensation by an advisory vote. ☐ ☐ ☐ +3 To ratify the appointment of PricewaterhouseCoopers LLP as independent registered public accounting firm. ☐ ☐ ☐ +4 To approve the amendment of the NIKE, Inc. Employee Stock Purchase Plan to increase authorized shares. ☐ ☐ ☐ +5 To consider a shareholder proposal regarding a policy on China sourcing, if properly presented at the meeting. ☐ ☐ ☐ +6 To transact such other business as may properly come before the meeting. +Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title. +Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date +2022 PROXY STATEMENT 72 +Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders To Be Held on September 9, 2022: +The Proxy Statement and NIKE, Inc.'s 2022 Annual Report to Shareholders are available online at www.investorvote.com or www.proxyvote.com, for registered and beneficial owners, respectively. +D21038-P43098 +Proxy - NIKE, INC. +CLASS B COMMON STOCK PROXY +SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS +FOR THE 2022 ANNUAL MEETING OF SHAREHOLDERS +SEPTEMBER 9, 2022 +The undersigned hereby appoints Mark G. Parker, Travis A. Knight, and Michelle A. Peluso, and each of them, proxies with full power of substitution, to vote, as designated on the reverse side, on behalf of the undersigned, all shares of Class B Common Stock which the undersigned may be entitled to vote at the Annual Meeting of Shareholders of NIKE, Inc. on September 9, 2022, and any adjournments thereof, with all powers that the undersigned would possess if personally present. A majority of the proxies or substitutes present at the meeting may exercise all powers granted hereby. +THE SHARES REPRESENTED BY THE PROXY WILL BE VOTED AS SPECIFIED, BUT IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE NOMINEES FOR DIRECTOR FOR PROPOSAL 1, FOR PROPOSALS 2, 3, AND 4, AND AGAINST PROPOSAL 5. THE PROXIES MAY VOTE IN THEIR DISCRETION AS TO OTHER MATTERS WHICH MAY COME BEFORE THE MEETING. +YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. THE PROXIES CANNOT VOTE THESE SHARES UNLESS YOU SIGN AND RETURN THIS CARD OR PROPERLY VOTE BY PHONE OR INTERNET. +Continued and to be signed on reverse side +73 NIKE, INC. \ No newline at end of file diff --git a/raw/proxies/0000320187/0000320187-22-000041/proxy_rpt.txt b/raw/proxies/0000320187/0000320187-22-000041/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..435f70562114abf325bdb68e8fc87bc78d2f9f6c --- /dev/null +++ b/raw/proxies/0000320187/0000320187-22-000041/proxy_rpt.txt @@ -0,0 +1,3 @@ +TRANSACTIONS WITH RELATED PERSONS +Philip Knight, the father of NIKE director Travis Knight, serves as Chairman Emeritus, which provides a standing invitation for Philip Knight to attend meetings of the Board and its committees as a non-voting observer. 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+Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +x +Definitive Proxy Statement +¨ +Definitive Additional Materials +¨ +Soliciting Material under §240.14a-12 +NIKE, Inc. +(Name of registrant as specified in its charter) +(Name of person(s) filing proxy statement, if other than the registrant) +Payment of Filing Fee (Check the appropriate box): +x +No fee required +¨ +Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11 +(1) +Title of each class of securities to which transaction applies: +(2) +Aggregate number of securities to which transaction applies: +(3) +Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): +(4) +Proposed maximum aggregate value of transaction: +(5) Total fee paid: +¨ +Fee paid previously with preliminary materials. +¨ +Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. +(1) +Amount Previously Paid: +(2) +Form, Schedule or Registration Statement No.: +(3) +Filing Party: +(4) +Date Filed: +MESSAGE FROM OUR +EXECUTIVE CHAIRMAN +To Our Shareholders: +At Nike, our passion for sport, innovation, and authenticity drives us. It fuels us through challenges and inspires us to emerge even stronger. In fiscal 2023, that passion fed our successes and helped to power transformations in support of future growth—both in the business and with respect to corporate governance. +Over the last twelve months, the Board has welcomed three new independent directors. These individuals complement and strengthen the Board's mix of skills and experiences, adding expertise across finance, business operations, technology, innovation, marketing, branding, and media. They also enhance the Board's overall balance of tenure and diversity. +Looking ahead to this year's Annual Meeting of Shareholders, we have continued to evolve our proxy statement. As part of our ongoing commitment to transparency, we have enhanced disclosures regarding our capital structure and engagement with shareholders. We have also made changes to formatting and organization to improve readability and clarity. +We are pleased to invite you to attend the Annual Meeting of Shareholders of NIKE, Inc. to be held virtually on Tuesday, September 12, 2023, at 9:00 A.M. Pacific Time. Whether or not you plan to attend, the prompt execution and return of your proxy card will both ensure that your shares are represented at the meeting and minimize the cost of proxy solicitation. Thank you for your continued support. +Sincerely, +"At Nike, our passion for sport, innovation, and authenticity drives us." +MARK PARKER, EXECUTIVE CHAIRMAN +July 20, 2023 +1 NIKE, INC. +NOTICE OF ANNUAL MEETING +OF SHAREHOLDERS +TO THE SHAREHOLDERS OF NIKE, INC. +You are cordially invited to the 2023 Annual Meeting of Shareholders (the "Annual Meeting") of NIKE, Inc., an Oregon corporation ("NIKE" or the "Company"): +DATE AND TIME: +Tuesday, September 12, 2023, +at 9:00 A.M. Pacific Time +LOCATION: +This year's meeting will be a virtual Annual Meeting at www.virtualshareholdermeeting.com/NKE2023 +ITEMS OF BUSINESS: +PROPOSAL +PAGE REFERENCE +1 To elect the 13 directors named in the accompanying proxy statement for the ensuing year. +Page 4 +Class A +Will elect nine directors. +Class B +Will elect four directors. +Holders of Class A Stock and holders of Class B Stock will vote together as one class on all other proposals. +2 To approve executive compensation by an advisory vote. +Page 29 +3 To hold an advisory vote on the frequency of advisory votes on executive compensation. +Page 57 +4 To ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm. +Page 58 +5 To consider a shareholder proposal regarding Supplemental Pay Equity Disclosure, if properly presented at the meeting. +Page 60 +6 To consider a shareholder proposal regarding a Supply Chain Management Report, if properly presented at the meeting. +Page 63 +7 To transact such other business as may properly come before the meeting. +The Annual Meeting will be held in a virtual format only. While we initially pivoted to a virtual format due to public health concerns, we are continuing to use this format based on the success of the last three meetings and the format's advantages, including enhanced accessibility for our shareholders. We continue to ensure that shareholders will be afforded the same rights and opportunities to participate in our virtual Annual Meeting as they would at an in-person meeting. Shareholders of record at the close of business on July 12, 2023, the record date fixed by the Board of Directors, may attend the Annual Meeting, vote, and submit questions in advance of and during the meeting. To attend, vote at, and submit questions during the Annual Meeting, visit www.virtualshareholdermeeting.com/NKE2023 and enter the 16-digit control number included in your Notice Regarding the Availability of Proxy Materials, voting instructions form, or proxy card. Questions may be submitted in advance of the Annual Meeting by visiting www.proxyvote.com and entering your 16-digit control number. +By Order of the Board of Directors, +Mary Hunter +Vice President, Corporate Secretary +Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders To Be Held on September 12, 2023. The proxy statement and NIKE, Inc.'s 2023 Annual Report to Shareholders are available online at www.investorvote.com or www.proxyvote.com, for registered and beneficial owners, respectively. +2023 PROXY STATEMENT 2 +TABLE OF CONTENTS +PAGE +NOTICE OF ANNUAL MEETING OF SHAREHOLDERS +2 +CORPORATE GOVERNANCE +4 +PROPOSAL 1 +Election of Directors +4 +NIKE, Inc. Board of Directors +5 +Board Structure and Responsibilities +21 +Code of Conduct +25 +Capital Structure +25 +Shareholder Engagement +26 +Director Compensation for Fiscal 20 23 +27 +EXECUTIVE COMPENSAT ION +29 +PROPOSAL 2 +Shareholder Advisory Vote to Approve Executive Compensation +29 +Comp ensation Discussion and Analysis +30 +E xecutive Comp ensation Tables +44 +PROPOSAL 3 +Frequency of Advisory Votes on Executive Compensation +57 +AUDIT MATTERS +58 +PROPOSAL 4 +Ratification of Appointment of Independent Registered Public Accounting Firm +58 +Report of the Audit & Finance Committee +59 +SHAREHOLDER PROPOSAL S +60 +PROPOSAL 5 +S hareholder Proposal Regarding Supplemental Pay Equity Disclosure +60 +PROPOSAL 6 +Shareholder Proposal Regarding a Supply Chain Management Report +63 +STOCK OWNERSHIP INFORMATION +66 +Stock Holdings of Certain Owners and Management +66 +Delinquent Section 16(a) Reports +67 +ADDITIONAL INFORMATION +68 +Transactions with Related Persons +68 +Compensation Committee Interlocks and Insider Participation +68 +Other Matters at the Meeting +68 +GENERAL INFORMATION +68 +3 NIKE, INC. +CORPORATE GOVERNANCE +PROPOSAL 1 +ELECTION OF DIRECTORS +A board of 13 directors will be elected at the Annual Meeting. Directors will hold office until the next annual meeting of shareholders or until their successors are elected and qualified. All of the nominees except Ms. Mónica Gil, Ms. Maria Henry, and Mr. Robert Swan were elected at the 2022 annual meeting of shareholders. +Ms. Cathleen Benko, Mr. Alan Graf, Jr., Mr. John Rogers, Jr., and Mr. Robert Swan are nominated by the Board of Directors (the "Board") for election by the holders of NIKE's Class B Common Stock ("Class B Stock"). The other nine nominees are nominated by the Board for election by the holders of NIKE's Class A Common Stock ("Class A Stock"). +Under Oregon law and our Bylaws, if a quorum of each class of shareholders is present at the Annual Meeting, the nine director nominees who receive the greatest number of votes cast by holders of Class A Stock and the four director nominees who receive the greatest number of votes cast by holders of Class B Stock will be elected directors. Abstentions and broker non-votes will have no effect on the results of the vote. Unless otherwise instructed, proxy holders will vote the proxies they receive for the nominees listed below. If any nominee becomes unable to serve, the holders of the proxies may, in their discretion, vote the shares for a substitute nominee or nominees designated by the Board. +The Bylaws and the Corporate Governance Guidelines of the Company provide that any nominee for director in an uncontested election who receives a greater number of votes "withheld" from their election than votes "for" such election shall tender their resignation for consideration by the Corporate Responsibility, Sustainability & Governance Committee. The committee will recommend to the Board the action to be taken with respect to the resignation, and the Board will publicly disclose its decision within 90 days after the certification of the election results. +Background information on the nominees as of July 20, 2023, including certain of the attributes that led to their selection, appears below. The Corporate Responsibility, Sustainability & Governance Committee has determined that each director meets the qualification standards described below under "NIKE, Inc. Board of Directors—Director Nominations". In addition, the Board firmly believes that the experience, attributes, and skills of any single director nominee should not be viewed in isolation, but rather in the context of the experience, attributes, and skills that all director nominees bring to the Board as a whole, each of which contributes to the function of an effective Board. +BOARD RECOMMENDATION +The Board of Directors recommends that the Class A Shareholders vote FOR the election of nominees to the Board of Directors +The Board of Directors recommends that the Class B Shareholders vote FOR the election of nominees to the Board of Directors +2023 PROXY STATEMENT 4 +NIKE, INC. BOARD OF DIRECTORS +BOARD OVERVIEW +Our Board is currently comprised of 13 individuals selected on the basis of numerous criteria, including experience and achievements, fields of significant knowledge, good character, sound judgment, and diversity. We view the effectiveness of our Board both through an individual and collective lens and believe that our Board is optimized to support and guide the Company. +DIVERSITY +AGE +TENURE +BOARD SKILLS, EXPERIENCES, AND QUALIFICATIONS +DIVERSITY 7 /13 +Gender, racial, or ethnic diversity that adds a range of perspectives and expands the Board's understanding of the needs and viewpoints of consumers, employees, and other stakeholders worldwide. +FINANCIAL EXPERTISE 12 /13 +Financial expertise assists our Board in overseeing our financial statements, capital structure, and internal controls. +CEO EXPERIENCE 8 / 13 +CEO experience brings leadership qualifications and skills that help our Board to capably advise, support, and oversee our management team, including regarding our strategy to drive long-term value. +INTERNATIONAL 10 / 13 +International exposure yields an understanding of diverse business environments, economic conditions, and cultural perspectives that informs our global business and strategy and enhances oversight of our multinational operations. +DIGITAL/TECHNOLOGY 6 /13 +Technology experience helps our Board oversee cybersecurity and advise our management team as we seek to enhance the consumer experience and further develop our multi-channel strategy. +RETAIL INDUSTRY 7 /13 +Retail experience brings a deep understanding of factors affecting our industry, operations, business needs, and strategic goals. +MEDIA 2 /13 +Media experience provides the Board with insight about connecting with consumers and other stakeholders in a timely and impactful manner. +ACADEMIA 1 /13 +Academia provides organizational management experience and knowledge of current issues in academia and thought leadership. +HR/TALENT MANAGEMENT 8 /13 +HR and talent management experience assists our Board in overseeing executive compensation, succession planning, and employee engagement. +GOVERNANCE 9 /13 +Public company board experience provides insight into new and best practices which informs our commitment to excellence in corporate governance. +CORPORATE GOVERNANCE HIGHLIGHTS +ü 10 out of 13 director nominees are independent +ü Separate Chair, CEO, and Lead Independent Director positions with clearly defined roles +ü "Evergreen" approach to Board refreshment, with 6 new independent directors added in the last five years and a mix of short-, medium-, and long-tenured directors to balance fresh perspectives and Company-specific experience +ü Director nominees selected based on robust qualification standards, including the desire to represent and serve the interests of all shareholders, and a holistic approach to Board composition +ü Retirement policy generally requires that directors do not stand for election after reaching the age of 72 +5 NIKE, INC. +NOMINEES FOR ELECTION BY CLASS A SHAREHOLDERS +TIMOTHY COOK, LEAD INDEPENDENT DIRECTOR +AGE +DIRECTOR SINCE +COMMITTEE +OTHER CURRENT +PUBLIC DIRECTORSHIPS +FAVORITE NIKE PRODUCTS +62 2005 +Compensation, Chair +Apple Inc. +Nike Air Max 270 and Nike Free Metcon +SKILLS, EXPERIENCES AND QUALIFICATIONS +FINANCIAL EXPERTISE +DIGITAL/TECHNOLOGY +HR/TALENT MANAGEMENT +CEO EXPERIENCE +RETAIL INDUSTRY +GOVERNANCE +INTERNATIONAL +Mr. Cook is the Company's Lead Independent Director and is the Chief Executive Officer of Apple Inc. ("Apple"). +• Mr. Cook joined Apple in March 1998 as Senior Vice President of Worldwide Operations and also served as its Executive Vice President, Worldwide Sales and Operations and Chief Operating Officer. +• Mr. Cook was Vice President, Corporate Materials for Compaq Computer Corporation from 1997 to 1998. +• Previous to his work at Compaq, Mr. Cook served in the positions of Senior Vice President Fulfillment and Chief Operating Officer of the Reseller Division at Intelligent Electronics from 1994 to 1997. +• Mr. Cook also worked for International Business Machines Corporation from 1983 to 1994, most recently as Director of North American Fulfillment. +Mr. Cook is a member of the Board of Directors of Apple. In addition to this public company board service, he is also a member of the Board of Directors of the National Football Foundation and Duke University Board of Trustees. +2023 PROXY STATEMENT 6 +JOHN DONAHOE II +AGE +DIRECTOR SINCE +COMMITTEE +OTHER CURRENT +PUBLIC DIRECTORSHIPS +FAVORITE NIKE PRODUCTS +63 2014 +Executive +PayPal Holdings, Inc. +Nike Invincible 3 and Nike Waffle One +SKILLS, EXPERIENCES AND QUALIFICATIONS +FINANCIAL EXPERTISE +DIGITAL/TECHNOLOGY +HR/TALENT MANAGEMENT +CEO EXPERIENCE +RETAIL INDUSTRY +GOVERNANCE +INTERNATIONAL +Mr. Donahoe is President and Chief Executive Officer of NIKE, Inc. and has been a director since 2014. +• From 2017 to 2019, Mr. Donahoe served as President and Chief Executive Officer of ServiceNow, Inc. ("ServiceNow"), provider of enterprise cloud computing services for global enterprises. +• From 2008 to 2015, Mr. Donahoe served as President and Chief Executive Officer of eBay, Inc. ("eBay"), provider of the global eBay.com online marketplace and PayPal digital payments platform. +• Mr. Donahoe joined eBay in 2005 as President of eBay Marketplaces, responsible for eBay's global e-Commerce businesses. +• Prior to joining eBay, Mr. Donahoe was the Chief Executive Officer and Worldwide Managing Director of Bain & Company from 1999 to 2005, and a Managing Director from 1992 to 1999. +Mr. Donahoe is Chairman and a member of the Board of Directors of PayPal Holdings, Inc. In addition to this public company board service, he also serves on the Board of Trustees for The Bridgespan Group. Mr. Donahoe served on the Board of Directors of Intel Corporation from March 2009 to May 2017 and ServiceNow from March 2017 to June 2020. +7 NIKE, INC. +THASUNDA DUCKETT +AGE +DIRECTOR SINCE +COMMITTEE +OTHER CURRENT +PUBLIC DIRECTORSHIPS +FAVORITE NIKE PRODUCTS +49 2019 +Corporate Responsibility, Sustainability & Governance +None +Nike Air Force 1 and Air Jordan +SKILLS, EXPERIENCES AND QUALIFICATIONS +DIVERSITY +FINANCIAL EXPERTISE +CEO EXPERIENCE +RETAIL INDUSTRY +HR/TALENT MANAGEMENT +Ms. Duckett is President and Chief Executive Officer of the Teachers Insurance and Annuity Association of America ("TIAA"), a leading provider of financial services in the academic, research, medical, cultural, and governmental fields. +• Prior to joining TIAA, Ms. Duckett was Chief Executive Officer of Chase Consumer Banking at JPMorgan Chase & Co. ("JPMorgan Chase") from 2016 to 2021. Before that appointment, Ms. Duckett was appointed to various management positions at JPMorgan Chase, including: +• From 2013 to 2016, Ms. Duckett served as the Chief Executive Officer of Chase Auto Finance, and +• From 2004 to 2013, Ms. Duckett held multiple management and consumer lending roles. +• Prior to joining JPMorgan Chase, Ms. Duckett was Director of Emerging Markets at the Federal National Mortgage Association, or Fannie Mae. +Ms. Duckett is Chair of the Otis and Rosie Brown Foundation and serves on the Board of Directors of Brex, National Medal of Honor Museum, and the Robert F. Kennedy Human Rights. She also serves on the Board of Trustees for Sesame Workshop. +2023 PROXY STATEMENT 8 +MÓNICA GIL +AGE +DIRECTOR SINCE +COMMITTEE +OTHER CURRENT +PUBLIC DIRECTORSHIPS +FAVORITE NIKE PRODUCTS +51 2022 +Compensation +None +Air Jordan 1, Nike Blazer Low, and Nike Vaporfly 2 +SKILLS, EXPERIENCES AND QUALIFICATIONS +DIVERSITY +INTERNATIONAL +MEDIA +HR/TALENT MANAGEMENT +Ms. Gil is Chief Administrative and Marketing Officer, NBCUniversal Telemundo Enterprises ("Telemundo") for Comcast Corp. +• Prior to her current role, Ms. Gil served as Chief Marketing Officer, Telemundo from 2018 until 2020, and as Executive Vice President, Telemundo, managing Communications and Corporate Affairs and Human Resources from 2017 until 2018. +• Prior to joining Telemundo, Ms. Gil served as Senior Vice President and General Manager, Multicultural Growth and Strategy of the Nielsen Company ("Nielsen") from 2014 until 2017. +• Ms. Gil joined Nielsen in 2005 as Vice President, Communications and was subsequently promoted in 2009 to Senior Vice President, Public Affairs and Government Relations. +• Previously, Ms. Gil served as Senior Vice President for Greer, Margolis, Mitchell and Burns from 2004 until 2005. +• She also served as Director of Public Affairs and Community Outreach for Telemundo Communications Group, Inc., Los Angeles, from 2001 to 2004. +Ms. Gil is a member of the Board of Directors of the National Women's History Museum and Welcome Tech, Inc. +9 NIKE, INC. +MARIA HENRY +AGE +DIRECTOR SINCE +COMMITTEE +OTHER CURRENT +PUBLIC DIRECTORSHIPS +FAVORITE NIKE PRODUCTS +56 2023 +Audit & Finance +General Mills, Inc. +Nike Invincible 2 and Nike Epic Luxe leggings +SKILLS, EXPERIENCES AND QUALIFICATIONS +DIVERSITY +FINANCIAL EXPERTISE +INTERNATIONAL +DIGITAL/TECHNOLOGY +RETAIL INDUSTRY +GOVERNANCE +Ms. Henry is the former Chief Financial Officer of Kimberly-Clark Corporation ("Kimberly-Clark"), a position she held from 2015 to April 2022 and served as Executive Vice President and Senior Advisor from April 2022 until her retirement in September 2022. +• Prior to joining Kimberly-Clark, she was Executive Vice President and Chief Financial Officer of The Hillshire Brands Company, formerly known as Sara Lee Corporation ("Sara Lee"), from 2012 to 2014. Ms. Henry was the Chief Financial Officer of Sara Lee's North American Retail and Foodservice business from 2011 to 2012. +• Prior to Sara Lee, she held various senior leadership positions in finance and strategy in three portfolio companies of Clayton, Dubilier, & Rice, most recently as Executive Vice President and Chief Financial Officer of Culligan International. Ms. Henry also held senior finance roles in several technology companies, and she began her career at General Electric. +Ms. Henry is a member of the Board of Directors of General Mills, Inc. +2023 PROXY STATEMENT 10 +PETER HENRY +AGE +DIRECTOR SINCE +COMMITTEE +OTHER CURRENT +PUBLIC DIRECTORSHIPS +FAVORITE NIKE PRODUCTS +53 2018 +Audit & Finance +Citigroup Inc. +Nike Epic React +SKILLS, EXPERIENCES AND QUALIFICATIONS +DIVERSITY +INTERNATIONAL +GOVERNANCE +FINANCIAL EXPERTISE +ACADEMIA +Dr. Henry is Class of 1984 Senior Fellow at Stanford University's Hoover Institution, Senior Fellow at Stanford's Freeman Spogli Institute for International Studies, and Dean Emeritus of New York University's Leonard N. Stern School of Business ("Stern"). +• Dr. Henry assumed the Deanship of Stern in January 2010 and served through December 2017. +• Prior to joining Stern, Dr. Henry was the Konosuke Matsushita Professor of International Economics at the Stanford University Graduate School of Business. +• In June 2009, President Obama appointed Dr. Henry to the President's Commission on White House Fellowships. +• In 2008, Dr. Henry led Barack Obama's Presidential Transition Team in its review of international lending agencies such as the IMF and the World Bank. +Dr. Henry is a member of the Board of Directors of Citigroup Inc. In addition to this public company board service, he also serves on the Board of Directors of the National Bureau of Economic Research and the Economic Club of New York and serves on the Advisory Board for Protiviti and Biospring Partners. Dr. Henry is a member of the Council of Foreign Relations and the Economic Advisory Panel of the Federal Reserve Bank of New York. Dr. Henry served on the Board of Directors of General Electric from July 2016 until April 2018 and Kraft Foods Group, Inc. and its predecessor, Kraft Foods Inc., from May 2011 until July 2015. +11 NIKE, INC. +TRAVIS KNIGHT +AGE +DIRECTOR SINCE +COMMITTEE +OTHER CURRENT +PUBLIC DIRECTORSHIPS +FAVORITE NIKE PRODUCTS +49 2015 +Executive +None +Nike Pegasus +SKILLS, EXPERIENCES AND QUALIFICATIONS +FINANCIAL EXPERTISE +CEO EXPERIENCE +MEDIA +Mr. Knight is the President and Chief Executive Officer of the animation studio, LAIKA, LLC ("LAIKA"), which specializes in feature-length films. +• Mr. Knight has been involved in all principal creative and business decisions at LAIKA since its founding in 2003, serving in successive management positions as Lead Animator, Vice President of Animation, and then as President and Chief Executive Officer in 2009. +• Mr. Knight was Producer and Director of the feature film Kubo and the Two Strings (2017) which was nominated for an Academy Award and winner of the BAFTA award for Best Animated Film. +• Mr. Knight has served as Producer and Lead Animator on Academy Award-nominated feature-length films The Boxtrolls (2014) and ParaNorman (2012), for which he won an Annie Award for Outstanding Achievement in Character Animation, and Lead Animator for Coraline (2009). +• Prior to his work at LAIKA, Mr. Knight held various animation positions at Will Vinton Studios from 1998 to 2002, and as a stop-motion animator for television series, commercials, and network promotions. He has been recognized for his work on the Emmy Award-winning stop-motion animated television series The PJs. +Mr. Knight serves on the Board of Directors of LAIKA. He is the son of NIKE's co-founder, Mr. Philip Knight, who currently serves as Chairman Emeritus. In addition to his skills and qualifications described above, Mr. Travis Knight was selected to serve on the Board because he has a significant role in the management of the Class A Stock owned by Swoosh, LLC, strengthening the alignment of the Board with the interests of NIKE shareholders. +2023 PROXY STATEMENT 12 +MARK PARKER, EXECUTIVE CHAIRMAN OF THE BOARD +AGE +DIRECTOR SINCE +COMMITTEE +OTHER CURRENT +PUBLIC DIRECTORSHIPS +FAVORITE NIKE PRODUCTS +67 2006 +Executive, Chair +The Walt Disney Company +Nike Pegasus, Nike Air Max, and Nike React Infinity Run +SKILLS, EXPERIENCES AND QUALIFICATIONS +FINANCIAL EXPERTISE +INTERNATIONAL +HR/TALENT MANAGEMENT +CEO EXPERIENCE +RETAIL INDUSTRY +GOVERNANCE +Mr. Parker is Executive Chairman of the Board of Directors of the Company. He served as President and Chief Executive Officer of the Company from 2006 to January 2020. +• Mr. Parker has been employed by NIKE since 1979 with primary responsibilities in product research, design and development, marketing, and brand management. +• Mr. Parker was appointed: +• President and Chief Executive Officer in 2006, +• President of the NIKE Brand in 2001, +• Vice President of Global Footwear in 1998, +• General Manager in 1993, +• Corporate Vice President in 1989, and +• Divisional Vice President in charge of product development in 1987. +Mr. Parker is Chairman of the Board of Directors of The Walt Disney Company. In addition to his skills and qualifications described above, Mr. Parker was selected to serve on the Board because the experience gained while serving as the Company's Chief Executive Officer makes his position as Executive Chairman of the Board instrumental. +13 NIKE, INC. +MICHELLE PELUSO +AGE +DIRECTOR SINCE +COMMITTEE +OTHER CURRENT +PUBLIC DIRECTORSHIPS +FAVORITE NIKE PRODUCTS +51 2014 +Corporate Responsibility, +Sustainability & Governance, Chair +None +Air Jordan 1 Low, Nike Air Max 97, Nike Dunk High, Nike Air Force 1, Nike Yoga Luxe, and Nike Dri-Fit ADV Epic Luxe +SKILLS, EXPERIENCES AND QUALIFICATIONS +DIVERSITY +INTERNATIONAL +HR/TALENT MANAGEMENT +FINANCIAL EXPERTISE +DIGITAL/TECHNOLOGY +GOVERNANCE +CEO EXPERIENCE +RETAIL INDUSTRY +Ms. Peluso is Executive Vice President and Chief Customer Officer at CVS Health and Co-President, Pharmacy and Consumer Wellness, responsible for leading the front store retail business, transforming the enterprise's consumer experience, and leveraging marketing to ensure CVS Health becomes the leading health solutions company for consumers. +• Prior to joining CVS Health, Ms. Peluso was Senior Vice President, Digital Sales and Chief Marketing Officer at IBM from 2016 to 2021. She oversaw marketing and brand strategy and execution, digital sales, and the commercial business, globally. She was also responsible for the company's client experience. +• Prior to her work at IBM, Ms. Peluso served as Chief Executive Officer of online shopping destination Gilt Groupe, Inc. ("Gilt") from 2013 until its sale to Hudson's Bay Company in February 2016 and was on Gilt's Board of Directors from 2009 to 2016. +• From 2009 to 2013, Ms. Peluso served as Global Consumer Chief Marketing and Internet Officer of Citigroup Inc. +• From 2002 to 2009, Ms. Peluso held senior management positions at Travelocity.com LP ("Travelocity"), being appointed Chief Operating Officer in March 2003, and President and Chief Executive Officer in December 2003. +• Prior to joining Travelocity, in 1999 Ms. Peluso founded Site59, an online travel site, serving as its Chief Executive Officer until its acquisition by Travelocity in 2002. +Ms. Peluso is a member of the Board of Directors at the Ad Council and is on the Executive Council of the Board of Directors of the Association of National Advertisers. +BOARD RECOMMENDATION +The Board of Directors recommends that the Class A Shareholders vote FOR the election of the nominees above to the Board of Directors. +2023 PROXY STATEMENT 14 +NOMINEES FOR ELECTION BY CLASS B SHAREHOLDERS +CATHLEEN BENKO +AGE +DIRECTOR SINCE +COMMITTEE +OTHER CURRENT +PUBLIC DIRECTORSHIPS +FAVORITE NIKE PRODUCTS +65 2018 +Compensation +SolarWinds Corporation +VaporMax +SKILLS, EXPERIENCES AND QUALIFICATIONS +DIVERSITY +INTERNATIONAL +HR/TALENT MANAGEMENT +FINANCIAL EXPERTISE +DIGITAL/TECHNOLOGY +Ms. Benko is a former Vice Chairman and Managing Principal of Deloitte LLP ("Deloitte"), an organization that, through its subsidiaries and network of member firms, provides audit, consulting, tax, and advisory services to clients globally. During her nearly 30-year career with Deloitte, Ms. Benko held many leadership roles, several concurrent with her appointment as Vice Chairman and Managing Principal in 2011. +• From 2015 to 2018, Ms. Benko served as Senior Partner working within the firm's "Digital Giants" practice where she was the senior advisory partner for several digital-native companies. +• From 2010 to 2014, Ms. Benko served as Chief Digital, Brand, and Communications Officer. +• Previous to her role as Chief Digital, Brand, and Communications Officer, Ms. Benko held multiple technology and talent management roles, including serving as the company's first Vice Chairman and Chief Talent Officer from 2006 to 2010, its Chief Inclusion Officer from 2008 to 2010, and as Managing Principal, Initiative for the Retention and Advancement of Women, from 2003 to 2009. +• Ms. Benko led Deloitte's technology sector from 2003 to 2007 and was previously Deloitte's first Global e-Business Leader, a position she held from 1998 to 2002. +Ms. Benko is a member of the Board of Directors of SolarWinds Corporation. In addition to this public company board service, she also holds board positions at nonprofits Stanford Institute for Research in the Social Sciences, the International Women's Forum, Santa Clara University's Markkula Center of Applied Ethics, Life Skills for Soldiers, and the National Association of Corporate Directors. She is also on the board of WorkBoard, a privately-held company. Ms. Benko is chair of Harvard Business School/NC's Advisory Council. +15 NIKE, INC. +ALAN GRAF, JR. +AGE +DIRECTOR SINCE +COMMITTEE +OTHER CURRENT +PUBLIC DIRECTORSHIPS +FAVORITE NIKE PRODUCTS +69 2002 +Audit & Finance, Chair +Mid-America Apartment Communities, Inc. +Nike Invincible 3 and Nike Dri-Fit Apparel +SKILLS, EXPERIENCES AND QUALIFICATIONS +FINANCIAL EXPERTISE +INTERNATIONAL +GOVERNANCE +Mr. Graf is the former Executive Vice President and Chief Financial Officer of FedEx Corporation ("FedEx"), a position he held from 1998 until his retirement in December 2020. +• Mr. Graf joined FedEx in 1980 and was Senior Vice President and Chief Financial Officer for FedEx Express, FedEx's predecessor, from 1991 to 1998. +Mr. Graf is a member of the Board of Directors of Mid-America Apartment Communities, Inc. In addition to this public company board service, he is also a director of the Indiana University Foundation. Mr. Graf previously served on the Board of Directors of Kimball International Inc., Storage USA, Inc., and Arkwright Mutual Insurance Co. +2023 PROXY STATEMENT 16 +JOHN ROGERS, JR. +AGE +DIRECTOR SINCE +COMMITTEE +OTHER CURRENT +PUBLIC DIRECTORSHIPS +FAVORITE NIKE PRODUCTS +65 2018 +Corporate Responsibility, +Sustainability & Governance +The New York Times Company and Ryan Specialty Group Holdings, Inc. +Nike KD and Nike LeBron Basketball Shoes +SKILLS, EXPERIENCES AND QUALIFICATIONS +DIVERSITY +CEO EXPERIENCE +GOVERNANCE +FINANCIAL EXPERTISE +Mr. Rogers is Chairman, Co-Chief Executive Officer, and Chief Investment Officer of Ariel Investments, LLC, a privately-held money management firm he founded in 1983, which serves individual and institutional investors through its mutual funds and separate accounts. Mr. Rogers is a Trustee of Ariel Investment Trust, the investment company consisting of the five mutual funds his firm manages. +• In 2008, Mr. Rogers was awarded Princeton University's highest honor, the Woodrow Wilson Award, presented each year to the alumnus whose career embodies a commitment to national service. +• Mr. Rogers served as co-chair for the Presidential Inaugural Committee 2009. +Mr. Rogers is a member of the Board of Directors of The New York Times Company and Ryan Specialty Group Holdings, Inc. In addition to this public company board service, he also serves as trustee of the University of Chicago; a member of the Board of Directors of the Barack Obama Foundation, the Robert F. Kennedy Human Rights, and the National Association of Basketball Coaches (NABC) Foundation, Inc.; and a life trustee of the Chicago Symphony Orchestra. Mr. Rogers served on the Board of Directors of McDonald's Corporation from May 2003 until May 2023 and Exelon Corporation from October 2000 until April 2019. +17 NIKE, INC. +ROBERT SWAN +AGE +DIRECTOR SINCE +COMMITTEE +OTHER CURRENT +PUBLIC DIRECTORSHIPS +FAVORITE NIKE PRODUCTS +63 2022 +Audit & Finance +GoTo Group +Nike Pegasus and Air Jordan +SKILLS, EXPERIENCES AND QUALIFICATIONS +FINANCIAL EXPERTISE +DIGITAL/TECHNOLOGY +HR/TALENT MANAGEMENT +CEO EXPERIENCE +RETAIL INDUSTRY +GOVERNANCE +INTERNATIONAL +Mr. Swan has been an Operating Partner at Andreessen Horowitz since 2021. +• Prior to his current role, Mr. Swan served as the Chief Executive Officer and a member of the Board of Directors of Intel Corp. ("Intel") from 2019 to 2021. Before that appointment, he was appointed to various management positions at Intel, including: +• Interim Chief Executive Officer and Chief Financial Officer from 2018 until 2019 and Chief Financial Officer from 2016 until 2019. +• Prior to joining Intel, Mr. Swan served as Operating Partner at General Atlantic LLC, a private equity firm, from 2015 to 2016. +• He also served as Senior Vice President, Finance and Chief Financial Officer of eBay Inc. ("eBay") from 2006 to 2015. +• Previously, Mr. Swan served as Chief Financial Officer of Electronic Data Systems Corporation, Chief Financial Officer of TRW Inc., as well as Chief Executive Officer, Chief Operating Officer, and Chief Financial Officer of Webvan Group, Inc. Mr. Swan began his career in 1985 at General Electric, serving in numerous senior finance roles. +Mr. Swan is a member of the Board of Commissioners of GoTo Group. In addition to this public company board service, he is also a member of the Board of Directors of Flexport, the American Heart Association, and Kearney. Mr. Swan served on the Board of Directors of eBay Inc. from July 2015 until June 2023 and Intel Corporation from January 2019 until February 2021. +BOARD RECOMMENDATION +The Board of Directors recommends that the Class B Shareholders vote FOR the election of the nominees above to the Board of Directors. +2023 PROXY STATEMENT 18 +INDIVIDUAL BOARD SKILLS MATRIX +EXPERIENCE, EXPERTISE, OR ATTRIBUTES +BENKO +COOK +DONAHOE +DUCKETT +GIL +GRAF +M HENRY +P HENRY +KNIGHT +PARKER +PELUSO +ROGERS +SWAN +DIVERSITY +Gender, racial, or ethnic diversity that adds a range of perspectives and expands the Board's understanding of the needs and viewpoints of consumers, employees, and other stakeholders worldwide. +ü +ü +ü +ü +ü +ü ü +FINANCIAL EXPERTISE +Financial expertise assists our Board in overseeing our financial statements, capital structure, and internal controls. +ü +ü +ü +ü +ü +ü +ü +ü +ü +ü ü ü +CEO EXPERIENCE +CEO experience brings leadership qualifications and skills that help our Board to capably advise, support, and oversee our management team, including regarding our strategy to drive long-term value. +ü +ü +ü +ü +ü +ü ü ü +INTERNATIONAL +International exposure yields an understanding of diverse business environments, economic conditions, and cultural perspectives that informs our global business and strategy and enhances oversight of our multinational operations. +ü +ü +ü +ü +ü +ü +ü +ü +ü ü +DIGITAL/TECHNOLOGY +Technology experience helps our Board oversee cybersecurity and advise our management team as we seek to enhance the consumer experience and further develop our multi-channel strategy. +ü +ü +ü +ü +ü +ü +RETAIL INDUSTRY +Retail experience brings a deep understanding of factors affecting our industry, operations, business needs, and strategic goals. +ü +ü +ü +ü +ü +ü +ü +MEDIA +Media experience provides the Board with insight about connecting with consumers and other stakeholders in a timely and impactful manner. +ü +ü +ACADEMIA +Academia provides organizational management experience and knowledge of current issues in academia and thought leadership. +ü +HR/TALENT MANAGEMENT +HR and talent management experience assists our Board in overseeing executive compensation, succession planning, and employee engagement. +ü +ü +ü +ü +ü +ü +ü ü +GOVERNANCE +Public company board experience provides insight into new and best practices which informs our commitment to excellence in corporate governance. +ü +ü +ü +ü +ü +ü +ü ü ü +19 NIKE, INC. +DIRECTOR NOMINATIONS +The Board of Directors takes an "evergreen" approach to Board refreshment, cultivating relationships with top talent on an ongoing basis. The Corporate Responsibility, Sustainability & Governance Committee identifies potential director candidates through a variety of means, including recommendations from members of the Corporate Responsibility, Sustainability & Governance Committee or the Board, suggestions from Company management, and shareholder recommendations. The committee may, in its discretion, engage director search firms to identify candidates. Shareholders may recommend director candidates for consideration by the Corporate Responsibility, Sustainability & Governance Committee by submitting a written recommendation to the committee, c/o Corporate Secretary, NIKE, Inc., One Bowerman Drive, Beaverton, Oregon 97005-6453. The recommendation should include the candidate's name, age, qualifications (including principal occupation and employment history), and written consent to be named as a nominee in the Company's proxy statement and to serve as a director, if elected. +The Board of Directors has adopted qualification standards for the selection of non-management nominees for director, which can be found at our corporate website: http://investors.nike.com. As provided in these standards and the Company's corporate governance guidelines, nominees for director are selected on the basis of, among other things, distinguished business experience or other non-business achievements; education; significant knowledge of international business, finance, marketing, technology, human resources, diversity, equity, and inclusion, law, or other fields which are complementary to, and balance the knowledge of, other Board members; a desire to represent and serve the interests of all shareholders; independence; good character; ethics; sound judgment; diversity; and ability to devote substantial time to discharge Board responsibilities. +The Corporate Responsibility, Sustainability & Governance Committee identifies qualified potential candidates without regard to their age, gender, race, national origin, sexual orientation, or religion. While the Board has no policy regarding Board member diversity, the Corporate Responsibility, Sustainability & Governance Committee considers and discusses diversity in selecting nominees for director and in the re-nomination of an incumbent director. The committee views diversity broadly to include, among other things, differences in backgrounds, qualifications, experiences, viewpoint, geographic location, education, skills and expertise (including financial, accounting, compliance, corporate social responsibility, public policy, cybersecurity, or other expertise relevant to service on the Board), professional and industry experience, and personal characteristics (including gender, ethnicity/race, and sexual orientation). The Board believes that a variety and balance of perspectives on the Board results in more thoughtful and robust deliberations, and ultimately, better decisions. +In considering the re-nomination of an incumbent director, the Corporate Responsibility, Sustainability & Governance Committee reviews the director's overall service to the Company during his or her term, including the number of meetings attended, level of participation, and quality of performance, as well as any special skills, experience, or diversity that such director brings to the Board. All potential new director candidates, whether recommended by shareholders or identified by other means, are initially screened by the Chair of the Corporate Responsibility, Sustainability & Governance Committee, who may seek additional information about the background and qualifications of the candidate, and who may determine that a candidate does not have qualifications that merit further consideration by the full committee. With respect to new director candidates who pass the initial screening, the Corporate Responsibility, Sustainability & Governance Committee meets to discuss and consider each candidate's qualifications and potential contributions to the Board, and determines by majority vote whether to recommend such candidate to the Board. The final decision to either appoint a candidate to fill a vacancy between annual meetings or include a candidate on the slate of nominees proposed at an annual meeting is made by the Board. +It is the general policy of the Board that directors will not stand for re‑election after reaching the age of 72. +DIRECTOR INDEPENDENCE +Pursuant to New York Stock Exchange ("NYSE") listing rules, in order for a director to qualify as "independent", the Board of Directors must affirmatively determine that the director has no material relationship with the Company that would impair the director's independence. The Board affirmatively determined that commercial or charitable relationships below the following thresholds will not be considered material relationships that impair a director's independence: (1) if a NIKE director or immediate family member is an executive officer of another company that does business with NIKE and the annual sales to, or purchases from, NIKE are less than one percent of the annual revenues of the other company; and (2) if a NIKE director or immediate family member serves as an officer, director, or trustee of a charitable organization, and NIKE's contributions to the organization are less than one percent of that organization's total annual charitable receipts. After applying this categorical standard and the applicable NYSE independence standards, the Board has determined that the following directors who served during fiscal 2023 and/or will stand for election to the Board at the Annual Meeting—Cathleen Benko, Elizabeth Comstock, Timothy Cook, Thasunda Duckett, Mónica Gil, Alan Graf, Jr., Maria Henry, Peter Henry, Michelle Peluso, John Rogers, Jr., and Robert Swan—have no material relationship with the Company and, therefore, are independent. Messrs. John Donahoe II, Travis Knight, and Mark Parker were not independent pursuant to NYSE rules. Messrs. Donahoe and Parker were not independent pursuant to NYSE rules because they were employed by the Company during fiscal 2023. Mr. Knight was not independent pursuant to NYSE rules because he is the son of NIKE's co-founder and former Chairman of the Board, Mr. Philip Knight, who received compensation in excess of the +2023 PROXY STATEMENT 20 +threshold set forth in applicable NYSE rules for his position as Chairman Emeritus. The compensation paid to Mr. Philip Knight is described in the section below titled "Additional Information—Transactions with Related Persons". +BOARD STRUCTURE AND RESPONSIBILITIES +The Board is currently composed of ten independent directors and three directors who are not independent under the NYSE listing rules. During fiscal 2023, there were four meetings of the Board and all of our directors attended at least 75 percent of the total number of meetings of the Board and committees on which he or she served. The Company encourages all directors to attend each annual meeting of shareholders, and all the directors then standing for election attended the 2022 annual meeting. +BOARD LEADERSHIP STRUCTURE +NIKE's governing documents provide the Board with flexibility to select the appropriate leadership structure of the Company. In determining the leadership structure, the Board considers many factors, including the specific needs of the business, fulfilling the duties of the Board, and the best interests of the Company's shareholders. Effective January 2020, the Company separated the position of Chair of the Board from the position of President and CEO, although this is not a permanent policy of the Board. The Executive Chairman, Mr. Mark Parker, presides over meetings of the Board of Directors and shareholders. The President and CEO, Mr. John Donahoe II, is in charge of the general supervision, direction, and control of the business and affairs of the Company, subject to the overall direction and supervision of the Board and its committees. +Given the particular experience and tenure of Messrs. Parker and Donahoe, the Board believes this leadership structure is appropriate for the Company because it separates the leadership of the Board from the duties of day-to-day leadership of the Company. This structure permits Mr. Donahoe to primarily focus his time and attention on the business, while Mr. Parker directs his attention to the broad strategic issues considered by the Board of Directors. This structure works particularly well given the talent, experience and professional relationship of Messrs. Donahoe and Parker established during Mr. Donahoe's service on the Board beginning in 2014. +In 2016, the Corporate Responsibility, Sustainability & Governance Committee established the position of lead independent director to ensure strong independent leadership of the Board. The position of Lead Independent Director is entrusted to execute the following functions: +• serve as a liaison between the Chair and the independent directors; +• approve the meeting agendas for the Board; +• advise the Chair regarding the sufficiency, quality, quantity, and timeliness of information provided to the Board; +• ensure that meeting schedules permit sufficient time for discussion of all agenda items; +• provide consultation and direct communication with major shareholders, if requested; +• preside at meetings of the Board at which the Chair is not present, including executive sessions; and +• perform other duties specified in the Lead Independent Director Charter. +In June 2022, the Board re-appointed Mr. Timothy Cook to serve as Lead Independent Director for a term of three years. Mr. Cook continues to serve as Lead Independent Director of the Company working in collaboration with Messrs. Parker and Donahoe. +The chairs of Board committees also play an active role in the leadership structure of the Board. The Corporate Responsibility, Sustainability & Governance Committee and the Board endeavor to select independent committee chairs who will provide strong leadership to guide the important work of the Board committees. Committee chairs work with the Company's senior executives to ensure the committees are discussing the key strategic risks and opportunities of the Company. In the absence of the Lead Independent Director, a presiding director is appointed to chair executive sessions of non-management directors (consisting of all directors other than Messrs. Parker and Donahoe). The position of presiding director is rotated among the chairs of the various Board committees, other than the Executive Committee. Executive sessions are regularly scheduled and held at least once each year. +Mr. Philip Knight, co-founder and former Chairman of the Company, serves as Chairman Emeritus, with a standing invitation to attend meetings of the Board and its committees as a non-voting observer. The Board believes that it benefits from the valuable experience and insights of the Company's co-founder and former Chairman of the Board. +For all of these reasons, the Board believes this leadership structure is optimal. +21 NIKE, INC. +BOARD COMMITTEES +The Board's current standing committees are an Audit & Finance Committee; a Compensation Committee; a Corporate Responsibility, Sustainability & Governance Committee; and an Executive Committee. The Board may appoint other committees from time to time. Each standing committee has a written charter and all such charters, as well as the Company's corporate governance guidelines, are available at the Company's corporate website, http://investors.nike.com, and will be provided in print to any shareholder who submits a request in writing to NIKE Investor Relations, One Bowerman Drive, Beaverton, Oregon 97005-6453. +AUDIT & FINANCE COMMITTEE +MEMBERS*: +Alan Graf, Jr., Chair +Maria Henry +Peter Henry +Robert Swan +MEETINGS IN FY ’23: 12 +ROLES AND RESPONSIBILITIES: +The Audit & Finance Committee provides assistance to the Board in fulfilling its legal and fiduciary obligations with respect to: +• Matters involving the Company's accounting, auditing, financial reporting, and internal controls; +• Overseeing the Company's financial policies and activities; +• Matters involving information security (including risks related to cyber security) and data protection; +• The integrity of the Company's financial statements and activities of the Company that may have a material impact on the financial position of the Company; +• The Company's compliance with legal and regulatory requirements; +• The independent auditor's qualifications and independence, and the performance of the Company's internal audit function and independent auditor; +• The Company's risk assessment and risk management processes and practices; and +• Considering long-term financing options, long-range tax, financial regulatory and foreign currency issues facing the Company, and management's recommendations concerning capital deployment strategy, major capital expenditures, and material acquisitions or divestitures. +The Board has determined that each member of the Audit & Finance Committee meets all independence and financial literacy requirements applicable to audit committees under the NYSE listing standards and applicable regulations adopted by the U.S. Securities and Exchange Commission (the "SEC"). The Board has also determined that each of Mr. Graf, Ms. Henry, and Mr. Swan is an "audit committee financial expert" as defined in regulations adopted by the SEC. +* Ms. Cathleen Benko served on the Audit & Finance Committee until October 6, 2022. Mr. Robert Swan and Ms. Maria Henry were appointed to the Audit & Finance Committee effective October 7, 2022 and June 1, 2023, respectively. +COMPENSATION COMMITTEE +MEMBERS*: +Cathleen Benko +Timothy Cook, Chair +Mónica Gil +MEETINGS IN FY ’23: 4 +ROLES AND RESPONSIBILITIES: +The Compensation Committee discharges the Board's responsibilities regarding executive and director compensation and senior leadership succession, and its duties include the following: +• Evaluate the performance of the CEO; +• Review and approve the compensation of each executive officer; +• Grant equity incentive awards under the NIKE, Inc. Stock Incentive Plan, and determine targets and awards under the NIKE, Inc. Executive Performance Sharing Plan and the NIKE, Inc. Long-Term Incentive Plan; +• Review and provide guidance to management regarding Company policies, programs, and practices related to talent management and development for executive officers and senior management; and +• Make recommendations to the Board regarding the compensation of directors. +The Board has determined that each member of the Compensation Committee meets all independence requirements applicable to compensation committees under the NYSE listing standards. +* Ms. Elizabeth Comstock served on the Compensation Committee until her retirement from the Board on September 20, 2022. Ms. Mónica Gil was appointed to the Compensation Committee effective September 20, 2022. +2023 PROXY STATEMENT 22 +CORPORATE RESPONSIBILITY, SUSTAINABILITY & GOVERNANCE COMMITTEE +MEMBERS: +Thasunda Duckett +Michelle Peluso, Chair +John Rogers, Jr. +MEETINGS IN FY ’23: 4 +ROLES AND RESPONSIBILITIES: +The Corporate Responsibility, Sustainability & Governance Committee sets the tone and pace for corporate governance and oversees our Purpose to move the world forward through the power of sport, with a focus on the three pillars of people, planet, and play. Its duties include the following: +• Review and evaluate NIKE's significant strategies, activities, policies, investments, and programs regarding social purpose, corporate responsibility, and sustainability; +• Provide oversight of management's efforts to ensure that the Company's dedication to sustainability is reflected in its business operations; +• Monitor the Company's progress towards its diversity, equity and inclusion objectives and compliance with the Company's responsibilities as an equal opportunity employer; +• Review and evaluate the social, political, and environmental impact, trends, and issues in connection with the Company's business activities and make recommendations to the Board; +• Provide oversight of the Company's community and social impact efforts; +• Review transactions with related persons in accordance with the Company's policies; +• Oversee protection of the Company's corporate reputation and other matters of importance to the Company and its stakeholders; +• Continue to identify individuals qualified to become Board members and recommend director nominees for election at each annual shareholder meeting; +• Review and reassess the Company's corporate governance framework, and make recommendations to the Board regarding proposed changes; and +• Oversee the annual self-evaluations of the Board and its committees and make recommendations to the Board concerning the structure and membership of the Board committees. +The Board has determined that each member of the Corporate Responsibility, Sustainability & Governance Committee meets all independence requirements applicable to +nominating/corporate governance committees under the NYSE listing standards. +EXECUTIVE COMMITTEE +MEMBERS: +John Donahoe II +Travis Knight +Mark Parker, Chair +MEETINGS IN FY ’23: 0 +ROLES AND RESPONSIBILITIES: +The Executive Committee is authorized to act on behalf of the Board on all corporate actions for which applicable law does not require participation by the full Board. +• In practice, the Executive Committee acts in place of the full Board only when emergency issues or scheduling conflicts make it difficult or impracticable to assemble the full Board. +• All actions taken by the Executive Committee must be reported at the next Board meeting, or as soon thereafter as practicable. +The Executive Committee held no formal meetings during fiscal 2023, but took action by unanimous written consent. +23 NIKE, INC. +THE BOARD’S ROLE IN RISK OVERSIGHT +While the Company's management team is responsible for day-to-day management of the various risks facing the Company, the Board takes an active role in the oversight of the management of critical business risks. The Board does not view risk in isolation. Risks are considered in virtually every business decision and as part of NIKE's business strategy. The Board recognizes it is neither possible nor prudent to eliminate all risk. Purposeful and appropriate risk-taking is essential for the Company to be competitive on a global basis and to achieve its strategic objectives. +THE BOARD OF DIRECTORS +The Board implements its risk oversight function both as a whole and through committees, which play a significant role in carrying out risk oversight. While the Audit & Finance Committee is responsible for oversight of management's risk management policies, oversight responsibility for particular areas of risk is allocated among the Board committees according to the committee's area of responsibility as reflected in the committee charters. +BOARD COMMITTEES +The AUDIT & FINANCE COMMITTEE oversees risks related to the Company's financial statements, the financial reporting process, accounting, legal matters, investments, access to capital and capital deployment, currency risk and hedging programs, information security (including risks related to cybersecurity), and data protection. The committee oversees the internal audit function, reviews a risk-based plan of internal audits, and reviews a risk-based integrated audit of internal controls over financial reporting. The committee meets separately with the Vice President of Global Audit and Chief Risk Officer, representatives of the independent registered public accountants, and senior management. +The COMPENSATION COMMITTEE oversees risks associated with the Company's compensation philosophy and programs and executive succession and development. +The CORPORATE RESPONSIBILITY, SUSTAINABILITY & GOVERNANCE COMMITTEE oversees risks associated with corporate social purpose and company governance, including NIKE's Code of Conduct and its compliance programs, and the structure and performance of the Board and its committees. The committee also oversees protection of the Company's corporate reputation including issues that involve social and community engagement, workplace diversity, equity, and inclusion, and sustainability relating to the Company's products, its supply chain (including labor practices), and the environment. +EXECUTIVE LEADERSHIP TEAM +Each committee chair works with one or more senior executives assigned to assist the committee in: developing agendas for the year and for each meeting, paying particular attention to areas of business risk identified by management, Board members, internal and external auditors, and in their committee charter; and scheduling agenda topics, presentations, and discussions regarding business risks within their area of responsibility. At meetings, the committees discuss areas of business risk, the potential impact, and management's initiatives to manage business risk, often within the context of important business decisions. Through this process, key business risk areas are reviewed at appropriate times, with some topics reviewed on multiple occasions throughout the year. At every Board meeting, each committee chair provides a report to the full Board outlining the committee's discussions and actions, including those affecting the oversight of various risks. +The Company believes its leadership structure, discussed in detail above, supports the risk oversight function of the Board. Strong directors chair the various committees involved in risk oversight, there is open communication between management and directors, and all directors are involved in the risk oversight function. +THE BOARD’S ROLE IN ESG OVERSIGHT +The Board takes an active role overseeing NIKE's commitment to, and progress on, environmental, social, and governance ("ESG") matters. The Board oversees ESG matters primarily through the Corporate Responsibility, Sustainability & Governance +2023 PROXY STATEMENT 24 +Committee. In addition to overseeing corporate governance (generally, the "G" in "ESG"), this committee also oversees the risks and opportunities associated with NIKE's Purpose to move the world forward through the power of sport, with a focus on the three pillars of people, planet, and play (generally, the "E" and "S" in "ESG"). The committee's responsibilities include reviewing and providing guidance to management regarding significant Purpose strategies, activities, policies, investments, and programs; reviewing the development of NIKE's five-year Purpose targets and long-term sustainability targets, and monitoring the Company's progress towards those targets; and reviewing and providing guidance to management regarding NIKE's annual Impact Report, which describes our progress towards our Purpose targets for our shareholders and other stakeholders. The Compensation Committee also plays a key role with respect to ESG by overseeing talent management and development for executive officers and senior management, including with respect to employee engagement and workplace diversity, equity, and inclusion. More information about Purpose, including NIKE's annual Impact Report, is available on the Impact section of our website. +SHAREHOLDER COMMUNICATIONS WITH DIRECTORS +Shareholders or interested parties desiring to communicate directly with the Board or with any individual director may do so in writing addressed to the intended recipient or recipients, c/o Corporate Secretary, NIKE, Inc., One Bowerman Drive, Beaverton, Oregon 97005-6453. The Office of the Corporate Secretary reviews all such communications and refers relevant correspondence directly to a director, as appropriate. In addition, the Office of the Corporate Secretary regularly summarizes for the Board all communications that relate to the functions of the Board or its committees or that otherwise warrant Board attention. +CODE OF CONDUCT +The NIKE Code of Conduct is available at the Company's corporate website, http://investors.nike.com, and will be provided in print without charge to any shareholder who submits a request in writing to NIKE Investor Relations, One Bowerman Drive, Beaverton, Oregon 97005-6453. The Code of Conduct applies to all of the Company's employees and directors, including our CEO and all other executive officers. The Code of Conduct provides that any waiver of the Code of Conduct for executive officers or directors may be made only by the Board or a committee of the Board. Any such waiver will be publicly disclosed, when required by law. The Company plans to disclose amendments to, and waivers from, the Code of Conduct on the Company's corporate website: http://investors.nike.com. +CAPITAL STRUCTURE +Since NIKE's initial public offering in 1980, the Company's articles of incorporation have provided for NIKE to have two classes of voting stock, consisting of the Class A Stock and the Class B Stock. +RIGHTS AND HOLDERS OF COMMON STOCK +The shares of Class A Stock and Class B Stock have identical voting and economic rights except that the holders of the Class A Stock and Class B Stock vote as separate classes for purposes of electing directors. As long as the number of outstanding shares of Class B Stock is between 25% and 87.5% of the total number of outstanding shares of Common Stock (as is currently the case), the holders of the Class B Stock, voting as a separate class, have the right to elect 25% of the Board (rounded up to the nearest whole number) and the holders of the Class A Stock, voting as a separate class, have the right to elect the remaining directors. If at any time the outstanding number of shares of Class A Stock is less than 12.5% of the total number of outstanding shares of Common Stock, then the Class B Stock, voting as a separate class, will continue to have the right to elect 25% of the Board (rounded up to the nearest whole number), and the Class A Stock and Class B Stock will vote together as a single class to elect the remaining directors. +Because there are currently thirteen directors on the Board and the outstanding number of shares of Class B Stock is between 25% and 87.5% of the outstanding shares of Common Stock, the holders of the Class B Stock are entitled to elect four directors at the Annual Meeting and the holders of the Class A Stock are entitled to elect the remaining nine. On all other matters besides the election of directors (including Proposals 2, 3, 4, 5, and 6), the Class A Stock and Class B Stock vote together as a single class, each with one vote per share. +25 NIKE, INC. +Each share of Class A Stock is convertible into one share of Class B Stock. Such conversion is solely at the option of the holder, and cannot be dictated by either the Company or the Board. The Class A Stock is currently primarily held by Swoosh, LLC, an entity that was formed by Mr. Philip Knight, NIKE's co-founder, in 2015 to hold the majority of his shares of Class A Stock. +For additional information regarding NIKE's classes of Common Stock, see the description of the Company's securities included as Exhibit 4.7 to NIKE's Annual Report on Form 10-K for fiscal 2023. For additional information regarding key holders of the Class A Stock and Class B Stock, see the section below titled "Stock Ownership Information—Stock Holdings of Certain Owners and Management". +STRUCTURAL ADVANTAGES +Our unique capital structure enables NIKE to focus on long-term strategy, which our Board believes is critical to creating long-term value. This long-term vision has enabled the Company to prioritize research and development and innovation, to invest in transformations in support of our strategic objectives, and to integrate Purpose into our business strategy. It has also helped to preserve and advance NIKE's unique culture, which we believe powers our success. +At the same time, our capital structure meaningfully protects and represents the interests of our public Class B shareholders. All of our directors, regardless of which class of Common Stock elected them, have fiduciary duties to act in the best interests of all NIKE shareholders. In addition, all directors are subject to the same nomination and evaluation processes, which are described in the section above titled "NIKE, Inc. Board of Directors—Director Nominations", and the Board considers all directors when assessing the mixture of experience, attributes, and skills represented on the Board. All of the directors elected by our Class B shareholders, as well as six out of nine of the directors elected by our Class A shareholders, are independent, and only independent directors sit on the Audit & Finance Committee, the Compensation Committee, and the Corporate Responsibility, Sustainability & Governance Committee. +INVESTOR FEEDBACK +Although the Board cannot change or eliminate our dual class capital structure without the approval of the holders of the Class A Stock, the Company believes it is important to engage regularly with Class B shareholders to understand their views on NIKE's capital structure. The majority of shareholders with whom we engaged since our last annual meeting expressed that they did not have concerns with the Company's dual class structure in light of the fact that it provides for equal voting and economic rights on all matters other than the election of directors, as well as the Company's long history of strong corporate governance practices, effective Board composition, and extensive shareholder engagement. However, some shareholders expressed a desire for the slate of Class B director nominees to include a member from each of the key Board committees and to be refreshed more frequently. In response to that feedback, the Company's Class B slate was updated for this Annual Meeting to include a balance of continuing and new Class B director nominees and to include a member of each of the three key Board committees: the Audit & Finance Committee, the Compensation Committee, and the Corporate Responsibility, Sustainability & Governance Committee. +SHAREHOLDER ENGAGEMENT +Our approach to governance is informed by the insights and perspectives of our Class B shareholders. We greatly value the opportunity to engage with and solicit feedback from our shareholders regarding matters involving the Company, with a focus on ESG matters, and we believe that maintaining an open dialogue strengthens the Company's approach to its corporate governance practices and disclosures. Below is an overview of the Company's fiscal 2023 engagement practices regarding ESG matters. These ESG-related engagements take place in addition to regular financial-related outreach led by our Investor Relations team and engagement with shareholder proponents led by our Office of the Corporate Secretary. +INTEGRATED ENGAGEMENT TEAM TYPES OF ENGAGEMENT KEY FY23 ENGAGEMENT TOPICS +• Independent Directors +• Investor Relations +• Total Rewards and Executive Compensation +• Office of the Corporate Secretary +• Sustainability +• Responsible Supply Chain +• One-on-one meetings +• Small group calls +• E-mail communications +• Board composition +• Risk oversight +• Capital structure +• Executive compensation +• Purpose strategy +• Responsible sourcing +• Environmental sustainability +• Diversity, equity, and inclusion +In fiscal 2023, we engaged with shareholders representing 52% of our Class B shares +2023 PROXY STATEMENT 26 +The Board is committed to understanding the views of our shareholders. Therefore, independent members of our Board—consisting of the Chair of our Corporate Responsibility, Sustainability & Governance Committee as well as our Lead Independent Director and Chair of our Compensation Committee—actively participated in engagements with certain of the Company's largest investors during fiscal 2023. In addition, management and our Board leadership ensures that key themes and feedback that emerge during these engagements are reported back to the full Board and any relevant committees, so that we can continue to refine and adapt our practices to better address the issues that our shareholders raise with us. +The Board and management carefully consider and integrate shareholder feedback into the Company's practices and disclosures. Recent changes to our practices include refreshing the slate of Class B director nominees for this Annual Meeting (as described in the section above titled "Capital Structure—Investor Feedback"); refining our fiscal 2023 executive compensation program, including by increasing the proportion of the long-term incentive mix delivered in the form of performance-based restricted stock units (as described in the section below titled "Executive Compensation—Compensation Discussion and Analysis—Executive Summary—Say-on-Pay Results and Response"); and revising the NIKE, Inc. Policy on Public Policy and Political Activities in fiscal 2022 to increase transparency regarding political contributions. We have also enhanced our proxy statement disclosures over the past several years in response to shareholder feedback, including providing additional detail and transparency regarding Board diversity, Board oversight of ESG, and our capital structure. +DIRECTOR COMPENSATION FOR FISCAL 2023 +NAME (1) +FEES EARNED OR +PAID IN CASH +($) +STOCK +AWARDS (2)(3) +($) +CHANGE IN +PENSION VALUE AND +NONQUALIFIED DEFERRED +COMPENSATION EARNINGS +($) +ALL OTHER +COMPENSATION (4) +($) +TOTAL +($) +Cathleen Benko (5) +101,745 200,190 — 19,995 321,890 +Elizabeth Comstock (6) +27,473 — — — 27,473 +Timothy Cook 165,000 200,190 — — 365,190 +Thasunda Duckett 100,000 200,190 — 20,000 320,190 +Mónica Gil (7) +69,780 190,092 — — 259,872 +Alan Graf, Jr. 135,000 200,190 — — 335,190 +Peter Henry 105,000 200,190 — 12,500 317,690 +Travis Knight 100,000 200,190 — — 300,190 +Michelle Peluso 125,000 200,190 — 97,140 422,330 +John Rogers, Jr. 100,000 200,190 — — 300,190 +Robert Swan (7)(8) +73,035 190,092 — 20,000 283,127 +(1) Does not include Maria Henry, who was appointed to the Board effective June 1, 2023. +(2) Represents the grant date fair value of restricted stock awards granted in fiscal 2023 computed in accordance with accounting guidance applicable to stock-based compensation. The grant date fair value is based on the closing market price of our Class B Stock on the grant date. As of May 31, 2023, Ms. Gil and Mr. Swan held 1,856 shares of unvested restricted stock and each other non-employee director then serving held 1,804 shares of unvested restricted stock. +(3) As of May 31, 2023, Mr. Cook held options for 14,000 shares of our Class B Stock, and no other non-employee director held outstanding options. +(4) For Ms. Peluso, consists of $20,000 in matched contributions to charities, $76,060 in security services, and the value of Company-related merchandise. For the other directors, consists of matched contributions to charities in the following amounts: Ms. Benko, $19,995; Ms. Duckett, $20,000; Mr. Henry, $12,500; and Mr. Swan $20,000. +(5) Ms. Benko served on the Audit & Finance Committee through October 6, 2022, therefore her Audit & Finance Committee annual retainer was prorated. +(6) Ms. Comstock did not stand for re-election at our 2022 annual meeting of shareholders and retired effective September 9, 2022, therefore her annual retainer was prorated. +(7) Ms. Gil and Mr. Swan were appointed to the Board on September 20, 2022, therefore their annual retainers were prorated. +(8) Mr. Swan was appointed to the Audit & Finance Committee effective October 7, 2022, therefore his Audit & Finance Committee annual retainer was prorated. +DIRECTOR FEES AND ARRANGEMENTS +Under our director compensation program in effect for fiscal 2023, non-employee directors receive: +• An annual retainer of $100,000, paid in quarterly installments. +• Upon appointment to the Board, a one-time, sign-on restricted stock award valued at $200,000 on the date of grant, generally, the date of appointment. The one-time, sign-on restricted stock award is subject to forfeiture in the event that service as a director terminates prior to the first anniversary of the date of grant. +27 NIKE, INC. +• An annual restricted stock award valued at $200,000 on the date of grant, generally, the date of each annual meeting of shareholders. The number of restricted shares granted to each director for fiscal 2023 was determined by dividing the director's award value by the average closing price of our Class B Stock for the 20-trading day period ending on the date of grant. The annual restricted stock award is subject to forfeiture in the event that service as a director terminates prior to the earlier of the next annual meeting and the last day of the 12 th full calendar month following the date of grant. +• For the Lead Independent Director, an annual retainer of $40,000, paid in quarterly installments. +• For chairs of Board committees (other than the Executive Committee), an annual retainer of $25,000 for each committee chaired ($30,000 for the chair of the Audit & Finance Committee), paid in quarterly installments. +• For Audit & Finance Committee members, an additional annual retainer of $5,000, paid in quarterly installments. +• Payment or reimbursement of travel and other expenses incurred in attending Board meetings. +• Matching charitable contributions under the NIKE Matching Gift Program, under which directors are eligible to contribute to qualified charitable organizations and the Company provides a matching contribution to the charities in an equal amount, up to $20,000 in the aggregate, for each director annually. +Neither Mr. Donahoe nor Mr. Parker received any additional compensation for services provided as a director in fiscal 2023. +STOCK OWNERSHIP GUIDELINES FOR DIRECTORS +NIKE maintains stock ownership guidelines for all non-employee directors. Under these guidelines, directors are required to hold NIKE stock valued at five times their annual cash retainer. New directors are required to attain these ownership levels within five years of their election to the Board. Each of our directors has met or is on track to meet the specified ownership level. +DIRECTOR PARTICIPATION IN DEFERRED COMPENSATION PLAN +Under our Deferred Compensation Plan, non-employee directors may elect in advance to defer up to 100 percent of the director fees paid by the Company. For a description of the plan, see the section below titled "Executive Compensation—Executive Compensation Tables—Non-Qualified Deferred Compensation in Fiscal 2023—Non-Qualified Deferred Compensation Plans". +2023 PROXY STATEMENT 28 +EXECUTIVE COMPENSATION +PROPOSAL 2 +SHAREHOLDER ADVISORY VOTE TO APPROVE +EXECUTIVE COMPENSATION +In accordance with the requirements of Section 14A of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), we are submitting to shareholders our annual "say-on-pay proposal", an advisory vote to approve the compensation of our Named Executive Officers as described in this proxy statement. +At our 2022 annual meeting of shareholders, approximately 65% of the votes cast on the say-on-pay proposal were voted in favor of the proposal, which indicated that there was a continuing opportunity for us to further understand our shareholders' feedback and take action to be responsive. Therefore, as further described in this section, during fiscal 2023 members of management and the Board continued to engage with shareholders to better understand and address their concerns. +As discussed in this section, our executive compensation program is designed to attract and retain top-tier talent and maximize shareholder value. To achieve the objectives of our executive compensation program and emphasize pay-for-performance principles, the Compensation Committee has continued to employ strong governance practices, including: +• basing a majority of total compensation on performance and retention incentives; +• setting incentive award targets based on clearly disclosed, objective performance measures; +• mitigating undue risk associated with compensation by using multiple performance targets, caps on potential incentive payments, and a clawback policy; and +• requiring executive officers to hold NIKE stock through published stock ownership guidelines. +Because your vote is advisory, it will not be binding on the Board. However, the Board values shareholder opinions, and the Compensation Committee will take into account the outcome of the vote when considering future executive compensation arrangements. +BOARD RECOMMENDATION +The Board of Directors recommends that shareholders vote FOR approval of the following resolution: +RESOLVED, that the shareholders approve the fiscal 2023 compensation paid to the Named Executive Officers as disclosed in this proxy statement pursuant to the SEC's compensation disclosure rules (which disclosure includes the Compensation Discussion and Analysis, the compensation tables, and the narrative disclosures that accompany the compensation tables). +29 NIKE, INC. +COMPENSATION DISCUSSION AND ANALYSIS +This Compensation Discussion and Analysis describes our compensation program, philosophy, decisions, and process for the compensation of our Named Executive Officers for fiscal 2023: +NAMED EXECUTIVE OFFICER +TITLE 1 +John Donahoe II President and Chief Executive Officer +Mark Parker Executive Chairman +Matthew Friend Executive Vice President and Chief Financial Officer +Andrew Campion Chief Operating Officer +Heidi O'Neill President, Consumer and Marketplace +(1) Reflects titles as of May 31, 2023, which was the last day of fiscal 2023. Effective June 1, 2023, the first day of fiscal 2024, Mr. Campion ceased serving as Chief Operating Officer and became NIKE's Managing Director, Strategic Business Ventures, and Ms. O'Neill became NIKE's President, Consumer, Product & Brand. +This Compensation Discussion and Analysis is organized into four sections: +• Executive Summary (page 31) +• Compensation of Our Named Executive Officers (page 34) +• Our Compensation Process (page 41) +• Other Compensation Practices (page 42) +Key Defined Terms +TERM DEFINITION +401(k) Plan 401(k) Savings and Profit Sharing Plan for Employees of NIKE, Inc. +Absolute TSR Company total shareholder return for the applicable performance period +Adjusted Digital Revenue +Company revenue generated through sales on NIKE digital platforms, excluding the impact of acquisitions and divestitures; changes in accounting principles; unanticipated restructurings; unanticipated exchange rate fluctuations; other extraordinary, unusual, or infrequently occurring items; and the unanticipated impact from Nike Virtual Studios and RTFKT +Adjusted EBIT EBIT, excluding the impact of acquisitions and divestitures; changes in accounting principles; unanticipated restructurings; unanticipated exchange rate fluctuations; other extraordinary, unusual, or infrequently occurring items; and the unanticipated impact from Nike Virtual Studios and RTFKT +Adjusted Revenue +Company revenue, excluding the impact of acquisitions and divestitures; changes in accounting principles; unanticipated restructurings; unanticipated exchange rate fluctuations; other extraordinary, unusual, or infrequently occurring items; and the unanticipated impact from Nike Virtual Studios and RTFKT +CD&A Compensation Discussion and Analysis +EBIT Company earnings before interest and taxes +LTIP NIKE, Inc. Amended and Restated Long-Term Incentive Plan +NEO Named Executive Officer +PSP NIKE, Inc. Executive Performance Sharing Plan +PSU Performance-based restricted stock unit +Relative TSR Absolute TSR for the applicable performance period relative to total shareholder return over the same period for the other companies in the S&P 500 +RSU Time-vesting restricted stock unit +SIP NIKE, Inc. Stock Incentive Plan +2023 PROXY STATEMENT 30 +EXECUTIVE SUMMARY +SAY-ON-PAY RESULTS AND RESPONSE +SCOPE OF OUTREACH & ENGAGEMENT +Our annual say-on-pay vote is one of our opportunities to receive feedback from shareholders regarding our executive compensation program, and as such is taken very seriously by the Compensation Committee and Board. In 2022, our executive compensation program received the support of approximately 65% of the total votes cast at our annual meeting of shareholders. This reflected a slight decrease in support compared to the 2021 say-on-pay vote, indicating to the Compensation Committee and the Board that there was an opportunity to further understand and consider investor perspectives on the recent changes to our compensation program and take additional responsive actions to address any ongoing concerns. As a result, we continued to actively seek feedback from shareholders and build on our record of responsiveness, reaching out to shareholders owning approximately 50% of outstanding shares of our Class B Stock and speaking with shareholders owning approximately 48% of outstanding shares of our Class B Stock. Our Lead Independent Director and Compensation Committee Chair, Timothy Cook, and our Corporate Responsibility, Sustainability & Governance Committee Chair, Michelle Peluso, participated in conversations with shareholders owning approximately 22% of outstanding shares of our Class B Stock. All feedback was shared with the Board and helped to shape the changes made to our executive compensation program and related disclosure, as set forth in this year's CD&A. +Engaged with +100% +of our top 10 institutional shareholders +Through this engagement, we learned that shareholders were generally supportive of changes made to our compensation program over the past two years, which have strengthened the alignment of our executives’ interests with those of our shareholders, continued our practice of tying compensation to progress on our Purpose targets, and reinforced our one-team culture. Shareholders also provided helpful feedback on fiscal 2022 compensation decisions and the continued evolution of our long-term incentive program, which informed a number of responsive actions described below. +While some shareholders understood the rationale for adjustments to the fiscal 2022 PSP given the unforeseen continued impacts of COVID-related disruptions in key geographies, others sought further clarification regarding the Compensation Committee's decision-making process, including its consideration of retention implications and its application of discretion under our "pay for performance" philosophy. During our conversations with shareholders, we discussed the challenges of setting rigorous targets in light of market uncertainty and the desire among shareholders to maintain a program design that prioritizes pay for performance and retention of top-tier talent, and aligns executive incentives with shareholder interests. These continue to be top priorities for NIKE, as reflected in our practices and disclosures with respect to our fiscal 2023 PSP. +We also discussed the continued evolution of the structure of our long-term incentive program, after replacing the cash-based LTIP awards with stock-based PSU awards beginning with the fiscal 2022 – 2024 performance period. This marked a significant shift in NIKE's program structure, and therefore required a transition period to phase-in delivering 50% of the long-term incentive awards in the form of PSUs. Shareholders broadly appreciated this commitment, but some expressed the desire for additional clarity on the specific timeline. The proportion of the total long-term incentive mix delivered in the form of PSUs was significantly increased for fiscal 2023 for all executive officers (excluding the Executive Chairman, who did not receive any new LTIP or PSU awards after fiscal 2021), and the phase-in will be completed with the fiscal 2024 awards. Shareholders also appreciated our additional proxy disclosure, including the Annual Direct Compensation Table, explaining the artificially inflated values in the Summary Compensation Table due to the shift to PSUs, which we have continued to provide in this year's proxy statement. +Our engagements with shareholders also provided the opportunity to discuss our continued incorporation of the "People & Planet" modifier into long-term incentive awards. Shareholders appreciated our thoughtful approach to the incorporation of progress on our Purpose targets as a consideration in executive compensation and supported the continued incorporation of the modifier. The fiscal 2021 – 2023 LTIP awards are the first to feature this modifier, and we have included robust disclosure in this CD&A regarding the methodology and rationale underlying the earnout, in line with feedback received from shareholders. +The Board and Compensation Committee greatly value these engagements with shareholders and are committed to maintaining ongoing dialogue and incorporating shareholder feedback into the design of the executive compensation program going forward. +31 NIKE, INC. +The following table summarizes feedback themes we heard from shareholders and actions taken to be responsive: +WHAT WE HEARD HOW WE RESPONDED +Shareholders supported increasing the proportion of the total long-term incentive mix (PSUs, stock options, and RSUs) delivered in the form of PSUs to 50%, and recommended clarifying the timeline for implementing that change +• For fiscal 2023 awards, significantly increased the proportion of the total long-term incentive mix delivered in the form of PSUs to all executive officers who received PSUs, with 46% of CEO awards delivered as PSUs +• For fiscal 2024 awards, increasing the proportion of the total long-term incentive mix delivered in the form of PSUs to 50% for all executive officers who receive PSUs +• Committed to maintain at least 50% PSUs on a go-forward basis +Shareholders had mixed reactions to adjusting upwards the payout for fiscal 2022 PSP awards, with some shareholders objecting to the principal of upward adjustments and other shareholders supporting the adjustment based on the specific circumstances and methodology +• Confirmed that the Compensation Committee generally seeks to avoid upward adjustments to incentive plan payouts, and carefully considers any such adjustments to ensure the compensation program continues to pay for performance and retain top-tier talent +Shareholders continued to support the inclusion of the People & Planet modifier in long-term incentive awards, and expressed interest in understanding the methodology underlying long-term incentive award payout determinations +• Continued incorporating People & Planet modifier in fiscal 2023 – 2025 PSU awards +• Provided robust disclosure in this proxy statement regarding the methodology and rationale underlying the earnout of the People & Planet modifier for the 2021 – 2023 LTIP awards (the first awards to feature this modifier) +Shareholders understood that replacing cash-based LTIP awards with PSUs would artificially inflate values in the Summary Compensation Table for fiscal years 2022 and 2023 due to SEC rules +• Continued to include the Fiscal 2023 Annual Direct Compensation Table to clearly communicate how the Compensation Committee views compensation awarded for fiscal 2023 +GUIDING COMPENSATION PRINCIPLES +• To drive business results and maximize shareholder value, our executive compensation is highly incentive-based. +• To emphasize long-term performance, increase alignment between executives and shareholders, and support retention, incentive compensation is weighted towards long-term awards. +• To foster teamwork and ensure internal pay equity, we utilize a cohort approach by aligning compensation across executive roles. +• To ensure that our executive compensation program supports our business strategy and talent plan, we determine cohort compensation levels by holistically considering factors relating to our business, the competitive market for top-tier talent, and the applicable executives. +ANNUAL DIRECT COMPENSATION ELEMENTS +NIKE's annual direct compensation for the Named Executive Officers generally consists of the following elements: +ELEMENT KEY CHARACTERISTICS PURPOSE +Base Salary Fixed cash compensation Provides market competitive baseline compensation to attract and retain top-tier talent +Annual Cash Incentive Award – PSP Variable cash incentive compensation earned at 0% – 150% based on Company performance over a 1-year performance period Motivates and rewards achievement of sustainable and profitable growth +Long-Term Incentive Awards – SIP +PSUs (1) +Variable stock-based incentive compensation earned at 0% – 200% based on Company performance over a 3-year performance period; value dependent upon achievement of performance metrics and our stock price Aligns NEOs' interests with those of our shareholders by motivating and rewarding achievement of long-term shareholder value and growth; promotes retention +Stock Options Stock-based incentive compensation that generally vests in 4 equal annual installments; only provides value if our stock price appreciates Aligns NEOs' interests with those of our shareholders by rewarding achievement of upside potential; promotes retention +RSUs Stock-based incentive compensation that generally vests in 3 equal annual installments; value tied to our stock price Aligns NEOs' interests with those of our shareholders by rewarding long-term value creation; promotes retention +(1) Prior to fiscal year 2022, this portion of annual direct compensation was delivered in the form of cash-based awards under our LTIP. LTIP awards granted in fiscal 2021 were earned based on Company performance over fiscal years 2021 – 2023; their payout is described in the section below titled "Compensation of our Named Executive Officers—Long-Term Incentive—Fiscal 2021 Award Results" and included in the Summary Compensation Table as part of fiscal 2023 compensation due to SEC rules. There are no other outstanding LTIP awards. +2023 PROXY STATEMENT 32 +FISCAL 2023 ANNUAL DIRECT COMPENSATION TABLE +In fiscal 2022, the Compensation Committee replaced cash-based LTIP awards with PSUs. Both types of awards are earned based on Company performance over a three-year performance period. Because SEC rules require that we report in the Summary Compensation Table cash-based incentive awards for the year earned and stock-based incentive awards for the year granted, for fiscal 2023 the Summary Compensation Table reflects both the payout of the fiscal 2021 – 2023 LTIP awards (which were awarded as part of fiscal 2021 annual compensation) and the grant of the fiscal 2023 – 2025 PSUs (which were awarded as part of fiscal 2023 annual compensation). The table below supplements the Summary Compensation Table, which appears on page 44. By excluding (1) the payout of the fiscal 2021 – 2023 LTIP awards and (2) perquisites, including the enhanced charitable match benefits provided to Messrs. Donahoe and Parker that are not actually received by these executives, we believe that the table below more accurately reflects how the Compensation Committee views fiscal 2023 annual direct compensation. +NAME (1) +SALARY +PSP (2) +PSUs (3) +RSUs (3) +STOCK OPTIONS (3) +TOTAL +John Donahoe II $1,500,000 $3,570,000 $10,250,484 $2,969,971 $7,247,371 $25,537,826 +Mark Parker $1,000,000 — — — $2,300,765 $3,300,765 +Matthew Friend +$1,221,154 $1,785,000 $2,595,059 $1,484,986 $2,415,790 $9,501,989 +Andrew Campion $1,250,000 $1,785,000 $2,595,059 $1,484,986 $2,415,790 $9,530,835 +Heidi O'Neill $1,250,000 $1,785,000 $2,595,059 $1,484,986 $2,415,790 $9,530,835 +(1) The above table is not a substitute for the Summary Compensation Table set forth on page 44 of this proxy statement. The amounts in this table differ from the amounts determined under SEC rules as reported for fiscal 2023 in the Summary Compensation Table. +(2) Reflects fiscal 2023 annual cash incentive awards under the PSP. These PSP awards were paid at 119% based on Company performance during fiscal 2023, as described in the section below titled "Compensation of our Named Executive Officers—Annual Cash Incentive". +(3) Reflects fiscal 2023 grants of long-term incentive compensation—granted in the form of PSUs, RSUs, and stock options—computed, in each case, in accordance with accounting guidance applicable to stock-based compensation. PSUs will be earned between 0% and 200% of target based on Company performance during the fiscal 2023 – 2025 performance period. +EXECUTIVE COMPENSATION GOVERNANCE PRACTICES +WHAT WE DO +WHAT WE DON’T DO +ü Base a majority of total compensation on performance and retention incentives +ü Mitigate risk by using multiple performance periods and metrics, incentive payment caps, and a clawback policy +ü Base incentive awards on clearly disclosed, objective performance goals +ü Maintain robust stock ownership guidelines +ü Vest stock-based awards over time to promote long-term performance and retention +ü Provide only double-trigger change-in-control acceleration for stock-based awards +û No retirement acceleration for PSUs or RSUs +û No dividend equivalents paid on PSUs or RSUs unless and until shares are earned +û No repricing of stock options +û No hedging transactions or short sales permitted +û No pension or supplemental executive retirement plan +û No tax gross-ups for perquisites +û No cash-based change-in-control benefits +û No excise tax gross-ups upon change of control +33 NIKE, INC. +COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS +COMPENSATION OBJECTIVES AND STRUCTURE +Our executive compensation program is designed to attract and retain top-tier talent in a competitive marketplace and to maximize shareholder value by rewarding NEOs for strong Company performance. The program generally consists of annual direct compensation, with a focus on incentive compensation, and competitive benefits that are generally consistent with the benefits offered to our other U.S.-based employees. +We structure our executive compensation program in the context of our business strategy and talent plan. To foster teamwork and ensure internal pay equity, we utilize a segmented cohort approach that aligns compensation across certain executive roles. Cohort compensation levels are determined by holistically considering factors such as future potential, individual performance, market insights, succession planning, retention, and leadership continuity. New executives are phased into a cohort by taking into consideration their relative experience, expected contributions, and market position. +Our philosophy is to "pay for performance" in order to drive business results and maximize shareholder value. As a result, executive compensation is highly incentive-based and weighted towards long-term awards to emphasize long-term performance and support retention. Our executive compensation program balances performance incentives, including by using multiple performance metrics and periods, and through a mixture of cash- and stock-based compensation elements. Stock-based compensation—which consists of PSUs, stock options, and RSUs—is also structured to pay for performance by linking the majority of each NEO's target total annual direct compensation directly to our stock price. The following chart illustrates the mix of components that make up fiscal 2023 target total annual direct compensation for our CEO. +BASE SALARY +Base salary is a fixed element of compensation that serves to attract and retain top-tier talent. Generally, the Compensation Committee reviews and determines base salaries for our Named Executive Officers in June, with any adjustments becoming effective in August of the same year. For fiscal 2023, the Compensation Committee increased Mr. Friend's base salary to align with his applicable cohort. Base salaries for each other NEO remained unchanged compared to fiscal 2022. +NAMED EXECUTIVE OFFICER FISCAL 2023 BASE SALARY +% CHANGE (1) +John Donahoe II $1,500,000 0% +Mark Parker $1,000,000 0% +Matthew Friend $1,250,000 13.6% +Andrew Campion $1,250,000 0% +Heidi O'Neill $1,250,000 0% +(1) Represents the change in base salary compared to fiscal 2022. +2023 PROXY STATEMENT 34 +ANNUAL CASH INCENTIVE +Annual cash incentive awards are paid to the Named Executive Officers under our PSP. PSP awards reflect our "pay for performance" philosophy: they are earned between 0% and 150% of target based on Company performance during the fiscal year. The Compensation Committee retains discretion to adjust PSP metrics and award payouts based on individual or Company performance. To align employees and reinforce our one-team culture, the same compensation philosophy and metrics that underlie our PSP awards generally apply to all global employees who are eligible to participate in the Company's success through annual incentive bonuses. +For fiscal 2023, the Compensation Committee maintained PSP target awards for each Named Executive Officer at the same level as his or her fiscal 2022 PSP target award. Therefore, the fiscal 2023 PSP target awards were: +NAMED EXECUTIVE OFFICER FISCAL 2023 PSP TARGET AWARD +(% OF BASE SALARY) +John Donahoe II 200% +Mark Parker 0% +Matthew Friend 120% +Andrew Campion 120% +Heidi O'Neill 120% +In June 2022, the Compensation Committee selected three equally-weighted metrics for the fiscal 2023 PSP awards, designed to support our strategic priorities and drive sustainable and profitable growth. Consistent with the prior year, the fiscal 2023 PSP metrics consisted of: (1) Adjusted Revenue, to drive topline income; (2) Adjusted Digital Revenue, to support digital growth in connection with our Consumer Direct Acceleration strategy; and (3) Adjusted EBIT, to manage overall profitability. Also consistent with the prior year, the committee maintained a single, year-long performance period and set year-long goals for each metric. +In setting the year-long performance goals for the PSP, the Compensation Committee sought to drive sustainable and profitable growth in the context of a business environment characterized by significant potential volatility. In particular, the committee anticipated potential volatility due to outsized macro-economic factors, such as the impact of inflationary pressures on consumer confidence, and geopolitical factors. Accordingly, the Adjusted Revenue and Adjusted Digital Revenue target goals represented an increase of 6% and 15%, respectively, compared to actual fiscal 2022 revenue and digital revenue. The Adjusted EBIT target goal represented a decrease of 4% compared to actual fiscal 2022 EBIT, reflecting anticipated currency headwinds. Threshold and maximum goals for each metric were set non-equidistant from the applicable target goal, with additional downside stretch to balance achievability (in support of continued retention) with appropriate upside stretch (to incentivize and reward exceptional performance). +In support of our one-team culture, the fiscal 2023 broad-based annual bonus plan (applicable to employees below the executive officer level) used the same metrics as the PSP and also weighted them equally. However, the broad-based annual bonus plan used two equally-weighted, six-month performance periods to reduce the potential impact of volatility and thereby enable more aggressive target setting. To balance the commitment to a year-long performance period for the PSP with support for our one-team culture, the Compensation Committee determined in June 2022 that the payout level for the fiscal 2023 PSP would not exceed the payout level for the fiscal 2023 broad-based annual bonus plan, and committed to use its negative discretion to reduce the PSP payout level if necessary. +For fiscal 2023, Adjusted Revenue of $52.6 billion corresponded to an earnout of 150%, Adjusted Digital Revenue of $13.7 billion corresponded to an earnout of 137%, and Adjusted EBIT of $7.2 billion corresponded to an earnout of 147%. The earnouts for the three equally-weighted metrics were averaged together to calculate a PSP earnout of 145%. The Compensation Committee then considered that the payout level for the broad-based annual bonus plan (applicable to employees below the executive officer level) was 119% as a result of that plan using six-month performance periods. Consistent with our one-team culture as well as the Compensation Committee's determination at the beginning of fiscal 2023 that the PSP payout level would not exceed the payout level under the broad-based annual bonus plan, the committee reduced the payout level under the fiscal 2023 PSP to 119% for all executive officers. The fiscal 2023 PSP performance goals and achievement levels, and the Compensation Committee's decision-making, are illustrated below. +35 NIKE, INC. +FISCAL 2023 PERFORMANCE GOALS AND RESULTS +(Dollars in millions) +% PAYOUT +THRESHOLD +50% +TARGET +100% +MAXIMUM +150% +Adjusted Revenue (1) +(Weighted 33.3%) +EARNOUT: +150% +Adjusted Digital Revenue (1) +(Weighted 33.3%) +EARNOUT: +137% +Adjusted EBIT (1) +(Weighted 33.3%) +EARNOUT: +147% +CALCULATED PSP EARNOUT 145% +ONE-TEAM CULTURE +• Payout under the broad-based annual bonus plan—based on the same equally-weighted metrics, but using two equally-weighted, six-month performance periods—was 119% +• Compensation Committee exercised negative discretion to reduce the PSP payout to equal the payout under the broad-based annual bonus plan, consistent with our one-team culture +FINAL FISCAL 2023 PSP PAYOUT 119% +(1) As described on page 30, each metric excluded the impact of certain non-operational events, to help drive and reward organic growth, as well as the unanticipated impact related to certain virtual products, due to the volatility inherent in the virtual products market and to help incubate the expansion of our virtual products business. +LONG-TERM INCENTIVE +Long-term incentive compensation incentivizes and rewards long-term Company performance, aligns executives' interests with those of our shareholders, and promotes retention in a highly competitive talent marketplace. Therefore, this element of our executive compensation program forms the largest portion of our Named Executive Officers' annual direct compensation, constituting 79% of fiscal 2023 target total annual direct compensation for Mr. Donahoe (67% for each other NEO). Fiscal 2023 long-term incentive compensation consisted of three components: PSUs, stock options, and RSUs, each granted under our SIP. +For fiscal 2023 awards, the Compensation Committee began evolving the long-term incentive award mix towards delivering 50% of the total award in the form of PSUs (excluding Mr. Parker, whose long-term incentive award is smaller and delivered entirely in the form of stock options due to his role as Executive Chairman). Accordingly, the committee significantly increased the proportion of PSUs for the fiscal 2023 long-term incentive awards, with Mr. Donahoe's award delivered 46% in the form of PSUs and the awards for each of Messrs. Friend and Campion and Ms. O'Neill delivered 36% in the form of PSUs. The evolution towards delivering 50% of the total long-term incentive award in the form of PSUs will be completed with the fiscal 2024 awards. +FISCAL 2023 AWARD GRANTS +The Compensation Committee determined the fiscal 2023 long-term incentive awards in June 2022. In setting the value of the total long-term incentive award, the committee considered multiple factors, including individual and Company performance, evolving responsibilities, our cohort compensation approach, and retaining top-tier talent in a highly competitive talent marketplace. With respect to the mix of the long-term incentive award components, the Compensation Committee began to phase in an increase in the proportion delivered in PSUs. +Accordingly, the Compensation Committee increased the target value of Mr. Donahoe's PSU award by $2,900,000 compared to fiscal 2022, maintained his stock option award at the same amount, and decreased his RSU award by $1,400,000. Given Mr. Parker's responsibilities as Executive Chairman, the committee maintained his same award value and mix compared to fiscal 2022. With respect to each other NEO, the Compensation Committee increased the target value of the PSU award by $1,000,000 to reflect the factors described above. The committee also increased Mr. Friend's stock option and RSU awards by $300,000 and $200,000, respectively, to align with his applicable cohort. The fiscal 2023 long-term incentive award values were: +2023 PROXY STATEMENT 36 +NAMED EXECUTIVE OFFICER TARGET PSUs STOCK OPTIONS RSUs TOTAL FISCAL 2023 +LONG-TERM INCENTIVE AWARDS +John Donahoe II $7,900,000 $6,300,000 $2,800,000 $17,000,000 +Mark Parker — $2,000,000 — $2,000,000 +Matthew Friend $2,000,000 $2,100,000 $1,400,000 $5,500,000 +Andrew Campion $2,000,000 $2,100,000 $1,400,000 $5,500,000 +Heidi O'Neill $2,000,000 $2,100,000 $1,400,000 $5,500,000 +FISCAL 2023 – 2025 PSUs +PSUs align our Named Executive Officers' interests with those of our shareholders by motivating and rewarding achievement of long-term shareholder value and growth. PSU awards reflect our "pay for performance" philosophy: they are earned between 0% and 200% of target based on Company performance during a three-year performance period. +In June 2022, the Compensation Committee selected the metric, corresponding performance goals, and award terms for the fiscal 2023 – 2025 PSU awards. The committee will determine the earnout of the fiscal 2023 – 2025 PSU awards following the completion of the three-year performance period, and any PSUs that are earned will vest on August 1, 2025. +Consistent with the prior year's awards, the Compensation Committee selected Relative TSR as the metric for the fiscal 2023 – 2025 PSU awards and continued to target above-median performance as shown in the table below: +FISCAL 2023 – 2025 PERFORMANCE GOALS +% PAYOUT +THRESHOLD +25% +TARGET +100% +MAXIMUM +200% +Relative TSR 1 +(1) Relative TSR for fiscal years 2023, 2024, and 2025, calculated using the 20-trading day average stock price and assuming that dividends paid during the performance period are reinvested in the applicable company's stock. +PSUs will be earned at 100% of target if the Company's Relative TSR for the performance period is at the 55 th percentile, and will be earned at 0% if the Company's Relative TSR for the performance period is below the 25 th percentile. PSU earnout based on Relative TSR performance is subject to a cap of 100% of target if Absolute TSR for the performance period is negative. The Compensation Committee selected three-year Relative TSR as the performance metric because it is an objective and transparent measure of long-term shareholder value, especially in the context of a volatile market. Furthermore, the cap on payout if Absolute TSR is negative incentivizes NEOs to pursue long-term growth. +The fiscal 2023 – 2025 PSU awards also contain a People & Planet modifier designed to support our commitment to Purpose, which is a key component of our long-term strategy. If Relative TSR meets or exceeds the threshold performance goal, the People & Planet modifier permits the Compensation Committee to adjust the earnout upwards or downwards by up to 20 percentage points (subject to both the 200% maximum earnout and the 100% Absolute TSR cap) based on a holistic assessment of the Company's performance with respect to employee engagement and inclusion, leadership diversity, and sustainability. Structuring the modifier as a holistic assessment ensures that the final earnout comprehensively balances these broad and disparate issues and appropriately reflects the spirit of our Purpose commitment. In determining the People & Planet modifier, the Compensation Committee will consider the Company's progress towards achieving certain of the five-year Purpose targets described in our fiscal 2022 Impact Report, including goals regarding increasing representation of women in our global corporate workforce and leadership positions; increasing representation of U.S. racial and ethnic minorities in our U.S. corporate workforce and at the Director level and above; employee feedback with respect to engagement and inclusion; foundational expectations related to responsible manufacturing in our supply chain; and operating more sustainably with respect to carbon, waste, water, and chemistry. +The target number of PSUs granted to each Named Executive Officer for fiscal 2023 was determined by dividing the NEO's target award value by the average closing price of our Class B Stock for the 20-trading day period ending on the date of grant. PSUs accumulate dividend equivalents that are paid only when, and to the extent, they vest. To promote retention, PSU awards generally provide that any unvested PSUs are forfeited if the Named Executive Officer leaves the Company. Forfeiture is subject to partial accelerated vesting upon termination of employment in connection with a divestiture or reduction in force (as described in the section below titled "Executive Compensation Tables—Potential Payments Upon Termination or Change-in-Control"). +STOCK OPTIONS +Stock options align our Named Executive Officers' interests with those of our shareholders by rewarding the achievement of upside potential, and they reflect our "pay for performance" philosophy by rewarding the NEOs only if the price of our Class B Stock appreciates. +37 NIKE, INC. +The number of stock options granted to each NEO for fiscal 2023 was determined by dividing the NEO's award value by the Black-Scholes value (calculated based on a 20-day average stock price and the available five-year and seven-year interest rates) of a stock option on the date of grant. Options granted to the Named Executive Officers vest in equal annual installments over four years and have an exercise price equal to the closing market price of our stock on the date of grant (or the trading day immediately prior to the grant date, if the grant date is not a trading day). To promote retention, stock options generally provide that if a Named Executive Officer leaves the Company, they forfeit any unvested stock options. Forfeiture is subject to a limited retirement provision designed to encourage executives to delay retirement, as well as partial accelerated vesting upon termination of employment in connection with a divestiture or reduction in force (each as described in the section below titled "Executive Compensation Tables—Potential Payments Upon Termination or Change-in-Control"). +RSUs +RSUs align our Named Executive Officers' interests with those of our shareholders by rewarding the achievement of long-term value creation, and they reflect our "pay for performance" philosophy because their value is directly tied to our Class B Stock price. +The number of RSUs granted to each NEO for fiscal 2023 was determined by dividing the NEO's award value by the average closing price of our Class B Stock for the 20-trading day period ending on the date of grant. RSUs granted to the Named Executive Officers as part of long-term incentive compensation vest in equal annual installments over three years and accumulate dividend equivalents that are paid only upon vesting. To promote retention, RSU awards generally provide that any unvested RSUs are forfeited if the Named Executive Officer leaves the Company. Forfeiture is subject to partial accelerated vesting upon termination of employment in connection with a divestiture or reduction in force (as described in the section below titled "Executive Compensation Tables—Potential Payments Upon Termination or Change-in-Control"). +FISCAL 2021 AWARD RESULTS +In fiscal 2021, the long-term incentive compensation mix included cash-based awards under our LTIP. LTIP awards were replaced by PSUs beginning with fiscal 2022 awards. As previously disclosed in our 2021 proxy statement, the fiscal 2021 – 2023 LTIP awards granted in June 2020 were to be earned between 0% and 200% of target based on Relative TSR over a three-year performance period (subject to a payout cap of 100% if Absolute TSR was negative). In addition, if Relative TSR was achieved at or above the threshold performance goal, a People & Planet modifier would allow the award payout to be increased by up to 25 percentage points (subject to both the 200% maximum earnout and the 100% Absolute TSR cap) based on a holistic assessment of the Company's performance with respect to employee engagement and inclusion, leadership diversity, and sustainability. +NIKE's Relative TSR for fiscal years 2021 – 2023 was at the 37 th percentile, corresponding to an earnout of 54%, and Absolute TSR for that period was positive. Relative TSR was calculated in comparison to the companies that were included in the S&P 500 as of May 31, 2023, using the 20-trading day average stock price and assuming that dividends paid during the performance period were reinvested in the applicable company's stock. +In June 2023, the Compensation Committee considered the People & Planet modifier. To support the Company's Purpose priorities—and to base the holistic assessment in data and quantitative metrics—the committee reviewed NIKE's progress towards our 2025 Purpose targets, which are challenging five-year targets that focus and objectivize our Purpose work. Specifically, the committee reviewed 14 targets: +• Inclusive culture and engagement : one target regarding employee engagement and inclusion +• Leadership diversity : three targets regarding representation in both the corporate workforce generally and in senior positions, for women globally and U.S. racial and ethnic minorities +• Sustainability : all nine Planet targets, covering issues regarding carbon, waste, water, and chemistry +• Foundational expectations : one target that addresses labor, health, safety, and environmental standards for facilities in our extended supply chain +More detail about each of these targets is available in NIKE's fiscal 2022 Impact Report, which is available on the Impact section of our website. +In determining the modifier, the Compensation Committee considered the significant progress made on these targets as of May 31, 2022, as reflected in the fiscal 2022 Impact Report. The committee considered the breadth of achievements, as indicated by strong progress for nine of the fourteen targets, including each leadership diversity target. The Compensation Committee also noted key sustainability work related to greenhouse gas emissions, waste diversion, and freshwater usage, as well as the ambitious expansion of the compliance program in connection with the foundational expectations target. The Compensation Committee supplemented the 2025 Purpose targets progress reflected in the Impact Report with additional quantitative and qualitative information, including continued progress on both People and Planet initiatives during fiscal 2023 as well as employee sentiment reported through employee engagement surveys. Based on this holistic assessment, the Compensation Committee determined a People & Planet modifier of 10%. +2023 PROXY STATEMENT 38 +As illustrated below, combining the Relative TSR earnout of 54% with the People & Planet modifier of 10% resulted in a total payout of 64% for each of the NEOs. +FISCAL 2021 – 2023 PERFORMANCE RESULTS +FINANCIAL PERFORMANCE METRIC +% PAYOUT +THRESHOLD +25% +TARGET +100% +MAXIMUM +200% +Relative TSR +EARNOUT: +54% +PEOPLE & PLANET MODIFIER +• Solid and sustained progress towards both People and Planet initiatives throughout the performance period +• Broad scope of achievements reflected in the significant progress on nine of the fourteen 2025 Purpose targets, as reported in the fiscal 2022 Impact Report +• Breadth of achievement balanced by depth of achievement, including key sustainability work related to greenhouse gas emissions, waste diversion, and freshwater usage +MODIFIER: +10% +TOTAL PAYOUT +64% +OTHER COMPENSATION +PROFIT SHARING AND RETIREMENT PLANS +We maintain a U.S. tax qualified retirement savings plan—the 401(k) Plan—under which all eligible U.S. employees, including the Named Executive Officers, are able to make pre-tax and after-tax contributions from their cash compensation. We make annual matching contributions for all participants equal to 100% of their pre-tax contributions up to 5% of their total eligible compensation. +The Internal Revenue Code limits the amount of compensation that can be deferred under the 401(k) Plan, and also limits the amount of salary and annual cash incentive award ($305,000 for fiscal 2023) that may be taken into account when determining contributions under that plan. Accordingly, we provide our Named Executive Officers and other highly compensated employees with the opportunity to defer their compensation, including amounts in excess of the tax law limit, under our nonqualified Deferred Compensation Plan. We do not match deferrals to the Deferred Compensation Plan. Balances in the Deferred Compensation Plan, including the balances of the Named Executive Officers, are unsecured and at-risk, meaning that the balances may be forfeited in the event of the Company's financial distress, such as bankruptcy. +Fiscal 2023 matching contributions to the Named Executive Officers under the 401(k) Plan are included in the All Other Compensation column in the Summary Compensation Table on page 44. +EMPLOYEE STOCK PURCHASE PLAN +Our Employee Stock Purchase Plan allows eligible employees in the United States and in many countries outside of the United States, including the Named Executive Officers, to purchase Class B Stock through payroll deductions at a 15% discount to the market price on the first or last trading day of the six-month purchase period, depending on which day the stock price was lower. +39 NIKE, INC. +PERQUISITES AND OTHER BENEFITS +Our executive compensation program includes limited perquisites and other personal benefits for our Named Executive Officers, which generally consist of home security and financial planning services. Given the nature of our business, from time to time certain Company employees, including certain executive officers, may also receive Company product, event tickets, or travel benefits that are not generally offered to all employees. +In addition, Mr. Donahoe and Mr. Parker are entitled to limited personal use of Company aircraft, primarily pursuant to time sharing agreements, which is intended to increase the security, availability, and productivity of these individuals. They are also entitled to enhanced charitable gift matching under our Employee Matching Gift Program—a program designed to encourage and support employees in giving back to our communities and creating positive change—with an executive contribution limit of $1,000,000 per calendar year and Company matching on a 4:1 basis. Our Employee Matching Gift Program does not match employee contributions that benefit the employee, including contributions to the employee's personal or family foundation or to a non-profit organization that is managed or led by, or provides compensation or assistance to, the employee or a member of their family. Because the Employee Matching Gift Program is managed on a calendar year basis while the Summary Compensation Table reports compensation for the fiscal year, the charitable matching amounts reported in the Summary Compensation Table may exceed $4,000,000 (up to a maximum of $8,000,000) due to the timing of charitable contributions. For fiscal 2023, Mr. Donahoe and Mr. Parker each donated to a range of charitable causes. +We do not provide any tax gross-ups on perquisites to our executive officers. Greater detail about the perquisites and personal benefits provided to our Named Executive Officers in fiscal 2023 is provided in the footnotes to the Summary Compensation Table on page 44. +NON-COMPETITION AGREEMENTS +In exchange for non-competition agreements from each of our Named Executive Officers, we have agreed to provide monthly payments during the non-compete period following termination of employment, as described in the section below titled "Executive Compensation Tables—Potential Payments upon Termination or Change-in-Control". We believe that it is appropriate to compensate individuals to refrain from working with competitors following termination, and that compensation enhances the enforceability of such agreements. +LETTER AGREEMENTS +We do not have employment contracts with any of our executive officers, other than letter agreements with Messrs. Donahoe and Parker that provide for the enhanced charitable matching benefit described in the section above titled "Perquisites and Other Benefits". +2023 PROXY STATEMENT 40 +OUR COMPENSATION PROCESS +COMPENSATION COMMITTEE +The Compensation Committee oversees our executive compensation program, including determining the value and composition of the compensation package for each of our executive officers and setting annual performance goals for the CEO. In addition to any special actions the Compensation Committee may take throughout the year, the committee generally acts with respect to compensation for our Named Executive Officers during the fiscal year as follows: +PEER GROUP +Given the competitive market for top-tier talent, the Compensation Committee uses a peer group (consisting of companies with similar revenue size, market capitalization, brand value, products, or markets, or with which we compete for executive talent, or which are aligned with our evolving business and talent strategies) to provide a reference for assessing executive compensation levels and practices. Based on the criteria, the following peer group was considered for purposes of setting fiscal 2023 executive compensation: +American Express Company Microsoft Corporation salesforce.com, inc. +Best Buy Company, Inc. Mondelez International, Inc. Starbucks Corporation +The Coca-Cola Company Netflix, Inc. Target Corporation +Kimberly-Clark Corporation Oracle Corporation TJX Companies +Lowe's Companies, Inc. Pepsico, Inc. Walmart Inc. +McDonald's Corporation Procter & Gamble Company The Walt Disney Company +In addition to considering our peer group, the Compensation Committee also uses market survey data from third parties, including Aon, Willis Towers Watson, and Mercer, about a broader range of companies. The Compensation Committee generally does not set executive compensation at or near any particular percentile of peer group, or market, compensation. Instead, the committee considers compensation to be competitive if it is generally within a reasonable range of market median. +41 NIKE, INC. +ROLE OF MANAGEMENT +The CEO makes compensation recommendations to, and participates in discussions with, the Compensation Committee regarding the compensation of each executive officer other than himself. In addition, our human resources staff regularly provides data, analysis, and recommendations to the committee regarding executive compensation. +The Compensation Committee meets regularly in executive session without the CEO or other management present to discuss our executive compensation program. Such executive sessions include discussions about, among other topics, the CEO's performance and compensation and the design and operation of our executive compensation plans. +ROLE OF COMPENSATION CONSULTANT +The Compensation Committee has the authority, in its sole discretion, to retain compensation consultants to assist the committee in overseeing our executive compensation program. The Compensation Committee chose not to retain any such consultants in fiscal 2023. However, in connection with the committee's analysis and decision-making regarding the fiscal 2023 executive compensation program, the Compensation Committee supplemented peer group data with information from surveys and reports containing competitive market data from Aon, Willis Towers Watson, and Mercer, which are obtained by our human resources staff. +OTHER COMPENSATION PRACTICES +STOCK OWNERSHIP GUIDELINES +We maintain stock ownership guidelines for executive officers that are designed to further align the interests of our executive officers with those of our shareholders. Under the guidelines, each executive officer is required to hold NIKE stock valued at the following multiple of their annual base salary: +POSITION OWNERSHIP LEVEL +Chief Executive Officer +8X Base Salary +Other Executive Officers (including NEOs) +3X Base Salary +New executive officers are required to attain these ownership levels within five years of their appointment. As of May 31, 2023, the CEO and each of our other executive officers, including each other Named Executive Officer, has met or is on track to meet the applicable ownership guideline within the requisite period. +HEDGING AND PLEDGING +The Company's Blackout and Pre-clearance Policy (which supplements our Insider Trading Policy) prohibits directors, executive officers, and other designated insiders (based on seniority and department) from engaging in transactions involving hedging, monetization, or short sales of NIKE stock, including zero-cost collars and forward sale contracts. The policy also requires directors and executive officers, along with members of their families and households, to obtain pre-approval from the Company's Chairman or CEO before pledging NIKE stock. Before any such approval is granted, the Company's Clearance Director considers the size of the pledge relative to the individual's other holdings, both direct and indirect, and NIKE's shares outstanding; the risk of foreclosure given the nature of the associated transaction; protections against the appearance of insider trading, including prohibitions on sales during trading blackouts; and the ability to timely report sales on Form 4. +CHANGE-IN-CONTROL PROVISIONS +Neither PSP nor LTIP awards are subject to acceleration upon a change in control. PSU, stock option, and RSU awards are subject only to "double-trigger" accelerated change-in-control vesting (with PSUs vesting at 100% of target), meaning that vesting is accelerated only if there is a change in control of the Company, and within the following two years, either the acquiring entity fails to assume the awards or the employee's employment is terminated by the acquirer without cause or by the employee for good reason. This double-trigger acceleration is intended to encourage executive retention through a period of uncertainty. The Compensation Committee believes that this approach will enhance shareholder value in the context of an acquisition and align executives' interests with those of investors. The effect of change-in-control transactions on stock-based awards is described further in the section below titled "Executive Compensation Tables—Potential Payments Upon Termination or Change-in-Control". +2023 PROXY STATEMENT 42 +CLAWBACK +We maintain a clawback policy for the recoupment of incentive compensation. Under the clawback policy, an executive officer who is involved in wrongful conduct that results in a restatement of the Company's financial statements must repay to the Company up to the full amount of any incentive compensation that was paid based on the financial statements that were subsequently restated. The clawback policy covers PSP awards, LTIP awards, SIP awards (based on excess proceeds from pre-restatement sales of stock acquired pursuant to the stock-based awards), and profit sharing contributions to the Deferred Compensation Plan. In addition to the clawback policy, the PSP, LTIP, and SIP also specify that the Committee may apply further clawback requirements to awards through additional clawback policies or award agreement provisions, and that all awards are subject to clawback requirements under applicable law and regulation. The Company will adopt a revised clawback policy regarding accounting restatements in connection with the SEC's adoption of new rules to implement Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, once such final rules, as implemented by NYSE, become effective. +RISK ASSESSMENT +At the Compensation Committee's request, management prepared an assessment of potential risks associated with the Company's fiscal 2023 compensation programs, including any risk that would be reasonably likely to have a material adverse effect on the Company. This included an assessment of risks associated with each element of executive compensation. The assessment considered certain design features of the compensation program that reduce the likelihood of excessive risk taking, such as reasonable performance targets, capped incentive compensation payouts, a balance of short- and long-term incentives, a balance of cash- and stock-based incentives, vesting of awards over time, and the potential for clawback of incentive compensation. In addition, for stock-based compensation, we have adopted stock ownership guidelines, provided for limited accelerated vesting of PSUs, stock options, and RSUs upon termination of employment, and provided for only double-trigger accelerated vesting of stock-based awards upon a change in control. The Compensation Committee reviewed the risk assessment and concluded that our compensation programs and practices do not create risks that are reasonably likely to have a material adverse effect on the Company. +TAX DEDUCTIBILITY OF EXECUTIVE COMPENSATION +Section 162(m) of the Internal Revenue Code generally places a $1 million limit on the amount of compensation a company can deduct in any one year for "covered employees". While the Compensation Committee seeks to preserve tax deductibility in developing and implementing our executive compensation program, the committee also believes that it is important to maintain flexibility in administering compensation programs in a manner designed to promote varying corporate goals and the interests of our shareholders. Accordingly, we have not adopted a policy that all compensation must qualify as deductible for tax purposes and retain the ability to provide compensation that may not qualify as deductible under Section 162(m). +COMPENSATION COMMITTEE REPORT +The Compensation Committee of the Board of Directors has reviewed and discussed with management the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K. Based on the review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement. +Members of the Compensation Committee: +• Timothy Cook, Chair +• Cathleen Benko +• Mónica Gil +43 NIKE, INC. +EXECUTIVE COMPENSATION TABLES +SUMMARY COMPENSATION TABLE +The following table sets forth information concerning the total compensation of each Named Executive Officer for fiscal years 2023, 2022, and 2021. +NAME AND PRINCIPAL +POSITION (1) +YEAR SALARY +($) +BONUS (2) +($) +STOCK +AWARDS (3) +($) +OPTION +AWARDS (4) +($) +NON-EQUITY +INCENTIVE PLAN +COMPENSATION (5) +($) +ALL OTHER +COMPENSATION (6) +($) +TOTAL (7) +($) +John Donahoe II +President and Chief Executive Officer +2023 1,500,000 — 13,220,455 7,247,371 6,770,000 4,052,059 32,789,885 +2022 1,500,000 — 12,061,812 6,782,995 4,450,000 4,043,253 28,838,060 +2021 1,500,000 13,600,000 3,602,980 5,402,416 4,500,000 4,315,312 32,920,708 +Matthew Friend +Executive Vice President and Chief Financial Officer +2023 1,221,154 — 4,080,045 2,415,790 2,425,000 15,250 10,157,239 +2022 1,056,731 1,056,000 2,783,949 1,938,030 890,000 14,500 7,739,210 +2021 875,000 1,260,000 7,161,045 1,740,792 900,000 14,250 11,951,087 +Andrew Campion +Chief Operating Officer +2023 1,250,000 — 4,080,045 2,415,790 2,425,000 15,250 10,186,085 +2022 1,221,154 1,200,000 2,990,322 2,261,028 890,000 15,241 8,577,745 +2021 1,100,000 1,584,000 11,161,060 1,740,792 900,000 14,250 16,500,102 +Heidi O'Neill +President, Consumer and Marketplace +2023 1,250,000 — 4,080,045 2,415,790 2,425,000 15,250 10,186,085 +2022 1,221,154 1,200,000 2,990,322 2,261,028 890,000 26,618 8,589,122 +2021 1,100,000 1,584,000 7,161,045 1,740,792 900,000 14,250 12,500,087 +Mark Parker +Executive Chairman +2023 1,000,000 — — 2,300,765 — 6,638,047 9,938,812 +2022 1,134,615 — — 2,153,362 4,450,000 4,096,391 11,834,368 +2021 1,700,000 12,040,000 — 6,002,675 4,500,000 3,235,307 24,477,982 +(1) Reflects titles as of May 31, 2023, which was the last day of fiscal 2023. Effective June 1, 2023, the first day of fiscal 2024, Mr. Campion ceased serving as Chief Operating Officer and became NIKE's Managing Director, Strategic Business Ventures and Ms. O'Neill became NIKE's President, Consumer, Product & Brand. +(2) For fiscal 2022, represents awards under our PSP, which were paid at 0% for Mr. Donahoe and 80% for Messrs. Friend and Campion and Ms. O'Neill; Mr. Parker did not receive a fiscal 2022 PSP award. For fiscal 2021, represents annual cash incentive awards which were paid at 120% of target to each executive officer, as well as transition-period cash incentive awards paid to Messrs. Donahoe and Parker. +(3) Represents the grant date fair value of RSU and PSU awards granted in fiscal 2023 and 2022, and RSU awards granted in fiscal 2021, in each case computed in accordance with accounting guidance applicable to stock-based compensation. For RSUs, the grant date fair value was computed based on the closing market price of our Class B Stock on the grant date. For PSUs, the grant date fair value was computed using a Monte Carlo simulation based on the probable outcome of the performance condition as of the grant date. The assumptions made in determining the grant date fair value of PSUs under applicable accounting guidance are disclosed in footnote 5 of "Grants of Plan-Based Awards in Fiscal 2023". For fiscal 2023, the grant date fair value of the PSU awards was: $10,250,484 for Mr. Donahoe; $2,595,059 for Messrs. Friend and Campion and Ms. O'Neill; and $0 for Mr. Parker. Assuming that the maximum level of performance conditions is achieved, the value of those PSU awards would be: $16,759,123 for Mr. Donahoe; $4,242,816 for Messrs. Friend and Campion and Ms. O'Neill; and $0 for Mr. Parker. +(4) Represents the grant date fair value of options granted in the applicable fiscal year computed in accordance with accounting guidance applicable to stock-based compensation. The grant date fair value of the options was estimated using the Black-Scholes option pricing model. The assumptions made in determining the grant date fair value of options under applicable accounting guidance are disclosed in Note 9 of Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended May 31, 2023. +(5) Non-Equity Incentive Plan Compensation consists of the following: +2023 PROXY STATEMENT 44 +NAME Year +ANNUAL INCENTIVE COMPENSATION (a) +($) +LONG-TERM INCENTIVE COMPENSATION (b) +($) +TOTAL +($) +John Donahoe II 2023 3,570,000 3,200,000 6,770,000 +2022 — 4,450,000 4,450,000 +2021 — 4,500,000 4,500,000 +Matthew Friend 2023 1,785,000 640,000 2,425,000 +2022 — 890,000 890,000 +2021 — 900,000 900,000 +Andrew Campion 2023 1,785,000.00 640,000 2,425,000 +2022 — 890,000 890,000 +2021 — 900,000 900,000 +Heidi O'Neill 2023 1,785,000.00 640,000 2,425,000 +2022 — 890,000 890,000 +2021 — 900,000 900,000 +Mark Parker 2023 — — — +2022 — 4,450,000 4,450,000 +2021 — 4,500,000 4,500,000 +(a) Amounts shown were earned for performance in the applicable fiscal year under our PSP. +(b) Amounts shown were earned for performance during the three-year period ending with the applicable fiscal year under our LTIP. +(6) For fiscal 2023, includes Company matching contributions to the 401(k) Plan in the amount of $15,250 for each of the Named Executive Officers. The amount for Mr. Donahoe also includes $3,920,000 in charitable matching contributions made by the Company, $110,365 in aggregate incremental cost to the Company for personal use of the Company's aircraft, as well as the value of Company-related merchandise and security services. The amount for Mr. Parker also includes $6,440,000 in charitable matching contributions made by the Company, $127,804 in aggregate incremental cost to the Company for personal use of the Company' aircraft, $54,806 in security services, as well as the value of Company-related merchandise. The aggregate incremental cost for personal use of the Company's aircraft is determined based on the variable operating cost to the Company, including the cost of fuel, maintenance, crew travel expenses, landing fees, parking fees, in-flight food and beverage, and other smaller variable costs associated with each flight. The amounts for Mr. Donahoe and Mr. Parker exclude the aggregate incremental cost to the Company for personal use of the Company's aircraft for which Mr. Donahoe or Mr. Parker, as applicable, reimbursed the Company in accordance with a time sharing agreement and as allowed under Federal Aviation Regulation 91.501(c) and (d). +(7) For fiscal 2023, includes the value of both the grant of PSUs for the fiscal 2023 – 2025 performance period (which were awarded as part of fiscal 2023 compensation) and the payout of LTIP awards for the fiscal 2021 – 2023 performance period (which were awarded as part of fiscal 2021 compensation). For fiscal 2022, includes the value of both the grant of PSUs for the fiscal 2022 – 2024 performance period (which were awarded as part of fiscal 2022 compensation) and the payout of LTIP awards for the fiscal 2020 – 2022 performance period (which were awarded as part of fiscal 2020 compensation). +45 NIKE, INC. +GRANTS OF PLAN-BASED AWARDS IN FISCAL 2023 +The following table sets forth information concerning the performance-based annual cash incentive opportunities and PSUs, RSUs, and stock options granted to the Named Executive Officers in fiscal 2023. +ESTIMATED FUTURE PAYOUTS UNDER +NON-EQUITY INCENTIVE PLAN AWARDS (1) +ESTIMATED FUTURE PAYOUTS UNDER +EQUITY INCENTIVE PLAN AWARDS (2) +ALL OTHER +STOCK AWARDS: +NUMBER OF +SHARES OF +STOCK OR +UNITS (3) +ALL OTHER OPTION +AWARDS: NUMBER +OF SECURITIES +UNDERLYING +OPTIONS (4) +EXERCISE +OR BASE +PRICE OF +OPTION +AWARDS +GRANT DATE +FAIR VALUE +OF STOCK +AND OPTION +AWARDS (5) +THRESHOLD TARGET MAXIMUM THRESHOLD TARGET MAXIMUM +NAME GRANT DATE APPROVAL DATE ($) ($) ($) (#) (#) (#) (#) (#) ($/SH) ($) +John Donahoe II 1,500,000 3,000,000 4,500,000 +8/1/2022 6/22/2022 18,328 73,312 146,624 10,250,484 +8/1/2022 6/22/2022 25,984 2,969,971 +8/1/2022 6/22/2022 225,564 114.30 7,247,371 +Matthew Friend 750,000 1,500,000 2,250,000 +8/1/2022 6/10/2022 4,640 18,560 37,120 2,595,059 +8/1/2022 6/10/2022 12,992 1,484,986 +8/1/2022 6/10/2022 75,188 114.30 2,415,790 +Andrew Campion 750,000 1,500,000 2,250,000 +8/1/2022 6/10/2022 4,640 18,560 37,120 2,595,059 +8/1/2022 6/10/2022 12,992 1,484,986 +8/1/2022 6/10/2022 75,188 114.30 2,415,790 +Heidi O'Neill 750,000 1,500,000 2,250,000 +8/1/2022 6/10/2022 4,640 18,560 37,120 2,595,059 +8/1/2022 6/10/2022 12,992 1,484,986 +8/1/2022 6/10/2022 75,188 114.30 2,415,790 +Mark Parker — — — +8/1/2022 6/10/2022 — — — — +8/1/2022 6/10/2022 — — +8/1/2022 6/10/2022 71,608 114.30 2,300,765 +(1) These amounts represent the potential performance-based annual cash incentive awards payable for performance during fiscal 2023 under our PSP. Under this plan, the Compensation Committee approved target awards for fiscal 2023 based on a percentage of the executive's base salary paid during fiscal 2023 as follows: Mr. Donahoe, 200%; Mr. Friend, 120%; Mr. Campion, 120%; Ms. O'Neill, 120%; and Mr. Parker, 0%. Fiscal 2023 PSP awards are earned between 0% and 150% of target based on Company performance on three equally-weighted metrics—Adjusted Revenue, Adjusted Digital Revenue, and Adjusted EBIT—during fiscal 2023. Actual award payouts earned in fiscal 2023 and paid in fiscal 2024 are shown in the Summary Compensation Table. +(2) These amounts represent grants of PSUs under the SIP which are earned between 0% and 200% of target based on Relative TSR for fiscal 2023 – 2025, subject to a cap of 100% of target if Absolute TSR for the performance period is negative. If Relative TSR is at or above the threshold performance goal, the Compensation Committee may adjust the earnout upwards or downwards by up to 20 percentage points based on a holistic assessment of the Company's performance during the three-year performance period with respect to employee engagement and inclusion, representation of diverse individuals in leadership positions, and sustainability. Earned PSUs will vest in August 2025 and are generally subject to continued employment through the vesting date. Vesting will be accelerated in certain circumstances as described below in the section "Potential Payouts Upon Termination or Change-in-Control". The PSUs accumulate cash dividend equivalents that are paid only when, and to the extent, they vest. +(3) Amounts reported in this column represent grants of RSUs under the SIP which vest in three equal installments on the first three anniversaries of the grant date. Vesting will be accelerated in certain circumstances as described below in the section "Potential Payouts Upon Termination or Change-in-Control". The RSUs accumulate cash dividend equivalents that are only paid upon vesting. +(4) Amounts reported in this column represent stock options granted under the SIP which become exercisable in four equal installments on the first four anniversaries of the grant date. Options become exercisable in certain circumstances as described below in the section "Potential Payouts Upon Termination or Change-in-Control". Each option has a maximum term of 10 years, subject to earlier termination in the event of the optionee's termination of employment. +(5) For stock awards, represents the grant date fair value of (a) RSUs based on the closing market price of our Class B Stock on the grant date and (b) PSUs based on a value of $139.82 per share computed using a Monte Carlo simulation based on the probable outcome of the performance condition as of the grant date. The Monte Carlo simulation was performed using the remaining performance period of 2.83 years and assuming an expected volatility of 34.97% and risk-free interest rate of 2.79%. The expected volatility was based on an analysis of the historical volatility of the Class B Stock on the grant date for 2.83 years. The risk-free interest rate corresponding with the remaining performance period was calculated using the U.S. Treasury (constant maturity) risk-free rates in effect on the grant date for a 2- and 3-year period. For option awards, represents the grant date fair value of stock options granted based on a value of $32.13 per share, calculated using the Black-Scholes option pricing model. The assumptions made in determining option values are disclosed in Note 9 to Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended May 31, 2023. Stock and option award values were computed in accordance with accounting guidance applicable to stock-based compensation. +2023 PROXY STATEMENT 46 +OUTSTANDING EQUITY AWARDS AT MAY 31, 2023 +The following table sets forth information concerning outstanding stock options, PSUs, and RSUs held by the Named Executive Officers at May 31, 2023. +OPTION AWARDS STOCK AWARDS +NAME NUMBER OF +SECURITIES +UNDERLYING +UNEXERCISED +OPTIONS +EXERCISABLE +(#) +NUMBER OF +SECURITIES +UNDERLYING +UNEXERCISABLE +OPTIONS +(#) (1) +OPTION +EXERCISE +PRICE +($) OPTION +EXPIRATION +DATE +NUMBER OF SHARES OR UNITS OF STOCK THAT HAVE NOT VESTED +(#) (2) +MARKET VALUE OF SHARES OR UNITS OF STOCK THAT HAVE NOT VESTED +($) +EQUITY INCENTIVE PLAN AWARDS: NUMBER OF UNEARNED SHARES, UNITS OR OTHER RIGHTS THAT HAVE NOT VESTED +(#) (3) +EQUITY INCENTIVE PLAN AWARDS: MARKET OR PAYOUT VALUE OF UNEARNED SHARES, UNITS OR OTHER RIGHTS THAT HAVE NOT VESTED +($) +John Donahoe II 177,633 +59,210 (4) +102.160 1/13/2030 +767,544 — 102.160 1/13/2030 +119,788 +119,787 (5) +97.610 8/1/2030 +38,210 +114,629 (6) +167.510 8/1/2031 +— +225,564 (7) +114.300 8/1/2032 55,536 5,845,719 177,428 18,676,071 +Matthew Friend 23,000 — 57.870 7/15/2026 +30,000 — 59.100 7/20/2027 +35,000 — 77.540 8/1/2028 +27,072 +9,023 (8) +83.120 8/1/2029 +38,599 +38,598 (5) +97.610 8/1/2030 +10,918 +32,751 (6) +167.510 8/1/2031 +— +75,188 (7) +114.300 8/1/2032 52,022 5,475,836 43,281 4,555,758 +Andrew Campion 75,000 — 57.870 7/15/2026 +75,000 — 59.100 7/20/2027 +80,000 — 77.540 8/1/2028 +65,744 +21,914 (8) +83.120 8/1/2029 +38,599 +38,598 (5) +97.610 8/1/2030 +12,737 +38,210 (6) +167.510 8/1/2031 +— +75,188 (7) +114.300 8/1/2032 72,936 7,677,243 43,281 4,555,758 +Heidi O'Neill 25,000 — 77.540 8/1/2028 +46,020 +15,340 (8) +83.120 8/1/2029 +38,599 +38,598 (5) +97.610 8/1/2030 +12,737 +38,210 (6) +167.510 8/1/2031 +— +75,188 (7) +114.300 8/1/2032 52,843 5,562,254 43,281 4,555,758 +Mark Parker 110,000 — 31.675 7/19/2023 +330,000 — 38.760 7/18/2024 +330,000 — 56.400 7/17/2025 +165,000 — 57.870 7/15/2026 +165,000 — 59.100 7/20/2027 +175,000 — 77.540 8/1/2028 +226,701 +75,567 (8) +83.120 8/1/2029 +133,098 +133,096 (5) +97.610 8/1/2030 +12,131 +36,390 (6) +167.510 8/1/2031 +— +71,608 (7) +114.300 8/1/2032 — — — — +(1) Stock options generally become exercisable in four equal installments on each of the first four anniversaries of the grant date. +47 NIKE, INC. +(2) Reflects RSUs that vest as described in the table below: +NAME FISCAL YEAR OF GRANT NUMBER OF UNVESTED UNITS VESTING SCHEDULE +John Donahoe II 2023 25,984 RSUs subject to three-year pro-rata vesting on 8/1/2023, 8/1/2024, and 8/1/2025 +2022 17,249 RSUs subject to three-year pro-rata vesting; 50% of the remaining units vest on 8/1/2023 and 50% vest on 8/1/2024 +2021 12,303 RSUs subject to three-year pro-rata vesting; 100% of the remaining units vest on 8/1/2023 +Matthew Friend 2023 12,992 RSUs subject to three-year pro-rata vesting on 8/1/2023, 8/1/2024, and 8/1/2025 +2022 4,928 RSUs subject to three-year pro-rata vesting; 50% of the remaining units vest on 8/1/2023 and 50% vest on 8/1/2024 +2021 30,138 RSUs subject to four-year pro-rata vesting; 50% of the remaining units vested on 6/1/2023 and 50% vest on 6/1/2024 +2021 3,964 RSUs subject to three-year pro-rata vesting; 100% of the remaining units vest on 8/1/2023 +Andrew Campion 2023 12,992 RSUs subject to three-year pro-rata vesting on 8/1/2023, 8/1/2024, and 8/1/2025 +2022 5,749 RSUs subject to three-year pro-rata vesting; 50% of the remaining units vest on 8/1/2023 and 50% vest on 8/1/2024 +2021 50,231 RSUs subject to four-year pro-rata vesting; 50% of the remaining units vested on 6/1/2023 and 50% vest on 6/1/2024 +2021 3,964 RSUs subject to three-year pro-rata vesting; 100% of the remaining units vest on 8/1/2023 +Heidi O'Neill 2023 12,992 RSUs subject to three-year pro-rata vesting on 8/1/2023, 8/1/2024, and 8/1/2025 +2022 5,749 RSUs subject to three-year pro-rata vesting, 50% of the remaining units vest on 8/1/2023 and 50% vest on 8/1/2024 +2021 30,138 RSUs subject to four-year pro-rata vesting, 50% of the remaining units vested on 6/1/2023 and 50% vest on 6/1/2024 +2021 3,964 RSUs subject to three-year pro-rata vesting; 100% of the remaining units vest on 8/1/2023 +(3) Reflects PSUs that vest as described in the table below, assuming performance at the maximum level (200%) for the fiscal 2023 – 2025 PSUs and performance at the target level (100%) for the fiscal 2022 – 2024 PSUs. In each case, PSUs will be earned between 0% and 200% based on Relative TSR over the applicable three-year performance period and subject to the People & Planet modifier. +NAME FISCAL YEAR OF PERFORMANCE PERIOD NUMBER OF UNVESTED UNITS VESTING SCHEDULE +John Donahoe II 2023 – 2025 146,624 Earned units will cliff vest on 8/1/2025 +2022 – 2024 30,804 Earned units will cliff vest on 8/1/2024 +Matthew Friend 2023 – 2025 37,120 Earned units will cliff vest on 8/1/2025 +2022 – 2024 6,161 Earned units will cliff vest on 8/1/2024 +Andrew Campion 2023 – 2025 37,120 Earned units will cliff vest on 8/1/2025 +2022 – 2024 6,161 Earned units will cliff vest on 8/1/2024 +Heidi O'Neill 2023 – 2025 37,120 Earned units will cliff vest on 8/1/2025 +2022 – 2024 6,161 Earned units will cliff vest on 8/1/2024 +(4) 100% of these options will vest on January 13, 2024. +(5) 50% of these options will vest on August 1, 2023 and 50% will vest on August 1, 2024. +(6) 33.3% of these options will vest on August 1, 2023, 33.3% will vest on August 1, 2024, and 33.3% will vest on August 1, 2025. +(7) 25% of these options will vest on August 1, 2023, 25% will vest on August 1, 2024, 25% will vest on August 1, 2025, and 25% will vest on August 1, 2026. +(8) 100% of these options will vest on August 1, 2023. +2023 PROXY STATEMENT 48 +OPTION EXERCISES AND STOCK VESTED DURING FISCAL 2023 +The following table sets forth information concerning stock option exercises and vesting of RSUs during fiscal 2023 for each of the Named Executive Officers on an aggregated basis. +OPTION AWARDS STOCK AWARDS +NAME NUMBER OF +SHARES ACQUIRED +ON EXERCISE +(#) VALUE +REALIZED +ON EXERCISE +($) NUMBER OF +SHARES ACQUIRED +ON VESTING +(#) VALUE +REALIZED +ON VESTING +($) +John Donahoe II — — 89,775 11,262,977 +Matthew Friend — — 23,104 2,706,794 +Andrew Campion — — 36,608 4,294,302 +Heidi O'Neill — — 24,637 2,882,016 +Mark Parker 220,000 19,443,600 16,041 1,833,486 +EQUITY COMPENSATION PLAN INFORMATION +The following table summarizes information regarding outstanding awards and shares available for future issuance under equity compensation plans approved by shareholders and equity compensation plans that were not approved by shareholders as of May 31, 2023. The table does not reflect issuances made during fiscal 2024. +NUMBER OF SECURITIES +TO BE ISSUED UPON +EXERCISE OF OUTSTANDING +OPTIONS, WARRANTS AND +RIGHTS +WEIGHTED- +AVERAGE EXERCISE +PRICE OF OUTSTANDING +OPTIONS, WARRANTS +AND RIGHTS (1) +NUMBER OF SECURITIES +REMAINING AVAILABLE FOR +FUTURE ISSUANCE UNDER +EQUITY COMPENSATION +PLANS (EXCLUDING SECURITIES +REFLECTED IN COLUMN (a)) +PLAN CATEGORY (a) (b) (c) +Equity compensation plans approved by shareholders 79,340,157 +(2) +$94.3954 94,321,128 +(3) +Equity compensation plans not approved by shareholders — — 3,432,320 +(4) +Total 79,340,157 $94.3954 97,753,448 +(1) Weighted-average exercise prices do not reflect the shares that will be used upon the payment of outstanding awards of RSUs. +(2) Consists of 79,340,157 shares subject to awards of options, RSUs, PSUs (based on performance at the target level of 100%), and stock appreciation rights outstanding under the SIP. +(3) Includes 92,459,174 shares available for future issuance under the SIP and 1,861,954 shares available for future issuance under the Employee Stock Purchase Plan. +(4) Consists of 3,432,320 shares available for future issuance under the Foreign Subsidiary Employee Stock Purchase Plan, pursuant to which shares are offered and sold to employees of selected non-U.S. subsidiaries of the Company on substantially the same terms as those offered to U.S. employees under the shareholder-approved Employee Stock Purchase Plan as described above under "Compensation Discussion and Analysis—Compensation of our Named Executive Officers—Other Compensation—Employee Stock Purchase Plan". +49 NIKE, INC. +NON-QUALIFIED DEFERRED COMPENSATION IN FISCAL 2023 +NAME PLAN +NAME +EXECUTIVE +CONTRIBUTIONS +IN FISCAL 2023 (1) +AGGREGATE EARNINGS +IN FISCAL 2023 AGGREGATE +WITHDRAWALS/ +DISTRIBUTIONS IN +FISCAL 2023 +AGGREGATE +BALANCE AT +MAY, 31 2023 (2) +John Donahoe II +DCP +— $10,645 — $798,540 +Matthew Friend +DCP +— $(5,349) — $573,515 +Andrew Campion +DCP +$461,539 $36,035 — $3,860,874 +Heidi O'Neill DCP $402,500 $45,951 — $4,627,399 +Mark Parker +DCP +$1,140,000 $389,725 — $28,391,316 +(1) All amounts reported in this column are also included in amounts reported in the Summary Compensation Table. +(2) Of the amounts reported in this column, the following amounts have been reported in the Summary Compensation Tables in this proxy statement or in prior year proxy statements: Mr. Donahoe, $63,695; Mr. Friend, $9,503; Mr. Campion, $2,445,433; Ms. O'Neill, $1,207,906; and Mr. Parker, $22,185,929. +NON-QUALIFIED DEFERRED COMPENSATION PLANS +The Named Executive Officers are eligible to participate in our Deferred Compensation Plan (the "DCP"). Participants in the DCP may elect in advance to defer up to 75 percent of their annual base salary, and up to 100 percent of their bonus and long-term cash incentive payments. +We may make annual profit sharing contributions to defined contribution retirement plans. The contributions are allocated among eligible employees based on a percentage of their total salary and bonus for the year. To the fullest extent permitted under Internal Revenue Code limitations, these contributions are made to employees' accounts under our qualified 401(k) Savings and Profit Sharing Plan. Contributions based on salary and bonus in excess of the tax law limit ($305,000 for fiscal 2023) are made as NIKE contributions under the DCP. +Amounts deferred under the DCP are credited to a participant's account under the DCP. Each participant may allocate his or her account among any combination of the investment options available under the DCP. Participants' accounts are adjusted to reflect the investment performance of the investment options selected by the participants. Participants can change the allocation of their account balances daily. The investment options available under the DCP consist of 18 mutual funds with a variety of investment objectives and five risk-based portfolios. The investment options had annual returns in fiscal 2023 ranging from -15.91% to 3.77%. Amounts credited to participants' accounts are invested by us in actual investments matching the investment options selected by the participants to ensure that we do not bear any investment risk related to participants' investment choices. +The portion of a participant's account attributable to elective deferrals, including investment returns, is fully vested at all times. The portion of a participant's account attributable to NIKE contributions, including investment returns, is fully vested after the participant has been employed by us for five years. All of the Named Executive Officers, other than Mr. Donahoe, are fully vested in their NIKE contributions. +Each time they elect to defer compensation, participants make an election regarding distribution of the compensation deferred under the election (as adjusted to reflect investment performance). A participant may elect for distribution to be made in a lump sum at the beginning of a predetermined year while the participant is still employed or in service (but no sooner than the fourth year after the year in which the distribution election is submitted). Alternatively, a participant may elect for distribution to be made in a lump sum or in quarterly installments over five, ten, or fifteen years after termination of employment or service. Participants have limited rights to change their distribution elections. Participants may make a hardship withdrawal under certain circumstances. Subject to certain limitations, a participant may also at any time request to withdraw amounts from his or her account balance that were vested as of December 31, 2004 (and any subsequent investment returns on such amount). If such request is approved, the participant may withdraw 90% of the amount requested, and the remaining 10% will be permanently forfeited. +2023 PROXY STATEMENT 50 +POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE-IN-CONTROL +CHANGE-IN-CONTROL COMPENSATION — ACCELERATION OF EQUITY AWARDS +All unvested stock option, RSU, and PSU awards are subject to accelerated vesting upon the occurrence of two events (a "double-trigger"): there is a "change-in-control"; and the Named Executive Officer's employment is terminated by us without "cause" or by the Named Executive Officer for "good reason", in each case between the change-in-control (or shareholder approval of the change-in-control, if earlier) and the second anniversary of the change-in-control. Stock options will be exercisable for four years following termination of employment, but not beyond each option's original 10-year term. PSUs will vest at 100% of target. Accelerated vesting of stock options, RSUs, and PSUs will also occur if we are acquired and the acquiring company does not assume the outstanding options, RSUs, or PSUs. For purposes of our stock awards, "change-in-control" is generally defined to include: +• the acquisition by any person of 50% or more of our outstanding Class A Stock or, if the Class A Stock no longer elects a majority of directors, the acquisition by any person of 30% or more of our total outstanding Common Stock; +• the nomination (and subsequent election) in a two-year period of a majority of our directors by persons other than the incumbent directors; +• a sale of all or substantially all of our assets; and +• an acquisition of NIKE through a merger, consolidation, or share exchange. +For purposes of our stock awards, "cause" generally includes willful and continued failure to substantially perform assigned duties and willful engagement in illegal conduct materially injurious to us, and "good reason" generally includes a material diminution in position or duties, a salary reduction or material reduction in other benefits, and a home office relocation of over 50 miles. +The following table shows the estimated benefits that would have been received by the Named Executive Officers if double-trigger accelerated vesting had occurred on May 31, 2023, when the closing price of our Class B Stock was $105.26 per share. +NAME +STOCK AWARD +ACCELERATION (1) +STOCK OPTION +ACCELERATION (2) +TOTAL +John Donahoe II $16,804,970 $1,099,922 $17,904,892 +Matthew Friend $8,077,969 $495,044 $8,573,013 +Andrew Campion $10,279,377 $780,451 $11,059,828 +Heidi O'Neill $8,164,388 $634,903 $8,799,291 +Mark Parker — $2,691,237 $2,691,237 +(1) Information regarding unvested RSUs and PSUs held by each Named Executive Officer is set forth in the Outstanding Equity Awards table above. The amounts in the table above represent the number of unvested RSUs and PSUs (at 100% of target) multiplied by the closing price of our Class B Stock on May 31, 2023. +(2) Information regarding outstanding unvested stock options held by each Named Executive Officer is set forth in the Outstanding Equity Awards table above. The amounts in the table above represent the aggregate value as of May 31, 2023 of those options using the excess of the per share closing price of our Class B Stock on May 31, 2023 over the per share exercise price, multiplied by the number of unvested option shares for each Named Executive Officer. +BENEFITS TRIGGERED ON CERTAIN EMPLOYMENT TERMINATIONS +STOCK OPTION ACCELERATION AND EXTENSION +As of May 31, 2023, each Named Executive Officer held stock options as listed in the Outstanding Equity Awards table above. Under the terms of the stock options held by each Named Executive Officer, upon the death or disability of the holder, all unvested options will vest and will be exercisable for four years following termination of employment, but not beyond each option's original 10-year term. If death or disability of a Named Executive Officer had occurred on May 31, 2023, the aggregate value of those options is as set forth in the "Stock Option Acceleration" column of the Change-in-Control Compensation – Acceleration of Equity Awards table above. +Under the terms of the stock options held by each Named Executive Officer that were granted after fiscal 2020, upon a termination of employment due to a "divestiture" or "reduction in force" that occurs at least six months following the grant date, and subject to the holder signing a general waiver and release of claims, options that are scheduled to vest within one year following the termination will vest and all vested options will be exercisable for one year following termination of employment, but not beyond each option's original 10-year term. The value of the unvested stock options held by each Named Executive Officer as of May 31, 2023 that would have become vested if a termination due to a "divestiture" or "reduction in force" had occurred on that date is $458,189 for Mr. Donahoe, $147,637 for each of Messrs. Friend and Campion and Ms. O'Neill, and $509,092 for Mr. Parker. +51 NIKE, INC. +Under the terms of all the stock options held by the Named Executive Officers, options that have been outstanding for at least one year will be subject to continued vesting if the holder retires after reaching age 55 with at least 5 years of service (or accelerated vesting if the holder retires after reaching age 60 with at least 5 years of service), and vested options will be exercisable for four years following termination of employment, but not beyond each option's original 10-year term. If the Named Executive Officers had retired on May 31, 2023, the aggregate value of stock options subject to retirement vesting would have been $1,099,922 for Mr. Donahoe, $634,903 for Ms. O'Neill, and $2,691,237 for Mr. Parker. Messrs. Friend and Campion are not eligible for retirement vesting because these Named Executive Officers have not reached age 55. +STOCK AWARD ACCELERATION +As of May 31, 2023, the Named Executive Officers held unvested RSUs and PSUs as set forth in the Outstanding Equity Awards table above. Under the terms of their award agreements, all unvested RSUs and PSUs will immediately vest upon the death or disability of the holder, with PSUs vesting at 100% of target. The value of the unvested RSUs and PSUs held by each Named Executive Officer as of May 31, 2023 that would have become vested if death or disability had occurred on that date is as set forth in the "Stock Award Acceleration" column of the Change-in-Control Compensation — Acceleration of Equity Awards table above. +Under the terms of the RSUs that were granted to the Named Executive Officers after fiscal 2020 (excluding the stock-based transition awards granted to Messrs. Friend and Campion and Ms. O'Neill) and all PSUs held by the Named Executive Officers, upon a termination of employment due to a "divestiture" or "reduction in force" that occurs at least six months following the grant date, and subject to the holder signing a general waiver and release of claims, RSUs and PSUs that are scheduled to vest within one year following the termination will vest, with PSUs vesting at 100% of target. The value of the unvested RSUs and PSUs held by each Named Executive Officer as of May 31, 2023 that would have become vested if a termination due to a "divestiture" or "reduction in force" had occurred on that date is $3,114,644 for Mr. Donahoe, $1,132,493 for Mr. Friend, $1,175,755 for each of Mr. Campion and Ms. O'Neill, and $0 for Mr. Parker. +PAYMENTS UNDER NONCOMPETITION AGREEMENTS +We have a noncompetition agreement with Mr. Donahoe that extends for 18 months following the termination of his employment with us and a noncompetition agreement with Mr. Parker that extends for two years following the termination of his employment with us. Under these agreements, if Mr. Donahoe's employment is terminated by us without "cause" (as defined in his agreement), or if Mr. Parker's employment is terminated by us, we will make monthly payments to the executive during the noncompetition period in an amount equal to one-twelfth of his then current annual salary and target PSP award ("Annual NIKE Income"). The agreements provide further that if the executive voluntarily resigns, we will make monthly payments to him during the noncompetition period in an amount equal to one-twenty-fourth of his then current Annual NIKE Income. However, commencement of the above-described monthly payments will be delayed until after the six-month period following the executive's separation from service, and all payments that he would otherwise have received during that period will be paid in a lump sum promptly following the end of the period, together with interest at the prime rate. If employment is terminated without "cause" (as defined in the applicable agreement), the parties may mutually agree to waive the covenant not to compete, and if employment is terminated for "cause", we may unilaterally waive the covenant. If the covenant is waived, we will not be required to make the payments described above for the months as to which the waiver applies. Assuming that Mr. Donahoe's employment had been terminated on May 31, 2023 and the covenant was not waived, during the 18-month period ending November 30, 2024 we would have been required to pay Mr. Donahoe $375,000 per month if the termination was by us without "cause", or $187,500 per month if he had voluntarily resigned. Assuming that Mr. Parker's employment had been terminated on May 31, 2023 and the covenant was not waived, during the 24-month period ending May 31, 2025 we would have been required to pay Mr. Parker $83,333 per month if the termination was by us, or $41,667 per month if he had voluntarily resigned. +We have noncompetition agreements with each of the other Named Executive Officers on generally the same terms as Mr. Donahoe, except that the noncompetition period is one year, we may unilaterally waive the covenant in all cases (including a termination without "cause"), the monthly payments are one-twelfth or one-twenty-fourth of the executive's then current annual salary (instead of their Annual NIKE Income), and payments may commence on termination. Assuming that the employment of each of these Named Executive Officers had been terminated on May 31, 2023 and the covenant was not waived, during the 12-month period ending May 31, 2024 we would have been required to pay them $104,167 per month if the termination was by us without "cause", or $52,083 per month if they had voluntarily resigned. +CEO PAY RATIO +NIKE's pay and benefits are designed to be competitive and equitable, meet the diverse needs of our global teammates, and reinforce our values. We pay for performance and impact by linking incentive pay to Company performance and seek to invest in positive experiences that have the greatest impact on the engagement and well-being of our employees. The executive compensation program is highly incentive-based and weighted towards long-term awards to emphasize long-term performance +2023 PROXY STATEMENT 52 +and support retention. Our executive compensation program is designed to attract and retain top-tier talent in a competitive market and to "pay for performance" in order to drive business results and maximize shareholder value. +For fiscal 2023, our last completed fiscal year: +• The employee identified at the median of all NIKE employees (other than our CEO) was a retail store employee in Canada; +• The annual total compensation of the median employee was $33,646; +• The annual total compensation of our CEO, Mr. Donahoe, was $32,789,885; and +• The estimated ratio of the annual total compensation of our CEO to the median annual total compensation of all other NIKE employees was 975 to 1. +This pay ratio is a reasonable estimate calculated in a manner consistent with SEC rules based on the methodology described below. The SEC rules for identifying the median compensated employee and calculating the pay ratio allow companies to adopt a variety of methodologies, apply certain exclusions, and make reasonable estimates and assumptions that reflect their compensation practices. As such, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies may utilize different methodologies, exclusions, estimates, and assumptions in calculating their own pay ratios. +METHODOLOGY +For purposes of calculating this pay ratio, we used the same median employee that was identified in fiscal 2022, as we believe there has been no change in our employee population, our compensation arrangements, or our median employee's circumstances that would significantly affect our pay ratio disclosure. The determination of the median employee was made in fiscal 2022 using the methodology described below, and the median employee's fiscal 2023 annual total compensation was calculated based on the Summary Compensation Table rules used for our Named Executive Officers (in accordance with Item 402(c)(2)(x) of Regulation S-K). +FISCAL 2022 METHODOLOGY +We use the first business day in May as the date to determine the median employee. The first business day in May for fiscal 2022 was May 2, 2022. At that time, we had approximately 77,239 employees globally. After applying the "de minimis exemption" under the SEC rules, which permits us to exclude non-U.S. employees accounting for 5% or less of our total employee population, we excluded the 3,656 employees in the jurisdictions identified below, and our employee population consisted of approximately 73,583 employees. +Slovenia 1 Denmark 68 Malaysia 206 +Sri Lanka 4 Uruguay 71 Thailand 206 +United Arab Emirates 5 Czech Republic 73 South Africa 207 +Croatia 6 Hungary 82 Vietnam 252 +Philippines 19 Indonesia 85 Israel 266 +Macau 42 Ireland 87 Poland 276 +New Zealand 44 Switzerland 113 Chile 285 +Norway 45 Greece 135 Hong Kong 323 +Sweden 55 Portugal 148 Turkey 340 +Brazil 61 Austria 151 +Of the 73,583 employees included in the CEO Pay Ratio calculation, approximately 75% were full-time, 49% were in retail jobs, and 51% were located in the United States. +To identify our median employee we calculated annual compensation for fiscal 2022 based on base salary or hourly wages, as applicable. For the majority of our employees, base salary or hourly wages comprise the majority of their compensation. To determine wages for hourly employees, we used each individual's pay rate and estimated scheduled hours in the applicable Human Resources system of record. +After determining the annual compensation for our employee population as described above, we identified a subset of approximately 100 individuals representing the potential median employee population. For this subset, we calculated each employee's annual total compensation in U.S. dollars for fiscal 2022 based on the Summary Compensation Table rules used for our Named Executive Officers (in accordance with Item 402(c)(2)(x) of Regulation S-K). Compensation for permanent employees hired during the fiscal year was annualized, compensation for non-U.S. employees was converted into U.S. dollars using the applicable currency conversion rate as reported in the Human Resources system of record for the median employee determination date, and the median employee was then selected from this subset. +53 NIKE, INC. +PAY VERSUS PERFORMANCE +This disclosure has been prepared in accordance with Item 402(v) of Regulation S-K under the Exchange Act and does not necessarily reflect how the Compensation Committee evaluates compensation decisions in light of Company or individual performance. The Compensation Committee did not consider the pay versus performance disclosure below in making its compensation decisions for any of the fiscal years shown. For discussion of how the Compensation Committee seeks to align pay with performance when making compensation decisions, please review the section above titled "Compensation Discussion and Analysis". +PAY VERSUS PERFORMANCE TABLE +The following table sets forth compensation information of our CEO and our non-CEO NEOs and Company performance for the fiscal years listed below, in accordance with Item 402(v) of Regulation S-K. +YEAR +SUMMARY COMPENSATION TABLE TOTAL FOR CEO (1)(2) +COMPENSATION ACTUALLY PAID TO CEO (1)(3) +AVERAGE SUMMARY COMPENSATION TABLE TOTAL FOR NON-CEO NEOs (1)(4) +AVERAGE COMPENSATION ACTUALLY PAID TO NON-CEO NEOs (1)(5) +VALUE OF INITIAL FIXED $100 INVESTMENT BASED ON +NET INCOME (7) +(IN MILLIONS) +ADJUSTED REVENUE (8) +(IN MILLIONS) +TOTAL SHAREHOLDER RETURN (6) +PEER GROUP TOTAL SHAREHOLDER RETURN (6) +2023 $ 32,789,885 $ 29,391,856 $ 10,117,055 $ 7,259,680 $ 109.51 $ 116.84 $ 5.070 $ 52.593 +2022 $ 28,838,060 $ 19,617,425 $ 9,185,111 $ 7,482,733 $ 122.26 $ 120.40 $ 6.046 $ 47.406 +2021 $ 32,920,708 $ 77,444,844 $ 17,107,315 $ 28,986,814 $ 139.58 $ 141.30 $ 5.727 $ 43.769 +(1) John Donahoe II served as the Company's CEO for each fiscal year presented. The individuals comprising the non-CEO NEOs for each fiscal year presented are Matthew Friend, Andrew Campion, Heidi O'Neill, and Mark Parker. +(2) Represents the amount of total compensation reported for our CEO, Mr. Donahoe, in the "Total" column of the "Summary Compensation Table" for each fiscal year presented. +(3) The dollar amounts reported in the "Compensation Actually Paid to CEO" column have been calculated in accordance with Item 402(v) of Regulation S-K and do not reflect compensation actually earned, realized, or received by the CEO. These amounts reflect the amount set forth in the "Total" column of the "Summary Compensation Table" for each fiscal year presented, with certain adjustments as described in the table below, in accordance with the requirements of Item 402(v) of Regulation S-K: +2023 2022 2021 +Summary Compensation Table ("SCT") total for CEO $ 32,789,885 $ 28,838,060 $ 32,920,708 +Deduction for amounts reported under the "Stock Awards" column in the SCT $ 13,220,455 $ 12,061,812 $ 3,602,980 +Deduction for amounts reported under the "Option Awards" column in the SCT $ 7,247,371 $ 6,782,995 $ 5,402,416 +Total deductions from SCT $ 20,467,826 $ 18,844,807 $ 9,005,396 +Year end fair value of equity awards $ 17,801,878 $ 9,719,590 $ 17,094,821 +Change in fair value of outstanding and unvested equity awards $( 4,440,691 ) $( 6,894,427 ) $ 23,324,355 +Change in fair value of equity awards granted in prior years that vested in the year $ 3,461,158 $ 6,578,196 $ 12,885,143 +Value of dividends on stock awards $ 247,452 $ 220,812 $ 225,212 +Total adjustments $ 17,069,797 $ 9,624,172 $ 53,529,532 +Compensation actually paid $ 29,391,856 $ 19,617,425 $ 77,444,844 +Equity valuations: Stock option grant date fair values are calculated based on the Black-Scholes option pricing model as of the grant date; adjustments have been made using stock option fair values as of each measurement date using the stock price as of the measurement date and updated assumptions (i.e., term, volatility, dividend yield, risk free rates) as of the measurement date. PSU grant date fair values are calculated using a Monte Carlo simulation based on the probable outcome of the performance condition as of the grant date; adjustments have been made using a revised Monte Carlo valuation as of fiscal year end. RSU grant date fair values are calculated using the stock price as of the grant date; adjustments have been made using the stock price as of fiscal year end and as of each vesting date. +(4) Represents the average of the amounts of total compensation reported for our non-CEO NEOs, as a group, in the "Total" column of the "Summary Compensation Table" for each fiscal year presented. +(5) The dollar amounts reported in the "Average Compensation Actually Paid to Non-CEO NEOs" column have been calculated in accordance with Item 402(v) of Regulation S-K and do not reflect compensation actually earned, realized, or received by the non-CEO NEOs. These amounts reflect the average of the amounts set forth in the "Total" column of the "Summary Compensation Table" for each fiscal year presented for the applicable non-CEO NEOs, with certain adjustments as described in the table below, in accordance with the requirements of Item 402(v) of Regulation S-K: +2023 PROXY STATEMENT 54 +2023 2022 2021 +Average Summary Compensation Table total for non-CEO NEOs $ 10,117,055 $ 9,185,111 $ 17,107,315 +Deduction for amounts reported under the "Stock Awards" column in the SCT $ 3,060,034 $ 2,191,148 $ 6,370,788 +Deduction for amounts reported under the "Option Awards" column in the SCT $ 2,387,034 $ 2,153,362 $ 2,806,263 +Total deductions from SCT $ 5,447,068 $ 4,344,510 $ 9,177,051 +Year end fair value of equity awards $ 4,815,268 $ 2,257,926 $ 15,020,734 +Change in fair value of outstanding and unvested equity awards $( 1,929,436 ) $( 2,839,461 ) $ 6,098,187 +Change in fair value of equity awards granted in prior years that vested in the year $( 373,621 ) $ 3,134,180 $( 186,300 ) +Value of dividends on stock awards $ 77,482 $ 89,487 $ 123,929 +Total adjustments $ 2,589,693 $ 2,642,132 $ 21,056,550 +Average compensation actually paid $ 7,259,680 $ 7,482,733 $ 28,986,814 +Equity valuations: Stock option grant date fair values are calculated based on the Black-Scholes option pricing model as of the grant date; adjustments have been made using stock option fair values as of each measurement date using the stock price as of the measurement date and updated assumptions (i.e., term, volatility, dividend yield, risk free rates) as of the measurement date. PSU grant date fair values are calculated using a Monte Carlo simulation based on the probable outcome of the performance condition as of the grant date; adjustments have been made using a revised Monte Carlo valuation as of fiscal year end. RSU grant date fair values are calculated using the stock price as of the grant date; adjustments have been made using the stock price as of fiscal year end and as of each vesting date. +(6) Peer group total shareholder return ("TSR") uses the Dow Jones U.S. Footwear Index, which the Company also uses in the stock performance graph required by Item 201(e) of Regulation S-K included in the Company's Annual Report on Form 10-K for fiscal 2023. These comparisons assume $100 (including reinvested dividends) was invested for the period starting May 31, 2020 through the end of the listed fiscal year in (a) the Company and (b) the Dow Jones U.S. Footwear Index, respectively. Historical stock performance is not necessarily indicative of future stock performance. +(7) Reflects net income calculated in accordance with generally accepted accounting principles ("GAAP") in the Company's Consolidated Statements of Income included in the Company's Annual Reports on Form 10-K for the applicable fiscal year. +(8) Reflects Adjusted Revenue calculated based on GAAP revenue excluding the impact of acquisitions and divestitures; changes in accounting principles; unanticipated restructurings; unanticipated exchange rate fluctuations; other extraordinary, unusual, or infrequently occurring items; and the unanticipated impact from Nike Virtual Studios and RTFKT. We determined Adjusted Revenue to be the most important financial performance measure used to link Company performance to compensation actually paid ("CAP") to our CEO and non-CEO NEOs in fiscal 2023, as required pursuant to Item 402(v) of Regulation S-K. This performance measure may not have been the most important financial performance measure for prior fiscal years, and we may determine a different financial performance measure to be the most important financial performance measure in future years. +DESCRIPTION OF RELATIONSHIPS +The following charts show graphically the relationships over the past three fiscal years of the CAP amounts for our CEO and non-CEO NEOs as compared to our cumulative TSR, peer group TSR, GAAP net income, and Adjusted Revenue as well as the relationship between TSR and peer group TSR. +CAP VERSUS COMPANY TSR & PEER GROUP TSR +55 NIKE, INC. +CAP VERSUS NET INCOME +CAP VERSUS ADJUSTED REVENUE +TABULAR LIST OF PERFORMANCE METRICS +The following table lists the three financial performance measures that, in the Company's assessment, represent the most important performance measures used to link CAP for our NEOs to Company performance for fiscal 2023. +Adjusted Revenue +Adjusted EBIT +Stock price +. +2023 PROXY STATEMENT 56 +PROPOSAL 3 +FREQUENCY OF ADVISORY VOTES ON +EXECUTIVE COMPENSATION +In accordance with the requirements of Section 14A of the Exchange Act, we are submitting to shareholders an advisory vote on whether to present our advisory "say-on-pay proposal" to shareholders every one year, every two years, or every three years. Under Exchange Act rules, we are required to present this "say-on-pay vote frequency proposal" at least once every six years. When shareholders last voted on a say-on-pay vote frequency proposal, at the 2017 Annual Meeting of Shareholders, the Board recommended holding a say-on-pay vote annually, and approximately 94% of the votes cast were voted in favor of holding such a vote annually. +The Board continues to value shareholder feedback on our executive compensation program, and believes that an annual say-on-pay vote offers a strong mechanism for all shareholders to provide timely input on the Company's executive compensation practices and policies. +Because your vote is advisory, it will not be binding on the Board. However, the Board values shareholder opinions, and will take into account the outcome of the vote when considering the frequency of future say-on-pay votes. +BOARD RECOMMENDATION +The Board of Directors recommends that shareholders vote for future shareholder advisory votes on executive compensation to be held every 1 YEAR . +57 NIKE, INC. +AUDIT MATTERS +PROPOSAL 4 +RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM +The Audit & Finance Committee of the Board of Directors has sole authority to retain, with shareholder ratification, the Company's independent registered public accounting firm. The Audit & Finance Committee directly oversees the firm's work with respect to the annual audit of the Company's consolidated financial statements and internal control over financial reporting and approves all audit engagement fees and terms. At least annually, the Audit & Finance Committee evaluates the independent registered public accounting firm's qualifications, performance, and independence, including a review and evaluation of its lead partner. The Audit & Finance Committee is also involved in the selection of the new lead engagement partner following mandated rotation of the firm’s lead partner, and is responsible for considering the benefits of rotation of the Company’s independent registered public accounting firm. +The Audit & Finance Committee has appointed PricewaterhouseCoopers LLP ("PwC") to audit the Company's consolidated financial statements and internal control over financial reporting for the fiscal year ending May 31, 2024 and to render other professional services as required. +PwC has served as the Company's independent registered public accounting firm for many years. The Audit & Finance Committee and the Board of Directors believe that the continued retention of PwC as the independent registered public accounting firm is in the best interests of the Company and its shareholders. +Accordingly, the Audit & Finance Committee is submitting the appointment of PwC to shareholders for ratification. If the appointment is not ratified by our shareholders, the Audit & Finance Committee may reconsider whether it should appoint another independent registered public accounting firm. +Representatives of PwC will be present at the Annual Meeting, will have the opportunity to make a statement if they desire to do so, and are expected to be available to respond to questions. +Aggregate fees billed by the Company's independent registered public accounting firm, PwC, for audit services related to the most recent two fiscal years, and for other professional services incurred in the most recent two fiscal years, were as follows: +TYPE OF SERVICE +2023 2022 +Audit Fees (1) +$18.7 million $18.1 million +Audit-Related Fees (2) +0.3 million 0.3 million +Tax Fees (3) +0.2 million 0.1 million +All Other Fees (4) +0.8 million 0.8 million +Total +$20.0 million $19.3 million +(1) Comprises the audits of the Company's annual financial statements and internal controls over financial reporting, and reviews of the Company's quarterly financial statements, as well as statutory audits of Company subsidiaries, attest services and consents to SEC filings. +(2) Comprises services including consultations regarding financial accounting and reporting. +(3) Comprises services for tax compliance, tax planning and tax advice. Tax compliance includes services for compliance related tax advice, as well as the preparation and review of both original and amended tax returns for the Company and its consolidated subsidiaries. Tax compliance related fees represented $0.1 million of the tax fees for fiscal 2023 and $0.1 million of the tax fees for fiscal 2022. The remaining tax fees primarily include tax advice. +(4) Comprises other miscellaneous services. +In accordance with the Sarbanes-Oxley Act of 2002, the Audit & Finance Committee established policies and procedures under which all audit and non-audit services performed by the Company's independent registered public accounting firm must be approved in advance by the Audit & Finance Committee. During fiscal 2023 and fiscal 2022, all such services performed by, and fees paid to, PwC were approved in advance. +BOARD RECOMMENDATION +The Board of Directors recommends that shareholders vote FOR ratification of the appointment of PricewaterhouseCoopers LLP as the Company's independent registered public accounting firm for the fiscal year ending May 31, 2024. +2023 PROXY STATEMENT 58 +REPORT OF THE AUDIT & FINANCE COMMITTEE +The Audit & Finance Committee has: +• Reviewed and discussed the audited financial statements with management. +• Discussed with the independent auditors the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board ("PCAOB") and the SEC. +• Received the written disclosures and the letter from the independent accountants required by applicable requirements of the PCAOB regarding the independent accountants' communications concerning independence, and has discussed with the independent accountant the independent accountant's independence. +• Based on the review and discussions above, recommended to the Board of Directors that the audited financial statements be included in the Company's Annual Report on Form 10-K for the last fiscal year for filing with the Securities and Exchange Commission. +Members of the Audit & Finance Committee: +• Alan Graf, Jr., Chair +• Maria Henry +• Peter Henry +• Robert Swan +59 NIKE, INC. +SHAREHOLDER PROPOSALS +PROPOSAL 5 +TO CONSIDER A SHAREHOLDER PROPOSAL REGARDING SUPPLEMENTAL PAY EQUITY DISCLOSURE +The following shareholder proposal will be voted on at the Annual Meeting only if properly presented by or on behalf of the shareholder proponent. Mary McInnes, c/o Arjuna Capital, 13 Elm Street, Manchester, MA 01944, a beneficial owner of at least $25,000 of Class B Stock, submitted the Proposal together with co-filer Change Finance, P.B.C. The Board of Directors recommends a vote AGAINST the proposal and asks shareholders to read through NIKE's response which follows the shareholder proposal. +Racial and Gender Pay Gaps +Whereas: Pay inequities persist across race and gender and pose substantial risk to companies and society at large. Black workers’ hourly median earnings represent 81 percent of white wages. The median income for women working full time is 83 percent that of men. Intersecting race, Black women earn 64 cents, Native women 51 cents, and Latina women 54 cents. At the current rate, women will not reach pay equity until 2059, Black women until 2130, and Latina women until 2224. +Citigroup estimates closing minority and gender wage gaps 20 years ago could have generated 12 trillion dollars in additional income. PwC estimates closing the gender pay gap could boost Organization for Economic Cooperation and Development countries’ economies by 2 trillion dollars annually. +Actively managing pay equity is associated with improved representation, and diversity is linked to superior stock performance and return on equity. Minorities represent 60 percent of Nike's workforce, but only 30 percent of leadership. Women represent 49 percent of Nike's workforce and 43 percent of leadership. +Best practice pay equity reporting consists of two parts: +1. unadjusted median pay gaps, assessing equal opportunity to high paying roles, +2. statistically adjusted gaps, assessing pay between minorities and non-minorities, men and women, +performing similar roles. +Nike reports only statistically adjusted gaps but ignores unadjusted gaps, which address structural bias women and minorities face regarding job opportunity and pay, particularly when men hold most higher paying jobs. Median pay gaps show, quite literally, how Nike assigns value to employees through the roles they inhabit and pay they receive. Median gap reporting also provides a digestible and comparable data point to determine progress over time. +Racial and gender median pay gaps are accepted as the valid way of measuring pay inequity by the United States Census Bureau, Department of Labor, Organization for Economic Cooperation and Development, and International Labor Organization. The United Kingdom and Ireland mandate disclosure of median gender pay gaps. Nike discloses data for United Kingdom employees, reporting a median hourly gender pay gap of 7 percent and median bonus gap of 33 percent. +Resolved: Shareholders request Nike report on median pay gaps across race and gender, including associated policy, reputational, competitive, and operational risks, and risks related to recruiting and retaining diverse talent. The report should be prepared at reasonable cost, omitting proprietary information, litigation strategy and legal compliance information. +Racial/gender pay gaps are defined as the difference between non-minority and minority/male and female median earnings expressed as a percentage of non-minority/male earnings (Wikipedia/OECD, respectively). +Supporting Statement: An annual report adequate for investors to assess performance could, with board discretion, integrate base, bonus and equity compensation to calculate: +• percentage median gender pay gap, globally and/or by country, where appropriate +• percentage median racial/minority/ethnicity pay gap, US and/or by country, where appropriate +2023 PROXY STATEMENT 60 +OPPOSITION STATEMENT +The Board of Directors recommends that shareholders vote AGAINST this proposal because: +• We remain committed to the principle of equal pay for equal work and to enhancing the representation of diverse individuals at all levels of the Company; and +• Our current initiatives and public disclosures, including the pay equity data published in our annual Impact Report, already address the underlying rationale for the proposal and provide our shareholders with more relevant information about NIKE's commitment to pay equity and increasing diversity, equity, and inclusion ("DE&I") at all levels of the Company than the requested measure. +We remain committed to maintaining pay equity, increasing diversity at all levels of the Company, and providing transparency. As demonstrated by the 2025 People targets set forth in NIKE's annual Impact Report, NIKE is committed to fostering a diverse, equitable, and inclusive culture by focusing on representation, education, development, and community. We believe that diversity is a key component of innovation and strive to build a creative and inclusive environment, where all voices are welcomed and heard. +Our pay equity ratio, which is disclosed annually in our Impact Report, reflects our commitment to deliver equal pay for equal work. NIKE defines pay equity as equal compensation for employees across gender, race, and ethnicity, who undertake the same work at the same career level, location, experience, and performance. We have achieved and maintained a global pay equity ratio of 1:1 for men to women and a 1:1 pay equity ratio for white employees to racial and ethnic minorities in the United States. We regularly monitor internal pay infrastructure and annually review our compensation and promotion practices across all geographies, functions, and business units with the goal of ensuring we continue to achieve pay equity every year. During fiscal 2022, we also enhanced our commitment to educate employees on talent and pay practices by expanding our resources and hosting live training sessions with the goal of strengthening manager capability and confidence in having productive pay conversations. +In addition to our commitment to maintaining pay equity, we are also focused on increasing gender and racial diversity throughout the Company, including among our leadership ranks. In our annual Impact Report we disclose the actual percentage representation of women globally and racial and ethnic minorities in the United States and its trend over time to enable our shareholders to track the progress that we have made in advancing diversity in our workforce generally as well as specifically in senior leadership roles. +We have also committed to specific 2025 targets related to pay equity as well as DE&I at the Company. For example, we have adopted specific representation-related targets, including achieving 50% representation of women in the global corporate workforce, 45% representation of women globally at the VP level, 35% representation of racial and ethnic minorities in our U.S. workforce, and 30% representation of racial and ethnic minorities at the Director level and above in the United States. We have already achieved many of these targets. As of fiscal 2022, women make up 51% of our global corporate workforce and racial and ethnic minorities make up 39% of our workforce in the United States and we have increased VP-level representation for women globally to 44% (a 17 percentage point increase from 2015) and for racial and ethnic minorities in the United States to 35% (a 19 percentage point increase from 2015). NIKE also discloses its Federal Employer Information Report EEO-1 Data, although we do not use the EEO-1 Data to measure progress or believe it is appropriate to do so. The EEO-1 Data for 2021 is available on the Company’s website. And at the Board level, NIKE has adopted a set of qualification standards for director nominees, which includes, among other things, diversity and inclusion as a factor. +We maintain robust policies and programs to advance our diversity, equity, and inclusion goals throughout the Company by ensuring a diverse breadth of talent in our pipeline and developing and supporting our female and U.S. racial and ethnic minority employees. Although we have made good progress with respect to DE&I, we know there is more work to be done. We have continued to expand our programming to recruit, develop, promote, and retain diverse employees. We have scaled up our efforts to recruit the best and the brightest talent through traditional executive and campus recruiting channels and by expanding and deepening our relationships with Historically Black Colleges and Universities ("HBCUs") and Hispanic-Serving Institutions ("HSIs"). We have also launched innovative programs, such as the Serena Design Crew, an eight-month apprenticeship program designed to bring diverse, talented individuals together to work on a Serena inspired collection, and Women in Nike ("WIN"), a two-year program to provide relevant and dynamic work experience for retired or retiring WNBA players. +61 NIKE, INC. +Specific highlights of our recent efforts to enhance the recruitment, development, and retention of diverse talent at all levels of the Company include: +• Increasing our focus on diversity recruitment programs, including by expanding and deepening our relationships with HBCUs and HSIs through year-round engagement, workshops, and a commitment to a $10 million investment in HBCUs and HSIs by 2025. +• Innovative programs aimed at building a pipeline of exceptional and diverse candidates, such as our Serena Design Crew apprenticeship for diverse and talented individuals and our WIN initiative for retired or retiring WNBA players. +• Strategies to attract and select diverse candidates for our intern program through inclusive intern hiring and full-time employee conversion. +• Eight employee-formed and managed networks that help build community for a diverse spectrum of individuals across the Company, such as the Black Employee Network and Friends, Latino & Friends Network, Native American Network & Friends, PRIDE Network and Women of Nike & Friends. +• A new Inclusive Leadership education certification within our ongoing VP leadership program for all NIKE executives across the globe. +• A custom unconscious bias awareness training was developed and rolled out to all employees in fiscal 2023. +• Our Board’s ongoing oversight of the Company’s DE&I policies as well as the Corporate Responsibility, Sustainability & Governance Committee's regular review and evaluation of significant DE&I strategies, activities, policies, investments, and programs. +• Benefits that are responsive to our employees’ diverse needs, including transgender healthcare coverage and fertility, adoption, and surrogacy benefits. +At NIKE, DE&I is integrated into the entire Talent agenda from the very beginning of the employee experience, with measurement and leadership accountability throughout each employee's career. Finally, NIKE supports our recruitment, development, promotion, and retention efforts through investments in DE&I education for all employees, to ensure that our people have the awareness and understanding necessary to build and retain diverse and inclusive teams; to empower and enable employees to grow their careers at NIKE through professional development programs and experiences; and to ensure an ecosystem of belonging and access for our internal communities through our eight employee networks. +Our long-standing commitment to and support of gender and racial equality has been affirmed by many organizations. For example, NIKE has earned the title of Best Place to Work for LGBTQ+ employees for the 20th year in a row, with a perfect score on the 2022 Corporate Equality Index, and Forbes named NIKE as one of the Best Employers for Diversity in 2023. +More information about our key initiatives and diversity metrics is available in the Diversity, Equity & Inclusion section of our website and in our FY22 NIKE, Inc. Impact Report, both of which are available through the Impact section of our website. +As described above, we continue to provide information about our pay infrastructure, pay equity, and the representation of women and racial and ethnic minority employees in senior leadership positions on our website and in our annual Impact Report. We believe that a commitment to transparency helps to build trust with our shareholders and internal and external stakeholders and holds us accountable to our commitments, which is why we continue to provide such information to our shareholders. +In contrast, the median pay gap measure seeks to compare the pay of two employees whose compensation happens to fall at the midpoint of the pay range among those employees sharing the relevant gender, racial, or ethnic characteristic, without adjusting for relevant factors that can explain differences in pay, such as their different role, skills, performance, experience, tenure, or location. Although the proposal is aimed at providing transparency with respect to pay equity and equal opportunity, this statistic does not demonstrate whether our women and racial and ethnic minority employees are being paid fairly for the roles that they are doing nor does it accurately depict female or racial and ethnic representation at NIKE’s different locations around the globe. +Our shareholders would not benefit from a surrogate measurement of pay equity that ultimately does not provide any meaningful supplemental information to our existing disclosures. Our shareholders seem to agree since a similar proposal received from the proponent in 2021 received the support of only approximately 18% of votes cast. +In summary, the Board of Directors believes the proposal is unnecessary because NIKE already publicly discloses information with respect to our DE&I initiatives, pay equity, and diversity metrics and provides our shareholders with meaningful insight into our progress in this area that more effectively responds to the underlying objective of the proposal than the unadjusted median pay gap disclosure requested by the proposal would. +BOARD RECOMMENDATION +X +The Board of Directors recommends that shareholders vote AGAINST the shareholder proposal. +2023 PROXY STATEMENT 62 +PROPOSAL 6 +TO CONSIDER A SHAREHOLDER PROPOSAL REGARDING A SUPPLY CHAIN MANAGEMENT REPORT +The following shareholder proposal will be voted on at the Annual Meeting only if properly presented by or on behalf of the shareholder proponent. Tulipshare Ltd., 64 Nile Street, International House, London, England, N1 7SR UK, a beneficial owner of at least $25,000 of Class B Stock, submitted the Proposal. The Board of Directors recommends a vote AGAINST the proposal and asks shareholders to read through NIKE's response which follows the shareholder proposal. +RESOLVED: Shareholders of Nike, Inc. ("Nike") request that the Board oversee and issue a report to shareholders, at reasonable cost and omitting proprietary information, assessing the effectiveness of its existing supply chain management infrastructure in ensuring alignment with Nike's equity goals and human rights commitments. +SUPPORTING STATEMENT: In the Board’s discretion we recommend Nike's report include: +• Assessment of whether existing policies and implementation mechanisms, such as codes, guidance and supply chain contract terms ensure alignment throughout the value chain; +• Methodology and metrics to track and measure performance on forced labor and wage theft risks; +• Consistency with OECD Guidelines, UN Guiding Principles, and Sustainable Development Goals; +• Consideration of American Bar Association (ABA) Model Contract Clauses on human rights in the supply chain; and +• Whether the assessment yields any changes to Company policies, decision making, and implementation mechanisms. +WHEREAS: In the apparel industry, forced labor occurs both in the production of raw materials and during manufacturing, especially at lower tier suppliers. An estimated 27.6 million people are trapped in forced labor, with annual increases in forced labor driven entirely by the private economy. 1 UN Guiding Principles require corporate responsibility to respect human rights within operations and supply chains. Shareholders agree Nike should expand "opportunity for women" 2 considering a majority of Nike's garment workers are women 3 and the exacerbated human rights violations during the pandemic. 4 +Nike's impact report includes continued support for the UN Global Compact. 5 However, Nike's communication on progress only meets six of seventeen Sustainable Development Goals. 6 Nike has not disclosed adequate analysis regarding the efficacy of traceability steps taken to address the risks of alleged Uyghur forced labor across its supply chain tiers, nor does Nike disclose engagement with affected rightsholders or whether remedies are satisfactory to victims; KnowTheChain identified Nike policies in need of improvement: purchasing practices, worker voice, and remedy. 7 +In 2022, the EU adopted a Directive on corporate sustainability due diligence in global value chains, requiring companies like Nike to identify, prevent, end or mitigate adverse impacts on human rights. 8 This Directive sets obligations, penalties and liability for large companies, with respect to their own operations, subsidiaries, and business partners. 9 +In 2023, garment-worker unions and labor-rights groups filed a complaint alleging Nike's treatment of workers and unpaid wages violated OECD guidelines. 10 Nike allegedly owes an estimated $1.4 million in unpaid wages to Cambodian garment workers, 11 with Nike's overall wage theft from workers alleged at $28 million. 12 +One possible approach for Nike to fulfil its responsibility to avoid causing or contributing to adverse human rights impacts in its supply chain is deployment of the ABA's Model Contract Clauses. The contract clauses are aimed at ensuring responsible purchasing practices, such as reasonable assistance to suppliers, responsible exit, and victim remedies. 13 +1 https://www.ilo.org/wcmsp5/groups/public/---ed_norm/---ipec/documents/publication/wcms_854733.pdf +2 https://about.nike.com/en/newsroom/statements/a-letter-from-our-president-and-ceo +3 https://manufacturingmap.nikeinc.com/ +4 https://www.payyourworkers.org/ramatex +5 https://purpose-cms-preprod01.s3.amazonaws.com/wp-content/uploads/2022/03/17210319/FY21_NIKE-Impact-Report.pdf +6 https://unglobalcompact.org/participation/report/cop/active/464879 +7 https://knowthechain.org/company/nike_2021/#resources +8 https://ec.europa.eu/commission/presscorner/detail/en/ip_22_1145 +9 https://www.consilium.europa.eu/en/press/press-releases/2022/12/01/council-adopts-position-on-due-diligence-rules-for-large-companies/ +10 https://www.businessoffashion.com/articles/sustainability/worker-rights-nike-oecd-complaint-covid-19-pandemic-wage-theft/; https://globallaborjustice.org/wp-content/uploads/2023/02/OECD-Fact-Sheet-Nike.pdf +11 https://www.business-humanrights.org/en/latest-news/cambodia-trade-unions-demand-nike-matalan-pay-garment-workers-from-closed-factory-14-million-in-unpaid-compensation-damages/ +12 https://asia.floorwage.org/wp-content/uploads/2022/02/Money-Heist_Book_Final-compressed.pdf +13 https://www.americanbar.org/content/dam/aba/administrative/human_rights/contractual-clauses-project/mccs-full-report.pdf +63 NIKE, INC. +OPPOSITION STATEMENT +The Board of Directors recommends that shareholders vote AGAINST this proposal because: +• NIKE strongly believes in, and is committed to respecting, human and labor rights throughout our operations and supply chain; +• NIKE's commitment to ethical practices in our own operations and our supply chain begins at the highest level; +• NIKE expects, and supports the creation of, world-class, safe, and healthy workplaces for the people making our products; +• NIKE continues to evolve and strengthen our expectations and practices; and +• NIKE's policies effectively articulate our long-standing commitment to human rights and sustainable sourcing, rendering the proposal unnecessary. +NIKE strongly believes in, and is committed to respecting, human and labor rights throughout our operations and supply chain. NIKE is deeply committed to ethical and responsible manufacturing and to the goal that all people who make and move NIKE products are respected and valued. To inform our expectations of third-party manufacturers and suppliers, we look to the human rights defined in the Universal Declaration of Human Rights and the International Labour Organization’s ("ILO") Declaration on Fundamental Rights at Work and consider the UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises as best practices for understanding and managing human rights risks and impacts. Using these standards, we have developed a Supplier Code of Conduct ("Supplier Code of Conduct") and Code Leadership Standards ("CLS"), which are publicly available on our website and translated into 15 languages, and which set strong expectations for the contract manufacturers that manufacture our finished products ("suppliers"), as well as procedures for measuring compliance with such expectations. The Supplier Code of Conduct lays out minimum standards NIKE expects each supplier to meet in producing NIKE products and includes strict requirements regarding forced and child labor, excessive overtime, compensation, and freedom of association, among other requirements. The CLS articulates how NIKE measures suppliers' compliance efforts and progress against our Supplier Code of Conduct, including specific requirements on the management of key forced labor risks. NIKE also explicitly requires our suppliers to comply with all local and country-specific labor laws as well as the CLS and our Supplier Code of Conduct. NIKE has progressively raised expectations for our suppliers through evolving the standards within the Supplier Code of Conduct and CLS. Recent updates include broadening the definitions of employment fees to be borne by suppliers and strengthening the oversight requirements for labor agents recruiting and hiring foreign migrant workers. +We monitor compliance with the Supplier Code of Conduct and CLS through regular internal and external third-party audits, both announced and unannounced, to track the environmental and social performance of our contract manufacturers against those expectations. In the event of alleged noncompliance, we investigate and, if improvements are required, we take a collaborative approach to working with suppliers to verify corrective actions are taken, problems are remediated, and managers have onsite verification. Should a supplier fail to remediate issues identified by an audit, it is subject to review and sanctions, including potential termination of the supplier relationship. +NIKE works to elevate human potential through our products, third party relationships, and operations, something that cannot be accomplished without a fundamental respect for human rights throughout NIKE's operations. NIKE expects the same from our suppliers, and we focus on working with long-term, strategic suppliers that demonstrate a commitment to engaging their workers, providing safe working conditions, and advancing environmental responsibility. This includes working to combat risks of forced labor. NIKE discloses all of the independent contract manufacturers and the majority of material vendors used to manufacture NIKE products in an interactive and publicly available NIKE Manufacturing Map. NIKE also requires our suppliers to source materials from vendors that are compliant with NIKE's Supplier Code of Conduct, Traceability Standards, and Restricted Substances List. +NIKE's commitment to ethical practices in our own operations and our supply chain begins at the highest level. The Board's Corporate Responsibility, Sustainability & Governance Committee reviews and evaluates the Company's significant strategies, activities, policies, investments, and programs regarding corporate purpose, including corporate responsibility, sustainability, human rights, and global community and social impact, and provides oversight of management’s efforts to ensure that the Company's dedication to sustainability (including environmental sustainability and human rights) is reflected in our business operations. NIKE's Responsible Supply Chain team manages the day-to-day human rights and environmental impacts and risks across the global supply chain, and drives appropriate strategies to fuel a transparent and responsible supply chain that enables NIKE's growth, builds resilience, and protects the future of sport. +NIKE works closely with suppliers, industry associations, brands, civil society, and other stakeholders to build world-class, safe, and healthy workplaces for the people making our products. NIKE believes that addressing complex and critical human rights risks, like forced labor, requires multi-stakeholder collaboration. We continually evaluate and update our systems to identify and address risks in the supply chain, including those related to forced labor. Where we identify potential adverse human rights impacts related to supply chain workers, we take steps to prevent and mitigate such impacts by leveraging our business relationships and collaborating with suppliers, stakeholders, and other brands. +NIKE is a founding signatory to the American Apparel and Footwear Association and Fair Labor Association’s Apparel & Footwear Industry Commitment to Responsible Recruitment. The principles of the Commitment, centered on addressing risks for forced labor, are aligned with NIKE's standards and the work we have been doing for more than a decade with the contract factories that manufacture our products. We believe this builds on the multi-sector focus to drive change in the dynamics of how workers are recruited, including for crossborder employment. NIKE is also a member of the Leadership Group for Responsible Recruitment, an initiative of the Institute for Human Rights and Business, and is a member of the Responsible Labor Initiative, an initiative of the Responsible Business Alliance, to further the Company’s work and goals on eliminating forced labor risks in our supply chain. Each organization helps NIKE to advance core aspects of our strategy. +2023 PROXY STATEMENT 64 +A few of our fiscal 2022 highlights relating to our efforts to promote human and labor rights throughout our supply chain include: +• Expanding our use of the CUMULUS Forced Labor ScreenTM (a due diligence tool to help identify risks related to the recruitment of foreign migrant workers by NIKE suppliers) to all Tier 1 finished goods and strategic Tier 2 suppliers hiring foreign migrant workers in our extended supply chain. +• Collaborating with the Fair Labor Association and ILO's Better Work Programme to support the delivery of Better Work's trainings to workers at several suppliers in Jordan, focused on topics like mental well-being, sexual harassment prevention, and workplace communication. +• Expanding our collaboration with the Issarra Institute by launching their Foreign Migrant Workers assessment survey in a factory in Thailand to assess gaps in the foreign migrant worker recruitment process, implementation of the Employer Pays Principle (prohibiting workers from paying fees for their employment), and working conditions. +NIKE continues to collaborate with industry experts, suppliers, industry associations, stakeholders, and other organizations to understand, evaluate and address matters related to forced labor. NIKE also continues to expand and evolve our work with other industry peers, NGOs, and organizations on issues of human rights in the countries where the Company and our suppliers operate. +NIKE continues to evolve and strengthen our expectations and practices. NIKE continues to refine our approach to supplier sustainability. We continue to adopt new strategies so our suppliers understand how to grow with NIKE's business in a sustainable and safe way. We develop five-year targets to enhance NIKE's sustainable sourcing practices, which are disclosed to shareholders in our annual Impact Report. Historically we have set an ambitious target of sourcing 100% from facilities that meet our foundational labor, health, safety, and environmental standards, focusing on finished goods manufacturing partners that we contract with directly. For our 2025 targets, we expanded the scope of this target to include key material suppliers (supplying approximately 90% of our footwear uppers and apparel materials) and focus distribution centers (representing at least 80% of volume), as well as NIKE owned or operated manufacturing facilities. +In addition, in fiscal year 2021, we updated our Supplier Code of Conduct to better reflect our priorities across labor, health and safety, and the environment, drive consistency across the NIKE supply chain and progress toward our 2025 targets. As part of these changes, we added a new requirement for suppliers to develop and share their own internal Code of Conduct. This supports suppliers in fully integrating our expectations into their own business practices and compliance policies. We also strengthened expectations on identifying and addressing forced labor and child labor by elevating key risks of forced labor beyond recruitment fees to include freedom of movement, debt bondage, and building sufficient systems to manage employment relationship of vulnerable worker groups like foreign workers. We clarified examples of hazardous work to align with the minimum working age and elevated requirements around nonretaliation or interference/intimidation to prevent right to freely associate. +As always, we plan to support our suppliers as we work together to meet our aggressive targets and implement the changes in our Supplier Code of Conduct. We have transitioned to common industry assessments on environment, labor, and health and safety to reduce duplication and audit fatigue for suppliers working with multiple brands, and to ensure that we work with others in the industry to drive impact with a unified voice. We have also enhanced supplier access to training and capacity building to +improve management systems, adopt technical improvements in environmental, labor, and health and safety standards, and to sustain those improvements. +NIKE is committed to sharing with our stakeholders how we manage social and environmental issues and impacts. At NIKE, we set open goals and implement transparent policies to promote human and labor rights and the ethical production of our products, while sharing our progress and learnings along the way. Each year's annual Impact Report highlights our progress towards our five-year targets and describes the work undertaken to support that progress. The Responsible Sourcing page of our website goes into further detail and includes our Supplier Code of Conduct and our CLS, which, as described above, specifies how contract manufacturers should implement the Supplier Code of Conduct and articulates how we measure supplier compliance efforts and progress against our Supplier Code of Conduct, including specific requirements on the management of key forced labor risks. +Finally, we have published our Statement on Forced Labor, Human Trafficking and Modern Slavery for Fiscal Year 2022 on our website. The statement describes NIKE's commitment to ethical and responsible manufacturing, our ongoing supplier diligence and monitoring to identify and assess potential forced labor risks, how we engage with suppliers to prioritize the well-being of their workers, and our partnerships with various organizations to drive collaborative efforts to address critical human rights risks, such as forced labor. +In summary, NIKE continues to work tirelessly to integrate respect for people and the planet throughout NIKE's entire business, including our supply chain, and to disclose our initiatives and policies so our shareholders have meaningful insight into our progress in this area. We believe that our decades of commitment to these issues have led to effective and impactful solutions. The Board of Directors believes that the Company's policies effectively articulate our long-standing support for, and continued commitment to, human rights and sustainable sourcing, rendering the proposal ineffective and unnecessary. +BOARD RECOMMENDATION +X +The Board of Directors recommends that shareholders vote AGAINST the shareholder proposal. +65 NIKE, INC. +STOCK OWNERSHIP INFORMATION +STOCK HOLDINGS OF CERTAIN OWNERS AND MANAGEMENT +The following table sets forth the number of shares of the classes of NIKE securities beneficially owned, as of June 30, 2023, after giving effect to any transactions that occurred on such date, by (1) each person known to the Company to be the beneficial owner of more than five percent of any class of the Company's securities, (2) each of the directors and nominees for director, (3) each executive officer listed in the Summary Compensation Table ("Named Executive Officers"), and (4) all directors, Named Executive Officers, and other executive officers as a group. Because Class A Stock is convertible into Class B Stock on a share-for-share basis, each beneficial owner of Class A Stock is deemed by the SEC to be a beneficial owner of the same number of shares of Class B Stock. Therefore, in indicating a person's beneficial ownership of shares of Class B Stock in the table, it has been assumed that such person has converted into Class B Stock all shares of Class A Stock of which such person is a beneficial owner. For these reasons the table contains substantial duplications in the numbers of shares and percentages of Class A and Class B Stock shown for Swoosh, LLC, Philip Knight, and the Travis A. Knight 2009 Irrevocable Trust II. In addition, unless otherwise indicated, all persons named below can be reached c/o Corporate Secretary, NIKE, Inc., One Bowerman Drive, Beaverton, Oregon 97005-6453. +TITLE OF CLASS +SHARES BENEFICIALLY +OWNED (1) +PERCENT OF +CLASS (2) +Cathleen Benko Class B 10,942 — +Timothy Cook Class B 48,443 +(3) +— +John Donahoe II (4) +Class B 1,435,975 +(3)(5) +0.1 % +Thasunda Duckett Class B 6,552 — +Mónica Gil Class B 1,856 — +Alan Graf, Jr. Class B 195,435 — +Maria Henry Class B 1,730 — +Peter Henry Class B 4,062 — +Travis Knight Class B 26,903 +(6) +— +Mark Parker (4) +Class B 3,212,383 +(3)(5) +0.3 % +Michelle Peluso Class B 25,777 — +John Rogers, Jr. Class B 27,485 — +Robert Swan Class B 4,532 +(7) +— +Andrew Campion (4) +Class B 433,658 +(3) +— +Matthew Friend (4) +Class B 238,202 +(3) +— +Heidi O'Neill (4) +Class B 246,456 +(3) +— +2023 PROXY STATEMENT 66 +TITLE OF CLASS +SHARES BENEFICIALLY +OWNED (1) +PERCENT OF +CLASS (2) +Sojitz Corporation of America Preferred +(8) +300,000 100.0 % +1211 S.W. 5th Ave, Pacwest Center, Ste. 2220, +Portland, OR 97204 +Philip Knight +One Bowerman Drive, Beaverton, OR 97005 +Class A 21,404,487 +(9) +7.0 % +Class B 29,740,174 +(10) +2.4 % +Swoosh, LLC +22990 NW Bennett Street, Hillsboro, OR 97124 +Class A 233,500,000 +(11) +76.6 % +Class B 233,500,000 16.0 % +Travis A. Knight 2009 Irrevocable Trust II +22990 NW Bennett Street, Hillsboro, OR 97124 +Class A 41,006,369 +(12) +13.5 % +Class B 41,006,369 +(12) +3.2 % +The Vanguard Group +100 Vanguard Blvd., Malvern, PA 19355 +Class B 109,698,806 +(13) +8.7 % +(12) +BlackRock, Inc. +55 East 52nd Street, New York, NY 10055 +Class B 85,497,266 +(14) +6.8 % +(13) +All directors and executive officers as a group (18 persons) +Class B 6,022,698 +(3)(5) +0.5 % +(1) A person is considered to beneficially own any shares: (a) over which the person exercises sole or shared voting or investment power, or (b) of which the person has the right to acquire beneficial ownership at any time within 60 days (such as through conversion of securities or exercise of stock options). Unless otherwise indicated, voting and investment power relating to the above shares is exercised solely by the beneficial owner or shared by the owner and the owner's spouse or children. +(2) Omitted if less than 0.1 percent. +(3) These amounts include the right to acquire the following numbers of shares within 60 days after June 30, 2023 pursuant to the exercise of stock options: 14,000 shares for Mr. Cook, 1,257,670 shares for Mr. Donahoe, 1,819,077 shares for Mr. Parker, 419,827 shares for Mr. Campion, 222,625 shares for Mr. Friend, 188,529 shares for Ms. O'Neill, and 3,954,301 shares for the executive officer and director group. +(4) Named Executive Officer listed in the Summary Compensation Table. +(5) Includes shares held in accounts under the NIKE, Inc. 401(k) Savings and Profit Sharing Plan: 146 shares for Mr. Donahoe, 37,435 shares for Mr. Parker, and 52,219 shares for the executive officer and director group. +(6) Does not include 233,500,000 shares of Class A Stock that are owned by Swoosh, LLC. Mr. Travis Knight has disclaimed beneficial ownership of all such shares. +(7) Includes 1,580 shares held by the Swan Family Revocable Trust. +(8) Preferred Stock does not have general voting rights except as provided by law, and under certain circumstances as provided in the Company's Restated Articles of Incorporation, as amended. +(9) Does not include 521,792 shares of Class A Stock that are owned by Mr. Philip Knight's spouse. Mr. Philip Knight has disclaimed ownership of all such shares. Mr. Philip Knight holds the position Chairman Emeritus, and has a standing invitation to attend all meetings of the Board as a non-voting observer. +(10) Does not include 521,792 shares of Class A Stock that are owned by Mr. Philip Knight's spouse. Mr. Philip Knight has disclaimed ownership of all such shares. +(11) Information provided as of July 17, 2020 in the Form 4 filed by the shareholder. +(12) Includes 21,863,989 shares of Class A Stock held directly by the Travis A. Knight 2009 Irrevocable Trust II (the "Trust") and 19,142,380 shares of Class A Stock held by an indirect subsidiary of the Trust. Mr. Travis Knight and members of his immediate family are among the beneficiaries of the Trust. Mr. Travis Knight disclaims beneficial ownership of the Company's securities held directly and indirectly by the Trust, except to the extent of his pecuniary interest therein. +(13) Information provided as of December 30, 2022 in Schedule 13G filed by the shareholder. +(14) Information provided as of December 31, 2022 in Schedule 13G filed by the shareholder. +DELINQUENT SECTION 16(a) REPORTS +Section 16(a) of the Exchange Act requires our directors and executive officers, and holders of more than 10 percent of a registered class of the Company's equity securities, to file with the SEC reports regarding their ownership and changes in ownership of Common Stock and other equity securities of the Company. Directors, officers, and greater than 10 percent shareholders are required by the regulations of the SEC to furnish the Company with copies of all Section 16(a) forms they file. Based solely on a review of such reports furnished to the Company and written representations that no other reports were required, during fiscal 2023, we believe that all such reports that were required to be filed under Section 16(a) were timely filed, except that an amended Form 3 was filed for Robert Swan on June 22, 2023 to report certain indirect holdings that were inadvertently omitted from his initial, timely Form 3. +67 NIKE, INC. +ADDITIONAL INFORMATION +TRANSACTIONS WITH RELATED PERSONS +Philip Knight, the father of NIKE director Travis Knight, serves as Chairman Emeritus, which provides a standing invitation for Philip Knight to attend meetings of the Board and its committees as a non-voting observer. In fiscal 2023, as Chairman Emeritus, Mr. Knight received an annual salary of $500,000, and medical and dental insurance coverage generally available to employees. +John Donahoe II and the Company have entered into time sharing agreements under which Mr. Donahoe reimburses the Company for limited personal use of Company aircraft, which is intended to increase his security, availability, and productivity. In fiscal 2023, Mr. Donahoe reimbursed the Company approximately $395,000 under the time sharing agreements. +Mark Parker's son, Matthew Parker, was employed by the Company in fiscal 2023 in a non-executive role for which the Company paid Matthew Parker aggregate compensation of approximately $135,000. The compensation and benefits received by Matthew Parker were consistent with compensation and benefits paid to other employees holding similar positions. +The Company's written policy requires the Corporate Responsibility, Sustainability & Governance Committee to review any transaction or proposed transaction with a related person that would be required to be reported under Item 404(a) of Regulation S-K, and to determine whether to ratify or approve the transaction, with ratification or approval to occur only if the committee determines that the transaction is fair to the Company or that approval or ratification of the transaction is in the interest of the Company. +COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION +The members of the Compensation Committee of the Board of Directors during fiscal 2023 were Timothy Cook, Cathleen Benko, and Mónica Gil, as well as Elizabeth Comstock (who served on the committee until she retired from the Board effective September 9, 2022). The committee is composed solely of independent, non-employee directors. No member of the Compensation Committee has been an executive officer of the Company, and no member of the Compensation Committee had any relationships requiring disclosure by the Company under the SEC's rules requiring disclosure of certain relationships and related-party transactions. None of the Company's executive officers served as a director or member of a compensation committee (or other committee serving an equivalent function) of any other entity, the executive officers of which served as a director or member of the Compensation Committee of the Company during fiscal 2023. +OTHER MATTERS AT THE MEETING +As of the time this proxy statement was printed, management was unaware of any proposals to be presented for consideration at the Annual Meeting other than those set forth herein, but if other matters do properly come before the Annual Meeting, the persons named in the proxy will vote the shares represented by such proxy according to their best judgment. +GENERAL INFORMATION +Why am I receiving these proxy materials? +You are receiving the enclosed proxy materials in connection with the solicitation of proxies by the Board of NIKE for use at the Annual Meeting. As a shareholder of record as of the close of business on July 12, 2023, which is the record date fixed by the Board, you are invited to attend the virtual Annual Meeting and are urged to vote your shares on the proposals described in this proxy statement. +How are the proxy materials being distributed? +This proxy statement is first being made available to shareholders on or about July 28, 2023. We are furnishing proxy materials to our shareholders primarily via the Internet, by mailing a Notice Regarding the Availability of Proxy Materials, or "Notice", instead +2023 PROXY STATEMENT 68 +of mailing printed copies of those materials to each shareholder. The Notice directs shareholders to a website where they can access our proxy materials, including our proxy statement and our annual report, and view instructions on how to vote online or by telephone. If you would prefer to receive a paper copy of our proxy materials, please follow the instructions included in the Notice. If you have previously elected to receive our proxy materials electronically, you will continue to receive access to these materials electronically unless you elect otherwise. +What is included in the proxy materials? +Our proxy materials include our Notice, our proxy statement, and our Annual Report on Form 10-K for the year ended May 31, 2023. Our Notice directs shareholders to a website where they can access our proxy materials. +Why is the Company holding a virtual Annual Meeting? +While we initially pivoted to a virtual format due to public health concerns, we are continuing to use this format because of the success of the last three virtual meetings; the advantages of the virtual format, including enhanced accessibility for our shareholders; and our ability to ensure that shareholders will be afforded the same rights and opportunities to participate in our virtual Annual Meeting as they would at an in-person meeting. +How can I attend and participate in the virtual Annual Meeting? +Holders of record of our Class A Stock and Class B Stock at the close of business on July 12, 2023 may attend the Annual Meeting, vote, and submit questions in advance of and during the meeting. +To attend, vote at, and submit questions during the Annual Meeting, visit www.virtualshareholdermeeting.com/NKE2023 and enter the 16-digit control number included in your Notice, voting instructions form, or proxy card. +Online access to the webcast will open approximately 15 minutes prior to the start of the Annual Meeting to allow time for you to log in and test the computer audio system. +How can I ask questions at the Annual Meeting? +We are committed to ensuring that shareholders will be afforded the same rights and opportunities to participate in our virtual Annual Meeting as they would at an in-person meeting. Shareholders of record at the close of business on July 12, 2023 may submit questions in advance of and during the Annual Meeting. +• To submit questions in advance of the Annual Meeting : Visit www.proxyvote.com and enter your 16-digit control number included in your Notice, voting instructions form, or proxy card. Questions submitted in advance must be submitted before 11:59 P.M. Eastern Time on September 11, 2023. +• To submit questions during the Annual Meeting : Visit www.virtualshareholdermeeting.com/NKE2023 and enter the 16-digit control number included in your Notice, voting instructions form, or proxy card. +What will I be voting on at the Annual Meeting? +You will be voting: +• To elect the 13 director nominees identified in this Proxy Statement. The holders of NIKE's Class A Stock will vote to elect nine of the director nominees identified in this Proxy Statement, and the holders of NIKE's Class B Stock will vote to elect the remaining four director nominees identified in this Proxy Statement; +• To approve executive compensation by an advisory vote; +• To hold an advisory vote on the frequency of advisory votes on executive compensation; +• To ratify the appointment of PwC as our independent registered public accounting firm; +• To consider a shareholder proposal regarding Supplemental Pay Equity Disclosure, if properly presented at the meeting; +• To consider a shareholder proposal regarding a Supply Chain Management Report, if properly presented at the meeting; and +• To transact such other business as may properly come before our Annual Meeting. +How does the Board recommend that I vote on these proposals? +Our Board recommends: +• For the holders of NIKE's Class A Stock, a vote FOR the election of each of Mr. Timothy Cook, Mr. John Donahoe II, Ms. Thasunda Duckett, Ms. Mónica Gil, Ms. Maria Henry, Mr. Peter Henry, Mr. Travis Knight, Mr. Mark Parker, and Ms. Michelle Peluso to serve as directors until the next annual meeting; +69 NIKE, INC. +• For the holders of NIKE's Class B Stock, a vote FOR the election of each of Ms. Cathleen Benko, Mr. Alan Graf, Jr., Mr. John Rogers, Jr., and Mr. Robert Swan, to serve as directors until the next annual meeting; +• For all shareholders, a vote FOR the advisory resolution approving the compensation of our Named Executive Officers as described in this proxy statement; +• For all shareholders, a vote for 1 YEAR regarding the frequency of advisory votes on executive compensation; +• For all shareholders, a vote FOR ratification of the appointment of PwC as our independent registered public accounting firm; +• For all shareholders, a vote AGAINST the shareholder proposal regarding Supplemental Pay Equity Disclosure; and +• For all shareholders, a vote AGAINST the shareholder proposal regarding a Supply Chain Management Report. +How do I vote my shares? +You may vote by proxy or at the Annual Meeting. If you received a printed copy of the proxy materials by mail, you may vote your shares by proxy before the Annual Meeting using one of the following methods: (1) vote via the internet at the website address listed on the Notice; (2) vote by telephone; or (3) complete, sign, date, and return your proxy card or voting instruction form in the postage-paid envelope we have provided. If you received only the Notice, you may vote your shares at the website address listed on the Notice or by telephone. If you plan to vote during the Annual Meeting rather than in advance, you may do so by entering the 16-digit control number included in your Notice, voting instructions form, or proxy card. Even if you plan to attend the Annual Meeting, you are encouraged to vote by proxy prior to the meeting. You can always change your vote, as described in more detail under "Can I change my vote or revoke my proxy?" +What is the difference between holding shares as a shareholder of record and as a beneficial owner or street name holder? +If your shares are registered directly in your name with our transfer agent, Computershare Trust Company, N.A., you are considered the "shareholder of record" with respect to those shares and we have sent the Notice (or if you received printed proxy materials, the Notice, proxy statement, and proxy card) directly to you. You may submit a proxy and vote those shares in the manner described in this proxy statement and the Notice. +If your shares are held in a stock brokerage account or by a bank, broker or other holder of record, you are considered the "beneficial owner" of shares held in street name. The Notice, voting instructions form, and/or proxy card have been forwarded to you by your broker, bank, or other holder of record who is considered the shareholder of record with respect to those shares. As the beneficial owner, you have the right to direct your broker, bank, or other holder of record on how to vote your shares by using the voting instruction card included in the mailing or by following their instructions for voting. +What does it mean if I receive more than one proxy card or Notice? +If you receive more than one proxy card or Notice, it means that you hold shares registered in more than one account. To ensure that all of your shares are voted, please follow the instructions included on each Notice you receive or, if you received printed proxy materials by mail, complete, sign, and return each proxy card you receive. +How many shares may be voted at the Annual Meeting? +On the close of business on July 12, 2023, 304,897,252 shares of Class A Stock and 1,225,074,356 shares of Class B Stock were issued and outstanding and entitled to vote at the meeting. +What constitutes a quorum? +For Proposal 1, the election of directors, a majority of the votes entitled to be cast by each of the Class A Stock and Class B Stock separately constitutes a quorum of Class A Stock and Class B Stock, respectively. For Proposals 2, 3, 4, 5, and 6, a majority of the votes entitled to be cast by both of the Class A Stock and Class B Stock together constitutes a quorum +Abstentions and broker non-votes are counted for purposes of determining whether a quorum exists. Broker non-votes occur when a person holding shares in street name, such as through a brokerage firm, does not provide instructions as to how to vote those shares and the broker does not then vote those shares on the shareholder's behalf. +How are votes calculated? +Each share of Class A Stock and each share of Class B Stock is entitled to one vote. The holders of our Common Stock will vote together on all matters at the Annual Meeting except for the election of directors, for which the holders of Class A Stock and holders of Class B Stock will vote separately. For more information regarding our Class A Stock and Class B Stock, see the section above titled "Corporate Governance—Capital Structure". +2023 PROXY STATEMENT 70 +How many votes are required to approve each proposal and how are votes counted? +How many votes are required for approval? How are director withhold votes treated? How are abstentions treated? How are broker non-votes handled? How will signed proxies that do not specify voting preferences be treated? +Proposal 1—Elect the director nominees For the directors elected by holders of Class A Stock: a plurality of votes of the holders of Class A Stock cast, subject to our director resignation policy if a director receives less than majority support +For the directors elected by holders of Class B Stock: a plurality of votes of the holders of Class B Stock cast, subject to our director resignation policy if a director receives less than majority support +Withhold votes will not be counted as votes cast for purposes of the plurality voting standard, but will be considered in determining whether our director resignation policy applies to a director Abstentions are not included as votes cast and will not affect the outcome of the proposal Broker non-votes are not included as votes cast and will not affect the outcome of the proposal Shares will be voted "FOR" the election of each of the named nominees for director +Proposal 2—Advisory vote to approve executive compensation Votes of Common Stock cast in favor of the proposal must exceed votes of Common Stock cast against the proposal N/A Abstentions are not included as votes cast and will not affect the outcome of the proposal Broker non-votes are not included as votes cast and will not affect the outcome of the proposal Shares will be voted "FOR" the proposal regarding an advisory vote to approve executive compensation +Proposal 3—Advisory vote on the frequency of advisory votes on executive compensation Votes of Common Stock cast in favor of one frequency under the proposal must exceed votes of Common Stock cast in favor of the other frequencies under the proposal. If no frequency receives a majority vote, then the Board will consider the option that receives the highest number of votes cast to be the frequency recommended by stockholders N/A Abstentions are not included as votes cast and will not affect the outcome of the proposal Broker non-votes are not included as votes cast and will not affect the outcome of the proposal Shares will be voted for "1 YEAR" for the proposal regarding an advisory vote on the frequency of advisory votes on executive compensation +Proposal 4— Ratify selection of PwC as our independent registered public accounting firm Votes of Common Stock cast in favor of the proposal must exceed votes of Common Stock cast against the proposal N/A Abstentions are not included as votes cast and will not affect the outcome of the proposal Banks, brokers and other holders of record may exercise discretion and vote on this matter and these will be counted as votes cast Shares will be voted "FOR" the ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm +Proposal 5— Consider a shareholder proposal regarding Supplemental Pay Equity Disclosure Votes of Common Stock cast in favor of the proposal must exceed votes of Common Stock cast against the proposal N/A Abstentions are not included as votes cast and will not affect the outcome of the proposal Broker non-votes are not included as votes cast and will not affect the outcome of the proposal Shares will be voted "AGAINST" the shareholder proposal regarding supplemental pay equity disclosure +Proposal 6— Consider a shareholder proposal regarding a Supply Chain Management Report Votes of Common Stock cast in favor of the proposal must exceed votes of Common Stock cast against the proposal N/A Abstentions are not included as votes cast and will not affect the outcome of the proposal Broker non-votes are not included as votes cast and will not affect the outcome of the proposal Shares will be voted "AGAINST" the shareholder proposal regarding a supply chain management report +What happens if a director fails to receive the support of a majority of votes cast? +The Bylaws and the Corporate Governance Guidelines of the Company provide that any nominee for director in an uncontested election who receives a greater number of votes "withheld" from their election than votes "for" such election shall tender their resignation for consideration by the Corporate Responsibility, Sustainability & Governance Committee. The committee will +71 NIKE, INC. +recommend to the Board the action to be taken with respect to the resignation, and the Board will publicly disclose its decision within 90 days after the certification of the election results. +Can I change my vote or revoke my proxy? +You can change your vote or revoke your proxy at any time before it is exercised at the Annual Meeting by voting your shares online during the Annual Meeting or by delivering to the Corporate Secretary of NIKE, Inc. at One Bowerman Drive, Beaverton, Oregon 97005-6453 either written notice of your revocation or an executed proxy bearing a later date. +How are proxies being solicited? +In addition to soliciting proxies by mail, certain officers and employees of the Company, without extra compensation, may also solicit proxies personally or by telephone. Copies of proxy solicitation materials will be furnished to fiduciaries, custodians, and brokerage houses for forwarding to the beneficial owners of shares held in their names. We may retain Georgeson, Inc. to solicit proxies at a cost we anticipate will not exceed $17,500. The Company will bear the cost of soliciting proxies. +How do I find out the voting results? +Preliminary voting results will be announced at the Annual Meeting, and final voting results will be published in a Current Report on Form 8-K within four business days following the Annual Meeting. +How can I submit a proposal for next year's annual meeting? +A shareholder proposal (other than a proxy access nomination) intended for inclusion in the Company's proxy statement and form of proxy for the 2024 annual meeting of shareholders must be received by the Corporate Secretary of NIKE, Inc. at shareholder.proposals@Nike.com on or before March 30, 2024. Rules under the Exchange Act describe standards as to the submission of shareholder proposals. A shareholder proxy access nomination intended for inclusion in the Company's proxy statement and form of proxy for the 2024 annual meeting of shareholders must be received, along with the other information required by the Company's Bylaws, by the Corporate Secretary of NIKE, Inc. at One Bowerman Drive, Beaverton, Oregon 97005-6453, no earlier than February 29, 2024 and no later than March 30, 2024. +In addition, the Company's Bylaws require that any shareholder wishing to make a nomination for director or introduce a proposal or other business at a shareholder meeting must give the Company at least 60 days' advance written notice (which for the 2023 annual meeting of shareholders was July 14, 2023) and that notice must meet certain other requirements described in the Bylaws. +In addition to satisfying the foregoing requirements under the Company's Bylaws, to comply with the universal proxy rules, shareholders who intend to solicit proxies in support of director nominees other than the Company's nominees for the 2024 annual meeting of shareholders must provide notice that sets forth the information required by Rule 14a-19 under the Exchange Act no later than July 14, 2024. The advance notice requirement under Rule 14a-19 does not override or supersede the longer advance notice requirement under the Company's Bylaws. +For the Board of Directors, +Mary Hunter +Vice President, Corporate Secretary +2023 PROXY STATEMENT 72 +ANNUAL +MEETING +AND +PROXY STATEMENT +September 12, 2023 +Whether or not you plan to attend the meeting, please sign and date the enclosed proxy card and return it in the enclosed envelope, or vote online or by telephone following the instructions on the proxy card. +73 NIKE, INC. \ No newline at end of file diff --git a/raw/proxies/0000320187/0000320187-23-000040/proxy_rpt.txt b/raw/proxies/0000320187/0000320187-23-000040/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..8d49350e99258ac830f6c6cb2c75199a395d4228 --- /dev/null +++ b/raw/proxies/0000320187/0000320187-23-000040/proxy_rpt.txt @@ -0,0 +1,5 @@ +TRANSACTIONS WITH RELATED PERSONS +Philip Knight, the father of NIKE director Travis Knight, serves as Chairman Emeritus, which provides a standing invitation for Philip Knight to attend meetings of the Board and its committees as a non-voting observer. In fiscal 2023, as Chairman Emeritus, Mr. Knight received an annual salary of $500,000, and medical and dental insurance coverage generally available to employees. +John Donahoe II and the Company have entered into time sharing agreements under which Mr. Donahoe reimburses the Company for limited personal use of Company aircraft, which is intended to increase his security, availability, and productivity. In fiscal 2023, Mr. Donahoe reimbursed the Company approximately $395,000 under the time sharing agreements. +Mark Parker's son, Matthew Parker, was employed by the Company in fiscal 2023 in a non-executive role for which the Company paid Matthew Parker aggregate compensation of approximately $135,000. The compensation and benefits received by Matthew Parker were consistent with compensation and benefits paid to other employees holding similar positions. +The Company's written policy requires the Corporate Responsibility, Sustainability & Governance Committee to review any transaction or proposed transaction with a related person that would be required to be reported under Item 404(a) of Regulation S-K, and to determine whether to ratify or approve the transaction, with ratification or approval to occur only if the committee determines that the transaction is fair to the Company or that approval or ratification of the transaction is in the interest of the Company. \ No newline at end of file diff --git a/raw/proxies/0000320187/0000320187-24-000045/proxy.txt b/raw/proxies/0000320187/0000320187-24-000045/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..b598c5029930e32d5942b77fcb96c5d3c7d6bf3f --- /dev/null +++ b/raw/proxies/0000320187/0000320187-24-000045/proxy.txt @@ -0,0 +1,2053 @@ +nke-20240725 +0000320187 DEF 14A FALSE iso4217:USD 0000320187 2023-06-01 2024-05-31 0000320187 2022-06-01 2023-05-31 0000320187 2021-06-01 2022-05-31 0000320187 2020-06-01 2021-05-31 0000320187 nke:AggregateGrantDateFairValueOfEquityAwardAmountsReportedInSummaryCompensationTableStockAwardsMember ecd:PeoMember 2023-06-01 2024-05-31 0000320187 nke:AggregateGrantDateFairValueOfEquityAwardAmountsReportedInSummaryCompensationTableOptionAwardsMember ecd:PeoMember 2023-06-01 2024-05-31 0000320187 ecd:EqtyAwrdsInSummryCompstnTblForAplblYrMember ecd:PeoMember 2023-06-01 2024-05-31 0000320187 ecd:YrEndFrValOfEqtyAwrdsGrntdInCvrdYrOutsdngAndUnvstdMember ecd:PeoMember 2023-06-01 2024-05-31 0000320187 ecd:ChngInFrValOfOutsdngAndUnvstdEqtyAwrdsGrntdInPrrYrsMember ecd:PeoMember 2023-06-01 2024-05-31 0000320187 ecd:ChngInFrValAsOfVstngDtOfPrrYrEqtyAwrdsVstdInCvrdYrMember ecd:PeoMember 2023-06-01 2024-05-31 0000320187 ecd:PeoMember ecd:DvddsOrOthrErngsPdOnEqtyAwrdsNtOthrwsRflctdInTtlCompForCvrdYrMember 2023-06-01 2024-05-31 0000320187 ecd:PeoMember 2023-06-01 2024-05-31 0000320187 ecd:NonPeoNeoMember nke:AggregateGrantDateFairValueOfEquityAwardAmountsReportedInSummaryCompensationTableStockAwardsMember 2023-06-01 2024-05-31 0000320187 nke:AggregateGrantDateFairValueOfEquityAwardAmountsReportedInSummaryCompensationTableOptionAwardsMember ecd:NonPeoNeoMember 2023-06-01 2024-05-31 0000320187 ecd:EqtyAwrdsInSummryCompstnTblForAplblYrMember ecd:NonPeoNeoMember 2023-06-01 2024-05-31 0000320187 ecd:NonPeoNeoMember ecd:YrEndFrValOfEqtyAwrdsGrntdInCvrdYrOutsdngAndUnvstdMember 2023-06-01 2024-05-31 0000320187 ecd:NonPeoNeoMember ecd:ChngInFrValOfOutsdngAndUnvstdEqtyAwrdsGrntdInPrrYrsMember 2023-06-01 2024-05-31 0000320187 ecd:NonPeoNeoMember ecd:ChngInFrValAsOfVstngDtOfPrrYrEqtyAwrdsVstdInCvrdYrMember 2023-06-01 2024-05-31 0000320187 ecd:NonPeoNeoMember ecd:DvddsOrOthrErngsPdOnEqtyAwrdsNtOthrwsRflctdInTtlCompForCvrdYrMember 2023-06-01 2024-05-31 0000320187 ecd:NonPeoNeoMember 2023-06-01 2024-05-31 0000320187 1 2023-06-01 2024-05-31 0000320187 2 2023-06-01 2024-05-31 0000320187 3 2023-06-01 2024-05-31 +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +Washington, D.C. 20549 +SCHEDULE 14A INFORMATION +Proxy Statement Pursuant to Section 14(a) of the +Securities Exchange Act of 1934 +(Amendment No. ) +Filed by the Registrant x Filed by a Party other than the Registrant ¨ +Check the appropriate box: +¨ Preliminary Proxy Statement +¨ +Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +x +Definitive Proxy Statement +¨ +Definitive Additional Materials +¨ +Soliciting Material under §240.14a-12 +NIKE, Inc. +(Name of registrant as specified in its charter) +(Name of person(s) filing proxy statement, if other than the registrant) +Payment of Filing Fee (Check the appropriate box): +x +No fee required +¨ +Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11 +(1) +Title of each class of securities to which transaction applies: +(2) +Aggregate number of securities to which transaction applies: +(3) +Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): +(4) +Proposed maximum aggregate value of transaction: +(5) Total fee paid: +¨ +Fee paid previously with preliminary materials. +¨ +Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. +(1) +Amount Previously Paid: +(2) +Form, Schedule or Registration Statement No.: +(3) +Filing Party: +(4) +Date Filed: +MESSAGE FROM OUR +EXECUTIVE CHAIRMAN +To Our Shareholders: +At Nike, we know that victory on game day is enabled by the practice and preparation that precede it. Similarly, we know that growth is enabled by strong corporate governance. That is why the Board of Directors is committed to effective and independent oversight, transparency, and continuous improvement—because in business and in sport, there is no finish line. +Fiscal 2024 saw our Board membership continue to evolve. As part of our evergreen approach to Board refreshment, we are continually assessing Board composition to ensure that we maintain the right mix of experiences, attributes, and skills to effectively oversee and guide Nike. At the beginning of the fiscal year, Maria Henry joined the Board as an independent director, complementing and enhancing the Board with her strong experience, including across finance, global business, and governance. And at the end of the fiscal year, Alan Graf, Jr., announced that he will not be standing for re-election this year. We have deeply valued Alan's many contributions to the Board over more than 20 years of service, including his unique insights and perspective and his leadership, most recently as Chair of the Audit & Finance Committee. We will miss him, but know that we remain well-positioned to oversee Nike's next steps thanks to our evergreen refreshment process. +As we look ahead to those next steps, Nike continues to engage with shareholders. The Board deeply values shareholder feedback and incorporates that feedback into our discussions and decision making. And we are pleased that, during fiscal 2024 engagements, shareholders recognized and responded positively to our responsiveness to feedback on governance, while continuing the dialogue. +We are pleased to invite you to attend the Annual Meeting of Shareholders of NIKE, Inc. to be held virtually on Tuesday, September 10, 2024, at 9:00 A.M. Pacific Time. Whether or not you plan to attend, the prompt execution and return of your proxy card will ensure that your shares are represented at the meeting. Thank you for your continued support. +Sincerely, +"In business and in sport, there is no finish line." +MARK PARKER, EXECUTIVE CHAIRMAN +July 25, 2024 +1 NIKE, INC. +NOTICE OF ANNUAL MEETING +OF SHAREHOLDERS +TO THE SHAREHOLDERS OF NIKE, INC. +You are cordially invited to the 2024 Annual Meeting of Shareholders (the "Annual Meeting") of NIKE, Inc., an Oregon corporation ("NIKE" or the "Company"): +DATE AND TIME: +Tuesday, September 10, 2024, +at 9:00 A.M. Pacific Time +LOCATION: +This year's meeting will be a virtual Annual Meeting at www.virtualshareholdermeeting.com/NKE2024 +ITEMS OF BUSINESS: +PROPOSAL +PAGE REFERENCE +1 To elect the 12 directors named in the accompanying proxy statement for the ensuing year. +Page 4 +Class A +Will elect nine directors. +Class B +Will elect three directors. +Holders of Class A Stock and holders of Class B Stock will vote together as one class on all other proposals. +2 To approve executive compensation by an advisory vote. +Page 28 +3 To ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm. +Page 55 +4 To consider a shareholder proposal regarding supplemental pay equity disclosure, if properly presented at the meeting. +Page 57 +5 To consider a shareholder proposal regarding a supply chain management report, if properly presented at the meeting. +Page 60 +6 To consider a shareholder proposal regarding worker-driven social responsibility, if properly presented at the meeting. +Page 63 +7 To consider a shareholder proposal regarding environmental targets, if properly presented at the meeting. +Page 65 +8 To consider a shareholder proposal regarding a divisive partnerships congruency report, if properly presented at the meeting. +Page 67 +9 To transact such other business as may properly come before the meeting. +The Annual Meeting will be held in a virtual format only. We are continuing to use this format because, based on the success of our last three annual meetings, we believe it provides greater accessibility, encourages broader shareholder participation, and helps reduce costs, while still allowing us to provide shareholders the same rights and opportunities to participate as an in-person meeting. Shareholders of record at the close of business on July 10, 2024, the record date fixed by the Board of Directors, may attend the Annual Meeting, vote, and submit questions in advance of and during the meeting. To attend, vote at, and submit questions during the Annual Meeting, visit www.virtualshareholdermeeting.com/NKE2024 and enter the 16-digit control number included in your Notice Regarding the Availability of Proxy Materials, voting instructions form, or proxy card. Questions may be submitted in advance of the Annual Meeting by visiting www.proxyvote.com and entering your 16-digit control number. +By Order of the Board of Directors, +Mary Hunter +Vice President, Corporate Secretary +Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders To Be Held on September 10, 2024. The proxy statement and NIKE, Inc.'s 2024 Annual Report to Shareholders are available online at www.investorvote.com or www.proxyvote.com, for registered and beneficial owners, respectively. +2024 PROXY STATEMENT 2 +TABLE OF CONTENTS +PAGE +NOTICE OF ANNUAL MEETING OF SHAREHOLDERS +2 +CORPORATE GOVERNANCE +4 +PROPOSAL 1 +Election of Directors +4 +NIKE, Inc. Board of Directors +5 +Board Structure and Responsibilities +20 +Code of Conduct +24 +Capital Structure +24 +Shareholder Engagement +25 +Director Compensation for Fiscal 20 24 +26 +EXECUTIVE COMPENSATION +28 +PROPOSAL 2 +Shareholder Advisory Vote to Approve Executive Compensation +28 +Compensation Discussion and Analysis +29 +Executive Compensation Tables +42 +AUDIT MATTERS +55 +PROPOSAL 3 +Ratification of Appointment of Independent Registered Public Accounting Firm +55 +Report of the Audit & Finance Committee +56 +SHAREHOLDER PROPOSAL S +57 +PROPOSAL 4 +Shareholder Proposal Regarding Supplemental Pay Equity Disclosure +57 +PROPOSAL 5 +Shareholder Proposal Regarding a Supply Chain Management Report +60 +PROPOSAL 6 +Shareholder Proposal Regarding Worker-Driven Social Responsibility +63 +PROPOSAL 7 +Shareholder Proposal Regarding Environmental Targets +65 +PROPOSAL 8 +Shareholder Proposal Regarding a Divisive Partnerships Congruency Report +67 +STOCK OWNERSHIP INFORMATION +69 +Stock Holdings of Certain Owners and Management +69 +Delinquent Section 16(a) Reports +70 +ADDITIONAL INFORMATION +71 +Insider Trading Arrangements and Policies +71 +Transactions with Related Persons +71 +Compensation Committee Interlocks and Insider Participation +71 +Other Matters at the Meeting +71 +GENERAL INFORMATION +72 +3 NIKE, INC. +CORPORATE GOVERNANCE +PROPOSAL 1 +ELECTION OF DIRECTORS +A board of 12 directors will be elected at the Annual Meeting. Each elected director will hold office until the next annual meeting of shareholders and until their successor is elected and qualified. All of the nominees were elected at the 2023 annual meeting of shareholders. +Ms. Cathleen Benko, Mr. John Rogers, Jr., and Mr. Robert Swan are nominated by the Board of Directors (the "Board") for election by the holders of NIKE's Class B Common Stock ("Class B Stock"). The other nine nominees are nominated by the Board for election by the holders of NIKE's Class A Common Stock ("Class A Stock"). +Under Oregon law and our Bylaws, if a quorum of each class of shareholders is present at the Annual Meeting, the nine director nominees who receive the greatest number of votes cast by holders of Class A Stock and the three director nominees who receive the greatest number of votes cast by holders of Class B Stock will be elected as directors. Withheld votes and broker non-votes will have no effect on the results of the vote. Unless otherwise instructed, proxy holders will vote the proxies they receive for the election of each of the nominees listed below. If any nominee becomes unable to serve, the holders of the proxies may, in their discretion, vote the shares for a substitute nominee or nominees designated by the Board. +The Bylaws and the Corporate Governance Guidelines of the Company provide that any nominee for director in an uncontested election who receives a greater number of votes "withheld" from their election than votes "for" such election shall tender their resignation for consideration by the Corporate Responsibility, Sustainability & Governance Committee. The committee will then recommend to the Board the action to be taken with respect to the resignation, and the Board will publicly disclose its decision with respect to such resignation within 90 days after the certification of the election results. +Background information on the nominees as of July 25, 2024, including certain of the attributes that led to their selection, appears below. The Board and the Corporate Responsibility, Sustainability & Governance Committee has determined that each director meets the qualification standards described below under "NIKE, Inc. Board of Directors—Director Nominations". In addition, while the Board believes that each director nominee is individually qualified to make unique and substantial contributions to the Board, the Board firmly believes that the experience, attributes, and skills of any single director nominee should not be viewed in isolation, but rather in the context of the experience, attributes, and skills that all director nominees bring to the Board as a whole, each of which contributes to the function of an effective Board. +BOARD RECOMMENDATION +The Board of Directors recommends that the Class A Shareholders vote FOR the election to the Board of Directors of each of the applicable nominees listed below. +The Board of Directors recommends that the Class B Shareholders vote FOR the election to the Board of Directors of each of the applicable nominees listed below. +2024 PROXY STATEMENT 4 +NIKE, INC. BOARD OF DIRECTORS +BOARD OVERVIEW +Our director nominees consist of 12 individuals selected on the basis of numerous criteria, including experience and achievements, fields of significant knowledge, good character, sound judgment, and diversity. We view the effectiveness of our Board both through an individual and collective lens and believe that our Board is optimized to support and guide the Company. +DIVERSITY +AGE +TENURE +BOARD SKILLS, EXPERIENCES, AND QUALIFICATIONS +DIVERSITY 7 /12 +Gender, racial, or ethnic diversity adds a range of perspectives and expands our Board's understanding of the needs and viewpoints of consumers, employees, and other stakeholders worldwide. +FINANCIAL EXPERTISE 11 /12 +Financial expertise assists our Board in overseeing our financial statements, capital structure, and internal controls. +CEO EXPERIENCE 8 / 12 +CEO experience brings leadership qualifications and skills that help our Board to capably advise, support, and oversee our management team, including regarding our strategy to drive long-term value. +INTERNATIONAL 9 / 12 +International exposure yields an understanding of diverse business environments, economic conditions, and cultural perspectives that informs our global business and strategy and enhances oversight of our multinational operations. +DIGITAL/TECHNOLOGY 6 /12 +Digital and technology experience helps our Board oversee cybersecurity and advise our management team as we seek to enhance the consumer experience and further develop our multi-channel strategy. +RETAIL INDUSTRY 7 /12 +Retail experience brings a deep understanding of factors affecting our industry, operations, business needs, and strategic goals. +MEDIA 2 /12 +Media experience provides our Board with insight about connecting with consumers and other stakeholders in a timely and impactful manner. +ACADEMIA 1 /12 +Academia provides organizational management experience and knowledge of current issues in academia and thought leadership. +HR/TALENT MANAGEMENT 8 /12 +HR and talent management experience assists our Board in overseeing executive compensation, succession planning, and employee engagement. +GOVERNANCE 8 /12 +Public company board experience provides insight into new and best practices which informs our commitment to excellence in corporate governance. +CORPORATE GOVERNANCE HIGHLIGHTS +ü 9 out of 12 director nominees are independent +ü All directors are elected annually +ü Separate Chair, CEO, and Lead Independent Director positions with clearly defined roles +ü "Evergreen" approach to Board refreshment, with 4 new independent directors added in the last 5 years and a mix of short-, medium-, and long-tenured directors to balance fresh perspectives and Company-specific experience +ü All director nominees are selected by the Board and the Corporate Responsibility, Sustainability & Governance Committee based on robust qualification standards, and individually and collectively provide the Board with unique skills and perspectives that are relevant to the Company's business and strategic objectives +ü Retirement policy generally requires that directors do not stand for election after reaching the age of 72 +ü Each director nominee is in compliance with our overboarding policy (as set forth in our Corporate Governance Guidelines) +5 NIKE, INC. +NOMINEES FOR ELECTION BY CLASS A SHAREHOLDERS +TIMOTHY COOK, LEAD INDEPENDENT DIRECTOR +AGE +DIRECTOR SINCE +COMMITTEE +OTHER CURRENT +PUBLIC DIRECTORSHIPS +FAVORITE NIKE PRODUCTS +63 2005 +Compensation, Chair +Apple Inc. +Nike Air Max 270, Nike Pegasus, and Nike Tech Pack +SKILLS, EXPERIENCES AND QUALIFICATIONS +FINANCIAL EXPERTISE +DIGITAL/TECHNOLOGY +HR/TALENT MANAGEMENT +CEO EXPERIENCE +RETAIL INDUSTRY +GOVERNANCE +INTERNATIONAL +Mr. Cook is the Company's Lead Independent Director and is the Chief Executive Officer of Apple Inc. ("Apple"). +• Mr. Cook joined Apple in March 1998 as Senior Vice President of Worldwide Operations and also served as its Executive Vice President, Worldwide Sales and Operations and Chief Operating Officer. +• Mr. Cook was Vice President, Corporate Materials for Compaq Computer Corporation from 1997 to 1998. +• Previous to his work at Compaq, Mr. Cook served in the positions of Senior Vice President Fulfillment and Chief Operating Officer of the Reseller Division at Intelligent Electronics from 1994 to 1997. +• Mr. Cook also worked for International Business Machines Corporation from 1983 to 1994, most recently as Director of North American Fulfillment. +Mr. Cook is a member of the Board of Directors of Apple. In addition to this public company board service, he is also a member of the Board of Directors of the National Football Foundation and Duke University Board of Trustees. +2024 PROXY STATEMENT 6 +JOHN DONAHOE II +AGE +DIRECTOR SINCE +COMMITTEE +OTHER CURRENT +PUBLIC DIRECTORSHIPS +FAVORITE NIKE PRODUCTS +64 2014 +Executive +None +Nike Air Max DN +SKILLS, EXPERIENCES AND QUALIFICATIONS +FINANCIAL EXPERTISE +DIGITAL/TECHNOLOGY +HR/TALENT MANAGEMENT +CEO EXPERIENCE +RETAIL INDUSTRY +GOVERNANCE +INTERNATIONAL +Mr. Donahoe is the Company's President and Chief Executive Officer, and has been a director since 2014. +• From 2017 to 2019, Mr. Donahoe served as President and Chief Executive Officer of ServiceNow, Inc. ("ServiceNow"), provider of enterprise cloud computing services for global enterprises. +• From 2008 to 2015, Mr. Donahoe served as President and Chief Executive Officer of eBay, Inc. ("eBay"), provider of the global eBay.com online marketplace and PayPal digital payments platform. +• Mr. Donahoe joined eBay in 2005 as President of eBay Marketplaces, responsible for eBay's global e-Commerce businesses. +• Prior to joining eBay, Mr. Donahoe was the Chief Executive Officer and Worldwide Managing Director of Bain & Company from 1999 to 2005, and a Managing Director from 1992 to 1999. +Mr. Donahoe served on the Board of Directors of PayPal Holdings, Inc. from July 2015 to July 2024, ServiceNow from March 2017 to June 2020, and Intel Corporation from March 2009 to May 2017. +7 NIKE, INC. +THASUNDA DUCKETT +AGE +DIRECTOR SINCE +COMMITTEE +OTHER CURRENT +PUBLIC DIRECTORSHIPS +FAVORITE NIKE PRODUCTS +51 2019 +Corporate Responsibility, Sustainability & Governance +None +Nike Air Force 1, Nike Pegasus, and Air Jordan +SKILLS, EXPERIENCES AND QUALIFICATIONS +DIVERSITY +FINANCIAL EXPERTISE +CEO EXPERIENCE +RETAIL INDUSTRY +HR/TALENT MANAGEMENT +Ms. Duckett is President and Chief Executive Officer of the Teachers Insurance and Annuity Association of America ("TIAA"), a leading provider of financial services in the academic, research, medical, cultural, and governmental fields. +• Prior to joining TIAA, Ms. Duckett was Chief Executive Officer of Chase Consumer Banking at JPMorgan Chase & Co. ("JPMorgan Chase") from 2016 to 2021. Before that appointment, Ms. Duckett was appointed to various management positions at JPMorgan Chase, including: +• From 2013 to 2016, Ms. Duckett served as the Chief Executive Officer of Chase Auto Finance, and +• From 2004 to 2013, Ms. Duckett held multiple management and consumer lending roles. +• Prior to joining JPMorgan Chase, Ms. Duckett was Director of Emerging Markets at the Federal National Mortgage Association, or Fannie Mae. +Ms. Duckett is Chair of the Otis and Rosie Brown Foundation and serves on the Board of Directors of Brex, National Medal of Honor Museum, and the Robert F. Kennedy Human Rights. She also serves on the Board of Trustees for Sesame Workshop. +2024 PROXY STATEMENT 8 +MÓNICA GIL +AGE +DIRECTOR SINCE +COMMITTEE +OTHER CURRENT +PUBLIC DIRECTORSHIPS +FAVORITE NIKE PRODUCTS +52 2022 +Compensation +None +Air Jordan 1, Nike Motiva, Nike Alphafly, Nike Air Max, Nike Pegasus, and Nike Pro Leggings +SKILLS, EXPERIENCES AND QUALIFICATIONS +DIVERSITY +INTERNATIONAL +MEDIA +HR/TALENT MANAGEMENT +Ms. Gil is Chief Administrative and Marketing Officer, NBCUniversal Telemundo Enterprises ("Telemundo") for Comcast Corp. +• Prior to her current role, Ms. Gil served as Chief Marketing Officer, Telemundo from 2018 until 2020, and as Executive Vice President, Telemundo, managing Communications and Corporate Affairs and Human Resources from 2017 until 2018. +• Prior to joining Telemundo, Ms. Gil served as Senior Vice President and General Manager, Multicultural Growth and Strategy of the Nielsen Company ("Nielsen") from 2014 until 2017. +• Ms. Gil joined Nielsen in 2005 as Vice President, Communications and was subsequently promoted in 2009 to Senior Vice President, Public Affairs and Government Relations. +• Previously, Ms. Gil served as Senior Vice President for Greer, Margolis, Mitchell and Burns from 2004 until 2005. +• She also served as Director of Public Affairs and Community Outreach for Telemundo Communications Group, Inc., Los Angeles, from 2001 to 2004. +Ms. Gil is a member of the Board of Directors of the National Women's History Museum. +9 NIKE, INC. +MARIA HENRY +AGE +DIRECTOR SINCE +COMMITTEE +OTHER CURRENT +PUBLIC DIRECTORSHIPS +FAVORITE NIKE PRODUCTS +57 2023 +Audit & Finance +General Mills, Inc. and NextEra Energy, Inc. +Nike Invincible, Jordan ADG Golf shoes, and Nike Zenvy leggings +SKILLS, EXPERIENCES AND QUALIFICATIONS +DIVERSITY +FINANCIAL EXPERTISE +INTERNATIONAL +DIGITAL/TECHNOLOGY +RETAIL INDUSTRY +GOVERNANCE +Ms. Henry is the former Chief Financial Officer of Kimberly-Clark Corporation ("Kimberly-Clark"), a position she held from 2015 to April 2022 and served as Executive Vice President and Senior Advisor from April 2022 until her retirement in September 2022. +• Prior to joining Kimberly-Clark, she was Executive Vice President and Chief Financial Officer of The Hillshire Brands Company, formerly known as Sara Lee Corporation ("Sara Lee"), from 2012 to 2014. Ms. Henry was the Chief Financial Officer of Sara Lee's North American Retail and Foodservice business from 2011 to 2012. +• Prior to Sara Lee, she held various senior leadership positions in finance and strategy in three portfolio companies of Clayton, Dubilier, & Rice, most recently as Executive Vice President and Chief Financial Officer of Culligan International. +• Ms. Henry also held senior finance roles in several technology companies, and she began her career at General Electric. +Ms. Henry is a member of the Board of Directors of General Mills, Inc. and NextEra Energy, Inc. She served on the Board of Directors of Kimberly-Clark de México from February 2016 to March 2022. +2024 PROXY STATEMENT 10 +PETER HENRY +AGE +DIRECTOR SINCE +COMMITTEE +OTHER CURRENT +PUBLIC DIRECTORSHIPS +FAVORITE NIKE PRODUCTS +54 2018 +Audit & Finance +Citigroup Inc. and Analog Devices, Inc. +Nike Epic React +SKILLS, EXPERIENCES AND QUALIFICATIONS +DIVERSITY +INTERNATIONAL +GOVERNANCE +FINANCIAL EXPERTISE +ACADEMIA +Dr. Henry is the Class of 1984 Senior Fellow at Stanford University's Hoover Institution, Senior Fellow at Stanford's Freeman Spogli Institute for International Studies, and Dean Emeritus of New York University's Leonard N. Stern School of Business ("Stern"). +• Dr. Henry assumed the Deanship of Stern in January 2010 and served through December 2017. +• Prior to joining Stern, Dr. Henry was the Konosuke Matsushita Professor of International Economics at the Stanford University Graduate School of Business. +• In June 2009, President Obama appointed Dr. Henry to the President's Commission on White House Fellowships. +• In 2008, Dr. Henry led Barack Obama's Presidential Transition Team in its review of international lending agencies such as the IMF and the World Bank. +Dr. Henry is a member of the Board of Directors of Citigroup Inc. and Analog Devices, Inc. In addition to this public company board service, he also serves on the Board of Directors of the National Bureau of Economic Research and the Economic Club of New York and serves on the Advisory Board for Protiviti and Biospring Partners. Dr. Henry is a member of the Council of Foreign Relations and the Economic Advisory Panel of the Federal Reserve Bank of New York. Dr. Henry served on the Board of Directors of General Electric from July 2016 to April 2018 and Kraft Foods Group, Inc. and its predecessor, Kraft Foods Inc., from May 2011 to July 2015. +11 NIKE, INC. +TRAVIS KNIGHT +AGE +DIRECTOR SINCE +COMMITTEE +OTHER CURRENT +PUBLIC DIRECTORSHIPS +FAVORITE NIKE PRODUCTS +50 2015 +Executive +None +Nike Pegasus +SKILLS, EXPERIENCES AND QUALIFICATIONS +FINANCIAL EXPERTISE +CEO EXPERIENCE +MEDIA +Mr. Knight is the President and Chief Executive Officer of the animation studio, LAIKA, LLC ("LAIKA"), which specializes in feature-length films. +• Mr. Knight has been involved in all principal creative and business decisions at LAIKA since its founding in 2003, serving in successive management positions as Lead Animator, Vice President of Animation, and then as President and Chief Executive Officer in 2009. +• Mr. Knight was Producer and Director of the feature film Kubo and the Two Strings (2017) which was nominated for an Academy Award and winner of the BAFTA award for Best Animated Film. +• Mr. Knight has served as Producer and Lead Animator on Academy Award-nominated feature-length films The Boxtrolls (2014) and ParaNorman (2012), for which he won an Annie Award for Outstanding Achievement in Character Animation, and Lead Animator for Coraline (2009). +• Prior to his work at LAIKA, Mr. Knight held various animation positions at Will Vinton Studios from 1998 to 2002, and as a stop-motion animator for television series, commercials, and network promotions. He has been recognized for his work on the Emmy Award-winning stop-motion animated television series The PJs. +Mr. Knight serves on the Board of Directors of LAIKA. He is the son of NIKE's co-founder, Mr. Philip Knight, who currently serves as Chairman Emeritus. In addition to his skills and qualifications described above, Mr. Travis Knight was selected to serve on the Board because he has a significant role in the management of the Class A Stock owned by Swoosh, LLC, strengthening the alignment of the Board with the interests of NIKE shareholders. +2024 PROXY STATEMENT 12 +MARK PARKER, EXECUTIVE CHAIRMAN OF THE BOARD +AGE +DIRECTOR SINCE +COMMITTEE +OTHER CURRENT +PUBLIC DIRECTORSHIPS +FAVORITE NIKE PRODUCTS +68 2006 +Executive, Chair +The Walt Disney Company +Nike Pegasus, Nike Air Max, and Nike React Infinity Run +SKILLS, EXPERIENCES AND QUALIFICATIONS +FINANCIAL EXPERTISE +INTERNATIONAL +HR/TALENT MANAGEMENT +CEO EXPERIENCE +RETAIL INDUSTRY +GOVERNANCE +Mr. Parker is Executive Chairman of the Company's Board of Directors. He served as President and Chief Executive Officer of the Company from 2006 to January 2020. +• Mr. Parker has been employed by NIKE since 1979 with primary responsibilities in product research, design and development, marketing, and brand management. +• Mr. Parker was appointed: +• President and Chief Executive Officer in 2006, +• President of the NIKE Brand in 2001, +• Vice President of Global Footwear in 1998, +• General Manager in 1993, +• Corporate Vice President in 1989, and +• Divisional Vice President in charge of product development in 1987. +Mr. Parker is Chairman of the Board of Directors of The Walt Disney Company. In addition to his skills and qualifications described above, Mr. Parker was selected to serve on the Board because the experience gained while serving as the Company's Chief Executive Officer makes his position as Executive Chairman of the Board instrumental. +13 NIKE, INC. +MICHELLE PELUSO +AGE +DIRECTOR SINCE +COMMITTEE +OTHER CURRENT +PUBLIC DIRECTORSHIPS +FAVORITE NIKE PRODUCTS +52 2014 +Corporate Responsibility, Sustainability & Governance, Chair +None +Nike Dunk Low, Nike Air Max 97, Nike Go leggings, and Serena Williams Collection +SKILLS, EXPERIENCES AND QUALIFICATIONS +DIVERSITY +INTERNATIONAL +HR/TALENT MANAGEMENT +FINANCIAL EXPERTISE +DIGITAL/TECHNOLOGY +GOVERNANCE +CEO EXPERIENCE +RETAIL INDUSTRY +Ms. Peluso is Executive Vice President and Chief Customer and Experience Officer for CVS Health. She leads the approach in defining unparalleled patient and consumer experiences to improve the health and wellbeing of the over 100 million people CVS Health serves. She also focuses on enhancing every consumer interaction within the service centers, leveraging cutting-edge technology to drive efficiency and deliver exceptional service and satisfaction. Additionally, Ms. Peluso leads the brand and marketing efforts, strengthening CVS Health’s connection with consumers across America. +• Prior to her current role, Ms. Peluso served as the Executive Vice President and Chief Customer Officer, CVS Health, and co-President, Pharmacy and Consumer Wellness. She was responsible for orchestrating the enterprise consumer experience, leading the front store business, bringing innovation into everyday health and wellness, and connecting retail consumers to the broader health assets of CVS Health. +• Prior to joining CVS Health, Ms. Peluso was Senior Vice President, Digital Sales and Chief Marketing Officer at IBM from 2016 to 2021. She oversaw marketing, digital sales, client experience, and the commercial business, globally. +• Prior to her work at IBM, Ms. Peluso served as Chief Executive Officer of online shopping destination Gilt Groupe, Inc. ("Gilt") from 2013 until its sale to Hudson's Bay Company in February 2016 and was on Gilt's Board of Directors from 2009 to 2016. +• From 2009 to 2013, Ms. Peluso served as Global Consumer Chief Marketing and Internet Officer of Citigroup Inc. +• From 2002 to 2009, Ms. Peluso held senior management positions at Travelocity.com LP ("Travelocity"), being appointed Chief Operating Officer in March 2003, and President and Chief Executive Officer in December 2003. +• Prior to joining Travelocity, in 1999 Ms. Peluso founded Site59, an online travel site, serving as its Chief Executive Officer until its acquisition by Travelocity in 2002. +Ms. Peluso is a member of the Board of Directors at the Ad Council and is on the Executive Council of the Board of Directors of the Association of National Advertisers. +BOARD RECOMMENDATION +The Board of Directors recommends that the Class A Shareholders vote FOR the election to the Board of Directors of each of the nominees above. +2024 PROXY STATEMENT 14 +NOMINEES FOR ELECTION BY CLASS B SHAREHOLDERS +CATHLEEN BENKO +AGE +DIRECTOR SINCE +COMMITTEE +OTHER CURRENT +PUBLIC DIRECTORSHIPS +FAVORITE NIKE PRODUCTS +66 2018 +Compensation +SolarWinds Corporation +Nike Air Max and Nike Air VaporMax +SKILLS, EXPERIENCES AND QUALIFICATIONS +DIVERSITY +INTERNATIONAL +HR/TALENT MANAGEMENT +FINANCIAL EXPERTISE +DIGITAL/TECHNOLOGY +Ms. Benko is a former Vice Chairman and Managing Principal of Deloitte LLP ("Deloitte"), an organization that, through its subsidiaries and network of member firms, provides audit, consulting, tax, and advisory services to clients globally. During her nearly 30-year career with Deloitte, Ms. Benko held many leadership roles, several concurrent with her appointment as Vice Chairman and Managing Principal in 2011. +• From 2015 to 2018, Ms. Benko served as Senior Partner working within the firm's "Digital Giants" practice where she was the senior advisory partner for several digital-native companies. +• From 2010 to 2014, Ms. Benko served as Chief Digital, Brand, and Communications Officer. +• Previous to her role as Chief Digital, Brand, and Communications Officer, Ms. Benko held multiple technology and talent management roles, including serving as the company's first Vice Chairman and Chief Talent Officer from 2006 to 2010, its Chief Inclusion Officer from 2008 to 2010, and as Managing Principal, Initiative for the Retention and Advancement of Women, from 2003 to 2009. +• Ms. Benko led Deloitte's technology sector from 2003 to 2007 and was previously Deloitte's first Global e-Business Leader, a position she held from 1998 to 2002. +Ms. Benko is a member of the Board of Directors of SolarWinds Corporation. In addition to this public company board service, she also holds board positions at nonprofits Stanford Institute for Research in the Social Sciences, the International Women's Forum, Santa Clara University's Markkula Center of Applied Ethics, Life Skills for Soldiers, and the National Association of Corporate Directors. She is also on the board of WorkBoard, a privately-held company. Ms. Benko is chair of Harvard Business School/NC's Advisory Council. +15 NIKE, INC. +JOHN ROGERS, JR. +AGE +DIRECTOR SINCE +COMMITTEE +OTHER CURRENT +PUBLIC DIRECTORSHIPS +FAVORITE NIKE PRODUCTS +66 2018 +Corporate Responsibility, Sustainability & Governance +The New York Times Company and Ryan Specialty Group Holdings, Inc. +Nike KD and Nike LeBron Basketball Shoes +SKILLS, EXPERIENCES AND QUALIFICATIONS +DIVERSITY +CEO EXPERIENCE +GOVERNANCE +FINANCIAL EXPERTISE +Mr. Rogers is Chairman, Co-Chief Executive Officer, and Chief Investment Officer of Ariel Investments, LLC, a privately-held money management firm he founded in 1983, which serves individual and institutional investors through its mutual funds and separate accounts. Mr. Rogers is a Trustee of Ariel Investment Trust, the investment company consisting of the five mutual funds his firm manages. +• In 2008, Mr. Rogers was awarded Princeton University's highest honor, the Woodrow Wilson Award, presented each year to the alumnus whose career embodies a commitment to national service. +• Mr. Rogers served as co-chair for the Presidential Inaugural Committee 2009. +Mr. Rogers is a member of the Board of Directors of The New York Times Company and Ryan Specialty Group Holdings, Inc. In addition to this public company board service, he also serves as trustee of the University of Chicago; a member of the Board of Directors of the Barack Obama Foundation, the Robert F. Kennedy Human Rights, and the National Association of Basketball Coaches (NABC) Foundation, Inc.; and a life trustee of the Chicago Symphony Orchestra. Mr. Rogers served on the Board of Directors of McDonald's Corporation from May 2003 to May 2023 and Exelon Corporation from October 2000 to April 2019. +2024 PROXY STATEMENT 16 +ROBERT SWAN +AGE +DIRECTOR SINCE +COMMITTEE +OTHER CURRENT +PUBLIC DIRECTORSHIPS +FAVORITE NIKE PRODUCTS +64 2022 +Audit & Finance* +Micron Technology, Inc. +Nike Pegasus +SKILLS, EXPERIENCES AND QUALIFICATIONS +FINANCIAL EXPERTISE +DIGITAL/TECHNOLOGY +HR/TALENT MANAGEMENT +CEO EXPERIENCE +RETAIL INDUSTRY +GOVERNANCE +INTERNATIONAL +* Mr. Swan will serve as Chair of the Audit & Finance Committee beginning August 1, 2024. +Mr. Swan has been an Operating Partner at Andreessen Horowitz since 2021. +• Prior to his current role, Mr. Swan served as the Chief Executive Officer and a member of the Board of Directors of Intel Corp. ("Intel") from 2019 to 2021. Before that appointment, he was appointed to various management positions at Intel, including: +• Interim Chief Executive Officer and Chief Financial Officer from 2018 until 2019 and Chief Financial Officer from 2016 until 2019. +• Prior to joining Intel, Mr. Swan served as Operating Partner at General Atlantic LLC, a private equity firm, from 2015 to 2016. +• He also served as Senior Vice President, Finance and Chief Financial Officer of eBay Inc. ("eBay") from 2006 to 2015. +• Previously, Mr. Swan served as Chief Financial Officer of Electronic Data Systems Corporation, Chief Financial Officer of TRW Inc., as well as Chief Executive Officer, Chief Operating Officer, and Chief Financial Officer of Webvan Group, Inc. Mr. Swan began his career in 1985 at General Electric, serving in numerous senior finance roles. +Mr. Swan is a member of the Board of Directors of Micron Technology, Inc. In addition to this public company board service, he is also a member of the Board of Directors of Flexport, the American Heart Association, and Kearney. Mr. Swan served on the Board of Commissioners of GoTo Group from December 2021 to June 2024, and on the Board of Directors of eBay from July 2015 to June 2023, Intel from January 2019 to February 2021, and Applied Materials, Inc. from March 2009 to September 2016. +BOARD RECOMMENDATION +The Board of Directors recommends that the Class B Shareholders vote FOR the election to the Board of Directors of each of the nominees above. +17 NIKE, INC. +INDIVIDUAL BOARD SKILLS MATRIX +The matrix below represents some of the key experiences, attributes, and skills that the Board has identified as particularly valuable to the oversight of the Company, and illustrates how the director nominees individually and collectively represent them. While all of these qualifications were considered in connection with this year's director nomination process, the matrix does not encompass all of the experiences, attributes, and skills of the director nominees. The Board firmly believes that its highly qualified director nominees provide the Board with a diverse complement of skills, qualifications, and perspectives necessary for effective oversight. +EXPERIENCE, EXPERTISE, OR ATTRIBUTES +BENKO +COOK +DONAHOE +DUCKETT +GIL +M HENRY +P HENRY +KNIGHT +PARKER +PELUSO +ROGERS +SWAN +DIVERSITY +Gender, racial, or ethnic diversity adds a range of perspectives and expands our Board's understanding of the needs and viewpoints of consumers, employees, and other stakeholders worldwide. +ü +ü +ü +ü +ü +ü ü +FINANCIAL EXPERTISE +Financial expertise assists our Board in overseeing our financial statements, capital structure, and internal controls. +ü +ü +ü +ü +ü +ü +ü +ü +ü ü ü +CEO EXPERIENCE +CEO experience brings leadership qualifications and skills that help our Board to capably advise, support, and oversee our management team, including regarding our strategy to drive long-term value. +ü +ü +ü +ü +ü +ü ü ü +INTERNATIONAL +International exposure yields an understanding of diverse business environments, economic conditions, and cultural perspectives that informs our global business and strategy and enhances oversight of our multinational operations. +ü +ü +ü +ü +ü +ü +ü +ü ü +DIGITAL/TECHNOLOGY +Digital and technology experience helps our Board oversee cybersecurity and advise our management team as we seek to enhance the consumer experience and further develop our multi-channel strategy. +ü +ü +ü +ü +ü +ü +RETAIL INDUSTRY +Retail experience brings a deep understanding of factors affecting our industry, operations, business needs, and strategic goals. +ü +ü +ü +ü +ü +ü +ü +MEDIA +Media experience provides our Board with insight about connecting with consumers and other stakeholders in a timely and impactful manner. +ü +ü +ACADEMIA +Academia provides organizational management experience and knowledge of current issues in academia and thought leadership. +ü +HR/TALENT MANAGEMENT +HR and talent management experience assists our Board in overseeing executive compensation, succession planning, and employee engagement. +ü +ü +ü +ü +ü +ü +ü ü +GOVERNANCE +Public company board experience provides insight into new and best practices which informs our commitment to excellence in corporate governance. +ü +ü +ü +ü +ü +ü ü ü +2024 PROXY STATEMENT 18 +DIRECTOR NOMINATIONS +The Board takes an "evergreen" approach to Board refreshment, cultivating relationships with top talent on an ongoing basis. The Corporate Responsibility, Sustainability & Governance Committee identifies potential director candidates through a variety of means, including recommendations from members of the Corporate Responsibility, Sustainability & Governance Committee or the Board, suggestions from Company management, and shareholder recommendations. The committee may, in its discretion, engage director search firms to identify candidates. Shareholders may recommend director candidates for consideration by the Corporate Responsibility, Sustainability & Governance Committee by submitting a written recommendation to the committee, c/o Corporate Secretary, NIKE, Inc., One Bowerman Drive, Beaverton, Oregon 97005-6453. The recommendation should include the candidate's name, age, qualifications (including principal occupation and employment history), and written consent to be named as a nominee in the Company's proxy statement and to serve as a director, if elected. +The Board has adopted qualification standards for the selection of non-management nominees for director, which can be found on our corporate website: http://investors.nike.com. As provided in these standards and the Company's Corporate Governance Guidelines, nominees for director are selected on the basis of, among other things, distinguished business experience or other non-business achievements; education; significant knowledge of international business, finance, marketing, technology, human resources, diversity, equity, and inclusion, law, or other fields which are complementary to, and balance the knowledge of, other Board members; a desire to represent and serve the interests of all shareholders; independence; good character; ethics; sound judgment; diversity; and ability to devote substantial time to discharge Board and committee responsibilities (including whether they are in compliance with the Board's overboarding policy). +The Corporate Responsibility, Sustainability & Governance Committee identifies qualified potential candidates without regard to their age, gender, race, national origin, sexual orientation, or religion. While the Board has no policy regarding Board member diversity, the Corporate Responsibility, Sustainability & Governance Committee considers and discusses diversity in selecting nominees for director and in the re-nomination of an incumbent director. The committee views diversity broadly to include, among other things, differences in backgrounds, qualifications, experiences, viewpoint, geographic location, education, skills and expertise (including financial, accounting, compliance, corporate social responsibility, public policy, cybersecurity, or other expertise relevant to service on the Board), professional and industry experience, and personal characteristics (including gender or gender identity, ethnicity/race, and sexual orientation). The Board believes that a variety and balance of perspectives on the Board results in more thoughtful and robust deliberations, and ultimately, better decisions. +In considering the re-nomination of an incumbent director, the Corporate Responsibility, Sustainability & Governance Committee reviews the director's overall service to the Company during his or her term, including the number of meetings attended, level of participation, and quality of performance, as well as any special skills, experience, or diversity that such director brings to the Board. All potential new director candidates, whether recommended by shareholders or identified by other means, are initially screened by the Chair of the Corporate Responsibility, Sustainability & Governance Committee, who may seek additional information about the background and qualifications of the candidate, and who may determine that a candidate does not have qualifications that merit further consideration by the full committee. With respect to new director candidates who pass the initial screening, the Corporate Responsibility, Sustainability & Governance Committee meets to discuss and consider each candidate's qualifications and potential contributions to the Board, and determines by majority vote whether to recommend such candidate to the Board. The final decision to either appoint a candidate to fill a vacancy between annual meetings or include a candidate on the slate of nominees proposed at an annual meeting is made by the Board. +As set forth in our Corporate Governance Guidelines, it is the general policy of the Board that directors will not stand for re‑election after reaching the age of 72. +DIRECTOR INDEPENDENCE +Pursuant to New York Stock Exchange ("NYSE") listing rules, in order for a director to qualify as "independent", the Board must affirmatively determine that the director has no material relationship with the Company. The Board affirmatively determined that commercial or charitable relationships below the following thresholds will not be considered material relationships that impair a director's independence: (1) if a NIKE director or immediate family member is an executive officer of another company that does business with NIKE and the annual sales to, or purchases from, NIKE are less than one percent of the annual revenues of the other company; and (2) if a NIKE director or immediate family member serves as an officer, director, or trustee of a charitable organization, and NIKE's contributions to the organization are less than one percent of that organization's total annual charitable receipts. After applying this categorical standard and the applicable NYSE independence standards, the Board has determined that the following directors who served during fiscal 2024—Cathleen Benko, Timothy Cook, Thasunda Duckett, Mónica Gil, Alan Graf, Jr., Maria Henry, Peter Henry, Michelle Peluso, John Rogers, Jr., and Robert Swan—have no material relationship with the Company and, therefore, are independent. Messrs. John Donahoe II, Travis Knight, and Mark Parker were not independent pursuant to NYSE rules. Messrs. Donahoe and Parker were not independent pursuant to NYSE rules because they were employed by the Company during fiscal 2024. Mr. Knight was not independent pursuant to NYSE rules because he is the son of +19 NIKE, INC. +NIKE's co-founder, Mr. Philip Knight, who received compensation in excess of the threshold set forth in applicable NYSE rules for his position as Chairman Emeritus. The compensation paid to Mr. Philip Knight is described in the section below titled "Additional Information—Transactions with Related Persons". +BOARD STRUCTURE AND RESPONSIBILITIES +The Board is currently composed of ten independent directors and three directors who are not independent under the NYSE listing rules. During fiscal 2024, there were four meetings of the Board and all of our directors attended at least 75 percent of the total number of meetings of the Board and committees on which he or she served. The Company encourages all directors to attend each annual meeting of shareholders, and all directors attended the 2023 annual meeting. +BOARD LEADERSHIP STRUCTURE +NIKE's governing documents provide the Board with flexibility to select the appropriate leadership structure of the Company. In determining the leadership structure, the Board considers many factors, including the specific needs of the business, fulfilling the duties of the Board, and the best interests of the Company's shareholders. +Effective January 2020, the Company separated the position of Chair of the Board from the position of President and CEO, although this is not a permanent policy of the Board. The Board believes this leadership structure is appropriate for the Company because it separates the leadership of the Board from the duties of day-to-day leadership of the Company. The Executive Chairman, Mr. Mark Parker, presides over meetings of the Board and shareholders. The President and CEO, Mr. John Donahoe II, is in charge of the general supervision, direction, and control of the business and affairs of the Company, subject to the overall direction and supervision of the Board and its committees. +Additionally, as part of the Board's commitment to strong independent Board leadership and oversight, the Board has adopted a policy requiring the appointment of a Lead Independent Director at any time when the Chair of the Board is not independent. The position of Lead Independent Director is entrusted with robust and clearly-defined duties, including: +• serving as a liaison between the Chair and the independent directors; +• approving the meeting agendas for the Board; +• advising the Chair regarding the sufficiency, quality, quantity, and timeliness of information provided to the Board; +• ensuring that meeting schedules permit sufficient time for discussion of all agenda items; +• providing consultation and direct communication with major shareholders, if requested; +• presiding at meetings of the Board at which the Chair is not present, including executive sessions; and +• performing other duties specified in the Lead Independent Director Charter. +In June 2022, the Board re-appointed Mr. Timothy Cook to serve as Lead Independent Director for a term of three years. Mr. Cook continues to serve as Lead Independent Director of the Company working in collaboration with Messrs. Parker and Donahoe. +The chairs of Board committees also play an active role in the leadership structure of the Board. The Corporate Responsibility, Sustainability & Governance Committee and the Board endeavor to select independent committee chairs who will provide strong leadership to guide the important work of the Board committees. Committee chairs work with the Company's senior executives to ensure the committees are discussing the key strategic risks and opportunities of the Company. In the absence of the Lead Independent Director, a presiding director is appointed to chair executive sessions of non-management directors (consisting of all directors other than Messrs. Parker and Donahoe). The position of presiding director is rotated among the chairs of the various Board committees, other than the Executive Committee. Executive sessions are regularly scheduled and held at least once each year. +Mr. Philip Knight, NIKE's co-founder, serves as Chairman Emeritus, with a standing invitation to attend meetings of the Board and its committees as a non-voting observer. The Board believes that it benefits from his valuable experience and insights. +For all of these reasons, the Board believes this leadership structure is optimal. +BOARD COMMITTEES +The Board's current standing committees are an Audit & Finance Committee; a Compensation Committee; a Corporate Responsibility, Sustainability & Governance Committee; and an Executive Committee. The Board may appoint other committees from time to time. Each standing committee has a written charter and all such charters, as well as the Company's Corporate Governance Guidelines, are available on the Company's corporate website, http://investors.nike.com, and will be provided in print +2024 PROXY STATEMENT 20 +to any shareholder who submits a request in writing to NIKE Investor Relations, One Bowerman Drive, Beaverton, Oregon 97005-6453. +AUDIT & FINANCE COMMITTEE +MEMBERS: +Alan Graf, Jr., Chair* +Maria Henry +Peter Henry +Robert Swan* +MEETINGS IN FY ’24: 12 +ROLES AND RESPONSIBILITIES: +The Audit & Finance Committee provides assistance to the Board in fulfilling its legal and fiduciary obligations with respect to: +• Matters involving the Company's accounting, auditing, financial reporting, and internal controls; +• Overseeing the Company's financial policies and activities; +• The integrity of the Company's financial statements and activities of the Company that may have a material impact on the financial position of the Company; +• Matters involving information security (including risks related to cyber security) and data protection; +• The Company's compliance with legal and regulatory requirements; +• The independent auditor's qualifications and independence, and the performance of the Company's internal audit function and independent auditor; +• The Company's risk assessment and risk management processes and practices; and +• Considering long-term financing options, long-range tax, financial regulatory and foreign currency issues facing the Company, and management's recommendations concerning capital deployment strategy, major capital expenditures, and material acquisitions or divestitures. +The Board has determined that each member of the Audit & Finance Committee meets all independence and financial literacy requirements applicable to audit committee members under the NYSE listing standards and applicable regulations adopted by the U.S. Securities and Exchange Commission (the "SEC"). The Board has also determined that each of Mr. Graf, Ms. Henry, and Mr. Swan is an "audit committee financial expert" as defined in regulations adopted by the SEC. +* Mr. Graf will not stand for re-election to the Board at the Annual Meeting. He will continue to serve as Chair of the Audit & Finance Committee until July 31, 2024, and Mr. Swan will serve as Chair of the Audit & Finance Committee beginning August 1, 2024. +COMPENSATION COMMITTEE +MEMBERS: +Cathleen Benko +Timothy Cook, Chair +Mónica Gil +MEETINGS IN FY ’24: 3 +ROLES AND RESPONSIBILITIES: +The Compensation Committee discharges the Board's responsibilities regarding executive and director compensation and senior leadership succession and talent management, and its duties include the following: +• Evaluate the performance of the CEO and other executive officers, and review and approve their compensation; +• Administer and interpret the Company's equity compensation plans and executive incentive compensation plans; +• Review the succession plans and leadership development programs for the executive officer positions, including reviewing the Company's development and succession management efforts; +• Review and provide guidance to management regarding Company policies, programs, and practices related to talent management and development for executive officers and senior management; and +• Make recommendations to the Board regarding the compensation of directors. +The Board has determined that each member of the Compensation Committee meets all independence requirements applicable to compensation committee members under the NYSE listing standards. +21 NIKE, INC. +CORPORATE RESPONSIBILITY, SUSTAINABILITY & GOVERNANCE COMMITTEE +MEMBERS: +Thasunda Duckett +Michelle Peluso, Chair +John Rogers, Jr. +MEETINGS IN FY ’24: 4 +ROLES AND RESPONSIBILITIES: +The Corporate Responsibility, Sustainability & Governance Committee sets the tone and pace for corporate governance and oversees our Purpose to move the world forward through the power of sport, with a focus on the three pillars of people, planet, and play. Its duties include the following: +• Review and evaluate NIKE's significant strategies, activities, policies, investments, and programs regarding social purpose, corporate responsibility, and sustainability; +• Provide oversight of management's efforts to ensure that the Company's dedication to sustainability is reflected in its business operations; +• Monitor the Company's progress towards its diversity, equity, and inclusion objectives and compliance with the Company's responsibilities as an equal opportunity employer; +• Review, evaluate, and make recommendations regarding the social, political, and environmental impact, trends, and issues in connection with the Company's business activities; +• Provide oversight of the Company's community and social impact efforts; +• Review transactions with related persons in accordance with the Company's policies; +• Oversee protection of the Company's corporate reputation and other matters of importance to the Company and its stakeholders; +• Identify individuals qualified to become Board members (consistent with the criteria approved by the Board) and recommend to the Board for approval the slate of Class A and Class B director nominees for election at each annual shareholder meeting; +• Review and make recommendations regarding the size, structure, composition, and leadership of the Board and its committees; +• Review and make recommendations regarding the Company's corporate governance framework; and +• Oversee the annual self-evaluations of the Board and its committees. +The Board has determined that each member of the Corporate Responsibility, Sustainability & Governance Committee meets all independence requirements applicable to +nominating/corporate governance committee members under the NYSE listing standards. +EXECUTIVE COMMITTEE +MEMBERS: +John Donahoe II +Travis Knight +Mark Parker, Chair +MEETINGS IN FY ’24: 0 +ROLES AND RESPONSIBILITIES: +The Executive Committee is authorized to act on behalf of the Board on all corporate actions for which applicable law does not require participation by the full Board. +• In practice, the Executive Committee acts in place of the full Board only when emergency issues or scheduling conflicts make it difficult or impracticable to assemble the full Board. +• All actions taken by the Executive Committee must be reported at the next Board meeting, or as soon thereafter as practicable. +The Executive Committee held no formal meetings during fiscal 2024, but took action by unanimous written consent. +2024 PROXY STATEMENT 22 +THE BOARD’S ROLE IN RISK OVERSIGHT +While the Company's management team is responsible for day-to-day management of the various risks facing the Company, the Board takes an active role in the oversight of the management of critical business risks. The Board does not view risk in isolation. Risks are considered in virtually every business decision and as part of NIKE's business strategy. The Board recognizes it is neither possible nor prudent to eliminate all risk. Purposeful and appropriate risk-taking is essential for the Company to be competitive on a global basis and to achieve its strategic objectives. +THE BOARD OF DIRECTORS +The Board implements its risk oversight function both as a whole and through committees, which play a significant role in carrying out risk oversight. While the Audit & Finance Committee is responsible for oversight of management's risk management policies, oversight responsibility for particular areas of risk is allocated among the Board committees according to the committee's area of responsibility as reflected in the committee charters. +BOARD COMMITTEES +The AUDIT & FINANCE COMMITTEE oversees risks related to the Company's financial statements, the financial reporting process, accounting, legal matters, investments, access to capital and capital deployment, currency risk and hedging programs, information security (including risks related to cybersecurity), and data protection. The committee oversees the internal audit function, reviews a risk-based plan of internal audits, and reviews a risk-based integrated audit of internal controls over financial reporting. The committee meets separately with the Vice President of Global Audit and Chief Risk Officer, representatives of the independent registered public accountants, and senior management. +The COMPENSATION COMMITTEE oversees risks associated with the Company's compensation philosophy and programs and executive succession and development. +The CORPORATE RESPONSIBILITY, SUSTAINABILITY & GOVERNANCE COMMITTEE oversees risks associated with corporate social purpose and company governance, including NIKE's Code of Conduct and its compliance programs, and the structure and performance of the Board and its committees. The committee also oversees protection of the Company's corporate reputation including issues that involve social and community engagement, workplace diversity, equity, and inclusion, and sustainability relating to the Company's products, its supply chain (including labor practices), and the environment. +EXECUTIVE LEADERSHIP TEAM +Each committee chair works with one or more senior executives assigned to assist the committee in: developing agendas for the year and for each meeting, paying particular attention to areas of business risk identified by management, Board members, internal and external auditors, and in their committee charter; and scheduling agenda topics, presentations, and discussions regarding business risks within their area of responsibility. At meetings, the committees discuss areas of business risk, the potential impact, and management's initiatives to manage business risk, often within the context of important business decisions. Through this process, key business risk areas are reviewed at appropriate times, with some topics reviewed on multiple occasions throughout the year. At every Board meeting, each committee chair provides a report to the full Board outlining the committee's discussions and actions, including those affecting the oversight of various risks. +The Company believes its leadership structure, discussed in detail above, further supports the risk oversight function of the Board. Strong directors chair the various committees involved in risk oversight, there is open communication between management and directors, and all directors are involved in the risk oversight function. +THE BOARD’S ROLE IN ESG OVERSIGHT +The Board takes an active role overseeing NIKE's commitment to, and progress on, environmental, social, and governance ("ESG") matters. The Board oversees ESG matters primarily through the Corporate Responsibility, Sustainability & Governance +23 NIKE, INC. +Committee. In addition to overseeing corporate governance (generally, the "G" in "ESG"), this committee also oversees the risks and opportunities associated with NIKE's Purpose to move the world forward through the power of sport, with a focus on the three pillars of people, planet, and play (generally, the "E" and "S" in "ESG"). The committee's responsibilities include reviewing and providing guidance to management regarding significant Purpose strategies, activities, policies, investments, and programs; reviewing the development of NIKE's five-year Purpose targets and long-term sustainability targets, and monitoring the Company's progress towards those targets; and reviewing and providing guidance to management regarding NIKE's annual Impact Report, which describes our progress towards our Purpose targets for our shareholders and other stakeholders. The Compensation Committee also plays a key role with respect to ESG by overseeing talent management and development for executive officers and senior management, including with respect to employee engagement and workplace diversity, equity, and inclusion. More information about Purpose, including NIKE's annual Impact Report, is available on the Impact section of our website. +SHAREHOLDER COMMUNICATIONS WITH DIRECTORS +Shareholders or interested parties desiring to communicate directly with the Board or with any individual director may do so in writing addressed to the intended recipient or recipients, c/o Corporate Secretary, NIKE, Inc., One Bowerman Drive, Beaverton, Oregon 97005-6453. The Office of the Corporate Secretary reviews all such communications and refers relevant correspondence directly to a director, as appropriate. In addition, the Office of the Corporate Secretary regularly summarizes for the Board all communications that relate to the functions of the Board or its committees or that otherwise warrant Board attention. +CODE OF CONDUCT +The NIKE Code of Conduct is available at the Company's corporate website, http://investors.nike.com, and will be provided in print without charge to any shareholder who submits a request in writing to NIKE Investor Relations, One Bowerman Drive, Beaverton, Oregon 97005-6453. The Code of Conduct applies to all of the Company's employees and directors, including our CEO and all other executive officers. The Code of Conduct provides that any waiver of the Code of Conduct for executive officers or directors may be made only by the Board or a committee of the Board. Any such waiver will be publicly disclosed, when required by law. The Company plans to disclose amendments to, and waivers from, the Code of Conduct on the Company's corporate website: http://investors.nike.com. +CAPITAL STRUCTURE +Since NIKE's initial public offering in 1980, the Company's articles of incorporation have provided for NIKE to have two classes of voting stock, consisting of the Class A Stock and the Class B Stock. +RIGHTS OF COMMON STOCK +The shares of Class A Stock and Class B Stock have identical voting and economic rights except that the holders of the Class A Stock and Class B Stock vote as separate classes for purposes of electing directors. Specifically, for as long as the number of outstanding shares of Class B Stock is between 25% and 87.5% of the total number of outstanding shares of Common Stock (as is currently the case), the holders of the Class B Stock, voting as a separate class, have the right to elect 25% of the Board (rounded up to the nearest whole number) and the holders of the Class A Stock, voting as a separate class, have the right to elect the remaining directors. If at any time the outstanding number of shares of Class A Stock is less than 12.5% of the total number of outstanding shares of Common Stock, then the Class B Stock, voting as a separate class, will continue to have the right to elect 25% of the Board (rounded up to the nearest whole number), but the Class A Stock and Class B Stock will vote together as a single class to elect the remaining directors. Outside of director elections, the Class A Stock and Class B Stock vote together on all other matters, with each Class A share and Class B share having one vote per share. +Because twelve directors will be elected at the Annual Meeting and the outstanding number of shares of Class B Stock is between 25% and 87.5% of the outstanding shares of Common Stock, the holders of the Class B Stock are entitled to elect three directors at the Annual Meeting and the holders of the Class A Stock are entitled to elect the remaining nine. For each other matter to be voted on at the Annual Meeting (including Proposals 2, 3, 4, 5, 6, 7, and 8), the Class A Stock and Class B Stock will vote together as a single class, each with one vote per share. +2024 PROXY STATEMENT 24 +Each share of Class A Stock is convertible into one share of Class B Stock. Such conversion is solely at the option of the holder, and cannot be dictated by either the Company or the Board. The Class A Stock is currently primarily held by Swoosh, LLC, an entity that was formed by Mr. Philip Knight, NIKE's co-founder, in 2015 to hold the majority of his shares of Class A Stock. +For additional information regarding NIKE's classes of Common Stock, see the description of the Company's securities included as Exhibit 4.7 to NIKE's Annual Report on Form 10-K for fiscal 2024. For additional information regarding key holders of the Class A Stock and Class B Stock, see the section below titled "Stock Ownership Information—Stock Holdings of Certain Owners and Management". +STRUCTURAL ADVANTAGES +Our unique capital structure enables NIKE to focus on long-term strategy, which our Board believes is critical to creating long-term value. This long-term vision enables the Company to prioritize research and development and innovation, to invest in transformations in support of our strategic objectives, and to integrate Purpose into our business strategy. It also helps to preserve and advance NIKE's unique culture, which we believe powers our success. +At the same time, our capital structure meaningfully protects and represents the interests of our public Class B shareholders. Each share of our Class A Stock and Class B Stock carries the same economic rights and risks, which helps align the interests of our Class A and Class B shareholders. All of our directors, regardless of which class of Common Stock elected them, have fiduciary duties to act in the best interests of all NIKE shareholders. In addition, all directors are subject to the same nomination and evaluation processes, which are described in the section above titled "NIKE, Inc. Board of Directors—Director Nominations", and the Board considers all directors when assessing the mixture of experience, attributes, and skills represented on the Board. All of the directors nominated for election by our Class B shareholders, as well as six out of nine of the directors nominated for election by our Class A shareholders, are independent, and only independent directors sit on the Audit & Finance Committee, the Compensation Committee, and the Corporate Responsibility, Sustainability & Governance Committee. +INVESTOR FEEDBACK +Although the Board cannot change or eliminate our dual class capital structure without the approval of the holders of the Class A Stock, the Company believes it is important to engage regularly with Class B shareholders to understand their views on NIKE's capital structure. The majority of shareholders with whom we engaged since our last annual meeting expressed that they did not have specific concerns with the Company's dual class structure in light of the fact that it provides for equal voting and economic rights on all matters other than the election of directors, as well as the Company's long history of robust corporate governance practices, strong and effective Board oversight, and highly qualified directors. They also appreciated the Board's responsiveness to feedback, including the refreshment of the slate of Class B director nominees in 2023 to include a member from each of the three key Board committees: the Audit & Finance Committee, the Compensation Committee, and the Corporate Responsibility, Sustainability & Governance Committee. +SHAREHOLDER ENGAGEMENT +Our approach to governance is informed by the insights and perspectives of our Class B shareholders. We greatly value the opportunity to engage with and solicit feedback from our shareholders regarding matters involving the Company, with a focus on ESG matters, and we believe that maintaining an open dialogue strengthens the Company's approach to its corporate governance practices and disclosures. Below is an overview of the Company's fiscal 2024 engagement practices regarding ESG matters. These ESG-related engagements take place in addition to regular financial-related outreach led by our Investor Relations team and engagement with shareholder proponents led by our Office of the Corporate Secretary. +INTEGRATED ENGAGEMENT TEAM TYPES OF ENGAGEMENT KEY FISCAL 2024 ENGAGEMENT TOPICS +• Independent Directors +• Investor Relations +• Total Rewards and Executive Compensation +• Office of the Corporate Secretary +• One-on-one meetings +• E-mail communications +• NIKE leadership structure +• Board composition and evergreen refreshment +• Risk oversight +• Capital structure +• Executive compensation +• Responsible sourcing +In fiscal 2024, we reached out to shareholders representing 46% of our Class B shares +and engaged with shareholders representing 43% of our Class B shares +25 NIKE, INC. +The Board is committed to understanding the views of our shareholders. Therefore, the Chair of our Corporate Responsibility, Sustainability & Governance Committee actively participated in engagements with certain of the Company's largest investors during fiscal 2024. In addition, management and our Board leadership reports key themes and feedback that emerge during these engagements to the full Board and any relevant committees, so that we can continue to refine and adapt our practices to better address the issues that our shareholders raise with us. +The Board and management carefully consider and integrate shareholder feedback into the Company's practices and disclosures. Recent changes to our practices include refining our fiscal 2024 executive compensation program, including by evolving the long-term incentive award mix to include 50% performance-based restricted stock units (as described in the section below titled "Executive Compensation—Compensation Discussion and Analysis—Compensation of our Named Executive Officers—Long-Term Incentive"); adopting an overboarding policy in 2024 to increase clarity and transparency about the Board's expectations that directors devote appropriate time to Board responsibilities; and refreshing the slate of Class B director nominees in 2023 to include a member of each of the key Board committees. We have also enhanced our proxy statement disclosures over the past several years in response to shareholder feedback, including providing additional detail and transparency regarding Board diversity, Board oversight of ESG, and our capital structure. +DIRECTOR COMPENSATION FOR FISCAL 2024 +NAME FEES EARNED OR +PAID IN CASH +($) +STOCK +AWARDS (1) +($) +CHANGE IN +PENSION VALUE AND +NONQUALIFIED DEFERRED +COMPENSATION EARNINGS +($) +ALL OTHER +COMPENSATION (2) +($) +TOTAL +($) +Cathleen Benko 100,000 190,770 — 18,714 309,484 +Timothy Cook 165,000 190,770 — 20,000 375,770 +Thasunda Duckett 100,000 190,770 — — 290,770 +Mónica Gil 100,000 190,770 — — 290,770 +Alan Graf, Jr. 135,000 190,770 — — 325,770 +Maria Henry (3) +105,000 370,050 — 20,000 495,050 +Peter Henry 105,000 190,770 — 10,000 305,770 +Travis Knight 100,000 190,770 — — 290,770 +Michelle Peluso 125,000 190,770 — 20,000 335,770 +John Rogers, Jr. 100,000 190,770 — — 290,770 +Robert Swan 105,000 190,770 — 20,000 315,770 +(1) Represents the grant date fair value of restricted stock awards granted in fiscal 2024 computed in accordance with accounting guidance applicable to stock-based compensation. The grant date fair value is based on the closing market price of our Class B Stock on the grant date. As of May 31, 2024, Ms. Henry held 3,711 shares of unvested restricted stock, each other non-employee director held 1,981shares of unvested restricted stock, and no non-employee director held any outstanding stock options. +(2) Consists of matched contributions to charities under the NIKE Matching Gift Program. +(3) For Ms. Henry, who was appointed to the Board effective June 1, 2023, stock awards consist of a one-time, sign-on grant of restricted stock as well as an annual restricted stock award, each as described in the section below titled "Director Fees and Arrangements". +DIRECTOR FEES AND ARRANGEMENTS +Under our director compensation program in effect for fiscal 2024, non-employee directors receive: +• An annual retainer of $100,000, paid in quarterly installments. +• Upon appointment to the Board, a one-time, sign-on restricted stock award valued at $200,000 on the date of grant, generally, the date of appointment. The one-time, sign-on restricted stock award is subject to forfeiture in the event that service as a director terminates prior to the first anniversary of the date of grant. +• An annual restricted stock award valued at $200,000 on the date of grant, generally, the date of each annual meeting of shareholders. The number of restricted shares granted to each director for fiscal 2024 was determined by dividing the director's award value by the average closing price of our Class B Stock for the 20-trading day period ending on the date of grant. The annual restricted stock award is subject to forfeiture in the event that service as a director terminates prior to the earlier of the next annual meeting and the last day of the 12 th full calendar month following the date of grant. +• For the Lead Independent Director, an annual retainer of $40,000, paid in quarterly installments. +• For chairs of Board committees (other than the Executive Committee), an annual retainer of $25,000 for each committee chaired ($30,000 for the chair of the Audit & Finance Committee), paid in quarterly installments. +2024 PROXY STATEMENT 26 +• For Audit & Finance Committee members, an additional annual retainer of $5,000, paid in quarterly installments. +• Payment or reimbursement of travel and other expenses incurred in attending Board meetings. +• Matching charitable contributions under the NIKE Matching Gift Program, under which directors are eligible to contribute to qualified charitable organizations and the Company provides a matching contribution to the charities in an equal amount, up to $20,000 in the aggregate, for each director annually. +Neither Mr. Donahoe nor Mr. Parker received any additional compensation for services provided as a director in fiscal 2024. +STOCK OWNERSHIP GUIDELINES FOR DIRECTORS +NIKE maintains stock ownership guidelines for all non-employee directors. Under these guidelines, directors are required to hold NIKE stock valued at five times their annual cash retainer. New directors are required to attain these ownership levels within five years of their election to the Board. Each of our directors has met or is on track to meet the specified ownership level. +DIRECTOR PARTICIPATION IN DEFERRED COMPENSATION PLAN +Under our Deferred Compensation Plan, non-employee directors may elect in advance to defer up to 100 percent of the director fees paid by the Company. For a description of the plan, see the section below titled "Executive Compensation—Executive Compensation Tables—Non-Qualified Deferred Compensation in Fiscal 2024—Non-Qualified Deferred Compensation Plans". +27 NIKE, INC. +EXECUTIVE COMPENSATION +PROPOSAL 2 +SHAREHOLDER ADVISORY VOTE TO APPROVE +EXECUTIVE COMPENSATION +In accordance with the requirements of Section 14A of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), we are submitting to shareholders our annual "say-on-pay proposal", an advisory vote to approve the compensation of our Named Executive Officers as described in this proxy statement. At our 2023 annual meeting of shareholders, approximately 88% of the votes cast on the say-on-pay proposal were voted in favor of the proposal. +The Compensation Committee is committed to understanding the views of our shareholders with respect to the executive compensation program. Therefore, during fiscal 2024, the committee considered the results of the 2023 say-on-pay proposal, which the committee believes affirm shareholders' support of the Company's approach to executive compensation and the committee's decisions, as well as direct feedback from shareholders provided during management and Board engagements. +As discussed in this section, our executive compensation program is designed to attract and retain top-tier talent and maximize shareholder value. To achieve the objectives of our executive compensation program and emphasize pay-for-performance principles, the Compensation Committee has continued to employ strong governance practices, including: +• basing a majority of total compensation on performance incentives; +• setting incentive award targets based on clearly disclosed, objective performance measures; +• mitigating undue risk associated with compensation by using multiple performance targets, caps on potential incentive payments, a clawback policy, and additional standalone clawback provisions; and +• requiring executive officers to hold NIKE stock through published stock ownership guidelines. +Because your vote is advisory, it will not be binding on the Board. However, the Board values shareholder opinions, and the Compensation Committee will take into account the outcome of the vote when considering future executive compensation arrangements. +BOARD RECOMMENDATION +The Board of Directors recommends that shareholders vote FOR approval of the following resolution: +RESOLVED, that the shareholders approve the fiscal 2024 compensation paid to the Named Executive Officers as disclosed in this proxy statement pursuant to the SEC's compensation disclosure rules (which disclosure includes the Compensation Discussion and Analysis, the compensation tables, and the narrative disclosures that accompany the compensation tables). +2024 PROXY STATEMENT 28 +COMPENSATION DISCUSSION AND ANALYSIS +This Compensation Discussion and Analysis describes our compensation program, philosophy, decisions, and process for the compensation of our Named Executive Officers for fiscal 2024: +NAMED EXECUTIVE OFFICER TITLE +John Donahoe II President and Chief Executive Officer +Mark Parker Executive Chairman +Matthew Friend Executive Vice President and Chief Financial Officer +Heidi O'Neill President, Consumer, Product & Brand +Craig Williams President, Geographies & Marketplace +This Compensation Discussion and Analysis is organized into four sections: +• Executive Summary (page 30) +• Compensation of Our Named Executive Officers (page 32) +• Our Compensation Process (page 39) +• Other Compensation Practices (page 40) +Key Defined Terms +TERM DEFINITION +401(k) Plan 401(k) Savings and Profit Sharing Plan for Employees of NIKE, Inc. +Absolute TSR Company total shareholder return for the applicable performance period +Adjusted EBIT EBIT, excluding the impact of acquisitions and divestitures; changes in accounting principles; unanticipated restructurings; unanticipated exchange rate fluctuations; and other extraordinary, unusual, or infrequently occurring items +Adjusted Revenue +Company revenue, excluding the impact of acquisitions and divestitures; changes in accounting principles; unanticipated restructurings; unanticipated exchange rate fluctuations; and other extraordinary, unusual, or infrequently occurring items +CD&A Compensation Discussion and Analysis +EBIT Company earnings before interest and taxes +NEO Named Executive Officer +PSP NIKE, Inc. Executive Performance Sharing Plan +PSU Performance-based restricted stock unit +Relative TSR Absolute TSR for the applicable performance period relative to total shareholder return over the same period for the other companies in the S&P 500 +RSU Time-vesting restricted stock unit +SIP NIKE, Inc. Stock Incentive Plan +29 NIKE, INC. +EXECUTIVE SUMMARY +OUR APPROACH TO EXECUTIVE COMPENSATION +• We follow a pay for performance philosophy, intended to drive business results and maximize shareholder value. Compensation is therefore highly incentive-based and heavily weighted towards long-term awards to emphasize long-term performance. +• We strive every day to win as a team . To foster teamwork, and ensure internal pay equity, we utilize a cohort approach by aligning compensation across executive roles. +• We value shareholder feedback . We consider the results of our annual say-on-pay vote—88% in favor last year, which we believe affirms shareholders' support of our executive compensation approach and decisions—as well as feedback shared directly through our shareholder engagement efforts described on page 25. +DIRECT COMPENSATION ELEMENTS +NIKE's direct compensation for the Named Executive Officers generally consists of the following elements: +ELEMENT KEY CHARACTERISTICS PURPOSE +Base Salary Fixed cash compensation Provides market competitive baseline compensation to attract and retain top-tier talent +Annual Cash Incentive Award – PSP Variable cash incentive compensation earned at 0% – 200% based on Company performance over a 1-year performance period Motivates and rewards achievement of sustainable and profitable growth +Long-Term Incentive Award – SIP +PSUs +(50% (1) ) +Variable stock-based incentive compensation earned at 0% – 200% based on Company performance over a 3-year performance period; value dependent upon achievement of performance metrics and our stock price Aligns NEOs' interests with those of our shareholders by motivating and rewarding achievement of long-term shareholder value and growth; promotes retention +Stock Options +(35% (1) ) +Stock-based incentive compensation that generally vests in 4 equal annual installments; only provides value if our stock price appreciates Aligns NEOs' interests with those of our shareholders by rewarding achievement of upside potential; promotes retention +RSUs +(15% (1) ) +Stock-based incentive compensation that generally vests in 3 equal annual installments; value tied to our stock price Aligns NEOs' interests with those of our shareholders by rewarding long-term value creation; promotes retention +(1) Percentages reflect the long-term incentive award mix for all NEOs except Mr. Parker who, due to his role as Executive Chairman, received his long-term incentive award 100% in the form of stock options. +FISCAL 2024 PROGRAM ENHANCEMENTS +The following outlines enhancements to the executive compensation program for fiscal 2024: +PROGRAM ELEMENT OBJECTIVE +ENHANCEMENT (1) +Annual Cash Incentive Award – PSP Focus on top-line growth and overall profitability +Streamlined plan to two equally-weighted metrics—Adjusted Revenue (for driving top-line growth) and Adjusted EBIT (for managing overall profitability)—by eliminating adjusted digital revenue as a metric +Incentivize and reward exceptional performance, while balancing achievability Increased the spread between threshold and maximum by increasing the maximum level (from 150% to 200%) and decreasing the threshold level (from 50% to 25%) +Long-Term Incentive Award – SIP Further strengthen the connection between pay and performance, and respond to shareholder feedback +Increased the portion of the long-term incentive award granted in the form of PSUs to 50%, with the remainder delivered in the form of stock options (35%) and RSUs (15%) +(1) Program enhancements applied to all NEOs except Mr. Parker who, due to his role as Executive Chairman, did not receive a PSP award and received his long-term incentive award 100% in the form of stock options. +2024 PROXY STATEMENT 30 +INCENTIVE AWARD OUTCOMES +The following summarizes incentive award outcomes for fiscal 2024. For more information on incentive award outcomes for the NEOs, see the sections below titled "Compensation of our Named Executive Officers—Annual Cash Incentive" and "Compensation of our Named Executive Officers—Long-Term Incentive—Fiscal 2022 Award Results". +FISCAL 2024 PSP FISCAL 2022 – 2024 PSUs +EXECUTIVE COMPENSATION GOVERNANCE PRACTICES +WHAT WE DO +WHAT WE DON’T DO +ü Base a majority of total compensation on performance and retention incentives +ü Mitigate risk by using multiple performance periods and metrics, incentive payment caps, a clawback policy, and additional standalone clawback provisions +ü Base incentive awards on clearly disclosed, objective performance goals +ü Maintain robust stock ownership guidelines +ü Vest stock-based awards over time to promote long-term performance and retention +ü Provide only double-trigger change-in-control acceleration for stock-based awards +û No dividend equivalents paid on PSUs or RSUs unless and until shares are earned +û No repricing of stock options +û No hedging transactions or short sales permitted +û No pension or supplemental executive retirement plan +û No tax gross-ups for perquisites +û No cash-based change-in-control benefits +û No excise tax gross-ups upon change of control +31 NIKE, INC. +COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS +COMPENSATION OBJECTIVES AND STRUCTURE +Our executive compensation program is designed to attract and retain top-tier talent in a competitive marketplace and to maximize shareholder value by rewarding NEOs for strong Company performance. The program consists of direct compensation, with a focus on incentive compensation, and competitive benefits that are generally consistent with the benefits offered to our other U.S.-based employees. +We structure our executive compensation program in the context of our business strategy and talent plan. To foster teamwork and ensure internal pay equity, we utilize a segmented cohort approach that aligns compensation across certain executive roles. Cohort compensation levels are determined by holistically considering factors relating to our business, the competitive market for top-tier talent, and the applicable executives—including future potential, individual performance, market insights, succession planning, retention, and leadership continuity. +Our philosophy is to "pay for performance" in order to drive business results and maximize shareholder value. As a result, executive compensation is highly incentive-based and weighted towards long-term awards to emphasize long-term performance and support retention. Our executive compensation program balances performance incentives, including by using multiple performance metrics and periods, and through a mixture of cash- and stock-based compensation elements. Stock-based compensation—which consists of PSUs, stock options, and RSUs—is also structured to pay for performance by linking the majority of each NEO's target total direct compensation directly to our stock price. The following charts illustrate the mix of components that make up fiscal 2024 target total direct compensation for our NEOs. +* "Other NEOs" represents each of Mr. Friend, Ms. O'Neill, and Mr. Williams, and excludes Mr. Parker whose compensation is structured differently due to his role as Executive Chairman. +BASE SALARY +Base salary is a fixed element of compensation that serves to attract and retain top-tier talent. Generally, the Compensation Committee reviews and determines base salaries for our Named Executive Officers in June, with any adjustments becoming effective in August of the same year. The Compensation Committee set Mr. Williams' base salary to align with his applicable cohort in connection with his appointment as President of Geographies & Marketplace. Fiscal 2024 base salaries for each other Named Executive Officer remained unchanged compared to fiscal 2023. +2024 PROXY STATEMENT 32 +NAMED EXECUTIVE OFFICER FISCAL 2024 BASE SALARY % CHANGE +John Donahoe II $1,500,000 0% +Mark Parker $1,000,000 0% +Matthew Friend $1,250,000 0% +Heidi O'Neill $1,250,000 0% +Craig Williams $1,250,000 N/A +ANNUAL CASH INCENTIVE +Annual cash incentive awards are paid to the Named Executive Officers under our PSP and are designed to reflect our "pay for performance" philosophy. For fiscal 2024, PSP awards were eligible to be earned between 0% and 200% of target based on Company performance during the fiscal year. The Compensation Committee retains discretion to adjust PSP metrics and award payouts based on individual or Company performance. To align employees and reinforce our one-team culture, the same compensation philosophy and metrics that underlie our PSP awards generally apply to all global employees who are eligible to participate in the Company's success through annual incentive bonuses. +The Compensation Committee set the PSP target award for Mr. Williams to align with his applicable cohort in connection with his appointment as President of Geographies & Marketplace. For each other NEO, the committee maintained fiscal 2024 PSP target awards at the same level as his or her fiscal 2023 PSP target award. Therefore, the fiscal 2024 PSP target awards were: +NAMED EXECUTIVE OFFICER FISCAL 2024 PSP TARGET AWARD +(% OF BASE SALARY) +John Donahoe II 200% +Mark Parker 0% +Matthew Friend 120% +Heidi O'Neill 120% +Craig Williams 120% +In June 2023, the Compensation Committee reviewed our annual cash incentive program and determined to make the following changes for the fiscal 2024 PSP awards in order to drive sustained engagement, motivation, and Company performance and to better align with NIKE's business strategy and culture: +• Streamlined the metrics to Adjusted Revenue and Adjusted EBIT (eliminating the adjusted digital revenue metric used in prior year awards) to focus on driving top-line growth and managing overall profitability, respectively. +• Increased the spread between threshold and maximum earnout levels by increasing the maximum to 200% of target (from 150%) and decreasing the threshold to 25% of target (from 50%), to incentivize and reward exceptional performance while balancing achievability. +Consistent with the prior year, the committee maintained equal weighting for the metrics (with the weight of each metric increasing to 50% due to the decrease from three metrics to two) as well as a single, year-long performance period. +In setting the year-long performance goals for the PSP, the Compensation Committee sought to drive sustainable and profitable growth. Accordingly, the Adjusted Revenue target goal represented an increase of 5% compared to actual fiscal 2023 revenue, with threshold and maximum goals set equidistant from the target goal to balance stretch and risk. The Adjusted EBIT target goal represented an increase of 15% compared to actual fiscal 2023 EBIT, with threshold and maximum goals set non-equidistant from the target goal; the additional upside stretch was built into the maximum goal to incentivize exceptional performance. +For fiscal 2024, Adjusted Revenue of $51.7 billion corresponded to an earnout of 37% and Adjusted EBIT of $7.1 billion corresponded to an earnout of 93%. These earnouts were averaged together to calculate a PSP payout of 65% for all executive officers. The fiscal 2024 PSP performance goals, achievement levels, and payout are illustrated below. +33 NIKE, INC. +FISCAL 2024 PERFORMANCE GOALS AND RESULTS +(Dollars in millions) +% PAYOUT THRESHOLD +25% TARGET +100% +MAXIMUM +200% +Adjusted Revenue (1) +(Weighted 50%) +EARNOUT: +37% +Adjusted EBIT (1) +(Weighted 50%) +EARNOUT: +93% +FISCAL 2024 PSP PAYOUT 65% +(1) As described on page 29, each metric excluded the impact of certain non-operational events to help drive and reward organic growth. +LONG-TERM INCENTIVE +Long-term incentive compensation incentivizes and rewards long-term Company performance, aligns executives' interests with those of our shareholders, and promotes retention in a highly competitive talent marketplace. Therefore, this element of our executive compensation program forms the largest portion of our Named Executive Officers' direct compensation, constituting 81% of fiscal 2024 target total direct compensation for Mr. Donahoe (67% for Mr. Parker and 74% for each other NEO). +Long-term incentive compensation consists of three components: PSUs, stock options, and RSUs, each granted under our SIP. In fiscal 2024, the Compensation Committee finished a multi-year evolution to increase the proportion of the total long-term incentive award delivered in the form of PSUs to 50%. Therefore, fiscal 2024 NEO awards were delivered 50% as PSUs, 35% as stock options, and 15% as RSUs (excluding Mr. Parker, whose long-term incentive award is delivered entirely as stock options due to his role as Executive Chairman). +Consistent with prior years, the Company made grants of fiscal 2024 long-term incentive awards to executive officers (including NEOs) on August 1, 2023. The Compensation Committee determined in June 2024 to align the grant date for long-term incentive awards to executive officers (including NEOs) with the grant date for employees below the executive officer level. Accordingly, awards for fiscal 2025 and thereafter are expected to be granted to executive officers (including NEOs) on September 1 of each fiscal year. +FISCAL 2024 AWARD GRANTS +The Compensation Committee determined the fiscal 2024 long-term incentive awards in June 2023. With respect to the mix of the long-term incentive award components, the Compensation Committee completed a multi-year evolution to increase the proportion delivered in PSUs. In setting the value of each long-term incentive award, the committee considered multiple factors, including individual and Company performance, evolving responsibilities, our cohort compensation approach, and retaining top-tier talent in a highly competitive talent marketplace. +2024 PROXY STATEMENT 34 +Accordingly, the Compensation Committee increased the target value of Mr. Donahoe's long-term incentive award by $2,000,000 compared to fiscal 2023, which consisted of a PSU increase of $1,600,000, a stock option increase of $350,000, and an RSU increase of $50,000. Given Mr. Parker's responsibilities as Executive Chairman, the committee maintained his same award value and mix compared to fiscal 2023. For each of Mr. Friend and Ms. O'Neill, the Compensation Committee increased the target long-term incentive award by $2,500,000, which consisted in each case of a PSU increase of $2,000,000, a stock option increase of $700,000, and an RSU decrease of $200,000. The committee set the target value and mix of Mr. Williams' long-term incentive award to align with his applicable cohort in connection with his appointment as President of Geographies & Marketplace. The fiscal 2024 long-term incentive award values were: +NAMED EXECUTIVE OFFICER TOTAL FISCAL 2024 +LONG-TERM INCENTIVE AWARD +TARGET PSUs +(50%) (1) +STOCK OPTIONS +(35%) (1) +RSUs +(15%) (1) +John Donahoe II $19,000,000 → $9,500,000 $6,650,000 $2,850,000 +Mark Parker $2,000,000 → — $2,000,000 — +Matthew Friend $8,000,000 → $4,000,000 $2,800,000 $1,200,000 +Heidi O'Neill $8,000,000 → $4,000,000 $2,800,000 $1,200,000 +Craig Williams $8,000,000 → $4,000,000 $2,800,000 $1,200,000 +(1) Percentages reflect the long-term incentive award mix for all Named Executive Officers except Mr. Parker, whose long-term incentive award was delivered 100% in stock options. +2024 – 2026 PSUs +PSUs align our Named Executive Officers' interests with those of our shareholders by motivating and rewarding achievement of long-term shareholder value and growth. PSU awards reflect our "pay for performance" philosophy: they are earned between 0% and 200% of target based on Company performance during a three-year performance period. +In June 2023, the Compensation Committee selected the metric, corresponding performance goals, and award terms for the fiscal 2024 – 2026 PSU awards. The committee will determine the earnout of the fiscal 2024 – 2026 PSU awards following the completion of the three-year performance period, and any PSUs that are earned will vest on August 1, 2026. +Consistent with the prior year's awards, the Compensation Committee selected Relative TSR as the metric for the fiscal 2024 – 2026 PSU awards and continued to target above-median performance as shown in the table below: +FISCAL 2024 – 2026 PERFORMANCE GOALS +% PAYOUT +THRESHOLD +25% +TARGET +100% +MAXIMUM +200% +Relative TSR (1) +(1) Relative TSR for fiscal years 2024, 2025, and 2026, calculated using the 20-trading day average stock price and assuming that dividends paid during the performance period are reinvested in the applicable company's stock. +PSUs will be earned at 100% of target if the Company's Relative TSR for the performance period is at the 55 th percentile, and will be earned at 0% if the Company's Relative TSR for the performance period is below the 25 th percentile. PSU earnout based on Relative TSR performance is subject to a cap of 100% of target if Absolute TSR for the performance period is negative. The Compensation Committee selected three-year Relative TSR as the performance metric because it is an objective and transparent measure of long-term shareholder value, especially in the context of a volatile market. Furthermore, the cap on payout if Absolute TSR is negative incentivizes NEOs to pursue long-term growth. +The fiscal 2024 – 2026 PSU awards also contain a People & Planet modifier designed to support our commitment to Purpose, which is a key component of our long-term strategy. If Relative TSR meets or exceeds the threshold performance goal, the People & Planet modifier permits the Compensation Committee to adjust the earnout upwards or downwards by up to 20 percentage points (subject to both the 200% maximum earnout and the 100% Absolute TSR cap) based on a holistic assessment of the Company's performance with respect to employee engagement and inclusion, leadership diversity, and sustainability. Structuring the modifier as a holistic assessment ensures that the final earnout comprehensively balances these broad and disparate issues and appropriately reflects the spirit of our Purpose commitment. +The target number of PSUs granted to each Named Executive Officer for fiscal 2024 was determined by dividing the NEO's target award value by the average closing price of our Class B Stock for the 20-trading day period ending on the date of grant. PSUs accumulate dividend equivalents that are paid only when, and to the extent, they vest. To promote retention, the PSU awards generally provide that any unvested PSUs are forfeited if the Named Executive Officer leaves the Company. Forfeiture is subject to partial accelerated vesting upon termination of employment in connection with a divestiture or reduction in force (as described in the section below titled "Executive Compensation Tables—Potential Payments Upon Termination or Change-in-Control"). +35 NIKE, INC. +STOCK OPTIONS +Stock options align our Named Executive Officers' interests with those of our shareholders by rewarding the achievement of upside potential, and they reflect our "pay for performance" philosophy by rewarding the NEOs only if the price of our Class B Stock appreciates. +The number of stock options granted to each NEO for fiscal 2024 was determined by dividing the NEO's award value by the Black-Scholes value (calculated based on a 20-day average stock price and the available five-year and seven-year interest rates) of a stock option on the date of grant. Options granted to the Named Executive Officers vest in equal annual installments over four years and have an exercise price equal to the closing market price of our stock on the date of grant (or the trading day immediately prior to the grant date, if the grant date is not a trading day). To promote retention, stock options generally provide that if a Named Executive Officer leaves the Company, they forfeit any unvested stock options. Forfeiture is subject to a limited retirement provision designed to encourage executives to delay retirement, as well as partial accelerated vesting upon termination of employment in connection with a divestiture or reduction in force (each as described in the section below titled "Executive Compensation Tables—Potential Payments Upon Termination or Change-in-Control"). +RSUs +RSUs align our Named Executive Officers' interests with those of our shareholders by rewarding the achievement of long-term value creation, and they reflect our "pay for performance" philosophy because their value is directly tied to our Class B Stock price. +The number of RSUs granted to each NEO for fiscal 2024 was determined by dividing the NEO's award value by the average closing price of our Class B Stock for the 20-trading day period ending on the date of grant. RSUs granted to the Named Executive Officers as part of long-term incentive compensation vest in equal annual installments over three years and accumulate dividend equivalents that are paid only upon vesting. To promote retention, RSU awards generally provide that any unvested RSUs are forfeited if the Named Executive Officer leaves the Company. Forfeiture is subject to partial accelerated vesting upon termination of employment in connection with a divestiture or reduction in force (as described in the section below titled "Executive Compensation Tables—Potential Payments Upon Termination or Change-in-Control"). +FISCAL 2022 AWARD RESULTS +As previously disclosed in our 2022 proxy statement, the fiscal 2022 – 2024 PSU awards granted in June 2021 were to be earned between 0% and 200% of target based on Relative TSR over a three-year performance period (subject to a payout cap of 100% if Absolute TSR was negative). In addition, if Relative TSR was achieved at or above the threshold performance goal, a People & Planet modifier would allow the award payout to be increased or decreased by up to 20 percentage points (subject to both the 200% maximum earnout and the 100% Absolute TSR cap) based on a holistic assessment of the Company's performance with respect to employee engagement and inclusion, leadership diversity, and sustainability. +NIKE's Relative TSR for fiscal years 2022 – 2024 was at the 10 th percentile, corresponding to an earnout of 0%. Relative TSR was calculated in comparison to the companies that were included in the S&P 500 as of May 31, 2024, using the 20-trading day average stock price and assuming that dividends paid during the performance period were reinvested in the applicable company's stock. Because Relative TSR was below the threshold performance goal, the People & Planet modifier was not applicable. Therefore, as illustrated below, the total payout for the fiscal 2022 – 2024 PSU awards was 0% for each of the NEOs. +2024 PROXY STATEMENT 36 +FISCAL 2022 – 2024 PERFORMANCE RESULTS +FINANCIAL PERFORMANCE METRIC +% PAYOUT +THRESHOLD +25% +TARGET +100% +MAXIMUM +200% +Relative TSR +EARNOUT: +0% +PEOPLE & PLANET MODIFIER +• The People & Planet modifier did not apply because Relative TSR performance was below the threshold performance level +MODIFIER: +0% +TOTAL PAYOUT +0% +OTHER COMPENSATION +PROFIT SHARING AND RETIREMENT PLANS +We maintain a U.S. tax qualified retirement savings plan—the 401(k) Plan—under which all eligible U.S. employees, including the Named Executive Officers, are able to make pre-tax and after-tax contributions from their cash compensation. We make annual matching contributions for all participants equal to 100% of their pre-tax contributions up to 5% of their total eligible compensation. +The Internal Revenue Code limits the amount of compensation that can be deferred under the 401(k) Plan, and also limits the amount of salary and annual cash incentive award ($330,000 for fiscal 2024) that may be taken into account when determining contributions under that plan. Accordingly, we provide our Named Executive Officers and other highly compensated employees with the opportunity to defer their compensation, including amounts in excess of the tax law limit, under our nonqualified Deferred Compensation Plan. We do not match deferrals to the Deferred Compensation Plan. Balances in the Deferred Compensation Plan, including the balances of the Named Executive Officers, are unsecured and at-risk, meaning that the balances may be forfeited in the event of the Company's financial distress, such as bankruptcy. +Fiscal 2024 matching contributions to the Named Executive Officers under the 401(k) Plan are included in the All Other Compensation column in the Summary Compensation Table on page 42. +EMPLOYEE STOCK PURCHASE PLAN +Our Employee Stock Purchase Plan allows eligible employees in the United States and in many countries outside of the United States, including the Named Executive Officers, to purchase Class B Stock through payroll deductions at a 15% discount to the market price on the first or last trading day of the six-month purchase period, depending on which day the stock price was lower. +37 NIKE, INC. +PERQUISITES AND OTHER BENEFITS +Our executive compensation program includes limited perquisites and other personal benefits for our Named Executive Officers, which generally consist of home security and financial planning services. Given the nature of our business, from time to time certain Company employees, including certain executive officers, may also receive Company product, event tickets, or travel benefits that are not generally offered to all employees. +In addition, Mr. Donahoe and Mr. Parker are entitled to limited personal use of Company aircraft, primarily pursuant to time sharing agreements, which is intended to increase the security, availability, and productivity of these individuals. They are also entitled to enhanced charitable gift matching under our Employee Matching Gift Program—a program designed to encourage and support employees in giving back to our communities and creating positive change—with an executive contribution limit of $1,000,000 per calendar year and Company matching on a 4:1 basis. Our Employee Matching Gift Program does not match employee contributions that benefit the employee, including contributions to the employee's personal or family foundation or to a non-profit organization that is managed or led by, or provides compensation or assistance to, the employee or a member of their family. Because the Employee Matching Gift Program is managed on a calendar year basis while the Summary Compensation Table reports compensation for the fiscal year, the charitable matching amounts reported in the Summary Compensation Table may exceed $4,000,000 (up to a maximum of $8,000,000) due to the timing of charitable contributions. For fiscal 2024, Mr. Donahoe and Mr. Parker each donated to a range of charitable causes. +We do not provide any tax gross-ups on perquisites to our executive officers. Greater detail about the perquisites and personal benefits provided to our Named Executive Officers in fiscal 2024 is provided in the footnotes to the Summary Compensation Table on page 42. +NON-COMPETITION AGREEMENTS +In exchange for non-competition agreements from each of our Named Executive Officers, we have agreed to provide monthly payments during the non-compete period following termination of employment, as described in the section below titled "Executive Compensation Tables—Potential Payments upon Termination or Change-in-Control". We believe that it is appropriate to compensate individuals to refrain from working with competitors following termination, and that compensation enhances the enforceability of such agreements. +LETTER AGREEMENTS +We do not have employment contracts with any of our executive officers, other than letter agreements with Messrs. Donahoe and Parker that provide for the enhanced charitable matching benefit described in the section above titled "Perquisites and Other Benefits". +2024 PROXY STATEMENT 38 +OUR COMPENSATION PROCESS +COMPENSATION COMMITTEE +The Compensation Committee oversees our executive compensation program, including determining the value and composition of the compensation package for each of our executive officers and setting annual performance goals for the CEO. In addition to any special actions the Compensation Committee may take throughout the year, the committee generally acts with respect to compensation for our Named Executive Officers during the fiscal year as follows: +PEER GROUP +Given the competitive market for top-tier talent, the Compensation Committee uses a peer group (consisting of companies with similar revenue size, market capitalization, brand value, products, or markets, or with which we compete for executive talent, or which are aligned with our evolving business and talent strategies) to provide a reference for assessing executive compensation levels and practices. Based on the criteria, the following peer group was considered for purposes of setting fiscal 2024 executive compensation: +American Express Company Microsoft Corporation Salesforce, Inc. +Best Buy Company, Inc. Mondelez International, Inc. Starbucks Corporation +The Coca-Cola Company Netflix, Inc. Target Corporation +Kimberly-Clark Corporation Oracle Corporation TJX Companies +Lowe's Companies, Inc. Pepsico, Inc. Walmart Inc. +McDonald's Corporation Procter & Gamble Company The Walt Disney Company +In November 2023, the Compensation Committee further refined the peer group for purposes of setting fiscal 2025 executive compensation to include Cisco Systems, Inc. and to remove American Express Company and Oracle Corporation. +In addition to considering our peer group, the Compensation Committee also uses market survey data from third parties, including Aon, Willis Towers Watson, and Mercer, about a broader range of companies. The Compensation Committee generally does not set executive compensation at or near any particular percentile of peer group, or market, compensation. Instead, the committee considers compensation to be competitive if it is generally within a reasonable range of market median. +39 NIKE, INC. +ROLE OF MANAGEMENT +The CEO makes compensation recommendations to, and participates in discussions with, the Compensation Committee regarding the compensation of each executive officer other than himself. In addition, our human resources staff regularly provides data, analysis, and recommendations to the committee regarding executive compensation. +The Compensation Committee meets regularly in executive session without the CEO or other management present to discuss our executive compensation program. Such executive sessions include discussions about, among other topics, the CEO's performance and compensation and the design and operation of our executive compensation plans. +ROLE OF COMPENSATION CONSULTANT +The Compensation Committee has the authority, in its sole discretion, to retain compensation consultants to assist the committee in overseeing our executive compensation program. The Compensation Committee chose not to retain any such consultants in fiscal 2024. However, in connection with the committee's analysis and decision-making regarding the fiscal 2024 executive compensation program, the Compensation Committee supplemented peer group data with information from surveys and reports containing competitive market data from Aon, Willis Towers Watson, and Mercer, which are obtained by our human resources staff. +OTHER COMPENSATION PRACTICES +STOCK OWNERSHIP GUIDELINES +We maintain stock ownership guidelines for executive officers that are designed to further align the interests of our executive officers with those of our shareholders. Under the guidelines, each executive officer is required to hold NIKE stock valued at the following multiple of their annual base salary: +POSITION OWNERSHIP LEVEL +Chief Executive Officer +8X Base Salary +Other Executive Officers (including NEOs) +3X Base Salary +New executive officers are required to attain these ownership levels within five years of their appointment. For purposes of calculating ownership, we exclude unvested PSUs as well as all stock options (whether vested or unvested). As of May 31, 2024, the CEO and each of our other executive officers, including each other Named Executive Officer, has met or is on track to meet the applicable ownership guideline within the requisite period. +HEDGING AND PLEDGING +The Company's Blackout and Pre-clearance Policy (which supplements our Insider Trading Policy) prohibits directors, executive officers, and other designated insiders (based on seniority and department) from engaging in transactions involving hedging, monetization, or short sales of NIKE stock, including zero-cost collars and forward sale contracts. The policy also requires directors and executive officers, along with members of their families and households, to obtain pre-approval from the Company's Chairman or CEO before pledging NIKE stock. Before any such approval is granted, the Company's Clearance Director considers the size of the pledge relative to the individual's other holdings, both direct and indirect, and NIKE's shares outstanding; the risk of foreclosure given the nature of the associated transaction; protections against the appearance of insider trading, including prohibitions on sales during trading blackouts; and the ability to timely report sales on Form 4. +CHANGE-IN-CONTROL PROVISIONS +PSP awards do not accelerate upon a change in control. PSU, stock option, and RSU awards are subject only to "double-trigger" accelerated change-in-control vesting (with PSUs vesting at 100% of target), meaning that vesting is accelerated only if there is a change in control of the Company, and within the following two years, either the acquiring entity fails to assume the awards or the employee's employment is terminated by the acquirer without cause or by the employee for good reason. This double-trigger acceleration is intended to encourage executive retention through a period of uncertainty. The Compensation Committee believes that this approach will enhance shareholder value in the context of an acquisition and align executives' interests with those of investors. The effect of change-in-control transactions on stock-based awards is described further in the section below titled "Executive Compensation Tables—Potential Payments Upon Termination or Change-in-Control". +2024 PROXY STATEMENT 40 +CLAWBACK +In December 2023, the Company adopted a revised clawback policy regarding accounting restatements in connection with the SEC's adoption of new rules to implement Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and corresponding NYSE listing standards. The clawback policy generally requires recoupment of erroneously awarded incentive-based compensation (including any compensation granted, earned, or vested wholly or in part upon the attainment of a financial reporting measure) received by current and former executive officers (as defined in Rule 10D-1 of the Exchange Act), including our NEOs, during the three completed fiscal years immediately preceding the date that the Company is required to prepare an accounting restatement due to the Company's material noncompliance with any financial reporting requirement under U.S. federal securities laws. +In addition to the clawback policy, the Company maintains clawback provisions in the PSP and all of our equity award agreements (including all time-vesting equity awards) that generally permit recoupment in the event of the recipient's theft, embezzlement, fraud, breach of confidentiality or other applicable restrictive covenants, or material breach of contract. +RISK ASSESSMENT +At the Compensation Committee's request, management prepared an assessment of potential risks associated with the Company's fiscal 2024 compensation programs, including any risk that would be reasonably likely to have a material adverse effect on the Company. This included an assessment of risks associated with each element of executive compensation. The assessment considered certain design features of the compensation program that reduce the likelihood of excessive risk taking, such as reasonable performance targets, capped incentive compensation payouts, a balance of short- and long-term incentives, a balance of cash- and stock-based incentives, vesting of awards over time, and the potential for clawback of incentive compensation. In addition, for stock-based compensation, we have adopted stock ownership guidelines, provided for limited accelerated vesting of PSUs, stock options, and RSUs upon termination of employment, and provided for only double-trigger accelerated vesting of stock-based awards upon a change in control. The Compensation Committee reviewed the risk assessment and concluded that our compensation programs and practices do not create risks that are reasonably likely to have a material adverse effect on the Company. +TAX DEDUCTIBILITY OF EXECUTIVE COMPENSATION +Section 162(m) of the Internal Revenue Code generally places a $1 million limit on the amount of compensation a company can deduct in any one year for "covered employees". While the Compensation Committee seeks to preserve tax deductibility in developing and implementing our executive compensation program, the committee also believes that it is important to maintain flexibility in administering compensation programs in a manner designed to promote varying corporate goals and the interests of our shareholders. Accordingly, we have not adopted a policy that all compensation must qualify as deductible for tax purposes and retain the ability to provide compensation that may not qualify as deductible under Section 162(m). +COMPENSATION COMMITTEE REPORT +The Compensation Committee of the Board of Directors has reviewed and discussed with management the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K. Based on the review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement. +Members of the Compensation Committee: +• Timothy Cook, Chair +• Cathleen Benko +• Mónica Gil +41 NIKE, INC. +EXECUTIVE COMPENSATION TABLES +SUMMARY COMPENSATION TABLE +The following table sets forth information concerning the total compensation of each Named Executive Officer for fiscal years 2024, 2023, and 2022. +NAME AND PRINCIPAL +POSITION YEAR +SALARY (1) +($) +BONUS (2) +($) +STOCK +AWARDS (3) +($) +OPTION +AWARDS (4) +($) +NON-EQUITY +INCENTIVE PLAN +COMPENSATION (5) +($) +ALL OTHER +COMPENSATION (6) +($) +TOTAL +($) +John Donahoe II +President and Chief Executive Officer +2024 1,557,692 — 12,400,986 6,836,722 1,950,000 6,439,301 29,184,701 +2023 1,500,000 — 13,220,455 7,247,371 6,770,000 4,052,059 32,789,885 +2022 1,500,000 — 12,061,812 6,782,995 4,450,000 4,043,253 28,838,060 +Matthew Friend +Executive Vice President and Chief Financial Officer +2024 1,298,077 — 5,221,473 2,878,629 975,000 17,331 10,390,510 +2023 1,221,154 — 4,080,045 2,415,790 2,425,000 15,250 10,157,239 +2022 1,056,731 1,056,000 2,783,949 1,938,030 890,000 14,500 7,739,210 +Heidi O'Neill +President, Consumer, Product & Brand +2024 1,298,077 — 5,221,473 2,878,629 975,000 26,208 10,399,387 +2023 1,250,000 — 4,080,045 2,415,790 2,425,000 15,250 10,186,085 +2022 1,221,154 1,200,000 2,990,322 2,261,028 890,000 26,618 8,589,122 +Mark Parker +Executive Chairman +2024 1,038,461 — — 2,056,159 — 4,969,977 8,064,597 +2023 1,000,000 — — 2,300,765 — 6,638,047 9,938,812 +2022 1,134,615 — — 2,153,362 4,450,000 4,096,391 11,834,368 +Craig Williams +President, Geographies & Marketplace +2024 1,272,115 — 5,221,473 2,878,629 975,000 16,500 10,363,717 +(1) Salary amounts for fiscal 2024 reflect 27 bi-weekly pay periods, compared with 26 bi-weekly pay periods for fiscal 2023 and fiscal 2022. +(2) For fiscal 2022, represents annual cash incentive awards under our PSP which were paid at 0% for Mr. Donahoe and 80% for Mr. Friend and Ms. O'Neill. Mr. Parker did not receive a fiscal 2022 PSP award. +(3) Represents the grant date fair value of RSU and PSU awards, in each case computed in accordance with accounting guidance applicable to stock-based compensation. For RSUs, the grant date fair value was computed based on the closing market price of our Class B Stock on the grant date. For PSUs, the grant date fair value was computed using a Monte Carlo simulation based on the probable outcome of the performance condition as of the grant date. The assumptions made in determining the grant date fair value of PSUs under applicable accounting guidance are disclosed in footnote 5 of "Grants of Plan-Based Awards in Fiscal 2024". For fiscal 2024, the grant date fair value of the PSU awards was: $9,515,014 for Mr. Donahoe and $4,006,367 for Messrs. Friend and Williams and Ms. O'Neill. Assuming that the maximum level of performance conditions is achieved, the PSU award values would be: $19,239,303 for Mr. Donahoe and $8,100,851 for Messrs. Friend and Williams and Ms. O'Neill. Mr. Parker's long-term incentive award for each fiscal year was delivered 100% in stock options. +(4) Represents the grant date fair value of options granted in the applicable fiscal year computed in accordance with accounting guidance applicable to stock-based compensation. The grant date fair value of the options was estimated using the Black-Scholes option pricing model. The assumptions made in determining the grant date fair value of options under applicable accounting guidance are disclosed in Note 9 of Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended May 31, 2024. +(5) Non-Equity Incentive Plan Compensation consists of the following: +NAME Year +ANNUAL INCENTIVE COMPENSATION (a) +($) +LONG-TERM INCENTIVE COMPENSATION (b) +($) +TOTAL +($) +John Donahoe II 2024 1,950,000 — 1,950,000 +2023 3,570,000 3,200,000 6,770,000 +2022 — 4,450,000 4,450,000 +Matthew Friend 2024 975,000 — 975,000 +2023 1,785,000 640,000 2,425,000 +2022 — 890,000 890,000 +Heidi O'Neill 2024 975,000 — 975,000 +2023 1,785,000 640,000 2,425,000 +2022 — 890,000 890,000 +Mark Parker 2024 — — — +2023 — — — +2022 — 4,450,000 4,450,000 +Craig Williams 2024 975,000 — 975,000 +2024 PROXY STATEMENT 42 +(a) Amounts shown were earned for performance in the applicable fiscal year under our PSP. +(b) Amounts shown were earned for performance during the three-year period ending with the applicable fiscal year under the NIKE, Inc. Amended and Restated Long-term Incentive Plan ("LTIP"). Beginning with the fiscal 2022 – 2024 performance period, LTIP awards were replaced by PSUs. +(6) For fiscal 2024, includes Company matching contributions to the 401(k) Plan in the amount of $16,500 for each of the Named Executive Officers. The amount for Mr. Donahoe also includes $6,280,000 in charitable matching contributions made by the Company, $123,026 in aggregate incremental cost to the Company for personal use of the Company's aircraft, as well as the value of security services and Company-related merchandise. The amount for Mr. Parker also includes $4,760,000 in charitable matching contributions made by the Company, $160,052 in aggregate incremental cost to the Company for personal use of the Company' aircraft, $33,400 in security services, as well as the value of Company-related merchandise. The aggregate incremental cost for personal use of the Company's aircraft is determined based on the variable operating cost to the Company, including the cost of fuel, maintenance, crew travel expenses, landing fees, parking fees, in-flight food and beverage, and other smaller variable costs associated with each flight. The amounts for Mr. Donahoe and Mr. Parker exclude the aggregate incremental cost to the Company for personal use of the Company's aircraft for which Mr. Donahoe or Mr. Parker, as applicable, reimbursed the Company in accordance with a time sharing agreement and as allowed under Federal Aviation Regulation 91.501(c) and (d). +43 NIKE, INC. +GRANTS OF PLAN-BASED AWARDS IN FISCAL 2024 +The following table sets forth information concerning the performance-based annual cash incentive opportunities and PSUs, RSUs, and stock options granted to the Named Executive Officers in fiscal 2024. +ESTIMATED POSSIBLE PAYOUTS UNDER +NON-EQUITY INCENTIVE PLAN AWARDS (1) +ESTIMATED FUTURE PAYOUTS UNDER +EQUITY INCENTIVE PLAN AWARDS (2) +ALL OTHER +STOCK AWARDS: +NUMBER OF +SHARES OF +STOCK OR +UNITS (3) +ALL OTHER OPTION +AWARDS: NUMBER +OF SECURITIES +UNDERLYING +OPTIONS (4) +EXERCISE +OR BASE +PRICE OF +OPTION +AWARDS +GRANT DATE +FAIR VALUE +OF STOCK +AND OPTION +AWARDS (5) +THRESHOLD TARGET MAXIMUM THRESHOLD TARGET MAXIMUM +NAME GRANT DATE APPROVAL DATE ($) ($) ($) (#) (#) (#) (#) (#) ($/SH) ($) +John Donahoe II 750,000 3,000,000 6,000,000 +8/1/2023 6/28/2023 21,983 87,931 175,862 9,515,014 +8/1/2023 6/28/2023 26,380 2,885,972 +8/1/2023 6/28/2023 196,514 109.40 6,836,722 +Matthew Friend 375,000 1,500,000 3,000,000 +8/1/2023 6/28/2023 9,256 37,024 74,048 4,006,367 +8/1/2023 6/28/2023 11,107 1,215,106 +8/1/2023 6/28/2023 82,743 109.40 2,878,629 +Heidi O'Neill 375,000 1,500,000 3,000,000 +8/1/2023 6/28/2023 9,256 37,024 74,048 4,006,367 +8/1/2023 6/28/2023 11,107 1,215,106 +8/1/2023 6/28/2023 82,743 109.40 2,878,629 +Mark Parker — — — +8/1/2023 6/28/2023 — — — — +8/1/2023 6/28/2023 — — +8/1/2023 6/28/2023 59,102 109.40 2,056,159 +Craig Williams 375,000 1,500,000 3,000,000 +8/1/2023 6/28/2023 9,256 37,024 74,048 4,006,367 +8/1/2023 6/28/2023 11,107 1,215,106 +8/1/2023 6/28/2023 82,743 109.40 2,878,629 +(1) These amounts represent the potential performance-based annual cash incentive awards payable for performance during fiscal 2024 under our PSP. Under this plan, the Compensation Committee approved target awards for fiscal 2024 based on a percentage of the executive's salary as follows: Mr. Donahoe, 200%; Mr. Friend, 120%; Ms. O'Neill, 120%; Mr. Parker, 0%; and Mr. Williams, 120%. Fiscal 2024 PSP awards were eligible to be earned between 0% and 200% of target based on Company performance on two equally-weighted metrics—Adjusted Revenue and Adjusted EBIT—during fiscal 2024. Actual award payouts earned in fiscal 2024 and paid in fiscal 2025 are shown in the Summary Compensation Table. +(2) These amounts represent grants of PSUs under the SIP which are eligible to be earned between 0% and 200% of target based on Relative TSR for fiscal 2024 – 2026, subject to a cap of 100% of target if Absolute TSR for the performance period is negative. If Relative TSR is at or above the threshold performance goal, the Compensation Committee may adjust the earnout upwards or downwards by up to 20 percentage points based on a holistic assessment of the Company's performance during the three-year performance period with respect to employee engagement and inclusion, representation of diverse individuals in leadership positions, and sustainability. Earned PSUs will vest in August 2026 and are generally subject to continued employment through the vesting date. Vesting will be accelerated in certain circumstances as described in the section below titled "Potential Payouts Upon Termination or Change-in-Control". The PSUs accumulate cash dividend equivalents that are paid only when, and to the extent, they vest. +(3) Amounts reported in this column represent grants of RSUs under the SIP which vest in three equal installments on the first three anniversaries of the grant date. Vesting will be accelerated in certain circumstances as described in the section below titled "Potential Payouts Upon Termination or Change-in-Control". The RSUs accumulate cash dividend equivalents that are only paid upon vesting. +(4) Amounts reported in this column represent stock options granted under the SIP which become exercisable in four equal installments on the first four anniversaries of the grant date. Options become exercisable in certain circumstances as described in the section below titled "Potential Payouts Upon Termination or Change-in-Control". Each option has a maximum term of 10 years, subject to earlier termination in the event of the optionee's termination of employment. +(5) For stock awards, represents the grant date fair value of (a) RSUs based on the closing market price of our Class B Stock on the grant date and (b) PSUs based on a value of $108.21 per share computed using a Monte Carlo simulation based on the probable outcome of the performance condition as of the grant date. The Monte Carlo simulation was performed using the remaining performance period of 2.83 years and assuming an expected volatility of 32.61% and risk-free interest rate of 4.50%. The expected volatility was based on an analysis of the historical volatility of the Class B Stock on the grant date for 2.83 years. The risk-free interest rate corresponding with the remaining performance period was calculated using the U.S. Treasury (constant maturity) risk-free rates in effect on the grant date for a 2- and 3-year period. For option awards, represents the grant date fair value of stock options granted based on a value of $34.79 per share, calculated using the Black-Scholes option pricing model. The assumptions made in determining option values are disclosed in Note 9 to Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended May 31, 2024. Stock and option award values were computed in accordance with accounting guidance applicable to stock-based compensation. +2024 PROXY STATEMENT 44 +OUTSTANDING EQUITY AWARDS AT MAY 31, 2024 +The following table sets forth information concerning outstanding stock options, PSUs, and RSUs held by the Named Executive Officers at May 31, 2024. +OPTION AWARDS STOCK AWARDS +NAME NUMBER OF +SECURITIES +UNDERLYING +UNEXERCISED +OPTIONS +EXERCISABLE +(#) +NUMBER OF +SECURITIES +UNDERLYING +UNEXERCISABLE +OPTIONS +(#) (1) +OPTION +EXERCISE +PRICE +($) OPTION +EXPIRATION +DATE +NUMBER OF SHARES OR UNITS OF STOCK THAT HAVE NOT VESTED +(#) (2) +MARKET VALUE OF SHARES OR UNITS OF STOCK THAT HAVE NOT VESTED +($) +EQUITY INCENTIVE PLAN AWARDS: NUMBER OF UNEARNED SHARES, UNITS OR OTHER RIGHTS THAT HAVE NOT VESTED +(#) (3) +EQUITY INCENTIVE PLAN AWARDS: MARKET OR PAYOUT VALUE OF UNEARNED SHARES, UNITS OR OTHER RIGHTS THAT HAVE NOT VESTED +($) +John Donahoe II 236,843 — 102.16 1/13/2030 +767,544 — 102.16 1/13/2030 +179,682 +59,893 (4) +97.61 8/1/2030 +76,420 +76,419 (5) +167.51 8/1/2031 +56,391 +169,173 (6) +114.30 8/1/2032 +— +196,514 (7) +109.40 8/1/2033 52,326 4,973,586 40,311 3,831,561 +Matthew Friend 23,000 — 57.87 7/15/2026 +30,000 — 59.10 7/20/2027 +35,000 — 77.54 8/1/2028 +36,095 — 83.12 8/1/2029 +57,898 +19,299 (4) +97.61 8/1/2030 +21,835 +21,834 (5) +167.51 8/1/2031 +18,797 +56,391 (6) +114.30 8/1/2032 +— +82,743 (7) +109.40 8/1/2033 37,301 3,545,460 13,896 1,320,815 +Heidi O'Neill 25,000 — 77.54 8/1/2028 +61,360 — 83.12 8/1/2029 +57,898 +19,299 (4) +97.61 8/1/2030 +25,474 +25,473 (5) +167.51 8/1/2031 +18,797 +56,391 (6) +114.30 8/1/2032 +— +82,743 (7) +109.40 8/1/2033 37,711 3,584,431 13,896 1,320,815 +Mark Parker 110,000 — 38.76 7/18/2024 +330,000 — 56.40 7/17/2025 +165,000 — 57.87 7/15/2026 +165,000 — 59.10 7/20/2027 +175,000 — 77.54 8/1/2028 +302,268 — 83.12 8/1/2029 +199,646 +66,548 (4) +97.61 8/1/2030 +24,261 +24,260 (5) +167.51 8/1/2031 +17,902 +53,706 (6) +114.30 8/1/2032 +— +59,102 (7) +109.40 8/1/2033 — — — — +Craig Williams 30,355 — 82.36 2/10/2029 +36,095 — 83.12 8/1/2029 +23,070 +7,690 (4) +97.61 8/1/2030 +15,710 +15,710 (5) +167.51 8/1/2031 +9,466 +28,398 (6) +114.30 8/1/2032 +— +82,743 (7) +109.40 8/1/2033 61,205 5,817,535 10,880 1,034,144 +(1) Stock options generally become exercisable in four equal installments on each of the first four anniversaries of the grant date. +45 NIKE, INC. +(2) Reflects RSUs that vest as described in the table below. PSUs for the fiscal 2022 – 2024 performance period that were scheduled to cliff vest on August 1, 2024 were earned at 0% based on three-year Relative TSR. +NAME FISCAL YEAR OF GRANT NUMBER OF UNVESTED UNITS VESTING SCHEDULE +John Donahoe II 2024 26,380 RSUs subject to three-year pro-rata vesting on 8/1/2024, 8/1/2025, and 8/1/2026 +2023 17,322 RSUs subject to three-year pro-rata vesting; 50% of the remaining units vest on 8/1/2024 and 50% vest on 8/1/2025 +2022 8,624 RSUs subject to three-year pro-rata vesting; 100% of the remaining units vest on 8/1/2024 +Matthew Friend 2024 11,107 RSUs subject to three-year pro-rata vesting on 8/1/2024, 8/1/2025, and 8/1/2026 +2023 8,661 RSUs subject to three-year pro-rata vesting; 50% of the remaining units vest on 8/1/2024 and 50% vest on 8/1/2025 +2022 2,464 RSUs subject to three-year pro-rata vesting; 100% of the remaining units vest on 8/1/2024 +2021 15,069 RSUs subject to four-year pro-rata vesting; 100% of the remaining units vested on 6/1/2024 +Heidi O'Neill 2024 11,107 RSUs subject to three-year pro-rata vesting on 8/1/2024, 8/1/2025, and 8/1/2026 +2023 8,661 RSUs subject to three-year pro-rata vesting; 50% of the remaining units vest on 8/1/2024 and 50% vest on 8/1/2025 +2022 2,874 RSUs subject to three-year pro-rata vesting; 100% of the remaining units vest on 8/1/2024 +2021 15,069 RSUs subject to four-year pro-rata vesting; 100% of the remaining units vested on 6/1/2024 +Craig Williams 2024 11,107 RSUs subject to three-year pro-rata vesting on 8/1/2024, 8/1/2025, and 8/1/2026 +2023 4,207 RSUs subject to three-year pro-rata vesting; 50% of the remaining units vest on 8/1/2024 and 50% vest on 8/1/2025 +2023 13,880 RSUs scheduled to vest in two equal tranches on 1/10/2024 and 7/10/2025; 100% of the remaining units vest on 7/10/2025 +2022 1,396 RSUs subject to three-year pro-rata vesting; 100% of the remaining units vest on 8/1/2024 +2021 30,615 RSUs scheduled to vest in two equal tranches on 7/10/2022 and 7/10/2024; 100% of the remaining units vested on 7/10/2024 +(3) Reflects PSUs that vest as described in the table below, assuming performance at the threshold level (25%). In each case, PSUs will be earned between 0% and 200% based on Relative TSR over the applicable three-year performance period and subject to the People & Planet modifier. +NAME FISCAL YEAR OF PERFORMANCE PERIOD NUMBER OF UNEARNED, UNVESTED UNITS VESTING SCHEDULE +John Donahoe II 2024 – 2026 21,983 Any earned units will cliff vest on 8/1/2026 +2023 – 2025 18,328 Any earned units will cliff vest on 8/1/2025 +Matthew Friend 2024 – 2026 9,256 Any earned units will cliff vest on 8/1/2026 +2023 – 2025 4,640 Any earned units will cliff vest on 8/1/2025 +Heidi O'Neill 2024 – 2026 9,256 Any earned units will cliff vest on 8/1/2026 +2023 – 2025 4,640 Any earned units will cliff vest on 8/1/2025 +Craig Williams 2024 – 2026 9,256 Any earned units will cliff vest on 8/1/2026 +2023 – 2025 1,624 Any earned units will cliff vest on 8/1/2025 +(4) 100% of these options will vest on August 1, 2024. +(5) 50% of these options will vest on August 1, 2024 and 50% will vest on August 1, 2025. +(6) 33.3% of these options will vest on August 1, 2024, 33.3% will vest on August 1, 2025, and 33.3% will vest on August 1, 2026. +(7) 25% of these options will vest on August 1, 2024, 25% will vest on August 1, 2025, 25% will vest on August 1, 2026, and 25% will vest on August 1, 2027. +2024 PROXY STATEMENT 46 +OPTION EXERCISES AND STOCK VESTED DURING FISCAL 2024 +The following table sets forth information concerning stock option exercises and vesting of RSUs during fiscal 2024 for each of the Named Executive Officers on an aggregated basis. +OPTION AWARDS STOCK AWARDS +NAME NUMBER OF +SHARES ACQUIRED +ON EXERCISE +(#) VALUE +REALIZED +ON EXERCISE +($) NUMBER OF +SHARES ACQUIRED +ON VESTING +(#) VALUE +REALIZED +ON VESTING +($) +John Donahoe II — — 29,590 3,237,146 +Matthew Friend — — 25,828 2,738,635 +Heidi O'Neill — — 26,239 2,783,598 +Mark Parker 330,000 21,727,750 — — +Craig Williams — — 18,748 1,972,887 +EQUITY COMPENSATION PLAN INFORMATION +The following table summarizes information regarding outstanding awards and shares available for future issuance under equity compensation plans approved by shareholders and equity compensation plans that were not approved by shareholders as of May 31, 2024. The table does not reflect issuances made during fiscal 2025. +NUMBER OF SECURITIES +TO BE ISSUED UPON +EXERCISE OF OUTSTANDING +OPTIONS, WARRANTS AND +RIGHTS +WEIGHTED- +AVERAGE EXERCISE +PRICE OF OUTSTANDING +OPTIONS, WARRANTS +AND RIGHTS (1) +NUMBER OF SECURITIES +REMAINING AVAILABLE FOR +FUTURE ISSUANCE UNDER +EQUITY COMPENSATION +PLANS (EXCLUDING SECURITIES +REFLECTED IN COLUMN (a)) +PLAN CATEGORY (a) (b) (c) +Equity compensation plans approved by shareholders 82,810,677 +(2) +$98.10 90,575,352 +(3) +Equity compensation plans not approved by shareholders — $0.00 2,576,605 +(4) +Total 82,810,677 $98.10 93,151,957 +(1) Weighted-average exercise prices do not reflect the shares that will be used upon the payment of outstanding awards of RSUs and PSUs. +(2) Consists of 82,810,677 shares subject to awards of options, RSUs, PSUs (based on performance at the target level of 100%), and stock appreciation rights outstanding under the SIP. +(3) Includes 80,002,503 shares available for future issuance under the SIP and 10,572,849 shares available for future issuance under the Employee Stock Purchase Plan. +(4) Consists of 2,576,605 shares available for future issuance under the Foreign Subsidiary Employee Stock Purchase Plan, pursuant to which shares are offered and sold to employees of selected non-U.S. subsidiaries of the Company on substantially the same terms as those offered to U.S. employees under the shareholder-approved Employee Stock Purchase Plan as described in the section above titled "Compensation Discussion and Analysis—Compensation of our Named Executive Officers—Other Compensation—Employee Stock Purchase Plan". +47 NIKE, INC. +NON-QUALIFIED DEFERRED COMPENSATION IN FISCAL 2024 +NAME PLAN +NAME +EXECUTIVE +CONTRIBUTIONS +IN FISCAL 2024 (1) +AGGREGATE EARNINGS +IN FISCAL 2024 AGGREGATE +WITHDRAWALS/ +DISTRIBUTIONS IN +FISCAL 2024 +AGGREGATE +BALANCE AT +MAY, 31 2024 (1) +John Donahoe II +DCP +— $174,747 — $973,287 +Matthew Friend +DCP +— $107,013 — $680,528 +Heidi O'Neill +DCP +$453,000 $796,756 — $5,877,155 +Mark Parker DCP $250,000 $3,885,900 — $32,527,216 +Craig Williams +DCP +$816,365 $98,500 — $1,084,448 +(1) All amounts reported in the Executive Contributions column are also included in amounts reported in the Summary Compensation Table. Of the amounts reported in the Aggregate Balance column, the following amounts have been reported in the Summary Compensation Tables in this proxy statement or in prior year proxy statements: Mr. Donahoe, $63,695; Mr. Friend, $9,503; Ms. O'Neill, $1,660,906; Mr. Parker, $22,435,929; and Mr. Williams, $816,365. +NON-QUALIFIED DEFERRED COMPENSATION PLANS +The Named Executive Officers are eligible to participate in our Deferred Compensation Plan (the "DCP"). Participants in the DCP may elect in advance to defer up to 75 percent of their annual base salary, and up to 100 percent of their bonus. +We may make annual profit sharing contributions to defined contribution retirement plans. The contributions are allocated among eligible employees based on a percentage of their total salary and bonus for the year. To the fullest extent permitted under Internal Revenue Code limitations, these contributions are made to employees' accounts under our qualified 401(k) Savings and Profit Sharing Plan. Contributions based on salary and bonus in excess of the tax law limit ($330,000 for fiscal 2024) are made as NIKE contributions under the DCP. +Amounts deferred under the DCP are credited to a participant's account under the DCP. Each participant may allocate his or her account among any combination of the investment options available under the DCP. Participants' accounts are adjusted to reflect the investment performance of the investment options selected by the participants. Participants can change the allocation of their account balances daily. The investment options available under the DCP consist of 18 mutual funds with a variety of investment objectives and five risk-based portfolios. The investment options had annual returns in fiscal 2024 ranging from -5% to 11%. Amounts credited to participants' accounts are invested by us in actual investments matching the investment options selected by the participants to ensure that we do not bear any investment risk related to participants' investment choices. +The portion of a participant's account attributable to elective deferrals, including investment returns, is fully vested at all times. The portion of a participant's account attributable to NIKE contributions, including investment returns, is fully vested after the participant has been employed by us for five years. All of the Named Executive Officers are fully vested in their NIKE contributions. +Each time they elect to defer compensation, participants make an election regarding distribution of the compensation deferred under the election (as adjusted to reflect investment performance). A participant may elect for distribution to be made in a lump sum at the beginning of a predetermined year while the participant is still employed or in service (but no sooner than the fourth year after the year in which the distribution election is submitted). Alternatively, a participant may elect for distribution to be made in a lump sum or in quarterly installments over five, ten or fifteen years after termination of employment or service. Participants have limited rights to change their distribution elections. Participants may make a hardship withdrawal under certain circumstances. Subject to certain limitations, a participant may also at any time request to withdraw amounts from his or her account balance that were vested as of December 31, 2004 (and any subsequent investment returns on such amount). If such request is approved, the participant may withdraw 90% of the amount requested, and the remaining 10% will be permanently forfeited. +2024 PROXY STATEMENT 48 +POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE-IN-CONTROL +CHANGE-IN-CONTROL COMPENSATION — ACCELERATION OF EQUITY AWARDS +All unvested stock option, RSU, and PSU awards are subject to accelerated vesting upon the occurrence of two events (a "double-trigger"): there is a "change-in-control"; and the Named Executive Officer's employment is terminated by us without "cause" or by the Named Executive Officer for "good reason", in each case between the change-in-control (or shareholder approval of the change-in-control, if earlier) and the second anniversary of the change-in-control. Stock options will be exercisable for four years following termination of employment, but not beyond each option's original 10-year term. PSUs will vest at 100% of target. Accelerated vesting of stock options, RSUs, and PSUs will also occur if we are acquired and the acquiring company does not assume the outstanding options, RSUs, or PSUs. For purposes of our stock awards, "change-in-control" is generally defined to include: +• the acquisition by any person of 50% or more of our outstanding Class A Stock or, if the Class A Stock no longer elects a majority of directors, the acquisition by any person of 30% or more of our total outstanding Common Stock; +• the nomination (and subsequent election) in a two-year period of a majority of our directors by persons other than the incumbent directors; +• a sale of all or substantially all of our assets; and +• an acquisition of NIKE through a merger, consolidation, or share exchange. +For purposes of our equity awards in connection with a change-in-control, "cause" generally includes willful and continued failure to substantially perform assigned duties and willful engagement in illegal conduct materially injurious to us, and "good reason" generally includes a material diminution in position or duties, a salary reduction or material reduction in other benefits, and a home office relocation of over 50 miles. +The following table shows the estimated benefits that would have been received by the Named Executive Officers if double-trigger accelerated vesting had occurred on May 31, 2024, when the closing price of our Class B Stock was $95.05 per share. +NAME +STOCK AWARD +ACCELERATION (1) +STOCK OPTION +ACCELERATION (2) +TOTAL +John Donahoe II $23,227,654 — $23,227,654 +Matthew Friend $9,414,321 — $9,414,321 +Heidi O'Neill $9,453,292 — $9,453,292 +Mark Parker — — — +Craig Williams $10,364,062 — $10,364,062 +(1) Information regarding unvested RSUs and PSUs held by each Named Executive Officer is set forth in the Outstanding Equity Awards table above. The amounts in the table above represent the number of unvested RSUs and PSUs (at 100% of target) multiplied by the closing price of our Class B Stock on May 31, 2024. +(2) Information regarding outstanding unvested stock options held by each Named Executive Officer is set forth in the Outstanding Equity Awards table above. No amounts are shown in the table above because those unvested stock options are all underwater at the per share closing price of our Class B Stock on May 31, 2024. +BENEFITS TRIGGERED ON CERTAIN EMPLOYMENT TERMINATIONS +STOCK OPTION ACCELERATION AND EXTENSION +As of May 31, 2024, each Named Executive Officer held stock options as listed in the Outstanding Equity Awards table above. Under the terms of the stock options held by each Named Executive Officer, upon the death or disability of the holder (or with respect to Mr. Donahoe's performance-based stock options, his termination without "cause"), all unvested options will vest and will be exercisable for four years following termination of employment, but not beyond each option's original 10-year term. If death or disability of a Named Executive Officer had occurred on May 31, 2024, the aggregate value of those options is as set forth in the "Stock Option Acceleration" column of the Change-in-Control Compensation – Acceleration of Equity Awards table above. +Under the terms of the stock options held by each Named Executive Officer that were granted after fiscal 2020, upon a termination of employment due to a "divestiture" or "reduction in force" that occurs at least six months following the grant date, and subject to the holder signing a general waiver and release of claims, options that are scheduled to vest within one year following the termination will vest and all vested options will be exercisable for one year following termination of employment, but not beyond each option's original 10-year term. The value of the unvested stock options held by each Named Executive Officer as of May 31, 2024 that would have become vested if a termination due to a "divestiture" or "reduction in force" had occurred on that date is $0 for each Named Executive Officer. +49 NIKE, INC. +Under the terms of the stock options held by the Named Executive Officers, options that have been outstanding for at least one year will be subject to continued vesting if the holder retires after reaching age 55 with at least 5 years of service (or accelerated vesting if the holder retires after reaching age 60 with at least 5 years of service), and vested options will be exercisable for four years following termination of employment, but not beyond each option's original 10-year term. The value of the unvested stock options held by each Named Executive Officer as of May 31, 2024 that would have continued to vest (or received accelerated vesting) if the NEO had retired on that date is $0 for each Named Executive Officer. Mr. Friend is not eligible for retirement vesting because he has not reached age 55. +STOCK AWARD ACCELERATION +As of May 31, 2024, the Named Executive Officers held unvested RSUs and PSUs as set forth in the Outstanding Equity Awards table above. Under the terms of their award agreements, all unvested RSUs (excluding a transition award granted to Mr. Williams) and PSUs will immediately vest upon the death or disability of the holder, with PSUs vesting at 100% of target. The value of the unvested RSUs and PSUs held by each Named Executive Officer as of May 31, 2024 that would have become vested if death or disability had occurred on that date is as set forth in the "Stock Award Acceleration" column of the Change-in-Control Compensation — Acceleration of Equity Awards table above. +Under the terms of the RSUs that were granted to the Named Executive Officers after fiscal 2020 (excluding stock-based transition awards granted to Messrs. Friend and Williams and Ms. O'Neill) and all PSUs held by the Named Executive Officers, upon a termination of employment due to a "divestiture" or "reduction in force" that occurs at least six months following the grant date, and subject to the holder signing a general waiver and release of claims, RSUs and PSUs that are scheduled to vest within one year following the termination will vest, with PSUs vesting at 100% of target. The value of the unvested RSUs and PSUs held by each Named Executive Officer as of May 31, 2024 that would have become vested if a termination due to a "divestiture" or "reduction in force" had occurred on that date is $5,406,729 for Mr. Donahoe, $1,583,438 for Mr. Friend, $1,622,409 for Ms. O’Neill, $0 for Mr. Parker, and $1,094,596 for Mr. Williams. +PAYMENTS UNDER NONCOMPETITION AGREEMENTS +We have a noncompetition agreement with Mr. Donahoe that extends for 18 months following the termination of his employment with us and a noncompetition agreement with Mr. Parker that extends for two years following the termination of his employment with us. Under these agreements, if Mr. Donahoe's employment is terminated by us without "cause" (as defined in his agreement), or if Mr. Parker's employment is terminated by us, we will make monthly payments to the executive during the noncompetition period in an amount equal to one-twelfth of his then current annual salary and target PSP award ("Annual NIKE Income"). The agreements provide further that if the executive voluntarily resigns, we will make monthly payments to him during the noncompetition period in an amount equal to one-twenty-fourth of his then current Annual NIKE Income. However, commencement of the above-described monthly payments will be delayed until after the six-month period following the executive's separation from service, and all payments that he would otherwise have received during that period will be paid in a lump sum promptly following the end of the period, together with interest at the prime rate. If employment is terminated without "cause" (as defined in the applicable agreement), the parties may mutually agree to waive the covenant not to compete, and if employment is terminated for "cause", we may unilaterally waive the covenant. If the covenant is waived, we will not be required to make the payments described above for the months as to which the waiver applies. Assuming that Mr. Donahoe's employment had been terminated on May 31, 2024 and the covenant was not waived, during the 18-month period ending November 30, 2025 we would have been required to pay Mr. Donahoe $375,000 per month if the termination was by us without "cause", or $187,500 per month if he had voluntarily resigned. Assuming that Mr. Parker's employment had been terminated on May 31, 2024 and the covenant was not waived, during the 24-month period ending May 31, 2026 we would have been required to pay Mr. Parker $83,333 per month if the termination was by us, or $41,667 per month if he had voluntarily resigned. +We have noncompetition agreements with each of the other Named Executive Officers on generally the same terms as Mr. Donahoe, except that the noncompetition period is one year, we may unilaterally waive the covenant in all cases (including a termination without "cause"), the monthly payments are one-twelfth or one-twenty-fourth of the executive's then current annual salary (instead of their Annual NIKE Income), and payments may commence on termination. Assuming that the employment of each of these Named Executive Officers had been terminated by us without "cause" on May 31, 2024 and the covenants were not waived, we would have been required to pay $104,167 to each of Messrs. Friend and Williams and Ms. O'Neill on a monthly basis for the 12-month period ending May 31, 2025. Assuming that each of these Named Executive Officers had voluntarily resigned on May 31, 2024 and the covenants were not waived, we would have been required to pay $52,083 to each of Messrs. Friend and Williams and Ms. O'Neill on a monthly basis for the 12-month period ending May 31, 2025. +CEO PAY RATIO +NIKE's pay and benefits are designed to be competitive and equitable, meet the diverse needs of our global teammates, and reinforce our values. We pay for performance and impact by linking incentive pay to Company performance and seek to invest in positive experiences that have the greatest impact on the engagement and well-being of our employees. The executive +2024 PROXY STATEMENT 50 +compensation program is highly incentive-based and weighted towards long-term awards to emphasize long-term performance and support retention. Our executive compensation program is designed to attract and retain top-tier talent in a competitive market and to "pay for performance" in order to drive business results and maximize shareholder value. +For fiscal 2024, our last completed fiscal year: +• The employee identified at the median of all NIKE employees (other than our CEO) was a retail store employee in Canada; +• The annual total compensation of the median employee was $38,462; +• The annual total compensation of our CEO, Mr. Donahoe, was $29,184,701; and +• The estimated ratio of the annual total compensation of our CEO to the median annual total compensation of all other NIKE employees was 759 to 1. +This pay ratio is a reasonable estimate calculated in a manner consistent with SEC rules based on the methodology described below. The SEC rules for identifying the median compensated employee and calculating the pay ratio allow companies to adopt a variety of methodologies, apply certain exclusions, and make reasonable estimates and assumptions that reflect their compensation practices. As such, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies may utilize different methodologies, exclusions, estimates, and assumptions in calculating their own pay ratios. +METHODOLOGY +For purposes of calculating this pay ratio, we used the same median employee that was identified in fiscal 2022, as we believe there has been no change in our employee population, our compensation arrangements, or our median employee's circumstances that would significantly affect our pay ratio disclosure. The determination of the median employee was made in fiscal 2022 using the methodology described below, and the median employee's fiscal 2024 annual total compensation was calculated based on the Summary Compensation Table rules used for our Named Executive Officers (in accordance with Item 402(c)(2)(x) of Regulation S-K). +FISCAL 2022 METHODOLOGY +We use the first business day in May as the date to determine the median employee. The first business day in May for fiscal 2022 was May 2, 2022. At that time, we had approximately 77,239 employees globally. After applying the "de minimis exemption" under the SEC rules, which permits us to exclude non-U.S. employees accounting for 5% or less of our total employee population, we excluded the 3,656 employees in the jurisdictions identified below, and our employee population consisted of approximately 73,583 employees. +Slovenia 1 Denmark 68 Malaysia 206 +Sri Lanka 4 Uruguay 71 Thailand 206 +United Arab Emirates 5 Czech Republic 73 South Africa 207 +Croatia 6 Hungary 82 Vietnam 252 +Philippines 19 Indonesia 85 Israel 266 +Macau 42 Ireland 87 Poland 276 +New Zealand 44 Switzerland 113 Chile 285 +Norway 45 Greece 135 Hong Kong 323 +Sweden 55 Portugal 148 Turkey 340 +Brazil 61 Austria 151 +Of the 73,583 employees included in the CEO Pay Ratio calculation, approximately 75% were full-time, 49% were in retail jobs, and 51% were located in the United States. +To identify our median employee we calculated annual compensation for fiscal 2022 based on base salary or hourly wages, as applicable. For the majority of our employees, base salary or hourly wages comprise the majority of their compensation. To determine wages for hourly employees, we used each individual's pay rate and estimated scheduled hours in the applicable Human Resources system of record. +After determining the annual compensation for our employee population as described above, we identified a subset of approximately 100 individuals representing the potential median employee population. For this subset, we calculated each employee's annual total compensation in U.S. dollars for fiscal 2022 based on the Summary Compensation Table rules used for our Named Executive Officers (in accordance with Item 402(c)(2)(x) of Regulation S-K). Compensation for permanent employees hired during the fiscal year was annualized, compensation for non-U.S. employees was converted into U.S. dollars using the +51 NIKE, INC. +applicable currency conversion rate as reported in the Human Resources system of record for the median employee determination date, and the median employee was then selected from this subset. +PAY VERSUS PERFORMANCE +This disclosure has been prepared in accordance with Item 402(v) of Regulation S-K under the Exchange Act and does not necessarily reflect how the Compensation Committee evaluates compensation decisions in light of Company or individual performance. The Compensation Committee did not consider the pay versus performance disclosure below in making its compensation decisions for any of the fiscal years shown. For discussion of how the Compensation Committee seeks to align pay with performance when making compensation decisions, please review the section above titled "Compensation Discussion and Analysis". +PAY VERSUS PERFORMANCE TABLE +The following table sets forth compensation information of our CEO and our non-CEO NEOs and Company performance for the fiscal years listed below, in accordance with Item 402(v) of Regulation S-K. +YEAR +SUMMARY COMPENSATION TABLE TOTAL FOR CEO (1)(2) +COMPENSATION ACTUALLY PAID TO CEO (1)(3) +AVERAGE SUMMARY COMPENSATION TABLE TOTAL FOR NON-CEO NEOs (1)(4) +AVERAGE COMPENSATION ACTUALLY PAID TO NON-CEO NEOs (1)(5) +VALUE OF INITIAL FIXED $100 INVESTMENT BASED ON +NET INCOME (7) +(IN MILLIONS) +ADJUSTED REVENUE (8) +(IN MILLIONS) +TOTAL SHAREHOLDER RETURN (6) +PEER GROUP TOTAL SHAREHOLDER RETURN (6) +2024 $ 29,184,701 $ 13,158,408 $ 9,804,553 $ 5,812,537 $ 100.23 $ 124.83 $ 5,700 $ 51,656 +2023 $ 32,789,885 $ 29,391,856 $ 10,117,055 $ 7,259,680 $ 109.51 $ 116.84 $ 5,070 $ 52,593 +2022 $ 28,838,060 $ 19,617,425 $ 9,185,111 $ 7,482,733 $ 122.26 $ 120.40 $ 6,046 $ 47,406 +2021 $ 32,920,708 $ 77,444,844 $ 17,107,315 $ 28,986,814 $ 139.58 $ 141.30 $ 5,727 $ 43,769 +(1) John Donahoe II served as the Company's CEO for each fiscal year presented. For fiscal 2024, the individuals comprising the non-CEO NEOs were Matthew Friend, Heidi O’Neill, Mark Parker, and Craig Williams. For fiscal 2023, 2022, and 2021, the individuals comprising the non-CEO NEOs were Matthew Friend, Andrew Campion, Heidi O'Neill, and Mark Parker. +(2) Represents the amount of total compensation reported for our CEO, Mr. Donahoe, in the "Total" column of the "Summary Compensation Table" for each fiscal year presented. +(3) The dollar amounts reported in the "Compensation Actually Paid to CEO" column have been calculated in accordance with Item 402(v) of Regulation S-K and do not reflect compensation actually earned, realized, or received by the CEO. These amounts reflect the amount set forth in the "Total" column of the "Summary Compensation Table" for each fiscal year presented, with certain adjustments as described in the table below, in accordance with the requirements of Item 402(v) of Regulation S-K: +2024 +Summary Compensation Table ("SCT") total for CEO $ 29,184,701 +Deduction for amounts reported under the "Stock Awards" column in the SCT $ 12,400,986 +Deduction for amounts reported under the "Option Awards" column in the SCT $ 6,836,722 +Total deductions from SCT $ 19,237,708 +Year end fair value of equity awards $ 12,176,020 +Change in fair value of outstanding and unvested equity awards $( 9,749,162 ) +Change in fair value of equity awards granted in prior years that vested in the year $ 577,093 +Value of dividends on stock awards $ 207,464 +Total adjustments $ 3,211,415 +Compensation actually paid $ 13,158,408 +Equity valuations: Stock option grant date fair values are calculated based on the Black-Scholes option pricing model as of the grant date; adjustments have been made using stock option fair values as of each measurement date using the stock price as of the measurement date and updated assumptions (i.e., term, volatility, dividend yield, risk free rates) as of the measurement date. PSU grant date fair values are calculated using a Monte Carlo simulation based on the probable outcome of the performance condition as of the grant date; adjustments have been made using a revised Monte Carlo valuation as of fiscal year end. RSU grant date fair values are calculated using the stock price as of the grant date; adjustments have been made using the stock price as of fiscal year end and as of each vesting date. +(4) Represents the average of the amounts of total compensation reported for our non-CEO NEOs, as a group, in the "Total" column of the "Summary Compensation Table" for each fiscal year presented. +(5) The dollar amounts reported in the "Average Compensation Actually Paid to Non-CEO NEOs" column have been calculated in accordance with Item 402(v) of Regulation S-K and do not reflect compensation actually earned, realized, or received by the non-CEO NEOs. These amounts reflect the average of the amounts set forth in the "Total" column of the "Summary Compensation Table" for each fiscal year presented for the applicable non-CEO NEOs, with certain adjustments as described in the table below, in accordance with the requirements of Item 402(v) of Regulation S-K: +2024 PROXY STATEMENT 52 +2024 +Average Summary Compensation Table total for non-CEO NEOs $ 9,804,553 +Deduction for amounts reported under the "Stock Awards" column in the SCT $ 3,916,105 +Deduction for amounts reported under the "Option Awards" column in the SCT $ 2,673,012 +Total deductions from SCT $ 6,589,117 +Year end fair value of equity awards $ 4,243,697 +Change in fair value of outstanding and unvested equity awards $( 1,980,907 ) +Change in fair value of equity awards granted in prior years that vested in the year $ 246,437 +Value of dividends on stock awards $ 87,874 +Total adjustments $ 2,597,101 +Average compensation actually paid $ 5,812,537 +Equity valuations: Stock option grant date fair values are calculated based on the Black-Scholes option pricing model as of the grant date; adjustments have been made using stock option fair values as of each measurement date using the stock price as of the measurement date and updated assumptions (i.e., term, volatility, dividend yield, risk free rates) as of the measurement date. PSU grant date fair values are calculated using a Monte Carlo simulation based on the probable outcome of the performance condition as of the grant date; adjustments have been made using a revised Monte Carlo valuation as of fiscal year end. RSU grant date fair values are calculated using the stock price as of the grant date; adjustments have been made using the stock price as of fiscal year end and as of each vesting date. +(6) Peer group total shareholder return ("TSR") uses the Dow Jones U.S. Footwear Index, which the Company also uses in the stock performance graph required by Item 201(e) of Regulation S-K included in the Company's Annual Report on Form 10-K for fiscal 2024. These comparisons assume $100 (including reinvested dividends) was invested for the period starting May 31, 2020 through the end of the listed fiscal year in (a) the Company and (b) the Dow Jones U.S. Footwear Index, respectively. Historical stock performance is not necessarily indicative of future stock performance. +(7) Reflects net income calculated in accordance with generally accepted accounting principles ("GAAP") in the Company's Consolidated Statements of Income included in the Company's Annual Reports on Form 10-K for the applicable fiscal year. +(8) Represents the most important financial performance measure used to link Company performance to compensation actually paid ("CAP") to our CEO and non-CEO NEOs in fiscal 2024, as required pursuant to Item 402(v) of Regulation S-K. Adjusted Revenue is a non-GAAP financial measure calculated based on GAAP revenue excluding the impact of acquisitions and divestitures; changes in accounting principles; unanticipated restructurings; unanticipated exchange rate fluctuations; other extraordinary, unusual, or infrequently occurring items; and for fiscal 2021, the unanticipated impact from Nike Virtual Studios and RTFKT. We may determine a different financial performance measure to be the most important financial performance measure in future years. +DESCRIPTION OF RELATIONSHIPS +The following charts show graphically the relationships over the past four fiscal years of the CAP amounts for our CEO and non-CEO NEOs as compared to our cumulative TSR, peer group TSR, GAAP net income, and Adjusted Revenue as well as the relationship between TSR and peer group TSR. +CAP VERSUS COMPANY TSR & PEER GROUP TSR +53 NIKE, INC. +CAP VERSUS NET INCOME +CAP VERSUS ADJUSTED REVENUE +TABULAR LIST OF PERFORMANCE METRICS +The following table lists the three financial performance measures that, in the Company's assessment, represent the most important performance measures used to link CAP for our NEOs to Company performance for fiscal 2024. +Adjusted Revenue +Adjusted EBIT +Stock price +. +2024 PROXY STATEMENT 54 +AUDIT MATTERS +PROPOSAL 3 +RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM +The Audit & Finance Committee of the Board has sole authority to retain, with shareholder ratification, the Company's independent registered public accounting firm. The Audit & Finance Committee directly oversees the firm's work with respect to the annual audit of the Company's consolidated financial statements and internal control over financial reporting and approves all audit engagement fees and terms. At least annually, the Audit & Finance Committee evaluates the independent registered public accounting firm's qualifications, performance, and independence, including a review and evaluation of its lead partner. The Audit & Finance Committee is also involved in the selection of the new lead engagement partner following mandated rotation of the firm’s lead partner, and is responsible for considering the benefits of rotation of the Company’s independent registered public accounting firm. +The Audit & Finance Committee has appointed PricewaterhouseCoopers LLP ("PwC") to audit the Company's consolidated financial statements and internal control over financial reporting for the fiscal year ending May 31, 2025 and to render other professional services as required. +PwC has served as the Company's independent registered public accounting firm for many years. The Audit & Finance Committee and the Board believe that the continued retention of PwC as the independent registered public accounting firm is in the best interests of the Company and its shareholders. +Accordingly, the Audit & Finance Committee is submitting the appointment of PwC to shareholders for ratification. If the appointment is not ratified by our shareholders, the Audit & Finance Committee may reconsider whether it should appoint another independent registered public accounting firm. +Representatives of PwC will be present at the Annual Meeting, will have the opportunity to make a statement if they desire to do so, and are expected to be available to respond to questions. +Aggregate fees billed by the Company's independent registered public accounting firm, PwC, for audit services related to the most recent two fiscal years, and for other professional services incurred in the most recent two fiscal years, were as follows: +TYPE OF SERVICE +2024 2023 +Audit Fees (1) +$20.2 million $18.7 million +Audit-Related Fees (2) +0.5 million 0.3 million +Tax Fees (3) +0.1 million 0.2 million +All Other Fees (4) +1.4 million 0.8 million +Total +$22.2 million $20.0 million +(1) Comprises the audits of the Company's annual financial statements and internal controls over financial reporting, and reviews of the Company's quarterly financial statements, as well as statutory audits of Company subsidiaries, attest services, and consents to SEC filings. +(2) Comprises services including consultations regarding financial accounting and reporting. +(3) Comprises services for tax compliance, tax planning and tax advice. Tax compliance includes services for compliance related tax advice, as well as the preparation and review of both original and amended tax returns for the Company and its consolidated subsidiaries. Tax fees for fiscal 2024 primarily consist of fees related to tax planning. Tax fees for fiscal 2023 primarily consist of fees related to tax compliance. +(4) Comprises other miscellaneous services. +In accordance with the Sarbanes-Oxley Act of 2002, the Audit & Finance Committee established policies and procedures under which all audit and non-audit services performed by the Company's independent registered public accounting firm must be approved in advance by the Audit & Finance Committee. During fiscal 2024 and fiscal 2023, all such services performed by, and fees paid to, PwC were approved in advance. +BOARD RECOMMENDATION +The Board of Directors recommends that shareholders vote FOR ratification of the appointment of PricewaterhouseCoopers LLP as the Company's independent registered public accounting firm for the fiscal year ending May 31, 2025. +55 NIKE, INC. +REPORT OF THE AUDIT & FINANCE COMMITTEE +The Audit & Finance Committee has: +• Reviewed and discussed the audited financial statements with management. +• Discussed with the independent auditors the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board ("PCAOB") and the SEC. +• Received the written disclosures and the letter from the independent accountants required by applicable requirements of the PCAOB regarding the independent accountants' communications concerning independence, and has discussed with the independent accountant the independent accountant's independence. +• Based on the review and discussions above, recommended to the Board of Directors that the audited financial statements be included in the Company's Annual Report on Form 10-K for the last fiscal year for filing with the Securities and Exchange Commission. +Members of the Audit & Finance Committee: +• Alan Graf, Jr., Chair +• Maria Henry +• Peter Henry +• Robert Swan +2024 PROXY STATEMENT 56 +SHAREHOLDER PROPOSALS +PROPOSAL 4 +TO CONSIDER A SHAREHOLDER PROPOSAL REGARDING SUPPLEMENTAL PAY EQUITY DISCLOSURE +The following shareholder proposal will be voted on at the Annual Meeting only if properly presented by or on behalf of the shareholder proponent. Robert and Mary McInnes, c/o Arjuna Capital, 13 Elm Street, Manchester, MA 01944, beneficial owners of at least $25,000 of Class B Stock, submitted the Proposal. The Board of Directors recommends a vote AGAINST the proposal and asks shareholders to read through NIKE's response which follows the shareholder proposal. +Racial and Gender Pay Gaps +Whereas: Pay inequities persist across race and gender and pose substantial risk to companies and society at large. Black workers' hourly median earnings represent 81 percent of white wages. The median income for women working full time is 84 percent that of men. Intersecting race, Black women earn 73 cents and Latina women 65 cents. At the current rate, women will not reach pay equity until 2059, Black women until 2130, and Latina women until 2224. +Citigroup estimates closing minority and gender wage gaps 20 years ago could have generated 12 trillion dollars in additional income. PwC estimates closing the gender pay gap could boost Organization for Economic Cooperation and Development countries’ economies by 2 trillion dollars annually. +Actively managing pay equity is associated with improved representation, and diversity is linked to superior stock performance and return on equity. Minorities represent 41 percent of Nike’s workforce and 34 percent of leadership. Women represent 51 percent of Nike's workforce and 44 percent of leadership. 1 +Best practice pay equity reporting consists of two parts: +1. unadjusted median pay gaps, assessing equal opportunity to high paying roles, +2. statistically adjusted gaps, assessing pay between minorities and non-minorities, men and women, +performing similar roles. +Nike reports only statistically adjusted gaps but ignores unadjusted gaps, which address structural bias women and minorities face regarding job opportunity and pay, particularly when men hold most higher paying jobs. Median pay gaps show, quite literally, how Nike assigns value to employees through the roles they inhabit and pay they receive. Median gap reporting also provides a digestible and comparable data point to determine progress over time. +Racial and gender median pay gaps are accepted as the valid way of measuring pay inequity by the United States Census Bureau, Department of Labor, Organization for Economic Cooperation and Development, and International Labor Organization. The United Kingdom and Ireland mandate disclosure of median gender pay gaps. Nike discloses data for United Kingdom employees, reporting a median hourly gender pay gap of 5 percent and median bonus gap of 11 percent. 2 +Resolved: Shareholders request Nike report on median pay gaps across race and gender, including associated policy, reputational, competitive, and operational risks, and risks related to recruiting and retaining diverse talent. The report should be prepared at reasonable cost, omitting proprietary information, litigation strategy and legal compliance information. +Racial/gender pay gaps are defined as the difference between non-minority and minority/male and female median earnings expressed as a percentage of non-minority/male earnings (Wikipedia/OECD, respectively). +Supporting Statement: An annual report adequate for investors to assess performance could, with board discretion, integrate base, bonus and equity compensation to calculate: +• percentage median gender pay gap, globally and/or by country, where appropriate +• percentage median racial/minority/ethnicity pay gap, US and/or by country, where appropriate +1 https://about.nike.com/en/newsroom/releases/fy23-nike-inc-impact-report +2 https://web.archive.org/web/20230314160211/https://media.about.nike.com/files/82af3407-4e4b-4b03-b704-43f54970f481/FY21_UK-Gender-Pay-Gap.pdf +57 NIKE, INC. +OPPOSITION STATEMENT +The Board of Directors recommends that shareholders vote AGAINST this proposal because: +• The Company remains committed to the principle of equal pay for equal work and to enhancing the representation of diverse individuals at all levels of the Company; and +• The Company's current initiatives and public disclosures provide our shareholders with more relevant information about the Company’s commitment to pay equity and increasing diversity, equity, and inclusion at all levels of the Company than the requested measure. +We remain committed to maintaining pay equity, increasing diversity and inclusivity at all levels of the Company, and providing transparency. +The Company is committed to fostering a diverse, equitable, and inclusive culture by focusing on representation, education, development, and community. We believe that diversity is a key component of innovation and strive to build a creative and inclusive environment, where all voices are welcomed and heard. +As part of this commitment, we maintain robust policies and programs to advance our diversity, equity, and inclusion ("DEI") goals throughout the Company, including ensuring we continue to provide equitable and competitive pay, maintain a diverse breadth of talent in our pipeline, and develop and support our female and U.S. racial and ethnic minority employees. +For example, the Company annually discloses our pay equity ratio in our annual Impact Report, which reflects our commitment to deliver equal pay for equal work. The Company defines pay equity as equal compensation for employees across gender, race, and ethnicity, who undertake the same work at the same career level, location, experience, and performance. The Company has achieved and maintained 100% pay equity across all employee levels on an annual basis. This includes a pay equity ratio of 1:1 achievement for women and U.S. racial and ethnic minorities from 2020 through 2023. We also continuously monitor, review and enhance our internal pay infrastructure through our Competitive Pay Management initiative, pursuant to which the Company, with the assistance of an independent third party, annually reviews our compensation and promotion practices across all geographies, functions, and business units to ensure the Company continues to provide competitive and equitable pay. +Complementing our commitment to maintaining pay equity, we prioritize increasing gender and racial diversity at all levels of the Company, including among the Company's leadership. Our annual Impact Report includes specific representation-related targets, including achieving 50% representation of women in the global corporate workforce and 45% in leadership positions, as well as 35% representation of racial and ethnic minorities in our U.S. workforce and 30% representation of racial and ethnic minorities at the director level and above and above in the U.S., and it provides transparent workforce data that enables our shareholders to track the progress we have made over time in advancing diversity and achieving our targets. As of 2023, we have already achieved many diversity targets. For the second year in a row, the Company surpassed our target of achieving 50% representation of women in the global workforce, and women hold 44% of the positions at the VP level and above globally. Racial and ethnic minorities make up 41% of our U.S. workforce and hold 34% of positions at the director level and above in the U.S. +DEI principles are also integrated into the entire Talent agenda from the very beginning of our employees' experience, with measurement and leadership accountability throughout each employee's career. The Company provides DEI education/trainings, mentorship programs and resources to all employees, with the goal of supporting career growth, building diverse and inclusive teams, and fostering awareness and understanding. +While we have made strides in DEI, we recognize there is more to do. We have continued to expand our recruitment, development, and retention programs for diverse talent, including bolstering traditional executive and campus recruitment and strengthening our relationships with Historically Black Colleges and Universities ("HBCUs") and Hispanic-Serving Institutions ("HSIs"). The Company continues to work toward our 2025 target of investing $10 million over five years in HBCUs and HSIs in the form of scholarships and academic partnerships, investing $2.95 million in scholarship programs in 2023 alone. Innovative initiatives, such as the Serena Design Crew and Women in Nike programs, help to further build our pipeline of exceptional and diverse candidates, enhancing our commitment to DEI. +More information about our key initiatives and diversity metrics is available in the Diversity, Equity & Inclusion section of our website and in our annual Impact Report and EEO-1 Data Report, both of which are available through the Impact section of our website. +2024 PROXY STATEMENT 58 +Our commitment to transparency in our current disclosures provides shareholders with meaningful information about our pay infrastructure and DEI goals and initiatives, and the requested median pay gap measure would not provide additional value. +As described above, we provide comprehensive information and data about our pay infrastructure, pay equity and workforce diversity on our website and in our annual Impact Report. We believe that a commitment to transparency helps to build trust with our shareholders and internal and external stakeholders and holds us accountable to our commitments, which is why we continue to provide such information to our shareholders. +In contrast, the median pay gap measure seeks to compare the pay of two employees whose compensation happens to fall at the midpoint of the pay range among those employees sharing the relevant gender, racial, or ethnic characteristic, without adjusting for relevant factors that can explain differences in pay, such as their different role, skills, performance, experience, tenure, or location. Although the Proposal is aimed at providing transparency with respect to pay equity and equal opportunity, this statistic does not demonstrate whether our women and racial and ethnic minority employees are being paid fairly for the roles that they are doing, nor does it accurately depict female or racial and ethnic representation at the Company's different locations around the globe. +Our shareholders would not benefit from a surrogate measurement of pay equity that ultimately does not provide any meaningful supplemental information to our existing disclosures. Our shareholders seem to agree since similar proposals received from the proponent in 2021 and 2023 received the support of only approximately 18% and 30% of votes cast, respectively. +In summary, the Board of Directors believes the Proposal is unnecessary because the Company already publicly discloses information and data with respect to our pay equity, DEI initiatives and workforce diversity that provides our shareholders with more meaningful insight into our policies and progress in this area than the unadjusted median pay gap disclosure requested by the Proposal would. +BOARD RECOMMENDATION +X +The Board of Directors recommends that shareholders vote AGAINST the shareholder proposal. +59 NIKE, INC. +PROPOSAL 5 +TO CONSIDER A SHAREHOLDER PROPOSAL REGARDING A SUPPLY CHAIN MANAGEMENT REPORT +The following shareholder proposal will be voted on at the Annual Meeting only if properly presented by or on behalf of the shareholder proponent. Tulipshare Ltd., c/o Tulipshare Capital LLC, 251 Little Falls Dr., Wilmington, DE 19808, beneficial owner of at least $25,000 of Class B Stock, submitted the Proposal. The Board of Directors recommends a vote AGAINST the proposal and asks shareholders to read through NIKE's response which follows the shareholder proposal. +RESOLVED: Shareholders of Nike, Inc. ("Nike") request that the Board oversee and issue a report to shareholders, at reasonable cost and omitting proprietary information, assessing the effectiveness of its existing supply chain management infrastructure in ensuring alignment with Nike's equity goals and human rights commitments. +SUPPORTING STATEMENT: In the Board's discretion we recommend Nike's report include: +• Assessment of whether existing policies and implementation mechanisms, such as codes, guidance and supply chain contract terms ensure alignment throughout the value chain; +• Methodology and metrics to track and measure performance on forced labor and wage theft risks; +• Consistency with OECD Guidelines, UN Guiding Principles, and Sustainable Development Goals; +• Consideration of American Bar Association (ABA) Model Contract Clauses on human rights in the supply chain; and +• Whether the assessment yields any changes to Company policies, decision making, and implementation mechanisms. +WHEREAS: In the apparel industry, forced labor occurs both in the production of raw materials and during manufacturing, especially at lower tier suppliers. An estimated 27.6 million people are trapped in forced labor, with annual increases in forced labor driven entirely by the private economy. 1 UN Guiding Principles require corporate responsibility to respect human rights within operations and supply chains. Shareholders agree Nike should expand "opportunity for women" 2 considering a majority of Nike's garment workers are women 3 and the exacerbated human rights violations during the pandemic. 4 +Nike's impact report includes continued support for the UN Global Compact. 5 However, Nike’s communication on progress only meets six of seventeen Sustainable Development Goals. 6 Nike has not disclosed adequate analysis regarding the efficacy of traceability steps taken to address the risks of alleged Uyghur forced labor across its supply chain tiers, nor does Nike disclose engagement with affected rightsholders or whether remedies are satisfactory to victims; KnowTheChain identified Nike policies in need of improvement: purchasing practices, worker voice, and remedy. 7 +In 2022, the EU adopted a Directive on corporate sustainability due diligence in global value chains, requiring companies like Nike to identify, prevent, end or mitigate adverse impacts on human rights. 8 This Directive sets obligations, penalties and liability for large companies, with respect to their own operations, subsidiaries, and business partners. 9 +In 2023, garment-worker unions and labor-rights groups filed a complaint alleging Nike's treatment of workers and unpaid wages violated OECD guidelines. 10 Nike allegedly owes an estimated $1.4 million in unpaid wages to Cambodian garment workers, 11 with Nike's overall wage theft from workers alleged at $28 million. 12 +One possible approach for Nike to fulfil its responsibility to avoid causing or contributing to adverse human rights impacts in its supply chain is deployment of the ABA’s Model Contract Clauses. The contract clauses are aimed at ensuring responsible purchasing practices, such as reasonable assistance to suppliers, responsible exit, and victim remedies. 13 +1 https://www.ilo.org/wcmsp5/groups/public/---ed_norm/---ipec/documents/publication/wcms_854733.pdf +2 https://about.nike.com/en/newsroom/statements/a-letter-from-our-president-and-ceo +3 https://manufacturingmap.nikeinc.com/ +4 https://www.payyourworkers.org/ramatex +5 https://purpose-cms-preprod01.s3.amazonaws.com/wp-content/uploads/2022/03/17210319/FY21_NIKE-Impact-Report.pdf +6 https://unglobalcompact.org/participation/report/cop/active/464879 +7 https://knowthechain.org/company/nike_2021/#resources +8 https://ec.europa.eu/commission/presscorner/detail/en/ip_22_1145 +9 https://www.consilium.europa.eu/en/press/press-releases/2022/12/01/council-adopts-position-on-due-diligence-rules-for-large-companies/ +10 https://www.businessoffashion.com/articles/sustainability/worker-rights-nike-oecd-complaint-covid-19-pandemic-wage-theft/; https://globallaborjustice.org/wp-content/uploads/2023/02/OECD-Fact-Sheet-Nike.pdf +11 https://www.business-humanrights.org/en/latest-news/cambodia-trade-unions-demand-nike-matalan-pay-garment-workers-from-closed-factory-14-million-in-unpaid-compensation-damages/ +12 https://asia.floorwage.org/wp-content/uploads/2022/02/Money-Heist_Book_Final-compressed.pdf +13 https://www.americanbar.org/content/dam/aba/administrative/human_rights/contractual-clauses-project/mccs-full-report.pdf +2024 PROXY STATEMENT 60 +OPPOSITION STATEMENT +The Board of Directors recommends that shareholders vote AGAINST this proposal because: +• The Company strongly believes in, and is committed to respecting, human and labor rights through our supply chain; +• The Company is continually working to facilitate world-class, safe, and healthy workplaces for the people making our products; and +• The Company's policies and current disclosure effectively articulate our long-standing commitment to human rights and sustainable sourcing, rendering the Proposal unnecessary. +The Company strongly believes in, and is committed to respecting, human and labor rights through our operations and supply chain. +The Company is deeply committed to ethical and responsible manufacturing and to the goal that all people who make and move NIKE products are respected and valued. To inform the Company's practices, we look to the human rights defined in the Universal Declaration of Human Rights and the International Labour Organization’s ("ILO") Declaration on Fundamental Rights at Work and consider the UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises as best practices for understanding and managing human rights risks and impacts. Using these standards, we developed our Supplier Code of Conduct ("Supplier Code") and Code Leadership Standards ("CLS"), which are publicly available on our website and set forth minimum standards that our suppliers must comply with when producing Company products, as well as procedures for ensuring compliance with such standards. Among other things, these policies include strict requirements regarding forced and child labor, excessive overtime, compensation, and freedom of association while also requiring compliance with all local and country-specific labor laws. The Company has progressively raised our expectations for our contract factories in recent years, including by broadening the definitions of employment fees to be borne by suppliers and strengthening the oversight requirements for labor agents recruiting and hiring foreign migrant workers in the Supplier Code and CLS. +In addition to updating our policies, the Company is constantly striving to enhance the impact of our practices, which is why in fiscal year 2023, the Company launched a Foreign Migrant Worker Enhanced Due Diligence program that adds a specialized approach to identify issues related to foreign migrant workers and forced labor beyond traditional labor, health, safety, and environment assessments. By the end of fiscal year 2023, we conducted enhanced due diligence assessments and remediation efforts at suppliers in countries and regions including Malaysia, Jordan, and Taiwan. +As discussed in our response to Proposal 6 on page 64 of this Proxy Statement, the Company monitors supplier compliance with the Supplier Code and CLS through regular internal and external third-party audits (both announced and unannounced) and various due diligence tools, and engages in investigation and, where necessary, remediation efforts in instances of noncompliance. Should a supplier fail to remediate any issues identified, it may be subject to sanctions, including potential termination of the supplier relationship. The Company's strategic suppliers also self-diagnose and report the effectiveness of their health and safety program using the Company's Culture of Safety Maturity Assessment (CoSMA) Tool. The Company validates the results of that self-assessment through worker feedback and by a third-party administered safety perception survey. +The Company takes a top-down approach to monitoring and assessing human rights-related risks. At the Board level, the Corporate Responsibility, Sustainability & Governance Committee reviews and evaluates the Company's significant strategies, activities, policies, investments, and programs regarding corporate purpose, including human rights. The Corporate Responsibility, Sustainability & Governance Committee also regularly engages with Company management to obtain appropriate information on the Company's supply chain management practices and efforts to promote human rights throughout our operations. +The Company works with suppliers, industry associations, brands, civil society, and other stakeholders to facilitate world-class, safe, and healthy workplaces for the people making our products. +The Company believes that addressing complex and critical human rights risks, like forced labor, requires multi-stakeholder collaboration. Leveraging information from external sources and supplier specific risks through the Company's own programs, the Company regularly evaluates and updates our systems to identify and address risks in the supply chain, including those related to forced labor. +The Company continues to collaborate with industry experts, partners, industry associations, stakeholders and other organizations to understand, evaluate, and address matters related to forced labor. The Company is a founding signatory to the American Apparel and Footwear Association and the Fair Labor Association's Apparel & Footwear Commitment on Responsible Recruitment and reaffirmed our support for the Commitment in 2023. The principles of the Commitment, centered on addressing risks for forced labor, are aligned with the Company's standards and the work we have been doing with our supply chain manufacturers for more than a decade. The Company is also a member of the Leadership Group for Responsible Recruitment, an initiative of the Institute for Human Rights and Business and is a member of the Responsible Labor Initiative, an initiative of the Responsible Business Alliance to further the Company's work and goals on eliminating forced labor risks in our supply chain. +61 NIKE, INC. +The Company is committed to sharing with our stakeholders how we manage social and environmental issues and impacts. +We set published goals and implement transparent policies to promote human and labor rights and the ethical production of our products, while sharing our progress and learnings along the way. The Company develops five-year targets to enhance the Company's sustainable sourcing practices, which are disclosed to shareholders, along with our annual progress towards those targets, in our annual Impact Report. Historically we have set an ambitious target of sourcing 100% from facilities that meet our foundational labor, health, safety, and environmental standards, focusing on finished goods manufacturing partners that we contract with directly. For our 2025 targets, we expanded the scope of this target to include key materials suppliers (supplying approximately 90% of our footwear uppers and apparel materials) and focus distribution centers (representing at least 80% of volume). +We have also published our Statement on Forced Labor, Human Trafficking and Modern Slavery for Fiscal Year 2023 on our website, which describes the Company's commitment to ethical and responsible manufacturing, our ongoing supplier diligence and monitoring practices to identify and assess potential forced labor risks, our processes for engaging with suppliers to prioritize the well-being of their workers, and our partnerships with various organizations to drive collaborative efforts to address critical human rights risks, such as forced labor. The Company also discloses the independent factories and materials suppliers used to manufacture the Company's products in an interactive and publicly available Nike Manufacturing Map and requires our finished goods suppliers to source materials from vendors that are compliant with the Company's Restricted Substances List, Supplier Code, and Traceability Standards. +In summary, the Company remains committed to integrating respect for people and the planet throughout the Company's entire business, including our contract supply chain. We believe that our decades of commitment to these issues have led to more effective and impactful solutions, and the Company is proud to share our initiatives and policies with our shareholders. The Board of Directors believes that the Company's policies and current disclosure effectively articulate our long-standing support for, and continued commitment to, human rights and sustainable sourcing, rendering the Proposal ineffective and unnecessary. +BOARD RECOMMENDATION +X +The Board of Directors recommends that shareholders vote AGAINST the shareholder proposal. +2024 PROXY STATEMENT 62 +PROPOSAL 6 +TO CONSIDER A SHAREHOLDER PROPOSAL REGARDING WORKER-DRIVEN SOCIAL RESPONSIBILITY +The following shareholder proposal will be voted on at the Annual Meeting only if properly presented by or on behalf of the shareholder proponent. Domini Impact Equity Fund, 180 Maiden Lane, Suite 1302, New York, NY 10038, a beneficial owner of at least $25,000 of Class B Stock, and other co-filers, submitted the Proposal. The Board of Directors recommends a vote AGAINST the proposal and asks shareholders to read through NIKE's response which follows the shareholder proposal. +RESOLVED: Shareholders request that Nike, Inc. ("Nike") publish a report evaluating how implementing worker-driven social responsibility principles and supporting binding agreements would impact the Company's ability to identify and remediate human rights issues in sourcing from high-risk countries. +WHEREAS: Nike has developed extensive corporate social responsibility (CSR) systems and initiatives in response to heightened scrutiny over exploitative and unsafe conditions in its global supply chains. +CSR approaches like Nike's can foster efficient supply chain-wide human rights risk assessment and oversight. However, evidence demonstrates that dominant CSR approaches, which rely heavily on social audits, often fail to identify, and remedy persistent rights abuses such as wage theft, inadequate health and safety or gender-based violence. 1 Sourcing from high-risk countries exposes Nike to increased risks of operational disruptions, legal liability, and reputational harm. CSR models face challenges in high-risk countries, where national regulation and enforcement of labor laws are inadequate or compromised, or where it is dangerous for workers or their representatives to report abuse and seek remediation. 2 For example, in spite of its existing programs, workers at Nike suppliers in Cambodia and Thailand are allegedly still owed $2.2 million in unpaid wages and benefits from 2020. 3 +Worker-driven social responsibility (WSR) principles were developed to protect the rights of workers, in response to the body of evidence illustrating that CSR approaches are insufficient. 4 WSR initiatives are led by workers, include binding agreements between workers and brands, and ensure independent monitoring. WSR initiatives also support timely and effective reporting of harms through grievance mechanisms and worker participation in the design and provision of remedy. 5 WSR initiatives are aligned with the United Nations Guiding Principles on Business and Human Rights and are effective even in contexts where workers are vulnerable to abuses and exploitation. 6 +For example, Nike supplier Hansae Vietnam, which had 26 separate social audits showing no rights violations in the same year that an investigation utilizing WSR principles unveiled extensive wage theft, forced and excessive overtime, unsafe conditions and abuse. 7 Vitally, using a WSR approach to remedy enabled full remediation of these issues. +Many of Nike's peers have taken steps to improve conditions for workers and remediate rights violations by employing WSR approaches or binding agreements with labor organizations, such as the International Accord and the Lesotho Agreement. 8 In contrast, Nike has not demonstrated the same level of due diligence in countries where binding agreements and WSR approaches to remedy are available and have proven to be essential in protecting vulnerable workers. +Evaluation of the impact of steps that could be taken to reinforce its due diligence, such as adopting and abiding by proven WSR solutions and binding agreements, would better position Nike to understand gaps in its efforts to mitigate legal, reputational, and human rights risks in high-risk countries. +1 See e.g., Sarosh Kuruvilla, Private Regulation of Labor Standards in Global Supply Chains, Cornell University Press (2021); https://www.theguardian.com/sustainable-business/2016/jan/14/supply-chain-audits-failing-detect-abuses-report +2 https://www.hrw.org/report/2022/11/21/only-instant-noodle-unions-survive/union-busting-cambodias-garment-and-tourism +3 https://www.business-humanrights.org/en/latest-news/cambodia-thailand-investors-labour-rights-advocates-call-on-nike-to-pay-more-than-4000-garment-workers-unpaid-wages-of-22-million-incl-co-response/; https://www.iccr.org/joint-investor-letter-to-nike-on-outstanding-wage-payments/ +4 https://wsr-network.org/what-is-wsr/statement-of-principles +5 https://fairfoodprogram.org/; https://electronicswatch.org/new-worker-driven-remedy-principles_2635094.pdf +6 https://www.ohchr.org/sites/default/files/documents/publications/guidingprinciplesbusinesshr_en.pdf; https://www.ohchr.org/sites/default/files/2022-01/arp-note-meeting-effectiveness-criteria.pdf +7 https://www.workersrights.org/factory-investigation/hansae-vietnam/ +8 https://internationalaccord.org/signatories/ +63 NIKE, INC. +OPPOSITION STATEMENT +The Board of Directors recommends that shareholders vote AGAINST this proposal because: +• The Company has a fundamental respect for human rights throughout our operations, and we expect our suppliers to share in our commitment to respecting the rights of workers and advancing their welfare; +• The Company has established robust controls to identify, assess, and remediate human rights and labor issues throughout its operations and supply chain; and +• The Proposal is unnecessary because the Company already shares how it identifies, assesses, and manages human rights and labor risks and impacts throughout its supply chain. +The Company has established robust processes and practices to help identify, assess, and remediate human rights and labor issues throughout its operations and supply chain. +The Company aims to elevate human potential through our products, partnerships, and operations, which cannot be accomplished without a fundamental respect for human rights throughout our operations and supply chain. +The Company expects each of its suppliers to share in its commitment to respecting the rights of workers and advancing their welfare, with particular care for people with unique vulnerabilities such as women, migrants, and temporary workers. To that end, the Company requires each of its suppliers to comply with the minimum standards set forth in the Company's Supplier Code of Conduct ("Supplier Code") and Code Leadership Standards ("CLS") when producing Company products. These policies are aligned with international human rights standards and include strict requirements regarding forced and child labor, excessive overtime, compensation, and freedom of association, among other requirements. +We regularly monitor our supply chain for compliance with these standards. For example, the Company engages in regular human rights-related due diligence, risk assessment, and monitoring efforts, which includes the use of regular internal and external third-party audits (both announced and unannounced) in order to assess supplier compliance with the Company's standards and local law, as well as the use of due diligence tools to help identify recruitment of foreign migrant workers by NIKE suppliers as part of the Company's Foreign Migrant Worker Enhanced Due Diligence Program (which is described in more detail in the Company's response to Proposal 5 on page 61 of this Proxy Statement). Suppliers are also required to inform their employees and applicable subcontractors of the Company's Speak Up Portal, which allows for the anonymous reporting of Supplier Code and CLS concerns. In the event the Company becomes aware of allegations of noncompliance with the Supplier Code or CLS, the Company investigates and takes appropriate action as needed, which may include reinforcing the Company's standards and expectations with the supplier, working with the supplier to correct the issue and identify and address root causes, and/or terminating the supplier relationship. +As an industry leader, the Company also regularly seeks to improve its approach to understanding and evaluating working conditions in its supply chain and works with its suppliers to enhance their capabilities. For example, in 2017, the Company introduced the Engagement and Wellbeing ("EWB") Survey, a comprehensive, manufacturing-focused and actionable tool that enables suppliers (and the Company) to hear directly from their workers about their experiences. The EWB Survey results establish a baseline for the Company's EWB Program, which is committed to embedding capabilities within the Company's suppliers that help improve worker experience. As of the end of fiscal year 2023, the EWB Survey has been deployed at least once by all of the Company's strategic suppliers. +The Company advocates for better practices and greater transparency throughout our global supply chain, which is why we share how we manage social issues and impacts with our stakeholders. +The Company's website features a Responsible Sourcing page that includes its Supplier Code and CLS, as well as its Statement on Forced Labor, Human Trafficking and Modern Slavery for Fiscal Year 2023, which describes the Company's commitment to ethical and responsible manufacturing, the Company's ongoing supplier diligence and monitoring practices detailed above, how the Company engages with its suppliers to prioritize the well-being of their workers, and the Company's collaborations with various organizations to drive collaborative efforts to identify and address critical human rights risks, such as forced labor. The Responsible Sourcing page features additional resources related to the Company's responsible sourcing commitment, including details on the Company's supply chain industry collaborations, strategic compensation practices in the Company's supply chain, and the Company's Fair Labor association reaccreditation. The Company's annual Impact Report also describes the Company's approach to supply chain governance, human rights, and compliance. +In sum, the Board of Directors believes that the Proposal is unnecessary because the Company's policies and disclosures effectively articulate the Company's long-standing support for, and continued commitment to, human rights and responsible sourcing, including its robust processes for identifying, assessing, and addressing human rights and labor risks and impacts throughout its supply chain. +BOARD RECOMMENDATION +X +The Board of Directors recommends that shareholders vote AGAINST the shareholder proposal. +2024 PROXY STATEMENT 64 +PROPOSAL 7 +TO CONSIDER A SHAREHOLDER PROPOSAL REGARDING ENVIRONMENTAL TARGETS +The following shareholder proposal will be voted on at the Annual Meeting only if properly presented by or on behalf of the shareholder proponent. Trium Sustainable Innovators funds, 60 Gresham Street, London EC2V 7BB, UK, a beneficial owner of at least $25,000 of Class B Stock, submitted the Proposal. The Board of Directors recommends a vote AGAINST the proposal and asks shareholders to read through NIKE's response which follows the shareholder proposal. +WHEREAS: NIKE, Inc. pledged a robust sustainability agenda but fell short on most of its targets, casting doubt on its commitment and communication reliability. +Trium Sustainable Innovators' investment in NIKE, Inc. is based on the expectation that it can achieve profitable growth in the long term. We recognize differing investor views on achieving this. While we acknowledge the fashion industry's negative environmental impact and associated financial risks, we respect differing perspectives. However, inconsistent strategy communication and execution serve neither investor group well. +The FY20 NIKE, Inc. Impact Report indicates that only 7 of 19 targets set for FY15-20 were achieved. Several targets were missed significantly or showed no progress. Moreover, objectives were altered or discontinued when the company set out its targets for the FY20-25 period, as shown in the FY21 Impact Report. +Amongst the most noteworthy failures: +The target to reduce average product carbon footprint by 10% in FY15-20 saw no progress, Nike’s FY20 footprint per unit +matched that of FY15. The FY21 Impact Report omits mention of the product carbon footprint, setting a less ambitious 10% waste reduction goal per unit for FY25 across manufacturing, DCs and HQs for FY25. +Five energy related targets were set, including achieving 100% renewable energy in owned sites by FY20 and four energy intensity goals. Progress toward the renewable energy target reached 48% in FY20, but energy intensity targets saw minimal progress and were discontinued in the FY21 Impact Report, with the renewable energy target postponed to FY25. +Three chemistry related targets (restricted substances and supplier wastewater management practices) were unmet in FY20 and discontinued in FY21 Impact Report. The current FY20-25 target focuses on "adopting clean chemistry alternatives for our 10 priority chemistries across our supply chain". +NIKE, Inc.'s explanations for these failures appear to absolve itself of responsibility, attributing them to "consumer preference" and "marketplace demand". This overlooks the company’s influence on demand through pricing, supply volumes, and product visibility on its direct sales channels. +We are disappointed by the firm's track record and lack of perseverance in reaching its self-imposed sustainability objectives. +BE IT RESOLVED: Shareholders request the Board of Directors prepare a report, at reasonable cost, omitting proprietary information, and published publicly within one year from the annual meeting date, and containing the following: +• An analysis of NIKE, Inc's failure to meet its self-imposed quantitative sustainability targets for FY15-20, now +discontinued, and whether reinstating them is advisable. +• An analysis of NIKE, Inc's corporate governance around sustainability, examining the mechanisms in place to define, +communicate and execute its sustainability strategy within the broader business strategy. +• A discussion of the potential additional measures NIKE, Inc could implement to ensure it achieves its sustainability +objectives irrespective of consumer preference and marketplace demand. +65 NIKE, INC. +OPPOSITION STATEMENT +The Board of Directors recommends that shareholders vote AGAINST this proposal because: +• The Company already publicly reports its year-over-year progress towards achieving its Purpose-related targets as well as its processes for developing, monitoring, and executing on those targets in the Company’s annual Impact Report; and +• The Proposal would divert Company time and resources to the preparation of a report that would ultimately not provide additional value to the Company’s shareholders. +The Company sets ambitious goals to advance the three pillars of the Company’s Purpose: People, Planet, and Play. +The Company believes in the power of sport to move the world forward, and we recognize that as a global athletic market leader, the Company must set bold, ambitious goals to show what is possible for the greater industry. Since 2005, the Company has published five-year targets that represent multi-year commitments to drive meaningful impact, meet stakeholder expectations, and align with the Company's strategic and business priorities. Currently, the Company has adopted a set of 29 ambitious corporate targets for fiscal year 2020 to fiscal year 2025 across its three Purpose pillars: People, Planet, and Play, each of which is described in detail in the Company's annual Impact Report. These targets are designed to be bold but also attainable and measurable, with the goal of pushing the Company to the edges of what it can achieve in order to drive meaningful progress. +While the Company is committed to working towards its 2025 targets, it’s also striving to do more. Every five years, the Company unveils new targets that reflect a continuation of its key priorities but are updated to reflect the Company's most current, evolved approach to these priorities, based on what the Company has learned, how it has grown, and how the world has evolved in understanding and addressing these issues. For each adopted target, the Company's Impact Report provides context on the defined goals and approach, details on the initiatives underway to reach the target, and updates on the results of our efforts. The Company's Impact Report provides additional context surrounding each adopted target, including the Company's goal, approach, and challenges, as well as initiatives that the Company has implemented to reach the target. +The Company's publicly-available annual Impact Report already provides the information requested by the Proposal. +The Company recognizes that success in this space is not linear, but that accountability means sharing both the Company's achievements and its learnings from its setbacks. As a result, the Company proudly reports its progress towards achieving each of its adopted targets in its annual Impact Report (which is available on the Company's website), including areas where the Company has succeeded, areas where the Company has faced challenges, and the steps the Company has taken/is taking to drive further progress. The Impact Report also details the Company's approach to governance, oversight, and reporting, including the roles of management and the Board in setting goals, prioritizing issues, monitoring, and reporting progress and managing the risks and opportunities associated with the Company's Purpose. +In short, the Company's Impact Report is currently designed to provide stakeholders with the key information that the Proposal seeks and the Board of Directors does not believe that diverting Company time and resources to the preparation of a separate report that would merely provide shareholders with duplicative information is in the best interests of shareholders. +BOARD RECOMMENDATION +X +The Board of Directors recommends that shareholders vote AGAINST the shareholder proposal. +2024 PROXY STATEMENT 66 +PROPOSAL 8 +TO CONSIDER A SHAREHOLDER PROPOSAL REGARDING A DIVISIVE PARTNERSHIPS CONGRUENCY REPORT +The following shareholder proposal will be voted on at the Annual Meeting only if properly presented by or on behalf of the shareholder proponent. National Center for Public Policy Research, 2005 Massachusetts Ave. NW, Washington, DC 20036, a beneficial owner of at least $2,000 of Class B Stock, submitted the Proposal. The Board of Directors recommends a vote AGAINST the proposal and asks shareholders to read through NIKE's response which follows the shareholder proposal. +Supporting Statement: +Nike is a leading athletic footwear and apparel company. That is its core business, and it owes a duty to shareholders to maximize the value of their investments by focusing on that core purpose and staying away from unrelated concerns, especially if they're partisan, extreme or otherwise fraught with easily avoidable risk. +Nike has partnerships with and contributes to many organizations that promote highly divisive agendas such as providing minors with secret-from-parents access to puberty blockers and gender transition surgeries, evangelizing radical gender ideology to minors, and lobbying to allow males to destroy girls' and women's chances to excel in their own sports and to violate their privacy and safety 1 in restrooms and locker rooms. +Proponents of radical gender ideology claim that children are sexually mature enough to make Iife-choices of permanent consequence, such as taking puberty blockers and undergoing gender transition surgeries. However, most people (and therefore most ultimate Nike investors – not the investment houses and proxy advisory services stealing their voices) don't. 2 This contentious and vast disagreement between radical gender ideologues and the public has nothing to do with Nike making and selling footwear and apparel. Yet, Nike has paid partnerships with the Human Rights Campaign 3 and the GenderCool Project 4 – organizations that promote these divisive practices. 5 +Nike also has partnerships with Athlete Ally 6 and The Out Foundation 7 – organizations that, along with HRC and GenderCool, lobby for males competing in girls' and women's sports 8 despite the fact that 70% of Americans oppose it. 9 +The burden of proof is on the Board to explain why these particularly divisive and unordinary uses of shareholder resources are deemed to be congruent with its fiduciary duty. +Recent events have made clear that shareholder value drops when companies engage in overtly divisive activism of this sort. Following Bud Light's embrace of such partisanship, its revenue fell $395 million in North America compared to a year prior. 10 Target's market cap fell over $15 billion amid backlash for similar actions. 11 Disney stock fell 44 percent in 2022 – its worst performance in nearly 50 years – for putting divisive agendas ahead of parental rights. 12 And more recently, Planet Fitness' valuation dropped by $400 million in just five days after the company banned a female member for expressing her discomfort with a male shaving next to her in the women's locker room. 13 +Considering that Nike gives shareholder assets to many organizations that advance the very agenda that caused Disney, Target, Bud Light and Planet Fitness valuations to plummet, such contributions pose a clear risk to Nike shareholders as well. +Resolved: Shareholders request that the Company prepare a report, at reasonable expense and excluding proprietary information, listing and analyzing voluntary partnerships and the congruency of those partners' agendas with the Company's fiduciary duty to shareholders. +1 https://pjmedia.com/graysonbakich/2024/03/26/canadian-man-allegedly-attacks-10-year-old-girl-when-confronted-about-being-in-changing-room-n4927671; https://www.dailywire.com/news/loudoun-county-schools-tried-to-conceal-sexual-assault-against-daughter-in-bathroom-father-says +2 https://thehill.com/blogs/blog-briefing-room/3991685-majority-of-americans-oppose-gender-affirming-care-for-minors-trans-women-participating- in-sports-poll/ +3 https://www.hrc.org/about/corporate-partners +4 https://gendercool.org/partners-and-supporters/ +5 https://hrc-prod-requests.s3-us-west-2.amazonaws.com/files/documents/SupportingCaringforTransChildren.pdf; https://gendercool.org/todayshow +6 https://www.athleteally.org/our-supporters/ +7 https://theoutfoundation.org/partners +8 https://www.athleteally.org/about/; https://theoutfoundation.org/about; https://gendercool.org/playitout/; https://www.hrc.org/resources/get-the- facts-about-transgender-non-binary-athletes +9 https://www.nbcnews.com/nbc-out/out-news/americans-oppose-inclusion-trans-athletes-sports-poll-finds-rcna88940 +10 https://www.cnn.com/2023/08/03/business/anheuser-busch-revenue-bud-light-intl-hnk/index.html; +11 https://www.foxbusiness.com/media/target-market-cap-losses-hit-15-7-billion-share-near-52-week-low-amid-woke-backlash +12 https://www.washingtonexaminer.com/policy/economy/disney-has-lost-50-billion-in-value-since-war-with-florida-began; https://www.hollywoodreporter.com/business/business-news/disney-stock-2022-1235289239/; https://markets.businessinsider.com/news/stocks/disney-stock-price-decline-bob-iger-pandemic-inflation-recession-streaming-2022-12 +13 https://www.dailymail.co.uk/news/article-13220723/Planet-Fitness-Value-Falls-Trans-row.html +67 NIKE, INC. +OPPOSITION STATEMENT +The Board of Directors recommends that shareholders vote AGAINST this proposal because: +• The Company’s current approach to partnering with third-party organizations, along with our existing disclosures, appropriately serves the best interests of our shareholders; and +• The Proposal would divert Company time and resources to the preparation of a report that would ultimately not provide additional value to the Company’s shareholders. +The Company's partnerships play a key role in advancing the best interests of the Company and its shareholders. +The Company believes that sport has the power to move the world forward, and that the Company has a role to play in creating greater access to sport for all. To that end, one of the Company's strategies is to grow its consumer base by inviting more people—including the next generation of athletes—into sport. This strategy serves as a foundation for driving long-term growth and value for the Company and our shareholders. +However, the Company cannot do it alone. Our partnerships with our employees, athletes, experts, and community organizations are critical in helping the Company achieve its vision for the future of sport—where everybody is invited to play. For example, through its partnerships, the Company is removing barriers to participation for kids—especially girls—and training coaches from diverse experiences and backgrounds to become game-changing mentors who encourage all kids to play. +The Company devotes considerable time and resources to making sure that its partnerships advance the Company's business goals, and has processes in place that are focused on evaluating and approving the Company's partnerships and policies. At the Board level, the Corporate Responsibility, Sustainability and Governance Committee is responsible for overseeing the Company's community and social impact efforts and other corporate purpose activities, including reviewing and providing guidance to management regarding the Company's significant purpose-related activities, policies, investments, and programs and its work with industry organizations and non-governmental organizations concerning corporate responsibility. This process helps ensure that the Company's partnerships continue to support its strategy of increasing accessibility, participation, and equality in sport, which in turn fuels long-term growth for our shareholders. +The Company already provides significant disclosure about the Company's partnerships and how they align with the Company's purpose and long-term value creation for shareholders. +We believe it is important not only to engage with organizations and issues that are important to our business and our shareholders, but to be transparent regarding that engagement. As a result, consistent with our Policy on Public Policy and Political Contributions, the Company annually reports its political contributions to political candidates, organizations, and ballot initiatives on its website. We also provide a list of significant governmental entities, NGOs and industry groups the Company is involved with in the resources section of the Company's Impact website. +The Company also reports its progress against its adopted purpose-related targets, including the impact of its partnerships, in its annual Impact Report. Therefore, in addition to being costly and time-consuming for the Company to prepare, the report that the Proposal requests would not provide meaningful additional information to the Company's shareholders. +BOARD RECOMMENDATION +X +The Board of Directors recommends that shareholders vote AGAINST the shareholder proposal. +2024 PROXY STATEMENT 68 +STOCK OWNERSHIP INFORMATION +STOCK HOLDINGS OF CERTAIN OWNERS AND MANAGEMENT +The following table sets forth the number of shares of the classes of NIKE securities beneficially owned, as of June 28, 2024, after giving effect to any transactions that occurred on such date, by (1) each person known to the Company to be the beneficial owner of more than five percent of any class of the Company's securities, (2) each of the directors and nominees for director, (3) each executive officer listed in the Summary Compensation Table ("Named Executive Officers"), and (4) all directors, Named Executive Officers, and other executive officers as a group. Because Class A Stock is convertible into Class B Stock on a share-for-share basis, each beneficial owner of Class A Stock is deemed by the SEC to be a beneficial owner of the same number of shares of Class B Stock. Therefore, in indicating a person's beneficial ownership of shares of Class B Stock in the table, it has been assumed that such person has converted into Class B Stock all shares of Class A Stock of which such person is a beneficial owner. For these reasons the table contains substantial duplications in the numbers of shares and percentages of Class A and Class B Stock shown for Swoosh, LLC, Philip Knight, and the Travis A. Knight 2009 Irrevocable Trust II. In addition, unless otherwise indicated, all persons named below can be reached c/o Corporate Secretary, NIKE, Inc., One Bowerman Drive, Beaverton, Oregon 97005-6453. +TITLE OF CLASS +SHARES BENEFICIALLY +OWNED (1) +PERCENT OF +CLASS (2) +Cathleen Benko Class B 12,923 — +Timothy Cook Class B 50,424 +(3) +— +John Donahoe II (4) +Class B 1,710,599 +(3)(5) +0.1 % +Thasunda Duckett Class B 8,533 — +Mónica Gil Class B 3,837 — +Alan Graf, Jr. Class B 197,416 — +Maria Henry Class B 3,711 — +Peter Henry Class B 6,043 — +Travis Knight Class B 6,528,884 +(6) +0.5 % +Mark Parker (4) +Class B 2,740,543 +(3)(5) +0.2 % +Michelle Peluso Class B 27,758 — +John Rogers, Jr. Class B 29,466 — +Robert Swan Class B 22,526 +(7) +— +Matthew Friend (4) +Class B 307,902 +(3) +— +Heidi O'Neill (4) +Class B 333,049 +(3) +— +Craig Williams (4) +Class B 237,289 +(3) +— +69 NIKE, INC. +TITLE OF CLASS +SHARES BENEFICIALLY +OWNED (1) +PERCENT OF +CLASS (2) +Sojitz Corporation of America Preferred +(8) +300,000 100.0 % +1211 S.W. 5th Ave, Pacwest Center, Ste. 2220, +Portland, OR 97204 +Philip Knight +One Bowerman Drive, Beaverton, OR 97005 +Class A 23,879,487 +(9) +8.0 % +Class B 32,215,174 +(10) +2.6 % +Swoosh, LLC +22990 NW Bennett Street, Hillsboro, OR 97124 +Class A 230,750,000 +(11) +77.5 % +Class B 230,750,000 16.1 % +Travis A. Knight 2009 Irrevocable Trust II +22990 NW Bennett Street, Hillsboro, OR 97124 +Class A 34,781,369 +(12) +11.7 % +Class B 34,781,369 +(12) +2.8 % +The Vanguard Group +100 Vanguard Blvd., Malvern, PA 19355 +Class B 109,539,710 +(13) +9.0 % +(13) +BlackRock, Inc. +55 East 52nd Street, New York, NY 10055 +Class B 89,773,424 +(14) +7.3 % +(14) +All directors and executive officers as a group (18 persons) +Class B 12,638,763 +(3)(5) +1.1 % +(1) A person is considered to beneficially own any shares: (a) over which the person exercises sole or shared voting or investment power, or (b) of which the person has the right to acquire beneficial ownership at any time within 60 days (such as through conversion of securities or exercise of stock options). Unless otherwise indicated, voting and investment power relating to the above shares is exercised solely by the beneficial owner or shared by the owner and the owner's spouse or children. +(2) Omitted if less than 0.1 percent. +(3) These amounts include the right to acquire the following numbers of shares within 60 days after June 28, 2024 pursuant to the exercise of stock options: 1,520,503 shares for Mr. Donahoe, 1,600,433 shares for Mr. Parker, 292,324 shares for Mr. Friend, 260,048 shares for Ms. O'Neill, 160,393 shares for Mr. Williams, and 4,180,796 shares for the executive officer and director group. +(4) Named Executive Officer listed in the Summary Compensation Table. +(5) Includes shares held in accounts under the NIKE, Inc. 401(k) Savings and Profit Sharing Plan: 195 shares for Mr. Donahoe, 38,020 shares for Mr. Parker, and 53,122 shares for the executive officer and director group. +(6) Does not include 230,750,000 shares of Class A Stock that are owned by Swoosh, LLC. Mr. Travis Knight has disclaimed beneficial ownership of all such shares. +(7) Includes 1,580 shares held by the Swan Family Revocable Trust. +(8) Preferred Stock does not have general voting rights except as provided by law, and under certain circumstances as provided in the Company's Restated Articles of Incorporation, as amended. +(9) Does not include 521,792 shares of Class A Stock that are owned by Mr. Philip Knight's spouse. Mr. Philip Knight has disclaimed ownership of all such shares. Mr. Philip Knight holds the position Chairman Emeritus, and has a standing invitation to attend all meetings of the Board as a non-voting observer. +(10) Does not include 521,792 shares of Class A Stock that are owned by Mr. Philip Knight's spouse. Mr. Philip Knight has disclaimed ownership of all such shares. +(11) Information provided as of July 12, 2023 in the Form 4 filed by the shareholder. +(12) Includes 15,638,989 shares of Class A Stock held directly by the Travis A. Knight 2009 Irrevocable Trust II (the "Trust") and 19,142,380 shares of Class A Stock held by an indirect subsidiary of the Trust. Mr. Travis Knight and members of his immediate family are among the beneficiaries of the Trust. Mr. Travis Knight disclaims beneficial ownership of the Company's securities held directly and indirectly by the Trust, except to the extent of his pecuniary interest therein. +(13) Information provided as of December 29, 2023 in Schedule 13G filed by the shareholder. +(14) Information provided as of December 31, 2023 in Schedule 13G filed by the shareholder. +DELINQUENT SECTION 16(a) REPORTS +Section 16(a) of the Exchange Act requires our directors and executive officers, and holders of more than 10 percent of a registered class of the Company's equity securities, to file with the SEC reports regarding their ownership and changes in ownership of Common Stock and other equity securities of the Company. Directors, officers, and greater than 10 percent shareholders are required by the regulations of the SEC to furnish the Company with copies of all Section 16(a) forms they file. Based solely on a review of such reports furnished to the Company and written representations that no other reports were required, during fiscal 2024, we believe that all such reports that were required to be filed under Section 16(a) were timely filed, except that one report relating to a September 1, 2023 grant of stock options to Johanna Nielsen was filed late due to an administrative error. +2024 PROXY STATEMENT 70 +ADDITIONAL INFORMATION +INSIDER TRADING ARRANGEMENTS AND POLICIES +We have adopted insider trading policies and procedures that govern the purchase, sale, and other disposition of our securities by our employees, directors, officers, and consultants. We believe our insider trading policies and procedures are reasonably designed to promote compliance with insider trading laws, rules, and regulations as well as the exchange listing standards applicable to us. Our insider trading policies and procedures prohibit our employees, directors, officers, and consultants from trading in our securities while in possession of material non-public information, among other things. The foregoing summary of our insider trading policies and procedures does not purport to be complete and is qualified by reference to our Insider Trading Policy and our Blackout and Pre-clearance Policy, copies of which can be found as exhibits to our Annual Report on Form 10-K for the fiscal year ended May 31, 2024. +TRANSACTIONS WITH RELATED PERSONS +Philip Knight, the father of NIKE director Travis Knight, serves as Chairman Emeritus, which provides a standing invitation for Philip Knight to attend meetings of the Board and its committees as a non-voting observer. In fiscal 2024, as Chairman Emeritus, Mr. Knight received salary of $519,235 (reflecting 27 bi-weekly pay periods for fiscal 2024), and medical and dental insurance coverage generally available to employees. +John Donahoe II and the Company have entered into time sharing agreements under which Mr. Donahoe reimburses the Company for limited personal use of Company aircraft, which is intended to increase his security, availability, and productivity. In fiscal 2024, Mr. Donahoe reimbursed the Company approximately $316,000 under the time sharing agreements. +Mark Parker's son, Matthew Parker, was employed by the Company in fiscal 2024 in a non-executive role for which the Company paid Matthew Parker aggregate compensation of approximately $136,000. The compensation and benefits received by Matthew Parker were consistent with compensation and benefits paid to other employees holding similar positions. +The Company's written policy requires the Corporate Responsibility, Sustainability & Governance Committee to review any transaction or proposed transaction with a related person that would be required to be reported under Item 404(a) of Regulation S-K, and to determine whether to ratify or approve the transaction, with ratification or approval to occur only if the committee determines that the transaction is fair to the Company or that approval or ratification of the transaction is in the interest of the Company. +COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION +The members of the Compensation Committee of the Board during fiscal 2024 were Timothy Cook, Cathleen Benko, and Mónica Gil. The committee is composed solely of independent, non-employee directors. No member of the Compensation Committee has been an executive officer of the Company, and no member of the Compensation Committee had any relationships requiring disclosure by the Company under the SEC's rules requiring disclosure of certain relationships and related-party transactions. None of the Company's executive officers served as a director or member of a compensation committee (or other committee serving an equivalent function) of any other entity, the executive officers of which served as a director or member of the Compensation Committee of the Company during fiscal 2024. +OTHER MATTERS AT THE MEETING +As of the time this proxy statement was printed, management was unaware of any proposals to be presented for consideration at the Annual Meeting other than those set forth herein, but if other matters do properly come before the Annual Meeting, the persons named in the proxy will vote the shares represented by such proxy according to their best judgment. +71 NIKE, INC. +GENERAL INFORMATION +Why am I receiving these proxy materials? +You are receiving the enclosed proxy materials in connection with the solicitation of proxies by the Board of NIKE for use at the Annual Meeting. As a shareholder of record as of the close of business on July 10, 2024, which is the record date fixed by the Board, you are invited to attend the virtual Annual Meeting and are urged to vote your shares on the proposals described in this proxy statement. +How are the proxy materials being distributed? +This proxy statement is first being made available to shareholders on or about July 31, 2024. We are furnishing proxy materials to our shareholders primarily via the Internet, by mailing a Notice Regarding the Availability of Proxy Materials, or "Notice", instead of mailing printed copies of those materials to each shareholder. The Notice directs shareholders to a website where they can access our proxy materials, including our proxy statement and our annual report, and view instructions on how to vote online or by telephone. If you would prefer to receive a paper copy of our proxy materials, please follow the instructions included in the Notice. If you have previously elected to receive our proxy materials electronically, you will continue to receive access to these materials electronically unless you elect otherwise. +What is included in the proxy materials? +Our proxy materials include our Notice, our proxy statement, and our Annual Report on Form 10-K for the year ended May 31, 2024. Our Notice directs shareholders to a website where they can access our proxy materials. +Why is the Company holding a virtual Annual Meeting? +While we initially pivoted to a virtual meeting format due to public health concerns, we are continuing to use this format because, based on the success of our last three annual meetings, we believe that it provides greater accessibility, encourages broader shareholder participation, and helps reduce costs, while still allowing us to provide shareholders the same rights and opportunities to participate as an in-person meeting. +How can I attend and participate in the virtual Annual Meeting? +Holders of record of our Class A Stock and Class B Stock at the close of business on July 10, 2024 may attend the Annual Meeting, vote, and submit questions in advance of and during the meeting. +To attend, vote at, and submit questions during the Annual Meeting, visit www.virtualshareholdermeeting.com/NKE2024 and enter the 16-digit control number included in your Notice, voting instructions form, or proxy card. +Online access to the webcast will open approximately 15 minutes prior to the start of the Annual Meeting to allow time for you to log in and test the computer audio system. +How can I ask questions at the Annual Meeting? +We are committed to ensuring that shareholders will be afforded the same rights and opportunities to participate in our virtual Annual Meeting as they would at an in-person meeting. Shareholders of record at the close of business on July 10, 2024 may submit questions in advance of and during the Annual Meeting. +• To submit questions in advance of the Annual Meeting : Visit www.proxyvote.com and enter your 16-digit control number included in your Notice, voting instructions form, or proxy card. Questions submitted in advance must be submitted before 11:59 P.M. Eastern Time on September 9, 2024. +• To submit questions during the Annual Meeting : Visit www.virtualshareholdermeeting.com/NKE2024 and enter the 16-digit control number included in your Notice, voting instructions form, or proxy card. +What will I be voting on at the Annual Meeting? +You will be voting: +• To elect the 12 director nominees identified in this Proxy Statement. The holders of NIKE's Class A Stock will vote to elect nine of the director nominees identified in this Proxy Statement, and the holders of NIKE's Class B Stock will vote to elect the remaining three director nominees identified in this Proxy Statement; +• To approve executive compensation by an advisory vote; +• To ratify the appointment of PwC as our independent registered public accounting firm; +2024 PROXY STATEMENT 72 +• To consider a shareholder proposal regarding supplemental pay equity disclosure, if properly presented at the meeting; +• To consider a shareholder proposal regarding a supply chain management report, if properly presented at the meeting; +• To consider a shareholder proposal regarding worker-driven social responsibility, if properly presented at the meeting; +• To consider a shareholder proposal regarding environmental targets, if properly presented at the meeting; +• To consider a shareholder proposal regarding a divisive partnerships congruency report, if properly presented at the meeting; and +• To transact such other business as may properly come before our Annual Meeting. +How does the Board recommend that I vote on these proposals? +Our Board recommends: +• For the holders of NIKE's Class A Stock, a vote FOR the election of each of Mr. Timothy Cook, Mr. John Donahoe II, Ms. Thasunda Duckett, Ms. Mónica Gil, Ms. Maria Henry, Mr. Peter Henry, Mr. Travis Knight, Mr. Mark Parker, and Ms. Michelle Peluso to serve as directors until the next annual meeting; +• For the holders of NIKE's Class B Stock, a vote FOR the election of each of Ms. Cathleen Benko, Mr. John Rogers, Jr., and Mr. Robert Swan, to serve as directors until the next annual meeting; +• For all shareholders, a vote FOR the advisory resolution approving the compensation of our Named Executive Officers as described in this proxy statement; +• For all shareholders, a vote FOR ratification of the appointment of PwC as our independent registered public accounting firm; +• For all shareholders, a vote AGAINST the shareholder proposal regarding supplemental pay equity disclosure; +• For all shareholders, a vote AGAINST the shareholder proposal regarding a supply chain management report; +• For all shareholders, a vote AGAINST the shareholder proposal regarding worker-driven social responsibility; +• For all shareholders, a vote AGAINST the shareholder proposal regarding environmental targets; and +• For all shareholders, a vote AGAINST the shareholder proposal regarding a divisive partnerships congruency report; +How do I vote my shares? +You may vote by proxy or at the Annual Meeting. If you received a printed copy of the proxy materials by mail, you may vote your shares by proxy before the Annual Meeting using one of the following methods: (1) vote via the internet at the website address listed on the Notice; (2) vote by telephone; or (3) complete, sign, date, and return your proxy card or voting instruction form in the postage-paid envelope we have provided. If you received only the Notice, you may vote your shares at the website address listed on the Notice or by telephone. If you plan to vote during the Annual Meeting rather than in advance, you may do so by entering the 16-digit control number included in your Notice, voting instructions form, or proxy card. Even if you plan to attend the Annual Meeting, you are encouraged to vote by proxy prior to the meeting. You can always change your vote, as described in more detail under "Can I change my vote or revoke my proxy?" +What is the difference between holding shares as a shareholder of record and as a beneficial owner or street name holder? +If your shares are registered directly in your name with our transfer agent, Computershare Trust Company, N.A., you are considered the "shareholder of record" with respect to those shares and we have sent the Notice (or if you received printed proxy materials, the Notice, proxy statement, and proxy card) directly to you. You may submit a proxy and vote those shares in the manner described in this proxy statement and the Notice. +If your shares are held in a stock brokerage account or by a bank, broker or other holder of record, you are considered the "beneficial owner" of shares held in street name. The Notice, voting instructions form, and/or proxy card have been forwarded to you by your broker, bank, or other holder of record who is considered the shareholder of record with respect to those shares. As the beneficial owner, you have the right to direct your broker, bank, or other holder of record on how to vote your shares by using the voting instruction card included in the mailing or by following their instructions for voting. +What does it mean if I receive more than one proxy card or Notice? +If you receive more than one proxy card or Notice, it means that you hold shares registered in more than one account. To ensure that all of your shares are voted, please follow the instructions included on each Notice you receive or, if you received printed proxy materials by mail, complete, sign, and return each proxy card you receive. +73 NIKE, INC. +How many shares may be voted at the Annual Meeting? +On the close of business on July 10, 2024, 297,897,252 shares of Class A Stock and 1,201,461,692 shares of Class B Stock were issued and outstanding and entitled to vote at the meeting. +What constitutes a quorum? +For Proposal 1, the election of directors, a majority of the votes entitled to be cast by each of the Class A Stock and Class B Stock separately constitutes a quorum of Class A Stock and Class B Stock, respectively. For Proposals 2, 3, 4, 5, 6, 7, and 8, a majority of the votes entitled to be cast by both of the Class A Stock and Class B Stock together constitutes a quorum +Abstentions and broker non-votes are counted for purposes of determining whether a quorum exists. Broker non-votes occur when a person holding shares in street name, such as through a brokerage firm, does not provide instructions as to how to vote those shares and the broker does not then vote those shares on the shareholder's behalf. +How are votes calculated? +Each share of Class A Stock and each share of Class B Stock is entitled to one vote. The holders of our Common Stock will vote together on all matters at the Annual Meeting except for the election of directors, for which the holders of Class A Stock and holders of Class B Stock will vote separately. For more information regarding our Class A Stock and Class B Stock, see the section above titled "Corporate Governance—Capital Structure". +How many votes are required to approve each proposal and how are votes counted? +How many votes are required for approval? How are director withhold votes treated? How are abstentions treated? How are broker non-votes handled? How will signed proxies that do not specify voting preferences be treated? +Proposal 1—Elect the director nominees For the directors elected by holders of Class A Stock: a plurality of votes of the holders of Class A Stock cast, subject to our director resignation policy if a director receives less than majority support +For the directors elected by holders of Class B Stock: a plurality of votes of the holders of Class B Stock cast, subject to our director resignation policy if a director receives less than majority support +Withhold votes will not be counted as votes cast for purposes of the plurality voting standard, but will be considered in determining whether our director resignation policy applies to a director Abstentions are not included as votes cast and will not affect the outcome of the proposal Broker non-votes are not included as votes cast and will not affect the outcome of the proposal Shares will be voted "FOR" the election of each of the named nominees for director +Proposal 2—Advisory vote to approve executive compensation Votes of Common Stock cast in favor of the proposal must exceed votes of Common Stock cast against the proposal N/A Abstentions are not included as votes cast and will not affect the outcome of the proposal Broker non-votes are not included as votes cast and will not affect the outcome of the proposal Shares will be voted "FOR" the proposal regarding an advisory vote to approve executive compensation +Proposal 3— Ratify selection of PwC as our independent registered public accounting firm Votes of Common Stock cast in favor of the proposal must exceed votes of Common Stock cast against the proposal N/A Abstentions are not included as votes cast and will not affect the outcome of the proposal Banks, brokers and other holders of record may exercise discretion and vote on this matter and these will be counted as votes cast Shares will be voted "FOR" the ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm +Proposal 4— Consider a shareholder proposal regarding supplemental pay equity disclosure Votes of Common Stock cast in favor of the proposal must exceed votes of Common Stock cast against the proposal N/A Abstentions are not included as votes cast and will not affect the outcome of the proposal Broker non-votes are not included as votes cast and will not affect the outcome of the proposal Shares will be voted "AGAINST" the shareholder proposal regarding supplemental pay equity disclosure +2024 PROXY STATEMENT 74 +Proposal 5— Consider a shareholder proposal regarding a supply chain management report Votes of Common Stock cast in favor of the proposal must exceed votes of Common Stock cast against the proposal N/A Abstentions are not included as votes cast and will not affect the outcome of the proposal Broker non-votes are not included as votes cast and will not affect the outcome of the proposal Shares will be voted "AGAINST" the shareholder proposal regarding supplemental pay equity disclosure +Proposal 6— Consider a shareholder proposal regarding worker-driven social responsibility Votes of Common Stock cast in favor of the proposal must exceed votes of Common Stock cast against the proposal N/A Abstentions are not included as votes cast and will not affect the outcome of the proposal Broker non-votes are not included as votes cast and will not affect the outcome of the proposal Shares will be voted "AGAINST" the shareholder proposal regarding supplemental pay equity disclosure +Proposal 7— Consider a shareholder proposal regarding environmental targets Votes of Common Stock cast in favor of the proposal must exceed votes of Common Stock cast against the proposal N/A Abstentions are not included as votes cast and will not affect the outcome of the proposal Broker non-votes are not included as votes cast and will not affect the outcome of the proposal Shares will be voted "AGAINST" the shareholder proposal regarding supplemental pay equity disclosure +Proposal 8— Consider a shareholder proposal regarding a divisive partnerships congruency report Votes of Common Stock cast in favor of the proposal must exceed votes of Common Stock cast against the proposal N/A Abstentions are not included as votes cast and will not affect the outcome of the proposal Broker non-votes are not included as votes cast and will not affect the outcome of the proposal Shares will be voted "AGAINST" the shareholder proposal regarding a supply chain management report +What happens if a director fails to receive the support of a majority of votes cast? +The Bylaws and the Corporate Governance Guidelines of the Company provide that any nominee for director in an uncontested election who receives a greater number of votes "withheld" from their election than votes "for" such election shall tender their resignation for consideration by the Corporate Responsibility, Sustainability & Governance Committee. The committee will then recommend to the Board the action to be taken with respect to the resignation, and the Board will publicly disclose its decision with respect to such resignation within 90 days after the certification of the election results. +Can I change my vote or revoke my proxy? +You can change your vote or revoke your proxy at any time before it is exercised at the Annual Meeting by voting your shares online during the Annual Meeting or by delivering to the Corporate Secretary of NIKE, Inc. at One Bowerman Drive, Beaverton, Oregon 97005-6453 either written notice of your revocation or an executed proxy bearing a later date. +How are proxies being solicited? +In addition to soliciting proxies by mail, certain officers and employees of the Company, without extra compensation, may also solicit proxies personally or by telephone. Copies of proxy solicitation materials will be furnished to fiduciaries, custodians, and brokerage houses for forwarding to the beneficial owners of shares held in their names. We may retain Georgeson, Inc. to solicit proxies at a cost we anticipate will not exceed $17,500. The Company will bear the cost of soliciting proxies. +How do I find out the voting results? +Preliminary voting results will be announced at the Annual Meeting, and final voting results will be published in a Current Report on Form 8-K within four business days following the Annual Meeting. +How can I submit a proposal for next year's annual meeting? +A shareholder proposal (other than a proxy access nomination) intended for inclusion in the Company's proxy statement and form of proxy for the 2025 annual meeting of shareholders must be received by the Corporate Secretary of NIKE, Inc. at shareholder.proposals@Nike.com on or before April 2, 2025. Rules under the Exchange Act describe standards as to the submission of shareholder proposals. A shareholder proxy access nomination intended for inclusion in the Company's proxy statement and form of proxy for the 2025 annual meeting of shareholders must be received, along with the other information required by the Company's Bylaws, by the Corporate Secretary of NIKE, Inc. at One Bowerman Drive, Beaverton, Oregon 97005-6453, no earlier than March 3, 2024 and no later than April 2, 2025. +75 NIKE, INC. +In addition, the Company's Bylaws require that any shareholder wishing to make a nomination for director or introduce a proposal or other business at a shareholder meeting must give the Company at least 60 days' advance written notice (which for the 2024 annual meeting of shareholders was July 12, 2024) and that notice must meet certain other requirements described in the Bylaws. +In addition to satisfying the foregoing requirements under the Company's Bylaws, to comply with the universal proxy rules, shareholders who intend to solicit proxies in support of director nominees other than the Company's nominees for the 2025 annual meeting of shareholders must provide notice that sets forth the information required by Rule 14a-19 under the Exchange Act no later than July 12, 2025. The advance notice requirement under Rule 14a-19 does not override or supersede the longer advance notice requirement under the Company's Bylaws. +For the Board of Directors, +Mary Hunter +Vice President, Corporate Secretary +2024 PROXY STATEMENT 76 +ANNUAL +MEETING +AND +PROXY STATEMENT +September 10, 2024 +Whether or not you plan to attend the meeting, please sign and date the enclosed proxy card and return it in the enclosed envelope, or vote online or by telephone following the instructions on the proxy card. +77 NIKE, INC. \ No newline at end of file diff --git a/raw/proxies/0000320187/0000320187-24-000045/proxy_rpt.txt b/raw/proxies/0000320187/0000320187-24-000045/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..e81302e6982c9592da75aabd63f9873a67240505 --- /dev/null +++ b/raw/proxies/0000320187/0000320187-24-000045/proxy_rpt.txt @@ -0,0 +1,5 @@ +TRANSACTIONS WITH RELATED PERSONS +Philip Knight, the father of NIKE director Travis Knight, serves as Chairman Emeritus, which provides a standing invitation for Philip Knight to attend meetings of the Board and its committees as a non-voting observer. In fiscal 2024, as Chairman Emeritus, Mr. Knight received salary of $519,235 (reflecting 27 bi-weekly pay periods for fiscal 2024), and medical and dental insurance coverage generally available to employees. +John Donahoe II and the Company have entered into time sharing agreements under which Mr. Donahoe reimburses the Company for limited personal use of Company aircraft, which is intended to increase his security, availability, and productivity. In fiscal 2024, Mr. Donahoe reimbursed the Company approximately $316,000 under the time sharing agreements. +Mark Parker's son, Matthew Parker, was employed by the Company in fiscal 2024 in a non-executive role for which the Company paid Matthew Parker aggregate compensation of approximately $136,000. The compensation and benefits received by Matthew Parker were consistent with compensation and benefits paid to other employees holding similar positions. +The Company's written policy requires the Corporate Responsibility, Sustainability & Governance Committee to review any transaction or proposed transaction with a related person that would be required to be reported under Item 404(a) of Regulation S-K, and to determine whether to ratify or approve the transaction, with ratification or approval to occur only if the committee determines that the transaction is fair to the Company or that approval or ratification of the transaction is in the interest of the Company. \ No newline at end of file diff --git a/raw/proxies/0000320187/0000320187-25-000048/proxy.txt b/raw/proxies/0000320187/0000320187-25-000048/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..e0c7940849e0861935cea6a0822d154ea81462bc --- /dev/null +++ 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Filed by a Party other than the Registrant ¨ +Check the appropriate box: +¨ Preliminary Proxy Statement +¨ +Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +x +Definitive Proxy Statement +¨ +Definitive Additional Materials +¨ +Soliciting Material under §240.14a-12 +NIKE, Inc. +(Name of registrant as specified in its charter) +(Name of person(s) filing proxy statement, if other than the registrant) +Payment of Filing Fee (Check the appropriate box): +x +No fee required +¨ +Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11 +(1) +Title of each class of securities to which transaction applies: +(2) +Aggregate number of securities to which transaction applies: +(3) +Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): +(4) +Proposed maximum aggregate value of transaction: +(5) Total fee paid: +¨ +Fee paid previously with preliminary materials. +¨ +Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. +(1) +Amount Previously Paid: +(2) +Form, Schedule or Registration Statement No.: +(3) +Filing Party: +(4) +Date Filed: +MESSAGE FROM OUR +EXECUTIVE CHAIRMAN +To Our Shareholders: +This past year has been a year of change for Nike, including changes to the team at both the Board and the executive level. But throughout this year, we have remained grounded in strong corporate governance, which enables these changes and supports the creation of long-term value for shareholders. +During fiscal 2025, the Board of Directors executed against one of its most important duties, a CEO transition. Elliott Hill brings the right combination of experience, skills and attributes to guide Nike during this period. His global and industry expertise as well as deep-rooted passion for sport and for Nike make him the ideal fit. And in turn, Elliott has made changes to his leadership team. With his senior leadership team set, the Board believes that Elliott and the team are well-positioned to support the company's Win Now actions as we navigate the year ahead. +Consistent with our evergreen approach to Board refreshment, we recently announced a fond farewell, as Cathleen Benko has decided to retire after more than seven years of service. And we also announced the introduction of fresh talent, with the Board nominating Jørgen Vig Knudstorp to stand for election at this year's annual meeting. +We are pleased to invite you to attend the Annual Meeting of Shareholders of NIKE, Inc. to be held virtually on Tuesday, September 9, 2025, at 9:00 A.M. Pacific Time. Whether or not you plan to attend, the prompt execution and return of your proxy card will ensure that your shares are represented at the meeting. Thank you for your continued support. +Sincerely, +"During fiscal 2025, the Board of Directors executed against one of its most important duties, a CEO transition." +MARK PARKER, EXECUTIVE CHAIRMAN +July 17, 2025 +1 NIKE, INC. +NOTICE OF ANNUAL MEETING +OF SHAREHOLDERS +TO THE SHAREHOLDERS OF NIKE, INC. +You are cordially invited to the 2025 Annual Meeting of Shareholders (the "Annual Meeting") of NIKE, Inc., an Oregon corporation ("NIKE" or the "Company"): +DATE AND TIME: +Tuesday, September 9, 2025, +at 9:00 A.M. Pacific Time +LOCATION: +This year's meeting will be a virtual Annual Meeting at www.virtualshareholdermeeting.com/NKE2025 +ITEMS OF BUSINESS: +PROPOSAL +PAGE REFERENCE +1 To elect the 12 directors named in the accompanying proxy statement for the ensuing year. +Page 4 +Class A +Will elect nine directors. +Class B +Will elect three directors. +Holders of Class A Stock and holders of Class B Stock will vote together as one class on all other proposals. +2 To approve executive compensation by an advisory vote. +Page 24 +3 To ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm. +Page 62 +4 To approve the NIKE, Inc. Stock Incentive Plan, as amended and restated. +Page 64 +5 To transact such other business as may properly come before the meeting. +The Annual Meeting will be held in a virtual format only. We are continuing to use this format because, based on the success of our recent annual meetings, we believe it provides greater accessibility, encourages broader shareholder participation, and helps reduce costs, while still allowing us to provide shareholders the same rights and opportunities to participate as an in-person meeting. Shareholders of record at the close of business on July 9, 2025, the record date fixed by the Board of Directors, may attend the Annual Meeting, vote, and submit questions in advance of and during the meeting. To attend, vote at, and submit questions during the Annual Meeting, visit www.virtualshareholdermeeting.com/NKE2025 and enter the 16-digit control number included in your Notice Regarding the Availability of Proxy Materials, voting instructions form, or proxy card. Questions may be submitted in advance of the Annual Meeting by visiting www.proxyvote.com and entering your 16-digit control number. +By Order of the Board of Directors, +Mary Hunter +Vice President, Corporate Secretary +Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders To Be Held on September 9, 2025. The proxy statement and NIKE, Inc.'s 2025 Annual Report to Shareholders are available online at www.investorvote.com or www.proxyvote.com, for registered and beneficial owners, respectively. +2025 PROXY STATEMENT 2 +TABLE OF CONTENTS +PAGE +NOTICE OF ANNUAL MEETING OF SHAREHOLDERS +2 +CORPORATE GOVERNANCE +4 +PROPOSAL 1 +Election of Directors +4 +NIKE, Inc. Board of Directors +5 +Board Structure and Responsibilities +16 +Code of Conduct +20 +Capital Structure +20 +Shareholder Engagement +21 +Director Compensation for Fiscal 20 25 +22 +EXECUTIVE COMPENSATION +24 +PROPOSAL 2 +Shareholder Advisory Vote to Approve Executive Compensation +24 +Compensation Discussion and Analysis +25 +Executive Compensation Tables +42 +AUDIT MATTERS +62 +PROPOSAL 3 +Ratification of Appointment of Independent Registered Public Accounting Firm +62 +Report of the Audit & Finance Committee +63 +STOCK INCENTIVE PLAN +64 +PROPOSAL 4 +To approve the NIKE, Inc. Stock Incentive Plan, as amended and restated +64 +Summary of Stock Incentive Plan +65 +STOCK OWNERSHIP INFORMATION +74 +Stock Holdings of Certain Owners and Management +74 +Delinquent Section 16(a) Reports +75 +ADDITIONAL INFORMATION +76 +Insider Trading Arrangements and Policies +76 +Transactions with Related Persons +76 +Compensation Committee Interlocks and Insider Participation +76 +Other Matters at the Meeting +76 +GENERAL INFORMATION +77 +EXHIBIT A - NIKE, INC. STOCK INCENTIVE PLAN +81 +3 NIKE, INC. +CORPORATE GOVERNANCE +PROPOSAL 1 +ELECTION OF DIRECTORS +A board of 12 directors will be elected at the Annual Meeting. Each elected director will hold office until the next annual meeting of shareholders and until their successor is elected and qualified. All of the nominees except Mr. Elliott Hill and Mr. Jørgen Vig Knudstorp were elected at the 2024 annual meeting of shareholders. Mr. Hill was elected to the Board of Directors (the "Board") in October 2024 in connection with his appointment as the Company's President and Chief Executive Officer. Mr. Knudstorp, who was recommended by an independent third-party search firm, is standing for election at the Annual Meeting for the first time. +Ms. Mónica Gil, Mr. John Rogers, Jr., and Mr. Robert Swan are nominated by the Board for election by the holders of NIKE's Class B Common Stock ("Class B Stock"). The other nine nominees are nominated by the Board for election by the holders of NIKE's Class A Common Stock ("Class A Stock"). +Under Oregon law and our Bylaws, if a quorum of each class of shareholders is present at the Annual Meeting, the nine director nominees who receive the greatest number of votes cast by holders of Class A Stock and the three director nominees who receive the greatest number of votes cast by holders of Class B Stock will be elected as directors. Withheld votes and broker non-votes will have no effect on the results of the vote. Unless otherwise instructed, proxy holders will vote the proxies they receive for the election of each of the nominees listed below. Each nominee has consented to serve if elected. If any nominee becomes unable or declines to serve, proxies will be voted "for" any nominee designated by the Board to fill such vacancy. +The Bylaws and the Corporate Governance Guidelines of the Company provide that any nominee for director in an uncontested election who receives a greater number of votes "withheld" from their election than votes "for" such election shall tender their resignation for consideration by the Corporate Responsibility, Sustainability & Governance Committee. The committee will then recommend to the Board the action to be taken with respect to the resignation, and the Board will publicly disclose its decision with respect to such resignation within 90 days after the certification of the election results. +Background information on the nominees as of July 17, 2025, including certain of the attributes that led to their selection, appears below. The Board and the Corporate Responsibility, Sustainability & Governance Committee have determined that each director meets the qualification standards described below under "NIKE, Inc. Board of Directors—Director Nominations". In addition, while the Board believes that each director nominee is individually qualified to make unique and substantial contributions to the Board, the Board firmly believes that the experience, attributes, and skills of any single director nominee should not be viewed in isolation, but rather in the context of the experience, attributes, and skills that all director nominees bring to the Board as a whole, each of which contributes to the function of an effective Board. +BOARD RECOMMENDATION +The Board of Directors recommends that the Class A Shareholders vote FOR the election to the Board of Directors of each of the applicable nominees listed below. +The Board of Directors recommends that the Class B Shareholders vote FOR the election to the Board of Directors of each of the applicable nominees listed below. +2025 PROXY STATEMENT 4 +NIKE, INC. BOARD OF DIRECTORS +BOARD OVERVIEW +Our director nominees consist of 12 individuals selected on the basis of numerous criteria, including experience and achievements, fields of significant knowledge, good character, and sound judgment. We view the effectiveness of our Board both through an individual and collective lens and believe that our Board is optimized to support and guide the Company. +GENDER AND RACE/ETHNICITY +AGE +TENURE +BOARD SKILLS, EXPERIENCES, AND QUALIFICATIONS +CEO EXPERIENCE 8 / 12 +CEO experience brings leadership qualifications and skills that help our Board to capably advise, support, and oversee our management team, including regarding our strategy to drive long-term value. +RETAIL INDUSTRY 8 /12 +Retail experience brings a deep understanding of factors affecting our industry, operations, business needs, and strategic goals. +BRAND/MARKETING 6 /12 +Brand and marketing experience brings perspective about building brand strength and creating consumer demand, as well as insight regarding consumer preferences, trends, and behaviors. +GLOBAL 9 / 12 +Global exposure yields an understanding of diverse business environments, economic conditions, and cultural perspectives that informs our global business and strategy and enhances oversight of our multinational operations. +MEDIA/ENTERTAINMENT 5 /12 +Media and entertainment experience provides our Board with insight about creating meaningful consumer connections as well as perspective regarding media trends, consumer behavior, and advertising. +HR/TALENT MANAGEMENT 8 /12 +HR and talent management experience assists our Board in overseeing executive compensation, succession planning, and employee engagement. +FINANCIAL EXPERTISE 11 /12 +Financial expertise assists our Board in overseeing our financial statements, capital structure, and internal controls. +DIGITAL/TECHNOLOGY 5 /12 +Digital and technology experience helps our Board oversee cybersecurity and advise our management team as we seek to enhance the consumer experience and further develop our multi-channel strategy. +GOVERNANCE 9 /12 +Public company board experience provides insight into new and best practices which informs our commitment to excellence in corporate governance. +CORPORATE GOVERNANCE HIGHLIGHTS +ü 9 out of 12 director nominees are independent +ü All directors are elected annually +ü Separate Chair, CEO, and Lead Independent Director positions with clearly defined roles +ü "Evergreen" approach to Board refreshment, resulting in 4 new independent directors added in the last 5 years and a fifth new independent director nominee for the Annual Meeting, as well as a mix of director tenures to balance fresh perspectives and Company-specific experience +ü All director nominees are selected by the Board and the Corporate Responsibility, Sustainability & Governance Committee based on robust qualification standards, and individually and collectively provide the Board with unique skills and perspectives that are relevant to the Company's business and strategic objectives +ü Retirement policy generally requires that directors do not stand for re-election after reaching the age of 72 +ü Each director nominee is in compliance with our overboarding policy (as set forth in our Corporate Governance Guidelines) +5 NIKE, INC. +NOMINEES FOR ELECTION BY CLASS A SHAREHOLDERS +TIMOTHY COOK, LEAD INDEPENDENT DIRECTOR +Mr. Cook is the Company's Lead Independent Director and is the Chief Executive Officer of Apple Inc. ("Apple"). +• Mr. Cook joined Apple in 1998 as Senior Vice President of Worldwide Operations and also served as its Executive Vice President, Worldwide Sales and Operations and Chief Operating Officer. +• Mr. Cook was Vice President, Corporate Materials for Compaq Computer Corporation from 1997 to 1998. +• Previous to his work at Compaq, Mr. Cook served in the positions of Senior Vice President Fulfillment and Chief Operating Officer of the Reseller Division at Intelligent Electronics from 1994 to 1997. +• Mr. Cook also worked for International Business Machines Corporation from 1983 to 1994, including as Director of North American Fulfillment. +Mr. Cook is a member of the Board of Directors of Apple. In addition to this public company board service, he is also a member of the Board of Directors of the National Football Foundation and Duke University Board of Trustees. +Age: 64 +Director Since: 2005 +Committee: Compensation, Chair +Other Public Company Directorships : Apple, Inc. +Favorite NIKE Products: Nike 24.7 Collection, Nike Metcon, and Nike Pegasus +SKILLS, EXPERIENCES AND QUALIFICATIONS +CEO EXPERIENCE +RETAIL INDUSTRY +BRAND/MARKETING +GLOBAL +MEDIA/ENTERTAINMENT +HR/TALENT MANAGEMENT +FINANCIAL EXPERTISE +DIGITAL/TECHNOLOGY +GOVERNANCE +THASUNDA DUCKETT +Ms. Duckett is President and Chief Executive Officer of the Teachers Insurance and Annuity Association of America ("TIAA"), a leading provider of financial services in the academic, research, medical, cultural, and governmental fields. +• Prior to joining TIAA, Ms. Duckett was Chief Executive Officer of Chase Consumer Banking at JPMorgan Chase & Co. ("JPMorgan Chase") from 2016 to 2021. Before that appointment, Ms. Duckett was appointed to various management positions at JPMorgan Chase, including: +• From 2013 to 2016, Ms. Duckett served as the Chief Executive Officer of Chase Auto Finance, and +• From 2004 to 2013, Ms. Duckett held multiple management and consumer lending roles. +• Prior to joining JPMorgan Chase, Ms. Duckett was Director of Emerging Markets at the Federal National Mortgage Association, or Fannie Mae. +Ms. Duckett serves on the Board of Governance and Board of Trustees of TIAA. She is also Chair of the Otis and Rosie Brown Foundation and serves on the Board of Directors of Brex, National Medal of Honor Museum, and the Robert F. Kennedy Human Rights. She also serves on the Board of Trustees for Sesame Workshop. +Age: 51 +Director Since: 2019 +Committee: Corporate Responsibility, Sustainability & Governance +Other Public Company Directorships : None +Favorite NIKE Products: Nike Pegasus +SKILLS, EXPERIENCES AND QUALIFICATIONS +CEO EXPERIENCE +RETAIL INDUSTRY +HR/TALENT MANAGEMENT +FINANCIAL EXPERTISE +2025 PROXY STATEMENT 6 +MARIA HENRY +Ms. Henry is the former Chief Financial Officer of Kimberly-Clark Corporation ("Kimberly-Clark"), a position she held from 2015 to 2022. +• Prior to joining Kimberly-Clark, she was Executive Vice President and Chief Financial Officer of The Hillshire Brands Company, formerly known as Sara Lee Corporation ("Sara Lee"), from 2012 to 2014. Ms. Henry was the Chief Financial Officer of Sara Lee's North American Retail and Foodservice business from 2011 to 2012. +• Prior to Sara Lee, she held various senior leadership positions in finance and strategy in three portfolio companies of Clayton, Dubilier, & Rice, most recently as Executive Vice President and Chief Financial Officer of Culligan International. +• Ms. Henry also held senior finance roles in several technology companies, and she began her career at General Electric. +Ms. Henry is a member of the Board of Directors of General Mills, Inc. and NextEra Energy, Inc. She served on the Board of Directors of Kimberly-Clark de México from February 2016 to March 2022. +Age: 58 +Director Since: 2023 +Committee: Audit & Finance +Other Public Company Directorships : General Mills, Inc. and NextEra Energy, Inc. +Favorite NIKE Products: Nike Pegasus +SKILLS, EXPERIENCES AND QUALIFICATIONS +RETAIL INDUSTRY +GLOBAL +FINANCIAL EXPERTISE +DIGITAL/TECHNOLOGY +GOVERNANCE +PETER HENRY +Dr. Henry is the Class of 1984 Senior Fellow at Stanford University's Hoover Institution, Senior Fellow at Stanford's Freeman Spogli Institute for International Studies, and Dean Emeritus of New York University's Leonard N. Stern School of Business ("Stern"). +• Dr. Henry assumed the Deanship of Stern in January 2010 and served through December 2017. +• Prior to joining Stern, Dr. Henry was the Konosuke Matsushita Professor of International Economics at the Stanford University Graduate School of Business. +• In June 2009, President Obama appointed Dr. Henry to the President's Commission on White House Fellowships. +• In 2008, Dr. Henry led Barack Obama's Presidential Transition Team in its review of international lending agencies such as the IMF and the World Bank. +Dr. Henry is a member of the Board of Directors of Citigroup Inc. and Analog Devices, Inc. In addition to this public company board service, he also serves on the Board of Directors of the National Bureau of Economic Research and the Economic Club of New York and serves on the Advisory Board for Protiviti and Biospring Partners. Dr. Henry is a member of the Council of Foreign Relations and the Economic Advisory Panel of the Federal Reserve Bank of New York. Dr. Henry served on the Board of Directors of General Electric from July 2016 to April 2018 and Kraft Foods Group, Inc. and its predecessor, Kraft Foods Inc., from May 2011 to July 2015. +Age: 55 +Director Since: 2018 +Committee: Audit & Finance +Other Public Company Directorships : Citigroup Inc. and Analog Devices, Inc. +Favorite NIKE Products: Nike Epic React +SKILLS, EXPERIENCES AND QUALIFICATIONS +GLOBAL +FINANCIAL EXPERTISE +GOVERNANCE +7 NIKE, INC. +ELLIOTT HILL +Mr. Hill is President & Chief Executive Officer of the Company. He was employed by the Company from 1988 - 2020 holding senior leadership positions across Europe and North America. +• Before retiring in 2020, he was President of Consumer and Marketplace leading all commercial and marketing operations for Nike and Jordan Brand, including the P&L across the Company's four geographies. +• Mr. Hill was appointed: +• President, Consumer and Marketplace in 2018, +• President, Geographies & Integrated Marketplace in 2016, +• President, Geographies & Sales in 2013, +• VP/General Manager, North America in 2010, and +• VP, Global Retail in 2006. +Mr. Hill currently serves on the board of trustees for Texas Christian University. +Age: 61 +Director Since: 2024 +Committee: Executive +Other Public Company Directorships : None +Favorite NIKE Products: Nike Vomero 18, Nike Metcon, Nike 24.7 Half Zip, and Nike Air Spiridon +SKILLS, EXPERIENCES AND QUALIFICATIONS +RETAIL INDUSTRY +BRAND/MARKETING +GLOBAL +HR/TALENT MANAGEMENT +FINANCIAL EXPERTISE +GOVERNANCE +TRAVIS KNIGHT +Mr. Knight is the President and Chief Executive Officer of the animation studio, LAIKA, LLC ("LAIKA"), which specializes in feature-length films. +• Mr. Knight has been involved in all principal creative and business decisions at LAIKA since its founding in 2003, serving in successive management positions as Lead Animator, Vice President of Animation, and then as President and Chief Executive Officer in 2009. +• Mr. Knight was Producer and Director of the feature film Kubo and the Two Strings (2017) which was nominated for an Academy Award and winner of the BAFTA award for Best Animated Film. +• Mr. Knight has served as Producer and Lead Animator on Academy Award-nominated feature-length films The Boxtrolls (2014) and ParaNorman (2012), for which he won an Annie Award for Outstanding Achievement in Character Animation, and Lead Animator for Coraline (2009). +• Prior to his work at LAIKA, Mr. Knight held various animation positions at Will Vinton Studios from 1998 to 2002, and as a stop-motion animator for television series, commercials, and network promotions. He has been recognized for his work on the Emmy Award-winning stop-motion animated television series The PJs. +Mr. Knight serves on the Board of Directors of LAIKA. He is the son of NIKE's co-founder, Mr. Philip Knight, who currently serves as Chairman Emeritus. +Age: 51 +Director Since: 2015 +Committee: Executive +Other Public Company Directorships : None +Favorite NIKE Products: Nike Pegasus +SKILLS, EXPERIENCES AND QUALIFICATIONS +CEO EXPERIENCE +MEDIA/ENTERTAINMENT +FINANCIAL EXPERTISE +2025 PROXY STATEMENT 8 +JØRGEN VIG KNUDSTORP +Mr. Knudstorp is the former President and Chief Executive Officer of the LEGO Group, a position he held from 2004 to 2016, and served as Executive Chairman of LEGO Brand Group, owner of the LEGO brand, from 2017 to 2023. +• From 2023 to 2024, Mr. Knudstorp served as Special Partner to the LEGO Brand Owner Family, KIRKBI Group, the holding company for LEGO Brand and the LEGO Group. +• He also held various leadership positions at the LEGO Group from 2001 to 2004, including Senior Vice President, Corporate Affairs and Vice President, Strategic Development. +• Prior to joining the LEGO Group, he served as a Management Consultant at McKinsey & Company from 1998 to 2001. +Mr. Knudstorp is a member and lead independent director of the Board of Directors of Starbucks Corporation. In addition to this public company board service, he is Deputy Chair of the LEGO Foundation and Chair of BrainPOP Education. +Age: 56 +Other Public Company Directorships : Starbucks Corporation +Favorite NIKE Products: Nike Pegasus and Nike AlphaFly +SKILLS, EXPERIENCES AND QUALIFICATIONS +CEO EXPERIENCE +RETAIL INDUSTRY +BRAND/MARKETING +GLOBAL +MEDIA/ENTERTAINMENT +HR/TALENT MANAGEMENT +FINANCIAL EXPERTISE +DIGITAL/TECHNOLOGY +GOVERNANCE +MARK PARKER, EXECUTIVE CHAIRMAN OF THE BOARD +Mr. Parker is Executive Chairman of the Company's Board of Directors. He served as President and Chief Executive Officer of the Company from 2006 to January 2020. +• Mr. Parker has been employed by NIKE since 1979 with primary responsibilities in product research, design and development, marketing, and brand management. +• Mr. Parker was appointed: +• President and Chief Executive Officer in 2006, +• President of the NIKE Brand in 2001, +• Vice President of Global Footwear in 1998, +• General Manager in 1993, +• Corporate Vice President in 1989, and +• Divisional Vice President in charge of product development in 1987. +Mr. Parker served on the Board of Directors of The Walt Disney Company from January 2016 to January 2025. In addition to his skills and qualifications described above, Mr. Parker was selected to serve on the Board because the experience gained while serving as the Company's Chief Executive Officer makes his position as Executive Chairman of the Board instrumental. +Age: 69 +Director Since: 2006 +Committee: Executive, Chair +Other Public Company Directorships : None +Favorite NIKE Products: Nike Pegasus Nike Air Max, Nike Vomero Plus, Nike Zegama 2, and Nike Dri-Fit Half Zip +SKILLS, EXPERIENCES AND QUALIFICATIONS +CEO EXPERIENCE +RETAIL INDUSTRY +BRAND/MARKETING +GLOBAL +MEDIA/ENTERTAINMENT +HR/TALENT MANAGEMENT +FINANCIAL EXPERTISE +GOVERNANCE +9 NIKE, INC. +MICHELLE PELUSO +Ms. Peluso is Chief Executive Officer of Revlon Group Holdings LLC ("Revlon"), a position she has held since 2024. She is leading a holistic transformation of the company, driving consumer centricity across the organization and leveraging her deep digital experience to drive innovation. +• Prior to Revlon, Ms. Peluso was served as the Executive Vice President and Chief Customer and Experience Officer for CVS Health from 2023 to 2024, where she oversaw the end-to-end consumer experience across all channels, including leading the brand and marketing efforts. She also served as the Executive Vice President and Chief Customer Officer, CVS Health, and co-President, Pharmacy and Consumer Wellness. +• Prior to joining CVS Health, Ms. Peluso was Senior Vice President, Digital Sales and Chief Marketing Officer at IBM from 2016 to 2021. She oversaw marketing, digital sales, client experience, and the commercial business, globally. +• Previous to her work at IBM, Ms. Peluso served as Chief Executive Officer of online shopping destination Gilt Groupe, Inc. ("Gilt") from 2013 until its sale to Hudson’s Bay Company in February 2016 and was on Gilt’s Board of Directors from 2009 to 2016. +• From 2009 to 2013, Ms. Peluso served as Global Consumer Chief Marketing and Internet Officer of Citigroup Inc. +• From 2002 to 2009, Ms. Peluso held senior management positions at Travelocity.com LP ("Travelocity"), being appointed President and Chief Executive Officer in 2003. +• Prior to joining Travelocity, in 1999 Ms. Peluso founded Site59, an online travel site, serving as its Chief Executive Officer until its acquisition by Travelocity in 2002. +Ms. Peluso is a member of the Board of Directors of Revlon. +Age: 53 +Director Since: 2014 +Committee: Corporate Responsibility, Sustainability & Governance, Chair +Other Public Company Directorships : None +Favorite NIKE Products: Nike 24.7 Impossibly Soft, Nike Vomero, Nike Pegasus, and Nike Cortez +SKILLS, EXPERIENCES AND QUALIFICATIONS +CEO EXPERIENCE +RETAIL INDUSTRY +BRAND/MARKETING +GLOBAL +HR/TALENT MANAGEMENT +FINANCIAL EXPERTISE +DIGITAL/TECHNOLOGY +GOVERNANCE +BOARD RECOMMENDATION +The Board of Directors recommends that the Class A Shareholders vote FOR the election to the Board of Directors of each of the nominees above. +2025 PROXY STATEMENT 10 +NOMINEES FOR ELECTION BY CLASS B SHAREHOLDERS +MÓNICA GIL +Ms. Gil is Chief Administrative and Marketing Officer, NBCUniversal Telemundo Enterprises ("Telemundo") for Comcast Corp, a position she has held since 2020. +• Prior to her current role, Ms. Gil served as Chief Marketing Officer, Telemundo from 2018 until 2020, and as Executive Vice President, Telemundo, managing Communications and Corporate Affairs and Human Resources from 2017 until 2018. +• Prior to joining Telemundo, Ms. Gil served as Senior Vice President and General Manager, Multicultural Growth and Strategy of the Nielsen Company ("Nielsen") from 2014 until 2017. +• Ms. Gil joined Nielsen in 2005 as Vice President, Communications and was subsequently promoted in 2009 to Senior Vice President, Public Affairs and Government Relations. +• Previously, Ms. Gil served as Senior Vice President for Greer, Margolis, Mitchell and Burns from 2004 until 2005. +• She also served as Director of Public Affairs and Community Outreach for Telemundo Communications Group, Inc., Los Angeles, from 2001 to 2004. +Ms. Gil is a member of the Board of Directors of the National Women's History Museum. +Age: 53 +Director Since: 2022 +Committee: Compensation +Other Public Company Directorships : None +Favorite NIKE Products: Nike Pegasus, Nike Vomero, Nike Air Max, Nike One Tights, and Nike Therma-FIT Tights +SKILLS, EXPERIENCES AND QUALIFICATIONS +BRAND/MARKETING +GLOBAL +MEDIA/ENTERTAINMENT +HR/TALENT MANAGEMENT +11 NIKE, INC. +JOHN ROGERS, JR. +Mr. Rogers is Chairman, Co-Chief Executive Officer, and Chief Investment Officer of Ariel Investments, LLC, a privately-held money management firm he founded in 1983, which serves individual and institutional investors through its mutual funds and separate accounts. Mr. Rogers is a Trustee of Ariel Investment Trust, the investment company consisting of the five mutual funds his firm manages. +• In 2008, Mr. Rogers was awarded Princeton University's highest honor, the Woodrow Wilson Award, presented each year to the alumnus whose career embodies a commitment to national service. +• Mr. Rogers served as co-chair for the Presidential Inaugural Committee 2009, and more recently, joined the Barack Obama Foundation's Board of Directors. +Mr. Rogers is a member of the Board of Directors of The New York Times Company and Ryan Specialty Group Holdings, Inc. In addition to this public company board service, he also serves as trustee of the University of Chicago, the Robert F. Kennedy Center for Justice and Human Rights, the National Association of Basketball Coaches (NABC) Foundation, Inc., and a life trustee of the Chicago Symphony Orchestra. Mr. Rogers served on the Board of Directors of McDonald's Corporation from May 2003 to May 2023 and Exelon Corporation from October 2000 to April 2019. +Age: 67 +Director Since: 2018 +Committee: Corporate Responsibility, Sustainability & Governance +Other Public Company Directorships : The New York Times Company and Ryan Specialty Group Holdings, Inc. +Favorite NIKE Products: Nike KD and Nike LeBron Basketball Shoes +SKILLS, EXPERIENCES AND QUALIFICATIONS +CEO EXPERIENCE +FINANCIAL EXPERTISE +GOVERNANCE +2025 PROXY STATEMENT 12 +ROBERT SWAN +Mr. Swan has been an Operating Partner at Andreessen Horowitz since 2021. +• Prior to his current role, Mr. Swan served as the Chief Executive Officer and a member of the Board of Directors of Intel Corp. ("Intel") from 2019 to 2021. Before that appointment, he was appointed to various management positions at Intel, including: +• Interim Chief Executive Officer and Chief Financial Officer from 2018 until 2019 and Chief Financial Officer from 2016 until 2019. +• Prior to joining Intel, Mr. Swan served as Operating Partner at General Atlantic LLC, a private equity firm, from 2015 to 2016. +• He also served as Senior Vice President, Finance and Chief Financial Officer of eBay Inc. ("eBay") from 2006 to 2015. +• Previously, Mr. Swan served as Chief Financial Officer of Electronic Data Systems Corporation, Chief Financial Officer of TRW Inc., as well as Chief Executive Officer, Chief Operating Officer, and Chief Financial Officer of Webvan Group, Inc. Mr. Swan began his career in 1985 at General Electric, serving in numerous senior finance roles. +Mr. Swan is a member of the Board of Directors of Micron Technology, Inc. In addition to this public company board service, he is also a member of the Board of Directors of Flexport, the American Heart Association, and Kearney. Mr. Swan served on the Board of Commissioners of GoTo Group from December 2021 to June 2024, and on the Board of Directors of eBay from July 2015 to June 2023, Intel from January 2019 to February 2021, and Applied Materials, Inc. from March 2009 to September 2016. +Age: 65 +Director Since: 2022 +Committee: Audit & Finance, Chair +Other Public Company Directorships : Micron Technology, Inc. +Favorite NIKE Products: Nike Pegasus, Nike Air Max, and Nike 24.7 PerfectStretch pants +SKILLS, EXPERIENCES AND QUALIFICATIONS +CEO EXPERIENCE +RETAIL INDUSTRY +GLOBAL +HR/TALENT MANAGEMENT +FINANCIAL EXPERTISE +DIGITAL/TECHNOLOGY +GOVERNANCE +BOARD RECOMMENDATION +The Board of Directors recommends that the Class B Shareholders vote FOR the election to the Board of Directors of each of the nominees above. +13 NIKE, INC. +INDIVIDUAL BOARD SKILLS MATRIX +The matrix below represents some of the key experiences, attributes, and skills that the Board has identified as particularly valuable to the oversight of the Company, and illustrates how the director nominees individually and collectively represent them. While all of these qualifications were considered in connection with this year's director nomination process, the matrix does not encompass all of the experiences, attributes, and skills of the director nominees. The Board firmly believes that its highly qualified director nominees provide the Board with a robust complement of backgrounds, skills, qualifications, and perspectives necessary for effective oversight. +EXPERIENCE, EXPERTISE, OR ATTRIBUTES +COOK +DUCKETT +GIL +M HENRY +P HENRY +HILL +KNIGHT +KNUDSTORP +PARKER +PELUSO +ROGERS +SWAN +CEO EXPERIENCE +CEO experience brings leadership qualifications and skills that help our Board to capably advise, support, and oversee our management team, including regarding our strategy to drive long-term value. +ü +ü +ü ü ü ü ü ü +RETAIL INDUSTRY +Retail experience brings a deep understanding of factors affecting our industry, operations, business needs, and strategic goals. +ü +ü +ü ü +ü +ü +ü +ü +BRAND/MARKETING +Brand and marketing experience brings perspective about building brand strength and creating consumer demand, as well as insight regarding consumer preferences, trends, and behaviors. +ü +ü +ü +ü +ü +ü +GLOBAL +Global exposure yields an understanding of diverse business environments, economic conditions, and cultural perspectives that informs our global business and strategy and enhances oversight of our multinational operations. +ü +ü +ü ü ü +ü +ü +ü ü +MEDIA/ENTERTAINMENT +Media and entertainment experience provides our Board with insight about creating meaningful consumer connections as well as perspective regarding media trends, consumer behavior, and advertising. +ü +ü +ü +ü +ü +HR/TALENT MANAGEMENT +HR and talent management experience assists our Board in overseeing executive compensation, succession planning, and employee engagement. +ü +ü +ü +ü ü ü ü ü +FINANCIAL EXPERTISE +Financial expertise assists our Board in overseeing our financial statements, capital structure, and internal controls. +ü ü ü ü ü ü ü ü ü ü ü +DIGITAL/TECHNOLOGY +Digital and technology experience helps our Board oversee cybersecurity and advise our management team as we seek to enhance the consumer experience and further develop our multi-channel strategy. +ü +ü +ü +ü +ü +GOVERNANCE +Public company board experience provides insight into new and best practices which informs our commitment to excellence in corporate governance. +ü +ü +ü +ü +ü +ü +ü ü ü +2025 PROXY STATEMENT 14 +DIRECTOR NOMINATIONS +The Board takes an "evergreen" approach to Board refreshment, cultivating relationships with top talent on an ongoing basis. The Corporate Responsibility, Sustainability & Governance Committee identifies potential director candidates through a variety of means, including recommendations from members of the Corporate Responsibility, Sustainability & Governance Committee or the Board, Company management, third-party search firms, and shareholders. The committee, in its discretion, engages director search firms to identify candidates. Shareholders may recommend director candidates for consideration by the Corporate Responsibility, Sustainability & Governance Committee by submitting a written recommendation to the committee, c/o Corporate Secretary, NIKE, Inc., One Bowerman Drive, Beaverton, Oregon 97005-6453. The recommendation should include the candidate's name, age, qualifications (including principal occupation and employment history), and written consent to be named as a nominee in the Company's proxy statement and to serve as a director, if elected. The committee evaluates recommendations from shareholders in the same manner that it considers recommendations from other sources. +The Board has adopted qualification standards for the selection of non-management nominees for director, which can be found on our corporate website: http://investors.nike.com. As provided in these standards and the Company's Corporate Governance Guidelines, nominees for director are selected on the basis of, among other things, distinguished business experience or other non-business achievements; education; significant knowledge of the consumer products industry, international business, finance, marketing, technology, law, or other fields which are complementary to, and balance the knowledge of, other Board members; a desire to represent and serve the interests of all shareholders; independence; good character; ethics; sound judgment; and ability to devote substantial time to discharge Board and committee responsibilities (including whether they are in compliance with the Board's overboarding policy), taking into account the overall composition of the Board and its committees. +In considering the re-nomination of an incumbent director, the Corporate Responsibility, Sustainability & Governance Committee reviews the director's overall service to the Company during his or her term, including the number of meetings attended, level of participation, and quality of performance, the needs and composition of the Board and its committees, and the qualifications of the director. The Board believes that a variety and balance of perspectives on the Board results in more thoughtful and robust deliberations, and ultimately, better decisions. All potential new director candidates, whether recommended by shareholders or identified by other means, are initially screened by the Chair of the Corporate Responsibility, Sustainability & Governance Committee, who may seek additional information about the background and qualifications of the candidate, and who may determine that a candidate does not have qualifications that merit further consideration by the full committee. With respect to new director candidates who pass the initial screening, the Corporate Responsibility, Sustainability & Governance Committee meets to discuss and consider each candidate's qualifications and potential contributions to the Board, and determines by majority vote whether to recommend such candidate to the Board. The final decision to either appoint a candidate to fill a vacancy between annual meetings or include a candidate on the slate of nominees proposed at an annual meeting is made by the Board. +As set forth in our Corporate Governance Guidelines, it is the general policy of the Board that directors will not stand for re‑election after reaching the age of 72. +DIRECTOR INDEPENDENCE +Pursuant to New York Stock Exchange ("NYSE") listing rules, in order for a director to qualify as "independent", the Board must affirmatively determine that the director has no material relationship with the Company. The Board affirmatively determined that commercial or charitable relationships below the following thresholds will not be considered material relationships that impair a director's independence: (1) if a NIKE director or immediate family member is an executive officer of another company that does business with NIKE and the annual sales to, or purchases from, NIKE are less than one percent of the annual revenues of the other company; and (2) if a NIKE director or immediate family member serves as an officer, director, or trustee of a charitable organization, and NIKE's contributions to the organization are less than one percent of that organization's total annual charitable receipts. +After applying this categorical standard and the applicable NYSE independence standards, the Board has determined that the following director nominees have no material relationship with the Company and are independent: Timothy Cook, Thasunda Duckett, Mónica Gil, Maria Henry, Peter Henry, Jørgen Vig Knudstorp, Michelle Peluso, John Rogers, Jr., and Robert Swan. The Board also determined that Alan Graf, Jr., whose service as a director ended on September 10, 2024, was independent when he served on the Board during fiscal 2025, and that Cathleen Benko, who is not standing for re-election at the Annual Meeting, is independent. In making its independence determinations, the Board specifically considered the following relationships and concluded that none of them were material to NIKE or impaired the applicable director’s independence: +• Payments for products and services in the ordinary course of business between NIKE and Apple, Inc., where Mr. Cook serves as an executive officer and director; +• NIKE's sports marketing relationship with Stanford University, where Mr. Henry serves in senior fellowship positions; and +15 NIKE, INC. +• De minimis payments between NIKE and Ariel Investments, LLC, where Mr. Rogers serves as Chairman, Co-CEO, and Chief Investment Officer. +In each case, the aggregate amount of payments involved in such transactions was for amounts representing significantly less than one percent of either entity's annual revenues, the transactions were entered into at arm's length, and the applicable director did not have any direct involvement in such transactions. +Messrs. Elliott Hill, Travis Knight, and Mark Parker are not independent pursuant to NYSE rules. Messrs. Hill and Parker are not independent pursuant to NYSE rules because they are employed by the Company. Mr. Knight is not independent pursuant to NYSE rules because he is the son of NIKE's co-founder, Mr. Philip Knight, who received compensation in excess of the threshold set forth in applicable NYSE rules for his position as Chairman Emeritus. The compensation paid to Mr. Philip Knight is described in the section below titled "Additional Information—Transactions with Related Persons". In addition, Mr. John Donahoe II, whose service as a director ended on September 19, 2024, was not independent when he served on the Board during fiscal 2025 because he was employed by the Company during that time. +BOARD STRUCTURE AND RESPONSIBILITIES +During fiscal 2025, there were four meetings of the Board and all of our incumbent directors attended at least 75 percent of the total number of meetings of the Board and committees on which he or she served. The Company encourages all directors to attend each annual meeting of shareholders, and all directors then-serving on the Board attended the 2024 annual meeting. +BOARD LEADERSHIP STRUCTURE +NIKE's governing documents provide the Board with flexibility to select the appropriate leadership structure of the Company. In determining the leadership structure, the Board considers many factors, including the specific needs of the business, fulfilling the duties of the Board, and the best interests of the Company's shareholders. +The Company separates the position of Chair of the Board from the position of President and CEO, although this is not a permanent policy of the Board. The Board believes this leadership structure is appropriate for the Company because it separates the leadership of the Board from the duties of day-to-day leadership of the Company. The Executive Chairman, Mr. Mark Parker, presides over meetings of the Board and shareholders. The President and CEO, Mr. Elliott Hill, is in charge of the general supervision, direction, and control of the business and affairs of the Company, subject to the overall direction and supervision of the Board and its committees. +Additionally, as part of the Board's commitment to strong independent Board leadership and oversight, the Board has adopted a policy requiring the appointment of a Lead Independent Director at any time when the Chair of the Board is not independent. The position of Lead Independent Director is entrusted with robust and clearly-defined duties, including: +• serving as a liaison between the Chair and the independent directors; +• approving the meeting agendas for the Board; +• advising the Chair regarding the sufficiency, quality, quantity, and timeliness of information provided to the Board; +• ensuring that meeting schedules permit sufficient time for discussion of all agenda items; +• providing consultation and direct communication with major shareholders, if requested; +• presiding at meetings of the Board at which the Chair is not present, including executive sessions; and +• performing other duties specified in the Lead Independent Director Charter. +In June 2025, the Board re-appointed Mr. Timothy Cook to serve as Lead Independent Director for a term of three years. Mr. Cook continues to serve as Lead Independent Director of the Company working in collaboration with Messrs. Parker and Hill. +The chairs of Board committees also play an active role in the leadership structure of the Board. The Corporate Responsibility, Sustainability & Governance Committee and the Board endeavor to select independent committee chairs who will provide strong leadership to guide the important work of the Board committees. Committee chairs work with the Company's senior executives to ensure the committees are discussing the key strategic risks and opportunities of the Company. In the absence of the Lead Independent Director, a presiding director is appointed to chair executive sessions of non-management directors (consisting of all directors other than Messrs. Parker and Hill). The position of presiding director is rotated among the chairs of the various Board committees, other than the Executive Committee. Executive sessions are regularly scheduled and held at least once each year. +Mr. Philip Knight, NIKE's co-founder, serves as Chairman Emeritus, with a standing invitation to attend meetings of the Board and its committees as a non-voting observer. The Board believes that it benefits from his valuable experience and insights. +For all of these reasons, the Board believes this leadership structure is optimal. +2025 PROXY STATEMENT 16 +BOARD COMMITTEES +The Board's current standing committees are an Audit & Finance Committee; a Compensation Committee; a Corporate Responsibility, Sustainability & Governance Committee; and an Executive Committee. The Board may appoint other committees from time to time. Each standing committee has a written charter and all such charters, as well as the Company's Corporate Governance Guidelines, are available on the Company's corporate website, http://investors.nike.com, and will be provided in print to any shareholder who submits a request in writing to NIKE Investor Relations, One Bowerman Drive, Beaverton, Oregon 97005-6453. +AUDIT & FINANCE COMMITTEE +MEMBERS: +Maria Henry +Peter Henry +Robert Swan, Chair +MEETINGS IN FY 2025: 12 +ROLES AND RESPONSIBILITIES: +The Audit & Finance Committee provides assistance to the Board in fulfilling its legal and fiduciary obligations with respect to: +• Matters involving the Company's accounting, auditing, financial reporting, and internal controls; +• Overseeing the Company's financial policies and activities; +• The integrity of the Company's financial statements and activities of the Company that may have a material impact on the financial position of the Company; +• Matters involving information security (including risks related to cybersecurity) and data protection; +• The Company's compliance with legal and regulatory requirements; +• The independent auditor's qualifications and independence, and the performance of the Company's internal audit function and independent auditor; +• The Company's risk assessment and risk management processes and practices; and +• Considering long-term financing options, long-range tax, financial regulatory and foreign currency issues facing the Company, and management's recommendations concerning capital deployment strategy, major capital expenditures, and material acquisitions or divestitures. +The Board has determined that each member of the Audit & Finance Committee meets all independence and financial literacy requirements applicable to audit committee members under the NYSE listing standards and applicable regulations adopted by the SEC. The Board has also determined that each of Ms. Henry and Mr. Swan is an "audit committee financial expert" as defined in regulations adopted by the SEC. +COMPENSATION COMMITTEE +MEMBERS: +Cathleen Benko* +Timothy Cook, Chair +Mónica Gil +MEETINGS IN FY 2025: 5 +ROLES AND RESPONSIBILITIES: +The Compensation Committee discharges the Board's responsibilities regarding executive and director compensation and senior leadership succession and talent management, and its duties include the following: +• Evaluate the performance of the CEO and other executive officers, and review and approve their compensation; +• Administer and interpret the Company's equity compensation plans and executive incentive compensation plans; +• Administer and monitor compliance with the Company's clawback policy for executive officers; +• Review the succession plans and leadership development programs for the executive officer positions, including reviewing the Company's development and succession management efforts; +• Review and provide guidance to management regarding Company policies, programs, and practices related to talent management and development for executive officers and senior management; and +• Make recommendations to the Board regarding the compensation of directors. +The Board has determined that each member of the Compensation Committee meets all independence requirements applicable to compensation committee members under the NYSE listing standards. +* Ms. Benko will not stand for re-election to the Board at the Annual Meeting. Ms. Peluso is expected to become a member of the Compensation Committee beginning September 9, 2025. +17 NIKE, INC. +CORPORATE RESPONSIBILITY, SUSTAINABILITY & GOVERNANCE COMMITTEE +MEMBERS: +Thasunda Duckett +Michelle Peluso, Chair +John Rogers, Jr. +MEETINGS IN FY 2025: 4 +ROLES AND RESPONSIBILITIES: +The Corporate Responsibility, Sustainability & Governance Committee sets the tone and pace for corporate governance and oversees our Purpose to move the world forward through the power of sport, with a focus on the three pillars of people, planet, and play. Its duties include the following: +• Review and evaluate NIKE's significant strategies, activities, policies, investments, and programs regarding social purpose, corporate responsibility, and sustainability; +• Provide oversight of management's efforts to ensure that the Company's dedication to sustainability is reflected in its business operations; +• Review, evaluate, and make recommendations regarding the social, political, and environmental impact, trends, and issues in connection with the Company's business activities; +• Provide oversight of the Company's community and social impact efforts; +• Review transactions with related persons in accordance with the Company's policies; +• Oversee protection of the Company's corporate reputation and other matters of importance to the Company and its stakeholders; +• Identify individuals qualified to become Board members (consistent with the criteria approved by the Board) and recommend to the Board for approval the slate of Class A and Class B director nominees for election at each annual shareholder meeting; +• Review and make recommendations regarding the size, structure, composition, and leadership of the Board and its committees; +• Review and make recommendations regarding the Company's corporate governance framework; and +• Oversee the annual self-evaluations of the Board and its committees. +The Board has determined that each member of the Corporate Responsibility, Sustainability & Governance Committee meets all independence requirements applicable to +nominating/corporate governance committee members under the NYSE listing standards. +* If elected at the Annual Meeting, Mr. Knudstorp will become a member of the Corporate Responsibility, Sustainability & Governance Committee effective September 9, 2025. +EXECUTIVE COMMITTEE +MEMBERS: +Elliott Hill* +Travis Knight +Mark Parker, Chair +MEETINGS IN FY 2025: 0 +ROLES AND RESPONSIBILITIES: +The Executive Committee is authorized to act on behalf of the Board on all corporate actions for which applicable law does not require participation by the full Board. +• In practice, the Executive Committee acts in place of the full Board only when emergency issues or scheduling conflicts make it difficult or impracticable to assemble the full Board. +• All actions taken by the Executive Committee must be reported at the next Board meeting, or as soon thereafter as practicable. +The Executive Committee held no formal meetings during fiscal 2025, but took action by unanimous written consent. +* Mr. Donahoe served on the Executive Committee until September 19, 2024. Mr. Hill became a member of the Executive Committee effective October 14, 2024. +2025 PROXY STATEMENT 18 +THE BOARD'S ROLE IN RISK OVERSIGHT +While the Company's management team is responsible for day-to-day management of the various risks facing the Company, the Board takes an active role in the oversight of the management of critical business risks. The Board does not view risk in isolation. Risks are considered in virtually every business decision and as part of NIKE's business strategy. The Board recognizes it is neither possible nor prudent to eliminate all risk. Purposeful and appropriate risk-taking is essential for the Company to be competitive on a global basis and to achieve its strategic objectives. +THE BOARD OF DIRECTORS +The Board implements its risk oversight function both as a whole and through committees, which play a significant role in carrying out risk oversight. While the Audit & Finance Committee is responsible for oversight of management's risk management policies, oversight responsibility for particular areas of risk is allocated among the Board committees according to the committee's area of responsibility as reflected in the committee charters. +BOARD COMMITTEES +The AUDIT & FINANCE COMMITTEE oversees risks related to the Company's financial statements, the financial reporting process, accounting, legal matters, investments, access to capital and capital deployment, currency risk and hedging programs, information security (including risks related to cybersecurity), and data protection. The committee oversees the internal audit function, reviews a risk-based plan of internal audits, and reviews a risk-based integrated audit of internal controls over financial reporting. The committee meets separately with the Vice President of Global Audit and Chief Risk Officer, representatives of the independent registered public accountants, and senior management. +The COMPENSATION COMMITTEE oversees risks associated with the Company's compensation philosophy and programs and executive succession and development. +The CORPORATE RESPONSIBILITY, SUSTAINABILITY & GOVERNANCE COMMITTEE oversees risks associated with the Company's corporate purpose and corporate governance, including NIKE's Code of Conduct and its compliance programs, and the structure and performance of the Board and its committees. The committee also oversees protection of the Company's corporate reputation including issues that involve social and community engagement, human capital management, and sustainability innovation relating to the Company's products, its supply chain (including labor practices), and the environment. +EXECUTIVE LEADERSHIP TEAM +Each committee chair works with one or more senior executives assigned to assist the committee in: developing agendas for the year and for each meeting, paying particular attention to areas of business risk identified by management, Board members, internal and external auditors, and in their committee charter; and scheduling agenda topics, presentations, and discussions regarding business risks within their area of responsibility. At meetings, the committees discuss areas of business risk, the potential impact, and management's initiatives to manage business risk, often within the context of important business decisions. Through this process, key business risk areas are reviewed at appropriate times, with some topics reviewed on multiple occasions throughout the year. At every Board meeting, each committee chair provides a report to the full Board outlining the committee's discussions and actions, including those affecting the oversight of various risks. +The Company believes its leadership structure, discussed in detail above, further supports the risk oversight function of the Board. Strong directors chair the various committees involved in risk oversight, there is open communication between management and directors, and all directors are involved in the risk oversight function. +19 NIKE, INC. +THE BOARD'S ROLE IN OVERSEEING THE COMPANY'S CORPORATE PURPOSE +The Board takes an active role overseeing NIKE's commitment to, and progress on, corporate responsibility, sustainability, and governance matters. The Board oversees such matters primarily through the Corporate Responsibility, Sustainability & Governance Committee. This committee oversees the Company's approach to corporate governance, as well as the risks and opportunities associated with NIKE's Purpose to move the world forward through the power of sport, with a focus on the three pillars of people, planet, and play. The committee's responsibilities include, among other things, reviewing and providing guidance to management regarding significant Purpose strategies, activities, policies, investments, and programs; reviewing the development of NIKE's Purpose goals; and monitoring the Company's progress towards those goals. The Compensation Committee also plays a key role with respect to NIKE's Purpose by overseeing talent management and development for executive officers and senior management. More information about Purpose is available on the Mission section of our website. +SHAREHOLDER COMMUNICATIONS WITH DIRECTORS +Shareholders or interested parties desiring to communicate directly with the Board or with any individual director may do so in writing addressed to the intended recipient or recipients, c/o Corporate Secretary, NIKE, Inc., One Bowerman Drive, Beaverton, Oregon 97005-6453. The Office of the Corporate Secretary reviews all such communications and refers relevant correspondence directly to a director, as appropriate. In addition, the Office of the Corporate Secretary regularly summarizes for the Board all communications that relate to the functions of the Board or its committees or that otherwise warrant Board attention. +CODE OF CONDUCT +The NIKE Code of Conduct is available at the Company's corporate website, http://investors.nike.com, and will be provided in print without charge to any shareholder who submits a request in writing to NIKE Investor Relations, One Bowerman Drive, Beaverton, Oregon 97005-6453. The Code of Conduct applies to all of the Company's employees and directors, including our CEO and all other executive officers. The Code of Conduct provides that any waiver of the Code of Conduct for executive officers or directors may be made only by the Board or a committee of the Board. Any such waiver will be publicly disclosed, when required by law. The Company plans to disclose amendments to, and waivers from, the Code of Conduct on the Company's corporate website: http://investors.nike.com. +CAPITAL STRUCTURE +Since NIKE's initial public offering in 1980, the Company's articles of incorporation have provided for NIKE to have two classes of voting stock, consisting of the Class A Stock and the Class B Stock. +RIGHTS OF COMMON STOCK +The shares of Class A Stock and Class B Stock have identical voting and economic rights except that the holders of the Class A Stock and Class B Stock vote as separate classes for purposes of electing directors. Specifically, for as long as the number of outstanding shares of Class B Stock is between 25% and 87.5% of the total number of outstanding shares of Common Stock (as is currently the case), the holders of the Class B Stock, voting as a separate class, have the right to elect 25% of the Board (rounded up to the nearest whole number) and the holders of the Class A Stock, voting as a separate class, have the right to elect the remaining directors. If at any time the outstanding number of shares of Class A Stock is less than 12.5% of the total number of outstanding shares of Common Stock, then the Class B Stock, voting as a separate class, will continue to have the right to elect 25% of the Board (rounded up to the nearest whole number), but the Class A Stock and Class B Stock will vote together as a single class to elect the remaining directors. Outside of director elections, the Class A Stock and Class B Stock vote together on all other matters, with each Class A share and Class B share having one vote per share. +Because twelve directors will be elected at the Annual Meeting and the outstanding number of shares of Class B Stock is between 25% and 87.5% of the outstanding shares of Common Stock, the holders of the Class B Stock are entitled to elect three directors at the Annual Meeting and the holders of the Class A Stock are entitled to elect the remaining nine. For each other matter to be voted on at the Annual Meeting (including Proposals 2, 3, and 4), the Class A Stock and Class B Stock will vote together as a single class, each with one vote per share. +2025 PROXY STATEMENT 20 +Each share of Class A Stock is convertible into one share of Class B Stock. Such conversion is solely at the option of the holder, and cannot be dictated by either the Company or the Board. The Class A Stock is currently primarily held by Swoosh, LLC, an entity that was formed by Mr. Philip Knight, NIKE's co-founder, in 2015 to hold the majority of his shares of Class A Stock. +For additional information regarding NIKE's classes of Common Stock, see the description of the Company's securities included as Exhibit 4.7 to NIKE's Annual Report on Form 10-K for fiscal 2025. For additional information regarding key holders of the Class A Stock and Class B Stock, see the section below titled "Stock Ownership Information—Stock Holdings of Certain Owners and Management". +STRUCTURAL ADVANTAGES +Our unique capital structure enables NIKE to focus on long-term strategy, which our Board believes is critical to creating long-term value. This long-term vision enables the Company to prioritize research and development and innovation, to invest in transformations in support of our strategic objectives, and to integrate Purpose into our business strategy. It also helps to preserve and advance NIKE's unique culture, which we believe powers our success. +At the same time, our capital structure meaningfully protects and represents the interests of our public Class B shareholders. Each share of our Class A Stock and Class B Stock carries the same economic rights and risks, which helps align the interests of our Class A and Class B shareholders. All of our directors, regardless of which class of Common Stock elected them, have fiduciary duties to act in the best interests of all NIKE shareholders. In addition, all directors are subject to the same nomination and evaluation processes, which are described in the section above titled "NIKE, Inc. Board of Directors—Director Nominations", and the Board considers all directors when assessing the mixture of experiences, attributes, and skills represented on the Board. All of the directors nominated for election by our Class B shareholders, as well as six out of nine of the directors nominated for election by our Class A shareholders, are independent, and only independent directors sit on the Audit & Finance Committee, the Compensation Committee, and the Corporate Responsibility, Sustainability & Governance Committee. +INVESTOR FEEDBACK +Although the Board cannot change or eliminate our dual class capital structure without the approval of the holders of the Class A Stock, the Company believes it is important to engage regularly with Class B shareholders to understand their views on NIKE's capital structure. The majority of shareholders with whom we have engaged have expressed that they did not have specific concerns with the Company's dual class structure in light of the fact that it provides for equal voting and economic rights on all matters other than the election of directors, as well as the Company's long history of robust corporate governance practices, strong and effective Board oversight, and highly qualified directors. They also appreciated the Board's responsiveness to feedback, including the Board's decision to include in the slate of Class B director nominees a member from each of the three key Board committees: the Audit & Finance Committee, the Compensation Committee, and the Corporate Responsibility, Sustainability & Governance Committee. +SHAREHOLDER ENGAGEMENT +Our approach to governance is informed by the insights and perspectives of our Class B shareholders. We greatly value the opportunity to engage with and solicit feedback from our shareholders regarding matters involving the Company and believe that maintaining an open dialogue strengthens the Company's approach to its corporate governance practices and disclosures. Below is an overview of the Company's fiscal 2025 engagement practices regarding corporate responsibility, sustainability, executive compensation, and governance matters. These engagements take place in addition to regular financial-related outreach led by our Investor Relations team and engagement with shareholder proponents led by our Office of the Corporate Secretary. +INTEGRATED ENGAGEMENT TEAM TYPES OF ENGAGEMENT KEY FISCAL 2025 ENGAGEMENT TOPICS +• Investor Relations +• Total Rewards and Executive Compensation +• Office of the Corporate Secretary +• One-on-one meetings +• Small group calls +• E-mail communications +• NIKE leadership structure +• Board composition and evergreen refreshment +• Risk oversight +• Executive compensation +• Responsible sourcing and sustainability +In fiscal 2025, we reached out to shareholders representing 48% of our Class B shares +and engaged with shareholders representing 43% of our Class B shares +21 NIKE, INC. +The Board is committed to understanding the views of our shareholders. Accordingly, management reports key themes and feedback that emerge during these engagements to the full Board and any relevant committees, so that we can continue to refine and adapt our practices to better address the issues that our shareholders raise with us. +The Board and management carefully consider and integrate shareholder feedback into the Company's practices and disclosures. Recent changes to our practices include adopting an overboarding policy to increase clarity and transparency about the Board's expectations that directors devote appropriate time to Board responsibilities; refreshing the slate of Class B director nominees to include a member of each of the key Board committees; and refining our fiscal 2024 executive compensation program, including by evolving the long-term incentive award mix to include 50% performance-based restricted stock units. We have also enhanced our proxy statement disclosures over the past several years in response to shareholder feedback, including providing additional detail and transparency regarding our capital structure. +DIRECTOR COMPENSATION FOR FISCAL 2025 +NAME FEES EARNED OR +PAID IN CASH +($) +STOCK +AWARDS (1) +($) +CHANGE IN +PENSION VALUE AND +NONQUALIFIED DEFERRED +COMPENSATION EARNINGS +($) +ALL OTHER +COMPENSATION (2) +($) +TOTAL +($) +Cathleen Benko 100,000 190,305 — 22,747 313,052 +Timothy Cook 165,000 190,305 — 20,000 375,305 +Thasunda Duckett 100,000 190,305 — 42,243 332,548 +Mónica Gil 100,000 190,305 — 5,000 295,305 +Alan Graf, Jr. (3) +34,107 — — — 34,107 +Maria Henry 105,000 190,305 — 20,000 315,305 +Peter Henry 105,000 190,305 — 17,422 312,727 +Travis Knight 100,000 190,305 — — 290,305 +Michelle Peluso 125,000 190,305 — 38,236 353,542 +John Rogers, Jr. 100,000 190,305 — 11,523 301,829 +Robert Swan (4) +130,027 190,305 — 38,521 358,853 +(1) Represents the grant date fair value of restricted stock awards granted in fiscal 2025 computed in accordance with accounting guidance applicable to stock-based compensation. The grant date fair value is based on the closing market price of our Class B Stock on the grant date. As of May 31, 2025, each non-employee director held 2,437 shares of unvested restricted stock, and no non-employee director held any outstanding stock options. +(2) Includes matched contributions to charities under the NIKE Matching Gift Program in the amount of $4,781 for Ms. Benko; $20,000 for Mr. Cook; $20,000 for Ms. Duckett; $5,000 for Ms. Gil; $20,000 for Ms. Henry; $20,000 for Ms. Peluso; and $20,000 for Mr. Swan. For Mses. Benko, Duckett, and Peluso and Messrs. Henry, Rogers, and Swan also includes the value of Company-related merchandise and travel and attendance at the 2024 Paris Olympics. +(3) Mr. Graf did not stand for re-election at our 2024 annual meeting of shareholders; he retired as Chair of the Audit & Finance Committee effective July 31, 2024, and retired as a member of that committee and a member of the Board effective September 10, 2024. Therefore, his annual retainer was prorated and he did not receive a restricted stock award for fiscal 2025. +(4) Mr. Swan was appointed Chair of the Audit & Finance Committee effective August 1, 2024, therefore his annual committee chair retainer was prorated. +DIRECTOR FEES AND ARRANGEMENTS +Under our director compensation program in effect for fiscal 2025, non-employee directors receive: +• An annual retainer of $100,000, paid in quarterly installments. +• When they initially join the Board, a one-time, sign-on restricted stock award valued at $200,000 on the date of grant. This award is subject to forfeiture in the event that service as a director terminates prior to the first anniversary of the date of grant. +• An annual restricted stock award valued at $200,000 on the date of grant, generally, the date of each annual meeting of shareholders. The number of restricted shares granted to each director for fiscal 2025 was determined by dividing the director's award value by the average closing price of our Class B Stock for the 20-trading day period ending on the date of grant. The annual restricted stock award is subject to forfeiture in the event that service as a director terminates prior to the earlier of the next annual meeting and the last day of the 12 th full calendar month following the date of grant. +• For the Lead Independent Director, an annual retainer of $40,000, paid in quarterly installments. +• For chairs of Board committees (other than the Executive Committee), an annual retainer of $25,000 for each committee chaired ($30,000 for the chair of the Audit & Finance Committee), paid in quarterly installments. +• For Audit & Finance Committee members, an additional annual retainer of $5,000, paid in quarterly installments. +2025 PROXY STATEMENT 22 +• Payment or reimbursement of travel and other expenses incurred in attending Board meetings. +• Matching charitable contributions under the NIKE Matching Gift Program, under which directors are eligible to contribute to qualified charitable organizations and the Company provides an equal matching contribution to the charities, up to $20,000 annually in the aggregate. +None of Mr. Hill, Mr. Parker, or Mr. Donahoe received any additional compensation for services provided as a director in fiscal 2025. +STOCK OWNERSHIP GUIDELINES FOR DIRECTORS +NIKE maintains stock ownership guidelines for all non-employee directors. Under these guidelines, directors are required to hold NIKE stock valued at five times their annual cash retainer. New directors are required to attain these ownership levels within five years of their election to the Board. Each of our directors has met or is on track to meet the specified ownership level. +DIRECTOR PARTICIPATION IN DEFERRED COMPENSATION PLAN +Under our DCP, non-employee directors may elect in advance to defer up to 100 percent of the director fees paid by the Company. For a description of the plan, see the section below titled "Executive Compensation—Executive Compensation Tables—Non-Qualified Deferred Compensation in Fiscal 2025—Non-Qualified Deferred Compensation Plans". +23 NIKE, INC. +EXECUTIVE COMPENSATION +PROPOSAL 2 +SHAREHOLDER ADVISORY VOTE TO APPROVE +EXECUTIVE COMPENSATION +In accordance with the requirements of Section 14A of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), we are submitting to shareholders our annual "say-on-pay proposal", an advisory vote to approve the compensation of our Named Executive Officers as described in this proxy statement. At our 2024 annual meeting of shareholders, approximately 83% of the votes cast on the say-on-pay proposal were voted in favor of the proposal. +The Compensation Committee is committed to understanding the views of our shareholders with respect to the executive compensation program. Therefore, during fiscal 2025, the committee considered the results of the 2024 say-on-pay proposal, which the committee believes affirm shareholders' support of the Company's approach to executive compensation and the committee's decisions, as well as direct feedback from shareholders provided during management and Board engagements. +As discussed in this section, our executive compensation program is designed to attract and retain top-tier talent and maximize shareholder value. To achieve the objectives of our executive compensation program and emphasize pay-for-performance principles, the Compensation Committee has continued to employ strong governance practices, including: +• basing a majority of total compensation on performance incentives; +• setting incentive award targets based on clearly disclosed, objective performance measures; +• mitigating undue risk associated with compensation by using multiple performance targets, caps on potential incentive payments, a clawback policy, and additional standalone clawback provisions; and +• requiring executive officers to hold NIKE stock through published stock ownership guidelines. +Because your vote is advisory, it will not be binding on the Board. However, the Board values shareholder opinions, and the Compensation Committee will take into account the outcome of the vote when considering future executive compensation arrangements. +BOARD RECOMMENDATION +The Board of Directors recommends that shareholders vote FOR approval of the following resolution: +RESOLVED, that the shareholders approve the fiscal 2025 compensation paid to the Named Executive Officers as disclosed in this proxy statement pursuant to the SEC's compensation disclosure rules (which disclosure includes the Compensation Discussion and Analysis, the compensation tables, and the narrative disclosures that accompany the compensation tables). +2025 PROXY STATEMENT 24 +COMPENSATION DISCUSSION AND ANALYSIS +This Compensation Discussion and Analysis describes our compensation program, philosophy, decisions, and process for the compensation of our Named Executive Officers for fiscal 2025: +NAMED EXECUTIVE OFFICER TITLE +Elliott Hill President and Chief Executive Officer (since October 14, 2024) +Matthew Friend Executive Vice President and Chief Financial Officer +Robert Leinwand Executive Vice President, Chief Legal Officer +Ann Miller Executive Vice President, Global Sports Marketing +Craig Williams +Executive Vice President, Chief Commercial Officer (1) +John Donahoe II +Former President and Chief Executive Officer (until October 13, 2024) (2) +Monique Matheson +Former Executive Vice President, Chief Human Resources Officer (3) +Heidi O'Neill +Former President, Consumer, Product & Brand (4) +(1) Mr. Williams' title changed from President, Geographies & Marketplace to Executive Vice President, Chief Commercial Officer effective June 18, 2025. +(2) Mr. Donahoe ceased to serve as the Company's President and CEO and member of the Board effective as of October 14, 2024, when he was succeeded by Mr. Hill, and retired effective January 31, 2025. +(3) Ms. Matheson retired as the Company's EVP, Chief Human Resources Officer effective as of January 6, 2025, and will retire from the Company in fiscal year 2026. +(4) Ms. O'Neill ceased to serve as the Company's President of Consumer, Product, and Brand effective as of May 2, 2025, in connection with certain organization changes including elimination of the President, Consumer, Product & Brand role, but will remain a full-time non-executive employee through her separation from the Company on September 5, 2025. +This Compensation Discussion and Analysis is organized into five sections: +• Executive Summary (page 26) +• Compensation of Our Named Executive Officers (page 29) +• Our Compensation Process (page 38) +• Other Compensation Practices (page 39) +• Compensation Committee Report (page 41) +Key Defined Terms +TERM DEFINITION +401(k) Plan 401(k) Savings and Profit Sharing Plan for Employees of NIKE, Inc. +Absolute TSR Company total shareholder return for the applicable performance period +Adjusted EBIT EBIT, excluding the impact of acquisitions and divestitures; changes in accounting principles; unanticipated restructurings; unanticipated exchange rate fluctuations; and other extraordinary, unusual, or infrequently occurring items +Adjusted Revenue +Company revenue, excluding the impact of acquisitions and divestitures; changes in accounting principles; unanticipated restructurings; unanticipated exchange rate fluctuations; and other extraordinary, unusual, or infrequently occurring items +CD&A Compensation Discussion and Analysis +DCP NIKE, Inc. Deferred Compensation Plan +EBIT Company earnings before interest and taxes +NEO Named Executive Officer +PSP NIKE, Inc. Executive Performance Sharing Plan +PSU Performance-based restricted stock unit +Relative TSR Absolute TSR for the applicable performance period relative to total shareholder return over the same period for the other companies in the S&P 500 +RSU Time-vesting restricted stock unit +SIP NIKE, Inc. Stock Incentive Plan +25 NIKE, INC. +EXECUTIVE SUMMARY +OUR APPROACH TO EXECUTIVE COMPENSATION +• We follow a pay for performance philosophy, intended to drive business results and maximize shareholder value. Compensation is therefore highly incentive-based and heavily weighted towards long-term awards to emphasize long-term performance. +• We strive every day to win as a team . To foster teamwork, and ensure internal pay equity, we utilize a cohort approach by aligning compensation across executive roles. +• We value shareholder feedback . We consider the results of our annual say-on-pay vote—approximately 83% in favor last year, which we believe affirms shareholders' support of our executive compensation approach and decisions—as well as feedback shared directly through our shareholder engagement efforts described on page 21. +DIRECT COMPENSATION ELEMENTS +NIKE's direct compensation for the NEOs generally consists of the following elements: For fiscal 2025, the Compensation Committee determined not to increase the amount of any element of direct compensation for any of our NEOs. +ELEMENT KEY CHARACTERISTICS PURPOSE +Base Salary Fixed cash compensation Provides market competitive baseline compensation to attract and retain top-tier talent +Annual Cash Incentive Award – PSP Variable cash incentive compensation earned at 0% – 200% based on Company performance over a 1-year performance period Motivates and rewards achievement of sustainable and profitable growth +Long-Term Incentive Award – SIP +PSUs +(50%) +Variable stock-based incentive compensation earned at 0% – 200% based generally on achievement of Relative TSR performance metric over a 3-year performance period Aligns NEOs' interests with those of our shareholders by motivating and rewarding achievement of long-term shareholder value and growth; promotes retention +Stock Options +(35%) +Stock-based incentive compensation that generally vests in 4 equal annual installments; only provides value if our stock price appreciates Aligns NEOs' interests with those of our shareholders by rewarding achievement of upside potential; promotes retention +RSUs +(15%) +Stock-based incentive compensation that generally vests in 3 or 4 equal annual installments; value tied to our stock price Aligns NEOs' interests with those of our shareholders by rewarding long-term value creation; promotes retention +2025 PROXY STATEMENT 26 +CEO TRANSITION HIGHLIGHTS +In September 2024, we announced a CEO transition plan pursuant to which, on October 14, 2024, Mr. Hill became President and CEO of NIKE. Mr. Donahoe, our President and CEO since 2020, resigned from that role effective as of the same date and served as an advisor to NIKE through his retirement on January 31, 2025. The Compensation Committee approved certain compensation arrangements in connection with, and support of, the CEO transition, the highlights of which are summarized below: +CURRENT CEO – +MR. HILL FORMER CEO – +MR. DONAHOE OTHER NON-CEO NEOs +• Base salary of $1.5 million and annual cash incentive target opportunity equal to 200% of base salary (prorated for fiscal 2025 consistent with our practice for all bonus-eligible employees). +• Annual target fiscal 2025 long-term incentive award equal to $15.5 million consisting of 50% PSUs, 35% stock options, and 15% RSUs. +• One-time awards to make Mr. Hill whole for certain forfeited compensation from his prior roles consisting of $4 million in cash and $3 million in RSUs. For more information, see the section below titled "Transition and Retention Awards". +• Standard Employee Matching Gift Program applicable to employees generally (no enhanced charitable gift matching). +• Annual base salary and employee benefit plan eligibility unchanged through retirement on January 31, 2025. +• No additional compensation or benefits for serving in advisor role. +• Outstanding unvested equity awards treated in accordance with their terms upon retirement, as applicable. For more information, see the section below titled "Executive Compensation Tables—Potential Payments upon Termination or Change-in-Control". +• Eligible to receive the benefits payable under his non-competition agreement upon a voluntary termination of employment. For more information, see the section below titled "Executive Compensation Tables—Potential Payments upon Termination or Change-in-Control". +• Equity retention awards to each other non-CEO NEO (other than Mr. Leinwand, who was promoted into the role of Executive Vice President, Chief Legal Officer in November 2024) on a limited, one-time basis in order to support business and leadership continuity and promote retention during this significant transitional period. For more information, see the section below titled "Transition and Equity Retention Awards". +INCENTIVE AWARD OUTCOMES +The following summarizes incentive award outcomes for fiscal 2025. Both the fiscal 2025 PSP and fiscal 2023 – 2025 PSUs were earned and paid out at 0%. For more information on incentive award outcomes for the NEOs, see the section below titled "Compensation of our Named Executive Officers". +FISCAL 2025 PSP FISCAL 2023 – 2025 PSUs +FISCAL YEAR 2025 REALIZABLE PAY +As discussed elsewhere in this proxy statement, our philosophy is to "pay for performance". As a result, executive compensation is highly incentive-based and includes, among other elements, a mixture of variable cash- and stock-based compensation elements consisting of PSP, PSUs, stock options, and RSUs. In total, 93% of total target annual compensation for our CEO is at risk (88% for the other current non-CEO NEOs). Given that a significant portion of our executive compensation packages varies depending on company performance, the grant date value of compensation, as reported annually in the Summary Compensation Table, is not always reflective of the actual realizable pay value that is ultimately received by our NEOs. Realizable Pay reinforces a pay-for-performance linkage as the target economic value of short- and long-term incentive opportunities under our executive compensation program only provide value when meaningful performance is achieved. +27 NIKE, INC. +To illustrate the differences, the graphs below compare, for the current CEO and other current non-CEO NEOs (on average), the 2025 Total Target Compensation and the 2025 Summary Compensation Table Compensation values to Realizable Pay at the end of fiscal year 2025. For this purpose: +• "Total Target Compensation" refers to the sum of target annual base salary, target fiscal 2025 PSP, target values for annual long-term incentive awards granted in fiscal 2025, and target values for one-time awards granted in connection with the CEO transition (which for Mr. Hill consisted of a sign-on RSU award and sign-on cash award, and for the other current non-CEO NEOs, excluding Mr. Leinwand, consisted of equity retention awards); +• "Summary Compensation Table Compensation" refers to the actual disclosure in the Summary Compensation Table; and +• "Realizable Pay" refers to the sum of actual base salary, actual fiscal 2025 PSP payouts ($0), the potential payout value of long-term incentive awards granted in fiscal 2025 (based on the intrinsic value of stock option grants, assuming threshold achievement for PSUs (excluding special retention awards) as reported in the Outstanding Equity Awards Table, and assuming 50% of each special retention award is earned) calculated using a stock price of $60.59, which was the closing price of our common stock on the last business day of fiscal 2025, and, for Mr. Hill, the one-time cash award granted in fiscal 2025 in connection with the CEO transition. +The graphs below are not substitutes for the information required by the 2025 Summary Compensation Table for fiscal years 2023 – 2025, which appears on page 42. +CEO +Average Current Non-CEO NEOs (1) +(1) The current non-CEO NEOs consist of Messrs. Friend, Leinwand, and Williams and Ms. Miller. +(2) Summary Compensation Table Compensation includes no value for PSP, which was earned at 0%. +(3) Realizable Pay includes no value for PSP, which was earned at 0%, or stock options, which had no intrinsic value as of May 31, 2025. +EXECUTIVE COMPENSATION GOVERNANCE PRACTICES +WHAT WE DO +WHAT WE DON'T DO +ü Base a majority of total compensation on performance and retention incentives +ü Mitigate risk by using multiple performance periods and metrics, incentive payment caps, a clawback policy, and additional standalone clawback provisions +ü Base incentive awards on clearly disclosed, objective performance goals +ü Maintain robust stock ownership guidelines +ü Vest stock-based awards over time to promote long-term performance and retention +ü Provide only double-trigger change-in-control acceleration for stock-based awards +û No dividend equivalents paid on PSUs or RSUs unless and until shares are earned +û No repricing of stock options +û No hedging transactions or short sales permitted +û No pension or supplemental executive retirement plan +û No tax gross-ups for perquisites, other than in accordance with our standard relocation policy +û No cash-based change-in-control benefits +û No excise tax gross-ups upon change of control +2025 PROXY STATEMENT 28 +COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS +COMPENSATION OBJECTIVES AND STRUCTURE +Our executive compensation program is designed to attract and retain top-tier talent in a competitive marketplace and to maximize shareholder value by rewarding NEOs for strong Company performance. The program consists of direct compensation, with a focus on incentive compensation, and competitive benefits that are generally consistent with the benefits offered to our other U.S.-based employees. +We structure our executive compensation program in the context of our business strategy and talent plan. To foster teamwork and ensure internal pay equity, we utilize a segmented cohort approach that aligns compensation across certain executive roles. Cohort compensation levels are determined by holistically considering factors relating to our business, the competitive market for top-tier talent, and the applicable executives—including future potential, individual performance, market insights, succession planning, retention, and leadership continuity. +Our philosophy is to "pay for performance" in order to drive business results and maximize shareholder value. As a result, executive compensation is highly incentive-based and weighted towards long-term awards to emphasize long-term performance and support retention. Our executive compensation program balances performance incentives, including by using multiple performance metrics and periods, and through a mixture of cash- and stock-based compensation elements. Stock-based compensation—which consists of PSUs, stock options, and RSUs—is also structured to pay for performance by linking the majority of each NEO's target total direct compensation directly to our stock price. The following charts illustrate the mix of components that make up fiscal 2025 target total annual direct compensation for our NEOs, excluding special transition and equity retention awards granted on a limited, one-time basis in connection with Mr. Hill's appointment as CEO, as described elsewhere in this proxy statement. +* "Current Non-CEO NEOs" represents the average for Messrs. Friend, Leinwand, and Williams and Ms. Miller. It excludes Mr. Donahoe (who retired on January 31, 2025) and Mses. Matheson and O'Neill (each of whom retired from their role during fiscal 2025 and from the Company during fiscal 2026). +As illustrated in the section below titled "Our Compensation Process", the Compensation Committee determines the target value and composition of the compensation package for each of our NEOs by considering multiple factors, including competitive data, individual and Company performance, evolving responsibilities, our cohort compensation approach, retaining top-tier talent in a highly competitive talent marketplace, and, for the compensation of each NEO other than our CEO, our CEO's recommendation. Target compensation amounts are reviewed annually and adjusted as the committee determines appropriate. +BASE SALARY +Base salary is a fixed element of compensation that serves to attract and retain top-tier talent. Generally, the Compensation Committee reviews and determines base salaries for our NEOs in June, with any adjustments becoming effective in August of the +29 NIKE, INC. +same year. The Compensation Committee set Mr. Hill's base salary to align with Mr. Donahoe's base salary in connection with Mr. Hill's appointment as President and CEO. The committee set Mr. Leinwand's base salary in connection with his appointment as Executive Vice President, Chief Legal Officer. Fiscal 2025 base salaries for each other NEO remained unchanged compared to fiscal 2024. +NAMED EXECUTIVE OFFICER FISCAL 2025 BASE SALARY % CHANGE +Elliott Hill $1,500,000 N/A +Matthew Friend $1,250,000 0% +Robert Leinwand $900,000 N/A +Ann Miller $1,100,000 N/A +Craig Williams $1,250,000 0% +John Donahoe II $1,500,000 0% +Monique Matheson $1,100,000 N/A +Heidi O'Neill $1,250,000 0% +ANNUAL CASH INCENTIVE +Annual cash incentive awards are paid to the NEOs under our PSP and are designed to reflect our "pay for performance" philosophy. For fiscal 2025, PSP awards were eligible to be earned between 0% and 200% of target based on Company performance during the fiscal year. The Compensation Committee retains discretion to adjust PSP metrics and award payouts based on individual or Company performance. +The Compensation Committee set the PSP target awards for Mr. Hill and Mr. Leinwand in connection with their appointment as President and CEO and Executive Vice President, Chief Legal Officer, respectively. The committee maintained fiscal 2025 PSP target awards for each other NEO at the same level as his or her fiscal 2024 PSP target award. Therefore, the fiscal 2025 PSP target awards were: +NAMED EXECUTIVE OFFICER FISCAL 2025 PSP TARGET AWARD +(% OF BASE SALARY) +Elliott Hill 200% +Matthew Friend 120% +Robert Leinwand 120% +Ann Miller 120% +Craig Williams 120% +John Donahoe II 200% +Monique Matheson 120% +Heidi O'Neill 120% +Consistent with the prior year, the committee maintained equal weighting for each metric (Adjusted Revenue and Adjusted EBIT) as well as a single, year-long performance period. +In setting the year-long performance goals for the PSP, the Compensation Committee sought to drive sustainable and profitable growth. The Compensation Committee recognizes that PSP target levels should reflect goals which are rigorous yet reasonable and considers market conditions and prior performance. Although we strive for year-over-year improvement in all areas of our business, fiscal 2025 PSP targets were set below fiscal 2024 target levels in light of the business environment that existed at that time. Accordingly, the Adjusted Revenue target goal represented a decrease of approximately 3% compared to actual fiscal 2024 revenue, with threshold and maximum goals set equidistant from the target goal to balance stretch and risk. The Adjusted EBIT target goal represented a decrease of approximately 8% compared to actual fiscal 2024 EBIT, with threshold and maximum goals set non-equidistant from the target goal; additional upside stretch was built into the maximum goal to incentivize exceptional performance. As described below, the applicable threshold performance levels for fiscal 2025 were not achieved. +For fiscal 2025, Adjusted Revenue of $46.4 billion corresponded to an earnout of 0% and Adjusted EBIT of $3.5 billion corresponded to an earnout of 0%. These earnouts were averaged together to calculate a PSP payout of 0% for all NEOs. The fiscal 2025 PSP performance goals and achievement levels are illustrated below. +2025 PROXY STATEMENT 30 +FISCAL 2025 PERFORMANCE GOALS AND RESULTS +(Dollars in millions) +% PAYOUT THRESHOLD +25% TARGET +100% +MAXIMUM +200% +Adjusted Revenue (1) +(Weighted 50%) +EARNOUT: +0% +Adjusted EBIT (1) +(Weighted 50%) +EARNOUT: +0% +FISCAL 2025 PSP PAYOUT 0% +(1) As described on page 31, each metric excluded the impact of certain non-operational events to help drive and reward organic growth. +LONG-TERM INCENTIVE +Long-term incentive compensation incentivizes and rewards long-term Company performance, aligns executives' interests with those of our shareholders, and promotes retention in a highly competitive talent marketplace. Therefore, this element of our executive compensation program forms the largest portion of our NEOs' direct compensation, constituting 78% of fiscal 2025 target total direct compensation for Mr. Hill on an annualized basis and 73% for each other current non-CEO NEO, excluding one-time sign-on and retention awards described elsewhere in this proxy statement. +Long-term incentive compensation consists of three components: PSUs, stock options, and RSUs, each granted under our SIP. In fiscal 2024, the Compensation Committee finished a multi-year evolution to increase the proportion of the total long-term incentive award delivered in the form of PSUs to 50%. Therefore, consistent with fiscal 2024, fiscal 2025 NEO awards were delivered 50% as PSUs, 35% as stock options, and 15% as RSUs. +LONG-TERM INCENTIVE AWARD MIX (1) +(1) Excludes one-time sign-on and retention awards described elsewhere in this proxy statement. +FISCAL 2025 AWARD GRANTS +The Compensation Committee determined the fiscal 2025 long-term incentive awards in June 2024. In setting the value of each long-term incentive award, the committee considered multiple factors, including individual and Company performance, evolving responsibilities, our cohort compensation approach, and retaining top-tier talent in a highly competitive talent marketplace. +In connection with the CEO transition, the Compensation Committee set the target value of the long-term incentive award for Mr. Hill at $15,500,000. The Compensation Committee considered Mr. Hill's target fiscal 2025 long-term incentive award to be competitive and within a reasonable range of market median. The committee set the target value for Mr. Leinwand's long-term incentive award in connection with his appointment as Executive Vice President, Chief Legal Officer. The target value and mix of +31 NIKE, INC. +long-term incentive awards for each other NEO remained unchanged compared to fiscal 2024. Therefore, the fiscal 2025 long-term incentive award target values were: +NAMED EXECUTIVE OFFICER TOTAL FISCAL 2025 +LONG-TERM INCENTIVE AWARD TARGET PSUs +(50%) STOCK OPTIONS +(35%) RSUs +(15%) +Elliott Hill (1) +$15,500,000 → $7,750,000 $5,425,000 $2,325,000 +Matthew Friend $8,000,000 → $4,000,000 $2,800,000 $1,200,000 +Robert Leinwand (2) +$5,500,000 → $2,750,000 $1,925,000 $825,000 +Ann Miller $5,500,000 → $2,750,000 $1,925,000 $825,000 +Craig Williams $8,000,000 → $4,000,000 $2,800,000 $1,200,000 +John Donahoe II $19,000,000 → $9,500,000 $6,650,000 $2,850,000 +Monique Matheson $5,500,000 → $2,750,000 $1,925,000 $825,000 +Heidi O'Neill $8,000,000 → $4,000,000 $2,800,000 $1,200,000 +(1) Given that Mr. Hill commenced employment after the awards for fiscal 2025 were granted to executive officers (including NEOs) in September 2024, Mr. Hill's fiscal 2025 long-term incentive awards were granted on his start date in October 2024. The share calculation methodology and vesting schedule for Mr. Hill's awards are the same as the September 1, 2024 annual equity grants to executive officers generally, but the exercise price of Mr. Hill's stock options is equal to the closing share price of the Company on the date of grant (as required per the terms and conditions of the SIP). +(2) Because Mr. Leinwand was promoted after the awards for fiscal 2025 were granted to executive officers (including NEOs) in September 2024, Mr. Leinwand's fiscal 2025 long-term incentive awards were granted in two parts. He received an initial annual grant on September 1, 2024 and a supplemental grant upon his promotion to achieve the total target long-term incentive awards set forth in this table. The share calculation methodology and vesting schedule for Mr. Leinwand's supplemental grant is the same as the September 1, 2024 annual equity grants to executive officers generally, but the exercise price of Mr. Leinwand's supplemental stock options is equal to the closing share price of the Company on the date of grant (as required per the terms and conditions of the SIP). +FISCAL 2025 EQUITY AWARD UPDATES +In the first fiscal quarter of 2025, the Compensation Committee reviewed our long-term incentive program under the SIP and determined to make the following changes to the Company's long-term incentive awards for grants made to all equity-eligible employees (including our NEOs), commencing with the fiscal 2025 award grants: +• Included retirement provisions in PSU and RSU awards (previously only included in stock option awards) and, in PSU, RSU and stock option awards, added protections for an involuntary termination of employment (other than due to death, total disability or cause) in lieu of provisions regarding treatment on a divestiture or reduction in force (with the prorated payment for PSUs based on actual performance), thus standardizing treatment both between award types and among all equity-eligible employees. These enhancements, described in more detail in the section below titled "Executive Compensation Tables—Potential Payments upon Termination or Change-in-Control", provide additional limited exceptions to the general rule that unvested equity awards are forfeited when an equity holder leaves the Company and, accordingly, further promote retention in a highly competitive talent marketplace. +• Extended the overall vesting period for RSUs granted to our NEOs from three years to four years to align with the vesting schedule used for grants to all equity-eligible employees and, accordingly, further promote retention and incentivize longer-term value creation. +• Streamlined "Normal Retirement" and "Early Retirement" provisions in stock option awards in order that a single set of terms and conditions will be applicable to a person becoming retirement eligible under their stock option awards going forward, as described in more detail in the section below titled "Executive Compensation Tables—Potential Payments upon Termination or Change-in-Control". +2025 – 2027 PSUs +PSUs align our NEOs' interests with those of our shareholders by motivating and rewarding achievement of long-term shareholder value and growth. PSU awards reflect our "pay for performance" philosophy: they are earned between 0% and 200% of target based on Company performance during a three-year performance period. For the PSUs granted in fiscal 2025, the Compensation Committee shifted the performance period for PSUs from our historical practice of using dates aligned with our fiscal year (June 1 through May 31) to a period aligned with the grant date for all equity-eligible employees (September 1 through August 31), while maintaining the overall length of the applicable performance period (three years). +In the first fiscal quarter of 2025, the Compensation Committee selected the metric, corresponding performance goals, and award terms for the fiscal 2025 – 2027 PSU awards. The committee will determine the earnout of the fiscal 2025 – 2027 PSU awards following the completion of the three-year performance period, and any PSUs that are earned will vest on September 1, 2027. +Consistent with the prior year's awards, the Compensation Committee selected Relative TSR as the metric for the fiscal 2025 – 2027 PSU awards and continued to target above-median performance as shown in the table below: +2025 PROXY STATEMENT 32 +FISCAL 2025 – 2027 PERFORMANCE GOALS +% PAYOUT +THRESHOLD +25% +TARGET +100% +MAXIMUM +200% +Relative TSR (1) +(1) Relative TSR for fiscal years 2025, 2026, and 2027, calculated using the 20-trading day average stock price and assuming that dividends paid during the performance period are reinvested in the applicable company's stock. +PSUs will be earned at 100% of target if the Company's Relative TSR for the performance period is at the 55 th percentile, and will be earned at 0% if the Company's Relative TSR for the performance period is below the 25 th percentile. PSU earnout based on Relative TSR performance is subject to a cap of 100% of target if Absolute TSR for the performance period is negative. The Compensation Committee selected three-year Relative TSR as the performance metric because it is an objective and transparent measure of long-term shareholder value, especially in the context of a volatile market. Furthermore, the cap on payout if Absolute TSR is negative incentivizes NEOs to pursue long-term growth. +The fiscal 2025 – 2027 PSU awards also contain a People & Planet modifier designed to support our commitment to Purpose, which is a key component of our long-term strategy. If Relative TSR meets or exceeds the threshold performance goal, the People & Planet modifier permits the Compensation Committee to adjust the earnout upwards or downwards by up to 20 percentage points (subject to both the 200% maximum earnout and the 100% Absolute TSR cap) based on a holistic assessment of the Company's performance with respect to employee engagement and inclusion, employee retention, and sustainability. Structuring the modifier as a holistic assessment ensures that the final earnout comprehensively balances these broad and disparate issues and appropriately reflects the spirit of our Purpose commitment. +The target number of PSUs granted to each NEO for fiscal 2025 was determined by dividing the NEO's target award value by the average closing price of our Class B Stock for the 20-trading day period ending on the date of grant (or, for Mr. Hill, whose fiscal 2025 long-term incentive awards were granted shortly following his start date in October 2024, and for Mr. Leinwand's supplemental award, granted in connection with his promotion in November 2024), the 20-trading day period ending on September 1, 2024, which was the date of the annual grant for equity-eligible employees generally). PSUs accumulate dividend equivalents that are paid only when, and to the extent, they vest. +To promote retention, the PSU awards generally provide that any unvested PSUs are forfeited if the NEO leaves the Company, with limited exceptions. Upon an involuntary termination of employment or retirement (as described in the section below titled "Executive Compensation Tables—Potential Payments Upon Termination or Change-in-Control"), the NEO will remain eligible to earn a prorated portion of any outstanding unvested PSUs based on actual performance for the performance period (any such earned prorated portion to be settled after the original scheduled vesting date). +STOCK OPTIONS +Stock options align our NEOs' interests with those of our shareholders by rewarding the achievement of upside potential, and they reflect our "pay for performance" philosophy by rewarding the NEOs only if the price of our Class B Stock appreciates. +The number of stock options granted to each NEO (excluding Mr. Hill and Mr. Leinwand) for fiscal 2025 was determined by dividing the NEO's award value by the Black-Scholes value (calculated based on a 20-day average stock price and the available five-year and seven-year interest rates) of a stock option on the date of grant. For Mr. Hill, whose fiscal 2025 long-term incentive awards were granted shortly following his start date in October 2024, and for Mr. Leinwand's supplemental award, granted in connection with his promotion in November 2024, the number of stock options granted was determined using the Black-Scholes value calculated for the 20-trading day period ending on September 1, 2024, which was the date of the annual grant for equity-eligible employees generally. +Options granted to the NEOs vest in equal annual installments over four years and have an exercise price equal to the closing market price of our stock on the date of grant (or the trading day immediately prior to the grant date, if the grant date is not a trading day). To promote retention, stock options generally provide that if a NEO leaves the Company, they forfeit any unvested stock options. Forfeiture is subject to a limited retirement provision designed to encourage executives to delay retirement, as well as partial accelerated vesting upon an involuntary termination of employment (each as described in the section below titled "Executive Compensation Tables—Potential Payments Upon Termination or Change-in-Control"). +RSUs +RSUs align our NEOs' interests with those of our shareholders by rewarding the achievement of long-term value creation, and they reflect our "pay for performance" philosophy because their value is directly tied to our Class B Stock price. +The number of RSUs granted to each NEO for fiscal 2025 was determined by dividing the NEO's award value by the average closing price of our Class B Stock for the 20-trading day period ending on the date of grant (or, for Mr. Hill, whose fiscal 2025 long-term incentive awards were granted shortly following his start date in October 2024, and for Mr. Leinwand's supplemental +33 NIKE, INC. +award, granted in connection with his promotion in November 2024, the 20-trading day period ending on September 1, 2024, which was the date of the annual grant for equity-eligible employees generally). RSUs granted to the NEOs as part of long-term incentive compensation vest in equal annual installments over four years (with the exception of Mr. Hill's sign-on RSU award and RSUs granted prior to fiscal 2025, which vest over three years) and accumulate dividend equivalents that are paid only upon vesting. To promote retention, RSU awards generally provide that any unvested RSUs are forfeited if the NEO leaves the Company. Forfeiture is subject to partial accelerated vesting upon an involuntary termination of employment or retirement (as described in the section below titled "Executive Compensation Tables—Potential Payments Upon Termination or Change-in-Control"). +FISCAL 2023 AWARD RESULTS +As previously disclosed in our 2023 proxy statement, the fiscal 2023 – 2025 PSU awards granted in June 2022 were to be earned between 0% and 200% of target based on Relative TSR over a three-year performance period (subject to a payout cap of 100% if Absolute TSR was negative). In addition, if Relative TSR was achieved at or above the threshold performance goal, a People & Planet modifier would allow the award payout to be increased or decreased by up to 20 percentage points (subject to both the 200% maximum earnout and the 100% Absolute TSR cap) based on a holistic assessment of the Company's performance with respect to employee engagement and inclusion, leadership representation, and sustainability. +NIKE's Relative TSR for fiscal years 2023 – 2025 was at the 4 th percentile, corresponding to an earnout of 0%. Relative TSR was calculated in comparison to the companies that were included in the S&P 500 as of May 31, 2025, using the 20-trading day average stock price and assuming that dividends paid during the performance period were reinvested in the applicable company's stock. Because Relative TSR was below the threshold performance goal, the People & Planet modifier was not applicable. Therefore, as illustrated below, the total payout for the fiscal 2023 – 2025 PSU awards was 0% for each of the NEOs. +FISCAL 2023 – 2025 PERFORMANCE RESULTS +FINANCIAL PERFORMANCE METRIC +% PAYOUT +THRESHOLD +25% +TARGET +100% +MAXIMUM +200% +Relative TSR +EARNOUT: +0% +PEOPLE & PLANET MODIFIER +• The People & Planet modifier did not apply because Relative TSR performance was below the threshold performance level +MODIFIER: +0% +TOTAL PAYOUT +0% +TRANSITION AND EQUITY RETENTION AWARDS +In connection with the CEO transition, the Compensation Committee also made certain one-time grants to Mr. Hill, consisting of a one-time $4,000,000 cash payment (subject to clawback for two years commencing on Mr. Hill's appointment) and a one-time $3,000,000 sign-on RSU award under our SIP. These one-time CEO transition awards are intended to make Mr. Hill whole for a portion of compensation that he forfeited from his prior roles in connection with his appointment as NIKE's CEO and, with respect to the award of sign-on RSUs, immediately align Mr. Hill's incentives with the Company's ongoing and long-term success. +2025 PROXY STATEMENT 34 +ONE-TIME CEO TRANSITION GRANTS FOR MR. HILL +One-Time Cash Award +• One-time $4,000,000 cash award granted to support a smooth and effective transition. +• Intended to make Mr. Hill whole for a portion of compensation forfeited from his prior roles in connection with his appointment as NIKE's CEO. +• Subject to recoupment upon certain triggering events, including if Mr. Hill voluntarily resigns within two years following his appointment as NIKE's CEO. +Sign-On RSU Award +• $3,000,000 sign-on RSU award that vests in equal installments over 3 years. +• Intended to make Mr. Hill whole for a portion of compensation forfeited from his prior roles in connection with his appointment as NIKE's CEO and to align Mr. Hill's incentives with the Company's ongoing and long-term success. +ONE-TIME EQUITY RETENTION AWARDS TO NON-CEO NEOs +After considering the need to support business and leadership continuity and to promote retention during this transitional period, the Compensation Committee also approved limited, one-time equity retention awards to our non-CEO NEOs (other than Mr. Leinwand, who was promoted into the role of Executive Vice President, Chief Legal Officer in November 2024) as illustrated in the table below. These retention awards cliff vest on September 18, 2026 and are earned 50% subject to continuous service through the scheduled vesting date, and 50% subject to continuous service through the scheduled vesting date and the achievement of a $100.00 stock price performance measure. For the stock price performance measure, target level achievement requires, as of any particular date prior to September 18, 2026, that the thirty (30)-consecutive trading day average price per share equal $100.00. Performance below target results in a 0% payout in respect of the stock price performance measure, and achievement at or above target results in a 100% payout in respect of the stock price performance measure. +NAMED EXECUTIVE OFFICER TARGET GRANT VALUE – RETENTION EQUITY +Matthew Friend $4,000,000 +Robert Leinwand — +Ann Miller +$3,000,000 +Craig Williams +$6,000,000 +Monique Matheson +$3,000,000 +Heidi O'Neill +$6,000,000 +The Compensation Committee selected a stock price performance metric as a means to incentivize senior management to drive sustainable and profitable growth, and because it is an objective and transparent measure of shareholder value. The Compensation Committee also determined that a portion of the retention awards should not be subject to any additional performance measure and vest (if at all) solely based on continued service, in order to balance promoting performance with long-term retention. +OTHER COMPENSATION +RETIREMENT PLANS +We maintain a U.S. tax qualified retirement savings plan—the 401(k) Plan—under which all eligible U.S. employees, including the NEOs, are able to make pre-tax and after-tax contributions from their cash compensation. We make annual matching contributions for all participants equal to 100% of their pre-tax contributions up to 5% of their total eligible compensation. +The Internal Revenue Code limits the amount of compensation that can be deferred under the 401(k) Plan, and also limits the amount of salary and annual cash incentive award ($345,000 for fiscal 2025) that may be taken into account when determining contributions under that plan. Accordingly, we provide our NEOs and other highly compensated employees with the opportunity to defer their compensation, including amounts in excess of the tax law limit, under our DCP. We do not match deferrals to the DCP. Balances in the DCP, including the balances of the NEOs, are unsecured and at-risk, meaning that the balances may be forfeited in the event of the Company's financial distress, such as bankruptcy. +Fiscal 2025 matching contributions to the NEOs under the 401(k) Plan are included in the All Other Compensation column in the Summary Compensation Table on page 42. +EMPLOYEE STOCK PURCHASE PLAN +Our Employee Stock Purchase Plan allows eligible employees in the United States and in many countries outside of the United States, including the NEOs, to purchase Class B Stock through payroll deductions at a 15% discount to the market price on the first or last trading day of the six-month purchase period, depending on which day the stock price was lower. +35 NIKE, INC. +PERQUISITES AND OTHER BENEFITS +Our executive compensation program includes limited perquisites and other personal benefits for our NEOs, which generally consist of home security and financial planning services. Given the nature of our business, from time to time certain Company employees, including certain executive officers, may also receive Company product, event tickets, or travel benefits that are not generally offered to all employees. +Effective June 1, 2024, consistent with the recommendation of an outside security provider hired by the Company to perform a comprehensive security assessment with respect to the CEO, Mr. Hill is entitled to unlimited personal use of Company aircraft, which is intended to increase his security, availability, and productivity. The unreimbursed incremental cost of his use is disclosed in the Summary Compensation Table on page 42. +Through the date of his retirement, Mr. Donahoe remained entitled to enhanced charitable gift matching under our Employee Matching Gift Program—a program designed to encourage and support employees in giving back to our communities and creating positive change—with an executive contribution limit of $1,000,000 per calendar year and Company matching on a 4:1 basis. All other NEOs (including Mr. Hill) participate in our standard Employee Matching Gift Program applicable to employees generally, without enhancement. Our Employee Matching Gift Program does not match employee contributions that benefit the employee, including contributions to the employee's personal or family foundation or to a non-profit organization that is managed or led by, or provides compensation or assistance to, the employee or a member of their family. +We do not provide any tax gross-ups on perquisites to our executive officers, other than for qualified relocation expenses in accordance with our standard relocation policy. Greater detail about the perquisites and personal benefits provided to our NEOs in fiscal 2025 is provided in the footnotes to the Summary Compensation Table on page 42. +NON-COMPETITION AGREEMENTS +In exchange for non-competition agreements from each of our NEOs, we have agreed to provide monthly payments during the non-compete period following termination of employment, as described in the section below titled "Executive Compensation Tables—Potential Payments upon Termination or Change-in-Control". We believe that it is appropriate to compensate individuals to refrain from working with competitors following termination, and that compensation enhances the enforceability of such agreements. +OTHER EMPLOYMENT ARRANGEMENTS +Except as otherwise described below with respect to Messrs. Hill and Donahoe and Mses. O'Neill and Matheson, we do not have employment contracts with any of our NEOs, and all of our NEOs are employed at-will. +OFFER LETTER WITH MR. HILL +Mr. Hill's CEO compensation arrangements were designed to tie his pay to Company performance in support of NIKE's "pay for performance" philosophy and to align his long-term economic interests with those of our shareholders. Accordingly, in connection with his appointment as President and CEO, Mr. Hill entered into an offer letter with the Company on September 19, 2024, which provides for: +• a base salary of $1,500,000, +• a target annual bonus under the PSP of 200% of base salary (prorated for fiscal 2025 based on the Company's standard methodology, consistent with our practice for all bonus-eligible employees), subject to the achievement of performance goals, and +• an annual target long-term incentive award under the SIP of $15,500,000, which, for fiscal 2025, was granted in the form of PSUs (50%), stock options (35%), and RSUs (15%), consistent with the mix of fiscal 2025 long-term incentive awards granted to other executive officers. +In addition, in order to make him whole for certain forfeited compensation from his prior roles, Mr. Hill received one-time equity and cash awards, including a sign-on RSU award with a target grant value of $3,000,000, vesting one-third per year on each anniversary of the grant date, and a one-time cash award equal to $4,000,000, payable in connection with his commencement of employment. Under Mr. Hill's offer letter, if, within two years following his start date, Mr. Hill voluntarily resigns from employment with the Company or is unable to continue working for the Company as a result of being subject to a non-compete agreement that prohibits Mr. Hill from working for the Company, Mr. Hill will be required to repay the full amount of the one-time cash award. +Mr. Hill will be eligible to participate in the Company's employee benefit plans and programs applicable to senior executives of the Company generally, as may be in effect from time to time, including, without limitation, participation in the Company's Relocation Policy (generally, with recognition for his prior service with the Company) and charitable gift matching under our standard Employee Matching Gift Program applicable to employees generally. +2025 PROXY STATEMENT 36 +As part of standard compensation and benefit arrangements for senior executives, Mr. Hill also entered into a non-competition agreement, as described in the section below titled "Executive Compensation Tables—Potential Payments Upon Termination or Change-in-Control". +TRANSITION LETTER WITH MR. DONAHOE +In connection with the CEO transition, the Compensation Committee affirmed the treatment of Mr. Donahoe's separation in accordance with the terms of his existing arrangements. Accordingly, on September 19, 2024, Mr. Donahoe entered into a letter agreement pursuant to which he continued to serve as President and CEO until Mr. Hill's appointment. From the date of Mr. Hill's appointment through the date of Mr. Donahoe's retirement on January 31, 2025, Mr. Donahoe continued to serve the Company as an advisor, during which time his annual base salary and employee benefit plan eligibility remained unchanged. Upon his retirement, Mr. Donahoe forfeited his fiscal 2025 PSP award in accordance with its terms, and forfeited outstanding unvested equity awards in accordance with their terms, except as provided for by virtue of his retirement eligibility under the terms and conditions of our equity award agreements (as described further in the section below titled "Executive Compensation Tables—Potential Payments Upon Termination or Change-in-Control"). +LETTER AGREEMENT WITH MS. O'NEILL +In connection with the organizational changes announced by the Company on May 5, 2025, including the elimination of the President, Consumer, Product & Brand role, on May 2, 2025, Ms. O'Neill ceased serving as President, Consumer, Product & Brand. As described in the 8-K filed on May 5, 2025, in connection with the foregoing, on May 2, 2025, the Company and Ms. O'Neill entered into a letter agreement pursuant to which Ms. O'Neill will remain a full-time non-executive employee through her separation from the Company on September 5, 2025, during which time her annual base salary and employee benefit eligibility will remain unchanged. The letter agreement also confirms that, (i) upon her separation of employment from the Company, Ms. O'Neill will be retirement eligible and her separation will constitute an involuntary termination without cause (or, as applicable, as a result of a reduction in force) for purposes of her equity awards that are outstanding on such separation date, and (ii) the non-competition agreement by and between Ms. O'Neill and the Company will remain in full force and effect pursuant to its terms, and the applicable Restriction Period (as defined in the non-competition agreement) will commence on the date of her separation of employment from the Company, such that Ms. O'Neill will be eligible to receive the benefits payable under the non-competition agreement upon an involuntary termination of employment without cause (as described further in the section below titled "Executive Compensation Tables—Potential Payments Upon Termination or Change-in-Control"). +LETTER AGREEMENT WITH MS. MATHESON +On November 24, 2024, the Company entered into a letter agreement with Ms. Matheson pursuant to which, as of January 6, 2025, she retired as Executive Vice President, Chief Human Resources Officer and an officer of the company. Under the terms of this letter agreement, Ms. Matheson will remain a full-time non-executive employee through her retirement from the Company in fiscal 2026, during which time her annual base salary, PSP and employee benefit eligibility will remain unchanged. The letter agreement also confirms that the non-competition agreement by and between Ms. Matheson and the Company will remain in full force and effect pursuant to its terms, and the Company will enforce the applicable Restriction Period (as defined in the non-competition agreement) to the extent provided in the letter agreement, as described in the section below titled "Executive Compensation Tables—Potential Payments Upon Termination or Change-in-Control". +37 NIKE, INC. +OUR COMPENSATION PROCESS +COMPENSATION COMMITTEE +The Compensation Committee oversees our executive compensation program, including determining the value and composition of the compensation package for each of our executive officers and setting annual performance goals for the CEO. In addition to any special actions the Compensation Committee may take throughout the year, the committee generally acts with respect to compensation for our NEOs during the fiscal year as follows: +PEER GROUP +Given the competitive market for top-tier talent, the Compensation Committee uses a peer group based on certain factors and criteria outlined below to provide a reference for assessing executive compensation levels and practices. Based on the most recent review, Cisco Systems, Inc. was added to the peer group beginning with fiscal 2025, and American Express and Oracle Corporation were removed. Accordingly, the following peer group was considered for purposes of setting fiscal 2025 executive compensation: +Best Buy Company, Inc. Microsoft Corporation Starbucks Corporation +Cisco Systems, Inc. Mondelez International, Inc. Target Corporation +The Coca-Cola Company Netflix, Inc. TJX Companies +Kimberly-Clark Corporation Pepsico, Inc. Walmart Inc. +Lowe's Companies, Inc. Procter & Gamble Company The Walt Disney Company +McDonald's Corporation Salesforce, Inc. +The Compensation Committee reviews our compensation peer group periodically to determine the appropriate companies to include. In its review, the Compensation Committee considers companies based on the following factors and criteria: +• Publicly-traded, US-based companies, with revenues and market capitalization within a reasonable range of NIKE's revenue and market capitalization. At the time the committee approved the peer group, NIKE's revenue was at the 50th percentile of the peer group and NIKE's market capitalization was at the 43rd percentile of the peer group. +2025 PROXY STATEMENT 38 +• Leading companies across retail, digital, and services spaces, with a focus on consumer products and having a top-tier brand value. +• Competitors for talent, aligned to NIKE's evolving business and talent strategies. +• Companies that list NIKE as a peer or are in NIKE's peer group as selected by a proxy advisory firm. +In addition to considering our peer group, the Compensation Committee also uses market survey data from third parties, including Aon, Willis Towers Watson, and Mercer, about a broader range of companies. The Compensation Committee generally does not set executive compensation at or near any particular percentile of peer group, or market, compensation. Instead, the committee considers compensation to be competitive if it is generally within a reasonable range of market median. +ROLE OF MANAGEMENT +The CEO makes compensation recommendations to, and participates in discussions with, the Compensation Committee regarding the compensation of each executive officer other than himself. In addition, our human resources staff regularly provides data, analysis, and recommendations to the committee regarding executive compensation. +The Compensation Committee meets regularly in executive session without the CEO or other management present to discuss our executive compensation program. Such executive sessions include discussions about, among other topics, the CEO's performance and compensation and the design and operation of our executive compensation plans. +ROLE OF COMPENSATION CONSULTANT +The Compensation Committee has the authority, in its sole discretion, to retain compensation consultants to assist the committee in overseeing our executive compensation program. The Compensation Committee chose not to retain any such consultants in fiscal 2025. However, in connection with the committee's analysis and decision-making regarding the fiscal 2025 executive compensation program, the Compensation Committee supplemented peer group data with information from surveys and reports containing competitive market data from Aon, Willis Towers Watson, and Mercer, which are obtained by our human resources staff. +OTHER COMPENSATION PRACTICES +STOCK OWNERSHIP GUIDELINES +We maintain stock ownership guidelines for executive officers that are designed to further align the interests of our executive officers with those of our shareholders. Under the guidelines, each executive officer is required to hold NIKE stock valued at the following multiple of their annual base salary: +POSITION OWNERSHIP LEVEL +Chief Executive Officer +8X Base Salary +Other Executive Officers (including NEOs) +3X Base Salary +New executive officers are required to attain these ownership levels within five years of their appointment. For purposes of calculating ownership, we exclude unvested PSUs that remain subject to performance-based vesting conditions as well as all stock options (whether vested or unvested). As of May 31, 2025, the CEO and each of our other executive officers, including each other NEO, has met or is on track to meet the applicable ownership guideline within the requisite period. +HEDGING AND PLEDGING +The Company's Blackout and Pre-clearance Policy (which supplements our Insider Trading Policy) prohibits directors, executive officers, and other designated insiders (based on seniority and department) from engaging in transactions involving hedging, monetization, or short sales of NIKE stock, including zero-cost collars and forward sale contracts. The policy also requires directors and executive officers, along with members of their families and households, to obtain pre-approval from the Company's Chairman or CEO before pledging NIKE stock. Before any such approval is granted, the Company's Clearance Director considers the size of the pledge relative to the individual's other holdings, both direct and indirect, and NIKE's shares outstanding; the risk of foreclosure given the nature of the associated transaction; protections against the appearance of insider trading, including prohibitions on sales during trading blackouts; and the ability to timely report sales on Form 4. +39 NIKE, INC. +CHANGE-IN-CONTROL PROVISIONS +PSP awards do not accelerate upon a change in control. PSU, stock option, and RSU awards are subject only to "double-trigger" accelerated change-in-control vesting, meaning that vesting is accelerated only if there is a change in control of the Company, and within the following two years, either the acquiring entity fails to assume the awards or the employee's employment is terminated by the acquirer without cause or by the employee for good reason. This double-trigger acceleration is intended to encourage executive retention through a period of uncertainty. The Compensation Committee believes that this approach will enhance shareholder value in the context of an acquisition and align executives' interests with those of investors. The effect of change-in-control transactions on stock-based awards is described further in the section below titled "Executive Compensation Tables—Potential Payments Upon Termination or Change-in-Control". +CLAWBACK +In December 2023, the Company adopted a revised clawback policy regarding accounting restatements in connection with the SEC's adoption of new rules to implement Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and corresponding NYSE listing standards. The clawback policy generally requires recoupment of erroneously awarded incentive-based compensation (including any compensation granted, earned, or vested wholly or in part upon the attainment of a financial reporting measure) received by current and former executive officers (as defined in Rule 10D-1 of the Exchange Act), including our NEOs, during the three completed fiscal years immediately preceding the date that the Company is required to prepare an accounting restatement due to the Company's material noncompliance with any financial reporting requirement under U.S. federal securities laws. +In addition to the clawback policy, the Company maintains clawback provisions in the PSP and all of our equity award agreements (including all time-vesting equity awards) that generally permit recoupment in the event of the recipient's theft, embezzlement, fraud, breach of confidentiality or other applicable restrictive covenants, or material breach of contract. +RISK ASSESSMENT +At the Compensation Committee's request, management prepared an assessment of potential risks associated with the Company's fiscal 2025 compensation programs, including any risk that would be reasonably likely to have a material adverse effect on the Company. This included an assessment of risks associated with each element of executive compensation. The assessment considered certain design features of the compensation program that reduce the likelihood of excessive risk taking, such as reasonable performance targets, capped incentive compensation payouts, a balance of short- and long-term incentives, a balance of cash- and stock-based incentives, vesting of awards over time, and the potential for clawback of incentive compensation. In addition, for stock-based compensation, we have adopted stock ownership guidelines, provided for limited accelerated vesting of PSUs, stock options, and RSUs upon termination of employment, and provided for only double-trigger accelerated vesting of stock-based awards upon a change in control. The Compensation Committee reviewed the risk assessment and concluded that our compensation programs and practices do not create risks that are reasonably likely to have a material adverse effect on the Company. +TAX DEDUCTIBILITY OF EXECUTIVE COMPENSATION +Section 162(m) of the Internal Revenue Code generally places a $1 million limit on the amount of compensation a company can deduct in any one year for "covered employees". While the Compensation Committee seeks to preserve tax deductibility in developing and implementing our executive compensation program, the committee also believes that it is important to maintain flexibility in administering compensation programs in a manner designed to promote varying corporate goals and the interests of our shareholders. Accordingly, we have not adopted a policy that all compensation must qualify as deductible for tax purposes and retain the ability to provide compensation that may not qualify as deductible under Section 162(m). +TIMING OF DECISIONS +In accordance with Item 402(x) of Regulation S-K, we are providing information regarding our procedures related to the grant of stock option awards close in time to the release of material non-public information. Although we do not have a policy, practice or obligation that requires us to grant stock options (or other equity or equity-based awards) on specific dates, we have adopted insider trading policies and procedures that govern the purchase, sale, and other disposition of our securities by our employees, directors, officers, and consultants. +Our insider trading policies and procedures prohibit our employees, directors, officers, and consultants from, among other things, trading in our securities while in possession of material non-public information. The trading restrictions set out in the Company's Insider Trading Policy expressly apply to any sale of stock purchased upon exercise of a stock option. We have also adopted a Blackout and Pre-clearance Policy (which supplements our Insider Trading Policy) designed to help prevent accidental violations of the law and to avoid even the appearance of trading on inside information. The Blackout and Pre-clearance Policy generally prohibits directors, executive officers, and other designated insiders from, among other things, trading in NIKE securities during +2025 PROXY STATEMENT 40 +the period beginning on the fifteenth day of the last month of each fiscal quarter and ending after the first full trading day following the public release of the Company's earnings for that quarter (and during event-specific blackouts). Moreover, the Blackout and Pre-clearance Policy requires directors and executive officers, along with members of their families and households, to obtain pre-approval from the Company's Chairman or CEO before pledging NIKE stock. Before any such approval is granted, the Company's Clearance Director considers, among other factors, protections against the appearance of insider trading, including prohibitions on sales during trading blackouts. +Neither our Board nor our Compensation Committee takes material non-public information into account when determining the timing of equity awards, nor do we time the disclosure of material non-public information for the purpose of affecting the value of executive compensation. The Compensation Committee determined in June 2024 to align the grant date for long-term incentive awards to executive officers (including NEOs) with the grant date for employees below the executive officer level. Accordingly, awards for fiscal 2025 were granted to executive officers (including NEOs, other than Mr. Hill and Mr. Leinwand's supplemental award) on September 1, 2024. We generally issue non-annual equity awards to our executive officers on a limited and infrequent basis, and not in accordance with any fixed schedule. +During fiscal 2025, there were no stock option awards granted to any NEO within four business days preceding the filing of any report on Forms 10-K, 10-Q, or 8-K that discloses material nonpublic information. +COMPENSATION COMMITTEE REPORT +The Compensation Committee of the Board of Directors has reviewed and discussed with management the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K. Based on the review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement. +Members of the Compensation Committee: +• Timothy Cook, Chair +• Cathleen Benko +• Mónica Gil +41 NIKE, INC. +EXECUTIVE COMPENSATION TABLES +SUMMARY COMPENSATION TABLE +The following table sets forth information concerning the total compensation of each NEO for fiscal years 2025, 2024, and 2023 (as applicable). +NAME AND PRINCIPAL +POSITION YEAR +SALARY (1) +($) +BONUS (2) +($) +STOCK +AWARDS (3) +($) +OPTION +AWARDS (4) +($) +NON-EQUITY +INCENTIVE PLAN +COMPENSATION (5) +($) +ALL OTHER +COMPENSATION (6) +($) +TOTAL +($) +Elliott Hill +President and Chief Executive Officer +2025 951,923 4,000,000 14,887,893 5,832,678 — 345,574 26,018,068 +Matthew Friend +Executive Vice President and Chief Financial Officer +2025 1,250,000 — 9,788,426 3,048,046 — 17,250 14,103,722 +2024 1,298,077 — 5,221,473 2,878,629 975,000 17,331 10,390,510 +2023 1,221,154 — 4,080,045 2,415,790 2,425,000 15,250 10,157,239 +Robert Leinwand +Executive Vice President, Chief Legal Officer +2025 795,749 — 3,875,030 2,162,574 — 21,128 6,854,481 +Ann Miller +Executive Vice President, Global Sports Marketing +2025 1,100,000 — 6,937,464 2,095,533 — 37,914 10,170,911 +Craig Williams +Executive Vice President, Chief Commercial Officer +2025 1,250,000 — 11,451,291 3,048,046 — 17,250 15,766,587 +2024 1,272,115 — 5,221,473 2,878,629 975,000 16,500 10,363,717 +John Donahoe II +Former President and Chief Executive Officer +2025 1,009,615 — 15,348,756 7,239,086 — 4,845,255 28,442,712 +2024 1,557,692 — 12,400,986 6,836,722 1,950,000 6,439,301 29,184,701 +2023 1,500,000 — 13,220,455 7,247,371 6,770,000 4,052,059 32,789,885 +Monique Matheson +Former Executive Vice President, Chief Human Resources Officer +2025 1,100,000 — 6,937,464 2,095,533 — 17,250 10,150,247 +Heidi O'Neill +Former President, Consumer, Product & Brand +2025 1,250,000 — 11,451,291 3,048,046 — 17,250 15,766,587 +2024 1,298,077 — 5,221,473 2,878,629 975,000 26,208 10,399,387 +2023 1,250,000 — 4,080,045 2,415,790 2,425,000 15,250 10,186,085 +(1) Salary amounts for fiscal 2025 and 2023 reflect 26 bi-weekly pay periods, compared with 27 bi-weekly pay periods for fiscal 2024. +(2) Reflects the sign-on cash award granted to Mr. Hill in connection with his appointment as President and CEO. +(3) Represents the grant date fair value of RSU and PSU awards, in each case computed in accordance with accounting guidance applicable to stock-based compensation. For RSUs, the grant date fair value was computed based on the closing market price of our Class B Stock on the grant date. For PSUs, the grant date fair value was computed using a Monte Carlo simulation based on the probable outcome of the performance condition as of the grant date. The assumptions made in determining the grant date fair value of PSUs under applicable accounting guidance are disclosed in footnote 5 of "Grants of Plan-Based Awards in Fiscal 2025". For fiscal 2025, the grant date fair value of the PSU awards that were granted as annual long-term incentive awards was: $9,609,352 for Mr. Hill, $5,212,730 for Messrs. Friend and Williams and Ms. O'Neill, $3,032,592 for Mr. Leinwand, $3,583,771 for Mses. Miller and Matheson, and $12,380,064 for Mr. Donahoe. Assuming that the maximum level of performance conditions is achieved, such PSU award values would be: $15,812,122 for Mr. Hill, $8,333,166 for Messrs. Friend and Williams and Ms. O'Neill, $5,474,789 for Mr. Leinwand, $5,729,083 for Mses. Miller and Matheson, and $19,791,000 for Mr. Donahoe. +(4) Represents the grant date fair value of options granted in the applicable fiscal year computed in accordance with accounting guidance applicable to stock-based compensation. The grant date fair value of the options was estimated using the Black-Scholes option pricing model. The assumptions made in determining the grant date fair value of options under applicable accounting guidance are disclosed in Note 9 of Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended May 31, 2025. +2025 PROXY STATEMENT 42 +(5) Non-Equity Incentive Plan Compensation consists of the following: +NAME Year +ANNUAL INCENTIVE COMPENSATION (a) +($) +LONG-TERM INCENTIVE COMPENSATION (b) +($) +TOTAL +($) +Elliott Hill 2025 — — — +Matthew Friend 2025 — — — +2024 975,000 — 975,000 +2023 1,785,000 640,000 2,425,000 +Robert Leinwand 2025 — — — +Ann Miller 2025 — — — +Craig Williams 2025 — — — +2024 975,000 — 975,000 +John Donahoe II 2025 — — — +2024 1,950,000 — 1,950,000 +2023 3,570,000 3,200,000 6,770,000 +Monique Matheson 2025 — — — +Heidi O'Neill 2025 — — — +2024 975,000 — 975,000 +2023 1,785,000 640,000 2,425,000 +(a) Amounts shown were earned for performance in the applicable fiscal year under our PSP. +(b) Amounts shown were earned for performance during the three-year period ending with the applicable fiscal year under the NIKE, Inc. Amended and Restated Long-term Incentive Plan ("LTIP"). Beginning with the fiscal 2022 – 2024 performance period, LTIP awards were replaced by PSUs. +(6) For fiscal 2025, includes Company matching contributions to the 401(k) Plan in the amount of $17,250 for Messrs. Friend, Leinwand, and Williams and Mses. Miller, Matheson, and O'Neill. The amount for Mr. Hill includes $243,649 in aggregate incremental cost to the Company for personal use of the Company's aircraft, $75,614 in relocation-related benefits, including $31,993 in tax gross-ups in accordance with our standard relocation policy, and the value of security services, spousal travel to and attendance at a Company-sponsored function, and Company-related merchandise. The amount for Ms. Miller also includes the value of financial advisory services, spousal travel to and attendance at a Company-sponsored function, and Company-related merchandise. The amount for Mr. Donahoe includes Company matching contributions to the 401(k) Plan in the amount of $7,508, $4,000,000 in charitable matching contributions made by the Company, $750,000 in accrued non-compete payments, and $87,747 in aggregate incremental cost to the Company for personal use of the Company's aircraft. The aggregate incremental cost for personal use of the Company's aircraft is determined based on the variable operating cost to the Company, including the cost of fuel, maintenance, crew travel expenses, landing fees, parking fees, in-flight food and beverage, and other smaller variable costs associated with each flight. +43 NIKE, INC. +GRANTS OF PLAN-BASED AWARDS IN FISCAL 2025 +The following table sets forth information concerning the performance-based annual cash incentive opportunities and PSUs, RSUs, and stock options granted to the NEOs in fiscal 2025. +ESTIMATED POSSIBLE PAYOUTS UNDER +NON-EQUITY INCENTIVE PLAN AWARDS (1) +ESTIMATED FUTURE PAYOUTS UNDER +EQUITY INCENTIVE PLAN AWARDS (2) +ALL OTHER +STOCK AWARDS: +NUMBER OF +SHARES OF +STOCK OR +UNITS (3) +ALL OTHER OPTION +AWARDS: NUMBER +OF SECURITIES +UNDERLYING +OPTIONS (4) +EXERCISE +OR BASE +PRICE OF +OPTION +AWARDS +GRANT DATE +FAIR VALUE +OF STOCK +AND OPTION +AWARDS (5) +THRESHOLD TARGET MAXIMUM THRESHOLD TARGET MAXIMUM +NAME GRANT DATE APPROVAL DATE ($) ($) ($) (#) (#) (#) (#) (#) ($/SH) ($) +Elliott Hill 562,500 2,250,000 4,500,000 +10/14/2024 9/18/2024 24,222 96,888 193,776 9,609,352 +10/14/2024 9/18/2024 29,067 2,371,867 +10/14/2024 9/18/2024 35,621 2,906,674 +10/14/2024 9/18/2024 227,750 81.60 5,832,678 +Matthew Friend 375,000 1,500,000 3,000,000 +9/1/2024 6/25/2024 12,502 50,007 100,014 5,212,730 +9/1/2024 6/25/2024 15,002 1,249,967 +9/1/2024 6/25/2024 117,549 83.32 3,048,046 +9/18/2024 9/18/2024 49,110 3,325,729 +Robert Leinwand 270,000 1,080,000 2,160,000 +9/1/2024 7/16/2024 766 3,063 61,126 319,287 +9/1/2024 7/16/2024 6,126 510,418 +9/1/2024 7/16/2024 24,504 83.32 635,389 +11/25/2024 11/8/2024 7,830 31,317 62,634 2,713,305 +11/25/2024 11/8/2024 4,189 332,020 +11/25/2024 11/8/2024 60,244 79.26 1,527,185 +Ann Miller 330,000 1,320,000 2,640,000 +9/1/2024 6/25/2024 8,595 34,380 68,760 3,583,771 +9/1/2024 6/25/2024 10,314 859,362 +9/1/2024 6/25/2024 80,815 83.32 2,095,533 +9/18/2024 9/18/2024 36,833 2,484,331 +Craig Williams 375,000 1,500,000 3,000,000 +9/1/2024 6/25/2024 12,502 50,007 100,014 5,212,730 +9/1/2024 6/25/2024 15,002 1,249,967 +9/1/2024 6/25/2024 117,549 83.32 3,048,046 +9/18/2024 9/18/2024 73,665 4,988,594 +John Donahoe II 750,000 3,000,000 6,000,000 +9/1/2024 6/25/2024 29,692 118,765 237,530 12,380,064 +9/1/2024 6/25/2024 35,630 2,968,692 +9/1/2024 6/25/2024 279,178 83.32 7,239,086 +Monique Matheson 330,000 1,320,000 2,640,000 +9/1/2024 6/25/2024 8,595 34,380 68,760 3,583,771 +9/1/2024 6/25/2024 10,314 859,362 +9/1/2024 6/25/2024 80,815 83.32 2,095,533 +9/18/2024 9/18/2024 36,833 2,494,331 +Heidi O'Neill 375,000 1,500,000 3,000,000 +9/1/2024 6/25/2024 12,502 50,007 100,014 5,212,730 +9/1/2024 6/25/2024 15,002 1,249,967 +9/1/2024 6/25/2024 117,549 83.32 3,048,046 +9/18/2024 9/18/2024 73,665 4,988,594 +(1) These amounts represent the potential performance-based annual cash incentive awards payable for performance during fiscal 2025 under our PSP. Under this plan, the Compensation Committee approved target awards for fiscal 2025 based on a percentage of the executive's salary as follows: Mr. Hill, 200%, prorated for fiscal 2025; Mr. Friend, 120%; Mr. Leinwand, 120%; Ms. Miller, 120%; Mr. Williams, 120%; Mr. Donahoe, 200%; Ms. Matheson, 120%; and Ms. O'Neill, 120%. Fiscal 2025 PSP awards were eligible to be earned between 0% and 200% of target based on Company performance on two equally-weighted metrics—Adjusted Revenue and Adjusted EBIT—during fiscal 2025. Actual award payouts earned in fiscal 2025 and paid in fiscal 2026 are shown in the Summary Compensation Table. +2025 PROXY STATEMENT 44 +(2) These amounts represent grants of PSUs and one-time equity retention awards under the SIP. The PSUs are eligible to be earned between 0% and 200% of target based on Relative TSR between September 1, 2024 and August 31, 2027, subject to a cap of 100% of target if Absolute TSR for the performance period is negative. If Relative TSR is at or above the threshold performance goal, the Compensation Committee may adjust the earnout upwards or downwards by up to 20 percentage points based on a holistic assessment of the Company's performance during fiscal years 2025, 2026, and 2027 with respect to employee engagement and inclusion, employee retention, and sustainability. Earned PSUs will vest in September 2027 and are generally subject to continued employment through the vesting date. The one-time equity retention awards granted on September 18, 2024 will cliff vest on September 18, 2026 and are earned 50% subject to continuous service through the scheduled vesting date, and 50% subject to continuous service through the scheduled vesting date and the achievement of a $100.00 stock price performance measure. The portion of the award subject to the stock price performance measure will be earned at 100% if such performance measure is achieved or at 0% if such performance measure is not achieved. Vesting for PSUs and one-time equity retention awards will be accelerated in certain circumstances as described in the section below titled "Potential Payouts Upon Termination or Change-in-Control". PSUs and one-time equity retention awards accumulate cash dividend equivalents that are paid only when, and to the extent, they vest. +(3) Amounts reported in this column represent grants of RSUs under the SIP. Mr. Hill's grant of 35,621 RSUs represents his sign-on RSU award which vests in three equal installments on the first three anniversaries of the grant date. All other RSUs vest in four equal installments on September 1 of 2025, 2026, 2027, and 2028. Vesting for all RSUs will be accelerated in certain circumstances as described in the section below titled "Potential Payouts Upon Termination or Change-in-Control". All RSUs accumulate cash dividend equivalents that are only paid upon vesting. +(4) Amounts reported in this column represent stock options granted under the SIP which become exercisable in four equal installments on September 1 of 2025, 2026, 2027, and 2028. Options become exercisable in certain circumstances as described in the section below titled "Potential Payouts Upon Termination or Change-in-Control". Each option has a maximum term of 10 years, subject to earlier termination in the event of the optionee's termination of employment. +(5) For stock awards, represents the grant date fair value of (a) RSUs based on the closing market price of our Class B Stock on the grant date and (b) PSUs based on a value of $67.72 – $104.24 per share computed using a Monte Carlo simulation based on the probable outcome of the performance condition as of the grant date. The Monte Carlo simulation was performed using the remaining performance period of 2 – 3 years and assuming an expected volatility of 34.56% – 35.72% and risk-free interest rate of 3.54% – 4.12%. The expected volatility was based on an analysis of the historical volatility of the Class B Stock on the grant date for 2 – 3 years. The risk-free interest rate corresponding with the remaining performance period was calculated using the U.S. Treasury (constant maturity) risk-free rates in effect on the grant date for a 2- and 3-year period. For option awards, represents the grant date fair value of stock options granted based on a value of $25.35 – $25.93 per share, calculated using the Black-Scholes option pricing model. The assumptions made in determining option values are disclosed in Note 9 to Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended May 31, 2025. Stock and option award values were computed in accordance with accounting guidance applicable to stock-based compensation. +OUTSTANDING EQUITY AWARDS AT MAY 31, 2025 +The following table sets forth information concerning outstanding stock options, PSUs, and RSUs held by the NEOs at May 31, 2025. +OPTION AWARDS STOCK AWARDS +NAME NUMBER OF +SECURITIES +UNDERLYING +UNEXERCISED +OPTIONS +EXERCISABLE +(#) +NUMBER OF +SECURITIES +UNDERLYING +UNEXERCISABLE +OPTIONS +(#) (1) +OPTION +EXERCISE +PRICE +($) OPTION +EXPIRATION +DATE +NUMBER OF SHARES OR UNITS OF STOCK THAT HAVE NOT VESTED +(#) (2) +MARKET VALUE OF SHARES OR UNITS OF STOCK THAT HAVE NOT VESTED +($) +EQUITY INCENTIVE PLAN AWARDS: NUMBER OF UNEARNED SHARES, UNITS OR OTHER RIGHTS THAT HAVE NOT VESTED +(#) (3) +EQUITY INCENTIVE PLAN AWARDS: MARKET OR PAYOUT VALUE OF UNEARNED SHARES, UNITS OR OTHER RIGHTS THAT HAVE NOT VESTED +($) +Elliott Hill — +227,750 (4) +81.60 10/14/2034 64,688 3,919,446 24,222 1,467,611 +Matthew Friend 23,000 — 57.87 7/15/2026 +30,000 — 59.10 7/20/2027 +35,000 — 77.54 8/1/2028 +36,095 — 83.12 8/1/2029 +77,197 — 97.61 8/1/2030 +32,752 +10,917 (5) +167.51 8/1/2031 +37,594 +37,594 (6) +114.30 8/1/2032 +20,686 +62,057 (7) +109.40 8/1/2033 +— +117,549 (4) +83.32 9/1/2034 51,291 3,107,722 46,313 2,806,105 +Robert Leinwand 11,000 — 57.87 7/15/2026 +15,000 — 59.10 7/20/2027 +19,770 — 82.20 9/1/2028 +23,670 — 84.50 9/1/2029 +30,760 — 97.61 8/1/2030 +13,864 +4,621 (5) +167.51 8/1/2031 +11,136 +11,136 (6) +114.30 8/1/2032 +5,554 +16,662 (7) +109.40 8/1/2033 +45 NIKE, INC. +OPTION AWARDS STOCK AWARDS +NAME NUMBER OF +SECURITIES +UNDERLYING +UNEXERCISED +OPTIONS +EXERCISABLE +(#) +NUMBER OF +SECURITIES +UNDERLYING +UNEXERCISABLE +OPTIONS +(#) (1) +OPTION +EXERCISE +PRICE +($) OPTION +EXPIRATION +DATE +NUMBER OF SHARES OR UNITS OF STOCK THAT HAVE NOT VESTED +(#) (2) +MARKET VALUE OF SHARES OR UNITS OF STOCK THAT HAVE NOT VESTED +($) +EQUITY INCENTIVE PLAN AWARDS: NUMBER OF UNEARNED SHARES, UNITS OR OTHER RIGHTS THAT HAVE NOT VESTED +(#) (3) +EQUITY INCENTIVE PLAN AWARDS: MARKET OR PAYOUT VALUE OF UNEARNED SHARES, UNITS OR OTHER RIGHTS THAT HAVE NOT VESTED +($) +— +24,504 (8) +83.32 9/1/2034 +— +60,244 (4) +79.26 11/25/2034 27,732 1,680,282 9,522 576,938 +Ann Miller 4,942 — 82.20 9/1/2028 +11,834 — 84.50 9/1/2029 +18,560 — 114.84 9/1/2030 +8,850 +2,950 (5) +164.56 9/1/2031 +32,224 +32,223 (6) +114.30 8/1/2032 +14,222 +42,664 (7) +109.40 8/1/2033 +— +80,815 (4) +83.32 9/1/2034 37,533 2,274,124 33,375 2,022,191 +Craig Williams 30,355 — 82.36 2/10/2029 +36,095 — 83.12 8/1/2029 +30,760 — 97.61 8/1/2030 +23,565 +7,855 (5) +167.51 8/1/2031 +18,932 +18,932 (6) +114.30 8/1/2032 +20,686 +62,057 (7) +109.40 8/1/2033 +— +117,549 (4) +83.32 9/1/2034 75,222 4,557,701 58,590 3,549,968 +John Donahoe II 236,843 — 102.16 1/31/2029 +767,544 — 102.16 1/31/2029 +239,575 — 97.61 1/31/2029 +152,839 — 167.51 1/31/2029 +225,564 — 114.30 1/31/2029 +196,514 — 109.40 1/31/2029 — — 3,300 199,947 +Monique Matheson 20,000 — 77.54 8/1/2028 +87,658 — 83.12 8/1/2029 +77,197 — 97.61 8/1/2030 +32,752 +10,917 (5) +167.51 8/1/2031 +32,224 +32,223 (6) +114.30 8/1/2032 +14,222 +42,664 (7) +109.40 8/1/2033 +— +80,815 (4) +83.32 9/1/2034 37,533 2,274,124 33,375 2,022,191 +Heidi O'Neill 25,000 — 77.54 8/1/2028 +61,360 — 83.12 8/1/2029 +77,197 — 97.61 8/1/2030 +38,211 +12,736 (5) +167.51 8/1/2031 +37,594 +37,594 (6) +114.30 8/1/2032 +20,686 +62,057 (7) +109.40 8/1/2033 +— +117,549 (4) +83.32 9/1/2034 63,569 3,851,646 58,590 3,549,968 +(1) Stock options generally become exercisable in four equal installments on each of the first four anniversaries of the grant date. +2025 PROXY STATEMENT 46 +(2) Reflects RSUs and one-time equity retention awards that vest as described in the table below. The retention awards granted in fiscal 2025 represent the portion of one-time equity retention awards that will be earned subject to continuous service through the scheduled vesting date. The PSUs for the fiscal 2023 – 2025 performance period that were scheduled to cliff vest on August 1, 2025 were earned at 0% based on three-year Relative TSR, and therefore no amount is shown. +NAME FISCAL YEAR OF GRANT NUMBER OF UNVESTED UNITS VESTING SCHEDULE +Elliott Hill 2025 35,621 RSUs subject to three-year pro-rata vesting on 10/14/2025, 10/15/2026, and 10/15/2027 +2025 29,067 RSUs subject to four-year pro-rata vesting on 9/1/2025, 9/1/2026, 9/1/2027, and 9/1/2028 +Matthew Friend 2025 15,002 RSUs subject to four-year pro-rata vesting on 9/1/2025, 9/1/2026, 9/1/2027, and 9/1/2028 +2025 24,555 One-time equity retention award will cliff vest on 09/18/2026 +2024 7,404 RSUs subject to three-year pro-rata vesting; 50% of the remaining units vest on 8/1/2025 and 50% vest on 8/1/2026 +2023 4,330 RSUs subject to three-year pro-rata vesting; 100% of the remaining units vest on 8/1/2025 +Robert Leinwand 2025 4,189 RSUs subject to four-year pro-rata vesting on 9/1/2025, 9/1/2026, 9/1/2027, and 9/1/2028 +2025 6,126 RSUs subject to four-year pro-rata vesting on 9/1/2025, 9/1/2026, 9/1/2027, and 9/1/2028 +2024 2,468 RSUs subject to three-year pro-rata vesting; 50% of the remaining units vest on 8/1/2025 and 50% vest on 8/1/2026 +2023 13,712 RSUs subject to four-year pro-rata vesting; 100% of the remaining units vest on 2/10/2026 +2023 1,237 RSUs subject to three-year pro-rata vesting; 100% of the remaining units vest on 8/1/2025 +Ann Miller 2025 10,314 RSUs subject to four-year pro-rata vesting on 9/1/2025, 9/1/2026, 9/1/2027, and 9/1/2028 +2025 18,417 One-time equity retention award will cliff vest on 09/18/2026 +2024 5,091 RSUs subject to three-year pro-rata vesting; 50% of the remaining units vest on 8/1/2025 and 50% vest on 8/1/2026 +2023 3,711 RSUs subject to three-year pro-rata vesting; 100% of the remaining units vest on 8/1/2025 +Craig Williams 2025 15,002 RSUs subject to four-year pro-rata vesting on 9/1/2025, 9/1/2026, 9/1/2027, and 9/1/2028 +2025 36,833 One-time equity retention award will cliff vest on 09/18/2026 +2024 7,404 RSUs subject to three-year pro-rata vesting; 50% of the remaining units vest on 8/1/2025 and 50% vest on 8/1/2026 +2023 2,103 RSUs subject to three-year pro-rata vesting; 100% of the remaining units vest on 8/1/2025 +2023 13,880 RSUs scheduled to vest in two equal tranches on 1/10/2024 and 7/10/2025; 100% of the remaining units vest on 7/10/2025 +Monique Matheson 2025 10,314 RSUs subject to four-year pro-rata vesting on 9/1/2025, 9/1/2026, 9/1/2027, and 9/1/2028 +2025 18,417 One-time equity retention award will cliff vest on 09/18/2026 +2024 5,091 RSUs subject to three-year pro-rata vesting; 50% of the remaining units vest on 8/1/2025 and 50% vest on 8/1/2026 +2023 3,711 RSUs subject to three-year pro-rata vesting; 100% of the remaining units vest on 8/1/2025 +Heidi O'Neill 2025 15,002 RSUs subject to four-year pro-rata vesting on 9/1/2025, 9/1/2026, 9/1/2027, and 9/1/2028 +2025 36,833 One-time equity retention award will cliff vest on 09/18/2026 +2024 7,404 RSUs subject to three-year pro-rata vesting; 50% of the remaining units vest on 8/1/2025 and 50% vest on 8/1/2026 +2023 4,330 RSUs subject to three-year pro-rata vesting; 100% of the remaining units vest on 8/1/2025 +47 NIKE, INC. +(3) Reflects PSUs and one-time equity retention awards that vest as described in the table below assuming performance (a) at the maximum level (100%) for the retention awards granted in fiscal 2025 and (b) at the threshold level (25%) for the PSUs. The retention awards granted in fiscal 2025 represent the portion of one-time equity retention awards that will be earned at 0% or 100% based on achievement of a $100.00 stock price performance measure. The PSUs for the fiscal 2025 – 2027 performance period will be earned between 0% and 200% based on Relative TSR between September 1, 2024 and August 31, 2027 and subject to the People & Planet modifier. The PSUs for the fiscal 2024 – 2026 performance period will be earned between 0% and 200% based on Relative TSR over the applicable three-year performance period and subject to the People & Planet modifier. +NAME FISCAL YEAR OF GRANT /PERFORMANCE PERIOD NUMBER OF UNEARNED, UNVESTED UNITS VESTING SCHEDULE +Elliott Hill 2025 - 2027 24,222 Earned units will cliff vest on 9/1/2027 +Matthew Friend 2025 - 2027 12,502 Earned units will cliff vest on 9/1/2027 +2025 24,555 One-time equity retention award will cliff vest on 9/18/2026 +2024 - 2026 9,256 Earned units will cliff vest on 8/1/2026 +Robert Leinwand 2025 - 2027 7,830 Earned units will cliff vest on 9/1/2027 +2025 - 2027 766 Earned units will cliff vest on 9/1/2027 +2024 - 2026 926 Earned units will cliff vest on 8/1/2026 +Ann Miller 2025 - 2027 8,595 Earned units will cliff vest on 9/1/2027 +2025 18,416 One-time equity retention award will cliff vest on 9/18/2026 +2024 - 2026 6,364 Earned units will cliff vest on 8/1/2026 +Craig Williams 2025 - 2027 12,502 Earned units will cliff vest on 9/1/2027 +2025 36,832 One-time equity retention award will cliff vest on 9/18/2026 +2024 - 2026 9,256 Earned units will cliff vest on 8/1/2026 +John Donahoe II 2025 - 2027 3,300 Earned units will cliff vest on 9/1/2027 +Monique Matheson 2025 - 2027 8,595 Earned units will cliff vest on 9/1/2027 +2025 18,416 One-time equity retention award will cliff vest on 9/18/2026 +2024 - 2026 6,364 Earned units will cliff vest on 8/1/2026 +Heidi O'Neill 2025 - 2027 12,502 Earned units will cliff vest on 9/1/2027 +2025 36,832 One-time equity retention award will cliff vest on 9/18/2026 +2024 - 2026 9,256 Earned units will cliff vest on 8/1/2026 +(4) 25% of these options will vest on September 1, 2025, 25% will vest on September 1, 2026, 25% will vest on September 1, 2027, and 25% will vest on September 1, 2028. +(5) 100% of these options will vest on August 1, 2025. +(6) 50% of these options will vest on August 1, 2025 and 50% will vest on August 1, 2026. +(7) 33% of these options will vest on August 1, 2025, 33% will vest on August 1, 2026, and 33% will vest on August 1, 2027. +OPTION EXERCISES AND STOCK VESTED DURING FISCAL 2025 +The following table sets forth information concerning stock option exercises and vesting of RSUs during fiscal 2025 for each of the NEOs on an aggregated basis. +OPTION AWARDS STOCK AWARDS +NAME NUMBER OF +SHARES ACQUIRED +ON EXERCISE +(#) VALUE +REALIZED +ON EXERCISE +($) NUMBER OF +SHARES ACQUIRED +ON VESTING +(#) VALUE +REALIZED +ON VESTING +($) +Elliott Hill — — — — +Matthew Friend — — 25,567 2,197,791 +Robert Leinwand — — 10,149 729,553 +Ann Miller — — 7,172 526,992 +Craig Williams — — 37,818 2,752,754 +John Donahoe II — — 26,079 1,925,934 +Monique Matheson — — 8,722 644,120 +Heidi O'Neill — — 25,977 2,228,069 +2025 PROXY STATEMENT 48 +NON-QUALIFIED DEFERRED COMPENSATION IN FISCAL 2025 +NAME PLAN +NAME +EXECUTIVE +CONTRIBUTIONS +IN FISCAL 2025 (1) +AGGREGATE EARNINGS +IN FISCAL 2025 AGGREGATE +WITHDRAWALS/ +DISTRIBUTIONS IN +FISCAL 2025 +AGGREGATE +BALANCE AT +MAY, 31 2025 (1) +Elliott Hill +DCP +$317,308 $697,985 $(822,916) $9,463,259 +Matthew Friend +DCP +— $57,180 — $737,708 +Robert Leinwand DCP $528,427 $337,989 — $4,175,485 +Ann Miller DCP — $2,266 $39,946 +Craig Williams DCP $960,289 $184,520 — $2,229,257 +John Donahoe II +DCP +— $77,327 — $1,050,614 +Monique Matheson DCP — $1,004,910 — $11,785,201 +Heidi O'Neill +DCP +$195,000 $510,227 — $6,582,382 +(1) All amounts reported in the Executive Contributions column are also included in amounts reported in the Summary Compensation Table. Of the amounts reported in the Aggregate Balance column, the following amounts have been reported in the Summary Compensation Tables in this proxy statement or in prior year proxy statements: Mr. Hill, $764,819 (Mr. Hill was an NEO in FY 2019-2020 and FY 2025); Mr. Friend, $9,503 (Mr. Friend has been an NEO since FY 2020); Mr. Leinwand, $528,427 (Mr. Leinwand has not previously been an NEO); Mr. Williams, $1,776,654 (Mr. Williams has been an NEO since FY 2024); Mr. Donahoe, $63,695 (Mr. Donahoe was an NEO from FY 2020 to FY 2025); Ms. Matheson, $617,417 (Ms. Matheson was an NEO in FY 2020 an FY 2025); and Ms. O'Neill, $1,855,906 (Ms. O'Neill has been an NEO since FY 2021). +NON-QUALIFIED DEFERRED COMPENSATION PLANS +The NEOs are eligible to participate in our DCP. Participants in the DCP may elect in advance to defer up to 75 percent of their annual base salary, and up to 100 percent of their bonus. +We may make annual profit sharing contributions to defined contribution retirement plans. The contributions are allocated among eligible employees based on a percentage of their total salary and bonus for the year. To the fullest extent permitted under Internal Revenue Code limitations, these contributions are made to employees' accounts under our qualified 401(k) Savings and Profit Sharing Plan. Contributions based on salary and bonus in excess of the tax law limit ($345,000 for fiscal 2025) are made as NIKE contributions under the DCP. +Amounts deferred under the DCP are credited to a participant's account under the DCP. Each participant may allocate his or her account among any combination of the investment options available under the DCP. Participants' accounts are adjusted to reflect the investment performance of the investment options selected by the participants. Participants can change the allocation of their account balances daily. The investment options available under the DCP consist of 18 mutual funds with a variety of investment objectives and five risk-based portfolios. The investment options had annual returns in fiscal 2025 ranging from 0.96% to 14.02%. Amounts credited to participants' accounts are invested by us in actual investments matching the investment options selected by the participants to ensure that we do not bear any investment risk related to participants' investment choices. +The table below lists the available investment options under the Deferred Compensation Plan and their annual return as of May 31, 2025. +NAME OF FUND ANNUAL RATE OF RETURN AS OF MAY 31, 2025 +Fidelity VIP Emerging Markets Initial +12.03% +Goldman Sachs VIT Government MMkt Instl +4.74% +Macquarie VIP Small Cap Value Series Svc +0.96% +MFS VIT II International Intrinsic Value Svc +14.02% +PIMCO VIT Real Return Ad +5.85% +Vanguard VIF Balanced +11.20% +Vanguard VIF Capital Growth +3.43% +Vanguard VIF Equity Income +10.01% +Vanguard VIF Equity Index +13.37% +Vanguard VIF Global Bond Index +5.66% +Vanguard VIF High Yield Bond Inv +8.69% +Vanguard VIF International Inv +11.80% +Vanguard VIF Mid Cap Index +12.12% +Vanguard VIF Real Estate Index +11.70% +Vanguard VIF Short Term Inv Grade I +6.85% +49 NIKE, INC. +Vanguard VIF Small Company Growth +0.98% +Vanguard VIF Total Bond Market Index +5.30% +Vanguard VIF Total Intl Stk Mkt Idx +12.75% +The portion of a participant's account attributable to elective deferrals, including investment returns, is fully vested at all times. The portion of a participant's account attributable to NIKE contributions, including investment returns, is fully vested after the participant has been employed by us for five years. All of the NEOs are fully vested in their NIKE contributions. +Each time they elect to defer compensation, participants make an election regarding distribution of the compensation deferred under the election (as adjusted to reflect investment performance). A participant may elect for distribution to be made in a lump sum at the beginning of a predetermined year while the participant is still employed or in service (but no sooner than the fourth year after the year in which the distribution election is submitted). Alternatively, a participant may elect for distribution to be made in a lump sum or in quarterly installments over five, ten or fifteen years after termination of employment or service. Participants have limited rights to change their distribution elections. Participants may make a hardship withdrawal under certain circumstances. Subject to certain limitations, a participant may also at any time request to withdraw amounts from his or her account balance that were vested as of December 31, 2004 (and any subsequent investment returns on such amount). If such request is approved, the participant may withdraw 90% of the amount requested, and the remaining 10% will be permanently forfeited. +POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE-IN-CONTROL +The Company does not maintain individual severance or change in control agreements with our NEOs, and, except as otherwise described above with respect to Mr. Hill in the section titled "Compensation Discussion and Analysis—Compensation of our Named Executive Officers—Other Compensation—Other Employment Arrangements", we do not have employment contracts with any of our current NEOs, all of whom are employed at-will. +However, our NEOs, including our current NEOs, are entitled to payments and benefits in connection with certain termination events pursuant to the standard terms and conditions of our equity award agreements under the SIP, as described below under the section titled "Equity Award Agreements". In addition, we have non-competition agreements with each of our NEOs, pursuant to which our NEOs may be entitled to receive monthly payments during the applicable post-termination noncompetition period, as described below under the section titled "Non-competition Agreements". Each of our former NEOs is party to a letter agreement setting forth their entitlements under such equity award and non-competition agreements, as described in the section titled "Compensation Discussion and Analysis—Compensation of our Named Executive Officers—Other Compensation—Other Employment Arrangements". +These payments and benefits for both our current and former NEOs are described further below and, as applicable, quantified in the table, under the section titled “Summary of Potential Payments”. A glossary of certain defined terms applicable to these agreements is included at the end of this section. +EQUITY AWARD AGREEMENTS +TERMINATION TREATMENT +As of May 31, 2025, each NEO held stock options, RSUs, and PSUs under the SIP, as listed in the Outstanding Equity Awards table above. Each award is evidenced by an award agreement that sets forth the terms and conditions of the award and the effect of any termination event or a change in control on unvested awards. As discussed elsewhere in this proxy statement, the Compensation Committee approved changes to the payments and benefits triggered on certain employment terminations (other than in connection with a change in control) under the Company's stock option, RSU, and PSU award agreements, including with respect to long-term incentive award grants made to our NEOs, beginning with the fiscal 2025 grants. As a result, the effect of a termination event on outstanding stock option, RSU, and PSU awards varies according to whether the award was granted on or after the September 1, 2024 annual grant (the “Current Options” and “Current Stock Awards”, as applicable) or prior to the September 1, 2024 annual grant (the “Prior Options” and “Prior Stock Awards”, as applicable), as described in the award summaries below. +Stock Options +Death or Disability +Upon the death or disability of the holder: +• unvested options will vest, and such options, together with all other vested options, will be exercisable for up to four years following termination of employment, but not beyond each option's original 10-year term. +2025 PROXY STATEMENT 50 +Involuntary Termination without Cause +Current Options +If the holder experiences an "involuntary termination" of employment by the Company without cause, then subject to the holder signing a general waiver and release of claims: +• a prorated portion of outstanding unvested options will vest and become exercisable based on the number of months elapsed in the vesting period prior to the termination of employment (less amounts already vested) and the remainder will be forfeited, and +• vested options (including such accelerated options) will be exercisable for up to one year following termination of employment, but not beyond each option's original term. +Prior Options (granted after fiscal 2020) +Upon a termination of employment due to a "divestiture" or "reduction in force" that is not a change in control, then subject to the holder signing a general waiver and release of claims: +• options that are scheduled to vest within one year following the termination will vest, and become exercisable, and all other unvested options will be forfeited, and +• vested options will be exercisable for up to one year following termination of employment, but not beyond each option's original term. +If the holder's employment is involuntarily terminated by the Company without cause for any other reason: +• options that are unvested will be forfeited, and +• options that are vested at termination may be exercised for up to three months after the termination of employment, but not beyond each option's original term. +Retirement +Current Options +In the event of a holder's "involuntary termination" or voluntary resignation, in each case when the holder is "retirement eligible", the following treatment will apply, as applicable: +• Unvested options that have been outstanding for at least one year will vest and become exercisable, and vested options will be exercisable for four years following retirement, but not beyond each option's original term. +• The treatment of unvested options that have been outstanding for less than one year will vary based on the termination event: +– If the holder voluntarily resigns when retirement eligible, then all such options will be forfeited, and vested options (if any) may be exercisable up to three months after the termination of employment, but not beyond each option's original term. +– If instead the holder experiences an involuntary termination when retirement eligible, then a prorated portion of such options that are unvested will vest and become exercisable based on the number of months elapsed in the vesting period prior to the termination of employment and the remainder of such options will be forfeited, and vested options will be exercisable for up to one year following termination of employment. +Prior Options +If the holder's employment terminates because of the holder's "early retirement" or the holder is terminated as a result of a "divestiture" or "reduction in force" when eligible for "early retirement": +• unvested options will continue to vest according to the schedule specified in the agreement, and such options, together with all other vested options, will be exercisable for up to four years following termination of employment, but not beyond each option's original term. +If the holder's employment terminates because of the holder's "normal retirement" or the holder is terminated as a result of a "divestiture" or "reduction in force" when eligible for "normal retirement": +• unvested options will vest, and such options, together with all other vested options, will be exercisable for up to four years following termination of employment, but not beyond each option's original term. +Other Termination Scenarios +Current Options +If the holder's employment is terminated due to a "prohibited act": +• vested but unexercised options and unvested options will terminate and be forfeited as of the termination of employment. +If instead the holder's employment is terminated due to a "performance failure" or for any other reason (other than "involuntary termination", death or disability, or retirement): +• options that are vested at termination may be exercised for up to three months after the termination of employment, but not beyond each option's original term. +51 NIKE, INC. +Prior Options +If the holder's employment is terminated for "cause" (as defined in the SIP): +• vested but unexercised options and unvested options will terminate and be forfeited as of the termination of employment. +If instead the holder's employment is terminated without cause for any reason (other than death or disability, retirement, or "divestiture" or "reduction in force"): +• options that are vested at termination may be exercised for up to three months after the termination of employment, but not beyond each option's original term. +RSUs and PSUs +Death or Disability +Upon the death or disability of the holder unvested RSUs and PSUs will vest, with PSUs vesting at 100% of target. +Involuntary Termination without Cause or Retirement +Current Stock Awards +If the holder experiences an "involuntary termination" of employment or "retirement", then (subject to the holder signing a general waiver and release with respect to an involuntary termination that occurs when the holder is not retirement eligible): +• a prorated portion of outstanding unvested RSUs will immediately vest based on the number of months elapsed in the vesting period prior to the termination of employment (less amounts already vested) and the remainder will be forfeited, and +• the holder will be eligible to earn a prorated portion of the holder's outstanding unvested PSUs (excluding the one-time equity retention awards granted to certain of our NEOs in connection with the CEO transition, as discussed below) based on actual Company performance, with any such earned prorated portion to be determined and settled according to its original scheduled vesting date. +Prior Stock Awards (granted after fiscal 2020) +The Prior Stock Awards do not provide for retirement treatment. Upon a termination of employment due to a "divestiture" or "reduction in force" that is not a change in control, subject to the holder signing a general waiver and release of claims: +• RSUs and PSUs that are scheduled to vest within one year following the termination will vest, with PSUs vesting at 100% of target, and the remainder will be forfeited. +Equity Retention Awards +As discussed in the section titled "Compensation Discussion and Analysis—Compensation of our Named Executive Officers—Transition and Equity Retention Awards—One-Time Equity Retention Awards to Non-CEO NEOs", in connection with the CEO transition, one-time equity retention awards were granted to our non-CEO NEOs (other than Mr. Leinwand, who was promoted into the role of Executive Vice President, Chief Legal Officer in November 2024) to support business and leadership continuity and to promote retention during this transitional period. Each such award has a component (50%) that vests subject to continuous service and a component (50%) that vests subject to continuous service and the achievement of a stock price performance measure. All such one-time equity retention awards will immediately vest upon the death or disability of the holder, with the component of such awards subject to a performance measure vesting at 100% of target. In addition, under the terms of these awards, if the holder's employment or service is involuntarily terminated other than due to death, total disability, or "cause" (which term has substantially the same meaning as under the Current Stock Awards), then subject to the holder signing a general waiver and release of claims: +• for the component of the award that is not subject to a performance measure, a prorated portion will vest based on the number of months elapsed in the vesting period prior to the termination of employment, and +• for the component of the award that is subject to a performance measure, a prorated portion based on the number of months elapsed in the vesting period prior to the termination of employment will vest if the applicable performance measure is achieved on or prior to the termination of employment. +The equity retention awards do not provide for retirement treatment. +CHANGE-IN-CONTROL TREATMENT +Unvested stock option, RSU, and PSU awards (including the one-time equity retention awards discussed above) are subject to accelerated vesting under the SIP upon the occurrence of two events (a "double-trigger"): there is a "change in control"; and the NEO's employment is terminated by us without "cause" or by the NEO for "good reason", in each case between the change in control (or shareholder approval of the change in control, if earlier) and the second anniversary of the change in control (a "Qualifying CIC Termination"). Stock options will be exercisable for four years following termination of employment, but not beyond each option's original term. PSUs, per the terms and conditions of the applicable award agreements, will vest at 100% of target. Accelerated vesting of stock options, RSUs, and PSUs will also occur if we are acquired and the acquiring company does not assume the outstanding options, RSUs, or PSUs. +2025 PROXY STATEMENT 52 +NON-COMPETITION AGREEMENTS +CEO AGREEMENTS +We have a non-competition agreement with Mr. Hill that extends for 18 months following the termination of his employment with us. Under this agreement, if Mr. Hill's employment is terminated by us without "cause" (as defined in his agreement), then so long as the covenant is not waived, we will make monthly payments to Mr. Hill during the noncompetition period in an amount equal to one-twelfth of his then current Annual NIKE Income. The agreements provide further that if Mr. Hill voluntarily resigns, then so long as the covenant is not waived, we will make monthly payments to him during the noncompetition period in an amount equal to one-twenty-fourth of his then current Annual NIKE Income. However, in accordance with applicable tax laws, commencement of the above-described monthly payments will be delayed until after the six-month period following Mr. Hill's separation from service, and all payments that he would otherwise have received during that period will be paid in a lump sum promptly following the end of the period, together with interest at the prime rate. If employment is terminated without "cause" (as defined in his agreement) or if Mr. Hill voluntarily resigns, the parties may mutually agree to waive the covenant not to compete, and if employment is terminated for "cause", we may unilaterally waive the covenant. If the covenant is waived, we will not be required to make the payments described above for the months as to which the waiver applies. +We have a non-competition agreement with Mr. Donahoe with substantially identical terms and conditions as those applicable to Mr. Hill under Mr. Hill's agreement. +OTHER NEO AGREEMENTS +We have non-competition agreements with each of the other NEOs on generally the same terms as Messrs. Hill and Donahoe, except that the noncompetition period is one year (instead of 18 months), we may unilaterally waive the covenant in all cases (including a termination without "cause"), and the monthly payments are one-twelfth or one-twenty-fourth of the executive's then current annual salary (instead of their Annual NIKE Income). +SUMMARY OF POTENTIAL PAYMENTS +The following table shows the estimated benefits that would have been received by the NEOs (other than Mr. Donahoe, Ms. Matheson and Ms. O'Neill) in respect of their outstanding equity awards (including, as applicable, any one-time equity retention awards) and under their non-competition agreements upon certain types of termination of employment if the triggering event had occurred on May 30, 2025, when the closing price of our Class B Stock was $60.59 per share, assuming PSUs are earned at 100% of target. Mr. Donahoe's, Ms. Matheson's and Ms. O'Neill's actual benefits payable in connection with their departures are quantified separately below. +NAME TYPE OF PAYMENT +QUALIFYING CIC TERMINATION (1) +DEATH OR DISABILITY +INVOLUNTARY TERMINATION WITHOUT CAUSE (2) +VOLUNTARY RESIGNATION (3) +Elliott Hill +Value of Stock Options (4) +$ — $ — $ — $ — +Value of PSUs/RSUs (5)(6) +$ 9,789,890 $ 9,789,890 $ 1,856,175 $ 1,856,175 +Noncompete Payments (7) +$ — $ — $ 6,750,000 $ 3,375,000 +Total: $ 9,789,890 $ 9,789,890 $ 8,606,175 $ 5,231,175 +Matthew Friend +Value of Stock Options (4) +$ — $ — $ — $ — +Value of PSUs/RSUs (5)(8) +$ 10,993,268 $ 10,993,268 $ 2,932,011 $ — +Noncompete Payments (7) +$ — $ — $ 1,250,000 $ 625,000 +Total: $ 10,993,268 $ 10,993,268 $ 4,182,011 $ 625,000 +Robert Leinwand +Value of Stock Options (4) +$ — $ — $ — $ — +Value of PSUs/RSUs (5) +$ 4,212,641 $ 3,381,831 $ 845,776 $ 471,148 +Noncompete Payments (7) +$ — $ — $ 900,000 $ 450,000 +Total: $ 4,212,641 $ 3,381,831 $ 1,745,776 $ 921,148 +Ann Miller +Value of Stock Options (4) +$ — $ — $ — $ — +Value of PSUs/RSUs (5)(8) +$ 7,858,705 $ 7,858,705 $ 2,161,548 $ — +Noncompete Payments (7) +$ — $ — $ 1,100,000 $ 550,000 +Total: $ 7,858,705 $ 7,858,705 $ 3,261,548 $ 550,000 +Craig Williams +Value of Stock Options (4) +$ — $ — $ — $ — +Value of PSUs/RSUs (5)(8) +$ 12,456,153 $ 12,456,153 $ 3,155,103 $ 824,872 +Noncompete Payments (7) +$ — $ — $ 1,250,000 $ 625,000 +Total: $ 12,456,153 $ 12,456,153 $ 4,405,103 $ 1,449,872 +53 NIKE, INC. +(1) Assumes a termination of employment by NIKE without "cause" or by the NEO for "good reason" (in each case, as defined in the SIP or applicable award agreement) on or prior to the second anniversary of a change in control. +(2) Assumes an involuntary termination of employment without cause (that, for purposes of the Current Options, is not the result of "performance failures" or "prohibited acts") and due to a "divestiture" or "reduction in force" (as defined in the Prior Options and Prior Stock Awards). Upon an involuntary termination of employment without cause that is not a "divestiture" or "reduction in force", the NEOs would be entitled to the following amounts in aggregate: Mr. Hill, $1,856,175; Mr. Friend, $1,320,801; Mr. Leinwand, $471,148; Ms. Miller, $939,024; and Mr. Williams, $1,568,796. As of May 31, 2025, Mr. Hill is eligible for retirement vesting under his equity awards; Mr. Williams is eligible for retirement vesting (including, as applicable, "early retirement" vesting) under his equity awards; Mr. Leinwand is eligible for retirement vesting (including, as applicable, "early retirement" vesting) under his equity awards; and Mr. Friend and Ms. Miller are not eligible for retirement vesting under any of their equity awards because neither Mr. Friend nor Ms. Miller has reached age 55. +(3) Includes, for NEOs who are retirement eligible, as applicable, the value of the unvested stock options held by each NEO as of May 31, 2025 that would have continued to vest if the NEO had retired on that date. As of May 31, 2025, Mr. Hill is eligible for retirement vesting under his equity awards; Mr. Williams is eligible for retirement vesting (including, as applicable, "early retirement" vesting) under his equity awards; Mr. Leinwand is eligible for retirement vesting (including, as applicable, "early retirement" vesting) under his equity awards; and Mr. Friend and Ms. Miller are not eligible for retirement vesting under any of their equity awards because neither Mr. Friend nor Ms. Miller has reached age 55. +(4) Information regarding outstanding unvested stock options held by each NEO is set forth in the Outstanding Equity Awards table above. No amounts are shown in the table above because the applicable unvested stock options have no intrinsic value at the per share closing price of our Class B Stock on May 31, 2025. +(5) Information regarding unvested RSUs and PSUs held by each NEO is set forth in the Outstanding Equity Awards table above. +(6) Includes the accelerated vesting of Mr. Hill's one-time RSU award, as discussed under the sections above titled "Compensation Discussion and Analysis—Compensation of our Named Executive Officers—Long-Term Incentive—Transition and Equity Retention Awards—One-Time CEO Transition Grants for Mr. Hill" and "Compensation Discussion and Analysis—Compensation of our Named Executive Officers—Other Compensation—Other Employment Arrangements—Offer Letter with Mr. Hill". +(7) Represents the estimated aggregate potential benefits that each NEO would have been entitled to receive under his or her respective non-competition agreement had such NEO been terminated by us without "cause" or voluntarily resigned, in each case, on May 31, 2025, assuming the applicable covenants are not waived by us. No amounts are shown in the Qualifying CIC Termination column because the non-competition agreements do not provide for enhanced benefits in the event of a qualifying termination following a change in control; rather, in such event, the aggregate potential benefits that each NEO would be entitled to receive will be as shown under either the Involuntary Termination without Cause column or the Voluntary Resignation column, as applicable. The restriction period under the non-competition agreement with Mr. Hill is 18 months; the restriction period under the non-competition agreements with Mr. Friend, Mr. Leinwand, Ms. Miller, and Mr. Williams is 12 months. The monthly payment amount that would become due to each of the NEOs for the duration of the applicable restriction period, assuming the applicable covenants are not waived by us or breached by the NEO, is as follows: assuming a termination by us without "cause": Mr. Hill, $375,000; Mr. Friend, $104,167; Mr. Leinwand, $75,000; Ms. Miller, $91,667; and Mr. Williams, $104,167; and assuming a voluntary termination of employment: Mr. Hill, $187,500; Mr. Friend, $52,083; Mr. Leinwand, $37,500; Ms. Miller, $45,833; and Mr. Williams, $52,083. +(8) Includes the accelerated vesting of certain one-time equity retention awards, as discussed under the section above titled "Compensation Discussion and Analysis—Compensation of our Named Executive Officers—Long-Term Incentive—Transition and Equity Retention Awards—One-Time Equity Retention Awards to Non-CEO NEOs". These awards do not provide for retirement treatment. +MR. DONAHOE +As discussed above in the section titled "Compensation Discussion and Analysis—Compensation of our Named Executive Officers—Other Compensation—Other Employment Arrangements", in connection with the CEO transition, Mr. Donahoe entered into a letter agreement pursuant to which, from the date of Mr. Hill's appointment through the date of Mr. Donahoe's retirement on January 31, 2025, Mr. Donahoe's annual base salary and employee benefit plan eligibility remained unchanged. Mr. Donahoe's outstanding equity awards continued to vest in accordance with their terms through his retirement on January 31, 2025. +Upon his retirement, Mr. Donahoe forfeited outstanding unvested equity awards in accordance with their terms, except as provided for by virtue of his retirement eligibility under the terms and conditions of our equity award agreements. The value of the portion of Mr. Donahoe's outstanding equity awards that accelerated and vested and/or remained eligible to be earned upon his retirement on January 31, 2025, using the closing price of our Class B Stock on such date ($76.90 per share) is $1,243,242 (assuming PSUs are earned at 100% of target). +The restriction period under the non-competition agreement with Mr. Donahoe is 18 months commencing on the date of his retirement on January 31, 2025. Accordingly, Mr. Donahoe has been and will remain entitled to receive, through expiration of the restriction period, the benefits payable under his agreement upon a voluntary termination of employment, equal to approximately $187,500 each month (subject to a six-month delay in accordance with applicable tax laws, as described above). +MS. O'NEILL +In connection with the organizational changes announced by the Company on May 5, 2025, Ms. O'Neill ceased to serve as the Company's President of Consumer, Product, and Brand and as an executive officer of the Company, in each case, effective as of May 2, 2025. As described in the 8-K filed on May 5, 2025, Ms. O'Neill entered into a letter agreement pursuant to which Ms. O'Neill's annual base salary and employee benefit eligibility will remain unchanged through the date of her separation of employment from the Company on September 5, 2025. Ms. O'Neill's outstanding equity awards will continue to vest in accordance with their terms through her departure. +Ms. O'Neill is retirement eligible (including, as applicable, "normal retirement" eligible), and her separation of employment from the Company will constitute an involuntary termination without cause (or, as applicable, as a result of a reduction in force) for purposes of her equity awards that are outstanding on such date. The value of the portion of Ms. O'Neill's outstanding equity awards that will accelerate and vest and/or remain eligible to be earned upon her departure on September 5, 2025, using the +2025 PROXY STATEMENT 54 +closing price of our Class B Stock on May 30, 2025 ($60.59 per share) is $4,593,449 (assuming PSUs are earned at 100% of target). +The restriction period under the non-competition agreement with Ms. O'Neill is 12 months commencing on her departure. Accordingly, Ms. O'Neill will be entitled to receive, through expiration of the restriction period, the benefits payable under her agreement upon an involuntary termination of employment without cause, equal to approximately $104,167 each month. +MS. MATHESON +Ms. Matheson retired as the Company's EVP, Chief Human Resources Officer and as an executive officer of the Company, in each case, effective as of January 6, 2025. Ms. Matheson entered into a letter agreement pursuant to which Ms. Matheson's annual base salary, bonus and employee benefit eligibility will remain unchanged through the date of her retirement from the Company (which will occur in fiscal 2026), and Ms. Matheson's outstanding equity awards will continue to vest in accordance with their terms through her retirement from the Company on such date. +Ms. Matheson is retirement eligible (including, as applicable, "early retirement" eligible). Accordingly, as of the date of her retirement from the Company, Ms. Matheson will forfeit outstanding unvested equity awards in accordance with their terms, except as provided for by virtue of her retirement eligibility under the terms and conditions of our equity award agreements. The value of the portion of Ms. Matheson's outstanding equity awards that will accelerate and vest and/or remain eligible to be earned upon her retirement in fiscal 2026, using the closing price of our Class B Stock on May 30, 2025 ($60.59 per share) is $694,361 (assuming PSUs are earned at 100% of target). +Ms. Matheson's letter agreement confirms that the Company will enforce the restriction period under her non-competition agreement as of the date of Ms. Matheson's retirement and for four months thereafter. Ms. Matheson will be entitled to receive, through expiration of such four-month restriction period, the benefits payable under her agreement upon a voluntary termination of employment, equal to approximately $45,833 each month. +Key Defined Terms – Potential Payments Upon Termination or Change-In-Control +TERM PLAN / AGREEMENT MEANING +Annual NIKE Income Non-competition agreements (Messrs. Hill and Donahoe only) The sum of current annual salary plus target PSP award. +Cause SIP +For purposes of the stock option, RSU, and PSU awards, in connection with a "change in control", "cause" has the meaning ascribed to it under the SIP and generally includes: +• willful and continued failure to substantially perform assigned duties; and +• willful engagement in illegal conduct materially injurious to us. +Cause Current Stock Awards +For purposes of the termination treatment applicable to our Current Stock Awards (other than in connection with a change in control), "cause" generally includes: +• failure to substantially perform assigned duties; +• commission of any act involving insubordination, fraud, illegality, dishonesty, gross misconduct in the performance of employment duties, or moral turpitude; +• breach of any material Company policy or code of conduct; or +• involvement in activities that violate Company policy and could be detrimental to or reflect unfavorably upon the Company. +Change in Control SIP +For purposes of the stock option, RSU, and PSU awards, "change in control" has the meaning ascribed to it under the SIP and is generally defined to include: +• the acquisition by any "person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act) of more than 50% of our outstanding Class A Stock or, if the Class A Stock no longer elects a majority of directors, the acquisition by any person or group of 30% or more of our total outstanding Common Stock; +• the nomination (and subsequent election) in a two-year period of a majority of our directors by persons other than the incumbent directors; +• a sale of all or substantially all of our assets; and +• an acquisition of NIKE through a merger, consolidation, or share exchange, as a result of which the holders of our outstanding Common Stock no longer hold at least 50% of the combined voting power of the surviving corporation (or a parent of the surviving corporation). +Divestiture Prior Options; Prior Stock Awards Generally means the sale, closing, or other disposition of a subsidiary, division, business unit, or other organizational unit. +Early retirement Prior Options Generally means achieving age 55 with at least 5 years of service. +55 NIKE, INC. +Good Reason SIP +For purposes of the stock option, RSU, and PSU awards, in connection with a "change in control", "good reason" generally includes: +• a material diminution in position or duties; +• a salary reduction or material reduction in other benefits; and +• a home office relocation of over 50 miles. +Involuntary termination Current Options Generally defined to include any involuntary termination of employment or service by the Company, other than due to "performance failures" or "prohibited acts", death, or total disability. +Involuntary termination Current Stock Awards Generally defined to include any involuntary termination of employment or service by the Company, other than due to death, total disability, or "cause". +Normal retirement Prior Options Generally means achieving age 60 with at least 5 years of service. +Performance Failure Current Options Generally defined to include failure to substantially perform assigned duties. +Prohibited Act Current Options +Generally defined to include: +• commission of any act involving insubordination, fraud, illegality, dishonesty, gross misconduct in the performance of employment duties, or moral turpitude; +• breach of any material Company policy or code of conduct; or +• involvement in activities that violate Company policy and could be detrimental to or reflect unfavorably upon the Company. +Reduction in force Prior Options; Prior Stock Awards Generally means a decrease in the number of positions at the Company due to reasons of economy or reorganization for efficiency or redesign (in each case, as designated by the Compensation Committee). +Retirement Current Stock Awards Generally means a participant's "involuntary termination" or voluntary resignation, in each case when (i) the participant's age is at least 55 years and (ii) the participant has at least 5 full years of service with the Company. +Retirement eligible Current Options Generally means (i) the participant's age is at least 55 years and (ii) the participant has at least 5 full years of service with the Company. +EQUITY COMPENSATION PLAN INFORMATION +The following table summarizes information regarding outstanding awards and shares available for future issuance under equity compensation plans approved by shareholders and equity compensation plans that were not approved by shareholders as of May 31, 2025. The table does not reflect issuances made during fiscal 2026. +NUMBER OF SECURITIES +TO BE ISSUED UPON +EXERCISE OF OUTSTANDING +OPTIONS, WARRANTS AND +RIGHTS +WEIGHTED- +AVERAGE EXERCISE +PRICE OF OUTSTANDING +OPTIONS, WARRANTS +AND RIGHTS (1) +NUMBER OF SECURITIES +REMAINING AVAILABLE FOR +FUTURE ISSUANCE UNDER +EQUITY COMPENSATION +PLANS (EXCLUDING SECURITIES +REFLECTED IN COLUMN (a)) +PLAN CATEGORY (a) (b) (c) +Equity compensation plans approved by shareholders 85,761,864 +(2) +$97.99 77,773,144 +(3) +Equity compensation plans not approved by shareholders — $0.00 1,593,476 +(4) +Total 85,761,864 $97.99 79,366,620 +(1) Weighted-average exercise prices do not reflect the shares that will be used upon the payment of outstanding awards of RSUs and PSUs. +(2) Consists of 85,761,864 shares subject to awards of options, RSUs, PSUs (based on performance at the target level of 100%), and stock appreciation rights outstanding under the SIP. +(3) Includes 69,821,064 shares available for future issuance under the SIP and 7,952,080 shares available for future issuance under the Employee Stock Purchase Plan. +(4) Consists of 1,593,476 shares available for future issuance under the Foreign Subsidiary Employee Stock Purchase Plan, pursuant to which shares are offered and sold to employees of selected non-U.S. subsidiaries of the Company on substantially the same terms as those offered to U.S. employees under the shareholder-approved Employee Stock Purchase Plan as described in the section above titled "Compensation Discussion and Analysis—Compensation of our Named Executive Officers—Other Compensation—Employee Stock Purchase Plan". +2025 PROXY STATEMENT 56 +CEO PAY RATIO +NIKE's pay and benefits are designed to be competitive and equitable, meet the needs of our global teammates, and reinforce our values. We pay for performance and impact by linking incentive pay to Company performance and seek to invest in positive experiences that have the greatest impact on the engagement and well-being of our employees. The executive compensation program is highly incentive-based and weighted towards long-term awards to emphasize long-term performance and support retention. Our executive compensation program is designed to attract and retain top-tier talent in a competitive market and to "pay for performance" in order to drive business results and maximize shareholder value. +For fiscal 2025, our last completed fiscal year: +• The employee identified at the median of all NIKE employees (other than our CEO) was a retail employee in the United Kingdom; +• The annual total compensation of the median employee was $48,723, based on the Summary Compensation Table rules used for our Named Executive Officers (in accordance with Item 402(c)(2)(x) of Regulation S-K); and +• The annualized total compensation of our CEO, Mr. Hill, was $26,566,145, as described below. +NIKE had two individuals serve as CEO during fiscal 2025. For purposes of calculating the CEO pay ratio, we annualized the base salary and cash incentive award under the PSP of our current CEO, Mr. Hill, who began serving in the role on October 14, 2024, and we included all other components of his compensation in the same amounts as disclosed in the Summary Compensation Table. Mr. Hill's annualized base salary was $1,500,000 (representing his fiscal 2025 base salary as CEO), and his annualized PSP award was $0 (representing the value of Mr. Hill's fiscal 2025 PSP award assuming his fiscal 2025 PSP target opportunity and fiscal 2025 base salary as CEO and applying his actual fiscal 2025 PSP award payout percentage of 0% of target). Accordingly, Mr. Hill's annualized total compensation for the purposes of this calculation was $26,566,145. +Based on this information, the estimated ratio of the annualized total compensation of our CEO to the median annual total compensation of all other NIKE employees was 545 to 1. +This pay ratio is a reasonable estimate calculated in a manner consistent with SEC rules based on the methodology described below. The SEC rules for identifying the median compensated employee and calculating the pay ratio allow companies to adopt a variety of methodologies, apply certain exclusions, and make reasonable estimates and assumptions that reflect their compensation practices. As such, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies may utilize different methodologies, exclusions, estimates, and assumptions in calculating their own pay ratios. +Consistent with our past practice, we used the first business day in May as the date to determine the median employee. This year, the first business day in May was May 1, 2025. At that time, we had approximately 76,600 employees globally. Of those employees, approximately 73% were full-time, 53% were in retail jobs, and 49% were located in the United States. +To identify our median employee from our global employee population, we calculated annual compensation for fiscal 2025 based on base salary or hourly wages, as applicable. For the majority of our employees, base salary or hourly wages comprise the majority of their compensation. To determine wages for hourly employees, we used each individual's pay rate and estimated scheduled hours in the applicable Human Resources system of record. Compensation for permanent employees hired during the fiscal year was annualized, and compensation for non-U.S. employees was converted into U.S. dollars using the applicable currency conversion rate as reported in the Human Resources system of record for the median employee determination date. +If this consistently applied compensation methodology yielded a median employee who, during fiscal 2025, (1) was on a leave of absence that significantly impacted total pay during the year, or (2) was an hourly employee who worked significantly more or significantly fewer hours than their scheduled hours, that individual was excluded. If this consistently applied compensation methodology yielded two or more employees, we selected one. +As permitted under SEC rules, we changed our methodology from prior fiscal years, when we (1) excluded non-U.S. employees accounting for 5% or less of our total employee population (commonly referred to as the de minimis exemption) and (2) after determining the annual compensation for the remainder of our employee population, selected a median employee from a subset of approximately 100 employees representing the potential median employee population, based on the Summary Compensation Table rules used for our Named Executive Officers (in accordance with Item 402(c)(2)(x) of Regulation S-K). We made the changes in methodology described above in order to streamline our median employee identification process and better reflect NIKE's organizational structure. +57 NIKE, INC. +PAY VERSUS PERFORMANCE +This disclosure has been prepared in accordance with Item 402(v) of Regulation S-K under the Exchange Act and does not necessarily reflect how the Compensation Committee evaluates compensation decisions in light of Company or individual performance. The Compensation Committee did not consider the pay versus performance disclosure below in making its compensation decisions for any of the fiscal years shown. For discussion of how the Compensation Committee seeks to align pay with performance when making compensation decisions, please review the section above titled "Compensation Discussion and Analysis". +PAY VERSUS PERFORMANCE TABLE +The following table sets forth compensation information of our CEO and our non-CEO NEOs and Company performance for the fiscal years listed below, in accordance with Item 402(v) of Regulation S-K. +YEAR +SUMMARY +COMPENSATION +TABLE FOR +MR.HILL (1)(2) +COMPENSATION +ACTUALLY PAID +TO MR. HILL (1)(3)(4) +SUMMARY +COMPENSATION +TABLE TOTAL +FOR MR. +DONAHOE (1)(5) +COMPENSATION +ACTUALLY PAID +TO MR. +DONAHOE (1)(4)(6) +AVERAGE +SUMMARY +COMPENSATION +TABLE TOTAL +FOR NON-CEO +NEOs (1)(7) +AVERAGE +COMPENSATION +ACTUALLY PAID +TO NON-CEO +NEOs (1)(4)(8) +VALUE OF INITIAL FIXED $100 +INVESTMENT BASED ON +NET INCOME (10) +(IN MILLIONS) +ADJUSTED +REVENUE (11) +(IN MILLIONS) +TOTAL +SHAREHOLDER +RETURN (9) +PEER GROUP +TOTAL +SHAREHOLDER +RETURN (9) +2025 $ 26,018,068 $ 17,010,238 $ 28,442,712 $( 10,924,243 ) $ 12,135,422 $ 2,798,172 $ 65.09 $ 81.16 $ 3,201 $ 46,350 +2024 — — $ 29,184,701 $ 13,158,408 $ 9,804,553 $ 5,812,537 $ 100.23 $ 124.83 $ 5,700 $ 51,656 +2023 — — $ 32,789,885 $ 29,391,856 $ 10,117,055 $ 7,259,680 $ 109.51 $ 116.84 $ 5,070 $ 52,593 +2022 — — $ 28,838,060 $ 19,617,425 $ 9,185,111 $ 7,482,733 $ 122.26 $ 120.40 $ 6,046 $ 47,406 +2021 — — $ 32,920,708 $ 77,444,844 $ 17,107,315 $ 28,986,814 $ 139.58 $ 141.30 $ 5,727 $ 43,769 +(1) The following NEOs are included in the table above: +YEAR CEO Non-CEO NEOs +2025 +Elliott Hill , John Donahoe II +Matthew Friend, Robert Leinwand, Ann Miller, Craig Williams, Monique Matheson, and Heidi O'Neill +2024 John Donahoe II Matthew Friend, Heidi O'Neill, Mark Parker, and Craig Williams +2023 John Donahoe II Matthew Friend, Andrew Campion, Heidi O'Neill, and Mark Parker +2022 John Donahoe II Matthew Friend, Andrew Campion, Heidi O'Neill, and Mark Parker +2021 John Donahoe II Matthew Friend, Andrew Campion, Heidi O'Neill, and Mark Parker +(2) Represents the amount of total compensation reported for our CEO, Mr. Hill, in the "Total" column of the "Summary Compensation Table" for each fiscal year presented. +(3) The dollar amounts reported in the "Compensation Actually Paid to Mr. Hill" column have been calculated in accordance with Item 402(v) of Regulation S-K and do not reflect compensation actually earned, realized, or received by Mr. Hill. These amounts reflect the amount set forth in the "Total" column of the "Summary Compensation Table" for each fiscal year presented, with certain adjustments as described in the table below, in accordance with the requirements of Item 402(v) of Regulation S-K: +2025 +Summary Compensation Table ("SCT") total for Mr. Hill $ 26,018,068 +Deduction for amounts reported under the "Stock Awards" column in the SCT $ 14,887,893 +Deduction for amounts reported under the "Option Awards" column in the SCT $ 5,832,678 +Total deductions from SCT $ 20,720,571 +Year end fair value of equity awards $ 11,583,480 +Value of dividends on stock awards $ 129,261 +Total adjustments $ 11,712,740 +Compensation actually paid $ 17,010,238 +(4) Equity awards included in these amounts are calculated using the following equity valuations: Stock option grant date fair values are calculated based on the Black-Scholes option pricing model as of the grant date; adjustments have been made using stock option fair values as of each measurement date using the stock price as of the measurement date and updated assumptions (i.e., term, volatility, dividend yield, risk free rates) as of the measurement date. PSU grant date fair values are calculated using a Monte Carlo simulation based on the probable outcome of the performance condition as of the grant date; adjustments have been made using a revised Monte Carlo valuation as of fiscal year end. RSU grant date fair values are calculated using the stock price as of the grant date; adjustments have been made using the stock price as of fiscal year end and as of each vesting date. +(5) Represents the amount of total compensation reported for our Former CEO, Mr. Donahoe, in the "Total" column of the "Summary Compensation Table" for each fiscal year presented. +(6) The dollar amounts reported in the "Compensation Actually Paid to Mr. Donahoe" column have been calculated in accordance with Item 402(v) of Regulation S-K and do not reflect compensation actually earned, realized, or received by Mr. Donahoe. These amounts reflect the amount set forth in the "Total" column of the "Summary Compensation Table" for each fiscal year presented, with certain adjustments as described in the table below, in accordance with the requirements of Item 402(v) of Regulation S-K: +2025 PROXY STATEMENT 58 +2025 +Summary Compensation Table ("SCT") total for Mr. Donahoe $ 28,442,712 +Deduction for amounts reported under the "Stock Awards" column in the SCT $ 15,348,756 +Deduction for amounts reported under the "Option Awards" column in the SCT $ 7,239,086 +Total deductions from SCT $ 22,587,842 +Year end fair value of equity awards $ 772,498 +Change in fair value of outstanding and unvested equity awards $( 5,677,419 ) +Change in fair value of equity awards granted in prior years that vested in the year $( 2,771,387 ) +Fair value as of the prior fiscal year of equity awards granted in prior years that failed to meet vesting conditions in the year $( 9,451,544 ) +Value of dividends on stock awards $ 348,739 +Total adjustments $( 16,779,113 ) +Compensation actually paid $( 10,924,243 ) +(7) Represents the average of the amounts of total compensation reported for our non-CEO NEOs, as a group, in the "Total" column of the "Summary Compensation Table" for each fiscal year presented. +(8) The dollar amounts reported in the "Average Compensation Actually Paid to Non-CEO NEOs" column have been calculated in accordance with Item 402(v) of Regulation S-K and do not reflect compensation actually earned, realized, or received by the non-CEO NEOs. These amounts reflect the average of the amounts set forth in the "Total" column of the "Summary Compensation Table" for each fiscal year presented for the applicable non-CEO NEOs, with certain adjustments as described in the table below, in accordance with the requirements of Item 402(v) of Regulation S-K: +2025 +Average Summary Compensation Table total for non-CEO NEOs $ 12,135,422 +Deduction for amounts reported under the "Stock Awards" column in the SCT $ 8,406,828 +Deduction for amounts reported under the "Option Awards" column in the SCT $ 2,582,963 +Total deductions from SCT $ 10,989,791 +Year end fair value of equity awards $ 5,825,996 +Change in fair value of outstanding and unvested equity awards $( 3,505,896 ) +Change in fair value of equity awards granted in prior years that vested in the year $( 805,227 ) +Value of dividends on stock awards $ 137,667 +Total adjustments $ 1,652,540 +Average compensation actually paid $ 2,798,172 +(9) Peer group total shareholder return ("TSR") uses the Dow Jones U.S. Footwear Index, which the Company also uses in the stock performance graph required by Item 201(e) of Regulation S-K included in the Company's Annual Report on Form 10-K for fiscal 2025. These comparisons assume $100 (including reinvested dividends) was invested for the period starting May 31, 2020 through the end of the listed fiscal year in (a) the Company and (b) the Dow Jones U.S. Footwear Index, respectively. Historical stock performance is not necessarily indicative of future stock performance. +(10) Reflects net income calculated in accordance with generally accepted accounting principles ("GAAP") in the Company's Consolidated Statements of Income included in the Company's Annual Reports on Form 10-K for the applicable fiscal year. +(11) Represents the most important financial performance measure used to link Company performance to compensation actually paid ("CAP") to our CEO and non-CEO NEOs in fiscal 2025, as required pursuant to Item 402(v) of Regulation S-K. Adjusted Revenue is a non-GAAP financial measure calculated based on GAAP revenue excluding the impact of acquisitions and divestitures; changes in accounting principles; unanticipated restructurings; unanticipated exchange rate fluctuations; other extraordinary, unusual, or infrequently occurring items; and for fiscal 2021, the unanticipated impact from Nike Virtual Studios and RTFKT. We may determine a different financial performance measure to be the most important financial performance measure in future years. +DESCRIPTION OF RELATIONSHIPS +The following charts show graphically the relationships over the past five fiscal years of the CAP amounts for our CEO and non-CEO NEOs as compared to our cumulative TSR, peer group TSR, GAAP net income, and Adjusted Revenue as well as the relationship between TSR and peer group TSR. +59 NIKE, INC. +CAP VERSUS COMPANY TSR & PEER GROUP TSR +CAP VERSUS NET INCOME +2025 PROXY STATEMENT 60 +CAP VERSUS ADJUSTED REVENUE +TABULAR LIST OF PERFORMANCE METRICS +The following table lists the three financial performance measures that, in the Company's assessment, represent the most important performance measures used to link CAP for our NEOs to Company performance for fiscal 2025. +Adjusted Revenue +Adjusted EBIT +Stock price +61 NIKE, INC. +AUDIT MATTERS +PROPOSAL 3 +RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM +The Audit & Finance Committee of the Board has sole authority to retain, with shareholder ratification, the Company's independent registered public accounting firm. The Audit & Finance Committee directly oversees the firm's work with respect to the annual audit of the Company's consolidated financial statements and internal control over financial reporting and approves all audit engagement fees and terms. At least annually, the Audit & Finance Committee evaluates the independent registered public accounting firm's qualifications, performance, and independence, including a review and evaluation of its lead partner. The Audit & Finance Committee is also involved in the selection of the new lead engagement partner following mandated rotation of the firm’s lead partner, and is responsible for considering the benefits of rotation of the Company’s independent registered public accounting firm. +The Audit & Finance Committee has appointed PricewaterhouseCoopers LLP ("PwC") to audit the Company's consolidated financial statements and internal control over financial reporting for the fiscal year ending May 31, 2026 and to render other professional services as required. +PwC has served as the Company's independent registered public accounting firm for many years. The Audit & Finance Committee and the Board believe that the continued retention of PwC as the independent registered public accounting firm is in the best interests of the Company and its shareholders. +Accordingly, the Audit & Finance Committee is submitting the appointment of PwC to shareholders for ratification. If the appointment is not ratified by our shareholders, the Audit & Finance Committee may reconsider whether it should appoint another independent registered public accounting firm. +Representatives of PwC will be present at the Annual Meeting, will have the opportunity to make a statement if they desire to do so, and are expected to be available to respond to questions. +Aggregate fees billed by the Company's independent registered public accounting firm, PwC, for audit services related to the most recent two fiscal years, and for other professional services incurred in the most recent two fiscal years, were as follows: +TYPE OF SERVICE +2025 2024 +Audit Fees (1) +$21.4 million $20.2 million +Audit-Related Fees (2) +0.4 million 0.5 million +Tax Fees (3) +— 0.1 million +All Other Fees (4) +0.4 million 1.4 million +Total +$22.2 million $22.2 million +(1) Comprises services performed to comply with the standards established by the PCAOB, including the audits of our financial statements and internal control over financial reporting; audits in connection with statutory filings; and attest services that the principal independent registered public accounting firm can most effectively and efficiently provide, such as procedures related to comfort letters, consents and reviews of our SEC filings. +(2) Comprises assurance and related services traditionally performed by the independent registered public accounting firm and reasonably related to the performance of the audit or review of our financial statements, and audit or compliance services not required by applicable statutes or regulations. This category also includes audits of pension and other employee benefit plans. +(3) Comprises tax compliance and consulting services such as preparation of tax returns in foreign jurisdictions, tax audits, and U.S. and non-U.S. tax planning. +(4) Comprises any services other than those described in the above categories. In both years, included subscriptions and licenses to accounting and tax resources, information systems reviews not performed in connection with the audit, and other permissible services. +In accordance with the Sarbanes-Oxley Act of 2002, the Audit & Finance Committee established policies and procedures under which all audit and non-audit services performed by the Company's independent registered public accounting firm must be approved in advance by the Audit & Finance Committee. During fiscal 2025 and fiscal 2024, all such services performed by, and fees paid to, PwC were approved in advance. +BOARD RECOMMENDATION +The Board of Directors recommends that shareholders vote FOR ratification of the appointment of PricewaterhouseCoopers LLP as the Company's independent registered public accounting firm for the fiscal year ending May 31, 2026. +2025 PROXY STATEMENT 62 +REPORT OF THE AUDIT & FINANCE COMMITTEE +The Audit & Finance Committee has: +• Reviewed and discussed the audited financial statements with management. +• Discussed with the independent auditors the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board ("PCAOB") and the SEC. +• Received the written disclosures and the letter from the independent accountants required by applicable requirements of the PCAOB regarding the independent accountants' communications concerning independence, and has discussed with the independent accountant the independent accountant's independence. +• Based on the review and discussions above, recommended to the Board of Directors that the audited financial statements be included in the Company's Annual Report on Form 10-K for the last fiscal year for filing with the Securities and Exchange Commission. +Members of the Audit & Finance Committee: +• Maria Henry +• Peter Henry +• Robert Swan, Chair +63 NIKE, INC. +STOCK INCENTIVE PLAN +PROPOSAL 4 +APPROVAL OF STOCK INCENTIVE PLAN +The Board of Directors is asking our shareholders to approve an amendment and restatement of the NIKE, Inc. Stock Incentive Plan (the "Amended Plan"). The Stock Incentive Plan was originally adopted by the Board and approved by shareholders in 1990 as the 1990 Stock Incentive Plan, and an amended and restated version was most recently adopted by the Board and approved by shareholders in 2020 (the "Current Plan"). On the recommendation of the Compensation Committee, the Board unanimously adopted the Amended Plan on July 17, 2025, subject to shareholder approval at the Annual Meeting. +If this proposal is approved by our shareholders, the Amended Plan will replace the Current Plan with respect to awards granted after the Annual Meeting. If this proposal is not approved, the Current Plan will remain in effect. +As of our record date, July 9, 2025, only 72,236,768 of the 798,000,000 shares authorized under the Current Plan remained available for future grants, a number that the Compensation Committee and the Board believe is insufficient to meet our future needs. We recommend that shareholders approve the Amended Plan to (1) permit the continued use of stock-based compensation by reserving an additional 45,000,000 shares for issuance under the Amended Plan, such that a total of 843,000,000 shares will be reserved and available for issuance under the Amended Plan, and (2) make other market standard updates, technical revisions in response to changes in law and other clarifying and administrative changes. Stock-based compensation is an important part of our compensation structure and serves the best interests of our shareholders by: +• rewarding long-term Company performance; +• aligning employees' interests with those of our shareholders; and +• enabling us to attract and retain top-tier talent in a competitive marketplace. +If the Amended Plan is not approved, we may need to replace the stock-based components of our compensation with cash, which may increase compensation expense, reduce compensation alignment with shareholder interests, and impede our ability to attract and retain talent. +We encourage shareholders to read this Proposal 4, which provides, among other items, a summary of certain key data relating to outstanding equity awards and shares available for future awards under the Current Plan, information relating to how the Board determined the number of shares proposed to be reserved under the Amended Plan, a summary of significant changes from the Current Plan, an overview of the terms and conditions of, and benefits to be received under, the Amended Plan, and a brief description of the current U.S. federal income tax consequences generally arising with respect to awards granted under the Amended Plan. +BOARD RECOMMENDATION +The Board of Directors recommends that shareholders vote FOR approval of the following resolution: +RESOLVED, that the shareholders approve the NIKE, Inc. Stock Incentive Plan as amended and restated. +2025 PROXY STATEMENT 64 +SUMMARY OF THE STOCK INCENTIVE PLAN +The Board believes that the Amended Plan will promote the interests of shareholders and is consistent with the principles of good corporate governance. The material terms of the Amended Plan and certain significant ways in which they differ from those of the Current Plan are summarized below. These summaries are qualified in their entirety by reference to the complete text of the Amended Plan, which is attached to this proxy statement as Exhibit A. Capitalized terms used in this proposal that are not otherwise defined have the meanings given to them in the Amended Plan. +If the Amended Plan is not approved by our shareholders, the Current Plan will remain in full force and effect in accordance with its terms. Regardless of whether the Amended Plan is approved by our shareholders, each award granted under the Current Plan will continue to be subject to the terms and provisions applicable to such award under the Current Plan and the applicable award agreement. +BEST PRACTICES AND SIGNIFICANT CHANGES +The Amended Plan includes several features designed to protect the interests of our shareholders and reflect sound corporate governance practices and our compensation philosophy, including the following key features and material differences from the Current Plan: +• Share reserve increase. The share reserve under the Current Plan is insufficient to meet our future needs. The Amended Plan will reserve a sufficient number of shares to enable the Company to continue to grant equity awards, which is a critical component of our compensation program. The Amended Plan will increase in the maximum number of shares of Common Stock authorized for issuance by an additional 45,000,000 shares. +• Modified fungible share ratio. Shares issued under the Amended Plan in respect of full value awards will count against the number of shares authorized for issuance under the Amended Plan at a rate of 2.5 shares for every share granted (rather than 2.8 shares for every share granted under the Current Plan). Unlike the Current Plan, which generally requires that grants made under such plan exceed 25,000,000 shares before the fungible share ratio first applies, the fungible share ratio under the Amended Plan will apply immediately and will not be subject to any such "Full Value Limit" or similar hurdle. +• No liberal share recycling. Shares under an award may not again be made available for issuance under the Amended Plan if such shares are: (1) subject to a stock-settled SAR and not issued or delivered upon the net settlement of such SAR, (2) delivered to or withheld by the Company to pay the exercise price, the strike price or the withholding taxes related to an outstanding award, or (3) repurchased on the open market with the proceeds of an option exercise. +• No "evergreen" provision. There continues to be no evergreen feature pursuant to which the shares authorized for issuance under the Amended Plan would be automatically replenished. +• No option / SAR reloads. The Amended Plan provides that the Company will not grant any stock options or SARs with automatic reload features. +• No repricing. As with the Current Plan, reducing the exercise price of stock options or SARs issued and outstanding under the Amended Plan will require approval of our stockholders. +• Double-trigger vesting; no discretionary PSU vesting. The Amended Plan provides double-trigger change in control vesting for awards granted under the Amended Plan, with PSUs deemed earned at the greater of target and actual level of performance through the date of the change in control. Terms regarding the vesting of PSUs in connection with a change in control of the Company under the Amended Plan may not be overridden by the terms of an award agreement or in the discretion of the plan administrator. +• Director compensation limits. The maximum number of shares of Common Stock subject to awards granted during a single fiscal year to any non-employee director, taken together with any cash fees, will be capped at $1,500,000 in total value based on grant date fair value. Unlike the Current Plan, no additional amount is provided for one-time awards to newly appointed non-employee directors. +• Awards subject to clawback. Awards granted under the Amended Plan continue to be subject to the Company's clawback policy and any clawback or recoupment provisions set forth in any agreements evidencing awards. +• Sub-plans. The Amended Plan permits the creation of sub-plans for the purpose of permitting the offering of awards to employees of certain Designated Foreign Subsidiaries or who are otherwise employed outside the U.S., with each such sub-plan designed to comply with local laws. +• Address other updates in law and market practice. The Amended Plan will incorporate certain other technical revisions in response to changes in the law and which are designed to protect the interests of our shareholders and reflect sound corporate governance practices, as well as other clarifying changes. +65 NIKE, INC. +BURN RATE AND POTENTIAL DILUTION +The Amended Plan will reserve an additional 45,000,000 shares for issuance under the Amended Plan. We believe this will provide sufficient shares for the Company's stock-based compensation needs through the 2027 annual meeting of shareholders. This estimate is based on our historical share usage, adjusted for growth and to allow for flexibility around types of awards used, though actual issuances could be materially different from this estimate. +In setting the number of shares authorized for issuance under the Amended Plan, we considered our historic burn rate, which measures annual share utilization. As shown in the following table, the Company's three-year average burn rate was 0.69%, which is below the benchmarks applied to our industry by certain major proxy advisory firms. +FISCAL YEAR STOCK OPTIONS AND SARS GRANTED +(in millions) FULL VALUE AWARDS GRANTED +(in millions) TOTAL GRANTED +(in millions) WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING (CLASS A AND CLASS B) +(in millions) BURN RATE +(%) +2025 13.3 6.6 19.9 1,485 0.81 +2024 12.2 5.3 17.5 1,518 0.65 +2023 12.0 4.5 16.5 1,552 0.61 +Average — — — — 0.69 +We also considered overhang, which measures potential shareholder dilution, in setting the number of additional shares authorized for issuance under the Amended Plan. As of our record date of July 9, 2025, there were 1,476,903,492 Class A shares and Class B shares outstanding in total, 81,627,622 Class B shares were subject to outstanding stock-based awards, and 72,236,768 Class B shares were available for future awards under the Current Plan (Class A shares are not available for issuance under the Current Plan and will not be available for issuance under the Amended Plan). Therefore, as of July 9, 2025, our overhang (calculated as the number of shares subject to outstanding awards plus the number of shares available to be granted ("Total Award Shares"), divided by the total number of outstanding Class A shares and Class B shares) was 10%. Had the 45,000,000 additional shares being requested under the Amended Plan been available for grant as of the record date, our overhang would have increased to 13%. +KEY TERMS +PURPOSE +The purpose of the Amended Plan, like the Current Plan, is to enable the Company to attract and retain experienced individuals to serve as employees, officers, directors, consultants, advisors, and independent contractors, and to provide incentives for them to apply their best efforts on behalf of the Company. +ELIGIBILITY +Participants under the Amended Plan may include employees, officers, directors, consultants and advisors to NIKE or any parent or subsidiary corporation who is selected by the Compensation Committee. As of July 9, 2025, it is anticipated that approximately 7,200 employees (inclusive of NIKE's Chair, President and CEO) and all of our non-employee directors (10 as of July 9, 2025) will be eligible to receive awards under the Amended Plan. +ADMINISTRATION +The Amended Plan generally will be administered by the Compensation Committee or any committee of the Board serving a similar function. Among other actions, the Compensation Committee is generally authorized in its sole discretion to (1) make all determinations under the Amended Plan; (2) construe, interpret and implement and correct any defect, supply any omission and reconcile any inconsistency in the Amended Plan and all award agreements and determine disputed facts related thereto, provided that, with respect to all claims or disputes arising out of any determination of the Compensation Committee that materially adversely affects a participant's award, (A) the affected participant will file a written claim with the Compensation Committee for review, explaining the reasons for such claim, and (B) the Compensation Committee's decision must be written and must explain the decision; (3) prescribe, amend and rescind rules and regulations relating to the Amended Plan, including rules governing the Compensation Committee's own operations; (4) grant, or recommend to the Board for approval to grant, awards and determine the terms of such awards; (5) amend the Amended Plan or any outstanding award agreement, including, without limitation, to accelerate the vesting and delivery of shares or to reflect a change in the participant's circumstances; (6) determine whether, to what extent and under what circumstances awards may be settled, exercised, or canceled, forfeited or suspended; and (7) adopt Sub-Plans. The determination of the Compensation Committee on all matters relating to the Amended +2025 PROXY STATEMENT 66 +Plan or any award agreement will be entitled to the maximum deference permitted by law and will be final, binding and conclusive and non-reviewable and non-appealable and may be entered as a final judgment in any court having jurisdiction. +The Compensation Committee may generally allocate among its members and delegate to any person who is not a member of the Compensation Committee, or to any administrative group within the Company Group, any of its powers, responsibilities or duties. Notwithstanding anything to the contrary contained in the Amended Plan, the Board may, in its sole discretion, at any time and from time to time, grant awards and administer the Amended Plan with respect to such awards. +Members of the Board, the Compensation Committee or any employee or agent of any member of the Company Group or any person to whom the Board or Compensation Committee delegates its powers, responsibilities or duties are generally provided indemnification under the Amended Plan in respect of any actions taken or omitted to be taken or any determinations made with respect to the Amended Plan or any award thereunder (unless constituting fraud or a willful criminal act or omission). +SHARES SUBJECT TO THE AMENDED PLAN +Share Limit +As noted above, as of our record date, July 9, 2025, only 72,236,768 of the 798,000,000 shares authorized under the Current Plan remained available for future grants. The Amended Plan reserves an additional 45,000,000 shares for issuance under the Amended Plan, such that a total of 843,000,000 shares (the Share Limit) will be reserved and available for issuance under the Amended Plan. Shares of Common Stock issued under the Amended Plan in settlement of awards may be authorized and unissued shares, shares held in treasury, shares purchased on the open market or by private purchase or a combination of the foregoing. +The actual Share Limit will reflect incremental changes in the number of shares of Common Stock remaining available under the Current Plan to reflect issuances and forfeitures of equity awards following such date through the Effective Date of the Amended Plan. The maximum number of shares for which incentive stock options may be granted under the Amended Plan is 843,000,000, and the maximum number of shares of Common Stock granted during a single fiscal year to any non-employee director, taken together with any cash fees paid to such non-employee director during the fiscal year in respect of such non-employee director's service on the Board, will not exceed $1,500,000 in total value (calculating the value of any such awards based on the grant date fair value of such awards for financial reporting purposes). +Share Recycling +Except as otherwise provided in the Amended Plan and for substitute awards (as described below), in the event any award is forfeited, cancelled, surrendered or terminated without the payment of the full number of shares subject to such award, including as a result of the award being settled in cash, the undelivered shares may be granted again under the Amended Plan. +Shares of Common Stock subject to an award under the Amended Plan may not again be made available for issuance if such shares: (1) were subject to a stock-settled SAR and were not issued or delivered upon the net settlement of such SAR; (2) were delivered to or withheld by the Company to pay the exercise price, the strike price, or the withholding taxes related to an outstanding award; or (3) were repurchased on the open market with the proceeds of an option exercise. +Fungible Share Ratio +Any shares of Common Stock subject to a Legacy Full Value Award, as applicable, will be counted against the Share Limit as 2.8:1 shares of Common Stock for every share of Common Stock issued in connection with such award, and every New Full Value Award will be counted against the Share Limit as 2.5:1 shares of Common Stock for every one share of Common Stock issued in connection with such award. If shares of Common Stock subject to any such Legacy Full Value Award, as applicable, or New Full Value Award are forfeited, cancelled, surrendered, or terminated without issuance of shares and would otherwise return to the Amended Plan, 2.8 times or 2.5 times the number of shares of Common Stock so forfeited, cancelled, surrendered or terminated will again be available for issuance under the Amended Plan, respectively. A "Legacy Full Value Award" (as such term is used in the Amended Plan) is a grant, prior to the Effective Date of the Amended Plan, of one or more shares of Common Stock or a right to receive the same in the future, including restricted stock, RSUs, performance shares, PSUs and dividend equivalents; provided, however, that the term "Legacy Full Value Award" will only relate to such full value awards granted after July 16, 2010 that were in excess of the applicable Full Value Limit established under the Current Plan. A "New Full Value Award" (as such term is used in the Amended Plan) is any grant, on or after the Effective Date, of one or more shares of Common Stock or a right to receive the same in the future, including restricted stock, RSUs, performance shares, PSUs and dividend equivalents. +Assumption and Substitution of Awards +Awards may, in the sole discretion of the Compensation Committee, be granted in assumption of, or in substitution for, outstanding awards previously granted by an entity directly or indirectly acquired by the Company or with which the Company +67 NIKE, INC. +combines (substitute awards), and such substitute awards will generally not be counted against the total number of shares that may be issued under the Amended Plan. +TYPES OF AWARDS +The Amended Plan authorizes the award of incentive stock options, nonqualified stock options, stock appreciation rights ("SARs"), restricted stock, restricted stock units ("RSUs"), performance shares, performance share units ("PSUs") and other stock-based awards payable by reference to the value of Common Stock. +• Stock Options. The Compensation Committee may grant non-qualified stock options and incentive stock options under the Amended Plan, with terms and conditions determined by the Compensation Committee that are not inconsistent with the Amended Plan; provided that all stock options granted under the Amended Plan are generally required to have a per share exercise price that is not less than the greater of 100% (or 110% for incentive stock options granted to employees with over 10% voting power) of the fair market value of the Company's Common Stock or the par value of the Company's Common Stock underlying such stock options, each as determined on the date an option is granted. All stock options that are intended to qualify as incentive stock options must be granted pursuant to an award agreement expressly stating that the option is intended to qualify as an incentive stock option and will be subject to the terms and conditions that comply with the rules as may be prescribed by Section 422 of the Code. The maximum term for stock options granted under the Amended Plan will be ten years from the initial date of grant, or with respect to any stock options intended to qualify as incentive stock options, such shorter period as prescribed by Section 422 of the Code. Additionally, in the sole discretion of the Compensation Committee, any option that is exercisable but unexercised as of the day immediately before its expiration may be automatically exercised, in accordance with procedures established for this purpose by the Compensation Committee, but only if the exercise price is less than the fair market value of a share of Common Stock on that date. The Compensation Committee, in its discretion, may provide post-exercise restrictions on shares of stock acquired pursuant to the exercise of an option as it determines to be appropriate. The purchase price for the shares as to which a stock option is exercised may be paid to the Company, to the extent permitted by law, (1) in cash, check, cash equivalent and/or, in the sole discretion of the Compensation Committee, shares of Common Stock valued at the fair market value at the time the stock option is exercised or (2) by such other method as the Compensation Committee may permit in its sole discretion. The Company will not grant any stock options with automatic reload features, and must get shareholder approval to reduce the exercise price of stock options issued and outstanding under the Amended Plan. +• Stock Appreciation Rights. The Compensation Committee may grant SARs, including tandem SARs and SARs independent of any option, subject to terms and conditions that are not inconsistent with the Amended Plan. Generally, each SAR will entitle the participant upon exercise to an amount (in cash, shares or a combination of cash and shares, valued at fair market value, as determined by the Compensation Committee) equal to the product of (1) the excess of (A) the fair market value on the exercise date of one share of Common Stock, over (B) the strike price per share, times (2) the number of shares of Common Stock covered by the SAR, less an amount equal to any statutory withholding amounts or taxes required to be withheld. The strike price per share of a SAR will be determined by the Compensation Committee at the time of grant, but in no event may such amount be less than the fair market value of a share of Common Stock on the date the SAR is granted (other than in the case of SARs granted in tandem with or in substitution for previously granted awards). The exercise of a SAR granted in connection with an option will cancel the corresponding tandem SAR or option right with respect to such share of Common Stock, and vice versa. Additionally, in the sole discretion of the Compensation Committee, any SAR that is exercisable but unexercised as of the day immediately before its expiration may be automatically exercised, in accordance with procedures established for this purpose by the Compensation Committee, but only if the strike price is less than the fair market value of a share of Common Stock on that date. The Company will not grant any SARs with automatic reload features, and must get shareholder approval to reduce the exercise price of SARs issued and outstanding under the Amended Plan. +• Restricted Shares and RSUs. The Compensation Committee may grant restricted shares of Common Stock or RSUs, representing the right to receive, upon the expiration of the applicable restricted period, one share of Common Stock for each RSU, or, in the Compensation Committee's sole discretion, the cash value thereof, valued as of the date on which the vesting period lapsed with respect to such restricted units (or any combination of shares and cash) or defer the issuance of shares or cash beyond the expiration of the vesting period if such extension would not cause adverse tax consequences under Section 409A of the Code. As to restricted shares of Common Stock, subject to the other provisions of the Amended Plan, the holder will generally have the rights and privileges of a shareholder, including, without limitation, the right to vote such restricted shares of Common Stock (except that dividends credited on such restricted shares of Common Stock may be subject to the same restrictions applicable to the underlying awards and delivered without interest to the holder of such shares when the restrictions on such shares lapse). To the extent provided in the applicable award agreement, the holder of outstanding RSUs may be entitled to be credited with dividend equivalent payments (upon the payment by the Company of dividends on shares of Common Stock) either in cash or, at the Compensation Committee's sole discretion, in shares of Common Stock having a value equal to the amount of such dividends (and interest may, at the Compensation Committee's sole discretion, be credited on the amount of cash dividend equivalents at a rate and subject to such terms as determined by the Compensation Committee). In the event that the dividend equivalents are subject to the same restrictions applicable to the underlying RSUs, +2025 PROXY STATEMENT 68 +the dividend equivalents will be held by the Company and delivered at the same time as the underlying RSUs are settled following the release of restrictions on such RSUs, or forfeited if such RSUs are forfeited. An award agreement may also provide that dividend equivalents on RSUs will be reinvested in additional RSUs. +• Other Stock-Based Awards. Under the Amended Plan, the Compensation Committee may issue other stock-based awards, including, without limitation, unrestricted Common Stock, rights to receive grants of awards at a future date, and other awards denominated in shares of Common Stock, in such amounts and dependent on such conditions as the Compensation Committee shall from time to time in its sole discretion determine. +• Performance Shares and Performance Share Units. The Compensation Committee may also make performance goals applicable to an award recipient with respect to any award granted in its discretion, including, but not limited to, one or more of the performance criteria set out in the Amended Plan. The Compensation Committee has the sole discretion to select the length of any applicable performance periods, the types of performance-based compensation awards to be issued, the applicable performance criteria and performance goals, and the kinds and/or levels of performance goals that are to apply and any other applicable terms and conditions. The performance criteria that will be used to establish the performance goal(s) may be based on the attainment of specific levels of performance of the Company (and/or one or more members of the Company Group, divisions or operational and/or business units, product lines, brands, business segments, administrative departments, or any combination of the foregoing) and may be determined in accordance with GAAP or on a non-GAAP basis. The Compensation Committee may specify any reasonable definition of the performance criteria it uses, and may provide for accelerated vesting of any awards based on the achievement of performance goals pursuant to the performance criteria specified. Following the completion of a performance period, the Compensation Committee will review and certify whether, and to what extent, the performance goals for the performance period have been achieved. +Each award under the Amended Plan will be evidenced by an award agreement, which will specify the terms and conditions of the award and any rules applicable thereto, including, without limitation, the effect on such award of the death, disability or termination, and no person will be entitled to the privileges of ownership in respect of shares of Common Stock which are subject to awards under the Amended Plan until such shares have been issued or delivered. +No person will have any claim or right to be granted an award under the Amended Plan or, having been selected for the grant of an award, to be selected for a grant of any other award. The terms and conditions of awards and the Compensation Committee's determinations and interpretations with respect thereto need not be the same with respect to each participant. +DEFERRALS OF PAYMENT +The Compensation Committee may determine that the delivery of shares or cash upon the vesting, exercise or settlement of an award under the Amended Plan may or will be deferred in accordance with applicable law. +DIVIDENDS AND DIVIDEND EQUIVALENTS +The Compensation Committee, in its sole discretion, may provide part of an award with dividends, dividend equivalents, or similar payments in respect of awards, on such terms and conditions as may be determined by the Compensation Committee in its sole discretion, except that, with respect to awards that are subject to the achievement of performance goals, any such credited dividends or dividend equivalents may only be paid with respect to the portion of such awards that is actually earned. The Compensation Committee may determine to subject any dividends, dividend equivalents, or other similar payments to the same restrictions applicable to their underlying awards, and in such case, such amounts will be held by the Company and delivered to the participant (with or without interest in the Compensation Committee's sole discretion), at the time that the underlying award is settled (and the right to any such accumulated dividends, dividend equivalents or other similar payments will be forfeited upon the forfeiture of the award to which such amounts relate). The Compensation Committee, in its sole discretion, may determine the form of payment of dividends or dividend equivalents. +CHANGES IN CAPITAL STRUCTURE AND SIMILAR EVENTS +Adjustments +In the event of (1) any dividend (other than regular cash dividends) or other distribution, recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, split-off, spin-off, combination, repurchase or exchange of shares of the Company's Common Stock or other securities, issuance of warrants or other rights to acquire shares of the Company's Common Stock or other securities, or other similar corporate transaction or event that affects the shares of Common Stock, or (2) unusual or nonrecurring events affecting the Company, including changes in applicable rules, rulings, regulations or other requirements, affecting the shares of Common Stock such that the Compensation Committee determines, in its sole discretion, that an adjustment is warranted in order to prevent a substantial dilution or enlargement of the rights intended to be granted to, or available for, participants (an adjustment event), the Compensation Committee will, in respect of any such adjustment event, make such proportionate substitution or adjustment, if any, as it deems equitable, to any or all of: (A) the Share Limit or any other +69 NIKE, INC. +limits applicable under the Amended Plan with respect to the number of awards which may be granted thereunder, (B) the number of shares of the Company's Common Stock or other securities which may be delivered in respect of awards or with respect to which awards may be granted under the Amended Plan, and (C) the terms of any outstanding award (subject to any limitations or reductions as may be necessary to comply with Section 409A of the Code), including, without limitation, (i) the number of shares of Common Stock or other securities of the Company subject to outstanding awards or to which outstanding awards relate, (ii) the exercise price or strike price with respect to any award, or (iii) any applicable performance measures. +Without limiting the generality of the foregoing, in connection with an equity restructuring, the Compensation Committee may generally provide for the cancellation of any outstanding award granted (x) in exchange for payment in cash, property, or other securities having an aggregate fair market value of the shares of Common Stock covered by such award, reduced by the aggregate exercise price, strike price, or purchase price thereof, if any, and (y) with respect to any awards for which the exercise price, strike price, or purchase price per share of Common Stock is greater than or equal to the then current fair market value per share of Common Stock, for no consideration. +Change in Control +Except as otherwise determined by the Compensation Committee at the time of a change in control (as defined under the Amended Plan), or as provided in an award agreement (in each case, other than in the case of an award the vesting of which is based in whole or part upon the attainment of one or more performance measures), in connection with any change in control event of the Company, the following will apply: unless otherwise provided in the participant's award agreement, if the participant experiences a qualifying termination (generally, a termination of service with the Company a successor company and its subsidiaries without cause, or by the participant with good reason (each, as defined under the Amended Plan), at any time after the earlier of (1) shareholder approval of the change in control and (2) on or before the second anniversary of the change in control), the participant's awards will be fully vested and, in the case of an option or SAR, will remain exercisable until the earlier of the award's original expiration date and four years after the date of the qualifying termination. In the case of an award subject to one or more performance measures, such performance measures will be deemed to have been met at the greater of target and actual level of performance through the date of the change in control, as determined by the Compensation Committee in its sole discretion. +Upon a change in control, the participant's award will be treated, to the extent determined by the Compensation Committee to be permitted under Section 409A of the Code, in one of the following ways, in the Compensation Committee's sole discretion: (A) settle the awards for an amount of cash or securities equal to their value; (B) assume or issue substitute awards; (C) modify the award's terms to add events, conditions or circumstances (including termination of employment within a specified period after the change in control) upon which the awards will accelerate; (D) deem any performance conditions satisfied at the greater of target and actual level of performance through the date of the change in control; (E) provide that for at least 20 days prior to the change in control, any stock options or SARs that would not otherwise become exercisable prior to the change in control will be exercisable as to all shares of Common Stock subject thereto (but with exercise contingent upon occurrence of the change in control), and that any unexercised options or SARs will terminate upon the change in control. If consideration for the change in control includes contingent value rights, earnout or indemnity payments or similar payments, then the Compensation Committee will determine if settled awards are (i) valued at closing taking into account such contingent consideration or (ii) entitled to a share of contingent consideration. Similar actions to those specified above may be taken in the event of a merger or other corporate reorganization that does not constitute a change in control. +NONTRANSFERABILITY OF AWARDS +An award will generally not be transferable or assignable by a participant other than by will or by the laws of descent and distribution (except as the Compensation Committee may otherwise determine in its discretion and in accordance with the terms of the Amended Plan), and any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance will be void and unenforceable against the company or any affiliate. +CLAWBACK/FORFEITURE +Unless otherwise provided in the applicable award agreement, all awards under the Amended Plan will be subject to (1) any applicable securities, tax and stock exchange laws, rules and regulations relating to the recoupment or clawback of incentive compensation, (2) the NIKE, Inc. Policy for Recoupment of Incentive Compensation as approved by the Compensation Committee and in effect at the time of grant, (3) such other policy for clawback or recoupment of incentive compensation as may subsequently be approved from time to time by the Compensation Committee, and (4) any clawback or recoupment provisions set forth in the agreement evidencing the award. Accordingly, each participant may subject to the requirement that awards be repaid to the Company and its subsidiaries after they have been distributed to the participant. +2025 PROXY STATEMENT 70 +AMENDMENT AND TERMINATION +The Board may amend, alter, suspend, discontinue, or terminate the Amended Plan or any portion thereof at any time; provided, that no such amendment, alteration, suspension, discontinuation or termination may be made without shareholder approval if (1) such approval is necessary to comply with any regulatory requirement applicable to the Amended Plan or for changes in GAAP to new accounting standards, (2) it would materially increase the number of securities which may be issued under the Amended Plan (except for adjustments in connection with certain adjustment events), or (3) it would materially modify the requirements for participation in the Amended Plan. Any such amendment, alteration, suspension, discontinuance or termination that would materially and adversely affect the rights of any participant or any holder or beneficiary of any award will not to be effective without such individual's consent. +The Compensation Committee may also, to the extent consistent with the terms of any applicable award agreement, waive any conditions or rights under, amend any terms of, or alter, suspend, discontinue, cancel or terminate, any award granted or the associated award agreement, prospectively or retroactively, subject to the consent of the affected participant if any such waiver, amendment, alteration, suspension, discontinuance, cancellation or termination would materially and adversely affect the rights of any participant with respect to such award. Without shareholder approval, except as otherwise permitted in the "adjustments" provisions of the Amended Plan, (A) no amendment or modification may reduce the exercise price of any option or the strike price of any SAR, (B) the Compensation Committee may not cancel any outstanding option or SAR and replace it with a new option or SAR (with a lower exercise price or strike price, as the case may be) or other award or cash payment that is greater than the value of the cancelled option or SAR, and (C) the Compensation Committee generally may not take any other action which is considered a "repricing". +GOVERNING LAW +The Amended Plan, all awards granted thereunder and all determinations made and actions taken pursuant thereto, to the extent not otherwise governed by the laws of the United States, will be governed by the laws of the State of Oregon, and each participant who accepts an award under the Amended Plan irrevocably waives all right to a trial by jury in any suit, action, or other proceeding instituted by or against such participant in respect of his or her rights or obligations under the Amended Plan. +PLAN TERM +The Amended Plan will be effective as of the date approved by the Company's shareholders. No award may be granted under the Amended Plan on or after the tenth anniversary of such date, but awards granted prior thereto may extend beyond that date. +NEW PLAN BENEFITS +Awards granted under the Amended Plan will be subject to the Compensation Committee's discretion, and the Compensation Committee has not determined future awards or who might receive them. As a result, the benefits that will be awarded under the Amended Plan are not determinable at this time. +On May 30, 2025, the last reported sales price for our Common Stock was $60.59 per share. +The awards granted for fiscal 2025, which would not have changed if the Amended Plan had been in place instead of the Current Plan, are set forth in the following table: +71 NIKE, INC. +NAME AND POSITION NUMBER OF SHARES SUBJECT TO OPTIONS +NUMBER OF UNITS (1) +DOLLAR VALUE ($) (2) +Elliott Hill +President and Chief Executive Officer +227,750 125,955 17,813,897 +Matthew Friend +Executive Vice President and Chief Financial Officer +117,549 65,009 9,510,742 +Robert Leinwand +Executive Vice President, Chief Legal Officer +84,748 44,695 6,037,605 +Ann Miller +Executive Vice President, Global Sports Marketing +80,815 44,694 6,538,667 +Craig Williams +Executive Vice President, Chief Commercial Officer +117,549 65,009 9,510,742 +John Donahoe II +Former President and Chief Executive Officer +279,178 154,395 22,587,841 +Monique Matheson +Former Executive Vice President, Chief Human Resources Officer +80,815 44,694 6,538,667 +Heidi O'Neill +Former President, Consumer, Product & Brand +117,549 65,009 9,510,742 +Current executive officers, as a group 778,887 370,305 54,264,968 +Non-employee directors, as a group — 24,370 1,903,053 +Non-executive officer employees, as a group 11,287,184 3,763,949 613,697,122 +(1) Includes all RSUs and PSUs (at target) granted in fiscal 2025 under our annual long-term incentive program, and excludes any one-time sign-on or retention awards, as discussed elsewhere in this proxy statement. +(2) Represents grant date fair value of awards, as determined in accordance with FASB ASC Topic 718. +U.S. FEDERAL INCOME TAX INFORMATION +The following is a general summary of the U.S. federal income tax consequences of awards under the Amended Plan to the Company and to participants in the Amended Plan who are citizens or residents of the United States for U.S. federal tax purposes. The summary is based on the Internal Revenue Code of 1986, as amended (the "Code"), applicable Treasury Regulations and administrative and judicial interpretations thereof, each as in effect on the date of this proxy statement and is, therefore, subject to future changes in the law, possibly with retroactive effect. The summary is general in nature and does not purport to be legal or tax advice. Furthermore, the summary does not address issues relating to any U.S. gift or estate tax consequences or the consequences of any state, local or foreign tax laws. Recipients of awards are advised to consult with their own independent tax advisors with respect to the specific tax consequences that, in light of their particular circumstances, might arise in connection with their awards. +STOCK OPTIONS +• Nonstatutory Stock Options. A participant receiving nonstatutory stock options should not recognize taxable income at the time of grant. A participant should generally recognize ordinary compensation income in an amount equal to the excess, if any, of the fair market value of the option shares on exercise of the nonstatutory stock options over the exercise price thereof. In general, we will be entitled to deduct from our taxable income the amount that the individual is required to include in ordinary income at the time of such inclusion. Additional special rules apply if a participant exercises a nonstatutory stock option by paying the exercise price, in whole or in part, by the transfer of shares of Common Stock to the Company. +• Incentive Stock Options. A participant granted an incentive stock option will not generally recognize taxable income at the time of grant or, subject to certain conditions, at the time of exercise, although he or she may be subject to alternative minimum tax. If the participant holds the shares acquired upon exercise of an incentive stock option for at least two years after the grant date and for at least one year after the exercise date, upon disposition of the shares by the participant, the difference, if any, between the sale price of the shares and the exercise price of the option will be treated as long-term capital gain or loss. In general, if a disqualifying disposition should occur (i.e., the shares acquired upon exercise of the stock option are disposed of within the later of two years from the date of grant or one year from the date of exercise), a participant will generally recognize ordinary compensation income in the year of disposition in an amount equal to the excess, if any, of the fair market value of the option shares at the time of exercise (or, if less, the amount realized on disposition), over the exercise price thereof. We are not entitled to any deduction on account of the grant of incentive stock options or the participant's exercise of the option to acquire Common Stock. However, in the event of a subsequent disqualifying disposition of such shares of Common Stock acquired pursuant to the exercise of an incentive stock option under circumstances resulting in taxable compensation to the participant, in general, we should be entitled to a tax deduction equal to the amount treated as taxable compensation to the participant. Additional special rules apply if a participant exercises an incentive stock option by paying the exercise price, in whole or in part, by the transfer of shares of Common Stock to the Company. +2025 PROXY STATEMENT 72 +STOCK APPRECIATION RIGHTS +No income will be realized by a participant upon grant of a stock appreciation right. Upon the exercise of a stock appreciation right, the participant will recognize ordinary compensation income in an amount equal to the fair market value of the payment received in respect of the stock appreciation right. We will be able to deduct this same amount for U.S. federal income tax purposes. +RESTRICTED STOCK AWARDS AND PERFORMANCE SHARE AWARDS +A recipient of a restricted stock award or performance share award generally will recognize compensation taxable as ordinary income when the shares cease to be subject to restrictions in an amount equal to the excess of the fair market value of the shares on the date the restrictions lapse over the amount, if any, paid by the participant with respect to the shares. +Any dividends paid with respect to shares of restricted stock or performance shares generally will be taxable as ordinary income to the participant at the time the dividends are received. +RESTRICTED STOCK UNITS AND PERFORMANCE SHARE UNITS +A participant generally will not recognize income at the time a restricted stock unit or performance share unit is granted. When any part of a restricted stock unit or performance share unit is paid, the participant generally will recognize compensation taxable as ordinary income at the time of such payment in an amount equal to the fair market value of any shares and/or cash the participant receives. +OTHER AWARDS +The U.S. federal income tax consequences of other awards under the Amended Plan will depend upon the specific terms of each award. +TAX CONSEQUENCES TO THE COMPANY +In the foregoing cases, the Company generally will be entitled to a deduction at the same time and in the same amount as a participant recognizes ordinary income, subject to certain limitations imposed under the Code. +SECTION 409A +If an award is subject to, but does not comply with, Section 409A of the Code, the taxable events as described above could apply earlier than described, and could result in the imposition of additional taxes and penalties (including without limitation an additional 20% penalty tax. To the extent applicable, we intend that awards granted under the Amended Plan comply with, or otherwise be exempt from, Section 409A of the Code. +TAX WITHHOLDING +The Company is authorized to deduct or withhold from any award granted or payment due under the Amended Plan, or require a participant to remit to the Company, the amount of any withholding taxes due in respect of the award or payment. Tendering shares held by the participant or share withholding for taxes is generally permitted. +73 NIKE, INC. +STOCK OWNERSHIP INFORMATION +STOCK HOLDINGS OF CERTAIN OWNERS AND MANAGEMENT +The following table sets forth the number of shares of the classes of NIKE securities beneficially owned, as of June 30, 2025, after giving effect to any transactions that occurred on such date, by (1) each person known to the Company to be the beneficial owner of more than five percent of any class of the Company's securities, (2) each of the directors and nominees for director, (3) each executive officer listed in the Summary Compensation Table ("NEOs"), and (4) all directors, NEOs, and other executive officers as a group. Because Class A Stock is convertible into Class B Stock on a share-for-share basis, each beneficial owner of Class A Stock is deemed by the SEC to be a beneficial owner of the same number of shares of Class B Stock. Therefore, in indicating a person's beneficial ownership of shares of Class B Stock in the table, it has been assumed that such person has converted into Class B Stock all shares of Class A Stock of which such person is a beneficial owner. For these reasons the table contains substantial duplications in the numbers of shares and percentages of Class A and Class B Stock shown for Swoosh, LLC, Philip Knight, and the Travis A. Knight 2009 Irrevocable Trust II. In addition, unless otherwise indicated, all persons named below can be reached c/o Corporate Secretary, NIKE, Inc., One Bowerman Drive, Beaverton, Oregon 97005-6453. +TITLE OF CLASS +SHARES BENEFICIALLY +OWNED (1) +PERCENT OF +CLASS (2) +Cathleen Benko Class B 15,360 — +Timothy Cook Class B 52,861 +— +Thasunda Duckett Class B 10,970 — +Mónica Gil Class B 6,274 — +Maria Henry Class B 6,148 — +Peter Henry Class B 8,480 — +Elliott Hill (4) +Class B — — +Travis Knight Class B 6,531,321 +(6) +0.6 % +Mark Parker (4) +Class B 2,196,333 +(3)(5) +0.2 % +Michelle Peluso Class B 30,195 — +John Rogers, Jr. Class B 34,403 — +Robert Swan Class B 33,563 +(7) +— +Matthew Friend (4) +Class B 356,116 +(3) +— +Robert Leinwand (4) +Class B 153,923 +(3)(5) +— +Ann Miller (4) +Class B 148,689 +(3)(5) +— +Craig Williams (4) +Class B 276,937 +(3) +— +John Donahoe II (4) +Class B 1,873,660 +(3)(5) +0.2 % +Monique Matheson (4) +Class B 356,583 +(3)(5) +— +Heidi O'Neill (4) +Class B 374,171 +(3) +— +2025 PROXY STATEMENT 74 +TITLE OF CLASS +SHARES BENEFICIALLY +OWNED (1) +PERCENT OF +CLASS (2) +Sojitz Corporation of America Preferred +(8) +300,000 100.0 % +1211 S.W. 5th Ave, Pacwest Center, Ste. 2220, +Portland, OR 97204 +Philip Knight +One Bowerman Drive, Beaverton, OR 97005 +Class A 27,479,487 +(9) +9.5 % +Class B 35,815,174 +(10) +3.0 % +Swoosh, LLC +22990 NW Bennett Street, Hillsboro, OR 97124 +Class A 226,750,000 +(11) +78.5 % +Class B 226,750,000 16.0 % +Travis A. Knight 2009 Irrevocable Trust II +22990 NW Bennett Street, Hillsboro, OR 97124 +Class A 27,181,369 +(12) +9.4 % +Class B 27,181,369 +(12) +2.2 % +The Vanguard Group +100 Vanguard Blvd., Malvern, PA 19355 +Class B 109,539,710 +(13) +9.0 % +(13) +BlackRock, Inc. +55 East 52nd Street, New York, NY 10055 +Class B 89,773,424 +(14) +7.3 % +(14) +All directors and executive officers as a group (18 persons) +Class B 10,027,130 +(3)(5) +0.8 % +(1) A person is considered to beneficially own any shares: (a) over which the person exercises sole or shared voting or investment power, or (b) of which the person has the right to acquire beneficial ownership at any time within 60 days (such as through conversion of securities or exercise of stock options). Unless otherwise indicated, voting and investment power relating to the above shares is exercised solely by the beneficial owner or shared by the owner and the owner's spouse or children. +(2) Omitted if less than 0.1 percent. +(3) These amounts include the right to acquire the following numbers of shares within 60 days after June 28, 2025 pursuant to the exercise of stock options: 1,315,241 shares for Mr. Parker, 342,724 shares for Mr. Friend, 146,497 shares for Mr. Leinwand, 120,966 shares for Ms. Miller, 198,400 shares for Mr. Williams, 1,818,879 shares for Mr. Donahoe, 305,304 shares for Ms. Matheson, 312,267 shares for Ms. O'Neill, and 2,119,093 shares for the executive officer and director group. +(4) NEO listed in the Summary Compensation Table. +(5) Includes shares held in accounts under the NIKE, Inc. 401(k) Savings and Profit Sharing Plan: 38,731 shares for Mr. Parker, 1,464 shares for Mr. Leinwand, 2,991 shares for Ms. Miller, 220 shares for Mr. Donahoe, 12,262 shares for Ms. Matheson and 43,605 shares for the executive officer and director group. +(6) Does not include 226,750,000 shares of Class A Stock that are owned by Swoosh, LLC. Mr. Travis Knight has disclaimed beneficial ownership of all such shares. +(7) Includes 1,580 shares held by the Swan Family Revocable Trust. +(8) Preferred Stock does not have general voting rights except as provided by law, and under certain circumstances as provided in the Company's Restated Articles of Incorporation, as amended. +(9) Does not include 521,792 shares of Class A Stock that are owned by Mr. Philip Knight's spouse. Mr. Philip Knight has disclaimed ownership of all such shares. Mr. Philip Knight holds the position Chairman Emeritus, and has a standing invitation to attend all meetings of the Board as a non-voting observer. +(10) Does not include 521,792 shares of Class A Stock that are owned by Mr. Philip Knight's spouse. Mr. Philip Knight has disclaimed ownership of all such shares. +(11) Information provided as of July 11, 2024 in the Form 4 filed by the shareholder. +(12) Includes 8,038,989 shares of Class A Stock held directly by the Travis A. Knight 2009 Irrevocable Trust II (the "Trust") and 19,142,380 shares of Class A Stock held by an indirect subsidiary of the Trust. Mr. Travis Knight and members of his immediate family are among the beneficiaries of the Trust. Mr. Travis Knight disclaims beneficial ownership of the Company's securities held directly and indirectly by the Trust, except to the extent of his pecuniary interest therein. +(13) Information provided as of December 29, 2023 in Schedule 13G/A filed by the shareholder. +(14) Information provided as of December 31, 2023 in Schedule 13G/A filed by the shareholder. +DELINQUENT SECTION 16(a) REPORTS +Section 16(a) of the Exchange Act requires our directors and executive officers, and holders of more than 10 percent of a registered class of the Company's equity securities, to file with the SEC reports regarding their ownership and changes in ownership of Common Stock and other equity securities of the Company. Directors, officers, and greater than 10 percent shareholders are required by the regulations of the SEC to furnish the Company with copies of all Section 16(a) forms they file. Based solely on a review of such reports furnished to the Company and written representations that no other reports were required, during fiscal 2025, we believe that all such reports that were required to be filed under Section 16(a) were timely filed. +75 NIKE, INC. +ADDITIONAL INFORMATION +INSIDER TRADING ARRANGEMENTS AND POLICIES +We have adopted insider trading policies and procedures that govern the purchase, sale, and other disposition of our securities by our employees, directors, officers, and consultants. We believe our insider trading policies and procedures are reasonably designed to promote compliance with insider trading laws, rules, and regulations as well as the exchange listing standards applicable to us. Our insider trading policies and procedures prohibit our employees, directors, officers, and consultants from trading in our securities while in possession of material non-public information, among other things. The foregoing summary of our insider trading policies and procedures does not purport to be complete and is qualified by reference to our Insider Trading Policy and our Blackout and Pre-clearance Policy, copies of which can be found as exhibits to our Annual Report on Form 10-K for the fiscal year ended May 31, 2025. +TRANSACTIONS WITH RELATED PERSONS +Philip Knight, the father of NIKE director Travis Knight, serves as Chairman Emeritus, which provides a standing invitation for Philip Knight to attend meetings of the Board and its committees as a non-voting observer. In fiscal 2025, as Chairman Emeritus, Mr. Knight received salary of $500,000, and medical and dental insurance coverage generally available to employees. +Mark Parker's son, Matthew Parker, was employed by the Company in fiscal 2025 in a non-executive role for which the Company paid Matthew Parker aggregate compensation of approximately $127,000. The compensation and benefits received by Matthew Parker were consistent with compensation and benefits paid to other employees holding similar positions. +The Company's written policy requires the Corporate Responsibility, Sustainability & Governance Committee to review any transaction or proposed transaction with a related person that would be required to be reported under Item 404(a) of Regulation S-K, and to determine whether to ratify or approve the transaction, with ratification or approval to occur only if the committee determines that the transaction is fair to the Company or that approval or ratification of the transaction is in the interest of the Company. +COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION +The members of the Compensation Committee of the Board during fiscal 2025 were Timothy Cook, Cathleen Benko, and Mónica Gil. The committee is composed solely of independent, non-employee directors. No member of the Compensation Committee has been an executive officer of the Company, and no member of the Compensation Committee had any relationships requiring disclosure by the Company under the SEC's rules requiring disclosure of certain relationships and related-party transactions. None of the Company's executive officers served as a director or member of a compensation committee (or other committee serving an equivalent function) of any other entity, the executive officers of which served as a director or member of the Compensation Committee of the Company during fiscal 2025. +OTHER MATTERS AT THE MEETING +As of the time this proxy statement was printed, management was unaware of any proposals to be presented for consideration at the Annual Meeting other than those set forth herein, but if other matters do properly come before the Annual Meeting, the persons named in the proxy will vote the shares represented by such proxy according to their best judgment. +2025 PROXY STATEMENT 76 +GENERAL INFORMATION +Why am I receiving these proxy materials? +You are receiving the enclosed proxy materials in connection with the solicitation of proxies by the Board of NIKE for use at the Annual Meeting. As a shareholder of record as of the close of business on July 9, 2025, which is the record date fixed by the Board, you are invited to attend the virtual Annual Meeting and are urged to vote your shares on the proposals described in this proxy statement. +How are the proxy materials being distributed? +This proxy statement is first being made available to shareholders on or about July 24, 2025. We are furnishing proxy materials to our shareholders primarily via the Internet, by mailing a Notice Regarding the Availability of Proxy Materials, or "Notice", instead of mailing printed copies of those materials to each shareholder. The Notice directs shareholders to a website where they can access our proxy materials, including our proxy statement and our annual report, and view instructions on how to vote online or by telephone. If you would prefer to receive a paper copy of our proxy materials, please follow the instructions included in the Notice. If you have previously elected to receive our proxy materials electronically, you will continue to receive access to these materials electronically unless you elect otherwise. +What is included in the proxy materials? +Our proxy materials include our Notice, our proxy statement, and our Annual Report on Form 10-K for the year ended May 31, 2025. Our Notice directs shareholders to a website where they can access our proxy materials. +Why is the Company holding a virtual Annual Meeting? +We are continuing to use a virtual meeting format because, based on the success of our recent annual meetings, we believe that it provides greater accessibility, encourages broader shareholder participation, and helps reduce costs, while still allowing us to provide shareholders the same rights and opportunities to participate as an in-person meeting. +How can I attend and participate in the virtual Annual Meeting? +Holders of record of our Class A Stock and Class B Stock at the close of business on July 9, 2025 may attend the Annual Meeting, vote, and submit questions in advance of and during the meeting. +To attend, vote at, and submit questions during the Annual Meeting, visit www.virtualshareholdermeeting.com/NKE2025 and enter the 16-digit control number included in your Notice, voting instructions form, or proxy card. +Online access to the webcast will open approximately 15 minutes prior to the start of the Annual Meeting to allow time for you to log in and test the computer audio system. +How can I ask questions at the Annual Meeting? +We are committed to ensuring that shareholders will be afforded the same rights and opportunities to participate in our virtual Annual Meeting as they would at an in-person meeting. Shareholders of record at the close of business on July 9, 2025 may submit questions in advance of and during the Annual Meeting. +• To submit questions in advance of the Annual Meeting : Visit www.proxyvote.com and enter your 16-digit control number included in your Notice, voting instructions form, or proxy card. Questions submitted in advance must be submitted before 11:59 P.M. Eastern Time on September 8, 2025. +• To submit questions during the Annual Meeting : Visit www.virtualshareholdermeeting.com/NKE2025 and enter the 16-digit control number included in your Notice, voting instructions form, or proxy card. +What will I be voting on at the Annual Meeting? +You will be voting: +• To elect the 12 director nominees identified in this Proxy Statement. The holders of NIKE's Class A Stock will vote to elect nine of the director nominees identified in this Proxy Statement, and the holders of NIKE's Class B Stock will vote to elect the remaining three director nominees identified in this Proxy Statement; +• To approve executive compensation by an advisory vote; +• To ratify the appointment of PwC as our independent registered public accounting firm; +• To approve the NIKE, Inc. Stock Incentive Plan as amended and restated; and +77 NIKE, INC. +• To transact such other business as may properly come before our Annual Meeting. +How does the Board recommend that I vote on these proposals? +Our Board recommends: +• For the holders of NIKE's Class A Stock, a vote FOR the election of each of Mr. Timothy Cook, Ms. Thasunda Duckett, Ms. Maria Henry, Mr. Peter Henry, Mr. Elliott Hill, Mr. Travis Knight, Mr. Jørgen Vig Knudstorp, Mr. Mark Parker, and Ms. Michelle Peluso to serve as directors until the next annual meeting; +• For the holders of NIKE's Class B Stock, a vote FOR the election of each of Ms. Mónica Gil, Mr. John Rogers, Jr., and Mr. Robert Swan to serve as directors until the next annual meeting; +• For all shareholders, a vote FOR the advisory resolution approving the compensation of our NEOs as described in this proxy statement; +• For all shareholders, a vote FOR ratification of the appointment of PwC as our independent registered public accounting firm; and +• For all shareholders, a vote FOR approval of the NIKE, Inc. Stock Incentive Plan as amended and restated. +How do I vote my shares? +You may vote by proxy or at the Annual Meeting. If you received a printed copy of the proxy materials by mail, you may vote your shares by proxy before the Annual Meeting using one of the following methods: (1) vote via the internet at the website address listed on the Notice; (2) vote by telephone; or (3) complete, sign, date, and return your proxy card or voting instruction form in the postage-paid envelope we have provided. If you received only the Notice, you may vote your shares at the website address listed on the Notice or by telephone. If you plan to vote during the Annual Meeting rather than in advance, you may do so by entering the 16-digit control number included in your Notice, voting instructions form, or proxy card. Even if you plan to attend the Annual Meeting, you are encouraged to vote by proxy prior to the meeting. You can always change your vote, as described in more detail under "Can I change my vote or revoke my proxy?" +What is the difference between holding shares as a shareholder of record and as a beneficial owner or street name holder? +If your shares are registered directly in your name with our transfer agent, Computershare Trust Company, N.A., you are considered the "shareholder of record" with respect to those shares and we have sent the Notice (or if you received printed proxy materials, the Notice, proxy statement, and proxy card) directly to you. You may submit a proxy and vote those shares in the manner described in this proxy statement and the Notice. +If your shares are held in a stock brokerage account or by a bank, broker or other holder of record, you are considered the "beneficial owner" of shares held in street name. The Notice, voting instructions form, and/or proxy card have been forwarded to you by your broker, bank, or other holder of record who is considered the shareholder of record with respect to those shares. As the beneficial owner, you have the right to direct your broker, bank, or other holder of record on how to vote your shares by using the voting instruction card included in the mailing or by following their instructions for voting. +What does it mean if I receive more than one proxy card or Notice? +If you receive more than one proxy card or Notice, it means that you hold shares registered in more than one account. To ensure that all of your shares are voted, please follow the instructions included on each Notice you receive or, if you received printed proxy materials by mail, complete, sign, and return each proxy card you receive. +How many shares may be voted at the Annual Meeting? +On the close of business on July 9, 2025, 288,887,752 shares of Class A Stock and 1,188,015,740 shares of Class B Stock were issued and outstanding and entitled to vote at the meeting. +What constitutes a quorum? +For Proposal 1, the election of directors, a majority of the votes entitled to be cast by each of the Class A Stock and Class B Stock separately constitutes a quorum of Class A Stock and Class B Stock, respectively. For Proposals 2, 3, and 4, a majority of the votes entitled to be cast by both of the Class A Stock and Class B Stock together constitutes a quorum +Abstentions and broker non-votes are counted for purposes of determining whether a quorum exists. Broker non-votes occur when a person holding shares in street name, such as through a brokerage firm, does not provide instructions as to how to vote those shares and the broker does not then vote those shares on the shareholder's behalf. +2025 PROXY STATEMENT 78 +How are votes calculated? +Each share of Class A Stock and each share of Class B Stock is entitled to one vote. The holders of our Common Stock will vote together on all matters at the Annual Meeting except for the election of directors, for which the holders of Class A Stock and holders of Class B Stock will vote separately. For more information regarding our Class A Stock and Class B Stock, see the section above titled "Corporate Governance—Capital Structure". +How many votes are required to approve each proposal and how are votes counted? +How many votes are required for approval? How are director withhold votes treated? How are abstentions treated? How are broker non-votes handled? How will signed proxies that do not specify voting preferences be treated? +Proposal 1—Elect the director nominees For the directors elected by holders of Class A Stock: a plurality of votes of the holders of Class A Stock cast +For the directors elected by holders of Class B Stock: a plurality of votes of the holders of Class B Stock cast +Withhold votes will not be counted as votes cast for purposes of the plurality voting standard, but will be considered in determining whether our director resignation policy applies to a director Abstentions are not included as votes cast and will not affect the outcome of the proposal Broker non-votes are not included as votes cast and will not affect the outcome of the proposal Shares will be voted "FOR" the election of each of the named nominees for director +Proposal 2—Advisory vote to approve executive compensation Votes of Common Stock cast in favor of the proposal must exceed votes of Common Stock cast against the proposal N/A Abstentions are not included as votes cast and will not affect the outcome of the proposal Broker non-votes are not included as votes cast and will not affect the outcome of the proposal Shares will be voted "FOR" the proposal regarding an advisory vote to approve executive compensation +Proposal 3— Ratify selection of PwC as our independent registered public accounting firm Votes of Common Stock cast in favor of the proposal must exceed votes of Common Stock cast against the proposal N/A Abstentions are not included as votes cast and will not affect the outcome of the proposal Banks, brokers and other holders of record may exercise discretion and vote on this matter and these will be counted as votes cast Shares will be voted "FOR" the ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm +Proposal 4— Approve the NIKE, Inc. Stock Incentive Plan as amended and restated Votes of Common Stock cast in favor of the proposal must exceed votes of Common Stock cast against the proposal N/A Abstentions are not included as votes cast and will not affect the outcome of the proposal Broker non-votes are not included as votes cast and will not affect the outcome of the proposal Shares will be voted "FOR" the proposal to approve the NIKE, Inc. Stock Incentive Plan as amended and restated +What happens if a director fails to receive the support of a majority of votes cast? +The Bylaws and the Corporate Governance Guidelines of the Company provide that any nominee for director in an uncontested election who receives a greater number of votes "withheld" from their election than votes "for" such election shall tender their resignation for consideration by the Corporate Responsibility, Sustainability & Governance Committee. The committee will then recommend to the Board the action to be taken with respect to the resignation, and the Board will publicly disclose its decision with respect to such resignation within 90 days after the certification of the election results. +Can I change my vote or revoke my proxy? +A shareholder giving the enclosed proxy has the power to revoke it. You can change your vote or revoke your proxy at any time before it is exercised at the Annual Meeting by voting your shares online during the Annual Meeting or by delivering to the Corporate Secretary of NIKE, Inc. at One Bowerman Drive, Beaverton, Oregon 97005-6453 either written notice of your revocation or an executed proxy bearing a later date. +How are proxies being solicited? +In addition to soliciting proxies by mail, certain officers and employees of the Company, without extra compensation, may also solicit proxies personally or by telephone. Copies of proxy solicitation materials will be furnished to fiduciaries, custodians, and brokerage houses for forwarding to the beneficial owners of shares held in their names. We may retain Georgeson, Inc. to solicit proxies at a cost we anticipate will not exceed $17,500. The Company will bear the cost of soliciting proxies. +79 NIKE, INC. +How do I find out the voting results? +We expect to announce preliminary voting results at the Annual Meeting. Final voting results will be published in a Current Report on Form 8-K following the Annual Meeting. +How can I submit a proposal for next year's annual meeting? +A shareholder proposal (other than a proxy access nomination) intended for inclusion in the Company's proxy statement and form of proxy for the 2026 annual meeting of shareholders pursuant to Rule 14a-8 under the Exchange Act must be received by the Corporate Secretary of NIKE, Inc. at shareholder.proposals@Nike.com on or before March 19, 2026 and otherwise comply with all applicable rules and regulations under the Exchange Act. +A shareholder wishing to submit a proxy access nomination for inclusion in the Company's proxy statement and form of proxy for the 2026 annual meeting of shareholders pursuant to Article II, Section 11 of the Company's Bylaws must provide the Company with timely written notice of such nomination and otherwise comply with the applicable requirements set forth in the Bylaws. To be timely, notice of such nomination, along with the other information required by the Company's Bylaws, must be received by the Corporate Secretary of NIKE, Inc. at One Bowerman Drive, Beaverton, Oregon 97005-6453, no earlier than February 24, 2026 and no later than March 26, 2026. +Under Article II, Section 10 of the Company's Bylaws, any shareholder wishing to submit any other proposal or nomination for consideration at the 2026 annual meeting of shareholders must provide the Company with timely written notice of such proposal or nomination and otherwise comply with the requirements set forth in the Bylaws. To be timely, such notice, along with the other information required by the Company's Bylaws, must be received by the Corporate Secretary of NIKE, Inc. at One Bowerman Drive, Beaverton, Oregon 97005-6453, no earlier than May 12, 2026 and no later than June 11, 2026. +In addition to satisfying the foregoing requirements under the Company's Bylaws, to comply with the universal proxy rules, shareholders who intend to solicit proxies in support of director nominees other than the Company's nominees for the 2026 annual meeting of shareholders must also comply with all applicable requirements of Rule 14a-19 under the Exchange Act. The advance notice requirement under Rule 14a-19 does not override or supersede the longer advance notice requirement under the Company's Bylaws. +For the Board of Directors, +Mary Hunter +Vice President, Corporate Secretary +2025 PROXY STATEMENT 80 +EXHIBIT A +NIKE, INC.STOCK INCENTIVE PLAN +As amended and restated effective July 17, 2025 +1. Purpose . The purpose of this Plan is to enable the Company to attract and retain experienced officers, directors, employees, consultants, advisors, and independent contractors and to provide an incentive for them to apply their best efforts on behalf of the Company. The Plan amends and restates the NIKE, Inc. Stock Incentive Plan, as amended as of June 17, 2020 (the “ 2020 Plan ”) for awards granted on or after the Effective Date, subject to the approval by the Company’s stockholders at the 2025 Annual Meeting. +2. Definitions . The following definitions shall be applicable throughout the Plan. +(a) “ 2020 Plan ” has the meaning set forth in Section 1 of the Plan. +(b) “ Accounting Firm ” has the meaning given such term in Section 14(x) of the Plan. +(c) “ Adjustment Event ” has the meaning given such term in Section 12(a) of the Plan. +(d) “ Affiliate ” has the meaning set forth in Rule 12b-2 promulgated under Section 12 of the Exchange Act. +(e) “ Award ” means, individually or collectively, any Incentive Stock Option, Nonqualified Stock Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, Performance Share, Performance Share Unit, Other Stock-Based Award or any other award granted under this Plan. +(f) “ Award Agreement ” means the document(s) or other terms and conditions in a form specified by the Committee by which each Award is evidenced, which may be in written, electronic or in any other form as specified by the Committee. +(g) “ Board ” means the Board of Directors of the Company. +(h) “ Cause ” means (i) the failure to substantially perform the Participant’s reasonably assigned duties with the Company or Employer (other than any such failure resulting from incapacity due to physical or mental illness) as determined in the sole discretion of the Company; (ii) commission of any act involving insubordination, fraud, illegality, dishonesty, gross misconduct in the performance of employment duties, or moral turpitude; (iii) the breach of any material Company (or subsidiary) policy or code of conduct as may be adopted from time to time; or (iv) involvement in activities where such activities violate Company (or subsidiary) policy and places the Company at risk or has or could be detrimental to or reflect unfavorably upon the Company or its reputation, brands, services, or products. The Company shall make the determination as to whether a Termination is for Cause, and such determination shall be binding, final and conclusive on all concerned. +(i) “ Change in Control ” means the occurrence of any of the following events: +(i) during any period of not more than 48 months, individuals who constitute the Board as of the beginning of the period (the “ Incumbent Directors ”) cease for any reason to constitute at least a majority of the Board; provided that any person becoming a director subsequent to the beginning of such period, whose election or nomination for election was approved by a vote of at least two-thirds of the Incumbent Directors then on the Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without written objection to such nomination) will be an Incumbent Director; provided, however , that no individual initially elected or nominated as a director as a result of an actual or publicly threatened election contest with respect to directors or as a result of any other actual or publicly threatened solicitation of proxies by or on behalf of any person other than the Board will be deemed to be an Incumbent Director; +(ii) (A) at any time the holders of the Company’s Class A Common Stock, voting as a separate class, have the right to elect a majority of the members of the Board, any “person” (as such term is defined in Section 3(a)(9) of the Exchange Act and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) or two or more persons acting in concert, other than the Knight Family, is or becomes a “beneficial owner” (as defined in Rule 13d 3 under the Exchange Act), directly or indirectly, of securities of the Company representing more than 50% of the then-outstanding Class A Common Stock of the Company or (B) at any time after the holders of the Company’s Class A Common Stock, voting as a separate class, cease to have the right to elect a majority of the members of the Board, a person or two or more persons acting in concert, other than the Knight Family, becomes the beneficial owner of 50% or more of the combined voting power of the Company’s then outstanding securities eligible to vote for the election of the Board (“ Company Voting Securities ”); provided, however , that the event described in this clause (ii) will not be deemed to be a Change in Control by virtue of the ownership or acquisition of more than 50% of the Company’s then-outstanding Class A Common Stock or Company Voting Securities: (A) by the Company Group, (B) by any employee benefit plan (or related trust) sponsored or maintained by the Company Group, (C) by any underwriter temporarily holding securities pursuant to an offering of such securities, (D) pursuant to a Non-Qualifying Transaction (as defined in clause (iii) of this definition) or (E) by any private investor from the Company Group; +(iii) the consummation of a merger, consolidation, statutory share exchange or similar form of corporate transaction involving the Company that requires the approval of the Company’s stockholders, whether for such transaction or the issuance of securities in the transaction (a “ Business Combination ”), unless immediately following such Business Combination: (A) more than 50% of the total voting power of (x) the entity resulting from such Business Combination (the “ Surviving Entity ”), or (y) if applicable, the ultimate parent corporation that directly or indirectly has beneficial ownership of at least 95% of the voting power, is represented by Company Voting Securities that were outstanding immediately prior to such Business Combination (or, if applicable, is represented by Shares into which such Company Voting Securities were converted pursuant to such Business +81 NIKE, INC. +Combination), and such voting power among the holders thereof is in substantially the same proportion as the voting power of such Company Voting Securities among the holders thereof immediately prior to the Business Combination, (B) no person (other than any employee benefit plan (or related trust) sponsored or maintained by the Surviving Entity or the parent), is or becomes the beneficial owner, directly or indirectly, of 50% or more of the total voting power of the outstanding voting securities eligible to elect directors of the parent (or, if there is no parent, the Surviving Entity) and (C) at least 50% of the members of the board of directors of the parent (or, if there is no parent, the Surviving Entity) following the consummation of the Business Combination were Incumbent Directors at the time of the Board’s approval of the execution of the initial agreement providing for such Business Combination (any Business Combination which satisfies all of the criteria specified in (A), (B) and (C) of this paragraph (c) will be deemed to be a “ Non-Qualifying Transaction ”); +(iv) the consummation of a sale of all or substantially all of the Company’s assets (other than to an affiliate of the Company); or +(v) the Company’s stockholders approve a plan resulting in the consummation of complete liquidation or dissolution of the Company. +Notwithstanding the foregoing, a Change in Control will not be deemed to occur solely because any person acquires beneficial ownership of more than 50% of the Company Voting Securities as a result of the acquisition of Company Voting Securities by the Company Group which reduces the number of Company Voting Securities outstanding; provided that if after such acquisition by the Company Group such person becomes the beneficial owner of additional Company Voting Securities that increases the percentage of outstanding Company Voting Securities beneficially owned by such person, a Change in Control will then occur. The Committee shall make the determination as to whether a Change in Control will have occurred, and such determination shall be binding, final and conclusive. +(j) “ CIC Qualifying Termination ” means a Termination of a Participant’s employment or service with the Company (or a Successor Company) and its subsidiaries by the Company (or a Successor Company) or any of its subsidiaries without Cause, or by the Participant for Good Reason, at any time after the earlier of Shareholder Approval, if any, or the Change in Control and on or before the second anniversary of the Change in Control. +(k) “ Code ” means the Internal Revenue Code of 1986, as amended, and any successor thereto. Reference in the Plan to any section of the Code shall be deemed to include any regulations or other interpretative guidance under such section, and any amendments or successor provisions to such section, regulations or guidance. +(l) “ Committee ” means the Compensation Committee of the Board (or any committee of the Board serving a similar function) or any properly delegated subcommittee thereof or, if no such Compensation Committee (or committee of the Board serving a similar function) or subcommittee thereof exists, the Board. +(m) “ Common Stock ” means the Class B Common Stock, no par value per share, of the Company (and any stock or other securities into which such Common Stock may be converted or into which it may be exchanged), as adjusted as set forth hereunder. +(n) “ Company ” means NIKE, Inc., an Oregon corporation, and any successor thereto. +(o) “ Company Group ” means, collectively, the Company and its subsidiaries. +(p) “ Designated Foreign Subsidiaries ” means all members of the Company Group that are organized under the laws of any jurisdiction or country other than the United States of America that may be designated by the Board or the Committee from time to time. +(q) “ Disability ” has the meaning ascribed to such term under Section 22(e)(3) of the Code. +(r) “ Effective Date ” has the meaning set forth in Section 14(bb) of the Plan. +(s) “ Eligible Director ” means a person who is (i) with respect to actions intended to obtain an exemption from Section 16(b) of the Exchange Act pursuant to Rule 16b-3 under the Exchange Act, a “non-employee director” within the meaning of Rule 16b-3 under the Exchange Act; and (ii) with respect to actions undertaken to comply with the rules of the NYSE or any other securities exchange or inter-dealer quotation system on which the Common Stock is listed or quoted, an “independent director” under the rules of the NYSE or any other securities exchange or inter- dealer quotation system on which the Common Stock is listed or quoted, or a person meeting any similar requirement under any successor rule or regulation. +(t) “ Eligible Person ” means any (i) individual employed by the Employer; provided, however , that no such employee within the United States covered by a collective bargaining agreement shall be an Eligible Person unless and to the extent that such eligibility is set forth in such collective bargaining agreement or in an agreement or instrument relating thereto; (ii) director or officer of any member of the Employer; or (iii) consultant or advisor to any member of the Employer who may be offered securities registrable pursuant to a registration statement on Form S-8 under the Securities Act. +(u) “ Employer ” means the Company and any parent or subsidiary corporation of the Company (if different from the Company). +(v) “ Exchange Act ” means the Securities Exchange Act of 1934, as amended, and any successor thereto. Reference in the Plan to any section of (or rule promulgated under) the Exchange Act shall be deemed to include any rules, regulations or other interpretative guidance under such section or rule, and any amendments or successor provisions to such section, rules, regulations or guidance. +(w) “ Excise Tax ” has the meaning given such term in Section 14(x) of the Plan. +(x) “ Exercise Price ” has the meaning given such term in Section 7(b) of the Plan. +2025 PROXY STATEMENT 82 +(y) “ Fair Market Value ” means, with respect to a share of Common Stock, the closing price reported for the Common Stock on the applicable date as reported on the New York Stock Exchange, unless determined as otherwise specified herein. For purposes of the grant of any Award, the applicable date will be the trading day on which the Award is granted or, if the date the Award is granted is not a trading day, the trading day immediately prior to the date the Award is granted. For purposes of the exercise of any Award, the applicable date is the date a notice of exercise is received by the Company or, if such date is not a trading day, the trading day immediately following the date a notice of exercise is received by the Company. +(z) “ GAAP ” means generally accepted accounting principles. +(aa) “ Good Reason ” means the occurrence (without the Participant’s express written consent) of any of the following: +(i) the assignment of a different title, job or responsibilities that results in a material decrease in the level of responsibility of the award holder after Shareholder Approval, if applicable, or the Change in Control when compared to the award holder’s level of responsibility for the Company’s operations prior to Shareholder Approval, if applicable, or the Change in Control; provided that Good Reason shall not exist if the award holder continues to have the same or a greater general level of responsibility for Company operations after the Change in Control as the award holder had prior to the Change in Control even if the Company operations are a subsidiary or division of the surviving company; +(ii) a reduction in the award holder’s base pay as in effect immediately prior to Shareholder Approval, if applicable, or the Change in Control; +(iii) a material reduction in the award holder’s total target direct compensation (comprising of annual base salary, target annual cash incentives and target long-term stock incentives, as applicable) after Shareholder Approval, if applicable, or the Change in Control compared to the holder’s total target direct compensation as in effect prior to Shareholder Approval, if applicable, or the Change in Control; or +(iv) the award holder is required to be based more than 50 miles from where the award holder’s principal place of employment is located immediately prior to Shareholder Approval, if applicable, or the Change in Control except for required travel on company business to an extent substantially consistent with the business travel obligations which the award holder undertook on behalf of the Company prior to Shareholder Approval, if applicable, or the Change in Control. +Notwithstanding any provision in this Agreement or the Plan to the contrary, a termination of an employment or other service relationship by the award holder will not be for Good Reason unless (1) the award holder notifies the Company in writing of the existence of the condition that the award holder believes constitutes Good Reason within thirty (30) days of the initial existence of such condition (which notice specifically identifies such condition), (2) the Company fails to remedy such condition within thirty (30) days after the date that it receives such notice (the “ Remedial Period ”), and (3) the award holder actually terminates the award holder’s employment or other service relationship within thirty (30) days after the expiration of the Remedial Period. If the award holder terminates his or her employment or other service relationship before the expiration of the Remedial Period or after the Company remedies the condition, then the award holder’s termination will not be considered to be for Good Reason. +(bb) “ Immediate Family Members ” has the meaning given such term in Section 14(b)(ii) of the Plan. +(cc) “ Incentive Stock Option ” means an Option which is designated by the Committee as an incentive stock option as described in Section 422 of the Code and otherwise meets the requirements set forth in the Plan. +(dd) “ Indemnifiable Person ” has the meaning given such term in Section 4(e) of the Plan. +(ee) “ Knight Family ” means, collectively, Philip H. Knight, and his wife, children, parents and siblings, and any trust, corporation or partnership with respect to his assets established for estate planning purposes, including, for the avoidance of doubt, Swoosh, LLC. +(ff) “ Legacy Full Value Award ” is a grant, prior to the Effective Date, of one (1) or more shares of Common Stock or a right to receive one (1) or more shares of Common Stock in the future, including Restricted Stock, Restricted Stock Units, Performance Shares, Performance Share Units and any dividend equivalents or units or rights issued in respect of dividend equivalents; provided, however , that only such shares issued under Awards granted after July 16, 2010 that were in excess of the Legacy Full Value Limit shall be a Legacy Full Value Award. For the avoidance of doubt, no Award granted on or after the Effective Date shall be a Legacy Full Value Award, and no Award (or shares issued under an Award) granted up to and below the Legacy Full Value Limit shall be a Legacy Full Value Award. +(gg) “ Legacy Full Value Limit ” shall equal twenty-five million (25,000,000) shares of Common Stock plus the number of shares of Common Stock issued pursuant to stock awards under the 2020 Plan (or any predecessor plan) granted on or before July 16, 2010 that were forfeited to the Company or withheld to satisfy tax withholding obligations after July 16, 2010. +(hh) “ New Full Value Award ” is a grant, on or after the Effective Date, of one (1) or more shares of Common Stock or a right to receive one (1) or more shares of Common Stock in the future, including Restricted Stock, Restricted Stock Units, Performance Shares, Performance Share Units and any dividend equivalents or units or rights issued in respect of dividend equivalents. +(ii) “ Nonqualified Stock Option ” means an Option which is not designated by the Committee as an Incentive Stock Option. +(jj) “ Non-Employee Director ” means a member of the Board who is not an employee of any member of the Company Group. +(kk) “ NYSE ” means the New York Stock Exchange. +83 NIKE, INC. +(ll) “ Option ” means an Award granted under Section 7 of the Plan. +(mm) “ Option Period ” has the meaning given such term in Section 7(c)(ii) of the Plan. +(nn) “ Other Stock-Based Award ” means an Award granted under Section 10 of the Plan that is payable by reference to the value of Common Stock. +(oo) “ Participant ” means an Eligible Person who has been selected by the Committee to participate in the Plan and to receive an Award pursuant to the Plan. +(pp) “ Performance Criteria ” means the criterion or criteria that the Committee shall select for purposes of establishing the Performance Goals for a Performance Period with respect to any Performance Share or Performance Share Unit under the Plan. +(qq) “ Performance Goals ” means, for a Performance Period, one (1) or more goals established by the Committee for the Performance Period based upon the Performance Criteria. +(rr) “ Performance Period ” means the one (1) or more periods of time, as the Committee may select, over which the attainment or one (1) or more Performance Goals will be measured for the purpose of determining a Participant’s right to, and the payment of, a Performance Share or Performance Share Unit. +(ss) “ Performance Share ” means any Award designated by the Committee as a Performance Share pursuant to Section 11 of the Plan. +(tt) “ Performance Share Unit ” means any Award designated by the Committee as a Performance Share Unit pursuant to Section 11 of the Plan. +(uu) “ Permitted Transferee ” has the meaning given such term in Section 14(b)(ii) of the Plan. +(vv) “ Person ” has the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include (i) any member of the Company Group, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its Affiliates, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, or (iv) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company. +(ww) “ Plan ” means this NIKE, Inc. Amended and Restated Stock Incentive Plan, as it may be amended from time to time. +(xx) “ Restricted Stock ” means a share of Common Stock, subject to certain specified restrictions (which may include, without limitation, a requirement that the Participant remain continuously employed or provide continuous services for a specified period of time), granted under Section 9 of the Plan. +(yy) “ Restricted Stock Unit ” means an unfunded and unsecured promise to deliver shares of Common Stock, cash, other securities or other property, subject to certain restrictions (which may include, without limitation, a requirement that the Participant remain continuously employed or provide continuous services for a specified period of time), granted under Section 9 of the Plan. +(zz) “ SAR Period ” has the meaning given such term in Section 8(c)(ii) of the Plan. +(aaa) “ Section 409A of the Code ” has the meaning given such term in Section 14(v)(i) of the Plan. +(bbb) “ Securities Act ” means the Securities Act of 1933, as amended, and any successor thereto. Reference in the Plan to any section of (or rule promulgated under) the Securities Act shall be deemed to include any rules, regulations or other interpretative guidance under such section or rule, and any amendments or successor provisions to such section, rules, regulations or guidance. +(ccc) “ Service Recipient ” means, with respect to a Participant holding a given Award, the member of the Company Group by which the original recipient of such Award is, or following a Termination was most recently, principally employed or to which such original recipient provides, or following a Termination was most recently providing, services, as applicable (or any Successor Company, to the extent applicable). +(ddd) “ Shareholder Approval ” means approval by the shareholders of the Company of a transaction, the consummation of which would be a Change in Control. +(eee) “ Share Limit ” has the meaning given such term in Section 5(a) of the Plan. +(fff) “ Stock Appreciation Right ” or “ SAR ” means an Award granted under Section 8 of the Plan. +(ggg) “ Strike Price ” has the meaning given such term in Section 8(b) of the Plan. +(hhh) “ Substitute Awards ” has the meaning given such term in Section 5(d) of the Plan. +(iii) “ Sub-Plans ” means any sub-plan to this Plan that has been adopted by the Board or the Committee for the purpose of permitting the offering of Awards to employees of certain Designated Foreign Subsidiaries or otherwise outside the United States of America, with each such sub-plan designed to comply with local laws applicable to offerings in such foreign jurisdictions. Although any Sub-Plan may be designated a separate and independent plan from the Plan in order to comply with applicable local laws, the Share Limit and the other limits specified in Section 5 shall apply in the aggregate to the Plan and any Sub-Plan adopted hereunder. +(jjj) “ Successor Company ” means an acquiring company or successor to the Company, or the surviving company of a Change in Control, or, if any, the parent or holding company thereof. +(kkk) “ Termination ” means the termination of a Participant’s employment or service, as applicable, with the Service Recipient. +2025 PROXY STATEMENT 84 +3. Effective Date; Duration . The Plan shall become effective as of the Effective Date, subject to approval by the Company’s stockholders on such date. The expiration date of the Plan, on and after which date no Awards may be granted hereunder, shall be the tenth (10th) anniversary of the Effective Date; provided, however , that such expiration shall not affect Awards then outstanding, and the terms and conditions of the Plan shall continue to apply to such Awards. In no event may an Incentive Stock Option be granted more than ten (10) years after the Effective Date. If the Plan is not approved by stockholders, the 2020 Plan shall continue to remain in effect in accordance with its terms until the later of (x) the date on which all shares of Common Stock available for issuance under the 2020 Plan have been issued and all restrictions on such shares have lapsed and (y) the tenth (10th) anniversary of the last action by the shareholders approving any amendment to the 2020 Plan or amendment and restatement of the Plan to increase the number of shares of Common Stock available for issuance under the 2020 Plan; provided, however , that such expiration shall not affect Awards then outstanding, and the terms and conditions of the 2020 Plan shall continue to apply to such Awards. +4. Administration . +(a) The Committee shall administer the Plan. To the extent required to comply with the provisions of Rule 16b-3 promulgated under the Exchange Act (if the Board is not acting as the Committee under the Plan), it is intended that each member of the Committee shall, at the time he or she takes any action with respect to an Award under the Plan that is intended to qualify for the exemptions provided by Rule 16b-3, be an Eligible Director. However, the fact that a Committee member shall fail to qualify as an Eligible Director shall not invalidate any Award granted by the Committee that is otherwise validly granted under the Plan. +(b) Subject to the provisions of the Plan and applicable law, in addition to other express powers and authorizations conferred on the Committee by the Plan, the Committee will have the authority in its sole discretion to: +(i) exercise all of the powers granted to it, and make all determinations, under the Plan; +(ii) construe, interpret and implement and correct any defect, supply any omission and reconcile any inconsistency in the Plan and all Award Agreements and determine disputed facts related thereto; provided that, with respect to all claims or disputes arising out of any determination of the Committee that materially adversely affects a Participant’s Award, (A) the affected Participant shall file a written claim with the Committee for review, explaining the reasons for such claim, and (B) the Committee’s decision must be written and must explain the decision; +(iii) prescribe, amend and rescind rules and regulations relating to the Plan, including rules governing the Committee’s own operations; +(iv) grant, or recommend to the Board for approval to grant, Awards and determine the terms of such Awards; +(v) amend the Plan or any outstanding Award Agreement in any respect including, without limitation, to: (A) accelerate the time or times at which the Award becomes vested, unrestricted or may be exercised or waive or amend any vesting terms, (B) accelerate the time or times at which Shares are delivered under the Award (and, without limitation on the Committee's rights, in connection with such acceleration, the Committee may provide that any shares of Common Stock delivered pursuant to such Award will be restricted shares, which are subject to vesting, transfer, forfeiture or repayment provisions similar to those in the Participant’s underlying Award), or (C) reflect a change in the Participant’s circumstances (e.g., a change to part-time employment status or a change in position, duties or responsibilities); +(vi) determine at any time whether, to what extent and under what circumstances and method or methods, subject to Section 14(v), (A) Awards may be: settled in cash, Common Stock, other securities, other Awards or other property, exercised, or canceled, forfeited or suspended; (B) shares of Common Stock, other securities, other Awards or other property and other amounts payable with respect to an Award may be deferred either automatically or at the election of the Participant thereof or of the Committee; and (C) Awards may be settled by the Company Group or any of their affiliates or any of their designees; and +(vii) adopt Sub-Plans. +(c) The Committee may allocate among its members and delegate to any person who is not a member of the Committee, or to any administrative group within the Company Group, any of its powers, responsibilities or duties. In delegating its authority, the Committee will consider the extent to which any delegation may cause Awards to fail to meet the requirements of Rules 16(b)-3(d)(1) or 16(b)-3(e) under the Exchange Act. Except as specifically provided to the contrary, references to the Committee include any administrative group, individual or individuals to whom the Committee has delegated its duties and powers. Any such allocation or delegation may be revoked by the Committee at any time. Without limiting the generality of the foregoing, the Committee may delegate to one (1) or more officers of any member of the Company Group, the authority to act on behalf of the Committee with respect to any matter, right, obligation, or election which is the responsibility of, or which is allocated to, the Committee herein, and which may be so delegated as a matter of law, except for grants of Awards to Non-Employee Directors. Notwithstanding the foregoing in this Section 4(c), it is intended that any action under the Plan intended to qualify for the exemptions provided by Rule 16b-3 under the Exchange Act will be taken only by the Board or by a committee or subcommittee of two (2) or more Eligible Directors. However, the fact that any member of such committee or subcommittee shall fail to qualify as an Eligible Director shall not invalidate any action that is otherwise valid under the Plan. +85 NIKE, INC. +(d) The determination of the Committee on all matters relating to the Plan or any Award Agreement will be entitled to the maximum deference permitted by law and will be final, binding and conclusive and non-reviewable and non-appealable and may be entered as a final judgment in any court having jurisdiction. +(e) No member of the Board, the Committee or any employee or agent of any member of the Company Group or any person to whom the Board or Committee delegates its powers, responsibilities or duties, including by resolution (each such Person, an “ Indemnifiable Person ”), shall be liable for any action taken or omitted to be taken or any determination made with respect to the Plan or any Award hereunder (unless constituting fraud or a willful criminal act or omission). Each Indemnifiable Person shall be indemnified and held harmless by the Company against and from any loss, cost, liability, or expense (including legal fees and expenses) that may be imposed upon or incurred by such Indemnifiable Person in connection with or resulting from any action, suit or proceeding to which such Indemnifiable Person may be a party or in which such Indemnifiable Person may be involved by reason of any action taken or omitted to be taken or determination made with respect to the Plan or any Award granted hereunder and against and from any and all amounts paid by such Indemnifiable Person with the Company’s approval, in settlement thereof, or paid by such Indemnifiable Person in satisfaction of any judgment in any such action, suit or proceeding against such Indemnifiable Person, and the Company shall advance to such Indemnifiable Person any such expenses promptly upon written request (which request shall include an undertaking by the Indemnifiable Person to repay the amount of such advance if it shall ultimately be determined, as provided below, that the Indemnifiable Person is not entitled to be indemnified); provided , that the Company shall have the right, at its own expense, to assume and defend any such action, suit or proceeding and once the Company gives notice of its intent to assume the defense, the Company shall have sole control over such defense with counsel of the Company’s choice. The foregoing right of indemnification shall not be available to an Indemnifiable Person to the extent that a final judgment or other final adjudication (in either case not subject to further appeal) binding upon such Indemnifiable Person determines that the acts, omissions or determinations of such Indemnifiable Person giving rise to the indemnification claim resulted from such Indemnifiable Person’s fraud or willful criminal act or omission or that such right of indemnification is otherwise prohibited by law (including the applicable rules of NYSE or any other securities exchange or inter-dealer quotation system on which the Common Stock is listed or quoted) or by the organizational documents of any member of the Company Group. The foregoing right of indemnification shall not be exclusive of or otherwise supersede any other rights of indemnification to which such Indemnifiable Persons may be entitled under the organizational documents of any member of the Company Group, as a matter of law, under an individual indemnification agreement or contract or otherwise, or any other power that the Company may have to indemnify such Indemnifiable Persons or hold such Indemnifiable Person harmless. +(f) Notwithstanding anything to the contrary contained in the Plan, the Board may, in its sole discretion, at any time and from time to time, grant Awards and administer the Plan with respect to such Awards. Any such actions by the Board shall be subject to the applicable rules of the NYSE or any other securities exchange or inter- dealer quotation system on which the Common Stock is listed or quoted. In any such case, the Board shall have all the authority granted to the Committee under the Plan. +5. Grant of Awards; Shares Subject to the Plan; Limitations . +(a) Awards granted under the Plan shall be subject to the following limitations: (i) subject to Section 12 of the Plan, as of the Effective Date, the maximum number of shares of Common Stock subject to Awards that may be delivered under the Plan is 843,000,000 shares of Common Stock (the “ Share Limit ”); (ii) subject to Section 12 of the Plan, no more than 843,000,000 shares of Common Stock may be issued in the aggregate pursuant to the exercise of Incentive Stock Options granted under the Plan; and (iii) the maximum number of shares of Common Stock subject to Awards granted during a single fiscal year to any Non-Employee Director, taken together with any cash fees paid to such Non-Employee Director during the fiscal year in respect of such Non-Employee Director’s service on the Board, shall not exceed $1,500,000 in total value (calculating the value of any such Awards based on the grant date fair value of such Awards for financial reporting purposes). +(b) Except as otherwise provided herein and other than with respect to Substitute Awards, any shares of Common Stock subject to an Award which for any reason expires or is forfeited, cancelled, surrendered, or terminated without issuance of shares of Common Stock (including shares of Common Stock attributable to Awards that are settled in cash) shall again be available under the Plan. Shares of Common Stock subject to an Award under the Plan may not again be made available for issuance under the Plan if such shares of Common Stock are: (i) shares of Common Stock that were subject to a stock-settled SAR and were not issued or delivered upon the net settlement of such SAR; (ii) shares of Common Stock delivered to or withheld by the Company to pay the Exercise Price, the Strike Price, or the withholding taxes related to an outstanding Award; or (iii) shares of Common Stock repurchased on the open market with the proceeds of an Option exercise. Any shares of Common Stock subject to a Legacy Full Value Award, as applicable, shall be counted against the Share Limit as 2.8:1 shares of Common Stock for every one (1) share of Common Stock issued in connection with such Award, and every New Full Value Award shall be counted against the Share Limit as 2.5:1 shares of Common Stock for every one (1) share of Common Stock issued in connection with such Award. If shares of Common Stock subject to any such Legacy Full Value Award, as applicable, or New Full Value Award are forfeited, cancelled, surrendered, or terminated without issuance of shares of Common Stock and would otherwise return to the Plan pursuant to this Section 5(b), 2.8 times or 2.5 times the number of shares of Common Stock so forfeited, cancelled, surrendered or terminated shall again be available for issuance under the Plan, respectively. +2025 PROXY STATEMENT 86 +(c) Shares of Common Stock issued by the Company in settlement of Awards may be authorized and unissued shares, shares held in the treasury of the Company, shares purchased on the open market or by private purchase or a combination of the foregoing. +(d) Awards may, in the sole discretion of the Committee, be granted under the Plan in assumption of, or in substitution for, outstanding awards previously granted by an entity directly or indirectly acquired by the Company or with which the Company combines (“ Substitute Awards ”). Substitute Awards shall not be counted against the Share Limit; provided , that Substitute Awards issued in connection with the assumption of, or in substitution for, outstanding options intended to qualify as “incentive stock options” within the meaning of Section 422 of the Code shall be counted against the aggregate number of shares of Common Stock available for Awards of Incentive Stock Options under the Plan. Subject to applicable stock exchange requirements, available shares under a stockholder approved plan of an entity directly or indirectly acquired by the Company or with which the Company combines (as appropriately adjusted to reflect the acquisition or combination transaction) may be used for Awards under the Plan and shall not reduce the number of shares of Common Stock available for issuance under the Plan (and shares of Common Stock subject to such Awards shall not be added to the shares available for Awards under the Plan as provided in Section 5(b) above); provided that Awards using such available shares of Common Stock shall not be made after the date awards or grants could have been made under the terms of the pre-existing plan, absent the acquisition or combination, and shall only be made to individuals who were not employees or directors of the Company Group prior to such acquisition or combination. Except as expressly provided by the terms of this Plan, the issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, for cash or property or for labor or services, either upon direct sale, upon the exercise of rights or warrants to subscribe therefor or upon conversion of shares or obligations of any member of the Company Group convertible into such shares or other securities, shall not affect, and no adjustment by reason thereof, shall be made with respect to Awards then outstanding hereunder. +6. Eligibility . Participation in the Plan shall be limited to Eligible Persons. The Committee shall determine and designate, from time to time, from among the Eligible Persons those persons who will be granted Awards under the Plan and who will become Participants, and, subject to the terms and conditions of the Plan, a Participant may be granted any Award permitted under the provisions of the Plan and more than one Award may be granted to a Participant. +7. Options . +(a) General . Each Option granted under the Plan shall be evidenced by an Award Agreement, in written or electronic form, which agreement need not be the same for each Participant. Each Option so granted shall be subject to the conditions set forth in this Section 7, and to such other conditions not inconsistent with the Plan as may be reflected in the applicable Award Agreement. All Options granted under the Plan shall be Nonqualified Stock Options unless the applicable Award Agreement expressly states that the Option is intended to be an Incentive Stock Option. Incentive Stock Options shall be granted only to Eligible Persons who are employees of the Company Group, and no Incentive Stock Option shall be granted to any Eligible Person who is ineligible to receive an Incentive Stock Option under the Code. No Option shall be treated as an Incentive Stock Option unless the Plan has been approved by the stockholders of the Company in a manner intended to comply with the stockholder approval requirements of Section 422(b)(1) of the Code, provided that any Option intended to be an Incentive Stock Option shall not fail to be effective solely on account of a failure to obtain such approval, but rather such Option shall be treated as a Nonqualified Stock Option unless and until such approval is obtained. In the case of an Incentive Stock Option, the terms and conditions of such grant shall be subject to, and comply with, such rules as may be prescribed by Section 422 of the Code. If for any reason an Option intended to be an Incentive Stock Option (or any portion thereof) shall not qualify as an Incentive Stock Option, then, to the extent of such non-qualification, such Option or portion thereof shall be regarded as a Nonqualified Stock Option appropriately granted under the Plan. +(b) Exercise Price . Except as otherwise provided by the Committee in the case of Substitute Awards, the exercise price (“ Exercise Price ”) per share of Common Stock for each Option shall not be less than 100% of the Fair Market Value of such share (determined as of the date of grant), or if greater, the par value of a share of Common Stock (determined as of the date of grant); provided, however , that in the case of an Incentive Stock Option granted to an employee who, at the time of the grant of such Option, owns stock representing more than 10% of the voting power of all classes of stock of any member of the Company Group, the Exercise Price per share shall be no less than 110% of the Fair Market Value per share on the date of grant. +(c) Vesting and Expiration . +(i) Options shall vest and become exercisable in such manner and on such date or dates or upon such event or events as determined by the Committee, subject to the terms of the Plan. +(ii) Options shall expire upon a date determined by the Committee, not to exceed ten (10) years from the date of grant (the “ Option Period ”). Notwithstanding the foregoing, in no event shall the Option Period exceed five (5) years from the date of grant in the case of an Incentive Stock Option granted to a Participant who on the date of grant owns stock representing more than 10% of the voting power of all classes of stock of any member of the Company Group. +(iii) In the sole discretion of the Committee, any Option that is exercisable but unexercised as of the day immediately before the expiration of the Option Period may be automatically exercised, in accordance with procedures established for this purpose by the Committee, but only if the Exercise Price is less than the Fair Market Value of a share of +87 NIKE, INC. +Common Stock on that date. In the event of an automatic exercise, payment of the Exercise Price and any applicable tax withholdings shall be made by a “net exercise” procedure as described in Section 7(d)(ii)(B) below. +(d) Method of Exercise and Form of Payment . No shares of Common Stock shall be issued pursuant to any exercise of an Option until payment in full of the Exercise Price therefor is received by the Company and the Participant has paid to the Company an amount equal to any Federal, state, local and non-U.S. income, employment and any other applicable taxes required to be withheld. Options which have become exercisable may be exercised in whole or in part (but with respect to whole shares of Common Stock only) by delivery of written or electronic notice of exercise to the Company (or telephonic instructions to the extent provided by the Committee) in accordance with the terms of the Option accompanied by payment of the Exercise Price. The Exercise Price shall be payable: (i) in cash, check, cash equivalent and/or, in the sole discretion of the Committee, shares of Common Stock valued at the Fair Market Value at the time the Option is exercised ( provided , however, that shares of Common Stock may not be used to pay any portion of the Exercise Price unless the holder thereof has good title, free and clear of all liens and encumbrances ); provided , that such shares of Common Stock are not subject to any pledge or other security interest and have been held by the Participant for not less than six (6) months (or such other period as established from time to time by the Committee in order to avoid adverse accounting treatment applying GAAP); or (ii) by such other method as the Committee may permit in its sole discretion, including, without limitation: (A) if there is a public market for the shares of Common Stock at such time, by means of a broker-assisted “cashless exercise” pursuant to which the Company is delivered (including telephonically to the extent permitted by the Committee) a copy of irrevocable instructions to a stockbroker to sell the shares of Common Stock otherwise issuable upon the exercise of the Option and to deliver promptly to the Company an amount equal to the Exercise Price; or (B) a “net exercise” procedure effected by withholding the minimum number of shares of Common Stock otherwise issuable in respect of an Option that are needed to pay the Exercise Price and any Federal, state, local and non-U.S. income, employment and any other applicable taxes required to be withheld. +(e) Notification upon Disqualifying Disposition of an Incentive Stock Option . Each Participant awarded an Incentive Stock Option under the Plan shall notify the Company in writing immediately after the date he or she makes a disqualifying disposition of any Common Stock acquired pursuant to the exercise of such Incentive Stock Option. A disqualifying disposition is any disposition (including, without limitation, any sale) of such Common Stock before the later of (A) two (2) years after the date of grant of the Incentive Stock Option or (B) one (1) year after the date of exercise of the Incentive Stock Option. The Company may, if determined by the Committee and in accordance with procedures established by the Committee, retain possession, as agent for the applicable Participant, of any Common Stock acquired pursuant to the exercise of an Incentive Stock Option until the end of the period described in the preceding sentence, subject to complying with any instructions from such Participant as to the sale of such Common Stock. +(f) Post-Exercise Limitations . The Committee, in its discretion, may provide in an Award Agreement such restrictions on shares of Common Stock acquired pursuant to the exercise of an Option as it determines to be desirable, including, without limitation, restrictions relating to disposition of the shares and forfeiture restrictions based on service, performance, share of Common Stock ownership by the Participant and such other factors as the Committee determines to be appropriate. +(g) Compliance With Laws, etc . Notwithstanding the foregoing, in no event shall a Participant be permitted to exercise an Option in a manner which the Committee determines would violate the Sarbanes-Oxley Act of 2002, as it may be amended from time to time, or any other applicable law or the applicable rules and regulations of the Securities and Exchange Commission or the applicable rules and regulations of any securities exchange or inter- dealer quotation system on which the securities of the Company are listed or traded. +(h) No Repricing or Reloads . Except as otherwise permitted under Section 12 of the Plan, reducing the Exercise Price of Stock Options issued and outstanding under the Plan, including through amendment, cancellation in exchange for the grant of a substitute Award or repurchase for cash or other consideration (in each case that has the effect of reducing the Exercise Price), will require approval of the Company’s stockholders. The Company will not grant any Stock Options with automatic reload features. +8. Stock Appreciation Rights . +(a) General . Each SAR granted under the Plan shall be evidenced by an Award Agreement. Each SAR so granted shall be subject to the conditions set forth in this Section 8, and to such other conditions not inconsistent with the Plan as may be reflected in the applicable Award Agreement. Any Option granted under the Plan may include tandem SARs. The Committee also may award SARs to Eligible Persons independent of any Option. +(b) Strike Price . Except as otherwise provided by the Committee in the case of Substitute Awards, the strike price (“ Strike Price ”) per share of Common Stock for each SAR shall not be less than 100% of the Fair Market Value of such share (determined as of the date of grant). Notwithstanding the foregoing, a SAR granted in tandem with (or in substitution for) an Option previously granted shall have a Strike Price equal to the Exercise Price of the corresponding Option. +(c) Vesting and Expiration . +(i) A SAR granted in connection with an Option shall become exercisable and shall expire according to the same vesting schedule and expiration provisions as the corresponding Option. A SAR granted independent of an Option shall vest and become exercisable in such manner and on such date or dates or upon such events as determined by the Committee, subject to the terms of the Plan. +2025 PROXY STATEMENT 88 +(ii) SARs shall expire upon a date determined by the Committee, not to exceed ten (10) years from the date of grant (the “ SAR Period ”). +(iii) In the sole discretion of the Committee, any SAR that is exercisable but unexercised as of the day immediately before the expiration of the SAR Period may be automatically exercised, in accordance with procedures established for this purpose by the Committee, but only if the Strike Price is less than the Fair Market Value of a share of Common Stock on that date. In the event of an automatic exercise, payment of the Strike Price and any applicable tax withholdings shall be made as described in Section 8(e) below. +(d) Method of Exercise . SARs which have become exercisable may be exercised in whole or in part (but with respect to whole shares of Common Stock only) by written or electronic notice of exercise to the Company in accordance with the terms of the Award, specifying the number of SARs to be exercised and the date on which such SARs were awarded. The exercise of a SAR granted in connection with an Option shall cancel the corresponding tandem SAR or Option right with respect to such share of Common Stock, and vice versa. +(e) Payment . Upon the exercise of a SAR, the Company shall pay to the Participant an amount equal to the number of shares of Common Stock subject to the SAR that is being exercised multiplied by the excess of the Fair Market Value of one (1) share of Common Stock on the exercise date over the Strike Price, less an amount equal to any Federal, state, local and non-U.S. income, employment and any other applicable taxes required to be withheld. The Company shall pay such amount in cash, in shares of Common Stock valued at Fair Market Value, or any combination thereof, as determined by the Committee. +(f) No Repricing or Reloads . Except as otherwise permitted under Section 12 of the Plan, reducing the Strike Price of SARs issued and outstanding under the Plan, including through amendment, cancellation in exchange for the grant of a substitute Award or repurchase for cash or other consideration (in each case that has the effect of reducing the Strike Price), will require approval of the Company’s stockholders. The Company will not grant any SARs with automatic reload features. +9. Restricted Stock and Restricted Stock Units . +(a) General . Each grant of Restricted Stock and Restricted Stock Units shall be evidenced by an Award Agreement. Each Restricted Stock and Restricted Stock Unit so granted shall be subject to the conditions set forth in this Section 9, and to such other conditions not inconsistent with the Plan as may be reflected in the applicable Award Agreement. +(b) Stock Certificates and Book-Entry; Escrow or Similar Arrangement . Upon the grant of Restricted Stock, the Committee shall cause a stock certificate registered in the name of the Participant to be issued or shall cause share(s) of Common Stock to be registered in the name of the Participant and held in book-entry form subject to the Company’s directions and, if the Committee determines that the Restricted Stock shall be held by the Company or in escrow rather than issued to the Participant pending the release of the applicable restrictions, the Committee may require the Participant to additionally execute and deliver to the Company (i) an escrow agreement satisfactory to the Committee, if applicable and (ii) the appropriate stock power (endorsed in blank) with respect to the Restricted Stock covered by such agreement. If a Participant shall fail to execute and deliver (if required by the Committee) an Award Agreement evidencing an Award of Restricted Stock and, if applicable, an escrow agreement and blank stock power within the amount of time specified by the Committee, the Award shall be null and void. Subject to the restrictions set forth in this Section 9 and the applicable Award Agreement, a Participant generally shall have the rights and privileges of a stockholder of Common Stock with respect to shares of Restricted Stock, including, without limitation, the right to vote such Restricted Stock; provided , that the Committee may determine that dividends credited with respect to any shares of Restricted Stock will be subject to the same restrictions (whether time-and/or performance-based) applicable to the underlying shares of Restricted Stock, and held by the Company and delivered (without interest) to the Participant at the time that the restrictions on such Restricted Stock lapse (and that the right to any such accumulated dividends shall be forfeited upon the forfeiture of the Restricted Stock to which such dividends relate). To the extent that shares of Restricted Stock are forfeited, any stock certificates issued to the Participant evidencing such shares shall be returned to the Company, and all rights of the Participant to such shares and as a stockholder with respect thereto shall terminate without further obligation on the part of the Company. A Participant shall have no rights or privileges as a stockholder as to Restricted Stock Units. +(c) Vesting . Restricted Stock and Restricted Stock Units shall vest, and any applicable vesting period shall lapse, in such manner and on such date or dates or upon such event or events as determined by the Committee, subject to the terms of the Plan. +(d) Issuance of Restricted Stock and Settlement of Restricted Stock Units . +(i) Upon the expiration of the vesting period with respect to any shares of Restricted Stock, the restrictions set forth in the applicable Award Agreement shall be of no further force or effect with respect to such shares, except as set forth in the applicable Award Agreement. If an escrow arrangement is used, upon such expiration, the Company shall issue to the Participant, or his or her beneficiary, without charge, the stock certificate (or, if applicable, a notice evidencing a book-entry notation) evidencing the shares of Restricted Stock which have not then been forfeited and with respect to which the vesting period has expired (rounded down to the nearest full share). Dividends, if any, that may have been withheld by the Committee and attributable to any particular share of Restricted Stock shall be distributed to the Participant in cash or, at the sole discretion of the Committee, in shares of Common Stock having a Fair Market Value (on the date of distribution) equal to the amount of such dividends, upon the release of restrictions on such share and, if such share is forfeited, the Participant shall have no right to such dividends. +89 NIKE, INC. +(ii) Unless provided by the Committee in an Award Agreement or otherwise, upon the expiration of the vesting period with respect to any outstanding Restricted Stock Units, the Company shall issue to the Participant or his or her beneficiary, without charge, one (1) share of Common Stock (or other securities or other property, as applicable) for each such outstanding Restricted Stock Unit; provided, however , that the Committee may, in its sole discretion, elect to (A) pay cash or part cash and part shares of Common Stock in lieu of issuing only shares of Common Stock in respect of such Restricted Stock Units; or (B) defer the issuance of shares of Common Stock (or cash or part shares of Common Stock and part cash, as the case may be) beyond the expiration of the vesting period if such extension would not cause adverse tax consequences under Section 409A of the Code. If a cash payment is made in lieu of issuing shares of Common Stock in settlement of such Restricted Stock Units, the amount of such payment shall be equal to the Fair Market Value per share of Common Stock as of the date on which the vesting period lapsed with respect to such Restricted Stock Units. To the extent provided in an Award Agreement, the holder of outstanding Restricted Stock Units shall be entitled to be credited with dividend equivalents (upon the payment by the Company of dividends on shares of Common Stock) either in cash or, at the sole discretion of the Committee, in shares of Common Stock having a Fair Market Value equal to the amount of such dividends (and interest may, at the sole discretion of the Committee, be credited on the amount of cash dividend equivalents at a rate, and subject to such terms, as determined by the Committee. Any accumulated dividend equivalents (and interest thereon, if applicable) may be subject to the same restrictions (whether time-and/or performance-based) applicable to the underlying Restricted Stock Units. In the event that the dividend equivalents are subject to the same restrictions applicable to the underlying Restricted Stock Units, the dividend equivalents will be held by the Company and delivered at the same time as the underlying Restricted Stock Units are settled following the date on which the vesting period lapses with respect to such Restricted Stock Units (and if such Restricted Stock Units are forfeited, the Participant shall have no right to such dividend equivalents (or interest thereon, if applicable)). An Award Agreement may also provide that dividend equivalents on Restricted Stock Units will be reinvested in additional Restricted Stock Units. +(e) Legends on Restricted Stock . Each certificate, if any, or book entry representing Restricted Stock awarded under the Plan, if any, shall bear any legends required by the Committee, in addition to any other information the Company deems appropriate, until the lapse of all restrictions with respect to such shares of Common Stock. +10. Other Stock-Based Awards . The Committee may issue Other Stock-Based Awards including, without limitation, (a) unrestricted Common Stock, (b) rights to receive grants of Awards at a future date, or (c) other Awards denominated in Common Stock, valued by reference to, or that are otherwise based on the Fair Market Value per share of Common Stock, including, without limitation, Performance Shares or Performance Share Units under the Plan to Eligible Persons, alone or in tandem with other Awards, in such amounts and dependent on such conditions as the Committee shall from time to time in its sole discretion determine (including, without limitation, provisions relating to deferred payment). Each Other Stock-Based Award granted under the Plan shall be evidenced by an Award Agreement. Each Other Stock-Based Award so granted shall be subject to such conditions not inconsistent with the Plan as may be reflected in the applicable Award Agreement or other form evidencing such Award, including, without limitation, those set forth in Section 14(a) of the Plan. +11. Performance Shares and Performance Share Units . +(a) General . The Committee shall have the authority, at or before the time of grant of any Award, to designate such Award as a Performance Share or Performance Share Unit. +(b) Discretion of Committee with Respect to Performance Shares and Performance Share Units . With regard to a particular Performance Period, the Committee shall have sole discretion to select the length of such Performance Period, the type(s) of Performance Share or Performance Share Unit to be issued, the Performance Criteria that will be used to establish the Performance Goal(s), the kind(s) and/or level(s) of the Performance Goal(s) that is (are) to apply and any other applicable terms and conditions. +(c) Performance Criteria . +(i) The Performance Criteria that will be used to establish the Performance Goal(s) may be based on the attainment of specific levels of performance of the Company (and/or one (1) or more members of the Company Group, divisions or operational and/or business units, product lines, brands, business segments, administrative departments, or any combination of the foregoing) and may include, but are not limited to, any of the following, which may be determined in accordance with GAAP or on a non-GAAP basis: (i) sales or net sales; (ii) gross profit or margin; (iii) expenses, including cost of goods sold, operating expenses, marketing and administrative expenses, research and development, restructuring or other special or unusual items, interest, tax expenses, or other measures of savings; (iv) operating earnings, earnings before interest, taxes, depreciation, or amortization, net earnings, earnings per share (basic or diluted) or other measure of earnings; (v) cash flow, including cash flow from operations, investing, or financing activities, before or after dividends, investments, or capital expenditures; (vi) balance sheet performance, including debt, long or short term, inventory, accounts payable or receivable, working capital, or stockholders’ equity; (vii) return measures, including return on invested capital, sales, assets, or equity; (viii) stock price performance or stockholder return; (ix) economic value created or added; (x) implementation or completion of critical projects, including acquisitions, divestitures, and other ventures, process improvements, product or production quality, attainment of other strategic objectives, including market penetration, geographic expansion, product development, regulatory or quality performance, innovation or research goals, or the like; (xi) any other objective or subjective performance criteria specified by the Committee; or (xii) any combination of the foregoing. +2025 PROXY STATEMENT 90 +(ii) The Committee may specify any reasonable definition of the Performance Criteria that it uses, and any one (1) or more of the Performance Criteria may be stated as a percentage of another Performance Criteria, or used on an absolute or relative basis to measure the performance of the Company and/or one (1) or more members of the Company Group as a whole or any divisions or operational and/or business units, product lines, brands, business segments, administrative departments of the Company and/or one (1) or more members of the Company Group or any combination thereof, as the Committee may deem appropriate, or any of the above Performance Criteria may be compared to the performance of a selected group of comparison companies, or a published or special index that the Committee, in its sole discretion, deems appropriate, or as compared to various stock market indices. The Committee also has the authority to provide for accelerated vesting of any Award based on the achievement of Performance Goals pursuant to the Performance Criteria specified in this Section 11(c). +(d) Modification of Performance Goal(s) . The Committee shall have the authority to specify adjustments or modifications to be made to the calculation of a Performance Goal for such Performance Period, based on and in order to appropriately reflect the following events: (i) asset write-downs; (ii) litigation or claim judgments or settlements; (iii) the effect of changes in tax laws, accounting principles, or other laws or regulatory rules affecting reported results; (iv) any reorganization and restructuring programs; (v) extraordinary nonrecurring items as described in Accounting Standards Codification Topic 225-20 (or any successor pronouncement thereto) and/or in management’s discussion and analysis of financial condition and results of operations appearing in the Company’s annual report to stockholders for the applicable year; (vi) acquisitions or divestitures; (vii) any other specific, unusual or nonrecurring events, or objectively determinable category thereof; (viii) foreign exchange gains and losses; (ix) discontinued operations and nonrecurring charges; (x) a change in the Company’s fiscal year; and (xi) any other adjustments specified by the Committee. If the Committee determines that a change in the business, operations, corporate structure or capital structure of the Company, the manner in which the Company or an Affiliate conducts its business, or other events or circumstances render Performance Goals to be unsuitable, the Committee may modify such Performance Goals, in whole or in part, as the Committee deems appropriate. If a Participant is promoted, demoted, or transferred to a different business unit or function during a Performance Period, the Committee may determine that the Performance Goals or Performance Period are no longer appropriate and may (x) adjust, change or eliminate the Performance Goals or the applicable Performance Period as it deems appropriate to make such goals and period comparable to the initial goals and period, or (y) make a cash payment to the Participant in an amount determined by the Committee. +(e) Payment of Performance Shares and Performance Share Units . +(i) Condition to Receipt of Payment . A Participant will be eligible for payment in respect of a Performance Share or Performance Share Unit for an applicable Performance Period as provided in the applicable Award Agreement. +(ii) Limitation . Unless otherwise provided in the applicable Award Agreement or as may otherwise be determined by the Committee, a Participant shall be eligible to receive payment in respect of a Performance Share or Performance Share Unit to the extent that: (A) the Performance Goals for such period are achieved; and (B) all or some of the portion of such Participant’s Performance Share or Performance Share Unit has been earned for the Performance Period. +(iii) Certification . Following the completion of a Performance Period, the Committee shall review and certify whether, and to what extent, the Performance Goals for the Performance Period have been achieved and, if so, calculate and certify that amount of the Performance Shares or Performance Share Units earned for the period. The Committee shall then determine the amount of each Participant’s Performance Shares or Performance Share Units actually payable for the Performance Period, and in so doing, the Committee may make such adjustments to the amount of the Performance Share or Performance Share Unit earned as it determines in its sole discretion. +(iv) Timing of Award Payments . Unless otherwise provided in the applicable Award Agreement, Performance Shares or Performance Share Units granted for a Performance Period shall be paid to Participants as soon as administratively practicable following completion of the certifications required by this Section 11. +12. Changes in Capital Structure and Similar Events . Notwithstanding any other provision in this Plan to the contrary, the following provisions shall apply to all Awards granted hereunder: +(a) General . In the event (i) any dividend (other than regular cash dividends) or other distribution (whether in the form of cash, shares of Common Stock, other securities or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, split-off, spin-off, combination, repurchase or exchange of shares of Common Stock or other securities of the Company, issuance of warrants or other rights to acquire shares of Common Stock or other securities of the Company, or other similar corporate transaction or event that affects the shares of Common Stock, or (ii) unusual or nonrecurring events affecting the Company, including changes in applicable rules, rulings, regulations or other requirements, affects the shares of Common Stock such that the Committee determines, in its sole discretion, that an adjustment is warranted in order to prevent a substantial dilution or enlargement of the rights intended to be granted to, or available for, Participants (any event in (i) or (ii), an “ Adjustment Event ”), the Committee shall, in respect of any such Adjustment Event, make such proportionate substitution or adjustment, if any, as it deems equitable, to any or all of (A) the Share Limit, or any other limit applicable under the Plan with respect to the number of Awards which may be granted hereunder, (B) the number of shares of Common Stock or other securities of the Company (or number and kind of other securities or other property) which may be issued in respect of Awards or with respect to which Awards may be granted under the Plan, and (C) the terms of any outstanding Award (subject to any limitations or reductions as may be necessary to comply with Section 409A of the Code), including, without limitation, (1) the number of shares of Common Stock or other securities of the Company (or number and kind of other securities +91 NIKE, INC. +or other property) subject to outstanding Awards or to which outstanding Awards relate, (2) the Exercise Price or Strike Price with respect to any Award, or (3) any applicable performance measures; provided , that in the case of any “equity restructuring” (within the meaning of the Financial Accounting Standards Board Accounting Standards Codification Topic 718 (or any successor pronouncement thereto)), the Committee shall make an equitable or proportionate adjustment to outstanding Awards to reflect such equity restructuring. Without limiting the generality of the foregoing, in connection with an Adjustment Event, the Committee may provide, in its sole discretion, for the cancellation of any outstanding Award granted hereunder (I) in exchange for payment in cash, property, or other securities, in the Committee’s sole discretion, having an aggregate Fair Market Value of the shares of Common Stock covered by such Award, reduced by the aggregate Exercise Price, Strike Price, or purchase price thereof, if any, and (II) with respect to any Awards for which the Exercise Price, Strike Price, or purchase price per share of Common Stock is greater than or equal to the then current Fair Market Value per share of Common Stock, for no consideration. Notwithstanding anything contained in the Plan to the contrary, any adjustment with respect to an Incentive Stock Option due to an adjustment or substitution described in this Section 12(a) shall comply with the rules of Section 424(a) of the Code, and in no event shall any adjustment be made which would render any Incentive Stock Option granted hereunder to be disqualified as an incentive stock option for purposes of Section 422 of the Code. Any adjustment made under this Section 12 shall be conclusive and binding for all purposes. +(b) Change in Control . Except as otherwise determined by the Committee at the time of a Change in Control or as provided in an Award Agreement (in each case, other than in the case of an Award the vesting of which is based in whole or part upon the attainment of one or more performance measures), in the event of a Change in Control of the Company, the following provisions will apply: +(i) Unless otherwise provided in the applicable Award Agreement, if the Participant experiences a CIC Qualifying Termination, the Participant’s Awards shall be fully vested and, in the case of an Option or SAR, shall remain exercisable until the earlier of the original expiration date of the Option or SAR and the expiration of four years after the date of the CIC Qualifying Termination; provided that in the case of an Award the vesting of which is based in whole or part upon the attainment of one or more performance measures, such performance measures shall be deemed to have been met at the greater of target and actual level of performance through the date of the Change in Control, as determined by the Committee in its sole discretion. The Committee may require a Participant to enter into an agreement containing restrictive covenants, including without limitation, covenants not to compete, not to solicit customers or employees, not to make use of confidential information, not to disparage the Company, or to cooperate with the Company in responding to claims about which the Participant has knowledge, as a condition to the application of the provisions of this Section 12(b)(i). +(ii) Notwithstanding the foregoing, in the event of a Change in Control, a Participant’s Award will be treated, to the extent determined by the Committee to be permitted under Section 409A of the Code, in accordance with one or more of the following methods as determined by the Committee in its sole discretion: (A) settle such Awards for an amount of cash or securities equal to their value, where in the case of Stock Options and SARs, the value of such Awards, if any, will be equal to their in-the-money spread value (if any), as determined in the sole discretion of the Committee; (B) provide for the assumption of or the issuance of substitute Awards that will substantially preserve the otherwise applicable terms of any affected Awards previously granted under the Plan, as determined by the Committee in its sole discretion; (C) modify the terms of such Awards to add events, conditions or circumstances (including termination of employment within a specified period after a Change in Control) upon which the vesting of such Awards or lapse of restrictions thereon will accelerate; (D) deem any performance conditions satisfied at the greater of target and actual level of performance through the date of the Change in Control, as determined by the Committee in its sole discretion; or (E) provide that for a period of at least twenty (20) days prior to the Change in Control, any Stock Options or SARs that would not otherwise become exercisable prior to the Change in Control will be exercisable as to all shares of Common Stock subject thereto (but any such exercise will be contingent upon and subject to the occurrence of the Change in Control, and if the Change in Control does not take place within a specified period after giving such notice for any reason whatsoever, the exercise will be null and void), and that any Stock Options or SARs not exercised prior to the consummation of the Change in Control will terminate and be of no further force and effect as of the consummation of the Change in Control. In the event that the consideration paid in the Change in Control includes contingent value rights, earnout or indemnity payments or similar payments, then the Committee will determine if Awards settled under clause (A) above are (1) valued at closing taking into account such contingent consideration (with the value determined by the Committee in its sole discretion) or (2) entitled to a share of such contingent consideration. For the avoidance of doubt, in the event of a Change in Control where all Stock Options and SARs are settled for an amount (as determined in the sole discretion of the Committee) of cash or securities, the Committee may, in its sole discretion, terminate any Stock Option or SAR for which the Exercise Price or Strike Price, as applicable, is equal to or exceeds the per share value of the consideration to be paid in the Change in Control transaction without payment of consideration therefor. Similar actions to those specified in this Section 12(b)(ii) may be taken in the event of a merger or other corporate reorganization that does not constitute a Change in Control. +(c) Other Requirements . Prior to any payment or adjustment contemplated under this Section 12, the Committee may require a Participant to (i) represent and warrant as to the unencumbered title to his or her Awards, (ii) bear such Participant’s pro rata share of any post-closing indemnity obligations, and be subject to the same post- closing purchase price adjustments, escrow terms, offset rights, holdback terms, and similar conditions as the other holders of Common Stock, subject to any limitations or reductions as may be necessary to comply with Section 409A of the Code, and (iii) deliver customary transfer documentation as reasonably determined by the Committee. +2025 PROXY STATEMENT 92 +13. Amendments and Termination . +(a) Amendment and Termination of the Plan . The Board may amend, alter, suspend, discontinue, or terminate the Plan or any portion thereof at any time; provided , that no such amendment, alteration, suspension, discontinuation or termination shall be made without stockholder approval if: (i) such approval is necessary to comply with any regulatory requirement applicable to the Plan (including, without limitation, as necessary to comply with any rules or regulations of any securities exchange or inter-dealer quotation system on which the securities of the Company may be listed or quoted) or for changes in GAAP to new accounting standards; (ii) it would materially increase the number of securities which may be issued under the Plan (provided that adjustments made pursuant to Section 12(a) shall not be subject to this limitation); or (iii) it would materially modify the requirements for participation in the Plan; provided , further , that any such amendment, alteration, suspension, discontinuance or termination that would materially and adversely affect the rights of any Participant or any holder or beneficiary of any Award theretofore granted shall not to that extent be effective without the consent of the affected Participant, holder or beneficiary. Notwithstanding the foregoing, no amendment shall be made to the last proviso of Section 13(b) of the Plan without stockholder approval. +(b) Amendment of Award Agreements . The Committee may, to the extent consistent with the terms of any applicable Award Agreement, waive any conditions or rights under, amend any terms of, or alter, suspend, discontinue, cancel or terminate, any Award theretofore granted or the associated Award Agreement, prospectively or retroactively (including after a Participant’s Termination); provided that, other than pursuant to Section 12, any such waiver, amendment, alteration, suspension, discontinuance, cancellation or termination that would materially and adversely affect the rights of any Participant with respect to any Award theretofore granted shall not to that extent be effective without the consent of the affected Participant; provided, further , that without stockholder approval, except as otherwise permitted under Section 12 of the Plan, (i) no amendment or modification may reduce the Exercise Price of any Option or the Strike Price of any SAR; (ii) the Committee may not cancel any outstanding Option or SAR and replace it with a new Option or SAR (with a lower Exercise Price or Strike Price, as the case may be) or other Award or cash payment that is greater than the intrinsic value (if any) of the cancelled Option or SAR and (iii) the Committee may not take any other action which is considered a “repricing” for purposes of the stockholder approval rules of any securities exchange or inter-dealer quotation system on which the securities of the Company are listed or quoted. +14. General . +(a) Award Agreements; Plan Document Controls . Each Award under the Plan shall be evidenced by an Award Agreement, which shall be delivered to the Participant to whom the Award was granted, and shall specify the terms and conditions of the Award and any rules applicable thereto, including, without limitation, the effect on such Award of the death, Disability or Termination of a Participant, or of such other events as may be determined by the Committee. The Committee need not require an Award Agreement to be signed by the Participant or a duly authorized representative of the Company. The Plan and each Award Agreement together constitute the entire agreement with respect to the subject matter hereof and thereof; provided , that in the event of any inconsistency between the Plan and such Award Agreement, the terms and conditions of the Plan shall control. +(b) Nontransferability . +(i) Each Award shall be exercisable only by such Participant to whom the Award was granted during the Participant’s lifetime, or, if permissible under applicable law, by the Participant’s legal guardian or representative. No Award may be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by a Participant (including, without limitation, except as may be prohibited by applicable law, pursuant to a domestic relations order) other than by will or by the laws of descent and distribution and any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall be void and unenforceable against the Company or any other member of the Company Group; provided , that the designation of a beneficiary shall not constitute an assignment, alienation, pledge, attachment, sale, transfer or encumbrance. +(ii) Notwithstanding the foregoing, the Committee may, in its sole discretion, permit Awards (other than Incentive Stock Options) to be transferred by a Participant, without consideration, subject to such rules and procedures as the Committee may adopt consistent with any applicable Award Agreement to preserve the purposes of the Plan, to: (A) any person who is a “family member” of the Participant, as such term is used in the instructions to Form S-8 under the Securities Act or any successor form of registration statement promulgated by the Securities and Exchange Commission (collectively, the “ Immediate Family Members ”); (B) a trust solely for the benefit of the Participant and his or her Immediate Family Members; (C) a partnership or limited liability company whose only partners or stockholders are the Participant and his or her Immediate Family Members; or (D) a beneficiary to whom donations are eligible to be treated as “charitable contributions” for federal income tax purposes (each transferee described in clauses (A), (B), (C) and (D) above is hereinafter referred to as a “ Permitted Transferee ”); provided , that the Participant gives the Committee advance written notice describing the terms and conditions of the proposed transfer and the Committee notifies the Participant in writing that such a transfer would comply with the requirements of the Plan. +(iii) The terms of any Award transferred in accordance with Section 14(b)(ii) above shall apply to the Permitted Transferee and any reference in the Plan, or in any applicable Award Agreement, to a Participant shall be deemed to refer to the Permitted Transferee, except that: (A) Permitted Transferees shall not be entitled to transfer any Award, other than by will or the laws of descent and distribution; (B) Permitted Transferees shall not be entitled to exercise any transferred Option unless there shall be in effect a registration statement on an appropriate form covering the shares of Common Stock to be acquired pursuant to the exercise of such Option if the Committee determines, consistent with any applicable Award Agreement, +93 NIKE, INC. +that such a registration statement is necessary or appropriate; (C) neither the Committee nor the Company shall be required to provide any notice to a Permitted Transferee, whether or not such notice is or would otherwise have been required to be given to the Participant under the Plan or otherwise; and (D) the consequences of a Participant’s Termination under the terms of the Plan and the applicable Award Agreement shall continue to be applied with respect to the Participant, including, without limitation, that an Option shall be exercisable by the Permitted Transferee only to the extent, and for the periods, specified in the Plan and the applicable Award Agreement. +(c) Dividends and Dividend Equivalents . The Committee, in its sole discretion, may provide a Participant as part of an Award with dividends, dividend equivalents, or similar payments in respect of Awards, payable in cash, shares of Common Stock, other securities, other Awards or other property, on a current or deferred basis, on such terms and conditions as may be determined by the Committee in its sole discretion, including, without limitation, payment directly to the Participant, withholding of such amounts by the Company subject to vesting of the Award or reinvestment in additional shares of Common Stock, Restricted Stock or other Awards; provided , that, with respect to Awards that are subject to achievement of performance goals, any such credited dividends or dividend equivalents may only be paid with respect to the portion of such Awards that is actually earned. Notwithstanding the foregoing, the Committee may determine to subject any dividends, dividend equivalents or other similar payments to the same restrictions (whether time- and/or performance-based) applicable to the underlying Award, and in such case, such amounts shall be held by the Company and delivered to the Participant (with or without interest, as the Committee may determine in its sole discretion) at the time that the underlying Award is settled (and the right to any such accumulated dividends, dividend equivalents, or other similar payments shall be forfeited upon the forfeiture of the Award to which such amounts relate). The Committee, in its sole discretion, may determine the form of payment of dividends or dividend equivalents, including cash, shares of Common Stock, Restricted Stock, Restricted Stock Units, Performance Shares or Performance Share Units. +(d) Reserved . +(e) Tax Withholding . +(i) A Participant shall be required to pay to the Company or any other member of the Company Group, and the Company or any other member of the Company Group shall have the right and is hereby authorized to withhold, from any cash, shares of Common Stock, other securities or other property issuable or deliverable under any Award or from any compensation or other amounts owing to a Participant, the amount (in cash, shares of Common Stock, other securities or other property) of any required withholding or any other applicable taxes in respect of an Award, its exercise, or any payment or transfer under an Award or under the Plan and to take such other action as may be necessary in the opinion of the Committee or the Company to satisfy all obligations for the payment of such withholding or any other applicable taxes. +(ii) Without limiting the generality of clause (i) above, the Committee may (but is not obligated to), in its sole discretion, permit a Participant to satisfy, in whole or in part, the foregoing withholding liability by (A) the delivery of shares of Common Stock (which are not subject to any pledge or other security interest) that have been held by the Participant for not less than six (6) months (or such other period as established from time to time by the Committee in order to avoid adverse accounting treatment applying GAAP) having a Fair Market Value equal to such withholding liability or (B) having the Company withhold from the number of shares of Common Stock otherwise issuable or deliverable pursuant to the exercise or settlement of the Award a number of shares with a Fair Market Value equal to such withholding liability; provided that with respect to shares withheld pursuant to clause (B), the number of such shares may not have a Fair Market Value greater than the maximum required statutory withholding liability. +(f) Data Protection . By participating in the Plan or accepting any rights granted under it, each Participant consents to the collection and processing of personal data relating to the Participant so that the Company and its Affiliates can fulfill their obligations and exercise their rights under the Plan and generally administer and manage the Plan. This data will include, but may not be limited to, data about participation in the Plan and shares offered or received, purchased, or sold under the Plan from time to time and other appropriate financial and other data (such as the date on which the Awards were granted) about the Participant and his or her participation in the Plan. +(g) No Claim to Awards; No Rights to Continued Employment or Engagement; Waiver . No employee of the Company or any other member of the Company Group, or other Person, shall have any claim or right to be granted an Award under the Plan or, having been selected for the grant of an Award, to be selected for a grant of any other Award. There is no obligation for uniformity of treatment of Participants or holders or beneficiaries of Awards. The terms and conditions of Awards and the Committee’s determinations and interpretations with respect thereto need not be the same with respect to each Participant and may be made selectively among Participants, whether or not such Participants are similarly situated. Neither the Plan nor any action taken hereunder shall be construed as giving any Participant any right to be retained in the employ or service of the Service Recipient or any other member of the Company Group, nor shall it be construed as giving any Participant any rights to continued service on the Board. The Company or any other member of the Company Group may at any time dismiss a Participant from employment or discontinue any consulting relationship, free from any liability or any claim under the Plan, unless otherwise expressly provided in the Plan or any Award Agreement. By accepting an Award under the Plan, a Participant shall thereby be deemed to have waived any claim to continued exercise or vesting of an Award or to damages or severance entitlement related to non-continuation of the Award beyond the period provided under the Plan or any Award Agreement, except to the extent of any provision to the contrary in any written employment contract or other agreement between the Company and +2025 PROXY STATEMENT 94 +any member of the Company Group and the Participant, whether any such agreement is executed before, on or after the date of grant. +(h) International Participants . Notwithstanding any other provision of the Plan to the contrary, the Committee may grant Awards to Eligible Persons who are foreign nationals on such terms and conditions different from those specified in the Plan as may, in the judgment of the Committee, be necessary or desirable to foster and promote achievement of the purposes of the Plan. In furtherance of such purposes, the Committee may, in its sole discretion, amend the terms of the Plan or any outstanding Awards with respect to such Participants and make such modifications, amendments, procedures and Sub-Plans as may be necessary or advisable to comply with provisions of laws in other countries or jurisdictions in which the Company Group operates or has employees or to obtain more favorable tax or other treatment for a Participant, the Company or any other member of the Company Group. +(i) Reserved . +(j) Termination . Except as otherwise provided in an Award Agreement, unless determined otherwise by the Committee at any point following such event: (i) neither a temporary absence from employment or service due to illness, vacation or leave of absence (including, without limitation, a call to active duty for military service through a Reserve or National Guard unit) nor a transfer from employment or service with one (1) Service Recipient to employment or service with another Service Recipient (or vice-versa) shall be considered a Termination; and (ii) if a Participant undergoes a Termination of employment, but such Participant continues to provide services to the Company Group in a non-employee capacity, such change in status shall not be considered a Termination for purposes of the Plan. Further, unless otherwise determined by the Committee, in the event that any Service Recipient ceases to be a member of the Company Group (by reason of sale, divestiture, spin-off or other similar transaction), unless a Participant’s employment or service is transferred to another entity that would constitute a Service Recipient immediately following such transaction, such Participant shall be deemed to have suffered a Termination hereunder as of the date of the consummation of such transaction. +(k) No Rights as a Stockholder . Except as otherwise specifically provided in the Plan or any Award Agreement, no Person shall be entitled to the privileges of ownership in respect of shares of Common Stock which are subject to Awards hereunder until such shares have been issued or delivered to such Person. +(l) Government and Other Regulations . +(i) The obligation of the Company to settle Awards in shares of Common Stock or other consideration shall be subject to all applicable laws, rules, and regulations, and to such approvals by governmental agencies as may be required. Notwithstanding any terms or conditions of any Award to the contrary, the Company shall be under no obligation to offer to sell or to sell, and shall be prohibited from offering to sell or selling, any shares of Common Stock pursuant to an Award unless such shares have been properly registered for sale pursuant to the Securities Act with the Securities and Exchange Commission or unless the Company has received an opinion of counsel (if the Company has requested such an opinion), satisfactory to the Company, that such shares may be offered or sold without such registration pursuant to an available exemption therefrom and the terms and conditions of such exemption have been fully complied with. The Company shall be under no obligation to register for sale under the Securities Act any of the shares of Common Stock to be offered or sold under the Plan. The Committee shall have the authority to provide that all shares of Common Stock or other securities of the Company or any other member of the Company Group issued under the Plan shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan, the applicable Award Agreement, the Federal securities laws, or the rules, regulations and other requirements of the Securities and Exchange Commission, any securities exchange or inter-dealer quotation system on which the securities of the Company are listed or quoted and any other applicable Federal, state, local or non-U.S. laws, rules, regulations and other requirements, and, without limiting the generality of Section 9 of the Plan, the Committee may cause a legend or legends to be put on certificates representing shares of Common Stock or other securities of the Company or any other member of the Company Group issued under the Plan to make appropriate reference to such restrictions or may cause such Common Stock or other securities of the Company or any other member of the Company Group issued under the Plan in book-entry form to be held subject to the Company’s instructions or subject to appropriate stop-transfer orders. Notwithstanding any provision in the Plan to the contrary, the Committee reserves the right to add any additional terms or provisions to any Award granted under the Plan that it, in its sole discretion, deems necessary or advisable in order that such Award complies with the legal requirements of any governmental entity to whose jurisdiction the Award is subject. +(ii) The Committee may cancel an Award or any portion thereof if it determines, in its sole discretion, that legal or contractual restrictions and/or blockage and/or other market considerations would make the Company’s acquisition of shares of Common Stock from the public markets, the Company’s issuance of Common Stock to the Participant, the Participant’s acquisition of Common Stock from the Company and/or the Participant’s sale of Common Stock to the public markets, illegal, impracticable or inadvisable. If the Committee determines to cancel all or any portion of an Award in accordance with the foregoing, the Company shall, subject to any limitations or reductions as may be necessary to comply with Section 409A of the Code, (A) pay to the Participant an amount equal to the excess of (I) the aggregate Fair Market Value of the shares of Common Stock subject to such Award or portion thereof canceled (determined as of the applicable exercise date, or the date that the shares would have been vested or issued, as applicable), over (II) the aggregate Exercise Price or Strike Price (of an Option or SAR, respectively) or any amount payable as a condition of issuance of shares of Common Stock (in the case of any other Award), and such amount shall be delivered to the Participant as soon as practicable following the cancellation of such Award or portion thereof, or (B) in the case of Restricted Stock, Restricted Stock Units or Other Stock-Based Awards, provide the +95 NIKE, INC. +Participant with a cash payment or equity subject to deferred vesting and delivery consistent with the vesting restrictions applicable to such Restricted Stock, Restricted Stock Units or Other Stock-Based Awards, or the underlying shares in respect thereof. +(m) Reserved . +(n) Reserved . +(o) Nonexclusivity of the Plan . Neither the adoption of this Plan by the Board nor the submission of this Plan to the stockholders of the Company for approval shall be construed as creating any limitations on the power of the Board to adopt such other incentive arrangements as it may deem desirable (including, without limitation, the granting of equity awards other than under this Plan) and such arrangements may be either applicable generally or only in specific cases. +(p) No Trust or Fund Created . Neither the Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or any other member of the Company Group, on the one hand, and a Participant or other person or entity, on the other hand. No provision of the Plan or any Award shall require the Company, for the purpose of satisfying any obligations under the Plan, to purchase assets or place any assets in a trust or other entity to which contributions are made or otherwise to segregate any assets, nor shall the Company be obligated to maintain separate bank accounts, books, records or other evidence of the existence of a segregated or separately maintained or administered fund for such purposes. Participants shall have no rights under the Plan (or with respect to any payments not yet made or shares of common stock not yet transferred) other than as unsecured general creditors of the Company and, except that insofar as they may have become entitled to payment of additional compensation by performance of services, they shall have the same rights as other service providers under general law. +(q) Reliance on Reports . Each member of the Committee and each member of the Board shall be fully justified in acting or failing to act, as the case may be, and shall not be liable for having so acted or failed to act in good faith, in reliance upon any report made by the independent public accountant of the Company or any other member of the Company Group and/or any other information furnished in connection with the Plan by any agent of the Company or the Committee or the Board, other than himself or herself. +(r) Relationship to Other Benefits . No payment under the Plan shall be taken into account in determining any benefits under any pension, retirement, profit sharing, group insurance or other benefit plan of the Company Group except as otherwise specifically provided in such other plan or as required by applicable law. +(s) Governing Law; Venue . The Plan, all Awards granted thereunder and all determinations made and actions taken pursuant thereto, to the extent not otherwise governed by the laws of the United States, shall be governed by the laws of the State of Oregon. For purposes of litigating any dispute that arises under the Plan, all Awards granted thereunder and all determinations made and actions taken pursuant thereto, the parties hereby submit to and consent to the jurisdiction of, and agree that such litigation shall be conducted in, the courts of Washington County, Oregon or the United States District Court for the District of Oregon. EACH PARTICIPANT WHO ACCEPTS AN AWARD IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY SUIT, ACTION, OR OTHER PROCEEDING INSTITUTED BY OR AGAINST SUCH PARTICIPANT IN RESPECT OF HIS OR HER RIGHTS OR OBLIGATIONS HEREUNDER. +(t) Severability . If any provision of the Plan or any Award or Award Agreement is or becomes or is deemed to be invalid, illegal, or unenforceable in any jurisdiction or as to any person or entity or Award, or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to the applicable laws, or if it cannot be construed or deemed amended without, in the determination of the Committee, materially altering the intent of the Plan or the Award, such provision shall be construed or deemed stricken as to such jurisdiction, person or entity or Award and the remainder of the Plan and any such Award shall remain in full force and effect. +(u) Obligations Binding on Successors . The obligations of the Company under the Plan shall be binding upon any successor corporation or organization resulting from the merger, consolidation or other reorganization of the Company, or upon any successor corporation or organization succeeding to substantially all of the assets and business of the Company. +(v) Section 409A of the Code . +(i) Notwithstanding any provision of the Plan to the contrary, it is intended that the provisions of this Plan be exempt from or, in the alternative, comply with Section 409A of the Code and any Treasury Regulations promulgated thereunder (collectively, “ Section 409A of the Code ”), and all provisions of this Plan shall be construed and interpreted in a manner consistent with the requirements for avoiding taxes or penalties under Section 409A of the Code. To the extent necessary to give effect to this intent, in the case of any conflict or potential inconsistency between this Section 14(v) of the Plan and a provision of any Award or Award Agreement with respect to an Award, this Section 14(v) of the Plan will govern. Each Participant is solely responsible and liable for the satisfaction of all taxes and penalties that may be imposed on or in respect of such Participant in connection with this Plan (including any taxes and penalties under Section 409A of the Code), and neither the Service Recipient nor any other member of the Company Group guarantees that Awards under the Plan will comply with Section 409A of the Code or shall have any obligation to indemnify or otherwise hold such Participant (or any beneficiary) harmless from any or all of such taxes or penalties. With respect to any Award that is considered “deferred compensation” subject to Section 409A of the Code, references in the Plan to “termination of employment” (and substantially similar phrases) shall mean “separation from service” within the meaning of Section 409A of the Code, and for purposes of determining whether the recipient has experienced a separation from service from the Company within the meaning of Section 409A of the Code, “subsidiary” will mean a corporation or other entity in a chain of corporations or other entities in which each corporation or other entity, starting +2025 PROXY STATEMENT 96 +with the Company, has a controlling interest in another corporation or other entity in the chain, ending with such corporation or other entity. For purposes of the preceding sentence, the term “controlling interest” has the same meaning as provided in Section 1.414(c)-2(b)(2)(i) of the Treasury Regulations, provided that the language “at least 20 percent” is used instead of “at least 80 percent” each place it appears in Section 1.414(c)-2(b)(2)(i) of the Treasury Regulations. For purposes of Section 409A of the Code, each of the payments that may be made in respect of any Award granted under the Plan is designated as separate payments. +(ii) Notwithstanding anything in the Plan to the contrary, any delivery or distribution contemplated under this Plan will be made to a Participant who is a “specified employee” (as defined in the NIKE, Inc. Deferred Compensation Plan or any subsequent deferred compensation plan of the Company, as in effect from time to time) at the time of a “separation from service” (within the meaning of Section 409A of the Code) within thirty (30) days following the earlier of (i) the expiration of the six-month period following the Participant’s separation from service, and (ii) the Participant’s death, to the extent such delayed payment is otherwise required to avoid a prohibited distribution under Section 409A of the Code. +(iii) Unless otherwise provided by the Committee in an Award Agreement or otherwise, in the event that the timing of payments in respect of any Award (that would otherwise be considered “deferred compensation” subject to Section 409A of the Code) would be accelerated upon the occurrence of (A) a Change in Control, any payment due upon such Change in Control will be paid only if such Change in Control constitutes a “change in ownership” or “change in effective control” within the meaning of Section 409A of the Code, and in the event that such Change in Control does not constitute a “change in the ownership” or “change in the effective control” within the meaning of Section 409A of the Code, such Award will vest upon the Change in Control and any payment will be delayed until the first compliant date under Section 409A of the Code or (B) a Disability, no such acceleration shall be permitted unless the Disability also satisfies the definition of “Disability” pursuant to Section 409A of the Code. +(iv) Unless otherwise provided by the Committee in an Award Agreement or otherwise, with respect to any Award made under the Plan that is intended to be “deferred compensation” subject to Section 409A of the Code, if the Award includes “dividend equivalents” (within the meaning of Section 1.409A-3(e) of the Treasury Regulations), the recipient’s right to the dividend equivalents will be treated separately from the right to other amounts under the award. +(v) The Committee shall have the authority to amend any outstanding Awards to conform to the requirements of Section 409A of the Code but is under no obligation to make any changes to any Awards to cause such compliance. +(w) Clawback/Forfeiture . Unless otherwise provided in the applicable Award Agreement, all awards under the Plan shall be subject to (a) any applicable securities, tax and stock exchange laws, rules and regulations relating to the recoupment or clawback of incentive compensation, (b) the NIKE, Inc. Policy for Recoupment of Incentive Compensation as approved by the Committee and in effect at the time of grant, (c) such other policy for clawback or recoupment of incentive compensation as may subsequently be approved from time to time by the Committee, and (d) any clawback or recoupment provisions set forth in the agreement evidencing the award, and, in each case, in accordance therewith, each Participant may subject to the requirement that Awards be repaid to the Company Group after they have been distributed to the Participant. +(x) Section 280G . If any payment or benefit received or to be received by a Participant (including any payment or benefit received pursuant to this Plan or otherwise) would be, in whole or in part, subject to the excise tax imposed by Section 4999 of the Code, or any successor provision thereto, or any similar tax imposed by state or local law, or any interest or penalties with respect to such excise tax (such tax or taxes, together with any interest and penalties, are hereinafter collectively referred to as the “ Excise Tax ”), then the payments or benefits provided under this Plan or any other agreement pursuant to which the Participant receives payments that give rise to the Excise Tax will either be (i) paid in full, or (ii) reduced to the extent necessary to make such payments and benefits not subject to such Excise Tax. The Company shall reduce or eliminate the payments in the following order of priority in a manner consistent with Section 409A of the Code: (A) first by reducing cash compensation, (B) next from equity compensation, and then (C) pro rata among all remaining payments and benefits, in each case, in reverse order beginning with payments that are to be paid the farthest in time from the determination. The Participant shall receive the greater, on an after-tax basis, of (i) or (ii). In no event will the Company be required to gross up any payment or benefit to the Participant to avoid the effects of the Excise Tax or to pay any regular or excise taxes arising from the application of the Excise Tax. Unless the Company and the Participant otherwise agree in writing, any parachute payment calculation will be made in writing by the Accounting Firm (as defined below), whose calculations will be conclusive and binding upon the Company and the Participant for all purposes. The Company and the Participant will furnish to the Accounting Firm such information and documents as they may reasonably request in order to make a parachute payment determination. The Accounting Firm also will provide its calculations, together with detailed supporting documentation, both to the Company and to the Participant, before making any payments that may be subject to the Excise Tax. For purposes of this Plan, “ Accounting Firm ” shall mean the then-current independent auditors of the Company or such other consulting firm or nationally recognized certified public accounting firm as may be designated by the Company. +(y) Right of Offset . The Company will have the right to offset against its obligation to deliver shares of Common Stock (or other property or cash) under the Plan or any Award Agreement any outstanding amounts (including, without limitation, travel and entertainment or advance account balances, loans, repayment obligations under any Awards, or amounts repayable to the Company pursuant to tax equalization, housing, automobile or other employee programs) that the Participant then owes to the Company or any other member of the Company Group, as applicable, and any amounts the Committee otherwise deems +97 NIKE, INC. +appropriate pursuant to any tax equalization policy or agreement. Notwithstanding the foregoing, if an Award is “deferred compensation” subject to Section 409A of the Code, the Committee will have no right to offset against its obligation to deliver shares of Common Stock (or other property or cash) under the Plan or any Award Agreement if such offset could subject the Participant to the additional tax imposed under Section 409A of the Code in respect of an outstanding Award; provided, this limitation will have no impact on the Company’s ability to enforce any clawback policy or provision as contemplated under Section 14(w) of the Plan. +(z) No Third Party Beneficiaries . Except as expressly provided in an Award Agreement, neither the Plan nor any Award Agreement will confer on any person other than the Company Group and the recipient of any Award any rights or remedies thereunder. The exculpation and indemnification provisions of Section 4(e) will inure to the benefit of a Indemnifiable Person’s estate and beneficiaries and legatees. +(aa) Gender; Titles and Headings . Masculine pronouns and other words of masculine gender shall refer to both men and women. The titles and headings of the sections in the Plan are for convenience of reference only, and in the event of any conflict, the text of the Plan, rather than such titles or headings, shall control. +(bb) Date of Adoption and Approval of Stockholders . The Plan was adopted by the Board on July 17, 2025 and was approved by the Company’s stockholders on September 9, 2025 (the “ Effective Date ”). +2025 PROXY STATEMENT 98 +ANNUAL +MEETING +AND +PROXY STATEMENT +September 9, 2025 +Whether or not you plan to attend the meeting, please sign and date the enclosed proxy card and return it in the enclosed envelope, or vote online or by telephone following the instructions on the proxy card. +99 NIKE, INC. \ No newline at end of file diff --git a/raw/proxies/0000320187/0000320187-25-000048/proxy_rpt.txt b/raw/proxies/0000320187/0000320187-25-000048/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..f7af10cf03c18ce04b9f0c707bf7924e74983cd8 --- /dev/null +++ b/raw/proxies/0000320187/0000320187-25-000048/proxy_rpt.txt @@ -0,0 +1,4 @@ +TRANSACTIONS WITH RELATED PERSONS +Philip Knight, the father of NIKE director Travis Knight, serves as Chairman Emeritus, which provides a standing invitation for Philip Knight to attend meetings of the Board and its committees as a non-voting observer. In fiscal 2025, as Chairman Emeritus, Mr. Knight received salary of $500,000, and medical and dental insurance coverage generally available to employees. +Mark Parker's son, Matthew Parker, was employed by the Company in fiscal 2025 in a non-executive role for which the Company paid Matthew Parker aggregate compensation of approximately $127,000. The compensation and benefits received by Matthew Parker were consistent with compensation and benefits paid to other employees holding similar positions. +The Company's written policy requires the Corporate Responsibility, Sustainability & Governance Committee to review any transaction or proposed transaction with a related person that would be required to be reported under Item 404(a) of Regulation S-K, and to determine whether to ratify or approve the transaction, with ratification or approval to occur only if the committee determines that the transaction is fair to the Company or that approval or ratification of the transaction is in the interest of the Company. \ No newline at end of file diff --git a/raw/proxies/0000320187/0000320187-26-000089/proxy.txt b/raw/proxies/0000320187/0000320187-26-000089/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..34544dc24996805180f51c9b143fd09addcd19dc --- /dev/null +++ b/raw/proxies/0000320187/0000320187-26-000089/proxy.txt @@ -0,0 +1,2289 @@ +nke-20260715 +0000320187 DEF 14A FALSE iso4217:USD 0000320187 2025-06-01 2026-05-31 0000320187 nke:ElliottHillMember 2025-06-01 2026-05-31 0000320187 nke:ElliottHillMember 2024-06-01 2025-05-31 0000320187 nke:JohnDonahoeIIMember 2024-06-01 2025-05-31 0000320187 2024-06-01 2025-05-31 0000320187 nke:JohnDonahoeIIMember 2023-06-01 2024-05-31 0000320187 2023-06-01 2024-05-31 0000320187 nke:JohnDonahoeIIMember 2022-06-01 2023-05-31 0000320187 2022-06-01 2023-05-31 0000320187 nke:JohnDonahoeIIMember 2021-06-01 2022-05-31 0000320187 2021-06-01 2022-05-31 0000320187 nke:AggregateGrantDateFairValueOfEquityAwardAmountsReportedInSummaryCompensationTableStockAwardsMember ecd:PeoMember 2025-06-01 2026-05-31 0000320187 nke:AggregateGrantDateFairValueOfEquityAwardAmountsReportedInSummaryCompensationTableOptionAwardsMember ecd:PeoMember 2025-06-01 2026-05-31 0000320187 ecd:EqtyAwrdsInSummryCompstnTblForAplblYrMember ecd:PeoMember 2025-06-01 2026-05-31 0000320187 ecd:YrEndFrValOfEqtyAwrdsGrntdInCvrdYrOutsdngAndUnvstdMember ecd:PeoMember 2025-06-01 2026-05-31 0000320187 ecd:ChngInFrValOfOutsdngAndUnvstdEqtyAwrdsGrntdInPrrYrsMember ecd:PeoMember 2025-06-01 2026-05-31 0000320187 ecd:ChngInFrValAsOfVstngDtOfPrrYrEqtyAwrdsVstdInCvrdYrMember ecd:PeoMember 2025-06-01 2026-05-31 0000320187 ecd:DvddsOrOthrErngsPdOnEqtyAwrdsNtOthrwsRflctdInTtlCompForCvrdYrMember ecd:PeoMember 2025-06-01 2026-05-31 0000320187 ecd:PeoMember 2025-06-01 2026-05-31 0000320187 nke:AggregateGrantDateFairValueOfEquityAwardAmountsReportedInSummaryCompensationTableStockAwardsMember ecd:NonPeoNeoMember 2025-06-01 2026-05-31 0000320187 nke:AggregateGrantDateFairValueOfEquityAwardAmountsReportedInSummaryCompensationTableOptionAwardsMember ecd:NonPeoNeoMember 2025-06-01 2026-05-31 0000320187 ecd:EqtyAwrdsInSummryCompstnTblForAplblYrMember ecd:NonPeoNeoMember 2025-06-01 2026-05-31 0000320187 ecd:YrEndFrValOfEqtyAwrdsGrntdInCvrdYrOutsdngAndUnvstdMember ecd:NonPeoNeoMember 2025-06-01 2026-05-31 0000320187 ecd:ChngInFrValOfOutsdngAndUnvstdEqtyAwrdsGrntdInPrrYrsMember ecd:NonPeoNeoMember 2025-06-01 2026-05-31 0000320187 ecd:ChngInFrValAsOfVstngDtOfPrrYrEqtyAwrdsVstdInCvrdYrMember ecd:NonPeoNeoMember 2025-06-01 2026-05-31 0000320187 ecd:DvddsOrOthrErngsPdOnEqtyAwrdsNtOthrwsRflctdInTtlCompForCvrdYrMember ecd:NonPeoNeoMember 2025-06-01 2026-05-31 0000320187 ecd:NonPeoNeoMember 2025-06-01 2026-05-31 0000320187 1 2025-06-01 2026-05-31 0000320187 2 2025-06-01 2026-05-31 0000320187 3 2025-06-01 2026-05-31 +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +Washington, D.C. 20549 +SCHEDULE 14A +Proxy Statement Pursuant to Section 14(a) of the +Securities Exchange Act of 1934 (Amendment No. ) +☑ +Filed by the Registrant +☐ +Filed by a party other than the Registrant +CHECK THE APPROPRIATE BOX: +☐ +Preliminary Proxy Statement +☐ +Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +☑ +Definitive Proxy Statement +☐ +Definitive Additional Materials +☐ +Soliciting Material under §240.14a-12 +NIKE, Inc. +(Name of Registrant as Specified In Its Charter) +(Name of Person(s) Filing Proxy Statement, if other than the Registrant) +PAYMENT OF FILING FEE (CHECK ALL BOXES THAT APPLY): +☑ +No fee required +☐ +Fee paid previously with preliminary materials +☐ +Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11 +MESSAGE FROM OUR +EXECUTIVE CHAIRMAN +To Our Shareholders: +We are proud of the progress our team has made over the past year as part of our effort to strengthen Nike for the long term. As we continue to execute our strategic and business priorities, we remain committed to maintain robust corporate governance standards while continuing to build a sustainable future. +Fiscal 2026 was a year of making progress against our Win Now actions and aligning our teams into the Sport Offense, with the support of strong and independent Board oversight. Among these actions, we continued to refresh our senior leadership team. Under the direction of Elliott and his leadership team, the Board believes Nike is well-positioned to continue strengthening the business and executing its long-term strategy. +As part of our evergreen approach to Board refreshment, we regularly assess our composition to ensure we maintain the right mix of experience, skills, tenure and fresh perspectives to effectively oversee and guide Nike. As part of our approach, we’ve added 4 new independent directors in the last 5 years. +We would also like to extend our sincere gratitude to John Rogers Jr., who has decided to retire from the Board after eight years of service. John's guidance and support as a director have been extremely valuable. We look forward to continuing to draw on his experience as he advises on the future of sport and community. +We are pleased to invite you to attend the Annual Meeting of Shareholders of NIKE, Inc. to be held virtually on Tuesday, September 8, 2026, at 9:00 A.M. Pacific Time. Whether or not you plan to attend, the prompt execution and return of your proxy card will ensure that your shares are represented at the meeting. Thank you for your continued support. +Sincerely, +"Fiscal 2026 was a year of making progress against our Win Now actions and aligning our teams into the Sport Offense, with the support of strong and independent Board oversight." +MARK PARKER, EXECUTIVE CHAIRMAN +July 15, 2026 +1 NIKE, INC. +NOTICE OF ANNUAL MEETING +OF SHAREHOLDERS +TO THE SHAREHOLDERS OF NIKE, INC. +You are cordially invited to the 2026 Annual Meeting of Shareholders (the "Annual Meeting") of NIKE, Inc., an Oregon corporation ("NIKE" or the "Company"): +DATE AND TIME: +Tuesday, September 8, 2026, +at 9:00 A.M. Pacific Time +LOCATION: +This year's meeting will be a virtual Annual Meeting at www.virtualshareholdermeeting.com/NKE2026 +ITEMS OF BUSINESS: +PROPOSAL +PAGE REFERENCE +1 To elect the 11 directors named in the accompanying proxy statement for the ensuing year. +Page 4 +Class A +Will elect eight directors. +Class B +Will elect three directors. +Holders of Class A Stock and holders of Class B Stock will vote together as one class on all other proposals. +2 To approve executive compensation by an advisory vote. +Page 23 +3 To ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm. +Page 59 +4 To approve the amendment of the NIKE, Inc. Employee Stock Purchase Plan to increase the number of authorized shares. +Page 61 +5 To consider a shareholder proposal regarding a report on discrimination in charitable support, as described in the accompanying proxy statement, if properly presented at the Annual Meeting. +Page 66 +6 To consider a shareholder proposal regarding environmental targets, as described in the accompanying proxy statement, if properly presented at the Annual Meeting. +Page 68 +7 To transact such other business as may properly come before the meeting or any adjournment or postponement thereof. +The Annual Meeting will be held in a virtual format only. We are continuing to use this format because, based on the success of our recent annual meetings, we believe it provides greater accessibility, encourages broader shareholder participation, and helps reduce costs, while still allowing us to provide shareholders the same rights and opportunities to participate as an in-person meeting. Shareholders of record at the close of business on July 8, 2026, the record date fixed by the Board of Directors, are entitled to attend the Annual Meeting and any adjournment or postponement thereof, and vote, and submit questions in advance of and during the meeting. To attend, vote at, and submit questions during the Annual Meeting, visit www.virtualshareholdermeeting.com/NKE2026 and enter the 16-digit control number included in your Notice Regarding the Availability of Proxy Materials, voting instructions form, or proxy card. Questions may be submitted in advance of the Annual Meeting by visiting www.proxyvote.com and entering your 16-digit control number. +By Order of the Board of Directors, +Mary Hunter +Vice President, Corporate Secretary +July 15, 2026 +Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders To Be Held on September 8, 2026. The proxy statement and NIKE, Inc.'s 2026 Annual Report to Shareholders are available online at www.investorvote.com or www.proxyvote.com, for registered and beneficial owners, respectively. +2026 PROXY STATEMENT 2 +TABLE OF CONTENTS +PAGE +NOTICE OF ANNUAL MEETING OF SHAREHOLDERS +2 +CORPORATE GOVERNANCE +4 +PROPOSAL 1 +Election of Directors +4 +NIKE, Inc. Board of Directors +5 +Board Structure and Responsibilities +15 +Code of Conduct +19 +Capital Structure +19 +Shareholder Engagement +21 +Director Compensation for Fiscal 20 2 6 +21 +EXECUTIVE COMPENSATION +23 +PROPOSAL 2 +Shareholder Advisory Vote to Approve Executive Compensation +23 +Compensation Discussion and Analysis +24 +Executive Compensation Tables +41 +AUDIT MATTERS +59 +PROPOSAL 3 +Ratification of Appointment of Independent Registered Public Accounting Firm +59 +Report of the Audit & Finance Committee +60 +EMPLOYEE STOCK PURCHASE PLAN +61 +PROPOSAL 4 +Approval of Amendment of NIKE, Inc. Employee Stock Purchase Plan to Increase Authorized Shares +61 +Summary of Em ployee Stock Purchase Plan +62 +SHAREHOLDER PROPOSALS +66 +PROPOSAL 5 +Shareholder Proposal Regarding a Report on Discrimination in Charitable Support +66 +PROPOSAL 6 +Shareholder Proposal Regarding Environmental Targets +68 +STOCK OWNERSHIP INFORMATION +70 +Stock Holdings of Certain Owners and Management +70 +Delinquent Section 16(a) Reports +71 +ADDITIONAL INFORMATION +72 +Insider Trading Arrangements and Policies +72 +Transactions with Related Persons +72 +Compensation Committee Interlocks and Insider Participation +72 +Other Matters +73 +GENERAL INFORMATION +74 +EXHIBIT A - NIKE, INC. EMPLOYEE STOCK PURCHASE PLAN +79 +3 NIKE, INC. +CORPORATE GOVERNANCE +PROPOSAL 1 +ELECTION OF DIRECTORS +A board of 11 directors will be elected at the Annual Meeting. Each elected director will hold office until the next annual meeting of shareholders and until their successor is elected and qualified, or until their earlier death, resignation or removal. All of the nominees were elected at the 2025 annual meeting of shareholders. +Ms. Thasunda Duckett, Ms. Mónica Gil, and Mr. Robert Swan are nominated by the Board for election by the holders of NIKE's Class B Common Stock ("Class B Stock"). The other eight nominees are nominated by the Board for election by the holders of NIKE's Class A Common Stock ("Class A Stock"). +Under Oregon law and our Bylaws, if a quorum of each class of shareholders is present at the Annual Meeting, the eight director nominees who receive the greatest number of votes cast by holders of Class A Stock and the three director nominees who receive the greatest number of votes cast by holders of Class B Stock will be elected as directors. Unless otherwise instructed, proxy holders will vote the proxies they receive "for" the election of each of the nominees listed below. Each nominee has consented to serve if elected. If any nominee becomes unable to serve or for good cause will not serve, proxies will be voted "for" any nominee designated by the Board to fill such vacancy, if any, or the number of directors constituting the entire Board will be reduced to eliminate the vacancy. +The Bylaws and the Corporate Governance Guidelines of the Company provide that any nominee for director in an uncontested election who receives a greater number of votes "withheld" from their election than votes "for" such election shall tender their resignation for consideration by the Corporate Responsibility, Sustainability & Governance Committee. The committee will then recommend to the Board the action to be taken with respect to the resignation, and the Board will publicly disclose its decision with respect to such resignation within 90 days after the certification of the election results. +Background information on the nominees as of July 15, 2026, including certain of the attributes that led to their selection, appears below. The Board and the Corporate Responsibility, Sustainability & Governance Committee have determined that each director meets the qualification standards described below under "NIKE, Inc. Board of Directors—Director Nominations". In addition, while the Board believes that each director nominee is individually qualified to make unique and substantial contributions to the Board, the Board firmly believes that the experience, attributes, and skills of any single director nominee should not be viewed in isolation, but rather in the context of the experience, attributes, and skills that all director nominees bring to the Board as a whole, each of which contributes to the function of an effective Board. +BOARD RECOMMENDATION +The Board of Directors recommends that the Class A Shareholders vote FOR the election of each of the applicable nominees listed below. +The Board of Directors recommends that the Class B Shareholders vote FOR the election of each of the applicable nominees listed below. +2026 PROXY STATEMENT 4 +NIKE, INC. BOARD OF DIRECTORS +BOARD OVERVIEW +Our director nominees consist of 11 individuals selected on the basis of numerous criteria, including experience and achievements, fields of significant knowledge, good character, and sound judgment. We view the effectiveness of our Board both through an individual and collective lens and believe that our Board is optimized to support and guide the Company. +GENDER AND RACE/ETHNICITY +AGE +TENURE +BOARD SKILLS, EXPERIENCES, AND QUALIFICATIONS +CEO EXPERIENCE 8 / 11 +CEO experience brings leadership qualifications and skills that help our Board to capably advise, support, and oversee our management team, including regarding our strategy to drive long-term value. +RETAIL INDUSTRY 8 /11 +Retail experience brings a deep understanding of factors affecting our industry, operations, business needs, and strategic goals. +BRAND/MARKETING 6 /11 +Brand and marketing experience brings perspective about building brand strength and creating consumer demand, as well as insight regarding consumer preferences, trends, and behaviors. +GLOBAL 9 / 11 +Global exposure yields an understanding of diverse business environments, economic conditions, and cultural perspectives that informs our global business and strategy and enhances oversight of our multinational operations. +SPORT/MEDIA/ENTERTAINMENT 6 /11 +Sport, media or entertainment experience provides our Board with insight about creating meaningful consumer connections as well as perspective regarding relevant trends, consumer behavior, and advertising. +HR/TALENT MANAGEMENT 8 /11 +HR and talent management experience assists our Board in overseeing executive compensation, succession planning, and employee engagement. +FINANCIAL EXPERTISE 10 /11 +Financial expertise assists our Board in overseeing our financial statements, capital structure, and internal controls. +DIGITAL/TECHNOLOGY 5 /11 +Digital and technology experience helps our Board oversee cybersecurity and advise our management team as we seek to enhance the consumer experience and further develop our multi-channel strategy. +GOVERNANCE 9 /11 +Governance experience provides insight into new and best practices which informs our commitment to excellence in corporate governance. +CORPORATE GOVERNANCE HIGHLIGHTS +ü 8 out of 11 director nominees are independent +ü All directors are elected annually +ü Separate Chair, CEO, and Lead Independent Director positions with clearly defined roles +ü "Evergreen" approach to Board refreshment, resulting in 4 new independent directors added in the last 5 years, as well as a mix of director tenures to balance fresh perspectives and Company-specific experience +ü All director nominees are selected by the Board and the Corporate Responsibility, Sustainability & Governance Committee based on robust qualification standards, and individually and collectively provide the Board with unique skills and perspectives that are relevant to the Company's business and strategic objectives +ü Retirement policy generally requires that directors do not stand for re-election after reaching the age of 72 +ü Each director nominee is in compliance with our overboarding policy (as set forth in our Corporate Governance Guidelines) +5 NIKE, INC. +NOMINEES FOR ELECTION BY CLASS A SHAREHOLDERS +TIMOTHY COOK, LEAD INDEPENDENT DIRECTOR +Mr. Cook is the Company's Lead Independent Director and is the Chief Executive Officer of Apple Inc. ("Apple"). +• Mr. Cook joined Apple in 1998 as Senior Vice President of Worldwide Operations and also served as its Executive Vice President, Worldwide Sales and Operations and Chief Operating Officer. +• Mr. Cook was Vice President, Corporate Materials for Compaq Computer Corporation from 1997 to 1998. +• Previous to his work at Compaq, Mr. Cook served in the positions of Senior Vice President Fulfillment and Chief Operating Officer of the Reseller Division at Intelligent Electronics from 1994 to 1997. +• Mr. Cook also worked for International Business Machines Corporation from 1983 to 1994, including as Director of North American Fulfillment. +Mr. Cook is a member of the Board of Directors of Apple. In addition to this public company board service, he is also a member of the Board of Directors of the National Football Foundation and Duke University Board of Trustees. +Age: 65 +Director Since: 2005 +Committee: Compensation, Chair +Other Public Company Directorships: Apple, Inc. +Favorite NIKE Products: +Nike 24.7 Collection, Nike Metcon, and Nike Pegasus +SKILLS, EXPERIENCES AND QUALIFICATIONS +CEO EXPERIENCE +RETAIL INDUSTRY +BRAND/MARKETING +GLOBAL +SPORT/MEDIA/ENTERTAINMENT +HR/TALENT MANAGEMENT +FINANCIAL EXPERTISE +DIGITAL/TECHNOLOGY +GOVERNANCE +MARIA HENRY +Ms. Henry is the former Chief Financial Officer of Kimberly-Clark Corporation ("Kimberly-Clark"), a position she held from 2015 to 2022. +• Prior to joining Kimberly-Clark, she was Executive Vice President and Chief Financial Officer of The Hillshire Brands Company, formerly known as Sara Lee Corporation ("Sara Lee"), from 2012 to 2014. Ms. Henry was the Chief Financial Officer of Sara Lee's North American Retail and Foodservice business from 2011 to 2012. +• Prior to Sara Lee, she held various senior leadership positions in finance and strategy in three portfolio companies of Clayton, Dubilier, & Rice, most recently as Executive Vice President and Chief Financial Officer of Culligan International. +• Ms. Henry also held senior finance roles in several technology companies, and she began her career at General Electric. +Ms. Henry is a member of the Board of Directors of General Mills, Inc. and NextEra Energy, Inc. She served on the Board of Directors of Kimberly-Clark de México from February 2016 to March 2022. +Age: 59 +Director Since : 2023 +Committee: Audit & Finance +Other Public Company Directorships: General Mills, Inc. and NextEra Energy, Inc. +Favorite NIKE Products: Nike Pegasus, Nike Zenvy, and Nike Victory Tour +SKILLS, EXPERIENCES AND QUALIFICATIONS +RETAIL INDUSTRY +GLOBAL +FINANCIAL EXPERTISE +DIGITAL/TECHNOLOGY +GOVERNANCE +2026 PROXY STATEMENT 6 +PETER HENRY +Dr. Henry is the Class of 1984 Senior Fellow at Stanford University's Hoover Institution and Senior Fellow at Stanford's Freeman Spogli Institute for International Studies, positions he has held since September 2022. He is also Dean Emeritus of New York University's Leonard N. Stern School of Business ("Stern"). +• From January 2018 through August 2022, Dr. Henry served as Stern's William R. Berkley Professor of Economics and Finance. He assumed the Deanship of Stern in January 2010 and served through December 2017. +• Prior to joining Stern, Dr. Henry was the Konosuke Matsushita Professor of International Economics at the Stanford University Graduate School of Business. +• In June 2009, President Obama appointed Dr. Henry to the President's Commission on White House Fellowships. +• In 2008, Dr. Henry led Barack Obama's Presidential Transition Team in its review of international lending agencies such as the IMF and the World Bank. +Dr. Henry is a member of the Board of Directors of Citigroup Inc. and Analog Devices, Inc. In addition to this public company board service, he also serves on the Board of Directors of the National Bureau of Economic Research and the Economic Club of New York, serves on the Advisory Board for Protiviti and Biospring Partners, and serves as Chair of the Jamaica Reconstruction and Resilience Oversight Committee. Dr. Henry is a member of the Council on Foreign Relations and the Economic Advisory Panel of the Federal Reserve Bank of New York. Dr. Henry served on the Board of Directors of General Electric from July 2016 to April 2018 and Kraft Foods Group, Inc. and its predecessor, Kraft Foods Inc., from May 2011 to July 2015. +Age : 56 +Director Since : 2018 +Committee: Audit & Finance +Other Public Company Directorships: Citigroup Inc. and Analog Devices, Inc. +Favorite NIKE Products: Nike Epic React +SKILLS, EXPERIENCES AND QUALIFICATIONS +GLOBAL +FINANCIAL EXPERTISE +GOVERNANCE +ELLIOTT HILL +Mr. Hill is President & Chief Executive Officer of the Company. He was employed by the Company from 1988 - 2020 holding senior leadership positions across Europe and North America. +• Before retiring in 2020, he was President of Consumer and Marketplace leading all commercial and marketing operations for Nike and Jordan Brand, including the P&L across the Company's four geographies. +• Mr. Hill was appointed: +• President, Consumer and Marketplace in 2018, +• President, Geographies & Integrated Marketplace in 2016, +• President, Geographies & Sales in 2013, +• VP/General Manager, North America in 2010, and +• VP, Global Retail in 2006. +Mr. Hill currently serves on the board of trustees for Texas Christian University. +Age: 62 +Director Since: 2024 +Committee: Executive +Other Public Company Directorships: None +Favorite NIKE Products: Nike Vomero Plus, Nike Metcon, Nike ACG Ultrafly Trail, and Nike ACG Lava Flow +SKILLS, EXPERIENCES AND QUALIFICATIONS +CEO EXPERIENCE +RETAIL INDUSTRY +BRAND/MARKETING +GLOBAL +SPORT/MEDIA/ENTERTAINMENT +HR/TALENT MANAGEMENT +FINANCIAL EXPERTISE +GOVERNANCE +7 NIKE, INC. +TRAVIS KNIGHT +Mr. Knight is the President and Chief Executive Officer of the animation studio, LAIKA, LLC ("LAIKA"), which specializes in feature-length films. +• Mr. Knight has been involved in all principal creative and business decisions at LAIKA since its founding in 2003, serving in successive management positions as Lead Animator, Vice President of Animation, and then as President and Chief Executive Officer in 2009. +• Mr. Knight was Producer and Director of the feature film Kubo and the Two Strings (2017) which was nominated for an Academy Award and winner of the BAFTA award for Best Animated Film. +• Mr. Knight has served as Producer and Lead Animator on Academy Award-nominated feature-length films The Boxtrolls (2014) and ParaNorman (2012), for which he won an Annie Award for Outstanding Achievement in Character Animation, and Lead Animator for Coraline (2009). +• Prior to his work at LAIKA, Mr. Knight held various animation positions at Will Vinton Studios from 1998 to 2002, and as a stop-motion animator for television series, commercials, and network promotions. He has been recognized for his work on the Emmy Award-winning stop-motion animated television series The PJs. +Mr. Knight serves on the Board of Directors of LAIKA. He is the son of NIKE's co-founder, Mr. Philip Knight, who currently serves as Chairman Emeritus. +Age: 52 +Director Since: 2015 +Committee: Executive +Other Public Company Directorships: None +Favorite NIKE Products: Nike Pegasus +SKILLS, EXPERIENCES AND QUALIFICATIONS +CEO EXPERIENCE +SPORT/MEDIA/ENTERTAINMENT +FINANCIAL EXPERTISE +JØRGEN VIG KNUDSTORP +Mr. Knudstorp is the former President and Chief Executive Officer of the LEGO Group, a position he held from 2004 to 2016, and served as Executive Chairman of LEGO Brand Group, owner of the LEGO brand, from 2017 to 2023. +• From 2023 to 2024, Mr. Knudstorp served as Special Partner to the LEGO Brand Owner Family, KIRKBI Group, the holding company for LEGO Brand and the LEGO Group. +• He also held various leadership positions at the LEGO Group from 2001 to 2004, including Senior Vice President, Corporate Affairs and Vice President, Strategic Development. +• Prior to joining the LEGO Group, he served as a Management Consultant at McKinsey & Company from 1998 to 2001. +Mr. Knudstorp is a member and lead independent director of the Board of Directors of Starbucks Corporation. In addition to this public company board service, he is the chair of BrainPOP Education, NYC. Furthermore, he chairs the Foundation Board and Supervisory Board of IMD, the Swiss Executive Education School. Finally, he acts as executive advisor and advisory board member of various venture firms, geopolitical advisory firms, and consulting and academic firms and institutions. +Age: 57 +Director Since: 2025 +Committee: Corporate Responsibility, Sustainability & Governance +Other Public Company Directorships: Starbucks Corporation +Favorite NIKE Products: Nike Vomero Premium, Nike Ava Rover, and Nike ACG Ultrafly Trail +SKILLS, EXPERIENCES AND QUALIFICATIONS +CEO EXPERIENCE +RETAIL INDUSTRY +BRAND/MARKETING +GLOBAL +SPORT/MEDIA/ENTERTAINMENT +HR/TALENT MANAGEMENT +FINANCIAL EXPERTISE +DIGITAL/TECHNOLOGY +GOVERNANCE +2026 PROXY STATEMENT 8 +MARK PARKER, EXECUTIVE CHAIRMAN OF THE BOARD +Mr. Parker is Executive Chairman of the Company's Board of Directors. He served as President and Chief Executive Officer of the Company from 2006 to January 2020. +• Mr. Parker has been employed by NIKE since 1979 with primary responsibilities in product research, design and development, marketing, and brand management. +• Mr. Parker was appointed: +• President and Chief Executive Officer in 2006, +• President of the NIKE Brand in 2001, +• Vice President of Global Footwear in 1998, +• General Manager in 1993, +• Corporate Vice President in 1989, and +• Divisional Vice President in charge of product development in 1987. +Mr. Parker served on the Board of Directors of The Walt Disney Company from January 2016 to January 2025. In addition to his skills and qualifications described above, Mr. Parker was selected to serve on the Board because the experience gained while serving as the Company's Chief Executive Officer makes his position as Executive Chairman of the Board instrumental. +Age : 70 +Director Since: 2006 +Committee: Executive, Chair +Other Public Company Directorships: None +Favorite NIKE Products: Nike Pegasus, Nike Air Max, Nike Vomero, Nike Zegama 2, and Nike Dri-Fit Half Zip +SKILLS, EXPERIENCES AND QUALIFICATIONS +CEO EXPERIENCE +RETAIL INDUSTRY +BRAND/MARKETING +GLOBAL +SPORT/MEDIA/ENTERTAINMENT +HR/TALENT MANAGEMENT +FINANCIAL EXPERTISE +GOVERNANCE +9 NIKE, INC. +MICHELLE PELUSO +Ms. Peluso is Chief Executive Officer of Revlon Group Holdings LLC ("Revlon"), a position she has held since 2024. +• Prior to Revlon, Ms. Peluso served as the Executive Vice President and Chief Customer and Experience Officer for CVS Health from 2023 to 2024, where she oversaw the end-to-end consumer experience across all channels, including leading the brand and marketing efforts. She also served as the Executive Vice President and Chief Customer Officer, CVS Health, and co-President, Pharmacy and Consumer Wellness. +• Prior to joining CVS Health, Ms. Peluso was Senior Vice President, Digital Sales and Chief Marketing Officer at IBM from 2016 to 2021. She oversaw marketing, digital sales, client experience, and the commercial business, globally. +• Previous to her work at IBM, Ms. Peluso served as Chief Executive Officer of online shopping destination Gilt Groupe, Inc. ("Gilt") from 2013 until its sale to Hudson’s Bay Company in February 2016 and was on Gilt’s Board of Directors from 2009 to 2016. +• From 2009 to 2013, Ms. Peluso served as Global Consumer Chief Marketing and Internet Officer of Citigroup Inc. +• From 2002 to 2009, Ms. Peluso held senior management positions at Travelocity.com LP ("Travelocity"), being appointed President and Chief Executive Officer in 2003. +• Prior to joining Travelocity, in 1999 Ms. Peluso founded Site59, an online travel site, serving as its Chief Executive Officer until its acquisition by Travelocity in 2002. +Ms. Peluso is a member of the Board of Directors of Revlon and Save the Children US. She is a White House Fellow and served as Senior Advisor to the Secretary of Labor. She is also a member of The Conference Board's Committee for Economic Development. +Age: 54 +Director Since: 2014 +Committee: Corporate Responsibility, Sustainability & Governance, Chair and Compensation +Other Public Company Directorships: None +Favorite NIKE Products: Nike 24.7 Impossibly Soft, Nike SKIMS, Nike Pegasus, and Nike Cortez +SKILLS, EXPERIENCES AND QUALIFICATIONS +CEO EXPERIENCE +RETAIL INDUSTRY +BRAND/MARKETING +GLOBAL +HR/TALENT MANAGEMENT +FINANCIAL EXPERTISE +DIGITAL/TECHNOLOGY +GOVERNANCE +BOARD RECOMMENDATION +The Board of Directors recommends that the Class A Shareholders vote FOR the election to the Board of Directors of each of the nominees above. +2026 PROXY STATEMENT 10 +NOMINEES FOR ELECTION BY CLASS B SHAREHOLDERS +THASUNDA DUCKETT +Ms. Duckett is President and Chief Executive Officer of the Teachers Insurance and Annuity Association of America ("TIAA"), a leading provider of financial services in the academic, research, medical, cultural, and governmental fields. +• Prior to joining TIAA, Ms. Duckett was Chief Executive Officer of Chase Consumer Banking at JPMorgan Chase & Co. ("JPMorgan Chase") from 2016 to 2021. Before that appointment, Ms. Duckett was appointed to various management positions at JPMorgan Chase, including: +• From 2013 to 2016, Ms. Duckett served as the Chief Executive Officer of Chase Auto Finance, and +• From 2004 to 2013, Ms. Duckett held multiple management and consumer lending roles. +• Prior to joining JPMorgan Chase, Ms. Duckett was Director of Emerging Markets at the Federal National Mortgage Association, or Fannie Mae. +Ms. Duckett serves on the Board of Governance and Board of Trustees of TIAA. She is also Chair of the Otis and Rosie Brown Foundation and serves on the Board of Directors of The National Medal of Honor Museum, and the Robert F. Kennedy Human Rights. She also serves on the Board of Trustees for Sesame Workshop. +Age : 52 +Director Since : 2019 +Committee: Corporate Responsibility, Sustainability & Governance +Other Public Company Directorships: None +Favorite NIKE Products: Nike Pegasus +SKILLS, EXPERIENCES AND QUALIFICATIONS +CEO EXPERIENCE +RETAIL INDUSTRY +HR/TALENT MANAGEMENT +FINANCIAL EXPERTISE +GOVERNANCE +MÓNICA GIL +Ms. Gil is Chief Administrative and Marketing Officer, NBCUniversal Telemundo Enterprises ("Telemundo") for Comcast Corp, a position she has held since 2020. +• Prior to her current role, Ms. Gil served as Chief Marketing Officer, Telemundo from 2018 until 2020, and as Executive Vice President, Telemundo, managing Communications and Corporate Affairs and Human Resources from 2017 until 2018. +• Prior to joining Telemundo, Ms. Gil served as Senior Vice President and General Manager, Multicultural Growth and Strategy of the Nielsen Company ("Nielsen") from 2014 until 2017. +• Ms. Gil joined Nielsen in 2005 as Vice President, Communications and was subsequently promoted in 2009 to Senior Vice President, Public Affairs and Government Relations. +• Previously, Ms. Gil served as Senior Vice President for Greer, Margolis, Mitchell and Burns from 2004 until 2005. +Ms. Gil is a member of the Board of Directors of the National Women's History Museum. +Age: 54 +Director Since: 2022 +Committee: Compensation +Other Public Company Directorships : None +Favorite NIKE Products: Nike Pegasus, Nike Vomero, Nike Air Max, and Nike 24.7 Collection +SKILLS, EXPERIENCES AND QUALIFICATIONS +BRAND/MARKETING +GLOBAL +SPORT/MEDIA/ENTERTAINMENT +HR/TALENT MANAGEMENT +11 NIKE, INC. +ROBERT SWAN +Mr. Swan has been an Operating Partner at Andreessen Horowitz since 2021. +• Prior to his current role, Mr. Swan served as the Chief Executive Officer and a member of the Board of Directors of Intel Corp. ("Intel") from 2019 to 2021. Before that appointment, he was appointed to various management positions at Intel, including: +• Interim Chief Executive Officer and Chief Financial Officer from 2018 until 2019 and Chief Financial Officer from 2016 until 2019. +• Prior to joining Intel, Mr. Swan served as Operating Partner at General Atlantic LLC, a private equity firm, from 2015 to 2016. +• He also served as Senior Vice President, Finance and Chief Financial Officer of eBay Inc. ("eBay") from 2006 to 2015. +• Previously, Mr. Swan served as Chief Financial Officer of Electronic Data Systems Corporation, Chief Financial Officer of TRW Inc., as well as Chief Executive Officer, Chief Operating Officer, and Chief Financial Officer of Webvan Group, Inc. Mr. Swan began his career in 1985 at General Electric, serving in numerous senior finance roles. +Mr. Swan is a member of the Board of Directors of Micron Technology, Inc. and Automatic Data Processing, Inc. In addition to this public company board service, he is also a member of the Board of Directors of Flexport, the American Heart Association, E3Tech, and Kearney. Mr. Swan served on the Board of Commissioners of GoTo Group from December 2021 to June 2024, and on the Board of Directors of eBay from July 2015 to June 2023, Intel from January 2019 to February 2021, and Applied Materials, Inc. from March 2009 to September 2016. +Age: 66 +Director Since: 2022 +Committee: Audit & Finance, Chair +Other Public Company Directorships: Micron Technology, Inc. and Automatic Data Processing, Inc. +Favorite NIKE Products: Nike Pegasus, Nike Air Max, and Nike 24.7 PerfectStretch pants +SKILLS, EXPERIENCES AND QUALIFICATIONS +CEO EXPERIENCE +RETAIL INDUSTRY +GLOBAL +HR/TALENT MANAGEMENT +FINANCIAL EXPERTISE +DIGITAL/TECHNOLOGY +GOVERNANCE +BOARD RECOMMENDATION +The Board of Directors recommends that the Class B Shareholders vote FOR the election to the Board of Directors of each of the nominees above. +2026 PROXY STATEMENT 12 +INDIVIDUAL BOARD SKILLS MATRIX +The matrix below represents some of the key experiences, attributes, and skills that the Board has identified as particularly valuable to the oversight of the Company, and illustrates how the director nominees individually and collectively represent them. While all of these qualifications were considered in connection with this year's director nomination process, the matrix does not encompass all of the experiences, attributes, and skills of the director nominees. The Board firmly believes that its highly qualified director nominees provide the Board with a robust complement of backgrounds, skills, qualifications, and perspectives necessary for effective oversight. +EXPERIENCE, EXPERTISE, OR ATTRIBUTES +COOK +DUCKETT +GIL +M HENRY +P HENRY +HILL +KNIGHT +KNUDSTORP +PARKER +PELUSO +SWAN +CEO EXPERIENCE +CEO experience brings leadership qualifications and skills that help our Board to capably advise, support, and oversee our management team, including regarding our strategy to drive long-term value. +ü +ü +ü +ü +ü +ü +ü +ü +RETAIL INDUSTRY +Retail experience brings a deep understanding of factors affecting our industry, operations, business needs, and strategic goals. +ü +ü +ü +ü +ü +ü +ü +ü +BRAND/MARKETING +Brand and marketing experience brings perspective about building brand strength and creating consumer demand, as well as insight regarding consumer preferences, trends, and behaviors. +ü +ü +ü +ü +ü +ü +GLOBAL +Global exposure yields an understanding of diverse business environments, economic conditions, and cultural perspectives that informs our global business and strategy and enhances oversight of our multinational operations. +ü +ü +ü +ü +ü +ü +ü +ü +ü +SPORT/MEDIA/ENTERTAINMENT +Sport, media or entertainment experience provides our Board with insight about creating meaningful consumer connections as well as perspective regarding relevant trends, consumer behavior, and advertising. +ü +ü +ü +ü +ü +ü +HR/TALENT MANAGEMENT +HR and talent management experience assists our Board in overseeing executive compensation, succession planning, and employee engagement. +ü +ü +ü +ü +ü +ü +ü +ü +FINANCIAL EXPERTISE +Financial expertise assists our Board in overseeing our financial statements, capital structure, and internal controls. +ü +ü +ü +ü +ü +ü +ü +ü +ü +ü +DIGITAL/TECHNOLOGY +Digital and technology experience helps our Board oversee cybersecurity and advise our management team as we seek to enhance the consumer experience and further develop our multi-channel strategy. +ü +ü +ü +ü +ü +GOVERNANCE +Governance experience provides insight into new and best practices which informs our commitment to excellence in corporate governance. +ü +ü +ü +ü +ü +ü +ü +ü +ü +13 NIKE, INC. +DIRECTOR NOMINATIONS +The Board takes an "evergreen" approach to Board refreshment, cultivating relationships with top talent on an ongoing basis. The Corporate Responsibility, Sustainability & Governance Committee identifies potential director candidates through a variety of means, including recommendations from members of the Corporate Responsibility, Sustainability & Governance Committee or the Board, Company management, third-party search firms, and shareholders. The committee, in its discretion, engages director search firms to identify candidates. Shareholders may recommend director candidates for consideration by the Corporate Responsibility, Sustainability & Governance Committee by submitting a written recommendation to the committee, c/o Corporate Secretary, NIKE, Inc., One Bowerman Drive, Beaverton, Oregon 97005-6453. The recommendation should include the candidate's name, age, qualifications (including principal occupation and employment history), and written consent to be named as a nominee in the Company's proxy statement and to serve as a director, if elected. The committee evaluates recommendations from shareholders in the same manner that it considers recommendations from other sources. +The Board has adopted qualification standards for the selection of non-management nominees for director, which can be found on our corporate website: http://investors.nike.com. As provided in these standards and the Company's Corporate Governance Guidelines, nominees for director are selected on the basis of, among other things, distinguished business experience or other non-business achievements; education; significant knowledge of the consumer products industry, international business, finance, marketing, technology, law, or other fields which are complementary to, and balance the knowledge of, other Board members; a desire to represent and serve the interests of all shareholders; independence; good character; ethics; sound judgment; and ability to devote substantial time to discharge Board and committee responsibilities (including whether they are in compliance with the Board's overboarding policy), taking into account the overall composition of the Board and its committees. +In considering the re-nomination of an incumbent director, the Corporate Responsibility, Sustainability & Governance Committee reviews the director's overall service to the Company during his or her term, including the number of meetings attended, level of participation, and quality of performance, the needs and composition of the Board and its committees, and the qualifications of the director. The Board believes that a variety and balance of perspectives on the Board results in more thoughtful and robust deliberations, and ultimately, better decisions. All potential new director candidates, whether recommended by shareholders or identified by other means, are initially screened by the Chair of the Corporate Responsibility, Sustainability & Governance Committee, who may seek additional information about the background and qualifications of the candidate, and who may determine that a candidate does not have qualifications that merit further consideration by the full committee. With respect to new director candidates who pass the initial screening, the Corporate Responsibility, Sustainability & Governance Committee meets to discuss and consider each candidate's qualifications and potential contributions to the Board, and determines by majority vote whether to recommend such candidate to the Board. The final decision to either appoint a candidate to fill a vacancy between annual meetings or include a candidate on the slate of nominees proposed at an annual meeting is made by the Board. +As set forth in our Corporate Governance Guidelines, it is the general policy of the Board that directors will not stand for re‑election after reaching the age of 72. +DIRECTOR INDEPENDENCE +Pursuant to New York Stock Exchange ("NYSE") listing rules, in order for a director to qualify as "independent", the Board must affirmatively determine that the director has no material relationship with the Company. The Board affirmatively determined that commercial or charitable relationships below the following thresholds will not be considered material relationships that impair a director's independence: (1) if a NIKE director or immediate family member is an executive officer of another company that does business with NIKE and the annual sales to, or purchases from, NIKE are less than one percent of the annual revenues of the other company; and (2) if a NIKE director or immediate family member serves as an officer, director, or trustee of a charitable organization, and NIKE's contributions to the organization are less than one percent of that organization's total annual charitable receipts. +After applying this categorical standard and the applicable NYSE independence standards, the Board has determined that the following director nominees have no material relationship with the Company and are independent: Timothy Cook, Thasunda Duckett, Mónica Gil, Maria Henry, Peter Henry, Jørgen Vig Knudstorp, Michelle Peluso, and Robert Swan. The Board also determined that Ms. Cathleen Benko, whose service as a director ended on September 9, 2025, was independent when she served on the Board during fiscal 2026, and that John Rogers, Jr., who is not standing for re-election at the Annual Meeting, is independent. The Company currently expects to enter into a consulting arrangement with Mr. Rogers pursuant to which Mr. Rogers will continue to provide advice to the Company on the future of sport and community engagement following the effective date of his retirement. In making its independence determinations, the Board specifically considered the following relationships and concluded that none of them were material to NIKE or impaired the applicable director's independence: +• Payments for products and services in the ordinary course of business between NIKE and Apple, Inc., where Mr. Cook serves as an executive officer and director; +2026 PROXY STATEMENT 14 +• NIKE's sports marketing relationship with Stanford University, where Mr. Henry serves in senior fellowship positions; and +• De minimis payments between NIKE and Ariel Investments, LLC, where Mr. Rogers serves as Chairman, Co-CEO, and Chief Investment Officer. +In each case, the aggregate amount of payments involved in such transactions was for amounts representing significantly less than one percent of either entity's annual revenues, the transactions were entered into at arm's length, and the applicable director did not have any direct involvement in such transactions. +Messrs. Elliott Hill, Travis Knight, and Mark Parker are not independent pursuant to NYSE rules. Messrs. Hill and Parker are not independent pursuant to NYSE rules because they are employed by the Company. Mr. Knight is not independent pursuant to NYSE rules because he is the son of NIKE's co-founder, Mr. Philip Knight, who received compensation in excess of the threshold set forth in applicable NYSE rules for his position as Chairman Emeritus. The compensation paid to Mr. Philip Knight is described in the section below titled "Additional Information—Transactions with Related Persons". +BOARD STRUCTURE AND RESPONSIBILITIES +During fiscal 2026, there were four meetings of the Board and all of our incumbent directors attended at least 75 percent of the total number of meetings of the Board and committees on which he or she served. The Company encourages all directors to attend each annual meeting of shareholders, and all directors then-serving on the Board attended the 2025 annual meeting. +BOARD LEADERSHIP STRUCTURE +NIKE's governing documents provide the Board with flexibility to select the appropriate leadership structure of the Company. In determining the leadership structure, the Board considers many factors, including the specific needs of the business, fulfilling the duties of the Board, and the best interests of the Company's shareholders. +The Company separates the position of Chair of the Board from the position of President and CEO, although this is not a permanent policy of the Board. The Board believes this leadership structure is appropriate for the Company because it separates the leadership of the Board from the duties of day-to-day leadership of the Company. The Executive Chairman, Mr. Mark Parker, presides over meetings of the Board and shareholders. The President and CEO, Mr. Elliott Hill, is in charge of the general supervision, direction, and control of the business and affairs of the Company, subject to the overall direction and supervision of the Board and its committees. +Additionally, as part of the Board's commitment to strong independent Board leadership and oversight, the Board has adopted a policy requiring the appointment of a Lead Independent Director at any time when the Chair of the Board is not independent. The position of Lead Independent Director is entrusted with robust and clearly-defined duties, including: +• serving as a liaison between the Chair and the independent directors; +• approving the meeting agendas for the Board; +• advising the Chair regarding the sufficiency, quality, quantity, and timeliness of information provided to the Board; +• ensuring that meeting schedules permit sufficient time for discussion of all agenda items; +• providing consultation and direct communication with major shareholders, if requested; +• presiding at meetings of the Board at which the Chair is not present, including executive sessions; and +• performing other duties specified in the Lead Independent Director Charter. +In June 2025, the Board re-appointed Mr. Timothy Cook to serve as Lead Independent Director for a term of three years. Mr. Cook continues to serve as Lead Independent Director of the Company working in collaboration with Messrs. Parker and Hill. +The chairs of Board committees also play an active role in the leadership structure of the Board. The Corporate Responsibility, Sustainability & Governance Committee and the Board endeavor to select independent committee chairs who will provide strong leadership to guide the important work of the Board committees. Committee chairs work with the Company's senior executives to ensure the committees are discussing the key strategic risks and opportunities of the Company. In the absence of the Lead Independent Director, a presiding director is appointed to chair executive sessions of non-management directors (consisting of all directors other than Messrs. Parker and Hill). The position of presiding director is rotated among the chairs of the various Board committees, other than the Executive Committee. Executive sessions are regularly scheduled and held at least once each year. +Mr. Philip Knight, NIKE's co-founder, serves as Chairman Emeritus, with a standing invitation to attend meetings of the Board and its committees as a non-voting observer. The Board believes that it benefits from his valuable experience and insights. +For all of these reasons, the Board believes this leadership structure is optimal. +15 NIKE, INC. +BOARD COMMITTEES +The Board's current standing committees are an Audit & Finance Committee; a Compensation Committee; a Corporate Responsibility, Sustainability & Governance Committee; and an Executive Committee. The Board may appoint other committees from time to time. Each standing committee has a written charter and all such charters, as well as the Company's Corporate Governance Guidelines, are available on the Company's corporate website, http://investors.nike.com, and will be provided in print to any shareholder who submits a request in writing to NIKE Investor Relations, One Bowerman Drive, Beaverton, Oregon 97005-6453. +AUDIT & FINANCE COMMITTEE +MEMBERS: +Maria Henry +Peter Henry +Robert Swan, Chair +MEETINGS IN FY 2026: 9 +ROLES AND RESPONSIBILITIES: +The Audit & Finance Committee provides assistance to the Board in fulfilling its legal and fiduciary obligations with respect to: +• Matters involving the Company's accounting, auditing, financial reporting, and internal controls; +• Overseeing the Company's financial policies and activities; +• The integrity of the Company's financial statements and activities of the Company that may have a material impact on the financial position of the Company; +• Matters involving information security (including risks related to cybersecurity) and data protection; +• The Company's compliance with legal and regulatory requirements; +• The independent auditor's qualifications and independence, and the performance of the Company's internal audit function and independent auditor; +• The Company's risk assessment and risk management processes and practices; and +• Significant financial and investment matters, including proposed capital expenditures, acquisitions and dispositions and other financial arrangements within specified limits. +The Board has determined that each member of the Audit & Finance Committee meets all independence and financial literacy requirements applicable to audit committee members under the NYSE listing standards and applicable regulations adopted by the SEC. The Board has also determined that each of Ms. Henry and Mr. Swan is an "audit committee financial expert" as defined in regulations adopted by the SEC. +COMPENSATION COMMITTEE +MEMBERS: +Timothy Cook, Chair +Mónica Gil +Michelle Peluso +MEETINGS IN FY 2026: 4 +ROLES AND RESPONSIBILITIES: +The Compensation Committee discharges the Board's responsibilities regarding executive and director compensation and senior leadership succession and talent management, and its duties include the following: +• Evaluate the performance of the CEO and other executive officers, and review and approve their compensation; +• Administer and interpret the Company's equity compensation plans and executive incentive compensation plans; +• Administer and monitor compliance with the Company's clawback policy for executive officers; +• Review the succession plans and leadership development programs for the executive officer positions, including reviewing the Company's development and succession management efforts; +• Review and provide guidance to management regarding Company policies, programs, and practices related to talent management and development for executive officers and senior management; and +• Make recommendations to the Board regarding the compensation of directors. +The Board has determined that each member of the Compensation Committee meets all independence requirements applicable to compensation committee members under the NYSE listing standards. +2026 PROXY STATEMENT 16 +CORPORATE RESPONSIBILITY, SUSTAINABILITY & GOVERNANCE COMMITTEE +MEMBERS: +Thasunda Duckett +Jørgen Vig Knudstorp +Michelle Peluso, Chair +John Rogers, Jr.* +MEETINGS IN FY 2026: 4 +ROLES AND RESPONSIBILITIES: +The Corporate Responsibility, Sustainability & Governance Committee assists the Board in discharging its oversight responsibilities with respect to corporate governance and corporate responsibility matters, and its duties include the following: +• Review and evaluate the Company's significant strategies, activities, policies, investments, and programs regarding corporate responsibility, including sustainability; +• Review transactions with related persons in accordance with the Company's policies; +• Oversee protection of the Company's corporate reputation with respect to issues involving corporate responsibility; +• Identify individuals qualified to become Board members and recommend to the Board for approval the slate of Class A and Class B director nominees for election at each annual shareholder meeting; +• Review and make recommendations regarding the size, structure, composition, and leadership of the Board and its committees; +• Review and make recommendations regarding the Company's corporate governance framework; and +• Oversee the annual self-evaluations of the Board and its committees. +The Board has determined that each member of the Corporate Responsibility, Sustainability & Governance Committee meets all independence requirements applicable to +nominating/corporate governance committee members under the NYSE listing standards. +* Mr. Rogers will not stand for re-election to the Board at the Annual Meeting. +EXECUTIVE COMMITTEE +MEMBERS: +Elliott Hill +Travis Knight +Mark Parker, Chair +MEETINGS IN FY 2026: 0 +ROLES AND RESPONSIBILITIES: +The Executive Committee is authorized to act on behalf of the Board on all corporate actions for which applicable law does not require participation by the full Board. +• In practice, the Executive Committee acts in place of the full Board only when emergency issues or scheduling conflicts make it difficult or impracticable to assemble the full Board. +• All actions taken by the Executive Committee must be reported at the next Board meeting, or as soon thereafter as practicable. +The Executive Committee held no formal meetings during fiscal 2026, but took action by unanimous written consent. +17 NIKE, INC. +THE BOARD'S ROLE IN RISK OVERSIGHT +While the Company's management team is responsible for day-to-day management of the various risks facing the Company, the Board takes an active role in the oversight of the management of critical business risks. The Board does not view risk in isolation. Risks are considered in virtually every business decision and as part of NIKE's business strategy. The Board recognizes it is neither possible nor prudent to eliminate all risk. Purposeful and appropriate risk-taking is essential for the Company to be competitive on a global basis and to achieve its strategic objectives. +THE BOARD OF DIRECTORS +The Board implements its risk oversight function both as a whole and through committees, which play a significant role in carrying out risk oversight. While the Audit & Finance Committee is responsible for oversight of management's risk management policies, oversight responsibility for particular areas of risk is allocated among the Board committees according to the committee's area of responsibility as reflected in the committee charters. +BOARD COMMITTEES +The AUDIT & FINANCE COMMITTEE oversees risks related to the Company's financial statements, the financial reporting process, accounting, legal matters, investments, access to capital and capital deployment, currency risk and hedging programs, information security (including risks related to cybersecurity), data protection, and artificial intelligence. The committee oversees the internal audit function, reviews a risk-based plan of internal audits, and reviews a risk-based integrated audit of internal controls over financial reporting. The committee meets separately with the Vice President of Global Audit and Chief Risk Officer, representatives of the independent registered public accountants, and senior management. +The COMPENSATION COMMITTEE oversees risks associated with the Company's compensation philosophy and programs and executive succession and development. +The CORPORATE RESPONSIBILITY, SUSTAINABILITY & GOVERNANCE COMMITTEE oversees risks associated with the Company's corporate governance and corporate responsibility, including NIKE's Code of Conduct and its compliance programs, and the structure and performance of the Board and its committees. The committee also oversees protection of the Company's corporate reputation, including with respect to issues involving corporate responsibility. +EXECUTIVE LEADERSHIP TEAM +Each committee chair works with one or more senior executives assigned to assist the committee in: developing agendas for the year and for each meeting, paying particular attention to areas of business risk identified by management, Board members, internal and external auditors, and in their committee charter; and scheduling agenda topics, presentations, and discussions regarding business risks within their area of responsibility. At meetings, the committees discuss areas of business risk, the potential impact, and management's initiatives to manage business risk, often within the context of important business decisions. Through this process, key business risk areas are reviewed at appropriate times, with some topics reviewed on multiple occasions throughout the year. At every Board meeting, each committee chair provides a report to the full Board outlining the committee's discussions and actions, including those affecting the oversight of various risks. +The Company believes its leadership structure, discussed in detail above, further supports the risk oversight function of the Board. Strong directors chair the various committees involved in risk oversight, there is open communication between management and directors, and all directors are involved in the risk oversight function. +2026 PROXY STATEMENT 18 +THE BOARD'S ROLE IN OVERSEEING THE COMPANY'S CORPORATE RESPONSIBILITY +The Board takes an active role overseeing the Company's commitment to corporate responsibility and governance matters. The Board oversees such matters primarily through the Corporate Responsibility, Sustainability & Governance Committee. The committee's responsibilities include, among other things, reviewing and providing guidance to management regarding the Company's significant corporate responsibility strategies, activities, policies, investments, and programs and the involvement of significant corporate responsibility issues in major business decisions in order to protect the Company's goodwill, reputation and human capital. The Compensation Committee also plays a key role with respect to corporate responsibility matters by overseeing talent management and development for executive officers and senior management. More information about the Company's purpose is available on the Mission section of our website. +SHAREHOLDER COMMUNICATIONS WITH DIRECTORS +Shareholders or interested parties desiring to communicate directly with the Board or with any individual director may do so in writing addressed to the intended recipient or recipients, c/o Corporate Secretary, NIKE, Inc., One Bowerman Drive, Beaverton, Oregon 97005-6453. The Office of the Corporate Secretary reviews all such communications and refers relevant correspondence directly to a director, as appropriate. In addition, the Office of the Corporate Secretary regularly summarizes for the Board all communications that relate to the functions of the Board or its committees or that otherwise warrant Board attention. +BOARD AND COMMITTEE EVALUATIONS +The Board believes that a robust and constructive evaluation process is an essential component of good corporate governance. The Corporate Responsibility, Sustainability & Governance Committee, in consultation with the Lead Independent Director, oversees the annual evaluation process of the Board and its committees. As part of this process, members of the Board complete written questionnaires and periodically participate in one-on-one interviews conducted by an independent third-party facilitator in lieu of the questionnaires, including, most recently, in fiscal 2026. +The process is designed to elicit feedback on a variety of subjects, including the structure, composition, key responsibilities, meeting agendas and formats, interactions with management and culture of the Board and each committee as well as the performance of Board and committee leaders and individual directors. The results of these evaluations are reviewed by the Corporate Responsibility, Sustainability & Governance Committee and then shared with the full Board, along with any recommended actions, for further discussion and, if applicable, approval. +CODE OF CONDUCT +The NIKE Code of Conduct is available at the Company's corporate website, http://investors.nike.com, and will be provided in print without charge to any shareholder who submits a request in writing to NIKE Investor Relations, One Bowerman Drive, Beaverton, Oregon 97005-6453. The Code of Conduct applies to all of the Company's employees and directors, including our CEO and all other executive officers. The Code of Conduct provides that any waiver of the Code of Conduct for executive officers or directors may be made only by the Board or a committee of the Board. Any such waiver will be publicly disclosed, when required by law. The Company plans to disclose amendments to, and waivers from, the Code of Conduct on the Company's corporate website: http://investors.nike.com. +CAPITAL STRUCTURE +Since NIKE's initial public offering in 1980, the Company's articles of incorporation have provided for NIKE to have two classes of voting stock, consisting of the Class A Stock and the Class B Stock. +19 NIKE, INC. +RIGHTS OF COMMON STOCK +The shares of Class A Stock and Class B Stock have identical voting and economic rights except that the holders of the Class A Stock and Class B Stock vote as separate classes for purposes of electing directors. Specifically, for as long as the number of outstanding shares of Class B Stock is between 25% and 87.5% of the total number of outstanding shares of Common Stock (as is currently the case), the holders of the Class B Stock, voting as a separate class, have the right to elect 25% of the Board (rounded up to the nearest whole number) and the holders of the Class A Stock, voting as a separate class, have the right to elect the remaining directors. If at any time the outstanding number of shares of Class A Stock is less than 12.5% of the total number of outstanding shares of Common Stock, then the Class B Stock, voting as a separate class, will continue to have the right to elect 25% of the Board (rounded up to the nearest whole number), but the Class A Stock and Class B Stock will vote together as a single class to elect the remaining directors. Outside of director elections, the Class A Stock and Class B Stock vote together on all other matters, with each Class A share and Class B share having one vote per share. +Because eleven directors will be elected at the Annual Meeting and the outstanding number of shares of Class B Stock is between 25% and 87.5% of the outstanding shares of Common Stock, the holders of the Class B Stock are entitled to elect three directors at the Annual Meeting and the holders of the Class A Stock are entitled to elect the remaining eight. For each other matter to be voted on at the Annual Meeting (including Proposals 2, 3, 4, 5 and 6), the Class A Stock and Class B Stock will vote together as a single class, each with one vote per share. +Each share of Class A Stock is convertible into one share of Class B Stock. Such conversion is solely at the option of the holder, and cannot be dictated by either the Company or the Board. The Class A Stock is currently primarily held by Swoosh, LLC, an entity that was formed by Mr. Philip Knight, NIKE's co-founder, in 2015 to hold the majority of his shares of Class A Stock. +For additional information regarding NIKE's classes of Common Stock, see the description of the Company's securities included as Exhibit 4.7 to NIKE's Annual Report on Form 10-K for fiscal 2026. For additional information regarding key holders of the Class A Stock and Class B Stock, see the section below titled "Stock Ownership Information—Stock Holdings of Certain Owners and Management". +STRUCTURAL ADVANTAGES +Our unique capital structure enables NIKE to focus on long-term strategy by reducing pressure from short-term market dynamics, which our Board believes is critical to creating long-term sustainable value for all shareholders. This long-term vision enables the Company to prioritize research and development and innovation, to invest in transformations in support of our strategic and corporate responsibility-driven objectives, and to preserve and advance NIKE's unique culture, each of which we believe powers our success. +At the same time, our capital structure meaningfully protects and represents the interests of our public Class B shareholders: +• One-Share/One-Vote Principle Maintained : Our Class B Stock does not have super-voting or special consent rights. Instead, as explained above, both our Class A Stock and Class B Stock carry one vote per share and have identical voting rights on all matters other than director elections, where they vote separately. +• No Disparate Economic Rights : Each share of our Class A Stock and Class B Stock carries the same economic rights and risks, which helps align the interests of our Class A and Class B shareholders. +• Shareholder Interests Remain Front and Center : All of our directors, regardless of which class of Common Stock elected them, have fiduciary duties to act in the best interests of all NIKE shareholders. In addition, all directors are subject to the same nomination and evaluation processes, which are described in the section above titled "NIKE, Inc. Board of Directors—Director Nominations", and the Board considers all directors when assessing the mixture of experiences, attributes, and skills represented on the Board. The Board also maintains executive and non-employee director stock ownership guidelines, further ensuring alignment between directors and our shareholder interests. +• Additional Governance Safeguards : We have established a robust governance structure that ensures effective independent oversight and that the interests of all NIKE shareholders are considered. We maintain separate CEO and Chair positions and a Lead Independent Director with well-defined duties. All of the directors nominated for election by our Class B shareholders, as well as five out of eight of the directors nominated for election by our Class A shareholders, are independent. Each of the Audit & Finance Committee, the Compensation Committee, and the Corporate Responsibility, Sustainability & Governance Committee are comprised solely of independent directors and the slate of Class B director nominees includes at least one member from each such committee. Additionally, as described in the section below titled "Shareholder Engagement", we have a robust engagement program for our Class B shareholders and the feedback received during such meetings is shared with the full Board and relevant committees. Although the Board cannot change or eliminate our dual class capital structure without the approval of the holders of the Class A Stock, our independent Corporate Responsibility, Sustainability & Governance Committee reviews our corporate governance, including our dual-class structure, periodically so as to align our internal practices with shareholder interests and feedback. We also provide our Class B shareholders with other meaningful rights, including annual director elections (with a mandatory resignation policy), special meeting rights set at a 10% threshold and proxy access rights. +2026 PROXY STATEMENT 20 +SHAREHOLDER ENGAGEMENT +Our approach to governance is informed by the insights and perspectives of our Class B shareholders. We greatly value the opportunity to engage with and solicit feedback from our shareholders regarding matters involving the Company and believe that maintaining an open dialogue strengthens the Company's approach to its corporate governance practices and disclosures. Below is an overview of the Company's fiscal 2026 engagement practices regarding corporate responsibility, executive compensation, and governance matters. These engagements take place in addition to regular financial-related outreach led by our Investor Relations team and engagement with shareholder proponents led by our Office of the Corporate Secretary. +INTEGRATED ENGAGEMENT TEAM TYPES OF ENGAGEMENT KEY FISCAL 2026 ENGAGEMENT TOPICS +• Investor Relations +• Total Rewards +• Office of the Corporate Secretary +• One-on-one meetings +• Small group calls +• E-mail communications +• NIKE leadership structure +• Board composition and evergreen refreshment +• Risk oversight +• Executive compensation +• Responsible sourcing and sustainability +In fiscal 2026, we reached out to shareholders representing 48% of our Class B shares +and engaged with shareholders representing 25% of our Class B shares +The Board is committed to understanding the views of our shareholders. Accordingly, management reports key themes and feedback that emerge during these engagements to the full Board and any relevant committees, so that we can continue to refine and adapt our practices to better address the issues that our shareholders raise with us. +The Board and management carefully consider and integrate shareholder feedback into the Company's practices and disclosures. Recent changes to our practices include enhancing our Board and committee annual evaluation processes; refreshing the slate of Class B director nominees to include a member of each of the key Board committees; and refining our fiscal 2026 executive compensation program, including by introducing a new Management by Objectives component to our PSP for non-CEO NEOs and updating our PSU design for fiscal 2026 – 2028 PSU awards (as described throughout the section titled, "Compensation Discussion and Analysis"). We have also enhanced our proxy statement disclosures over the past several years in response to shareholder feedback, including providing additional detail and transparency regarding our capital structure. +DIRECTOR COMPENSATION FOR FISCAL 2026 +NAME FEES EARNED OR +PAID IN CASH +($) +STOCK +AWARDS (1) +($) +CHANGE IN +PENSION VALUE AND +NONQUALIFIED DEFERRED +COMPENSATION EARNINGS +($) +ALL OTHER +COMPENSATION (2) +($) +TOTAL +($) +Cathleen Benko (3) +27,473 — — 14,756 42,229 +Timothy Cook 165,000 192,758 — 20,000 377,758 +Thasunda Duckett 100,000 192,758 — 20,000 312,758 +Mónica Gil 100,000 192,758 — — 292,758 +Maria Henry 105,000 192,758 — 20,000 317,758 +Peter Henry 105,000 192,758 — — 297,758 +Travis Knight 100,000 192,758 — — 292,758 +Jørgen Vig Knudstorp (4) +72,802 385,517 — — 458,319 +Michelle Peluso 125,000 192,758 — 20,000 337,758 +John Rogers, Jr. 100,000 192,758 — — 292,758 +Robert Swan 135,000 192,758 — 20,000 347,758 +(1) Represents the grant date fair value of restricted stock awards granted in fiscal 2026 computed in accordance with accounting guidance applicable to stock-based compensation. The grant date fair value is based on the closing market price of our Class B Stock on the grant date. As of May 31, 2026, Mr. Knudstorp held 5,238 shares of unvested restricted stock, each other non-employee director held 2,619 shares of unvested restricted stock, and no non-employee director held any outstanding stock options. +(2) Includes matched contributions to charities under the NIKE Matching Gift Program in the amount of $14,756 for Ms. Benko; $20,000 for Mr. Cook; $20,000 for Ms. Duckett; $20,000 for Ms. Henry; $20,000 for Ms. Peluso; and $20,000 for Mr. Swan. +21 NIKE, INC. +(3) Ms. Benko did not stand for re-election at our 2025 annual meeting of shareholders and retired effective September 9, 2025. Therefore, her annual retainer was prorated. +(4) Mr. Knudstorp was elected to the Board effective September 9, 2025. Therefore, his annual retainer was prorated and his stock awards consist of a one- time, sign-on grant of restricted stock as well as an annual restricted stock award, each as described in the section below titled "Director Fees and Arrangements". +DIRECTOR FEES AND ARRANGEMENTS +Under our director compensation program in effect for fiscal 2026, non-employee directors receive: +• An annual retainer of $100,000, paid in quarterly installments. +• When they initially join the Board, a one-time, sign-on restricted stock award valued at $200,000 on the date of grant. This award is subject to forfeiture in the event that service as a director terminates prior to the first anniversary of the date of grant. +• An annual restricted stock award valued at $200,000 on the date of grant, generally, the date of each annual meeting of shareholders. The number of restricted shares granted to each director for fiscal 2026 was determined by dividing the director's award value by the average closing price of our Class B Stock for the 20-trading day period ending on the date of grant. The annual restricted stock award is subject to forfeiture in the event that service as a director terminates prior to the earlier of the next annual meeting and the last day of the 12 th full calendar month following the date of grant. +• For the Lead Independent Director, an annual retainer of $40,000, paid in quarterly installments. +• For chairs of Board committees (other than the Executive Committee), an annual retainer of $25,000 for each committee chaired ($30,000 for the chair of the Audit & Finance Committee), paid in quarterly installments. +• For Audit & Finance Committee members, an additional annual retainer of $5,000, paid in quarterly installments. +• Payment or reimbursement of travel and other expenses incurred in attending Board meetings. +• Matching charitable contributions under the NIKE Matching Gift Program, under which directors are eligible to contribute to qualified charitable organizations and the Company provides an equal matching contribution to the charities, up to $20,000 in fiscal 2026 and up to $25,000 in fiscal 2027, annually in the aggregate. +Neither Mr. Hill nor Mr. Parker received any additional compensation for services provided as a director in fiscal 2026. +STOCK OWNERSHIP GUIDELINES FOR DIRECTORS +NIKE maintains stock ownership guidelines for all non-employee directors. Under these guidelines, directors are required to hold NIKE stock valued at five times their annual cash retainer. New directors are required to attain these ownership levels within five years of their election to the Board. Each of our directors has met or is on track to meet the specified ownership level. +DIRECTOR PARTICIPATION IN DEFERRED COMPENSATION PLAN +Under our DCP, non-employee directors may elect in advance to defer up to 100 percent of the director fees paid by the Company. For a description of the plan, see the section below titled "Executive Compensation—Executive Compensation Tables—Non-Qualified Deferred Compensation in Fiscal 2026—Non-Qualified Deferred Compensation Plans". +2026 PROXY STATEMENT 22 +EXECUTIVE COMPENSATION +PROPOSAL 2 +SHAREHOLDER ADVISORY VOTE TO APPROVE +EXECUTIVE COMPENSATION +In accordance with the requirements of Section 14A of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), we are submitting to shareholders our annual "say-on-pay proposal", an advisory vote to approve the compensation of our Named Executive Officers as described in this proxy statement. At our 2025 annual meeting of shareholders, approximately 94% of the votes cast on the say-on-pay proposal were voted in favor of the proposal. +The Compensation Committee is committed to understanding the views of our shareholders with respect to the executive compensation program. Therefore, during fiscal 2026, the committee considered the results of the 2025 say-on-pay proposal, which the committee believes affirm shareholders' support of the Company's approach to executive compensation and the committee's decisions, as well as direct feedback from shareholders provided during shareholder engagements. +As discussed in this section, our executive compensation program is designed to attract and retain top-tier talent and maximize shareholder value. To achieve the objectives of our executive compensation program and emphasize pay-for-performance principles, the Compensation Committee has continued to employ strong governance practices, including: +• basing a majority of total compensation on performance incentives; +• grounding incentive awards in objective financial performance goals and clearly disclosing rationales and outcomes; +• mitigating undue risk associated with compensation by using multiple performance targets, caps on potential incentive payments, a clawback policy, and additional standalone clawback provisions; and +• requiring executive officers to hold NIKE stock through published stock ownership guidelines. +Because your vote is advisory, it will not be binding on the Board. However, the Board values shareholder opinions, and the Compensation Committee will take into account the outcome of the vote when considering future executive compensation arrangements. +BOARD RECOMMENDATION +The Board of Directors recommends that shareholders vote FOR approval of the following resolution: +RESOLVED, that the shareholders approve the fiscal 2026 compensation paid to the Named Executive Officers as disclosed in this proxy statement pursuant to the SEC's compensation disclosure rules (which disclosure includes the Compensation Discussion and Analysis, the compensation tables, and the narrative disclosures that accompany the compensation tables). +23 NIKE, INC. +COMPENSATION DISCUSSION AND ANALYSIS +This Compensation Discussion and Analysis describes our compensation program, philosophy, decisions, and process for the compensation of our Named Executive Officers for fiscal 2026: +NAMED EXECUTIVE OFFICER +TITLE (1) +Elliott Hill President and Chief Executive Officer +Matthew Friend Executive Vice President and Chief Financial Officer +Venkatesh Alagirisamy +Executive Vice President, Chief Operating Officer (2) +Treasure Heinle Executive Vice President, Chief People Officer +Robert Leinwand Executive Vice President, Chief Legal Officer +(1) Reflects titles as of May 31, 2026, which was the last day of fiscal year 2026. +(2) Mr. Alagirisamy was appointed Executive Vice President, Chief Operating Officer effective December 8, 2025. +This Compensation Discussion and Analysis is organized into six sections: +• Executive Summary (page 25 ) +• Compensation of Our Named Executive Officers (page 28 ) +• Our Compensation Process (page 36 ) +• Other Compensation Practices (page 37 ) +• Realizable Pay (page 39 ) +• Compensation Committee Report (page 40 ) +Key Defined Terms +TERM DEFINITION +401(k) Plan The NIKE, Inc. 401(k) Plan +Absolute TSR Company total shareholder return for the applicable performance period +Adjusted EBIT +Company earnings before interest and taxes (EBIT), subject to the impact of adjustments (1) +Adjusted EPS +Diluted earnings per common share, as set forth in the audited consolidated financial statements of the Company, subject to the impact of adjustments (1) +Adjusted Operating Margin Growth +Margin growth rate of FY27 Adjusted (1) EBIT Margin measured in basis points above FY26 EBIT Margin +Adjusted Revenue +Revenue as set forth in the audited consolidated financial statements of the Company, subject to the impact of adjustments (1) +CD&A Compensation Discussion and Analysis +DCP NIKE, Inc. Deferred Compensation Plan +EBIT Margin EBIT divided by Total Revenues +NEO Named Executive Officer +PSP NIKE, Inc. Executive Performance Sharing Plan +PSU Performance-based restricted stock unit +Relative TSR Absolute TSR for the applicable performance period relative to total shareholder return over the same period for the other companies in the S&P 500 +RSU Time-vesting restricted stock unit +SIP NIKE, Inc. Stock Incentive Plan, as amended and restated +(1) Financial metrics are adjusted to neutralize the impact of acquisitions and divestitures; changes in accounting principles; unanticipated restructurings; unanticipated exchange rate fluctuations; acceleration of expense due to a change in useful life or related to exit or disposal activity within ongoing business operations; any change affecting the costs and/or operations of the business resulting from changes to laws, rules, or regulations by any government or regulatory entity; investments in new business ventures or initiatives; acts of God, war, terrorism, cybersecurity breaches, geopolitical incidents, natural disasters, pandemics, or similar conditions or events; any variance in share buybacks relative to planned share buybacks assumed for the applicable fiscal year; and any items categorized as unusual or infrequently occurring within the meaning of Generally Accepted Accounting Principles ("GAAP"), as applicable. Any such adjustments may be positive or negative, as applicable, and are applied in a neutral manner. +2026 PROXY STATEMENT 24 +EXECUTIVE SUMMARY +OUR APPROACH TO EXECUTIVE COMPENSATION +• We follow a pay for performance philosophy, intended to drive business results and maximize shareholder value. Compensation is therefore highly incentive-based and heavily weighted towards long-term awards to emphasize long- term performance. +• Our compensation philosophy is designed to attract and retain top talent in a competitive marketplace, reward business results and performance, and motivate executives to maximize long-term shareholder value. +• We strive every day to win as a team . To foster teamwork, and ensure internal pay equity, we utilize a cohort approach by aligning compensation across executive roles. +• We consider shareholder feedback , including the results of our annual say-on-pay vote, as well as feedback shared directly through our shareholder engagement efforts described on page 21 . +FISCAL YEAR 2026 HIGHLIGHTS +In fiscal year 2026 we continued to execute against our multi-year strategy to drive growth. This includes additional changes to the senior executive team that remove layers and strengthen our leadership team's connection with consumers and the marketplace. In support of these changes, we implemented the following key compensation decisions, which are described in greater detail throughout the section below titled "Compensation of our Named Executive Officers": +• Updated PSP design for non-CEO NEOs to introduce a Management by Objectives ("MBO") component, weighted 20% of the total award, in order to drive individual accountability. +• Exercised negative discretion to downward adjust PSP award payouts for fiscal 2026 so that, in support of our one-team culture, the PSP financial metrics payout level would not exceed the payout level for the broad-based global annual bonus plan. +• Updated PSU design to use Adjusted Revenue (50%) and Adjusted EPS (50%) as the metrics for the fiscal 2026 – 2028 PSU awards, with a Relative TSR modifier, to provide an objective, market-based measure of performance. +• Granted equity-based retention awards to our NEOs in fiscal 2026 to enhance retention during this pivotal period and to collectively align the newly established leadership team to drive operating margin growth in the near term. All of the NEOs, except Mr. Friend, were appointed as executive officers following the fiscal 2025 CEO transition and did not receive retention awards in connection with that transition. +INCENTIVE AWARD OUTCOMES +The following summarizes incentive award outcomes for fiscal 2026. The fiscal 2024 – 2026 PSUs paid out at 0%. The fiscal 2026 PSP was earned at 101% based on achievement of the financial metrics; however, the Compensation Committee exercised negative discretion to reduce the financial metrics earnout to 74% to align with the broad-based global annual bonus plan. For non-CEO NEOs the achievement of financial metrics was weighted at 80% and the remaining 20% was based on MBOs which were earned at 90%. As a result, the fiscal 2026 PSP payout for the CEO was 74% and payout for the non-CEO NEOs was 78%. For more information on incentive award outcomes for the NEOs, see the section below titled "Compensation of our Named Executive Officers—Annual Cash Incentive" beginning on page 28 . +FISCAL 2026 PSP FINANCIAL METRICS +25 NIKE, INC. +FISCAL 2026 PSP PAYOUTS +FINANCIAL METRICS +MBOs +FISCAL 2024-2026 PSUs +REALIZABLE PAY +Because of our "pay for performance" compensation philosophy, executive compensation is highly incentive-based. In total, 92% of total target annual compensation for our CEO is at risk (87% for the other non-CEO NEOs). Since a significant portion of our executive compensation packages varies depending on company performance, the grant date value of compensation reported in the Summary Compensation Table does not always reflect the actual realizable pay value that is ultimately received by our NEOs. Realizable pay reinforces a pay-for-performance linkage because the short- and long-term incentive opportunities under our executive compensation program only provide value when meaningful performance is achieved. +To illustrate the differences, the table below compares, for the CEO and other non-CEO NEOs (on average), the cumulative values for fiscal 2025 and 2026 for total target compensation, Summary Compensation Table compensation, and realizable pay at the end of fiscal year 2026. +For more information on realizable pay for the NEOs, see the section below titled "Realizable Pay" beginning on page 39 . +The table below is not a substitute for the information required by the 2026 Summary Compensation Table for fiscal years 2024 – 2026, which appears on page 41 . +CUMULATIVE FISCAL 2025 AND 2026 COMPENSATION +CEO +Average for Non-CEO NEOs (1) +2-Year +Cumulative Value % of Cumulative +Summary +Compensation +Table +Compensation 2-Year +Cumulative Value % of Cumulative +Summary +Compensation +Table +Compensation +Cumulative Total Target Compensation $62,000,000 101 % $23,605,000 102 % +Cumulative Summary Compensation Table Compensation $61,497,405 100 % $23,205,082 100 % +Cumulative Realizable Pay $30,635,333 50 % $10,464,552 45 % +(1) For fiscal 2025, the non-CEO NEOs consist of Messrs. Friend and Leinwand. For fiscal 2026, the non-CEO NEOs consist of Messrs. Friend, Leinwand, and Alagirisamy and Ms. Heinle. +2026 PROXY STATEMENT 26 +FISCAL YEAR 2027 CFO TRANSITION +On June 23, 2026, we announced a CFO transition plan pursuant to which, on August 17, 2026, David Denton will become Executive Vice President and CFO of NIKE. Mr. Friend will cease serving in that role effective as of the same date and begin serving as an advisor to the CEO until his separation from the Company on September 4, 2026. NIKE approved certain compensation arrangements in connection with the CFO transition, which are described in more detail in the Current Report on Form 8-K filed with the SEC on June 23, 2026. +EXECUTIVE COMPENSATION GOVERNANCE PRACTICES +WHAT WE DO +WHAT WE DON'T DO +ü Base a majority of total compensation on performance and retention incentives +ü Mitigate risk by using multiple performance periods and metrics, incentive payment caps, a clawback policy, and additional standalone clawback provisions +ü Ground incentive awards in objective financial performance goals and clearly disclose rationales and outcomes +ü Maintain robust stock ownership guidelines +ü Vest stock-based awards over time to promote long-term performance and retention +ü Provide only double-trigger change-in-control acceleration for stock-based awards +û No dividend equivalents paid on PSUs or RSUs unless and until shares are earned +û No repricing of stock options +û No hedging transactions or short sales permitted +û No pension or supplemental executive retirement plan +û No tax gross-ups for perquisites, other than in accordance with our standard relocation policy +û No cash-based change-in-control benefits +û No excise tax gross-ups upon change of control +27 NIKE, INC. +COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS +COMPENSATION OBJECTIVES AND STRUCTURE +Our executive compensation program is designed to attract and retain top-tier talent in a competitive marketplace and to maximize shareholder value by rewarding NEOs for strong Company performance. The program consists of direct compensation, with a focus on incentive compensation, and competitive benefits that are generally consistent with the benefits offered to our other U.S.-based employees. +We structure our executive compensation program in the context of our business strategy and talent plan. To foster teamwork and ensure internal pay equity, we utilize a segmented cohort approach that aligns compensation across certain executive roles. Cohort compensation levels are determined by holistically considering factors relating to our business, the competitive market for top-tier talent, the applicable executives—including future potential, individual performance, market insights, succession planning, retention, and leadership continuity—and, for each NEO other than our CEO, our CEO's recommendation. +Our philosophy is to "pay for performance" in order to drive business results and maximize shareholder value. As a result, executive compensation is highly incentive-based and weighted towards long-term awards to emphasize long-term performance and support retention. Our executive compensation program balances performance incentives, including by using multiple performance metrics and periods, and through a mixture of cash- and stock-based compensation elements. Stock-based compensation—which consists of PSUs, stock options, and RSUs—is also structured to pay for performance by linking the majority of each NEO's target total direct compensation directly to our stock price. The following charts illustrate the mix of components that make up fiscal 2026 target total annual direct compensation for our NEOs, excluding equity retention awards granted to the NEOs on a limited basis, as described elsewhere in this proxy statement. +2026 PROXY STATEMENT 28 +ANNUAL DIRECT COMPENSATION ELEMENTS +NIKE's annual direct compensation for the NEOs generally consists of the following elements: +ELEMENT KEY CHARACTERISTICS PURPOSE +Base Salary Fixed cash compensation Provides market competitive baseline compensation to attract and retain top-tier talent +Annual Cash Incentive Award – PSP Variable cash incentive compensation earned at 0% – 200% based on Company and individual performance over a 1-year performance period Motivates and rewards achievement of sustainable and profitable growth +Long-Term Incentive Award – SIP +PSUs +(50%) +Variable stock-based incentive compensation earned at 0% – 200%; fiscal year 2026 grants based generally on achievement of Adjusted Revenue and Adjusted Earnings Per Share (EPS) performance metrics over a 3-year performance period Aligns NEOs' interests with those of our shareholders by motivating and rewarding achievement of long-term shareholder value and growth; promotes retention +Stock Options +(25%) +Stock-based incentive compensation that generally vests in 4 equal annual installments; only provides value if our stock price appreciates Aligns NEOs' interests with those of our shareholders by rewarding achievement of upside potential; promotes retention +RSUs +(25%) +Stock-based incentive compensation that generally vests in 4 equal annual installments; value tied to our stock price Aligns NEOs' interests with those of our shareholders by rewarding long-term value creation; promotes retention +BASE SALARY +Base salary is a fixed element of compensation that serves to attract and retain top-tier talent and provide a consistent, repeatable minimum amount of compensation. Generally, the Compensation Committee reviews and determines base salaries for our NEOs in June, with any adjustments becoming effective in August of the same year. The committee set Mr. Alagirisamy's base salary in connection with his appointment as Executive Vice President, Chief Operating Officer. For fiscal 2026, Mr. Leinwand's base salary was increased in alignment with our cohort approach. The table below shows the change in base salary for any NEO who was a NEO in the prior fiscal year. +NAMED EXECUTIVE OFFICER FISCAL 2026 BASE SALARY % CHANGE +Elliott Hill $1,500,000 0% +Matthew Friend $1,250,000 0% +Venkatesh Alagirisamy $1,025,000 N/A +Treasure Heinle $1,000,000 N/A +Robert Leinwand $1,025,000 14% +ANNUAL CASH INCENTIVE +Annual cash incentive awards are paid to the NEOs under our PSP and are designed to reflect our "pay for performance" philosophy. For fiscal 2026, PSP awards were eligible to be earned between 0% and 200% of target based on Company and, for non-CEO NEOs, individual performance during the fiscal year. The Compensation Committee retains discretion to adjust PSP metrics and award payouts based on individual or Company performance. As discussed in greater detail below, the Compensation Committee exercised negative discretion to adjust PSP award payouts for fiscal 2026. +The Compensation Committee set the PSP target awards for Mr. Alagirisamy in connection with his appointment as Executive Vice President, Chief Operating Officer. The committee maintained fiscal 2026 PSP target awards for each other NEO at the same level as his or her fiscal 2025 PSP target award. Therefore, the fiscal 2026 PSP target awards were: +29 NIKE, INC. +NAMED EXECUTIVE OFFICER FISCAL 2026 PSP TARGET AWARD +(% OF BASE SALARY) +Elliott Hill 200% +Matthew Friend 120% +Venkatesh Alagirisamy 120% +Treasure Heinle 120% +Robert Leinwand 120% +FINANCIAL METRICS +The fiscal 2026 PSP payout was based 100% on financial metrics for the CEO and 80% on financial metrics for the non-CEO NEOs (with the remaining 20% based on MBOs as described below). Consistent with the prior year, the Compensation Committee maintained equally weighted financial metrics of Adjusted Revenue and Adjusted EBIT as well as a single, year-long performance period. +Fiscal year 2026 was a year to reposition NIKE's business for future growth, reignite brand momentum and stabilize NIKE's business. Accordingly, in setting the year-long performance goals for the PSP, the Compensation Committee sought to drive sustainable and profitable growth in pursuit of those objectives. The Compensation Committee recognizes that PSP target levels should reflect goals which are rigorous yet reasonable and considers market conditions and prior performance. The Adjusted Revenue target goal represented an increase of approximately 0.5% compared to actual fiscal 2025 revenue, with threshold and maximum goals set equidistant from the target goal to balance stretch and risk. The Adjusted EBIT target goal represented a decrease of approximately 15% compared to actual fiscal 2025 EBIT, with threshold and maximum goals set non-equidistant from the target goal; additional upside stretch was built into the maximum goal to incentivize exceptional performance. In setting these targets, we strove to address both the anticipated impact from our actions to reposition NIKE for future growth and the uncertain and volatile operating environment that existed at the time these targets were set, including, but not limited to, geopolitical dynamics, tax regulation, and evolving tariff policies. +As described below, the performance levels for fiscal 2026 Adjusted Revenue and Adjusted EBIT were achieved at 76% and 125%, respectively. In support of our one-team culture, the fiscal 2026 broad-based annual bonus plan (applicable to the majority of employees below the executive officer level) used the same financial metrics as the PSP under which the NEOs participate and also weighted them equally. However, the broad-based annual plan used two equally-weighted, six-month performance periods to reduce the potential impact of volatility and thereby enable more aggressive target setting. To balance the commitment to a year-long performance period for the PSP with support for our one-team culture, the Compensation Committee determined that the financial metrics payout level for the fiscal 2026 PSP would not exceed the payout level for the fiscal 2026 broad-based global annual bonus plan, and committed to use its negative discretion to reduce the PSP financial metrics payout level if necessary. Bonuses under the broad-based global annual plan were earned below target (and lower than the PSP), and therefore the Compensation Committee exercised negative discretion for the PSP financial metric earnout to support our one-team culture. +For fiscal 2026, under the PSP, Adjusted Revenue of $45.8 billion corresponded to an earnout of 76% and Adjusted EBIT of $3.3 billion corresponded to an earnout of 125%. These earnouts were averaged together to calculate a financial metric earnout of 101%, and negative discretion was exercised as discussed above to reduce the financial metric earnout to 74%. Accordingly, the fiscal 2026 PSP payout for Mr. Hill, whose PSP is not subject to MBOs, was 74%. +MBOs +As noted above, in fiscal 2026, for non-CEO NEOs, the Committee approved leader-specific goals (or MBOs) weighted at 20%. The two MBOs consisted of: +• Managing wage-related operating overhead spend, and +• Enterprise goals for employee engagement. +These two metrics were selected respectively to drive operational efficiency and motivate and unite the employee base to win as a team and further long-term shareholder value and growth. In determining the MBO payouts, Mr. Hill completed a holistic assessment based on achievement against quantitative goals and qualitative considerations and recommended 90% achievement for the MBOs. All non-CEO NEOs successfully managed their wage-related operating overhead spend and enterprise goals for employee engagement remained generally consistent with the prior year. The Committee reviewed these results and Mr. Hill's recommendation and determined 90% achievement for the MBOs. These MBO earnouts, weighted at 20%, were combined with the 74% financial metric earnout (calculated by averaging the Adjusted Revenue and Adjusted EBIT earnouts and applying negative discretion, as described above) to calculate the fiscal 2026 PSP payouts for each of the non- CEO NEOs. +2026 PROXY STATEMENT 30 +The fiscal 2026 PSP performance goals and achievement levels are illustrated below. +FISCAL 2026 FINANCIAL METRIC GOALS AND RESULTS +(Dollars in millions) +% PAYOUT THRESHOLD +25% TARGET +100% +MAXIMUM +200% +Adjusted Revenue (1) +(Weighted 50%) +EARNOUT: +76% +Adjusted EBIT (1) +(Weighted 50%) +EARNOUT: +125% +CALCULATED PSP EARNOUT +101% +ONE-TEAM CULTURE +• Payout under the broad-based global annual bonus plan—based on the same equally-weighted financial metrics, but using two equally-weighted, six-month performance periods—was 74% +• The Compensation Committee exercised negative discretion to reduce the PSP financial metrics payout to equal the payout under the broad-based global annual bonus plan, consistent with our one-team culture +FISCAL 2026 PSP FINANCIAL METRIC PAYOUT +74% +(1) As described on page 24 , each metric is adjusted for the impact of certain non-operational events to help drive and reward organic growth. +FISCAL 2026 PSP PAYOUTS +FINANCIAL METRICS (1) +MBOs (2) +NAMED EXECUTIVE OFFICER EARNOUT WEIGHT EARNOUT WEIGHT FISCAL 2026 PSP PAYOUT +Elliott Hill 74% 100% N/A 0% 74% +Matthew Friend 74% 80% 90% 20% 78% +Venkatesh Alagirisamy 74% 80% 90% 20% 78% +Treasure Heinle 74% 80% 90% 20% 78% +Robert Leinwand 74% 80% 90% 20% 78% +(1) As described on page 24 , each metric is adjusted for the impact of certain non-operational events to help drive and reward organic growth. The financial metric earnout also reflects the Compensation Committee's determination to exercise negative discretion to reduce PSP payouts, as described above. +(2) Comprises wage-related operating overhead spend and enterprise goals for employee engagement. +LONG-TERM INCENTIVE +Long-term incentive compensation incentivizes and rewards long-term Company performance, aligns executives' interests with those of our shareholders, and promotes retention in a highly competitive talent marketplace. Therefore, this element of our executive compensation program forms the largest portion of our NEOs' direct compensation, constituting 78% of fiscal 2026 target total direct compensation for Mr. Hill on an annualized basis and 72% for each other non-CEO NEO, excluding equity retention awards described elsewhere in this proxy statement. +Long-term incentive compensation consists of three components: PSUs, stock options, and RSUs, each granted under our SIP. Fiscal 2026 NEO awards were delivered 50% as PSUs (consistent with fiscal year 2025), 25% as stock options, and 25% as RSUs, reflecting the Committee's determination to equally weight stock options and RSUs to strengthen the inherent value of the LTI portfolio and better align with market practice. +31 NIKE, INC. +LONG-TERM INCENTIVE AWARD MIX (1) +(1) Excludes equity retention awards described elsewhere in this proxy statement. +FISCAL 2026 LONG-TERM INCENTIVE AWARD GRANTS +The Compensation Committee determined the fiscal 2026 long-term incentive awards in June 2025. In setting the value of each long-term incentive award, the committee considered multiple factors, including individual and Company performance, evolving responsibilities, our cohort compensation approach, and retaining top-tier talent in a highly competitive talent marketplace. +The committee set the target value for Mr. Alagirisamy's long-term incentive award in connection with his appointment as Executive Vice President, Chief Operating Officer. Therefore, the fiscal 2026 long-term incentive award target values were: +NAMED EXECUTIVE OFFICER TOTAL FISCAL 2026 +LONG-TERM INCENTIVE AWARD TARGET PSUs STOCK OPTIONS RSUs +Elliott Hill $15,500,000 → $7,750,000 $3,875,000 $3,875,000 +Matthew Friend $8,000,000 → $4,000,000 $2,000,000 $2,000,000 +Venkatesh Alagirisamy $5,500,000 → $2,750,000 $1,375,000 $1,375,000 +Treasure Heinle $5,500,000 → $2,750,000 $1,375,000 $1,375,000 +Robert Leinwand $5,500,000 → $2,750,000 $1,375,000 $1,375,000 +(1) Because Mr. Alagirisamy was appointed after the awards for fiscal 2026 were granted to executive officers (including NEOs) in September 2025, Mr. Alagirisamy's fiscal 2026 long-term incentive awards were granted in two parts. He received an initial annual grant on September 1, 2025 and a supplemental grant on December 10, 2025 shortly following his appointment to achieve the total target long-term incentive awards set forth in this table. The share calculation methodology and vesting schedule for Mr. Alagirisamy's supplemental grant is the same as the September 1, 2025 annual equity grants to executive officers generally, but the exercise price of Mr. Alagirisamy's supplemental stock options is equal to the closing share price of the Company on the date of grant (as required per the terms and conditions of the SIP). +2026 – 2028 PSUs +PSUs align our NEOs' interests with those of our shareholders by motivating and rewarding achievement of long-term shareholder value and growth. PSU awards reflect our "pay for performance" philosophy: they are earned between 0% and 200% of target based on Company performance during a three-year performance period. +In the first quarter of fiscal 2026, the Compensation Committee selected the metrics, corresponding performance goals, and award terms for the fiscal 2026 – 2028 PSU awards. To focus executives on key financial measures that drive value creation, the Compensation Committee selected Adjusted Revenue (50%) and Adjusted EPS (50%) as the financial metrics for the fiscal 2026 – 2028 PSU awards, with a Relative TSR modifier that aligns payouts with shareholder experience, providing an objective, market-based measure of performance. +Performance is measured on an annual growth rate basis. For each of the three years within the performance period, the Compensation Committee approved individual annual targets for Adjusted Revenue and Adjusted EPS expressed as a growth rate over the previous year's actual result. Targets were established for threshold (25%), target (100%), and maximum (200%), interpolated on a straight-line basis. This approach allows plan achievement to be calculated on a fiscal year basis (i.e., growth over prior year adjusted actuals) and averaged at the end of the three-year performance period, subject to the Relative TSR modifier which is measured over the full three-year performance period. +2026 PROXY STATEMENT 32 +The Compensation Committee selected this market-based approach for goal setting taking into account the inherent challenges in setting three-year cumulative financial goals in the current operating and macroeconomic environment. Utilizing annual growth rates provides for discrete annual goals within the performance period, while maintaining the integrity of the three-year performance period because the growth rates are approved before the grant date and the same rates apply to each year within the three-year period. It also ensures that participants remain sufficiently motivated over the full three-year performance period and are not disproportionately impacted, either positively or negatively, by an outlier year within the performance period. +The total payout opportunity for PSUs is 0% to 200%: 0% of target will be earned if the threshold level of performance is not satisfied, 25% of target will be earned if the threshold level is satisfied, 100% of target will be earned if the target level is satisfied, and 200% of target will be earned if the maximum level is satisfied. Performance for each financial metric is measured independently, so PSUs can be earned as long as the threshold is satisfied for at least one financial metric. The payout for each financial metric will be averaged together to calculate the total financial metric payout, and then the Relative TSR modifier will be applied. +The Relative TSR modifier is measured over the full three-year performance period and applied to the total financial metric payout as follows: +Relative TSR Level Relative TSR Multiplier +25 th Percentile or less +75.0% +Between 25 th Percentile and 75 th Percentile +No adjustment +75 th Percentile or greater +125.0% +The final PSU payout is subject to a 200% maximum, regardless of the Relative TSR modifier. In the event NIKE's absolute TSR is negative for the 3-year performance period, then the Relative TSR modifier is capped at 100%. Any PSUs that are earned will vest on September 1, 2028. +The specific targets and corresponding achievement will be disclosed following the Committee's certification of achievement at the conclusion of the performance period. In setting the performance goals, the Compensation Committee considered factors including achievability and motivational impact, as well as our repositioning actions to drive our return to growth. The growth rate targets established by the committee are based on scenario analyses that factor in upside and downside for each metric over the three-year performance period. The targets were set to provide growth in each year of the performance period, with threshold growth levels grounded in achievability based on historical levels of performance, and maximum growth levels set to reward outperformance. +The target number of PSUs granted to each NEO for fiscal 2026 was determined by dividing the NEO's target award value by the average closing price of our Class B Stock for the 20-trading day period ending on the date of grant (or, for Mr. Alagirisamy's supplemental award granted in connection with his December 2025 appointment, the 20-trading day period ending on September 1, 2025, which was the date of the annual grant for equity-eligible employees generally). PSUs accumulate dividend equivalents that are paid only when, and to the extent, they vest. +STOCK OPTIONS +Stock options align our NEOs' interests with those of our shareholders by rewarding the achievement of upside potential, and they reflect our "pay for performance" philosophy by rewarding the NEOs only if the price of our Class B Stock appreciates. +The number of stock options granted to each NEO (excluding Mr. Alagirisamy) for fiscal 2026 was determined by dividing the NEO's award value by the Black-Scholes value (calculated based on a 20-day average stock price and the available five-year and seven-year interest rates) of a stock option on the date of grant. For Mr. Alagirisamy's supplemental award, granted in connection with his appointment in December 2025, the number of stock options granted was determined using the Black-Scholes value calculated for the 20-trading day period ending on September 1, 2025, which was the date of the annual grant for equity-eligible employees generally. +Options granted to the NEOs vest in equal annual installments over four years and have an exercise price equal to the closing market price of our stock on the date of grant (or the trading day immediately prior to the grant date, if the grant date is not a trading day). To promote retention, stock options generally provide that if a NEO leaves the Company, they forfeit any unvested stock options. Forfeiture is subject to a limited retirement provision as well as partial accelerated vesting upon an involuntary termination of employment (each as described in the section below titled "Executive Compensation Tables—Potential Payments Upon Termination or Change-in-Control"). +RSUs +RSUs align our NEOs' interests with those of our shareholders by rewarding the achievement of long-term value creation, and they reflect our "pay for performance" philosophy because their value is directly tied to our Class B Stock price. +33 NIKE, INC. +The number of RSUs granted to each NEO for fiscal 2026 was determined by dividing the NEO's award value by the average closing price of our Class B Stock for the 20-trading day period ending on the date of grant (or, for Mr. Alagirisamy's supplemental award, granted in connection with his appointment in December 2025, the 20-trading day period ending on September 1, 2025, which was the date of the annual grant for equity-eligible employees generally). RSUs granted annually to the NEOs as part of long-term incentive compensation vest in equal annual installments over four years and accumulate dividend equivalents that are paid only upon vesting. To promote retention, RSU awards generally provide that any unvested RSUs are forfeited if the NEO leaves the Company. Forfeiture is subject to partial accelerated vesting upon an involuntary termination of employment or retirement (as described in the section below titled "Executive Compensation Tables—Potential Payments Upon Termination or Change-in-Control"). +FISCAL 2024 PSU AWARD RESULTS +As previously disclosed in our 2024 proxy statement, the fiscal 2024 – 2026 PSU awards granted in June 2023 were to be earned between 0% and 200% of target based on Relative TSR over a three-year performance period (subject to a payout cap of 100% if Absolute TSR was negative). In addition, if Relative TSR was achieved at or above the threshold performance goal, a People & Planet modifier would allow the award payout to be increased or decreased by up to 20 percentage points (subject to both the 200% maximum earnout and the 100% Absolute TSR cap) based on a holistic assessment of the Company's performance. +NIKE's Relative TSR for fiscal years 2024 – 2026 was at the 1st percentile, corresponding to an earnout of 0%. Relative TSR was calculated in comparison to the companies that were included in the S&P 500 as of May 31, 2026, using the 20-trading day average stock price and assuming that dividends paid during the performance period were reinvested in the applicable company's stock. Because Relative TSR was below the threshold performance goal, the People & Planet modifier was not applicable. Therefore, as illustrated below, the total payout for the fiscal 2024 – 2026 PSU awards was 0% for each of the NEOs. +FISCAL 2024 – 2026 PERFORMANCE RESULTS +FINANCIAL PERFORMANCE METRIC +% PAYOUT +THRESHOLD +25% +TARGET +100% +MAXIMUM +200% +Relative TSR +PAYOUT: +0% +EQUITY RETENTION AWARDS +In December 2025, the Compensation Committee approved an equity-based retention grant with a target value of $15 million for Mr. Hill and $4 million for each of our non-CEO NEOs. These grants were designed to collectively motivate the newly established senior leadership team to execute on the Company's turnaround plan and strengthen retention during this pivotal period. While Mr. Friend received a retention award in September 2024 in connection with the CEO transition, all of the other NEOs, including Mr. Hill, were newly appointed as executive officers after that grant and did not receive it. +The December 2025 retention awards cliff vest on December 10, 2027 and are earned 50% subject to continuous service through the scheduled vesting date, and 50% subject to achievement of Adjusted Operating Margin Growth targets (the growth rate of fiscal 2027 EBIT Margin measured in basis points above fiscal 2026 EBIT Margin, each as set forth in the audited consolidated financial statements of the Company). The Compensation Committee selected Adjusted Operating Margin Growth because it is a metric that measures profitability and operational efficiency, both of which play a key role in NIKE's turnaround. +For the Adjusted Operating Margin Growth performance measure, performance below target results in a 0% payout, achievement at target results in a 100% payout, and achievement equal to or exceeding the maximum performance value results in a 200% payout. Achievement between target and maximum performance values is interpolated on a straight-line basis. +The Committee carefully weighed shareholder feedback and considered multiple factors in determining the target award values and structure of the grant. The target award grant values balance providing meaningful retention for each NEO with the shareholder value we believe will be created through the achievement of growth in Adjusted Operating Margin by the end of fiscal 2027. +These awards are subject to partial accelerated vesting, based on actual Company performance during the performance period, upon an involuntary termination of employment (described in the section below titled "Executive Compensation Tables - Potential Payments Upon Termination or Change-in-Control"). +2026 PROXY STATEMENT 34 +OTHER COMPENSATION +RETIREMENT PLANS +We maintain a U.S. tax qualified retirement savings plan—the 401(k) Plan—under which all eligible U.S. employees, including the NEOs, are able to make pre-tax and after-tax contributions from their cash compensation. We make annual matching contributions for all participants equal to 100% of their pre-tax contributions up to 5% of their total eligible compensation. +The Internal Revenue Code limits the amount of compensation that can be deferred under the 401(k) Plan, and also limits the amount of salary and annual cash incentive award ($350,000 for our 2026 fiscal year) that may be taken into account when determining contributions under that plan. Accordingly, we provide our NEOs and other highly compensated employees with the opportunity to defer their compensation, including amounts in excess of the tax law limit, under our DCP. We do not match deferrals to the DCP. Balances in the DCP, including the balances of the NEOs, are unsecured and at-risk, meaning that the balances may be forfeited in the event of the Company's financial distress, such as bankruptcy. +Fiscal 2026 matching contributions to the NEOs under the 401(k) Plan are included in the All Other Compensation column in the Summary Compensation Table on page 41 . +EMPLOYEE STOCK PURCHASE PLAN +Our Employee Stock Purchase Plan allows eligible employees in the United States and in many countries outside of the United States, including the NEOs, to purchase Class B Stock through payroll deductions at a 15% discount to the market price on the first or last trading day of the six-month purchase period, depending on which day the stock price was lower. +PERQUISITES AND OTHER BENEFITS +Our executive compensation program includes limited perquisites and other personal benefits for our NEOs, which generally consist of home security and financial planning services. Given the nature of our business, from time to time certain Company employees, including certain executive officers, may also receive Company product, event tickets, or travel benefits that are not generally offered to all employees. +Effective June 1, 2024, consistent with the recommendation of an outside security provider hired by the Company to perform a comprehensive security assessment with respect to the CEO, Mr. Hill is entitled to unlimited personal use of Company aircraft, which is intended to increase his security, availability, and productivity. The unreimbursed incremental cost of his use is disclosed in the Summary Compensation Table on page 41 . +All NEOs participate in our standard Employee Matching Gift Program applicable to employees generally, without enhancement. Our Employee Matching Gift Program does not match employee contributions that benefit the employee, including contributions to the employee's personal or family foundation or to a non-profit organization that is managed or led by, or provides compensation or assistance to, the employee or a member of their family. +We do not provide any tax gross-ups on perquisites to our executive officers, other than for qualified relocation expenses in accordance with our standard relocation policy. Greater detail about the perquisites and personal benefits provided to our NEOs in fiscal 2026 is provided in the footnotes to the Summary Compensation Table on page 41 . +Effective June 16, 2026, the Company adopted the NIKE, Inc. Executive Severance Pay Plan covering various executives, including the NEOs. See the section below titled "Executive Compensation Tables—Potential Payments Upon Termination or Change-in-Control" for additional information. +NON-COMPETITION AGREEMENTS +In exchange for non-competition agreements from each of our NEOs, we have agreed to provide monthly payments during the non-compete period following termination of employment, as described in the section below titled "Executive Compensation Tables—Potential Payments upon Termination or Change-in-Control". We believe that it is appropriate to compensate individuals to refrain from working with competitors following termination, and that compensation enhances the enforceability of such agreements. +OTHER EMPLOYMENT ARRANGEMENTS +Except as previously disclosed with respect to Mr. Hill, who entered into an offer letter with the Company in connection with his appointment as President and CEO, we do not have employment contracts with any of our NEOs, and all of our NEOs are employed at-will. +35 NIKE, INC. +OUR COMPENSATION PROCESS +COMPENSATION COMMITTEE +The Compensation Committee oversees our executive compensation program, including determining the value and composition of the compensation package for each of our executive officers and setting annual performance goals for the CEO. In addition to any special actions the Compensation Committee may take throughout the year, the committee generally acts with respect to compensation for our NEOs during the fiscal year as follows: +PEER GROUP +Given the competitive market for top-tier talent, the Compensation Committee uses a peer group based on certain factors and criteria outlined below to provide a reference for assessing executive compensation levels and practices. Based on the criteria, the following peer group was considered for purposes of setting fiscal 2026 executive compensation: +Best Buy Company, Inc. Microsoft Corporation Starbucks Corporation +Cisco Systems, Inc. Mondelez International, Inc. Target Corporation +The Coca-Cola Company Netflix, Inc. TJX Companies +Kimberly-Clark Corporation Pepsico, Inc. Walmart Inc. +Lowe's Companies, Inc. Procter & Gamble Company The Walt Disney Company +McDonald's Corporation Salesforce, Inc. +The Compensation Committee reviews our compensation peer group periodically to determine the appropriate companies to include. In its review, the Compensation Committee considers companies based on the following factors and criteria: +• Publicly-traded, U.S.-based companies, with revenues and market capitalization within a reasonable range of NIKE's revenue and market capitalization. At the time the committee approved the peer group, NIKE's revenue was at the 50th percentile of the peer group and NIKE's market capitalization was at the 43rd percentile of the peer group. +• Leading companies across retail, digital, and services spaces, with a focus on consumer products and having a top-tier brand value. +2026 PROXY STATEMENT 36 +• Competitors for talent, aligned to NIKE's evolving business and talent strategies. +• Companies that list NIKE as a peer or are in NIKE's peer group as selected by a proxy advisory firm. +In November 2025, the Compensation Committee further refined our peer group for purposes of setting fiscal 2027 executive compensation to remove Microsoft Corporation. +In addition to considering our peer group, the Compensation Committee also uses market survey data from third parties, including Aon, Willis Towers Watson, and Mercer, about a broader range of companies. The Compensation Committee generally does not set executive compensation at or near any particular percentile of peer group, or market, compensation. Instead, the committee considers compensation to be competitive if it is generally within a reasonable range of market median. +ROLE OF MANAGEMENT +The CEO makes compensation recommendations to, and participates in discussions with, the Compensation Committee regarding the compensation of each executive officer other than himself. Mr. Hill completed a holistic assessment of the MBOs under the PSP for each of the other NEOs at the end of fiscal year 2026 that factored in both quantitative measures and qualitative considerations. In June 2026, Mr. Hill recommended the MBO achievement level for the other NEOs and the Committee approved the payouts under the PSP. In addition, our human resources staff regularly provides data, analysis, and recommendations to the committee regarding executive compensation. +The Compensation Committee meets regularly in executive session without the CEO or other management present to discuss our executive compensation program. Such executive sessions include discussions about, among other topics, the CEO's performance and compensation and the design and operation of our executive compensation plans. +ROLE OF COMPENSATION CONSULTANT +The Compensation Committee has the authority, in its sole discretion, to retain compensation consultants to assist the committee in overseeing our executive compensation program. The Compensation Committee chose not to retain any such consultants in fiscal 2026. However, in connection with the committee's analysis and decision-making regarding the fiscal 2026 executive compensation program, the Compensation Committee supplemented peer group data with information from surveys and reports containing competitive market data from Aon, Willis Towers Watson, and Mercer, which are obtained by our human resources staff. +OTHER COMPENSATION PRACTICES +STOCK OWNERSHIP GUIDELINES +We maintain stock ownership guidelines for executive officers that are designed to further align the interests of our executive officers with those of our shareholders. Under the guidelines, each executive officer is required to hold NIKE stock valued at the following multiple of their annual base salary: +POSITION OWNERSHIP LEVEL +Chief Executive Officer +8X Base Salary +Other Executive Officers (including NEOs) +3X Base Salary +New executive officers are required to attain these ownership levels within five years of their appointment. For purposes of calculating ownership, we exclude unvested PSUs that remain subject to performance-based vesting conditions as well as all stock options (whether vested or unvested). As of May 31, 2026, the CEO and each of our other executive officers, including each other NEO, has met or is on track to meet the applicable ownership guideline within the requisite period. +HEDGING AND PLEDGING +The Company's Blackout and Pre-clearance Policy (which supplements our Insider Trading Policy) prohibits directors, executive officers, and other designated insiders (based on seniority and department) from engaging in transactions involving hedging, monetization, or short sales of NIKE stock, including zero-cost collars and forward sale contracts. The policy also requires directors and executive officers, along with members of their families and households, to obtain pre-approval from the Company's Chairman or CEO before pledging NIKE stock. Before any such approval is granted, the Company's Clearance Director considers the size of the pledge relative to the individual's other holdings, both direct and indirect, and NIKE's shares outstanding; the risk of foreclosure given the nature of the associated transaction; protections against the appearance of insider trading, including prohibitions on sales during trading blackouts; and the ability to timely report sales on Form 4. +37 NIKE, INC. +CHANGE-IN-CONTROL PROVISIONS +PSP awards do not accelerate upon a change in control. PSU, stock option, and RSU awards are subject only to "double-trigger" accelerated change-in-control vesting, meaning that vesting is accelerated only if there is a change in control of the Company, and either the acquiring entity fails to assume the awards or, within the following two years, the employee's employment is terminated by the acquirer without cause or by the employee for good reason. This double-trigger acceleration is intended to encourage executive retention through a period of uncertainty. The Compensation Committee believes that this approach will enhance shareholder value in the context of an acquisition and align executives' interests with those of investors. The effect of change-in-control transactions on stock-based awards is described further in the section below titled "Executive Compensation Tables—Potential Payments Upon Termination or Change-in-Control". +CLAWBACK +In December 2023, the Company adopted a revised clawback policy regarding accounting restatements in connection with the SEC's adoption of new rules to implement Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and corresponding NYSE listing standards. The clawback policy generally requires recoupment of erroneously awarded incentive-based compensation (including any compensation granted, earned, or vested wholly or in part upon the attainment of a financial reporting measure) received by current and former executive officers (as defined in Rule 10D-1 of the Exchange Act), including our NEOs, during the three completed fiscal years immediately preceding the date that the Company is required to prepare an accounting restatement due to the Company's material noncompliance with any financial reporting requirement under U.S. federal securities laws. +In addition to the clawback policy, the Company maintains clawback provisions in the PSP and all of our equity award agreements (including all time-vesting equity awards) that generally permit recoupment in the event of the recipient's theft, embezzlement, fraud, breach of confidentiality or other applicable restrictive covenants, or material breach of contract. +RISK ASSESSMENT +At the Compensation Committee's request, management prepared an assessment of potential risks associated with the Company's fiscal 2026 compensation programs, including any risk that would be reasonably likely to have a material adverse effect on the Company. This included an assessment of risks associated with each element of executive compensation. The assessment considered certain design features of the compensation program that reduce the likelihood of excessive risk taking, such as reasonable performance targets, capped incentive compensation payouts, a balance of short- and long-term incentives, a balance of cash- and stock-based incentives, vesting of awards over time, and the potential for clawback of incentive compensation. In addition, for stock-based compensation, we have adopted stock ownership guidelines, provided for limited accelerated vesting of PSUs, stock options, and RSUs upon termination of employment, and provided for only double-trigger accelerated vesting of stock-based awards upon a change in control. The Compensation Committee reviewed the risk assessment and concluded that our compensation programs and practices do not create risks that are reasonably likely to have a material adverse effect on the Company. +TAX DEDUCTIBILITY OF EXECUTIVE COMPENSATION +Section 162(m) of the Internal Revenue Code generally places a $1 million limit on the amount of compensation a company can deduct in any one year for "covered employees". While the Compensation Committee seeks to preserve tax deductibility in developing and implementing our executive compensation program, the committee also believes that it is important to maintain flexibility in administering compensation programs in a manner designed to promote varying corporate goals and the interests of our shareholders. Accordingly, we have not adopted a policy that all compensation must qualify as deductible for tax purposes and retain the ability to provide compensation that may not qualify as deductible under Section 162(m). +TIMING OF DECISIONS +In accordance with Item 402(x) of Regulation S-K, we are providing information regarding our procedures related to the grant of stock option awards close in time to the release of material non-public information. Although we do not have a policy, practice or obligation that requires us to grant stock options (or other equity or equity-based awards) on specific dates, we have adopted insider trading policies and procedures that govern the purchase, sale, and other disposition of our securities by our employees, directors, officers, and consultants. +2026 PROXY STATEMENT 38 +Our insider trading policies and procedures prohibit our employees, directors, officers, and consultants from, among other things, trading in our securities while in possession of material non-public information. The trading restrictions set out in the Company's Insider Trading Policy expressly apply to any sale of stock purchased upon exercise of a stock option. We have also adopted a Blackout and Pre-clearance Policy (which supplements our Insider Trading Policy) designed to help prevent accidental violations of the law and to avoid even the appearance of trading on inside information. The Blackout and Pre-clearance Policy generally prohibits directors, executive officers, and other designated insiders from, among other things, trading in NIKE securities during the period beginning on the fifteenth day of the last month of each fiscal quarter and ending after the first full trading day following the public release of the Company's earnings for that quarter (and during event-specific blackouts). Moreover, the Blackout and Pre-clearance Policy requires directors and executive officers, along with members of their families and households, to obtain pre-approval from the Company's Chairman or CEO before pledging NIKE stock. Before any such approval is granted, the Company's Clearance Director considers, among other factors, protections against the appearance of insider trading, including prohibitions on sales during trading blackouts. +Neither our Board nor our Compensation Committee takes material non-public information into account when determining the timing of equity awards, nor do we time the disclosure of material non-public information for the purpose of affecting the value of executive compensation. The Compensation Committee determined in June 2024 to align the grant date for long-term incentive awards to executive officers (including NEOs) with the grant date for employees below the executive officer level. Accordingly, awards for fiscal 2026 were granted to executive officers (including NEOs, other than Mr. Alagirisamy's supplemental award) on September 1, 2025. We generally issue non-annual equity awards to our executive officers on a limited and infrequent basis, and not in accordance with any fixed schedule. +During fiscal 2026, there were no stock option awards granted to any NEO within four business days preceding the filing of any report on Forms 10-K, 10-Q, or 8-K that discloses material nonpublic information. +REALIZABLE PAY +Our philosophy is to "pay for performance". As a result, executive compensation is highly incentive-based and includes, among other elements, a mixture of variable cash- and stock-based compensation elements consisting of PSP, PSUs, stock options, and RSUs. In total, 92% of total target annual compensation for our CEO is at risk (87% for the other non-CEO NEOs). Given that a significant portion of our executive compensation packages varies depending on company performance, the grant date value of compensation reported annually in the Summary Compensation Table does not always reflect the actual realizable pay value that is ultimately received by our NEOs. Realizable Pay reinforces a pay-for-performance linkage because the short- and long-term incentive opportunities under our executive compensation program only provide value when meaningful performance is achieved. +To illustrate the differences, the graphs below compare, for the CEO and other non-CEO NEOs (on average), the cumulative values for fiscal 2025 and 2026 for Total Target Compensation, Summary Compensation Table Compensation, and Realizable Pay at the end of fiscal year 2026. For this purpose: +• "Total Target Compensation" is the sum of target annual base salary, target values for PSP, target values for annual long-term incentive awards and target values for equity retention awards (as applicable), in each case, for fiscal years 2025 and 2026. +• "Summary Compensation Table Compensation" refers to the actual disclosure in the Summary Compensation Table for fiscal years 2025 and 2026 (excluding amounts reported under the "All Other Compensation" column). +• "Realizable Pay" refers to the sum of actual base salary, actual PSP payouts, and the potential payout value of long-term incentive awards and equity retention awards (as applicable), for fiscal years 2025 and 2026. +• Realizable Pay for stock options is based on their intrinsic value, assuming threshold achievement for the 2025-2027 PSU award and target achievement for the 2026-2028 PSU award as reported in the Outstanding Equity Awards Table, calculated using a stock price of $46.23, which was the closing price of our common stock on the last business day of fiscal 2026. +• Realizable Pay for the equity retention award granted on September 18, 2024 (applicable only to Mr. Friend) assumes 50% of the award is earned, and for the December 10, 2025 equity retention award assumes 100% of the award is earned, calculated using a stock price of $46.23, which was the closing price of our common stock on the last business day of fiscal 2026. +39 NIKE, INC. +The graphs below are not substitutes for the information required by the 2026 Summary Compensation Table for fiscal years 2024 – 2026, which appears on page 41 . +CEO +Non-CEO NEOs (1) +(1) For fiscal 2025, the non-CEO NEOs consist of Messrs. Friend and Leinwand. For fiscal 2026, the non-CEO NEOs consist of Messrs. Friend, Leinwand, and Alagirisamy and Ms. Heinle. +(2) Realizable Pay includes no value for stock options, which had no intrinsic value as of May 31, 2026. +COMPENSATION COMMITTEE REPORT +The Compensation Committee of the Board of Directors has reviewed and discussed with management the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K. Based on the review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement. +Members of the Compensation Committee: +• Timothy Cook, Chair +• Mónica Gil +• Michelle Peluso +2026 PROXY STATEMENT 40 +EXECUTIVE COMPENSATION TABLES +SUMMARY COMPENSATION TABLE +The following table sets forth information concerning the total compensation of each NEO for fiscal years 2026, 2025, and 2024 (as applicable). +NAME AND PRINCIPAL +POSITION YEAR +SALARY (1) +($) +BONUS (2) +($) +STOCK +AWARDS (3) +($) +OPTION +AWARDS (4) +($) +NON-EQUITY +INCENTIVE PLAN +COMPENSATION (5) +($) +ALL OTHER +COMPENSATION (6) +($) +TOTAL +($) +Elliott Hill +President and Chief Executive Officer +2026 1,500,000 — 28,137,798 3,967,113 2,220,000 515,965 36,340,876 +2025 951,923 4,000,000 14,887,893 5,832,678 — 345,574 26,018,068 +Matthew Friend +Executive Vice President and Chief Financial Officer +2026 1,250,000 — 10,680,353 2,047,547 1,170,000 17,500 15,165,400 +2025 1,250,000 — 9,788,426 3,048,046 — 17,250 14,103,722 +2024 1,298,077 — 5,221,473 2,878,629 975,000 17,331 10,390,510 +Venkatesh Alagirisamy +Executive Vice President, Chief Operating Officer +2026 960,096 — 8,071,579 1,564,777 900,900 17,500 11,514,852 +Treasure Heinle +Executive Vice President, Chief People Officer +2026 984,615 — 8,626,384 1,407,691 936,000 17,500 11,972,190 +Robert Leinwand +Executive Vice President, Chief Legal Officer +2026 1,005,769 — 8,626,384 1,407,691 959,400 13,877 12,013,121 +2025 795,749 — 3,875,030 2,162,574 — 21,128 6,854,481 +(1) Salary amounts for fiscal 2025 and 2026 reflect 26 bi-weekly pay periods, compared with 27 bi-weekly pay periods for fiscal 2024. +(2) For Fiscal 2025, reflects the sign-on cash award granted to Mr. Hill in connection with his appointment as President and CEO. +(3) Represents the grant date fair value of RSU and PSU awards, in each case computed in accordance with accounting guidance applicable to stock-based compensation. For RSUs, the grant date fair value was computed based on the closing market price of our Class B Stock on the grant date. For PSUs, the grant date fair value was computed using a Monte Carlo simulation based on the probable outcome of the performance condition as of the grant date. The assumptions made in determining the grant date fair value of PSUs under applicable accounting guidance are disclosed in footnote 5 of "Grants of Plan-Based Awards in Fiscal 2026". For fiscal 2026, the grant date fair value of the PSU awards that were granted as annual long-term incentive awards was: $8,813,456 for Mr. Hill, $4,548,875 for Mr. Friend, $2,635,392 for Mr. Alagirisamy, and $3,127,406 for Ms. Heinle and Mr. Leinwand. Assuming that the maximum level of performance conditions is achieved, such PSU award values would be: $15,686,613 for Mr. Hill, $8,096,306 for Mr. Friend, $4,878,617 for Mr. Alagirisamy, and $5,566,307 for Ms. Heinle and Mr. Leinwand. For equity retention awards, the grant date fair value was computed based on the closing market price of our Class B Stock on the grant date. Assuming the maximum level of the performance condition is achieved, the equity retention PSU award values would be: $23,104,066 for Mr. Hill and $6,161,102 for Messrs. Friend, Alagirisamy and Leinwand and Ms. Heinle. +(4) Represents the grant date fair value of options granted in the applicable fiscal year computed in accordance with accounting guidance applicable to stock-based compensation. The grant date fair value of the options was estimated using the Black-Scholes option pricing model. The assumptions made in determining the grant date fair value of options under applicable accounting guidance are disclosed in Note 9 of Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended May 31, 2026. +(5) Amounts reported in this column represent annual cash incentive awards under the NIKE, Inc. Executive Performance Sharing Plan for the applicable fiscal year. Fiscal 2026 amounts were earned at 74% of target for Mr. Hill and 78% of target for each other NEO and were paid in fiscal 2027. No amounts were earned for fiscal 2025. Mr. Friend's fiscal 2024 amount represents his annual cash incentive award earned under the PSP for fiscal 2024. +(6) For fiscal 2026, includes Company matching contributions to the 401(k) Plan in the amount of $17,500 for Messrs. Friend and Alagirisamy, and Ms. Heinle and $13,877 for Mr. Leinwand. The amount for Mr. Hill includes $504,102 in aggregate incremental cost to the Company for personal use of the Company's aircraft, in addition to the value of security services, and Company-related merchandise. The aggregate incremental cost for personal use of the Company's aircraft is determined based on the variable operating cost to the Company, including the cost of fuel, maintenance, crew travel expenses, landing fees, parking fees, in-flight food and beverage, and other smaller variable costs associated with each flight. +41 NIKE, INC. +GRANTS OF PLAN-BASED AWARDS IN FISCAL 2026 +The following table sets forth information concerning the performance-based annual cash incentive opportunities and PSUs, RSUs, and stock options granted to the NEOs in fiscal 2026. +ESTIMATED POSSIBLE PAYOUTS UNDER +NON-EQUITY INCENTIVE PLAN AWARDS (1) +ESTIMATED FUTURE PAYOUTS UNDER +EQUITY INCENTIVE PLAN AWARDS (2) +ALL OTHER +STOCK AWARDS: +NUMBER OF +SHARES OF +STOCK OR +UNITS (3) +ALL OTHER OPTION +AWARDS: NUMBER +OF SECURITIES +UNDERLYING +OPTIONS (4) +EXERCISE +OR BASE +PRICE OF +OPTION +AWARDS +GRANT DATE +FAIR VALUE +OF STOCK +AND OPTION +AWARDS (5) +APPROVAL DATE THRESHOLD TARGET MAXIMUM THRESHOLD TARGET MAXIMUM +NAME GRANT DATE ($) ($) ($) (#) (#) (#) (#) (#) ($/SH) ($) +Elliott Hill 750,000 3,000,000 6,000,000 +9/1/2025 6/25/2025 25,344 101,374 202,748 8,813,456 +9/1/2025 6/25/2025 50,687 3,921,653 +9/1/2025 6/25/2025 164,474 77.37 3,967,113 +12/10/2025 12/1/2025 117,060 234,119 351,179 15,402,689 +Matthew Friend 375,000 1,500,000 3,000,000 +9/1/2025 6/25/2025 13,081 52,322 104,644 4,548,875 +9/1/2025 6/25/2025 26,161 2,024,077 +9/1/2025 6/25/2025 84,890 77.37 2,047,547 +12/10/2025 12/1/2025 31,216 62,432 93,648 4,107,401 +Venkatesh Alagirisamy 288,750 1,155,000 2,310,000 +9/1/2025 7/20/2025 1,570 6,279 12,558 545,896 +9/1/2025 7/20/2025 12,558 971,612 +9/1/2025 7/20/2025 50,232 77.37 1,211,596 +12/10/2025 12/1/2025 7,423 29,693 59,386 2,089,496 +12/10/2025 12/1/2025 5,429 357,174 +12/10/2025 12/1/2025 17,615 65.79 353,181 +12/10/2025 12/1/2025 31,216 62,432 93,648 4,107,401 +Treasure Heinle 300,000 1,200,000 2,400,000 +9/1/2025 6/25/2025 8,993 35,972 71,944 3,127,406 +9/1/2025 6/25/2025 17,986 1,391,577 +9/1/2025 6/25/2025 58,362 77.37 1,407,691 +12/10/2025 12/1/2025 31,216 62,432 93,648 4,107,401 +Robert Leinwand 307,500 1,230,000 2,460,000 +9/1/2025 6/25/2025 8,993 35,972 71,944 3,127,406 +9/1/2025 6/25/2025 17,986 1,391,577 +9/1/2025 6/25/2025 58,362 77.37 1,407,691 +12/10/2025 12/1/2025 31,216 62,432 93,648 4,107,401 +(1) These amounts represent the potential performance-based annual cash incentive awards payable for performance during fiscal 2026 under our PSP. Under this plan, the Compensation Committee approved target awards for fiscal 2026 based on a percentage of the executive's salary as follows: Mr. Hill, 200%; Mr. Friend, 120%; Mr. Alagirisamy, 120%, Ms. Heinle, 120% and Mr. Leinwand, 120%. Fiscal 2026 PSP awards were eligible to be earned between 0% and 200% of target based on Company performance and MBO performance, as applicable, during fiscal 2026. Actual award payouts earned in fiscal 2026 and paid in fiscal 2027 are shown in the Summary Compensation Table. +(2) These amounts represent grants of PSUs and equity retention awards under the SIP. The PSUs are eligible to be earned between 0% and 200% of target based on Adjusted Revenue and Adjusted EPS between June 1, 2025 and May 31, 2028, with a Relative TSR modifier, as described under the section above titled "Compensation Discussion and Analysis – Compensation of our Named Executive Officers – Long-Term Incentive – Fiscal 2026 Long-Term Incentive Award Grants – 2026 - 2028 PSUs." Earned PSUs will vest in September 2028 and are generally subject to continued employment through the vesting date. The equity retention awards granted on December 10, 2025 will cliff vest on December 10, 2027 and are earned 50% subject to continuous service through the scheduled vesting date, and 50% subject to the achievement of FY27 Adjusted Operating Margin growth goal. The portion of the award subject to the performance measure will be earned at 100% if such performance measure is achieved and up to a maximum of 200%. Vesting for PSUs and equity retention awards will be accelerated in certain circumstances as described in the section below titled "Potential Payouts Upon Termination or Change-in-Control". PSUs and equity retention awards accumulate cash dividend equivalents that are paid only when, and to the extent, they vest. +(3) Amounts reported in this column represent grants of RSUs under the SIP. All RSUs vest in four equal installments on September 1 of 2026, 2027, 2028, and 2029. Vesting for all RSUs will be accelerated in certain circumstances as described in the section below titled "Potential Payouts Upon Termination or Change-in-Control". All RSUs accumulate cash dividend equivalents that are only paid upon vesting. +(4) Amounts reported in this column represent stock options granted under the SIP which become exercisable in four equal installments on September 1 of 2026, 2027, 2028, and 2029. Options also become exercisable in certain circumstances as described in the section below titled "Potential Payouts Upon Termination or Change-in-Control". Each option has a maximum term of 10 years, subject to earlier termination in the event of the optionee's termination of employment. +2026 PROXY STATEMENT 42 +(5) For stock awards, represents the grant date fair value of (a) RSUs based on the closing market price of our Class B Stock on the grant date, (b) an equity retention grant, also valued based on the closing market price of our Class B Stock on the grant date and (c) PSUs based on values of $86.94 and $70.37 per share computed using a Monte Carlo simulation based on the probable outcome of the performance condition as of the grant date. The Monte Carlo simulation was performed using the remaining performance period of 2 – 3 years and assuming an expected volatility of 35.11% and 35.59% and risk-free interest rate of 3.52% and 3.49%. The expected volatility was based on an analysis of the historical volatility of the Class B Stock on the grant date for 2 – 3 years. The risk-free interest rate corresponding with the remaining performance period was calculated using the U.S. Treasury (constant maturity) risk-free rates in effect on the grant date for a 2- and 3-year period. For option awards, represents the grant date fair value of stock options granted based on a value of $20.05 and $24.12 per share, calculated using the Black-Scholes option pricing model. The assumptions made in determining option values are disclosed in Note 9 to Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended May 31, 2026. Stock and option award values were computed in accordance with accounting guidance applicable to stock-based compensation. +OUTSTANDING EQUITY AWARDS AT MAY 31, 2026 +The following table sets forth information concerning outstanding stock options, PSUs, and RSUs held by the NEOs at May 31, 2026. +OPTION AWARDS STOCK AWARDS +NAME NUMBER OF +SECURITIES +UNDERLYING +UNEXERCISED +OPTIONS +EXERCISABLE +(#) +NUMBER OF +SECURITIES +UNDERLYING +UNEXERCISABLE +OPTIONS +(#) (1) +OPTION +EXERCISE +PRICE +($) OPTION +EXPIRATION +DATE +NUMBER OF SHARES OR UNITS OF STOCK THAT HAVE NOT VESTED +(#) (2) +MARKET VALUE OF SHARES OR UNITS OF STOCK THAT HAVE NOT VESTED +($) +EQUITY INCENTIVE PLAN AWARDS: NUMBER OF UNEARNED SHARES, UNITS OR OTHER RIGHTS THAT HAVE NOT VESTED +(#) (3) +EQUITY INCENTIVE PLAN AWARDS: MARKET OR PAYOUT VALUE OF UNEARNED SHARES, UNITS OR OTHER RIGHTS THAT HAVE NOT VESTED +($) +Elliott Hill 56,938 +170,812 (4) +81.60 10/14/2034 +— +164,474 (5) +77.37 9/1/2035 213,294 9,860,582 242,655 11,217,941 +Matthew Friend 23,000 — 57.87 7/15/2026 +30,000 — 59.10 7/20/2027 +35,000 — 77.54 8/1/2028 +36,095 — 83.12 8/1/2029 +77,197 — 97.61 8/1/2030 +43,669 — 167.51 8/1/2031 +56,391 +18,797 (6) +114.30 8/1/2032 +41,372 +41,371 (7) +109.40 8/1/2033 +29,388 +88,161 (8) +83.32 9/1/2034 +— +84,890 (5) +77.37 9/1/2035 96,885 4,478,994 120,595 5,575,107 +Venkatesh Alagirisamy 10,000 — 57.87 7/15/2026 +15,000 — 59.10 7/20/2027 +12,170 — 82.20 9/1/2028 +23,670 — 84.50 9/1/2029 +30,760 — 97.61 8/1/2030 +18,485 — 167.51 8/1/2031 +16,704 +5,568 (6) +114.30 8/1/2032 +15,550 +15,550 (7) +109.40 8/1/2033 +10,502 +31,506 (8) +83.32 9/1/2034 +— +50,232 (5) +77.37 9/1/2035 +— +17,615 (5) +65.79 12/10/2035 86,040 3,977,629 68,501 3,166,804 +Treasure Heinle 1,584 — 82.20 9/1/2028 +2,958 — 84.50 9/1/2029 +9,280 — 114.84 9/1/2030 +5,900 — 164.56 9/1/2031 +10,695 +3,565 (9) +106.49 9/1/2032 +6,238 +6,238 (10) +102.36 9/1/2033 +20,204 +60,611 (8) +72.00 1/6/2035 +— +58,362 (5) +77.37 9/1/2035 58,243 2,692,574 75,784 3,503,494 +43 NIKE, INC. +OPTION AWARDS STOCK AWARDS +NAME NUMBER OF +SECURITIES +UNDERLYING +UNEXERCISED +OPTIONS +EXERCISABLE +(#) +NUMBER OF +SECURITIES +UNDERLYING +UNEXERCISABLE +OPTIONS +(#) (1) +OPTION +EXERCISE +PRICE +($) OPTION +EXPIRATION +DATE +NUMBER OF SHARES OR UNITS OF STOCK THAT HAVE NOT VESTED +(#) (2) +MARKET VALUE OF SHARES OR UNITS OF STOCK THAT HAVE NOT VESTED +($) +EQUITY INCENTIVE PLAN AWARDS: NUMBER OF UNEARNED SHARES, UNITS OR OTHER RIGHTS THAT HAVE NOT VESTED +(#) (3) +EQUITY INCENTIVE PLAN AWARDS: MARKET OR PAYOUT VALUE OF UNEARNED SHARES, UNITS OR OTHER RIGHTS THAT HAVE NOT VESTED +($) +Robert Leinwand 11,000 — 57.87 7/15/2026 +15,000 — 59.10 7/20/2027 +19,770 — 82.20 9/1/2028 +23,670 — 84.50 9/1/2029 +30,760 — 97.61 8/1/2030 +18,485 — 167.51 8/1/2031 +16,704 +5,568 (6) +114.30 8/1/2032 +11,108 +11,108 (7) +109.40 8/1/2033 +6,126 +18,378 (8) +83.32 9/1/2034 +15,061 +45,183 (8) +79.26 11/25/2034 +— +58,362 (5) +77.37 9/1/2035 58,171 2,689,245 75,784 3,503,494 +(1) Stock options generally become exercisable in four equal installments on each of the first four anniversaries of the grant date. +2026 PROXY STATEMENT 44 +(2) Reflects RSUs and one-time equity retention awards that vest as described in the table below. The retention awards granted in fiscal 2025 and 2026 represent the portion of one-time equity retention awards that will be earned subject to continuous service through the scheduled vesting date. The PSUs for the fiscal 2024 – 2026 performance period that were scheduled to cliff vest on August 1, 2026 were earned at 0% based on three-year Relative TSR, and therefore no amount is shown. +NAME FISCAL YEAR OF GRANT NUMBER OF UNVESTED UNITS VESTING SCHEDULE +Elliott Hill 2026 50,687 RSUs subject to four-year pro-rata vesting on 9/1/2026, 9/1/2027, 9/1/2028, and 9/1/2029 +2026 117,060 Equity retention award will cliff vest on 12/10/2027 +2025 23,747 RSUs subject to three-year pro-rata vesting; 50% of the remaining units vest on 10/15/2026 and 50% vest on 10/15/2027 +2025 21,800 RSUs subject to four-year pro-rata vesting; 33.3% of the remaining units vest on 9/1/2026, 33.3% vest on 9/1/2027, and 33.3% vest on 9/1/2028 +Matthew Friend 2026 26,161 RSUs subject to four-year pro-rata vesting on 9/1/2026, 9/1/2027, 9/1/2028, and 9/1/2029 +2026 31,216 Equity retention award will cliff vest on 12/10/2027 +2025 11,251 RSUs subject to four-year pro-rata vesting; 33.3% of the remaining units vest on 9/1/2026, 33.3% vest on 9/1/2027, and 33.3% vest on 9/1/2028 +2025 24,555 Equity retention award will cliff vest on 09/18/2026 +2024 3,702 RSUs subject to three-year pro-rata vesting; 100% of the remaining units vest on 8/1/2026 +Venkatesh Alagirisamy 2026 5,429 RSUs subject to four-year pro-rata vesting on 9/1/2026, 9/1/2027, 9/1/2028, and 9/1/2029 +2026 12,558 RSUs subject to four-year pro-rata vesting on 9/1/2026, 9/1/2027, 9/1/2028, and 9/1/2029 +2026 31,216 Equity retention award will cliff vest on 12/10/2027 +2025 7,876 RSUs subject to four-year pro-rata vesting; 33.3% of the remaining units vest on 9/1/2026, 33.3% vest on 9/1/2027, and 33.3% vest on 9/1/2028 +2024 1,727 RSUs subject to three-year pro-rata vesting; 100% of the remaining units vest on 8/1/2026 +2024 27,234 Equity retention award will cliff vest on 06/10/2026 +Treasure Heinle 2026 17,986 RSUs subject to four-year pro-rata vesting on 9/1/2026, 9/1/2027, 9/1/2028, and 9/1/2029 +2026 31,216 Equity retention award will cliff vest on 12/10/2027 +2026 3,798 RSUs subject to four-year pro-rata vesting; 33.3% of the remaining units vest on 9/1/2026, 33.3% vest on 9/1/2027, and 33.3% vest on 9/1/2028 +2025 3,938 RSUs subject to four-year pro-rata vesting; 33.3% of the remaining units vest on 9/1/2026, 33.3% vest on 9/1/2027, and 33.3% vest on 9/1/2028 +2024 1,305 RSUs subject to three-year pro-rata vesting; 100% of the remaining units vest on 2/10/2027 +Robert Leinwand 2026 17,986 RSUs subject to four-year pro-rata vesting on 9/1/2026, 9/1/2027, 9/1/2028, and 9/1/2029 +2026 31,216 Equity retention award will cliff vest on 12/10/2027 +2025 4,594 RSUs subject to four-year pro-rata vesting; 33.3% of the remaining units vest on 9/1/2026, 33.3% vest on 9/1/2027, and 33.3% vest on 9/1/2028 +2025 3,141 RSUs subject to four-year pro-rata vesting; 33.3% of the remaining units vest on 9/1/2026, 33.3% vest on 9/1/2027, and 33.3% vest on 9/1/2028 +2024 1,234 RSUs subject to three-year pro-rata vesting; 100% of the remaining units vest on 8/1/2026 +45 NIKE, INC. +(3) Reflects PSUs and equity retention awards that vest as described in the table below assuming performance (a) at the maximum level (100%) for the retention award granted in fiscal 2025, (b) at the target level (100%) for the retention awards granted in fiscal 2026 and the annual PSU (performance period 2026 - 2028) and (c) at the threshold level (25%) for the annual PSU (performance period 2025 - 2027). The retention award granted in fiscal 2025 represent the portion of one-time equity retention awards that will be earned at 0% or 100% based on achievement of a $100.00 stock price performance measure. The retention awards granted in fiscal 2026 represent the portion of the one-time equity retention awards that will be earned at 0% or between 100% and 200%. The PSUs for the fiscal 2026 – 2028 performance period will be earned between 0% and 200% based on achievement against annual growth targets set for Adjusted Revenue and Adjusted EPS and a relative TSR modifier between June 1, 2025 and May 31, 2028. The PSUs for the fiscal 2025 – 2027 performance period will be earned between 0% and 200% based on relative TSR between September 1, 2024 and August 31, 2027 and subject to the People & Planet modifier. +NAME FISCAL YEAR OF GRANT /PERFORMANCE PERIOD NUMBER OF UNEARNED, UNVESTED UNITS VESTING SCHEDULE +Elliott Hill 2026 - 2028 101,374 Earned units will cliff vest on 9/1/2028 +2026 117,059 Equity retention award will cliff vest on 12/10/2027 +2025 - 2027 24,222 Earned units will cliff vest on 9/1/2027 +Matthew Friend 2026 - 2028 52,322 Earned units will cliff vest on 9/1/2028 +2026 31,216 Equity retention award will cliff vest on 12/10/2027 +2025 - 2027 12,502 Earned units will cliff vest on 9/1/2027 +2025 24,555 Equity retention award will cliff vest on 9/18/2026 +Venkatesh Alagirisamy 2026 - 2028 6,279 Earned units will cliff vest on 9/1/2028 +2026 - 2028 29,693 Earned units will cliff vest on 9/1/2028 +2026 31,216 Equity retention award will cliff vest on 12/10/2027 +2025 - 2027 1,313 Earned units will cliff vest on 9/1/2027 +Treasure Heinle 2026 - 2028 35,972 Earned units will cliff vest on 9/1/2028 +2026 31,216 Equity retention award will cliff vest on 12/10/2027 +2025 - 2027 8,267 Earned units will cliff vest on 9/1/2027 +2025 - 2027 329 Earned units will cliff vest on 9/1/2027 +Robert Leinwand 2026 - 2028 35,972 Earned units will cliff vest on 9/1/2028 +2026 31,216 Equity retention award will cliff vest on 12/10/2027 +2025 - 2027 7,830 Earned units will cliff vest on 9/1/2027 +2025 - 2027 766 Earned units will cliff vest on 9/1/2027 +(4) 33% of these options will vest on August 1, 2026, 33% will vest on August 1, 2027, and 33% will vest on August 1, 2028. +(5) 25% of these options will vest on September 1, 2026, 25% will vest on September 1, 2027, 25% will vest on September 1, 2028, and 25% will vest on September 1, 2029. +(6) 100% of these options will vest on August 1, 2026. +(7) 50% of these options will vest on August 1, 2026 and 50% will vest on August 1, 2027. +(8) 33% of these options will vest on September 1, 2026, 33% will vest on September 1, 2027, and 33% will vest on September 1, 2028. +(9) 100% of these options will vest on September 1, 2026. +(10) 50% of these options will vest on September 1, 2026 and 50% will vest on September 1, 2027. +OPTION EXERCISES AND STOCK VESTED DURING FISCAL 2026 +The following table sets forth information concerning stock option exercises and vesting of RSUs during fiscal 2026 for each of the NEOs on an aggregated basis. +OPTION AWARDS STOCK AWARDS +NAME NUMBER OF +SHARES ACQUIRED +ON EXERCISE +(#) VALUE +REALIZED +ON EXERCISE +($) NUMBER OF +SHARES ACQUIRED +ON VESTING +(#) VALUE +REALIZED +ON VESTING +($) +Elliott Hill — — 19,141 1,362,318 +Matthew Friend — — 11,783 890,125 +Venkatesh Alagirisamy — — 5,591 424,629 +Treasure Heinle — — 5,233 369,587 +Robert Leinwand — — 18,763 1,239,940 +2026 PROXY STATEMENT 46 +NON-QUALIFIED DEFERRED COMPENSATION IN FISCAL 2026 +NAME PLAN +NAME +EXECUTIVE +CONTRIBUTIONS +IN FISCAL 2026 (1) +AGGREGATE EARNINGS +IN FISCAL 2026 AGGREGATE +WITHDRAWALS/ +DISTRIBUTIONS IN +FISCAL 2026 +AGGREGATE +BALANCE AT +MAY 31, 2026 (1) +Elliott Hill +DCP +$750,000 $1,207,656 $(942,015) $10,478,901 +Matthew Friend +DCP +— $203,040 — $940,748 +Venkatesh Alagirisamy DCP — $280,387 — $2,036,674 +Treasure Heinle DCP $98,462 $115,125 — $695,749 +Robert Leinwand DCP $546,250 $1,063,069 — $5,784,804 +(1) All amounts reported in the Executive Contributions column are also included in amounts reported in the Summary Compensation Table. Of the amounts reported in the Aggregate Balance column, the following amounts have been reported in the Summary Compensation Tables in this proxy statement or in prior year proxy statements: Mr. Hill, $1,514,819 (Mr. Hill was a NEO in FY 2019-2020 and has been a NEO since FY 2025); Mr. Friend, $9,503 (Mr. Friend has been a NEO since FY 2020); Mr. Alagirisamy, $0 (Mr. Alagirisamy has not previously been a NEO); Ms. Heinle, $98,462 (Ms. Heinle has not previously been a NEO); Mr. Leinwand, $1,074,677 (Mr. Leinwand has been a NEO since FY 2025). +NON-QUALIFIED DEFERRED COMPENSATION PLANS +The NEOs are eligible to participate in our DCP. Participants in the DCP may elect in advance to defer up to 75 percent of their annual base salary, and up to 100 percent of their bonus. +We may make annual profit sharing contributions to defined contribution retirement plans. The contributions are allocated among eligible employees based on a percentage of their total salary and bonus for the year. To the fullest extent permitted under Internal Revenue Code limitations, these contributions are made to employees' accounts under our qualified 401(k) Plan. Contributions based on salary and bonus in excess of the tax law limit ($350,000 for fiscal 2026) are made as NIKE contributions under the DCP. +Amounts deferred under the DCP are credited to a participant's account under the DCP. Each participant may allocate his or her account among any combination of the investment options available under the DCP. Participants' accounts are adjusted to reflect the investment performance of the investment options selected by the participants. Participants can change the allocation of their account balances daily. The investment options available under the DCP consist of 22 mutual funds with a variety of investment objectives. The investment options had annual returns in fiscal 2026 ranging from 2.24% to 65.16%. Amounts credited to participants' accounts are invested by us in actual investments matching the investment options selected by the participants to ensure that we do not bear any investment risk related to participants' investment choices. +The table below lists the available investment options under the Deferred Compensation Plan and their annual return as of May 31, 2026. +NAME OF FUND ANNUAL RATE OF RETURN AS OF MAY 31, 2026 +Fidelity Advisor® Focused Emerging Markets 65.16 % +MFS International Intrinsic Equity 21.88 % +Nomura Small Cap Value 29.09 % +PIMCO Real Return 5.46 % +Vanguard 500 Index 29.73 % +Vanguard Equity-Income 23.83 % +Vanguard Explorer 30.78 % +Vanguard Federal Money Market 3.94 % +Vanguard High-Yield Corporate 7.08 % +Vanguard International Growth 13.19 % +Vanguard LifeStrategy 20/80 9.39 % +Vanguard LifeStrategy 40/60 14.57 % +Vanguard LifeStrategy 60/40 19.96 % +Vanguard LifeStrategy 80/20 25.50 % +Vanguard Mid-Cap Index 18.59 % +Vanguard PRIMECAP 59.77 % +Vanguard Real Estate Index 11.30 % +Vanguard Short-Term Investment-Grade 4.78 % +47 NIKE, INC. +NAME OF FUND ANNUAL RATE OF RETURN AS OF MAY 31, 2026 +Vanguard Total Bond Market Index 5.10 % +Vanguard Total International Bond Index 2.24 % +Vanguard Total International Stock Index 32.57 % +Vanguard Wellington 21.42 % +The portion of a participant's account attributable to elective deferrals, including investment returns, is fully vested at all times. The portion of a participant's account attributable to NIKE contributions, including investment returns, is fully vested after the participant has been employed by us for five years. All of the NEOs are fully vested in their NIKE contributions. +Each time they elect to defer compensation, participants make an election regarding distribution of the compensation deferred under the election (as adjusted to reflect investment performance). A participant may elect for distribution to be made in a lump sum at the beginning of a predetermined year while the participant is still employed or in service (but no sooner than the fourth year after the year in which the distribution election is submitted). Alternatively, a participant may elect for distribution to be made in a lump sum or in quarterly installments over five, ten or fifteen years after termination of employment or service. Participants have limited rights to change their distribution elections. Participants may make a hardship withdrawal under certain circumstances. Subject to certain limitations, a participant may also at any time request to withdraw amounts from his or her account balance that were vested as of December 31, 2004 (and any subsequent investment returns on such amount). If such request is approved, the participant may withdraw 90% of the amount requested, and the remaining 10% will be permanently forfeited. +POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE-IN-CONTROL +The Company does not maintain individual severance or change in control agreements with our NEOs, and, except as otherwise described above with respect to Mr. Hill in the section titled "Compensation Discussion and Analysis—Compensation of our Named Executive Officers—Other Compensation—Other Employment Arrangements", we do not have employment contracts with any of our current NEOs, all of whom are employed at-will. +However, our NEOs, including our current NEOs, are entitled to payments and benefits in connection with certain termination events pursuant to the standard terms and conditions of our equity award agreements under the SIP, as described below under the section titled "Equity Award Agreements". In addition, we have non-competition agreements with each of our NEOs, pursuant to which our NEOs may be entitled to receive monthly payments during the applicable post-termination noncompetition period, as described below under the section titled "Non-competition Agreements". +These payments and benefits for our current NEOs are described further below and, as applicable, quantified in the table, under the section titled “Summary of Potential Payments”, which assumes the relevant triggering event had occurred as of the last business day of our fiscal year, May 29, 2026, consistent with the SEC's compensation disclosure rules. A glossary of certain defined terms applicable to these agreements is included at the end of this section. +On June 16, 2026, the Company adopted the NIKE, Inc. Executive Severance Pay Plan, effective as of the same date, in which each of our NEOs is eligible to participate. For more information refer to the Current Report on Form 8-K filed with the SEC on June 23, 2026. +EQUITY AWARD AGREEMENTS +TERMINATION TREATMENT +As of May 29, 2026, each NEO held stock options, RSUs, and PSUs under the SIP, as set forth in the Outstanding Equity Awards table above. Each award is evidenced by an award agreement that sets forth the terms and conditions of the award and the effect of any termination event or a change in control on unvested awards. As discussed elsewhere in this proxy statement, the Compensation Committee approved changes to the payments and benefits triggered on certain employment terminations (other than in connection with a change in control) under the Company's stock option, RSU, and PSU award agreements, including with respect to long-term incentive award grants made to our NEOs, beginning with the fiscal 2025 grants. As a result, the effect of a termination event on outstanding stock option, RSU, and PSU awards varies according to whether the award was granted on or after the September 1, 2024 annual grant (the "Current Options" and "Current Stock Awards", as applicable) or prior to the September 1, 2024 annual grant (the "Pre-Fiscal 2025 Options" and "Pre-Fiscal 2025 Stock Awards", as applicable), as described in the award summaries below. +2026 PROXY STATEMENT 48 +STOCK OPTIONS +Death or Disability +Upon the death or disability of the holder: +• unvested options will vest, and such options, together with all other vested options, will be exercisable for up to four years following termination of employment, but not beyond each option's original 10-year term. +Involuntary Termination without Cause +Current Options +If the holder experiences an "involuntary termination" of employment by the Company without cause, then subject to the holder signing a general waiver and release of claims: +• a prorated portion of outstanding unvested options will vest and become exercisable based on the number of months elapsed in the vesting period prior to the termination of employment (less amounts already vested) and the remainder will be forfeited, and +• vested options (including such accelerated options) will be exercisable for up to one year following termination of employment, but not beyond each option's original term. +Pre-Fiscal 2025 Options +Upon a termination of employment due to a "divestiture" or "reduction in force" that is not a change in control, then subject to the holder signing a general waiver and release of claims: +• options that are scheduled to vest within one year following the termination will vest, and become exercisable, and all other unvested options will be forfeited, and +• vested options will be exercisable for up to one year following termination of employment, but not beyond each option's original term. +If the holder's employment is involuntarily terminated by the Company without cause for any other reason: +• options that are unvested will be forfeited, and +• options that are vested at termination may be exercised for up to three months after the termination of employment, but not beyond each option's original term. +Retirement +Current Options +In the event of a holder's "involuntary termination" or voluntary resignation, in each case when the holder is "retirement eligible", the following treatment will apply, as applicable: +• Unvested options that have been outstanding for at least one year will vest and become exercisable, and vested options will be exercisable for four years following retirement, but not beyond each option's original term. +• The treatment of unvested options that have been outstanding for less than one year will vary based on the termination event: +– If the holder voluntarily resigns when retirement eligible, then all such options will be forfeited, and vested options (if any) may be exercisable up to three months after the termination of employment, but not beyond each option's original term. +– If instead the holder experiences an involuntary termination when retirement eligible, then a prorated portion of such options that are unvested will vest and become exercisable based on the number of months elapsed in the vesting period prior to the termination of employment and the remainder of such options will be forfeited, and vested options will be exercisable for up to one year following termination of employment. +Pre-Fiscal 2025 Options +If the holder's employment terminates because of the holder's "early retirement" or the holder is terminated as a result of a "divestiture" or "reduction in force" when eligible for "early retirement": +• unvested options will continue to vest according to the schedule specified in the agreement, and such options, together with all other vested options, will be exercisable for up to four years following termination of employment, but not beyond each option's original term. +If the holder's employment terminates because of the holder's "normal retirement" or the holder is terminated as a result of a "divestiture" or "reduction in force" when eligible for "normal retirement": +• unvested options will vest, and such options, together with all other vested options, will be exercisable for up to four years following termination of employment, but not beyond each option's original term. +49 NIKE, INC. +Other Termination Scenarios +Current Options +If the holder's employment is terminated due to a "prohibited act": +• vested but unexercised options and unvested options will terminate and be forfeited as of the termination of employment. +If instead the holder's employment is terminated due to a "performance failure" or for any other reason (other than "involuntary termination", death or disability, or retirement): +• options that are vested at termination may be exercised for up to three months after the termination of employment, but not beyond each option's original term. +Pre-Fiscal 2025 Options +If the holder's employment is terminated for "cause" (as defined in the SIP): +• vested but unexercised options and unvested options will terminate and be forfeited as of the termination of employment. +If instead the holder's employment is terminated without cause for any reason (other than death or disability, retirement, or "divestiture" or "reduction in force"): +• options that are vested at termination may be exercised for up to three months after the termination of employment, but not beyond each option's original term. +RSUs and PSUs +Death or Disability +Upon the death or disability of the holder unvested RSUs and PSUs will vest, with PSUs vesting at 100% of target. +Involuntary Termination without Cause or Retirement +Current Stock Awards +If the holder experiences an "involuntary termination" of employment or "retirement", then (subject to the holder signing a general waiver and release with respect to an involuntary termination that occurs when the holder is not retirement eligible): +• a prorated portion of outstanding unvested RSUs will immediately vest based on the number of months elapsed in the vesting period prior to the termination of employment (less amounts already vested) and the remainder will be forfeited, and +• the holder will be eligible to earn a prorated portion of the holder's outstanding unvested PSUs (excluding the equity retention awards granted to certain of our NEOs in connection with the CEO transition, as discussed below) based on actual Company performance, with any such earned prorated portion to be determined and settled according to its original scheduled vesting date. +Pre-Fiscal 2025 Stock Awards +The Pre-Fiscal 2025 Stock Awards do not provide for retirement treatment. Upon a termination of employment due to a "divestiture" or "reduction in force" that is not a change in control, subject to the holder signing a general waiver and release of claims: +• RSUs and PSUs that are scheduled to vest within one year following the termination will vest, with PSUs vesting at 100% of target, and the remainder will be forfeited. +2025 EQUITY RETENTION AWARDS +As discussed in the section titled "Compensation Discussion and Analysis—Compensation of our Named Executive Officers—Equity Retention Awards" equity retention awards were granted to each of our NEOs to promote retention. +Each such award has a component (50%) that vests subject to continuous service and a component (50%) that vests subject to the achievement of an Adjusted Operating Margin Growth performance measure. All such one-time equity retention awards will immediately vest upon the death or disability of the holder, with the component of such awards subject to a performance measure vesting at 100% of target. In addition, under the terms of these awards, if the holder's employment or service is involuntarily terminated other than due to death, total disability, or "cause" (which term has substantially the same meaning as under the Current Stock Awards), then subject to the holder signing a general waiver and release of claims: +• for the component of the award that is not subject to a performance measure, a prorated portion will vest based on the number of months elapsed in the vesting period prior to the termination of employment, and such prorated portion will be settled within 74 days of such date of termination, and +2026 PROXY STATEMENT 50 +• for the component of the award that is subject to a performance measure, the holder will remain eligible to earn a prorated portion based on the number of months elapsed in the vesting period prior to the termination of employment, determined based on actual performance measured at the end of the performance period, and any such earned prorated portion will be settled after the scheduled vesting date. +The equity retention awards do not provide for retirement treatment. +CHANGE-IN-CONTROL TREATMENT +Unvested stock option, RSU, and PSU awards (including the one-time equity retention awards discussed above) are subject to accelerated vesting under the SIP upon the occurrence of two events (a "double-trigger"): there is a "change in control"; and the NEO's employment is terminated by us without "cause" or by the NEO for "good reason", in each case between the change in control (or shareholder approval of the change in control, if earlier) and the second anniversary of the change in control (a "Qualifying CIC Termination"). Stock options will be exercisable for four years following termination of employment, but not beyond each option's original term. PSUs, per the terms and conditions of the applicable award agreements, will vest at 100% of target or, for equity retention awards granted in 2025, pursuant to the terms provided in the SIP. Accelerated vesting of stock options, RSUs, and PSUs will also occur if we are acquired and the acquiring company does not assume the outstanding options, RSUs, or PSUs. +NON-COMPETITION AGREEMENTS +CEO AGREEMENTS +We have a non-competition agreement with Mr. Hill that extends for 18 months following the termination of his employment with us. Under this agreement, if Mr. Hill's employment is terminated by us without "cause" (as defined in his agreement), then so long as the covenant is not waived, we will make monthly payments to Mr. Hill during the noncompetition period in an amount equal to one-twelfth of his then current Annual NIKE Income. The agreements provide further that if Mr. Hill voluntarily resigns, then so long as the covenant is not waived, we will make monthly payments to him during the noncompetition period in an amount equal to one-twenty-fourth of his then current Annual NIKE Income. However, in accordance with applicable tax laws, commencement of the above-described monthly payments will be delayed until after the six-month period following Mr. Hill's separation from service, and all payments that he would otherwise have received during that period will be paid in a lump sum promptly following the end of the period, together with interest at the prime rate. If employment is terminated without "cause" (as defined in his agreement) or if Mr. Hill voluntarily resigns, the parties may mutually agree to waive the covenant not to compete, and if employment is terminated for "cause", we may unilaterally waive the covenant. If the covenant is waived, we will not be required to make the payments described above for the months as to which the waiver applies. +OTHER NEO AGREEMENTS +We have non-competition agreements with each of the other NEOs on generally the same terms as Mr. Hill, except that the noncompetition period is one year (instead of 18 months), we may unilaterally waive the covenant in all cases (including a termination without "cause"), and the monthly payments are one-twelfth or one-twenty-fourth of the executive's then current annual salary (instead of their Annual NIKE Income). +As described under the section above titled "Potential Payments Upon Termination or Change-in-Control", as of June 16, 2026, the Company adopted the NIKE, Inc. Executive Severance Pay Plan, which provides that any severance benefits that a NEO becomes eligible to receive under the NIKE, Inc. Executive Severance Pay Plan will be reduced by any pay or benefits to which the NEO would otherwise be entitled under the NEO's non-competition agreement. +51 NIKE, INC. +SUMMARY OF POTENTIAL PAYMENTS +The following table shows the estimated benefits that would have been received by the NEOs in respect of their outstanding equity awards (including, as applicable, any equity retention awards) and under their non-competition agreements upon certain types of termination of employment if the triggering event had occurred on May 29, 2026, when the closing price of our Class B Stock was $46.23 per share, assuming PSUs are earned at 100% of target. +NAME TYPE OF PAYMENT +QUALIFYING CIC +TERMINATION (1) +DEATH OR +DISABILITY +INVOLUNTARY +TERMINATION +WITHOUT CAUSE (2) +VOLUNTARY +RESIGNATION (3) +Elliott Hill +Value of Stock Options (4) +$— $— $— $— +Value of PSUs/RSUs (5)(7) +$24,437,871 $24,437,871 $6,645,979 $4,391,064 +Noncompete Payments (6) +$— $— $6,750,000 $3,375,000 +Total: $24,437,871 $24,437,871 $13,395,979 $7,766,064 +Matthew Friend +Value of Stock Options (4) +$— $— $— $— +Value of PSUs/RSUs (5)(7)(8) +$13,499,576 $13,499,576 $5,569,213 $— +Noncompete Payments (6) +$— $— $1,250,000 $625,000 +Total: $13,499,576 $13,499,576 $6,819,213 $625,000 +Venkatesh Alagirisamy +Value of Stock Options (4) +$— $— $— $— +Value of PSUs/RSUs (5)(7) +$7,626,055 $7,626,055 $2,852,807 $— +Noncompete Payments (6) +$— $— $1,025,000 $512,500 +Total: $7,626,055 $7,626,055 $3,877,807 $512,500 +Treasure Heinle +Value of Stock Options (4) +$— $— $— $— +Value of PSUs/RSUs (5)(7) +$7,473,680 $7,473,680 $2,120,663 $1,373,355 +Noncompete Payments (6) +$— $— $1,000,000 $500,000 +Total: $7,473,680 $7,473,680 $3,120,663 $1,873,355 +Robert Leinwand +Value of Stock Options (4) +$— $— $— $— +Value of PSUs/RSUs (5)(7) +$7,555,924 $7,555,924 $2,257,503 $1,427,906 +Noncompete Payments (6) +$— $— $1,025,000 $512,500 +Total: $7,555,924 $7,555,924 $3,282,503 $1,940,406 +(1) Assumes a termination of employment by NIKE without "cause" or by the NEO for "good reason" (in each case, as defined in the SIP or applicable award agreement) on or prior to the second anniversary of a change in control. +(2) Assumes an involuntary termination of employment without cause (that, for purposes of the Current Options, is not the result of "performance failures" or "prohibited acts") and due to a "divestiture" or "reduction in force" (as defined in the Pre-Fiscal 2025 Options and Pre-Fiscal 2025 Stock Awards). Upon an involuntary termination of employment without cause that is not a "divestiture" or "reduction in force", the NEOs would be entitled to the following amounts in aggregate: Mr. Hill, $6,645,979; Mr. Friend, $3,686,450; Mr. Alagirisamy, $1,214,370; Ms. Heinle, $1,974,714; and Mr. Leinwand, $2,029,266. As of May 29, 2026, Mr. Hill is eligible for retirement vesting under his equity awards; Ms. Heinle is eligible for retirement vesting (including, as applicable, "early retirement" vesting) under her equity awards; Mr. Leinwand is eligible for retirement vesting (including, as applicable, "early retirement" vesting) under his equity awards; and Mr. Friend and Mr. Alagirisamy are not eligible for retirement vesting under any of their equity awards because neither Mr. Friend nor Mr. Alagirisamy has reached age 55. +(3) Includes, for NEOs who are retirement eligible, as applicable, the value of the unvested stock options held by each NEO as of May 29, 2026 that would have continued to vest if the NEO had retired on that date. As of May 29, 2026, Mr. Hill is eligible for retirement vesting under his equity awards; Ms. Heinle is eligible for retirement vesting (including, as applicable, "early retirement" vesting) under her equity awards; Mr. Leinwand is eligible for retirement vesting (including, as applicable, "early retirement" vesting) under his equity awards; and Mr. Friend and Mr. Alagirisamy are not eligible for retirement vesting under any of their equity awards because neither Mr. Friend nor Mr. Alagirisamy has reached age 55. +(4) Information regarding outstanding unvested stock options held by each NEO is set forth in the Outstanding Equity Awards table above. No amounts are shown in the table above because the applicable unvested stock options have no intrinsic value at the per share closing price of our Class B Stock on May 29, 2026. +(5) Information regarding unvested RSUs and PSUs held by each NEO is set forth in the Outstanding Equity Awards table above. +(6) Represents the estimated aggregate potential benefits that each NEO would have been entitled to receive under his or her respective non-competition agreement had such NEO been terminated by us without "cause" or voluntarily resigned, in each case, on May 29, 2026, assuming the applicable covenants are not waived by us. No amounts are shown in the Qualifying CIC Termination column because the non-competition agreements do not provide for enhanced benefits in the event of a qualifying termination following a change in control; rather, in such event, the aggregate potential benefits that each NEO would be entitled to receive will be as shown under either the Involuntary Termination without Cause column or the Voluntary Resignation column, as applicable. The restriction period under the non-competition agreement with Mr. Hill is 18 months; the restriction period under the non-competition agreements with Mr. Friend, Mr. Alagirisamy, Ms. Heinle, and Mr. Leinwand is 12 months. The monthly payment amount that would become due to each of the NEOs for the duration of the applicable restriction period, assuming the applicable covenants are not waived by us or breached by the NEO, is as follows: assuming a termination by us without "cause": Mr. Hill, $375,000; Mr. Friend, $104,167; Mr. Alagirisamy, $85,417; Ms. Heinle, $83,333; and Mr. Leinwand, $85,417; and assuming a voluntary termination of employment: Mr. Hill, $187,500; Mr. Friend, $52,083; Mr. Alagirisamy, $42,708; Ms. Heinle, $41,667; and Mr. Leinwand, $42,708. +(7) Includes the accelerated vesting of certain one-time equity retention awards, as discussed under the section above titled "Compensation Discussion and Analysis—Compensation of our Named Executive Officers—Long-Term Incentive—Equity Retention Awards". These awards do not provide for retirement treatment. +2026 PROXY STATEMENT 52 +(8) Includes the equity retention award granted to Mr. Friend in 2024, as described in greater detail in last year's proxy statement. The only current NEO to have received an equity retention award in 2024 is Mr. Friend. The award immediately vests upon death or disability, with the component of such award subject to a performance measure vesting at 100% of target. In addition, if Mr. Friend's employment or service is involuntarily terminated other than due to death, total disability, or "cause" (which term has substantially the same meaning as under the Current Stock Awards), then subject to a general waiver and release of claims: (a) for the component of the award that is not subject to a performance measure (50%), a prorated portion will vest based on the number of months elapsed in the vesting period prior to the termination of employment, and (b) for the component of the award that is subject to a performance measure (50%), a prorated portion based on the number of months elapsed in the vesting period prior to the termination of employment will vest if the applicable performance measure is achieved on or prior to the termination of employment. +Key Defined Terms – Potential Payments Upon Termination or Change-In-Control +TERM PLAN / AGREEMENT MEANING +Annual NIKE Income Non-competition agreements (Mr. Hill only) The sum of current annual salary plus target PSP award. +Cause SIP +For purposes of the stock option, RSU, and PSU awards, in connection with a "change in control", "cause" has the meaning ascribed to it under the SIP and generally includes: +• willful and continued failure to substantially perform assigned duties; and +• willful engagement in illegal conduct materially injurious to us. +Cause Current Stock Awards +For purposes of the termination treatment applicable to our Current Stock Awards (other than in connection with a change in control), "cause" generally includes: +• failure to substantially perform assigned duties; +• commission of any act involving insubordination, fraud, illegality, dishonesty, gross misconduct in the performance of employment duties, or moral turpitude; +• breach of any material Company policy or code of conduct; or +• involvement in activities that violate Company policy and could be detrimental to or reflect unfavorably upon the Company. +Change in Control SIP +For purposes of the stock option, RSU, and PSU awards, "change in control" has the meaning ascribed to it under the SIP and is generally defined to include: +• the acquisition by any "person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act) of more than 50% of our outstanding Class A Stock or, if the Class A Stock no longer elects a majority of directors, the acquisition by any person or group of 30% or more of our total outstanding Common Stock; +• the nomination (and subsequent election) in a two-year period of a majority of our directors by persons other than the incumbent directors; +• a sale of all or substantially all of our assets; and +• an acquisition of NIKE through a merger, consolidation, or share exchange, as a result of which the holders of our outstanding Common Stock no longer hold at least 50% of the combined voting power of the surviving corporation (or a parent of the surviving corporation). +Divestiture Pre-Fiscal 2025 Options; Pre-Fiscal 2025 Stock Awards Generally means the sale, closing, or other disposition of a subsidiary, division, business unit, or other organizational unit. +Early retirement Pre-Fiscal 2025 Options Generally means achieving age 55 with at least 5 years of service. +Good Reason SIP +For purposes of the stock option, RSU, and PSU awards, in connection with a "change in control", "good reason" generally includes: +• a material diminution in position or duties; +• a salary reduction or material reduction in other benefits; and +• a home office relocation of over 50 miles. +53 NIKE, INC. +Involuntary termination Current Options Generally defined to include any involuntary termination of employment or service by the Company, other than due to "performance failures" or "prohibited acts", death, or total disability. +Involuntary termination Current Stock Awards Generally defined to include any involuntary termination of employment or service by the Company, other than due to death, total disability, or "cause". +Normal retirement Pre-Fiscal 2025 Options Generally means achieving age 60 with at least 5 years of service. +Performance Failure Current Options Generally defined to include failure to substantially perform assigned duties. +Prohibited Act Current Options +Generally defined to include: +• commission of any act involving insubordination, fraud, illegality, dishonesty, gross misconduct in the performance of employment duties, or moral turpitude; +• breach of any material Company policy or code of conduct; or +• involvement in activities that violate Company policy and could be detrimental to or reflect unfavorably upon the Company. +Reduction in force Pre-Fiscal 2025 Options; Pre-Fiscal 2025 Stock Awards Generally means a decrease in the number of positions at the Company due to reasons of economy or reorganization for efficiency or redesign (in each case, as designated by the Compensation Committee). +Retirement Current Stock Awards Generally means a participant's "involuntary termination" or voluntary resignation, in each case when (i) the participant's age is at least 55 years and (ii) the participant has at least 5 full years of service with the Company. +Retirement eligible Current Options Generally means (i) the participant's age is at least 55 years and (ii) the participant has at least 5 full years of service with the Company. +EQUITY COMPENSATION PLAN INFORMATION +The following table summarizes information regarding outstanding awards and shares available for future issuance under equity compensation plans approved by shareholders and equity compensation plans that were not approved by shareholders as of May 31, 2026. The table does not reflect issuances made during fiscal 2027. +NUMBER OF SECURITIES +TO BE ISSUED UPON +EXERCISE OF OUTSTANDING +OPTIONS, WARRANTS AND +RIGHTS +WEIGHTED- +AVERAGE EXERCISE +PRICE OF OUTSTANDING +OPTIONS, WARRANTS +AND RIGHTS (1) +NUMBER OF SECURITIES +REMAINING AVAILABLE FOR +FUTURE ISSUANCE UNDER +EQUITY COMPENSATION +PLANS (EXCLUDING SECURITIES +REFLECTED IN COLUMN (a)) +PLAN CATEGORY (a) (b) (c) +Equity compensation plans approved by shareholders 89,354,992 +(2) +$96.44 111,431,782 +(3) +Equity compensation plans not approved by shareholders — $0.00 8,429,226 +(4) +Total 89,354,992 $96.44 119,861,008 +(1) Weighted-average exercise prices do not reflect the shares that will be used upon the payment of outstanding awards of RSUs and PSUs. +(2) Consists of 89,354,992 shares subject to awards of options, RSUs, PSUs (based on performance at the target level of 100%), and stock appreciation rights outstanding under the SIP. +(3) Includes 106,338,981 shares available for future issuance under the SIP and 5,092,801 shares available for future issuance under the Employee Stock Purchase Plan (prior to the proposed amendment to the Employee Stock Purchase Plan described in Proposal 4). +(4) Consists of 8,429,226 shares available for future issuance under the Foreign Subsidiary Employee Stock Purchase Plan, pursuant to which shares are offered and sold to employees of selected non-U.S. subsidiaries of the Company on substantially the same terms as those offered to U.S. employees under the shareholder-approved Employee Stock Purchase Plan as described in the section above titled "Compensation Discussion and Analysis—Compensation of our Named Executive Officers—Other Compensation—Employee Stock Purchase Plan". +2026 PROXY STATEMENT 54 +CEO PAY RATIO +NIKE's pay and benefits are designed to be competitive and equitable, meet the needs of our global teammates, and reinforce our values. We pay for performance and impact by linking incentive pay to Company performance and seek to invest in positive experiences that have the greatest impact on the engagement and well-being of our employees. The executive compensation program is highly incentive-based and weighted towards long-term awards to emphasize long-term performance and support retention. Our executive compensation program is designed to attract and retain top-tier talent in a competitive market and to "pay for performance" in order to drive business results and maximize shareholder value. +For fiscal 2026, our last completed fiscal year: +• The employee identified at the median of all NIKE employees (other than our CEO) was a retail employee in the United Kingdom; +• The annual total compensation of the median employee was $48,695; +• The annual total compensation of our CEO, Mr. Hill, was $36,340,876; and +• Based on this information, the estimated ratio of the annual total compensation of our CEO to the median annual total compensation of all other NIKE employees was 746 to 1. +This pay ratio is a reasonable estimate calculated in a manner consistent with SEC rules based on the methodology described below. The SEC rules for identifying the median compensated employee and calculating the pay ratio allow companies to adopt a variety of methodologies, apply certain exclusions, and make reasonable estimates and assumptions that reflect their compensation practices. As such, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies may utilize different methodologies, exclusions, estimates, and assumptions in calculating their own pay ratios. +METHODOLOGY +For purposes of calculating this pay ratio, we used the same median employee that was identified in fiscal 2025, as we believe there has been no change in our employee population, our compensation arrangements, or our median employee's circumstances that would significantly affect our pay ratio disclosure. The determination of the median employee was made in fiscal 2025 using the methodology described below, and the median employee's fiscal 2026 annual total compensation was calculated based on the Summary Compensation Table rules used for our Named Executive Officers (in accordance with Item 402(c)(2)(x) of Regulation S-K). +FISCAL 2025 METHODOLOGY +We use the first business day in May as the date to determine the median employee. The first business day in May 2025 was May 1, 2025. At that time, we had approximately 76,600 employees globally. Of those employees, approximately 73% were full-time, 53% were in retail jobs, and 49% were located in the United States. +To identify our median employee from our global employee population, we calculated annual compensation for fiscal 2025 based on base salary or hourly wages, as applicable. For the majority of our employees, base salary or hourly wages comprise the majority of their compensation. To determine wages for hourly employees, we used each individual's pay rate and estimated scheduled hours in the applicable Human Resources system of record. Compensation for permanent employees hired during the fiscal year was annualized, and compensation for non-U.S. employees was converted into U.S. dollars using the applicable currency conversion rate as reported in the Human Resources system of record for the median employee determination date. +If this consistently applied compensation methodology yielded a median employee who, during fiscal 2025, (1) was on a leave of absence that significantly impacted total pay during the year, or (2) was an hourly employee who worked significantly more or significantly fewer hours than their scheduled hours, that individual was excluded. If this consistently applied compensation methodology yielded two or more employees, we selected one. +55 NIKE, INC. +PAY VERSUS PERFORMANCE +This disclosure has been prepared in accordance with Item 402(v) of Regulation S-K under the Exchange Act and does not necessarily reflect how the Compensation Committee evaluates compensation decisions in light of Company or individual performance. The Compensation Committee did not consider the pay versus performance disclosure below in making its compensation decisions for any of the fiscal years shown. For discussion of how the Compensation Committee seeks to align pay with performance when making compensation decisions, please review the section above titled "Compensation Discussion and Analysis". +PAY VERSUS PERFORMANCE TABLE +The following table sets forth compensation information of our CEO and our non-CEO NEOs and Company performance for the fiscal years listed below, in accordance with Item 402(v) of Regulation S-K. +YEAR +SUMMARY +COMPENSATION +TABLE FOR +MR.HILL (1)(2) +COMPENSATION +ACTUALLY PAID +TO MR. HILL (1)(3)(4) +SUMMARY +COMPENSATION +TABLE TOTAL +FOR MR. +DONAHOE (1)(5) +COMPENSATION +ACTUALLY PAID +TO MR. +DONAHOE (1)(4) +AVERAGE +SUMMARY +COMPENSATION +TABLE TOTAL +FOR NON-CEO +NEOs (1)(6) +AVERAGE +COMPENSATION +ACTUALLY PAID +TO NON-CEO +NEOs (1)(4)(7) +VALUE OF INITIAL FIXED $100 +INVESTMENT BASED ON +NET INCOME (9) +(IN MILLIONS) +ADJUSTED +REVENUE (10) +(IN MILLIONS) +TOTAL +SHAREHOLDER +RETURN (8) +PEER GROUP +TOTAL +SHAREHOLDER +RETURN (8) +2026 $ 36,340,876 $ 19,275,855 — — $ 12,666,391 $ 6,614,656 $ 36.47 $ 48.36 $ 3,108 $ 45,809 +2025 $ 26,018,068 $ 17,010,238 $ 28,442,712 $( 10,924,243 ) $ 12,135,422 $ 2,798,172 $ 65.09 $ 81.16 $ 3,219 $ 46,350 +2024 — — $ 29,184,701 $ 13,158,408 $ 9,804,553 $ 5,812,537 $ 100.23 $ 124.83 $ 5,700 $ 51,656 +2023 — — $ 32,789,885 $ 29,391,856 $ 10,117,055 $ 7,259,680 $ 109.51 $ 116.84 $ 5,070 $ 52,593 +2022 — — $ 28,838,060 $ 19,617,425 $ 9,185,111 $ 7,482,733 $ 122.26 $ 120.40 $ 6,046 $ 47,406 +(1) The following NEOs are included in the table above: +YEAR CEO Non-CEO NEOs +2026 Elliott Hill Matthew Friend, Venkatesh Alagirisamy, Treasure Heinle, and Robert Leinwand +2025 +Elliott Hill , John Donahoe II +Matthew Friend, Robert Leinwand, Ann Miller, Craig Williams, Monique Matheson, and Heidi O'Neill +2024 John Donahoe II Matthew Friend, Heidi O'Neill, Mark Parker, and Craig Williams +2023 John Donahoe II Matthew Friend, Andrew Campion, Heidi O'Neill, and Mark Parker +2022 John Donahoe II Matthew Friend, Andrew Campion, Heidi O'Neill, and Mark Parker +(2) Represents the amount of total compensation reported for our CEO, Mr. Hill, in the "Total" column of the "Summary Compensation Table" for each fiscal year presented. +(3) The dollar amounts reported in the "Compensation Actually Paid to Mr. Hill" column have been calculated in accordance with Item 402(v) of Regulation S-K and do not reflect compensation actually earned, realized, or received by Mr. Hill. These amounts reflect the amount set forth in the "Total" column of the "Summary Compensation Table" for each fiscal year presented, with certain adjustments as described in the table below, in accordance with the requirements of Item 402(v) of Regulation S-K: +2026 +Summary Compensation Table ("SCT") total for Mr. Hill $ 36,340,876 +Deduction for amounts reported under the "Stock Awards" column in the SCT $ 28,137,798 +Deduction for amounts reported under the "Option Awards" column in the SCT $ 3,967,113 +Total deductions from SCT $ 32,104,911 +Year end fair value of equity awards $ 19,045,414 +Change in fair value of outstanding and unvested equity awards $( 5,181,085 ) +Change in fair value of equity awards granted in prior years that vested in the year $ 650,907 +Value of dividends on stock awards $ 524,654 +Total adjustments $ 15,039,890 +Compensation actually paid $ 19,275,855 +(4) Equity awards included in these amounts are calculated using the following equity valuations: Stock option grant date fair values are calculated based on the Black-Scholes option pricing model as of the grant date; adjustments have been made using stock option fair values as of each measurement date using the stock price as of the measurement date and updated assumptions (i.e., term, volatility, dividend yield, risk free rates) as of the measurement date. PSU grant date fair values are calculated using a Monte Carlo simulation based on the probable outcome of the performance condition as of the grant date; adjustments have been made using a revised Monte Carlo valuation as of fiscal year end. RSU grant date fair values are calculated using the stock price as of the grant date; adjustments have been made using the stock price as of fiscal year end and as of each vesting date. +(5) Represents the amount of total compensation reported for our Former CEO, Mr. Donahoe, in the "Total" column of the "Summary Compensation Table" for each fiscal year presented. +(6) Represents the average of the amounts of total compensation reported for our non-CEO NEOs, as a group, in the "Total" column of the "Summary Compensation Table" for each fiscal year presented. +2026 PROXY STATEMENT 56 +(7) The dollar amounts reported in the "Average Compensation Actually Paid to Non-CEO NEOs" column have been calculated in accordance with Item 402(v) of Regulation S-K and do not reflect compensation actually earned, realized, or received by the non-CEO NEOs. These amounts reflect the average of the amounts set forth in the "Total" column of the "Summary Compensation Table" for each fiscal year presented for the applicable non-CEO NEOs, with certain adjustments as described in the table below, in accordance with the requirements of Item 402(v) of Regulation S-K: +2026 +Average Summary Compensation Table total for non-CEO NEOs $ 12,666,391 +Deduction for amounts reported under the "Stock Awards" column in the SCT $ 9,001,175 +Deduction for amounts reported under the "Option Awards" column in the SCT $ 1,606,927 +Total deductions from SCT $ 10,608,102 +Year end fair value of equity awards $ 6,161,484 +Change in fair value of outstanding and unvested equity awards $( 2,125,365 ) +Change in fair value of equity awards granted in prior years that vested in the year $ 354,810 +Value of dividends on stock awards $ 165,438 +Total adjustments $ 4,556,367 +Average compensation actually paid $ 6,614,656 +(8) Peer group total shareholder return ("TSR") uses the Dow Jones U.S. Footwear Index, which the Company also uses in the stock performance graph required by Item 201(e) of Regulation S-K included in the Company's Annual Report on Form 10-K for fiscal 2026. These comparisons assume $100 (including reinvested dividends) was invested for the period starting May 31, 2021 through the end of the listed fiscal year in (a) the Company and (b) the Dow Jones U.S. Footwear Index, respectively. Historical stock performance is not necessarily indicative of future stock performance. +(9) Reflects net income calculated in accordance with GAAP in the Company's Consolidated Statements of Income included in the Company's Annual Reports on Form 10-K for the applicable fiscal year. +(10) Represents the most important financial performance measure used to link Company performance to compensation actually paid ("CAP") to our CEO and non-CEO NEOs in fiscal 2026, as required pursuant to Item 402(v) of Regulation S-K. Adjusted Revenue is a non-GAAP financial measure calculated based on GAAP revenue excluding the impact of acquisitions and divestitures; changes in accounting principles; unanticipated restructurings; unanticipated exchange rate fluctuations; other extraordinary, unusual, or infrequently occurring items. We may determine a different financial performance measure to be the most important financial performance measure in future years. +DESCRIPTION OF RELATIONSHIPS +The following charts show graphically the relationships over the past five fiscal years of the CAP amounts for our CEO and non-CEO NEOs as compared to our cumulative TSR, peer group TSR, GAAP net income, and Adjusted Revenue as well as the relationship between TSR and peer group TSR. +CAP VERSUS COMPANY TSR & PEER GROUP TSR +57 NIKE, INC. +CAP VERSUS NET INCOME +CAP VERSUS ADJUSTED REVENUE +TABULAR LIST OF PERFORMANCE METRICS +The following table lists the three financial performance measures that, in the Company's assessment, represent the most important performance measures used to link CAP for our NEOs to Company performance for fiscal 2026. +Adjusted Revenue +Adjusted EBIT +Stock price +2026 PROXY STATEMENT 58 +AUDIT MATTERS +PROPOSAL 3 +RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM +The Audit & Finance Committee of the Board has sole authority to retain, with shareholder ratification, the Company's independent registered public accounting firm. The Audit & Finance Committee directly oversees the firm's work with respect to the annual audit of the Company's consolidated financial statements and internal control over financial reporting and approves all audit engagement fees and terms. At least annually, the Audit & Finance Committee evaluates the independent registered public accounting firm's qualifications, performance, and independence, including a review and evaluation of its lead partner. The Audit & Finance Committee is also involved in the selection of the new lead engagement partner following mandated rotation of the firm’s lead partner, and is responsible for considering the benefits of rotation of the Company’s independent registered public accounting firm. +The Audit & Finance Committee has appointed PricewaterhouseCoopers LLP ("PwC") to audit the Company's consolidated financial statements and internal control over financial reporting for the fiscal year ending May 31, 2027 and to render other professional services as required. +PwC has served as the Company's independent registered public accounting firm for many years. The Audit & Finance Committee and the Board believe that the continued retention of PwC as the independent registered public accounting firm is in the best interests of the Company and its shareholders. +Accordingly, the Audit & Finance Committee is submitting the appointment of PwC to shareholders for ratification. If the appointment is not ratified by our shareholders, the Audit & Finance Committee may reconsider whether it should appoint another independent registered public accounting firm. +Representatives of PwC will be present at the Annual Meeting, will have the opportunity to make a statement if they desire to do so, and are expected to be available to respond to questions. +Aggregate fees billed by the Company's independent registered public accounting firm, PwC, for audit services related to the most recent two fiscal years, and for other professional services incurred in the most recent two fiscal years, were as follows: +TYPE OF SERVICE +2026 2025 +Audit Fees (1) +$22.8 million $21.4 million +Audit-Related Fees (2) +0.6 million 0.4 million +Tax Fees (3) +— — +All Other Fees (4) +1.4 million 0.4 million +Total +$24.8 million $22.2 million +(1) Comprises services performed to comply with the standards established by the PCAOB, including the audits of our financial statements and internal control over financial reporting; audits in connection with statutory filings; and attest services that the principal independent registered public accounting firm can most effectively and efficiently provide, such as procedures related to comfort letters, consents and reviews of our SEC filings. +(2) Comprises assurance and related services traditionally performed by the independent registered public accounting firm and reasonably related to the performance of the audit or review of our financial statements, and audit or compliance services not required by applicable statutes or regulations. This category also includes audits of pension and other employee benefit plans. +(3) Comprises tax compliance and consulting services such as preparation of tax returns in foreign jurisdictions, tax audits, and U.S. and non-U.S. tax planning. +(4) Comprises any services other than those described in the above categories. In both years, included subscriptions and licenses to accounting and tax resources, information systems reviews not performed in connection with the audit, and other permissible services. +In accordance with the Sarbanes-Oxley Act of 2002, the Audit & Finance Committee established policies and procedures under which all audit and non-audit services performed by the Company's independent registered public accounting firm must be approved in advance by the Audit & Finance Committee. During fiscal 2026 and fiscal 2025, all such services performed by, and fees paid to, PwC were approved in advance. +BOARD RECOMMENDATION +The Board of Directors recommends that shareholders vote FOR ratification of the appointment of PricewaterhouseCoopers LLP as the Company's independent registered public accounting firm for the fiscal year ending May 31, 2027. +59 NIKE, INC. +REPORT OF THE AUDIT & FINANCE COMMITTEE +The Audit & Finance Committee has: +• Reviewed and discussed the audited financial statements with management. +• Discussed with the independent auditors the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board ("PCAOB") and the SEC. +• Received the written disclosures and the letter from the independent accountants required by applicable requirements of the PCAOB regarding the independent accountants' communications concerning independence, and has discussed with the independent accountant the independent accountant's independence. +• Based on the review and discussions above, recommended to the Board of Directors that the audited financial statements be included in the Company's Annual Report on Form 10-K for the last fiscal year for filing with the Securities and Exchange Commission. +Members of the Audit & Finance Committee: +• Maria Henry +• Peter Henry +• Robert Swan, Chair +2026 PROXY STATEMENT 60 +EMPLOYEE STOCK PURCHASE PLAN +PROPOSAL 4 +APPROVAL OF AMENDMENT OF NIKE, INC. EMPLOYEE STOCK PURCHASE PLAN TO INCREASE AUTHORIZED SHARES +The Board of Directors is asking our shareholders to approve an amendment and restatement of the NIKE, Inc. Employee Stock Purchase Plan (the "ESPP"). The ESPP was initially adopted by the Board and shareholders in 2001 and was most recently amended in 2023 (the "Current ESPP"). On the recommendation of the Compensation Committee, the Board unanimously approved an amended and restated version of the ESPP (the "Amended ESPP") on July 15, 2026, subject to shareholder approval at the Annual Meeting. The Amended ESPP would increase the number of shares of Class B Stock ("Shares") authorized for issuance thereunder by 16 million Shares to a total of 78 million Shares. +The ESPP is intended to provide a convenient and practical means by which employees may participate in stock ownership of the Company. The ESPP serves the best interests of our shareholders by: +• aligning employees' interests with those of our shareholders; +• reinforcing a culture of ownership; and +• enhancing the Company's ability to attract and retain highly qualified and motivated employees in a competitive marketplace. +We recommend that shareholders approve the Amended ESPP to ensure that the number of Shares available for issuance under the ESPP is sufficient in light of the expected levels of ongoing participation and to help the Company meet the goals of its compensation strategy. +BOARD RECOMMENDATION +The Board of Directors recommends that shareholders vote FOR approval of the following resolution: +RESOLVED, that the shareholders approve the NIKE, Inc. Employee Stock Purchase Plan as amended and restated. +61 NIKE, INC. +SUMMARY OF THE EMPLOYEE STOCK PURCHASE PLAN +The following summary of the Amended ESPP is qualified in its entirety by reference to the complete text of the Amended ESPP, which is attached to this proxy statement as Exhibit A. The Amended ESPP is intended to qualify as an "employee stock purchase plan" under Section 423 of the Internal Revenue Code of 1986, as amended (the "Code"). +The Amended ESPP increases the number of Shares authorized for issuance thereunder by 16 million Shares to 78 million Shares, among other administrative and clerical revisions, including updates to the tax withholding provision and the addition of a governing law provision; it does not make any other material changes to the Current ESPP. If this proposal is rejected by shareholders, the total number of Shares authorized and reserved for issuance under the ESPP will remain at 62 million, of which approximately 5,093,140 remained available for issuance as of June 26, 2026. Based on our current forecasts and estimated participation rates, if the Amended ESPP is not approved, it is anticipated that the Current ESPP will run out of available Shares in approximately fiscal year 2028. +We believe that the ESPP furthers the interests of the Company and our shareholders by aligning employees' interests with those of our shareholders, reinforcing a culture of ownership, and enhancing the Company's ability to attract and retain highly qualified and motivated employees in a competitive marketplace. To continue to provide employees with benefits under the ESPP, we believe that additional Shares must be authorized because the number of Shares remaining available for issuance under the Current ESPP will not be sufficient in light of the expected levels of ongoing participation. +In considering its recommendation to seek shareholder approval for the addition of 16 million Shares to the ESPP, the Board considered the historical number of Shares purchased under the ESPP in the past 5 fiscal years. The Board also considered the Company's expectation that the additional Shares should last through approximately fiscal year 2031. However, the additional Shares could last for a longer or shorter period of time based on various factors which cannot be predicted, including the growth of our employee population, future ESPP offering practices, our Share price, and prevailing market conditions. In the event that more Shares are required for the ESPP in the future, the prior approval of our shareholders will be required. +DESCRIPTION OF THE AMENDED ESPP +ELIGIBILITY +The Amended ESPP is a broad-based plan in which almost all active employees of the Company and its participating subsidiaries are eligible to participate, except for the following: (a) any employee who has been employed less than one month when an offering commences, (b) any employee whose customary employment is less than 20 hours per week, and (c) any employee who would, immediately after the purchase right grant for an offering, own or be deemed to own stock (including any stock the employee may purchase under outstanding purchase rights) representing five percent or more of the total combined voting power or value of all classes of stock of the Company or any subsidiary of the Company. As of June 26, 2026, approximately 32,159 employees, including all 8 executive officers, were eligible to participate in the ESPP. +SHARES AUTHORIZED FOR ISSUANCE +As noted above, if shareholders approve this proposal, the total number of Shares authorized and reserved for issuance under the Amended ESPP will be 78 million Shares. Such number of Shares is subject to adjustment in the event of any stock dividend, stock split, combination of shares, recapitalization, or other change in the outstanding Shares. As of June 26, 2026, the closing price of our Shares on the New York Stock Exchange was $40.75 per Share. +ADMINISTRATION +The Board has full power and authority to administer the Plan. Without limiting the foregoing, the Board has delegated to the Company's senior human resources executive (the "Authorized Officer") all authority for administration of the Amended ESPP and such Authorized Officer may delegate some or all of his or her duties and authority to one or more Company employees. Unless prohibited by applicable law, the Authorized Officer may promulgate rules and regulations, adopt forms for use in connection with the Amended ESPP, decide any question of interpretation or rights arising under, and generally supervises the administration of, the Amended ESPP. Unless otherwise determined by the Board, all determinations and decisions of the Authorized Officer or the Board will be conclusive. The Company pays all expenses of the Amended ESPP. +2026 PROXY STATEMENT 62 +OFFERINGS +The Amended ESPP is implemented by a series of six-month offerings, with a new offering commencing on April 1 and October 1 of each year. The first day of each offering is the "offering date" for that offering, and the last day of each offering is the "purchase date" for that offering. An eligible employee who joins the Amended ESPP (a "participant") may purchase Shares only through payroll deductions permitted under the Amended ESPP, unless the Board or the Authorized Officer determines that an alternative form of contributions may be used. Payroll deductions must be not less than 1% nor more than 10% of the participant's eligible compensation. +The maximum number of Shares that any participant may purchase in any single offering is 500 Shares. In addition, the terms of an offering may not allow a participant's right to purchase Shares under all stock purchase plans of the Company and its subsidiaries to which Section 423 of the Code applies to accrue at a rate that exceeds $25,000 of fair market value of Shares, as determined on the offering date, for each calendar year in which such option is outstanding. +Eligible employees voluntarily elect whether or not to enroll in the Amended ESPP by submitting a subscription and payroll deduction authorization to the Company or its agent in a form and manner and by the deadline set by the Authorized Officer. A participant may terminate participation in the Amended ESPP by written notice to the Company submitted no later than the "change deadline" for that offering, which is the number of days before the purchase date established by the Authorized Officer. Participation in the Amended ESPP will also terminate when a participant ceases to be an eligible employee for any reason, including death or retirement, but not while such participant is on military leave, sick leave, or other bona fide leave of absence approved by the Company in certain instances. Unless otherwise determined by the Authorized Officer, a transfer of a participant's employment between or among the Company and/or the Participating Subsidiaries will not be considered a termination of employment. An employee may not reinstate participation in the Amended ESPP with respect to a particular offering after terminating participation in the Amended ESPP with respect to that offering, but may participate in subsequent offerings. Generally, upon termination of a participant's participation in the Amended ESPP, all amounts deducted from the participant's pay that had not yet been used to purchase Shares will be returned to the employee. The rights of participants under the Amended ESPP are not transferable. +PURCHASE PRICE +The price at which Shares may be purchased in an offering is the lower of (a) 85 percent of the fair market value of a Share on the offering date of the offering or (b) 85 percent of the fair market value of a Share on the purchase date of the offering. The fair market value of a Share on any date is the closing price of the Share on the New York Stock Exchange on such date or, if such date is not a trading day, then on the first immediately preceding trading day prior to such date; provided that if the Share is not traded on the New York Stock Exchange, then the fair market value of a Share will be such other reported value of the Share as may be specified by the Board. +PURCHASE OF SHARES; CUSTODIAN +All participant payroll deductions will be credited to the participant's account under the Amended ESPP. No interest will be paid on such accounts, unless otherwise determined by the Authorized Officer or required under applicable law. On each purchase date, the amount of the account of each participant will be applied to the purchase of Shares (including fractional Shares) by such participant from the Company at the purchase price (described above). Any cash balance remaining in a participant's account after a purchase date will be repaid to the participant. Shares purchased under the Amended ESPP are delivered to and held in the custody of a custodian (the "Custodian"), which is an investment or financial firm appointed by the Authorized Officer. By appropriate instructions to the Custodian, a participant may from time to time sell all or part of the Shares held by the Custodian for the participant's account in the public market at the market price at the time the order is executed. Also by appropriate instructions, the participant may transfer all or part of the Shares held for that participant by the Custodian to the participant or to a regular individual brokerage account in the participant's own name, except that no Shares may be so transferred until two years after the offering date of the offering in which the Shares were purchased. +DIVIDENDS AND OTHER DISTRIBUTIONS; REINVESTMENT +Stock dividends and other distributions in Shares, with respect to Shares held by the Custodian, will be issued to the Custodian and held by it for the account of the respective participants entitled to such dividends or other distributions. Cash distributions other than dividends, if any, on Shares held by the Custodian will be paid currently to the participants entitled to such distributions. Cash dividends, if any, on Shares held by the Custodian may be reinvested in Shares on behalf of the participants entitled to such dividends. The Custodian will establish a separate account for each participant for the purpose of holding any Shares acquired through reinvestment of participants' dividends. +63 NIKE, INC. +TERMINATION AND AMENDMENT +The Amended ESPP will terminate when all of the Shares reserved for purposes of the Amended ESPP have been purchased, provided that the Board or the Authorized Officer in their sole discretion may terminate the Amended ESPP at any time with respect to any participating subsidiary and the Board in its sole discretion may at any time terminate the Amended ESPP completely. +The Board or the Authorized Officer may at any time amend the Amended ESPP in any and all respects, except that only the Board may change (a) the number of Shares reserved for the Amended ESPP, (b) the maximum percentage of a participant's eligible compensation that may be deducted from a participant's paycheck during an offering, (c) the purchase price of Shares offered pursuant to the Amended ESPP, (d) the maximum number of Shares that any participant may purchase in any single offering or certain other purchase limitations, or (e) certain other terms of the Amended ESPP relating to the offering and purchase dates. Notwithstanding the foregoing, the Board may not without shareholder approval increase the number of Shares reserved for the Amended ESPP (except for certain capital adjustments, described above under "Shares Authorized for Issuance") or decrease the purchase price of Shares offered pursuant to the Amended ESPP. +FUTURE ESPP BENEFITS +Participation in the Amended ESPP is voluntary and dependent on each eligible employee's election to participate and his or her determination as to the level of payroll deductions. Further, the number of Shares that may be purchased under the Amended ESPP is determined, in part, by the price of our Shares on the first and last day of each offering. Accordingly, the actual number of Shares that may be purchased by any eligible individual in the future is not determinable. +SUMMARY OF U.S. FEDERAL INCOME TAX CONSEQUENCES +The following is a general summary under current law of the material U.S. federal income tax consequences to participants in the Amended ESPP. This summary deals with the general tax principles that apply and is provided only for general information. Certain types of taxes, such as state and local income taxes, are not discussed. Tax laws are complex and subject to change and may vary depending on individual circumstances and from locality to locality. The summary does not discuss all aspects of income taxation that may be relevant to a participant in light of his or her personal investment circumstances. This summarized tax information is not tax advice. +The Amended ESPP is intended to qualify as an "employee stock purchase plan" within the meaning of Section 423 of the Code. Under the Code, employees will not recognize taxable income or gain with respect to Shares purchased under the Amended ESPP either at the offering date or the purchase date of an offering. If an employee disposes of Shares purchased under the Amended ESPP more than two years after the offering date, or in the event of the employee's death at any time, the employee or the employee's estate generally will be required to report as ordinary compensation income for the taxable year of disposition or death an amount equal to the lesser of (a) the excess of the fair market value of the Shares at the time of disposition or death over the applicable purchase price, or (b) 15 percent of the fair market value of the Shares on the offering date. In the case of such a disposition or death, the Company will not be entitled to any deduction from income. Any gain on the disposition in excess of the amount treated as ordinary compensation income generally will be capital gain. +If an employee disposes of Shares purchased under the Amended ESPP within two years after the offering date, the employee generally will be required to report the excess of the fair market value of the Shares on the purchase date over the applicable purchase price as ordinary compensation income for the year of disposition. If the disposition is by sale, any difference between the fair market value of the Shares on the purchase date and the disposition price generally will be capital gain or loss. In the event of a disposition within two years after the offering date, the Company generally will be entitled to a deduction (subject to applicable limits under the Code) from income in the year of such disposition equal to the amount the employee is required to report as ordinary compensation income. +2026 PROXY STATEMENT 64 +PURCHASES UNDER THE ESPP +The table below provides information on the number of Shares purchased by the following employees and groups since the inception of the ESPP through June 26, 2026. Non-employee directors are not eligible for participation in the ESPP. No associate of a non-employee director or nominee for election as a non-employee director has purchased shares under the ESPP and no participating employee has purchased five percent or more of the total amount of Shares purchased under the ESPP. +NAME AND POSITION NUMBER OF SHARES PURCHASED +Elliott Hill +President and Chief Executive Officer +5,673 +Matthew Friend +Executive Vice President and Chief Financial Officer +5,072 +Venkatesh Alagirisamy +Executive Vice President, Chief Operating Officer +6,168 +Treasure Heinle +Executive Vice President, Chief People Officer +3,303 +Robert Leinwand +Executive Vice President, Chief Legal Officer +6,959 +All current executive officers as a group 39,243 +All non-employee directors as a group — +All employees (including all current officers who are not executive officers) as a group 56,914,957 +65 NIKE, INC. +SHAREHOLDER PROPOSALS +PROPOSAL 5 +TO CONSIDER A SHAREHOLDER PROPOSAL REGARDING A REPORT ON DISCRIMINATION IN CHARITABLE SUPPORT +The following shareholder proposal will be voted on at the Annual Meeting only if properly presented by or on behalf of the shareholder proponent. Bowyer Research, Inc., on behalf of William C. Cunningham, P.O. Box 120, McKeesport, PA 15135, beneficial owners of 154 shares of Class B Stock, has submitted the proposal. The proposal, including any supporting statements, is included exactly as submitted to us by the proponent. The Board of Directors recommends a vote AGAINST the proposal and asks shareholders to read through NIKE's response, which follows the shareholder proposal. +Supporting Statement: +Corporations routinely use their platforms to voice support for humanitarian causes and human rights. Unfortunately, some companies provide funds, data, or other resources to advocacy groups leading highly controversial social campaigns — particularly on gender and sexuality— often backing only one side of the debate. Such one-sided giving alienates significant portions of their customers, employees, and shareholders and exposes companies to reputational, market, and legal risk. +One notable example is that of Nike, which has a verified, perfect score 1 on the Human Rights Campaign's Corporate Equality Index. The Human Rights Campaign is a leading driver in getting companies to promote transgender activism. To get 100 points on its Corporate Equality Index, 2 a company ostensibly agrees to cover radical adolescent transgender treatments recommended by the World Professional Association for Transgender Health (WPATH), 3 a group widely criticized for its ideological bias and lack of scientific rigor. 4 These treatments include gender transition surgery, cross-sex hormone therapy, menstruation suppression, and puberty blockers. +Supporting this activism may also alienate Nike employees who have religious or other moral objections to supporting these kinds of radical treatments with their healthcare premiums. Given Nike's many diversity initiatives, 5 both past and present, investors are right to ask whether the company’s charitable partnerships respect the most crucial form of diversity: diversity of viewpoint. +Partnering with HRC or similar organizations does not do so, given the organization's pressure on companies to take sides in political engagement. Furthermore, a perfect score on the Corporate Equality Index implies 6 that the company likely covers highly controversial healthcare practices, including ones that are currently the subject of increasing legal liability 7 and major shifts 8 in medical guidance. These are serious concerns for any company aiming for political neutrality and avoidance of public controversy. +This isn't merely a political or social point but a matter of brand value. Nike has a Interbrand-estimated 9 brand value exceeding $33 billion, 41 percent of its roughly $80 billion market cap. 10 Given the EEOC’s current high-profile investigation 11 into Nike over "systemic race discrimination allegations" occurring partially as a result of the company's diversity, equity, and inclusion initiatives, investors are right to be concerned about what further brand politicization could do to company performance. +Many companies, including John Deere, Jack Daniels, Harley Davidson, Lowes, Home Depot, Ford, and Coors, have already refocused their charitable support in a manner that acknowledges the diverse views held by their customers and employees. 12 65% of the Fortune 500 have ceased 13 participation with activist groups such as the Human Rights Campaign as a part of this effort. Nike should do the same. +Resolved: Shareholders request that Nike Inc. conduct an evaluation and issue a report within the next year, or disclose analysis which has already been performed, at reasonable expense and excluding proprietary and confidential information, analyzing the benefits, costs, and legal, reputational, competitive, and other relevant risks of the company's charitable support. +(1) https://www.hrc.org/resources/corporations/nike-inc. +(2) https://reports.hrc.org/corporate-equality-index-2026#rating-system-and-methodology +(3) https://www.tandfonline.com/doi/pdf/10.1080/26895269.2022.2100644 +(4) https://adflegal.org/article/leaked-files-reveal-ethical-concerns-pseudoscience-wpath-standards-care/ +(5) https://about.nike.com/en/mission/focus-areas/diversity-equity-inclusion-at-nike +(6) https://reports.hrc.org/corporate-equality-index-2026#rating-system-and-methodology +(7) https://nypost.com/2026/01/31/us-news/detransitioner-wins-2-million-against-new-york-docs-who-pushed-double-mastectomy/ +(8) https://www.plasticsurgery.org/documents/health-policy/positions/2026-gender-surgery-children-adolescents.pdf +(9) https://interbrand.com/best-global-brands/global/nike/ +(10) https://finance.yahoo.com/quote/NKE/ +(11) https://www.eeoc.gov/newsroom/eeoc-files-subpoena-enforcement-action-against-nike +(12) https://www.dailymail.co.uk/news/article-13812241/american-brand-dei-rules-backlash.html +(13) https://www.cnbc.com/2026/02/04/corporate-dei-index-hrc.html +2026 PROXY STATEMENT 66 +OPPOSITION STATEMENT +The Board of Directors recommends that shareholders vote AGAINST this proposal because: +• The Company's current approach to charitable giving, together with our existing disclosures and guidelines, appropriately serves the best interests of our shareholders; and +• The Proposal would divert Company time and resources to prepare a report that would not provide additional value to shareholders. +The Company’s charitable giving plays an important role in supporting our strategy and advancing long-term shareholder value. +The Company is committed to, and takes pride in, making a difference in the communities where we live, work, and play, including by supporting causes and organizations that align with our values where there is a clear strategic, business, or community need. These efforts help expand access to sport and grow the Company's consumer base by engaging more people. +The Company's approach to charitable giving is reflected in initiatives such as the Nike Community Impact Fund and our partnerships with nonprofit organizations worldwide. Through these efforts, the Company drives positive, lasting change in the communities we serve and promotes broader participation in sport among future generations. Contrary to the Proponent's implications in its supporting statement, the Company contributes to a wide variety of charitable and civic organizations as part of our commitment to those communities and business objectives. Further, we support our employees to share in our mission whenever possible by supporting causes of their choice. Our employee-giving platform, Give Your Best ("GYB"), empowers employees who want to give back to their communities by donating money or volunteering to charitable organizations, subject to common exclusions, such as organizations found not to be in good standing. GYB allows the Company and the Nike Foundation to amplify giving efforts by matching donations dollar-for-dollar to schools and charitable organizations, up to $25,000 per calendar year, per employee. +Business risks associated with charitable giving are evaluated by the Company and the Board of Directors. +The Company devotes considerable time and resources to ensuring that our charitable partnerships advance business objectives and maintains processes and guidelines to evaluate and approve charitable contributions, nonprofit partnerships, and related policies. Charitable partnerships are approved by the Company only after a robust due diligence review of the proposed recipient organization. At the Board level, the Corporate Responsibility, Sustainability and Governance Committee is responsible for overseeing the Company's community and social impact efforts and other corporate responsibility activities, including reviewing and providing guidance to management regarding the Company's significant corporate responsibility related activities, policies, investments and programs and our work with industry organizations and non-governmental organizations concerning corporate responsibility. This oversight ensures alignment with the Company's strategy of increasing access, participation, and inclusion in sport, supporting long-term shareholder value. +The Company already provides significant disclosure regarding charitable giving. +We believe it is important not only to engage with organizations and issues that are important to our business, our employees, and our shareholders, but to be transparent regarding that engagement. As a result, consistent with our Policy on Public Policy and Political Contributions, the Company annually reports political contributions to political candidates, organizations, and ballot initiatives on the Company's website. We also provide a list of significant governmental entities, NGOs and industry groups the Company is involved with in the resources section of the Company's Mission website. +Therefore, in addition to being costly and time-consuming for the Company to prepare, the report that the Proposal requests would not provide meaningful additional information to the Company's shareholders. +BOARD RECOMMENDATION +X +The Board of Directors recommends that shareholders vote AGAINST approval of the shareholder proposal. +67 NIKE, INC. +PROPOSAL 6 +TO CONSIDER A SHAREHOLDER PROPOSAL REGARDING ENVIRONMENTAL TARGETS +The following shareholder proposal will be voted on at the Annual Meeting only if properly presented by or on behalf of the shareholder proponent. Green Century Capital Management, Inc., 114 State Street, Suite 200 Boston, MA 02109, beneficial owner of at least $25,000 of Class B Stock, submitted the proposal. The proposal, including any supporting statements, is included exactly as submitted to us by the proponent. The Board of Directors recommends a vote AGAINST the proposal and asks shareholders to read through NIKE's response, which follows the shareholder proposal. +WHEREAS: Climate change may cost the global economy over $38 trillion annually by 2049. 1 Mitigation is critical to address investment risks and avert economic losses. +A warming climate is associated with enterprise risks, and climate inaction jeopardizes 34% of fashion industry profits by 2030. 2 Nike's 10-K reports that: "Given the broad and global scope of our operations, we are particularly vulnerable to the physical risks of climate change." 3 Risks include disruptions to the production of Nike's products, operations of retail stores, suppliers, manufacturers, distribution centers, and vendors. +Given these risks, Nike acknowledges the importance of addressing and disclosing its climate mitigation strategy to stakeholders. In its 2023 issue prioritization matrix, Nike identified transparency, reporting and climate emissions as tier one issues. 5 Its website states that "reporting is the primary tool we use to disclose important information to our stakeholders about how we manage social and environmental issues." 6 +In 2019, Nike adopted Science Based Targets initiative-verified goals, including reducing operational emissions 65% and supply chain emissions 30% by 2030. 7 Yet, Nike did not release a comprehensive sustainability report in 2025, as it has routinely since 2001. 8 Instead, it published sustainability data that omits qualitative updates on climate initiatives and lacks the detail of prior disclosures. +Meanwhile, Nike must increase the pace of supply chain emissions reductions to achieve its 2030 target. As of FY24, its supply chain emissions have fallen 11% from a 2015 baseline, putting the company about one-third of the way to its goal with more than half the timeline elapsed. 9 These emissions comprise 99% of Nike's greenhouse gas footprint and are thus essential to effectively addressing the climate risks outlined in its 10-K. 10 +Competitors such as New Balance, Adidas, Puma, and lululemon disclose annual sustainability reports and/or climate transition plans that provide ongoing visibility into actions to align their operations and value chains with their targets, including: +• Processes for assessing, and responding to climate-related risks and opportunities; +• Scenario analyses to develop climate strategy, based on several potential future climatic states; +• Governance policies to support climate transition; +• Future actions to reduce value chain emissions; +• Expected emissions reductions and transition pathways associated with initiatives. +RESOLVED: Shareholders request Nike issue a report, above and beyond existing disclosures, summarizing if and how it intends to achieve the company's existing science-based emissions reduction targets, such as describing credible pathways and needed resource commitments. The plan should be published at reasonable expense, excluding confidential information. +SUPPORTING STATEMENT: In developing these disclosures, the proponent recommends considering, at management's discretion: +• Forward-looking, quantitative strategies, and key actions, for achieving the Company's climate goals; +• Guidance by advisory groups such as the Transition Plan Taskforce. +(1) https://epic.uchicago.edu/news/climate-change-may-cost-38-trillion-a-year-by-2049-study-says/ +(2) https://www.bloomberg.com/news/articles/2026-02-10/climate-inaction-puts-34-of-fashion-industry-profits-at-risk +(3) https://s1.q4cdn.com/806093406/files/doc_financials/2025/ar/Nike-Inc-2025_10K.pdf, 11 +(4) https://s1.q4cdn.com/806093406/files/doc_financials/2025/ar/Nike-Inc-2025_10K.pdf, 11 +(5) https://media.about.nike.com/files/2fd5f76d-50a2-4906-b30b-3b6046f36ebf/FY23_Nike_Impact_Report.pdf, 144 +(6) https://about.nike.com/en/resources/nike-inc-impact-report-archive +(7) https://about.nike.com/en/mission/initiatives/reducing-carbon-footprint +(8) https://about.nike.com/en/resources/nike-inc-impact-report-archive +(9) https://media.about.nike.com/files/f37dfe60-0341-4db1-8ab9-6156da717313/FY24-NIKE%2C-Inc.-Sustainability-Data.pdf, 12 +(10) https://media.about.nike.com/files/ab589635-4ed5-4a35-887a-e94f0eae4908/200254B_FY24_Nike_Emissions_Footprint.pdf, 2 +2026 PROXY STATEMENT 68 +OPPOSITION STATEMENT +The Board of Directors recommends that shareholders vote AGAINST this proposal because: +• We take a thoughtful and responsible approach when setting targets to reduce our greenhouse gas emissions, and intend to maintain that approach particularly in light of evolving methodologies and emerging global regulations; +• The Company has a longstanding history of transparent and voluntary reporting and intends to continue our efforts to reduce greenhouse gas emissions; and +• The Board of Directors and our management are best positioned to determine the targets and related disclosures that are appropriate for the Company, especially given the complex and shifting developments in this area. +We take a thoughtful and responsible approach when setting targets to reduce our greenhouse gas emissions. +At NIKE, we aim to drive innovation focused on performance and sustainability. Across our entire value chain, we strive to improve how we design, make and deliver products while reducing our greenhouse gas emissions. We have more than 20 years of experience setting greenhouse gas emissions reduction targets. Most recently, we set a 2030 greenhouse gas reduction target in 2019, based on the then-effective methodologies developed by the Science-Based Targets initiative (SBTi). +Currently, we are assessing the greenhouse gas reduction target we set in 2019, consistent with SBTi’s requirement that companies review, recalculate and revalidate targets at least every five years. We intend to maintain a thoughtful and responsible approach as we continue the assessment of our greenhouse gas target. We believe such an approach is particularly crucial at this time in light of evolving methodologies and emerging global regulations in this area. We note that, for example, SBTi is in the process of updating its target-setting methodologies. In addition, jurisdictions in which we operate have recently adopted (or are expected to adopt) laws, regulations and policies related to corporate disclosure of, target- setting on, and pathways for achieving, greenhouse gas emissions reduction. NIKE is actively monitoring the evolving methodologies, regulations and other developments in this area. +The Company has a longstanding history of transparent and voluntary reporting and intends to continue our efforts to reduce greenhouse gas emissions. +We have a longstanding history of transparent and voluntary reporting on our greenhouse gas emissions. As demonstrated by our latest Sustainability Data Report, which is available on our website, we already publish data on our emissions reduction progress. We continue to reduce our greenhouse gas emissions, including: +• 69% reduction of absolute Scope 1 & 2 GHG emissions from NIKE operations in FY24 (vs. FY20 baseline). +• 36% reduction of absolute Scope 3 GHG emissions from NIKE's product manufacturing and transportation in FY24 (vs. FY20 baseline). +• 96% of electricity consumption in NIKE's global operations was sourced from renewable electricity in FY24. +• 27% of electricity used by core NIKE finished goods manufacturers was sourced from renewable electricity in FY24. +We intend to continue taking action designed to reduce our greenhouse gas emissions. We expect to continue to focus on the three areas of our business that account for the majority of our emissions: materials innovation, renewable energy transition, and transportation. We also plan to continue to provide transparent reporting on our greenhouse gas emissions, including as we assess our greenhouse gas reduction target and comply with applicable legal requirements. +The Board of Directors and our management are best positioned to determine the targets and related disclosures that are appropriate for the Company. +The Board of Directors and our management monitor and evaluate our climate- and other sustainability-related initiatives, including as companies' actions and initiatives on these matters continue to receive significant attention from regulators and other stakeholders. The legal and regulatory environments surrounding such matters are becoming increasingly complex, especially as regulators in different jurisdictions adopt diverging requirements. Our ability to meet the expectations and requirements of regulators and other key stakeholders (including our shareholders and customers), particularly in light of rapid changes in regulations, interpretations of existing regulations or consumer preferences, could affect our business, operating results and financial condition, as well as our policies and procedures relating to such matters. +The Board of Directors and our management regularly review developments in this area as part of their holistic oversight of the risks and opportunities facing the Company. Given their collective industry knowledge and expertise, as well as their ongoing engagement and monitoring of the developments relevant to our Company (including those related to our sustainability initiatives and other aspects of our business), they are best positioned to determine our approach to setting any emissions reduction targets and related reporting on our progress and pathway towards achieving any such target. This proposal’s resolution is overly prescriptive in demanding an additional report on this topic and fails to take into account the evolving circumstances, regulatory requirements and other complexities facing the Company. Given the climate-related reporting that the Company already has published or is planning to publish (including both voluntary and regulatory disclosures), the report that this proposal requests would not provide meaningful additional information to the Company's shareholders and would constitute an unnecessary expenditure of the Company's resources and management's time. +BOARD RECOMMENDATION +X +The Board of Directors recommends that shareholders vote AGAINST the shareholder proposal. +69 NIKE, INC. +STOCK OWNERSHIP INFORMATION +STOCK HOLDINGS OF CERTAIN OWNERS AND MANAGEMENT +The following table sets forth the number of shares of the classes of NIKE securities beneficially owned, as of June 30, 2026, after giving effect to any transactions that occurred on such date, by (1) each person known to the Company to be the beneficial owner of more than five percent of any class of the Company's securities, (2) each of the directors and nominees for director, (3) each executive officer listed in the Summary Compensation Table ("NEOs"), and (4) all directors, NEOs, and other executive officers as a group. Because Class A Stock is convertible into Class B Stock on a share-for-share basis, each beneficial owner of Class A Stock is deemed by the SEC to be a beneficial owner of the same number of shares of Class B Stock. Therefore, in indicating a person's beneficial ownership of shares of Class B Stock in the table, it has been assumed that such person has converted into Class B Stock all shares of Class A Stock of which such person is a beneficial owner. For these reasons the table contains substantial duplications in the numbers of shares and percentages of Class A and Class B Stock shown for Swoosh, LLC, Philip Knight, and the Travis A. Knight 2009 Irrevocable Trust II. In addition, unless otherwise indicated, all persons named below can be reached c/o Corporate Secretary, NIKE, Inc., One Bowerman Drive, Beaverton, Oregon 97005-6453. +TITLE OF CLASS +SHARES BENEFICIALLY +OWNED (1) +PERCENT OF +CLASS (2) +Timothy Cook Class B 130,480 +— +Thasunda Duckett Class B 13,589 — +Mónica Gil Class B 8,893 — +Maria Henry Class B 8,767 — +Peter Henry Class B 11,099 — +Elliott Hill (3) +Class B 225,951 — +Travis Knight Class B 9,533,940 +(4) +0.8 % +Jørgen Vig Knudstorp Class B 21,388 +Mark Parker (3) +Class B 1,924,163 +(5)(6) +0.2 % +Michelle Peluso Class B 32,814 — +John Rogers, Jr. Class B 41,022 — +Robert Swan Class B 55,558 +(7) +— +Matthew Friend (3) +Class B 460,050 +(5) +— +Venkatesh Alagirisamy (3) +Class B 189,634 +(5) +— +Treasure Heinle (3) +Class B 90,608 +(5)(6) +— +Robert Leinwand (3) +Class B 216,591 +(5)(6) +— +Sojitz Corporation of America Preferred +(8) +300,000 100.0 % +1211 S.W. 5th Ave, Pacwest Center, Ste. 2220, +Portland, OR 97204 +Philip Knight +One Bowerman Drive, Beaverton, OR 97005 +Class A 27,479,487 +(9) +9.8 % +Class B 35,815,174 +(10) +2.9 % +Swoosh, LLC +22990 NW Bennett Street, Hillsboro, OR 97124 +Class A 221,750,000 +(11) +78.8 % +Class B 221,750,000 15.6 % +Travis A. Knight 2009 Irrevocable Trust II +22990 NW Bennett Street, Hillsboro, OR 97124 +Class A 24,681,369 +(12) +8.8 % +Class B 24,681,369 +(12) +2.0 % +Vanguard Capital Management +100 Vanguard Blvd., Malvern, PA 19355 +Class B 89,476,687 +(13) +7.5 % +(13) +State Street Corporation +One Congress Street, Suite 1, Boston, MA 02114 +Class B 59,588,679 +(14) +5.0 % +(14) +All directors and executive officers as a group (18 persons) +Class B 13,323,115 +(5)(6) +1.1 % +2026 PROXY STATEMENT 70 +(1) A person is considered to beneficially own any shares: (a) over which the person exercises sole or shared voting or investment power, or (b) of which the person has the right to acquire beneficial ownership at any time within 60 days (such as through conversion of securities or exercise of stock options). Unless otherwise indicated, voting and investment power relating to the above shares is exercised solely by the beneficial owner or shared by the owner and the owner's spouse or children. +(2) Omitted if less than 0.1 percent. +(3) NEO listed in the Summary Compensation Table. +(4) Includes 4,694,859 shares of Class B Stock held by Three Strings Investors, L.P. ("Three Strings"). Mr. Travis Knight has the right to remove and replace the sole general partner of Three Strings and serves as trustee of trusts that hold limited partnership interests in Three Strings. Mr. Travis Knight disclaims beneficial ownership of the shares held by Three Strings, except to the extent of his pecuniary interest therein. Does not include 221,750,000 shares of Class A Stock that are owned by Swoosh, LLC. Mr. Travis Knight has disclaimed beneficial ownership of all such shares. +(5) These amounts include the right to acquire the following numbers of shares within 60 days after June 30, 2026 pursuant to the exercise of stock options: 1,258,909 shares for Mr. Parker, 411,595 shares for Mr. Friend, 166,184 shares for Mr. Alagirisamy, 56,859 shares for Ms. Heinle, 178,806 shares for Mr. Leinwand, and 2,436,083 shares for the executive officer and director group. +(6) Includes shares held in accounts under the NIKE, Inc. 401(k) Savings and Profit Sharing Plan: 39,869 shares for Mr. Parker, 680 shares for Ms. Heinle, 1,507 shares for Mr. Leinwand, and 44,992 shares for the executive officer and director group. +(7) Includes 1,580 shares held by the Swan Family Revocable Trust. +(8) Preferred Stock does not have general voting rights except as provided by law, and under certain circumstances as provided in the Company's Restated Articles of Incorporation, as amended. +(9) Does not include 521,792 shares of Class A Stock that are owned by Mr. Philip Knight's spouse. Mr. Philip Knight has disclaimed ownership of all such shares. Mr. Philip Knight holds the position Chairman Emeritus, and has a standing invitation to attend all meetings of the Board as a non- voting observer. +(10) Does not include 521,792 shares of Class A Stock that are owned by Mr. Philip Knight's spouse. Mr. Philip Knight has disclaimed ownership of all such shares. +(11) Information provided as of December 30, 2025 in the Form 4 filed by the shareholder. +(12) Includes 5,538,989 shares of Class A Stock held directly by the Travis A. Knight 2009 Irrevocable Trust II (the "Trust") and 19,142,380 shares of Class A Stock held by an indirect subsidiary of the Trust. Mr. Travis Knight and members of his immediate family are among the beneficiaries of the Trust. Mr. Travis Knight disclaims beneficial ownership of the Company's securities held directly and indirectly by the Trust, except to the extent of his pecuniary interest therein. +(13) Information provided as of March 31, 2026 in Schedule 13G/A filed by the shareholder. +(14) Information provided as of March 31, 2026 in Schedule 13G/A filed by the shareholder. +DELINQUENT SECTION 16(a) REPORTS +Section 16(a) of the Exchange Act requires our directors and executive officers, and holders of more than 10 percent of a registered class of the Company's equity securities, to file with the SEC reports regarding their ownership and changes in ownership of Common Stock and other equity securities of the Company. Directors, officers, and greater than 10 percent shareholders are required by the regulations of the SEC to furnish the Company with copies of all Section 16(a) forms they file. Based solely on a review of such reports furnished to the Company and written representations that no other reports were required, during fiscal 2026, we believe that all such reports that were required to be filed under Section 16(a) were timely filed, except that one report relating to a December 10, 2025 grant of restricted stock units, performance-based stock units, and stock options to Venkatesh Alagirisamy was filed late due to administrative processing delays. +71 NIKE, INC. +ADDITIONAL INFORMATION +INSIDER TRADING ARRANGEMENTS AND POLICIES +We have adopted insider trading policies and procedures that govern the purchase, sale, and other disposition of our securities by our employees, directors, officers, and consultants. We believe our insider trading policies and procedures are reasonably designed to promote compliance with insider trading laws, rules, and regulations as well as the exchange listing standards applicable to us. Our insider trading policies and procedures prohibit our employees, directors, officers, and consultants from trading in our securities while in possession of material non-public information, among other things. The foregoing summary of our insider trading policies and procedures does not purport to be complete and is qualified by reference to our Insider Trading Policy and our Blackout and Pre-clearance Policy, copies of which can be found as exhibits to our Annual Report on Form 10-K for the fiscal year ended May 31, 2026. +TRANSACTIONS WITH RELATED PERSONS +Philip Knight, the father of NIKE director Travis Knight, serves as Chairman Emeritus, which provides a standing invitation for Philip Knight to attend meetings of the Board and its committees as a non-voting observer. In fiscal 2026, as Chairman Emeritus, Mr. Knight received salary of approximately $221,000, and medical and dental insurance coverage generally available to employees. +Mark Parker's son, Matthew Parker, was employed by the Company in fiscal 2026 in a non-executive role for which the Company paid Matthew Parker aggregate compensation of approximately $146,000. The compensation and benefits received by Matthew Parker were consistent with compensation and benefits paid to other employees holding similar positions. +Mark Parker's sister, Betsy Parker, was contracted by the Company in fiscal 2026 in a non-executive role for which the Company paid Betsy Parker aggregate compensation of approximately $175,000. +Kenneth Smith, son-in-law of former NEO Craig Williams, was employed by the Company in fiscal 2026 in a non-executive role for which the Company paid Kenneth Smith aggregate compensation of approximately $125,000. The compensation and benefits received by Kenneth Smith were consistent with compensation and benefits paid to other employees holding similar positions. +The Company's written policy requires the Corporate Responsibility, Sustainability & Governance Committee to review any transaction or proposed transaction with a related person that would be required to be reported under Item 404(a) of Regulation S-K, and to determine whether to ratify or approve the transaction, with ratification or approval to occur only if the committee determines that the transaction is fair to the Company and that approval or ratification of the transaction is in the interest of the Company. +COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION +The members of the Compensation Committee of the Board during fiscal 2026 were Timothy Cook, Mónica Gil, and Michelle Peluso. The committee is composed solely of independent, non-employee directors. No member of the Compensation Committee has been an executive officer of the Company, and no member of the Compensation Committee had any relationships requiring disclosure by the Company under the SEC's rules requiring disclosure of certain relationships and related-party transactions. None of the Company's executive officers served as a director or member of a compensation committee (or other committee serving an equivalent function) of any other entity, the executive officers of which served as a director or member of the Compensation Committee of the Company during fiscal 2026. +2026 PROXY STATEMENT 72 +OTHER MATTERS +WEBSITE REFERENCES +References to the Company's websites are for informational purposes only. Information contained on, or accessible through, such websites is not incorporated by reference into, and does not constitute a part of, this proxy statement. +OTHER BUSINESS +As of the time this proxy statement was printed, management was unaware of any proposals to be presented for consideration at the Annual Meeting other than those set forth herein, but if other matters do properly come before the Annual Meeting, the persons named in the proxy will vote the shares represented by such proxy according to their best judgment. +73 NIKE, INC. +GENERAL INFORMATION +Why am I receiving these proxy materials? +You are receiving the enclosed proxy materials in connection with the solicitation of proxies by the Board of NIKE for use at the Annual Meeting, including at any adjournment or postponement thereof. As a shareholder of record as of the close of business on July 8, 2026, which is the record date fixed by the Board, you are invited to attend the virtual Annual Meeting and are urged to vote your shares on the proposals described in this proxy statement. +How are the proxy materials being distributed? +This proxy statement is first being made available to shareholders on or about July 15, 2026. We are furnishing proxy materials to our shareholders primarily via the Internet, by mailing a Notice Regarding the Availability of Proxy Materials, or "Notice", instead of mailing printed copies of those materials to each shareholder. The Notice directs shareholders to a website where they can access our proxy materials, including our proxy statement and our annual report, and view instructions on how to vote online or by telephone. If you would prefer to receive a paper copy of our proxy materials, please follow the instructions included in the Notice. If you have previously elected to receive our proxy materials electronically, you will continue to receive access to these materials electronically unless you elect otherwise. +What is included in the proxy materials? +Our proxy materials include our Notice, our proxy statement, and our Annual Report on Form 10-K for the year ended May 31, 2026. Our Notice directs shareholders to a website where they can access our proxy materials. +Why is the Company holding a virtual Annual Meeting? +We are continuing to use a virtual meeting format because, based on the success of our recent annual meetings, we believe that it provides greater accessibility, encourages broader shareholder participation, and helps reduce costs, while still allowing us to provide shareholders the same rights and opportunities to participate as an in-person meeting. +How can I attend and participate in the virtual Annual Meeting? +Holders of record of our Class A Stock and Class B Stock at the close of business on July 8, 2026 may attend the Annual Meeting and any adjournment or postponement thereof, and may vote, and submit questions in advance of and during the meeting. +To attend, vote at, and submit questions during the Annual Meeting, visit www.virtualshareholdermeeting.com/NKE2026 and enter the 16-digit control number included in your Notice, voting instructions form, or proxy card. +Online access to the webcast will open approximately 15 minutes prior to the start of the Annual Meeting to allow time for you to log in and test the computer audio system. +How can I ask questions at the Annual Meeting? +We are committed to ensuring that shareholders will be afforded the same rights and opportunities to participate in our virtual Annual Meeting as they would at an in-person meeting. Shareholders of record at the close of business on July 8, 2026 may submit questions in advance of and during the Annual Meeting. +• To submit questions in advance of the Annual Meeting : Visit www.proxyvote.com and enter your 16-digit control number included in your Notice, voting instructions form, or proxy card. Questions submitted in advance must be submitted before 11:59 P.M. Eastern Time on September 7, 2026. +• To submit questions during the Annual Meeting : Visit www.virtualshareholdermeeting.com/NKE2026 and enter the 16-digit control number included in your Notice, voting instructions form, or proxy card. +All questions must comply with the rules of conduct for the Annual Meeting, which will be made available on the virtual meeting website at www.virtualshareholdermeeting.com/NKE2026. +What will I be voting on at the Annual Meeting? +You will be voting: +• To elect the 11 director nominees identified in this proxy statement. The holders of NIKE's Class A Stock will vote to elect eight of the director nominees identified in this proxy statement, and the holders of NIKE's Class B Stock will vote to elect the remaining three director nominees identified in this proxy statement; +• To approve executive compensation by an advisory vote; +2026 PROXY STATEMENT 74 +• To ratify the appointment of PwC as our independent registered public accounting firm; +• To approve the amendment of the NIKE, Inc. Employee Stock Purchase Plan to increase the number of authorized shares; +• To consider a shareholder proposal regarding a report on discrimination in charitable support, if properly presented at the Annual Meeting; +• To consider a shareholder proposal regarding environmental targets, if properly presented at the Annual Meeting; and +• To transact such other business as may properly come before our Annual Meeting or any adjournment or postponement thereof. +How does the Board recommend that I vote on these proposals? +Our Board recommends: +• For the holders of NIKE's Class A Stock, a vote FOR the election of each of Mr. Timothy Cook, Ms. Maria Henry, Mr. Peter Henry, Mr. Elliott Hill, Mr. Travis Knight, Mr. Jørgen Vig Knudstorp, Mr. Mark Parker, and Ms. Michelle Peluso to serve as directors until the next annual meeting and until their successor is elected and qualified; +• For the holders of NIKE's Class B Stock, a vote FOR the election of each of Ms. Thasunda Duckett, Ms. Mónica Gil, and Mr. Robert Swan to serve as directors until the next annual meeting and until their successor is elected and qualified; +• For all shareholders, a vote FOR the advisory resolution approving the compensation of our NEOs as described in this proxy statement; +• For all shareholders, a vote FOR ratification of the appointment of PwC as our independent registered public accounting firm; +• For all shareholders, a vote FOR to approve the amendment of the NIKE, Inc. Employee Stock Purchase Plan to increase the number of authorized shares; +• For all shareholders, a vote AGAINST the shareholder proposal regarding a report on discrimination in charitable support; and +• For all shareholders, a vote AGAINST the shareholder proposal regarding environmental targets. +How do I vote my shares? +You may vote by proxy before or at the Annual Meeting. +Voting in Advance of the Annual Meeting +If you are a shareholder of record, you may vote your shares by proxy before the Annual Meeting using one of the following methods: +• Internet: Visit www.proxyvote.com and follow the on-screen instructions. Internet voting is available 24 hours a day and closes at 11:59 p.m. Eastern Time on September 7, 2026 for shares held directly and by 11:59 p.m. Eastern Time on September 3, 2026 for shares held in a Plan; +• Telephone: Call toll-free 1-800-690-6903. Telephone voting is available 24 hours a day and closes at 11:59 p.m. Eastern Time on September 7, 2026 for shares held directly and by 11:59 p.m. Eastern Time on September 3, 2026 for shares held in a Plan; or +• Mail: Complete, sign, date, and return your proxy card in the postage-paid envelope we have provided. Your completed and signed proxy card must be received prior to the Annual Meeting. +If you are a beneficial owner of shares held in street name, please follow the instructions you receive from your bank, broker or record holder to vote your shares. +Voting During the Annual Meeting +If you are a shareholder of record or if you are a beneficial owner of shares held in street name and obtain a legal proxy from your bank, broker or record holder and plan to vote during the Annual Meeting rather than in advance, you may do so by visiting www.virtualshareholdermeeting.com/NKE2026 and entering the 16-digit control number included in your Notice, voting instructions form, or proxy card. Even if you plan to attend the Annual Meeting, you are encouraged to vote by proxy prior to the meeting. You can always change your vote, as described in more detail under "Can I change my vote or revoke my proxy?" +75 NIKE, INC. +What is the difference between holding shares as a shareholder of record and as a beneficial owner or street name holder? +If your shares are registered directly in your name with our transfer agent, Computershare Trust Company, N.A., you are considered the "shareholder of record" with respect to those shares and we have sent the Notice (or if you received printed proxy materials, the Notice, proxy statement, and proxy card) directly to you. You may submit a proxy and vote those shares in the manner described in this proxy statement and the Notice. +If your shares are held in a stock brokerage account or by a bank, broker or other holder of record, you are considered the "beneficial owner" of shares held in street name. The Notice, voting instructions form, and/or proxy card have been forwarded to you by your broker, bank, or other holder of record who is considered the shareholder of record with respect to those shares. As the beneficial owner, you have the right to direct your broker, bank, or other holder of record on how to vote your shares by using the voting instruction card included in the mailing or by following their instructions for voting. +What does it mean if I receive more than one proxy card or Notice? +If you receive more than one proxy card or Notice, it means that you hold shares registered in more than one account. To ensure that all of your shares are voted, please follow the instructions included on each Notice you receive or, if you received printed proxy materials by mail, complete, sign, and return each proxy card you receive. +How many shares may be voted at the Annual Meeting? +On the close of business on July 8, 2026, 281,387,752 shares of Class A Stock and 1,202,110,951 shares of Class B Stock were issued and outstanding and entitled to vote at the meeting. +What constitutes a quorum? +For Proposal 1, the election of directors, a majority of the votes entitled to be cast by each of the Class A Stock and Class B Stock separately constitutes a quorum of Class A Stock and Class B Stock, respectively. For Proposals 2, 3, 4, 5 and 6, a majority of the votes entitled to be cast by both of the Class A Stock and Class B Stock together constitutes a quorum. Withhold votes, abstentions and broker non-votes are counted for purposes of determining whether a quorum exists. Broker non-votes occur when a person holding shares in street name, such as through a brokerage firm, does not provide instructions as to how to vote those shares and the broker does not then vote those shares on the shareholder's behalf. +How are votes calculated? +Each share of Class A Stock and each share of Class B Stock is entitled to one vote. The holders of our Common Stock will vote together on all matters at the Annual Meeting except for the election of directors, for which the holders of Class A Stock and holders of Class B Stock will vote separately. For more information regarding our Class A Stock and Class B Stock, see the section above titled "Corporate Governance—Capital Structure". +2026 PROXY STATEMENT 76 +How many votes are required to approve each proposal and how are votes counted? +How many votes are required for approval? How are director withhold votes treated? How are abstentions treated? How are broker non-votes handled? How will signed proxies that do not specify voting preferences be treated? +Proposal 1—Elect the director nominees +For the directors elected by holders of Class A Stock: a plurality of votes of the holders of Class A Stock cast +For the directors elected by holders of Class B Stock: a plurality of votes of the holders of Class B Stock cast +Withhold votes are not counted as votes cast for purposes of the plurality voting standard and will not affect the outcome of the proposal, but will be considered in determining whether our director resignation policy applies to a director N/A Broker non-votes are not included as votes cast and will not affect the outcome of the proposal Shares will be voted "FOR" the election of each of the named nominees for director +Proposal 2—Advisory vote to approve executive compensation Votes of Common Stock cast in favor of the proposal must exceed votes of Common Stock cast against the proposal N/A Abstentions are not included as votes cast and will not affect the outcome of the proposal Broker non-votes are not included as votes cast and will not affect the outcome of the proposal Shares will be voted "FOR" the proposal regarding an advisory vote to approve executive compensation +Proposal 3— Ratify the appointment of PwC as our independent registered public accounting firm Votes of Common Stock cast in favor of the proposal must exceed votes of Common Stock cast against the proposal N/A Abstentions are not included as votes cast and will not affect the outcome of the proposal Banks, brokers and other holders of record may exercise discretion and vote on this matter and these will be counted as votes cast Shares will be voted "FOR" the ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm +Proposal 4—Approval of Amendment of NIKE, Inc. Employee Stock Purchase Plan to increase authorized shares Votes of Common Stock cast in favor of the proposal must exceed votes of Common Stock cast against the proposal N/A Abstentions are not included as votes cast and will not affect the outcome of the proposal Broker non-votes are not included as votes cast and will not affect the outcome of the proposal Shares will be voted "FOR" the approval of the amendment of NIKE, Inc. Employee Stock Purchase Plan to increase authorized shares +Proposal 5—Consider a shareholder proposal regarding a report on discrimination in charitable support Votes of Common Stock cast in favor of the proposal must exceed votes of Common Stock cast against the proposal N/A Abstentions are not included as votes cast and will not affect the outcome of the proposal Broker non-votes are not included as votes cast and will not affect the outcome of the proposal Shares will be voted "AGAINST" the shareholder proposal regarding a report on discrimination in charitable support +Proposal 6 —Consider a shareholder proposal regarding environmental targets Votes of Common Stock cast in favor of the proposal must exceed votes of Common Stock cast against the proposal N/A Abstentions are not included as votes cast and will not affect the outcome of the proposal Broker non-votes are not included as votes cast and will not affect the outcome of the proposal Shares will be voted "AGAINST" the shareholder proposal regarding environmental targets +What happens if a director fails to receive the support of a majority of votes cast? +The Bylaws and the Corporate Governance Guidelines of the Company provide that any nominee for director in an uncontested election who receives a greater number of votes "withheld" from their election than votes "for" such election shall tender their resignation for consideration by the Corporate Responsibility, Sustainability & Governance Committee. The committee will then recommend to the Board the action to be taken with respect to the resignation, and the Board will publicly disclose its decision with respect to such resignation within 90 days after the certification of the election results. +77 NIKE, INC. +Can I change my vote or revoke my proxy? +A shareholder giving the enclosed proxy has the power to revoke it. You can change your vote or revoke your proxy at any time before it is exercised at the Annual Meeting by: +• Delivering written notice of your revocation to the Corporate Secretary of NIKE, Inc. at One Bowerman Drive, Beaverton, Oregon 97005-6453; +• Executing a proxy bearing a later date using any of the voting methods described above under "How do I vote my shares?"; or +• Attending and voting your shares online during the Annual Meeting (attending the Annual Meeting will not, by itself, revoke your proxy). +If you are a beneficial owner of shares held in street name, please contact your bank, broker or record holder for instructions on how to change or revoke your voting instructions. +How are proxies being solicited? +In addition to soliciting proxies by mail, certain officers and employees of the Company, without extra compensation, may also solicit proxies personally or by telephone. Copies of proxy solicitation materials will be furnished to fiduciaries, custodians, and brokerage houses for forwarding to the beneficial owners of shares held in their names. The Company will bear the cost of soliciting proxies. +How do I find out the voting results? +We expect to announce preliminary voting results at the Annual Meeting. Final voting results will be published in a Current Report on Form 8-K following the Annual Meeting. +How can I submit a proposal for next year's annual meeting? +A shareholder proposal intended for inclusion in the Company's proxy statement and form of proxy for the 2027 annual meeting of shareholders pursuant to Rule 14a-8 under the Exchange Act must be received by the Corporate Secretary of NIKE, Inc. at shareholder.proposals@nike.com on or before March 17, 2027 and otherwise comply with all applicable rules and regulations under the Exchange Act. +A shareholder wishing to submit a proxy access nomination for inclusion in the Company's proxy statement and form of proxy for the 2027 annual meeting of shareholders pursuant to Article II, Section 11 of the Company's Bylaws must provide the Company with timely written notice of such nomination and otherwise comply with the applicable requirements set forth in the Bylaws. To be timely, notice of such nomination, along with the other information required by the Company's Bylaws, must be received by the Corporate Secretary of NIKE, Inc. at One Bowerman Drive, Beaverton, Oregon 97005-6453, no earlier than February 15, 2027 and no later than March 17, 2027. +Under Article II, Section 10 of the Company's Bylaws, any shareholder wishing to submit any other proposal or nomination for consideration at the 2027 annual meeting of shareholders must provide the Company with timely written notice of such proposal or nomination and otherwise comply with the requirements set forth in the Bylaws. To be timely, such notice, along with the other information required by the Company's Bylaws, must be received by the Corporate Secretary of NIKE, Inc. at One Bowerman Drive, Beaverton, Oregon 97005-6453, no earlier than May 11, 2027 and no later than June 10, 2027. +In addition to satisfying the foregoing requirements under the Company's Bylaws, to comply with the universal proxy rules, shareholders who intend to solicit proxies in support of director nominees other than the Company's nominees for the 2027 annual meeting of shareholders must also comply with all applicable requirements of Rule 14a-19 under the Exchange Act. The advance notice requirement under Rule 14a-19 does not override or supersede the longer advance notice requirement under the Company's Bylaws. +For the Board of Directors, +Mary Hunter +Vice President, Corporate Secretary +2026 PROXY STATEMENT 78 +EXHIBIT A +NIKE, INC. +EMPLOYEE STOCK PURCHASE PLAN +(As amended as of September 8, 2026) +1. Purpose of the Plan . NIKE, Inc. (the “ Company ”) believes that ownership of shares of its common stock by employees of the Company and its Participating Subsidiaries (as defined below) is desirable as an incentive to better performance and improvement of profits, and as a means by which employees may share in the rewards of growth and success. The purpose of the Company’s Employee Stock Purchase Plan (the “ Plan ”) is to provide a convenient means by which employees of the Company and Participating Subsidiaries may purchase the Company’s shares through payroll deductions and a method by which the Company may assist and encourage such employees to become share owners. The Company operates a Foreign Subsidiary Employee Stock Purchase Plan (as amended from time to time, the “ Foreign ESPP ”) pursuant to which selected groups of employees of the Company’s foreign subsidiaries (“ Foreign Subsidiaries ”) are provided a similar opportunity to purchase Company shares. Such groups of employees designated as participating groups for purposes of the Foreign ESPP are hereinafter referred to as “ Participating Foreign ESPP Groups .” +2. Shares Reserved for the Plan . As of September 8, 2026 there are 78,000,000 shares of the Company’s authorized but unissued or reacquired Class B Common Stock reserved for purposes of the Plan (which reflects an increase of 16,000,000 Shares from 62,000,000, the number of shares reserved under the Plan as of September 9, 2022). The number of shares reserved for the Plan is subject to adjustment in the event of any stock dividend, stock split, combination of shares, recapitalization or other change in the outstanding Class B Common Stock of the Company. The determination of whether an adjustment shall be made and the manner of any such adjustment shall be made by the Board of Directors of the Company (the “ Board ”), which determination shall be conclusive. +3. Administration of the Plan . The Board has full power and authority to administer the Plan. Without limiting the foregoing, the Board has delegated to the Chief Human Resources Officer of the Company (or, if the officer who is the Company’s senior human resources executive shall have a title other than Chief Human Resources Officer, then such other officer) all authority for administration of the Plan and, in connection with such delegation and unless otherwise determined by the Board or required by applicable law, the Plan shall be administered by or under the direction of such officer (the “ Authorized Officer ”), who may delegate some or all of his or her duties and authority to one or more Company employees. Unless prohibited by applicable law, the Authorized Officer may promulgate rules and regulations for the operation of the Plan, adopt forms for use in connection with the Plan, and decide any question of interpretation of the Plan or rights arising thereunder. The Authorized Officer may consult with counsel for the Company on any matter arising under the Plan. Unless otherwise determined by the Board, all determinations and decisions of the Authorized Officer or the Board shall be conclusive. +4. Eligible Employees . The Board hereby authorizes the purchase of shares of Class B Common Stock pursuant to the Plan by employees of the Company and of each corporate subsidiary of the Company, but has delegated to the Authorized Officer the authority to designate from time to time those “subsidiary corporations” (within the meaning of Section 424(f) of the Internal Revenue Code of 1986, as amended (the “ Code ”)) of the Company which shall be participants in the Plan (each such participating subsidiary being hereinafter called a “ Participating Subsidiary ”). All Eligible Employees (as defined below) of the Company and all Eligible Employees of each Participating Subsidiary are eligible to participate in the Plan. An “ Eligible Employee ” is an employee of the Company or a Participating Subsidiary who has been employed by the Company or a Participating Subsidiary for at least one full month prior to the Offering Date (as defined below) excluding, however, (a) any employee whose customary employment is less than 20 hours per week and (b) any employee who would, after a purchase of shares under the Plan, own or be deemed (under Section 424(d) of the Code) to own stock (including stock subject to any outstanding options held by the employee) possessing 5 percent or more of the total combined voting power or value of all classes of stock of the Company or any parent or subsidiary of the Company. Employee status shall be determined consistent with Treasury Regulation Section 1.421-1(h). The Board and Authorized Officer shall have the sole discretion to determine whether an individual satisfies the definition of Eligible Employee under this paragraph 4, in a manner consistent with Section 423 of the Code, and any such determination shall be final and binding on all parties. Notwithstanding the foregoing, any individual retroactively determined to be an Eligible Employee by the Company, a court, or a governmental agency will be permitted to participate only prospectively from the date of such determination. All participants granted options pursuant to an Offering (as defined below) shall have the same rights and privileges within the meaning of Section 423(b)(5) of the Code. +5. Offerings . +(a) Offering and Purchase Dates. The Plan shall be implemented by a series of six-month offerings (the “ Offerings ”), with a new Offering commencing on April 1 and October 1 of each year. Each Offering commencing on April 1 of any year shall end on September 30 of that year, and each Offering commencing on October 1 of any year shall end on March 31 of the following year. The first day of each Offering is the “ Offering Date ” for that Offering and the last day of each Offering is the “ Purchase Date ” for that Offering. +79 NIKE, INC. +(b) Grants; Limitations . On each Offering Date, each Eligible Employee shall be granted an option under the Plan to purchase shares of Class B Common Stock on the Purchase Date for the Offering for the price determined under paragraph 7 of the Plan exclusively through payroll deductions authorized under paragraph 6 of the Plan, unless the Board or the Authorized Officer determines that an alternative form of contributions may be used; provided, however, that (i) no option shall permit the purchase of more than 500 shares, and (ii) no option may be granted under the Plan that would allow an employee’s right to purchase shares under all stock purchase plans of the Company and its parents and subsidiaries to which Section 423 of the Code applies to accrue at a rate that exceeds $25,000 of fair market value of shares (determined at the date of grant) for each calendar year in which such option is outstanding. +6. Participation in the Plan. +(a) Initiating Participation . An Eligible Employee may participate in an Offering under the Plan by submitting to the Company or its agent a subscription and payroll deduction authorization in the form specified by the Company. The subscription and payroll deduction authorization must be submitted no later than the “ Subscription Deadline ,” which shall be a number of days prior to the Offering Date with the exact number of days being established from time to time by the Authorized Officer by written notice to Eligible Employees. Once submitted, a subscription and payroll deduction authorization shall remain in effect unless amended or terminated, and upon the expiration of an Offering the participants in that Offering will be automatically enrolled in the new Offering starting the following day. The payroll deduction authorization will authorize the employing corporation to make payroll deductions in an amount designated by the participant from each of the participant’s paychecks during the Offering. The designated amount to be deducted from each paycheck must be a whole percentage of not less than one percent or more than 10 percent of the participant’s Compensation (as defined below) for the period covered by the paycheck; provided, however, that the amount actually deducted from any paycheck shall not exceed the amount remaining after deduction of all other required or elective withholdings and deductions from that paycheck. If payroll deductions are made by a Participating Subsidiary, that corporation will promptly remit the amount of the deductions to the Company. +(b) Definition of Compensation. “ Compensation ” means amounts received by the participant from the Company or Participating Subsidiary to the extent that the amounts are subject to federal income tax withholding on wages under Section 3401(a) of the Code, determined without regard to any limitations based on the nature or location of the employment or the services performed, and adjusted as follows: +(i) Before-tax contributions to a non-qualified deferred compensation arrangement, contributions to a plan qualified under Section 401(k) of the Code, and any amounts set aside by the participant from otherwise taxable pay under a welfare benefit plan qualified under Section 125 of the Code or for qualified transportation fringe benefits under Section 132 of the Code shall be included. +(ii) Taxable expense reimbursements, any amount paid in lieu of unused paid-time off (before or after termination of employment), moving expenses, welfare benefits, payments from a nonqualified deferred compensation plan, amounts realized from the exercise of a stock option, settlement of restricted stock units, lapse of restrictions on restricted property or from any other equity incentive award, payments made in any form under the Company’s Long Term Incentive Plan (or similar long term incentive arrangements maintained by a Participating Subsidiary), and adjustments for overseas employment (other than any transfer premium) shall be excluded. +(c) Amending Participation . After a participant has begun participating in the Plan by initiating payroll deductions, the participant may amend the payroll deduction authorization (i) once during any Offering to decrease the amount of payroll deductions, and (ii) effective for the first paycheck of a new Offering to either increase or decrease the amount of payroll deductions. A request for a decrease in payroll deductions during an Offering must be submitted to the Company in the form specified by the Company no later than the Change Deadline (as defined below) for that Offering, and shall be effective for any paycheck only if the request is received by the Company at least 10 business days prior to the payday for that paycheck or by such other deadline as established by the Authorized Officer. A request for an increase or decrease in payroll deductions effective for the first paycheck of a new Offering must be submitted to the Company in the form specified by the Company no later than the Subscription Deadline for the new Offering. In addition, if the amount of payroll deductions from any participant during an Offering exceeds the maximum amount that can be applied to purchase shares in that Offering under the limitations set forth in paragraph 5(b) above, then (x) payroll deductions from the participant shall cease and all such excess amounts shall be refunded to the participant, and (y) payroll deductions from the participant shall restart as of the commencement of the next Offering at the rate set forth in the participant’s then effective payroll deduction authorization. +(d) Terminating Participation . After a participant has begun participating in the Plan by initiating payroll deductions, the participant may terminate participation in the Plan by notice to the Company in the form specified by the Company. To be effective to terminate participation in an Offering, a notice of termination must be submitted no later than the “ Change Deadline, ” which shall be a number of days prior to the Purchase Date for that Offering with the exact number of days being established from time to time by the Authorized Officer by written notice to participants. Participation +2026 PROXY STATEMENT 80 +in the Plan shall also terminate when a participant ceases to be an Eligible Employee for any reason, including death or retirement; provided, however, that for purposes of the Plan, a participant’s status as an Eligible Employee shall be considered to be continuing intact while such participant is on military leave, sick leave, or other bona fide leave of absence approved by the Company; provided further, however, that if such period of leave of absence exceeds three months, and the participant’s right to reemployment is not provided either by statute or by contract, the participant’s status as an Eligible Employee shall be deemed to have terminated on the first day immediately following such three-month period. Unless otherwise determined by the Authorized Officer (on a uniform and non-discriminatory basis), a transfer of a participant’s employment between or among the Company and/or the Participating Subsidiaries shall not be considered a termination of employment. A participant may not reinstate participation in the Plan with respect to a particular Offering after terminating participation in the Plan with respect to that Offering. Upon termination of a participant’s participation in the Plan, all amounts deducted from the participant’s Compensation and not previously used to purchase shares under the Plan shall be returned to the participant. +7. Option Price . The price at which shares shall be purchased in an Offering shall be the lower of (a) 85% of the fair market value of a share of Class B Common Stock on the Offering Date of the Offering or (b) 85% of the fair market value of a share of Class B Common Stock on the Purchase Date of the Offering. The fair market value of a share of Class B Common Stock on any date shall be the closing price of the Class B Common Stock on the New York Stock Exchange on such date or, if such date is not a trading day, then on the first immediately preceding trading day prior to such date; provided that if the Class B Common Stock is not traded on the New York Stock Exchange, then the fair market value of a share of Class B Common Stock will be such other reported value of the Class B Common Stock as shall be specified by the Board. +8. Purchase of Shares . All amounts withheld from the Compensation of a participant shall be credited to his or her account under the Plan. No interest will be paid on such accounts, unless otherwise determined by the Authorized Officer or required under applicable law. On each Purchase Date, the amount of the account of each participant will be applied to the purchase of shares (including fractional shares) by such participant from the Company at the price determined under paragraph 7 above. Any cash balance remaining in a participant’s account after a Purchase Date as a result of the limitations set forth in paragraph 5(b) above shall be repaid to the participant. +9. Delivery and Custody of Shares . Shares purchased by participants pursuant to the Plan will be delivered to and held in the custody of such investment or financial firm (the “ Custodian ”) as shall be appointed by the Authorized Officer. The Custodian may hold in nominee or street name certificates for shares purchased pursuant to the Plan, and may commingle shares in its custody pursuant to the Plan in a single account without identification as to individual participants. By appropriate instructions to the Custodian, a participant may from time to time sell all or part of the shares held by the Custodian for the participant’s account at the market price at the time the order is executed. If a participant desires to sell all of the shares in his or her account, the Custodian or the Company will purchase any fraction of a share in the account at the same price per share that the whole shares are sold on the market. By appropriate instructions to the Custodian, a participant may obtain (a) transfer into the participant’s own name of all or part of the whole shares held by the Custodian for the participant’s account and delivery of such whole shares to the participant, or (b) transfer of all or part of the whole shares held for the participant’s account by the Custodian to a regular individual brokerage account in the participant’s own name, either with the firm then acting as Custodian or with another firm; provided, however, that no shares may be transferred under (a) or (b) until two years after the Offering Date of the Offering in which the shares were purchased. +10. Records and Statements . The Custodian will maintain the records of the Plan. As soon as practicable after each Purchase Date each participant will receive a statement showing the activity of his or her account since the preceding Purchase Date and the balance on the Purchase Date as to both cash and shares. Participants will be furnished such other reports and statements, and at such intervals, as the Authorized Officer shall determine from time to time. +11. Expense of the Plan . The Company will pay all expenses incident to operation of the Plan, including costs of record keeping, accounting fees, legal fees, commissions and issue or transfer taxes on purchases pursuant to the Plan, on dividend reinvestments and on delivery of shares to a participant or into his or her brokerage account. Unless otherwise provided by the Board or the Authorized Officer in its discretion, the Company will not pay expenses, commissions or taxes incurred in connection with sales of shares by the Custodian at the request of a participant. Expenses to be paid by a participant will be deducted from the proceeds of sale prior to remittance. +12. Rights Not Transferable . The right to purchase shares under this Plan is not transferable by a participant, and such right is exercisable during the participant’s lifetime only by the participant. Upon the death of a participant, any cash withheld and not previously applied to purchase shares, together with any shares held by the Custodian for the participant’s account shall be transferred to the persons entitled thereto under the laws of the state of domicile of the participant upon a proper showing of authority. +13. Dividends and Other Distributions; Reinvestment . Stock dividends and other distributions in shares of Class B Common Stock of the Company on shares held by the Custodian shall be issued to the Custodian and held by it for the account of the respective participants entitled thereto. Cash distributions other than dividends, if any, on shares held by the Custodian will +81 NIKE, INC. +be paid currently to the participants entitled thereto. Cash dividends, if any, on shares held by the Custodian may be reinvested in Class B Common Stock on behalf of the participants entitled thereto. The Custodian shall establish a separate account for each participant for the purpose of holding any shares acquired through reinvestment of participants’ dividends. On each dividend payment date, the Custodian shall receive from the Company the aggregate amount of dividends payable with respect to all shares held by the Custodian for participants’ accounts under the Plan. As soon as practicable thereafter, the Custodian shall use such portion of the funds designated for reinvestment to purchase shares of Class B Common Stock in the public market, and shall then allocate such shares (including fractional shares) among the dividend reinvestment accounts of the participants pro rata based on the amount of dividends reinvested for such participants. For those participants receiving cash dividends, the Custodian shall allocate the remainder of such funds among the accounts of such participants pro rata based upon the amount of dividends received. A participant may sell or transfer shares in the participant’s dividend reinvestment account in accordance with paragraph 9 above, except that there shall be no holding period required for a transfer from a dividend reinvestment account. +14. Voting and Shareholder Communications . In connection with voting on any matter submitted to the shareholders of the Company, the Custodian will cause the shares held by the Custodian for each participant’s accounts to be voted in accordance with instructions from the participant or, if requested by a participant, furnish to the participant a proxy authorizing the participant to vote the shares held by the Custodian for his or her accounts. Copies of all general communications to shareholders of the Company will be sent to participants in the Plan. +15. Tax Withholding. Each participant who has purchased shares under the Plan shall immediately upon notification of the amount due, if any, pay to the Company in cash amounts necessary to satisfy any applicable federal, state and local tax or other withholding determined by the Company to be required. If the Company determines that additional withholding is required beyond any amount deposited by the participant, the participant shall pay such amount to the Company on demand. If the participant fails to pay the amount demanded, the Company, in its discretion, may (i) withhold that amount from other amounts payable by the Company or any subsidiary of the Company to the participant, including salary, (ii) withhold shares otherwise issuable following a Purchase Date have an aggregate fair market value to pay the withholding taxes that remain due, or (iii) withhold from proceeds of the sale of the shares issued following the Purchase Date, either through a voluntary sale or a mandatory sale arranged by the Company, in all cases subject to applicable law. +16. Responsibility and Indemnity . Neither the Company, the Board, the Custodian, any Participating Subsidiary, any Foreign Subsidiary, nor any member, officer, agent, or employee of any of them, shall be liable to any participant under the Plan for any mistake of judgment or for any omission or wrongful act unless resulting from gross negligence, willful misconduct or intentional misfeasance. The Company will indemnify and save harmless the Board, the Custodian and any such member, officer, agent or employee against any claim, loss, liability or expense arising out of the Plan, except such as may result from the gross negligence, willful misconduct or intentional misfeasance of such entity or person. +17. Conditions and Approvals . The obligations of the Company under the Plan shall be subject to compliance with all applicable state and federal laws and regulations, compliance with the rules of any stock exchange on which the Company’s securities may be listed, and approval of such federal and state authorities or agencies as may have jurisdiction over the Plan or the Company or any Participating Subsidiary. The Company will use its best effort to comply with such laws, regulations and rules and to obtain such approvals. +18. Amendment of the Plan . Unless otherwise determined by the Board, the Board or the Authorized Officer may from time to time amend the Plan in any and all respects; provided, however, that only the Board may change (a) the number of shares reserved for purposes of the Plan, (b) the purchase price of shares offered pursuant to the Plan, (c) the terms of paragraph 5 above, or (d) in paragraph 6(a) above the maximum percentage of a participant’s Compensation that may be deducted from a participant’s paycheck during an Offering. Notwithstanding the foregoing, the Board may not without the approval of the shareholders of the Company increase the number of shares reserved for purposes of the Plan (except for adjustments authorized in paragraph 2 above) or decrease the purchase price of shares offered pursuant to the Plan. +19. Termination of the Plan . The Plan shall terminate when all of the shares reserved for purposes of the Plan have been purchased, provided that (a) the Board or the Authorized Officer in their sole discretion may at any time terminate the Plan with respect to any Participating Subsidiary, without any obligation on account of such termination, except as set forth in the following sentence, and (b) the Board in its sole discretion may at any time terminate the Plan completely, without any obligation on account of such termination, except as set forth in the following sentence. Upon any such termination, the cash and shares, if any, held in the accounts of each participant to whom the termination applies shall forthwith be distributed to the participant or to the participant’s order, provided that if prior to such termination, the Board and shareholders of the Company shall have adopted and approved a substantially similar plan, the Board may in its discretion determine that the accounts of each participant under this Plan to whom the termination applies shall be carried forward and continued as the accounts of such participant under such other plan, subject to the right of any participant to request distribution of the cash and shares, if any, held for his or her accounts. +2026 PROXY STATEMENT 82 +20. No Constraint on Corporate Action . Nothing contained in the Plan shall be construed to prevent the Company or any Participating Subsidiary from taking any corporate action (including the Company’s right or power to make adjustments, reclassifications, reorganizations or changes of its capital or business structure, or to merge or consolidate, or dissolve, liquidate, sell, or transfer all or any part of its business or assets) which is deemed by it to be appropriate, or in its best interest, whether or not such action would have an adverse effect on the Plan, or any rights awarded participants under the Plan. No employee, beneficiary, or other person shall have any claim against the Company or any Participating Subsidiary as a result of any such action. +21. Tax. +(a) Tax Qualification . Although the Company may endeavor to (i) qualify an option for favorable tax treatment under the laws of the United States or (ii) avoid adverse tax treatment, the Company makes no representation to that effect and expressly disavows any covenant to maintain favorable or avoid unfavorable tax treatment, notwithstanding anything to the contrary in this Plan. The Company shall be unconstrained in its corporate activities without regard to the potential negative tax impact on participants under the Plan. +(b) Separate Offerings. Unless otherwise determined by the Board or the Authorized Officer, each Offering to the Eligible Employees of the Company and of a Participating Subsidiary shall be deemed a separate Offering under the Plan, and the provisions of the Plan will separately apply to each such Offering. The terms of separate Offerings need not be identical provided that the terms of the Plan and an Offering together satisfy Section 423 of the Code. +22. Governing Law . Except to the extent that provisions of this Plan are governed by applicable provisions of the Code or any other substantive provision of United States federal law, this Plan will be governed by and construed in accordance with the internal laws of the State of Oregon without giving effect to the conflict of laws principles thereof. +83 NIKE, INC. +ANNUAL +MEETING +AND +PROXY STATEMENT +September 8, 2026 +Whether or not you plan to attend the meeting, please sign and date the enclosed proxy card and return it in the enclosed envelope, or vote online or by telephone following the instructions on the proxy card. +2026 PROXY STATEMENT 84 \ No newline at end of file diff --git a/raw/proxies/0000320187/0000320187-26-000089/proxy_rpt.txt b/raw/proxies/0000320187/0000320187-26-000089/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..f49fe998b6299fd84d002de0615b199ccd939f95 --- /dev/null +++ b/raw/proxies/0000320187/0000320187-26-000089/proxy_rpt.txt @@ -0,0 +1,6 @@ +TRANSACTIONS WITH RELATED PERSONS +Philip Knight, the father of NIKE director Travis Knight, serves as Chairman Emeritus, which provides a standing invitation for Philip Knight to attend meetings of the Board and its committees as a non-voting observer. In fiscal 2026, as Chairman Emeritus, Mr. Knight received salary of approximately $221,000, and medical and dental insurance coverage generally available to employees. +Mark Parker's son, Matthew Parker, was employed by the Company in fiscal 2026 in a non-executive role for which the Company paid Matthew Parker aggregate compensation of approximately $146,000. The compensation and benefits received by Matthew Parker were consistent with compensation and benefits paid to other employees holding similar positions. +Mark Parker's sister, Betsy Parker, was contracted by the Company in fiscal 2026 in a non-executive role for which the Company paid Betsy Parker aggregate compensation of approximately $175,000. +Kenneth Smith, son-in-law of former NEO Craig Williams, was employed by the Company in fiscal 2026 in a non-executive role for which the Company paid Kenneth Smith aggregate compensation of approximately $125,000. The compensation and benefits received by Kenneth Smith were consistent with compensation and benefits paid to other employees holding similar positions. +The Company's written policy requires the Corporate Responsibility, Sustainability & Governance Committee to review any transaction or proposed transaction with a related person that would be required to be reported under Item 404(a) of Regulation S-K, and to determine whether to ratify or approve the transaction, with ratification or approval to occur only if the committee determines that the transaction is fair to the Company and that approval or ratification of the transaction is in the interest of the Company. \ No newline at end of file diff --git a/raw/proxies/0000794172/0001193125-14-439639/proxy.txt b/raw/proxies/0000794172/0001193125-14-439639/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..85d2cff20f1041fc7feb561b914449037e73337a --- /dev/null +++ b/raw/proxies/0000794172/0001193125-14-439639/proxy.txt @@ -0,0 +1,2313 @@ +DEF 14A +1 +d829666ddef14a.htm +DEFINITIVE PROXY STATEMENT +Definitive Proxy Statement +Table of Contents +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +WASHINGTON, D.C. 20549 +SCHEDULE 14A +(Rule 14a-101) +INFORMATION REQUIRED IN PROXY STATEMENT +SCHEDULE 14A INFORMATION +Proxy Statement Pursuant to Section 14(a) of the +Securities Exchange Act of 1934 +(Amendment No. ) +Filed by the Registrant x Filed by a Party other than the +Registrant ¨ +Check the appropriate box: +¨ +Preliminary Proxy Statement +¨ +Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +x +Definitive Proxy Statement +¨ +Definitive Additional Materials +¨ +Soliciting Material Pursuant to Section 14a-12 +Meridian Bioscience, Inc. +(Name of Registrant as +Specified in Its Charter) +(Name of Person(s) Filing Proxy Statement if Other Than the Registrant) +Payment of Filing Fee (Check the appropriate box): +x +No fee required. +¨ +Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. +(1) +Title of each class of securities to which transaction applies: +(2) +Aggregate number of securities to which transaction applies: +(3) +Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on +which the filing fee is calculated and state how it was determined): +(4) +Proposed maximum aggregate value of transaction: +(5) +Total Fee Paid: +¨ +Fee paid previously with preliminary materials. +¨ +Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the +offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. +(1) +Amount Previously Paid: +(2) +Form, Schedule or Registration Statement No.: +(3) +Filing Party: +(4) +Date Filed: +Table of Contents +MERIDIAN BIOSCIENCE, INC. +3471 River Hills Drive +Cincinnati, Ohio 45244 +www.meridianbioscience.com +Notice of Annual Meeting +and Proxy Statement +Dear Shareholder: +Our Annual Meeting of Shareholders will be held at 2:00 p.m. on January 22, 2015 at the Holiday Inn Eastgate, 4501 Eastgate Boulevard, Cincinnati, +OH 45245. We hope you will attend. +At the meeting, you will hear a report on our operations and have a chance to meet your Directors and +Executive Officers. +This booklet includes the formal notice of the meeting and the proxy statement. The proxy statement tells you more about +the agenda and procedures for the meeting. It also describes how the Board operates and gives personal information about our Director candidates. +We are pleased to once again take advantage of the U.S. Securities and Exchange Commission rules that allow companies to furnish their proxy materials over the Internet. As a result, we are mailing to +most of our shareholders a Notice of Internet Availability of Proxy Materials (the “Notice”) instead of a paper copy of this proxy statement and our Annual Report. The Notice contains instructions on how to access and review those +documents over the Internet. We believe that this process allows us to provide our shareholders with the information they need in a more timely manner, while reducing the environmental impact and lowering the costs of printing and distributing our +proxy materials. If you received a Notice by mail and would like to receive a printed copy of our proxy materials, you should follow the instructions for requesting such materials included in the Notice. +Whether or not you plan to attend the meeting, please cast your proxy vote promptly, either on-line, over the phone or by returning your signed and dated +proxy card in the enclosed envelope. +Sincerely yours, +/s/ John A. Kraeutler +John A. Kraeutler +Chairman of the Board +December 11, 2014 +Table of Contents +NOTICE OF ANNUAL MEETING +OF +SHAREHOLDERS OF MERIDIAN BIOSCIENCE, INC. +Time: +2:00 p.m., Eastern Standard Time +Date: +January 22, +2015 +Place: +Holiday Inn Eastgate +4501 Eastgate Blvd. +Cincinnati, Ohio 45245 +Purpose: +• +Elect as Directors the five nominees named in the attached proxy materials +• +Conduct an advisory vote on our executive compensation (“Say-on-Pay”) +• +Ratify appointment of Grant Thornton LLP as Meridian’s independent registered public accountants for fiscal year 2015 +• +Conduct other business if properly raised +Only shareholders of record on November 25, 2014 may vote at the meeting. The approximate mailing date of this proxy statement and accompanying Proxy Card is December 11, 2014. +Your vote is important. Please cast your proxy vote promptly, either on-line, over the phone or by returning your signed and dated proxy card in the +enclosed envelope. +/s/ Melissa A. Lueke +Melissa A. Lueke +Secretary +December 11, 2014 +Table of Contents +TABLE OF CONTENTS +Page +GENERAL INFORMATION +1 +ELECTION OF DIRECTORS +2 +SAY-ON-PAY +5 +RATIFICATION OF APPOINTMENT OF ACCOUNTANTS +6 +CORPORATE GOVERNANCE +7 +DIRECTORS AND EXECUTIVE OFFICERS +14 +SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS +16 +SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE +16 +TRANSACTIONS WITH RELATED PERSONS +17 +COMPENSATION DISCUSSION AND ANALYSIS +17 +SUMMARY COMPENSATION TABLE +26 +DIRECTOR COMPENSATION +33 +SHAREHOLDER PROPOSALS FOR NEXT YEAR +33 +QUESTIONS? +34 +Meridian makes available, free of charge on its website, all of its filings that are made electronically with the +Securities and Exchange Commission (“SEC”), including Forms 10-K, 10-Q and 8-K. These filings are also available on the SEC’s website (www.sec.gov). To access these filings, go to our website (www.meridianbioscience.com). Copies of +Meridian’s Annual Report on Form 10-K for the fiscal year ended September 30, 2014, including financial statements and schedules thereto, filed with the SEC, are also available without charge to shareholders upon written request addressed +to: +Melissa A. Lueke +Executive +Vice President, Chief Financial Officer and Secretary +Meridian Bioscience, Inc. +3471 River Hills Drive +Cincinnati, Ohio 45244 +Table of Contents +GENERAL INFORMATION +Who may vote +Shareholders of Meridian, as recorded in our stock register on +November 25, 2014, may vote at the meeting. As of that date, Meridian had 41,669,166 shares of Common Stock outstanding. +How to +vote +You may vote in person at the meeting or by proxy. We recommend you vote by proxy even if you plan to attend the meeting. You can +always change your vote at the meeting. +How proxies work +Meridian’s Board of Directors is asking for your proxy. Giving us your proxy means you authorize us to vote your shares at the meeting in the manner you direct. You may vote for all, some or none of +our Director candidates. You may also vote for or against the other proposals or abstain from voting. +If you complete your proxy on-line, +over the phone or sign and return the enclosed proxy card but do not specify how to vote, we will vote your shares in favor of (i) our Director candidates; (ii) our executive compensation; and (iii) the ratification of appointment of +Grant Thornton LLP as Meridian’s independent registered public accountants for fiscal year 2015. If any other matters come before the meeting or any postponement or adjournment thereof, each proxy will be voted in the discretion of the +individuals named as proxies on the card. +You may receive more than one proxy or voting card depending on how you hold your shares. Shares +registered in your name are covered by one card. If you hold shares through someone else, such as a stockbroker, bank or nominee, you may get material from them asking how you want to vote. +Stockbrokers, banks and nominees holding shares for beneficial owners must vote those shares as instructed. If the stockbroker, bank or nominee has not received instructions from you, the beneficial +owner, the stockbroker, bank or nominee generally has discretionary voting power only with respect to the ratification of appointment of the independent registered public accountants. However, a stockbroker, bank or nominee does not have discretion +to vote for or against the election of Directors and certain other matters subject to a vote if they have not received voting instructions. In order to avoid a broker non-vote of your shares on the election of Directors and the other matters subject +to a vote, you must send voting instructions to your stockbroker, bank or nominee. +Solicitation of proxies +Solicitation of proxies is being made by management at the direction of Meridian’s Board of Directors, without additional compensation, through the +mail, in person or by telephone. The cost of preparing and mailing the Notice and the proxy statement and any accompanying material will be borne by Meridian. In addition, Meridian will request brokers and other custodians, nominees and fiduciaries +to forward proxy soliciting material to the beneficial owners of shares held of record and Meridian will reimburse them for their expenses in so doing. +1 +Table of Contents +Revoking a proxy +You may revoke your proxy before it is voted by submitting a new proxy with a later date, by voting in person at the meeting or by notifying Meridian’s Secretary in writing at the address under +“Questions?” on page 34. +Quorum +In order to carry on the business of the meeting, we must have a quorum. This means at least a majority of the outstanding shares eligible to vote must be represented at the meeting, either by proxy or in +person. +Votes needed +The five Director candidates receiving the most votes will be elected to fill the seats on the Board. The approval on an advisory basis of our executive +compensation (Proposal No. 2) and the ratification of appointment of accountants (Proposal No. 3) require the favorable vote of a majority of the votes cast. Only votes for or against these proposals count, with abstentions not being +counted either for or against these proposals. +Abstentions and broker non-votes count for quorum purposes but, as indicated above, will not +count for voting purposes. Broker non-votes occur when a broker returns a proxy card but does not have authority to vote on a particular proposal. +Other matters +Any other matters considered at the meeting, including postponement +or adjournment, will require the affirmative vote of a majority of the votes cast. +ELECTIO N OF DIRECTORS +(Item 1 on the Proxy Card) +The Nominating and Corporate Governance Committee of the Board of Directors has nominated for re-election the following current Directors: James M. +Anderson, Dwight E. Ellingwood, John A. Kraeutler, David C. Phillips and Robert J. Ready. +Proxies solicited by the Board will be voted for +the election of these nominees. All Directors elected at the Annual Shareholders’ Meeting will be elected to hold office until the next annual meeting. In voting to elect Directors, shareholders are entitled to cumulate their votes and to give +one candidate a number of votes equal to the number of Directors to be elected multiplied by the number of shares held by the shareholder, or to distribute their votes on the same principle among as many candidates as the shareholder sees fit. In +order to invoke cumulative voting, notice of cumulative voting must be given in writing by a shareholder to the Chief Executive Officer, a Vice President or the Secretary of Meridian not less than 48 hours prior to the Annual Shareholders’ +Meeting. The proxies solicited include discretionary authority to cumulate votes. +All Meridian Directors are elected for one-year terms. +Personal information on each of our nominees is given below. +2 +Table of Contents +If a Director nominee becomes unavailable before the election, your proxy card authorizes us to vote for a +replacement nominee if the Board names one. +The Board recommends that shareholders vote FOR each of the following candidates: +James M. Anderson +Director since 2009 +Age: 72 +James M. Anderson serves as Chairman of the Nominating and Corporate Governance Committee. He currently serves as Advisor to the President of Cincinnati Children’s Hospital Medical Center +(“CCHMC”), following his retiring as President and Chief Executive Officer of CCHMC on December 31, 2009. From 2006 to May 2014, he served as a director of Ameritas Mutual Holding Company and has also served as Chairman of the Board +of the Cincinnati Branch of the Federal Reserve Bank of Cleveland, retiring in 2012. Prior to joining the staff of CCHMC, Mr. Anderson was a partner in the general corporate law department at Taft, Stettinius & Hollister for 24 years (1968-1977; +1982-1996) and president of U.S. operations at Xomox Corporation, a publicly-traded manufacturer of specialty process controls (1977-1982). Mr. Anderson has also served as director of Gateway Investment Advisors (1997-2008). The Board believes that +Mr. Anderson’s corporate legal experience and his experience as CEO of a large health care organization have given him a wealth of insight into various corporate governance and business management issues, which, along with his status as an +independent Director, make him an integral member of the Board. +Dwight E. Ellingwood +Director since 2014 +Age: 62 +Dwight E. Ellingwood is currently the Senior Vice President of Strategy, Communications and Public Affairs for TriHealth in Cincinnati, Ohio, having joined TriHealth in November 2014. +Immediately prior to joining TriHealth, Mr. Ellingwood served as the Lead Executive for the Collective Impact on Health, The Health Collaborative (January 2014 – November 2014). From 1997 through 2013, Mr. Ellingwood served as Senior Vice +President, Planning and Business Development for Cincinnati Children’s Hospital Medical Center. The Board believes that the Company will benefit greatly from Mr. Ellingwood’s extensive experience in the health care industry. +3 +Table of Contents +John A. Kraeutler +Director since 1997 +Age: 66 +John A. Kraeutler has more than 40 years of experience in the medical diagnostics industry and joined Meridian as Executive Vice President and Chief Operating Officer in January 1992. In July +1992, Mr. Kraeutler was named President of Meridian, in January 2008, Mr. Kraeutler was named Chief Executive Officer of Meridian, and in September 2014 Mr. Kraeutler was named Chairman of the Board. Before joining Meridian, Mr. Kraeutler served as +Vice President, General Manager for a division of Carter-Wallace, Inc. Prior to that, he held key marketing and technical positions with Becton, Dickinson and Company and Organon, Inc. Mr. Kraeutler’s long-time service to Meridian, all in an +executive capacity, has given him significant insight into, and familiarity with, all aspects of Meridian’s business and the strategic vision for its continued success, and makes his service on the Board extremely beneficial. +David C. Phillips +Director since 2000 +Age: 76 +David C. Phillips serves as Chairman of the Audit Committee and Lead Director. Mr. Phillips spent 32 years with Arthur Andersen LLP. His service with this firm included several managing partner +leadership positions. After retiring from Arthur Andersen in 1994, Mr. Phillips became Chief Executive Officer of Downtown Cincinnati, Inc., which is responsible for economic revitalization of Downtown Cincinnati. Mr. Phillips retired from DCI in +1999 to devote full time to Cincinnati Works, Inc., an organization dedicated to reducing the number of people living below the poverty level by assisting them to strive towards self-sufficiency through work, and his financial consulting services. +Mr. Phillips has also served as a director of Cintas Corporation, retiring in 2012, and as a director of Summit Mutual Funds, a registered investment company, through 2009. The Board believes that Mr. Phillips’ years of service as a certified +public accountant and trusted advisor to his clients and business owners, which qualify him as an “audit committee financial expert” under SEC guidelines, give him significant experience in preparing, auditing, analyzing and evaluating +financial statements and dealing with complex accounting and business issues, all of which is valuable to Meridian. +4 +Table of Contents +Robert J. Ready +Director since 1986 +Age: 74 +Robert J. Ready serves as Chairman of the Compensation Committee. Mr. Ready founded LSI Industries Inc., Cincinnati, Ohio in 1976, which engineers, manufactures and markets commercial/industrial +lighting and graphics products, and is currently Chairman of its Board of Directors. Meridian’s Board believes that Mr. Ready’s years of experience as the chief executive of a publicly-traded company and the myriad, wide-ranging business +issues encountered in such capacity, as well as his status as an independent Director, render his service on the Board valuable to Meridian. +ADVISORY VOTE ON COMPENSATION OF NAMED EXECUTIVE OFFICERS +(“SAY-ON-PAY” PROPOSAL) +(Item 2 on the Proxy Card) +The +Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd Act”), enacted in July 2010, requires that we provide our shareholders with the opportunity to vote to approve, on a non-binding, advisory basis, the compensation of our +named executives officers as disclosed in this proxy statement in accordance with the compensation disclosure rules of the Securities and Exchange Commission (“SEC”). The Dodd Act also provides that, at least once every six years, +shareholders must be given the opportunity to vote, on a non-binding, advisory basis, for their preference as to how frequently we should seek future advisory votes on the compensation of our named executive officers. We provided this opportunity to +our shareholders at our 2012 annual meeting where over 90% of our shareholders voted to hold the “say-on-pay” advisory vote annually, in accordance with the recommendation of our Board of Directors. As a result, we are again holding a +say-on-pay advisory vote at our 2015 annual meeting, with the next say-on-pay advisory vote to be held at our 2016 annual meeting. +As +described in detail below under the heading “Compensation Discussion and Analysis” beginning on page 17 of this proxy statement, we seek to closely align the interests of our named executive officers with the interests of our shareholders. +We structure our programs to discourage excessive risk-taking through a balanced use of compensation vehicles and metrics with an overall goal of delivering sustained long-term shareholder value while aligning our executives’ interests with +those of our shareholders. Further, our programs require that a substantial portion of each named executive officer’s compensation be contingent on delivering performance results that benefit our shareholders. Our compensation programs are +designed to reward our named executive officers for the achievement of short-term and long-term strategic and operational goals and the achievement of increased total shareholder return. +5 +Table of Contents +The vote on this matter is not intended to address any specific element of compensation; rather, the vote +relates to the compensation of our named executive officers, as described in this proxy statement in accordance with the compensation disclosure rules of the SEC. The vote is advisory, which means that the vote is not binding on the Company, our +Board of Directors or the Compensation Committee. The Board and the Compensation Committee will review and consider the voting results when making future decisions regarding our executive compensation program. +Accordingly, we ask our shareholders to approve, on an advisory basis, the compensation of the named executive officers, as disclosed in this proxy +statement pursuant to the compensation disclosure rules of the SEC, including the Compensation Discussion and Analysis, the Summary Compensation Table and the other related tables and disclosure. +The Board of Directors recommends that shareholders vote FOR the approval of the compensation of our named executive officers as disclosed in +this proxy statement. +RATIFICATION OF APPOINTMENT OF ACCOUNTANTS +(Item 3 on the Proxy Card) +Although not +required, we are seeking shareholder ratification of the Audit Committee’s selection of Grant Thornton LLP as Meridian’s independent registered public accountants for the 2015 fiscal year. The affirmative vote of a majority of shares +voting at the meeting is required for ratification. If ratification is not obtained, the Audit Committee intends to continue the employment of Grant Thornton at least through fiscal 2015. Representatives of Grant Thornton are expected to be present +at the Annual Shareholders’ Meeting and will be available to make a statement, if they so desire, and to respond to appropriate questions asked by shareholders. +Principal Accounting Firm Fees +Aggregate fees billed to Meridian by Grant Thornton LLP for +fiscal years 2014 and 2013 are listed below: +2014 +2013 +Audit Fees +$ +468,300 +$ +453,406 +Audit-Related Fees +37,544 +28,424 +Tax Fees +436,568 +220,226 +$ +942,412 +$ +702,056 +Audit Fees. Audit fees are the fees billed for professional services rendered by Meridian’s +independent registered public accounting firm for their (i) audit of Meridian’s consolidated annual financial statements for the fiscal years ended September 30, 2014 and 2013, respectively; (ii) reviews of the unaudited +quarterly consolidated financial statements contained in the reports on Form 10-Q filed by Meridian during those years; (iii) completion of audits of Bioline Group statutory accounts in the United Kingdom, Australia and +6 +Table of Contents +Singapore during fiscal 2014 and 2013; and (iv) reporting on Meridian’s internal controls during those years. +Audit-Related Fees . Audit-related fees are the fees billed for assurance and related services that are reasonably related to the performance of the audit or review of +Meridian’s financial statements, including the audit of the Savings and Investment Plan (i.e., the 401(k) Plan). +Tax +Fees. Tax fees are the fees billed for U.S. federal and state tax return preparation and compliance, as well as consultation and research on various matters such as state tax issues, international tax issues and transfer pricing. In 2014, +the international tax matters included consultation related to a restructuring of our international legal entity ownership structure. +The Board recommends that shareholders vote FOR the ratification of appointment of Grant Thornton LLP as Meridian’s independent registered public accountants for the 2015 fiscal year. +CORPORATE GOVERNANCE +As an Ohio corporation, Meridian is governed by the corporate laws of Ohio. Since its common shares are publicly traded on the Nasdaq Global Select Market and it files reports with the Securities and +Exchange Commission, it is also subject to Nasdaq rules and federal securities laws. +Board Leadership Structure +Governance of the corporation is placed in the hands of the Directors who, in turn, elect officers to manage the business operations. The Board oversees +the management of Meridian on your behalf. The Board reviews Meridian’s long-term strategic plans and exercises direct decision making authority in all major decisions, such as acquisitions, the declaration of dividends, major capital +expenditures and the establishment of company policies. +The Board operates and evaluates its performance in accordance with Corporate +Governance Guidelines approved by the Board on November 7, 2012. These Guidelines are available at our website www.meridianbioscience.com . +The Board of Directors is responsible for evaluating and determining Meridian’s leadership structure, and believes that at this point in time one individual should serve in the capacities of Chairman +of the Board and Chief Executive Officer (“CEO”). It is the Board’s belief that such a structure currently provides the Company with the right foundation to pursue its strategic and operational objectives, while maintaining effective +oversight and objective evaluation of the Company’s performance. Currently, these key executive positions are held by Mr. John A. Kraeutler. As Chairman and CEO, Mr. Kraeutler is responsible for (i) general Board activities +including setting agendas for Board meetings and presiding over all meetings of the Board and shareholders; and (ii) general management, oversight, supervision and control of the business affairs of Meridian, and ensuring that all orders and +resolutions of the Board are put into effect. +7 +Table of Contents +Mr. David C. Phillips has been appointed by the Board to serve as Lead Director. The Board has +determined that the Lead Director shall (i) in consultation with the non-management Directors, advise the Chairman as to an appropriate schedule of Board meetings and review and provide the Chairman with input regarding the agendas for each +Board meeting; (ii) preside at all meetings at which the Chairman is not present, including Executive Sessions of the non-management Directors, and apprise the Chairman of the issues considered thereat; (iii) call meetings of the +non-management Directors when necessary and appropriate; and (iv) perform such other duties as the Board may from time to time designate. We believe that this leadership structure is currently the most appropriate for Meridian, particularly in +light of the requirement noted below that all Committees of the Board are comprised solely of independent Directors. +In accordance with +Nasdaq rules, our Board of Directors affirmatively determines the independence of each Director and nominee for election as a Director in accordance with the elements of independence set forth in the Nasdaq listing standards and Exchange Act rules. +Meridian’s Director Independence Standards are available at our website www.meridianbioscience.com . Based on these standards, the Board has determined that each of the following members of the Board is independent: James M. +Anderson, Dwight E. Ellingwood, David C. Phillips and Robert J. Ready. +During fiscal 2014, the Board of Directors met on five occasions and +took one action in writing. The independent Directors plan to meet at least two times during fiscal 2015 without the presence of management Directors. In addition to periodically meeting in executive session without the presence of management +Directors following regularly scheduled Board meetings, the independent members of the Board held one independent Directors meeting in fiscal 2014. +Meridian expects all Directors to attend shareholders’ meetings and all were in attendance at the 2014 Annual Shareholders’ Meeting. +Shareholders may communicate with the full Board or individual Directors on matters concerning Meridian by mail or through our website, in each case to the attention of the Secretary, the address for whom +is set forth on page 34 of this proxy statement. +The Board’s Role in Risk Oversight +The Board of Directors, as a whole and also at the Committee level, plays a key role in operational risk oversight at Meridian and works with management +to understand the risks the Company faces, the steps that management is taking to manage those risks and the level of risk appropriate for the Company in light of its overall business strategy. The Board approves the high level strategies, financial +plans and policies of Meridian, setting the tone and direction for the appropriate levels of risk-taking within the organization. +While +overall responsibility for risk oversight rests with the Board, it is the Audit Committee that has been given the primary responsibility of monitoring and evaluating the adequacy of management’s risk assessment and risk management practices. +This role is carried out through its charter-mandated responsibilities related to Meridian’s (i) overall financial risks and exposures; (ii) financial statement risks and exposures; (iii) financial reporting processes; +8 +Table of Contents +(iv) compliance with ethics policies, such as the Code of Ethics, Employee Complaint Policy, Security Trading Policies and the Foreign Corrupt Practices Act Policy; and (v) compliance with +governmental and legal regulations, including those contained within the Sarbanes-Oxley Act. The Audit Committee provides regular reports to the full Board and works closely with management to update the full Board, as necessary, on matters +identified through these Committee risk oversight roles. +Committees of the Board of Directors +The Board has adopted a Code of Ethics applicable to Meridian’s officers, Directors and employees. This Code of Ethics is posted on +www.meridianbioscience.com . To the extent permitted by Nasdaq Marketplace Rule 5610, any amendments to or waivers from the Code of Ethics will be posted on our website within four business days after the date of an amendment. +The Directors have organized themselves into the Committees described below. Each of these Committees has a charter posted on +www.meridianbioscience.com . Meridian does not have an Executive Committee of its Board of Directors. +The Audit Committee +is composed of David C. Phillips (Chairman), James M. Anderson and Robert J. Ready. The Committee met nine times during fiscal 2014 and took no actions in writing. Each member is able to read and understand fundamental financial statements. David C. +Phillips has been designated as an Audit Committee financial expert as that term is defined by the Securities and Exchange Commission. +The Committee oversees the accounting and financial reporting processes of Meridian and the audits of its financial statements by its independent registered public accounting firm. The Committee is solely +responsible for the appointment, compensation, retention and oversight of Meridian’s independent registered public accounting firm. The Audit Committee also evaluates information received from Meridian’s independent registered public +accounting firm and management to determine whether the independent registered public accounting firm is independent of management. The independent registered public accounting firm reports directly to the Audit Committee. +In addition, the Audit Committee has established procedures for the receipt, retention and treatment of complaints received by Meridian concerning +accounting, internal accounting controls or auditing matters and has established procedures for the confidential and anonymous submission by employees of any concerns they may have regarding questionable accounting or auditing matters. +The Audit Committee, or its Chairman, approves all audit and non-audit services performed for Meridian by its independent registered public accounting +firm before those services are commenced. The Chairman reports to the full Committee at each of its meetings regarding pre-approvals he made since the prior meeting and the Committee approves what he has done between meetings. For these purposes, +the Committee or its Chairman is provided with information as to the nature, extent and purpose of each proposed service, as well as the approximate timeframe and proposed cost arrangements for that service. +9 +Table of Contents +As previously noted, the Audit Committee also bears primary risk oversight responsibilities, including +responsibilities such as (i) overseeing the risks and exposures relating to the Company’s financial statements and financial reporting process; (ii) overseeing the Company’s policies and procedures for monitoring and mitigating +such risks and exposures; and (iii) reviewing management’s monitoring of the Company’s compliance with established ethics and legal policies and procedures. +The Committee has submitted the following report for inclusion in this proxy statement. +REPORT OF THE AUDIT COMMITTEE +On January 21, 2014, the Audit Committee met with +representatives of Grant Thornton and Meridian’s internal accountants, at which time the Grant Thornton representatives updated the Committee on Public Company Accounting Oversight Board (“PCAOB”) developments. In addition, the +Committee discussed the timing and scope of the planned Sarbanes-Oxley internal audit work for fiscal 2014, along with developments related to the new framework issued by The Committee of Sponsoring Organizations of the Treadway Commission +(“COSO”). +On April 22, 2014, the Committee met with representatives of Grant Thornton and Meridian’s internal accountants +and reviewed with them the proposed 2014 Audit Plan, areas warranting particular concentration on the audit and the effects of new accounting pronouncements. The Grant Thornton representatives reviewed with the Committee required Audit Committee +communications. +On July 22, 2014, the Committee met with representatives of Grant Thornton and Meridian’s internal accountants and +reviewed the status of the 2014 audit, including internal control matters, the Meridian Bioscience, Inc. Savings and Investment Plan audit, and new accounting pronouncements. Additionally, the Committee met with members of the Company’s +Information Technology department to review and discuss the assessment of risks in this area, including the risk reduction activities undertaken and being planned. +At its meeting on August 21, 2014, the Committee reviewed management’s strategic business plan and related risk assessment, specifically discussing with management its risk management strategies +related to key financial and business risks. The Committee concluded that this annual in-depth review and ongoing management updates of the integrated strategic and risk management plan were appropriate in order to fulfill its risk oversight +obligations. The Committee also reviewed the requirements of its Charter previously adopted, performed its annual self-assessment and discussed the Company’s ethical behavior policies and the training thereon for employees and Directors, +including the Company’s Code of Ethics, Employee Complaint Policy, Security Trading Policies, Foreign Corrupt Practices Act Policy, and Travel and Entertainment Policy as it relates to officer expense accounts. +At its meeting on November 5, 2014, the Committee reviewed and discussed with management, Grant Thornton and Meridian’s accounting officers the +results of the audit for fiscal 2014, including the financial results. The Committee discussed with Grant Thornton the matters required to be discussed by Auditing Standards No. 16, as amended (PCAOB +10 +Table of Contents +Interim Auditing Standard AU Section 380, Communication with Audit Committees ). The Grant Thornton representatives reviewed with the Committee written disclosures required by +applicable requirements of the PCAOB regarding the independent accountants’ communications with the Audit Committee concerning independence, discussed with the Committee the independent accountants’ independence, and presented a letter +regarding that matter to the Committee. The Committee discussed with Grant Thornton its independence. In concluding that the auditors are independent, we determined, among other things, that the non-audit services provided by the auditors were +compatible with their independence. +Based on the above mentioned review and review of the audited financial statements, on November 21, +2014, the Committee recommended to the Board of Directors that the audited financial statements of Meridian be included in its Annual Report on Form 10-K for the year ended September 30, 2014 for filing with the Securities and Exchange +Commission. +During its meetings throughout the year, the Committee reviewed and assessed the Company’s financial, financial control, +financial reporting, and certain legal and regulatory risk exposures, including reviewing procedures related to the receipt, retention and treatment of any complaints concerning accounting, internal accounting controls or auditing matters. Also +during its meetings throughout the year, the Chairman of the Audit Committee reported to the full Committee the independent accountants’ fees that had been pre-approved and the Committee approved such fees. Certain fees were pre-approved by the +full Committee. The Committee also reviewed the requirements of and Meridian’s ongoing compliance with Section 404 of the Sarbanes-Oxley Act. +Respectfully submitted, +Audit Committee +David C. Phillips (Chairman) +James M. Anderson +Robert J. Ready +The +Compensation Committee is composed of Robert J. Ready (Chairman), James M. Anderson and David C. Phillips and is responsible for establishing compensation for Executive Officers and administering the Company’s compensation plans. This +includes establishing salary levels and bonus plans, making bonus and stock-based awards, and otherwise dealing in all matters concerning compensation of the Executive Officers. During fiscal 2014, the Compensation Committee met three times, and +took no actions in writing. +In general, the Compensation Committee annually reviews the Company’s compensation programs +and its philosophy in setting performance targets in November of each year. At that time, the Company provides the Compensation Committee with information on total compensation received for all Executive Officers, including the sources of such +compensation, for the immediately preceding fiscal year and recommendations for the current fiscal year. In discharging the responsibilities of the Board of Directors relating to compensation of the Company’s Chief Executive Officer and other +Executive Officers, the purposes of the Compensation Committee are, among others, (i) to review and approve the +11 +Table of Contents +compensation of the Company’s Chief Executive Officer and other Executive Officers; and (ii) to oversee the compensation policies and programs of the Company, including stock and +benefit plans. The Compensation Committee’s specific functions include adopting, administering and approving the Company’s incentive compensation and stock plans and awards, including amendments to the plans or awards and performing such +duties and responsibilities under the terms of any executive compensation plan, incentive-compensation plan or equity-based plan. The Compensation Committee has the authority to delegate any of its responsibilities to subcommittees as the +Compensation Committee may deem appropriate in its sole discretion. The Compensation Committee has the authority to engage consultants and advisors. The Compensation Committee did not engage a consultant or advisor this year. The Compensation +Committee has an appropriate level of contact among its members and the Company’s Executive Officers in connection with the analysis of this data. On an annual basis, the Committee reviews its Charter and performs a self-assessment. +The Compensation Committee determines the amount and mix of compensation components for the Chairman and Chief Executive Officer, Mr. Kraeutler. As +Chairman and Chief Executive Officer, Mr. Kraeutler provides input and recommendations to the Compensation Committee with respect to the compensation to be paid to the non-employee members of the Board, as well as with respect to compensation +to be paid to the other corporate officers. +To achieve compensation objectives, the Committee believes it is important to provide competitive +levels of compensation to retain the most qualified employees, to recognize individuals who exceed expectations and to closely link executive compensation with corporate performance. The Committee believes Meridian’s long-term objectives can be +achieved through cash incentive compensation plans and equity incentive compensation plans. +The Compensation Committee’s processes and +procedures for the consideration and determination of Executive and Director compensation are discussed in the section entitled “Compensation Discussion and Analysis” in this proxy statement. +Compensation Committee Interlocks and Insider Participation +None of the members of the Compensation Committee has ever been an officer or employee of the Company. None of the members of the Compensation Committee is or was a participant in any related person +transaction in fiscal 2014 (see the section entitled “Transactions With Related Persons” in this proxy statement for a description of our policy on related person transactions). Lastly, none of the members of the Compensation Committee is +an Executive Officer of another entity at which one of our Executive Officers serves on the Board of Directors. No Named Executive Officer of Meridian serves as a Director or as a member of a committee of any company of which any of the +Company’s non-employee Directors are Executive Officers. +12 +Table of Contents +The Nominating and Corporate Governance Committee consists of James M. Anderson (Chairman), +David C. Phillips and Robert J. Ready. The Committee met three times during fiscal 2014 and took no actions in writing. On November 5, 2014, the Committee considered and nominated the current Directors for re-election. The Committee identifies +qualified nominees for the Board, determines who will be nominated by the Company for election to the Board and recommends to the full Board any changes in the size of the Board. The Committee also reviewed its Charter and performed its annual +self-assessment. +In nominating Directors, the Committee takes into account, among other factors which it may deem appropriate, +the judgment, skill, diversity, and business experience of the potential nominee and the needs of the Board as its function relates to the business of the Company. The Committee considers candidates for nomination from a variety of sources including +recommendations of shareholders. Shareholders desiring to submit recommendations for nominations by the Committee should direct them to the Chairman of the Nominating and Corporate Governance Committee in care of the Company at its address shown on +the cover page of this proxy statement. +The Nominating and Corporate Governance Committee will assess the qualifications of all candidates +for the Board on an equal basis. In identifying and considering candidates for nomination to the Board, the Committee considers, among other factors, quality of experience, the needs of the Company and the range of talent and experience currently +represented on the Board. The Committee evaluates such factors, among others, and does not assign any particular weighting or priority to any of these factors, nor does the Committee have a formal policy with respect to diversity. However, the +Committee, working with the Board, considers the diversity of all of the Company’s stakeholders – including shareholders, employees and customers – when engaging in corporate governance discussions. +During several Board meetings in fiscal 2014, the Board discussed the benefits of adding new members to the Board. Pursuant to this, the Nominating and +Corporate Governance Committee considered potential candidates and chose to meet with Dwight E. Ellingwood. Based upon the review of his qualifications and the favorable results of their meeting, the Board proceeded to nominate him as a candidate to +the Board. Mr. Ellingwood was appointed to the Board in July 2014. +13 +Table of Contents +DIRECTORS AND EXECUTIVE OFFICERS +This table lists the Executive Officers and Directors of Meridian and shows the number of shares beneficially owned, as determined under SEC rules, on +November 25, 2014. Beneficial ownership includes any shares as to which the individual has sole or shared voting or investment power and also any shares that the individual has the right to acquire as of January 24, 2015 (60 days after +November 25, 2014). +Common Stock +Beneficially +Owned +Name +Position +Amount 1 +Percentage +John A. Kraeutler +Chairman of the Board, +Chief Executive Officer, President and Director +270,942 +* +Richard L. Eberly 2 +Executive Vice President, +President Meridian Life Science +9,264 +* +Lawrence J. Baldini 3 +Executive Vice President, +Operations and Information Systems +40,434 +* +Melissa A. Lueke 4 +Executive Vice President, +Chief Financial Officer and Secretary +106,898 +* +Vecheslav A. Elagin 5 +Executive Vice President, +Research & Development +19,497 +* +Susan D. Rolih 6 +Executive Vice President, +Regulatory & Quality Systems +119,713 +* +Michael C. Shaughnessy 7 +Executive Vice President, +President Meridian Diagnostics +— +* +Marco G. Calzavara 8 +President and Managing Director, +Meridian Bioscience Europe +3,900 +* +Marviette D. Johnson 9 +Vice President, +Human Resources +17,336 +* +James M. Anderson 10, 11, 12 +Director +58,000 +* +Dwight E. Ellingwood 13 +Director +9,500 +* +David C. Phillips 10, 11, 12 +Director +92,626 +* +Robert J. Ready 10, 11, 12 +Director +86,115 +* +All Executive Officers and Directors as a Group +834,225 +2.0 +% +1 +Includes options +exercisable within 60 days for Mr. Kraeutler of 81,500 shares, Mr. Eberly of 9,000 shares, Mr. Baldini of 500 shares, Ms. Lueke of 15,750 shares, Dr. Elagin of 14,500 shares, Ms. Rolih of 49,700 shares, Ms. Johnson +of 10,750 shares, Mr. Anderson of 47,000 shares, Mr. Ellingwood of 8,500 shares, Mr. Phillips of 67,214 shares and Mr. Ready of 72,428 shares. +2 +Richard L. Eberly was appointed Vice President of Sales and Marketing in January 1997, Executive Vice President in May 2000, Executive Vice President, +General Manager of Meridian Life Science in February 2003, +14 +Table of Contents +Executive Vice President and President Meridian Life Science in October 2005 and Chief Commercial Officer in February 2011. In October 2012, he was re-appointed President of Meridian Life +Science, and no longer serves as Chief Commercial Officer. He has over 20 years of experience in the medical diagnostics industry and joined Meridian in March 1995. Prior to his appointment to Vice President of Sales and Marketing, Mr. Eberly +served as the Director of Sales for Meridian. Before joining Meridian, he held key sales and marketing positions at Abbott Diagnostics, Division of Abbott Laboratories. Age: 53 +3 +Lawrence J. Baldini was appointed Vice President of Operations in April 2001 and Executive Vice President, Operations and Information Systems in +October 2005. Before joining Meridian, Mr. Baldini held various operations management positions with Instrumentation Laboratories and Fisher Scientific. Age: 55 +4 +Melissa A. Lueke was appointed Vice President, Chief Financial Officer and Secretary in January 2001 and Executive Vice President, Chief Financial +Officer and Secretary in November 2009. Prior to her appointment, Ms. Lueke served as Meridian’s Controller since March 2000 and Acting Secretary from July 20, 2000 to January 23, 2001. Before joining Meridian, Ms. Lueke was +employed by Arthur Andersen LLP from June 1985 to January 1999, most recently as a Senior Audit Manager. Age: 51 +5 +Vecheslav A. Elagin joined Meridian in August 2009 as Vice President of Research and Development, was appointed Senior Vice President of Research and +Development in November 2011, and promoted to Executive Vice President of Research and Development in June 2012. Before joining Meridian, Dr. Elagin held various executive research and development positions, most recently with Madison Life +Science (August 2008 – August 2009), EraGen Biosciences (May 2006 – August 2008) and Third Wave Technologies (June 2003 – May 2006). Age: 47 +6 +Susan D. Rolih was appointed Vice President of Regulatory Affairs and Quality Assurance in May 2001, Senior Vice President of Regulatory Affairs and +Quality Assurance in April 2008, and Executive Vice President of Regulatory and Quality Systems in April 2013. Before joining Meridian, Ms. Rolih held various regulatory and quality positions with Immucor, Inc. Age: 65 +7 +Michael C. Shaughnessy joined Meridian in February 2014 as Executive Vice President, President of Meridian Diagnostics. Before joining Meridian, +Mr. Shaughnessy held various executive sales, marketing and business development positions with CORPAK MedSystems (June 1993 – January 2014), most recently serving as Vice President, Sales & Business Development. Age: 58 +8 +Marco G. Calzavara, founder of the Bioline Group, which Meridian acquired July 20, 2010, was appointed President and Managing Director of Meridian +Bioscience Europe in April 2011. Prior to this appointment, Mr. Calzavara had served as President of the Bioline Group of Companies since 1992. Age: 60 +9 +Marviette D. Johnson served as Director of Human Resources from January 2006 to April 2008, as Senior Director of Human Resources from April 2008 to +November 2009 and was appointed to her current position of Vice President of Human Resources in November 2009. Before joining Meridian in 2003, Ms. Johnson held various human resources leadership positions within the hospitality industry, +including with Marriott International and Millennium Copthorne. Age: 46 +10 +Audit Committee +Member. +11 +Compensation +Committee Member. +12 +Nominating and +Corporate Governance Committee Member. +13 +Dwight E. +Ellingwood was appointed a director in July 2014. +* +Less than one percent. +15 +Table of Contents +SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS +The following table lists the persons known by the Company to be the beneficial owners of more than five percent of the Company’s Common Stock as of +November 25, 2014, unless otherwise noted. Beneficial ownership includes any shares as to which the individual has sole or shared voting or investment power. +Name and address of beneficial owner +Amount and nature of +beneficial ownership +Percent of +class 1 +Brown Capital Management, LLC +1201 N. Calvert Street +Baltimore, MD 21202 +4,656,648 +11.21 +Neuberger Berman Group LLC +605 Third Avenue +New York, NY 10158 +4,019,339 +9.68 +BlackRock, Inc. +40 East 52 nd Street +New York, NY 10022 +3,806,511 +9.20 +The Vanguard Group, Inc. +100 Vanguard Blvd. +Malvern, PA 19355 +2,814,118 +6.77 +T. Rowe Price Associates, Inc. 2 +100 E. Pratt Street +Baltimore, MD 21202 +2,637,985 +6.30 +1 +For the beneficial +owners listed in the table, the percentages listed reflect disclosures in the Schedule 13Gs most recently filed by each beneficial owner with the SEC as of the date of this proxy statement. +2 +Per correspondence +from T. Rowe Price Associates, Inc., (“Price Associates”), these securities are owned by various individual and institutional investors which Price Associates serves as an investment adviser with power to direct investments and/or sole +power to vote the securities. For the purposes of the reporting requirements of the Securities Exchange Act of 1934, Price Associates is deemed to be a beneficial owner of such securities; however, Price Associates expressly disclaims that it is, in +fact, the beneficial owner of such securities. +SECTION 16(a) BENEFICIAL OWNERSHIP +REPORTING COMPLIANCE +Section 16 of the Securities Exchange Act of 1934 requires Meridian’s Executive Officers, Directors and +persons who own more than ten percent of a registered class of Meridian’s equity securities to file reports of ownership and changes in ownership with the SEC. Based on a review of the copies of such forms received by it, Meridian believes that +during the last fiscal year, all of its Executive Officers, Directors and ten percent stockholders complied with the Section 16 reporting requirements, with the exception that one late ownership report was filed for Mr. William J. +Motto with respect to relinquishment of indirect ownership of certain common shares in connection with estate planning transactions. In making these statements, Meridian has relied upon examination of the copies of Forms 3, 4 and 5, and amendments +thereto, and the written representation of its Directors and Executive Officers. +16 +Table of Contents +TRANSACTIONS WITH RELATED PERSONS +During fiscal 2014, the Company leased certain office space from an entity controlled by Marco G. Calzavara, President and Managing Director, Meridian +Bioscience Europe. Payments made under such arrangements during fiscal 2014 totaled approximately $200,000. +Nasdaq rules require the +Company to conduct an appropriate review of related party transactions required to be disclosed by the Company pursuant to SEC Regulation S-K Item 404 for potential conflict of interest situations on an ongoing basis and that all such +transactions must be approved by the Audit Committee or another Committee comprised of independent Directors. As a result, the Audit Committee annually reviews all such related party transactions and approves each related party transaction if it +determines that it is in the best interests of the Company. Additionally, the Audit Committee’s Charter provides it the authority to review, approve and monitor transactions involving the Company and “related persons” (Directors and +Executive Officers or their immediate family members, or shareholders owning five percent or greater of the Company’s outstanding stock). This also covers any related person transaction that meets the minimum threshold for disclosure in the +proxy statement under the relevant SEC rules (generally, transactions involving amounts exceeding $120,000 in which a related person has a direct or indirect material interest). In considering the transaction, the Audit Committee may consider all +relevant factors, including, as applicable, (i) the Company’s business rationale for entering into the transaction; (ii) the alternatives to entering into a related person transaction; (iii) whether the transaction is on terms +comparable to those available to third parties, or in the case of employment relationships, to employees generally; (iv) the potential for the transaction to lead to an actual or apparent conflict of interest and any safeguards imposed to +prevent such actual or apparent conflicts; and (v) the overall fairness of the transaction to the Company. This policy is included in the Company’s Employee Handbook. The approval of such related person transactions are evidenced by +internal Company resolutions or memoranda. +COMPENSATION DISCUSSION AND ANALYSIS +Throughout this proxy statement, the individuals who served as the Company’s Chief Executive Officer and Chief Financial Officer during fiscal 2014, +as well as the other individuals listed in the Summary Compensation Table below, are referred to as the “Named Executive Officers” or “NEOs.” +Compensation Philosophy and Objectives +Our policies regarding executive compensation +programs are intended to balance motivating, rewarding and retaining executives with a competitive compensation package, and maximizing long-term shareholder value by linking compensation earned to both individual and Company performance. +Compensation typically includes base salary, eligibility for annual cash bonuses and stock-based awards contingent on Company performance and/or future service, retirement plan contributions and other Company-sponsored benefits. A significant +portion of each Executive Officer’s cash bonus and stock-based awards are dependent upon achieving business and financial goals and realizing other performance objectives. Examples of Company performance metrics for which we measure achievement +are net revenue growth, net earnings growth and profit margins (gross profit, operating income and net earnings). Annual performance targets for these metrics are set after +17 +Table of Contents +consideration of industry averages and historical results. Our compensation programs are intended to reward individual contributions (for example, bringing a new product to market) and +Company-wide achievement of performance metric targets (for example, overall revenue and net earnings growth). +The Compensation Committee of +the Board of Directors is responsible for ongoing oversight of compliance with this compensation philosophy. The Compensation Committee ensures that the total compensation paid to the NEOs is fair, reasonable and competitive. +At our 2014 annual meeting, Meridian once again held an advisory vote on the compensation of its NEOs, commonly referred to as a say-on-pay vote. Our +shareholders overwhelmingly approved the compensation of our NEOs, with approximately 96% of votes cast in favor of our 2014 say-on-pay resolution. Based on the results of the 2014 say-on-pay vote, the Compensation Committee concluded that the +compensation paid to the NEOs and Meridian’s overall pay practices received strong shareholder support and do not require substantial revision to address shareholder concerns. +Establishing Compensation Levels +Compensation levels for the NEOs are driven by market pay +levels, the NEO’s leadership performance and overall Company performance. The Compensation Committee relies upon a combination of judgment (which is necessarily subjective) and guidelines (discussed herein), as well as market data, in +determining the amount and mix of compensation components for the Chairman and Chief Executive Officer. The compensation levels for the other NEOs are recommended by the Chief Executive Officer. The Compensation Committee has discretion to follow or +modify such recommended levels of compensation. The Compensation Committee considers the input of our Chairman and Chief Executive Officer as a crucial component of its compensation processes and decisions relating to NEO compensation. The +Compensation Committee is not obligated to follow his recommendations. The Company does not engage in strict numerical benchmarking in determining the percentage modifications for the NEOs. +Market Pay Levels +Market pay levels for the NEOs are determined annually in November for +the upcoming calendar year. From time to time, at the request of the Compensation Committee, an outside financial advisor is used to gather and summarize for the Company disclosures of executive compensation paid by other publicly traded companies +in the diagnostic and life science industries, as well as those outside such industries in the Greater Cincinnati area. This information concerns base salary, bonus awards and long-term incentive awards such as stock options and/or restricted stock +for these peer companies, as well as their net revenue, net earnings and market capitalization levels in order to take company size into consideration. The Compensation Committee considers this competitive market compensation paid by such companies, +but does not attempt to maintain a certain target percentile within a peer group or otherwise rely on that data to determine executive compensation. This means that the Compensation Committee considers this information generally and as a reference +point in determining the amounts and elements of our compensation program. For example, the Compensation Committee periodically reviews compensation information of our industry peers in order to understand compensation trends. +18 +Table of Contents +In other words, although it does not utilize such information for benchmarking purposes, the Compensation Committee considers such information as part of its decision-making process with respect +to the Company’s executive compensation programs. +Company Performance +We believe that certain Company performance metrics drive shareholder value through stock price appreciation and dividends. We take +this belief into account in setting performance metric targets that are considered in establishing the performance-based component of our compensation programs. Performance metric targets that are taken into consideration in our compensation +programs include net revenue growth, earnings growth and profit margins. These targets are set after consideration of industry averages and historical results. Also taken into consideration in evaluating Company performance in our compensation +programs is the market penetration of our illumi gene ® molecular platform and the build-out of the related product menu. +Our cash bonus and a portion of our stock-based award programs operate under the fundamental principle that minimum levels of net earnings be achieved +prior to any compensation being earned under these programs. Net earnings targets are determined based on what the Company believes to be meaningful growth rates relative to its industry peers and the Company’s performance objectives. +Stock-based awards granted under performance programs are generally forfeited if the Company does not meet its minimum earnings targets as specified in each grant. +Recovery of Prior Awards +Except as provided by applicable laws and regulations, we do not +have a policy with respect to adjustment or recovery of awards or payments if relevant Company performance measures upon which previous awards were based are restated or otherwise adjusted in a manner that would reduce the size of such award or +payment. Under those circumstances, we expect that the Compensation Committee and the Board would evaluate whether compensation adjustments were appropriate based upon the facts and circumstances surrounding the applicable restatement or adjustment. +Tally Sheets +In setting the +NEOs’ compensation, the Compensation Committee reviews all components of such compensation through the use of tally sheets. These tally sheets provide the amount of total compensation paid or earned by each NEO based on his or her base salary, +cash bonus, stock-based awards, retirement contributions and perquisites. The tally sheets reviewed provide all of the information that is reflected in the Summary Compensation Table. The review by the Compensation Committee analyzes how changes in +any element of compensation would impact other elements, particularly severance or change in control benefits, if applicable to the executive. The analysis of the tally sheets conducted in November 2014 resulted in increases of 0% to 4% in base +salary for executives, including NEOs, and an increase in Chairman and Chief Executive Officer equity awards. Such analysis has become an important component in the Compensation Committee’s review of executive compensation as the tally sheet +allows the Compensation Committee to consider an executive’s overall compensation rather than only one or two specific components of an executive’s compensation. This allows the Compensation Committee to make compensation +19 +Table of Contents +decisions and evaluate management recommendations based on a complete analysis of an executive’s total compensation. +Components of Executive Compensation +Meridian’s executive compensation and benefits +packages consist of: base salary, cash bonuses, long-term equity incentive awards, Company-sponsored benefit and retirement plans, and change in control severance benefits. Each of these components has a certain risk profile. +Element +Form of Compensation +Purpose +Risk Profile +Base Salaries +Cash +Provides competitive, fixed compensation to attract and retain exceptional executive talent +Low to moderate +Annual Cash Incentives +Cash +Provides a direct financial incentive to achieve corporate and individual operating goals +Moderate to high +Long-Term Equity +Incentives +Non-qualified stock options, restricted stock, restricted stock units and/or stock appreciation rights +Encourages Executive Officers to build and maintain a long-term equity ownership position in Meridian so that their interests are aligned with our shareholders +High +Health, Retirement and +Other Benefits +Eligibility to participate in benefit plans generally available to our employees, including Retirement Plan contributions, premiums paid on long-term disability and life insurance +policies, and certain perquisites +Benefit plans are part of a broad-based employee benefits program; the perquisites provide competitive benefits to our Executive Officers +Low +Change in Control Severance Benefits +Cash and continuation of certain benefits +Encourages Executive Officers to maximize value for shareholders in the event that the Company becomes subject to a change in control transaction +Moderate to high +20 +Table of Contents +The Compensation Committee has reviewed the risk profile of the components of the Company’s executive +compensation program, including the performance objectives and target levels used in connection with incentive awards, and has considered the risks an NEO might be incentivized to take with respect to such components. When establishing the mix among +these components, the Compensation Committee is careful not to encourage excessive risk taking. Specifically, the performance objectives contained in the Company’s executive compensation programs have been balanced between annual and long-term +incentive compensation to ensure that both components are aligned and consistent with our long-term business plan and that our overall mix of equity-based awards has been allocated to promote an appropriate combination of incentive and retention +objectives. +The Compensation Committee believes that the Company’s executive compensation program does not incentivize the NEOs to +engage in business activities or other behavior that would threaten the value of the Company or the investments of its shareholders. +The +Compensation Committee continues to monitor and evaluate on an on-going basis the mix of compensation, especially equity compensation, awarded to the NEOs, and the extent to which such compensation aligns the interests of the NEOs with those of the +Company’s shareholders. In connection with this practice, the Compensation Committee has, from time to time, reconsidered the structure of the Company’s executive compensation program and the relative weighting of various compensation +elements. +Interplay of Compensation Elements +We believe that each element of our compensation program plays a substantial role in maximizing long-term value for our shareholders and employees because of the significant emphasis on +pay-for-performance principles. In fiscal 2014, we did not reach our minimum net earnings target required for vesting in performance-based equity awards, and therefore, our NEOs did not earn such awards granted in November 2013. +In addition, our NEOs did not earn the second tranche of the additional performance-based equity awards granted November 9, 2011. These additional +performance-based equity awards were granted to certain executive management employees, including the NEOs, to reward them for meeting pre-defined Company net revenue targets. These awards, which included both restricted stock units and options, can +only be earned if specified cumulative net revenue thresholds are met through fiscal 2015, with the three measurement dates for ratably earning one-third of the grant being (i) the 21-month period ended June 30, 2013; (ii) the +33-month period ended June 30, 2014; and (iii) the 45-month period ending June 30, 2015. As a result of the cumulative threshold for the 21-month and 33-month periods ended June 30, 2013 and June 30, 2014, respectively, not +having been met, two-thirds of the restricted stock units and options granted have been cancelled. +We strive to achieve an appropriate mix +between equity incentive awards and cash payments in order to meet our objectives. We use the Officer’s Performance Compensation Plan as another tool to assess an executive’s total pay opportunities and whether we have provided the +appropriate incentives to accomplish our compensation objectives. Our mix of compensation elements is designed to reward recent results and motivate long-term performance through a combination of cash and stock-based awards. We also seek to +21 +Table of Contents +balance compensation elements that are based on financial, operational and strategic metrics with others that are based on the performance of Meridian shares via application of the personal +multiplier component of cash bonus for the Chairman and Chief Executive Officer. We believe the most important indicator of whether our compensation objectives are being met is our ability to motivate our NEOs to deliver superior performance and +retain them to continue their careers with Meridian on a cost-effective basis. +Base Salary +The Company pays salaries that are designed to attract, motivate and retain experienced executives who will drive superior Company performance and +maintain long-term shareholder value. The Compensation Committee considers recommendations from the Chairman and Chief Executive Officer and approves annual base salaries that are commensurate with each NEO’s responsibilities and performance, +as well as Company performance in the prior fiscal year, which are competitive with similar positions locally and in the industry. Salaries are set on a calendar year basis and therefore salaries paid in the first three months of each fiscal year +beginning on the first day of October are set in the prior fiscal year. +For 2015, the Chairman and Chief Executive Officer, +Mr. Kraeutler, provided a recommendation to the Compensation Committee of salary increases ranging from 0% to 4% for the NEOs. The Compensation Committee duly considered and followed these recommendations. +Cash Bonuses +The Compensation Committee +believes that employees should be rewarded based on Company results and individual performance. The Compensation Committee awards cash bonuses pursuant to the Officer’s Performance Compensation Plan (the “Plan”) contingent upon +Company performance. Cash bonuses, if earned, are paid in the first quarter of each fiscal year, for the prior year’s performance. Cash bonuses are subject to the Company’s attainment of a specific net earnings target. Should the Company +fail to reach such net earnings target, no cash bonuses are paid pursuant to the Plan. +Cash bonuses are also subject to the application of a +personal achievement multiplier as recommended by the Chairman and Chief Executive Officer, Mr. Kraeutler. In evaluating the personal achievement multipliers, the Compensation Committee takes into consideration the net revenue and net earnings +levels, net revenue and net earnings growth rates and achievement against plan, profit margins and improvements therein, and individual achievements and leadership of the NEOs. Instead of establishing specific quantifiable targets for each of these +factors, the Compensation Committee exercises its discretion in using the factors to determine each NEO’s personal achievement multiplier. Specifically, the Compensation Committee does not establish measurable objective targets in connection +with its deliberation of such factors. The adoption and application of such factors are intended to be discretionary and subjective so that the Compensation Committee can use its business judgment to provide an appropriate incentive and award for +performance that sustains and enhances long-term shareholder value. The Compensation Committee believes that such discretionary and subjective components allow it to respond appropriately as business and strategic environments change and are +appropriate for the size of the Company. The personal +22 +Table of Contents +achievement multiplier choices range from 0 (zero) to 2.0. For example, a personal achievement multiplier of 1.25 would result in a bonus payout percentage of 37.5% when applied to a 30% base +salary component. A personal achievement multiplier of 0 (zero) would result in no bonus payout and is intended for circumstances where the NEO’s performance is far less than satisfactory. +Company Performance Component and 2014 Results +The 2014 Officer’s Performance Compensation Plan, which was similar in form to the plans utilized over the last several fiscal years, provided for the granting of cash bonuses as a percentage of base +salary if 2014 net earnings reached at least $41,275,000. For 2014, actual net earnings were below the minimum threshold, and therefore, there were no cash bonuses awarded to the NEOs for fiscal 2014 performance pursuant to the Plan. +2015 +At its +November 6, 2014 meeting, the Compensation Committee approved the Officer’s Performance Compensation Plan for fiscal 2015. The 2015 Plan will award cash bonuses if 2015 net earnings reach $36,300,000, which the Compensation Committee +believes is a meaningful increase from 2014 net earnings of $34,743,000. Consistent with 2014, the 2015 Plan also provides for increasing bonus awards tied to increasing net earnings beyond the initial minimum level. The 2015 Plan includes six net +earnings thresholds ranging from a low of $36,300,000 to a high of $38,425,000. These six net earnings thresholds represent growth over 2014 net earnings ranging from a low of approximately 4% to a high of approximately 11%. The corresponding +potential bonus payouts as a percent of base salary, before application of the personal multiplier, for the six net earnings thresholds range from a low of 10% to a high of 60%. Depending on the level of net earnings achieved and the application of +the personal multiplier, cash bonuses for the NEOs could range from 0% to 120% of base salary. +Management and the Compensation Committee have +intended that the earnings thresholds should be set at meaningful rates so that management must be diligent, focused and effective in order to achieve these goals. In other words, the Company and management believed at the time of the establishment +of these thresholds that they would be challenging to achieve and would require substantial efforts from management. To this end, the Compensation Committee tends to set the thresholds consistent with the earnings guidance range requiring that the +low end of guidance is achieved before bonuses are paid. +Long-Term Incentive Awards +The Compensation Committee believes that equity-based compensation encourages employees to commit to the long-term goals of the Company. This ensures that +the Company’s NEOs have a stake in the long-term creation of shareholder value. A significant portion of the awards is performance-based, meaning the NEOs’ ability to vest in that portion of awards is contingent upon the Company achieving +a minimum level of net earnings. +For fiscal 2015, at its meeting on November 6, 2014, the Compensation Committee approved two types of +restricted stock unit awards. The first type of restricted stock unit award is performance-based, where the NEOs’ ability to vest in such awards is contingent upon the Company reaching a minimum level of net earnings of $38,425,000 for fiscal +2015. This +23 +Table of Contents +award would vest 25% per year over four years, if earned. The second type of restricted stock award is time-based and fully vests after four years. The Compensation Committee believes that +this latter award is appropriate to encourage retention of top management talent. +Although Meridian does not have a written policy regarding +the timing or practices related to granting equity awards, neither Meridian nor the Compensation Committee engages in spring-loading, back-dating or bullet-dodging practices. Equity awards are generally granted at a regularly scheduled meeting +of the Compensation Committee in the first quarter of the fiscal year. Stock options are granted at the closing market price on the date of grant, pursuant to the 2012 Stock Incentive Plan. Prior to the exercise of an option, the holder has no +rights as a stockholder with respect to the shares subject to such option, including no rights to vote or to receive dividends. Prior to vesting of restricted stock units noted above, the holder will receive dividend equivalent payments. Restricted +stock units do not have voting rights. +Company-Sponsored Benefit and Retirement Plans +Meridian provides Company-sponsored benefit and retirement plans to the NEOs. In general, executives participate in the Company’s benefit and +retirement plans on the same basis as other Company employees. The core benefit package includes health, dental, short and long-term disability, and group term life insurance. Meridian generally provides retirement benefits to executives through +qualified (under the Internal Revenue Code) defined contribution plans. +Change in Control Severance Benefits +The Compensation Committee believes that a reasonable level of salary and Company-sponsored benefit protection provides a means of retention and allows +the NEOs to remain focused on achievement of Company goals and objectives in the event that the Company becomes subject to a merger or acquisition transaction. This component of compensation would only be paid in the event of a change in control of +the Company, under certain qualifying conditions. For the NEOs other than the Chairman and CEO, this component of compensation would include two years’ salary, performance bonus and core benefits. For the Chairman and CEO, this component of +compensation would include three years’ salary, performance bonus and core benefits. +Other Personal Benefits +Allowances for automobiles and professional, financial and tax planning are made available to Meridian’s NEOs and other corporate officers. The costs +to the Company are included in the All Other Compensation table on page 27. The Company believes these perquisites to be reasonable, comparable to peer companies and consistent with the Company’s overall executive compensation philosophy. +Chairman and CEO Employment Agreement and Supplemental Benefit Agreement +The Company and Mr. Kraeutler are parties to an employment agreement and a supplemental benefit agreement (collectively, the “CEO agreements”). In addition to an established minimum annual +salary and eligibility to participate in the Company’s bonus and stock incentive plans, the CEO agreements provide that Mr. Kraeutler is eligible to receive: +24 +Table of Contents +• +Post-retirement benefit payments totaling $1,200,000, payable in one hundred twenty (120) monthly payments of $10,000 +• +Lifetime insurance benefits including health insurance and comprehensive long-term care insurance +Internal Pay Equity +The Compensation +Committee believes that the relative difference between the Chairman and Chief Executive Officer’s compensation and the compensation of the Company’s other executives has not increased significantly over the years. Further, the +Compensation Committee believes that the Company’s internal pay equity structure is appropriate based upon the contributions to the success of the Company and as a means of motivation to other executives and employees. +Tax Deductibility of Pay +Section 162(m) of the Internal Revenue Code contains compensation deduction limitations for certain highly compensated employees. One exception to +this limitation is for performance-based compensation that is approved by, among other things, a committee of “outside directors” (as defined under IRS treasury regulations). The Committee believes that all compensation paid to the NEOs +for fiscal year 2014 is properly deductible under Section 162(m), but no assurance can be made in this regard. +Actions of the +Compensation Committee +In several meetings during the year, then Executive Chairman, Mr. Motto, current Chairman and Chief Executive +Officer, Mr. Kraeutler, and the Compensation Committee Chairman discussed, among other things, Meridian’s compensation system and its effectiveness in attracting and retaining talented employees. These individuals believe that the system, +including the Officer’s Performance Compensation Plan, is understood by employees and shareholders and has worked well in practice. They noted that the underlying principles in the plan have been followed for many years, even when following +such principles resulted in no Officer’s Performance Compensation Plan bonuses being awarded to the NEOs (2009, 2010, 2011, 2012 and 2014) and performance-based stock awards being forfeited (2008, 2009, 2011, 2012, 2013 and 2014). The Committee +discussed on a number of occasions the advisability of engaging a compensation consultant or advisor. The Compensation Committee concluded that it did not want to engage a compensation consultant or advisor this year, in part because of the +relatively small number of Executive Officers and their frequent interaction. +At its November 6, 2014 meeting, the Compensation +Committee discussed these matters, both with and without the presence of management. The Compensation Committee discussed the recommendations of the Chairman and Chief Executive Officer for compensation levels for all officers and answered questions +about individual recommendations and the general pay increases to be paid throughout the Company. The Committee then made the compensation decisions, which are reflected in the figures presented in this proxy statement. +25 +Table of Contents +Compensation Committee Report +The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with +management. Based on these reviews and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Company’s proxy statement on Schedule 14A. +Members of the Compensation Committee +Robert J. Ready (Chairman) +James M. Anderson +David C. Phillips +SUMMARY COMPENSATION TABLE +The following table summarizes the aggregate compensation paid, or earned, by each of the NEOs for the +fiscal years ended September 30, 2014, 2013 and 2012, respectively. +Name and Principal +Position +(a) +Year +(b) +Salary +(c) +Bonus 1 +(d) +Stock +Awards 2,4 +(e) +Option +Awards 3,4 +(f) +Non-Equity +Incentive Plan +Compensation +(g) +Change in +Pension Value +and +Nonqualified +Deferred +Compensation +Earnings +(h) +All +Other +Compensation 5 +(i) +Total +John A. Kraeutler +Chairman of +the Board, +Chief Executive Officer +and President +2014 +2013 +2012 +$ +$ +$ +602,871 +579,684 +558,600 +$ +— +321,681 +— +$ +$ +$ +373,650 +193,000 +175,700 +— +— +— +— +— +— +— +— +— +$ +$ +$ +86,867 +79,242 +74,901 +$ +$ +$ +1,063,388 +1,173,607 +809,201 +Melissa A. Lueke +Executive +Vice President, +Chief Financial Officer +and Secretary +2014 +2013 +2012 +$ +$ +$ +263,334 +253,206 +243,997 +$ +— +140,511 +— +$ +$ +$ +230,103 +184,113 +131,775 +— +— +— +— +— +— +— +— +— +$ +$ +$ +65,805 +55,367 +45,425 +$ +$ +$ +559,242 +633,197 +421,197 +William J. Motto 6 +Former Executive Chairman of +the Board of Directors +2014 +2013 +2012 +$ +$ +$ +579,476 +579,684 +558,600 +$ +— +321,681 +— +$ +$ +$ +542,125 +193,000 +175,700 +$ +174,930 +— +— +— +— +— +— +— +— +$ +$ +$ +123,499 +120,366 +110,234 +$ +$ +$ +1,420,030 +1,214,731 +844,534 +Marco G. Calzavara 7 +President and Managing +Director, +Meridian +Bioscience Europe +2014 +2013 +2012 +$ +$ +$ +356,747 +328,694 +322,394 +$ +$ +— +200,954 +40,595 +$ +$ +$ +224,190 +144,750 +131,775 +— +— +— +— +— +— +— +— +— +$ +$ +$ +47,607 +30,573 +24,972 +$ +$ +$ +628,544 +704,971 +519,736 +Richard L. Eberly +Executive +Vice President, +President Meridian Life Science +2014 +2013 +2012 +$ +$ +$ +306,973 +296,592 +358,077 +$ +— +163,795 +— +$ +$ +$ +224,190 +144,750 +131,775 +— +— +— +— +— +— +— +— +— +$ +$ +$ +62,985 +59,729 +47,456 +$ +$ +$ +594,148 +664,866 +537,308 +Vecheslav A. Elagin +Executive +Vice President, +Research & Development +2014 +2013 +2012 +$ +$ +$ +284,080 +273,154 +250,962 +$ +$ +— +151,580 +25,000 +$ +$ +$ +224,190 +144,750 +307,475 +$ +— +— +25,103 +— +— +— +— +— +— +$ +$ +$ +69,937 +59,471 +52,925 +$ +$ +$ +578,207 +628,955 +661,465 +1 +Aside from payment to Bioline Group employees for fiscal 2012, which +Mr. Calzavara was considered for fiscal 2012 bonus purposes, no payments were made to the NEOs pursuant to the Officer’s Performance Compensation Plan for fiscal 2014 or 2012 as the corporate-wide targets were not reached for either of the +respective fiscal years. In addition to the payment made pursuant to the Officer’s Performance Compensation Plan, the amount reflected for Mr. Calzavara for fiscal 2013 includes $18,845 awarded in connection with his 20 year anniversary +with the Bioline Group. +2 +The amounts shown reflect the grant date fair value of the restricted stock units issued during fiscal years 2014, 2013 and 2012 in accordance with ASC +Topic 718. With the exception of Mr. Motto, no compensation cost is included in this table related to the performance-based portion of the restricted stock +26 +Table of Contents +units granted November 9, 2011, November 7, 2012 and November 6, 2013. Because the required earnings target for Meridian was not reached for fiscal 2012, 2013 or 2014, the +performance-based restricted stock units have been cancelled. Upon Mr. Motto’s death, the vesting of the performance-based restricted stock units granted to him on November 6, 2013 was accelerated. As a result, Mr. Motto’s +fiscal 2014 compensation reflected above includes a grant date fair value totaling $249,100 related to these restricted stock units. A discussion of the assumptions used in calculating these values may be found in Note 5(b) on page 64 to the +Company’s Annual Report on Form 10-K filed with the SEC on December 1, 2014. +3 +The amounts shown reflect the grant date fair value of the stock options granted during fiscal years 2014, 2013 and 2012 in accordance with ASC Topic +718. A discussion of the assumptions used in calculating these values may be found in Note 5(b) on page 64 to the Company’s Annual Report on Form 10-K filed with the SEC on December 1, 2014. +4 +In addition, with the exception of Mr. Motto, no compensation cost is +included in this table related to the additional performance-based equity awards granted November 9, 2011 to certain executive management employees, including the NEOs, to reward them for meeting pre-defined Company revenue targets. These +awards, which included both restricted stock units and options, can only be earned if specified cumulative revenue thresholds are met through fiscal 2015, with the three measurement dates for ratably earning one-third of the grant being (i) the +21-month period ended June 30, 2013; (ii) the 33-month period ended June 30, 2014; and (iii) the 45-month period ending June 30, 2015. As a result of the cumulative threshold for the 21-month and 33-month periods ended +June 30, 2013 and June 30, 2014, respectively, not having been met, two-thirds of the restricted stock units and options granted have been cancelled. Furthermore, at the present time, achievement of the remaining revenue threshold within +the required timeframe is not considered probable and, therefore, with the exception of Mr. Motto, no compensation is included within the table. However, upon Mr. Motto’s death, the vesting of the awards subject to the third +measurement period was accelerated. As a result, Mr. Motto’s fiscal 2014 compensation reflected within the table above includes a grant date fair value related to restricted stock units and options granted under this award of $43,925 and +$174,930, respectively. Based upon grant date fair value in accordance with ASC Topic 718, the remaining maximum compensation cost that could be recognized for each of the NEOs in connection with this award is as follows: +Mr. Kraeutler—$218,855; Ms. Lueke—$163,268; Mr. Motto—$0; Mr. Calzavara—$204,972; Mr. Eberly—$218,855; and Dr. Elagin—$218,855. +5 +See the All Other Compensation table below for amounts, which include +certain Company contributions, perquisites and other personal benefits. +Fiscal 2014 +All Other Compensation +John A. +Kraeutler +Melissa A. +Lueke +William J. +Motto +Marco G. +Calzavara +Richard L. +Eberly +Vecheslav A. +Elagin +Retirement Contributions +$ +16,240 +$ +16,130 +$ +16,240 +$ +14,233 +$ +16,240 +$ +16,240 +Auto Lease / Auto Allowance +14,220 +12,000 +8,135 +6,237 +12,000 +12,000 +Financial and Tax Planning +9,007 +1,500 +59,624 +— +2,750 +1,802 +Restricted Stock Dividends +47,400 +31,995 +39,500 +27,137 +31,995 +39,895 +Gross-up for Anniversary Award +— +4,180 +— +— +— +— +Totals +$ +86,867 +$ +65,805 +$ +123,499 +$ +47,607 +$ +62,985 +$ +69,937 +6 +Mr. Motto, Founder of the Company, was serving as Executive Chairman of the Board at the time of his death on September 15, 2014. +7 +Mr. Calzavara’s salary and bonus were £215,362 and £0, respectively, in fiscal 2014; £210,634 and £128,775, +respectively, in fiscal 2013; and £204,500 and £25,750, respectively, in fiscal 2012. All conversions were made at the average exchange rates for the respective fiscal years. +27 +Table of Contents +GRANTS OF PLAN-BASED AWARDS +The following table sets forth, for each of the NEOs, information related to grants made during fiscal 2014 under Meridian’s 2012 Stock Incentive Plan. +Name +Grant +Date +Estimated Future Payouts Under +Non-Equity Incentive Plan +Awards +Estimated Future Payouts Under +Equity Incentive Plan Awards +All other +Stock +Awards: +Number of +Shares of +Stock or +Units (#) +All other +Option +Awards: +Number of +Securities +Underlying +Options (#) +Exercise +or Base +Price of +Option +Awards +($/Sh) +Grant Date +Fair Value +of Stock +and +Option +Awards +Threshold +($) +Target +($) +Max +($) +Threshold +(#) +Target +(#) +Max +(#) +(a) +(b) +(c) +(d) +(e) +(f) +(g) +(h) +(i) +(j) +(k) +(l) +John A. Kraeutler +11/06/13 +— +— +— +— +— +— +15,000 +1 +— +— +$ +373,650 +Melissa A. Lueke +11/06/13 +01/21/14 +— +— +— +— +— +— +— +— +— +— +— +— +9,000 +225 +1 +2 +— +— +— +— +$ +$ +224,190 +5,913 +William J. Motto +11/06/13 +— +— +— +— +— +— +20,000 +1 +— +— +$ +498,200 +Marco G. Calzavara +11/06/13 +— +— +— +— +— +— +9,000 +1 +— +— +$ +224,190 +Richard L. Eberly +11/06/13 +— +— +— +— +— +— +9,000 +1 +— +— +$ +224,190 +Vecheslav A. Elagin +11/06/13 +— +— +— +— +— +— +9,000 +1 +— +— +$ +224,190 +1 +At the time of the grant, half of each NEO’s restricted stock units were time-based with 100% vesting after four years, and the remaining half +were performance-based, subject to attainment of a specified earnings target for fiscal 2014. As the 2014 earnings target was not met, the performance-based restricted stock units have been cancelled and are not reflected in the table above, except +for those granted to Mr. Motto, which vested upon his death. In addition, Mr. Kraeutler was granted an additional 25,000 performance-based restricted stock units, subject to attainment of a specified earnings target for fiscal 2014. As the +2014 earnings target was not met, these restricted stock units have also been cancelled and are not reflected in the table above. +2 +This grant of unrestricted common shares was made to Ms. Lueke pursuant to Company policy for 15 years of service. +28 +Table of Contents +OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END +The following table provides information on the NEOs’ holdings of equity awards under Meridian’s 2012 Stock Incentive Plan, 2004 Equity Compensation Plan and 1996 Stock Option Plan as of +September 30, 2014. +Option Awards +Stock Awards +Name +Number of +Securities +Underlying +Unexercised +Options +(#) +Exercisable +Number of +Securities +Underlying +Unexercised +Options +(#) +Unexercisable +Equity +Incentive Plan +Awards: +Number +of +Securities +Underlying +Unexercised +Unearned +Options (#) +Option +Exercise +Price ($) +Option +Expiration +Date +Number of +Shares or +Units of +Stock That +Have Not +Vested +(#) +Market +Value of +Shares or +Units of +Stock That +Have +Not +Vested ($) +Equity +Incentive +Plan +Awards: +Number of +Unearned +Shares, +Units or +Other +Rights That +Have +Not +Vested (#) +Equity +Incentive +Plan +Awards: +Market +or Payout +Value of +Unearned +Shares, +Units +or +Other +Rights +That +Have Not +Vested +($) +(a) +(b) +(c) +(d) +(e) +(f) +(g) +(h) +(i) +(j) +John A. Kraeutler +10,500 1 +15,750 1 +15,750 1 +25,000 2 +25,000 3 +— +— +— +— +— +— +— +— +— +— +37,500 8 +$ +$ +$ +$ +$ +$ +7.280 +14.007 +16.554 +33.090 +33.090 +17.570 +12/07/14 +11/10/15 +11/15/16 +01/28/18 +01/28/18 +11/09/21 +— +— +— +— +— +— +10,000 10 +10,000 11 +10,000 12 +15,000 13 +$ +$ +$ +$ +— +— +— +— +— +— +176,900 +176,900 +176,900 +265,350 +— +— +— +— +— +— +— +— +— +— +2,500 8 +$ +— +— +— +— +— +— +— +— +— +— +44,225 +Melissa A. Lueke +10,500 1 +15,750 1 +— +— +— +— +35,000 8 +$ +$ +$ +7.280 +14.007 +17.570 +12/07/14 +11/10/15 +11/09/21 +— +— +— +7,500 10 +7,500 11 +7,500 12 +9,000 13 +$ +$ +$ +$ +— +— +— +132,675 +132,675 +132,675 +159,210 +— +— +— +— +— +— +— +— +— +— +— +— +— +— +William J. Motto +15,750 1 +15,750 1 +37,500 9 +— +— +— +— +— +$ +$ +$ +14.007 +16.554 +17.570 +09/15/15 +09/15/15 +09/15/15 +— +— +— +— +— +— +— +— +— +— +— +— +Marco G. Calzavara +800 14 +1,500 10 +7,500 11 +7,500 12 +9,000 13 +$ +$ +$ +$ +$ +14,152 +26,535 +132,675 +132,675 +159,210 +— +— +— +— +— +11,666 8 +$ +— +— +— +— +— +206,372 +29 +Table of Contents +Richard L. Eberly +1,500 5 +7,500 6 +— +2,500 6 +— +— +37,500 8 +$ +$ +$ +19.710 +21.940 +17.570 +08/04/20 +01/31/21 +11/09/21 +— +— +— +7,500 10 +7,500 11 +7,500 12 +9,000 13 +$ +$ +$ +$ +— +— +— +132,675 +132,675 +132,675 +159,210 +— +— +— +— +— +— +— +2,500 8 +$ +— +— +— +— +— +— +— +44,225 +Vecheslav A. Elagin +10,000 4 +2,000 5 +2,500 7 +— +— +2,500 7 +— +— +— +37,500 8 +$ +$ +$ +$ +22.290 +19.710 +18.910 +17.570 +08/03/19 +08/04/20 +06/01/22 +11/09/21 +— +— +— +— +7,500 10 +17,500 11 +7,500 12 +9,000 13 +$ +$ +$ +$ +— +— +— +— +132,675 +309,575 +132,675 +159,210 +— +— +— +— +— +— +— +— +2,500 8 +$ +— +— +— +— +— +— +— +— +44,225 +1 +Options vested in three equal annual installments beginning one year from public earnings release date for the fiscal year ending immediately following +the grant date, indicating that performance targets were met, occurring approximately one year from date of grant. +2 +Options vested on January 22, 2011. +3 +Options vested on January 22, 2013. +4 +Options fully vested on August 3, 2013. +5 +Options fully vested on August 4, 2014. +6 +Options vest in four equal annual installments from the date of grant (i.e., vest 25% per year until fully vested on January 31, 2015). +7 +Options vest in four equal annual installments from the date of grant (i.e., vest 25% per year until fully vested on June 1, 2016). +8 +These awards can only be earned if specified cumulative revenue thresholds are met through fiscal 2015, with the remaining one of three original +measurement dates for ratably earning one-third of the grant being the 45-month period ending June 30, 2015. If earned, the awards vest one year from the date the cumulative thresholds are met. As a result of the cumulative revenue threshold +required for the 21-month and 33-month periods ended June 30, 2013 and June 30, 2014, respectively, not being achieved, the two-thirds portion of the original grant available to be earned as of these measurement periods has been cancelled +and is not reflected in the above table. +9 +This award is structured like those described at Note 8 above. However, vesting of the award was accelerated upon Mr. Motto’s death. +10 +Shares/units vest on November 11, 2014. +11 +Shares/units vest on November 9, 2015. +12 +Shares/units vest on November 7, 2016. +13 +Shares/units vest on November 6, 2017. +14 +Units vest in four equal installments from January 31, 2011 (i.e., vest 25% per year until fully vested on January 31, 2015). +30 +Table of Contents +OPTION EXERCISES AND STOCK VESTED +The following table sets forth, for each of the NEOs, information on options exercised and restricted stock and restricted stock units vested during fiscal 2014. +Option Awards +Stock Awards +Name +Number of +Shares +Acquired on +Exercise (#) +Value Realized +on Exercise ($) +(1) +Number of +Shares +Acquired on +Vesting (#) +Value Realized +On Vesting ($) +(2) +(a) +(b) +(c) +(d) +(e) +John A. Kraeutler +5,250 +$ +108,922 +10,000 +$ +254,500 +Melissa A. Lueke +— +$ +— +7,500 +$ +190,875 +William J. Motto +15,750 +$ +178,783 +62,500 +$ +1,225,750 +Marco G. Calzavara +— +$ +— +1,600 +$ +34,736 +Richard L. Eberly +— +$ +— +7,500 +$ +190,875 +Vecheslav A. Elagin +— +$ +— +5,000 +$ +127,250 +1 +Amounts reflect the difference between the exercise price of the option and the market price of Meridian common shares at the time of exercise. +2 +Amounts reflect the market price of Meridian common shares at the time of restricted stock or units vesting. +NONQUALIFIED DEFERRED COMPENSATION +Our +401(k) Savings Plan (“401(k) Plan”) allows all U.S. employees of the Company as of the first day of their employment to set aside a portion of their compensation each year for their retirement needs, up to the limits set by the Internal +Revenue Code. The Company contributes a matching contribution of 100% of the first 3% of the employee’s contribution (i.e., up to 3% of an employee’s salary) subject to Internal Revenue Code limitations. The Company may also contribute a +profit-sharing contribution at its discretion. Employee contributions are 100% vested immediately, while Company contributions are subject to a graded vesting schedule of 20% per year for the first 5 years of employment. Participants are +entitled to direct the investment of their accounts among various mutual funds selected by the Company’s Fiduciary Committee. The Plan also provides that Company discretionary profit-sharing contributions may be invested in Company stock. +Participants who terminate employment are entitled to receive the vested portion of their accounts. +POTENTIAL PAYMENTS UPON TERMINATION OR +CHANGE IN CONTROL +As detailed on page 24 within the “Compensation Discussion and Analysis” section of this Proxy Statement, +Mr. Kraeutler and Meridian are parties to an employment agreement and a supplemental benefit agreement dated June 12, 2012, each as amended September 23, 2014, which set forth compensation, non-competition, benefit and severance +provisions and provide for a payment equal to three times Mr. Kraeutler’s base salary (plus any salary earned but not paid) and three-year average annual performance bonus if Mr. Kraeutler is terminated by Meridian without cause, +Mr. Kraeutler terminates his employment for good reason or upon a change in control of Meridian. The employment agreement, as amended, has been extended through December 31, 2014. The Company and Mr. Kraeutler are currently finalizing +a new +31 +Table of Contents +employment agreement that would extend through September 30, 2016, and contain provisions under which it could be extended annually for up to two additional one year periods ending +September 30, 2017 and September 30, 2018, respectively, upon mutual agreement by both parties. +Pursuant to +Mr. Kraeutler’s supplemental benefit agreement, had his employment with the Company terminated on September 30, 2014, Mr. Kraeutler would have been entitled to receive post-retirement benefit payments totaling $1,200,000, payable +in one hundred twenty (120) monthly payments of $10,000. +Had a change in control occurred on September 30, 2014, Mr. Kraeutler +would also have been entitled to the following under his employment agreement: +Salary +$ +1,741,155 +Annual Performance Bonus +321,681 +Total Payment +$ +2,062,836 +In addition, the Meridian Bioscience, Inc. Change in Control Severance Compensation Policy (the “Policy”) +applies to the Company’s NEOs (as defined in Item 402 of Regulation S-K) and other Executive Officers of the Company and its affiliates other than the Chairman and Chief Executive Officer – with Mr. Kraeutler’s benefits and +provisions provided in the separate, individual agreements described above. Generally, subject to certain conditions surrounding post-change in control employment, in the event of a qualifying change in control, each Executive Officer covered under +the Policy will be entitled to: +• +Base salary, accrued bonus and certain other benefits through the later of the effective date of the change in control or termination of employment; +• +Lump sum payment equal to two (2) times the sum of (i) the base salary in effect immediately preceding the change in control, and +(ii) the average of the bonus amounts paid for each of the two fully-completed fiscal years immediately preceding the change in control; and +• +Continued participation in the Company’s medical and dental plans for a twenty-four (24) month period following the effective date of the +change in control. +Had a change in control occurred on September 30, 2014, the NEOs to which the Policy applied at +that date (Ms. Lueke, Mr. Calzavara, Mr. Eberly and Dr. Elagin) would have been entitled to the following lump sum payments under the Policy: +Melissa A. +Lueke +Marco G. +Calzavara +Richard L. +Eberly +Vecheslav A. +Elagin +Salary +$ +531,386 +$ +731,049 +$ +619,442 +$ +573,248 +Annual Performance Bonus +140,511 +182,109 +163,795 +151,580 +Total Lump Sum Payment +$ +671,897 +$ +913,158 +$ +783,237 +$ +724,828 +32 +Table of Contents +DIRECTOR COMPENSATION +For fiscal 2014, independent Directors of Meridian received compensation at a rate of $35,000 per year for serving as Directors and as members of +Committees of the Board. They also received $2,000 and $1,250, respectively, for each Board and Committee meeting attended. For meetings held by telephone, they received $1,000 and $750, respectively, for each Board and Committee meeting. The Audit +Committee Chairman received an additional $16,000 annually, and the Compensation Committee and Nominating & Corporate Governance Committee Chairmen each received an additional $5,000 annually. In accordance with the terms and conditions set +forth in the Company’s 2012 Stock Incentive Plan, each independent Director was also granted a non-qualified option to purchase 8,500 common shares at the time of appointment, election or re-election to the Board of Directors, with the exercise +price being the closing sale price on Nasdaq reported on the date of grant. Directors who are employees of Meridian are not separately compensated for serving as Directors. +The following table provides information on compensation related to fiscal 2014 for independent Directors who served during fiscal 2014. +Name +Fees +Earned +or +Paid in +Cash ($) +Stock +Awards +($) 1 +Option +Awards +($) 1 +Non-Equity +Incentive +Plan +Compensation +($) +Change in +Pension +Value +and Nonqualified +Deferred +Compensation +Earnings +All Other +Compensation +($) +Total +($) +(a) +(b) +(c) +(d) +(e) +(f) +(g) +(h) +James M. Anderson +$ +66,534 +— +$ +49,694 +— +— +— +$ +116,228 +Dwight E. Ellingwood +$ +11,750 +— +$ +40,016 +— +— +— +$ +51,766 +David C. Phillips +$ +78,000 +— +$ +49,694 +— +— +— +$ +127,694 +Robert J. Ready +$ +66,500 +— +$ +49,694 +— +— +— +$ +116,194 +1 +The amounts shown +reflect the grant date fair value of the awards made in fiscal year 2014 in accordance with ASC Topic 718. A discussion of the assumptions used in calculating these values may be found in Note 5(b) on page 64 to the Company’s Annual Report on +Form 10-K filed with the SEC on December 1, 2014. +SHAREHOLDER PROPOSALS FOR NEXT YEAR +The deadline for shareholder proposals to be included in the proxy statement for next year’s meeting is August 14, 2015. +The form of Proxy for this meeting grants authority to the designated proxies to vote in their discretion on any matters that come before the +meeting except those set forth in Meridian’s proxy statement and except for matters as to which adequate notice is received. In order for a notice to be deemed adequate for the 2016 Annual Shareholders’ Meeting, it must be received prior +to October 29, 2015. If there is a change in the anticipated date of next year’s Annual Shareholders’ Meeting or these deadlines by more than 30 days, we will notify you of this change through our Form 8-K and/or Form 10-Q filings. +33 +Table of Contents +Meridian’s Code of Regulations provides that only persons nominated by an officer, Director or in +writing by a shareholder not earlier than 150 days nor later than 90 days prior to the meeting at which Directors are to be selected shall be eligible for election and that shareholder proposals be presented not earlier than 150 days nor later than +90 days prior to the meeting at which the proposals are to be presented. +QUESTIONS? +If you have questions or need more information about the annual meeting, write to: +Melissa A. Lueke +Executive Vice President, Chief Financial Officer and Secretary +Meridian Bioscience, Inc. +3471 River Hills +Drive +Cincinnati, Ohio 45244 +or +call us at (513) 271-3700 +For information about your record holdings, call Computershare Shareholder Services at (800) 884-4225. +34 +Table of Contents +*** Exercise Your Right to Vote *** +Important Notice Regarding the Availability of Proxy Materials for the +Shareholder Meeting to Be Held on January 22, 2015. +MERIDIAN BIOSCIENCE, INC. +MERIDIAN BIOSCIENCE, INC. +3471 RIVER HILLS DRIVE +CINCINNATI, OH +45244 +Meeting Information +Meeting Type: Annual Meeting +For holders as of: November 25, 2014 +Date: January 22, 2015 Time: 2:00 PM EST +Location: Holiday Inn +Eastgate +4501 Eastgate Boulevard +Cincinnati, OH 45245 +You are receiving this communication because you hold shares in the company +named above. +This is not a ballot. You cannot use this notice to vote these shares. This +communication presents only an overview of the more complete proxy materials that are available to you on the Internet. You may view the proxy materials online at www.proxyvote.com or easily request a paper copy (see reverse side). +We encourage you to access and review all of the important information contained in the proxy +materials before voting. +See the reverse side of this notice to obtain proxy materials and voting instructions. +Table of Contents +— Before You Vote — +How to Access the Proxy Materials +Proxy Materials Available to VIEW or RECEIVE: +NOTICE AND PROXY STATEMENT ANNUAL REPORT AND FORM 10-K +How to View Online: +Have the information that is printed in the box marked by the arrow +(located on the following page) and visit: www.proxyvote.com . +How to Request and +Receive a PAPER or E-MAIL Copy: +If you want to receive a paper or e-mail copy of these documents, you must request one. There is NO charge for requesting a copy. Please choose one of the following methods to make your request: +1) BY INTERNET : www.proxyvote.com +2) BY TELEPHONE : +1-800-579-1639 +3) BY E-MAIL* : +sendmaterial@proxyvote.com +* +If requesting materials by e-mail, please send a blank e-mail with the information that is printed +in the box marked by the arrow +(located on the following page) in the subject line. +Requests, instructions and other inquiries sent to this e-mail address +will NOT be forwarded to your investment advisor. Please make the request as instructed above on or before January 8, 2015 to facilitate timely delivery. +— How To Vote — +Please Choose One of the Following +Voting Methods +Vote In Person: Many shareholder meetings have attendance requirements including, but not limited to, the possession of an attendance ticket issued by the +entity holding the meeting. Please check the meeting materials for any special requirements for meeting attendance. At the meeting, you will need to request a ballot to vote these shares. +Vote By Internet: To vote now by Internet, go to www.proxyvote.com. Have the +information that is printed in the box marked by the arrow +(located on the following page) available and follow the instructions. +Vote By Mail: You can vote by mail by requesting a paper copy of the materials, which will include a proxy card. +Table of Contents +Voting Items +The Board of Directors recommends you vote FOR the +following: +1. Election of Directors +Nominees: +01) JAMES M. ANDERSON +04) DAVID C. PHILLIPS +02) DWIGHT E. ELLINGWOOD +05) ROBERT J. READY +03) JOHN A. KRAEUTLER +The Board of Directors recommends you vote FOR the following proposals: +2. Advisory vote on named executive officer compensation. +3. To ratify the appointment of Grant Thornton LLP as Meridian’s independent registered public accountants for fiscal year +2015. +NOTE: Such other business as may properly come before the meeting or any postponement or adjournment thereof. Only shareholders of record at the close of business on +November 25, 2014 are entitled to notice of and to vote at the meeting. +Table of Contents +Table of Contents +MERIDIAN BIOSCIENCE, INC. +3471 RIVER HILLS DRIVE +CINCINNATI, OH 45244 +VOTE BY INTERNET - www.proxyvote.com +Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the cut-off date or +meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. +ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS +If you would like to reduce the +costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the +instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. +VOTE BY PHONE - 1-800-690-6903 +Use any touch-tone telephone to transmit your +voting instructions up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions. +VOTE BY MAIL +Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, +Edgewood, NY 11717. +TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS +FOLLOWS: x +M80096-P57105 KEEP THIS PORTION FOR +YOUR RECORDS +THIS PROXY CARD IS VALID +ONLY WHEN SIGNED AND DATED. DETACH AND RETURN THIS PORTION ONLY +MERIDIAN BIOSCIENCE, INC. +The Board of Directors recommends you +vote FOR the following: +For +All +Withhold +All +For All Except +To withhold authority to vote for any individual nominee(s), mark +“For All Except” and write the number(s) of the nominee(s) on the line below. +1. +Election of Directors +Nominees: +¨ +¨ +¨ +01) JAMES M. ANDERSON +04) DAVID C. PHILLIPS +02) DWIGHT E. ELLINGWOOD 05) ROBERT J. READY +03) JOHN A. KRAEUTLER +The Board of Directors recommends you vote FOR the +following proposals: +For +Against +Abstain +2. +Advisory vote on named executive officer compensation. +¨ +¨ +¨ +3. +To ratify the appointment of Grant Thornton LLP as Meridian’s independent registered public accountants for fiscal year 2015. +¨ +¨ +¨ +NOTE: Such other business as may properly come before the +meeting or any postponement or adjournment thereof. Only shareholders of record at the close of business on November 25, 2014 are entitled to notice of and to vote at the meeting. +For address changes and/or comments, please check this box and write them on the back where indicated. +¨ +Please indicate if you plan to attend this meeting. +¨ +¨ +Yes +No +Please sign exactly as your name(s) appear(s) hereon. When signing +as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by +authorized officer. +Signature [PLEASE SIGN WITHIN BOX] +Date +Signature (Joint Owners) +Date +Table of Contents +Important Notice Regarding the Availability of +Proxy Materials for the Annual Meeting: The Notice and Proxy Statement, Annual Report and Form 10-K are available at www.proxyvote.com. +--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- +M80097-P57105 +MERIDIAN BIOSCIENCE, INC. +Annual Meeting of Shareholders +January 22, +2015 2:00 PM +This proxy is solicited by the Board of Directors +The undersigned hereby appoints JOHN A. KRAEUTLER or MELISSA A. +LUEKE, or either of them, attorneys and proxies of the undersigned, each with the power of substitution, to vote all shares of Common Stock which the undersigned would be entitled to vote on the matters specified on the reverse side (and in their +discretion to cumulate votes in the election of directors if cumulative voting is invoked by a shareholder through proper notice to the Company) and, in their discretion, with respect to such other business as may properly come before the Annual +Meeting of Shareholders of Meridian Bioscience, Inc. to be held on January 22, 2015, at 2:00 p.m. Eastern Standard Time, at the Holiday Inn Eastgate, 4501 Eastgate Boulevard, Cincinnati, Ohio 45245 and any postponement or adjournment of such +Annual Meeting. +This proxy, when properly executed, will be voted +as directed by the shareholder(s). If no such directions are made, this proxy will be voted FOR the election to the Board of Directors of the nominees listed on the reverse side and FOR each remaining proposal. +Please mark, sign, date, and return this proxy card promptly using the +enclosed reply envelope. +Address Changes/Comments: +(If you noted any Address Changes/Comments +above, please mark corresponding box on the reverse side.) +Continued and to be signed on reverse side \ No newline at end of file diff --git a/raw/proxies/0000794172/0001193125-14-439639/proxy_rpt.txt b/raw/proxies/0000794172/0001193125-14-439639/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..267d51cd948aeab7ae4f223c4364cfd832e9fb49 --- /dev/null +++ b/raw/proxies/0000794172/0001193125-14-439639/proxy_rpt.txt @@ -0,0 +1,13 @@ +TRANSACTIONS WITH RELATED PERSONS +During fiscal 2014, the Company leased certain office space from an entity controlled by Marco G. Calzavara, President and Managing Director, Meridian +Bioscience Europe. Payments made under such arrangements during fiscal 2014 totaled approximately $200,000. +Nasdaq rules require the +Company to conduct an appropriate review of related party transactions required to be disclosed by the Company pursuant to SEC Regulation S-K Item 404 for potential conflict of interest situations on an ongoing basis and that all such +transactions must be approved by the Audit Committee or another Committee comprised of independent Directors. As a result, the Audit Committee annually reviews all such related party transactions and approves each related party transaction if it +determines that it is in the best interests of the Company. Additionally, the Audit Committee’s Charter provides it the authority to review, approve and monitor transactions involving the Company and “related persons” (Directors and +Executive Officers or their immediate family members, or shareholders owning five percent or greater of the Company’s outstanding stock). This also covers any related person transaction that meets the minimum threshold for disclosure in the +proxy statement under the relevant SEC rules (generally, transactions involving amounts exceeding $120,000 in which a related person has a direct or indirect material interest). In considering the transaction, the Audit Committee may consider all +relevant factors, including, as applicable, (i) the Company’s business rationale for entering into the transaction; (ii) the alternatives to entering into a related person transaction; (iii) whether the transaction is on terms +comparable to those available to third parties, or in the case of employment relationships, to employees generally; (iv) the potential for the transaction to lead to an actual or apparent conflict of interest and any safeguards imposed to +prevent such actual or apparent conflicts; and (v) the overall fairness of the transaction to the Company. This policy is included in the Company’s Employee Handbook. The approval of such related person transactions are evidenced by +internal Company resolutions or memoranda. \ No newline at end of file diff --git a/raw/proxies/0000794172/0001193125-15-404341/proxy.txt b/raw/proxies/0000794172/0001193125-15-404341/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..497b87b14fd9772b2093e0cc762372bff05e8ce9 --- /dev/null +++ b/raw/proxies/0000794172/0001193125-15-404341/proxy.txt @@ -0,0 +1,2260 @@ +DEF 14A +1 +d56334ddef14a.htm +DEFINITIVE PROXY STATEMENT +Definitive Proxy Statement +Table of Contents +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +WASHINGTON, D.C. 20549 +SCHEDULE 14A +(Rule 14a-101) +INFORMATION REQUIRED IN PROXY STATEMENT +SCHEDULE 14A INFORMATION +Proxy Statement Pursuant to Section 14(a) of the +Securities Exchange Act of 1934 +(Amendment No. ) +Filed by the Registrant x Filed by a Party other than the +Registrant ¨ +Check the appropriate box: +¨ +Preliminary Proxy Statement +¨ +Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +x +Definitive Proxy Statement +¨ +Definitive Additional Materials +¨ +Soliciting Material Pursuant to Section 14a-12 +Meridian Bioscience, Inc. +(Name of Registrant as +Specified in Its Charter) +(Name of Person(s) Filing Proxy Statement if Other Than the Registrant) +Payment of Filing Fee (Check the appropriate box): +x +No fee required. +¨ +Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. +(1) +Title of each class of securities to which transaction applies: +(2) +Aggregate number of securities to which transaction applies: +(3) +Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on +which the filing fee is calculated and state how it was determined): +(4) +Proposed maximum aggregate value of transaction: +(5) +Total Fee Paid: +¨ +Fee paid previously with preliminary materials. +¨ +Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the +offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. +(1) +Amount Previously Paid: +(2) +Form, Schedule or Registration Statement No.: +(3) +Filing Party: +(4) +Date Filed: +Table of Contents +3471 River Hills Drive +Cincinnati, Ohio 45244 +www.meridianbioscience.com +Notice of Annual Meeting of Shareholders +and Proxy Statement +Dear Shareholders: +Our Annual Meeting of Shareholders will be held at 2:00 p.m. on January 27, 2016 at the Holiday Inn Eastgate, 4501 Eastgate Boulevard, Cincinnati, +Ohio 45245. We hope you will attend. +At the meeting, you will hear a report on our operations and have a chance to meet your Directors and +Executive Officers. +This booklet includes the formal notice of the meeting and the proxy statement. The proxy statement tells you more about +the agenda and procedures for the meeting. It also describes how the Board operates and gives personal information about our Director candidates. +We are pleased to once again take advantage of the U.S. Securities and Exchange Commission rules that allow companies to furnish their proxy materials over the Internet. As a result, we are mailing to +most of our shareholders a Notice of Internet Availability of Proxy Materials (the “Notice”) instead of a paper copy of this proxy statement and our Annual Report. The Notice contains instructions on how to access and review those +documents over the Internet. We believe that this process allows us to provide our shareholders with the information they need in a more timely manner, while reducing the environmental impact and lowering the costs of printing and distributing our +proxy materials. If you received a Notice by mail and would like to receive a printed copy of our proxy materials, you should follow the instructions for requesting such materials included in the Notice. +Whether or not you plan to attend the meeting, please cast your proxy vote promptly, either online, over the phone or by returning your signed and dated +proxy card in the enclosed envelope. +Sincerely yours, +/s/ John A. Kraeutler +John A. Kraeutler +Chairman of the Board +December 16, 2015 +Table of Contents +NOTICE OF ANNUAL MEETING OF SHAREHOLDERS +Date: +January 27, +2016 +Time: +2:00 p.m., Eastern Standard Time +Place: +Holiday Inn +Eastgate +4501 Eastgate Blvd. +Cincinnati, Ohio 45245 +Purpose: +• +Elect as Directors the six nominees named in the attached proxy materials +• +Conduct an advisory vote on our executive compensation (“Say-on-Pay”) +• +Ratify appointment of Grant Thornton LLP as Meridian’s independent registered public accountants for fiscal year 2016 +• +Conduct other business if properly raised +Only shareholders of record on November 30, 2015 may vote at the meeting. The approximate mailing date of this proxy statement and accompanying Proxy Card is December 16, 2015. +Your vote is important. Please cast your proxy vote promptly, either online, over the phone or by returning your signed and dated proxy card in the +enclosed envelope. +/s/ Melissa A. Lueke +Melissa A. Lueke +Secretary +December 16, 2015 +Table of Contents +Table of Contents +GENERAL INFORMATION +1 +ELECTION OF DIRECTORS (Item 1 on the Proxy Card) +2 +ADVISORY VOTE ON COMPENSATION OF NAMED EXECUTIVE OFFICERS (“SAY-ON-PAY” PROPOSAL) (Item 2 on the Proxy +Card) +4 +RATIFICATION OF APPOINTMENT OF ACCOUNTANTS (Item 3 on the Proxy Card) +5 +CORPORATE GOVERNANCE +5 +REPORT OF THE AUDIT COMMITTEE +7 +DIRECTORS AND EXECUTIVE OFFICERS +11 +SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS +13 +SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE +13 +TRANSACTIONS WITH RELATED PERSONS +13 +COMPENSATION DISCUSSION AND ANALYSIS +14 +COMPENSATION COMMITTEE REPORT +21 +SUMMARY COMPENSATION TABLE +22 +GRANTS OF PLAN-BASED AWARDS +24 +OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END +25 +OPTION EXERCISES AND STOCK VESTED +26 +401(K) PLAN +27 +POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL +27 +DIRECTOR COMPENSATION +28 +SHAREHOLDER PROPOSALS FOR NEXT YEAR +29 +QUESTIONS? +29 +Meridian makes available, free of charge on its website, all of its filings that are made electronically with the +Securities and Exchange Commission (“SEC”), including Forms 10-K, 10-Q and 8-K. These filings are also available on the SEC’s website (www.sec.gov). To access these filings, go to our website (www.meridianbioscience.com). Copies of +Meridian’s Annual Report on Form 10-K for the fiscal year ended September 30, 2015, including financial statements and schedules thereto, filed with the SEC, are also available without charge to shareholders upon written request addressed +to: +Melissa A. Lueke +Executive +Vice President, Chief Financial Officer and Secretary +Meridian Bioscience, Inc. +3471 River Hills Drive +Cincinnati, Ohio 45244 +Table of Contents +MERIDIAN BIOSCIENCE, INC. +3471 River Hills Drive +Cincinnati, Ohio 45244 +Telephone (513) 271-3700 +P R O X Y S T A T E M E N T +Annual Meeting of Shareholders +January 27, 2016 +GENERAL INFORMATION +Who may vote +Shareholders of Meridian, as recorded in our stock register on +November 30, 2015, may vote at the meeting. As of that date, Meridian had 42,036,363 shares of Common Stock outstanding. +How to +vote +You may vote in person at the meeting or by proxy. We recommend you vote by proxy even if you plan to attend the meeting. You can +always change your vote at the meeting. +How proxies work +Meridian’s Board of Directors is asking for your proxy. Giving us your proxy means you authorize us to vote your shares at the meeting in the manner you direct. You may vote for all, some or none of +our Director candidates. You may also vote for or against the other proposals or abstain from voting. +If you complete your proxy online, over +the phone or sign and return the enclosed proxy card but do not specify how to vote, we will vote your shares in favor of (i) our Director candidates; (ii) our executive compensation; and (iii) the ratification of appointment of Grant +Thornton LLP as Meridian’s independent registered public accountants for fiscal year 2016. If any other matters come before the meeting or any postponement or adjournment thereof, each proxy will be voted in the discretion of the individuals +named as proxies on the card. +You may receive more than one proxy or voting card depending on how you hold your shares. Shares registered in +your name are covered by one card. If you hold shares through someone else, such as a stockbroker, bank or nominee, you may get material from them asking how you want to vote. +Stockbrokers, banks and nominees holding shares for beneficial owners must vote those shares as instructed by you. If the stockbroker, bank or nominee has not received instructions from you, the +beneficial owner, the stockbroker, bank or nominee generally has discretionary voting power only with respect to the ratification of appointment of the independent registered public accountants. However, a stockbroker, bank or nominee does not have +discretion to vote for or against the election of Directors and certain other matters subject to a vote if they have not received voting instructions from you. In order to avoid a broker non-vote of your shares on the election of Directors and the +other matters subject to a vote, you must send voting instructions to your stockbroker, bank or nominee. +Solicitation of proxies +Solicitation of proxies is being made by management at the direction of Meridian’s Board of Directors, without additional +compensation, through the mail, in person or by telephone. The cost of preparing and mailing the Notice and the proxy statement and any accompanying material will be borne by Meridian. In addition, Meridian will request brokers and other custodians, +nominees and fiduciaries to forward proxy soliciting material to the beneficial owners of shares held of record, and Meridian will reimburse them for their expenses in so doing. +Revoking a proxy +You may revoke your proxy before it is voted by submitting a new +proxy with a later date, by voting in person at the meeting or by notifying Meridian’s Secretary in writing at the address under “Questions?” on page 29. +Quorum +In order to carry on the business of the meeting, we must have a quorum. +This means at least a majority of the outstanding shares eligible to vote must be represented at the meeting, either by proxy or in person. +1 +Table of Contents +Votes needed +The six Director candidates receiving the most votes will be elected to fill the seats on the Board. The approval on an advisory basis of our executive compensation (Proposal No. 2) and the +ratification of appointment of accountants (Proposal No. 3) require the favorable vote of a majority of the votes cast. Only votes for or against these proposals count, with abstentions not being counted either for or against these proposals. +Abstentions and broker non-votes count for quorum purposes but, as indicated above, will not count for voting purposes. Broker non-votes +occur when a broker returns a proxy card but does not have authority to vote on a particular proposal. +Other matters +Any other matters considered at the meeting, including postponement or adjournment, will require the affirmative vote of a majority of +the votes cast. +ELECTION OF DIRECTORS +(Item 1 on the Proxy Card) +The Nominating and Corporate Governance Committee of the Board +of Directors has nominated for re-election the following current Directors: James M. Anderson, Dwight E. Ellingwood, John A. Kraeutler, John C. McIlwraith, David C. Phillips and Catherine A. Sazdanoff. +Proxies solicited by the Board will be voted for the election of these nominees. All Directors elected at the Annual Shareholders’ Meeting will be +elected to hold office until the next annual meeting. In voting to elect Directors, shareholders are entitled to cumulate their votes and to give one candidate a number of votes equal to the number of Directors to be elected multiplied by the number +of shares held by the shareholder, or to distribute their votes on the same principle among as many candidates as the shareholder sees fit. In order to invoke cumulative voting, notice of cumulative voting must be given in writing by a shareholder +to the CEO, a Vice President or the Secretary of Meridian not less than 48 hours prior to the Annual Shareholders’ Meeting. The proxies solicited include discretionary authority to cumulate votes. +All Meridian Directors are elected for one-year terms. Personal information on each of our nominees is given below. +If a Director nominee becomes unavailable before the election, your proxy card authorizes us to vote for a replacement nominee if the Board names one. +The Board recommends that shareholders vote FOR each of the following candidates: +James M. Anderson +Director since 2009 +Age: 73 +James M. Anderson serves as Chairman of the Compensation Committee. He currently serves as Advisor to the President of Cincinnati Children’s Hospital Medical Center +(“CCHMC”), following his retirement as President and Chief Executive Officer of CCHMC on December 31, 2009. From 2006 to 2014, he served as a director of Ameritas Mutual Holding Company and has also served as Chairman of the Board of +the Cincinnati Branch of the Federal Reserve Bank of Cleveland, retiring in 2012. Prior to joining the staff of CCHMC, Mr. Anderson was a partner in the general corporate law department at Taft, Stettinius & Hollister for 24 years (1968-1977; +1982-1996) and president of U.S. operations at Xomox Corporation, a publicly-traded manufacturer of specialty process controls (1977-1982). Mr. Anderson has also served as director of Gateway Investment Advisors (1997-2008). The Board believes that +Mr. Anderson’s corporate legal experience and his experience as CEO of a large health care organization have given him a wealth of insight into various corporate governance and business management issues, which, along with his status as an +independent Director, make him an integral member of the Board. +2 +Table of Contents +Dwight E. Ellingwood +Director +since 2014 +Age: 63 +Dwight E. Ellingwood serves as Chairman of the Nominating and Corporate Governance Committee. He is currently the Senior Vice President of Strategy, Communications and Public +Affairs for TriHealth in Cincinnati, Ohio, having joined TriHealth in November 2014. Immediately prior to joining TriHealth, Mr. Ellingwood served as the Lead Executive for the Collective Impact on Health, The Health Collaborative (January 2014 +– November 2014). From 1997 through 2013, Mr. Ellingwood served as Senior Vice President, Planning and Business Development for Cincinnati Children’s Hospital Medical Center. The Board believes that the Company will benefit greatly from +Mr. Ellingwood’s extensive experience in the health care industry. +John A. Kraeutler +Director +since 1997 +Age: 67 +John A. Kraeutler has more than 40 years of experience in the medical diagnostics industry and joined Meridian as Executive Vice President and Chief Operating Officer in January +1992. In July 1992, Mr. Kraeutler was named President of Meridian, in January 2008, Mr. Kraeutler was named Chief Executive Officer of Meridian, and in September 2014 Mr. Kraeutler was named Chairman of the Board. Before joining Meridian, Mr. +Kraeutler served as Vice President, General Manager for a division of Carter-Wallace, Inc. Prior to that, he held key marketing and technical positions with Becton, Dickinson and Company and Organon, Inc. Mr. Kraeutler’s long-time service to +Meridian, all in an executive capacity, has given him significant insight into, and familiarity with, all aspects of Meridian’s business and the strategic vision for its continued success, and makes his service on the Board extremely +beneficial. +John C. McIlwraith +Director +since 2015 +Age: 56 +John C. McIlwraith co-founded Allos Ventures, a venture capital firm, in March 2010 and has served as a Managing Director there since that time. Prior to founding Allos +Ventures, Mr. McIlwraith was a Managing Director of Blue Chip Venture Company, a Cincinnati-based venture capital and private equity firm, which he joined in 1997. He has served on the board of directors of more than 20 health care or +information technology companies, and is currently the lead director of Assurex Health, Inc., an informatics-based precision medicine company providing treatment decision support to health care providers for behavioral health conditions. Prior +to 1997, Mr. McIlwraith served as Senior Vice President of Strategic Planning and General Counsel of publicly-traded Quantum Health Resources, Inc., and was a partner in the Jones Day law firm. The Board believes that Mr. McIlwraith’s years of +experience with an extensive number of companies, including health care companies, render his service on the Board valuable to Meridian. +David C. Phillips +Director +since 2000 +Age: 77 +David C. Phillips serves as Chairman of the Audit Committee and Lead Director. Mr. Phillips spent 32 years with Arthur Andersen LLP. His service with this firm included several +managing partner leadership positions. After retiring from Arthur Andersen in 1994, Mr. Phillips became Chief Executive Officer of Downtown Cincinnati, Inc., which is responsible for economic revitalization of Downtown Cincinnati. Mr. Phillips +retired from DCI in 1999 to devote full time to Cincinnati Works, Inc., an organization dedicated to reducing the number of people living below the poverty level by assisting them to strive towards self-sufficiency through work, and his financial +consulting services. Mr. Phillips has also served as a director of Cintas Corporation, retiring in 2012, and as a director of Summit Mutual Funds, a registered investment company, through 2009. The Board believes that Mr. Phillips’ years of +service as a certified public accountant and trusted advisor to his clients and business owners, which qualify him as an “audit committee financial expert” under SEC guidelines, give him significant experience in preparing, auditing, +analyzing and evaluating financial statements and dealing with complex accounting and business issues, all of which is valuable to Meridian. +3 +Table of Contents +Catherine A. Sazdanoff +Director since 2015 +Age: 59 +Catherine A. Sazdanoff has held the position of CEO and President of Sazdanoff Consulting LLC, specializing in business development, management and strategy consulting since January +2015. In addition, since January 2015, she has served as Strategic Advisor to mProve Health LLC, a mobile health technology company located in Arlington, Virginia. From 2006 to 2015, Ms. Sazdanoff held a number of executive positions with +Takeda Pharmaceutical International, Inc. (“Takeda”), a wholly-owned subsidiary of Japanese-based Takeda Pharmaceutical Corporation, including Vice President, Head of Corporate Projects (2012-2015), VP, Global Business Development +(2011-2013) and VP, Corporate Development (2010-2011). Ms. Sazdanoff’s time at Takeda was preceded by approximately 22 years with Abbott Laboratories, where she held numerous executive positions. The Board believes that Ms. +Sazdanoff’s years of experience in the pharmaceutical and medical diagnostics industries will make her service on the Board valuable to Meridian. +ADVISORY VOTE ON COMPENSATION OF NAMED EXECUTIVE OFFICERS +(“SAY-ON-PAY” PROPOSAL) +(Item 2 on the Proxy Card) +The +Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd Frank”), enacted in July 2010, requires that we provide our shareholders with the opportunity to vote to approve, on a non-binding, advisory basis, the compensation of our +named executives officers as disclosed in this proxy statement in accordance with the compensation disclosure rules of the Securities and Exchange Commission (“SEC”). Dodd Frank also provides that, at least once every six years, +shareholders must be given the opportunity to vote, on a non-binding, advisory basis, for their preference as to how frequently we should seek future advisory votes on the compensation of our named executive officers. We provided this opportunity to +our shareholders at our 2012 annual meeting where over 90% of our shareholders voted to hold the “say-on-pay” advisory vote annually, in accordance with the recommendation of our Board of Directors. As a result, we are again holding a +say-on-pay advisory vote at our 2016 annual meeting, with the next say-on-pay advisory vote to be held at our 2017 annual meeting. +As +described in detail below under the heading “Compensation Discussion and Analysis” beginning on page 14 of this proxy statement, we seek to closely align the interests of our named executive officers with the interests of our shareholders. +We structure our programs to discourage excessive risk-taking through a balanced use of compensation vehicles and metrics with an overall goal of delivering sustained long-term shareholder value while aligning our executives’ interests with +those of our shareholders. Further, our programs require that a substantial portion of each named executive officer’s compensation be contingent on delivering performance results that benefit our shareholders. Our compensation programs are +designed to reward our named executive officers for the achievement of short-term and long-term strategic and operational goals and the achievement of increased total shareholder return. +The vote on this matter is not intended to address any specific element of compensation; rather, the vote relates to the compensation of our named executive officers, as described in this proxy statement +in accordance with the compensation disclosure rules of the SEC. The vote is advisory, which means that the vote is not binding on the Company, our Board of Directors or the Compensation Committee. The Board and the Compensation Committee will +review and consider the voting results when making future decisions regarding our executive compensation program. +Accordingly, we ask our +shareholders to approve, on an advisory basis, the compensation of the named executive officers, as disclosed in this proxy statement pursuant to the compensation disclosure rules of the SEC, including the Compensation Discussion and Analysis, the +Summary Compensation Table and the other related tables and disclosure. +The Board of Directors recommends that shareholders vote +FOR the approval of the compensation of our named executive officers as disclosed in this proxy statement. +4 +Table of Contents +RATIFICATION OF APPOINTMENT OF ACCOUNTANTS +(Item 3 on the Proxy Card) +Although not +required, we are seeking shareholder ratification of the Audit Committee’s selection of Grant Thornton LLP as Meridian’s independent registered public accountants for the 2016 fiscal year. The affirmative vote of a majority of shares +voting at the meeting is required for ratification. If ratification is not obtained, the Audit Committee intends to continue the employment of Grant Thornton at least through fiscal 2016. Representatives of Grant Thornton are expected to be present +at the Annual Shareholders’ Meeting and will be available to make a statement, if they so desire, and to respond to appropriate questions asked by shareholders. +Principal Accounting Firm Fees +Aggregate fees billed to Meridian by Grant Thornton LLP for +fiscal years 2015 and 2014 are listed below: +2015 +2014 +Audit Fees +$ +528,863 +$ +468,300 +Audit-Related Fees +102,988 +37,544 +Tax Fees +205,806 +436,568 +$ +837,657 +$ +942,412 +Audit Fees . Audit fees are the fees billed for professional services rendered by Meridian’s +independent registered public accounting firm for their (i) audit of Meridian’s consolidated annual financial statements for the fiscal years ended September 30, 2015 and 2014, respectively; (ii) reviews of the unaudited +quarterly consolidated financial statements contained in the reports on Form 10-Q filed by Meridian during those years; (iii) completion of audits of Bioline Group statutory accounts in the United Kingdom and Singapore during fiscal 2015 and +2014; and (iv) reporting on Meridian’s internal controls during those years. +Audit-Related Fees . +Audit-related fees are the fees billed for assurance and related services that are reasonably related to the performance of the audit or review of Meridian’s financial statements, including the audit of the Savings and Investment Plan (i.e., +the 401K Plan). Fees in 2015 included fees for acquisition candidate due diligence services. +Tax Fees. Tax fees +are the fees billed for tax return preparation and compliance in Australia, England, Germany and the United States, as well as consultation and research on various matters such as state tax issues, international tax issues and transfer pricing. In +2014, the international tax matters included consultation related to a restructuring of our international legal entity ownership structure. +The Board recommends that shareholders vote FOR the ratification of appointment of Grant Thornton LLP as Meridian’s independent registered public accountants for the 2016 fiscal year. +CORPORATE GOVERNANCE +As an Ohio corporation, Meridian is governed by the corporate laws of Ohio. Since its common shares are publicly traded on the Nasdaq Global Select Market stock exchange, and it files reports with the +Securities and Exchange Commission, it is also subject to Nasdaq rules and federal securities laws. +Board Leadership Structure +Governance of the corporation is placed in the hands of the Directors who, in turn, elect officers to manage the business operations. The +Board oversees the management of Meridian on your behalf. The Board reviews Meridian’s long-term strategic plans and exercises direct decision making authority in all major decisions, such as acquisitions, the declaration of dividends, major +capital expenditures and the establishment of company policies. +The Board operates and evaluates its performance in accordance with Corporate +Governance Guidelines approved by the Board. These Guidelines are available at our website www.meridianbioscience.com . +The Board of +Directors is responsible for evaluating and determining Meridian’s leadership structure, and believes that at this point in time one individual should serve in the capacities of Chairman of the Board (“Chairman”) and Chief Executive +Officer (“CEO”). It is the Board’s belief that such a structure currently provides the Company with the right foundation to pursue its strategic and operational objectives, while maintaining effective oversight and +5 +Table of Contents +objective evaluation of the Company’s performance. Currently, these key executive positions are held by Mr. John A. Kraeutler. As Chairman and CEO, Mr. Kraeutler is +responsible for (i) general Board activities including setting agendas for Board meetings and presiding over all meetings of the Board and shareholders; and (ii) general management, oversight, supervision and control of the business +affairs of Meridian, and ensuring that all orders and resolutions of the Board are put into effect. +Mr. David C. Phillips has been +appointed by the Board to serve as Lead Director. The Board has determined that the Lead Director shall (i) in consultation with the non-management Directors, advise the Chairman as to an appropriate schedule of Board meetings and review and +provide the Chairman with input regarding the agendas for each Board meeting; (ii) preside at all meetings at which the Chairman is not present, including Executive Sessions of the non-management Directors, and apprise the Chairman of the +issues considered thereat; (iii) call meetings of the non-management Directors when necessary and appropriate; and (iv) perform such other duties as the Board may from time to time designate. We believe that this leadership structure is +currently the most appropriate for Meridian, particularly in light of the requirement noted below that all Committees of the Board are comprised solely of independent Directors. +In accordance with Nasdaq rules, our Board of Directors affirmatively determines the independence of each Director and nominee for election as a Director in accordance with the elements of independence +set forth in the Nasdaq listing standards and Exchange Act rules. Meridian’s Director Independence Standards are available at our website www.meridianbioscience.com . Based on these standards, the Board has determined that each +of the following members of the Board are independent: James M. Anderson, Dwight E. Ellingwood, John C. McIlwraith, David C. Phillips and Catherine A. Sazdanoff. +During fiscal 2015, the Board of Directors met on nine occasions and took no actions in writing. The independent Directors plan to meet as necessary during fiscal 2016 without the presence of management +Directors. During fiscal 2015, the independent members of the Board periodically met in executive session without the presence of management Directors following regularly scheduled Board meetings. +Meridian expects all Directors to attend shareholders’ meetings and all current Directors serving at that time were in attendance at the 2015 Annual +Shareholders’ Meeting. +Shareholders may communicate with the full Board or individual Directors on matters concerning Meridian by mail +or through our website, www.meridianbioscience.com , in each case to the attention of the Secretary, the address for whom is set forth on page 29 of this proxy statement. +The Board’s Role in Risk Oversight +The Board of Directors, as a whole and also at the +Committee level, plays a key role in operational risk oversight at Meridian and works with management to understand the risks the Company faces, the steps that management is taking to manage those risks and the level of risk appropriate for the +Company in light of its overall business strategy. The Board approves the high level strategies, financial plans and policies of Meridian, setting the tone and direction for the appropriate levels of risk-taking within the organization. +While overall responsibility for risk oversight rests with the Board, it is the Audit Committee that has been given the primary responsibility of +monitoring and evaluating the adequacy of management’s risk assessment and risk management practices. This role is carried out through its charter-mandated responsibilities related to Meridian’s (i) overall financial risks and +exposures; (ii) financial statement risks and exposures; (iii) financial reporting processes; (iv) compliance with ethics policies, such as the Code of Ethics, Employee Complaint Policy, Security Trading Policies and the Foreign +Corrupt Practices Act Policy; and (v) compliance with governmental and legal regulations, including those contained within the Sarbanes-Oxley Act. The Audit Committee provides regular reports to the full Board and works closely with management +to update the full Board, as necessary, on matters identified through these Committee risk oversight roles. +The Board has adopted a Code of +Ethics applicable to Meridian’s officers, Directors and employees. This Code of Ethics is posted on www.meridianbioscience.com . To the extent permitted by Nasdaq Marketplace Rule 5610, any amendments to or waivers from the Code of Ethics +will be posted on our website within four business days after the date of an amendment. +6 +Table of Contents +Committees of the Board of Directors +The Directors have organized themselves into the Committees described below. Each of these Committees has a charter posted on www.meridianbioscience.com . Meridian does not have an Executive +Committee of its Board of Directors. +The following table identifies membership and the Chairman of each of the current standing committees of +the Board, as well as the number of times each committee met during the fiscal year. In August 2015, John C. McIlwraith and Catherine A. Sazdanoff joined the Board and have not yet been appointed to any committees. It is anticipated that +Mr. McIlwraith and Ms. Sazdanoff will be appointed to one or more of the Board’s committees following their election at the 2016 Annual Meeting of Shareholders. +Director +Audit +Committee +Compensation +Committee +Nominating +and +Corporate +Governance +Committee +James M. Anderson +Member +Chair +Member +Dwight E. Ellingwood +Member +Member +Chair +David C. Phillips +Chair +Member +Member +Meetings in 2015 +9 +2 +3 +The Audit Committee is composed of David C. Phillips (Chairman), Dwight E. Ellingwood and James M. +Anderson. The Committee met nine times during fiscal 2015 and took no actions in writing. Each member is able to read and understand fundamental financial statements. David C. Phillips has been designated as an Audit Committee financial expert as +that term is defined by the Securities and Exchange Commission. +The Committee oversees the accounting and financial reporting +processes of Meridian and the audits of its financial statements by its independent registered public accounting firm. The Committee is solely responsible for the appointment, compensation, retention and oversight of Meridian’s independent +registered public accounting firm. The Audit Committee also evaluates information received from Meridian’s independent registered public accounting firm and management to determine whether the independent registered public accounting firm is +independent of management. The independent registered public accounting firm reports directly to the Audit Committee. +In addition, the Audit +Committee has established procedures for the receipt, retention and treatment of complaints received by Meridian concerning accounting, internal accounting controls or auditing matters and has established procedures for the confidential and +anonymous submission by employees of any concerns they may have regarding questionable accounting or auditing matters. +The Audit Committee, +or its Chairman, approves all audit and non-audit services performed for Meridian by its independent registered public accounting firm before those services are commenced. The Chairman reports to the full Committee at each of its meetings regarding +pre-approvals he made since the prior meeting and the Committee approves what he has done between meetings. For these purposes, the Committee or its Chairman is provided with information as to the nature, extent and purpose of each proposed service, +as well as the approximate timeframe and proposed cost arrangements for that service. +As previously noted, the Audit Committee also bears +primary risk oversight responsibilities, including responsibilities such as (i) overseeing the risks and exposures relating to the Company’s financial statements and financial reporting process; (ii) overseeing the Company’s +policies and procedures for monitoring and mitigating such risks and exposures; and (iii) reviewing management’s monitoring of the Company’s compliance with established ethics and legal policies and procedures. +The Committee has submitted the following report for inclusion in this proxy statement. +REPORT OF THE AUDIT COMMITTEE +On January 21, 2015, the Audit Committee met with representatives of Grant Thornton and Meridian’s internal accountants, at which time the Grant Thornton representatives presented to the +Committee the results of their work, including their review of Meridian’s first quarter consolidated financial statements, and updated the Committee on Public +7 +Table of Contents +Company Accounting Oversight Board (“PCAOB”) developments and implications to their planned audit approach in 2015. In addition, the Committee discussed the timing and scope of the +planned Sarbanes-Oxley internal audit work for fiscal 2015, along with developments related to the new framework issued by The Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). +On April 21, 2015, the Committee met with representatives of Grant Thornton and Meridian’s internal accountants, at which time the Grant +Thornton representatives presented to the Committee the results of their work for their review of Meridian’s second quarter consolidated financial statements and the timing and scope of their engagement for the audit of Meridian’s fiscal +2015 consolidated financial statements. +On July 21, 2015, the Committee met with representatives of Grant Thornton and Meridian’s +internal accountants and reviewed the status of the 2015 audit, including internal control matters, the Meridian Bioscience, Inc. Savings and Investment Plan audit, and new accounting pronouncements. Grant Thornton also presented to the Committee +the results of their work, including their review of Meridian’s third quarter consolidated financial statements. Additionally, the Committee discussed the independent cyber security review conducted and the resulting recommendations, including +securing cyber security insurance coverage. +At its meeting on August 25, 2015, the Committee reviewed management’s outlook for 2015 +and the Company compliance update. The Committee consulted with an independent cyber security consultant, and discussed the results of the testing, which concluded that the Company had proper and adequate controls in place. The Committee also +reviewed the requirements of its Charter previously adopted, performed its annual self-assessment and discussed the Company’s policies, including the Company’s Employee Handbook and the specific policies set forth therein. +At its meeting on November 4, 2015, the Committee reviewed and discussed with management, Grant Thornton and Meridian’s accounting officers the +results of the audit for fiscal 2015, including the financial results. The Committee discussed with Grant Thornton the matters required to be discussed by Auditing Standards No. 16, as amended (PCAOB Interim Auditing Standard AU +Section 380, Communication with Audit Committees ). The Grant Thornton representatives reviewed with the Committee written disclosures required by applicable requirements of the PCAOB regarding the independent accountants’ +communications with the Audit Committee concerning independence, discussed with the Committee the independent accountants’ independence, and presented a letter regarding that matter to the Committee. The Committee discussed with Grant Thornton +its independence. In concluding that the auditors are independent, we determined, among other things, that the non-audit services provided by the auditors were compatible with their independence. +Based on the above mentioned review and review of the audited consolidated financial statements, on November 20, 2015, the Committee recommended to +the Board of Directors that the audited consolidated financial statements of Meridian be included in its Annual Report on Form 10-K for the year ended September 30, 2015 for filing with the Securities and Exchange Commission. +During its meetings throughout the year, the Committee reviewed and assessed the Company’s financial, financial control, financial reporting, and +certain legal and regulatory risk exposures, including reviewing procedures related to the receipt, retention and treatment of any complaints concerning accounting, internal accounting controls or auditing matters. Also during its meetings +throughout the year, the Chairman of the Audit Committee reported to the full Committee the independent accountants’ fees that had been pre-approved and the Committee approved such fees. Certain fees were pre-approved by the full Committee. The +Committee also reviewed the requirements of and Meridian’s ongoing compliance with Section 404 of the Sarbanes-Oxley Act. +Respectfully submitted, +Audit Committee +David C. Phillips (Chairman) +James M. Anderson +Dwight E. Ellingwood +The Compensation Committee is composed of James M. Anderson (Chairman effective August 25, 2015), Dwight E. Ellingwood, +and David C. Phillips and is responsible for establishing compensation for Executive Officers and administering the Company’s compensation plans. This includes establishing salary levels and bonus plans, making bonus and +stock- +8 +Table of Contents +based awards, and otherwise dealing in all matters concerning compensation of the Executive Officers. During fiscal 2015, the Compensation Committee met two times, and took no actions in writing. +In general, the Compensation Committee annually reviews the Company’s compensation programs and its philosophy in setting performance +targets in November of each year. At that time, the Company provides the Compensation Committee with information on total compensation received for all Executive Officers, including the sources of such compensation, for the immediately preceding +fiscal year and recommendations for the current fiscal year. In discharging the responsibilities of the Board of Directors relating to compensation of the Company’s CEO and other Executive Officers, the purposes of the Compensation Committee +are, among others, (i) to review and approve the compensation of the Company’s CEO and other Executive Officers; and (ii) to oversee the compensation policies and programs of the Company, including stock and benefit plans. The +Compensation Committee’s specific functions include adopting, administering and approving the Company’s incentive compensation and stock plans and awards, including amendments to the plans or awards and performing such duties and +responsibilities under the terms of any executive compensation plan, incentive-compensation plan or equity-based plan. The Compensation Committee has the authority to delegate any of its responsibilities to subcommittees as the Compensation +Committee may deem appropriate in its sole discretion. The Compensation Committee has the authority to engage consultants and advisors. The Compensation Committee did not engage a consultant or advisor this year. The Compensation Committee has an +appropriate level of contact among its members and the Company’s Executive Officers in connection with the analysis of this data. On an annual basis, the Committee reviews its Charter, and is currently planning to perform a self-assessment in +conjunction with the anticipated new Committee composition following the upcoming Annual Meeting of Shareholders. +The Compensation Committee +determines the amount and mix of compensation components for the Chairman and CEO, Mr. Kraeutler. As Chairman and CEO, Mr. Kraeutler provides input and recommendations to the Compensation Committee with respect to the compensation to be +paid to the non-employee members of the Board, as well as with respect to compensation to be paid to the other Named Executive Officers. +To +achieve compensation objectives, the Committee believes it is important to provide competitive levels of compensation to retain the most qualified employees, to recognize individuals who exceed expectations and to closely link executive compensation +with corporate performance. The Committee believes Meridian’s long-term objectives can be achieved through cash incentive compensation plans and equity incentive compensation plans. +The Compensation Committee’s processes and procedures for the consideration and determination of Executive and Director compensation are discussed in the section entitled “Compensation +Discussion and Analysis” in this proxy statement. +Compensation Committee Interlocks and Insider Participation +None of the members of the Compensation Committee has ever been an officer or employee of the Company. None of the members of the Compensation Committee +is or was a participant in any related person transaction in fiscal 2015 (see the section entitled “Transactions With Related Persons” in this proxy statement for a description of our policy on related person transactions). Lastly, none of +the members of the Compensation Committee are an Executive Officer of another entity at which one of our Executive Officers serves on the Board of Directors. No Named Executive Officer of Meridian serves as a Director or as a member of a committee +of any company of which any of the Company’s non-employee Directors are Executive Officers. +The Nominating and Corporate +Governance Committee consists of Dwight E. Ellingwood (Chairman effective August 25, 2015), James M. Anderson and David C. Phillips. The Committee met three times during fiscal 2015 and took no actions in writing. On November 4, +2015, the Committee considered and nominated the current Directors for re-election. The Committee identifies qualified nominees for the Board, determines who will be nominated by the Company for election to the Board and recommends to the full Board +any changes in the size of the Board. The Committee also reviewed its Charter and discussed a future self-assessment in conjunction with the anticipated new Committee composition following the upcoming Annual Meeting of Shareholders. +In nominating Directors, the Committee takes into account, among other factors which it may deem appropriate, the judgment, skill, +diversity, and business experience of the potential nominee and the +9 +Table of Contents +needs of the Board as its function relates to the business of the Company. The Committee considers candidates for nomination from a variety of sources including recommendations of shareholders. +Shareholders desiring to submit recommendations for nominations by the Committee should direct them to the Chairman of the Nominating and Corporate Governance Committee in care of the Company at its address shown on the cover page of this proxy +statement. +The Nominating and Corporate Governance Committee will assess the qualifications of all candidates for the Board on an equal +basis. In identifying and considering candidates for nomination to the Board, the Committee considers, among other factors, quality of experience, the needs of the Company and the range of talent and experience currently represented on the Board. +The Committee evaluates such factors, among others, and does not assign any particular weighting or priority to any of these factors, nor does the Committee have a formal policy with respect to diversity. However, the Committee, working with the +Board, considers the diversity of all of the Company’s stakeholders – including shareholders, employees and customers – when engaging in corporate governance discussions. +During several Board meetings in fiscal 2015, the Board discussed the benefits of adding new members to the Board. Pursuant to this, the Nominating and Corporate Governance Committee considered potential +candidates and chose to meet with each of Mr. McIlwraith and Ms. Sazdanoff. Based upon the review of their qualifications and the favorable results of their meetings, the Board proceeded to nominate each of them as a candidate to the +Board. Each of Mr. McIlwraith and Ms. Sazdanoff was appointed to the Board in August 2015. +10 +Table of Contents +DIRECTORS AND EXECUTIVE OFFICERS +This table lists the Executive Officers and Directors of Meridian and shows the number of shares beneficially owned, as determined under SEC rules, on +November 30, 2015. Beneficial ownership includes any shares as to which the individual has sole or shared voting or investment power and also any shares that the individual has the right to acquire within 60 days. +Common Stock +Beneficially +Owned +Name +Position +Amount 1 +Percentage +John A. Kraeutler +Chairman of the Board, +Chief Executive Officer, President and Director +328,143 +* +Richard L. Eberly 2 +Executive Vice President, +President Meridian Life Science +17,153 +* +Lawrence J. Baldini 3 +Executive Vice President, +Operations and Information Systems +45,376 +* +Melissa A. Lueke 4 +Executive Vice President, +Chief Financial Officer and Secretary +110,989 +* +Vecheslav A. Elagin 5 +Executive Vice President, +Research & Development +32,283 +* +Susan D. Rolih 6 +Executive Vice President, +Regulatory & Quality Systems +114,694 +* +Michael C. Shaughnessy 7 +Executive Vice President, +President Meridian Diagnostics +2,500 +* +Marco G. Calzavara 8 +President and Managing Director, +Meridian Bioscience Europe +8,563 +* +James M. Anderson 9, 10, 11 +Director +66,500 +* +Dwight E. Ellingwood 9, 10, 11 +Director +19,980 +* +John C. McIlwraith 12 +Director +10,500 +* +David C. Phillips 9, 10, 11 +Director +101,126 +* +Catherine A. Sazdanoff 12 +Director +8,500 +* +All Executive Officers and Directors as a Group +866,307 +2.0 +% +1 +Includes options +exercisable within 60 days for Mr. Kraeutler of 115,750 shares, Mr. Eberly of 11,500 shares, Mr. Baldini of 500 shares, Dr. Elagin of 15,750 shares, Ms. Rolih of 19,450 shares, Mr. Shaughnessy of 2,500 shares, +Mr. Anderson of 55,500 shares, Mr. Ellingwood of 17,000 shares, Mr. McIlwraith of 8,500 shares, Mr. Phillips of 75,714 shares, and Ms. Sazdanoff of 8,500 shares. +2 +Richard L. Eberly was appointed Vice President of Sales and Marketing in January 1997, Executive Vice President in May 2000, Executive Vice President, +General Manager of Meridian Life Science in February 2003, Executive Vice President and President Meridian Life Science in October 2005 and Chief Commercial Officer in February 2011. In October 2012, he was re-appointed President of Meridian Life +Science, and no longer serves as Chief +11 +Table of Contents +Commercial Officer. He has nearly 30 years of experience in the medical diagnostics industry and joined Meridian in March 1995. Prior to his appointment to Vice President of Sales and Marketing, +Mr. Eberly served as the Director of Sales for Meridian. Before joining Meridian, he held key sales and marketing positions at Abbott Diagnostics, Division of Abbott Laboratories. Age: 54 +3 +Lawrence J. Baldini was appointed Vice President of Operations in April 2001 and Executive Vice President, Operations and Information Systems in +October 2005. Before joining Meridian, Mr. Baldini held various operations management positions with Instrumentation Laboratories and Fisher Scientific. Age: 56 +4 +Melissa A. Lueke was appointed Vice President, Chief Financial Officer and Secretary in January 2001 and Executive Vice President, Chief Financial +Officer and Secretary in November 2009. Prior to her appointment, Ms. Lueke served as Meridian’s Controller since March 2000 and Acting Secretary from July 20, 2000 to January 23, 2001. Before joining Meridian, Ms. Lueke was +employed by Arthur Andersen LLP from June 1985 to January 1999, most recently as a Senior Audit Manager. Age: 52 +5 +Vecheslav A. Elagin joined Meridian in August 2009 as Vice President of Research and Development, was appointed Senior Vice President of Research and +Development in November 2011, and promoted to Executive Vice President of Research and Development in June 2012. Before joining Meridian, Dr. Elagin held various executive research and development positions, most recently with Madison Life +Science (August 2008 – August 2009), EraGen Biosciences (May 2006 – August 2008) and Third Wave Technologies (June 2003 – May 2006). Age: 48 +6 +Susan D. Rolih was appointed Vice President of Regulatory Affairs and Quality Assurance in May 2001, Senior Vice President of Regulatory Affairs and +Quality Assurance in April 2008, and Executive Vice President of Regulatory and Quality Systems in April 2013. Before joining Meridian, Ms. Rolih held various regulatory and quality positions with Immucor, Inc. Age: 66 +7 +Michael C. Shaughnessy joined Meridian in February 2014 as Executive Vice President, President of Meridian Diagnostics. Before joining Meridian, +Mr. Shaughnessy held various executive sales, marketing and business development positions with CORPAK MedSystems (June 1993 – January 2014), most recently serving as Vice President, Sales & Business Development. Age: 60 +8 +Marco G. Calzavara, founder of the Bioline Group, which Meridian acquired July 20, 2010, was appointed President and Managing Director of Meridian +Bioscience Europe in April 2011. Prior to this appointment, Mr. Calzavara had served as President of the Bioline Group of Companies since 1992. Age: 61 +9 +Audit Committee Member. +10 +Compensation +Committee Member. +11 +Nominating and +Corporate Governance Committee Member. +12 +Appointed a +director in August 2015. +* +Less than one percent. +12 +Table of Contents +SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS +The following table lists the persons known by the Company to be the beneficial owners of more than five percent of the Company’s Common Stock as of +November 30, 2015, unless otherwise noted. Beneficial ownership includes any shares as to which the individual has sole or shared voting or investment power. +Name and address of beneficial owner +Amount and nature of +beneficial ownership +Percent of +class 1 +Brown Capital Management, LLC +1201 N. Calvert Street +Baltimore, MD 21202 +4,459,546 +10.70 +BlackRock, Inc. +55 East 52 nd Street +New York, NY 10022 +3,650,098 +8.80 +Neuberger Berman Group LLC +605 Third Avenue +New York, NY 10158 +2,989,983 +7.18 +The Vanguard Group, Inc. +100 Vanguard Blvd. +Malvern, PA 19355 +2,704,956 +6.49 +T. Rowe Price Associates, Inc. 2 +100 E. Pratt Street +Baltimore, MD 21202 +2,672,005 +6.40 +1 +For the beneficial +owners listed in the table, the percentages listed reflect disclosures in the Schedule 13Gs most recently filed by each beneficial owner with the SEC as of the date of this proxy statement. +2 +Per correspondence +from T. Rowe Price Associates, Inc., (“Price Associates”), these securities are owned by various individual and institutional investors which Price Associates serves as an investment adviser with power to direct investments and/or sole +power to vote the securities. For the purposes of the reporting requirements of the Securities Exchange Act of 1934, Price Associates is deemed to be a beneficial owner of such securities; however, Price Associates expressly disclaims that it is, in +fact, the beneficial owner of such securities. +SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING +COMPLIANCE +Section 16 of the Securities Exchange Act of 1934 requires Meridian’s Executive Officers, Directors and persons who +own more than ten percent of a registered class of Meridian’s equity securities to file reports of ownership and changes in ownership with the SEC. Based on a review of the copies of such forms received by it, Meridian believes that during the +last fiscal year, all of its Executive Officers, Directors and ten percent stockholders complied with the Section 16 reporting requirements. In making these statements, Meridian has relied upon examination of the copies of Forms 3, 4 and 5, and +amendments thereto, and the written representation of its Directors and Executive Officers. +TRANSACTIONS WITH +RELATED PERSONS +During fiscal 2015, the Company leased certain office space from an entity controlled by Marco G. Calzavara, President and +Managing Director, Meridian Bioscience Europe. Payments made under such arrangements during fiscal 2015 totaled approximately $185,000. +Nasdaq rules require the Company to conduct an appropriate review of related party transactions required to be disclosed by the Company pursuant to SEC +Regulation S-K Item 404 for potential conflict +13 +Table of Contents +of interest situations on an ongoing basis and that all such transactions must be approved by the Audit Committee or another Committee comprised of independent Directors. As a result, the Audit +Committee annually reviews all such related party transactions and approves each related party transaction if it determines that it is in the best interests of the Company. Additionally, the Audit Committee’s Charter provides it the authority +to review, approve and monitor transactions involving the Company and “related persons” (Directors and Executive Officers or their immediate family members, or shareholders owning five percent or greater of the Company’s outstanding +stock). This also covers any related person transaction that meets the minimum threshold for disclosure in the proxy statement under the relevant SEC rules (generally, transactions involving amounts exceeding $120,000 in which a related person has a +direct or indirect material interest). In considering the transaction, the Audit Committee may consider all relevant factors, including, as applicable: (i) the Company’s business rationale for entering into the transaction; (ii) the +alternatives to entering into a related person transaction; (iii) whether the transaction is on terms comparable to those available to third parties, or in the case of employment relationships, to employees generally; (iv) the potential +for the transaction to lead to an actual or apparent conflict of interest and any safeguards imposed to prevent such actual or apparent conflicts; and (v) the overall fairness of the transaction to the Company. This policy is included in the +Company’s Employee Handbook. The approval of such related person transactions are evidenced by internal Company resolutions or memoranda. +COMPENSATION DISCUSSION AND ANALYSIS +Throughout this proxy statement, the individuals who served as the Company’s CEO and Chief Financial Officer during fiscal 2015, as well as the other individuals listed in the Summary Compensation +Table below, are referred to as the “Named Executive Officers” or “NEOs.” +Executive Summary +Most of our compensation decisions are made in the first few months of our fiscal year, after review of our performance and the performance of our CEO and +the other executive officers. We believe the compensation of all of our named executive officers for 2015 aligned well with both our performance in 2015 and the objectives of our executive compensation policies: +• +Our net revenue for 2015 was $194.8 million, an increase of 3%, compared to 2014 net revenue. Net earnings for 2015 were $35.5 million, an increase of +2% compared to 2014 net earnings. Both revenues and net earnings met Company-provided guidance despite strong negative currency impact. Additionally, operating income for 2015 increased 7%. +• +Even though our financial results met Company-provided guidance, these results did not meet minimum threshold targets in our Officer’s Performance +Compensation Plan or our performance-based long-term equity incentive awards. As a result, no NEOs received cash bonus payments under the Officer’s Performance Compensation Plan. Furthermore, except for the performance-based restricted stock +units granted to our CEO, Mr. Kraeutler, in his Second Amended and Restated Employment Agreement (discussed on pages 20 and 21 of this proxy statement), no performance-based restricted stock unit awards vested for any NEOs. +• +Based on our financial results and the individual evaluations of the NEOs by the Compensation Committee, with respect to Mr. Kraeutler, and the +Compensation Committee and Mr. Kraeutler, with respect to the other NEOs, our NEOs received merit increases in their base salaries. These increases ranged from 0% to 4% of 2014 base salary. Base salaries across all Meridian employees increased +approximately 3%. +• +From 2014 to 2015, total cash compensation for Mr. Kraeutler increased 1% and for the other named executive officers 2% to 4%. +Compensation Philosophy and Objectives +Our policies regarding executive compensation programs are intended to balance motivating, rewarding and retaining executives with a competitive compensation package, and maximizing long-term shareholder +value by linking compensation earned to both individual and Company performance. Compensation typically includes base salary, eligibility for annual cash bonuses and stock-based awards contingent on Company performance and/or future service, +retirement plan contributions and other Company-sponsored benefits. A significant portion of each Executive Officer’s cash bonus and stock-based awards are dependent upon achieving business and financial goals and realizing other performance +objectives. Examples of Company performance metrics for which we measure achievement are net revenue growth, net earnings growth and profit +14 +Table of Contents +margins (gross profit, operating income and net earnings). Annual performance targets for these metrics are set after consideration of industry averages and historical results. Our compensation +programs are intended to reward individual contributions (for example, bringing a new product to market) and Company-wide achievement of performance metric targets (for example, overall revenue and net earnings growth). +The Compensation Committee of the Board of Directors is responsible for ongoing oversight of compliance with this compensation philosophy. The +Compensation Committee ensures that the total compensation paid to the NEOs is fair, reasonable and competitive. +At our 2015 annual meeting, +Meridian once again held an advisory vote on the compensation of its NEOs, commonly referred to as a say-on-pay vote. Our shareholders approved the compensation of our NEOs, with approximately 74% of votes cast in favor of our 2015 say-on-pay +resolution. Based on the results of the 2015 say-on-pay vote, the Compensation Committee concluded that the compensation paid to the NEOs and Meridian’s overall pay practices received strong shareholder support and do not require substantial +revision to address shareholder concerns. +Establishing Compensation Levels +Compensation levels for the NEOs are driven by market pay levels, the NEO’s leadership performance and overall Company performance. The Compensation Committee relies upon a combination of judgment +(which is necessarily subjective) and guidelines (discussed herein), as well as market data, in determining the amount and mix of compensation components for the Chairman and CEO. The compensation levels for the other NEOs are recommended by the +CEO. The Compensation Committee has discretion to follow or modify such recommended levels of compensation. The Compensation Committee considers the input of our Chairman and CEO as a crucial component of its compensation processes and decisions +relating to NEO compensation. The Compensation Committee is not obligated to follow his recommendations. The Company does not engage in strict numerical benchmarking in determining the percentage modifications for the NEOs. +Market Pay Levels +Market pay levels for +the NEOs are determined annually in November for the upcoming calendar year. From time to time, at the request of the Compensation Committee, an outside financial advisor is used to gather and summarize for the Company disclosures of executive +compensation paid by other publicly traded companies in the diagnostic and life science industries, as well as those outside such industries in the Greater Cincinnati area. This information concerns base salary, bonus awards and long-term incentive +awards such as stock options and/or restricted stock for these peer companies, as well as their net revenue, net earnings and market capitalization levels in order to take company size into consideration. The Compensation Committee considers this +competitive market compensation paid by such companies, but does not attempt to maintain a certain target percentile within a peer group or otherwise rely on that data to determine executive compensation. This means that the Compensation Committee +considers this information generally and as a reference point in determining the amounts and elements of our compensation program. For example, the Compensation Committee periodically reviews compensation information of our industry peers in order +to understand compensation trends. In other words, although it does not utilize such information for benchmarking purposes, the Compensation Committee considers such information as part of its decision-making process with respect to the +Company’s executive compensation programs. +Company Performance +We believe that certain Company performance metrics drive shareholder value through stock price appreciation and +dividends. We take this belief into account in setting performance metric targets that are considered in establishing the performance-based component of our compensation programs. Performance metric targets that are taken into consideration in our +compensation programs include net revenue growth, earnings growth and profit margins. These targets are set after consideration of industry averages and historical results. Also taken into consideration in evaluating Company performance in our +compensation programs is the market penetration of our illumi gene ® molecular platform and the build-out of the related product +menu. +Our cash bonus and a portion of our stock-based award programs operate under the fundamental principle that minimum +levels of net earnings be achieved prior to any compensation being earned under these programs. Net earnings targets are determined based on what the Company believes to be meaningful growth rates relative to its industry peers and the +Company’s performance objectives. Stock-based awards granted under performance +15 +Table of Contents +programs are generally forfeited if the Company does not meet its minimum earnings targets as specified in each grant. +Recovery of Prior Awards +Except as provided by applicable laws and regulations, we do not +have a policy with respect to adjustment or recovery of awards or payments if relevant Company performance measures upon which previous awards were based are restated or otherwise adjusted in a manner that would reduce the size of such award or +payment. Under those circumstances, we expect that the Compensation Committee and the Board would evaluate whether compensation adjustments were appropriate based upon the facts and circumstances surrounding the applicable restatement or adjustment. +Tally Sheets +In setting the +NEOs’ compensation, the Compensation Committee reviews all components of such compensation through the use of tally sheets. These tally sheets provide the amount of total compensation paid or earned by each NEO based on his or her base salary, +cash bonus, stock-based awards, retirement contributions and perquisites. The tally sheets reviewed provide all of the information that is reflected in the Summary Compensation Table. The review by the Compensation Committee analyzes how changes in +any element of compensation would impact other elements, particularly severance or change in control benefits, if applicable to the executive. The analysis of the tally sheets conducted in November 2015 resulted in increases of 3% to 11% in base +salary for executives, including NEOs, and an increase in equity awards for all executives, including NEOs, with the exception of the Chairman and CEO. Such analysis has become an important component in the Compensation Committee’s review of +executive compensation as the tally sheet allows the Compensation Committee to consider an executive’s overall compensation rather than only one or two specific components of an executive’s compensation. This allows the Compensation +Committee to make compensation decisions and evaluate management recommendations based on a complete analysis of an executive’s total compensation. +Components of Executive Compensation +Meridian’s executive compensation and benefits +packages consist of: base salary, cash bonuses, long-term equity incentive awards, Company-sponsored benefit and retirement plans, and change in control severance benefits. Each of these components has a certain risk profile. +Element +Form of Compensation +Purpose +Risk Profile +Base Salaries +Cash +Provides competitive, fixed compensation to attract and retain exceptional executive talent +Low to moderate +Annual Cash Incentives +Cash +Provides a direct financial incentive to achieve corporate and individual operating goals +Moderate to high +Long-Term Equity Incentives +Non-qualified stock options and/or restricted stock units +Encourages Executive Officers to build and maintain a long-term equity ownership position in Meridian so that their interests are aligned with our shareholders +High +16 +Table of Contents +Health, Retirement and Other Benefits +Eligibility to participate in benefit plans generally available to our employees, including Retirement Plan contributions, premiums paid on long-term disability and life insurance +policies, and certain perquisites +Benefit plans are part of a broad-based employee benefits program; the perquisites provide competitive benefits to our Executive Officers +Low +Change in Control Severance Benefits +Cash and continuation of certain benefits +Encourages Executive Officers to maximize value for shareholders in the event that the Company becomes subject to a change in control transaction +Moderate to high +The Compensation Committee has reviewed the risk profile of the components of the Company’s executive compensation +program, including the performance objectives and target levels used in connection with incentive awards, and has considered the risks an NEO might be incentivized to take with respect to such components. When establishing the mix among these +components, the Compensation Committee is careful not to encourage excessive risk taking. Specifically, the performance objectives contained in the Company’s executive compensation programs have been balanced between annual and long-term +incentive compensation to ensure that both components are aligned and consistent with our long-term business plan and that our overall mix of equity-based awards has been allocated to promote an appropriate combination of incentive and retention +objectives. +The Compensation Committee believes that the Company’s executive compensation program does not incentivize the NEOs to +engage in business activities or other behavior that would threaten the value of the Company or the investments of its shareholders. +The +Compensation Committee continues to monitor and evaluate on an on-going basis the mix of compensation, especially equity compensation, awarded to the NEOs, and the extent to which such compensation aligns the interests of the NEOs with those of the +Company’s shareholders. In connection with this practice, the Compensation Committee has, from time to time, reconsidered the structure of the Company’s executive compensation program and the relative weighting of various compensation +elements. +Interplay of Compensation Elements +We believe that each element of our compensation program plays a substantial role in maximizing long-term value for our shareholders and employees because of the significant emphasis on +pay-for-performance principles. In fiscal 2015, we did not reach our minimum net earnings target required for vesting in performance-based equity awards, and therefore, our NEOs did not earn such awards granted in November 2014. +In addition, our NEOs did not earn the third and final tranche of the additional performance-based equity awards granted November 9, 2011. These +additional performance-based equity awards were granted to certain executive management employees, including the NEOs, to reward them for meeting pre-defined Company net revenue targets. These awards, which included both restricted stock units and +options, could only be earned if specified cumulative net revenue thresholds were met through fiscal 2015, with the three measurement dates for ratably earning one-third of the grant being (i) the 21-month period ended June 30, 2013; +(ii) the 33-month period ended June 30, 2014; and (iii) the 45-month period ended June 30, 2015. As a result of the cumulative thresholds not having been met, the restricted stock units and options granted were cancelled. +We strive to achieve an appropriate mix between equity incentive awards and cash payments in order to meet our objectives. We use the +Officer’s Performance Compensation Plan as another tool to assess an executive’s total pay opportunities and whether we have provided the appropriate incentives to accomplish our compensation objectives. Our mix +17 +Table of Contents +of compensation elements is designed to reward recent results and motivate long-term performance through a combination of cash and stock-based awards. We also seek to balance compensation +elements that are based on financial, operational and strategic metrics with others that are based on the performance of Meridian shares via application of the personal multiplier component of cash bonus for the Chairman and CEO. We believe the most +important indicator of whether our compensation objectives are being met is our ability to motivate our NEOs to deliver superior performance and retain them to continue their careers with Meridian on a cost-effective basis. +Base Salary +The Company pays salaries +that are designed to attract, motivate and retain experienced executives who will drive superior Company performance and maintain long-term shareholder value. The Compensation Committee considers recommendations from the Chairman and CEO and +approves annual base salaries that are commensurate with each NEO’s responsibilities and performance, as well as Company performance in the prior fiscal year, which are competitive with similar positions locally and in the industry. Salaries +are set on a calendar year basis and therefore salaries paid in the first three months of each fiscal year beginning on the first day of October are set in the prior fiscal year. +For 2015, the Chairman and CEO, Mr. Kraeutler, provided a recommendation to the Compensation Committee of salary increases ranging from 3% to 11% for the NEOs other than himself. The Compensation +Committee duly considered and followed these recommendations. +Cash Bonuses +The Compensation Committee believes that employees should be rewarded based on Company results and individual performance. The Compensation Committee awards cash bonuses pursuant to the Officer’s +Performance Compensation Plan (the “Plan”) contingent upon Company performance. Cash bonuses, if earned, are paid in the first quarter of each fiscal year, for the prior year’s performance. Cash bonuses are subject to the +Company’s attainment of a specific net earnings target, after inclusion of the compensation expense related to such bonuses. Should the Company fail to reach such net earnings target, no cash bonuses are paid pursuant to the Plan. +Cash bonuses are also subject to the application of a personal achievement multiplier as recommended by management, except that no such recommendation is +made by management for the Chairman and CEO, Mr. Kraeutler. In evaluating the personal achievement multipliers, the Compensation Committee takes into consideration the net revenue and net earnings levels, net revenue and net earnings growth +rates and achievement against plan, profit margins and improvements therein, and individual achievements and leadership of the NEOs. Instead of establishing specific quantifiable targets for each of these factors, the Compensation Committee +exercises its discretion in using the factors to determine each NEO’s personal achievement multiplier. Specifically, the Compensation Committee does not establish measurable objective targets in connection with its deliberation of such factors. +The adoption and application of such factors are intended to be discretionary and subjective so that the Compensation Committee can use its business judgment to provide an appropriate incentive and award for performance that sustains and enhances +long-term shareholder value. The Compensation Committee believes that such discretionary and subjective components allow it to respond appropriately as business and strategic environments change and are appropriate for the size of the Company. The +personal achievement multiplier choices range from 0 (zero) to 2.0. For example, a personal achievement multiplier of 1.25 would result in a bonus payout percentage of 37.5% when applied to a 30% base salary component. A personal achievement +multiplier of 0 (zero) would result in no bonus payout and is intended for circumstances where the NEO’s performance is far less than satisfactory. +Company Performance Component and 2015 Results +The 2015 Officer’s Performance +Compensation Plan, which was similar in form to the plans utilized over the last several fiscal years, provided for the granting of cash bonuses as a percentage of base salary if 2015 net earnings reached at least $36,300,000. For 2015, actual net +earnings were below the minimum threshold, and therefore, there were no cash bonuses awarded to the NEOs for fiscal 2015 performance pursuant to the Plan. +2016 +At its November 4, 2015 meeting, the Compensation Committee approved the +Officer’s Performance Compensation Plan for fiscal 2016. The 2016 Plan will award cash bonuses if 2016 net earnings reach $36,700,000, which the Compensation Committee believes is a meaningful increase from 2015 net earnings of $35,540,000. +Consistent with 2015, the 2016 Plan also provides for increasing bonus awards +18 +Table of Contents +tied to increasing net earnings beyond the initial minimum level. The 2016 Plan includes six net earnings thresholds ranging from a low of $36,700,000 to a high of $38,900,000. These six net +earnings thresholds represent growth over 2015 net earnings ranging from a low of approximately 3% to a high of approximately 9%. The corresponding potential bonus payouts as a percent of base salary, before application of the personal multiplier, +for the six net earnings thresholds range from a low of 10% to a high of 60%. Depending on the level of net earnings achieved and the application of the personal multiplier, cash bonuses for the NEOs could range from 0% to 120% of base salary. +Management and the Compensation Committee have intended that the earnings thresholds should be set at meaningful rates so that management +must be diligent, focused and effective in order to achieve these goals. In other words, the Company and management believed at the time of the establishment of these thresholds that they would be challenging to achieve and would require substantial +efforts from management. To this end, the Compensation Committee tends to set the thresholds consistent with the earnings guidance range requiring that the low end of guidance is achieved before bonuses are paid. +Long-Term Incentive Awards +The +Compensation Committee believes that equity-based compensation encourages employees to commit to the long-term goals of the Company. This ensures that the Company’s NEOs have a stake in the long-term creation of shareholder value. A significant +portion of the awards is performance-based, meaning the NEOs’ ability to vest in that portion of awards is contingent upon the Company achieving a minimum level of net earnings. +For fiscal 2016, at its meeting on November 4, 2015, the Compensation Committee approved two types of restricted stock unit awards. The first type of restricted stock unit award is performance-based, +where the NEOs’ ability to vest in such awards is contingent upon the Company reaching a minimum level of net earnings of $38,900,000 for fiscal 2016. This award would vest 25% per year over four years, if earned. The second type of +restricted stock award is time-based and fully vests after four years. The Compensation Committee believes that this latter award is appropriate to encourage retention of top management talent. +Although Meridian does not have a written policy regarding the timing or practices related to granting equity awards, neither Meridian nor the +Compensation Committee engages in spring-loading, back-dating or bullet-dodging practices. Equity awards are generally granted at a regularly scheduled meeting of the Compensation Committee in the first quarter of the fiscal year. Stock options +are granted at the closing market price on the date of grant, pursuant to the 2012 Stock Incentive Plan. Prior to the exercise of an option, the holder has no rights as a stockholder with respect to the shares subject to such option, including no +rights to vote or to receive dividends. Prior to vesting of restricted stock units noted above, the holder will receive dividend equivalent payments. Restricted stock units do not have voting rights. +Equity Ownership Guidelines +Consistent +with its compensation philosophy and the principle of aligning the interests of management and directors of the Company with the interests of its stockholders, the Board of Directors has implemented stock ownership guidelines for “Specified +Officers” (defined in the guidelines as those officers required to file beneficial ownership reports with the SEC) and non-employee directors. Under the guidelines, the Company’s Chief Executive Officer is required to own an amount of our +common stock (including vested and non-vested restricted stock units) which is equal to or exceeds three times such Chief Executive Officer’s annual base salary, and Specified Officers other than the Chief Executive Officer are required to own +an amount of our common stock (including vested and non-vested restricted stock units) which is equal to or exceeds such officer’s annual base salary. Also under the guidelines, each of the Company’s non-employee directors is required to +own an amount of Company common stock which is equal to or exceeds three times such non-employee director’s annual retainer. Generally, persons subject to the guidelines are required to achieve the applicable guideline not later than three +years from the appointment to their position. Notwithstanding this phase-in period, most persons subject to these guidelines have met their ownership target, either as a result of their direct holdings or shares held indirectly by an entity +affiliated with such person, in accordance with the guidelines. +Minimum Vesting Periods +Although the plan document for our 2012 Stock Incentive Plan does not include minimum vesting periods for options or stock appreciation rights, our +Compensation Committee includes minimum vesting provisions in the award agreements for stock options pursuant to authority granted to it under the 2012 Stock Incentive Plan. Generally the option award +19 +Table of Contents +agreements provide for a minimum vesting period of three years. +Option/SAR Buyouts +Although the plan document for our 2012 Stock Incentive Plan does not include a provision expressly prohibiting cash buyouts of options or +stock appreciation rights, the Compensation Committee believes cash buyouts of “underwater options” is a governance practice that investors view as unfavorable. As a result, the Compensation Committee is generally opposed to cash buyouts +of options or stock appreciation rights. +Pledging and Hedging +Our Insider Trading Policy provides that Directors, executive officers and certain other designated employees persons may not purchase Meridian securities on margin or borrow against any account in which +Meridian securities are held. The Policy also provides that such persons may not pledge Meridian securities as collateral for a loan or engage in hedging or monetization transactions with respect to Meridian securities. +Company-Sponsored Benefit and Retirement Plans +Meridian provides Company-sponsored benefit and retirement plans to the NEOs. In general, executives participate in the Company’s benefit and retirement plans on the same basis as other Company +employees. The core benefit package includes health, dental, short and long-term disability, and group term life insurance. Meridian generally provides retirement benefits to executives through qualified (under the Internal Revenue Code) defined +contribution plans. +Change in Control Severance Benefits +The Compensation Committee believes that a reasonable level of salary and Company-sponsored benefit protection provides a means of retention and allows the NEOs to remain focused on achievement of Company +goals and objectives in the event that the Company becomes subject to a merger or acquisition transaction. This component of compensation would only be paid in the event of a change in control of the Company, under certain qualifying conditions. For +the NEOs other than the Chairman and CEO, this component of compensation would include two years’ salary, performance bonus and core benefits. For the Chairman and CEO, this component of compensation would include three years’ salary, +performance bonus and core benefits. Pursuant to Mr. Kraeutler’s Second Amended and Restated Employment Agreement (the “Kraeutler Employment Agreement”), such compensation would be payable upon the following: (1) Meridian +terminates Mr. Kraeutler’s employment without Cause; (2) Mr. Kraeutler terminates his employment for Good Reason; or (3) Mr. Kraeutler’s employment is terminated ninety (90) days prior to a change of control +or within thirty-six (36) months following the date of the occurrence of a change of control except in the event (x) Mr. Kraeutler is terminated for Cause or (y) Mr. Kraeutler terminates employment for reasons other than +Good Reason during the ninety (90) days prior to or thirty-six (36) months following a change of control. +Other Personal +Benefits +Allowances for automobiles and professional, financial and tax planning services are made available to Meridian’s NEOs and +other Executive Officers. The costs to the Company are included in the All Other Compensation table on page 23. The Company believes these perquisites to be reasonable, comparable to peer companies and consistent with the Company’s overall +executive compensation philosophy. +Chairman and CEO Employment Agreement and Supplemental Benefit Agreement +Effective January 15, 2015, the Company and Mr. Kraeutler entered into the Kraeutler Employment Agreement which, among other things, extended +the term of his employment and incorporated the terms and conditions of his Supplemental Benefit Agreement. The Kraeutler Employment Agreement provides that Mr. Kraeutler is entitled to receive an established minimum annual salary and that he +is eligible to participate in the Company’s bonus and stock incentive plans. The Kraeutler Employment Agreement also provides that Mr. Kraeutler receive (i) a grant of 50,000 non-qualified stock options vesting on September 30, +2015 as long as he is employed on that date and a grant of 50,000 non-qualified stock options vesting on September 30, 2016 as long as he is employed on that date; and (ii) two grants of 25,000 performance-based restricted stock units, +with one grant to be earned if published fiscal 2015 revenue and earnings guidance is achieved, and the other grant to be earned if published fiscal 2016 revenue and earnings guidance is achieved. Since Mr. Kraeutler was employed by the Company +as of September 30, 2015 and published fiscal 2015 revenue and earnings guidance was achieved, 50,000 non-qualified stock options and 25,000 restricted stock units were earned and fully vested as of September 30, 2015. +20 +Table of Contents +In addition, the Kraeutler Employment Agreement provides that Mr. Kraeutler is eligible to receive: +• +Post-retirement benefit payments totaling $1,200,000, payable in one hundred twenty (120) monthly payments of $10,000 +• +Lifetime insurance benefits including health insurance and comprehensive long-term care insurance +The Kraeutler Employment Agreement provides for potential payments to Mr. Kraeutler upon a change in control. These payments are described on page +27 of this proxy statement. The Kraeutler Employment Agreement’s term extends through September 30, 2016, and its renewal provisions provide that the agreement may be extended annually for up to two additional one year periods ending +September 30, 2017 and September 30, 2018, respectively, upon mutual agreement by both Mr. Kraeutler and Meridian’s Board of Directors. +Internal Pay Equity +The Compensation Committee believes that the relative difference +between the Chairman and CEO’s compensation and the compensation of the Company’s other executives has not increased significantly over the years. Further, the Compensation Committee believes that the Company’s internal pay equity +structure is appropriate based upon the contributions to the success of the Company and as a means of motivation to other executives and employees. +Tax Deductibility of Pay +Section 162(m) of the Internal Revenue Code contains +compensation deduction limitations for certain highly compensated employees. One exception to this limitation is for performance-based compensation that is approved by, among other things, a committee of “outside directors” (as defined +under IRS treasury regulations). The Committee believes that all compensation paid to the NEOs for fiscal year 2015 is properly deductible under Section 162(m), but no assurance can be made in this regard. +Actions of the Compensation Committee +In several meetings during the year, Mr. Kraeutler, and the Compensation Committee Chairman discussed, among other things, Meridian’s +compensation system and its effectiveness in attracting and retaining talented employees. These individuals believe that the system, including the Officer’s Performance Compensation Plan, is understood by employees and shareholders and has +worked well in practice. They noted that the underlying principles in the plan have been followed for many years, even when following such principles resulted in no Officer’s Performance Compensation Plan bonuses being awarded to the NEOs and +performance-based stock awards being forfeited. The Committee discussed on a number of occasions the advisability of engaging a compensation consultant or advisor. The Compensation Committee concluded that it did not want to engage a compensation +consultant or advisor this year, in part because of the relatively small number of Executive Officers and their frequent interaction. +At its +November 4, 2015 meeting, the Compensation Committee discussed these matters, both with and without the presence of management. The Compensation Committee discussed the recommendations of the Chairman and CEO for compensation levels for all +officers and answered questions about individual recommendations and the general pay increases to be paid throughout the Company. The Committee then made the compensation decisions, which are reflected in the figures presented in this proxy +statement. +COMPENSATION COMMITTEE REPORT +The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management. Based on these reviews and discussions, the +Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Company’s proxy statement on Schedule 14A. +Members of the Compensation Committee +James M. Anderson (Chairman) +Dwight E. Ellingwood +David C. Phillips +21 +Table of Contents +SUMMARY COMPENSATION TABLE +The following table summarizes the aggregate compensation paid, or earned, by each of the NEOs for the fiscal years ended September 30, 2015, 2014 +and 2013, respectively. +Name and Principal +Position +(a) +Year +(b) +Salary +(c) +Bonus 1 +(d) +Stock +Awards 2,3,5 +(e) +Option +Awards 4,5 +(f) +Non-Equity +Incentive Plan +Compensation +(g) +Change in +Pension Value +and +Nonqualified +Deferred +Compensation +Earnings +(h) +All +Other +Compensation 6 +(i) +Total +John A. Kraeutler 7 +Chairman of the Board, +Chief Executive Officer +and President +2015 +2014 +2013 +$ +$ +$ +608,270 +602,871 +579,684 +$ +— +— +321,681 +$ +$ +$ +860,250 +373,650 +193,000 +$ +372,800 +— +— +— +— +— +— +— +— +$ +$ +$ +111,580 +86,867 +79,242 +$ +$ +$ +1,952,900 +1,063,388 +1,173,607 +Melissa A. Lueke +Executive +Vice President, +Chief Financial Officer +and Secretary +2015 +2014 +2013 +$ +$ +$ +269,780 +263,334 +253,206 +$ +— +— +140,511 +$ +$ +$ +161,190 +230,103 +184,113 +— +— +— +— +— +— +— +— +— +$ +$ +$ +62,120 +65,805 +55,367 +$ +$ +$ +493,090 +559,242 +633,197 +Marco G. Calzavara 8 +President and Managing +Director, Meridian +Bioscience Europe +2015 +2014 +2013 +$ +$ +$ +344,339 +356,747 +328,694 +$ +— +— +200,954 +$ +$ +$ +161,190 +224,190 +144,750 +— +— +— +— +— +— +— +— +— +$ +$ +$ +68,230 +47,607 +30,573 +$ +$ +$ +573,759 +628,544 +704,971 +Richard L. Eberly +Executive +Vice President, +President Meridian Life Science +2015 +2014 +2013 +$ +$ +$ +319,252 +306,973 +296,592 +$ +— +— +163,795 +$ +$ +$ +161,190 +224,190 +144,750 +— +— +— +— +— +— +— +— +— +$ +$ +$ +61,089 +62,985 +59,729 +$ +$ +$ +541,531 +594,148 +664,866 +Vecheslav A. Elagin +Executive +Vice President, +Research & Development +2015 +2014 +2013 +$ +$ +$ +291,034 +284,080 +273,154 +$ +— +— +151,580 +$ +$ +$ +161,190 +224,190 +144,750 +— +— +— +— +— +— +— +— +— +$ +$ +$ +70,016 +69,937 +59,471 +$ +$ +$ +522,240 +578,207 +628,955 +1 +No payments were made to the NEOs pursuant to the Officer’s Performance +Compensation Plan for fiscal 2015 or 2014 as the corporate-wide targets were not reached for either of the respective fiscal years. In addition to the payment made pursuant to the Officer’s Performance Compensation Plan, the amount reflected +for Mr. Calzavara for fiscal 2013 includes $18,845 awarded in connection with his 20 year anniversary with the Bioline Group. +2 +The amount reflected for Mr. Kraeutler for fiscal 2015 includes $412,500 for the grant date fair value of performance-based restricted stock units +granted pursuant to his employment agreement dated January 15, 2015 (“Employment Agreement RSUs”). Since the required published revenue and earnings guidance was achieved for fiscal 2015, the Employment Agreement RSUs were earned and +the corresponding compensation cost is included in this table. A discussion of the assumptions used in calculating these values may be found in Note 5(b) on page 66 to the Company’s Annual Report on Form 10-K filed with the SEC on +November 30, 2015. +3 +The amounts shown reflect the grant date fair value of the restricted stock units issued during fiscal years 2015, 2014 and 2013 in accordance with ASC +Topic 718. With the exception of Employment Agreement RSUs discussed in Note 2 above, no compensation cost is included in this table related to the performance-based portion of the restricted stock units granted during fiscal 2015, 2014 and 2013. +Because the required earnings target for Meridian was not reached for fiscal 2015, 2014 or 2013, with the exception of the Employment Agreement RSUs, the performance-based restricted stock units have been cancelled. A discussion of the assumptions +used in calculating these values may be found in Note 5(b) on page 66 to the Company’s Annual Report on Form 10-K filed with the SEC on November 30, 2015. +4 +The amounts shown reflect the grant date fair value of the stock options +granted during fiscal years 2015, 2014 and 2013 in accordance with ASC Topic 718, and are comprised solely of the stock options granted to Mr. Kraeutler in connection with his employment agreement dated January 15, 2015 (“Employment +Agreement Options”). A discussion of the assumptions used in calculating these values may be found in Note 5(b) on page 66 to the Company’s Annual Report on Form 10-K filed with the SEC on November 30, 2015. +22 +Table of Contents +5 +In addition, no compensation cost is included in this table related to the additional performance-based equity awards granted November 9, 2011 to +certain executive management employees, including the NEOs, to reward them for meeting pre-defined Company revenue targets. These awards, which included both restricted stock units and options, could only be earned if specified cumulative revenue +thresholds were met through fiscal 2015, with the three measurement dates for ratably earning one-third of the grant being (i) the 21-month period ended June 30, 2013; (ii) the 33-month period ended June 30, 2014; and +(iii) the 45-month period ended June 30, 2015. As a result of none of the cumulative thresholds being met, these restricted stock units and options have been cancelled and no related compensation is included within the table. +6 +See the All Other Compensation table below for amounts, which include certain Company contributions, perquisites and other personal benefits. +Fiscal 2015 +All Other Compensation +John A. +Kraeutler +Melissa A. +Lueke +Marco G. +Calzavara +Richard L. +Eberly +Vecheslav +A. Elagin +Retirement Contributions +$ +16,032 +$ +14,920 +$ +27,966 +$ +15,982 +$ +15,446 +Auto Lease / Auto Allowance +12,548 +12,000 +6,930 +10,042 +12,000 +Financial and Tax Planning +15,000 +1,600 +— +1,465 +970 +Restricted Stock Dividends +68,000 +33,600 +33,334 +33,600 +41,600 +Totals +$ +111,580 +$ +62,120 +$ +68,230 +$ +61,089 +$ +70,016 +7 +Mr. Kraeutler was named Chairman of the Board in September 2014, at which time he assumed the chairmanship responsibilities previously held by +William J. Motto, Meridian’s founder. +8 +Mr. Calzavara’s salary and bonus were £222,916 and £0, respectively, in fiscal 2015; £215,362 and £0, respectively, +in fiscal 2014; and £210,634 and £128,775, respectively, in fiscal 2013. All conversions were made at the average exchange rates for the respective fiscal years. +23 +Table of Contents +GRANTS OF PLAN-BASED AWARDS +The following table sets forth, for each of the NEOs, information related to grants made during fiscal 2015 under Meridian’s 2012 Stock Incentive +Plan. +Name +Grant +Date +Estimated Future Payouts Under +Non-Equity Incentive Plan +Awards +Estimated Future Payouts Under +Equity Incentive Plan Awards +All other +Stock +Awards: +Number of +Shares of +Stock or +Units (#) +All other +Option +Awards: +Number of +Securities +Underlying +Options (#) +Exercise +or Base +Price of +Option +Awards +($/Sh) +Grant Date +Fair Value +of Stock +and +Option +Awards +Threshold +($) +Target +($) +Max +($) +Threshold +(#) +Target +(#) +Max +(#) +(a) +(b) +(c) +(d) +(e) +(f) +(g) +(h) +(i) +(j) +(k) +(l) +John A. Kraeutler +11/06/14 +01/15/15 +— +— +— +— +— +— +— +— +— +— +— +— +25,000 +25,000 +1 +2 +— +100,000 +2 +$ +— +16.50 +$ +$ +447,750 +785,300 +Melissa A. Lueke +11/06/14 +— +— +— +— +— +— +9,000 +1 +— +— +$ +161,190 +Marco G. Calzavara +11/06/14 +— +— +— +— +— +— +9,000 +1 +— +— +$ +161,190 +Richard L. Eberly +11/06/14 +— +— +— +— +— +— +9,000 +1 +— +— +$ +161,190 +Vecheslav A. Elagin +11/06/14 +— +— +— +— +— +— +9,000 +1 +— +— +$ +161,190 +1 +At the time of the grant, half of each NEO’s restricted stock units were time-based with 100% vesting after four years, and the remaining half +were performance-based, subject to attainment of a specified earnings target for fiscal 2015. As the 2015 earnings target was not met, the performance-based restricted stock units have been cancelled and are not reflected in the table above. +2 +This grant of performance-based restricted stock units and time-based options was made to Mr. Kraeutler pursuant to his employment agreement dated +January 15, 2015. Since the required published revenue and earnings guidance was achieved for fiscal 2015, the restricted stock units have been earned. See a detailed description of these grants under “Chairman and CEO Employment Agreement +and Supplemental Benefit Agreement” on page 20 of this proxy statement. +24 +Table of Contents +OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END +The following table provides information on the NEOs’ holdings of equity awards under Meridian’s 2012 Stock Incentive Plan, 2004 Equity +Compensation Plan and 1996 Stock Option Plan as of September 30, 2015. +Option Awards +Stock Awards +Name +Number of +Securities +Underlying +Unexercised +Options +(#) +Exercisable +Number of +Securities +Underlying +Unexercised +Options +(#) +Unexercisable +Equity +Incentive Plan +Awards: +Number +of +Securities +Underlying +Unexercised +Unearned +Options (#) +Option +Exercise +Price ($) +Option +Expiration +Date +Number of +Shares or +Units of +Stock That +Have Not +Vested +(#) +Market +Value of +Shares or +Units of +Stock That +Have +Not +Vested ($) +Equity +Incentive +Plan +Awards: +Number of +Unearned +Shares, +Units or +Other +Rights That +Have +Not +Vested (#) +Equity +Incentive +Plan +Awards: +Market +or Payout +Value of +Unearned +Shares, +Units +or +Other +Rights +That +Have Not +Vested +($) +(a) +(b) +(c) +(d) +(e) +(f) +(g) +(h) +(i) +(j) +John A. Kraeutler +15,750 1 +15,750 1 +25,000 2 +25,000 3 +50,000 7 +— +— +— +— +— +— +50,000 9 +— +— +— +— +— +— +$ +$ +$ +$ +$ +$ +14.007 +16.554 +33.090 +33.090 +16.500 +16.500 +11/10/15 +11/15/16 +01/28/18 +01/28/18 +01/15/25 +01/15/25 +— +— +— +— +— +— +10,000 10 +10,000 11 +15,000 12 +25,000 13 +$ +$ +$ +$ +— +— +— +— +— +— +171,000 +171,000 +256,500 +427,500 +— +— +— +— +— +— +— +— +— +— +— +— +— +— +— +— +— +— +— +— +Melissa A. Lueke +15,750 1 +— +— +$ +14.007 +11/10/15 +— +7,500 10 +7,500 11 +9,000 12 +9,000 13 +$ +$ +$ +$ +— +128,250 +128,250 +153,900 +153,900 +— +— +— +— +— +— +— +— +— +— +Marco G. Calzavara +7,500 10 +7,500 11 +9,000 12 +9,000 13 +$ +$ +$ +$ +128,250 +128,250 +153,900 +153,900 +— +— +— +— +— +— +— +— +Richard L. Eberly +1,500 5 +10,000 6 +— +— +— +— +$ +$ +19.710 +21.940 +08/04/20 +01/31/21 +— +— +7,500 10 +7,500 11 +9,000 12 +9,000 13 +$ +$ +$ +$ +— +— +128,250 +128,250 +153,900 +153,900 +— +— +— +— +— +— +— +— +— +— +— +— +Vecheslav A. Elagin +10,000 4 +2,000 5 +3,750 8 +— +— +1,250 8 +— +— +— +$ +$ +$ +22.290 +19.710 +18.910 +08/03/19 +08/04/20 +06/01/22 +— +— +— +17,500 10 +7,500 11 +9,000 12 +9,000 13 +$ +$ +$ +$ +— +— +— +299,250 +128,250 +153,900 +153,900 +— +— +— +— +— +— +— +— +— +— +— +— +— +— +25 +Table of Contents +1 +Options vested in three equal annual installments beginning one year from public earnings release date for the fiscal year ending immediately following +the grant date, indicating that performance targets were met, occurring approximately one year from date of grant. +2 +Options vested on January 22, 2011. +3 +Options vested on January 22, 2013. +4 +Options fully vested on August 3, 2013. +5 +Options fully vested on August 4, 2014. +6 +Options fully vested on January 31, 2015. +7 +Options fully vested on September 30, 2015. +8 +Options vest in four equal annual installments from the date of grant (i.e., vest 25% per year until fully vested on June 1, 2016). +9 +Options fully vest on September 30, 2016. +10 +Units vest on November 9, 2015. +11 +Units vest on November 7, 2016. +12 +Units vest on November 6, 2017. +13 +Units vest on November 6, 2018. +OPTION EXERCISES AND STOCK VESTED +The following table sets forth, +for each of the NEOs, information on options exercised and restricted stock and restricted stock units vested during fiscal 2015. +Option Awards +Stock Awards +Name +Number of +Shares +Acquired on +Exercise (#) +Value Realized +on Exercise ($) +(1) +Number of +Shares +Acquired on +Vesting (#) +Value Realized +On Vesting ($) +(2) +(a) +(b) +(c) +(d) +(e) +John A. Kraeutler +10,500 +$ +93,669 +35,000 +$ +596,600 +Melissa A. Lueke +10,500 +$ +93,660 +7,500 +$ +126,825 +Marco G. Calzavara +— +$ +— +2,300 +$ +39,205 +Richard L. Eberly +— +$ +— +7,500 +$ +126,825 +Vecheslav A. Elagin +— +$ +— +7,500 +$ +126,825 +1 +Amounts reflect the difference between the exercise price of the option and the market price of Meridian common shares at the time of exercise. +2 +Amounts reflect the market price of Meridian common shares at the time of restricted stock or units vesting. +26 +Table of Contents +401(K) PLAN +Our 401(k) Savings Plan (“401(k) Plan”) allows all U.S. employees of the Company as soon as administratively possible following their employment to set aside a portion of their compensation each +year for their retirement needs, up to the limits set by the Internal Revenue Code. The Company contributes a matching contribution of 100% of the first 3% of the employee’s contribution (i.e., up to 3% of an employee’s salary) subject to +Internal Revenue Code limitations. The Company may also contribute a profit-sharing contribution at its discretion. Employee contributions are 100% vested immediately, while Company contributions are subject to a graded vesting schedule of +20% per year for the first 5 years of employment. Participants are entitled to direct the investment of their accounts among various mutual funds selected by the Meridian Bioscience, Inc., Savings and Investment Plan Committee. The 401(k) Plan +also provides that Company discretionary profit-sharing contributions may be invested in Company stock. Participants who terminate employment are entitled to receive the vested portion of their accounts. +POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL +As described on page 20 in the “Compensation Discussion and Analysis” section of this proxy statement, Mr. Kraeutler and Meridian are parties to the Kraeutler Employment Agreement which +sets forth compensation, non-competition, benefit and severance provisions and provides for a payment equal to three times Mr. Kraeutler’s three-year average base salary (plus any salary earned but not paid) and three-year average annual +performance bonus if Mr. Kraeutler is terminated by Meridian without cause, Mr. Kraeutler terminates his employment for good reason or is terminated in connection with a change in control of Meridian. +Pursuant to the Kraeutler Employment Agreement, had Mr. Kraeutler’s employment with the Company terminated on September 30, 2015, +Mr. Kraeutler would have been entitled to receive post-retirement benefit payments totaling $1,200,000, payable in one hundred twenty (120) monthly payments of $10,000. +Had one of the events noted above occurred on September 30, 2015, Mr. Kraeutler would also have been entitled to the following under the Kraeutler Employment Agreement: +Salary +$ +1,790,825 +Annual Performance Bonus +321,681 +Total Payment +$ +2,112,506 +In addition, the Meridian Bioscience, Inc. Change in Control Severance Compensation Policy (the “Policy”) +applies to the Company’s NEOs (as defined in Item 402 of Regulation S-K) and other Executive Officers of the Company and its affiliates other than the Chairman and CEO – with Mr. Kraeutler’s benefits and provisions provided +in the separate, individual agreements described above. Generally, subject to certain conditions surrounding post-change in control employment, in the event of termination in connection with a qualifying change in control, each Executive Officer +covered under the Policy will be entitled to: +• +Base salary, accrued bonus and certain other benefits through the later of the effective date of the change in control or termination of employment; +• +Lump sum payment equal to two (2) times the sum of (i) the base salary in effect immediately preceding the change in control, and +(ii) the average of the bonus amounts paid for each of the two fully-completed fiscal years immediately preceding the change in control; and +• +Continued participation in the Company’s medical and dental plans for a twenty-four (24) month period following the effective date of the +change in control. +27 +Table of Contents +Had termination in connection with a change in control occurred on September 30, 2015, the NEOs to +which the Policy applied at that date (Ms. Lueke, Mr. Calzavara, Mr. Eberly and Mr. Elagin) would have been entitled to the following lump sum payments under the Policy: +Melissa A. +Lueke +Marco G. +Calzavara +Richard L. +Eberly +Vecheslav +A. Elagin +Salary +$ +542,014 +$ +709,081 +$ +644,220 +$ +584,712 +Annual Performance Bonus +— +— +— +— +Total Lump Sum Payment +$ +542,014 +$ +709,081 +$ +644,220 +$ +584,712 +DIRECTOR COMPENSATION +For fiscal 2015, independent Directors of Meridian received compensation at a rate of $35,000 per year for serving as Directors and as members of Committees of the Board. They also received $2,000 and +$1,250, respectively, for each Board and Committee meeting attended. For meetings held by telephone, they received $1,000 and $750, respectively, for each Board and Committee meeting. The Audit Committee Chairman received an additional $16,000 +annually, and the Compensation Committee and Nominating & Corporate Governance Committee Chairmen each received an additional $5,000 annually. In accordance with the terms and conditions set forth in the Company’s 2012 Stock Incentive +Plan, each independent Director was also granted a non-qualified option to purchase 8,500 common shares at the time of appointment, election or re-election to the Board of Directors, with the exercise price being the closing sale price on Nasdaq +reported on the date of grant. Directors who are employees of Meridian are not separately compensated for serving as Directors. +The following +table provides information on compensation related to fiscal 2015 for independent Directors who served during fiscal 2015. +Name +Fees +Earned +or +Paid in +Cash ($) +Stock +Awards +($) 1 +Option +Awards +($) 1 +Non-Equity +Incentive +Plan +Compensation +($) +Change in +Pension +Value +and Nonqualified +Deferred +Compensation +Earnings +All +Other +Compensation +($) +Total +($) +(a) +(b) +(c) +(d) +(e) +(f) +(g) +(h) +James M. Anderson +$ +66,250 +— +$ +33,301 +— +— +— +$ +99,551 +Dwight E. Ellingwood +$ +56,000 +— +$ +33,301 +— +— +— +$ +89,301 +John C. McIlwraith 2 +$ +8,750 +— +$ +34,915 +— +— +— +$ +43,665 +David C. Phillips +$ +70,750 +— +$ +33,301 +— +— +— +$ +104,051 +Catherine A. Sazdanoff 2 +$ +8,750 +— +$ +34,915 +— +— +— +$ +43,665 +Robert J. Ready 3 +$ +28,500 +— +$ +33,301 +— +— +— +$ +61,801 +1 +The amounts shown +reflect the grant date fair value of the awards made in fiscal year 2015 in accordance with ASC Topic 718. A discussion of the assumptions used in calculating these values may be found in Note 5(b) on page 66 to the Company’s Annual Report on +Form 10-K filed with the SEC on November 30, 2015. +2 +Mr. McIlwraith and Ms. Sazdanoff were +appointed Directors in August 2015. +3 +Mr. Ready was +serving as a Director at the time of his death in March 2015. +28 +Table of Contents +SHAREHOLDER PROPOSALS FOR NEXT YEAR +The deadline for shareholder proposals to be included in the proxy statement for next year’s meeting is August 30, 2016. +The form of Proxy for this meeting grants authority to the designated proxies to vote in their discretion on any matters that come before the meeting +except those set forth in Meridian’s proxy statement and except for matters as to which adequate notice is received. In order for a notice to be deemed adequate for the 2017 Annual Shareholders’ Meeting, it must be received prior to +October 29, 2016. If there is a change in the anticipated date of next year’s Annual Shareholders’ Meeting or these deadlines by more than 30 days, we will notify you of this change through our Form 8-K and/or Form 10-Q filings. +Meridian’s Code of Regulations provides that only persons nominated by an officer, Director or in writing by a shareholder not earlier +than 150 days nor later than 90 days prior to the meeting at which Directors are to be selected shall be eligible for election and that shareholder proposals be presented not earlier than 150 days nor later than 90 days prior to the meeting at which +the proposals are to be presented. +QUESTIONS? +If you have questions or need more information about the annual meeting, write to: +Melissa A. +Lueke +Executive Vice President, Chief Financial Officer and Secretary +Meridian Bioscience, Inc. +3471 River Hills Drive +Cincinnati, Ohio 45244 +or call us at +(513) 271-3700 +For information about your record holdings, call Computershare Shareholder Services at (888) 294-8217. +29 +Table of Contents +*** Exercise Your Right to Vote *** +Important Notice Regarding the Availability of Proxy Materials for the +Shareholder Meeting to Be Held on January 27, 2016. +MERIDIAN BIOSCIENCE, INC. +MERIDIAN BIOSCIENCE, INC. +3471 RIVER HILLS DRIVE +CINCINNATI, OH +45244 +Meeting Information +Meeting Type: Annual Meeting +For holders as of: November 30, 2015 +Date: January 27, 2016 Time: 2:00 PM EST +Location: Holiday Inn +Eastgate +4501 Eastgate Boulevard +Cincinnati, OH 45245 +You are receiving this communication because you hold shares +in the company named above. +This is not a ballot. You cannot use this notice to vote +these shares. This communication presents only an overview of the more complete proxy materials that are available to you on the Internet. You may view the proxy materials online at www.proxyvote.com or easily request a paper copy (see +reverse side). +We encourage you to access and review +all of the important information contained in the proxy materials before voting. +See the reverse side of this notice to obtain proxy materials and voting instructions. +Table of Contents +— Before You Vote — +How to Access the Proxy Materials +Proxy Materials Available to VIEW or RECEIVE: +NOTICE AND PROXY STATEMENT ANNUAL REPORT AND FORM 10-K +How to View Online: +Have the information that is printed in the box marked by the arrow +(located on the following page) and visit: www.proxyvote.com . +How to Request and +Receive a PAPER or E-MAIL Copy: +If you want to receive a paper or e-mail copy of these documents, you must request one. There is NO charge for requesting a copy. Please choose one of the following methods to make your request: +1) BY INTERNET : www.proxyvote.com +2) BY TELEPHONE : +1-800-579-1639 +3) BY E-MAIL* : +sendmaterial@proxyvote.com +* +If requesting materials by e-mail, please send a blank e-mail with the information that is printed +in the box marked by the arrow +(located on the following page) in the subject line. +Requests, instructions and other inquiries sent to this e-mail address +will NOT be forwarded to your investment advisor. Please make the request as instructed above on or before January 13, 2016 to facilitate timely delivery. +— How To Vote — +Please Choose One of the Following +Voting Methods +Vote In Person: Many shareholder meetings have attendance requirements including, but not limited to, the possession of an attendance ticket issued by the +entity holding the meeting. Please check the meeting materials for any special requirements for meeting attendance. At the meeting, you will need to request a ballot to vote these shares. +Vote By Internet: To vote now by Internet, go to www.proxyvote.com. Have the +information that is printed in the box marked by the arrow +(located on the following page) available and follow the instructions. +Vote By Mail: You can vote by mail by requesting a paper copy of the materials, which will include a proxy card. +Table of Contents +Voting Items +The Board of Directors recommends you vote FOR the +following: +1. Election of Directors +Nominees: +01) JAMES M. ANDERSON +04) JOHN C. MCILWRAITH +02) DWIGHT E. ELLINGWOOD +05) DAVID C. PHILLIPS +03) JOHN A. KRAEUTLER +06) CATHERINE A. SAZDANOFF +The Board of Directors recommends you vote FOR the following proposals: +2. Advisory vote on named executive officer compensation. +3. To ratify the appointment of Grant Thornton LLP as Meridian’s independent registered public accountants for fiscal year +2016. +NOTE: Such other business as may properly come before the meeting or any postponement or adjournment thereof. Only shareholders of record at the close of business on +November 30, 2015 are entitled to notice of and to vote at the meeting. +Table of Contents +Table of Contents +MERIDIAN BIOSCIENCE, INC. +3471 RIVER HILLS DRIVE +CINCINNATI, OH 45244 +VOTE BY INTERNET - www.proxyvote.com +Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the +cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. +ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS +If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy +cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials +electronically in future years. +VOTE BY PHONE - 1-800-690-6903 +Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have +your proxy card in hand when you call and then follow the instructions. +VOTE BY +MAIL +Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o +Broadridge, 51 Mercedes Way, Edgewood, NY 11717. +TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: +M97995-P70805 KEEP THIS PORTION FOR +YOUR RECORDS +THIS PROXY CARD IS VALID +ONLY WHEN SIGNED AND DATED. DETACH AND RETURN THIS PORTION ONLY +MERIDIAN BIOSCIENCE, INC. +The Board of Directors recommends you +vote FOR the following: +For +All +Withhold +All +For All Except +To withhold authority to vote for any individual nominee(s), mark +“For All Except” and write the number(s) of the nominee(s) on the line below. +1. +Election of Directors +Nominees: +¨ +¨ +¨ +01) JAMES M. ANDERSON +02) DWIGHT E. ELLINGWOOD +03) JOHN A. KRAEUTLER +04) JOHN C. MCILWRAITH +05) DAVID C. PHILLIPS +06) CATHERINE A. +SAZDANOFF +The Board of Directors recommends you vote FOR the +following proposals: +For +Against +Abstain +2. +Advisory vote on named executive officer compensation. +¨ +¨ +¨ +3. +To ratify the appointment of Grant Thornton LLP as Meridian’s independent registered public accountants for fiscal year 2016. +¨ +¨ +¨ +NOTE: Such other business as may properly come before the +meeting or any postponement or adjournment thereof. Only shareholders of record at the close of business on November 30, 2015 are entitled to notice of and to vote at the meeting. +For address changes and/or comments, please check this box and write them on the back where indicated. +¨ +Please indicate if you plan to attend this meeting. +¨ +¨ +Yes +No +Please sign exactly as your name(s) appear(s) hereon. When signing +as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by +authorized officer. +Signature [PLEASE SIGN WITHIN BOX] +Date +Signature (Joint Owners) +Date +Table of Contents +Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice and Proxy Statement, Annual Report and Form 10-K are available +at www.proxyvote.com. +--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- +M97996-P70805 +MERIDIAN BIOSCIENCE, INC. +Annual Meeting of Shareholders +January 27, +2016 2:00 PM +This proxy is solicited by the Board of Directors +The undersigned hereby appoints JOHN A. KRAEUTLER and MELISSA A. +LUEKE, and either of them, attorneys and proxies of the undersigned, each with the power of substitution, to vote all shares of Common Stock of Meridian Bioscience, Inc. which the undersigned would be entitled to vote on the matters specified on the +reverse side (and in their discretion to cumulate votes in the election of directors if cumulative voting is invoked by a shareholder through proper notice to the Company) and, in their discretion, with respect to such other matters as may properly +come before the Annual Meeting of Shareholders of Meridian Bioscience, Inc. to be held on January 27, 2016, at 2:00 p.m. Eastern Standard Time, at the Holiday Inn Eastgate, 4501 Eastgate Boulevard, Cincinnati, Ohio 45245 and any postponement or +adjournment of such Annual Meeting. +This proxy, when properly +executed, will be voted as directed by the shareholder(s). If no such directions are made, this proxy will be voted FOR the election to the Board of Directors of the nominees listed on the reverse side and FOR each remaining +proposal. +Please mark, sign, date, and return this proxy card +promptly using the enclosed reply envelope. +Address Changes/Comments: +(If you noted any Address Changes/Comments above, please mark corresponding box on the reverse side.) +Continued and to be signed on reverse side \ No newline at end of file diff --git a/raw/proxies/0000794172/0001193125-15-404341/proxy_rpt.txt b/raw/proxies/0000794172/0001193125-15-404341/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..0b5037453460b9f912db11528f0d2ea4ebd1b48d --- /dev/null +++ b/raw/proxies/0000794172/0001193125-15-404341/proxy_rpt.txt @@ -0,0 +1,2 @@ +TRANSACTIONS WITH RELATED PERSONS +13 \ No newline at end of file diff --git a/raw/proxies/0000794172/0001193125-16-792527/proxy.txt b/raw/proxies/0000794172/0001193125-16-792527/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..a3befbcdc904b8142e5692dc5cadf07e0beaf08a --- /dev/null +++ b/raw/proxies/0000794172/0001193125-16-792527/proxy.txt @@ -0,0 +1,3518 @@ +DEF 14A +1 +d264395ddef14a.htm +DEFINITIVE PROXY STATEMENT +Definitive Proxy Statement +Table of Contents +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +WASHINGTON, D.C. 20549 +SCHEDULE 14A +(Rule 14a-101) +INFORMATION REQUIRED IN PROXY STATEMENT +SCHEDULE 14A INFORMATION +Proxy Statement Pursuant to Section 14(a) of the +Securities Exchange Act of 1934 +(Amendment No. ) +Filed by the Registrant x Filed by a Party other than the +Registrant ¨ +Check the appropriate box: +¨ +Preliminary Proxy Statement +¨ +Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +x +Definitive Proxy Statement +¨ +Definitive Additional Materials +¨ +Soliciting Material Pursuant to Section 14a-12 +Meridian Bioscience, Inc. +(Name of Registrant as +Specified in Its Charter) +(Name of Person(s) Filing Proxy Statement if Other Than the Registrant) +Payment of Filing Fee (Check the appropriate box): +x +No fee required. +¨ +Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. +(1) +Title of each class of securities to which transaction applies: +(2) +Aggregate number of securities to which transaction applies: +(3) +Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on +which the filing fee is calculated and state how it was determined): +(4) +Proposed maximum aggregate value of transaction: +(5) +Total Fee Paid: +¨ +Fee paid previously with preliminary materials. +¨ +Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the +offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. +(1) +Amount Previously Paid: +(2) +Form, Schedule or Registration Statement No.: +(3) +Filing Party: +(4) +Date Filed: +Table of Contents +3471 River Hills Drive +Cincinnati, Ohio 45244 +www.meridianbioscience.com +Notice of Annual Meeting of Shareholders +and Proxy Statement +Dear Shareholders: +Our Annual Meeting of Shareholders will be held at 2:00 p.m. on January 25, 2017 at the Holiday Inn Eastgate, 4501 Eastgate Boulevard, Cincinnati, Ohio +45245. We hope you will attend. +At the meeting, you will hear a report on our operations and have a chance to meet your Directors and +Executive Officers. +This booklet includes the formal notice of the meeting and the proxy statement. The proxy statement tells you more +about the agenda and procedures for the meeting. It also describes how the Board operates and gives personal information about our Director candidates. +We are pleased to once again take advantage of the U.S. Securities and Exchange Commission rules that allow companies to furnish their proxy materials over the Internet. As a result, we are mailing +to most of our shareholders a Notice of Internet Availability of Proxy Materials (the “Notice”) instead of a paper copy of this proxy statement and our Annual Report. The Notice contains instructions on how to access and review those +documents over the Internet. We believe that this process allows us to provide our shareholders with the information they need in a more timely manner, while reducing the environmental impact and lowering the costs of printing and distributing +our proxy materials. If you received a Notice by mail and would like to receive a printed copy of our proxy materials, you should follow the instructions for requesting such materials included in the Notice. +Whether or not you plan to attend the meeting, please cast your proxy vote promptly, either online, over the phone or by returning your signed and dated +proxy card in the enclosed envelope. +Sincerely yours, +/s/ John A. Kraeutler +John A. Kraeutler +Chairman of the Board +December 14, 2016 +Table of Contents +NOTICE OF ANNUAL MEETING OF SHAREHOLDERS +Date: +January 25, 2017 +Time: +2:00 +p.m., Eastern Standard Time +Place: +Holiday Inn Eastgate +4501 Eastgate Blvd. +Cincinnati, Ohio 45245 +Purpose: +• +Elect as Directors the six nominees named in the attached proxy materials +• +Conduct an advisory vote on our executive compensation (“Say-on-Pay”) +• +Ratify appointment of Grant Thornton LLP as Meridian’s independent registered public accountants for fiscal year 2017 +• +Reapprove the material terms for payment of performance-based incentive compensation under the Meridian Bioscience, Inc. 2012 Stock Incentive Plan +• +Conduct other business if properly raised +Only shareholders of record on November 30, 2016 may vote at the meeting. The approximate mailing date of this proxy statement and accompanying Proxy Card is December 14, 2016. +Your vote is important. Please cast your proxy vote promptly, either online, over the phone or by returning your signed and dated proxy card in the +enclosed envelope. +/s/ Melissa A. Lueke +Melissa A. Lueke +Secretary +December 14, 2016 +Table of Contents +Table of Contents +GENERAL INFORMATION +1 +ELECTION OF DIRECTORS (Item 1 on the Proxy Card) +2 +ADVISORY VOTE ON COMPENSATION OF NAMED EXECUTIVE OFFICERS (“SAY-ON-PAY” PROPOSAL) (Item 2 on the Proxy Card) +4 +RATIFICATION OF APPOINTMENT OF ACCOUNTANTS (Item 3 on the Proxy Card) +5 +REAPPROVAL OF THE MATERIAL TERMS FOR PAYMENT OF PERFORMANCE-BASED INCENTIVE COMPENSATION UNDER THE MERIDIAN BIOSCIENCE, INC. 2012 STOCK INCENTVE PLAN (Item 4 on +the Proxy Card) +6 +CORPORATE GOVERNANCE +14 +REPORT OF THE AUDIT COMMITTEE +16 +DIRECTORS AND EXECUTIVE OFFICERS +19 +SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS +21 +SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE +21 +TRANSACTIONS WITH RELATED PERSONS +22 +COMPENSATION DISCUSSION AND ANALYSIS +22 +COMPENSATION COMMITTEE REPORT +31 +SUMMARY COMPENSATION TABLE +32 +GRANTS OF PLAN-BASED AWARDS +34 +OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END +35 +OPTION EXERCISES AND STOCK VESTED +36 +401(K) PLAN +37 +POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL +37 +DIRECTOR COMPENSATION +38 +SHAREHOLDER PROPOSALS FOR NEXT YEAR +39 +QUESTIONS? +39 +ANNEX A: MERIDIAN BIOSCIENCE, INC. 2012 STOCK INCENTIVE PLAN +A-1 +Meridian makes available, free of charge on its website, all of its filings that are made electronically with the +Securities and Exchange Commission (“SEC”), including Forms 10-K, 10-Q and 8-K. These filings are also available on the SEC’s website (www.sec.gov). To access these filings, go to our website +(www.meridianbioscience.com). Copies of Meridian’s Annual Report on Form 10-K for the fiscal year ended September 30, 2016, including financial statements and schedules thereto, filed with the SEC, are also available without charge to +shareholders upon written request addressed to: +Melissa A. Lueke +Executive Vice President, Chief Financial Officer and Secretary +Meridian Bioscience, Inc. +3471 River Hills Drive +Cincinnati, +Ohio 45244 +Table of Contents +MERIDIAN BIOSCIENCE, INC. +3471 River Hills Drive +Cincinnati, Ohio 45244 +Telephone (513) 271-3700 +P R O X Y S T A T E M E N T +Annual Meeting of Shareholders +January 25, 2017 +GENERAL INFORMATION +Who may vote +Shareholders of Meridian, as recorded in our stock register on +November 30, 2016, may vote at the meeting. As of that date, Meridian had 42,201,867 shares of Common Stock outstanding. +How to +vote +You may vote in person at the meeting or by proxy. We recommend you vote by proxy even if you plan to attend the +meeting. You can always change your vote at the meeting. +How proxies work +Meridian’s Board of Directors is asking for your proxy. Giving us your proxy means you authorize us to vote your shares at the meeting in the +manner you direct. You may vote for all, some or none of our Director candidates. You may also vote for or against the other proposals or abstain from voting. +If you complete your proxy online, over the phone or sign and return the enclosed proxy card but do not specify how to vote, we will vote your shares in favor of (i) our Director candidates; (ii) our +executive compensation; (iii) ratification of appointment of Grant Thornton LLP as Meridian’s independent registered public accountants for fiscal year 2017; and (iv) reapproval of the material terms for payment of performance-based incentive +compensation under the Meridian Bioscience, Inc. 2012 Stock Incentive Plan. If any other matters come before the meeting or any postponement or adjournment thereof, each proxy will be voted in the discretion of the individuals named as proxies +on the card. +You may receive more than one proxy or voting card depending on how you hold your shares. Shares registered in your name +are covered by one card. If you hold shares through someone else, such as a stockbroker, bank or nominee, you may get material from them asking how you want to vote. +Stockbrokers, banks and nominees holding shares for beneficial owners must vote those shares as instructed by you. If the stockbroker, bank or nominee has not received instructions from you, the +beneficial owner, the stockbroker, bank or nominee generally has discretionary voting power only with respect to the ratification of appointment of the independent registered public accountants. However, a stockbroker, bank or nominee does not +have discretion to vote for or against the election of Directors and certain other matters subject to a vote if they have not received voting instructions from you. In order to avoid a broker non-vote of your shares on the election of Directors +and the other matters subject to a vote, you must send voting instructions to your stockbroker, bank or nominee. +Solicitation of +proxies +Solicitation of proxies is being made by management at the direction of Meridian’s Board of Directors, without additional +compensation, through the mail, in person or by telephone. The cost of preparing and mailing the Notice and the proxy statement and any accompanying material will be borne by Meridian. In addition, Meridian will request brokers and other +custodians, nominees and fiduciaries to forward proxy soliciting material to the beneficial owners of shares held of record, and Meridian will reimburse them for their expenses in so doing. +Revoking a proxy +You may revoke your proxy before it is voted by submitting a new +proxy with a later date, by voting in person at the meeting or by notifying Meridian’s Secretary in writing at the address under “Questions?” on page 39. +Quorum +In order to carry on the business of the meeting, we must have a +quorum. This means at least a majority of the outstanding shares eligible to vote must be +1 +Table of Contents +represented at the meeting, either by proxy or in person. +Votes needed +The six Director candidates receiving the most votes will be elected to fill the seats on the Board. The approval on an advisory +basis of our executive compensation (Proposal No. 2), the ratification of appointment of accountants (Proposal No. 3), and the reapproval of the material terms for payment of performance-based incentive compensation under the Meridian Bioscience, +Inc. 2012 Stock Incentive Plan (Proposal No. 4) require the favorable vote of a majority of the votes cast. Only votes for or against these proposals count, with abstentions not being counted either for or against these proposals. +Abstentions and broker non-votes count for quorum purposes but, as indicated above, will not count for voting purposes. Broker non-votes occur when +a broker returns a proxy card but does not have authority to vote on a particular proposal. +Other matters +Any other matters considered at the meeting, including postponement or adjournment, will require the affirmative vote of a majority of the votes cast. +ELECTION OF DIRECTORS +(Item 1 on the Proxy Card) +The Nominating and Corporate Governance Committee of the Board +of Directors has nominated for re-election the following current Directors: James M. Anderson, Dwight E. Ellingwood, John A. Kraeutler, John C. McIlwraith, David C. Phillips and Catherine A. Sazdanoff. +Proxies solicited by the Board will be voted for the election of these nominees. All Directors elected at the Annual Shareholders’ Meeting will +be elected to hold office until the next annual meeting. In voting to elect Directors, shareholders are entitled to cumulate their votes and to give one candidate a number of votes equal to the number of Directors to be elected multiplied by +the number of shares held by the shareholder, or to distribute their votes on the same principle among as many candidates as the shareholder sees fit. In order to invoke cumulative voting, notice of cumulative voting must be given in writing by +a shareholder to the CEO, a Vice President or the Secretary of Meridian not less than 48 hours prior to the Annual Shareholders’ Meeting. The proxies solicited include discretionary authority to cumulate votes. +All Meridian Directors are elected for one-year terms. Personal information on each of our nominees is given below. +If a Director nominee becomes unavailable before the election, your proxy card authorizes us to vote for a replacement nominee if the Board names one. +The Board recommends that shareholders vote FOR each of the following candidates: +James M. Anderson +Director +since 2009 +Age: 74 +James M. Anderson serves as Chairman of the Compensation Committee. He currently serves as Advisor to the President of Cincinnati Children’s Hospital Medical Center +(“CCHMC”), following his retirement as President and Chief Executive Officer of CCHMC on December 31, 2009. From 2006 to 2014, he served as a director of Ameritas Mutual Holding Company and has also served as Chairman of the Board of +the Cincinnati Branch of the Federal Reserve Bank of Cleveland, retiring in 2012. Prior to joining the staff of CCHMC, Mr. Anderson was a partner in the general corporate law department at Taft, Stettinius & Hollister for 24 years +(1968-1977; 1982-1996) and president of U.S. operations at Xomox Corporation, a publicly-traded manufacturer of specialty process controls (1977-1982). Mr. Anderson has also served as director of Gateway Investment Advisors +(1997-2008). The Board believes that Mr. Anderson’s corporate legal experience and his +2 +Table of Contents +experience as CEO of a large health care organization have given him a wealth of insight into various corporate governance and business management issues, which, along with his +status as an independent Director, make him an integral member of the Board. +Dwight E. Ellingwood +Director +since 2014 +Age: 64 +Dwight E. Ellingwood serves as Chairman of the Nominating and Corporate Governance Committee. With 35 years of experience in health care strategy, planning, commercialization +and marketing, he is currently the President of D.E.E. Strategy Consulting, LLC, partnering with leadership in health care, education and the community to develop strategy, relationships and innovative approaches to growth, organization +transformation and collaborations. Mr. Ellingwood previously served as Senior Vice President of Strategy, Communications and Public Affairs for TriHealth in Cincinnati, Ohio (November 2014 – July 2016; and as the Lead Executive for the +Collective Impact on Health, The Health Collaborative (January 2014 – November 2014). From 1997 through 2013, Mr. Ellingwood served as Senior Vice President, Planning and Business Development for Cincinnati Children’s Hospital Medical +Center. The Board believes that the Company will benefit greatly from Mr. Ellingwood’s extensive experience in the health care industry. +John A. Kraeutler +Director +since 1997 +Age: 68 +John A. Kraeutler has more than 40 years of experience in the medical diagnostics industry and joined Meridian as Executive Vice President and Chief Operating Officer in January +1992. In July 1992, Mr. Kraeutler was named President of Meridian, in January 2008, Mr. Kraeutler was named Chief Executive Officer of Meridian, and in September 2014 Mr. Kraeutler was named Chairman of the Board. Before joining Meridian, +Mr. Kraeutler served as Vice President, General Manager for a division of Carter-Wallace, Inc. Prior to that, he held key marketing and technical positions with Becton, Dickinson and Company and Organon, Inc. Mr. Kraeutler’s long-time +service to Meridian, all in an executive capacity, has given him significant insight into, and familiarity with, all aspects of Meridian’s business and the strategic vision for its continued success, and makes his service on the Board extremely +beneficial. +John C. McIlwraith +Director +since 2015 +Age: 57 +John C. McIlwraith co-founded Allos Ventures, a venture capital firm, in March 2010 and has served as a Managing Director there since that time. Prior to founding Allos +Ventures, Mr. McIlwraith was a Managing Director of Blue Chip Venture Company, a Cincinnati-based venture capital and private equity firm, which he joined in 1997. He has served on the board of directors of more than 20 health care or +information technology companies. Prior to 1997, Mr. McIlwraith served as Senior Vice President of Strategic Planning and General Counsel of publicly-traded Quantum Health Resources, Inc., and was a partner in the Jones Day law firm. The +Board believes that Mr. McIlwraith’s years of experience with an extensive number of companies, including health care companies, render his service on the Board valuable to Meridian. +David C. Phillips +Director +since 2000 +Age: 78 +David C. Phillips serves as Chairman of the Audit Committee and Lead Director. Mr. Phillips spent 32 years with Arthur Andersen LLP. His service with this firm included +several managing partner leadership positions. After retiring from Arthur Andersen in 1994, Mr. Phillips became Chief Executive Officer of Downtown Cincinnati, Inc., which is responsible for economic revitalization of Downtown +Cincinnati. Mr. Phillips retired from DCI in 1999 to devote full time to Cincinnati Works, Inc., an organization dedicated to reducing the number of people living below the poverty level by assisting them to strive towards self-sufficiency +through work, and his financial consulting services. Mr. Phillips has also served as a director of Cintas Corporation, retiring in 2012, and as a director of +3 +Table of Contents +Summit Mutual Funds, a registered investment company, through 2009. The Board believes that Mr. Phillips’ years of service as a certified public accountant and trusted +advisor to his clients and business owners, which qualify him as an “audit committee financial expert” under SEC guidelines, give him significant experience in preparing, auditing, analyzing and evaluating financial statements and dealing +with complex accounting and business issues, all of which is valuable to Meridian. +Catherine A. Sazdanoff +Director since 2015 +Age: 60 +Catherine A. Sazdanoff currently serves as Chief Business Officer of Strata Oncology, Inc., a precision medicine company providing no-cost tumor sequencing to advanced cancer +patients and a portfolio of matching clinical trials, having joined Strata in May 2016. Since May 2016, she has also been a member of the Advisory Board of Neurocern, Inc., a privately-held dementia management system company. Immediately +prior to joining Strata, Ms. Sazdanoff held the position of CEO and President of Sazdanoff Consulting LLC, specializing in business development, management and strategy consulting (January 2015 – May 2016). In addition, from January 2015 +to March 2016, she served as Strategic Advisor to mProve Health LLC, a mobile health technology company located in Arlington, Virginia. From 2006 to 2015, Ms. Sazdanoff held a number of executive positions with Takeda Pharmaceutical +International, Inc. (“Takeda”), a wholly-owned subsidiary of Japanese-based Takeda Pharmaceutical Corporation, including Vice President, Head of Corporate Projects (2012-2015), VP, Global Business Development (2011-2013) and VP, Corporate +Development (2010-2011). Ms. Sazdanoff’s time at Takeda was preceded by approximately 22 years with Abbott Laboratories, where she held numerous executive positions. The Board believes that Ms. Sazdanoff’s years of experience in +the pharmaceutical and medical diagnostics industries will make her service on the Board valuable to Meridian. +ADVISORY VOTE ON COMPENSATION OF NAMED EXECUTIVE OFFICERS +(“SAY-ON-PAY” PROPOSAL) +(Item 2 on the Proxy Card) +The +Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd Frank”), enacted in July 2010, requires that we provide our shareholders with the opportunity to vote to approve, on a non-binding, advisory basis, the compensation of our +named executives officers as disclosed in this proxy statement in accordance with the compensation disclosure rules of the Securities and Exchange Commission (“SEC”). Dodd Frank also provides that, at least once every six years, +shareholders must be given the opportunity to vote, on a non-binding, advisory basis, for their preference as to how frequently we should seek future advisory votes on the compensation of our named executive officers. We provided this opportunity to +our shareholders at our 2012 annual meeting where over 90% of our shareholders voted to hold the “say-on-pay” advisory vote annually, in accordance with the recommendation of our Board of Directors. As a result, we are again holding a +say-on-pay advisory vote at our 2017 annual meeting, with the next say-on-pay advisory vote to be held at our 2018 annual meeting. +As +described in detail below under the heading “Compensation Discussion and Analysis” beginning on page 22 of this proxy statement, we seek to closely align the interests of our named executive officers with the interests of our +shareholders. We structure our programs to discourage excessive risk-taking through a balanced use of compensation vehicles and metrics with an overall goal of delivering sustained long-term shareholder value while aligning our executives’ +interests with those of our shareholders. Further, our programs require that a substantial portion of each named executive officer’s compensation be contingent on delivering performance results that benefit our shareholders. Our +compensation programs are designed to reward our named executive officers for the achievement of short-term and long-term strategic and operational goals and the achievement of increased total shareholder return. +The vote on this matter is not intended to address any specific element of compensation; rather, the vote relates to the compensation of our named +executive officers, as described in this proxy statement in +4 +Table of Contents +accordance with the compensation disclosure rules of the SEC. The vote is advisory, which means that the vote is not binding on the Company, our Board of Directors or the Compensation +Committee. The Board and the Compensation Committee will review and consider the voting results when making future decisions regarding our executive compensation program. +Accordingly, we ask our shareholders to approve, on an advisory basis, the compensation of the named executive officers, as disclosed in this proxy statement pursuant to the compensation disclosure rules +of the SEC, including the Compensation Discussion and Analysis, the Summary Compensation Table and the other related tables and disclosure. +The Board of Directors recommends that shareholders vote FOR the approval of the compensation of our named executive officers as disclosed in +this proxy statement. +RATIFICATION OF APPOINTMENT OF ACCOUNTANTS +(Item 3 on the Proxy Card) +Although not +required, we are seeking shareholder ratification of the Audit Committee’s selection of Grant Thornton LLP as Meridian’s independent registered public accountants for the 2017 fiscal year. The affirmative vote of a majority of shares +voting at the meeting is required for ratification. If ratification is not obtained, the Audit Committee intends to continue the employment of Grant Thornton LLP at least through fiscal 2017. Representatives of Grant Thornton LLP are +expected to be present at the Annual Shareholders’ Meeting and will be available to make a statement, if they so desire, and to respond to appropriate questions asked by shareholders. +Principal Accounting Firm Fees +Aggregate fees billed to Meridian by Grant Thornton LLP for +fiscal years 2016 and 2015 are listed below: +2016 +2015 +Audit Fees +$ +569,739 +$ +528,863 +Audit-Related Fees +144,085 +102,988 +Tax Fees +393,669 +205,806 +$ +1,107,493 +$ +837,657 +Audit Fees. Audit fees are the fees billed for professional services rendered by Meridian’s +independent registered public accounting firm for their (i) audit of Meridian’s consolidated annual financial statements for the fiscal years ended September 30, 2016 and 2015, respectively; (ii) reviews of the unaudited quarterly consolidated +financial statements contained in the reports on Form 10-Q filed by Meridian during those years; (iii) completion of audits of Bioline Group statutory accounts in the United Kingdom during fiscal 2016 and 2015; and (iv) reporting on Meridian’s +internal controls during those years. The fiscal 2016 amount also includes fees associated with expanded audit services in connection with the acquisition of Magellan Biosciences, Inc., and its wholly-owned subsidiary Magellan Diagnostics, Inc. +(collectively, “Magellan”). +Audit-Related Fees . Audit-related fees are the fees billed for assurance and +related services that are reasonably related to the performance of the audit or review of Meridian’s financial statements, including the audit of the Savings and Investment Plan (i.e., the 401K Plan). Fees in 2016 also included fees +related to consulting and required standalone audits associated with the Magellan acquisition. +Tax Fees. Tax fees are the fees +billed for tax return preparation and compliance in Australia, England, Germany and the United States, as well as consultation and research on various matters such as state tax issues, international tax issues and transfer +pricing. Additionally, the 2016 tax amount includes fees for services associated with the Magellan acquisition, including pre-acquisition due diligence, tax return preparation, net operating loss limitations analysis and transaction cost +deductibility analysis. +The Board recommends that shareholders vote FOR the ratification of appointment of Grant Thornton LLP as +Meridian’s independent registered public accountants for the 2017 fiscal year. +5 +Table of Contents +REAPPROVAL OF THE MATERIAL TERMS FOR PAYMENT OF PERFORMANCE-BASED INCENTIVE +COMPENSATION UNDER THE MERIDIAN BIOSCIENCE, INC. 2012 STOCK INCENTIVE PLAN +(Item 4 on the Proxy Card) +We are asking our shareholders to reapprove the material terms of the performance goals used for payment of performance-based incentive compensation to +certain covered employees of the Company under our 2012 Stock Incentive Plan (the “2012 Plan”). The 2012 Plan, including the material terms of the performance goals under the 2012 Plan, was approved by our shareholders at our 2012 Annual +Meeting. We are not amending the 2012 Plan nor are we asking shareholders to approve an increase in the number of shares available under the 2012 Plan. +Our sole purpose in asking shareholders to reapprove the material terms of the performance goals used for payment of performance-based compensation under the 2012 Plan is to enable us to continue to grant +incentive compensation structured in a manner intended to qualify as tax-deductible, performance-based compensation under Section 162(m) of the Internal Revenue Code of 1986, as amended (“Section 162(m)”). Our incentive compensation +programs are intended to promote the interests of the Company and its shareholders by rewarding Company executives with incentive compensation based upon the level of achievement of financial, business, operational and other performance objectives +established in accordance with these material terms. +Although the 2012 Plan was previously approved by our shareholders, Section 162(m) +requires shareholders to approve the material terms of the performance goals that may be used for payment of performance-based compensation in the 2012 Plan every five years. +Background +Section 162(m) of the Internal Revenue Code limits publicly-held companies such +as the Company to an annual deduction for federal income tax purposes of $1 million for compensation paid to their covered employees (as defined in Section 162(m), generally the chief executive officer, and the three most highly compensated +officers, other than the chief financial officer). However, performance-based compensation is excluded from this limitation. The 2012 Plan is designed to permit the Compensation Committee to grant awards that are intended to qualify as +performance-based for purposes of satisfying the conditions of Section 162(m). +To qualify as performance-based: +(1) +the compensation must be paid solely on account of the attainment of one or more pre-established, objective performance goals; +(2) +the performance goal under which compensation is paid must be established by a compensation committee comprised solely of two or more directors who qualify as outside directors for +purposes of the exception; +(3) +the material terms under which the compensation is to be paid must be disclosed to and subsequently approved by shareholders of the corporation in a separate vote before payment is +made; and +(4) +the compensation committee must certify in writing before payment of the compensation that the performance goals and any other material terms were in fact +satisfied. +Under Section 162(m), the compensation committee must establish the performance goal in writing within the first 90 days +after the commencement of the performance period, but in no event no later than before 25% of the performance period has lapsed. +In the case +of compensation attributable to stock options, the performance goal requirement (summarized in (1) above) is deemed satisfied, and the certification requirement (summarized in (4) above) is inapplicable, if the grant or award is made by the +Compensation Committee; the plan under which the option is granted states the maximum number of shares with respect to which options may be granted during a specified period to an employee; and under the terms of the option, the amount of +compensation is based solely on an increase in the value of the common stock after the date of grant. +Under the Internal Revenue Code, a +director is an “outside director” of the Company if he or she is not a current employee of the Company; is not a former employee who receives compensation for prior services (other than under a tax-qualified retirement plan); has not been +an officer of the Company; and does not receive, directly or indirectly (including amounts paid to an entity that employs the director or in which the director has at least a five percent +6 +Table of Contents +ownership interest), remuneration from the Company in any capacity other than as a director. +Therefore, we are asking shareholders to reapprove the material terms of the performance goals under which performance-based compensation will be paid under the 2012 Plan. For purposes of +Section 162(m), the material terms of performance-based compensation include (i) the employees eligible to receive such compensation; (ii) a description of the business criteria upon which the performance goals are based (i.e., +performance measures); and (iii) the maximum amount of compensation that can be paid to an employee as performance-based compensation during a specified time period (i.e., award limit). Each of these aspects of the Company’s +performance-based incentive compensation under the 2012 Plan is discussed below. The Compensation Committee has, and will continue to have, the discretion and authority to provide compensation that is not exempt from the limits on deductibility +under Section 162(m) and nothing requires the Company to grant any compensation to any employee that is exempt from the limits on deductibility under Section 162(m). +Set forth below are: (i) a summary of the principal features of the 2012 Plan, including the material terms of the performance-based compensation that may be issued under it; and (ii) a +description of the U.S. federal income tax consequences under the 2012 Plan. +1. Summary of the 2012 Stock Incentive Plan +The following is a summary of the material terms of the 2012 Plan and is qualified in its entirety by the full text of the 2012 Plan, +which is set forth as Annex A to this proxy statement. +Objectives of the 2012 Plan +The Board believes that stock-based awards are an important element of the Company’s compensation programs. The 2012 Plan promotes the Company’s +compensation philosophy and objectives by: (i) providing long-term incentives to those persons with significant responsibility for the success and growth of the Company; (ii) motivating participants to achieve the long-term success and +growth of the Company; (iii) providing a vehicle to tie a significant portion of compensation to the long-term performance of the Company’s shares; (iv) enabling the Company to attract and retain skilled and qualified officers, other +employees, directors, and consultants who are expected to contribute to the Company’s success in a competitive market for such individuals; (v) facilitating ownership of the Company’s shares; and (vi) aligning the personal +interests of officers, employees, and others in the Company’s long-term growth and profitability with the interests of the Company’s shareholders. As of December 1, 2016, approximately 2,940,000 shares remained available for grant +under the 2012 Plan. Information on the total number of shares available under the Company’s existing equity compensation plans and subject to outstanding options and rights is presented in the Equity Compensation Plan Information table on page +11. +The 2012 Plan allows the Company the flexibility to grant a variety of stock and stock-based awards, including stock options and stock +appreciation rights, granted separately or in tandem with each other, and restricted shares and restricted share units, both time vested or conditioned on the attainment of performance goals. All stock incentive awards to the Company’s most +highly compensated executives that may be made over the next few years are expected to be granted under the 2012 Plan. +Shares Subject +to the 2012 Plan +The aggregate number of common shares that may be issued under the 2012 Plan is 3,000,000. The 2012 Plan provides for +appropriate adjustments in the number of shares subject to the 2012 Plan (and other share limitations contained therein and described below) and to grants previously made if there is a share split, dividend, reorganization, or other relevant change +affecting the Company’s corporate structure or its shares. If shares under an award are not issued prior to the expiration, termination, cancellation or forfeiture of the award, then those shares would again be available for inclusion in future +grants. +Closing Quotation +The closing quotation of Meridian common stock on December 1, 2016 was $17.35 per share. +Other Share Limitations +The +maximum number of shares subject to restricted shares or restricted share units that may be granted under the 2012 Plan is 1,000,000. The maximum number of shares subject to stock options that may be granted under the 2012 Plan is 3,000,000. The +maximum number of shares subject to restricted shares or restricted share units that may be granted to an individual in a calendar year is 100,000 shares, and the maximum number of shares subject to stock options or stock appreciation rights that +may be granted to an individual in a calendar year is 300,000 shares. +7 +Table of Contents +Eligible Participants +Officers and key employees of the Company, any consultant to the Company, and the Company’s non-employee directors are eligible to receive awards under the 2012 Plan. Awards are granted to those +persons with significant responsibility for the Company’s success and growth. +Administration +The 2012 Plan is administered by a committee (the “Committee”) consisting of at least three directors appointed by the Board, all of whom meet +the definitions of the terms “outside director” set forth in the regulations under Section 162(m), “independent director” set forth in The Nasdaq Stock Market, Inc. rules, and “non-employee director” set forth in +Rule 16b-3 under the Exchange Act. Unless determined otherwise by the Board, the Compensation Committee will administer the 2012 Plan and has the authority under the 2012 Plan to: (i) select the employees, consultants, and Directors to +whom awards are granted; (ii) determine the type and timing of awards and the appropriate award agreement evidencing each award; (iii) determine the number of shares covered by each award and all other terms and conditions of awards, not +inconsistent with the terms of the 2012 Plan; (iv) determine whether an award is, or is intended to be, performance based compensation within the meaning of 162(m); (v) determine whether terms, conditions, and objectives have been met or, +including, without limitation, making certifications related thereto, if permissible, should be modified or waived, not inconsistent with the terms of the 2012 Plan; (vi) cancel or suspend an award, or determine whether an amount or payment of +an award should be reduced or eliminated; (vii) determine administrative rules, guidelines, and practices governing the 2012 Plan; and (viii) interpret the provisions of and otherwise supervise the administration of the 2012 Plan. +Stock Options +Stock +options granted under the 2012 Plan must be in the form of either ISOs, which meet the requirements of Section 422 of the Code, or nonqualified stock options (“NQSOs”), which do not meet those requirements. The term of a stock option +is fixed by the Committee, but may not exceed ten years, and stock options are exercisable at such time or times as determined by the Committee. The exercise price of a stock option cannot be less than the fair market value of the shares on the date +of grant, which generally means the last closing price of a share as reported on The Nasdaq Stock Market on the date of the grant. The grantee may pay the stock option exercise price either in cash or such other manner authorized in the 2012 Plan or +the applicable award agreement, including the tender of shares. Shares tendered by participants as full or partial payment of the exercise price will not become available for issuance under the 2012 Plan. The 2012 Plan prohibits stock option +repricing. +Code Limitations on Incentive Stock Options +The Code currently places certain limitations on ISO awards. In addition to the other limitations described in the 2012 Plan, an ISO may only be granted to full or part-time employees (including officers +and Directors who are also employees) of the Company. The total fair market value of shares subject to ISOs which are exercisable for the first time by any participant in any given calendar year cannot exceed $100,000 (valued as of the date of +grant). No ISO may be exercisable more than three months following termination of employment for any reason other than death or disability, nor more than one year with respect to disability terminations, or such stock option will no longer qualify +as an ISO and shall be treated as an NQSO. ISOs will also be non-transferable in accordance with the provisions of the Code. Additional restrictions apply to the grant of ISOs to holders of more than 10% of the Company’s outstanding Common +Stock. +Stock Appreciation Rights +The Committee may grant stock appreciation rights (“SAR”) separately or in connection with a stock option granted under the 2012 Plan. If a grantee exercises a SAR, the grantee will receive an +amount equal to the excess of the then-fair market value of the shares with respect to which the SAR is being exercised over the stock option exercise price of the shares, in the case of a SAR in connection with a stock option, or the exercise price +of the SAR, in the case of an independent SAR. The SAR exercise price must be at least 100% of the fair market value of the underlying shares on the date of grant, and the term of such SAR may not exceed ten years. Payment may be made in cash, in +shares, or in a combination of cash and shares, as the Committee determines. If a SAR granted in connection with a stock option is exercised in whole or in part, the right under the related stock option to purchase shares with respect to which the +SAR has been exercised will terminate to the same extent. If a stock option is exercised, any SAR related to the shares purchased upon exercise of the stock option will terminate. To the extent that the number of shares reserved for issuance upon +the +8 +Table of Contents +grant of a SAR exceeds the number actually issued upon exercise of a SAR, such shares will not become available for issuance under the 2012 Plan. The 2012 Plan prohibits SAR repricing. +Restricted Share and Restricted Share Unit Awards +The Committee may grant restricted share awards which consist of shares issued by the Company to a participant for no consideration, or for a purchase price which may be below their fair market value, and +are subject to forfeiture in the event of termination of the participant’s employment prior to vesting and subject to restrictions on sale or other transfer by the participant. Unless otherwise determined by the Committee, participants who hold +restricted shares have voting rights with respect to the shares and have the right to receive dividend distributions, in cash or shares, payable to the extent the restrictions on the applicable restricted shares lapse. The Committee may also grant +restricted share unit awards which are substantially similar to restricted share awards but which generally do not give the participant-holder the rights of a shareholder prior to lapse of the restrictions and, upon such lapse, may be settled in +cash, shares, or a combination of both. The Committee may provide for the payment in cash or shares equal to the amount of dividends paid from time to time on the number of shares that would become payable upon vesting of the restricted share unit +award. The Committee may provide that restrictions lapse after the passage of time (time-vested), upon certain events (such as death, disability, or retirement) or upon the attainment of specified performance objectives (performance-vested). The +Committee may waive any restrictions or accelerate the date or dates on which restrictions lapse except no waiver may apply to a term that is not within the Committee’s discretion to waive under the 2012 Plan. +Performance Based Exception +The +Committee may grant awards in a manner that is intended to qualify for the performance based exception to the deductibility limitations of Section 162(m) and conditioned upon the achievement of performance goals as the Committee shall +determine, in its sole discretion. The performance goals shall be based on one or more performance measures, and the Committee shall specify the time period or periods during which the performance goals must be met. The performance measure(s) may be +described in terms of objectives that are related to the individual participant, the Company, or a subsidiary, division, department, region, function, or business unit of the Company, and shall consist of one or more or any combination of the +following criteria: cash flow, profit, revenue, stock price, market share, sales, net income, operating income, return ratios, earnings per share, earnings (which may include an add back for taxes, interest, and/or depreciation and amortization), +operating earnings, profit margins, earnings per Common Share, favorable comparison to established budgets, return on shareholders’ equity, return on assets, attainment of strategic and operational initiatives, comparisons with various stock +market indices, reduction in costs or a combination of such factors, personal performance measures, working capital, total assets, net assets, return on sales, return on invested capital, gross margin, costs, shareholders’ equity, shareholder +return and/or productivity or productivity improvement. Performance goals may be expressed in absolute terms or relative to the performance of other entities or the prior performance of Meridian. The Committee may adjust or modify the performance +objectives or periods, provided that any such modifications meet the requirements of Section 162(m), to the extent applicable unless the Committee determines that such requirements should not be satisfied. Awards intended to qualify for the +performance based exception shall not vest or be paid until the Committee certifies that the performance goals have been achieved. +Unrestricted Share Awards +The +Committee may grant unrestricted shares on a bonus or other basis for no cash consideration. +Transferability of Awards +No award is transferable other than by will or the laws of descent and distribution, except the Committee may, in its discretion, +provide that an award (other than an ISO) is transferable without consideration to a participant’s family member (as defined in the 2012 Plan), subject to such terms and conditions as the Committee may impose. All awards shall be exercisable, +during the participant’s lifetime, only by the participant or a permitted transferee. +Termination of Employment +Generally, awards are forfeited upon a participant’s termination of employment; however, the 2012 Plan provides that the +Committee: (i) may allow a participant to exercise vested stock options or SARs for a period of time after termination, if not terminated for cause; and (ii) has discretion to provide the extent to which, if any, the vesting of any award +is accelerated or forfeited due to a participant’s, death, disability, or retirement, +9 +Table of Contents +provided that, for awards intended to be performance-based compensation within the meaning of +Section 162(m), no vesting may occur or no distribution may be made prior to the attainment of the performance goals, unless otherwise provided by Section 162(m). +Change in Control +Except as otherwise provided in an award agreement, upon a +“change in control” as defined in the 2012 Plan: (i) all outstanding stock options and SARs automatically become fully exercisable; and (ii) all restricted share and restricted share unit awards automatically become fully vested. +Recoupment Policy +Awards are subject to forfeiture or repayment pursuant to the terms of any applicable compensation recoupment or recovery policy adopted by the Company, +Committee, or Board, including any policy adopted to comply with the rules of any stock exchange on which the shares are traded or the SEC. +Plan Benefits +Below are benefits +which Meridian has awarded and anticipates will be awarded to the individuals and groups under the 2012 Plan in the 2017 fiscal year. +Name and Position +Number of +Stock +Options +Number of Restricted +Stock +Unit Awards +John A. Kraeutler +Chairman of +the Board, Chief Executive Officer and President +100,000 +(1) +50,000 +(2) +Melissa A. Lueke +Executive +Vice President, Chief Financial Officer and Secretary +— +20,000 +(2) +Richard L. Eberly +Executive +Vice President, President, Chief Commercial Officer +— +20,000 +(2) +Lawrence J. Baldini +Executive +Vice President, President, Global Operations +— +20,000 +(2) +Marco G. Calzavara +President +and Managing Director, Meridian Bioscience Europe +— +20,000 +(2) +Executive Group +— +100,000 +(2) +Non-Executive Director Group +60,000 +(3) +— +Non-Executive Officer Employee Group +— +180,000 +(2) +(1) +Granted in connection with Mr. Kraeutler’s Amended and Restated Employment Agreement dated October 3, 2016, with half of the options vesting on September 30, 2017 +and September 30, 2018, respectively, so long as he is employed on such dates. +(2) +Half of each award is time-based, vesting in full November 15, 2020, while the other half is earned 25% per year over four years, subject to attainment of a specified +earnings target for fiscal 2017. If the target is not achieved, the RSUs are forfeited. +(3) +Annual award of 12,000 options upon election to the Board of Directors. +10 +Table of Contents +Equity Compensation Plan Information +The following table presents summary information as of September 30, 2016 with respect to all of our equity compensation plans (number of securities information in thousands): +Plan Category +(a) +Number of +Securities +to be issued upon +exercise +of +outstanding options, +warrants and rights +(b) +Weighted-average +exercise price +of +outstanding +options, warrants +and +rights +(c) +Number of +securities +remaining available for +future issuance under +equity compensation +plans (excluding +securities reflected +in +column (a)) +Equity compensation plans approved by security holders (1) +780 +$ +20.974 +3,267 +Total (2) +780 +$ +20.974 +3,267 +(1) +2004 Equity Compensation Plan, as amended 2012 Stock Incentive Plan +(2) +Weighted-average remaining term of 6.05 years +Discontinuation of 2012 Plan, Amendments, and Award Substitutions +The Board may amend, alter, or discontinue the 2012 Plan at any time, provided that any such amendment, alteration, or discontinuance has been approved by the Company’s shareholders, if shareholder +approval is required under applicable laws, regulations, or exchange requirements (including for the purpose of qualification under Section 162(m) as “performance-based compensation”), and does not materially and adversely impair the +rights of any grantee, without his or her consent, under any award previously granted. The 2012 Plan could be amended without shareholder approval in certain nonmaterial ways that could result in an increased cost to the Company. No Awards shall be +made under the 2012 Plan after the tenth anniversary of the effective date. +2. Certain Federal Tax Consequences with Respect to +Awards +The following information is not intended to be a complete discussion of the U.S. federal income tax consequences of participation +in the 2012 Plan and is qualified in its entirety by references to the Code and the regulations adopted under the Code. The provisions of the Code described in this section include current tax law only and do not reflect any proposals to revise +current tax law. The federal income tax consequences applicable to officers, directors, and other persons who are subject to potential liability under Section 16(b) of the Exchange Act may be different than the federal income tax consequences +applicable to persons who are not subject to Section 16(b). The federal income tax consequences applicable to all persons, whether or not subject to Section 16(b), are described below. +Incentive Stock Options +Generally, under the Code, an optionee will not realize taxable income by reason of the grant or exercise of an ISO granted pursuant to the 2012 Plan +(see, however, discussion of alternative minimum tax below). If an optionee exercises an ISO and does not dispose of the shares until the later of (i) two years from the date the option was granted; and (ii) one year from the date of +exercise, the entire gain, if any, realized upon disposition of such shares will be taxable to the optionee as long-term capital gain, and Meridian will not be entitled to any deduction. If an optionee disposes of the shares within the period of two +years from the date of grant or one year from the date of exercise (a “disqualifying disposition”), the optionee generally will realize ordinary income in the year of disposition and Meridian will receive a +11 +Table of Contents +corresponding deduction in an amount equal to the excess of (i) the lesser of (a) the amount, if any, realized on the disposition and (b) the fair market value of the shares on the +date the option was exercised over (ii) the option price. Any additional gain realized on the disposition will be short-term or long-term capital gain and any loss will be long-term or short-term capital loss. The optionee will be considered to +have disposed of a share if he or she sells, exchanges, makes a gift of or transfers legal title to the share (except transfers, among others, by pledge, on death or to a spouse). If the disposition is by sale or exchange, the optionee’s tax +basis will equal the amount paid for the shares plus any ordinary income realized as a result of the disqualifying disposition. +The exercise +of an ISO may subject the optionee to the so-called “alternative minimum tax” (“AMT”). The amount by which the fair market value of the shares purchased at the time of the exercise exceeds the option exercise price is an +adjustment for purposes of computing the AMT. In the event of a disqualifying disposition of the shares in the same taxable year as exercise of the ISO, no adjustment is then required for purposes of the AMT, but regular income tax, as described +above, may result from such disqualifying disposition. +An optionee who surrenders shares as payment of the exercise price of his or her ISO +generally will not recognize gain or loss on his or her surrender of such shares. The surrender of shares previously acquired upon exercise of an ISO in payment of the exercise price of another Incentive Stock Option, is, however, a +“disposition” of such stock. If the ISO holding period requirements described above have not been satisfied with respect to such stock, such disposition will be a disqualifying disposition that may cause the optionee to recognize ordinary +income as discussed above. +Under the Code, all of the shares received by an optionee upon exercise of an ISO by surrendering shares will be +subject to the Incentive Stock Option holding period requirements. Of those shares, a number of shares (the “Exchange Shares”) equal to the number of shares surrendered by the optionee will have the same tax basis for capital gains +purposes (increased by any ordinary income recognized as a result of a disqualifying disposition of the surrendered shares if they were ISO shares) and the same capital gains holding period as the shares surrendered. For purposes of determining +ordinary income upon a subsequent disqualifying disposition of the Exchange Shares, the amount paid for such shares will be deemed to be the fair market value of the shares surrendered. The balance of the shares received by the optionee will have a +tax basis (and a deemed purchase price) of zero and a capital gains holding period beginning on the date of exercise. The ISO holding period for all shares will be the same as if the option had been exercised for cash. +Non-Qualified Stock Options +Generally, there will be no federal income tax consequences to either the optionee or Meridian on the grant of NQSO pursuant to the 2012 Plan. On the +exercise of a NQSO, the optionee has taxable ordinary income equal to the excess of the fair market value of the shares acquired on the exercise date over the option price of the shares. Meridian will be entitled to a federal income tax deduction +(subject to the limitations contained in Section 162(m)) in an amount equal to such excess, provided that Meridian complies with applicable reporting rules. +Upon the sale of stock acquired by exercise of a NQSO, optionees will realize long-term or short-term capital gain or loss depending upon their holding period for such stock. For individuals, capital +losses are deductible only to the extent of capital gains for the year plus $3,000. An optionee who surrenders shares in payment of the exercise price of a NQSO will not recognize gain or loss with respect to the shares so delivered unless such +shares were acquired pursuant to the exercise of an Incentive Stock Option and the delivery of such shares is a disqualifying disposition. See “Incentive Stock Options” above. The optionee will recognize ordinary income on the exercise of +the NQSO as described above. Of the shares received in such an exchange, that number of shares equal to the number of shares surrendered have the same tax basis and capital gains holding period as the shares surrendered. The balance of shares +received will have a tax basis equal to their fair market value on the date of exercise and the capital gains holding period will begin on the date of exercise. +Stock Appreciation Rights +A participant who is awarded a SAR will not have taxable +income upon the grant of such SAR and Meridian will not be entitled to a tax deduction by reason of such grant. Upon the exercise of a SAR, a participant will recognize taxable ordinary income equal to the amount of cash and the fair market value of +any shares of common stock received. Meridian may generally claim a deduction at that time equal to the amount recognized as ordinary income by the participant. +12 +Table of Contents +Restricted Share and Restricted Share Unit Awards +The taxability of a restricted share and restricted share unit awards to a participant is dependent upon the extent to which the award is restricted on +the date of grant. If the award is either transferable or not subject to a substantial risk of forfeiture, a participant will recognize taxable ordinary income on the date of grant. If the award is both non-transferable and subject to a substantial +risk of forfeiture on the date of grant, then unless an election is made as described below, a participant will not recognize taxable ordinary income on the date of grant, but will at such time or times as an award becomes either transferable or not +subject to a substantial risk of forfeiture in an amount equal to the fair market value of such shares at that time. Within thirty days of receipt of an award that is not transferable and subject to a substantial risk of forfeiture, a participant +may file an election with the Internal Revenue Service to include as taxable ordinary income in the year of receipt an amount equal to the fair market value of the shares subject to the award at the time of receipt. In such event, any subsequent +appreciation in the value of such shares will not be taxable as compensation to a participant upon the vesting of shares subject to the award. However, if shares subject to the award are forfeited subsequent to such election, a participant will not +be entitled to a tax deduction. For purposes of determining the amount of taxable gain or loss upon a subsequent disposition of shares issued pursuant to such an award, the amount of ordinary income to a participant will be treated as the cost basis +for such shares. Shares which are held for more than one year after vesting (or in the event of an election as described above, the date of receipt) generally will qualify for long-term capital gain treatment. Meridian will be entitled to a +deduction in such amount and at such time as ordinary income becomes taxable to the participant. +Application of Section 409A to +Deferred Compensation Arrangements +The 2012 Plan provides that the Committee may permit recipients of Awards to defer the distribution +of all or part of any Award in accordance with such terms and conditions as the Committee shall establish. To the extent that a participant makes such a deferral election, Section 409A of the Code, which was enacted as part of the American Jobs +Creation Act of 2004, subjects the deferral arrangement to certain substantive requirements including (among other items) deferral election and payment timing requirements. In the event that a deferral arrangement fails to comply with Code +Section 409A in form or operation, a participant may become subject to: (i) the imposition of Federal income tax on all amounts deferred in the tax year in which the amounts are deferred (or, if later, in the tax year when the receipt of +the benefits are no longer subject to a substantial risk of forfeiture); (ii) a penalty tax of 20 percent of the includable amount (in addition to the regular income tax at ordinary income rates); and (iii) interest at the +underpayment rate plus 1 percent from the time the amount was first deferred (or, if later, the tax year when the benefits are no longer subject to a substantial risk of forfeiture) until the time the amount is included in income. +Withholding of Tax; Company Deduction +Generally, whenever a participant realizes ordinary income under the 2012 Plan, a corresponding deduction is available to Meridian provided Meridian complies with certain reporting requirements. Under +Section 162(m), however, Meridian will be denied a deduction for certain compensation exceeding $1,000,000 paid to its “covered employees,” who generally are the Chief Executive Officer and the four other highest paid executive +officers, excluding (among other things) certain performance-based compensation. +Meridian is entitled to withhold, or secure payment from a +participant in lieu of withholding, the amount of any tax required by law to be withheld or paid by Meridian with respect to any amount payable or shares issuable under a participant’s award. +Conclusion +The foregoing +summarizes the U.S. federal income tax consequences, and does not include a discussion of state and local income tax or foreign tax consequences of participation in the 2012 Plan. Participants are encouraged to consult their own tax advisors +regarding the federal, state and local tax consequences in their particular circumstances and with respect to their particular awards. +Board Recommendation +The Board +of Directors believes it is in the best interests of the Company and its shareholders to enable the Company to implement incentive compensation arrangements that are intended to qualify as tax-deductible, performance-based compensation under +Section 162(m). The Board of Directors recommends that shareholders approve, for Section 162(m) purposes, the material terms for the payment of performance-based incentive compensation by the Company under the 2012 Plan, as set forth +above. However, shareholder approval of +13 +Table of Contents +the material terms is only one of several requirements under Section 162(m) that must be satisfied for incentive compensation to qualify for the “performance-based” compensation +exemption. The rules and regulations promulgated under Section 162(m) are complicated and may change from time to time, sometimes with retroactive effect. As such, there can be no guarantee that any incentive compensation award intended to +qualify as performance-based compensation within the meaning of Section 162(m) will so qualify. In addition, nothing in this proposal prevents the Company or the Compensation Committee from making any payment or granting awards that do not (and +are not intended to) qualify for tax deductibility under Section 162(m). +The affirmative vote of a majority of votes cast is required +for this proposal to pass. +The Board of Directors recommends that shareholders vote FOR the reapproval of the material terms for +payment of performance-based incentive compensation under the Meridian Bioscience, Inc. 2012 Stock Incentive Plan. +CORPORATE GOVERNANCE +As an Ohio corporation, Meridian is governed by the corporate laws of Ohio. Since its common shares are +publicly traded on the Nasdaq Global Select Market stock exchange, and it files reports with the Securities and Exchange Commission, it is also subject to Nasdaq rules and federal securities laws. +Board Leadership Structure +Governance +of the corporation is placed in the hands of the Directors who, in turn, elect officers to manage the business operations. The Board oversees the management of Meridian on your behalf. The Board reviews Meridian’s long-term strategic +plans and exercises direct decision making authority in all major decisions, such as acquisitions, the declaration of dividends, major capital expenditures and the establishment of certain company policies. +The Board operates and evaluates its performance in accordance with Corporate Governance Guidelines approved by the Board. These Guidelines are +available at our website www.meridianbioscience.com . +The Board of Directors is responsible for evaluating and determining +Meridian’s leadership structure, and believes that at this point in time one individual should serve in the capacities of Chairman of the Board (“Chairman”) and Chief Executive Officer (“CEO”). It is the Board’s +belief that such a structure currently provides the Company with the right foundation to pursue its strategic and operational objectives, while maintaining effective oversight and objective evaluation of the Company’s +performance. Currently, these key executive positions are held by Mr. John A. Kraeutler. As Chairman and CEO, Mr. Kraeutler is responsible for (i) general Board activities including setting agendas for Board meetings and presiding over all +meetings of the Board and shareholders; and (ii) general management, oversight, supervision and control of the business affairs of Meridian, and ensuring that all orders and resolutions of the Board are put into effect. +Mr. David C. Phillips has been appointed by the Board to serve as Lead Director. The Board has determined that the Lead Director shall (i) in +consultation with the non-management Directors, advise the Chairman as to an appropriate schedule of Board meetings and review and provide the Chairman with input regarding the agendas for each Board meeting; (ii) preside at all meetings at which +the Chairman is not present, including Executive Sessions of the non-management Directors, and apprise the Chairman of the issues considered thereat; (iii) call meetings of the non-management Directors when necessary and appropriate; and (iv) +perform such other duties as the Board may from time to time designate. We believe that this leadership structure is currently the most appropriate for Meridian, particularly in light of the requirement noted below that all Committees of the +Board are comprised solely of independent Directors. +In accordance with Nasdaq rules, our Board of Directors affirmatively determines the +independence of each Director and nominee for election as a Director in accordance with the elements of independence set forth in the Nasdaq listing standards +14 +Table of Contents +and Exchange Act rules. Meridian’s Director Independence Standards are available at our website www.meridianbioscience.com . Based on these standards, the Board has +determined that each of the following members of the Board are independent: James M. Anderson, Dwight E. Ellingwood, John C. McIlwraith, David C. Phillips and Catherine A. Sazdanoff. +During fiscal 2016, the Board of Directors met on five occasions and took no actions in writing. The independent Directors plan to meet as necessary during fiscal 2017 without the presence of +management Directors. During fiscal 2016, the independent members of the Board periodically met in executive session without the presence of management Directors following regularly scheduled Board meetings. +Meridian expects all Directors to attend shareholders’ meetings and all current Directors serving at that time were in attendance at the 2016 Annual +Shareholders’ Meeting. +Shareholders may communicate with the full Board or individual Directors on matters concerning Meridian by mail +or through our website, www.meridianbioscience.com , in each case to the attention of the Secretary, the address for whom is set forth on page 39 of this proxy statement. +The Board’s Role in Risk Oversight +The Board of Directors, as a whole and also at the +Committee level, plays a key role in operational risk oversight at Meridian and works with management to understand the risks the Company faces, the steps that management is taking to manage those risks and the level of risk appropriate for the +Company in light of its overall business strategy. The Board approves the high level strategies, financial plans and policies of Meridian, setting the tone and direction for the appropriate levels of risk-taking within the organization. +While overall responsibility for risk oversight rests with the Board, it is the Audit Committee that has been given the primary +responsibility of monitoring and evaluating the adequacy of management’s risk assessment and risk management practices. This role is carried out through its charter-mandated responsibilities related to Meridian’s (i) overall financial +risks and exposures; (ii) financial statement risks and exposures; (iii) financial reporting processes; (iv) compliance with ethics policies, such as the Code of Ethics, Employee Complaint Policy, Security Trading Policies and the Foreign Corrupt +Practices Act Policy; and (v) compliance with governmental and legal regulations, including those contained within the Sarbanes-Oxley Act. The Audit Committee provides regular reports to the full Board and works closely with management to +update the full Board, as necessary, on matters identified through these Committee risk oversight roles. +The Board has adopted a Code of +Ethics applicable to Meridian’s officers, Directors and employees. This Code of Ethics is posted on www.meridianbioscience.com . To the extent permitted by Nasdaq Marketplace Rule 5610, any amendments to or waivers from the Code +of Ethics will be posted on our website within four business days after the date of an amendment. +Committees of the Board of Directors +The Directors have organized themselves into the Committees described below. Each of these Committees has a charter posted on +www.meridianbioscience.com . Meridian does not have an Executive Committee of its Board of Directors. The following table identifies membership and the Chairman of each of the current standing committees of the Board, as well as the +number of times each committee met during the fiscal year. +Director +Audit +Compensation +Nominating +and +Corporate +Governance +James M. Anderson +Member +Chair +Member +Dwight E. Ellingwood +Chair +John C. McIlwraith +Member +Member +David C. Phillips +Chair +Member +Catherine A. Sazdanoff +Member +Meetings in 2016 +9 +6 +4 +15 +Table of Contents +The Audit Committee is comprised of David C. Phillips (Chairman), James M. Anderson and +Catherine A. Sazdanoff (effective January 27, 2016). The Committee met nine times during fiscal 2016 and took no actions in writing. Each member is able to read and understand fundamental financial statements. David C. Phillips has +been designated as an Audit Committee financial expert as that term is defined by the Securities and Exchange Commission. +The Committee +oversees the accounting and financial reporting processes of Meridian and the audits of its financial statements by its independent registered public accounting firm. The Committee is solely responsible for the appointment, compensation, +retention and oversight of Meridian’s independent registered public accounting firm. The Audit Committee also evaluates information received from Meridian’s independent registered public accounting firm and management to determine +whether the independent registered public accounting firm is independent of management. The independent registered public accounting firm reports directly to the Audit Committee. +In addition, the Audit Committee has established procedures for the receipt, retention and treatment of complaints received by Meridian concerning accounting, internal accounting controls or auditing +matters and has established procedures for the confidential and anonymous submission by employees of any concerns they may have regarding questionable accounting or auditing matters. +The Audit Committee, or its Chairman, approves all audit and non-audit services performed for Meridian by its independent registered public accounting firm before those services are commenced. The +Chairman reports to the full Committee at each of its meetings regarding pre-approvals he made since the prior meeting and the Committee approves what he has done between meetings. For these purposes, the Committee or its Chairman is provided +with information as to the nature, extent and purpose of each proposed service, as well as the approximate timeframe and proposed cost arrangements for that service. +As previously noted, the Audit Committee also bears primary risk oversight responsibilities, including responsibilities such as (i) overseeing the risks and exposures relating to the Company’s +financial statements and financial reporting process; (ii) overseeing the Company’s policies and procedures for monitoring and mitigating such risks and exposures; and (iii) reviewing management’s monitoring of the Company’s +compliance with established ethics and legal policies and procedures. +The Committee has submitted the following report for inclusion in this +proxy statement. +REPORT OF THE AUDIT COMMITTEE +On January 26, 2016, the Audit Committee met with representatives of Grant Thornton LLP and Meridian’s internal accountants, at which time the Grant +Thornton LLP representatives presented to the Committee the results of their work, including their review of Meridian’s first quarter consolidated financial statements, and updated the Committee on the new Public Company Accounting Oversight +Board (“PCAOB”) standard regarding related party transactions. In addition, the Committee discussed the timing and scope of the planned Sarbanes-Oxley and internal audit work for fiscal 2016, and received an update regarding certain +of the Company’s information technology (“IT”) and cyber security endeavors. +On April 26, 2016, the Committee met with +representatives of Grant Thornton LLP and Meridian’s internal accountants, at which time the Grant Thornton LLP representatives presented to the Committee the results of their work for their review of Meridian’s second quarter consolidated +financial statements and the timing and scope of their engagement for the audit of Meridian’s fiscal 2016 consolidated financial statements. In addition, the Committee reviewed and discussed the Company’s Global Customs and Import +Policy, which it recommended to the Board for approval, and received an IT security update. +On July 26, 2016, the Committee met with +representatives of Grant Thornton LLP and Meridian’s internal accountants, at which time the Grant Thornton LLP representatives presented to the Committee the results of their work for their review of Meridian’s third quarter consolidated +financial statements. Additionally, the Committee received an update on the Company’s ongoing cyber security review, disaster recovery planning, Magellan integration and activities associated with expanded business in China. +At its meeting on August 31, 2016, the Committee reviewed management’s outlook for 2016 and the Company compliance update related to Sarbanes-Oxley +requirements. The Committee discussed the results of testing performed by an independent organization, which once again concluded that the +16 +Table of Contents +Company had proper and adequate general IT controls in place. The Committee also performed its annual risk assessment and approved related party transactions. In addition, Grant +Thornton LLP representatives reviewed the status of their internal control and interim testing being performed in connection with the fiscal 2016 audit. +At its meeting on November 7, 2016, the Committee reviewed and discussed with management, Grant Thornton LLP and Meridian’s accounting officers the results of the audit for fiscal 2016, including the +financial results. The Committee discussed with Grant Thornton LLP the matters required to be discussed by Auditing Standards No. 16, as amended (PCAOB Interim Auditing Standard AU Section 380, Communication with Audit +Committees ). The Grant Thornton LLP representatives reviewed with the Committee written disclosures required by applicable requirements of the PCAOB regarding the independent accountants’ communications with the Audit Committee +concerning independence, discussed with the Committee the independent accountants’ independence, and presented a letter regarding that matter to the Committee. The Committee discussed with Grant Thornton LLP its independence. In +concluding that the auditors are independent, we determined, among other things, that the non-audit services provided by the auditors were compatible with their independence. In addition, the Committee approved the Audit Committee Charter and +received an IT security update. +Based on the above mentioned review and review of the audited consolidated financial statements, on November +21, 2016, the Committee recommended that the audited consolidated financial statements of Meridian be included in its Annual Report on Form 10-K for the year ended September 30, 2016 for filing with the Securities and Exchange Commission. +During its meetings throughout the year, the Committee reviewed and assessed the Company’s financial statements, financial control, +financial reporting, and certain legal and regulatory risk exposures, including reviewing procedures related to the receipt, retention and treatment of any complaints concerning accounting, internal accounting controls or auditing matters. Also +during its meetings throughout the year, the Chairman of the Audit Committee reported to the full Committee the independent accountants’ fees that had been pre-approved and the Committee approved such fees. Certain fees were pre-approved +by the full Committee. The Committee also reviewed the requirements of and Meridian’s ongoing compliance with Section 404 of the Sarbanes-Oxley Act. +During 2016, under the oversight of the Nominating and Corporate Governance Committee, an evaluation of the Board and Committees was performed by a third party. The results of the evaluation were +reviewed by the Board on November 7, 2016. +Respectfully submitted, +Audit Committee +David C. Phillips (Chairman) +James M. Anderson +Catherine A. Sazdanoff +The Compensation Committee is comprised of James M. Anderson (Chairman), John C. McIlwraith (effective January 27, 2016) and +David C. Phillips and is responsible for establishing compensation for Executive Officers and administering the Company’s compensation plans. This includes establishing salary levels and bonus plans, making bonus and stock-based awards, and +otherwise dealing in all matters concerning compensation of the Executive Officers. During fiscal 2016, the Compensation Committee met six times, and took no actions in writing. +In general, the Compensation Committee annually reviews the Company’s compensation programs and its philosophy in setting performance targets in November of each year. At that time, the Company +provides the Compensation Committee with information on total compensation received for all Executive Officers, including the sources of such compensation, for the immediately preceding fiscal year and recommendations for the current fiscal +year. In discharging the responsibilities of the Board of Directors relating to compensation of the Company’s CEO and other Executive Officers, the purposes of the Compensation Committee are, among others, (i) to review and approve the +compensation of the Company’s CEO and other Executive Officers; and (ii) to oversee the compensation policies and programs of the Company, including stock and benefit plans. The Compensation Committee’s specific functions include adopting, +administering and approving the Company’s incentive compensation and stock plans and awards, including amendments to the plans or awards and performing such duties and responsibilities under the terms of any executive compensation plan, +incentive-compensation plan or equity-based plan. The Compensation Committee has the authority to +17 +Table of Contents +delegate any of its responsibilities to subcommittees as the Compensation Committee may deem appropriate in its sole discretion. The Compensation Committee has the authority to engage consultants +and advisors. The Compensation Committee engaged a compensation consultant in 2016, and this engagement is further described in the Compensation Discussion and Analysis on page 23. In 2016 the Committee also reviewed its Charter and +conducted a self-assessment, facilitated by a third party. +The Compensation Committee determines the amount and mix of compensation +components for the Chairman and CEO, Mr. Kraeutler. As Chairman and CEO, Mr. Kraeutler provides recommendations to the Compensation Committee with respect to the compensation to be paid to the other Named Executive Officers and also provides +limited input regarding the compensation to be paid to the non-employee members of the Board. +To achieve compensation objectives, the +Committee believes it is important to provide competitive levels of compensation to retain the most qualified employees, to recognize individuals who exceed expectations and to closely link executive compensation with corporate performance. The +Committee believes Meridian’s long-term objectives can be achieved through cash incentive compensation plans and equity incentive compensation plans. +The Compensation Committee’s processes and procedures for the consideration and determination of Executive and Director compensation are discussed in the section entitled “Compensation +Discussion and Analysis” in this proxy statement. +Compensation Committee Interlocks and Insider Participation +None of the members of the Compensation Committee has ever been an officer or employee of the Company. None of the members of the Compensation +Committee is or was a participant in any related person transaction in fiscal 2016 (see the section entitled “Transactions With Related Persons” in this proxy statement for a description of our policy on related person +transactions). Lastly, none of the members of the Compensation Committee are an Executive Officer of another entity at which one of our Executive Officers serves on the Board of Directors. No Named Executive Officer of Meridian serves as a +Director or as a member of a committee of any company of which any of the Company’s non-employee Directors are Executive Officers. +The Nominating and Corporate Governance Committee consists of Dwight E. Ellingwood (Chairman), James M. Anderson and John C. +McIlwraith. The Committee met four times during fiscal 2016 and took no actions in writing. On November 9, 2016, the Committee considered and nominated the current Directors for re-election. The Committee identifies qualified nominees +for the Board, determines who will be nominated by the Company for election to the Board and recommends to the full Board any changes in the size of the Board. The Committee also reviewed its Charter and oversaw a third-party-facilitated +self-assessment of the Board and its committees. +In nominating Directors, the Committee takes into account, among other factors which it may +deem appropriate, the judgment, skill, diversity, and business experience of the potential nominee and the needs of the Board as its function relates to the business of the Company. The Committee considers candidates for nomination from a +variety of sources including recommendations of shareholders. Shareholders desiring to submit recommendations for nominations by the Committee should direct them to the Chairman of the Nominating and Corporate Governance Committee in care of +the Company at its address shown on the cover page of this proxy statement. +The Nominating and Corporate Governance Committee will assess the +qualifications of all candidates for the Board on an equal basis. In identifying and considering candidates for nomination to the Board, the Committee considers, among other factors, quality of experience, the needs of the Company and the range +of talent and experience currently represented on the Board. The Committee evaluates such factors, among others, and does not assign any particular weighting or priority to any of these factors, nor does the Committee have a formal policy with +respect to diversity. However, the Committee, working with the Board, considers the diversity of all of the Company’s stakeholders – including shareholders, employees and customers – when engaging in corporate governance +discussions. +18 +Table of Contents +DIRECTORS AND EXECUTIVE OFFICERS +This table lists the Executive Officers and Directors of Meridian and shows the number of shares beneficially owned, as determined under SEC rules, on +November 30, 2016. Beneficial ownership includes any shares as to which the individual has sole or shared voting or investment power and also any shares that the individual has the right to acquire within 60 days. +Common Stock +Beneficially +Owned +Name +Position +Amount 1 +Percentage +John A. Kraeutler +Chairman of the Board, +Chief Executive Officer, President and Director +373,962 +* +Richard L. Eberly 2 +Executive Vice President, +President, Chief Commercial Officer +12,219 +* +Lawrence J. Baldini 3 +Executive Vice President, +President, Global Operations +55,434 +* +Melissa A. Lueke 4 +Executive Vice President, +Chief Financial Officer and Secretary +115,071 +* +Vecheslav A. Elagin 5 +Executive Vice President, +Research & Development +29,886 +* +Susan D. Rolih 6 +Executive Vice President, +Global Regulatory & Quality Systems +121,110 +* +Amy M. Winslow 7 +Executive Vice President, +President and Chief Executive Officer, Magellan +— +* +Marco G. Calzavara 8 +President and Managing Director, +Meridian Bioscience Europe +12,424 +* +James M. Anderson 9, 10, 11 +Director +75,000 +* +Dwight E. Ellingwood 11 +Director +29,500 +* +John C. McIlwraith 10, 11 +Director +20,000 +* +David C. Phillips 9, 10 +Director +109,626 +* +Catherine A. Sazdanoff 9 +Director +24,700 +* +All Executive Officers and Directors as a Group +978,932 +2.3 +% +1 +Includes options +currently exercisable and/or exercisable within 60 days for Mr. Kraeutler of 150,000 shares; Mr. Eberly of 11,500 shares; Mr. Baldini of 500 shares; Dr. Elagin of 17,000 shares; Ms. Rolih of 4,950 shares; Mr. Anderson of 64,000 shares; Mr. +Ellingwood of 22,500 shares; Mr. McIlwraith of 17,000 shares; Mr. Phillips of 71,500 shares; and Ms. Sazdanoff of 17,000 shares. +2 +Richard L. Eberly was appointed Vice President of Sales and Marketing in January 1997, Executive Vice President in May 2000, Executive Vice President, +General Manager of Meridian Life Science in February 2003, Executive Vice President and President Meridian Life Science in October 2005 and Chief Commercial Officer in February 2011. In October 2012, he was re-appointed President of Meridian Life +Science, and in July 2016 was appointed Executive Vice President & President, Chief Commercial Officer. He has approximately 30 years of experience in the medical +19 +Table of Contents +diagnostics industry and joined Meridian in March 1995. Prior to his appointment to Vice President of Sales and Marketing, Mr. Eberly served as the Director of Sales for +Meridian. Before joining Meridian, he held key sales and marketing positions at Abbott Diagnostics, Division of Abbott Laboratories. Age: 55 +3 +Lawrence J. Baldini was appointed Vice President of Operations in April 2001, Executive Vice President, Operations and Information Systems in October +2005 and Executive Vice President & President, Global Operations in March 2016. Before joining Meridian, Mr. Baldini held various operations management positions with Instrumentation Laboratories and Fisher Scientific. Age: 57 +4 +Melissa A. Lueke was appointed Vice President, Chief Financial Officer and Secretary in January 2001 and Executive Vice President, Chief Financial +Officer and Secretary in November 2009. Prior to her appointment, Ms. Lueke served as Meridian’s Controller since March 2000 and Acting Secretary from July 20, 2000 to January 23, 2001. Before joining Meridian, Ms. Lueke was employed +by Arthur Andersen LLP from June 1985 to January 1999, most recently as a Senior Audit Manager. Age: 53 +5 +Vecheslav A. Elagin joined Meridian in August 2009 as Vice President of Research and Development, was appointed Senior Vice President of Research and +Development in November 2011, and promoted to Executive Vice President of Research and Development in June 2012. Before joining Meridian, Dr. Elagin held various executive research and development positions, most recently with Madison Life +Science (August 2008 – August 2009), EraGen Biosciences (May 2006 – August 2008) and Third Wave Technologies (June 2003 – May 2006). Age: 49 +6 +Susan D. Rolih was appointed Vice President of Regulatory Affairs and Quality Assurance in May 2001, Senior Vice President of Regulatory Affairs and +Quality Assurance in April 2008, Executive Vice President of Regulatory and Quality Systems in April 2013, and Executive Vice President, Global Regulatory and Quality Systems in November 2016. Before joining Meridian, Ms. Rolih held various +regulatory and quality positions with Immucor, Inc. Age: 67 +7 +Amy M. Winslow was appointed Executive Vice President & President and Chief Executive Officer of Magellan in March 2016 at the time Meridian +acquired Magellan, having served as President and Chief Executive Officer of Magellan since October 2011. With over 20 years of experience in health care, prior to joining Magellan, Ms. Winslow served as President of MW Advisory (June 2004 +– October 2011) and Vice President, Marketing for Athena Diagnostics (August 1999 – June 2004). Age: 45 +8 +Marco G. Calzavara, founder of the Bioline Group, which Meridian acquired July 20, 2010, was appointed President and Managing Director of Meridian +Bioscience Europe in April 2011. Prior to this appointment, Mr. Calzavara had served as President of the Bioline Group of Companies since 1992. Age: 62 +9 +Audit Committee +Member. +10 +Compensation +Committee Member. +11 +Nominating and +Corporate Governance Committee Member. +* +Less than one percent. +20 +Table of Contents +SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS +The following table lists the persons known by the Company to be the beneficial owners of more than five percent of the Company’s Common Stock as of +November 30, 2016, unless otherwise noted. Beneficial ownership includes any shares as to which the individual has sole or shared voting or investment power. +Name and address of beneficial owner +Amount and nature +of +beneficial ownership +Percent of +class 1 +Brown Capital Management, LLC +1201 N. Calvert Street +Baltimore, MD 21202 +5,507,476 +13.10 +BlackRock, Inc. +55 East 52 nd Street +New York, NY 10055 +4,213,063 +10.00 +The Vanguard Group, Inc. +100 Vanguard Blvd. +Malvern, PA 19355 +3,165,099 +7.52 +T. Rowe Price Associates, Inc. 2 +100 E. Pratt Street +Baltimore, MD 21202 +2,583,155 +6.10 +Schroder Investment Management Ltd. +875 Third Ave, 22 nd Floor +New York, NY 10022 +2,155,744 +5.13 +1 +For the beneficial +owners listed in the table, the percentages listed reflect disclosures in the Schedule 13Gs most recently filed by each beneficial owner with the SEC as of the date of this proxy statement. +2 +Per correspondence +from T. Rowe Price Associates, Inc., (“Price Associates”), these securities are owned by various individual and institutional investors which Price Associates serves as an investment adviser with power to direct investments and/or sole +power to vote the securities. For the purposes of the reporting requirements of the Securities Exchange Act of 1934, Price Associates is deemed to be a beneficial owner of such securities; however, Price Associates expressly disclaims that it +is, in fact, the beneficial owner of such securities. +SECTION 16(A) BENEFICIAL OWNERSHIP +REPORTING COMPLIANCE +Section 16 of the Securities Exchange Act of 1934 requires Meridian’s Executive Officers, Directors and persons +who own more than ten percent of a registered class of Meridian’s equity securities to file reports of ownership and changes in ownership with the SEC. Based on a review of the copies of such forms received by it, Meridian believes that +during the last fiscal year, all of its Executive Officers, Directors and ten percent stockholders complied with the Section 16 reporting requirements, with the exceptions that (i) one late ownership report was filed for each of Ms. Lueke and Ms. +Rolih with respect to the exercise of stock options; (ii) one late ownership report was filed for independent Director McIlwraith with respect to the purchase of shares; and (iii) one late ownership report was filed for each of Mr. Baldini, Mr. +Elagin, Mr. Kraeutler, Ms. Lueke, Ms. Rolih and Mr. Shaughnessy with respect to stock options granted in connection with the Magellan transaction. In making these statements, Meridian has relied upon examination of the copies of Forms 3, 4 and +5, and amendments thereto, and the written representation of its Directors and Executive Officers. +21 +Table of Contents +TRANSACTIONS WITH RELATED PERSONS +During fiscal 2016, the Company leased certain office space from an entity controlled by Marco G. Calzavara, President and Managing Director, Meridian +Bioscience Europe. Payments made under such arrangements during fiscal 2016 totaled approximately $170,000. +Nasdaq rules require the +Company to conduct an appropriate review of related party transactions required to be disclosed by the Company pursuant to SEC Regulation S-K Item 404 for potential conflict of interest situations on an ongoing basis and that all such transactions +must be approved by the Audit Committee or another Committee comprised of independent Directors. As a result, the Audit Committee annually reviews all such related party transactions and approves each related party transaction if it determines +that it is in the best interests of the Company. Additionally, the Audit Committee’s Charter provides it the authority to review, approve and monitor transactions involving the Company and “related persons” (Directors and +Executive Officers or their immediate family members, or shareholders owning five percent or greater of the Company’s outstanding stock). This also covers any related person transaction that meets the minimum threshold for disclosure in +the proxy statement under the relevant SEC rules (generally, transactions involving amounts exceeding $120,000 in which a related person has a direct or indirect material interest). In considering the transaction, the Audit Committee may +consider all relevant factors, including, as applicable: (i) the Company’s business rationale for entering into the transaction; (ii) the alternatives to entering into a related person transaction; (iii) whether the transaction is on terms +comparable to those available to third parties, or in the case of employment relationships, to employees generally; (iv) the potential for the transaction to lead to an actual or apparent conflict of interest and any safeguards imposed to prevent +such actual or apparent conflicts; and (v) the overall fairness of the transaction to the Company. This policy is included in the Company’s Employee Handbook. The approval of such related person transactions are evidenced by internal +Company resolutions or memoranda. +COMPENSATION DISCUSSION AND ANALYSIS +Throughout this proxy statement, the individuals who served as the Company’s CEO and Chief Financial Officer during fiscal 2016, as well as the other +individuals listed in the Summary Compensation Table below, are referred to as the “Named Executive Officers” or “NEOs.” +Executive Summary +Most of our +compensation decisions are made in the first few months of our fiscal year, after review of our performance and the performance of our CEO and the other executive officers. We believe the compensation of all of our named executive officers for 2016 +aligned well with both our performance in 2016 and the objectives of our executive compensation policies: +• +From fiscal 2015 to fiscal 2016, total cash compensation for Mr. Kraeutler increased 2%, and increased 6% to 11% for the other NEOs. These +increases include increased compensation for two NEOs receiving promotions during fiscal 2016, which was reviewed by the Compensation Committee. +• +Our net revenue for 2016 was $196.1 million, an increase of 1%, compared to 2015 net revenue. Net earnings for 2016 were $32.2 million, a decrease +of 9% compared to 2015 net earnings. Both revenues and net earnings failed to meet Company-provided guidance. Additionally, operating income for 2016 decreased 8%. +• +In recognition of completing the acquisition of Magellan, a number of employees, including four NEOs were granted time-based stock options vesting 25% +per year. See the “Summary Compensation Table” and “Grants of Plan-Based Awards” on pages 32 and 34, respectively, for details. +• +In light of our financial results also not meeting the minimum threshold targets in our Officer’s Performance Compensation Plan or our +performance-based long-term equity incentive awards, no NEOs received cash bonus payments under the Officer’s Performance Compensation Plan. Furthermore, no performance-based restricted stock unit awards vested for any NEOs. +• +Based on our financial results in fiscal 2016 and the individual evaluations of the NEOs by the Compensation Committee, with respect to +Mr. Kraeutler, and the Compensation Committee and Mr. Kraeutler, with respect to the other NEOs, our NEOs received no merit increases in their base salaries for 2017. Base salaries across all Meridian employees below the executive +level are expected to increase approximately 3% effective January 1, 2017. +22 +Table of Contents +• +Effective October 1, 2016, NEO base salaries were increased in an amount commensurate with previously-provided auto and professional allowances +(reflected in All Other Compensation within the Summary Compensation Table). Additionally, as a result of a compensation study-driven market adjustment and a promotion, two NEOs received base salary increases effective in fiscal 2017 of 6% and +9%. +Compensation Philosophy and Objectives +Our policies regarding executive compensation programs are intended to balance motivating, rewarding and retaining executives with a competitive compensation package, and maximizing long-term shareholder +value by linking compensation earned to both individual and Company performance. Compensation typically includes base salary, eligibility for annual cash bonuses and stock-based awards contingent on Company performance and/or future service, +retirement plan contributions and other Company-sponsored benefits. A significant portion of each Executive Officer’s cash bonus and stock-based awards are dependent upon achieving business and financial goals and realizing other +performance objectives. Examples of Company performance metrics for which we measure achievement are net revenue growth, net earnings growth and profit margins (gross profit, operating income and net earnings). Annual performance targets +for these metrics are set after consideration of industry averages and historical results. Our compensation programs are intended to reward individual contributions (for example, bringing a new product to market) and Company-wide achievement of +performance metric targets (for example, overall revenue and net earnings growth). +The Compensation Committee is responsible for ongoing +oversight of compliance with this compensation philosophy. The Compensation Committee ensures that the total compensation paid to the NEOs is fair, reasonable and competitive. +At our 2016 annual meeting, Meridian once again held an advisory vote on the compensation of its NEOs, commonly referred to as a say-on-pay vote. Our shareholders approved the compensation of our NEOs, +with approximately 95% of votes cast in favor of our 2016 say-on-pay resolution. Based on the results of the 2016 say-on-pay vote, the Compensation Committee concluded that the compensation paid to the NEOs and Meridian’s overall pay practices +received strong shareholder support and do not require substantial revision to address shareholder concerns. +Establishing Compensation +Levels +Compensation levels for the NEOs are driven by market pay levels, the NEO’s leadership performance and overall Company +performance. The Compensation Committee relies upon a combination of judgment (which is necessarily subjective) and guidelines (discussed herein), as well as market data, in determining the amount and mix of compensation components for the +Chairman and CEO. The compensation levels for the other NEOs are recommended by the CEO. The Compensation Committee has discretion to follow or modify such recommended levels of compensation. The Compensation Committee considers the +input of our Chairman and CEO as a crucial component of its compensation processes and decisions relating to NEO compensation. The Compensation Committee is not obligated to follow his recommendations. The Company does not engage in strict +numerical benchmarking in determining the percentage modifications for the NEOs. +Market Pay Levels and Role of the Compensation Consultant +Under its charter, the Compensation Committee is authorized to engage outside advisors at the Company’s expense. In fiscal 2016, +the Compensation Committee engaged Arnosti Consulting, Inc. (“Arnosti”) to act as the Committee’s independent compensation consultant to assist the Committee with ensuring that the designs of the Company’s executive compensation +programs are strongly aligned with Company performance. The Committee assessed the independence of Arnosti and concluded that no conflict of interest existed that would prevent it from providing independent advice to the Committee regarding +executive compensation matters. The consultant delivered to the Committee advisory reports that benchmarked elements of total compensation of the Company’s NEOs. Additionally, the consultant provided advice to the Committee as to the +structure, content and performance metrics of the Company’s cash incentive and long-term equity incentive plans for the Company’s NEOs. +Market pay levels for the NEOs are determined annually in November for the upcoming calendar year and the consultant provided information on certain market pay levels. +23 +Table of Contents +Company Performance +We believe that certain Company performance metrics drive shareholder value through stock price appreciation and dividends. We take this belief into account in setting performance metric targets that +are considered in establishing the performance-based component of our compensation programs. Performance metric targets that are taken into consideration in our compensation programs include net revenue growth, earnings growth and profit +margins. These targets are set after consideration of industry averages and historical results. Also taken into consideration in evaluating Company performance in our compensation programs are the market penetration of our +illumigene molecular platform, the build-out of the related product menu and success of activities related to suitable acquisition targets. +Our cash bonus and a portion of our stock-based award programs operate under the fundamental principle that minimum levels of net earnings be achieved prior to any compensation being earned under these +programs. Net earnings targets are determined based on what the Company believes to be meaningful growth rates relative to its industry peers and the Company’s performance objectives. Stock-based awards granted under performance +programs are generally forfeited if the Company does not meet its minimum earnings targets as specified in each grant. +Recovery of Prior +Awards +Except as provided by applicable laws and regulations, we do not have a policy with respect to adjustment or recovery of awards or +payments if relevant Company performance measures upon which previous awards were based are restated or otherwise adjusted in a manner that would reduce the size of such award or payment. Under those circumstances, we expect that the +Compensation Committee and the Board would evaluate whether compensation adjustments were appropriate based upon the facts and circumstances surrounding the applicable restatement or adjustment. +Tally Sheets +In setting the NEOs’ +compensation, the Compensation Committee reviews all components of such compensation through the use of tally sheets. These tally sheets provide the amount of total compensation paid or earned by each NEO based on his or her base salary, cash +bonus, stock-based awards and retirement contributions. The tally sheets reviewed provide all of the information that is reflected in the Summary Compensation Table. The review by the Compensation Committee analyzes how changes in any +element of compensation would impact other elements, particularly severance or change in control benefits, if applicable to the executive. Following (i) increases for two NEOs during fiscal 2016 in connection with their promotions; and (ii) +October 1, 2016 increases for NEOs in an amount commensurate with previously-provided auto and professional allowances, the analysis of the tally sheets conducted in November 2016 resulted in base salary increases of 6% and 9% for two NEOs, along +with the granting of 10,000 stock options each that vest 25% each year from the date of grant – one resulting from a compensation study-driven market adjustment, and one resulting from a promotion. The analysis also resulted in grants of +equity awards for all executives, including NEOs, at a level consistent with the grants made in November 2015. Such analysis has become an important component in the Compensation Committee’s review of executive compensation as the tally +sheet allows the Compensation Committee to consider an executive’s overall compensation rather than only one or two specific components of an executive’s compensation. This allows the Compensation Committee to make compensation +decisions and evaluate management recommendations based on a complete analysis of an executive’s total compensation. +24 +Table of Contents +Below is a summary of practices we have and practices we refrain from that highlight certain features in our +compensation programs. +What Meridian Does +Pays for performance . A significant portion of executive pay is not guaranteed, but rather is at-risk and tied to the achievement of various performance metrics that are disclosed to shareholders. +Sets NEO salary guidelines on an annual basis . The Company generally considers NEO salaries as part of its annual performance review +process in an effort to be responsive to industry trends. +Balances short-term and long-term incentives . The incentive programs provide +an appropriate balance of annual and longer-term incentives, with long term incentive compensation comprising a substantial percentage of total target compensation. +Uses multiple performance metrics. These mitigate the risk of the undue influence of a single metric by utilizing multiple performance measures for annual incentive awards and multi-year vesting +for long-term incentive awards. +Caps award payouts. Amounts or shares that can be earned under the 2012 Stock Incentive Plan are +capped, both for stock options and for full value awards. +Uses market-based approach for determining NEO target pay. Target +compensation for NEOs is set after consideration of market data on compensation at other peer companies. +Conducts a risk assessment. +The Committee annually conducts a compensation risk assessment to determine whether the compensation policies and practices, or components thereof, create risks that are reasonably likely to have a material adverse effect on the Company. +Acts through an independent Compensation Committee. The Committee consists entirely of independent directors. +What Meridian Does Not Do +Provide excise tax gross-up payments . The Company will not enter into any new contractual agreements that include excise tax gross-up payments. +Reprice options . The Company has never repriced or otherwise reduced the per-share exercise price of any outstanding stock options. +Repricing of stock options is not permitted under the 2012 Stock Incentive Plan without first obtaining approval from the stockholders of the Company. The Company and the Committee will not reprice underwater options without the consent of the +Company’s stockholders. +Allow pledging or hedging of shares . The Company’s insider trading policy places restrictions on the +Company’s directors and executive officers regarding entering into hedging transactions with respect to the Company’s securities and from holding the Company’s securities in margin accounts or otherwise pledging such securities as +collateral for loans. No directors or executive officers have in place any pledges or hedging transactions. +25 +Table of Contents +Components of Executive Compensation +Meridian’s executive compensation and benefits packages consist of: base salary, cash bonuses, long-term equity incentive awards, Company-sponsored benefit and retirement plans, and change in control +severance benefits. Each of these components has a certain risk profile. +Element +Form of Compensation +Purpose +Risk Profile +Base Salaries +Cash +Provides competitive, fixed compensation to attract and retain exceptional executive talent +Low to moderate +Annual Cash Incentives +Cash +Provides a direct financial incentive to achieve corporate and individual operating goals +Moderate to high +Long-Term Equity Incentives +Non-qualified stock options and/or restricted stock units +Encourages Executive Officers to build and maintain a long-term equity ownership position in Meridian so that their interests are aligned with our shareholders +High +Health, Retirement and Other Benefits +Eligibility to participate in benefit plans generally available to our employees, including retirement plan contributions, and premiums paid on disability and life insurance +policies +Benefit plans are part of a broad-based employee benefits program providing competitive benefits to our Executive Officers +Low +Change in Control Severance Benefits +Cash and continuation of certain benefits +Encourages Executive Officers to maximize value for shareholders in the event that the Company becomes subject to a change in control transaction +Moderate to high +The Compensation Committee has reviewed the risk profile of the components of the Company’s executive compensation +program, including the performance objectives and target levels used in connection with incentive awards, and has considered the risks an NEO might be incentivized to take with respect to such components. When establishing the mix among these +components, the Compensation Committee is careful not to encourage excessive risk taking. Specifically, the performance objectives contained in the Company’s executive compensation programs have been balanced between annual and long-term +incentive compensation to ensure that both components are aligned and consistent with our long- +26 +Table of Contents +term business plan and that our overall mix of equity-based awards has been allocated to promote an appropriate combination of incentive and retention objectives. +The Compensation Committee believes that the Company’s executive compensation program does not incentivize the NEOs to engage in business activities +or other behavior that would threaten the value of the Company or the investments of its shareholders. +The Compensation Committee continues +to monitor and evaluate on an on-going basis the mix of compensation, especially equity compensation, awarded to the NEOs, and the extent to which such compensation aligns the interests of the NEOs with those of the Company’s shareholders. In +connection with this practice, the Compensation Committee has, from time to time, reconsidered the structure of the Company’s executive compensation program and the relative weighting of various compensation elements. +Interplay of Compensation Elements +We +believe that each element of our compensation program plays a substantial role in maximizing long-term value for our shareholders and employees because of the significant emphasis on pay-for-performance principles. In fiscal 2016, we did not +reach our minimum net earnings target required for vesting in performance-based equity awards, and therefore, our NEOs did not earn such awards granted in November 2015. +We strive to achieve an appropriate mix between equity incentive awards and cash payments in order to meet our objectives. We use the Officer’s Performance Compensation Plan as another tool to +assess an executive’s total pay opportunities and whether we have provided the appropriate incentives to accomplish our compensation objectives. Our mix of compensation elements is designed to reward recent results and motivate long-term +performance through a combination of cash and stock-based awards. We also seek to balance compensation elements that are based on financial, operational and strategic metrics with others that are based on the performance of Meridian shares via +application of the personal multiplier component of cash bonus for the Chairman and CEO. We believe the most important indicator of whether our compensation objectives are being met is our ability to motivate our NEOs to deliver superior +performance and retain them to continue their careers with Meridian on a cost-effective basis. +Base Salary +The Company pays salaries that are designed to attract, motivate and retain experienced executives who will drive superior Company performance and +maintain long-term shareholder value. The Compensation Committee considers recommendations from the Chairman and CEO and approves annual base salaries that are commensurate with each NEO’s responsibilities and performance, as well as +Company performance in the prior fiscal year, which are competitive with similar positions locally and in the industry. Salaries are set on a calendar year basis and therefore salaries paid in the first three months of each fiscal year +beginning on the first day of October are set in the prior fiscal year. +For 2017, the Chairman and CEO, Mr. Kraeutler, provided a +recommendation to the Compensation Committee of no salary increases for the NEOs, other than the previously-noted increases related to a compensation study-driven market adjustment and a promotion. The Compensation Committee duly considered and +followed these recommendations. +Cash Bonuses +The Compensation Committee believes that employees should be rewarded based on Company results and individual performance. The Compensation Committee awards cash bonuses pursuant to the +Officer’s Performance Compensation Plan (the “Plan”) contingent upon Company performance. Cash bonuses, if earned, are paid in the first quarter of each fiscal year, for the prior year’s performance. Cash bonuses are +subject to the Company’s attainment of a specific net earnings target, after inclusion of the compensation expense related to such bonuses. Should the Company fail to reach such net earnings target, no cash bonuses are paid pursuant to the +Plan. +Cash bonuses are also subject to the application of a personal achievement multiplier as recommended by management (recommended by CEO +for other NEOs), except that no such recommendation is made by management for the Chairman and CEO, Mr. Kraeutler. In evaluating the personal achievement multipliers, the Compensation Committee takes into consideration the net revenue and net +earnings levels, net revenue and net earnings growth rates and achievement against plan, profit margins and improvements therein, and individual achievements and leadership of the NEOs. Instead of establishing specific quantifiable targets for +each of these factors, the Compensation Committee exercises its discretion in using the factors to determine each NEO’s personal achievement multiplier. Specifically, the +27 +Table of Contents +Compensation Committee does not establish measurable objective targets in connection with its deliberation of such factors. The adoption and application of such factors are intended to be +discretionary and subjective so that the Compensation Committee can use its business judgment to provide an appropriate incentive and award for performance that sustains and enhances long-term shareholder value. The Compensation Committee +believes that such discretionary and subjective components allow it to respond appropriately as business and strategic environments change and are appropriate for the size of the Company. The personal achievement multiplier choices range from 0 +(zero) to 2.0. For example, a personal achievement multiplier of 1.25 would result in a bonus payout percentage of 37.5% when applied to a 30% base salary component. A personal achievement multiplier of 0 (zero) would result in no bonus +payout and is intended for circumstances where the NEO’s performance is far less than satisfactory. +Company +Performance Component and 2016 Results +The 2016 Officer’s Performance Compensation Plan, which was similar in form to the plans +utilized over the last several fiscal years, provided for the granting of cash bonuses as a percentage of base salary if 2016 net earnings reached at least $36,700,000. For 2016, actual net earnings were below the minimum threshold, and +therefore, there were no cash bonuses awarded to the NEOs for fiscal 2016 performance pursuant to the Plan. +2017 +At its November 9, 2016 meeting, the Compensation Committee approved the Officer’s Performance Compensation Plan for fiscal +2017. The 2017 Plan will award cash bonuses if 2017 net earnings reach $34,500,000, which the Compensation Committee believes is a meaningful increase from 2016 net earnings of $32,229,000. Consistent with 2016, the 2017 Plan also provides +for increasing bonus awards tied to increasing net earnings beyond the initial minimum level. The 2017 Plan includes six net earnings thresholds ranging from a low of $34,500,000 to a high of $36,800,000. These six net earnings thresholds +represent growth over 2016 net earnings ranging from a low of approximately 7% to a high of approximately 14%. The corresponding potential bonus payouts as a percent of base salary, before application of the personal multiplier, for the six net +earnings thresholds range from a low of 10% to a high of 60%. Depending on the level of net earnings achieved and the application of the personal multiplier, cash bonuses for the NEOs could range from 0% to 120% of base salary, with a target of +30% to 40% being modeled. +Management and the Compensation Committee have intended that the earnings thresholds should be set at meaningful +rates so that management must be diligent, focused and effective in order to achieve these goals. In other words, the Company and management believed at the time of the establishment of these thresholds that they would be challenging to achieve +and would require substantial efforts from management. To this end, the Compensation Committee tends to set the thresholds consistent with the earnings guidance range requiring that the low end of guidance is achieved before bonuses are paid. +Long-Term Incentive Awards +The Compensation Committee believes that equity-based compensation encourages employees to commit to the long-term goals of the Company. This ensures +that the Company’s NEOs have a stake in the long-term creation of shareholder value. A significant portion of the awards is performance-based, meaning the NEOs’ ability to vest in that portion of awards is contingent upon the Company +achieving a minimum level of net earnings. +For fiscal 2017, at its meeting on November 9, 2016, the Compensation Committee approved two types +of restricted stock unit awards. The first type of restricted stock unit award is performance-based, where the NEOs’ ability to vest in such awards is contingent upon the Company reaching a minimum level of net earnings of $36,800,000 for +fiscal 2017. This award would vest 25% per year over four years, if earned. The second type of restricted stock award is time-based and fully vests after four years. The Compensation Committee believes that this latter award is +appropriate to encourage retention of top management talent. +Although Meridian does not have a written policy regarding the timing or +practices related to granting equity awards, neither Meridian nor the Compensation Committee engages in spring-loading, back-dating or bullet-dodging practices. Equity awards are generally granted at a regularly scheduled meeting of the +Compensation Committee in the first quarter of the fiscal year. Stock options are granted at the closing market price on the date of grant, pursuant to the 2012 Stock Incentive Plan. Prior to the exercise of an option, the holder has no +rights as a stockholder with respect to the shares subject to such option, including no rights to vote or to receive dividends. Prior to vesting of restricted stock units noted above, the holder will receive dividend +28 +Table of Contents +equivalent payments. Restricted stock units do not have voting rights. +Equity +Ownership Guidelines +Consistent with its compensation philosophy and the principle of aligning the interests of management and directors +of the Company with the interests of its stockholders, the Board of Directors has implemented stock ownership guidelines for “Specified Officers” (defined in the guidelines as those officers required to file beneficial ownership reports +with the SEC) and non-employee directors. Under the guidelines, the Company’s Chief Executive Officer is required to own an amount of our common stock (including vested and non-vested restricted stock units) which is equal to or exceeds three +times such Chief Executive Officer’s annual base salary, and Specified Officers other than the Chief Executive Officer are required to own an amount of our common stock (including vested and non-vested restricted stock units) which is equal to +or exceeds such officer’s annual base salary. Also under the guidelines, each of the Company’s non-employee directors is required to own an amount of Company common stock which is equal to or exceeds three times such non-employee +director’s annual retainer. Generally, persons subject to the guidelines are required to achieve the applicable guideline not later than three years from the appointment to their position. Notwithstanding this phase-in period, most persons +subject to these guidelines have met their ownership target, either as a result of their direct holdings or shares held indirectly by an entity affiliated with such person, in accordance with the guidelines. +Minimum Vesting Periods +Although the +plan document for our 2012 Stock Incentive Plan does not include minimum vesting periods for options or stock appreciation rights, our Compensation Committee includes minimum vesting provisions in the award agreements for stock options pursuant to +authority granted to it under the 2012 Stock Incentive Plan. Generally the option award agreements provide for a minimum vesting period of three years. +Option/SAR Buyouts +Although the plan document for our 2012 Stock Incentive Plan does not +include a provision expressly prohibiting cash buyouts of options or stock appreciation rights, the Compensation Committee believes cash buyouts of “underwater options” is a governance practice that investors view as unfavorable. As a +result, the Compensation Committee is generally opposed to cash buyouts of options or stock appreciation rights. +Pledging and Hedging +Our Insider Trading Policy provides that Directors, executive officers and certain other designated employees persons may not purchase +Meridian securities on margin or borrow against any account in which Meridian securities are held. The Policy also provides that such persons may not pledge Meridian securities as collateral for a loan or engage in hedging or monetization +transactions with respect to Meridian securities. +Company-Sponsored Benefit and Retirement Plans +Meridian provides Company-sponsored benefit and retirement plans to the NEOs. In general, executives participate in the Company’s benefit and +retirement plans on the same basis as other Company employees. The core benefit package includes health, dental, short and long-term disability, and group term life insurance. Meridian generally provides retirement benefits to executives +through qualified (under the Internal Revenue Code) defined contribution plans (401K Plan). +Change in Control Severance Benefits +The Compensation Committee believes that a reasonable level of salary and Company-sponsored benefit protection provides a means of +retention and allows the NEOs to remain focused on achievement of Company goals and objectives in the event that the Company becomes subject to a merger or acquisition transaction. This component of compensation would only be paid in the event +of a change in control of the Company, under certain qualifying conditions, and termination. For the NEOs other than the Chairman and CEO, this component of compensation would include two years’ salary, performance bonus and core +benefits. For the Chairman and CEO, this component of compensation would include three years’ salary, performance bonus and core benefits. Pursuant to Mr. Kraeutler’s Third Amended and Restated Employment Agreement (the +“Kraeutler Employment Agreement”), such compensation would be payable upon the following: (1) Meridian terminates Mr. Kraeutler’s employment without Cause; (2) Mr. Kraeutler terminates his employment for Good Reason; or (3) Mr. +Kraeutler’s employment is terminated ninety (90) days prior to a change of control or within thirty-six (36) months following the date of the occurrence of a change of control except in the event (x) Mr. Kraeutler is terminated for Cause or (y) +Mr. Kraeutler terminates employment for reasons other than Good Reason during the ninety (90) days prior to or thirty-six (36) months following a change of control. +29 +Table of Contents +Other Personal Benefits +Three of the NEOs have auto leases that are paid by the Company, the costs of which are included in the All Other Compensation table on page 33. The Company believes payment of these leases to be +reasonable given the nature of the positions and consistent with the Company’s overall executive compensation philosophy. +Chairman +and CEO Employment Agreement and Supplemental Benefit Agreement +Effective October 3, 2016, the Company and Mr. Kraeutler entered into the +Kraeutler Employment Agreement which, among other things, extended the term of his employment and incorporated the terms and conditions of his Supplemental Benefit Agreement. The Kraeutler Employment Agreement provides that Mr. Kraeutler is entitled +to receive an established minimum annual salary and that he is eligible to participate in the Company’s bonus and stock incentive plans. The Kraeutler Employment Agreement also provides that Mr. Kraeutler receive (i) a grant of 50,000 +non-qualified stock options vesting on September 30, 2017 as long as he is employed on that date and a grant of 50,000 non-qualified stock options vesting on September 30, 2018 as long as he is employed on that date; and (ii) two grants of 25,000 +performance-based restricted stock units, with one grant to be earned if published fiscal 2017 revenue and earnings guidance is achieved, and the other grant to be earned if published fiscal 2018 revenue and earnings guidance is achieved. +Pursuant to his Second Amended and Restated Employment Agreement, effective from January 15, 2015 to October 3, 2016 (the “2015 Employment +Agreement”) and which was replaced by the current Kraeutler Employment Agreement, Mr. Kraeutler earned 50,000 non-qualified stock options as a result of being employed by the Company as of September 30, 2016. However, as a result of +published fiscal 2016 revenue and earnings guidance not being achieved, 25,000 restricted stock units granted under the 2015 Employment Agreement were not earned and have been cancelled. +In addition, the Kraeutler Employment Agreement provides that Mr. Kraeutler is eligible to receive: +• +Post-retirement benefit payments totaling $1,200,000, payable in one hundred twenty (120) monthly payments of $10,000 +• +Lifetime insurance benefits including health insurance and comprehensive long-term care insurance +The Kraeutler Employment Agreement provides for potential payments to Mr. Kraeutler upon a change in control. These payments are described on page 37 of +this proxy statement. The Kraeutler Employment Agreement’s term extends through September 30, 2018, and includes provisions for a 12-month consulting arrangement following that date. +Richard Eberly Employment Letter Agreement +On July 26, 2016, the Company and Richard +Eberly entered into a letter agreement providing for terms of Mr. Eberly’s employment as Corporate Executive Vice President and President, Chief Commercial Officer, responsible for all sales and marketing operations in the core diagnostics and +Life Science units, as well as research and development for these units, effective August 1, 2016. The letter agreement provides that Mr. Eberly’s new annual base salary shall be $400,000, he shall be entitled to participate in the +Company’s cash bonus plan, he shall be awarded options to acquire 20,000 of the Company’s shares of Common Stock, vesting 25% each year from date of grant, and he shall be entitled to receive other benefits commensurate with his new +position with the Company. +Internal Pay Equity +The Compensation Committee believes that the relative difference between the Chairman and CEO’s compensation and the compensation of the Company’s other executives has not increased +significantly over the years. Further, the Compensation Committee believes that the Company’s internal pay equity structure is appropriate based upon the contributions to the success of the Company and as a means of motivation to other +executives and employees. +Tax Deductibility of Pay +Section 162(m) of the Internal Revenue Code contains compensation deduction limitations for certain highly compensated employees. One exception to this limitation is for performance-based +compensation that is approved by, among other things, a committee of “outside directors” (as defined under IRS treasury regulations). The Committee believes that all compensation paid to the NEOs for fiscal year 2016 is properly +deductible under Section 162(m), but no assurance can be made in this regard. +30 +Table of Contents +Actions of the Compensation Committee +In several meetings during the year, Mr. Kraeutler, and the Compensation Committee Chairman discussed, among other things, Meridian’s compensation system and its effectiveness in attracting and +retaining talented employees. These individuals believe that the system, including the Officer’s Performance Compensation Plan, is understood by employees and shareholders and has worked well in practice. They noted that the +underlying principles in the plan have been followed for many years, even when following such principles resulted in no Officer’s Performance Compensation Plan bonuses being awarded to the NEOs and performance-based stock awards being +forfeited. +At its November 9, 2016 meeting, the Compensation Committee discussed these matters, both with and without the presence of +management. The Compensation Committee discussed the recommendations of the Chairman and CEO for compensation levels for all officers and the general pay increases to be paid throughout the Company. The Committee then made the compensation +decisions, which are reflected in the figures presented in this proxy statement. +COMPENSATION COMMITTEE REPORT +The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K +with management. Based on these reviews and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Company’s proxy statement on Schedule 14A. +Members of the Compensation Committee +James M. Anderson (Chairman) +John C. McIlwraith +David C. Phillips +31 +Table of Contents +SUMMARY COMPENSATION TABLE +The following table summarizes the aggregate compensation paid, or earned, by each of the NEOs for the fiscal years ended September 30, 2016, 2015 and +2014, respectively: +Name and Principal +Position +(a) +Year +(b) +Salary +(c) +Bonus 1 +(d) +Stock +Awards 2,3,5 +(e) +Option +Awards 4,5 +(f) +Non-Equity +Incentive Plan +Compensation +(g) +Change in +Pension Value +and +Nonqualified +Deferred +Compensation +Earnings +(h) +All Other +Compensation 6 +(i) +Total +John A. Kraeutler +Chairman of +the Board, +Chief Executive Officer +and President +2016 +2015 +2014 +$ +$ +$ +621,605 +608,270 +602,871 +— +— +— +$ +$ +$ +485,250 +860,250 +373,650 +$ +$ +53,300 +372,800 +— +— +— +— +— +— +— +$ +$ +$ +198,275 +111,580 +86,867 +$ +$ +$ +1,358,430 +1,952,900 +1,063,388 +Melissa A. Lueke +Executive +Vice President, Chief Financial Officer +and Secretary +2016 +2015 +2014 +$ +$ +$ +292,194 +269,780 +263,334 +— +— +— +$ +$ +$ +194,100 +161,190 +230,103 +$ +44,416 +— +— +— +— +— +— +— +— +$ +$ +$ +68,343 +62,120 +65,805 +$ +$ +$ +599,053 +493,090 +559,242 +Richard L. Eberly +Executive +Vice President, President, Chief Commercial Officer +2016 +2015 +2014 +$ +$ +$ +339,669 +319,252 +306,973 +— +— +— +$ +$ +$ +194,100 +161,190 +224,190 +$ +74,408 +— +— +— +— +— +— +— +— +$ +$ +$ +66,888 +61,089 +62,985 +$ +$ +$ +675,065 +541,531 +594,148 +Lawrence J. Baldini +Executive +Vice President, President, Global Operations +2016 +2015 +2014 +$ +$ +$ +310,001 +280,157 +272,402 +— +— +— +$ +$ +$ +198,765 +161,190 +224,190 +$ +44,184 +— +— +— +— +— +— +— +— +$ +$ +$ +69,204 +61,453 +60,235 +$ +$ +$ +622,154 +502,800 +556,827 +Marco G. Calzavara 7 +President and Managing +Director, Meridian Bioscience Europe +2016 +2015 +2014 +$ +$ +$ +324,503 +344,339 +356,747 +— +— +— +$ +$ +$ +194,100 +161,190 +224,190 +— +— +— +— +— +— +— +— +— +$ +$ +$ +72,599 +68,230 +47,607 +$ +$ +$ +591,202 +573,759 +628,544 +Michael C. Shaughnessy 8 +Former Executive Vice +President, President, Meridian +Global Diagnostics +2016 +2015 +2014 +$ +$ +$ +259,038 +300,000 +177,692 +— +— +— +$ +$ +$ +194,100 +161,190 +48,300 +$ +3,553 +— +— +— +— +— +— +— +— +$ +$ +$ +281,664 +32,223 +43,352 +$ +$ +$ +738,355 +493,413 +269,344 +1 +No payments were made to the NEOs pursuant to the Officer’s Performance +Compensation Plan for fiscal 2016, 2015 or 2014 as the corporate-wide targets were not reached for each of the respective fiscal years. +2 +The amounts shown reflect the grant date fair value of the restricted stock +units issued during fiscal years 2016, 2015 and 2014 in accordance with ASC Topic 718. With the exception of Employment Agreement RSUs discussed in Note 3 below, no compensation cost is included in this table related to the performance-based +portion of the restricted stock units granted during fiscal 2016, 2015 and 2014. Because the required earnings target for Meridian was not reached for fiscal 2016, 2015 or 2014, with the exception of the Employment Agreement RSUs discussed in +Note 3 below, the performance-based restricted stock units have been cancelled. A discussion of the assumptions used in calculating these values may be found in Note 6(b) on page 69 to the Company’s Annual Report on Form 10-K filed with +the SEC on November 29, 2016. In addition, for Mr. Baldini, the amount reflected includes the value of unrestricted common shares granted pursuant to Company policy for 15 years of service. +3 +The amount reflected for Mr. Kraeutler for fiscal 2015 includes $412,500 for +the grant date fair value of performance-based restricted stock units granted pursuant to his employment agreement dated January 15, 2015 (“Employment Agreement RSUs”). Since the required published revenue and earnings guidance was +achieved for fiscal 2015, the Employment Agreement RSUs were earned and the corresponding compensation cost is included in this table. A discussion of the assumptions used in calculating these values may be found in Note 6(b) on page 69 to the +Company’s Annual Report on Form 10-K filed with the SEC on November 29, 2016. +4 +The amounts shown reflect the grant date fair value of the stock options +granted during fiscal years 2016, 2015 and 2014 in accordance with ASC Topic 718, and during fiscal 2016 are comprised of (i) stock options granted to Mr. Kraeutler, Ms. Lueke, Mr. Baldini, and Mr. Shaughnessy in connection with the Magellan +acquisition; and (ii) stock options granted to Mr. Eberly and Mr. Baldini in connection with their promotions. The fiscal 2015 amount is comprised solely of the stock options granted to Mr. Kraeutler in connection with his employment +32 +Table of Contents +agreement dated January 15, 2015 (“Employment Agreement Options”). A discussion of the assumptions used in calculating these values may be found in Note 6(b) on page 69 to the +Company’s Annual Report on Form 10-K filed with the SEC on November 29, 2016. +5 +In addition, no compensation cost is included in this table related to the +additional performance-based equity awards granted November 9, 2011 to certain executive management employees, including the NEOs, to reward them for meeting pre-defined Company revenue targets. These awards, which included both restricted +stock units and options, could only be earned if specified cumulative revenue thresholds were met through fiscal 2015, with the three measurement dates for ratably earning one-third of the grant being (i) the 21-month period ended June 30, 2013; +(ii) the 33-month period ended June 30, 2014; and (iii) the 45-month period ended June 30, 2015. As a result of none of the cumulative thresholds being met, these restricted stock units and options have been cancelled and no related +compensation is included within the table. +6 +See the All Other Compensation table below for amounts, which include +certain Company contributions, perquisites and other personal benefits. +Fiscal 2016 +All Other Compensation +John A. +Kraeutler +Melissa A. +Lueke +Richard L. +Eberly +Lawrence J. +Baldini +Marco G. +Calzavara +Michael C. +Shaughnessy +Retirement Contributions +$ +16,358 +$ +16,358 +$ +16,358 +$ +16,358 +$ +32,450 +$ +7,174 +Auto Lease / Auto Allowance +12,366 +12,000 +12,000 +12,000 +3,749 +6,000 +Financial and Tax Planning +30,000 +3,585 +2,130 +1,600 +— +1,090 +Insurance Premiums, including Gross-up +59,551 +— +— +— +— +— +Restricted Stock Dividends +80,000 +36,400 +36,400 +36,400 +36,400 +17,400 +Gross-up for Anniversary Award +— +— +— +2,846 +— +— +Separation Payment +— +— +— +— +— +250,000 +Totals +$ +198,275 +$ +68,343 +$ +66,888 +$ +69,204 +$ +72,599 +$ +281,664 +7 +Mr. Calzavara’s salary during fiscal 2016, 2015 and 2014 was +£228,450, £222,916 and £215,362, respectively. All conversions were made at the average exchange rates for the respective fiscal years. +8 +On July 22, 2016, Mr. Shaughnessy was terminated from his position with +Meridian. In connection with his termination, Mr. Shaughnessy received the $250,000 severance payment detailed in the All Other Compensation table above. +33 +Table of Contents +GRANTS OF PLAN-BASED AWARDS +The following table sets forth, for each of the NEOs, information related to grants made during fiscal 2016 under Meridian’s 2012 Stock Incentive +Plan: +Estimated Future Payouts Under +Non-Equity Incentive Plan +Awards +Estimated Future Payouts Under +Equity Incentive Plan Awards +All other +Stock +Awards: +Number of +Shares of +Stock or +Units (#) +All other +Option +Awards: +Number of +Securities +Underlying +Options (#) +Exercise +or Base +Price of +Option +Awards +($/Sh) +Grant Date +Fair +Value +of Stock +and +Option +Awards +Name +Grant +Date +Threshold +($) +Target +($) +Max +($) +Threshold +(#) +Target +(#) +Max +(#) +(a) +(b) +(c) +(d) +(e) +(f) +(g) +(h) +(i) +(j) +(k) +(l) +John A. Kraeutler +11/04/15 +03/24/16 +— +— +— +— +— +— +— +— +— +— +— +— +25,000 +— +1 +— +15,000 +2 +$ +— +19.56 +$ +$ +485,250 +53,300 +Melissa A. Lueke +11/04/15 +03/24/16 +— +— +— +— +— +— +— +— +— +— +— +— +10,000 +— +1 +— +12,500 +2 +$ +— +19.56 +$ +$ +194,100 +44,416 +Richard L. Eberly +11/04/15 +07/27/16 +— +— +— +— +— +— +— +— +— +— +— +— +10,000 +— +1 +— +20,000 +3 +$ +— +20.48 +$ +$ +194,100 +74,408 +Lawrence J. Baldini +11/04/15 +03/24/16 +03/28/16 +04/19/16 +— +— +— +— +— +— +— +— +— +— +— +— +— +— +— +— +— +— +— +— +— +— +— +— +10,000 +— +— +225 +1 +5 +— +2,000 +10,000 +— +2 +4 +$ +$ +— +19.56 +20.41 +— +$ +$ +$ +$ +194,100 +7,107 +37,077 +4,665 +Marco G. Calzavara +11/04/15 +— +— +— +— +— +— +10,000 +1 +— +— +$ +194,100 +Michael C. Shaughnessy +11/04/15 +03/24/16 +— +— +— +— +— +— +— +— +— +— +— +— +10,000 +— +1 +— +1,000 +2 +$ +— +19.56 +$ +$ +194,100 +3,553 +1 +At the time of the grant, half of each NEO’s restricted stock units were time-based with 100% vesting after four years, and the remaining half +were performance-based, subject to attainment of a specified earnings target for fiscal 2016. As the 2016 earnings target was not met, the performance-based restricted stock units have been cancelled and are not reflected in the table above. +2 +This award of time-based options was made in connection with the March 24, 2016 acquisition of Magellan. The options have a ten-year term and vest +in four equal annual installments from the date of grant (i.e., vest 25% per year until fully vested on March 24, 2020). +3 +This award of time-based options was made in recognition of Mr. Eberly’s promotion. The options have a ten-year term and vest in four equal annual +installments from the date of grant (i.e., vest 25% per year until fully vested on July 27, 2020). +4 +This award of time-based options was made in recognition of Mr. Baldini’s promotion. The options have a ten-year term and vest in three equal +annual installments from the date of grant (i.e., vest one-third per year until fully vested on March 28, 2019). +5 +This award of unrestricted common shares was made to Mr. Baldini pursuant to Company policy for 15 years of service. +34 +Table of Contents +OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END +The following table provides information on the NEOs’ holdings of equity awards under Meridian’s 2012 Stock Incentive Plan and 2004 Equity +Compensation Plan as of September 30, 2016: +Option Awards +Stock Awards +Name +Number of +Securities +Underlying +Unexercised +Options +(#) +Exercisable +Number of +Securities +Underlying +Unexercised +Options +(#) +Unexercisable +Equity +Incentive Plan +Awards: +Number of +Securities +Underlying +Unexercised +Unearned +Options (#) +Option +Exercise +Price ($) +Option +Expiration +Date +Number of +Shares or +Units of +Stock That +Have Not +Vested (#) +Market +Value of +Shares or +Units of +Stock That +Have Not +Vested ($) +Equity +Incentive +Plan +Awards: +Number of +Unearned +Shares, +Units or +Other +Rights That +Have Not +Vested (#) +Equity +Incentive +Plan +Awards: +Market or +Payout +Value of +Unearned +Shares, +Units or +Other +Rights That +Have Not +Vested ($) +(a) +(b) +(c) +(d) +(e) +(f) +(g) +(h) +(i) +(j) +John A. Kraeutler +15,750 1 +25,000 2 +25,000 +3 +50,000 6 +50,000 8 +— +— +— +— +— +— +15,000 13 +— +— +— +— +— +— +$ +$ +$ +$ +$ +$ +16.554 +33.090 +33.090 +16.500 +16.500 +19.560 +11/15/16 +01/28/18 +01/28/18 +01/15/25 +01/15/25 +03/24/26 +— +— +— +— +— +— +10,000 9 +15,000 10 +25,000 11 +25,000 12 +$ +$ +$ +$ +— +— +— +— +— +— +192,900 +289,350 +482,250 +482,250 +— +— +— +— +— +— +— +— +— +— +— +— +— +— +— +— +— +— +— +— +Melissa A. Lueke +— +12,500 13 +— +$ +19.560 +03/24/26 +— +7,500 9 +9,000 10 +9,000 11 +10,000 12 +$ +$ +$ +$ +— +144,675 +173,610 +173,610 +192,900 +— +— +— +— +— +— +— +— +Richard L. Eberly +1,500 4 +10,000 5 +— +— +— +20,000 14 +— +— +— +$ +$ +$ +19.710 +21.940 +20.480 +08/04/20 +01/31/21 +07/27/26 +— +— +— +7,500 9 +9,000 10 +9,000 11 +10,000 12 +$ +$ +$ +$ +— +— +— +144,675 +173,610 +173,610 +192,900 +— +— +— +— +— +— +— +— +— +— +— +— +— +— +Lawrence J. Baldini +500 4 +— +— +— +2,000 13 +10,000 15 +— +— +— +$ +$ +$ +19.710 +19.560 +20.410 +08/04/20 +03/24/26 +03/28/26 +— +— +— +7,500 9 +9,000 10 +9,000 11 +10,000 12 +$ +$ +$ +$ +— +— +— +144,675 +173,610 +173,610 +192,900 +— +— +— +— +— +— +— +— +— +— +— +— +— +— +Marco G. Calzavara +7,500 9 +9,000 10 +9,000 11 +10,000 12 +$ +$ +$ +$ +144,675 +173,610 +173,610 +192,900 +— +— +— +— +— +— +— +— +Michael C. Shaughnessy +5,000 7 +— +— +$ +21.340 +10/22/16 +— +— +— +— +35 +Table of Contents +1 +Options vested in three equal annual installments beginning one year from +public earnings release date for the fiscal year ending immediately following the grant date, indicating that performance targets were met, occurring approximately one year from date of grant. +2 +Options vested on January 22, 2011. +3 +Options vested on January 22, 2013. +4 +Options fully vested on August 4, 2014. +5 +Options fully vested on January 31, 2015. +6 +Options fully vested on September 30, 2015. +7 +Options fully vested on February 25, 2016. +8 +Options fully vested on September 30, 2016. +9 +Units vest on November 7, 2016. +10 +Units vest on November 6, 2017. +11 +Units vest on November 15, 2018. +12 +Units vest on November 15, 2019. +13 +Options vest in four equal annual installments from the date of grant (i.e., vest 25% per year until fully vested on March 24, 2020). +14 +Options vest in four equal annual installments from the date of grant (i.e., vest 25% per year until fully vested on July 27, 2020). +15 +Options vest in three equal annual installments from the date of grant (i.e., vest one-third per year until fully vested on March 28, 2019). +OPTION EXERCISES AND STOCK VESTED +The following table sets forth, for each of the NEOs, information on options exercised and restricted stock units vested during fiscal 2016: +Option Awards +Stock Awards +Name +Number of +Shares +Acquired on +Exercise (#) +Value Realized +on Exercise ($) +(1) +Number of +Shares +Acquired on +Vesting (#) +Value Realized +On Vesting ($) +(2) +(a) +(b) +(c) +(d) +(e) +John A. Kraeutler +15,750 +$ +93,525 +10,000 +$ +202,600 +Melissa A. Lueke +15,750 +$ +94,075 +7,500 +$ +151,950 +Richard L. Eberly +— +$ +— +7,500 +$ +151,950 +Lawrence J. Baldini +— +$ +— +7,500 +$ +151,950 +Marco G. Calzavara +— +$ +— +7,500 +$ +151,950 +Michael C. Shaughnessy +— +$ +— +— +$ +— +36 +Table of Contents +1 +Amounts reflect the difference between the exercise price of the option and the market price of Meridian common shares at the time of exercise. +2 +Amounts reflect the market price of Meridian common shares at the time of restricted stock or units vesting. +401(K) PLAN +Our 401(k) Savings Plan (“401(k) Plan”) allows all U.S. employees of the Company as soon as administratively possible following their employment +to set aside a portion of their compensation each year for their retirement needs, up to the limits set by the Internal Revenue Code. Presently, the Company contributes a matching contribution of 100% of the first 3% of the employee’s +contribution (i.e., up to 3% of an employee’s salary) subject to Internal Revenue Code limitations. Effective January 1, 2017, the Company matching contribution percentage will be increased to 100% of the first 4% of the employee’s +contribution (i.e., up to 4% of an employee’s salary) subject to Internal Revenue Code limitations. The Company may also contribute a profit-sharing contribution at its discretion. Employee contributions are 100% vested immediately, +while presently Company contributions are subject to a graded vesting schedule of 20% per year for the first 5 years of employment. Effective January 1, 2017, participants will also be immediately 100% vested in Company matching contributions. +Participants are entitled to direct the investment of their accounts among various mutual funds selected by the Meridian Bioscience, Inc., Savings and Investment Plan Committee. Participants who terminate employment are entitled to receive the +vested portion of their accounts. +POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL +As described on page 30 in the “Compensation Discussion and Analysis” section of this proxy statement, Mr. Kraeutler and Meridian are parties to +the Kraeutler Employment Agreement which sets forth compensation, non-competition, benefit and severance provisions and provides for a payment equal to three times Mr. Kraeutler’s three-year average base salary (plus any salary earned but not +paid) and three-year average annual performance bonus if Mr. Kraeutler is terminated by Meridian without cause, Mr. Kraeutler terminates his employment for good reason or is terminated in connection with a change in control of Meridian. +Pursuant to the Kraeutler Employment Agreement, had Mr. Kraeutler’s employment with the Company terminated on September 30, 2016, Mr. Kraeutler +would have been entitled to receive post-retirement benefit payments totaling $1,200,000, payable in one hundred twenty (120) monthly payments of $10,000. +Had one of the events noted above occurred on September 30, 2016, Mr. Kraeutler would also have been entitled to the following under the Kraeutler Employment Agreement: +Salary +$ +1,832,746 +Annual Performance Bonus +— +Total Payment +$ +1,832,746 +Our Board of Directors authorized us to enter into change in control severance agreements with our executive officers +(other than our Chief Executive Officer who has change of control provisions in his Employment Agreement), which were executed effective August 4, 2016. Each agreement has an initial term ending December 31, 2016, and each year will +automatically renew for an additional one year term, provided however, that if a change in control occurs the term will expire no earlier than 24 calendar months after the calendar month in which such change in control occurs. The change in control +severance agreements replace the Company’s change in control policy which was adopted by the Board in March 2011. This agreement is the result of Management’s and the Board’s periodic review and updates of certain policies and +practices. A change of control is generally defined in each agreement as any of the following: (i) a person is or becomes a beneficial owner of more than 50% of our voting securities; (ii) the composition of a majority of our Board +changes; (iii) we consummate a merger or similar transaction; (iv) the sale of all or substantially all of our assets; or (v) the employment of a Chief Executive Officer other than the Company’s current +37 +Table of Contents +CEO as of the date of the agreement. Each agreement provides, among other things, that if a change in control occurs during the term of the agreement, and the executive’s employment is +terminated either by us or by the executive, other than: (a) by us for cause; (b) by reason of death or disability; or (c) by the executive without good reason, such executive will receive a severance payment equal to: (A) a +multiple of such executive’s annual base salary; (B) a multiple of executive’s target bonus amounts; and (C) earned but unused vacation time. In addition, each change in control agreement provides that in the event that the +severance and other benefits provided for in the agreement or otherwise payable to the executive would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code, the benefits under the agreement will be either delivered +in full, or delivered to a lesser extent which would result in no portion of the benefits being subject to such excise tax, whichever is more beneficial to the executive. +Had termination in connection with a change in control occurred on September 30, 2016, the NEOs to which the Policy applied at that date (Ms. Lueke, Mr. Eberly, Mr. Baldini and Mr. Calzavara) would have +been entitled to the following lump sum payments under the Policy: +Melissa A. +Lueke +Richard L. +Eberly +Lawrence J. +Baldini +Marco G. +Calzavara +Salary +$ +600,000 +$ +800,000 +$ +660,000 +$ +649,006 +Annual Performance Bonus +— +— +— +— +Total Lump Sum Payment +$ +600,000 +$ +800,000 +$ +660,000 +$ +649,006 +DIRECTOR COMPENSATION +For fiscal 2016, independent Directors of Meridian received the following compensation for service on the Board and the Audit Committee (“AC”), Compensation Committee (“CC) and Nominating +& Corporate Governance Committee (N&CGC”) (annual amounts presented unless otherwise indicated): +-Base for Director service +$ +35,000 +-AC Chair +$ +16,000 +-CC Chair +$ +5,000 +-N&CGC Chair +$ +5,000 +-Board Meeting Attendance: +Regular (per meeting) +$ +2,000 +Telephonic (per meeting) +$ +1,000 +-Committee Meeting Attendance: +Regular (per meeting) +$ +1,250 +Telephonic (per meeting) +$ +750 +Additionally, in accordance with the terms and conditions set forth in the Company’s 2012 Stock Incentive Plan, each +independent Director was also granted a non-qualified option to purchase 8,500 common shares at the time of appointment, election or re-election to the Board of Directors, with the exercise price being the closing sale price on Nasdaq reported on +the date of grant. +Effective for fiscal 2017, independent Director compensation will be as follows (annual amounts presented): +-Base for Director service +$ +40,000 +-Additional for Lead Director +$ +20,000 +-AC Chair +$ +20,000 +-AC Member +$ +10,000 +-CC Chair +$ +13,000 +-CC Member +$ +6,000 +-N&CGC Chair +$ +13,000 +-N&CGC Member +$ +5,000 +Additionally, in accordance with the terms and conditions set forth in the Company’s 2012 Stock Incentive Plan, each +independent Director will also be granted a non-qualified option to purchase 12,000 common shares at the time of election or re-election to the Board of Directors, with the exercise price being the closing sale price on Nasdaq reported on the date +of grant. Directors who are employees of Meridian are not separately compensated for serving as Directors. +38 +Table of Contents +The following table provides information on compensation related to fiscal 2016 for independent Directors +who served during fiscal 2016: +Name +Fees +Earned +or +Paid in +Cash ($) +Stock +Awards +($) 1 +Option +Awards +($) 1 +Non-Equity +Incentive +Plan +Compensation +($) +Change in +Pension +Value +and +Nonqualified +Deferred +Compensation +Earnings +All +Other +Compensation +($) +Total +($) +(a) +(b) +(c) +(d) +(e) +(f) +(g) +(h) +James M. Anderson +$ +67,500 +— +$ +28,783 +— +— +— +$ +96,283 +Dwight E. Ellingwood +$ +58,500 +— +$ +28,783 +— +— +— +$ +87,283 +John C. McIlwraith +$ +53,500 +— +$ +28,783 +— +— +— +$ +82,283 +David C. Phillips +$ +77,250 +— +$ +28,783 +— +— +— +$ +106,033 +Catherine A. Sazdanoff +$ +49,250 +— +$ +28,783 +— +— +— +$ +78,033 +1 +The amounts shown +reflect the grant date fair value of the awards made in fiscal year 2016 in accordance with ASC Topic 718. A discussion of the assumptions used in calculating these values may be found in Note 6(b) on page 69 to the Company’s Annual Report +on Form 10-K filed with the SEC on November 29, 2016. +SHAREHOLDER PROPOSALS FOR NEXT YEAR +The deadline for shareholder proposals to be included in the proxy statement for next year’s meeting is August 28, 2017. +The form of Proxy for this meeting grants authority to the designated proxies to vote in their discretion on any matters that come before the meeting +except those set forth in Meridian’s proxy statement and except for matters as to which adequate notice is received. In order for a notice to be deemed adequate for the 2018 Annual Shareholders’ Meeting, it must be received prior to +October 27, 2017. If there is a change in the anticipated date of next year’s Annual Shareholders’ Meeting or these deadlines by more than 30 days, we will notify you of this change through our Form 8-K and/or Form 10-Q +filings. +Meridian’s Code of Regulations provides that only persons nominated by an officer, Director or in writing by a shareholder not +earlier than 150 days nor later than 90 days prior to the meeting at which Directors are to be selected shall be eligible for election and that shareholder proposals be presented not earlier than 150 days nor later than 90 days prior to the meeting +at which the proposals are to be presented. +QUESTIONS? +If you have questions or need more information about the annual meeting, write to: +Melissa A. Lueke +Executive Vice President, Chief Financial Officer and Secretary +Meridian Bioscience, Inc. +3471 River Hills +Drive +Cincinnati, Ohio 45244 +or +call us at (513) 271-3700 +For information about your record holdings, call Computershare Shareholder Services at (888) 294-8217. +39 +Table of Contents +ANNEX A +MERIDIAN BIOSCIENCE, INC. 2012 STOCK INCENTIVE PLAN +MERIDIAN BIOSCIENCE, INC. +2012 STOCK INCENTIVE PLAN +A-1 +Table of Contents +TABLE OF CONTENTS +1. +Purposes +A-4 +2. +Definitions +A-4 +3. +Administration of the Plan +A-8 +(a) +Authority of Committee +A-8 +(b) +Binding Authority +A-9 +(c) +Delegation of Authority +A-9 +4. +Eligibility +A-9 +5. +Common Shares Subject to the Plan +A-9 +(a) +Authorized Number of Common Shares +A-9 +(b) +Share Counting +A-10 +(c) +Award Limitations +A-10 +(d) +Shares to be Delivered +A-11 +6. +Awards to Participants +A-11 +(a) +Stock Options. +A-11 +(b) +Stock Appreciation Rights +A-13 +(c) +Restricted Shares and Restricted Share Units +A-14 +(d) +Performance-Based Exception +A-15 +(e) +Unrestricted Share Awards +A-16 +7. +Deferred Payment +A-16 +8. +Dilution and Other Adjustments +A-16 +9. +Change in Control +A-17 +10. +Termination +A-17 +(a) +Termination by Death, Disability, or Retirement +A-17 +(b) +Termination for Cause +A-17 +(c) +Other Terminations +A-17 +(d) +Limitation for ISOs +A-18 +(e) +Transfers and Leaves of Absence +A-18 +11. +Recoupment or Recovery Policy +A-18 +12. +Miscellaneous Provisions +A-18 +(a) +Rights as a Shareholder +A-18 +(b) +No Loans +A-18 +(c) +Assignment or Transfer +A-18 +(d) +Withholding Taxes +A-19 +(e) +No Rights to Awards +A-19 +A-2 +Table of Contents +(f) +Beneficiary Designation +A-19 +(g) +Fractional Shares +A-19 +(h) +Unfunded Plan +A-19 +(i) +Severability +A-20 +(j) +Limitation of Liability +A-20 +(k) +Successors +A-20 +(l) +Code Section 409A Compliance +A-20 +13. +Effective Date, Amendments, Governing Law and Plan Termination +A-20 +(a) +Effective Date +A-20 +(b) +Amendments +A-20 +(c) +Governing Law +A-21 +(d) +Plan Termination +A-21 +A-3 +Table of Contents +MERIDIAN BIOSCIENCE, INC. +2012 STOCK INCENTIVE PLAN +1. +Purposes +The purposes of the Plan are to provide long-term incentives to +those persons with significant responsibility for the success and growth of the Company, to align the interests of such persons with those of the Company’s shareholders, to assist the Company in recruiting, retaining and motivating employees, +directors and consultants on a competitive basis and to link compensation to performance. +2. +Definitions +For purposes of the Plan, the following capitalized terms +shall have the meanings specified below: +(a) “Affiliate” has the meaning set forth in Rule 12b-2 under the Exchange Act. +(b) “Award” means a grant of Stock Options, Stock Appreciation Rights, Restricted Shares or Restricted Share Units, or any or all of +them, to a Participant. +(c) “Award Agreement” means an agreement, either in written or electronic format, between the Company +and a Participant setting forth the terms and conditions of an Award granted to the Participant. +(d) “Beneficial Owner” has the +meaning given in Rule 13d-3 under the Exchange Act. +(e) “Board” means the Board of Directors of the Company. +(f) “Cause” means with respect to any Participant, unless otherwise provided in the applicable Award Agreement, (i) the +Participant’s conviction or misappropriation of money or other property or conviction of a felony, or a guilty plea or plea of nolo contendere by Participant with respect to a felony, (ii) conduct by the Participant that is in competition with +the Company, conduct by a Participant that breaches the Participant’s duty of loyalty to the Company or a Participant’s willful misconduct, any of which materially injures the Company, (iii) a willful and material breach by the Participant +of his or her obligations under any agreement entered into between the Participant and the Company that materially injures the Company, or (iv) the Participant’s failure to substantially perform his or her duties with the Company (other than by +reason of the Participant’s Disability). For Participants subject to Section 16 of the Exchange Act, the determination of whether any conduct, action or failure to act constitutes “Cause” shall be made by the Committee in its +sole discretion. +(g) “Change in Control” means the occurrence of any of the following events: +(i) Any Person (including a “group” as defined in Section 14(d) of the Exchange Act) other than an Exempt Person is or becomes the +Beneficial Owner, directly or indirectly, of securities of the Company representing more than 35% of the combined voting +A-4 +Table of Contents +power of the Company’s then-outstanding securities; provided, however, that no Change of Control shall be deemed to have occurred as a result of a change in ownership percentage resulting +solely from an acquisition of securities by the Company; +(ii) During any two (2) consecutive years, individuals who at the beginning of +such two (2) year period constitute the Board and any new director whose election to the Board or nomination for election by the Company’s shareholders was approved by a vote of at least two-thirds of the directors then still in office who +either were directors at the beginning of the period or whose election or nomination for election was previously so approved cease for any reason to constitute at least a majority of the Board; +(iii) A reorganization, merger or consolidation of the Company in each case, unless, following such reorganization, merger or consolidation, +all or substantially all of the individuals and entities who were the Beneficial Owners of the Company’s outstanding voting securities immediately prior thereto beneficially own, directly or indirectly, more than 50% of the combined voting +power of the Company’s then-outstanding voting securities entitled to vote generally in the election of directors resulting from such reorganization, merger or consolidation in substantially the same proportions as their ownership +immediately prior to such reorganization, merger or consolidation of the outstanding voting securities of the Company; or +(iv) A +liquidation, dissolution, sale or other disposition of all or substantially all of the assets of the Company (other than in a transaction in which all or substantially all of the individuals and entities who were the Beneficial Owners +of the Company’s outstanding voting securities immediately prior to such sale or other disposition beneficially own, directly or indirectly, substantially all of the combined voting power of the Company’s then-outstanding voting +securities entitled to vote generally in the election of directors of the acquiror of such assets (either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such sale or other +disposition). +(h) “Code” means the Internal Revenue Code of 1986, as amended, and any rules, regulations or guidance promulgated +thereunder. Any reference to the Code or a section thereof shall also refer to any successor Code or section. +(i) +“Committee” means a committee appointed by the Board consisting of at least three members of the Board, all meeting the definitions of “outside director” set forth in Code Section 162(m), “independent director” set +forth in The Nasdaq Stock Market rules, and “non-employee director” set forth in Rule 16b-3 of the Exchange Act, or any successor definitions adopted for a similar purpose by the Internal Revenue Service, any national securities exchange +on which the Common Shares are listed or the Securities and Exchange Commission. +(j) “Common Share” or “Common Shares” +means one or more of the common shares, without par value, of the Company. +(k) “Company” means Meridian Bioscience, Inc., a +corporation organized under the laws of the State of Ohio, its subsidiaries, divisions and affiliated businesses. +(l) “Date of +Grant” means the date on which the Committee authorizes the grant of an Award or such later date as may be specified by the Committee in such authorization. +A-5 +Table of Contents +(m) “Disability” means a Participant’s physical or mental incapacity resulting +from personal injury, disease, illness or other condition which (i) prevents him or her from performing his or her duties for the Company, as determined by the Committee or its designee, and (ii) results in his or her termination of employment or +service with the Company. The Committee may substitute a different definition for the term “Disability” in its discretion as it deems appropriate. +(n) “Effective Date” has the meaning set forth in Section 13(a). +(o) “Exchange Act” means the Securities Exchange Act of 1934, as amended, and any rules, regulations, schedules or guidance +promulgated thereunder. Any reference to the Exchange Act or a section thereof shall also refer to any successor Exchange Act or section. +(p) “Exempt Person” shall mean William J. Motto, his spouse, his children and their spouses, and his grandchildren (or the legal +representative of such person), and each trust for the benefit of any such person. +(q) “Exercise Price” means the purchase price +of a Common Share covered by a Stock Option or SAR, as applicable. +(r) “Fair Market Value” on any date means the closing price +of the Common Shares as reported on The Nasdaq Stock Market or, if applicable, any other national securities exchange on which the Common Shares are principally traded, or, if there were no sales of Common Shares on such date, then on the +immediately preceding date on which there were any sales of Common Shares. If the Common Shares cease to be traded on a national securities exchange, the Fair Market Value shall be determined pursuant to a reasonable valuation method prescribed +by the Committee. In the case of an ISO (or Tandem SAR), Fair Market Value shall be determined by the Committee in accordance with Code Section 422. For Awards intended to be exempt from Code Section 409A, Fair Market Value shall be +determined by the Committee in accordance with Code Section 409A. +(s) “Full-Value Award” means Restricted Shares, Restricted +Share Units or unrestricted Common Shares. +(t) “ISO” means an Incentive Stock Option satisfying the requirements of Code Section +422 and designated as an ISO by the Committee. +(u) “Non-Employee Director” means a member of the Board who is not an employee of +the Company. +(v) “NQSO” means a non-qualified Stock Option that does not satisfy the requirements of Code Section 422 or that is +not designated as an ISO by the Committee. +(w) “Participant” means a person eligible to receive an Award under the Plan, as set +forth in Section 4, and designated by the Committee to receive an Award subject to the conditions set forth in the Plan and any Award Agreement. +A-6 +Table of Contents +(x) “Performance-Based Exception” means the performance-based exception to the +deductibility limitations of Code Section 162(m), as set forth in Code Section 162(m)(4)(C). +(y) “Performance Goals” means the +goals established by the Committee, as described in Section 6(d)(ii). +(z) “Performance Measures” means the criteria set out in +Section 6(d)(iii) that may be used by the Committee as the basis for a Performance Goal. +(aa) “Performance Period” means the +period established by the Committee during which the achievement of Performance Goals is assessed in order to determine whether and to what extent an Award that is conditioned on attaining Performance Goals has been earned. +(bb) “Person” shall have the meaning given in Section 3(a)(9) of the Exchange Act, except that such term shall not include +(i) the Company or any of its Affiliates, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its subsidiaries, (iii) an underwriter temporarily holding securities pursuant to an +offering of such securities or (iv) a corporation owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of Company securities. +(cc) “Plan” means the Meridian Bioscience, Inc. 2012 Stock Incentive Plan, as amended and restated from time to time. +(dd) “Prior Plan” means the Meridian Bioscience, Inc. 2004 Equity Compensation Plan, as amended and restated. +(ee) “Restricted Shares” means Common Shares that are subject to restrictions, as described in Section 6(c). +(ff) “Restricted Share Units” means a right, as described in Section 6(c), denominated in Common Shares to receive an amount, payable +in either cash, Common Shares, Restricted Shares, or a combination thereof, equal to the value of a specified number of Common Shares. +(gg) “Restriction Period” means, with respect to any Full-Value Award, the period during which any risk of forfeiture or other +restrictions set by the Committee, including performance restrictions, remain in effect until such time as they have lapsed under the terms and conditions of the Full-Value Award or as otherwise determined by the Committee, including the Performance +Period for Full-Value Awards intended to qualify for the Performance-Based Exception. +(hh) “Retirement” means retirement with +the Company at or after age 65 or at or after the later of age 55 and ten years of service. +(ii) “Securities Act” means the +Securities Act of 1933, as amended, and any rules, regulations, schedules or guidance promulgated thereunder. Any reference to the Securities Act or a section thereof shall also refer to any successor Securities Act or section. +A-7 +Table of Contents +(jj) “Stock Appreciation Right” or “SAR” means the right, as described in +Section 6(b), to receive a payment equal to the excess of the Fair Market Value of a Common Share on the date the SAR is exercised over the Exercise Price established for that SAR at the time of grant, multiplied by the number of Common Shares with +respect to which the SAR is exercised. +(kk) “Stock Option” means the right, as described in Section 6(a), to purchase Common +Shares at a specified price for a specified period of time. Stock Options include ISOs and NQSOs. +(ll) “Tandem SAR” means a +SAR granted in tandem with a Stock Option. +3. +Administration of the Plan +(a) Authority of +Committee . The Plan shall be administered by the Committee. Unless otherwise determined by the Board, the Compensation Committee of the Board shall serve as the Committee. The Committee shall have all the powers +vested in it by the terms of the Plan, such powers to include the sole and exclusive authority to (within the limitations described in the Plan): +(i) select Participants to be granted Awards under the Plan and grant Awards pursuant to the terms of the Plan; +(ii) determine the type, size and terms of the Awards to be granted to each Participant; +(iii) determine the time when Awards are to be granted and any conditions that must be satisfied before an Award is granted; +(iv) establish objectives and conditions for earning an Award; +(v) determine all other terms and conditions, not inconsistent with the terms of the Plan and any operative employment or other agreement, of +any Award granted under the Plan, and determine the appropriate Award Agreement evidencing the Award; +(vi) determine whether the terms, +conditions, and objectives for earning an Award have been met, including, without limitation, any such determination or certification, as the case may be, required for compliance with Code Section 162(m); +(vii) modify or waive the terms and conditions of Awards granted under the Plan, not inconsistent with the terms of the Plan and any operative +employment or other agreement, accelerate the vesting, exercise or payment of an Award or cancel or suspend an Award; +(viii) determine +whether the amount or payment of an Award should be reduced or eliminated, and determine if, when and under what conditions payment of all or any part of any Award may be deferred; +A-8 +Table of Contents +(ix) determine the guidelines and/or procedures for the payment or exercise of Awards; +(x) determine whether an Award should qualify, regardless of its amount, as deductible in its entirety for federal income tax purposes, +including whether any Awards granted to an employee should qualify for the Performance-Based Exception; +(xi) adopt, alter and repeal such +administrative rules, guidelines and practices governing the Plan; +(xii) construe, interpret, administer and implement the Plan, any Award +Agreements or related documents and correct any defect, supply an omission or reconcile any inconsistency in or between the Plan, any Award Agreement or related documents; and +(xiii) make factual determinations with respect to the Plan and any Awards and otherwise supervise the administration of the Plan. +(b) Binding Authority . The Committee’s interpretations of the Plan, and all actions taken and +determinations made by the Committee pursuant to the powers vested in it under the Plan, shall be conclusive and binding on all parties, including the Company, its shareholders and all Participants. +(c) Delegation of Authority . To the extent not prohibited by law or the rules of the national securities +exchange on which the Company’s Common Shares are listed, the Committee may allocate its authority hereunder to one or more of its members or delegate its authority hereunder to one or more Non-Employee Directors, except that no such allocation +or delegation shall be permitted with respect to Awards intended to qualify for the Performance-Based Exception, and may grant authority to employees of the Company to execute documents on behalf of the Committee or to otherwise assist in the +administration and operation of the Plan. +4. +Eligibility +Subject to the terms and conditions of the Plan, the Committee may select, +from all eligible persons, Participants to whom Awards shall be granted under the Plan and shall determine the nature and amount of each Award. Eligible persons include any of the following individuals: (i) any officer or key employee of the +Company, (ii) any consultant (as defined in the General Instructions to the Form S-8 registration statement under the Securities Act) to the Company, and (iii) any Non-Employee Director. All Awards shall be evidenced by an Award Agreement, and +Awards may be conditioned upon the Participant’s execution of an Award Agreement. +5. +Common Shares Subject to the Plan +(a) Authorized Number of Common +Shares . Unless otherwise authorized by the Company’s shareholders and subject to this Section 5 and Section 8, the maximum aggregate number of Common Shares available for issuance under the Plan is 3,000,000, plus (i) +the number of Common Shares that, on the Effective Date, are available to be granted under the Prior Plan but which are not then subject to outstanding awards under the Prior Plan, and (ii) the number of Common Shares subject to outstanding awards +under the Prior Plan as of the Effective +A-9 +Table of Contents +Date which thereafter are forfeited, settled in cash or cancelled or expire. Upon the Effective Date, the Prior Plan will terminate; provided that all outstanding awards under the Prior Plan +as of the Effective Date shall remain outstanding and shall be administered and settled in accordance with the provisions of the Prior Plan, as applicable. +(i) The maximum number of Common Shares available for grant with respect to Full-Value Awards is 1,000,000. +(ii) The maximum number of Common Shares available for issuance with respect to ISOs is 3,000,000. +(b) Share Counting . The following rules shall apply in determining the number of Common Shares available for +grant under the Plan: +(i) Common Shares subject to any Award shall be counted against the maximum share limitation as one Common Share for +every Common Share subject thereto. +(ii) To the extent that any Award is forfeited, cancelled, settled in cash, returned to the Company +for failure to satisfy vesting requirements or other conditions of the Award or otherwise terminates without an issuance of Common Shares being made, the maximum share limitation shall be credited with one Common Share for each Common Share subject +to such Award, and such number of credited Common Shares may again be made subject to Awards under the Plan. +(iii) Any Common Shares +tendered by a Participant or withheld as full or partial payment of withholding or other taxes or as payment for the exercise or conversion price of an Award or repurchased by the Company with Stock Option proceeds shall not be added back to the +number of Common Shares available for issuance under the Plan. Upon exercise of a SAR, the number of Common Shares subject to the Award that are being exercised shall be counted against the maximum aggregate number of Common Shares that may be +issued under the Plan on the basis of one Common Share for every Common Share subject thereto, regardless of the actual number of Common Shares used to settle the SAR upon exercise. +(iv) Any Common Shares underlying Awards granted through the assumption of, or in substitution for, outstanding awards previously granted to +individuals who become employees of the Company as a result of a merger, consolidation, acquisition or other corporate transaction shall not, unless required by law or regulation, count against the reserve of available Common Shares under the Plan. +(c) Award Limitations . Subject to the adjustment provisions of Section 8, the following limits shall +apply with respect to Awards intended to quality for the Performance-Based Exception: +(i) The maximum aggregate number of Common Shares +that may be subject to Stock Options or SARs granted in any calendar year to any one Participant shall be 300,000 Common Shares. +A-10 +Table of Contents +(ii) The maximum aggregate number of Common Shares that may be subject to Full-Value Awards +granted in any calendar year to any one Participant shall be 100,000 Common Shares. +(d) Shares to be +Delivered . Common Shares to be delivered by the Company under the Plan may consist in whole or in part of authorized but unissued shares or treasury shares. +6. +Awards to Participants +(a) Stock Options . +(i) Grants . Subject to the terms and conditions of the Plan, Stock Options may be granted to Participants, in such number and upon +such terms and conditions as the Committee determines, and may consist of ISOs or NQSOs. Stock options may be granted alone or with Tandem SARs. With respect to Stock Options granted with Tandem SARs, the exercise of either such Stock +Options or Tandem SARs will result in the simultaneous cancellation of the same number of Stock Options or Tandem SARs, as the case may be. +(ii) Exercise Price . The Exercise Price shall be equal to or, at the Committee’s discretion, greater than the Fair Market +Value on the date the Stock Option is granted, unless the Stock Option was granted through the assumption of, or in substitution for, outstanding awards previously granted to individuals who became employees of the Company as a result of a merger, +consolidation, acquisition or other corporate transaction, in which case the assumption or substitution shall be accomplished in a manner that permits the Stock Option to be exempt from Code Section 409A. +(iii) Term . The term of Stock Options shall be determined by the Committee in its sole discretion, but in no event shall the term +exceed ten years from the Date of Grant. +(iv) ISO Limits . ISOs may be granted only to Participants who are employees of the +Company (or of any parent or subsidiary corporation within the meaning of Code Section 424) on the Date of Grant, and may only be granted to an employee who, at the time the Stock Option is granted, does not own more than ten percent of the total +combined voting power of all classes of stock of the Company (or of any parent or subsidiary corporation within the meaning of Code Section 424), unless (A) the Exercise Price is at least 110% percent of the Fair Market Value on the Date of Grant, +and (B) the ISO is not exercisable after five years from the Date of Grant. The aggregate Fair Market Value of all Common Shares, determined at the time the ISOs are granted, with respect to which ISOs are exercisable by a Participant for the +first time during any calendar year (under all plans of the Company) shall not exceed $100,000 or such other amount as may subsequently be specified by the Code. If such Fair Market Value exceeds the $100,000 limit, the ISOs exceeding the limit +shall be treated as NQSOs, taking the Stock Options in the order each was granted. The terms of all ISOs shall be consistent with and contain or be deemed to contain all provisions required to qualify as an “incentive stock option” +under Code Section 422. +(v) No Repricing . Subject to the adjustment provisions of Section 8, without the approval of the +Company’s shareholders, (A) the Exercise Price for any outstanding Stock Option may not be decreased after the Date of Grant, (B) no outstanding Stock Option may be +A-11 +Table of Contents +surrendered to the Company as consideration for the grant of a new Stock Option with a lower Exercise Price, and (C) no other modifications to any outstanding Stock Option may be made that would +be treated as a “repricing” under the then applicable rules, regulations or listing requirements adopted by the national securities exchange on which the Common Shares are listed. +(vi) Form of Payment. Vested Stock Options may be exercised in whole or in part, and the Exercise Price shall be paid to the Company at +the time of exercise, subject to any applicable rules or regulations adopted by the Committee: +(A) +to the extent permitted by applicable law, pursuant to cashless exercise procedures that are approved by the Committee; +(B) +through the tender of unrestricted Common Shares owned by the Participant (or by delivering a certification or attestation of ownership of such Common Shares) valued at their Fair Market Value on the date of exercise; +(C) +in cash or its equivalent; or +(D) +by any combination of (A), (B), and (C) above. +(vii) No Dividends or Shareholder +Rights . No dividends or dividend equivalents may be paid on Stock Options. Except as otherwise provided herein, a Participant shall have no rights as a holder of Common Shares covered by a Stock Option unless and until such Common +Shares have been registered to the Participant as the owner. +(viii) Terms and Conditions of Non-Qualified Options Granted to +Non-Employee Directors . Each Non-Employee Director shall be granted a NQSO for [7,500] Common Shares, or such other number as may be determined by the Board of Directors from time to time, upon appointment or election and immediately after each +subsequent annual meeting of shareholders if such person is serving as a Non-Employee Director at such time either by virtue of being re-elected or serving a term in excess of one year. All grants shall be made on the date of the event giving rise +to the NQSO and shall have an Exercise Price of Fair Market Value on such date. Such grants shall vest in four equal installments beginning ninety (90) days after such date and each ninety (90) days thereafter or at such other time(s) as the +Board or the Committee shall have otherwise determined. +(A) +All NQSOs granted to Non-Employee Directors shall be exercisable in the manner provided in Section 6(a) for a term of ten years. +(B) +All NQSOs granted to Non-Employee Directors shall be transferable as provided in Section 12(c) and shall terminate in accordance with Section 10(a), except that the timing provisions of Subsections 10(a) and 10(c) may +not be varied by Committee determination. +A-12 +Table of Contents +(C) +Notwithstanding anything contained herein to the contrary, if at any time a Non-Employee Director holder of a NQSO granted under the Plan becomes an employee, officer or director of or a consultant to an entity which +the Committee determines is a competitor of the Company, such NQSO shall automatically terminate as of the date such conflicting relationship was established. +(b) Stock Appreciation Rights . +(i) Grants . Subject to the terms and provisions of the Plan, SARs may be granted to Participants, in such number and upon +such terms and conditions as the Committee determines, and may be granted alone or as Tandem SARs. With respect to Tandem SARs, the exercise of either such Stock Options or SARs will result in the simultaneous cancellation of the same number of +Tandem SARs or Stock Options, as the case may be. +(ii) Exercise Price . The Exercise Price shall be equal +to or, at the Committee’s discretion, greater than Fair Market Value on the date the SAR is granted, unless the SAR was granted through the assumption of, or in substitution for, outstanding awards previously granted to individuals who became +employees of the Company as a result of a merger, consolidation, acquisition or other corporate transaction involving the Company, in which case the assumption or substitution shall be accomplished in a manner that permits the SAR to be exempt from +Code Section 409A. +(iii) Term . The term of a SAR shall be determined by the Committee in its sole +discretion, but in no event shall the term exceed ten years from the Date of Grant; provided that, each SAR granted in tandem with a Stock Option shall terminate upon the termination or exercise of the related Stock Option. +(iv) No Repricing . Subject to the adjustment provisions of Section 8, without the approval of the Company’s +shareholders, (A) the Exercise Price for any outstanding SAR may not be decreased after the Date of Grant, (B) no outstanding SAR may be surrendered to the Company as consideration for the grant of a new SAR with a lower Exercise Price, and (C) no +other modifications to any outstanding SAR may be made that would be treated as a “repricing” under the then applicable rules, regulations or listing requirements adopted by the national securities exchange on which the Common Shares are +listed. +(v) Form of Payment . Vested SARs may be exercised in whole or in part, and the Committee may authorize payment +of a SAR in the form of cash, Common Shares valued at its Fair Market Value on the date of the exercise or a combination thereof, or by any other method as the Committee may determine. +(vi) Tandem SARs . Tandem SARs may be exercised for all or part of the Common Shares subject to the related +Stock Option upon the surrender of the right to exercise the equivalent portion of the related Stock Option. A Tandem SAR may be exercised only with respect to the Common Shares for which its related Stock Option is then +exercisable. Notwithstanding any other provision of the Plan to the contrary, with respect to a Tandem SAR +A-13 +Table of Contents +granted in connection with an ISO: (A) the Tandem SAR will expire no later than the expiration of the underlying ISO; (B) the value of the payout with respect to the Tandem SAR may be for no more +than 100% of the excess of the Fair Market Value of the Common Shares subject to the underlying ISO at the time the Tandem SAR is exercised over the Exercise Price of the underlying ISO; and (C) the Tandem SAR may be exercised only when the +Fair Market Value of the Common Shares subject to the ISO exceeds the Exercise Price of the ISO. +(vii) No Dividends or Shareholder +Right s . No dividends or dividend equivalents may be paid on SARs. Except as otherwise provided herein, a Participant shall have no rights as a holder of Common Shares covered by a SAR unless and until such Common Shares have +been registered to the Participant as the owner. +(c) Restricted Shares and Restricted Share Units . +(i) Grants . Subject to the terms and provisions of the Plan, Restricted Shares and Restricted Share Units may be granted to +Participants in such number and upon such terms and conditions as the Committee determines. Restricted Shares will be registered in the name of the Participant and deposited with the Company or its agent in certificated or book-entry form. +(ii) Restrictions . Restricted Shares or Restricted Share Units may be granted at no cost or at a purchase +price determined by the Committee, which may be less than the Fair Market Value, but subject to such terms and conditions as the Committee determines, including, without limitation: forfeiture conditions, transfer restrictions, restrictions based +upon the achievement of specific performance goals (Company-wide, divisional and/or individual), which may be based on one or more Performance Measures, time-based restrictions on vesting and/or restrictions under applicable federal or state +securities laws. Subject to Sections 9 and 10, for Awards to employees, no Restricted Shares or Restricted Share Units conditioned upon the achievement of performance shall be based on a Restriction Period of less than one year, and, except as +may be determined by the Committee, any Restriction Period based solely on continued employment or service (time-based) shall be for a minimum of three years, subject to (A) pro rata or graded vesting prior to the expiration of such time-based +Restriction Period, and (B) acceleration due to the Participant’s death, Disability or Retirement, in each case as specified in the applicable Award Agreement; provided that the Restriction Period applicable to the first vesting date of an +Award subject to pro rata or graded vesting (as referenced in (A) above) may be for less than one year, provided the first vesting date is no earlier than the fiscal year-end date of the fiscal year during which the Award was granted. To the +extent the Restricted Shares or Restricted Share Units are intended to qualify for the Performance-Based Exception, except as may be determined by the Committee, the applicable restrictions shall be based on the achievement of Performance Goals over +a Performance Period, as described in Section 6(d). +(iii) Transfer Restrictions . During the Restriction +Period, Restricted Shares and Restricted Share Units may not be sold, assigned, transferred or otherwise disposed of, or mortgaged, pledged or otherwise encumbered. In order to enforce the limitations imposed upon the Restricted Shares, the +Committee may (A) cause a legend or legends to be placed on any certificates evidencing such Restricted Shares, and/or (B) cause “stop transfer” instructions to be issued, as it deems necessary or appropriate. +A-14 +Table of Contents +(iv) Dividends and Voting Rights . Unless otherwise determined by the +Committee, during the Restriction Period, Participants who hold Restricted Shares shall have the right to receive dividends in cash or other property or other distribution or rights in respect of the Restricted Shares and shall have the right to +vote the Restricted Shares as the record owners; provided that, unless otherwise determined by the Committee, any dividends or other property payable to a Participant during the Restriction Period shall be distributed to the Participant only if and +when the restrictions imposed on the applicable Restricted Shares lapse. Unless otherwise determined by the Committee, during the Restriction Period, Participants who hold Restricted Shares Units shall be credited with dividend equivalents in +respect of such Restricted Share Units; provided that, unless otherwise determined by the Committee, such dividend equivalents shall be distributed (without interest) to the Participant only if and when the restrictions imposed on the applicable +Restricted Share Units lapse. Participants shall have no other rights as a shareholder with respect to Restricted Share Units unless otherwise determined by the Committee. Notwithstanding the forgoing, no Restricted Shares or Restricted +Share Units conditioned upon the achievement of performance shall provide the Participant with dividend or shareholder rights unless otherwise determined by the Committee; provided that an Award Agreement may provide for payment (in money or shares) +equal to the dividends paid on the number of Common Shares payable upon vesting of such Restricted Shares or Restricted Share Units or at any time prior thereto. +(v) Payment of Restricted Share Units . Restricted Share Units that become payable in accordance with their terms and +conditions shall be settled in cash, Common Shares, Restricted Shares, or a combination thereof, as determined by the Committee. +(vi) +Ownership . Restricted Shares shall be registered in the name of the Participant on the books and records of the Company or its designee (or by one or more physical certificates if physical certificates are issued) subject to the +applicable restrictions imposed by the Plan. At the end of the Restriction Period that applies to Restricted Shares, the number of shares to which the Participant is entitled shall be delivered to the Participant free and clear of the +restrictions, either in certificated or book-entry form. No Common Shares shall be registered in the name of the Participant with respect to Restricted Share Units, and Participants shall have no ownership interest in the Common Shares to which +the Restricted Share Units relate, unless and until payment is made in Common Shares. +(vii) +Forfeiture . If a Participant who holds Restricted Shares or Restricted Share Units fails to satisfy the restrictions, terms or conditions applicable to the Award, except as otherwise determined by the Committee, the +Participant shall forfeit the Restricted Shares or Restricted Share Units. The Committee may at any time waive such restrictions or accelerate the date or dates on which the restrictions will lapse; however, to the extent the Restricted Shares +or Restricted Share Units are intended to qualify for the Performance-Based Exception, the provisions of Section 6(d)(iv) will apply. +(d) +Performance-Based Exception . +(i) Grants . Subject to the provisions of the Plan, Full-Value Awards granted +in a manner that is intended to qualify for the Performance-Based Exception shall be conditioned +A-15 +Table of Contents +upon the achievement of Performance Goals as the Committee shall determine, in its sole discretion. +(ii) Performance Goals . Performance Goals shall be based on one or more Performance Measures, over a Performance Period, as +to be determined by the Committee. +(iii) Performance Measures . The Performance Measure(s) may be described in terms of +objectives that are related to the individual Participant or objectives that are Company-wide or related to a subsidiary, division, department, region, function or business unit of the Company, and shall consist of one or more or any combination of +the following criteria: cash flow, profit, revenue, stock price, market share, sales, net income, operating income, return ratios, earnings per share, earnings (which may include an add back for taxes, interest, and/or depreciation and +amortization), operating earnings, profit margins, earnings per Common Share, favorable comparison to established budgets, return on shareholders’ equity, return on assets, attainment of strategic and operational initiatives, comparisons with +various stock market indices, reduction in costs or a combination of such factors, personal performance measures, working capital, total assets, net assets, return on sales, return on invested capital, gross margin, costs, shareholders’ equity, +shareholder return and/or productivity or productivity improvement. The Performance Goals based on these Performance Measures may be expressed in absolute terms or relative to the performance of other entities. +(iv) Treatment of Awards . With respect to any Full-Value Award that is intended to qualify for the Performance-Based +Exception: (A) the Committee shall interpret the Plan and this Section 6(d) in light of Code Section 162(m), (B) the Committee shall not amend the Full-Value Award in any way that would adversely affect the treatment of the Full-Value Award under +Code Section 162(m), and (C) such Full-Value Award shall not vest or be paid until the Committee shall first have certified that the Performance Goals have been achieved. +(e) Unrestricted Share Awards . +Subject to the terms and provisions of the Plan, the Committee may grant awards of unrestricted Common Shares to Participants in such number +and upon such terms and conditions as the Committee determines in recognition of outstanding achievements or contributions by such Participants or otherwise. Unrestricted Common Shares issued on a bonus basis may be issued for no cash +consideration. +7. +Deferred Payment +Subject to the terms of the Plan, the Committee may +determine that all or a portion of any Award to a Participant, whether it is to be paid in cash, Common Shares or a combination thereof, shall be deferred or may, in its sole discretion, approve deferral elections made by +Participants. Deferrals shall be for such periods and upon such terms as the Committee may determine in its sole discretion, which terms shall comply with Code Section 409A. +8. +Dilution and Other Adjustments +In the event of any merger, +reorganization, consolidation, liquidation, recapitalization, reclassification, redesignation, stock dividend, other distribution (whether in the form of cash, +A-16 +Table of Contents +shares or otherwise), stock split, reverse stock split, spin off, combination, repurchase or exchange of shares or issuance of warrants or rights to purchase shares or other securities, or other +change in corporate structure affecting the Common Shares, the Committee shall make such adjustments in the aggregate number and type of Common Shares which may be delivered and the individual award maximums as set forth in Section 5, the number and +type of Common Shares subject to outstanding Awards and the Exercise Price or other price of Common Shares subject to outstanding Awards (provided the number of Common Shares subject to any Award shall always be a whole number), as may be and to the +extent determined to be appropriate and equitable by the Committee to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan. Such adjustment shall be conclusive and binding for all +purposes of the Plan. Any such adjustment of an ISO or SAR shall be made in compliance with Code Sections 422 and 424, and no such adjustment shall be made that would cause any Award which is or becomes subject to Code Section 409A to fail to +comply with the requirements of Code Section 409A or is exempt from Code Section 409A to become subject to Code Section 409A. +9. +Change in Control +Notwithstanding any other provision of the Plan to the +contrary, immediately upon the occurrence of a Change in Control, the following provisions of this Section 9 shall apply except to the extent an Award Agreement provides for a different treatment (in which case the Award Agreement shall govern): +(a) +all outstanding Stock Options and SARs vest and become fully exercisable; and +(b) +all Full-Value Awards become fully vested. +10. +Termination +(a) Termination by Death, Disability, or +Retirement . The terms and conditions of the Participant’s Award Agreement shall govern the extent, if at all, to which the vesting of any Award is accelerated or forfeited due to a Participant’s death, +Disability, or Retirement; provided that, for Full-Value Awards intended to qualify for the Performance-Based Exception, no vesting may occur or no distribution may be made prior to the attainment of the Performance Goals. +(b) Termination for Cause . If a Participant’s employment or service terminates for Cause, (i) all Stock +Options and SARs (or portions thereof) which have not been exercised, whether vested or not, and (ii) all Full-Value Awards, shall immediately be forfeited upon termination, including such Awards that are subject to performance conditions (or +unearned portions thereof). +(c) Other Terminations . If a Participant’s employment or service +terminates, voluntarily or involuntarily, for any reason other than death, Disability, Retirement or Cause, (i) any vested portion of Stock Options or SARs held by the Participant at the time of termination may be exercised for a period of three +months (or such other period as the Committee may specify at or after the time of grant) from the termination date, or until the expiration of the original term of the Stock Option or SAR, whichever period is shorter, (ii) no unvested portion of any +Stock Option or SAR shall become vested, including such Awards that are subject to +A-17 +Table of Contents +performance conditions (or unearned portions thereof), and (iii) all Full-Value Awards, including such Awards that are subject to performance conditions (or unearned portions thereof), shall +immediately be forfeited upon termination. +(d) Limitation for ISOs . No ISO may be exercised more than +three months following termination of employment for any reason (including Retirement) other than death or Disability, nor more than one year following termination of employment for the reason of death or Disability (as defined in Code Section 422), +or such Award will no longer qualify as an ISO and shall thereafter be, and receive the tax treatment applicable to, a NQSO. For this purpose, a termination of employment is cessation of employment, under the rules applicable to ISOs, such that +no employment relationship exists between the Participant and the Company. +(e) Transfers and Leaves of +Absence . The transfer of a Participant within the Company shall not be deemed a termination of employment except as required by Code Sections 422 and 409A, and other applicable laws. The following leaves of absences +are not deemed to be a termination of employment: +(i) if approved in writing by the Company, for military service, sickness or any other +purpose approved by the Company, and the period of absence does not exceed 90 days; +(ii) if in excess of 90 days, if approved in writing +by the Company, but only if the Participant’s right to reemployment is guaranteed by statute or contract and provided that the Participant returns to work within 30 days after the end of such absence; and +(iii) subject to the restrictions of Code Section 409A and to the extent that such discretion is permitted by law, if the Committee determines +in its discretion that the absence is not a termination of employment. +11. +Recoupment or Recovery Policy +Any Award shall be subject to forfeiture or +repayment pursuant to the terms of any applicable compensation recoupment or recovery policy adopted by the Company, Committee or Board, as thereafter amended, including any policy adopted to comply with the rules of any stock exchange on which the +Common Shares are traded or the Securities and Exchange Commission. +12. +Miscellaneous Provisions +(a) Rights as a Shareholder . Except +as otherwise provided herein, a Participant shall have no rights as a shareholder with respect to Awards hereunder, unless and until the Common Shares have been registered to the Participant as the owner. +(b) No Loans . No loans from the Company to Participants shall be permitted in connection with the Plan. +(c) Assignment or Transfer . Except as otherwise provided under the Plan, no Award or any rights or interests therein shall +be transferable other than by will or the laws of descent and distribution. The Committee may, in its discretion, provide that an Award (other than an ISO) is transferable without the payment of any consideration to a Participant’s family +member, +A-18 +Table of Contents +subject to such terms and conditions as the Committee may impose. For this purpose, “family member” has the meaning given to such term in the General Instructions to the Form S-8 +registration statement under the Securities Act. All Awards shall be exercisable, during the Participant’s lifetime, only by the Participant or a person who is a permitted transferee pursuant to this Section 12(c). Once awarded, the +Common Shares (other than Restricted Shares) received by Participants may be freely transferred, assigned, pledged or otherwise subjected to lien, subject to the restrictions imposed by the Securities Act, Section 16 of the Exchange Act and the +Company’s Insider Trading Policy, each as amended. +(d) Withholding Taxes . The Company shall have the +right to deduct from all Awards paid in cash to a Participant any taxes required by law to be withheld with respect to such Awards. All statutory minimum applicable withholding taxes arising with respect to Awards paid in Common Shares to a +Participant shall be satisfied by the Company retaining Common Shares having a Fair Market Value on the date the tax is to be determined that is equal to the amount of such statutory minimum applicable withholding tax (rounded, if necessary, to the +next lowest whole number of Common Shares); provided, however, that, subject to any restrictions or limitations that the Company deems appropriate, a Participant may elect to satisfy such statutory minimum applicable withholding tax through cash or +cash proceeds. +(e) No Rights to Awards . Neither the Plan nor any action taken hereunder shall be construed as giving +any person any right to be retained in the employ or service of the Company, and the Plan shall not interfere with or limit in any way the right of the Company to terminate any person’s employment or service at any time. Except as set +forth herein, no employee or other person shall have any claim or right to be granted an Award under the Plan. By accepting an Award, the Participant acknowledges and agrees that (i) the Award will be exclusively governed by the Plan, including +the right of the Company to amend or cancel the Plan at any time without the Company incurring liability to the Participant (except, to the extent the terms of the Award so provide, for Awards already granted under the Plan), (ii) the Participant is +not entitled to future award grants under the Plan or any other plan, and (iii) the value of any Awards received shall be excluded from the calculation of termination or other severance payments or benefits. +(f) Beneficiary Designation . To the extent allowed by the Committee, each Participant under the Plan may name any +beneficiary or beneficiaries to whom any benefit under the Plan is to be paid in case of his or her death before he or she receives all of such benefit. Unless the Committee determines otherwise, each such designation shall revoke all prior +designations by the same Participant, shall be in a form prescribed by the Committee and shall be effective only when received in writing by the Company during the Participant’s lifetime. In the absence of any such designation, benefits +remaining unpaid at the Participant’s death shall be paid to the Participant’s estate. +(g) Fractional +Shares . Fractional Common Shares shall not be issued or transferred under an Award, but the Committee may direct that cash be paid in lieu of fractional shares or may round off fractional shares, in its discretion. +(h) Unfunded Plan . The Plan shall be unfunded and any benefits under the Plan shall represent an unsecured promise to pay by +the Company. With respect to any payments not yet +A-19 +Table of Contents +made to a Participant pursuant to an Award, nothing contained in the Plan or any Award Agreement shall give the Participant any rights that are greater than those of a general unsecured creditor +of the Company. +(i) Severability . If any provision of the Plan is deemed illegal or invalid, the +illegality or invalidity shall not affect the remaining provisions of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included. +(j) Limitation of Liability . Members of the Board and the Committee and officers and employees of the Company who are their +designees acting under the Plan shall be fully protected in relying in good faith upon the advice of counsel and shall incur no liability except for gross or willful misconduct in the performance of their duties hereunder. +(k) Successors . All obligations of the Company with respect to Awards granted under the Plan shall be binding on any +successor to the Company, whether as a result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company. +(l) Code Section 409A Compliance . Each Award granted under the Plan is intended to be either exempt from or in compliance +with the requirements of Code Section 409A and any regulations or guidance that may be adopted thereunder, including any transition relief available under applicable guidance. The Plan may be amended or interpreted by the Committee as it +determines appropriate in accordance with Code Section 409A and to avoid a plan failure under Code Section 409A(a)(1). If a Participant is a “specified employee” as defined in Code Section 409A at the time of the Participant’s +separation from service with the Company, then solely to the extent necessary to avoid the imposition of any additional tax under Code Section 409A, the commencement of any payments or benefits under an Award shall be deferred until the date that is +six months following the Participant’s separation from service (or such other period as required to comply with Code Section 409A). +13. +Effective Date, Amendments, Governing Law and Plan Termination +(a) +Effective Date . The Effective Date of the Plan is the date on which the Company’s shareholders approve the Plan at a duly held shareholder meeting. +(b) Amendments . +(i) +Amendment of the Plan . The Committee or the Board may at any time terminate or amend the Plan in whole or in part, but no such action shall materially and adversely affect any rights or obligations with respect to +any Awards granted prior to the date of such termination or amendment without the consent of the affected Participant, except to the extent that the Committee reasonably determines that such termination or amendment is necessary or appropriate to +comply with applicable law or the rules and regulations of any stock exchange on which the Common Shares are traded or to preserve any intended favorable, or avoid any unintended unfavorable, tax effects for the Company, Plan or +Participants. Notwithstanding the foregoing, unless the Company’s shareholders shall have first approved the amendment, no amendment of the Plan shall be effective if the amendment would: (A) increase the maximum number of Common Shares +that may be delivered under the Plan or to any one individual (except +A-20 +Table of Contents +to the extent made pursuant to Section 8 hereof), (B) extend the maximum period during which Awards may be granted under the Plan, (C) add to the types of awards that can be made under the Plan, +(D) modify the requirements as to eligibility for participation in the Plan, (E) permit a repricing or decrease the Exercise Price to less than the Fair Market Value on the Date of Grant of any Stock Option or SAR, except for adjustments made +pursuant to Section 8, (F) materially increase benefits to Participants, or (G) otherwise require shareholder approval pursuant to the Plan or applicable law or the rules of the principal securities exchange on which Common Shares are traded. +(ii) Amendment of Awards . The Committee may amend, prospectively or retroactively, the terms of an Award, +provided that no such amendment is inconsistent with the terms of the Plan or would materially and adversely affect the rights of any Participant without his or her written consent. +(c) Governing Law . To the extent not preempted by Federal law, the Plan and all Award Agreements are construed in accordance +with and governed by the laws of the State of Ohio. The Plan is not intended to be governed by the Employment Retirement Income Security Act of 1974, and shall be so construed and administered. +(d) Plan Termination . No Awards shall be made under the Plan after the tenth anniversary of the Effective Date. +A-21 +Table of Contents +*** Exercise Your Right to Vote *** +Important Notice Regarding the Availability of Proxy Materials for the +Shareholder Meeting to Be Held on January 25, 2017. +MERIDIAN BIOSCIENCE, INC. +MERIDIAN BIOSCIENCE, INC. +3471 RIVER HILLS DRIVE +CINCINNATI, OH +45244 +Meeting Information +Meeting Type: Annual Meeting +For holders as of: November 30, 2016 +Date: January 25, 2017 Time: 2:00 PM EST +Location: Holiday Inn +Eastgate +4501 Eastgate Boulevard +Cincinnati, OH 45245 +You are receiving this communication because you hold shares +in the above named company. +This is not a ballot. You cannot use this notice to vote +these shares. This communication presents only an overview of the more complete proxy materials that are available to you on the Internet. You may view the proxy materials online at www.proxyvote.com or easily request a paper copy (see +reverse side). +We encourage you to access and review +all of the important information contained in the proxy materials before voting. +See the reverse side of this notice to obtain proxy materials and voting instructions. +Table of Contents +— Before You Vote — +How to Access the Proxy Materials +Proxy Materials Available to VIEW or RECEIVE: +1. Notice and Proxy Statement 2. Annual Report and Form 10-K +How to View Online: +Have the information that is printed in the box marked by the arrow +(located on the following page) and visit: www.proxyvote.com . +How to Request and +Receive a PAPER or E-MAIL Copy: +If you want to receive a paper or e-mail copy of these documents, you must request one. There is NO charge for requesting a copy. Please choose one of the following methods to make your request: +1) BY INTERNET : www.proxyvote.com +2) BY TELEPHONE : +1-800-579-1639 +3) BY E-MAIL* : +sendmaterial@proxyvote.com +* +If requesting materials by e-mail, please send a blank e-mail with the information that is printed +in the box marked by the arrow +(located on the following page) in the subject line. +Requests, instructions and other inquiries sent to this e-mail address +will NOT be forwarded to your investment advisor. Please make the request as instructed above on or before January 11, 2017 to facilitate timely delivery. +— How To Vote — +Please Choose One of the Following +Voting Methods +Vote In Person: Many shareholder meetings have attendance requirements including, but not limited to, the possession of an attendance ticket issued by the +entity holding the meeting. Please check the meeting materials for any special requirements for meeting attendance. At the meeting, you will need to request a ballot to vote these shares. +Vote By Internet: To vote now by Internet, go to www.proxyvote.com. Have the +information that is printed in the box marked by the arrow +available and follow the instructions. +Vote By +Mail: You can vote by mail by requesting a paper copy of the materials, which will include a proxy card. +Table of Contents +Voting items +The Board of Directors recommends you vote FOR the +following: +1. Election of Directors +Nominees +01 JAMES M. ANDERSON +04 JOHN C. MCILWRAITH +02 DWIGHT E. ELLINGWOOD +05 DAVID C. PHILLIPS +03 JOHN A. KRAEUTLER +06 CATHERINE A. SAZDANOFF +The Board of Directors recommends you vote FOR the following proposals: +2. Advisory vote to approve named executive officer compensation. +3. Ratification of the appointment of Grant Thornton LLP as Meridian's independent registered public accountants for fiscal year +2017. +4. Reapproval of the material terms for payment of performance-based incentive compensation under the Meridian Bioscience, Inc. 2012 Stock +Incentive Plan. +NOTE: Such other business as may properly come before the meeting or any postponement or adjournment thereof. Only shareholders of record at the close of business on +November 30, 2016 are entitled to notice of and to vote at the meeting. +Table of Contents +Table of Contents +MERIDIAN BIOSCIENCE, INC. +3471 RIVER HILLS DRIVE +CINCINNATI, OH 45244 +VOTE BY INTERNET - www.proxyvote.com +Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the +cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. +ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS +If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy +cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials +electronically in future years. +VOTE BY PHONE - 1-800-690-6903 +Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have +your proxy card in hand when you call and then follow the instructions. +VOTE BY +MAIL +Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o +Broadridge, 51 Mercedes Way, Edgewood, NY 11717. +TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: +KEEP THIS PORTION FOR YOUR RECORDS +THIS PROXY CARD IS VALID ONLY WHEN +SIGNED AND DATED. DETACH AND RETURN THIS PORTION ONLY +The Board of Directors recommends +you +vote FOR the following: +For +All +Withhold +All +For All Except +To withhold authority to vote for any individual nominee(s), mark +“For All Except” and write the number(s) of the nominee(s) on the line below. +1. +Election of Directors +Nominees: +¨ +¨ +¨ +01 JAMES M. ANDERSON +04 JOHN C. MCILWRAITH +02 DWIGHT E. ELLINGWOOD 05 DAVID C. PHILLIPS +03 JOHN A. KRAEUTLER 06 CATHERINE A. SAZDANOFF +The Board of Directors recommends you vote FOR the +following proposals: +For +Against +Abstain +2. +Advisory vote to approve named executive officer compensation. +¨ +¨ +¨ +3. +Ratification of the appointment of Grant Thornton LLP as Meridian's independent registered public accountants for fiscal year 2017. +¨ +¨ +¨ +4. +Reapproval of the material terms for payment of performance-based incentive compensation under the Meridian Bioscience, Inc. 2012 Stock +Incentive Plan. +¨ +¨ +¨ +NOTE: Such other business as may properly come before the +meeting or any postponement or adjournment thereof. Only shareholders of record at the close of business on November 30, 2016 are entitled to notice of and to vote at the meeting. +For address change/comments, mark here. (see reverse for instructions) +¨ +Yes +No +Please indicate if you plan to attend this meeting. +¨ +¨ +Please sign exactly as your name(s) appears(s) hereon. When signing +as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by +authorized officer. +Signature [PLEASE SIGN WITHIN BOX] +Date +Signature (Joint Owners) +Date +Table of Contents +Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice and Proxy Statement, Annual Report and Form 10-K are available +at www.proxyvote.com +--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- +MERIDIAN +BIOSCIENCE, INC. +Annual Meeting of Shareholders +January 25, 2017 2:00 PM +This proxy is +solicited by the Board of Directors +The undersigned hereby +appoints JOHN A. KRAEUTLER and MELISSA A. LUEKE, and either of them, attorneys and proxies of the undersigned, each with the power of substitution, to vote all shares of Common Stock of Meridian Bioscience, Inc. which the undersigned would be +entiltled to vote on the matters specified on the reverse side (and in their discretion to cumulate votes in the election of directors if cumulative voting is invoked by a shareholder through proper notice to the Company) and, in their discretion, +with respect to such other matters as may properly come before the Annual Meeting of Shareholders of Meridian Bioscience, Inc. to be held on January 25, 2017, at 2:00 p.m. Eastern Standard Time, at the Holiday Inn Eastgate, 4501 Eastgate Boulevard, +Cincinnati, Ohio 45245 and any postponement or adjournment of such Annual Meeting. +This proxy, when properly executed, will be voted as directed by the shareholder(s). If no such directions are made, this proxy will be voted FOR +the election to the Board of Directors of the nominees listed on the reverse side and FOR each remaining proposal. +Please mark, sign, date, and return this proxy card promptly using the enclosed reply envelope. +Address change / comments: +(If you noted any Address Changes and / or Comments above, please mark +corresponding box on the reverse side.) +Continued and to be +signed on reverse side \ No newline at end of file diff --git a/raw/proxies/0000794172/0001193125-16-792527/proxy_rpt.txt b/raw/proxies/0000794172/0001193125-16-792527/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..f44d0988bfc20269b6dfd6fec0fab43dc4eee13f --- /dev/null +++ b/raw/proxies/0000794172/0001193125-16-792527/proxy_rpt.txt @@ -0,0 +1,13 @@ +TRANSACTIONS WITH RELATED PERSONS +During fiscal 2016, the Company leased certain office space from an entity controlled by Marco G. Calzavara, President and Managing Director, Meridian +Bioscience Europe. Payments made under such arrangements during fiscal 2016 totaled approximately $170,000. +Nasdaq rules require the +Company to conduct an appropriate review of related party transactions required to be disclosed by the Company pursuant to SEC Regulation S-K Item 404 for potential conflict of interest situations on an ongoing basis and that all such transactions +must be approved by the Audit Committee or another Committee comprised of independent Directors. As a result, the Audit Committee annually reviews all such related party transactions and approves each related party transaction if it determines +that it is in the best interests of the Company. Additionally, the Audit Committee’s Charter provides it the authority to review, approve and monitor transactions involving the Company and “related persons” (Directors and +Executive Officers or their immediate family members, or shareholders owning five percent or greater of the Company’s outstanding stock). This also covers any related person transaction that meets the minimum threshold for disclosure in +the proxy statement under the relevant SEC rules (generally, transactions involving amounts exceeding $120,000 in which a related person has a direct or indirect material interest). In considering the transaction, the Audit Committee may +consider all relevant factors, including, as applicable: (i) the Company’s business rationale for entering into the transaction; (ii) the alternatives to entering into a related person transaction; (iii) whether the transaction is on terms +comparable to those available to third parties, or in the case of employment relationships, to employees generally; (iv) the potential for the transaction to lead to an actual or apparent conflict of interest and any safeguards imposed to prevent +such actual or apparent conflicts; and (v) the overall fairness of the transaction to the Company. This policy is included in the Company’s Employee Handbook. The approval of such related person transactions are evidenced by internal +Company resolutions or memoranda. \ No newline at end of file diff --git a/raw/proxies/0000794172/0001193125-17-369403/proxy.txt b/raw/proxies/0000794172/0001193125-17-369403/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..8c9a03ec8e4c6053196fb2cc965e1711a2e1d820 --- /dev/null +++ b/raw/proxies/0000794172/0001193125-17-369403/proxy.txt @@ -0,0 +1,2477 @@ +DEF 14A +1 +d493749ddef14a.htm +DEFINITIVE PROXY STATEMENT +Definitive Proxy Statement +Table of Contents +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +WASHINGTON, D.C. 20549 +SCHEDULE 14A +(Rule 14a-101) +INFORMATION REQUIRED IN PROXY STATEMENT +SCHEDULE 14A INFORMATION +Proxy Statement Pursuant to Section 14(a) of the +Securities Exchange Act of 1934 +(Amendment No. ) +Filed by the +Registrant ☒ Filed by a Party other than the +Registrant ☐ +Check the appropriate box: +☐ +Preliminary Proxy Statement +☐ +Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +☒ +Definitive Proxy Statement +☐ +Definitive Additional Materials +☐ +Soliciting Material Pursuant to Section 14a-12 +Meridian Bioscience, Inc. +(Name of Registrant as +Specified in Its Charter) +(Name of Person(s) Filing Proxy Statement if Other Than the Registrant) +Payment of Filing Fee (Check the appropriate box): +☒ +No fee required. +☐ +Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. +(1) +Title of each class of securities to which transaction applies: +(2) +Aggregate number of securities to which transaction applies: +(3) +Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on +which the filing fee is calculated and state how it was determined): +(4) +Proposed maximum aggregate value of transaction: +(5) +Total Fee Paid: +☐ +Fee paid previously with preliminary materials. +☐ +Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the +offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. +(1) +Amount Previously Paid: +(2) +Form, Schedule or Registration Statement No.: +(3) +Filing Party: +(4) +Date Filed: +Table of Contents +3471 River Hills Drive +Cincinnati, Ohio 45244 +www.meridianbioscience.com +Notice of Annual Meeting of Shareholders +and Proxy Statement +Dear Shareholders: +Our Annual Meeting of Shareholders will be held at 2:00 p.m. on January 25, 2018 at the Holiday Inn Eastgate, 4501 Eastgate Boulevard, Cincinnati, +Ohio 45245. We hope you will attend. +At the meeting, you will hear a report on our operations and have a chance to meet your Directors and +Executive Officers. +This booklet includes the formal notice of the meeting and the proxy statement. The proxy statement tells you more about +the agenda and procedures for the meeting. It also describes how the Board operates and gives personal information about our Director candidates. +We are pleased to once again take advantage of the U.S. Securities and Exchange Commission rules that allow companies to furnish their proxy materials over the Internet. As a result, we are mailing to +most of our shareholders a Notice of Internet Availability of Proxy Materials (the “Notice”) instead of a paper copy of this proxy statement and our Annual Report. The Notice contains instructions on how to access and review those +documents over the Internet. We believe that this process allows us to provide our shareholders with the information they need in a more timely manner, while reducing the environmental impact and lowering the costs of printing and distributing our +proxy materials. If you received a Notice by mail and would like to receive a printed copy of our proxy materials, you should follow the instructions for requesting such materials included in the Notice. +Whether or not you plan to attend the meeting, please cast your proxy vote promptly, either online, over the phone or by returning your signed and dated +proxy card in the enclosed envelope. +Sincerely yours, +/s/ John A. Kraeutler +John A. Kraeutler +Executive Chairman of the Board +December 14, 2017 +Table of Contents +NOTICE OF ANNUAL MEETING OF SHAREHOLDERS +Date: +January 25, +2018 +Time: +2:00 p.m., Eastern Standard Time +Place: +Holiday Inn +Eastgate +4501 Eastgate Blvd. +Cincinnati, Ohio 45245 +Purpose: +• +Elect as Directors the eight nominees named in the accompanying proxy materials +• +Conduct an advisory vote on our executive compensation +(“Say-on-Pay”) +• +Conduct an advisory vote on the preference for the frequency of future +Say-on-Pay votes (“Say-on-Frequency”) +• +Ratify appointment of Grant Thornton LLP as Meridian’s independent registered public accountants for fiscal year 2018 +Only shareholders of record on November 30, 2017 may vote at the meeting. The approximate mailing date of this proxy +statement and accompanying Proxy Card is December 14, 2017. +Your vote is important. Please cast your proxy vote promptly, either online, +over the phone or by returning your signed and dated proxy card in the enclosed envelope. +/s/ Melissa A. Lueke +Melissa A. Lueke +Secretary +December 14, 2017 +Table of Contents +Table of Contents +GENERAL INFORMATION +1 +ELECTION OF DIRECTORS (Item 1 on the Proxy Card) +2 +ADVISORY VOTE ON COMPENSATION OF NAMED EXECUTIVE OFFICERS (“SAY-ON-PAY” PROPOSAL) +(Item 2 on the Proxy Card) +5 +ADVISORY VOTE ON THE FREQUENCY OF FUTURE ADVISORY VOTES ON COMPENSATION OF NAMED EXECUTIVE OFFICERS (“SAY-ON-FREQUENCY” PROPOSAL) (Item 3 on the Proxy Card) +6 +RATIFICATION OF APPOINTMENT OF GRANT THORNTON LLP AS INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS (Item 4 on the Proxy Card) +7 +CORPORATE GOVERNANCE +8 +REPORT OF THE AUDIT COMMITTEE +10 +DIRECTORS AND EXECUTIVE OFFICERS +13 +SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS +15 +SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE +15 +TRANSACTIONS WITH RELATED PERSONS +15 +COMPENSATION DISCUSSION AND ANALYSIS +16 +COMPENSATION COMMITTEE REPORT +24 +SUMMARY COMPENSATION TABLE +24 +GRANTS OF PLAN-BASED AWARDS +26 +OUTSTANDING EQUITY AWARDS AT FISCAL +YEAR-END +27 +OPTION EXERCISES AND STOCK VESTED +28 +401(K) PLAN +29 +POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL +29 +DIRECTOR COMPENSATION +30 +SHAREHOLDER PROPOSALS FOR NEXT YEAR +31 +QUESTIONS +31 +Meridian makes available, free of charge on its website, all of its filings that are made electronically with the +Securities and Exchange Commission (“SEC”), including Forms 10-K, 10-Q and 8-K. These filings are also available on the +SEC’s website (www.sec.gov). To access these filings, go to our website (www.meridianbioscience.com). Copies of Meridian’s Annual Report on Form 10-K for the fiscal year ended September 30, +2017, including financial statements and schedules thereto, filed with the SEC, are also available without charge to shareholders upon written request addressed to: +Melissa A. Lueke +Executive Vice President, Chief Financial Officer and Secretary +Meridian Bioscience, Inc. +3471 River Hills +Drive +Cincinnati, Ohio 45244 +Table of Contents +MERIDIAN BIOSCIENCE, INC. +3471 River Hills Drive +Cincinnati, Ohio 45244 +Telephone (513) 271-3700 +P R O X +Y S T A T E M E N T +Annual Meeting of Shareholders +January 25, 2018 +GENERAL INFORMATION +Who may vote +Shareholders of Meridian, as recorded in our stock register on November 30, 2017, may vote at the meeting. As of that date, Meridian had 42,307,542 +shares of Common Stock outstanding. +How to vote +You may vote in person at the meeting or by proxy. We recommend you vote by proxy even if you plan to attend the meeting. You can always change your vote at the meeting. +How proxies work +Meridian’s +Board of Directors is asking for your proxy. Giving us your proxy means you authorize us to vote your shares at the meeting in the manner you direct. You may vote for all, some or none of our Director candidates. You may also vote for or against the +other proposals or abstain from voting. +If you complete your proxy online, over the phone or sign and return the enclosed proxy card but do +not specify how to vote, we will vote your shares in favor of: (i) our Director candidates; (ii) our executive compensation; (iii) ratification of appointment of Grant Thornton LLP as Meridian’s independent registered public +accountants for fiscal year 2018; and (iv) “one year” as the preferred frequency for future advisory votes on executive compensation. If any other matters come before the meeting or any postponement or adjournment thereof, each proxy will +be voted in the discretion of the individuals named as proxies on the card. +You may receive more than one proxy or voting card depending on +how you hold your shares. Shares registered in your name are covered by one card. If you hold shares through someone else, such as a stockbroker, bank or nominee, you may get material from them asking how you want to vote. +Stockbrokers, banks and nominees holding shares for beneficial owners must vote those shares as instructed by you. If the stockbroker, bank or nominee +has not received instructions from you, the beneficial owner, the stockbroker, bank or nominee generally has discretionary voting power only with respect to the ratification of appointment of the independent registered public accountants. However, a +stockbroker, bank or nominee does not have discretion to vote for or against the election of Directors and certain other matters subject to a vote if they have not received voting instructions from you. In order to avoid a broker non-vote of your shares on the election of Directors and the other matters subject to a vote, you must send voting instructions to your stockbroker, bank or nominee. +Solicitation of proxies +Solicitation of proxies is being made by management at the direction of Meridian’s Board of Directors, without additional compensation, through the +mail, in person or by telephone. The cost of preparing and mailing the Notice and the proxy statement and any accompanying material will be borne by Meridian. In addition, Meridian will request brokers and other custodians, nominees and fiduciaries +to forward proxy soliciting material to the beneficial owners of shares held of record, and Meridian will reimburse them for their expenses in so doing. +1 +Table of Contents +Revoking a proxy +You may revoke your proxy before it is voted by submitting a new proxy with a later date, by voting in person at the meeting or by notifying Meridian’s Secretary in writing at the address under +“Questions” on page 31. +Quorum +In order to carry on the business of the meeting, we must have a quorum. This means at least a majority of the outstanding shares eligible to vote must be represented at the meeting, either by proxy or in +person. +Votes needed +The eight Director candidates receiving the most votes will be elected to fill the seats on the Board. The approval on an advisory basis of our executive +compensation (Proposal No. 2) and the ratification of appointment of accountants (Proposal No. 4) require the favorable vote of a majority of the votes cast. Only votes for or against these proposals count, with abstentions not being +counted either for or against these proposals. +The advisory vote on the frequency of say-on-pay votes (every one, two, or three years) (Proposal No. 3) is a plurality vote, and we will consider shareholders to have expressed a non-binding +preference for the frequency option that receives the most favorable votes. Abstentions from voting on this proposal will have the same effect as not expressing a preference. +Abstentions and broker non-votes count for quorum purposes but, as indicated above, will not count for voting purposes. Broker +non-votes occur when a broker returns a proxy card but does not have authority to vote on a particular proposal. +Other matters +Any other matters considered at the meeting, including postponement +or adjournment, will require the affirmative vote of a majority of the votes cast. +ELECTION OF DIRECTORS +(Item 1 on the Proxy Card) +The Nominating and Corporate Governance Committee of the Board of Directors has nominated for re-election the +following current Directors: James M. Anderson, Dwight E. Ellingwood, Jack Kenny, John A. Kraeutler, John C. McIlwraith, David C. Phillips, John M. Rice, Jr. and Catherine A. Sazdanoff. +Proxies solicited by the Board will be voted for the election of these nominees. All Directors elected at the Annual Shareholders’ Meeting will be elected to hold office until the next annual +meeting. In voting to elect Directors, shareholders are entitled to cumulate their votes and to give one candidate a number of votes equal to the number of Directors to be elected multiplied by the number of shares held by the shareholder, or to +distribute their votes on the same principle among as many candidates as the shareholder sees fit. In order to invoke cumulative voting, notice of cumulative voting must be given in writing by a shareholder to the CEO, a Vice President or the +Secretary of Meridian not less than 48 hours prior to the Annual Shareholders’ Meeting. The proxies solicited include discretionary authority to cumulate votes. +All Meridian Directors are elected for one-year terms. Personal information on each of our nominees is given below. +If a Director nominee becomes unavailable before the election, your proxy card authorizes us to vote for a replacement nominee if the Board names one. +2 +Table of Contents +The Board recommends that shareholders vote FOR each of the following candidates: +James M. Anderson +Director +since 2009 +Age: 75 +James M. Anderson serves as Chairman of the Compensation Committee. He currently serves as President Emeritus of Cincinnati Children’s Hospital Medical Center +(“CCHMC”), after having served as advisor to the President of CCHMC from January 2010 through June 30, 2017 and as President and Chief Executive Officer of CCHMC from 1996 through 2009. From 2006 to 2014, he served as a director of +Ameritas Mutual Holding Company and has also served as Chairman of the Board of the Cincinnati Branch of the Federal Reserve Bank of Cleveland, retiring in 2012. Prior to joining the staff of CCHMC, Mr. Anderson was a partner in the general +corporate law department at Taft, Stettinius & Hollister for 24 years (1968-1977; 1982-1996) and president of U.S. operations at Xomox Corporation, a publicly-traded manufacturer of specialty process controls (1977-1982). Mr. Anderson +has also served as director of Gateway Investment Advisors (1997-2008). The Board believes that Mr. Anderson’s corporate legal experience and his experience as CEO of a large health care organization have given him a wealth of insight into +various corporate governance and business management issues, which, along with his status as an independent Director, make him an integral member of the Board. +Dwight E. Ellingwood +Director +since 2014 +Age: 65 +Dwight E. Ellingwood serves as Chairman of the Nominating and Corporate Governance Committee. With over 35 years of experience in health care strategy, planning, commercialization +and marketing, he currently serves as a teaching professor at Xavier University in the Graduate Program in the Department of Health Service Administration and as President of D.E.E. Strategy Consulting, LLC, to advise leadership in health care and +the community on strategy and innovative approaches to growth and collaboration. Mr. Ellingwood previously served as Senior Vice President of Strategy, Communications and Public Affairs for TriHealth in Cincinnati, Ohio (November 2014 – +July 2016) and as the Lead Executive for the Collective Impact on Health, The Health Collaborative (January 2014 – November 2014). From 1997 through 2013, Mr. Ellingwood served as Senior Vice President, Planning and Business Development +for Cincinnati Children’s Hospital Medical Center. The Board believes that the Company benefits greatly from Mr. Ellingwood’s extensive experience in the health care industry. +Jack Kenny +Director since +2017 +Age: 49 +Jack Kenny serves as Meridian’s Chief Executive Officer, having joined the Company on October 9, 2017. Before joining Meridian, Mr. Kenny served as Senior Vice +President and General Manager, North America, with Siemens Healthcare, a position he held from October 2014 to May 2017. From June 2012 through October 2014, Mr. Kenny served as Vice President and General Manager, U.S. Region, for Becton +Dickinson, Diagnostic Systems. Prior to June 2012, Mr. Kenny held executive roles at Danaher Corporation and Quest Diagnostics. Mr. Kenny’s experience as a key executive leader within large public companies in the health care and +medical device industry, as well as his ongoing insights into Meridian’s business and operations, makes him a valuable member of the Board. +3 +Table of Contents +John A. Kraeutler +Director since 1997 +Age: 69 +John A. Kraeutler has more than 40 years of experience in the medical diagnostics industry and joined Meridian as Executive Vice President and Chief Operating Officer in January +1992. In July 1992, Mr. Kraeutler was named President of Meridian, in January 2008, Mr. Kraeutler was named Chief Executive Officer of Meridian, and in September 2014, Mr. Kraeutler was named Chairman of the Board. Mr. Kraeutler +was named Executive Chairman of the Board effective October 9, 2017, upon the hiring of Mr. Jack Kenny as Chief Executive Officer. Before joining Meridian, Mr. Kraeutler served as Vice President, General Manager for a division of +Carter-Wallace, Inc. Prior to that, he held key marketing and technical positions with Becton, Dickinson and Company and Organon, Inc. Mr. Kraeutler’s long-time service to Meridian, all in an executive capacity, has given him significant +insight into, and familiarity with, all aspects of Meridian’s business and the strategic vision for its continued success, and makes his service on the Board extremely beneficial. +John C. McIlwraith +Director since 2015 +Age: 58 +John C. McIlwraith co-founded Allos Ventures, a venture capital firm, in March 2010 and has served as a Managing Director there since that +time. Prior to founding Allos Ventures, Mr. McIlwraith was a Managing Director of Blue Chip Venture Company, a Cincinnati-based venture capital and private equity firm, which he joined in 1997. He has served on the board of +directors of more than 20 health care or information technology companies. Prior to 1997, Mr. McIlwraith served as Senior Vice President of Strategic Planning and General Counsel of publicly-traded Quantum Health Resources, Inc., and was a +partner in the Jones Day law firm. The Board believes that Mr. McIlwraith’s years of experience with an extensive number of companies, including health care companies, render his service on the Board valuable to Meridian. +David C. Phillips +Director since 2000 +Age: 79 +David C. Phillips serves as Chairman of the Audit Committee and Lead Director. Mr. Phillips spent 32 years with Arthur Andersen LLP. His service with this firm included several +managing partner leadership positions. After retiring from Arthur Andersen in 1994, Mr. Phillips became Chief Executive Officer of Downtown Cincinnati, Inc., which is responsible for economic revitalization of Downtown Cincinnati. +Mr. Phillips retired from DCI in 1999 to devote full time to Cincinnati Works, Inc., an organization dedicated to reducing the number of people living below the poverty level by assisting them to strive towards self-sufficiency through work, +and his financial consulting services. Mr. Phillips has also served as a director of Cintas Corporation, retiring in 2012, and as a director of Summit Mutual Funds, a registered investment company, through 2009. The Board believes that +Mr. Phillips’ years of service as a certified public accountant and trusted advisor to his clients and business owners, which qualify him as an “audit committee financial expert” under SEC guidelines, give him significant +experience in preparing, auditing, analyzing and evaluating financial statements and dealing with complex accounting and business issues, all of which is valuable to Meridian. +4 +Table of Contents +John M. Rice, Jr. +Director since 2017 +Age: 68 +John M. Rice is the founder, and since 2003 has been the Managing Partner of Triathlon Medical Venture Partners, a venture capital firm that invests equity capital in early and +expansion stage life science companies. Since 2014, Dr. Rice has also served as the Director of Life Sciences at CincyTech, a firm that provides advice and capital to entrepreneurs and helps research institutions commercialize technology +through startups. In addition, Dr. Rice has served on the board of directors of several privately-held health care companies. The Board believes that Dr. Rice’s years of experience with a number of companies operating in the health +care and related industries, as well as extensive experience within the capital markets, will prove extremely valuable to Meridian. +Catherine A. Sazdanoff +Director since 2015 +Age: 61 +Catherine A. Sazdanoff currently serves as Business Advisor of Strata Oncology, Inc., a precision medicine company providing no-cost tumor +sequencing to advanced cancer patients and a portfolio of matching clinical trials, having joined Strata in May 2016 as Chief Business Officer. Since May 2016, she has also been a member of the Advisory Board of Neurocern, Inc., a privately-held +dementia management system company. Immediately prior to joining Strata, Ms. Sazdanoff held the position of CEO and President of Sazdanoff Consulting LLC, specializing in business development, management and strategy consulting (January 2015 +– May 2016). In addition, from January 2015 to March 2016, she served as Strategic Advisor to mProve Health LLC, a mobile health technology company located in Arlington, Virginia. From 2006 to 2015, Ms. Sazdanoff held a number of +executive positions with Takeda Pharmaceutical International, Inc. (“Takeda”), a wholly-owned subsidiary of Japanese-based Takeda Pharmaceutical Corporation, including Vice President, Head of Corporate Projects (2012-2015), VP, Global +Business Development (2011-2013) and VP, Corporate Development (2010-2011). Ms. Sazdanoff’s time at Takeda was preceded by approximately 22 years with Abbott Laboratories, where she held numerous executive positions. The Board +believes that Ms. Sazdanoff’s years of experience in the pharmaceutical and medical diagnostics industries makes her service on the Board valuable to Meridian. +ADVISORY VOTE ON COMPENSATION OF NAMED EXECUTIVE OFFICERS (“SAY-ON-PAY” PROPOSAL) +(Item 2 on the Proxy Card) +The Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd Frank”), enacted in July 2010, requires that we provide our shareholders +with the opportunity to vote to approve, on a non-binding, advisory basis, the compensation of our named executives officers as disclosed in this proxy statement in accordance with the compensation disclosure +rules of the Securities and Exchange Commission (“SEC”). As noted in the discussion of Proposal No. 3 below, Dodd Frank also provides that shareholders periodically be given the opportunity to vote, on a +non-binding, advisory basis, for their preference as to how frequently we should seek future advisory votes on the compensation of our named executive officers. This opportunity was provided to our +shareholders at our 2012 annual meeting, where over 90% of our shareholders voted to hold the “say-on-pay” advisory vote annually, in accordance with the +recommendation of our Board of Directors. As a result, we are again holding a say-on-pay advisory vote at our 2018 annual meeting, with the next say-on-pay advisory vote to be held at our 2019 annual meeting. See Proposal No. 3 below regarding the +“say-on-frequency” vote being held at the 2018 annual meeting. +As described in detail below under the heading “Compensation Discussion and Analysis” beginning on page 16 of this proxy statement, we seek to closely align the interests of our named executive +officers with the interests of our shareholders. We structure our programs to discourage excessive risk-taking through a balanced use of compensation vehicles and metrics with an overall goal of delivering sustained long-term shareholder value while +aligning our executives’ interests with those of our shareholders. Further, our programs require that a substantial portion of each named executive officer’s compensation be contingent on delivering performance results that benefit +5 +Table of Contents +our shareholders. Our compensation programs are designed to reward our named executive officers for the achievement of short-term and long-term strategic and operational goals and the achievement +of increased total shareholder return. +The vote on this matter is not intended to address any specific element of compensation; rather, the +vote relates to the compensation of our named executive officers, as described in this proxy statement in accordance with the compensation disclosure rules of the SEC. The vote is advisory, which means that the vote is not binding on the Company, +our Board of Directors or the Compensation Committee. The Board and the Compensation Committee will review and consider the voting results when making future decisions regarding our executive compensation program. +Accordingly, we ask our shareholders to approve, on an advisory basis, the compensation of the named executive officers, as disclosed in this proxy +statement pursuant to the compensation disclosure rules of the SEC, including the Compensation Discussion and Analysis, the Summary Compensation Table and the other related tables and disclosure. +The Board recommends that shareholders vote FOR the approval of the compensation of our named executive officers as disclosed in this proxy +statement. +ADVISORY VOTE ON THE FREQUENCY OF FUTURE ADVISORY VOTES ON COMPENSATION OF NAMED EXECUTIVE +OFFICERS (“SAY-ON-FREQUENCY” PROPOSAL) +(Item +3 on the Proxy Card) +Dodd-Frank also provides that, at least once every six years, shareholders must be given the opportunity to vote, on +a non-binding, advisory basis, for their preference as to how frequently we should seek future advisory votes on the compensation of our named executive officers as disclosed in accordance with the +compensation disclosure rules of the SEC, which we refer to as an advisory vote on executive compensation. As noted in Proposal No. 2 above, we last provided this opportunity to our shareholders at our 2012 annual meeting where over 90% of our +shareholders voted to hold the “say-on-pay” advisory vote annually. By voting with respect to this Proposal No. 3, shareholders may once again indicate +whether they would prefer that we conduct future advisory votes on executive compensation once every one, two or three years. +Consistent with +the 2012 say-on-frequency voting results, our Board of Directors has determined that an advisory vote on executive compensation that occurs each year is the most +appropriate alternative for the Company at this time, and therefore, our Board recommends that you vote for annual advisory votes on executive compensation. The Board of Directors has determined that an annual advisory vote on executive compensation +will allow our shareholders to provide timely, direct input on the Company’s executive compensation philosophy, policies and practices as disclosed in the proxy statement each year. The Board believes that an annual vote is therefore consistent +with the Company’s efforts to engage in an ongoing dialogue with our shareholders on executive compensation and corporate governance matters. However, shareholders should note that because the advisory vote on executive compensation occurs well +after the beginning of the compensation year, and because the different elements of our executive compensation programs are designed to operate in an integrated manner and to complement one another, in many cases it may not be appropriate or +feasible to change our executive compensation programs in consideration of any one year’s advisory vote on executive compensation by the time of the following year’s annual meeting of shareholders. +This vote is advisory and not binding on the Company or our Board of Directors in any way. The Board and the Compensation Committee will carefully review +the voting results. Notwithstanding the Board’s recommendation and the outcome of the shareholder vote, the Board may in the future decide to conduct advisory votes on a more or less frequent basis and may vary its practice based on factors +such as discussions with shareholders and the adoption of material changes to compensation programs. +6 +Table of Contents +Shareholders may cast a vote on the preferred voting frequency by selecting the option of every one year, +two years, or three years (or abstain) when voting in response to this Proposal No. 3. Shareholders will not be voting to approve or disapprove the recommendation of the Board of Directors. +The Board recommends that shareholders vote FOR the option of “one year” as the preferred frequency for future advisory votes on +executive compensation. +RATIFICATION OF APPOINTMENT OF GRANT THORNTON LLP AS INDEPENDENT REGISTERED PUBLIC +ACCOUNTANTS +(Item 4 on the Proxy Card) +Although not required, we are seeking shareholder ratification of the Audit Committee’s selection of Grant Thornton LLP as Meridian’s independent registered public accountants for the 2018 +fiscal year. The affirmative vote of a majority of shares voting at the meeting is required for ratification. If ratification is not obtained, the Audit Committee intends to continue the engagement of Grant Thornton LLP at least through fiscal 2018. +Representatives of Grant Thornton LLP are expected to be present at the Annual Shareholders’ Meeting and will be available to make a statement, if they so desire, and to respond to appropriate questions asked by shareholders. +Principal Accounting Firm Fees +Aggregate fees billed to Meridian by Grant Thornton LLP for fiscal years 2017 and 2016 are listed below: +2017 +2016 +Audit Fees +$ +631,374 +$ +569,739 +Audit-Related Fees +39,450 +144,085 +Tax Fees +352,611 +393,669 +$1,023,435 +$1,107,493 +Audit Fees. Audit fees are the fees billed for professional services rendered by Meridian’s +independent registered public accounting firm for their (i) audit of Meridian’s consolidated annual financial statements for the fiscal years ended September 30, 2017 and 2016, respectively; (ii) reviews of the unaudited +quarterly consolidated financial statements contained in the reports on Form 10-Q filed by Meridian during those years; (iii) completion of audits of Bioline Group statutory accounts in the United Kingdom +during fiscal 2017 and 2016; and (iv) reporting on Meridian’s internal controls during those years. The fiscal 2016 amount also includes fees associated with expanded audit services in connection with the acquisition of Magellan +Biosciences, Inc., and its wholly-owned subsidiary Magellan Diagnostics, Inc. (collectively, “Magellan”). +Audit-Related +Fees . Audit-related fees are the fees billed for assurance and related services that are reasonably related to the performance of the audit or review of Meridian’s financial statements, including the audit of the Savings and +Investment Plan (i.e., the 401K Plan). Fees in 2016 also included fees related to consulting and required standalone audits associated with the Magellan acquisition. +Tax Fees. Tax fees are the fees billed for tax return preparation and compliance in Australia, England, Germany and the United States, as well as consultation and research on various matters +such as state tax issues, international tax issues and transfer pricing. Additionally, the 2016 tax amount includes fees for services associated with the Magellan acquisition, including pre-acquisition due +diligence, tax return preparation, net operating loss limitations analysis and transaction cost deductibility analysis. +The Board +recommends that shareholders vote FOR the ratification of appointment of Grant Thornton LLP as Meridian’s independent registered public accountants for the 2018 fiscal year. +7 +Table of Contents +CORPORATE GOVERNANCE +As an Ohio corporation, Meridian is governed by the corporate laws of Ohio. Since its common shares are publicly traded on the Nasdaq Global Select +Market, and it files reports with the SEC, it is also subject to Nasdaq rules and federal securities laws. +Board Leadership Structure +Governance of the corporation is placed in the hands of the Directors who, in turn, elect officers to manage the business operations. The +Board oversees the management of Meridian on your behalf. The Board reviews Meridian’s long-term strategic plans and exercises direct decision making authority in all major decisions, such as acquisitions, the declaration of dividends, major +capital expenditures and the establishment of certain company policies. +The Board operates and evaluates its performance in accordance with +Corporate Governance Guidelines approved by the Board. These Guidelines are available at our website www.meridianbioscience.com . +The +Board of Directors is responsible for evaluating and determining Meridian’s leadership structure, and believes that at this point in time separate individuals should serve in the capacities of Chairman of the Board (“Chairman”) and +Chief Executive Officer (“CEO”). It is the Board’s belief that such a structure currently provides the Company with the right foundation to pursue its strategic and operational objectives, while maintaining effective oversight and +objective evaluation of the Company’s performance. Currently, these key executive positions are held by Mr. John A. Kraeutler, Executive Chairman of the Board, and Mr. Jack Kenny, CEO. Having served as both Chairman and CEO since +2014, Mr. Kraeutler was appointed Executive Chairman of the Board upon Mr. Kenny becoming the Company’s CEO in October 2017. In his capacity as Executive Chairman, Mr. Kraeutler is responsible for (i) general Board +activities, including setting agendas for Board meetings and presiding over all meetings of the Board and shareholders; and (ii) providing advice and counsel to Meridian’s management regarding the Company’s business operations. As +CEO, Mr. Kenny is responsible for the general management, oversight, supervision and control of the business affairs of Meridian, and ensuring that all resolutions of the Board are put into effect. +Mr. David C. Phillips has been appointed by the Board to serve as Lead Director. The Board has determined that the Lead Director shall +(i) in consultation with the non-management Directors, advise the Chairman as to an appropriate schedule of Board meetings and review and provide the Chairman with input regarding the agendas for each +Board meeting; (ii) preside at all meetings at which the Chairman is not present, including Executive Sessions of the non-management Directors, and apprise the Chairman of the issues considered thereat; +(iii) call meetings of the non-management Directors when necessary and appropriate; and (iv) perform such other duties as the Board may from time to time designate. We believe that this leadership +structure is currently the most appropriate for Meridian, particularly in light of the requirement noted below that all Committees of the Board are comprised solely of independent Directors. +In accordance with Nasdaq rules, our Board of Directors affirmatively determines the independence of each Director and nominee for election as a Director in accordance with the elements of independence +set forth in the Nasdaq listing standards and Exchange Act rules. Meridian’s Director Independence Standards are available at our website www.meridianbioscience.com . Based on these standards, the Board has determined that each +of the following members of the Board are independent: James M. Anderson, Dwight E. Ellingwood, John C. McIlwraith, David C. Phillips, John M. Rice and Catherine A. Sazdanoff. +During fiscal 2017, the Board of Directors met on nine occasions and took no actions in writing. The independent Directors plan to meet as necessary during fiscal 2018 without the presence of management +Directors. During fiscal 2017, the independent members of the Board periodically met in executive session without the presence of management Directors following regularly scheduled Board meetings. +Meridian expects all Directors to attend shareholders’ meetings, and all but one of the current Directors serving at that time were in attendance at +the 2017 Annual Shareholders’ Meeting. +8 +Table of Contents +Shareholders may communicate with the full Board or individual Directors on matters concerning Meridian by +mail or through our website, www.meridianbioscience.com , in each case to the attention of the Secretary, the address for whom is set forth on page 31 of this proxy statement. +The Board’s Role in Risk Oversight +The Board of Directors, as a whole and also at the +Committee level, plays a key role in operational risk oversight at Meridian and works with management to understand the risks the Company faces, the steps that management is taking to manage those risks and the level of risk appropriate for the +Company in light of its overall business strategy. The Board approves the high level strategies, financial plans and policies of Meridian, setting the tone and direction for the appropriate levels of risk-taking within the organization. +While overall responsibility for risk oversight rests with the Board, it is the Audit Committee that has been given the primary responsibility of +monitoring and evaluating the adequacy of management’s risk assessment and risk management practices. This role is carried out through its charter-mandated responsibilities related to Meridian’s (i) overall financial +risks and exposures; (ii) financial statement risks and exposures; (iii) financial reporting processes; (iv) compliance with ethics policies, such as the Code of Ethics, Employee Complaint Policy, Securities Trading Policies and the +Foreign Corrupt Practices Act Policy; and (v) compliance with governmental and legal regulations, including those contained within the Sarbanes-Oxley Act. The Audit Committee provides regular reports to the full Board and works closely with +management to update the full Board, as necessary, on matters identified through these Committee risk oversight roles. +The Board has adopted +a Code of Ethics applicable to Meridian’s officers, Directors and employees. This Code of Ethics is posted on www.meridianbioscience.com . To the extent permitted by Nasdaq Marketplace Rule 5610, any amendments to or waivers from the Code +of Ethics will be posted on our website within four business days after the date of an amendment. +Committees of the Board of Directors +The Directors have organized themselves into the Committees described below. Each of these Committees has a charter posted on +www.meridianbioscience.com . Meridian does not have an Executive Committee of its Board of Directors. The following table identifies membership and the Chairman of each of the current standing committees of the Board, as well as the number of +times each committee met during the fiscal year. In August 2017, John M. Rice joined the Board and has not yet been appointed to any committees. +Director +Audit +Compensation +Nominating +and +Corporate +Governance +James M. Anderson +Member +Chair +Member +Dwight E. Ellingwood +Chair +John C. McIlwraith +Member +Member +David C. Phillips +Chair +Member +Catherine A. Sazdanoff +Member +Meetings in Fiscal 2017 +9 +6 +6 +The Audit Committee is comprised of David C. Phillips (Chairman), James M. Anderson and Catherine A. +Sazdanoff. The Committee met nine times during fiscal 2017 and took no actions in writing. Each member is able to read and understand fundamental financial statements. David C. Phillips has been designated as an Audit Committee financial expert as +that term is defined by the SEC. +The Committee oversees the accounting and financial reporting processes of Meridian and the audits of its +financial statements by its independent registered public accounting firm. The Committee is solely responsible for the appointment, compensation, retention and oversight of Meridian’s independent registered public accounting firm. The Audit +Committee also evaluates information received from Meridian’s independent registered public accounting firm and management to determine whether the independent registered public accounting firm is independent of management. The independent +registered public accounting firm reports directly to the Audit Committee. +9 +Table of Contents +In addition, the Audit Committee has established procedures for the receipt, retention and treatment of +complaints received by Meridian concerning accounting, internal accounting controls or auditing matters and has established procedures for the confidential and anonymous submission by employees of any concerns they may have regarding questionable +accounting or auditing matters. +The Audit Committee, or its Chairman, approves all audit and +non-audit services performed for Meridian by its independent registered public accounting firm before those services are commenced. The Chairman reports to the full Committee at each of its meetings regarding pre-approvals he made since the prior meeting and the Committee approves what he has done between meetings. For these purposes, the Committee or its Chairman is provided with information as to the nature, extent and +purpose of each proposed service, as well as the approximate timeframe and proposed cost arrangements for that service. +As previously noted, +the Audit Committee also bears primary risk oversight responsibilities, including responsibilities such as: (i) overseeing the risks and exposures relating to the Company’s financial statements and financial reporting process; +(ii) overseeing the Company’s policies and procedures for monitoring and mitigating such risks and exposures; and (iii) reviewing management’s monitoring of the Company’s compliance with established ethics and legal policies +and procedures. +The Committee has submitted the following report for inclusion in this proxy statement. +REPORT OF THE AUDIT COMMITTEE +On January 24, 2017, the Audit Committee met with representatives of Grant Thornton LLP and Meridian’s internal accountants, at which time the Grant Thornton LLP representatives presented to the +Committee the results of their work, including their review of Meridian’s first quarter consolidated financial statements, and discussed their proposed audit fees for fiscal 2017. In addition, the Committee discussed the timing and scope of the +planned Sarbanes-Oxley (“SOX”) and internal audit work for fiscal 2017, received a progress report on the efforts to form a wholly foreign-owned enterprise (“WFOE”) in China, and received an update regarding certain of the +Company’s information technology (“IT”) and cyber security endeavors. +On April 25, 2017, the Committee met with +representatives of Grant Thornton LLP and Meridian’s internal accountants, at which time the Grant Thornton LLP representatives presented to the Committee the results of their work for their review of Meridian’s second quarter consolidated +financial statements and the timing and scope of their engagement for the audit of Meridian’s fiscal 2017 consolidated financial statements. In addition, the Committee received an update on the status of the WFOE in China and IT security, and +discussed planned training activities focused on the Foreign Corrupt Practices Act and U.K. Bribery Act. +On July 25, 2017, the Committee +met with representatives of Grant Thornton LLP and Meridian’s internal accountants, at which time the Grant Thornton LLP representatives presented to the Committee the results of their work for their review of Meridian’s third quarter +consolidated financial statements, including the activities related to the goodwill impairment charge recorded for Magellan during the quarter. Additionally, the Committee received an update on various matters including SOX work completed to-date by internal audit, the Company’s ongoing cyber security review and disaster recovery planning, status of Magellan financial integration, the WFOE in China, and status of activities associated with the +planned implementation of the new Revenue Recognition Standard in fiscal 2019. +At its meeting on September 26, 2017, the Committee +reviewed management’s outlook for 2017 and the Company compliance update related to SOX requirements. The Committee performed its annual risk assessment, reviewed and approved related party transactions, and approved the Audit Committee +Charter. In addition, Grant Thornton LLP representatives reviewed the status of their internal control and interim testing being performed in connection with the fiscal 2017 audit. +At its meeting on November 8, 2017, the Committee reviewed and discussed with management, Grant Thornton LLP and Meridian’s accounting officers the results of the audit for fiscal 2017, +including the financial statements. The Committee discussed with Grant Thornton LLP the matters required to be discussed by Auditing Standards No. +10 +Table of Contents +16, as amended (PCAOB Interim Auditing Standard AU Section 380, Communication with Audit Committees ). The Grant Thornton LLP representatives reviewed with the Committee written +disclosures required by applicable requirements of the PCAOB regarding the independent accountants’ communications with the Audit Committee concerning independence, discussed with the Committee the independent accountants’ independence, +and presented a letter regarding that matter to the Committee. The Committee discussed with Grant Thornton LLP its independence. In concluding that the auditors are independent, we determined, among other things, that the non-audit services provided by the auditors were compatible with their independence. In addition, the Committee received an IT security update. +Based on the above mentioned review and discussion of the audited consolidated financial statements, including during a November 20, 2017 Committee meeting, and discussion of a material weakness +associated with access to a computer file, on November 28, 2017, the Committee recommended that the audited consolidated financial statements of Meridian be included in its Annual Report on Form 10-K for +the year ended September 30, 2017 for filing with the SEC. +During its meetings throughout the year, the Committee reviewed and assessed +the Company’s financial statements, financial control, financial reporting, and certain legal and regulatory risk exposures, including reviewing procedures related to the receipt, retention and treatment of any complaints concerning accounting, +internal accounting controls or auditing matters. Also during its meetings throughout the year, the Chairman of the Audit Committee reported to the full Committee the independent accountants’ fees that had been +pre-approved and the Committee approved such fees. Certain fees were pre-approved by the full Committee. The Committee also reviewed the requirements of and +Meridian’s ongoing compliance with Section 404 of the Sarbanes-Oxley Act. +During 2017, under the oversight of the Nominating and +Corporate Governance Committee, an evaluation of the Board and Committees was performed by a third party. The results of the evaluation were reviewed by the Board on November 8, 2017. +Respectfully submitted, +Audit Committee +David C. Phillips (Chairman) +James M. Anderson +Catherine A. Sazdanoff +The +Compensation Committee is comprised of James M. Anderson (Chairman), John C. McIlwraith and David C. Phillips and is responsible for establishing compensation for Executive Officers and administering the Company’s compensation plans. +This includes establishing base salary levels and cash-based incentive plans, making stock-based awards, and otherwise dealing in all matters concerning compensation of the Executive Officers. During fiscal 2017, the Compensation Committee met six +times, and took one action in writing. +In general, the Compensation Committee annually reviews the Company’s compensation programs and +its philosophy in setting performance targets in November of each year. At that time, the Company provides the Compensation Committee with information on total compensation received for all Executive Officers, including the sources of such +compensation, for the immediately preceding fiscal year and recommendations for the current fiscal year. In discharging the responsibilities of the Board of Directors relating to compensation of the Company’s CEO and other Executive Officers, +the purposes of the Compensation Committee are, among others: (i) to review and approve the compensation of the Company’s CEO and other Executive Officers; and (ii) to oversee the compensation policies and programs of the Company, +including stock and benefit plans. The Compensation Committee’s specific functions include adopting, administering and approving the Company’s cash-based incentive compensation and stock-based incentive plans and awards, including +amendments to the plans or awards and performing such duties and responsibilities under the terms of any executive compensation plan, incentive-compensation plan or equity-based plan. The Compensation Committee has the authority to delegate any of +its responsibilities to subcommittees as the Compensation Committee may deem appropriate in its sole discretion. The Compensation Committee has the authority to engage consultants and advisors. The Compensation Committee did not engage a +compensation consultant in 2017. In 2017 the Committee also reviewed its Charter and conducted a self-assessment, facilitated by a third party. +11 +Table of Contents +The Compensation Committee determines the amount and mix of compensation components for the Executive +Chairman, Mr. Kraeutler, and the CEO, Mr. Kenny. During fiscal 2017, Mr. Kraeutler as both Chairman and CEO, provided recommendations to the Compensation Committee with respect to the compensation to be paid to the other Named +Executive Officers. For fiscal 2018, Mr. Kenny provided input and recommendations with respect to the compensation of the other Named Executive Officers. +To achieve compensation objectives, the Committee believes it is important to provide competitive levels of compensation to retain the most qualified employees, to recognize individuals who exceed +expectations and to closely link executive compensation with corporate performance. The Committee believes Meridian’s long-term objectives can be achieved through cash-based incentive compensation plans and stock-based incentive compensation +plans. +The Compensation Committee’s processes and procedures for the consideration and determination of Executive and Director +compensation are discussed in the section entitled “Compensation Discussion and Analysis” in this proxy statement. See Compensation Committee Report on page 24 following the Compensation Discussion and Analysis. +Compensation Committee Interlocks and Insider Participation +None of the members of the Compensation Committee has ever been an officer or employee of the Company. None of the members of the Compensation Committee is or was a participant in any related person +transaction in fiscal 2017 (see the section entitled “Transactions With Related Persons” in this proxy statement for a description of our policy on related person transactions). Lastly, none of the members of the Compensation Committee are +an Executive Officer of another entity at which one of our Executive Officers serves on the Board of Directors. No Named Executive Officer of Meridian serves as a Director or as a member of a committee of any company of which any of the +Company’s non-employee Directors are Executive Officers. +The Nominating and Corporate +Governance Committee consists of Dwight E. Ellingwood (Chairman), James M. Anderson and John C. McIlwraith. The Committee met six times during fiscal 2017 and took no actions in writing. On November 8, 2017, the Committee considered and +nominated the current Directors for re-election. The Committee identifies qualified nominees for the Board, determines who will be nominated by the Company for election to the Board and recommends to the full +Board any changes in the size of the Board. The Committee also reviewed its Charter and oversaw a third-party-facilitated self-assessment of the Board and its committees. +In nominating Directors, the Committee takes into account, among other factors which it may deem appropriate, the judgment, skill, diversity, and business experience of the potential nominee and the needs +of the Board as its function relates to the business of the Company. The Committee considers candidates for nomination from a variety of sources including recommendations of shareholders. Shareholders desiring to submit recommendations for +nominations by the Committee should direct them to the Chairman of the Nominating and Corporate Governance Committee in care of the Company at its address shown on the cover page of this proxy statement. +The Nominating and Corporate Governance Committee will assess the qualifications of all candidates for the Board on an equal basis. In identifying and +considering candidates for nomination to the Board, the Committee considers, among other factors, quality of experience, the needs of the Company and the range of talent and experience currently represented on the Board. The Committee evaluates such +factors, among others, and does not assign any particular weighting or priority to any of these factors, nor does the Committee have a formal policy with respect to diversity. However, the Committee, working with the Board, considers the diversity +of all of the Company’s stakeholders – including shareholders, employees and customers – when engaging in corporate governance discussions. +During several Board meetings in fiscal 2017, the Board discussed the benefits of adding new members to the Board. Pursuant to this, the Nominating and Corporate Governance Committee considered potential +candidates based upon extensive conversations with and recommendations from non-managerial Directors, and chose to meet with Dr. Rice. Based upon the review of his qualifications and the favorable results +of their meetings, the Board proceeded to nominate Dr. Rice as a candidate to the Board, and he was appointed to the Board in August 2017. +12 +Table of Contents +DIRECTORS AND EXECUTIVE OFFICERS +This table lists the Executive Officers and Directors of Meridian and shows the number of shares beneficially owned, as determined under SEC rules, on +November 30, 2017. Beneficial ownership includes any shares as to which the individual has sole or shared voting or investment power and also any shares that the individual has the right to acquire within 60 days. +Common Stock +Beneficially +Owned +Name +Position +Amount 1 +Percentage +John A. Kraeutler +Executive Chairman of the Board +and Director +444,561 +1.0 +% +Jack Kenny +Chief Executive Officer +and Director +— +— +Richard L. Eberly 2 +Executive Vice President, +President, Chief Commercial Officer +23,348 +* +Lawrence J. Baldini 3 +Executive Vice President, +President, Global Operations +69,254 +* +Melissa A. Lueke 4 +Executive Vice President, Chief +Financial Officer and Secretary +130,523 +* +Vecheslav A. Elagin 5 +Executive Vice President, Research & +Development, and Chief Scientific +Officer +26,819 +* +Susan D. Rolih 6 +Executive Vice President, Global +Regulatory & Quality Systems +131,039 +* +Amy M. Winslow 7 +Executive Vice President, President and +Chief Executive Officer, Magellan +3,400 +* +Marco G. Calzavara 8 +President and Managing Director, +Meridian Bioscience Europe +17,057 +* +James M. Anderson 9, 10, 11 +Director +87,000 +* +Dwight E. Ellingwood 11 +Director +41,500 +* +John C. McIlwraith 10, 11 +Director +32,000 +* +David C. Phillips 9, 10 +Director +121,626 +* +John M. Rice 12 +Director +12,000 +* +Catherine A. Sazdanoff 9 +Director +36,700 +* +All Executive Officers and Directors as a Group +1,176,827 +2.7 +% +1 +Includes shares +for options currently exercisable and/or exercisable within 60 days as follows: Mr. Kraeutler (203,750); Mr. Eberly (16,500); Mr. Baldini (4,400); Ms. Lueke (5,625); Dr. Elagin (17,250); Ms. Rolih (8,950); +Ms. Winslow (3,400); Mr. Anderson (76,000); Mr. Ellingwood (34,500); Mr. McIlwraith (29,000); Mr. Phillips (83,500); Dr. Rice (12,000); and Ms. Sazdanoff (29,000). +13 +Table of Contents +2 +Richard L. Eberly was appointed Vice President of Sales and Marketing in January 1997, Executive Vice President in May 2000, Executive Vice President, +General Manager of Meridian Life Science in February 2003, Executive Vice President and President Meridian Life Science in October 2005 and Chief Commercial Officer in February 2011. In October 2012, he was +re-appointed President of Meridian Life Science, and in July 2016 was appointed Executive Vice President & President, Chief Commercial Officer. He has approximately 30 years of experience in the +medical diagnostics industry and joined Meridian in March 1995. Prior to his appointment to Vice President of Sales and Marketing, Mr. Eberly served as the Director of Sales for Meridian. Before joining Meridian, he held key sales and marketing +positions at Abbott Diagnostics, Division of Abbott Laboratories. Age: 56 +3 +Lawrence J. Baldini was appointed Vice President of Operations in April 2001, Executive Vice President, Operations and Information Systems in October +2005 and Executive Vice President & President, Global Operations in March 2016. Before joining Meridian, Mr. Baldini held various operations management positions with Instrumentation Laboratories and Fisher Scientific. Age: 58 +4 +Melissa A. Lueke was appointed Vice President, Chief Financial Officer and Secretary in January 2001 and Executive Vice President, Chief Financial +Officer and Secretary in November 2009. Prior to her appointment, Ms. Lueke served as Meridian’s Controller since March 2000 and Acting Secretary from July 20, 2000 to January 23, 2001. Before joining Meridian, Ms. Lueke was +employed by Arthur Andersen LLP from June 1985 to January 1999, most recently as a Senior Audit Manager. Age: 54 +5 +Vecheslav A. Elagin joined Meridian in August 2009 as Vice President of Research and Development, was appointed Senior Vice President of Research and +Development in November 2011, promoted to Executive Vice President of Research and Development in June 2012, and appointed Executive Vice President of Research and Development, and Chief Scientific Officer in May 2017. Before joining Meridian, +Dr. Elagin held various executive research and development positions, most recently with Madison Life Science (August 2008 – August 2009), EraGen Biosciences (May 2006 – August 2008) and Third Wave Technologies (June 2003 – May +2006). Age: 50 +6 +Susan D. Rolih was appointed Vice President of Regulatory Affairs and Quality Assurance in May 2001, Senior Vice President of Regulatory Affairs and +Quality Assurance in April 2008, Executive Vice President of Regulatory and Quality Systems in April 2013, and Executive Vice President, Global Regulatory and Quality Systems in November 2016. Before joining Meridian, Ms. Rolih held various +regulatory and quality positions with Immucor, Inc. Age: 68 +7 +Amy M. Winslow was appointed Executive Vice President & President and Chief Executive Officer of Magellan in March 2016 at the time Meridian +acquired Magellan, having served as President and Chief Executive Officer of Magellan since October 2011. With over 20 years of experience in health care, prior to joining Magellan, Ms. Winslow served as President of MW Advisory (June 2004 +– October 2011) and Vice President, Marketing for Athena Diagnostics (August 1999 – June 2004). Age: 46 +8 +Marco G. Calzavara, founder of the Bioline Group, which Meridian acquired July 20, 2010, was appointed President and Managing Director of Meridian +Bioscience Europe in April 2011. Prior to this appointment, Mr. Calzavara had served as President of the Bioline Group of Companies since 1992. Age: 63 +9 +Audit Committee +Member. +10 +Compensation +Committee Member. +11 +Nominating and +Corporate Governance Committee Member. +12 +Appointed a +director in August 2017. +* +Less than one percent. +14 +Table of Contents +SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS +The following table lists the persons known by the Company to be the beneficial owners of more than five percent of the Company’s Common Stock as of +November 30, 2017, unless otherwise noted. Beneficial ownership includes any shares as to which the individual has sole or shared voting or investment power. +Name and address of beneficial owner +Amount and nature of +beneficial ownership +Percent of +class 1 +Brown Capital Management, LLC +1201 N. Calvert Street +Baltimore, MD 21202 +5,691,631 +13.49 +BlackRock, Inc. +55 East 52 nd Street +New York, NY 10055 +4,819,109 +11.40 +The Vanguard Group, Inc. +100 Vanguard Blvd. +Malvern, PA 19355 +3,614,424 +8.56 +1 +For the beneficial +owners listed in the table, the percentages listed reflect disclosures in the Schedule 13Gs most recently filed by each beneficial owner with the SEC as of the date of this proxy statement. +SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE +Section 16 of the Securities Exchange Act of 1934 requires Meridian’s Executive Officers, Directors and persons who own more than ten percent of a registered class of Meridian’s equity +securities to file reports of ownership and changes in ownership with the SEC. Based on a review of the copies of such forms received by it, Meridian believes that during the last fiscal year, all of its Executive Officers, Directors and ten percent +stockholders complied with the Section 16 reporting requirements. In making these statements, Meridian has relied upon examination of the copies of Forms 3, 4 and 5, and amendments thereto, and the written representation of its Directors and +Executive Officers. +TRANSACTIONS WITH RELATED PERSONS +During fiscal 2017, the Company leased certain office space from an entity controlled by Marco G. Calzavara, President and Managing Director, Meridian +Bioscience Europe. Payments made under such arrangements during fiscal 2017 totaled approximately $150,000. +Nasdaq rules require the +Company to conduct an appropriate review of related party transactions required to be disclosed by the Company pursuant to SEC Regulation S-K Item 404 for potential conflict of interest situations on an +ongoing basis and that all such transactions must be approved by the Audit Committee or another Committee comprised of independent Directors. As a result, the Audit Committee annually reviews all such related party transactions and approves each +related party transaction if it determines that it is in the best interests of the Company. Additionally, the Audit Committee’s Charter provides it the authority to review, approve and monitor transactions involving the Company and +“related persons” (Directors and Executive Officers or their immediate family members, or shareholders owning five percent or greater of the Company’s outstanding stock). This also covers any related person transaction that meets the +minimum threshold for disclosure in the proxy statement under the relevant SEC rules (generally, transactions involving amounts exceeding $120,000 in which a related person has a direct or indirect material interest). In +considering the transaction, the Audit Committee may consider all relevant factors, including, as applicable: (i) the Company’s business rationale for entering into the transaction; (ii) the alternatives to entering into a related +person transaction; (iii) whether the transaction is on terms comparable to those available to third parties, or in the case of employment relationships, to employees generally; (iv) the potential for +15 +Table of Contents +the transaction to lead to an actual or apparent conflict of interest and any safeguards imposed to prevent such actual or apparent conflicts; and (v) the overall fairness of the transaction +to the Company. This policy is included in the Company’s Employee Handbook. The approval of such related person transactions are evidenced by internal Company resolutions or memoranda. +COMPENSATION DISCUSSION AND ANALYSIS +Throughout this proxy +statement, the individuals who served as the Company’s CEO and Chief Financial Officer during fiscal 2017, as well as the other individuals listed in the Summary Compensation Table below, are referred to as the “Named Executive +Officers” or “NEOs.” +Compensation Philosophy and Objectives +Our principles and actions regarding executive compensation programs are designed to achieve a series of objectives. We believe our executive compensation programs support our corporate strategies by +adopting a “pay for performance” philosophy that provides incentives to our Executive Officers and employees for support and achievement of these strategies. Our executive compensation programs are designed to align the interests of +management with those of our shareholders, and to attract, retain and motivate high quality executives. Each element of total compensation is designed such that it achieves one or more of these objectives. +We follow several principles when designing our compensation programs. First, we select performance measures on which incentive compensation is based. +These performance measures establish expectations for performance. We then set payout ratios based on levels of achievement of those performance measures. Our performance measures align incentive pay so that management is compensated for activities +and performance that drive revenue growth, profitability and shareholder returns. We believe our programs offer a competitive total compensation opportunity with a significant portion dependent on the achievement of performance goals. +Our executive compensation program focuses on both short and long-term results and is composed of three key elements: +• +Base salaries, which reflect job responsibilities and take into account individual performance in connection with merit increases; +• +Annual cash-based incentive opportunities, which are a function of the performance of the Company; and +• +Longer-term stock-based incentive opportunities under our 2012 Stock Incentive Plan, in the form of stock options and/or restricted stock unit grants, +which link the long-term interests of senior management with our shareholders. +Base salaries are +generally set in the 50 th -75 th percentile of market rates for the specific region. Annual +cash-based incentive programs target a payout range of 12.5% to 37.5% of base salary, with a target payout ratio of 25% of base salary. Our intent is to increase this payout range over time, pending results. Annual cash-based incentive programs are +based on the achievement of performance goals that are set at levels to motivate executives by being reasonably achievable, yet at levels that produce improved performance. It is intended to set goals at levels that enable sustained improvements in +performance. +Stock-based incentive awards consist of restricted stock units, both time-based and performance-based, and non-qualified options, both time-based and performance-based. This combination of stock-based awards is designed to both reward and retain, while aligning interests of management with our shareholders. +The Compensation Committee has established several principles and practices that are important to achieving our compensation philosophy and objectives. +These are summarized below. +Gross-up Payments, Repricing of Options, Pledging, Hedging and Margin +Accounts +The Company avoids new contractual agreements that include excise tax gross-up payments. +It does not allow the repricing of options, which is not permitted under the 2012 Stock Incentive Plan without first obtaining the approval from stockholders of the Company. Additionally, the Company’s Insider Trading Policy places restrictions +on the Company’s Directors and Executive Officers regarding entering into hedging transactions with respect to the Company’s securities and from holding the Company’s securities in margin accounts or otherwise pledging such +16 +Table of Contents +securities as collateral for loans. Specifically, our Insider Trading Policy provides that Directors, Executive Officers and certain other designated employees may not purchase Meridian +securities on margin or borrow against any account in which Meridian securities are held. The Policy also provides that such persons may not pledge Meridian securities as collateral for a loan or engage in hedging or monetization transactions +with respect to Meridian securities. No Directors or Executive Officers have in place any pledges or hedging transactions. +Recovery of +Past Awards +With respect to recovery of past awards, except as provided by applicable laws and regulations, we do not have a policy with +respect to adjustment or recovery of awards or payments if relevant Company performance measures upon which previous awards were based are restated or otherwise adjusted in a manner that would reduce the size of such award or payment. Under those +circumstances, we expect that the Compensation Committee and the Board would evaluate whether compensation adjustments were appropriate based upon the facts and circumstances surrounding the applicable restatement or adjustment. +Minimum Vesting Periods +Although the +plan document for our 2012 Stock Incentive Plan does not include minimum vesting periods for options or stock appreciation rights, our Compensation Committee includes minimum vesting provisions in the award agreements for stock options pursuant to +authority granted to it under the 2012 Stock Incentive Plan. Generally the option award agreements provide for a minimum vesting period of three years. The 2012 Stock Incentive Plan provides that no Restricted Shares or Restricted Share Units +conditioned upon the achievement of performance objectives shall be based on a restriction period of less than one year, subject to the Plan’s provisions applicable to termination of employment and change of control. +Cash Buyouts of Underwater Options +Although the plan document for our 2012 Stock Incentive Plan does not include a provision expressly prohibiting cash buyouts of options or stock +appreciation rights, the Compensation Committee believes cash buyouts of “underwater options” is a governance practice that investors view as unfavorable. As a result, the Compensation Committee is generally opposed to cash buyouts of +options or stock appreciation rights. +Back-Dating and Spring-Loading +Although Meridian does not have a written policy regarding the timing or practices related to granting equity awards, neither Meridian nor the Compensation Committee engages in spring-loading, back-dating +or bullet-dodging practices. Equity awards are generally granted at a regularly scheduled meeting of the Compensation Committee in the first quarter of the fiscal year. Stock options are granted at the closing market price on the date of grant, +pursuant to the 2012 Stock Incentive Plan. Prior to the exercise of an option, the holder has no rights as a stockholder with respect to the shares subject to such option, including no rights to vote or to receive dividends. Prior to vesting of +restricted stock units noted above, the holder may receive dividend equivalent payments depending on the award nature and agreement. Restricted stock units do not have voting rights. +Ownership Guidelines +Consistent with its compensation philosophy and the principle of +aligning the interests of management and Directors of the Company with the interests of its stockholders, the Board of Directors has implemented stock ownership guidelines for “Specified Officers” (defined in the guidelines as those +officers required to file beneficial ownership reports with the SEC) and non-employee Directors. Under the guidelines, the Company’s Chief Executive Officer is required to own an amount of Company common +stock (including vested and non-vested restricted stock units) which is equal to or exceeds three times such Chief Executive Officer’s annual base salary, and Specified Officers other than the Chief +Executive Officer are required to own an amount of Company common stock (including vested and non-vested restricted stock units) which is equal to or exceeds such officer’s annual base salary. Also under +the guidelines, each of the Company’s non-employee Directors is required to own an amount of Company common stock which is equal to or exceeds three times such +non-employee director’s annual retainer. Generally, persons subject to the guidelines are required to achieve the applicable guideline not later than three years from the appointment to their position. +Excluding those still within the phase-in period, persons subject to these guidelines have met their ownership target, either as a result of their direct holdings or shares held indirectly by an entity +affiliated with such person, in accordance with the guidelines. +17 +Table of Contents +The Compensation Committee is responsible for ongoing oversight of compliance with this compensation +philosophy. The Compensation Committee ensures that the total compensation paid to the NEOs is fair, reasonable and competitive. +At our 2017 +annual meeting, Meridian once again held an advisory vote on the compensation of its NEOs, commonly referred to as a say-on-pay vote. Our shareholders approved the +compensation of our NEOs, with approximately 96% of votes cast in favor of our 2017 say-on-pay resolution. Based on the results of the 2017 say-on-pay vote, the Compensation Committee concluded that the compensation paid to the NEOs and Meridian’s overall pay practices received strong shareholder support and +do not require substantial revision to address shareholder concerns. +Executive Summary +Actions of the Compensation Committee +In +several meetings during the year, Mr. Kraeutler, and subsequent to year-end, Mr. Kenny, and the Compensation Committee Chairman discussed, among other things, Meridian’s compensation system and +its effectiveness in attracting and retaining talented employees. They noted that the underlying principles in the plan have been followed for many years, even when following such principles resulted in no Officer’s Performance Compensation +Plan (cash-based incentive compensation) bonuses being awarded to the NEOs and performance-based stock awards not vesting. They also discussed certain changes to the compensation programs for fiscal 2018 which are outlined in this proxy statement. +At its November 8, 2017 meeting, the Compensation Committee discussed these matters, both with and without the presence of management. +The Compensation Committee discussed the recommendations of the CEO for compensation levels for all officers and the general pay increases to be paid throughout the Company. The Committee then made the compensation decisions, which are reflected in +the figures presented in this proxy statement. +Fiscal 2017 Compensation Decisions +In light of our financial results not meeting the minimum threshold targets in our cash-based incentive compensation plan or our performance-based +long-term stock incentive awards, no NEOs received cash-based incentive compensation payments, and no performance-based restricted stock unit awards vested for any NEOs. +Fiscal 2018 Compensation Decisions +Base Salaries +Based on our financial results in fiscal 2017 and the individual evaluations of the NEOs by the Compensation Committee, the Compensation Committee +approved a merit increase pool of 1.5% for NEOs, with the actual merit increases to be determined by the CEO. With respect to Mr. Kraeutler, now Executive Chairman, Mr. Kraeutler waived the provisions of his Employment Agreement and will +forego an increase in his salary as of January 1, 2018. With respect to Mr. Kenny, hired October 9, 2017 as CEO, see page 22 for discussion of his compensation arrangements. Base salaries across all Meridian employees below the +executive level are expected to increase approximately 3% effective January 1, 2018. +Cash-based Incentive Compensation +The Compensation Committee approved the 2018 Cash-based Incentive Compensation Plan structure, +including performance targets and payout targets. For NEOs, the target payout ratio is twenty-five percent of base salary. Fifty percent of the target payout ratio (12.5%) is based on achieving certain levels of net revenues. +The remaining fifty percent of the target payout ratio (12.5%) is based on achieving certain levels of net earnings on a non-GAAP basis. Non-GAAP items for fiscal 2018 +are defined in the below excerpt from Section V of the plan document, which is filed as Exhibit 10.9 to our fiscal 2017 Form 10-K. Depending on the level of achievement, an NEO may earn from 0% to 37.5% of +base salary. +18 +Table of Contents +NON-GAAP MEASUREMENT +Non-GAAP items shall consist of items disclosed in the Company’s +Non-GAAP Financial Measures disclosures in the MD&A section of the fiscal 2018 Form 10-K. +In the event of an acquisition during the Plan year, to the extent not already captured in the non-GAAP disclosures noted above, the Board, upon the proposal of +the Compensation Committee, may in its discretion consider restructuring, purchase accounting and extraordinary charges associated with such acquisitions as disclosed in the Company’s Form 10-K to be +considered in the calculation of non-GAAP earnings. If the acquisition provides accretive earnings, the Board may, in its discretion, include this for purposes of bonus calculations as a means to incent +management to pursue accretive acquisitions and in recognition of the significant time and effort necessary to complete such acquisitions. Upon the completion of acquisitions, interest income assumed in the fiscal plan will be adjusted to reflect +the cash used. +The Compensation Committee shall evaluate certain events, in its discretion, for determination of treatment in the bonus +calculation. Examples include the impact of tax legislation and the impact of implementing new accounting standards. +Net revenues must +reach a minimum of $208 million for NEOs to earn any portion of the cash-based incentive tied to net revenues achievement. At net revenues in excess of $212 million, NEOs earn one hundred percent payout for this portion (12.5% of base +salary), while upon achievement of net revenues in excess of $216 million, NEOs earn one hundred and fifty percent payout for this portion (18.75% of base salary). Non-GAAP net earnings must reach a +minimum of $27.65 million to earn any portion of cash-based incentive tied to net earnings achievement. Upon achieving non-GAAP net earnings in excess of $28.65 million, NEOs earn one hundred percent +payout for this portion (12.5% of base salary) and upon achieving non-GAAP net earnings in excess of $29.75 million, NEOs earn one hundred fifty percent payout (18.75% of base salary). +Cash-based incentive compensation, if earned, is paid in the first quarter of each fiscal year, for the prior year’s performance. The net revenues +and non-GAAP net earnings targets operate independently. While the net revenues portion may be earned upon achieving the net revenues targets, the portion related to +non-GAAP net earnings is subject to the Company’s attainment of the specific non-GAAP net earnings target, after inclusion of the compensation expense related to +cash-based incentive compensation. Should the Company fail to reach the minimum non-GAAP net earnings target, no cash-based incentive compensation will be paid for this portion. +Management and the Compensation Committee have intended that the net revenues and non-GAAP net earnings +thresholds be set at reasonably achievable targets, yet at levels that require diligence to produce improved performance. The Compensation Committee tends to set the thresholds consistent with the net revenue and net earnings guidance range +requiring that the low end of guidance is achieved before cash-based incentive compensation is paid. +Long-Term Stock-based Incentive +Awards +The Compensation Committee approved two types of restricted stock unit awards and two types of +non-qualified stock option awards for the Company’s NEOs, with the exception of Messrs. Kraeutler and Kenny, whose awards consisted of only restricted stock units. Messrs. Kraeutler and Kenny received +separate non-qualified option awards in connection with their respective employment agreements. The first type of restricted stock unit award and +non-qualified stock option award is performance-based, where the NEOs’ ability to vest in such awards is contingent upon the Company reaching a minimum level of +non-GAAP net earnings of $30.5 million for fiscal 2018. This award would vest 25% per year over four years, if earned. The second type of restricted stock unit award and +non-qualified stock option award is time-based and fully vests after four years (cliff vesting). Management and the Compensation Committee determined the mix of both restricted stock units and non-qualified stock options provides better alignment with shareholder interests. In prior years the awards consisted of only restricted stock units. Following is a summary of the awards: +19 +Table of Contents +Messrs. Kraeutler and Kenny were each awarded 25,000 performance-based and 25,000 time-based +restricted stock units. Other NEOs were each awarded 7,500 performance-based and 7,500 time-based restricted stock units. The other NEOs were also each awarded 12,500 performance-based and 12,500 time-based +non-qualified options. +Establishing Compensation Levels +The Compensation Committee recommends CEO compensation to the Board of Directors for approval. On October 9, 2017, Mr. Kenny was hired as CEO. +The terms of his Employment Agreement are summarized on page 22. The compensation levels for the other NEOs are recommended by the CEO. The Compensation Committee has discretion to follow or modify such recommended levels of compensation. The +Compensation Committee considers the input of our CEO as a crucial component of its compensation processes and decisions relating to NEO compensation. The Compensation Committee is not obligated to follow his recommendations. The Company does not +engage in strict numerical benchmarking in determining the percentage modifications for the NEOs. Under its charter, the Compensation Committee is authorized to engage outside advisors at the Company’s expense. In fiscal 2017, Company did +not engage a consultant, as it had done so in 2016. +In setting the NEOs’ compensation, the Compensation Committee reviews all components +of such compensation through the use of tally sheets. These tally sheets provide the amount of total compensation paid or earned by each NEO based on his or her base salary, cash-based incentive compensation, stock-based awards and retirement +contributions. The tally sheets reviewed provide all of the information that is reflected in the Summary Compensation Table. The review by the Compensation Committee analyzes how changes in any element of compensation would impact other elements, +particularly severance or change in control benefits, if applicable to the executive. Such analysis has become an important component in the Compensation Committee’s review of executive compensation, as the tally sheet allows the Compensation +Committee to consider an executive’s overall compensation rather than only one or two specific components of an executive’s compensation. This allows the Compensation Committee to make compensation decisions and evaluate management +recommendations based on a complete analysis of an executive’s total compensation. Salaries are set on a calendar year basis and, therefore, salaries paid in the first three months of each fiscal year beginning on the first day of October are +set in the prior fiscal year. +Components of Executive Compensation and Related Risk Profile +Meridian’s executive compensation and benefits packages consist of: base salary, cash-based incentive compensation, long-term stock-based incentive +awards, Company-sponsored benefit and retirement plans, and change in control severance benefits. Each of these components has a certain risk profile. +Element +Form of Compensation +Purpose +Risk Profile +Base Salaries +Cash +Provides competitive, fixed compensation to attract and retain exceptional executive talent +Low to moderate +Annual Cash-based Incentives +Cash +Provides a direct financial incentive to achieve corporate operating goals +Moderate to high +20 +Table of Contents +Element +Form of Compensation +Purpose +Risk Profile +Long-Term Stock-based Incentives +Non-qualified stock options and/or restricted stock units +Encourages Executive Officers to build and maintain a long-term equity ownership position in Meridian so that their interests are aligned with our shareholders +High +Health, Retirement and Other Benefits +Eligibility to participate in benefit plans generally available to our employees, including retirement plan contributions, and premiums paid on disability and life insurance +policies +Benefit plans are part of a broad-based employee benefits program providing competitive benefits to our Executive Officers +Low +Change in Control Severance Benefits +Cash and continuation of certain benefits +Encourages Executive Officers to maximize value for shareholders in the event that the Company becomes subject to a change in control transaction +Moderate to high +The Compensation Committee has reviewed the risk profile of the components of the Company’s executive compensation +program, including the performance objectives and target levels used in connection with incentive awards, and has considered the risks an NEO might be incentivized to take with respect to such components. When establishing the mix among these +components, the Compensation Committee is careful not to encourage excessive risk taking. Specifically, the performance objectives contained in the Company’s executive compensation programs have been balanced between annual and long-term +incentive compensation to ensure that both components are aligned and consistent with our long-term business plan and that our overall mix of stock-based awards has been allocated to promote an appropriate combination of incentive and retention +objectives. +The Compensation Committee believes that the Company’s executive compensation program does not incentivize the NEOs to +engage in business activities or other behavior that would threaten the value of the Company or the investments of its shareholders. +The +Compensation Committee continues to monitor and evaluate on an on-going basis the mix of compensation, especially equity compensation, awarded to the NEOs, and the extent to which such compensation aligns the +interests of the NEOs with those of the Company’s shareholders. In connection with this practice, the Compensation Committee has, from time to time, including in November 2017, reconsidered the structure of the Company’s executive +compensation program and the relative weighting of various compensation elements. See discussion of Long-Term Stock-based Incentives on page 19 for changes made for fiscal 2018 to this component of compensation. +See Executive Summary on page 18 for discussion of base salaries, annual cash-based incentive compensation and long-term stock-based compensation. +Company-Sponsored Benefit and Retirement Plans +Meridian provides Company-sponsored benefit and retirement plans to the NEOs. In general, executives participate in the Company’s benefit and retirement plans on the same basis as other Company +employees. The core benefit package includes health, dental, short and long-term disability, and group term life insurance. Meridian generally +21 +Table of Contents +provides retirement benefits to executives through qualified (under the Internal Revenue Code) defined contribution plans (401K Plan). +Change in Control Severance Benefits +The Compensation Committee believes that a reasonable +level of salary and Company-sponsored benefit protection provides a means of retention and allows the NEOs to remain focused on achievement of Company goals and objectives in the event that the Company becomes subject to a merger or acquisition +transaction. This component of compensation would only be paid in the event of a change in control of the Company, under certain qualifying conditions, and termination of the NEO’s employment (double trigger). For the CEO and the NEOs other +than the Executive Chairman, this component of compensation would include two years’ base salary, performance bonus and core benefits. For the Executive Chairman, this component of compensation would include three years’ base salary, +performance bonus and core benefits. See page 29 for a description of change in control severance agreements entered into with our Executive Officers. +Other Personal Benefits +Two of the NEOs have auto leases that are paid by the Company, the +costs of which are included in the All Other Compensation table on page 25. The Company believes payment of these leases to be reasonable given the nature of the positions and consistent with the Company’s overall executive compensation +philosophy. +Jack Kenny Employment Agreement +Effective October 9, 2017, the Company and Mr. Kenny entered into an Employment Agreement (the “Kenny Employment Agreement”) providing for the terms of Mr. Kenny’s employment +as Chief Executive Officer. The Kenny Employment Agreement provides that Mr. Kenny is entitled to receive a base salary of $550,000 for the first year of the Kenny Employment Agreement’s term (“Year 1”) and $650,000 for the +second year of the Kenny Employment Agreement’s term (“Year 2”). Mr. Kenny is eligible to earn an annual bonus of up to $275,000 for Year 1 and $325,000 for Year 2, subject to the achievement of certain performance criteria as +determined by the Compensation Committee of the Board. The Kenny Employment Agreement also provides that Mr. Kenny receive (i) a grant of stock options to purchase 100,000 shares of common stock which will vest on a pro-rata basis over four (4) years following the effective date of the Kenny Employment Agreement; and (ii) a grant of 13,000 restricted stock units vesting in a lump sum or “cliff” basis on the +second anniversary of the effective date of the Kenny Employment Agreement. The Kenny Employment Agreement also provides that Mr. Kenny receive an annual equity award of no less than 25,000 restricted stock units per year vesting in a lump sum +or “cliff” basis on the fourth anniversary following the date of grant. +The Kenny Employment Agreement’s term continues +through October 9, 2019, and thereafter provides for renewal periods of one (1) year that automatically renew on the annual anniversary of the effective date of the Kenny Employment Agreement. Pursuant to the terms of the Kenny Employment +Agreement, there is no required minimum period of employment and either the Company or Mr. Kenny may terminate his employment under the Kenny Employment Agreement at any time for any reason or no reason. If Mr. Kenny voluntarily terminates +the Kenny Employment Agreement, he must give the Company at least 90 days’ prior written notice. If the Company voluntarily terminates the Kenny Employment Agreement without cause, the Company is obligated to give Mr. Kenny 90 days’ +prior written notice. In the event that the Company terminates the employment of Mr. Kenny without Cause or if he terminates his employment for Good Reason, each as defined in the Kenny Employment Agreement, Mr. Kenny is entitled to a +severance payment equal to twelve months of his then current base salary plus a pro-rata portion of the target bonus through the date of termination. If such termination occurs during a change of control +period (double trigger), Mr. Kenny is entitled to a severance payment equal to two times his then current base salary plus his target bonus for the severance period. +John A. Kraeutler Employment Agreement and Supplemental Benefit Agreement +Effective +October 3, 2016, the Company and Mr. Kraeutler entered into a Third Amended and Restated Employment Agreement (the “Kraeutler Employment Agreement”), which, among other things, extended the term of his employment and incorporated +the terms and conditions of his Supplemental Benefit Agreement. The Kraeutler Employment Agreement provides that Mr. Kraeutler is entitled to receive an established minimum annual salary and that he is eligible to participate in the +Company’s cash-based and stock-based incentive plans. The Kraeutler Employment Agreement also provides that Mr. Kraeutler receive (i) a grant of 50,000 non-qualified stock options vesting on +September 30, 2017 and a grant of 50,000 non-qualified stock options vesting on September 30, 2018 so +22 +Table of Contents +long as he is employed on that date; and (ii) two grants of 25,000 performance-based restricted stock units, with one grant to be earned if published fiscal 2017 revenue and earnings +guidance is achieved, and the other grant to be earned if published fiscal 2018 revenue and earnings guidance is achieved. However, as a result of originally published fiscal 2017 revenue and earnings guidance not being achieved, 25,000 restricted +stock units granted under the Kraeutler Employment Agreement were not earned and have been cancelled. +Pursuant to his Second Amended and +Restated Employment Agreement, effective from January 15, 2015 to October 3, 2016 (the “2015 Employment Agreement”) and which was replaced by the current Kraeutler Employment Agreement, Mr. Kraeutler earned 50,000 non-qualified stock options as a result of being employed by the Company as of September 30, 2016. However, as a result of published fiscal 2016 revenue and earnings guidance not being achieved, 25,000 +restricted stock units granted under the 2015 Employment Agreement were not earned and have been cancelled. +In addition, the Kraeutler +Employment Agreement provides that Mr. Kraeutler is eligible to receive: +• +Post-retirement benefit payments totaling $1,200,000, payable in one hundred twenty (120) monthly payments of $10,000; and +• +Lifetime insurance benefits including health insurance and comprehensive long-term care insurance. +The Kraeutler Employment Agreement provides for potential payments to Mr. Kraeutler upon a change in control. These payments are described on page +29 of this proxy statement. The Kraeutler Employment Agreement’s term extends through September 30, 2018, and includes provisions for a 12-month consulting arrangement following that date. +Richard Eberly Employment Letter Agreement +On July 26, 2016, the Company and Richard Eberly entered into a letter agreement providing for terms of Mr. Eberly’s employment as Corporate Executive Vice President and President, Chief +Commercial Officer, responsible for all sales and marketing operations in the core diagnostics and Life Science units, as well as research and development for these units, effective August 1, 2016. The letter agreement provides that +Mr. Eberly’s annual base salary shall be $400,000, he shall be entitled to participate in the Company’s cash-based incentive compensation plan, he shall be awarded options to acquire 20,000 of the Company’s shares of Common +Stock, vesting 25% each year from date of grant, and he shall be entitled to receive other benefits commensurate with his new position with the Company. +Internal Pay Equity +The Compensation Committee believes that the relative difference +between the CEO’s compensation and the compensation of the Company’s other executives has not increased significantly over the years. Further, the Compensation Committee believes that the Company’s internal pay equity structure is +appropriate based upon the contributions to the success of the Company and as a means of motivation to other executives and employees. +Tax +Deductibility of Pay +Section 162(m) of the Internal Revenue Code contains compensation deduction limitations for certain highly +compensated employees. One exception to this limitation is for performance-based compensation that is approved by, among other things, a committee of “outside directors” (as defined under IRS treasury regulations). The Committee believes +that compensation paid to the NEOs for fiscal year 2017 is properly deductible under Section 162(m), but no assurance can be made in this regard. +23 +Table of Contents +COMPENSATION COMMITTEE REPORT +The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management. Based on these reviews and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Company’s proxy +statement on Schedule 14A. +Members of the Compensation Committee +James M. Anderson (Chairman) +John C. McIlwraith +David C. Phillips +SUMMARY COMPENSATION TABLE +The following table summarizes the aggregate compensation paid, or earned, by each of the NEOs for the fiscal years ended September 30, 2017, 2016 and 2015, respectively: +Name and Principal +Position +(a) +Year +(b) +Salary +(c) +Bonus 1 +(d) +Stock +Awards 2,3,5 +(e) +Option +Awards 4,5 +(f) +Non-Equity +Incentive Plan +Compensation +(g) +Change in +Pension Value +and +Nonqualified +Deferred +Compensation +Earnings +(h) +All +Other +Compensation 6 +(i) +Total +John A. Kraeutler 7 +Executive Chairman of the Board +2017 +2016 +2015 +$ +$ +$ +655,942 +621,605 +608,270 +— +— +— +$ +$ +$ +423,750 +485,250 +860,250 +$ +$ +$ +306,640 +53,300 +372,800 +— +— +— +— +— +— +$ +$ +$ +155,859 +198,275 +111,580 +$ +$ +$ +1,542,191 +1,358,430 +1,952,900 +Melissa A. Lueke +Executive +Vice President, Chief Financial Officer and Secretary +2017 +2016 +2015 +$ +$ +$ +339,520 +292,194 +269,780 +— +— +— +$ +$ +$ +169,500 +194,100 +161,190 +$ +$ +27,708 +44,416 +— +— +— +— +— +— +— +$ +$ +$ +45,564 +68,343 +62,120 +$ +$ +$ +582,292 +599,053 +493,090 +Richard L. Eberly +Executive +Vice President, President, Chief Commercial Officer +2017 +2016 +2015 +$ +$ +$ +404,904 +339,669 +319,252 +— +— +— +$ +$ +$ +169,500 +194,100 +161,190 +$ +— +74,408 +— +— +— +— +— +— +— +$ +$ +$ +57,891 +66,888 +61,089 +$ +$ +$ +632,295 +675,065 +541,531 +Susan D. Rolih +Executive Vice +President, +Global Regulatory & Quality Systems +2017 +2016 +2015 +$ +$ +$ +332,750 +294,522 +278,385 +— +— +— +$ +$ +$ +169,500 +198,493 +161,190 +$ +$ +27,708 +3,553 +— +— +— +— +— +— +— +$ +$ +$ +42,941 +66,794 +59,682 +$ +$ +$ +572,899 +563,362 +499,257 +Vecheslav A. Elagin +Executive +Vice President, Research & Development, and Chief Scientific Officer +2017 +2016 +2015 +$ +$ +$ +324,408 +298,766 +291,034 +— +— +— +$ +$ +$ +169,500 +194,100 +161,190 +$ +$ +21,845 +3,553 +— +— +— +— +— +— +— +$ +$ +$ +45,782 +65,616 +70,016 +$ +$ +$ +561,535 +562,035 +522,240 +1 +No payments were made to the NEOs pursuant to the Officer’s Performance +Compensation Plan for fiscal 2017, 2016 or 2015, as the corporate-wide targets were not reached for each of the respective fiscal years. +2 +The amounts shown reflect the grant date fair value of the restricted stock +units issued during fiscal years 2017, 2016 and 2015 in accordance with ASC Topic 718. With the exception of Employment Agreement RSUs discussed in Note 3 below, no compensation cost is included in this table related to the performance-based portion +of the restricted stock units granted during fiscal 2017, 2016 and 2015. Because the required earnings target for Meridian was not reached for fiscal 2017, 2016 or 2015, with the exception of the Employment Agreement RSUs discussed in Note 3 below, +the performance-based restricted stock units have been cancelled. A discussion of the assumptions used in calculating these values may be found in Note 6(b) on page 73 to the Company’s Annual Report on Form +10-K filed with the SEC on November 29, 2017. In addition, the amount reflected for Ms. Rolih for fiscal 2016 includes the value of unrestricted common shares granted pursuant to Company policy for +15 years of service. +24 +Table of Contents +3 +The amount reflected for Mr. Kraeutler for fiscal 2015 includes +$412,500 for the grant date fair value of performance-based restricted stock units granted pursuant to his employment agreement dated January 15, 2015 (“Employment Agreement RSUs”). Since the required published revenue and earnings +guidance was achieved for fiscal 2015, the Employment Agreement RSUs were earned and the corresponding compensation cost is included in this table. A discussion of the assumptions used in calculating these values may be found in Note 6(b) on page 73 +to the Company’s Annual Report on Form 10-K filed with the SEC on November 29, 2017. +4 +The amounts shown reflect the grant date fair value of the stock options +granted during fiscal years 2017, 2016 and 2015 in accordance with ASC Topic 718, and during fiscal 2017 are comprised of stock options granted to (i) Mr. Kraeutler pursuant to his employment agreement dated October 3, 2016; (ii) +Ms. Lueke in recognition of increased responsibilities in her position of Executive Vice President and Chief Financial Officer; and (iii) Dr. Elagin and Ms. Rolih in connection with their promotions. The fiscal 2016 amount is +comprised of stock options granted to (i) Mr. Kraeutler, Ms. Lueke, Ms. Rolih and Dr. Elagin in connection with the Magellan acquisition; and (ii) Mr. Eberly in connection with his promotion. The fiscal 2015 amount +is comprised solely of the stock options granted to Mr. Kraeutler in connection with his employment agreement dated January 15, 2015 (“Employment Agreement Options”). A discussion of the assumptions used in calculating these +values may be found in Note 6(b) on page 73 to the Company’s Annual Report on Form 10-K filed with the SEC on November 29, 2017. +5 +In addition, no compensation cost is included in this table related to the +additional performance-based equity awards granted November 9, 2011 to certain executive management employees, including the NEOs, to reward them for meeting pre-defined Company revenue targets. These +awards, which included both restricted stock units and options, could only be earned if specified cumulative revenue thresholds were met through fiscal 2015, with the three measurement dates for ratably earning +one-third of the grant being (i) the 21-month period ended June 30, 2013; (ii) the 33-month period ended June 30, +2014; and (iii) the 45-month period ended June 30, 2015. As a result of none of the cumulative thresholds being met, these restricted stock units and options have been cancelled and no related +compensation is included within the table. +6 +See the All Other Compensation table below for amounts, which include +certain Company contributions, and other personal benefits. +Fiscal 2017 +All Other Compensation +John A. +Kraeutler +Melissa A. +Lueke +Richard L. +Eberly +Susan D. +Rolih +Vecheslav A. +Elagin +Retirement Contributions +$ +17,206 +$ +17,964 +$ +18,237 +$ +15,341 +$ +18,182 +Auto Lease +11,516 +— +12,054 +— +— +Insurance Premiums, including Gross-up +61,012 +— +— +— +— +Restricted Stock Dividends +66,125 +27,600 +27,600 +27,600 +27,600 +Totals +$ +155,859 +$ +45,564 +$ +57,891 +$ +42,941 +$ +45,782 +7 +Mr. Kraeutler was named Executive Chairman of the Board effective +October 9, 2017, upon the hiring of Mr. Jack Kenny as Chief Executive Officer. Prior to that time, Mr. Kraeutler served as Chairman of the Board, Chief Executive Officer and President. +25 +Table of Contents +GRANTS OF PLAN-BASED AWARDS +The following table sets forth, for each of the NEOs, information related to grants made during fiscal 2017 under Meridian’s 2012 Stock Incentive +Plan: +Estimated Future Payouts Under +Non-Equity +Incentive Plan +Awards +Estimated Future Payouts Under +Equity Incentive Plan Awards +All other +Stock +Awards: +Number of +Shares of +Stock or +Units (#) +All other +Option +Awards: +Number of +Securities +Underlying +Options (#) +Exercise +or Base +Price of +Option +Awards +($/Sh) +Grant Date +Fair Value +of Stock +and +Option +Awards +Name +Grant +Date +Threshold +($) +Target +($) +Max +($) +Threshold +(#) +Target +(#) +Max +(#) +(a) +(b) +(c) +(d) +(e) +(f) +(g) +(h) +(i) +(j) +(k) +(l) +John A. Kraeutler +10/03/16 +11/09/16 +— +— +— +— +— +— +— +— +— +— +— +— +25,000 +2 +100,000 +— +1 +$ +19.09 +— +$ +$ +306,640 +423,750 +Melissa A. Lueke +11/09/16 +11/16/16 +— +— +— +— +— +— +— +— +— +— +— +— +10,000 +— +2 +— +10,000 +3 +$ +— +16.85 +$ +$ +169,500 +27,708 +Richard L. Eberly +11/09/16 +— +— +— +— +— +— +10,000 +2 +— +— +$ +169,500 +Susan D. Rolih +11/09/16 +11/16/16 +— +— +— +— +— +— +— +— +— +— +— +— +10,000 +— +2 +— +10,000 +3 +$ +— +16.85 +$ +$ +169,500 +27,708 +Vecheslav A. Elagin +11/09/16 +05/19/17 +— +— +— +— +— +— +— +— +— +— +— +— +10,000 +— +2 +— +10,000 +4 +$ +— +13.60 +$ +$ +169,500 +21,845 +1 +This grant of time-based options was made to Mr. Kraeutler pursuant to his employment agreement dated October 3, 2016, with 50,000 options +vesting on each of September 30, 2017 and September 30, 2018 so long as he is employed by the Company on such dates. In connection with the employment agreement, Mr. Kraeutler also received two grants of 25,000 performance-based +restricted stock units, one subject to attainment of published revenue and earnings guidance for fiscal 2017 and one subject to attainment of published revenue and earnings guidance for fiscal 2018. As the fiscal 2017 revenue and earnings guidance +was not met, the first of these 25,000 performance-based restricted stock unit grants has been cancelled and is not reflected in the table above. The second of these performance-based restricted stock grants will be evaluated for inclusion within +the fiscal 2018 compensation information to be detailed in next year’s proxy statement, based upon the Company’s financial performance in fiscal 2018. +2 +At the time of the grant, half of each NEO’s restricted stock units were time-based with 100% vesting after four years, and the remaining half +were performance-based, subject to attainment of a specified earnings target for fiscal 2017. As the 2017 earnings target was not met, the performance-based restricted stock units have been cancelled and are not reflected in the table above. +3 +These awards of time-based options were made (i) in recognition of increased responsibilities in Ms. Lueke’s position of Executive Vice +President and Chief Financial Officer; and (ii) in connection with Ms. Rolih’s promotion to Executive Vice President, Global Regulatory & Quality Systems. Both options have a ten-year +term and vest in four equal annual installments from the date of grant (i.e., vest 25% per year until fully vested on November 16, 2020). +4 +This award of time-based options was made in connection with Dr. Elagin’s promotion to Executive Vice President, Research & +Development, and Chief Scientific Officer. The options have a ten-year term and vest in four equal annual installments from the date of grant (i.e., vest 25% per year until fully vested on May 19, 2021). +26 +Table of Contents +OUTSTANDING EQUITY AWARDS AT FISCAL +YEAR-END +The following table provides information on the NEOs’ holdings of equity awards +under Meridian’s 2012 Stock Incentive Plan and 2004 Equity Compensation Plan as of September 30, 2017: +Option Awards +Stock Awards +Name +Number of +Securities +Underlying +Unexercised +Options +(#) +Exercisable +Number of +Securities +Underlying +Unexercised +Options +(#) +Unexercisable +Equity +Incentive Plan +Awards: +Number +of +Securities +Underlying +Unexercised +Unearned +Options (#) +Option +Exercise +Price ($) +Option +Expiration +Date +Number of +Shares or +Units of +Stock That +Have Not +Vested +(#) +Market +Value of +Shares or +Units of +Stock That +Have Not +Vested +($) +Equity +Incentive +Plan +Awards: +Number of +Unearned +Shares, +Units or +Other +Rights That +Have +Not +Vested (#) +Equity +Incentive +Plan +Awards: +Market or +Payout +Value of +Unearned +Shares, +Units +or +Other +Rights That +Have Not +Vested ($) +(a) +(b) +(c) +(d) +(e) +(f) +(g) +(h) +(i) +(j) +John A. Kraeutler +25,000 1 +25,000 2 +100,000 7 +3,750 11 +50,000 9 +— +— +— +11,250 11 +50,000 10 +— +— +— +— +— +$ +$ +$ +$ +$ +33.090 +33.090 +16.500 +19.560 +19.090 +01/28/18 +01/28/18 +01/15/25 +03/24/26 +09/30/21 +— +— +— +— +— +15,000 13 +25,000 14 +25,000 15 +25,000 16 +$ +$ +$ +$ +— +— +— +— +— +214,500 +357,500 +357,500 +357,500 +— +— +— +— +— +— +— +— +— +— +— +— +— +— +— +— +— +— +Melissa A. Lueke +3,125 11 +— +9,375 11 +10,000 12 +— +— +$ +$ +19.560 +16.850 +03/24/26 +11/16/26 +— +— +9,000 13 +9,000 14 +10,000 15 +10,000 16 +$ +$ +$ +$ +— +— +128,700 +128,700 +143,000 +143,000 +— +— +— +— +— +— +— +— +— +— +— +— +Richard L. Eberly +1,500 4 +10,000 5 +5,000 12 +— +— +15,000 12 +— +— +— +$ +$ +$ +19.710 +21.940 +20.480 +08/04/20 +01/31/21 +07/27/26 +— +— +— +9,000 13 +9,000 14 +10,000 15 +10,000 16 +$ +$ +$ +$ +— +— +— +128,700 +128,700 +143,000 +143,000 +— +— +— +— +— +— +— +— +— +— +— +— +— +— +Susan D. Rolih +1,200 4 +5,000 8 +250 11 +— +— +— +750 11 +10,000 12 +— +— +— +— +$ +$ +$ +$ +19.710 +21.750 +19.560 +16.850 +08/04/20 +07/01/23 +03/24/26 +11/16/26 +— +— +— +— +9,000 13 +9,000 14 +10,000 15 +10,000 16 +$ +$ +$ +$ +— +— +— +— +128,700 +128,700 +143,000 +143,000 +— +— +— +— +— +— +— +— +— +— +— +— +— +— +— +— +Vecheslav A. Elagin +10,000 3 +2,000 4 +5,000 6 +250 11 +— +— +— +— +750 11 +10,000 12 +— +— +— +— +— +$ +$ +$ +$ +$ +22.290 +19.710 +18.910 +19.560 +13.600 +08/03/19 +08/04/20 +06/01/22 +03/24/26 +05/19/27 +— +— +— +— +9,000 13 +9,000 14 +10,000 15 +10,000 16 +$ +$ +$ +$ +— +— +— +— +128,700 +128,700 +143,000 +143,000 +— +— +— +— +— +— +— +— +— +— +— +— +— +— +— +— +27 +Table of Contents +1 +Options vested on January 22, 2011. +2 +Options vested on January 22, 2013. +3 +Options fully vested on August 3, 2013. +4 +Options fully vested on August 4, 2014. +5 +Options fully vested on January 31, 2015. +6 +Options fully vested on June 1, 2016. +7 +Options are fully vested; half as of September 30, 2015 and half as of September 30, 2016. +8 +Options fully vested on July 1, 2017. +9 +Options fully vested on September 30, 2017. +10 +Options vest in full on September 30, 2018. +11 +Options vest in four equal annual installments from the date of grant (i.e., vest 25% per year until fully vested on March 24, 2020). +12 +Options vest in four equal annual installments from the date of grant (i.e., vest 25% per year until fully vested on July 27, 2020 for +Mr. Eberly; November 16, 2020 for Ms. Lueke and Ms. Rolih; and May 19, 2021 for Dr. Elagin). +13 +Units vest on November 6, 2017. +14 +Units vest on November 15, 2018. +15 +Units vest on November 15, 2019. +16 +Units vest on November 15, 2020. +OPTION EXERCISES AND STOCK VESTED +The following table sets +forth, for each of the NEOs, information on options exercised and restricted stock units vested during fiscal 2017: +Option Awards +Stock Awards +Name +Number of +Shares +Acquired on +Exercise (#) +Value Realized +on Exercise ($) 1 +Number of Shares +Acquired on +Vesting (#) +Value Realized on +Vesting ($) 2 +(a) +(b) +(c) +(d) +(e) +John A. Kraeutler +— +$ +— +10,000 +$ +163,500 +Melissa A. Lueke +— +$ +— +7,500 +$ +122,625 +Richard L. Eberly +— +$ +— +7,500 +$ +122,625 +Susan D. Rolih +15,750 +$ +6,237 +7,500 +$ +122,625 +Vecheslav A. Elagin +— +$ +— +7,500 +$ +122,625 +28 +Table of Contents +1 +Amounts reflect the difference between the exercise price of the option and the market price of Meridian common shares at the time of exercise. +2 +Amounts reflect the market price of Meridian common shares at the time of restricted stock units vesting. +401(K) PLAN +Our 401(k) Savings Plan (“401(k) Plan”) allows all U.S. employees of the Company as soon as administratively possible following their employment +to set aside a portion of their compensation each year for their retirement needs, up to the limits set by the Internal Revenue Code. Presently, the Company contributes a matching contribution of 100% of the first 4% of the employee’s +contribution (i.e., up to 4% of an employee’s salary), subject to Internal Revenue Code limitations, having increased from 100% of the first 3% of the employee’s contribution (i.e., up to 3% of an employee’s salary), subject to +Internal Revenue Code limitations, effective January 1, 2017. The Company may also contribute a profit-sharing contribution at its discretion. Employee contributions and employer matching contributions are 100% vested immediately. Participants +are entitled to direct the investment of their accounts among various mutual funds selected by the Meridian Bioscience, Inc., Savings and Investment Plan Committee. Participants who terminate employment are entitled to receive the vested portion of +their accounts. +POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL +As described on page 22 in the “Compensation Discussion and Analysis” section of this proxy statement, Mr. Kraeutler and Meridian are +parties to the Kraeutler Employment Agreement which sets forth compensation, non-competition, benefit and severance provisions and provides for a payment equal to three times Mr. Kraeutler’s +three-year average base salary (plus any salary earned but not paid) and three-year average annual performance bonus if Mr. Kraeutler is terminated by Meridian without cause, Mr. Kraeutler terminates his employment for good reason or is +terminated in connection with a change in control of Meridian (double trigger). +Pursuant to the Kraeutler Employment Agreement, had +Mr. Kraeutler’s employment with the Company terminated on September 30, 2017, Mr. Kraeutler would have been entitled to receive post-retirement benefit payments totaling $1,200,000, payable in one hundred twenty +(120) monthly payments of $10,000. +Had one of the events noted above occurred on September 30, 2017, Mr. Kraeutler would also +have been entitled to the following under the Kraeutler Employment Agreement: +Salary +$ +1,885,817 +Annual Performance Bonus +— +Total Lump Sum Payment +$ +1,885,817 +Our Board of Directors authorized us to enter into change in control severance agreements with our Executive Officers +(other than our Executive Chairman and our Chief Executive Officer, each of whom have change of control provisions in their Employment Agreements), which were executed effective August 4, 2016. Each agreement had an initial term ended +December 31, 2016, and each year will automatically renew for an additional one year term, provided however, that if a change in control occurs the term will expire no earlier than 24 calendar months after the calendar month in which such +change in control occurs. A change of control is generally defined in each agreement as any of the following: (i) a person is or becomes a beneficial owner of more than 50% of our voting securities; (ii) the composition of a majority of +our Board changes; (iii) we consummate a merger or similar transaction; (iv) the sale of all or substantially all of our assets; or (v) the employment of a Chief Executive Officer other than the Company’s current CEO as of the +date of the agreement. Each agreement provides, among other things, that if a change in control occurs during the term of the agreement, and the executive’s employment is terminated either by us or by the executive, other than: (a) by us +for cause; (b) by reason of death or disability; or (c) by the executive without good reason, such executive will receive a severance payment equal to: (A) a multiple of such executive’s annual base salary; (B) a multiple of +executive’s target bonus amounts; and (C) earned but unused vacation time. In addition, each change in control agreement provides that in the event that the severance and other benefits provided +29 +Table of Contents +for in the agreement or otherwise payable to the executive would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code, the benefits under the agreement will be +either delivered in full, or delivered to a lesser extent which would result in no portion of the benefits being subject to such excise tax, whichever is more beneficial to the executive. +Had termination in connection with a change in control occurred on September 30, 2017, the NEOs to which the policy applied at that date +(Ms. Lueke, Mr. Eberly, Ms. Rolih and Dr. Elagin) would have been entitled to the following lump sum payments under the policy: +Melissa A. +Lueke +Richard L. +Eberly +Susan D. +Rolih +Vecheslav A. +Elagin +Salary +$ +688,000 +$ +810,000 +$ +672,000 +$ +674,430 +Annual Performance Bonus +— +— +— +— +Total Lump Sum Payment +$ +688,000 +$ +810,000 +$ +672,000 +$ +674,430 +DIRECTOR COMPENSATION +For fiscal 2017, independent Directors of Meridian received the following compensation for service on the Board and the Audit Committee (“AC”), Compensation Committee (“CC”) and +Nominating & Corporate Governance Committee (“N&CGC”) (annual amounts presented): +-Base for Director service +$ +40,000 +-Additional for Lead Director +$ +20,000 +-AC Chair +$ +20,000 +-AC Member +$ +10,000 +-CC Chair +$ +13,000 +-CC Member +$ +6,000 +-N&CGC Chair +$ +13,000 +-N&CGC Member +$ +5,000 +Additionally, in accordance with the terms and conditions set forth in the Company’s 2012 Stock Incentive Plan, each +independent Director will also be granted a non-qualified option to purchase 12,000 common shares at the time of election or re-election to the Board of Directors, with +the exercise price being the closing sale price on Nasdaq reported on the date of grant. Directors who are employees of Meridian are not separately compensated for serving as Directors. +30 +Table of Contents +The following table provides information on compensation related to fiscal 2017 for independent Directors +who served during fiscal 2017: +Name +Fees +Earned +or +Paid in +Cash +($) +Stock +Awards +($) 1 +Option +Awards +($) 1 +Non-Equity +Incentive Plan +Compensation +($) +Change in +Pension +Value +and Nonqualified +Deferred +Compensation +Earnings +All Other +Compensation +($) +Total +($) +(a) +(b) +(c) +(d) +(e) +(f) +(g) +(h) +James M. Anderson +$ +68,000 +— +$ +24,672 +— +— +— +$ +92,672 +Dwight E. Ellingwood +$ +53,000 +— +$ +24,672 +— +— +— +$ +77,672 +John C. McIlwraith +$ +51,000 +— +$ +24,672 +— +— +— +$ +75,672 +David C. Phillips +$ +86,000 +— +$ +24,672 +— +— +— +$ +110,672 +John M. Rice +$ +5,900 +— +$ +26,118 +— +— +— +$ +32,018 +Catherine A. Sazdanoff +$ +50,000 +— +$ +24,672 +— +— +— +$ +74,672 +1 +The amounts shown +reflect the grant date fair value of the awards made in fiscal year 2017 in accordance with ASC Topic 718. A discussion of the assumptions used in calculating these values may be found in Note 6(b) on page 73 to the Company’s Annual Report on +Form 10-K filed with the SEC on November 29, 2017. +SHAREHOLDER PROPOSALS FOR NEXT YEAR +The deadline for shareholder proposals to be included in the proxy statement for next year’s meeting is August 16, 2018. +The form of proxy for this meeting grants authority to the designated proxies to vote in their discretion on any matters that come before the meeting except those set forth in Meridian’s proxy +statement and except for matters as to which adequate notice is received. In order for a notice to be deemed adequate for the 2019 Annual Shareholders’ Meeting, it must be received prior to October 27, 2018. If there is a change in the +anticipated date of next year’s Annual Shareholders’ Meeting or these deadlines by more than 30 days, we will notify you of this change through our Form 8-K and/or Form +10-Q filings. +Meridian’s Code of Regulations provides that only persons nominated by an officer, +Director or in writing by a shareholder not earlier than 150 days nor later than 90 days prior to the meeting at which Directors are to be selected shall be eligible for election and that shareholder proposals be presented not earlier than 150 days +nor later than 90 days prior to the meeting at which the proposals are to be presented. +QUESTIONS +If you have questions or need more information about the annual meeting, write to: +Melissa A. Lueke +Executive Vice President, +Chief Financial Officer and Secretary +Meridian Bioscience, Inc. +3471 River Hills Drive +Cincinnati, Ohio 45244 +or call us at (513) 271-3700 +For information about your record holdings, call Computershare Shareholder Services at (888) 294-8217. +31 +Table of Contents +*** Exercise Your Right to Vote *** +Important Notice Regarding the Availability of Proxy Materials for the +Shareholder Meeting to Be Held on January 25, 2018 +MERIDIAN BIOSCIENCE, +INC. +MERIDIAN BIOSCIENCE, +INC. +3471 RIVER HILLS DRIVE +CINCINNATI, OH +45244 +Meeting Information +Meeting Type: Annual Meeting +For holders as of: November 30, 2017 +Date: January 25, 2018 Time: 2:00 PM EST +Location: Holiday Inn +Eastgate +4501 Eastgate Boulevard +Cincinnati, OH 45245 +You are receiving this communication +because you hold shares in the above named company. +This is not a ballot. You cannot use +this notice to vote these shares. This communication presents only an overview of the more complete proxy materials that are available to you on the Internet. You may view the proxy materials online at www.proxyvote.com or easily request a +paper copy (see reverse side). +We +encourage you to access and review all of the important information contained in the proxy materials before voting. +See the reverse side of this notice to obtain proxy materials and voting instructions. +Table of Contents +— Before You Vote — +How to Access the Proxy Materials +Proxy Materials Available to VIEW or RECEIVE: +1. Notice and Proxy Statement 2. Annual Report and Form 10-K +How to View Online: +Have the information that is printed in the box marked by the arrow +(located on the following page) and visit: www.proxyvote.com . +How to Request and +Receive a PAPER or E-MAIL Copy: +If you want to receive a paper or e-mail copy of these documents, you must request one. There is NO charge for requesting a copy. Please choose one of the following methods to make your request: +1) BY INTERNET : www.proxyvote.com +2) BY TELEPHONE : +1-800-579-1639 +3) BY E-MAIL* : +sendmaterial@proxyvote.com +* +If requesting materials by e-mail, please send a blank e-mail with the information that is printed +in the box marked by the arrow +(located on the following page) in the subject line. +Requests, instructions and other inquiries sent to this e-mail address +will NOT be forwarded to your investment advisor. Please make the request as instructed above on or before January 11, 2018 to facilitate timely delivery. +— How To Vote — +Please Choose One of the Following +Voting Methods +Vote In Person: Many shareholder meetings have attendance requirements including, but not limited to, the possession of an attendance ticket issued by the +entity holding the meeting. Please check the meeting materials for any special requirements for meeting attendance. At the meeting, you will need to request a ballot to vote these shares. +Vote By Internet: To vote now by Internet, go to +www.proxyvote.com. Have the information that is printed in the box marked by the arrow +available and follow the instructions. +Vote By Mail: You can vote by mail by requesting a paper copy of the materials, which will include a proxy card. +Table of Contents +Voting items +The Board of Directors recommends you +vote FOR the following: +1. Election of Directors +Nominees +01 JAMES M. ANDERSON +05 JOHN C. MCILWRAITH +02 DWIGHT E. ELLINGWOOD +06 JOHN M. RICE, JR. +03 JACK KENNY +07 DAVID C. PHILLIPS +04 JOHN A. KRAEUTLER 08 CATHERINE A. +SAZDANOFF +The Board of Directors recommends you vote FOR the following proposal: +2. Advisory vote on compensation of named executive officers, as disclosed in the Proxy Statement ("Say-on-Pay" Proposal). +The Board of Directors recommends you vote 1 YEAR on the following proposal: +3. Advisory vote on the frequency of future advisory votes on compensation of named executive officers ("Say-on-Frequency" +Proposal). +The Board of Directors recommends you vote FOR the following proposal: +4. Ratification of the appointment of Grant Thornton LLP as Meridian's independent registered public accountants for fiscal year +2018. +NOTE: Such other business as may properly come before the meeting or any postponement or adjournment thereof. Only shareholders of record at the close of business on +November 30, 2017 are entitled to notice of and to vote at the meeting. +Table of Contents +Table of Contents +MERIDIAN BIOSCIENCE, INC. +3471 RIVER HILLS DRIVE +CINCINNATI, OH 45244 +VOTE BY INTERNET - www.proxyvote.com +Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the +cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. +ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS +If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy +cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials +electronically in future years. +VOTE BY PHONE - 1-800-690-6903 +Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have +your proxy card in hand when you call and then follow the instructions. +VOTE BY +MAIL +Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o +Broadridge, 51 Mercedes Way, Edgewood, NY 11717. +TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: +KEEP THIS PORTION FOR YOUR RECORDS +THIS PROXY CARD IS VALID ONLY WHEN +SIGNED AND DATED. DETACH AND RETURN THIS PORTION ONLY +The Board of Directors recommends you vote FOR the following: +For +All +Withhold All +For All Except +To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below. +☐ +☐ +☐ +1. Election of Directors +Nominees +01 JAMES M. ANDERSON +02 DWIGHT E. ELLINGWOOD +03 JACK KENNY +04 JOHN A. KRAEUTLER +05 JOHN C. MCILWRAITH +06 JOHN M. RICE, JR. +07 DAVID C. PHILLIPS +08 CATHERINE A. SAZDANOFF +The Board of Directors recommends you vote FOR the following proposal: +For +Against +Abstain +The Board of Directors recommends you vote FOR the +following proposal: +For +Against +Abstain +2. Advisory vote +on compensation of named executive officers, as disclosed in the Proxy Statement (“Say-on-Pay” Proposal). +☐ +☐ +☐ +4. Ratification +of the appointment of Grant Thornton LLP as Meridian’s independent registered public accountants for fiscal year 2018. +☐ +☐ +☐ +The Board of Directors recommends you vote 1 YEAR on the following proposal: +3 years +2 years +1 year +Abstain +NOTE: Such other business as may properly come before the meeting or any postponement or adjournment thereof. Only shareholders of record at the close of business on November 30, 2017 are entitled to +notice of and to vote at the meeting. +3. Advisory vote +on the frequency of future advisory votes on compensation of named executive officers (“Say-on-Frequency” Proposal). +☐ +☐ +☐ +☐ +For address change/comments, mark here. +(see reverse for instructions) +☐ +Yes +No +Please indicate if you plan to attend this meeting +☐ +☐ +Please sign exactly as your name(s) appears(s) hereon. When signing +as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by +authorized officer. +Signature [PLEASE SIGN WITHIN BOX] +Date +Signature (Joint Owners) +Date +Table of Contents +Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: +The Notice and Proxy Statement, Annual Report and Form 10-K are available at www.proxyvote.com +MERIDIAN +BIOSCIENCE, INC. +Annual Meeting of Shareholders +January 25, 2018 2:00 PM +This proxy is +solicited by the Board of Directors +The undersigned hereby +appoints JACK KENNY and MELISSA A. LUEKE, and either of them, attorneys and proxies of the undersigned, each with the power of substitution and re-substitution, to vote all shares of Common Stock of Meridian Bioscience, Inc. which the undersigned +would be entiltled to vote on the matters specified on the reverse side (and in their discretion to cumulate votes in the election of directors if cumulative voting is invoked by a shareholder through proper notice to the Company) and, in their +discretion, with respect to such other matters as may properly come before the Annual Meeting of Shareholders of Meridian Bioscience, Inc. to be held on January 25, 2018, at 2:00 p.m. Eastern Standard Time, at the Holiday Inn Eastgate, 4501 Eastgate +Boulevard, Cincinnati, Ohio 45245 and any postponement or adjournment of such Annual Meeting. +This proxy, when properly executed, will be voted as directed by the shareholder(s). If no such directions are made, this proxy will be voted +FOR the election to the Board of Directors all of the nominees listed on the reverse side and FOR each remaining proposal as recommended by the Board of Directors. +Please mark, sign, date, and return this proxy card promptly using +the enclosed reply envelope. +Address change / comments: +(If you noted any Address Changes and / or Comments above, please mark +corresponding box on the reverse side.) +Continued and to be +signed on reverse side \ No newline at end of file diff --git a/raw/proxies/0000794172/0001193125-17-369403/proxy_rpt.txt b/raw/proxies/0000794172/0001193125-17-369403/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..c7bad3cd2e9f6a5176a983b5b981d9d9621ecea4 --- /dev/null +++ b/raw/proxies/0000794172/0001193125-17-369403/proxy_rpt.txt @@ -0,0 +1,15 @@ +TRANSACTIONS WITH RELATED PERSONS +During fiscal 2017, the Company leased certain office space from an entity controlled by Marco G. Calzavara, President and Managing Director, Meridian +Bioscience Europe. Payments made under such arrangements during fiscal 2017 totaled approximately $150,000. +Nasdaq rules require the +Company to conduct an appropriate review of related party transactions required to be disclosed by the Company pursuant to SEC Regulation S-K Item 404 for potential conflict of interest situations on an +ongoing basis and that all such transactions must be approved by the Audit Committee or another Committee comprised of independent Directors. As a result, the Audit Committee annually reviews all such related party transactions and approves each +related party transaction if it determines that it is in the best interests of the Company. Additionally, the Audit Committee’s Charter provides it the authority to review, approve and monitor transactions involving the Company and +“related persons” (Directors and Executive Officers or their immediate family members, or shareholders owning five percent or greater of the Company’s outstanding stock). This also covers any related person transaction that meets the +minimum threshold for disclosure in the proxy statement under the relevant SEC rules (generally, transactions involving amounts exceeding $120,000 in which a related person has a direct or indirect material interest). In +considering the transaction, the Audit Committee may consider all relevant factors, including, as applicable: (i) the Company’s business rationale for entering into the transaction; (ii) the alternatives to entering into a related +person transaction; (iii) whether the transaction is on terms comparable to those available to third parties, or in the case of employment relationships, to employees generally; (iv) the potential for +15 +Table of Contents +the transaction to lead to an actual or apparent conflict of interest and any safeguards imposed to prevent such actual or apparent conflicts; and (v) the overall fairness of the transaction +to the Company. This policy is included in the Company’s Employee Handbook. The approval of such related person transactions are evidenced by internal Company resolutions or memoranda. \ No newline at end of file diff --git a/raw/proxies/0000794172/0001193125-18-348327/proxy.txt b/raw/proxies/0000794172/0001193125-18-348327/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..553dd832089f809bc1229b4ffa112c5f07a13bb5 --- /dev/null +++ b/raw/proxies/0000794172/0001193125-18-348327/proxy.txt @@ -0,0 +1,2594 @@ +DEF 14A +1 +d623895ddef14a.htm +DEF 14A +DEF 14A +Table of Contents +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +WASHINGTON, D.C. 20549 +SCHEDULE 14A +(Rule 14a-101) +INFORMATION REQUIRED IN PROXY STATEMENT +SCHEDULE 14A INFORMATION +Proxy Statement Pursuant to Section 14(a) of the +Securities Exchange Act of 1934 +(Amendment No. ) +Filed by the Registrant ☒ +Filed by a Party other than the Registrant ☐ +Check the appropriate box: +☐ +Preliminary Proxy Statement +☐ +Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +☒ +Definitive Proxy Statement +☐ +Definitive Additional Materials +☐ +Soliciting Material Pursuant to Section 14a-12 +Meridian Bioscience, Inc. +(Name of Registrant as +Specified in Its Charter) +(Name of Person(s) Filing Proxy Statement if Other Than the Registrant) +Payment of Filing Fee (Check the appropriate box): +☒ +No fee required. +☐ +Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and +0-11. +(1) +Title of each class of securities to which transaction applies: +(2) +Aggregate number of securities to which transaction applies: +(3) +Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 +(set forth the amount on which the filing fee is calculated and state how it was determined): +(4) +Proposed maximum aggregate value of transaction: +(5) +Total Fee Paid: +☐ +Fee paid previously with preliminary materials. +☐ +Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify +the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. +(1) +Amount Previously Paid: +(2) +Form, Schedule or Registration Statement No.: +(3) +Filing Party: +(4) +Date Filed: +Table of Contents +3471 River Hills Drive +Cincinnati, Ohio 45244 +www.meridianbioscience.com +Notice of Annual Meeting of Shareholders +and Proxy Statement +Dear Shareholders: +Our Annual Meeting of Shareholders will be held at 2:00 p.m. on January 24, 2019 at the Meridian Innovation Center, 7007 Valley Avenue, Cincinnati, +Ohio 45244. We hope you will attend. +At the meeting, you will hear a report on our operations and have a chance to meet your Directors and +Executive Officers. +This booklet includes the formal notice of the meeting and the proxy statement. The proxy statement tells you more about +the agenda and procedures for the meeting. It also describes how the Board operates and gives personal information about our Director candidates. +Pursuant to the Securities and Exchange Commission rule allowing companies to furnish proxy materials to their shareholders over the internet, a Notice of Internet Availability of Proxy Materials (the +“Notice”) was sent to shareholders on or about December 13, 2018. The Notice contains information on how to access copies of the proxy materials and vote your shares. +Whether or not you plan to attend the meeting, please cast your proxy vote promptly, either online, over the phone or by returning your signed and dated proxy card in the enclosed envelope. +Sincerely yours, +/s/ David C. Phillips +David C. Phillips +Chairman of the +Board +December 13, 2018 +Table of Contents +NOTICE OF ANNUAL MEETING OF SHAREHOLDERS +Date: +January 24, +2019 +Time: +2:00 p.m., Eastern Standard Time +Place: +Meridian +Bioscience, Inc. +Meridian Innovation Center +7007 Valley Avenue +Cincinnati, Ohio 45244 +Purpose: +• +Elect as Directors the eight nominees named in the accompanying proxy materials +• +Conduct an advisory vote on our executive compensation +(“Say-on-Pay”) +• +Ratify appointment of Grant Thornton LLP as Meridian’s independent registered public accountants for fiscal year 2019 +Only shareholders of record on November 30, 2018 may vote at the meeting. The approximate mailing date of this proxy +statement and accompanying Proxy Card is December 13, 2018. +Your vote is important. Please cast your proxy vote promptly, either online, +over the phone or by returning your signed and dated proxy card in the enclosed envelope. +By order of the Board of Directors, +/s/ Melissa A. Lueke +Melissa A. Lueke +Secretary +December 13, 2018 +Table of Contents +Table of Contents +GENERAL INFORMATION +1 +ELECTION OF DIRECTORS (Item 1 on the Proxy Card) +2 +ADVISORY VOTE ON COMPENSATION OF NAMED EXECUTIVE OFFICERS (“SAY-ON-PAY” PROPOSAL) +(Item 2 on the Proxy Card) +5 +RATIFICATION OF APPOINTMENT OF GRANT THORNTON LLP AS INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS (Item 3 on the Proxy Card) +6 +CORPORATE GOVERNANCE +7 +REPORT OF THE AUDIT COMMITTEE +9 +DIRECTORS AND EXECUTIVE OFFICERS +12 +SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS +14 +SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE +14 +TRANSACTIONS WITH RELATED PERSONS +14 +COMPENSATION DISCUSSION AND ANALYSIS +15 +COMPENSATION COMMITTEE REPORT +22 +CEO PAY RATIO +22 +SUMMARY COMPENSATION TABLE +23 +GRANTS OF PLAN-BASED AWARDS +25 +OUTSTANDING EQUITY AWARDS AT FISCAL +YEAR-END +26 +OPTION EXERCISES AND STOCK VESTED +27 +401(K) PLAN +28 +POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL +28 +DIRECTOR COMPENSATION +29 +SHAREHOLDER PROPOSALS FOR NEXT YEAR +30 +QUESTIONS +31 +Meridian makes available, free of charge on its website, all of its filings that are made electronically with the +Securities and Exchange Commission (“SEC”), including Forms 10-K, 10-Q and 8-K. These filings are also available on the +SEC’s website (www.sec.gov). To access these filings, go to our website (www.meridianbioscience.com). Copies of Meridian’s Annual Report on Form 10-K for the fiscal year ended September 30, +2018, including financial statements and schedules thereto, filed with the SEC, are also available without charge to shareholders upon written request addressed to: +Melissa A. Lueke +Executive Vice President, Chief Financial Officer and Secretary +Meridian Bioscience, Inc. +3471 River Hills +Drive +Cincinnati, Ohio 45244 +Table of Contents +MERIDIAN BIOSCIENCE, INC. +3471 River Hills Drive +Cincinnati, Ohio 45244 +Telephone (513) 271-3700 +P R O X +Y S T A T E M E N T +Annual Meeting of Shareholders +January 24, 2019 +GENERAL INFORMATION +Who may vote +Shareholders of Meridian, as recorded in our stock register on +November 30, 2018, may vote at the meeting. As of that date, Meridian had 42,463,102 shares of Common Stock outstanding. +How to +vote +You may vote in person at the meeting, by telephone, online, or by completing and returning a proxy card. We recommend you vote +by proxy even if you plan to attend the meeting. You can always change your vote at the meeting. +How proxies work +Meridian’s Board of Directors is asking for your proxy. Giving us your proxy means you authorize us to vote your shares at the meeting in the manner +you direct. You may vote for all, some or none of our Director candidates. You may also vote for or against the other proposals or abstain from voting. +If you complete your proxy online, over the phone or sign and return the enclosed proxy card but do not specify how to vote, we will vote your shares in favor of: (i) our Director candidates; +(ii) our executive compensation; and (iii) ratification of appointment of Grant Thornton LLP as Meridian’s independent registered public accountants for fiscal year 2019. If any other matters come before the meeting or any postponement or +adjournment thereof, each proxy will be voted in the discretion of the individuals named as proxies on the card. +You may receive more than +one proxy or voting card depending on how you hold your shares. Shares registered in your name are covered by one card. If you hold shares through someone else, such as a stockbroker, bank or nominee, you may get material from them asking how you +want to vote. +Stockbrokers, banks and nominees holding shares for beneficial owners must vote those shares as instructed by you. If the +stockbroker, bank or nominee has not received instructions from you, the beneficial owner, the stockbroker, bank or nominee generally has discretionary voting power only with respect to the ratification of appointment of the independent registered +public accountants. However, a stockbroker, bank or nominee does not have discretion to vote for or against the election of Directors and certain other matters subject to a vote if they have not received voting instructions from you. In order to +avoid a broker non-vote of your shares on the election of Directors and the other matters subject to a vote, you must send voting instructions to your stockbroker, bank or nominee. +Solicitation of proxies +Solicitation of proxies is being made by management at the direction of Meridian’s Board of Directors, without additional compensation, through the +mail, in person or by telephone. The cost of preparing and mailing the Notice and the proxy statement and any accompanying material will be borne by Meridian. In addition, Meridian will request brokers and other custodians, nominees and fiduciaries +to forward proxy soliciting material to the beneficial owners of shares held of record, and Meridian will reimburse them for their expenses in so doing. +1 +Table of Contents +Revoking a proxy +You may revoke your proxy before it is voted by submitting a new proxy with a later date, by voting in person at the meeting or by notifying Meridian’s Secretary in writing at the address under +“Questions” on page 31 of this proxy statement. +Quorum +In order to carry on the business of the meeting, we must have a quorum. This means at least a majority of the outstanding shares eligible to vote must be represented at the meeting, either by proxy or in +person. +Votes needed +The eight Director candidates receiving the most votes will be elected to fill the seats on the Board. The approval on an advisory basis of our executive +compensation (Proposal No. 2) and the ratification of appointment of accountants (Proposal No. 3) require the favorable vote of a majority of the votes cast. Only votes for or against these proposals count, with abstentions not being +counted either for or against these proposals. +Abstentions and broker non-votes count for quorum +purposes but, as indicated above, will not count for voting purposes. Broker non-votes occur when a broker returns a proxy card but does not have authority to vote on a particular proposal. +Other matters +Any other matters +considered at the meeting, including postponement or adjournment, will require the affirmative vote of a majority of the votes cast. +ELECTION OF DIRECTORS +(Item 1 on the Proxy Card) +The Nominating and Corporate Governance Committee of the Board of Directors has nominated for re-election the following current Directors: James M. Anderson, Dwight +E. Ellingwood, Jack Kenny, John C. McIlwraith, David C. Phillips, John M. Rice, Jr., Catherine A. Sazdanoff, and Felicia Williams. +Proxies solicited by the Board will be voted for the election of these nominees. All Directors elected at the Annual Shareholders’ Meeting will be +elected to hold office until the next annual meeting. In voting to elect Directors, shareholders are entitled to cumulate their votes and to give one candidate a number of votes equal to the number of Directors to be elected multiplied by the number +of shares held by the shareholder, or to distribute their votes on the same principle among as many candidates as the shareholder sees fit. In order to invoke cumulative voting, notice of cumulative voting must be given in writing by a shareholder +to the CEO, a Vice President or the Secretary of Meridian not less than 48 hours prior to the Annual Shareholders’ Meeting. The proxies solicited include discretionary authority to cumulate votes. +All Meridian Directors are elected for one-year terms. Personal information on each of our nominees is given +below. +If a Director nominee becomes unavailable before the election, your proxy card authorizes us to vote for a replacement nominee if the +Board names one. +2 +Table of Contents +The Board recommends that shareholders vote FOR each of the following candidates: +James M. Anderson +Director +since 2009 +Age: 76 +James M. Anderson serves as Chairman of the Compensation Committee. He currently serves as Senior Strategic and External Affairs Advisor with Taft Stettinius & Hollister +LLP and President Emeritus of Cincinnati Children’s Hospital Medical Center (“CCHMC”), after having served as advisor to the President of CCHMC from January 2010 through June 30, 2017 and as President and Chief Executive Officer +of CCHMC from 1996 through 2009. From 2006 to 2014, he served as a director of Ameritas Mutual Holding Company and has also served as Chairman of the Board of the Cincinnati Branch of the Federal Reserve Bank of Cleveland, retiring in 2012. Prior to +joining the staff of CCHMC, Mr. Anderson was a partner in the general corporate law department at Taft, Stettinius & Hollister for 24 years (1968-1977; 1982-1996) and president of U.S. operations at Xomox Corporation, a publicly-traded +manufacturer of specialty process controls (1977-1982). Mr. Anderson has also served as director of Gateway Investment Advisors (1997-2008). The Board believes that Mr. Anderson’s corporate legal experience and his experience as CEO +of a large health care organization have given him a wealth of insight into various corporate governance and business management issues, which, along with his status as an independent Director, make him an integral member of the +Board. +Dwight E. Ellingwood +Director +since 2014 +Age: 66 +Dwight E. Ellingwood serves as Chairman of the Nominating and Corporate Governance Committee. With over 35 years of experience in health care strategy, planning, commercialization +and marketing, he currently serves as a teaching professor at Xavier University in the Graduate Program in the Department of Health Service Administration and as President of D.E.E. Strategy Consulting, LLC, to advise leadership in health care and +the community on strategy and innovative approaches to growth and collaboration. Mr. Ellingwood previously served as Senior Vice President of Strategy, Communications and Public Affairs for TriHealth in Cincinnati, Ohio (November 2014 – +July 2016) and as the Lead Executive for the Collective Impact on Health, The Health Collaborative (January 2014 – November 2014). From 1997 through 2013, Mr. Ellingwood served as Senior Vice President, Planning and Business Development +for Cincinnati Children’s Hospital Medical Center. The Board believes that the Company benefits greatly from Mr. Ellingwood’s extensive experience in the health care industry. +Jack Kenny +Director since +2017 +Age: 50 +Jack Kenny serves as Meridian’s Chief Executive Officer, having joined the Company on October 9, 2017. Before joining Meridian, Mr. Kenny served as Senior Vice +President and General Manager, North America, with Siemens Healthcare, a position he held from October 2014 to May 2017. From June 2012 through October 2014, Mr. Kenny served as Vice President and General Manager, U.S. Region, for Becton +Dickinson, Diagnostic Systems. Prior to June 2012, Mr. Kenny held executive roles at Danaher Corporation and Quest Diagnostics. Mr. Kenny’s experience as a key executive leader within large public companies in the health care and +medical device industry, as well as his ongoing insights into Meridian’s business and operations, makes him a valuable member of the Board. +3 +Table of Contents +John C. McIlwraith +Director since 2015 +Age: 59 +John C. McIlwraith co-founded Allos Ventures, a venture capital firm, in March 2010 and has served as a Managing Director there since that +time. Prior to founding Allos Ventures, Mr. McIlwraith was a Managing Director of Blue Chip Venture Company, a Cincinnati-based venture capital firm, which he joined in 1997. He has served on the board of directors of more than +20 health care or information technology companies. Prior to 1997, Mr. McIlwraith served as Senior Vice President of Strategic Planning and General Counsel of publicly-traded Quantum Health Resources, Inc., and was a partner in the Jones +Day law firm. The Board believes that Mr. McIlwraith’s corporate legal and business development experience, and his years of business-building experience with an extensive number of companies, including health care companies, render his +service on the Board valuable to Meridian. +David C. Phillips +Director since 2000 +Age: 80 +David C. Phillips serves as Chairman of the Board and Chairman of the Audit Committee. Mr. Phillips spent 32 years with Arthur Andersen LLP. His service with this firm included +several managing partner leadership positions. After retiring from Arthur Andersen in 1994, Mr. Phillips became Chief Executive Officer of Downtown Cincinnati, Inc., which is responsible for economic revitalization of Downtown Cincinnati. +Mr. Phillips retired from DCI in 1999 to devote full time to Cincinnati Works, Inc., an organization dedicated to reducing the number of people living below the poverty level by assisting them to strive towards self-sufficiency through work, +and his financial consulting services. Mr. Phillips has also served as a director of Cintas Corporation, retiring in 2012, and as a director of Summit Mutual Funds, a registered investment company, through 2009. The Board believes that +Mr. Phillips’ years of service as a certified public accountant and trusted advisor to his clients and business owners, which qualify him as an “audit committee financial expert” under SEC guidelines, give him significant +experience in preparing, auditing, analyzing and evaluating financial statements and dealing with complex accounting and business issues, all of which is valuable to Meridian. +John M. Rice, Jr. +Director since 2017 +Age: 69 +John M. Rice is the founder, and since 2003 has been the Managing Partner of Triathlon Medical Venture Partners, a venture capital firm that invests equity capital in early and +expansion stage life science companies. Since 2014, Dr. Rice has also served as the Director of Life Sciences at CincyTech, a firm that provides advice and capital to entrepreneurs and helps research institutions commercialize technology +through startups. In addition, Dr. Rice has served on the board of directors of several privately-held health care companies. The Board believes that Dr. Rice’s years of experience with a number of companies operating in the health +care and related industries, as well as extensive experience within the capital markets, will prove extremely valuable to Meridian. +4 +Table of Contents +Catherine A. Sazdanoff +Director since 2015 +Age: 62 +Catherine A. Sazdanoff is the President and CEO of Sazdanoff Consulting, LLC, providing health care strategy and business development advisory services to a number of +clients, having held these positions since January 2015. She also currently serves as Business Advisor to Strata Oncology, Inc., a precision oncology company, having joined Strata in May 2016 as Chief Business Officer (May 2016 – September +2017). Prior clients include mProve Health LLC (Strategic Advisor January 2015 – March 2016). Ms. Sazdanoff is also a member since April 2016 of the Advisory Board of Neurocern, Inc., a dementia insuretech company, and is a lecturer since +March 2018 in the Business of Biotech program at the University of Chicago Graham School for Continuing and Professional Education. She serves on the Faculty Advisory Board of the University of Chicago Graham School and on the External Advisory +Board of the Rosalind Franklin University Innovation and Research Park. Ms. Sazdanoff’s prior corporate roles include a number of global corporate positions with Takeda Pharmaceuticals, Inc. (“Takeda”), a wholly-owned +subsidiary of Japanese-based Takeda Pharmaceutical Corporation, from 2006 to 2015 including VP, Head of Corporate Projects (2012-2015), VP, Global Business Development (2011-2013) and VP, Corporate +Development (2010-2011). Ms. Sazdanoff’s time at Takeda was preceded by approximately 22 years with Abbott Laboratories, where she held numerous executive positions covering legal, compliance and business +development. The Board believes that Ms. Sazdanoff’s years of experience in the pharmaceutical and medical diagnostics industries makes her service on the Board valuable to Meridian. +Felicia Williams +Director since 2018 +Age: 53 +Felicia Williams has served as Executive Vice President, Controller and Enterprise Risk at Macy’s Inc. since June 2016. Having joined Macy’s in June 2004, she has +previously served as Senior Vice President, Finance and Risk Management (February 2011 – June 2016), as well as in other finance, treasury, risk management and internal audit capacities. Prior to her time at Macy’s, Ms. Williams +served in various financial positions at the Coca-Cola Hellenic Bottling Company and The Coca-Cola Company (June 1994 – June 2004). Ms. Williams brings broad and wide-ranging finance and risk management experience, which the Board believes +will greatly benefit the Company. +ADVISORY VOTE ON COMPENSATION OF NAMED EXECUTIVE OFFICERS (“SAY-ON-PAY” PROPOSAL) +(Item 2 on the Proxy Card) +The Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd Frank”), enacted in July 2010, requires that we provide our shareholders +with the opportunity to vote to approve, on a non-binding, advisory basis, the compensation of our named executives officers as disclosed in this proxy statement in accordance with the compensation disclosure +rules of the Securities and Exchange Commission (“SEC”). Dodd Frank also provides that shareholders periodically be given the opportunity to vote, on a non-binding, advisory basis, for their +preference as to how frequently we should seek future advisory votes on the compensation of our named executive officers. This opportunity was provided to our shareholders at our 2018 annual meeting, where over 80% of our voting shareholders voted +to hold the “say-on-pay” advisory vote annually, in accordance with the recommendation of our Board of Directors. As a result, we are again holding a say-on-pay advisory vote at our 2019 annual meeting, with the next say-on-pay advisory vote to +be held at our 2020 annual meeting. +As described below under the heading “Compensation Discussion and Analysis” beginning on page +15 of this proxy statement, we seek to closely align the interests of our named executive officers with the interests of our shareholders. We structure our programs to discourage excessive risk-taking through a balanced use of compensation vehicles +and metrics with an overall goal of delivering sustained long-term shareholder value while aligning our executives’ interests with those of our shareholders. Further, our programs require that a substantial portion of each named executive +officer’s compensation be contingent on delivering performance results that benefit our shareholders. Our compensation programs are designed to reward our named executive officers for the +5 +Table of Contents +achievement of short-term and long-term strategic and operational goals and the achievement of increased total shareholder return. +The vote on this matter is not intended to address any specific element of compensation; rather, the vote relates to the compensation of our named executive officers, as described in this proxy statement +in accordance with the compensation disclosure rules of the SEC. The vote is advisory, which means that the vote is not binding on the Company, our Board of Directors or the Compensation Committee. The Board and the Compensation Committee will +review and consider the voting results when making future decisions regarding our executive compensation program. +Accordingly, we ask our +shareholders to approve, on an advisory basis, the compensation of the named executive officers, as disclosed in this proxy statement pursuant to the compensation disclosure rules of the SEC, including the Compensation Discussion and Analysis, the +Summary Compensation Table and the other related tables and disclosure. +The Board recommends that shareholders vote FOR the +approval of the compensation of our named executive officers as disclosed in this proxy statement. +RATIFICATION OF APPOINTMENT OF GRANT THORNTON LLP AS INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS +(Item 3 on the Proxy Card) +Although not +required, we are seeking shareholder ratification of the Audit Committee’s selection of Grant Thornton LLP as Meridian’s independent registered public accountants for the 2019 fiscal year. The affirmative vote of a majority of shares +voting at the meeting is required for ratification. If ratification is not obtained, the Audit Committee intends to continue the engagement of Grant Thornton LLP at least through fiscal 2019. Representatives of Grant Thornton LLP are expected to be +present at the meeting and will be available to make a statement, if they so desire, and to respond to appropriate questions asked by shareholders. +Principal Accounting Firm Fees +Aggregate fees billed to Meridian by Grant Thornton LLP for +fiscal years 2018 and 2017 are listed below: +2018 +2017 +Audit Fees +$ +717,043 +$ +631,374 +Audit-Related Fees +44,213 +39,450 +Tax Fees +478,566 +352,611 +$1,239,822 +$1,023,435 +Audit Fees. Audit fees are the fees billed for professional services rendered by Meridian’s +independent registered public accounting firm for their: (i) audit of Meridian’s consolidated annual financial statements for the fiscal years ended September 30, 2018 and 2017, respectively; (ii) reviews of the unaudited +quarterly consolidated financial statements contained in the reports on Form 10-Q filed by Meridian during those years; (iii) completion of audits of wholly-owned subsidiaries’ statutory accounts in +the United Kingdom during fiscal 2018 and 2017; and (iv) reporting on Meridian’s internal controls during those years. +Audit-Related Fees . Audit-related fees are the fees billed for assurance and related services that are reasonably related to the +performance of the audit or review of Meridian’s financial statements, including the audit of the Savings and Investment Plan (i.e., the 401K Plan). +Tax Fees. Tax fees are the fees billed for tax return preparation and compliance in Australia, England, Germany and the United States, as well as consultation and research on various matters +such as the U.S. tax reform act, state tax issues, international tax issues and transfer pricing. +The Board recommends that shareholders +vote FOR the ratification of appointment of Grant Thornton LLP as Meridian’s independent registered public accountants for the 2019 fiscal year. +6 +Table of Contents +CORPORATE GOVERNANCE +As an Ohio corporation, Meridian is governed by the corporate laws of Ohio. Since its common shares are publicly traded on the Nasdaq Global Select +Market, and it files reports with the SEC, it is also subject to Nasdaq rules and federal securities laws. +Board Leadership Structure +Governance of the corporation is placed in the hands of the Directors who, in turn, elect officers to manage the business operations. The +Board oversees the management of Meridian on your behalf. The Board reviews Meridian’s long-term strategic plans and exercises direct decision making authority in all major decisions, such as acquisitions, the declaration of dividends, major +capital expenditures and the establishment of certain company policies. +The Board operates and evaluates its performance in accordance with +Corporate Governance Guidelines approved by the Board. These Guidelines are available at our website www.meridianbioscience.com . +The +Board of Directors is responsible for evaluating and determining Meridian’s leadership structure, and believes that at this point in time separate individuals should serve in the capacities of Chairman of the Board (“Chairman”) and +Chief Executive Officer (“CEO”). It is the Board’s belief that such a structure provides the Company with the right foundation to pursue its strategic and operational objectives, while maintaining effective oversight and objective +evaluation of the Company’s performance. These key executive positions are held by Mr. David C. Phillips, Chairman of the Board, and Mr. Jack Kenny, CEO. Having served as a Director since 2000, Mr. Phillips was appointed +Chairman of the Board upon Mr. John A. Kraeutler retiring from the Company and the Board effective September 30, 2018. In his capacity as Chairman, Mr. Phillips is responsible for: (i) general Board activities, including +setting agendas for Board meetings and presiding over all meetings of the Board and shareholders; and (ii) providing advice and counsel to Meridian’s management regarding the Company’s business operations. As CEO, Mr. Kenny is +responsible for the general management, oversight, supervision and control of the business affairs of Meridian, and ensuring that all resolutions of the Board are put into effect. +Mr. Phillips was appointed by the Board to serve as Lead Director throughout fiscal 2018, during which time Mr. Kraeutler served as Executive +Chairman. As Lead Director, Mr. Phillips’ responsibilities included: (i) in consultation with the non-management Directors, advising the Chairman as to an appropriate schedule of Board meetings +and reviewing and providing the Chairman with input regarding the agendas for each Board meeting; (ii) presiding at all meetings at which the Chairman was not present, including Executive Sessions of the +non-management Directors, and apprising the Chairman of the issues considered thereat; (iii) calling meetings of the non-management Directors when necessary and +appropriate; and (iv) performing such other duties as the Board may from time to time designate. We believe that this leadership structure was the most appropriate for Meridian during fiscal 2018. +In accordance with Nasdaq rules, our Board of Directors affirmatively determines the independence of each Director and nominee for election as a Director +in accordance with the elements of independence set forth in the Nasdaq listing standards and Exchange Act rules. Meridian’s Director Independence Standards are available at our website www.meridianbioscience.com . Based on these +standards, the Board has determined that each of the following members of the Board is independent: James M. Anderson, Dwight E. Ellingwood, John C. McIlwraith, David C. Phillips, John M. Rice, Catherine A. Sazdanoff, and Felicia Williams. +During fiscal 2018, the Board of Directors met on ten occasions. The independent Directors plan to meet as necessary during fiscal 2019 +without the presence of management Directors. During fiscal 2018, the independent members of the Board periodically met in executive session without the presence of management Directors following regularly scheduled Board meetings. In addition, +there were two meetings of the independent directors during fiscal 2018. +Meridian expects all Directors to attend shareholders’ +meetings, and all Directors attended the 2018 Annual Shareholders’ Meeting. +7 +Table of Contents +Shareholders may communicate with the full Board or individual Directors on matters concerning Meridian by +mail or through our website, www.meridianbioscience.com , in each case to the attention of the Secretary, the address for whom is set forth on page 31 of this proxy statement. +The Board’s Role in Risk Oversight +The Board of Directors, as a whole and also at the +Committee level, plays a key role in operational risk oversight at Meridian and works with management to understand the risks the Company faces, the steps that management is taking to manage those risks and the level of risk appropriate for the +Company in light of its overall business strategy. The Board approves the high level strategies, financial plans and policies of Meridian, setting the tone and direction for the appropriate levels of risk-taking within the organization. +While overall responsibility for risk oversight rests with the Board, it is the Audit Committee that has been given the primary responsibility of +monitoring and evaluating the adequacy of management’s risk assessment and risk management practices. This role is carried out through its charter-mandated responsibilities related to Meridian’s: (i) overall +financial risks and exposures; (ii) financial statement risks and exposures; (iii) financial reporting processes; (iv) compliance with ethics policies, such as the Code of Ethics, Employee Complaint Policy, Securities Trading Policies +and the Foreign Corrupt Practices Act Policy; and (v) compliance with governmental and legal regulations, including those contained within the Sarbanes-Oxley Act. The Audit Committee provides regular reports to the full Board and works closely +with management to update the full Board, as necessary, on matters identified through these Committee risk oversight roles. +The Board has +adopted a Code of Ethics applicable to Meridian’s officers, Directors and employees. This Code of Ethics is posted on www.meridianbioscience.com . To the extent permitted by Nasdaq Marketplace Rule 5610, any amendments to or waivers from +the Code of Ethics will be posted on our website within four business days after the date of an amendment. +Committees of the Board of +Directors +The Directors have organized themselves into the Committees described below. Each of these Committees has a charter posted on +www.meridianbioscience.com . Meridian does not have an Executive Committee of its Board of Directors. The following table identifies membership and the Chairman of each of the current standing committees of the Board, as well as the number of +times each committee met during the fiscal year. In September 2018, Felicia Williams joined the Board and was appointed to the Audit Committee. +Director +Audit +Compensation +Nominating +and +Corporate +Governance +James M. Anderson +Member +Chair +Member +Dwight E. Ellingwood +Chair +John C. McIlwraith +Member +Member +David C. Phillips +Chair +Member +Catherine A. Sazdanoff +Member +Felicia Williams (1) +Member +Meetings in Fiscal 2018 +9 +7 +7 +(1) +Ms. Williams was appointed to the Audit Committee upon joining the Board in September 2018. +The Audit Committee is comprised of David C. Phillips (Chairman), James M. Anderson, Catherine A. Sazdanoff, and Felicia Williams +(effective September 20, 2018). The Committee met nine times during fiscal 2018. Each member is able to read and understand fundamental financial statements. David C. Phillips and Felicia Williams have been designated as Audit Committee +financial experts as that term is defined by the SEC. +The Committee oversees the accounting and financial reporting processes of Meridian and +the audits of its financial statements by its independent registered public accounting firm. The Committee is solely responsible for the appointment, compensation, retention and oversight of Meridian’s independent registered public accounting +firm. The Audit Committee also evaluates information received from Meridian’s independent registered public accounting +8 +Table of Contents +firm and management to determine whether the independent registered public accounting firm is independent of management. The independent registered public accounting firm reports directly to the +Audit Committee. +In addition, the Audit Committee has established procedures for the receipt, retention and treatment of complaints received +by Meridian concerning accounting, internal accounting controls or auditing matters and has established procedures for the confidential and anonymous submission by employees of any concerns they may have regarding questionable accounting or auditing +matters. +The Audit Committee, or its Chairman, approves all audit and non-audit services performed +for Meridian by its independent registered public accounting firm before those services are commenced. The Chairman reports to the full Committee at each of its meetings regarding pre-approvals he made since +the prior meeting and the Committee approves what he has done between meetings. For these purposes, the Committee or its Chairman is provided with information as to the nature, extent and purpose of each proposed service, as well as the approximate +timeframe and proposed cost arrangements for that service. +As previously noted on page 8 in “The Board’s Role in Risk +Oversight” section, the Audit Committee also bears certain risk oversight responsibilities. +The Committee has submitted the following +report for inclusion in this proxy statement. +REPORT OF THE AUDIT COMMITTEE +On January 24, 2018, the Audit Committee met with representatives of Grant Thornton LLP and Meridian’s internal accountants, at which time the +Grant Thornton LLP representatives presented to the Committee the results of their work, including their review of Meridian’s first quarter consolidated financial statements, and discussed their proposed audit fees for fiscal 2018. In addition, +the Committee: (i) received an update on controls being put into place to remediate the material weakness in the controls over financial reporting identified during the fiscal 2017 audit (the “2017 material weakness”); (ii) discussed +the timing and scope of the planned Sarbanes-Oxley (“SOX”) and internal audit work for fiscal 2018; (iii) received an overview of the new Revenue Recognition Standard, which was effective for the Company October 1, 2018; (iv) received +an overview of the anticipated effects of the U.S. Tax and Jobs Act (the “tax reform act”) on the Company; and (v) received an update regarding certain of the Company’s information technology (“IT”) and cyber security +endeavors. +On April 24, 2018, the Committee met with representatives of Grant Thornton LLP and Meridian’s internal accountants, at +which time the Grant Thornton LLP representatives presented to the Committee the results of their work for their review of Meridian’s second quarter consolidated financial statements and the timing and scope of their engagement for the audit of +Meridian’s fiscal 2018 consolidated financial statements. In addition, the Committee received an update on various matters including: (i) SOX work completed to-date by internal audit; +(ii) impact of the tax reform act; (iii) the Company’s ongoing cyber security and disaster recovery efforts; (iv) status of the WFOE in China; and (v) status of efforts surrounding preparation to adopt the new Revenue +Recognition Standard. The Committee also received an update regarding the successful remediation of the 2017 material weakness. +On +July 24, 2018, the Committee met with representatives of Grant Thornton LLP and Meridian’s internal accountants, at which time the Grant Thornton LLP representatives presented to the Committee the results of their work for their review of +Meridian’s third quarter consolidated financial statements, including their activities related to their review of the income tax calculation and key accounting matters. Additionally, the Committee received an update on various matters +including: (i) SOX work completed to-date by internal audit, including the results of visits to the Company’s locations in the U.K. and Italy, as well the status of certain ITGC testing; (ii) an +overview of the Company’s 2018 cyber and IT risk reduction program; (iii) goodwill testing and the reporting units considered for such testing; and (iv) status of activities associated with the planned implementation of the new +Revenue Recognition Standard at the beginning of fiscal 2019. +9 +Table of Contents +At its meeting on November 6, 2018, the Committee reviewed and discussed with management, Grant +Thornton LLP and Meridian’s accounting officers the results of the audit for fiscal 2018, including the financial statements. The Committee discussed with Grant Thornton LLP the matters required to be discussed by Auditing Standards +No. 16, as amended (PCAOB Interim Auditing Standard AU Section 380, Communication with Audit Committees ). The Grant Thornton LLP representatives reviewed with the Committee written disclosures required by applicable requirements of +the PCAOB regarding the independent accountants’ communications with the Audit Committee concerning independence, and presented a letter regarding that matter to the Committee. In concluding that the auditors are independent, we determined, +among other things, that the non-audit services provided by the auditors were compatible with their independence. In addition, the Committee approved related party transactions and approved amendments to the +Audit Committee Charter. It also received updates on: (i) IT security; (ii) the results of SOX work; and (iii) implementation of the new Revenue Recognition Standard. +Based on the above mentioned review and discussion of the audited consolidated financial statements, on November 20, 2018, the Committee recommended that the audited consolidated financial statements +of Meridian be included in its Annual Report on Form 10-K for the year ended September 30, 2018 for filing with the SEC. Similar meetings were held during November 2017 related to the fiscal 2017 audited +financial statements. +The remaining meetings throughout fiscal 2018 were held primarily for the purpose of reviewing, discussing and +approving the Company’s Quarterly Reports on Form 10-Q for filing with SEC. +During its meetings +throughout the year, the Committee reviewed and assessed the Company’s financial statements, financial control, financial reporting, and certain legal and regulatory risk exposures, including reviewing procedures related to the receipt, +retention and treatment of any complaints concerning accounting, internal accounting controls or auditing matters. Also during its meetings throughout the year, the Chairman of the Audit Committee reported to the full Committee the independent +accountants’ fees that had been pre-approved and the Committee approved such fees. Certain fees were pre-approved by the full Committee. The Committee also reviewed +the requirements of and Meridian’s ongoing compliance with Section 404 of the Sarbanes-Oxley Act and conducted a self-assessment, facilitated by a third party. +Respectfully submitted, +Audit Committee +David C. Phillips (Chairman) +James M. Anderson +Catherine A. Sazdanoff +Felicia +Williams +The Compensation Committee is comprised of James M. Anderson (Chairman), John C. McIlwraith and David C. Phillips and +is responsible for establishing compensation for Executive Officers and administering the Company’s compensation plans. As used in this proxy statement, “Executive Officer” means our president, principal financial officer, principal +accounting officer, any vice president in charge of a principal business unit, division or function, any other officer who performs a policy-making function, or any other person who performs similar policy-making functions for Meridian. Not all +“Executive Officers” are “Named Executive Officers” who are identified in the Summary Compensation Table on page 23. This includes establishing base salary levels and cash-based incentive plans, making stock-based awards, and +otherwise dealing in all matters concerning compensation of the Executive Officers. During fiscal 2018, the Compensation Committee met seven times. +In general, the Compensation Committee annually reviews the Company’s compensation programs and its philosophy in setting performance targets in November of each year. At that time, the Company +provides the Compensation Committee with information on total compensation received for all Executive Officers, including the sources of such compensation, for the immediately preceding fiscal year and recommendations for the current fiscal year. In +discharging the responsibilities of the Board of Directors relating to compensation of the Company’s CEO and other Executive Officers, the purposes of the Compensation Committee are, among others: (i) to review and approve the compensation +of the Company’s CEO and other Executive Officers; and (ii) to oversee the compensation policies and programs of the Company, including stock and benefit plans. The Compensation Committee’s specific functions include adopting, +administering and approving the Company’s cash-based incentive +10 +Table of Contents +compensation and stock-based incentive plans and awards, including amendments to the plans or awards and performing such duties and responsibilities under the terms of any executive compensation +plan, incentive-compensation plan or equity-based plan. The Compensation Committee has the authority to delegate any of its responsibilities to subcommittees as the Compensation Committee may deem appropriate in its sole discretion. The Compensation +Committee has the authority to engage consultants and advisors. An independent consultant was engaged during fiscal 2018 to complete a Company-wide compensation study, a part of which was assisting the Company in evaluating and making +recommendations related to the Company’s long-term incentive compensation plan. See discussion of the Long-Term Stock-based Incentives below on pages 16 and 19. Another consultant provided a review of the competitiveness of the Company’s +compensation of non-employee Directors. In 2018, the Committee also conducted a review of the CEO’s performance, reviewed the CEO’s assessment of his team’s performance, reviewed its Charter and +conducted a self-assessment, facilitated by a third party. +The Compensation Committee determines the amount and mix of compensation +components for the CEO, Mr. Kenny. As CEO, Mr. Kenny provides recommendations to the Compensation Committee with respect to the compensation to be paid to the other Named Executive Officers. +To achieve corporate objectives, the Committee believes it is important to provide competitive levels of compensation to retain the most qualified +employees, to recognize individuals who exceed expectations and to closely link executive compensation with corporate performance. The Committee believes Meridian’s long-term objectives can be achieved through cash-based incentive compensation +plans and stock-based incentive compensation plans. +The Compensation Committee’s processes and procedures for the consideration and +determination of Executive and Director compensation are discussed in the section entitled “Compensation Discussion and Analysis” in this proxy statement. See Compensation Committee Report on page 22 following the Compensation Discussion +and Analysis. +Compensation Committee Interlocks and Insider Participation +None of the members of the Compensation Committee has ever been an officer or employee of the Company. None of the members of the Compensation Committee is or was a participant in any related person +transaction in fiscal 2018 (see the section entitled “Transactions With Related Persons” in this proxy statement for a description of our policy on related person transactions). Lastly, none of the members of the Compensation Committee is +an Executive Officer of another entity at which one of our Executive Officers serves on the Board of Directors. No Named Executive Officer of Meridian serves as a Director or as a member of a committee of any company of which any of the +Company’s non-employee Directors are Executive Officers. +The Nominating and Corporate +Governance Committee consists of Dwight E. Ellingwood (Chairman), James M. Anderson and John C. McIlwraith. The Committee met seven times during fiscal 2018. On November 7, 2018, the Committee considered and recommended the +nomination of the current Directors for re-election. The Committee identifies qualified nominees for the Board, recommends to the Board who will be nominated by the Company for election to the Board and +recommends to the full Board any changes in the size of the Board. The Committee also reviewed its Charter and oversaw a third-party-facilitated self-assessment of the Board and its committees. +In recommending the nomination of Directors, the Committee takes into account, among other factors which it may deem appropriate, the judgment, skill, +diversity, independence, and business experience of the potential nominee and the needs of the Board as its function relates to the business of the Company. The Committee considers candidates for nomination from a variety of sources including +recommendations of shareholders. Shareholders desiring to submit recommendations for nominations by the Committee should direct them to the Chairman of the Nominating and Corporate Governance Committee in care of the Company at its address shown on +the cover page of this proxy statement. +The Nominating and Corporate Governance Committee will assess the qualifications of all candidates +for the Board on an equal basis. In identifying and considering candidates for nomination to the Board, the Committee considers, among other factors, quality of experience, the needs of the Company and the range of talent and experience currently +represented on the Board. The Committee also discusses a director skills matrix, which it has prepared and updated. The Committee evaluates such factors, among others, and does not assign any particular weighting or +11 +Table of Contents +priority to any of these factors, nor does the Committee have a formal policy with respect to diversity. However, the Committee, working with the Board, considers the diversity of all of the +Company’s stakeholders – including shareholders, employees and customers – when engaging in corporate governance discussions. +During several Board meetings in fiscal 2018, the Board discussed the benefits of adding new members to the Board and its Committees. Pursuant to this, +the Nominating and Corporate Governance Committee conducted a thorough search, which involved meeting with several candidates identified through extensive conversations with and recommendations from +non-employee Directors. Based upon the review of Ms. Williams’ qualifications and the favorable results of their meetings with her, the Committee recommended that the Board nominate Ms. Williams +as a candidate for election to the Board. As a result, the Board elected Ms. Williams as Director in September 2018. +During fiscal 2018, +the Nominating and Corporate Governance Committee provided oversight of the Board’s process for electing Mr. David C. Phillips as Chairman of the Board. +Additionally, during 2018, under the oversight of the Nominating and Corporate Governance Committee, an evaluation of the Board and Committees was performed by a third party. The results of the evaluation +were reviewed by the Board on November 7, 2018. +DIRECTORS AND EXECUTIVE OFFICERS +This table lists the Executive Officers and Directors of Meridian and shows the number of shares beneficially owned, as determined under SEC rules, on +November 30, 2018. Beneficial ownership includes any shares as to which the individual has sole or shared voting or investment power and also any shares that the individual has the right to acquire within 60 days. +Common Stock +Beneficially +Owned +Name +Position +Amount 1 +Percentage +Jack Kenny +Chief Executive Officer +and Director +25,000 +* +Lawrence J. Baldini 2 +Executive Vice President, Global Operations +44,135 +* +Melissa A. Lueke 3 +Executive Vice President, Chief Financial Officer and Secretary +206,080 +* +Eric S. Rasmussen 4 +Executive Vice President, Corporate Development +— +— +Susan D. Rolih 5 +Executive Vice President, Global +Regulatory & Quality Systems +197,980 +* +Lourdes G. Weltzien 6 +Executive Vice President, Life Science +17,327 +* +David C. Phillips 7, 8 +Chairman of the Board and Director +126,126 +* +James M. Anderson 7, 8, 9 +Director +99,000 +* +Dwight E. Ellingwood 9 +Director +53,500 +* +John C. McIlwraith 8, 9 +Director +47,000 +* +John M. Rice +Director +25,000 +* +Catherine A. Sazdanoff 7 +Director +48,700 +* +Felicia Williams 7 +Director +12,000 +* +All Executive Officers and Directors as a Group +876,848 +2.0 +% +12 +Table of Contents +1 +Includes shares for options and restricted stock units currently exercisable and/or exercisable or vesting within 60 days as follows: Mr. Kenny +(25,000); Mr. Baldini (8,200); Ms. Lueke (75,000); Ms. Rolih (69,700); Dr. Weltzien (5,000); Mr. Phillips (88,000); Mr. Anderson (88,000); Mr. Ellingwood (45,500); Mr. McIlwraith (39,000); Dr. Rice +(22,000); Ms. Sazdanoff (41,000); and Ms. Williams (12,000). +2 +Lawrence J. Baldini was appointed Vice President of Operations in April 2001, Executive Vice President, Operations and Information Systems in October +2005 and Executive Vice President, Global Operations in March 2016. Before joining Meridian, Mr. Baldini held various operations management positions with Instrumentation Laboratories and Fisher Scientific. Age: 59 +3 +Melissa A. Lueke was appointed Vice President, Chief Financial Officer and Secretary in January 2001 and Executive Vice President, Chief Financial +Officer and Secretary in November 2009. Prior to her appointment, Ms. Lueke served as Meridian’s Controller since March 2000 and Acting Secretary from July 20, 2000 to January 23, 2001. Before joining Meridian, Ms. Lueke was +employed by Arthur Andersen LLP from June 1985 to January 1999, most recently as a Senior Audit Manager. On December 6, 2018, Ms. Lueke notified the Company of her retirement from the position of Executive Vice President and Chief +Financial Officer effective January 1, 2019. Age: 55 +4 +Eric S. Rasmussen joined Meridian as Executive Vice President, Corporate Development in June 2018. Before joining Meridian, Mr. Rasmussen served +as Vice President, Strategy and Business Development with Lear Corporation from October 2012 to May 2018. Mr. Rasmussen has been promoted to the position of Executive Vice President, Chief Financial Officer effective January 1, 2019. Age: +51 +5 +Susan D. Rolih was appointed Vice President of Regulatory Affairs and Quality Assurance in May 2001, Senior Vice President of Regulatory Affairs and +Quality Assurance in April 2008, Executive Vice President of Regulatory and Quality Systems in April 2013, and Executive Vice President, Global Regulatory and Quality Systems in November 2016. Before joining Meridian, Ms. Rolih held various +regulatory and quality positions with Immucor, Inc. Effective November 30, 2018, Ms. Rolih retired from her position with the Company. Age: 69 +6 +Lourdes G. Weltzien joined Meridian in July 2008 as General Manager of Life Science and was appointed Vice President and General Manager of Life +Science in April 2013, as well as President of Asia Pacific Markets in July 2016, and Executive Vice President, Life Science in March 2018. Prior to joining Meridian, Dr. Weltzien held various executive and management positions with +Sigma-Aldrich Corporation (now Millipore-Sigma) since 1994. Age: 53 +7 +Audit Committee Member. +8 +Compensation Committee Member. +9 +Nominating and Corporate Governance Committee Member. +* +Less than one percent. +13 +Table of Contents +SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS +The following table lists the persons known by the Company to be the beneficial owners of more than five percent of the Company’s Common Stock as of +November 30, 2018, unless otherwise noted. Beneficial ownership includes any shares as to which the individual has sole or shared voting or investment power. +Name and address of beneficial owner +Amount and nature of +beneficial ownership +Percent of +class 1 +BlackRock, Inc. +55 East 52 nd Street +New York, NY 10055 +5,273,081 +12.50 +Brown Capital Management, LLC +1201 N. Calvert Street +Baltimore, MD 21202 +4,665,143 +11.03 +The Vanguard Group, Inc. +100 Vanguard Blvd. +Malvern, PA 19355 +4,258,302 +10.06 +Renaissance Technologies LLC +800 Third Avenue +New York, NY 10022 +2,230,676 +5.27 +1 +For the beneficial owners listed in the table, the percentages listed reflect disclosures in the Schedule 13Gs most recently filed by each beneficial +owner with the SEC as of the date of this proxy statement. +SECTION 16(A) BENEFICIAL OWNERSHIP +REPORTING COMPLIANCE +Section 16 of the Securities Exchange Act of 1934 requires Meridian’s Executive Officers, Directors and +persons who own more than ten percent of a registered class of Meridian’s equity securities to file reports of ownership and changes in ownership with the SEC. Based on a review of the copies of such forms received by it, Meridian believes that +during the last fiscal year, all of its Executive Officers, Directors and ten percent stockholders complied with the Section 16 reporting requirements. In making these statements, Meridian has relied upon examination of the copies of Forms 3, 4 +and 5, and amendments thereto, and the written representation of its Directors and Executive Officers. +TRANSACTIONS WITH RELATED PERSONS +During fiscal 2018, the Company leased certain office space from an entity controlled by Marco G. Calzavara, who served as President and Managing Director, Meridian Bioscience Europe through July +2018. Payments made under such arrangements during fiscal 2018 totaled approximately $160,000. +Nasdaq rules require the Company to +conduct an appropriate review of related party transactions required to be disclosed by the Company pursuant to SEC Regulation S-K Item 404 for potential conflict of interest situations on an ongoing basis and +that all such transactions must be approved by the Audit Committee or another Committee comprised of independent Directors. As a result, the Audit Committee annually reviews all such related party transactions and approves each related party +transaction if it determines that it is in the best interests of the Company. Additionally, the Audit Committee’s Charter provides it the authority to review, approve and monitor transactions involving the Company and “related +persons” (Directors and Executive Officers or their immediate family members, or shareholders owning five percent or greater of the Company’s outstanding stock). This also covers any related person transaction that meets the minimum +threshold for disclosure in the proxy statement under +14 +Table of Contents +the relevant SEC rules (generally, transactions involving amounts exceeding $120,000 in which a related person has a direct or indirect material interest). In considering +the transaction, the Audit Committee may consider all relevant factors, including, as applicable: (i) the Company’s business rationale for entering into the transaction; (ii) the alternatives to entering into a related person +transaction; (iii) whether the transaction is on terms comparable to those available to third parties, or in the case of employment relationships, to employees generally; (iv) the potential for the transaction to lead to an actual or +apparent conflict of interest and any safeguards imposed to prevent such actual or apparent conflicts; and (v) the overall fairness of the transaction to the Company. This policy is included in the Company’s Employee Handbook. The +approvals of such related person transactions are evidenced by internal Company resolutions, minutes or memoranda. +COMPENSATION DISCUSSION AND ANALYSIS +Throughout this proxy statement, the individuals who served as the Company’s CEO and Chief Financial Officer during fiscal 2018, as well as the other individuals listed in the Summary Compensation +Table below, are referred to as the “Named Executive Officers” or “NEOs.” +Compensation Philosophy and Objectives +Our executive compensation is tied to performance objectives that are aligned with our strategic objectives to incentivize and focus +behavior on strengthening our business for long-term shareholder value. Meridian believes that people who understand our purpose will drive progress. In order to create value for our shareholders, it has been important for us to focus on the core +areas of growth, cost containment and organizational redesign. In fiscal 2018, we launched our new Meridian brand supporting a fresh, new image and message to the channels and customers we serve. We also consolidated what were essentially separately-run, subsidiary businesses into two globally integrated strategic business units. This coincided with the realignment of our organizational structure, which resulted in fewer management layers and a more +efficient cost structure that will free up resources for future growth initiatives. +We continued to transform our business resources in 2018, +based on where to compete in the market, and better leverage our strengths across the globe. Our strategic priorities are as follows: +• +Reshape the financial profile to achieve higher growth over time, while maintaining strong financial returns and mitigating risks in our business. +• +Focus on organic and inorganic investment to re-allocate capital to where we can win and compete over the +long-term. +• +Align the deployment of human capital and minimize risk, while improving organizational fitness. +Compensation and benefit programs are an important part of the Company’s employment relationship, which also include challenging and rewarding work +and a focus on career growth, while aligning with our strategy of increasing value. Pay for performance is fundamental to our compensation philosophy. We reward individuals’ performance for contributions to business success. +Critical to each element of our total compensation and benefits philosophy is that it be based on a strategy to attract, retain, and unlock the hidden +potential of our human capital, and it therefore consists of competitive pay, incentive programs, and benefits that meet income security and protection. The affordability of compensation and benefits are considered over the medium- to long-term, and +to the extent possible, will not fluctuate based on short-term business conditions. +The key principles to the design of our compensation +programs are as follows: +• +Base salaries, which reflect job responsibilities, competitiveness, and individual performance in connection with merit increases; +• +Annual cash-based incentive opportunities, which are a function of company and personal performance; and +15 +Table of Contents +• +Longer-term stock-based incentive opportunities under our 2012 Stock Incentive Plan, in the form of stock options and/or restricted stock unit grants, +which align the long-term interests of senior management with our shareholders. +Base salaries are based on individual job +duties, performance and achievements, while considering internal pay equity, retention, critical skills, and independent survey market data for specific regions. Annual cash-based incentive programs include a payout range of 17.5% to 56% of base +salary, with a target payout ratio of 35% of base salary. Our intent is to increase this payout range over time, pending results. Annual cash-based incentive programs are based on defined metrics aligned to our strategic objectives and the +achievement of performance goals that are set at levels to motivate executives to commit to growth and align with value creation, while improving performance. +Stock-based incentive awards consist of restricted stock units, both time-based and performance-based, and performance-based non-qualified options. This combination +of stock-based awards is designed to both reward and retain, while aligning interests of management with our shareholders. +The Compensation +Committee has established several principles and practices that are important to achieving our compensation philosophy and objectives. These are summarized below. +Gross-up Payments, Repricing of Options, Pledging, Hedging and Margin Accounts +The Company avoids new contractual agreements that include excise tax gross-up payments. It does not allow the repricing of options, which is not permitted under +the 2012 Stock Incentive Plan without first obtaining the approval from stockholders of the Company. Additionally, the Company’s Insider Trading Policy places restrictions on the Company’s Directors and Executive Officers regarding +entering into hedging transactions with respect to the Company’s securities and from holding the Company’s securities in margin accounts or otherwise pledging such securities as collateral for loans. Specifically, our Insider Trading +Policy provides that Directors, Executive Officers and certain other designated employees may not purchase Meridian securities on margin or borrow against any account in which Meridian securities are held. The Policy also provides that such +persons may not pledge Meridian securities as collateral for a loan or engage in hedging or monetization transactions with respect to Meridian securities. No Directors or Executive Officers have in place any pledges or hedging transactions. +Recovery of Past Awards +With respect to recovery of past awards, except as provided by applicable laws and regulations, we do not have a policy with respect to adjustment or +recovery of awards or payments if relevant Company performance measures upon which previous awards were based are restated or otherwise adjusted in a manner that would reduce the size of such award or payment. Under those circumstances, we expect +that the Compensation Committee and the Board would evaluate whether compensation adjustments are appropriate based upon the facts and circumstances surrounding the applicable restatement or adjustment. +Minimum Vesting Periods +Although the +plan document for our 2012 Stock Incentive Plan does not include minimum vesting periods for options or stock appreciation rights, our Compensation Committee includes minimum vesting provisions in the award agreements for stock options pursuant to +authority granted to it under the 2012 Stock Incentive Plan. Generally the option award agreements provide for a minimum vesting period of three years. The 2012 Stock Incentive Plan provides that no Restricted Shares or Restricted Share Units +conditioned upon the achievement of performance objectives shall be based on a restriction period of less than one year, subject to the Plan’s provisions applicable to termination of employment and change of control. +Cash Buyouts of Underwater Options +Although the plan document for our 2012 Stock Incentive Plan does not include a provision expressly prohibiting cash buyouts of options or stock +appreciation rights, the Compensation Committee believes cash buyouts of “underwater options” is a governance practice that investors view as unfavorable. As a result, the Compensation Committee is generally opposed to cash buyouts of +options or stock appreciation rights. +16 +Table of Contents +Back-Dating and Spring-Loading +Although Meridian does not have a written policy regarding the timing or practices related to granting equity awards, neither Meridian nor the Compensation Committee engages in spring-loading, back-dating +or bullet-dodging practices. Equity awards are generally granted by the Compensation Committee in the first quarter of the fiscal year. Stock options are granted at the closing market price on the date of grant, pursuant to the 2012 Stock +Incentive Plan. Prior to the exercise of an option, the holder has no rights as a stockholder with respect to the shares subject to such option, including no rights to vote or to receive dividends. Prior to vesting of restricted stock units noted +above, the holder may receive dividend equivalent payments depending on the award nature and agreement. Restricted stock units do not have voting rights. +Ownership Guidelines +Consistent with its compensation philosophy and the principle of +aligning the interests of management and Directors of the Company with the interests of its stockholders, the Board of Directors has implemented stock ownership guidelines for “Specified Officers” (defined in the guidelines as those +officers required to file beneficial ownership reports with the SEC) and non-employee Directors. Under the guidelines, the Company’s Chief Executive Officer is required to own an amount of Company common +stock (including vested and non-vested restricted stock units) which is equal to or exceeds three times such Chief Executive Officer’s annual base salary, and Specified Officers other than the Chief +Executive Officer are required to own an amount of Company common stock (including vested and non-vested restricted stock units) which is equal to or exceeds such officer’s annual base salary. Also under +the guidelines, each of the Company’s non-employee Directors is required to own an amount of Company common stock which is equal to or exceeds three times such +non-employee director’s annual retainer. Generally, persons subject to the guidelines are required to achieve the applicable guideline not later than three years from the appointment to their position. +Excluding those still within the phase-in period, as of the date of this proxy statement, persons subject to these guidelines have been deemed by the Board to have met their ownership target, either as a +result of their direct holdings or shares held indirectly by an entity affiliated with such person, in accordance with the guidelines. +The +Compensation Committee is responsible for ongoing oversight of compliance with this compensation philosophy. The Compensation Committee ensures that the total compensation paid to the NEOs is fair, reasonable and competitive. +At our 2018 annual meeting, Meridian once again held an advisory vote on the compensation of its NEOs, commonly referred to as a say-on-pay vote. Our shareholders approved the compensation of our NEOs, with approximately 95% of votes cast in favor of our 2018 say-on-pay resolution. Based on the results of the 2018 say-on-pay vote, the Compensation Committee concluded that the +compensation paid to the NEOs and Meridian’s overall pay practices received strong shareholder support and do not require substantial revision to address shareholder concerns. +Executive Summary +Actions of the Compensation Committee +In several meetings during the year, Mr. Kenny and the Compensation Committee Chairman discussed, among other things, Meridian’s compensation +system and its effectiveness in attracting and retaining talented employees. They noted that the underlying principles in the plan have been followed for many years, even when following such principles resulted in no Officer’s Performance +Compensation Plan (cash-based incentive compensation) bonuses being awarded to the NEOs and performance-based stock awards not vesting. They also discussed certain changes to the compensation programs for fiscal 2019 which are outlined in this proxy +statement. +At its 2018 meetings, the Compensation Committee discussed these matters, both with and without the presence of management. The +Compensation Committee discussed the recommendations of the CEO for compensation levels for all officers and the general pay increases to be paid throughout the Company. The Committee then made the compensation decisions, which are reflected in the +figures presented in this proxy statement. +Fiscal 2018 Compensation Decisions +For fiscal 2018, the Cash-based Incentive Compensation Plan’s target payout ratio for the NEOs was thirty-five percent of base salary, with forty percent of the target payout ratio (14%) based on +revenues; forty percent of the target payout ratio (14%) based on non-GAAP net earnings; and the remaining twenty percent of the target payout +17 +Table of Contents +ratio (7%) based on individual performance using a 1-5 rating system. The specific minimum levels of revenues, +non-GAAP earnings and individual performance ratings required to achieve the varying percentage of target payout for each measurement criteria are as follows: +Threshold +(50%) +Target +(100%) +Maximum +(150%) +Revenues +$ +208,000,000 +$ +212,000,001 +$ +216,000,001 +Non-GAAP Earnings +$ +31,400,000 +$ +32,550,001 +$ +33,800,001 +Individual Performance +2 Rating +3 Rating +4 Rating +The cash-based incentive compensation payments received by the NEOs for fiscal 2018, as reflected in the Summary +Compensation Table, were based on the Company achieving: (i) revenues totaling $213,571,000 (100% of target payout); non-GAAP earnings totaling $31,705,000 (50% of target payout); and +(iii) individual performance ratings of 3 or higher. As set forth in the Company’s fiscal 2018 Annual Report on Form 10-K, non-GAAP earnings exclude the impact +of restructuring and litigation costs incurred in fiscal 2018, along with the one-time benefit of the U.S. tax law change and the repatriation transition tax. +Due to the Company not achieving the $34,700,000 non-GAAP earnings threshold required to earn performance-based +long-term stock incentive awards for fiscal 2018, no such performance-based restricted stock unit awards vested for any NEOs. The minimum threshold related to these awards was established as a stretch target for the Company. +However, as discussed below in the “John A. Kraeutler Employment Agreement and Supplemental Benefit Agreement” section, as a result of fiscal +2018 revenue and earnings guidance being achieved, the performance-based restricted stock unit awards made to Mr. Kraeutler in connection with his Third Amended and Restated Employment Agreement fully vested. +Fiscal 2019 Compensation Decisions +Base Salaries +Based on our +financial results in fiscal 2018 and the Compensation Committee’s review of the CEO’s evaluation of the other NEOs, the Compensation Committee approved a merit increase pool of 2.5% for NEOs, with the actual merit increases to be +determined by the CEO. With respect to Mr. Kenny, see page 21 for discussion of his compensation arrangements. Base salaries across all Meridian employees below the executive level are expected to increase approximately 3% effective +January 1, 2019. +Cash-based Incentive Compensation +The Compensation Committee approved the 2019 Cash-based Incentive Compensation Plan structure, including performance targets and payout targets. For NEOs, the target payout ratio is +thirty-five percent of base salary. Forty percent of the target payout ratio (14%) is based on achieving certain levels of net revenues; forty percent of the target payout ratio (14%) is based on achieving certain levels of operating income; and the +remaining twenty percent of the target payout ratio (7%) is based on individual performance. Depending on the level of achievement, a NEO may earn from 0% to 56% of base salary. +Cash-based incentive compensation, if earned, is paid in the first quarter of each fiscal year, for the prior fiscal year’s performance. The net revenues and operating income targets operate +independently. While the net revenues portion may be earned upon achieving the net revenues targets, the component related to operating income is subject to the Company’s attainment of the specific operating income target, after inclusion of +the compensation expense related to cash-based incentive compensation. Should the Company fail to reach the minimum operating income target, no cash-based incentive compensation will be paid for this component. +Management and the Compensation Committee have intended that the net revenues and operating income thresholds be set at reasonably achievable targets, +yet at levels that require diligence to produce improved performance. The Compensation Committee tends to set the thresholds consistent with the net revenue and operating income guidance range. +18 +Table of Contents +Long-Term Stock-based Incentives +After considering the independent consultant’s findings and recommendations, the Compensation Committee has modified the Company’s long-term stock-based incentive program. As a result of these +modifications, awards to be granted to certain executives of the Company including the NEOs will include two types of equity awards, restricted stock units and options to purchase Company stock. Varying levels of these awards, ranging from 50% to +150% would be earned if established targets for net revenue, operating income and total shareholder return are achieved over an established three year measurement period. The target levels to be achieved as part of this program are established at +levels that the Compensation Committee believes represent appropriate long-term incentive compensation value for each executive. +Establishing Compensation Levels +The +Compensation Committee recommends CEO compensation to the Board of Directors for approval. On October 9, 2017, Mr. Kenny was hired as CEO. The terms of his Employment Agreement are summarized on page 21. The compensation levels for the +other NEOs are recommended by the CEO. The Compensation Committee has discretion to follow or modify such recommended levels of compensation. The Compensation Committee considers the input of our CEO as a crucial component of its compensation +processes and decisions relating to NEO compensation. The Compensation Committee is not obligated to follow his recommendations. The Company does not engage in strict numerical benchmarking in determining the percentage modifications for the NEOs. +Under its charter, the Compensation Committee is authorized to engage outside advisors at the Company’s expense. In fiscal 2018, the Company engaged an independent consultant to complete a Company-wide compensation study, a part of which +was assisting the Company in evaluating, and making recommendations related to the Company’s long-term incentive compensation, including providing benchmarked peer data of such compensation. See discussion of the long-term incentive +compensation above. +In setting the NEOs’ compensation, the Compensation Committee reviews all components of such compensation through +the use of tally sheets. These tally sheets provide the amount of total compensation paid or earned by each NEO based on his or her base salary, cash-based incentive compensation, stock-based awards and retirement contributions. The tally sheets +reviewed provide all of the information that is reflected in the Summary Compensation Table. The review by the Compensation Committee analyzes how changes in any element of compensation would impact other elements, particularly severance or change +in control benefits, if applicable to the executive. Such analysis has become an important component in the Compensation Committee’s review of executive compensation, as the tally sheet allows the Compensation Committee to consider an +executive’s overall compensation rather than only one or two specific components of an executive’s compensation. This allows the Compensation Committee to make compensation decisions and evaluate management recommendations based on a +complete analysis of an executive’s total compensation. Salaries are set on a calendar year basis and, therefore, salaries paid in the first three months of each fiscal year beginning on the first day of October are set in the prior fiscal +year. +Components of Executive Compensation and Related Risk Profile +Meridian’s executive compensation and benefits packages consist of base salary, cash-based incentive compensation, long-term stock-based incentive awards, Company-sponsored benefit and retirement +plans, and change in control severance benefits. Each of these components has a certain risk profile. +Element +Form of Compensation +Purpose +Risk Profile +Base Salaries +Cash +Provides competitive, fixed compensation to attract and retain exceptional executive talent +Low to moderate +19 +Table of Contents +Element +Form of Compensation +Purpose +Risk Profile +Annual Cash-based Incentives +Cash +Provides a direct financial incentive to achieve corporate operating goals +Moderate to high +Long-Term Stock-based Incentives +Non-qualified stock options and/or restricted stock units +Encourages Executive Officers to build and maintain a long-term equity ownership position in Meridian so that their interests are aligned with our shareholders +High +Health, Retirement and Other Benefits +Eligibility to participate in benefit plans generally available to our employees, including retirement plan contributions, and premiums paid on disability and life insurance +policies +Benefit plans are part of a broad-based employee benefits program providing competitive benefits to our Executive Officers +Low +Change in Control Severance Benefits +Cash and continuation of certain benefits +Encourages Executive Officers to maximize value for shareholders in the event that the Company becomes subject to a change in control transaction +Moderate to high +The Compensation Committee has reviewed the risk profile of the components of the Company’s executive compensation +program, including the performance objectives and target levels used in connection with incentive awards, and has considered the risks a NEO might be incentivized to take with respect to such components. When establishing the mix among these +components, the Compensation Committee is careful not to encourage excessive risk taking. Specifically, the performance objectives contained in the Company’s executive compensation programs have been balanced between annual and long-term +incentive compensation to ensure that both components are aligned and consistent with our long-term business plan and that our overall mix of stock-based awards has been allocated to promote an appropriate combination of incentive and retention +objectives. +The Compensation Committee believes that the Company’s executive compensation program does not incentivize the NEOs to +engage in business activities or other behavior that would threaten the value of the Company or the investments of its shareholders. +The +Compensation Committee continues to monitor and evaluate on an on-going basis the mix of compensation, especially equity compensation, awarded to the NEOs, and the extent to which such compensation aligns the +interests of the NEOs with those of the Company’s shareholders. In connection with this practice, the Compensation Committee has, from time to time, including in November 2018 as noted above, reconsidered the structure of the Company’s +executive compensation program and the relative weighting of various compensation elements. +See Executive Summary on page 17 for +discussion of base salaries, annual cash-based incentive compensation and long-term stock-based compensation. +20 +Table of Contents +Company-Sponsored Benefit and Retirement Plans +Meridian provides Company-sponsored benefit and retirement plans to the NEOs. In general, executives participate in the Company’s benefit and +retirement plans on the same basis as other Company employees. The core benefit package includes health, dental, short and long-term disability, and group term life insurance. Meridian generally provides retirement benefits to executives through +qualified (under the Internal Revenue Code) defined contribution plans (401K Plan). +Change in Control Severance Benefits +The Compensation Committee believes that a reasonable level of salary and Company-sponsored benefit protection provides a means of retention and allows +the NEOs to remain focused on achievement of Company goals and objectives in the event that the Company becomes subject to a merger or acquisition transaction. This component of compensation would only be paid in the event of a change in control of +the Company, under certain qualifying conditions, and termination of the NEO’s employment (double trigger). For the CEO and other NEOs, this component of compensation would include two years’ base salary, performance bonus and core +benefits. See page 28 for a description of change in control severance agreements entered into with our Executive Officers. +Jack Kenny +Employment Agreement +Effective October 9, 2017, the Company and Mr. Kenny entered into an Employment Agreement (the “Kenny +Employment Agreement”) providing for the terms of Mr. Kenny’s employment as Chief Executive Officer. The Kenny Employment Agreement provides that Mr. Kenny is entitled to receive a base salary of $550,000 for the first year of +the Kenny Employment Agreement’s term (“Year 1”) and $650,000 for the second year of the Kenny Employment Agreement’s term (“Year 2”). Mr. Kenny is eligible to earn an annual bonus of up to $275,000 for Year 1 and +$325,000 for Year 2, subject to the achievement of certain performance criteria as determined by the Compensation Committee of the Board. The Kenny Employment Agreement also provides that Mr. Kenny receive: (i) a grant of stock options to +purchase 100,000 shares of common stock which will vest on a pro-rata basis over four (4) years following the effective date of the Kenny Employment Agreement; and (ii) a grant of 13,000 restricted +stock units vesting in a lump sum or “cliff” basis on the second anniversary of the effective date of the Kenny Employment Agreement. The Kenny Employment Agreement also provides that Mr. Kenny receive an annual equity award of no +less than 25,000 restricted stock units per year. +The Kenny Employment Agreement’s term continues through October 9, 2019, and +thereafter provides for renewal periods of one (1) year that automatically renew on the annual anniversary of the effective date of the Kenny Employment Agreement. Pursuant to the terms of the Kenny Employment Agreement, there is no required +minimum period of employment and either the Company or Mr. Kenny may terminate his employment under the Kenny Employment Agreement at any time for any reason or no reason. If Mr. Kenny terminates the Kenny Employment Agreement, he must +give the Company at least 90 days’ prior written notice. If the Company terminates the Kenny Employment Agreement without Cause, the Company is obligated to give Mr. Kenny 90 days’ prior written notice. In the event that the Company +terminates the employment of Mr. Kenny without Cause or if he terminates his employment for Good Reason, each as defined in the Kenny Employment Agreement, Mr. Kenny is entitled to a severance payment equal to twelve months of his then +current base salary plus a pro-rata portion of the target bonus through the date of termination. If such termination occurs during a change of control period (double trigger), Mr. Kenny is entitled to a +severance payment equal to two times his then current base salary plus his target bonus for the severance period. +John A. Kraeutler +Employment Agreement and Supplemental Benefit Agreement +Effective October 3, 2016, the Company and Mr. Kraeutler entered into a +Third Amended and Restated Employment Agreement (the “Kraeutler Employment Agreement”), which, among other things, extended the term of his employment and incorporated the terms and conditions of his Supplemental Benefit Agreement. The +Kraeutler Employment Agreement provided that Mr. Kraeutler was entitled to receive an established minimum annual salary and that he was eligible to participate in the Company’s cash-based and stock-based incentive plans. The Kraeutler +Employment Agreement also provided that Mr. Kraeutler receive: (i) a grant of 50,000 non-qualified stock options vesting on September 30, 2017 and a grant of 50,000 non-qualified stock options vesting on September 30, 2018 so long as he was employed on that date; and (ii) two grants of 25,000 performance-based restricted stock units, with one grant to be earned if +fiscal 2017 revenue and earnings guidance was achieved, and the other grant to be earned if fiscal 2018 revenue and earnings guidance was achieved. As a result of the fiscal 2018 revenue and earnings guidance being achieved, 25,000 restricted stock +units granted under the Kraeutler Employment Agreement have +21 +Table of Contents +fully vested. However, as a result of fiscal 2017 revenue and earnings guidance not being achieved, 25,000 restricted stock units granted under the Kraeutler Employment Agreement were not earned +and have been cancelled. +Pursuant to his Second Amended and Restated Employment Agreement, effective from January 15, 2015 to +October 3, 2016 (the “2015 Employment Agreement”) and which was replaced by the Kraeutler Employment Agreement, Mr. Kraeutler earned 50,000 non-qualified stock options as a result of being +employed by the Company as of September 30, 2016. However, as a result of fiscal 2016 revenue and earnings guidance not being achieved, 25,000 restricted stock units granted under the 2015 Employment Agreement were not earned and have been +cancelled. +In addition, the Kraeutler Employment Agreement provides that Mr. Kraeutler is eligible to receive: +• +Post-retirement benefit payments totaling $1,200,000, payable in one hundred twenty (120) monthly payments of $10,000; and +• +Lifetime insurance benefits including health insurance and comprehensive long-term care insurance. +The Kraeutler Employment Agreement’s term extended through September 30, 2018, and included provisions for a +12-month consulting arrangement following that date. +Lueke Consulting Agreement +The Company and Ms. Lueke have entered into a Consulting Agreement effective January 1, 2019 upon her retirement from the Company. The +Consulting Agreement provides that Ms. Lueke will assist the Company on an as-requested basis with matters related to the Company’s financial reporting and accounting, among other matters. Under the +Consulting Agreement, the Company agreed to pay Ms. Lueke $90,000 per year and reimburse her for certain expenses. The Consulting Agreement’s term is three years and may be renewed upon mutual written agreement or cancelled by +Ms. Lueke at any time. +Internal Pay Equity +The Compensation Committee believes that the relative difference between the CEO’s compensation and the compensation of the Company’s other executives has not increased significantly over the +years. Further, the Compensation Committee believes that the Company’s internal pay equity structure is appropriate based upon the contributions to the success of the Company and as a means of motivation to other executives and employees. +COMPENSATION COMMITTEE REPORT +The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management. Based on +these reviews and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Company’s proxy statement on Schedule 14A. +Members of the Compensation Committee +James M. Anderson (Chairman) +John C. McIlwraith +David C. Phillips +CEO PAY RATIO +Our CEO Pay Ratio was calculated in compliance with the requirements set forth in Item 402(u) of Regulation S-K. We identified the median employee population as of July 31, 2018, which included all 618 global full-time, part-time, temporary and seasonal employees employed on that date, excluding 26 such employees in +our Belgium, China, France, Holland and Singapore locations, which in the aggregate represent less than 5% of our workforce. We used a consistently applied compensation measure across our global employee population to calculate the median employee +compensation. For our consistently applied compensation measure, we utilized total cash +22 +Table of Contents +compensation per our internal payroll records, annualized and translated to U.S. dollars. We then calculated the median employee’s fiscal 2018 compensation in the same manner as the named +executive officers in the Summary Compensation Table. Our median employee compensation for fiscal 2018 was $71,983 and our Chief Executive Officer’s compensation was $1,858,606. Accordingly, our CEO-to-Employee Pay Ratio is 26:1 (17:1 upon excluding certain one-time compensation components related to our CEO’s hiring in October 2017, as disclosed within +this proxy statement). +SUMMARY COMPENSATION TABLE +The following table summarizes the aggregate compensation paid, or earned, by each of the NEOs for the fiscal years ended September 30, 2018, 2017 and 2016, respectively: +Name and Principal +Position +(a) +Year +(b) +Salary +(c) +Bonus +(d) +Stock +Awards 1,2 +(e) +Option +Awards 3 +(f) +Non-Equity +Incentive Plan +Compensation 4 +(g) +Change +in +Pension Value +and +Nonqualified +Deferred +Compensation +Earnings +(h) +All +Other +Compensation 5 +(i) +Total +Jack Kenny +Chief Executive +Officer +2018 +2017 +2016 +$ +542,408 +— +— +— +— +— +$ +554,750 +— +— +$ +319,140 +— +— +$ +250,000 +— +— +— +— +— +$ +192,308 +— +— +$ +1,858,606 +— +— +Melissa A. Lueke +Executive +Vice President, Chief Financial Officer and Secretary +2018 +2017 +2016 +$ +$ +$ +344,000 +339,520 +292,194 +— +— +— +$ +$ +$ +109,875 +169,500 +194,100 +$ +$ +$ +40,306 +27,708 +44,416 +$ +96,320 +— +— +— +— +— +$ +$ +$ +38,771 +45,564 +68,343 +$ +$ +$ +629,272 +582,292 +599,053 +John A. Kraeutler 6 +Former Executive Chairman of the Board +2018 +2017 +2016 +$ +$ +$ +656,518 +655,942 +621,605 +— +— +— +$ +$ +$ +748,750 +423,750 +485,250 +$ +$ +— +306,640 +53,300 +$ +183,825 +— +— +— +— +— +$ +$ +$ +152,205 +155,859 +198,275 +$ +$ +$ +1,741,298 +1,542,191 +1,358,430 +Lawrence J. Baldini +Executive +Vice President, Global Operations +2018 +2017 +2016 +$ +$ +$ +350,804 +346,673 +310,001 +— +— +— +$ +$ +$ +109,875 +169,500 +198,765 +$ +$ +40,306 +— +44,184 +$ +98,617 +— +— +— +— +— +$ +$ +$ +41,774 +42,561 +69,204 +$ +$ +$ +641,376 +558,734 +622,154 +Susan D. Rolih +Executive Vice +President, +Global Regulatory & Quality Systems +2018 +2017 +2016 +$ +$ +$ +339,683 +332,750 +294,522 +— +— +— +$ +$ +$ +109,875 +169,500 +198,493 +$ +$ +$ +40,306 +27,708 +3,553 +$ +95,491 +— +— +— +— +— +$ +$ +$ +41,394 +42,941 +66,794 +$ +$ +$ +626,749 +572,899 +563,362 +Richard L. Eberly 7 +Former Executive Vice President, President, Chief Commercial Officer +2018 +2017 +2016 +$ +$ +$ +167,538 +404,904 +339,669 +— +— +— +$ +$ +$ +109,875 +169,500 +194,100 +$ +$ +40,306 +— +74,408 +— +— +— +— +— +— +$ +$ +$ +1,162,239 +57,891 +66,888 +$ +$ +$ +1,479,958 +632,295 +675,065 +Marco G. Calzavara 8 +Former President and Managing +Director, +Meridian Bioscience Europe +2018 +2017 +2016 +$ +$ +$ +252,547 +289,397 +324,503 +— +— +— +$ +$ +$ +117,200 +169,500 +194,100 +— +— +— +— +— +— +— +— +— +$ +$ +$ +914,361 +60,234 +72,599 +$ +$ +$ +1,284,108 +519,131 +591,202 +1 +The amounts shown reflect the grant date fair value of the restricted stock units issued during fiscal years 2018, 2017 and 2016 in accordance with ASC +Topic 718, including those granted to Mr. Kenny upon his being hired as Chief Executive Officer in October 2017. With the exception of Employment Agreement RSUs discussed in Note 2 below, no compensation cost is included in this table related +to the performance-based portion of the restricted stock units granted during fiscal 2018, 2017 and 2016. Because the required earnings targets for Meridian were not reached for fiscal 2018, 2017 or 2016, with the exception of the Employment +Agreement RSUs discussed in Note 2 below, the performance-based restricted stock units have been cancelled. A discussion of the assumptions used in calculating these values may be found in Note 7(b) on page 72 of the Company’s Annual Report on +Form 10-K filed with the SEC on November 29, 2018. In addition, the amounts reflected for Mr. Baldini and Ms. Rolih for fiscal 2016 include the value of unrestricted common shares granted +pursuant to Company policy for 15 years of service. +23 +Table of Contents +2 +The amount reflected for Mr. Kraeutler for fiscal 2018 includes $382,500 for the grant date fair value of performance-based restricted stock units +granted pursuant to his employment agreement dated October 3, 2016 (“Employment Agreement RSUs”). Since the required revenue and earnings guidance was achieved for fiscal 2018, the Employment Agreement RSUs were earned and the +corresponding compensation cost is included in this table. A discussion of the assumptions used in calculating these values may be found in Note 7(b) on page 72 of the Company’s Annual Report on Form 10-K +filed with the SEC on November 29, 2018. +3 +The amounts shown reflect the grant date fair value of the stock options granted during fiscal years 2018, 2017 and 2016 in accordance with ASC Topic +718, and during fiscal 2018 are comprised of: (i) stock options granted to Mr. Kenny upon his being hired as Chief Executive Officer in October 2017; and (ii) time-based grants made in connection with the Company’s long-term +incentive compensation program. No compensation cost is included in this table related to the performance-based portion of stock options granted during fiscal 2018. Because the required earnings target for Meridian was not reached for fiscal 2018, +the performance-based stock options have been cancelled. The fiscal 2017 amounts are comprised of stock options granted to: (i) Mr. Kraeutler pursuant to his employment agreement dated October 3, 2016; (ii) Ms. Lueke in +recognition of increased responsibilities in her position of Executive Vice President and Chief Financial Officer; and (iii) Ms. Rolih in connection with her promotion. The fiscal 2016 amounts are comprised of stock options granted to: +(i) Ms. Lueke, Mr. Kraeutler, Mr. Baldini and Ms. Rolih in connection with the Magellan acquisition; and (ii) Mr. Baldini and Mr. Eberly in connection with their promotions. A discussion of the assumptions +used in calculating these values may be found in Note 7(b) on page 72 of the Company’s Annual Report on Form 10-K filed with the SEC on November 29, 2018. +4 +The amounts shown represent amounts earned by the NEOs pursuant to the Officer’s Performance Compensation Plan for fiscal 2018. No such amounts +were earned for fiscal 2017 or 2016, as the corporate-wide targets were not reached for each of the respective fiscal years. +5 +See the All Other Compensation table below for amounts, which include certain Company contributions and other personal benefits for fiscal 2018. +All Other Compensation +Jack +Kenny +Melissa A. +Lueke +John A. +Kraeutler +Lawrence J. +Baldini +Susan D. +Rolih +Richard L. +Eberly +Marco G. +Calzavara +Retirement Contributions +$ +11,846 +$ +16,771 +$ +17,529 +$ +19,774 +$ +19,394 +$ +8,406 +$ +26,012 +Relocation Costs, Including Gross-up +148,962 +— +— +— +— +— +— +Restricted Stock Dividends +31,500 +22,000 +62,500 +22,000 +22,000 +11,000 +13,255 +Auto Lease / Auto Allowance +— +— +11,552 +— +— +5,023 +3,815 +Insurance Premiums, Including Gross-up +— +— +60,624 +— +— +— +— +Separation Payment +— +— +— +— +— +1,137,810 +871,279 +Totals +$ +192,308 +$ +38,771 +$ +152,205 +$ +41,774 +$ +41,394 +$ +1,162,239 +$ +914,361 +6 +Mr. Kraeutler served as Executive Chairman of the Board through September 30, 2018, after having been named to the position effective +October 9, 2017, upon the hiring of Mr. Jack Kenny as Chief Executive Officer. Prior to that time, Mr. Kraeutler served as Chairman of the Board, Chief Executive Officer and President. +7 +In February 2018, Mr. Eberly was terminated from his position with Meridian. In connection with his termination, Mr. Eberly received the +separation payment reflected in the All Other Compensation Table above, which included the payout of accrued but unused vacation. +8 +In July 2018, Mr. Calzavara was terminated from his position with Meridian. In connection with his termination, Mr. Calzavara received the +separation payment reflected in the All Other Compensation Table above, which included the payout of accrued but unused vacation. The amounts reflected in the Summary Compensation Table and the notes thereto were converted from the British +Pound Sterling at the average exchange rates for the respective periods in which the payments were made. +24 +Table of Contents +GRANTS OF PLAN-BASED AWARDS +The following table sets forth, for each of the NEOs, information related to grants made during fiscal 2018 under Meridian’s 2012 Stock Incentive +Plan: +Estimated Future Payouts Under +Non-Equity +Incentive Plan +Awards 1 +Estimated Future Payouts Under +Equity Incentive Plan Awards +All other +Stock +Awards: +Number of +Shares of +Stock or +Units (#) +All other +Option +Awards: +Number of +Securities +Underlying +Options +(#) +Exercise +or Base +Price of +Option +Awards +($/Sh) +Grant Date +Fair Value +of Stock +and +Option +Awards +Name +Grant +Date +Threshold +($) +Target +($) +Max +($) +Threshold +(#) +Target +(#) +Max +(#) +(a) +(b) +(c) +(d) +(e) +(f) +(g) +(h) +(i) +(j) +(k) +(l) +Jack Kenny +10/09/17 +11/08/17 +$ +— +96,250 +$ +— +192,500 +$ +— +275,000 +— +— +— +— +— +— +13,000 +25,000 +2 +3 +100,000 +— +2 +$ +14.50 +— +$ +$ +507,640 +366,250 +Melissa A. Lueke +11/08/17 +$ +60,200 +$ +120,400 +$ +180,600 +— +— +— +7,500 +3 +12,500 +3 +$ +14.65 +$ +150,181 +John A. Kraeutler +10/02/17 +11/08/17 +$ +— +114,891 +$ +— +229,781 +$ +— +344,672 +— +— +— +— +— +— +25,000 +25,000 +4 +3 +— +— +— +— +$ +$ +382,500 +366,250 +Lawrence J. Baldini +11/08/17 +$ +61,636 +$ +123,272 +$ +184,908 +— +— +— +7,500 +3 +12,500 +3 +$ +14.65 +$ +150,181 +Susan D. Rolih +11/08/17 +$ +59,682 +$ +119,364 +$ +179,046 +— +— +— +7,500 +3 +12,500 +3 +$ +14.65 +$ +150,181 +Richard L. Eberly +11/08/17 +— +— +— +— +— +— +7,500 +3 +12,500 +3 +$ +14.65 +$ +150,181 +Marco G. Calzavara +11/08/17 +— +— +— +— +— +— +8,000 +3 +— +— +$ +117,200 +1 +These columns reflect the potential payout for each NEO under the Fiscal 2018 Cash-Based Incentive Compensation Plan if the threshold, target and +maximum goals were satisfied for all performance measures. As described within the “Executive Summary” section of the “Compensation Discussion and Analysis” beginning on page 17, the performance measurements were achieved during +fiscal 2018, resulting in the amounts set forth in “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table being earned by the NEOs. While Messrs. Eberly and Calzavara were +subject to the Fiscal 2018 Cash-Based Incentive Compensation Plan, in light of their terminations during fiscal 2018, payments made to them were included within their Separation Payments set forth in Note 5 of the Summary Compensation Table. +2 +This grant of time-based restricted stock units and options was made to Mr. Kenny upon his being hired as Chief Executive Officer. +3 +At the time of the grant, half of each NEO’s restricted stock units and options (as applicable) were time-based with 100% vesting after four +years, and the remaining half were performance-based, subject to attainment of a specified earnings target for fiscal 2018. As the 2018 earnings target was not met, the performance-based restricted stock units and options have been cancelled and are +not reflected in the table above. +4 +This grant of performance-based restricted stock units was made to Mr. Kraeutler pursuant to his employment agreement dated October 3, 2016 +and was subject to attainment of revenue and earnings guidance for fiscal 2018. As the fiscal 2018 revenue and earnings guidance was met, these restricted stock units have fully vested. +25 +Table of Contents +OUTSTANDING EQUITY AWARDS AT FISCAL +YEAR-END +The following table provides information on the NEOs’ holdings of equity awards +under Meridian’s 2012 Stock Incentive Plan and 2004 Equity Compensation Plan as of September 30, 2018: +Option Awards +Stock Awards +Name +Number of +Securities +Underlying +Unexercised +Options (#) +Exercisable +Number of +Securities +Underlying +Unexercised +Options (#) +Unexercisable +Equity +Incentive Plan +Awards: +Number of +Securities +Underlying +Unexercised +Unearned +Options (#) +Option +Exercise +Price ($) +Option +Expiration +Date +Number of +Shares or +Units of +Stock +That Have +Not +Vested (#) +Market +Value of +Shares or +Units of +Stock That +Have Not +Vested ($) +Equity +Incentive +Plan +Awards: +Number of +Unearned +Shares, +Units or +Other +Rights That +Have +Not +Vested (#) +Equity +Incentive +Plan +Awards: +Market or +Payout +Value of +Unearned +Shares, +Units +or +Other +Rights That +Have Not +Vested ($) +(a) +(b) +(c) +(d) +(e) +(f) +(g) +(h) +(i) +(j) +Jack Kenny +— +100,000 1 +— +$ +14.50 +10/09/27 +— +13,000 10 +25,000 11 +$ +$ +— +193,700 +372,500 +— +— +— +— +— +— +Melissa A. Lueke +6,250 2 +2,500 3 +— +6,250 2 +7,500 3 +12,500 4 +— +— +— +$ +$ +$ +19.56 +16.85 +14.65 +03/24/26 +11/16/26 +11/08/27 +— +— +— +9,000 12 +10,000 13 +10,000 14 +7,500 11 +$ +$ +$ +$ +— +— +— +134,100 +149,000 +149,000 +111,750 +— +— +— +— +— +— +— +— +— +— +— +— +— +— +John A. Kraeutler +100,000 5 +15,000 2 +100,000 6 +— +— +— +— +— +— +$ +$ +$ +16.50 +19.56 +19.09 +09/30/21 +12/30/18 +09/30/21 +— +— +— +— +— +— +— +— +— +— +— +— +Lawrence J. Baldini +500 7 +1,000 2 +6,700 8 +— +— +1,000 2 +3,300 8 +12,500 4 +— +— +— +— +$ +$ +$ +$ +19.71 +19.56 +20.41 +14.65 +08/04/20 +03/24/26 +03/28/26 +11/08/27 +— +— +— +— +9,000 12 +10,000 13 +10,000 14 +7,500 11 +$ +$ +$ +$ +— +— +— +— +134,100 +149,000 +149,000 +111,750 +— +— +— +— +— +— +— +— +— +— +— +— +— +— +— +— +Susan D. Rolih +1,200 7 +5,000 9 +500 2 +2,500 3 +— +— +— +500 2 +7,500 3 +12,500 4 +— +— +— +— +— +$ +$ +$ +$ +$ +19.71 +21.75 +19.56 +16.85 +14.65 +08/04/20 +07/01/23 +03/24/26 +11/16/26 +11/08/27 +— +— +— +— +— +9,000 12 +10,000 13 +10,000 14 +7,500 11 +$ +$ +$ +$ +— +— +— +— +— +134,100 +149,000 +149,000 +111,750 +— +— +— +— +— +— +— +— +— +— +— +— +— +— +— +— +— +— +Richard L. Eberly +— +— +— +— +— +— +— +— +— +Marco G. Calzavara +— +— +— +— +— +— +— +— +— +26 +Table of Contents +1 +Options vest in four equal annual installments from the date of grant, until fully vested on October 9, 2021. +2 +Options vest in four equal annual installments from the date of grant, until fully vested on March 24, 2020, with the exception of +Mr. Kraeutler’s options which vested upon his September 30, 2018 retirement. +3 +Options vest in four equal annual installments from the date of grant, until fully vested on November 16, 2020. +4 +Options vest in four equal annual installments from the date of grant, until fully vested on November 8, 2021. +5 +Options are fully vested; half as of September 30, 2015 and half as of September 30, 2016. +6 +Options are fully vested; half as of September 30, 2017 and half as of September 30, 2018. +7 +Options fully vested on August 4, 2014. +8 +Options vest in three approximately equal annual installments from the date of grant, until fully vested on March 28, 2019). +9 +Options fully vested on July 1, 2017. +10 +Units vest on October 9, 2019. +11 +Units vest on November 15, 2021. +12 +Units vest on November 15, 2018. +13 +Units vest on November 15, 2019. +14 +Units vest on November 15, 2020. +OPTION EXERCISES AND STOCK VESTED +The following table sets +forth, for each of the NEOs, information on options exercised and restricted stock units vested during fiscal 2018: +Option Awards +Stock Awards +Name +Number of +Shares +Acquired on +Exercise (#) +Value Realized +on Exercise ($) 1 +Number of Shares +Acquired on +Vesting (#) +Value Realized on +Vesting ($) 2 +(a) +(b) +(c) +(d) +(e) +Jack Kenny +— +$ +— +— +$ +— +Melissa A. Lueke +— +$ +— +9,000 +$ +134,550 +John A. Kraeutler +— +$ +— +140,000 +$ +2,086,750 +Lawrence J. Baldini +— +$ +— +9,000 +$ +134,550 +Susan D. Rolih +— +$ +— +9,000 +$ +134,550 +Richard L. Eberly 3 +12,500 +$ +1,875 +45,500 +$ +660,150 +Marco G. Calzavara 3 +— +$ +— +46,000 +$ +721,000 +1 +Amounts reflect the difference between the exercise price of the option and the market price of Meridian common shares at the time of exercise. +27 +Table of Contents +2 +Amounts reflect the market price of Meridian common shares at the time of restricted stock units vesting. +3 +Upon their terminations, Messrs. Eberly and Calzavara became fully vested in the unvested restricted stock units held at that time, which were +comprised of time-based restricted stock units granted in November 2014, November 2015, November 2016 and November 2017. +401(K) PLAN +Our 401(k) Savings Plan (“401(k) Plan”) allows all U.S. employees of the Company as soon as administratively possible following their employment +to set aside a portion of their compensation each year for their retirement needs, up to the limits set by the Internal Revenue Code. Presently, the Company contributes a matching contribution of 100% of the first 4% of the employee’s +contribution (i.e., up to 4% of an employee’s salary), subject to Internal Revenue Code limitations. The Company may also contribute a profit-sharing contribution at its discretion. Employee contributions and employer matching contributions are +100% vested immediately. Participants are entitled to direct the investment of their accounts among various mutual funds selected by the Meridian Bioscience, Inc., Savings and Investment Plan Committee. Participants who terminate employment are +entitled to receive the vested portion of their accounts. +POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN +CONTROL +As described on page 21 in the “Compensation Discussion and Analysis” section of this proxy statement, Mr. Kenny +and Meridian are parties to the Kenny Employment Agreement which sets forth compensation, non-competition, benefit and severance provisions and provides for a payment equal to twelve months of +Mr. Kenny’s then current base salary plus a pro-rata portion of the target bonus through the date of termination in the event Mr. Kenny is terminated by Meridian without cause or Mr. Kenny +terminates his employment for good reason. If such termination occurs during a change of control period (double trigger), Mr. Kenny is entitled to a severance payment equal to two times his then current base salary plus his target bonus for the +severance period. +Had one of the events noted above occurred on September 30, 2018 and Meridian been within a change of control period +at that time, Mr. Kenny would also have been entitled to the following under the Kenny Employment Agreement: +Salary +$ +1,100,000 +Annual Performance Bonus +385,000 +Total Lump Sum Payment +$ +1,485,000 +Our Board of Directors authorized us to enter into change in control severance agreements with our Executive Officers +(other than our Chief Executive Officer, who has a change of control provision in his Employment Agreement). Each agreement had an initial term ended December 31, 2016, and each year will automatically renew for an additional one year term, +provided however, that if a change in control occurs the term will expire no earlier than 24 calendar months after the calendar month in which such change in control occurs. A change of control is generally defined in each agreement as any of the +following: (i) a person is or becomes a beneficial owner of more than 50% of our voting securities; (ii) the composition of a majority of our Board changes; (iii) we consummate a merger or similar transaction; (iv) the sale of +all or substantially all of our assets; or (v) the employment of a Chief Executive Officer other than the Company’s current CEO as of the date of the agreement. Each agreement provides, among other things, that if a change in control +occurs during the term of the agreement, and the executive’s employment is terminated either by us or by the executive, other than: (a) by us for cause; (b) by reason of death or disability; or (c) by the executive without good +reason, such executive will receive a severance payment equal to: (A) a multiple of such executive’s annual base salary; (B) a multiple of executive’s target bonus amounts; and (C) earned but unused vacation time. In +addition, each change in control agreement provides that in the event that the severance and other benefits provided for in the agreement or otherwise payable to the executive would be subject to the excise tax imposed by Section 4999 of the +Internal Revenue Code, the benefits under the agreement +28 +Table of Contents +will be either delivered in full, or delivered to a lesser extent which would result in no portion of the benefits being subject to such excise tax, whichever is more beneficial to the +executive. +Had termination in connection with a change in control occurred on September 30, 2018, the NEOs to which the policy applied +at that date (Ms. Lueke, Mr. Baldini and Ms. Rolih) would have been entitled to the following lump sum payments under the policy: +Melissa A. +Lueke +Lawrence J. +Baldini +Susan D. +Rolih +Salary +$ +688,000 +$ +704,410 +$ +682,080 +Annual Performance Bonus +240,800 +246,544 +238,728 +Total Lump Sum Payment +$ +928,800 +$ +950,954 +$ +920,808 +DIRECTOR COMPENSATION +For fiscal 2018, independent Directors of Meridian received the following compensation for service on the Board and the Audit Committee (“AC”), Compensation Committee (“CC”) and +Nominating & Corporate Governance Committee (“N&CGC”) (annual amounts presented): +-Base for Director service +$ +40,000 +-Additional for Lead Director +$ +20,000 +-AC Chair +$ +20,000 +-AC Member +$ +10,000 +-CC Chair +$ +13,000 +-CC Member +$ +6,000 +-N&CGC Chair +$ +13,000 +-N&CGC Member +$ +5,000 +Additionally, in accordance with the terms and conditions set forth in the Company’s 2012 Stock Incentive Plan, each +independent Director was also granted a non-qualified option to purchase 12,000 common shares at the time of election or re-election to the Board of Directors, with the +exercise price being the grant date closing sale price as reported on Nasdaq. Directors who are employees of Meridian are not separately compensated for serving as Directors. +Effective for fiscal 2019, the additional Lead Director compensation is being eliminated and the independent Chairperson of the Board will receive $50,000, resulting in the following independent Director +compensation (annual amounts presented): +-Base for Director service +$ +40,000 +-Additional for Independent Chairperson +$ +50,000 +-AC Chair +$ +20,000 +-AC Member +$ +10,000 +-CC Chair +$ +13,000 +-CC Member +$ +6,000 +-N&CGC Chair +$ +13,000 +-N&CGC Member +$ +5,000 +29 +Table of Contents +Additionally, as the result of the review of the competitiveness of the Company’s compensation program +for non-employee Directors conducted by an independent consultant, the equity awards to independent Directors of the Company are being increased to a value of $100,000 per Director, to be phased in over a two-year period commencing January 2019. Accordingly, each independent Director will be granted equity valued at $50,000 in January 2019, increasing to $100,000 in January 2020. +One-third of such equity value is to be in the form of restricted stock units (valued at the market value of our common stock at the date of award) and two-thirds is to +be in the form of non-qualified options to purchase common shares of the Company at an exercise price equal to the grant date closing sale price as reported on Nasdaq (valued pursuant to the current +methodology utilized by the Company for financial reporting purposes, which may be found in Note 7(b) on page 72 of the Company’s Annual Report on Form 10-K filed with the SEC on November 29, 2018). +The following table provides information on compensation related to fiscal 2018 for independent Directors who served during fiscal 2018: +Name +Fees +Earned +or +Paid in +Cash +($) +Stock +Awards +($) 1 +Option +Awards +($) 1 +Non-Equity +Incentive Plan +Compensation +($) +Change in +Pension +Value +and Nonqualified +Deferred +Compensation +Earnings +All Other +Compensation +($) +Total +($) +(a) +(b) +(c) +(d) +(e) +(f) +(g) +(h) +James M. Anderson +$ +68,000 +— +$ +42,787 +— +— +— +$ +110,787 +Dwight E. Ellingwood +$ +53,000 +— +$ +42,787 +— +— +— +$ +95,787 +John C. McIlwraith +$ +51,000 +— +$ +42,787 +— +— +— +$ +93,787 +David C. Phillips +$ +86,000 +— +$ +42,787 +— +— +— +$ +128,787 +John M. Rice +$ +49,750 +— +$ +42,787 +— +— +— +$ +92,537 +Catherine A. Sazdanoff +$ +50,000 +— +$ +42,787 +— +— +— +$ +92,787 +Felicia Williams +$ +1,100 +— +$ +40,014 +— +— +— +$ +41,114 +1 +The amounts shown reflect the grant date fair value of the awards made in fiscal year 2018 in accordance with ASC Topic 718. A discussion of the +assumptions used in calculating these values may be found in Note 7(b) on page 72 of the Company’s Annual Report on Form 10-K filed with the SEC on November 29, 2018. +SHAREHOLDER PROPOSALS FOR NEXT YEAR +The deadline for shareholder proposals to be included in the proxy statement for next year’s meeting is August 26, 2019. +The form of proxy for this meeting grants authority to the designated proxies to vote in their discretion on any matters that come before the meeting except those set forth in Meridian’s proxy +statement and except for matters as to which adequate notice is received. In order for a notice to be deemed adequate for the 2020 Annual Shareholders’ Meeting, it must be received prior to October 25, 2019. If there is a change in the +anticipated date of next year’s Annual Shareholders’ Meeting or these deadlines by more than 30 days, we will notify you of this change through our Form 8-K and/or Form +10-Q filings. +Meridian’s Code of Regulations provides that only persons nominated by an officer, +Director or in writing by a shareholder not earlier than 150 days nor later than 90 days prior to the meeting at which Directors are to be selected shall be eligible for election and that shareholder proposals be presented not earlier than 150 days +nor later than 90 days prior to the meeting at which the proposals are to be presented. +30 +Table of Contents +QUESTIONS +If you have questions or need more information about the annual meeting, call us at (513) 271-3700 or write to: +Melissa A. Lueke +Executive Vice President, +Chief Financial Officer and Secretary +Meridian Bioscience, Inc. +3471 River Hills Drive +Cincinnati, Ohio 45244 +For information about your record holdings, call Computershare Shareholder Services at (888) 294-8217. +31 +Table of Contents +*** Exercise Your Right to Vote *** +Important Notice Regarding the Availability of Proxy Materials for the +Shareholder Meeting to Be Held on January 24, 2019 +MERIDIAN BIOSCIENCE, INC. +Meeting Information +Meeting Type: Annual Meeting +For holders as of: November 30, 2018 +Date: January 24, +2019 Time: 2:00 PM EST +Location: Meridian Innovation Center +7007 Valley Avenue +Cincinnati, OH 45244 +You are receiving this communication +because you hold shares in the company named above. +MERIDIAN BIOSCIENCE, INC. +3471 RIVER +HILLS DRIVE +CINCINNATI, OH 45244 +This is not a ballot. You cannot use +this notice to vote these shares. This communication presents only an overview of the more complete proxy materials that are available to you on the Internet. You may view the proxy materials online at www.proxyvote.com or easily request a +paper copy (see reverse side). +We +encourage you to access and review all of the important information contained in the proxy materials before voting. +See the reverse side of this notice to obtain proxy materials and voting instructions. +Table of Contents +— Before You Vote — +How to Access the Proxy Materials +Proxy Materials Available to VIEW or RECEIVE: +NOTICE AND PROXY STATEMENT ANNUAL REPORT AND +FORM 10-K +How to View Online: +Have the information that is printed in the box marked by the arrow +(located on the following page) and visit: www.proxyvote.com . +How to Request and Receive a PAPER or E-MAIL Copy: +If you want to receive a paper or e-mail copy of these documents, you must +request one. There is NO charge for requesting a copy. Please choose one of the following methods to make your request: +1) BY INTERNET : www.proxyvote.com +2) BY TELEPHONE : +1-800-579-1639 +3) BY E-MAIL* : sendmaterial@proxyvote.com +* If requesting materials by e-mail, please send a blank e-mail with the information that is printed in the box marked by the arrow +(located on the following page) in the subject line. +Requests, instructions and other inquiries sent to this +e-mail address will NOT be forwarded to your investment advisor. Please make the request as instructed above on or before January 10, 2019 to facilitate timely delivery. +— How To Vote — +Please Choose One of the Following Voting Methods +Vote In Person: Many shareholder meetings have attendance requirements including, but not limited to, the possession of +an attendance ticket issued by the entity holding the meeting. Please check the meeting materials for any special requirements for meeting attendance. At the meeting, you will need to request a ballot to vote these shares. +Vote By Internet: +To vote now by Internet, go to www.proxyvote.com. Have the information that is printed in the box marked by the arrow +(located on the following page) available and follow the instructions. +Vote By Mail: You can vote by mail by requesting a paper copy of the materials, which will include a proxy card. +Table of Contents +Voting Items +The Board of Directors recommends you +vote FOR the following: +1. Election of Directors +Nominees +01) JAMES M. ANDERSON +05) DAVID C. PHILLIPS +02) DWIGHT E. ELLINGWOOD 06) JOHN M. RICE, +JR. +03) JACK KENNY +07) CATHERINE A. SAZDANOFF +04) JOHN C. +MCILWRAITH 08) FELICIA WILLIAMS +The Board of Directors recommends you vote FOR proposals 2 and 3. +2. Advisory vote to approve compensation of named executive officers, as disclosed in the Proxy Statement (“Say-on-Pay” Proposal). +3. Ratification of the appointment of Grant Thornton LLP as Meridian’s independent registered public accountants for fiscal year 2019. +NOTE: Such other business as may properly come before the meeting or any postponement or adjournment thereof. Only shareholders of record at the close of business +on November 30, 2018 are entitled to notice of and to vote at the meeting. +Table of Contents +Table of Contents +MERIDIAN BIOSCIENCE, INC. +3471 RIVER HILLS DRIVE +CINCINNATI, OH 45244 +VOTE BY INTERNET - www.proxyvote.com +Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Time the day before the +cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. +ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS +If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy +cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials +electronically in future years. +VOTE BY PHONE - 1-800-690-6903 +Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time the day before the cut-off date or meeting date. +Have your proxy card in hand when you call and then follow the instructions. +VOTE BY MAIL +Mark, sign and date your proxy card and return it +in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. +TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: +E53812-P14433 KEEP THIS PORTION FOR +YOUR RECORDS +THIS PROXY CARD IS VALID +ONLY WHEN SIGNED AND DATED. DETACH AND RETURN THIS PORTION ONLY +MERIDIAN BIOSCIENCE, INC. +To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line +below. +The Board of Directors recommends you vote FOR the following: +For +All +Withhold +All +For All +Except +☐ +☐ +☐ +1.    Election of Directors +Nominees +01) JAMES M. ANDERSON +05) DAVID C. PHILLIPS +02) DWIGHT E. ELLINGWOOD +06) JOHN M. RICE, JR. +03) JACK KENNY +07) CATHERINE A. SAZDANOFF +04) JOHN C. MCILWRAITH +08) FELICIA WILLIAMS +The Board of Directors recommends you vote FOR proposals 2 +and 3. +2.   Advisory vote to approve compensation of named executive officers, as disclosed in the Proxy Statement +(“Say-on-Pay” Proposal). +For +☐ +Against +☐ +Abstain +☐ +3.   Ratification of the appointment of Grant Thornton LLP as Meridian’s independent registered public +accountants for fiscal year 2019. +☐ +☐ +☐ +NOTE: Such other business as may properly come before the +meeting or any postponement or adjournment thereof. Only shareholders of record at the close of business on November 30, 2018 are entitled to notice of and to vote at the meeting. +For address changes and/or comments, please check this box and +write them on the back where indicated. +☐ +☐ +☐ +Please indicate if you plan to attend this meeting. +Yes +No +Please sign exactly as your name(s) appear(s) hereon. When signing +as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by +authorized officer. +Signature [PLEASE SIGN WITHIN BOX] +Date +Signature (Joint Owners) +Date +Table of Contents +Important Notice Regarding the +Availability of Proxy Materials for the Annual Meeting: +The Notice and Proxy Statement, Annual Report and Form 10-K are available at +www.proxyvote.com . +E53813-P14433 +MERIDIAN BIOSCIENCE, INC. +Annual Meeting of Shareholders +January 24, +2019 2:00 PM +This proxy is solicited by the Board of Directors +The undersigned hereby appoints JACK KENNY and MELISSA A. LUEKE, and +either of them, attorneys and proxies of the undersigned, each with the power of substitution and re-substitution, to vote all shares of Common Stock of Meridian Bioscience, Inc. which the undersigned may be entitled to vote on the matters specified +on the reverse side (and in their discretion to cumulate votes in the election of directors if cumulative voting is invoked by a shareholder through proper notice to the Company) and, in their discretion, with respect to such other matters as may +properly come before the Annual Meeting of Shareholders of Meridian Bioscience, Inc. to be held on January 24, 2019, at 2:00 p.m. Eastern Standard Time, at the Meridian Innovation Center, 7007 Valley Avenue, Cincinnati, Ohio 45244 and any +postponement or adjournment of such Annual Meeting. +This +proxy, when properly executed, will be voted as directed by the shareholder(s). If no such directions are made, this proxy will be voted FOR the election to the Board of Directors all of the nominees under Proposal 1 and FOR each +remaining proposal as recommended by the Board of Directors. +Please mark, sign, date, and return this proxy card promptly using the enclosed reply envelope. +Address Changes/Comments: +(If you noted any Address Changes/Comments +above, please mark corresponding box on the reverse side.) +Continued and to be signed on reverse side \ No newline at end of file diff --git a/raw/proxies/0000794172/0001193125-18-348327/proxy_rpt.txt b/raw/proxies/0000794172/0001193125-18-348327/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..c5936b2761b68fd3791caab01b24e4d047cf7e1b --- /dev/null +++ b/raw/proxies/0000794172/0001193125-18-348327/proxy_rpt.txt @@ -0,0 +1,16 @@ +TRANSACTIONS WITH RELATED PERSONS +During fiscal 2018, the Company leased certain office space from an entity controlled by Marco G. Calzavara, who served as President and Managing Director, Meridian Bioscience Europe through July +2018. Payments made under such arrangements during fiscal 2018 totaled approximately $160,000. +Nasdaq rules require the Company to +conduct an appropriate review of related party transactions required to be disclosed by the Company pursuant to SEC Regulation S-K Item 404 for potential conflict of interest situations on an ongoing basis and +that all such transactions must be approved by the Audit Committee or another Committee comprised of independent Directors. As a result, the Audit Committee annually reviews all such related party transactions and approves each related party +transaction if it determines that it is in the best interests of the Company. Additionally, the Audit Committee’s Charter provides it the authority to review, approve and monitor transactions involving the Company and “related +persons” (Directors and Executive Officers or their immediate family members, or shareholders owning five percent or greater of the Company’s outstanding stock). This also covers any related person transaction that meets the minimum +threshold for disclosure in the proxy statement under +14 +Table of Contents +the relevant SEC rules (generally, transactions involving amounts exceeding $120,000 in which a related person has a direct or indirect material interest). In considering +the transaction, the Audit Committee may consider all relevant factors, including, as applicable: (i) the Company’s business rationale for entering into the transaction; (ii) the alternatives to entering into a related person +transaction; (iii) whether the transaction is on terms comparable to those available to third parties, or in the case of employment relationships, to employees generally; (iv) the potential for the transaction to lead to an actual or +apparent conflict of interest and any safeguards imposed to prevent such actual or apparent conflicts; and (v) the overall fairness of the transaction to the Company. This policy is included in the Company’s Employee Handbook. The +approvals of such related person transactions are evidenced by internal Company resolutions, minutes or memoranda. \ No newline at end of file diff --git a/raw/proxies/0000794172/0001193125-19-316898/proxy.txt b/raw/proxies/0000794172/0001193125-19-316898/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..dc77d1471389b698746ebd607630c48bb3da3f08 --- /dev/null +++ b/raw/proxies/0000794172/0001193125-19-316898/proxy.txt @@ -0,0 +1,2502 @@ +DEF 14A +1 +d824987ddef14a.htm +DEF 14A +DEF 14A +Table of Contents +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +WASHINGTON, D.C. 20549 +SCHEDULE 14A +(Rule 14a-101) +INFORMATION REQUIRED IN PROXY STATEMENT +SCHEDULE 14A INFORMATION +Proxy Statement Pursuant to Section 14(a) of the +Securities Exchange Act of 1934 +(Amendment No. ) +Filed by the Registrant ☒ +Filed by a Party other than the Registrant ☐ +Check the appropriate box: +☐ +Preliminary Proxy Statement +☐ +Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +☒ +Definitive Proxy Statement +☐ +Definitive Additional Materials +☐ +Soliciting Material Pursuant to Section 14a-12 +Meridian Bioscience, Inc. +(Name of Registrant as +Specified in Its Charter) +(Name of Person(s) Filing Proxy Statement if Other Than the Registrant) +Payment of Filing Fee (Check the appropriate box): +☒ +No fee required. +☐ +Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and +0-11. +(1) +Title of each class of securities to which transaction applies: +(2) +Aggregate number of securities to which transaction applies: +(3) +Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 +(set forth the amount on which the filing fee is calculated and state how it was determined): +(4) +Proposed maximum aggregate value of transaction: +(5) +Total Fee Paid: +☐ +Fee paid previously with preliminary materials. +☐ +Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify +the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. +(1) +Amount Previously Paid: +(2) +Form, Schedule or Registration Statement No.: +(3) +Filing Party: +(4) +Date Filed: +Table of Contents +3471 River Hills Drive +Cincinnati, Ohio 45244 +www.meridianbioscience.com +Notice of Annual Meeting of Shareholders +and Proxy Statement +Dear Shareholders: +On behalf of the Board of Directors, I invite you to attend our Annual Meeting of Shareholders on January 29, 2020 at 2:00 p.m. Eastern Time. This +year’s Annual Meeting will be conducted as a virtual meeting of shareholders, a format that we believe will provide expanded access, improved communication and cost savings to our shareholders and the Company. You will be able to attend the +Annual Meeting online, vote your shares electronically and submit your questions during the Annual Meeting by visiting www.virtualshareholdermeeting.com/VIVO2020 . There will not be a physical meeting location and you will not +be able to attend the Annual Meeting in person. +This booklet includes the formal notice of the meeting and the proxy statement. The proxy +statement tells you more about the agenda and procedures for the meeting. It also describes how the Board operates and gives personal information about our director candidates. +Pursuant to the Securities and Exchange Commission rule allowing companies to furnish proxy materials to shareholders over the internet, a Notice of Internet Availability of Proxy Materials (the +“Notice”) was sent to shareholders on or about December 18, 2019. The Notice contains information on how to access copies of the proxy materials and vote your shares. +Whether or not you plan to attend the meeting, please cast your proxy vote promptly, either online, over the phone or by returning your signed and dated proxy card in the enclosed envelope. +Sincerely yours, +/s/ David C. Phillips +David C. Phillips +Chairman of the +Board +December 18, 2019 +Table of Contents +IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS +FOR THE ANNUAL MEETING TO BE HELD ON JANUARY 29, 2020 +Date: +January 29, 2020 +Time: +2:00 p.m., +Eastern Standard Time +Place: +Online at www.virtualshareholdermeeting.com/VIVO2020 +Purpose: +• +Elect as directors the eight nominees named in the accompanying proxy materials +• +Ratify the appointment of Grant Thornton LLP as Meridian’s independent registered public accountants for fiscal year 2020 +• +Conduct an advisory vote on our executive compensation +(“Say-on-Pay”) +Only shareholders +of record on December 5, 2019 may vote at the meeting. The approximate mailing date of this proxy statement and accompanying proxy card is December 18, 2019. +Your vote is important. Whether or not you plan to virtually attend the 2020 annual meeting, please cast your proxy vote promptly, either online, over the phone or by returning your signed and dated proxy +card in the enclosed envelope. +By order of the Board of Directors, +/s/ Bryan T. Baldasare +Bryan T. Baldasare +Secretary +December 18, 2019 +Table of Contents +Table of Contents +Page +GENERAL INFORMATION +1 +ELECTION OF DIRECTORS (Item 1 on the Proxy Card) +3 +RATIFICATION OF APPOINTMENT OF GRANT THORNTON LLP AS INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS (Item 2 on the Proxy Card) +6 +ADVISORY VOTE ON COMPENSATION OF NAMED EXECUTIVE OFFICERS (“SAY-ON-PAY” PROPOSAL) +(Item 3 on the Proxy Card) +6 +CORPORATE GOVERNANCE +7 +REPORT OF THE AUDIT COMMITTEE +9 +DIRECTORS AND EXECUTIVE OFFICERS +12 +SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS +14 +DELINQUENT SECTION 16(A) REPORTS +14 +TRANSACTIONS WITH RELATED PERSONS +14 +COMPENSATION DISCUSSION AND ANALYSIS +15 +COMPENSATION COMMITTEE REPORT +22 +CEO PAY RATIO +23 +EQUITY COMPENSATION PLAN INFORMATION +23 +SUMMARY COMPENSATION TABLE +24 +GRANTS OF PLAN-BASED AWARDS +26 +OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END +27 +OPTION EXERCISES AND STOCK VESTED +28 +401(K) PLAN +29 +POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL +29 +DIRECTOR COMPENSATION +30 +SHAREHOLDER PROPOSALS FOR NEXT YEAR +31 +QUESTIONS +31 +Meridian makes available, free of charge on its website, all of its filings that are made electronically with the +Securities and Exchange Commission (“SEC”), including Forms 10-K, 10-Q and 8-K. These filings are also available on the +SEC’s website (www.sec.gov). To access these filings, go to our website (www.meridianbioscience.com). Copies of Meridian’s Annual Report on Form 10-K for the fiscal year ended September 30, +2019, including financial statements and schedules thereto, filed with the SEC, are also available without charge to shareholders upon written request addressed to: +Bryan T. Baldasare +Executive Vice President, Chief Financial Officer and Secretary +Meridian Bioscience, Inc. +3471 River Hills +Drive +Cincinnati, Ohio 45244 +Table of Contents +MERIDIAN BIOSCIENCE, INC. +3471 River Hills Drive +Cincinnati, Ohio 45244 +Telephone (513) 271-3700 +P R O X +Y S T A T E M E N T +Annual Meeting of Shareholders +January 29, 2020 +GENERAL INFORMATION +Who may vote +Shareholders of Meridian, as recorded in our stock register on December 5, 2019, may vote at the meeting. As of that date, +Meridian had 42,827,258 shares of common stock outstanding. +Location of Annual Meeting +The Annual Meeting will be conducted as a virtual meeting of shareholders by means of a live webcast. We believe that hosting a virtual meeting will +enable greater shareholder attendance and participation from any location, improved communication and cost savings to our shareholders. By visiting www.virtualshareholdermeeting.com/VIVO2020 , you will be able to attend the Annual Meeting, +vote your shares, and submit your questions during the meeting via the internet. There will not be a physical meeting location and you will not be able to attend in person. We invite you to attend the Annual Meeting and request that you vote on the +proposals described in this proxy statement. However, you do not need to attend the meeting to vote your shares. Instead, you may vote by internet, by telephone, or, if you requested and received paper copies of the proxy materials by mail, you may +also vote by completing and mailing your proxy card. +How to vote +You may vote electronically at the meeting, by telephone, online, or by completing and returning a proxy card. We recommend you vote by proxy even if you plan to attend the virtual meeting. You can always +change your vote, by voting electronically, at the meeting. +How proxies work +Meridian’s Board of Directors is asking for your proxy. Giving us your proxy means you authorize us to vote your shares at the meeting in the manner +you direct. You may vote for all, some or none of our director candidates. You may also vote for or against the other proposals or abstain from voting. +If you complete your proxy online, over the phone or sign and return the enclosed proxy card but do not specify how to vote, we will vote your shares in favor of: (i) our director candidates; +(ii) the ratification of the appointment of Grant Thornton LLP as Meridian’s independent registered public accountants for fiscal year 2020; and (iii) our executive compensation. If any other matters come before the meeting or any +postponement or adjournment thereof, each proxy will be voted in the discretion of the individuals named as proxies on the card. +You may +receive more than one proxy or voting card depending on how you hold your shares. Shares registered in your name are covered by one card. If you hold shares through someone else, such as a stockbroker, bank or nominee, you may get material from them +asking how you want to vote. +Stockbrokers, banks and nominees holding shares for beneficial owners must vote those shares as instructed by +you. If the stockbroker, bank or nominee has not received instructions from you, the beneficial owner, the +1 +Table of Contents +stockbroker, bank or nominee generally has discretionary voting power only with respect to the ratification of appointment of the independent registered public accountants. However, a +stockbroker, bank or nominee does not have discretion to vote for or against the election of directors and certain other matters subject to a vote if they have not received voting instructions from you. In order to avoid a broker non-vote of your shares on the election of directors and the other matters subject to a vote, you must send voting instructions to your stockbroker, bank or nominee. +Solicitation of proxies +Solicitation of proxies is being made by management at the direction of Meridian’s Board of Directors, without additional compensation, through the +mail, in person or by telephone. The cost of preparing and mailing the Notice and the proxy statement and any accompanying material will be borne by Meridian. In addition, Meridian will request brokers and other custodians, nominees and fiduciaries +to forward proxy soliciting material to the beneficial owners of shares held of record, and Meridian will reimburse them for their expenses in so doing. +Revoking a proxy +You may revoke your proxy before it is voted by submitting a new +proxy with a later date, by voting electronically at the meeting or by notifying Meridian’s Secretary in writing at the address under “Questions” on page 31 of this proxy statement. +Quorum +In order to carry on the +business of the meeting, we must have a quorum. This means at least a majority of the outstanding shares eligible to vote must be represented at the meeting, either by proxy or in person. +Votes needed +The eight director candidates receiving the most votes will be elected +to fill the seats on the Board (Proposal No. 1). The ratification of appointment of accountants (Proposal No. 2) and the approval on an advisory basis of our executive compensation (Proposal No. 3) require the favorable vote of a +majority of the votes cast. Only votes for or against these proposals count, with abstentions not being counted either for or against these proposals. +Abstentions and broker non-votes count for quorum purposes but, as indicated above, will not count for voting purposes. Broker +non-votes occur when a broker returns a proxy card but does not have authority to vote on a particular proposal. +Other matters +Any other matters considered at the meeting, including postponement +or adjournment, will require the affirmative vote of a majority of the votes cast. +The Virtual Meeting +We will be hosting the Annual Meeting only by means of a live webcast. There will not be a physical meeting location and you will not be able to attend +the meeting in person. Please be assured that you will be afforded the same rights and opportunities to participate in the virtual meeting as you would at an in-person meeting. By going to +www.virtualshareholdermeeting.com/VIVO2020 , you will be able to listen to the Annual Meeting, submit questions and vote. If you wish to listen to the Annual Meeting, but do not wish to submit questions or vote during the Annual Meeting, you +may go to www.virtualshareholdermeeting.com/VIVO2020 and log in as a guest. +The Annual Meeting will start at 2:00 p.m. (Eastern Time) +on January 29, 2020. We encourage you to access the meeting website prior to the start time to allow time for check in. If you encounter any technical difficulties with the virtual meeting platform on the meeting day, please call the following +applicable number for technical support: 800-586-1548 (United States); 303-562-9288 +(International). +You do not need to register to attend the Annual Meeting webcast. Follow the instructions on your Notice of Internet +Availability or proxy card (if you requested and received a printed copy of the proxy materials) to access the Annual Meeting. +2 +Table of Contents +If you wish to submit a question the day of the Annual Meeting, you may log in to the virtual meeting +platform at www.virtualshareholdermeeting.com/VIVO2020 , type your question into the “Ask a Question” field, and click “Submit.” Questions pertinent to meeting matters will be answered during the Annual Meeting, subject to +time constraints. Questions regarding personal matters, including those related to employment, are not pertinent to annual meeting matters and, therefore, will not be answered. +ELECTION OF DIRECTORS +(Item 1 on the Proxy Card) +The Nominating and Corporate Governance Committee of the Board of Directors has nominated for +re-election the following current directors: James M. Anderson, Dwight E. Ellingwood, Jack Kenny, John C. McIlwraith, David C. Phillips, John M. Rice, Jr., Catherine A. Sazdanoff, and Felicia Williams. +Proxies solicited by the Board will be voted for the election of these nominees. All directors elected at the Annual Shareholders’ +Meeting will be elected to hold office until the next annual meeting. In voting to elect directors, shareholders are entitled to cumulate their votes and to give one candidate a number of votes equal to the number of directors to be elected +multiplied by the number of shares held by the shareholder, or to distribute their votes on the same principle among as many candidates as the shareholder sees fit. In order to invoke cumulative voting, notice of cumulative voting must be given in +writing by a shareholder to the Chief Executive Officer, a Vice President or the Secretary of Meridian not less than 48 hours prior to the Annual Shareholders’ Meeting. The proxies solicited include discretionary authority to cumulate votes. +All Meridian directors are elected for one-year terms. Personal information on each of our nominees +is given below. +If a director nominee becomes unavailable before the election, your proxy card authorizes us to vote for a replacement +nominee if the Board names one. +The Board recommends that you vote FOR each of the following candidates: +James M. Anderson +Director +since 2009 +Age: 77 +James M. Anderson serves as Chairman of the Compensation Committee. He currently serves as Senior Strategic and External Affairs Advisor with Taft Stettinius & Hollister +LLP and President Emeritus of Cincinnati Children’s Hospital Medical Center (“CCHMC”), after having served as advisor to the President of CCHMC from January 2010 through June 30, 2017 and as President and Chief Executive Officer +of CCHMC from 1996 through 2009. Mr. Anderson serves on the Board of Managers of CincyTech, a firm that provides advice and capital to entrepreneurs, helps research institutions commercialize technology through startups, and catalyzes +investment from individuals and institutions to regional companies. From 2006 to 2014, he served as a director of Ameritas Mutual Holding Company and has also served as Chairman of the Board of the Cincinnati Branch of the Federal Reserve Bank of +Cleveland, retiring in 2012. Prior to joining the staff of CCHMC, Mr. Anderson was a partner in the general corporate law department at Taft, Stettinius & Hollister for 24 years (1968-1977; 1982-1996) and president of U.S. operations +at Xomox Corporation, a publicly-traded manufacturer of specialty process controls (1977-1982). Mr. Anderson has also served as director of Gateway Investment Advisors (1997-2008). The Board believes that Mr. Anderson’s corporate +legal experience and his experience as CEO of a large health care organization have given him a wealth of insight into various corporate governance and business management issues, which, along with his status as an independent director, make him an +integral member of the Board. +3 +Table of Contents +Dwight E. Ellingwood +Director since 2014 +Age: 67 +Dwight E. Ellingwood serves as Chairman of the Nominating and Corporate Governance Committee. With over 35 years of experience in health care strategy, planning, and business +development, he currently is a teaching professor and associate director for practitioner experience in the Graduate Program of the Department of Health Services Administration at Xavier University in Cincinnati, Ohio. He founded D.E.E. Strategy +Consulting, LLC, to advise health care clients. Mr. Ellingwood previously served as Senior Vice President of Strategy, Communications and Public Affairs for TriHealth in Cincinnati, Ohio (November 2014 – July 2016) and as the Lead Executive for +the Collective Impact on Health, The Health Collaborative (January 2014 – November 2014). From 1997 through 2013, Mr. Ellingwood served as Senior Vice President, Planning and Business Development for Cincinnati Children’s Hospital Medical +Center. The Board believes that the Company benefits greatly from Mr. Ellingwood’s extensive experience in strategy and business development in the health care industry. +Jack Kenny +Director since +2017 +Age: 51 +Jack Kenny serves as Meridian’s Chief Executive Officer, having joined the Company on October 9, 2017. Before joining Meridian, Mr. Kenny served as Senior Vice +President and General Manager, North America, with Siemens Healthcare, a position he held from October 2014 to May 2017. From June 2012 through October 2014, Mr. Kenny served as Vice President and General Manager, U.S. Region, for Becton +Dickinson, Diagnostic Systems. Prior to June 2012, Mr. Kenny held executive roles at Danaher Corporation and Quest Diagnostics. Mr. Kenny’s experience as a key executive leader within large public companies in the health care and +medical device industry, as well as his ongoing insights into Meridian’s business and operations, makes him a valuable member of the Board. +John C. McIlwraith +Director +since 2015 +Age: 60 +John C. McIlwraith co-founded Allos Ventures, a venture capital firm, in March 2010 and has served as a Managing Director there since that +time. Prior to founding Allos Ventures, Mr. McIlwraith was a Managing Director of Blue Chip Venture Company, a Cincinnati-based venture capital firm, which he joined in 1997. He has served on the board of directors of more than +20 health care or information technology companies. Prior to 1997, Mr. McIlwraith served as Senior Vice President of Strategic Planning and General Counsel of publicly-traded Quantum Health Resources, Inc., and was a partner in the Jones +Day law firm. The Board believes that Mr. McIlwraith’s corporate legal and business development experience, and his years of business-building experience with an extensive number of companies, including health care companies, render his +service on the Board valuable to Meridian. +David C. Phillips +Director +since 2000 +Age: 81 +David C. Phillips serves as Chairman of the Board. Mr. Phillips spent 32 years with Arthur Andersen LLP. His service with this firm included several managing partner +leadership positions. After retiring from Arthur Andersen in 1994, Mr. Phillips became Chief Executive Officer of Downtown Cincinnati, Inc., which is responsible for economic revitalization of Downtown Cincinnati. Mr. Phillips retired from +DCI in 1999 to devote full time to Cincinnati Works, Inc., an organization dedicated to reducing the number of people living below the poverty level by assisting them to strive towards self-sufficiency through work, and his financial consulting +services. Mr. Phillips has also served as a director of Cintas Corporation, retiring in 2012, and as a director of Summit Mutual Funds, a registered investment company, through 2009. The Board believes that the Company benefits greatly from +Mr. Phillips’ public accounting experience in dealing with +4 +Table of Contents +complex accounting and business issues, as well as his service to the Cincinnati community. +John M. Rice, Jr. +Director since 2017 +Age: 70 +John M. Rice is a Managing Director leading the Life Sciences practice at CincyTech, a firm that provides advice and capital to entrepreneurs, helps research institutions +commercialize technology through startups, and catalyzes investment from individuals and institutions to regional companies, having previously served as Director of Life Sciences since 2014. Dr. Rice is also the founder of Triathlon Medical Venture +Partners, a venture capital firm that invests equity capital in early and expansion stage life science companies, having served as Managing Partner from 2003 – 2018. In addition, Dr. Rice has served on the board of directors of several +privately-held health care companies. The Board believes that Dr. Rice’s scientific background and years of experience with a number of companies operating in the health care and related industries, as well as extensive experience within the +capital markets, is extremely valuable to Meridian. +Catherine A. Sazdanoff +Director since 2015 +Age: 63 +Catherine A. Sazdanoff is the President and Chief Executive Officer of Sazdanoff Consulting, LLC, providing health care strategy and business development advisory +services to a number of clients, since January 2015. She also currently serves as Business Advisor to Strata Oncology, Inc., a precision oncology company, having joined Strata in May 2016 as Chief Business Officer (May 2016 – +September 2017). Since July 2019, Ms. Sazdanoff has served as an independent director of the Board of InMed Pharmaceuticals, Inc., currently chairing its nominating and governance committee. Ms. Sazdanoff is also a member since April 2016 +of the Advisory Board of Neurocern, Inc., a dementia insuretech company, and is a lecturer since March 2018 in the Business of Biotech program at the University of Chicago Graham School for Continuing and Professional Education. She serves on the +External Advisory Board of the Rosalind Franklin University Innovation and Research Park. Ms. Sazdanoff’s prior corporate roles include a number of global corporate positions with Takeda Pharmaceuticals, Inc. (“Takeda”), a +wholly-owned subsidiary of Japanese-based Takeda Pharmaceutical Corporation, from 2006 to 2015 including VP, Head of Corporate Projects (2012-2015), VP, Global Business Development (2011-2013) and VP, Corporate +Development (2010-2011). Ms. Sazdanoff’s time at Takeda was preceded by approximately 22 years with Abbott Laboratories, where she held numerous executive positions covering legal, compliance and business +development. The Board believes that Ms. Sazdanoff’s years of experience in the pharmaceutical and medical diagnostics industries makes her service on the Board valuable to Meridian. +Felicia Williams +Director +since 2018 +Age: 54 +Felicia Williams serves as Chairwoman of the Audit Committee. Ms. Williams has served as Executive Vice President, Controller and Enterprise Risk at Macy’s Inc. since +June 2016. Having joined Macy’s in June 2004, she has previously served as Senior Vice President, Finance and Risk Management (February 2011 – June 2016), as well as in other finance, treasury, risk management and internal audit +capacities. Prior to her time at Macy’s, Ms. Williams served in various financial positions at the Coca-Cola Hellenic Bottling Company and The Coca-Cola Company (June 1994 – June 2004). Ms. Williams brings broad and wide-ranging +finance and risk management experience, including analyzing financial statements, complex accounting issues and internal controls over financial reporting, which qualifies her as an “audit committee financial expert” under SEC guidelines. +The Board believes her experience greatly benefits the Company. +5 +Table of Contents +RATIFICATION OF APPOINTMENT OF GRANT THORNTON LLP AS INDEPENDENT REGISTERED +PUBLIC ACCOUNTANTS +(Item 2 on the Proxy Card) +Although not required, we are seeking shareholder ratification of the Audit Committee’s selection of Grant Thornton LLP as Meridian’s independent registered public accountants for the 2020 +fiscal year. The affirmative vote of a majority of shares voting at the meeting is required for ratification. If ratification is not obtained, the Audit Committee intends to continue the engagement of Grant Thornton LLP at least through fiscal 2020. +Representatives of Grant Thornton LLP are expected to be present at the meeting and will be available to make a statement, if they so desire, and to respond to appropriate questions asked by shareholders. +Principal Accounting Firm Fees +Aggregate fees billed to Meridian by Grant Thornton LLP for fiscal years 2019 and 2018 are listed below: +2019 +2018 +Audit Fees +$ +646,736 +$ +717,043 +Audit-Related Fees +164,440 +44,213 +Tax Fees +446,590 +478,566 +$ +1,257,766 +$ +1,239,822 +Audit Fees. Audit fees are the fees billed for professional services rendered by Meridian’s +independent registered public accounting firm for their: (i) audit of Meridian’s consolidated annual financial statements for the fiscal years ended September 30, 2019 and 2018, respectively; (ii) reviews of the unaudited +quarterly consolidated financial statements contained in the reports on Form 10-Q filed by Meridian during those years; (iii) completion of audits of wholly-owned subsidiaries’ statutory accounts in +the United Kingdom and China during fiscal 2019 and 2018; and (iv) reporting on Meridian’s internal controls during those years. +Audit-Related Fees . Audit-related fees are the fees billed for assurance and related services that are reasonably related to the +performance of the audit or review of Meridian’s financial statements. +Tax Fees. Tax fees are the fees billed for tax +return preparation and compliance in Australia, England, Germany, and the United States, as well as consultation and research on various matters such as the U.S. tax reform act, state tax issues, international tax issues, transfer pricing, and tax +planning. +The Board recommends that you vote FOR the ratification of appointment of Grant Thornton LLP as Meridian’s +independent registered public accountants for the 2020 fiscal year. +ADVISORY VOTE ON COMPENSATION OF NAMED +EXECUTIVE OFFICERS (“SAY-ON-PAY” PROPOSAL) +(Item 3 on the Proxy Card) +The +Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd Frank”), enacted in July 2010, requires that we provide our shareholders with the opportunity to vote to approve, on a non-binding, +advisory basis, the compensation of our named executives officers as disclosed in this proxy statement in accordance with the compensation disclosure rules of the Securities and Exchange Commission (“SEC”). Dodd Frank also provides that +shareholders periodically be given the opportunity to vote, on a non-binding, advisory basis, for their preference as to how frequently we should seek future advisory votes on the compensation of our named +executive officers. This opportunity was provided to our shareholders at our 2018 annual meeting, where over 80% of our voting shareholders voted to hold the +“say-on-pay” advisory vote annually, in accordance with the recommendation of our Board of Directors. As a result, we are again holding a say-on-pay advisory vote at our 2020 annual meeting, with the next say-on-pay advisory vote to +be held at our 2021 annual meeting. +6 +Table of Contents +As described below under the heading “Compensation Discussion and Analysis” beginning on page 15 +of this proxy statement, we seek to closely align the interests of our named executive officers with the interests of our shareholders. We structure our programs to discourage excessive risk-taking through a balanced use of compensation vehicles and +metrics with an overall goal of delivering sustained long-term shareholder value, while aligning our executives’ interests with those of our shareholders. Further, our programs require that a substantial portion of each named executive +officer’s compensation be contingent on delivering performance results that benefit our shareholders. Our compensation programs are designed to reward our named executive officers for the achievement of short-term and long-term strategic and +operational goals and the achievement of increased total shareholder return. +The vote on this matter is not intended to address any specific +element of compensation; rather, the vote relates to the compensation of our named executive officers, as described in this proxy statement in accordance with the compensation disclosure rules of the SEC. The vote is advisory, which means that the +vote is not binding on the Company, our Board of Directors or the Compensation Committee. The Board and the Compensation Committee will review and consider the voting results when making future decisions regarding our executive compensation program. +Accordingly, we ask our shareholders to approve, on an advisory basis, the compensation of the named executive officers, as disclosed in this +proxy statement pursuant to the compensation disclosure rules of the SEC, including the Compensation Discussion and Analysis, the Summary Compensation Table and the other related tables and disclosure. +The Board recommends that you vote FOR the approval of the compensation of our named executive officers as disclosed in this proxy statement. +CORPORATE GOVERNANCE +As an Ohio corporation, Meridian is governed by the corporate laws of Ohio. Since Meridian’s common shares are publicly traded on the Nasdaq Global Select Market, and it files reports with the SEC, +it is also subject to Nasdaq rules and federal securities laws. +Board Leadership Structure +Governance of the corporation is placed in the hands of the directors who, in turn, elect officers to manage the business operations. The Board oversees +the management of Meridian on your behalf. The Board reviews Meridian’s long-term strategic plans and exercises direct decision making authority in all major decisions, such as acquisitions, the declaration of dividends, major capital +expenditures and the establishment of certain company policies. +The Board operates and evaluates its performance in accordance with Corporate +Governance Guidelines approved by the Board. These Guidelines are available at our website www.meridianbioscience.com . +The Board is +responsible for evaluating and determining Meridian’s leadership structure, and believes that at this point in time separate individuals should serve in the capacities of Chairman of the Board (“Chairman”) and Chief Executive Officer +(“CEO”). It is the Board’s belief that such a structure provides the Company with the right foundation to pursue its strategic and operational objectives, while maintaining effective oversight and objective evaluation of the +Company’s performance. These key executive positions are held by Mr. David C. Phillips, Chairman of the Board, and Mr. Jack Kenny, CEO. Having served as a director since 2000, Mr. Phillips was appointed Chairman of the Board +upon Mr. John A. Kraeutler retiring from the Company and the Board effective September 30, 2018. In his capacity as Chairman, Mr. Phillips is responsible for: (i) general Board activities, including setting agendas for Board +meetings and presiding over all meetings of the Board and shareholders; and (ii) providing advice and counsel to Meridian’s management regarding the Company’s business operations. As +7 +Table of Contents +CEO, Mr. Kenny is responsible for the general management, oversight, supervision and control of the business affairs of Meridian, and ensuring that all resolutions of the Board are put into +effect. +In accordance with Nasdaq rules, our Board of Directors affirmatively determines the independence of each director and nominee for +election as a director in accordance with the elements of independence set forth in the Nasdaq listing standards and Exchange Act rules. Meridian’s Director Independence Standards are available at our website www.meridianbioscience.com . +Based on these standards, the Board has determined that each of the following members of the Board is independent: James M. Anderson, Dwight E. Ellingwood, John C. McIlwraith, David C. Phillips, John M. Rice, Catherine A. Sazdanoff, and Felicia +Williams. +During fiscal 2019, the Board of Directors met on six occasions. The independent directors plan to meet as necessary during fiscal +2020 without the presence of management directors. During fiscal 2019, the independent members of the Board met two times in executive session without the presence of management directors following regularly scheduled Board meetings. All of our +directors attended at least 75% of the aggregate of all Board meetings and all meetings of Committees on which such directors served during fiscal 2019. +Meridian expects all directors to attend shareholders’ meetings, and all directors attended the 2019 Annual Shareholders’ Meeting. +Shareholders may communicate with the full Board or individual directors on matters concerning Meridian by mail or through our website, www.meridianbioscience.com , in each case to the attention of +the Secretary, the address for whom is set forth on page 31 of this proxy statement. +The Board’s Role in Risk Oversight +The Board of Directors, as a whole and also at the Committee level, plays a key role in operational risk oversight at Meridian and works +with management to understand the risks the Company faces, the steps that management is taking to manage those risks and the level of risk appropriate for the Company in light of its overall business strategy. The Board approves the high level +strategies, financial plans and policies of Meridian, setting the tone and direction for the appropriate levels of risk-taking within the organization. +While overall responsibility for risk oversight rests with the Board, it is the Audit Committee that has been given the primary responsibility of monitoring and evaluating the adequacy of +management’s risk assessment and risk management practices. This role is carried out through its charter-mandated responsibilities related to Meridian’s: (i) overall financial risks and exposures; (ii) financial statement risks and +exposures; (iii) financial reporting processes; (iv) compliance with ethics policies, such as the Code of Ethics, Employee Complaint Policy, Securities Trading Policies and the Foreign Corrupt Practices Act Policy; and (v) compliance +with governmental and legal regulations, including those contained within the Sarbanes-Oxley Act. The Audit Committee provides regular reports to the full Board and works closely with management to update the full Board, as necessary, on matters +identified through these Committee risk oversight roles. +The Board has adopted a Code of Ethics applicable to Meridian’s officers, +directors and employees. This Code of Ethics is posted on www.meridianbioscience.com . Any amendments to or waivers from the Code of Ethics (to the extent permitted by Nasdaq Marketplace Rule 5610) will be posted on our website within four +business days after the date of an amendment. +Committees of the Board of Directors +The directors have organized themselves into the Committees described below. Each of these Committees has a charter posted on +www.meridianbioscience.com . Meridian does not have an Executive Committee of its Board of Directors. The following table identifies membership and the Chairperson of each of the current standing committees of the Board, as well as the number +of times each committee met during the fiscal year: +8 +Table of Contents +Director +Audit +Compensation +Nominating +and +Corporate +Governance +James M. Anderson +Member +Chair +Dwight E. Ellingwood +Member +Chair +John C. McIlwraith +Member +Member +David C. Phillips +Ex-Officio +Ex-Officio +Ex-Officio +Catherine A. Sazdanoff +Member +Member +Felicia Williams +Chair +Meetings in Fiscal 2019 +8 +5 +5 +The Audit Committee is comprised of Felicia Williams (Chair), James M. Anderson, Catherine A. Sazdanoff, +and David C. Phillips (Ex-Officio). The Committee met eight times during fiscal 2019. Each member is able to read and understand fundamental financial statements. Felicia Williams has been designated as an +Audit Committee financial expert as that term is defined by the SEC. +The Committee oversees the accounting and financial reporting processes +of Meridian and the audits of its financial statements by its independent registered public accounting firm. The Committee is solely responsible for the appointment, compensation, retention and oversight of Meridian’s independent registered +public accounting firm. The Audit Committee also evaluates information received from Meridian’s independent registered public accounting firm and management to determine whether the independent registered public accounting firm is independent +of management. The independent registered public accounting firm reports directly to the Audit Committee. +In addition, the Audit Committee +has established procedures for the receipt, retention and treatment of complaints received by Meridian concerning accounting, internal accounting controls or auditing matters and has established procedures for the confidential and anonymous +submission by employees of any concerns they may have regarding questionable accounting or auditing matters. +The Audit Committee, or its +Chairwoman, approves all audit and non-audit services performed for Meridian by its independent registered public accounting firm before those services are commenced. The Chairwoman reports to the full +Committee at each of its meetings regarding pre-approvals she made since the prior meeting and the Committee approves what she has done between meetings. For these purposes, the Committee or its Chairwoman is +provided with information as to the nature, extent and purpose of each proposed service, as well as the approximate timeframe and proposed cost arrangements for that service. +As previously noted on page 8 in “The Board’s Role in Risk Oversight” section, the Audit Committee also bears certain risk oversight responsibilities. +The Committee has submitted the following report for inclusion in this proxy statement: +REPORT OF THE AUDIT COMMITTEE +The Audit Committee oversees Meridian’s financial reporting process on behalf of the Board. Management has the primary responsibility for the financial statements and the reporting process including +the systems of internal controls over financial reporting. As part of the oversight processes, the Audit Committee regularly meets with management of Meridian, Meridian’s independent registered public accounting firm and Meridian’s finance +and accounting personnel. The Audit Committee regularly meets with each of these groups separately in closed sessions. Throughout the year, the Audit Committee had full access to management, the independent registered public accounting firm and +internal auditors for Meridian. To fulfill its responsibilities, the Audit Committee did, among other things, the following: +9 +Table of Contents +(a) +reviewed and discussed Meridian’s audited financial statements for fiscal 2019 with Meridian’s management and the independent +registered public accounting firm, including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments and the clarity of disclosures in the financial statements; +(b) +reviewed management’s representations that the interim and audited financial statements were prepared in accordance with U.S. generally +accepted accounting principles and fairly present the results of operations and financial position of Meridian; +(c) +reviewed and discussed with the independent registered public accounting firm the matters required to be discussed by the applicable +requirements of the Public Company Accounting Oversight Board (“PCAOB”) and SEC rules, including matters related to the conduct of the audit of Meridian’s financial statements; +(d) +discussed with the independent registered public accounting firm the firm’s independence from management and Meridian including the +matters in the written disclosures and letter received from the independent registered public accounting firm as required by applicable requirements of the PCAOB; +(e) +based on the reviews and discussions with management and the independent registered public accounting firm, the independent registered public +accounting firm’s disclosures to the Audit Committee, the representations of management and the report of the independent registered public accounting firm, recommended to the Board, which adopted the recommendation, that Meridian’s +audited annual financial statements be included in Meridian’s Annual Report on Form 10-K for the fiscal year ended September 30, 2019, for filing with the SEC; and +(f) +reviewed all audit and non-audit services performed for Meridian by the independent registered public accounting firm for the fiscal year +ended September 30, 2019 and determined that its provision of non-audit services was compatible with maintaining its independence from Meridian. +Respectfully submitted, +Audit Committee +Felicia Williams (Chair) +James M. Anderson +Catherine A. Sazdanoff +David C. +Phillips (Ex-Officio) +The Compensation Committee is comprised of James M. Anderson +(Chair), Dwight E. Ellingwood, John C. McIlwraith, and David C. Phillips (Ex-Officio) and is responsible for establishing compensation for Executive Officers and administering the Company’s compensation +plans. As used in this proxy statement, “Executive Officer” means our chief executive officer, principal financial officer, principal accounting officer and any executive vice president. This includes establishing base salary levels and +cash-based incentive plans, making stock-based awards, and otherwise dealing in all matters concerning compensation of the Executive Officers. During fiscal 2019, the Compensation Committee met five times. +In general, the Compensation Committee annually reviews the Company’s compensation programs and its philosophy in setting performance targets each +year. The Company provides the Compensation Committee with information on total compensation received for all Executive Officers, including the sources of such compensation, for the immediately preceding fiscal year and recommendations for the +current fiscal year. In discharging the responsibilities of the Board of Directors relating to compensation of the Company’s CEO and other Executive Officers, the purposes of the Compensation Committee are, among others: (i) to review and +approve the compensation of the Company’s CEO and other Executive Officers; and (ii) to oversee the compensation policies and programs of the Company, including stock and benefit plans. The Compensation Committee’s specific functions +include adopting, administering and approving the Company’s cash-based incentive compensation and +10 +Table of Contents +stock-based incentive plans and awards, including amendments to the plans or awards and performing such duties and responsibilities under the terms of any executive compensation plan, +incentive-compensation plan or equity-based plan. The Compensation Committee has the authority to delegate any of its responsibilities to subcommittees as the Compensation Committee may deem appropriate in its sole discretion. The Compensation +Committee has the authority to engage consultants and advisors. An independent consultant was engaged during fiscal 2018 to complete a compensation study of U.S. employees, a part of which was assisting the Company in evaluating and making +recommendations related to the Company’s long-term incentive compensation plan. See discussion of the Long-Term Stock-based Incentives below on pages 16 and 19. The consultant provided a review of the competitiveness of the Company’s +compensation of non-employee directors. In 2019, the Committee also conducted a review of the CEO’s performance, reviewed the CEO’s assessment of his team’s performance, reviewed its Charter and +conducted a self-assessment, facilitated by a third party. +The Compensation Committee determines the amount and mix of compensation +components for the CEO, Mr. Kenny. As CEO, Mr. Kenny provides recommendations to the Compensation Committee with respect to the compensation to be paid to the other Named Executive Officers. +To achieve corporate objectives, the Committee believes it is important to provide competitive levels of compensation to retain the most qualified +employees, to recognize individuals who exceed expectations and to closely link executive compensation with corporate performance. The Committee believes Meridian’s long-term objectives can be achieved through cash-based incentive compensation +plans and stock-based incentive compensation plans. +The Compensation Committee’s processes and procedures for the consideration and +determination of executive and director compensation are discussed in the section entitled “Compensation Discussion and Analysis” in this proxy statement. See Compensation Committee Report on page 22 following the Compensation Discussion +and Analysis. +Compensation Committee Interlocks and Insider Participation +None of the members of the Compensation Committee has ever been an officer or employee of the Company. None of the members of the Compensation Committee is or was a participant in any related person +transaction in fiscal 2019 (see the section entitled “Transactions With Related Persons” in this proxy statement for a description of our policy on related person transactions). Lastly, none of the members of the Compensation Committee is +an Executive Officer of another entity at which one of our Executive Officers serves on the Board of Directors. No Named Executive Officer of Meridian serves as a director or as a member of a committee of any company of which any of the +Company’s non-employee directors are Executive Officers. +The Nominating and Corporate +Governance Committee consists of Dwight E. Ellingwood (Chair), John C. McIlwraith, Catherine A. Sazdanoff, and David C. Phillips (Ex-Officio). The Committee met five times during fiscal 2019. On +November 4, 2019, the Committee considered and recommended the nomination of the current directors for re-election. The Committee identifies qualified nominees for the Board, recommends to the Board who +will be nominated by the Company for election to the Board and recommends to the full Board any changes in the size of the Board. The Committee also reviewed its Charter and oversaw a third-party-facilitated self-assessment of the Board and its +committees. +In recommending the nomination of directors, the Committee takes into account, among other factors which it may deem appropriate, +the judgment, skill, diversity, independence, and business experience of the potential nominee and the needs of the Board as its function relates to the business of the Company. The Committee considers candidates for nomination from a variety of +sources including recommendations of shareholders. Shareholders desiring to submit recommendations for nomination by the Committee should direct them to the Chairman of the Nominating and Corporate Governance Committee in care of the Company at its +address shown on the cover page of this proxy statement. +11 +Table of Contents +The Nominating and Corporate Governance Committee will assess the qualifications of all candidates for the +Board on an equal basis. In identifying and considering candidates for nomination to the Board, the Committee considers, among other factors, quality of experience, the needs of the Company and the range of talent and experience currently +represented on the Board. The Committee also discusses a director skills matrix, which it has prepared and periodically updates. The Committee evaluates such factors, among others, and does not assign any particular weighting or priority to any of +these factors, nor does the Committee have a formal policy with respect to diversity. However, the Committee, working with the Board, considers the diversity of all of the Company’s stakeholders – including shareholders, employees and +customers – when engaging in corporate governance discussions. +Additionally, during 2019, under the oversight of the Nominating and +Corporate Governance Committee, an evaluation of the Board and Committees was performed by a third party. The results of the evaluation were reviewed by the Board on November 5, 2019. +DIRECTORS AND EXECUTIVE OFFICERS +This table lists the Executive +Officers and Directors of Meridian and shows the number of shares beneficially owned, as determined under SEC rules, on December 5, 2019. Beneficial ownership includes any shares as to which the individual has sole or shared voting or +investment power and also any shares that the individual has the right to acquire within 60 days. +Common Stock +Beneficially +Owned +Name +Position +Amount 1 +Percentage +Jack Kenny +Chief Executive Officer +and Director +98,819 +* +Bryan T. Baldasare 2 +Executive Vice President, Chief Financial Officer, Chief Accounting Officer, and Secretary +24,153 +* +Lourdes G. Weltzien 3 +Executive Vice President, Life Science +26,376 +* +David C. Phillips 7 +Chairman of the Board and Director +143,347 +* +James M. Anderson 4, 5 +Director +106,221 +* +Dwight E. Ellingwood 5, 6 +Director +63,787 +* +John C. McIlwraith 5, 6 +Director +56,721 +* +John M. Rice +Director +36,721 +* +Catherine A. Sazdanoff 4, 6 +Director +58,421 +* +Felicia Williams 4 +Director +21,721 +* +Lawrence J. Baldini 8 +Former Executive Vice President, Global Operations +64,624 +* +Melissa A. Lueke 9 +Former Executive Vice President and Chief Financial Officer +193,983 +* +Eric S. Rasmussen 10 +Former Executive Vice President and Chief Financial Officer +— +— +All Executive Officers and Directors as a Group +894,894 +2.1 +% +12 +Table of Contents +1 +Includes shares for options and restricted stock units currently exercisable and/or exercisable or vesting within 60 days as follows: Mr. Kenny +(50,000); Mr. Baldasare (12,750); Dr. Weltzien (10,000); Mr. Phillips (89,486); Mr. Anderson (89,486); Mr. Ellingwood (54,486); Mr. McIlwraith (47,986); Dr. Rice (30,986); Ms. Sazdanoff (49,986); +Ms. Williams (20,986); and Ms. Lueke (35,000). +2 +On December 6, 2018, Bryan T. Baldasare was promoted to be the Company’s Chief Accounting Officer effective January 1, 2019. +Mr. Baldasare was appointed as the Company’s Chief Financial Officer effective October 1, 2019. Mr. Baldasare served the Company as Interim Chief Financial Officer since June 28, 2019. Prior to that, Mr. Baldasare +served the Company as its Senior Vice President, Corporate Controller and Treasurer. Mr. Baldasare has been employed by the Company since 2000, holding positions of increasing responsibility in the Company’s accounting and finance +departments. Age: 53 +3 +Lourdes G. Weltzien joined Meridian in July 2008 as General Manager of Life Science and was appointed Vice President and General Manager of Life +Science in April 2013, as well as President of Asia Pacific Markets in July 2016, and Executive Vice President, Life Science in March 2018. Prior to joining Meridian, Dr. Weltzien held various executive and management positions with +Sigma-Aldrich Corporation (now Millipore-Sigma) since 1994. Age: 54 +4 +Audit Committee Member. +5 +Compensation Committee Member. +6 +Nominating and Corporate Governance Committee Member. +7 +Ex-Officio member of Audit, Compensation, and Nominating and Corporate Governance Committees. +8 +Mr. Baldini retired from his position as Executive Vice President, Global Operations effective April 26, 2019. Age: 60 +9 +Ms. Lueke retired from her position as Executive Vice President and Chief Financial Officer effective January 1, 2019. Ms. Lueke is now +providing consulting services to the Company under a three-year Consulting Agreement. Age: 56 +10 +Mr. Rasmussen resigned as the Company’s Executive Vice President and Chief Financial Officer effective June 28, 2019. Age: 52 +* +Less than one percent. +13 +Table of Contents +SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS +The following table lists the persons known by the Company to be the beneficial owners of more than five percent of the Company’s common stock as of +December 5, 2019, unless otherwise noted. Beneficial ownership includes any shares as to which the individual has sole or shared voting or investment power. +Name and address of beneficial owner +Amount and nature of +beneficial ownership +Percent of +class 1 +BlackRock, Inc. +55 East 52 nd Street +New York, NY 10055 +6,295,660 +14.80 +The Vanguard Group, Inc. +100 Vanguard Blvd. +Malvern, PA 19355 +4,414,539 +10.39 +Renaissance Technologies LLC +800 Third Avenue +New York, NY 10022 +2,893,348 +6.81 +1 +For the beneficial owners listed in the table, the percentages listed reflect disclosures in the Schedule 13Gs most recently filed by each beneficial +owner with the SEC as of the date of this proxy statement. According to its Schedule 13G Amendment filed with the SEC on December 10, 2019, Brown Capital Management, LLC reported that it has ceased to be the beneficial owner of more than five +percent of the Company’s common stock. +DELINQUENT SECTION 16(A) REPORTS +Section 16 of the Securities Exchange Act of 1934 requires Meridian’s Executive Officers, directors and persons who own more than ten percent of +a registered class of Meridian’s equity securities to file reports of ownership and changes in ownership with the SEC. Based on a review of the copies of such forms received by it, Meridian believes that during the last fiscal year, all of its +Executive Officers, directors and ten percent shareholders complied with the Section 16 reporting requirements except as described below. In making these statements, Meridian has relied upon examination of the copies of Forms 3, 4 and 5, and +amendments thereto, and the written representation of its directors and Executive Officers. +Lawrence J. Baldini, Melissa A. Lueke and Lourdes +G. Weltzien each filed a late Form 4 on February 25, 2019 to report the sale of 407, 1,304 and 158 shares, respectively, to cover tax withholding that occurred on December 15, 2018 for Mr. Baldini and Ms. Lueke, and on +November 21, 2018 for Dr. Weltzien. Dwight E. Ellingwood filed a late Form 4 on February 25, 2019 to report the acquisition of a total of 566 shares that had occurred through Mr. Ellingwood’s dividend reinvestment between +February 2016 and November 2018. Bryan T. Baldasare filed a late Form 4 on September 23, 2019 to report a grant of 1,200 restricted stock units that was received on September 16, 2019. +TRANSACTIONS WITH RELATED PERSONS +Nasdaq rules require the Company to conduct an appropriate review of related party transactions required to be disclosed by the Company pursuant to SEC Regulation +S-K Item 404 for potential conflict of interest situations on an ongoing basis and that all such transactions must be approved by the Audit Committee or another Committee comprised of independent directors. As +a result, the Audit Committee annually reviews all such related party transactions and approves each related party transaction if it determines that it is in the best interests of the +14 +Table of Contents +Company. Additionally, the Audit Committee’s Charter provides it the authority to review, approve and monitor transactions involving the Company and “related persons” (directors +and Executive Officers or their immediate family members, or shareholders owning five percent or greater of the Company’s outstanding stock). This also covers any related person transaction that meets the minimum threshold for disclosure in the +proxy statement under the relevant SEC rules (generally, transactions involving amounts exceeding $120,000 in which a related person has a direct or indirect material interest). In considering the transaction, the Audit Committee may consider all +relevant factors, including, as applicable: (i) the Company’s business rationale for entering into the transaction; (ii) the alternatives to entering into a related person transaction; (iii) whether the transaction is on terms +comparable to those available to third parties, or in the case of employment relationships, to employees generally; (iv) the potential for the transaction to lead to an actual or apparent conflict of interest and any safeguards imposed to +prevent such actual or apparent conflicts; and (v) the overall fairness of the transaction to the Company. This policy is included in the Company’s Employee Handbook. The approvals of such related person transactions are evidenced by +internal Company resolutions, minutes or memoranda. +COMPENSATION DISCUSSION AND ANALYSIS +Throughout this proxy statement, the individuals who served as the Company’s CEO and Chief Financial Officer during fiscal 2019, as well as the other +individuals listed in the Summary Compensation Table below, are referred to as the “Named Executive Officers” or “NEOs.” +Compensation Philosophy and Objectives +Our executive compensation is tied to performance objectives that are aligned with our strategic objectives to incentivize and focus behavior on +strengthening our business for long-term shareholder value. Meridian believes that people who understand our purpose will drive progress. In order to create value for our shareholders, it has been important for us to focus on the core areas of +growth, cost containment and organizational development. We continued to transform our business resources in 2019, based on where to compete in the market, and better leverage our strengths across the globe. Our strategic priorities are as follows: +• +Reshape the financial profile to achieve higher growth over time, while maintaining strong financial returns and mitigating risks in our business. +• +Focus on organic and inorganic investment to re-allocate capital to where we can win and compete over the +long-term. +• +Align the deployment of human capital and minimize risk, while improving organizational fitness. +Compensation and benefit programs are an important part of the Company’s employment relationship, which also include challenging and rewarding work +and a focus on career growth, while aligning with our strategy of increasing value. Pay for performance is fundamental to our compensation philosophy. We reward individuals’ performance for contributions to business success. +Critical to each element of our total compensation and benefits philosophy is that it be based on a strategy to attract, retain, and unlock the hidden +potential of our human capital, and it, therefore, consists of competitive pay, incentive programs, and benefits that meet income security and protection. The affordability of compensation and benefits are considered over the medium- to long-term, +and to the extent possible, will not fluctuate based on short-term business conditions. +The key principles to the design of our compensation +programs are as follows: +• +Base salaries, which reflect job responsibilities, competitiveness, and individual performance in connection with merit increases; +15 +Table of Contents +• +Annual cash-based incentive opportunities, which are a function of company and personal performance; and +• +Longer-term stock-based incentive opportunities under our 2012 Stock Incentive Plan, in the form of stock options and/or restricted stock unit grants, +which align the long-term interests of senior management with our shareholders. +Base salaries are based on individual job +duties, performance and achievements, while considering internal pay equity, retention, critical skills, and independent survey market data for specific regions. Annual cash-based incentive programs are based on defined metrics aligned to our +strategic objectives and the achievement of performance goals that are set at levels to motivate executives to commit to growth and align with value creation, while improving performance. +Stock-based incentive awards consist of restricted stock units and non-qualified stock options, with vesting generally being time-based. Stock-based awards are +designed to both reward and retain, while aligning interests of management with our shareholders. +The Compensation Committee has established +several principles and practices that are important to achieving our compensation philosophy and objectives. These are summarized below. +Gross-up Payments, Repricing of Options, Pledging, Hedging and Margin Accounts +The Company avoids new +contractual agreements that include excise tax gross-up payments. It does not allow the repricing of options, which is not permitted under the 2012 Stock Incentive Plan without first obtaining the approval +from shareholders of the Company. Additionally, the Company’s Insider Trading Policy places restrictions on the Company’s directors and Executive Officers regarding entering into hedging transactions with respect to the Company’s +securities and from holding the Company’s securities in margin accounts or otherwise pledging such securities as collateral for loans. Specifically, our Insider Trading Policy provides that directors, Executive Officers and certain other +designated employees may not purchase Meridian securities on margin or borrow against any account in which Meridian securities are held. The Policy also provides that such persons may not pledge Meridian securities as collateral for a loan or +engage in hedging or monetization transactions (such as zero-cost collars and forward-sale contracts) with respect to Meridian securities. No directors or Executive Officers have in place any pledges or +hedging transactions. +Recovery of Past Awards +With respect to recovery of past awards, except as provided by applicable laws and regulations, we do not have a policy with respect to adjustment or recovery of awards or payments if relevant Company +performance measures upon which previous awards were based are restated or otherwise adjusted in a manner that would reduce the size of such award or payment. Under those circumstances, we expect that the Compensation Committee and the Board would +evaluate whether compensation adjustments are appropriate based upon the facts and circumstances surrounding the applicable restatement or adjustment. +Minimum Vesting Periods +Although the plan document for our 2012 Stock Incentive Plan does +not include minimum vesting periods for options or stock appreciation rights, our Compensation Committee includes minimum vesting provisions in the award agreements for stock options pursuant to authority granted to it under the 2012 Stock Incentive +Plan. Generally the option award agreements provide for a minimum vesting period of three years. The 2012 Stock Incentive Plan provides that no restricted stock or restricted stock units conditioned upon the achievement of performance objectives +shall be based on a restriction period of less than one year, subject to the Plan’s provisions applicable to termination of employment and change in control. +Cash Buyouts of Underwater Options +Although the plan document for our 2012 Stock Incentive +Plan does not include a provision expressly prohibiting cash buyouts of options or stock appreciation rights, the Compensation Committee believes cash buyouts of +16 +Table of Contents +“underwater options” is a governance practice that investors view as unfavorable. As a result, the Compensation Committee is generally opposed to cash buyouts of options or stock +appreciation rights. +Back-Dating and Spring-Loading +Although Meridian does not have a written policy regarding the timing or practices related to granting equity awards, neither Meridian nor the Compensation Committee engages in spring-loading, back-dating +or bullet-dodging practices. Equity awards are generally granted by the Compensation Committee in the first quarter of the fiscal year. Stock options are granted at the closing market price on the date of grant, pursuant to the 2012 Stock +Incentive Plan. Prior to the exercise of an option, the holder has no rights as a shareholder with respect to the shares subject to such option, including no rights to vote or to receive dividends. Restricted stock units do not have voting rights. +Ownership Guidelines +Consistent with its compensation philosophy and the principle of aligning the interests of management and directors of the Company with the interests of +its shareholders, the Board of Directors has implemented stock ownership guidelines for “Specified Officers” (defined in the guidelines as those officers required to file beneficial ownership reports with the SEC) and non-employee directors. Under the guidelines, the Company’s CEO is required to own an amount of Company common stock (including non-vested restricted stock units) which +is equal to or exceeds three times such CEO’s annual base salary, and Specified Officers other than the CEO are required to own an amount of Company common stock (including non-vested restricted stock +units) which is equal to or exceeds such officer’s annual base salary. Also under the guidelines, each of the Company’s non-employee directors is required to own an amount of Company common stock +which is equal to or exceeds three times such non-employee director’s annual retainer. Generally, persons subject to the guidelines are required to achieve the applicable guideline not later than three +years from the appointment to their position. Excluding certain of those who are still within the phase-in period, as of the date of this proxy statement, persons subject to these guidelines have been deemed +by the Board to have met their ownership target, either as a result of their direct holdings or shares held indirectly by an entity affiliated with such person, in accordance with the guidelines. +The Compensation Committee is responsible for ongoing oversight of compliance with this compensation philosophy. The Compensation Committee ensures that +the total compensation paid to the NEOs is fair, reasonable and competitive. +At our 2019 annual meeting, Meridian once again held an advisory +vote on the compensation of its NEOs, commonly referred to as a say-on-pay vote. Our shareholders approved the compensation of our NEOs, with approximately 97% of votes +cast in favor of our 2019 say-on-pay resolution. Based on the results of the 2019 +say-on-pay vote, the Compensation Committee concluded that the compensation paid to the NEOs and Meridian’s overall pay practices received strong shareholder +support and do not require substantial revision to address shareholder concerns. +Executive Summary +Actions of the Compensation Committee +In +several meetings during the year, Mr. Kenny and the Compensation Committee Chairman discussed, among other things, Meridian’s compensation philosophy and its effectiveness in attracting and retaining talented employees. They also discussed +certain changes to the compensation programs for fiscal 2019 which are outlined in this proxy statement. +At its 2019 meetings, the +Compensation Committee discussed these matters, both with and without the presence of management. The Compensation Committee discussed the recommendations of the CEO for compensation levels for all officers and the general pay increases to be paid +throughout the Company. The Committee then made the compensation decisions, which are reflected in the figures presented in this proxy statement. +17 +Table of Contents +Fiscal 2019 Compensation Decisions +For fiscal 2019, the Cash-Based Incentive Compensation Plan’s target payout ratio for the NEOs other than the CEO was thirty-five percent of base salary, with forty percent of the target payout ratio +(14%) based on revenues; forty percent of the target payout ratio (14%) based on non-GAAP operating income (see non-GAAP financial measure reconciliation below); and the +remaining twenty percent of the target payout ratio (7%) based on individual performance using a 1-5 rating system. The specific minimum levels of revenues, non-GAAP +operating income and individual performance ratings required to achieve the varying percentage of target payout for each measurement criteria are as follows: +Threshold +(50%) +Target +(100%) +Maximum +(150%) +Revenues +$ +210,000,000 +$ +220,000,000 +$ +230,000,000 +Non-GAAP Operating Income +$ +43,500,000 +$ +45,500,000 +$ +47,500,000 +Individual Performance +2 Rating +3 Rating +4 Rating +The cash-based incentive compensation payments received by the NEOs other than the CEO for fiscal 2019, as reflected in +the Summary Compensation Table, were based on the Company achieving: (i) revenues totaling approximately $201,000,000 (no payout); non-GAAP operating income totaling approximately $43,500,000 (50% of +target payout); and (iii) individual performance ratings of 3. Non-GAAP operating income excludes the impact of acquisition-related, restructuring and selected legal costs incurred in fiscal 2019. As +detailed in the table below, measurement of actual non-GAAP operating income achieved relative to the targets listed above was adjusted to take into consideration the operating costs from the acquisition of +the GenePOC business, as this acquisition occurred subsequent to the determination of the operating income targets. +Operating Income (GAAP to Non-GAAP Reconciliation) +U.S. GAAP Operating Income +$ +32,699,000 +Acquisition-related costs +1,808,000 +Restructuring costs +2,839,000 +Selected legal costs +1,583,000 +Non-GAAP Operating Income +$ +38,929,000 +Operating costs of GenePOC business +4,589,000 +Adjusted Operating Income for use in Cash-Based +Incentive Target Measurement +$ +43,518,000 +The cash-based incentive compensation payment for the CEO was determined by the Compensation Committee pursuant to the +terms of Mr. Kenny’s employment agreement, as well as taking into consideration actual revenues and non-GAAP operating income achieved, relative to the targets noted above. Similar to the NEOs other +than the CEO, the Compensation Committee’s determination for the CEO took into consideration the operating costs from the acquisition of the GenePOC business, as this acquisition occurred subsequent to the determination of the operating income +targets. +Fiscal 2020 Compensation Decisions +Base Salaries +Based on our financial results in fiscal 2019 and the Compensation +Committee’s review of the CEO’s evaluation of the other NEOs, the up-coming merit increase for Dr. Weltzien is expected to be approximately 3%. As a result of his promotion and base salary +adjustment on October 1, 2019, Mr. Baldasare will not receive a merit adjustment on January 1, 2020. With respect to Mr. Kenny, see page 21 for discussion of his compensation arrangements. Base salaries across all Meridian +employees below the executive level are expected to increase approximately 3% effective January 1, 2020. +18 +Table of Contents +Cash-Based Incentive Compensation +The Compensation Committee approved the 2020 Cash-Based Incentive Compensation Plan structure, including performance targets and payout targets. For NEOs other than the CEO, the target payout ratio is +forty percent of base salary. For the NEOs other than the CEO, thirty percent of the target payout ratio (12%) is based on achieving certain levels of net revenues; thirty percent of the target payout ratio (12%) is based on achieving certain levels +of operating income; and the remaining forty percent of the target payout ratio (16%) is based on individual performance. Depending on the level of achievement, a NEO other than the CEO may earn from 0% to 68% of base salary. For the CEO, the target +pay-out ratio is seventy-five percent of base salary pursuant to the provisions of Mr. Kenny’s amended employment agreement. +Cash-based incentive compensation, if earned, is paid in the first quarter of each fiscal year, for the prior fiscal year’s performance. The net revenues and operating income targets operate +independently. While the net revenues portion may be earned upon achieving the net revenues targets, the component related to operating income is subject to the Company’s attainment of the specific operating income target, after inclusion of +the compensation expense related to cash-based incentive compensation. Should the Company fail to reach the minimum operating income target, no cash-based incentive compensation will be paid for this component. +Management and the Compensation Committee have intended that the net revenues and operating income thresholds be set at reasonably achievable targets, +yet at levels that require diligence to produce meaningful performance. The Compensation Committee tends to set the thresholds consistent with the net revenue and operating income guidance range. +Long-Term Stock-based Incentives +After considering the independent consultant’s findings and recommendations, the Compensation Committee has modified the Company’s long-term +stock-based incentive program. As a result of these modifications, awards to be granted to certain executives of the Company, including the NEOs other than the CEO, are based on fixed dollar values that are dependent upon the executive’s level +in the Company. Such awards are expected to be in the form of restricted stock units. Awards to be granted to the CEO will be governed by the provisions of Mr. Kenny’s amended employment agreement and are expected to include two types of +equity awards, restricted stock units and options to purchase Company stock. +Establishing Compensation Levels +The Compensation Committee recommends CEO compensation to the Board of Directors for approval. The Company has an employment agreement with the CEO, which +is described on page 21. The compensation levels for the other NEOs are recommended by the CEO. The Compensation Committee has discretion to follow or modify such recommended levels of compensation. The Compensation Committee considers the input of +our CEO as a crucial component of its compensation processes and decisions relating to NEO compensation. The Compensation Committee is not obligated to follow his recommendations. The Company does not engage in strict numerical benchmarking in +determining the percentage modifications for the NEOs. Under its charter, the Compensation Committee is authorized to engage outside advisors at the Company’s expense. In fiscal 2018, the Company engaged an independent consultant to +complete a compensation study for U.S. employees, a part of which was assisting the Company in evaluating, and making recommendations related to the Company’s long-term incentive compensation, including providing benchmarked peer data of such +compensation. See discussion of the long-term incentive compensation above. +In setting the NEOs’ compensation, the Compensation +Committee reviews all components of such compensation through the use of tally sheets. These tally sheets provide the amount of total compensation paid or earned by each NEO based on his or her base salary, cash-based incentive compensation, +stock-based awards and retirement contributions. The tally sheets reviewed provide all of the information that is reflected in the Summary Compensation Table. The review by the Compensation Committee analyzes how changes in any element of +compensation would impact other elements, particularly severance or change in control benefits, if applicable to the executive. Such analysis has become an important component in the Compensation Committee’s review of executive compensation, as +the tally sheet allows the Compensation Committee to consider an executive’s overall +19 +Table of Contents +compensation rather than only one or two specific components of an executive’s compensation. This allows the Compensation Committee to make compensation decisions and evaluate management +recommendations based on a complete analysis of an executive’s total compensation. Salaries are set on a calendar year basis and, therefore, salaries paid in the first three months of each fiscal year beginning on the first day of October are +set in the prior fiscal year. +Components of Executive Compensation and Related Risk Profile +Meridian’s executive compensation and benefits packages consist of base salary, cash-based incentive compensation, long-term stock-based incentive +awards, Company-sponsored benefit and retirement plans, and change in control severance benefits. Each of these components has a certain risk profile. +Element +Form of Compensation +Purpose +Risk Profile +Base Salaries +Cash +Provides competitive, fixed compensation to attract and retain exceptional executive talent +Low to moderate +Annual Cash-based Incentives +Cash +Provides a direct financial incentive to achieve corporate operating goals +Moderate to high +Long-Term Stock-based Incentives +Non-qualified stock options and/or restricted stock units +Encourages Executive Officers to build and maintain a long-term equity ownership position in Meridian so that their interests are aligned with our shareholders +High +Health, Retirement and Other Benefits +Eligibility to participate in benefit plans generally available to our employees, including retirement plan contributions, and premiums paid on disability and life insurance +policies +Benefit plans are part of a broad-based employee benefits program providing competitive benefits to our Executive Officers +Low +Change in Control Severance Benefits +Cash and continuation of certain benefits +Encourages Executive Officers to maximize value for shareholders in the event that the Company becomes subject to a change in control transaction +Moderate to high +20 +Table of Contents +The Compensation Committee has reviewed the risk profile of the components of the Company’s executive +compensation program, including the performance objectives and target levels used in connection with incentive awards, and has considered the risks a NEO might be incentivized to take with respect to such components. When establishing the mix among +these components, the Compensation Committee is careful not to encourage excessive risk taking. Specifically, the performance objectives contained in the Company’s executive compensation programs have been balanced between annual and long-term +incentive compensation to ensure that both components are aligned and consistent with our long-term business plan and that our overall mix of stock-based awards has been allocated to promote an appropriate combination of incentive and retention +objectives. +The Compensation Committee believes that the Company’s executive compensation program does not incentivize the NEOs to +engage in business activities or other behavior that would threaten the value of the Company or the investments of its shareholders. +The +Compensation Committee continues to monitor and evaluate on an on-going basis the mix of compensation, especially equity compensation, awarded to the NEOs, and the extent to which such compensation aligns the +interests of the NEOs with those of the Company’s shareholders. In connection with this practice, the Compensation Committee has, from time to time, reconsidered the structure of the Company’s executive compensation program and the +relative weighting of various compensation elements. +See Executive Summary on page 17 for discussion of base salaries, annual cash-based +incentive compensation and long-term stock-based compensation. +Company-Sponsored Benefit and Retirement Plans +Meridian provides Company-sponsored benefit and retirement plans to the NEOs. In general, executives participate in the Company’s benefit and +retirement plans on the same basis as other Company employees. The core benefit package includes health, dental, short and long-term disability, and group term life insurance. Meridian generally provides retirement benefits to executives through +qualified (under the Internal Revenue Code) defined contribution plans (401K Plan). +Change in Control Severance Benefits +The Compensation Committee believes that a reasonable level of salary and Company-sponsored benefit protection provides a means of retention and allows +the NEOs to remain focused on achievement of Company goals and objectives in the event that the Company becomes subject to a merger or acquisition transaction. This component of compensation would only be paid in the event of a change in control of +the Company, under certain qualifying conditions, and termination of the NEO’s employment (i.e., double trigger). For the CEO and other NEOs, this component of compensation would include two years’ base salary, performance bonus and core +benefits. See page 29 for a description of change in control severance agreements entered into with our Executive Officers. +Jack Kenny +Employment Agreement +On November 5, 2019, Meridian entered into an Amended and Restated Employment Agreement (the “Kenny +Employment Agreement”) with Jack Kenny, its CEO. Under the Kenny Employment Agreement Mr. Kenny is entitled to be paid a base salary of $670,000 and his salary shall be reviewed annually by the Compensation Committee. During the first year +of the Kenny Employment Agreement, Mr. Kenny is eligible to earn an annual target bonus of seventy-five percent of his base salary. Thereafter, the Compensation Committee shall set an eligible target amount for the annual bonus for the +applicable employment term year. The actual amount of any annual bonus payable to Mr. Kenny in any year shall be determined by the Compensation Committee based upon performance criteria set forth in advance under the bonus plan established by +the Compensation Committee and the achievement of such performance criteria. +As contemplated by the Kenny Employment Agreement, on +November 5, 2019 the Company granted Mr. Kenny pursuant to Meridian’s 2012 Stock Incentive Plan: (i) options to purchase 198,119 shares of common stock of the +21 +Table of Contents +Company, which shall vest on a pro rata basis over three years; and (ii) 99,505 restricted stock units, which shall vest in a lump sum or “cliff” basis on October 1, +2022. +The effective date of the Kenny Employment Agreement is October 1, 2019 and its term is two years, with annual renewal provisions +following the initial term. Either the Company or Mr. Kenny may terminate the Kenny Employment Agreement at any time for any reason upon 90 days’ notice. In the event that the Company terminates the employment of Mr. Kenny without +Cause or if he terminates his employment for Good Reason, each as defined in the Kenny Employment Agreement, Mr. Kenny is entitled to a severance payment equal to twelve months of his then current base salary plus a pro-rata portion of the target bonus through the date of termination. If such termination occurs during a change in control period (i.e., a double trigger), Mr. Kenny is entitled to a severance payment +equal to two times his then current base salary plus his target bonus for the year in which the termination occurs. +The Kenny Employment +Agreement contains customary indemnification provisions and a “clawback” provision that enables the Company to recoup any amounts paid to Mr. Kenny under the Kenny Employment Agreement if so required by applicable law or any +applicable securities exchange listing standards. +Melissa A. Lueke Consulting Agreement +The Company and Ms. Lueke, our former Chief Financial Officer, entered into a Consulting Agreement effective January 1, 2019 upon her retirement from +the Company. The Consulting Agreement provides that Ms. Lueke will assist the Company on an as-requested basis with matters related to the Company’s financial reporting and accounting, among other +matters. Under the Consulting Agreement, the Company agreed to pay Ms. Lueke $90,000 per year and reimburse her for certain expenses. The Consulting Agreement’s term is three years and may be renewed upon mutual written agreement or +cancelled by Ms. Lueke at any time. +Internal Pay Equity +The Compensation Committee believes that the relative difference between the CEO’s compensation and the compensation of the Company’s other executives has not increased significantly over the +years. Further, the Compensation Committee believes that the Company’s internal pay equity structure is appropriate based upon the contributions to the success of the Company and as a means of motivation to other executives and employees. +COMPENSATION COMMITTEE REPORT +The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management. Based on +these reviews and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Company’s proxy statement on Schedule 14A. +Members of the Compensation Committee +James M. Anderson (Chair) +Dwight E. Ellingwood +John C. McIlwraith +David C. +Phillips (Ex-Officio) +22 +Table of Contents +CEO PAY RATIO +Our CEO Pay Ratio was calculated in compliance with the requirements set forth in Item 402(u) of Regulation S-K. We identified the median employee population as of +July 31, 2019, which included all 660 global full-time, part-time, temporary and seasonal employees employed on that date, excluding 18 such employees in our Belgium, China, France and Holland locations, which in the aggregate represent less +than 5% of our workforce. We used a consistently applied compensation measure across our global employee population to calculate the median employee compensation. For our consistently applied compensation measure, we utilized total cash compensation +per our internal payroll records, annualized and translated to U.S. dollars. We then calculated the median employee’s fiscal 2019 compensation in the same manner as the NEOs in the Summary Compensation Table. Our median employee compensation +for fiscal 2019 was $59,227 and our CEO’s compensation was $1,316,392. Accordingly, our CEO-to-Employee Pay Ratio is 22:1. +EQUITY COMPENSATION PLAN INFORMATION +The following table presents information about the Company’s equity compensation plans as of September 30, 2019 (number of securities information in thousands): +Plan category +Number of +securities +to +be issued upon +exercise +of outstanding +options, +warrants and +rights +(a) +Weighted average +exercise +price of +outstanding +options, +warrants and +rights +(b) +Number +of +securities +remaining +available for future +issuance +under +equity +compensation +plans +(excluding +securities reflected +in +column +(a)) +(c) +Equity compensation plans approved by security holders (1) +990 +$ +17.360 +2,657 +Total +(2) +990 +$ +17.360 +2,657 +(1) +2004 Equity Compensation Plan, as amended, and 2012 Stock Incentive Plan +(2) +Weighted-average remaining term of 6.37 years +23 +Table of Contents +SUMMARY COMPENSATION TABLE +The following table summarizes the aggregate compensation paid, or earned, by each of the NEOs for the fiscal years ended September 30, 2019, 2018 +and 2017, respectively: +Name and Principal +Position +(a) +Year +(b) +Salary +(c) +Bonus 1 +(d) +Stock +Awards 2,7 +(e) +Option +Awards 3 +(f) +Non-Equity +Incentive Plan +Compensation 4 +(g) +Change in +Pension +Value +and +Nonqualified +Deferred +Compensation +Earnings +(h) +All Other +Compensation 5 +(i) +Total +Jack Kenny +Chief Executive +Officer +2019 +2018 +2017 +$ +$ +650,000 +542,408 +— +— +— +— +$ +$ +485,250 +554,750 +— +$ +— +319,140 +— +$ +$ +150,000 +250,000 +— +— +— +— +$ +$ +31,142 +192,308 +— +$ +$ +1,316,392 +1,858,606 +— +Bryan T. Baldasare 6 +Executive Vice President, Chief Financial Officer and Secretary +2019 +2018 +2017 +$ +$ +$ +283,039 +251,037 +243,610 +— +— +— +$ +$ +$ +157,563 +73,250 +84,750 +— +— +— +$ +$ +28,600 +61,875 +— +— +— +— +$ +$ +$ +21,557 +26,801 +27,692 +$ +$ +$ +490,759 +412,963 +356,052 +Eric S. Rasmussen 7 +Former Executive Vice President, Chief Financial Officer and Secretary +2019 +2018 +2017 +$ +$ +318,847 +107,692 +— +$ +— +60,000 +— +— +— +— +— +— +— +$ +— +32,667 +— +— +— +— +$ +$ +838,364 +45,331 +— +$ +$ +1,157,211 +245,690 +— +Melissa A. Lueke 8 +Former Executive Vice President, Chief Financial Officer and Secretary +2019 +2018 +2017 +$ +$ +$ +93,938 +344,000 +339,520 +— +— +— +$ +$ +$ +242,625 +109,875 +169,500 +$ +$ +— +40,306 +27,708 +$ +— +96,320 +— +— +— +— +$ +$ +$ +96,407 +38,771 +45,564 +$ +$ +$ +432,970 +629,272 +582,292 +Lourdes G. Weltzien +Executive +Vice President, Life Science +2019 +2018 +2017 +$ +$ +$ +358,431 +341,516 +323,296 +— +— +— +$ +$ +$ +242,625 +109,875 +212,625 +$ +— +71,780 +— +$ +$ +50,512 +57,493 +— +— +— +— +$ +$ +$ +23,982 +35,385 +36,484 +$ +$ +$ +675,550 +616,049 +572,405 +Lawrence J. Baldini 9 +Former Executive Vice President, Global Operations +2019 +2018 +2017 +$ +$ +$ +212,847 +350,804 +346,673 +— +— +— +$ +$ +$ +242,625 +109,875 +169,500 +$ +— +40,306 +— +$ +$ +28,801 +98,617 +— +— +— +— +$ +$ +$ +209,246 +41,774 +42,561 +$ +$ +$ +693,519 +641,376 +558,734 +1 +The amount reflected for Mr. Rasmussen represents a signing bonus upon his being hired as Executive Vice President, Corporate Development in June +2018. See Note 7 below. +2 +The amounts shown reflect the grant date fair value of the restricted stock units issued during fiscal years 2019, 2018 and 2017 in accordance with ASC +Topic 718, including those granted to Mr. Kenny upon his being hired as CEO in October 2017. In addition, the amounts reflected for Mr. Baldasare in fiscal 2019 and Dr. Weltzien in fiscal 2017 include the grant date fair value of +restricted stock units granted to: (i) Mr. Baldasare in connection with the acquisition of the business of GenePOC Inc.; and (ii) Dr. Weltzien in connection with her serving as President of Asia Pacific Markets. No compensation +cost is included in this table related to the performance-based portion of the restricted stock units granted during fiscal 2018 and 2017, and because the required earnings targets for Meridian were not reached for fiscal 2018 or 2017, the +performance-based restricted stock units have been cancelled. No such performance-based restricted stock units were granted during fiscal 2019. A discussion of the assumptions used in calculating these values may be found in Note 7(b) on page 61 of +the Company’s Annual Report on Form 10-K filed with the SEC on November 26, 2019. +3 +The amounts shown reflect the grant date fair value of the stock options granted during fiscal years 2018 and 2017 in accordance with ASC Topic 718, +and during fiscal 2018 are comprised of: (i) a grant to Mr. Kenny upon his being hired as CEO in October 2017; (ii) a grant to Dr. Weltzien in connection with her promotion to Executive Vice President, Life Science in March 2018; and +(iii) time-based grants made in connection with the Company’s long-term incentive compensation program. No compensation cost is included in this table related to the performance-based portion of stock options granted during fiscal 2018. +Because the required earnings target for Meridian was not reached for fiscal 2018, the performance-based stock options have been cancelled. The fiscal 2017 amount relates to a grant to Ms. Lueke in recognition of increased responsibilities in +her position of +24 +Table of Contents +Executive Vice President and Chief Financial Officer. A discussion of the assumptions used in calculating these values may be found in Note 7(b) on page 61 of the Company’s Annual Report on +Form 10-K filed with the SEC on November 26, 2019. +4 +The amounts shown represent amounts earned by the NEOs pursuant to the Officer’s Performance Compensation Plan for fiscal 2019 and 2018. No such +amounts were earned for fiscal 2017, as the corporate-wide targets were not reached for this fiscal year. +5 +See the All Other Compensation table below for amounts, which include certain Company contributions and other personal benefits for fiscal 2019. +All Other Compensation +Jack +Kenny +Bryan T. +Baldasare +Eric S. +Rasmussen +Melissa A. +Lueke +Lourdes G. +Weltzien +Lawrence J. +Baldini +Retirement Contributions +$ +15,392 +$ +15,932 +$ +18,820 +$ +5,001 +$ +14,920 +$ +9,483 +Restricted Stock Dividends +15,750 +5,625 +4,375 +10,000 +9,062 +10,000 +Consulting Agreement Payments +— +— +— +67,500 +— +— +Accumulated Vacation Payout +— +— +9,809 +13,906 +— +9,258 +Relocation Costs, including Gross-up +— +— +55,360 +— +— +— +Separation Payment +— +— +750,000 +— +— +180,505 +Totals +$ +31,142 +$ +21,557 +$ +838,364 +$ +96,407 +$ +23,982 +$ +209,246 +6 +Mr. Baldasare was named Interim Chief Financial Officer effective June 28, 2109, upon Mr. Rasmussen’s resignation. On +October 1, 2019, Mr. Baldasare was named Executive Vice President and Chief Financial Officer of Meridian. See Note 7 below. +7 +In June 2019, Mr. Rasmussen resigned from his position with Meridian. Mr. Rasmussen was appointed as the Company’s Chief Financial +Officer effective January 1, 2019. In connection with his resignation, Mr. Rasmussen received the separation payment reflected in the All Other Compensation Table above, which was comprised of: (i) one year of regular base salary +($450,000); (ii) payment in lieu of fiscal 2019 corporate bonus ($75,000); and (iii) payment to compensate for restricted stock units forfeited and recognize contributions related to the acquisition of the business of GenePOC Inc. ($225,000). +The grant date fair value of restricted stock units and options forfeited by Mr. Rasmussen totaled $414,925 and $99,376, respectively ($339,675 for fiscal 2019 grants and $174,626 for fiscal 2018 grants). +8 +Effective January 1, 2019, Ms. Lueke retired from her position with Meridian. Effective January 1, 2019, the Company and Ms. Lueke +entered into a Consulting Agreement at a rate of $90,000 per year, the fiscal 2019 payments for which are reflected in the All Other Compensation Table above. The Consulting Agreement’s term is three years and may be renewed upon mutual +agreement or cancelled by Ms. Lueke at any time. +9 +Effective April 26, 2019, Mr. Baldini retired from his position as Executive Vice President, Global Operations, with Meridian. In connection +with his retirement, Mr. Baldini received the separation payment reflected in the All Other Compensation Table above, representing six months of regular base salary. +25 +Table of Contents +GRANTS OF PLAN-BASED AWARDS +The following table sets forth, for each of the NEOs, information related to grants made during fiscal 2019 under Meridian’s Cash-Based Incentive +Compensation Plan and 2012 Stock Incentive Plan: +Estimated Future Payouts Under +Non-Equity Incentive Plan +Awards 1 +Estimated Future Payouts Under +Equity Incentive Plan Awards +All other +Stock +Awards: +Number of +Shares of +Stock or +Units (#) +All other +Option +Awards: +Number of +Securities +Underlying +Options (#) +Exercise +or Base +Price of +Option +Awards +($/Sh) +Grant Date +Fair +Value +of Stock +and +Option +Awards +Name +Grant +Date +Threshold +($) +Target +($) +Max +($) +Threshold +(#) +Target +(#) +Max +(#) +(a) +(b) +(c) +(d) +(e) +(f) +(g) +(h) +(i) +(j) +(k) +(l) +Jack Kenny +12/06/18 +11/15/18 +$ +22,750 +— +$ +227,500 +— +$ +325,000 +— +— +— +— +— +— +— +— +25,000 +2 +— +— +— +— +$ +— +485,250 +Bryan T. Baldasare +12/06/18 +11/15/18 +09/16/19 +$ +7,150 +— +— +$ +71,500 +— +— +$ +114,400 +— +— +— +— +— +— +— +— +— +— +— +— +7,500 +1,200 +2 +3 +— +— +— +— +$ +$ +— +145,575 +11,988 +Eric S. Rasmussen 4 +12/06/18 +11/15/18 +$ +15,750 +— +$ +157,500 +— +$ +252,000 +— +— +— +— +— +— +— +— +17,500 +2 +— +— +— +— +$ +— +339,675 +Melissa A. Lueke +11/15/18 +— +— +— +— +— +— +12,500 +2 +— +— +$ +242,625 +Lourdes G. Weltzien +12/06/18 +11/15/18 +$ +12,628 +— +$ +126,280 +— +$ +202,048 +— +— +— +— +— +— +— +— +12,500 +2 +— +— +$ +— +242,625 +Lawrence J. Baldini +12/06/18 +11/15/18 +$ +12,635 +— +$ +126,354 +— +$ +202,166 +— +— +— +— +— +— +— +— +12,500 +2 +— +— +— +— +$ +— +242,625 +1 +These columns reflect the potential payout for each NEO under the Fiscal 2019 Cash-Based Incentive Compensation Plan if the threshold, target and +maximum goals were satisfied for all performance measures. As described within the “Executive Summary” section of the “Compensation Discussion and Analysis” beginning on page 17, during fiscal 2019, the revenue performance +measurement was not achieved, while the operating income performance measurements were achieved at the 50% of Target threshold. These results, along with the individual performance factor, resulted in the amounts set forth in “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table being earned by the NEOs. +2 +These grants were of time-based restricted stock units with 100% vesting after three years. +3 +This grant of time-based restricted stock units with 100% vesting after three years was made to Mr. Baldasare in connection with the acquisition +of the business of GenePOC Inc. +4 +See Note 7 of the Summary Compensation Table regarding forfeiture of the time-based restricted stock units granted to Mr. Rasmussen during fiscal +2019. +26 +Table of Contents +OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END +The following table provides information on the NEOs’ holdings of equity awards under +Meridian’s 2012 Stock Incentive Plan and 2004 Equity Compensation Plan as of September 30, 2019: +Option Awards +Stock Awards +Name +Number of +Securities +Underlying +Unexercised +Options (#) +Exercisable +Number of +Securities +Underlying +Unexercised +Options (#) +Unexercisable +Equity +Incentive Plan +Awards: +Number of +Securities +Underlying +Unexercised +Unearned +Options (#) +Option +Exercise +Price ($) +Option +Expiration +Date +Number of +Shares or +Units of +Stock +That Have +Not +Vested (#) +Market +Value of +Shares or +Units of +Stock That +Have Not +Vested ($) +Equity +Incentive +Plan +Awards: +Number of +Unearned +Shares, +Units or +Other +Rights That +Have +Not +Vested (#) +Equity +Incentive +Plan +Awards: +Market or +Payout +Value of +Unearned +Shares, +Units +or +Other +Rights That +Have Not +Vested ($) +(a) +(b) +(c) +(d) +(e) +(f) +(g) +(h) +(i) +(j) +Jack Kenny +25,000 1 +75,000 1 +— +$ +14.50 +10/09/27 +— +13,000 8 +25,000 9 +25,000 9 +$ +$ +$ +— +123,370 +237,250 +237,250 +— +— +— +— +— +— +— +— +Bryan T. Baldasare +1,500 2 +— +— +$ +19.71 +08/04/20 +— +— +— +— +11,250 3 +3,750 3 +— +$ +19.56 +03/24/26 +— +— +— +— +5,000 10 +$ +47,450 +— +— +5,000 11 +$ +47,450 +— +— +5,000 9 +$ +47,450 +— +— +7,500 9 +$ +71,175 +— +— +1,200 12 +$ +11,388 +— +— +Eric S. Rasmussen +— +— +— +— +— +— +— +— +— +Melissa A. Lueke +12,500 4 +— +— +$ +19.56 +12/31/21 +— +— +— +— +10,000 4 +— +— +$ +16.85 +12/31/21 +— +— +— +— +12,500 4 +— +— +$ +14.65 +12/31/21 +— +— +— +— +Lourdes G. Weltzien +7,500 5 +2,500 5 +— +$ +19.66 +07/01/26 +— +— +— +— +— +12,500 6 +— +$ +14.65 +11/08/27 +— +— +— +— +2,500 7 +7,500 7 +— +$ +14.30 +04/24/28 +— +— +— +— +5,000 10 +$ +47,450 +— +— +10,000 11 +$ +94,900 +— +— +1,250 13 +$ +11,863 +— +— +7,500 9 +$ +71,175 +— +— +12,500 9 +$ +118,625 +Lawrence J. Baldini +— +— +— +— +— +10,000 14 +$ +94,900 +— +— +10,000 14 +$ +94,900 +— +— +7,500 14 +$ +71,175 +— +— +12,093 14 +$ +114,763 +— +— +1 +Options vest in four equal annual installments from the date of grant, until fully vested on October 9, 2021. +2 +Options fully vested on August 4, 2014. +27 +Table of Contents +3 +Options vest in four equal annual installments from the date of grant, until fully vested on March 24, 2020. +4 +Options fully vested upon Ms. Lueke’s January 1, 2019 retirement and expire upon the conclusion of the original three-year term of her +consulting agreement with the Company. +5 +Options vest in four equal annual installments from the date of grant, until fully vested on July 1, 2020. +6 +Options vest in full on November 8, 2021. +7 +Options vest in four equal annual installments from the date of grant, until fully vested on April 24, 2022. +8 +Units vest on October 9, 2019. +9 +Units vest on November 15, 2021. +10 +Units vest on November 15, 2019. +11 +Units vest on November 15, 2020. +12 +Units vest on September 16, 2022. +13 +Units vest half on November 21, 2019 and half on November 21, 2020. +14 +Units vested on November 1, 2019 in connection with Mr. Baldini’s April 26, 2019 retirement. +OPTION EXERCISES AND STOCK VESTED +The following table sets forth, for each of the NEOs, information on options exercised and restricted stock units vested during fiscal 2019: +Option Awards +Stock Awards +Name +Number of +Shares +Acquired on +Exercise (#) +Value Realized +on Exercise ($) 1 +Number of Shares +Acquired on +Vesting (#) +Value Realized on +Vesting ($) 2 +(a) +(b) +(c) +(d) +(e) +Jack Kenny +— +$ +— +— +$ +— +Bryan T. Baldasare +— +$ +— +2,400 +$ +46,584 +Eric S. Rasmussen +— +$ +— +— +$ +— +Melissa A. Lueke +— +$ +— +49,000 +$ +653,310 +Lourdes G. Weltzien +— +$ +— +3,025 +$ +58,046 +Lawrence J. Baldini +— +$ +— +9,407 +$ +181,800 +1 +Amounts reflect the difference between the exercise price of the option and the market price of Meridian common shares at the time of exercise. +2 +Amounts reflect the market price of Meridian common shares at the time of restricted stock units vesting. +28 +Table of Contents +401(K) PLAN +Our 401(k) Savings Plan (“401(k) Plan”) allows all U.S. employees of the Company as soon as administratively possible following their employment to set aside a portion of their compensation each +year for their retirement needs, up to the limits set by the Internal Revenue Code. Presently, the Company contributes a matching contribution of 100% of the first 4% of the employee’s contribution (i.e., up to 4% of an employee’s salary), +subject to Internal Revenue Code limitations. The Company may also contribute a profit-sharing contribution at its discretion. Employee contributions and employer matching contributions are 100% vested immediately. Participants are entitled to +direct the investment of their accounts among various mutual funds selected by the Meridian Bioscience, Inc., Savings and Investment Plan Committee. Participants who terminate employment are entitled to receive the vested portion of their accounts. +POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL +As described on page 21 in the “Compensation Discussion and Analysis” section of this proxy statement, Mr. Kenny and Meridian are parties +to the Kenny Employment Agreement which sets forth compensation, non-competition, benefit and severance provisions and provides for a payment equal to twelve months of Mr. Kenny’s then current base +salary plus a pro-rata portion of the target bonus through the date of termination in the event Mr. Kenny is terminated by Meridian without cause or Mr. Kenny terminates his employment for good +reason. If such termination occurs during a change in control period (double trigger), Mr. Kenny is entitled to a severance payment equal to two times his then current base salary plus his target bonus for the severance period. +Had one of the events noted above occurred on September 30, 2019 and Meridian been within a change in control period at that time, Mr. Kenny +would also have been entitled to the following under the Kenny Employment Agreement: +Salary +$ +1,300,000 +Annual Performance Bonus +975,000 +Total Lump Sum Payment +$ +2,275,000 +Our Board of Directors authorized us to enter into change in control severance agreements with our Executive Officers +(other than our CEO, who has a change in control provision in his Employment Agreement). Each agreement had an initial term ended December 31, 2016, and each year will automatically renew for an additional one year term, provided however, that +if a change in control occurs the term will expire no earlier than 24 calendar months after the calendar month in which such change in control occurs. A change in control is generally defined in each agreement as any of the following: (i) a +person is or becomes a beneficial owner of more than 50% of our voting securities; (ii) the composition of a majority of our Board changes; (iii) we consummate a merger or similar transaction; (iv) the sale of all or substantially all +of our assets; or (v) the employment of a CEO other than the Company’s current CEO as of the date of the agreement. Each agreement provides, among other things, that if a change in control occurs during the term of the agreement, and the +executive’s employment is terminated either by us or by the executive, other than: (a) by us for cause; (b) by reason of death or disability; or (c) by the executive without good reason, such executive will receive a severance +payment equal to: (A) a multiple of such executive’s annual base salary; (B) a multiple of executive’s target bonus amounts; and (C) earned but unused vacation time. In addition, each change in control agreement provides +that in the event that the severance and other benefits provided for in the agreement or otherwise payable to the executive would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code, the benefits under the +agreement will be either delivered in full, or delivered to a lesser extent which would result in no portion of the benefits being subject to such excise tax, whichever is more beneficial to the executive. +29 +Table of Contents +Had termination in connection with a change in control occurred on September 30, 2019, the NEOs to +which the policy applied at that date (Mr. Baldasare and Dr. Weltzien) would have been entitled to the following lump sum payments under the policy: +Bryan T. +Baldasare +Lourdes G. +Weltzien +Salary +$ +572,000 +$ +721,600 +Annual Performance Bonus +143,000 +252,560 +Earned but Unused Vacation +11,006 +13,868 +Total Lump Sum Payment +$ +726,006 +$ +988,028 +DIRECTOR COMPENSATION +For fiscal 2019, independent directors of Meridian received the following compensation for service on the Board and the Audit Committee (“AC”), Compensation Committee (“CC”) and +Nominating & Corporate Governance Committee (“N&CGC”) (annual amounts presented): +-Base for director service +$ +40,000 +-Additional for Independent Chairperson +$ +50,000 +-AC Chair +$ +20,000 +-AC Member +$ +10,000 +-CC Chair +$ +13,000 +-CC Member +$ +6,000 +-N&CGC Chair +$ +13,000 +-N&CGC Member +$ +5,000 +Beginning in January 2020, each independent director is entitled to receive on an annual basis an equity award grant +valued at $100,000, an increase from $50,000 in January 2019. One-third of such equity value is to be in the form of restricted stock units (valued at the market value of our common stock at the date of award) +and two-thirds is to be in the form of non-qualified options to purchase common shares of the Company at an exercise price equal to the grant date closing sale price as +reported on Nasdaq (valued pursuant to the current methodology utilized by the Company for financial reporting purposes, which may be found in Note 7(b) on page 61 of the Company’s Annual Report on Form +10-K filed with the SEC on November 26, 2019). +The following table provides information on +compensation related to fiscal 2019 for independent directors who served during fiscal 2019: +Name +Fees +Earned +or +Paid in +Cash +($) +Stock +Awards +($) 1 +Option +Awards +($) 1 +Non-Equity +Incentive Plan +Compensation +($) +Change in +Pension Value +and +Nonqualified +Deferred +Compensation +Earnings +All Other +Compensation +($) +Total +($) +(a) +(b) +(c) +(d) +(e) +(f) +(g) +(h) +James M. Anderson +$ +64,667 +$ +16,650 +$ +33,350 +— +— +— +$ +114,667 +Dwight E. Ellingwood +$ +57,000 +$ +16,650 +$ +33,350 +— +— +— +$ +107,000 +John C. McIlwraith +$ +51,000 +$ +16,650 +$ +33,350 +— +— +— +$ +101,000 +David C. Phillips +$ +98,167 +$ +16,650 +$ +33,350 +— +— +— +$ +148,167 +John M. Rice +$ +53,000 +$ +16,650 +$ +33,350 +— +— +— +$ +103,000 +Catherine A. Sazdanoff +$ +53,333 +$ +16,650 +$ +33,350 +— +— +— +$ +103,333 +Felicia Williams +$ +56,667 +$ +16,650 +$ +33,350 +— +— +— +$ +106,667 +30 +Table of Contents +1 +The amounts shown reflect the grant date fair value of the awards made in fiscal year 2019 in accordance with ASC Topic 718. A discussion of the +assumptions used in calculating these values may be found in Note 7(b) on page 61 of the Company’s Annual Report on Form 10-K filed with the SEC on November 26, 2019. +SHAREHOLDER PROPOSALS FOR NEXT YEAR +The deadline for shareholder proposals to be included in the proxy statement for next year’s meeting is August 20, 2020. +The form of proxy for this meeting grants authority to the designated proxies to vote in their discretion on any matters that come before the meeting except those set forth in Meridian’s proxy +statement and except for matters as to which adequate notice is received. In order for a notice to be deemed adequate for the 2021 Annual Shareholders’ Meeting, it must be received prior to October 29, 2020. If there is a change in the +anticipated date of next year’s Annual Shareholders’ Meeting or these deadlines by more than 30 days, we will notify you of this change through our Form 8-K and/or Form +10-Q filings. +Meridian’s Code of Regulations provides that only persons nominated by an officer, +director or in writing by a shareholder not earlier than 150 days nor later than 90 days prior to the meeting at which directors are to be selected shall be eligible for election and that shareholder proposals be presented not earlier than 150 days +nor later than 90 days prior to the meeting at which the proposals are to be presented. +QUESTIONS +If you have questions or need more information about the annual meeting, call us at (513) 271-3700 +or write to: +Bryan T. Baldasare +Executive Vice President, Chief Financial Officer and Secretary +Meridian Bioscience, Inc. +3471 River Hills Drive +Cincinnati, Ohio 45244 +For information about +your record holdings, call Computershare Shareholder Services at (888) 294-8217. +31 +Table of Contents +*** Exercise Your Right to Vote *** +Important Notice Regarding the Availability of Proxy Materials for the +Shareholder Meeting to Be Held Virtually on January 29, 2020. +MERIDIAN BIOSCIENCE, INC. +Meeting Information +Meeting Type: Annual Meeting +For holders as of: December 5, 2019 +Date: January 29, +2020 Time: 2:00 PM EST +Location: Meeting live via the Internet-please visit +www.virtualshareholdermeeting.com/VIVO2020 +The company will be hosting the meeting live via the +Internet this year. To attend the meeting via the Internet please visit www.virtualshareholdermeeting.com/VIVO2020 and be sure to have the information that is printed in the box marked by the arrow +(located on the following page). +You are receiving this communication +because you hold shares in the company named above. +MERIDIAN BIOSCIENCE, INC. +3471 RIVER +HILLS DRIVE +CINCINNATI, OH 45244 +This is not a ballot. You cannot use +this notice to vote these shares. This communication presents only an overview of the more complete proxy materials that are available to you on the Internet. You may view the proxy materials online at www.proxyvote.com or easily request a +paper copy (see reverse side). +We +encourage you to access and review all of the important information contained in the proxy materials before voting. +See the reverse side of this notice to obtain proxy materials and voting +instructions. +Table of Contents +— Before You Vote — +How to Access the Proxy Materials +Proxy Materials Available to VIEW or RECEIVE: +NOTICE AND PROXY STATEMENT ANNUAL REPORT ON FORM 10-K +How to View Online: +Have the information that is printed in the box marked by the arrow +(located on the following page) and visit: www.proxyvote.com. +How to Request and Receive a PAPER or E-MAIL Copy: +If you want to receive a paper or e-mail copy of these documents, you must request one. There is NO charge for +requesting a copy. Please choose one of the following methods to make your request: +1) BY INTERNET: +www.proxyvote.com +2) BY TELEPHONE: 1-800-579-1639 +3) BY E-MAIL* : sendmaterial@proxyvote.com +* If requesting materials by e-mail, please send a blank e-mail with the information that is printed in the box +marked by the arrow +(located on the following page) in the subject line. +Requests, instructions and other inquiries sent to this e-mail address will NOT be forwarded to +your investment advisor. Please make the request as instructed above on or before January 15, 2020 to facilitate timely delivery. +— How To Vote — +Please Choose One of the +Following Voting Methods +Vote By Internet: +Before The Meeting: +Go to www.proxyvote.com. Have the information that is printed in the box marked by the arrow +(located on the following page) available and follow the instructions. +During The +Meeting: +Go to www.virtualshareholdermeeting.com/VIVO2020. Have the information that +is printed in the box marked by the arrow +(located on the following page) available and follow the instructions. +Vote By Mail: You can vote by mail by requesting a paper copy of the materials, which will include a proxy card. +Vote By Telephone: You can vote by telephone by requesting a paper copy of the materials, which will +include a proxy card that will provide instructions on how to vote via telephone. +Table of Contents +Voting Items +The Board of Directors recommends you +vote FOR the following: +1. Election of Directors +Nominees: +01) JAMES M. ANDERSON +05) DAVID C. PHILLIPS +02) DWIGHT E. ELLINGWOOD 06) JOHN M. RICE, +JR. +03) JACK KENNY +07) CATHERINE A. SAZDANOFF +04) JOHN C. +MCILWRAITH 08) FELICIA WILLIAMS +The Board of Directors recommends you vote FOR proposals 2 and 3. +2. Ratification of the appointment of Grant Thornton LLP as Meridian’s independent registered public accountants for fiscal year 2020. +3. Advisory vote to approve compensation of named executive officers, as disclosed in the Proxy Statement (“Say-on-Pay” Proposal). +NOTE: Such other business as may properly come before the meeting or any postponement or adjournment thereof. Only +shareholders of record at the close of business on December 5, 2019 are entitled to notice of and to vote at the meeting. +Table of Contents +Table of Contents +MERIDIAN BIOSCIENCE, INC. +3471 RIVER HILLS DRIVE +CINCINNATI, OH 45244 +VOTE BY INTERNET +Before The Meeting - +Go to www.proxyvote.com +Use the +Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Time on January 28, 2020, the day before the meeting date. Have your proxy card in hand when you access the web site and follow +the instructions to obtain your records and to create an electronic voting instruction form. +During The Meeting - Go to www.virtualshareholdermeeting.com/VIVO2020 +You may attend the meeting via the Internet and vote during the +meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions. +VOTE BY PHONE - +1-800-690-6903 +Use any +touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time on January 28, 2020, the day before the meeting date. Have your proxy card in hand when you call and then follow the instructions. +VOTE BY MAIL +Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 +Mercedes Way, Edgewood, NY 11717. +TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: +E87540-P30830 KEEP THIS PORTION FOR +YOUR RECORDS +— — — — — — — — — — — — +— — — — — — — — — — — — — — — — — — — — +— — — — — — — — — — — — +THIS +PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. DETACH AND RETURN THIS PORTION ONLY +MERIDIAN BIOSCIENCE, INC. +For +All +Withhold +All +For All +Except +To withhold authority to vote for any individual +nominee(s), mark “For All Except” and write the +number(s) of the nominee(s) on the line below. +The Board of Directors recommends you vote FOR the following: +1.   Election of Directors +☐ +☐ +☐ +Nominees : +01) JAMES M. ANDERSON +05) DAVID C. PHILLIPS +02) DWIGHT E. ELLINGWOOD +06) JOHN M. RICE, JR. +03) JACK KENNY +07) CATHERINE A. SAZDANOFF +04) JOHN C. MCILWRAITH +08) FELICIA WILLIAMS +The Board of Directors recommends you vote +FOR proposals 2 and 3. +For +Against +Abstain +2.   Ratification of the appointment of Grant Thornton LLP as +Meridian’s independent registered public accountants for fiscal year 2020. +☐ +☐ +☐ +3.   Advisory vote to approve compensation of named executive +officers, as disclosed in the Proxy Statement (“Say-on-Pay” Proposal). +☐ +☐ +☐ +NOTE: Such other business as may properly come before the meeting or any postponement or +adjournment thereof. Only shareholders of record at the close of business on December 5, 2019 are entitled to notice of and to vote at the meeting. +For address changes and/or comments, please check this box and write them on the back where +indicated. +☐ +Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, +administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. +Signature [PLEASE SIGN WITHIN BOX] +Date +Signature (Joint Owners) +Date +Table of Contents +Important Notice Regarding the +Availability of Proxy Materials for the Annual Meeting: +The Notice and Proxy Statement and Annual Report on Form 10-K are available at www.proxyvote.com. +— — — — — — — — — — — — +— — — — — — — — — — — — — — — — — — — — +— — — — — — — — — — — — — — — — — — — — +— — — +E87541-P30830 +MERIDIAN BIOSCIENCE, INC. +Annual Meeting of Shareholders +January 29, +2020 2:00 PM +This proxy is solicited by the Board of Directors +The undersigned hereby appoints JACK KENNY and BRYAN T. BALDASARE, +and either of them, attorneys and proxies of the undersigned, each with the power of substitution and re-substitution, to vote all shares of Common Stock of Meridian Bioscience, Inc. which the undersigned may be entitled to vote on the matters +specified on the reverse side (and in their discretion to cumulate votes in the election of directors if cumulative voting is invoked by a shareholder through proper notice to the Company) and, in their discretion, with respect to such other matters +as may properly come before the Annual Meeting of Shareholders of Meridian Bioscience, Inc. to be held virtually on January 29, 2020, at 2:00 p.m. Eastern Standard Time, and any postponement or adjournment of such Annual Meeting. +This proxy, when properly executed, will be voted as directed by +the shareholder(s). If no such directions are made, this proxy will be voted FOR the election to the Board of Directors all of the nominees under Proposal 1 and FOR each remaining proposal as recommended by the Board of +Directors. +Please mark, sign, date, and return this proxy +card promptly using the enclosed reply envelope. +Address Changes/Comments: +(If you noted any Address Changes/Comments +above, please mark corresponding box on the reverse side.) +Continued and to be signed on reverse side \ No newline at end of file diff --git a/raw/proxies/0000794172/0001193125-19-316898/proxy_rpt.txt b/raw/proxies/0000794172/0001193125-19-316898/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..55be980c4a9c1a1201d85f484516737451f5e2a7 --- /dev/null +++ b/raw/proxies/0000794172/0001193125-19-316898/proxy_rpt.txt @@ -0,0 +1,13 @@ +TRANSACTIONS WITH RELATED PERSONS +Nasdaq rules require the Company to conduct an appropriate review of related party transactions required to be disclosed by the Company pursuant to SEC Regulation +S-K Item 404 for potential conflict of interest situations on an ongoing basis and that all such transactions must be approved by the Audit Committee or another Committee comprised of independent directors. As +a result, the Audit Committee annually reviews all such related party transactions and approves each related party transaction if it determines that it is in the best interests of the +14 +Table of Contents +Company. Additionally, the Audit Committee’s Charter provides it the authority to review, approve and monitor transactions involving the Company and “related persons” (directors +and Executive Officers or their immediate family members, or shareholders owning five percent or greater of the Company’s outstanding stock). This also covers any related person transaction that meets the minimum threshold for disclosure in the +proxy statement under the relevant SEC rules (generally, transactions involving amounts exceeding $120,000 in which a related person has a direct or indirect material interest). In considering the transaction, the Audit Committee may consider all +relevant factors, including, as applicable: (i) the Company’s business rationale for entering into the transaction; (ii) the alternatives to entering into a related person transaction; (iii) whether the transaction is on terms +comparable to those available to third parties, or in the case of employment relationships, to employees generally; (iv) the potential for the transaction to lead to an actual or apparent conflict of interest and any safeguards imposed to +prevent such actual or apparent conflicts; and (v) the overall fairness of the transaction to the Company. This policy is included in the Company’s Employee Handbook. The approvals of such related person transactions are evidenced by +internal Company resolutions, minutes or memoranda. \ No newline at end of file diff --git a/raw/proxies/0000794172/0001193125-20-318636/proxy.txt b/raw/proxies/0000794172/0001193125-20-318636/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..094eb5ca0ea2c64534d64ceac710fa2d916f33c2 --- /dev/null +++ b/raw/proxies/0000794172/0001193125-20-318636/proxy.txt @@ -0,0 +1,3345 @@ +DEF 14A +1 +d50382ddef14a.htm +DEF 14A +DEF 14A +Table of Contents +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +WASHINGTON, D.C. 20549 +SCHEDULE 14A +(Rule 14a-101) +INFORMATION REQUIRED IN PROXY STATEMENT +SCHEDULE 14A INFORMATION +Proxy Statement Pursuant to Section 14(a) +of the Securities Exchange Act of 1934 +(Amendment No. ) +Filed by the +Registrant ☒ Filed by a Party other than the +Registrant ☐ +Check the appropriate box: +☐ +Preliminary Proxy Statement +☐ +Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +☒ +Definitive Proxy Statement +☐ +Definitive Additional Materials +☐ +Soliciting Material Pursuant to Section 14a-12 +Meridian Bioscience, Inc. +(Name of Registrant as +Specified in Its Charter) +(Name of Person(s) Filing Proxy Statement if Other Than the Registrant) +Payment of Filing Fee (Check the appropriate box): +☒ +No fee required. +☐ +Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and +0-11. +(1) +Title of each class of securities to which transaction applies: +(2) +Aggregate number of securities to which transaction applies: +(3) +Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 +(set forth the amount on which the filing fee is calculated and state how it was determined): +(4) +Proposed maximum aggregate value of transaction: +(5) +Total Fee Paid: +☐ +Fee paid previously with preliminary materials. +☐ +Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify +the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. +(1) +Amount Previously Paid: +(2) +Form, Schedule or Registration Statement No.: +(3) +Filing Party: +(4) +Date Filed: +Table of Contents +3471 River Hills Drive +Cincinnati, Ohio 45244 +www.meridianbioscience.com +Notice of Annual Meeting of Shareholders +and Proxy Statement +Dear Shareholders: +On behalf of the Board of Directors, I invite you to attend our Annual Meeting of Shareholders on January 27, 2021 at 2:00 p.m. Eastern Time. In +connection with ongoing developments related to coronavirus COVID-19 and with continued concern for the health and safety of our shareholders and employees, this year’s Annual Meeting will once again be +conducted as a virtual meeting of shareholders. We believe that hosting a virtual meeting provides expanded access, improved communication and cost savings to our shareholders and the Company and also aligns with our interests in the health and +safety of our shareholders and employees. You will be able to attend the Annual Meeting online, vote your shares electronically and submit your questions during the Annual Meeting by visiting +www.virtualshareholdermeeting.com/VIVO2021 . There will not be a physical meeting location and you will not be able to attend the Annual Meeting in person. +This booklet includes the formal notice of the meeting and the proxy statement. The proxy statement tells you more about the agenda and procedures for the meeting. It also describes how the Board operates +and gives personal information about our director candidates. +Pursuant to Securities and Exchange Commission rules allowing companies to +furnish proxy materials to shareholders over the internet, a Notice of Internet Availability of Proxy Materials was sent to shareholders on or about December 16, 2020. The Notice contains information on how to access copies of the proxy +materials and vote your shares. +Whether or not you virtually attend the meeting, please cast your proxy vote promptly, either online, over +the phone or by returning your signed and dated proxy card in the enclosed envelope. +Sincerely yours, +/s/ David C. Phillips +David C. Phillips +Chairman of the Board +December 16, 2020 +Table of Contents +IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS +FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON JANUARY 27, 2021 +This proxy statement and our 2020 Annual Report to Shareholders are available at www.proxyvote.com +Date: +January 27, +2021 +Time: +2:00 p.m., Eastern Time +Place: +Online at +www.virtualshareholdermeeting.com/VIVO2021 +Purpose: +• +Elect as directors the nine nominees named in the accompanying proxy materials; +• +Ratify the appointment of Grant Thornton LLP as Meridian’s independent registered public accountants for fiscal year 2021; +• +Approve the 2021 Omnibus Award Plan; and +• +Conduct an advisory vote on our executive compensation +(“Say-on-Pay”). +Only shareholders +of record on December 3, 2020 may vote at the meeting. The approximate mailing date of this proxy statement and accompanying proxy card is December 16, 2020. +Your vote is important. Whether or not you plan to virtually attend the 2021 annual meeting, please cast your proxy vote promptly, either online, over the phone or by returning your signed and dated proxy +card in the enclosed envelope. +By Order of the Board of Directors, +/s/ Bryan T. Baldasare +Bryan T. Baldasare +Executive Vice President, Chief Financial Officer +and Secretary +December 16, 2020 +Table of Contents +Table of Contents +Page +GENERAL INFORMATION +1 +ELECTION OF DIRECTORS (Item 1 on the Proxy Card) +3 +RATIFICATION OF APPOINTMENT OF GRANT THORNTON LLP AS INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS (Item 2 on the Proxy +Card) +7 +APPROVAL OF 2021 OMNIBUS AWARD PLAN (Item 3 on the Proxy Card) +8 +ADVISORY VOTE ON COMPENSATION OF NAMED EXECUTIVE OFFICERS (“SAY-ON-PAY” PROPOSAL) (Item 4 on the Proxy Card) +17 +CORPORATE GOVERNANCE +18 +REPORT OF THE AUDIT COMMITTEE +20 +DIRECTORS AND EXECUTIVE OFFICERS +23 +SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS +24 +DELINQUENT SECTION 16(A) REPORTS +24 +TRANSACTIONS WITH RELATED PERSONS +25 +COMPENSATION DISCUSSION AND ANALYSIS +25 +COMPENSATION COMMITTEE REPORT +33 +CEO PAY RATIO +33 +SUMMARY COMPENSATION TABLE +34 +GRANTS OF PLAN-BASED AWARDS +36 +OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END +37 +OPTION EXERCISES AND STOCK VESTED +38 +401(K) PLAN +38 +POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL +39 +DIRECTOR COMPENSATION +40 +SHAREHOLDER PROPOSALS FOR NEXT YEAR +41 +QUESTIONS +41 +APPENDIX A +A-1 +Meridian makes available, free of charge on its website, all of its filings that are made electronically with the +Securities and Exchange Commission (“SEC”), including Forms 10-K, 10-Q and 8-K. These filings are also available on the +SEC’s website ( www.sec.gov ). To access these filings, go to our website ( www.meridianbioscience.com ). Copies of Meridian’s Annual Report on Form 10-K for the fiscal year ended +September 30, 2020, including financial statements and schedules thereto, filed with the SEC, are also available without charge to shareholders upon written request addressed to: +Bryan T. Baldasare +Executive Vice President, Chief Financial Officer and Secretary +Meridian Bioscience, Inc. +3471 River Hills +Drive +Cincinnati, Ohio 45244 +Table of Contents +MERIDIAN BIOSCIENCE, INC. +3471 River Hills Drive +Cincinnati, Ohio 45244 +Telephone (513) 271-3700 +P R O X +Y S T A T E M E N T +Annual Meeting of Shareholders +January 27, 2021 +GENERAL INFORMATION +Who may vote +Shareholders of Meridian, as recorded in our stock register on December 3, 2020, may vote at the meeting. As of that date, Meridian had 43,123,087 +shares of common stock outstanding. +Location of Annual Meeting +In connection with developments related to coronavirus COVID-19 and with concern for the health and safety of our shareholders and employees, the Annual Meeting +will again be conducted as a virtual meeting of shareholders by means of a live webcast. We believe that hosting a virtual meeting provides greater shareholder attendance and participation from any location, improved communication and cost savings +to our shareholders and Company, and also aligns with our interests in the health and safety of our shareholders and employees. By visiting www.virtualshareholdermeeting.com/VIVO2021 , you will be able to attend the Annual Meeting, vote your +shares, and submit your questions during the meeting via the internet. There will not be a physical meeting location and you will not be able to attend in person. We invite you to attend the Annual Meeting and request that you vote on the proposals +described in this proxy statement. However, you do not need to attend the meeting to vote your shares. Instead, you may vote by internet, by telephone, or, if you requested and received paper copies of the proxy materials by mail, you may also vote +by completing and mailing your proxy card. +How to vote +You may vote electronically at the meeting, by telephone, online, or by completing and returning a proxy card. We recommend you vote by proxy even if you plan to attend the virtual meeting. You can always +change your vote, by voting electronically, at the meeting. +How proxies work +Meridian’s Board of Directors is asking for your proxy. Giving us your proxy means you authorize us to vote your shares at the meeting in the manner +you direct. You may vote for all, some or none of our director candidates. You may also vote for or against the other proposals or abstain from voting. +If you complete your proxy online, over the phone or sign and return the enclosed proxy card but do not specify how to vote, we will vote your shares in favor of: (i) the election of our director +candidates; (ii) the ratification of the appointment of Grant Thornton LLP as Meridian’s independent registered public accountants for fiscal year 2021; (iii) the approval of the 2021 Omnibus Award Plan; and (iv) our executive +compensation. If any other matters come before the meeting or any continuation, postponement or adjournment, each proxy will be voted in the discretion of the individuals named as proxies on the card. +You may receive more than one proxy or voting card depending on how you hold your shares. Shares registered in your name are covered by one card. If you +hold shares through someone else, such as a stockbroker, bank or nominee, you may get material from them asking how you want to vote. +1 +Table of Contents +Stockbrokers, banks and nominees holding shares for beneficial owners must vote those shares as instructed +by you. If the stockbroker, bank or nominee has not received instructions from you, the beneficial owner, the stockbroker, bank or nominee generally has discretionary voting power only with respect to the ratification of appointment of the +independent registered public accountants. However, a stockbroker, bank or nominee does not have discretion to vote for or against the election of directors and certain other matters subject to a vote if they have not received voting instructions +from you. In order to avoid a broker non-vote of your shares on the election of directors and the other matters subject to a vote, you must send voting instructions to your stockbroker, bank or nominee. +Solicitation of proxies +Solicitation of proxies is being made by management at the direction of Meridian’s Board of Directors, without additional compensation, through the mail, in person or by telephone. The cost of +preparing and mailing the Notice and the proxy statement and any accompanying material will be borne by Meridian. In addition, Meridian will request brokers and other custodians, nominees and fiduciaries to forward proxy soliciting material to the +beneficial owners of shares held of record, and Meridian will reimburse them for their related expenses. +Revoking a proxy +You may revoke your proxy before it is voted by submitting a new proxy with a later date, by voting electronically at the meeting or +by notifying Meridian’s Secretary in writing at the address under “Questions” on page 41 of this proxy statement. +Quorum +In order to carry on the business of the meeting, we must have a quorum. This means at least a majority of the outstanding shares +eligible to vote must be represented at the meeting, either by proxy or in person. +Votes needed +The nine director candidates receiving the most votes will be elected to fill the seats on the Board (Proposal No. 1). The ratification of +appointment of accountants (Proposal No. 2), the approval of the 2021 Omnibus Award Plan (Proposal No. 3), and the approval on an advisory basis of our executive compensation (Proposal No. 4) require the favorable vote of a majority +of the votes cast. Only votes for or against these proposals count, with abstentions not being counted either for or against these proposals. +Abstentions and broker non-votes count for quorum purposes but, as indicated above, will not count for voting +purposes. Broker non-votes occur when a broker returns a proxy card but does not have authority to vote on a particular proposal. +Other matters +Any other matters considered at the meeting, including any +continuation, postponement or adjournment, will require the affirmative vote of a majority of the votes cast. +The Virtual Meeting +We will be hosting the Annual Meeting only by means of a live webcast. There will not be a physical meeting location and you will not +be able to attend the meeting in person. Please be assured that you will be afforded the same rights and opportunities to participate in the virtual meeting and ask questions as you would at an in-person +meeting. By going to www.virtualshareholdermeeting.com/VIVO2021 , you will be able to listen to the Annual Meeting, submit questions and vote. If you wish to listen to the Annual Meeting, but do not wish to submit questions or vote during the +Annual Meeting, you may go to www.virtualshareholdermeeting.com/VIVO2021 and log in as a guest. We will post a recording of the meeting, including appropriate questions received during the meeting and the Company’s answers, on the +investor page of www.meridianbioscience.com as soon as practicable after the meeting. +2 +Table of Contents +The Annual Meeting will start at 2:00 p.m. (Eastern Time) on January 27, 2021. We encourage you to +access the meeting website prior to the start time to allow time for check-in. If you encounter any technical or logistical issues or difficulties accessing the virtual meeting during the check-in or meeting time, please call the technical support number that will be posted on the Virtual Shareholder Meeting login page. +You do not need to register to attend the Annual Meeting webcast. Follow the instructions on your Notice of Internet Availability or proxy card (if you requested and received a printed copy of the proxy +materials) to access the Annual Meeting. +If you wish to submit a question the day of the Annual Meeting, you may log in to the virtual +meeting platform at www.virtualshareholdermeeting.com/VIVO2021 , type your question into the “Ask a Question” field, and click “Submit.” Questions pertinent to meeting matters will be answered during the Annual Meeting, +subject to time constraints. Questions regarding personal matters, including those related to employment, are not pertinent to annual meeting matters and, therefore, will not be answered. We will post on the Virtual Meeting page additional +guidelines for shareholder questions, rules around what types of questions are allowed, and any other procedures for how questions and comments will be recognized. +ELECTION OF DIRECTORS +(Item 1 on the Proxy Card) +The Nominating and Corporate Governance Committee of the Board of Directors has nominated for +re-election the following current directors: James M. Anderson, Anthony P. Bihl III, Dwight E. Ellingwood, Jack Kenny, John C. McIlwraith, David C. Phillips, John M. Rice, Jr., Catherine A. Sazdanoff, and +Felicia Williams. +Proxies solicited by the Board will be voted for the election of these nominees. All directors elected at the Annual +Meeting will be elected to hold office until the next annual meeting. In voting to elect directors, shareholders are entitled to cumulate their votes and to give one candidate a number of votes equal to the number of directors to be elected +multiplied by the number of shares held by the shareholder, or to distribute their votes on the same principle among as many candidates as the shareholder sees fit. In order to invoke cumulative voting, notice of cumulative voting must be given in +writing by a shareholder to the Chief Executive Officer, a Vice President or the Secretary of Meridian not less than 48 hours prior to the Annual Meeting. The proxies solicited include discretionary authority to cumulate votes. +All Meridian directors are elected for one-year terms. Personal information on each of our nominees is given +below. +If a director nominee becomes unavailable before the election, your proxy card authorizes us to vote for a replacement nominee if the +Board names one. +The Board recommends that you vote FOR each of the following candidates: +James M. Anderson +Director +since 2009 +Age: 78 +James M. Anderson serves as Chairman of the Compensation Committee. He currently serves as Senior Strategic and External Affairs Advisor with Taft Stettinius & Hollister +LLP and President Emeritus of Cincinnati Children’s Hospital Medical Center (“CCHMC”), after having served as advisor to the President of CCHMC from January 2010 through June 30, 2017 and as President and Chief Executive Officer +of CCHMC from 1996 through 2009. Mr. Anderson serves on the board of managers of CincyTech, a firm that provides advice and capital to entrepreneurs, helps research institutions commercialize technology through startups, and catalyzes +investment from individuals and institutions to regional companies. From 2006 to 2014, he served as a director of Ameritas Mutual Holding +3 +Table of Contents +Company and has also served as Chairman of the Board of the Cincinnati Branch of the Federal Reserve Bank of Cleveland, retiring in 2012. Prior to joining the staff of CCHMC, +Mr. Anderson was a partner in the general corporate law department at Taft, Stettinius & Hollister for 24 years (1968 – 1977; 1982 – 1996) and president of U.S. operations at Xomox Corporation, a publicly-traded manufacturer +of specialty process controls (1977 – 1982). Mr. Anderson has also served as director of Gateway Investment Advisors (1997 – 2008). The Board believes that Mr. Anderson’s corporate legal experience and his experience as CEO +of a large health care organization have given him a wealth of insight into various corporate governance and business management issues, which, along with his status as an independent director, make him an integral member of the +Board. +Anthony P. Bihl III +Director +since 2020 +Age: 64 +Anthony P. Bihl III served as Chief Executive Officer and a member of the board of managers of Bioventus, LLC, a company that +develops, manufactures and sells products that promote active orthopedic healing, from December 2013 to April 2020. From June 2011 through June 2012, he was Group President of American Medical Systems, or AMS, a subsidiary of Endo Pharmaceuticals. +Mr. Bihl was President, Chief Executive Officer and a director of AMS from April 2008 until Endo acquired AMS in June 2011. He served as Chief Executive Officer of the Diagnostics Division of Siemens Medical Solutions from January to November +2007, and as President of the Diagnostics Division of Bayer HealthCare from 2004 through 2006. Prior to that, Mr. Bihl served in a number of operations and finance roles at Bayer HealthCare and for over 20 years at E.I. DuPont. +Mr. Bihl is a director and Chairman of the Board of +Spectral Medical, Inc. (TSX: EDTXF), a Canadian company that develops products for the diagnosis and treatment of severe sepsis and septic shock. In addition, Mr. Bihl currently serves on the boards of directors of Sonendo, Inc., a +privately-held company that develops and markets breakthrough technologies for endodontics and dentistry (since May 2010), and Flowonix Medical Inc., a privately-held company that develops and markets targeted drug delivery platforms (since July +2020). Mr. Bihl previously served as a member of the board of directors of Nuvectra Corporation (OTC: NVTRQ) from March 2016 to May 2020 and prior to March 2016, served on the board of directors of Integer Holdings Corporation (NYSE: ITGR) +before it spun off Nuvectra. The Board believes that Mr. Bihl is well qualified to serve on Meridian’s Board considering his 30 years of experience in the medical device industry in a variety of operations, finance and general management +roles. +Dwight E. Ellingwood +Director +since 2014 +Age: 68 +Dwight E. Ellingwood serves as Chairman of the Nominating and Corporate Governance Committee. With over 40 years of experience in health care strategy, planning and business +development, he has served since 2017 as a Teaching Professor and Associate Director for Practitioner Experience in the Masters Program of the Department of Health Services Administration at Xavier University in Cincinnati, Ohio. Mr. Ellingwood +previously served as Senior Vice President of Strategy, Communications and Public Affairs for TriHealth, Inc. in Cincinnati, Ohio (November 2014 – July 2016) and as the Lead Executive for the Collective Impact on Health, The Health +Collaborative (2014). From 1997 to 2013, Mr. Ellingwood served as Senior Vice President, Planning and Business Development for Cincinnati Children’s Hospital Medical Center, following executive experience with the Spohn Health System in +Corpus Christi, Texas (1990 – 1997) and as a health care consultant in Salt Lake City, Utah (1978 – 1990). The Board believes that the Company benefits greatly from Mr. Ellingwood’s extensive experience in management, strategy +and business development in the health care industry. +4 +Table of Contents +Jack Kenny +Director since +2017 +Age: 52 +Jack Kenny serves as Meridian’s Chief Executive Officer, having joined the Company on October 9, 2017. Before joining Meridian, Mr. Kenny served as Senior Vice +President and General Manager, North America, with Siemens Healthcare, a position he held from October 2014 to May 2017. From June 2012 through October 2014, Mr. Kenny served as Vice President and General Manager, U.S. Region, for Becton +Dickinson, Diagnostic Systems. Prior to June 2012, Mr. Kenny held executive roles at Danaher Corporation and Quest Diagnostics. Mr. Kenny’s experience as a key executive leader within large public companies in the health care and +medical device industry, as well as his ongoing insights into Meridian’s business and operations, makes him a valuable member of the Board. +John C. McIlwraith +Director +since 2015 +Age: 61 +John C. McIlwraith co-founded Allos Ventures, a venture capital firm, in March 2010 and has served as a Managing Director there since that +time. Prior to founding Allos Ventures, Mr. McIlwraith was a Managing Director of Blue Chip Venture Company, a Cincinnati-based venture capital firm, which he joined in 1997. He has served on the board of directors of more than +20 health care or information technology companies. Prior to 1997, Mr. McIlwraith served as Senior Vice President of Strategic Planning and General Counsel of publicly-traded Quantum Health Resources, Inc., and was a partner in the Jones +Day law firm. The Board believes that Mr. McIlwraith’s corporate legal and business development experience, and his years of business-building experience with an extensive number of companies, including health care companies, render his +service on the Board valuable to Meridian. +David C. Phillips +Director +since 2000 +Age: 82 +David C. Phillips serves as Chairman of the Board. Mr. Phillips spent 32 years with Arthur Andersen LLP. His service with this firm included several managing partner +leadership positions. After retiring from Arthur Andersen in 1994, Mr. Phillips became Chief Executive Officer of Downtown Cincinnati, Inc., which is responsible for economic revitalization of Downtown Cincinnati. Mr. Phillips retired from +DCI in 1999 to devote full time to Cincinnati Works, Inc., an organization dedicated to reducing the number of people living below the poverty level by assisting them to strive towards self-sufficiency through work, and his financial consulting +services. Mr. Phillips has also served as a director of Cintas Corporation, retiring in 2012, and as a director of Summit Mutual Funds, a registered investment company, through 2009. The Board believes that the Company benefits greatly from +Mr. Phillips’ public accounting experience in dealing with complex accounting and business issues, as well as his service to the Cincinnati community. +John M. Rice, Jr. +Director +since 2017 +Age: 71 +John M. Rice is a Managing Director leading the Life Sciences practice at CincyTech, a firm that provides advice and capital to entrepreneurs, helps research institutions +commercialize technology through startups, and catalyzes investment from individuals and institutions to regional companies, having previously served as Director of Life Sciences since 2014. Dr. Rice is also the founder of Triathlon Medical +Venture Partners, a venture capital firm that invests equity capital in early and expansion stage life science companies, having served as Managing Partner from 2003 – 2018. He was previously a Managing Director at Senmed Medical Ventures from +1989 – 2003. In his greater than 30 years in health care venture capital, Dr. Rice has served on the board of directors of more than 25 privately-held health care companies, currently chairing the boards of Genetesis, Kurome and Airway +Therapeutics. In addition, he currently chairs the Investment Advisory Board of the Harrington Discovery Institute and serves on the board +5 +Table of Contents +of Enable Injections. The Board believes that Dr. Rice’s scientific background and years of experience with a number of companies operating in the health care and +related industries, as well as extensive experience within the capital markets, is extremely valuable to Meridian. +Catherine A. Sazdanoff +Director since 2015 +Age: 64 +Catherine A. Sazdanoff is the President and Chief Executive Officer of Sazdanoff Consulting, LLC, providing health care strategy and business development advisory +services to a number of clients, since January 2015. She also currently serves as Strategy Advisor and Chief Compliance Officer to Strata Oncology, Inc., a precision oncology company, having joined Strata in May 2016 as Chief Business +Officer (May 2016 – September 2017) and consulted as Business Advisor (October 2017 – February 2019). Since July 2019, Ms. Sazdanoff has served as an independent director of the board of InMed Pharmaceuticals, Inc., currently chairing +its nominating and governance committee. Ms. Sazdanoff is also a member since April 2016 of the Advisory Board of Neurocern, Inc., a dementia insuretech company, and is a lecturer since March 2018 in the Business of Biotech program at the +University of Chicago Graham School for Continuing and Professional Education. She serves on the External Advisory Board of the Rosalind Franklin University Innovation and Research Park. Ms. Sazdanoff’s prior corporate roles include a +number of global corporate positions with Takeda Pharmaceuticals, Inc. (“Takeda”), a wholly-owned subsidiary of Japanese-based Takeda Pharmaceutical Corporation, from 2006 to 2015 including VP, Head of Corporate +Projects (2012 – 2015), VP, Global Business Development (2011 – 2013) and VP, Corporate Development (2010 – 2011). Ms. Sazdanoff’s time at Takeda was preceded by approximately 22 years +with Abbott Laboratories, where she held numerous executive positions covering legal, compliance and business development. The Board believes that Ms. Sazdanoff’s years of experience in the pharmaceutical and medical diagnostics +industries makes her service on the Board valuable to Meridian. +Felicia Williams +Director +since 2018 +Age: 55 +Felicia Williams serves as Chairwoman of the Audit Committee. Ms. Williams is currently serving as the Macy’s Inc. Fellow for CEO Action for Racial Equality, a +fellowship that provides the 1,500+ CEO signatories of CEO Action for Diversity & Inclusion with an opportunity to advance racial equity through public policy to address systemic racism and social injustice and improve societal well-being. +Prior to becoming a Fellow, Ms. Williams served as Macy’s Interim Chief Financial Officer and Enterprise Risk Officer from June 2020 to November 2020. Since joining Macy’s in June 2004, Ms. Williams has served as Executive Vice +President, Controller and Enterprise Risk Officer (June 2016 – June 2020) and Senior Vice President, Finance and Risk Management (February 2011 – June 2016), as well as in other finance, treasury, risk management and internal audit +capacities. Prior to her time at Macy’s, Ms. Williams served in various financial positions at the Coca-Cola Hellenic Bottling Company in Athens, Greece and The Coca-Cola Company in Atlanta, Georgia (June 1994 – June 2004). +Ms. Williams brings broad and wide-ranging accounting, finance, treasury and enterprise risk management experience, including analyzing financial statements, complex accounting issues and internal controls over financial reporting, which +qualifies her as an “audit committee financial expert” under SEC guidelines. The Board believes her experience greatly benefits the Company. +6 +Table of Contents +RATIFICATION OF APPOINTMENT OF GRANT THORNTON LLP AS INDEPENDENT REGISTERED +PUBLIC ACCOUNTANTS +(Item 2 on the Proxy Card) +Our Audit Committee has appointed Grant Thornton LLP as our independent registered public accounting firm for the fiscal year ending September 30, 2021. Grant Thornton LLP has served as our +independent registered public accounting firm since 2005. Our Board has directed that this appointment be submitted to our shareholders for ratification. Although ratification of our appointment of Grant Thornton LLP is not required, we value the +opinions of our shareholders and believe that shareholder ratification of our appointment is a good corporate governance practice. +Grant +Thornton LLP also served as our independent registered public accounting firm for the fiscal year ended September 30, 2020. Neither the accounting firm nor any of its members has any direct or indirect financial interest in or any connection +with us in any capacity other than as our auditors, providing audit and non-audit related services. A representative of Grant Thornton LLP is expected to virtually attend the Annual Meeting and to have an +opportunity to make a statement and be available to respond to appropriate questions from shareholders. +In the event that the appointment of +Grant Thornton LLP is not ratified by the shareholders, the Audit Committee will consider this fact when it appoints the independent auditors for the fiscal year ending September 30, 2021. Even if the appointment of Grant Thornton LLP is +ratified, the Audit Committee retains the discretion to appoint a different independent auditor at any time if it determines that such a change is in the interests of the Company. +Principal Accounting Firm Fees +Aggregate fees billed to Meridian by Grant Thornton LLP for +fiscal years 2020 and 2019 are listed below: +2020 +2019 +Audit Fees +$ +602,382 +$ +646,736 +Audit-Related Fees +77,625 +164,440 +Tax Fees +475,909 +446,590 +$ +1,155,916 +$ +1,257,766 +Audit Fees. Audit fees are the fees billed for professional services rendered by Meridian’s +independent registered public accounting firm for their: (i) audit of Meridian’s consolidated annual financial statements for the fiscal years ended September 30, 2020 and 2019, respectively; (ii) reviews of the unaudited +quarterly consolidated financial statements contained in the reports on Form 10-Q filed by Meridian during those years; (iii) completion of audits of wholly-owned subsidiaries’ statutory accounts in +the United Kingdom and China during fiscal 2020 and 2019; and (iv) reporting on Meridian’s internal controls during those years. +Audit-Related Fees . Audit-related fees are the fees billed for assurance and related services that are reasonably related to the +performance of the audit or review of Meridian’s financial statements. +Tax Fees. Tax fees are the fees billed for tax +return preparation and compliance in Australia, England, Germany, and the United States, as well as consultation and research on various matters such as the U.S. tax reform act, state tax issues, international tax issues, transfer pricing, and tax +planning. +The Board recommends that you vote FOR the ratification of appointment of Grant Thornton LLP as Meridian’s +independent registered public accountants for the 2021 fiscal year. +7 +Table of Contents +APPROVAL OF 2021 OMNIBUS AWARD PLAN +(Item 3 on the Proxy Card) +Our +shareholders are being asked to approve the Meridian Bioscience, Inc. 2021 Omnibus Award Plan (“2021 Omnibus Award Plan”). The Board of Directors adopted the 2021 Omnibus Award Plan in November 2020, subject to shareholder approval at the +Annual Meeting. +The Board of Directors has determined that it is advisable and in the best interests of the Company and the shareholders to +adopt the 2021 Omnibus Award Plan. The purpose of the 2021 Omnibus Award Plan is to provide a means through which the Company and its affiliates may attract and retain key personnel and to provide a means whereby directors, officers, employees, +consultants and advisors of the Company and its affiliates can acquire and maintain an equity interest in the Company, or be paid incentive compensation, including incentive compensation measured by reference to the value of the Company’s +common stock, thereby strengthening their commitment to the welfare of the Company and its affiliates and aligning their interests with those of the Company’s shareholders. +If the 2021 Omnibus Award Plan is approved, no more awards will be granted under the 2012 Stock Incentive Plan (the “Prior Plan”), which is the only existing equity plan of the Company. +Governance +Highlights +The 2021 Omnibus Award Plan incorporates certain governance best practices, including: +✓ +Minimum vesting period of one year from the date of grant for all equity-based awards granted under the 2021 Omnibus Award Plan, except under certain limited circumstances and with +permitted exceptions up to 5% of the share reserve. +✓ +No “liberal share recycling” of options or stock appreciation rights. +✓ +Minimum 100% fair market value exercise price as of the date of grant for options and stock appreciation rights, except for substitute awards granted through the assumption or +substitution of awards from an acquired or merged company. +✓ +No “liberal” change in control definition. +✓ +No repricing of options or stock appreciation rights and no cash buyout of underwater options or stock appreciation rights without shareholder approval, except for adjustments with +respect to a change in control or an equitable adjustment in connection with certain corporate transactions. +✓ +No excise tax gross-ups. +A copy of the 2021 Omnibus Award Plan is attached hereto as Appendix A . The following summary of the material +features of the 2021 Omnibus Award Plan is qualified in its entirety by reference to the complete text of the 2021 Omnibus Award Plan. +Administration . The 2021 Omnibus Award Plan will be administered by a committee of independent directors approved by our Board of Directors (or, +if no committee has been appointed, it shall be administered by the Board of Directors). Our Board has designated our Compensation Committee to administer the 2021 Omnibus Award Plan. The Committee will have the authority to determine the terms and +conditions of any agreements evidencing any awards granted under the 2021 Omnibus Award Plan and to establish, amend, suspend or waive any rules and regulations relating to the 2021 Omnibus Award Plan. The Compensation Committee will have full +discretion to administer and interpret the 2021 Omnibus Award Plan and to determine, among other things, the time or times at which the awards may be exercised and whether and under what circumstances an award may be exercised. +8 +Table of Contents +Eligibility . Any of our employees, directors, officers, consultants or advisors and those of our +affiliates will be eligible for awards under the 2021 Omnibus Award Plan. The Committee has the sole authority to determine who will be granted an award under the 2021 Omnibus Award Plan. As of December 3, 2020, approximately 50 employees +(including 14 senior executives, of whom four are corporate officers) and eight non-employee directors were eligible to be selected by our Compensation Committee for awards under the 2021 Omnibus Award Plan. +Over the past several years, the Committee has determined award recipients and has granted awards approximately one month after the end of the Company’s fiscal year, often in November. The Committee determines grants of awards and identifies +recipients of awards based on a variety of considerations, including, without limitation: (i) the Company’s need to attract and retain key personnel; (ii) the Company’s objective of providing a means pursuant to which +participants may be paid incentive compensation, including incentive compensation measured by reference to the value of the Company’s common stock; and (iii) the Company’s objective of strengthening the commitment of award recipients +to the welfare of the Company and its affiliates and aligning their interests with those of the Company’s shareholders. +Number of +Shares Authorized . The 2021 Omnibus Award Plan reserves for issuance an aggregate of 2,000,000 shares of our common stock plus the number of shares of our common stock that remain available for awards under the Prior Plan on the day the 2021 +Omnibus Award Plan is approved by our shareholders (such aggregate amount, the “Effective Date Share Limit”). As of the record date, December 3, 2020, the market value of one share of our common stock that could be issued under the +2021 Omnibus Award Plan is $18.55. +If any award granted under the 2021 Omnibus Award Plan or under the Prior Plan expires, terminates, is +canceled or is forfeited without being settled or exercised, or if an award is settled in cash or otherwise without the issuance of shares, shares of our common stock subject to such award will be made available for future grant under the 2021 +Omnibus Award Plan. In addition, if shares issuable upon vesting or settlement of an award are withheld by the Company, or if shares owned by a participant are surrendered or tendered to the Company, in payment of taxes required to be withheld in +respect of the award (other than an award of options or stock appreciation rights), such shares will be made available for future grant under the 2021 Omnibus Award Plan. If any shares are surrendered or tendered to pay the exercise price of an +option, or to satisfy withholding taxes owed with respect to an option or stock appreciation right, or if any shares subject to a stock appreciation right are not issued in connection with its stock settlement on exercise thereof, or if any shares +are reacquired by us on the open market or otherwise using cash proceeds from the exercise of options, such shares will not again be available for grant under the 2021 Omnibus Award Plan. +Share Usage . As of November 30, 2020, there were approximately 1,745,000 shares of our common stock available under the Prior Plan, which would result in an Effective Date Share Limit of +approximately 3,745,000 shares of our common stock if the 2021 Omnibus Award Plan were approved by the shareholders on such date. No more awards will be granted under the Prior Plan if the 2021 Omnibus Award Plan is approved. The actual Effective +Date Share Limit will reflect incremental changes in the number of shares remaining available under the Prior Plan to reflect issuances and forfeitures of equity awards following such date through the actual date that shareholders approve the 2021 +Omnibus Award Plan. The following table includes more specific information regarding outstanding equity awards and shares available for future awards under the Prior Plan as of November 30, 2020. +Key Stock Plan Data +Shares underlying outstanding stock options: 1,218,385 +Weighted average exercise price of outstanding stock options: $15.04 +Weighted average remaining contractual life of outstanding stock options: 7.09 yrs. +Shares subject to outstanding, unvested full-value awards at target: 731,934 +Shares available for grant: 1,745,560 +Basic shares of common stock outstanding as of the record date: 43,123,087 +9 +Table of Contents +The following table sets forth information regarding the share usage for each of the last three fiscal years +under all awards reported in our Form 10-Ks for such fiscal years. The share usage (or “burn rate”) has been calculated as the quotient of (i) the sum of (x) all options and SARs +granted in such year, (y) all service-based restricted stock or stock units (“service-based RS/RSUs”) granted in such year, and (z) the number of performance-based restricted stock or stock units (“performance RS/RSUs”) +earned in such year, divided by (ii) the weighted average number of shares of common stock outstanding at the end of such year. +Year Ended September 30, +3-Year +Share Usage Data (shares in thousands) +2020 +2019 +2018 +Average +Stock Options granted +367 +77 +479 +308 +Service-based RS/RSUs granted +359 +250 +238 +282 +Performance RS/RSUs earned +— +— +25 +8 +Weighted-average basic shares of common stock outstanding +42,855 +42,571 +42,325 +42,584 +Share Usage +1.7 +% +0.8 +% +1.8 +% +1.4 +% +Dilution and Expected Duration . We carefully monitor the rate at which we use the shares authorized for issuance +under our equity compensation program and the program’s impact on shareholder dilution, and our historical and expected future usage were taken into account when we determined the number of shares to be reserved for issuance under the 2021 +Omnibus Award Plan. If this Proposal 3 is approved by our shareholders, we expect the share reserve under the 2021 Omnibus Award Plan to last us for approximately five years based upon our historical three-year average burn rate. However, +expectations regarding future share usage could be impacted by a number of factors such as award type mix; hiring and promotion activity; the rate at which shares are returned to the 2021 Omnibus Award Plan’s reserve upon the awards’ +expiration, forfeiture or cash settlement; the future performance of our stock price; the consequences of acquiring other companies; and other factors. While we believe that the assumptions we used are reasonable, future share usage may differ from +current expectations. The potential dilution to our shareholders resulting from the 2021 Omnibus Award Plan as of September 30, 2020, is approximately 11.8%, which we consider reasonable and necessary to realize the intended purposes of the +2021 Omnibus Award Plan and our compensation programs and philosophy. (Dilution here is calculated as the sum of the shares subject to outstanding awards plus shares available for future awards under the Prior Plan plus the incremental share request +under the 2021 Omnibus Award Plan (collectively, the “numerator”) divided by the sum of the numerator and basic common shares outstanding, with all data as of September 30, 2020.) +Limitations . No more than an aggregate number of shares of our common stock equal to the Effective Date Share Limit may be issued in the aggregate +in respect of incentive stock options under the 2021 Omnibus Award Plan. The maximum grant date fair value of equity awards that may be awarded to a non-employee director under the 2021 Omnibus Award Plan +during any one fiscal year, taken together with any cash fees paid to such non-employee director during such fiscal year, will be $450,000; provided that our board of directors may make exceptions for a non-executive chairman of the board who does not participate in the decision to award such compensation, and for special projects and ad hoc committee appointments deemed appropriate by the board from time to time. +Adjustments . If there is any change in our corporate capitalization, the Compensation Committee in its sole discretion may make +substitutions or adjustments to the number of shares reserved for issuance under the 2021 Omnibus Award Plan, the number of shares covered by awards then-outstanding under the 2021 Omnibus Award Plan, the limitations on awards under the 2021 Omnibus +Award Plan, and/or the exercise price of outstanding options and such other equitable substitution or adjustments as it may determine to be equitable. +10 +Table of Contents +Term of Plan . The 2021 Omnibus Award Plan will have a term of ten years, and no awards may be granted +after that date. +Awards Available for Grant . The Compensation Committee may grant awards of nonqualified stock options, incentive +(qualified) stock options, stock appreciation rights, restricted stock awards, restricted stock units, other stock-based awards, deferred stock, deferred stock units, performance compensation awards (including cash bonus awards) or any combination +of the foregoing. +Options . The Compensation Committee will be authorized to grant options to purchase shares of common stock that are +either “qualified,” meaning they are intended to satisfy the requirements of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”) for incentive stock options, or “nonqualified,” meaning they +are not intended to satisfy the requirements of Section 422 of the Code. Options granted under the 2021 Omnibus Award Plan will be subject to the terms and conditions established by the Compensation Committee. Under the terms of the 2021 +Omnibus Award Plan, the exercise price of the options will not be less than the fair market value of our common stock at the time of grant. Options granted under the 2021 Omnibus Award Plan will be subject to such terms, including the exercise price +and the conditions and timing of exercise, as may be determined by the Committee and specified in the applicable award agreement. The maximum term of an option granted under the 2021 Omnibus Award Plan will be ten years from the date of grant (or +five years in the case of a qualified option granted to a 10% shareholder). Payment in respect of the exercise of an option may be made in cash or by check, by surrender of unrestricted shares (at their fair market value on the date of exercise), or +through a “net exercise,” or the Compensation Committee may, in its discretion and to the extent permitted by law, allow such payment to be made through a broker-assisted cashless exercise mechanism or by such other method as the Committee +may determine to be appropriate. In-the-money options that have not been exercised by the option’s expiration date will be automatically exercised by means of a net +exercise. +Stock Appreciation Rights . The Committee will be authorized to award stock appreciation rights (referred to in this proxy +statement as SARs) under the 2021 Omnibus Award Plan. SARs will be subject to the terms and conditions established by the Compensation Committee and reflected in the award agreement. A SAR is a contractual right that allows a participant to receive, +in the form of either cash, shares or any combination of cash and shares, the appreciation, if any, in the value of a share over a certain period of time. An option granted under the 2021 Omnibus Award Plan may include SARs, and SARs may also be +awarded to a participant independent of the grant of an option. SARs granted in connection with an option shall be subject to terms similar to the option corresponding to such SARs. +In-the-money SARs that have not been exercised by the SAR’s expiration date will be automatically settled at that time. +Restricted Stock . The Committee will be authorized to award restricted stock under the 2021 Omnibus Award Plan. Awards of restricted stock will be +subject to the terms and conditions established by the Compensation Committee. Restricted stock is common stock that is subject to such restrictions as may be determined by the Compensation Committee for a specified period. If any dividends in +respect of restricted stock have been withheld by the Company during the restricted period, those dividends will be paid in cash or, at the discretion of the Committee, in common stock when the restricted period ends, unless the restricted stock has +previously been forfeited. +Restricted Stock Unit Awards . The Committee will be authorized to award restricted stock unit awards. +Restricted stock unit awards will be subject to the terms and conditions established by the Compensation Committee. At the election of the Compensation Committee, the participant will receive a number of shares of common stock equal to the number of +units earned or an amount in cash equal to the fair market value of that number of shares at the expiration of the period over which the units are to be earned or at a later date selected by the Compensation Committee. +Deferred Stock . The Committee will be authorized to grant deferred stock. The number of shares of deferred stock shall be determined by the +Committee and may (but is not required to) be based on one or more performance goals or performance measures, including service to the Company, as the Committee determines, in each case on a +11 +Table of Contents +specified date or dates or over any period or periods determined by the Committee. Shares of common stock underlying a deferred stock award which is subject to a vesting schedule or other +conditions or criteria set by the Committee will be issued on the vesting date(s) or date(s) that those conditions and criteria have been satisfied, as applicable. Unless otherwise provided by the Committee, a holder of deferred stock shall have no +rights as a Company shareholder with respect to such deferred stock until such time as the award has vested and any other applicable conditions and/or criteria have been satisfied and shares of common stock underlying the award have been issued to +the holder. Recipients of deferred stock generally will have no rights as shareholders with respect to the deferred stock until the time the vesting conditions are satisfied, and the underlying shares of deferred stock have been paid. +Deferred Stock Units . The Committee will be authorized to grant deferred stock units. Awards of deferred stock units are denominated in unit +equivalents of shares of common stock and vest pursuant to a vesting schedule or performance goals or performance measures as determined by the Committee. The shares of common stock underlying deferred stock units will not be issued until the +deferred stock units have vested, and recipients of deferred stock units generally will have no voting rights prior to the time when vesting conditions are satisfied. +Other Stock-Based Awards . The Committee will be authorized to award other stock-based awards having terms and conditions as determined by the Committee. These awards may be granted either alone or +in tandem with other awards. +Performance Compensation Awards . The Compensation Committee may grant any award other than a stock option +or a SAR under the 2021 Omnibus Award Plan in the form of a performance compensation award by conditioning the vesting of the award on the satisfaction of certain performance goals. The Committee may consult with senior management prior to +establishing performance goals with reference to one or more of the following: +• +net earnings or net income (before or after taxes); +• +basic or diluted earnings per share (before or after taxes); +• +net revenue or net revenue growth; +• +gross profit or gross profit growth; +• +net operating profit (before or after taxes); +• +return measures (including, but not limited to, return on investment, assets (including net assets), capital, invested capital, equity or +sales); +• +cash flow measures (including, but not limited to, operating cash flow, free cash flow and cash flow return on capital); +• +earnings before or after taxes, interest, depreciation, and/or amortization; +• +gross or operating margins; +• +productivity ratios; +• +share price (including, but not limited to, growth measures and total shareholder return); +• +expense targets; +• +operating efficiency; +12 +Table of Contents +• +objective measures of customer satisfaction; +• +working capital targets; +• +measures of economic value added; +• +inventory control; +• +shareholder return; +• +sales; +• +enterprise value; +• +competitive market metrics; +• +employee retention; +• +timely completion of new product rollouts; +• +timely launch of new facilities; +• +objective measures of personal targets, goals or completion of projects (including, but not limited to, succession and hiring projects, +completion of specific acquisitions, reorganizations or other corporate transactions, expansions of specific business operations and meeting divisional or project budgets); +• +any other objective or subjective criteria, including individual performance criteria, as determined by the Committee; or +• +any combination of the foregoing. +Transferability . Each award may be exercised during the participant’s lifetime only by the participant or, if permissible under applicable law, by the participant’s legal guardian or +representative and may not be otherwise transferred or encumbered by a participant other than by will or by the laws of descent and distribution, except that awards (other than incentive stock options) may in the sole discretion of the Compensation +Committee be transferred without consideration and on such other terms and conditions as set forth by the Compensation Committee. +Amendment . The 2021 Omnibus Award Plan will have a term of ten years. Our board of directors may amend, suspend or terminate the 2021 Omnibus +Award Plan at any time; however, shareholder approval to amend the 2021 Omnibus Award Plan may be necessary if the law so requires. Specifically, shareholder approval is required if we want to amend the plan to increase the number of shares subject +to the 2021 Omnibus Award Plan. Also, we would need shareholder approval if the Committee intended to amend an award agreement in a way that would either reduce the exercise price or strike price of a stock option or SAR, or cancel and replace an +outstanding stock option or SAR with a new option or SAR or other award or cash in a way that would constitute a “repricing” for financial statement reporting purposes or otherwise fail to qualify for equity accounting treatment, or take +any other action that would be considered a “repricing” for purposes of any shareholder approval rules of any securities exchange or inter-dealer quotation system on which our securities are listed or quoted, and in either case was not +otherwise permitted by the provisions of the plan relating to adjustments of awards in the case of changes in our capital structure and similar events. No amendment, suspension or termination will materially and adversely affect the rights of any +participant or recipient of any award without the consent of the participant or recipient. +13 +Table of Contents +Minimum Vesting Requirements . Awards granted under the 2021 Omnibus Award Plan must be subject to a +minimum vesting period of one year from the date of grant, subject to the Committee’s ability to provide for acceleration of vesting, including upon a change in control, death, disability, or retirement; provided that the following are exempt +from such minimum vesting requirement: cash-based awards, substitute awards, shares delivered in lieu of fully vested cash awards, awards to eligible non-employee directors that vest on the earlier of the one-year anniversary of the date of grant and the next annual meeting of shareholders that is at least 50 weeks after the immediately preceding year’s annual meeting, and awards granted with respect to a +maximum of 5% of the available share reserve authorized for issuance under the 2021 Omnibus Award Plan. +U.S. Federal Income Tax +Consequences +The following is a general summary of the material U.S. federal income tax consequences of the grant, vesting and exercise of +awards under the 2021 Omnibus Award Plan and the disposition of shares acquired pursuant to the exercise of such awards and is intended to reflect the current provisions of the Code and the regulations thereunder. This summary is not intended to be +a complete statement of applicable law, nor does it address foreign, state, local and payroll tax considerations. Moreover, the U.S. federal income tax consequences to any particular participant may differ from those described herein by reason of, +among other things, the particular circumstances of such participant. +Options . The Code requires that, for treatment of an option as a +qualified option, shares of our common stock acquired through the exercise of a qualified option cannot be disposed of before the later of (i) two years from the date of grant of the option and (ii) one year from the date of exercise. +Holders of qualified options will generally incur no federal income tax liability at the time of grant or upon exercise of those options. However, the spread at exercise will be an “item of tax preference,” which may give rise to +“alternative minimum tax” liability for the taxable year in which the exercise occurs. If the holder does not dispose of the shares before two years following the date of grant and one year following the date of exercise, the difference +between the exercise price and the amount realized upon disposition of the shares will constitute long-term capital gain or loss, as the case may be. Assuming both holding periods are satisfied, no deduction will be allowed to us for federal income +tax purposes in connection with the grant or exercise of the qualified option. If, within two years following the date of grant or within one year following the date of exercise, the holder of shares acquired through the exercise of a qualified +option disposes of those shares, the participant will generally realize taxable compensation at the time of such disposition equal to the difference between the exercise price and the lesser of the fair market value of the share on the date of +exercise or the amount realized on the subsequent disposition of the shares, and that amount will generally be deductible by us for federal income tax purposes, subject to the possible limitations on deductibility under Sections 162(m) and 280G of +the Code for compensation paid to certain executives designated in those Sections. Finally, if an otherwise qualified option becomes first exercisable in any one year for shares having an aggregate value in excess of $100,000 (based on the grant +date value), the portion of the qualified option in respect of those excess shares will be treated as a non-qualified stock option for federal income tax purposes. No income will be realized by a participant +upon grant of a non-qualified stock option. Upon the exercise of a non-qualified stock option, the participant will recognize ordinary compensation income in an amount +equal to the excess, if any, of the fair market value of the underlying exercised shares over the option exercise price paid at the time of exercise. We will be able to deduct this same amount for U.S. federal income tax purposes, but such deduction +may be limited under Sections 162(m) and 280G of the Code for compensation paid to certain executives designated in those Sections. +Restricted Stock . A participant will not be subject to tax upon the grant of an award of restricted stock unless the participant otherwise elects +to be taxed at the time of grant pursuant to Section 83(b) of the Code. On the date an award of restricted stock becomes transferable or is no longer subject to a substantial risk of forfeiture, the participant will have taxable compensation +equal to the difference between the fair market value of the shares on that date over the amount the participant paid for such shares, if any, unless the participant made an election under Section 83(b) of the Code to be taxed at the time of +grant. If the participant made an election under Section 83(b), the participant will have taxable compensation at the time of grant equal to the difference between the fair market value of the shares on the date of grant over the amount the +participant paid for such shares, if any. +14 +Table of Contents +(Special rules apply to the receipt and disposition of restricted shares received by officers and directors who are subject to Section 16(b) of the Securities Exchange Act of 1934.) We will +be able to deduct, at the same time as it is recognized by the participant, the amount of taxable compensation to the participant for U.S. federal income tax purposes, but such deduction may be limited under Sections 162(m) and 280G of the Code for +compensation paid to certain executives designated in those Sections. +Deferred Stock Units and Restricted Stock Units . A participant +will not be subject to tax upon the grant of a deferred stock unit award or a restricted stock unit award. Rather, upon the delivery of shares or cash pursuant to a deferred stock unit award or a restricted stock unit award, the participant will +have taxable compensation equal to the fair market value of the number of shares (or the amount of cash) he actually receives with respect to the award. We will be able to deduct the amount of taxable compensation to the participant for U.S. federal +income tax purposes, but the deduction may be limited under Sections 162(m) and 280G of the Code for compensation paid to certain executives designated in those Sections. Deferred stock units and restricted stock units may be subject to +Section 409A of the Code, and the failure of any award of such units that is subject to Section 409A to comply with Section 409A may result in taxable income to the participant upon the grant or vesting of the award. Furthermore, an +additional 20% penalty tax may be imposed pursuant to Section 409A of the Code and certain interest penalties may apply. +Deferred +Stock . Deferred stock is generally not subject to federal income taxes at the time of issuance and the Company will not then be entitled to a deduction. However, when the stock is issued to the participant the participant will recognize ordinary +income and the Company will be entitled to a deduction. Deferred stock may be subject to Section 409A of the Code, and the failure of any award of deferred stock that is subject to Section 409A to comply with Section 409A may result +in taxable income to the participant upon the grant of the award. Furthermore, an additional 20% penalty tax may be imposed pursuant to Section 409A of the Code and certain interest penalties may apply. +SARs . No income will be realized by a participant upon grant of a SAR. Upon the exercise of a SAR, the participant will recognize ordinary +compensation income in an amount equal to the fair market value of the payment received in respect of the SAR. We will be able to deduct this same amount for U.S. federal income tax purposes, but such deduction may be limited under Sections 162(m) +and 280G of the Code for compensation paid to certain executives designated in those Sections. +Other Stock-Based Awards . A participant +will have taxable compensation equal to the difference between the fair market value of the shares on the date the award is settled (whether in shares or cash, or both) over the amount the participant paid for such shares, if any. We will be able to +deduct, at the same time as it is recognized by the participant, the amount of taxable compensation to the participant for U.S. federal income tax purposes, but such deduction may be limited under Sections 162(m) and 280G of the Code for +compensation paid to certain executives designated in those Sections. +New Plan Benefits +If the 2021 Omnibus Award Plan is approved by our shareholders, awards under the 2021 Omnibus Award Plan will be determined by the Committee in its +discretion, and it is, therefore, not possible to predict the awards that will be made to particular officers in the future. +If our +shareholders approve the 2021 Omnibus Award Plan, we intend to make the grants described in the 2021 Omnibus Award Plan to our non-employee directors. Our non-employee +directors are identified in Proposal 1 in this proxy statement and the grants are captured in the table below. The following table discloses the benefits and amounts which either: (i) were received by or allocated to the following persons or +groups in fiscal 2020; or (ii) would have been received by or allocated to the following persons or groups in fiscal 2020. These awards are not necessarily representative of future awards that may be made under the 2021 Omnibus Award Plan. +15 +Table of Contents +MERIDIAN BIOSCIENCE, INC. +2021 Omnibus Award Plan +Named Executive Officers and Non-Employee Directors +Name and Principal Position +Dollar Value +Number +of Units +Jack Kenny +$ +1,675,000 +297,624 +CEO +Bryan T. Baldasare +$ +201,028 +20,534 +EVP, CFO and Secretary +Lourdes G. Weltzien +$ +201,028 +20,534 +EVP, Life Science +Tony Serafini-Lamanna +$ +130,941 +16,320 +EVP, Diagnostics +Executive Officers as a Group (currently 4 persons) +$ +2,207,997 +355,012 +Non-employee Directors as a Group (currently 8 persons) +$ +760,000 +148,183 +Non-executive Employees as a Group (approximately 55 persons) +$ +1,966,245 +223,135 +Equity Compensation Plan Information +The following table presents information about the Company’s equity compensation plan as of September 30, 2020 (shares in thousands): +Plan category +Number of +securities +to +be issued upon +exercise +of outstanding +options, +warrants and +rights +(a) +Weighted average +exercise price +of +outstanding +options, +warrants +and +rights +(b) +Number +of +securities +remaining +available for future +issuance +under +equity +compensation +plans +(excluding +securities reflected +in +column (a)) +(c) +Equity compensation plans approved by security holders +1,103 +$ +14.667 +2,043 +Total +(1) +1,103 +$ +14.667 +2,043 +(1) +Weighted-average remaining term of 6.89 years. In addition to the shares to be issued upon exercise of outstanding options reflected in the +table, approximately 603 shares remain issuable upon the lapsing of currently outstanding restricted stock units. +16 +Table of Contents +Registration of Shares +The Company intends to register the shares underlying awards to be granted under the 2021 Omnibus Award Plan with the U.S. Securities and Exchange Commission on a Form +S-8 registration statement within twelve months after shareholder approval. +Shareholder Approval +Required +The affirmative vote of the holders of a majority of the shares present in person or by proxy and entitled to vote thereon at the +meeting of shareholders is required to approve the 2021 Omnibus Award Plan. Properly executed proxies will be voted as marked. Executed but unmarked proxies will be voted in favor of approving the 2021 Omnibus Award Plan. +Interests of Certain Persons in the Proposal +As indicated above, our executive officers and our non-employee directors, each of whom is identified elsewhere in this proxy statement, are eligible to receive +discretionary grants under the 2021 Omnibus Award Plan and thus have an interest in the approval of the 2021 Omnibus Award Plan. Please see “New Plan Benefits” above. +The Board recommends that you vote FOR the approval of the 2021 Omnibus Award Plan. +ADVISORY VOTE ON COMPENSATION OF NAMED EXECUTIVE OFFICERS +(“SAY-ON-PAY” PROPOSAL) +(Item 4 on the Proxy +Card) +The Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd Frank”), enacted in July 2010, requires that we +provide our shareholders with the opportunity to vote to approve, on a non-binding, advisory basis, the compensation of our named executive officers as disclosed in this proxy statement in accordance with the +compensation disclosure rules of the Securities and Exchange Commission (“SEC”). Dodd Frank also provides that shareholders periodically be given the opportunity to vote, on a non-binding, advisory +basis, for their preference as to how frequently we should seek future advisory votes on the compensation of our named executive officers. This opportunity was provided to our shareholders at our 2018 annual meeting, where over 80% of our voting +shareholders voted to hold the “say-on-pay” advisory vote annually, in accordance with the recommendation of our Board of Directors. As a result, we are again +holding a say-on-pay advisory vote at our 2021 annual meeting, with the next say-on-pay +advisory vote to be held at our 2022 annual meeting. +As described below under the heading “Compensation Discussion and Analysis” +beginning on page 25 of this proxy statement, we seek to closely align the interests of our named executive officers with the interests of our shareholders. We structure our programs to discourage excessive risk-taking through a balanced use of +compensation vehicles and metrics with an overall goal of delivering sustained long-term shareholder value, while aligning our executives’ interests with those of our shareholders. Further, our programs require that a substantial portion of +each named executive officer’s compensation be contingent on delivering performance results that benefit our shareholders. Our compensation programs are designed to reward our named executive officers for the achievement of short-term and +long-term strategic and operational goals and the achievement of increased total shareholder return. +The vote on this matter is not intended +to address any specific element of compensation; rather, the vote relates to the compensation of our named executive officers, as described in this proxy statement in accordance with the compensation disclosure rules of the SEC. The vote is +advisory, which means that the vote is not binding on the Company, our Board of Directors or the Compensation Committee. The Board and the Compensation Committee will review and consider the voting results when making future decisions regarding our +executive compensation program. +17 +Table of Contents +Accordingly, we ask our shareholders to approve, on an advisory basis, the compensation of the named +executive officers, as disclosed in this proxy statement pursuant to the compensation disclosure rules of the SEC, including the Compensation Discussion and Analysis, the Summary Compensation Table and the other related tables and disclosure. +The Board recommends that you vote FOR the approval of the compensation of our named executive officers as disclosed in this proxy +statement. +CORPORATE GOVERNANCE +As an Ohio corporation, Meridian is governed by the corporate laws of Ohio. Since Meridian’s common shares are publicly traded on the Nasdaq Global Select Market, and it files reports with the SEC, +it is also subject to Nasdaq rules and federal securities laws. +Board Leadership Structure +Governance of the corporation is placed in the hands of the directors who, in turn, elect officers to manage the business operations. The Board oversees +the management of Meridian on your behalf. The Board reviews Meridian’s long-term strategic plans and exercises direct decision making authority in all major decisions, such as acquisitions, the declaration of dividends, major capital +expenditures and the establishment of certain company policies. +The Board operates and evaluates its performance in accordance with Corporate +Governance Guidelines approved by the Board. These Guidelines are available on our website www.meridianbioscience.com . +The Board is +responsible for evaluating and determining Meridian’s leadership structure, and believes that at this point in time separate individuals should serve in the capacities of Chairman of the Board (“Chairman”) and Chief Executive Officer +(“CEO”). It is the Board’s belief that such a structure provides the Company with the right foundation to pursue its strategic and operational objectives, while maintaining effective oversight and objective evaluation of the +Company’s performance. These key positions are held by Mr. David C. Phillips, Chairman of the Board, and Mr. Jack Kenny, CEO. Having served as a director since 2000, Mr. Phillips was appointed Chairman of the Board upon +Mr. John A. Kraeutler retiring from the Company and the Board effective September 30, 2018. In his capacity as Chairman, Mr. Phillips is responsible for: (i) general Board activities, including setting agendas for Board +meetings and presiding over all meetings of the Board and shareholders; and (ii) providing advice and counsel to Meridian’s management regarding the Company’s business operations. As CEO, Mr. Kenny is responsible for the general +management, oversight, supervision and control of the business affairs of Meridian, and ensuring that all resolutions of the Board are put into effect. +In accordance with Nasdaq rules, our Board of Directors affirmatively determines the independence of each director and nominee for election as a director in accordance with the elements of independence +set forth in the Nasdaq listing standards and Exchange Act rules. Meridian’s Director Independence Standards are available at our website www.meridianbioscience.com . Based on these standards, the Board has determined that each +of the following members of the Board is independent: James M. Anderson, Anthony P. Bihl, Dwight E. Ellingwood, John C. McIlwraith, David C. Phillips, John M. Rice, Catherine A. Sazdanoff, and Felicia Williams. +During fiscal 2020, the Board of Directors met on eight occasions. The independent directors plan to meet as necessary during fiscal 2021 without the +presence of management directors. During fiscal 2020, the independent members of the Board met three times in executive session without the presence of management directors following regularly scheduled Board meetings. All of our directors attended +at least 75% of the aggregate of all Board meetings and all meetings of Committees on which such directors served during fiscal 2020. +Meridian expects all directors to attend shareholders’ meetings, and all directors attended the 2020 Annual Shareholders’ Meeting. +18 +Table of Contents +Shareholders may communicate with the full Board or individual directors on matters concerning Meridian by +mail or through our website, www.meridianbioscience.com , in each case to the attention of the Secretary, the address for whom is set forth on page 41 of this proxy statement. +The Board’s Role in Risk Oversight +The Board of Directors, as a whole and also at the +Committee level, plays a key role in operational risk oversight at Meridian and works with management to understand the risks the Company faces, the steps that management is taking to manage those risks and the level of risk appropriate for the +Company in light of its overall business strategy. The Board approves the high level strategies, financial plans and policies of Meridian, setting the tone and direction for the appropriate levels of risk-taking within the organization. +While overall responsibility for risk oversight rests with the Board, it is the Audit Committee that has been given the primary responsibility of +monitoring and evaluating the adequacy of management’s risk assessment and risk management practices. This role is carried out through its charter-mandated responsibilities related to Meridian’s: (i) overall financial risks and exposures; +(ii) financial statement risks and exposures; (iii) financial reporting processes; (iv) compliance with ethics policies, such as the Code of Ethics, Employee Complaint Policy, Securities Trading Policies and the Foreign Corrupt +Practices Act Policy; and (v) compliance with governmental and legal regulations, including those contained within the Sarbanes-Oxley Act. The Audit Committee provides regular reports to the full Board and works closely with management to +update the full Board, as necessary, on matters identified through these Committee risk oversight roles. +The Board has adopted a Code of +Ethics applicable to Meridian’s officers, directors and employees. This Code of Ethics is posted on www.meridianbioscience.com . Any amendments to or waivers from the Code of Ethics (to the extent permitted by Nasdaq Marketplace Rule +5610) will be posted on our website within four business days after the date of an amendment. +Committees of the Board of Directors +The directors have organized themselves into the Committees described below. Each of these Committees has a charter posted on +www.meridianbioscience.com . Meridian does not have an Executive Committee of its Board of Directors. The following table identifies membership and the Chairperson of each of the current standing committees of the Board, as well as the number +of times each committee met during the fiscal year. In July 2020, Anthony P. Bihl III joined the Board and has not yet been appointed to any committees. +Director +Audit +Compensation +Nominating +and +Corporate +Governance +James M. Anderson +Member +Chair +Dwight E. Ellingwood +Member +Chair +John C. McIlwraith +Member +Member +David C. Phillips +Ex-Officio +Ex-Officio +Ex-Officio +Catherine A. Sazdanoff +Felicia +Williams +Member +Chair +Member +Meetings in Fiscal 2020 +8 +6 +5 +The Audit Committee is comprised of Felicia Williams (Chair), James M. Anderson, Catherine A. Sazdanoff, +and David C. Phillips (Ex-Officio). The Committee met eight times during fiscal 2020. Each member is able to read and understand fundamental financial statements. Felicia Williams has been designated as an +Audit Committee financial expert as that term is defined by the SEC. +The Committee oversees the accounting and financial reporting processes +of Meridian and the audits of its financial statements by its independent registered public accounting firm. The Committee is solely responsible for the appointment, compensation, retention and oversight of Meridian’s independent registered +public accounting +19 +Table of Contents +firm. The Audit Committee also evaluates information received from Meridian’s independent registered public accounting firm and management to determine whether the independent registered +public accounting firm is independent of management. The independent registered public accounting firm reports directly to the Audit Committee. +In addition, the Audit Committee has established procedures for the receipt, retention and treatment of complaints received by Meridian concerning +accounting, internal accounting controls or auditing matters and has established procedures for the confidential and anonymous submission by employees of any concerns they may have regarding questionable accounting or auditing matters. +The Audit Committee, or its Chairwoman, approves all audit and non-audit services performed for Meridian by its +independent registered public accounting firm before those services are commenced. The Chairwoman reports to the full Committee at each of its meetings regarding pre-approvals she made since the prior meeting +and the Committee approves what she has done between meetings. For these purposes, the Committee or its Chairwoman is provided with information as to the nature, extent and purpose of each proposed service, as well as the approximate timeframe and +proposed cost arrangements for that service. +As previously noted on page 19 in “The Board’s Role in Risk Oversight” section, +the Audit Committee also bears certain risk oversight responsibilities. +The Committee has submitted the following report for inclusion in +this proxy statement: +REPORT OF THE AUDIT COMMITTEE +The Audit Committee oversees Meridian’s financial reporting process on behalf of the Board. Management has the primary responsibility for the +financial statements and the reporting process including the systems of internal controls over financial reporting. As part of the oversight processes, the Audit Committee regularly meets with management of Meridian, Meridian’s independent +registered public accounting firm and Meridian’s finance and accounting personnel. The Audit Committee regularly meets with each of these groups separately in closed sessions. Throughout the year, the Audit Committee had full access to +management, the independent registered public accounting firm and internal auditors for Meridian. To fulfill its responsibilities, the Audit Committee did, among other things, the following: +(a) +reviewed and discussed Meridian’s audited financial statements for fiscal 2020 with Meridian’s management and the independent +registered public accounting firm, including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments and the clarity of disclosures in the financial statements; +(b) +reviewed management’s representations that the interim and audited financial statements were prepared in accordance with U.S. generally +accepted accounting principles and fairly present the results of operations and financial position of Meridian; +(c) +reviewed and discussed with the independent registered public accounting firm the matters required to be discussed by the applicable +requirements of the Public Company Accounting Oversight Board (“PCAOB”) and SEC rules, including matters related to the conduct of the audit of Meridian’s financial statements; +(d) +discussed with the independent registered public accounting firm the firm’s independence from management and Meridian including the +matters in the written disclosures and letter received from the independent registered public accounting firm as required by applicable requirements of the PCAOB; +(e) +based on the reviews and discussions with management and the independent registered public accounting firm, the independent registered public +accounting firm’s disclosures to the Audit Committee, +20 +Table of Contents +the representations of management and the report of the independent registered public accounting firm, recommended to the Board, which adopted the recommendation, that Meridian’s audited +annual financial statements be included in Meridian’s Annual Report on Form 10-K for the fiscal year ended September 30, 2020, for filing with the SEC; and +(f) +reviewed all audit and non-audit services performed for Meridian by the independent registered public +accounting firm for the fiscal year ended September 30, 2020 and determined that its provision of non-audit services was compatible with maintaining its independence from Meridian. +Respectfully submitted, +Audit Committee +Felicia Williams (Chair) +James M. Anderson +Catherine A. Sazdanoff +David C. Phillips (Ex-Officio) +The Compensation Committee is comprised of James M. Anderson (Chair), Dwight E. Ellingwood, John C. McIlwraith, and David C. Phillips (Ex-Officio) and +is responsible for establishing compensation for executive officers and administering the Company’s compensation plans. As used in this proxy statement, “executive officer” means our chief executive officer, principal financial +officer, principal accounting officer and any executive vice president. This includes establishing base salary levels and cash-based incentive plans, making stock-based awards, and otherwise dealing in all matters concerning compensation of the +executive officers. During fiscal 2020, the Compensation Committee met six times. +In general, the Compensation Committee annually reviews the +Company’s compensation programs and its philosophy in setting performance targets each year. The Company provides the Compensation Committee with information on total compensation received for all executive officers, including the sources of +such compensation, for the immediately preceding fiscal year and recommendations for the current fiscal year. In discharging the responsibilities of the Board of Directors relating to compensation of the Company’s CEO and other executive +officers, the purposes of the Compensation Committee are, among others: (i) to review, set and recommend to the Board the compensation of the CEO and the Company’s other executive officers; and (ii) to oversee the compensation +policies and programs of the Company, including stock and benefit plans. The Compensation Committee’s specific functions include adopting, administering and approving the Company’s cash-based incentive compensation and stock-based +incentive plans and awards, including amendments to the plans or awards and performing such duties and responsibilities under the terms of any executive compensation plan, incentive-compensation plan or equity-based plan. The Compensation Committee +has the authority to delegate any of its responsibilities to subcommittees as the Compensation Committee may deem appropriate in its sole discretion. In 2020, the Committee also conducted a review of the CEO’s performance, reviewed the +CEO’s assessment of his team’s performance, reviewed its Charter and conducted a self-assessment, facilitated by a third party. +The +Compensation Committee determines the amount and mix of compensation components for the CEO, Mr. Kenny, for recommendation to the Board. As CEO, Mr. Kenny provides recommendations to the Compensation Committee with respect to the +compensation to be paid to the other Named Executive Officers. +To achieve corporate objectives, the Committee believes it is important to +provide competitive levels of compensation to retain the most qualified employees, to recognize individuals who exceed expectations and to closely link executive compensation with corporate performance. The Committee believes Meridian’s +long-term objectives can be achieved through cash-based incentive compensation plans and stock-based incentive compensation plans. +21 +Table of Contents +The Compensation Committee’s processes and procedures for the consideration and determination of +executive and director compensation are discussed in the section entitled “Compensation Discussion and Analysis” in this proxy statement. See Compensation Committee Report on page 33 following the Compensation Discussion and Analysis. +Compensation Committee Interlocks and Insider Participation +None of the members of the Compensation Committee has ever been an officer or employee of the Company. None of the members of the Compensation Committee is or was a participant in any related person +transaction in fiscal 2020 (see the section entitled “Transactions With Related Persons” in this proxy statement for a description of our policy on related person transactions). Lastly, none of the members of the Compensation Committee is +an executive officer of another entity at which one of our executive officers serves on the Board of Directors. No Named Executive Officer of Meridian serves as a director or as a member of a committee of any company of which any of the +Company’s non-employee directors are executive officers. +The Nominating and Corporate +Governance Committee consists of Dwight E. Ellingwood (Chair), John C. McIlwraith, Catherine A. Sazdanoff, and David C. Phillips (Ex-Officio). The Committee met five times during fiscal 2020. In +November 2020, the Committee considered and recommended the nomination of the current directors for re-election. The Committee identifies qualified nominees for the Board, recommends to the Board who will be +nominated by the Company for election to the Board and recommends to the full Board any changes in the size of the Board. The Committee also reviewed its Charter and oversaw a third-party-facilitated self-assessment of the Board and its committees. +In recommending the nomination of directors, the Committee takes into account, among other factors which it may deem appropriate, the +judgment, skill, diversity, independence, and business experience of the potential nominee and the needs of the Board as its function relates to the business of the Company. The Committee considers candidates for nomination from a variety of sources +including recommendations of shareholders. Shareholders desiring to submit recommendations for nomination by the Committee should direct them to the Chairman of the Nominating and Corporate Governance Committee in care of the Company at its address +shown on the cover page of this proxy statement. +The Nominating and Corporate Governance Committee will assess the qualifications of all +candidates for the Board on an equal basis. In identifying and considering candidates for nomination to the Board, the Committee considers, among other factors, quality of experience, the needs of the Company and the range of talent and experience +currently represented on the Board. The Committee also discusses a director skills matrix, which it has prepared and periodically updates. The Committee evaluates such factors, among others, and does not assign any particular weighting or priority +to any of these factors, nor does the Committee have a formal policy with respect to diversity. However, the Committee, working with the Board, considers the diversity of all of the Company’s stakeholders – including shareholders, +employees and customers – when engaging in corporate governance discussions. +Additionally, during 2020, under the oversight of the +Nominating and Corporate Governance Committee, an evaluation of the Board and Committees was performed by a third party. The results of the evaluation were reviewed by the Board on November 10, 2020. +22 +Table of Contents +DIRECTORS AND EXECUTIVE OFFICERS +This table identifies the executive officers and directors of Meridian and shows the number of shares beneficially owned, as determined under SEC rules, +on December 3, 2020. Beneficial ownership includes any shares as to which the individual has sole or shared voting or investment power and any shares that the individual has the right to acquire within 60 days. +Common Stock +Beneficially +Owned +Name +Position +Amount 1 +Percentage +Jack Kenny +Chief Executive Officer +and +Director +179,860 +* +Bryan T. Baldasare 2 +Executive Vice President, Chief Financial Officer, Chief Accounting Officer, and Secretary +31,575 +* +Lourdes G. Weltzien 3 +Executive Vice President, +Life Science +39,335 +* +Tony Serafini-Lamanna 4 +Executive Vice President, Diagnostics +— +* +David C. Phillips 8 +Chairman of the Board and Director +156,238 +* +James M. Anderson 5, 6 +Director +119,112 +* +Anthony P. Bihl +Director +15,446 +* +Dwight E. Ellingwood 6, 7 +Director +84,178 +* +John C. McIlwraith 6, 7 +Director +82,112 +* +John M. Rice +Director +60,112 +* +Catherine A. Sazdanoff 5, 7 +Director +78,812 +* +Felicia Williams 5 +Director +43,662 +* +All Executive Officers and Directors as a Group +890,442 +2.0 +% +1 +Includes shares for options and restricted stock units currently exercisable and/or exercisable or vesting within 60 days as follows: Mr. Kenny +(91,041); Mr. Baldasare (15,000); Dr. Weltzien (15,000); Mr. Phillips (99,742); Mr. Anderson (99,742); Mr. Bihl (5,020); Mr. Ellingwood (72,242); Mr. McIlwraith (65,742); Dr. Rice (48,742); Ms. Sazdanoff +(67,742); and Ms. Williams (38,742). +2 +On December 6, 2018, Bryan T. Baldasare was promoted to be the Company’s Chief Accounting Officer effective January 1, 2019. +Mr. Baldasare was appointed as the Company’s Chief Financial Officer effective October 1, 2019. Mr. Baldasare served the Company as Interim Chief Financial Officer since June 28, 2019. Prior to that, Mr. Baldasare +served the Company as its Senior Vice President, Corporate Controller and Treasurer. Mr. Baldasare has been employed by the Company since 2000, holding positions of increasing responsibility in the Company’s accounting and finance +departments. Age: 54 +3 +Lourdes G. Weltzien joined Meridian in July 2008 as General Manager of Life Science and was appointed Vice President and General Manager of Life +Science in April 2013, as well as President of Asia Pacific Markets in July 2016, and Executive Vice President, Life Science in March 2018. Prior to joining Meridian, Dr. Weltzien held various executive and management positions with +Sigma-Aldrich Corporation (now Millipore-Sigma) since 1994. Age: 55 +4 +Tony Serafini-Lamanna joined Meridian in April 2018 as Vice President and General Manager of Diagnostics and was appointed Executive Vice President, +Diagnostics in May 2020. Prior to joining Meridian, Mr. Serafini-Lamanna held various executive and management positions with Siemens Healthcare since 2001. Age: 57 +23 +Table of Contents +5 +Audit Committee Member. +6 +Compensation Committee Member. +7 +Nominating and Corporate Governance Committee Member. +8 +Ex-Officio member of Audit, Compensation, and Nominating and Corporate Governance Committees. +* +Less than one percent. +SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS +The following +table lists the persons known by the Company to be the beneficial owners of more than five percent of the Company’s common stock as of December 3, 2020, unless otherwise noted. Beneficial ownership includes any shares as to which the +individual has sole or shared voting or investment power. +Name and address of beneficial owner +Amount and nature of +beneficial ownership +Percent of +class 1 +BlackRock, Inc. +55 East 52 nd Street +New York, NY 10055 +6,906,209 +16.10 +The Vanguard Group, Inc. +100 Vanguard Blvd. +Malvern, PA 19355 +4,601,826 +10.74 +Renaissance Technologies LLC +800 Third Avenue +New York, NY 10022 +3,286,712 +7.67 +Deerfield Mgmt, L.P. +780 Third Avenue, 37 th Floor +New York, NY 10017 +2,369,166 +5.53 +1 +For the beneficial owners listed in the table, the percentages listed reflect disclosures in the Schedule 13Gs most recently filed by each beneficial +owner with the SEC as of the date of this proxy statement. +DELINQUENT SECTION 16(A) REPORTS +Section 16 of the Securities Exchange Act of 1934 requires Meridian’s executive officers, directors and persons who own more +than ten percent of a registered class of Meridian’s equity securities to file reports of ownership and changes in ownership with the SEC. Based on a review of the copies of such forms received by it, Meridian believes that during the last +fiscal year, all of its executive officers, directors and ten percent shareholders complied with the Section 16 reporting requirements. In making these statements, Meridian has relied upon examination of the copies of Forms 3, 4 and 5, and +amendments thereto, and the written representation of its directors and executive officers. +24 +Table of Contents +TRANSACTIONS WITH RELATED PERSONS +Nasdaq rules require the Company to conduct an appropriate review of related party transactions required to be disclosed by the Company pursuant to SEC +Regulation S-K Item 404 for potential conflict of interest situations on an ongoing basis and that all such transactions must be approved by the Audit Committee or another Committee comprised of independent +directors. As a result, the Audit Committee annually reviews all such related party transactions and approves each related party transaction if it determines that it is in the best interests of the Company. Additionally, the Audit Committee’s +Charter provides it the authority to review, approve and monitor transactions involving the Company and “related persons” (directors and executive officers or their immediate family members, or shareholders owning five percent or greater +of the Company’s outstanding stock). This also covers any related person transaction that meets the minimum threshold for disclosure in the proxy statement under the relevant SEC rules (generally, transactions involving amounts exceeding +$120,000 in which a related person has a direct or indirect material interest). In considering the transaction, the Audit Committee may consider all relevant factors, including, as applicable: (i) the Company’s business rationale for +entering into the transaction; (ii) the alternatives to entering into a related person transaction; (iii) whether the transaction is on terms comparable to those available to third parties, or in the case of employment relationships, to +employees generally; (iv) the potential for the transaction to lead to an actual or apparent conflict of interest and any safeguards imposed to prevent such actual or apparent conflicts; and (v) the overall fairness of the transaction to +the Company. This policy is included in the Company’s Employee Handbook. The approvals of such related person transactions are evidenced by internal Company resolutions, minutes or memoranda. +COMPENSATION DISCUSSION AND ANALYSIS +Throughout this proxy statement, the individuals who served as the Company’s CEO and Chief Financial Officer during fiscal 2020, as well as the other individuals listed in the Summary Compensation +Table below, are referred to as the “Named Executive Officers” or “NEOs.” +Compensation Philosophy and Objectives +Our executive compensation is tied to performance objectives that are aligned with our strategic objectives to incentivize and focus +behavior on strengthening our business for long-term shareholder value. Meridian believes that people who understand our purpose will drive progress. In order to create value for our shareholders, it has been important for us to focus on the core +areas of growth, cost containment and organizational development. We continued to transform our business resources in 2020, based on where to compete in the market, and better leverage our strengths across the globe. Our strategic priorities are as +follows: +• +Reshape the financial profile to achieve higher growth over time, while maintaining strong financial returns and mitigating risks in our business. +• +Focus on organic and inorganic investment to re-allocate capital to where we can win and compete over the +long-term. +• +Align the deployment of human capital and minimize risk, while improving organizational fitness. +Compensation and benefit programs are an important part of the Company’s employment relationship, which also include challenging and rewarding work +and a focus on career growth, while aligning with our strategy of increasing value. Pay for performance is fundamental to our compensation philosophy. We reward individuals’ performance for contributions to business success. +Critical to each element of our total compensation and benefits philosophy is that it be based on a strategy to attract, retain, and unlock the hidden +potential of our human capital, and it, therefore, consists of competitive pay, incentive programs, and benefits that meet income security and protection. The affordability of compensation and +25 +Table of Contents +benefits are considered over the medium- to long-term, and to the extent possible, will not fluctuate based on short-term business conditions. +The key principles to the design of our compensation programs are as follows: +• +Base salaries, which reflect job responsibilities, competitiveness, and individual performance in connection with merit increases; +• +Annual cash-based incentive opportunities, which are a function of company and personal performance; and +• +Longer-term stock-based incentive opportunities under our 2012 Stock Incentive Plan, in the form of stock options and/or restricted stock unit grants, +which align the long-term interests of senior management with our shareholders. +Base salaries are based on individual job +duties, performance and achievements, while considering internal pay equity, retention, critical skills, and independent survey market data for specific regions. Annual cash-based incentive programs are based on defined metrics aligned to our +strategic objectives and the achievement of performance goals that are set at levels to motivate executives to commit to growth and align with value creation, while improving performance. +Stock-based incentive awards consist of restricted stock units and non-qualified stock options, with vesting generally being time-based. Stock-based awards are +designed to both reward and retain, while aligning interests of management with our shareholders. +The Compensation Committee has established +several principles and practices that are important to achieving our compensation philosophy and objectives. These are summarized below. +Gross-up Payments, Repricing of Options, Pledging, Hedging and Margin Accounts +The Company avoids new +contractual agreements that include excise tax gross-up payments. It does not allow the repricing of options, which is not permitted under the 2012 Stock Incentive Plan without first obtaining the approval +from shareholders of the Company. Additionally, the Company’s Insider Trading Policy places restrictions on the Company’s directors and executive officers regarding entering into hedging transactions with respect to the Company’s +securities and from holding the Company’s securities in margin accounts or otherwise pledging such securities as collateral for loans. Specifically, our Insider Trading Policy provides that directors, executive officers and certain other +designated employees may not purchase Meridian securities on margin or borrow against any account in which Meridian securities are held. The Policy also provides that such persons may not pledge Meridian securities as collateral for a loan or +engage in hedging or monetization transactions (such as zero-cost collars and forward-sale contracts) with respect to Meridian securities. No directors or executive officers have in place any pledges or +hedging transactions. +Recovery of Past Awards +The Board has adopted a compensation recoupment or “clawback” policy, applicable to all officers subject to Section 16 of the Securities Exchange Act of 1934. Under this policy, the Company +will pursue recoupment of any excess compensation, including incentive cash bonuses, restricted awards, stock options or other compensation, which was awarded to a covered officer based on financial statements of the Company where such statements +are required to be restated as a result of the intentional misconduct or fraud of the covered officer. In addition to recoupment, the Company shall take such other remedial actions deemed necessary against a covered employee, including recommending +disciplinary actions up to and including termination and other available remedies. The recovery period for recoupment of any compensation is up to two fiscal years preceding the date on which the Company is required to prepare and file the restated +financial statements. This policy has been proactively adopted in advance of final guidance under Section 954 of the Dodd-Frank Act and will be amended to conform with this Section when final guidance is available. +26 +Table of Contents +Minimum Vesting Periods +Although the plan document for our 2012 Stock Incentive Plan does not include minimum vesting periods for options or stock appreciation rights, our Compensation Committee includes minimum vesting +provisions in the award agreements for stock options pursuant to authority granted to it under the 2012 Stock Incentive Plan. Generally the option award agreements provide for a minimum vesting period of three years. The 2012 Stock Incentive Plan +provides that no restricted stock or restricted stock units conditioned upon the achievement of performance objectives shall be based on a restriction period of less than one year, subject to the Plan’s provisions applicable to termination of +employment and change in control. +Cash Buyouts of Underwater Options +Although the plan document for our 2012 Stock Incentive Plan does not include a provision expressly prohibiting cash buyouts of options or stock appreciation rights, the Compensation Committee believes +cash buyouts of “underwater options” is a governance practice that investors view as unfavorable. As a result, the Compensation Committee is generally opposed to cash buyouts of options or stock appreciation rights. +Back-Dating and Spring-Loading +Neither +Meridian nor the Compensation Committee engages in spring-loading, back-dating or bullet-dodging practices. Meridian’s Board has adopted a policy that provides that the Compensation Committee may grant equity awards to Company employees +(executive officers, vice presidents, senior directors and directors) for the Company’s annual equity compensation grant cycle only during the period of October 20 through November 10 each year. Stock options are granted at the +closing market price on the date of grant, pursuant to the 2012 Stock Incentive Plan. Prior to the exercise of an option, the holder has no rights as a shareholder with respect to the shares subject to such option, including no rights to vote or to +receive dividends. Restricted stock units do not have voting rights. +Ownership Guidelines +Consistent with its compensation philosophy and the principle of aligning the interests of management and directors of the Company with the interests of +its shareholders, the Board of Directors has implemented stock ownership guidelines for “Specified Officers” (defined in the guidelines as those officers required to file beneficial ownership reports with the SEC) and non-employee directors. Under the guidelines, the Company’s CEO is required to own an amount of Company common stock (including non-vested restricted stock units) which +is equal to or exceeds three times such CEO’s annual base salary, and Specified Officers other than the CEO are required to own an amount of Company common stock (including non-vested restricted stock +units) which is equal to or exceeds such officer’s annual base salary. Also under the guidelines, each of the Company’s non-employee directors is required to own an amount of Company common stock +which is equal to or exceeds three times such non-employee director’s annual retainer. Generally, persons subject to the guidelines are required to achieve the applicable guideline not later than three +years from the appointment to their position. Excluding certain of those who are still within the phase-in period, as of the date of this proxy statement, persons subject to these guidelines have been deemed +by the Board to have met their ownership target, either as a result of their direct holdings or shares held indirectly by an entity affiliated with such person, in accordance with the guidelines. +The Compensation Committee is responsible for ongoing oversight of compliance with this compensation philosophy. The Compensation Committee ensures that +the total compensation paid to the NEOs is fair, reasonable and competitive. +At our 2020 annual meeting, Meridian once again held an advisory +vote on the compensation of its NEOs, commonly referred to as a say-on-pay vote. Our shareholders approved the compensation of our NEOs, with approximately 80% of votes +cast in favor of our 2020 say-on-pay resolution. Based on the results of the 2020 +say-on-pay vote, the Compensation Committee concluded that the compensation paid to the NEOs and Meridian’s overall pay practices received strong shareholder +support and do not require substantial revision to address shareholder concerns. +27 +Table of Contents +Executive Summary +Fiscal 2020 Highlights +Fiscal 2020 was a transformative year for Meridian. Actions of +management over the previous two years prepared the Company to both weather the storm in Diagnostics and excel as a critical supplier to the IVD industry battling a global pandemic. The Compensation Committee recognized the following achievements of +the Company during fiscal 2020 as it considered the Company’s compensation philosophy and related decisions related to executive compensation: +• +Consolidated Net Revenue of $253.7 million, up 26% year-over-year; +• +Life Science segment delivered record revenue of $132.5 million, up 106% year-over-year, with the contribution of $71.5 million from COVID-19 related products for immunological and molecular tests; +• +Diagnostics segment revenues decreased 11% year-over-year to $121.1 million, due to headwinds from +COVID-19 pandemic in the second half; +• +Launched the +Curian ® analyzer and HpSA ® assay, the first internally developed new product in several years; +• +Completed assay design lock in the development of a PCR COVID-19 test on the Revogene ® system and expecting submission to the FDA for EUA approval; and +• +Closed the acquisition of Exalenz Bioscience, adding the BreathID ® instrument and its Urea Breath Test for H. pylori to the diagnostics product portfolio. +Actions of the Compensation Committee +In several meetings during the year, Mr. Kenny and the Compensation Committee Chairman discussed, among other things, Meridian’s compensation +philosophy and its effectiveness in attracting and retaining talented employees. They also discussed certain changes to the compensation programs for fiscal 2020, which are outlined in this proxy statement. +At its 2020 meetings, the Compensation Committee discussed these matters, both with and without the presence of management. The Compensation Committee +discussed the recommendations of the CEO for compensation levels for all officers and the general pay increases to be paid throughout the Company. The Committee then made the compensation decisions, which are reflected in the figures presented in +this proxy statement. +Fiscal 2020 Compensation Decisions +For Fiscal 2020, the target payout ratios as a percentage of base salary for the original Cash-Based Incentive Compensation Plan (“CICP”) were forty percent (40%) for the NEOs other than the +CEO, and seventy-five percent (75%) for the CEO. Thirty percent (30%) of the target payout ratio was based on achieving certain levels of net revenues; thirty percent (30%) of the target payout ratio was based on achieving certain levels of non-GAAP operating income; and forty percent (40%) was based on individual performance using a 1-5 rating system. +As a result of the COVID-19 pandemic, during May 2020, the Company raised its revenue and non-GAAP operating income +expectations to levels substantially higher than the maximum targets included in the original CICP. As a result, at that time, the Compensation Committee added “kickers” to the revenue component of the original CICP in order to incentivize +maximization of the revenue opportunity. +28 +Table of Contents +ORIGINAL TARGETS +Revenue Target +(Millions) +Income¹ Target +(Millions) +NEOs other than CEO +CEO +Original Plan at Targets +$202 +$22.7 +40% +75.0% +Original Plan Max Increments +$ 10 +$1.1 +12% +22.5% +Original Plan Design Max Payout 2 +$212 +$23.8 +52% +97.5% +COVID Kicker +$225 to $270 +NA +2.4% to 24% +4.5% to 45% +Individual Performance Kicker +>$240 +NA +8% +15% +Actual +$253.7 +$61.7 +76.32% +143.1% +¹ +Non-GAAP operating income excludes charges for acquisition-related costs, restructuring costs and +selected legal matters, as well as the change in fair value of the contingent consideration obligation for the GenePOC acquisition. The Compensation Committee believes that that use of this non-GAAP measure is +more useful than the comparable GAAP measure in evaluating performance against incentive bonus achievement targets. +2 +Original Plan Design Max Payout percentage is calculated based on 150% payouts for both the Revenue and Income component targets and 100% payout for +the personal component. +Following is a reconciliation of GAAP operating income to +non-GAAP operating income for fiscal 2020: +Operating Income (GAAP to Non-GAAP Reconciliation) +U.S. GAAP Operating Income +$ +61,324,000 +Acquisition-related costs +3,890,000 +Restructuring costs +687,000 +Selected legal costs +2,080,000 +Change in fair value of contingent consideration obligation +(6,293,000 +) +Non-GAAP Operating Income for use in Cash-Based Incentive Target +Measurement +$ +61,688,000 +The CICP payment for the CEO was determined by the Compensation Committee pursuant to the terms of Mr. Kenny’s +employment agreement, as well as taking into consideration actual revenues and non-GAAP operating income achieved, relative to the original targets and Kicker thresholds noted in the table above. +Fiscal 2021 Compensation Decisions +Base Salaries +Based on our financial +results in fiscal 2020 and the Compensation Committee’s review of the CEO’s evaluation of the other NEOs, merit increases for Mr. Baldasare, Dr. Weltzien and Mr. Serafini-Lamanna for fiscal 2021 are expected to be +approximately 3%. With respect to Mr. Kenny, see page 32 for discussion of his compensation arrangements. Base salaries across all Meridian employees below the executive level are expected to increase approximately 3% effective January 1, +2021. +29 +Table of Contents +Cash-Based Incentive Compensation +The Compensation Committee approved the 2021 CICP structure, including performance targets and payout targets. The target payout ratios as a percentage of base salary are fifty percent (50%) for the NEOs +other than the CEO, and ninety percent (90%) for the CEO. Thirty percent (30%) of the target payout ratio is based on achieving certain levels of net revenues; thirty percent (30%) of the target payout ratio is based on achieving certain levels of non-GAAP operating income; and forty percent (40%) is based on individual performance using a 1-5 rating system. Depending on the level of achievement, a NEO other than the +CEO may earn from 0% to 85% of base salary, and the CEO may earn from 0% to 153% of base salary. +Cash-based incentive compensation, if +earned, is paid in the first quarter of each fiscal year, for the prior fiscal year’s performance. The net revenues and operating income targets operate independently from one another. While the net revenues portion may be earned upon achieving +the net revenues targets, the component related to operating income is subject to the Company’s attainment of the specific operating income target, after inclusion of the compensation expense related to cash-based incentive compensation. Should +the Company fail to reach the minimum operating income target, no cash-based incentive compensation will be paid for this component. +The +Compensation Committee has designed the net revenues and operating income thresholds to be reasonably achievable targets, yet at levels that require diligence to produce meaningful performance. The Compensation Committee has also established +“kickers” that are aimed at rewarding performance for revenue achievement and growth significantly above our financial guidance and internal operating plan. Such “kickers” are effective at revenues ranging from $325 million +to $370 million. At $325 million, a NEO other than the CEO could earn as much as 88% of base salary, and the CEO could earn as much as 158% of base salary. At $370 million, a NEO other than the CEO could earn as much as 115% of base +salary, and the CEO could earn as much as 207% of base salary. +Long-Term Stock-Based Incentives +Awards to be granted to certain executives of the Company, including the NEOs other than the CEO, are based on fixed dollar values that are dependent upon +the executive’s level in the Company. Such awards are expected to be in the form of restricted stock units and in some cases, options to purchase Company stock. Awards to be granted to the CEO will be governed by the provisions of +Mr. Kenny’s amended employment agreement and are expected to include two types of equity awards, restricted stock units and options to purchase Company stock. +Establishing Compensation Levels +The Compensation Committee reviews, sets and recommends +to the Board of Directors for approval the compensation of the CEO. The Company has an employment agreement with the CEO, which is described on page 32. The compensation levels for the other NEOs are recommended by the CEO. The Compensation +Committee has discretion to follow or modify such recommended levels of compensation. The Compensation Committee considers the input of our CEO as a crucial component of its compensation processes and decisions relating to NEO compensation. The +Compensation Committee is not obligated to follow his recommendations. The Company does not engage in strict numerical benchmarking in determining the percentage modifications for the NEOs. Under its charter, the Compensation Committee is authorized +to engage outside advisors at the Company’s expense. In fiscal 2020, the Company did not engage an independent consultant. +In +setting the NEOs’ compensation, the Compensation Committee reviews all components of such compensation through the use of tally sheets. These tally sheets provide the amount of total compensation paid or earned by each NEO based on his or her +base salary, cash-based incentive compensation, stock-based awards and retirement contributions. The tally sheets reviewed provide all of the information that is reflected in the Summary Compensation Table. The review by the Compensation Committee +analyzes how changes in any element of compensation would impact other elements, particularly severance or change in control benefits, if applicable to the executive. Such analysis has become an important component in the Compensation +Committee’s review of executive compensation, as the tally sheet allows the Compensation Committee to consider an executive’s overall compensation rather than only one or two specific components of an executive’s compensation. This +allows the Compensation Committee to make compensation decisions and evaluate management recommendations based +30 +Table of Contents +on a complete analysis of an executive’s total compensation. Salaries are set on a calendar year basis and, therefore, salaries paid in the first three months of each fiscal year beginning +on the first day of October are set in the prior fiscal year. +Components of Executive Compensation and Related Risk Profile +Meridian’s executive compensation and benefits packages consist of base salary, cash-based incentive compensation, long-term +stock-based incentive awards, Company-sponsored benefit and retirement plans, and change in control severance benefits. Each of these components has a certain risk profile. +Element +Form of Compensation +Purpose +Risk Profile +Base Salaries +Cash +Provides competitive, fixed compensation to attract and retain exceptional executive talent +Low to moderate +Annual Cash-Based Incentives +Cash +Provides a direct financial incentive to achieve corporate operating goals +Moderate to high +Long-Term Stock-Based Incentives +Non-qualified stock options and/or restricted stock units +Encourages executive officers to build and maintain a long-term equity ownership position in Meridian so that their interests are aligned with our shareholders +High +Health, Retirement and Other Benefits +Eligibility to participate in benefit plans generally available to our employees, including retirement plan contributions, and premiums paid on disability and life insurance +policies +Benefit plans are part of a broad-based employee benefits program providing competitive benefits to our executive officers +Low +Change in Control Severance Benefits +Cash and continuation of certain benefits +Encourages executive officers to maximize value for shareholders in the event that the Company becomes subject to a change in control transaction +Moderate to high +31 +Table of Contents +The Compensation Committee has reviewed the risk profile of the components of the Company’s executive +compensation program, including the performance objectives and target levels used in connection with incentive awards, and has considered the risks a NEO might be incentivized to take with respect to such components. When establishing the mix among +these components, the Compensation Committee is careful not to encourage excessive risk taking. Specifically, the performance objectives contained in the Company’s executive compensation programs have been balanced between annual and long-term +incentive compensation to ensure that both components are aligned and consistent with our long-term business plan and that our overall mix of stock-based awards has been allocated to promote an appropriate combination of incentive and retention +objectives. +The Compensation Committee believes that the Company’s executive compensation program does not incentivize the NEOs to +engage in business activities or other behavior that would threaten the value of the Company or the investments of its shareholders. +The +Compensation Committee continues to monitor and evaluate on an on-going basis the mix of compensation, especially equity compensation, awarded to the NEOs, and the extent to which such compensation aligns the +interests of the NEOs with those of the Company’s shareholders. In connection with this practice, the Compensation Committee has, from time to time, reconsidered the structure of the Company’s executive compensation program and the +relative weighting of various compensation elements. +See Executive Summary on page 28 for discussion of base salaries, annual cash-based +incentive compensation and long-term stock-based compensation. +Company-Sponsored Benefit and Retirement Plans +Meridian provides Company-sponsored benefit and retirement plans to the NEOs. In general, executives participate in the Company’s benefit and +retirement plans on the same basis as other Company employees. The core benefit package includes health, dental, short- and long-term disability, and group term life insurance. Meridian generally provides retirement benefits to executives through +qualified (under the Internal Revenue Code) defined contribution plans (401K Plan). +Change in Control Severance Benefits +The Compensation Committee believes that a reasonable level of salary and Company-sponsored benefit protection provides a means of retention and allows +the NEOs to remain focused on achievement of Company goals and objectives in the event that the Company becomes subject to a merger or acquisition transaction. This component of compensation would only be paid in the event of a change in control of +the Company, under certain qualifying conditions, and termination of the NEO’s employment (i.e., double trigger). For the CEO and selected other NEOs, this component of compensation would include two years’ base salary, performance bonus +and core benefits. See page 39 for a description of change in control severance agreements entered into with certain of our executive officers. +Jack Kenny Employment Agreement +On +November 5, 2019, Meridian entered into an Amended and Restated Employment Agreement (the “Kenny Employment Agreement”) with Jack Kenny, its CEO. Under the Kenny Employment Agreement, Mr. Kenny is entitled to be paid a base +salary of $670,000 and his salary shall be reviewed annually by the Compensation Committee. During the first year of the Kenny Employment Agreement, Mr. Kenny was eligible to earn an annual target bonus of seventy-five percent of his base +salary. Thereafter, the Compensation Committee shall set an eligible target amount for the annual bonus for the applicable employment term year. The actual amount of any annual bonus payable to Mr. Kenny in any year shall be determined by the +Compensation Committee based upon performance criteria set forth in advance under the bonus plan established by the Compensation Committee and the achievement of such performance criteria. +The effective date of the Kenny Employment Agreement is October 1, 2019 and its term is two years, with annual renewal provisions following the initial term. Either the Company or Mr. Kenny may +terminate the Kenny Employment Agreement at any time for any reason upon 90 days’ notice. In the event that the Company +32 +Table of Contents +terminates the employment of Mr. Kenny without Cause or if he terminates his employment for Good Reason, each as defined in the Kenny Employment Agreement, Mr. Kenny is entitled to a +severance payment equal to twelve months of his then current base salary plus a pro-rata portion of the target bonus through the date of termination. If such termination occurs during a change in control +period (i.e., a double trigger), Mr. Kenny is entitled to a severance payment equal to two times his then current base salary plus his target bonus for the year in which the termination occurs. +The Kenny Employment Agreement contains customary indemnification provisions and a “clawback” provision that enables the Company to recoup any +amounts paid to Mr. Kenny under the Kenny Employment Agreement if so required by applicable law or any applicable securities exchange listing standards. +Internal Pay Equity +The Compensation Committee believes that the relative difference +between the CEO’s compensation and the compensation of the Company’s other executives has not increased significantly over the years. Further, the Compensation Committee believes that the Company’s internal pay equity structure is +appropriate based upon the contributions to the success of the Company and as a means of motivation to other executives and employees. +COMPENSATION COMMITTEE REPORT +The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required +by Item 402(b) of Regulation S-K with management. Based on these reviews and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be +included in the Company’s proxy statement on Schedule 14A. +Members of the Compensation Committee +James M. Anderson (Chair) +Dwight E. Ellingwood +John C. McIlwraith +David C. +Phillips (Ex-Officio) +CEO PAY RATIO +Our CEO Pay Ratio was calculated in compliance with the requirements set forth in Item 402(u) of Regulation S-K. +We identified the median employee population as of July 31, 2020, which included all 693 global full-time, part-time, temporary and seasonal employees employed on that date, excluding 24 such employees in our Belgium, China, France and Holland +locations, which in the aggregate represent less than 5% of our workforce. We used a consistently applied compensation measure across our global employee population to calculate the median employee compensation. For our +consistently applied compensation measure, we utilized total cash compensation per our internal payroll records, annualized and translated to U.S. dollars. We then calculated the median employee’s fiscal 2020 compensation in the same manner as +the NEOs in the Summary Compensation Table. Our median employee compensation for fiscal 2020 was $66,070 and our CEO’s compensation was $3,330,484. Accordingly, our +CEO-to-Employee Pay Ratio is approximately 50:1. +33 +Table of Contents +SUMMARY COMPENSATION TABLE +The following table summarizes the aggregate compensation paid, or earned, by each of the NEOs for the fiscal years ended September 30, 2020, 2019 +and 2018, respectively: +Name and Principal +Position +(a) +Year +(b) +Salary +(c) +Bonus 1 +(d) +Stock +Awards 2 +(e) +Option +Awards 3 +(f) +Non-Equity +Incentive Plan +Compensation 4 +(g) +Change in +Pension Value +and +Nonqualified +Deferred +Compensation +Earnings +(h) +All +Other +Compensation 5 +(i) +Total +Jack Kenny +Chief Executive +Officer +2020 +2019 +2018 +$ +$ +$ +670,000 +650,000 +542,408 +— +— +— +$ +$ +$ +1,005,000 +485,250 +554,750 +$ +$ +670,000 +— +319,140 +$ +$ +$ +958,770 +150,000 +250,000 +— +— +— +$ +$ +$ +26,714 +31,142 +192,308 +$ +$ +$ +3,330,484 +1,316,392 +1,858,606 +Bryan T. Baldasare 6 +Executive Vice President, +Chief Financial +Officer +and Secretary +2020 +2019 +2018 +$ +$ +$ +377,831 +283,039 +251,037 +— +— +— +$ +$ +$ +201,028 +157,563 +73,250 +— +— +— +$ +$ +$ +290,016 +28,600 +61,875 +— +— +— +$ +$ +$ +33,749 +21,557 +26,801 +$ +$ +$ +902,624 +490,759 +412,963 +Lourdes G. Weltzien +Executive +Vice President, +Life Science +2020 +2019 +2018 +$ +$ +$ +368,711 +358,431 +341,516 +— +— +— +$ +$ +$ +201,028 +242,625 +109,875 +$ +— +— +71,780 +$ +$ +$ +283,625 +50,512 +57,493 +— +— +— +$ +$ +$ +31,172 +23,982 +35,385 +$ +$ +$ +884,536 +675,550 +616,049 +Tony Serafini-Lamanna 7 +Executive Vice President, Diagnostics +2020 +2019 +2018 +$ +$ +$ +317,269 +274,346 +105,000 +$ +30,000 +— +— +$ +$ +120,613 +157,563 +— +$ +$ +10,328 +— +32,134 +$ +$ +$ +274,752 +28,700 +28,000 +— +— +— +$ +$ +$ +32,979 +76,921 +15,706 +$ +$ +$ +785,941 +537,530 +180,840 +1 +The amount reflected for Mr. Serafini-Lamanna represents an amount received in connection with retention bonus payments made to the Executive +Leadership Team in March 2020, prior to his promotion to Executive Vice President. No such payments were made to Mr. Kenny, Mr. Baldasare or Dr. Weltzien. See Note 7 below. +2 +The amounts shown reflect the grant date fair value of the restricted stock units issued during fiscal years 2020, 2019 and 2018 in accordance with ASC +Topic 718, including those granted to Mr. Kenny in connection with his November 5, 2019 Employment agreement and upon his being hired as CEO in October 2017. In addition, the amounts reflected for Mr. Baldasare and +Mr. Serafini-Lamanna in fiscal 2019 include the grant date fair value of restricted stock units granted in connection with the acquisition of GenePOC, Inc. No compensation cost is included in this table related to the performance-based portion +of the restricted stock units granted during fiscal 2018, and because the required earnings targets for Meridian were not reached for fiscal 2018, the performance-based restricted stock units were cancelled. No such performance-based restricted +stock units were granted during fiscal 2020 or fiscal 2019. A discussion of the assumptions used in calculating these values may be found in Note 7(b) on page 66 of the Company’s Annual Report on Form +10-K filed with the SEC on November 23, 2020. +3 +The amounts shown reflect the grant date fair value of the stock options granted during fiscal years 2020 and 2018 in accordance with ASC Topic 718, +and during fiscal 2020 are comprised of: (i) a grant to Mr. Kenny in connection with his November 5, 2019 Employment Agreement; and (ii) a grant to Mr. Serafini-Lamanna in connection with retention grants made to members of +the Executive Leadership Team, excluding Mr. Kenny, Mr. Baldasare and Dr. Weltzien, in March 2020, prior to his promotion to Executive Vice President. The fiscal 2018 amounts are comprised of: (i) a grant to Mr. Kenny upon +his being hired as CEO in October 2017; (ii) a grant to Dr. Weltzien in connection with her promotion to Executive Vice President, Life Science in March 2018; (iii) a grant to Mr. Serafini-Lamanna upon his hiring in April 2018; and +(iv) time-based grants made in connection with the Company’s long-term incentive compensation program. No compensation cost is included in this table related to the performance-based portion of stock options granted during fiscal 2018. +Because the required +34 +Table of Contents +earnings target for Meridian was not reached for fiscal 2018, the performance-based stock options were cancelled. A discussion of the assumptions used in calculating these values may be found in +Note 7(b) on page 66 of the Company’s Annual Report on Form 10-K filed with the SEC on November 23, 2020. +4 +The amounts shown represent amounts earned by the NEOs pursuant to the Officer’s Performance Compensation Plan for fiscal 2020, 2019 and 2018. +5 +See the All Other Compensation table below for amounts, which include certain Company contributions and other personal benefits for fiscal 2020. +All Other Compensation +Jack +Kenny +Bryan T. +Baldasare +Lourdes G. +Weltzien +Tony +Serafini- +Lamanna +Retirement Contributions +$ +16,406 +$ +19,133 +$ +16,878 +$ +19,133 +Vacation Cash-out Payment +10,308 +14,616 +14,294 +13,846 +Totals +$ +26,714 +$ +33,749 +$ +31,172 +$ +32,979 +6 +Mr. Baldasare was named Executive Vice President and Chief Financial Officer of Meridian effective October 1, 2019. +7 +Mr. Serafini-Lamanna was named Executive Vice President, Diagnostics effective May 18, 2020. +35 +Table of Contents +GRANTS OF PLAN-BASED AWARDS +The following table sets forth, for each of the NEOs, information related to grants made during fiscal 2020 under Meridian’s Cash-Based Incentive +Compensation Plan and 2012 Stock Incentive Plan: +Name +Grant +Date +Estimated Future Payouts Under +Non-Equity Incentive +Plan +Awards 1,2 +Estimated Future Payouts Under +Equity Incentive Plan Awards +All other +Stock +Awards: +Number of +Shares of +Stock or +Units (#) +All other +Option +Awards: +Number of +Securities +Underlying +Options (#) +Exercise +or Base +Price of +Option +Awards +($/Sh) +Grant Date +Fair Value +of Stock +and +Option +Awards +Threshold +($) +Target +($) +Max +($) +Threshold +(#) +Target +(#) +Max +(#) +(a) +(b) +(c) +(d) +(e) +(f) +(g) +(h) +(i) +(j) +(k) +(l) +Jack Kenny +10/31/19 +11/05/19 +$ +100,500 +— +$ +502,300 +— +$ +854,250 +— +— +— +— +— +— +— +— +99,505 +3 +— +198,119 +4 +— +— +$ +— +1,675,000 +Bryan T. Baldasare +10/31/19 +10/31/19 +$ +30,400 +— +$ +152,000 +— +$ +258,400 +— +— +— +— +— +— +— +— +20,534 +5 +— +— +— +— +$ +— +201,028 +Lourdes G. Weltzien +10/31/19 +10/31/19 +$ +29,730 +— +$ +148,650 +— +$ +252,705 +— +— +— +— +— +— +— +— +20,534 +5 +— +— +— +— +$ +— +201,028 +Tony Serafini-Lamanna +10/31/19 +10/31/19 +03/26/20 +$ +18,000 +— +— +$ +90,000 +— +— +$ +153,000 +— +— +— +— +— +— +— +— +— +— +— +— +12,320 +— +5 +— +— +4,000 +6 +— +— +— +$ +$ +— +120,613 +10,328 +1 +These columns reflect the potential payout for each NEO under the fiscal 2020 CICP if the threshold, target and maximum goals, as initially +established, were satisfied for all performance measures. As described within the “Executive Summary” section of the “Compensation Discussion and Analysis” beginning on page 28, in connection with developments related to the COVID-19 pandemic, during May 2020, the Company raised its revenue and non-GAAP operating income expectations to levels substantially higher than the maximum targets included +in the original CICP. As a result, at that time, the Compensation Committee added “kickers” to the revenue component of the original CICP in order to incentivize maximization of the revenue opportunity. The application of these revised +revenue and operating income expectations, the COVID kicker and the individual performance factors resulted in the determination of the amounts earned by the NEOs set forth in “Non-Equity Incentive Plan +Compensation” column of the Summary Compensation Table. +2 +Mr. Serafini-Lamanna’s potential payout for fiscal 2020 was established prior to his promotion to Executive Vice President. +3 +This grant of time-based restricted stock units vests 100% on October 1, 2022. +4 +This grant of time-based stock options vests in three equal annual installments from the date of grant, until fully vested on October 1, 2022. +5 +These grants of time-based restricted stock units vest 100% on November 15, 2022. +6 +This grant of time-based restricted stock units with 100% vesting after three years was made to Mr. Serafin-Lamanna in connection with retention +grants made to the Executive Leadership Team in March 2020, prior to his promotion to Executive Vice President. No such grants were made to Mr. Kenny, Mr. Baldasare or Dr. Weltzien. +36 +Table of Contents +OUTSTANDING EQUITY AWARDS AT FISCAL +YEAR-END +The following table provides information on the NEOs’ holdings of equity awards +under Meridian’s 2012 Stock Incentive Plan as of September 30, 2020: +Option Awards +Stock Awards +Name +Number of +Securities +Underlying +Unexercised +Options (#) +Exercisable +Number of +Securities +Underlying +Unexercised +Options (#) +Unexercisable +Equity +Incentive Plan +Awards: +Number of +Securities +Underlying +Unexercised +Unearned +Options (#) +Option +Exercise +Price ($) +Option +Expiration +Date +Number of +Shares or +Units of +Stock +That Have +Not +Vested (#) +Market +Value of +Shares or +Units of +Stock That +Have Not +Vested ($) +Equity +Incentive +Plan +Awards: +Number of +Unearned +Shares, +Units or +Other +Rights That +Have +Not +Vested (#) +Equity +Incentive +Plan +Awards: +Market or +Payout +Value of +Unearned +Shares, +Units or +Other +Rights That +Have +Not +Vested ($) +(a) +(b) +(c) +(d) +(e) +(f) +(g) +(h) +(i) +(j) +Jack Kenny +50,000 +— +1 +50,000 +198,119 +1 +2 +— +— +$ +$ +14.50 +10.10 +10/09/27 +11/05/29 +— +— +25,000 +25,000 +99,505 +9 +9 +10 +$ +$ +$ +— +— +424,500 +424,500 +1,689,595 +— +— +— +— +— +— +— +— +— +— +Bryan T. Baldasare +15,000 +3 +— +— +$ +19.56 +03/24/26 +— +5,000 +5,000 +7,500 +1,200 +20,534 +11 +9 +9 +12 +13 +$ +$ +$ +$ +$ +— +84,900 +84,900 +127,350 +20,376 +348,667 +— +— +— +— +— +— +— +— +— +— +— +— +Lourdes G. Weltzien +10,000 +— +5,000 +4 +6 +— +12,500 +5,000 +5 +6 +— +— +— +$ +$ +$ +19.66 +14.65 +14.30 +07/01/26 +11/08/27 +04/24/28 +— +— +— +10,000 +625 +7,500 +12,500 +20,534 +11 +14 +9 +9 +13 +$ +$ +$ +$ +$ +— +— +— +169,800 +10,613 +127,350 +212,250 +348,667 +— +— +— +— +— +— +— +— +— +— +— +— +— +— +— +— +Tony Serafini-Lamanna +— +— +10,000 +4,000 +7 +8 +— +— +$ +$ +14.60 +6.97 +04/30/28 +03/26/30 +— +— +7,500 +1,200 +12,320 +9 +12 +13 +$ +$ +$ +— +— +127,350 +20,376 +209,194 +— +— +— +— +— +— +— +— +— +— +1 +Options vest in four equal annual installments from the date of grant, until fully vested on October 9, 2021. +2 +Options vest in three equal annual installments from the date of grant, until fully vested on October 1, 2022. +3 +Options fully vested on March 24, 2020. +4 +Options fully vested on July 1, 2020. +5 +Options vest in full on November 8, 2021. +37 +Table of Contents +6 +Options vest in four equal annual installments from the date of grant, until fully vested on April 24, 2022. +7 +Options vest in full on April 30, 2022. +8 +Options vest in full on March 26, 2023. +9 +Units vest on November 15, 2021. +10 +Units vest on October 1, 2022. +11 +Units vest on November 15, 2020. +12 +Units vest on September 16, 2022. +13 +Units vest on November 15, 2022. +14 +Units vest on November 21, 2020. +OPTION EXERCISES AND STOCK VESTED +The following table sets forth, +for each of the NEOs, information on options exercised and restricted stock units vested during fiscal 2020: +Option Awards +Stock Awards +Name +Number of +Shares +Acquired on +Exercise (#) +Value Realized +on Exercise ($) 1 +Number of Shares +Acquired on +Vesting (#) +Value Realized on +Vesting ($) 2 +(a) +(b) +(c) +(d) +(e) +Jack Kenny +— +$ +— +13,000 +$ +117,520 +Bryan T. Baldasare +1,500 +$ +5,370 +5,000 +$ +43,200 +Lourdes G. Weltzien +— +$ +— +5,625 +$ +48,694 +Tony Serafini-Lamanna +— +$ +— +— +$ +— +1 +Amounts reflect the difference between the exercise price of the option and the market price of Meridian common shares at the time of exercise. +2 +Amounts reflect the market price of Meridian common shares at the time of restricted stock units vesting. +401(K) PLAN +Our 401(k) Savings Plan (“401(k) Plan”) allows all U.S. employees of the Company as soon as administratively possible following their employment +to set aside a portion of their compensation each year for their retirement needs, up to the limits set by the Internal Revenue Code. Presently, the Company contributes a matching contribution of 100% of the first 4% of the employee’s +contribution (i.e., up to 4% of an employee’s salary), subject to Internal Revenue Code limitations. The Company may also contribute a profit-sharing contribution at its discretion. Employee contributions and employer matching contributions are +100% vested immediately. Participants are entitled to direct the investment of their accounts among various mutual funds selected by the Meridian Bioscience, Inc., Savings and Investment Plan Committee. Participants who terminate employment are +entitled to receive the vested portion of their accounts. +38 +Table of Contents +POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL +As described on page 32 in the “Compensation Discussion and Analysis” section of this proxy statement, Mr. Kenny and Meridian are parties +to the Kenny Employment Agreement which sets forth compensation, non-competition, benefit and severance provisions and provides for a payment equal to twelve months of Mr. Kenny’s then current base +salary plus a pro-rata portion of the target bonus through the date of termination in the event Mr. Kenny is terminated by Meridian without cause or Mr. Kenny terminates his employment for good +reason. If such termination occurs during a change in control period (double trigger), Mr. Kenny is entitled to a severance payment equal to two times his then current base salary plus his target bonus for the severance period. +Had one of the events noted above occurred on September 30, 2020 and Meridian been within a change in control period at that time, Mr. Kenny +would also have been entitled to the following under the Kenny Employment Agreement: +Salary +$ +1,340,000 +Annual Performance Bonus +1,005,000 +Total Lump Sum Payment +$ +2,345,000 +Our Board of Directors authorized us to enter into change in control severance agreements with certain of our executive +officers (other than our CEO, who has a change in control provision in his Employment Agreement). Each agreement had an initial term ended December 31, 2016, and each year will automatically renew for an additional one year term, provided +however, that if a change in control occurs the term will expire no earlier than 24 calendar months after the calendar month in which such change in control occurs. A change in control is generally defined in each agreement as any of the following: +(i) a person is or becomes a beneficial owner of more than 50% of our voting securities; (ii) the composition of a majority of our Board changes; (iii) we consummate a merger or similar transaction; or (iv) the sale of all or +substantially all of our assets. Each agreement provides, among other things, that if a change in control occurs during the term of the agreement, and the executive’s employment is terminated either by us or by the executive, other than: +(a) by us for cause; (b) by reason of death or disability; or (c) by the executive without good reason, such executive will receive a severance payment equal to: (A) a multiple of such executive’s annual base salary; +(B) a multiple of executive’s target bonus amounts; and (C) earned but unused vacation time. In addition, each change in control agreement provides that in the event that the severance and other benefits provided for in the agreement +or otherwise payable to the executive would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code, the benefits under the agreement will be either delivered in full, or delivered to a lesser extent which would +result in no portion of the benefits being subject to such excise tax, whichever is more beneficial to the executive. +Had termination in +connection with a change in control occurred on September 30, 2020, the NEOs to which the policy applied at that date (Mr. Baldasare and Dr. Weltzien) would have been entitled to the following lump sum payments under the policy: +Bryan T. +Baldasare +Lourdes G. +Weltzien +Salary +$ +760,000 +$ +743,250 +Annual Performance Bonus +304,000 +297,300 +Earned but Unused Vacation +17,560 +22,138 +Total Lump Sum Payment +$ +1,081,560 +$ +1,062,688 +39 +Table of Contents +DIRECTOR COMPENSATION +For fiscal 2020, independent directors of Meridian received the following compensation for service on the Board and the Audit Committee (“AC”), +Compensation Committee (“CC”) and Nominating & Corporate Governance Committee (“N&CGC”) (annual amounts presented): +-Base for director service +$ +40,000 +-Additional for Independent Chairperson +$ +50,000 +-AC Chair +$ +20,000 +-AC Member +$ +10,000 +-CC Chair +$ +13,000 +-CC Member +$ +6,000 +-N&CGC Chair +$ +13,000 +-N&CGC Member +$ +5,000 +Each independent director is entitled to receive on an annual basis an equity award grant valued at $100,000. During +fiscal 2020, one-third of such equity value was in the form of restricted stock units (valued at the market value of our common stock at the date of award) and +two-thirds was in the form of non-qualified options to purchase common shares of the Company at an exercise price equal to the grant date closing sale price as reported +on Nasdaq (valued pursuant to the current methodology utilized by the Company for financial reporting purposes, which may be found in Note 7(b) on page 66 of the Company’s Annual Report on Form 10-K filed +with the SEC on November 23, 2020). Effective in fiscal 2021, the $100,000 director stock-based grant will be paid to each director in the equity form of their choosing (i.e., restricted stock units and/or +non-qualified stock options), with the value of each form of equity determined consistent with that previously noted for fiscal 2020. +The following table provides information on compensation related to fiscal 2020 for independent directors who served during fiscal 2020: +Name +Fees +Earned +or +Paid in +Cash +($) +Stock +Awards +($) 1 +Option +Awards +($) 1 +Non-Equity +Incentive Plan +Compensation +($) +Change in +Pension Value +and Nonqualified +Deferred +Compensation +Earnings +All +Other +Compensation +($) +Total +($) +(a) +(b) +(c) +(d) +(e) +(f) +(g) +(h) +James M. Anderson +$ +63,000 +$ +33,326 +$ +66,674 +— +— +— +$ +163,000 +Anthony P. Bihl +$ +10,000 +$ +20,000 +$ +40,000 +— +— +— +$ +70,000 +Dwight E. Ellingwood +$ +59,000 +$ +33,326 +$ +66,674 +— +— +— +$ +159,000 +John C. McIlwraith +$ +51,000 +$ +33,326 +$ +66,674 +— +— +— +$ +151,000 +David C. Phillips +$ +90,000 +$ +33,326 +$ +66,674 +— +— +— +$ +190,000 +John M. Rice +$ +46,500 +$ +33,326 +$ +66,674 +— +— +— +$ +146,500 +Catherine A. Sazdanoff +$ +55,000 +$ +33,326 +$ +66,674 +— +— +— +$ +155,000 +Felicia Williams +$ +60,000 +$ +33,326 +$ +66,674 +— +— +— +$ +160,000 +1 +The amounts shown reflect the grant date fair value of the awards made in fiscal year 2020 in accordance with ASC Topic 718. A discussion of the +assumptions used in calculating these values may be found in Note 7(b) on page 66 of the Company’s Annual Report on Form 10-K filed with the SEC on November 23, 2020. +40 +Table of Contents +SHAREHOLDER PROPOSALS FOR NEXT YEAR +The deadline for shareholder proposals to be included in the proxy statement for next year’s meeting is August 18, 2021. +The form of proxy for this meeting grants authority to the designated proxies to vote in their discretion on any matters that come before the meeting +except those set forth in Meridian’s proxy statement and except for matters as to which adequate notice is received. In order for a notice to be deemed adequate for the 2022 Annual Shareholders’ Meeting, it must be received prior to +November 1, 2021. If there is a change in the anticipated date of next year’s Annual Shareholders’ Meeting or these deadlines by more than 30 days, we will notify you of this change through our Form +8-K and/or Form 10-Q filings. +Meridian’s Code of +Regulations provides that only persons nominated by an officer, director or in writing by a shareholder not earlier than 150 days nor later than 90 days prior to the meeting at which directors are to be selected shall be eligible for election and +that shareholder proposals be presented not earlier than 150 days nor later than 90 days prior to the meeting at which the proposals are to be presented. +QUESTIONS +If you have questions or need more information about +the annual meeting, call us at (513) 271-3700 or write to: +Bryan T. Baldasare +Executive Vice President, Chief Financial Officer and Secretary +Meridian Bioscience, Inc. +3471 River Hills Drive +Cincinnati, Ohio 45244 +For information about +your record holdings, call Computershare Shareholder Services at (888) 294-8217. +41 +Table of Contents +APPENDIX A +MERIDIAN BIOSCIENCE, Inc. +2021 Omnibus Award Plan +1. Purpose . The purpose of the Meridian +Bioscience, Inc. 2021 Omnibus Award Plan is to provide a means through which the Company and its Affiliates may attract and retain key personnel and to provide a means whereby directors, officers, employees, consultants and advisors (and prospective +directors, officers, employees, consultants and advisors) of the Company and its Affiliates can acquire and maintain an equity interest in the Company, or be paid incentive compensation, including incentive compensation measured by reference to the +value of Common Stock, thereby strengthening their commitment to the welfare of the Company and its Affiliates and aligning their interests with those of the Company’s stockholders. This Plan document is an omnibus document which authorizes, in +addition to the Plan, the establishment of separate sub-plans (“ Sub Plans ”) that the Committee (defined below) may create and administer from time to time. The Plan shall be a separate and +independent plan from the Sub Plans, but the total number of shares of Common Stock authorized to be issued under the Plan applies in the aggregate to both the Plan and the Sub Plans. The Israeli Appendix to the Meridian Bioscience, Inc. 2012 Stock +Incentive Plan shall apply to this Plan in the same manner as it applied to and formed an integral part of the Meridian Bioscience, Inc. 2012 Stock Incentive Plan; such Israeli Appendix shall form an integral part of this Plan. +2. Definitions . The following definitions shall be applicable throughout the Plan. +(A) “ Affiliate ” means (i) any person or entity that directly or indirectly controls, is controlled by or is under +common control with the Company and/or (ii) to the extent provided by the Committee, any person or entity in which the Company has a significant interest. The term “control” (including, with correlative meaning, the terms +“controlled by” and “under common control with”), as applied to any person or entity, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such person or +entity, whether through the ownership of voting or other securities, by contract or otherwise. +(B) “Award” means, +individually or collectively, any Incentive Stock Option, Nonqualified Stock Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, Deferred Stock, Deferred Stock Unit, Other Stock-Based Award and Performance Compensation Award +granted under the Plan. For purposes of Section (C) of the Plan, “Award” and “Award under the Plan” shall also mean any stock-based award granted under the Prior Plan and outstanding on the Effective Date. +(C) “ Board ” means the Board of Directors of the Company. +(D) “ Cause ” means, in the case of a particular Award, unless the applicable Award agreement states otherwise, +(i) the Participant’s conviction or misappropriation of money or other property or conviction of a felony, or a guilty plea or plea of nolo contendere by Participant with respect to a felony, (ii) conduct by the Participant that is in +competition with the Company, conduct by a Participant that breaches the Participant’s duty of loyalty to the Company or a Participant’s willful misconduct, (iii) a willful and material breach by the Participant of his or her +obligations under any agreement entered into between the Participant and the Company, or (iv) the Participant’s failure to substantially perform his or her duties with the Company (other than by reason of the Participant’s +Disability). For Participants subject to Section 16 of the Exchange Act, the determination of whether any conduct, action or failure to act constitutes “Cause” shall be made by the Committee in its sole discretion. +(E) “ Change in Control ” shall, in the case of a particular Award, unless the applicable Award agreement states otherwise +or contains a different definition of “Change in Control,” be deemed to occur upon: (A) the sale of all, or substantially all of the assets of the Company; (B) a merger, or recapitalization, or similar transaction which results +in the shareholders of the Company immediately prior to such event owning less than fifty percent (50%) of the fair market value or the voting power of the surviving entity; (C) the date during any +A-1 +Table of Contents +twelve (12) month period that a majority of the Board is replaced by directors whose appointment is not endorsed by a majority of the members of the Board before the date of appointment or +election; or (D) the acquisition, directly or indirectly, of the Beneficial Ownership (within the meaning of that term as it is used in Section 13(d) of the Exchange Act) of thirty percent (30%) or more of the outstanding voting +securities of the Company by any Person, entity or group. This definition shall not apply to the purchase of by underwriters in connection with a public offering of securities of the Company, or the purchase of shares of up to twenty five +percent (25%) of any class of securities of the Company by a tax-qualified employee stock benefit plan. Notwithstanding anything herein to the contrary, and only to the extent that an Award is subject to +Code Section 409A and payment of the Award pursuant to the application of the definition of “Change in Control” above would cause such Award not to otherwise comply with Code Section 409A, payment of an Award may occur upon a +Change in Control only to the extent that the event constitutes a “change in the ownership or effective control” of the Company or a “change in the ownership of a substantial portion of the assets” of the Company under Code +Section 409A. +(F) “Code” means the Internal Revenue Code of 1986, as amended, and any successor thereto. +Reference in the Plan to any section of the Code shall be deemed to include any regulations or other interpretative guidance under such section, and any amendments or successor provisions to such section, regulations or guidance. +(G) “Committee” means a committee of at least two people as the Board may appoint to administer the Plan or, if no such +committee has been appointed by the Board, the Board. +(H) “Common Stock” means the common stock, no par value per +share, of the Company (and any stock or other securities into which such common stock may be converted or into which it may be exchanged). +(I) “Company” means Meridian Bioscience, Inc., an Ohio corporation, and any successor thereto. +(J) “Date of Grant” means the date on which the granting of an Award is authorized, or such other date as may be specified in such authorization. +(K) “Deferred Stock” means a right to receive shares of Common Stock pursuant to Section (C) of this Plan upon the terms +and conditions set forth in the respective Award agreement granting the Award. +(L) “Deferred Stock Unit” means a +right to receive shares of Common Stock pursuant to Section (D) of this Plan upon the terms and conditions set forth in this respective Award agreement granting the Award. +(M) “Disability” means a Participant’s physical or mental incapacity resulting from personal injury, disease, illness or other condition which (i) prevents him or her from performing +his or her duties for the Company, as determined by the Committee or its designee, and (ii) results in his or her termination of employment or service with the Company . The Committee may substitute a different definition for the term +“Disability” in its discretion as it deems appropriate, including the definition under a long term disability plan of the Company or an Affiliate. +(N) “Effective Date” means the date on which the Plan is initially approved by the stockholders of the Company. +(O) “Effective Date Share Limit” has the meaning given such term in Section (B). +(P) “Eligible Director” means a person who is (i) a “non-employee director” within the meaning of +Rule 16b-3 under the Exchange Act and (ii) an “independent director” under the rules of NASDAQ or +A-2 +Table of Contents +any other securities exchange or inter-dealer quotation system on which the Common Stock is listed or quoted, or a person meeting any similar requirement under any successor rule or regulation. +(Q) “Eligible Person” means any (i) individual employed by the Company or an Affiliate; (ii) director or +officer of the Company or an Affiliate; (iii) consultant or advisor to the Company or an Affiliate who may be offered securities registrable pursuant to a registration statement on Form S-8 under the +Securities Act; or (iv) individual who has accepted an offer of employment or service as an employee, director, officer, consultant or advisor with the Company or its Affiliates (and would satisfy the provisions of any of clauses +(i) through (iii) above once he or she begins employment with or providing services to the Company or its Affiliates), who, in the case of each of clauses (i) through (iv) above, has entered into an Award agreement or who has received +written notification from the Committee or its designee that he or she has been selected to participate in the Plan. +(R) +“Exchange Act” means the Securities Exchange Act of 1934, as amended, and any successor thereto. Reference in the Plan to any section of (or rule promulgated under) the Exchange Act shall be deemed to include any rules, regulations or +other interpretative guidance under such section or rule, and any amendments or successor provisions to such section, rules, regulations or guidance. +(S) “Exercise Price” has the meaning given such term in Section (B) of the Plan. +(T) “Fair Market Value” means (i) unless otherwise determined by the Committee, on a given date, (A) if the Common Stock is listed on a national securities exchange, the closing sales +price of the Common Stock reported on the primary exchange on which the Common Stock is listed and traded on such date, or, if there is no such sale on that date, then on the last preceding date on which such a sale was reported, or (B) if the +Common Stock is not listed on any national securities exchange but is quoted in an inter-dealer quotation system on a last sale basis, the average between the closing bid price and ask price reported on such date, or, if there is no such sale on +that date, then on the last preceding date on which a sale was reported; or (ii) if the Common Stock is not listed on a national securities exchange or quoted in an inter-dealer quotation system on a last sale basis, the amount determined by +the Committee in good faith to be the fair market value of the Common Stock. In the case of an Incentive Stock Option, Fair Market Value shall be determined by the Committee in accordance with Code Section 422. For Awards intended to be exempt +from Code Section 409A, Fair Market Value shall be determined by the Committee in accordance with Code Section 409A. +(U) “Full-Value Award” means Restricted Stock, Restricted Stock Units, unrestricted Common Stock, Deferred Stock or Deferred +Stock Units. +(V) “Immediate Family Members” shall have the meaning set forth in Section (C). +(W) “Incentive Stock Option” means an Option that is designated by the Committee as an incentive stock option as described in +Section 422 of the Code and otherwise meets the requirements set forth in the Plan. +(X) “Indemnifiable Person” +shall have the meaning set forth in Section (E) of the Plan. +(Y) “NASDAQ” shall mean The NASDAQ Global Select +Market. +(Z) “Negative Discretion” shall mean the discretion authorized by the Plan to be applied by the Committee to +eliminate or reduce the size of a Performance Compensation Award. +(AA) “Nonqualified Stock Option” means an Option +that is not designated by the Committee as an Incentive Stock Option. +(BB) +“Non-Employee Director” means a member of the Board who is not an employee of the Company or any Affiliate. +A-3 +Table of Contents +(CC) “Option” means an Award granted under Section 7 of the Plan. +(DD) “Option Period” has the meaning given such term in Section (C) of the Plan. +(EE) “Other Stock-Based Award” means an Award granted under Section 10 of the Plan. +(FF) “Participant” means an Eligible Person who has been selected by the Committee to participate in the Plan and to receive an +Award. +(GG) “Participant Agreement” means, with respect to an Eligible Person, any applicable Award agreement or any +other employment, consulting, or other service or compensatory or severance agreement between the Eligible Person and the Company or an Affiliate, or any compensatory or severance plan, program, or arrangement of the Company or an Affiliate in which +the Eligible Person participates. +(HH) “Performance Compensation Award” shall mean any Award, whether cash-based or +stock-based, designated by the Committee as a Performance Compensation Award pursuant to Section 11 of the Plan. +(II) +“Performance Criteria” shall mean the criterion or criteria that the Committee shall select for purposes of establishing the Performance Goal(s) for a Performance Period with respect to any Performance Compensation Award under the Plan. +(JJ) “Performance Formula” shall mean, for a Performance Period, the one or more objective formulae applied against +the relevant Performance Goal to determine, with regard to the Performance Compensation Award of a particular Participant, whether all, some portion but less than all, or none of the Performance Compensation Award has been earned for the Performance +Period. +(KK) “Performance Goals” shall mean, for a Performance Period, the one or more goals established by the +Committee for the Performance Period. +(LL) “Performance Period” shall mean the one or more periods of time, as the +Committee may select, over which the attainment of one or more Performance Goals will be measured for the purpose of determining a Participant’s right to, and the payment of, a Performance Compensation Award. +(MM) “Permitted Transferee” shall have the meaning set forth in Section (C) of the Plan. +(NN) “Person” shall have the meaning given such term in Section 3(a)(9) of the Exchange Act. +(OO) “Plan” means this Meridian Bioscience, Inc. 2021 Omnibus Award Plan, as amended from time to time. +(PP) “Prior Plan” shall mean the Meridian Bioscience, Inc. 2012 Stock Incentive Plan, collectively with the 2004 Equity +Compensation Plan, as each such plan may have been amended and/or restated. +(QQ) “Restricted Period” means the +period of time determined by the Committee during which an Award is subject to restrictions or, as applicable, the period of time within which performance is measured for purposes of determining whether an Award has been earned. +(RR) “Restricted Stock” means Common Stock, subject to certain specified restrictions (including, without limitation, a +requirement that the Participant remain continuously employed or provide continuous services for a specified period of time), granted under Section 9 of the Plan. +A-4 +Table of Contents +(SS) “Restricted Stock Unit” means an unfunded and unsecured promise to deliver +shares of Common Stock, cash, other securities or other property, subject to certain restrictions (including, without limitation, a requirement that the Participant remain continuously employed or provide continuous services for a specified period +of time), granted under Section 9 of the Plan. +(TT) “Retirement” shall have the following meaning, unless +otherwise set forth in applicable Participant Agreements: retirement with the Company at or after age 65 or at or after the later of age 55 and ten years of service. +(UU) “SAR Period” has the meaning given such term in Section (C) of the Plan. +(VV) “Securities Act” means the Securities Act of 1933, as amended, and any successor thereto. Reference in the Plan to any section of (or rule promulgated under) the Securities Act shall be +deemed to include any rules, regulations or other interpretative guidance under such section or rule, and any amendments or successor provisions to such section, rules, regulations or guidance. +(WW) “Separation From Service” shall have the meaning set forth in Section 409A(a)(2)(A)(i) of the Code. +(XX) “Specified Employee” means a Participant who meets the definition of “specified employee,” as defined in +Section 409A(a)(2)(B)(i) of the Code. +(YY) “Stock Appreciation Right” or “SAR” means an Award granted +under Section 8 of the Plan. +(ZZ) “Strike Price” has the meaning given such term in Section (B) of the +Plan. +(AAA) “Subsidiary” means, with respect to any specified Person: +(1) any corporation, association or other business entity of which more than 50% of the total voting power of shares of company voting +securities (without regard to the occurrence of any contingency and after giving effect to any voting agreement or stockholders’ agreement that effectively transfers voting power) is at the time owned or controlled, directly or indirectly, by +that Person or one or more of the other Subsidiaries of that Person (or a combination thereof); and +(2) any partnership (or +any comparable foreign entity) (a) the sole general partner (or functional equivalent thereof) or the managing general partner of which is such Person or Subsidiary of such Person or (b) the only general partners (or functional equivalents +thereof) of which are that Person or one or more Subsidiaries of that Person (or any combination thereof). +(BBB) +“Substitute Award” has the meaning given such term in Section (E). +(CCC) “Sub Plans” has the meaning given +such term in Section 1. +(DDD) “Transaction” has the meaning given such term in the definition of “Change +in Control.” +3. Effective Date; Duration . The Plan is effective as of the Effective Date. The expiration date of +the Plan, on and after which date no Awards may be granted hereunder, shall be the tenth anniversary of the Effective Date; provided , however , that such expiration shall not affect Awards then outstanding, and the terms and conditions +of the Plan shall continue to apply to such Awards. +A-5 +Table of Contents +4. Administration. +(A) The Committee shall administer the Plan. To the extent required to comply with the provisions of Rule +16b-3 promulgated under the Exchange Act (if the Board is not acting as the Committee under the Plan), it is intended that each member of the Committee shall, at the time he or she takes any action with +respect to an Award under the Plan, be an Eligible Director. However, the fact that a Committee member shall fail to qualify as an Eligible Director shall not invalidate any Award granted by the Committee that is otherwise validly granted under the +Plan. +(B) Subject to the provisions of the Plan and applicable law, the Committee shall have the sole and plenary authority, +in addition to other express powers and authorizations conferred on the Committee by the Plan, to: (i) designate Participants; (ii) determine the type or types of Awards to be granted to a Participant; (iii) determine the number of +shares of Common Stock to be covered by, or with respect to which payments, rights, or other matters are to be calculated in connection with, Awards; (iv) determine the terms and conditions of any Award, including the vesting provisions; +(v) determine whether, to what extent, and under what circumstances Awards may be settled or exercised in cash, shares of Common Stock, other securities, other Awards or other property, or canceled, forfeited, or suspended and the method or +methods by which Awards may be settled, exercised, canceled, forfeited, or suspended; (vi) determine whether, to what extent, and under what circumstances the delivery of cash, Common Stock, other securities, other Awards or other property and +other amounts payable with respect to an Award shall be deferred either automatically or at the election of the Participant or of the Committee; (vii) establish any Sub Plans that may be governed by the Plan; (viii) interpret, administer, +reconcile any inconsistency in, correct any defect in and/or supply any omission in the Plan and any instrument or agreement relating to, or Award granted under, the Plan; (ix) establish, amend, suspend, or waive any rules and regulations and +appoint such agents as the Committee shall deem appropriate for the proper administration of the Plan; (x) accelerate the vesting or exercisability of, payment for or lapse of restrictions on, Awards (including previously deferred Awards), and +accelerate and determine payouts, if any, in respect of Awards with incomplete Performance Periods, in each case upon a Change in Control, death, Disability or Retirement (or on any other termination of employment) of a Participant; and +(xi) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the Plan. +(C) Except to the extent prohibited by applicable law or the applicable rules and regulations of any securities exchange or inter-dealer quotation system on which the securities of the Company are listed +or traded, the Committee may allocate all or any portion of its responsibilities and powers to any one or more of its members and may delegate all or any part of its responsibilities and powers to any person or persons selected by it. Any such +allocation or delegation may be revoked by the Committee at any time. Without limiting the generality of the foregoing, the Committee may delegate to one or more officers of the Company the authority to act on behalf of the Committee with respect to +any matter, right, obligation, or election that is the responsibility of or that is allocated to the Committee herein, and that may be so delegated as a matter of law, except for grants of Awards to persons subject to Section 16 of the Exchange +Act. When the Committee delegates its authority hereunder to one or more officers of the Company, it shall specify the total number of Awards that the officer or officers may award and the terms on which any Awards may be offered or sold. In no +event shall the Committee authorize any officer to designate such officer as a recipient of any Awards. +(D) Unless otherwise +expressly provided in the Plan, all designations, determinations, interpretations, and other decisions under or with respect to the Plan or any Award or any documents evidencing Awards granted pursuant to the Plan shall be within the sole discretion +of the Committee, may be made at any time and shall be final, conclusive and binding upon all persons or entities, including, without limitation, the Company, any Affiliate, any Participant, any holder or beneficiary of any Award, and any +stockholder of the Company. +(E) No member of the Board, the Committee or any employee or agent of the Company (each such +person, an “Indemnifiable Person”) shall be liable for any action taken or omitted to be taken or any determination made with respect to the Plan or any Award hereunder (unless constituting bad faith, fraud or a +A-6 +Table of Contents +willful criminal act or omission). Each Indemnifiable Person shall be indemnified and held harmless by the Company against and from any loss, cost, liability, or expense (including +attorneys’ fees) that may be imposed upon or incurred by such Indemnifiable Person in connection with or resulting from any action, suit or proceeding to which such Indemnifiable Person may be a party or in which such Indemnifiable Person may +be involved by reason of any action taken or omitted to be taken or determination made under the Plan or any Award agreement and against and from any and all amounts paid by such Indemnifiable Person with the Company’s approval, in settlement +thereof, or paid by such Indemnifiable Person in satisfaction of any judgment in any such action, suit or proceeding against such Indemnifiable Person, provided that the Company shall have the right, at its own expense, to assume and defend any such +action, suit or proceeding and once the Company gives notice of its intent to assume the defense, the Company shall have sole control over such defense with counsel of the Company’s choice. The foregoing right of indemnification shall not be +available to an Indemnifiable Person to the extent that a final judgment or other final adjudication (in either case not subject to further appeal) binding upon such Indemnifiable Person determines that the acts or omissions or determinations of +such Indemnifiable Person giving rise to the indemnification claim resulted from such Indemnifiable Person’s bad faith, fraud or willful criminal act or omission or that such right of indemnification is otherwise prohibited by law or by the +Company’s Amended Articles of Incorporation or Amended and Restated Code of Regulations. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such Indemnifiable Persons may be entitled +under the Company’s Amended Articles of Incorporation or Amended and Restated Code of Regulations, as a matter of law, or otherwise, or any other power that the Company may have to indemnify such Indemnifiable Persons or hold them harmless. +(F) Notwithstanding anything to the contrary contained in the Plan, the Board may, in its sole discretion, at any time and +from time to time, grant Awards and administer the Plan with respect to such Awards. In any such case, the Board shall have all the authority granted to the Committee under the Plan. +5. Grant of Awards; Shares Subject to the Plan; Limitations. +(A) The Committee may, from time to time, grant Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Deferred +Stock, Deferred Stock Units, Other Stock-Based Awards and/or Performance Compensation Awards to one or more Eligible Persons. +(B) Awards granted under the Plan shall be subject to the following limitations: (i) subject to Sections (C) and 12 of the Plan, +no more than the sum of (A) 2,000,000 shares of Common Stock plus (B) the number of shares of Common Stock that, as of the Effective Date, are remaining available for issuance or delivery, and not subject to outstanding awards, under the Prior +Plan may be delivered in the aggregate pursuant to Awards granted under the Plan (such sum of (A) and (B), the “ Effective Date Share Limit ”); (ii) subject to Section 12 of the Plan, no more than the number of shares +of Common Stock equal to the Effective Date Share Limit may be delivered in the aggregate pursuant to the exercise of Incentive Stock Options granted under the Plan; and (iii) the maximum number of shares subject to Awards granted to any Non-Employee Director during a single fiscal year shall be limited so that the Awards, taken together with any cash fees paid to such Non-Employee Director in respect of his +or her service during such year (including service as a member or chair of any committees of the Board), do not exceed $450,000 in total value (calculating the value of any such Awards based on the grant date fair value of such Awards for financial +reporting purposes). Notwithstanding the foregoing, the Board may make exceptions to the limit in the foregoing clause (iii) for (A) a non-executive chairman of the Board, provided that such non-executive chairman does not participate in the decision to award such compensation, and (B) special projects and ad hoc committee appointments, as deemed appropriate by the Board, from time to time. +(C) If shares of Common Stock issued or issuable upon vesting or settlement of an Award are withheld by the Company, or if +shares of Common Stock owned by a Participant are surrendered or tendered to the Company (either directly or by means of attestation), in payment of any taxes required to be withheld in respect of such Award (other than an Award of Options or SARs), +in each case, in accordance with the terms and conditions of the Plan and any applicable Award agreement, such withheld, surrendered or tendered shares shall become available for other Awards under the Plan; provided , further , that in +no event shall such shares increase +A-7 +Table of Contents +the number of shares of Common Stock that may be delivered pursuant to Incentive Stock Options granted under the Plan. If and to the extent an Award under the Plan is settled in cash or expires, +terminates or is canceled or forfeited for any reason whatsoever, the shares covered by such Award shall again become available for other Awards under the Plan. For the avoidance of doubt, the following shares shall not be added to the shares +authorized for grant under sub-section (B) of this Section 5: (i) shares tendered by a Participant or withheld by the Company in payment of the Exercise Price of an Option; (ii) shares tendered +by a Participant or withheld by the Company to satisfy any tax withholding obligation with respect to Options or SARs; (iii) shares subject to a SAR that are not issued in connection with its stock settlement on exercise thereof; and +(iv) shares reacquired by the Company on the open market or otherwise using cash proceeds from the exercise of Options. +(D) Shares of Common Stock delivered by the Company in settlement of Awards may be authorized and unissued shares, shares held in the +treasury of the Company, shares purchased on the open market or by private purchase, or a combination of the foregoing. +(E) +Awards may, in the sole discretion of the Committee, be granted under the Plan in assumption of, or in substitution for, outstanding awards previously granted by an entity acquired directly or indirectly by the Company or with which the Company +combines (“ Substitute Awards ”). Shares of Common Stock underlying Substitute Awards shall not be counted against the number of shares of Common Stock available for issuance pursuant to Section (B) above; provided , that +Substitute Awards issued in connection with the assumption of, or in substitution for, outstanding options intended to qualify as “incentive stock options” within the meaning of Section 422 of the Code shall be counted against the +aggregate number of shares of Common Stock available for Awards of Incentive Stock Options under the Plan. +(F) Following the +Effective Date, no new awards shall be granted under the Prior Plan. For purposes of the preceding sentence, awards under the Prior Plan with performance periods that commenced prior to the Effective Date and end after the Effective Date shall not +be deemed new awards granted following the Effective Date. +6. Eligibility. Participation shall be limited to Eligible +Persons. +7. Options. +(A) Generally . Each Option granted under the Plan shall be evidenced by an Award agreement. Each Option so granted shall be subject to the conditions set forth in this Section 7, and to such +other conditions not inconsistent with the Plan as may be reflected in the applicable Award agreement. All Options granted under the Plan shall be Nonqualified Stock Options unless the applicable Award agreement expressly states that the Option is +intended to be an Incentive Stock Option. Incentive Stock Options shall be granted only to Eligible Persons who are employees of the Company and its Affiliates, and no Incentive Stock Option shall be granted to any Eligible Person who is ineligible +to receive an Incentive Stock Option under the Code. No Option shall be treated as an Incentive Stock Option unless the Plan has been approved by the stockholders of the Company in a manner intended to comply with the stockholder approval +requirements of Section 422(b)(1) of the Code, provided that any Option intended to be an Incentive Stock Option shall not fail to be effective solely on account of a failure to obtain such approval, but rather such Option shall be treated +as a Nonqualified Stock Option unless and until such approval is obtained. In the case of an Incentive Stock Option, the terms and conditions of such grant shall be subject to and comply with such rules as may be prescribed by Section 422 of +the Code. If for any reason an Option intended to be an Incentive Stock Option (or any portion thereof) shall not qualify as an Incentive Stock Option, then, to the extent of such nonqualification, such Option or portion thereof shall be regarded as +a Nonqualified Stock Option appropriately granted under the Plan. +(B) Exercise Price . Except as otherwise provided by +the Committee in the case of Substitute Awards, the exercise price (“ Exercise Price ”) per share of Common Stock for each Option shall not be less than 100% of the Fair Market Value of such share (determined as of the Date of Grant); +provided , however , that in the case of an Incentive Stock Option granted to an employee who, at the time of the grant of such Option, owns stock +A-8 +Table of Contents +representing more than 10% of the voting power of all classes of stock of the Company or any Affiliate, the Exercise Price per share shall be no less than 110% of the Fair Market Value per share +on the Date of Grant. +(C) Vesting and Expiration . Options shall vest and become exercisable in such manner and on such +date or dates determined by the Committee and shall expire after such period, not to exceed ten years, as may be determined by the Committee (the “ Option Period ”); provided , however , that the Option Period shall not +exceed five years from the Date of Grant in the case of an Incentive Stock Option granted to a Participant who on the Date of Grant owns stock representing more than 10% of the voting power of all classes of stock of the Company or any Affiliate; +provided , further , that notwithstanding any vesting dates set by the Committee, and consistent with the Committee’s power under Section (B), the Committee may, in its sole discretion, accelerate the exercisability of any Option +upon a Change in Control, death, Disability or Retirement (or on any other termination of employment) of a Participant, which acceleration shall not affect the terms and conditions of such Option other than with respect to exercisability. +(D) Method of Exercise and Form of Payment . No shares of Common Stock shall be delivered pursuant to any exercise of an +Option until payment in full of the Exercise Price therefor is received by the Company and the Participant has paid to the Company an amount equal to any federal, state, local and non-U.S. income and +employment taxes required to be withheld. Options that have become exercisable may be exercised by delivery of written or electronic notice of exercise to the Company in accordance with the terms of the Option accompanied by payment of the Exercise +Price. The Exercise Price shall be payable (i) in cash, check, cash equivalent or shares of Common Stock valued at the Fair Market Value at the time the Option is exercised (including, pursuant to procedures approved by the Committee, by means +of attestation of ownership of a sufficient number of shares of Common Stock in lieu of actual delivery of such shares to the Company), provided that such shares of Common Stock are not subject to any pledge or other security interest; (ii) a +“net exercise” procedure effected by withholding the minimum number of shares of Common Stock otherwise deliverable in respect of an Option that are needed to pay the Exercise Price and all applicable required withholding taxes; or +(iii) by such other method as the Committee may permit in its sole discretion, including without limitation: (A) in other property having a fair market value on the date of exercise equal to the Exercise Price or (B) if there is a +public market for the shares of Common Stock at such time, by means of a broker-assisted “cashless exercise” pursuant to which the Company is delivered a copy of irrevocable instructions to a stockbroker to sell the shares of Common Stock +otherwise deliverable upon the exercise of the Option and to deliver promptly to the Company an amount equal to the Exercise Price. Notwithstanding the foregoing, if on the last day of the Option Period, the Fair Market Value exceeds the Exercise +Price, the Participant has not exercised the Option, and the Option has not expired, such Option shall be deemed to have been exercised by the Participant on such last day by means of a net exercise and the Company shall deliver to the Participant +the number of shares of Common Stock for which the Option was deemed exercised less such number of shares of Common Stock required to be withheld to cover the payment of the Exercise Price and all applicable required withholding taxes. Any +fractional share of Common Stock shall be settled in cash. +(E) Notification upon Disqualifying Disposition of an Incentive +Stock Option . Each Participant awarded an Incentive Stock Option under the Plan shall notify the Company in writing immediately after the date on which he or she makes a disqualifying disposition of any Common Stock acquired pursuant to the +exercise of such Incentive Stock Option. A disqualifying disposition is any disposition (including, without limitation, any sale) of such Common Stock before the later of (i) two years after the Date of Grant of the Incentive Stock Option and +(ii) one year after the date of exercise of the Incentive Stock Option. The Company may, if determined by the Committee and in accordance with procedures established by the Committee, retain possession, as agent for the applicable Participant, +of any Common Stock acquired pursuant to the exercise of an Incentive Stock Option until the end of the period described in the preceding sentence, subject to complying with any instructions from such Participant as to the sale of such Common Stock. +(F) Compliance with Laws, etc . Notwithstanding the foregoing, in no event shall a Participant be permitted to exercise +an Option in a manner that the Committee determines would violate the Sarbanes-Oxley Act of 2002, or any other applicable law or the applicable rules and regulations of the Securities +A-9 +Table of Contents +and Exchange Commission or the applicable rules and regulations of any securities exchange or inter-dealer quotation system on which the securities of the Company are listed or traded. +8. Stock Appreciation Rights. +(A) Generally . Each SAR granted under the Plan shall be evidenced by an Award agreement. Each SAR so granted shall be subject to the conditions set forth in this Section 8, and to such other +conditions not inconsistent with the Plan as may be reflected in the applicable Award agreement. Any Option granted under the Plan may include tandem SARs. The Committee also may award SARs to Eligible Persons independent of any Option. +(B) Strike Price . Except as otherwise provided by the Committee in the case of Substitute Awards, the strike price (“ Strike +Price ”) per share of Common Stock for each SAR shall not be less than 100% of the Fair Market Value of such share (determined as of the Date of Grant). Notwithstanding the foregoing, a SAR granted in tandem with (or in substitution for) an +Option previously granted shall have a Strike Price at least equal to the Exercise Price of the corresponding Option. +(C) +Vesting and Expiration . A SAR granted in connection with an Option shall become exercisable and shall expire according to the same vesting schedule and expiration provisions as the corresponding Option. A SAR granted independent of an Option +shall vest and become exercisable and shall expire in such manner and on such date or dates determined by the Committee and shall expire after such period, not to exceed ten years, as may be determined by the Committee (the “ SAR +Period ”); provided , however , that notwithstanding any vesting dates set by the Committee, and consistent with the Committee’s power under Section (B), the Committee may, in its sole discretion, accelerate the +exercisability of any SAR upon a Change in Control, death, Disability or Retirement (or on any other termination of employment) of a Participant, which acceleration shall not affect the terms and conditions of such SAR other than with respect to +exercisability. +(D) Method of Exercise . SARs that have become exercisable may be exercised by delivery of written or +electronic notice of exercise to the Company in accordance with the terms of the Award, specifying the number of SARs to be exercised and the date on which such SARs were awarded. Notwithstanding the foregoing, if on the last day of the Option +Period (or in the case of a SAR independent of an Option, the SAR Period), the Fair Market Value exceeds the Strike Price, the Participant has not exercised the SAR or the corresponding Option (if applicable), and neither the SAR nor the +corresponding Option (if applicable) has expired, such SAR shall be deemed to have been exercised by the Participant on such last day and the Company shall make the appropriate payment therefor. +(E) Payment . Upon the exercise of a SAR, the Company shall pay to the Participant an amount equal to the number of shares subject +to the SAR that are being exercised multiplied by the excess, if any, of the Fair Market Value of one share of Common Stock on the exercise date over the Strike Price, less an amount equal to any federal, state, local and non-U.S. income and employment taxes required to be withheld. The Company shall pay such amount in cash, in shares of Common Stock valued at Fair Market Value, or any combination thereof, as determined by the +Committee. Any fractional share of Common Stock shall be settled in cash. +(F) Substitution of SARs for Nonqualified Stock +Options . The Committee shall have the authority in its sole discretion to substitute, without the consent of the affected Participant or any holder or beneficiary of SARs, SARs settled in shares of Common Stock (or settled in shares or cash in +the sole discretion of the Committee) for outstanding Nonqualified Stock Options, provided that (i) the substitution shall not otherwise result in a modification of the terms of any such Nonqualified Stock Option, (ii) the number of shares +of Common Stock underlying the substituted SARs shall be the same as the number of shares of Common Stock underlying such Nonqualified Stock Options and (iii) the Strike Price of the substituted SARs shall be equal to the Exercise Price of such +Nonqualified Stock Options; provided , however , that if, in the opinion of the Company’s independent public +A-10 +Table of Contents +auditors, the foregoing provision creates adverse accounting consequences for the Company, such provision shall be considered null and void. +9. Restricted Stock and Restricted Stock Units. +(A) Generally . Each grant of Restricted Stock and Restricted Stock Units shall be evidenced by an Award agreement. Each Restricted Stock and Restricted Stock Unit grant shall be subject to the +conditions set forth in this Section 9, and to such other conditions not inconsistent with the Plan as may be reflected in the applicable Award agreement. +(B) Stock Certificates and Book Entry; Escrow or Similar Arrangement . Upon the grant of Restricted Stock, the Committee shall cause a stock certificate registered in the name of the Participant to +be issued or shall cause share(s) of Common Stock to be registered in the name of the Participant and held in book-entry form subject to the Company’s directions and, if the Committee determines that the Restricted Stock shall be held by the +Company or in escrow rather than delivered to the Participant pending the release of the applicable restrictions, the Committee may require the Participant to additionally execute and deliver to the Company (i) an escrow agreement satisfactory +to the Committee, if applicable, and (ii) the appropriate stock power (endorsed in blank) with respect to the Restricted Stock covered by such agreement. If a Participant shall fail to execute an agreement evidencing an Award of Restricted +Stock and, if applicable, an escrow agreement and blank stock power within the amount of time specified by the Committee, the Award shall be null and void. Subject to the restrictions set forth in this Section 9 and the applicable Award +agreement, the Participant generally shall have the rights and privileges of a stockholder as to such Restricted Stock, including without limitation the right to vote such Restricted Stock. To the extent that shares of Restricted Stock are +forfeited, any stock certificates issued to the Participant evidencing such shares shall be returned to the Company, and all rights of the Participant to such shares and as a stockholder with respect thereto shall terminate without further +obligation on the part of the Company. +(C) Vesting; Acceleration of Lapse of Restrictions . The Restricted Period with +respect to Restricted Stock and Restricted Stock Units shall lapse in such manner and on such date or dates determined by the Committee and the Committee shall determine the treatment of the unvested portion of Restricted Stock and Restricted Stock +Units upon termination of employment or service of the Participant granted the applicable Award. Consistent with the Committee’s power under Section (B), the Committee may in its sole discretion accelerate the lapse of any or all of the +restrictions on the Restricted Stock and Restricted Stock Units upon a Change in Control, death, Disability or Retirement (or on any other termination of employment) of a Participant, which acceleration shall not affect any other terms and +conditions of such Awards. +(D) Delivery of Restricted Stock and Settlement of Restricted Stock Units . +(i) Upon the expiration of the Restricted Period with respect to any shares of Restricted Stock, the restrictions set +forth in the applicable Award agreement shall be of no further force or effect with respect to such shares, except as set forth in the applicable Award agreement. If an escrow arrangement is used, upon such expiration, the Company shall deliver to +the Participant, or his or her beneficiary, without charge, the stock certificate (or, if applicable, a notice evidencing a book entry notation) evidencing the shares of Restricted Stock that have not then been forfeited and with respect to which +the Restricted Period has expired (rounded down to the nearest full share). Dividends, if any, that may have been withheld by the Committee and attributable to any particular share of Restricted Stock shall be distributed to the Participant in cash +or, at the sole discretion of the Committee, in shares of Common Stock having a Fair Market Value equal to the amount of such dividends, upon the release of restrictions on such share and, if such share is forfeited, the Participant shall have no +right to such dividends. Dividends and dividend equivalents credited or payable in connection with an Award of Restricted Stock that has not yet vested shall be subject to the same restrictions and risk of forfeiture as the underlying Award and +shall not be paid until the underlying Award vests. +A-11 +Table of Contents +(ii) Unless otherwise provided by the Committee in the applicable Award +agreement, upon the expiration of the Restricted Period with respect to any outstanding Restricted Stock Units, the Company shall deliver to the Participant, or his or her beneficiary, without charge, one share of Common Stock (or other securities +or other property, as applicable) for each such outstanding Restricted Stock Unit; provided , however , that the Committee may, in its sole discretion, elect to (A) pay cash or part cash and part Common Stock in lieu of delivering +only shares of Common Stock in respect of such Restricted Stock Units or (B) defer the delivery of Common Stock (or cash or part Common Stock and part cash, as the case may be) beyond the expiration of the Restricted Period. If a cash payment +is made in lieu of delivering shares of Common Stock, the amount of such payment shall be equal to the Fair Market Value of the Common Stock as of the date on which the Restricted Period lapsed with respect to such Restricted Stock Units. To the +extent provided in the applicable Award agreement, the holder of outstanding Restricted Stock Units shall be entitled to be credited with dividend equivalent payments (upon the payment by the Company of dividends on shares of Common Stock) either in +cash or, at the sole discretion of the Committee, in shares of Common Stock having a Fair Market Value equal to the amount of such dividends, upon the release of restrictions on such Restricted Stock Units, and, if such Restricted Stock Units are +forfeited, the Participant shall have no right to such dividend equivalent payments. Dividends and dividend equivalents credited or payable in connection with an Award of Restricted Stock Units that has not yet vested shall be subject to the same +restrictions and risk of forfeiture as the underlying Award and shall not be paid until the underlying Award vests. +(E) +Legends on Restricted Stock . Each certificate representing Restricted Stock awarded under the Plan, if any, shall bear a legend substantially in the form of the following, in addition to any other information the Company deems appropriate, +until the lapse of all restrictions with respect to such Common Stock: +TRANSFER OF THIS CERTIFICATE AND THE SHARES REPRESENTED +HEREBY IS RESTRICTED PURSUANT TO THE TERMS OF THE MERIDIAN BIOSCIENCE, INC. 2021 OMNIBUS AWARD PLAN AND A RESTRICTED STOCK AWARD AGREEMENT, BETWEEN MERIDIAN BIOSCIENCE, INC. AND PARTICIPANT. A COPY OF SUCH PLAN AND AWARD AGREEMENT IS ON FILE AT THE +PRINCIPAL EXECUTIVE OFFICES OF MERIDIAN BIOSCIENCE, INC. +10. Other Stock-Based Awards. +(A) Generally . The Committee may issue unrestricted Common Stock or rights under the Company’s other incentive programs that, +subject to the terms and conditions thereof, provide for the right to receive grants of Awards at a future date, or other Awards denominated in Common Stock, under the Plan to Eligible Persons, alone or in tandem with other Awards, in such amounts +as the Committee shall from time to time in its sole discretion determine. Each Other Stock-Based Award granted under the Plan shall be evidenced by an Award agreement. Each Other Stock-Based Award so granted shall be subject to such conditions not +inconsistent with the Plan as may be reflected in the applicable Award agreement. +(B) +Non-Employee Director Awards. The Committee shall grant Awards to each Non-Employee Director as part of the retainer for +Non-Employee Director service. The number of shares of Common Stock underlying the Awards granted to each Non-Employee Director shall be the number of shares Common +Stock equal to the award value divided by the Fair Market Value of a share of Common Stock on the Date of Grant. Notwithstanding the foregoing, the Committee may grant Stock Options, Restricted Stock Units, Restricted Stock or other types of Awards +contemplated by this Plan. Subject to the limitations in Section 5(b)(iii), the Committee shall have the authority to establish the award value annually. +(C) Deferred Stock . The Committee is authorized to grant Deferred Stock to any Participant. The number of shares of Deferred Stock shall be determined by the Committee and may (but is not +required to) be based on one or more Performance Criteria, Performance Formulae or Performance Goals, including service to the Company, as the Committee determines, in each case on a specified date or dates or over any period or periods +A-12 +Table of Contents +determined by the Committee. Shares of Common Stock underlying a Deferred Stock award which may be subject to a vesting schedule or other conditions or criteria set by the Committee will be +issued on the vesting date(s) or date(s) that those conditions and criteria have been satisfied, as applicable. Unless otherwise provided by the Committee, a holder of Deferred Stock shall have no rights as a Company shareholder with respect to such +Deferred Stock until such time as the Award has vested and any other applicable conditions and/or criteria have been satisfied and the shares of Common Stock underlying the Award have been issued to such holder. +(D) Deferred Stock Units . The Committee is authorized to grant Deferred Stock Units to any Participant. The number of Deferred +Stock Units shall be determined by the Committee and may (but is not required to) be based on one or more Performance Criteria, Performance Formulae or Performance Goals, including service to the Company, as the Committee determines, in each case on +a specified date or dates or over any period or periods determined by the Committee. Each Deferred Stock Unit shall entitle the holder thereof to receive one share of Common Stock on the date the Deferred Stock Unit becomes vested or upon a +specified settlement date thereafter (which settlement date may (but is not required to) be the date of the holder’s termination of service). Shares of Common Stock underlying a Deferred Stock Unit award which is subject to a vesting schedule +or other conditions or criteria set by the Committee will not be issued until on or following the date that those conditions and criteria have been satisfied. Unless otherwise provided by the Committee, a holder of Deferred Stock Units shall have no +rights as a Company shareholder with respect to such Deferred Stock Units until such time as the Award has vested and any other applicable conditions and/or criteria have been satisfied and the shares of Common Stock underlying the Award have been +issued to such holder. +11. Performance Compensation Awards. +(A) Generally . The Committee shall have the authority, at the time of grant of any Award described in Section 9 or 10 of the +Plan, to designate such Award as a Performance Compensation Award. The Committee shall also have the authority to grant a standalone cash-based Performance Compensation Award pursuant to this Section 11. +(B) Discretion of Committee with Respect to Performance Compensation Awards . With regard to a particular Performance Period, the +Committee shall have sole discretion to select the length of such Performance Period, the type(s) of Performance Compensation Awards to be issued, the Performance Criteria that will be used to establish the Performance Goal(s), the kind(s) and/or +level(s) of the Performance Goals(s) that is (are) to apply, the Performance Formula, and the form of settlement for such Award. With regard to the Performance Compensation Awards to be issued for such Performance Period, the Committee may exercise +its discretion with respect to each of the matters enumerated in the immediately preceding sentence and record the same in writing. +(C) Performance Criteria . The Performance Criteria that will be used to establish the Performance Goal(s) may be based on the attainment of specific levels of performance of the Company (and/or one +or more Affiliates, divisions or operational units, or any combination of the foregoing) and may include, but shall not be limited to, the following: (i) net earnings or net income (before or after taxes); (ii) basic or diluted earnings per +share (before or after taxes); (iii) net revenue or net revenue growth; (iv) gross revenue, gross revenue growth; (v) gross profit or gross profit growth; (vi) net operating profit (before or after taxes); (vii) return measures +(including, but not limited to, return on investment, assets (including net assets), capital, invested capital, equity, or sales); (viii) cash flow measures (including, but not limited to, operating cash flow, free cash flow, and cash flow return on +capital); (ix) earnings before or after taxes, interest, depreciation or amortization; (x) gross or operating margins; (xi) productivity ratios; (xii) share price (including, but not limited to, growth measures and total stockholder +return); (xiii) expense targets; (xiv) operating efficiency; (xv) objective measures of customer satisfaction; (xvi) working capital targets; (xvii) measures of economic value added; (xviii) inventory control; +(xix) enterprise value; (xx) sales; (xxi) stockholder return; (xxii); client retention; (xxiii) competitive market metrics; (xxiv) employee retention; (xxv) timely completion of new product rollouts; (xxvi) timely +launch of new facilities; (xxvii) objective measures of personal targets, goals or completion of projects (including, but not limited to, succession and hiring projects, completion of specific acquisitions, reorganizations or other corporate +transactions, +A-13 +Table of Contents +expansions of specific business operations and meeting divisional or project budgets); (xxviii) any other objective or subjective criteria, including individual performance criteria, as +determined by the Committee; or (xxix) any combination of the foregoing. Any one or more of the Performance Criteria may be used on an absolute, adjusted, or relative basis to measure the performance of the Company and/or one or more Affiliates +as a whole or any divisional or operational unit(s) of the Company and/or one or more Affiliates or any combination thereof, as the Committee may deem appropriate, or any of the above Performance Criteria may be compared to the performance of a +selected group of comparison companies, or a published or special index that the Committee, in its sole discretion, deems appropriate, or as compared to various stock market indices. The Committee also has the authority to provide for accelerated +vesting of any Award based on the achievement of Performance Goals pursuant to the Performance Criteria specified in this paragraph. +(D) Modification of Performance Goal(s) . The Committee may alter Performance Criteria or modify the calculation of a Performance Goal without obtaining shareholder approval to reflect any event +that would reasonably be expected to affect or alter such Performance Criteria or Performance Goal, including, but not limited to: (i) asset write-downs; (ii) litigation or claim judgments or settlements; (iii) the effect of changes +in tax laws, accounting principles, or other laws or regulatory rules affecting reported results; (iv) any reorganization and restructuring programs; (v) nonrecurring items; (vi) acquisitions or divestitures; (vii) any other +specific unusual or infrequently occurring events, or objectively determinable category thereof; (viii) foreign exchange gains and losses; (ix) a change in the Company’s fiscal year; or (x) any other event as determined by the +Committee. +(E) Payment of Performance Compensation Awards. +(i) Condition to Receipt of Payment . Unless otherwise provided in the applicable Participant Agreement, a +Participant must be employed by the Company on the last day of a Performance Period to be eligible for payment in respect of a Performance Compensation Award for such Performance Period. +(ii) Limitation . Unless otherwise provided in the applicable Participant Agreement, a Participant shall be eligible +to receive payment in respect of a Performance Compensation Award only to the extent that (A) the Performance Goals for such period are achieved; and (B) all or some of the portion of such Participant’s Performance Compensation Award +has been earned for the Performance Period based on the application of the Performance Formula to such achieved Performance Goals. +(iii) Use of Negative Discretion . In determining the actual amount of an individual Participant’s Performance Compensation Award for a Performance Period, the Committee may reduce or eliminate +the amount of the Performance Compensation Award earned under the Performance Formula in the Performance Period through the use of Negative Discretion if, in its sole judgment, such reduction or elimination is appropriate. +(F) Timing of Award Payments . Unless otherwise provided in the applicable Award agreement, Performance Compensation Awards granted +for a Performance Period shall be paid to Participants as soon as administratively practicable following the Committee’s determination of the amount earned. Unless otherwise provided in the applicable Award agreement, any Performance +Compensation Award that is otherwise payable in shares of Common Stock shall be credited (during the period between the Date of Grant and the payment date) with dividend equivalents (in a manner consistent with the methodology set forth in the last +sentence of Section 1(a)(ii)). +12. Changes in Capital Structure and Similar Events. In the event of (a) any +dividend (other than regular cash dividends) or other distribution (whether in the form of cash, shares of Common Stock, other securities or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, split-off, spin-off, combination, repurchase or exchange of shares of Common Stock or other securities of the Company, +issuance of warrants or other rights to acquire shares of Common Stock or other securities of the Company, or other similar corporate transaction or event (including, without limitation, a Change in Control) that +A-14 +Table of Contents +affects the shares of Common Stock, or (b) unusual or nonrecurring events (including, without limitation, a Change in Control) affecting the Company, any Affiliate, or the financial +statements of the Company or any Affiliate, or changes in applicable rules, rulings, regulations or other requirements of any governmental body or securities exchange or inter-dealer quotation system, accounting principles or law, such that in +either case an adjustment is determined by the Committee in its sole discretion to be necessary or appropriate, then the Committee shall make any such adjustments in such manner as it may deem equitable, including without limitation, any or all of +the following: +(i) adjusting any or all of (A) the number of shares of Common Stock or other securities +of the Company (or number and kind of other securities or other property) that may be delivered in respect of Awards or with respect to which Awards may be granted under the Plan (including, without limitation, adjusting any or all of the +limitations under Section 5 of the Plan) and (B) the terms of any outstanding Award, including, without limitation, (1) the number of shares of Common Stock or other securities of the Company (or number and kind of other securities or +other property) subject to outstanding Awards or to which outstanding Awards relate, (2) the Exercise Price or Strike Price with respect to any Award or (3) any applicable performance measures (including, without limitation, Performance +Criteria and Performance Goals); +(ii) providing for a substitution or assumption of Awards, accelerating the +exercisability of, lapse of restrictions on, or termination of Awards or providing for a period of time for exercise prior to the occurrence of such event; and +(iii) cancelling any one or more outstanding Awards and causing to be paid to the holders thereof, in cash, shares of Common Stock, other securities or other property, or any combination thereof, the +value of such Awards, if any, as determined by the Committee (which if applicable may be based upon the price per share of Common Stock received or to be received by other stockholders of the Company in such event), including without limitation, in +the case of an outstanding Option or SAR, a cash payment in an amount equal to the excess, if any, of the Fair Market Value (as of a date specified by the Committee) of the shares of Common Stock subject to such Option or SAR over the aggregate +Exercise Price or Strike Price of such Option or SAR, respectively (it being understood that, in such event, any Option or SAR having a per share Exercise Price or Strike Price equal to, or in excess of, the Fair Market Value of a share of Common +Stock subject thereto may be canceled and terminated without any payment or consideration therefor); +provided , however , that in +the case of any “equity restructuring” (within the meaning of the Financial Accounting Standards Board Accounting Standards Codification Topic No. 718, or any successor thereto), the Committee shall make an equitable or proportionate +adjustment to outstanding Awards to reflect such equity restructuring. Any adjustment in Incentive Stock Options under this Section 12 (other than any cancellation of Incentive Stock Options) shall be made only to the extent not constituting a +“modification” within the meaning of Section 424(h)(3) of the Code, and no such adjustment shall be made that would cause any Award which is exempt from Code Section 409A or which is or becomes subject to Code Section 409A +to fail to comply with the requirements of Code Section 409A and any adjustments under this Section 12 shall be made in a manner which does not adversely affect the exemption provided pursuant to +Rule 16b-3 under the Exchange Act. Any such adjustment shall be conclusive and binding for all purposes. Notwithstanding the foregoing, the Committee may, in its discretion, provide in any Award agreement +for the acceleration of the exercisability, vesting and/or settlement in connection with such Change in Control of each or any outstanding Award or portion thereof and shares of Common Stock acquired pursuant thereto upon such conditions (if any), +including termination of the Participant’s service prior to, upon or following such Change in Control, to the extent as the Committee shall determine. +13. Amendments and Termination. +(A) Amendment and Termination of the +Plan . The Board may amend, alter, suspend, discontinue, or terminate the Plan or any portion thereof at any time; provided , that no such amendment, +A-15 +Table of Contents +alteration, suspension, discontinuation or termination shall be made without stockholder approval if such approval is necessary to comply with any regulatory requirement applicable to the Plan +(including, without limitation, as necessary to comply with any rules or regulations of any securities exchange or inter-dealer quotation system on which the securities of the Company may be listed or quoted); provided , further , that +any such amendment, alteration, suspension, discontinuance or termination that would materially and adversely affect the rights of any Participant or any holder or beneficiary of any Award theretofore granted shall not to that extent be effective +without the consent of the affected Participant, holder or beneficiary. Notwithstanding the foregoing, no amendment shall be made to the last proviso of Section (B) without stockholder approval. +(B) Amendment of Award Agreements . The Committee may, to the extent consistent with the terms of any applicable Award agreement, +waive any conditions or rights under, amend any terms of, or alter, suspend, discontinue, cancel or terminate, any Award theretofore granted or the associated Award agreement, prospectively or retroactively; provided that any such waiver, +amendment, alteration, suspension, discontinuance, cancellation or termination that would materially and adversely affect the rights of any Participant with respect to any Award theretofore granted shall not to that extent be effective without the +consent of the affected Participant; provided , further , that without stockholder approval, except as otherwise permitted under Section 12 of the Plan, (i) no amendment or modification may reduce the Exercise Price of any +Option or the Strike Price of any SAR, (ii) the Committee may not cancel any outstanding Option or SAR and replace it with a new Option or SAR (with a lower Exercise Price or Strike Price, as the case may be) or other Award or cash in a manner +which would result in any “repricing” for financial statement reporting purposes (or otherwise cause the Award to fail to qualify for equity accounting treatment) and (iii) the Committee may not take any other action which is +considered a “repricing” for purposes of the stockholder approval rules of any securities exchange or inter-dealer quotation system on which the securities of the Company are listed or quoted. +14. General. +(A) Award Agreements . Each Award under the Plan shall be evidenced by an Award agreement, which shall be delivered to the Participant and shall specify the terms and conditions of the Award and any +rules applicable thereto, including, without limitation, the effect on such Award of the death, Disability or termination of employment or service of a Participant, or of such other events as may be determined by the Committee. For purposes of the +Plan, an Award agreement may be in any such form (written or electronic) as determined by the Committee (including, without limitation, a Board or Committee resolution, an employment agreement, a notice, a certificate or a letter) evidencing the +Award. The Committee need not require an Award agreement to be signed by the Participant or a duly authorized representative of the Company. +(B) Minimum Vesting Requirement . Notwithstanding any other provision of the Plan to the contrary, Awards granted under the Plan (other than cash-based Awards) shall vest no earlier than the first +anniversary of the date on which the Award is granted; provided , that the following Awards shall not be subject to the foregoing minimum vesting requirement: any (i) Substitute Awards, (ii) Shares delivered in lieu of fully vested +cash Awards, (iii) Awards to Eligible Directors that vest on the earlier of the one-year anniversary of the date of grant and the next annual meeting of stockholders which is at least 50 weeks after the +immediately preceding year’s annual meeting, and (iv) any additional Awards the Committee may grant, up to a maximum of five percent (5%) of the available share reserve authorized for issuance under the Plan pursuant to Section (B) +(subject to adjustment under Section 12); and, provided , further , that the foregoing restriction does not apply to the Committee’s discretion to provide for accelerated exercisability or vesting of any Award, including in +cases of Retirement, death, Disability or a Change in Control, in the terms of the Award or otherwise. +(C) +Nontransferability . +(i) Each Award shall be exercisable only by a Participant during the +Participant’s lifetime, or, if permissible under applicable law, by the Participant’s legal guardian or representative. No Award may be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by a Participant +other than by will or by the laws of descent and distribution, and any such purported +A-16 +Table of Contents +assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall be void and unenforceable against the Company or an Affiliate; provided, that the designation of a beneficiary +shall not constitute an assignment, alienation, pledge, attachment, sale, transfer or encumbrance. +(ii) +Notwithstanding the foregoing, the Committee may, in its sole discretion, permit Awards (other than Incentive Stock Options) to be transferred by a Participant, without consideration, subject to such rules as the Committee may adopt consistent with +any applicable Award agreement to preserve the purposes of the Plan, to (A) any person who is a “family member” of the Participant, as such term is used in the instructions to Form S-8 +under the Securities Act (collectively, “ Immediate Family Members ”); (B) a trust solely for the benefit of the Participant and his or her Immediate Family Members; (C) a partnership or limited liability company whose only +partners or stockholders are the Participant and his or her Immediate Family Members; or (D) any other transferee as may be approved either (1) by the Board or the Committee, as applicable, in its sole discretion, or (2) as provided +in the applicable Award agreement (each transferee described in clause (A), (B), (C) or (D) above is hereinafter referred to as a “ Permitted Transferee ”) provided that the Participant gives the Committee advance written notice +describing the terms and conditions of the proposed transfer and the Committee notifies the Participant in writing that such a transfer would comply with the requirements of the Plan. +(iii) The terms of any Award transferred in accordance with the immediately preceding sentence shall apply to the +Permitted Transferee, and any reference in the Plan, or in any applicable Award agreement, to a Participant shall be deemed to refer to the Permitted Transferee, except that (A) Permitted Transferees shall not be entitled to transfer any Award, +other than by will or the laws of descent and distribution; (B) Permitted Transferees shall not be entitled to exercise any transferred Option unless there shall be in effect a registration statement on an appropriate form covering the shares +of Common Stock to be acquired pursuant to the exercise of such Option if the Committee determines, consistent with any applicable Award agreement, that such a registration statement is necessary or appropriate; (C) the Committee or the Company +shall not be required to provide any notice to a Permitted Transferee, whether or not such notice is or would otherwise have been required to be given to the Participant under the Plan or otherwise; and (D) the consequences of the termination +of the Participant’s employment by, or services to, the Company or an Affiliate under the terms of the Plan and the applicable Award agreement shall continue to be applied with respect to the Participant, including, without limitation, that an +Option shall be exercisable by the Permitted Transferee only to the extent, and for the periods, specified in the Plan and the applicable Award agreement. +(D) Dividends and Dividend Equivalents . The Committee in its sole discretion may provide a Participant as part of an Award with dividends or dividend equivalents, payable in cash, shares of Common +Stock, other securities, other Awards or other property, on a current or deferred basis, on such terms and conditions as may be determined by the Committee in its sole discretion, including, without limitation, payment directly to the Participant, +withholding of such amounts by the Company subject to vesting of the Award or reinvestment in additional shares of Common Stock, Restricted Stock or other Awards. However, dividends and dividend equivalents credited or payable in connection with an +Award that has not yet vested shall be subject to the same restrictions and risk of forfeiture as the underlying Award and shall not be paid until the underlying Award vests. +(E) Tax Withholding. +(i) A Participant shall be required +to pay to the Company or any Affiliate, and the Company or any Affiliate shall have the right and is hereby authorized to withhold, from any cash, shares of Common Stock, other securities or other property deliverable under any Award or from any +compensation or other amounts owing to a Participant, the amount (in cash, Common Stock, other securities or other property) of any required withholding taxes in respect of an Award, its exercise, or any payment or transfer under an Award or under +the Plan and to take such other action as may be necessary in the opinion of the Committee or the Company to satisfy all obligations for the payment of such withholding and taxes. +A-17 +Table of Contents +(ii) Without limiting the generality of clause (i) above, the +Committee may, in its sole discretion, permit a Participant to satisfy, in whole or in part, the foregoing withholding liability (but no more than the maximum required statutory withholding liability) by (A) the delivery of shares of Common +Stock (which are not subject to any pledge or other security interest) owned by the Participant having a Fair Market Value equal to such withholding liability or (B) having the Company withhold from the number of shares of Common Stock +otherwise issuable or deliverable pursuant to the exercise or settlement of the Award a number of shares with a Fair Market Value equal to such withholding liability. Participant may elect to satisfy such withholding liability through cash or cash +proceeds. +(F) No Claim to Awards; No Rights to Continued Employment; Waiver . No employee of the Company or an +Affiliate, or other person, shall have any claim or right to be granted an Award under the Plan or, having been selected for the grant of an Award, to be selected for a grant of any other Award. There is no obligation for uniformity of treatment of +Participants or holders or beneficiaries of Awards. The terms and conditions of Awards and the Committee’s determinations and interpretations with respect thereto need not be the same with respect to each Participant and may be made selectively +among Participants, whether or not such Participants are similarly situated. Neither the Plan nor any action taken hereunder shall be construed as giving any Participant any right to be retained in the employ or service of the Company or an +Affiliate, nor shall it be construed as giving any Participant any rights to continued service on the Board. The Company or any of its Affiliates may at any time dismiss a Participant from employment or discontinue any consulting relationship, free +from any liability or any claim under the Plan, unless otherwise expressly provided in the Plan or any Award agreement. By accepting an Award under the Plan, a Participant shall thereby be deemed to have waived any claim to continued exercise or +vesting of an Award or to damages or severance entitlement related to non-continuation of the Award beyond the period provided under the Plan or any Award agreement, notwithstanding any provision to the +contrary in any written employment contract or other agreement between the Company and its Affiliates and the Participant, whether any such agreement is executed before, on or after the Date of Grant. +(G) International Participants . With respect to Participants who reside or work outside of the United States of America, the +Committee may in its sole discretion amend the terms of the Plan or Sub Plans or outstanding Awards with respect to such Participants in order to conform such terms with the requirements of local law or to obtain more favorable tax or other +treatment for a Participant, the Company or its Affiliates. +(H) Designation and Change of Beneficiary . Each Participant +may file with the Committee a written designation of one or more persons as the beneficiary or beneficiaries, as applicable, who shall be entitled to receive the amounts payable with respect to an Award, if any, due under the Plan upon his or her +death. A Participant may, from time to time, revoke or change his or her beneficiary designation without the consent of any prior beneficiary by filing a new designation with the Committee. The last such designation received by the Committee shall +be controlling; provided , however , that no designation, or change or revocation thereof, shall be effective unless received by the Committee prior to the Participant’s death, and in no event shall it be effective as of a date +prior to such receipt. If no beneficiary designation is filed by a Participant, the beneficiary shall be deemed to be his or her spouse or, if the Participant is unmarried at the time of death, his or her estate. +(I) Termination of Employment . Except as otherwise provided in the applicable Participant Agreement, unless determined otherwise by +the Committee at any point following such event: (i) neither a temporary absence from employment or service due to illness, vacation or leave of absence nor a transfer from employment or service with the Company to employment or service with an +Affiliate (or vice-versa) shall be considered a termination of employment or service of such Participant with the Company or an Affiliate; and (ii) if a Participant’s employment with the Company and its Affiliates terminates, but such +Participant continues to provide services to the Company and its Affiliates in a non-employee capacity, such change in status shall not be considered a termination of employment or service of such Participant +with the Company or an Affiliate for purposes of the Plan. +A-18 +Table of Contents +(J) No Rights as a Stockholder . Except as otherwise specifically provided in the Plan +or any Award agreement, no person shall be entitled to the privileges of ownership in respect of shares of Common Stock that are subject to Awards hereunder until such shares have been issued or delivered to that person. +(K) Government and Other Regulations . +(i) The obligation of the Company to settle Awards in Common Stock or other consideration shall be subject to all applicable laws, rules, and regulations, and to such approvals by governmental agencies as +may be required. Notwithstanding any terms or conditions of any Award to the contrary, the Company shall be under no obligation to offer to sell or to sell, and shall be prohibited from offering to sell or selling, any shares of Common Stock +pursuant to an Award unless such shares have been properly registered for sale pursuant to the Securities Act with the Securities and Exchange Commission or unless the Company has received an opinion of counsel, satisfactory to the Company, that +such shares may be offered or sold without such registration pursuant to an available exemption therefrom and the terms and conditions of such exemption have been fully complied with. The Company shall be under no obligation to register for sale +under the Securities Act any of the shares of Common Stock to be offered or sold under the Plan. The Committee shall have the authority to provide that all shares of Common Stock or other securities of the Company or any Affiliate delivered under +the Plan shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan, the applicable Award agreement, the federal securities laws, or the rules, regulations and other requirements of the +Securities and Exchange Commission, any securities exchange or inter-dealer quotation system on which the securities of the Company are listed or quoted and any other applicable federal, state, local or +non-U.S. laws, and, without limiting the generality of Section 9 of the Plan, the Committee may cause a legend or legends to be put on certificates representing shares of Common Stock or other securities +of the Company or any Affiliate delivered under the Plan to make appropriate reference to such restrictions or may cause such Common Stock or other securities of the Company or any Affiliate delivered under the Plan in book-entry form to be held +subject to the Company’s instructions or subject to appropriate stop-transfer orders. Notwithstanding any provision in the Plan to the contrary, the Committee reserves the right to add any additional terms or provisions to any Award granted +under the Plan that it in its sole discretion deems necessary or advisable in order that such Award complies with the legal requirements of any governmental entity to whose jurisdiction the Award is subject. +(ii) The Committee may cancel an Award or any portion thereof if it determines, in its sole discretion, that legal or +contractual restrictions, blockage, other market considerations or any combination of the foregoing would make the Company’s acquisition of shares of Common Stock from the public markets, the Company’s issuance of Common Stock to the +Participant, the Participant’s acquisition of Common Stock from the Company or the Participant’s sale of Common Stock to the public markets, illegal, impracticable or inadvisable. If the Committee determines to cancel all or any portion of +an Award in accordance with the foregoing, the Company shall pay to the Participant an amount equal to the excess of (A) the aggregate Fair Market Value of the shares of Common Stock subject to such Award or portion thereof canceled (determined +as of the applicable exercise date, or the date that the shares would have been vested or delivered, as applicable), over (B) the aggregate Exercise Price or Strike Price (in the case of an Option or SAR, respectively) or any amount payable as +a condition of delivery of shares of Common Stock (in the case of any other Award). Such amount shall be delivered to the Participant as soon as practicable following the cancellation of such Award or portion thereo f. +(L) No Section 83(b) Elections Without Consent of Company . No election under Section 83(b) of the Code or +under a similar provision of law may be made unless expressly permitted by the terms of the applicable Award agreement or by action of the Committee in writing prior to the making of such election. If a Participant, in connection with the +acquisition of shares of Common Stock under the Plan or otherwise, is expressly permitted to make such election and the Participant makes the election, the Participant shall notify the Company of such election within ten days of filing notice of the +election with the Internal Revenue Service or other +A-19 +Table of Contents +governmental authority, in addition to any filing and notification required pursuant to Section 83(b) of the Code or other applicable provision. +(M) Payments to Persons Other Than Participants . If the Committee shall find that any person to whom any amount is payable under +the Plan is unable to care for his or her affairs because of illness or accident, or is a minor, or has died, then any payment due to such person or his or her estate (unless a prior claim therefor has been made by a duly appointed legal +representative) may, if the Committee so directs the Company, be paid to his or her spouse, child, relative, an institution maintaining or having custody of such person, or any other person deemed by the Committee to be a proper recipient on behalf +of such person otherwise entitled to payment. Any such payment shall be a complete discharge of the liability of the Committee and the Company therefor. +(N) Nonexclusivity of the Plan . Neither the adoption of this Plan by the Board nor the submission of this Plan to the stockholders of the Company for approval shall be construed as creating any +limitations on the power of the Board to adopt such other incentive arrangements as it may deem desirable, including, without limitation, the granting of stock options otherwise than under this Plan, and such arrangements may be either applicable +generally or only in specific cases. +(O) No Trust or Fund Created . Neither the Plan nor any Award shall create or be +construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or any Affiliate, on the one hand, and a Participant or other person or entity, on the other hand. No provision of the Plan or any Award shall +require the Company, for the purpose of satisfying any obligations under the Plan, to purchase assets or place any assets in a trust or other entity to which contributions are made or otherwise to segregate any assets, nor shall the Company maintain +separate bank accounts, books, records or other evidence of the existence of a segregated or separately maintained or administered fund for such purposes. Participants shall have no rights under the Plan other than as unsecured general creditors of +the Company, except that insofar as they may have become entitled to payment of additional compensation by performance of services, they shall have the same rights as other employees under general law. +(P) Reliance on Reports . Each member of the Committee and each member of the Board shall be fully justified in acting or failing to +act, as the case may be, and shall not be liable for having so acted or failed to act in good faith, in reliance upon any report made by the independent public accountant of the Company and its Affiliates and/or any other information furnished in +connection with the Plan by any agent of the Company or the Committee or the Board, other than himself. +(Q) Relationship to +Other Benefits . No payment under the Plan shall be taken into account in determining any benefits under any pension, retirement, profit sharing, group insurance or other benefit plan of the Company except as otherwise specifically provided in +such other plan. +(R) Governing Law . The Plan shall be governed by and construed in accordance with the internal laws of +the State of Ohio applicable to contracts made and performed wholly within the State of Ohio, without giving effect to the conflict of laws provisions thereof. +(S) Severability . If any provision of the Plan or any Award or Award agreement is or becomes or is deemed to be invalid, illegal, or unenforceable in any jurisdiction or as to any person or entity +or Award, or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to the applicable laws, or if it cannot be construed or deemed amended without, in +the determination of the Committee, materially altering the intent of the Plan or the Award, such provision shall be construed or deemed stricken as to such jurisdiction, person or entity or Award and the remainder of the Plan and any such Award +shall remain in full force and effect. +(T) Obligations Binding on Successors . The obligations of the Company under the +Plan shall be binding upon any successor corporation or organization resulting from the merger, consolidation or other +A-20 +Table of Contents +reorganization of the Company, or upon any successor corporation or organization succeeding to substantially all of the assets and business of the Company. +(U) 409A of the Code . Each Award granted under the Plan is intended to be either exempt from or in compliance with the requirements +of Section 409A of the Code, and all provisions of this Plan shall be construed and interpreted in a manner consistent with the requirements for avoiding taxes or penalties under Section 409A of the Code. Each Participant is solely +responsible and liable for the satisfaction of all taxes and penalties that may be imposed on or in respect of such Participant in connection with this Plan or any other plan maintained by the Company (including any taxes and penalties under +Section 409A of the Code), and neither the Company nor any Affiliate shall have any obligation to indemnify or otherwise hold such Participant (or any beneficiary) harmless from any or all of such taxes or penalties. If a Participant is a +Specified Employee at the time of the Participant’s Separation from Service with the Company, then solely to the extent necessary to avoid the imposition of any additional tax under Section 409A of the Code, the commencement of any +payments or benefits under an Award (which Award is subject to Section 409A of the Code and otherwise provides for the commencement of payments or benefits upon Separation from Service) shall be deferred until the date that is six months +following the Participant’s Separation from Service (or such other period as required to comply with Section 409A of the Code). +(V) Clawback/Forfeiture . Notwithstanding anything to the contrary contained herein, a Participant Agreement may provide that the Committee may in its sole discretion cancel such Award if the +Participant, without the consent of the Company, while employed by or providing services to the Company or any Affiliate or after termination of such employment or service, violates a non-competition, non-solicitation or non-disclosure covenant or agreement or otherwise engages in activity that is in conflict with or adverse to the interest of the Company or any Affiliate, +including fraud or conduct contributing to any financial restatements or irregularities, as determined by the Committee in its sole discretion. A Participant Agreement may also provide that if the Participant engages in any activity referred to in +the preceding sentence, the Participant will forfeit any gain realized on the vesting or exercise of such Award, and must repay the gain to the Company. +(W) Expenses; Gender; Titles and Headings . The expenses of administering the Plan shall be borne by the Company and its Affiliates. Masculine pronouns and other words of masculine gender shall +refer to both men and women. The titles and headings of the sections in the Plan are for convenience of reference only, and in the event of any conflict, the text of the Plan, rather than such titles or headings shall control. +A-21 +Table of Contents +*** Exercise Your Right to Vote *** +Important Notice Regarding the Availability of Proxy Materials for the +Shareholder Meeting to Be Held Virtually on January 27, 2021. +MERIDIAN BIOSCIENCE, INC. +Meeting Information +Meeting Type: Annual Meeting +For holders as of: December 3, 2020 +Date: January 27, 2021 Time: 2:00 PM EST +Location: Meeting live via the Internet-please visit +www.virtualshareholdermeeting.com/VIVO2021 +The company will be hosting the meeting live via the Internet this year. To +attend the meeting via the Internet please visit www.virtualshareholdermeeting.com/VIVO2021 and be sure to have the information that is printed in the box marked by the arrow +(located on the following page). +MERIDIAN BIOSCIENCE, INC. +3471 RIVER +HILLS DRIVE +CINCINNATI, OH 45244 +You are receiving this communication because you hold shares in the company named above. +This is not a ballot. You cannot use this +notice to vote these shares. This communication presents only an overview of the more complete proxy materials that are available to you on the Internet. You may view the proxy materials online at www.proxyvote.com or easily request a paper +copy (see reverse side). +We +encourage you to access and review all of the important information contained in the proxy materials before voting. +See the reverse side of this notice to obtain proxy materials and voting instructions. +Table of Contents +— Before You Vote — +How to Access the Proxy Materials +Proxy Materials Available to VIEW or RECEIVE: +NOTICE AND PROXY STATEMENT ANNUAL REPORT ON FORM 10-K +How to View Online: +Have the information that is printed in the box marked by the arrow +(located on the following page) and visit: www.proxyvote.com. +How to Request and Receive a PAPER or E-MAIL Copy: +If you want to receive a paper or e-mail copy of these documents, you must request one. There is NO charge for +requesting a copy. Please choose one of the following methods to make your request: +1) BY INTERNET: +www.proxyvote.com +2) BY TELEPHONE: 1-800-579-1639 +3) BY E-MAIL* : sendmaterial@proxyvote.com +* If requesting materials by e-mail, please send a blank e-mail with the information that is printed in the box +marked by the arrow +(located on the following page) in the subject line. +Requests, instructions and other inquiries sent to this e-mail address will NOT be forwarded to +your investment advisor. Please make the request as instructed above on or before January 13, 2021 to facilitate timely delivery. +— How To Vote — +Please Choose One of the +Following Voting Methods +Vote By Internet: +Before The Meeting: +Go to www.proxyvote.com. Have the information that is printed in the box marked by the arrow +(located on the following page) available and follow the instructions. +During The +Meeting: +Go to www.virtualshareholdermeeting.com/VIVO2021. Have the information that +is printed in the box marked by the arrow +(located on the following page) available and follow the instructions. +Vote By Telephone: You can vote by telephone by requesting a paper copy of the materials, which will include a proxy card that will provide instructions on how to vote via telephone. +Vote By Mail: You can vote by mail by requesting a paper copy of the materials, which will include a +proxy card. +Table of Contents +Voting Items +The Board of Directors recommends you +vote FOR the following: +1. Election of Directors +Nominees: +01) JAMES M. ANDERSON +06) DAVID C. PHILLIPS +02) ANTHONY P. BIHL +III 07) JOHN M. RICE, JR. +03) DWIGHT E. ELLINGWOOD 08) CATHERINE A. +SAZDANOFF +04) JACK KENNY +09) FELICIA WILLIAMS +05) JOHN C. MCILWRAITH +The Board of Directors recommends you vote FOR proposals 2, 3 and 4. +2. Ratification of the appointment of Grant Thornton LLP as Meridian’s independent registered public accountants for fiscal year 2021. +3. Approval of the 2021 Omnibus Award Plan. +4. Approval on an advisory basis of the compensation of named executive officers, as disclosed in the Proxy Statement (“Say-on-Pay” +Proposal). +NOTE: Such other business as may properly come before the meeting or any continuation, postponement or adjournment thereof. Only shareholders of record at the close of +business on December 3, 2020 are entitled to notice of and to vote at the meeting. +Table of Contents +Table of Contents +MERIDIAN BIOSCIENCE, INC. +3471 RIVER HILLS DRIVE +CINCINNATI, OH +45244 +VOTE BY INTERNET +Before The Meeting - +Go to www.proxyvote.com +Use the +Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Time on January 26, 2021, the day before the meeting date. Have your proxy card in hand when you access the web site and follow the +instructions to obtain your records and to create an electronic voting instruction form. +During The Meeting - Go to www.virtualshareholdermeeting.com/VIVO2021 +You may attend the meeting via the Internet and vote during the +meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions. +VOTE BY PHONE - +1-800-690-6903 +Use any +touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time on January 26, 2021, the day before the meeting date. Have your proxy card in hand when you call and then follow the instructions. +VOTE BY MAIL +Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 +Mercedes Way, Edgewood, NY 11717. +TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: +D27824-P46855 KEEP THIS PORTION FOR +YOUR RECORDS +— — — — — — — — — — — — +— — — — — — — — — — — — — — — — — — — — +— — — — — — — — — — — — +THIS +PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. DETACH AND RETURN THIS PORTION ONLY +MERIDIAN BIOSCIENCE, INC. +For +All +Withhold +All +For All +Except +To withhold authority to vote for any individual +nominee(s), mark “For All Except” and write the +number(s) of the nominee(s) on the line below. +The Board of Directors recommends you vote FOR the following: +1.   Election of Directors +☐ +☐ +☐ +Nominees : +01) JAMES M. ANDERSON +06) DAVID C. PHILLIPS +02) ANTHONY P. BIHL III +07) JOHN M. RICE, JR. +03) DWIGHT E. ELLINGWOOD +08) CATHERINE A. SAZDANOFF +04) JACK KENNY +05) JOHN C. MCILWRAITH +09) FELICIA WILLIAMS +The Board of Directors recommends you vote +FOR proposals 2, 3 and 4. +For +Against +Abstain +2.   Ratification of the appointment of Grant Thornton LLP as +Meridian’s independent registered public accountants for fiscal year 2021. +☐ +☐ +☐ +3.   Approval of the 2021 Omnibus Award Plan. +☐ +☐ +☐ +4.   Approval on an advisory basis of the compensation of +named executive officers, as disclosed in the Proxy Statement (“Say-on-Pay” Proposal). +☐ +☐ +☐ +NOTE: Such other business as may properly come before the meeting or any continuation, +postponement or adjournment thereof. Only shareholders of record at the close of business on December 3, 2020 are entitled to notice of and to vote at the meeting. +Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, +administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. +Signature [PLEASE SIGN WITHIN BOX] +Date +Signature (Joint Owners) +Date +Table of Contents +Important Notice Regarding the +Availability of Proxy Materials for the Annual Meeting: +The Notice and Proxy Statement and Annual Report on Form 10-K are available at www.proxyvote.com. +— — — — — — — — — — — — +— — — — — — — — — — — — — — — — — — — — +— — — — — — — — — — — — — — — — — — — — +— — — +D27825-P46855 +MERIDIAN BIOSCIENCE, INC. +Annual Meeting of Shareholders +January 27, +2021 2:00 PM +This proxy is solicited by the Board of Directors +The undersigned hereby appoints JACK KENNY and BRYAN T. BALDASARE, +and either of them, attorneys and proxies of the undersigned, each with the power of substitution and re-substitution, to represent and vote all shares of Common Stock of Meridian Bioscience, Inc. which the undersigned may be entitled to vote on the +matters specified on the reverse side (and in their discretion to cumulate votes in the election of directors if cumulative voting is invoked by a shareholder through proper notice to the Company) and, in their discretion, with respect to such other +matters as may properly come before the Annual Meeting of Shareholders of Meridian Bioscience, Inc. to be held virtually on January 27, 2021, at 2:00 p.m. Eastern Standard Time, and any continuation, postponement or adjournment of such Annual +Meeting. +This proxy, when properly executed, will be voted as +directed by the shareholder(s). If no such directions are made, this proxy will be voted FOR the election to the Board of Directors of all of the nominees under Proposal 1 and FOR each remaining proposal as recommended by the Board of +Directors. +Please mark, sign, date, and return this proxy +card promptly using the enclosed reply envelope. +Continued and to be signed on reverse side \ No newline at end of file diff --git a/raw/proxies/0000794172/0001193125-20-318636/proxy_rpt.txt b/raw/proxies/0000794172/0001193125-20-318636/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..b13014e82fe3f41cefc52614017c82ea0bf4c36a --- /dev/null +++ b/raw/proxies/0000794172/0001193125-20-318636/proxy_rpt.txt @@ -0,0 +1,10 @@ +TRANSACTIONS WITH RELATED PERSONS +Nasdaq rules require the Company to conduct an appropriate review of related party transactions required to be disclosed by the Company pursuant to SEC +Regulation S-K Item 404 for potential conflict of interest situations on an ongoing basis and that all such transactions must be approved by the Audit Committee or another Committee comprised of independent +directors. As a result, the Audit Committee annually reviews all such related party transactions and approves each related party transaction if it determines that it is in the best interests of the Company. Additionally, the Audit Committee’s +Charter provides it the authority to review, approve and monitor transactions involving the Company and “related persons” (directors and executive officers or their immediate family members, or shareholders owning five percent or greater +of the Company’s outstanding stock). This also covers any related person transaction that meets the minimum threshold for disclosure in the proxy statement under the relevant SEC rules (generally, transactions involving amounts exceeding +$120,000 in which a related person has a direct or indirect material interest). In considering the transaction, the Audit Committee may consider all relevant factors, including, as applicable: (i) the Company’s business rationale for +entering into the transaction; (ii) the alternatives to entering into a related person transaction; (iii) whether the transaction is on terms comparable to those available to third parties, or in the case of employment relationships, to +employees generally; (iv) the potential for the transaction to lead to an actual or apparent conflict of interest and any safeguards imposed to prevent such actual or apparent conflicts; and (v) the overall fairness of the transaction to +the Company. This policy is included in the Company’s Employee Handbook. The approvals of such related person transactions are evidenced by internal Company resolutions, minutes or memoranda. \ No newline at end of file diff --git a/raw/proxies/0000794172/0001193125-21-357515/proxy.txt b/raw/proxies/0000794172/0001193125-21-357515/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..23848795e3adb4fab3fa7156b6985d8ebfc8ae84 --- /dev/null +++ b/raw/proxies/0000794172/0001193125-21-357515/proxy.txt @@ -0,0 +1,2394 @@ +DEF 14A +1 +d217468ddef14a.htm +DEF 14A +DEF 14A +Table of Contents +UNITED STATES SECURITIES AND EXCHANGE COMMISSION +WASHINGTON, D.C. 20549 +SCHEDULE 14A +Proxy Statement Pursuant to Section 14(a) +of the Securities Exchange Act of 1934 +(Amendment No. ___ ) +Filed by the Registrant [X] +Filed by a Party other than the Registrant [ ] +Check the appropriate box: +[ ] +Preliminary Proxy Statement +[ ] +Confidential, for Use of the Commission Only (as permitted by Rule +14a-6(e)(2)) +[ X ] +Definitive Proxy Statement +[ ] +Definitive Additional Materials +[ ] +Soliciting Material Pursuant to Section 14a-12 +Meridian Bioscience, Inc. +(Name of Registrant as Specified in Its Charter) +(Name of Person(s) Filing Proxy Statement if Other Than the Registrant) +Payment of Filing Fee (Check the appropriate box): +[X] +No fee required. +[ ] +Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. +(1) +Title of each class of securities to which transaction applies: +(2) +Aggregate number of securities to which transaction applies: +(3) +Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): +(4) +Proposed maximum aggregate value of transaction: +(5) +Total Fee Paid: +[ ] +Fee paid previously with preliminary materials. +[ ] +Check box if any part of the fee is offset as provided by Exchange Act Rule +0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. +(1) +Amount Previously Paid: +(2) +Form, Schedule or Registration Statement No.: +(3) +Filing Party: +(4) +Date Filed: +Table of Contents +3471 River Hills Drive +Cincinnati, Ohio 45244 +www.meridianbioscience.com +Notice of Annual +Meeting of Shareholders +and Proxy Statement +Dear +Shareholders: +On behalf of the Board of Directors, I invite you to attend our Annual Meeting of Shareholders on January 26, 2022 at 2:00 p.m. Eastern Time, +which will be held virtually. We believe that hosting a virtual meeting provides expanded access, improved communication and cost savings to our shareholders and the Company, and also aligns with our interests in the health and safety of our +shareholders and employees during this time when COVID-19 remains a concern. You will be able to attend the Annual Meeting online, vote your shares electronically and submit your questions during the Annual +Meeting by visiting www.virtualshareholdermeeting.com/VIVO2022 . There will not be a physical meeting location and you will not be able to attend the Annual Meeting in person. +This booklet includes the formal notice of the meeting and the proxy statement. The proxy statement tells you more about the agenda and procedures for the meeting. It +also describes how the Board operates and gives personal information about our director candidates. +Pursuant to Securities and Exchange Commission rules allowing +companies to furnish proxy materials to shareholders over the internet, a Notice of Internet Availability of Proxy Materials was sent to shareholders on or about December 15, 2021. The Notice contains information on how to access copies of the +proxy materials and vote your shares. +Whether or not you virtually attend the meeting, please cast your proxy vote promptly, either online, over the phone or by +returning your signed and dated proxy card in the enclosed envelope. +Sincerely yours, +/s/ David C. Phillips +David C. Phillips +Chairman of the Board +December 15, 2021 +Table of Contents +IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS +FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON JANUARY 26, 2022 +This proxy statement and our 2021 Annual Report to Shareholders are available at www.proxyvote.com +Date: +January 26, 2022 +Time: +2:00 p.m., Eastern Time +Place: +Online at www.virtualshareholdermeeting.com/VIVO2022 +Purpose: +● +Elect as directors the eight nominees named in the accompanying proxy materials; +● +Ratify the appointment of Ernst & Young LLP as Meridian’s independent registered public accounting firm for fiscal year 2022; and +● +Conduct an advisory vote on our executive compensation (“Say-on-Pay”). +Only shareholders of record on December 2, 2021 may vote at +the meeting. The approximate mailing date of this proxy statement and accompanying proxy card is December 15, 2021. +Your vote is important. Whether or not you plan to virtually attend the 2022 annual meeting, please cast your proxy vote promptly, either online, over the phone or by +returning your signed and dated proxy card in the enclosed envelope. +By Order of the Board of +Directors, +/s/ Bryan T. Baldasare +Bryan T. Baldasare +Executive Vice President, Chief Financial Officer +and Secretary +December 15, 2021 +Table of Contents +Table of Contents +Page +GENERAL INFORMATION +1 +ELECTION OF DIRECTORS (Item 1 on the Proxy Card) +3 +RATIFICATION OF APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (Item 2 on the Proxy Card) +7 +ADVISORY VOTE ON COMPENSATION OF NAMED EXECUTIVE OFFICERS (“SAY-ON-PAY” PROPOSAL) (Item 3 on the Proxy Card) +9 +CORPORATE GOVERNANCE +9 +REPORT OF THE AUDIT COMMITTEE +12 +DIRECTORS AND EXECUTIVE OFFICERS +15 +SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS +16 +DELINQUENT SECTION 16(A) REPORTS +17 +TRANSACTIONS WITH RELATED PERSONS +17 +COMPENSATION DISCUSSION AND ANALYSIS +17 +COMPENSATION COMMITTEE REPORT +27 +CEO PAY RATIO +28 +SUMMARY COMPENSATION TABLE +28 +GRANTS OF PLAN-BASED AWARDS +29 +OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END +30 +OPTION EXERCISES AND STOCK VESTED +31 +401(K) PLAN +32 +POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL +32 +DIRECTOR COMPENSATION +33 +SHAREHOLDER PROPOSALS FOR NEXT YEAR +34 +QUESTIONS +34 +Meridian makes available, free of charge on its website, all of its filings that are made electronically with the Securities and +Exchange Commission (“SEC”), including Forms 10-K, 10-Q and 8-K. These filings are also available on the SEC’s +website ( www.sec.gov ). To access these filings, go to our website ( www.meridianbioscience.com ). Copies of Meridian’s Annual Report on Form 10-K for the fiscal year ended September 30, +2021, including consolidated financial statements and schedules thereto, filed with the SEC, are also available without charge to shareholders upon written request addressed to: +Charles Wood, Jr. +Vice President, Investor +Relations +Meridian Bioscience, Inc. +3471 River Hills Drive +Cincinnati, Ohio 45244 +Table of Contents +MERIDIAN BIOSCIENCE, INC. +3471 River Hills Drive +Cincinnati, +Ohio 45244 +Telephone (513) 271-3700 +P R O X Y S T A T E M E N T +Annual Meeting of Shareholders +January 26, 2022 +GENERAL +INFORMATION +Who may vote +Shareholders of Meridian, as +recorded in our stock register on December 2, 2021, may vote at the meeting. As of that date, Meridian had 43,512,743 shares of common stock outstanding. +Location of Annual Meeting +The Annual Meeting will again be conducted +as a virtual meeting of shareholders by means of a live webcast. We believe that hosting a virtual meeting provides greater shareholder attendance and participation from any location, improved communication and cost savings to our shareholders and +Company, and also aligns with our interests in the health and safety of our shareholders and employees during this time when COVID-19 remains a concern. By visiting +www.virtualshareholdermeeting.com/VIVO2022 , you will be able to attend the Annual Meeting, vote your shares, and submit your questions during the meeting via the internet. There will not be a physical meeting location and you will not be able +to attend in person. We invite you to attend the Annual Meeting and request that you vote on the proposals described in this proxy statement. However, you do not need to attend the meeting to vote your shares. Instead, you may vote by internet, by +telephone, or, if you requested and received paper copies of the proxy materials by mail, you may also vote by completing and mailing your proxy card. +How to +vote +You may vote electronically at the meeting, by telephone, online, or by completing and returning a proxy card. We recommend you vote by proxy even if +you plan to attend the virtual meeting. You can always change your vote, by voting electronically, at the meeting. +How proxies work +Meridian’s Board of Directors is asking for your proxy. Giving us your proxy means you authorize us to vote your shares at the meeting in the manner you direct. You +may vote for all, some or none of our director candidates. You may also vote for or against the other proposals or abstain from voting. +If you complete your proxy +online, over the phone or sign and return the enclosed proxy card but do not specify how to vote, we will vote your shares in favor of: (i) the election of our director candidates; (ii) the ratification of the appointment of +Ernst & Young LLP as Meridian’s independent registered public accounting firm for fiscal year 2022; and (iii) our executive compensation. If any other matters come before the meeting or any continuation, postponement or +adjournment, each proxy will be voted in the discretion of the individuals named as proxies on the card. +You may receive more than one proxy or voting card +depending on how you hold your shares. Shares registered in your name are covered by one card. If you hold shares through someone else, such as a stockbroker, bank or nominee, you may get material from them asking how you want to vote. +1 +Table of Contents +Stockbrokers, banks and nominees holding shares for beneficial owners must vote those shares as instructed by you. If +the stockbroker, bank or nominee has not received instructions from you, the beneficial owner, the stockbroker, bank or nominee generally has discretionary voting power only with respect to the ratification of appointment of the independent +registered public accounting firm. However, a stockbroker, bank or nominee does not have discretion to vote for or against the election of directors and certain other matters subject to a vote if they have not received voting instructions from you. +In order to avoid a broker non-vote of your shares on the election of directors and the other matters subject to a vote, you must send voting instructions to your stockbroker, bank or nominee. +Solicitation of proxies +Solicitation of proxies is being made by +management at the direction of Meridian’s Board of Directors, without additional compensation, through the mail, in person or by telephone. The cost of preparing and mailing the Notice and the proxy statement and any accompanying material will +be borne by Meridian. In addition, Meridian will request brokers and other custodians, nominees and fiduciaries to forward proxy soliciting material to the beneficial owners of shares held of record, and Meridian will reimburse them for their +related expenses. +Revoking a proxy +You may revoke your proxy +before it is voted by submitting a new proxy with a later date, by voting electronically at the meeting or by notifying Meridian’s Vice President, Investor Relations in writing at the address under “Questions” on page 34 of this proxy +statement. +Quorum +In order to carry on the business of the +meeting, we must have a quorum. This means at least a majority of the outstanding shares eligible to vote must be represented at the meeting, either by proxy or in person. +Votes needed +The eight director candidates receiving the most votes +will be elected to fill the seats on the Board (Proposal No. 1). The ratification of appointment of accounting firm (Proposal No. 2), and the approval on an advisory basis of our executive compensation (Proposal No. 3) require the +favorable vote of a majority of the votes cast. Only votes for or against these proposals count, with abstentions not being counted either for or against these proposals. +Abstentions and broker non-votes count for quorum purposes but as indicated above, will not count for voting purposes. Broker non-votes occur when a broker returns a proxy card but does not have authority to vote on a particular proposal. +Other +matters +Any other matters considered at the meeting, including any continuation, postponement or adjournment, will require the affirmative vote of a +majority of the votes cast. +The Virtual Meeting +We will be +hosting the Annual Meeting only by means of a live webcast. There will not be a physical meeting location and you will not be able to attend the meeting in person. Please be assured that you will be afforded the same rights and opportunities to +participate in the virtual meeting and ask questions as you would at an in-person meeting. By going to www.virtualshareholdermeeting.com/VIVO2022 , you will be able to listen to the Annual Meeting, +submit questions and vote. If you wish to listen to the Annual Meeting, but do not wish to submit questions or vote during the Annual Meeting, you may go to www.virtualshareholdermeeting.com/VIVO2022 and log in as a guest. We will post a +recording of the meeting, including appropriate questions received during the meeting and the Company’s answers, on the investor page of www.meridianbioscience.com as soon as practicable after the meeting. +2 +Table of Contents +The Annual Meeting will start at 2:00 p.m. (Eastern Time) on January 26, 2022. We encourage you to access the +meeting website prior to the start time to allow time for check-in. If you encounter any technical or logistical issues or difficulties accessing the virtual meeting during the +check-in or meeting time, please call the technical support number that will be posted on the Virtual Shareholder Meeting login page. +You do not need to register to attend the Annual Meeting webcast. Follow the instructions on your Notice of Internet Availability or proxy card (if you requested and +received a printed copy of the proxy materials) to access the Annual Meeting. +If you wish to submit a question the day of the Annual Meeting, you may log in to the +virtual meeting platform at www.virtualshareholdermeeting.com/VIVO2022 , type your question into the “Ask a Question” field, and click “Submit.” Questions pertinent to meeting matters will be answered during the Annual +Meeting, subject to time constraints. Questions regarding personal matters, including those related to employment, are not pertinent to annual meeting matters and, therefore, will not be answered. We will post on the Virtual Meeting page additional +guidelines for shareholder questions, rules around what types of questions are allowed, and any other procedures for how questions and comments will be recognized. +ELECTION OF DIRECTORS +(Item 1 on the Proxy Card) +The +Nominating and Corporate Governance Committee of the Board of Directors has nominated for re-election the following current directors: James M. Anderson, Anthony P. Bihl III, Dwight E. Ellingwood, Jack Kenny, +John C. McIlwraith, John M. Rice, Jr., Catherine A. Sazdanoff, and Felicia Williams. +Proxies solicited by the Board will be voted for the election of these +nominees. All directors elected at the Annual Meeting will be elected to hold office until the next annual meeting. In voting to elect directors, shareholders are entitled to cumulate their votes and to give one candidate a number of votes equal to +the number of directors to be elected multiplied by the number of shares held by the shareholder, or to distribute their votes on the same principle among as many candidates as the shareholder sees fit. In order to invoke cumulative voting, notice +of cumulative voting must be given in writing by a shareholder to the Chief Executive Officer, a Vice President or the Assistant Secretary of Meridian not less than 48 hours prior to the Annual Meeting. The proxies solicited include discretionary +authority to cumulate votes. +All Meridian directors are elected for one-year terms. Personal information on each of our +nominees is given below. +If a director nominee becomes unavailable before the election, your proxy card authorizes us to vote for a replacement nominee if the +Board names one. +The Board recommends that you vote FOR each of the following candidates: +James M. +Anderson +Director since 2009 +Age: 79 +James M. Anderson serves as Chairman of the Compensation Committee. He currently serves as Senior Strategic and External +Affairs Advisor with Taft Stettinius & Hollister LLP and President Emeritus of Cincinnati Children’s Hospital Medical Center (“CCHMC”), after having served as advisor to the President of CCHMC from January 2010 through +June 30, 2017 and as President and Chief Executive Officer of CCHMC from 1996 through 2009. Mr. Anderson serves on the board of managers of CincyTech, a firm that provides advice and capital to entrepreneurs, helps research institutions +commercialize technology through startups, and catalyzes investment from individuals and institutions to regional companies. In addition, he serves on the board of directors of Cintrifuse, an +organization +3 +Table of Contents +whose purpose is to stimulate and support the Greater Cincinnati regional +start-up community and the connections between start-ups and larger, more established enterprises. From 2006 to 2014, he served as a director of Ameritas Mutual Holding +Company and has also served as Chairman of the Board of the Cincinnati Branch of the Federal Reserve Bank of Cleveland, retiring in 2012. Prior to joining the staff of CCHMC, Mr. Anderson was a partner in the general corporate law department at +Taft, Stettinius & Hollister for 24 years (1968 – 1977; 1982 – 1996) and president of U.S. operations at Xomox Corporation, a publicly-traded manufacturer of specialty process controls (1977 – 1982), where he also served on +the board of directors (1978 – 1980). Mr. Anderson has also served as director of Gateway Investment Advisors (1997 – 2008). The Board believes that Mr. Anderson’s corporate legal experience and his experience as CEO of a +large health care organization have given him a wealth of insight into various corporate governance and business management issues, which, along with his status as an independent director, make him an integral member of the Board. +Anthony +P. Bihl III +Director since 2020 +Age: 65 +Anthony P. Bihl served as Chief +Executive Officer and a member of the board of managers of Bioventus, LLC, a company that develops, manufactures and sells products that promote active orthopedic healing, from December 2013 to April 2020. From June 2011 through June 2012, he was +Group President of American Medical Systems, or AMS, a subsidiary of Endo Pharmaceuticals. Mr. Bihl was President, Chief Executive Officer and a director of AMS from April 2008 until Endo acquired AMS in June 2011. He served as Chief Executive +Officer of the Diagnostics Division of Siemens Medical Solutions from January to November 2007, and as President of the Diagnostics Division of Bayer HealthCare from 2004 through 2006. Prior to that, Mr. Bihl served in a number of operations +and finance roles at Bayer HealthCare and for over 20 years at E.I. DuPont. +Mr. Bihl is +a director and Chairman of the Board of Spectral Medical, Inc. (TSX: EDTXF), a Canadian company that develops products for the diagnosis and treatment of severe sepsis and septic shock, and Sonendo, Inc. (NYSE:SONX), a leading dental technology +company that began trading on the New York Stock Exchange on October 29, 2021. In addition, Mr. Bihl currently serves on the boards of directors of Flowonix Medical Inc., a privately-held company that develops and markets targeted drug +delivery platforms (since July 2020). Mr. Bihl previously served as a member of the board of directors of Nuvectra Corporation (OTC: NVTRQ) from March 2016 to May 2020 and prior to March 2016, served on the board of directors of Integer +Holdings Corporation (NYSE: ITGR) before it spun off Nuvectra. The Board believes that Mr. Bihl is well qualified to serve on Meridian’s Board considering his more than 30 years of experience in the medical device industry in a variety of +operations, finance and general management roles. +Dwight E. +Ellingwood +Director since 2014 +Age: 69 +Dwight E. Ellingwood has over 40 years of experience in health care strategy, planning and business development, and +since 2017 has served as a Teaching Professor and Associate Director for Practitioner Experience in the Masters Program of the Department of Health Services Administration at Xavier University in Cincinnati, Ohio. Mr. Ellingwood previously +served as Senior Vice President of Strategy, Communications and Public Affairs for TriHealth, Inc. in Cincinnati, Ohio (November 2014 – July 2016) and as the Lead Executive for the Collective Impact on Health, The Health Collaborative (2014). +From 1997 to 2013, Mr. Ellingwood served as Senior Vice President, Planning and Business Development for Cincinnati Children’s Hospital Medical Center, following executive experience with the Spohn Health System in Corpus Christi, Texas +(1990 – 1997) and as a health care consultant in Salt Lake City, Utah (1978 – 1990). The Board +4 +Table of Contents +believes that the Company benefits greatly from Mr. Ellingwood’s extensive experience in management, strategy +and business development in the health care industry. +Jack +Kenny +Director since 2017 +Age: 53 +Jack Kenny serves as Meridian’s Chief Executive Officer, having joined the Company on October 9, 2017. Before +joining Meridian, Mr. Kenny served as Senior Vice President and General Manager, North America, with Siemens Healthcare, a position he held from October 2014 to May 2017. From June 2012 through October 2014, Mr. Kenny served as Vice +President and General Manager, U.S. Region, for Becton Dickinson, Diagnostic Systems. Prior to June 2012, Mr. Kenny held executive roles at Danaher Corporation and Quest Diagnostics. Mr. Kenny’s experience as a key executive leader +within large public companies in the health care and medical device industry, as well as his ongoing insights into Meridian’s business and operations, makes him a valuable member of the Board. +John C. +McIlwraith +Director since 2015 +Age: 62 +John C. McIlwraith co-founded Allos Ventures, a venture capital firm, in March +2010 and has served as a Managing Director there since that time. Prior to founding Allos Ventures, Mr. McIlwraith was a Managing Director of Blue Chip Venture Company, a Cincinnati-based venture capital firm, which he joined in +1997. He has served on the board of directors of more than 20 health care or information technology companies, including as the Chairman of the Board and later Lead Director of Assurex Health, the provider of a pharmacogenetic test that +analyzed genetic variations which impact how patients metabolize and respond to medications that treat mental health conditions, which was sold to Myriad Genetics. Prior to 1997, Mr. McIlwraith served as Senior Vice President of Strategic +Planning and General Counsel of publicly-traded Quantum Health Resources, Inc., a provider of biologic drugs and other therapies to patients with rare chronic diseases; Senior Vice President of Development of Olsten Health Services (which acquired +Quantum); and was a partner in the Jones Day law firm. The Board believes that Mr. McIlwraith’s strategic, business development and legal experience, and his years of business-building experience with a large number of startup and growth +companies, including health care companies, render his service on the Board valuable to Meridian. +John M. +Rice, Jr. +Director since 2017 +Age: 72 +John M. Rice is a Managing Director leading the Life Sciences practice at CincyTech, a firm that provides advice and +capital to entrepreneurs, helps research institutions commercialize technology through start-ups, and catalyzes investment from individuals and institutions to regional companies, having previously served as +Director of Life Sciences since 2014. Dr. Rice is also the founder of Triathlon Medical Venture Partners, a venture capital firm that invests equity capital in early and expansion stage life science companies, having served as Managing Partner +from 2003 – 2018. He was previously a Managing Director at Senmed Medical Ventures from 1989 – 2003. In his greater than 30 years in health care venture capital, Dr. Rice has served on the board of directors of more than 25 +privately-held health care companies, currently chairing the boards of Genetesis, Kurome and Airway Therapeutics. In addition, he currently chairs the Investment Advisory Board of the Harrington Discovery Institute and serves on the board of Enable +Injections. The Board believes that Dr. Rice’s scientific background and years of experience with a number of companies operating in the health care and related industries, as well as extensive experience within the capital markets, is +extremely valuable to Meridian. +5 +Table of Contents +Catherine +A. Sazdanoff +Director since 2015 +Age: 65 +Catherine A. Sazdanoff serves as Chairwoman of the Nominating and Corporate Governance Committee. Since 2015, she has +served as President and Chief Executive Officer of Sazdanoff Consulting, LLC, providing health care strategy and business development advisory services to a number of clients, including currently serving in the following capacities +for Strata Oncology Inc., a precision oncology company: Chief Business Development Officer (since February 2021), and Chief Compliance and Legal Officer (since December 2019). This follows Ms. Sazdanoff having joined Strata in May 2016 as Chief +Business Officer (May 2016 – September 2017) and consulted as Business Advisor (October 2017 – February 2019). Since July 2019, Ms. Sazdanoff has served as an independent director of the board of InMed Pharmaceuticals, Inc., currently +chairing its nominating and governance committee, and serving on its audit and compensation committees. Ms. Sazdanoff is also a member since April 2016 of the Advisory Board of Neurocern, Inc., a dementia insuretech company, and is a lecturer +since March 2018 in the Business of Biotech program at the University of Chicago Graham School for Continuing and Professional Education. She serves on the External Advisory Board of the Rosalind Franklin University Innovation and Research Park. +Ms. Sazdanoff’s prior corporate roles include a number of global corporate positions with Takeda Pharmaceuticals, Inc. (“Takeda”), a wholly-owned subsidiary of Japanese-based Takeda Pharmaceutical Corporation, from 2006 to +2015 including VP, Head of Corporate Projects (2012 – 2015); VP, Global Business Development (2011 – 2013); and VP, Corporate Development (2010 – 2011). Ms. Sazdanoff’s time at Takeda was +preceded by approximately 22 years with Abbott Laboratories, where she held numerous executive positions covering legal, compliance and business development. The Board believes that Ms. Sazdanoff’s years of experience in the +pharmaceutical and medical diagnostics industries makes her service on the Board valuable to Meridian. +Felicia +Williams +Director since 2018 +Age: 56 +Felicia Williams serves as Chairwoman +of the Audit Committee. Ms. Williams is currently serving as the Macy’s Inc. Fellow for CEO Action for Racial Equality, a fellowship that provides the 1,500+ CEO signatories of CEO Action for Diversity & Inclusion with an +opportunity to advance racial equity through public policy to address systemic racism and social injustice and improve societal well-being. Prior to becoming a Fellow, Ms. Williams served as Macy’s Interim Chief Financial Officer and +Enterprise Risk Officer from June 2020 to November 2020. Since joining Macy’s in June 2004, Ms. Williams has served as Executive Vice President, Controller and Enterprise Risk Officer (June 2016 – June 2020) and Senior Vice President, +Finance and Risk Management (February 2011 – June 2016), as well as in other finance, treasury, risk management and internal audit capacities. Prior to her time at Macy’s, Ms. Williams served in various financial positions at the +Coca-Cola Hellenic Bottling Company in Athens, Greece and The Coca-Cola Company in Atlanta, Georgia (June 1994 – June 2004). +Since March 2021, Ms. Williams has served as a director and member of the audit committee of Realogy Holdings Corp. (NYSE:RLGY), a leading provider of U.S. +residential real estate services. Ms. Williams brings broad and wide-ranging accounting, finance, treasury and enterprise risk management experience, including analyzing financial statements, complex accounting issues and internal controls over +financial reporting, which qualifies her as an “audit committee financial expert” under SEC guidelines. The Board believes her experience greatly benefits the Company. +6 +Table of Contents +RATIFICATION OF APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM +(Item 2 on the Proxy Card) +Our Audit Committee has appointed Ernst & Young LLP (“Ernst & Young” or “the Firm”) as our independent registered public +accounting firm for the fiscal year ending September 30, 2022. In evaluating the appropriateness of engaging Ernst & Young as the Company’s independent registered public accounting firm, the Audit Committee considered a number of +factors including, but not limited to: (i) Ernst & Young’s relevant technical expertise and its significant institutional knowledge of the Company’s operations and industry; (ii) the quality and candor of the Firm’s +communications with the Audit Committee and management; (iii) the Firm’s independence, including the consideration of any non-audit services provided and their impact on independence; (iv) the +quality and efficiency of the services provided, including input from management on the Firm’s performance, objectivity and professional skepticism; (v) external data on audit quality and performance, including recent Public Company +Accounting Oversight Board (“PCAOB”) reports on the Firm and its peer firms; (vi) the appropriateness of the Firm’s fees; and (vii) the Firm’s tenure as independent auditors, including the benefits of a longer tenure, +and the controls and processes in place that help ensure the Firm’s continued independence. Ernst & Young has served as the Company’s independent registered public accounting firm since December 2020. Our Board has directed that +this appointment be submitted to our shareholders for ratification. Although ratification of our appointment of Ernst & Young is not required, we value the opinions of our shareholders and believe that shareholder ratification of our +appointment is a good corporate governance practice. +Ernst & Young also served as our independent registered public accounting firm for the fiscal year +ended September 30, 2021. Neither the Firm nor any of its members has any direct or indirect financial interest in or any connection with us in any capacity other than as our auditors, providing audit and +non-audit related services. A representative of Ernst & Young is expected to virtually attend the Annual Meeting and to have an opportunity to make a statement and be available to respond to +appropriate questions from shareholders. In the event that the appointment of Ernst & Young is not ratified by the shareholders, the Audit Committee intends to continue the engagement of Ernst & Young at least through the fiscal +year ending September 30, 2022. Even if the appointment of Ernst & Young is ratified, the Audit Committee retains the discretion to appoint a different independent auditor at any time if it determines that such a change is in the +interests of the Company. +Recent Change in Accounting Firm +Following a +request for proposal (“RFP”) process, effective December 22, 2020 (the “Effective Date”), the Audit Committee of the Board of Directors of Meridian selected Ernst & Young as the Company’s independent registered +public accounting firm for the Company’s fiscal year ended September 30, 2021. The Audit Committee dismissed Grant Thornton LLP (“Grant Thornton”), the Company’s then current independent registered public accounting firm, +effective as of the Effective Date. +Grant Thornton’s reports on the Company’s Consolidated Financial Statements as of and for the fiscal years ended +September 30, 2020 and 2019 did not contain any adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope, or accounting principles. During the fiscal years ended September 30, 2020 and +2019, and the subsequent interim period through the Effective Date, there were: (i) no disagreements within the meaning of Item 304(a)(1)(iv) of Regulation S-K and the related instructions between +the Company and Grant Thornton on any matters of accounting principles or practices, consolidated financial statement disclosure, or auditing scope or procedure which, if not resolved to Grant Thornton’s satisfaction, would have caused Grant +Thornton to make reference thereto in their reports; and (ii) no “reportable events” within the meaning of Item 304(a)(1)(v) of Regulation S-K. +The Company requested that Grant Thornton furnish a letter addressed to the SEC stating whether or not it agrees with the above statements, and, if not, stating the +respects in which it does not agree. A copy of Grant Thornton’s letter agreeing with the above statements, dated December 28, 2020, was filed as Exhibit 16.1 to Meridian’s Form 8-K filed on or +about December 30, 2020. +7 +Table of Contents +During the fiscal years ended September 30, 2020 and 2019 and the subsequent interim period through the Effective +Date, neither the Company nor anyone on its behalf consulted with Ernst & Young regarding: (i) the application of accounting principles to a specific transaction, either completed or proposed, or the type of audit opinion that might be +rendered on the Company’s Consolidated Financial Statements, and neither a written report nor oral advice was provided to the Company that Ernst & Young concluded was an important factor considered by the Company in reaching a decision +as to any accounting, auditing, or financial reporting issue; (ii) any matter that was the subject of a disagreement within the meaning of Item 304(a)(1)(iv) of Regulation S-K and the related +instructions; or (iii) any “reportable event” within the meaning of Item 304(a)(1)(v) of Regulation S-K. +Principal Accounting Firm Fees +Aggregate fees billed to Meridian by +Ernst & Young and Grant Thornton for fiscal years 2021 and 2020, as applicable, are listed below: +Ernst & Young +2021 +2020 +Audit Fees +$ +702,500 +$ +- +Audit-Related Fees +- +- +Tax Fees +189,150 +- +$ +891,650 +$ +- +Grant Thornton +2021 +2020 +Audit Fees +$ +- +$ +602,382 +Audit-Related Fees +- +77,625 +Tax Fees +326,427 +475,909 +$ +326,427 +$ +1,155,916 +Audit Fees. Audit fees are the fees billed for professional services rendered by Meridian’s independent registered +public accounting firms for their: (i) audit of Meridian’s consolidated financial statements for the fiscal years ended September 30, 2021 and 2020, respectively; (ii) reviews of the unaudited quarterly consolidated financial +statements contained in the reports on Form 10-Q filed by Meridian during those years; (iii) audits of wholly-owned subsidiaries’ statutory accounts in the United Kingdom, Israel and China during +fiscal 2021 and 2020; and (iv) reporting on Meridian’s internal controls during those years. +Audit-Related Fees . Audit-related fees +are the fees billed for assurance and related services that are reasonably related to the performance of the audit or review of Meridian’s consolidated financial statements. +Tax Fees. Tax fees are the fees billed for tax return preparation and compliance in Australia, Canada, China, England, Germany, Israel and the United +States, as well as consultation and research on various matters such as the U.S. tax reform act, state tax issues, international tax issues, transfer pricing, and tax planning. +The Board recommends that you vote FOR the ratification of appointment of Ernst & Young LLP as Meridian’s independent registered public +accounting firm for the 2022 fiscal year. +8 +Table of Contents +ADVISORY VOTE ON COMPENSATION OF NAMED EXECUTIVE OFFICERS (“SAY-ON-PAY” PROPOSAL) +(Item 3 on the Proxy Card) +The Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd Frank”), enacted in July 2010, requires that we provide our shareholders with the +opportunity to vote to approve, on a non-binding, advisory basis, the compensation of our named executive officers as disclosed in this proxy statement in accordance with the compensation disclosure rules of +the Securities and Exchange Commission (“SEC”). Dodd Frank also provides that shareholders periodically be given the opportunity to vote, on a non-binding, advisory basis, for their preference as to +how frequently we should seek future advisory votes on the compensation of our named executive officers. This opportunity was provided to our shareholders at our 2018 annual meeting, where over 80% of our voting shareholders voted to hold the “say-on-pay” advisory vote annually, in accordance with the recommendation of our Board of Directors. As a result, we are again holding a say-on-pay advisory vote at our 2022 annual meeting, with the next say-on-pay advisory vote to +be held at our 2023 annual meeting. +As described below under the heading “Compensation Discussion and Analysis” beginning on page 17 of this proxy +statement, we seek to closely align the interests of our named executive officers with the interests of our shareholders. We structure our programs to discourage excessive risk-taking through a balanced use of compensation vehicles and metrics with +an overall goal of delivering sustained long-term shareholder value, while aligning our executives’ interests with those of our shareholders. Further, our programs require that a substantial portion of each named executive officer’s +compensation be contingent on delivering performance results that benefit our shareholders. Our compensation programs are designed to reward our named executive officers for the achievement of short-term and long-term strategic and operational goals +and the achievement of increased total shareholder return. +The vote on this matter is not intended to address any specific element of compensation; rather, the +vote relates to the overall compensation of our named executive officers, as described in this proxy statement in accordance with the compensation disclosure rules of the SEC. The vote is advisory, which means that the vote is not binding on the +Company, our Board of Directors or the Compensation Committee. The Board and the Compensation Committee will review and consider the voting results when making future decisions regarding our executive compensation program. +Accordingly, we ask our shareholders to approve, on an advisory basis, the compensation of the named executive officers, as disclosed in this proxy statement pursuant +to the compensation disclosure rules of the SEC, including the Compensation Discussion and Analysis, the Summary Compensation Table and the other related tables and disclosure. +The Board recommends that you vote FOR the approval of the compensation of our named executive officers as disclosed in this proxy statement. +CORPORATE GOVERNANCE +As an Ohio +corporation, Meridian is governed by the corporate laws of Ohio. Since Meridian’s common shares are publicly traded on the Nasdaq Global Select Market, and it files reports with the SEC, it is also subject to Nasdaq rules and federal securities +laws. +Board Leadership Structure +Governance of the Company is placed in +the hands of the directors who, in turn, elect officers to manage the business operations. The Board oversees the management of Meridian on your behalf. The Board reviews Meridian’s long-term strategic plans and exercises direct decision making +authority in all major decisions, such as acquisitions, the declaration of dividends, major capital expenditures and the establishment of certain company policies. +9 +Table of Contents +The Board operates and evaluates its performance in accordance with Corporate Governance Guidelines approved by the +Board. These Guidelines are available on our website www.meridianbioscience.com . +The Board is responsible for evaluating and determining Meridian’s +leadership structure, and believes that at this point in time separate individuals should serve in the capacities of Chairman of the Board (“Chairman”) and Chief Executive Officer (“CEO”). It is the Board’s belief that such +a structure provides the Company with the right foundation to pursue its strategic and operational objectives, while maintaining effective oversight and objective evaluation of the Company’s performance. Mr. Jack Kenny holds the position +of CEO. Mr. David C. Phillips holds the position of Chairman of the Board, having served as a director since 2000. However, on November 19, 2022, Mr. Phillips notified the Company of his retirement as a director of the Company +effective January 26, 2022. The Board intends to elect a new chairman when Mr. Phillips’ current term expires and will not replace the vacated seat, which will reduce the number of directors to eight (candidates listed above). In his +capacity as Chairman, Mr. Phillips has been responsible for: (i) general Board activities, including setting agendas for Board meetings and presiding over all meetings of the Board and shareholders; and (ii) providing advice and +counsel to Meridian’s management regarding the Company’s business operations. As CEO, Mr. Kenny is responsible for the general management, oversight, supervision and control of the business affairs of Meridian, and ensuring that all +resolutions of the Board are put into effect. +In accordance with Nasdaq rules, our Board of Directors affirmatively determines the independence of each director +and nominee for election as a director in accordance with the elements of independence set forth in the Nasdaq listing standards and Exchange Act rules. Meridian’s Director Independence Standards are available at our website +www.meridianbioscience.com . Based on these standards, the Board has determined that each of the following members of the Board is independent: James M. Anderson, Anthony P. Bihl, Dwight E. Ellingwood, John C. McIlwraith, David C. +Phillips, John M. Rice, Catherine A. Sazdanoff, and Felicia Williams. +During fiscal 2021, the Board of Directors met on 14 occasions. The independent directors +plan to meet as necessary during fiscal 2022 without the presence of management directors. During fiscal 2021, the independent directors met five times in executive session without the presence of management directors following regularly scheduled +Board meetings. All of our directors attended at least 75% of the aggregate of all Board meetings and all meetings of Committees on which such directors served during fiscal 2021. +Meridian expects all directors to attend shareholders’ meetings, and all directors attended the 2021 Annual Shareholders’ Meeting. +Shareholders may communicate with the full Board or individual directors on matters concerning Meridian by mail or through our website, +www.meridianbioscience.com , in each case to the attention of the Vice President, Investor Relations, the address for whom is set forth on page 34 of this proxy statement. +The Board’s Role in Risk Oversight +The Board of Directors, as a whole +and also at the Committee level, plays a key role in operational risk oversight at Meridian and works with management to understand the risks the Company faces, the steps that management is taking to manage those risks and the level of risk +appropriate for the Company in light of its overall business strategy. The Board approves the high level strategies, financial plans and policies of Meridian, setting the tone and direction for the appropriate levels of risk-taking within the +organization. +While overall responsibility for risk oversight rests with the Board, it is the Audit Committee that has been given the primary responsibility of +monitoring and evaluating the adequacy of management’s risk assessment and risk management practices. This role is carried out through its charter-mandated responsibilities related to Meridian’s: (i) overall financial risks and exposures; +(ii) consolidated financial statement risks and exposures; (iii) financial reporting processes; (iv) compliance with ethics policies, such as the Code of Ethics, Employee Complaint Policy, Securities Trading Policies and the Foreign +Corrupt Practices Act Policy; and (v) compliance with governmental and legal regulations, including those contained within the Sarbanes-Oxley Act. The Audit Committee provides regular +10 +Table of Contents +reports to the full Board and works closely with management to update the full Board, as necessary, on matters identified through these Committee risk oversight roles. +The Board has adopted a Code of Ethics applicable to Meridian’s officers, directors and employees. This Code of Ethics is posted on +www.meridianbioscience.com . Any amendments to or waivers of the Code of Ethics (to the extent permitted by Nasdaq Marketplace Rule 5610) will be posted on our website within four business days after the date of an amendment. +Committees of the Board of Directors +The directors have organized themselves +into the standing Committees described below. Each of these Committees has a charter posted on www.meridianbioscience.com . Meridian does not have an Executive Committee of its Board of Directors. The following table identifies membership and +the Chairperson of each of the current standing Committees of the Board, as well as the number of times each Committee met during the fiscal year. +Director +Audit +Compensation +Nominating +and Corporate +Governance +James M. Anderson +Member +Chair +Anthony P. Bihl +Member +Member +Dwight E. Ellingwood +Member +John C. McIlwraith +Member +David C. Phillips +Ex-Officio +Ex-Officio +Ex-Officio +John M. Rice +Member +Catherine A. Sazdanoff +Felicia Williams +Chair +Chair +Meetings in Fiscal 2021 +9 +10 +4 +The Audit Committee is comprised of Felicia Williams (Chair), James M. Anderson, Anthony P. Bihl, and David C. Phillips (Ex-Officio). The Committee met nine times during fiscal 2021. Each member is able to read and understand fundamental financial statements. Felicia Williams has been designated as an Audit Committee financial expert +as that term is defined by the SEC. +The Committee oversees the accounting and financial reporting processes of Meridian and the audit of its consolidated financial +statements by its independent registered public accounting firm. The Committee is solely responsible for the appointment, compensation, retention and oversight of Meridian’s independent registered public accounting firm. The Audit Committee +also evaluates information received from Meridian’s independent registered public accounting firm and management to determine whether the independent registered public accounting firm is independent of management. The independent registered +public accounting firm reports directly to the Audit Committee. +In addition, the Audit Committee has established procedures for the receipt, retention and +treatment of complaints received by Meridian concerning accounting, internal accounting controls or auditing matters and has established procedures for the confidential and anonymous submission by employees of any concerns they may have regarding +questionable accounting or auditing matters. +The Audit Committee, or its Chairwoman, approves all audit and non-audit +services performed for Meridian by its independent registered public accounting firm before those services are commenced. The Chairwoman reports to the full Audit Committee at each of its meetings regarding +pre-approvals she made since the prior meeting and the Committee approves what she has done between meetings. For these purposes, the Audit Committee or its Chairwoman is provided with information as to the +nature, extent and purpose of each proposed service, as well as the approximate timeframe and proposed cost arrangements for that service. +11 +Table of Contents +As previously noted on page 10 in “The Board’s Role in Risk Oversight” section, the Audit Committee +also bears certain risk oversight responsibilities. +The Audit Committee has submitted the following report for inclusion in this proxy statement: +REPORT OF THE AUDIT COMMITTEE +The Audit +Committee oversees Meridian’s financial reporting process on behalf of the Board. Management has the primary responsibility for the consolidated financial statements and the reporting process including the systems of internal controls over +financial reporting. As part of the oversight processes, the Audit Committee regularly meets with management of Meridian, Meridian’s independent registered public accounting firm and Meridian’s finance and accounting personnel. The Audit +Committee regularly meets with each of these groups separately in closed sessions. Throughout the year, the Audit Committee had full access to management, the independent registered public accounting firm and internal auditor for Meridian. To +fulfill its responsibilities, the Audit Committee did, among other things, the following: +(a) +reviewed and discussed Meridian’s audited consolidated financial statements for fiscal 2021 with Meridian’s +management and the independent registered public accounting firm, including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments and the clarity of disclosures in the +consolidated financial statements; +(b) +reviewed management’s representations that the interim and audited consolidated financial statements were prepared +in accordance with U.S. generally accepted accounting principles and fairly present the results of operations and financial position of Meridian; +(c) +reviewed and discussed with the independent registered public accounting firm the matters required to be discussed by the +applicable requirements of the PCAOB and SEC rules, including matters related to the conduct of the audit of Meridian’s consolidated financial statements; +(d) +discussed with the independent registered public accounting firm the firm’s independence from management and +Meridian including the matters in the written disclosures and letter received from the independent registered public accounting firm as required by applicable requirements of the PCAOB; +(e) +based on the reviews and discussions with management and the independent registered public accounting firm, the +independent registered public accounting firm’s disclosures to the Audit Committee, the representations of management and the report of the independent registered public accounting firm, recommended to the Board, which adopted the +recommendation, that Meridian’s audited consolidated financial statements be included in Meridian’s Annual Report on Form 10-K for the fiscal year ended September 30, 2021, for filing with +the SEC; and +(f) +reviewed all audit and non-audit services performed for Meridian by the +independent registered public accounting firm for the fiscal year ended September 30, 2021 and determined that its provision of non-audit services was compatible with maintaining its independence from +Meridian. +Respectfully submitted, +Audit Committee +Felicia Williams (Chair) +James M. Anderson +Anthony P. Bihl +David C. Phillips +(Ex-Officio) +12 +Table of Contents +The Compensation Committee is comprised of James M. Anderson (Chair), Anthony P. Bihl, John C. +McIlwraith, and David C. Phillips (Ex-Officio) and is responsible for establishing compensation for executive officers and administering the Company’s compensation plans. As used in this proxy statement, +“executive officer” means our chief executive officer, chief financial officer and any executive vice president. This includes establishing base salary levels and cash-based incentive plans, making stock-based awards, and otherwise dealing +in all matters concerning compensation of the executive officers. During fiscal 2021, the Compensation Committee met ten times. +In general, the Compensation +Committee annually reviews the Company’s compensation programs and its philosophy in setting performance targets each year. The Company provides the Compensation Committee with information on total compensation received for all executive +officers, including the sources of such compensation, for the immediately preceding fiscal year and recommendations for the current fiscal year. In discharging the responsibilities of the Board of Directors relating to compensation of the +Company’s CEO and other executive officers, the purposes of the Compensation Committee are, among others: (i) to review, set and recommend to the Board the compensation of the CEO and the Company’s other executive officers; and +(ii) to oversee the compensation policies and programs of the Company, including stock and benefit plans. The Compensation Committee’s specific functions include adopting, administering and approving the Company’s cash-based incentive +compensation and stock-based incentive plans and awards, including amendments to the plans or awards and performing such duties and responsibilities under the terms of any executive compensation plan, incentive-compensation plan or equity-based +plan. The Compensation Committee has the authority to delegate any of its responsibilities to subcommittees as the Compensation Committee may deem appropriate in its sole discretion. In 2021, the Committee also conducted a review of the CEO’s +performance, reviewed the CEO’s assessment of his team’s performance, reviewed its Charter and conducted a self-assessment, facilitated by a third party. +The Compensation Committee determines the amount and mix of compensation components for the CEO, Mr. Kenny, for recommendation to the Board. As CEO, Mr. Kenny +provides recommendations to the Compensation Committee with respect to the compensation to be paid to the other Named Executive Officers. +To achieve corporate +objectives, the Committee believes it is important to provide competitive levels of compensation in order to retain the most qualified employees, to recognize individuals who exceed expectations and to closely link executive compensation with +corporate performance. The Committee believes Meridian’s long-term objectives can be achieved through a mix of cash-based incentive compensation plans and stock-based incentive compensation plans. +The Compensation Committee’s processes and procedures for the consideration and determination of executive and director compensation are discussed in the section +entitled “Compensation Discussion and Analysis” in this proxy statement. See Compensation Committee Report on page 27 following the Compensation Discussion and Analysis. +Compensation Committee Interlocks and Insider Participation +None of the +members of the Compensation Committee has ever been an officer or employee of the Company. None of the members of the Compensation Committee is or was a participant in any related person transaction in fiscal 2021 (see the section entitled +“Transactions With Related Persons” in this proxy statement for a description of our policy on related person transactions). Lastly, none of the members of the Compensation Committee is an executive officer of another entity at which one +of our executive officers serves on the Board of Directors. No Named Executive Officer of Meridian serves as a director or as a member of a committee of any company of which any of the Company’s +non-employee directors are executive officers. +13 +Table of Contents +The Nominating and Corporate Governance Committee consists of Catherine A. Sazdanoff (Chair), Dwight E. +Ellingwood, John M. Rice, and David C. Phillips (Ex-Officio). The Committee met four times during fiscal 2021. In November 2021, the Committee considered and recommended the nomination of the eight nominees +identified in this proxy statement. The Committee identifies qualified nominees for the Board, recommends to the Board who will be nominated by the Company for election to the Board and recommends to the full Board any changes in the size of the +Board. The Committee also reviewed its Charter and oversaw a third-party-facilitated self-assessment of the Board and its Committees, the results of which are in process to be reviewed by the Nominating and Corporate Governance Committee. +In identifying, considering and recommending candidates for nomination to the Board, the Nominating and Corporate Governance Committee assesses the qualifications of +all candidates for the Board on an equal basis, taking into account, among other factors which it may deem appropriate, the judgment, skill, diversity, independence, and business experience of the potential nominee and the needs of the Board as its +function relates to the business of the Company. The Committee also discusses a director skills matrix, which it has prepared and periodically updates. The Committee evaluates such factors, among others, and does not assign any particular weighting +or priority to any of these factors, nor does the Committee have a formal policy with respect to diversity. However, the Committee, working with the Board, considers the diversity of all of the Company’s stakeholders – including +shareholders, employees and customers – when engaging in corporate governance discussions. +The Committee considers candidates for nomination from a variety of +sources including recommendations of shareholders. Shareholders desiring to submit recommendations for nomination by the Committee should direct them to the Chair of the Nominating and Corporate Governance Committee in care of the Company at its +address shown on the cover page of this proxy statement. +14 +Table of Contents +DIRECTORS AND EXECUTIVE OFFICERS +This table identifies the executive officers and directors of Meridian and shows the number of shares beneficially owned, as determined under SEC rules, on +December 2, 2021. Beneficial ownership includes any shares as to which the individual has sole or shared voting or investment power and any shares that the individual has the right to acquire within 60 days. +Common Stock +Beneficially Owned +Name +Position +Amount 1 +Percentage +Jack Kenny +Chief Executive Officer +and Director +192,751 +* +Bryan T. +Baldasare 2 +Executive Vice President, Chief Financial Officer, Chief Accounting Officer, and Secretary +86,690 +* +Lourdes G. +Weltzien 3 +Executive Vice President, +Life Science +71,052 +* +Tony +Serafini-Lamanna 4 +Executive Vice President, Diagnostics +5,268 +* +David C. +Phillips 8 +Chairman of the Board and Director +156,079 +* +James M. Anderson 5, 6 +Director +118,953 +* +Anthony P. Bihl 5, 6 +Director +22,787 +* +Dwight E. +Ellingwood 7 +Director +91,519 +* +John C. +McIlwraith 6 +Director +89,453 +* +John M. +Rice 7 +Director +50,973 +* +Catherine A. +Sazdanoff 7 +Director +86,153 +* +Felicia Williams 5 +Director +51,003 +* +All Executive Officers and Directors as a Group +1,022,681 +2.3 +% +1 Includes shares for options and restricted stock units currently exercisable and/or exercisable or vesting within 60 days as follows: Mr. Kenny (139,603); Mr. Baldasare (66,926); Dr. Weltzien +(30,000); Mr. Phillips (98,786); Mr. Anderson (98,786); Mr. Bihl (11,936); Mr. Ellingwood (78,786); Mr. McIlwraith (72,286); Dr. Rice (28,081); Ms. Sazdanoff (74,286); and Ms. Williams (45,286). +2 On December 6, 2018, Bryan T. Baldasare was promoted to be the Company’s Chief Accounting Officer effective January 1, 2019. Mr. Baldasare was appointed as the Company’s Chief +Financial Officer effective October 1, 2019. Mr. Baldasare served the Company as Interim Chief Financial Officer since June 28, 2019. Prior to that, Mr. Baldasare served the Company as its Senior Vice President, Corporate +Controller and Treasurer. Mr. Baldasare has been employed by the Company since 2000, holding positions of increasing responsibility in the Company’s accounting and finance departments. On December 2, 2021, Meridian announced +Mr. Baldasare’s retirement effective as of December 31, 2021. Age: 55 +3 Lourdes G. Weltzien joined Meridian in July 2008 as General Manager of Life Science and was appointed Vice President and General Manager of Life +Science in April 2013, as well as President of Asia Pacific Markets in July 2016, and Executive Vice President, Life Science in March 2018. Prior to joining Meridian, Dr. Weltzien held various executive and management positions with +Sigma-Aldrich Corporation (now Millipore-Sigma) since 1994. Age: 56 +15 +Table of Contents +4 Tony Serafini-Lamanna joined Meridian in April 2018 as Vice President and General Manager of Diagnostics and was appointed Executive Vice President, Diagnostics in May 2020. Prior to joining Meridian, +Mr. Serafini-Lamanna held various executive and management positions with Siemens Healthcare since 2001. Age: 58 +5 Audit Committee Member. +6 +Compensation Committee Member. +7 Nominating and Corporate Governance Committee Member. +8 Ex-Officio member of Audit, Compensation, and Nominating and Corporate Governance Committees. +* Less than one percent. +SECURITY OWNERSHIP OF +CERTAIN BENEFICIAL OWNERS +The following table lists the persons known by the Company to be the beneficial owners of more than five percent of the +Company’s common stock as of December 2, 2021, unless otherwise noted. Beneficial ownership includes any shares as to which the individual has sole or shared voting or investment power. +Name and address of beneficial owner +Amount and nature of +beneficial ownership +Percent of class 1 +BlackRock, Inc. +55 East 52 nd Street +New York, NY 10055 +6,847,747 +15.90 +The Vanguard Group, Inc. +100 Vanguard Blvd. +Malvern, PA 19355 +4,757,715 +11.03 +Earnest Partners, LLC +1180 Peachtree Street NE, Suite 2300 +Atlanta, GA 30309 +4,341,834 +10.10 +Renaissance Technologies LLC +800 Third Avenue +New York, NY 10022 +2,313,864 +5.37 +Deerfield Mgmt, L.P. +345 Park Avenue South, 12 th Floor +New York, NY 10010 +2,161,000 +5.01 +1 For the beneficial owners listed in the table, the percentages listed reflect disclosures in the Schedule 13Gs most recently filed by each beneficial owner with the SEC as of the date of this proxy +statement. +16 +Table of Contents +DELINQUENT SECTION 16(A) REPORTS +Section 16 of the Securities Exchange Act of 1934 requires Meridian’s executive officers, directors and persons who own more than ten percent of a registered +class of Meridian’s equity securities to file reports of ownership and changes in ownership with the SEC. Based on a review of the copies of such forms received by it, Meridian believes that during the last fiscal year, all of its executive +officers, directors and ten percent shareholders complied with the Section 16 reporting requirements except as described below. In making these statements, Meridian has relied upon examination of the copies of Forms 3, 4 and 5, and amendments +thereto, and the written representation of its directors and executive officers. +Bryan T. Baldasare and Lourdes G. Weltzien each filed a late form 4 on +December 21, 2020 to report the sale of 1,991 and 2,666 shares, respectively, to cover tax withholding arising from the vesting of equity awards that occurred on November 16, 2020 for Mr. Baldasare, and on November 16, 2020 and +November 23, 2020 for Dr. Weltzien. +TRANSACTIONS WITH RELATED PERSONS +Nasdaq rules require the Company to conduct an appropriate review of related party transactions required to be disclosed by the Company pursuant to SEC Regulation S-K Item 404 for potential conflict of interest situations on an ongoing basis and that all such transactions must be approved by the Audit Committee or another Committee comprised of independent directors. As a +result, the Audit Committee annually reviews all such related party transactions and approves each related party transaction if it determines that it is in the best interests of the Company. Additionally, the Audit Committee’s Charter provides +it the authority to review, approve and monitor transactions involving the Company and “related persons” (directors and executive officers or their immediate family members, or shareholders owning five percent or greater of the +Company’s outstanding stock). This also covers any related person transaction that meets the minimum threshold for disclosure in the proxy statement under the relevant SEC rules (generally, transactions involving amounts exceeding $120,000 in +which a related person has a direct or indirect material interest). In considering the transaction, the Audit Committee may consider all relevant factors, including, as applicable: (i) the Company’s business rationale for entering into the +transaction; (ii) the alternatives to entering into a related person transaction; (iii) whether the transaction is on terms comparable to those available to third parties, or in the case of employment relationships, to employees generally; +(iv) the potential for the transaction to lead to an actual or apparent conflict of interest and any safeguards imposed to prevent such actual or apparent conflicts; and (v) the overall fairness of the transaction to the Company. This +policy is included in the Company’s Employee Handbook. The approvals of such related person transactions are evidenced by internal Company resolutions, minutes or memoranda. +COMPENSATION DISCUSSION AND ANALYSIS +Throughout this proxy statement, the individuals who served as the Company’s CEO and Chief Financial Officer during fiscal 2021, as well as the other individuals +listed in the Summary Compensation Table below, are referred to as the “Named Executive Officers” or “NEOs.” +Compensation Philosophy and +Objectives +Our executive compensation is tied to performance objectives that are aligned with our strategic objectives to incentivize and focus behavior on +creating long-term shareholder value. Meridian believes that employees who understand our purpose will drive progress. In order to create value for our shareholders, it has been important for us to focus on the core areas of growth, cost containment +and organizational development. We continued to transform our business resources in 2021, based on where we believe we can better compete in the market and better leverage our strengths across the globe. Our strategic priorities are as follows: +17 +Table of Contents +● +Reshape the financial profile to achieve higher growth over time, while maintaining strong financial returns and mitigating +risks in our business. +● +Focus on organic and inorganic investment to re-allocate capital to where we can +win and compete over the long-term. +● +Align the deployment of human capital and minimize risk, while improving organizational fitness. +Compensation and benefit programs are an important part of the Company’s employment relationship, which also include challenging and rewarding work and a focus on +career growth, while aligning with our strategy of increasing shareholder value. Pay for performance is fundamental to our compensation philosophy. We reward individuals’ performance for contributions to business success. +Critical to each element of our total compensation and benefits philosophy is that it be based on a strategy to attract, retain, and unlock the potential of our human +capital, and it therefore consists of competitive base pay, incentive programs, and benefits that provide income security and protection. The affordability of compensation and benefits are considered over the medium- to long-term, and to the extent +possible, will not fluctuate based on short-term business conditions. +The key principles to the design of our compensation programs are as follows: +● +Base salaries, which reflect job responsibilities, market competitiveness, and individual performance in connection with +merit increases; +● +Annual cash-based incentive opportunities, which are a function of Company and personal performance; and +● +Longer-term stock-based incentive opportunities under our 2021 Omnibus Award Plan, in the form of stock options and +restricted stock unit grants that vest over a minimum service period, and a new performance-based restricted stock unit program, which align the long-term interests of senior management with our shareholders. +Base salaries are based on individual job duties, performance and achievements, while considering internal pay equity, retention, critical skills, and independent +survey market data. Annual cash-based incentive programs are based on defined metrics aligned to our strategic objectives and the achievement of performance goals that are set at levels to motivate executives to commit to growth and align with +shareholder value creation, while improving performance. +Stock-based incentive awards historically consisted of restricted stock units and non-qualified stock options, with vesting generally being time-based. During November 2021, the Company adopted a performance-based restricted stock unit program as discussed below. Stock-based awards are designed +to both reward and retain, while aligning interests of management with our shareholders. +The Compensation Committee has established several principles and +practices that are important to achieving our compensation philosophy and objectives. These are summarized below. +Gross-up Payments, Repricing of Options, Pledging, Hedging and Margin Accounts +The Company avoids contractual agreements that include excise tax gross-up payments. It does not allow the repricing of options, +which is not permitted under the 2021 Omnibus Award Plan without first obtaining the approval from shareholders of the Company. Additionally, the Company’s Insider Trading Policy places restrictions on the Company’s directors and executive +officers regarding entering into hedging transactions with respect to the Company’s securities and from holding the Company’s securities in margin accounts or otherwise pledging such +18 +Table of Contents +securities as collateral for loans. Specifically, our Insider Trading Policy provides that directors, executive officers and certain other designated employees may not purchase Meridian +securities on margin or borrow against any account in which Meridian securities are held. The Policy also provides that such persons may not pledge Meridian securities as collateral for a loan or engage in hedging or monetization transactions +(such as zero-cost collars and forward-sale contracts) with respect to Meridian securities. No directors or executive officers have in place any pledges or hedging transactions. +Recovery of Past Awards +The Board has adopted a compensation recoupment or +“clawback” policy, applicable to all officers subject to Section 16 of the Securities Exchange Act of 1934. Under this policy, the Company will pursue recoupment of any excess compensation, including incentive cash bonuses, restricted +stock unit awards, stock options or other compensation, which was awarded to a covered officer based on financial statements of the Company where such statements are required to be restated as a result of the intentional misconduct or fraud of the +covered officer. In addition to recoupment, the Company shall take such other remedial actions deemed necessary against a covered employee, including recommending disciplinary actions up to and including termination and other available remedies. The +recovery period for recoupment of any compensation is up to two fiscal years preceding the date on which the Company is required to prepare and file the restated financial statements. This policy has been proactively adopted in advance of final +guidance under Section 954 of the Dodd-Frank Act and will be amended to conform with this Section when final guidance is available. +Minimum Vesting Periods +Awards granted under the 2021 Omnibus Award Plan, other than cash-based awards, are generally subject to minimum vesting requirements of one year. The 2021 +Omnibus Award Plan also provides that no restricted stock or restricted stock units conditioned upon the achievement of performance objectives shall be based on a restriction period of less than one year, subject to the Plan’s provisions +applicable to termination of employment and change in control. +Cash Buyouts of Underwater Options +Although the plan document for our 2021 Omnibus Award Plan does not include a provision expressly prohibiting cash buyouts of options or stock appreciation rights, the +Compensation Committee believes cash buyouts of “underwater options” is a governance practice that investors view as unfavorable. As a result, the Compensation Committee is generally opposed to cash buyouts of options or stock appreciation +rights. +Back-Dating and Spring-Loading +Neither Meridian nor the +Compensation Committee engages in spring-loading, back-dating or bullet-dodging practices. Meridian’s Board has adopted a policy that provides that the Compensation Committee may grant equity awards to Company employees (executive officers, +vice presidents, senior directors and directors) for the Company’s annual equity compensation grant cycle only during the period of October 20 through November 10 each year. Stock options are granted at the closing market price on the +date of grant. Prior to the exercise of an option, the holder has no rights as a shareholder with respect to the shares subject to such option, including no rights to vote or to receive dividends. Restricted stock units do not have voting rights. +Ownership Guidelines +Consistent with its compensation philosophy and +the principle of aligning the interests of management and directors of the Company with the interests of its shareholders, the Board of Directors has implemented stock ownership guidelines for “Specified Officers” (defined in the +guidelines as those officers required to file beneficial ownership reports with the SEC) and non-employee directors. Under the guidelines, the Company’s CEO is required to own an amount of Company common +stock (including non-vested restricted stock units) which is equal to or exceeds three times such CEO’s annual base salary, and Specified Officers other than the CEO are required to own an amount of +Company common stock (including non-vested restricted stock units) which is equal to or exceeds such officer’s annual base salary. Also, under the guidelines, each of the Company’s non-employee directors is required to own an amount of Company common stock which is equal to or exceeds three times such non-employee director’s annual retainer. +Generally, persons subject to the guidelines are required to achieve the +19 +Table of Contents +applicable guideline not later than three years from the appointment to their position. As of the date of this proxy statement, persons subject to these guidelines have been deemed by the Board +to have met their ownership target, either as a result of their direct holdings or shares held indirectly by an entity affiliated with such person, in accordance with the guidelines. +The Compensation Committee is responsible for ongoing oversight of compliance with this compensation philosophy. The Compensation Committee ensures that the total +compensation paid to the NEOs is fair, reasonable and competitive. +At our 2021 annual meeting, Meridian once again held an advisory vote on the compensation of its +NEOs, commonly referred to as a say-on-pay vote. Our shareholders approved the compensation of our NEOs, with approximately 86% of votes cast in favor of our 2021 say-on-pay resolution. Based on the results of the 2021 say-on-pay vote, the Compensation +Committee concluded that the compensation paid to the NEOs and Meridian’s overall pay practices received strong shareholder support and do not require substantial revision to address shareholder concerns. +Executive Summary +Fiscal 2021 Highlights +Fiscal 2021 was a second consecutive record year for Meridian for reported net revenues and earnings. Actions of management over the previous two years prepared the +Company to both weather the effects of the COVID-19 pandemic storm in Diagnostics and excel as a critical supplier to the IVD industry battling the global COVID-19 +pandemic. The Compensation Committee recognized the following achievements of the Company during fiscal 2021 as it considered the Company’s compensation philosophy and related decisions related to executive compensation: +● +The Company reported record consolidated net revenues of $318 million, up 25% year-over-year; +● +The Life Science segment delivered record net revenues of $190 million, up 43% year-over-year, with the contribution +of $112 million from COVID-19 related products for immunological and molecular tests; +● +The Diagnostics segment net revenues increased 5% year-over-year to $128 million, despite significant headwinds from +the COVID-19 pandemic and the LeadCare ® product recall; +● +The Company launched several new molecular reagents in air-dryable format with +sample-specific characteristics; +● +The Company completed a second Emergency Use Authorization (“EUA”) submission for a PCR COVID-19 test on the Revogene ® system, and received FDA authorization in November 2021; and +● +The Company acquired the BreathTek ® business, adding the BreathTek ® instrument and its Urea Breath Test for H. pylori to the diagnostics product portfolio. +Actions of the Compensation Committee +In several meetings during the year, +Mr. Kenny and the Compensation Committee Chairman discussed, among other things, Meridian’s compensation philosophy and its effectiveness in attracting and retaining talented employees. They also discussed certain changes to the +compensation programs for fiscal 2021, which are outlined in this proxy statement. +At its 2021 meetings, the Compensation Committee discussed these matters, both +with and without the presence of management. The Compensation Committee discussed the recommendations of the CEO for compensation +20 +Table of Contents +levels for all officers and the general pay increases to be paid throughout the Company. The Committee then made the compensation decisions, which are reflected in the figures presented in this +proxy statement. +Fiscal 2021 Compensation Decisions +For Fiscal 2021, +the target payout ratios as a percentage of base salary for the original Cash-Based Incentive Compensation Plan (“CICP”) were fifty percent (50%) for the NEOs other than the CEO, and ninety percent (90%) for the CEO. Thirty percent (30%) +of the target payout ratio was based on achieving certain levels of net revenues; thirty percent (30%) of the target payout ratio was based on achieving certain levels of non-GAAP operating income; and forty +percent (40%) was based on individual performance using a 1-5 rating system. The Business Accelerator and Individual Performance Kickers were aimed at rewarding performance for net revenues achievement and +growth significantly above our original financial guidance published in November 2020 and our internal operating plan. The Kickers were not achieved for Fiscal 2021; however, the CICP under the original plan design achieved actual revenue and income +of 135% and 150% of the targets, respectively. The individual performance achievements for the NEOs other than the CEO ranged from 75% to 125%, and for the CEO was 108%, resulting in the actual payout percentages shown below. +ORIGINAL TARGETS +Revenue Target +(Millions) +Income¹ Target +(Millions) +NEOs other than CEO +CEO +Original Plan at Targets +$300 +$73.0 +50% +90% +Original Plan Max Increments +$ 20 +$4.9 +15% +27% +Original Plan Design Max +Payout 2 +$320 +$77.9 +65% +117% +Business Accelerator Kicker +$325 to $370 +NA +3% to 30% +5.4% to 54% +Individual Performance Kicker +>$335 +NA +10% +18% +Actual 3 +$318 +$95.3 +57.75% to 67.75% +115.93% +¹ Non-GAAP operating income excludes charges for acquisition-related costs +and selected legal matters, as well as the change in fair value of the contingent consideration obligation for the GenePOC acquisition. The Compensation Committee believes that that use of this non-GAAP +measure is more useful than the comparable GAAP measure in evaluating performance against incentive bonus achievement targets. +2 Original Plan Design Max Payout percentage is calculated based on 150% payouts for both the Revenue +and Income component targets and 100% payout for the personal component. +3 Actual bonus payouts were calculated before consideration of BreathTek ® revenue and +income contributions. +Following is a reconciliation of GAAP operating income to non-GAAP operating income for fiscal +2021: +Operating Income (GAAP to Non-GAAP +Reconciliation) +U.S. GAAP Operating Income +$ +93,034,000 +Selected legal costs +2,803,000 +Acquisition-related costs +392,000 +Change in fair value of contingent consideration obligation +(909,000 +) +Non-GAAP Operating Income for use in Cash-Based Incentive Target +Measurement +$ +95,320,000 +The CICP payment for the CEO was determined by the Compensation Committee pursuant to the terms of Mr. Kenny’s employment +agreement, as well as taking into consideration actual net revenues and non-GAAP operating income achieved, relative to the original targets and the Business Accelerator Kicker and Individual Performance +Kicker thresholds noted in the table above. +21 +Table of Contents +Fiscal 2022 Compensation Decisions +Base Salaries +Based on our financial results in fiscal 2021 and the +Compensation Committee’s review of the CEO’s evaluation of the other NEOs, merit increases for Dr. Weltzien and Mr. Serafini-Lamanna for fiscal 2022 are expected to be approximately 3%. With respect to Mr. Kenny, whose +employment agreement has an October 1 st anniversary, the Compensation Committee approved a 3% merit increase effective October 1, 2021 based on the Compensation Committee’s evaluation of +Mr. Kenny’s performance during fiscal 2021. Base salaries across all Meridian employees below the executive level are expected to increase approximately 3% effective January 1, 2022. +Cash-Based Incentive Compensation +The Compensation Committee approved the +2022 CICP structure, including performance targets and payout targets. The target payout ratios as a percentage of base salary are fifty-five percent (55%) for the NEOs other than the CEO, and ninety-five percent (95%) for the CEO. Thirty percent +(30%) of the target payout ratio is based on achieving certain levels of net revenues; thirty percent (30%) of the target payout ratio is based on achieving certain levels of non-GAAP operating income; and +forty percent (40%) is based on individual performance using a 1-5 rating system. Depending on the level of achievement, a NEO other than the CEO may earn from 0% to 93.5% of base salary, and the CEO may earn +from 0% to 161.5% of base salary. +Cash-based incentive compensation, if earned, is paid in the first quarter of each fiscal year, for the prior fiscal year’s +performance. The net revenues and operating income targets operate independently from one another. While the net revenues portion may be earned upon achieving the net revenues targets, the component related to operating income is subject to the +Company’s attainment of the specific operating income target, after inclusion of the compensation expense related to cash-based incentive compensation. Should the Company fail to reach the minimum operating income target, generally, no +cash-based incentive compensation will be paid for this component. +The Compensation Committee has designed the net revenues and operating income thresholds to be +reasonably achievable targets, yet at levels that require diligence to produce meaningful performance. The Compensation Committee has also established “kickers” that are aimed at rewarding performance for net revenues achievement and +growth significantly above our financial guidance and internal operating plan, while maintaining a minimum non-GAAP operating income margin of at least 22%. Such “kickers” are effective at revenues +ranging from $325 million to $370 million. At $325 million, a NEO other than the CEO could earn as much as 96.8% of base salary, and the CEO could earn as much as 167.2% of base salary. At $370 million, a NEO other than the CEO +could earn as much as 126.5% of base salary, and the CEO could earn as much as 218.5% of base salary. At kicker levels of $340 million and above, maximum kicker amounts for a given level are subject to a business unit achieving at least 100% of +its $150 million net revenues plan, and the achievement of an individual performance rating of 3 or higher on the 1-5 rating system. +Stock-Based Incentive Compensation +Awards to be granted to certain +executives of the Company, including the NEOs and the CEO, are based on fixed dollar values that are dependent on the executive’s level in the Company. Such awards have historically been in the form of restricted stock units, and in some cases, +non-qualified stock options, that vested over certain service periods. In November 2021, performance-based restricted stock units (“PSU”) were granted to certain executives, including the NEOs and +CEO, based on fixed dollar values that are dependent on the executive’s level in the Company. The performance conditions in these awards are based on a range of net revenues for each business unit and +non-GAAP consolidated operating income before consideration of stock-based compensation expense, each to be measured for the Company’s fiscal 2024. +22 +Table of Contents +For Life Science, the foundational principles underlying the performance metrics include a larger scale of net +revenues in a post-pandemic world, fueled by innovative new products and broad penetration within industrial customers (IVD manufacturers, veterinary, environmental, ag-bio, etc.), while generating non-GAAP operating profit margin at 50% or higher. +For Diagnostics, the foundational principles underlying the performance +metrics are intended to evidence that this business has completed a turnaround from its pre-fiscal 2019 lack of investment vulnerabilities, has fully recovered from the LeadCare ® product recall situation, and has begun generating respectable returns from major investments to re-freshen its product portfolio and improve manufacturing +efficiencies. These foundational principles contemplate success with commercial execution, new product clearances and launches, and manufacturing efficiencies. +Each business unit has a range of net revenues targets, as well as the consolidated non-GAAP operating income before +consideration of stock-based compensation measurement, for fiscal 2024 that trigger a given level of PSU Award payout as follows: +Illustrative Performance Restricted +Stock Units Payout Percentages¹ +50% +100% +200% +Life Science +Net revenues +Net revenues growth +$165,000,000 +3.7% +$175,000,000 +10.0% +$190,000,000 +19.4% +Diagnostics +Net revenues +Net revenues growth +$165,000,000 +1.9% +$175,000,000 +8.0% +$190,000,000 +17.3% +Consolidated +Net revenues +Net revenues growth +Non-GAAP +operating income +$330,000,000 +2.8% +$89,000 +$350,000,000 +9.0% +$101,000 +$380,000,000 +18.3% +$120,000 +¹ Payout percentage scale is intended to be at a graduated pro rata rate between 50% and 100%, and 100% and 200%. +23 +Table of Contents +Given that the PSU Award program has a mix of net revenues and non-GAAP +operating income targets, any mix which could be met or none at all, the table below summarizes the formula to allocate the award payouts across the financial targets. +Life Science Net +Revenues +Diagnostics Net +Revenues +Consolidated Non-GAAP +Operating Income Before +Stock-Based +Compensation +Corporate functions +40% +40% +20% +Life Science business +unit +80% +Not applicable +20% +Diagnostics business +unit +Not applicable +80% +20% +Establishing Compensation Levels +The +Compensation Committee reviews, sets and recommends to the Board of Directors for approval the compensation of the CEO. The Company has an employment agreement with the CEO, which is described on page 27. The compensation levels for the other NEOs +are recommended by the CEO. The Compensation Committee has discretion to follow or modify such recommended levels of compensation. The Compensation Committee considers the input of our CEO as a crucial component of its compensation processes and +decisions relating to NEO compensation. +Under its charter, the Compensation Committee is authorized to engage outside advisors at the Company’s +expense. In fiscal 2021, the Company did engage an independent consultant to provide benchmarking data from a selected peer group and provide counsel on the levels of compensation and benefits for executives, including the individual components +thereof. The peer group was selected based on several criteria: industry sector and therapeutic focus, market capitalization, employee headcount and trailing 12 months’ net revenues. Recommendations from the independent consultant led to: +(i) implementation of the PSU Award program discussed herein; (ii) increases to the targeted percentage payouts under the Company’s CICP (annual cash-based incentives); and (iii) changes in vesting for equity awards that vest +based on future employee service. +The following table summarizes the key changes to executive compensation resulting from the counsel of the independent +consultant: +Fiscal 2022 +Base salaries +CEO +NEOs other than CEO +Other executives +No change +No change +10% to 15% increases +CICP (annual cash-based incentive) +CEO +NEOs other than CEO +Other executives +Increase from 90% to 95% at Target +Increase from 50% to +55% at Target +5-point increases at Target +Restricted Stock Unit vesting based on future employee service +Change from 3-year cliff vesting to 4-year +pro-rata vesting at 25% per year +Non-qualified stock option vesting based on future employee service +Change from 3-year cliff vesting to 4-year +pro-rata vesting at 25% after the first year +and monthly thereafter +PSU Award program +Previously discussed herein +24 +Table of Contents +In setting the NEOs’ compensation, the Compensation Committee reviews all components of such compensation through +the use of tally sheets. These tally sheets provide the amount of total compensation paid or earned by each NEO based on his or her base salary, cash-based incentive compensation, stock-based awards and retirement contributions. The tally sheets +reviewed provide all of the information that is reflected in the Summary Compensation Table. The review by the Compensation Committee analyzes how changes in any element of compensation would impact other elements, particularly severance or change +in control benefits, if applicable to the executive. Such analysis has become an important component in the Compensation Committee’s review of executive compensation, as the tally sheet allows the Compensation Committee to consider an +executive’s overall compensation rather than only one or two specific components of an executive’s compensation. This allows the Compensation Committee to make compensation decisions and evaluate management recommendations based on a +complete analysis of an executive’s total compensation. Salaries are set on a calendar year basis and, therefore, salaries paid in the first three months of each fiscal year beginning on the first day of October are set in the prior fiscal +year. +The selected peer group used by the independent consultant referred to above was as follows: +Accuray +Heska +Adaptive Biotechnologies +iRhythm Technologies +AngioDynamics +Luminex +Anika Therapeutics +Myriad Genetics +Atricure +NanoString Technologies +Atrion +Natus Medical +Cardiovascular Systems +OraSure Technologies +Castle Biosciences +Quidel +Cutera +Veracyte +Components of Executive Compensation and Related Risk Profile +Meridian’s executive compensation and benefits packages consist of base salary, cash-based incentive compensation, long-term stock-based incentive awards, +Company-sponsored benefit and retirement plans, and change in control severance benefits. Each of these components has a certain risk profile. +Element +Form of Compensation +Purpose +Risk Profile +Base Salaries +Cash +Provides competitive, fixed compensation +to +attract and retain exceptional executive talent +Low to moderate +Annual Cash-Based Incentives +Cash +Provides a direct financial incentive to achieve corporate operating goals +Moderate to high +Long-Term Stock-Based Incentives +Non-qualified stock options and/or restricted stock units, including performance-based +awards +Encourages executive officers to build and maintain a long-term equity ownership position in Meridian so that their interests +are aligned with our shareholders +High +25 +Table of Contents +Health, Retirement and Other Benefits +Eligibility to participate in benefit plans generally available to our employees, including retirement plan contributions, and +premiums paid on disability and life insurance policies +Benefit plans are part of a broad-based employee benefits program providing competitive benefits to our executive officers +Low +Change in Control Severance Benefits +Cash and continuation of certain benefits +Encourages executive +officers to maximize value for shareholders in the event that the Company becomes subject to a change in control transaction +Moderate to high +The Compensation Committee has reviewed the risk profile of the components of the Company’s executive compensation program, +including the performance objectives and target levels used in connection with incentive awards, and has considered the risks a NEO might be incentivized to take with respect to such components. When establishing the mix among these components, the +Compensation Committee is careful not to encourage excessive risk taking. Specifically, the performance objectives contained in the Company’s executive compensation programs have been balanced between annual and long-term incentive compensation +to ensure that all components are aligned and consistent with our long-term business plan and that our overall mix of stock-based awards has been allocated to promote an appropriate combination of incentive and retention objectives. +The Compensation Committee believes that the Company’s executive compensation program does not incentivize the NEOs to engage in business activities or other +behavior that would threaten the value of the Company or the investments of its shareholders. +The Compensation Committee continues to monitor and evaluate on an on-going basis the mix of compensation, especially equity compensation, awarded to the NEOs, and the extent to which such compensation aligns the interests of the NEOs with those of the Company’s shareholders. +In connection with this practice, the Compensation Committee has, from time to time, reconsidered the structure of the Company’s executive compensation program and the relative weighting of various compensation elements. +See Executive Summary on page 20 for discussion of base salaries, annual cash-based incentive compensation and long-term stock-based compensation. +Company-Sponsored Benefit and Retirement Plans +Meridian provides +Company-sponsored benefit and retirement plans to the NEOs. In general, executives participate in the Company’s benefit and retirement plans on the same basis as other Company employees. The core benefit package includes health, dental, short- +and long-term disability, and group term life insurance. Meridian generally provides retirement benefits to executives through qualified (under the Internal Revenue Code) defined contribution plans (401K Plan). +Change in Control Severance Benefits +The Compensation Committee believes +that a reasonable level of salary and Company-sponsored benefit protection provides a means of retention and allows the NEOs to remain focused on achievement of Company goals and objectives in the event that the Company becomes subject to a merger +or acquisition transaction. This component of compensation would only be paid in the event of a change in control of the Company, under certain qualifying conditions, and termination of the NEO’s employment (i.e., double trigger). For the CEO +and the NEOs, this component of compensation would include two years’ base salary, performance bonus and core benefits. See page 32 for a description of change in control severance agreements entered into with our executive officers. +26 +Table of Contents +Jack Kenny Employment Agreement +On November 5, 2019, Meridian entered into an Amended and Restated Employment Agreement (the “Kenny Employment Agreement”) with Jack Kenny, its CEO. Under +the Kenny Employment Agreement, Mr. Kenny is entitled to be paid a base salary of $670,000 and his salary shall be reviewed annually by the Compensation Committee. During the first year of the Kenny Employment Agreement, Mr. Kenny was +eligible to earn an annual target bonus of seventy-five percent (75%) of his base salary. Thereafter, the Compensation Committee shall set an eligible target amount for the annual bonus for the applicable employment term year. For fiscal 2022, the +target bonus has been set at ninety-five percent (95%) of base salary. The actual amount of any annual bonus payable to Mr. Kenny in any year shall be determined by the Compensation Committee based upon performance criteria set forth in advance +under the bonus plan established by the Compensation Committee and the achievement of such performance criteria. +The effective date of the Kenny Employment +Agreement is October 1, 2019 and its term is two years, with annual renewal provisions following the initial term. Either the Company or Mr. Kenny may terminate the Kenny Employment Agreement at any time for any reason upon 90 days’ +notice. In the event that the Company terminates the employment of Mr. Kenny without Cause or if he terminates his employment for Good Reason, each as defined in the Kenny Employment Agreement, Mr. Kenny is entitled to a severance payment +equal to twelve months of his then current base salary plus a pro-rata portion of the target bonus through the date of termination. If such termination occurs during a change in control period (i.e., a double +trigger), Mr. Kenny is entitled to a severance payment equal to two times his then current base salary plus his target bonus for the year in which the termination occurs. +The Kenny Employment Agreement contains customary indemnification provisions and a “clawback” provision that enables the Company to recoup any amounts paid to +Mr. Kenny under the Kenny Employment Agreement if so required by applicable law or any applicable securities exchange listing standards. +Internal Pay +Equity +The Compensation Committee believes that the relative difference between the CEO’s compensation and the compensation of the Company’s other +executives is appropriate. Further, the Compensation Committee believes that the Company’s internal pay equity structure is appropriate based upon the contributions to the success of the Company and as a means of motivation to other executives +and employees. +COMPENSATION COMMITTEE REPORT +The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation +S-K with management. Based on these reviews and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Company’s +proxy statement on Schedule 14A. +Members of the Compensation Committee +James M. Anderson (Chair) +Anthony P. Bihl +John C. McIlwraith +David C. Phillips +(Ex-Officio) +27 +Table of Contents +CEO PAY RATIO +Our CEO Pay Ratio was calculated in compliance with the requirements set forth in Item 402(u) of Regulation S-K. We identified +the median employee population as of July 31, 2021, which included all 730 global full-time, part-time, temporary and seasonal employees employed on that date, excluding 26 such employees in our Belgium, China, France and Holland locations, +which in the aggregate represent less than 5% of our workforce. We used a consistently applied compensation measure across our global employee population to calculate the median employee compensation. For our consistently +applied compensation measure, we utilized total cash compensation per our internal payroll records, annualized and translated to U.S. dollars. We then calculated the median employee’s fiscal 2021 compensation in the same manner as the NEOs in +the Summary Compensation Table. Our median employee compensation for fiscal 2021 was $71,837 and our CEO’s compensation was $3,233,705. Accordingly, our +CEO-to-Employee Pay Ratio is approximately 45:1. +SUMMARY COMPENSATION TABLE +The following +table summarizes the aggregate compensation paid, or earned, by each of the NEOs for the fiscal years ended September 30, 2021, 2020 and 2019, respectively: +Name and Principal +Position +Year +Salary +Bonus 1 +Stock +Awards 2 +Option +Awards 3 +Non-Equity +Incentive Plan +Compensation 4 +Change in +Pension Value +and +Nonqualified +Deferred +Compensation +Earnings +All +Other +Compensation 5 +Total +(a) +(b) +(c) +(d) +(e) +(f) +(g) +(h) +(i) +Jack Kenny +2021 +$ +690,000 +- +$ +1,035,000 +$ +690,000 +$ +800,000 +- +$ +18,705 +$ +3,233,705 +Chief Executive Officer +2020 +$ +670,000 +- +$ +1,005,000 +$ +670,000 +$ +958,770 +- +$ +26,714 +$ +3,330,484 +2019 +$ +650,000 +- +$ +485,250 +- +$ +150,000 +- +$ +31,142 +$ +1,316,392 +Bryan T. +Baldasare 6 +Executive Vice President, +2021 +$ +388,332 +- +$ +200,000 +$ +100,000 +$ +245,604 +- +$ +18,705 +$ +952,641 +Chief Financial Officer +2020 +$ +377,831 +- +$ +201,028 +- +$ +290,016 +- +$ +33,749 +$ +902,624 +and Secretary +2019 +$ +283,039 +- +$ +157,563 +- +$ +28,600 +- +$ +21,557 +$ +490,759 +Lourdes G. Weltzien +2021 +$ +383,847 +- +$ +225,000 +$ +100,000 +$ +263,106 +- +$ +18,705 +$ +990,658 +Executive Vice President, +2020 +$ +368,711 +- +$ +201,028 +- +$ +283,625 +- +$ +31,172 +$ +884,536 +Life Science +2019 +$ +358,431 +- +$ +242,625 +- +$ +50,512 +- +$ +23,982 +$ +675,550 +Tony +Serafini-Lamanna 7 +2021 +$ +367,891 +- +$ +200,000 +$ +100,000 +$ +214,137 +- +$ +18,498 +$ +900,526 +Executive Vice President, +2020 +$ +317,269 +$ +30,000 +$ +120,613 +$ +10,328 +$ +274,752 +- +$ +32,979 +$ +785,941 +Diagnostics +2019 +$ +274,346 +- +$ +157,563 +- +$ +28,700 +- +$ +76,921 +$ +537,530 +1 The amount reflected for Mr. Serafini-Lamanna represents an amount received in connection with retention bonus payments made to the Executive Leadership Team in March 2020, prior to his promotion to +Executive Vice President. No such payments were made to Mr. Kenny, Mr. Baldasare or Dr. Weltzien. See Note 7 below. +2 The amounts shown reflect the grant date fair value of the restricted stock units issued during +fiscal years 2021, 2020 and 2019 in accordance with ASC Topic 718, including those granted to Mr. Kenny in connection with his November 5, 2019 Employment Agreement. In addition, the amounts reflected for Mr. Baldasare and +Mr. Serafini-Lamanna in fiscal 2019 include the grant date fair value of restricted stock units granted in connection with the acquisition of GenePOC, Inc. A discussion of the assumptions used in calculating these values may be found in Note +12(b) on page 67 of the Company’s Annual Report on Form 10-K filed with the SEC on November 23, 2021. +3 The amounts shown reflect the grant date fair value of the stock options granted during fiscal years 2021 and 2020 in accordance with ASC Topic 718, including those granted to: (i) Mr. Kenny in +connection with his +28 +Table of Contents +November 5, 2019 Employment Agreement; and (ii) Mr. Serafini-Lamanna in connection with retention grants made to members of the Executive Leadership Team, excluding Mr. Kenny, +Mr. Baldasare and Dr. Weltzien, in March 2020, prior to his promotion to Executive Vice President. A discussion of the assumptions used in calculating these values may be found in Note 12(b) on page 67 of the Company’s Annual Report +on Form 10-K filed with the SEC on November 23, 2021. +4 The amounts shown represent amounts earned by the NEOs pursuant to the Officer’s Performance Compensation Plan for fiscal 2021, 2020 and +2019. +5 The amounts shown represent Retirement Contributions made by the Company on behalf of the NEOs. +6 Mr. Baldasare was named Executive Vice President and Chief Financial Officer of Meridian +effective October 1, 2019. +7 Mr. Serafini-Lamanna was named Executive Vice President, Diagnostics effective May +18, 2020. +GRANTS OF PLAN-BASED AWARDS +The following table sets forth, for each of the NEOs, information related to grants made during fiscal 2021 under Meridian’s Cash-Based Incentive Compensation Plan +and 2012 Stock Incentive Plan: +Name +Grant +Date +Estimated Future Payouts Under Non- +Equity Incentive Plan Awards 1 +Estimated Future Payouts Under +Equity Incentive Plan Awards +All other +Stock +Awards: +Number of +Shares of +Stock or +Units (#) +All other +Option +Awards: +Number of +Securities +Underlying +Options (#) +Exercise +or Base +Price of +Option +Awards +($/Sh) +Grant Date +Fair Value +of Stock +and Option +Awards +Threshold +($) +Target +($) +Max +($) +Threshold +(#) +Target +(#) +Max +(#) +(a) +(b) +(c) +(d) +(e) +(f) +(g) +(h) +(i) +(j) +(k) +(l) +Jack Kenny +11/05/20 +11/05/20 +$124,218 +- +$621,090 +- +$1,055,853 +- +- +- +- +- +- +- +- +56,006 2 +- +83,535 3 +- +- +- +$1,725,000 +Bryan T. Baldasare +11/05/20 +11/05/20 +$ 39,140 +- +$195,700 +- +$332,690 +- +- +- +- +- +- +- +- +10,823 2 +- +12,107 3 +- +- +- +$ 300,000 +Lourdes G. Weltzien +11/05/20 +11/05/20 +$ 38,835 +- +$194,174 +- +$330,096 +- +- +- +- +- +- +- +- +12,175 2 +- +12,107 3 +- +- +- +$ 325,000 +Tony Serafini-Lamanna +11/05/20 +11/05/20 +$ 37,080 +- +$185,400 +- +$315,180 +- +- +- +- +- +- +- +- +10,823 2 +- +12,107 3 +- +- +- +$ 300,000 +1 These columns reflect the potential payout for each NEO under the fiscal 2021 CICP if the threshold, target and maximum goals, as initially established, were satisfied for all performance measures. +2 +This grant of time-based restricted stock units vests 100% on November 15, 2023. +3 This grant of time-based stock options vests 100% on November 15, 2023. +29 +Table of Contents +OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END +The following table provides information on the NEOs’ holdings of equity awards under Meridian’s 2021 Omnibus Award Plan and 2012 Stock Incentive +Plan as of September 30, 2021: +Option Awards +Stock Awards +Name +Number of +Securities +Underlying +Unexercised +Options (#) +Exercisable +Number of +Securities +Underlying +Unexercised +Options (#) +Unexercisable +Equity +Incentive Plan +Awards: +Number of +Securities +Underlying +Unexercised +Unearned +Options (#) +Option +Exercise +Price ($) +Option +Expiration +Date +Number of +Shares or +Units of +Stock That +Have Not +Vested (#) +Market +Value of +Shares or +Units of +Stock That +Have Not +Vested ($) +Equity +Incentive +Plan +Awards: +Number of +Unearned +Shares, +Units or +Other +Rights That +Have Not +Vested (#) +Equity +Incentive +Plan +Awards: +Market or +Payout +Value of +Unearned +Shares, +Units or +Other +Rights That +Have +Not +Vested ($) +(a) +(b) +(c) +(d) +(e) +(f) +(g) +(h) +(i) +(j) +Jack Kenny +25,000 +1 +25,000 +1 +- +$ +14.50 +10/09/27 +- +- +- +- +23,564 +2 +132,078 +2 +- +$ +10.10 +11/05/29 +- +- +- +- +- +83,535 +3 +- +$ +18.48 +11/05/30 +- +- +- +- +25,000 +9 +$ +481,000 +- +- +25,000 +9 +$ +481,000 +- +- +99,505 +10 +$ +1,914,476 +- +- +56,006 +13 +$ +1,077,555 +- +- +Bryan T. Baldasare +- +12,107 +3 +- +$ +18.48 +11/05/30 +- +- +- +- +5,000 +9 +$ +96,200 +- +- +7,500 +9 +$ +144,300 +- +- +1,200 +11 +$ +23,088 +- +- +20,534 +12 +$ +395,075 +- +- +10,823 +13 +$ +208,235 +- +- +Lourdes G. Weltzien +10,000 +4 +- +- +$ +19.66 +07/01/26 +- +- +- +- +- +12,500 +5 +- +$ +14.65 +11/08/27 +- +- +- +- +7,500 +6 +2,500 +6 +- +$ +14.30 +04/24/28 +- +- +- +- +- +12,107 +3 +- +$ +18.48 +11/05/30 +- +- +- +- +7,274 +9 +$ +139,952 +- +- +12,123 +9 +$ +233,247 +- +- +19,915 +12 +$ +383,165 +- +- +11,808 +13 +$ +227,186 +- +- +Tony Serafini- +- +10,000 +7 +- +$ +14.60 +04/30/28 +- +- +- +- +Lamanna +- +4,000 +8 +- +$ +6.97 +03/26/30 +- +- +- +- +- +12,107 +3 +- +$ +18.48 +11/05/30 +- +- +- +- +7,500 +9 +$ +144,300 +- +- +1,200 +11 +$ +23,088 +- +- +12,320 +12 +$ +237,037 +- +- +10,823 +13 +$ +208,235 +- +- +1 Options vest in four equal annual installments from the date of grant, until fully vested on October 9, 2021. +2 Options +vest in three equal annual installments from the date of grant, until fully vested on October 1, 2022. +3 Options vest in full on November 15, 2023. +30 +Table of Contents +4 Options fully vested on July 1, 2020. +5 Options vest in full on November 8, 2021. +6 Options vest in four equal annual installments from the date of grant, until fully vested on +April 24, 2022. +7 Options vest in full on April 30, 2022. +8 Options vest in full on March 26, 2023. +9 Units vest on November 15, 2021. +10 Units vest +on October 1, 2022. +11 Units vest on September 16, 2022. +12 Units vest on November 15, 2022. +13 Units vest on November 15, 2023. +OPTION EXERCISES AND STOCK VESTED +The +following table sets forth, for each of the NEOs, information on options exercised and restricted stock units vested during fiscal 2021: +Option Awards +Stock Awards +Name +Number of Shares +Acquired on +Exercise (#) +Value Realized on +Exercise ($) 1 +Number of Shares +Acquired on +Vesting (#) +Value Realized on +Vesting ($) 2 +(a) +(b) +(c) +(d) +(e) +Jack Kenny +92,477 +$ +1,614,455 +- +$ +- +Bryan T. Baldasare +15,000 +$ +117,225 +5,000 +$ +84,600 +Lourdes G. Weltzien +- +$ +- +12,214 +3 +$ +212,871 +Tony Serafini-Lamanna +- +$ +- +- +$ +- +1 Amounts reflect the difference between the exercise price of the option and the market price of Meridian common shares at the time of exercise. +2 Amounts +reflect the market price of Meridian common shares at the time of restricted stock units vesting. +3 Included in these restricted stock units are the following restricted stock units that were withheld by the Company under the net share +settlement method to cover certain taxes due upon Dr. Weltzien becoming retirement eligible: (i) 226 granted November 8, 2017; (ii) 377 granted November 15, 2018; (iii) 619 granted October 31, 2019; and (iv) 367 granted +November 5, 2020. The value realized related to these withheld restricted stock units totaled $31,796 and is included within the total reflected in the table above. +31 +Table of Contents +401(K) PLAN +Our 401(k) Savings Plan (“401(k) Plan”) allows all U.S. employees of the Company as soon as administratively possible following their employment to set aside +a portion of their compensation each year for their retirement needs, up to the limits set by the Internal Revenue Code. Presently, the Company contributes a matching contribution of 100% of the first 4% of the employee’s contribution (i.e., up +to 4% of an employee’s salary), subject to Internal Revenue Code limitations. The Company may also contribute a profit-sharing contribution at its discretion. Employee contributions and employer matching contributions are 100% vested +immediately. Participants are entitled to direct the investment of their accounts among various mutual funds selected by the Meridian Bioscience, Inc., Savings and Investment Plan Committee. Participants who terminate employment are entitled to +receive the vested portion of their accounts. +POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL +As described on page 27 in the “Compensation Discussion and Analysis” section of this proxy statement, Mr. Kenny and Meridian are parties to the Kenny +Employment Agreement which sets forth compensation, non-competition, benefit and severance provisions and provides for a payment equal to twelve months of Mr. Kenny’s then current base salary plus a pro-rata portion of the target bonus through the date of termination in the event Mr. Kenny is terminated by Meridian without cause or Mr. Kenny terminates his employment for good reason. If such +termination occurs during a change in control period (double trigger), Mr. Kenny is entitled to a severance payment equal to two times his then current base salary plus his target bonus for the severance period. +Had one of the events noted above occurred on September 30, 2021 and Meridian been within a change in control period at that time, Mr. Kenny would also have +been entitled to the following under the Kenny Employment Agreement: +Salary +$ +1,380,200 +Annual Performance Bonus +1,242,180 +Total Lump Sum Payment +$ +2,622,380 +Our Board of Directors authorized us to enter into change in control severance agreements with our executive officers (other than our +CEO, who has a change in control provision in his Employment Agreement). In the case of Mr. Baldasare and Dr. Weltzien, each agreement had an initial term ended December 31, 2016, and each year will automatically renew for an +additional one year term, provided however, that if a change in control occurs the term will expire no earlier than 24 calendar months after the calendar month in which such change in control occurs. In the case of Mr. Serafini-Lamanna, his +agreement has an initial term ending December 31, 2021, and each year thereafter will automatically renew for a one-year term, provided however, that if a change in control occurs the term will expire no +earlier than 24 calendar months after the calendar month in which such change in control occurs. A change in control is generally defined in each agreement as any of the following: (i) a person is or becomes a beneficial owner of more than 50% +of our voting securities; (ii) the composition of a majority of our Board changes; (iii) we consummate a merger or similar transaction; or (iv) the sale of all or substantially all of our assets. Each agreement provides, among other +things, that if a change in control occurs during the term of the agreement, and the executive’s employment is terminated either by us or by the executive, other than: (a) by us for cause; (b) by reason of death or disability; or +(c) by the executive without good reason, such executive will receive a severance payment equal to: (A) a multiple of such executive’s annual base salary; (B) a multiple of executive’s target bonus amounts; and +(C) earned but unused vacation time. In addition, each change in control agreement provides that in the event that the severance and other benefits provided for in the agreement or otherwise payable to the executive would be subject to the +excise tax imposed by Section 4999 of the Internal Revenue Code, the benefits under the agreement will be either delivered in full or delivered to a lesser extent which would result in no portion of the benefits being subject to such +excise tax, whichever is more beneficial to the executive. +32 +Table of Contents +Had termination in connection with a change in control occurred on September 30, 2021, the NEOs would have been +entitled to the following lump sum payments under the policy: +Bryan T. +Baldasare +Lourdes G. +Weltzien +Tony +Serafini- +Lamanna +Salary +$ +782,800 +$ +776,696 +$ +741,600 +Annual Performance Bonus +391,400 +388,348 +370,800 +Earned but Unused Vacation +25,602 +19,412 +18,551 +Total Lump Sum Payment +$ +1,199,802 +$ +1,184,456 +$ +1,130,951 +DIRECTOR COMPENSATION +For fiscal 2021, independent directors of Meridian received the following compensation for service on the Board and the Audit Committee (“AC”), Compensation +Committee (“CC”) and Nominating & Corporate Governance Committee (“N&CGC”) (annual amounts presented): +-Base for director service +$ +40,000 +-Additional for Independent Chairperson +$ +50,000 +-AC Chair +$ +20,000 +-AC Member +$ +10,000 +-CC Chair +$ +13,000 +-CC Member +$ +6,000 +-N&CGC Chair +$ +13,000 +-N&CGC Member +$ +5,000 +In addition, each independent director is entitled to receive on an annual basis an equity award grant valued at $100,000. During fiscal +2021, one-third of such equity value was in the form of restricted stock units (valued at the market value of our common stock at the date of award) and two-thirds was +in the form of non-qualified options to purchase common shares of the Company at an exercise price equal to the grant date closing sale price as reported on Nasdaq (valued pursuant to the current methodology +utilized by the Company for financial reporting purposes, which may be found in Note 12(b) on page 67 of the Company’s Annual Report on Form 10-K filed with the SEC on November 23, 2021). +The following table provides information on compensation related to fiscal 2021 for independent directors who served during fiscal 2021: +Name +Fees +Earned +or +Paid in +Cash +($) +Stock +Awards +($) 1 +Option +Awards +($) 1 +Non-Equity +Incentive Plan +Compensation +($) +Change in +Pension Value +and Nonqualified +Deferred +Compensation +Earnings +All Other +Compensation +($) +Total +($) +(a) +(b) +(c) +(d) +(e) +(f) +(g) +(h) +James M. Anderson +$ +63,000 +$ +33,000 +$ +67,000 +- +- +- +$ +163,000 +Anthony P. Bihl +$ +59,033 +$ +33,000 +$ +67,000 +- +- +- +$ +159,033 +Dwight E. Ellingwood +$ +48,500 +$ +33,000 +$ +67,000 +- +- +- +$ +148,500 +John C. McIlwraith +$ +47,250 +$ +33,000 +$ +67,000 +- +- +- +$ +147,250 +David C. Phillips +$ +90,000 +$ +33,000 +$ +67,000 +- +- +- +$ +190,000 +John M. Rice +$ +43,750 +$ +33,000 +$ +67,000 +- +- +- +$ +143,750 +Catherine A. Sazdanoff +$ +53,500 +$ +33,000 +$ +67,000 +- +- +- +$ +153,500 +Felicia Williams +$ +60,000 +$ +33,000 +$ +67,000 +- +- +- +$ +160,000 +33 +Table of Contents +1 The +amounts shown reflect the grant date fair value of the awards made in fiscal year 2021 in accordance with ASC Topic 718. A discussion of the assumptions used in calculating these values may be found in Note 12(b) on page 67 of the Company’s +Annual Report on Form 10-K filed with the SEC on November 23, 2021. +The engagement of the independent +consultant by the Compensation Committee to review executive compensation (discussed on page 24) also covered independent director compensation. The following table summarizes the key changes to independent director compensation effective in January +2022 resulting from the counsel of the independent consultant: +Fiscal 2022 +Base for director service +Increase from $40,000 to $50,000 +Compensation Committee +Increase Chair fee from $13,000 to $15,000 and increase member fee from $6,000 to $7,500 +Equity awards +Increase the annual dollar value of the award from $100,000 to $125,000 in January 2022, with a further +increase to $150,000 in January 2023; the allocation of the awards between restricted stock units and non-qualified stock options to be 50/50 +SHAREHOLDER PROPOSALS FOR NEXT YEAR +The deadline for shareholder proposals to be included in the proxy statement for next year’s meeting is August 17, 2022. +The form of proxy for this meeting grants authority to the designated proxies to vote in their discretion on any matters that come before the meeting except those set +forth in Meridian’s proxy statement and except for matters as to which adequate notice is received. In order for a notice to be deemed adequate for the 2023 Annual Shareholders’ Meeting, it must be received prior to November 1, 2022. +If there is a change in the anticipated date of next year’s Annual Shareholders’ Meeting or these deadlines by more than 30 days, we will notify you of this change through our Form 8-K and/or Form 10-Q filings. +Meridian’s Code of Regulations provides that only persons nominated by an officer, director or in writing by a +shareholder not earlier than 150 days nor later than 90 days prior to the meeting at which directors are to be selected shall be eligible for election and that shareholder proposals be presented not earlier than 150 days nor later than 90 days prior +to the meeting at which the proposals are to be presented. +QUESTIONS +If you have questions or need more information about the annual meeting, call us at (513) 271-3700 or write to: +Charles Wood, Jr. +Vice President, Investor +Relations +Meridian Bioscience, Inc. +3471 River +Hills Drive +Cincinnati, Ohio 45244 +For information about your +record holdings, call Computershare Shareholder Services at (888) 294-8217. +34 +Table of Contents +MERIDIAN BIOSCIENCE, INC. +3471 RIVER HILLS DRIVE +CINCINNATI, OH +45244 +VOTE BY INTERNET +Before +The Meeting - Go to www.proxyvote.com or scan the QR Barcode above +Use the Internet to transmit your voting instructions and for +electronic delivery of information up until 11:59 p.m. Eastern Time on January 25, 2022, the day before the meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create +an electronic voting instruction form. +During The Meeting - Go to www.virtualshareholdermeeting.com/VIVO2022 +You may attend the meeting via the Internet and vote during the meeting. Have the information that is printed in the box marked by the arrow available and +follow the instructions. +VOTE BY PHONE - +1-800-690-6903 +Use any +touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time on January 25, 2022, the day before the meeting date. Have your proxy card in hand when you call and then follow the instructions. +VOTE BY MAIL +Mark, sign and date your proxy +card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. +TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS +FOLLOWS: +D63148-P64021 +KEEP THIS PORTION FOR YOUR RECORDS +— — — — — — — — — — — — — — +— — — — — — — — — — — — — — — — — — — — +— — — — — — — — — — — — — — — — — — — — +— — — — — — — — — —— — — — — +THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND +DATED. +DETACH AND RETURN THIS PORTION ONLY +MERIDIAN BIOSCIENCE, INC. +For +All +Withhold +All +For All +Except +To withhold authority to vote for any individual +nominee(s), mark “For All Except” and write the +number(s) of the nominee(s) on the line below. +The Board of Directors recommends you vote FOR the +following: +☐ +☐ +☐ +1. +Election of Directors +Nominees: +01) JAMES M. ANDERSON 05) JOHN C. MCILWRAITH +02) ANTHONY P. BIHL III 06) JOHN M. RICE, JR. +03) DWIGHT E. ELLINGWOOD 07) CATHERINE A. SAZDANOFF +04) JACK KENNY 08) FELICIA WILLIAMS +The Board of Directors recommends you vote FOR proposals 2 and 3. +For +Against +Abstain +2. +Ratification of the appointment of Ernst & Young LLP as Meridian’s independent registered public accounting firm for fiscal year 2022. +☐ +☐ +☐ +3. +Approval on an advisory basis of the compensation of named executive officers, as disclosed in the Proxy Statement (“Say-on-Pay” +Proposal). +☐ +☐ +☐ +NOTE: Such other business as may properly come before the meeting or any continuation, postponement or adjournment thereof. Only shareholders of record at the close of business on December 2, 2021 are +entitled to notice of and to vote at the meeting. +Please sign exactly as your name(s) appear(s) +hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or +partnership name by authorized officer. +Signature [PLEASE SIGN WITHIN BOX] +Date +Signature (Joint Owners) +Date +Table of Contents +Important Notice Regarding +the Availability of Proxy Materials for the Annual Meeting: +The Notice and Proxy Statement and Annual Report on Form 10-K are available at www.proxyvote.com. +— — — — — — — — — — — — — — +— — — — — — — — — — — — — — — — — — — — +— — — — — — — — — — — — — — — — — — — — +— — — — — — — — — —— — — — +D63149-P64021 +MERIDIAN BIOSCIENCE, INC. +Annual Meeting of Shareholders +January 26, 2022 2:00 PM +This proxy is +solicited by the Board of Directors +The undersigned hereby appoints JACK KENNY and JEFFERY T. PINKSTON, and +either of them, attorneys and proxies of the undersigned, each with the power of substitution and re-substitution, to represent and vote all shares of Common Stock of Meridian Bioscience, Inc. which the +undersigned may be entitled to vote on the matters specified on the reverse side (and in their discretion to cumulate votes in the election of directors if cumulative voting is invoked by a shareholder through proper notice to the Company) and, in +their discretion, with respect to such other matters as may properly come before the Annual Meeting of Shareholders of Meridian Bioscience, Inc. to be held virtually on January 26, 2022, at 2:00 p.m. Eastern Standard Time, and any continuation, +postponement or adjournment of such Annual Meeting. +This proxy, when properly executed, will be voted as +directed by the shareholder(s). If no such directions are made, this proxy will be voted FOR the election to the Board of Directors of all of the nominees under Proposal 1 and FOR each remaining proposal as recommended by the Board of +Directors. +Please mark, sign, date, and return this proxy card promptly using the enclosed reply envelope. +Continued and to be signed on reverse side \ No newline at end of file diff --git a/raw/proxies/0000794172/0001193125-21-357515/proxy_rpt.txt b/raw/proxies/0000794172/0001193125-21-357515/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..9eb4ae311ca54cb3db588cb7a2fb4d0585463034 --- /dev/null +++ b/raw/proxies/0000794172/0001193125-21-357515/proxy_rpt.txt @@ -0,0 +1,9 @@ +TRANSACTIONS WITH RELATED PERSONS +Nasdaq rules require the Company to conduct an appropriate review of related party transactions required to be disclosed by the Company pursuant to SEC Regulation S-K Item 404 for potential conflict of interest situations on an ongoing basis and that all such transactions must be approved by the Audit Committee or another Committee comprised of independent directors. As a +result, the Audit Committee annually reviews all such related party transactions and approves each related party transaction if it determines that it is in the best interests of the Company. Additionally, the Audit Committee’s Charter provides +it the authority to review, approve and monitor transactions involving the Company and “related persons” (directors and executive officers or their immediate family members, or shareholders owning five percent or greater of the +Company’s outstanding stock). This also covers any related person transaction that meets the minimum threshold for disclosure in the proxy statement under the relevant SEC rules (generally, transactions involving amounts exceeding $120,000 in +which a related person has a direct or indirect material interest). In considering the transaction, the Audit Committee may consider all relevant factors, including, as applicable: (i) the Company’s business rationale for entering into the +transaction; (ii) the alternatives to entering into a related person transaction; (iii) whether the transaction is on terms comparable to those available to third parties, or in the case of employment relationships, to employees generally; +(iv) the potential for the transaction to lead to an actual or apparent conflict of interest and any safeguards imposed to prevent such actual or apparent conflicts; and (v) the overall fairness of the transaction to the Company. This +policy is included in the Company’s Employee Handbook. The approvals of such related person transactions are evidenced by internal Company resolutions, minutes or memoranda. \ No newline at end of file diff --git a/raw/proxies/0000889900/0000889900-26-000020/proxy.txt b/raw/proxies/0000889900/0000889900-26-000020/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..0bd85bab5c1cd389b6906d7ab7a510b60ea78e71 --- /dev/null +++ b/raw/proxies/0000889900/0000889900-26-000020/proxy.txt @@ -0,0 +1,1520 @@ +pten-20260413 +DEF 14A FALSE 0000889900 iso4217:USD 0000889900 2025-01-01 2025-12-31 0000889900 2024-01-01 2024-12-31 0000889900 2023-01-01 2023-12-31 0000889900 2022-01-01 2022-12-31 0000889900 2021-01-01 2021-12-31 0000889900 ecd:EqtyAwrdsInSummryCompstnTblForAplblYrMember ecd:PeoMember 2025-01-01 2025-12-31 0000889900 ecd:YrEndFrValOfEqtyAwrdsGrntdInCvrdYrOutsdngAndUnvstdMember ecd:PeoMember 2025-01-01 2025-12-31 0000889900 ecd:ChngInFrValOfOutsdngAndUnvstdEqtyAwrdsGrntdInPrrYrsMember ecd:PeoMember 2025-01-01 2025-12-31 0000889900 ecd:VstngDtFrValOfEqtyAwrdsGrntdAndVstdInCvrdYrMember ecd:PeoMember 2025-01-01 2025-12-31 0000889900 ecd:EqtyAwrdsInSummryCompstnTblForAplblYrMember ecd:NonPeoNeoMember 2025-01-01 2025-12-31 0000889900 ecd:YrEndFrValOfEqtyAwrdsGrntdInCvrdYrOutsdngAndUnvstdMember ecd:NonPeoNeoMember 2025-01-01 2025-12-31 0000889900 ecd:ChngInFrValOfOutsdngAndUnvstdEqtyAwrdsGrntdInPrrYrsMember ecd:NonPeoNeoMember 2025-01-01 2025-12-31 0000889900 ecd:VstngDtFrValOfEqtyAwrdsGrntdAndVstdInCvrdYrMember ecd:NonPeoNeoMember 2025-01-01 2025-12-31 0000889900 1 2025-01-01 2025-12-31 0000889900 2 2025-01-01 2025-12-31 0000889900 3 2025-01-01 2025-12-31 0000889900 4 2025-01-01 2025-12-31 0000889900 5 2025-01-01 2025-12-31 +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +Washington, D.C. 20549 +___________________ +SCHEDULE 14A INFORMATION +Proxy Statement Pursuant to Section 14(a) of the +Securities Exchange Act of 1934 +(Amendment No. ) +___________________ +Filed by the Registrant x +Filed by a Party other than the Registrant o +Check the appropriate box: +o +Preliminary Proxy Statement +o +Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +x +Definitive Proxy Statement +o +Definitive Additional Materials +o +Soliciting Material under § 240.14a-12 +PATTERSON-UTI ENERGY, INC. +(Name of registrant as specified in its charter) +(Name of person(s) filing proxy statement, if other than the registrant) +Payment of Filing Fee (Check all boxes that apply): +x +No fee required +o +Fee paid previously with preliminary materials +o +Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11 +10713 West Sam Houston Parkway North, Suite 800 +Houston, Texas 77064 +(281) 765-7100 +April 13, 2026 +Dear Stockholder: +We cordially invite you to attend Patterson-UTI Energy, Inc.’s annual stockholders’ meeting. The Annual Meeting will be held Thursday, June 4, 2026, at 10:00 a.m., Central Time, at our corporate headquarters, located at 10713 W. Sam Houston Parkway North, Suite 125, Houston, Texas 77064. +We are pleased to take advantage of Securities and Exchange Commission rules that allow us to furnish proxy materials to our stockholders on the Internet. We believe that posting these materials on the Internet enables us to provide stockholders with the information that they need quickly, while lowering our costs of printing and delivery and supporting our sustainability efforts. We are mailing to most of our stockholders a Notice of Internet Availability of Proxy Materials, rather than a paper copy of our proxy materials. The notice contains instructions on how to access the proxy materials, vote and obtain, if you so desire, a paper copy of the proxy materials. +Your vote is important to us. Whether or not you plan to attend the Annual Meeting in person, we urge you to promptly vote your shares by using the Internet or telephone, or if the accompanying proxy statement was mailed to you, by completing, signing, dating and returning your proxy card as soon as possible in the enclosed postage prepaid envelope. +Thank you for your support. +Sincerely, +C URTIS W. H UFF +Chairman of the Board +W ILLIAM A NDREW H ENDRICKS , J R . +President, Chief Executive Officer and Director +PATTERSON-UTI ENERGY, INC. +10713 West Sam Houston Parkway North, Suite 800 +Houston, Texas 77064 +___________________ +NOTICE OF 2026 ANNUAL MEETING OF STOCKHOLDERS +To Be Held June 4, 2026 +___________________ +The 2026 annual meeting of the stockholders of Patterson-UTI Energy, Inc., a Delaware corporation (“Patterson-UTI”), will be held Thursday, June 4, 2026, at 10:00 a.m., Central Time, at our corporate headquarters, located at 10713 W. Sam Houston Parkway North, Suite 125, Houston, Texas 77064 (the “Meeting”), for the following purposes: +• to elect ten directors named in this proxy statement to the Board of Directors of Patterson-UTI to serve until the next annual meeting of the stockholders or until their respective successors are elected and qualified; +• to ratify the selection of PricewaterhouseCoopers LLP as the independent registered public accounting firm of Patterson-UTI for the fiscal year ending December 31, 2026; +• to approve an amendment to Patterson-UTI’s 2021 Long-Term Incentive Plan; +• to approve, on an advisory basis, Patterson-UTI’s compensation of its named executive officers; and +• to transact such other business as may properly come before the Meeting or any adjournment or postponement thereof. +Stockholders of record at the close of business on April 10, 2026 are entitled to notice of and to vote at the Meeting and any adjournment or postponement thereof. +Your vote is important to us. Whether or not you plan to attend the Meeting in person, we urge you to promptly vote your shares by using the Internet or telephone, or if the accompanying proxy statement was mailed to you, by completing, signing, dating and returning your proxy card as soon as possible in the enclosed postage prepaid envelope. +By order of the Board of Directors +S ETH D. W EXLER +Executive Vice President, General Counsel and Secretary +April 13, 2026 +Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting +to Be Held on June 4, 2026 +The proxy statement and annual report to stockholders are available at www.proxyvote.com . +PATTERSON-UTI ENERGY, INC. +10713 West Sam Houston Parkway North, Suite 800 +Houston, Texas 77064 +______________________ +PROXY STATEMENT +______________________ +ANNUAL MEETING OF STOCKHOLDERS +To Be Held June 4, 2026 +General Information About the Annual Meeting and Voting +The Board of Directors (the “Board” or “Board of Directors”) of Patterson-UTI Energy, Inc., a Delaware corporation (“Patterson-UTI” or the “Company”), is expected to make this proxy statement and its 2025 annual report available to you on the Internet or, upon your request to deliver printed versions of these materials to you by mail beginning on or about April 13, 2026. Patterson-UTI is furnishing this proxy statement in connection with the solicitation by the Board of Directors of proxies to be voted at the 2026 annual meeting of stockholders of Patterson-UTI (the “Meeting”). The Meeting will be held Thursday, June 4, 2026, at 10:00 a.m., Central Time, at our corporate headquarters, located at 10713 W. Sam Houston Parkway North, Suite 125, Houston, Texas 77064, or at any adjournment or postponement thereof. +The Notice of Internet Availability of Proxy Materials (the “Notice”) is expected to be mailed to each of Patterson-UTI’s stockholders (other than those who previously requested electronic delivery) entitled to vote at the Meeting on or about April 13, 2026. +Pursuant to the “notice and access” rules adopted by the Securities and Exchange Commission (the “SEC”), Patterson-UTI has elected to provide stockholders access to its proxy materials on the Internet. Accordingly, Patterson-UTI sent a Notice to all of its stockholders as of the record date. The Notice includes instructions on how to access Patterson-UTI’s proxy materials on the Internet and how to request a printed copy of these materials. In addition, by following the instructions in the Notice, stockholders may request to receive proxy materials in printed form by mail or electronically by email on an ongoing basis. +Choosing to receive your future proxy materials by email will save us the cost of printing and mailing documents to you and will support our sustainability efforts. If you choose to receive future proxy materials by email, you will receive an email next year with instructions containing a link to those materials and a link to the proxy voting site. Your election to receive proxy materials by email will remain in effect until you terminate such election. +If your shares are registered directly in your name with our transfer agent, Continental Stock Transfer & Trust Company, you are considered the “stockholder of record” with respect to those shares, and the Notice was sent directly to you. +If your shares are held in an account at a brokerage firm, bank, broker-dealer, or other similar organization, then you are the beneficial owner of shares held in “street name,” and the Notice was forwarded to you by that organization. As a beneficial owner, you have the right to direct that organization on how to vote the shares held in your account. +Whether you are a “stockholder of record” or hold your shares in “street name,” you may direct your vote without attending the Meeting in person. +If you are a stockholder of record, you may vote by using the Internet or telephone by following the instructions in the Notice. If you request printed copies of the proxy materials by mail, you may also vote by completing, dating, signing and returning your proxy card by mail. You should sign your name exactly as it appears on the proxy card. If you are signing in a representative capacity (for example, as guardian, executor, trustee, custodian, attorney or officer of a corporation), you should indicate your name and title or capacity. +If you are the beneficial owner of shares held in street name, you may be eligible to vote your shares electronically using the Internet or telephone by following the instructions in the Notice. If you request printed copies of the proxy materials by mail, you may also vote by signing the voter instruction card provided by your brokerage firm, bank, broker-dealer, or other similar organization and returning it by mail. If you provide specific voting instructions by mail, telephone or the Internet, your shares will be voted by your brokerage firm, bank, broker-dealer, or similar organization as you have directed. +1 +Properly submitted proxies received either by mail, Internet, telephone or in person in time to be counted for the Meeting will be voted as you have directed in your proxy, unless you revoke your proxy in the manner provided below. As to any matter for which you give no direction in your proxy, your shares will be voted as follows: +• “FOR ALL” the election of the nominees to the Board of Directors named in this proxy statement; +• “FOR” the ratification of PricewaterhouseCoopers LLP as the independent registered public accounting firm of Patterson-UTI for the fiscal year ending December 31, 2026; +• “FOR” the approval of the amendment to Patterson-UTI’s 2021 Long-Term Incentive Plan; +• “FOR” the approval, on an advisory basis, of Patterson-UTI’s compensation of its named executive officers; and +• “FOR” or “AGAINST” any other proposals that may be properly submitted at the Meeting at the discretion of the persons named in the proxy. +If you are a stockholder of record, you may revoke your proxy before the proxy is voted by either: +• submitting a new proxy with a later date, including a proxy submitted using the Internet or telephone, in time to be counted for the Meeting; +• notifying the Secretary of Patterson-UTI in writing before the Meeting that you have revoked your proxy; or +• attending the Meeting and voting in person. +If your shares are held in street name, you must obtain a proxy executed in your favor from the stockholder of record (that is, your brokerage firm, bank, broker-dealer or similar organization) to be able to vote at the Meeting (see below). +The Board of Directors is making this solicitation. We have retained Georgeson LLC, 480 Washington Blvd., 26 th Floor, Jersey City, New Jersey 07310, for a fee of approximately $10,000 and the reimbursement of out of pocket costs and expenses, to assist in the solicitation of proxies on behalf of the Board. Patterson-UTI’s officers and other employees, without compensation other than regular compensation, may also solicit proxies on behalf of the Board by mail, email, the Internet, telephone, electronic means and personal interview. Patterson-UTI will pay all costs associated with this solicitation. +2 +Shares Outstanding and Voting Rights +Only stockholders of record of Patterson-UTI’s common stock, $0.01 par value per share (the “Common Stock”), at the close of business on April 10, 2026 are entitled to notice of and to vote at the Meeting or any adjournment or postponement thereof. At the close of business on April 10, 2026, there were 379,615,632 shares of Common Stock issued and outstanding. Holders of record of Common Stock on April 10, 2026 will be entitled to one vote per share on all matters to properly come before the Meeting. A list of stockholders entitled to notice of and to vote at the Meeting will be made available during regular business hours at the offices of Patterson-UTI Energy, Inc., 10713 West Sam Houston Parkway North, Suite 800, Houston, Texas 77064 for the ten day period ending on the day before the Meeting for examination by any stockholder for any purpose germane to the Meeting. +A quorum is necessary to transact business at the Meeting. A majority of the shares of Common Stock outstanding on April 10, 2026 will constitute a quorum. The shares held by each stockholder who attends the Meeting in person, signs and timely returns the form of proxy, or properly votes using the Internet or telephone will be counted for purposes of determining the presence of a quorum at the Meeting. +If your shares are held in an account at a brokerage firm, bank, broker-dealer, or other similar organization, then you are the beneficial owner of shares held in “street name.” As a beneficial owner, you have the right to direct that organization on how to vote the shares held in your account in the manner provided in the voting instructions you received from that organization. Street name stockholders are also invited to attend the Meeting. However, because a street name stockholder is not the stockholder of record, you may not vote your shares at the Meeting unless you follow the procedures of your brokerage firm, bank, broker-dealer, or other similar organization for obtaining a legal proxy. +“Broker non-votes” and abstentions will be considered present at the Meeting for the purpose of determining a quorum. Broker non-votes occur when nominees, such as brokerage firms, banks, broker-dealers, or other similar organizations holding shares on behalf of the beneficial owners, are prohibited from exercising discretionary voting authority for beneficial owners who have not provided voting instructions. If you do not give instructions to your bank, brokerage firm or other agent, the bank, brokerage firm or other agent does not have authority to vote on the applicable proposal except on “routine matters.” For these reasons, please promptly vote in accordance with the instructions provided by your brokerage firm, bank, broker-dealer, or other similar organization. +3 +PROPOSAL NO. 1 +ELECTION OF DIRECTORS +Directors are elected to serve until the next annual meeting of stockholders and until their successors are elected and qualified. Under Delaware law and Patterson-UTI’s bylaws, the affirmative vote of a plurality of shares present in person or represented by proxy at the meeting at which a quorum is present is required for the election of directors. +The enclosed form of proxy provides a means for you to either: +• vote “For All” with respect to the election of the nominees to the Board of Directors listed below, +• withhold authority to vote for one or more of the nominees (i.e., "For All Except"), or +• withhold authority to vote for all of the nominees (i.e., "Withhold All"). +The Board of Directors recommends that you vote “FOR ALL” of the nominees. Unless you give contrary instructions in your proxy, your properly submitted proxy will be voted “For All” with respect to the election of all of the nominees to the Board of Directors. If any nominee should become unable or unwilling to accept the nomination or election, the person acting under the proxy will vote for the election of such other person as the Board of Directors may recommend. The Board has no reason, however, to believe that any of the nominees will be unable or unwilling to serve if elected. +Because directors are elected by a plurality vote, shares as to which a stockholder withholds authority to vote and broker non-votes will not affect the outcome of the election. +Our corporate governance guidelines require that if a director receives in an uncontested election a greater number of “withhold” votes than votes cast “for” his or her election, the Nominating and Corporate Governance Committee of the Board of Directors will undertake a prompt evaluation of the appropriateness of the director’s continued service on the Board of Directors. In performing this evaluation, the Nominating and Corporate Governance Committee will review all factors it deems relevant, including the stated reasons why votes were withheld, the director’s length of service, his or her past contributions to Patterson-UTI and the availability of other qualified candidates. The Nominating and Corporate Governance Committee will then make its recommendation to the Board. The Board of Directors will review the Nominating and Corporate Governance Committee’s recommendation and consider such further factors and information as it deems relevant. The Board of Directors will act on the Nominating and Corporate Governance Committee’s recommendation no later than 90 days following the date of the stockholders’ meeting. If the Board of Directors determines remedial action is appropriate, the director shall promptly take whatever action is requested by the Board. If the director does not promptly take the recommended remedial action or if the Board of Directors determines that immediate resignation is in the best interests of Patterson-UTI and its stockholders, the Board of Directors may accept the director’s resignation that will have been tendered as follows. Each director will, as a condition to his or her appointment or election as a director or nomination as a director, agree in writing to comply with the terms of Patterson-UTI’s majority voting policy and provide to the Board of Directors an irrevocable resignation that will be effective upon (i) the failure to receive the required vote at the next annual meeting at which such director faces re-election and (ii) the Board of Directors’ acceptance of such resignation. +Set forth below is the name, age (as of the date of the Meeting), position and a brief description of the business experience during at least the past five years of each of the nominees to Patterson-UTI’s Board of Directors, as well as specific qualifications, attributes and skills of such member that were identified by the Nominating and Corporate Governance Committee when such member was nominated to serve on the Board of Directors. +4 +Each current member of Patterson-UTI’s Board of Directors is a nominee for election to the Board of Directors and was last elected at the 2025 annual meeting of stockholders. There are no arrangements or understandings between any person and any of the directors pursuant to which such director was selected as a nominee for election at the Meeting. There are no family relationships among any of the directors or executive officers of Patterson-UTI. +Name Age Position Director Since +Curtis W. Huff 68 Chairman of the Board and Director 2001 +Robert W. Drummond 65 Vice Chairman of the Board 2023 +William A. Hendricks, Jr. 61 President and Chief Executive Officer and Director 2017 +Tiffany (TJ) Thom Cepak 54 Director 2014 +Gary M. Halverson 67 Director 2023 +Cesar Jaime 67 Director 2022 +Janeen S. Judah 66 Director 2018 +Amy H. Nelson 57 Director 2023 +Julie J. Robertson 70 Director 2022 +James C. Stewart 63 Director 2023 +The following charts show a snapshot of the average tenure and age (each as of the date of the Meeting) and gender of the ten nominees for election to our Board of Directors. +The table below summarizes some of the skills and experience that the Board believes each director possesses and are relevant to such director’s Board and committee service. This summary is not intended to be an exhaustive list of each of our directors’ skills or contributions, and the lack of a checkmark for a particular item does not necessarily mean that the director does not possess that skill or experience. +5 +Cepak Drummond Halverson Hendricks Huff Jaime Judah Nelson Robertson Stewart +SKILLS AND EXPERIENCE +Accounting and Finance +Understanding of finance and public company financial reporting +ü ü ü ü ü ü ü ü ü +Corporate Finance/Capital Markets +Corporate finance, capital markets and/or merger and acquisition experience +ü ü ü ü ü ü ü ü +Corporate Governance +Corporate governance principles and process +ü ü ü ü ü ü ü ü ü +Environmental and Safety +Safety and environmental regulations +ü ü ü ü ü ü ü ü ü +Global +Management and/or work experience with businesses operating outside of the United States +ü ü ü ü ü ü ü ü +Human Resource Management +Human resource management and/or work experience +ü ü ü +Independent +Satisfies the independence requirements of Nasdaq and the Securities and Exchange Commission +ü ü ü ü ü ü ü ü ü +Industry and Operations +Operational and management experience in the oil and gas industry +ü ü ü ü ü ü ü ü ü ü +Leadership +Business and strategic management experience from service in a leadership position, such as a CEO, COO, CFO or other senior leadership position of a significant operating unit +ü ü ü ü ü ü ü ü ü +Legal Background +Practiced law and/or has law degree +ü ü +Prior Board Experience +Service on public company boards +ü ü ü ü ü ü ü +Risk Oversight +Understanding significant risks facing companies +ü ü ü ü ü ü ü ü ü ü +Technology +Developing and investing in new technologies +ü ü ü ü ü ü ü ü +When considering whether directors and nominees have the experience, qualifications, attributes and skills, taken as a whole, to enable the Board of Directors to satisfy its oversight responsibilities effectively in light of Patterson-UTI’s business and structure, the Nominating and Corporate Governance Committee and the Board of Directors focused primarily on the information discussed in each of the directors’ individual biographies set forth below. +6 +Curtis W. Huff — Mr. Huff has served as Chairman of the Board of Patterson-UTI since June 2020, as a director of Patterson-UTI since May 2001 and served as a director of UTI Energy Corp. (“UTI”) from 1997 to May 2001. Mr. Huff is owner and Chairman of Freebird Partners, a private investment firm created in 2002 that is focused on new technologies, energy, digital and sustainability. Mr. Huff serves as a director at various of Freebird’s private portfolio companies, including Corva AI, an oilfield services software solutions company, FSubsea AS, a subsea pump provider, and Flocean AS, a subsea desalination technology company where he is Chairman. Previously, Mr. Huff served as the President and Chief Executive Officer of Grant Prideco, Inc., the world’s largest provider of drill pipe and other drill stem products, Executive Vice President, Chief Financial Officer and General Counsel of Weatherford International, Inc., one of the world’s largest international oilfield services companies, and co-founded Intervale Capital, an oilfield service private equity company. Mr. Huff began his professional career in 1983 with the law firm of Norton Rose Fulbright US LLP where he was a partner and specialized in corporate, securities and merger and acquisition matters. Mr. Huff holds a Bachelor of Arts degree and J.D. from the University of New Mexico, where he graduated as a member of the Order of the Coif and cum laude, and a Masters of Law from New York University School of Law. Mr. Huff serves on the Boards of the University of New Mexico Foundation, the Alley Theatre and the Hobby School of Public Affairs at the University of Houston and is actively involved with various charities, including the University of St. Thomas, Houston and the Houston Food Bank. +The Board of Directors considered Mr. Huff’s background as an executive of publicly traded oilfield services companies and as an owner and manager of a private investment firm focused on the oilfield service industry. The Board noted his knowledge and experience in a broad range of oilfield products and services and his current and historical experience in managing operations in both the United States and internationally. The Board also considered Mr. Huff’s expertise and background with regard to accounting and legal matters, which, among other things, provides guidance to Patterson-UTI in assessing its corporate governance structure, policies and procedures. +Robert W. Drummond — Mr. Drummond has served as Vice Chairman of the Board and a director of Patterson-UTI since September 2023. Mr. Drummond served as a member of the board of directors of NexTier Oilfield Solutions Inc. (“NexTier”), an oilfield service company that merged with the Company in September 2023, from August 2018 to September 2023. He joined NexTier in August 2018 as Chief Executive Officer and was elected as President in October 2019, which position he held until September 2023. Prior to joining NexTier, Mr. Drummond served as the President & Chief Executive Officer of Key Energy Services, Inc. and served for more than 30 years at Schlumberger Limited in various executive positions. Mr. Drummond has served as a director of Expro Group Holdings N.V. (“Expro”) since May 2017, and as Chairman of the Board of Expro since May 2024. He has previously served on the board of directors of the National Ocean Industries Association, the Houston Offshore Energy Center, the Greater Houston Partnership, the API Upstream Committee, and as an Advisory Board Member of the University of Houston Global Energy Management Institute. Mr. Drummond attained his B.S. in Mineral/Petroleum Engineering from the University of Alabama. +The Board of Directors considered Mr. Drummond’s more than 30 years of leadership experience in the oil and gas industry, including his service as Chief Executive Officer and President of multiple oilfield service companies. The Board also considered Mr. Drummond’s experience in leading NexTier preceding its merger with Patterson-UTI, and the benefits to the Board from having Mr. Drummond’s institutional knowledge as a resource for the Board following the merger. In addition, the Board noted his extensive experience serving or previously serving on public company boards and on the board of directors of a variety of industry organizations. +7 +William Andrew Hendricks, Jr. —Mr. Hendricks has served as President and Chief Executive Officer of Patterson-UTI since October 2012 and as a director of Patterson-UTI since June 2017. From April 2012 through September 2012, he served as Chief Operating Officer of Patterson-UTI. Prior to Patterson-UTI, Mr. Hendricks worked in a number of positions at Schlumberger for 24 years, where he last served as a drilling division President, having lived and worked around the world in the energy industry, offshore and onshore, and conducting business at times in Spanish and French. As CEO at Patterson-UTI, he has focused on transformation through investments in people and technology, growth through strategic acquisitions, improving recruiting and leadership development and also enhancing the company’s sustainability position. Mr. Hendricks attended Texas A&M University, receiving a Bachelor of Science degree in Petroleum Engineering, and then began his career working on an offshore drilling rig in the Gulf of Mexico for Ocean Drilling & Exploration Company (currently Diamond Offshore). Mr. Hendricks is a past Chairman of the International Association of Drilling Contractors, IADC Contractor of the Year in 2021, a member of the Society of Petroleum Engineers, an energy contributor on CNBC and has testified on energy matters with the U.S. Senate Committee on Energy and Natural Resources in Washington D.C. +The Board of Directors considered Mr. Hendricks’ more than 30 years of combined operational and managerial experience in the oil and gas industry. In addition, the Board noted his nearly 14 years of service as Patterson-UTI’s President and Chief Executive Officer and nearly 10 years of service in numerous executive positions with Schlumberger Limited, a global provider of oilfield services, including nearly two years as President of Schlumberger Drilling & Measurements. The Board further considered Mr. Hendricks’ significant experience with evaluating the drivers for macro trends in the oil and gas industry, as well as managing the cyclical nature of the oil and gas service business, which allows Mr. Hendricks to provide valuable input into the development and implementation of Patterson-UTI’s corporate strategy. In addition, the Board noted that Mr. Hendricks’ operational experience brings valuable knowledge to the oversight of achieving safe and efficient operations. The Board also considered Mr. Hendricks’ significant experience working in numerous worldwide locations, which allows him to provide valuable counsel regarding possible expansion into new international markets. +8 +Tiffany (TJ) Thom Cepak — Ms. Cepak has served as a director of Patterson-UTI since August 2014. Ms. Cepak has served as a director of Baytex Energy Corp., an upstream oil and gas company, since June 2023, as a director of California Resources Corporation, an upstream oil and gas company, since October 2020 (and as chair since April 2021). Ms. Cepak served as a director of EnLink Midstream, LLC, a midstream company, from December 2021 until its acquisition by ONEOK, Inc. in January 2025 and as a director of Ranger Oil Corporation, an upstream oil and gas company, from September 2019 until its acquisition by Baytex in 2023. Ms. Cepak served as the Chief Financial Officer of Energy XXI Gulf Coast, Inc., an upstream oil and gas company, from August 2017 to October 2018. Ms. Cepak served as the Chief Financial Officer of KLR Energy (and, subsequent to its business combination, Rosehill Resources Inc., an upstream oil and gas company) from January 2015 to June 2017. Ms. Cepak served as a director of Yates Petroleum Corporation, a privately owned, independent oil and gas exploration and production company, from October 2015 to October 2016. Ms. Cepak served four years as the Chief Financial Officer of EPL Oil & Gas, Inc., and was further appointed Executive Vice President in January 2014, and she served in those roles until June 2014, when EPL was sold. Ms. Cepak began her career with EPL as a Senior Asset Management Engineer, a position she held until she was appointed Director of Corporate Reserves in September 2001. Ms. Cepak was named EPL’s Director of Investor Relations in April 2006 and Vice President, Treasurer and Investor Relations in July 2008. In July 2009, Ms. Cepak was designated as EPL’s Principal Financial Officer and, in September 2009, she was appointed Senior Vice President. Ms. Cepak has more than 25 years of energy industry experience and prior to joining EPL, she was a Senior Reservoir Engineer with Exxon Production Company and ExxonMobil Company with operational roles including reservoir engineering and subsurface completion engineering for numerous offshore Gulf of Mexico properties. Ms. Cepak holds a B.S. in Engineering from the University of Illinois and a Masters of Business Administration in Management with a concentration in Finance from Tulane University. +The Board of Directors considered Ms. Cepak’s more than 25 years of operational and financial experience in the energy industry. The Board noted her service in various operational roles, including as a reservoir engineer for a major oil and gas exploration and production company. The Board also noted Ms. Cepak’s executive management experience, including as chief financial officer of a publicly traded independent oil and gas exploration and production company, which allows her to provide Patterson-UTI with valuable insight on financial and strategic matters. The Board also considered Ms. Cepak’s diversity of perspective, which is exemplified by her recognition in 2018 as one of Oil and Gas Investor’s 25 Influential Women in Energy. +Gary M. Halverson — Mr. Halverson has served as a director of Patterson-UTI since September 2023. Mr. Halverson served as a member of NexTier’s board of directors from September 2016 to September 2023. In 2016, Mr. Halverson became a Senior Advisor at First Reserve, a private equity firm that focuses on energy investments, and a Partner at 360 Development Partners, a commercial real estate firm. Mr. Halverson was formerly Group President of Drilling and Production Systems and Senior Vice President at Cameron International Corporation from 2014 to 2016 prior to its sale to Schlumberger in 2016. He has over 38 years of industry experience with Cameron, where he worked in various leadership roles across the U.S., Latin America and Asia. Mr. Halverson currently serves as a director on the board of the General Committee of Special Programs of the American Petroleum Institute, as a director on the board of the Well Control Institute, as a director on the board of FlexSteel Pipeline Technologies, Inc. and was the U.S. delegate to the World Petroleum Congress. Mr. Halverson previously served as Chairman of the Board of Directors of the Petroleum Equipment Suppliers Association. +The Board of Directors considered Mr. Halverson’s over 40 years of leadership and operational experience in the energy industry. The Board also noted Mr. Halverson’s extensive financial and investment experience, including as a senior advisor of an energy-focused private equity firm, which brings a valuable financial and strategic perspective to the Board. The Board also noted Mr. Halverson’s continued involvement in a variety of industry organizations, which brings a wide knowledge of industry perspectives to the Board. +9 +Cesar Jaime — Mr. Jaime has served as a director of Patterson-UTI since April 2022. Mr. Jaime previously served on the board of Summum Group Ltd, a provider of well servicing and oil and gas engineering and construction in Colombia, Mexico and Peru, from 2014 to 2022. Mr. Jaime previously served on the board of LAREIF, a renewable energy developer in Colombia, from 2014 to 2019. Mr. Jaime served in various management positions at Schlumberger between 1981 and 2010, including serving as President of Schlumberger’s Latin America business from 2008 to 2010. Mr. Jaime has served on the board of Alliance Schlumberger, a non-profit organization grouping former Schlumberger engineers, since 2019. Mr. Jaime holds a Bachelor of Science degree in electrical engineering from Pontificia Universidad Javeriana in Bogotá, Colombia. +The Board of Directors considered Mr. Jaime’s 30 years of experience in international oilfield services in Latin America, Europe and Africa for Schlumberger, including serving as President of Latin American operations. The Board also noted his international operations background in light of the Company’s drilling operations in Colombia and recent acquisition of Ulterra, which operates in many countries across the world. The Board also considered the breadth of his experience including in key management roles in operations, sales and human resource management. +Janeen S. Judah — Ms. Judah has served as a director of Patterson-UTI since April 2018. Ms. Judah has served as a director for privately held Aethon Energy III, LLC, an upstream oil and gas investment firm, since June 2019, and as a member of the University Lands Advisory Board since August 2020. Ms. Judah served as a director of the general partner of Crestwood Equity Partners LP, a midstream company, from November 2018 to November 2023, when Crestwood was acquired by Energy Transfer. Ms. Judah served as a director of Jagged Peak Energy Inc., an upstream oil and gas company, from April 2019 to January 2020, when Jagged Peak was acquired by Parsley Energy. Ms. Judah served as the President of the Society of Petroleum Engineers from September 2016 to October 2017 while on secondment from Chevron, and as a member of the Board of Directors of the Society of Petroleum Engineers from 2003 to 2006 and from 2012 to 2018. Ms. Judah held numerous leadership positions at Chevron, including general manager for Chevron’s Southern Africa business unit from August 2010 to September 2016, president of Chevron Environmental Management Company from August 2007 to August 2010 and general manager of reservoir and production engineering for Chevron Energy Technology Company from June 2004 to August 2007. Before joining Chevron in 1998, she held various upstream petroleum engineering positions for Texaco and Arco, starting in Midland in 1981. Ms. Judah holds Bachelor of Science and Masters of Science degrees in petroleum engineering from Texas A&M University, a Masters of Business Administration from the University of Texas of the Permian Basin and a Juris Doctorate from the University of Houston Law Center. Ms. Judah is a registered professional Engineer in Texas, currently serves on both the Texas A&M and University of Houston College of Engineering Advisory Councils, and has been a member of the Texas A&M Petroleum Engineering Industry Board since 1996. +The Board of Directors considered Ms. Judah’s more than 35 years of operational, managerial and environmental experience in the oil and gas industry. The Board noted her experience derived from oil and gas industry positions held involving significant operational and management responsibilities, including positions with Chevron and upstream petroleum engineering positions. The Board also noted Ms. Judah’s extensive international experience, including most recently as general manager for Chevron’s Southern Africa business unit, which allows her to provide Patterson-UTI with valuable insight on international and strategic matters. The Board also considered Ms. Judah’s service as the President of the Society of Petroleum Engineers from 2017 to 2018, as well as her diversity of perspective, which is exemplified by her recognition in 2018 as one of Oil and Gas Investor’s 25 Influential Women in Energy. +10 +Amy H. Nelson — Ms. Nelson has served as a director of Patterson-UTI since September 2023. Ms. Nelson served as a member of NexTier’s board of directors from October 2019 to September 2023. She is also the president of Greenridge Advisors, LLC, which she founded in 2007 as an energy services and equipment consulting firm focused on the development, execution, and financing of corporate and product line strategies. Ms. Nelson advises her clients on strategy development, capital allocation, acquisition evaluation and infrastructure development. Her clients span a broad range of oilfield service, product and geographic markets. She also joined the Helix Energy Solutions Group, Inc. board of directors and its audit committee in July of 2019, and in May of 2020 began serving as the chair of the audit committee. Ms. Nelson served as a member of APA Corporation's board of directors from February 2014 until May 2024. Ms. Nelson began her career at Amoco Production Company in a variety of engineering, project management and planning roles. From 2000 to 2007, Ms. Nelson served as a vice president of SCF Partners, an oilfield service and equipment-focused private equity firm, where she concentrated on investment strategy, investment execution and portfolio company management. During her tenure at SCF Partners and Greenridge Advisors, Ms. Nelson has served on the board of directors of several private companies. Ms. Nelson has devoted her career to serving companies in the oil and gas industry. +The Board of Directors considered Ms. Nelson’s extensive oilfield service experience through her founding and leadership of an energy services and equipment consulting firm, as well as her financial and strategic experience gained through her service at an oilfield service and equipment-focused private equity firm. The Board also considered Ms. Nelson’s extensive board of directors experience as a result of currently serving or previously serving on public company boards and a variety of private company boards, bringing valuable corporate governance, sustainability and oversight experience to the Board. +Julie J. Robertson — Ms. Robertson has served as a director of Patterson-UTI since April 2022. Ms. Robertson has served as a director of EOG Resources, Inc., an upstream oil and gas company, since January 2019, and as a director of Seadrill Limited, an offshore drilling contractor, since November 2021. Ms. Robertson served as a director of Superior Energy Services, Inc., an oilfield services company, from February 2021 until March 2025. Ms. Robertson served in the role of Executive Chairman of Noble Corporation plc (“Noble”), an offshore drilling contractor, from May 2020 until her retirement from Noble in February 2021. Previously, Ms. Robertson served as Chairman of the Board, President and Chief Executive Officer of Noble from January 2018 until May 2020. Ms. Robertson previously served in various other management roles for Noble and its subsidiaries, including (i) Executive Vice President from 2006 to January 2018, (ii) Senior Vice President — Administration from 2001 to 2006 and (iii) Vice President — Administration from 1996 to 2001. Ms. Robertson also served continuously as Corporate Secretary of Noble from 1993 until assuming the Chairman’s role in 2018. Ms. Robertson joined a predecessor subsidiary of Noble in 1979. Ms. Robertson holds a Bachelor of Journalism degree from the University of Texas at Austin and successfully completed the Harvard Business School Advanced Management Program in 1998. +The Board of Directors considered Ms. Robertson’s more than 40 years of operational, managerial, administrative and human resource experience at a leading global offshore drilling contractor, including as the Executive Chair and as the Chair of the Board, President and Chief Executive Officer. The Board noted Ms. Robertson’s extensive international experience, including working in over 45 countries, her experience in mergers and acquisitions and her experience in global compliance and risk mitigation, executive compensation, governance and sustainability matters and supply chain management. Ms. Robertson also has extensive board of directors experience as a result of currently serving or previously serving on four public company boards. The Board also considered Ms. Robertson’s recognition as 2013 Drilling Contractor of the Year by the International Association of Drilling Contractors, and her recognition in 2020 as one of Oil and Gas Investor’s 25 Influential Women in Energy. +11 +James C. Stewart — Mr. Stewart has served as a director of Patterson-UTI since September 2023. Mr. Stewart served as a member of Keane’s and, subsequently, NexTier’s board of directors from March 2011 to September 2023. He joined Keane (predecessor to NexTier) in March 2011 as Chairman and Chief Executive Officer and served as Executive Chairman from August 2018 to October 2019. Mr. Stewart has served as Chief Executive Officer of One X, a provider of flowback, production and sand management, and pressure control equipment rentals and associated services, since October 2023 . Prior to joining Keane, from 2007 to 2009, he served as the President and Chief Executive Officer of a privately held international drilling company. From 2006 to 2007, Mr. Stewart served as Vice President of Integrated Drilling Services for Weatherford International plc, based in London and Dubai, where he created and managed a global business unit that included a 50-rig international land contract drilling group and a global project management team. Mr. Stewart began his career with Schlumberger Limited, where he held senior leadership positions across the globe over the span of 22 years. +The Board considered Mr. Stewart’s more than 30 years of leadership experience in the oilfield services industry, including his service as former Chief Executive Officer of NexTier and of another oilfield service company. The Board also considered his extensive international experience and management of global business and project management teams, which brings perspective to the Board and allows him to provide Patterson-UTI with valuable insight on international and strategic matters. +12 +Board Leadership Structure and Independent Chairman +The Board evaluates its leadership structure on an ongoing basis. The decision on whether to combine or separate the Chairman and Chief Executive Officer (“CEO”) role is determined on the basis of what the Board considers to be best for Patterson-UTI at any given point in time. Patterson-UTI’s current Board leadership structure separates the role of Chairman and CEO, and our Chairman is an independent director. In addition to having an independent Chairman, the Board has an independent Vice Chairman who works with the independent Chairman to provide independent oversight and leadership of the Board. +The independent directors meet periodically in executive sessions at which only independent directors are present, and the Chairman chairs those sessions. The Chairman serves as a liaison between the independent directors and any employee directors, consults with regard to Board and agenda items, and works with the chairpersons of Board committees as appropriate. The Chairman also participates from time to time in meetings with large stockholders. +The Nominating and Corporate Governance Committee and the Board currently believe that the Board’s leadership structure, which includes the separation of the role of CEO and Chairman, is appropriate because it, among other things, provides for sufficient independence between the Board and management and for an independent director who provides board member leadership. +Board Role in Risk Oversight +The Board has adopted Corporate Governance Guidelines, which can be accessed electronically in the “Governance” section of Patterson-UTI’s website at www.patenergy.com. The Guidelines describe one of the Board’s primary responsibilities as overseeing Patterson-UTI’s processes for assessing and managing risks. The Board delegates to its committees responsibility for overseeing certain types of risk, as reflected in the chart below, and the committees in turn report regularly to the Board on their respective areas of oversight. +Board of Directors +• The Board oversees assessment of major risks facing the Company and, to the extent the Board deems it appropriate, evaluates options for their mitigation. The risks that the Board routinely oversees, either directly or by delegating to a committee, include those related to safety, operational, financial, strategy, technology, competition, legal, regulatory and sustainability matters, including climate change-related matters. +• The Board and its committees discharge their oversight responsibility, in part, through regular inquiries from the Chairman of the Board and other directors to senior management, regular discussions during Board and committee meetings of general and specific risks to Patterson-UTI, and periodic communications with senior management regarding particular risks and events. +• The Board oversees risk management by our senior management team, in part, by reviewing and evaluating major financial objectives, critical strategies, and long-term plans, including major allocations of capital, significant proposed business acquisitions and divestitures, safety and operating performance, sustainability performance, and stockholder returns. +Audit Committee Compensation Committee Nominating and Corporate Governance Committee +• Financial statements and internal controls +• Independent auditors and internal audit function +• Financial reporting process +• Legal and ethics compliance programs +• Sustainability disclosures in SEC reports and financial statements +• Health, safety and environmental protection policies +• Cybersecurity +• Compensation policies and related risks +• Compensation of executive officers, including KPIs +• Incentive compensation plan administration +• CD&A and report in proxy statement +• Human and workplace rights and policies, including human capital management +• Corporate governance guidelines and code of business conduct +• Review of board performance +• Recommendation of director nominees and committee composition +• Executive succession planning +• Sustainability risks and opportunities, including climate-change related matters +• Sustainability report and related disclosure issues +• Sustainability-related strategy, policies and practices +13 +Senior Management +Day-to-day responsibility for: +• Identifying corporate risks, including those related to safety, operational, financial, strategy, technology, competition, legal, regulatory and sustainability matters, including climate-related risks and opportunities +• Assessing the potential level of impact to the business from such risks +• Implementing appropriate risk management strategies, including integrating consideration of risk and risk management into business decision-making +• Reviewing the effectiveness of our risk management efforts +Management's Role in Risk Management +Our senior management identifies risks and opportunities through discussions with employees and other stakeholders, including customers, investors, trade associations and industry groups; engagement with sustainability-focused groups; and our own business risk assessments, as well as regular monitoring of legal, regulatory and policy changes with the potential to affect the industry as well as our company specifically. We believe that climate risks are inherently business risks, and our assessment of these climate-related transition and physical risks is integrated into our business risk assessment process. +Our senior management and representatives from our business units regularly communicate with the Board on risk management matters. Senior management conducts regular risk assessments to identify risks that have the potential to significantly affect our business over the short-, medium- and longer term and reviews with the Board risk mitigation and oversight measures, including prioritization of risk management and allocation of responsibility within the Company for the management of a particular risk. +Meetings and Committees of the Board of Directors; Director Independence +Meetings +The Board of Directors met seven times during the year ended December 31, 2025. Each then-serving director attended, in person or by telephone, at least 75% of the aggregate of all meetings held by the Board and meetings of each committee on which such director served. Although Patterson-UTI does not have a formal policy regarding attendance by members of the Board at its annual meetings of stockholders, directors are invited to attend annual meetings of Patterson-UTI stockholders. All of our directors attended the 2025 annual meeting of stockholders either in person or by telephone. +Director Independence +A majority of the members of the Board of Directors are independent within the meaning of the Nasdaq Stock Market, Inc. (“Nasdaq”) listing standards. Specifically, the Board has determined that Messrs. Drummond, Halverson, Huff, Jaime and Stewart and Mses. Cepak, Judah, Nelson and Robertson are independent within the meaning of the Nasdaq listing standards. In addition, Leslie A. Beyer, who served on the Board until September 18, 2025, qualified as independent during her service on the Board. In making its independence determinations, the Board considered transactions occurring since the beginning of 2025 between Patterson-UTI and entities associated with the independent directors or their immediate family members. The Board considered that since October 2023, Mr. Stewart has been employed by an organization that does business in the ordinary course with a subsidiary of Patterson-UTI. The amount received by Patterson-UTI or such other organization in each of the last three fiscal years did not exceed the greater of $200,000 or 1% of either Patterson-UTI’s or such organization’s consolidated gross revenues. +Committees of the Board of Directors (1) +The Board of Directors has established four standing committees: an Executive Committee, an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee. The Board of +14 +Directors has adopted a written charter for the Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee. +(1) In April 2026, the Board of Directors dissolved the Sustainability Committee for administrative convenience and re-allocated that committee's responsibilities among the remaining committees. In particular, the Audit Committee assumed former Sustainability Committee topics pertaining to health, safety and environmental protection policies, the Compensation Committee assumed former Sustainability Committee topics pertaining to human capital management policies and practices, and the Nominating and Corporate Governance Committee assumed former Sustainability Committee topics pertaining to sustainability-related issues. The Board of Directors believes these changes help streamline our board oversight structure and will allow the Board of Directors and its remaining committees to more efficiently and effectively deploy resources and focus their attention on matters that drive long-term shareholder value. The Sustainability Committee’s members during 2025 included Mses. Nelson (chair) and Judah and Messrs. Drummond, Jaime and Stewart, and, prior to her departure from the Board, Ms. Beyer. The Sustainability Committee met five times during 2025. +Executive Committee +Current Composition: Messrs. Huff (chair), Drummond and Hendricks +Number of Meetings during 2025: None +The Executive Committee has the authority, to the extent permitted by applicable law, to act for the Board in all matters arising between regular or special meetings of the Board of Directors. +Audit Committee +Current Composition: Mses. Cepak (chair), Judah and Robertson, and Messrs. Halverson, Jaime and Stewart +Number of Meetings during 2025: Five +Primary oversight and responsibilities: +• oversee management’s execution of Patterson-UTI’s accounting and financial reporting process, including review of the financial reports and other financial information provided by Patterson-UTI to the public and government and regulatory bodies +• review system of internal accounting, financial controls, and the annual independent audit of Patterson-UTI’s financial statements +• review system of internal control over financial reporting +• review cybersecurity risks with management +• oversee management’s monitoring and enforcement of policies to protect the health and safety of employees, customers, the public and the environment +• oversee compliance with Patterson-UTI’s codes of conduct and ethics and with legal and regulatory requirements +• select the independent registered public accounting firm to audit Patterson-UTI's books and records +• consider and act upon accounting matters as they arise +Each member is independent within the meaning of applicable rules under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and within the meaning of the Nasdaq listing standards. The Board has determined that Ms. Cepak is an “audit committee financial expert” within the meaning of applicable SEC rules. +Please see “Audit Committee Report” elsewhere in this proxy statement. +Compensation Committee +Current Composition: Messrs. Halverson (chair) and Huff and Mses. Cepak and Nelson +Number of Meetings during 2025: Six +Primary oversight and responsibilities: +• set and administer the policies that govern the compensation of executive officers of Patterson-UTI +• periodically review director compensation and recommend changes, as appropriate, to the Board of Directors for approval +• oversee Patterson-UTI's human capital management policies and practices +Each member is independent as defined in the Nasdaq listing standards. +Please see “Compensation Discussion and Analysis” and “Compensation Committee Report” elsewhere in this proxy statement for further information about the Compensation Committee. +15 +Nominating and Corporate Governance Committee +Current Composition: Ms. Robertson (chair) and Messrs. Huff and Stewart +Number of Meetings during 2025: Two +Primary oversight and responsibilities: +• identify individuals qualified to become Board members +• recommend for selection by the Board director nominees for the annual meetings of stockholders +• recommend nominees for Board committees +• review succession planning for executive officers of the Company +• review Patterson-UTI’s Code of Business Conduct and Corporate Governance Guidelines +• develop and make recommendations with respect to the best corporate governance principles +• oversee the annual review of the Board and management +• oversee sustainability issues, including climate-related risks and opportunities +Each member is independent as defined in the Nasdaq listing standards. +Consideration of Director Nominees +On behalf of the Board, the Nominating and Corporate Governance Committee considers director nominees recommended by Patterson-UTI’s stockholders if the recommendations are made in accordance with all legal requirements, including applicable provisions of Patterson-UTI’s restated certificate of incorporation and bylaws. A stockholder’s notice to the Secretary of Patterson-UTI shall contain certain information specified in Patterson-UTI’s bylaws regarding the stockholder and the proposed nominee. See “Other Matters—Stockholder Proposals for 2027 Annual Meeting” and Article I, Section 8 and Article I, Section 11 of Patterson-UTI’s bylaws. +The number of directors may be fixed or changed by amendment of Patterson-UTI's bylaws or by resolution of the Board. The Board assesses periodically, in connection with director refreshment and other considerations, whether a larger or smaller number of directors would be preferable. +The Nominating and Corporate Governance Committee determines qualification criteria and procedures for the identification and recruitment of candidates for election to serve as directors of Patterson-UTI. The Nominating and Corporate Governance Committee relies on the knowledge and relationships of Patterson-UTI and its officers and directors, as well as third parties when it deems appropriate, to identify and evaluate nominees for director, including nominees recommended by stockholders (which are evaluated in the same manner as nominees identified by other sources). In evaluating a nominee for director, the Nominating and Corporate Governance Committee considers the nominee’s skills, expertise, industry and other knowledge, personal and professional ethics, integrity and values, sound business judgment and willingness to commit sufficient time to the Board and be committed to representing the long-term interests of Patterson-UTI’s stockholders. The Nominating and Corporate Governance Committee also reviews the individual performance and qualifications of each director who wishes to be considered for nomination to the Board. Although the Nominating and Corporate Governance Committee does not have a stand-alone policy with regard to consideration of diversity in identifying director nominees, it is required, in accordance with our Corporate Governance Guidelines, to consider diversity in professional background, experience, expertise (including as to financial matters) and perspective with respect to the Board of Directors composition as a whole when evaluating a director nominee. The Board assesses its effectiveness in this regard as part of the annual board and director evaluation process. +Board and Director Performance Assessments +The Nominating and Corporate Governance Committee annually reviews and evaluates the performance of the Board, each Committee of the Board, and each director in order to improve the effectiveness of the Board and each Committee of the Board. The Committee assesses the contributions of the Board as a whole and each of its Committees and identifies areas in which improvements may be made. The results of the evaluations are reviewed and discussed with the Board and its Committees, and recommendations are made, as appropriate, to the Board and its Committees. +The Nominating and Corporate Governance Committee also annually reviews the individual performance and qualifications of each director who wishes to be considered for nomination for reelection to the Board. +16 +Continuing Education +Continuing education helps our directors strengthen their skills, deepen their understanding of our business and operations and stay current with emerging issues that affect our business, governance and compensation practices. It also helps directors keep abreast of governance developments and requirements and understand the issues we face in the context of our business. To further these goals, our Board’s continuing director education policy requires directors to participate in continuing education programs and reimburses directors for expenses incurred in connection with such education programs. +Succession Planning +The Board of Directors oversees processes and procedures to provide continuity of well-qualified executive leadership and to assess whether such leadership possesses the skill and talent to execute Patterson-UTI’s long-term business strategies. The Board of Directors reviews succession planning for the Chief Executive Officer and the other senior executives tailored to reflect the Board’s standards for executive leadership and Patterson-UTI’s business strategy and vision. The succession planning addresses, among other things, (i) both current and long-term needs of Patterson-UTI and establishes a process for identifying and assessing potential internal candidates; (ii) periodic review and assessment of readiness; (iii) contingency planning for temporary absences of the Chief Executive Officer due to disability or other unexpected event; and (iv) long-term continuity planning for succession to the Chief Executive Officer position. +Political Contributions +Patterson-UTI has a policy prohibiting the contribution of company funds to political parties or organizations or to candidates for any public office or to influence the general public, or segments thereof, with respect to public elections or referenda. Patterson-UTI participates in certain trade organizations with purposes that include enhancement of the public image of our industry, education about the industry and issues that affect the industry and industry best practices and standards. Many of the trade organizations also engage in legislative or political activity related to matters that affect the industry as a whole and not a specific company. Patterson-UTI, as one of many members in various trade associations, does not direct the legislative activities of any trade organization of which it is a member. +Sustainability +We encourage you to review our latest sustainability report for information regarding our sustainability programs and initiatives. A copy of Patterson-UTI’s sustainability report can be accessed electronically in the “Sustainability” section of the Patterson-UTI website at www.patenergy.com and in print to any stockholder who requests it from the Secretary of Patterson-UTI. Nothing on our website, including our sustainability report or sections thereof, shall be deemed incorporated by reference into this proxy statement or other filings that we make with the SEC. Our sustainability goals are aspirational and may change. Statements regarding our goals are not guarantees or promises that they will be met. +Patterson-UTI’s Code of Business Conduct and Ethics and Equal Employment Opportunity and Anti-Harassment Policy prohibit discrimination or harassment of any type and afford equal employment opportunities to all employees and applicants, without regard to age, race, sex, color, religion, national origin, disability, marital status, covered veteran status, genetic information, sexual orientation, gender identity or any other characteristic protected under state, federal or local law. Each employee is expected to demonstrate a shared commitment to Patterson-UTI’s values regarding diversity and inclusion, as well as mutual respect for all co-workers, vendors, customers, third parties, and business partners. +Communication with the Board and its Independent Members +Persons may communicate with the Board, or directly with its Chairman, Mr. Huff, by submitting such communication in writing in care of Chairman of the Board of Directors, Patterson-UTI Energy, Inc., 10713 West Sam Houston Parkway North, Suite 800, Houston, Texas 77064. Persons may communicate with the independent members of the Board by submitting such communication in writing to the Nominating and Corporate Governance Committee of the Board of Directors of Patterson-UTI Energy, Inc., 10713 West Sam Houston Parkway North, Suite 800, Houston, Texas 77064. +17 +Insider Trading Policy +Patterson-UTI has adopted an Insider Trading Compliance Policy and Insider Trading Compliance Memorandum that set forth policies and procedures governing the purchase, sale, and other transactions in Company securities by directors, officers, employees and consultants, and persons related to directors, officers, employees and consultants. These policies and procedures, as well as procedures that the Company follows, are reasonably designed to promote compliance with insider trading laws, rules, and regulations and applicable listing standards. A copy of the Insider Trading Compliance Policy and Insider Trading Compliance Memorandum were filed as Exhibits 19.1 and 19.2 to the Company's Annual Report on Form 10-K for the year ended December 31, 2025. +Corporate Governance Documents Available on Patterson-UTI’s Website +Copies of each of the following documents can be accessed electronically in the “Corporate Governance” section of the Patterson-UTI website at www.patenergy.com and in print to any stockholder who requests them from the Secretary of Patterson-UTI: +• Audit Committee Charter; +• Compensation Committee Charter; +• Nominating and Corporate Governance Committee Charter; +• Corporate Governance Guidelines; +• Code of Business Conduct and Ethics for its employees, officers and directors; +• Code of Business Conduct and Ethics for Senior Financial Executives; and +• Global Anticorruption Policy. +18 +PROPOSAL NO. 2 +RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM +The Audit Committee appointed PricewaterhouseCoopers LLP as the independent registered public accounting firm to audit the financial statements and internal control over financial reporting of Patterson-UTI for the fiscal year ending December 31, 2026, and directed that such engagement be submitted to the stockholders of Patterson-UTI for ratification. In recommending ratification by the stockholders of such engagement, the Board of Directors is acting upon the recommendation of the Audit Committee, which has satisfied itself as to PricewaterhouseCoopers LLP’s independence, professional competence and standing. Although ratification by stockholders of the engagement of PricewaterhouseCoopers LLP is not required by Delaware corporate law or Patterson-UTI’s restated certificate of incorporation or bylaws, the Audit Committee believes a decision of this nature should be made with the consideration of Patterson-UTI’s stockholders. If the stockholders fail to ratify the appointment, the Audit Committee will reconsider whether to retain PricewaterhouseCoopers LLP and may retain that firm or another without re-submitting the matter to our stockholders. Even if the appointment is ratified, the Audit Committee may, in its discretion, direct the appointment of a different independent registered public accounting firm at any time during the year if it determines that such change would be in the best interests of Patterson-UTI and its stockholders. +It is expected that one or more representatives of PricewaterhouseCoopers LLP will be available to participate in the Meeting and will be given the opportunity to make a statement if they so desire. It also is expected that the representative(s) will be available to respond to appropriate questions from the stockholders. +The Board of Directors recommends a vote “FOR” the ratification of PricewaterhouseCoopers LLP as Patterson-UTI’s independent registered public accounting firm. Ratification of the selection of PricewaterhouseCoopers LLP requires the affirmative vote of the holders of a majority of the shares of Common Stock entitled to vote on, and voted “FOR” or “AGAINST,” the proposal. Unless you give contrary instructions in your proxy, your properly submitted proxy will be voted “FOR” such ratification. Abstentions will not be counted as votes cast “FOR” or “AGAINST” the proposal and will have no effect on the outcome of the proposal. If you do not give instructions to your brokerage firm, bank, broker-dealer, or other similar organization, the brokerage firm, bank, broker-dealer, or other similar organization is expected to be entitled, but not required, to vote your shares in its discretion and may give or authorize the giving of a proxy to vote the shares in its discretion on this proposal. Broker non-votes, if any, will not be treated as a share entitled to vote on the proposal and will have no effect on the outcome of the proposal. +19 +PROPOSAL NO. 3 +APPROVAL OF AMENDMENT TO +2021 LONG-TERM INCENTIVE PLAN +Background +The Patterson-UTI Energy, Inc. 2021 Long-Term Incentive Plan (as previously amended, the “2021 Plan”) was originally approved by Patterson-UTI's stockholders effective as of June 3, 2021. On June 8, 2023, our stockholders approved an amendment to the 2021 Plan to increase the number of shares available for issuance thereunder by 5.445 million shares. On September 1, 2023, in connection with the NexTier merger, our Board of Directors approved a second amendment to the 2021 Plan to assume 10,050,932 shares previously reserved for issuance under the NexTier Oilfield Solutions Inc. Equity and Incentive Award Plan (the “NexTier Plan” and such assumed shares, the “NexTier Pool”) as permitted by Nasdaq Rule 5635(c). On June 6, 2024, our stockholders approved a third amendment to the 2021 Plan to increase the number of shares available for issuance thereunder by 20 million shares and eliminate the NexTier Pool on a go-forward basis. +On April 1, 2026, our Board of Directors approved a fourth amendment to the 2021 Plan (the “Plan Amendment”) to increase the number of shares available for issuance under the plan by 28,900,000 shares, subject to the approval of our stockholders. No other changes to the 2021 Plan are proposed by the Plan Amendment. Participation in the 2021 Plan is broad-based, with approximately 400 employees and directors receiving grants in 2025. The increase in the overall number of shares available for issuance under the 2021 Plan is being proposed in order to preserve the flexibility of the Company to grant future awards to all of its employees, directors, consultants or advisors. +In considering the Plan Amendment, our Board of Directors considered the dilutive impact of the additional share pool request, and in particular our overhang level. Overhang is equal to the total number of shares subject to equity awards outstanding (assuming target payout of all performance units (PSUs) then outstanding) plus the total number of shares available for grant under the Company’s equity plans, divided by the sum of the total common shares outstanding, the number of shares subject to equity awards outstanding (assuming target payout of all PSUs then outstanding) and the total number of shares available for grant under the Company’s equity plans. Our total overhang was 4.8% based on our shares and shares subject to equity awards outstanding (assuming target payout of all PSUs then outstanding) as of April 1, 2026, and would increase to 11.3% upon approval of the Plan Amendment (given the additional share request). Approval of the Plan Amendment requires the affirmative vote of the holders of a majority of the shares of Common Stock that are present in person or by proxy and entitled to vote at the Meeting. +If the Plan Amendment is not approved by stockholders, the 2021 Plan will remain in effect with its current share pool. As of April 1, 2026, there were 9,372,194 shares of common stock remaining available for grant under the 2021 Plan, assuming a target payout of all PSUs then outstanding. If the Plan Amendment is not approved by stockholders, we will not be able to continue our equity-based long term incentive program once the current share pool is depleted, which would require us to increase significantly the cash component of our compensation program in order to remain competitive and adequately compensate our employees, directors, consultants and advisors. +Certain material terms of the 2021 Plan are discussed below; however, the description is subject to, and qualified by the full text of the 2021 Plan, attached hereto as Annex A, which includes the Plan Amendment highlighted in bold. Unless otherwise indicated, references to the “2021 Plan” in the following description of the material terms of the 2021 Plan reflect the 2021 Plan as amended by the Plan Amendment. +Best Practices +Independent Oversight . The Compensation Committee, composed solely of non-employee independent directors, approves all grants made to employees under the 2021 Plan; provided, however, that the Compensation Committee may delegate to the Board or any committee of the Board, to one or more executive officers or a committee of executive officers its right to grant awards under the 2021 Plan to employees who are not executive officers or directors of Patterson-UTI pursuant to such conditions or limitations as the Compensation Committee may establish. The Board of Directors approves all grants to directors under the 2021 Plan. +No Repricing of Options or SARs . The 2021 Plan prohibits the repricing and replacement of stock options or stock appreciation rights (“SARs”) at lower exercise prices unless approved by our stockholders. +20 +No Discounted Options or SARs . Stock options and SARs may not be granted with an exercise price below the fair market value of our common stock on the date of grant. +No Dividends on Options or SARs . Dividends and dividend equivalents may not be paid or accrued on stock options or SARs. +No Dividends or Dividend Equivalents Paid on Unvested Awards . Any dividends or dividend equivalents will only be paid if and to the extent the underlying shares vest pursuant to the terms of the award. +Limited Terms for Options and SARs . Stock options and SARs granted under the 2021 Plan are generally limited to 10-year terms. +No Liberal Share Recycling. The 2021 Plan prohibits liberal share recycling. Shares delivered to Patterson-UTI or withheld to satisfy the exercise price of a stock option or SAR or withholding tax obligations on any award, shares not issued in the net settlement of a stock-settled SAR, and shares repurchased on the open market with the proceeds of a stock option exercise will not again be made available for grant under the 2021 Plan. +No “Evergreen” Provision . Shares authorized for issuance under the 2021 Plan will not be replenished automatically. Any additional shares to be issued over and above the current share pool, as increased by the Plan Amendment, will require further stockholder approval. +No Tax Gross-Ups . The Compensation Committee does not provide tax gross-ups in connection with awards under the 2021 Plan. +Annual Limitation on Director Compensation . The total compensation paid to each non-employee director for their service as such, whether in cash or in equity awards under the 2021 Plan (based on the grant date fair value of any such awards) during a single fiscal year may not exceed $750,000 (or $1,000,000 for any fiscal year in which the non-employee director is first appointed to the Board or any fiscal year in which the non-employee director serves as chairman or lead director). +Recoupment . Awards granted under the 2021 Plan are subject to the Patterson-UTI Energy, Inc. Clawback Policy and will be subject to any other clawback policy adopted by us. In addition, if we are required to prepare an accounting restatement due to the material noncompliance of Patterson-UTI, as a result of misconduct, with any financial reporting requirement, the 2021 Plan requires recoupment where required under Section 304 of the Sarbanes-Oxley Act of 2002 and permits recoupment from any participant who engaged in such misconduct. See the description of our current Clawback policy below under “Clawback Policy”. +Minimum Vesting . Subject to a 5% carve-out, all awards are subject to a minimum vesting period of one year from the date of grant, except in the case of substitute awards, awards delivered in lieu of fully-vested cash obligations, certain awards to directors that vest in connection with an annual meeting, and permitted accelerations of awards, such as in connection with a holder's retirement, death or disability or in the event of a change in control. +21 +Burn Rate +Our Board and Compensation Committee are committed to using equity awards prudently and consider the dilutive impact of annual grants on our stockholders. Set forth below is information on the awards granted or earned and our burn rate for the years 2023-2025 under our previous equity compensation plan, the Amended and Restated 2014 Long-Term Incentive Plan, as amended (the “2014 Plan”), and the 2021 Plan: +A B C D E F +G +Fiscal Year +Stock +Options +Granted (1) +Time-Based +RSUs +Granted (1) +PSUs / Performance-Based RSUs +Granted (1)(2) +Actual PSUs +and +Performance- +Based RSUs +Earned (1) +Total +(1)(3) +Weighted +Average # of +Common Shares +Outstanding +Burn +Rate (4) +2025 — 4,448,229 743,800 — 8,896,458 383,465,285 2.32 % +2024 — 3,113,411 875,100 764,242 7,755,306 397,195,631 1.95 % +2023 — 1,840,861 796,976 1,001,000 5,683,722 280,061,025 2.03 % +Average Three-Year Burn Rate (2023-2025) 2.10 % +_____________ +(1) Excludes 652,573 stock options and 7,438,031 time-based RSUs outstanding under the NexTier Plan and the NexTier Oilfield Solutions Inc. (Former C&J Energy) Management Incentive Plan (the “Former C&J Energy Plan”), which we assumed in 2023 in connection with the NexTier Merger. All of these assumed awards had been previously granted by NexTier or its affiliates in periods prior to the NexTier merger. Excludes 619,417 cash-settled RSUs granted in the 2025 fiscal year. +(2) Reflects target number of PSUs granted in applicable fiscal year. Excludes 743,800 cash-settled PSUs granted in 2025 fiscal year. +(3) Total number of shares in a particular fiscal year includes all time-based awards granted during such fiscal year, and all PSUs and RSUs for which the performance criteria was certified as attained and earned during such fiscal year. In light of the fungible ratio share counting provisions of both the 2014 Plan and the 2021 Plan, RSUs and PSUs are counted as two shares in the Total amount. Accordingly, the number in this “Total” column for a particular fiscal year is derived as follows: (i) column A (zero for each year); plus (ii) column B, times two, plus (iii) column D, times two. +(4) PSUs granted in the applicable fiscal year and not yet earned are excluded from the calculation of burn rate. +Description of the 2021 Plan +The primary objective of the 2021 Plan is to assist Patterson-UTI and its subsidiaries in attracting and retaining selected individuals to serve as directors, employees, consultants and advisors of Patterson-UTI who are expected to contribute to its success and achieve long-term objectives that will inure to the benefit of its stockholders through the additional incentives inherent in awards under the 2021 Plan. The 2021 Plan provides for the granting of incentive and non-qualified stock options, tandem and freestanding stock appreciation rights, restricted stock awards, other stock unit awards, performance shares, performance units and dividend equivalents. Certain awards under the 2021 Plan may be paid in cash or Common Stock, as determined by the Compensation Committee. The Compensation Committee has exclusive authority to select the participants to whom awards may be granted, and to determine the type, size and terms of each award, subject to the limitations set forth in the 2021 Plan. The Compensation Committee will also make all determinations that it decides are necessary or desirable in the interpretation and administration of the 2021 Plan. In addition, the Compensation Committee may, if consistent with applicable rules, regulations and Nasdaq requirements, delegate to a committee of one or more directors or to one or more executive officers the right to grant, cancel and suspend awards to employees who are not directors or executive officers of Patterson-UTI. +22 +As of April 1, 2026, the equity awards outstanding under the NexTier Plan, the Former C&J Energy Plan, the 2014 Plan, and the 2021 Plan, were as follows (1) : +Options outstanding (2) +1,137,205 +Full-value awards outstanding (3) (4) +8,832,248 +Weighted-average exercise price of outstanding options $23.56 +Weighted-average remaining contractual term of outstanding options 0.45 +Shares available for grant under the 2021 Plan (4) (5) +9,372,194 +Shares of Common Stock Outstanding 379,602,464 +_____________ +(1) This table excludes the 28,900,000 shares requested pursuant to the Plan Amendment. +(2) Includes 406,405 options outstanding under the Former C&J Energy Plan (with a weighted average exercise price of $32.50 and weighted average remaining contractual term of 1.08 years) and 730,800 options outstanding under the 2014 Plan (with a weighted average exercise price of $18.59 and weighted average remaining contractual term of 0.11 years). +(3) Includes 9,076 RSUs under the NexTier Plan and 6,608,472 RSUs and 2,214,700 PSUs (at target) under the 2021 Plan. No RSUs and PSUs are outstanding under the 2014 Plan. +(4) Under the fungible counting provisions of the 2021 Plan, full-value awards count as two shares. +(5) No shares remain available for grant under the 2014 Plan, the NexTier Plan or the Former C&J Energy Plan. +General Terms +• Subject to adjustment in the event of certain corporate transactions, the aggregate number of shares of Common Stock authorized for grant under the 2021 Plan (after giving effect to the Plan Amendment) is 67,812,480, which includes the 38,912,480 shares previously authorized for issuance under the 2021 Plan. Shares that are subject to options or SARs count as one share of Common Stock against this aggregate limit. Shares that are subject to awards other than options and SARS count as two shares of Common Stock against this aggregate limit. The closing price of a share of Common Stock on April 1, 2026 was $10.35. +• The maximum number of shares that may be issued pursuant to awards under the 2021 Plan (after giving effect to the Plan Amendment) will be the sum of 28,900,000 new shares requested plus 9,372,194 currently available shares, less one share for each option and SAR award (and less two shares for all other award types) subject to any equity award granted under the current plan after April 1, 2026, until the proposed Plan Amendment’s approval date (provided that, in no event shall the number of shares subject to any equity award granted under the 2021 Plan after April 1, 2026 and prior to the Plan Amendment approval date exceed 9,372,194 shares). +• In addition to the above, if an award granted under the 2021 Plan or the 2014 Plan expires, is forfeited, is settled in cash or otherwise terminates without the issuance of all or a portion of the shares of Common Stock subject to the award, the shares allocable to the expired, forfeited, cash settled, or terminated portion of the award will be available for awards again under the 2021 Plan. Consistent with the fungible counting provisions of both the 2014 and 2021 Plans, any share of Common Stock that again becomes available for grant under the 2021 Plan will be added back as one share if the share was subject to an option or SAR, and as two shares if the share was subject to an award other than an option or SAR. +• If any shares subject to an award are used to exercise options, are not issued upon the settlement of a SAR, are withheld by Patterson-UTI for income or employment taxes on the exercise of an option or SAR or the vesting or settlement of any other award type, or are re-purchased on the open market with the exercise price for an option, such shares will not become available for grant under the 2021 Plan. +• With respect to awards to participants other than directors, the 2021 Plan is administered by the Compensation Committee of Patterson-UTI’s Board of Directors, which comprises exclusively non-employee independent directors. With respect to awards to directors, the 2021 Plan is administered by the Board of Directors. +• Directors, employees, including officers, consultants and advisors are eligible for awards under the 2021 Plan. As of April 1, 2026, approximately 7,800 employees, nine directors and an indeterminate number of consultants and advisors would be eligible for awards under the 2021 Plan, although Patterson-UTI has not historically granted awards under its long-term incentive plans to consultants or advisors. +23 +• The Board of Directors, at any time, may amend the terms of the 2021 Plan, subject to the stockholder approval requirements of the Nasdaq Stock Market and other rules and regulations applicable to Patterson-UTI. Generally, the 2021 Plan also may not be amended without stockholder approval to permit the repricing of options or SARs or to extend the generally applicable maximum 10-year term applicable to options and SARs. +• Except in connection with certain corporate transactions involving Patterson-UTI, the terms of outstanding options or SARs may not be amended to reduce the applicable exercise price and outstanding options and SARs may not be cancelled in exchange for cash, other awards or options or SARs with an exercise price that is less than the exercise price of the original options or SARs, in each case without stockholder approval. +• Subject to the exceptions in this bullet, awards may not be sold, assigned, transferred, pledged or otherwise encumbered, other than by will or the laws of descent and distribution or pursuant to a domestic relations order, as determined by the Compensation Committee, and awards may be exercised during the life of the participant only by the participant or the participant’s guardian or legal representative. Notwithstanding the foregoing, a participant may assign or transfer an award other than an incentive stock option with the consent of the Compensation Committee (i) for charitable donations; (ii) to the participant’s spouse, children or grandchildren (including any adopted and stepchildren and grandchildren), or (iii) to a trust for the benefit of one or more of the participants or the persons referred to in clause (ii); provided that certain administrative conditions are met. For the avoidance of doubt, awards (other than fully vested and unrestricted shares of Common Stock) may not be transferred to a third party for monetary value. +• Except with respect to 5% of the shares authorized for grant under the 2021 Plan, no award may vest prior to the first anniversary of the grant date other than in the case of substitute awards, awards delivered in lieu of fully-vested cash obligations, certain awards to directors that vest in connection with an annual meeting, and accelerations of awards such as in connection with a holder’s retirement, death or disability or in the event of a change in control. +• No awards may be granted under the 2021 Plan after April 9, 2031, the tenth anniversary of the original effective date of the 2021 Plan. +Options +• The vesting schedule for options is set by the Compensation Committee, subject to the minimum vesting requirements of the 2021 Plan. +• The term of options is set by the Compensation Committee, but may be no longer than 10 years other than as a result of any extension of the term in compliance with applicable law as provided in an award agreement. +• The exercise price for options may be paid in cash, with previously acquired shares of Common Stock, or by other means approved by the Compensation Committee. +• All options granted under the 2021 Plan (other than substitute awards) are granted with an exercise price equal to or greater than the fair market value of the Common Stock at the time the option is granted. +SARs +• SARs may be granted alone or in connection with the grant of any option. A SAR entitles a participant to surrender any then exercisable portion of the SAR and, if applicable, the related option, in exchange for an amount equal to the product of (i) the excess of the fair market value of a share of Common Stock on the date of surrender over the fair market value of a share of Common Stock on the date that the SAR was granted, or, if the SAR is related to an option, the per share exercise price of the option, multiplied by (ii) the number of shares of Common Stock subject to the SAR and being surrendered. +• SARs granted alone may be exercised at such times and be subject to such terms and conditions as the Compensation Committee may impose. SARs that are granted in tandem with options may be exercised only on the surrender of the right to purchase an equivalent number of shares under the related options and may be exercised only with respect to the shares of Common Stock for which the related options are then exercisable. +• The vesting schedule for SARs is set by the Compensation Committee, subject to the minimum vesting requirements of the 2021 Plan. +24 +• The term of SARs under the 2021 Plan may be no longer than 10 years other than as a result of any extension of the term in compliance with applicable law as provided in an award agreement. +• Payment on exercise of a SAR shall be, in the discretion of the Compensation Committee, shares of Common Stock, cash, or a combination of shares of Common Stock and cash. +• All SARs granted under the 2021 Plan (other than substitute awards) are granted with an exercise price equal to or greater than the fair market value of the Common Stock at the time the SAR is granted. +Restricted Stock Awards +• The Compensation Committee determines the material terms of restricted stock awards, including the price, if any, to be paid by the recipient, and, subject to the minimum vesting requirements of the 2021 Plan, the vesting schedule and conditions, which may include the attainment of specified performance objectives. +• Beginning on the date of grant, a participant receiving a restricted stock award will become a stockholder of Patterson-UTI with respect to all shares of Common Stock subject to the restricted stock award, which, unless the Committee determines otherwise at the time of the grant, includes the right to vote the shares and receive dividends in respect of the shares; provided, however, that any dividends with respect to any restricted stock award as to which the restrictions have not yet lapsed shall be subject to the same restrictions as such restricted stock award. +Other Stock Unit Awards +• The Compensation Committee may grant other stock unit awards under the 2021 Plan, which have a value equal to an identical number of shares of Common Stock. Other stock unit awards may also be a form of payment for other awards granted under the 2021 Plan and other earned cash-based incentive compensation. +• The payment of other stock units may be in cash, shares of Common Stock, other property, or any combination of the foregoing, and may be made in a lump sum or, in accordance with procedures established by the Compensation Committee, on a deferred basis subject to the requirements of section 409A of the Internal Revenue Code (the "Code"). +• The vesting schedule for other stock unit awards is set by the Compensation Committee, subject to the minimum vesting requirements of the 2021 Plan. +Dividend Equivalent Rights +• The Compensation Committee may grant dividend equivalent rights either in connection with awards or as separate awards under the 2021 Plan. +• Amounts payable in respect of dividend equivalent rights will not be paid until the vesting, payment, settlement or other lapse of restrictions of the award to which the dividend equivalent rights relate, including with respect to any performance conditions applicable to the underlying award. +• No award of options or SARs will have dividend equivalent rights. +Performance Awards +• Performance awards are payable in cash, shares of Common Stock, other property, or a combination of the foregoing, and may be paid in a lump sum, in installments, or on a deferred basis in accordance with procedures established by the Compensation Committee. +• The Compensation Committee determines the material terms of the performance awards, including a performance period over which the performance goal of such award shall be measured. Performance awards are subject to the one year minimum vesting requirements of the 2021 Plan. +Deferrals +• The Compensation Committee may require or permit a participant to defer the receipt of cash or shares pursuant to any awards under the 2021 Plan. Any deferral permitted under the 2021 Plan will be administered in a manner that is intended to comply with section 409A of the Code. +25 +Effect of Certain Transactions and Change of Control +The Compensation Committee, in its discretion, may determine that, unless otherwise specifically set forth in an award agreement or other agreement applicable to any award, upon a change of control (as defined in the 2021 Plan): +• awards outstanding as of the date of the change of control immediately vest and become free of all restrictions and limitations and, to the extent applicable, become fully exercisable and/or immediately settled or distributed; +• each option and SAR shall terminate within a specified period of days after notice to the participant; +• each participant shall receive, with respect to each share subject to an award, an amount equal to the excess of the fair market value of such share immediately prior to the occurrence of the change of control over the exercise price per share, if applicable, of such award, with such payment being made in one or more kinds of stock or property or a combination of stock or property; +• each option and SAR outstanding on the date of the change of control may be cancelled and terminated without payment if the fair market value of a share of Common Stock on the date of the change of control is less than the per share exercise price of the option or SAR; or +• such other additional adjustments or benefits as the Compensation Committee deems appropriate shall apply. +Further, in the event of changes in the capital or corporate structure of Patterson-UTI due to events such as recapitalization, stock split, merger, spin-off, joint venture, subsidiary or division sale or similar transaction, that affect the shares of Common Stock, the Compensation Committee, in its sole discretion, may determine that it is equitable or appropriate to make adjustments or substitutions to the 2021 Plan or outstanding options and awards, including to the number, class, kind and option or exercise price or securities subject to awards and to the terms and conditions of awards (including any applicable performance targets or criteria with respect thereto). +Federal Income Tax Consequences +The following discussion summarizes certain U.S. federal income tax consequences of the grant and receipt of awards pursuant to the 2021 Plan under the law as in effect on the date of this proxy statement. The rules governing the tax treatment of such awards are quite technical, so the following discussion of tax consequences is necessarily general in nature and is not complete. In addition, statutory provisions are subject to change, as are their interpretations, and their application may vary in individual circumstances. This summary does not purport to cover all federal employment tax, estate tax, or other federal tax consequences associated with the 2021 Plan, nor does it address state, local, or non-U.S. tax consequences. As such, we recommend that all participants consult their own tax advisor concerning the tax implications of awards granted under the 2021 Plan. +ISOs . In general, a participant will not recognize income upon the grant or exercise of an ISO. However, upon the exercise of an ISO, the excess of the fair market value of the shares of Common Stock received upon the exercise of the ISO over the exercise price will increase the employee’s alternative minimum taxable income, which may cause the employee to incur the alternative minimum tax. Subject to certain exceptions for death or disability, if a participant exercises an ISO more than three months after termination of employment, the exercise of the option will be taxed as the exercise of a NQSO, as described below. +The general rule is that gain or loss from the sale or exchange of shares acquired on the exercise of an ISO will be treated as capital gain or loss. However, if shares acquired upon the exercise of an ISO are disposed of within two years from the date of grant or within one year after exercise (a “disqualifying disposition”), the participant generally will recognize ordinary income in the year of disposition in an amount equal to the fair market value of the shares at the time of exercise (or, if less, the amount realized on the disposition of the shares) less the exercise price. Any further gain (or loss) realized by the participant generally will be taxed as short- or long-term capital gain (or loss) depending on the holding period. +NQSOs, SARs, Performance Award, Other Stock Unit Award and Dividend Equivalents . A participant generally is not required to recognize income on the grant of a NQSO, SAR, performance award or other stock unit award. Instead, ordinary income generally is required to be recognized on the date the NQSO or SAR is exercised, or in the case of performance awards or other stock unit awards, upon the issuance of shares and/or the payment of cash pursuant to the terms of the award. In general, the amount of ordinary income required to be recognized is, (a) in +26 +the case of a NQSO or a SAR, an amount equal to the excess, if any, of the fair market value of the shares on the exercise date over the exercise price, and (b) in the case of performance awards or other stock unit awards, the amount of cash and/or the fair market value of any shares received in respect thereof, plus the amount of taxes withheld from such amounts. Ordinary income is recognized upon the payment of dividend equivalents, if any, granted with respect to performance awards, other stock unit awards or as separate awards. +Restricted Common Stock . Unless a participant who receives an award of restricted Common Stock makes an election under section 83(b) of the Code as described below, the participant generally is not required to recognize ordinary income on the grant of restricted Common Stock. Instead, on the date the shares vest (i.e., become transferable and no longer subject to forfeiture), the participant will be required to recognize ordinary income in an amount equal to the excess, if any, of the fair market value of the shares on such date over the amount, if any, paid for such shares. If a section 83(b) election has not been made, any dividends received with respect to restricted Common Stock that are subject at that time to a risk of forfeiture or restrictions on transfer generally will be treated as compensation that is taxable as ordinary income to the recipient. If a participant makes a section 83(b) election within 30 days following the date of transfer of the restricted Common Stock, the participant will recognize ordinary income on the date the shares are granted in an amount equal to the excess, if any, of the fair market value of the shares on the date of award over the amount, if any, paid for such shares. In such case, the participant will not be required to recognize additional ordinary income when the shares vest. However, if the shares are later forfeited, a loss can only be recognized up to the amount the participant paid, if any, for the shares. +Gain or Loss on Sale or Exchange of Shares . In general, gain or loss from the sale or exchange of shares granted or awarded under the 2021 Plan will be treated as capital gain or loss, provided that the shares are held as capital assets at the time of the sale or exchange. However, if certain holding period requirements are not satisfied at the time of a sale or exchange of shares acquired upon exercise of an ISO (a “disqualifying disposition,” see above), a participant generally will be required to recognize ordinary income upon such disposition. +Deductibility by Patterson-UTI . To the extent that a participant recognizes ordinary income in the circumstances described above, Patterson-UTI or the subsidiary for which the participant performs services will be entitled to a corresponding deduction, provided that, among other things, the income meets the test of reasonableness, is an ordinary and necessary business expense, is not an “excess parachute payment” within the meaning of section 280G of the Code (see Parachute Payments below) and is not disallowed by the $1,000,000 limitation on certain executive compensation under section 162(m) of the Code. In general, under section 162(m) of the Code, remuneration paid by a public corporation to certain “covered employees” (which includes any individual who serves as chief executive officer, chief financial officer or one of the other three most highly compensated executive officers for 2017 or any subsequent calendar year and, commencing in 2027, certain other highly paid employees) is not deductible to the extent it exceeds $1 million for any year. It is expected that compensation deductions for any covered employee with respect to awards under the 2021 Plan will be subject to a $1 million annual deduction limitation. The Compensation Committee may grant awards under the 2021 Plan or otherwise that are or may become non-deductible when it believes doing so is in the best interests of the Company and its stockholders. +Parachute Payments . The acceleration of the exercisability or the vesting of an award upon the occurrence of a change in control may result in an “excess parachute payment” within the meaning of section 280G of the Code. A “parachute payment” occurs when an employee receives payments contingent upon a change in control that exceed an amount equal to three times his or her “base amount.” The term “base amount” generally means the average annual compensation paid to such employee during the five calendar years preceding the calendar year in which the change in control occurs. An “excess parachute payment” is the excess of all parachute payments made to the employee on account of a change in control over the employee’s base amount. If any amount received by an employee is characterized as an excess parachute payment, the employee is subject to a 20% excise tax on the amount of the excess, and Patterson-UTI is denied a tax deduction with respect to such excess. +Withholding . Awards under the 2021 Plan may be subject to tax withholding. Where an award results in income subject to withholding, Patterson-UTI may require the participant to remit the withholding amount to Patterson-UTI or cause shares of Common Stock to be withheld or sold in order to satisfy the tax withholding obligations. +Section 409A . Section 409A of the Code generally provides that any deferred compensation arrangement must satisfy specific requirements, both in operation and in form, regarding (i) the timing of payment, (ii) the election of deferrals and (iii) restrictions on the acceleration of payment. Failure to comply with section 409A may result in the early taxation (plus interest) to the participant of deferred compensation and the imposition of a 20% tax on the participant of the deferred amounts included in the participant’s income. Patterson-UTI intends to structure awards +27 +under the 2021 Plan in a manner that is designed to be exempt from or comply with section 409A, but does not guarantee such treatment. +Existing Plan Benefits +Any future awards granted to employees, consultants, advisors and non-employee directors under the 2021 Plan are subject to the discretion of the Compensation Committee or the Board, as applicable, and therefore, are not determinable at this time. The "Grants of Plan-Based Awards" table below sets forth information with respect to prior awards granted to our named executive officers under the 2021 Plan during 2025. As of April 1, 2026, no stock options or SARs have been granted under the 2021 Plan, and no awards have been granted that are contingent on the approval of the 2021 Plan. +In addition, our non-employee directors are expected to receive annual grants on January 1 of each year consistent with the equity grants described below under “Director Compensation”. Because future awards are at the discretion of the Compensation Committee and the Board, the number of shares subject to future awards could increase or decrease and the type and terms of future awards could change as well, all without the need for future stockholder approval. If the Plan Amendment is approved, Patterson-UTI intends to thereafter register the additional shares authorized for grant under the 2021 Plan, as amended, on a Registration Statement on Form S-8 filed with the Securities and Exchange Commission. +The Board of Directors recommends a vote “FOR” the approval of the Plan Amendment. Approval of the proposal requires the affirmative vote of the holders of a majority of the shares of Common Stock present in person or by proxy and entitled to vote on the proposal. Unless you give contrary instructions in your proxy, your properly submitted proxy will be voted “FOR” approval of the proposal. Abstentions will be counted as shares entitled to vote on the proposal and will have the same effect as a vote “AGAINST” the proposal. A broker non-vote will not be treated as a share entitled to vote on the proposal and will have no effect on the outcome of the proposal. Brokerage firms, banks, broker-dealers, and other similar organizations do not have authority to vote on this proposal without instructions from the beneficial owner. +28 +PROPOSAL NO. 4 +ADVISORY APPROVAL OF EXECUTIVE COMPENSATION +In accordance with Section 14A of the Exchange Act, the Board of Directors is asking stockholders to approve a non-binding, advisory resolution to approve the compensation of Patterson-UTI’s executive officers who are named in the Summary Compensation Table appearing in this proxy statement (the “Named Executive Officers”). The compensation of the Named Executive Officers is described in the “Compensation Discussion and Analysis” and “Executive Compensation” sections of this proxy statement. +For a discussion of our stockholder engagement and compensation program alignment with stockholder interests, please see “Compensation Discussion and Analysis— Aligning Compensation Programs with Stockholder Interests.” +The compensation program for the Named Executive Officers is designed to attract and retain highly qualified individuals and to motivate and reward them for performance that benefits Patterson-UTI and its stockholders. The Compensation Committee and the Board of Directors believe that the policies and procedures detailed in the “Compensation Discussion and Analysis” achieve these goals by, among other things: +• providing a mix of short-term compensation in the form of base salary and annual cash incentive bonuses and long-term compensation in the form of restricted stock units, performance units, and, in some years, restricted stock, stock options and phantom units, which strikes a balance between offering competitive compensation packages and aligning compensation with long-term growth and creating value for stockholders; +• emphasizing variable equity and cash compensation to link realized compensation to performance; +• reviewing annual base salaries, in part, based on Patterson-UTI’s financial results and position and performance compared to similarly situated companies; +• providing performance-based annual cash incentive bonuses designed to place a meaningful portion of total compensation at risk; +• awarding long-term equity incentives whose value is tied to the achievement of certain performance goals and/or an increase in the price of the Common Stock; +• awarding long-term equity incentives that generally vest over periods of three years; and +• maintaining stock ownership requirements. +The Board of Directors is asking stockholders to approve the following non-binding, advisory resolution at the Meeting: +“RESOLVED, that the stockholders of Patterson-UTI Energy, Inc. (the “Company”) approve, on an advisory basis, the compensation of the Company’s Named Executive Officers, as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the compensation tables and other narrative discussion in the Proxy Statement for the 2026 Annual Meeting of Stockholders of the Company.” +This advisory resolution, commonly referred to as a “say-on-pay” resolution, is non-binding on the Board of Directors. Although non-binding, the Board of Directors and the Compensation Committee value the views of Patterson-UTI’s stockholders and will review and consider the voting results when (i) evaluating the effectiveness of Patterson-UTI’s compensation policies and practices and (ii) making future compensation decisions for the Named Executive Officers. As recommended by our stockholders at the 2023 annual meeting, Patterson-UTI currently holds an annual “say-on-pay” vote and thus, unless the Company changes its policy, expects that the next such vote after the 2026 annual meeting will be held at the 2027 annual meeting of stockholders. +The Board of Directors recommends a vote “FOR” the approval of the advisory resolution on executive compensation . Approval of the advisory resolution requires the affirmative vote of the holders of a majority of the shares of Common Stock entitled to vote on, and voted “FOR” or “AGAINST,” the proposal. Unless you give contrary instructions in your proxy, your properly submitted proxy will be voted “FOR” approval of the proposal. Abstentions will not be counted as votes cast “FOR” or “AGAINST” the proposal and will have no effect on the outcome of the proposal. A broker non-vote will not be treated as a vote cast “FOR” or “AGAINST” the proposal and will have no effect on the outcome of the proposal. +29 +EXECUTIVE OFFICERS +Set forth below is the name, age and position followed by a brief description of the business experience during at least the past five years for each executive officer who is not also a nominee for election to the Board of Directors. Each of our executive officers is appointed by the Board of Directors and serves at the discretion of our Board of Directors. +Named Executive Officer Age Title +William A. Hendricks, Jr 61 President and Chief Executive Officer and Director +C. Andrew Smith 55 Executive Vice President and Chief Financial Officer +James M. Holcomb 63 Executive Vice President and Chief Operating Officer +Seth D. Wexler 54 Executive Vice President, General Counsel and Secretary +Kenneth N. Berns 66 Executive Vice President and Chief Commercial Officer +C. Andrew Smith — Mr. Smith has served as Executive Vice President and Chief Financial Officer of Patterson-UTI since September 2017. From April 2014 until September 2017, Mr. Smith served as Executive Vice President and Chief Financial Officer of Kirby Corporation, a marine transportation and diesel engine services company. From January 2014 to April 2014, Mr. Smith served as Executive Vice President – Finance of Kirby Corporation. Prior to joining Kirby Corporation, Mr. Smith served as Senior Vice President and Chief Financial Officer of Benthic Geotech and was previously Chief Financial Officer for both Global Industries, LTD and NATCO Group. Mr. Smith holds a degree in business administration from the University of Houston. +James M. Holcomb — Mr. Holcomb has served as Executive Vice President and Chief Operating Officer since August 2025. Mr. Holcomb joined Patterson-UTI in February 1998 with the acquisition of Robertson Onshore Drilling Company, and since that time has served in numerous operational management roles, including as Chief Business Officer from September 2023 to August 2025, Chief Operating Officer from January 2023 to September 2023, as President of Patterson-UTI Drilling Company LLC, a wholly owned subsidiary of Patterson-UTI, from January 2012 to December 2022, and as Senior Vice President of Operations of Patterson-UTI Drilling Company LLC from April 2006 to January 2012. Mr. Holcomb has over 35 years of experience in contract drilling operations. Mr. Holcomb holds a Bachelor of Science Degree in Business Management from LeTourneau University. +Seth D. Wexler — Mr. Wexler has served as Executive Vice President, General Counsel and Secretary of Patterson-UTI since February 2024. Mr. Wexler served as Senior Vice President, General Counsel and Secretary of Patterson-UTI from February 2017 to February 2024, and as General Counsel and Secretary of Patterson-UTI from August 2009 to February 2017. From March 1998 to August 2009, he specialized in securities law and mergers and acquisitions for the law firm of Norton Rose Fulbright US LLP, including as a partner of such law firm since January 2007. Mr. Wexler holds a Bachelor of Business Administration in Finance from the University of Texas at Austin, a Juris Doctorate from the University of Houston Law Center and a Masters of Business Administration from the University of Houston. +Kenneth N. Berns — Mr. Berns has served as Executive Vice President and Chief Commercial Officer of Patterson-UTI since May 2017. Mr. Berns served as a director of Patterson-UTI from May 2001 to June 2017 and as Senior Vice President of Patterson-UTI from April 2003 to May 2017. Mr. Berns served as a director of UTI from 1995 to May 2001. Mr. Berns has been an executive with REMY Investors since 1994. Mr. Berns holds a Bachelor’s Degree in Business Administration from San Diego State University and a Master’s Degree in Taxation from Golden Gate University. +30 +COMPENSATION DISCUSSION AND ANALYSIS +This Compensation Discussion and Analysis (“CD&A”) sets forth the principal compensation policies and programs of Patterson-UTI for 2025 for our Named Executive Officers (“NEOs”). Our NEOs for 2025 were as follows: +Named Executive Officer Title +William Andrew Hendricks, Jr. Chief Executive Officer and President +C. Andrew Smith Executive Vice President and Chief Financial Officer +James M. Holcomb +Executive Vice President and Chief Operating Officer (1) +Seth D. Wexler +Executive Vice President, General Counsel and Secretary +Kenneth N. Berns Executive Vice President and Chief Commercial Officer +_____________ +(1) Mr. Holcomb served as Executive Vice President and Chief Business Officer from January 1, 2025 to August 8, 2025. He was appointed Patterson-UTI’s Executive Vice President and Chief Operating Officer on August 8, 2025. +2025 Company Highlights +In 2025, we achieved a number of key financial and strategic successes, including the following: +• Delivered another year of strong Operating Cash Flow through excellent operational execution in all of our business units and through a disciplined, company-wide focus on cash management and capital allocation; +• Returned nearly $200 million to shareholders in 2025 through share repurchases and dividends; +• Maintained our strong balance sheet and liquidity profile; +• Strengthened and maintained key customer relationships through delivery of top-tier operational performance, excellent customer service and new technologies, including the following successes: +◦ The Drilling Services segment successfully increased usage of performance-based drilling agreements, continued deployment of new automation technologies, controlled costs and improved operational efficiencies; +◦ The Completion Services segment deployed additional next-generation, emissions-friendly equipment, developed and deployed new digital platforms and frac automation technology; controlled costs through, among other things, more efficient maintenance programs and technology usage; and maintained relationships with key customers; and +◦ The Drilling Products segment increased revenue per rig in the United States, expanded its sales of and development of new downhole tools; and opened a new manufacturing facility in Saudi Arabia. +Aligning Compensation Programs with Stockholder Interests +Realized Compensation Closely Aligns with Performance +The oilfield services industry has experienced challenging market conditions in recent years due to various macro factors, including commodity prices, an uncertain geopolitical environment, changes to international tariffs and trade policies, inflationary pressures, the economic environment in the United States and elsewhere, customer consolidation and increased focus by exploration and production companies and service companies on capital returns. These conditions have collectively contributed to a decline in industry activity and our share price in recent years. +The Board of Directors and the Compensation Committee recognize the importance of aligning our compensation program with the Company’s performance and stockholder returns. Our executive compensation program emphasizes variable equity and cash compensation to link our executives’ realized compensation to Company performance, and a significant portion of our executive compensation is comprised of long-term equity +31 +incentives whose value is tied to the achievement of certain operational and financial performance goals and/or an increase in the price of our Common Stock. +These design practices reinforce a strong pay-for-performance philosophy and closely align our compensation program with the creation of long-term stockholder value. As a result, our NEOs' realized compensation meaningfully tracks our stock price performance. As illustrated in the chart below, over the past three years our CEO's realized pay has declined significantly in step with our stock price performance, underscoring the direct alignment between executive compensation and stockholder outcomes and demonstrating the rigor of our goal-setting and performance assessment processes. +_____________ +(1) Realized pay includes the actual base salary paid in each year, actual bonus paid in respect of each year, market value of phantom units, performance units and restricted stock units that vested in each year, and all other compensation as reported in the summary compensation table in respect of that year. +Minimizing Dilution During Period of Relatively Lower Stock Prices +We have historically issued our executive long-term incentive awards as share-settled awards. In 2025, in light of the decline in our stock price, the Compensation Committee determined to issue a portion of our equity-based awards in the form of cash-settled units in order to minimize the dilutive effect of these awards. The Compensation Committee believes that cash-settled units, which pay out in cash based on an average closing stock price calculated at the applicable vesting dates (for cash-settled RSUs) or the end of the final performance period (for cash-settled PSUs), retain the link between stock price performance and executive compensation, while minimizing the dilutive effect from the issuance of stock-settled awards during a period of relatively low stock prices. +Stockholder Support for Say-on-Pay and Engagement with Stockholders +While our Say-on-Pay proposal received 82% support at our most recent Annual Meeting of Stockholders, this result followed five consecutive years of exceptionally strong support, with approval of at least 96% at each Annual Meeting prior to 2025. The Compensation Committee carefully monitors year-over-year changes in stockholder support and takes such feedback seriously, while also placing significant weight on our frequency of strong approval. Taken together, these results reflect a compensation program that remains well aligned with stockholder interests. +In response to the 2025 Say-on-Pay vote outcome and other relevant factors, and consistent with our commitment to ongoing stockholder engagement, we requested meetings with stockholders representing approximately 79% of our outstanding shares and met with stockholders representing over 50% of our outstanding +32 +shares following the 2025 Annual Meeting. During these discussions, we listened carefully to stockholder perspectives, addressed questions regarding our compensation philosophy and decision-making processes, and solicited feedback on our strategy, operations, capital allocation philosophy, and compensation program. +As a result of this engagement, no significant concerns were raised regarding the overall structure of our compensation program, and no specific changes were made in response to the 2025 Say-on-Pay vote or stockholder meetings. The Compensation Committee believes that the generally supportive feedback received through this outreach is consistent with our long-standing history of strong Say-on-Pay support and reflects continued alignment between our compensation program and stockholder interests. Nevertheless, the Committee will continue to carefully evaluate future Say-on-Pay results and other stockholder feedback as part of its ongoing oversight of executive compensation for our NEOs. +Good Governance and Compensation Practices Aligned with Stockholders +We are mindful of the positive impact that strong corporate governance has on maintaining an executive compensation program that is aligned with the interests of our stockholders. In designing the current executive compensation program, we incorporate various best practices for compensation governance, including those summarized below. +What We Do What We Don’t Do +þ Provide a balanced mix of cash and equity compensation with long-term incentives accounting for 50% or more of total target compensation +þ Grant more than 50% of long-term incentives (by target value) with performance-based vesting conditions +þ Award variable compensation earned based on both absolute performance and performance versus peers +þ Maintain meaningful share ownership requirements for our executive officers and directors +þ Maintain an anti-pledging policy for our executive officers and directors (subject to a limited waiver for a legacy NexTier director, which is described in "Anti-Pledging Policy" below) +þ Maintain an anti-hedging policy for our executive officers and directors +þ Engage independent compensation consultant +þ Hold an annual Say-on-Pay vote and solicit more robust feedback from stockholders +x No above-target payouts on relative TSR awards when absolute TSR is negative +x No re-pricing of options +x No single trigger change-of-control severance arrangements +x No dividends or dividend equivalents paid unless and until underlying award vests +x No new agreements with tax gross-ups and none entered into in more than 20 years +x No material perquisites to NEOs +x No single trigger change-of-control equity-based grants for our executive officers +33 +What Guides Our Program +Our overriding philosophy for the compensation of our key executives is to link their compensation with Patterson-UTI’s operational and market performance and to establish incentives that reward our executives for their achievement of both short-term tactical and long-term strategic objectives. In doing so, we seek to offer competitive compensation designed to attract and retain highly qualified individuals and to motivate and reward our executives in achieving Patterson-UTI’s goals. Specifically, the 2025 program was designed to reinforce the following goals: +Patterson-UTI Goals +How Goal Was Reinforced in Our 2025 Compensation Program +Provide quality services for our customers in a safe and efficient manner +• Our 2025 annual cash bonus incentive plan included “Health, Safety +and Environmental” performance as a distinct metric (weighted at 10%), with certain goals requiring outperformance relative to industry peers +• Our financial performance metrics required quality operational performance +Generate strong financial performance and returns for our stockholders +• The majority of executive compensation was delivered in the form of variable, at-risk compensation (as referenced in the charts below) aligned with stockholder interests +• The majority of the target payout under our 2025 annual cash bonus incentive plan was based on financial performance metrics (80%) +• Our 2025 annual cash bonus incentive plan was designed to reward executives for cash flow generation and profitability through the use of Operating Cash Flow and Adjusted EBITDA as the primary performance metrics +• Our long-term incentive plan incentivizes the creation of stockholder value on both an absolute and relative basis through the grant of equity compensation and the use of absolute and relative TSR performance goals under our TSR performance units +• For 2025, we introduced “FCF performance units” that vest based on relative cash flow performance goals, in order to incentivize cash flow generation +Attract and retain highly qualified individuals, with a strong emphasis on teams working together to capitalize +on opportunities and solve problems +• We benchmarked our executive pay programs against oilfield services companies, oil and gas exploration and production companies and industrial companies +• We did not target a specific market percentile for executive compensation. Instead, executive compensation was set based on a holistic review of several factors, including market pay levels, individual performance and qualifications, and executive tenure +• Our annual and long-term incentive programs generally reward company-wide results rather than performance against individual objectives +• The majority of our executives’ compensation was delivered in the form of long-term incentives that vest over a multi-year period to aid in retention of executives +34 +For 2025, target total direct compensation for our NEOs was most heavily weighted toward long-term incentives, with the majority of long-term incentive compensation subject to performance-based vesting criteria, as shown below. +2025 TARGET TOTAL DIRECT COMPENSATION +Process for Determination of Executive Compensation +Role of the Compensation Committee +The Board of Directors has delegated the management of Patterson-UTI’s executive compensation program to the Compensation Committee. The Compensation Committee meets on a regular basis to consider compensation matters and to review how Patterson-UTI’s plans and policies work in practice. Each of the Compensation Committee’s current members is an independent director as defined by the Nasdaq listing standards. +Independent, Outside Compensation Consultant +Our Compensation Committee regularly utilizes outside compensation consultants to help assess and design our executive compensation program. These consultants are paid on either a basic, fixed-fee structure plus expenses or an hourly rate structure plus expenses. These outside consultants provide data and advice on historical compensation, market trends and peer compensation practices. The Compensation Committee has retained Pay Governance LLC (“Pay Governance”) since October 2024 to advise on executive compensation matters. +Our Compensation Committee regularly reviews the services provided by its outside consultants and has determined that the engagement of Pay Governance does not raise any conflicts of interest. The Compensation Committee receives a confirmation certification of independence from its consultants annually. +In 2025, Pay Governance provided the Compensation Committee with advice regarding the peer group used to benchmark executive pay levels for purposes of setting executive compensation, information on the compensation practices of our peer group and other oilfield service companies and on the reasonableness of our program as compared to the compensation practices of our peer group. In so doing, Pay Governance provided the Compensation Committee with information on each element of total direct compensation for our executive officers as well as a comparison of each such element of compensation against our peers and the broader oilfield services, oil and gas exploration and production and industrials markets. Pay Governance also provided the Compensation Committee with information on the cost and potential dilution to our stockholders of our equity-based incentives and compared our equity usage to that of our peer group. During 2025, Pay Governance did not provide any services to us other than consulting services for the Compensation Committee and providing compensation benchmarking data for certain of our employee groups. +35 +Role of Management and Feedback of Others +In making compensation determinations, including annual bonus plan design and equity award grants, the Compensation Committee also seeks input from management through our CEO. +Our CEO provides the Compensation Committee with reviews of the performance of other executive officers and senior managers, including the other NEOs. He also engages in an annual dialogue with our Committee Chairman and the Chairman of the Board on our compensation program and seeks their input on and review of proposals for long-term incentive grants. This process results in a recommendation that is then considered by our Compensation Committee as a whole. The Compensation Committee meets in executive session without our CEO present, and our CEO is not involved in decisions relating to his compensation. +In addition to the recommendations of management and consultants, the Compensation Committee considers feedback from Patterson-UTI’s stockholders, guidelines of proxy advisory firms, reported trends in compensation, internal budgets, historical data for the Company and its peers, strategic planning updates, executive retention risk and other information that it considers relevant. +2025 Compensation Peer Group +In late 2024, the Compensation Committee worked with Pay Governance to review the compensation peer group to benchmark executive pay levels for purposes of setting 2025 executive compensation. No changes were made as a result of this review. At the time the 2025 compensation peer group was confirmed, the Company was at the 45 th percentile for projected 2025 revenues as compared to the peer group and at the 65 th percentile for trailing twelve month EBITDA as compared to the peer group. +2025 Compensation Peer Group +Antero Resources Corporation +APA Corporation +ChampionX Corporation +Diamondback Energy, Inc. +Dover Corporation Fluor Corporation +Halliburton Company +Helmerich & Payne, Inc. +Ingersoll Rand Inc. +KBR, Inc. Liberty Energy Inc. +Nabors Industries Ltd. +NOV, Inc. +TechnipFMC plc +Weatherford International plc +2025 Performance Peer Group +The Compensation Committee also worked with Pay Governance to establish the following 2025 performance peer group, which is used to assess relative performance for the Company’s 2025 performance units. +2025 Performance Peer Group +Baker Hughes Company +Ensign Energy Services Inc. +Expro Group Holdings N.V. +Halliburton Company Helmerich & Payne, Inc. +Liberty Energy Inc. +Nabors Industries Ltd. +Precision Drilling Corporation ProFrac Holding Corp. +ProPetro Holding Corp. +Schlumberger Limited +Weatherford International plc +2026 Compensation Peer Group +In late 2025, the Compensation Committee worked with Pay Governance to review the compensation peer group to benchmark executive pay levels for purposes of setting 2026 executive compensation. +As part of its annual peer group review, the Compensation Committee removed ChampionX, which had been acquired, removed APA, Dover and Fluor, and added Flowserve, Noble Corp., Oceaneering, Transocean and Valaris. These changes reflect a deliberate shift away from industrial and exploration and production companies in favor of peers that are more closely aligned with the Company’s drilling-and services-oriented business profile. +In evaluating both existing and potential peer group companies, the Compensation Committee considered each company’s operational footprint, revenue, EBITDA, market capitalization, and frequency of inclusion in peer groups among similarly situated companies. The resulting changes also appropriately right-sized the peer group in terms of revenue, market capitalization, and EBITDA. Based on these considerations, the Compensation Committee established the 2026 compensation peer group set forth below. +36 +At the time the 2026 compensation peer group was established, the Company was at the 51 st percentile for projected 2025 revenues and the 40 th percentile for trailing twelve-month EBITDA relative to the peer group. +2026 Compensation Peer Group +Antero Resources Corporation +Diamondback Energy, Inc. +Flowserve Corporation +Halliburton Company +Helmerich & Payne, Inc. +Ingersoll Rand Inc. KBR, Inc. +Liberty Energy Inc. +Nabors Industries Ltd. +Noble Corporation plc +NOV, Inc. +Oceaneering International, Inc. +TechnipFMC plc +Transocean Ltd. +Valaris Limited +Weatherford International plc +Components of 2025 Compensation +Base Salary +Base salaries are reviewed annually by the Compensation Committee, which considers, among other things, competitive pay practices, the results achieved by each executive, future potential contributions, scope of responsibilities and experience, tenure, executive retention risk, cost of living increases, and the magnitude of any recent increases. The annual review of base salaries by the Compensation Committee in December 2024 resulted in no increase to the base salaries of our NEOs for 2025, and the annual review of base salaries by the Compensation Committee in February 2026 resulted in no increase to the base salaries of our NEOs for 2026 . +NEO 2025 Annual Base Salary % Increase Over +2024 Annual Base Salary +William Andrew Hendricks, Jr. $ 1,300,000 0 % +C. Andrew Smith $ 680,000 0 % +James M. Holcomb $ 670,000 0 % +Seth D. Wexler $ 650,000 0 % +Kenneth N. Berns $ 590,000 0 % +Annual Incentive Compensation +In 2025, the Compensation Committee adopted an annual cash bonus program that used multiple, pre-established objectives for determining bonus compensation. The bonus plan set a target opportunity for each executive’s annual cash bonus as a percentage of salary, with payout contingent upon meeting Patterson-UTI’s financial goals and other key performance indicators (KPIs). The Compensation Committee considered the average range of performance and payouts, and believed – based on advice from its compensation consultant – that Patterson-UTI’s performance range was consistent with typical, general industry practice. +In December 2024, the Compensation Committee reviewed the target annual cash bonus opportunities as a percentage of base salary for our NEOs, and no changes were made to 2025 target bonuses as a result of this review. +NEO +2025 Target Annual Cash Bonus (as a percentage of base salary) +William Andrew Hendricks, Jr. 125% +C. Andrew Smith 110% +James M. Holcomb 100% +Seth D. Wexler 100% +Kenneth N. Berns 100% +37 +The metrics for the 2025 annual cash bonus program were generally consistent with those used in our 2024 annual cash incentive plan. A summary of the weighting, description and rationale for each metric is provided in the table below. +2025 ANNUAL CASH INCENTIVE METRICS +Metric (Weighting) Description Rationale +Operating Cash Flow (60%) +For purposes of our annual cash bonus program, Operating Cash Flow is defined as net cash provided by operating activities (excluding, for the purposes of the annual cash bonus program, any non-operating expenses such as merger and integration expenses and restructuring costs and the effects of customer prepayments) less net capital expenditures (as adjusted for any Board-approved increase in capital expenditures after targets are set). +Target Operating Cash Flow for 2025 was set at $374.8 million. +Our continued focus on cash flow generation during 2025 furthered our goal of having a business model that is self-sustaining, can weather the ebbs and flows of the commodity and business cycle, can endure extreme events, and allows for return of capital to stockholders. +We believe the potential exclusion of certain non-operating expenses is a better reflection of our actual performance. +Despite being set below our 2024 actual results, we believe the 2025 goal was rigorous as it aligned with our internal budget, which was set based on both then-existing market conditions and our projections for challenging industry- and oil price-related conditions during 2025. +Adjusted EBITDA (20%) +Adjusted EBITDA is defined as net income (loss) plus income tax expense (benefit), net interest expense, depreciation, depletion, amortization and impairment expense, legal accruals and settlements and impairment of goodwill, excluding, for the purposes of the annual cash bonus program, any non-operating expenses such as merger and integration expenses and restructuring costs. +Target Adjusted EBITDA for 2025 was set at $953.3 million. +The Compensation Committee continued to include Adjusted EBITDA as a metric for the 2025 program as this metric establishes a clear and consistent link to the Company’s financial performance. Additionally, Adjusted EBITDA is a significant metric used by analysts in evaluating the Company and is therefore, we believe, a key driver of the Company’s stock price. +Despite being set below our 2024 actual results, we believe the 2025 goal was rigorous as it aligned with our internal budget, which was set based on both then-existing market conditions and our projections for challenging industry- and oil price-related conditions during 2025. +Health, Safety and Environmental (10%) +Holistic evaluation of HSE factors, including without limitation, maintenance of safety incident rate below a pre-determined rate that was better than the industry average, maintenance of motor vehicle incident rate below a pre-determined rate, maintenance of training, reporting, investigation and remedial actions to reduce the fatality and impairment incident (“FPI”) rate and the FPI near miss reporting rate, maintenance of environmental regulatory compliance, reduction of environmental incidents, and improvement of HSE training. +The Compensation Committee views health, safety, and environmental factors as a component of the Company’s risk management and critical to the well-being of the Company’s employees, other personnel and the communities in which we work. +Strategy (10%) +Taking demonstrable and meaningful actions to maximize shareholder value. +This KPI encompassed actions that could position the Company for short-term and long-term success, such as positioning the Company to increase its return of capital to shareholders, improving the Company's balance sheet, strengthening customer relationships, pursuing strategic opportunities and developing and deploying technology. +The Compensation Committee set a strategic action goal as it believed achievement of this goal would improve our competitive position, financial results and stockholder returns. +38 +The Compensation Committee’s practice is to take into account market conditions when setting annual bonus targets (for example, in prior years the Compensation Committee has significantly increased the performance required to achieve a target payout under relevant financial metrics in light of anticipated improved market conditions when the targets were set). For the 2025 annual cash bonus plan, the Compensation Committee set the performance levels required to achieve target payouts under the financial metrics after considering the more challenging industry and market conditions the Company was facing and the Company's internal budget at the time the goals were established. +The overall annual cash bonus plan for 2025 required achievement of a threshold level of 80% of target performance on both the Operating Cash Flow and Adjusted EBITDA metrics before any payouts with respect to such metrics could be earned. Once the relevant threshold was met, the annual cash bonus opportunity attributable to the Operating Cash Flow and Adjusted EBITDA metrics was calculated based on actual performance, with a 50% payout for threshold achievement, 100% payout for target achievement, and 200% payout for maximum achievement. Linear interpolation would be used to calculate the payouts for performance between achievement levels. +For the Health, Safety and Environmental KPI and the Strategy KPI, the target annual cash bonus opportunity would be based on the Compensation Committee’s holistic assessment of the achievement of the elements of each KPI and any payout above target would require material outperformance. +The achievement levels under the annual cash bonus plan for our NEOs were calculated as follows: +2025 ANNUAL INCENTIVE METRICS AND PERCENTAGE PAYOUT CALCULATIONS +($ in millions) +Metrics Threshold Target Maximum Actual Metric Achievement Percentage Metric +Weighting Weighted Achievement Percentage +Operating Cash Flow $ 299.8 $ 374.8 $ 449.8 $ 401.3 (1) 107% 60% 81% +Adjusted EBITDA $ 762.6 $ 953.3 $ 1,144.0 $ 917.6 (1) 96% 20% 18% +Health, Safety and Environmental (2) 200% 10% 20% +Strategy (3) 200% 10% 20% +Total 100% 139% +_____________ +(1) As discussed above in “2025 Annual Cash Incentive Metrics,” the calculation of actual performance on the financial metrics provided for certain adjustments and the exclusion of certain non-operating expenses; however, there were no adjustments other than the exclusion of the effect of customer prepayments. +(2) The Committee determined that the NEOs met 200% achievement for this metric based on: +• the significant reduction in the overall total recordable incident rate; +• the significant reduction in the motor vehicle incident rate; +• the improved training, reporting and investigations and other actions taken to reduce FPIs and improve FPI near miss reporting; +• maintaining regulatory compliance and the reduction in the number of incidents with an environmental impact; and +• the improvement in training generally, including the development of new driver safety training programs. +(3) The Committee determined that the NEOs met 200% achievement for this metric based on, among other things, (i) the return of nearly $200 million of capital to the Company’s shareholders in 2025, (ii) improving the efficiency and quality of operations, (iii) successful operational management promotions and succession planning, (iv) maintaining an investment grade credit rating at the three major credit ratings agencies, and continuing to strengthen the Company’s balance sheet, and (v) continued success in technology development and deployment in the Company’s businesses. The Committee further considered the Company’s efforts to expand internationally +The applicable payout percentage was applied to each executive’s bonus target as follows to determine actual 2025 cash bonus payments: +2025 ANNUAL INCENTIVE CASH BONUS +NEO Target Bonus Bonus Payout +(as a % of Target, +rounded) Actual Bonus +William Andrew Hendricks, Jr. $ 1,625,000 139% $ 2,264,330 +C. Andrew Smith $ 748,000 139% $ 1,042,290 +James M. Holcomb $ 670,000 139% $ 933,600 +Seth D. Wexler $ 650,000 139% $ 905,730 +Kenneth N. Berns $ 590,000 139% $ 822,130 +39 +The Committee determined that the payout under the 2025 annual cash bonus program at 139% of target appropriately reflected the Company’s solid performance against its pre-established objectives in 2025. The Company achieved 107% of its operating cash flow target and 96% of its adjusted EBITDA target, while attaining maximum performance on the health, safety and environmental component (200%) and on each of the strategic priorities (200%). These strategic priorities included the return of nearly $200 million of capital to shareholders, meaningful progress in operational efficiency and service quality, successful management promotions and succession planning, maintenance of investment grade credit ratings with the three major agencies, continued balance sheet strengthening, and sustained advancement in technology development and deployment. +In light of these results, particularly the strong cash flow generation and significant achievement across safety and strategic objectives, the Committee concluded that the above-target payout was warranted, even amid challenging industry and market conditions. The Committee believes these accomplishments strengthen the Company’s financial profile, position it for sustained execution, and support its ability to create long-term shareholder value. +The Committee also recognizes that the Company's long-term incentive program, which includes a significant relative TSR component over a three-year period, is specifically designed to align executive compensation with sustained shareholder returns relative to peers. While the trailing three-year relative TSR performance resulted in no payout under that metric in 2025, the annual cash bonus program appropriately rewards strong annual operational and financial execution that contributes to the foundational drivers of long-term value creation. The Committee views the complementary nature of the short-term incentive and long-term incentive programs as intentional, with the short-term incentive focused on near-term execution and key strategic milestones and the long-term incentive focused on relative shareholder return over time, thereby ensuring balanced incentives that drive both immediate progress and enduring alignment with shareholders. +Other Bonuses +As discussed in more detail in “Employment-Related Agreements and Other Matters” below, Mr. Holcomb also received retention payments totaling $750,000 during 2025 pursuant to his letter agreement entered into in connection with the NexTier merger. The final payment under this letter agreement was made in September 2025. +Long-Term Incentive Compensation +We have historically delivered the majority of total NEO compensation in the form of equity-based awards and continued to do so in 2025. This emphasis on equity-based compensation enhances alignment between our executives and our stockholders. We plan to retain this emphasis going forward, and we believe that by tying a large portion of compensation to equity we ensure that our NEOs can only fully realize the potential value of their compensation if our stockholders also benefit. All of the long-term incentive awards granted in 2025 vest over a three-year period. As described above, while the value of any realized payouts remains tied directly to our stock price performance, the Compensation Committee determined to issue a portion of 2025 equity-based awards as cash-settled units to minimize their dilutive effect. +40 +2025 Long- +Term Incentive +Award Type +2025 Award Design Alignment with Philosophy +Restricted Stock Units +(49% of LTI Mix) +• Time-vested units that are settled in shares of stock (59% of RSUs for 2025) or cash (41% of RSUs for 2025) +• 1/3 of each award vests annually over a three-year period +• Value dependent upon stock price performance +• Enhances retention of executive talent +• Share-settled RSUs encourage long-term share ownership +• Cash-settled RSUs mitigate share dilution +Performance Units (51% of LTI Mix), consisting of: +TSR Performance +Units +(50% of Performance Unit Mix; 25.5% of Total LTI Mix) +• Performance-vested units that are settled in cash +• Number of units earned depends upon TSR performance relative to our peers over one-, two- and three-year periods, each commencing on April 1, 2025 (each, a “performance period”) +• No shares will vest and be delivered until after completion of the three-year performance period +• Relative TSR calculation for 2025 performance units includes the performance peer group members listed above +• For each of the TSR performance periods: +◦ No shares are earned for performance below the 25 th percentile +◦ Target shares are not earned unless performance is at the 55 th percentile +◦ Maximum shares are not earned unless performance is at the 75th percentile or above +◦ No greater than the target amount of shares may be earned for each of the one- and two-year TSR performance periods, unless absolute TSR during the three-year TSR performance period is greater than absolute TSR, as applicable, for the one- and/or two-year TSR performance period, in which case, the number of shares earned in respect of the one- and/or two-year TSR performance period, as applicable, will be determined as if our absolute TSR during the three-year TSR performance period was our absolute TSR during the one- and/or two-year TSR performance period +• Total payout is capped at “target” amount if absolute TSR during the three-year performance period is not positive +• Performance-contingent +• Number of units earned dependent upon performance relative to peers and absolute performance +• Value of cash payout dependent upon stock price +• Cash-settled units mitigate share dilution +• Above-median performance is required to achieve a target payout +• Multiple performance periods during the three-year period incentivizes relative and absolute stock outperformance throughout the three-year period +• Three-year vesting period provides a retention incentive +FCF Performance Units +(50% of Performance Unit Mix; 25.5% of Total LTI Mix) +• Performance-vested units that are settled in shares of stock +• Number of units earned depends upon free cash flow return performance relative to our peers over a three-year period commencing on January 1, 2025 (the “FCF performance period”) +• No shares will vest and be delivered until after completion of the three-year FCF performance period +• Relative cash flow return calculation for 2025 performance units includes the performance peer group members listed above +• No shares are earned for performance below the 25th percentile +• Target shares are not earned unless performance is at the 55th percentile +• Maximum shares are not earned unless performance is at the 75th percentile or above +• Performance-contingent +• Number of shares earned dependent upon performance relative to peers +• Value of shares dependent upon stock price +• Above-median performance is required to achieve a target payout +• Three-year vesting period provides for a retention incentive +41 +2025 Long-Term Incentive Grants +The Compensation Committee approved the following long-term incentive target award values for our NEOs in 2025. In determining the 2025 LTI grants, the Compensation Committee considered Patterson-UTI’s 2024 financial results and comparative TSR performance over the one-, two- and three-year periods ended March 31, 2025. The target value of the grants was determined with the assistance of the Compensation Committee's compensation consultant and was set at levels that the compensation consultant viewed as reasonable in relation to the Company’s performance peer group. There were no increases in 2025 LTI target value amounts from the 2024 LTI grants. +2025 Long-Term Incentive Grants +NEO 2025 Target Value % Increase Over 2024 Target Value +William Andrew Hendricks, Jr. $ 8,500,000 0 % +C. Andrew Smith $ 2,100,000 0 % +James M. Holcomb $ 2,000,000 0 % +Seth D. Wexler $ 1,800,000 0 % +Kenneth N. Berns $ 1,750,000 0 % +No Payout in 2025 of 2022 Performance Unit Awards +The performance-based LTI awards granted to the NEOs in 2022 were TSR performance units that had a three-year performance period that ended on March 31, 2025. For that three-year performance period, Patterson-UTI’s TSR was 44.0%. This performance was at the 7 th percentile relative to our 2022 peer group. While this performance was positive on an absolute basis, based on relative performance no payout was earned under the 2022 performance units. +Retirement Plans +Patterson-UTI offers a 401(k) plan to its employees, including its NEOs (the “Patterson-UTI 401(k) Plan”). Participants may contribute a portion of their base salary to the 401(k) plan, subject to federal limits. During 2025, Patterson-UTI made matching contributions up to 100% of the first 4% of each participant’s eligible base salary, and up to 50% of the next 2% of each participant’s eligible base salary. Our NEOs are eligible to participate in the Patterson-UTI 401(k) plan on the same basis as other employees. Our NEOs do not participate in any other retirement plans, except for a qualified retiree program, which provides continued vesting for long-term and short-term incentive awards upon retirement of eligible retirees. For additional details, see “Employment-Related Agreements and Other Matters” below. +Other Executive Compensation Matters +Share Ownership Guidelines and Stock Holding Requirements +We have had significant share ownership requirements in place for more than 15 years. Our share ownership guidelines are applicable to all Section 16 officers and directors of Patterson-UTI. We believe share ownership requirements are an important tool to ensure that officers and directors remain invested in Patterson-UTI and aligned with the interests of our stockholders. +Each Section 16 officer or non-executive Director has five years from the date of appointment or election to their position to satisfy the ownership guidelines. The Nominating and Corporate Governance Committee may, from time to time, reevaluate and revise an individual’s guidelines to incorporate pay changes, promotions or other events. +Share Ownership Guidelines +President and Chief Executive Officer Number of shares equal to 5 times base salary +Other Section 16 Officers Number of shares equal to 2 times base salary +Outside Directors Number of shares equal to 5 times annual base cash retainer +Share value for purposes of the guidelines is determined based on (i) the closing price on the date of grant for vested or unvested awards or, in the case of open market purchases, the closing price on the date of acquisition or (ii) the average closing price over the previous 12 months, whichever would result in a greater aggregate value. Share +42 +ownership for purposes of the guidelines includes unvested time-based equity incentive awards, and unvested performance-based equity incentive awards only once the performance-based component has been satisfied. +Each Section 16 officer and director is required to maintain ownership of the net after-tax shares of Common Stock acquired pursuant to any equity-based awards received from Patterson-UTI, unless such person has met his or her individual ownership requirement. +Each person subject to this policy was in compliance with these guidelines as of the date of this proxy statement. +Equity Award Grant Practices +Patterson-UTI does not currently grant stock options. Restricted stock unit and performance unit award target values are typically approved at our regularly scheduled compensation committee meetings near the end of April. The number of units granted is then calculated based on our closing stock price after the completion of two full trading days following the filing of our Form 10-Q for the first quarter. Patterson-UTI may also grant awards at other times during the year, typically in connection with new hires or promotions, and may change its equity grant practices in the future. During 2025, the Compensation Committee did not consider material non-public information when determining the timing or terms of equity awards, and Patterson-UTI did not time the disclosure of material non-public information for the purpose of affecting the value of executive compensation. +Clawback Policy +Patterson-UTI has a Clawback Policy that complies with the requirements of Nasdaq Stock Market Listing Standard 5608 implementing Rule 10D-1 under the Securities Exchange Act of 1934, which requires the recovery of certain excess incentive-based compensation from an executive officer in the event that Patterson-UTI is required to prepare an accounting restatement of its financial statements due to its material non-compliance with any financial reporting requirement under the federal securities laws. +If the Compensation Committee determines the amount of incentive-based compensation received by an executive officer during the prior three fiscal years exceeds the amount that would have been received if determined or calculated based on Patterson-UTI’s restated financial results, such excess amount of incentive-based compensation shall be subject to recoupment by Patterson-UTI pursuant to the Clawback Policy. The Compensation Committee may effect any recovery pursuant to the Clawback Policy by requiring payment of amount(s) to Patterson-UTI, by set-off, by reducing future compensation, or by such other means or combination of means as the Compensation Committee determines to be appropriate. +In addition to this stand-alone policy, Patterson-UTI’s 2021 Plan, as amended, provides that if Patterson-UTI is required to prepare an accounting restatement due to the material noncompliance of Patterson-UTI, as a result of misconduct, with any financial reporting requirement under the securities laws, and if the participant is one of the persons subject to automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002 or the Participant engaged in such misconduct, such participant (regardless of whether a covered executive under the Clawback Policy) may be required to (or, if required by law, shall be required to) reimburse Patterson-UTI the amount of any payment in settlement of an award earned or accrued during the 12-month period following the first public issuance or filing with the SEC (whichever just occurred) of the financial document embodying such financial statement requirement. +Anti-Pledging Policy +Patterson-UTI has an anti-pledging policy. Our directors and executive officers generally may not engage in transactions in which Patterson-UTI securities are used as collateral for any loan, including, but not limited to, “margin loans” in a brokerage account. One of our directors, a former NexTier director, Mr. Stewart, had NexTier shares pledged as collateral for an asset-based loan prior to the closing of the NexTier merger. The Patterson-UTI Board of Directors approved a waiver of the anti-pledging policy with respect to Mr. Stewart’s pledged shares in connection with the closing of the NexTier merger, and in October 2024, approved an increase to the number of shares permitted to be pledged under this waiver. +Anti-Hedging Policy +Patterson-UTI has an anti-hedging policy for directors and executive officers. Our directors and executive officers and their respective spouses and minor children are prohibited from engaging in hedging or monetization transactions, including but not limited to prepaid variable forward contracts, equity swaps, collars, exchange funds, +43 +purchasing, selling or writing options or transacting in other third-party derivative securities that primarily involve or reference Patterson-UTI equity securities. This policy does not apply broadly to other employees. +Perquisites and Personal Benefits +The Compensation Committee believes that benefits to executives should generally be aligned with those provided for other employees. No Named Executive Officer received perquisites during 2025 with an aggregate incremental cost to the Company of more than $10,000. +Evaluation of Compensation Risk +We have considered the potential risks associated with the design of our compensation programs for employees. Regarding our executive compensation program in particular, we do not believe that our program creates unreasonable risks for the following reasons: +• The emphasis on long-term equity based awards and the required vesting periods help minimize the potential for excessive risk taking and actions aimed at short-term stock gains; +• Our use of different types of equity grants helps offset these risks; +• We have meaningful share ownership guidelines; +• We maintain an anti-hedging policy; +• We maintain a clawback policy that applies to all our executive officers for both cash and equity incentives; and +• The NEOs have been employed by Patterson-UTI for many years and have an established track record of focus on managing Patterson-UTI for long-term success. +Our Board has also considered in its risk assessment of our compensation program its view that our management is highly ethical and focused on creating true long-term value for stockholders and not focused on just short-term gains. The Board, primarily through its Compensation Committee and Audit Committee, monitors and considers risks associated with Patterson-UTI’s compensation plans on a regular basis. +Employment-Related Agreements and Other Matters +Employment, Change in Control and Severance Agreements +Employment Agreements. Patterson-UTI is party to an employment agreement with each of Messrs. Hendricks, Wexler, Holcomb and Smith. Each employment agreement generally has an initial three-year term, and unless earlier terminated as provided therein, has a one year automatic annual extension each year. Each employment agreement provides for a specified base salary, subject to any increases that may be granted in the future. The employment agreements also provide for, among other things, severance payments following termination by Patterson-UTI of the executive other than for cause, or termination by the executive for good reason (as defined in the employment agreement). As discussed in more detail below, the employment agreements contain change in control provisions. +Holcomb Letter Agreements. Mr. Holcomb has served as an employee of the Company for over 25 years, including serving as a key member of the Company’s executive team for over 10 years, and the Compensation Committee believes that Mr. Holcomb is instrumental to the Company’s future success. Prior to the closing of the NexTier merger, Mr. Holcomb served as the Company’s Chief Operating Officer, with responsibility for overseeing the Company’s completions business. Pursuant to the terms of the merger agreement with NexTier, oversight of the Company’s completion business was removed from Mr. Holcomb’s duties, which triggered Mr. Holcomb's right to resign for "good reason" and receive severance benefits per his employment agreement. To encourage Mr. Holcomb to remain employed with the Company at the time of the closing of the NexTier merger, Patterson-UTI entered into a letter agreement with Mr. Holcomb that provided for his transition to the role of Executive Vice President and Chief Business Officer. This letter agreement further provided that, following the one-year anniversary of the closing of the NexTier merger, Mr. Holcomb would no longer have “good reason” to terminate his employment with Patterson-UTI due to the transition of his role in connection with the NexTier merger and any resulting changes in his authority, duties or responsibilities. The letter agreement also provided for a $2 million cash retention bonus, payable in eight quarterly installments following the closing of the NexTier merger (with the final installment paid in September 2025). +44 +In August 2024, Patterson-UTI entered into a second letter agreement with Mr. Holcomb, and in August 2025, Patterson-UTI entered into a promotion letter agreement with Mr. Holcomb, each modifying certain terms of his employment agreement. Specifically, Mr. Holcomb may continue in his current role as Executive Vice President and Chief Operating Officer of the Company until (i) December 31, 2026 (if Mr. Holcomb so elects and provides at least three months’ prior notice to the Company), or (ii) December 31, 2027 (as applicable, the “Transition Date”). From the Transition Date through September 30, 2030, Mr. Holcomb has agreed to serve as a non-executive advisor, providing transition and advisory services as and when reasonably requested by the Company’s Chief Executive Officer or his designee. During such advisory period, Mr. Holcomb will receive a reduced base salary at 55% of the level in effect on the Transition Date but will receive no further bonuses or grants under the Company’s cash or equity-based incentive programs. The Compensation Committee expects that Mr. Holcomb's continued service during his transition period will be highly beneficial to the Company due to his lengthy tenure with the Company, and in particular due to his experience with, and knowledge of, the Company's Drilling Services business. During the transition period, Mr. Holcomb is expected to provide, among other things, assistance with the retention of key customer relationships, as well as advice and support to executive leadership and the leadership teams within the Drilling Services, Completion Services and Drilling Products segments. +Mr. Holcomb will not be entitled to any severance payments and benefits upon his termination of employment on September 30, 2030, and if Mr. Holcomb voluntarily resigns prior to September 30, 2030, he will not be eligible for any benefits under the Company’s qualified retiree program or accelerated vesting of any performance-based equity awards on account of a termination of employment due to retirement. Mr. Holcomb's promotion letter agreement provides that any further change to Mr. Holcomb's position, authority, duties or responsibilities shall not be deemed to give rise to “good reason” for resignation under Mr. Holcomb's (a) employment agreement, (b) any equity or equity-based award agreement or (c) any other agreement between Mr. Holcomb and the Company or any of its affiliates that provides Mr. Holcomb with a right to resign his employment for “good reason”; provided, that in connection with such event or occurrence, Mr. Holcomb's base salary, target annual bonus and target annual equity incentive compensation are not reduced. +Change in Control Agreements and Tax Gross-Up Payments. Patterson-UTI entered into a change-in-control agreement with Mr. Berns in 2004 and employment agreements with Messrs. Hendricks, Smith, Holcomb and Wexler that contain change-in-control provisions, as further described below. Patterson-UTI believes that such agreements may under certain circumstances protect Patterson-UTI’s interest by discouraging the NEOs from leaving employment out of concern for the security of their jobs or from otherwise being unable to concentrate on their work. We believe that the change in control agreements may also help Patterson-UTI attract and retain new key employees by reducing the personal uncertainty and anxiety that arises from the possibility of a future business combination. Any future change in control or severance agreements will be approved subject to the circumstances existing at the time. +As was customary when the change in control agreement with Mr. Berns was entered into more than 20 years ago, the change-in-control agreement provides Mr. Berns with a full gross-up payment for any excise taxes imposed on payments and benefits received under the change-in-control agreement or otherwise, including other taxes that may be imposed as a result of the gross-up payment. As indicated above, the Compensation Committee subsequently adopted a policy, more than ten years ago, to no longer approve tax gross-ups in connection with compensation arrangements, and the employment agreements entered into with Messrs. Hendricks, Smith, Holcomb and Wexler, which are described above, do not include a tax gross-up provision. +Severance Agreement. In order to address prior severance agreements between UTI Energy Corp. and Mr. Berns, Patterson-UTI entered into a written letter agreement with Mr. Berns in 2004 pursuant to which Patterson-UTI agreed to pay Mr. Berns within ten days of the termination of his employment with Patterson-UTI for any reason (including voluntary termination by him), an amount in cash equal to his annual base salary at the time of such termination. Any payment made by Patterson-UTI pursuant to this letter agreement will reduce dollar for dollar any payment owed to Mr. Berns, if any, pursuant to the change-in-control agreement referenced above. +Qualified Retiree Program. The Company maintains the Patterson-UTI Energy, Inc. Qualified Retiree Program (the “Retiree Program”) for certain senior employees of the Company, including the NEOs. Under the Retiree Program, eligible employees who retire after providing at least six months’ prior notice and have achieved the “Rule of 65” will receive the following benefits: +• continued vesting of any unvested equity-based awards outstanding as of the retirement date that are subject solely to time-based vesting conditions; and +• continued eligibility to earn a pro-rata annual bonus for the year of retirement based on actual Company performance relative to all applicable performance objectives. +45 +An employee achieves the “Rule of 65” when the employee’s age and service tenure with Patterson-UTI equals 65 “points.” The points required under the “Rule of 65” may be achieved in any combination of age and service tenure, subject to the following minimums: (i) must be at least 55 years of age and (ii) must have at least five continuous years of service completed as of immediately prior to the retirement date. +If a participant in the Retiree Program is terminated by Patterson-UTI or any of its subsidiaries without cause after having provided the requisite notice of retirement but before his or her retirement date, the participant will also receive the benefits described above. We believe that the Retiree Program provides a framework for senior employees, including our NEOs, transitioning into retirement to remain incentivized to transfer knowledge and assist in long-term organizational success following their retirement, thereby benefiting Patterson-UTI. Messrs. Hendricks, Holcomb and Berns currently meet the age and service requirements for retirement under the Retiree Program. +We believe the employment agreements, the Holcomb letter agreements, the change-in-control agreement, the severance agreement and the Retiree Program are important components of our overall executive compensation program. These agreements and program set forth the manner by which the employment relationship may be extended or terminated, the compensation and benefits that we provide during the term of employment and the obligations each party has in the event of termination of the executive officer’s employment. We believe that severance protections, particularly in the context of a change-in-control transaction, play a critical role in attracting and retaining key executive officers. Providing this type of protection is common in the oilfield services industry. In addition, these benefits serve our interests by promoting a continuity of management and aligning management’s interests with those of our stockholders in the context of an actual or threatened change in control transaction. +Compensation Committee Report +The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based upon such review and discussion, the Compensation Committee has recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement. +Gary M. Halverson, Chair +Tiffany (TJ) Thom Cepak +Curtis W. Huff +Amy H. Nelson +46 +EXECUTIVE COMPENSATION +Summary Compensation Table +The following table sets forth information concerning compensation for the fiscal years ended December 31, 2025, December 31, 2024 and December 31, 2023 with respect to the principal executive officer, the principal financial officer and the other Named Executive Officers of Patterson-UTI: +Name and Principal Position(s) Year +Salary +($) +Bonus +($)(1) +Stock +Awards +($)(2) +Non-equity +Incentive plan +Compensation +($)(3) +All Other +Compensation +($)(4) +Total +($) +William Andrew Hendricks, Jr. 2025 1,300,000 — 8,497,991 (5) 2,264,330 15,000 12,077,321 +President & Chief 2024 1,300,000 — 9,004,376 1,733,000 13,800 12,051,176 +Executive Officer 2023 1,000,000 — 5,930,679 1,340,129 13,200 8,284,008 +C. Andrew Smith 2025 680,000 — 2,099,943 (6) 1,042,290 17,500 3,839,733 +Executive Vice President & 2024 680,000 360,000 2,225,112 798,000 13,800 4,076,912 +Chief Financial Officer 2023 450,000 — 2,076,670 603,058 13,200 3,142,928 +James M. Holcomb 2025 670,000 750,000 1,998,725 (7) 933,600 17,500 4,369,825 +Executive Vice President & 2024 670,000 1,000,000 2,118,692 700,000 13,800 4,502,492 +Chief Operating Officer 2023 513,635 250,000 1,694,098 536,051 13,200 3,006,984 +Seth D. Wexler 2025 650,000 — 1,799,265 (8) 905,730 17,500 3,372,495 +Executive Vice President, General 2024 650,000 460,000 1,907,098 693,000 13,800 3,723,898 +Counsel & Secretary 2023 475,000 — 1,531,624 407,399 13,200 2,427,223 +Kenneth N. Berns 2025 590,000 — 1,749,558 (9) 822,130 — 3,161,688 +Executive Vice President & 2024 590,000 300,000 1,853,888 629,000 — 3,372,888 +Chief Commercial Officer 2023 450,000 — 1,976,893 603,058 — 3,029,951 +_____________ +(1) The bonuses paid to Messrs. Smith and Berns in 2024 were synergy milestone payments, as described in the “ Compensation Discussion and Analysis ” section in our 2024 proxy statement. The bonuses paid to Mr. Holcomb in 2025, 2024 and 2023 were retention payments pursuant to his letter agreement entered into in connection with the NexTier merger, as described in “ Employment-Related Agreements and Other Matters–Holcomb Letter Agreements ” above. The 2024 bonus paid to Mr. Wexler comprised $100,000 in connection with his promotion in February 2024 to Executive Vice President, General Counsel and Secretary and $360,000 of synergy milestone payments as described in the "Compensation Discussion and Analysis" section in our 2024 proxy statement. +(2) Amounts include the fair value of restricted stock unit and performance unit awards at the date of grant as determined in accordance with FASB ASC Topic 718. For additional information related to the assumptions used in the valuation of these awards, see Note 12 to the consolidated financial statements in Patterson-UTI’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025. +(3) Amounts represent annual cash bonuses earned for the fiscal years ended December 31, 2025, 2024 and 2023. +(4) Amounts reflect contributions to the Company's 401(k) plan by Patterson-UTI. +(5) Includes $2,411,976 related to an award of share-settled restricted stock units, $1,711,120 related to an award of cash-settled restricted stock units, $2,145,346 related to an award of share-settled FCF performance units and $2,229,549 related to an award of cash-settled TSR performance units during 2025. Assuming maximum performance, the aggregate value of the performance units awarded in 2025 would be $8,581,384 (calculated using the closing price of Patterson-UTI’s common stock on the grant date and assuming maximum payout of two times the target number of units for each award of performance units). +(6) Includes $595,962 related to an award of share-settled restricted stock units, $422,506 related to an award of cash-settled restricted stock units, $530,330 related to an award of share-settled FCF performance units and $551,145 related to an award of cash-settled TSR performance units during 2025. Assuming maximum performance, the aggregate value of the performance units awarded in 2025 would be $2,121,320 (calculated using the closing price of Patterson-UTI’s common stock on the grant date and assuming maximum payout of two times the target number of units for each award of performance units). +(7) Includes $567,248 related to an award of share-settled restricted stock units, $402,582 related to an award of cash-settled restricted stock units, $504,546 related to an award of share-settled FCF performance units and $524,349 related to an award of cash-settled TSR performance units during 2025. Assuming maximum performance, the aggregate value of the +47 +performance units awarded in 2025 would be $2,018,184 (calculated using the closing price of Patterson-UTI’s common stock on the grant date and assuming maximum payout of two times the target number of units for each award of performance units). +(8) Includes $510,992 related to an award of share-settled restricted stock units, $362,148 related to an award of cash-settled restricted stock units, $454,150 related to an award of share-settled FCF performance units and $471,975 related to an award of cash-settled TSR performance units during 2025. Assuming maximum performance, the aggregate value of the performance units awarded in 2025 would be $1,816,600 (calculated using the closing price of Patterson-UTI’s common stock on the grant date and assuming maximum payout of two times the target number of units for each award of performance units). +(9) Includes $496,342 related to an award of share-settled restricted stock units, $352,186 related to an award of cash-settled restricted stock units, $441,844 related to an award of share-settled FCF performance units and $459,186 related to an award of cash-settled TSR performance units during 2025. Assuming maximum performance, the aggregate value of the performance units awarded in 2025 would be $1,767,376 (calculated using the closing price of Patterson-UTI’s common stock on the grant date and assuming maximum payout of two times the target number of units for each award of performance units). +Grants of Plan-Based Awards +The following table sets forth information concerning grants of plan-based awards during the fiscal year ended December 31, 2025 to the Named Executive Officers: +Estimated Future Payouts under +Non-equity Incentive Plan Awards (1) +Estimated Future Payouts under +Equity Incentive Plan Awards +All Other +Stock +Awards: +Number of +Shares of +Stock or Units +Grant Date +Fair Value of +Stock and +Option Awards +Grant Threshold Target Maximum Threshold Target Maximum +Name Date ($) ($) ($) (#) (#) (#) (#) ($)(2) +William Andrew Hendricks, Jr. 812,500 1,625,000 3,250,000 — — — — $ — +5/1/25 (3) — — — 183,050 366,100 732,200 — $ 2,145,346 +5/1/25 (4) — — — 183,050 366,100 732,200 — $ 2,229,549 +5/1/25 (5) — — — — — — 411,600 $ 2,411,976 +5/1/25 (6) — — — — — — 292,000 $ 1,711,120 +C. Andrew Smith 374,000 748,000 1,496,000 — — — — $ — +5/1/25 (3) — — — 45,250 90,500 181,000 — $ 530,330 +5/1/25 (4) — — — 45,250 90,500 181,000 — $ 551,145 +5/1/25 (5) — — — — — — 101,700 $ 595,962 +5/1/25 (6) — — — — — — 72,100 $ 422,506 +James M. Holcomb 335,000 670,000 1,340,000 — — — — $ — +5/1/25 (3) — — — 43,050 86,100 172,200 — $ 504,546 +5/1/25 (4) — — — 43,050 86,100 172,200 — $ 524,349 +5/1/25 (5) — — — — — — 96,800 $ 567,248 +5/1/25 (6) — — — — — — 68,700 $ 402,582 +Seth D. Wexler 325,000 650,000 1,300,000 — — — — $ — +5/1/25 (3) — — — 38,750 77,500 155,000 — $ 454,150 +5/1/25 (4) — — — 38,750 77,500 155,000 — $ 471,975 +5/1/25 (5) — — — — — — 87,200 $ 510,992 +5/1/25 (6) — — — — — — 61,800 $ 362,148 +Kenneth N. Berns 295,000 590,000 1,180,000 — — — — $ — +5/1/25 (3) — — — 37,700 75,400 150,800 — $ 441,844 +5/1/25 (4) — — — 37,700 75,400 150,800 — $ 459,186 +5/1/25 (5) — — — — — — 84,700 $ 496,342 +5/1/25 (6) — — — — — — 60,100 $ 352,186 +____________ +(1) The 2025 non-equity incentive cash bonus plan for the fiscal year ended December 31, 2025 set a target opportunity for each executive’s annual cash bonus as a percent of salary, with payout contingent upon meeting Patterson-UTI’s financial goals and other KPIs as described above in “Compensation Discussion and Analysis - Annual Incentive Compensation”. +(2) The grant date fair value of restricted stock units and FCF performance unit awards was based on the closing price of Common Stock on the date of grant, and the grant date fair value of TSR performance unit awards was determined based on a Monte-Carlo simulation model, each of which is consistent with the valuation used by Patterson-UTI for the recognition of compensation expense under FASB ASC Topic 718. +48 +(3) On May 1, 2025, Patterson-UTI granted FCF performance unit awards to the Named Executive Officers. These settle in shares of Common Stock based on the achievement of certain performance goals during a specified period, as described in “Compensation Discussion and Analysis – Long-Term Incentive Compensation”. +(4) On May 1, 2025, Patterson-UTI granted TSR performance unit awards to the Named Executive Officers. These settle in cash (based on the value of shares of Common Stock) based on the achievement of certain performance goals during a specified period, as described in “Compensation Discussion and Analysis – Long-Term Incentive Compensation”. +(5) These restricted stock units settle in shares of Common Stock. Ordinary dividends are accrued on unvested restricted stock units and paid upon vesting. The rate at which these dividends are paid or accrued is the same rate at which ordinary dividends are paid on all other shares of Common Stock. The restricted stock units vest over a three-year period as follows: one-third on May 1, 2026, one-third on May 1, 2027 and one-third on May 1, 2028. +(6) These restricted stock units settle in cash and vest over a three-year period as follows: one-third on May 1, 2026, one-third on May 1, 2027 and one-third on May 1, 2028. +Outstanding Equity Awards at Fiscal Year-End +The following table sets forth information concerning outstanding equity awards held by the Named Executive Officers at December 31, 2025: +Option Awards +Stock Awards +Number of +Securities +Underlying +Unexercised +Options (#) +Exercisable Option +Exercise +Price +($) Option +Expiration +Date Number +of Shares +or Units of +Stock +That Have +Not +Vested (#) Market Value of +Shares or Units +of Stock +That Have +Not Vested ($)(1) Equity Incentive +Plan Awards: +Number of +Unearned Shares, +Units or Other +Rights that Have +Not Vested(2) Equity Incentive +Plan Awards: Market +or Payout Value of +Unearned Shares, +Units or Other +Rights that Have +Not Vested ($)(1) +Name +William Andrew Hendricks, Jr. 315,400 $ 18.54 4/25/2026 740,900 (3) $ 4,526,899 1,052,100 (5) $ 6,428,331 +— — — 292,000 (4) $ 1,784,120 183,050 (6) $ 1,118,436 +C. Andrew Smith — — — 191,367 (3) $ 1,169,252 273,000 (5) $ 1,668,030 +— — — 72,100 (4) $ 440,531 45,250 (6) $ 276,478 +James M. Holcomb — — — 178,334 (3) $ 1,089,621 253,800 (5) $ 1,550,718 +— — — 68,700 (4) $ 419,757 43,050 (6) $ 263,036 +Seth D. Wexler — — — 160,667 (3) $ 981,675 228,600 (5) $ 1,396,746 +— — — 61,800 (4) $ 377,598 38,750 (6) $ 236,763 +Kenneth N. Berns 189,100 $ 18.54 4/25/2026 162,734 (3) $ 994,305 232,700 (5) $ 1,421,797 +— — — 60,100 (4) $ 367,211 37,700 (6) $ 230,347 +_____________ +(1) Based on the closing price of Common Stock on December 31, 2025 of $6.11 per share. +(2) The 2023, 2024 and 2025 performance unit awards reflected in this column were granted on May 5, 2023, May 9, 2024, and May 1, 2025, respectively. The Performance Units generally vest over a three-year period based on the achievement of performance goals. One-half of the Performance Units granted in May 2025 are cash-settled and are otherwise structured in the same manner as the Performance Units issued in 2024, with achievement tied to our TSR over 1-, 2- and 3-year performance periods each commencing on April 1 of the grant year. One-half of the Performance Units granted in May 2025 are share-settled and tied to our relative free cash flow return over the three-year period commencing January 1, 2025 as compared to the free cash flow return of a performance peer group. All performance unit awards provide for a target payout based on a target level of total stockholder return or relative free cash flow return, as applicable, compared to the performance peer group. The amounts presented in this column represent the threshold payout under the 2023, 2024 and 2025 TSR performance unit awards, and the maximum payout under the 2025 FCF performance unit awards. Based on Patterson-UTI’s total stockholder return or relative free cash flow return, as applicable, during the performance period, the recipients could receive a number of shares (or cash amount) ranging from no shares (or no cash) to two times the target number of shares granted (or cash amount). If Patterson-UTI’s total stockholder return is negative, then the number of units that may vest in respect of the 2023 and 2024 Performance Units and 2025 TSR Performance Units will be capped at the target amount. +49 +(3) These share-settled restricted stock units vest as follows: +Name 5/1/2026 5/5/2026 5/9/2026 5/1/2027 5/9/2027 5/1/2028 Total +William Andrew Hendricks, Jr. 137,200 80,500 124,400 137,200 124,400 137,200 740,900 +C. Andrew Smith 33,900 28,200 30,733 33,900 30,734 33,900 191,367 +James M. Holcomb 32,266 23,000 29,267 32,267 29,267 32,267 178,334 +Seth D. Wexler 29,066 20,800 26,333 29,067 26,334 29,067 160,667 +Kenneth N. Berns 28,233 26,834 25,600 28,233 25,600 28,234 162,734 +(4) These cash-settled restricted stock units vest as follows: +Name 5/1/2026 5/1/2027 5/1/2028 Total +William Andrew Hendricks, Jr. 97,333 97,333 97,334 292,000 +C. Andrew Smith 24,033 24,033 24,034 72,100 +James M. Holcomb 22,900 22,900 22,900 68,700 +Seth D. Wexler 20,600 20,600 20,600 61,800 +Kenneth N. Berns 20,033 20,033 20,034 60,100 +(5) Includes share-settled performance unit awards as follows: +Name 2023 Performance +Unit Awards 2024 Performance +Unit Awards 2025 FCF Performance +Unit Awards Total +William Andrew Hendricks, Jr. 125,700 194,200 732,200 1,052,100 +C. Andrew Smith 44,000 48,000 181,000 273,000 +James M. Holcomb 35,900 45,700 172,200 253,800 +Seth D. Wexler 32,450 41,150 155,000 228,600 +Kenneth N. Berns 41,900 40,000 150,800 232,700 +The amounts presented in this table represent the threshold payout under the 2023 and 2024 performance unit awards, although relative TSR performance as of December 31, 2025 would result in no payout for these performance unit awards. The amounts presented in this table represent maximum payout under the 2025 FCF performance units. The maximum payout amounts for the 2025 FCF performance unit awards are shown due to the relative free cash flow return performance trending above our target threshold as of December 31, 2025. +(6) Reflects cash-settled TSR performance unit awards. The amounts presented in this table represent the threshold payout under the cash-settled 2025 TSR performance unit awards, although relative TSR performance as of December 31, 2025 would result in no payout for these TSR performance unit awards. +Stock Vested +The following table sets forth information concerning stock awards vested during the fiscal year ended December 31, 2025 for the Named Executive Officers. +Stock awards +Name +Number of shares +acquired on vesting (#) +Value realized +on vesting ($)(1) +William Andrew Hendricks, Jr. 264,500 $ 1,550,576 +C. Andrew Smith 79,800 $ 466,169 +James M. Holcomb 64,200 $ 375,111 +Seth D. Wexler 62,533 $ 365,845 +Kenneth N. Berns 72,300 $ 421,817 +_____________ +(1) Value realized on vesting is based on the closing price of Common Stock on the day the respective shares vested; provided that if the stock market was closed on the day the respective awards vested, the value realized on vesting is based on the closing price of Common Stock on the last day the stock market was open immediately prior to the day the respective awards vested. +No Pension Benefits or Nonqualified Deferred Compensation +Patterson-UTI does not provide any pension benefits for any of the Named Executive Officers. None of the Named Executive Officers had any items of nonqualified deferred compensation during 2025. As a result, tables with respect to pension benefits and nonqualified deferred compensation have not been provided. +50 +EMPLOYMENT-RELATED AGREEMENTS +Employment, Change in Control and Severance Agreements +Employment Agreements with Messrs. Hendricks, Smith, Holcomb and Wexler +As described above under “Employment-Related Agreements and Other Matters - Employment, Change in Control and Severance Agreements,” Patterson-UTI has entered into Employment Agreements with Messrs. Hendricks, Smith, Holcomb and Wexler. Each Employment Agreement provides for, among other things, severance payments following termination by Patterson-UTI of the executive other than for cause, or termination by the executive for good reason (as defined in each Employment Agreement). Under these provisions, if the executive's employment is terminated by Patterson-UTI without cause, or the executive terminates his employment for good reason: +• the executive will have the right to receive a lump-sum payment consisting of 3 times (in the case of Mr. Hendricks) or 2.5 times (in the case of Messrs. Smith, Holcomb and Wexler) the sum of (i) his base salary and (ii) the average annual cash bonus received by him for the three years prior to the date of termination, +• the executive will have the right to receive a pro-rated lump-sum payment equal to his annual cash bonus based on actual results for the year, payable at the same time as annual cash bonuses are paid to active employees, +• Patterson-UTI will accelerate vesting of all time-based equity, phantom equity and long-term cash incentive awards on the 60th day following the executive’s termination, +• Patterson-UTI will cause all performance-based equity, phantom equity and long-term cash incentive awards to continue in effect through the end of the applicable performance period and vest based on actual results as if the executive had remained employed through the end of the applicable performance period, and +• Patterson-UTI will pay the executive certain accrued obligations and certain obligations pursuant to the terms of employee benefit plans. +However, if a termination by Patterson-UTI other than for cause or by the executive for good reason occurs following a change in control (which is defined in a substantially similar manner to the definition in Mr. Berns' CIC Agreement (as defined below)), the executive will generally be entitled to the same severance payments and benefits described above except that (i) the pro-rated lump-sum payment for annual cash bonuses will be based on the executive’s highest annual cash bonus for the last three years, (ii) the executive will be entitled to 36 months (in the case of Mr. Hendricks) or 30 months (in the case of Messrs. Smith, Holcomb and Wexler) of subsidized benefits continuation coverage, and (iii) the performance-based equity, phantom equity and long-term cash incentive awards will be accelerated based on the target level of performance on the 60th day following the executive’s termination. +As described above under “Holcomb Letter Agreements,” Mr. Holcomb has entered into letter agreements with Patterson-UTI pursuant to which he may continue in his role as Executive Vice President and Chief Operating Officer of the Company until (i) December 31, 2026 (if Mr. Holcomb so elects and provides at least three months' prior notice to the Company), or (ii) December 31, 2027 (as applicable, the “Transition Date”). From the Transition Date through September 30, 2030, Mr. Holcomb has agreed to serve as a non-executive advisor, providing transition and advisory services as and when reasonably requested by the Company's Chief Executive Officer or his designee. Mr. Holcomb will not be entitled to any severance payments and benefits upon his termination of employment on September 30, 2030, and if Mr. Holcomb voluntarily resigns prior to September 30, 2030, he will not be eligible for any benefits under the Retiree Program or accelerated vesting of any performance-based equity awards on account of a termination of employment due to retirement. Mr. Holcomb's letter agreements provide that any further change to Mr. Holcomb's position, authority, duties or responsibilities shall not be deemed to give rise to “good reason” for resignation under Mr. Holcomb's (a) employment agreement, (b) any equity or equity-based award agreement or (c) any other agreement between Mr. Holcomb and the Company or any of its affiliates that provides Mr. Holcomb with a right to resign his employment for “good reason”; provided, that in connection with such event or occurrence, Mr. Holcomb's base salary, target annual bonus and target annual equity incentive compensation are not reduced. +Change in Control Agreement with Mr. Berns +As described above under “Employment-Related Agreements and Other Matters - Employment, Change in Control and Severance Agreements,” Patterson-UTI has a Change in Control Agreement with Mr. Berns (the “CIC Agreement”). The CIC Agreement was entered into in 2004 to protect Mr. Berns should a change in control occur, thereby encouraging Mr. Berns to remain in the employ of Patterson-UTI and not be distracted from the performance of his duties to Patterson-UTI by the possibility of a change in control. +51 +The CIC Agreement generally has an initial term with automatic 12-month renewals unless Patterson-UTI notifies Mr. Berns at least 90 days before the end of such renewal period that the term will not be extended. If a change in control of Patterson-UTI occurs during the term of the CIC Agreement and Mr. Berns’ employment is terminated (i) by Patterson-UTI other than for cause or other than automatically as a result of death, disability or retirement, or (ii) by Mr. Berns for good reason (as those terms are defined in the CIC Agreement), then Mr. Berns will generally be entitled to, among other things: +• a bonus payment equal to the highest bonus paid after the CIC Agreement was entered into (such bonus payment prorated for the portion of the fiscal year preceding the termination date); +• a payment equal to 2 times the sum of (i) the highest annual salary in effect for Mr. Berns and (ii) the average of the three annual bonuses earned by Mr. Berns for the three fiscal years preceding the termination date; and +• continued coverage under Patterson-UTI’s welfare plans for up to two years. +As was customary when the CIC Agreement was entered into more than fifteen years ago, the CIC Agreement provides Mr. Berns with a full gross-up payment for any excise taxes imposed on payments and benefits received under the CIC Agreement or otherwise, including other taxes that may be imposed as a result of the gross-up payment. As indicated above, the Compensation Committee subsequently adopted a policy, more than ten years ago, to no longer approve tax gross-ups in connection with compensation arrangements, and the employment agreements entered into with Messrs. Hendricks, Smith, Holcomb and Wexler, which are described above, do not include a tax gross-up provision. +A “change in control” is principally defined by the CIC Agreement as: +• an acquisition by any individual, entity or group of beneficial ownership of 35% or more of either Patterson-UTI’s then outstanding common stock or the combined voting power of the then outstanding voting securities of Patterson-UTI entitled to vote in the election of directors, +• a change occurs in which the members of the Board of Directors as of the date of the CIC Agreement cease to constitute at least a majority of Patterson-UTI’s Board of Directors unless that change occurs through a vote of at least a majority of the incumbent members of the Board of Directors, or +• a change in the beneficial ownership of Patterson-UTI following consummation of a reorganization, merger, consolidation, sale of Patterson-UTI or any subsidiary of Patterson-UTI or a disposition of all or substantially all of the assets of Patterson-UTI, in which the beneficial owners immediately prior to the transaction own 65% or less of outstanding common stock of the newly combined or merged entity. +Severance Agreement with Mr. Berns +To address a prior severance agreement between UTI Energy Corp. and Mr. Berns, Patterson-UTI entered into a written letter agreement with Mr. Berns in 2004 pursuant to which Patterson-UTI agreed to pay Mr. Berns within ten days of the termination of his employment with Patterson-UTI for any reason (including voluntary termination by him), an amount in cash equal to his annual base salary at the time of such termination. Any payment made by Patterson-UTI pursuant to this letter agreement will reduce dollar for dollar any payment owed to Mr. Berns, if any, pursuant to the CIC Agreement. +Qualified Retiree Program +The Company maintains the Retiree Program, described above under “Employment-Related Agreements and Other Matters - Employment, Change in Control and Severance Agreements.” Under the Retiree Program, eligible retirees will receive: (1) continued vesting of any unvested equity-based awards outstanding as of the retirement date that are subject solely to time-based vesting conditions; and (2) continued eligibility to earn a pro-rata annual bonus for the year of retirement based on actual Company performance relative to all applicable performance objectives. As of December 31, 2025, each of Messrs. Hendricks, Holcomb and Berns met the age and service requirements under the Retiree Program. Had they delivered the requisite notice and retired on December 31, 2025, they would have been entitled under the Retiree Program to continued vesting in the following equity awards (that would have otherwise been unvested and forfeited; with the fair value based on the market price of Common Stock at December 31, 2025) and to receive the 2025 annual bonus amounts set forth in "Executive Compensation - Summary Compensation Table" above: +52 +Name RSUs Fair Value +William Andrew Hendricks, Jr. 740,900 $ 4,526,899 +James M. Holcomb 178,334 $ 1,089,621 +Kenneth N. Berns 162,734 $ 994,305 +Equity Award Agreements with Named Executive Officers +Outstanding awards held by the Named Executive Officers do not provide for acceleration solely upon a change in control, and instead provide for acceleration only upon the executive’s termination of employment without cause or termination by the executive for good reason following a change in control. +All restricted stock unit and performance unit awards held by the Named Executive Officers provide that in the event of termination of employment due to death or disability, the holder would vest in a portion of the award. Such terminations at December 31, 2025 would have resulted in the issuance of the following shares or cash payment pursuant to the accelerated vesting of restricted stock units (with the fair value based on the market price of Common Stock at December 31, 2025): +Share-Settled Cash-Settled +Name Shares Fair Value Shares +(to Determine Cash Payment) Fair Value +William Andrew Hendricks, Jr. 540,821 $ 3,304,416 119,777 $ 731,837 +C. Andrew Smith 141,013 $ 861,589 29,575 $ 180,703 +James M. Holcomb 130,814 $ 799,274 28,180 $ 172,180 +Seth D. Wexler 117,848 $ 720,051 25,350 $ 154,889 +Kenneth N. Berns 120,428 $ 735,815 24,652 $ 150,624 +In the event of termination of employment due to death or disability, the holders of performance units would vest in the portion of the award that was earned at the time of death or disability. This payment would be determined at the end of the performance period and would equal the amount that the holder would have received at that time, pro-rated for the amount of time from the date of grant through the date of death or disability. +Potential Payments Upon a Termination or Change in Control +Amounts that each of the Named Executive Officers would be entitled to under the employee’s CIC Agreement or Employment Agreement and other award agreements if a change in control had occurred as of December 31, 2025 and the employee’s employment was terminated by Patterson-UTI other than for cause or terminated by the employee for good reason (as defined in the CIC Agreement or the Employment Agreement and applicable award agreements) are reflected in the following table: +Cash Payments Other Benefits +Name Bonus +Payment +($)(1) Salary and +Bonus +($)(2) Stock +Awards +($)(3) Performance +Unit Awards +($)(4) Other +Benefits +($)(5) Total +($) +William Andrew Hendricks, Jr. $ 2,187,500 $ 9,160,629 $ 6,311,019 $ 9,687,014 $ 58,243 $ 27,404,405 +C. Andrew Smith $ 984,375 $ 3,687,861 $ 1,609,783 $ 2,552,520 $ 48,536 $ 8,883,075 +James M. Holcomb $ 700,000 $ 3,247,543 $ 1,509,378 $ 2,355,992 $ 27,165 $ 7,840,078 +Seth D. Wexler $ 693,000 $ 3,096,166 $ 1,359,273 $ 2,122,504 $ 46,642 $ 7,317,585 +Kenneth N. Berns $ 1,397,022 $ 2,657,622 $ 1,361,516 $ 2,190,789 $ — $ 7,606,949 +_______________ +(1) In the case of Messrs. Hendricks, Smith, Holcomb and Wexler, the assumed bonus is equal to the highest annual bonus paid in the three years prior to 2025. In the case of Mr. Berns, the assumed bonus payment is equal to the highest annual bonus paid from the time the CIC Agreement was entered into through December 31, 2025. +(2) The assumed salary and bonus payment represents 3.0 times (in the case of Mr. Hendricks), 2.5 times (in the case of Messrs. Smith, Holcomb and Wexler) or 2.0 times (in the case of Mr. Berns) of the sum of the 2025 salary in effect for each employee and the average of the annual bonuses earned by each employee for 2024, 2023 and 2022. Bonus amounts earned in 2025 were not considered in this calculation as they were not determined until after December 31, 2025. +53 +(3) Each of the stock award agreements provide that unvested awards will vest upon the executive’s termination of employment without cause or termination by the executive for good reason following a change in control. Amounts presented in the table represent the value of unvested stock awards using the market price of Common Stock on December 31, 2025 of $6.11 per share. +(4) Performance unit agreements include a provision that, upon the executive’s termination of employment without cause or termination by the executive for good reason following a change in control, the Named Executive Officer will receive a number of shares equal to the greater of target amount or amount earned for any completed (or deemed completed) Performance Period set forth in each agreement. Amounts presented in the table represent the value of the assumed share issuance (or cash payout) had the change in control occurred on December 31, 2025, valued at the December 31, 2025 closing price of Common Stock of $6.11 per share. The column includes the value of a share issuance (or cash payout) based on the target number of shares for TSR performance units granted in 2023, 2024 and 2025 and the FCF return performance as of December 31, 2025 for the FCF performance units granted in 2025. +(5) Messrs. Hendricks, Smith, Holcomb and Wexler participated in Patterson-UTI’s health and welfare plans as of December 31, 2025. The amounts presented represent Patterson-UTI’s portion of the premiums for three years in the case of Mr. Hendricks and 30 months in the case of Messrs. Smith, Holcomb and Wexler. No tax gross-up payment would have been payable to Mr. Berns under the terms of his CIC Agreement. +In the event of a termination of employment of Mr. Berns for any reason, including voluntary termination, Mr. Berns would be entitled to an amount in cash equal to his annual base salary at the time of such termination. Any such payment made by Patterson-UTI will reduce dollar for dollar any payment owed to Mr. Berns that is reflected in the table above. In the case of Messrs. Hendricks, Smith, Holcomb or Wexler, if the executive’s employment was terminated by Patterson-UTI other than for cause or terminated by the executive for good reason (as defined in the Employment Agreement) and not in connection with a change-in-control, then the executive would be entitled to the same potential payments and benefits as set forth in the table above. Additionally, upon a termination by Patterson-UTI other than for cause or a termination by the executive for good reason and not in connection with a change-in-control, the potential payments and benefits set forth in the table above with respect to the performance units and phantom units would not be paid at the time of such termination, as such awards would instead remain outstanding through the end of the applicable performance period, subject to achievement of the applicable performance measures. +With respect to Messrs. Hendricks, Smith, Holcomb or Wexler, the foregoing severance benefits (other than the accrued obligations and benefit obligations) are conditioned on the executive’s execution of a release within 50 days of his termination that is not revoked during any applicable revocation period provided in such release. Their employment agreements also contain covenants and restrictions, including non-competition and non-solicitation provisions pursuant to which the executive will not be permitted to compete with Patterson-UTI in certain circumstances for a period of one year following termination of employment. +Pay Ratio +Under rules adopted pursuant to the Dodd-Frank Act of 2010, we are required to calculate and disclose the total compensation paid to our median employee, as well as the ratio of the total compensation paid to the median employee as compared to the total compensation paid to our CEO. The paragraphs that follow describe our methodology and the resulting CEO pay ratio for 2025. +We identified the median employee using our employee population on December 31, 2025. At December 31, 2025, we had 7,608 employees located in the United States, 156 employees located in Canada and 321 employees located in other countries. +In identifying the median employee, in accordance with SEC rules, we relied on the de minimis exception to decrease the number of countries where we obtained data, which resulted in us excluding 321 employees in the following countries: Argentina (22 employees), Australia (7 employees), Brazil (2 employees), Colombia (209 employees), Ecuador (6 employees), Mexico (1 employee), Oman (18 employees), Saudi Arabia (47 employees) and Ukraine (9 employees). +The compensation measure we used to identify the median employee was W-2 wages and the equivalent measure in Canada. We chose this compensation measure as it applied to all U.S. and Canadian employees, allowing for accessibility and broad comparability. +The total annual compensation for the year ended December 31, 2025 was calculated as $132,715 for our median employee and $12,077,321 for our CEO as reflected in the “Total” column of the Summary Compensation Table. The ratio of our CEO’s pay to that of our median employee for 2025 was approximately 91 times. The pay ratio provided is a reasonable estimate calculated in a manner consistent with SEC rules. +54 +Because the SEC rules for identifying the median of the annual total compensation of our employees and calculating the pay ratio based on that employee’s annual total compensation allows companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices, the pay ratio reported by other companies may not be comparable to the pay ratio for our Company, as other companies have headquarters and offices in different states and countries, have different employee populations and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their pay ratios. +Pay Versus Performance +Pay Versus Performance Table +The following table sets forth specified executive compensation and financial performance measures for the Company’s five most recently completed fiscal years, and cumulative total shareholder return (TSR) information for the Company and a peer group for the 1-, 2-, 3-, 4- and 5-year periods commencing as of December 31, 2020, as required by Item 402(v) of Regulation S-K: +Value of Initial Fixed $100 Investment Based On: +Year Summary Compensation Table Total for +PEO ($) Compensation Actually Paid to PEO +($)(1) Average Summary Compensation Table Total for +Non-PEO Named Executive Officers ($)(2) Average Compensation Actually Paid to Non-PEO Named Executive Officers ($)(2)(3) Total Shareholder Return Peer Group Total Shareholder +Return (4) Net Income (Loss) ($ in +thousands) Operating Cash Flow ($ in +millions) (5)(6) +2025 $ 12,077,321 $ 8,217,231 $ 3,685,935 $ 2,720,177 133 182 $ ( 93,054 ) $ 401.3 +2024 $ 12,051,176 $ 6,373,765 $ 3,919,048 $ 2,454,344 170 176 $ ( 966,399 ) $ 571.6 +2023 $ 8,284,008 $ ( 9,501,753 ) $ 2,901,772 $ ( 2,575,133 ) 215 199 $ 245,952 $ 521.0 +2022 $ 10,968,467 $ 32,675,932 $ 3,563,545 $ 9,767,320 327 195 $ 154,658 $ 198.9 +2021 $ 8,017,005 $ 14,736,737 $ 2,696,782 $ 4,588,122 162 121 $ ( 654,545 ) $ ( 94.6 ) +_____________ +(1) The dollar amounts reported in this column represent the amount of “compensation actually paid” to our Principal Executive Officer (“PEO”), as computed in accordance with Item 402(v) of Regulation S-K and do not reflect the total compensation actually realized or received . In accordance with these rules, these amounts reflect Total compensation as set forth in the Summary Compensation Table for each year, with adjustments made to 2025 Total compensation as shown below, and adjustments for prior fiscal years as reflected in the Pay Versus Performance Section of our 2023, 2024 and 2025 proxy statements. The fair value of performance unit and phantom unit awards was determined based on a Monte-Carlo simulation model that takes into account expected price movement of Common Stock as compared to peer companies and relevant market indices, as of the relevant measurement dates. Assumptions used in the Monte-Carlo simulation model include assumptions regarding volatility, the risk-free interest rate, dividend yield, and stock beta. Due to differences in measurement dates, the assumptions used in these valuations could differ materially from the assumptions used to determine the fair value as of the grant date of such awards. +Compensation Actually Paid to PEO 2025 +Summary Compensation Table Total $ 12,077,321 +Less, value of Stock Awards reported in Summary Compensation Table $ 8,497,991 +Plus, year-end fair value of outstanding and unvested equity awards granted in the year $ 8,259,525 +Plus (less), year over year change in fair value of outstanding and unvested equity awards granted in prior years $ ( 2,999,285 ) +Plus (less), change in fair value from prior year-end to vesting date of equity awards granted in prior years that vested in the year $ ( 622,339 ) +Total $ 8,217,231 +_____________ +(2) The non-PEO Named Executive Officers for each of the covered fiscal years are Messrs. Smith, Berns, Holcomb and Wexler. +(3) The dollar amounts reported in this column represent the average amount of “compensation actually paid” to the other Named Executive Officers, as computed in accordance with Item 402(v) of Regulation S-K and do not reflect the total compensation actually realized or received by the Named Executive Officers . In accordance with these rules, these amounts reflect average Total compensation as set forth in the Summary Compensation Table for each year, with +55 +adjustments made to average 2025 Total compensation as shown below, and adjustments for prior fiscal years as reflected in the Pay Versus Performance Section of our 2023, 2024 and 2025 proxy statements. The fair value of performance unit awards was determined based on a Monte-Carlo simulation model that takes into account expected price movement of Common Stock as compared to peer companies and relevant market indices, as of the relevant measurement dates. Assumptions used in the Monte-Carlo simulation model include assumptions regarding volatility, the risk-free interest rate, dividend yield, and stock beta. Due to differences in measurement dates, the assumptions used in these valuations could differ materially from the assumptions used to determine the fair value as of the grant date of such awards. +Average Compensation Actually Paid to Other Named Executive Officers 2025 +Average Summary Compensation Table Total $ 3,685,935 +Less, average value of Stock Awards reported in Summary Compensation Table $ 1,911,873 +Plus, average year-end fair value of outstanding and unvested equity awards granted in the year $ 1,858,203 +Plus (less), average year over year change in fair value of outstanding and unvested equity awards granted in prior years $ ( 746,455 ) +Plus (less), change in fair value from prior year-end to vesting date of equity awards granted in prior years that vested in the year $ ( 165,633 ) +Total $ 2,720,177 +_____________ +(4) The peer group used for the calculation of Peer Group Total Shareholder Return is the Oilfield Service Index(OSX). +(5) The Company-Selected Measure is Operating Cash Flow , which is not defined by U.S. GAAP. Operating cash flow is defined herein as net cash provided by operating activities (excluding, for the purposes of the annual cash bonus program, any non-operating expenses such as merger and integration expenses and restructuring costs and the effects of customer prepayments) less net capital expenditures (as adjusted for any Board-approved increase in capital expenditures after targets are set). For all years presented, the Operating Cash Flow measure was adjusted to exclude the effects of customer prepayments. For 2021-2024, the Operating Cash Flow measure was adjusted to exclude merger and integration expenses. For 2022, the Operating Cash Flow measure was adjusted for Board-approved increases in capital expenditures after targets were set. +(6) While SEC guidance under Item 402(v) of Regulation S-K does not permit the use of multi-year relative Total Shareholder Return as a permissible Company-Selected Measure for the table above, the Company views 3-year relative Total Shareholder Return as one of the most important measures used to link executive “compensation actually paid” to Company performance. +Other Financial and Non-Financial Measures Used +The Company considers the following financial and non-financial measures to be the most important measures used to link executive compensation actually paid to company performance for the most recently completed fiscal year: +Most Important Measures Used to Link Executive Compensation Actually Paid to Company Performance +Absolute Total Stockholder Return +Relative Total Stockholder Return +Operating Cash Flow +Adjusted EBITDA +Health, Safety and Environmental Performance +Please see “Compensation Discussion and Analysis” elsewhere in this proxy statement for additional information regarding these measures. +Relationship Between Compensation Actually Paid and TSR, Net Income and Company-Selected Measure +The following chart(s) show a graphical relationship between Compensation Actually Paid (PEO and Average Other NEOs) to the Company’s TSR, Net Income, and Operating Cash Flow, as well as between the Company TSR and Peer Group TSR for the five-year period ended December 31, 2025: +56 +57 +Indemnification Agreements +Patterson-UTI has entered into an indemnification agreement with each of the Named Executive Officers and each of its directors containing provisions that may require Patterson-UTI, among other things, to indemnify such executive officers and directors against liabilities that may arise by reason of their status or service as executive officers or directors (subject to certain exceptions) and to advance expenses incurred as a result of any proceeding against them as to which they could be indemnified. +58 +DIRECTOR COMPENSATION +The following table sets forth information concerning compensation for the fiscal year ended December 31, 2025 with respect to the directors of Patterson-UTI who are not executive officers: +Name Fees Earned or Paid in Cash +($) Stock Awards +($)(1)(2) All Other +Compensation +($) Total +($) +Leslie A. Beyer (3) +$ 76,667 $ 174,996 $ — $ 251,663 +Tiffany (TJ) Thom Cepak $ 135,000 $ 174,996 $ — $ 309,996 +Robert W. Drummond $ 107,500 $ 174,996 $ 2,475,000 (4) $ 2,757,496 +Gary M. Halverson $ 130,000 $ 174,996 $ — $ 304,996 +Curtis W. Huff $ 187,500 $ 245,000 $ — $ 432,500 +Cesar Jaime $ 117,500 $ 174,996 $ — $ 292,496 +Janeen S. Judah $ 117,500 $ 174,996 $ — $ 292,496 +Amy H. Nelson $ 125,000 $ 174,996 $ — $ 299,996 +Julie Robertson $ 125,000 $ 174,996 $ — $ 299,996 +James C. Stewart $ 125,000 $ 174,996 $ — $ 299,996 +_______________ +(1) Amounts represent the fair value at the date of grant as determined in accordance with FASB ASC Topic 718 with respect to restricted stock units awarded to the directors in the fiscal year ended December 31, 2025. For additional information related to the assumptions used and valuation of restricted stock units, see Note 12 to the consolidated financial statements in Patterson-UTI’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025. Mses. Beyer, Cepak, Judah, Nelson and Robertson and Messrs. Drummond, Halverson, Jaime and Stewart received an award of 21,186 restricted stock units, and Mr. Huff received an award of 29,661 restricted stock units, on January 1, 2025, with a grant date value of $8.26 per restricted stock unit. +(2) No options were issued to directors during the fiscal year ended December 31, 2025. As of December 31, 2025, the non-employee directors do not hold any outstanding stock options. +(3) Ms. Beyer resigned from our Board on September 18, 2025. The Board of Directors approved the vesting of 15,149 restricted stock units, effective upon her resignation, reflecting a prorated amount for her service during 2025. +(4) Amounts reflect severance paid to Mr. Drummond in 2025. Prior to the NexTier merger, NexTier and Mr. Drummond were party to an employment agreement pursuant to which Mr. Drummond became eligible to receive severance benefits upon his qualifying termination of employment, which occurred immediately following the closing of the NexTier merger in 2023. Accordingly, Mr. Drummond entered into a Separation Agreement and General Release of Claims with NexTier, effective as of September 1, 2023, which provides for, among other severance amounts, a cash amount equal to three times the sum of his annual base salary plus annual target bonus, payable over 36 months (of which $2,475,000 was paid in 2025). +Directors who are also employees of Patterson-UTI do not receive compensation for serving as a director or as a member of a committee of the Board of Directors. All directors are reimbursed for reasonable out-of-pocket expenses incurred in connection with serving as a member of the Board of Directors. The Compensation Committee annually reviews director compensation using a director compensation peer benchmarking process and recommends any changes to the Board of Directors for approval. +As a result of the most recent annual review in February 2026, the current compensation for non-employee directors is as follows: Each non-employee director receives an annual base cash retainer of $100,000 and an award of restricted stock units on January 1 of each year with a grant date value of $200,000. The non-Executive Chairman receives an additional annual cash retainer of $75,000 and an award of additional restricted stock units with a grant date value of $75,000. At times while the Board has an Executive Chairman, the Lead Director receives an additional annual cash retainer of $35,000. Each non-employee director receives additional annual cash retainers for the committees on which he or she serves as follows: +Committee Chair Member +Compensation Committee $ 25,000 $ 10,000 +Nominating and Corporate Governance Committee $ 20,000 $ 10,000 +Audit Committee $ 30,000 $ 12,500 +59 +CERTAIN TRANSACTIONS +Patterson-UTI has a written policy with respect to related person transactions. In accordance with this policy, related person transactions are reviewed by the chair of the Audit Committee, who has full delegated authority to approve, disapprove, ratify, amend, terminate or rescind any such transaction (if the aggregate amount involved in such transaction is $1,000,000 or less), or direct that such transaction be submitted to the Audit Committee for consideration. Any such transaction involving an aggregate amount exceeding $1,000,000 is submitted to the Audit Committee for consideration. In approving or disapproving related person transactions, the relevant facts and circumstances of the related person transaction are considered, including whether such transaction is in, or not inconsistent with, the best interest of Patterson-UTI and whether, in appropriate cases, such transaction is on commercial terms at least as favorable to Patterson-UTI as would otherwise be available to or from an unrelated third party or to Patterson-UTI’s employees generally. Related person transactions generally include transactions in an amount that exceeds $100,000 between Patterson-UTI or any of its subsidiaries and an executive officer, a director (or nominee to become director), an immediate family member of any of the foregoing or any entity in which any of the foregoing has a 10% or greater beneficial ownership interest or in which they are an executive officer, general partner, principal or engaged in a similar position. Certain related person transactions have been pre-approved under the terms of the policy, including, subject to certain exceptions and limitations, the sale to or purchase from Patterson-UTI of goods and services by entities related to directors in the ordinary course of business that are immaterial to Patterson-UTI and with respect to which the director has no direct economic interest or decision making authority, transactions with passive institutional stockholders that are in the ordinary course of both Patterson-UTI’s and such other company’s business and transactions with another publicly traded company where the related person’s interest arises solely from beneficial ownership of more than 5% of the common stock of Patterson-UTI and being a passive institutional stockholder of the other publicly traded company’s equity securities. +In connection with the acquisition by REMY Capital Partners III, L.P. (“REMY Capital”) of an ownership interest in UTI Energy Corp. in March 1995, REMY Capital succeeded to a registration rights agreement with UTI. As the successor-in-interest to UTI, Patterson-UTI assumed this registration rights agreement pursuant to which REMY Capital has the right to require Patterson-UTI to use its reasonable efforts to register shares held by REMY Capital under the Securities Act of 1933, as amended. In the event that such rights are exercised in connection with a primary offering proposed by Patterson-UTI (or a secondary offering with which Patterson-UTI agrees to participate), REMY Capital would bear its pro rata share of the costs of the offering, other than legal, accounting and printing costs, all of which Patterson-UTI would bear. In the event that REMY Capital elects to exercise such rights other than in connection with an offering in which Patterson-UTI participates, REMY Capital would bear all costs of the offering. These rights continue so long as REMY Capital continues to own the Common Stock that it acquired in March 1995. As of the date of this proxy statement, REMY Capital continues to hold 465,000 shares of such Common Stock. +Mr. Berns, Executive Vice President and Chief Commercial Officer of Patterson-UTI, is an executive of REMY Investors, which is the general partner of REMY Capital. +60 +SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT +The following table sets forth, as of March 31, 2026 (except as otherwise indicated), the ownership of Common Stock of (i) the Named Executive Officers, directors and Board nominees, individually, (ii) all directors, Board nominees and executive officers as a group and (iii) each person known by Patterson-UTI to be the beneficial owner of more than 5% of Common Stock. As of March 31, 2026, we had 379,602,464 shares of Common Stock outstanding. +Name of Beneficial Owner +Amount and +Nature of +Beneficial +Ownership +Percent +of Class +Beneficial Owners of more than 5% of Patterson-UTI’s Common Stock: +BlackRock, Inc. 55,550,653 (1) 14.6 % +Blackstone 28,061,525 (2) 7.4 % +Dimensional Fund Advisors LP 21,211,576 (3) 5.6 % +Directors and Named Executive Officers: +William Andrew Hendricks, Jr. 2,810,792 (4) * +C. Andrew Smith 596,721 (5) * +James M. Holcomb 458,723 (6) * +Seth D. Wexler 420,800 (7) * +Kenneth N. Berns 1,173,053 (8) * +Tiffany (TJ) Thom Cepak 132,470 +(9) +* +Robert W. Drummond 1,484,306 +(10) +* +Gary M. Halverson 167,971 +(11) +* +Curtis W. Huff 409,942 +(12) +* +Cesar Jaime 58,821 +(13) +* +Janeen S. Judah 159,054 +(14) +* +Amy H. Nelson 162,827 +(15) +* +Julie J. Robertson 58,821 +(16) +* +James C. Stewart 292,475 +(17) +* +All current directors and executive officers as a group (14 persons) 8,386,776 (18) 2.2 % +_______________ +* indicates less than 1.0% +(1) Based solely on a Schedule 13G/A filed by BlackRock, Inc. with the SEC on April 30, 2025 reporting ownership as of March 31, 2025. According to the report, BlackRock, Inc. has sole voting power with respect to 54,784,576 shares and sole dispositive power with respect to 55,550,653 shares. The address of the principal business office of BlackRock, Inc. is 50 Hudson Yards, New York, New York 10001. +(2) Based solely on a Schedule 13G/A filed by BEP Diamond Topco L.P., BEP Diamond Topco LLC, BEP Diamond Aggregator L.P., BCP VII/BEP II Holdings Manager L.L.C., Blackstone Energy Management Associates II L.L.C., Blackstone Management Associates VII L.L.C., BMA VII L.L.C., Blackstone EMA II L.L.C., Blackstone Holdings III L.P., Blackstone Holdings III GP L.P., Blackstone Holdings III GP Management L.L.C., Blackstone Inc., Blackstone Group Management L.L.C and Stephen A. Schwarzman ("Blackstone") with the SEC on August 8, 2025 reporting ownership as of June 30, 2025. According to the report, Blackstone has sole voting power with respect to 28,061,525 shares, sole dispositive power with respect to 25,958,752 shares and shared dispositive power with respect to 2,102,773 shares. The principal business address of Blackstone is 345 Park Avenue, New York, New York 10154. +(3) Based solely on a Schedule 13G filed by Dimensional Fund Advisors LP with the SEC on April 9, 2026 reporting ownership as of March 31, 2026. According to the report, Dimensional Fund Advisors LP has sole voting power with respect to 20,807,923 shares and sole dispositive power with respect to 21,211,576 shares. The address of the principal business office of Dimensional Fund Advisors LP is 6300 Bee Cave Road, Building One, Austin, Texas 78746. +(4) Includes shares underlying stock options held by Mr. Hendricks that are presently exercisable to purchase 315,400 shares. Includes 342,100 shares underlying restricted stock units that will vest within 60 days. Does not include 398,800 shares underlying restricted stock units that will not vest within 60 days. +(5) Includes 92,833 shares underlying restricted stock units held by Mr. Smith that will vest within 60 days. Does not include 98,534 shares underlying restricted stock units that will not vest within 60 days. +61 +(6) Includes 84,533 shares underlying restricted stock units held by Mr. Holcomb that will vest within 60 days. Does not include 93,801 shares underlying restricted stock units that will not vest within 60 days. +(7) Includes 76,199 shares underlying restricted stock units held by Mr. Wexler that will vest within 60 days. Does not include 84,468 shares underlying restricted stock units that will not vest within 60 days. +(8) Includes shares underlying stock options held by Mr. Berns that are presently exercisable to purchase 189,100 shares. Includes 80,667 shares underlying restricted stock units that will vest within 60 days. Does not include 82,067 shares underlying restricted stock units that will not vest within 60 days. The Common Stock beneficially owned by Mr. Berns includes 34,000 shares held in trust(s) for which he is the trustee. Does not include shares of Common Stock beneficially owned by REMY Investors. Mr. Berns disclaims beneficial ownership of such shares beneficially owned by REMY Investors. +(9) Does not include 28,641 shares underlying unvested restricted stock units held by Ms. Cepak that will not vest within 60 days. +(10) Does not include 28,641 shares underlying unvested restricted stock units held by Mr. Drummond that will not vest within 60 days. +(11) Does not include 28,641 shares underlying unvested restricted stock units held by Mr. Halverson that will not vest within 60 days. +(12) Does not include 40,098 shares underlying unvested restricted stock units held by Mr. Huff that will not vest within 60 days. +(13) Does not include 28,641 shares underlying unvested restricted stock units held by Mr. Jaime that will not vest within 60 days. +(14) Does not include 28,641 shares underlying unvested restricted stock units held by Ms. Judah that will not vest within 60 days. +(15) Does not include 28,641 shares underlying unvested restricted stock units held by Ms. Nelson that will not vest within 60 days. +(16) Does not include 28,641 shares underlying unvested restricted stock units held by Ms. Robertson that will not vest within 60 days. +(17) Does not include 28,641 shares underlying unvested restricted stock units held by Mr. Stewart that will not vest within 60 days. The Common Stock beneficially owned by Mr. Stewart includes 207,000 shares held by a limited partnership over which he exercises ownership and control. +(18) Includes shares underlying stock options that are presently exercisable to purchase 504,500 shares of Common Stock. Includes 676,332 shares underlying restricted stock units held by certain directors and executive officers that will vest within 60 days. Does not include 1,026,896 shares underlying restricted stock units held by such individuals that will not vest within 60 days. Does not include shares of Common Stock beneficially owned by REMY Investors. +Except as stated herein, each stockholder has sole voting and investment power with respect to Common Stock included in the above table. There are no arrangements known to Patterson-UTI which may result in a change in control. The business address of each of our directors and officers is 10713 West Sam Houston Parkway North, Suite 800, Houston, Texas 77064. +Equity Compensation Plan Information +The following table presents equity compensation plan information as of December 31, 2025. +Equity Compensation Plan Information +Plan Category +Number of +Securities to +be Issued upon +Exercise of +Outstanding +Options, Warrants and Rights +Weighted - Average +Exercise Price of +Outstanding Options, Warrants and Rights (2) +Number of Securities +Remaining Available +for Future Issuance +under Equity +Compensation Plans +(Excluding Securities +Reflected in Column(a)) +(a) (b) (c) +Equity compensation plans approved by security holders (1) +10,435,633 $ 23.56 9,144,162 +Equity compensation plans not approved by security holders — $ — — +Total 10,435,633 $ 23.56 9,144,162 +______________ +(1) This plan category includes the Patterson-UTI Energy, Inc. 2021 Long-Term Incentive Plan, as amended (the "2021 Plan"), the NexTier Oilfield Solutions Inc. Equity and Incentive Award Plan (the "NexTier Plan"), the NexTier Oilfield Solutions Inc. +62 +(Former C&J Energy) Management Incentive Plan (the "Former C&J Energy Plan"), and the Patterson-UTI Energy, Inc. Amended and Restated 2014 Long-Term Incentive Plan, as amended (the "2014 Plan"). The 2021 Plan provides for awards of incentive stock options, non-incentive stock options, tandem and freestanding stock appreciation rights, restricted stock awards, other stock unit awards, performance share awards, performance unit awards and dividend equivalents to key employees, officers and directors, which are subject to certain vesting and forfeiture provisions. All options are granted with an exercise price equal to or greater than the fair market value of the common stock at the time of grant. Amount in column (a) assumes target payout of all performance units outstanding. The vesting schedule and term are set by the Compensation Committee of the Board of Directors, except that the Board has the same power as the Compensation Committee with respect to awards to directors. Certain awards outstanding under the NexTier Plan and the Former C&J Energy Plan at the time of the NexTier merger were converted into, as applicable, options or time-vesting restricted stock units with respect to shares of Common Stock. Additionally, certain options remain exercisable under the 2014 Plan. All securities remaining available for future issuance under equity compensation plans approved by security holders in column (c) are available under the 2021 Plan. +No future awards will be granted under the NexTier Plan, the Former C&J Energy Plan, or the 2014 Plan. All options were granted with an exercise price equal to the fair market value of the related common stock at the time of grant. +(2) This column reflects the weighted average exercise price of options granted under the Former C&J Energy Plan and the 2014 Plan that were outstanding on December 31, 2025. No options have been granted under the 2021 Plan. This column excludes outstanding restricted stock units and performance units, for which no consideration is paid for the vesting of such awards into Common Stock. +63 +AUDIT COMMITTEE REPORT +The following report of the Audit Committee does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other Patterson-UTI filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent Patterson-UTI specifically incorporates this report by reference therein. +The Audit Committee members are Mses. Cepak (chair), Judah and Robertson, and Messrs. Halverson, Jaime and Stewart, each of whom is independent within the meaning of applicable rules under the Exchange Act and within the meaning of the Nasdaq listing standards. The Board has determined that Ms. Cepak is an “audit committee financial expert” within the meaning of applicable SEC rules. +The Audit Committee oversees management’s conduct of Patterson-UTI’s accounting and financial reporting process, including review of: (i) financial reports and other financial information provided by Patterson-UTI to the public and government/regulatory bodies, (ii) Patterson-UTI’s system of internal control over financial reporting, and (iii) the annual independent audit of Patterson-UTI’s consolidated financial statements and internal control over financial reporting. +The Audit Committee’s role is one of review, and it recognizes that Patterson-UTI’s management is responsible for preparing Patterson-UTI’s consolidated financial statements and the independent auditors are responsible for auditing those financial statements. In fulfilling its review and oversight responsibilities, the Audit Committee reviewed and discussed with management the audited financial statements included in Patterson-UTI’s Annual Report on Form 10-K for the year ended December 31, 2025, including a discussion of the quality, not just the acceptability, of the accounting principles used, the reasonableness of significant judgments made by management, and the clarity of disclosures provided in the financial statements. The Audit Committee also discussed with management the basis for their assertion that Patterson-UTI maintained effective internal control over financial reporting as of December 31, 2025. +The Audit Committee discussed with Patterson-UTI’s independent registered public accounting firm (PricewaterhouseCoopers LLP) the overall scope and plans for their integrated audit. The Audit Committee met with PricewaterhouseCoopers LLP, with and without management present, to discuss the results of their integrated audit, their evaluation of Patterson-UTI’s internal control over financial reporting and the overall quality of Patterson-UTI’s financial reporting. The Audit Committee also reviewed with PricewaterhouseCoopers LLP their judgments as to the quality, not just the acceptability, of Patterson-UTI’s accounting principles and discussed such other matters as are required by the applicable requirements of the Public Company Accounting Oversight Board and the SEC. +The Audit Committee has received and reviewed the written disclosures and the letter from PricewaterhouseCoopers LLP required by the Public Company Accounting Oversight Board regarding their independence, and their communications with the Audit Committee concerning independence, and has discussed with PricewaterhouseCoopers LLP its independence. +Taking the foregoing into consideration, the undersigned Audit Committee members recommended to the Board of Directors that the Board approve the inclusion of Patterson-UTI’s audited financial statements and management’s report on internal control over financial reporting in the Annual Report on Form 10-K for the fiscal year ended December 31, 2025. +Audit Committee of the Board of Directors: +Tiffany (TJ) Thom Cepak, Chair +Gary M. Halverson +Cesar Jaime +Janeen S. Judah +Julie J. Robertson +James C. Stewart +64 +PricewaterhouseCoopers LLP Fees for Fiscal Years 2025 and 2024 +For fiscal years 2025 and 2024, Patterson-UTI and its subsidiaries incurred fees for services provided by PricewaterhouseCoopers LLP. +Description Fees Incurred for +Fiscal Year +2025 Fees Incurred for +Fiscal Year +2024 +Audit fees $ 3,316,500 $ 3,777,000 +Audit-related fees $ — $ — +Tax fees $ 272,000 $ 274,000 +All other fees $ 2,000 $ 202,000 +Total $ 3,590,500 $ 4,253,000 +The Audit Committee appoints the independent registered public accounting firm. The Audit Committee or Ms. Cepak, as Chair of the Audit Committee, approves all other engagements of the independent registered public accounting firm in advance. In the event Ms. Cepak approves any such engagement, she discusses such approval with the Audit Committee at its next meeting. +“Audit fees” relate to audit services of PricewaterhouseCoopers LLP for fiscal 2025 and 2024 consisting of the integrated audit of Patterson-UTI’s consolidated financial statements and internal control over financial reporting, quarterly reviews of Patterson-UTI’s interim financial statements and the audits of certain subsidiaries. “Tax fees” included income tax compliance and consultation services. “All other fees” for 2025 relate to annual subscription fees to software products. “All other fees” for 2024 relate to professional services regarding the review of controls in connection with the implementation of a human resources system, and annual subscription fees to software products. The Audit Committee Charter includes procedures under which the Audit Committee or its delegate approves in advance all audit and non-audit services (subject to any de minimis exceptions permitted by law for non-audit services, which must, in any event, be approved annually by the Audit Committee prior to completion of the annual audit) provided by the Company's independent auditors. The Audit Committee or Ms. Cepak, as Chair of the Audit Committee, approved in advance all of the services described above. +The Audit Committee has discussed the non-audit services provided by PricewaterhouseCoopers LLP and the related fees and has considered whether those services and fees are compatible with maintaining auditor independence. The Audit Committee determined that such non-audit services were consistent with the independence of PricewaterhouseCoopers LLP. +65 +OTHER MATTERS +Other Business +As of the date of this proxy statement, management of Patterson-UTI was not aware of any matter to be presented at the Meeting other than as set forth herein. If any other matters are properly brought before the Meeting, however, the shares represented by valid proxies will be voted with respect to such matters in accordance with the judgment of the persons voting them. +Stockholder Proposals for 2027 Annual Meeting +Proposals for Inclusion in the Proxy Statement. Pursuant to Rule 14a-8 under the Exchange Act, stockholders may present proper proposals for inclusion in Patterson-UTI’s proxy statement and for consideration at the next annual meeting of stockholders by submitting their proposals to Patterson-UTI in a timely manner. In order to be included in Patterson-UTI’s proxy statement for the 2027 annual meeting of stockholders, proposals from stockholders must be received by Patterson-UTI no later than the close of business on December 14, 2026, and must otherwise comply with the requirements of Rule 14a-8. +Proposals or Director Nominations not Included in the Proxy Statement. Patterson-UTI’s bylaws establish an advance notice procedure with regard to stockholder proposals and director nominations not included in Patterson-UTI’s proxy statement. For director nominations not included in Patterson-UTI’s proxy statement or stockholder proposals to be properly brought before the 2027 annual meeting by a stockholder, the stockholder must be a stockholder of record on the date of the giving of the notice provided for in Patterson-UTI’s bylaws and on the record date for the determination of stockholders entitled to vote at such annual meeting and must give timely notice of such business in writing to the Secretary of Patterson-UTI. To be timely with respect to the 2027 annual meeting of stockholders, a stockholder’s notice must be delivered to or mailed and received by the close of business at Patterson-UTI’s principal executive offices not earlier than the close of business on February 4, 2027 and not later than the close of business on March 6, 2027, assuming the date of the 2027 annual meeting is not changed by more than 30 days before or after the anniversary date of the 2026 annual meeting. A stockholder’s notice to the Secretary of Patterson-UTI shall contain certain information specified in Patterson-UTI’s bylaws regarding the stockholder and the proposed nominee or stockholder proposal. See Article I, Section 8 of Patterson-UTI’s bylaws. In addition to giving notice pursuant to the advance notice provisions of Patterson-UTI’s bylaws, a stockholder who intends to solicit proxies in support of nominees submitted under these advance notice provisions must also provide the notice required pursuant to Rule 14a-19, the SEC’s universal proxy rule, to the Secretary of the Company regarding such intent no later than April 5, 2027. +Proxy Access Procedures. Patterson-UTI’s bylaws permit a stockholder, or group of up to 20 stockholders, owning continuously for at least three years shares of Patterson-UTI stock representing an aggregate of at least 3% of our outstanding shares, to nominate and include in our proxy materials director nominees constituting up to the greater of two or 20% of our Board, provided that the stockholder(s) and nominee(s) satisfy the requirements in Patterson-UTI’s bylaws. See Article I, Section 11 of Patterson-UTI’s bylaws. Written notice of proxy access director nominees must be received by the close of business at Patterson-UTI’s principal executive offices not earlier than December 14, 2026 and not later than January 13, 2027, assuming the date of the 2027 annual meeting is not changed by more than 30 days before or after the anniversary date of the 2026 annual meeting. +66 +Annual Report +A copy of Patterson-UTI’s annual report on Form 10-K accompanies this proxy statement only if you have requested that a copy of this proxy statement be mailed to you. The annual report on Form 10-K also is available electronically by following the instructions in the Notice. The annual report on Form 10-K is not incorporated into this proxy statement and is not considered proxy-soliciting material. +A copy of the annual report on Form 10-K, including the financial statements and financial statement schedules, but excluding exhibits, may be obtained by stockholders without charge by written request to the Secretary of Patterson-UTI at 10713 West Sam Houston Parkway North, Suite 800, Houston, Texas 77064 or by accessing it on Patterson-UTI’s website at www.patenergy.com in the investors section under the “Financial Information” link. Patterson-UTI will furnish the exhibits to Form 10-K upon request and upon receipt of a reproduction fee. +Delivery of Documents to Stockholders Sharing an Address +The SEC’s rules allow companies to send a single Notice or single copy of annual reports, proxy statements, prospectuses and other disclosure documents to two or more stockholders sharing the same address, subject to certain conditions. These rules are intended to provide greater convenience for stockholders, and cost savings for companies, by reducing the number of duplicate documents that stockholders receive. Unless different instructions were previously provided to Patterson-UTI, if two or more stockholders share a mailing address, such stockholders were deemed to have consented to receiving only one copy, and a single copy of this proxy statement and Patterson-UTI's annual report on Form 10-K (and/or a single copy of the Notice) has been sent to their address. If instructions for separate delivery have been received from any stockholder, Patterson-UTI will deliver promptly separate copies of the relevant disclosure materials. Similarly, if multiple copies of disclosure materials are being delivered to a single address, stockholders can request a single copy for future deliveries. Written requests should be submitted to the Secretary of Patterson-UTI at 10713 West Sam Houston Parkway North, Suite 800, Houston, Texas 77064. Requests may also be made by calling Investor Relations at (281) 765-7100. +67 +ANNEX A +PATTERSON-UTI ENERGY, INC. +2021 LONG-TERM INCENTIVE PLAN +(as amended through June 6, 2024 and as proposed to be amended by the Plan Amendment) +Patterson-UTI Energy, Inc. (the “Company”), a Delaware corporation, hereby establishes and adopts the following 2021 Long-Term Incentive Plan (as amended from time to time, the “Plan”) effective as of April 9, 2021 (the “Effective Date”), as amended effective June 8, 2023, September 1, 2023, June 6, 2024 and June 4, 2026 . +1. PURPOSE OF THE PLAN +The purpose of the Plan is to assist the Company and its Subsidiaries in attracting and retaining selected individuals to serve as directors, employees, consultants and/or advisors of the Company who are expected to contribute to the Company’s success and to achieve long-term objectives which will inure to the benefit of all stockholders of the Company through the additional incentives inherent in the Awards hereunder. +2. DEFINITIONS +2.1 “Award” shall mean any Option, Stock Appreciation Right, Restricted Stock Award, Performance Award, Performance Unit, Other Stock Unit Award or any other right, interest or option relating to Shares or other property (including cash) granted pursuant to the provisions of the Plan. +2.2 “ Award Agreement ” shall mean any agreement, contract or other instrument or document evidencing any Award granted by the Committee hereunder, which shall be in written or electronic form, as designated by the Committee. +2.3 “ Board ” shall mean the board of directors of the Company. +2.4 “ Change of Control ” shall mean, except as otherwise provided in an Award Agreement, the occurrence of any of the following: +(a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended) (a “ Covered Person ”) of beneficial ownership (within the meaning of rule 13d-3 promulgated under the Exchange Act) of 35% or more of either (i) the then outstanding shares of the common stock of the Company (the “ Outstanding Company Common Stock ”), or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “ Outstanding Company Voting Securities ”); provided, however, that for purposes of this Section 2.4(a) , the following acquisitions shall not constitute a Change of Control: (A) any acquisition directly from the Company, (B) any acquisition by the Company, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any entity controlled by the Company, or (D) any acquisition by any entity pursuant to a transaction which complies with clauses (A), (B) and (C) of Section 2.4(c) ; or +(b) Individuals who, as of the Effective Date, constitute the Board (the “ Incumbent Board ”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the Effective Date whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Covered Person other than the Board; or +(c) Consummation of (i) a reorganization, merger or consolidation or sale of the Company or any subsidiary of the Company, or (ii) a disposition of all or substantially all of the assets of the Company (a “ Business Combination ”), in each case, unless, immediately following such Business Combination: (A) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, direct or indirectly, more than 65% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the +68 +Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be; (B) no Covered Person (excluding any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 35% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation, except to the extent that such ownership existed prior to the Business Combination; and (C) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or, if earlier, of the action of the Board, providing for such Business Combination. +2.5 “ Code ” shall mean the Internal Revenue Code of 1986, as amended from time to time. +2.6 “ Committee ” shall mean the Compensation Committee of the Board, consisting of no fewer than two Directors, each of whom is (a) a “Non-Employee Director” within the meaning of Rule 16b-3 of the Exchange Act and (b) an “independent director” for purpose of the rules and regulations of the Nasdaq Stock Market. +2.7 “ Director ” shall mean a non-employee member of the Board. +2.8 “ Disability ” shall, except as otherwise provided in an Award Agreement, exist (a) if the Participant qualifies for long-term disability benefits under a long-term disability program sponsored by the Company in which employees participate generally or (b) if the Company does not sponsor such a long-term disability program, if the Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months. +2.9 “ Employee ” shall mean any employee of the Company or any Subsidiary and any prospective employee conditioned upon, and effective not earlier than, such person’s becoming an employee of the Company or any Subsidiary. Solely for purposes of the Plan, an Employee shall also mean any consultant or advisor who provides services to the Company or any Subsidiary, so long as such person (a) renders bona fide services that are not in connection with the offer and sale of the Company’s securities in a capital raising transaction and (b) does not directly or indirectly promote or maintain a market for the Company’s securities. +2.10 “ Exchange Act ” shall mean the Securities Exchange Act of 1934, as amended. +2.11 “ Fair Market Value ” shall mean, with respect to any property other than Shares, the market value of such property determined by such methods or procedures as shall be established from time to time by the Committee. The Fair Market Value of Shares as of any date shall be the per Share closing price of the Shares as reported on the Nasdaq Stock Market on that date (or if there were no reported prices on such date, on the last preceding date on which the prices were reported) or, if the Company is not then listed on the Nasdaq Stock Market, on the principal national securities exchange on which the Company is listed, and if the Company is not then listed on the Nasdaq Stock Market or any national securities exchange, the Fair Market Value of Shares shall be determined by the Committee in its sole discretion using appropriate criteria. +2.12 “ Incentive Stock Option ” shall mean an Option intended to qualify as an “incentive stock option” as defined in Section 422 of the Code. +2.13 “ Option ” shall mean any right granted to a Participant under the Plan allowing such Participant to purchase Shares at such price or prices and during such period or periods as the Committee shall determine. +2.14 “ Participant ” shall mean an Employee or Director who is selected by the Committee to receive an Award under the Plan. +2.15 “ Performance Award ” shall mean any Award of Performance Shares or Performance Units granted pursuant to Article 9 . +2.16 “ Performance Period ” shall mean that period established by the Committee at the time any Performance Award is granted or at any time thereafter during which any performance goals specified by the Committee with respect to such Award are to be measured. +2.17 “ Performance Share ” shall mean any grant pursuant to Section 9 of a unit valued by reference to a designated number of Shares, which value may be paid to the Participant by delivery of such property as the Committee shall determine, including cash, Shares, other property, or any combination thereof, upon achievement of such performance goals during the Performance Period as the Committee shall establish at the time of such grant or thereafter. +69 +2.18 “ Performance Unit ” shall mean any grant pursuant to Section 9 of a unit valued by reference to a designated amount of property (including cash) other than Shares, which value may be paid to the Participant by delivery of such property as the Committee shall determine, including cash, Shares, other property, or any combination thereof, upon achievement of such performance goals during the Performance Period as the Committee shall establish at the time of such grant or thereafter. +2.19 “ Prior Plans ” shall mean, collectively, the Company’s 2005 Long-Term Incentive Plan, as amended, and the Company’s Amended and Restated 2014 Long-Term Incentive Plan, as amended. +2.20 “ Restricted Stock ” shall mean any Share issued with the restriction that the holder may not sell, transfer, pledge or assign such Share and with such other restrictions as the Committee, in its sole discretion, may impose (including any restriction on the right to vote such Share and the right to receive any dividends), which restrictions may lapse separately or in combination at such time or times, in installments or otherwise, as the Committee may deem appropriate in its sole discretion. +2.21 “ Shares ” shall mean the shares of common stock of the Company, par value $.01 per share. +2.22 “ Stock Appreciation Right ” shall mean the right granted to a Participant pursuant to Section 6 . +2.23 “ Subsidiary ” shall mean any corporation or other entity, whether domestic or foreign, in which the Company has or obtains, directly or indirectly, a proprietary interest of more than 50% by reason of stock ownership or otherwise. +2.24 “ Substitute Awards ” shall mean Awards granted or Shares issued by the Company in assumption of, or in substitution or exchange for, awards previously granted, or the right or obligation to make future awards, by a company acquired by the Company or any Subsidiary or with which the Company or any Subsidiary combines. +3. SHARES SUBJECT TO THE PLAN +3.1 Number of Shares . +(a) Subject to adjustment as provided in Section 11.2 and this Section 3.1, the total number of Shares authorized for grant under the Plan shall be the sum of (i) 34,045,000 62,945,000 Shares, plus (ii) the total number of Shares remaining available for grant under the Prior Plans as of the Effective Date. Any Shares that are subject to Awards of Options or Stock Appreciation Rights shall be counted against this limit as one Share for every one Share granted. Any Shares that are subject to Awards other than Options or Stock Appreciation Rights shall be counted against this limit as two Shares for every one Share awarded. No further awards will be granted under any Prior Plans. +(b) If any Shares subject to an Award or to an award under the Prior Plans are forfeited, expire or otherwise terminate without issuance of such Shares, or any Award or award under the Prior Plans is settled for cash or otherwise does not result in the issuance of all or a portion of the Shares subject to such Award, the Shares shall, to the extent of such forfeiture, expiration, termination, cash settlement or non-issuance, again be (or become with respect to Shares subject to awards under the Prior Plans) available for grant subject to Awards under the Plan, subject to Section 3.1(d) below. Notwithstanding the foregoing, the following Shares shall not become available for grant under the Plan: (i) Shares subject to an Option or Stock Appreciation Right or to a stock option or stock appreciation right under the Prior Plans that are used to satisfy the exercise price of stock options or are not issued upon the stock-settlement of a stock appreciation right, (ii) Shares withheld by the Company for income or employment taxes on any Award granted under the Plan or (iii) Shares repurchased on the open market with the proceeds of the option exercise price. +(c) Substitute Awards shall not reduce the Shares authorized for grant under the Plan. Additionally, in the event that a company acquired by the Company or any Subsidiary or with which the Company or any Subsidiary combines has shares available under a pre-existing plan approved by shareholders and not adopted in contemplation of such acquisition or combination, the shares available for grant pursuant to the terms of such pre-existing plan (as adjusted, to the extent appropriate, using the exchange ratio or other adjustment or valuation ratio or formula used in such acquisition or combination to determine the consideration payable to the holders of common stock of the entities party to such acquisition or combination) may be used for Awards under the Plan and shall not reduce the Shares authorized for grant under the Plan; provided that Awards using such available shares shall only be made (i) until the last date that awards or grants could have been made under the terms of the pre-existing plan, absent the acquisition or combination, and (ii) to individuals who were not Employees or Directors prior to such acquisition or combination. +70 +(d) Any Shares that become available for grant pursuant to Section 3.1(b) shall be added to the share reserve set forth in Section 3.1(a): (i) as one Share if such Shares were subject to options or stock appreciation rights granted under the Plan or Prior Plans or (ii) as two Shares if such Shares were subject to awards other than options or stock appreciation rights that were granted under the Plan or the Prior Plans. +3.2 Character of Shares . Any Shares issued hereunder may consist, in whole or in part, of authorized and unissued shares, treasury shares or shares purchased in the open market or otherwise. +3.3 Minimum Vesting for Awards . Notwithstanding any other provision of the Plan to the contrary, Awards granted under the Plan (other than cash-based awards) shall vest no earlier than the first anniversary of the date on which the Award is granted; provided, however, that the following Awards shall not be subject to the foregoing minimum vesting requirement: (i) Substitute Awards, (ii) Shares delivered in lieu of fully-vested cash obligations, (iii) Awards to non-employee Directors that vest on the earlier of the one-year anniversary of the date of grant and the next annual meeting of stockholders which is at least 50 weeks after the immediately preceding year’s annual meeting, and (iv) any additional Awards the Committee may grant, up to a maximum of 5% of the available share reserve authorized for issuance under the Plan pursuant to Section 3.1 (subject to adjustment under Section 11.2 ); provided, further, that the foregoing restriction does not apply to the Committee’s discretion to provide for accelerated exercisability or vesting of any Award, including in cases of retirement, death, Disability or a Change in Control, in the terms of the Award Agreement or otherwise. +3.4 Limits on Non-Employee Director Compensation . The aggregate dollar value of equity-based Awards (based on the grant date fair value of such Awards for financial reporting purposes) and cash compensation granted under the Plan or otherwise during any fiscal year to any non-employee director for services provided as a director shall not exceed $750,000; provided, however, that in the fiscal year in which a non-employee director first joins the Board or during any fiscal year in which a non-employee director is designated as Chairman of the Board or Lead Director, the maximum aggregate dollar value of equity-based and cash compensation granted to the non-employee director for services provided as a director may be up to $1,000,000. +4. ELIGIBILITY AND ADMINISTRATION +4.1 Eligibility. Any Employee or Director shall be eligible to be selected as a Participant. +4.2 Administration. +(a) The Plan shall be administered by the Committee. The Committee shall have full power and authority, subject to the provisions of the Plan and subject to such orders or resolutions not inconsistent with the provisions of the Plan as may from time to time be adopted by the Board, to, in its sole discretion: (i) select the Employees and Directors to whom Awards may from time to time be granted hereunder; (ii) determine the type or types of Awards, not inconsistent with the provisions of the Plan, to be granted to each Participant hereunder; (iii) determine the number of Shares to be covered by each Award granted hereunder; (iv) determine the terms and conditions, not inconsistent with the provisions of the Plan, of any Award granted hereunder; (v) determine whether, to what extent and under what circumstances Awards may be settled in cash, Shares or other property, subject to Section 8.1 ; (vi) determine whether, to what extent, and under what circumstances cash, Shares, other property and other amounts payable with respect to an Award made under the Plan shall be (A) deferred either automatically or at the election of the Participant or (B) accelerated; (vii) determine whether, to what extent and under what circumstances any Award shall be canceled or suspended; (viii) interpret and administer the Plan and any instrument or agreement entered into under or in connection with the Plan, including any Award Agreement; (ix) correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award in the manner and to the extent that the Committee shall deem desirable to carry it into effect; (x) establish such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of the Plan; (xi) determine whether any Award (other than Options or Stock Appreciation Rights) will have Dividend Equivalents; and (xii) make any other determination and take any other action that the Committee deems necessary or desirable for administration of the Plan. Notwithstanding the foregoing, the Board shall have the same powers as the Committee with respect to Awards to Directors. +(b) Decisions of the Committee shall be final, conclusive and binding on all persons or entities, including the Company, any Participant, and any Subsidiary. A majority of the members of the Committee may determine its actions and fix the time and place of its meetings. +(c) To the extent not inconsistent with applicable law or the rules and regulations of the Nasdaq Stock Market (or any other principal national securities exchange on which the Company is then listed), the Committee may delegate to a committee of one or more directors of the Company or, to the extent permitted by law, to one or more executive officers or a committee of executive officers the right to grant Awards to +71 +Employees who are not Directors or executive officers of the Company and the authority to take action on behalf of the Committee pursuant to the Plan to cancel or suspend Awards to Employees who are not Directors or executive officers of the Company; provided, however, (i) the resolution providing such authorization sets forth the total number of Shares subject to such Awards that such officer(s) may grant; and (ii) the officer(s) shall report periodically to the Committee regarding the nature and scope of the Awards granted pursuant to the authority delegated. +5. OPTIONS +5.1 Grant of Options . Options may be granted hereunder to Participants either alone or in addition to other Awards granted under the Plan; provided that Incentive Stock Options may be granted only to eligible Employees of the Company or of any parent or subsidiary corporation (as permitted by Section 422 of the Code and the regulations thereunder). Any Option shall be subject to the terms and conditions of this Article 5 and to such additional terms and conditions, not inconsistent with the provisions of the Plan, as the Committee shall determine in its sole discretion. +5.2 Award Agreements . All Options granted pursuant to this Article 5 shall be evidenced by an Award Agreement in such form and containing such terms and conditions as the Committee shall determine which are not inconsistent with the provisions of the Plan. The terms of Options need not be the same with respect to each Participant. Granting of an Option pursuant to the Plan shall impose no obligation on the recipient to exercise such Option. Any individual who is granted an Option pursuant to this Article 5 may hold more than one Option granted pursuant to the Plan at the same time. The Award Agreement also shall specify whether the Option is intended to qualify as an Incentive Stock Option. +5.3 Option Price. Other than in connection with Substitute Awards or an adjustment in connection with Section 11.2 , the option price per each Share purchasable under any Option granted pursuant to this Article 5 shall not be less than 100% of the Fair Market Value of such Share on the date of grant of such Option. +5.4 Option Term. The term of each Option shall be fixed by the Committee in its sole discretion; provided that no Option shall be exercisable after the expiration of ten years from the date the Option is granted other than as a result of any extension of the term in compliance with applicable law as provided in an Award Agreement. +5.5 Exercise of Options. Vested Options granted under the Plan shall be exercised by the Participant or by a Permitted Assignee thereof (or by the Participant’s executors, administrators, guardian or legal representative, as may be provided in an Award Agreement) as to all or part of the Shares covered thereby, by the giving of written notice of exercise to the Company or its designated agent, specifying the number of Shares to be purchased, accompanied by payment of the full purchase price for the Shares being purchased. Unless otherwise provided in an Award Agreement, full payment of such purchase price shall be made at the time of exercise and shall be made (a) in cash or cash equivalents (including certified check or bank check or wire transfer of immediately available funds), (b) by tendering previously acquired Shares (either actually or by attestation, valued at their then Fair Market Value) that have been owned for a period of at least six months (or such other period to avoid accounting charges against the Company’s earnings), (c) with the consent of the Committee, by delivery of other consideration (including, where permitted by law and the Committee, other Awards) having a Fair Market Value on the exercise date equal to the total purchase price, (d) with the consent of the Committee, by withholding Shares otherwise issuable in connection with the exercise of the Option, (e) through any other method specified in an Award Agreement, or (f) any combination of any of the foregoing. The notice of exercise, accompanied by such payment, shall be delivered to the Company at its principal business office or such other office as the Committee may from time to time direct, and shall be in such form, containing such further provisions consistent with the provisions of the Plan, as the Committee may from time to time prescribe. In no event may any Option granted hereunder be exercised for a fraction of a Share. No adjustment shall be made for cash dividends or other rights for which the record date is prior to the date of such issuance. +5.6 Vesting. Subject to Section 3.3 , the vesting schedule shall be set forth in the Award Agreement. +5.7 Incentive Stock Options. The Committee may grant Options intended to qualify as Incentive Stock Options to any employee of the Company or any subsidiary corporation (as defined in Section 424 of the Code), subject to the requirements of Section 422 of the Code. Notwithstanding anything in Section 3.1 to the contrary and solely for the purposes of determining whether Shares are available for the grant of Incentive Stock Options under the Plan, the maximum aggregate number of Shares with respect to which Incentive Stock Options may be granted under the Plan shall be the number of Shares authorized for grant under Section 3.1 . +5.8 Form of Settlement. In its sole discretion, the Committee may provide, at the time of grant, that the Shares to be issued upon an Option’s exercise shall be in the form of Restricted Stock or other similar securities, or if provided for in the Award Agreement, may reserve the right to provide so after the time of grant. +72 +5.9 No Repricing. Notwithstanding anything in the Plan to the contrary, except in connection with a corporate transaction involving the Company (including, without limitation, any stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination, or exchange of shares), the terms of outstanding Awards may not be amended without stockholder approval to (a) reduce the option price of outstanding Options, (b) cancel outstanding Options in exchange for cash, other awards or Options with an option price that is less than the option price of the original Options, (c) take any other action with respect to an Option that would be treated as a repricing under the rules and regulations of the principal national securities exchange on which they are listed or (d) permit the grant of any Options that contains a so-called “reload” feature under which additional Options or other Awards are granted automatically to the Participant upon exercise of the original Option. +6. STOCK APPRECIATION RIGHTS +6.1 Grant and Exercise . The Committee may provide Stock Appreciation Rights (a) in conjunction with all or part of any Option granted under the Plan (“ Tandem Stock Appreciation Right ”), (b) in conjunction with all or part of any Award (other than an Option) granted under the Plan, or (c) without regard to any Option or other Award (a “ Freestanding Stock Appreciation Right ”), in each case, upon such terms and conditions as the Committee may establish in its sole discretion. +6.2 Terms and Conditions . Stock Appreciation Rights shall be subject to such terms and conditions, not inconsistent with the provisions of the Plan, as shall be determined from time to time by the Committee, including the following: +(a) Except in the case of Substitute Awards or in connection with an adjustment provided in Section 11.2 , the grant price of a Stock Appreciation Right shall not be less than the Fair Market Value of one Share on such date of grant of the right. Upon the exercise of a Stock Appreciation Right, the holder shall have the right to receive the excess of (i) the Fair Market Value of one Share on the date of exercise over (ii) the grant price of the right on the date of grant. +(b) Upon the exercise of a Stock Appreciation Right, payment shall be made in the sole discretion of the Committee in (i) whole Shares, (ii) cash or (iii) a combination of (i) or (ii). +(c) Any Tandem Stock Appreciation Right shall be granted at the same time as the related Option is granted. +(d) Any Tandem Stock Appreciation Right related to an Option may be exercised only when the related Option would be exercisable and the Fair Market Value of the Shares subject to the related Option exceeds the option price at which Shares can be acquired pursuant to the Option. In addition, (i) if a Tandem Stock Appreciation Right exists with respect to less than the full number of Shares covered by a related Option, then an exercise or termination of such Option shall not reduce the number of Shares to which the Tandem Stock Appreciation Right applies until the number of Shares then exercisable under such Option equals the number of Shares to which the Tandem Stock Appreciation Right applies, and (ii) no Tandem Stock Appreciation Right granted under the Plan to a person then subject to Section 16 of the Exchange Act shall be exercised during the first six months of its term for cash, except as provided in Article 10 . +(e) Any Option related to a Tandem Stock Appreciation Right shall no longer be exercisable to the extent the Tandem Stock Appreciation Right has been exercised. +(f) The provisions of Stock Appreciation Rights need not be the same with respect to each recipient. +(g) Subject to Section 11.2 , a Freestanding Stock Appreciation Right shall have the same terms and conditions as Options, including (i) an exercise price not less than Fair Market Value on the date of grant and (ii) a term not greater than ten years other than as a result of any extension of the term in compliance with applicable law as provided in an Award Agreement. Subject to Section 3.3 , the vesting schedule shall be set forth in the Award Agreement. +(h) The Committee may impose such terms and conditions on Stock Appreciation Rights granted in conjunction with any Award (other than an Option) as the Committee shall determine in its sole discretion. +6.3 No Repricing . Notwithstanding anything in the Plan to the contrary, except in connection with a corporate transaction involving the Company (including, without limitation, any stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination, or exchange of shares), the terms of outstanding awards may not be amended without stockholder approval to (a) +73 +reduce the exercise price of outstanding Stock Appreciation Rights, (b) cancel outstanding Stock Appreciation Rights in exchange for cash, other awards or Stock Appreciation Rights with an exercise price that is less than the exercise price of the original Stock Appreciation Rights, (c) take any other action with respect to the Stock Appreciation Rights that would be treated as a repricing under the rules and regulations of the principal national securities exchange on which they are listed, or (d) permit the grant of any Stock Appreciation Rights that contains a so-called “reload” feature under which additional Stock Appreciation Rights or other Awards are granted automatically to the Participant upon exercise of the original Stock Appreciation Rights. +7. RESTRICTED STOCK AWARDS +7.1 Grants . Awards of Restricted Stock may be issued hereunder to Participants either alone or in addition to other Awards granted under the Plan (a “ Restricted Stock Award ”), and such Restricted Stock Awards shall also be available as a form of payment of Performance Awards and other earned cash-based incentive compensation. A Restricted Stock Award shall be subject to restrictions imposed by the Committee covering a period of time specified by the Committee (the “ Restriction Period ”). The Committee has sole discretion to determine whether any consideration (other than services) is to be received by the Company or any Subsidiary as a condition precedent to the issuance of Restricted Stock. +7.2 Award Agreements . The terms of any Restricted Stock Award granted under the Plan shall be set forth in an Award Agreement which shall contain provisions determined by the Committee and not inconsistent with the Plan. The terms of Restricted Stock Awards need not be the same with respect to each Participant. +7.3 Rights of Holders of Restricted Stock . Beginning on the date of grant of the Restricted Stock Award and subject to execution of the Award Agreement, the Participant shall become a shareholder of the Company with respect to all Shares subject to the Award Agreement and shall have all of the rights of a shareholder, including the right to vote such Shares and the right to receive distributions made with respect to such Shares unless otherwise provided in such Award Agreement; provided, however, that any Shares, any other property, or cash distributed as a dividend or otherwise with respect to any Restricted Stock as to which the restrictions have not yet lapsed shall be subject to the same restrictions as such Restricted Stock. +7.4 Vesting . Subject to Section 3.3 , the vesting schedule shall be set forth in the Award Agreement. +7.5 Section 83(b) Election . The Committee may provide in an Award Agreement that the Award of Restricted Stock is conditioned upon the Participant making or refraining from making an election with respect to the Award under Section 83(b) of the Code. If a Participant makes an election pursuant to Section 83(b) of the Code concerning a Restricted Stock Award, the Participant shall be required to file promptly a copy of such election with the Company. +8. OTHER STOCK UNIT AWARDS +8.1 Grants . Other Awards of units having a value equal to an identical number of Shares (“ Other Stock Unit Awards ”) may be granted hereunder to Participants, in addition to other Awards granted under the Plan. Other Stock Unit Awards shall also be available as a form of payment of other Awards granted under the Plan and other earned cash-based incentive compensation. +8.2 Award Agreements . The terms of Other Stock Unit Award granted under the Plan shall be set forth in an Award Agreement which shall contain provisions determined by the Committee and not inconsistent with the Plan. The terms of such Awards need not be the same with respect to each Participant. +8.3 Vesting . Subject to Section 3.3 , the vesting schedule shall be set forth in the Award Agreement. +8.4 Payment . Except as provided in Article 10 or as maybe provided in an Award Agreement, Other Stock Unit Awards may be paid in cash, Shares, other property, or any combination thereof, in the sole discretion of the Committee at the time of payment. Other Stock Unit Awards may be paid in a lump sum or in installments following the lapse of the restrictions applicable to such Awards, but, unless expressly provided in an Award Agreement, no later than two and one-half months following the end of the calendar year in which such restrictions lapse, or in accordance with procedures established by the Committee, on a deferred basis subject to the requirements of Section 409A of the Code. +9. PERFORMANCE AWARDS +9.1 Grants . Performance Awards in the form of Performance Shares or Performance Units, as determined by the Committee in its sole discretion, may be granted hereunder to Participants, for no consideration or for such minimum consideration as may be required by applicable law, either alone or in addition to other Awards granted +74 +under the Plan. The performance goals to be achieved for each Performance Period shall be conclusively determined by the Committee. +9.2 Award Agreements . The terms of any Performance Award granted under the Plan shall be set forth in an Award Agreement which shall contain provisions determined by the Committee and not inconsistent with the Plan, including whether such Awards shall have Dividend Equivalents. The terms of Performance Awards need not be the same with respect to each Participant. +9.3 Terms and Conditions . The performance criteria to be achieved during any Performance Period and the length of the Performance Period shall be determined by the Committee upon the grant of each Performance Award. Performance Awards shall be subject to the vesting requirements as set forth in Section 3.3 . The amount of the Award to be distributed shall be conclusively determined by the Committee. +9.4 Payment. Except as provided in Article 10 or as may be provided in an Award Agreement, Performance Awards will be distributed only after the end of the relevant Performance Period. Performance Awards may be paid in cash, Shares, or any combination thereof, in the sole discretion of the Committee at the time of payment. Performance Awards may be paid in a lump sum or in installments, but, unless expressly provided in an Award Agreement, no later than two and one-half months following the close of the calendar year that contains the end of the Performance Period or, in accordance with procedures established by the Committee, on a deferred basis subject to the requirements of Section 409A of the Code. +9.5 Performance Award Dividend Equivalents . Subject to the provisions of the Plan and any Award Agreement, the Committee in its sole discretion may award currently or on a deferred basis, Dividend Equivalents with respect to the number of Shares covered by a Performance Unit or Performance Share Award, provided, that such Dividend Equivalents (if any) shall be deemed to have been reinvested in additional Performance Shares or Performance Units and shall provide that such Dividend Equivalents are subject to the same vesting conditions as the underlying Award. +10. CHANGE OF CONTROL PROVISIONS +Upon the occurrence of a Change of Control, unless otherwise specifically set forth in an Award Agreement or other agreement applicable to any Award, the Committee may effect one or more of the following alternatives, which may vary among individual holders and which may vary among Awards held by any individual holder: +(a) Awards outstanding as of the date of the Change of Control immediately vest and become free of all restrictions and limitations and, to the extent applicable, become fully exercisable and/or immediately settled or distributed; +(b) Options and Stock Appreciation Rights outstanding shall terminate within a specified number of days after notice to the Participant; +(c) Participants shall receive, with respect to each Share subject to an Award (or vested portion thereof), an amount equal to the excess, if any, of the Fair Market Value of such Share immediately prior to the occurrence of such Change of Control over the exercise price per share, if applicable, of such Award, such amount to be payable in cash, in one or more kinds of stock or property (including the stock or property, if any, payable in the transaction) or in a combination thereof, as the Committee, in its sole discretion, shall determine; +(d) Options and Stock Appreciation Rights outstanding as of the date of the Change of Control may be cancelled and terminated without payment therefor if the Fair Market Value of one Share as of the date of the Change of Control is less than the per Share Option exercise price or Stock Appreciation Right grant price; or +(e) such other adjustments or benefits as the Committee deems appropriate in its sole discretion shall apply (including the substitution, assumption or continuation of Awards by the successor company or a parent or subsidiary thereof); +in each case, (i) to the extent permitted under Section 409A of the Code and (ii) subject to any terms and conditions contained in the Award Agreement evidencing such Award or other agreement applicable to such Award. +11. GENERALLY APPLICABLE PROVISIONS +11.1 Amendment and Termination of the Plan . The Board may, from time to time, alter, amend, suspend or terminate the Plan as it shall deem advisable in its sole discretion, subject to any requirement for stockholder approval imposed by applicable law, including the rules and regulations of the Nasdaq Stock Market (or any other principal +75 +national securities exchange on which the Company is listed) provided that the Board may not amend the Plan in any manner that would result in noncompliance with Rule 16b-3 of the Exchange Act; and further provided that the Board may not, without the approval of the Company’s stockholders, amend the Plan to (a) increase the number of Shares that may be the subject of Awards under the Plan (except for adjustments pursuant to Section 11.2 ), (b) expand the types of awards available under the Plan, (c) materially expand the class of persons eligible to participate in the Plan, (d) amend any provision of Section 5.9 , (e) increase the maximum permissible term of any Option specified by Section 5.4 or any Stock Appreciation Right specified by Section 6.2(g) , or (f) amend any provision of Section 6.3 . In addition, no amendments to, or termination of, the Plan shall in any way materially impair the rights of a Participant under any Award previously granted without such Participant’s consent. +11.2 Adjustments . In the event of any merger, reorganization, consolidation, recapitalization, dividend or distribution (whether in cash, shares or other property, other than a regular cash dividend), stock split, reverse stock split, spin-off, joint venture, subsidiary or division sale or similar transaction or other change in corporate structure affecting the Shares or the value thereof, such adjustments and other substitutions shall be made to the Plan and to Awards as the Committee, in its sole discretion, deems equitable or appropriate, including such adjustments (a) in the aggregate number, class and kind of securities that may be delivered under the Plan, in the aggregate or to any one Participant, (b) in the number, class, kind and option or exercise price of securities subject to outstanding Awards granted under the Plan (including, if the Committee deems appropriate, the substitution of similar options to purchase the shares of, or other awards denominated in the shares of, another company) and (c) to the terms and conditions of any outstanding Awards (including any applicable performance targets or criteria with respect thereto), in each case, as the Committee may determine to be appropriate in its sole discretion; provided, however, that the number of Shares subject to any Award shall always be a whole number. No adjustment or substitution pursuant to this Section 11.2 shall be made in a manner that results in noncompliance with the requirements of Section 409A of the Code, to the extent applicable. +11.3 Transferability of Awards . Except as provided below, no Award and no Shares subject to Other Stock Unit Awards or Performance Units that have not been issued or as to which any applicable restriction, performance or deferral period has not lapsed, may be sold, assigned, transferred, pledged or otherwise encumbered, other than by will or the laws of descent and distribution or pursuant to a domestic relations order, as determined by the Committee, and such Award may be exercised during the life of the Participant only by the Participant or the Participant’s guardian or legal representative. Notwithstanding the foregoing, a Participant may assign or transfer an Award with the consent of the Committee (a) for charitable donations; (b) to the Participant’s spouse, children or grandchildren (including any adopted and stepchildren and grandchildren), or (c) a trust for the benefit of one or more of the Participants or the persons referred to in clause (b) (each transferee thereof, a “ Permitted Assignee ”); provided that such Permitted Assignee shall be bound by and subject to all of the terms and conditions of the Plan and the Award Agreement relating to the transferred Award and shall execute an agreement satisfactory to the Company evidencing such obligations; and provided further that such Participant shall remain bound by the terms and conditions of the Plan. The Company shall cooperate with any Permitted Assignee and the Company’s transfer agent in effectuating any transfer permitted under this Section 11.3 . Notwithstanding the foregoing, no Incentive Stock Option granted under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, all Incentive Stock Options granted to a Participant under the Plan shall be exercisable during his or her lifetime only by such Participant. For the avoidance of doubt, in no event may an Award (excluding any fully vested and unrestricted Shares received pursuant to an Award) be transferred by a Participant to a third party for monetary value. +11.4 Termination of Employment . The Committee shall determine and set forth in each Award Agreement whether any Awards granted in such Award Agreement will continue to be exercisable, and the terms of such exercise, on and after the date that a Participant ceases to be employed by or to provide services to the Company or any Subsidiary (including as a Director), whether by reason of death, Disability, voluntary or involuntary termination of employment or services, or otherwise. The date of termination of a Participant’s employment or services will be determined by the Committee, which determination will be final. +11.5 Deferral . The Committee shall be authorized to establish procedures pursuant to which the payment of any Award may be deferred. Such deferrals shall be administered in a manner that is intended to comply with Section 409A of the Code and shall be construed and interpreted in accordance with such intent. +11.6 Dividend Equivalents . Subject to the provisions of the Plan and any Award Agreement, the recipient of an Award (including any deferred Award) may, if so determined by the Committee, be entitled to receive, on a deferred basis, cash, stock or other property dividends, or cash payments in amounts equivalent to cash, stock or other property dividends on Shares (“ Dividend Equivalents ”) with respect to the number of Shares covered by the Award, as determined by the Committee, in its sole discretion. Dividend Equivalents may accrue but will not, in any event, be +76 +payable until the vesting conditions of the underlying Award have been met. The Committee may provide that such amounts and Dividend Equivalents (if any) shall be deemed to have been reinvested in additional Shares or otherwise reinvested. Notwithstanding the foregoing, Dividend Equivalents shall not be made part of any Options or Stock Appreciation Rights. +12. MISCELLANEOUS +12.1 Tax Withholding . The Company shall have the right to make all payments or distributions pursuant to the Plan to a Participant (or a Permitted Assignee thereof) (any such person, a “ Payee ”) net of any applicable federal, state and local taxes required to be paid or withheld as a result of (a) the grant of any Award, (b) the exercise of an Option or Stock Appreciation Right, (c) the delivery of Shares or cash, (d) the lapse of any restrictions in connection with any Award or (e) any other event occurring pursuant to the Plan. The Company or any Subsidiary shall have the right to withhold from wages or other amounts otherwise payable to such Payee such minimum statutory withholding taxes as may be required by law, or to otherwise require the Payee to pay such withholding taxes. If the Payee shall fail to make such tax payments as are required, the Company or its Subsidiaries shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to such Payee or to take such other action as may be necessary to satisfy such withholding obligations. The Committee shall be authorized to establish procedures for election by Participants to satisfy such obligation for the payment of such taxes by tendering previously acquired Shares (either actually or by attestation, valued at their then Fair Market Value) that have been owned for a period of at least six months (or such other period to avoid accounting charges against the Company’s earnings), or by directing the Company to retain Shares (up to the Participant’s minimum required tax withholding rate or such other rate that will not trigger a negative accounting impact) otherwise deliverable in connection with the Award. +12.2 Right of Discharge Reserved; Claims to Awards . Nothing in the Plan nor the grant of an Award hereunder shall confer upon any Employee or Director the right to continue in the employment or service of the Company or any Subsidiary or affect any right that the Company or any Subsidiary may have to terminate the employment or service of (or to demote or to exclude from future Awards under the Plan) any such Employee or Director at any time for any reason. Except as specifically provided by the Committee, the Company shall not be liable for the loss of existing or potential profit from an Award granted in the event of termination of an employment or other relationship. No Employee or Participant shall have any claim to be granted any Award under the Plan, and there is no obligation for uniformity of treatment of Employees or Participants under the Plan. +12.3 Prospective Recipient . Unless otherwise determined by the Committee, the prospective recipient of any Award under the Plan shall not, with respect to such Award, be deemed to have become a Participant, or to have any rights with respect to such Award, until and unless such recipient shall have executed or acknowledged an Award Agreement and delivered a copy thereof to the Company, in each case, in the manner prescribed by the Committee, and otherwise complied with the then applicable terms and conditions. +12.4 Cancellation of Award . Notwithstanding anything to the contrary contained herein, all outstanding Awards granted to any Participant may be canceled if the Participant, without the consent of the Company, while employed by the Company or any Subsidiary or after termination of such employment or service, establishes a relationship with a competitor of the Company or any Subsidiary or engages in activity that is in conflict with or adverse to the interest of the Company or any Subsidiary, as determined by the Committee in its sole discretion. +12.5 Stop Transfer Orders . All certificates for Shares delivered under the Plan pursuant to any Award shall be subject to such stop-transfer orders and other restrictions as the Committee may deem advisable in its sole discretion under the rules, regulations and other requirements of the Securities and Exchange Commission, any stock exchange upon which the Shares are then listed, and any applicable federal or state securities law, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions. +12.6 Nature of Payments . All Awards made pursuant to the Plan are in consideration of services performed or to be performed for the Company or any Subsidiary, division or business unit of the Company. Neither Awards made under the Plan nor Shares or cash paid pursuant to such Awards, may be included as “compensation” for purposes of computing the benefits payable to any Participant under the Company’s or any Subsidiary’s retirement plans (both qualified and non-qualified), welfare benefit plans or other employee benefit plans unless such plan expressly provides that such compensation shall be taken into account in computing a participant’s benefit. +12.7 Other Plans . Nothing contained in the Plan shall prevent the Board from adopting other or additional compensation arrangements, subject to stockholder approval if such approval is required; and such arrangements may be either generally applicable or applicable only in specific cases. +77 +12.8 Severability . If any provision of the Plan shall be held unlawful or otherwise invalid or unenforceable in whole or in part by a court of competent jurisdiction, such provision shall (a) be deemed limited to the extent that such court of competent jurisdiction deems it lawful, valid and/or enforceable and as so limited shall remain in full force and effect, and (b) not affect any other provision of the Plan or part thereof, each of which shall remain in full force and effect. If the making of any payment or the provision of any other benefit required under the Plan shall be held unlawful or otherwise invalid or unenforceable by a court of competent jurisdiction, such unlawfulness, invalidity or unenforceability shall not prevent any other payment or benefit from being made or provided under the Plan, and if the making of any payment in full or the provision of any other benefit required under the Plan in full would be unlawful or otherwise invalid or unenforceable, then such unlawfulness, invalidity or unenforceability shall not prevent such payment or benefit from being made or provided in part, to the extent that it would not be unlawful, invalid or unenforceable, and the maximum payment or benefit that would not be unlawful, invalid or unenforceable shall be made or provided under the Plan. +12.9 Interpretation . As used in the Plan, the words “include” and “including,” and variations thereof, shall not be deemed to be terms of limitation, but rather shall be deemed to be followed by the words “without limitation.” The captions in the Plan are for convenience of reference only, and are not intended to narrow, limit or affect the substance or interpretation of the provisions contained herein. +12.10 Unfunded Status of the Plan . The Plan is intended to constitute an “unfunded” plan for incentive and deferred compensation. With respect to any payments not yet made to a Participant by the Company, nothing contained herein shall give any such Participant any rights that are greater than those of a general creditor of the Company. In its sole discretion, the Committee may authorize the creation of trusts or other arrangements to meet the obligations created under the Plan to deliver the Shares or payments in lieu of or with respect to Awards hereunder; provided, however, that the existence of such trusts or other arrangements is consistent with the unfunded status of the Plan. +12.11 Governing Law . The Plan and all determinations made and actions taken thereunder, to the extent not otherwise governed by the Code or the laws of the United States, shall be governed by the laws of the State of Delaware, without reference to principles of conflict of laws, and construed accordingly. +12.12 Effective Date of Plan; Termination of Plan . The Plan was originally approved by the Board as of the Effective Date, subject to approval by the Company’s stockholders. Awards may be granted under the Plan at any time and from time to time on or prior to April 9, 2031, on which date the Plan will expire except as to Awards then outstanding under the Plan. Such outstanding Awards shall remain in effect until they have been exercised or terminated, or have expired. +12.13 Foreign Employees . Awards may be granted to Participants who are foreign nationals or employed outside the United States, or both, on such terms and conditions different from those applicable to Awards to Employees employed in the United States as may, in the Committee’s sole discretion, be necessary or desirable in order to recognize differences in local law or tax policy. The Committee also may impose conditions on the exercise or vesting of Awards in order to minimize the Company’s obligation with respect to tax equalization for Employees on assignments outside their home country. +12.14 Section 409A of the Code . +(a) Awards made under the Plan are intended to comply with or be exempt from Section 409A of the Code, and ambiguous provisions hereof, if any, shall be construed and interpreted in a manner consistent with such intent. No payment, benefit or consideration shall be substituted for an Award if such action would result in the imposition of taxes under Section 409A of the Code. Notwithstanding anything in the Plan to the contrary, if any Plan provision or Award under the Plan would result in the imposition of an additional tax under Section 409A of the Code, that Plan provision or Award shall be reformed, to the extent permissible under Section 409A of the Code, to avoid imposition of the additional tax, and no such action shall be deemed to adversely affect the Participant’s rights to an Award. +(b) Unless the Committee provides otherwise in an Award Agreement, each Other Stock Unit Award or Performance Unit (or portion thereof if the Award is subject to a vesting schedule) shall be settled no later than the 15th day of the third month after the end of the first calendar year in which the Award (or such portion thereof) is no longer subject to a “substantial risk of forfeiture” within the meaning of Section 409A of the Code. If the Committee determines that an Other Stock Unit Award or Performance Unit is intended to be subject to Section 409A of the Code, the applicable Award Agreement shall include terms that are designed to satisfy the requirements of Section 409A of the Code. +78 +(c) If the Participant is identified by the Company as a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code on the date on which the Participant has a “separation from service” (other than due to death) within the meaning of Treasury Regulation § 1.409A-1(h), any Award payable or settled on account of a separation from service that is deferred compensation subject to Section 409A of the Code shall be paid or settled on the earliest of (i) the first business day following the expiration of six months from the Participant’s separation from service, (ii) the date of the Participant’s death, or (iii) such earlier date as complies with the requirements of Section 409A of the Code. +12.15 Notification of Disqualifying Disposition . If any Participant shall make any disposition of Shares issued pursuant to the exercise of an Incentive Stock Option under the circumstances described in Section 421(b) of the Code (relating to certain disqualifying dispositions), such Participant shall notify the Company of such disposition within ten days thereof. +12.16 Clawback Provisions . If the Company is required to prepare an accounting restatement due to the material noncompliance of the Company, as a result of misconduct, with any financial reporting requirement under the securities laws, and if the Participant is one of the persons subject to automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002 or the Participant engaged in such misconduct, such Participant shall to the extent required by law, or may otherwise if required as determined in the sole discretion of the Committee, be required to reimburse the Company the amount of any payment in settlement of an Award earned or accrued during the 12-month period following the first public issuance or filing with the United States Securities and Exchange Commission (whichever just occurred) of the financial document embodying such financial reporting requirement. Notwithstanding any other provisions in this Plan, any Award shall be subject to recovery or clawback by the Company under the Patterson-UTI Energy, Inc. Clawback Policy and any other applicable clawback policy adopted by the Company whether before or after the date of grant of the Award. +12.17 Indemnification . Each person who is or shall have been a member of the Board, or a Committee appointed by the Board, or an officer of the Company to whom authority was delegated in accordance with Section 4.2 shall be indemnified and held harmless by the Company against and from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him or her in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by him or her in settlement thereof, with the Company’s approval, or paid by him or her in satisfaction of any judgment in any such action, suit, or proceeding against him or her, provided he or she shall give the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf, unless such loss, cost, liability, or expense is a result of his or her own willful misconduct or except as expressly provided by statute. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company’s Certificate of Incorporation of Bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless. +79 +80 +81 \ No newline at end of file diff --git a/raw/proxies/0000889900/0000889900-26-000020/proxy_rpt.txt b/raw/proxies/0000889900/0000889900-26-000020/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..e69de29bb2d1d6434b8b29ae775ad8c2e48c5391 diff --git a/raw/proxies/0000889900/0000950170-22-005570/proxy.txt b/raw/proxies/0000889900/0000950170-22-005570/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..e127d62ca75ab62d1c84404e866cf913279807c5 --- /dev/null +++ b/raw/proxies/0000889900/0000950170-22-005570/proxy.txt @@ -0,0 +1,2023 @@ +DEF 14A +1 +pten-def14a_2022_proxy.htm +DEF 14A +DEF 14A +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +Washington, D.C. 20549 +SCHEDULE 14A INFORMATION +Proxy Statement Pursuant to Section 14(a) of the +Securities Exchange Act of 1934 +(Amendment No. ) +Filed by the Registrant ☒ +Filed by a Party other than the Registrant ☐ +Check the appropriate box: +☐ Preliminary Proxy Statement +☐ Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +☒ Definitive Proxy Statement +☐ Definitive Additional Materials +☐ Soliciting Material under § 240.14a-12 +PATTERSON-UTI ENERGY, INC. +(Name of registrant as specified in its charter) +(Name of person(s) filing proxy statement, if other than the registrant) +Payment of Filing Fee (Check all boxes that apply): +☒ No fee required +☐ Fee paid previously with preliminary materials +☐ Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11 +10713 West Sam Houston Parkway North, Suite 800 +Houston, Texas 77064 +(281) 765-7100 +April 11, 2022 +Dear Stockholder: +We cordially invite you to attend Patterson-UTI Energy, Inc.’s annual stockholders’ meeting. The annual meeting will be held Thursday, June 2, 2022, at 10:00 a.m., Central Time, at our corporate headquarters, located at 10713 W. Sam Houston Parkway North, Suite 125, Houston, Texas 77064 . +We are pleased to take advantage of Securities and Exchange Commission rules that allow us to furnish proxy materials to our stockholders on the Internet. We believe that posting these materials on the Internet enables us to provide stockholders with the information that they need quickly, while lowering our costs of printing and delivery and supporting our sustainability efforts. We are mailing to most of our stockholders a Notice of Internet Availability of Proxy Materials, rather than a paper copy of our proxy materials. The notice contains instructions on how to access the proxy materials, vote and obtain, if you so desire, a paper copy of the proxy materials. +Your vote is important to us. Whether or not you plan to attend the Annual Meeting in person, we urge you to promptly vote your shares by using the Internet or telephone, or if the accompanying proxy statement was mailed to you, by completing, signing, dating and returning your proxy card as soon as possible in the enclosed postage prepaid envelope. +Thank you for your support. +Sincerely, +Curtis W. Huff +Chairman of the Board +W illiam A ndrew H endricks , J r . +President, Chief Executive Officer and Director +PATTERSON-UTI ENERGY, INC. +10713 West Sam Houston Parkway North, Suite 800 +Houston, Texas 77064 +NOTICE OF 2022 ANNUAL MEETING OF STOCKHOLDERS +To Be Held June 2, 2022 +The 2022 annual meeting of the stockholders of Patterson-UTI Energy, Inc., a Delaware corporation (“Patterson-UTI”), will be held Thursday, June 2, 2022, at 10:00 a.m., Central Time, at our corporate headquarters, located at 10713 W. Sam Houston Parkway North, Suite 125, Houston, Texas 77064 (the “Meeting”), for the following purposes: +• +to elect eight directors named in this proxy statement to the Board of Directors of Patterson-UTI to serve until the next annual meeting of the stockholders or until their respective successors are elected and qualified; +• +to ratify the selection of PricewaterhouseCoopers LLP as the independent registered public accounting firm of Patterson-UTI for the fiscal year ending December 31, 2022; +• +to approve, on an advisory basis, Patterson-UTI’s compensation of its named executive officers; and +• +to transact such other business as may properly come before the Meeting or any adjournment or postponement thereof. +Stockholders of record at the close of business on April 5, 2022 are entitled to notice of and to vote at the Meeting and any adjournment or postponement thereof. +Your vote is important to us. Whether or not you plan to attend the Meeting in person, we urge you to promptly vote your shares by using the Internet or telephone, or if the accompanying proxy statement was mailed to you, by completing, signing, dating and returning your proxy card as soon as possible in the enclosed postage prepaid envelope. +By order of the Board of Directors +S ETH D. W EXLER +Senior Vice President, General Counsel and Secretary +April 11, 2022 +Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting +to Be Held on June 2, 2022 +The proxy statement and annual report to stockholders are available at www.proxyvote.com . +PATTERSON-UTI ENERGY, INC. +10713 West Sam Houston Parkway North, Suite 800 +Houston, Texas 77064 +PROXY STATEMENT +ANNUAL MEETING OF STOCKHOLDERS +To Be Held June 2, 2022 +General Information About the Annual Meeting and Voting +The Board of Directors (the “Board” or “Board of Directors”) of Patterson-UTI Energy, Inc., a Delaware corporation (“Patterson-UTI” or the “Company”), has made this proxy statement and its 2021 annual report available to you on the Internet or, upon your request has delivered printed versions of these materials to you by mail beginning on or about April 11, 2022. Patterson-UTI is furnishing this proxy statement in connection with the solicitation by the Board of Directors of proxies to be voted at the 2022 annual meeting of stockholders of Patterson-UTI (the “Meeting”). The Meeting will be held Thursday, June 2, 2022, at 10:00 a.m., Central Time, at our corporate headquarters, located at 10713 W. Sam Houston Parkway North, Suite 125, Houston, Texas 77064 , or at any adjournment or postponement thereof . +The Notice of Internet Availability of Proxy Materials (the “Notice”) was mailed to each of Patterson-UTI’s stockholders (other than those who previously requested electronic delivery) entitled to vote at the Meeting on or about April 11, 2022. +Pursuant to the “notice and access” rules adopted by the Securities and Exchange Commission (the “SEC”), Patterson-UTI has elected to provide stockholders access to its proxy materials on the Internet. Accordingly, Patterson-UTI sent a Notice to all of its stockholders as of the record date. The Notice includes instructions on how to access Patterson-UTI’s proxy materials on the Internet and how to request a printed copy of these materials. In addition, by following the instructions in the Notice, stockholders may request to receive proxy materials in printed form by mail or electronically by email on an ongoing basis. +Choosing to receive your future proxy materials by email will save us the cost of printing and mailing documents to you and will support our sustainability efforts. If you choose to receive future proxy materials by email, you will receive an email next year with instructions containing a link to those materials and a link to the proxy voting site. Your election to receive proxy materials by email will remain in effect until you terminate such election. +If your shares are registered directly in your name with our transfer agent, Continental Stock Transfer & Trust Company, you are considered the “stockholder of record” with respect to those shares, and the Notice was sent directly to you. +If your shares are held in an account at a brokerage firm, bank, broker-dealer, or other similar organization, then you are the beneficial owner of shares held in “street name,” and the Notice was forwarded to you by that organization. As a beneficial owner, you have the right to direct that organization on how to vote the shares held in your account. +Whether you are a “stockholder of record” or hold your shares in “street name,” you may direct your vote without attending the Meeting in person. +If you are a stockholder of record, you may vote by using the Internet or telephone by following the instructions in the Notice. If you request printed copies of the proxy materials by mail, you may also vote by completing, dating, signing and returning your proxy card by mail. You should sign your name exactly as it appears on the proxy card. If you are signing in a representative capacity (for example, as guardian, executor, trustee, custodian, attorney or officer of a corporation), you should indicate your name and title or capacity. +If you are the beneficial owner of shares held in street name, you may be eligible to vote your shares electronically using the Internet or telephone by following the instructions in the Notice. If you request printed copies of the proxy materials by mail, you may also vote by signing the voter instruction card provided by your brokerage firm, bank, broker-dealer, or other similar organization and returning it by mail. If you provide specific voting instructions by mail, telephone or the Internet, your shares will be voted by your brokerage firm, bank, broker-dealer, or similar organization as you have directed. +1 +Properly submitted proxies received either by mail, Internet, telephone or in person in time to be counted for the Meeting will be voted as you have directed in your proxy, unless you revoke your proxy in the manner provided below. As to any matter for which you give no direction in your proxy, your shares will be voted as follows: +• +“FOR” the election of all of the nominees to the Board of Directors named in this proxy statement; +• +“FOR” the ratification of PricewaterhouseCoopers LLP as the independent registered public accounting firm of Patterson-UTI for the fiscal year ending December 31, 2022; +• +“FOR” the approval, on an advisory basis, of Patterson-UTI’s compensation of its named executive officers; and +• +“FOR” or “AGAINST” any other proposals that may be properly submitted at the Meeting at the discretion of the persons named in the proxy. +If you are a stockholder of record, you may revoke your proxy before the proxy is voted by either: +• +submitting a new proxy with a later date, including a proxy submitted using the Internet or telephone, in time to be counted for the Meeting; +• +notifying the Secretary of Patterson-UTI in writing before the Meeting that you have revoked your proxy; or +• +attending the Meeting and voting in person. +If your shares are held in street name, you must obtain a proxy executed in your favor from the stockholder of record (that is, your brokerage firm, bank, broker-dealer or similar organization) to be able to vote at the Meeting. +The Board of Directors is making this solicitation. We have retained Georgeson LLC, 480 Washington Blvd., 26 th Floor, Jersey City, New Jersey 07310, for a fee of approximately $8,500 and the reimbursement of out of pocket costs and expenses, to assist in the solicitation of proxies on behalf of the Board. Patterson-UTI’s officers and other employees, without compensation other than regular compensation, may also solicit proxies on behalf of the Board by mail, email, the Internet, telephone, electronic means and personal interview. Patterson-UTI will pay all costs associated with this solicitation. +Shares Outstanding and Voting Rights +Only stockholders of record of Patterson-UTI’s common stock, $0.01 par value per share (the “Common Stock”), at the close of business on April 5, 2022 are entitled to notice of and to vote at the Meeting or any adjournment or postponement thereof. At the close of business on April 5, 2022, there were 215,288,948 shares of Common Stock issued and outstanding. Holders of record of Common Stock on April 5, 2022 will be entitled to one vote per share on all matters to properly come before the Meeting. A list of stockholders entitled to notice of and to vote at the Meeting will be made available at the Meeting and during regular business hours at the offices of Patterson-UTI Energy, Inc., 10713 West Sam Houston Parkway North, Suite 800, Houston, Texas 77064 for the ten day period prior to the Meeting for examination by any stockholder for any purpose germane to the Meeting. +A quorum is necessary to transact business at the Meeting. A majority of the shares of Common Stock outstanding on April 5, 2022 will constitute a quorum. The shares held by each stockholder who attends the Meeting in person, signs and timely returns the form of proxy, or properly votes using the Internet or telephone will be counted for purposes of determining the presence of a quorum at the Meeting. +“Broker non-votes” and abstentions will be considered present at the Meeting for the purpose of determining a quorum. Broker non-votes occur when nominees, such as brokerage firms, banks, broker-dealers, or other similar organizations holding shares on behalf of the beneficial owners, are prohibited from exercising discretionary voting authority for beneficial owners who have not provided voting instructions. If you do not give instructions to your bank, brokerage firm or other agent, the bank, brokerage firm or other agent will nevertheless be entitled, but not required, to vote your shares of Common Stock in its discretion on “routine matters” and may give or authorize the giving of a proxy to vote the shares of Common Stock in its discretion on such matters. The ratification of an independent registered public accounting firm is generally considered a routine matter, whereas the election of directors and the advisory approval of executive compensation are not considered routine matters. For these reasons, please promptly vote in accordance with the instructions provided by your brokerage firm, bank, broker-dealer, or other similar organization. +2 +PROPOSAL NO. 1 +ELECTION OF DIRECTORS +Directors are elected to serve until the next annual meeting of stockholders and until their successors are elected and qualified. Under Delaware law and Patterson-UTI’s bylaws, the affirmative vote of a plurality of shares present in person or represented by proxy at the meeting at which a quorum is present is required for the election of directors. +The enclosed form of proxy provides a means for you to either: +• +vote “For All” with respect to the election of the nominees to the Board of Directors listed below, +• +withhold authority to vote for one or more of the nominees (i.e., "For All Except"), or +• +withhold authority to vote for all of the nominees (i.e., "Withhold All"). +The Board of Directors recommends that you vote “FOR” all of the nominees. Unless you give contrary instructions in your proxy, your proxy will be voted “For All” with respect to the election of all of the nominees to the Board of Directors. If any nominee should become unable or unwilling to accept the nomination or election, the person acting under the proxy will vote for the election of such other person as the Board of Directors may recommend. The Board has no reason, however, to believe that any of the nominees will be unable or unwilling to serve if elected. +Because directors are elected by a plurality vote, shares as to which a stockholder withholds authority to vote and broker non-votes will not affect the outcome of the election, although a broker non-vote will be counted for purposes of establishing a quorum. +Our corporate governance guidelines require that if a director receives in an uncontested election a greater number of “withhold” votes than votes cast “for” his or her election, the Nominating and Corporate Governance Committee of the Board of Directors will undertake a prompt evaluation of the appropriateness of the director’s continued service on the Board of Directors. In performing this evaluation, the Nominating and Corporate Governance Committee will review all factors it deems relevant, including the stated reasons why votes were withheld, the director’s length of service, his or her past contributions to Patterson-UTI and the availability of other qualified candidates. The Nominating and Corporate Governance Committee will then make its recommendation to the Board. The Board of Directors will review the Nominating and Corporate Governance Committee’s recommendation and consider such further factors and information as it deems relevant. The Board of Directors will act on the Nominating and Corporate Governance Committee’s recommendation no later than 90 days following the date of the stockholders’ meeting. If the Board of Directors determines remedial action is appropriate, the director shall promptly take whatever action is requested by the Board. If the director does not promptly take the recommended remedial action or if the Board of Directors determines that immediate resignation is in the best interests of Patterson-UTI and its stockholders, the Board of Directors may accept the director’s resignation that will have been tendered as follows. Each director will, as a condition to his or her appointment or election as a director or nomination as a director, agree in writing to comply with the terms of Patterson-UTI’s majority voting policy and provide to the Board of Directors an irrevocable resignation that will be effective upon (i) the failure to receive the required vote at the next annual meeting at which such director faces re-election and (ii) the Board of Directors’ acceptance of such resignation. +Set forth below is the name, age, position and a brief description of the business experience during at least the past five years of each of the nominees to Patterson-UTI’s Board of Directors, as well as specific qualifications, attributes and skills of such member that were identified by the Nominating and Corporate Governance Committee when such member was nominated to serve on the Board of Directors. In July 2020, Noble Corporation plc (“Noble”) and certain of its subsidiaries filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of Texas. Noble successfully completed its subsequent financial restructuring and plan of reorganization and, together with such subsidiaries, emerged from Chapter 11 in February 2021. As is further discussed in her biographical information below, Ms. Robertson served in various management roles during her 40-year career with Noble, including as Chairman of the Board, President and Chief Executive Officer from January 2018 until May 2020 and as Executive Chairman from May 2020 until her retirement in February 2021. We have evaluated Noble’s Chapter 11 filing and do not believe it is material to Ms. Robertson’s service as a director. +3 +Each current member of Patterson-UTI’s Board of Directors is a nominee for election to the Board of Directors. Mr. Jaime and Ms. Robertson were first recommended as nominees by Mr. Hendricks, among other candidates recommended by the Chairman and the CEO. There are no arrangements or understandings between any person and any of the directors pursuant to which such director was selected as a nominee for election at the Meeting. There are no family relationships among any of the directors or executive officers of Patterson-UTI. +Name +Age +Position +Director Since +Curtis W. Huff +64 +Chairman of the Board and Director +2001 +William A. Hendricks, Jr. +57 +President and Chief Executive Officer and Director +2017 +Tiffany (TJ) Thom Cepak +49 +Director +2014 +Michael W. Conlon +75 +Director +2012 +Terry H. Hunt +73 +Director +2003 +Cesar Jaime +63 +Director +2022 +Janeen S. Judah +62 +Director +2018 +Julie J. Robertson +66 +Director +2022 +The following charts and diversity matrix show a snapshot of the average tenure and age, and gender and demographic diversity, of the eight nominees for election to our Board of Directors. +Board Diversity Matrix (As of April 11, 2022) +Total Number of Directors + +Female +Male +Part I: Gender Identity +Directors +3 +5 +Part II: Demographic Background +African American or Black +1 +0 +Hispanic or Latinx +0 +1 +White +3 +4 +Two or More Races or Ethnicities +1 +0 +When considering whether directors and nominees have the experience, qualifications, attributes and skills, taken as a whole, to enable the Board of Directors to satisfy its oversight responsibilities effectively in light of Patterson-UTI’s business and structure, the Nominating and Corporate Governance Committee and the Board of Directors focused primarily on the information discussed in each of the directors’ individual biographies set forth below. +4 +Curtis W. Huff — Mr. Huff has served as Chairman of the Board of Patterson-UTI since June 2020, as a director of Patterson-UTI since May 2001 and served as a director of UTI Energy Corp. ("UTI") from 1997 to May 2001. Mr. Huff is owner and Chairman of Freebird Partners, a private investment firm created in 2002 that is focused on oilfield service companies and technology. Mr. Huff co-founded Intervale Capital, an oilfield service private equity firm, in 2006 and served as a Managing Director from 2006 to 2012, when he sold his interest in the firm. Mr. Huff also serves as Chairman of Impact Fluid Solutions LP, which provides drilling and production solutions for oil and gas operators and fluid companies. Mr. Huff also serves as a director at various of Freebird’s portfolio companies. Mr. Huff served as the President and Chief Executive Officer of Grant Prideco, Inc., a provider of drill pipe and other drill stem products, from February 2001 to June 2002. From January 2000 to February 2001, Mr. Huff served as Executive Vice President, Chief Financial Officer and General Counsel of Weatherford International, Inc., one of the world’s largest international oilfield services companies. He served as Senior Vice President and General Counsel of Weatherford from May 1998 to January 2000. Mr. Huff began his professional career in 1983 with the law firm of Norton Rose Fulbright US LLP where he specialized in corporate, securities and merger and acquisition matters. Mr. Huff was made a partner in that firm in 1989 where he served until 1998 when he joined Weatherford. Mr. Huff holds a Bachelor of Arts degree and J.D. from the University of New Mexico, where he graduated as a member of the Order of the Coif and cum laude, and a Masters of Law from New York University School of Law. Mr. Huff is the Chairman of the Board of Directors of the University of St. Thomas in Houston, Texas and is actively involved with various charities, including the Houston Food Bank. +The Board of Directors considered Mr. Huff’s background as an executive of publicly traded oilfield services companies and as an owner and manager of a private investment firm focused on the oilfield service industry. The Board noted his knowledge and experience in a broad range of oilfield products and services and his current and historical experience in managing operations in both the United States and internationally. The Board also considered Mr. Huff’s expertise and background with regard to accounting and legal matters, which, among other things, provides guidance to Patterson-UTI in assessing its corporate governance structure, policies and procedures. +William Andrew Hendricks, Jr. —Mr. Hendricks has served as President and Chief Executive Officer of Patterson-UTI since October 2012 and as a director of Patterson-UTI since June 2017. From April 2012 through September 2012, he served as Chief Operating Officer of Patterson-UTI. Prior to Patterson-UTI, Mr. Hendricks worked in a number of positions at Schlumberger for 24 years, where he last served as a drilling division President, having lived and worked around the world in the energy industry, offshore and onshore, and conducting business at times in Spanish and French. As CEO at Patterson-UTI, he has focused on transformation through investments in people and technology, growth through strategic acquisitions, improving diversity in recruiting and leadership and also enhancing the company’s sustainability and ESG position. Mr. Hendricks attended Texas A&M University, receiving a Bachelor of Science degree in Petroleum Engineering, and then began his career working on an offshore drilling rig in the Gulf of Mexico for Ocean Drilling & Exploration Company (currently Diamond Offshore). Mr. Hendricks is currently Vice Chair and a past Chairman of the International Association of Drilling Contractors, a member of the Society of Petroleum Engineers, an energy contributor on CNBC and has testified on energy matters with the U.S. Senate Committee on Energy and Natural Resources in Washington D.C. +The Board of Directors considered Mr. Hendricks’ more than 30 years of combined operational and managerial experience in the oil and gas industry. In addition, the Board noted his nearly seven years of service as Patterson-UTI’s President and Chief Executive Officer and nearly ten years of service in numerous executive positions with Schlumberger Limited, a global provider of oilfield services, including nearly two years as President of Schlumberger Drilling & Measurements. The Board further considered Mr. Hendricks’ significant experience with evaluating the drivers for macro trends in the oil and gas industry, as well as managing the cyclical nature of the oil and gas service business, which allows Mr. Hendricks to provide valuable input into the development and implementation of Patterson-UTI’s corporate strategy. In addition, the Board noted that Mr. Hendricks’ operational experience brings valuable knowledge to the oversight of achieving safe and efficient operations. The Board also considered Mr. Hendricks’ significant experience working in numerous worldwide locations, which allows him to provide valuable counsel regarding possible expansion into markets outside of the United States and Colombia. +5 +Tiffany (TJ) Thom Cepak — Ms. Cepak has served as a director of Patterson-UTI since August 2014. Ms. Cepak has served as a director of Ranger Oil Corporation, an upstream oil and gas company, since September 2019, as a director of California Resources Corporation, an upstream oil and gas company, since October 2020 and as a director of EnLink Midstream, LLC, a midstream company, since December 2021. Ms. Cepak served as the Chief Financial Officer of Energy XXI Gulf Coast, Inc., an upstream oil and gas company, from August 2017 to October 2018. Ms. Cepak served as the Chief Financial Officer of KLR Energy (and, subsequent to its business combination, Rosehill Resources Inc., an upstream oil and gas company) from January 2015 to June 2017. Ms. Cepak served as a director of Yates Petroleum Corporation, a privately owned, independent oil and gas exploration and production company, from October 2015 to October 2016. Ms. Cepak served four years as the Chief Financial Officer of EPL Oil & Gas, Inc., and was further appointed Executive Vice President in January 2014, and she served in those roles until June 2014, when EPL was sold. Ms. Cepak began her career with EPL as a Senior Asset Management Engineer, a position she held until she was appointed Director of Corporate Reserves in September 2001. Ms. Cepak was named EPL’s Director of Investor Relations in April 2006 and Vice President, Treasurer and Investor Relations in July 2008. In July 2009, Ms. Cepak was designated as EPL’s Principal Financial Officer and, in September 2009, she was appointed Senior Vice President. Ms. Cepak has more than 20 years of energy industry experience and prior to joining EPL, she was a Senior Reservoir Engineer with Exxon Production Company and ExxonMobil Company with operational roles including reservoir engineering and subsurface completion engineering for numerous offshore Gulf of Mexico properties. Ms. Cepak holds a B.S. in Engineering from the University of Illinois and a Masters of Business Administration in Management with a concentration in Finance from Tulane University. +The Board of Directors considered Ms. Cepak’s more than 25 years of operational and financial experience in the energy industry. The Board noted her service in various operational roles, including as a reservoir engineer for a major oil and gas exploration and production company. The Board also noted Ms. Cepak’s executive management experience, including as chief financial officer of a publicly traded independent oil and gas exploration and production company, which allows her to provide Patterson-UTI with valuable insight on financial and strategic matters. The Board also considered Ms. Cepak’s diversity of perspective, which is exemplified by her recognition in 2018 as one of Oil and Gas Investor’s 25 Influential Women in Energy. +Michael W. Conlon — Mr. Conlon has served as a director of Patterson-UTI since September 2012. Mr. Conlon retired as a partner of the law firm, Norton Rose Fulbright US LLP, in January 2012 after 40 years with the firm. Mr. Conlon specialized in corporate, securities and merger and acquisition matters. Mr. Conlon was partner-in-charge of the firm’s Houston office from 2007 to 2011, was co-partner-in-charge from 2001 to 2007 and partner-in-charge of its Washington, D.C. office from 1992 to 1998. Mr. Conlon holds a Bachelor of Arts degree in Economics from Catholic University of America, where he graduated magna cum laude and as a member of Phi Beta Kappa, and a Juris Doctorate from the Duke University School of Law, where he graduated as a member of the Order of the Coif. +The Board of Directors considered Mr. Conlon’s more than 40 years of experience handling corporate, securities and mergers and acquisition matters as a lawyer with an international law firm, as well as his service in a number of management roles throughout his tenure at the firm. The Board noted Mr. Conlon’s experience in representing numerous public companies, including Patterson-UTI, and other energy services companies, allows him to provide valuable insight on legal, governance and regulatory issues facing Patterson-UTI. +6 +Terry H. Hunt — Mr. Hunt has served as a director of Patterson-UTI since April 2003 and served as a director of UTI from 1994 to May 2001. Mr. Hunt is an energy consultant and retired senior natural gas and electric utility executive. Mr. Hunt served as Senior Vice President — Strategic Planning of PPL Corporation, an international energy and utility holding company, from 1998 to 2000. Mr. Hunt served as the President and Chief Executive Officer of Penn Fuel Gas, Inc., a Pennsylvania-based natural gas and propane distribution company, from 1992 to 1999. Previously, Mr. Hunt was President of Carnegie Natural Gas and Apollo Gas Company, both Appalachian natural gas distribution companies. He also previously served in senior management positions in natural gas project and venture development, oil and natural gas exploration and development evaluation and operations and major production facilities construction with Texas Oil & Gas Corp. and Atlantic Richfield. Mr. Hunt holds a Bachelor of Engineering degree from the University of Saskatchewan, Canada and a Masters of Business Administration from Southern Methodist University. +The Board of Directors considered Mr. Hunt’s more than 25 years of experience covering most phases of the upstream oil and natural gas industry in the United States and Canada, including the evaluation of exploration and development programs, oil and natural gas production and pipeline operations, and project development and major production facility construction. This experience and background provides Patterson-UTI with an invaluable perspective of the oil and natural gas industry and its customers. In addition, Mr. Hunt’s many years of senior executive experience leading natural gas distribution, storage and marketing companies provides insight into the management of multi-faceted businesses and the markets for natural gas in North America. +Cesar Jaime — Mr. Jaime has served on the board of Summum Group Ltd, a provider of well servicing and oil and gas engineering and construction in Colombia, Mexico and Peru, since 2014. Mr. Jaime previously served on the board of LAREIF, a renewable energy developer in Colombia, from 2014 to 2019. Mr. Jaime served in various management positions at Schlumberger between 1981 and 2010, including serving as President of Schlumberger’s Latin America business from 2008 to 2010. Mr. Jaime has served on the board of Alliance Schlumberger, a non-profit organization grouping former Schlumberger engineers, since 2019. Mr. Jaime holds a Bachelor of Science degree in electrical engineering from Pontificia Universidad Javeriana in Bogotá, Colombia. +The Board considered Mr. Jaime’s 30 years of experience in international oilfield services in Latin America, Europe and Africa for Schlumberger, including serving as President of Latin American operations. The Board also noted his Colombian background in light of the Company’s recent acquisition of drilling operations in Colombia. The Board also considered the breadth of his experience including in key management roles in operations, sales and human resource management. +7 +Janeen S. Judah — Ms. Judah has served as a director of Patterson-UTI since April 2018. Ms. Judah has served as a director of the general partner of Crestwood Equity Partners LP, a midstream company, since November 2018. Ms. Judah has also served as a director for privately held Aethon Energy III, LLC, an upstream oil and gas investment firm, since June 2019, and as a member of the University Lands Advisory Board since August 2020. Ms. Judah served as a director of Jagged Peak Energy Inc., an upstream oil and gas company, from April 2019 to January 2020, when Jagged Peak was acquired by Parsley Energy. Ms. Judah served as the President of the Society of Petroleum Engineers from September 2016 to October 2017 while on secondment from Chevron, and as a member of the Board of Directors of the Society of Petroleum Engineers from 2003 to 2006 and from 2012 to 2018. Ms. Judah held numerous leadership positions at Chevron, including general manager for Chevron’s Southern Africa business unit from August 2010 to September 2016, president of Chevron Environmental Management Company from August 2007 to August 2010 and general manager of reservoir and production engineering for Chevron Energy Technology Company from June 2004 to August 2007. Before joining Chevron in 1998, she held various upstream petroleum engineering positions for Texaco and Arco, starting in Midland in 1981. Ms. Judah holds Bachelor of Science and Masters of Science degrees in petroleum engineering from Texas A&M University, a Masters of Business Administration from the University of Texas of the Permian Basin and a Juris Doctorate from the University of Houston Law Center. Ms. Judah is a registered professional Engineer in Texas, currently serves on both the Texas A&M and University of Houston College of Engineering Advisory Councils, and has been a member of the Texas A&M Petroleum Engineering Industry Board since 1996. Ms. Judah is also president-elect of Houston Audubon, a conservation land trust and environmental education nonprofit organization. +The Board of Directors considered Ms. Judah’s more than 35 years of operational, managerial and environmental experience in the oil and gas industry. The Board noted her experience derived from oil and gas industry positions held involving significant operational and management responsibilities, including positions with Chevron and upstream petroleum engineering positions. The Board also noted Ms. Judah’s extensive international experience, including most recently as general manager for Chevron’s Southern Africa business unit, which allows her to provide Patterson-UTI with valuable insight on international and strategic matters. The Board also considered Ms. Judah’s service as the President of the Society of Petroleum Engineers from 2017 to 2018, as well as her diversity of perspective, which is exemplified by her recognition in 2018 as one of Oil and Gas Investor’s 25 Influential Women in Energy. +Julie J. Robertson — Ms. Robertson has served as a director of EOG Resources, Inc., an upstream oil and gas company, since January 2019, as a director of Superior Energy Services, Inc., an oilfield services company, since February 2021 and as a director of Seadrill Limited, an offshore drilling contractor, since November 2021. Ms. Robertson served in the role of Executive Chairman of Noble Corporation plc (“Noble”), an offshore drilling contractor, from May 2020 until her retirement from Noble in February 2021. Previously, Ms. Robertson served as Chairman of the Board, President and Chief Executive Officer of Noble from January 2018 until May 2020. Ms. Robertson previously served in various other management roles for Noble and its subsidiaries, including (i) Executive Vice President from 2006 to January 2018, (ii) Senior Vice President — Administration from 2001 to 2006 and (iii) Vice President — Administration from 1996 to 2001. Ms. Robertson also served continuously as Corporate Secretary of Noble from 1993 until assuming the Chairman’s role in 2018. Ms. Robertson joined a predecessor subsidiary of Noble in 1979. Ms. Robertson holds a Bachelor of Journalism degree from the University of Texas at Austin. +The Board considered Ms. Robertson’s more than 40 years of operational, managerial, administrative and human resource experience at a leading global offshore drilling contractor, including as the Executive Chair and as the Chair of the Board, President and Chief Executive Officer. The Board noted Ms. Robertson’s extensive international experience, including working in over 45 countries, her experience in mergers and acquisitions and her experience in global compliance and risk mitigation, executive compensation, governance and sustainability matters and supply chain management. Ms. Robertson also has extensive board of directors experience as a result of currently serving or previously serving on four public company boards. +8 +Board Leadership Structure, Independent Chairman and Board Role in Risk Oversight +The Board evaluates its leadership structure and role in risk oversight on an ongoing basis. The decision on whether to combine or separate the Chairman and Chief Executive Officer (“CEO”) role is determined on the basis of what the Board considers to be best for Patterson-UTI at any given point in time. Patterson-UTI’s current Board leadership structure separates the role of Chairman and CEO, and our Chairman is an independent director. +The independent directors meet regularly in executive sessions at which only independent directors are present, and the Chairman chairs those sessions. The Chairman serves as a liaison between the employee directors and independent directors, consults with regard to Board and agenda items, and works with the chairpersons of Board committees as appropriate. +The Nominating and Corporate Governance Committee and the Board currently believe that the Board’s leadership structure, which includes the separation of the role of CEO and Chairman, is appropriate because it, among other things, provides for sufficient independence between the Board and management and for an independent director who provides board member leadership. +The Board has adopted Corporate Governance Guidelines, which can be accessed electronically in the “Governance” section of Patterson-UTI’s website at www.patenergy.com. The Guidelines describe one of the Board’s primary responsibilities as overseeing Patterson-UTI’s processes for assessing and managing risks. The Board discharges this responsibility, in part, through regular inquiries from the Chairman of the Board to management, periodic communications from management to the Board of Directors of particular risks and events, and discussions during Board meetings of general and specific risks to Patterson-UTI. +Our senior-level management is responsible for identifying corporate risks, including climate-related risks and opportunities, assessing the potential level of impact to the business, and discussing this risk assessment with the Board on at least a quarterly basis. We believe that climate risks are inherently business risks, and our assessment of these climate-related transition and physical risks is integrated into our business risk assessment process. +Risks and opportunities are identified through discussions with stakeholders, including customers, investors, trade associations and industry groups; engagement with environmental, social and governance (ESG) groups; and our own business risk assessments, as well as regular monitoring of legal, regulatory and policy changes with the potential to affect the industry as well as our company specifically. +Our senior management and representatives from our business units regularly communicate with the Board on risk management matters. For example, the Board and senior management regularly discuss sustainability issues, climate-related risks, information security, safety and other risks that are important to our business. +Meetings and Committees of the Board of Directors +The Board of Directors met eleven times during the year ended December 31, 2021. Each director attended, in person or by telephone, at least 75% of the aggregate of all meetings held by the Board and meetings of each committee on which such director served. A majority of the members of the Board of Directors are independent within the meaning of the Nasdaq Stock Market, Inc. (“Nasdaq”) listing standards. Specifically, the Board has determined that Messrs. Conlon, Huff, Hunt and Jaime and Mses. Cepak, Judah and Robertson are independent within the meaning of the Nasdaq listing standards. +The Board of Directors has established five standing committees: an Executive Committee, an Audit Committee, a Compensation Committee, a Nominating and Corporate Governance Committee and a Sustainability Committee. +The Executive Committee, which currently is composed of Messrs. Huff and Hendricks and Ms. Cepak, has the authority, to the extent permitted by applicable law, to act for the Board in all matters arising between regular or special meetings of the Board of Directors. The Executive Committee did not meet or take any action in 2021. +The Audit Committee members are Mses. Cepak (chair) and Judah, and Messrs. Huff and Hunt, each of whom is independent within the meaning of applicable rules under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and within the meaning of the Nasdaq listing standards. The Audit Committee oversees management’s execution of Patterson-UTI’s accounting and financial reporting process, including review of the financial reports and other financial information provided by Patterson-UTI to the public and government and regulatory bodies, Patterson-UTI’s system of internal accounting, Patterson-UTI’s financial controls, and the annual independent audit of Patterson-UTI’s financial statements and internal control over financial reporting. The Audit Committee also oversees compliance with Patterson-UTI’s codes of conduct and ethics and with legal and regulatory requirements. The Board has determined that Ms. Cepak and Mr. Huff are “audit committee financial experts” within the meaning of applicable SEC rules. The Audit Committee selects the independent registered public accounting firm to audit Patterson-UTI’s books and records and considers and acts upon accounting matters as they arise. The Board of Directors has adopted a written charter for the +9 +Audit Committee. The Audit Committee held six meetings during the year ended December 31, 2021. Please see “Audit Committee Report” elsewhere in this proxy statement. +The Compensation Committee members are Messrs. Hunt (chair), Conlon and Huff and Ms. Cepak, each of whom is independent as defined in the Nasdaq listing standards. Among other things, the Compensation Committee sets and administers the policies that govern the compensation of executive officers of Patterson-UTI and periodically reviews director compensation and recommends changes, as appropriate, to the Board of Directors for approval. The Board of Directors has adopted a written charter for the Compensation Committee. The Compensation Committee held three meetings during the year ended December 31, 2021. Please see “Compensation Discussion and Analysis” and “Compensation Committee Report” elsewhere in this proxy statement for further information about the Compensation Committee. +The Nominating and Corporate Governance Committee members are Messrs. Conlon (chair) and Huff and Ms. Judah, each of whom is independent as defined in the Nasdaq listing standards. The purpose of the Nominating and Corporate Governance Committee is to, among other things, identify individuals qualified to become Board members, to recommend for selection by the Board director nominees for the annual meetings of stockholders, to recommend nominees for Board committees, to review Patterson-UTI’s Code of Business Conduct and Corporate Governance Guidelines, to develop and continually make recommendations with respect to the best corporate governance principles and to oversee the annual review of the Board and management. The Nominating and Corporate Governance Committee assists the Board’s Sustainability Committee in its oversight of governance-related sustainability issues, including climate-related risks and opportunities. The Board of Directors has adopted a written charter for the Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee held three meetings during the year ended December 31, 2021. +The Sustainability Committee members are Mses. Judah (chair) and Cepak and Mr. Conlon, each of whom is independent as defined in the Nasdaq listing standards. The purpose of the Sustainability Committee is to, among other things, review significant policies and performance and provide guidance on matters relating to sustainability, oversee and monitor the Company’s vision and values relating to sustainability, advise the Board and management on significant public issues related to sustainability matters, assist management in setting strategy, establishing goals and integrating sustainability into strategic and tactical business activities across the Company to create long-term stockholder value, and review and recommend to the Board for approval any sustainability reporting to the public or governmental agencies. The Board of Directors has adopted a written charter for the Sustainability Committee. The Sustainability Committee was formed in November 2021, and did not hold any meetings during the year ended December 31, 2021. +Although Patterson-UTI does not have a formal policy regarding attendance by members of the Board at its annual meetings of stockholders, directors are invited to attend annual meetings of Patterson-UTI stockholders. All six of the directors who were directors at the time of the 2021 annual meeting of stockholders attended the 2021 annual meeting of stockholders either in person or by telephone. +Consideration of Director Nominees +On behalf of the Board, the Nominating and Governance Committee considers director nominees recommended by Patterson-UTI’s stockholders if the recommendations are made in accordance with all legal requirements, including applicable provisions of Patterson-UTI’s restated certificate of incorporation and bylaws. A stockholder’s notice to the Secretary of Patterson-UTI shall contain certain information specified in Patterson-UTI’s bylaws regarding the stockholder and the proposed nominee. See “Other Matters—Stockholder Proposals for 2023 Annual Meeting” and Article I, Section 8 and Article I, Section 11 of Patterson-UTI’s bylaws. +The number of directors may be fixed or changed by amendment of Patterson-UTI's bylaws or by resolution of the Board. The Board assesses periodically, in connection with director refreshment and other considerations, whether a larger or smaller number of directors would be preferable. +The Nominating and Corporate Governance Committee determines qualification criteria and procedures for the identification and recruitment of candidates for election to serve as directors of Patterson-UTI. The Nominating and Corporate Governance Committee relies on the knowledge and relationships of Patterson-UTI and its officers and directors, as well as third parties when it deems appropriate, to identify and evaluate nominees for director, including nominees recommended by stockholders. In evaluating a nominee for director, the Nominating and Corporate Governance Committee considers the nominee’s skills, expertise, industry and other knowledge, personal and professional ethics, integrity and values, sound business judgment and willingness to commit sufficient time to the Board and be committed to representing the long-term interests of Patterson-UTI’s stockholders. The Nominating and Corporate Governance Committee also reviews the individual performance and qualifications of each director who wishes to be considered for nomination to the Board. Although the Nominating and Corporate Governance Committee does not have a stand-alone policy with regard to consideration of diversity in identifying director nominees, it is required, in accordance +10 +with our Corporate Governance Guidelines, to consider diversity in professional background, experience, expertise (including as to financial matters) and perspective (including as to age, gender and ethnicity) with respect to the Board of Directors composition as a whole when evaluating a director nominee. +Board and Director Performance Assessments +The Nominating and Corporate Governance Committee annually reviews and evaluates the performance of the Board, each Committee of the Board, and each director in order to improve the effectiveness of the Board and each Committee of the Board. The Committee assesses the contributions of the Board as a whole and each of its Committees and identifies areas in which improvements may be made. The results of the evaluations are reviewed and discussed with the Board and its Committees, and recommendations are made, as appropriate, to the Board and its Committees. +The Nominating and Corporate Governance Committee also annually reviews the individual performance and qualifications of each director who wishes to be considered for nomination for reelection to the Board. +Continuing Education +Continuing education helps our directors strengthen their skills, deepen their understanding of our business and operations and stay current with emerging issues that affect our business, governance and compensation practices. It also helps directors keep abreast of governance developments and requirements and understand the issues we face in the context of our business. To further these goals, our Board’s continuing director education policy requires directors to participate in continuing education programs and reimburses directors for expenses incurred in connection with such education programs. +Succession Planning +The Board of Directors oversees processes and procedures to provide continuity of well-qualified executive leadership and to assess whether such leadership possesses the skill and talent to execute Patterson-UTI’s long-term business strategies. The Board of Directors reviews succession planning for the Chief Executive Officer and the senior executives tailored to reflect the Board’s standards for executive leadership and Patterson-UTI’s business strategy and vision. The succession planning addresses (i) both current and long-term needs of Patterson-UTI and establishes a process for identifying and assessing potential internal candidates; (ii) periodic review and assessment of readiness; (iii) contingency planning for temporary absences of the Chief Executive Officer due to disability or other unexpected event; and (iv) long-term continuity planning for succession to the Chief Executive Officer position. +Political Contributions +Patterson-UTI has a policy prohibiting the contribution of company funds to political parties or organizations or to candidates for any public office or to influence the general public, or segments thereof, with respect to public elections or referenda. Patterson-UTI participates in certain trade organizations with purposes that include enhancement of the public image of our industry, education about the industry and issues that affect the industry and industry best practices and standards. Many of the trade organizations also engage in legislative or political activity related to matters that affect the industry as a whole and not a specific company. Patterson-UTI, as one of many members in various trade associations, does not direct the legislative activities of any trade organization of which it is a member. +ESG and Sustainability +Patterson-UTI strives to be a leader in our industry in the area of environmental, social, governance ("ESG") and other sustainability-related issues, and remains committed to managing these issues for the long-term benefit of our employees, communities and our business. We aim to minimize our environmental impact in the communities in which we work and live, while providing services for our customers in a safe and responsible manner. We invest extensively in the safety, health and well-being of our people, who are our most important asset and our greatest strength. Also, maintaining a rigorous focus on ethics and integrity at every level of our operations is a practice on which all of our success depends. +We encourage you to review our latest sustainability report for more detailed information regarding our sustainability programs and initiatives. A copy of Patterson-UTI’s sustainability report can be accessed electronically in the “Sustainability” section of the Patterson-UTI website at www.patenergy.com and in print to any stockholder who requests it from the Secretary of Patterson-UTI. Nothing on our website, including our sustainability report or sections thereof, shall be deemed incorporated by reference into this proxy statement or other filings that we make with the SEC. Our ESG goals are aspirational and may change. Statements regarding our goals are not guarantees or promises that they will be met. +At Patterson-UTI, we believe that a commitment to diversity and inclusion for all is foundational and extends beyond what is required by various federal, state and local laws. We actively foster an inclusive culture where our employees are +11 +supported, valued and respected. We are proud of our workforce, where all employees can contribute to the success of the Company, drawing upon their unique backgrounds, perspectives and life experiences. +We recognize that a diverse workforce is imperative in order to remain competitive and to meet our customers’ expectations. As part of our diversity and inclusion efforts, we recruit candidates from across the United States, with a focus on employing local content in the communities near where we operate. We partner with state and local workforce commissions to ensure potential candidates from a variety of backgrounds and experiences are aware of open positions. We also utilize the services of a leading third-party provider of diversity recruitment to help advertise our positions to various organizations. +Our leaders remain focused and committed to a diverse workplace and culture of inclusion and respect, and they drive accountability for promoting and maintaining that commitment throughout our Company. Additionally, our Vice President of Diversity and ESG partners with other Company leaders to ensure that our businesses are each doing their part to adhere to Company policies, programs and initiatives that promote our diverse workplace and our culture of inclusion and respect. +Patterson-UTI’s Code of Business Conduct and Ethics and Equal Employment Opportunity and Anti-Harassment Policy prohibit discrimination or harassment of any type and afford equal employment opportunities to all employees and applicants, without regard to age, race, sex, color, religion, national origin, disability, marital status, covered veteran status, genetic information, sexual orientation, gender identity or any other characteristic protected under state, federal or local law. Each employee is expected to demonstrate a shared commitment to Patterson-UTI’s values regarding diversity and inclusion, as well as mutual respect for all co-workers, vendors, customers, third parties, and business partners. +Communication with the Board and its Independent Members +Persons may communicate with the Board, or directly with its Chairman, Mr. Huff, by submitting such communication in writing in care of Chairman of the Board of Directors, Patterson-UTI Energy, Inc., 10713 West Sam Houston Parkway North, Suite 800, Houston, Texas 77064. Persons may communicate with the independent members of the Board by submitting such communication in writing to the Nominating and Corporate Governance Committee of the Board of Directors of Patterson-UTI Energy, Inc., 10713 West Sam Houston Parkway North, Suite 800, Houston, Texas 77064. +Corporate Governance Documents Available on Patterson-UTI’s Website +Copies of each of the following documents can be accessed electronically in the “Corporate Governance” section of the Patterson-UTI website at www.patenergy.com and in print to any stockholder who requests them from the Secretary of Patterson-UTI: +• +Audit Committee Charter; +• +Compensation Committee Charter; +• +Nominating and Corporate Governance Committee Charter; +• +Sustainability Committee Charter; +• +Corporate Governance Guidelines; +• +Code of Business Conduct and Ethics for its employees, officers and directors; +• +Code of Business Conduct and Ethics for Senior Financial Executives; and +• +Global Anticorruption Policy. +12 +PROPOSAL NO. 2 +RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM +The Audit Committee appointed PricewaterhouseCoopers LLP as the independent registered public accounting firm to audit the financial statements and internal control over financial reporting of Patterson-UTI for the fiscal year ending December 31, 2022, and directed that such engagement be submitted to the stockholders of Patterson-UTI for ratification. In recommending ratification by the stockholders of such engagement, the Board of Directors is acting upon the recommendation of the Audit Committee, which has satisfied itself as to PricewaterhouseCoopers LLP’s independence, professional competence and standing. Although ratification by stockholders of the engagement of PricewaterhouseCoopers LLP is not required by Delaware corporate law or Patterson-UTI’s restated certificate of incorporation or bylaws, the Audit Committee believes a decision of this nature should be made with the consideration of Patterson-UTI’s stockholders. If the stockholders fail to ratify the appointment, the Audit Committee will reconsider whether to retain PricewaterhouseCoopers LLP and may retain that firm or another without re-submitting the matter to our stockholders. Even if the appointment is ratified, the Audit Committee may, in its discretion, direct the appointment of a different independent registered public accounting firm at any time during the year if it determines that such change would be in the best interests of Patterson-UTI and its stockholders. +It is expected that one or more representatives of PricewaterhouseCoopers LLP will be available to participate in the Meeting and will be given the opportunity to make a statement if they so desire. It also is expected that the representative(s) will be available to respond to appropriate questions from the stockholders. +The Board of Directors recommends a vote “FOR” the ratification of PricewaterhouseCoopers LLP as Patterson-UTI’s independent registered public accounting firm. Ratification of the selection of PricewaterhouseCoopers LLP requires the affirmative vote of the holders of a majority of the shares of Common Stock entitled to vote on, and voted “FOR” or “AGAINST,” the proposal. Unless you give contrary instructions in your proxy, your properly submitted proxy will be voted “FOR” such ratification. Abstentions will not be counted as votes cast “FOR” or “AGAINST” the proposal and will have no effect on the outcome of the proposal. Because the ratification of an independent registered public accounting firm is considered a routine matter, if you do not give instructions to your brokerage firm, bank, broker-dealer, or other similar organization, the brokerage firm, bank, broker-dealer, or other similar organization will nevertheless be entitled, but not required, to vote your shares in its discretion and may give or authorize the giving of a proxy to vote the shares in its discretion on this proposal. +13 +PROPOSAL NO. 3 +ADVISORY APPROVAL OF EXECUTIVE COMPENSATION +In accordance with Section 14A of the Exchange Act, the Board of Directors is asking stockholders to approve a non-binding, advisory resolution on the compensation of Patterson-UTI’s executive officers who are named in the Summary Compensation Table appearing in this proxy statement (the “Named Executive Officers”). The compensation of the Named Executive Officers is described in the “Compensation Discussion and Analysis” and “Executive Compensation” sections of this proxy statement. +For a discussion of our stockholder engagement and board responsiveness to stockholders, please see “Compensation Discussion and Analysis— Aligning Compensation Programs with Stockholder Interests.” +The compensation program for the Named Executive Officers is designed to attract and retain highly qualified individuals and to motivate and reward them for performance that benefits Patterson-UTI and its stockholders. The Compensation Committee and the Board of Directors believe that the policies and procedures detailed in the “Compensation Discussion and Analysis” achieve these goals by, among other things: +• +providing a mix of short-term compensation in the form of base salary and annual cash incentive bonuses and long-term compensation in the form of restricted stock units, performance units, and, in some years, restricted stock, stock options and phantom units, which strikes a balance between offering competitive compensation packages and aligning compensation with long-term growth and creating value for stockholders; +• +emphasizing variable equity and cash compensation to link realized compensation to performance; +• +reviewing annual base salaries, in part, based on Patterson-UTI’s financial results and position and performance compared to similarly situated companies; +• +providing performance-based annual cash incentive bonuses designed to put a meaningful portion of total compensation at risk; +• +awarding long-term equity incentives whose value is tied to the achievement of certain performance goals and/or an increase in the price of the Common Stock; +• +awarding long-term equity incentives that generally vest over periods of three years; and +• +maintaining stock ownership requirements. +The Board of Directors is asking stockholders to approve the following non-binding, advisory resolution at the Meeting: +“RESOLVED, that the stockholders of Patterson-UTI Energy, Inc. (the “Company”) approve, on an advisory basis, the compensation of the Company’s named executive officers, as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the compensation tables and other narrative discussion in the Proxy Statement for the 2022 Annual Meeting of Stockholders of the Company.” +This advisory resolution, commonly referred to as a “say-on-pay” resolution, is non-binding on the Board of Directors. Although non-binding, the Board of Directors and the Compensation Committee value the views of Patterson-UTI’s stockholders and will review and consider the voting results when (i) evaluating the effectiveness of Patterson-UTI’s compensation policies and practices and (ii) making future compensation decisions for the Named Executive Officers. +The Board of Directors recommends a vote “FOR” the approval of the advisory resolution on executive compensation . Approval of the advisory resolution requires the affirmative vote of the holders of a majority of the shares of Common Stock entitled to vote on, and voted “FOR” or “AGAINST,” the proposal. Unless you give contrary instructions in your proxy, your properly submitted proxy will be voted “FOR” such approval. Abstentions will not be counted as votes cast “FOR” or “AGAINST” the proposal and will have no effect on the outcome of the proposal. A broker non-vote will be counted for purposes of establishing a quorum, but will not be treated as a vote cast “FOR” or “AGAINST” the proposal and will have no effect on the outcome of the proposal. +14 +EXECUTIVE OFFICERS +Set forth below is the name, age and position followed by a brief description of the business experience during at least the past five years for each executive officer of Patterson-UTI who is not also a nominee for election to the Board of Directors. +Name +Age +Position +C. Andrew Smith +51 +Executive Vice President and Chief Financial Officer +Kenneth N. Berns +62 +Executive Vice President and Chief Commercial Officer +Seth D. Wexler +50 +Senior Vice President, General Counsel and Secretary +James M. Holcomb +59 +President — Patterson-UTI Drilling Company LLC +C. Andrew Smith — Mr. Smith has served as Executive Vice President and Chief Financial Officer of Patterson-UTI since September 2017. From April 2014 until September 2017, Mr. Smith served as Executive Vice President and Chief Financial Officer of Kirby Corporation, a marine transportation and diesel engine services company. From January 2014 to April 2014, Mr. Smith served as Executive Vice President – Finance of Kirby Corporation. Prior to joining Kirby Corporation, Mr. Smith served as Senior Vice President and Chief Financial Officer of Benthic Geotech and was previously Chief Financial Officer for both Global Industries, LTD and NATCO Group. Mr. Smith holds a degree in business administration from the University of Houston. +Kenneth N. Berns — Mr. Berns has served as Executive Vice President and Chief Commercial Officer of Patterson-UTI since May 2017. Mr. Berns served as a director of Patterson-UTI from May 2001 to June 2017 and as Senior Vice President of Patterson-UTI from April 2003 to May 2017. Mr. Berns served as a director of UTI from 1995 to May 2001. Mr. Berns has been an executive with REMY Investors since 1994. Mr. Berns holds a Bachelor’s Degree in Business Administration from San Diego State University and a Master’s Degree in Taxation from Golden Gate University. +Seth D. Wexler — Mr. Wexler has served as Senior Vice President, General Counsel and Secretary of Patterson-UTI since February 2017. Mr. Wexler served as General Counsel and Secretary of Patterson-UTI from August 2009 to February 2017. From March 1998 to August 2009, he specialized in securities law and mergers and acquisitions for the law firm of Norton Rose Fulbright US LLP, including as a partner of such law firm since January 2007. Mr. Wexler holds a Bachelor of Business Administration in Finance from the University of Texas at Austin, a Juris Doctorate from the University of Houston Law Center and a Masters of Business Administration from the University of Houston. +James M. Holcomb — Mr. Holcomb has served as President of Patterson-UTI Drilling Company LLC since January 2012. Mr. Holcomb came to Patterson-UTI in February 1998 with the acquisition of Robertson Onshore Drilling Company and since that time has served in numerous operational management roles, including as Senior Vice President of Operations of Patterson-UTI Drilling Company LLC from April 2006 to January 2012. Mr. Holcomb has over 30 years of experience in contract drilling operations. Mr. Holcomb holds a Bachelor of Science Degree in Business Management from LeTourneau University . +15 +COMPENSATION DISCUSSION AND ANALYSIS +The following Compensation Discussion and Analysis (“CD&A”) sets forth the principal compensation policies and programs of Patterson-UTI for our Named Executive Officers (“NEOs”). +Named Executive Officer +Title +William Andrew Hendricks, Jr. +Chief Executive Officer and President +C. Andrew Smith +Executive Vice President and Chief Financial Officer +Kenneth N. Berns +Executive Vice President and Chief Commercial Officer +Seth D. Wexler +Senior Vice President, General Counsel and Secretary +James M. Holcomb +President — Patterson-UTI Drilling Company LLC +Aligning Compensation Programs with Stockholder Interests +Strong Stockholder Support for Say-on-Pay +We received 96% stockholder support for our Say-on-Pay proposal at both our 2019 and 2020 Annual General Meetings of Stockholders, and 98% stockholder support at our 2021 Annual General Meeting of Stockholders. The Compensation Committee strongly values the opinions of our stockholders as expressed in the Say-on-Pay vote and believes that our recent support levels demonstrate a strong alignment of our compensation program with our stockholders’ interests. +During the last three years, we have met with a number of our larger stockholders and listened to areas of concern and requested feedback, including with respect to possible changes to our compensation program. Although no specific changes were made to our compensation programs as a result of the 2021 Say-on-Pay vote or stockholder meetings, the Compensation Committee will continue to consider the results of our future Say-on-Pay votes and feedback of our stockholders when making future compensation decisions for our NEOs. +Recognition of Challenging Market Environment +The COVID-19 pandemic had a meaningful impact on the oil and gas industry. Following the onset of COVID-19, oil prices collapsed and turned negative for the first time in history. Lower oil prices resulted in a meaningful reduction in the capital budgets for our customers. While oil and gas activity recovered modestly in early 2021, it continued to remain well below the activity levels experienced before the onset of the COVID-19 pandemic. +In recognition of the challenging market environment, we took the following actions with respect to executive pay in 2020 and 2021: +Compensation Element +2020 +2021 +Base Salary + Held base salaries flat + Held base salaries flat +Annual Cash Bonus + Held target bonus percentages flat + Capped bonus plan maximum at 50% of target for CEO, CFO, and CCO and 60% of target for other NEOs + Aligned incentive plan metrics around key business objectives related to cash flow generation through the use of Adjusted EBITDA, HSE, capital expenditure reduction, and operating cash flow in our drilling business + Held target bonus percentages flat + Capped bonus plan maximum at 125% of target for the CEO and other NEOs + Aligned incentive plan metrics around key business objectives tied to operating cash flow, HSE, and pressure pumping improvement +Long-Term Incentives + Determined the number of shares to grant using an $8 notional stock price, which effectively reduced the LTI grant value by 75% when compared to 2019 target LTI + Continued to determine the number of shares to grant using an $8 notional stock price, which resulted in an average 15% reduction in LTI grant value when compared to 2019 target LTI +The changes to our bonus program and LTI program created strong alignment between the change in our reported pay levels (as disclosed in the Summary Compensation Table for the year) and stock price (at the time of the LTI grant in each respective fiscal year). +16 +Top Tier Total Stockholder Return During 2021 +Our continued focus on generating operating cash flow and improving our pressure pumping business during 2021 contributed to strengthening our Company during a very challenging year for the oil and gas industry. Our stockholders benefitted from our actions, as our total stockholder return (“TSR”) performance during 2021 was 62%. Also, on a relative basis, for the one year period ended December 31, 2021, our TSR performance relative to our 2021 peer group was in the 80th percentile. +Good Governance and Compensation Practices Aligned with Stockholders +We are mindful of the positive impact that strong corporate governance can have on maintaining an executive compensation program that is aligned with the interests of our stockholders. In designing the current executive +17 +compensation program, we sought to incorporate best practices for compensation governance, including those summarized below. +What We Do +What We Don’t Do + Disclose specific metrics that make up our cash bonus program + 50% or more of total target compensation in the form of long-term incentives + More than 50% of long-term incentives (by target value) are performance-based + Variable compensation based upon absolute performance and performance versus peers and broader market index + Claw-back provisions that apply to our all of our executive officers + Share ownership requirements for our executive officers and directors + Anti-pledging policy for our executive officers and directors + Anti-hedging policy for our executive officers and directors + Engage independent compensation consultant and solicit feedback from stockholders + Hold an annual Say-on-Pay vote +☒ No re-pricing of options +☒ No single trigger change-of-control severance arrangements +☒ No dividends or dividend equivalents on unearned performance units +☒ No new agreements with tax gross-ups and none entered into in more than ten years +☒ No material perquisites to NEOs that are not widely available to our other employees +☒ No new single trigger change-of-control equity-based grants for our executive officers +18 +What Guides Our Program +Our overriding philosophy for the compensation of our key executives is to link their compensation with Patterson-UTI’s operational and market performance and to establish incentives that reward them for their achievement of both short-term tactical and long-term strategic objectives. In doing so, we seek to offer competitive compensation designed to attract and retain highly qualified individuals and to motivate and reward our executives in achieving Patterson-UTI’s goals. Specifically, the 2021 program was designed to reinforce the following goals: +Patterson-UTI Goals +How Goal Was Reinforced in Our 2021 Compensation Program +Provide quality services for our customers in a safe and efficient manner + Our 2021 annual cash bonus incentive plan included “Health, Safety and Environmental” performance as a distinct metric, and the proportion of the annual cash bonus incentive plan attributable to this metric was 20% + Our financial performance metrics required quality operational performance +Generate strong financial performance and returns for our stockholders + The majority of executive compensation was delivered in the form of variable, at-risk compensation (as referenced in the charts below) + The majority of the payout under our 2021 annual cash bonus incentive plan was based on financial performance metrics (60%) + Our 2021 annual cash bonus incentive plan rewarded executives for cash flow generation through the use of Operating Cash Flow as the primary performance metric + Our long-term incentive plan incentivizes the creation of stockholder value on both an absolute and relative basis through the grant of equity compensation and the use of absolute and relative TSR performance goals under our performance units +Attract and retain highly qualified individuals, with a strong emphasis on teams working together to capitalize on opportunities and solve problems + We benchmarked our executive pay programs against broader oilfield services companies and comparably sized oil and gas exploration and production companies + We did not target a specific market percentile for executive compensation. Instead, executive compensation was set based on a holistic review of several factors, including market pay levels, individual performance and qualifications, and executive tenure + Our annual and long-term incentive programs generally reward company-wide results rather than performance against individual objectives + The majority of our executives’ compensation was delivered in the form of long-term incentives that vest over a multi-year period to aid in retention of executives +Continue reduced executive compensation to align with stockholders in light of industry conditions + We capped the 2021 annual cash bonus plan payout by limiting the maximum payout to 125% of the target bonus amount for the NEOs (reduced from a 200% maximum payout in 2019 and previous years) + Provided that no payout would be made above 100% unless performance reached or exceeded 125% of the target, in which case the maximum payout would be at 125% of the target +· We maintained the aggregate value of LTI awards granted in 2021 at a reduced level compared to the 2019 LTI value +19 +For 2021, target total direct compensation for our NEOs was most heavily weighted toward long-term incentives, with greater than 50% of such long-term incentive compensation including performance-based vesting criteria, as shown below. +2021 TARGET TOTAL DIRECT COMPENSATION +Process for Determination of Executive Compensation +Role of the Compensation Committee and Management +The Board of Directors has delegated the management of Patterson-UTI’s executive compensation program to the Compensation Committee. The Compensation Committee meets on a regular basis to consider compensation matters and to review how Patterson-UTI’s plans and policies work in practice. Each of the Compensation Committee’s current members is an independent director as defined by the Nasdaq listing standards. +Compensation determinations, including equity award grants, have been approved through a process that solicits input from management through our CEO, as well as from outside compensation consultants retained by the Compensation Committee. In addition to the recommendations of management and consultants, the Compensation Committee considers feedback from Patterson-UTI’s stockholders, guidelines of proxy advisory firms, reported trends in compensation, internal budgets, historical data for the Company and its peers, strategic planning updates and other information that it considers relevant. +Our CEO provides the Compensation Committee with reviews of the performance of other executive officers and senior managers, including the other NEOs. The Compensation Committee also engages our CEO in an annual dialogue with our Committee Chairman and the Chairman of the Board on our compensation program and seeks their input on and review of proposals for long-term incentive grants. This process results in a recommendation that is then considered by our Compensation Committee as a whole. The Compensation Committee meets in executive session without our CEO present, and our CEO is not involved in decisions relating to his compensation. +Independent, Outside Compensation Consultant +Our Compensation Committee regularly utilizes outside compensation consultants to help assess and design our executive compensation program. These consultants are paid on either a basic, fixed-fee structure plus expenses or an hourly rate structure plus expenses. These outside consultants provide data and advice on historical compensation and stockholder returns, market trends and peer compensation practices. The Compensation Committee has retained Frederick W. Cook & Co., Inc. (“FW Cook”) as its consultant and advisor for executive compensation matters since 2018. +Our Compensation Committee regularly reviews the services provided by its outside consultant and has determined that the engagement of FW Cook does not raise any conflicts of interest. The Compensation Committee receives a confirmation certification of independence from its consultant annually. +In 2021, FW Cook provided the Compensation Committee with information on the compensation practices of our peer group and other oilfield service companies and on the reasonableness of our program as compared to the compensation practices of our peer group. In so doing, FW Cook provided the Compensation Committee with information on each element of total direct compensation for our executive officers as well as a comparison of each such element of compensation against our peers and the broader oilfield services and oil and gas exploration and production markets. FW +20 +Cook also provided the Compensation Committee with information on the cost and potential dilution to our stockholders of our equity-based incentives and compared our equity usage to that of our peer group. +Peer Group +The Company’s 2021 peer group consisted of the following 20 companies within the oilfield services and oil and gas exploration and production industries. When developing this peer group, the Compensation Committee considered the Company’s positioning versus peers on key metrics (Revenue, EBITDA, Total Assets, Market Capitalization, and Total Enterprise Value), the robustness of the peer group, and the business characteristics of each peer. Due to bankruptcies and consolidations, four of the 2020 peer group companies were removed and replaced with Bristow Group, Cactus, Franks International (now Expro Group Holdings) and Helix Energy Solutions. Also, due to industry consolidation, the Compensation Committee elected to retain four oil and gas exploration and production companies in the peer group to provide a more robust group for pay comparisons, while maintaining an emphasis on oilfield services companies. +The Compensation Committee also elected to add three market indices (the S&P 500, Russell 3000 and MSCI World Index) to the peer group, solely for purposes of the relative TSR performance measurement. These market indices were added to include indices outside our sector, given our industry's returns are compared with the returns of other industries and indices, and to provide a broader range of companies and performance results when considering the Company’s relative performance. +2021 Peer Group +Archrock, Inc. +Bristow Group Inc. +Cactus, Inc. +ChampionX Corporation +Cimarex Energy Co.* +EQT Corporation +Frank’s International N.V.* +Helix Energy Solutions Group, Inc. +Helmerich & Payne, Inc. +Liberty Oilfield Services Inc. +Nabors Industries Ltd. +NexTier Oilfield Solutions +NOV Inc. +Oceaneering International, Inc. +Oil States International, Inc. +PDC Energy, Inc. +Precision Drilling Corporation +Range Resources Corporation +TechnipFMC plc +Transocean Ltd. +S&P 500 Index +Russell 3000 Index +MSCI World Index +* Cimarex and Frank’s International each merged with other companies after the 2021 peer group was established and are now Coterra Energy and Expro Group Holdings, respectively. +This peer group was used by the Company and the Compensation Committee to benchmark executive pay levels and will be used to measure relative TSR performance for purposes of determining achievement under the Company’s 2021 performance units. +Components of 2021 Compensation +Base Salary +The table below outlines the base salaries for our executives . In 2021, we held base salaries flat for the third consecutive year for all of our NEOs. +2021 ANNUAL SALARIES +William Andrew Hendricks, Jr. +$ +1,000,000 +C. Andrew Smith +$ +450,000 +Kenneth N. Berns +$ +450,000 +Seth D. Wexler +$ +475,000 +James M. Holcomb +$ +465,000 +Annual Incentive Compensation +In 2021, the Compensation Committee adopted an annual cash bonus program that relied upon multiple, pre-established objectives for determining bonus compensation. The bonus plan set a target opportunity for each executive’s annual cash bonus as a percent of salary, with payout contingent upon meeting Patterson-UTI’s financial goals and other key performance indicators (KPIs). The Compensation Committee considered the average range of performance and payouts, and the Compensation Committee believed – based on advice from its compensation consultant – that: +• +Patterson-UTI’s performance range was consistent with typical, general industry practice; and +21 +• +Patterson-UTI’s payout range was appropriate in light of market conditions and Company share price considerations when the payout range was set, even though the maximum payout was significantly less than typical, general industry practice on a historic basis. +The 2021 bonus metrics, along with the definition of each metric and the corresponding rationale for including the metric, are provided in the table below. +2021 ANNUAL CASH INCENTIVE METRICS +Metric (Weighting) +Description +Rationale +Operating Cash Flow (60%) +Operating cash flow is defined as Adjusted EBITDA less cash capital expenditures (as adjusted for any Board-approved increase in capital expenditures). Adjusted EBITDA is defined as net income (loss) plus net interest expense, income tax expense (benefit) and depreciation, depletion, amortization and impairment expense (including impairment of goodwill), excluding, for the purposes of the annual cash bonus program, any M&A related or restructuring charges. +Targeted operating cash flow for 2021 was set at $12.7 million, which was lower than actual operating cash flow for 2020. We believe that the 2021 goal was rigorous despite being set below our 2020 actual results because: +· operating cash flow for 2021 was expected to be negatively impacted by a full-year impact of COVID-19 pandemic-related market challenges compared to a partial-year in 2020, +· operating cash flow for 2021 was expected to be negatively impacted by the expiration of drilling term contracts that were entered into prior to the COVID-19 pandemic, and +· higher anticipated capital expenditures in 2021 compared to 2020. +Our focus on cash flow generation during 2021 furthered our goal of having a business model that is self-sustaining, can weather the ebbs and flows of the commodity and business cycle, can endure extreme events, such as the COVID-19 pandemic, and allows for return of capital to stockholders. +Health, Safety and Environmental (20%) +Evaluation of HSE factors, including without limitation, improvement in safety incident rates, environmental incidents, operational audits and training. +The Compensation Committee views health, safety, and environmental factors as a component of the Company’s risk management and critical to the well-being of the Company’s employees, other personnel and the communities in which we work. +Pressure Pumping Improvement (20%) +Taking actions to improve the Company’s pressure pumping business and position that business in a manner to maximize its value to the Company and its stockholders. +In 2020, the Company's pressure pumping business had negative Adjusted EBITDA and operating cash flow. Accordingly, the Compensation Committee set a strategic goal of pressure pumping business improvement as it believed achievement of this goal would improve our competitive position, financial results and stockholder returns. This KPI represented a mix of financial goals (improvement in Adjusted EBITDA and cash flow) and strategic improvements (overall operating improvements) for this portion of our business. +For Mr. Holcomb’s annual cash bonus opportunity, the metrics and allocations were Contract Drilling Operating Cash Flow (60%), Health, Safety and Environmental for the contract drilling business (20%) and Technology Development for the contract drilling business (20%). Mr. Holcomb’s metrics were specifically tailored to the contract drilling business in order to focus on the portion of our business on which he has the most impact. +The overall annual cash bonus plan for 2021 required a minimum threshold level of 75% of target performance on the operating cash flow metric to be achieved for the year before any payouts with respect to such metric could be +22 +earned. Once the relevant threshold was met, the annual cash bonus opportunity attributable to the operating cash flow metric was calculated based on actual performance, with a 50% payout for threshold achievement, 100% payout for achievement between target and 125% of target, 125% payout for achievement of 125% of target and 200% maximum payout for maximum achievement, with linear interpolation being used to calculate payout for performance between threshold and target, and between 125% and maximum achievement levels. In light of industry conditions, the maximum payout opportunity under the bonus program was reduced to 125% of target for the NEOs and the Compensation Committee retained discretion to pay any bonus amount earned above target, if applicable, in RSUs. +For the Health, Safety and Environmental KPI, the target annual cash bonus opportunity would be achieved if each of the factors was met and any payout above target would be dependent on material outperformance. For the Pressure Pumping Improvement KPI, the target annual cash bonus opportunity would be achieved based on actions taken and results achieved. The achievement levels and actual performance of the Health, Safety and Environmental KPI and the Pressure Pumping Improvement KPI were determined based on an evaluation of multiple factors described in footnotes 2 and 3 of the “2021 Annual Incentive Metrics and Percentage Payout Calculations” table below, with the final determination of actual achievement of these KPIs subject to the discretion of the Compensation Committee. +The achievement levels under the annual cash bonus plan for our NEOs were calculated as follows: +2021 ANNUAL INCENTIVE METRICS AND PERCENTAGE PAYOUT CALCULATIONS +Metrics +Threshold +Target +Maximum +Actual +Metric Achievement Percentage +Metric +Weighting +Weighted Achievement Percentage +Operating Cash Flow (1) +$9.5million +$12.7million +$25.4million +$49.0million +200% +60% +120% +Health, Safety and Environmental +(2) +100% +20% +20% +Pressure Pumping Improvement +(3) +150% +20% +30% +Total +100% +170% +(1) +As discussed in “2021 Annual Cash Incentive Metrics,” the calculation of actual performance on the financial metrics excluded the impact of M&A related and restructuring charges and was adjusted for any Board-approved increase in capital expenditures. +(2) +The Committee determined that the NEOs met 100% achievement for this metric based on: +• +the overall total recordable incident rate being at an acceptable level relative to peers; +• +the 2021 drilling operations continuing to have a total recordable incident rate below the land drilling industry average; +• +the reduction in the motor vehicle incident rate; the reduction in the number of high potential incidents and near misses, and improvements in reporting; +• +the reduction in the number of incidents with an environmental impact; +• +the improved operational audit and follow-up process; and +• +the improvement in training, including the development of new training programs and training of additional people. +(3) +The Committee determined that the NEOs met 150% achievement for this metric based on a significant improvement in Adjusted EBITDA and the operating and cash flow results, improved service quality, and technology development, including the development of emission-reducing equipment at the Company's pressure pumping business. +As discussed above, for Mr. Holcomb’s bonus opportunity, the metrics and allocations were Contract Drilling Operating Cash Flow (60%), Health, Safety and Environmental for the contract drilling business (20%) and Technology Development for the contract drilling business (20%). The calculated payouts for Mr. Holcomb for these metrics unique to him were determined based on the achievement in 2021 of: (i) drilling segment operating cash flow (excluding the impact of M&A related and restructuring charges and adjusted for any Board-approved increase in capital expenditures) of $104.5 million, compared to a targeted operating cash flow of $77.3 million for this segment, resulting in 136% achievement, (ii) the Committee’s assessment of 100% achievement for the drilling segment on the Health, Safety and Environmental KPI as a result of the items listed in footnote 2 above with respect to the drilling segment; and (iii) the Committee’s assessment of 175% achievement for the drilling segment on the Technology Development KPI based on the increased installation of controls and automation systems and applications on drilling rigs, as well as the improvement of rig performance and customer relationships due to the enhanced data analytics performance center for the drilling segment. As a result, Mr. Holcomb’s payout under his bonus program was based on the achievement in 2021 of 136% of target. +As referenced above, the formulaic bonus calculation would have resulted in a 170% payout for the NEOs other than Mr. Holcomb and a 136% payout for Mr. Holcomb; however, due to the pre-established bonus cap, the plan paid at only 125% of target, as shown in the following table. In light of the Company’s strong performance +23 +against its pre-established goals and the recovery in the Company’s stock price, the Compensation Committee elected to pay all of the earned bonus in cash. +2021 ANNUAL INCENTIVE CASH BONUS +NEO +Bonus +Target +Pre-Cap +Bonus +Multiplier +(as a % of +Target) +Pre-Cap +Bonus +Calculation +Post-Cap +Actual +Bonus +Amount +Percentage +Reduction +Due To +Cap +William Andrew Hendricks, Jr. +$ +1,250,000 +170% +$ +2,125,000 +$ +1,562,500 +26% +C. Andrew Smith +$ +562,500 +170% +$ +956,250 +$ +703,125 +26% +Kenneth N. Berns +$ +562,500 +170% +$ +956,250 +$ +703,125 +26% +Seth D. Wexler +$ +380,000 +170% +$ +646,000 +$ +475,000 +26% +James M. Holcomb +$ +372,000 +136% +$ +507,514 +$ +465,000 +8% +Long-Term Incentive Compensation +We have historically delivered the majority of total NEO compensation in the form of equity-based awards. This emphasis on equity-based compensation was intended to enhance alignment between our executives and our stockholders. We plan to retain this emphasis going forward, and we believe that by tying a large portion of compensation to equity we ensure that our NEOs can only fully realize the potential value of their compensation if our stockholders also benefit. As described below, all of the long-term incentive awards granted in 2021 vest over a three-year period. +2021 Long- +Term Incentive +Award Type +2021 Award Design +Alignment with Philosophy +Restricted Stock Units +(49% of LTI Mix) + Time-vested units that are settled in shares of stock + 1/3 of each award vests annually over a three-year period + Value dependent upon stock price performance + Enhances retention of executive talent + Encourages long-term share ownership +Performance +Units +(51% of LTI Mix) + Performance-vested units that are settled in shares of stock + Number of units earned depends upon stock price performance relative to our peers over a full three-year period from April 1, 2021 through March 31, 2024 + No shares are earned for performance below the 25 th percentile + Relative TSR calculation for 2021 units includes the 20 peer companies listed above and three market indices + Target shares are not earned unless performance is at the 55th percentile + Maximum shares are not earned unless performance is at the 75 th percentile or above + Capped payout at “target” amount if absolute TSR during the performance period is not positive + Performance-contingent + Number of shares dependent upon performance relative to peers, relative to broader market indices and absolute performance + Value of shares dependent upon stock price + Three-year performance period provides for a retention incentive +2021 Long-Term Incentive Grants +Due to a continuation of challenging industry conditions, the Compensation Committee elected to use a $8 notional stock price to determine the LTI grants for the executives in 2021, as they did in 2020, which was higher than the grant date stock price of $6.37. The $8 stock price was chosen as it approximated our average stock price prior to the COVID-related decline in stock prices in early 2020. The use of an $8 notional stock price resulted in 2021 award levels that were approximately 15% lower, on average, than 2019 targets for the executives. +24 +Long-Term Incentive Grants +NEO +2019 Target +2021 Award (1) +% Change +William Andrew Hendricks, Jr. +$5,750,000 +$4,630,000 +-19.5% +C. Andrew Smith (2) +$1,700,000 +$1,740,000 +2.4% +Kenneth N. Berns +$2,150,000 +$1,730,000 +-19.5% +Seth D. Wexler +$1,200,000 +$1,145,000 +-4.6% +James M. Holcomb +$1,200,000 +$965,000 +-19.5% +(1) +Based on our stock price on April 27, 2021, when the Compensation Committee granted the 2021 awards. +(2) +The design value for Mr. Smith’s LTI award was increased in 2021 in recognition of his performance, leadership and tenure. +Payout in 2021 of 2018 Performance Unit Awards +For the three-year performance period that ended on March 31, 2021, Patterson-UTI’s total stockholder return, or TSR, was -23.0%. This performance was at the 79 th percentile relative to our peers. Based on this performance, the 2018 performance units paid out at 200% of the target level. Despite this payout level, the actual value of shares issued on settlement of the performance units was less than 50% of the grant date fair value as a result of our stock price performance. +All performance unit awards granted after 2018 provide for a capped payout at the “target” amount if absolute TSR during the performance period is negative. +2018 Performance Unit Awards +(Performance Period Ended in 2021) +Units Granted +Units Earned +# +Grant Date Fair Value / Share +Grant +Value +# +Share Price at Vesting +Value at +Vesting +William Andrew Hendricks, Jr. +106,900 +$ +25.76 +$ +2,753,744 +213,800 +$ +6.37 +$ +1,361,906 +C. Andrew Smith +22,900 +$ +25.76 +$ +589,904 +45,800 +$ +6.37 +$ +291,746 +Kenneth N. Berns +39,700 +$ +25.76 +$ +1,022,672 +79,400 +$ +6.37 +$ +505,778 +Seth D. Wexler +20,600 +$ +25.76 +$ +530,656 +41,200 +$ +6.37 +$ +262,444 +James M. Holcomb +20,600 +$ +25.76 +$ +530,656 +41,200 +$ +6.37 +$ +262,444 +TSR calculations for Patterson-UTI and our peers were measured based on the change in the value of the relevant stock from the first trading day of the performance period to the last trading day of the performance period, in each case measured using the average closing price of the relevant stock for the 20 trading day period ending on such trading day, with dividends deemed reinvested. +Retirement Plans +Patterson-UTI offers a 401(k) plan to its employees, including its NEOs. Participants may contribute a portion of their base salary to the 401(k) plan, subject to federal limits. Patterson-UTI makes matching contributions up to four percent of each participant’s eligible base salary. Our NEOs are eligible to participate in the 401(k) plan on the same basis as other employees. Patterson-UTI does not have any other retirement plan. The Committee believes that benefits to executives should generally be aligned with those provided for other employees, and thus we generally do not provide retirement plans beyond a 401(k) plan for our executives. +Other Executive Compensation Matters +Share Ownership Guidelines and Stock Holding Requirements +We have had significant share ownership requirements in place for more than 15 years. Our share ownership guidelines are applicable to all Section 16 officers and directors of Patterson-UTI. We believe share ownership requirements are an important tool to ensure that officers and directors stay invested in Patterson-UTI and aligned with the interests of our stockholders. +Each Section 16 officer or non-executive Director has five years from the date of appointment or election to their position to satisfy the ownership guidelines. +25 +Share Ownership Guidelines +President and Chief Executive Officer +Number of shares equal to 5 times base salary +Other Section 16 Officers +Number of shares equal to 2 times base salary +Outside Directors +Number of shares equal to 5 times annual base cash retainer +Each Section 16 officer and director is required to maintain ownership of the net after-tax shares of Common Stock acquired pursuant to any equity-based awards received from Patterson-UTI, unless such person has met his or her individual ownership requirement. +Each person subject to this policy was in compliance with these guidelines as of the date of this proxy statement. +Clawback Policy +As provided for in Patterson-UTI’s Corporate Governance Guidelines and set forth in written agreements with its executive officers, Patterson-UTI has implemented a clawback policy that allows for the recovery of bonus, severance or incentive based compensation from an executive officer in the event the Board of Directors learns that any misconduct by such executive officer contributed to Patterson-UTI having to restate all or a portion of its financial statements. The Board will take such action as it deems necessary to remedy the misconduct, prevent its recurrence, and if it deems appropriate based on the relevant facts and circumstances, take remedial action against such executive officer, which may include requiring the reimbursement of any bonus or incentive compensation awarded to such executive officer or effecting the cancellation of stock awards previously granted to such executive officer if: (i) the amount of the bonus, incentive compensation or stock award was calculated based upon the achievement of certain financial results that were subsequently the subject of a restatement, (ii) such executive officer engaged in intentional misconduct that caused or partially caused the need for the restatement, and (iii) the amount of the bonus, incentive compensation or stock award that would have been awarded to such executive officer had the financial results been properly reported would have been lower than the amount actually awarded. +In addition to this stand-alone policy, Patterson-UTI’s long-term incentive plans provide that if Patterson-UTI is required to prepare an accounting restatement due to the material noncompliance of Patterson-UTI, as a result of misconduct, with any financial reporting requirement under the securities laws, or if the participant is one of the persons subject to automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002, the participant shall reimburse Patterson-UTI the amount of any payment in settlement of an award earned or accrued during the 12-month period following the first public issuance or filing with the SEC (whichever just occurred) of the financial document embodying such financial statement requirement. +Anti-Hedging Policy +Patterson-UTI has an anti-hedging policy for directors and executive officers. Our directors and executive officers and their respective spouses and minor children are prohibited from engaging in hedging or monetization transactions, including but not limited to prepaid variable forward contracts, equity swaps, collars, exchange funds, purchasing, selling or writing options or transacting in other third-party derivative securities that primarily involve or reference Patterson-UTI equity securities. This policy does not apply broadly to other employees. +Anti-Pledging Policy +Patterson-UTI has an anti-pledging policy. Our directors and executive officers may not engage in transactions in which Patterson-UTI securities are used as collateral for any loan, including, but not limited to, “margin loans” in a brokerage account. +Perquisites and Personal Benefits +The Compensation Committee believes that benefits to executives should generally be aligned with those provided for other employees. No Named Executive Officer received perquisites during 2021 totaling more than $10,000. +Evaluation of Compensation Risk +We have considered the potential risks associated with the design of our compensation programs for employees. With regard to our executive compensation program in particular, we do not believe that our program creates unreasonable risks for the following reasons: +• +The emphasis on long-term equity based awards and the required vesting periods help minimize the potential for excessive risk taking and actions aimed at short-term stock gains; +26 +• +Our use of different types of equity grants helps offset these risks; +• +We have meaningful share ownership guidelines; +• +We maintain an anti-hedging policy; +• +We maintain a clawback policy that applies to all of our executive officers for both cash and equity incentives; and +• +Four of the NEOs have been with Patterson-UTI for more than ten years and have an established track record of focus on managing Patterson-UTI for long-term success. +Our Board has also considered in its risk assessment of our compensation program its view that our management is highly ethical and focused on creating true long-term value for stockholders and not focused on just short-term gains. The Board, primarily through its Compensation Committee and Audit Committee, monitors and considers risks associated with Patterson-UTI’s compensation plans on a regular basis. +Employment-Related Agreements and Other Matters +Employment, Change in Control and Severance Agreements +Employment Agreements. Patterson-UTI entered into an employment agreement with Mr. Hendricks in August 2016, with Messrs. Wexler and Holcomb in January 2017 and with Mr. Smith in September 2017. Each employment agreement generally has an initial three-year term, subject to automatic annual renewal thereafter. Each employment agreement provides for a specified base salary, subject to any increases that may be granted in the future. The employment agreement also provides for, among other things, severance payments following termination by Patterson-UTI of the executive other than for cause, or termination by the executive for good reason (as defined in the employment agreement). As discussed in more detail below, the employment agreements contain change in control provisions. +Change in Control Agreements and Tax Gross-Up Payments. Patterson-UTI entered into a change-in-control agreement with Mr. Berns in 2004 and employment agreements with Messrs. Wexler, Hendricks, Smith and Holcomb in 2016 and 2017 that contain change-in-control provisions, as further described in “Employment-Related Agreements” below. Patterson-UTI believes that such agreements may under certain circumstances protect Patterson-UTI’s interest by discouraging the NEOs from leaving employment out of concern for the security of their jobs or from otherwise being unable to concentrate on their work. We believe that the change in control agreements may also help Patterson-UTI attract and retain new key employees by reducing the personal uncertainty and anxiety that arises from the possibility of a future business combination. Any future change in control or severance agreements will be approved subject to the circumstances existing at the time. +As was customary when the change in control agreement with Mr. Berns was entered into more than fifteen years ago, the change-in-control agreement provides Mr. Berns with a full gross-up payment for any excise taxes imposed on payments and benefits received under the change-in-control agreement or otherwise, including other taxes that may be imposed as a result of the gross-up payment. As indicated above, the Compensation Committee subsequently adopted a policy, more than five years ago, to no longer approve tax gross-ups in connection with compensation arrangements, and the employment agreements entered into with Mr. Hendricks in 2016 and Messrs. Wexler, Holcomb and Smith in 2017, which are described below, do not include a tax gross-up provision. +Severance Agreement. In order to address prior severance agreements between UTI Energy Corp. and Mr. Berns, Patterson-UTI has entered into a written letter agreement with Mr. Berns pursuant to which Patterson-UTI has agreed to pay Mr. Berns within ten days of the termination of his employment with Patterson-UTI for any reason (including voluntary termination by him), an amount in cash equal to his annual base salary at the time of such termination. Any payment made by Patterson-UTI pursuant to this letter agreement will reduce dollar for dollar any payment owed to Mr. Berns, if any, pursuant to the change-in-control agreement referenced above. +We believe the employment agreements, the change-in-control agreement and the severance agreement are important components of our overall executive compensation program. The employment agreements currently in effect set forth the manner by which the employment relationship may be extended or terminated, the compensation and benefits that we provide during the term of employment and the obligations each party has in the event of termination of the executive officer’s employment. We believe that severance protections, particularly in the context of a change-in-control transaction, play a critical role in attracting and retaining key executive officers. Providing this type of protection is common in the oilfield services industry. In addition, these benefits serve our interests by promoting a continuity of management and aligning management’s interests with those of our stockholders in the context of an actual or threatened change in control transaction. +Please see “Employment-Related Agreements” elsewhere in the proxy statement for further description of the employment agreements, change-in-control agreement and severance agreement. +27 +Section 162(m) Considerations +We consider the impact of accounting and tax treatment when designing all aspects of compensation, but the primary driver of program design is the support of business objectives. In that regard, we review and consider the deductibility of executive compensation under Section 162(m) of the Internal Revenue Code, which limits the tax deductibility by a corporation of compensation in excess of $1 million paid to each covered employee. Covered employees for this purpose generally include any individual who serves as chief executive officer, chief financial officer or one of the other three most highly compensated executive officers for that year, as well as any individual who was a covered employee for 2017 or any later calendar year. In addition, there is no longer any performance-based compensation exception to this limitation as was the case under prior law. However, some outstanding awards may be eligible for transition rules in effect for binding contracts in effect on November 2, 2017, which should continue to allow these awards to maintain their exemption from the $1 million annual deduction limitation for so long as such grants are not materially modified. The Compensation Committee views the tax deductibility of executive compensation as one factor to be considered in the context of its overall compensation philosophy, but it retains discretion to pay compensation that is subject to the $1 million deductibility limit. +Compensation Committee Report +The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based upon such review and discussion, the Compensation Committee has recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement. +Terry H. Hunt, Chair +Tiffany (TJ) Thom Cepak +Michael W. Conlon +Curtis W. Huff +28 +EXECUTIVE COMPENSATION +The following table sets forth information concerning compensation for the fiscal years ended December 31, 2021, December 31, 2020 and December 31, 2019 with respect to the principal executive officer, the principal financial officer and the other Named Executive Officers of Patterson-UTI: +Summary Compensation Table +Name and Principal Position(s) +Year +Salary +($) +Bonus +($)(1) +Stock +Awards +($)(2) +Non-equity +Incentive plan +Compensation +($)(3) +All Other +Compensation +($)(4) +Total +($) +William Andrew Hendricks, Jr. +2021 +1,000,000 +— +5,442,905 +(5) +1,562,500 +11,600 +8,017,005 +President & Chief +2020 +1,000,000 +— +2,086,115 +625,000 +11,400 +3,722,515 +Executive Officer +2019 +1,000,000 +— +6,582,856 +1,251,300 +11,200 +8,845,356 +C. Andrew Smith +2021 +450,000 +— +2,044,810 +(6) +703,125 +11,600 +3,209,535 +Executive Vice President & +2020 +450,000 +— +399,656 +281,250 +11,400 +1,142,306 +Chief Financial Officer +2019 +450,000 +200,000 +1,946,742 +563,100 +11,200 +3,171,042 +Kenneth N. Berns +2021 +450,000 +— +2,036,286 +(7) +703,125 +— +3,189,411 +Executive Vice President & +2020 +450,000 +— +505,746 +281,250 +— +1,236,996 +Chief Commercial Officer +2019 +450,000 +— +2,463,147 +563,100 +— +3,476,247 +Seth D. Wexler +2021 +475,000 +— +1,349,000 +(8) +475,000 +11,600 +2,310,600 +Senior Vice President, General +2020 +475,000 +— +282,046 +228,000 +11,400 +996,446 +Counsel & Secretary +2019 +475,000 +— +1,374,064 +380,400 +11,200 +2,240,664 +James M. Holcomb +2021 +465,000 +— +1,135,972 +(9) +465,000 +11,600 +2,077,572 +President--Patterson-UTI +2020 +465,000 +— +282,046 +223,200 +11,400 +981,646 +Drilling Company LLC +2019 +465,000 +— +1,374,064 +358,200 +23,200 +(10) +2,220,464 +(1) +The 2019 Bonus for Mr. Smith was a fixed amount awarded pursuant to his employment agreement as a condition to his commencement of employment with the Company. +(2) +Amounts include the fair value of awards at the date of grant as determined in accordance with FASB ASC Topic 718 with respect to restricted stock units and performance units awarded to the Named Executive Officer in the fiscal years ended December 31, 2021, 2020 and 2019, and with respect to phantom units awarded to Mr. Hendricks in 2020. For additional information related to the assumptions used and valuation of restricted stock units, performance units and phantom units, see Note 12 to the consolidated financial statements in Patterson-UTI’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021. As described in the Form 10-K, the fair value of performance unit and phantom unit awards was determined based on a Monte-Carlo simulation model, which is consistent with the valuation used by Patterson-UTI for the recognition of compensation expense under FASB ASC Topic 718. The Monte-Carlo simulation model takes into account expected price movement of Patterson-UTI stock as compared to the peer group and, for the 2020 performance unit and phantom unit awards, the S&P 500 Index. For the 2021 performance unit awards the Monte-Carlo simulation model also takes into account expected price movement of Patterson-UTI stock as compared to the peer group, the S&P 500 Index, the Russell 3000 Index and the MSCI World Index. The Monte-Carlo simulation model assigned a higher value to each 2021 performance unit award than the closing price of Patterson-UTI’s stock on the grant date. Therefore, the value reflected in the 2021 Summary Compensation Table does not reflect the target award values shown in the 2021 Long-Term Incentive Grants section of the Compensation Discussion and Analysis in this proxy statement. +(3) +Amounts represent annual cash bonuses earned for the fiscal years ended December 31, 2021, 2020 and 2019. +(4) +Amounts reflect contributions to the Company's 401(k) plan by Patterson-UTI. +(5) +The 2021 amount includes $2,267,720 related to an annual award of restricted stock units and $3,175,185 related to an award of performance units during 2021. Assuming maximum performance, the value of the performance unit award would be $4,720,170 (calculated using the closing price of Patterson-UTI’s stock on the grant date and assuming maximum payout of two times the target number of shares). +(6) +The 2021 amount includes $853,580 related to an annual award of restricted stock units and $1,191,230 related to an award of performance units during 2021. Assuming maximum performance, the value of the performance unit award would be $1,770,860 (calculated using the closing price of Patterson-UTI’s stock on the grant date and assuming maximum payout of two times the target number of shares). +(7) +The 2021 amount includes $848,484 related to an annual award of restricted stock units and $1,187,802 related to an award of performance units during 2021. Assuming maximum performance, the value of the performance unit award would be $1,765,764 (calculated using the closing price of Patterson-UTI’s stock on the grant date and assuming maximum payout of two times the target number of shares). +(8) +The 2021 amount includes $560,560 related to an annual award of restricted stock units and $788,440 related to an award of performance units during 2021. Assuming maximum performance, the value of the performance unit award would be $1,172,080 (calculated using the closing price of Patterson-UTI’s stock on the grant date and assuming maximum payout of two times the target number of shares). +29 +(9) +The 2021 amount includes $472,654 related to an annual award of restricted stock units and $663,318 related to an award of performance units during 2021. Assuming maximum performance, the value of the performance unit award would be $986,076 (calculated using the closing price of Patterson-UTI’s stock on the grant date and assuming maximum payout of two times the target number of shares). +(10) +Amounts include contributions to a 401(k) plan by Patterson-UTI and an automobile allowance of $12,000. +The following table sets forth information concerning grants of plan-based awards during the fiscal year ended December 31, 2021 to the Named Executive Officers: +Grants of Plan-Based Awards +Estimated Future Payouts under +Non-equity Incentive Plan Awards (1) +Estimated Future Payouts under +Equity Incentive Plan Awards +All Other +Stock +Awards: +Number of +Shares of +Grant Date +Fair Value of +Stock and +Grant +Threshold +Target +Maximum +Threshold +Target +Maximum +Stock or Units +Option Awards +Name +Date +($) +($) +($) +(#) +(#) +(#) +(#) +($)(4) +William Andrew Hendricks, Jr +$ +625,000 +$ +1,250,000 +$ +1,562,500 +— +— +— +— +$ +— +4/27/21 +(2) +— +— +— +185,250 +370,500 +741,000 +— +$ +3,175,185 +4/27/21 +(3) +— +— +— +— +— +— +356,000 +$ +2,267,720 +C. Andrew Smith +$ +281,250 +$ +562,500 +$ +703,125 +— +— +— +— +$ +— +4/27/21 +(2) +— +— +69,500 +139,000 +278,000 +$ +1,191,230 +4/27/21 +(3) +— +— +— +— +— +— +134,000 +$ +853,580 +Kenneth N. Berns +$ +281,250 +$ +562,500 +$ +703,125 +— +— +— +— +$ +— +4/27/21 +(2) +— +— +— +69,300 +138,600 +277,200 +— +$ +1,187,802 +4/27/21 +(3) +— +— +— +— +— +— +133,200 +$ +848,484 +Seth D. Wexler +$ +190,000 +$ +380,000 +$ +475,000 +— +— +— +— +$ +— +4/27/21 +(2) +— +— +— +46,000 +92,000 +184,000 +— +$ +788,440 +4/27/21 +(3) +— +— +— +— +— +— +88,000 +$ +560,560 +James M. Holcomb +$ +186,000 +$ +372,000 +465,000 +— +— +— +— +$ +— +4/27/21 +(2) +— +— +— +38,700 +77,400 +154,800 +— +$ +663,318 +4/27/21 +(3) +— +— +— +— +— +— +74,200 +$ +472,654 +(1) The 2021 non-equity incentive cash bonus plan for the fiscal year ended December 31, 2021 was approved on April 27, 2021 for our Named Executive Officers. The bonus plan set a target opportunity for each executive’s annual cash bonus as a percent of salary, with payout contingent upon meeting Patterson-UTI’s financial goals and other KPIs as described above in “Compensation Discussion and Analysis”. The annual cash bonus opportunity attributable to each metric was determined based on a measurement of actual performance relative to target performance, with a cap applied to the calculated payouts as described above in “Annual Incentive Compensation". The target and maximum amounts shown above take into consideration the application of this cap. Please see the “Annual Incentive Compensation” section for a discussion of actual payments made in respect of the 2021 cash bonus plan. +(2) On April 27, 2021, Patterson-UTI granted performance unit awards to the Named Executive Officers. These awards provide for the recipients to receive shares of Common Stock upon the achievement of certain performance goals established by Patterson-UTI during a specified period. The performance period is the period from April 1, 2021 through March 31, 2024. The performance goals are tied to Patterson-UTI’s total stockholder return for the performance period as compared to total stockholder return for our peer group determined by the Compensation Committee. The recipients will receive a target number of shares if Patterson-UTI’s total stockholder return when compared to the peer group, is at the 55 th percentile and two times the target if at the 75 th percentile or higher. If Patterson-UTI’s total stockholder return, when compared to the peer group, is at the 25 th percentile, the recipients will only receive one-half of the target number of shares. The grant of shares when achievement is between the 25th and 55 th percentile, or between the 55 th and 75 th percentile, will be determined using linear interpolation for levels of achievement between these points. If Patterson-UTI’s total stockholder return is negative or zero, the payout shall not exceed the target number of shares. +(3) Restricted stock units were awarded to the Named Executive Officers pursuant to the 2021 Long-Term Incentive Plan. Ordinary dividends are accrued on unvested restricted stock units and paid upon vesting. The rate at which these dividends are paid or accrued is the same rate at which ordinary dividends are paid on all other shares of Common Stock. The restricted stock units vest over a three-year period as follows: one-third on April 27, 2022, one-third on April 27, 2023 and one-third on April 27, 2024. +(4) The grant date fair value of restricted stock units was based on the closing price of Patterson-UTI Common Stock on the date of grant, which is consistent with the valuation used by Patterson-UTI for the recognition of compensation expense under FASB ASC Topic 718. The grant date fair value of performance unit awards was determined based on a Monte-Carlo simulation model, which is consistent with the valuation used by Patterson-UTI for the recognition of compensation expense under FASB ASC Topic 718. +30 +The following table sets forth information concerning outstanding equity awards at December 31, 2021 for the Named Executive Officers: +Outstanding Equity Awards at Fiscal Year-End +Stock Awards +Number +Equity Incentive +Equity Incentive +of Shares +Plan Awards: +Plan Awards: Market +Option Awards +or Units of +Market Value of +Number of +or Payout Value of +Number of Securities +Option +Stock +Shares or Units +Unearned Shares, +Unearned Shares, +Underlying Unexercised +Exercise +Option +That Have +of Stock +Units or Other +Units or Other +Options (#) +Price +Expiration +Not +That Have +Rights that Have +Rights that Have +Name +Exercisable +Unexercisable +($) +Date +Vested (#) +Not Vested ($)(1) +Not Vested(2) +Not Vested ($)(1) +William Andrew Hendricks, Jr. +100,000 +— +$ +17.27 +4/1/2022 +613,112 +(3) +$ +5,180,796 +1,667,200 +(4) +$ +14,087,840 +25,000 +— +$ +15.82 +9/30/2022 +172,500 +— +$ +22.88 +4/21/2023 +117,750 +— +$ +33.10 +4/21/2024 +257,000 +— +$ +20.33 +4/20/2025 +315,400 +— +$ +18.54 +4/25/2026 +C. Andrew Smith +— +— +— +— +209,979 +(3) +$ +1,774,323 +552,000 +(4) +$ +4,664,400 +Kenneth N. Berns +160,000 +— +$ +16.20 +4/23/2022 +229,400 +(3) +$ +1,938,430 +623,700 +(4) +$ +5,270,265 +115,000 +— +$ +22.88 +4/21/2023 +78,500 +— +$ +33.10 +4/21/2024 +154,200 +— +$ +20.33 +4/20/2025 +189,100 +— +$ +18.54 +4/25/2026 +Seth D. Wexler +— +— +— +— +149,834 +(3) +$ +1,266,097 +377,500 +(4) +$ +3,189,875 +James M. Holcomb +— +— +— +— +136,034 +(3) +$ +1,149,487 +348,300 +(4) +$ +2,943,135 +(1) Based on the closing price of Patterson-UTI Common Stock on December 31, 2021 of $8.45 per share. +(2) As of December 31, 2021, performance unit awards had been granted to the Named Executive Officers. The 2019, 2020 and 2021 performance unit awards were granted on April 23, 2019, April 7, 2020 and April 27, 2021, respectively, and provide for an award of shares of Patterson-UTI common stock to the recipient based on Patterson-UTI’s total stockholder return compared to our peer group of companies at the time of grant for the performance period of April 1 of the grant year through March 31 of the third year following the grant. All performance unit awards provide for a target payout based on a target level of total stockholder return compared to the peer group. The amounts presented in this column represent the target payout under the 2019 performance unit awards, the maximum payout under the 2020 and 2021 performance unit awards and the maximum payout under the 2020 phantom unit award. The maximum payout amounts for certain awards are shown due to the relative TSR performance trending above our target threshold as of December 31, 2021. Based on Patterson-UTI’s total stockholder return during the performance period, the recipients could receive a number of shares ranging from no shares to two times the target number of shares. If Patterson-UTI’s total stockholder return is negative, then the number of shares received by the recipients will be capped at the target number of shares. For the performance units granted in 2020, there will be no payout unless Patterson-UTI’s total stockholder return is equal to or greater than the total stockholder return of the S&P 500 Index for the performance period. +(3) +These restricted stock units vest as follows: +1/23/2022 +2/23/2022 +3/23/2022 +4/7/2022 +4/23/2022 +4/27/2022 +4/7/2023 +4/27/2023 +4/27/2024 +Total +William Andrew Hendricks, Jr. +4,944 +4,945 +4,944 +118,667 +4,945 +118,666 +118,667 +118,667 +118,667 +613,112 +C. Andrew Smith +1,461 +1,461 +1,461 +35,067 +1,462 +44,666 +35,067 +44,667 +44,667 +209,979 +Kenneth N. Berns +1,850 +1,850 +1,850 +44,400 +1,850 +44,400 +44,400 +44,400 +44,400 +229,400 +Seth D. Wexler +— +— +— +24,733 +12,367 +29,333 +24,734 +29,333 +29,334 +149,834 +James M. Holcomb +— +— +— +24,733 +12,367 +24,733 +24,734 +24,733 +24,734 +136,034 +(4) +Includes amounts related to performance unit and phantom unit awards as follows: +2020 Phantom +2019 +2020 +2021 +Unit Awards +Total +William Andrew Hendricks, Jr. +185,200 +144,000 +741,000 +597,000 +1,667,200 +C. Andrew Smith +54,800 +219,200 +278,000 +— +552,000 +Kenneth N. Berns +69,300 +277,200 +277,200 +— +623,700 +Seth D. Wexler +38,700 +154,800 +184,000 +— +377,500 +James M. Holcomb +38,700 +154,800 +154,800 +— +348,300 +31 +The following table sets forth information concerning stock awards vested during the fiscal year ended December 31, 2021 for the Named Executive Officers. None of the Named Executive Officers exercised any stock options during the fiscal year ended December 31, 2021. +Stock Vested +Stock awards +Name +Number of +shares acquired +on vesting (#) +Value realized +on vesting ($)(1) +William Andrew Hendricks, Jr. +419,523 +$ +2,861,068 +C. Andrew Smith +104,344 +$ +719,579 +Kenneth N. Berns +156,300 +$ +1,066,210 +Seth D. Wexler +94,334 +$ +617,895 +James M. Holcomb +94,334 +$ +617,895 +(1) Value realized on vesting is based on the closing price of Patterson-UTI common stock on the day the respective shares vested; provided that if the stock market was closed on the day the respective shares vested, the value realized on vesting is based on the closing price of Patterson-UTI common stock on the last day the stock market was open immediately prior to the day the respective shares vested. +No Pension Benefits or Nonqualified Deferred Compensation +Patterson-UTI does not provide any pension benefits for any of the Named Executive Officers. None of the Named Executive Officers had any items of nonqualified deferred compensation during 2021. As a result, tables with respect to pension benefits and nonqualified deferred compensation have not been provided. +32 +EMPLOYMENT-RELATED AGREEMENTS +Employment, Change in Control and Severance Agreements +Employment Agreements with Messrs. Hendricks, Smith, Wexler and Holcomb +Patterson-UTI has Employment Agreements with Messrs. Hendricks, Smith, Wexler and Holcomb. Each Employment Agreement generally has an initial three-year term, subject to automatic annual renewal thereafter. The executive may terminate his employment under his Employment Agreement by providing written notice of such termination at least 30 days before the effective date of such termination. Under specified circumstances, Patterson-UTI may terminate the executive’s employment under his Employment Agreement for cause (as defined in the Employment Agreement) by either (i) providing written notice 10 days before the effective date of such termination and by granting at least 10 days to cure the cause for such termination or (ii) by providing written notice of such termination at least 30 days before the effective date of such termination and by granting at least 20 days to cure the cause for such termination, provided that if the matter is reasonably determined by Patterson-UTI to not be capable of being cured, the executive may be terminated for cause on the date the written notice is delivered. Each Employment Agreement also provides for, among other things, severance payments following termination by Patterson-UTI of the executive other than for cause, or termination by the executive for good reason (as defined in each Employment Agreement). Under these provisions, if the executive’s employment is terminated by Patterson-UTI without cause, or the executive terminates his employment for good reason: +• +the executive will have the right to receive a lump-sum payment consisting of 3 times (in the case of Mr. Hendricks) or 2.5 times (in the case of Messrs. Smith, Wexler and Holcomb) the sum of (i) his base salary and (ii) the average annual cash bonus received by him for the three years prior to the date of termination, +• +the executive will have the right to receive a pro-rated lump-sum payment equal to his annual cash bonus based on actual results for the year, payable at the same time as annual cash bonuses are paid to active employees, +• +Patterson-UTI will accelerate vesting of all time-based equity, phantom equity and long-term cash incentive awards on the 60th day following the executive’s termination, +• +Patterson-UTI will cause all performance-based equity, phantom equity and long-term cash incentive awards to continue in effect through the end of the applicable performance period and vest based on actual results as if the executive had remained employed through the end of the applicable performance period, and +• +Patterson-UTI will pay the executive certain accrued obligations and certain obligations pursuant to the terms of employee benefit plans. +However, if a termination by Patterson-UTI other than for cause or by the executive for good reason occurs following a change in control (which is defined in a substantially similar manner to the definition in Mr. Berns' CIC Agreement (as defined below)), the executive will generally be entitled to the same severance payments and benefits described above except that (i) the pro-rated lump-sum payment for annual cash bonuses will be based on the executive’s highest annual cash bonus for the last three years, (ii) the executive will be entitled to 36 months (in the case of Mr. Hendricks) or 30 months (in the case of Messrs. Smith, Wexler and Holcomb) of subsidized benefits continuation coverage, and (iii) the performance-based equity, phantom equity and long-term cash incentive awards will be accelerated based on the target level of performance on the 60th day following the executive’s termination. +Change in Control Agreement with Mr. Berns +Patterson-UTI has a Change in Control Agreement with Mr. Berns (the “CIC Agreement”). The CIC Agreement was entered into in 2004 to protect Mr. Berns should a change in control occur, thereby encouraging Mr. Berns to remain in the employ of Patterson-UTI and not be distracted from the performance of his duties to Patterson-UTI by the possibility of a change in control. +The CIC Agreement generally has an initial term with automatic 12-month renewals unless Patterson-UTI notifies Mr. Berns at least 90 days before the end of such renewal period that the term will not be extended. If a change in control of Patterson-UTI occurs during the term of the CIC Agreement and Mr. Berns’ employment is terminated (i) by Patterson-UTI other than for cause or other than automatically as a result of death, disability or retirement, or (ii) by Mr. Berns for +33 +good reason (as those terms are defined in the CIC Agreement), then Mr. Berns will generally be entitled to, among other things: +• +a bonus payment equal to the highest bonus paid after the CIC Agreement was entered into (such bonus payment prorated for the portion of the fiscal year preceding the termination date); +• +a payment equal to 2 times the sum of (i) the highest annual salary in effect for Mr. Berns and (ii) the average of the three annual bonuses earned by Mr. Berns for the three fiscal years preceding the termination date; and +• +continued coverage under Patterson-UTI’s welfare plans for up to two years. +As was customary when the CIC Agreement was entered into more than fifteen years ago, the CIC Agreement provides Mr. Berns with a full gross-up payment for any excise taxes imposed on payments and benefits received under the CIC Agreement or otherwise, including other taxes that may be imposed as a result of the gross-up payment. As indicated above, the Compensation Committee subsequently adopted a policy, more than five years ago, to no longer approve tax gross-ups in connection with compensation arrangements, and the employment agreements entered into with Mr. Hendricks in 2016 and Messrs. Smith, Wexler and Holcomb in 2017, which are described above, do not include a tax gross-up provision. +A “change in control” is principally defined by the CIC Agreement as: +• +an acquisition by any individual, entity or group of beneficial ownership of 35% or more of either Patterson-UTI’s then outstanding common stock or the combined voting power of the then outstanding voting securities of Patterson-UTI entitled to vote in the election of directors, +• +a change occurs in which the members of the Board of Directors as of the date of the CIC Agreement cease to constitute at least a majority of Patterson-UTI’s Board of Directors unless that change occurs through a vote of at least a majority of the incumbent members of the Board of Directors, or +• +a change in the beneficial ownership of Patterson-UTI following consummation of a reorganization, merger, consolidation, sale of Patterson-UTI or any subsidiary of Patterson-UTI or a disposition of all or substantially all of the assets of Patterson-UTI, in which the beneficial owners immediately prior to the transaction own 65% or less of outstanding common stock of the newly combined or merged entity. +Severance Agreement with Mr. Berns +To address a prior severance agreement between UTI Energy Corp. and Mr. Berns, Patterson-UTI has entered into a written letter agreement with Mr. Berns pursuant to which Patterson-UTI has agreed to pay Mr. Berns within ten days of the termination of his employment with Patterson-UTI for any reason (including voluntary termination by him), an amount in cash equal to his annual base salary at the time of such termination. Any payment made by Patterson-UTI pursuant to this letter agreement will reduce dollar for dollar any payment owed to Mr. Berns, if any, pursuant to the CIC Agreement. +Equity Award Agreements with Named Executive Officers +All unvested stock options, restricted stock, restricted stock unit and phantom unit awards granted prior to 2021 to the Named Executive Officers vest upon a change of control as defined by the underlying award agreements. Upon a change in control as defined in the underlying performance unit award grants, the Named Executive Officers would receive the target number of shares issuable thereunder. Upon a change in control as defined in the phantom unit award grant, Mr. Hendricks would receive an amount equal to the product of the average of the closing price of Patterson-UTI common stock for the twenty consecutive trading days preceding the change in control and the target number of phantom units set forth in the agreement. +Beginning in 2021, awards granted to the Named Executive Officers no longer provide for acceleration solely upon a change in control, and instead provide for acceleration only upon the executive’s termination of employment without cause or termination by the executive for good reason following a change in control. +All restricted stock, restricted stock unit, performance unit and phantom unit awards held by the Named Executive Officers provide that in the event of termination of employment due to death or disability, the holder would vest in a portion of the award. Such terminations at December 31, 2021 would have resulted in the issuance of the following shares pursuant to the accelerated vesting of restricted stock units (with the fair value based on the market price of Patterson-UTI common stock at December 31, 2021): +34 +Shares +Fair Value +William Andrew Hendricks, Jr. +169,110 +$ +1,428,980 +C. Andrew Smith +56,490 +$ +477,341 +Kenneth N. Berns +63,273 +$ +534,657 +Seth D. Wexler +46,613 +$ +393,880 +James M. Holcomb +43,490 +$ +367,491 +In the event of termination of employment due to death or disability, the holders of performance units and phantom units would vest in the portion of the award that was earned at the time of death or disability. This payment would be determined at the end of the performance period and would equal the amount that the holder would have received at that time, pro-rated for the amount of time from the date of grant through the date of death or disability. +Potential Payments Upon a Termination or Change in Control +Amounts that each of the Named Executive Officers would be entitled to under the employee’s CIC Agreement or Employment Agreement and other award agreements if a change in control had occurred as of December 31, 2021 and the employee’s employment was terminated by Patterson-UTI other than for cause or terminated by the employee for good reason (as defined in the CIC Agreement or the Employment Agreement and applicable award agreements) are reflected in the following table: +Cash Payments +Other Benefits +Name +Bonus +Payment +($)(1) +Salary and +Bonus +($)(2) +Stock +Awards +($)(3) +Performance +Unit Awards +($)(4) +Phantom +Unit Awards +($)(5) +Other +Benefits +($)(6) +Total +($) +William Andrew Hendricks, Jr. +$ +1,251,300 +$ +5,976,300 +$ +5,180,796 +$ +5,304,065 +$ +2,502,475 +$ +37,663 +$ +20,252,599 +C. Andrew Smith +$ +563,100 +$ +2,241,125 +$ +1,774,323 +$ +2,563,730 +$ +— +$ +30,230 +$ +7,172,508 +Kenneth N. Berns +$ +1,397,022 +$ +1,792,900 +$ +1,938,430 +$ +2,927,925 +$ +— +$ +— +$ +8,056,277 +Seth D. Wexler +$ +380,400 +$ +1,972,833 +$ +1,266,097 +$ +1,758,445 +$ +— +$ +31,385 +$ +5,409,160 +James M. Holcomb +$ +619,380 +$ +2,163,150 +$ +1,149,487 +$ +1,635,075 +$ +— +$ +15,892 +$ +5,582,984 +(1) In the case of Messrs. Hendricks, Smith Wexler and Holcomb, the assumed bonus is equal to the highest annual bonus paid in the three years prior to 2021. In the case of Mr. Berns, the assumed bonus payment is equal to the highest annual bonus paid from the time the CIC Agreement was entered into through December 31, 2021. +(2) The assumed salary and bonus payment represents 3.0 times (in the case of Mr. Hendricks), 2.5 times (in the case of Messrs. Smith, Wexler and Holcomb) or 2.0 times (in the case of Mr. Berns) of the sum of the 2021 salary in effect for each employee and the average of the annual bonuses earned by each employee for 2020, 2019 and 2018. Bonus amounts earned in 2021 were not considered in this calculation as they were not determined until after December 31, 2021. +(3) Each of the stock award agreements granted prior to 2021 for the Named Executive Officers provide that unvested awards will vest upon a change in control, and each of the stock award agreements granted beginning in 2021 provide that unvested awards will vest upon the executive’s termination of employment without cause or termination by the executive for good reason following a change in control. Amounts presented in the table represent the value of unvested stock awards using the market price of Patterson-UTI common stock at December 31, 2021. +(4) Share settled performance unit agreements granted prior to 2021 for the Named Executive Officers include a provision that upon a change in control as defined in the respective award agreements, the Named Executive Officer will receive an award of shares equal to the target amount set forth in each agreement. Share settled performance unit agreements granted beginning in 2021 include a provision that, upon the executive’s termination of employment without cause or termination by the executive for good reason following a change in control, the Named Executive Officer will receive an award of shares equal to the target amount set forth in each agreement. Amounts presented in the table represent the assumed award of the target number of shares if a change in control had occurred on December 31, 2021, valued at the December 31, 2021 closing price of Patterson-UTI common stock of $8.45 per share. +(5) The cash settled phantom unit agreement for Mr. Hendricks includes a provision that upon a change in control as defined in the award agreement, Mr. Hendricks will receive a payment equal to the product of the average of the closing price of Patterson-UTI common stock for the twenty consecutive trading days preceding the change in control and the target number of phantom units set forth in the agreement. The amount presented in the table represents the assumed payment if a change in control had occurred on December 31, 2021. The average of the closing price of Patterson-UTI common stock for the twenty consecutive trading days ending December 31, 2021 was $8.38 per share. +(6) Messrs. Hendricks, Smith, Wexler and Holcomb participated in Patterson-UTI’s health and welfare plans as of December 31, 2021. The amounts presented represent Patterson-UTI’s portion of the premiums for three years in the case of Mr. Hendricks and 30 months in the case of Messrs. Smith, Wexler and Holcomb. No tax gross-up payment would have been payable to Mr. Berns under the terms of his CIC Agreement. +35 +In the event of a termination of employment of Mr. Berns for any reason, including voluntary termination, Mr. Berns would be entitled to an amount in cash equal to his annual base salary at the time of such termination. Any such payment made by Patterson-UTI will reduce dollar for dollar any payment owed to Mr. Berns that is reflected in the table above. In the case of Messrs. Hendricks, Smith, Wexler or Holcomb, if the executive’s employment was terminated by Patterson-UTI other than for cause or terminated by the executive for good reason (as defined in the Employment Agreement) and not in connection with a change-in-control, then the executive would be entitled to the same potential payments and benefits as set forth in the table above, except that Mr. Hendricks’ cash payment would be higher by $311,200; Mr. Smith’s cash payment would be higher by $140,025; Mr. Wexler’s cash payment would be higher by $94,600 and Mr. Holcomb’s cash payment would be lower by $154,380 as a result of the calculation of the bonus payment for the year in which the termination occurred. Additionally, upon a termination by Patterson-UTI other than for cause or a termination by the executive for good reason and not in connection with a change-in-control, the potential payments and benefits set forth in the table above with respect to the performance units and phantom units would not be paid at the time of such termination, as such awards would instead remain outstanding through the end of the applicable performance period, subject to achievement of the applicable performance measures. +With respect to Messrs. Hendricks, Smith, Wexler or Holcomb, the foregoing severance benefits (other than the accrued obligations and benefit obligations) are conditioned on the executive’s execution of a release within 50 days of his termination that is not revoked during any applicable revocation period provided in such release. Their employment agreements also contain covenants and restrictions, including non-competition and non-solicitation provisions pursuant to which the executive will not be permitted to compete with Patterson-UTI in certain circumstances for a period of one year following termination of employment. +Pay Ratio +Under rules adopted pursuant to the Dodd-Frank Act of 2010, we are required to calculate and disclose the total compensation paid to our median employee, as well as the ratio of the total compensation paid to the median employee as compared to the total compensation paid to our CEO. The paragraphs that follow describe our methodology and the resulting CEO pay ratio for 2021. +We identified the median employee using our employee population on December 31, 2021. At December 31, 2021, we had approximately 5,300 employees located in the United States and Colombia. In identifying the median employee, we excluded approximately 800 employees that became our employees as a result of our acquisition of Pioneer Energy Services Corp. in October 2021. +The compensation measure we used to identify the median employee was Box 1 of the Form W-2 issued by the IRS for federal tax purposes. We chose Form W-2 because our employee population (excluding the former Pioneer employees) consisted solely of U.S. employees, and this compensation measure applied to all U.S. employees, allowing for accessibility and broad comparability. +The total annual compensation for the year ended December 31, 2021 was calculated as $83,363 for our median employee and $8,017,005 for our CEO as reflected in the “Total” column of the Summary Compensation Table. The ratio of our CEO’s pay to that of our median employee for 2021 was approximately 96 times. The pay ratio provided is a reasonable estimate calculated in a manner consistent with SEC rules. +Because the SEC rules for identifying the median of the annual total compensation of our employees and calculating the pay ratio based on that employee’s annual total compensation allows companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices, the pay ratio reported by other companies may not be comparable to the pay ratio for our Company, as other companies have headquarters and offices in different states and countries, have different employee populations and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their pay ratios. +Indemnification Agreements +Patterson-UTI has entered into an indemnification agreement with each of the Named Executive Officers and each of its directors containing provisions that may require Patterson-UTI, among other things, to indemnify such executive officers and directors against liabilities that may arise by reason of their status or service as executive officers or directors (subject to certain exceptions) and to advance expenses incurred as a result of any proceeding against them as to which they could be indemnified. +36 +DIRECTOR COMPENSATION +The following table sets forth information concerning compensation for the fiscal year ended December 31, 2021 with respect to the directors of Patterson-UTI who are not executive officers: +Name +Fees earned +or paid in cash +($) +Stock awards +($)(1) +Option awards +($)(2) +All other +compensation +($) +Total +($) +Tiffany (TJ) Thom Cepak +$ +100,000 +$ +115,063 +$ +— +$ +— +$ +215,063 +Michael W. Conlon +$ +95,000 +$ +115,063 +$ +— +$ +— +$ +210,063 +Curtis W. Huff +$ +145,000 +$ +147,938 +$ +— +$ +— +$ +292,938 +Terry H. Hunt +$ +100,000 +$ +115,063 +$ +— +$ +— +$ +215,063 +Janeen S. Judah +$ +85,000 +$ +115,063 +$ +— +$ +— +$ +200,063 +(1) Amounts set forth represent the fair value at the date of grant as determined in accordance with FASB ASC Topic 718 with respect to restricted stock units awarded to the directors in the fiscal year ended December 31, 2021. For additional information related to the assumptions used and valuation of restricted stock units, see Note 12 to the consolidated financial statements in Patterson-UTI’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021. Mses. Cepak and Judah and Messrs. Conlon and Hunt received an award of 21,875 restricted stock units, and Mr. Huff received an award of 28,125 restricted stock units, on January 1, 2021 with a grant date value of $5.26 per restricted stock unit. As of December 31, 2021, each current director held unvested restricted stock units in the same amount. The restricted stock units awarded on January 1, 2021 fully vested on January 1, 2022. +(2) No options were issued to directors during the fiscal year ended December 31, 2021. As of December 31, 2021, Messrs. Conlon, Huff and Hunt and Ms. Cepak held the following options to purchase shares of Common Stock: +Number of Securities Underlying +Unexercised Options (#) +Name +Exercisable +Unexercisable +Total +Tiffany (TJ) Thom Cepak +30,000 +— +30,000 +Michael W. Conlon +50,000 +— +50,000 +Curtis W. Huff +40,000 +— +40,000 +Terry H. Hunt +40,000 +— +40,000 +Directors who are also employees of Patterson-UTI do not receive compensation for serving as a director or as a member of a committee of the Board of Directors. All directors are reimbursed for reasonable out-of-pocket expenses incurred in connection with serving as a member of the Board of Directors. +The current compensation for non-employee directors is as follows: Each non-employee director receives an annual base cash retainer of $75,000 and restricted stock units on January 1 of each year with a grant date value of $175,000. The non-Executive Chairman receives an additional annual cash retainer of $50,000 and additional restricted stock units with a grant date value of $50,000. At times while the Board has an Executive Chairman, the Lead Director receives an additional annual cash retainer of $20,000. Each non-employee director receives additional annual cash retainers for the committees on which he or she serves as follows: +Chair +Member +Compensation Committee +$ +15,000 +$ +10,000 +Nominating and Corporate Governance Committee +$ +10,000 +$ +5,000 +Audit Committee +$ +20,000 +$ +10,000 +Sustainability Committee +$ +10,000 +$ +5,000 +The Board of Directors determined to limit the amount of the annual restricted stock unit grants made to non-employee directors on January 1, 2021 in recognition of the significant decline in our stock price. This limitation was accomplishing by determining the number of restricted stock units granted by dividing the grant date values set forth above by the greater of the market price at the time of grant and $8.00. As a result, the grant date value of restricted stock unit awards issued to non-employee directors in 2021 was reduced by approximately 34% compared to the grant date value of restricted stock unit awards issued to non-employee directors in 2020. +37 +CERTAIN TRANSACTIONS +Patterson-UTI has a written policy with respect to related person transactions. In accordance with this policy, related person transactions are reviewed by the non-executive Chairman of the Board or the chair of the Audit Committee, each of whom has full delegated authority to approve, disapprove, ratify, amend, terminate or rescind any such transaction, or direct that such transaction be submitted to the Audit Committee or the full Board of Directors for consideration. In approving or disapproving related person transactions, the relevant facts and circumstances of the related person transaction are considered, including whether such transaction is in, or not inconsistent with, the best interest of Patterson-UTI and whether, in appropriate cases, such transaction is on commercial terms at least as favorable to Patterson-UTI as would otherwise be available to or from an unrelated third party or to Patterson-UTI’s employees generally. Related person transactions generally include transactions in an amount that exceeds $50,000 between Patterson-UTI or any of its subsidiaries and an executive officer, a director (or nominee to become director), an immediate family member of any of the foregoing or any entity in which any of the foregoing has a 10% or greater beneficial ownership interest or in which they are an executive officer, general partner, principal or engaged in a similar position. Certain related person transactions have been pre-approved under the terms of the policy, including, subject to certain exceptions and limitations, the sale to or purchase from Patterson-UTI of goods and services by entities related to directors in the ordinary course of business that are immaterial to Patterson-UTI and with respect to which the director has no direct economic interest or decision making authority. +In connection with the acquisition by REMY Capital Partners III, L.P. (“REMY Capital”) of an ownership interest in UTI Energy Corp. in March 1995, REMY Capital succeeded to a registration rights agreement with UTI. As the successor-in-interest to UTI, Patterson-UTI assumed this registration rights agreement pursuant to which REMY Capital has the right to require Patterson-UTI to use its reasonable efforts to register shares held by REMY Capital under the Securities Act of 1933, as amended. In the event that such rights are exercised in connection with a primary offering proposed by Patterson-UTI (or a secondary offering with which Patterson-UTI agrees to participate), REMY Capital would bear its pro rata share of the costs of the offering, other than legal, accounting and printing costs, all of which Patterson-UTI would bear. In the event that REMY Capital elects to exercise such rights other than in connection with an offering in which Patterson-UTI participates, REMY Capital would bear all costs of the offering. These rights continue so long as REMY Capital continues to own the Common Stock that it acquired in March 1995. As of the date of this proxy statement, REMY Capital continues to hold 545,000 shares of such Common Stock. +Mr. Berns, Executive Vice President and Chief Commercial Officer of Patterson-UTI, is an executive of REMY Investors, which is the general partner of REMY Capital. +38 +SECURITY OWNERSHIP OF CERTAIN +BENEFICIAL OWNERS AND MANAGEMENT +The following table sets forth, as of April 6, 2022, the stock ownership of (i) the Named Executive Officers, directors and Board nominees, individually, (ii) all directors, Board nominees and executive officers as a group and (iii) each person known by Patterson-UTI to be the beneficial owner of more than 5% of Common Stock. +Name of Beneficial Owner +Amount and +Nature of +Beneficial +Ownership +Percent +of Class +Beneficial Owners of more than 5% of Patterson-UTI’s Common Stock: +BlackRock, Inc. +34,992,772 +(1) +16.3 +% +The Vanguard Group +21,975,906 +(2) +10.2 +% +Macquarie +12,980,732 +(3) +6.0 +% +Van Eck Associates Corporation +11,886,031 +(4) +5.5 +% +Directors and Named Executive Officers: +William Andrew Hendricks, Jr. +2,522,968 +(5) +1.2 +% +C. Andrew Smith +214,935 +(6) +* +Kenneth N. Berns +1,605,372 +(7) +* +Seth D. Wexler +233,016 +(8) +* +James M. Holcomb +335,425 +(9) +* +Tiffany (TJ) Thom Cepak +120,980 +(10) +* +Michael W. Conlon +165,554 +(11) +* +Curtis W. Huff +357,608 +(12) +* +Terry H. Hunt +140,145 +(13) +* +Cesar Jaime +- +(14) +- +Janeen S. Judah +90,564 +(15) +* +Julie J. Robertson +- +(16) +- +All current directors and executive officers as a group (12 persons) +5,786,567 +(17) +2.7 +% +* indicates less than 1.0% +(1) +Based solely on a Schedule 13G/A filed by BlackRock, Inc. with the SEC on January 27, 2022. According to the report, BlackRock, Inc. has sole voting power with respect to 33,648,485 shares and sole dispositive power with respect to 34,992,772 shares. The address of the principal business office of BlackRock, Inc. is 55 East 52nd Street, New York, New York 10055. +(2) +Based solely on a Schedule 13G/A filed by The Vanguard Group with the SEC on February 10, 2022. According to the report, The Vanguard Group has shared voting power with respect to 171,353 shares, sole dispositive power with respect to 21,646,533 shares and shared dispositive power with respect to 329,373 shares. The address of the principal business office of The Vanguard Group is 100 Vanguard Blvd., Malvern, Pennsylvania 19355. +(3) +Based solely on a Schedule 13G/A filed by Macquarie Group Limited, Macquarie Management Holdings Inc, Macquarie Investment Management Business Trust, Macquarie Investment Management Global Limited and Ivy Investment Management Company ("Macquarie") with the SEC on February 14, 2022. According to the report, Macquarie has sole voting and dispositive power with respect to 12,980,732 shares. The principal business address of Macquarie Group Limited and Macquarie Investment Management Global Limited is 50 Martin Place Sydney, New South Wales, Australia. The principal business address of Macquarie Management Holdings Inc. and Macquarie Investment Management Business Trust is 2005 Market Street, Philadelphia, PA 19103. +(4) +Based solely on a Schedule 13G/A filed by Van Eck Associates Corporation with the SEC on February 10, 2022. According to the report, Van Eck Associates Corporation has sole voting and dispositive power with respect to 11,886,031 shares. The address of the principal business office of Van Eck Associates Corporation is 666 Third Ave. - 9th Floor, New York, New York 10017. +(5) +Includes shares underlying stock options held by Mr. Hendricks that are presently exercisable to purchase 887,650 shares. Includes 242,278 shares underlying restricted stock units that will vest within 60 days. Does not include 356,001 shares underlying restricted stock units that will not vest within 60 days. +(6) +Includes 81,195 shares underlying restricted stock units held by Mr. Smith that will vest within 60 days. Does not include 124,401 shares underlying restricted stock units that will not vest within 60 days. +(7) +Includes shares underlying stock options held by Mr. Berns that are presently exercisable to purchase 696,800 shares. Includes 90,650 shares underlying restricted stock units that will vest within 60 days. Does not include 133,200 shares underlying restricted stock units that will not vest within 60 days. The Common Stock beneficially owned by Mr. Berns includes 70,000 shares held in trust(s) for which he is the trustee. Does not include shares of Common Stock beneficially owned by REMY Investors. Mr. Berns disclaims beneficial ownership of such shares beneficially owned by REMY Investors. +39 +(8) +Includes 66,433 shares underlying restricted stock units held by Mr. Wexler that will vest within 60 days. Does not include 83,401 shares underlying restricted stock units that will not vest within 60 days. +(9) +Includes 61,833 shares underlying restricted stock units held by Mr. Holcomb that will vest within 60 days. Does not include 74,201 shares underlying restricted stock units that will not vest within 60 days. +(10) +Includes shares underlying presently exercisable stock options held by Ms. Cepak to purchase 30,000 shares. Does not include 20,710 shares underlying unvested restricted stock units that will not vest within 60 days. +(11) +Includes shares underlying presently exercisable stock options held by Mr. Conlon to purchase 50,000 shares. Does not include 20,710 shares underlying unvested restricted stock units that will not vest within 60 days. +(12) +Includes shares underlying presently exercisable stock options held by Mr. Huff to purchase 40,000 shares. Does not include 26,627 shares underlying unvested restricted stock units that will not vest within 60 days. +(13) +Includes shares underlying presently exercisable stock options held by Mr. Hunt to purchase 40,000 shares. Does not include 20,710 shares underlying unvested restricted stock units that will not vest within 60 days. +(14) +Does not include 11,041 shares underlying unvested restricted stock units held by Mr. Jaime that will not vest within 60 days. +(15) +Does not include 20,710 shares underlying unvested restricted stock units held by Ms. Judah that will not vest within 60 days. +(16) +Does not include 11,041 shares underlying unvested restricted stock units held by Ms. Robertson that will not vest within 60 days. +(17) +Includes shares underlying stock options that are presently exercisable to purchase 1,744,450 shares of Common Stock. Includes 542,389 shares underlying restricted stock units held by certain directors and executive officers that will vest within 60 days. Does not include 902,753 shares underlying restricted stock units held by such individuals that will not vest within 60 days. Does not include shares of Common Stock beneficially owned by REMY Investors. +Except as stated herein, each stockholder has sole voting and investment power with respect to Common Stock included in the above table. There are no arrangements known to Patterson-UTI which may result in a change in control. The business address of each of our directors and officers is 10713 West Sam Houston Parkway North, Suite 800, Houston, Texas 77064. +40 +Equity Compensation Plan Information +Equity compensation plan information as of December 31, 2021 follows: +Equity Compensation Plan Information +Plan Category +Number of +Securities to +be Issued upon +Exercise of +Outstanding +Options, +Warrants and +Rights +Weighted - +Average +Exercise +Price of +Outstanding +Options, +Warrants and +Rights (2) +Number of +Securities +Remaining +Available +for Future +Issuance +under Equity +Compensation +Plans +(Excluding +Securities +Reflected +in Column(a)) +(a) +(b) +(c) +Equity compensation plans approved by security holders(1) +3,720,150 +$ +20.93 +8,288,582 +Equity compensation plans not approved by security holders +— +$ +— +— +Total +3,720,150 +$ +20.93 +8,288,582 +(1) The 2021 Long-Term Incentive Plan (the "2021 Plan") provides for awards of incentive stock options, non-incentive stock options, tandem and freestanding stock appreciation rights, restricted stock awards, other stock unit awards, performance share awards, performance unit awards and dividend equivalents to key employees (as defined in the 2021 Plan), officers and directors, which are subject to certain vesting and forfeiture provisions. All options are granted with an exercise price equal to or greater than the fair market value of the common stock at the time of grant. The vesting schedule and term are set by the Compensation Committee of the Board of Directors, except that the Board has the same power as the Compensation Committee with respect to awards to directors. All securities remaining available for future issuance under equity compensation plans approved by security holders in column (c) are available under this plan. In addition to the 2021 Plan, this plan category also includes the Amended and Restated 2014 Long-Term Incentive Plan, as amended (the "2014 Plan"), and the 2005 Long-Term Incentive Plan, as amended (the "2005 Plan"). The 2021 Plan contains a provision that upon stockholder approval, no further awards will be granted under any other equity compensation plan. Options granted under the 2014 Plan and the 2005 Plan typically vested over one year for non-employee directors and three years for employees. All options were granted with an exercise price equal to the fair market value of the related common stock at the time of grant. +(2) This column reflects the weighted average exercise price of options granted under the 2014 Plan and the 2005 Plan that were outstanding on December 31, 2021. No options have been granted under the 2021 Plan. +41 +AUDIT COMMITTEE REPORT +The following report of the Audit Committee does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other Patterson-UTI filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent Patterson-UTI specifically incorporates this report by reference therein. +The Audit Committee members are Mses. Cepak (chair) and Judah and Messrs. Huff and Hunt, each of whom is independent within the meaning of applicable rules under the Exchange Act and within the meaning of the Nasdaq listing standards. The Board has determined that Ms. Cepak and Mr. Huff are “audit committee financial experts” within the meaning of applicable SEC rules. +The Audit Committee oversees management’s conduct of Patterson-UTI’s accounting and financial reporting process, including review of: (i) financial reports and other financial information provided by Patterson-UTI to the public and government/regulatory bodies, (ii) Patterson-UTI’s system of internal control over financial reporting, and (iii) the annual independent audit of Patterson-UTI’s consolidated financial statements and internal control over financial reporting. +The Audit Committee’s role is one of review, and it recognizes that Patterson-UTI’s management is responsible for preparing Patterson-UTI’s consolidated financial statements and the independent auditors are responsible for auditing those financial statements. In fulfilling its review and oversight responsibilities, the Audit Committee reviewed and discussed with management the audited financial statements included in Patterson-UTI’s Annual Report on Form 10-K for the year ended December 31, 2021, including a discussion of the quality, not just the acceptability, of the accounting principles used, the reasonableness of significant judgments made by management, and the clarity of disclosures provided in the financial statements. The Audit Committee also discussed with management the basis for their assertion that Patterson-UTI maintained effective internal control over financial reporting as of December 31, 2021. +The Audit Committee discussed with Patterson-UTI’s independent registered public accounting firm (PricewaterhouseCoopers LLP) the overall scope and plans for their integrated audit. The Audit Committee met with PricewaterhouseCoopers LLP, with and without management present, to discuss the results of their integrated audit, their evaluation of Patterson-UTI’s internal control over financial reporting and the overall quality of Patterson-UTI’s financial reporting. The Audit Committee also reviewed with PricewaterhouseCoopers LLP their judgments as to the quality, not just the acceptability, of Patterson-UTI’s accounting principles and discussed such other matters as are required by the applicable requirements of the Public Company Accounting Oversight Board and the SEC. +The Audit Committee has received and reviewed the written disclosures and the letter from PricewaterhouseCoopers LLP required by the Public Company Accounting Oversight Board regarding their independence, and their communications with the Audit Committee concerning independence, and has discussed with PricewaterhouseCoopers LLP its independence. +Taking the foregoing into consideration, the undersigned Audit Committee members recommended to the Board of Directors that the Board approve the inclusion of Patterson-UTI’s audited financial statements and management’s report on internal control over financial reporting in the Annual Report on Form 10-K for the fiscal year ended December 31, 2021. +Audit Committee of the Board of Directors: +Tiffany (TJ) Thom Cepak, Chair +Curtis W. Huff +Terry H. Hunt +Janeen S. Judah +42 +PricewaterhouseCoopers LLP Fees for Fiscal Years 2021 and 2020 +In 2021 and 2020, Patterson-UTI and its subsidiaries incurred fees for services provided by PricewaterhouseCoopers LLP. +Description +Fees Incurred in +Fiscal Year +2021 +Fees Incurred in +Fiscal Year +2020 +Audit fees +$ +2,775,000 +$ +1,963,146 +Audit-related fees +146,738 +— +Tax fees +60,000 +60,000 +All other fees +2,893 +2,893 +Total +$ +2,984,631 +$ +2,026,039 +The Audit Committee appoints the independent registered public accounting firm. The Audit Committee or Ms. Cepak, as Chair of the Audit Committee, approves all other engagements of the independent registered public accounting firm in advance. In the event Ms. Cepak approves any such engagement, she discusses such approval with the Audit Committee at its next meeting. +“Audit fees” relate to audit services of PricewaterhouseCoopers LLP for fiscal 2021 and 2020 consisting of the integrated audit of Patterson-UTI’s consolidated financial statements and internal control over financial reporting, and quarterly reviews of Patterson-UTI’s interim financial statements and the audits of certain subsidiaries. “Audit-related fees” for 2021 relate to the performance of certain procedures in connection with our acquisition of Pioneer Energy Services, Corp. and the filing of various registration statements and Exchange Act reports. “Tax fees” include federal, state, local and foreign tax compliance and related matters. “All other fees” consists of annual subscription fees to software products. The Audit Committee Charter includes procedures under which the Audit Committee or its delegate approves in advance all audit and non-audit services (subject to any de minimis exceptions permitted by law for non-audit services, which must, in any event, be approved annually by the Audit Committee prior to completion of the annual audit) provided by the Company's independent auditors. The Audit Committee or Ms. Cepak, as Chair of the Audit Committee, approved in advance all of the services described above. +The Audit Committee has discussed the non-audit services provided by PricewaterhouseCoopers LLP and the related fees and has considered whether those services and fees are compatible with maintaining auditor independence. The Audit Committee determined that such non-audit services were consistent with the independence of PricewaterhouseCoopers LLP. +OTHER MATTERS +Other Business +As of the date of this proxy statement, management of Patterson-UTI was not aware of any matter to be presented at the Meeting other than as set forth herein. If any other matters are properly brought before the Meeting, however, the shares represented by valid proxies will be voted with respect to such matters in accordance with the judgment of the persons voting them. +Stockholder Proposals for 2023 Annual Meeting +Proposals for Inclusion in the Proxy Statement. Pursuant to Rule 14a-8 under the Exchange Act, stockholders may present proper proposals for inclusion in Patterson-UTI’s proxy statement and for consideration at the next annual meeting of stockholders by submitting their proposals to Patterson-UTI in a timely manner. In order to be included in Patterson-UTI’s proxy statement for the 2023 annual meeting of stockholders, proposals from stockholders must be received by Patterson-UTI no later than the close of business on December 12, 2022, and must otherwise comply with the requirements of Rule 14a-8. +Proposals or Director Nominations not Included in the Proxy Statement. Patterson-UTI’s bylaws establish an advance notice procedure with regard to stockholder proposals and director nominations not included in Patterson-UTI’s proxy statement. For director nominations not included in Patterson-UTI’s proxy statement or stockholder proposals to be properly brought before the 2023 annual meeting by a stockholder, the stockholder must be a stockholder of record on the date of the giving of the notice provided for in Patterson-UTI’s bylaws and on the record date for the determination of stockholders entitled to vote at such annual meeting and must give timely notice of such business in writing to the Secretary of Patterson-UTI. To be timely with respect to the 2023 annual meeting of stockholders, a stockholder’s notice must be delivered to or mailed and received by the close of business at Patterson-UTI’s principal executive offices not earlier than the close of business on February 2, 2023 and not later than the close of business on March 4, 2023, +43 +assuming the date of the 2023 annual meeting is not changed by more than 30 days before or after the anniversary date of the 2022 annual meeting. A stockholder’s notice to the Secretary of Patterson-UTI shall contain certain information specified in Patterson-UTI’s bylaws regarding the stockholder and the proposed nominee or stockholder proposal. See Article I, Section 8 of Patterson-UTI’s bylaws. In addition to giving notice pursuant to the advance notice provisions of Patterson-UTI’s bylaws, a stockholder who intends to solicit proxies in support of nominees submitted under these advance notice provisions must also provide the notice required pursuant to Rule 14a-19, the SEC’s universal proxy rule, to the Secretary of the Company regarding such intent no later than April 3, 2023. +Proxy Access Procedures. Patterson-UTI’s bylaws permit a stockholder, or group of up to 20 stockholders, owning continuously for at least three years shares of Patterson-UTI stock representing an aggregate of at least 3% of our outstanding shares, to nominate and include in our proxy materials director nominees constituting up to the greater of two or 20% of our Board, provided that the stockholder(s) and nominee(s) satisfy the requirements in Patterson-UTI’s bylaws. See Article I, Section 11 of Patterson-UTI’s bylaws. Written notice of proxy access director nominees must be received by the close of business at Patterson-UTI’s principal executive offices not earlier than December 12, 2022 and not later than January 11, 2023, assuming the date of the 2023 annual meeting is not changed by more than 30 days before or after the anniversary date of the 2022 annual meeting. +Annual Report +A copy of Patterson-UTI’s annual report on Form 10-K accompanies this proxy statement only if you have requested that a copy of this proxy statement be mailed to you. The annual report on Form 10-K also is available electronically by following the instructions in the Notice. The annual report on Form 10-K is not incorporated into this proxy statement and is not considered proxy-soliciting material. +A copy of the annual report on Form 10-K, including the financial statements and financial statement schedules, but excluding exhibits, may be obtained by stockholders without charge by written request to the Secretary of Patterson-UTI at 10713 West Sam Houston Parkway North, Suite 800, Houston, Texas 77064 or by accessing it on Patterson-UTI’s website at www.patenergy.com in the investors section under the “Financial Information” link. Patterson-UTI will furnish the exhibits to Form 10-K upon request and upon receipt of a reproduction fee. +Delivery of Documents to Stockholders Sharing an Address +The SEC’s rules allow companies to send a single Notice or single copy of annual reports, proxy statements, prospectuses and other disclosure documents to two or more stockholders sharing the same address, subject to certain conditions. These rules are intended to provide greater convenience for stockholders, and cost savings for companies, by reducing the number of duplicate documents that stockholders receive. Unless different instructions were previously provided to Patterson-UTI, if two or more stockholders share a mailing address, such stockholders were deemed to have consented to receiving only one copy, and a single copy of this proxy statement and Patterson-UTI's annual report on Form 10-K (and/or a single copy of the Notice) has been sent to their address. If instructions for separate delivery have been received from any stockholder, Patterson-UTI will deliver promptly separate copies of the relevant disclosure materials. Similarly, if multiple copies of disclosure materials are being delivered to a single address, stockholders can request a single copy for future deliveries. Written requests should be submitted to the Secretary of Patterson-UTI at 10713 West Sam Houston Parkway North, Suite 800, Houston, Texas 77064. Requests may also be made by calling Investor Relations at (281) 765-7100. +44 +0000413080_2 R1.0.1.18 Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice & Proxy Statement and Form 10-K, are available at www.proxyvote.com PATTERSON-UTI ENERGY, INC. Annual Meeting of Stockholders June 6, 2019 10:00 AM This proxy is solicited by the Board of Directors The undersigned stockholder of Patterson-UTI Energy, Inc. (the "Company") hereby appoints Mark S. Siegel, William Andrew Hendricks, Jr. and C. Andrew Smith and each of them, proxies to the undersigned, each with full power to act without the other and with full power of substitution, to vote at the annual meeting of stockholders of the Company to be held Thursday, June 6, 2019, at 10:00 a.m., Central Time, at our corporate headquarters, located at 10713 W. Sam Houston Parkway North, Suite 125, Houston, Texas, 77064, and at any and all adjournments or postponements thereof, with the same force and effect as if the undersigned were personally present. The undersigned hereby instructs the above-named proxies to vote the shares represented by this proxy in the manner as directed for the undersigned on the reverse side of this proxy card. If no directions are made, the proxies will vote “FOR” the nominees for directors, “FOR” the approval of the amendment to the Patterson-UTI Energy, Inc. Amended and Restated 2014 Long-Term Incentive Plan, “FOR” the ratification of the selection of PricewaterhouseCoopers LLP and “FOR” the approval of the advisory resolution on executive compensation, as set forth on the reverse side. If any other matter should be presented properly, this proxy will be voted in accordance with the discretion of the above-named proxies. 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COMMISSION +Washington, D.C. 20549 +SCHEDULE 14A INFORMATION +Proxy Statement Pursuant to Section 14(a) of the +Securities Exchange Act of 1934 +(Amendment No. ) +Filed by the Registrant ☒ +Filed by a Party other than the Registrant ☐ +Check the appropriate box: +☐ Preliminary Proxy Statement +☐ Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +☒ Definitive Proxy Statement +☐ Definitive Additional Materials +☐ Soliciting Material under § 240.14a-12 +PATTERSON-UTI ENERGY, INC. +(Name of registrant as specified in its charter) +(Name of person(s) filing proxy statement, if other than the registrant) +Payment of Filing Fee (Check all boxes that apply): +☒ No fee required +☐ Fee paid previously with preliminary materials +☐ Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11 +10713 West Sam Houston Parkway North, Suite 800 +Houston, Texas 77064 +(281) 765-7100 +April 11, 2023 +Dear Stockholder: +We cordially invite you to attend Patterson-UTI Energy, Inc.’s annual stockholders’ meeting. The annual meeting will be held Thursday, June 8, 2023, at 10:00 a.m., Central Time, at our corporate headquarters, located at 10713 W. Sam Houston Parkway North, Suite 125, Houston, Texas 77064. +We are pleased to take advantage of Securities and Exchange Commission rules that allow us to furnish proxy materials to our stockholders on the Internet. We believe that posting these materials on the Internet enables us to provide stockholders with the information that they need quickly, while lowering our costs of printing and delivery and supporting our sustainability efforts. We are mailing to most of our stockholders a Notice of Internet Availability of Proxy Materials, rather than a paper copy of our proxy materials. The notice contains instructions on how to access the proxy materials, vote and obtain, if you so desire, a paper copy of the proxy materials. +Your vote is important to us. Whether or not you plan to attend the Annual Meeting in person, we urge you to promptly vote your shares by using the Internet or telephone, or if the accompanying proxy statement was mailed to you, by completing, signing, dating and returning your proxy card as soon as possible in the enclosed postage prepaid envelope. +Thank you for your support. +Sincerely, +Curtis W. Huff +Chairman of the Board +W illiam A ndrew H endricks , J r . +President, Chief Executive Officer and Director +PATTERSON-UTI ENERGY, INC. +10713 West Sam Houston Parkway North, Suite 800 +Houston, Texas 77064 +NOTICE OF 2023 ANNUAL MEETING OF STOCKHOLDERS +To Be Held June 8, 2023 +The 2023 annual meeting of the stockholders of Patterson-UTI Energy, Inc., a Delaware corporation (“Patterson-UTI”), will be held Thursday, June 8, 2023, at 10:00 a.m., Central Time, at our corporate headquarters, located at 10713 W. Sam Houston Parkway North, Suite 125, Houston, Texas 77064 (the “Meeting”), for the following purposes: +• +to elect eight directors named in this proxy statement to the Board of Directors of Patterson-UTI to serve until the next annual meeting of the stockholders or until their respective successors are elected and qualified; +• +to ratify the selection of PricewaterhouseCoopers LLP as the independent registered public accounting firm of Patterson-UTI for the fiscal year ending December 31, 2023; +• +to approve an amendment to Patterson-UTI’s 2021 Long-Term Incentive Plan; +• +to approve, on an advisory basis, Patterson-UTI’s compensation of its named executive officers; +• +to hold an advisory vote on the frequency of future advisory votes to approve executive compensation; and +• +to transact such other business as may properly come before the Meeting or any adjournment or postponement thereof. +Stockholders of record at the close of business on April 10, 2023 are entitled to notice of and to vote at the Meeting and any adjournment or postponement thereof. +Your vote is important to us. Whether or not you plan to attend the Meeting in person, we urge you to promptly vote your shares by using the Internet or telephone, or if the accompanying proxy statement was mailed to you, by completing, signing, dating and returning your proxy card as soon as possible in the enclosed postage prepaid envelope. +By order of the Board of Directors +S ETH D. W EXLER +Senior Vice President, General Counsel and Secretary +April 11, 2023 +Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting +to Be Held on June 8, 2023 +The proxy statement and annual report to stockholders are available at www.proxyvote.com . +PATTERSON-UTI ENERGY, INC. +10713 West Sam Houston Parkway North, Suite 800 +Houston, Texas 77064 +PROXY STATEMENT +ANNUAL MEETING OF STOCKHOLDERS +To Be Held June 8, 2023 +General Information About the Annual Meeting and Voting +The Board of Directors (the “Board” or “Board of Directors”) of Patterson-UTI Energy, Inc., a Delaware corporation (“Patterson-UTI” or the “Company”), has made this proxy statement and its 2022 annual report available to you on the Internet or, upon your request has delivered printed versions of these materials to you by mail beginning on or about April 11, 2023. Patterson-UTI is furnishing this proxy statement in connection with the solicitation by the Board of Directors of proxies to be voted at the 2023 annual meeting of stockholders of Patterson-UTI (the “Meeting”). The Meeting will be held Thursday, June 8, 2023, at 10:00 a.m., Central Time, at our corporate headquarters, located at 10713 W. Sam Houston Parkway North, Suite 125, Houston, Texas 77064, or at any adjournment or postponement thereof. +The Notice of Internet Availability of Proxy Materials (the “Notice”) was mailed to each of Patterson-UTI’s stockholders (other than those who previously requested electronic delivery) entitled to vote at the Meeting on or about April 11, 2023. +Pursuant to the “notice and access” rules adopted by the Securities and Exchange Commission (the “SEC”), Patterson-UTI has elected to provide stockholders access to its proxy materials on the Internet. Accordingly, Patterson-UTI sent a Notice to all of its stockholders as of the record date. The Notice includes instructions on how to access Patterson-UTI’s proxy materials on the Internet and how to request a printed copy of these materials. In addition, by following the instructions in the Notice, stockholders may request to receive proxy materials in printed form by mail or electronically by email on an ongoing basis. +Choosing to receive your future proxy materials by email will save us the cost of printing and mailing documents to you and will support our sustainability efforts. If you choose to receive future proxy materials by email, you will receive an email next year with instructions containing a link to those materials and a link to the proxy voting site. Your election to receive proxy materials by email will remain in effect until you terminate such election. +If your shares are registered directly in your name with our transfer agent, Continental Stock Transfer & Trust Company, you are considered the “stockholder of record” with respect to those shares, and the Notice was sent directly to you. +If your shares are held in an account at a brokerage firm, bank, broker-dealer, or other similar organization, then you are the beneficial owner of shares held in “street name,” and the Notice was forwarded to you by that organization. As a beneficial owner, you have the right to direct that organization on how to vote the shares held in your account. +Whether you are a “stockholder of record” or hold your shares in “street name,” you may direct your vote without attending the Meeting in person. +If you are a stockholder of record, you may vote by using the Internet or telephone by following the instructions in the Notice. If you request printed copies of the proxy materials by mail, you may also vote by completing, dating, signing and returning your proxy card by mail. You should sign your name exactly as it appears on the proxy card. If you are signing in a representative capacity (for example, as guardian, executor, trustee, custodian, attorney or officer of a corporation), you should indicate your name and title or capacity. +If you are the beneficial owner of shares held in street name, you may be eligible to vote your shares electronically using the Internet or telephone by following the instructions in the Notice. If you request printed copies of the proxy materials by mail, you may also vote by signing the voter instruction card provided by your brokerage firm, bank, broker-dealer, or other similar organization and returning it by mail. If you provide specific voting instructions by mail, telephone or the Internet, your shares will be voted by your brokerage firm, bank, broker-dealer, or similar organization as you have directed. +1 +Properly submitted proxies received either by mail, Internet, telephone or in person in time to be counted for the Meeting will be voted as you have directed in your proxy, unless you revoke your proxy in the manner provided below. As to any matter for which you give no direction in your proxy, your shares will be voted as follows: +• +“FOR” the election of all of the nominees to the Board of Directors named in this proxy statement; +• +“FOR” the ratification of PricewaterhouseCoopers LLP as the independent registered public accounting firm of Patterson-UTI for the fiscal year ending December 31, 2023; +• +"FOR" the approval of the amendment to Patterson-UTI’s 2021 Long-Term Incentive Plan; +• +“FOR” the approval, on an advisory basis, of Patterson-UTI’s compensation of its named executive officers; +• +"ONE YEAR" as the recommended frequency, on an advisory basis, with which future advisory votes to approve named executive officer compensation should be held; and +• +“FOR” or “AGAINST” any other proposals that may be properly submitted at the Meeting at the discretion of the persons named in the proxy. +If you are a stockholder of record, you may revoke your proxy before the proxy is voted by either: +• +submitting a new proxy with a later date, including a proxy submitted using the Internet or telephone, in time to be counted for the Meeting; +• +notifying the Secretary of Patterson-UTI in writing before the Meeting that you have revoked your proxy; or +• +attending the Meeting and voting in person. +If your shares are held in street name, you must obtain a proxy executed in your favor from the stockholder of record (that is, your brokerage firm, bank, broker-dealer or similar organization) to be able to vote at the Meeting. +The Board of Directors is making this solicitation. We have retained Georgeson LLC, 480 Washington Blvd., 26 th Floor, Jersey City, New Jersey 07310, for a fee of approximately $9,500 and the reimbursement of out of pocket costs and expenses, to assist in the solicitation of proxies on behalf of the Board. Patterson-UTI’s officers and other employees, without compensation other than regular compensation, may also solicit proxies on behalf of the Board by mail, email, the Internet, telephone, electronic means and personal interview. Patterson-UTI will pay all costs associated with this solicitation. +2 +Shares Outstanding and Voting Rights +Only stockholders of record of Patterson-UTI’s common stock, $0.01 par value per share (the “Common Stock”), at the close of business on April 10, 2023 are entitled to notice of and to vote at the Meeting or any adjournment or postponement thereof. At the close of business on April 10, 2023, there were 208,241,879 shares of Common Stock issued and outstanding. Holders of record of Common Stock on April 10, 2023 will be entitled to one vote per share on all matters to properly come before the Meeting. A list of stockholders entitled to notice of and to vote at the Meeting will be made available during regular business hours at the offices of Patterson-UTI Energy, Inc., 10713 West Sam Houston Parkway North, Suite 800, Houston, Texas 77064 for the ten day period ending on the day before the Meeting for examination by any stockholder for any purpose germane to the Meeting. +A quorum is necessary to transact business at the Meeting. A majority of the shares of Common Stock outstanding on April 10, 2023 will constitute a quorum. The shares held by each stockholder who attends the Meeting in person, signs and timely returns the form of proxy, or properly votes using the Internet or telephone will be counted for purposes of determining the presence of a quorum at the Meeting. +If your shares are held in an account at a brokerage firm, bank, broker-dealer, or other similar organization, then you are the beneficial owner of shares held in “street name.” As a beneficial owner, you have the right to direct that organization on how to vote the shares held in your account in the manner provided in the voting instructions you received from that organization. Street name stockholders are also invited to attend the Meeting. However, because a street name stockholder is not the stockholder of record, you may not vote your shares at the Meeting unless you follow the procedures of your brokerage firm, bank, broker-dealer, or other similar organization for obtaining a legal proxy. +“Broker non-votes” and abstentions will be considered present at the Meeting for the purpose of determining a quorum. Broker non-votes occur when nominees, such as brokerage firms, banks, broker-dealers, or other similar organizations holding shares on behalf of the beneficial owners, are prohibited from exercising discretionary voting authority for beneficial owners who have not provided voting instructions. If you do not give instructions to your bank, brokerage firm or other agent, the bank, brokerage firm or other agent does not have authority to vote on the applicable proposal except on “routine matters.” For these reasons, please promptly vote in accordance with the instructions provided by your brokerage firm, bank, broker-dealer, or other similar organization. +3 +PROPOSAL NO. 1 +ELECTION OF DIRECTORS +Directors are elected to serve until the next annual meeting of stockholders and until their successors are elected and qualified. Under Delaware law and Patterson-UTI’s bylaws, the affirmative vote of a plurality of shares present in person or represented by proxy at the meeting at which a quorum is present is required for the election of directors. +The enclosed form of proxy provides a means for you to either: +• +vote “For All” with respect to the election of the nominees to the Board of Directors listed below, +• +withhold authority to vote for one or more of the nominees (i.e., "For All Except"), or +• +withhold authority to vote for all of the nominees (i.e., "Withhold All"). +The Board of Directors recommends that you vote “FOR” all of the nominees. Unless you give contrary instructions in your proxy, your properly submitted proxy will be voted “For All” with respect to the election of all of the nominees to the Board of Directors. If any nominee should become unable or unwilling to accept the nomination or election, the person acting under the proxy will vote for the election of such other person as the Board of Directors may recommend. The Board has no reason, however, to believe that any of the nominees will be unable or unwilling to serve if elected. +Because directors are elected by a plurality vote, shares as to which a stockholder withholds authority to vote and broker non-votes will not affect the outcome of the election, although a broker non-vote will be counted for purposes of establishing a quorum. +Our corporate governance guidelines require that if a director receives in an uncontested election a greater number of “withhold” votes than votes cast “for” his or her election, the Nominating and Corporate Governance Committee of the Board of Directors will undertake a prompt evaluation of the appropriateness of the director’s continued service on the Board of Directors. In performing this evaluation, the Nominating and Corporate Governance Committee will review all factors it deems relevant, including the stated reasons why votes were withheld, the director’s length of service, his or her past contributions to Patterson-UTI and the availability of other qualified candidates. The Nominating and Corporate Governance Committee will then make its recommendation to the Board. The Board of Directors will review the Nominating and Corporate Governance Committee’s recommendation and consider such further factors and information as it deems relevant. The Board of Directors will act on the Nominating and Corporate Governance Committee’s recommendation no later than 90 days following the date of the stockholders’ meeting. If the Board of Directors determines remedial action is appropriate, the director shall promptly take whatever action is requested by the Board. If the director does not promptly take the recommended remedial action or if the Board of Directors determines that immediate resignation is in the best interests of Patterson-UTI and its stockholders, the Board of Directors may accept the director’s resignation that will have been tendered as follows. Each director will, as a condition to his or her appointment or election as a director or nomination as a director, agree in writing to comply with the terms of Patterson-UTI’s majority voting policy and provide to the Board of Directors an irrevocable resignation that will be effective upon (i) the failure to receive the required vote at the next annual meeting at which such director faces re-election and (ii) the Board of Directors’ acceptance of such resignation. +Set forth below is the name, age, position and a brief description of the business experience during at least the past five years of each of the nominees to Patterson-UTI’s Board of Directors, as well as specific qualifications, attributes and skills of such member that were identified by the Nominating and Corporate Governance Committee when such member was nominated to serve on the Board of Directors. In July 2020, Noble Corporation plc (“Noble”) and certain of its subsidiaries filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of Texas. Noble successfully completed its subsequent financial restructuring and plan of reorganization and, together with such subsidiaries, emerged from Chapter 11 in February 2021. As is further discussed in her biographical information below, Ms. Robertson served in various management roles during her 40-year career with Noble, including as Chairman of the Board, President and Chief Executive Officer from January 2018 until May 2020 and as Executive Chairman from May 2020 until her retirement in February 2021. We have evaluated Noble’s Chapter 11 filing and do not believe it is material to Ms. Robertson’s service as a director. +4 +Each current member of Patterson-UTI’s Board of Directors is a nominee for election to the Board of Directors. There are no arrangements or understandings between any person and any of the directors pursuant to which such director was selected as a nominee for election at the Meeting. There are no family relationships among any of the directors or executive officers of Patterson-UTI. +Name +Age +Position +Director Since +Curtis W. Huff +65 +Chairman of the Board and Director +2001 +William A. Hendricks, Jr. +58 +President and Chief Executive Officer and Director +2017 +Tiffany (TJ) Thom Cepak +50 +Director +2014 +Michael W. Conlon +76 +Director +2012 +Terry H. Hunt +74 +Director +2003 +Cesar Jaime +64 +Director +2022 +Janeen S. Judah +63 +Director +2018 +Julie J. Robertson +67 +Director +2022 +The following charts and diversity matrix show a snapshot of the average tenure and age, and gender and demographic diversity, of the eight nominees for election to our Board of Directors. +Board Diversity Matrix (As of March 29, 2023) +Total Number of Directors + +Female +Male +Part I: Gender Identity +Directors +3 +5 +Part II: Demographic Background +African American or Black +1 +0 +Hispanic or Latinx +0 +1 +White +3 +4 +Two or More Races or Ethnicities +1 +0 +5 +The table below summarizes some of the skills and experience that the Board believes each director possesses and are relevant to such director’s Board and committee service. This summary is not intended to be an exhaustive list of each of our directors’ skills or contributions, and the lack of a checkmark for a particular item does not necessarily mean that the director does not possess that skill or experience. +Cepak +Conlon +Hendricks +Huff +Hunt +Jaime +Judah +Robertson +SKILLS AND EXPERIENCE +Accounting and Finance +Understanding of finance and public company financial reporting +ü +ü +ü +ü +ü +ü +ü +Corporate Finance/Capital Markets +Corporate finance, capital markets and/or merger and acquisition experience +ü +ü +ü +ü +ü +ü +Corporate Governance +Corporate governance principles and process +ü +ü +ü +ü +ü +ü +ü +Environmental and Safety +Safety and environmental regulations +ü +ü +ü +ü +ü +Global +Management and/or work experience with businesses operating outside of the United States +ü +ü +ü +ü +ü +Human Resource Management +Human resource management and/or work experience +ü +ü +ü +Independent +Satisfies the independence requirements of Nasdaq and the Securities and Exchange Commission +ü +ü +ü +ü +ü +ü +ü +Industry and Operations +Operational and management experience in the oil and gas industry +ü +ü +ü +ü +ü +ü +ü +Leadership +Business and strategic management experience from service in a leadership position, such as a CEO, COO, CFO or other senior leadership position of a significant operating unit +ü +ü +ü +ü +ü +ü +ü +ü +Legal Background +Practiced law and/or has law degree +ü +ü +ü +Prior Board Experience +Service on public company boards +ü +ü +ü +ü +ü +Risk Oversight +Understanding significant risks facing companies +ü +ü +ü +ü +ü +ü +ü +ü +Technology +Developing and investing in new technologies +ü +ü +ü +ü +ü +6 +When considering whether directors and nominees have the experience, qualifications, attributes and skills, taken as a whole, to enable the Board of Directors to satisfy its oversight responsibilities effectively in light of Patterson-UTI’s business and structure, the Nominating and Corporate Governance Committee and the Board of Directors focused primarily on the information discussed in each of the directors’ individual biographies set forth below. +Curtis W. Huff — Mr. Huff has served as Chairman of the Board of Patterson-UTI since June 2020, as a director of Patterson-UTI since May 2001 and served as a director of UTI Energy Corp. ("UTI") from 1997 to May 2001. Mr. Huff is owner and Chairman of Freebird Partners, a private investment firm created in 2002 that is focused on oilfield service companies and technology. Mr. Huff co-founded Intervale Capital, an oilfield service private equity firm, in 2006 and served as a Managing Director from 2006 to 2012, when he sold his interest in the firm. Mr. Huff also serves as Chairman of Impact Fluid Solutions LP, which provides drilling and production solutions for oil and gas operators and fluid companies. Mr. Huff also serves as a director at various of Freebird’s private portfolio companies. Mr. Huff served as the President and Chief Executive Officer of Grant Prideco, Inc., a provider of drill pipe and other drill stem products, from February 2001 to June 2002. From January 2000 to February 2001, Mr. Huff served as Executive Vice President, Chief Financial Officer and General Counsel of Weatherford International, Inc., one of the world’s largest international oilfield services companies. He served as Senior Vice President and General Counsel of Weatherford from May 1998 to January 2000. Mr. Huff began his professional career in 1983 with the law firm of Norton Rose Fulbright US LLP where he specialized in corporate, securities and merger and acquisition matters. Mr. Huff was made a partner in that firm in 1989 where he served until 1998 when he joined Weatherford. Mr. Huff holds a Bachelor of Arts degree and J.D. from the University of New Mexico, where he graduated as a member of the Order of the Coif and cum laude, and a Masters of Law from New York University School of Law. Mr. Huff is the Chairman of the Board of Directors of the University of St. Thomas in Houston, Texas and is actively involved with various charities, including the Houston Food Bank. +The Board of Directors considered Mr. Huff’s background as an executive of publicly traded oilfield services companies and as an owner and manager of a private investment firm focused on the oilfield service industry. The Board noted his knowledge and experience in a broad range of oilfield products and services and his current and historical experience in managing operations in both the United States and internationally. The Board also considered Mr. Huff’s expertise and background with regard to accounting and legal matters, which, among other things, provides guidance to Patterson-UTI in assessing its corporate governance structure, policies and procedures. +William Andrew Hendricks, Jr. —Mr. Hendricks has served as President and Chief Executive Officer of Patterson-UTI since October 2012 and as a director of Patterson-UTI since June 2017. From April 2012 through September 2012, he served as Chief Operating Officer of Patterson-UTI. Prior to Patterson-UTI, Mr. Hendricks worked in a number of positions at Schlumberger for 24 years, where he last served as a drilling division President, having lived and worked around the world in the energy industry, offshore and onshore, and conducting business at times in Spanish and French. As CEO at Patterson-UTI, he has focused on transformation through investments in people and technology, growth through strategic acquisitions, improving diversity in recruiting and leadership and also enhancing the company’s sustainability and ESG position. Mr. Hendricks attended Texas A&M University, receiving a Bachelor of Science degree in Petroleum Engineering, and then began his career working on an offshore drilling rig in the Gulf of Mexico for Ocean Drilling & Exploration Company (currently Diamond Offshore). Mr. Hendricks is current and past Chairman of the International Association of Drilling Contractors, IADC Contractor of the Year in 2021, a member of the Society of Petroleum Engineers, an energy contributor on CNBC and has testified on energy matters with the U.S. Senate Committee on Energy and Natural Resources in Washington D.C. +7 +The Board of Directors considered Mr. Hendricks’ more than 30 years of combined operational and managerial experience in the oil and gas industry. In addition, the Board noted his nearly 11 years of service as Patterson-UTI’s President and Chief Executive Officer and nearly 10 years of service in numerous executive positions with Schlumberger Limited, a global provider of oilfield services, including nearly two years as President of Schlumberger Drilling & Measurements. The Board further considered Mr. Hendricks’ significant experience with evaluating the drivers for macro trends in the oil and gas industry, as well as managing the cyclical nature of the oil and gas service business, which allows Mr. Hendricks to provide valuable input into the development and implementation of Patterson-UTI’s corporate strategy. In addition, the Board noted that Mr. Hendricks’ operational experience brings valuable knowledge to the oversight of achieving safe and efficient operations. The Board also considered Mr. Hendricks’ significant experience working in numerous worldwide locations, which allows him to provide valuable counsel regarding possible expansion into markets outside of the United States and Colombia. +Tiffany (TJ) Thom Cepak — Ms. Cepak has served as a director of Patterson-UTI since August 2014. Ms. Cepak has served as a director of Ranger Oil Corporation, an upstream oil and gas company, since September 2019, as a director of California Resources Corporation, an upstream oil and gas company, since October 2020 (and as chair since April 2021) and as a director of EnLink Midstream, LLC, a midstream company, since December 2021. Ms. Cepak served as the Chief Financial Officer of Energy XXI Gulf Coast, Inc., an upstream oil and gas company, from August 2017 to October 2018. Ms. Cepak served as the Chief Financial Officer of KLR Energy (and, subsequent to its business combination, Rosehill Resources Inc., an upstream oil and gas company) from January 2015 to June 2017. Ms. Cepak served as a director of Yates Petroleum Corporation, a privately owned, independent oil and gas exploration and production company, from October 2015 to October 2016. Ms. Cepak served four years as the Chief Financial Officer of EPL Oil & Gas, Inc., and was further appointed Executive Vice President in January 2014, and she served in those roles until June 2014, when EPL was sold. Ms. Cepak began her career with EPL as a Senior Asset Management Engineer, a position she held until she was appointed Director of Corporate Reserves in September 2001. Ms. Cepak was named EPL’s Director of Investor Relations in April 2006 and Vice President, Treasurer and Investor Relations in July 2008. In July 2009, Ms. Cepak was designated as EPL’s Principal Financial Officer and, in September 2009, she was appointed Senior Vice President. Ms. Cepak has more than 25 years of energy industry experience and prior to joining EPL, she was a Senior Reservoir Engineer with Exxon Production Company and ExxonMobil Company with operational roles including reservoir engineering and subsurface completion engineering for numerous offshore Gulf of Mexico properties. Ms. Cepak holds a B.S. in Engineering from the University of Illinois and a Masters of Business Administration in Management with a concentration in Finance from Tulane University. +The Board of Directors considered Ms. Cepak’s more than 25 years of operational and financial experience in the energy industry. The Board noted her service in various operational roles, including as a reservoir engineer for a major oil and gas exploration and production company. The Board also noted Ms. Cepak’s executive management experience, including as chief financial officer of a publicly traded independent oil and gas exploration and production company, which allows her to provide Patterson-UTI with valuable insight on financial and strategic matters. The Board also considered Ms. Cepak’s diversity of perspective, which is exemplified by her recognition in 2018 as one of Oil and Gas Investor’s 25 Influential Women in Energy. +Michael W. Conlon — Mr. Conlon has served as a director of Patterson-UTI since September 2012. Mr. Conlon retired as a partner of the law firm, Norton Rose Fulbright US LLP, in January 2012 after 40 years with the firm. Mr. Conlon specialized in corporate, securities and merger and acquisition matters. Mr. Conlon was partner-in-charge of the firm’s Houston office from 2007 to 2011, was co-partner-in-charge from 2001 to 2007 and partner-in-charge of its Washington, D.C. office from 1992 to 1998. Mr. Conlon holds a Bachelor of Arts degree in Economics from Catholic University of America, where he graduated magna cum laude and as a member of Phi Beta Kappa, and a Juris Doctorate from the Duke University School of Law, where he graduated as a member of the Order of the Coif. +The Board of Directors considered Mr. Conlon’s more than 40 years of experience handling corporate, securities and mergers and acquisition matters as a lawyer with an international law firm, as well as his service in a number of management roles throughout his tenure at the firm. The Board noted Mr. Conlon’s experience in representing numerous public companies, including Patterson-UTI, and other energy services companies, allows him to provide valuable insight on legal, governance and regulatory issues facing Patterson-UTI. +8 +Terry H. Hunt — Mr. Hunt has served as a director of Patterson-UTI since April 2003 and served as a director of UTI from 1994 to May 2001. Mr. Hunt is an energy consultant and retired senior natural gas and electric utility executive. Mr. Hunt served as Senior Vice President — Strategic Planning of PPL Corporation, an international energy and utility holding company, from 1998 to 2000. Mr. Hunt served as the President and Chief Executive Officer of Penn Fuel Gas, Inc., a Pennsylvania-based natural gas and propane distribution company, from 1992 to 1999. Previously, Mr. Hunt was President of Carnegie Natural Gas and Apollo Gas Company, both Appalachian natural gas distribution companies. He also previously served in senior management positions in natural gas project and venture development, oil and natural gas exploration and development evaluation and operations and major production facilities construction with Texas Oil & Gas Corp. and Atlantic Richfield. Mr. Hunt holds a Bachelor of Engineering degree from the University of Saskatchewan, Canada and a Masters of Business Administration from Southern Methodist University. +The Board of Directors considered Mr. Hunt’s more than 25 years of experience covering most phases of the upstream oil and natural gas industry in the United States and Canada, including the evaluation of exploration and development programs, oil and natural gas production and pipeline operations, and project development and major production facility construction. This experience and background provides Patterson-UTI with an invaluable perspective of the oil and natural gas industry and its customers. In addition, Mr. Hunt’s many years of senior executive experience leading natural gas distribution, storage and marketing companies provides insight into the management of multi-faceted businesses and the markets for natural gas in North America. +Cesar Jaime — Mr. Jaime has served as a director of Patterson-UTI since April 2022. Mr. Jaime previously served on the board of Summum Group Ltd, a provider of well servicing and oil and gas engineering and construction in Colombia, Mexico and Peru, from 2014 to 2022. Mr. Jaime previously served on the board of LAREIF, a renewable energy developer in Colombia, from 2014 to 2019. Mr. Jaime served in various management positions at Schlumberger between 1981 and 2010, including serving as President of Schlumberger’s Latin America business from 2008 to 2010. Mr. Jaime has served on the board of Alliance Schlumberger, a non-profit organization grouping former Schlumberger engineers, since 2019. Mr. Jaime holds a Bachelor of Science degree in electrical engineering from Pontificia Universidad Javeriana in Bogotá, Colombia. +The Board considered Mr. Jaime’s 30 years of experience in international oilfield services in Latin America, Europe and Africa for Schlumberger, including serving as President of Latin American operations. The Board also noted his Colombian background in light of the Company’s recent acquisition of drilling operations in Colombia. The Board also considered the breadth of his experience including in key management roles in operations, sales and human resource management. +9 +Janeen S. Judah — Ms. Judah has served as a director of Patterson-UTI since April 2018. Ms. Judah has served as a director of the general partner of Crestwood Equity Partners LP, a midstream company, since November 2018. Ms. Judah has also served as a director for privately held Aethon Energy III, LLC, an upstream oil and gas investment firm, since June 2019, and as a member of the University Lands Advisory Board since August 2020. Ms. Judah served as a director of Jagged Peak Energy Inc., an upstream oil and gas company, from April 2019 to January 2020, when Jagged Peak was acquired by Parsley Energy. Ms. Judah served as the President of the Society of Petroleum Engineers from September 2016 to October 2017 while on secondment from Chevron, and as a member of the Board of Directors of the Society of Petroleum Engineers from 2003 to 2006 and from 2012 to 2018. Ms. Judah held numerous leadership positions at Chevron, including general manager for Chevron’s Southern Africa business unit from August 2010 to September 2016, president of Chevron Environmental Management Company from August 2007 to August 2010 and general manager of reservoir and production engineering for Chevron Energy Technology Company from June 2004 to August 2007. Before joining Chevron in 1998, she held various upstream petroleum engineering positions for Texaco and Arco, starting in Midland in 1981. Ms. Judah holds Bachelor of Science and Masters of Science degrees in petroleum engineering from Texas A&M University, a Masters of Business Administration from the University of Texas of the Permian Basin and a Juris Doctorate from the University of Houston Law Center. Ms. Judah is a registered professional Engineer in Texas, currently serves on both the Texas A&M and University of Houston College of Engineering Advisory Councils, and has been a member of the Texas A&M Petroleum Engineering Industry Board since 1996. Ms. Judah is also president-elect of Houston Audubon, a conservation land trust and environmental education nonprofit organization. +The Board of Directors considered Ms. Judah’s more than 35 years of operational, managerial and environmental experience in the oil and gas industry. The Board noted her experience derived from oil and gas industry positions held involving significant operational and management responsibilities, including positions with Chevron and upstream petroleum engineering positions. The Board also noted Ms. Judah’s extensive international experience, including most recently as general manager for Chevron’s Southern Africa business unit, which allows her to provide Patterson-UTI with valuable insight on international and strategic matters. The Board also considered Ms. Judah’s service as the President of the Society of Petroleum Engineers from 2017 to 2018, as well as her diversity of perspective, which is exemplified by her recognition in 2018 as one of Oil and Gas Investor’s 25 Influential Women in Energy. +10 +Julie J. Robertson — Ms. Robertson has served as a director of Patterson-UTI since April 2022. Ms. Robertson has served as a director of EOG Resources, Inc., an upstream oil and gas company, since January 2019, as a director of Superior Energy Services, Inc., an oilfield services company, since February 2021 and as a director of Seadrill Limited, an offshore drilling contractor, since November 2021. Ms. Robertson served in the role of Executive Chairman of Noble Corporation plc (“Noble”), an offshore drilling contractor, from May 2020 until her retirement from Noble in February 2021. Previously, Ms. Robertson served as Chairman of the Board, President and Chief Executive Officer of Noble from January 2018 until May 2020. Ms. Robertson previously served in various other management roles for Noble and its subsidiaries, including (i) Executive Vice President from 2006 to January 2018, (ii) Senior Vice President — Administration from 2001 to 2006 and (iii) Vice President — Administration from 1996 to 2001. Ms. Robertson also served continuously as Corporate Secretary of Noble from 1993 until assuming the Chairman’s role in 2018. Ms. Robertson joined a predecessor subsidiary of Noble in 1979. Ms. Robertson holds a Bachelor of Journalism degree from the University of Texas at Austin and successfully completed the Harvard Business School Advanced Management Program in 1998. +The Board considered Ms. Robertson’s more than 40 years of operational, managerial, administrative and human resource experience at a leading global offshore drilling contractor, including as the Executive Chair and as the Chair of the Board, President and Chief Executive Officer. The Board noted Ms. Robertson’s extensive international experience, including working in over 45 countries, her experience in mergers and acquisitions and her experience in global compliance and risk mitigation, executive compensation, governance and sustainability matters and supply chain management. Ms. Robertson also has extensive board of directors experience as a result of currently serving or previously serving on four public company boards. The Board also considered Ms. Robertson's recognition as 2013 Drilling Contractor of the Year by the International Association of Drilling Contractors, and her recognition in 2020 as one of Oil and Gas Investor’s 25 Influential Women in Energy. +11 +Board Leadership Structure and Independent Chairman +The Board evaluates its leadership structure on an ongoing basis. The decision on whether to combine or separate the Chairman and Chief Executive Officer (“CEO”) role is determined on the basis of what the Board considers to be best for Patterson-UTI at any given point in time. Patterson-UTI’s current Board leadership structure separates the role of Chairman and CEO, and our Chairman is an independent director. +The independent directors meet regularly in executive sessions at which only independent directors are present, and the Chairman chairs those sessions. The Chairman serves as a liaison between the independent directors and any employee directors, consults with regard to Board and agenda items, and works with the chairpersons of Board committees as appropriate. The Chairman also participates from time to time in meetings with large shareholders. +The Nominating and Corporate Governance Committee and the Board currently believe that the Board’s leadership structure, which includes the separation of the role of CEO and Chairman, is appropriate because it, among other things, provides for sufficient independence between the Board and management and for an independent director who provides board member leadership. +Board Role in Risk Oversight +The Board has adopted Corporate Governance Guidelines, which can be accessed electronically in the “Governance” section of Patterson-UTI’s website at www.patenergy.com. The Guidelines describe one of the Board’s primary responsibilities as overseeing Patterson-UTI’s processes for assessing and managing risks. The Board delegates to its committees responsibility for overseeing certain types of risk, as reflected in the chart below, and the committees in turn report regularly to the Board on their respective areas of oversight. +Board of Directors +• +The Board oversees assessment of major risks facing the Company and, to the extent the Board deems it appropriate, evaluates options for their mitigation. The risks that the Board routinely oversees, either directly or by delegating to a committee, include those related to safety, operations, financial matters, strategy, technology, competition, legal and regulatory matters, and sustainability matters, including climate change-related matters. +• +The Board and its committees discharge their oversight responsibility, in part, through regular inquiries from the Chairman of the Board and other directors to senior management, regular discussions during Board and committee meetings of general and specific risks to Patterson-UTI, and periodic communications with senior management regarding particular risks and events. +• +The Board oversees risk management by our senior management team, in part, by reviewing and evaluating major financial objectives, critical strategies, and long-term plans, including major allocations of capital, significant proposed business acquisitions and divestitures, safety and operating performance, sustainability performance, and stockholder returns. +Audit Committee +Compensation Committee +Nominating and Corporate Governance Committee +Sustainability Committee +• +Financial statements and internal controls +• +Independent auditors and internal audit function +• +Financial reporting process +• +Legal and ethics compliance programs +• +Sustainability disclosures in SEC reports and financial statements +• +Cybersecurity +• +Compensation policies and related risks +• +Compensation of executive officers, including KPIs +• +Incentive compensation plan administration +• +CD&A and report in proxy statement +• +Corporate governance guidelines and code of business conduct +• +Review of board performance +• +Recommendation of director nominees and committee composition +• +Executive succession planning +• +Assistance with governance-related sustainability issues, including climate-related risks and opportunities +• +Sustainability risks and opportunities, including climate-change related matters +• +Sustainability report and related disclosure issues +• +Sustainability-related strategy, policies and practices +• +Health, safety and environmental protection policies; related risks +• +Human and workplace rights and policies, including diversity and inclusion policies and human capital management +12 +Senior Management +Day-to-day responsibility for: +• +Identifying corporate risks, including climate-related risks and opportunities +• +Assessing the potential level of impact to the business from such risks +• +Implementing appropriate risk management strategies, including integrating consideration of risk and risk management into business decision-making +• +Reviewing the effectiveness of our risk management efforts +Our senior management identifies risks and opportunities through discussions with employees and other stakeholders, including customers, investors, trade associations and industry groups; engagement with environmental, social and governance (ESG) groups; and our own business risk assessments, as well as regular monitoring of legal, regulatory and policy changes with the potential to affect the industry as well as our company specifically. We believe that climate risks are inherently business risks, and our assessment of these climate-related transition and physical risks is integrated into our business risk assessment process. +Our senior management and representatives from our business units regularly communicate with the Board on risk management matters. Senior management conducts regular risk assessments to identify risks that have the potential to significantly affect our business over the short-, medium- and longer term and reviews with the Board risk mitigation and oversight measures, including prioritization of risk management and allocation of responsibility within the Company for the management of a particular risk. +Meetings and Committees of the Board of Directors +The Board of Directors met eight times during the year ended December 31, 2022. Each director attended, in person or by telephone, at least 75% of the aggregate of all meetings held by the Board and meetings of each committee on which such director served. A majority of the members of the Board of Directors are independent within the meaning of the Nasdaq Stock Market, Inc. (“Nasdaq”) listing standards. Specifically, the Board has determined that Messrs. Conlon, Huff, Hunt and Jaime and Mses. Cepak, Judah and Robertson are independent within the meaning of the Nasdaq listing standards. +The Board of Directors has established five standing committees: an Executive Committee, an Audit Committee, a Compensation Committee, a Nominating and Corporate Governance Committee and a Sustainability Committee. +The Executive Committee, which currently is composed of Messrs. Huff and Hendricks and Ms. Cepak, has the authority, to the extent permitted by applicable law, to act for the Board in all matters arising between regular or special meetings of the Board of Directors. The Executive Committee did not meet or take any action in 2022. +The Audit Committee members are Mses. Cepak (chair), Judah and Robertson, and Mr. Huff, each of whom is independent within the meaning of applicable rules under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and within the meaning of the Nasdaq listing standards. The Audit Committee oversees management’s execution of Patterson-UTI’s accounting and financial reporting process, including review of the financial reports and other financial information provided by Patterson-UTI to the public and government and regulatory bodies, Patterson-UTI’s system of internal accounting, Patterson-UTI’s financial controls, and the annual independent audit of Patterson-UTI’s financial statements and internal control over financial reporting. The Audit Committee also oversees compliance with Patterson-UTI’s codes of conduct and ethics and with legal and regulatory requirements. The Board has determined that Ms. Cepak and Mr. Huff are “audit committee financial experts” within the meaning of applicable SEC rules. The Audit Committee selects the independent registered public accounting firm to audit Patterson-UTI’s books and records and considers and acts upon accounting matters as they arise. The Board of Directors has adopted a written charter for the Audit Committee. The Audit Committee held five meetings during the year ended December 31, 2022. Please see “Audit Committee Report” elsewhere in this proxy statement. +The Compensation Committee members are Messrs. Hunt (chair), Huff and Jaime and Ms. Cepak, each of whom is independent as defined in the Nasdaq listing standards. Among other things, the Compensation Committee sets and administers the policies that govern the compensation of executive officers of Patterson-UTI and periodically reviews director compensation and recommends changes, as appropriate, to the Board of Directors for approval. The Board of Directors has adopted a written charter for the Compensation Committee. The Compensation Committee held four meetings during the year ended December 31, 2022. Please see “Compensation Discussion and Analysis” and “Compensation Committee Report” elsewhere in this proxy statement for further information about the Compensation Committee. +13 +The Nominating and Corporate Governance Committee members are Messrs. Conlon (chair) and Hunt and Ms. Robertson, each of whom is independent as defined in the Nasdaq listing standards. The purpose of the Nominating and Corporate Governance Committee is to, among other things, identify individuals qualified to become Board members, to recommend for selection by the Board director nominees for the annual meetings of stockholders, to recommend nominees for Board committees, to review Patterson-UTI’s Code of Business Conduct and Corporate Governance Guidelines, to develop and continually make recommendations with respect to the best corporate governance principles and to oversee the annual review of the Board and management. The Nominating and Corporate Governance Committee assists the Board’s Sustainability Committee in its oversight of governance-related sustainability issues, including climate-related risks and opportunities. The Board of Directors has adopted a written charter for the Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee held two meetings during the year ended December 31, 2022. +The Sustainability Committee members are Ms. Judah (chair) and Messrs. Conlon and Jaime, each of whom is independent as defined in the Nasdaq listing standards. The purpose of the Sustainability Committee is to, among other things, review significant policies and performance and provide guidance on matters relating to sustainability, oversee and monitor the Company’s vision and values relating to sustainability, advise the Board and management on significant public issues related to sustainability matters, assist management in setting strategy, establishing goals and integrating sustainability into strategic and tactical business activities across the Company to create long-term stockholder value, and review and recommend to the Board for approval any sustainability reporting to the public or governmental agencies. The Board of Directors has adopted a written charter for the Sustainability Committee. The Sustainability Committee held four meetings during the year ended December 31, 2022. +Although Patterson-UTI does not have a formal policy regarding attendance by members of the Board at its annual meetings of stockholders, directors are invited to attend annual meetings of Patterson-UTI stockholders. All of the directors attended the 2022 annual meeting of stockholders either in person or by telephone. +Consideration of Director Nominees +On behalf of the Board, the Nominating and Governance Committee considers director nominees recommended by Patterson-UTI’s stockholders if the recommendations are made in accordance with all legal requirements, including applicable provisions of Patterson-UTI’s restated certificate of incorporation and bylaws. A stockholder’s notice to the Secretary of Patterson-UTI shall contain certain information specified in Patterson-UTI’s bylaws regarding the stockholder and the proposed nominee. See “Other Matters—Stockholder Proposals for 2024 Annual Meeting” and Article I, Section 8 and Article I, Section 11 of Patterson-UTI’s bylaws. +The number of directors may be fixed or changed by amendment of Patterson-UTI's bylaws or by resolution of the Board. The Board assesses periodically, in connection with director refreshment and other considerations, whether a larger or smaller number of directors would be preferable. +The Nominating and Corporate Governance Committee determines qualification criteria and procedures for the identification and recruitment of candidates for election to serve as directors of Patterson-UTI. The Nominating and Corporate Governance Committee relies on the knowledge and relationships of Patterson-UTI and its officers and directors, as well as third parties when it deems appropriate, to identify and evaluate nominees for director, including nominees recommended by stockholders. In evaluating a nominee for director, the Nominating and Corporate Governance Committee considers the nominee’s skills, expertise, industry and other knowledge, personal and professional ethics, integrity and values, sound business judgment and willingness to commit sufficient time to the Board and be committed to representing the long-term interests of Patterson-UTI’s stockholders. The Nominating and Corporate Governance Committee also reviews the individual performance and qualifications of each director who wishes to be considered for nomination to the Board. Although the Nominating and Corporate Governance Committee does not have a stand-alone policy with regard to consideration of diversity in identifying director nominees, it is required, in accordance with our Corporate Governance Guidelines, to consider diversity in professional background, experience, expertise (including as to financial matters) and perspective (including as to age, gender and ethnicity) with respect to the Board of Directors composition as a whole when evaluating a director nominee. The Board assesses its effectiveness in this regard as part of the annual board and director evaluation process. +14 +Board and Director Performance Assessments +The Nominating and Corporate Governance Committee annually reviews and evaluates the performance of the Board, each Committee of the Board, and each director in order to improve the effectiveness of the Board and each Committee of the Board. The Committee assesses the contributions of the Board as a whole and each of its Committees and identifies areas in which improvements may be made. The results of the evaluations are reviewed and discussed with the Board and its Committees, and recommendations are made, as appropriate, to the Board and its Committees. +The Nominating and Corporate Governance Committee also annually reviews the individual performance and qualifications of each director who wishes to be considered for nomination for reelection to the Board. +Continuing Education +Continuing education helps our directors strengthen their skills, deepen their understanding of our business and operations and stay current with emerging issues that affect our business, governance and compensation practices. It also helps directors keep abreast of governance developments and requirements and understand the issues we face in the context of our business. To further these goals, our Board’s continuing director education policy requires directors to participate in continuing education programs and reimburses directors for expenses incurred in connection with such education programs. +Succession Planning +The Board of Directors oversees processes and procedures to provide continuity of well-qualified executive leadership and to assess whether such leadership possesses the skill and talent to execute Patterson-UTI’s long-term business strategies. The Board of Directors reviews succession planning for the Chief Executive Officer and the senior executives tailored to reflect the Board’s standards for executive leadership and Patterson-UTI’s business strategy and vision. The succession planning addresses (i) both current and long-term needs of Patterson-UTI and establishes a process for identifying and assessing potential internal candidates; (ii) periodic review and assessment of readiness; (iii) contingency planning for temporary absences of the Chief Executive Officer due to disability or other unexpected event; and (iv) long-term continuity planning for succession to the Chief Executive Officer position. +Political Contributions +Patterson-UTI has a policy prohibiting the contribution of company funds to political parties or organizations or to candidates for any public office or to influence the general public, or segments thereof, with respect to public elections or referenda. Patterson-UTI participates in certain trade organizations with purposes that include enhancement of the public image of our industry, education about the industry and issues that affect the industry and industry best practices and standards. Many of the trade organizations also engage in legislative or political activity related to matters that affect the industry as a whole and not a specific company. Patterson-UTI, as one of many members in various trade associations, does not direct the legislative activities of any trade organization of which it is a member. +ESG and Sustainability +Patterson-UTI strives to be a leader in our industry in the area of environmental, social, governance ("ESG") and other sustainability-related issues, and remains committed to managing these issues for the long-term benefit of our employees, communities and our business. We aim to minimize our environmental impact in the communities in which we work and live, while providing services for our customers in a safe and responsible manner. We invest extensively in the safety, health and well-being of our people, who are our most important asset and our greatest strength. Also, maintaining a rigorous focus on ethics and integrity at every level of our operations is a practice on which all of our success depends. +We encourage you to review our latest sustainability report for more detailed information regarding our sustainability programs and initiatives. A copy of Patterson-UTI’s sustainability report can be accessed electronically in the “Sustainability” section of the Patterson-UTI website at www.patenergy.com and in print to any stockholder who requests it from the Secretary of Patterson-UTI. Nothing on our website, including our sustainability report or sections thereof, shall be deemed incorporated by reference into this proxy statement or other filings that we make with the SEC. Our ESG goals are aspirational and may change. Statements regarding our goals are not guarantees or promises that they will be met. +At Patterson-UTI, we believe that a commitment to diversity and inclusion for all is foundational and extends beyond what is required by various federal, state and local laws. We actively foster an inclusive culture where our employees are supported, valued and respected. We are proud of our workforce, where all employees can contribute to the success of the Company, drawing upon their unique backgrounds, perspectives and life experiences. +15 +We recognize that a diverse workforce is imperative in order to remain competitive and to meet our customers’ expectations. As part of our diversity and inclusion efforts, we recruit candidates from across the United States, with a focus on employing local content in the communities near where we operate. We partner with state and local workforce commissions to ensure potential candidates from a variety of backgrounds and experiences are aware of open positions. We also utilize the services of a leading third-party provider of diversity recruitment to help advertise our positions to various organizations. +Our leaders remain focused and committed to a diverse workplace and culture of inclusion and respect, and they drive accountability for promoting and maintaining that commitment throughout our Company. Additionally, our Vice President of Diversity and ESG partners with other Company leaders to ensure that our businesses are each doing their part to adhere to Company policies, programs and initiatives that promote our diverse workplace and our culture of inclusion and respect. +Patterson-UTI’s Code of Business Conduct and Ethics and Equal Employment Opportunity and Anti-Harassment Policy prohibit discrimination or harassment of any type and afford equal employment opportunities to all employees and applicants, without regard to age, race, sex, color, religion, national origin, disability, marital status, covered veteran status, genetic information, sexual orientation, gender identity or any other characteristic protected under state, federal or local law. Each employee is expected to demonstrate a shared commitment to Patterson-UTI’s values regarding diversity and inclusion, as well as mutual respect for all co-workers, vendors, customers, third parties, and business partners. +Communication with the Board and its Independent Members +Persons may communicate with the Board, or directly with its Chairman, Mr. Huff, by submitting such communication in writing in care of Chairman of the Board of Directors, Patterson-UTI Energy, Inc., 10713 West Sam Houston Parkway North, Suite 800, Houston, Texas 77064. Persons may communicate with the independent members of the Board by submitting such communication in writing to the Nominating and Corporate Governance Committee of the Board of Directors of Patterson-UTI Energy, Inc., 10713 West Sam Houston Parkway North, Suite 800, Houston, Texas 77064. +Corporate Governance Documents Available on Patterson-UTI’s Website +Copies of each of the following documents can be accessed electronically in the “Corporate Governance” section of the Patterson-UTI website at www.patenergy.com and in print to any stockholder who requests them from the Secretary of Patterson-UTI: +• +Audit Committee Charter; +• +Compensation Committee Charter; +• +Nominating and Corporate Governance Committee Charter; +• +Sustainability Committee Charter; +• +Corporate Governance Guidelines; +• +Code of Business Conduct and Ethics for its employees, officers and directors; +• +Code of Business Conduct and Ethics for Senior Financial Executives; and +• +Global Anticorruption Policy. +16 +PROPOSAL NO. 2 +RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM +The Audit Committee appointed PricewaterhouseCoopers LLP as the independent registered public accounting firm to audit the financial statements and internal control over financial reporting of Patterson-UTI for the fiscal year ending December 31, 2023, and directed that such engagement be submitted to the stockholders of Patterson-UTI for ratification. In recommending ratification by the stockholders of such engagement, the Board of Directors is acting upon the recommendation of the Audit Committee, which has satisfied itself as to PricewaterhouseCoopers LLP’s independence, professional competence and standing. Although ratification by stockholders of the engagement of PricewaterhouseCoopers LLP is not required by Delaware corporate law or Patterson-UTI’s restated certificate of incorporation or bylaws, the Audit Committee believes a decision of this nature should be made with the consideration of Patterson-UTI’s stockholders. If the stockholders fail to ratify the appointment, the Audit Committee will reconsider whether to retain PricewaterhouseCoopers LLP and may retain that firm or another without re-submitting the matter to our stockholders. Even if the appointment is ratified, the Audit Committee may, in its discretion, direct the appointment of a different independent registered public accounting firm at any time during the year if it determines that such change would be in the best interests of Patterson-UTI and its stockholders. +It is expected that one or more representatives of PricewaterhouseCoopers LLP will be available to participate in the Meeting and will be given the opportunity to make a statement if they so desire. It also is expected that the representative(s) will be available to respond to appropriate questions from the stockholders. +The Board of Directors recommends a vote “FOR” the ratification of PricewaterhouseCoopers LLP as Patterson-UTI’s independent registered public accounting firm. Ratification of the selection of PricewaterhouseCoopers LLP requires the affirmative vote of the holders of a majority of the shares of Common Stock entitled to vote on, and voted “FOR” or “AGAINST,” the proposal. Unless you give contrary instructions in your proxy, your properly submitted proxy will be voted “FOR” such ratification. Abstentions will not be counted as votes cast “FOR” or “AGAINST” the proposal and will have no effect on the outcome of the proposal. If you do not give instructions to your brokerage firm, bank, broker-dealer, or other similar organization, the brokerage firm, bank, broker-dealer, or other similar organization will be entitled, but not required, to vote your shares in its discretion and may give or authorize the giving of a proxy to vote the shares in its discretion on this proposal. +17 +PROPOSAL NO. 3 +APPROVAL OF AMENDMENT TO +2021 LONG-TERM INCENTIVE PLAN +Background +The Patterson-UTI Energy, Inc. 2021 Long-Term Incentive Plan (the “2021 Plan”) was originally approved by Patterson-UTI's stockholders effective as of June 3, 2021. Participation in the 2021 Plan is broad based, with approximately 280 employees and directors participating in 2022. Subject to the approval of our stockholders, our Board of Directors has approved an amendment to the 2021 Plan to increase the number of shares available for issuance under the plan by 5.445 million shares (the “Plan Amendment”). No other changes are proposed by the Plan Amendment. Approval of the Plan Amendment requires the affirmative vote of the holders of a majority of the shares of Common Stock that are present in person or by proxy and entitled to vote at the Meeting. +If the Plan Amendment is not approved by stockholders, the 2021 Plan will remain in effect with its current share pool and term. As of March 29, 2023, there were 3,554,410 shares of common stock remaining available for grant under the 2021 Plan, assuming a target payout of all performance units (PSUs) then outstanding. If the Plan Amendment is not approved by stockholders, we will not be able to continue our equity-based long term incentive program once this remaining pool is depleted, and we may be required to increase significantly the cash component of our employee compensation program in order to remain competitive and adequately compensate our employees. +Certain material terms of the 2021 Plan are discussed below; however, the description is subject to, and qualified by the full text of the 2021 Plan, attached hereto as Annex A, which includes the Plan Amendment highlighted in bold. Unless otherwise indicated, references to the "2021 Plan" in the following description of the material terms of the 2021 Plan reflect the 2021 Plan as amended by the Plan Amendment. +Best Practices +Independent Oversight . The Compensation Committee, composed solely of non-employee independent directors, approves all grants made to employees under the 2021 Plan; provided, however, that the Compensation Committee may delegate to the Board or any committee of the Board, to one or more executive officers or a committee of executive officers its right to grant awards under the 2021 Plan to employees who are not executive officers or directors of Patterson-UTI pursuant to such conditions or limitations as the Compensation Committee may establish. The Board of Directors approves all grants to directors under the 2021 Plan. +No Repricing of Options or SARs . The 2021 Plan prohibits the repricing and replacement of stock options or stock appreciation rights (“SARs”) at lower exercise prices unless approved by our stockholders. +No Discounted Options or SARs . Stock options and SARs may not be granted with an exercise price below the fair market value of our common stock on the date of grant. +No Dividends on Options or SARs . Dividends and dividend equivalents may not be paid or accrued on stock options or SARs. +Limited Terms for Options and SARs . Stock options and SARs granted under the 2021 Plan are generally limited to 10-year terms. +No “Evergreen” Provision . Shares authorized for issuance under the 2021 Plan will not be replenished automatically. Any additional shares to be issued over and above the current share pool, as increased by the Plan Amendment, will require further stockholder approval. +No Tax Gross-Ups . The Compensation Committee does not provide tax gross-ups in connection with awards under the 2021 Plan. +Annual Limitation on Director Compensation . The total compensation paid to each non-employee director for their service as such, whether in cash or in equity awards under the 2021 Plan (based on the grant date fair value of any such awards) during a single fiscal year may not exceed $750,000; however, the foregoing limit will instead be $1,000,000 for any fiscal year in which the non-employee director is first appointed to the Board or any fiscal year in which the non-employee director serves as chairman or lead director. +No Dividends or Dividend Equivalents Paid on Unvested Awards . Any dividends or dividend equivalents will only be paid if and to the extent the underlying shares vest pursuant to the terms of the award. +18 +Recoupment . All awards granted under the 2021 Plan will be subject to any clawback policy adopted by us. See the description of our current Clawback policy below under “Clawback Policy”. +Minimum Vesting . Subject to a 5% carve-out, all awards are subject to a minimum vesting period of one year from the date of grant, except in the case of substitute awards, awards delivered in lieu of fully-vested cash obligations, certain awards to directors that vest in connection with an annual meeting, and accelerations of awards, such as in connection with a holder's retirement, death or disability or in the event of a change in control. +Key Equity Plan Metrics +Set forth below is information on the awards granted or earned and our burn rate for the years 2020-2022 under our Amended and Restated 2014 Long-Term Incentive Plan, as amended (the "2014 Plan") and the 2021 Plan: +A +B +C +D +E +F +G +Fiscal Year +Stock +Options +Granted +Time-Based +RSUs +Granted +PSUs / Performance-Based RSUs +Granted (1) +Actual PSUs +and +Performance- +Based RSUs +Earned +Total +(2) +Weighted +Average # of +Common Shares +Outstanding +Burn +Rate (3) +2022 +— +1,554,849 +414,000 +979,600 +5,068,898 +219,495,864 +2.31 +% +2021 +— +1,797,875 +843,000 +621,400 +4,838,550 +195,021,450 +2.48 +% +2020 +— +1,691,246 +500,500 +370,773 +4,124,038 +188,013,105 +2.19 +% +Average Three-Year Burn Rate (2020-2022) +2.34 +% +(1) +Reflects target number of PSUs granted in applicable fiscal year. +(2) +Total number of shares in a particular fiscal year includes all time-based awards granted during such fiscal year, and all PSUs and RSUs for which the performance criteria was certified as attained and earned during such fiscal year. In light of the fungible ratio share counting provisions of both the 2014 Plan and the 2021 Plan, RSUs and PSUs are counted as two shares in the Total amount. Accordingly, the number in this “Total” column for a particular fiscal year is derived as follows: (i) column A (zero for each year); plus (ii) column B, times two, plus (iii) column D, times two. +(3) +PSUs granted in the applicable fiscal year and not yet earned are excluded from the calculation of burn rate. +In considering the Plan Amendment, our Board of Directors also considered the dilutive impact of the additional share pool request, and in particular our overhang level. Overhang is equal to the total number of equity awards outstanding plus the total number of shares available for grant under the Company’s equity plans, divided by the sum of the total common shares outstanding, the number of equity awards outstanding and the total number of shares available for grant under the Company’s equity plans. Our overhang as of December 31, 2022 was 5.2%. If the Plan Amendment is approved, our overhang would have increased to 7.5%. +Description of the 2021 Plan +The primary objective of the 2021 Plan is to assist Patterson-UTI and its subsidiaries in attracting and retaining selected individuals to serve as directors, employees, consultants and advisors of Patterson-UTI who are expected to contribute to its success and achieve long-term objectives which will inure to the benefit of its stockholders through the additional incentives inherent in awards under the 2021 Plan. The 2021 Plan provides for the granting of incentive and non-qualified stock options, tandem and freestanding stock appreciation rights, restricted stock awards, other stock unit awards, performance shares, performance units and dividend equivalents. Certain awards under the 2021 Plan may be paid in cash or Common Stock, as determined by the Compensation Committee. The Compensation Committee has exclusive authority to select the participants to whom awards may be granted, and to determine the type, size and terms of each award, subject to the limitations set forth in the 2021 Plan. The Compensation Committee will also make all determinations that it decides are necessary or desirable in the interpretation and administration of the 2021 Plan. In addition, the Compensation Committee may, if consistent with applicable rules, regulations and Nasdaq requirements, delegate to a committee of one or more directors or to one or more executive officers the right to grant, cancel and suspend awards to employees who are not directors or executive officers of Patterson-UTI. +19 +As of March 29, 2023, the equity awards outstanding under Patterson-UTI’s 2005 Long-Term Incentive Plan, as amended (the “2005 Plan”), the 2014 Plan, and the 2021 Plan, were as follows (1): +Options outstanding (2) +2,905,150 +Full-value awards outstanding (3) (4) +5,186,277 +Weighted-average exercise price of outstanding options +$ +22.19 +Weighted-average remaining contractual term of outstanding options +1.95 years +Shares available for grant under the 2021 Plan (4) (5) +3,554,410 +Shares of Common Stock Outstanding +208,438,771 +(1) +This table excludes the 5.445 million shares requested under the Plan Amendment. +(2) +Includes 672,500 options outstanding under the 2005 Plan and 2,232,650 options outstanding under the 2014 Plan. +(3) +Includes 855,336 RSUs and 500,500 PSUs (at target) under the 2014 Plan and 2,594,825 RSUs and 1,257,000 PSUs (at target) under the 2021 Plan. No full-value awards are outstanding under the 2005 Plan. +(4) +Under the fungible counting provisions of the 2014 Plan and the 2021 Plan, full-value awards count as two shares. +(5) +No shares remain available for grant under the 2005 Plan or the 2014 Plan. +General Terms +• +Subject to adjustment in the event of certain corporate transactions, the aggregate number of shares of Common Stock authorized for grant under the 2021 Plan (after giving effect to the Amendment) is 18,912,480 shares, which includes the 13,467,480 shares previously authorized under the 2021 Plan. Shares that are subject to options or SARs count as one share of Common Stock against this aggregate limit. Shares that are subject to awards other than options and SARS count as two shares of Common Stock against this aggregate limit. The closing price of a share of Common Stock on March 29, 2023 was $11.78. +• +In addition to the above, if an award granted under the 2021 Plan, the 2014 Plan or the 2005 Plan expires, is forfeited, is settled in cash or otherwise terminates without the issuance of all or a portion of the shares of Common Stock subject to the award, the shares allocable to the expired, forfeited, cash settled, or terminated portion of the award will be available for awards again under the 2021 Plan. Any shares of Common Stock that again become available for grant under the 2021 Plan will be added back as one share if the shares were subject to options or SARs, and as two shares if the shares were subject to awards other than options or SARs. +• +If any shares subject to an award are used to exercise options, are not issued upon the settlement of a SAR, are withheld by Patterson-UTI for income or employment taxes on exercise of an option or SAR, or are re-purchased on the open market with the exercise price for an option, such shares will not become available for grant under the 2021 Plan. +• +With respect to awards to participants other than directors, the 2021 Plan is administered by the Compensation Committee of Patterson-UTI’s Board of Directors, which comprises exclusively non-employee independent directors. With respect to awards to directors, the 2021 Plan is administered by the Board of Directors. +• +Directors, employees, including officers, consultants and advisors are eligible for awards under the 2021 Plan. As of March 29, 2023, approximately 6,300 employees, seven directors and an indeterminate number of consultants and advisors would be eligible for awards under the 2021 Plan, although Patterson-UTI has not historically granted awards under its long-term incentive plans to consultants or advisors. +• +The Board of Directors, at any time, may amend the terms of the 2021 Plan, subject to the stockholder approval requirements of the Nasdaq Stock Market and other rules and regulations applicable to Patterson-UTI. Generally, the 2021 Plan also may not be amended without stockholder approval to permit the repricing of options or SARs or to extend the generally applicable maximum 10-year term applicable to options and SARs. +• +Except in connection with certain corporate transactions involving Patterson-UTI, the terms of outstanding options or SARs may not be amended to reduce the applicable exercise price and outstanding options and SARs may not be cancelled in exchange for cash, other awards or options or SARs with an exercise price that is less than the exercise price of the original options or SARs, in each case without stockholder approval. +20 +• +Subject to the exceptions in this bullet, awards may not be sold, assigned, transferred, pledged or otherwise encumbered, other than by will or the laws of descent and distribution or pursuant to a domestic relations order, as determined by the Compensation Committee, and awards may be exercised during the life of the participant only by the participant or the participant’s guardian or legal representative. Notwithstanding the foregoing, a participant may assign or transfer an award other than an incentive stock option with the consent of the Compensation Committee (i) for charitable donations; (ii) to the participant’s spouse, children or grandchildren (including any adopted and stepchildren and grandchildren), or (iii) to a trust for the benefit of one or more of the participants or the persons referred to in clause (ii); provided that certain administrative conditions are met. For the avoidance of doubt, awards (other than fully vested and unrestricted shares of Common Stock) may not be transferred to a third party for monetary value. +• +Except with respect to 5% of the shares authorized for grant under the 2021 Plan, no award may vest prior to the first anniversary of the grant date other than in the case of substitute awards, awards delivered in lieu of fully-vested cash obligations, certain awards to directors that vest in connection with an annual meeting, and accelerations of awards such as in connection with a holder’s retirement, death or disability or in the event of a change in control. +• +No awards may be granted under the 2021 Plan after April 9, 2031, the tenth anniversary of the original effective date of the 2021 Plan. +Options +• +The vesting schedule for options is set by the Compensation Committee, subject to the minimum vesting requirements of the 2021 Plan. +• +The term of options is set by the Compensation Committee, but may be no longer than 10 years other than as a result of any extension of the term in compliance with applicable law as provided in an award agreement. +• +The exercise price for options may be paid in cash, with previously acquired shares of Common Stock, or by other means approved by the Compensation Committee. +• +All options granted under the 2021 Plan (other than substitute awards) are granted with an exercise price equal to or greater than the fair market value of the Common Stock at the time the option is granted. +SARs +• +SARs may be granted alone or in connection with the grant of any option. A SAR entitles a participant to surrender any then exercisable portion of the SAR and, if applicable, the related option, in exchange for an amount equal to the product of (i) the excess of the fair market value of a share of Common Stock on the date of surrender over the fair market value of a share of Common Stock on the date that the SAR was granted, or, if the SAR is related to an option, the per share exercise price of the option, multiplied by (ii) the number of shares of Common Stock subject to the SAR and being surrendered. +• +SARs granted alone may be exercised at such times and be subject to such terms and conditions as the Compensation Committee may impose. SARs that are granted in tandem with options may be exercised only on the surrender of the right to purchase an equivalent number of shares under the related options and may be exercised only with respect to the shares of Common Stock for which the related options are then exercisable. +• +The vesting schedule for SARs is set by the Compensation Committee, subject to the minimum vesting requirements of the 2021 Plan. +• +The term of SARs under the 2021 Plan may be no longer than 10 years other than as a result of any extension of the term in compliance with applicable law as provided in an award agreement. +• +Payment on exercise of a SAR shall be, in the discretion of the Compensation Committee, shares of Common Stock, cash, or a combination of shares of Common Stock and cash. +• +All SARs granted under the 2021 Plan (other than substitute awards) are granted with an exercise price equal to or greater than the fair market value of the Common Stock at the time the SAR is granted. +21 +Restricted Stock Awards +• +The Compensation Committee determines the material terms of restricted stock awards, including the price, if any, to be paid by the recipient, and, subject to the minimum vesting requirements of the 2021 Plan, the vesting schedule and conditions, which may include the attainment of specified performance objectives. +• +Beginning on the date of grant, a participant receiving a restricted stock award will become a stockholder of Patterson-UTI with respect to all shares of Common Stock subject to the restricted stock award, which, unless the Committee determines otherwise at the time of the grant, includes the right to vote the shares and receive dividends in respect of the shares; provided, however, that any dividends with respect to any restricted stock award as to which the restrictions have not yet lapsed shall be subject to the same restrictions as such restricted stock award. +Other Stock Unit Awards +• +The Compensation Committee may grant other stock unit awards under the 2021 Plan, which have a value equal to an identical number of shares of Common Stock. Other stock unit awards may also be a form of payment for other awards granted under the 2021 Plan and other earned cash-based incentive compensation. +• +The payment of other stock units may be in cash, shares of Common Stock, other property, or any combination of the foregoing, and may be made in a lump sum or, in accordance with procedures established by the Compensation Committee, on a deferred basis subject to the requirements of section 409A of the Internal Revenue Code (the "Code"). +• +The vesting schedule for other stock unit awards is set by the Compensation Committee, subject to the minimum vesting requirements of the 2021 Plan. +Dividend Equivalent Rights +• +The Compensation Committee may grant dividend equivalent rights either in connection with awards or as separate awards under the 2021 Plan. +• +Amounts payable in respect of dividend equivalent rights will not be paid until the vesting, payment, settlement or other lapse of restrictions of the award to which the dividend equivalent rights relate, including with respect to any performance conditions applicable to the underlying award. +• +No award of options or SARs will have dividend equivalent rights. +Performance Awards +• +Performance awards are payable in cash, shares of Common Stock, other property, or a combination of the foregoing, and may be paid in a lump sum, in installments, or on a deferred basis in accordance with procedures established by the Compensation Committee. +• +The Compensation Committee determines the material terms of the performance awards, including a performance period over which the performance goal of such award shall be measured. Performance awards are subject to the one year minimum vesting requirements of the 2021 Plan. +Deferrals +• +The Compensation Committee may require or permit a participant to defer the receipt of cash or shares pursuant to any awards under the 2021 Plan. Any deferral permitted under the 2021 Plan will be administered in a manner that is intended to comply with section 409A of the Code. +Effect of Certain Transactions and Change of Control +The Compensation Committee, in its discretion, may determine that, unless otherwise specifically set forth in an award agreement or other agreement applicable to any award, upon a change of control (as defined in the 2021 Plan): +• +awards outstanding as of the date of the change of control immediately vest and become free of all restrictions and limitations and, to the extent applicable, become fully exercisable and/or immediately settled or distributed; +• +each option and SAR shall terminate within a specified period of days after notice to the participant; +22 +• +each participant shall receive, with respect to each share subject to an award, an amount equal to the excess of the fair market value of such share immediately prior to the occurrence of the change of control over the exercise price per share, if applicable, of such award, with such payment being made in one or more kinds of stock or property or a combination of stock or property; +• +each option and SAR outstanding on the date of the change of control may be cancelled and terminated without payment if the fair market value of a share of Common Stock on the date of the change of control is less than the per share exercise price of the option or SAR; or +• +such other additional adjustments or benefits as the Compensation Committee deems appropriate shall apply. +Further, in the event of changes in the capital or corporate structure of Patterson-UTI due to events such as recapitalization, stock split, merger, spin-off, joint venture, subsidiary or division sale or similar transaction, that affect the shares of Common Stock, the Compensation Committee, in its sole discretion, may determine that it is equitable or appropriate to make adjustments or substitutions to the 2021 Plan or outstanding options and awards, including to the number, class, kind and option or exercise price or securities subject to awards and to the terms and conditions of awards (including any applicable performance targets or criteria with respect thereto). +Federal Income Tax Consequences +The following discussion summarizes certain U.S. federal income tax consequences of the grant and receipt of awards pursuant to the 2021 Plan under the law as in effect on the date of this proxy statement. The rules governing the tax treatment of such awards are quite technical, so the following discussion of tax consequences is necessarily general in nature and is not complete. In addition, statutory provisions are subject to change, as are their interpretations, and their application may vary in individual circumstances. This summary does not purport to cover all federal employment tax, estate tax, or other federal tax consequences associated with the 2021 Plan, nor does it address state, local, or non-U.S. tax consequences. +ISOs . In general, a participant will not recognize income upon the grant or exercise of an ISO. However, upon the exercise of an ISO, the excess of the fair market value of the shares of Common Stock received upon the exercise of the ISO over the exercise price will increase the employee’s alternative minimum taxable income, which may cause the employee to incur the alternative minimum tax. Subject to certain exceptions for death or disability, if a participant exercises an ISO more than three months after termination of employment, the exercise of the option will be taxed as the exercise of a NQSO, as described below. +The general rule is that gain or loss from the sale or exchange of shares acquired on the exercise of an ISO will be treated as capital gain or loss. However, if shares acquired upon the exercise of an ISO are disposed of within two years from the date of grant or within one year after exercise (a “disqualifying disposition”), the participant generally will recognize ordinary income in the year of disposition in an amount equal to the fair market value of the shares at the time of exercise (or, if less, the amount realized on the disposition of the shares) less the exercise price. Any further gain (or loss) realized by the participant generally will be taxed as short- or long-term capital gain (or loss) depending on the holding period. +NQSOs, SARs, Performance Award, and Other Stock Unit Award . A participant generally is not required to recognize income on the grant of a NQSO, a SAR, performance award or other stock unit award. Instead, ordinary income generally is required to be recognized on the date the NQSO or SAR is exercised, or in the case of performance awards or other stock unit awards, upon the issuance of shares and/or the payment of cash pursuant to the terms of the award. In general, the amount of ordinary income required to be recognized is, (a) in the case of a NQSO or a SAR, an amount equal to the excess, if any, of the fair market value of the shares on the exercise date over the exercise price, and (b) in the case of performance awards or other stock unit awards, the amount of cash and/or the fair market value of any shares received in respect thereof, plus the amount of taxes withheld from such amounts. +Restricted Common Stock . Unless a participant who receives an award of restricted Common Stock makes an election under section 83(b) of the Code as described below, the participant generally is not required to recognize ordinary income on the grant of restricted Common Stock. Instead, on the date the shares vest (i.e., become transferable and no longer subject to forfeiture), the participant will be required to recognize ordinary income in an amount equal to the excess, if any, of the fair market value of the shares on such date over the amount, if any, paid for such shares. If a section 83(b) election has not been made, any dividends received with respect to restricted Common Stock that are subject at that time to a risk of forfeiture or restrictions on transfer generally will be treated as compensation that is taxable as ordinary income to the recipient. If a participant makes a section 83(b) election within 30 days following the date of transfer of the restricted Common Stock, the participant will recognize ordinary income on the date the shares are granted in an amount equal to the excess, if any, of the fair market value of the shares on the date of award over the amount, if any, paid for such shares. In such case, the participant will not be required to recognize additional ordinary income when the shares vest. However, if the shares are later forfeited, a loss can only be recognized up to the amount the participant paid, if any, for the shares. +23 +Gain or Loss on Sale or Exchange of Shares . In general, gain or loss from the sale or exchange of shares granted or awarded under the 2021 Plan will be treated as capital gain or loss, provided that the shares are held as capital assets at the time of the sale or exchange. However, if certain holding period requirements are not satisfied at the time of a sale or exchange of shares acquired upon exercise of an ISO (a “disqualifying disposition,” see above), a participant generally will be required to recognize ordinary income upon such disposition. +Deductibility by Patterson-UTI . To the extent that a participant recognizes ordinary income in the circumstances described above, Patterson-UTI or the subsidiary for which the participant performs services will be entitled to a corresponding deduction, provided that, among other things, the income meets the test of reasonableness, is an ordinary and necessary business expense, is not an “excess parachute payment” within the meaning of section 280G of the Code (see Parachute Payments below) and is not disallowed by the $1,000,000 limitation on certain executive compensation under section 162(m) of the Code. In general, under section 162(m) of the Code, remuneration paid by a public corporation to certain “covered employees” (which includes any individual who serves as chief executive officer, chief financial officer or one of the other three most highly compensated executive officers for 2017 or any subsequent calendar year) is not deductible to the extent it exceeds $1 million for any year. It is expected that compensation deductions for any covered employee with respect to awards under the 2021 Plan will be subject to a $1 million annual deduction limitation. The Compensation Committee may grant awards under the 2021 Plan or otherwise that are or may become non-deductible when it believes doing so is in the best interests of the Company and its stockholders. +Parachute Payments . The acceleration of the exercisability or the vesting of an award upon the occurrence of a change in control may result in an “excess parachute payment” within the meaning of section 280G of the Code. A “parachute payment” occurs when an employee receives payments contingent upon a change in control that exceed an amount equal to three times his or her “base amount.” The term “base amount” generally means the average annual compensation paid to such employee during the five calendar years preceding the calendar year in which the change in control occurs. An “excess parachute payment” is the excess of all parachute payments made to the employee on account of a change in control over the employee’s base amount. If any amount received by an employee is characterized as an excess parachute payment, the employee is subject to a 20% excise tax on the amount of the excess, and Patterson-UTI is denied a tax deduction with respect to such excess. +Withholding . Awards under the 2021 Plan may be subject to tax withholding. Where an award results in income subject to withholding, Patterson-UTI may require the participant to remit the withholding amount to Patterson-UTI or cause shares of Common Stock to be withheld or sold in order to satisfy the tax withholding obligations. +Section 409A . Section 409A of the Code generally provides that any deferred compensation arrangement must satisfy specific requirements, both in operation and in form, regarding (i) the timing of payment, (ii) the election of deferrals and (iii) restrictions on the acceleration of payment. Failure to comply with section 409A may result in the early taxation (plus interest) to the participant of deferred compensation and the imposition of a 20% tax on the participant of the deferred amounts included in the participant’s income. Patterson-UTI intends to structure awards under the 2021 Plan in a manner that is designed to be exempt from or comply with section 409A, but does not guarantee such treatment. +Existing Plan Benefits +Any future awards granted to employees, consultants, advisors and non-employee directors under the 2021 Plan are subject to the discretion of the Compensation Committee or the Board, as applicable, and therefore, are not determinable at this time. The "Grants of Plan-Based Awards" table below sets forth information with respect to prior awards granted to our named executive officers under the 2021 Plan during 2022. As of March 29, 2023, no stock options or SARs have been granted under the 2021 Plan and no awards have been granted that are contingent on the approval of the 2021 Plan. +In addition, our non-employee directors are expected to receive annual grants on January 1 of each year consistent with the equity grants described below under “Director Compensation”. Because future awards are at the discretion of the Compensation Committee and the Board, the number of shares subject to future awards could increase or decrease and the type and terms of future awards could change as well, all without the need for future stockholder approval. If the Plan Amendment is approved, Patterson-UTI intends to thereafter register the additional shares authorized for grant under the 2021 Plan, as amended, on a Registration Statement on Form S-8 filed with the Securities and Exchange Commission. +The Board of Directors recommends a vote “FOR” the approval of the Plan Amendment. Approval of the proposal requires the affirmative vote of the holders of a majority of the shares of Common Stock present in person or by proxy and entitled to vote on the proposal. Unless you give contrary instructions in your proxy, your properly submitted proxy will be voted “FOR” approval of the proposal. Abstentions will be counted as shares entitled to vote on the proposal and will have the same effect as a vote “AGAINST” the proposal. A broker non-vote will be counted for purposes of establishing a quorum, but will not be treated as a share entitled to vote on the proposal and will have no effect on the outcome of the proposal. Brokerage firms, banks, broker-dealers, and other similar organizations do not have authority to vote on this proposal without instructions from the beneficial owner. +24 +PROPOSAL NO. 4 +ADVISORY APPROVAL OF EXECUTIVE COMPENSATION +In accordance with Section 14A of the Exchange Act, the Board of Directors is asking stockholders to approve a non-binding, advisory resolution on the compensation of Patterson-UTI’s executive officers who are named in the Summary Compensation Table appearing in this proxy statement (the “Named Executive Officers”). The compensation of the Named Executive Officers is described in the “Compensation Discussion and Analysis” and “Executive Compensation” sections of this proxy statement. +For a discussion of our stockholder engagement and board responsiveness to stockholders, please see “Compensation Discussion and Analysis— Aligning Compensation Programs with Stockholder Interests.” +The compensation program for the Named Executive Officers is designed to attract and retain highly qualified individuals and to motivate and reward them for performance that benefits Patterson-UTI and its stockholders. The Compensation Committee and the Board of Directors believe that the policies and procedures detailed in the “Compensation Discussion and Analysis” achieve these goals by, among other things: +• +providing a mix of short-term compensation in the form of base salary and annual cash incentive bonuses and long-term compensation in the form of restricted stock units, performance units, and, in some years, restricted stock, stock options and phantom units, which strikes a balance between offering competitive compensation packages and aligning compensation with long-term growth and creating value for stockholders; +• +emphasizing variable equity and cash compensation to link realized compensation to performance; +• +reviewing annual base salaries, in part, based on Patterson-UTI’s financial results and position and performance compared to similarly situated companies; +• +providing performance-based annual cash incentive bonuses designed to place a meaningful portion of total compensation at risk; +• +awarding long-term equity incentives whose value is tied to the achievement of certain performance goals and/or an increase in the price of the Common Stock; +• +awarding long-term equity incentives that generally vest over periods of three years; and +• +maintaining stock ownership requirements. +The Board of Directors is asking stockholders to approve the following non-binding, advisory resolution at the Meeting: +“RESOLVED, that the stockholders of Patterson-UTI Energy, Inc. (the “Company”) approve, on an advisory basis, the compensation of the Company’s Named Executive Officers, as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the compensation tables and other narrative discussion in the Proxy Statement for the 2023 Annual Meeting of Stockholders of the Company.” +This advisory resolution, commonly referred to as a “say-on-pay” resolution, is non-binding on the Board of Directors. Although non-binding, the Board of Directors and the Compensation Committee value the views of Patterson-UTI’s stockholders and will review and consider the voting results when (i) evaluating the effectiveness of Patterson-UTI’s compensation policies and practices and (ii) making future compensation decisions for the Named Executive Officers. Patterson-UTI currently holds an annual “say-on-pay” vote and thus, unless the Company changes its policy, including after considering the results of Proposal 5 below, the next such vote after the 2023 annual meeting will be held at the 2024 annual meeting of stockholders. +The Board of Directors recommends a vote “FOR” the approval of the advisory resolution on executive compensation . Approval of the advisory resolution requires the affirmative vote of the holders of a majority of the shares of Common Stock entitled to vote on, and voted “FOR” or “AGAINST,” the proposal. Unless you give contrary instructions in your proxy, your properly submitted proxy will be voted “FOR” approval of the proposal. Abstentions will not be counted as votes cast “FOR” or “AGAINST” the proposal and will have no effect on the outcome of the proposal. A broker non-vote will be counted for purposes of establishing a quorum, but will not be treated as a vote cast “FOR” or “AGAINST” the proposal and will have no effect on the outcome of the proposal. Brokerage firms, banks, broker-dealers, and other similar organizations do not have authority to vote on this proposal without instructions from the beneficial owner. +25 +PROPOSAL NO. 5 +ADVISORY VOTE ON FREQUENCY OF +FUTURE ADVISORY VOTES TO APPROVE EXECUTIVE COMPENSATION +In accordance with Section 14A of the Exchange Act, the Board of Directors is asking stockholders to vote, on an advisory basis, on whether future advisory votes to approve the compensation of the Named Executive Officers (“Say-on-Pay Vote”) should occur every year, every two years or every three years. Stockholders may also abstain from casting a vote on this proposal. +At our annual meeting in 2017, our stockholders overwhelmingly approved our Board of Directors’ recommendation that the Say-on-Pay Vote be held every year. We are required to provide our stockholders the opportunity at least once every six years to cast another advisory vote on the frequency of the Say-on-Pay Vote. +After careful review and consideration, the Board of Directors, on the recommendation of the Compensation Committee, has determined that an advisory vote on the compensation of the Named Executive Officers should continue to take place every year. In making its determination, the Board considered that an annual advisory vote on executive compensation will allow Patterson-UTI’s stockholders to provide their direct and timely feedback on Patterson-UTI’s compensation objectives, policies and practices. +This advisory vote on the frequency of future advisory votes to approve the compensation of the Named Executive Officers is non-binding on the Board. However, the Board of Directors and the Compensation Committee value the views of Patterson-UTI’s stockholders and will take into account the outcome of the voting when determining the frequency of such a vote. Stockholders will be able to specify one of four choices for this proposal on the proxy card: one year, two years, three years or abstain. Stockholders are not being asked to approve or disapprove the Board’s recommendation, but instead to indicate their choice among the frequency options (or to abstain). +The Board of Directors recommends a vote, on an advisory basis, for an annual (every one year) frequency of future advisory votes to approve executive compensation . Approval of the frequency of future advisory votes on executive compensation will be decided by the affirmative vote of a plurality of shares of the Common Stock present in person or by proxy, and entitled to vote at the Meeting. A “plurality” means that the frequency option that receives the greatest number of votes cast will be considered the preference of Patterson-UTI’s stockholders. Unless you give contrary instructions in your proxy, your properly submitted proxy will be voted “ONE YEAR” to approve, on an advisory basis, a stockholder advisory vote every year on executive compensation. Abstentions and broker non-votes will have no effect on the outcome of this vote. Brokerage firms, banks, broker-dealers, and other similar organizations do not have authority to vote on this proposal without instructions from the beneficial owner. +26 +EXECUTIVE OFFICERS +Set forth below is the name, age and position followed by a brief description of the business experience during at least the past five years for each executive officer of Patterson-UTI who is not also a nominee for election to the Board of Directors. +Name +Age +Position +C. Andrew Smith +52 +Executive Vice President and Chief Financial Officer +Kenneth N. Berns +63 +Executive Vice President and Chief Commercial Officer +James M. Holcomb +60 +Chief Operating Officer +Seth D. Wexler +51 +Senior Vice President, General Counsel and Secretary +C. Andrew Smith — Mr. Smith has served as Executive Vice President and Chief Financial Officer of Patterson-UTI since September 2017. From April 2014 until September 2017, Mr. Smith served as Executive Vice President and Chief Financial Officer of Kirby Corporation, a marine transportation and diesel engine services company. From January 2014 to April 2014, Mr. Smith served as Executive Vice President – Finance of Kirby Corporation. Prior to joining Kirby Corporation, Mr. Smith served as Senior Vice President and Chief Financial Officer of Benthic Geotech and was previously Chief Financial Officer for both Global Industries, LTD and NATCO Group. Mr. Smith holds a degree in business administration from the University of Houston. +Kenneth N. Berns — Mr. Berns has served as Executive Vice President and Chief Commercial Officer of Patterson-UTI since May 2017. Mr. Berns served as a director of Patterson-UTI from May 2001 to June 2017 and as Senior Vice President of Patterson-UTI from April 2003 to May 2017. Mr. Berns served as a director of UTI from 1995 to May 2001. Mr. Berns has been an executive with REMY Investors since 1994. Mr. Berns holds a Bachelor’s Degree in Business Administration from San Diego State University and a Master’s Degree in Taxation from Golden Gate University. +James M. Holcomb — Mr. Holcomb has served as Chief Operating Officer of Patterson-UTI since January 2023. Mr. Holcomb joined Patterson-UTI in February 1998 with the acquisition of Robertson Onshore Drilling Company, and since that time has served in numerous operational management roles, including as President of Patterson-UTI Drilling Company LLC, a wholly owned subsidiary of Patterson-UTI, from January 2012 to December 2022, and as Senior Vice President of Operations of Patterson-UTI Drilling Company LLC from April 2006 to January 2012. Mr. Holcomb has over 35 years of experience in contract drilling operations. Mr. Holcomb holds a Bachelor of Science Degree in Business Management from LeTourneau University. +Seth D. Wexler — Mr. Wexler has served as Senior Vice President, General Counsel and Secretary of Patterson-UTI since February 2017. Mr. Wexler served as General Counsel and Secretary of Patterson-UTI from August 2009 to February 2017. From March 1998 to August 2009, he specialized in securities law and mergers and acquisitions for the law firm of Norton Rose Fulbright US LLP, including as a partner of such law firm since January 2007. Mr. Wexler holds a Bachelor of Business Administration in Finance from the University of Texas at Austin, a Juris Doctorate from the University of Houston Law Center and a Masters of Business Administration from the University of Houston. +27 +COMPENSATION DISCUSSION AND ANALYSIS +The following Compensation Discussion and Analysis (“CD&A”) sets forth the principal compensation policies and programs of Patterson-UTI for 2022 for our Named Executive Officers (“NEOs”). +Named Executive Officer +Title +William Andrew Hendricks, Jr. +Chief Executive Officer and President +C. Andrew Smith +Executive Vice President and Chief Financial Officer +Kenneth N. Berns +Executive Vice President and Chief Commercial Officer +James M. Holcomb +Chief Operating Officer (1) +Seth D. Wexler +Senior Vice President, General Counsel and Secretary +(1) +Mr. Holcomb served as President of Patterson-UTI Drilling Company LLC during 2022 and was appointed Patterson-UTI’s Chief Operating Officer on January 1, 2023. +Aligning Compensation Programs with Stockholder Interests +Strong Stockholder Support for Say-on-Pay +Year of Annual Meeting +Stockholder Support for Say-on-Pay Proposal +2022 +97% +2021 +98% +2020 +96% +2019 +96% +We received at least 96% stockholder support for our Say-on-Pay proposal at each of our last four Annual General Meetings of Stockholders. The Compensation Committee strongly values the opinions of our stockholders as expressed in the Say-on-Pay vote and believes that our recent support levels demonstrate a strong alignment of our compensation program with our stockholders’ interests. +We regularly meet with stockholders to solicit feedback on areas of concern. With the strong stockholder support for our Say-on-Pay proposals at our recent Annual General Meetings of Stockholders, no specific changes were made to our compensation programs as a result of the 2022 Say-on-Pay vote or meetings with stockholders; however, the Compensation Committee will continue to consider the results of our future Say-on-Pay votes and feedback of our stockholders when making future compensation decisions for our NEOs. +28 +Top Tier Total Stockholder Return +Our continued focus on generating Operating Cash Flow, driving profitability, and improving our business during 2022 contributed to outperformance by our Company. Our stockholders benefitted from our actions, as our total stockholder return (“TSR”) performance was +102% for the one-year period ended December 31, 2022 and was +68% for the three-year period ended December 31, 2022. On a relative basis, this positioned us at the 84th percentile of our 2022 peer group for the one-year period ended December 31, 2022 and at the 77th percentile of our 2022 peer group for the three-year period ended December 31, 2022. +(1) +The peer group reflected in this chart is the 2022 Peer Group described below in “Process for Determination of Executive Compensation." +Good Governance and Compensation Practices Aligned with Stockholders +We are mindful of the positive impact that strong corporate governance has on maintaining an executive compensation program that is aligned with the interests of our stockholders. In designing the current executive compensation program, we sought to incorporate best practices for compensation governance, including those summarized below. +What We Do +What We Don’t Do + 50% or more of total target compensation in the form of long-term incentives + More than 50% of long-term incentives (by target value) are performance-based + Variable compensation based upon absolute performance and performance versus peers and a broader market index + Claw-back provisions that apply to our all of our executive officers + Share ownership requirements for our executive officers and directors + Anti-pledging policy for our executive officers and directors + Anti-hedging policy for our executive officers and directors + Engage independent compensation consultant + Hold an annual Say-on-Pay vote and solicit more robust feedback from stockholders +☒ No re-pricing of options +☒ No single trigger change-of-control severance arrangements +☒ No dividends or dividend equivalents paid unless and until underlying award vests +☒ No new agreements with tax gross-ups and none entered into in more than 15 years +☒ No material perquisites to NEOs that are not widely available to our other employees +☒ No new single trigger change-of-control equity-based grants for our executive officers +29 +What Guides Our Program +Our overriding philosophy for the compensation of our key executives is to link their compensation with Patterson-UTI’s operational and market performance and to establish incentives that reward them for their achievement of both short-term tactical and long-term strategic objectives. In doing so, we seek to offer competitive compensation designed to attract and retain highly qualified individuals and to motivate and reward our executives in achieving Patterson-UTI’s goals. Specifically, the 2022 program was designed to reinforce the following goals: +Patterson-UTI Goals +How Goal Was Reinforced in Our 2022 Compensation Program +Provide quality services for our customers in a safe and efficient manner + Our 2022 annual cash bonus incentive plan included “Health, Safety and Environmental” performance as a distinct metric (weighted at 10%) + Our financial performance metrics required quality operational performance +Generate strong financial performance and returns for our stockholders + The majority of executive compensation was delivered in the form of variable, at-risk compensation (as referenced in the charts below) aligned with stockholder interests + The majority of the payout under our 2022 annual cash bonus incentive plan was based on financial performance metrics (75%) + Our 2022 annual cash bonus incentive plan rewarded executives for cash flow generation and profitability through the use of Operating Cash Flow and Adjusted EBITDA as the primary performance metrics + Our long-term incentive plan incentivizes the creation of stockholder value on both an absolute and relative basis through the grant of equity compensation and the use of absolute and relative TSR performance goals under our performance units +Attract and retain highly qualified individuals, with a strong emphasis on teams working together to capitalize on opportunities and solve problems + We benchmarked our executive pay programs against broader oilfield services companies and comparably sized oil and gas exploration and production companies + We did not target a specific market percentile for executive compensation. Instead, executive compensation was set based on a holistic review of several factors, including market pay levels, individual performance and qualifications, and executive tenure + Our annual and long-term incentive programs generally reward company-wide results rather than performance against individual objectives + The majority of our executives’ compensation was delivered in the form of long-term incentives that vest over a multi-year period to aid in retention of executives +For 2022, target total direct compensation for our NEOs was most heavily weighted toward long-term incentives, with greater than 50% of long-term incentive compensation subject to performance-based vesting criteria, as shown below. +2022 TARGET TOTAL DIRECT COMPENSATION +30 +Process for Determination of Executive Compensation +Role of the Compensation Committee +The Board of Directors has delegated the management of Patterson-UTI’s executive compensation program to the Compensation Committee. The Compensation Committee meets on a regular basis to consider compensation matters and to review how Patterson-UTI’s plans and policies work in practice. Each of the Compensation Committee’s current members is an independent director as defined by the Nasdaq listing standards. +Independent, Outside Compensation Consultant +Our Compensation Committee regularly utilizes outside compensation consultants to help assess and design our executive compensation program. These consultants are paid on either a basic, fixed-fee structure plus expenses or an hourly rate structure plus expenses. These outside consultants provide data and advice on historical compensation and stockholder returns, market trends and peer compensation practices. The Compensation Committee has retained Frederick W. Cook & Co., Inc. ("FW Cook") as its consultant and advisor for executive compensation matters since 2018. +Our Compensation Committee regularly reviews the services provided by its outside consultant and has determined that the engagement of FW Cook does not raise any conflicts of interest. The Compensation Committee receives a confirmation certification of independence from its consultant annually. +In 2022, FW Cook provided the Compensation Committee with information on the compensation practices of our peer group and other oilfield service companies and on the reasonableness of our program as compared to the compensation practices of our peer group. In so doing, FW Cook provided the Compensation Committee with information on each element of total direct compensation for our executive officers as well as a comparison of each such element of compensation against our peers and the broader oilfield services and oil and gas exploration and production markets. FW Cook also provided the Compensation Committee with information on the cost and potential dilution to our stockholders of our equity-based incentives and compared our equity usage to that of our peer group . +Role of Management and Feedback of Others +Compensation determinations, including annual bonus plan design and equity award grants, are approved through a process that solicits input from outside compensation consultants retained by the Compensation Committee, such as FW Cook. The Compensation Committee also seeks input from management through our CEO. In 2022, management separately retained Compensation Advisory Partners (“CAP”) to provide market information, which assisted management in designing and formulating its compensation recommendations, and provided management with advice and benchmarking on incentive compensation design. CAP does not provide advice directly to the Compensation Committee. +In addition to the recommendations of management and consultants, the Compensation Committee considers feedback from Patterson-UTI’s stockholders, guidelines of proxy advisory firms, reported trends in compensation, internal budgets, historical data for the Company and its peers, strategic planning updates and other information that it considers relevant. +Our CEO provides the Compensation Committee with reviews of the performance of other executive officers and senior managers, including the other NEOs. Our CEO also engages in an annual dialogue with our Committee Chairman and the Chairman of the Board on our compensation program and seeks their input on and review of proposals for long-term incentive grants. This process results in a recommendation that is then considered by our Compensation Committee as a whole. The Compensation Committee meets in executive session without our CEO present, and our CEO is not involved in decisions relating to his compensation. +Peer Group +2022 Peer Group +Archrock, Inc. +Bristow Group Inc. +Cactus, Inc. +ChampionX Corporation +EQT Corporation +Expro Group Holdings N.V. +Helmerich & Payne, Inc. +Liberty Oilfield Services Inc. +Nabors Industries Ltd. +NexTier Oilfield Solutions +NOV Inc. +Oceaneering International, Inc. +PDC Energy, Inc. +Precision Drilling Corporation +ProPetro Holding Corp. +Range Resources Corporation +TechnipFMC plc +Transocean Ltd. +Valaris Ltd. +Weatherford International plc +S&P 500 Index +31 +The Company’s 2022 peer group consisted of the 20 companies listed above within the oilfield services and oil and gas exploration and production industries and one market index. When developing this peer group, the Compensation Committee considered the Company’s positioning versus peers on key metrics (Revenue, EBITDA, Total Assets, Market Capitalization, and Total Enterprise Value), the robustness of the peer group, and the business characteristics of each peer. Due to peer company positioning changes and consolidations, three of the 2021 peer group companies were removed and replaced with ProPetro Holding Corp., Valaris Ltd. and Weatherford International. Also, due to industry consolidation, the Compensation Committee elected to retain three oil and gas exploration and production companies in the peer group to provide a more robust group for pay comparisons, while maintaining an emphasis on oilfield services companies. +The Compensation Committee elected to retain one market index (the S&P 500) in the peer group, solely for purposes of the relative TSR performance measurement under our performance units. This market index was retained to include an index outside our sector, given our industry's returns are compared with the returns of other industries and indices, and to provide a broader range of companies and performance results when considering the Company’s relative performance. +This peer group was used by the Company and the Compensation Committee to benchmark executive pay levels and will be used to measure relative TSR performance for purposes of determining achievement under the Company’s 2022 performance units. +Components of 2022 Compensation +Base Salary +The table below outlines the base salaries for our NEOs. In 2022, we held base salaries flat for the fourth consecutive year for all of our NEOs. +2022 ANNUAL SALARIES +William Andrew Hendricks, Jr. +$ +1,000,000 +C. Andrew Smith +$ +450,000 +Kenneth N. Berns +$ +450,000 +James M. Holcomb (1) +$ +465,000 +Seth D. Wexler +$ +475,000 +(1) Mr. Holcomb's base salary was raised to $500,000 effective January 1, 2023 in connection with his promotion to Chief Operating Officer. +32 +Annual Incentive Compensation +In 2022, the Compensation Committee adopted an annual cash bonus program that relied upon multiple, pre-established objectives for determining bonus compensation. The bonus plan set a target opportunity for each executive’s annual cash bonus as a percent of salary, with payout contingent upon meeting Patterson-UTI’s financial goals and other key performance indicators (KPIs). The Compensation Committee considered the average range of performance and payouts, and the Compensation Committee believed – based on advice from its compensation consultant – that Patterson-UTI’s performance range was consistent with typical, general industry practice. +The metrics for the 2022 annual cash bonus program, along with the definition of each metric and the corresponding rationale for including the metric, are provided in the table below. +2022 ANNUAL CASH INCENTIVE METRICS +Metric (Weighting) +Description +Rationale +Operating Cash Flow (50%) +Operating Cash Flow is defined as Adjusted EBITDA (as defined below) less cash capital expenditures (as adjusted for any Board-approved increase in capital expenditures after targets are set). +Target Operating Cash Flow for 2022 was set at $109.0 million, which was a $60.0 million (or 122%) increase over actual Operating Cash Flow for 2021. +Our continued focus on cash flow generation during 2022 furthered our goal of having a business model that is self-sustaining, can weather the ebbs and flows of the commodity and business cycle, can endure extreme events, and allows for return of capital to stockholders. +Adjusted EBITDA (25%) +Adjusted EBITDA is defined as net income plus net interest expense, income tax expense and depreciation, depletion, amortization and impairment expense (including impairment of goodwill), excluding, for the purposes of the annual cash bonus program, any non-operating expenses such as M&A and restructuring costs. +Target Adjusted EBITDA for 2022 was set at $461.5 million, which was a $290 million (or 169%) increase over actual Adjusted EBITDA for 2021. +The Compensation Committee added Adjusted EBITDA as a metric for the 2022 program as this metric establishes a clear and consistent link to the Company’s financial performance. Additionally, Adjusted EBITDA is a significant consideration used by analysts in evaluating the Company and is therefore, we believe, a key driver of the Company’s stock price. +Health, Safety and Environmental (10%) +Holistic evaluation of HSE factors, including without limitation, maintenance of safety incident rates below industry average, reduction of environmental incidents and improvement of operational audits and training. +The Compensation Committee views health, safety, and environmental factors as a component of the Company’s risk management and critical to the well-being of the Company’s employees, other personnel and the communities in which we work. +Strategy (15%) +Taking demonstrable and meaningful actions to maximize shareholder value. +The Compensation Committee set a strategic action goal as it believed achievement of this goal would improve our competitive position, financial results and stockholder returns. +This KPI represented actions that could position the Company for short-term and long-term success, such as positioning the Company to increase its return of capital to shareholders, improving the Company's balance sheet, strengthening customer relationships, improving the Company's pressure pumping business, pursuing strategic opportunities and taking actions in low-carbon emissions technology and ESG initiatives. +For Mr. Holcomb’s 2022 annual cash bonus opportunity, the metrics and allocations were Contract Drilling Operating Cash Flow (50%), Contract Drilling Adjusted EBITDA (25%), Health, Safety and Environmental for the contract drilling business (10%) and Strategy for the contract drilling business, which included the deployment of new technologies and successful integration of any acquisition (15%). Mr. Holcomb’s metrics were specifically tailored to the contract drilling business in order to focus on the portion of our business on which he had the most impact during 2022 as President of Patterson-UTI Drilling Company LLC. +33 +The overall annual cash bonus plan for 2022 required achievement of a threshold level of 80% of target performance on both the Operating Cash Flow and Adjusted EBITDA metrics before any payouts with respect to such metrics could be earned. Once the relevant threshold was met, the annual cash bonus opportunity attributable to the Operating Cash Flow and Adjusted EBITDA metrics was calculated based on actual performance, with a 50% payout for threshold achievement, 100% payout for target achievement, and 200% maximum payout for maximum achievement. Linear interpolation would be used to calculate the payouts for performance between achievement levels. +For the Health, Safety and Environmental KPI and the Strategy KPI, the target annual cash bonus opportunity would be based on the Compensation Committee’s holistic assessment of the achievement of the elements of each KPI and any payout above target would be dependent on material outperformance. The achievement levels and actual performance of the Health, Safety and Environmental KPI and the Strategy KPI were determined based on an evaluation of the factors described in footnotes 2 and 3 of the “2022 Annual Incentive Metrics and Percentage Payout Calculations” table below. +The achievement levels under the annual cash bonus plan for our NEOs were calculated as follows: +2022 ANNUAL INCENTIVE METRICS AND PERCENTAGE PAYOUT CALCULATIONS +($ in millions) +Metrics +Threshold +Target +Maximum +Actual +Metric Achievement Percentage +Metric +Weighting +Weighted Achievement Percentage +Operating Cash Flow +$ +87.2 +$ +109.0 +$ +130.8 +$ +332.3 +(1) +200% +50% +100% +Adjusted EBITDA +$ +369.2 +$ +461.5 +$ +553.8 +$ +693.8 +(1) +200% +25% +50% +Health, Safety and Environmental +(2) +100% +10% +10% +Strategy +(3) +100% +15% +15% +Total +100% +175% +(1) +As discussed in “2022 Annual Cash Incentive Metrics,” the calculation of actual performance on the financial metrics excluded the impact of any non-operating expenses, such as M&A and restructuring costs, and were adjusted for any Board-approved increase in capital expenditures after targets are set. There were $2.0 million of M&A costs in 2022, and $75.3 million of Board-approved increases in capital expenditures after the targets were set. +(2) +The Committee determined that the NEOs met 100% achievement for this metric based on: +• +the overall total recordable incident rate remaining below the land drilling industry average (with this factor being given the most weight); +• +the reduction in the motor vehicle incident rate and improved tracking, reporting and follow-up on incidents; +• +the improvement in training and reporting relating to high potential incidents and near misses; +• +maintaining regulatory compliance and the reduction in the number of incidents with an environmental impact; +• +the improvement in operational audit and follow-up process; and +• +the improvement in training, including the development of new training programs and training of additional people. +(3) +The Committee determined that the NEOs met 100% achievement for this metric based on, among other things, (i) the implementation of the Board’s commitment to capital discipline, the efficient management of cash flow and the positioning of the Company to materially increase its return of capital to its shareholders, (ii) improvements to the Company's balance sheet and liquidity, (iii) continued strengthening of customer relationships and service quality to maximize the profitability of existing operations, (iv) significant improvements in the operations, profitability and perceived value of the Company’s pressure pumping business and (v) efforts in defining and analyzing various strategic opportunities for geographic expansion, opportunistic consolidations and increased revenue and profitability through product and service line extensions and technology expansions. This Committee further considered the Company’s leadership in low-carbon emissions technology and actions supporting the Company’s ESG initiatives. +As discussed above, for Mr. Holcomb’s 2022 bonus opportunity, the metrics and allocations were Contract Drilling Operating Cash Flow (50%), Contract Drilling Adjusted EBITDA (25%), Health, Safety and Environmental for the contract drilling business (10%) and Strategy for the contract drilling business (15%). The calculated payouts for Mr. Holcomb for these metrics were determined based on the achievement in 2022 of: +• +drilling segment Operating Cash Flow (excluding the impact of non-operating expenses, such as M&A and restructuring costs, of which there were none for the drilling segment in 2022, and adjusted for any Board-approved increase in capital expenditures after the targets were set, of which there were $25.5 million for the drilling segment) of $247.6 million, compared to a targeted Operating Cash Flow of $133.3 million for this segment, resulting in 200% achievement; +• +drilling segment Adjusted EBITDA (excluding the impact of non-operating expenses such as M&A and restructuring costs, of which there were none for the drilling segment in 2022) of $477.8 million, compared to a targeted Adjusted EBITDA of $350.9 million for this segment, resulting in 200% achievement; +34 +• +the Committee’s assessment of 100% achievement for the drilling segment on the Health, Safety and Environmental KPI as a result of the items listed in footnote 2 above with respect to the drilling segment; and +• +the Committee’s assessment of 100% achievement for the drilling segment on the Strategy KPI based on the increased development of drilling rig technology and applications and the successful integration of the acquired Pioneer contract drilling business. +As a result, Mr. Holcomb’s payout under his bonus program was based on the achievement in 2022 of 175% of target. +The payout percentage was applied to each executive’s bonus target as follows to determine the actual 2022 cash bonus payment: +2022 ANNUAL INCENTIVE CASH BONUS +NEO +Target Bonus +Bonus Payout +(as a % of +Target) +Actual Bonus +William Andrew Hendricks, Jr. +$ +1,250,000 +175% +$ +2,187,500 +C. Andrew Smith +$ +562,500 +175% +$ +984,375 +Kenneth N. Berns +$ +562,500 +175% +$ +984,375 +James M. Holcomb (1) +$ +372,000 +175% +$ +651,000 +Seth D. Wexler +$ +380,000 +175% +$ +665,000 +(1) +The table above reflects the original bonus target for Mr. Holcomb’s 2022 annual cash incentive award, as set by the Compensation Committee on February 8, 2022, and the actual bonus calculation had Mr. Holcomb’s bonus target remained at its original level. +In lieu of any promotion-based cash award or equity grant at the time of his promotion to Chief Operating Officer, the Compensation Committee increased the target bonus for Mr. Holcomb’s 2022 annual cash incentive award to 100% of his new $500,000 base salary. This resulted in Mr. Holcomb’s actual 2022 bonus being $875,000, rather than the $651,000 reflected in the table above. The incremental increase to Mr. Holcomb's 2022 bonus is reported as a "Bonus" in the Summary Compensation Table. +Long-Term Incentive Compensation +We have historically delivered the majority of total NEO compensation in the form of equity-based awards. This emphasis on equity-based compensation enhances alignment between our executives and our stockholders. We plan to retain this emphasis going forward, and we believe that by tying a large portion of compensation to equity we ensure that our NEOs can only fully realize the potential value of their compensation if our stockholders also benefit. As described below, all of the long-term incentive awards granted in 2022 vest over a three-year period. +2022 Long- +Term Incentive +Award Type +2022 Award Design +Alignment with Philosophy +Restricted Stock Units +(49% of LTI Mix) + Time-vested units that are settled in shares of stock + 1/3 of each award vests annually over a three-year period + Value dependent upon stock price performance + Enhances retention of executive talent + Encourages long-term share ownership +Performance +Units +(51% of LTI Mix) + Performance-vested units that are settled in shares of stock + Number of units earned depends upon TSR performance relative to our peers over a full three-year period from April 1, 2022 through March 31, 2025 + Relative TSR calculation for 2022 units includes the 20 peer companies listed above and one market index (S&P 500) + No shares are earned for performance below the 25 th percentile + Target shares are not earned unless performance is at the 55th percentile + Maximum shares are not earned unless performance is at the 75 th percentile or above + Capped payout at “target” amount if absolute TSR during the performance period is not positive + Performance-contingent + Number of shares dependent upon performance relative to peers, relative to broader market index and absolute performance + Value of shares dependent upon stock price + Three-year performance period provides for a retention incentive +35 +2022 Long-Term Incentive Grants +The Compensation Committee established the following long-term incentive target awards for our executives in 2022. In determining the 2022 LTI grants, the Compensation Committee considered Patterson-UTI’s 2021 financial results and comparative TSR performance over the one-, two- and three-year periods ended March 31, 2022. The target value of the grants was determined with the assistance of the Compensation Committee's compensation consultant. +The aggregate target value of long-term incentives for the Named Executive Officers remained relatively flat between 2021 and 2022. +Long-Term Incentive Grants +NEO +2021 Awarded Value (1) +2021 Target Value +2022 Target Value +William Andrew Hendricks, Jr. +$ +4,630,000 +$ +5,750,000 +$ +6,000,000 +C. Andrew Smith +$ +1,740,000 +$ +2,184,000 +$ +2,100,000 +Kenneth N. Berns +$ +1,730,000 +$ +2,150,000 +$ +2,000,000 +James M. Holcomb (1) +$ +965,000 +$ +1,200,000 +$ +1,200,000 +Seth D. Wexler +$ +1,145,000 +$ +1,440,000 +$ +1,550,000 +(1) +Due to challenging industry conditions in 2021 and to avoid issuing an inflated number of RSUs and PSUs, the Compensation Committee elected to use a $8 notional stock price to determine the actual LTI grants for the executives in 2021. The use of an $8 notional stock price resulted in 2021 actual award values being approximately 20% less than the 2021 Target Values, based on our stock price of $6.37 when the Compensation Committee granted the 2021 awards on April 27, 2021. +Payout in 2022 of 2019 Performance Unit Awards +For the three-year performance period that ended on March 31, 2022, Patterson-UTI’s TSR was 5.2%. This performance was at the 90 th percentile relative to our 2019 peer group. Based on this performance, the 2019 performance units paid out at 200% of the target level. +2019 Performance Unit Awards +(Performance Period Ended in 2022) +Units Granted +Payout Multiplier +Units Earned +# +% +# +Share Price at Vesting +Value at +Vesting +William Andrew Hendricks, Jr. +185,200 +200% +370,400 +$15.90 +$5,889,360 +C. Andrew Smith +54,800 +200% +109,600 +$15.90 +$1,742,640 +Kenneth N. Berns +69,300 +200% +138,600 +$15.90 +$2,203,740 +James M. Holcomb +38,700 +200% +77,400 +$15.90 +$1,230,660 +Seth D. Wexler +38,700 +200% +77,400 +$15.90 +$1,230,660 +TSR calculations for Patterson-UTI and our peers were measured based on the change in the value of the relevant stock from the first trading day of the performance period to the last trading day of the performance period, in each case measured using the average closing price of the relevant stock for the 20 trading day period ending on such trading day, with dividends deemed reinvested. +Retirement Plans +Patterson-UTI offers a 401(k) plan to its employees, including its NEOs. Participants may contribute a portion of their base salary to the 401(k) plan, subject to federal limits. Patterson-UTI makes matching contributions up to four percent of each participant’s eligible base salary. Our NEOs are eligible to participate in the 401(k) plan on the same basis as other employees. Patterson-UTI does not have any other retirement plan. The Committee believes that benefits to executives should generally be aligned with those provided for other employees, and thus we generally do not provide retirement plans beyond a 401(k) plan for our executives. +36 +Other Executive Compensation Matters +Share Ownership Guidelines and Stock Holding Requirements +We have had significant share ownership requirements in place for more than 15 years. Our share ownership guidelines are applicable to all Section 16 officers and directors of Patterson-UTI. We believe share ownership requirements are an important tool to ensure that officers and directors stay invested in Patterson-UTI and aligned with the interests of our stockholders. +Each Section 16 officer or non-executive Director has five years from the date of appointment or election to their position to satisfy the ownership guidelines. The Nominating and Corporate Governance Committee may, from time to time, reevaluate and revise an individual’s guidelines to incorporate pay changes, promotions or other events. +Share Ownership Guidelines +President and Chief Executive Officer +Number of shares equal to 5 times base salary +Other Section 16 Officers +Number of shares equal to 2 times base salary +Outside Directors +Number of shares equal to 5 times annual base cash retainer +Share value for purposes of the guidelines is determined based on (i) the closing price on the date of grant for vested or unvested awards or, in the case of open market purchases, the closing price on the date of acquisition or (ii) the average closing price over the previous 12 months, whichever would result in a greater aggregate value. Share ownership for purposes of the guidelines includes unvested time-based equity incentive awards, and unvested performance-based equity incentive awards only when the performance-based component has been satisfied. +Each Section 16 officer and director is required to maintain ownership of the net after-tax shares of Common Stock acquired pursuant to any equity-based awards received from Patterson-UTI, unless such person has met his or her individual ownership requirement. +Each person subject to this policy was in compliance with these guidelines as of the date of this proxy statement. +Clawback Policy +As provided for in Patterson-UTI’s Corporate Governance Guidelines and set forth in written agreements with its executive officers, Patterson-UTI has implemented a clawback policy that allows for the recovery of bonus, severance or incentive based compensation from an executive officer in the event the Board of Directors learns that any misconduct by such executive officer contributed to Patterson-UTI having to restate all or a portion of its financial statements. The Board will take such action as it deems necessary to remedy the misconduct, prevent its recurrence, and if it deems appropriate based on the relevant facts and circumstances, take remedial action against such executive officer, which may include requiring the reimbursement of any bonus or incentive compensation awarded to such executive officer or effecting the cancellation of stock awards previously granted to such executive officer if: (i) the amount of the bonus, incentive compensation or stock award was calculated based upon the achievement of certain financial results that were subsequently the subject of a restatement, (ii) such executive officer engaged in intentional misconduct that caused or partially caused the need for the restatement, and (iii) the amount of the bonus, incentive compensation or stock award that would have been awarded to such executive officer had the financial results been properly reported would have been lower than the amount actually awarded. +In addition to this stand-alone policy, Patterson-UTI’s long-term incentive plans provide that if Patterson-UTI is required to prepare an accounting restatement due to the material noncompliance of Patterson-UTI, as a result of misconduct, with any financial reporting requirement under the securities laws, or if the participant is one of the persons subject to automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002, the participant shall reimburse Patterson-UTI the amount of any payment in settlement of an award earned or accrued during the 12-month period following the first public issuance or filing with the SEC (whichever just occurred) of the financial document embodying such financial statement requirement. +Patterson-UTI intends to modify its clawback policy to be compliant with the requirements of new Rule 10D-1 under the Securities Exchange Act following Nasdaq’s adoption of final listing standards implementing such rule. +37 +Anti-Hedging Policy +Patterson-UTI has an anti-hedging policy for directors and executive officers. Our directors and executive officers and their respective spouses and minor children are prohibited from engaging in hedging or monetization transactions, including but not limited to prepaid variable forward contracts, equity swaps, collars, exchange funds, purchasing, selling or writing options or transacting in other third-party derivative securities that primarily involve or reference Patterson-UTI equity securities. This policy does not apply broadly to other employees. +Anti-Pledging Policy +Patterson-UTI has an anti-pledging policy. Our directors and executive officers may not engage in transactions in which Patterson-UTI securities are used as collateral for any loan, including, but not limited to, “margin loans” in a brokerage account. +Perquisites and Personal Benefits +The Compensation Committee believes that benefits to executives should generally be aligned with those provided for other employees. No Named Executive Officer received perquisites during 2022 with an aggregate incremental cost to the Company of more than $10,000. +Evaluation of Compensation Risk +We have considered the potential risks associated with the design of our compensation programs for employees. With regard to our executive compensation program in particular, we do not believe that our program creates unreasonable risks for the following reasons: +• +The emphasis on long-term equity based awards and the required vesting periods help minimize the potential for excessive risk taking and actions aimed at short-term stock gains; +• +Our use of different types of equity grants helps offset these risks; +• +We have meaningful share ownership guidelines; +• +We maintain an anti-hedging policy; +• +We maintain a clawback policy that applies to all of our executive officers for both cash and equity incentives; and +• +Four of the NEOs have been with Patterson-UTI for more than ten years and have an established track record of focus on managing Patterson-UTI for long-term success. +Our Board has also considered in its risk assessment of our compensation program its view that our management is highly ethical and focused on creating true long-term value for stockholders and not focused on just short-term gains. The Board, primarily through its Compensation Committee and Audit Committee, monitors and considers risks associated with Patterson-UTI’s compensation plans on a regular basis. +Employment-Related Agreements and Other Matters +Employment, Change in Control and Severance Agreements +Employment Agreements. Patterson-UTI entered into an employment agreement with Mr. Hendricks in August 2016, with Messrs. Wexler and Holcomb in January 2017 and with Mr. Smith in September 2017. Mr. Holcomb's employment agreement was superseded by a new employment agreement entered into in January 2023 in connection with his promotion to Chief Operating Officer. Each employment agreement generally has an initial three-year term, and unless earlier terminated as provided therein, has a one year automatic annual extension each year. Each employment agreement provides for a specified base salary, subject to any increases that may be granted in the future. The employment agreement also provides for, among other things, severance payments following termination by Patterson-UTI of the executive other than for cause, or termination by the executive for good reason (as defined in the employment agreement). As discussed in more detail below, the employment agreements contain change in control provisions. +Change in Control Agreements and Tax Gross-Up Payments. Patterson-UTI entered into a change-in-control agreement with Mr. Berns in 2004 and employment agreements with Messrs. Hendricks, Smith, Holcomb and Wexler in recent years that contain change-in-control provisions, as further described in “Employment-Related Agreements” below. Patterson-UTI believes that such agreements may under certain circumstances protect Patterson-UTI’s interest by discouraging the NEOs from leaving employment out of concern for the security of their jobs or from otherwise being unable to concentrate on their work. We believe that the change in control agreements may also help Patterson-UTI +38 +attract and retain new key employees by reducing the personal uncertainty and anxiety that arises from the possibility of a future business combination. Any future change in control or severance agreements will be approved subject to the circumstances existing at the time. +As was customary when the change in control agreement with Mr. Berns was entered into more than fifteen years ago, the change-in-control agreement provides Mr. Berns with a full gross-up payment for any excise taxes imposed on payments and benefits received under the change-in-control agreement or otherwise, including other taxes that may be imposed as a result of the gross-up payment. As indicated above, the Compensation Committee subsequently adopted a policy, more than five years ago, to no longer approve tax gross-ups in connection with compensation arrangements, and the employment agreements entered into with Messrs. Hendricks, Smith, Holcomb and Wexler, which are described below, do not include a tax gross-up provision. +Severance Agreement. In order to address prior severance agreements between UTI Energy Corp. and Mr. Berns, Patterson-UTI has entered into a written letter agreement with Mr. Berns pursuant to which Patterson-UTI has agreed to pay Mr. Berns within ten days of the termination of his employment with Patterson-UTI for any reason (including voluntary termination by him), an amount in cash equal to his annual base salary at the time of such termination. Any payment made by Patterson-UTI pursuant to this letter agreement will reduce dollar for dollar any payment owed to Mr. Berns, if any, pursuant to the change-in-control agreement referenced above. +We believe the employment agreements, the change-in-control agreement and the severance agreement are important components of our overall executive compensation program. The employment agreements currently in effect set forth the manner by which the employment relationship may be extended or terminated, the compensation and benefits that we provide during the term of employment and the obligations each party has in the event of termination of the executive officer’s employment. We believe that severance protections, particularly in the context of a change-in-control transaction, play a critical role in attracting and retaining key executive officers. Providing this type of protection is common in the oilfield services industry. In addition, these benefits serve our interests by promoting a continuity of management and aligning management’s interests with those of our stockholders in the context of an actual or threatened change in control transaction. +Please see “Employment-Related Agreements” elsewhere in the proxy statement for further description of the employment agreements, change-in-control agreement and severance agreement. +Compensation Committee Report +The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based upon such review and discussion, the Compensation Committee has recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement. +Terry H. Hunt, Chair +Tiffany (TJ) Thom Cepak +Curtis W. Huff +Cesar Jaime +39 +EXECUTIVE COMPENSATION +The following table sets forth information concerning compensation for the fiscal years ended December 31, 2022, December 31, 2021 and December 31, 2020 with respect to the principal executive officer, the principal financial officer and the other Named Executive Officers of Patterson-UTI: +Summary Compensation Table +Name and Principal Position(s) +Year +Salary +($) +Bonus +($)(1) +Stock +Awards +($)(2) +Non-equity +Incentive plan +Compensation +($)(3) +All Other +Compensation +($)(4) +Total +($) +William Andrew Hendricks, Jr. +2022 +1,000,000 +— +7,768,767 +(5) +2,187,500 +12,200 +10,968,467 +President & Chief +2021 +1,000,000 +— +5,442,905 +1,562,500 +11,600 +8,017,005 +Executive Officer +2020 +1,000,000 +— +2,086,115 +625,000 +11,400 +3,722,515 +C. Andrew Smith +2022 +450,000 +— +2,718,489 +(6) +984,375 +12,200 +4,165,064 +Executive Vice President & +2021 +450,000 +— +2,044,810 +703,125 +11,600 +3,209,535 +Chief Financial Officer +2020 +450,000 +— +399,656 +281,250 +11,400 +1,142,306 +Kenneth N. Berns +2022 +450,000 +— +2,588,724 +(7) +984,375 +— +4,023,099 +Executive Vice President & +2021 +450,000 +— +2,036,286 +703,125 +— +3,189,411 +Chief Commercial Officer +2020 +450,000 +— +505,746 +281,250 +— +1,236,996 +James M. Holcomb +2022 +465,000 +224,000 +1,553,892 +(8) +651,000 +12,200 +2,906,092 +Chief Operating Officer +2021 +465,000 +— +1,135,972 +465,000 +11,600 +2,077,572 +2020 +465,000 +— +282,046 +223,200 +11,400 +981,646 +Seth D. Wexler +2022 +475,000 +— +2,007,723 +(9) +665,000 +12,200 +3,159,923 +Senior Vice President, General +2021 +475,000 +— +1,349,000 +475,000 +11,600 +2,310,600 +Counsel & Secretary +2020 +475,000 +— +282,046 +228,000 +11,400 +996,446 +(1) +As described in "Compensation Discussion and Analysis", in lieu of any promotion-based cash award or equity grant at the time of Mr. Holcomb's promotion to Chief Operating Officer on January 1, 2023, the Compensation Committee increased the target bonus for Mr. Holcomb’s 2022 annual cash incentive award to 100% of his new $500,000 base salary. The resulting incremental increase to Mr. Holcomb's 2022 bonus is reported as a "Bonus" in the table above. +(2) +Amounts include the fair value of awards at the date of grant as determined in accordance with FASB ASC Topic 718 with respect to restricted stock units and performance units awarded to the Named Executive Officers in the fiscal years ended December 31, 2022, 2021 and 2020, and with respect to phantom units awarded to Mr. Hendricks in 2020. For additional information related to the assumptions used in the valuation of restricted stock units, performance units and phantom units, see Note 12 to the consolidated financial statements in Patterson-UTI’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022. The fair value of performance unit and phantom unit awards was determined based on a Monte-Carlo simulation model, which is consistent with the valuation used by Patterson-UTI for the recognition of compensation expense under FASB ASC Topic 718. The Monte-Carlo simulation model takes into account expected price movement of Patterson-UTI stock as compared to the applicable peer group and, for the 2020 performance unit and phantom unit awards and 2022 performance unit awards, the S&P 500 Index. For the 2021 performance unit awards the Monte-Carlo simulation model also takes into account expected price movement of Patterson-UTI stock as compared to the peer group, the S&P 500 Index, the Russell 3000 Index and the MSCI World Index. The Monte-Carlo simulation model assigned a higher value to each 2022 performance unit award than the closing price of Patterson-UTI’s stock on the grant date. Therefore, the value reflected in the 2022 Summary Compensation Table does not reflect the target award values shown in the 2022 Long-Term Incentive Grants section of the Compensation Discussion and Analysis in this proxy statement. +(3) +Amounts represent annual cash bonuses earned for the fiscal years ended December 31, 2022, 2021 and 2020. +(4) +Amounts reflect contributions to the Company's 401(k) plan by Patterson-UTI. +(5) +The 2022 amount includes $2,939,472 related to an annual award of restricted stock units and $4,829,295 related to an award of performance units during 2022. Assuming maximum performance, the value of the performance unit award would be $6,118,968 (calculated using the closing price of Patterson-UTI’s stock on the grant date and assuming maximum payout of two times the target number of shares). +(6) +The 2022 amount includes $1,029,144 related to an annual award of restricted stock units and $1,689,345 related to an award of performance units during 2022. Assuming maximum performance, the value of the performance unit award would be $2,140,488 (calculated using the closing price of Patterson-UTI’s stock on the grant date and assuming maximum payout of two times the target number of shares). +(7) +The 2022 amount includes $979,824 related to an annual award of restricted stock units and $1,608,900 related to an award of performance units during 2022. Assuming maximum performance, the value of the performance unit award would be $2,038,560 (calculated using the closing price of Patterson-UTI’s stock on the grant date and assuming maximum payout of two times the target number of shares). +40 +(8) +The 2022 amount includes $588,552 related to an annual award of restricted stock units and $965,340 related to an award of performance units during 2022. Assuming maximum performance, the value of the performance unit award would be $1,223,136 (calculated using the closing price of Patterson-UTI’s stock on the grant date and assuming maximum payout of two times the target number of shares). +(9) +The 2022 amount includes $759,528 related to an annual award of restricted stock units and $1,248,195 related to an award of performance units during 2022. Assuming maximum performance, the value of the performance unit award would be $1,581,528 (calculated using the closing price of Patterson-UTI’s stock on the grant date and assuming maximum payout of two times the target number of shares). +The following table sets forth information concerning grants of plan-based awards during the fiscal year ended December 31, 2022 to the Named Executive Officers: +Grants of Plan-Based Awards +Estimated Future Payouts under +Non-equity Incentive Plan Awards (1) +Estimated Future Payouts under +Equity Incentive Plan Awards +All Other +Stock +Awards: +Number of +Shares of +Grant Date +Fair Value of +Stock and +Grant +Threshold +Target +Maximum +Threshold +Target +Maximum +Stock or Units +Option Awards +Name +Date +($) +($) +($) +(#) +(#) +(#) +(#) +($)(4) +William Andrew Hendricks, Jr. +$ +625,000 +$ +1,250,000 +$ +2,500,000 +— +— +— +— +$ +— +4/29/22 +(2) +— +— +— +93,050 +186,100 +372,200 +— +$ +4,829,295 +4/29/22 +(3) +— +— +— +— +— +— +178,800 +$ +2,939,472 +C. Andrew Smith +$ +281,250 +$ +562,500 +$ +1,125,000 +— +— +— +— +$ +— +4/29/22 +(2) +— +— +32,550 +65,100 +130,200 +$ +1,689,345 +4/29/22 +(3) +— +— +— +— +— +— +62,600 +$ +1,029,144 +Kenneth N. Berns +$ +281,250 +$ +562,500 +$ +1,125,000 +— +— +— +— +$ +— +4/29/22 +(2) +— +— +— +31,000 +62,000 +124,000 +— +$ +1,608,900 +4/29/22 +(3) +— +— +— +— +— +— +59,600 +$ +979,824 +James M. Holcomb +$ +186,000 +$ +372,000 +744,000 +— +— +— +— +$ +— +4/29/22 +(2) +— +— +— +18,600 +37,200 +74,400 +— +$ +965,340 +4/29/22 +(3) +— +— +— +— +— +— +35,800 +$ +588,552 +Seth D. Wexler +$ +190,000 +$ +380,000 +$ +760,000 +— +— +— +— +$ +— +4/29/22 +(2) +— +— +— +24,050 +48,100 +96,200 +— +$ +1,248,195 +4/29/22 +(3) +— +— +— +— +— +— +46,200 +$ +759,528 +(1) +The 2022 non-equity incentive cash bonus plan for the fiscal year ended December 31, 2022 was approved on February 8, 2022 for our Named Executive Officers. The bonus plan set a target opportunity for each executive’s annual cash bonus as a percent of salary, with payout contingent upon meeting Patterson-UTI’s financial goals and other KPIs as described above in “Compensation Discussion and Analysis”. +(2) +On April 29, 2022, Patterson-UTI granted performance unit awards to the Named Executive Officers. These awards provide for the recipients to receive shares of Common Stock upon the achievement of certain performance goals established by Patterson-UTI during a specified period. The performance period is the period from April 1, 2022 through March 31, 2025. The performance goals are tied to Patterson-UTI’s total stockholder return for the performance period as compared to total stockholder return for our peer group determined by the Compensation Committee. The recipients will receive a target number of shares if Patterson-UTI’s total stockholder return when compared to the peer group, is at the 55 th percentile and two times the target if at the 75 th percentile or higher. If Patterson-UTI’s total stockholder return, when compared to the peer group, is at the 25 th percentile, the recipients will only receive one-half of the target number of shares. The grant of shares when achievement is between the 25th and 55 th percentile, or between the 55 th and 75 th percentile, will be determined using linear interpolation for levels of achievement between these points. If Patterson-UTI’s total stockholder return is negative or zero, the payout shall not exceed the target number of shares. +(3) +Restricted stock units were awarded to the Named Executive Officers pursuant to the 2021 Long-Term Incentive Plan. Ordinary dividends are accrued on unvested restricted stock units and paid upon vesting. The rate at which these dividends are paid or accrued is the same rate at which ordinary dividends are paid on all other shares of Common Stock. The restricted stock units vest over a three-year period as follows: one-third on April 29, 2023, one-third on April 29, 2024 and one-third on April 29, 2025. +(4) +The grant date fair value of restricted stock units was based on the closing price of Patterson-UTI Common Stock on the date of grant, which is consistent with the valuation used by Patterson-UTI for the recognition of compensation expense under FASB ASC Topic 718. The grant date fair value of performance unit awards was determined based on a Monte-Carlo simulation model, which is consistent with the valuation used by Patterson-UTI for the recognition of compensation expense under FASB ASC Topic 718. +41 +The following table sets forth information concerning outstanding equity awards at December 31, 2022 for the Named Executive Officers: +Outstanding Equity Awards at Fiscal Year-End +Stock Awards +Number +Equity Incentive +Equity Incentive +of Shares +Plan Awards: +Plan Awards: Market +Option Awards +or Units of +Market Value of +Number of +or Payout Value of +Number of Securities +Option +Stock +Shares or Units +Unearned Shares, +Unearned Shares, +Underlying Unexercised +Exercise +Option +That Have +of Stock +Units or Other +Units or Other +Options (#) +Price +Expiration +Not +That Have +Rights that Have +Rights that Have +Name +Exercisable +Unexercisable +($) +Date +Vested (#) +Not Vested ($)(1) +Not Vested(2) +Not Vested ($)(1) +William Andrew Hendricks, Jr. +172,500 +— +$ +22.88 +4/21/2023 +534,801 +(3) +$ +9,006,049 +1,854,200 +(4) +$ +31,224,728 +117,750 +— +$ +33.10 +4/21/2024 +257,000 +— +$ +20.33 +4/20/2025 +315,400 +— +$ +18.54 +4/25/2026 +C. Andrew Smith +— +— +— +— +187,001 +(3) +$ +3,149,097 +627,400 +(4) +$ +10,565,416 +Kenneth N. Berns +115,000 +— +$ +22.88 +4/21/2023 +192,800 +(3) +$ +3,246,752 +678,400 +(4) +$ +11,424,256 +78,500 +— +$ +33.10 +4/21/2024 +154,200 +— +$ +20.33 +4/20/2025 +189,100 +— +$ +18.54 +4/25/2026 +James M. Holcomb +— +— +— +— +110,001 +(3) +$ +1,852,417 +384,000 +(4) +$ +6,466,560 +Seth D. Wexler +— +— +— +— +129,601 +(3) +$ +2,182,481 +435,000 +(4) +$ +7,325,400 +(1) +Based on the closing price of Patterson-UTI Common Stock on December 30, 2022 of $16.84 per share. +(2) +The 2020, 2021 and 2022 performance unit awards reflected in this column were granted on April 7, 2020, April 27, 2021 and April 29, 2022, respectively, and provide for an award of shares of Patterson-UTI common stock to the recipient based on Patterson-UTI’s total stockholder return compared to our peer group of companies at the time of grant for the performance period of April 1 of the grant year through March 31 of the third year following the grant. All performance unit awards provide for a target payout based on a target level of total stockholder return compared to the peer group. The amounts presented in this column represent the maximum payout under the 2020, 2021 and 2022 performance unit awards and the maximum payout under the 2020 phantom unit award. The maximum payout amounts for these awards are shown due to the relative TSR performance trending above our target threshold as of December 31, 2022. Based on Patterson-UTI’s total stockholder return during the performance period, the recipients could receive a number of shares ranging from no shares to two times the target number of shares granted. If Patterson-UTI’s total stockholder return is negative, then the number of shares received by the recipients will be capped at the target number of shares. In addition, for the performance units granted in 2020, there will be no payout unless Patterson-UTI’s total stockholder return is equal to or greater than the total stockholder return of the S&P 500 Index for the performance period. +(3) +These restricted stock units vest as follows: +4/7/2023 +4/27/2023 +4/29/2023 +4/27/2024 +4/29/2024 +4/29/2025 +Total +William Andrew Hendricks, Jr. +118,667 +118,667 +59,599 +118,667 +59,600 +59,601 +534,801 +C. Andrew Smith +35,067 +44,667 +20,866 +44,667 +20,867 +20,867 +187,001 +Kenneth N. Berns +44,400 +44,400 +19,866 +44,400 +19,867 +19,867 +192,800 +James M. Holcomb +24,734 +24,733 +11,933 +24,734 +11,933 +11,934 +110,001 +Seth D. Wexler +24,734 +29,333 +15,399 +29,334 +15,400 +15,401 +129,601 +(4) +Includes performance unit and phantom unit awards as follows: +2020 Performance +2021 Performance +2022 Performance +2020 Phantom +Unit Awards +Unit Awards +Unit Awards +Unit Awards +Total +William Andrew Hendricks, Jr. +144,000 +741,000 +372,200 +597,000 +1,854,200 +C. Andrew Smith +219,200 +278,000 +130,200 +— +627,400 +Kenneth N. Berns +277,200 +277,200 +124,000 +— +678,400 +James M. Holcomb +154,800 +154,800 +74,400 +— +384,000 +Seth D. Wexler +154,800 +184,000 +96,200 +— +435,000 +The amounts presented in this table represent the maximum payout under the 2020, 2021 and 2022 performance unit awards and the maximum payout under the 2020 phantom unit award. The maximum payout amounts for these awards are shown due to the relative TSR performance trending above our target threshold as of December 31, 2022. +42 +The following table sets forth information concerning options exercised and stock awards vested during the fiscal year ended December 31, 2022 for the Named Executive Officers. +Option Exercises and Stock Vested +Option awards +Stock awards +Name +Number of +shares acquired on exercise (#) +Value realized +on exercise ($) (1) +Number of +shares acquired +on vesting (#) +Value realized +on vesting ($)(1) +William Andrew Hendricks, Jr. +- +$ +- +627,511 +$ +9,886,301 +C. Andrew Smith +- +$ +- +195,178 +$ +3,076,404 +Kenneth N. Berns +160,000 +$ +107,200 +234,800 +$ +3,699,225 +James M. Holcomb +- +$ +- +139,233 +$ +2,215,660 +Seth D. Wexler +- +$ +- +143,833 +$ +2,288,800 +(1) +Value realized on vesting is based on the closing price of Patterson-UTI common stock on the day the respective shares vested; provided that if the stock market was closed on the day the respective shares vested, the value realized on vesting is based on the closing price of Patterson-UTI common stock on the last day the stock market was open immediately prior to the day the respective shares vested. +No Pension Benefits or Nonqualified Deferred Compensation +Patterson-UTI does not provide any pension benefits for any of the Named Executive Officers. None of the Named Executive Officers had any items of nonqualified deferred compensation during 2022. As a result, tables with respect to pension benefits and nonqualified deferred compensation have not been provided. +43 +EMPLOYMENT-RELATED AGREEMENTS +Employment, Change in Control and Severance Agreements +Employment Agreements with Messrs. Hendricks, Smith, Holcomb and Wexler +Patterson-UTI has Employment Agreements with Messrs. Hendricks, Smith, Holcomb and Wexler. Each Employment Agreement generally has an initial three-year term, and unless earlier terminated as provided therein, has a one year automatic annual extension each year. The executive may terminate his employment under his Employment Agreement by providing written notice of such termination at least 30 days before the effective date of such termination. Under specified circumstances, Patterson-UTI may terminate the executive’s employment under his Employment Agreement for cause (as defined in the Employment Agreement) by providing written notice 10 - 30 days, depending on the nature of the cause trigger, before the effective date of such termination and by granting at least 10 - 20 days, depending on the nature of the cause trigger, to cure the cause for such termination, provided that if the matter is reasonably determined by Patterson-UTI to not be capable of being cured, the executive may be terminated for cause on the date the written notice is delivered. Each Employment Agreement also provides for, among other things, severance payments following termination by Patterson-UTI of the executive other than for cause, or termination by the executive for good reason (as defined in each Employment Agreement). Under these provisions, if the executive’s employment is terminated by Patterson-UTI without cause, or the executive terminates his employment for good reason: +• +the executive will have the right to receive a lump-sum payment consisting of 3 times (in the case of Mr. Hendricks) or 2.5 times (in the case of Messrs. Smith, Holcomb and Wexler) the sum of (i) his base salary and (ii) the average annual cash bonus received by him for the three years prior to the date of termination, +• +the executive will have the right to receive a pro-rated lump-sum payment equal to his annual cash bonus based on actual results for the year, payable at the same time as annual cash bonuses are paid to active employees, +• +Patterson-UTI will accelerate vesting of all time-based equity, phantom equity and long-term cash incentive awards on the 60th day following the executive’s termination, +• +Patterson-UTI will cause all performance-based equity, phantom equity and long-term cash incentive awards to continue in effect through the end of the applicable performance period and vest based on actual results as if the executive had remained employed through the end of the applicable performance period, and +• +Patterson-UTI will pay the executive certain accrued obligations and certain obligations pursuant to the terms of employee benefit plans. +However, if a termination by Patterson-UTI other than for cause or by the executive for good reason occurs following a change in control (which is defined in a substantially similar manner to the definition in Mr. Berns' CIC Agreement (as defined below)), the executive will generally be entitled to the same severance payments and benefits described above except that (i) the pro-rated lump-sum payment for annual cash bonuses will be based on the executive’s highest annual cash bonus for the last three years, (ii) the executive will be entitled to 36 months (in the case of Mr. Hendricks) or 30 months (in the case of Messrs. Smith, Holcomb and Wexler) of subsidized benefits continuation coverage, and (iii) the performance-based equity, phantom equity and long-term cash incentive awards will be accelerated based on the target level of performance on the 60th day following the executive’s termination. +44 +Change in Control Agreement with Mr. Berns +Patterson-UTI has a Change in Control Agreement with Mr. Berns (the “CIC Agreement”). The CIC Agreement was entered into in 2004 to protect Mr. Berns should a change in control occur, thereby encouraging Mr. Berns to remain in the employ of Patterson-UTI and not be distracted from the performance of his duties to Patterson-UTI by the possibility of a change in control. +The CIC Agreement generally has an initial term with automatic 12-month renewals unless Patterson-UTI notifies Mr. Berns at least 90 days before the end of such renewal period that the term will not be extended. If a change in control of Patterson-UTI occurs during the term of the CIC Agreement and Mr. Berns’ employment is terminated (i) by Patterson-UTI other than for cause or other than automatically as a result of death, disability or retirement, or (ii) by Mr. Berns for good reason (as those terms are defined in the CIC Agreement), then Mr. Berns will generally be entitled to, among other things: +• +a bonus payment equal to the highest bonus paid after the CIC Agreement was entered into (such bonus payment prorated for the portion of the fiscal year preceding the termination date); +• +a payment equal to 2 times the sum of (i) the highest annual salary in effect for Mr. Berns and (ii) the average of the three annual bonuses earned by Mr. Berns for the three fiscal years preceding the termination date; and +• +continued coverage under Patterson-UTI’s welfare plans for up to two years. +As was customary when the CIC Agreement was entered into more than fifteen years ago, the CIC Agreement provides Mr. Berns with a full gross-up payment for any excise taxes imposed on payments and benefits received under the CIC Agreement or otherwise, including other taxes that may be imposed as a result of the gross-up payment. As indicated above, the Compensation Committee subsequently adopted a policy, more than five years ago, to no longer approve tax gross-ups in connection with compensation arrangements, and the employment agreements entered into with Messrs. Hendricks, Smith, Holcomb and Wexler, which are described above, do not include a tax gross-up provision. +A “change in control” is principally defined by the CIC Agreement as: +• +an acquisition by any individual, entity or group of beneficial ownership of 35% or more of either Patterson-UTI’s then outstanding common stock or the combined voting power of the then outstanding voting securities of Patterson-UTI entitled to vote in the election of directors, +• +a change occurs in which the members of the Board of Directors as of the date of the CIC Agreement cease to constitute at least a majority of Patterson-UTI’s Board of Directors unless that change occurs through a vote of at least a majority of the incumbent members of the Board of Directors, or +• +a change in the beneficial ownership of Patterson-UTI following consummation of a reorganization, merger, consolidation, sale of Patterson-UTI or any subsidiary of Patterson-UTI or a disposition of all or substantially all of the assets of Patterson-UTI, in which the beneficial owners immediately prior to the transaction own 65% or less of outstanding common stock of the newly combined or merged entity. +Severance Agreement with Mr. Berns +To address a prior severance agreement between UTI Energy Corp. and Mr. Berns, Patterson-UTI has entered into a written letter agreement with Mr. Berns pursuant to which Patterson-UTI has agreed to pay Mr. Berns within ten days of the termination of his employment with Patterson-UTI for any reason (including voluntary termination by him), an amount in cash equal to his annual base salary at the time of such termination. Any payment made by Patterson-UTI pursuant to this letter agreement will reduce dollar for dollar any payment owed to Mr. Berns, if any, pursuant to the CIC Agreement. +Equity Award Agreements with Named Executive Officers +All unvested stock options, restricted stock, restricted stock unit and phantom unit awards granted prior to 2021 to the Named Executive Officers vest upon a change of control as defined by the underlying award agreements. Upon a change in control as defined in the underlying performance unit award grants, the Named Executive Officers would receive the target number of shares issuable thereunder. Upon a change in control as defined in the phantom unit award grant, Mr. Hendricks would receive an amount equal to the product of the average of the closing price of Patterson-UTI common stock for the twenty consecutive trading days preceding the change in control and the target number of phantom units set forth in the agreement. +Beginning in 2021, awards granted to the Named Executive Officers no longer provide for acceleration solely upon a change in control, and instead provide for acceleration only upon the executive’s termination of employment without cause or termination by the executive for good reason following a change in control. +45 +All restricted stock, restricted stock unit, performance unit and phantom unit awards held by the Named Executive Officers provide that in the event of termination of employment due to death or disability, the holder would vest in a portion of the award. Such terminations at December 31, 2022 would have resulted in the issuance of the following shares pursuant to the accelerated vesting of restricted stock units (with the fair value based on the market price of Patterson-UTI common stock at December 30, 2022): +Shares +Fair Value +William Andrew Hendricks, Jr. +207,709 +$ +3,497,820 +C. Andrew Smith +70,078 +$ +1,180,114 +Kenneth N. Berns +76,076 +$ +1,281,120 +James M. Holcomb +42,963 +$ +723,497 +Seth D. Wexler +48,415 +$ +815,309 +In the event of termination of employment due to death or disability, the holders of performance units and phantom units would vest in the portion of the award that was earned at the time of death or disability. This payment would be determined at the end of the performance period and would equal the amount that the holder would have received at that time, pro-rated for the amount of time from the date of grant through the date of death or disability. +Potential Payments Upon a Termination or Change in Control +Amounts that each of the Named Executive Officers would be entitled to under the employee’s CIC Agreement or Employment Agreement and other award agreements if a change in control had occurred as of December 31, 2022 and the employee’s employment was terminated by Patterson-UTI other than for cause or terminated by the employee for good reason (as defined in the CIC Agreement or the Employment Agreement and applicable award agreements) are reflected in the following table: +Cash Payments +Other Benefits +Name +Bonus +Payment +($)(1) +Salary and +Bonus +($)(2) +Stock +Awards +($)(3) +Performance +Unit Awards +($)(4) +Phantom +Unit Awards +($)(5) +Other +Benefits +($)(6) +Total +($) +William Andrew Hendricks, Jr. +$ +1,562,500 +$ +6,438,800 +$ +9,006,049 +$ +10,585,624 +$ +4,918,683 +$ +36,600 +$ +32,548,256 +C. Andrew Smith +$ +703,125 +$ +2,414,563 +$ +3,149,097 +$ +5,282,708 +$ +— +$ +30,500 +$ +11,579,993 +Kenneth N. Berns +$ +1,397,022 +$ +1,931,650 +$ +3,246,752 +$ +5,712,128 +$ +— +$ +— +$ +12,287,552 +James M. Holcomb +$ +465,000 +$ +2,034,500 +$ +1,852,417 +$ +3,233,280 +$ +— +$ +30,500 +$ +7,615,697 +Seth D. Wexler +$ +475,000 +$ +2,090,333 +$ +2,182,481 +$ +3,662,700 +$ +— +$ +30,500 +$ +8,441,014 +(1) +In the case of Messrs. Hendricks, Smith, Holcomb and Wexler, the assumed bonus is equal to the highest annual bonus paid in the three years prior to 2022. In the case of Mr. Berns, the assumed bonus payment is equal to the highest annual bonus paid from the time the CIC Agreement was entered into through December 31, 2022. +(2) +The assumed salary and bonus payment represents 3.0 times (in the case of Mr. Hendricks), 2.5 times (in the case of Messrs. Smith, Holcomb and Wexler) or 2.0 times (in the case of Mr. Berns) of the sum of the 2022 salary in effect for each employee and the average of the annual bonuses earned by each employee for 2021, 2020 and 2019. Bonus amounts earned in 2022 were not considered in this calculation as they were not determined until after December 31, 2022. +(3) +Each of the stock award agreements granted prior to 2021 for the Named Executive Officers provide that unvested awards will vest upon a change in control, and each of the stock award agreements granted beginning in 2021 provide that unvested awards will vest upon the executive’s termination of employment without cause or termination by the executive for good reason following a change in control. Amounts presented in the table represent the value of unvested stock awards using the market price of Patterson-UTI common stock at December 31, 2022. +(4) +Share settled performance unit agreements granted prior to 2021 for the Named Executive Officers include a provision that upon a change in control as defined in the respective award agreements, the Named Executive Officer will receive an award of shares equal to the target amount set forth in each agreement. Share settled performance unit agreements granted beginning in 2021 include a provision that, upon the executive’s termination of employment without cause or termination by the executive for good reason following a change in control, the Named Executive Officer will receive an award of shares equal to the target amount set forth in each agreement. Amounts presented in the table represent the assumed award of the target number of shares if a change in control had occurred on December 31, 2022, valued at the December 30, 2022 closing price of Patterson-UTI common stock of $16.84 per share. +46 +(5) +The cash settled phantom unit agreement for Mr. Hendricks includes a provision that upon a change in control as defined in the award agreement, Mr. Hendricks will receive a payment equal to the product of the average of the closing price of Patterson-UTI common stock for the twenty consecutive trading days preceding the change in control and the target number of phantom units set forth in the agreement. The amount presented in the table represents the assumed payment if a change in control had occurred on December 31, 2022. The average of the closing price of Patterson-UTI common stock for the twenty consecutive trading days ending December 30, 2022 was $16.48 per share. +(6) +Messrs. Hendricks, Smith, Holcomb and Wexler participated in Patterson-UTI’s health and welfare plans as of December 31, 2022. The amounts presented represent Patterson-UTI’s portion of the premiums for three years in the case of Mr. Hendricks and 30 months in the case of Messrs. Smith, Holcomb and Wexler. No tax gross-up payment would have been payable to Mr. Berns under the terms of his CIC Agreement. +In the event of a termination of employment of Mr. Berns for any reason, including voluntary termination, Mr. Berns would be entitled to an amount in cash equal to his annual base salary at the time of such termination. Any such payment made by Patterson-UTI will reduce dollar for dollar any payment owed to Mr. Berns that is reflected in the table above. In the case of Messrs. Hendricks, Smith, Holcomb or Wexler, if the executive’s employment was terminated by Patterson-UTI other than for cause or terminated by the executive for good reason (as defined in the Employment Agreement) and not in connection with a change-in-control, then the executive would be entitled to the same potential payments and benefits as set forth in the table above, except that Mr. Hendricks’ cash payment would be higher by $625,000; Mr. Smith’s cash payment would be higher by $281,250; Mr. Holcomb’s cash payment would be higher by $410,000 and Mr. Wexler’s cash payment would be higher by $190,000 as a result of the calculation of the bonus payment for the year in which the termination occurred. Additionally, upon a termination by Patterson-UTI other than for cause or a termination by the executive for good reason and not in connection with a change-in-control, the potential payments and benefits set forth in the table above with respect to the performance units and phantom units would not be paid at the time of such termination, as such awards would instead remain outstanding through the end of the applicable performance period, subject to achievement of the applicable performance measures. +With respect to Messrs. Hendricks, Smith, Holcomb or Wexler, the foregoing severance benefits (other than the accrued obligations and benefit obligations) are conditioned on the executive’s execution of a release within 50 days of his termination that is not revoked during any applicable revocation period provided in such release. Their employment agreements also contain covenants and restrictions, including non-competition and non-solicitation provisions pursuant to which the executive will not be permitted to compete with Patterson-UTI in certain circumstances for a period of one year following termination of employment. +Pay Ratio +Under rules adopted pursuant to the Dodd-Frank Act of 2010, we are required to calculate and disclose the total compensation paid to our median employee, as well as the ratio of the total compensation paid to the median employee as compared to the total compensation paid to our CEO. The paragraphs that follow describe our methodology and the resulting CEO pay ratio for 2022. +We identified the median employee using our employee population on December 31, 2022. At December 31, 2022, we had approximately 6,200 employees located in the United States and Colombia. +The compensation measure we used to identify the median employee was W-2 wages and the equivalent measure in Colombia. We chose this compensation measure as it applied to all U.S. and Colombia employees, allowing for accessibility and broad comparability. +The total annual compensation for the year ended December 31, 2022 was calculated as $99,146 for our median employee and $10,968,467 for our CEO as reflected in the “Total” column of the Summary Compensation Table. The ratio of our CEO’s pay to that of our median employee for 2022 was approximately 111 times. The pay ratio provided is a reasonable estimate calculated in a manner consistent with SEC rules. +Because the SEC rules for identifying the median of the annual total compensation of our employees and calculating the pay ratio based on that employee’s annual total compensation allows companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices, the pay ratio reported by other companies may not be comparable to the pay ratio for our Company, as other companies have headquarters and offices in different states and countries, have different employee populations and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their pay ratios. +47 +Pay Versus Performance +Pay Versus Performance Table +The following table sets forth specified executive compensation and financial performance measures for the Company’s three most recently completed fiscal years, and cumulative total shareholder return (TSR) information for the Company and a peer group for the 1-, 2- and 3-year periods commencing as of December 31, 2019, as required by Item 402(v) of Regulation S-K: +Value of Initial Fixed $100 Investment Based On: +Year +Summary Compensation Table Total for PEO ($) +Compensation Actually Paid to PEO ($) (1) +Average Summary Compensation Table Total for Non-PEO Named Executive Officers ($) (2) +Average Compensation Actually Paid to Non-PEO Named Executive Officers ($) (2) (3) +Total Shareholder Return +Peer Group Total Shareholder Return (4) +Net Income (Loss) ($ in thousands) +Operating Cash Flow ($ in millions) (5) (6) +2022 +$ +10,968,467 +$ +32,675,932 +$ +3,563,545 +$ +9,767,320 +168 +113 +$ +154,658 +$ +332.3 +2021 +$ +8,017,005 +$ +14,736,737 +$ +2,696,782 +$ +4,588,122 +83 +70 +$ +( 654,545 +) +$ +49.0 +2020 +$ +3,722,515 +$ +1,228,134 +$ +1,089,349 +$ +710,831 +51 +58 +$ +( 803,692 +) +$ +86.5 +(1) +The dollar amounts reported in this column represent the amount of “compensation actually paid” to our Principal Executive Officer ("PEO"), as computed in accordance with Item 402(v) of Regulation S-K and do not reflect the total compensation actually realized or received . In accordance with these rules, these amounts reflect Total compensation as set forth in the Summary Compensation Table for each year, adjusted as shown below. The fair value of performance unit and phantom unit awards was determined based on a Monte-Carlo simulation model that takes into account expected price movement of Patterson-UTI stock as compared to peer companies and relevant market indices, as of the relevant measurement dates. Assumptions used in the Monte-Carlo simulation model include assumptions regarding volatility, the risk-free interest rate, dividend yield, and stock beta. Due to differences in measurement dates, the assumptions used in these valuations could differ materially from the assumptions used to determine the fair value as of the grant date of such awards. +Compensation Actually Paid to PEO +2022 +2021 +2020 +Summary Compensation Table Total +$ +10,968,467 +$ +8,017,005 +$ +3,722,515 +Less, value of Stock Awards reported in Summary Compensation Table +$ +7,768,767 +$ +5,442,905 +$ +2,086,115 +Plus, year-end fair value of outstanding and unvested equity awards granted in the year +$ +7,580,440 +$ +7,738,615 +$ +4,539,290 +Plus (less), year over year change in fair value of outstanding and unvested equity awards granted in prior years +$ +16,066,304 +$ +3,636,008 +$ +( 2,754,787 +) +Plus (less), year over year change in fair value of equity awards granted in prior years that vested in the year +$ +5,829,488 +$ +788,014 +$ +( 2,192,769 +) +Total +$ +32,675,932 +$ +14,736,737 +$ +1,228,134 +(2) +The non-PEO Named Executive Officers for each of the covered fiscal years are Messrs. Smith, Berns, Holcomb and Wexler. +(3) +The dollar amounts reported in this column represent the average amount of “compensation actually paid” to the other Named Executive Officers, as computed in accordance with Item 402(v) of Regulation S-K and do not reflect the total compensation actually realized or received by the Named Executive Officers . In accordance with these rules, these amounts reflect average Total compensation as set forth in the Summary Compensation Table for each year, adjusted as shown below. The fair value of performance unit awards was determined based on a Monte-Carlo simulation model that takes into account expected price movement of Patterson-UTI stock as compared to peer companies and relevant market indices, as of the relevant measurement dates. Assumptions used in the Monte-Carlo simulation model include assumptions regarding volatility, the risk-free interest rate, dividend yield, and stock beta. Due to differences in measurement dates, the assumptions used in these valuations could differ materially from the assumptions used to determine the fair value as of the grant date of such awards. +Average Compensation Actually Paid to Other Named Executive Officers +2022 +2021 +2020 +Average Summary Compensation Table Total +$ +3,563,545 +$ +2,696,782 +$ +1,089,349 +Less, average value of Stock Awards reported in Summary Compensation Table +$ +2,217,207 +$ +1,641,520 +$ +367,374 +Plus, average year-end fair value of outstanding and unvested equity awards granted in the year +$ +2,163,490 +$ +2,333,891 +$ +1,233,799 +Plus (less), average year over year change in fair value of outstanding and unvested equity awards granted in prior years +$ +4,604,211 +$ +1,002,038 +$ +( 769,185 +) +Plus (less), average year over year change in fair value of equity awards granted in prior years that vested in the year +$ +1,653,281 +$ +196,931 +$ +( 475,758 +) +Total +$ +9,767,320 +$ +4,588,122 +$ +710,831 +(4) +The peer group used for the calculation of Peer Group Total Shareholder Return is the Oilfield Service Index(OSX). +48 +(5) +The Company-Selected Measure is Operating Cash Flow , which is not defined by U.S. GAAP. Operating cash flow is defined herein as Adjusted EBITDA less cash capital expenditures (as adjusted for any Board-approved increase in capital expenditures after targets were set ). Adjusted EBITDA is defined herein as net income (loss) plus net interest expense, income tax expense (benefit) and depreciation, depletion, amortization and impairment expense (including impairment of goodwill), excluding any M&A related or restructuring charges (and, for 2020, excluding the impact of a $9.2 million charge to reduce the carrying value of a deposit for future sand purchases). +(6) +While SEC guidance under Item 402(v) of Regulation S-K does not permit the use of multi-year relative Total Shareholder Return as a permissible Company-Selected Measure for the table above, the Company views 3-year relative Total Shareholder Return as the most important measure used to link executive “compensation actually paid” to Company performance. +Other Financial and Non-Financial Measures Used +The Company considers the following financial and non-financial measures to be the most important measures used to link executive compensation actually paid to company performance: +Most Important Measures Used to Link Executive Compensation Actually Paid to Company Performance +Absolute Total Stockholder Return +Relative Total Stockholder Return +Operating Cash Flow +Adjusted EBITDA +Health, Safety and Environmental Performance +Please see “Compensation Discussion and Analysis” elsewhere in this proxy statement for additional information regarding these measures. +49 +Relationship Between Compensation Actually Paid and TSR, Net Income and Company-Selected Measure +The following chart(s) show a graphical relationship between Compensation Actually Paid (PEO and Average Other NEOs) to the Company’s TSR, Net Income, and Operating Cash Flow, as well as between the Company TSR and Peer Group TSR for the three-year period ended December 31, 2022: +Pay Versus TSR 2020-2022 +Pay Versus Net Income 2020-2022 +Pay Versus Operating Cash Flow 2020-2022 +50 +Indemnification Agreements +Patterson-UTI has entered into an indemnification agreement with each of the Named Executive Officers and each of its directors containing provisions that may require Patterson-UTI, among other things, to indemnify such executive officers and directors against liabilities that may arise by reason of their status or service as executive officers or directors (subject to certain exceptions) and to advance expenses incurred as a result of any proceeding against them as to which they could be indemnified. +51 +DIRECTOR COMPENSATION +The following table sets forth information concerning compensation for the fiscal year ended December 31, 2022 with respect to the directors of Patterson-UTI who are not executive officers: +Name +Fees earned +or paid in cash +($) +Stock awards +($)(1) +Option awards +($)(2) +All other +compensation +($) +Total +($) +Tiffany (TJ) Thom Cepak +$ +106,026 +$ +175,000 +$ +— +$ +— +$ +281,026 +Michael W. Conlon +$ +93,659 +$ +175,000 +$ +— +$ +— +$ +268,659 +Curtis W. Huff +$ +146,561 +$ +224,998 +$ +— +$ +— +$ +371,559 +Terry H. Hunt +$ +97,097 +$ +175,000 +$ +— +$ +— +$ +272,097 +Cesar Jaime +$ +64,283 +$ +175,000 +$ +— +$ +— +$ +239,283 +Janeen S. Judah +$ +96,562 +$ +175,000 +$ +— +$ +— +$ +271,562 +Julie Robertson +$ +64,958 +$ +175,000 +$ +— +$ +— +$ +239,958 +(1) +Amounts set forth represent the fair value at the date of grant as determined in accordance with FASB ASC Topic 718 with respect to restricted stock units awarded to the directors in the fiscal year ended December 31, 2022. For additional information related to the assumptions used and valuation of restricted stock units, see Note 12 to the consolidated financial statements in Patterson-UTI’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022. Mses. Cepak and Judah and Messrs. Conlon and Hunt received an award of 20,710 restricted stock units, and Mr. Huff received an award of 26,627 restricted stock units, on January 1, 2022 with a grant date value of $8.45 per restricted stock unit. In connection with their appointments to the Board of Directors, Ms. Robertson and Mr. Jaime each received an award of 11,041 restricted stock units on April 1, 2022 with a grant date value of $15.85 per restricted stock unit. As of December 31, 2022, each current director held unvested restricted stock units in the same amount granted on such dates. The restricted stock units awarded on January 1, 2022 fully vested on January 1, 2023. +(2) +No options were issued to directors during the fiscal year ended December 31, 2022. As of December 31, 2022, Messrs. Conlon, Huff and Hunt and Ms. Cepak held the following options to purchase shares of Common Stock: +Number of Securities Underlying +Unexercised Options (#) +Name +Exercisable +Unexercisable +Total +Tiffany (TJ) Thom Cepak +30,000 +— +30,000 +Michael W. Conlon +30,000 +— +30,000 +Curtis W. Huff +30,000 +— +30,000 +Terry H. Hunt +30,000 +— +30,000 +Directors who are also employees of Patterson-UTI do not receive compensation for serving as a director or as a member of a committee of the Board of Directors. All directors are reimbursed for reasonable out-of-pocket expenses incurred in connection with serving as a member of the Board of Directors. +The current compensation for non-employee directors is as follows: Each non-employee director receives an annual base cash retainer of $75,000 and restricted stock units on January 1 of each year with a grant date value of $175,000. The non-Executive Chairman receives an additional annual cash retainer of $50,000 and additional restricted stock units with a grant date value of $50,000. At times while the Board has an Executive Chairman, the Lead Director receives an additional annual cash retainer of $20,000. Each non-employee director receives additional annual cash retainers for the committees on which he or she serves as follows: +Chair +Member +Compensation Committee +$ +15,000 +$ +10,000 +Nominating and Corporate Governance Committee +$ +10,000 +$ +5,000 +Audit Committee +$ +20,000 +$ +10,000 +Sustainability Committee +$ +10,000 +$ +5,000 +52 +CERTAIN TRANSACTIONS +Patterson-UTI has a written policy with respect to related person transactions. In accordance with this policy, related person transactions are reviewed by the chair of the Audit Committee, who has full delegated authority to approve, disapprove, ratify, amend, terminate or rescind any such transaction (if the aggregate amount involved in such transaction is $1,000,000 or less), or direct that such transaction be submitted to the Audit Committee for consideration. Any such transaction involving an aggregate amount exceeding $1,000,000 is submitted to the Audit Committee for consideration. In approving or disapproving related person transactions, the relevant facts and circumstances of the related person transaction are considered, including whether such transaction is in, or not inconsistent with, the best interest of Patterson-UTI and whether, in appropriate cases, such transaction is on commercial terms at least as favorable to Patterson-UTI as would otherwise be available to or from an unrelated third party or to Patterson-UTI’s employees generally. Related person transactions generally include transactions in an amount that exceeds $100,000 between Patterson-UTI or any of its subsidiaries and an executive officer, a director (or nominee to become director), an immediate family member of any of the foregoing or any entity in which any of the foregoing has a 10% or greater beneficial ownership interest or in which they are an executive officer, general partner, principal or engaged in a similar position. Certain related person transactions have been pre-approved under the terms of the policy, including, subject to certain exceptions and limitations, the sale to or purchase from Patterson-UTI of goods and services by entities related to directors in the ordinary course of business that are immaterial to Patterson-UTI and with respect to which the director has no direct economic interest or decision making authority, transactions with passive institutional shareholders that are in the ordinary course of both Patterson-UTI’s and such other company’s business and transactions with another publicly traded company where the related party’s interest arises solely from beneficial ownership of more than 5% of the common stock of Patterson-UTI and being a passive institutional shareholder of the other publicly traded company’s equity securities. +In connection with the acquisition by REMY Capital Partners III, L.P. (“REMY Capital”) of an ownership interest in UTI Energy Corp. in March 1995, REMY Capital succeeded to a registration rights agreement with UTI. As the successor-in-interest to UTI, Patterson-UTI assumed this registration rights agreement pursuant to which REMY Capital has the right to require Patterson-UTI to use its reasonable efforts to register shares held by REMY Capital under the Securities Act of 1933, as amended. In the event that such rights are exercised in connection with a primary offering proposed by Patterson-UTI (or a secondary offering with which Patterson-UTI agrees to participate), REMY Capital would bear its pro rata share of the costs of the offering, other than legal, accounting and printing costs, all of which Patterson-UTI would bear. In the event that REMY Capital elects to exercise such rights other than in connection with an offering in which Patterson-UTI participates, REMY Capital would bear all costs of the offering. These rights continue so long as REMY Capital continues to own the Common Stock that it acquired in March 1995. As of the date of this proxy statement, REMY Capital continues to hold 545,000 shares of such Common Stock. +Mr. Berns, Executive Vice President and Chief Commercial Officer of Patterson-UTI, is an executive of REMY Investors, which is the general partner of REMY Capital. +53 +SECURITY OWNERSHIP OF CERTAIN +BENEFICIAL OWNERS AND MANAGEMENT +The following table sets forth, as of March 29, 2023 (except as otherwise indicated), the stock ownership of (i) the Named Executive Officers, directors and Board nominees, individually, (ii) all directors, Board nominees and executive officers as a group and (iii) each person known by Patterson-UTI to be the beneficial owner of more than 5% of Common Stock. As of March 29, 2023, we had 208,438,771 shares of common stock outstanding. +Name of Beneficial Owner +Amount and +Nature of +Beneficial +Ownership +Percent +of Class +Beneficial Owners of more than 5% of Patterson-UTI’s Common Stock: +BlackRock, Inc. +41,182,824 +(1) +19.3 +% +The Vanguard Group +26,004,724 +(2) +12.2 +% +Macquarie +14,439,074 +(3) +6.8 +% +Directors and Named Executive Officers: +William Andrew Hendricks, Jr. +2,426,156 +(4) +1.1 +% +C. Andrew Smith +269,649 +(5) +* +Kenneth N. Berns +1,173,398 +(6) +* +James M. Holcomb +224,507 +(7) +* +Seth D. Wexler +188,833 +(8) +* +Tiffany (TJ) Thom Cepak +141,690 +(9) +* +Michael W. Conlon +166,264 +(10) +* +Curtis W. Huff +374,235 +(11) +* +Terry H. Hunt +150,855 +(12) +* +Cesar Jaime +11,041 +(13) +- +Janeen S. Judah +111,274 +(14) +* +Julie J. Robertson +11,041 +(15) +- +All current directors and executive officers as a group (12 persons) +5,248,943 +(16) +2.4 +% +* indicates less than 1.0% +(1) +Based solely on a Schedule 13G/A filed by BlackRock, Inc. with the SEC on January 23, 2023. According to the report, BlackRock, Inc. has sole voting power with respect to 40,226,349 shares and sole dispositive power with respect to 41,182,824 shares. The address of the principal business office of BlackRock, Inc. is 55 East 52nd Street, New York, New York 10055. +(2) +Based solely on a Schedule 13G/A filed by The Vanguard Group with the SEC on February 9, 2023. According to the report, The Vanguard Group has shared voting power with respect to 298,284 shares, sole dispositive power with respect to 25,518,365 shares and shared dispositive power with respect to 486,359 shares. The address of the principal business office of The Vanguard Group is 100 Vanguard Blvd., Malvern, Pennsylvania 19355. +(3) +Based solely on a Schedule 13G/A filed by Macquarie Group Limited, Macquarie Management Holdings Inc and Macquarie Investment Management Business Trust ("Macquarie") with the SEC on February 14, 2023. According to the report, Macquarie has sole voting and dispositive power with respect to 14,303,611 shares. The principal business address of Macquarie Group Limited is 50 Martin Place Sydney, New South Wales, Australia. The principal business address of Macquarie Management Holdings Inc. and Macquarie Investment Management Business Trust is 2005 Market Street, Philadelphia, PA 19103. +(4) +Includes shares underlying stock options held by Mr. Hendricks that are presently exercisable to purchase 862,650 shares. Includes 296,933 shares underlying restricted stock units that will vest within 60 days. Does not include 237,868 shares underlying restricted stock units that will not vest within 60 days. +(5) +Includes 100,600 shares underlying restricted stock units held by Mr. Smith that will vest within 60 days. Does not include 86,401 shares underlying restricted stock units that will not vest within 60 days. +(6) +Includes shares underlying stock options held by Mr. Berns that are presently exercisable to purchase 536,800 shares. Includes 108,666 shares underlying restricted stock units that will vest within 60 days. Does not include 84,134 shares underlying restricted stock units that will not vest within 60 days. The Common Stock beneficially owned by Mr. Berns includes 34,000 shares held in trust(s) for which he is the trustee. Does not include shares of Common Stock beneficially owned by REMY Investors. Mr. Berns disclaims beneficial ownership of such shares beneficially owned by REMY Investors. +(7) +Includes 61,400 shares underlying restricted stock units held by Mr. Holcomb that will vest within 60 days. Does not include 48,601 shares underlying restricted stock units that will not vest within 60 days. +(8) +Includes 69,466 shares underlying restricted stock units held by Mr. Wexler that will vest within 60 days. Does not include 60,135 shares underlying restricted stock units that will not vest within 60 days. +54 +(9) +Includes shares underlying presently exercisable stock options held by Ms. Cepak to purchase 30,000 shares. Does not include 10,391 shares underlying unvested restricted stock units that will not vest within 60 days. +(10) +Includes shares underlying presently exercisable stock options held by Mr. Conlon to purchase 30,000 shares. Does not include 10,391 shares underlying unvested restricted stock units that will not vest within 60 days. +(11) +Includes shares underlying presently exercisable stock options held by Mr. Huff to purchase 30,000 shares. Does not include 13,361 shares underlying unvested restricted stock units that will not vest within 60 days. +(12) +Includes shares underlying presently exercisable stock options held by Mr. Hunt to purchase 30,000 shares. Does not include 10,391 shares underlying unvested restricted stock units that will not vest within 60 days. +(13) +Does not include 10,391 shares underlying unvested restricted stock units held by Mr. Jaime that will not vest within 60 days. +(14) +Does not include 10,391 shares underlying unvested restricted stock units held by Ms. Judah that will not vest within 60 days. +(15) +Does not include 10,391 shares underlying unvested restricted stock units held by Ms. Robertson that will not vest within 60 days. +(16) +Includes shares underlying stock options that are presently exercisable to purchase 1,519,450 shares of Common Stock. Includes 637,065 shares underlying restricted stock units held by certain directors and executive officers that will vest within 60 days. Does not include 592,846 shares underlying restricted stock units held by such individuals that will not vest within 60 days. Does not include shares of Common Stock beneficially owned by REMY Investors. +Except as stated herein, each stockholder has sole voting and investment power with respect to Common Stock included in the above table. There are no arrangements known to Patterson-UTI which may result in a change in control. The business address of each of our directors and officers is 10713 West Sam Houston Parkway North, Suite 800, Houston, Texas 77064. +55 +Equity Compensation Plan Information +The following table presents equity compensation plan information as of December 31, 2022. This information is presented without regard to the Plan Amendment for which stockholder approval is being requested under Proposal 3: +Equity Compensation Plan Information +Plan Category +Number of +Securities to +be Issued upon +Exercise of +Outstanding +Options, +Warrants and +Rights +Weighted - +Average +Exercise +Price of +Outstanding +Options, +Warrants and +Rights (2) +Number of +Securities +Remaining +Available +for Future +Issuance +under Equity +Compensation +Plans +(Excluding +Securities +Reflected +in Column(a)) +(a) +(b) +(c) +Equity compensation plans approved by security holders(1) +2,905,150 +$ +22.19 +3,689,156 +Equity compensation plans not approved by security holders +— +$ +— +— +Total +2,905,150 +$ +22.19 +3,689,156 +(1) +The 2021 Plan provides for awards of incentive stock options, non-incentive stock options, tandem and freestanding stock appreciation rights, restricted stock awards, other stock unit awards, performance share awards, performance unit awards and dividend equivalents to key employees, officers and directors, which are subject to certain vesting and forfeiture provisions. All options are granted with an exercise price equal to or greater than the fair market value of the common stock at the time of grant. The vesting schedule and term are set by the Compensation Committee of the Board of Directors, except that the Board has the same power as the Compensation Committee with respect to awards to directors. All securities remaining available for future issuance under equity compensation plans approved by security holders in column (c) are available under this plan. In addition to the 2021 Plan, this plan category also includes the 2014 Plan and the 2005 Plan. No future awards will be granted under the 2014 Plan and the 2005 Plan. All options were granted with an exercise price equal to the fair market value of the related common stock at the time of grant. +(2) +This column reflects the weighted average exercise price of options granted under the 2014 Plan and the 2005 Plan that were outstanding on December 31, 2022. No options have been granted under the 2021 Plan. +56 +AUDIT COMMITTEE REPORT +The following report of the Audit Committee does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other Patterson-UTI filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent Patterson-UTI specifically incorporates this report by reference therein. +The Audit Committee members are Mses. Cepak (chair), Judah and Robertson and Mr. Huff, each of whom is independent within the meaning of applicable rules under the Exchange Act and within the meaning of the Nasdaq listing standards. The Board has determined that Ms. Cepak and Mr. Huff are “audit committee financial experts” within the meaning of applicable SEC rules. +The Audit Committee oversees management’s conduct of Patterson-UTI’s accounting and financial reporting process, including review of: (i) financial reports and other financial information provided by Patterson-UTI to the public and government/regulatory bodies, (ii) Patterson-UTI’s system of internal control over financial reporting, and (iii) the annual independent audit of Patterson-UTI’s consolidated financial statements and internal control over financial reporting. +The Audit Committee’s role is one of review, and it recognizes that Patterson-UTI’s management is responsible for preparing Patterson-UTI’s consolidated financial statements and the independent auditors are responsible for auditing those financial statements. In fulfilling its review and oversight responsibilities, the Audit Committee reviewed and discussed with management the audited financial statements included in Patterson-UTI’s Annual Report on Form 10-K for the year ended December 31, 2022, including a discussion of the quality, not just the acceptability, of the accounting principles used, the reasonableness of significant judgments made by management, and the clarity of disclosures provided in the financial statements. The Audit Committee also discussed with management the basis for their assertion that Patterson-UTI maintained effective internal control over financial reporting as of December 31, 2022. +The Audit Committee discussed with Patterson-UTI’s independent registered public accounting firm (PricewaterhouseCoopers LLP) the overall scope and plans for their integrated audit. The Audit Committee met with PricewaterhouseCoopers LLP, with and without management present, to discuss the results of their integrated audit, their evaluation of Patterson-UTI’s internal control over financial reporting and the overall quality of Patterson-UTI’s financial reporting. The Audit Committee also reviewed with PricewaterhouseCoopers LLP their judgments as to the quality, not just the acceptability, of Patterson-UTI’s accounting principles and discussed such other matters as are required by the applicable requirements of the Public Company Accounting Oversight Board and the SEC. +The Audit Committee has received and reviewed the written disclosures and the letter from PricewaterhouseCoopers LLP required by the Public Company Accounting Oversight Board regarding their independence, and their communications with the Audit Committee concerning independence, and has discussed with PricewaterhouseCoopers LLP its independence. +Taking the foregoing into consideration, the undersigned Audit Committee members recommended to the Board of Directors that the Board approve the inclusion of Patterson-UTI’s audited financial statements and management’s report on internal control over financial reporting in the Annual Report on Form 10-K for the fiscal year ended December 31, 2022. +Audit Committee of the Board of Directors: +Tiffany (TJ) Thom Cepak, Chair +Curtis W. Huff +Janeen S. Judah +Julie J. Robertson +57 +PricewaterhouseCoopers LLP Fees for Fiscal Years 2022 and 2021 +In 2022 and 2021, Patterson-UTI and its subsidiaries incurred fees for services provided by PricewaterhouseCoopers LLP. +Description +Fees Incurred in +Fiscal Year +2022 +Fees Incurred in +Fiscal Year +2021 +Audit fees +$ +2,015,000 +$ +2,775,000 +Audit-related fees +— +146,738 +Tax fees +246,600 +60,000 +All other fees +9,105 +2,893 +Total +$ +2,270,705 +$ +2,984,631 +The Audit Committee appoints the independent registered public accounting firm. The Audit Committee or Ms. Cepak, as Chair of the Audit Committee, approves all other engagements of the independent registered public accounting firm in advance. In the event Ms. Cepak approves any such engagement, she discusses such approval with the Audit Committee at its next meeting. +“Audit fees” relate to audit services of PricewaterhouseCoopers LLP for fiscal 2022 and 2021 consisting of the integrated audit of Patterson-UTI’s consolidated financial statements and internal control over financial reporting, and quarterly reviews of Patterson-UTI’s interim financial statements and the audits of certain subsidiaries. “Audit-related fees” for 2021 relate to the performance of certain procedures in connection with our acquisition of Pioneer Energy Services, Corp. and the filing of various registration statements and Exchange Act reports. “Tax fees” include federal, state, local and foreign tax compliance and related matters. “All other fees” consists of annual subscription fees to software products. The Audit Committee Charter includes procedures under which the Audit Committee or its delegate approves in advance all audit and non-audit services (subject to any de minimis exceptions permitted by law for non-audit services, which must, in any event, be approved annually by the Audit Committee prior to completion of the annual audit) provided by the Company's independent auditors. The Audit Committee or Ms. Cepak, as Chair of the Audit Committee, approved in advance all of the services described above. +The Audit Committee has discussed the non-audit services provided by PricewaterhouseCoopers LLP and the related fees and has considered whether those services and fees are compatible with maintaining auditor independence. The Audit Committee determined that such non-audit services were consistent with the independence of PricewaterhouseCoopers LLP. +58 +OTHER MATTERS +Other Business +As of the date of this proxy statement, management of Patterson-UTI was not aware of any matter to be presented at the Meeting other than as set forth herein. If any other matters are properly brought before the Meeting, however, the shares represented by valid proxies will be voted with respect to such matters in accordance with the judgment of the persons voting them. +Stockholder Proposals for 2024 Annual Meeting +Proposals for Inclusion in the Proxy Statement. Pursuant to Rule 14a-8 under the Exchange Act, stockholders may present proper proposals for inclusion in Patterson-UTI’s proxy statement and for consideration at the next annual meeting of stockholders by submitting their proposals to Patterson-UTI in a timely manner. In order to be included in Patterson-UTI’s proxy statement for the 2024 annual meeting of stockholders, proposals from stockholders must be received by Patterson-UTI no later than the close of business on December 13, 2023, and must otherwise comply with the requirements of Rule 14a-8. +Proposals or Director Nominations not Included in the Proxy Statement. Patterson-UTI’s bylaws establish an advance notice procedure with regard to stockholder proposals and director nominations not included in Patterson-UTI’s proxy statement. For director nominations not included in Patterson-UTI’s proxy statement or stockholder proposals to be properly brought before the 2024 annual meeting by a stockholder, the stockholder must be a stockholder of record on the date of the giving of the notice provided for in Patterson-UTI’s bylaws and on the record date for the determination of stockholders entitled to vote at such annual meeting and must give timely notice of such business in writing to the Secretary of Patterson-UTI. To be timely with respect to the 2024 annual meeting of stockholders, a stockholder’s notice must be delivered to or mailed and received by the close of business at Patterson-UTI’s principal executive offices not earlier than the close of business on February 9, 2024 and not later than the close of business on March 10, 2024, assuming the date of the 2024 annual meeting is not changed by more than 30 days before or after the anniversary date of the 2023 annual meeting. A stockholder’s notice to the Secretary of Patterson-UTI shall contain certain information specified in Patterson-UTI’s bylaws regarding the stockholder and the proposed nominee or stockholder proposal. See Article I, Section 8 of Patterson-UTI’s bylaws. In addition to giving notice pursuant to the advance notice provisions of Patterson-UTI’s bylaws, a stockholder who intends to solicit proxies in support of nominees submitted under these advance notice provisions must also provide the notice required pursuant to Rule 14a-19, the SEC’s universal proxy rule, to the Secretary of the Company regarding such intent no later than April 9, 2024. +Proxy Access Procedures. Patterson-UTI’s bylaws permit a stockholder, or group of up to 20 stockholders, owning continuously for at least three years shares of Patterson-UTI stock representing an aggregate of at least 3% of our outstanding shares, to nominate and include in our proxy materials director nominees constituting up to the greater of two or 20% of our Board, provided that the stockholder(s) and nominee(s) satisfy the requirements in Patterson-UTI’s bylaws. See Article I, Section 11 of Patterson-UTI’s bylaws. Written notice of proxy access director nominees must be received by the close of business at Patterson-UTI’s principal executive offices not earlier than December 13, 2023 and not later than January 12, 2024, assuming the date of the 2024 annual meeting is not changed by more than 30 days before or after the anniversary date of the 2023 annual meeting. +59 +Annual Report +A copy of Patterson-UTI’s annual report on Form 10-K accompanies this proxy statement only if you have requested that a copy of this proxy statement be mailed to you. The annual report on Form 10-K also is available electronically by following the instructions in the Notice. The annual report on Form 10-K is not incorporated into this proxy statement and is not considered proxy-soliciting material. +A copy of the annual report on Form 10-K, including the financial statements and financial statement schedules, but excluding exhibits, may be obtained by stockholders without charge by written request to the Secretary of Patterson-UTI at 10713 West Sam Houston Parkway North, Suite 800, Houston, Texas 77064 or by accessing it on Patterson-UTI’s website at www.patenergy.com in the investors section under the “Financial Information” link. Patterson-UTI will furnish the exhibits to Form 10-K upon request and upon receipt of a reproduction fee. +Delivery of Documents to Stockholders Sharing an Address +The SEC’s rules allow companies to send a single Notice or single copy of annual reports, proxy statements, prospectuses and other disclosure documents to two or more stockholders sharing the same address, subject to certain conditions. These rules are intended to provide greater convenience for stockholders, and cost savings for companies, by reducing the number of duplicate documents that stockholders receive. Unless different instructions were previously provided to Patterson-UTI, if two or more stockholders share a mailing address, such stockholders were deemed to have consented to receiving only one copy, and a single copy of this proxy statement and Patterson-UTI's annual report on Form 10-K (and/or a single copy of the Notice) has been sent to their address. If instructions for separate delivery have been received from any stockholder, Patterson-UTI will deliver promptly separate copies of the relevant disclosure materials. Similarly, if multiple copies of disclosure materials are being delivered to a single address, stockholders can request a single copy for future deliveries. Written requests should be submitted to the Secretary of Patterson-UTI at 10713 West Sam Houston Parkway North, Suite 800, Houston, Texas 77064. Requests may also be made by calling Investor Relations at (281) 765-7100. +60 +ANNEX A +PATTERSON-UTI ENERGY, INC. +2021 LONG-TERM INCENTIVE PLAN +(as proposed to be amended) +Patterson-UTI Energy, Inc. (the “Company”), a Delaware corporation, hereby establishes and adopts the following 2021 Long-Term Incentive Plan (as amended from time to time, the “Plan”) effective as of April 9, 2021 (the “Effective Date”) and as amended effective June 8, 2023 . +1. PURPOSE OF THE PLAN +The purpose of the Plan is to assist the Company and its Subsidiaries in attracting and retaining selected individuals to serve as directors, employees, consultants and/or advisors of the Company who are expected to contribute to the Company’s success and to achieve long-term objectives which will inure to the benefit of all stockholders of the Company through the additional incentives inherent in the Awards hereunder. +2. DEFINITIONS +2.1 “Award” shall mean any Option, Stock Appreciation Right, Restricted Stock Award, Performance Award, Performance Unit, Other Stock Unit Award or any other right, interest or option relating to Shares or other property (including cash) granted pursuant to the provisions of the Plan. +2.2 “ Award Agreement ” shall mean any agreement, contract or other instrument or document evidencing any Award granted by the Committee hereunder, which shall be in written or electronic form, as designated by the Committee. +2.3 “ Board ” shall mean the board of directors of the Company. +2.4 “ Change of Control ” shall mean, except as otherwise provided in an Award Agreement, the occurrence of any of the following: +(a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended) (a “ Covered Person ”) of beneficial ownership (within the meaning of rule 13d-3 promulgated under the Exchange Act) of 35% or more of either (i) the then outstanding shares of the common stock of the Company (the “ Outstanding Company Common Stock ”), or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “ Outstanding Company Voting Securities ”); provided, however, that for purposes of this Section 2.4(a) , the following acquisitions shall not constitute a Change of Control: (A) any acquisition directly from the Company, (B) any acquisition by the Company, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any entity controlled by the Company, or (D) any acquisition by any entity pursuant to a transaction which complies with clauses (A), (B) and (C) of Section 2.4(c) ; or +(b) Individuals who, as of the Effective Date, constitute the Board (the “ Incumbent Board ”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the Effective Date whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Covered Person other than the Board; or +(c) Consummation of (i) a reorganization, merger or consolidation or sale of the Company or any subsidiary of the Company, or (ii) a disposition of all or substantially all of the assets of the Company (a “ Business Combination ”), in each case, unless, immediately following such Business Combination: (A) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, direct or indirectly, more than 65% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be; (B) no Covered Person (excluding any employee benefit plan (or related trust) of the Company or such +corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 35% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation, except to the extent that such ownership existed prior to the Business Combination; and (C) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or, if earlier, of the action of the Board, providing for such Business Combination. +2.5 “ Code ” shall mean the Internal Revenue Code of 1986, as amended from time to time. +2.6 “ Committee ” shall mean the Compensation Committee of the Board, consisting of no fewer than two Directors, each of whom is (a) a “Non-Employee Director” within the meaning of Rule 16b-3 of the Exchange Act and (b) an “independent director” for purpose of the rules and regulations of the Nasdaq Stock Market. +2.7 “ Director ” shall mean a non-employee member of the Board. +2.8 “ Disability ” shall, except as otherwise provided in an Award Agreement, exist (a) if the Participant qualifies for long-term disability benefits under a long-term disability program sponsored by the Company in which employees participate generally or (b) if the Company does not sponsor such a long-term disability program, if the Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months. +2.9 “ Employee ” shall mean any employee of the Company or any Subsidiary and any prospective employee conditioned upon, and effective not earlier than, such person’s becoming an employee of the Company or any Subsidiary. Solely for purposes of the Plan, an Employee shall also mean any consultant or advisor who provides services to the Company or any Subsidiary, so long as such person (a) renders bona fide services that are not in connection with the offer and sale of the Company’s securities in a capital raising transaction and (b) does not directly or indirectly promote or maintain a market for the Company’s securities. +2.10 “ Exchange Act ” shall mean the Securities Exchange Act of 1934, as amended. +2.11 “ Fair Market Value ” shall mean, with respect to any property other than Shares, the market value of such property determined by such methods or procedures as shall be established from time to time by the Committee. The Fair Market Value of Shares as of any date shall be the per Share closing price of the Shares as reported on the Nasdaq Stock Market on that date (or if there were no reported prices on such date, on the last preceding date on which the prices were reported) or, if the Company is not then listed on the Nasdaq Stock Market, on the principal national securities exchange on which the Company is listed, and if the Company is not then listed on the Nasdaq Stock Market or any national securities exchange, the Fair Market Value of Shares shall be determined by the Committee in its sole discretion using appropriate criteria. +2.12 “ Incentive Stock Option ” shall mean an Option intended to qualify as an “incentive stock option” as defined in Section 422 of the Code. +2.13 “ Option ” shall mean any right granted to a Participant under the Plan allowing such Participant to purchase Shares at such price or prices and during such period or periods as the Committee shall determine. +2.14 “ Participant ” shall mean an Employee or Director who is selected by the Committee to receive an Award under the Plan. +2.15 “ Performance Award ” shall mean any Award of Performance Shares or Performance Units granted pursuant to Article 9 . +2.16 “ Performance Period ” shall mean that period established by the Committee at the time any Performance Award is granted or at any time thereafter during which any performance goals specified by the Committee with respect to such Award are to be measured. +2.17 “ Performance Share ” shall mean any grant pursuant to Section 9 of a unit valued by reference to a designated number of Shares, which value may be paid to the Participant by delivery of such property as the Committee shall determine, including cash, Shares, other property, or any combination thereof, upon achievement of such performance goals during the Performance Period as the Committee shall establish at the time of such grant or thereafter. +2.18 “ Performance Unit ” shall mean any grant pursuant to Section 9 of a unit valued by reference to a designated amount of property (including cash) other than Shares, which value may be paid to the Participant by delivery of such property as the Committee shall determine, including cash, Shares, other property, or any combination thereof, upon achievement of such performance goals during the Performance Period as the Committee shall establish at the time of such grant or thereafter. +2.19 “ Prior Plans ” shall mean, collectively, the Company’s 2005 Long-Term Incentive Plan, as amended, and the Company’s Amended and Restated 2014 Long-Term Incentive Plan, as amended. +2.20 “ Restricted Stock ” shall mean any Share issued with the restriction that the holder may not sell, transfer, pledge or assign such Share and with such other restrictions as the Committee, in its sole discretion, may impose (including any restriction on the right to vote such Share and the right to receive any dividends), which restrictions may lapse separately or in combination at such time or times, in installments or otherwise, as the Committee may deem appropriate in its sole discretion. +2.21 “ Shares ” shall mean the shares of common stock of the Company, par value $.01 per share. +2.22 “ Stock Appreciation Right ” shall mean the right granted to a Participant pursuant to Section 6 . +2.23 “ Subsidiary ” shall mean any corporation or other entity, whether domestic or foreign, in which the Company has or obtains, directly or indirectly, a proprietary interest of more than 50% by reason of stock ownership or otherwise. +2.24 “ Substitute Awards ” shall mean Awards granted or Shares issued by the Company in assumption of, or in substitution or exchange for, awards previously granted, or the right or obligation to make future awards, by a company acquired by the Company or any Subsidiary or with which the Company or any Subsidiary combines. +3. SHARES SUBJECT TO THE PLAN +3.1 Number of Shares . +(a) Subject to adjustment as provided in Section 11.2 and this Section 3.1 , the total number of Shares authorized for grant under the Plan shall be the sum of (i) 8,600,000 14,045,000 Shares, plus (ii) the total number of Shares remaining available for grant under the Prior Plans as of the Effective Date. Any Shares that are subject to Awards of Options or Stock Appreciation Rights shall be counted against this limit as one Share for every one Share granted. Any Shares that are subject to Awards other than Options or Stock Appreciation Rights shall be counted against this limit as two Shares for every one Share awarded. Upon stockholder approval of the Plan, no further awards will be granted under any Prior Plans. +(b) If any Shares subject to an Award or to an award under the Prior Plans are forfeited, expire or otherwise terminate without issuance of such Shares, or any Award or award under the Prior Plans is settled for cash or otherwise does not result in the issuance of all or a portion of the Shares subject to such Award, the Shares shall, to the extent of such forfeiture, expiration, termination, cash settlement or non-issuance, again be (or become with respect to Shares subject to awards under the Prior Plans) available for grant subject to Awards under the Plan, subject to Section 3.1(d) below. Notwithstanding the foregoing, the following Shares shall not become available for grant under the Plan: (i) Shares subject to an Option or Stock Appreciation Right or to a stock option or stock appreciation right under the Prior Plans that are used to satisfy the exercise price of stock options, are not issued upon the stock-settlement of a stock appreciation right, or are withheld by the Company for income or employment taxes on exercise of an option or stock appreciation right or (ii) Shares repurchased on the open market with the proceeds of the option exercise price. +(c) Substitute Awards shall not reduce the Shares authorized for grant under the Plan. Additionally, in the event that a company acquired by the Company or any Subsidiary or with which the Company or any Subsidiary combines has shares available under a pre-existing plan approved by shareholders and not adopted in contemplation of such acquisition or combination, the shares available for grant pursuant to the terms of such pre-existing plan (as adjusted, to the extent appropriate, using the exchange ratio or other adjustment or valuation ratio or formula used in such acquisition or combination to determine the consideration payable to the holders of common stock of the entities party to such acquisition or combination) may be used for Awards under the Plan and shall not reduce the Shares authorized for grant under the Plan; provided that Awards using such available shares shall only be made (i) until the last date that awards or grants could have been made under the terms of the pre-existing plan, absent the acquisition or combination, and (ii) to individuals who were not Employees or Directors prior to such acquisition or combination. +(d) Any Shares that become available for grant pursuant to Section 3.1(b) shall be added to the share reserve set forth in Section 3.1(a): (i) as one Share if such Shares were subject to options or stock appreciation rights granted under the Plan or Prior Plans or (ii) as two Shares if such Shares were subject to awards other than options or stock appreciation rights that were granted under the Plan or the Prior Plans. +3.2 Character of Shares . Any Shares issued hereunder may consist, in whole or in part, of authorized and unissued shares, treasury shares or shares purchased in the open market or otherwise. +3.3 Minimum Vesting for Awards . Notwithstanding any other provision of the Plan to the contrary, Awards granted under the Plan (other than cash-based awards) shall vest no earlier than the first anniversary of the date on which the Award is granted; provided, however, that the following Awards shall not be subject to the foregoing minimum vesting requirement: (i) Substitute Awards, (ii) Shares delivered in lieu of fully-vested cash obligations, (iii) Awards to non-employee Directors that vest on the earlier of the one-year anniversary of the date of grant and the next annual meeting of stockholders which is at least 50 weeks after the immediately preceding year’s annual meeting, and (iv) any additional Awards the Committee may grant, up to a maximum of 5% of the available share reserve authorized for issuance under the Plan pursuant to Section 3.1 (subject to adjustment under Section 11.2 ); provided, further, that the foregoing restriction does not apply to the Committee’s discretion to provide for accelerated exercisability or vesting of any Award, including in cases of retirement, death, Disability or a Change in Control, in the terms of the Award Agreement or otherwise. +3.4 Limits on Non-Employee Director Compensation . The aggregate dollar value of equity-based Awards (based on the grant date fair value of such Awards for financial reporting purposes) and cash compensation granted under the Plan or otherwise during any fiscal year to any non-employee director for services provided as a director shall not exceed $750,000; provided, however, that in the fiscal year in which a non-employee director first joins the Board or during any fiscal year in which a non-employee director is designated as Chairman of the Board or Lead Director, the maximum aggregate dollar value of equity-based and cash compensation granted to the non-employee director for services provided as a director may be up to $1,000,000. +4. ELIGIBILITY AND ADMINISTRATION +4.1 Eligibility. Any Employee or Director shall be eligible to be selected as a Participant. +4.2 Administration. +(a) The Plan shall be administered by the Committee. The Committee shall have full power and authority, subject to the provisions of the Plan and subject to such orders or resolutions not inconsistent with the provisions of the Plan as may from time to time be adopted by the Board, to, in its sole discretion: (i) select the Employees and Directors to whom Awards may from time to time be granted hereunder; (ii) determine the type or types of Awards, not inconsistent with the provisions of the Plan, to be granted to each Participant hereunder; (iii) determine the number of Shares to be covered by each Award granted hereunder; (iv) determine the terms and conditions, not inconsistent with the provisions of the Plan, of any Award granted hereunder; (v) determine whether, to what extent and under what circumstances Awards may be settled in cash, Shares or other property, subject to Section 8.1 ; (vi) determine whether, to what extent, and under what circumstances cash, Shares, other property and other amounts payable with respect to an Award made under the Plan shall be (A) deferred either automatically or at the election of the Participant or (B) accelerated; (vii) determine whether, to what extent and under what circumstances any Award shall be canceled or suspended; (viii) interpret and administer the Plan and any instrument or agreement entered into under or in connection with the Plan, including any Award Agreement; (ix) correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award in the manner and to the extent that the Committee shall deem desirable to carry it into effect; (x) establish such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of the Plan; (xi) determine whether any Award (other than Options or Stock Appreciation Rights) will have Dividend Equivalents; and (xii) make any other determination and take any other action that the Committee deems necessary or desirable for administration of the Plan. Notwithstanding the foregoing, the Board shall have the same powers as the Committee with respect to Awards to Directors. +(b) Decisions of the Committee shall be final, conclusive and binding on all persons or entities, including the Company, any Participant, and any Subsidiary. A majority of the members of the Committee may determine its actions and fix the time and place of its meetings. +(c) To the extent not inconsistent with applicable law or the rules and regulations of the Nasdaq Stock Market (or any other principal national securities exchange on which the Company is then listed), the Committee may delegate to a committee of one or more directors of the Company or, to the extent permitted by law, to one or more executive officers or a committee of executive officers the right to grant Awards to Employees who are not Directors or executive officers of the Company and the authority to take action on behalf of the Committee pursuant to the Plan to cancel or suspend Awards to Employees who are not Directors or executive officers of the Company; provided, however, (i) the resolution providing such authorization sets forth the total number of Shares subject to such Awards that such officer(s) may grant; and (ii) the officer(s) shall report periodically to the Committee regarding the nature and scope of the Awards granted pursuant to the authority delegated. +5. OPTIONS +5.1 Grant of Options . Options may be granted hereunder to Participants either alone or in addition to other Awards granted under the Plan; provided that Incentive Stock Options may be granted only to eligible Employees of the Company or of any parent or subsidiary corporation (as permitted by Section 422 of the Code and the regulations thereunder). Any Option shall be subject to the terms and conditions of this Article 5 and to such additional terms and conditions, not inconsistent with the provisions of the Plan, as the Committee shall determine in its sole discretion. +5.2 Award Agreements . All Options granted pursuant to this Article 5 shall be evidenced by an Award Agreement in such form and containing such terms and conditions as the Committee shall determine which are not inconsistent with the provisions of the Plan. The terms of Options need not be the same with respect to each Participant. Granting of an Option pursuant to the Plan shall impose no obligation on the recipient to exercise such Option. Any individual who is granted an Option pursuant to this Article 5 may hold more than one Option granted pursuant to the Plan at the same time. The Award Agreement also shall specify whether the Option is intended to qualify as an Incentive Stock Option. +5.3 Option Price. Other than in connection with Substitute Awards or an adjustment in connection with Section 11.2 , the option price per each Share purchasable under any Option granted pursuant to this Article 5 shall not be less than 100% of the Fair Market Value of such Share on the date of grant of such Option. +5.4 Option Term. The term of each Option shall be fixed by the Committee in its sole discretion; provided that no Option shall be exercisable after the expiration of ten years from the date the Option is granted other than as a result of any extension of the term in compliance with applicable law as provided in an Award Agreement. +5.5 Exercise of Options. Vested Options granted under the Plan shall be exercised by the Participant or by a Permitted Assignee thereof (or by the Participant’s executors, administrators, guardian or legal representative, as may be provided in an Award Agreement) as to all or part of the Shares covered thereby, by the giving of written notice of exercise to the Company or its designated agent, specifying the number of Shares to be purchased, accompanied by payment of the full purchase price for the Shares being purchased. Unless otherwise provided in an Award Agreement, full payment of such purchase price shall be made at the time of exercise and shall be made (a) in cash or cash equivalents (including certified check or bank check or wire transfer of immediately available funds), (b) by tendering previously acquired Shares (either actually or by attestation, valued at their then Fair Market Value) that have been owned for a period of at least six months (or such other period to avoid accounting charges against the Company’s earnings), (c) with the consent of the Committee, by delivery of other consideration (including, where permitted by law and the Committee, other Awards) having a Fair Market Value on the exercise date equal to the total purchase price, (d) with the consent of the Committee, by withholding Shares otherwise issuable in connection with the exercise of the Option, (e) through any other method specified in an Award Agreement, or (f) any combination of any of the foregoing. The notice of exercise, accompanied by such payment, shall be delivered to the Company at its principal business office or such other office as the Committee may from time to time direct, and shall be in such form, containing such further provisions consistent with the provisions of the Plan, as the Committee may from time to time prescribe. In no event may any Option granted hereunder be exercised for a fraction of a Share. No adjustment shall be made for cash dividends or other rights for which the record date is prior to the date of such issuance. +5.6 Vesting. Subject to Section 3.3 , the vesting schedule shall be set forth in the Award Agreement. +5.7 Incentive Stock Options. The Committee may grant Options intended to qualify as Incentive Stock Options to any employee of the Company or any subsidiary corporation (as defined in Section 424 of the Code), subject to the requirements of Section 422 of the Code. Notwithstanding anything in Section 3.1 to the contrary and solely for the purposes of determining whether Shares are available for the grant of Incentive Stock Options under the Plan, the maximum aggregate number of Shares with respect to which Incentive Stock Options may be granted under the Plan shall be the number of Shares authorized for grant under Section 3.1 . +5.8 Form of Settlement. In its sole discretion, the Committee may provide, at the time of grant, that the Shares to be issued upon an Option’s exercise shall be in the form of Restricted Stock or other similar securities, or if provided for in the Award Agreement, may reserve the right to provide so after the time of grant. +5.9 No Repricing. Notwithstanding anything in the Plan to the contrary, except in connection with a corporate transaction involving the Company (including, without limitation, any stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination, or exchange of shares), the terms of outstanding Awards may not be amended without stockholder approval to (a) reduce the option price of outstanding Options, (b) cancel outstanding Options in exchange for cash, other awards or Options with an option price that is less than the option price of the original Options, (c) take any other action with respect to an Option that would be treated as a repricing under the rules and regulations of the principal national securities exchange on which they are listed or (d) permit the grant of any Options that contains a so-called “reload” feature under which additional Options or other Awards are granted automatically to the Participant upon exercise of the original Option. +6. STOCK APPRECIATION RIGHTS +6.1 Grant and Exercise . The Committee may provide Stock Appreciation Rights (a) in conjunction with all or part of any Option granted under the Plan (“ Tandem Stock Appreciation Right ”), (b) in conjunction with all or part of any Award (other than an Option) granted under the Plan, or (c) without regard to any Option or other Award (a “ Freestanding Stock Appreciation Right ”), in each case, upon such terms and conditions as the Committee may establish in its sole discretion. +6.2 Terms and Conditions . Stock Appreciation Rights shall be subject to such terms and conditions, not inconsistent with the provisions of the Plan, as shall be determined from time to time by the Committee, including the following: +(a) Except in the case of Substitute Awards or in connection with an adjustment provided in Section 11.2 , the grant price of a Stock Appreciation Right shall not be less than the Fair Market Value of one Share on such date of grant of the right. Upon the exercise of a Stock Appreciation Right, the holder shall have the right to receive the excess of (i) the Fair Market Value of one Share on the date of exercise over (ii) the grant price of the right on the date of grant. +(b) Upon the exercise of a Stock Appreciation Right, payment shall be made in the sole discretion of the Committee in (i) whole Shares, (ii) cash or (iii) a combination of (i) or (ii). +(c) Any Tandem Stock Appreciation Right shall be granted at the same time as the related Option is granted. +(d) Any Tandem Stock Appreciation Right related to an Option may be exercised only when the related Option would be exercisable and the Fair Market Value of the Shares subject to the related Option exceeds the option price at which Shares can be acquired pursuant to the Option. In addition, (i) if a Tandem Stock Appreciation Right exists with respect to less than the full number of Shares covered by a related Option, then an exercise or termination of such Option shall not reduce the number of Shares to which the Tandem Stock Appreciation Right applies until the number of Shares then exercisable under such Option equals the number of Shares to which the Tandem Stock Appreciation Right applies, and (ii) no Tandem Stock Appreciation Right granted under the Plan to a person then subject to Section 16 of the Exchange Act shall be exercised during the first six months of its term for cash, except as provided in Article 10 . +(e) Any Option related to a Tandem Stock Appreciation Right shall no longer be exercisable to the extent the Tandem Stock Appreciation Right has been exercised. +(f) The provisions of Stock Appreciation Rights need not be the same with respect to each recipient. +(g) Subject to Section 11.2 , a Freestanding Stock Appreciation Right shall have the same terms and conditions as Options, including (i) an exercise price not less than Fair Market Value on the date of grant and (ii) a term not greater than ten years other than as a result of any extension of the term in compliance with applicable law as provided in an Award Agreement. Subject to Section 3.3 , the vesting schedule shall be set forth in the Award Agreement. +(h) The Committee may impose such terms and conditions on Stock Appreciation Rights granted in conjunction with any Award (other than an Option) as the Committee shall determine in its sole discretion. +6.3 No Repricing . Notwithstanding anything in the Plan to the contrary, except in connection with a corporate transaction involving the Company (including, without limitation, any stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination, or exchange of shares), the terms of outstanding awards may not be amended without stockholder approval to (a) reduce the exercise price of outstanding Stock Appreciation Rights, (b) cancel outstanding Stock Appreciation Rights in exchange for cash, other awards or Stock Appreciation Rights with an exercise price that is less than the exercise price of the original Stock Appreciation Rights, (c) take any other action with respect to the Stock Appreciation Rights that would be treated as a repricing under the rules and regulations of the principal national securities exchange on which they are listed, or (d) permit the grant of any Stock Appreciation Rights that contains a so-called “reload” feature under which additional Stock Appreciation Rights or other Awards are granted automatically to the Participant upon exercise of the original Stock Appreciation Rights. +7. RESTRICTED STOCK AWARDS +7.1 Grants . Awards of Restricted Stock may be issued hereunder to Participants either alone or in addition to other Awards granted under the Plan (a “ Restricted Stock Award ”), and such Restricted Stock Awards shall also be available as a form of payment of Performance Awards and other earned cash-based incentive compensation. A Restricted Stock Award shall be subject to restrictions imposed by the Committee covering a period of time specified by the Committee (the “ Restriction Period ”). The Committee has sole discretion to determine whether any consideration (other than services) is to be received by the Company or any Subsidiary as a condition precedent to the issuance of Restricted Stock. +7.2 Award Agreements . The terms of any Restricted Stock Award granted under the Plan shall be set forth in an Award Agreement which shall contain provisions determined by the Committee and not inconsistent with the Plan. The terms of Restricted Stock Awards need not be the same with respect to each Participant. +7.3 Rights of Holders of Restricted Stock . Beginning on the date of grant of the Restricted Stock Award and subject to execution of the Award Agreement, the Participant shall become a shareholder of the Company with respect to all Shares subject to the Award Agreement and shall have all of the rights of a shareholder, including the right to vote such Shares and the right to receive distributions made with respect to such Shares unless otherwise provided in such Award Agreement; provided, however, that any Shares, any other property, or cash distributed as a dividend or otherwise with respect to any Restricted Stock as to which the restrictions have not yet lapsed shall be subject to the same restrictions as such Restricted Stock. +7.4 Vesting . Subject to Section 3.3 , the vesting schedule shall be set forth in the Award Agreement. +7.5 Section 83(b) Election . The Committee may provide in an Award Agreement that the Award of Restricted Stock is conditioned upon the Participant making or refraining from making an election with respect to the Award under Section 83(b) of the Code. If a Participant makes an election pursuant to Section 83(b) of the Code concerning a Restricted Stock Award, the Participant shall be required to file promptly a copy of such election with the Company. +8. OTHER STOCK UNIT AWARDS +8.1 Grants . Other Awards of units having a value equal to an identical number of Shares (“ Other Stock Unit Awards ”) may be granted hereunder to Participants, in addition to other Awards granted under the Plan. Other Stock Unit Awards shall also be available as a form of payment of other Awards granted under the Plan and other earned cash-based incentive compensation. +8.2 Award Agreements . The terms of Other Stock Unit Award granted under the Plan shall be set forth in an Award Agreement which shall contain provisions determined by the Committee and not inconsistent with the Plan. The terms of such Awards need not be the same with respect to each Participant. +8.3 Vesting . Subject to Section 3.3 , the vesting schedule shall be set forth in the Award Agreement. +8.4 Payment . Except as provided in Article 10 or as maybe provided in an Award Agreement, Other Stock Unit Awards may be paid in cash, Shares, other property, or any combination thereof, in the sole discretion of the Committee at the time of payment. Other Stock Unit Awards may be paid in a lump sum or in installments following the lapse of the restrictions applicable to such Awards, but, unless expressly provided in an Award Agreement, no later than two and one-half months following the end of the calendar year in which such restrictions lapse, or in accordance with procedures established by the Committee, on a deferred basis subject to the requirements of Section 409A of the Code. +9. PERFORMANCE AWARDS +9.1 Grants . Performance Awards in the form of Performance Shares or Performance Units, as determined by the Committee in its sole discretion, may be granted hereunder to Participants, for no consideration or for such minimum consideration as may be required by applicable law, either alone or in addition to other Awards granted under the Plan. The performance goals to be achieved for each Performance Period shall be conclusively determined by the Committee. +9.2 Award Agreements . The terms of any Performance Award granted under the Plan shall be set forth in an Award Agreement which shall contain provisions determined by the Committee and not inconsistent with the Plan, including whether such Awards shall have Dividend Equivalents. The terms of Performance Awards need not be the same with respect to each Participant. +9.3 Terms and Conditions . The performance criteria to be achieved during any Performance Period and the length of the Performance Period shall be determined by the Committee upon the grant of each Performance Award. Performance Awards shall be subject to the vesting requirements as set forth in Section 3.3 . The amount of the Award to be distributed shall be conclusively determined by the Committee. +9.4 Payment. Except as provided in Article 10 or as may be provided in an Award Agreement, Performance Awards will be distributed only after the end of the relevant Performance Period. Performance Awards may be paid in cash, Shares, or any combination thereof, in the sole discretion of the Committee at the time of payment. Performance Awards may be paid in a lump sum or in installments, but, unless expressly provided in an Award Agreement, no later than two and one-half months following the close of the calendar year that contains the end of the Performance Period or, in accordance with procedures established by the Committee, on a deferred basis subject to the requirements of Section 409A of the Code. +9.5 Performance Award Dividend Equivalents . Subject to the provisions of the Plan and any Award Agreement, the Committee in its sole discretion may award currently or on a deferred basis, Dividend Equivalents with respect to the number of Shares covered by a Performance Unit or Performance Share Award, provided, that such Dividend Equivalents (if any) shall be deemed to have been reinvested in additional Performance Shares or Performance Units and shall provide that such Dividend Equivalents are subject to the same vesting conditions as the underlying Award. +10. CHANGE OF CONTROL PROVISIONS +Upon the occurrence of a Change of Control, unless otherwise specifically set forth in an Award Agreement or other agreement applicable to any Award, the Committee may effect one or more of the following alternatives, which may vary among individual holders and which may vary among Awards held by any individual holder: +(a) Awards outstanding as of the date of the Change of Control immediately vest and become free of all restrictions and limitations and, to the extent applicable, become fully exercisable and/or immediately settled or distributed; +(b) Options and Stock Appreciation Rights outstanding shall terminate within a specified number of days after notice to the Participant; +(c) Participants shall receive, with respect to each Share subject to an Award (or vested portion thereof), an amount equal to the excess, if any, of the Fair Market Value of such Share immediately prior to the occurrence of such Change of Control over the exercise price per share, if applicable, of such Award, such amount to be payable in cash, in one or more kinds of stock or property (including the stock or property, if any, payable in the transaction) or in a combination thereof, as the Committee, in its sole discretion, shall determine; +(d) Options and Stock Appreciation Rights outstanding as of the date of the Change of Control may be cancelled and terminated without payment therefor if the Fair Market Value of one Share as of the date of the Change of Control is less than the per Share Option exercise price or Stock Appreciation Right grant price; or +(e) such other adjustments or benefits as the Committee deems appropriate in its sole discretion shall apply (including the substitution, assumption or continuation of Awards by the successor company or a parent or subsidiary thereof); +in each case, (i) to the extent permitted under Section 409A of the Code and (ii) subject to any terms and conditions contained in the Award Agreement evidencing such Award or other agreement applicable to such Award. +11. GENERALLY APPLICABLE PROVISIONS +11.1 Amendment and Termination of the Plan . The Board may, from time to time, alter, amend, suspend or terminate the Plan as it shall deem advisable in its sole discretion, subject to any requirement for stockholder approval imposed by applicable law, including the rules and regulations of the Nasdaq Stock Market (or any other principal national securities exchange on which the Company is listed) provided that the Board may not amend the Plan in any manner that would result in noncompliance with Rule 16b-3 of the Exchange Act; and further provided that the Board may not, without the approval of the Company’s stockholders, amend the Plan to (a) increase the number of Shares that may be the subject of Awards under the Plan (except for adjustments pursuant to Section 11.2 ), (b) expand the types of awards available under the Plan, (c) materially expand the class of persons eligible to participate in the Plan, (d) amend any provision of Section 5.9 , (e) increase the maximum permissible term of any Option specified by Section 5.4 or any Stock Appreciation Right specified by Section 6.2(g) , or (f) amend any provision of Section 6.3 . In addition, no amendments to, or termination of, the Plan shall in any way materially impair the rights of a Participant under any Award previously granted without such Participant’s consent. +11.2 Adjustments . In the event of any merger, reorganization, consolidation, recapitalization, dividend or distribution (whether in cash, shares or other property, other than a regular cash dividend), stock split, reverse stock split, spin-off, joint venture, subsidiary or division sale or similar transaction or other change in corporate structure affecting the Shares or the value thereof, such adjustments and other substitutions shall be made to the Plan and to Awards as the Committee, in its sole discretion, deems equitable or appropriate, including such adjustments (a) in the aggregate number, class and kind of securities that may be delivered under the Plan, in the aggregate or to any one Participant, (b) in the number, class, kind and option or exercise price of securities subject to outstanding Awards granted under the Plan (including, if the Committee deems appropriate, the substitution of similar options to purchase the shares of, or other awards denominated in the shares of, another company) and (c) to the terms and conditions of any outstanding Awards (including any applicable performance targets or criteria with respect thereto), in each case, as the Committee may determine to be appropriate in its sole discretion; provided, however, that the number of Shares subject to any Award shall always be a whole number. No adjustment or substitution pursuant to this Section 11.2 shall be made in a manner that results in noncompliance with the requirements of Section 409A of the Code, to the extent applicable. +11.3 Transferability of Awards . Except as provided below, no Award and no Shares subject to Other Stock Unit Awards or Performance Units that have not been issued or as to which any applicable restriction, performance or deferral period has not lapsed, may be sold, assigned, transferred, pledged or otherwise encumbered, other than by will or the laws of descent and distribution or pursuant to a domestic relations order, as determined by the Committee, and such Award may be exercised during the life of the Participant only by the Participant or the Participant’s guardian or legal representative. Notwithstanding the foregoing, a Participant may assign or transfer an Award with the consent of the Committee (a) for charitable donations; (b) to the Participant’s spouse, children or grandchildren (including any adopted and stepchildren and grandchildren), or (c) a trust for the benefit of one or more of the Participants or the persons referred to in clause (b) (each transferee thereof, a “ Permitted Assignee ”); provided that such Permitted Assignee shall be bound by and subject to all of the terms and conditions of the Plan and the Award Agreement relating to the transferred Award and shall execute an agreement satisfactory to the Company evidencing such obligations; and provided further that such Participant shall remain bound by the terms and conditions of the Plan. The Company shall cooperate with any Permitted Assignee and the Company’s transfer agent in effectuating any transfer permitted under this Section 11.3 . Notwithstanding the foregoing, no Incentive Stock Option granted under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, all Incentive Stock Options granted to a Participant under the Plan shall be exercisable during his or her lifetime only by such Participant. For the avoidance of doubt, in no event may an Award (excluding any fully vested and unrestricted Shares received pursuant to an Award) be transferred by a Participant to a third party for monetary value. +11.4 Termination of Employment . The Committee shall determine and set forth in each Award Agreement whether any Awards granted in such Award Agreement will continue to be exercisable, and the terms of such exercise, on and after the date that a Participant ceases to be employed by or to provide services to the Company or any Subsidiary (including as a Director), whether by reason of death, Disability, voluntary or involuntary termination of employment or services, or otherwise. The date of termination of a Participant’s employment or services will be determined by the Committee, which determination will be final. +11.5 Deferral . The Committee shall be authorized to establish procedures pursuant to which the payment of any Award may be deferred. Such deferrals shall be administered in a manner that is intended to comply with Section 409A of the Code and shall be construed and interpreted in accordance with such intent. +11.6 Dividend Equivalents . Subject to the provisions of the Plan and any Award Agreement, the recipient of an Award (including any deferred Award) may, if so determined by the Committee, be entitled to receive, on a deferred basis, cash, stock or other property dividends, or cash payments in amounts equivalent to cash, stock or other property dividends on Shares (“ Dividend Equivalents ”) with respect to the number of Shares covered by the Award, as determined by the Committee, in its sole discretion. Dividend Equivalents may accrue but will not, in any event, be payable until the vesting conditions of the underlying Award have been met. The Committee may provide that such amounts and Dividend Equivalents (if any) shall be deemed to have been reinvested in additional Shares or otherwise reinvested. Notwithstanding the foregoing, Dividend Equivalents shall not be made part of any Options or Stock Appreciation Rights. +12. MISCELLANEOUS +12.1 Tax Withholding . The Company shall have the right to make all payments or distributions pursuant to the Plan to a Participant (or a Permitted Assignee thereof) (any such person, a “ Payee ”) net of any applicable federal, state and local taxes required to be paid or withheld as a result of (a) the grant of any Award, (b) the exercise of an Option or Stock Appreciation Right, (c) the delivery of Shares or cash, (d) the lapse of any restrictions in connection with any Award or (e) any other event occurring pursuant to the Plan. The Company or any Subsidiary shall have the right to withhold from wages or other amounts otherwise payable to such Payee such minimum statutory withholding taxes as may be required by law, or to otherwise require the Payee to pay such withholding taxes. If the Payee shall fail to make such tax payments as are required, the Company or its Subsidiaries shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to such Payee or to take such other action as may be necessary to satisfy such withholding obligations. The Committee shall be authorized to establish procedures for election by Participants to satisfy such obligation for the payment of such taxes by tendering previously acquired Shares (either actually or by attestation, valued at their then Fair Market Value) that have been owned for a period of at least six months (or such other period to avoid accounting charges against the Company’s earnings), or by directing the Company to retain Shares (up to the Participant’s minimum required tax withholding rate or such other rate that will not trigger a negative accounting impact) otherwise deliverable in connection with the Award. +12.2 Right of Discharge Reserved; Claims to Awards . Nothing in the Plan nor the grant of an Award hereunder shall confer upon any Employee or Director the right to continue in the employment or service of the Company or any Subsidiary or affect any right that the Company or any Subsidiary may have to terminate the employment or service of (or to demote or to exclude from future Awards under the Plan) any such Employee or Director at any time for any reason. Except as specifically provided by the Committee, the Company shall not be liable for the loss of existing or potential profit from an Award granted in the event of termination of an employment or other relationship. No Employee or Participant shall have any claim to be granted any Award under the Plan, and there is no obligation for uniformity of treatment of Employees or Participants under the Plan. +12.3 Prospective Recipient . Unless otherwise determined by the Committee, the prospective recipient of any Award under the Plan shall not, with respect to such Award, be deemed to have become a Participant, or to have any rights with respect to such Award, until and unless such recipient shall have executed or acknowledged an Award Agreement and delivered a copy thereof to the Company, in each case, in the manner prescribed by the Committee, and otherwise complied with the then applicable terms and conditions. +12.4 Cancellation of Award . Notwithstanding anything to the contrary contained herein, all outstanding Awards granted to any Participant may be canceled if the Participant, without the consent of the Company, while employed by the Company or any Subsidiary or after termination of such employment or service, establishes a relationship with a competitor of the Company or any Subsidiary or engages in activity that is in conflict with or adverse to the interest of the Company or any Subsidiary, as determined by the Committee in its sole discretion. +12.5 Stop Transfer Orders . All certificates for Shares delivered under the Plan pursuant to any Award shall be subject to such stop-transfer orders and other restrictions as the Committee may deem advisable in its sole discretion under the rules, regulations and other requirements of the Securities and Exchange Commission, any stock exchange upon which the Shares are then listed, and any applicable federal or state securities law, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions. +12.6 Nature of Payments . All Awards made pursuant to the Plan are in consideration of services performed or to be performed for the Company or any Subsidiary, division or business unit of the Company. Neither Awards made under the Plan nor Shares or cash paid pursuant to such Awards, may be included as “compensation” for purposes of computing the benefits payable to any Participant under the Company’s or any Subsidiary’s retirement plans (both qualified and non-qualified), welfare benefit plans or other employee benefit plans unless such plan expressly provides that such compensation shall be taken into account in computing a participant’s benefit. +12.7 Other Plans . Nothing contained in the Plan shall prevent the Board from adopting other or additional compensation arrangements, subject to stockholder approval if such approval is required; and such arrangements may be either generally applicable or applicable only in specific cases. +12.8 Severability . If any provision of the Plan shall be held unlawful or otherwise invalid or unenforceable in whole or in part by a court of competent jurisdiction, such provision shall (a) be deemed limited to the extent that such court of competent jurisdiction deems it lawful, valid and/or enforceable and as so limited shall remain in full force and effect, and (b) not affect any other provision of the Plan or part thereof, each of which shall remain in full force and effect. If the making of any payment or the provision of any other benefit required under the Plan shall be held unlawful or otherwise invalid or unenforceable by a court of competent jurisdiction, such unlawfulness, invalidity or unenforceability shall not prevent any other payment or benefit from being made or provided under the Plan, and if the making of any payment in full or the provision of any other benefit required under the Plan in full would be unlawful or otherwise invalid or unenforceable, then such unlawfulness, invalidity or unenforceability shall not prevent such payment or benefit from being made or provided in part, to the extent that it would not be unlawful, invalid or unenforceable, and the maximum payment or benefit that would not be unlawful, invalid or unenforceable shall be made or provided under the Plan. +12.9 Interpretation . As used in the Plan, the words “include” and “including,” and variations thereof, shall not be deemed to be terms of limitation, but rather shall be deemed to be followed by the words “without limitation.” The captions in the Plan are for convenience of reference only, and are not intended to narrow, limit or affect the substance or interpretation of the provisions contained herein. +12.10 Unfunded Status of the Plan . The Plan is intended to constitute an “unfunded” plan for incentive and deferred compensation. With respect to any payments not yet made to a Participant by the Company, nothing contained herein shall give any such Participant any rights that are greater than those of a general creditor of the Company. In its sole discretion, the Committee may authorize the creation of trusts or other arrangements to meet the obligations created under the Plan to deliver the Shares or payments in lieu of or with respect to Awards hereunder; provided, however, that the existence of such trusts or other arrangements is consistent with the unfunded status of the Plan. +12.11 Governing Law . The Plan and all determinations made and actions taken thereunder, to the extent not otherwise governed by the Code or the laws of the United States, shall be governed by the laws of the State of Delaware, without reference to principles of conflict of laws, and construed accordingly. +12.12 Effective Date of Plan; Termination of Plan . The Plan is was originally approved by the Board as of the Effective Date, subject to approval by the Company’s stockholders. Awards may be granted under the Plan at any time and from time to time on or prior to April 9, 2031, on which date the Plan will expire except as to Awards then outstanding under the Plan. Such outstanding Awards shall remain in effect until they have been exercised or terminated, or have expired. +12.13 Foreign Employees . Awards may be granted to Participants who are foreign nationals or employed outside the United States, or both, on such terms and conditions different from those applicable to Awards to Employees employed in the United States as may, in the Committee’s sole discretion, be necessary or desirable in order to recognize differences in local law or tax policy. The Committee also may impose conditions on the exercise or vesting of Awards in order to minimize the Company’s obligation with respect to tax equalization for Employees on assignments outside their home country. +12.14 Section 409A of the Code . +(a) Awards made under the Plan are intended to comply with or be exempt from Section 409A of the Code, and ambiguous provisions hereof, if any, shall be construed and interpreted in a manner consistent with such intent. No payment, benefit or consideration shall be substituted for an Award if such action would result in the imposition of taxes under Section 409A of the Code. Notwithstanding anything in the Plan to the contrary, if any Plan provision or Award under the Plan would result in the imposition of an additional tax under Section 409A of the Code, that Plan provision or Award shall be reformed, to the extent permissible under Section 409A of the Code, to avoid imposition of the additional tax, and no such action shall be deemed to adversely affect the Participant’s rights to an Award. +(b) Unless the Committee provides otherwise in an Award Agreement, each Other Stock Unit Award or Performance Unit (or portion thereof if the Award is subject to a vesting schedule) shall be settled no later than the 15th day of the third month after the end of the first calendar year in which the Award (or such portion thereof) is no longer subject to a “substantial risk of forfeiture” within the meaning of Section 409A of the Code. If the Committee determines that an Other Stock Unit Award or Performance Unit is intended to be subject to Section 409A of the Code, the applicable Award Agreement shall include terms that are designed to satisfy the requirements of Section 409A of the Code. +(c) If the Participant is identified by the Company as a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code on the date on which the Participant has a “separation from service” (other than due to death) within the meaning of Treasury Regulation § 1.409A-1(h), any Award payable or settled on account of a separation from service that is deferred compensation subject to Section 409A of the Code shall be paid or settled on the earliest of (i) the first business day following the expiration of six months from the Participant’s separation from service, (ii) the date of the Participant’s death, or (iii) such earlier date as complies with the requirements of Section 409A of the Code. +12.15 Notification of Disqualifying Disposition . If any Participant shall make any disposition of Shares issued pursuant to the exercise of an Incentive Stock Option under the circumstances described in Section 421(b) of the Code (relating to certain disqualifying dispositions), such Participant shall notify the Company of such disposition within ten days thereof. +12.16 Sarbanes Oxley Act and Clawback Policy . If the Company is required to prepare an accounting restatement due to the material noncompliance of the Company, as a result of misconduct, with any financial reporting requirement under the securities laws, or if the Participant is one of the persons subject to automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002, the Participant shall reimburse the Company the amount of any payment in settlement of an Award earned or accrued during the 12-month period following the first public issuance or filing with the United States Securities and Exchange Commission (whichever just occurred) of the financial document embodying such financial reporting requirement. Notwithstanding any other provisions in this Plan, any Award shall be subject to recovery or clawback by the Company under any applicable clawback policy adopted by the Company whether before or after the date of grant of the Award. +12.17 Indemnification . Each person who is or shall have been a member of the Board, or a Committee appointed by the Board, or an officer of the Company to whom authority was delegated in accordance with Section 4.2 shall be indemnified and held harmless by the Company against and from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him or her in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by him or her in settlement thereof, with the Company’s approval, or paid by him or her in satisfaction of any judgment in any such action, suit, or proceeding against him or her, provided he or she shall give the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf, unless such loss, cost, liability, or expense is a result of his or her own willful misconduct or except as expressly provided by statute. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company’s Certificate of Incorporation of Bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless. +0000413080_2 R1.0.1.18 Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice & Proxy Statement and Form 10-K, are available at www.proxyvote.com PATTERSON-UTI ENERGY, INC. Annual Meeting of Stockholders June 6, 2019 10:00 AM This proxy is solicited by the Board of Directors The undersigned stockholder of Patterson-UTI Energy, Inc. (the "Company") hereby appoints Mark S. Siegel, William Andrew Hendricks, Jr. and C. Andrew Smith and each of them, proxies to the undersigned, each with full power to act without the other and with full power of substitution, to vote at the annual meeting of stockholders of the Company to be held Thursday, June 6, 2019, at 10:00 a.m., Central Time, at our corporate headquarters, located at 10713 W. Sam Houston Parkway North, Suite 125, Houston, Texas, 77064, and at any and all adjournments or postponements thereof, with the same force and effect as if the undersigned were personally present. The undersigned hereby instructs the above-named proxies to vote the shares represented by this proxy in the manner as directed for the undersigned on the reverse side of this proxy card. If no directions are made, the proxies will vote “FOR” the nominees for directors, “FOR” the approval of the amendment to the Patterson-UTI Energy, Inc. Amended and Restated 2014 Long-Term Incentive Plan, “FOR” the ratification of the selection of PricewaterhouseCoopers LLP and “FOR” the approval of the advisory resolution on executive compensation, as set forth on the reverse side. If any other matter should be presented properly, this proxy will be voted in accordance with the discretion of the above-named proxies. Continued and to be marked, dated and signed on reverse side \ No newline at end of file diff --git a/raw/proxies/0000889900/0000950170-23-012448/proxy_rpt.txt b/raw/proxies/0000889900/0000950170-23-012448/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..e69de29bb2d1d6434b8b29ae775ad8c2e48c5391 diff --git a/raw/proxies/0000889900/0000950170-24-043522/proxy.txt b/raw/proxies/0000889900/0000950170-24-043522/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..cf4da9077b7fdd2c57316b6afc2ec2f17564f8b5 --- /dev/null +++ b/raw/proxies/0000889900/0000950170-24-043522/proxy.txt @@ -0,0 +1,2864 @@ +DEF 14A +0000889900 false DEF 14A 0000889900 2022-01-01 2022-12-31 0000889900 4 2023-01-01 2023-12-31 0000889900 ecd:PeoMember pten:AdjustmentToCompensationYearEndFairValueOfOutstandingAndUnvestedEquityAwardsGrantedInTheYearMember 2023-01-01 2023-12-31 0000889900 3 2023-01-01 2023-12-31 0000889900 pten:AdjustmentToCompensationYearOverYearChangeInFairValueOfEquityAwardsGrantedInPriorYearsThatVestedInTheYearMember ecd:PeoMember 2023-01-01 2023-12-31 0000889900 2 2023-01-01 2023-12-31 0000889900 ecd:NonPeoNeoMember pten:AdjustmentToCompensationYearEndFairValueOfOutstandingAndUnvestedEquityAwardsGrantedInTheYearMember 2023-01-01 2023-12-31 0000889900 pten:AdjustmentToCompensationYearOverYearChangeInFairValueOfEquityAwardsGrantedInPriorYearsThatVestedInTheYearMember ecd:NonPeoNeoMember 2023-01-01 2023-12-31 0000889900 2020-01-01 2020-12-31 0000889900 pten:AdjustmentToCompensationYearOverYearChangeInFairValueOfOutstandingAndUnvestedEquityAwardsGrantedInPriorYearsMember ecd:NonPeoNeoMember 2023-01-01 2023-12-31 0000889900 1 2023-01-01 2023-12-31 0000889900 pten:AdjustmentToCompensationValueOfStockAwardsReportedInSummaryCompensationTableMember ecd:PeoMember 2023-01-01 2023-12-31 0000889900 pten:AdjustmentToCompensationYearOverYearChangeInFairValueOfOutstandingAndUnvestedEquityAwardsGrantedInPriorYearsMember ecd:PeoMember 2023-01-01 2023-12-31 0000889900 pten:AdjustmentToCompensationValueOfStockAwardsReportedInSummaryCompensationTableMember ecd:NonPeoNeoMember 2023-01-01 2023-12-31 0000889900 5 2023-01-01 2023-12-31 0000889900 2023-01-01 2023-12-31 0000889900 2021-01-01 2021-12-31 iso4217:USD +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +Washington, D.C. 20549 +SCHEDULE 14A INFORMATION +Proxy Statement Pursuant to Section 14(a) of the +Securities Exchange Act of 1934 +(Amendment No. ) +Filed by the Registrant ☒ +Filed by a Party other than the Registrant ☐ +Check the appropriate box: +☐ Preliminary Proxy Statement +☐ Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +☒ Definitive Proxy Statement +☐ Definitive Additional Materials +☐ Soliciting Material under § 240.14a-12 +PATTERSON-UTI ENERGY, INC. +(Name of registrant as specified in its charter) +(Name of person(s) filing proxy statement, if other than the registrant) +Payment of Filing Fee (Check all boxes that apply): +☒ No fee required +☐ Fee paid previously with preliminary materials +☐ Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11 +10713 West Sam Houston Parkway North, Suite 800 +Houston, Texas 77064 +(281) 765-7100 +April 11, 2024 +Dear Stockholder: +We cordially invite you to attend Patterson-UTI Energy, Inc.’s annual stockholders’ meeting. The annual meeting will be held Thursday, June 6, 2024, at 10:00 a.m., Central Time, at our corporate headquarters, located at 10713 W. Sam Houston Parkway North, Suite 125, Houston, Texas 77064. +We are pleased to take advantage of Securities and Exchange Commission rules that allow us to furnish proxy materials to our stockholders on the Internet. We believe that posting these materials on the Internet enables us to provide stockholders with the information that they need quickly, while lowering our costs of printing and delivery and supporting our sustainability efforts. We are mailing to most of our stockholders a Notice of Internet Availability of Proxy Materials, rather than a paper copy of our proxy materials. The notice contains instructions on how to access the proxy materials, vote and obtain, if you so desire, a paper copy of the proxy materials. +Your vote is important to us. Whether or not you plan to attend the Annual Meeting in person, we urge you to promptly vote your shares by using the Internet or telephone, or if the accompanying proxy statement was mailed to you, by completing, signing, dating and returning your proxy card as soon as possible in the enclosed postage prepaid envelope. +Thank you for your support. +Sincerely, +Curtis W. Huff +Chairman of the Board +W illiam A ndrew H endricks , J r . +President, Chief Executive Officer and Director +PATTERSON-UTI ENERGY, INC. +10713 West Sam Houston Parkway North, Suite 800 +Houston, Texas 77064 +NOTICE OF 2024 ANNUAL MEETING OF STOCKHOLDERS +To Be Held June 6, 2024 +The 2024 annual meeting of the stockholders of Patterson-UTI Energy, Inc., a Delaware corporation (“Patterson-UTI”), will be held Thursday, June 6, 2024, at 10:00 a.m., Central Time, at our corporate headquarters, located at 10713 W. Sam Houston Parkway North, Suite 125, Houston, Texas 77064 (the “Meeting”), for the following purposes: +• +to elect eleven directors named in this proxy statement to the Board of Directors of Patterson-UTI to serve until the next annual meeting of the stockholders or until their respective successors are elected and qualified; +• +to ratify the selection of PricewaterhouseCoopers LLP as the independent registered public accounting firm of Patterson-UTI for the fiscal year ending December 31, 2024; +• +to approve an amendment to Patterson-UTI’s 2021 Long-Term Incentive Plan; +• +to approve, on an advisory basis, Patterson-UTI’s compensation of its named executive officers; +• +to approve an amendment to Patterson-UTI's Restated Certificate of Incorporation to limit the liability of certain officers of Patterson-UTI as permitted by recent amendments to Delaware law; and +• +to transact such other business as may properly come before the Meeting or any adjournment or postponement thereof. +Stockholders of record at the close of business on April 10, 2024 are entitled to notice of and to vote at the Meeting and any adjournment or postponement thereof. +Your vote is important to us. Whether or not you plan to attend the Meeting in person, we urge you to promptly vote your shares by using the Internet or telephone, or if the accompanying proxy statement was mailed to you, by completing, signing, dating and returning your proxy card as soon as possible in the enclosed postage prepaid envelope. +By order of the Board of Directors +S ETH D. W EXLER +Executive Vice President, General Counsel and Secretary +April 11, 2024 +Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting +to Be Held on June 6, 2024 +The proxy statement and annual report to stockholders are available at www.proxyvote.com . +PATTERSON-UTI ENERGY, INC. +10713 West Sam Houston Parkway North, Suite 800 +Houston, Texas 77064 +PROXY STATEMENT +ANNUAL MEETING OF STOCKHOLDERS +To Be Held June 6, 2024 +General Information About the Annual Meeting and Voting +The Board of Directors (the “Board” or “Board of Directors”) of Patterson-UTI Energy, Inc., a Delaware corporation (“Patterson-UTI” or the “Company”), is expected to make this proxy statement and its 2023 annual report available to you on the Internet or, upon your request to deliver printed versions of these materials to you by mail beginning on or about April 11, 2024. Patterson-UTI is furnishing this proxy statement in connection with the solicitation by the Board of Directors of proxies to be voted at the 2024 annual meeting of stockholders of Patterson-UTI (the “Meeting”). The Meeting will be held Thursday, June 6, 2024, at 10:00 a.m., Central Time, at our corporate headquarters, located at 10713 W. Sam Houston Parkway North, Suite 125, Houston, Texas 77064, or at any adjournment or postponement thereof. +The Notice of Internet Availability of Proxy Materials (the “Notice”) is expected to be mailed to each of Patterson-UTI’s stockholders (other than those who previously requested electronic delivery) entitled to vote at the Meeting on or about April 11, 2024. +Pursuant to the “notice and access” rules adopted by the Securities and Exchange Commission (the “SEC”), Patterson-UTI has elected to provide stockholders access to its proxy materials on the Internet. Accordingly, Patterson-UTI sent a Notice to all of its stockholders as of the record date. The Notice includes instructions on how to access Patterson-UTI’s proxy materials on the Internet and how to request a printed copy of these materials. In addition, by following the instructions in the Notice, stockholders may request to receive proxy materials in printed form by mail or electronically by email on an ongoing basis. +Choosing to receive your future proxy materials by email will save us the cost of printing and mailing documents to you and will support our sustainability efforts. If you choose to receive future proxy materials by email, you will receive an email next year with instructions containing a link to those materials and a link to the proxy voting site. Your election to receive proxy materials by email will remain in effect until you terminate such election. +If your shares are registered directly in your name with our transfer agent, Continental Stock Transfer & Trust Company, you are considered the “stockholder of record” with respect to those shares, and the Notice was sent directly to you. +If your shares are held in an account at a brokerage firm, bank, broker-dealer, or other similar organization, then you are the beneficial owner of shares held in “street name,” and the Notice was forwarded to you by that organization. As a beneficial owner, you have the right to direct that organization on how to vote the shares held in your account. +Whether you are a “stockholder of record” or hold your shares in “street name,” you may direct your vote without attending the Meeting in person. +If you are a stockholder of record, you may vote by using the Internet or telephone by following the instructions in the Notice. If you request printed copies of the proxy materials by mail, you may also vote by completing, dating, signing and returning your proxy card by mail. You should sign your name exactly as it appears on the proxy card. If you are signing in a representative capacity (for example, as guardian, executor, trustee, custodian, attorney or officer of a corporation), you should indicate your name and title or capacity. +If you are the beneficial owner of shares held in street name, you may be eligible to vote your shares electronically using the Internet or telephone by following the instructions in the Notice. If you request printed copies of the proxy materials by mail, you may also vote by signing the voter instruction card provided by your brokerage firm, bank, broker-dealer, or other similar organization and returning it by mail. If you provide specific voting instructions by mail, telephone or the Internet, your shares will be voted by your brokerage firm, bank, broker-dealer, or similar organization as you have directed. +1 +Properly submitted proxies received either by mail, Internet, telephone or in person in time to be counted for the Meeting will be voted as you have directed in your proxy, unless you revoke your proxy in the manner provided below. As to any matter for which you give no direction in your proxy, your shares will be voted as follows: +• +“FOR” the election of all of the nominees to the Board of Directors named in this proxy statement; +• +“FOR” the ratification of PricewaterhouseCoopers LLP as the independent registered public accounting firm of Patterson-UTI for the fiscal year ending December 31, 2024; +• +“FOR” the approval of the amendment to Patterson-UTI’s 2021 Long-Term Incentive Plan; +• +“FOR” the approval, on an advisory basis, of Patterson-UTI’s compensation of its named executive officers; +• +“FOR” the approval of an amendment to Patterson-UTI’s Restated Certificate of Incorporation to limit the liability of certain officers of Patterson-UTI as permitted by recent amendments to Delaware law; and +• +“FOR” or “AGAINST” any other proposals that may be properly submitted at the Meeting at the discretion of the persons named in the proxy. +If you are a stockholder of record, you may revoke your proxy before the proxy is voted by either: +• +submitting a new proxy with a later date, including a proxy submitted using the Internet or telephone, in time to be counted for the Meeting; +• +notifying the Secretary of Patterson-UTI in writing before the Meeting that you have revoked your proxy; or +• +attending the Meeting and voting in person. +If your shares are held in street name, you must obtain a proxy executed in your favor from the stockholder of record (that is, your brokerage firm, bank, broker-dealer or similar organization) to be able to vote at the Meeting. +The Board of Directors is making this solicitation. We have retained Georgeson LLC, 480 Washington Blvd., 26 th Floor, Jersey City, New Jersey 07310, for a fee of approximately $9,500 and the reimbursement of out of pocket costs and expenses, to assist in the solicitation of proxies on behalf of the Board. Patterson-UTI’s officers and other employees, without compensation other than regular compensation, may also solicit proxies on behalf of the Board by mail, email, the Internet, telephone, electronic means and personal interview. Patterson-UTI will pay all costs associated with this solicitation. +2 +Shares Outstanding and Voting Rights +Only stockholders of record of Patterson-UTI’s common stock, $0.01 par value per share (the “Common Stock”), at the close of business on April 10, 2024 are entitled to notice of and to vote at the Meeting or any adjournment or postponement thereof. At the close of business on April 10, 2024, there were 403,251,901 shares of Common Stock issued and outstanding. Holders of record of Common Stock on April 10, 2024 will be entitled to one vote per share on all matters to properly come before the Meeting. A list of stockholders entitled to notice of and to vote at the Meeting will be made available during regular business hours at the offices of Patterson-UTI Energy, Inc., 10713 West Sam Houston Parkway North, Suite 800, Houston, Texas 77064 for the ten day period ending on the day before the Meeting for examination by any stockholder for any purpose germane to the Meeting. +A quorum is necessary to transact business at the Meeting. A majority of the shares of Common Stock outstanding on April 10, 2024 will constitute a quorum. The shares held by each stockholder who attends the Meeting in person, signs and timely returns the form of proxy, or properly votes using the Internet or telephone will be counted for purposes of determining the presence of a quorum at the Meeting. +If your shares are held in an account at a brokerage firm, bank, broker-dealer, or other similar organization, then you are the beneficial owner of shares held in “street name.” As a beneficial owner, you have the right to direct that organization on how to vote the shares held in your account in the manner provided in the voting instructions you received from that organization. Street name stockholders are also invited to attend the Meeting. However, because a street name stockholder is not the stockholder of record, you may not vote your shares at the Meeting unless you follow the procedures of your brokerage firm, bank, broker-dealer, or other similar organization for obtaining a legal proxy. +“Broker non-votes” and abstentions will be considered present at the Meeting for the purpose of determining a quorum. Broker non-votes occur when nominees, such as brokerage firms, banks, broker-dealers, or other similar organizations holding shares on behalf of the beneficial owners, are prohibited from exercising discretionary voting authority for beneficial owners who have not provided voting instructions. If you do not give instructions to your bank, brokerage firm or other agent, the bank, brokerage firm or other agent does not have authority to vote on the applicable proposal except on “routine matters.” For these reasons, please promptly vote in accordance with the instructions provided by your brokerage firm, bank, broker-dealer, or other similar organization. +3 +PROPOSAL NO. 1 +ELECTION OF DIRECTORS +Directors are elected to serve until the next annual meeting of stockholders and until their successors are elected and qualified. Under Delaware law and Patterson-UTI’s bylaws, the affirmative vote of a plurality of shares present in person or represented by proxy at the meeting at which a quorum is present is required for the election of directors. +The enclosed form of proxy provides a means for you to either: +• +vote “For All” with respect to the election of the nominees to the Board of Directors listed below, +• +withhold authority to vote for one or more of the nominees (i.e., "For All Except"), or +• +withhold authority to vote for all of the nominees (i.e., "Withhold All"). +The Board of Directors recommends that you vote “FOR” all of the nominees. Unless you give contrary instructions in your proxy, your properly submitted proxy will be voted “For All” with respect to the election of all of the nominees to the Board of Directors. If any nominee should become unable or unwilling to accept the nomination or election, the person acting under the proxy will vote for the election of such other person as the Board of Directors may recommend. The Board has no reason, however, to believe that any of the nominees will be unable or unwilling to serve if elected. +Because directors are elected by a plurality vote, shares as to which a stockholder withholds authority to vote and broker non-votes will not affect the outcome of the election, although a broker non-vote will be counted for purposes of establishing a quorum. +Our corporate governance guidelines require that if a director receives in an uncontested election a greater number of “withhold” votes than votes cast “for” his or her election, the Nominating and Corporate Governance Committee of the Board of Directors will undertake a prompt evaluation of the appropriateness of the director’s continued service on the Board of Directors. In performing this evaluation, the Nominating and Corporate Governance Committee will review all factors it deems relevant, including the stated reasons why votes were withheld, the director’s length of service, his or her past contributions to Patterson-UTI and the availability of other qualified candidates. The Nominating and Corporate Governance Committee will then make its recommendation to the Board. The Board of Directors will review the Nominating and Corporate Governance Committee’s recommendation and consider such further factors and information as it deems relevant. The Board of Directors will act on the Nominating and Corporate Governance Committee’s recommendation no later than 90 days following the date of the stockholders’ meeting. If the Board of Directors determines remedial action is appropriate, the director shall promptly take whatever action is requested by the Board. If the director does not promptly take the recommended remedial action or if the Board of Directors determines that immediate resignation is in the best interests of Patterson-UTI and its stockholders, the Board of Directors may accept the director’s resignation that will have been tendered as follows. Each director will, as a condition to his or her appointment or election as a director or nomination as a director, agree in writing to comply with the terms of Patterson-UTI’s majority voting policy and provide to the Board of Directors an irrevocable resignation that will be effective upon (i) the failure to receive the required vote at the next annual meeting at which such director faces re-election and (ii) the Board of Directors’ acceptance of such resignation. +Set forth below is the name, age, position and a brief description of the business experience during at least the past five years of each of the nominees to Patterson-UTI’s Board of Directors, as well as specific qualifications, attributes and skills of such member that were identified by the Nominating and Corporate Governance Committee when such member was nominated to serve on the Board of Directors. +4 +Each current member of Patterson-UTI’s Board of Directors is a nominee for election to the Board of Directors. Other than the Governance Policy described below in “Consideration of Director Nominees and Governance Policy,” there are no arrangements or understandings between any person and any of the directors pursuant to which such director was selected as a nominee for election at the Meeting. There are no family relationships among any of the directors or executive officers of Patterson-UTI. +Name +Age +Position +Director Since +Curtis W. Huff +66 +Chairman of the Board and Director +2001 +Robert W. Drummond +63 +Vice Chairman of the Board +2023 +William A. Hendricks, Jr. +59 +President and Chief Executive Officer and Director +2017 +Leslie A. Beyer +48 +Director +2023 +Tiffany (TJ) Thom Cepak +51 +Director +2014 +Gary M. Halverson +65 +Director +2023 +Cesar Jaime +65 +Director +2022 +Janeen S. Judah +64 +Director +2018 +Amy H. Nelson +55 +Director +2023 +Julie J. Robertson +68 +Director +2022 +James C. Stewart +61 +Director +2023 +The following charts and diversity matrix show a snapshot of the average tenure and age, and gender and demographic diversity, of the eleven nominees for election to our Board of Directors. +Board Diversity Matrix (As of March 28, 2024) +Total Number of Directors + +Female +Male +Did Not Disclose Gender +Part I: Gender Identity +Directors +5 +5 +1 +Part II: Demographic Background +African American or Black +1 +0 +Hispanic or Latinx +0 +1 +White +5 +4 +Two or More Races or Ethnicities +1 +0 +Did Not Disclose Demographic Background +1 +5 +The table below summarizes some of the skills and experience that the Board believes each director possesses and are relevant to such director’s Board and committee service. This summary is not intended to be an exhaustive list of each of our directors’ skills or contributions, and the lack of a checkmark for a particular item does not necessarily mean that the director does not possess that skill or experience. +Beyer +Cepak +Drummond +Halverson +Hendricks +Huff +Jaime +Judah +Nelson +Robertson +Stewart +SKILLS AND EXPERIENCE +Accounting and Finance +Understanding of finance and public company financial reporting +ü +ü +ü +ü +ü +ü +ü +ü +ü +Corporate Finance/Capital Markets +Corporate finance, capital markets and/or merger and acquisition experience +ü +ü +ü +ü +ü +ü +ü +ü +Corporate Governance +Corporate governance principles and process +ü +ü +ü +ü +ü +ü +ü +ü +ü +ü +Environmental and Safety +Safety and environmental regulations +ü +ü +ü +ü +ü +ü +ü +ü +ü +ü +Global +Management and/or work experience with businesses operating outside of the United States +ü +ü +ü +ü +ü +ü +ü +ü +ü +Human Resource Management +Human resource management and/or work experience +ü +ü +ü +Independent +Satisfies the independence requirements of Nasdaq and the Securities and Exchange Commission +ü +ü +ü +ü +ü +ü +ü +ü +ü +ü +Industry and Operations +Operational and management experience in the oil and gas industry +ü +ü +ü +ü +ü +ü +ü +ü +ü +ü +ü +Leadership +Business and strategic management experience from service in a leadership position, such as a CEO, COO, CFO or other senior leadership position of a significant operating unit +ü +ü +ü +ü +ü +ü +ü +ü +ü +ü +Legal Background +Practiced law and/or has law degree +ü +ü +Prior Board Experience +Service on public company boards +ü +ü +ü +ü +ü +ü +ü +ü +Risk Oversight +Understanding significant risks facing companies +ü +ü +ü +ü +ü +ü +ü +ü +ü +ü +ü +Technology +Developing and investing in new technologies +ü +ü +ü +ü +ü +ü +ü +ü +ü +6 +When considering whether directors and nominees have the experience, qualifications, attributes and skills, taken as a whole, to enable the Board of Directors to satisfy its oversight responsibilities effectively in light of Patterson-UTI’s business and structure, the Nominating and Corporate Governance Committee and the Board of Directors focused primarily on the information discussed in each of the directors’ individual biographies set forth below. +Curtis W. Huff — Mr. Huff has served as Chairman of the Board of Patterson-UTI since June 2020, as a director of Patterson-UTI since May 2001 and served as a director of UTI Energy Corp. ("UTI") from 1997 to May 2001. Mr. Huff is owner and Chairman of Freebird Partners, a private investment firm created in 2002 that is focused on oilfield service companies and technology. Mr. Huff co-founded Intervale Capital, an oilfield service private equity firm, in 2006 and served as a Managing Director from 2006 to 2012, when he sold his interest in the firm. Mr. Huff also serves as Chairman of Impact Fluid Solutions LP, which provides drilling and production solutions for oil and gas operators and fluid companies. Mr. Huff also serves as a director at various of Freebird’s private portfolio companies. Mr. Huff served as the President and Chief Executive Officer of Grant Prideco, Inc., a provider of drill pipe and other drill stem products, from February 2001 to June 2002. From January 2000 to February 2001, Mr. Huff served as Executive Vice President, Chief Financial Officer and General Counsel of Weatherford International, Inc., one of the world’s largest international oilfield services companies. He served as Senior Vice President and General Counsel of Weatherford from May 1998 to January 2000. Mr. Huff began his professional career in 1983 with the law firm of Norton Rose Fulbright US LLP where he specialized in corporate, securities and merger and acquisition matters. Mr. Huff was made a partner in that firm in 1989 where he served until 1998 when he joined Weatherford. Mr. Huff holds a Bachelor of Arts degree and J.D. from the University of New Mexico, where he graduated as a member of the Order of the Coif and cum laude, and a Masters of Law from New York University School of Law. Mr. Huff is the immediate past Chairman of the Board of Directors of the University of St. Thomas in Houston, Texas and is actively involved with various charities, including the Houston Food Bank. +The Board of Directors considered Mr. Huff’s background as an executive of publicly traded oilfield services companies and as an owner and manager of a private investment firm focused on the oilfield service industry. The Board noted his knowledge and experience in a broad range of oilfield products and services and his current and historical experience in managing operations in both the United States and internationally. The Board also considered Mr. Huff’s expertise and background with regard to accounting and legal matters, which, among other things, provides guidance to Patterson-UTI in assessing its corporate governance structure, policies and procedures. +Robert W. Drummond — Mr. Drummond has served as Vice Chairman of the Board and a director of Patterson-UTI since September 2023. Mr. Drummond served as a member of NexTier’s board of directors from August 2018 to September 2023. He joined NexTier in August 2018 as Chief Executive Officer and was elected as President in October 2019, which position he held until September 2023. Prior to joining NexTier, Mr. Drummond served as the President & Chief Executive Officer of Key Energy Services, Inc. and served for more than 30 years at Schlumberger Limited in various executive positions. Mr. Drummond has been a Supervisory Director at Expro Group Holdings N.V. since May 2017. He has previously served on the board of directors of the National Ocean Industries Association, the Houston Offshore Energy Center, the Greater Houston Partnership, the API Upstream Committee, and as an Advisory Board Member of the University of Houston Global Energy Management Institute. Mr. Drummond attained his B.S. in Mineral/Petroleum Engineering from the University of Alabama. +The Board of Directors considered Mr. Drummond’s more than 30 years of leadership experience in the oil and gas industry, including his service as Chief Executive Officer and President of multiple oilfield service companies. The Board also considered Mr. Drummond’s experience in leading NexTier preceding its merger with Patterson-UTI, and the benefits to the Board from having Mr. Drummond’s institutional knowledge as a resource for the Board following the merger. In addition, the Board noted his extensive experience serving or previously serving on public company boards and on the board of directors of a variety of industry organizations. +7 +William Andrew Hendricks, Jr. —Mr. Hendricks has served as President and Chief Executive Officer of Patterson-UTI since October 2012 and as a director of Patterson-UTI since June 2017. From April 2012 through September 2012, he served as Chief Operating Officer of Patterson-UTI. Prior to Patterson-UTI, Mr. Hendricks worked in a number of positions at Schlumberger for 24 years, where he last served as a drilling division President, having lived and worked around the world in the energy industry, offshore and onshore, and conducting business at times in Spanish and French. As CEO at Patterson-UTI, he has focused on transformation through investments in people and technology, growth through strategic acquisitions, improving diversity in recruiting and leadership and also enhancing the company’s sustainability and ESG position. Mr. Hendricks attended Texas A&M University, receiving a Bachelor of Science degree in Petroleum Engineering, and then began his career working on an offshore drilling rig in the Gulf of Mexico for Ocean Drilling & Exploration Company (currently Diamond Offshore). Mr. Hendricks is past Chairman of the International Association of Drilling Contractors, IADC Contractor of the Year in 2021, a member of the Society of Petroleum Engineers, an energy contributor on CNBC and has testified on energy matters with the U.S. Senate Committee on Energy and Natural Resources in Washington D.C. +The Board of Directors considered Mr. Hendricks’ more than 30 years of combined operational and managerial experience in the oil and gas industry. In addition, the Board noted his nearly 12 years of service as Patterson-UTI’s President and Chief Executive Officer and nearly 10 years of service in numerous executive positions with Schlumberger Limited, a global provider of oilfield services, including nearly two years as President of Schlumberger Drilling & Measurements. The Board further considered Mr. Hendricks’ significant experience with evaluating the drivers for macro trends in the oil and gas industry, as well as managing the cyclical nature of the oil and gas service business, which allows Mr. Hendricks to provide valuable input into the development and implementation of Patterson-UTI’s corporate strategy. In addition, the Board noted that Mr. Hendricks’ operational experience brings valuable knowledge to the oversight of achieving safe and efficient operations. The Board also considered Mr. Hendricks’ significant experience working in numerous worldwide locations, which allows him to provide valuable counsel regarding possible expansion into new international markets. +Leslie A. Beyer — Ms. Beyer has served as a director of Patterson-UTI since September 2023. Ms. Beyer served as a member of NexTier’s board of directors from February 2023 to September 2023. Ms. Beyer has served as a director of Forum Energy Technologies since December 2023. Ms. Beyer served as the Chief Executive Officer of the Energy Workforce & Technology Council from 2014 to 2023, the largest global energy technology and services association. She is a frequent speaker on issues facing the energy industry including the global energy market, regulatory environment and ESG best practices. Ms. Beyer has been an advocate for the energy services sector testifying before Congress and frequently appearing on national media outlets. She also serves on the Advisory Board of the Energy Advisory firm Veriten. Before joining EWTC, her career highlights include 15 years in Washington, D.C. serving in policy and public affairs roles in the U.S. Senate, multiple presidential campaigns, The White House – Executive Office of the President, U.S. State Department and U.S. Department of Housing and Urban Development. After government service, Ms. Beyer began a career in advocacy as Director, Member and Board Relations with the National Association of Manufacturers. Ms. Beyer holds a bachelor’s degree of arts in Latin American Studies from The University of Texas at Austin. +The Board of Directors considered Ms. Beyer’s leadership and advocacy for responsible operations in the energy sector and extensive experience supporting the energy services sector, and the depth and perspective that such experience would bring to the Board. The Board also noted Ms. Beyer’s leadership as Chief Executive Officer of the Energy Workforce & Technology Council and her deep understanding of regulatory and environmental issues, which allows her to provide Patterson-UTI with valuable insight into industry issues. +8 +Tiffany (TJ) Thom Cepak — Ms. Cepak has served as a director of Patterson-UTI since August 2014. Ms. Cepak has served as a director of Ranger Oil Corporation, an upstream oil and gas company, since September 2019, as a director of California Resources Corporation, an upstream oil and gas company, since October 2020 (and as chair since April 2021) and as a director of EnLink Midstream, LLC, a midstream company, since December 2021. Ms. Cepak served as the Chief Financial Officer of Energy XXI Gulf Coast, Inc., an upstream oil and gas company, from August 2017 to October 2018. Ms. Cepak served as the Chief Financial Officer of KLR Energy (and, subsequent to its business combination, Rosehill Resources Inc., an upstream oil and gas company) from January 2015 to June 2017. Ms. Cepak served as a director of Yates Petroleum Corporation, a privately owned, independent oil and gas exploration and production company, from October 2015 to October 2016. Ms. Cepak served four years as the Chief Financial Officer of EPL Oil & Gas, Inc., and was further appointed Executive Vice President in January 2014, and she served in those roles until June 2014, when EPL was sold. Ms. Cepak began her career with EPL as a Senior Asset Management Engineer, a position she held until she was appointed Director of Corporate Reserves in September 2001. Ms. Cepak was named EPL’s Director of Investor Relations in April 2006 and Vice President, Treasurer and Investor Relations in July 2008. In July 2009, Ms. Cepak was designated as EPL’s Principal Financial Officer and, in September 2009, she was appointed Senior Vice President. Ms. Cepak has more than 25 years of energy industry experience and prior to joining EPL, she was a Senior Reservoir Engineer with Exxon Production Company and ExxonMobil Company with operational roles including reservoir engineering and subsurface completion engineering for numerous offshore Gulf of Mexico properties. Ms. Cepak holds a B.S. in Engineering from the University of Illinois and a Masters of Business Administration in Management with a concentration in Finance from Tulane University. +The Board of Directors considered Ms. Cepak’s more than 25 years of operational and financial experience in the energy industry. The Board noted her service in various operational roles, including as a reservoir engineer for a major oil and gas exploration and production company. The Board also noted Ms. Cepak’s executive management experience, including as chief financial officer of a publicly traded independent oil and gas exploration and production company, which allows her to provide Patterson-UTI with valuable insight on financial and strategic matters. The Board also considered Ms. Cepak’s diversity of perspective, which is exemplified by her recognition in 2018 as one of Oil and Gas Investor’s 25 Influential Women in Energy. +Gary M. Halverson — Mr. Halverson has served as a director of Patterson-UTI since September 2023. Mr. Halverson served as a member of NexTier’s board of directors from September 2016 to September 2023. In 2016, Mr. Halverson became a Senior Advisor at First Reserve, a private equity firm that focuses on energy investments, and a Partner at 360 Development Partners, a commercial real estate firm. Mr. Halverson was formerly Group President of Drilling and Production Systems and Senior Vice President at Cameron International Corporation from 2014 to 2016 prior to its sale to Schlumberger in 2016. He has over 38 years of industry experience with Cameron, where he worked in various leadership roles across the U.S., Latin America and Asia. Mr. Halverson currently serves as Chairman of the Board of Directors of the Petroleum Equipment Suppliers Association, as a director on the board of the General Committee of Special Programs of the American Petroleum Institute, as a director on the board of the Well Control Institute, as a director on the board of FlexSteel Pipeline Technologies, Inc. and was the U.S. delegate to the World Petroleum Congress. +The Board of Directors considered Mr. Halverson’s over 40 years of leadership and operational experience in the energy industry. The Board also noted Mr. Halverson’s extensive financial and investment experience, including as a senior advisor of an energy-focused private equity firm, which brings a valuable financial and strategic perspective to the Board. The Board also noted Mr. Halverson’s continued involvement in a variety of industry organizations, which brings a wide knowledge of industry perspectives to the Board. +9 +Cesar Jaime — Mr. Jaime has served as a director of Patterson-UTI since April 2022. Mr. Jaime previously served on the board of Summum Group Ltd, a provider of well servicing and oil and gas engineering and construction in Colombia, Mexico and Peru, from 2014 to 2022. Mr. Jaime previously served on the board of LAREIF, a renewable energy developer in Colombia, from 2014 to 2019. Mr. Jaime served in various management positions at Schlumberger between 1981 and 2010, including serving as President of Schlumberger’s Latin America business from 2008 to 2010. Mr. Jaime has served on the board of Alliance Schlumberger, a non-profit organization grouping former Schlumberger engineers, since 2019. Mr. Jaime holds a Bachelor of Science degree in electrical engineering from Pontificia Universidad Javeriana in Bogotá, Colombia. +The Board of Directors considered Mr. Jaime’s 30 years of experience in international oilfield services in Latin America, Europe and Africa for Schlumberger, including serving as President of Latin American operations. The Board also noted his international operations background in light of the Company’s drilling operations in Colombia and recent acquisition of Ulterra, which operates in many countries across the world. The Board also considered the breadth of his experience including in key management roles in operations, sales and human resource management. +Janeen S. Judah — Ms. Judah has served as a director of Patterson-UTI since April 2018. Ms. Judah has served as a director of the general partner of Crestwood Equity Partners LP, a midstream company, since November 2018. Ms. Judah has also served as a director for privately held Aethon Energy III, LLC, an upstream oil and gas investment firm, since June 2019, and as a member of the University Lands Advisory Board since August 2020. Ms. Judah served as a director of Jagged Peak Energy Inc., an upstream oil and gas company, from April 2019 to January 2020, when Jagged Peak was acquired by Parsley Energy. Ms. Judah served as the President of the Society of Petroleum Engineers from September 2016 to October 2017 while on secondment from Chevron, and as a member of the Board of Directors of the Society of Petroleum Engineers from 2003 to 2006 and from 2012 to 2018. Ms. Judah held numerous leadership positions at Chevron, including general manager for Chevron’s Southern Africa business unit from August 2010 to September 2016, president of Chevron Environmental Management Company from August 2007 to August 2010 and general manager of reservoir and production engineering for Chevron Energy Technology Company from June 2004 to August 2007. Before joining Chevron in 1998, she held various upstream petroleum engineering positions for Texaco and Arco, starting in Midland in 1981. Ms. Judah holds Bachelor of Science and Masters of Science degrees in petroleum engineering from Texas A&M University, a Masters of Business Administration from the University of Texas of the Permian Basin and a Juris Doctorate from the University of Houston Law Center. Ms. Judah is a registered professional Engineer in Texas, currently serves on both the Texas A&M and University of Houston College of Engineering Advisory Councils, and has been a member of the Texas A&M Petroleum Engineering Industry Board since 1996. Ms. Judah is also president-elect of Houston Audubon, a conservation land trust and environmental education nonprofit organization. +The Board of Directors considered Ms. Judah’s more than 35 years of operational, managerial and environmental experience in the oil and gas industry. The Board noted her experience derived from oil and gas industry positions held involving significant operational and management responsibilities, including positions with Chevron and upstream petroleum engineering positions. The Board also noted Ms. Judah’s extensive international experience, including most recently as general manager for Chevron’s Southern Africa business unit, which allows her to provide Patterson-UTI with valuable insight on international and strategic matters. The Board also considered Ms. Judah’s service as the President of the Society of Petroleum Engineers from 2017 to 2018, as well as her diversity of perspective, which is exemplified by her recognition in 2018 as one of Oil and Gas Investor’s 25 Influential Women in Energy. +10 +Amy H. Nelson — Ms. Nelson has served as a director of Patterson-UTI since September 2023. Ms. Nelson served as a member of NexTier’s board of directors from October 2019 to September 2023. She is also the president of Greenridge Advisors, LLC, which she founded in 2007 as an energy services and equipment consulting firm focused on the development, execution, and financing of corporate and product line strategies. Ms. Nelson advises her clients on strategy development, capital allocation, acquisition evaluation and infrastructure development. Her clients span a broad range of oilfield service, product and geographic markets. Ms. Nelson has been a member of APA Corporation’s board of directors since 2014, and she is a member of both its audit committee and corporate responsibility, governance, and nominating committee. She also joined the Helix Energy Solutions Group, Inc. board of directors and its audit committee in July of 2019, and in May of 2020 began serving as the chair of the audit committee. Ms. Nelson began her career at Amoco Production Company in a variety of engineering, project management and planning roles. From 2000 to 2007, Ms. Nelson served as a vice president of SCF Partners, an oilfield service and equipment-focused private equity firm, where she concentrated on investment strategy, investment execution and portfolio company management. During her tenure at SCF Partners and Greenridge Advisors, Ms. Nelson has served on the board of directors of several private companies. Ms. Nelson has devoted her career to serving companies in the oil and gas industry. +The Board of Directors considered Ms. Nelson’s extensive oilfield service experience through her founding and leadership of an energy services and equipment consulting firm, as well as her financial and strategic experience gained through her service at an oilfield service and equipment-focused private equity firm. The Board also considered Ms. Nelson’s extensive board of directors experience as a result of currently serving or previously serving on public company boards and a variety of private company boards, bringing valuable corporate governance, sustainability and oversight experience to the Board. +Julie J. Robertson — Ms. Robertson has served as a director of Patterson-UTI since April 2022. Ms. Robertson has served as a director of EOG Resources, Inc., an upstream oil and gas company, since January 2019, as a director of Superior Energy Services, Inc., an oilfield services company, since February 2021 and as a director of Seadrill Limited, an offshore drilling contractor, since November 2021. Ms. Robertson served in the role of Executive Chairman of Noble Corporation plc (“Noble”), an offshore drilling contractor, from May 2020 until her retirement from Noble in February 2021. Previously, Ms. Robertson served as Chairman of the Board, President and Chief Executive Officer of Noble from January 2018 until May 2020. Ms. Robertson previously served in various other management roles for Noble and its subsidiaries, including (i) Executive Vice President from 2006 to January 2018, (ii) Senior Vice President — Administration from 2001 to 2006 and (iii) Vice President — Administration from 1996 to 2001. Ms. Robertson also served continuously as Corporate Secretary of Noble from 1993 until assuming the Chairman’s role in 2018. Ms. Robertson joined a predecessor subsidiary of Noble in 1979. Ms. Robertson holds a Bachelor of Journalism degree from the University of Texas at Austin and successfully completed the Harvard Business School Advanced Management Program in 1998. +The Board of Directors considered Ms. Robertson’s more than 40 years of operational, managerial, administrative and human resource experience at a leading global offshore drilling contractor, including as the Executive Chair and as the Chair of the Board, President and Chief Executive Officer. The Board noted Ms. Robertson’s extensive international experience, including working in over 45 countries, her experience in mergers and acquisitions and her experience in global compliance and risk mitigation, executive compensation, governance and sustainability matters and supply chain management. Ms. Robertson also has extensive board of directors experience as a result of currently serving or previously serving on four public company boards. The Board also considered Ms. Robertson’s recognition as 2013 Drilling Contractor of the Year by the International Association of Drilling Contractors, and her recognition in 2020 as one of Oil and Gas Investor’s 25 Influential Women in Energy. +11 +James C. Stewart — Mr. Stewart has served as a director of Patterson-UTI since September 2023. Mr. Stewart served as a member of Keane’s and, subsequently, NexTier’s board of directors from March 2011 to September 2023. He joined Keane (predecessor to NexTier) in March 2011 as Chairman and Chief Executive Officer and served as Executive Chairman from August 2018 to October 2019. Mr. Stewart has served as Chief Executive Officer of Covenant Testing Technologies, a provider of flowback, production and sand management, and pressure control equipment rentals and associated services, since October 2023 . Prior to joining Keane, from 2007 to 2009, he served as the President and Chief Executive Officer of a privately held international drilling company. From 2006 to 2007, Mr. Stewart served as Vice President of Integrated Drilling Services for Weatherford International plc, based in London and Dubai, where he created and managed a global business unit that included a 50-rig international land contract drilling group and a global project management team. Mr. Stewart began his career with Schlumberger Limited, where he held senior leadership positions across the globe over the span of 22 years. +The Board considered Mr. Stewart’s more than 30 years of leadership experience in the oilfield services industry, including his service as former Chief Executive Officer of NexTier and of another oilfield service company. The Board also considered his extensive international experience and management of global business and project management teams, which brings perspective to the Board and allows him to provide Patterson-UTI with valuable insight on international and strategic matters. +12 +Board Leadership Structure and Independent Chairman +The Board evaluates its leadership structure on an ongoing basis. The decision on whether to combine or separate the Chairman and Chief Executive Officer (“CEO”) role is determined on the basis of what the Board considers to be best for Patterson-UTI at any given point in time. Patterson-UTI’s current Board leadership structure separates the role of Chairman and CEO, and our Chairman is an independent director. In addition to having an independent Chairman, the Board has an independent Vice Chairman who works with the independent Chairman to provide independent oversight and leadership of the Board. +The independent directors meet regularly in executive sessions at which only independent directors are present, and the Chairman chairs those sessions. The Chairman serves as a liaison between the independent directors and any employee directors, consults with regard to Board and agenda items, and works with the chairpersons of Board committees as appropriate. The Chairman also participates from time to time in meetings with large stockholders. +The Nominating and Corporate Governance Committee and the Board currently believe that the Board’s leadership structure, which includes the separation of the role of CEO and Chairman, is appropriate because it, among other things, provides for sufficient independence between the Board and management and for an independent director who provides board member leadership. +Board Role in Risk Oversight +The Board has adopted Corporate Governance Guidelines, which can be accessed electronically in the “Governance” section of Patterson-UTI’s website at www.patenergy.com. The Guidelines describe one of the Board’s primary responsibilities as overseeing Patterson-UTI’s processes for assessing and managing risks. The Board delegates to its committees responsibility for overseeing certain types of risk, as reflected in the chart below, and the committees in turn report regularly to the Board on their respective areas of oversight. +Board of Directors +• +The Board oversees assessment of major risks facing the Company and, to the extent the Board deems it appropriate, evaluates options for their mitigation. The risks that the Board routinely oversees, either directly or by delegating to a committee, include those related to safety, operations, financial matters, strategy, technology, competition, legal and regulatory matters, and sustainability matters, including climate change-related matters. +• +The Board and its committees discharge their oversight responsibility, in part, through regular inquiries from the Chairman of the Board and other directors to senior management, regular discussions during Board and committee meetings of general and specific risks to Patterson-UTI, and periodic communications with senior management regarding particular risks and events. +• +The Board oversees risk management by our senior management team, in part, by reviewing and evaluating major financial objectives, critical strategies, and long-term plans, including major allocations of capital, significant proposed business acquisitions and divestitures, safety and operating performance, sustainability performance, and stockholder returns. +Audit Committee +Compensation Committee +Nominating and Corporate Governance Committee +Sustainability Committee +• +Financial statements and internal controls +• +Independent auditors and internal audit function +• +Financial reporting process +• +Legal and ethics compliance programs +• +Sustainability disclosures in SEC reports and financial statements +• +Cybersecurity +• +Compensation policies and related risks +• +Compensation of executive officers, including KPIs +• +Incentive compensation plan administration +• +CD&A and report in proxy statement +• +Corporate governance guidelines and code of business conduct +• +Review of board performance +• +Recommendation of director nominees and committee composition +• +Executive succession planning +• +Assistance with governance-related sustainability issues, including climate-related risks and opportunities +• +Sustainability risks and opportunities, including climate-change related matters +• +Sustainability report and related disclosure issues +• +Sustainability-related strategy, policies and practices +• +Health, safety and environmental protection policies; related risks +• +Human and workplace rights and policies, including diversity and inclusion policies and human capital management +13 +Senior Management +Day-to-day responsibility for: +• +Identifying corporate risks, including climate-related risks and opportunities +• +Assessing the potential level of impact to the business from such risks +• +Implementing appropriate risk management strategies, including integrating consideration of risk and risk management into business decision-making +• +Reviewing the effectiveness of our risk management efforts +Our senior management identifies risks and opportunities through discussions with employees and other stakeholders, including customers, investors, trade associations and industry groups; engagement with environmental, social and governance (ESG) groups; and our own business risk assessments, as well as regular monitoring of legal, regulatory and policy changes with the potential to affect the industry as well as our company specifically. We believe that climate risks are inherently business risks, and our assessment of these climate-related transition and physical risks is integrated into our business risk assessment process. +Our senior management and representatives from our business units regularly communicate with the Board on risk management matters. Senior management conducts regular risk assessments to identify risks that have the potential to significantly affect our business over the short-, medium- and longer term and reviews with the Board risk mitigation and oversight measures, including prioritization of risk management and allocation of responsibility within the Company for the management of a particular risk. +Meetings and Committees of the Board of Directors +The Board of Directors met 11 times during the year ended December 31, 2023. Each then-serving director attended, in person or by telephone, at least 75% of the aggregate of all meetings held by the Board and meetings of each committee on which such director served. A majority of the members of the Board of Directors are independent within the meaning of the Nasdaq Stock Market, Inc. (“Nasdaq”) listing standards. Specifically, the Board has determined that Messrs. Drummond, Halverson, Huff, Jaime and Stewart and Mses. Beyer, Cepak, Judah, Nelson and Robertson are independent within the meaning of the Nasdaq listing standards. In addition, each of Michael W. Conlon and Terry H. Hunt, who served on the Board until September 1, 2023, qualified as independent during their service on the Board. In making its independence determinations, the Board considered transactions occurring since the beginning of 2023 between Patterson-UTI and entities associated with the independent directors or their immediate family members. The Board considered that since October 2023, Mr. Stewart has been employed by an organization that does business in the ordinary course with a subsidiary of Patterson-UTI. The amount received by Patterson-UTI or such other organization in each of the last three fiscal years did not exceed the greater of $200,000 or 1% of either Patterson-UTI’s or such organization’s consolidated gross revenues. +The Board of Directors has established five standing committees: an Executive Committee, an Audit Committee, a Compensation Committee, a Nominating and Corporate Governance Committee and a Sustainability Committee. +The Executive Committee, which currently is composed of Messrs. Huff (chair), Drummond and Hendricks, has the authority, to the extent permitted by applicable law, to act for the Board in all matters arising between regular or special meetings of the Board of Directors. The Executive Committee held one meeting during the year ended December 31, 2023. +The Audit Committee members are Mses. Cepak (chair), Judah and Robertson, and Messrs. Halverson, Jaime and Stewart, each of whom is independent within the meaning of applicable rules under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and within the meaning of the Nasdaq listing standards. The Audit Committee oversees management’s execution of Patterson-UTI’s accounting and financial reporting process, including review of the financial reports and other financial information provided by Patterson-UTI to the public and government and regulatory bodies, Patterson-UTI’s system of internal accounting, Patterson-UTI’s financial controls, and the annual independent audit of Patterson-UTI’s financial statements and internal control over financial reporting. The Audit Committee also oversees compliance with Patterson-UTI’s codes of conduct and ethics and with legal and regulatory requirements. The Board has determined that Ms. Cepak is an “audit committee financial expert” within the meaning of applicable SEC rules. The Audit Committee selects the independent registered public accounting firm to audit Patterson-UTI’s books and records and considers and acts upon accounting matters as they arise. The Board of Directors has adopted a written charter for the Audit Committee. The Audit Committee held six meetings during the year ended December 31, 2023. Please see “Audit Committee Report” elsewhere in this proxy statement. +14 +The Compensation Committee members are Messrs. Halverson (chair) and Huff and Mses. Cepak and Nelson, each of whom is independent as defined in the Nasdaq listing standards. Among other things, the Compensation Committee sets and administers the policies that govern the compensation of executive officers of Patterson-UTI and periodically reviews director compensation and recommends changes, as appropriate, to the Board of Directors for approval. The Board of Directors has adopted a written charter for the Compensation Committee. The Compensation Committee held six meetings during the year ended December 31, 2023. Please see “Compensation Discussion and Analysis” and “Compensation Committee Report” elsewhere in this proxy statement for further information about the Compensation Committee. +The Nominating and Corporate Governance Committee members are Mses. Robertson (chair) and Beyer and Messrs. Huff and Stewart, each of whom is independent as defined in the Nasdaq listing standards. The purpose of the Nominating and Corporate Governance Committee is to, among other things, identify individuals qualified to become Board members, to recommend for selection by the Board director nominees for the annual meetings of stockholders, to recommend nominees for Board committees, to review Patterson-UTI’s Code of Business Conduct and Corporate Governance Guidelines, to develop and continually make recommendations with respect to the best corporate governance principles and to oversee the annual review of the Board and management. The Nominating and Corporate Governance Committee assists the Board’s Sustainability Committee in its oversight of governance-related sustainability issues, including climate-related risks and opportunities. The Board of Directors has adopted a written charter for the Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee held four meetings during the year ended December 31, 2023. +The Sustainability Committee members are Mses. Nelson (chair), Beyer and Judah and Messrs. Drummond, Jaime and Stewart, each of whom is independent as defined in the Nasdaq listing standards. The purpose of the Sustainability Committee is to, among other things, review significant policies and performance and provide guidance on matters relating to sustainability, oversee and monitor the Company’s vision and values relating to sustainability, advise the Board and management on significant public issues related to sustainability matters, assist management in setting strategy, establishing goals and integrating sustainability into strategic and tactical business activities across the Company to create long-term stockholder value, and review and recommend to the Board for approval any sustainability reporting to the public or governmental agencies. The Board of Directors has adopted a written charter for the Sustainability Committee. The Sustainability Committee held five meetings during the year ended December 31, 2023. +Although Patterson-UTI does not have a formal policy regarding attendance by members of the Board at its annual meetings of stockholders, directors are invited to attend annual meetings of Patterson-UTI stockholders. All of the then-serving directors attended the 2023 annual meeting of stockholders either in person or by telephone. +Consideration of Director Nominees and Governance Policy +On behalf of the Board, the Nominating and Corporate Governance Committee considers director nominees recommended by Patterson-UTI’s stockholders if the recommendations are made in accordance with all legal requirements, including applicable provisions of Patterson-UTI’s restated certificate of incorporation and bylaws. A stockholder’s notice to the Secretary of Patterson-UTI shall contain certain information specified in Patterson-UTI’s bylaws regarding the stockholder and the proposed nominee. See “Other Matters—Stockholder Proposals for 2025 Annual Meeting” and Article I, Section 8 and Article I, Section 11 of Patterson-UTI’s bylaws. +The number of directors may be fixed or changed by amendment of Patterson-UTI's bylaws or by resolution of the Board. The Board assesses periodically, in connection with director refreshment and other considerations, whether a larger or smaller number of directors would be preferable. +The Nominating and Corporate Governance Committee determines qualification criteria and procedures for the identification and recruitment of candidates for election to serve as directors of Patterson-UTI. The Nominating and Corporate Governance Committee relies on the knowledge and relationships of Patterson-UTI and its officers and directors, as well as third parties when it deems appropriate, to identify and evaluate nominees for director, including nominees recommended by stockholders. In evaluating a nominee for director, the Nominating and Corporate Governance Committee considers the nominee’s skills, expertise, industry and other knowledge, personal and professional ethics, integrity and values, sound business judgment and willingness to commit sufficient time to the Board and be committed to representing the long-term interests of Patterson-UTI’s stockholders. The Nominating and Corporate Governance Committee also reviews the individual performance and qualifications of each director who wishes to be considered for nomination to the Board. Although the Nominating and Corporate Governance Committee does not have a stand-alone policy with regard to consideration of diversity in identifying director nominees, it is required, in accordance with our Corporate Governance Guidelines, to consider diversity in professional background, experience, expertise (including as to financial matters) and perspective (including as to age, gender and ethnicity) with respect to the Board of +15 +Directors composition as a whole when evaluating a director nominee. The Board assesses its effectiveness in this regard as part of the annual board and director evaluation process. +In connection with the closing of the NexTier merger in September 2023, the Board adopted a Governance Policy that sets forth certain requirements on the Board and its composition for a period of two years following completion of the NexTier merger. The Governance Policy provides that, at each of the 2024 and 2025 annual meetings of stockholders, the Patterson-UTI Board will re-nominate each Patterson-UTI and NexTier designee then serving on the Patterson-UTI Board for re-election by stockholders, subject to certain exceptions. In addition, until September 1, 2025, (i) the Nominating and Corporate Governance Committee will have an equal number of Patterson-UTI and NexTier designees, (ii) all other committees will have at least one NexTier designee, such that the membership of all the committees (excluding the Executive Committee) of the Patterson-UTI Board, taken as a whole, will have an equal number of Patterson-UTI and NexTier designees and (iii) the Executive Committee will consist of the Chairman, Vice Chairman and Chief Executive Officer. Mses. Cepak, Judah and Robertson and Messrs. Huff, Hendricks and Jaime are the current Patterson-UTI designees, and Mses. Nelson and Beyer and Messrs. Drummond, Halverson and Stewart are the current NexTier designees. +Board and Director Performance Assessments +The Nominating and Corporate Governance Committee annually reviews and evaluates the performance of the Board, each Committee of the Board, and each director in order to improve the effectiveness of the Board and each Committee of the Board. The Committee assesses the contributions of the Board as a whole and each of its Committees and identifies areas in which improvements may be made. The results of the evaluations are reviewed and discussed with the Board and its Committees, and recommendations are made, as appropriate, to the Board and its Committees. +The Nominating and Corporate Governance Committee also annually reviews the individual performance and qualifications of each director who wishes to be considered for nomination for reelection to the Board. +Continuing Education +Continuing education helps our directors strengthen their skills, deepen their understanding of our business and operations and stay current with emerging issues that affect our business, governance and compensation practices. It also helps directors keep abreast of governance developments and requirements and understand the issues we face in the context of our business. To further these goals, our Board’s continuing director education policy requires directors to participate in continuing education programs and reimburses directors for expenses incurred in connection with such education programs. +Succession Planning +The Board of Directors oversees processes and procedures to provide continuity of well-qualified executive leadership and to assess whether such leadership possesses the skill and talent to execute Patterson-UTI’s long-term business strategies. The Board of Directors reviews succession planning for the Chief Executive Officer and the senior executives tailored to reflect the Board’s standards for executive leadership and Patterson-UTI’s business strategy and vision. The succession planning addresses (i) both current and long-term needs of Patterson-UTI and establishes a process for identifying and assessing potential internal candidates; (ii) periodic review and assessment of readiness; (iii) contingency planning for temporary absences of the Chief Executive Officer due to disability or other unexpected event; and (iv) long-term continuity planning for succession to the Chief Executive Officer position. +Political Contributions +Patterson-UTI has a policy prohibiting the contribution of company funds to political parties or organizations or to candidates for any public office or to influence the general public, or segments thereof, with respect to public elections or referenda. Patterson-UTI participates in certain trade organizations with purposes that include enhancement of the public image of our industry, education about the industry and issues that affect the industry and industry best practices and standards. Many of the trade organizations also engage in legislative or political activity related to matters that affect the industry as a whole and not a specific company. Patterson-UTI, as one of many members in various trade associations, does not direct the legislative activities of any trade organization of which it is a member. +Sustainability +Patterson-UTI strives to be a leader in our industry in the area of environmental, social, governance ("ESG") and other sustainability-related issues, and remains committed to managing these issues for the long-term benefit of our +16 +employees, communities and our business. We aim to minimize our environmental impact in the communities in which we work and live, while providing services for our customers in a safe and responsible manner. We invest extensively in the safety, health and well-being of our people, who are our greatest strength. Also, maintaining a rigorous focus on ethics and integrity at every level of our operations is a practice on which all of our success depends. +We also promote overall wellness with our employees through our PTEN Cares program, which reminds employees of the importance of taking care of each other and remaining aware of how important overall health and wellness is to our employees and their families. Through our PTEN Cares program, we also engage with local communities to make a positive impact where we work and live. +We encourage you to review our latest sustainability report for more detailed information regarding our sustainability programs and initiatives. A copy of Patterson-UTI’s sustainability report can be accessed electronically in the “Sustainability” section of the Patterson-UTI website at www.patenergy.com and in print to any stockholder who requests it from the Secretary of Patterson-UTI. Nothing on our website, including our sustainability report or sections thereof, shall be deemed incorporated by reference into this proxy statement or other filings that we make with the SEC. Our ESG goals are aspirational and may change. Statements regarding our goals are not guarantees or promises that they will be met. +At Patterson-UTI, we believe that a commitment to diversity and inclusion for all is foundational and extends beyond what is required by various federal, state and local laws. We actively foster an inclusive culture where our employees are supported, valued and respected. We are proud of our workforce, where all employees can contribute to the success of the Company, drawing upon their unique backgrounds, perspectives and life experiences. +We recognize that a diverse workforce is imperative in order to remain competitive and to meet our customers’ expectations. As part of our diversity and inclusion efforts, we recruit candidates from different geographies, with a focus on employing local content in the communities near where we operate. We partner with state and local workforce commissions to ensure potential candidates from a variety of backgrounds and experiences are aware of open positions. We also utilize the services of a leading third-party provider of diversity recruitment to help advertise our positions to various organizations. +Our leaders remain focused and committed to a diverse workplace and culture of inclusion and respect, and they drive accountability for promoting and maintaining that commitment throughout our Company. Additionally, our Senior Vice President of Sustainability, Diversity and Culture partners with other Company leaders to ensure that our businesses are each doing their part to adhere to Company policies, programs and initiatives that promote our diverse workplace and our culture of inclusion and respect. +Patterson-UTI’s Code of Business Conduct and Ethics and Equal Employment Opportunity and Anti-Harassment Policy prohibit discrimination or harassment of any type and afford equal employment opportunities to all employees and applicants, without regard to age, race, sex, color, religion, national origin, disability, marital status, covered veteran status, genetic information, sexual orientation, gender identity or any other characteristic protected under state, federal or local law. Each employee is expected to demonstrate a shared commitment to Patterson-UTI’s values regarding diversity and inclusion, as well as mutual respect for all co-workers, vendors, customers, third parties, and business partners. +Communication with the Board and its Independent Members +Persons may communicate with the Board, or directly with its Chairman, Mr. Huff, by submitting such communication in writing in care of Chairman of the Board of Directors, Patterson-UTI Energy, Inc., 10713 West Sam Houston Parkway North, Suite 800, Houston, Texas 77064. Persons may communicate with the independent members of the Board by submitting such communication in writing to the Nominating and Corporate Governance Committee of the Board of Directors of Patterson-UTI Energy, Inc., 10713 West Sam Houston Parkway North, Suite 800, Houston, Texas 77064. +Corporate Governance Documents Available on Patterson-UTI’s Website +Copies of each of the following documents can be accessed electronically in the “Corporate Governance” section of the Patterson-UTI website at www.patenergy.com and in print to any stockholder who requests them from the Secretary of Patterson-UTI: +• +Audit Committee Charter; +• +Compensation Committee Charter; +• +Nominating and Corporate Governance Committee Charter; +• +Sustainability Committee Charter; +17 +• +Corporate Governance Guidelines; +• +Governance Policy; +• +Code of Business Conduct and Ethics for its employees, officers and directors; +• +Code of Business Conduct and Ethics for Senior Financial Executives; and +• +Global Anticorruption Policy. +18 +PROPOSAL NO. 2 +RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM +The Audit Committee appointed PricewaterhouseCoopers LLP as the independent registered public accounting firm to audit the financial statements and internal control over financial reporting of Patterson-UTI for the fiscal year ending December 31, 2024, and directed that such engagement be submitted to the stockholders of Patterson-UTI for ratification. In recommending ratification by the stockholders of such engagement, the Board of Directors is acting upon the recommendation of the Audit Committee, which has satisfied itself as to PricewaterhouseCoopers LLP’s independence, professional competence and standing. Although ratification by stockholders of the engagement of PricewaterhouseCoopers LLP is not required by Delaware corporate law or Patterson-UTI’s restated certificate of incorporation or bylaws, the Audit Committee believes a decision of this nature should be made with the consideration of Patterson-UTI’s stockholders. If the stockholders fail to ratify the appointment, the Audit Committee will reconsider whether to retain PricewaterhouseCoopers LLP and may retain that firm or another without re-submitting the matter to our stockholders. Even if the appointment is ratified, the Audit Committee may, in its discretion, direct the appointment of a different independent registered public accounting firm at any time during the year if it determines that such change would be in the best interests of Patterson-UTI and its stockholders. +It is expected that one or more representatives of PricewaterhouseCoopers LLP will be available to participate in the Meeting and will be given the opportunity to make a statement if they so desire. It also is expected that the representative(s) will be available to respond to appropriate questions from the stockholders. +The Board of Directors recommends a vote “FOR” the ratification of PricewaterhouseCoopers LLP as Patterson-UTI’s independent registered public accounting firm. Ratification of the selection of PricewaterhouseCoopers LLP requires the affirmative vote of the holders of a majority of the shares of Common Stock entitled to vote on, and voted “FOR” or “AGAINST,” the proposal. Unless you give contrary instructions in your proxy, your properly submitted proxy will be voted “FOR” such ratification. Abstentions will not be counted as votes cast “FOR” or “AGAINST” the proposal and will have no effect on the outcome of the proposal. If you do not give instructions to your brokerage firm, bank, broker-dealer, or other similar organization, the brokerage firm, bank, broker-dealer, or other similar organization will be entitled, but not required, to vote your shares in its discretion and may give or authorize the giving of a proxy to vote the shares in its discretion on this proposal. +19 +PROPOSAL NO. 3 +APPROVAL OF AMENDMENT TO +2021 LONG-TERM INCENTIVE PLAN +Background +The Patterson-UTI Energy, Inc. 2021 Long-Term Incentive Plan (as previously amended, the “2021 Plan”) was originally approved by Patterson-UTI's stockholders effective as of June 3, 2021. On June 8, 2023, our stockholders approved an amendment to the 2021 Plan to increase the number of shares available for issuance thereunder by 5.445 million shares. On September 1, 2023, in connection with the NexTier merger, our Board of Directors approved a second amendment to the 2021 Plan to assume 10,050,932 shares previously reserved for issuance under the NexTier Oilfield Solutions Inc. Equity and Incentive Award Plan (the “NexTier Plan” and such assumed shares, the “NexTier Pool”) as permitted by Nasdaq Rule 5635(c). Pursuant to Nasdaq Rule 5635(c) and such amendment, the NexTier Pool may only be used for awards granted on or prior to January 3, 2027 to persons who were not employees, directors, consultants or advisors of the Company or any of its subsidiaries as of immediately prior to the September 1, 2023 NexTier merger closing date. +Subject to the approval of our stockholders, on March 28, 2024 our Board of Directors approved a third amendment to the 2021 Plan (the “Plan Amendment”) to (i) increase the number of shares available for issuance under the plan by 20 million shares, (ii) eliminate the NexTier Pool on a go forward basis, (iii) expand the plan’s restrictions on share recycling, and (iv) make certain edits to the recoupment provisions under the plan. No other changes are proposed by the Plan Amendment. Participation in the 2021 Plan is broad based, with approximately 240 employees and directors participating in 2023. The elimination of the NexTier Pool, and the concurrent increase in the overall number of shares available for issuance under the 2021 Plan, are being proposed in order to preserve the flexibility of the Company to grant future awards to all of its employees, directors, consultants or advisors without the limitations to which the NexTier Pool is subject. +In considering the Plan Amendment, our Board of Directors considered the dilutive impact of the additional share pool request, and in particular our overhang level. Overhang is equal to the total number of shares subject to equity awards outstanding (assuming target payout of all performance units (PSUs) then outstanding) plus the total number of shares available for grant under the Company’s equity plans, divided by the sum of the total common shares outstanding, the number of shares subject to equity awards outstanding (assuming target payout of all PSUs then outstanding) and the total number of shares available for grant under the Company’s equity plans. Our total overhang was 5.4% based on our shares and shares subject to equity awards outstanding (assuming target payout of all PSUs then outstanding) as of March 28, 2024, and would increase to 7.6% upon approval of the Plan Amendment (given the elimination of the NexTier pool and the additional share request). Approval of the Plan Amendment requires the affirmative vote of the holders of a majority of the shares of Common Stock that are present in person or by proxy and entitled to vote at the Meeting. +If the Plan Amendment is not approved by stockholders, the 2021 Plan will remain in effect with its current share pool. As of March 28, 2024, there were 13,616,988 shares of common stock remaining available for grant under the 2021 Plan, assuming a target payout of all PSUs then outstanding. Of these shares available for grant, (i) 3,728,086 of these shares were available for awards to any employees, directors, consultants or advisors of the Company, and (ii) 9,888,902 of these shares were available for awards using the NexTier Pool, which may only be used for awards to persons who were not employees, directors, consultants or advisors of the Company or any of its subsidiaries as of immediately prior to September 1, 2023. If the Plan Amendment is not approved by stockholders, we will continue to be limited with respect to the awards that can be granted from the NexTier Pool and will not be able to continue our equity-based long term incentive program once these remaining pools are depleted, which would require us to increase significantly the cash component of our employee compensation program in order to remain competitive and adequately compensate our employees. +Certain material terms of the 2021 Plan are discussed below; however, the description is subject to, and qualified by the full text of the 2021 Plan, attached hereto as Annex A, which includes the Plan Amendment highlighted in bold. Unless otherwise indicated, references to the “2021 Plan” in the following description of the material terms of the 2021 Plan reflect the 2021 Plan as amended by the Plan Amendment. +Best Practices +Independent Oversight . The Compensation Committee, composed solely of non-employee independent directors, approves all grants made to employees under the 2021 Plan; provided, however, that the Compensation Committee may delegate to the Board or any committee of the Board, to one or more executive officers or a committee of executive +20 +officers its right to grant awards under the 2021 Plan to employees who are not executive officers or directors of Patterson-UTI pursuant to such conditions or limitations as the Compensation Committee may establish. The Board of Directors approves all grants to directors under the 2021 Plan. +No Repricing of Options or SARs . The 2021 Plan prohibits the repricing and replacement of stock options or stock appreciation rights (“SARs”) at lower exercise prices unless approved by our stockholders. +No Discounted Options or SARs . Stock options and SARs may not be granted with an exercise price below the fair market value of our common stock on the date of grant. +No Dividends on Options or SARs . Dividends and dividend equivalents may not be paid or accrued on stock options or SARs. +No Dividends or Dividend Equivalents Paid on Unvested Awards . Any dividends or dividend equivalents will only be paid if and to the extent the underlying shares vest pursuant to the terms of the award. +Limited Terms for Options and SARs . Stock options and SARs granted under the 2021 Plan are generally limited to 10-year terms. +No Liberal Share Recycling. The 2021 Plan prohibits liberal share recycling. Shares delivered to Patterson-UTI or withheld to satisfy the exercise price of a stock option or SAR or withholding tax obligations on any award, shares not issued in the net settlement of a stock-settled SAR, and shares repurchased on the open market with the proceeds of a stock option exercise will not again be made available for grant under the 2021 Plan. +No “Evergreen” Provision . Shares authorized for issuance under the 2021 Plan will not be replenished automatically. Any additional shares to be issued over and above the current share pool, as increased by the Plan Amendment, will require further stockholder approval. +No Tax Gross-Ups . The Compensation Committee does not provide tax gross-ups in connection with awards under the 2021 Plan. +Annual Limitation on Director Compensation . The total compensation paid to each non-employee director for their service as such, whether in cash or in equity awards under the 2021 Plan (based on the grant date fair value of any such awards) during a single fiscal year may not exceed $750,000 (or $1,000,000 for any fiscal year in which the non-employee director is first appointed to the Board or any fiscal year in which the non-employee director serves as chairman or lead director). +Recoupment . Awards granted under the 2021 Plan are subject to the Patterson-UTI Energy, Inc. Clawback Policy and will be subject to any other clawback policy adopted by us. In addition, if we are required to prepare an accounting restatement due to the material noncompliance of Patterson-UTI, as a result of misconduct, with any financial reporting requirement, the 2021 Plan requires recoupment where required under Section 304 of the Sarbanes-Oxley Act of 2002 and permits recoupment from any participant who engaged in such misconduct. See the description of our current Clawback policy below under “Clawback Policy”. +Minimum Vesting . Subject to a 5% carve-out, all awards are subject to a minimum vesting period of one year from the date of grant, except in the case of substitute awards, awards delivered in lieu of fully-vested cash obligations, certain awards to directors that vest in connection with an annual meeting, and permitted accelerations of awards, such as in connection with a holder's retirement, death or disability or in the event of a change in control. +Burn Rate +Our Board and Compensation Committee are committed to using equity awards prudently and considers the dilutive impact of annual grants on our stockholders. Set forth below is information on the awards granted or earned and our burn +21 +rate for the years 2021-2023 under our previous equity compensation plan, the Amended and Restated 2014 Long-Term Incentive Plan, as amended (the “2014 Plan”) and the 2021 Plan: +A +B +C +D +E +F +G +Fiscal Year +Stock +Options +Granted (1) +Time-Based +RSUs +Granted (1) +PSUs / Performance-Based RSUs +Granted (1)(2) +Actual PSUs +and +Performance- +Based RSUs +Earned (1) +Total +(1)(3) +Weighted +Average # of +Common Shares +Outstanding +Burn +Rate (4) +2023 +— +1,840,861 +796,976 +1,001,000 +5,683,722 +280,061,025 +2.03 +% +2022 +— +1,554,849 +414,000 +979,600 +5,068,898 +219,495,864 +2.31 +% +2021 +— +1,797,875 +843,000 +621,400 +4,838,550 +195,021,450 +2.48 +% +Average Three-Year Burn Rate (2021-2023) +2.27 +% +(1) +Excludes 652,573 stock options and 7,438,031 time-based RSUs outstanding under the NexTier Plan and the NexTier Oilfield Solutions Inc. (Former C&J Energy) Management Incentive Plan (the “Former C&J Energy Plan”), which we assumed in connection with the NexTier Merger. All of these assumed awards had been previously granted by NexTier or its affiliates in periods prior to the NexTier merger. +(2) +Reflects target number of PSUs granted in applicable fiscal year. +(3) +Total number of shares in a particular fiscal year includes all time-based awards granted during such fiscal year, and all PSUs and RSUs for which the performance criteria was certified as attained and earned during such fiscal year. In light of the fungible ratio share counting provisions of both the 2014 Plan and the 2021 Plan, RSUs and PSUs are counted as two shares in the Total amount. Accordingly, the number in this “Total” column for a particular fiscal year is derived as follows: (i) column A (zero for each year); plus (ii) column B, times two, plus (iii) column D, times two. +(4) +PSUs granted in the applicable fiscal year and not yet earned are excluded from the calculation of burn rate. +Description of the 2021 Plan +The primary objective of the 2021 Plan is to assist Patterson-UTI and its subsidiaries in attracting and retaining selected individuals to serve as directors, employees, consultants and advisors of Patterson-UTI who are expected to contribute to its success and achieve long-term objectives which will inure to the benefit of its stockholders through the additional incentives inherent in awards under the 2021 Plan. The 2021 Plan provides for the granting of incentive and non-qualified stock options, tandem and freestanding stock appreciation rights, restricted stock awards, other stock unit awards, performance shares, performance units and dividend equivalents. Certain awards under the 2021 Plan may be paid in cash or Common Stock, as determined by the Compensation Committee. The Compensation Committee has exclusive authority to select the participants to whom awards may be granted, and to determine the type, size and terms of each award, subject to the limitations set forth in the 2021 Plan. The Compensation Committee will also make all determinations that it decides are necessary or desirable in the interpretation and administration of the 2021 Plan. In addition, the Compensation Committee may, if consistent with applicable rules, regulations and Nasdaq requirements, delegate to a committee of one or more directors or to one or more executive officers the right to grant, cancel and suspend awards to employees who are not directors or executive officers of Patterson-UTI. +22 +As of March 28, 2024, the equity awards outstanding under the NexTier Plan, the Former C&J Energy Plan, the 2014 Plan, and the 2021 Plan, were as follows (1): +Options outstanding (2) +2,859,920 +Full-value awards outstanding (3) (4) +6,942,369 +Weighted-average exercise price of outstanding options +$ +23.54 +Weighted-average remaining contractual term of outstanding options +1.55 years +Shares available for grant under the 2021 Plan (4) (5) +13,616,988 +Shares of Common Stock Outstanding +403,806,999 +(1) +This table excludes the 20 million shares requested, and the reduction of approximately 10 million shares available for grant with the elimination of the NexTier Pool, pursuant to the Plan Amendment. +(2) +Includes 54,069 options outstanding under the NexTier Plan (with a weighted average exercise price of $19.54 and weighted average remaining contractual term of 0.22 years), 406,405 options outstanding under the Former C&J Energy Plan (with a weighted average exercise price of $32.50 and weighted average remaining contractual term of 3.08 years) and 2,212,650 options outstanding under the 2014 Plan (with a weighted average exercise price of $21.99 and weighted average remaining contractual term of 1.30 years). +(3) +Includes 1,240 RSUs under the Former C&J Energy Plan, 1,427,160 RSUs under the NexTier Plan, 359,315 RSUs under the 2014 Plan and 3,339,142 RSUs and 1,811,800 PSUs (at target) under the 2021 Plan. No PSUs are outstanding under the 2014 Plan. +(4) +Under the fungible counting provisions of the 2021 Plan, full-value awards count as two shares. +(5) +No shares remain available for grant under the 2014 Plan, the NexTier Plan or the Former C&J Energy Plan. +General Terms +• +Subject to adjustment in the event of certain corporate transactions, the aggregate number of shares of Common Stock authorized for grant under the 2021 Plan (after giving effect to the Plan Amendment) is 38,912,480, which includes the 18,912,480 shares previously authorized for issuance under the 2021 Plan (excluding the 9,888,902 shares from the NexTier Pool, which will be eliminated by the Plan Amendment). Shares that are subject to options or SARs count as one share of Common Stock against this aggregate limit. Shares that are subject to awards other than options and SARS count as two shares of Common Stock against this aggregate limit. The closing price of a share of Common Stock on March 28, 2024 was $11.94. +• +The maximum number of shares that may be issued pursuant to awards under the 2021 Plan (after giving effect to the Plan Amendment) will be the sum of 20,000,000 new shares requested plus 3,728,086 currently available shares, less one share for each option and SAR award (and less two shares for all other award types) subject to any equity award granted under the current plan after March 28, 2024, until the proposed Plan Amendment’s approval date (provided that, in no event shall the number of shares subject to any equity award granted under the 2021 Plan after March 28, 2024 and prior to the Plan Amendment approval date exceed 3,728,086 shares). +• +No awards will be granted from the NexTier Pool (from which 9,888,902 shares were remaining as of March 28, 2024) from March 28, 2024 through the Plan Amendment approval date, and all remaining shares available for awards under the NexTier Pool will be cancelled upon the approval of the new Plan Amendment. +• +In addition to the above, if an award granted under the 2021 Plan or the 2014 Plan expires, is forfeited, is settled in cash or otherwise terminates without the issuance of all or a portion of the shares of Common Stock subject to the award, the shares allocable to the expired, forfeited, cash settled, or terminated portion of the award will be available for awards again under the 2021 Plan. Consistent with the fungible counting provisions of both the 2014 and 2021 Plans, any shares of Common Stock that again become available for grant under the 2021 Plan will be added back as one share if the shares were subject to options or SARs, and as two shares if the shares were subject to awards other than options or SARs. +• +If any shares subject to an award are used to exercise options, are not issued upon the settlement of a SAR, are withheld by Patterson-UTI for income or employment taxes on the exercise of an option or SAR or the vesting or settlement of any other award type, or are re-purchased on the open market with the exercise price for an option, such shares will not become available for grant under the 2021 Plan. +• +With respect to awards to participants other than directors, the 2021 Plan is administered by the Compensation Committee of Patterson-UTI’s Board of Directors, which comprises exclusively non-employee independent directors. With respect to awards to directors, the 2021 Plan is administered by the Board of Directors. +• +Directors, employees, including officers, consultants and advisors are eligible for awards under the 2021 Plan. As of March 28, 2024, approximately 10,400 employees, ten directors and an indeterminate number of consultants +23 +and advisors would be eligible for awards under the 2021 Plan, although Patterson-UTI has not historically granted awards under its long-term incentive plans to consultants or advisors. +• +The Board of Directors, at any time, may amend the terms of the 2021 Plan, subject to the stockholder approval requirements of the Nasdaq Stock Market and other rules and regulations applicable to Patterson-UTI. Generally, the 2021 Plan also may not be amended without stockholder approval to permit the repricing of options or SARs or to extend the generally applicable maximum 10-year term applicable to options and SARs. +• +Except in connection with certain corporate transactions involving Patterson-UTI, the terms of outstanding options or SARs may not be amended to reduce the applicable exercise price and outstanding options and SARs may not be cancelled in exchange for cash, other awards or options or SARs with an exercise price that is less than the exercise price of the original options or SARs, in each case without stockholder approval. +• +Subject to the exceptions in this bullet, awards may not be sold, assigned, transferred, pledged or otherwise encumbered, other than by will or the laws of descent and distribution or pursuant to a domestic relations order, as determined by the Compensation Committee, and awards may be exercised during the life of the participant only by the participant or the participant’s guardian or legal representative. Notwithstanding the foregoing, a participant may assign or transfer an award other than an incentive stock option with the consent of the Compensation Committee (i) for charitable donations; (ii) to the participant’s spouse, children or grandchildren (including any adopted and stepchildren and grandchildren), or (iii) to a trust for the benefit of one or more of the participants or the persons referred to in clause (ii); provided that certain administrative conditions are met. For the avoidance of doubt, awards (other than fully vested and unrestricted shares of Common Stock) may not be transferred to a third party for monetary value. +• +Except with respect to 5% of the shares authorized for grant under the 2021 Plan, no award may vest prior to the first anniversary of the grant date other than in the case of substitute awards, awards delivered in lieu of fully-vested cash obligations, certain awards to directors that vest in connection with an annual meeting, and accelerations of awards such as in connection with a holder’s retirement, death or disability or in the event of a change in control. +• +No awards may be granted under the 2021 Plan after April 9, 2031, the tenth anniversary of the original effective date of the 2021 Plan. +Options +• +The vesting schedule for options is set by the Compensation Committee, subject to the minimum vesting requirements of the 2021 Plan. +• +The term of options is set by the Compensation Committee, but may be no longer than 10 years other than as a result of any extension of the term in compliance with applicable law as provided in an award agreement. +• +The exercise price for options may be paid in cash, with previously acquired shares of Common Stock, or by other means approved by the Compensation Committee. +• +All options granted under the 2021 Plan (other than substitute awards) are granted with an exercise price equal to or greater than the fair market value of the Common Stock at the time the option is granted. +SARs +• +SARs may be granted alone or in connection with the grant of any option. A SAR entitles a participant to surrender any then exercisable portion of the SAR and, if applicable, the related option, in exchange for an amount equal to the product of (i) the excess of the fair market value of a share of Common Stock on the date of surrender over the fair market value of a share of Common Stock on the date that the SAR was granted, or, if the SAR is related to an option, the per share exercise price of the option, multiplied by (ii) the number of shares of Common Stock subject to the SAR and being surrendered. +• +SARs granted alone may be exercised at such times and be subject to such terms and conditions as the Compensation Committee may impose. SARs that are granted in tandem with options may be exercised only on the surrender of the right to purchase an equivalent number of shares under the related options and may be exercised only with respect to the shares of Common Stock for which the related options are then exercisable. +• +The vesting schedule for SARs is set by the Compensation Committee, subject to the minimum vesting requirements of the 2021 Plan. +24 +• +The term of SARs under the 2021 Plan may be no longer than 10 years other than as a result of any extension of the term in compliance with applicable law as provided in an award agreement. +• +Payment on exercise of a SAR shall be, in the discretion of the Compensation Committee, shares of Common Stock, cash, or a combination of shares of Common Stock and cash. +• +All SARs granted under the 2021 Plan (other than substitute awards) are granted with an exercise price equal to or greater than the fair market value of the Common Stock at the time the SAR is granted. +Restricted Stock Awards +• +The Compensation Committee determines the material terms of restricted stock awards, including the price, if any, to be paid by the recipient, and, subject to the minimum vesting requirements of the 2021 Plan, the vesting schedule and conditions, which may include the attainment of specified performance objectives. +• +Beginning on the date of grant, a participant receiving a restricted stock award will become a stockholder of Patterson-UTI with respect to all shares of Common Stock subject to the restricted stock award, which, unless the Committee determines otherwise at the time of the grant, includes the right to vote the shares and receive dividends in respect of the shares; provided, however, that any dividends with respect to any restricted stock award as to which the restrictions have not yet lapsed shall be subject to the same restrictions as such restricted stock award. +Other Stock Unit Awards +• +The Compensation Committee may grant other stock unit awards under the 2021 Plan, which have a value equal to an identical number of shares of Common Stock. Other stock unit awards may also be a form of payment for other awards granted under the 2021 Plan and other earned cash-based incentive compensation. +• +The payment of other stock units may be in cash, shares of Common Stock, other property, or any combination of the foregoing, and may be made in a lump sum or, in accordance with procedures established by the Compensation Committee, on a deferred basis subject to the requirements of section 409A of the Internal Revenue Code (the "Code"). +• +The vesting schedule for other stock unit awards is set by the Compensation Committee, subject to the minimum vesting requirements of the 2021 Plan. +Dividend Equivalent Rights +• +The Compensation Committee may grant dividend equivalent rights either in connection with awards or as separate awards under the 2021 Plan. +• +Amounts payable in respect of dividend equivalent rights will not be paid until the vesting, payment, settlement or other lapse of restrictions of the award to which the dividend equivalent rights relate, including with respect to any performance conditions applicable to the underlying award. +• +No award of options or SARs will have dividend equivalent rights. +Performance Awards +• +Performance awards are payable in cash, shares of Common Stock, other property, or a combination of the foregoing, and may be paid in a lump sum, in installments, or on a deferred basis in accordance with procedures established by the Compensation Committee. +• +The Compensation Committee determines the material terms of the performance awards, including a performance period over which the performance goal of such award shall be measured. Performance awards are subject to the one year minimum vesting requirements of the 2021 Plan. +Deferrals +• +The Compensation Committee may require or permit a participant to defer the receipt of cash or shares pursuant to any awards under the 2021 Plan. Any deferral permitted under the 2021 Plan will be administered in a manner that is intended to comply with section 409A of the Code. +25 +Effect of Certain Transactions and Change of Control +The Compensation Committee, in its discretion, may determine that, unless otherwise specifically set forth in an award agreement or other agreement applicable to any award, upon a change of control (as defined in the 2021 Plan): +• +awards outstanding as of the date of the change of control immediately vest and become free of all restrictions and limitations and, to the extent applicable, become fully exercisable and/or immediately settled or distributed; +• +each option and SAR shall terminate within a specified period of days after notice to the participant; +• +each participant shall receive, with respect to each share subject to an award, an amount equal to the excess of the fair market value of such share immediately prior to the occurrence of the change of control over the exercise price per share, if applicable, of such award, with such payment being made in one or more kinds of stock or property or a combination of stock or property; +• +each option and SAR outstanding on the date of the change of control may be cancelled and terminated without payment if the fair market value of a share of Common Stock on the date of the change of control is less than the per share exercise price of the option or SAR; or +• +such other additional adjustments or benefits as the Compensation Committee deems appropriate shall apply. +Further, in the event of changes in the capital or corporate structure of Patterson-UTI due to events such as recapitalization, stock split, merger, spin-off, joint venture, subsidiary or division sale or similar transaction, that affect the shares of Common Stock, the Compensation Committee, in its sole discretion, may determine that it is equitable or appropriate to make adjustments or substitutions to the 2021 Plan or outstanding options and awards, including to the number, class, kind and option or exercise price or securities subject to awards and to the terms and conditions of awards (including any applicable performance targets or criteria with respect thereto). +Federal Income Tax Consequences +The following discussion summarizes certain U.S. federal income tax consequences of the grant and receipt of awards pursuant to the 2021 Plan under the law as in effect on the date of this proxy statement. The rules governing the tax treatment of such awards are quite technical, so the following discussion of tax consequences is necessarily general in nature and is not complete. In addition, statutory provisions are subject to change, as are their interpretations, and their application may vary in individual circumstances. This summary does not purport to cover all federal employment tax, estate tax, or other federal tax consequences associated with the 2021 Plan, nor does it address state, local, or non-U.S. tax consequences. As such, we recommend that all participants consult their own tax advisor concerning the tax implications of awards granted under the 2021 Plan. +ISOs . In general, a participant will not recognize income upon the grant or exercise of an ISO. However, upon the exercise of an ISO, the excess of the fair market value of the shares of Common Stock received upon the exercise of the ISO over the exercise price will increase the employee’s alternative minimum taxable income, which may cause the employee to incur the alternative minimum tax. Subject to certain exceptions for death or disability, if a participant exercises an ISO more than three months after termination of employment, the exercise of the option will be taxed as the exercise of a NQSO, as described below. +The general rule is that gain or loss from the sale or exchange of shares acquired on the exercise of an ISO will be treated as capital gain or loss. However, if shares acquired upon the exercise of an ISO are disposed of within two years from the date of grant or within one year after exercise (a “disqualifying disposition”), the participant generally will recognize ordinary income in the year of disposition in an amount equal to the fair market value of the shares at the time of exercise (or, if less, the amount realized on the disposition of the shares) less the exercise price. Any further gain (or loss) realized by the participant generally will be taxed as short- or long-term capital gain (or loss) depending on the holding period. +NQSOs, SARs, Performance Award, Other Stock Unit Award and Dividend Equivalents . A participant generally is not required to recognize income on the grant of a NQSO, SAR, performance award or other stock unit award. Instead, ordinary income generally is required to be recognized on the date the NQSO or SAR is exercised, or in the case of performance awards or other stock unit awards, upon the issuance of shares and/or the payment of cash pursuant to the terms of the award. In general, the amount of ordinary income required to be recognized is, (a) in the case of a NQSO or a SAR, an amount equal to the excess, if any, of the fair market value of the shares on the exercise date over the exercise price, and (b) in the case of performance awards or other stock unit awards, the amount of cash and/or the fair market value of any shares received in respect thereof, plus the amount of taxes withheld from such amounts. Ordinary income is recognized upon the payment of dividend equivalents, if any, granted with respect to performance awards, other stock unit awards or as separate awards. +Restricted Common Stock . Unless a participant who receives an award of restricted Common Stock makes an election under section 83(b) of the Code as described below, the participant generally is not required to recognize +26 +ordinary income on the grant of restricted Common Stock. Instead, on the date the shares vest (i.e., become transferable and no longer subject to forfeiture), the participant will be required to recognize ordinary income in an amount equal to the excess, if any, of the fair market value of the shares on such date over the amount, if any, paid for such shares. If a section 83(b) election has not been made, any dividends received with respect to restricted Common Stock that are subject at that time to a risk of forfeiture or restrictions on transfer generally will be treated as compensation that is taxable as ordinary income to the recipient. If a participant makes a section 83(b) election within 30 days following the date of transfer of the restricted Common Stock, the participant will recognize ordinary income on the date the shares are granted in an amount equal to the excess, if any, of the fair market value of the shares on the date of award over the amount, if any, paid for such shares. In such case, the participant will not be required to recognize additional ordinary income when the shares vest. However, if the shares are later forfeited, a loss can only be recognized up to the amount the participant paid, if any, for the shares. +Gain or Loss on Sale or Exchange of Shares . In general, gain or loss from the sale or exchange of shares granted or awarded under the 2021 Plan will be treated as capital gain or loss, provided that the shares are held as capital assets at the time of the sale or exchange. However, if certain holding period requirements are not satisfied at the time of a sale or exchange of shares acquired upon exercise of an ISO (a “disqualifying disposition,” see above), a participant generally will be required to recognize ordinary income upon such disposition. +Deductibility by Patterson-UTI . To the extent that a participant recognizes ordinary income in the circumstances described above, Patterson-UTI or the subsidiary for which the participant performs services will be entitled to a corresponding deduction, provided that, among other things, the income meets the test of reasonableness, is an ordinary and necessary business expense, is not an “excess parachute payment” within the meaning of section 280G of the Code (see Parachute Payments below) and is not disallowed by the $1,000,000 limitation on certain executive compensation under section 162(m) of the Code. In general, under section 162(m) of the Code, remuneration paid by a public corporation to certain “covered employees” (which includes any individual who serves as chief executive officer, chief financial officer or one of the other three most highly compensated executive officers for 2017 or any subsequent calendar year) is not deductible to the extent it exceeds $1 million for any year. It is expected that compensation deductions for any covered employee with respect to awards under the 2021 Plan will be subject to a $1 million annual deduction limitation. The Compensation Committee may grant awards under the 2021 Plan or otherwise that are or may become non-deductible when it believes doing so is in the best interests of the Company and its stockholders. +Parachute Payments . The acceleration of the exercisability or the vesting of an award upon the occurrence of a change in control may result in an “excess parachute payment” within the meaning of section 280G of the Code. A “parachute payment” occurs when an employee receives payments contingent upon a change in control that exceed an amount equal to three times his or her “base amount.” The term “base amount” generally means the average annual compensation paid to such employee during the five calendar years preceding the calendar year in which the change in control occurs. An “excess parachute payment” is the excess of all parachute payments made to the employee on account of a change in control over the employee’s base amount. If any amount received by an employee is characterized as an excess parachute payment, the employee is subject to a 20% excise tax on the amount of the excess, and Patterson-UTI is denied a tax deduction with respect to such excess. +Withholding . Awards under the 2021 Plan may be subject to tax withholding. Where an award results in income subject to withholding, Patterson-UTI may require the participant to remit the withholding amount to Patterson-UTI or cause shares of Common Stock to be withheld or sold in order to satisfy the tax withholding obligations. +Section 409A . Section 409A of the Code generally provides that any deferred compensation arrangement must satisfy specific requirements, both in operation and in form, regarding (i) the timing of payment, (ii) the election of deferrals and (iii) restrictions on the acceleration of payment. Failure to comply with section 409A may result in the early taxation (plus interest) to the participant of deferred compensation and the imposition of a 20% tax on the participant of the deferred amounts included in the participant’s income. Patterson-UTI intends to structure awards under the 2021 Plan in a manner that is designed to be exempt from or comply with section 409A, but does not guarantee such treatment. +Existing Plan Benefits +Any future awards granted to employees, consultants, advisors and non-employee directors under the 2021 Plan are subject to the discretion of the Compensation Committee or the Board, as applicable, and therefore, are not determinable at this time. The "Grants of Plan-Based Awards" table below sets forth information with respect to prior awards granted to our named executive officers under the 2021 Plan during 2023. As of March 28, 2024, no stock options or SARs have been granted under the 2021 Plan and no awards have been granted that are contingent on the approval of the 2021 Plan. +In addition, our non-employee directors are expected to receive annual grants on January 1 of each year consistent with the equity grants described below under “Director Compensation”. Because future awards are at the discretion of the Compensation Committee and the Board, the number of shares subject to future awards could increase or decrease and the type and terms of future awards could change as well, all without the need for future stockholder approval. If the Plan Amendment is approved, Patterson-UTI intends to thereafter register the additional shares authorized for grant under the 2021 Plan, as amended, on a Registration Statement on Form S-8 filed with the Securities and Exchange Commission. +27 +The Board of Directors recommends a vote “FOR” the approval of the Plan Amendment. Approval of the proposal requires the affirmative vote of the holders of a majority of the shares of Common Stock present in person or by proxy and entitled to vote on the proposal. Unless you give contrary instructions in your proxy, your properly submitted proxy will be voted “FOR” approval of the proposal. Abstentions will be counted as shares entitled to vote on the proposal and will have the same effect as a vote “AGAINST” the proposal. A broker non-vote will be counted for purposes of establishing a quorum, but will not be treated as a share entitled to vote on the proposal and will have no effect on the outcome of the proposal. Brokerage firms, banks, broker-dealers, and other similar organizations do not have authority to vote on this proposal without instructions from the beneficial owner. +28 +PROPOSAL NO. 4 +ADVISORY APPROVAL OF EXECUTIVE COMPENSATION +In accordance with Section 14A of the Exchange Act, the Board of Directors is asking stockholders to approve a non-binding, advisory resolution to approve the compensation of Patterson-UTI’s executive officers who are named in the Summary Compensation Table appearing in this proxy statement (the “Named Executive Officers”). The compensation of the Named Executive Officers is described in the “Compensation Discussion and Analysis” and “Executive Compensation” sections of this proxy statement. +For a discussion of our stockholder engagement and compensation program alignment with stockholder interests, please see “Compensation Discussion and Analysis— Aligning Compensation Programs with Stockholder Interests.” +The compensation program for the Named Executive Officers is designed to attract and retain highly qualified individuals and to motivate and reward them for performance that benefits Patterson-UTI and its stockholders. The Compensation Committee and the Board of Directors believe that the policies and procedures detailed in the “Compensation Discussion and Analysis” achieve these goals by, among other things: +• +providing a mix of short-term compensation in the form of base salary and annual cash incentive bonuses and long-term compensation in the form of restricted stock units, performance units, and, in some years, restricted stock, stock options and phantom units, which strikes a balance between offering competitive compensation packages and aligning compensation with long-term growth and creating value for stockholders; +• +emphasizing variable equity and cash compensation to link realized compensation to performance; +• +reviewing annual base salaries, in part, based on Patterson-UTI’s financial results and position and performance compared to similarly situated companies; +• +providing performance-based annual cash incentive bonuses designed to place a meaningful portion of total compensation at risk; +• +awarding long-term equity incentives whose value is tied to the achievement of certain performance goals and/or an increase in the price of the Common Stock; +• +awarding long-term equity incentives that generally vest over periods of three years; and +• +maintaining stock ownership requirements. +The Board of Directors is asking stockholders to approve the following non-binding, advisory resolution at the Meeting: +“RESOLVED, that the stockholders of Patterson-UTI Energy, Inc. (the “Company”) approve, on an advisory basis, the compensation of the Company’s Named Executive Officers, as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the compensation tables and other narrative discussion in the Proxy Statement for the 2024 Annual Meeting of Stockholders of the Company.” +This advisory resolution, commonly referred to as a “say-on-pay” resolution, is non-binding on the Board of Directors. Although non-binding, the Board of Directors and the Compensation Committee value the views of Patterson-UTI’s stockholders and will review and consider the voting results when (i) evaluating the effectiveness of Patterson-UTI’s compensation policies and practices and (ii) making future compensation decisions for the Named Executive Officers. As recommended by our stockholders at the 2023 annual meeting, Patterson-UTI currently holds an annual “say-on-pay” vote and thus, unless the Company changes its policy, expects that the next such vote after the 2024 annual meeting will be held at the 2025 annual meeting of stockholders. +The Board of Directors recommends a vote “FOR” the approval of the advisory resolution on executive compensation . Approval of the advisory resolution requires the affirmative vote of the holders of a majority of the shares of Common Stock entitled to vote on, and voted “FOR” or “AGAINST,” the proposal. Unless you give contrary instructions in your proxy, your properly submitted proxy will be voted “FOR” approval of the proposal. Abstentions will not be counted as votes cast “FOR” or “AGAINST” the proposal and will have no effect on the outcome of the proposal. A broker non-vote will be counted for purposes of establishing a quorum, but will not be treated as a vote cast “FOR” or “AGAINST” the proposal and will have no effect on the outcome of the proposal. Brokerage firms, banks, broker-dealers, and other similar organizations do not have authority to vote on this proposal without instructions from the beneficial owner. +29 +PROPOSAL NO. 5 +APPROVAL OF THE AMENDMENT OF THE PATTERSON-UTI RESTATED CERTIFICATE OF INCORPORATION TO LIMIT THE LIABILITY OF CERTAIN OFFICERS OF PATTERSON-UTI AS PERMITTED BY RECENT AMENDMENTS TO DELAWARE LAW +Background +Effective August 1, 2022, Section 102(b)(7) of the Delaware General Corporation Law (“DGCL”) was amended to permit a Delaware corporation to adopt a provision in its certificate of incorporation to eliminate or limit monetary liability of certain senior corporate officers for breach of the fiduciary duty of care in certain actions. Previously, the DGCL allowed only exculpation of corporate directors for breach of the fiduciary duty of care. +Article Ninth of Patterson-UTI's Restated Certificate of Incorporation currently provides for Patterson-UTI to limit the monetary liability of directors in certain circumstances pursuant to and consistent with Section 102(b)(7) of the DGCL, but does not include a provision that allows for the exculpation of officers. Subject to the approval of the stockholders, the Board has approved a proposal to amend our Restated Certificate of Incorporation (the “Amendment”) to provide for the elimination or limitation of monetary liability of specified executive officers of the Company for breach of the duty of care in certain actions and recommends that stockholders approve such Amendment. The proposed Amendment would allow for the exculpation of certain officers only in connection with direct claims brought by stockholders, including class actions, but would not eliminate officers’ monetary liability for breach of fiduciary duty claims brought by the Company itself or for derivative claims brought by stockholders in the name of the Company. As is currently the case with directors under our Restated Certificate of Incorporation, the Amendment would not limit the liability of officers for any breach of the duty of loyalty to the Company or its stockholders, any acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of the law and any transaction from which the officer derived an improper personal benefit. +If adopted by the stockholders, the Amendment would become effective upon filing of an appropriate certificate of amendment with the Secretary of State of the State of Delaware. The proposed Amendment would replace Article NINTH of the Restated Certificate of Incorporation with the following language: +“To the fullest extent permitted by the General Corporation Law of the State of Delaware, as the same exists or may hereafter be amended, a director or officer of the Corporation shall not be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director or officer, as applicable.” +Other than the replacement of the existing Article NINTH by the proposed Article NINTH, the remainder of our Restated Certificate of Incorporation will remain unchanged after effectiveness of the Amendment. +The Board believes that amending our Restated Certificate of Incorporation to add the authorized liability protection for certain officers, consistent with the protection in our Restated Certificate of Incorporation currently afforded our directors, is necessary in order to continue to attract and retain experienced and qualified officers. The nature of the role of directors and officers often requires them to make decisions on crucial matters. Frequently, directors and officers must make decisions in response to time-sensitive opportunities and challenges, which can create substantial risk of investigations, claims, actions, suits or proceedings seeking to impose liability on the basis of hindsight, especially in the current litigious environment and regardless of merit. Limiting concern about personal risk would empower both directors and officers to best exercise their business judgment in furtherance of stockholder interests. To the extent our peers adopt exculpation clauses that limit the personal liability of officers in their certificates of incorporation, failing to adopt the Amendment could impact our recruitment and retention of exceptional officer candidates that conclude that the potential exposure to liabilities, costs of defense and other risks of proceedings exceeds the benefits of serving as an officer of the Company. +The Board of Directors recommends a vote “FOR” the approval of the Amendment . Approval of the proposal requires the affirmative vote of the holders of a majority of the outstanding shares of Common Stock entitled to vote at the Meeting. Unless you give contrary instructions in your proxy, your properly submitted proxy will be voted “FOR” approval of the proposal. Abstentions and broker non-votes will have the same effect as a vote “AGAINST” the proposal. Brokerage firms, banks, broker-dealers, and other similar organizations do not have authority to vote on this proposal without instructions from the beneficial owner. +30 +EXECUTIVE OFFICERS +Set forth below is the name, age and position followed by a brief description of the business experience during at least the past five years for each executive officer who is not also a nominee for election to the Board of Directors. +Name +Age +Position +William A. Hendricks, Jr +59 +President and Chief Executive Officer and Director +C. Andrew Smith +53 +Executive Vice President and Chief Financial Officer +Kenneth N. Berns +64 +Executive Vice President and Chief Commercial Officer +James M. Holcomb +61 +Executive Vice President and Chief Business Officer +Seth D. Wexler +52 +Executive Vice President, General Counsel and Secretary +Matthew Gillard +51 +President, NexTier Completions +C. Andrew Smith — Mr. Smith has served as Executive Vice President and Chief Financial Officer of Patterson-UTI since September 2017. From April 2014 until September 2017, Mr. Smith served as Executive Vice President and Chief Financial Officer of Kirby Corporation, a marine transportation and diesel engine services company. From January 2014 to April 2014, Mr. Smith served as Executive Vice President – Finance of Kirby Corporation. Prior to joining Kirby Corporation, Mr. Smith served as Senior Vice President and Chief Financial Officer of Benthic Geotech and was previously Chief Financial Officer for both Global Industries, LTD and NATCO Group. Mr. Smith holds a degree in business administration from the University of Houston. +Kenneth N. Berns — Mr. Berns has served as Executive Vice President and Chief Commercial Officer of Patterson-UTI since May 2017. Mr. Berns served as a director of Patterson-UTI from May 2001 to June 2017 and as Senior Vice President of Patterson-UTI from April 2003 to May 2017. Mr. Berns served as a director of UTI from 1995 to May 2001. Mr. Berns has been an executive with REMY Investors since 1994. Mr. Berns holds a Bachelor’s Degree in Business Administration from San Diego State University and a Master’s Degree in Taxation from Golden Gate University. +James M. Holcomb — Mr. Holcomb has served as Executive Vice President and Chief Business Officer since September 2023. Mr. Holcomb joined Patterson-UTI in February 1998 with the acquisition of Robertson Onshore Drilling Company, and since that time has served in numerous operational management roles, including as Chief Operating Officer from January 2023 to September 2023, as President of Patterson-UTI Drilling Company LLC, a wholly owned subsidiary of Patterson-UTI, from January 2012 to December 2022, and as Senior Vice President of Operations of Patterson-UTI Drilling Company LLC from April 2006 to January 2012. Mr. Holcomb has over 35 years of experience in contract drilling operations. Mr. Holcomb holds a Bachelor of Science Degree in Business Management from LeTourneau University. +Seth D. Wexler — Mr. Wexler has served as Executive Vice President, General Counsel and Secretary of Patterson-UTI since February 2024. Mr. Wexler served as Senior Vice President, General Counsel and Secretary of Patterson-UTI from February 2017 to February 2024, and as General Counsel and Secretary of Patterson-UTI from August 2009 to February 2017. From March 1998 to August 2009, he specialized in securities law and mergers and acquisitions for the law firm of Norton Rose Fulbright US LLP, including as a partner of such law firm since January 2007. Mr. Wexler holds a Bachelor of Business Administration in Finance from the University of Texas at Austin, a Juris Doctorate from the University of Houston Law Center and a Masters of Business Administration from the University of Houston. +Matthew Gillard — Mr. Gillard has served as President, NexTier Completions since September 2023. From August 2021 to August 2023, Mr. Gillard served as Executive Vice President & Chief Operating Officer of NexTier Oilfield Solutions. He has more than 25 years of experience in the oil and gas industry, working primarily for Schlumberger in progressing roles of responsibility including Sales and Commercial Director, Vice President Completions, President OneStim and Vice President Vertical Integration & Strategy North America. Prior to joining NexTier, Mr. Gillard held the role of Principal and Owner of Intex Consulting from June 2020 to August 2021. Mr. Gillard received a B.S. in Marine & Offshore Civil Engineering from University of Plymouth, UK and also studied Petroleum Engineering at Institut Français du Pétrole. +31 +COMPENSATION DISCUSSION AND ANALYSIS +The following Compensation Discussion and Analysis (“CD&A”) sets forth the principal compensation policies and programs of Patterson-UTI for 2023 for our Named Executive Officers (“NEOs”). +Named Executive Officer +Title +William Andrew Hendricks, Jr. +Chief Executive Officer and President +C. Andrew Smith +Executive Vice President and Chief Financial Officer +Kenneth N. Berns +Executive Vice President and Chief Commercial Officer +James M. Holcomb +Executive Vice President and Chief Business Officer (1) +Seth D. Wexler +Executive Vice President, General Counsel and Secretary (2) +(1) +Mr. Holcomb served as Patterson-UTI’s Chief Operating Officer from January 1, 2023 to September 1, 2023. He was appointed Patterson-UTI’s Executive Vice President and Chief Business Officer on September 1, 2023. +(2) +Mr. Wexler served as Senior Vice President, General Counsel and Secretary during 2023. He was appointed Patterson-UTI’s Executive Vice President, General Counsel and Secretary on February 13, 2024. +2023 Company Highlights +In 2023, we achieved a number of key financial and strategic successes, including the following: +• +Significantly increased Adjusted EBITDA and Operating Cash Flow compared to 2022; +• +Increased profitability and returned over $300 million to shareholders in 2023 through share repurchases and dividends; +• +Strengthened and maintained key customer relationships through delivery of top-tier operational performance, excellent customer service and emission-reducing technologies; +• +Strengthened our balance sheet and improved our liquidity profile; +• +Completed our merger (the “NexTier merger”) with NexTier Oilfield Solutions Inc. (“NexTier”) on September 1, 2023, strengthening our leadership position in both U.S. onshore drilling and completions and positioning the company to deliver enhanced shareholder value; and +• +Acquired Ulterra Drilling Technologies, L.P. (the “Ulterra acquisition”), a global provider of specialized drill bit solutions, on August 14, 2023, expanding our international footprint and expanding our capabilities to provide comprehensive, technology-driven solutions to our customers. +Aligning Compensation Programs with Stockholder Interests +Strong Stockholder Support for Say-on-Pay +Year of Annual Meeting +Stockholder Support for Say-on-Pay Proposal +2023 +98% +2022 +97% +2021 +98% +2020 +96% +2019 +96% +We have received at least 96% support for our Say-on-Pay proposal at each of our last five Annual General Meetings of Stockholders. The Compensation Committee strongly values the opinions of our stockholders and believes that our recent support levels demonstrate a strong alignment of our compensation program with our stockholders’ interests. +We regularly meet with stockholders to solicit feedback on areas of concern. With the strong stockholder support for our Say-on-Pay proposals at our recent Annual General Meetings of Stockholders, no specific changes were made to our compensation programs as a result of the 2023 Say-on-Pay vote or meetings with stockholders; however, the Compensation Committee will continue to consider the results of our future Say-on-Pay votes and other stockholder feedback when making future compensation decisions for our NEOs. +32 +Reduction in 2023 Executive Compensation +Although the Company experienced excellent financial and relative TSR performance in 2022, in light of share price declines in early 2023, the Compensation Committee generally set 2023 target compensation at reduced levels for our NEOs relative to 2022 to achieve better alignment with anticipated financial results and near-term stockholder returns. More specifically, for 2023, the Compensation Committee: +• +Held base salaries flat for the fifth consecutive year , other than an increase for Mr. Holcomb in connection with his promotion to Chief Operating Officer effective January 1, 2023; +• +Held target bonus levels for our annual cash bonus program flat as compared to 2022, while significantly increasing the performance required to achieve a target payout under the financial metrics; +o +As a result, aggregate actual bonuses paid to our NEOs under our annual cash bonus program decreased by 36% from 2022 to 2023 ; and +• +Reduced 2023 target long-term incentive (LTI) awards by approximately 12% (excluding a modest increase for Mr. Holcomb in connection with his promotion to Chief Operating Officer) as compared to 2022 target LTI award values in recognition of the decline in our stock price in the first few months of 2023 and to help mitigate shareholder dilution. +In summary, excluding the impact of compensation changes approved in connection with Mr. Holcomb’s changed roles in 2023, the net effect of continuing to hold salaries flat, increasing performance targets under the 2023 annual cash bonus program, and reducing the target value of the 2023 LTI awards resulted in an average 18% decline in 2023 compensation levels for our NEOs (excluding Mr. Holcomb). +Good Governance and Compensation Practices Aligned with Stockholders +We are mindful of the positive impact that strong corporate governance has on maintaining an executive compensation program that is aligned with the interests of our stockholders. In designing the current executive compensation program, we sought to incorporate best practices for compensation governance, including those summarized below. +What We Do +What We Don’t Do + Balanced mix of cash and equity compensation with emphasis on long-term incentives accounting for 60% or more of total target compensation + More than 50% of long-term incentives (by target value) are performance-based + Variable compensation based upon absolute performance and performance versus peers and a broader market index + Claw-back provisions that apply to all our executive officers, including SEC-compliant clawback policy covering executive officer incentive-based compensation + Share ownership requirements for our executive officers and directors + Anti-pledging policy for our executive officers and directors (subject to the continuation of a limited waiver for a legacy NexTier director, which is described below) + Anti-hedging policy for our executive officers and directors + Engage independent compensation consultant + Hold an annual Say-on-Pay vote and solicit more robust feedback from stockholders +☒ No re-pricing of options +☒ No single trigger change-of-control severance arrangements +☒ No dividends or dividend equivalents paid unless and until underlying award vests +☒ No new agreements with tax gross-ups and none entered into in more than 15 years +☒ No material perquisites to NEOs +☒ No single trigger change-of-control equity-based grants for our executive officers +33 +What Guides Our Program +Our overriding philosophy for the compensation of our key executives is to link their compensation with Patterson-UTI’s operational and market performance and to establish incentives that reward them for their achievement of both short-term tactical and long-term strategic objectives. In doing so, we seek to offer competitive compensation designed to attract and retain highly qualified individuals and to motivate and reward our executives in achieving Patterson-UTI’s goals. Specifically, the 2023 program was designed to reinforce the following goals: +Patterson-UTI Goals +How Goal Was Reinforced in Our 2023 Compensation Program +Provide quality services for our customers in a safe and efficient manner + Our 2023 annual cash bonus incentive plan included “Health, Safety and Environmental” performance as a distinct metric (weighted at 10%) + Our financial performance metrics required quality operational performance +Generate strong financial performance and returns for our stockholders + The majority of executive compensation was delivered in the form of variable, at-risk compensation (as referenced in the charts below) aligned with stockholder interests + The majority of the target payout under our 2023 annual cash bonus incentive plan was based on financial performance metrics (75%) + Our 2023 annual cash bonus incentive plan rewarded executives for cash flow generation and profitability through the use of Operating Cash Flow and Adjusted EBITDA as the primary performance metrics + Our long-term incentive plan incentivizes the creation of stockholder value on both an absolute and relative basis through the grant of equity compensation and the use of absolute and relative TSR performance goals under our performance units +Attract and retain highly qualified individuals, with a strong emphasis on teams working together to capitalize on opportunities and solve problems + We benchmarked our executive pay programs against broader oilfield services companies and comparably sized oil and gas exploration and production companies + We did not target a specific market percentile for executive compensation. Instead, executive compensation was set based on a holistic review of several factors, including market pay levels, individual performance and qualifications, and executive tenure + Our annual and long-term incentive programs generally reward company-wide results rather than performance against individual objectives + The majority of our executives’ compensation was delivered in the form of long-term incentives that vest over a multi-year period to aid in retention of executives +34 +For 2023, target total direct compensation for our NEOs was most heavily weighted toward long-term incentives, with greater than 50% of long-term incentive compensation subject to performance-based vesting criteria, as shown below. +2023 TARGET TOTAL DIRECT COMPENSATION +Process for Determination of Executive Compensation +Role of the Compensation Committee +The Board of Directors has delegated the management of Patterson-UTI’s executive compensation program to the Compensation Committee. The Compensation Committee meets on a regular basis to consider compensation matters and to review how Patterson-UTI’s plans and policies work in practice. Each of the Compensation Committee’s current members is an independent director as defined by the Nasdaq listing standards. +Independent, Outside Compensation Consultant +Our Compensation Committee regularly utilizes outside compensation consultants to help assess and design our executive compensation program. These consultants are paid on either a basic, fixed-fee structure plus expenses or an hourly rate structure plus expenses. These outside consultants provide data and advice on historical compensation and stockholder returns, market trends and peer compensation practices. The Compensation Committee retained Frederick W. Cook & Co., Inc. ("FW Cook") as its consultant and advisor for executive compensation matters from 2018 to September 2023. Following the NexTier merger, the Compensation Committee engaged Compensation Advisory Partners (“CAP”) to advise on executive compensation matters. +Our Compensation Committee regularly reviews the services provided by its outside consultants and has determined that the engagement of FW Cook did not, and the engagement of CAP does not, raise any conflicts of interest. The Compensation Committee receives a confirmation certification of independence from its consultants annually. +In 2023, FW Cook provided the Compensation Committee with information on the compensation practices of our peer group and other oilfield service companies and on the reasonableness of our program as compared to the compensation practices of our peer group. In so doing, FW Cook provided the Compensation Committee with information on each element of total direct compensation for our executive officers as well as a comparison of each such element of compensation against our peers and the broader oilfield services and oil and gas exploration and production markets. FW Cook also provided the Compensation Committee with information on the cost and potential dilution to our stockholders of our equity-based incentives and compared our equity usage to that of our peer group . +In late 2023, CAP provided the Compensation Committee with advice regarding the establishment of a new peer group to benchmark executive pay levels for purposes of setting 2024 executive compensation, as described below. In 2024, we anticipate that CAP will perform the same services that FW Cook performed during 2023. +35 +Role of Management and Feedback of Others +Compensation determinations, including annual bonus plan design and equity award grants, are approved through a process that solicits input from outside compensation consultants retained by the Compensation Committee, such as FW Cook. The Compensation Committee also seeks input from management through our CEO. In 2022 and 2023, management separately retained CAP to provide market information, which assisted management in designing and formulating its compensation recommendations, and provided management with advice and benchmarking on incentive compensation design. CAP ceased providing advice to management following its engagement by the Compensation Committee in September 2023. +In addition to the recommendations of management and consultants, the Compensation Committee considers feedback from Patterson-UTI’s stockholders, guidelines of proxy advisory firms, reported trends in compensation, internal budgets, historical data for the Company and its peers, strategic planning updates and other information that it considers relevant. +Our CEO provides the Compensation Committee with reviews of the performance of other executive officers and senior managers, including the other NEOs. Our CEO also engages in an annual dialogue with our Committee Chairman and the Chairman of the Board on our compensation program and seeks their input on and review of proposals for long-term incentive grants. This process results in a recommendation that is then considered by our Compensation Committee as a whole. The Compensation Committee meets in executive session without our CEO present, and our CEO is not involved in decisions relating to his compensation. +2023 Peer Group +2023 Peer Group +Archrock, Inc. +Bristow Group Inc. +Cactus, Inc. +ChampionX Corporation +EQT Corporation +Expro Group Holdings N.V. +Helmerich & Payne, Inc. +Liberty Energy Inc. +Nabors Industries Ltd. +NexTier Oilfield Solutions +NOV, Inc. +Oceaneering International, Inc. +PDC Energy, Inc. +Precision Drilling Corporation +ProPetro Holding Corp. +Range Resources Corporation +TechnipFMC plc +Transocean Ltd. +Valaris Ltd. +Weatherford International plc +S&P 500 Index +The Company’s 2023 peer group consisted of the 20 companies listed above within the oilfield services and oil and gas exploration and production industries, plus one market index. When developing this peer group, the Compensation Committee considered the Company’s positioning versus peers on key metrics (Revenue, EBITDA, Total Assets, Market Capitalization, and Total Enterprise Value), the robustness of the peer group, and the business characteristics of each peer. Due to industry consolidation, the Compensation Committee elected to retain three oil and gas exploration and production companies in the peer group to provide a more robust group for pay comparisons, while maintaining an emphasis on oilfield services companies. +The Compensation Committee elected to retain one market index (the S&P 500) in the peer group, solely for purposes of the relative TSR performance measurement under our performance units. This market index was retained to include an index outside our sector, given our industry’s returns are compared with the returns of other industries and indices, and to provide a broader range of companies and performance results when considering the Company’s relative performance. +This peer group was used by the Company and the Compensation Committee to benchmark executive pay levels and will be used to measure relative TSR performance for purposes of determining achievement under the Company’s 2023 performance units. +36 +2024 Peer Group +Following the NexTier merger, and in consideration of the Company’s larger size and increased complexity of operations, the Compensation Committee worked with CAP to establish the following 2024 peer group to benchmark executive pay levels for purposes of setting 2024 executive compensation. +2024 Compensation Peer Group +Antero Resources Corporation +APA Corporation +ChampionX Corporation +Diamondback Energy, Inc. +Dover Corporation +Fluor Corporation +Halliburton Company +Helmerich & Payne, Inc. +Ingersoll Rand Inc. +KBR, Inc. +Liberty Energy Inc. +Nabors Industries Ltd. +NOV, Inc. +TechnipFMC plc +Weatherford International plc +Components of 2023 Compensation +Base Salary +The table below outlines the base salaries for our NEOs. In 2023, we held base salaries flat for the fifth consecutive year , except for Mr. Holcomb, whose base salary was raised to $500,000 effective January 1, 2023 in connection with his promotion to Chief Operating Officer . +2023 ANNUAL SALARIES +William Andrew Hendricks, Jr. +$ +1,000,000 +C. Andrew Smith +$ +450,000 +Kenneth N. Berns +$ +450,000 +James M. Holcomb +$ +500,000 +Seth D. Wexler +$ +475,000 +Base salaries are reviewed annually by the Compensation Committee, which review takes into account, among other things, competitive pay practices, the results achieved by each executive, their future potential contributions, scope of responsibilities and experience, tenure, executive retention risk, cost of living increases, and the magnitude of recent increases, if any. In December 2023, the Compensation Committee reviewed the base salaries of our NEOs and approved changes to the base salaries of our NEOs, effective January 1, 2024, as set forth below. As noted above, this is the first time since 2018 that we have approved salary increases for our named executive officers, other than Mr. Holcomb. The Compensation Committee considered the impact of our NexTier merger and Ulterra acquisition and the significant increase in responsibilities and scope of each role. Salaries were set to competitive levels relative to our newly adopted peer group. +2024 ANNUAL SALARIES +William Andrew Hendricks, Jr. +$ +1,300,000 +C. Andrew Smith +$ +680,000 +Kenneth N. Berns +$ +590,000 +James M. Holcomb +$ +670,000 +Seth D. Wexler +$ +650,000 +37 +Annual Incentive Compensation +In 2023, the Compensation Committee adopted an annual cash bonus program that uses multiple, pre-established objectives for determining bonus compensation. The bonus plan set a target opportunity for each executive’s annual cash bonus as a percent of salary, with payout contingent upon meeting Patterson-UTI’s financial goals and other key performance indicators (KPIs). The Compensation Committee considered the average range of performance and payouts, and the Compensation Committee believed – based on advice from its compensation consultant – that Patterson-UTI’s performance range was consistent with typical, general industry practice. +The metrics for the 2023 annual cash bonus program (which are generally consistent with those used in our 2022 annual cash incentive plan), along with the definition of each metric and the corresponding rationale for including the metric, are provided in the table below. +2023 ANNUAL CASH INCENTIVE METRICS +Metric (Weighting) +Description +Rationale +Operating Cash Flow (50%) +Operating Cash Flow is defined as Adjusted EBITDA (as defined below) less cash capital expenditures (as adjusted for any Board-approved increase in capital expenditures after targets are set). +Target Operating Cash Flow for 2023 was set at $528.0 million, which was a $195.7 million (or 59%) increase over actual Operating Cash Flow (for purposes of the annual cash bonus program) for 2022. +Our continued focus on cash flow generation during 2023 furthered our goal of having a business model that is self-sustaining, can weather the ebbs and flows of the commodity and business cycle, can endure extreme events, and allows for return of capital to stockholders. +Adjusted EBITDA (25%) +Adjusted EBITDA is defined as net income plus net interest expense, income tax expense and depreciation, depletion, amortization and impairment expense (including impairment of goodwill), excluding, for the purposes of the annual cash bonus program, any non-operating expenses such as M&A and restructuring costs. +Target Adjusted EBITDA for 2023 was set at $1,081.0 million, which was a $387 million (or 56%) increase over actual Adjusted EBITDA (for purposes of the annual cash bonus program) for 2022. +The Compensation Committee included Adjusted EBITDA as a metric for the 2023 program as this metric establishes a clear and consistent link to the Company’s financial performance. Additionally, Adjusted EBITDA is a significant consideration used by analysts in evaluating the Company and is therefore, we believe, a key driver of the Company’s stock price. +Health, Safety and Environmental (10%) +Holistic evaluation of HSE factors, including without limitation, maintenance of safety incident rates below industry average, reduction of environmental incidents and improvement of operational audits and training. +The Compensation Committee views health, safety, and environmental factors as a component of the Company’s risk management and critical to the well-being of the Company’s employees, other personnel and the communities in which we work. +Strategy (15%) +Taking demonstrable and meaningful actions to maximize shareholder value. +This KPI represented actions that could position the Company for short-term and long-term success, such as positioning the Company to increase its return of capital to shareholders, improving the Company's balance sheet, strengthening customer relationships, improving the Company's pressure pumping business, pursuing strategic opportunities and taking actions in low-carbon emissions technology and ESG initiatives. +The Compensation Committee set a strategic action goal as it believed achievement of this goal would improve our competitive position, financial results and stockholder returns. +As compared to the 2022 annual cash bonus program, the Compensation Committee significantly increased the performance required to achieve a target payout under the financial metrics in light of anticipated improved market conditions and to align with strategic goals to grow Operating Cash Flow and Adjusted EBITDA. +The overall annual cash bonus plan for 2023 required achievement of a threshold level of 80% of target performance on both the Operating Cash Flow and Adjusted EBITDA metrics before any payouts with respect to such metrics could be earned. Once the relevant threshold was met, the annual cash bonus opportunity attributable to the Operating Cash Flow and Adjusted EBITDA metrics was calculated based on actual performance, with a 50% payout for threshold +38 +achievement, 100% payout for target achievement, and 200% maximum payout for maximum achievement. Linear interpolation would be used to calculate the payouts for performance between achievement levels. +For the Health, Safety and Environmental KPI and the Strategy KPI, the target annual cash bonus opportunity would be based on the Compensation Committee’s holistic assessment of the achievement of the elements of each KPI and any payout above target would be dependent on material outperformance. The achievement levels and actual performance of the Health, Safety and Environmental KPI and the Strategy KPI were determined based on an evaluation of the factors described in footnotes 2 and 3 of the “2023 Annual Incentive Metrics and Percentage Payout Calculations” table below. +As noted above, we completed the Ulterra acquisition on August 14, 2023 and the NexTier merger on September 1, 2023. Without any adjustment, the incremental operating cash flow and Adjusted EBITDA contributions from NexTier and Ulterra during 2023 would have been considered in determining the level of metric achievement under the 2023 annual cash bonus plan; however, because the annual targets for the Operating Cash Flow and Adjusted EBITDA metrics under the program were set prior to the NexTier merger and Ulterra acquisition, the Compensation Committee adjusted the metric achievement calculations to reduce the impact of incremental Operating Cash Flow and Adjusted EBITDA from the contribution of these acquired businesses. This adjustment resulted in a lower payout than would have been paid had the full contribution from these businesses been used to calculate achievement. +The achievement levels under the annual cash bonus plan for our NEOs were calculated as follows: +2023 ANNUAL INCENTIVE METRICS AND PERCENTAGE PAYOUT CALCULATIONS +($ in millions) +Metrics +Threshold +Target +Maximum +Actual +Metric Achievement Percentage +Metric +Weighting +Weighted Achievement Percentage +Operating Cash Flow +$ +422.4 +$ +528.0 +$ +633.6 +$ +530.9 +(1) +101% +50% +51% +Adjusted EBITDA +$ +864.8 +$ +1,081.0 +$ +1,297.2 +$ +1,009.0 +(1) +93% +25% +21% +Health, Safety and Environmental +(2) +50% +10% +5% +Strategy +(3) +200% +15% +30% +Total +100% +107% +(1) +As discussed above in “2023 Annual Cash Incentive Metrics,” the calculation of actual performance on the financial metrics excluded the impact of non-operating expenses, such as M&A and restructuring costs, and were adjusted for any Board-approved increase in capital expenditures after the targets were set. In addition, as noted above, the Compensation Committee adjusted the metric achievement calculations to reduce the impact of incremental Operating Cash Flow and Adjusted EBITDA from the contribution of the acquired NexTier and Ulterra businesses. +(2) +The Committee determined that the NEOs met 50% achievement for this metric based on: +• +the overall total recordable incident rate remaining below the land drilling industry average (with this factor being given the most weight); +• +the reduction in the motor vehicle incident rate and improved tracking, reporting and follow-up on incidents; +• +the reduction in high potential incidents and near misses; +• +maintaining regulatory compliance and the reduction in the number of incidents with an environmental impact; +• +the improvement in operational audit and follow-up process; and +• +the improvement in training, including the development of new training programs and training of additional people. +Although the Committee felt there had been significant success in continuous safety improvement, it believed that achievement should be assessed at only the threshold level due to the occurrence of certain significant incidents during 2023. +(3) +The Committee determined that the NEOs met 200% achievement for this metric based on, among other things, (i) the completion of the NexTier merger and the Ulterra acquisition during 2023, and integration efforts and annualized cost-savings realized related thereto, (ii) continued implementation of the Board’s commitment to capital discipline, the efficient management of cash flow and the positioning of the Company to materially increase its return of capital to its shareholders, (iii) securing of an investment grade credit rating at the three major credit ratings agencies, successful completion of a $400 million senior notes offering, and improvements in the Company’s leverage ratio and interest coverage ratio and (iv) continued strengthening of customer relationships and service quality to maximize the profitability of existing operations. The Committee further considered the Company’s leadership in low-carbon emissions technology and actions supporting the Company’s ESG initiatives. +The payout percentage was applied to each executive’s bonus target as follows to determine actual 2023 cash bonus payments: +2023 ANNUAL INCENTIVE CASH BONUS +NEO +Target Bonus +Bonus Payout +(as a % of Target) +Actual Bonus +William Andrew Hendricks, Jr. +$ +1,250,000 +107% +$ +1,340,129 +C. Andrew Smith +$ +562,500 +107% +$ +603,058 +Kenneth N. Berns +$ +562,500 +107% +$ +603,058 +James M. Holcomb +$ +500,000 +107% +$ +536,051 +Seth D. Wexler +$ +380,000 +107% +$ +407,399 +39 +Other Bonuses +As discussed in more detail in “Employment-Related Agreements and Other Matters” below, Mr. Holcomb also received a $250,000 retention payment in December 2023 pursuant to his letter agreement entered into in connection with the NexTier merger and his transition out of his role of Chief Operating Officer to Executive Vice President and Chief Business Officer. +During 2023, the Company announced that it would target at least $200 million in annualized synergies from the NexTier merger. In early 2024, the Compensation Committee approved cash bonus opportunities for Messrs. Smith, Wexler and Berns based on the achievement of integration milestone targets in connection with the NexTier merger. These integration milestone targets were designed to enhance alignment with our stockholders by incentivizing the achievement of these synergy targets. If the Company achieves total integration synergies of $125 million, Mr. Smith will receive $180,000, Mr. Wexler will receive $180,000, and Mr. Berns will receive $150,000. If the Company achieves total integration synergies of $200 million, Mr. Smith will receive an additional $180,000, Mr. Wexler will receive an additional $180,000, and Mr. Berns will receive an additional $150,000. In March 2024, the Compensation Committee determined that the Company had so far achieved total integration synergies of over $125 million, resulting in payments to Messrs. Smith, Wexler and Berns as described above. +In February 2024, the Compensation Committee also approved a promotion for Mr. Wexler to Executive Vice President, General Counsel and Secretary to reflect his level of experience and increased duties and responsibilities with the expanded company. In connection with this promotion, Mr. Wexler was paid a one-time cash bonus of $100,000. +Long-Term Incentive Compensation +We have historically delivered the majority of total NEO compensation in the form of equity-based awards and continued to do so in 2023. This emphasis on equity-based compensation enhances alignment between our executives and our stockholders. We plan to retain this emphasis going forward, and we believe that by tying a large portion of compensation to equity we ensure that our NEOs can only fully realize the potential value of their compensation if our stockholders also benefit. As described below, all of the long-term incentive awards granted in 2023 vest over a three-year period. +2023 Long- +Term Incentive +Award Type +2023 Award Design +Alignment with Philosophy +Restricted Stock Units +(49% of LTI Mix) + Time-vested units that are settled in shares of stock + 1/3 of each award vests annually over a three-year period + Value dependent upon stock price performance + Enhances retention of executive talent + Encourages long-term share ownership +Performance +Units +(51% of LTI Mix) + Performance-vested units that are settled in shares of stock + Number of units earned depends upon TSR performance relative to our peers over a full three-year period from April 1, 2023 through March 31, 2026 + Relative TSR calculation for 2023 units includes the 20 peer companies listed above and one market index (S&P 500) + No shares are earned for performance below the 25 th percentile + Target shares are not earned unless performance is at the 55 th percentile + Maximum shares are not earned unless performance is at the 75 th percentile or above + Capped payout at “target” amount if absolute TSR during the performance period is not positive + Performance-contingent + Number of shares dependent upon performance relative to peers, relative to broader market index and absolute performance + Value of shares dependent upon stock price + Three-year performance period provides for a retention incentive +40 +2023 Long-Term Incentive Grants +The Compensation Committee approved the following long-term incentive target awards for our NEOs in 2023. In determining the 2023 LTI grants, the Compensation Committee considered Patterson-UTI’s 2022 financial results and comparative TSR performance over the one-, two- and three-year periods ended March 31, 2023. The target value of the grants was determined with the assistance of the Compensation Committee's compensation consultant. +Although the Company experienced outstanding financial and relative TSR performance in 2022, in light of share price declines in early 2023, the Compensation Committee generally reduced the aggregate target value of long-term incentives for the Named Executive Officers between 2022 and 2023. Mr. Holcomb’s 2023 target value was increased in connection with his January 1, 2023 promotion to Chief Operating Officer. +Long-Term Incentive Grants +NEO +2022 Target Value +2023 Target Value +Percentage Change +William Andrew Hendricks, Jr. +$ +6,000,000 +$ +5,250,000 +(13)% +C. Andrew Smith +$ +2,100,000 +$ +1,838,000 +(12)% +Kenneth N. Berns +$ +2,000,000 +$ +1,750,000 +(13)% +James M. Holcomb +$ +1,200,000 +$ +1,500,000 +25% +Seth D. Wexler +$ +1,550,000 +$ +1,356,000 +(13)% +Payout in 2023 of 2020 Performance Unit and Phantom Unit Awards +For the three-year performance period that ended on March 31, 2023, Patterson-UTI’s TSR was 371%. This performance was at the 76 th percentile relative to our 2020 peer group. Based on this performance, the 2020 performance units paid out at 200% of the target level. +2020 Performance Unit Awards +(Performance Period Ended in 2023) +Units Granted +Payout Multiplier +Units Earned +# +% +# +William Andrew Hendricks, Jr. +72,000 +200% +144,000 +C. Andrew Smith +109,600 +200% +219,200 +Kenneth N. Berns +138,600 +200% +277,200 +James M. Holcomb +77,400 +200% +154,800 +Seth D. Wexler +77,400 +200% +154,800 +In May 2020, the Compensation Committee approved a grant of long-term performance-based cash-settled phantom units to Mr. Hendricks. Pursuant to this phantom unit grant, Mr. Hendricks could earn from 0% to 200% of a target award of 298,500 phantom units based on our achievement of the same performance conditions over the same performance period that applied to the 2020 performance units. The phantom units settled in May 2023, with a cash payment of $7.4 million, which was determined by multiplying 597,000 earned phantom units by our average trading price per share over the twenty consecutive trading days preceding March 31, 2023. +TSR calculations for Patterson-UTI and our peers were measured based on the change in the value of the relevant stock from the first trading day of the performance period to the last trading day of the performance period, in each case using the average closing price of the relevant stock for the 20-trading day period ending on such trading day, with dividends deemed reinvested. +Retirement Plans +Patterson-UTI offers a 401(k) plan to its employees, including its NEOs (the “Patterson-UTI 401(k) Plan”). Participants may contribute a portion of their base salary to the 401(k) plan, subject to federal limits. Patterson-UTI makes matching contributions up to 4% of each participant’s eligible base salary. Our NEOs are eligible to participate in the Patterson-UTI 401(k) plan on the same basis as other employees. In 2023, we assumed the 401(k) plans sponsored by Ulterra and NexTier in connection with those transactions and currently continue to maintain those as separate plans for the benefit of legacy Ulterra and NexTier employees. Patterson-UTI does not have any other retirement plans, except for a continuing award program for qualified retirees that was assumed as part of the NexTier merger, which provides continued vesting for long-term and short-term incentive awards upon retirement of eligible NexTier retirees. The Committee believes that benefits to executives should generally be aligned with those provided for other employees, and thus we generally do not provide retirement plans beyond a 401(k) plan for our executives. +41 +Other Executive Compensation Matters +Share Ownership Guidelines and Stock Holding Requirements +We have had significant share ownership requirements in place for more than 15 years. Our share ownership guidelines are applicable to all Section 16 officers and directors of Patterson-UTI. We believe share ownership requirements are an important tool to ensure that officers and directors stay invested in Patterson-UTI and aligned with the interests of our stockholders. +Each Section 16 officer or non-executive Director has five years from the date of appointment or election to their position to satisfy the ownership guidelines. The Nominating and Corporate Governance Committee may, from time to time, reevaluate and revise an individual’s guidelines to incorporate pay changes, promotions or other events. +Share Ownership Guidelines +President and Chief Executive Officer +Number of shares equal to 5 times base salary +Other Section 16 Officers +Number of shares equal to 2 times base salary +Outside Directors +Number of shares equal to 5 times annual base cash retainer +Share value for purposes of the guidelines is determined based on (i) the closing price on the date of grant for vested or unvested awards or, in the case of open market purchases, the closing price on the date of acquisition or (ii) the average closing price over the previous 12 months, whichever would result in a greater aggregate value. Share ownership for purposes of the guidelines includes unvested time-based equity incentive awards, and unvested performance-based equity incentive awards only when the performance-based component has been satisfied. +Each Section 16 officer and director is required to maintain ownership of the net after-tax shares of Common Stock acquired pursuant to any equity-based awards received from Patterson-UTI, unless such person has met his or her individual ownership requirement. +Each person subject to this policy was in compliance with these guidelines as of the date of this proxy statement. +Clawback Policy +In 2023 Patterson-UTI amended its Clawback Policy to comply with the requirements of Nasdaq Stock Market Listing Standard 5608 implementing Rule 10D-1 under the Securities Exchange Act of 1934, which requires the recovery of certain excess incentive-based compensation from an executive officer in the event that Patterson-UTI is required to prepare an accounting restatement of its financial statements due to its material non-compliance with any financial reporting requirement under the federal securities laws. +If the Compensation Committee determines the amount of incentive-based compensation received by an executive officer during the prior three fiscal years exceeds the amount that would have been received if determined or calculated based on Patterson-UTI’s restated financial results, such excess amount of incentive-based compensation shall be subject to recoupment by Patterson-UTI pursuant to the Clawback Policy. The Compensation Committee may effect any recovery pursuant to the Clawback Policy by requiring payment of amount(s) to Patterson-UTI, by set-off, by reducing future compensation, or by such other means or combination of means as the Compensation Committee determines to be appropriate. +In addition to this stand-alone policy, Patterson-UTI’s 2021 Plan, as proposed to be amended under Proposal No. 3, provides that if Patterson-UTI is required to prepare an accounting restatement due to the material noncompliance of Patterson-UTI, as a result of misconduct, with any financial reporting requirement under the securities laws, and if the participant is one of the persons subject to automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002 or the Participant engaged in such misconduct, such participant (regardless of whether a covered executive under the Clawback Policy) may be required to (or, if required by law, shall be required to) reimburse Patterson-UTI the amount of any payment in settlement of an award earned or accrued during the 12-month period following the first public issuance or filing with the SEC (whichever just occurred) of the financial document embodying such financial statement requirement. +Anti-Pledging Policy +Patterson-UTI has an anti-pledging policy. Our directors and executive officers generally may not engage in transactions in which Patterson-UTI securities are used as collateral for any loan, including, but not limited to, “margin loans” in a brokerage account. One of the former NexTier directors, Mr. Stewart, had NexTier shares pledged as collateral for an asset-based loan prior to the closing of the NexTier merger. The Patterson-UTI Board of Directors approved a waiver of the anti-pledging policy with respect to Mr. Stewart’s pledged shares in connection with the closing of the NexTier merger. +42 +Anti-Hedging Policy +Patterson-UTI has an anti-hedging policy for directors and executive officers. Our directors and executive officers and their respective spouses and minor children are prohibited from engaging in hedging or monetization transactions, including but not limited to prepaid variable forward contracts, equity swaps, collars, exchange funds, purchasing, selling or writing options or transacting in other third-party derivative securities that primarily involve or reference Patterson-UTI equity securities. This policy does not apply broadly to other employees. +Perquisites and Personal Benefits +The Compensation Committee believes that benefits to executives should generally be aligned with those provided for other employees. No Named Executive Officer received perquisites during 2023 with an aggregate incremental cost to the Company of more than $10,000. +Evaluation of Compensation Risk +We have considered the potential risks associated with the design of our compensation programs for employees. Regarding our executive compensation program in particular, we do not believe that our program creates unreasonable risks for the following reasons: +• +The emphasis on long-term equity based awards and the required vesting periods help minimize the potential for excessive risk taking and actions aimed at short-term stock gains; +• +Our use of different types of equity grants helps offset these risks; +• +We have meaningful share ownership guidelines; +• +We maintain an anti-hedging policy; +• +We maintain a clawback policy that applies to all our executive officers for both cash and equity incentives; and +• +Four of the NEOs have been with Patterson-UTI for more than ten years and have an established track record of focus on managing Patterson-UTI for long-term success. +Our Board has also considered in its risk assessment of our compensation program its view that our management is highly ethical and focused on creating true long-term value for stockholders and not focused on just short-term gains. The Board, primarily through its Compensation Committee and Audit Committee, monitors and considers risks associated with Patterson-UTI’s compensation plans on a regular basis. +43 +Employment-Related Agreements and Other Matters +Employment, Change in Control and Severance Agreements +Employment Agreements. Patterson-UTI entered into an employment agreement with Mr. Hendricks in August 2016, with Messrs. Wexler and Holcomb in January 2017 and with Mr. Smith in September 2017. Mr. Holcomb's employment agreement was superseded by a new employment agreement entered into in January 2023 in connection with his promotion to Chief Operating Officer. Each employment agreement generally has an initial three-year term, and unless earlier terminated as provided therein, has a one year automatic annual extension each year. Each employment agreement provides for a specified base salary, subject to any increases that may be granted in the future. The employment agreement also provides for, among other things, severance payments following termination by Patterson-UTI of the executive other than for cause, or termination by the executive for good reason (as defined in the employment agreement). As discussed in more detail below, the employment agreements contain change in control provisions. +Holcomb Letter Agreement. Mr. Holcomb has served as an employee of the Company for over 25 years, including serving as a key member of the Company’s executive team for over 10 years, and the Compensation Committee believes that Mr. Holcomb is instrumental to the Company’s future success. Prior to the closing of the NexTier merger, Mr. Holcomb served as the Company’s Chief Operating Officer, with responsibility for overseeing the Company’s completions business. Pursuant to the merger agreement with NexTier, responsibility for overseeing the Company’s completion business was removed from Mr. Holcomb upon the closing of the NexTier merger, which triggered Mr. Holcomb's right to terminate his employment agreement for "good reason" and receive the severance benefits thereunder. To encourage Mr. Holcomb to not exercise his right to terminate his employment for good reason at the time of the closing of the NexTier merger, Patterson-UTI entered into a letter agreement with Mr. Holcomb that provided for his transition out of his role as Chief Operating Officer and into the role of Executive Vice President and Chief Business Officer. This letter agreement further provides that, following the one-year anniversary of the closing of the NexTier merger, Mr. Holcomb will not have “good reason” to terminate his employment with Patterson-UTI due to the transition of his role in connection with the NexTier merger and any resulting changes in his authority, duties or responsibilities. The letter agreement also provides a $2 million cash retention bonus, payable in eight quarterly installments following the closing of the NexTier merger (with the first installment paid in December 2023 as discussed above), subject to Mr. Holcomb’s continued employment in good standing with Patterson-UTI on each applicable payment date. Any unpaid portions of Mr. Holcomb’s retention bonus will become payable if terminated by Patterson-UTI without cause or by Mr. Holcomb for good reason. Except as expressly modified by this letter agreement, the terms of Mr. Holcomb’s employment agreement remain in force and effect. +Change in Control Agreements and Tax Gross-Up Payments. Patterson-UTI entered into a change-in-control agreement with Mr. Berns in 2004 and employment agreements with Messrs. Hendricks, Smith, Holcomb and Wexler in recent years that contain change-in-control provisions, as further described in “Employment-Related Agreements” below. Patterson-UTI believes that such agreements may under certain circumstances protect Patterson-UTI’s interest by discouraging the NEOs from leaving employment out of concern for the security of their jobs or from otherwise being unable to concentrate on their work. We believe that the change in control agreements may also help Patterson-UTI attract and retain new key employees by reducing the personal uncertainty and anxiety that arises from the possibility of a future business combination. Any future change in control or severance agreements will be approved subject to the circumstances existing at the time. +As was customary when the change in control agreement with Mr. Berns was entered into more than fifteen years ago, the change-in-control agreement provides Mr. Berns with a full gross-up payment for any excise taxes imposed on payments and benefits received under the change-in-control agreement or otherwise, including other taxes that may be imposed as a result of the gross-up payment. As indicated above, the Compensation Committee subsequently adopted a policy, more than five years ago, to no longer approve tax gross-ups in connection with compensation arrangements, and the employment agreements entered into with Messrs. Hendricks, Smith, Holcomb and Wexler, which are described below, do not include a tax gross-up provision. +Severance Agreement. In order to address prior severance agreements between UTI Energy Corp. and Mr. Berns, Patterson-UTI has entered into a written letter agreement with Mr. Berns pursuant to which Patterson-UTI has agreed to pay Mr. Berns within ten days of the termination of his employment with Patterson-UTI for any reason (including voluntary termination by him), an amount in cash equal to his annual base salary at the time of such termination. Any payment made by Patterson-UTI pursuant to this letter agreement will reduce dollar for dollar any payment owed to Mr. Berns, if any, pursuant to the change-in-control agreement referenced above. +44 +We believe the employment agreements, the Holcomb letter agreement, the change-in-control agreement and the severance agreement are important components of our overall executive compensation program. The employment agreements currently in effect, as well as the Holcomb letter agreement, set forth the manner by which the employment relationship may be extended or terminated, the compensation and benefits that we provide during the term of employment and the obligations each party has in the event of termination of the executive officer’s employment. We believe that severance protections, particularly in the context of a change-in-control transaction, play a critical role in attracting and retaining key executive officers. Providing this type of protection is common in the oilfield services industry. In addition, these benefits serve our interests by promoting a continuity of management and aligning management’s interests with those of our stockholders in the context of an actual or threatened change in control transaction. +Please see “Employment-Related Agreements” elsewhere in the proxy statement for further description of the employment agreements, letter agreement, change-in-control agreement and severance agreement. +Compensation Committee Report +The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based upon such review and discussion, the Compensation Committee has recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement. +Gary M. Halverson, Chair +Tiffany (TJ) Thom Cepak +Curtis W. Huff +Amy H. Nelson +45 +EXECUTIVE COMPENSATION +The following table sets forth information concerning compensation for the fiscal years ended December 31, 2023, December 31, 2022 and December 31, 2021 with respect to the principal executive officer, the principal financial officer and the other Named Executive Officers of Patterson-UTI: +Summary Compensation Table +Name and Principal Position(s) +Year +Salary +($) +Bonus +($)(1) +Stock +Awards +($)(2) +Non-equity +Incentive plan +Compensation +($)(3) +All Other +Compensation +($)(4) +Total +($) +William Andrew Hendricks, Jr. +2023 +1,000,000 +— +5,930,679 +(5) +1,340,129 +13,200 +8,284,008 +President & Chief +2022 +1,000,000 +— +7,768,767 +2,187,500 +12,200 +10,968,467 +Executive Officer +2021 +1,000,000 +— +5,442,905 +1,562,500 +11,600 +8,017,005 +C. Andrew Smith +2023 +450,000 +— +2,076,670 +(6) +603,058 +13,200 +3,142,928 +Executive Vice President & +2022 +450,000 +— +2,718,489 +984,375 +12,200 +4,165,064 +Chief Financial Officer +2021 +450,000 +— +2,044,810 +703,125 +11,600 +3,209,535 +Kenneth N. Berns +2023 +450,000 +— +1,976,893 +(7) +603,058 +— +3,029,951 +Executive Vice President & +2022 +450,000 +— +2,588,724 +984,375 +— +4,023,099 +Chief Commercial Officer +2021 +450,000 +— +2,036,286 +703,125 +— +3,189,411 +James M. Holcomb +2023 +513,635 +(8) +250,000 +1,694,098 +(9) +536,051 +13,200 +3,006,984 +Chief Operating Officer +2022 +465,000 +224,000 +1,553,892 +651,000 +12,200 +2,906,092 +2021 +465,000 +— +1,135,972 +465,000 +11,600 +2,077,572 +Seth D. Wexler +2023 +475,000 +— +1,531,624 +(10) +407,399 +13,200 +2,427,223 +Executive Vice President, General +2022 +475,000 +— +2,007,723 +665,000 +12,200 +3,159,923 +Counsel & Secretary +2021 +475,000 +— +1,349,000 +475,000 +11,600 +2,310,600 +(1) +The bonus paid to Mr. Holcomb in 2023 was a retention payment in December 2023 pursuant to his letter agreement entered into in connection with the NexTier merger and his transition out of his role of Chief Operating Officer to Executive Vice President and Chief Business Officer, as described in “Employment-Related Agreements and Other Matters”. The bonus amount for 2022 represents the incremental increase to Mr. Holcomb's 2022 bonus approved in connection with his promotion to Chief Operating Officer on January 1, 2023. +(2) +Amounts include the fair value of awards at the date of grant as determined in accordance with FASB ASC Topic 718 with respect to restricted stock units and performance units awarded to the Named Executive Officers in the fiscal years ended December 31, 2023, 2022 and 2021. For additional information related to the assumptions used in the valuation of restricted stock units and performance units, see Note 12 to the consolidated financial statements in Patterson-UTI’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023. The fair value of performance unit awards was determined based on a Monte-Carlo simulation model, which is consistent with the valuation used by Patterson-UTI for the recognition of compensation expense under FASB ASC Topic 718. The Monte-Carlo simulation model takes into account expected price movement of Patterson-UTI stock as compared to the applicable peer group and, for the 2022 and 2023 performance unit awards, the S&P 500 Index. For the 2021 performance unit awards the Monte-Carlo simulation model takes into account expected price movement of Patterson-UTI stock as compared to the peer group, the S&P 500 Index, the Russell 3000 Index and the MSCI World Index. The Monte-Carlo simulation model assigned a higher value to each 2023 performance unit award than the closing price of Patterson-UTI’s stock on the grant date. Therefore, the value reflected in the 2023 Summary Compensation Table does not reflect the target award values shown in the 2023 Long-Term Incentive Grants section of the "Compensation Discussion and Analysis" in this proxy statement. +(3) +Amounts represent annual cash bonuses earned for the fiscal years ended December 31, 2023, 2022 and 2021. +(4) +Amounts reflect contributions to the Company's 401(k) plan by Patterson-UTI. +(5) +The 2023 amount includes $2,571,975 related to an annual award of restricted stock units and $3,358,704 related to an award of performance units during 2023. Assuming maximum performance, the value of the performance unit award would be $5,354,820 (calculated using the closing price of Patterson-UTI’s stock on the grant date and assuming maximum payout of two times the target number of shares). +(6) +The 2023 amount includes $900,990 related to an annual award of restricted stock units and $1,175,680 related to an award of performance units during 2023. Assuming maximum performance, the value of the performance unit award would be $1,874,400 (calculated using the closing price of Patterson-UTI’s stock on the grant date and assuming maximum payout of two times the target number of shares). +(7) +The 2023 amount includes $857,325 related to an annual award of restricted stock units and $1,119,568 related to an award of performance units during 2023. Assuming maximum performance, the value of the performance unit award would be $1,784,940 (calculated using the closing price of Patterson-UTI’s stock on the grant date and assuming maximum payout of two times the target number of shares). +46 +(8) +Due to the timing of payroll cycles, the aggregate amount paid to Mr. Holcomb in 2023 as base salary differs slightly from his annual base salary for 2023 described above in “Compensation Discussion and Analysis”. +(9) +The 2023 amount includes $734,850 related to an annual award of restricted stock units and $959,248 related to an award of performance units during 2023. Assuming maximum performance, the value of the performance unit award would be $1,529,340 (calculated using the closing price of Patterson-UTI’s stock on the grant date and assuming maximum payout of two times the target number of shares). +(10) +The 2023 amount includes $664,560 related to an annual award of restricted stock units and $867,064 related to an award of performance units during 2023. Assuming maximum performance, the value of the performance unit award would be $1,382,370 (calculated using the closing price of Patterson-UTI’s stock on the grant date and assuming maximum payout of two times the target number of shares). +The following table sets forth information concerning grants of plan-based awards during the fiscal year ended December 31, 2023 to the Named Executive Officers: +Grants of Plan-Based Awards +Estimated Future Payouts under +Non-equity Incentive Plan Awards (1) +Estimated Future Payouts under +Equity Incentive Plan Awards +All Other +Stock +Awards: +Number of +Shares of +Grant Date +Fair Value of +Stock and +Grant +Threshold +Target +Maximum +Threshold +Target +Maximum +Stock or Units +Option Awards +Name +Date +($) +($) +($) +(#) +(#) +(#) +(#) +($)(2) +William Andrew Hendricks, Jr. +625,000 +1,250,000 +2,500,000 +— +— +— +— +$ +— +5/5/23 +(3) +— +— +— +125,700 +251,400 +502,800 +— +$ +3,358,704 +5/5/23 +(4) +— +— +— +— +— +— +241,500 +$ +2,571,975 +C. Andrew Smith +281,250 +562,500 +1,125,000 +— +— +— +— +$ +— +5/5/23 +(3) +— +— +44,000 +88,000 +176,000 +$ +1,175,680 +5/5/23 +(4) +— +— +— +— +— +— +84,600 +$ +900,990 +Kenneth N. Berns +281,250 +562,500 +1,125,000 +— +— +— +— +$ +— +5/5/23 +(3) +— +— +— +41,900 +83,800 +167,600 +— +$ +1,119,568 +5/5/23 +(4) +— +— +— +— +— +— +80,500 +$ +857,325 +James M. Holcomb +250,000 +500,000 +1,000,000 +— +— +— +— +$ +— +5/5/23 +(3) +— +— +— +35,900 +71,800 +143,600 +— +$ +959,248 +5/5/23 +(4) +— +— +— +— +— +— +69,000 +$ +734,850 +Seth D. Wexler +190,000 +380,000 +760,000 +— +— +— +— +$ +— +5/5/23 +(3) +— +— +— +32,450 +64,900 +129,800 +— +$ +867,064 +5/5/23 +(4) +— +— +— +— +— +— +62,400 +$ +664,560 +(1) +The 2023 non-equity incentive cash bonus plan for the fiscal year ended December 31, 2023 set a target opportunity for each executive’s annual cash bonus as a percent of salary, with payout contingent upon meeting Patterson-UTI’s financial goals and other KPIs as described above in “Compensation Discussion and Analysis - Annual Incentive Compensation”. +(2) +The grant date fair value of restricted stock units was based on the closing price of Patterson-UTI Common Stock on the date of grant, and the grant date fair value of performance unit awards was determined based on a Monte-Carlo simulation model, each of which is consistent with the valuation used by Patterson-UTI for the recognition of compensation expense under FASB ASC Topic 718. +(3) +On May 5, 2023, Patterson-UTI granted performance unit awards to the Named Executive Officers. These awards provide for the recipients to receive shares of Common Stock upon the achievement of certain performance goals established by Patterson-UTI during a specified period. The performance period is the period from April 1, 2023 through March 31, 2026. The performance goals are tied to Patterson-UTI’s total stockholder return for the performance period as compared to total stockholder return for our peer group determined by the Compensation Committee. The recipients will receive a target number of shares if Patterson-UTI’s total stockholder return when compared to the peer group, is at the 55 th percentile and two times the target if at the 75 th percentile or higher. If Patterson-UTI’s total stockholder return, when compared to the peer group, is at the 25 th percentile, the recipients will only receive one-half of the target number of shares. The grant of shares when achievement is between the 25th and 55 th percentile, or between the 55 th and 75 th percentile, will be determined using linear interpolation for levels of achievement between these points. If Patterson-UTI’s total stockholder return is negative or zero, the payout will not exceed the target number of shares. +(4) +Restricted stock units were awarded to the Named Executive Officers pursuant to the 2021 Long-Term Incentive Plan. Ordinary dividends are accrued on unvested restricted stock units and paid upon vesting. The rate at which these dividends are paid or accrued is the same rate at which ordinary dividends are paid on all other shares of Common Stock. The restricted stock units vest over a three-year period as follows: one-third on May 5, 2024, one-third on May 5, 2025 and one-third on May 5, 2026. +47 +The following table sets forth information concerning outstanding equity awards at December 31, 2023 for the Named Executive Officers: +Outstanding Equity Awards at Fiscal Year-End +Stock Awards +Option Awards +Number +Equity Incentive +Equity Incentive +Number of +of Shares +Plan Awards: +Plan Awards: Market +Securities +or Units of +Market Value of +Number of +or Payout Value of +Underlying +Option +Stock +Shares or Units +Unearned Shares, +Unearned Shares, +Unexercised +Exercise +Option +That Have +of Stock +Units or Other +Units or Other +Options (#) +Price +Expiration +Not +That Have +Rights that Have +Rights that Have +Name +Exercisable +($) +Date +Vested (#) +Not Vested ($)(1) +Not Vested(2) +Not Vested ($)(1) +William Andrew Hendricks, Jr. +117,750 +$ +33.10 +4/21/2024 +479,367 +(3) +$ +5,177,164 +589,250 +(4) +$ +6,363,900 +257,000 +$ +20.33 +4/20/2025 +315,400 +$ +18.54 +4/25/2026 +C. Andrew Smith +— +— +— +171,001 +(3) +$ +1,846,811 +215,550 +(4) +$ +2,327,940 +Kenneth N. Berns +78,500 +$ +33.10 +4/21/2024 +164,634 +(3) +$ +1,778,047 +211,500 +(4) +$ +2,284,200 +154,200 +$ +20.33 +4/20/2025 +189,100 +$ +18.54 +4/25/2026 +James M. Holcomb +— +— +— +117,601 +(3) +$ +1,270,091 +131,900 +(4) +$ +1,424,520 +Seth D. Wexler +— +— +— +122,534 +(3) +$ +1,323,367 +148,500 +(4) +$ +1,603,800 +(1) +Based on the closing price of Patterson-UTI Common Stock on December 29, 2023 of $10.80 per share. +(2) +The 2021, 2022 and 2023 performance unit awards reflected in this column were granted on April 27, 2021, April 29, 2022, and May 5, 2023, respectively, and provide for an award of shares of Patterson-UTI common stock to the recipient based on Patterson-UTI’s total stockholder return compared to our peer group of companies at the time of grant for the performance period of April 1 of the grant year through March 31 of the third year following the grant year. All performance unit awards provide for a target payout based on a target level of total stockholder return compared to the peer group. The amounts presented in this column represent the target payout under the 2021 performance unit awards and the threshold payout under the 2022 and 2023 performance unit awards. These payout amounts for these awards are shown due to the relative TSR performance as of December 31, 2023. Based on Patterson-UTI’s total stockholder return during the performance period, the recipients could receive a number of shares ranging from no shares to two times the target number of shares granted. If Patterson-UTI’s total stockholder return is negative, then the number of shares received by the recipients will be capped at the target number of shares. +(3) +These restricted stock units vest as follows: +4/27/2024 +4/29/2024 +5/5/2024 +4/29/2025 +5/5/2025 +5/5/2026 +Total +William Andrew Hendricks, Jr. +118,667 +59,600 +80,500 +59,600 +80,500 +80,500 +479,367 +C. Andrew Smith +44,667 +20,867 +28,200 +20,867 +28,200 +28,200 +171,001 +Kenneth N. Berns +44,400 +19,867 +26,833 +19,867 +26,833 +26,834 +164,634 +James M. Holcomb +24,734 +11,933 +23,000 +11,934 +23,000 +23,000 +117,601 +Seth D. Wexler +29,334 +15,400 +20,800 +15,400 +20,800 +20,800 +122,534 +(4) +Includes performance unit awards as follows: +2021 Performance +2022 Performance +2023 Performance +Unit Awards +Unit Awards +Unit Awards +Total +William Andrew Hendricks, Jr. +370,500 +93,050 +125,700 +589,250 +C. Andrew Smith +139,000 +32,550 +44,000 +215,550 +Kenneth N. Berns +138,600 +31,000 +41,900 +211,500 +James M. Holcomb +77,400 +18,600 +35,900 +131,900 +Seth D. Wexler +92,000 +24,050 +32,450 +148,500 +The amounts presented in this table represent the target payout under the 2021 performance unit awards and the threshold payout under the 2022 and 2023 performance unit awards. These payout amounts for these awards are shown due to the relative TSR performance as of December 31, 2023 (as described in footnote 2 above). +48 +The following table sets forth information concerning options exercised and stock awards vested during the fiscal year ended December 31, 2023 for the Named Executive Officers. +Option Exercises and Stock Vested +Option awards +Stock awards +Name +Number of +shares acquired on exercise (#) +Value realized +on exercise ($) (1) +Number of +shares acquired +on vesting (#) +Value realized +on vesting ($)(1) +William Andrew Hendricks, Jr. +— +$ +— +1,037,934 +$ +12,391,796 +C. Andrew Smith +— +$ +— +319,800 +$ +3,496,542 +Kenneth N. Berns +— +$ +— +385,866 +$ +4,212,109 +James M. Holcomb +— +$ +— +216,200 +$ +2,360,172 +Seth D. Wexler +— +$ +— +224,267 +$ +2,451,224 +(1) +Value realized on vesting is based on the closing price of Patterson-UTI common stock on the day the respective shares or phantom units vested; provided that if the stock market was closed on the day the respective awards vested, the value realized on vesting is based on the closing price of Patterson-UTI common stock on the last day the stock market was open immediately prior to the day the respective awards vested. +No Pension Benefits or Nonqualified Deferred Compensation +Patterson-UTI does not provide any pension benefits for any of the Named Executive Officers. None of the Named Executive Officers had any items of nonqualified deferred compensation during 2023. As a result, tables with respect to pension benefits and nonqualified deferred compensation have not been provided. +49 +EMPLOYMENT-RELATED AGREEMENTS +Employment, Change in Control and Severance Agreements +Employment Agreements with Messrs. Hendricks, Smith, Holcomb and Wexler +Patterson-UTI has Employment Agreements with Messrs. Hendricks, Smith, Holcomb and Wexler. Each Employment Agreement generally has an initial three-year term, and unless earlier terminated as provided therein, has a one year automatic annual extension each year. The executive may terminate his employment under his Employment Agreement by providing written notice of such termination at least 30 days before the effective date of such termination. Under specified circumstances, Patterson-UTI may terminate the executive’s employment under his Employment Agreement for cause (as defined in the Employment Agreement) by providing written notice 10 - 30 days, depending on the nature of the cause trigger, before the effective date of such termination and by granting at least 10 - 20 days, depending on the nature of the cause trigger, to cure the cause for such termination, provided that if the matter is reasonably determined by Patterson-UTI to not be capable of being cured, the executive may be terminated for cause on the date the written notice is delivered. Each Employment Agreement also provides for, among other things, severance payments following termination by Patterson-UTI of the executive other than for cause, or termination by the executive for good reason (as defined in each Employment Agreement). Under these provisions, if the executive’s employment is terminated by Patterson-UTI without cause, or the executive terminates his employment for good reason: +• +the executive will have the right to receive a lump-sum payment consisting of 3 times (in the case of Mr. Hendricks) or 2.5 times (in the case of Messrs. Smith, Holcomb and Wexler) the sum of (i) his base salary and (ii) the average annual cash bonus received by him for the three years prior to the date of termination, +• +the executive will have the right to receive a pro-rated lump-sum payment equal to his annual cash bonus based on actual results for the year, payable at the same time as annual cash bonuses are paid to active employees, +• +Patterson-UTI will accelerate vesting of all time-based equity, phantom equity and long-term cash incentive awards on the 60th day following the executive’s termination, +• +Patterson-UTI will cause all performance-based equity, phantom equity and long-term cash incentive awards to continue in effect through the end of the applicable performance period and vest based on actual results as if the executive had remained employed through the end of the applicable performance period, and +• +Patterson-UTI will pay the executive certain accrued obligations and certain obligations pursuant to the terms of employee benefit plans. +However, if a termination by Patterson-UTI other than for cause or by the executive for good reason occurs following a change in control (which is defined in a substantially similar manner to the definition in Mr. Berns' CIC Agreement (as defined below)), the executive will generally be entitled to the same severance payments and benefits described above except that (i) the pro-rated lump-sum payment for annual cash bonuses will be based on the executive’s highest annual cash bonus for the last three years, (ii) the executive will be entitled to 36 months (in the case of Mr. Hendricks) or 30 months (in the case of Messrs. Smith, Holcomb and Wexler) of subsidized benefits continuation coverage, and (iii) the performance-based equity, phantom equity and long-term cash incentive awards will be accelerated based on the target level of performance on the 60th day following the executive’s termination. +As discussed in “Compensation Discussion and Analysis – Employment-Related Agreements and Other Matters", Mr. Holcomb entered into a letter agreement in connection with the NexTier merger that provides that, following the one-year anniversary of the closing of the NexTier merger, Mr. Holcomb will not have “good reason” to terminate his employment with Patterson-UTI due to the transition of his role in connection with the NexTier merger and any resulting changes in his authority, duties or responsibilities. +50 +Change in Control Agreement with Mr. Berns +Patterson-UTI has a Change in Control Agreement with Mr. Berns (the “CIC Agreement”). The CIC Agreement was entered into in 2004 to protect Mr. Berns should a change in control occur, thereby encouraging Mr. Berns to remain in the employ of Patterson-UTI and not be distracted from the performance of his duties to Patterson-UTI by the possibility of a change in control. +The CIC Agreement generally has an initial term with automatic 12-month renewals unless Patterson-UTI notifies Mr. Berns at least 90 days before the end of such renewal period that the term will not be extended. If a change in control of Patterson-UTI occurs during the term of the CIC Agreement and Mr. Berns’ employment is terminated (i) by Patterson-UTI other than for cause or other than automatically as a result of death, disability or retirement, or (ii) by Mr. Berns for good reason (as those terms are defined in the CIC Agreement), then Mr. Berns will generally be entitled to, among other things: +• +a bonus payment equal to the highest bonus paid after the CIC Agreement was entered into (such bonus payment prorated for the portion of the fiscal year preceding the termination date); +• +a payment equal to 2 times the sum of (i) the highest annual salary in effect for Mr. Berns and (ii) the average of the three annual bonuses earned by Mr. Berns for the three fiscal years preceding the termination date; and +• +continued coverage under Patterson-UTI’s welfare plans for up to two years. +As was customary when the CIC Agreement was entered into more than fifteen years ago, the CIC Agreement provides Mr. Berns with a full gross-up payment for any excise taxes imposed on payments and benefits received under the CIC Agreement or otherwise, including other taxes that may be imposed as a result of the gross-up payment. As indicated above, the Compensation Committee subsequently adopted a policy, more than five years ago, to no longer approve tax gross-ups in connection with compensation arrangements, and the employment agreements entered into with Messrs. Hendricks, Smith, Holcomb and Wexler, which are described above, do not include a tax gross-up provision. +A “change in control” is principally defined by the CIC Agreement as: +• +an acquisition by any individual, entity or group of beneficial ownership of 35% or more of either Patterson-UTI’s then outstanding common stock or the combined voting power of the then outstanding voting securities of Patterson-UTI entitled to vote in the election of directors, +• +a change occurs in which the members of the Board of Directors as of the date of the CIC Agreement cease to constitute at least a majority of Patterson-UTI’s Board of Directors unless that change occurs through a vote of at least a majority of the incumbent members of the Board of Directors, or +• +a change in the beneficial ownership of Patterson-UTI following consummation of a reorganization, merger, consolidation, sale of Patterson-UTI or any subsidiary of Patterson-UTI or a disposition of all or substantially all of the assets of Patterson-UTI, in which the beneficial owners immediately prior to the transaction own 65% or less of outstanding common stock of the newly combined or merged entity. +Severance Agreement with Mr. Berns +To address a prior severance agreement between UTI Energy Corp. and Mr. Berns, Patterson-UTI has entered into a written letter agreement with Mr. Berns pursuant to which Patterson-UTI has agreed to pay Mr. Berns within ten days of the termination of his employment with Patterson-UTI for any reason (including voluntary termination by him), an amount in cash equal to his annual base salary at the time of such termination. Any payment made by Patterson-UTI pursuant to this letter agreement will reduce dollar for dollar any payment owed to Mr. Berns, if any, pursuant to the CIC Agreement. +Equity Award Agreements with Named Executive Officers +Outstanding awards held by the Named Executive Officers do not provide for acceleration solely upon a change in control, and instead provide for acceleration only upon the executive’s termination of employment without cause or termination by the executive for good reason following a change in control. +All restricted stock unit and performance unit awards held by the Named Executive Officers provide that in the event of termination of employment due to death or disability, the holder would vest in a portion of the award. Such terminations at December 31, 2023 would have resulted in the issuance of the following shares pursuant to the accelerated vesting of +51 +restricted stock units (with the fair value based on the market price of Patterson-UTI common stock at December 29, 2023): +Shares +Fair Value +William Andrew Hendricks, Jr. +351,564 +$ +3,796,891 +C. Andrew Smith +128,328 +$ +1,385,942 +Kenneth N. Berns +125,311 +$ +1,353,359 +James M. Holcomb +76,544 +$ +826,675 +Seth D. Wexler +88,611 +$ +956,999 +In the event of termination of employment due to death or disability, the holders of performance units and phantom units would vest in the portion of the award that was earned at the time of death or disability. This payment would be determined at the end of the performance period and would equal the amount that the holder would have received at that time, pro-rated for the amount of time from the date of grant through the date of death or disability. +Potential Payments Upon a Termination or Change in Control +Amounts that each of the Named Executive Officers would be entitled to under the employee’s CIC Agreement or Employment Agreement and other award agreements if a change in control had occurred as of December 31, 2023 and the employee’s employment was terminated by Patterson-UTI other than for cause or terminated by the employee for good reason (as defined in the CIC Agreement or the Employment Agreement and applicable award agreements) are reflected in the following table: +Cash Payments +Other Benefits +Name +Bonus +Payment +($)(1) +Salary and +Bonus +($)(2) +Stock +Awards +($)(3) +Performance +Unit Awards +($)(4) +Other +Benefits +($)(5) +Total +($) +William Andrew Hendricks, Jr. +$ +2,187,500 +$ +7,375,000 +$ +5,177,164 +$ +6,363,900 +$ +39,600 +$ +21,143,164 +C. Andrew Smith +$ +984,375 +$ +2,765,625 +$ +1,846,811 +$ +2,327,940 +$ +33,000 +$ +7,957,751 +Kenneth N. Berns +$ +1,397,022 +$ +2,212,500 +$ +1,778,047 +$ +2,284,200 +$ +— +$ +7,671,769 +James M. Holcomb +$ +875,000 +$ +2,552,667 +$ +1,270,091 +$ +1,424,520 +$ +33,000 +$ +6,155,278 +Seth D. Wexler +$ +665,000 +$ +2,327,500 +$ +1,323,367 +$ +1,603,800 +$ +33,000 +$ +5,952,667 +(1) +In the case of Messrs. Hendricks, Smith, Holcomb and Wexler, the assumed bonus is equal to the highest annual bonus paid in the three years prior to 2023. In the case of Mr. Berns, the assumed bonus payment is equal to the highest annual bonus paid from the time the CIC Agreement was entered into through December 31, 2023. +(2) +The assumed salary and bonus payment represents 3.0 times (in the case of Mr. Hendricks), 2.5 times (in the case of Messrs. Smith, Holcomb and Wexler) or 2.0 times (in the case of Mr. Berns) of the sum of the 2023 salary in effect for each employee and the average of the annual bonuses earned by each employee for 2022, 2021 and 2020. Bonus amounts earned in 2023 were not considered in this calculation as they were not determined until after December 31, 2023. +(3) +Each of the stock award agreements granted beginning in 2021 provide that unvested awards will vest upon the executive’s termination of employment without cause or termination by the executive for good reason following a change in control. Amounts presented in the table represent the value of unvested stock awards using the market price of Patterson-UTI common stock on December 29, 2023 of $10.80 per share. +(4) +Share settled performance unit agreements granted beginning in 2021 include a provision that, upon the executive’s termination of employment without cause or termination by the executive for good reason following a change in control, the Named Executive Officer will receive an award of shares equal to the target amount set forth in each agreement. Amounts presented in the table represent the assumed award of the target number of shares if a change in control had occurred on December 31, 2023, valued at the December 29, 2023 closing price of Patterson-UTI common stock of $10.80 per share. +(5) +Messrs. Hendricks, Smith, Holcomb and Wexler participated in Patterson-UTI’s health and welfare plans as of December 31, 2023. The amounts presented represent Patterson-UTI’s portion of the premiums for three years in the case of Mr. Hendricks and 30 months in the case of Messrs. Smith, Holcomb and Wexler. No tax gross-up payment would have been payable to Mr. Berns under the terms of his CIC Agreement. +In the event of a termination of employment of Mr. Berns for any reason, including voluntary termination, Mr. Berns would be entitled to an amount in cash equal to his annual base salary at the time of such termination. Any such payment made by Patterson-UTI will reduce dollar for dollar any payment owed to Mr. Berns that is reflected in the table above. In the case of Messrs. Hendricks, Smith, Holcomb or Wexler, if the executive’s employment was terminated by Patterson-UTI other than for cause or terminated by the executive for good reason (as defined in the Employment Agreement) and +52 +not in connection with a change-in-control, then the executive would be entitled to the same potential payments and benefits as set forth in the table above. Additionally, upon a termination by Patterson-UTI other than for cause or a termination by the executive for good reason and not in connection with a change-in-control, the potential payments and benefits set forth in the table above with respect to the performance units and phantom units would not be paid at the time of such termination, as such awards would instead remain outstanding through the end of the applicable performance period, subject to achievement of the applicable performance measures. +With respect to Messrs. Hendricks, Smith, Holcomb or Wexler, the foregoing severance benefits (other than the accrued obligations and benefit obligations) are conditioned on the executive’s execution of a release within 50 days of his termination that is not revoked during any applicable revocation period provided in such release. Their employment agreements also contain covenants and restrictions, including non-competition and non-solicitation provisions pursuant to which the executive will not be permitted to compete with Patterson-UTI in certain circumstances for a period of one year following termination of employment. +Pay Ratio +Under rules adopted pursuant to the Dodd-Frank Act of 2010, we are required to calculate and disclose the total compensation paid to our median employee, as well as the ratio of the total compensation paid to the median employee as compared to the total compensation paid to our CEO. The paragraphs that follow describe our methodology and the resulting CEO pay ratio for 2023. +We identified the median employee using our employee population on December 31, 2023. At December 31, 2023, we had approximately 10,100 employees located in the United States and 550 employees located in other countries. +In identifying the median employee, in accordance with SEC rules, we excluded approximately 4,900 employees that became our employees as a result of the NexTier Merger in September 2023 and approximately 700 employees that became our employees as a result of the Ulterra acquisition in August 2023, 261 of which were located in other countries. Additionally, as permitted under SEC rules, we relied on the de minimis exception to decrease the number of countries where we obtained data, which resulted in us excluding 228 legacy Patterson-UTI employees in Colombia. +The compensation measure we used to identify the median employee was W-2 wages. We chose this compensation measure as it applied to all U.S. employees, allowing for accessibility and broad comparability. +The total annual compensation for the year ended December 31, 2023 was calculated as $93,324 for our median employee and $8,284,008 for our CEO as reflected in the “Total” column of the Summary Compensation Table. The ratio of our CEO’s pay to that of our median employee for 2023 was approximately 89 times. The pay ratio provided is a reasonable estimate calculated in a manner consistent with SEC rules. +Because the SEC rules for identifying the median of the annual total compensation of our employees and calculating the pay ratio based on that employee’s annual total compensation allows companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices, the pay ratio reported by other companies may not be comparable to the pay ratio for our Company, as other companies have headquarters and offices in different states and countries, have different employee populations and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their pay ratios. +53 +Pay Versus Performance +Pay Versus Performance Table +The following table sets forth specified executive compensation and financial performance measures for the Company’s four most recently completed fiscal years, and cumulative total shareholder return (TSR) information for the Company and a peer group for the 1-, 2-, 3- and 4-year periods commencing as of December 31, 2019, as required by Item 402(v) of Regulation S-K: +Value of Initial Fixed $100 Investment Based On: +Year +Summary Compensation Table Total for PEO ($) +Compensation Actually Paid to PEO ($) (1) +Average Summary Compensation Table Total for Non-PEO Named Executive Officers ($) (2) +Average Compensation Actually Paid to Non-PEO Named Executive Officers ($) (2) (3) +Total Shareholder Return +Peer Group Total Shareholder Return (4) +Net Income (Loss) ($ in thousands) +Operating Cash Flow ($ in millions) (5) (6) +2023 +$ +8,284,008 +$ +( 9,501,753 +) +$ +2,901,772 +$ +( 2,575,133 +) +110 +115 +$ +245,952 +$ +530.9 +2022 +$ +10,968,467 +$ +32,675,932 +$ +3,563,545 +$ +9,767,320 +168 +113 +$ +154,658 +$ +332.3 +2021 +$ +8,017,005 +$ +14,736,737 +$ +2,696,782 +$ +4,588,122 +83 +70 +$ +( 654,545 +) +$ +49.0 +2020 +$ +3,722,515 +$ +1,228,134 +$ +1,089,349 +$ +710,831 +51 +58 +$ +( 803,692 +) +$ +86.5 +(1) +The dollar amounts reported in this column represent the amount of “compensation actually paid” to our Principal Executive Officer ("PEO"), as computed in accordance with Item 402(v) of Regulation S-K and do not reflect the total compensation actually realized or received . In accordance with these rules, these amounts reflect Total compensation as set forth in the Summary Compensation Table for each year, with adjustments made to 2023 Total compensation as shown below. Adjustments for prior fiscal years are reflected in the Pay Versus Performance Section of our 2023 proxy statement. The fair value of performance unit and phantom unit awards was determined based on a Monte-Carlo simulation model that takes into account expected price movement of Patterson-UTI stock as compared to peer companies and relevant market indices, as of the relevant measurement dates. Assumptions used in the Monte-Carlo simulation model include assumptions regarding volatility, the risk-free interest rate, dividend yield, and stock beta. Due to differences in measurement dates, the assumptions used in these valuations could differ materially from the assumptions used to determine the fair value as of the grant date of such awards. +Compensation Actually Paid to PEO +2023 +Summary Compensation Table Total +$ +8,284,008 +Less, value of Stock Awards reported in Summary Compensation Table +$ +5,930,679 +Plus, year-end fair value of outstanding and unvested equity awards granted in the year +$ +5,200,272 +Plus (less), year over year change in fair value of outstanding and unvested equity awards granted in prior years +$ +( 12,534,094 +) +Plus (less), year over year change in fair value of equity awards granted in prior years that vested in the year +$ +( 4,521,260 +) +Total +$ +( 9,501,753 +) +(2) +The non-PEO Named Executive Officers for each of the covered fiscal years are Messrs. Smith, Berns, Holcomb and Wexler. +(3) +The dollar amounts reported in this column represent the average amount of “compensation actually paid” to the other Named Executive Officers, as computed in accordance with Item 402(v) of Regulation S-K and do not reflect the total compensation actually realized or received by the Named Executive Officers . In accordance with these rules, these amounts reflect average Total compensation as set forth in the Summary Compensation Table for each year, with adjustments made to average 2023 Total compensation as shown below. Adjustments for prior fiscal years are reflected in the Pay Versus Performance Section of our 2023 proxy statement. The fair value of performance unit awards was determined based on a Monte-Carlo simulation model that takes into account expected price movement of Patterson-UTI stock as compared to peer companies and relevant market indices, as of the relevant measurement dates. Assumptions used in the Monte-Carlo simulation model include assumptions regarding volatility, the risk-free interest rate, dividend yield, and stock beta. Due to differences in measurement dates, the assumptions used in these valuations could differ materially from the assumptions used to determine the fair value as of the grant date of such awards. +54 +Average Compensation Actually Paid to Other Named Executive Officers +2023 +Average Summary Compensation Table Total +$ +2,901,772 +Less, average value of Stock Awards reported in Summary Compensation Table +$ +1,819,821 +Plus, average year-end fair value of outstanding and unvested equity awards granted in the year +$ +1,595,760 +Plus (less), average year over year change in fair value of outstanding and unvested equity awards granted in prior years +$ +( 3,712,842 +) +Plus (less), average year over year change in fair value of equity awards granted in prior years that vested in the year +$ +( 1,540,002 +) +Total +$ +( 2,575,133 +) +(4) +The peer group used for the calculation of Peer Group Total Shareholder Return is the Oilfield Service Index(OSX). +(5) +The Company-Selected Measure is Operating Cash Flow , which is not defined by U.S. GAAP. Operating cash flow is defined herein as Adjusted EBITDA less cash capital expenditures (as adjusted for any Board-approved increase in capital expenditures after incentive plan performance targets were set ) and, for 2023, as further adjusted to reduce the impact of incremental Operating Cash Flow and Adjusted EBITDA realized from the contribution of the acquired NexTier and Ulterra businesses. Adjusted EBITDA is defined herein as net income (loss) plus net interest expense, income tax expense (benefit) and depreciation, depletion, amortization and impairment expense (including impairment of goodwill), excluding any M&A related or restructuring charges (and, for 2020, excluding the impact of a $9.2 million charge to reduce the carrying value of a deposit for future sand purchases). +(6) +While SEC guidance under Item 402(v) of Regulation S-K does not permit the use of multi-year relative Total Shareholder Return as a permissible Company-Selected Measure for the table above, the Company views 3-year relative Total Shareholder Return as the most important measure used to link executive “compensation actually paid” to Company performance. +Other Financial and Non-Financial Measures Used +The Company considers the following financial and non-financial measures to be the most important measures used to link executive compensation actually paid to company performance for the most recently completed fiscal year: +Most Important Measures Used to Link Executive Compensation Actually Paid to Company Performance +Absolute Total Stockholder Return +Relative Total Stockholder Return +Operating Cash Flow +Adjusted EBITDA +Health, Safety and Environmental Performance +Please see “Compensation Discussion and Analysis” elsewhere in this proxy statement for additional information regarding these measures. +Relationship Between Compensation Actually Paid and TSR, Net Income and Company-Selected Measure +The following chart(s) show a graphical relationship between Compensation Actually Paid (PEO and Average Other NEOs) to the Company’s TSR, Net Income, and Operating Cash Flow, as well as between the Company TSR and Peer Group TSR for the four-year period ended December 31, 2023: +55 +56 +Indemnification Agreements +Patterson-UTI has entered into an indemnification agreement with each of the Named Executive Officers and each of its directors containing provisions that may require Patterson-UTI, among other things, to indemnify such executive officers and directors against liabilities that may arise by reason of their status or service as executive officers or directors (subject to certain exceptions) and to advance expenses incurred as a result of any proceeding against them as to which they could be indemnified. +57 +DIRECTOR COMPENSATION +The following table sets forth information concerning compensation for the fiscal year ended December 31, 2023 with respect to the directors of Patterson-UTI who are not executive officers: +Name +Fees earned +or paid in cash +($) +Stock awards +($)(1) +Option awards +($)(2) +All other +compensation +($) +Total +($) +Leslie A. Beyer (3) +$ +28,333 +$ +— +$ +— +$ +— +$ +28,333 +Tiffany (TJ) Thom Cepak +$ +105,000 +$ +174,984 +$ +— +$ +— +$ +279,984 +Michael W. Conlon (3) +$ +67,500 +$ +174,984 +$ +— +$ +— +$ +242,484 +Robert W. Drummond (3) +$ +26,667 +$ +— +$ +— +$ +2,293,998 +(4) +$ +2,320,665 +Gary M. Halverson (3) +$ +33,333 +$ +— +$ +— +$ +— +$ +33,333 +Curtis W. Huff +$ +143,333 +$ +224,999 +$ +— +$ +— +$ +368,332 +Terry H. Hunt (3) +$ +71,250 +$ +174,984 +$ +— +$ +— +$ +246,234 +Cesar Jaime +$ +84,568 +$ +174,984 +$ +— +$ +— +$ +259,552 +Janeen S. Judah +$ +93,333 +$ +174,984 +$ +— +$ +— +$ +268,317 +Amy H. Nelson (3) +$ +31,667 +$ +— +$ +— +$ +— +$ +— +Julie Robertson +$ +91,667 +$ +174,984 +$ +— +$ +— +$ +266,651 +James C. Stewart (3) +$ +31,667 +$ +— +$ +— +$ +— +$ +31,667 +(1) +Amounts set forth represent the fair value at the date of grant as determined in accordance with FASB ASC Topic 718 with respect to restricted stock units awarded to the directors in the fiscal year ended December 31, 2023. For additional information related to the assumptions used and valuation of restricted stock units, see Note 12 to the consolidated financial statements in Patterson-UTI’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023. Mses. Cepak, Judah and Robertson and Messrs. Conlon, Hunt and Jaime received an award of 10,391 restricted stock units, and Mr. Huff received an award of 13,361 restricted stock units, on January 1, 2023 with a grant date value of $16.84 per restricted stock unit. The restricted stock units awarded on January 1, 2023 fully vested on September 1, 2023 upon consummation of the NexTier merger. +(2) +No options were issued to directors during the fiscal year ended December 31, 2023. As of December 31, 2023, Messrs. Conlon, Huff, Hunt and Stewart and Ms. Cepak held the following options to purchase shares of Common Stock: +Number of Securities Underlying +Unexercised Options (#) +Name +Exercisable +Unexercisable +Total +Tiffany (TJ) Thom Cepak +30,000 +— +30,000 +Michael W. Conlon +20,000 +— +20,000 +Curtis W. Huff +20,000 +— +20,000 +Terry H. Hunt +20,000 +— +20,000 +James C. Stewart +157,776 +— +157,776 +(3) +In connection with the NexTier merger, Messrs. Conlon and Hunt resigned from our Board on September 1, 2023, and Messrs. Drummond, Halverson and Stewart and Mses. Beyer and Nelson were each appointed to our Board effective as of such date. +(4) +Amounts reflect severance paid to Mr. Drummond in 2023. Prior to the NexTier merger, NexTier and Mr. Drummond were party to an employment agreement pursuant to which Mr. Drummond became eligible to receive severance benefits upon his qualifying termination of employment, which occurred immediately following the closing of the NexTier merger. Accordingly, Mr. Drummond entered into a Separation Agreement and General Release of Claims with NexTier, effective as of September 1, 2023, under which he received (or receives) the following: (i) a cash amount equal to three times the sum of his annual base salary plus annual target bonus, payable over 36 months (of which $825,500 was paid in 2023); (ii) a one-time cash amount of $1,464,266, equal to the sum of his target annual bonus for the year of termination, the cost of 36 months’ continuation of coverage of group health coverage, and 50% of the value of Mr. Drummond’s paid time off days for the 2023 calendar year; (iii) full vesting of all outstanding equity awards in accordance with the awards’ governing terms (at a total value of $7,428,294 for his cash-settled performance units and $44,433,713 for all other awards based on the closing price per share on the date of settlement, which is not included above); and (iv) continued payment of certain financial planning service fees. +Directors who are also employees of Patterson-UTI do not receive compensation for serving as a director or as a member of a committee of the Board of Directors. All directors are reimbursed for reasonable out-of-pocket expenses incurred in connection with serving as a member of the Board of Directors. +In December 2023, the Board of Directors approved certain changes to compensation for non-employee directors. These changes followed a director compensation peer benchmarking process, and were implemented to better align director compensation with similar peers in light of the Company’s growth during 2023. As a result of these changes, the current compensation for non-employee directors is as follows: Each non-employee director receives an annual base cash retainer of $100,000 and an award of restricted stock units on January 1 of each year with a grant date value of $175,000. The non-Executive Chairman receives an additional annual cash retainer of $70,000 and an award of additional +58 +restricted stock units with a grant date value of $70,000. At times while the Board has an Executive Chairman, the Lead Director receives an additional annual cash retainer of $20,000. Each non-employee director receives additional annual cash retainers for the committees on which he or she serves as follows: +Chair +Member +Compensation Committee +$ +20,000 +$ +10,000 +Nominating and Corporate Governance Committee +$ +15,000 +$ +7,500 +Audit Committee +$ +25,000 +$ +10,000 +Sustainability Committee +$ +15,000 +$ +7,500 +59 +CERTAIN TRANSACTIONS +Patterson-UTI has a written policy with respect to related person transactions. In accordance with this policy, related person transactions are reviewed by the chair of the Audit Committee, who has full delegated authority to approve, disapprove, ratify, amend, terminate or rescind any such transaction (if the aggregate amount involved in such transaction is $1,000,000 or less), or direct that such transaction be submitted to the Audit Committee for consideration. Any such transaction involving an aggregate amount exceeding $1,000,000 is submitted to the Audit Committee for consideration. In approving or disapproving related person transactions, the relevant facts and circumstances of the related person transaction are considered, including whether such transaction is in, or not inconsistent with, the best interest of Patterson-UTI and whether, in appropriate cases, such transaction is on commercial terms at least as favorable to Patterson-UTI as would otherwise be available to or from an unrelated third party or to Patterson-UTI’s employees generally. Related person transactions generally include transactions in an amount that exceeds $100,000 between Patterson-UTI or any of its subsidiaries and an executive officer, a director (or nominee to become director), an immediate family member of any of the foregoing or any entity in which any of the foregoing has a 10% or greater beneficial ownership interest or in which they are an executive officer, general partner, principal or engaged in a similar position. Certain related person transactions have been pre-approved under the terms of the policy, including, subject to certain exceptions and limitations, the sale to or purchase from Patterson-UTI of goods and services by entities related to directors in the ordinary course of business that are immaterial to Patterson-UTI and with respect to which the director has no direct economic interest or decision making authority, transactions with passive institutional stockholders that are in the ordinary course of both Patterson-UTI’s and such other company’s business and transactions with another publicly traded company where the related person’s interest arises solely from beneficial ownership of more than 5% of the common stock of Patterson-UTI and being a passive institutional stockholder of the other publicly traded company’s equity securities. +In connection with the acquisition by REMY Capital Partners III, L.P. (“REMY Capital”) of an ownership interest in UTI Energy Corp. in March 1995, REMY Capital succeeded to a registration rights agreement with UTI. As the successor-in-interest to UTI, Patterson-UTI assumed this registration rights agreement pursuant to which REMY Capital has the right to require Patterson-UTI to use its reasonable efforts to register shares held by REMY Capital under the Securities Act of 1933, as amended. In the event that such rights are exercised in connection with a primary offering proposed by Patterson-UTI (or a secondary offering with which Patterson-UTI agrees to participate), REMY Capital would bear its pro rata share of the costs of the offering, other than legal, accounting and printing costs, all of which Patterson-UTI would bear. In the event that REMY Capital elects to exercise such rights other than in connection with an offering in which Patterson-UTI participates, REMY Capital would bear all costs of the offering. These rights continue so long as REMY Capital continues to own the Common Stock that it acquired in March 1995. As of the date of this proxy statement, REMY Capital continues to hold 545,000 shares of such Common Stock. +Mr. Berns, Executive Vice President and Chief Commercial Officer of Patterson-UTI, is an executive of REMY Investors, which is the general partner of REMY Capital. +60 +SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT +The following table sets forth, as of March 28, 2024 (except as otherwise indicated), the stock ownership of (i) the Named Executive Officers, directors and Board nominees, individually, (ii) all directors, Board nominees and executive officers as a group and (iii) each person known by Patterson-UTI to be the beneficial owner of more than 5% of Common Stock. As of March 28, 2024, we had 403,806,999 shares of common stock outstanding. +Name of Beneficial Owner +Amount and +Nature of +Beneficial +Ownership +Percent +of Class +Beneficial Owners of more than 5% of Patterson-UTI’s Common Stock: +BlackRock, Inc. +55,520,175 +(1) +13.7 +% +The Vanguard Group +45,041,080 +(2) +11.1 +% +Blackstone +28,720,953 +(3) +7.1 +% +Directors and Named Executive Officers: +William Andrew Hendricks, Jr. +2,356,424 +(4) +* +C. Andrew Smith +427,146 +(5) +* +Kenneth N. Berns +1,235,578 +(6) +* +James M. Holcomb +318,175 +(7) +* +Seth D. Wexler +283,418 +(8) +* +Leslie A. Beyer +17,731 +(9) +* +Tiffany (TJ) Thom Cepak +137,081 +(10) +* +Robert W. Drummond +2,391,692 +(11) +* +Gary M. Halverson +130,582 +(12) +* +Curtis W. Huff +377,596 +(13) +* +Cesar Jaime +21,432 +(14) +* +Janeen S. Judah +121,665 +(15) +* +Amy H. Nelson +125,438 +(16) +* +Julie J. Robertson +21,432 +(17) +* +James C. Stewart +1,396,582 +(18) +* +All current directors and executive officers as a group (16 persons) +9,579,556 +(19) +2.3 +% +* indicates less than 1.0% +(1) +Based solely on a Schedule 13G/A filed by BlackRock, Inc. with the SEC on January 23, 2024. According to the report, BlackRock, Inc. has sole voting power with respect to 54,742,055 shares and sole dispositive power with respect to 55,520,175 shares. The address of the principal business office of BlackRock, Inc. is 50 Hudson Yards, New York, New York 10001. +(2) +Based solely on a Schedule 13G/A filed by The Vanguard Group with the SEC on February 13, 2024. According to the report, The Vanguard Group has shared voting power with respect to 278,306 shares, sole dispositive power with respect to 44,437,638 shares and shared dispositive power with respect to 603,442 shares. The address of the principal business office of The Vanguard Group is 100 Vanguard Blvd., Malvern, Pennsylvania 19355. +(3) +Based solely on a Schedule 13G/A filed by BEP Diamond Topco L.P., BEP Diamond Topco LLC, BEP Diamond Aggregator L.P., BCP VII/BEP II Holdings Manager L.L.C., Blackstone Energy Management Associates II L.L.C., Blackstone Management Associates VII L.L.C., BMA VII L.L.C., Blackstone EMA II L.L.C., Blackstone Holdings III L.P., Blackstone Holdings III GP L.P., Blackstone Holdings III GP Management L.L.C., Blackstone Inc., Blackstone Group Management L.L.C and Stephen A. Schwarzman ("Blackstone") with the SEC on February 9, 2024. According to the report, Blackstone has sole voting power with respect to 28,720,953 shares, sole dispositive power with respect to 26,618,180 shares and shared dispositive power with respect to 2,102,773 shares. The principal business address of Blackstone is 345 Park Avenue, New York, New York 10154. +(4) +Includes shares underlying stock options held by Mr. Hendricks that are presently exercisable to purchase 690,150 shares. Includes 258,767 shares underlying restricted stock units that will vest within 60 days. Does not include 220,600 shares underlying restricted stock units that will not vest within 60 days. +(5) +Includes 93,734 shares underlying restricted stock units held by Mr. Smith that will vest within 60 days. Does not include 77,267 shares underlying restricted stock units that will not vest within 60 days. +(6) +Includes shares underlying stock options held by Mr. Berns that are presently exercisable to purchase 421,800 shares. Includes 91,100 shares underlying restricted stock units that will vest within 60 days. Does not include 73,534 shares underlying restricted stock units that will not vest within 60 days. The Common Stock beneficially owned by Mr. Berns includes 34,000 shares held in trust(s) for which he is the trustee. Does not include shares of Common Stock beneficially owned by REMY Investors. Mr. Berns disclaims beneficial ownership of such shares beneficially owned by REMY Investors. +61 +(7) +Includes 59,667 shares underlying restricted stock units held by Mr. Holcomb that will vest within 60 days. Does not include 57,934 shares underlying restricted stock units that will not vest within 60 days. +(8) +Includes 65,534 shares underlying restricted stock units held by Mr. Wexler that will vest within 60 days. Does not include 57,000 shares underlying restricted stock units that will not vest within 60 days. +(9) +Does not include 16,203 shares underlying unvested restricted stock units held by Ms. Beyer that will not vest within 60 days. +(10) +Includes shares underlying presently exercisable stock options held by Ms. Cepak to purchase 30,000 shares. Does not include 16,203 shares underlying unvested restricted stock units that will not vest within 60 days. +(11) +Does not include 16,203 shares underlying unvested restricted stock units held by Mr. Drummond that will not vest within 60 days. +(12) +Does not include 16,203 shares underlying unvested restricted stock units held by Mr. Halverson that will not vest within 60 days. +(13) +Includes shares underlying presently exercisable stock options held by Mr. Huff to purchase 20,000 shares. Does not include 22,685 shares underlying unvested restricted stock units that will not vest within 60 days. +(14) +Does not include 16,203 shares underlying unvested restricted stock units held by Mr. Jaime that will not vest within 60 days. +(15) +Does not include 16,203 shares underlying unvested restricted stock units held by Ms. Judah that will not vest within 60 days. +(16) +Does not include 16,203 shares underlying unvested restricted stock units held by Ms. Nelson that will not vest within 60 days. +(17) +Does not include 16,203 shares underlying unvested restricted stock units held by Ms. Robertson that will not vest within 60 days. +(18) +Includes shares underlying presently exercisable stock options held by Mr. Stewart to purchase 23,093 shares. Does not include 16,203 shares underlying unvested restricted stock units that will not vest within 60 days. The Common Stock beneficially owned by Mr. Stewart includes 1,277,254 shares held by a limited partnership over which he exercises ownership and control. +(19) +Includes shares underlying stock options that are presently exercisable to purchase 1,185,043 shares of Common Stock. Includes 568,802 shares underlying restricted stock units held by certain directors and executive officers that will vest within 60 days. Does not include 866,229 shares underlying restricted stock units held by such individuals that will not vest within 60 days. Does not include shares of Common Stock beneficially owned by REMY Investors. +Except as stated herein, each stockholder has sole voting and investment power with respect to Common Stock included in the above table. There are no arrangements known to Patterson-UTI which may result in a change in control. The business address of each of our directors and officers is 10713 West Sam Houston Parkway North, Suite 800, Houston, Texas 77064. +62 +Equity Compensation Plan Information +The following table presents equity compensation plan information as of December 31, 2023. This information is presented without regard to the Plan Amendment for which stockholder approval is being requested under Proposal 3: +Equity Compensation Plan Information +Plan Category +Number of +Securities to +be Issued upon +Exercise of +Outstanding +Options, Warrants and Rights +Weighted - +Average +Exercise +Price of +Outstanding +Options, +Warrants and +Rights (2) +Number of Securities +Remaining Available +for Future Issuance +under Equity +Compensation Plans +(Excluding Securities +Reflected in Column(a)) +(a) +(b) +(c) +Equity compensation plans approved by security holders (1) +11,026,224 +$ +23.36 +13,910,294 +Equity compensation plans not approved by security holders +— +$ +— +— +Total +11,026,224 +$ +23.36 +13,910,294 +(1) +This plan category includes the 2021 Plan, the NexTier Plan, the Former C&J Energy Plan, and the 2014 Plan. The 2021 Plan provides for awards of incentive stock options, non-incentive stock options, tandem and freestanding stock appreciation rights, restricted stock awards, other stock unit awards, performance share awards, performance unit awards and dividend equivalents to key employees, officers and directors, which are subject to certain vesting and forfeiture provisions. All options are granted with an exercise price equal to or greater than the fair market value of the common stock at the time of grant. Amount in column (a) assumes target payout of all performance units outstanding. The vesting schedule and term are set by the Compensation Committee of the Board of Directors, except that the Board has the same power as the Compensation Committee with respect to awards to directors. Certain awards outstanding under the NexTier Plan and the Former C&J Energy Plan at the time of the NexTier merger were converted into, as applicable, options or time-vesting restricted stock units with respect to shares of Patterson-UTI common stock. Additionally, certain options remain exercisable under the 2014 Plan. All securities remaining available for future issuance under equity compensation plans approved by security holders in column (c) are available under the 2021 Plan. In addition to the 2021 Plan, this plan category also includes the NexTier Plan, the Former C&J Energy Plan, and the 2014 Plan. No future awards will be granted under the NexTier Plan, the Former C&J Energy Plan, or the 2014 Plan. All options were granted with an exercise price equal to the fair market value of the related common stock at the time of grant. +(2) +This column reflects the weighted average exercise price of options granted under the NexTier Plan, the Former C&J Energy Plan, and the 2014 Plan that were outstanding on December 31, 2023. No options have been granted under the 2021 Plan. This column excludes outstanding restricted stock units and performance units, for which no consideration is paid for the vesting of such awards into common stock. +63 +AUDIT COMMITTEE REPORT +The following report of the Audit Committee does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other Patterson-UTI filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent Patterson-UTI specifically incorporates this report by reference therein. +The Audit Committee members are Mses. Cepak (chair), Judah and Robertson, and Messrs. Halverson, Jaime and Stewart, each of whom is independent within the meaning of applicable rules under the Exchange Act and within the meaning of the Nasdaq listing standards. The Board has determined that Ms. Cepak is an “audit committee financial expert” within the meaning of applicable SEC rules. +The Audit Committee oversees management’s conduct of Patterson-UTI’s accounting and financial reporting process, including review of: (i) financial reports and other financial information provided by Patterson-UTI to the public and government/regulatory bodies, (ii) Patterson-UTI’s system of internal control over financial reporting, and (iii) the annual independent audit of Patterson-UTI’s consolidated financial statements and internal control over financial reporting. +The Audit Committee’s role is one of review, and it recognizes that Patterson-UTI’s management is responsible for preparing Patterson-UTI’s consolidated financial statements and the independent auditors are responsible for auditing those financial statements. In fulfilling its review and oversight responsibilities, the Audit Committee reviewed and discussed with management the audited financial statements included in Patterson-UTI’s Annual Report on Form 10-K for the year ended December 31, 2023, including a discussion of the quality, not just the acceptability, of the accounting principles used, the reasonableness of significant judgments made by management, and the clarity of disclosures provided in the financial statements. The Audit Committee also discussed with management the basis for their assertion that Patterson-UTI maintained effective internal control over financial reporting as of December 31, 2023. +The Audit Committee discussed with Patterson-UTI’s independent registered public accounting firm (PricewaterhouseCoopers LLP) the overall scope and plans for their integrated audit. The Audit Committee met with PricewaterhouseCoopers LLP, with and without management present, to discuss the results of their integrated audit, their evaluation of Patterson-UTI’s internal control over financial reporting and the overall quality of Patterson-UTI’s financial reporting. The Audit Committee also reviewed with PricewaterhouseCoopers LLP their judgments as to the quality, not just the acceptability, of Patterson-UTI’s accounting principles and discussed such other matters as are required by the applicable requirements of the Public Company Accounting Oversight Board and the SEC. +The Audit Committee has received and reviewed the written disclosures and the letter from PricewaterhouseCoopers LLP required by the Public Company Accounting Oversight Board regarding their independence, and their communications with the Audit Committee concerning independence, and has discussed with PricewaterhouseCoopers LLP its independence. +Taking the foregoing into consideration, the undersigned Audit Committee members recommended to the Board of Directors that the Board approve the inclusion of Patterson-UTI’s audited financial statements and management’s report on internal control over financial reporting in the Annual Report on Form 10-K for the fiscal year ended December 31, 2023. +Audit Committee of the Board of Directors: +Tiffany (TJ) Thom Cepak, Chair +Gary M. Halverson +Cesar Jaime +Janeen S. Judah +Julie J. Robertson +James C. Stewart +64 +PricewaterhouseCoopers LLP Fees for Fiscal Years 2023 and 2022 +In 2023 and 2022, Patterson-UTI and its subsidiaries incurred fees for services provided by PricewaterhouseCoopers LLP. +Description +Fees Incurred in +Fiscal Year +2023 +Fees Incurred in +Fiscal Year +2022 +Audit fees +$ +3,630,000 +$ +2,015,000 +Audit-related fees +865,000 +— +Tax fees +176,100 +246,600 +All other fees +5,400 +9,105 +Total +$ +4,676,500 +$ +2,270,705 +The Audit Committee appoints the independent registered public accounting firm. The Audit Committee or Ms. Cepak, as Chair of the Audit Committee, approves all other engagements of the independent registered public accounting firm in advance. In the event Ms. Cepak approves any such engagement, she discusses such approval with the Audit Committee at its next meeting. +“Audit fees” relate to audit services of PricewaterhouseCoopers LLP for fiscal 2023 and 2022 consisting of the integrated audit of Patterson-UTI’s consolidated financial statements and internal control over financial reporting, and quarterly reviews of Patterson-UTI’s interim financial statements and the audits of certain subsidiaries. “Audit-related fees” for 2023 relate to professional services provided in connection with the NexTier merger, Ulterra acquisition, and $400 million senior notes offering. The Audit Committee Charter includes procedures under which the Audit Committee or its delegate approves in advance all audit and non-audit services (subject to any de minimis exceptions permitted by law for non-audit services, which must, in any event, be approved annually by the Audit Committee prior to completion of the annual audit) provided by the Company's independent auditors. The Audit Committee or Ms. Cepak, as Chair of the Audit Committee, approved in advance all of the services described above. +The Audit Committee has discussed the non-audit services provided by PricewaterhouseCoopers LLP and the related fees and has considered whether those services and fees are compatible with maintaining auditor independence. The Audit Committee determined that such non-audit services were consistent with the independence of PricewaterhouseCoopers LLP. +65 +OTHER MATTERS +Other Business +As of the date of this proxy statement, management of Patterson-UTI was not aware of any matter to be presented at the Meeting other than as set forth herein. If any other matters are properly brought before the Meeting, however, the shares represented by valid proxies will be voted with respect to such matters in accordance with the judgment of the persons voting them. +Stockholder Proposals for 2024 Annual Meeting +Proposals for Inclusion in the Proxy Statement. Pursuant to Rule 14a-8 under the Exchange Act, stockholders may present proper proposals for inclusion in Patterson-UTI’s proxy statement and for consideration at the next annual meeting of stockholders by submitting their proposals to Patterson-UTI in a timely manner. In order to be included in Patterson-UTI’s proxy statement for the 2025 annual meeting of stockholders, proposals from stockholders must be received by Patterson-UTI no later than the close of business on December 12, 2024, and must otherwise comply with the requirements of Rule 14a-8. +Proposals or Director Nominations not Included in the Proxy Statement. Patterson-UTI’s bylaws establish an advance notice procedure with regard to stockholder proposals and director nominations not included in Patterson-UTI’s proxy statement. For director nominations not included in Patterson-UTI’s proxy statement or stockholder proposals to be properly brought before the 2025 annual meeting by a stockholder, the stockholder must be a stockholder of record on the date of the giving of the notice provided for in Patterson-UTI’s bylaws and on the record date for the determination of stockholders entitled to vote at such annual meeting and must give timely notice of such business in writing to the Secretary of Patterson-UTI. To be timely with respect to the 2025 annual meeting of stockholders, a stockholder’s notice must be delivered to or mailed and received by the close of business at Patterson-UTI’s principal executive offices not earlier than the close of business on February 6, 2025 and not later than the close of business on March 8, 2025, assuming the date of the 2025 annual meeting is not changed by more than 30 days before or after the anniversary date of the 2024 annual meeting. A stockholder’s notice to the Secretary of Patterson-UTI shall contain certain information specified in Patterson-UTI’s bylaws regarding the stockholder and the proposed nominee or stockholder proposal. See Article I, Section 8 of Patterson-UTI’s bylaws. In addition to giving notice pursuant to the advance notice provisions of Patterson-UTI’s bylaws, a stockholder who intends to solicit proxies in support of nominees submitted under these advance notice provisions must also provide the notice required pursuant to Rule 14a-19, the SEC’s universal proxy rule, to the Secretary of the Company regarding such intent no later than April 7, 2025. +Proxy Access Procedures. Patterson-UTI’s bylaws permit a stockholder, or group of up to 20 stockholders, owning continuously for at least three years shares of Patterson-UTI stock representing an aggregate of at least 3% of our outstanding shares, to nominate and include in our proxy materials director nominees constituting up to the greater of two or 20% of our Board, provided that the stockholder(s) and nominee(s) satisfy the requirements in Patterson-UTI’s bylaws. See Article I, Section 11 of Patterson-UTI’s bylaws. Written notice of proxy access director nominees must be received by the close of business at Patterson-UTI’s principal executive offices not earlier than December 12, 2024 and not later than January 11, 2025, assuming the date of the 2025 annual meeting is not changed by more than 30 days before or after the anniversary date of the 2024 annual meeting. +66 +Annual Report +A copy of Patterson-UTI’s annual report on Form 10-K accompanies this proxy statement only if you have requested that a copy of this proxy statement be mailed to you. The annual report on Form 10-K also is available electronically by following the instructions in the Notice. The annual report on Form 10-K is not incorporated into this proxy statement and is not considered proxy-soliciting material. +A copy of the annual report on Form 10-K, including the financial statements and financial statement schedules, but excluding exhibits, may be obtained by stockholders without charge by written request to the Secretary of Patterson-UTI at 10713 West Sam Houston Parkway North, Suite 800, Houston, Texas 77064 or by accessing it on Patterson-UTI’s website at www.patenergy.com in the investors section under the “Financial Information” link. Patterson-UTI will furnish the exhibits to Form 10-K upon request and upon receipt of a reproduction fee. +Delivery of Documents to Stockholders Sharing an Address +The SEC’s rules allow companies to send a single Notice or single copy of annual reports, proxy statements, prospectuses and other disclosure documents to two or more stockholders sharing the same address, subject to certain conditions. These rules are intended to provide greater convenience for stockholders, and cost savings for companies, by reducing the number of duplicate documents that stockholders receive. Unless different instructions were previously provided to Patterson-UTI, if two or more stockholders share a mailing address, such stockholders were deemed to have consented to receiving only one copy, and a single copy of this proxy statement and Patterson-UTI's annual report on Form 10-K (and/or a single copy of the Notice) has been sent to their address. If instructions for separate delivery have been received from any stockholder, Patterson-UTI will deliver promptly separate copies of the relevant disclosure materials. Similarly, if multiple copies of disclosure materials are being delivered to a single address, stockholders can request a single copy for future deliveries. Written requests should be submitted to the Secretary of Patterson-UTI at 10713 West Sam Houston Parkway North, Suite 800, Houston, Texas 77064. Requests may also be made by calling Investor Relations at (281) 765-7100. +67 +ANNEX A +PATTERSON-UTI ENERGY, INC. +2021 LONG-TERM INCENTIVE PLAN +(as amended through September 1, 2023 and proposed to be amended by the Plan Amendment) +Patterson-UTI Energy, Inc. (the “Company”), a Delaware corporation, hereby establishes and adopts the following 2021 Long-Term Incentive Plan (as amended from time to time, the “Plan”) effective as of April 9, 2021 (the “Effective Date”), as amended effective June 8, 2023, September 1, 2023, and June 6, 2024. +1. PURPOSE OF THE PLAN +The purpose of the Plan is to assist the Company and its Subsidiaries in attracting and retaining selected individuals to serve as directors, employees, consultants and/or advisors of the Company who are expected to contribute to the Company’s success and to achieve long-term objectives which will inure to the benefit of all stockholders of the Company through the additional incentives inherent in the Awards hereunder. +2. DEFINITIONS +2.1 “Award” shall mean any Option, Stock Appreciation Right, Restricted Stock Award, Performance Award, Performance Unit, Other Stock Unit Award or any other right, interest or option relating to Shares or other property (including cash) granted pursuant to the provisions of the Plan. +2.2 “ Award Agreement ” shall mean any agreement, contract or other instrument or document evidencing any Award granted by the Committee hereunder, which shall be in written or electronic form, as designated by the Committee. +2.3 “ Board ” shall mean the board of directors of the Company. +2.4 “ Change of Control ” shall mean, except as otherwise provided in an Award Agreement, the occurrence of any of the following: +(a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended) (a “ Covered Person ”) of beneficial ownership (within the meaning of rule 13d-3 promulgated under the Exchange Act) of 35% or more of either (i) the then outstanding shares of the common stock of the Company (the “ Outstanding Company Common Stock ”), or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “ Outstanding Company Voting Securities ”); provided, however, that for purposes of this Section 2.4(a) , the following acquisitions shall not constitute a Change of Control: (A) any acquisition directly from the Company, (B) any acquisition by the Company, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any entity controlled by the Company, or (D) any acquisition by any entity pursuant to a transaction which complies with clauses (A), (B) and (C) of Section 2.4(c) ; or +(b) Individuals who, as of the Effective Date, constitute the Board (the “ Incumbent Board ”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the Effective Date whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Covered Person other than the Board; or +(c) Consummation of (i) a reorganization, merger or consolidation or sale of the Company or any subsidiary of the Company, or (ii) a disposition of all or substantially all of the assets of the Company (a “ Business Combination ”), in each case, unless, immediately following such Business Combination: (A) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, direct or indirectly, more than 65% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be; (B) no Covered Person (excluding any employee benefit plan (or related trust) of the Company or such +68 +corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 35% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation, except to the extent that such ownership existed prior to the Business Combination; and (C) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or, if earlier, of the action of the Board, providing for such Business Combination. +2.5 “ Code ” shall mean the Internal Revenue Code of 1986, as amended from time to time. +2.6 “ Committee ” shall mean the Compensation Committee of the Board, consisting of no fewer than two Directors, each of whom is (a) a “Non-Employee Director” within the meaning of Rule 16b-3 of the Exchange Act and (b) an “independent director” for purpose of the rules and regulations of the Nasdaq Stock Market. +2.7 “ Director ” shall mean a non-employee member of the Board. +2.8 “ Disability ” shall, except as otherwise provided in an Award Agreement, exist (a) if the Participant qualifies for long-term disability benefits under a long-term disability program sponsored by the Company in which employees participate generally or (b) if the Company does not sponsor such a long-term disability program, if the Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months. +2.9 “ Employee ” shall mean any employee of the Company or any Subsidiary and any prospective employee conditioned upon, and effective not earlier than, such person’s becoming an employee of the Company or any Subsidiary. Solely for purposes of the Plan, an Employee shall also mean any consultant or advisor who provides services to the Company or any Subsidiary, so long as such person (a) renders bona fide services that are not in connection with the offer and sale of the Company’s securities in a capital raising transaction and (b) does not directly or indirectly promote or maintain a market for the Company’s securities. +2.10 “ Exchange Act ” shall mean the Securities Exchange Act of 1934, as amended. +2.11 “ Fair Market Value ” shall mean, with respect to any property other than Shares, the market value of such property determined by such methods or procedures as shall be established from time to time by the Committee. The Fair Market Value of Shares as of any date shall be the per Share closing price of the Shares as reported on the Nasdaq Stock Market on that date (or if there were no reported prices on such date, on the last preceding date on which the prices were reported) or, if the Company is not then listed on the Nasdaq Stock Market, on the principal national securities exchange on which the Company is listed, and if the Company is not then listed on the Nasdaq Stock Market or any national securities exchange, the Fair Market Value of Shares shall be determined by the Committee in its sole discretion using appropriate criteria. +2.12 “ Incentive Stock Option ” shall mean an Option intended to qualify as an “incentive stock option” as defined in Section 422 of the Code. +2.13 “ Option ” shall mean any right granted to a Participant under the Plan allowing such Participant to purchase Shares at such price or prices and during such period or periods as the Committee shall determine. +2.14 “ Participant ” shall mean an Employee or Director who is selected by the Committee to receive an Award under the Plan. +2.15 “ Performance Award ” shall mean any Award of Performance Shares or Performance Units granted pursuant to Article 9 . +2.16 “ Performance Period ” shall mean that period established by the Committee at the time any Performance Award is granted or at any time thereafter during which any performance goals specified by the Committee with respect to such Award are to be measured. +2.17 “ Performance Share ” shall mean any grant pursuant to Section 9 of a unit valued by reference to a designated number of Shares, which value may be paid to the Participant by delivery of such property as the Committee shall determine, including cash, Shares, other property, or any combination thereof, upon achievement of such performance goals during the Performance Period as the Committee shall establish at the time of such grant or thereafter. +2.18 “ Performance Unit ” shall mean any grant pursuant to Section 9 of a unit valued by reference to a designated amount of property (including cash) other than Shares, which value may be paid to the Participant by delivery of such property as the Committee shall determine, including cash, Shares, other property, or any combination thereof, upon achievement of such performance goals during the Performance Period as the Committee shall establish at the time of such grant or thereafter. +69 +2.19 “ Prior Plans ” shall mean, collectively, the Company’s 2005 Long-Term Incentive Plan, as amended, and the Company’s Amended and Restated 2014 Long-Term Incentive Plan, as amended. +2.20 “ Restricted Stock ” shall mean any Share issued with the restriction that the holder may not sell, transfer, pledge or assign such Share and with such other restrictions as the Committee, in its sole discretion, may impose (including any restriction on the right to vote such Share and the right to receive any dividends), which restrictions may lapse separately or in combination at such time or times, in installments or otherwise, as the Committee may deem appropriate in its sole discretion. +2.21 “ Shares ” shall mean the shares of common stock of the Company, par value $.01 per share. +2.22 “ Stock Appreciation Right ” shall mean the right granted to a Participant pursuant to Section 6 . +2.23 “ Subsidiary ” shall mean any corporation or other entity, whether domestic or foreign, in which the Company has or obtains, directly or indirectly, a proprietary interest of more than 50% by reason of stock ownership or otherwise. +2.24 “ Substitute Awards ” shall mean Awards granted or Shares issued by the Company in assumption of, or in substitution or exchange for, awards previously granted, or the right or obligation to make future awards, by a company acquired by the Company or any Subsidiary or with which the Company or any Subsidiary combines. +3. SHARES SUBJECT TO THE PLAN +3.1 Number of Shares . +(a) Subject to adjustment as provided in Section 11.2 and this Section 3.1, the total number of Shares authorized for grant under the Plan shall be the sum of (i) 34,045,000 14,045,000 Shares, plus (ii) the total number of Shares remaining available for grant under the Prior Plans as of the Effective Date , plus (iii) 10,050,932 Shares (such Shares under prong (iii), the “NexTier Shares”) . Any Shares that are subject to Awards of Options or Stock Appreciation Rights shall be counted against this limit as one Share for every one Share granted. Any Shares that are subject to Awards other than Options or Stock Appreciation Rights shall be counted against this limit as two Shares for every one Share awarded. No further awards will be granted under any Prior Plans. Notwithstanding anything to the contrary contained herein, the NexTier Shares (i) may only be subject to Awards granted on or prior to January 3, 2027 and (ii) may only be subject to Awards granted to Employees and Directors who were not employees, directors, consultants or advisors of the Company or any of its subsidiaries as of immediately prior to September 1, 2023. +(b) If any Shares subject to an Award or to an award under the Prior Plans are forfeited, expire or otherwise terminate without issuance of such Shares, or any Award or award under the Prior Plans is settled for cash or otherwise does not result in the issuance of all or a portion of the Shares subject to such Award, the Shares shall, to the extent of such forfeiture, expiration, termination, cash settlement or non-issuance, again be (or become with respect to Shares subject to awards under the Prior Plans) available for grant subject to Awards under the Plan, subject to Section 3.1(d) below. Notwithstanding the foregoing, the following Shares shall not become available for grant under the Plan: (i) Shares subject to an Option or Stock Appreciation Right or to a stock option or stock appreciation right under the Prior Plans that are used to satisfy the exercise price of stock options , or are not issued upon the stock-settlement of a stock appreciation right, or (ii) Shares are withheld by the Company for income or employment taxes on exercise of an option or stock appreciation right any Award granted under the Plan or (iii) Shares repurchased on the open market with the proceeds of the option exercise price. +(c) Substitute Awards shall not reduce the Shares authorized for grant under the Plan. Additionally, in the event that a company acquired by the Company or any Subsidiary or with which the Company or any Subsidiary combines has shares available under a pre-existing plan approved by shareholders and not adopted in contemplation of such acquisition or combination, the shares available for grant pursuant to the terms of such pre-existing plan (as adjusted, to the extent appropriate, using the exchange ratio or other adjustment or valuation ratio or formula used in such acquisition or combination to determine the consideration payable to the holders of common stock of the entities party to such acquisition or combination) may be used for Awards under the Plan and shall not reduce the Shares authorized for grant under the Plan; provided that Awards using such available shares shall only be made (i) until the last date that awards or grants could have been made under the terms of the pre-existing plan, absent the acquisition or combination, and (ii) to individuals who were not Employees or Directors prior to such acquisition or combination. +(d) Any Shares that become available for grant pursuant to Section 3.1(b) shall be added to the share reserve set forth in Section 3.1(a): (i) as one Share if such Shares were subject to options or stock appreciation rights granted under the Plan or Prior Plans or (ii) as two Shares if such Shares were subject to awards other than options or stock appreciation rights that were granted under the Plan or the Prior Plans. +70 +3.2 Character of Shares . Any Shares issued hereunder may consist, in whole or in part, of authorized and unissued shares, treasury shares or shares purchased in the open market or otherwise. +3.3 Minimum Vesting for Awards . Notwithstanding any other provision of the Plan to the contrary, Awards granted under the Plan (other than cash-based awards) shall vest no earlier than the first anniversary of the date on which the Award is granted; provided, however, that the following Awards shall not be subject to the foregoing minimum vesting requirement: (i) Substitute Awards, (ii) Shares delivered in lieu of fully-vested cash obligations, (iii) Awards to non-employee Directors that vest on the earlier of the one-year anniversary of the date of grant and the next annual meeting of stockholders which is at least 50 weeks after the immediately preceding year’s annual meeting, and (iv) any additional Awards the Committee may grant, up to a maximum of 5% of the available share reserve authorized for issuance under the Plan pursuant to Section 3.1 (subject to adjustment under Section 11.2 ); provided, further, that the foregoing restriction does not apply to the Committee’s discretion to provide for accelerated exercisability or vesting of any Award, including in cases of retirement, death, Disability or a Change in Control, in the terms of the Award Agreement or otherwise. +3.4 Limits on Non-Employee Director Compensation . The aggregate dollar value of equity-based Awards (based on the grant date fair value of such Awards for financial reporting purposes) and cash compensation granted under the Plan or otherwise during any fiscal year to any non-employee director for services provided as a director shall not exceed $750,000; provided, however, that in the fiscal year in which a non-employee director first joins the Board or during any fiscal year in which a non-employee director is designated as Chairman of the Board or Lead Director, the maximum aggregate dollar value of equity-based and cash compensation granted to the non-employee director for services provided as a director may be up to $1,000,000. +4. ELIGIBILITY AND ADMINISTRATION +4.1 Eligibility. Any Employee or Director shall be eligible to be selected as a Participant. +4.2 Administration. +(a) The Plan shall be administered by the Committee. The Committee shall have full power and authority, subject to the provisions of the Plan and subject to such orders or resolutions not inconsistent with the provisions of the Plan as may from time to time be adopted by the Board, to, in its sole discretion: (i) select the Employees and Directors to whom Awards may from time to time be granted hereunder; (ii) determine the type or types of Awards, not inconsistent with the provisions of the Plan, to be granted to each Participant hereunder; (iii) determine the number of Shares to be covered by each Award granted hereunder; (iv) determine the terms and conditions, not inconsistent with the provisions of the Plan, of any Award granted hereunder; (v) determine whether, to what extent and under what circumstances Awards may be settled in cash, Shares or other property, subject to Section 8.1 ; (vi) determine whether, to what extent, and under what circumstances cash, Shares, other property and other amounts payable with respect to an Award made under the Plan shall be (A) deferred either automatically or at the election of the Participant or (B) accelerated; (vii) determine whether, to what extent and under what circumstances any Award shall be canceled or suspended; (viii) interpret and administer the Plan and any instrument or agreement entered into under or in connection with the Plan, including any Award Agreement; (ix) correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award in the manner and to the extent that the Committee shall deem desirable to carry it into effect; (x) establish such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of the Plan; (xi) determine whether any Award (other than Options or Stock Appreciation Rights) will have Dividend Equivalents; and (xii) make any other determination and take any other action that the Committee deems necessary or desirable for administration of the Plan. Notwithstanding the foregoing, the Board shall have the same powers as the Committee with respect to Awards to Directors. +(b) Decisions of the Committee shall be final, conclusive and binding on all persons or entities, including the Company, any Participant, and any Subsidiary. A majority of the members of the Committee may determine its actions and fix the time and place of its meetings. +(c) To the extent not inconsistent with applicable law or the rules and regulations of the Nasdaq Stock Market (or any other principal national securities exchange on which the Company is then listed), the Committee may delegate to a committee of one or more directors of the Company or, to the extent permitted by law, to one or more executive officers or a committee of executive officers the right to grant Awards to Employees who are not Directors or executive officers of the Company and the authority to take action on behalf of the Committee pursuant to the Plan to cancel or suspend Awards to Employees who are not Directors or executive officers of the Company; provided, however, (i) the resolution providing such authorization sets forth the total number of Shares subject to such Awards that such officer(s) may grant; and (ii) the officer(s) shall report periodically to the Committee regarding the nature and scope of the Awards granted pursuant to the authority delegated. +71 +5. OPTIONS +5.1 Grant of Options . Options may be granted hereunder to Participants either alone or in addition to other Awards granted under the Plan; provided that Incentive Stock Options may be granted only to eligible Employees of the Company or of any parent or subsidiary corporation (as permitted by Section 422 of the Code and the regulations thereunder). Any Option shall be subject to the terms and conditions of this Article 5 and to such additional terms and conditions, not inconsistent with the provisions of the Plan, as the Committee shall determine in its sole discretion. +5.2 Award Agreements . All Options granted pursuant to this Article 5 shall be evidenced by an Award Agreement in such form and containing such terms and conditions as the Committee shall determine which are not inconsistent with the provisions of the Plan. The terms of Options need not be the same with respect to each Participant. Granting of an Option pursuant to the Plan shall impose no obligation on the recipient to exercise such Option. Any individual who is granted an Option pursuant to this Article 5 may hold more than one Option granted pursuant to the Plan at the same time. The Award Agreement also shall specify whether the Option is intended to qualify as an Incentive Stock Option. +5.3 Option Price. Other than in connection with Substitute Awards or an adjustment in connection with Section 11.2 , the option price per each Share purchasable under any Option granted pursuant to this Article 5 shall not be less than 100% of the Fair Market Value of such Share on the date of grant of such Option. +5.4 Option Term. The term of each Option shall be fixed by the Committee in its sole discretion; provided that no Option shall be exercisable after the expiration of ten years from the date the Option is granted other than as a result of any extension of the term in compliance with applicable law as provided in an Award Agreement. +5.5 Exercise of Options. Vested Options granted under the Plan shall be exercised by the Participant or by a Permitted Assignee thereof (or by the Participant’s executors, administrators, guardian or legal representative, as may be provided in an Award Agreement) as to all or part of the Shares covered thereby, by the giving of written notice of exercise to the Company or its designated agent, specifying the number of Shares to be purchased, accompanied by payment of the full purchase price for the Shares being purchased. Unless otherwise provided in an Award Agreement, full payment of such purchase price shall be made at the time of exercise and shall be made (a) in cash or cash equivalents (including certified check or bank check or wire transfer of immediately available funds), (b) by tendering previously acquired Shares (either actually or by attestation, valued at their then Fair Market Value) that have been owned for a period of at least six months (or such other period to avoid accounting charges against the Company’s earnings), (c) with the consent of the Committee, by delivery of other consideration (including, where permitted by law and the Committee, other Awards) having a Fair Market Value on the exercise date equal to the total purchase price, (d) with the consent of the Committee, by withholding Shares otherwise issuable in connection with the exercise of the Option, (e) through any other method specified in an Award Agreement, or (f) any combination of any of the foregoing. The notice of exercise, accompanied by such payment, shall be delivered to the Company at its principal business office or such other office as the Committee may from time to time direct, and shall be in such form, containing such further provisions consistent with the provisions of the Plan, as the Committee may from time to time prescribe. In no event may any Option granted hereunder be exercised for a fraction of a Share. No adjustment shall be made for cash dividends or other rights for which the record date is prior to the date of such issuance. +5.6 Vesting. Subject to Section 3.3 , the vesting schedule shall be set forth in the Award Agreement. +5.7 Incentive Stock Options. The Committee may grant Options intended to qualify as Incentive Stock Options to any employee of the Company or any subsidiary corporation (as defined in Section 424 of the Code), subject to the requirements of Section 422 of the Code. Notwithstanding anything in Section 3.1 to the contrary and solely for the purposes of determining whether Shares are available for the grant of Incentive Stock Options under the Plan, the maximum aggregate number of Shares with respect to which Incentive Stock Options may be granted under the Plan shall be the number of Shares authorized for grant under Section 3.1 . +5.8 Form of Settlement. In its sole discretion, the Committee may provide, at the time of grant, that the Shares to be issued upon an Option’s exercise shall be in the form of Restricted Stock or other similar securities, or if provided for in the Award Agreement, may reserve the right to provide so after the time of grant. +5.9 No Repricing. Notwithstanding anything in the Plan to the contrary, except in connection with a corporate transaction involving the Company (including, without limitation, any stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination, or exchange of shares), the terms of outstanding Awards may not be amended without stockholder approval to (a) reduce the option price of outstanding Options, (b) cancel outstanding Options in exchange for cash, other awards or Options with an option price that is less than the option price of the original Options, (c) take any other action with respect to an Option that would be treated as a repricing under the rules and regulations of the principal national securities exchange on which they are listed or (d) permit the grant +72 +of any Options that contains a so-called “reload” feature under which additional Options or other Awards are granted automatically to the Participant upon exercise of the original Option. +6. STOCK APPRECIATION RIGHTS +6.1 Grant and Exercise . The Committee may provide Stock Appreciation Rights (a) in conjunction with all or part of any Option granted under the Plan (“ Tandem Stock Appreciation Right ”), (b) in conjunction with all or part of any Award (other than an Option) granted under the Plan, or (c) without regard to any Option or other Award (a “ Freestanding Stock Appreciation Right ”), in each case, upon such terms and conditions as the Committee may establish in its sole discretion. +6.2 Terms and Conditions . Stock Appreciation Rights shall be subject to such terms and conditions, not inconsistent with the provisions of the Plan, as shall be determined from time to time by the Committee, including the following: +(a) Except in the case of Substitute Awards or in connection with an adjustment provided in Section 11.2 , the grant price of a Stock Appreciation Right shall not be less than the Fair Market Value of one Share on such date of grant of the right. Upon the exercise of a Stock Appreciation Right, the holder shall have the right to receive the excess of (i) the Fair Market Value of one Share on the date of exercise over (ii) the grant price of the right on the date of grant. +(b) Upon the exercise of a Stock Appreciation Right, payment shall be made in the sole discretion of the Committee in (i) whole Shares, (ii) cash or (iii) a combination of (i) or (ii). +(c) Any Tandem Stock Appreciation Right shall be granted at the same time as the related Option is granted. +(d) Any Tandem Stock Appreciation Right related to an Option may be exercised only when the related Option would be exercisable and the Fair Market Value of the Shares subject to the related Option exceeds the option price at which Shares can be acquired pursuant to the Option. In addition, (i) if a Tandem Stock Appreciation Right exists with respect to less than the full number of Shares covered by a related Option, then an exercise or termination of such Option shall not reduce the number of Shares to which the Tandem Stock Appreciation Right applies until the number of Shares then exercisable under such Option equals the number of Shares to which the Tandem Stock Appreciation Right applies, and (ii) no Tandem Stock Appreciation Right granted under the Plan to a person then subject to Section 16 of the Exchange Act shall be exercised during the first six months of its term for cash, except as provided in Article 10 . +(e) Any Option related to a Tandem Stock Appreciation Right shall no longer be exercisable to the extent the Tandem Stock Appreciation Right has been exercised. +(f) The provisions of Stock Appreciation Rights need not be the same with respect to each recipient. +(g) Subject to Section 11.2 , a Freestanding Stock Appreciation Right shall have the same terms and conditions as Options, including (i) an exercise price not less than Fair Market Value on the date of grant and (ii) a term not greater than ten years other than as a result of any extension of the term in compliance with applicable law as provided in an Award Agreement. Subject to Section 3.3 , the vesting schedule shall be set forth in the Award Agreement. +(h) The Committee may impose such terms and conditions on Stock Appreciation Rights granted in conjunction with any Award (other than an Option) as the Committee shall determine in its sole discretion. +6.3 No Repricing . Notwithstanding anything in the Plan to the contrary, except in connection with a corporate transaction involving the Company (including, without limitation, any stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination, or exchange of shares), the terms of outstanding awards may not be amended without stockholder approval to (a) reduce the exercise price of outstanding Stock Appreciation Rights, (b) cancel outstanding Stock Appreciation Rights in exchange for cash, other awards or Stock Appreciation Rights with an exercise price that is less than the exercise price of the original Stock Appreciation Rights, (c) take any other action with respect to the Stock Appreciation Rights that would be treated as a repricing under the rules and regulations of the principal national securities exchange on which they are listed, or (d) permit the grant of any Stock Appreciation Rights that contains a so-called “reload” feature under which additional Stock Appreciation Rights or other Awards are granted automatically to the Participant upon exercise of the original Stock Appreciation Rights. +73 +7. RESTRICTED STOCK AWARDS +7.1 Grants . Awards of Restricted Stock may be issued hereunder to Participants either alone or in addition to other Awards granted under the Plan (a “ Restricted Stock Award ”), and such Restricted Stock Awards shall also be available as a form of payment of Performance Awards and other earned cash-based incentive compensation. A Restricted Stock Award shall be subject to restrictions imposed by the Committee covering a period of time specified by the Committee (the “ Restriction Period ”). The Committee has sole discretion to determine whether any consideration (other than services) is to be received by the Company or any Subsidiary as a condition precedent to the issuance of Restricted Stock. +7.2 Award Agreements . The terms of any Restricted Stock Award granted under the Plan shall be set forth in an Award Agreement which shall contain provisions determined by the Committee and not inconsistent with the Plan. The terms of Restricted Stock Awards need not be the same with respect to each Participant. +7.3 Rights of Holders of Restricted Stock . Beginning on the date of grant of the Restricted Stock Award and subject to execution of the Award Agreement, the Participant shall become a shareholder of the Company with respect to all Shares subject to the Award Agreement and shall have all of the rights of a shareholder, including the right to vote such Shares and the right to receive distributions made with respect to such Shares unless otherwise provided in such Award Agreement; provided, however, that any Shares, any other property, or cash distributed as a dividend or otherwise with respect to any Restricted Stock as to which the restrictions have not yet lapsed shall be subject to the same restrictions as such Restricted Stock. +7.4 Vesting . Subject to Section 3.3 , the vesting schedule shall be set forth in the Award Agreement. +7.5 Section 83(b) Election . The Committee may provide in an Award Agreement that the Award of Restricted Stock is conditioned upon the Participant making or refraining from making an election with respect to the Award under Section 83(b) of the Code. If a Participant makes an election pursuant to Section 83(b) of the Code concerning a Restricted Stock Award, the Participant shall be required to file promptly a copy of such election with the Company. +8. OTHER STOCK UNIT AWARDS +8.1 Grants . Other Awards of units having a value equal to an identical number of Shares (“ Other Stock Unit Awards ”) may be granted hereunder to Participants, in addition to other Awards granted under the Plan. Other Stock Unit Awards shall also be available as a form of payment of other Awards granted under the Plan and other earned cash-based incentive compensation. +8.2 Award Agreements . The terms of Other Stock Unit Award granted under the Plan shall be set forth in an Award Agreement which shall contain provisions determined by the Committee and not inconsistent with the Plan. The terms of such Awards need not be the same with respect to each Participant. +8.3 Vesting . Subject to Section 3.3 , the vesting schedule shall be set forth in the Award Agreement. +8.4 Payment . Except as provided in Article 10 or as maybe provided in an Award Agreement, Other Stock Unit Awards may be paid in cash, Shares, other property, or any combination thereof, in the sole discretion of the Committee at the time of payment. Other Stock Unit Awards may be paid in a lump sum or in installments following the lapse of the restrictions applicable to such Awards, but, unless expressly provided in an Award Agreement, no later than two and one-half months following the end of the calendar year in which such restrictions lapse, or in accordance with procedures established by the Committee, on a deferred basis subject to the requirements of Section 409A of the Code. +9. PERFORMANCE AWARDS +9.1 Grants . Performance Awards in the form of Performance Shares or Performance Units, as determined by the Committee in its sole discretion, may be granted hereunder to Participants, for no consideration or for such minimum consideration as may be required by applicable law, either alone or in addition to other Awards granted under the Plan. The performance goals to be achieved for each Performance Period shall be conclusively determined by the Committee. +9.2 Award Agreements . The terms of any Performance Award granted under the Plan shall be set forth in an Award Agreement which shall contain provisions determined by the Committee and not inconsistent with the Plan, including whether such Awards shall have Dividend Equivalents. The terms of Performance Awards need not be the same with respect to each Participant. +9.3 Terms and Conditions . The performance criteria to be achieved during any Performance Period and the length of the Performance Period shall be determined by the Committee upon the grant of each Performance Award. Performance Awards shall be subject to the vesting requirements as set forth in Section 3.3 . The amount of the Award to be distributed shall be conclusively determined by the Committee. +74 +9.4 Payment. Except as provided in Article 10 or as may be provided in an Award Agreement, Performance Awards will be distributed only after the end of the relevant Performance Period. Performance Awards may be paid in cash, Shares, or any combination thereof, in the sole discretion of the Committee at the time of payment. Performance Awards may be paid in a lump sum or in installments, but, unless expressly provided in an Award Agreement, no later than two and one-half months following the close of the calendar year that contains the end of the Performance Period or, in accordance with procedures established by the Committee, on a deferred basis subject to the requirements of Section 409A of the Code. +9.5 Performance Award Dividend Equivalents . Subject to the provisions of the Plan and any Award Agreement, the Committee in its sole discretion may award currently or on a deferred basis, Dividend Equivalents with respect to the number of Shares covered by a Performance Unit or Performance Share Award, provided, that such Dividend Equivalents (if any) shall be deemed to have been reinvested in additional Performance Shares or Performance Units and shall provide that such Dividend Equivalents are subject to the same vesting conditions as the underlying Award. +10. CHANGE OF CONTROL PROVISIONS +Upon the occurrence of a Change of Control, unless otherwise specifically set forth in an Award Agreement or other agreement applicable to any Award, the Committee may effect one or more of the following alternatives, which may vary among individual holders and which may vary among Awards held by any individual holder: +(a) Awards outstanding as of the date of the Change of Control immediately vest and become free of all restrictions and limitations and, to the extent applicable, become fully exercisable and/or immediately settled or distributed; +(b) Options and Stock Appreciation Rights outstanding shall terminate within a specified number of days after notice to the Participant; +(c) Participants shall receive, with respect to each Share subject to an Award (or vested portion thereof), an amount equal to the excess, if any, of the Fair Market Value of such Share immediately prior to the occurrence of such Change of Control over the exercise price per share, if applicable, of such Award, such amount to be payable in cash, in one or more kinds of stock or property (including the stock or property, if any, payable in the transaction) or in a combination thereof, as the Committee, in its sole discretion, shall determine; +(d) Options and Stock Appreciation Rights outstanding as of the date of the Change of Control may be cancelled and terminated without payment therefor if the Fair Market Value of one Share as of the date of the Change of Control is less than the per Share Option exercise price or Stock Appreciation Right grant price; or +(e) such other adjustments or benefits as the Committee deems appropriate in its sole discretion shall apply (including the substitution, assumption or continuation of Awards by the successor company or a parent or subsidiary thereof); +in each case, (i) to the extent permitted under Section 409A of the Code and (ii) subject to any terms and conditions contained in the Award Agreement evidencing such Award or other agreement applicable to such Award. +11. GENERALLY APPLICABLE PROVISIONS +11.1 Amendment and Termination of the Plan . The Board may, from time to time, alter, amend, suspend or terminate the Plan as it shall deem advisable in its sole discretion, subject to any requirement for stockholder approval imposed by applicable law, including the rules and regulations of the Nasdaq Stock Market (or any other principal national securities exchange on which the Company is listed) provided that the Board may not amend the Plan in any manner that would result in noncompliance with Rule 16b-3 of the Exchange Act; and further provided that the Board may not, without the approval of the Company’s stockholders, amend the Plan to (a) increase the number of Shares that may be the subject of Awards under the Plan (except for adjustments pursuant to Section 11.2 ), (b) expand the types of awards available under the Plan, (c) materially expand the class of persons eligible to participate in the Plan, (d) amend any provision of Section 5.9 , (e) increase the maximum permissible term of any Option specified by Section 5.4 or any Stock Appreciation Right specified by Section 6.2(g) , or (f) amend any provision of Section 6.3 . In addition, no amendments to, or termination of, the Plan shall in any way materially impair the rights of a Participant under any Award previously granted without such Participant’s consent. +75 +11.2 Adjustments . In the event of any merger, reorganization, consolidation, recapitalization, dividend or distribution (whether in cash, shares or other property, other than a regular cash dividend), stock split, reverse stock split, spin-off, joint venture, subsidiary or division sale or similar transaction or other change in corporate structure affecting the Shares or the value thereof, such adjustments and other substitutions shall be made to the Plan and to Awards as the Committee, in its sole discretion, deems equitable or appropriate, including such adjustments (a) in the aggregate number, class and kind of securities that may be delivered under the Plan, in the aggregate or to any one Participant, (b) in the number, class, kind and option or exercise price of securities subject to outstanding Awards granted under the Plan (including, if the Committee deems appropriate, the substitution of similar options to purchase the shares of, or other awards denominated in the shares of, another company) and (c) to the terms and conditions of any outstanding Awards (including any applicable performance targets or criteria with respect thereto), in each case, as the Committee may determine to be appropriate in its sole discretion; provided, however, that the number of Shares subject to any Award shall always be a whole number. No adjustment or substitution pursuant to this Section 11.2 shall be made in a manner that results in noncompliance with the requirements of Section 409A of the Code, to the extent applicable. +11.3 Transferability of Awards . Except as provided below, no Award and no Shares subject to Other Stock Unit Awards or Performance Units that have not been issued or as to which any applicable restriction, performance or deferral period has not lapsed, may be sold, assigned, transferred, pledged or otherwise encumbered, other than by will or the laws of descent and distribution or pursuant to a domestic relations order, as determined by the Committee, and such Award may be exercised during the life of the Participant only by the Participant or the Participant’s guardian or legal representative. Notwithstanding the foregoing, a Participant may assign or transfer an Award with the consent of the Committee (a) for charitable donations; (b) to the Participant’s spouse, children or grandchildren (including any adopted and stepchildren and grandchildren), or (c) a trust for the benefit of one or more of the Participants or the persons referred to in clause (b) (each transferee thereof, a “ Permitted Assignee ”); provided that such Permitted Assignee shall be bound by and subject to all of the terms and conditions of the Plan and the Award Agreement relating to the transferred Award and shall execute an agreement satisfactory to the Company evidencing such obligations; and provided further that such Participant shall remain bound by the terms and conditions of the Plan. The Company shall cooperate with any Permitted Assignee and the Company’s transfer agent in effectuating any transfer permitted under this Section 11.3 . Notwithstanding the foregoing, no Incentive Stock Option granted under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, all Incentive Stock Options granted to a Participant under the Plan shall be exercisable during his or her lifetime only by such Participant. For the avoidance of doubt, in no event may an Award (excluding any fully vested and unrestricted Shares received pursuant to an Award) be transferred by a Participant to a third party for monetary value. +11.4 Termination of Employment . The Committee shall determine and set forth in each Award Agreement whether any Awards granted in such Award Agreement will continue to be exercisable, and the terms of such exercise, on and after the date that a Participant ceases to be employed by or to provide services to the Company or any Subsidiary (including as a Director), whether by reason of death, Disability, voluntary or involuntary termination of employment or services, or otherwise. The date of termination of a Participant’s employment or services will be determined by the Committee, which determination will be final. +11.5 Deferral . The Committee shall be authorized to establish procedures pursuant to which the payment of any Award may be deferred. Such deferrals shall be administered in a manner that is intended to comply with Section 409A of the Code and shall be construed and interpreted in accordance with such intent. +11.6 Dividend Equivalents . Subject to the provisions of the Plan and any Award Agreement, the recipient of an Award (including any deferred Award) may, if so determined by the Committee, be entitled to receive, on a deferred basis, cash, stock or other property dividends, or cash payments in amounts equivalent to cash, stock or other property dividends on Shares (“ Dividend Equivalents ”) with respect to the number of Shares covered by the Award, as determined by the Committee, in its sole discretion. Dividend Equivalents may accrue but will not, in any event, be payable until the vesting conditions of the underlying Award have been met. The Committee may provide that such amounts and Dividend Equivalents (if any) shall be deemed to have been reinvested in additional Shares or otherwise reinvested. Notwithstanding the foregoing, Dividend Equivalents shall not be made part of any Options or Stock Appreciation Rights. +76 +12. MISCELLANEOUS +12.1 Tax Withholding . The Company shall have the right to make all payments or distributions pursuant to the Plan to a Participant (or a Permitted Assignee thereof) (any such person, a “ Payee ”) net of any applicable federal, state and local taxes required to be paid or withheld as a result of (a) the grant of any Award, (b) the exercise of an Option or Stock Appreciation Right, (c) the delivery of Shares or cash, (d) the lapse of any restrictions in connection with any Award or (e) any other event occurring pursuant to the Plan. The Company or any Subsidiary shall have the right to withhold from wages or other amounts otherwise payable to such Payee such minimum statutory withholding taxes as may be required by law, or to otherwise require the Payee to pay such withholding taxes. If the Payee shall fail to make such tax payments as are required, the Company or its Subsidiaries shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to such Payee or to take such other action as may be necessary to satisfy such withholding obligations. The Committee shall be authorized to establish procedures for election by Participants to satisfy such obligation for the payment of such taxes by tendering previously acquired Shares (either actually or by attestation, valued at their then Fair Market Value) that have been owned for a period of at least six months (or such other period to avoid accounting charges against the Company’s earnings), or by directing the Company to retain Shares (up to the Participant’s minimum required tax withholding rate or such other rate that will not trigger a negative accounting impact) otherwise deliverable in connection with the Award. +12.2 Right of Discharge Reserved; Claims to Awards . Nothing in the Plan nor the grant of an Award hereunder shall confer upon any Employee or Director the right to continue in the employment or service of the Company or any Subsidiary or affect any right that the Company or any Subsidiary may have to terminate the employment or service of (or to demote or to exclude from future Awards under the Plan) any such Employee or Director at any time for any reason. Except as specifically provided by the Committee, the Company shall not be liable for the loss of existing or potential profit from an Award granted in the event of termination of an employment or other relationship. No Employee or Participant shall have any claim to be granted any Award under the Plan, and there is no obligation for uniformity of treatment of Employees or Participants under the Plan. +12.3 Prospective Recipient . Unless otherwise determined by the Committee, the prospective recipient of any Award under the Plan shall not, with respect to such Award, be deemed to have become a Participant, or to have any rights with respect to such Award, until and unless such recipient shall have executed or acknowledged an Award Agreement and delivered a copy thereof to the Company, in each case, in the manner prescribed by the Committee, and otherwise complied with the then applicable terms and conditions. +12.4 Cancellation of Award . Notwithstanding anything to the contrary contained herein, all outstanding Awards granted to any Participant may be canceled if the Participant, without the consent of the Company, while employed by the Company or any Subsidiary or after termination of such employment or service, establishes a relationship with a competitor of the Company or any Subsidiary or engages in activity that is in conflict with or adverse to the interest of the Company or any Subsidiary, as determined by the Committee in its sole discretion. +12.5 Stop Transfer Orders . All certificates for Shares delivered under the Plan pursuant to any Award shall be subject to such stop-transfer orders and other restrictions as the Committee may deem advisable in its sole discretion under the rules, regulations and other requirements of the Securities and Exchange Commission, any stock exchange upon which the Shares are then listed, and any applicable federal or state securities law, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions. +12.6 Nature of Payments . All Awards made pursuant to the Plan are in consideration of services performed or to be performed for the Company or any Subsidiary, division or business unit of the Company. Neither Awards made under the Plan nor Shares or cash paid pursuant to such Awards, may be included as “compensation” for purposes of computing the benefits payable to any Participant under the Company’s or any Subsidiary’s retirement plans (both qualified and non-qualified), welfare benefit plans or other employee benefit plans unless such plan expressly provides that such compensation shall be taken into account in computing a participant’s benefit. +12.7 Other Plans . Nothing contained in the Plan shall prevent the Board from adopting other or additional compensation arrangements, subject to stockholder approval if such approval is required; and such arrangements may be either generally applicable or applicable only in specific cases. +77 +12.8 Severability . If any provision of the Plan shall be held unlawful or otherwise invalid or unenforceable in whole or in part by a court of competent jurisdiction, such provision shall (a) be deemed limited to the extent that such court of competent jurisdiction deems it lawful, valid and/or enforceable and as so limited shall remain in full force and effect, and (b) not affect any other provision of the Plan or part thereof, each of which shall remain in full force and effect. If the making of any payment or the provision of any other benefit required under the Plan shall be held unlawful or otherwise invalid or unenforceable by a court of competent jurisdiction, such unlawfulness, invalidity or unenforceability shall not prevent any other payment or benefit from being made or provided under the Plan, and if the making of any payment in full or the provision of any other benefit required under the Plan in full would be unlawful or otherwise invalid or unenforceable, then such unlawfulness, invalidity or unenforceability shall not prevent such payment or benefit from being made or provided in part, to the extent that it would not be unlawful, invalid or unenforceable, and the maximum payment or benefit that would not be unlawful, invalid or unenforceable shall be made or provided under the Plan. +12.9 Interpretation . As used in the Plan, the words “include” and “including,” and variations thereof, shall not be deemed to be terms of limitation, but rather shall be deemed to be followed by the words “without limitation.” The captions in the Plan are for convenience of reference only, and are not intended to narrow, limit or affect the substance or interpretation of the provisions contained herein. +12.10 Unfunded Status of the Plan . The Plan is intended to constitute an “unfunded” plan for incentive and deferred compensation. With respect to any payments not yet made to a Participant by the Company, nothing contained herein shall give any such Participant any rights that are greater than those of a general creditor of the Company. In its sole discretion, the Committee may authorize the creation of trusts or other arrangements to meet the obligations created under the Plan to deliver the Shares or payments in lieu of or with respect to Awards hereunder; provided, however, that the existence of such trusts or other arrangements is consistent with the unfunded status of the Plan. +12.11 Governing Law . The Plan and all determinations made and actions taken thereunder, to the extent not otherwise governed by the Code or the laws of the United States, shall be governed by the laws of the State of Delaware, without reference to principles of conflict of laws, and construed accordingly. +12.12 Effective Date of Plan; Termination of Plan . The Plan was originally approved by the Board as of the Effective Date, subject to approval by the Company’s stockholders. Awards may be granted under the Plan at any time and from time to time on or prior to April 9, 2031, on which date the Plan will expire except as to Awards then outstanding under the Plan. Such outstanding Awards shall remain in effect until they have been exercised or terminated, or have expired. +12.13 Foreign Employees . Awards may be granted to Participants who are foreign nationals or employed outside the United States, or both, on such terms and conditions different from those applicable to Awards to Employees employed in the United States as may, in the Committee’s sole discretion, be necessary or desirable in order to recognize differences in local law or tax policy. The Committee also may impose conditions on the exercise or vesting of Awards in order to minimize the Company’s obligation with respect to tax equalization for Employees on assignments outside their home country. +12.14 Section 409A of the Code . +(a) Awards made under the Plan are intended to comply with or be exempt from Section 409A of the Code, and ambiguous provisions hereof, if any, shall be construed and interpreted in a manner consistent with such intent. No payment, benefit or consideration shall be substituted for an Award if such action would result in the imposition of taxes under Section 409A of the Code. Notwithstanding anything in the Plan to the contrary, if any Plan provision or Award under the Plan would result in the imposition of an additional tax under Section 409A of the Code, that Plan provision or Award shall be reformed, to the extent permissible under Section 409A of the Code, to avoid imposition of the additional tax, and no such action shall be deemed to adversely affect the Participant’s rights to an Award. +(b) Unless the Committee provides otherwise in an Award Agreement, each Other Stock Unit Award or Performance Unit (or portion thereof if the Award is subject to a vesting schedule) shall be settled no later than the 15th day of the third month after the end of the first calendar year in which the Award (or such portion thereof) is no longer subject to a “substantial risk of forfeiture” within the meaning of Section 409A of the Code. If the Committee determines that an Other Stock Unit Award or Performance Unit is intended to be subject to Section 409A of the Code, the applicable Award Agreement shall include terms that are designed to satisfy the requirements of Section 409A of the Code. +78 +(c) If the Participant is identified by the Company as a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code on the date on which the Participant has a “separation from service” (other than due to death) within the meaning of Treasury Regulation § 1.409A-1(h), any Award payable or settled on account of a separation from service that is deferred compensation subject to Section 409A of the Code shall be paid or settled on the earliest of (i) the first business day following the expiration of six months from the Participant’s separation from service, (ii) the date of the Participant’s death, or (iii) such earlier date as complies with the requirements of Section 409A of the Code. +12.15 Notification of Disqualifying Disposition . If any Participant shall make any disposition of Shares issued pursuant to the exercise of an Incentive Stock Option under the circumstances described in Section 421(b) of the Code (relating to certain disqualifying dispositions), such Participant shall notify the Company of such disposition within ten days thereof. +12.16 Sarbanes Oxley Act and Clawback Provisions Policy . If the Company is required to prepare an accounting restatement due to the material noncompliance of the Company, as a result of misconduct, with any financial reporting requirement under the securities laws, or and if the Participant is one of the persons subject to automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002 or the Participant engaged in such misconduct , such the Participant shall to the extent required by law, or may otherwise if required as determined in the sole discretion of the Committee, be required to reimburse the Company the amount of any payment in settlement of an Award earned or accrued during the 12-month period following the first public issuance or filing with the United States Securities and Exchange Commission (whichever just occurred) of the financial document embodying such financial reporting requirement. Notwithstanding any other provisions in this Plan, any Award shall be subject to recovery or clawback by the Company under the Patterson-UTI Energy, Inc. Clawback Policy and any other applicable clawback policy adopted by the Company whether before or after the date of grant of the Award. +12.17 Indemnification . Each person who is or shall have been a member of the Board, or a Committee appointed by the Board, or an officer of the Company to whom authority was delegated in accordance with Section 4.2 shall be indemnified and held harmless by the Company against and from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him or her in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by him or her in settlement thereof, with the Company’s approval, or paid by him or her in satisfaction of any judgment in any such action, suit, or proceeding against him or her, provided he or she shall give the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf, unless such loss, cost, liability, or expense is a result of his or her own willful misconduct or except as expressly provided by statute. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company’s Certificate of Incorporation of Bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless. +79 +80 +81 \ No newline at end of file diff --git a/raw/proxies/0000889900/0000950170-24-043522/proxy_rpt.txt b/raw/proxies/0000889900/0000950170-24-043522/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..e69de29bb2d1d6434b8b29ae775ad8c2e48c5391 diff --git a/raw/proxies/0000889900/0001193125-15-135760/proxy.txt b/raw/proxies/0000889900/0001193125-15-135760/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..a2460fdc86497304faebda6a9aa2f8b4d7a3816f --- /dev/null +++ b/raw/proxies/0000889900/0001193125-15-135760/proxy.txt @@ -0,0 +1,3223 @@ +DEF 14A +1 +d864560ddef14a.htm +DEFINITIVE PROXY STATEMENT +Definitive Proxy Statement +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +Washington, D.C. 20549 +SCHEDULE 14A +INFORMATION +Proxy Statement Pursuant to Section 14(a) of the +Securities Exchange Act of 1934 +(Amendment No. ) +Filed by the +Registrant x Filed by +a Party other than the Registrant ¨ +Check the appropriate box: +¨ +Preliminary Proxy Statement +¨ +Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +x +Definitive Proxy Statement +¨ +Definitive Additional Materials +¨ +Soliciting Material under Rule 14a-12 +PATTERSON-UTI ENERGY, +INC. +(Name of registrant as specified in its charter) +(Name of person(s) filing proxy statement, if other than the registrant) +Payment of Filing Fee (Check the appropriate box): +x +No fee required. +¨ +Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. +(1) +Title of each class of securities to which transaction applies: +(2) +Aggregate number of securities to which transaction applies: +(3) +Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing +fee is calculated and state how it was determined): +(4) +Proposed maximum aggregate value of transaction: +(5) +Total fee paid: +¨ +Fee paid previously with preliminary materials. +¨ +Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement +number, or the Form or Schedule and the date of its filing. +(1) +Amount Previously Paid: +(2) +Form, Schedule or Registration Statement No.: +(3) +Filing Party: +(4) +Date Filed: +April 17, 2015 +Dear Stockholder: +We cordially invite you to +attend Patterson-UTI Energy, Inc.’s annual stockholders’ meeting. The annual meeting will be held Thursday, June 4, 2015, at 10:00 a.m., local time, at the Hyatt North Houston Hotel, 425 N. Sam Houston Parkway East, Houston, Texas +77060. +We are pleased to take advantage of Securities and Exchange Commission rules that allow us to furnish these proxy materials and our +annual report primarily over the Internet. We believe that posting these materials on the Internet enables us to provide stockholders with the information that they need quickly, while lowering our costs of printing and delivery and supporting +sustainability. We encourage you to vote via the Internet and follow the links to our proxy statement and annual report, which are both available at www.proxyvote.com . +For those stockholders who have elected to receive their proxy materials in the mail, please review our proxy statement and annual report and +vote via the Internet, by telephone or using your proxy card. +Your vote is important to us. Please review your proxy materials carefully +and send in your vote today. +Thank you for your support. +Sincerely, +M ARK S. S IEGEL +Chairman of the Board +W ILLIAM A NDREW H ENDRICKS , J R . +President and Chief Executive Officer +PATTERSON-UTI ENERGY, INC. +450 Gears Road, Suite 500 +Houston, Texas 77067 +NOTICE OF 2015 +ANNUAL MEETING OF STOCKHOLDERS +To Be Held June 4, 2015 +The 2015 annual meeting of the stockholders of Patterson-UTI Energy, Inc., a Delaware corporation (“Patterson-UTI”), will be held +Thursday, June 4, 2015, at 10:00 a.m., local time, at the Hyatt North Houston Hotel, 425 N. Sam Houston Parkway East, Houston, Texas 77060 (the “Meeting”), for the following purposes: +Ÿ +to elect seven directors named in this proxy statement to the Board of Directors of Patterson-UTI to serve until the next annual meeting of the stockholders or until their respective successors are elected and +qualified; +Ÿ +to approve, on an advisory basis, Patterson-UTI’s compensation of its named executive officers; +Ÿ +to ratify the selection of PricewaterhouseCoopers LLP as the independent registered public accounting firm of Patterson-UTI for the fiscal year ending December 31, 2015; and +Ÿ +to transact such other business as may properly come before the Meeting or any adjournment or postponement thereof. +Stockholders of record at the close of business on April 7, 2015 are entitled to notice of and to vote at the Meeting and any adjournment +or postponement thereof. +Your vote is important to us. Whether or not you plan to attend the Meeting in person, we urge you to promptly +vote your shares via the Internet, by telephone, or if the accompanying proxy statement was mailed to you, by completing, signing, dating and returning your proxy card as soon as possible in the enclosed postage prepaid envelope. +By order of the Board of Directors +S ETH D. W EXLER +General Counsel and Secretary +April 17, 2015 +Important Notice Regarding the +Availability of Proxy Materials for the Stockholder Meeting +to Be Held on June 4, 2015 +The proxy statement and annual report to stockholders are available at www.proxyvote.com . +PATTERSON-UTI ENERGY, INC. +450 Gears Road, Suite 500 +Houston, Texas 77067 +PROXY +STATEMENT +ANNUAL MEETING OF STOCKHOLDERS +To Be Held June 4, 2015 +GENERAL INFORMATION ABOUT THE ANNUAL MEETING AND VOTING +The Board of Directors (the “Board” or “Board of Directors”) of Patterson-UTI Energy, Inc., a Delaware corporation +(“Patterson-UTI”), has made this proxy statement and its 2014 annual report to stockholders available to you on the Internet or, upon your request has delivered printed versions of these materials to you by mail beginning on or about April +20, 2015. Patterson-UTI is furnishing this proxy statement in connection with the solicitation by the Board of Directors of proxies to be voted at the 2015 annual meeting of stockholders of Patterson-UTI (the “Meeting”). The Meeting will +be held Thursday, June 4, 2015, at 10:00 a.m., local time, at the Hyatt North Houston Hotel, 425 N. Sam Houston Parkway East, Houston, Texas 77060, or at any adjournment or postponement thereof. The Notice of Internet Availability of Proxy +Materials (the “Notice”) was mailed to each of Patterson-UTI’s stockholders (other than those who previously requested electronic delivery) entitled to vote at the Meeting on or about April 20, 2015. +Pursuant to the “notice and access” rules adopted by the Securities and Exchange Commission (the “SEC”), Patterson-UTI has +elected to provide stockholders access to its proxy materials over the Internet. Accordingly, Patterson-UTI sent a Notice to all of its stockholders as of the record date. The Notice includes instructions on how to access Patterson-UTI’s proxy +materials over the Internet and how to request a printed copy of these materials. In addition, by following the instructions in the Notice, stockholders may request to receive proxy materials in printed form by mail or electronically by email on an +ongoing basis. +Choosing to receive your future proxy materials by email will save us the cost of printing and mailing documents to you and +will support sustainability. If you choose to receive future proxy materials by email, you will receive an email next year with instructions containing a link to those materials and a link to the proxy voting site. Your election to receive proxy +materials by email will remain in effect until you terminate it. +If your shares are registered directly in your name with our transfer +agent, Continental Stock Transfer & Trust Company, you are considered the “stockholder of record” with respect to those shares, and the Notice was sent directly to you. +If your shares are held in an account at a brokerage firm, bank, broker-dealer, or other similar organization, then you are the beneficial +owner of shares held in “street name,” and the Notice was forwarded to you by that organization. As a beneficial owner, you have the right to direct that organization on how to vote the shares held in your account. +Whether you are a “stockholder of record” or hold your shares in “street name,” you may direct your vote without attending +the Meeting in person. +If you are a stockholder of record, you may vote by Internet or by telephone by following the instructions in the +Notice. If you request printed copies of the proxy materials by mail, you may also vote by signing and submitting your proxy card and returning it by mail. You should sign your name exactly as it appears on the proxy card. If you are signing in a +representative capacity (for example, as guardian, executor, trustee, custodian, attorney or officer of a corporation), you should indicate your name and title or capacity. +If you are the beneficial owner of shares held in street name, you may be eligible to vote your shares electronically over the Internet or by +telephone by following the instructions in the Notice. If you request printed +1 +copies of the proxy materials by mail, you may also vote by signing the voter instruction card provided by your brokerage firm, bank, broker-dealer, or other similar organization and returning it +by mail. If you provide specific voting instructions by mail, telephone or the Internet, your shares will be voted by your brokerage firm, bank, broker-dealer, or similar organization as you have directed. +Properly submitted proxies received either by mail, Internet, telephone or in person in time to be counted for the Meeting will be voted as you +have directed in your proxy, unless you revoke your proxy in the manner provided below. As to any matter for which you give no direction in your proxy, your shares will be voted as follows: +Ÿ +“FOR” the election of all of the nominees to the Board of Directors named in this proxy statement; +Ÿ +“FOR” the approval, on an advisory basis, of Patterson-UTI’s compensation of its named executive officers; +Ÿ +“FOR” the ratification of PricewaterhouseCoopers LLP as the independent registered public accounting firm of Patterson-UTI for the fiscal year ending December 31, 2015; and +Ÿ +“FOR” or “AGAINST” any other proposals that may be properly submitted at the Meeting at the discretion of the persons named in the proxy. +If you are a stockholder of record, you may revoke your proxy before the proxy is voted by either: +Ÿ +submitting a new proxy with a later date, including a proxy submitted by the Internet or by telephone, in time to be counted for the meeting; +Ÿ +notifying the Secretary of Patterson-UTI in writing before the Meeting that you have revoked your proxy; or +Ÿ +attending the Meeting and voting in person. +If your shares are held in street name, you must +obtain a proxy executed in your favor from the stockholder of record (that is, your brokerage firm, bank, broker-dealer or similar organization) to be able to vote at the Meeting. +The Board of Directors is making this solicitation. We have retained Georgeson Shareholder Communications Inc., 480 Washington Blvd., 26 th Floor, Jersey City, New Jersey 07310, for a fee of approximately $8,500 and the reimbursement of out of pocket costs and expenses, to assist in the solicitation of proxies on behalf of the Board. +Patterson-UTI’s officers and other employees, without compensation other than regular compensation, may also solicit proxies on behalf of the Board by mail, email, the Internet, telephone, electronic means and personal interview. Patterson-UTI +will pay all costs associated with this solicitation. +SHARES OUTSTANDING AND VOTING RIGHTS +Only stockholders of record of Patterson-UTI’s common stock, $.01 par value per share (the “Common Stock”), at the close of +business on April 7, 2015 are entitled to notice of and to vote at the Meeting or any adjournment or postponement thereof. At the close of business on April 7, 2015, there were 146,446,701 shares of Common Stock issued and outstanding. +Holders of record of Common Stock on April 7, 2015 will be entitled to one vote per share on all matters to properly come before the Meeting. A list of stockholders entitled to notice of and to vote at the Meeting will be made available during +regular business hours at the offices of Patterson-UTI Energy, Inc., 450 Gears Road, Suite 500, Houston, Texas 77067, for the 10 days prior to, and at, the Meeting for examination by any stockholder for any purpose germane to the Meeting. +A quorum is necessary to transact business at the Meeting. A majority of the shares of Common Stock outstanding on April 7, 2015 will +constitute a quorum. The shares held by each stockholder who attends the Meeting in person, signs and timely returns the form of proxy or properly votes using the Internet or telephone will be counted for purposes of determining the presence of a +quorum at the Meeting. +“Broker non-votes” will be considered present at the Meeting but will not be counted to determine the +total number of votes cast. Broker non-votes occur when nominees, such as brokerage firms, banks, broker-dealers, or +2 +other similar organizations holding shares on behalf of the beneficial owners, are prohibited from exercising discretionary voting authority for beneficial owners who have not provided voting +instructions. If you do not give instructions to your bank, brokerage firm or other agent, the bank, brokerage firm or other agent will nevertheless be entitled to vote your shares of Common Stock in its discretion on “routine matters” and +may give or authorize the giving of a proxy to vote the shares of Common Stock in its discretion on such matters. The ratification of an independent registered public accounting firm is generally considered a routine matter, whereas the election of +directors and advisory approval of executive compensation are not considered routine matters. For these reasons, please promptly vote in accordance with the instructions provided by your brokerage firm, bank, broker-dealer, or other similar +organization. +PROPOSAL NO. 1 +ELECTION OF DIRECTORS +Directors are elected to serve until the next annual meeting of stockholders and until their successors are elected and qualified. +Patterson-UTI’s bylaws provide that the affirmative vote of a plurality of the votes cast at the meeting at which a quorum is present is required for the election of directors. Shares as to which a stockholder withholds authority to vote on the +election of directors and shares as to which a broker indicates that it does not have discretionary authority to vote on the election of directors will not be counted as voting thereon and will not affect the election of the nominees receiving a +plurality of the votes cast. +The enclosed form of proxy provides a means for you to either: +Ÿ +vote “FOR” the election of the nominees to the Board of Directors listed below, +Ÿ +withhold authority to vote for one or more of the nominees, or +Ÿ +withhold authority to vote for all of the nominees. +The Board of Directors recommends that +you vote “FOR” all of the nominees. Unless you give contrary instructions in your proxy, your proxy will be voted “FOR” the election of all of the nominees to the Board of Directors. If any nominee +should become unable or unwilling to accept the nomination or election, the person acting under the proxy will vote for the election of such other person as the Board of Directors may recommend. The Board has no reason, however, to believe that any +of the nominees will be unable or unwilling to serve if elected. Abstentions will have no effect with respect to the election of directors. A broker non-vote will be counted for purposes of establishing a quorum, but will not be treated as a vote +cast with respect to the election of directors. This will have the effect of reducing the absolute number of votes cast for the election of directors. +There are no arrangements or understandings between any person and any of the directors pursuant to which such director was selected as a +nominee for election at the Meeting. There are no family relationships among any of the directors or executive officers of Patterson-UTI. +Our corporate governance guidelines require that if a director receives in an uncontested election a greater number of “withhold” +votes than votes cast “for” his or her election, the Nominating and Corporate Governance Committee of the Board of Directors will undertake a prompt evaluation of the appropriateness of the director’s continued service on the Board of +Directors. In performing this evaluation, the Nominating and Corporate Governance Committee will review all factors it deems relevant, including the stated reasons why votes were withheld, the director’s length of service, his or her past +contributions to Patterson-UTI and the availability of other qualified candidates. The Nominating and Corporate Governance Committee will then make its recommendation to the Board. The Board of Directors will review the Nominating and Corporate +Governance Committee’s recommendation and consider such further factors and information as it deems relevant. The Board of Directors will act on the Nominating and Corporate Governance Committee’s recommendation no later than 90 days +following the date of the stockholders’ meeting. If the Board of Directors determines remedial action is appropriate, the director shall promptly take whatever action is requested by the Board. If the director does not promptly take the +recommended remedial action or if the Board of Directors determines that immediate resignation is in the best interests of Patterson-UTI and its stockholders, the Board of Directors may accept the director’s resignation that will have been +tendered as follows. Each director will, as a condition to his or her +3 +appointment or election as a director or nomination as a director, agree in writing to comply with the terms of Patterson-UTI’s majority voting policy and provide to the Board of Directors +an irrevocable resignation that will be effective upon (i) the failure to receive the required vote at the next annual meeting at which such director faces re-election and (ii) the Board of Directors’ acceptance of such resignation. +Set forth below is the name, age, position and a brief description of the business experience during at least the past five years of each +of the members of Patterson-UTI’s Board of Directors, as well as specific qualifications, attributes and skills of such member that were identified by the Nominating and Corporate Governance Committee when concluding such member should be +nominated to serve on the Board of Directors. Each current member of Patterson-UTI’s Board of Directors is a nominee for election to the Board of Directors, except for Mr. Cloyce A. Talbott whom after more than 50 years in the oil and +gas industry, more than 35 of which have been with Patterson-UTI, has chosen to retire effective at the Meeting. Mr. Talbott, more than any other person, has been instrumental in the growth of Patterson-UTI to what it is today, and the Board is +grateful to him for his many services to Patterson-UTI. As a result of the retirement, the Board of Directors expects to reduce the size of the Board to seven members effective at the Meeting. +Name +Age +Position +Mark S. Siegel +64 +Chairman of the Board and Director +Kenneth N. Berns +55 +Senior Vice President and Director +Charles O. Buckner +70 +Director +Michael W. Conlon +68 +Director +Curtis W. Huff +57 +Director +Terry H. Hunt +66 +Director +Tiffany J. Thom +42 +Director +When considering whether directors and nominees have the experience, qualifications, attributes and skills, +taken as a whole, to enable the Board of Directors to satisfy its oversight responsibilities effectively in light of Patterson-UTI’s business and structure, the Nominating and Corporate Governance Committee and the Board of Directors focused +primarily on the information discussed in each of the directors’ individual biographies set forth below. +In particular, with regard +to Mr. Siegel, the Board of Directors considered his broad business and legal experience, as well as his expertise with respect to Patterson-UTI’s business. In addition, the Board considered Mr. Siegel’s demonstrated leadership +for 20 years of both Patterson-UTI and one of its predecessor companies, UTI Energy Corp. (“UTI”). In addition, the Board considered Mr. Siegel’s prior leadership experience in other public companies and in the oil services +industry, and in numerous other businesses and industries. Mr. Siegel also brings substantial experience and expertise in mergers and acquisitions, capital structure transactions, strategic planning, and board and business management. +Mr. Siegel’s broad and deep experience and expertise allows him to provide Patterson-UTI with valuable leadership in all areas of its business endeavors. +With regard to Mr. Berns, the Board of Directors considered his more than 30 years of financial, mergers and acquisitions and +transactional experience, including 20 years in the oil and gas industry. This experience and background provides perspective on the cyclical nature of the oil and gas industry and allows Mr. Berns to provide valuable direction with respect to +Patterson-UTI’s financial affairs, corporate transactions and strategic decisions. +With regard to Mr. Buckner, the Board of +Directors considered his service as a director of oil and gas companies, as well as his experience, expertise and background with regard to accounting matters, which includes his role as the former chairman of Ernst & Young LLP’s U.S. +energy practice. +With regard to Mr. Conlon, the Board of Directors considered his more than 40 years of experience handling +corporate, securities and mergers and acquisition matters as a lawyer with an international law firm, as well as his service in a number of management roles throughout his tenure at the firm. The Board noted Mr. Conlon’s experience in +representing numerous public companies, including Patterson-UTI, and other energy services companies, allows him to provide valuable insight on legal, governance and regulatory issues facing Patterson-UTI. +With regard to Mr. Huff, the Board of Directors considered his background as an executive of publicly traded oilfield services companies +and as an owner and manager of a private investment firm focused on the oil- +4 +field service industry. The Board noted his knowledge and experience in a broad range of oilfield products and services and his current and historical experience in managing operations in both +the United States and internationally. The Board also considered Mr. Huff’s expertise and background with regard to accounting and legal matters, which, among other things, provides guidance to Patterson-UTI in assessing its corporate +governance structure, policies and procedures. +With regard to Mr. Hunt, the Board of Directors considered his over 25 years of +experience covering most phases of the upstream oil and natural gas industry in the United States and Canada, including the evaluation of exploration and development programs, oil and natural gas production and pipeline operations, and project +development and major production facility construction. This experience and background provides Patterson-UTI with an invaluable perspective of the oil and natural gas industry and its customers. In addition, Mr. Hunt’s many years of +senior executive experience leading natural gas distribution, storage and marketing companies provides insight into the management of multi-faceted businesses and the markets for natural gas in North America. +With regard to Ms. Thom, the Board of Directors considered her more than 20 years of operational and financial experience in the energy +industry. The Board noted her service in various operational roles, including a reservoir engineer for a major oil and gas exploration and production company. The Board also noted Ms. Thom’s prior executive management experience, including +most recently as executive vice president and chief financial officer of a publicly traded independent oil and gas exploration and production company, which allows her to provide Patterson-UTI with valuable insight on financial and strategic +matters. +Mark S. Siegel — Mr. Siegel has served as Chairman of the Board and as a director of Patterson-UTI +since May 2001. Mr. Siegel served as Chairman of the Board and as a director of UTI from 1995 to May 2001, when UTI merged with and into Patterson-UTI. Mr. Siegel has been President of REMY Investors & Consultants, Incorporated +(“REMY Investors”) since 1993. From 1992 to 1993, Mr. Siegel was President, Music Division, Blockbuster Entertainment Corp. From 1988 through 1992, Mr. Siegel was an Executive Vice President of Shamrock Holdings, Inc., a private +investment company, and Managing Director of Shamrock Capital Advisors, Incorporated. Mr. Siegel holds a Bachelor of Arts degree from Colgate University and a J.D. from the University of California, Berkeley (Boalt Hall) School of Law. +Kenneth N. Berns — Mr. Berns has served as Senior Vice President of Patterson-UTI since April 2003 and as a director +of Patterson-UTI since May 2001. Mr. Berns served as a director of UTI from 1995 to May 2001. Mr. Berns has been an executive with REMY Investors since 1994. Mr. Berns holds a Bachelor’s Degree in Business Administration from San +Diego State University and a Master’s Degree in Taxation from Golden Gate University. +Charles O. +Buckner — Mr. Buckner has served as a director of Patterson-UTI since February 2007. Mr. Buckner, a private investor, retired from the public accounting firm of Ernst & Young LLP in 2002 after 35 years of +service in a variety of client service and administrative roles, including chairmanship of Ernst & Young’s U.S. energy practice. Mr. Buckner served as a director of Energy Partners, Ltd., a publicly held company with oil and +natural gas exploration and production on the continental shelf in the Gulf of Mexico from 2009 to 2014, Global Industries, Ltd., a marine construction services company with global operations from 2010 to 2011, Gateway Energy Corporation, a publicly +held oil and gas pipeline company from 2008 to 2010, Horizon Offshore, Incorporated, a marine construction services company for the offshore oil and gas industry from 2003 to 2007, and Whittier Energy Corporation, a publicly held company with +domestic onshore oil and natural gas exploration and production from 2003 to 2007. Mr. Buckner is a Certified Public Accountant and holds a Bachelor of Business Administration from the University of Texas and a Masters of Business +Administration from the University of Houston. +Michael W. Conlon — Mr. Conlon has served as a director of +Patterson-UTI since September 2012. Mr. Conlon retired as a partner of the law firm, Norton Rose Fulbright US LLP, in January 2012 after 40 years with the firm. Mr. Conlon specialized in corporate, securities and merger and acquisition +matters. Mr. Conlon was partner-in-charge of the firm’s Houston office from 2007 to 2011, was co-partner-in-charge from 2001 to 2007 and partner-in-charge of its Washington, D.C. office from 1992 to 1998. Mr. Conlon currently acts as +Secretary to the Board of Directors of The Men’s Wearhouse Inc., a specialty retailer of men’s apparel and an NYSE listed company. Mr. Conlon holds a Bachelor of Arts degree in Economics from Catholic University of +5 +America, where he graduated magna cum laude, and a Juris Doctorate from the Duke University School of Law, where he graduated as a member of the Order of the Coif. +Curtis W. Huff — Mr. Huff has served as a director of Patterson-UTI since May 2001 and served as a director of UTI +from 1997 to May 2001. Mr. Huff is owner and Chairman of Freebird Partners, a private investment firm created in 2002 that is focused on oilfield service companies and technology. Mr. Huff was Managing Director of Intervale Capital, an +oilfield service private equity firm that Mr. Huff co-founded in 2006, and he was a senior advisor to that firm from 2012 to February 2015. Mr. Huff also serves as Chairman of Impact Fluid Solutions LLC, which provides drilling +and production solutions for oil and gas operators and fluid companies. Mr. Huff served as the President and Chief Executive Officer of Grant Prideco, Inc., a provider of drill pipe and other drill stem products, from February 2001 to June +2002. From January 2000 to February 2001, Mr. Huff served as Executive Vice President, Chief Financial Officer and General Counsel of Weatherford International, Inc., one of the world’s largest international oilfield services companies. He +served as Senior Vice President and General Counsel of Weatherford from May 1998 to January 2000. Mr. Huff began his professional career in 1983 with the law firm of Norton Rose Fulbright US LLP where he specialized in corporate, securities and +merger and acquisition matters. Mr. Huff was made a partner in that firm in 1989 where he served until 1998 when he joined Weatherford. Mr. Huff holds a Bachelor of Arts degree and J.D. from the University of New Mexico, where he graduated +as a member of the Order of the Coif and cum laude, and a Masters of Law from New York University School of Law. Mr. Huff is a Vice Chairman of the Board of Directors of the University of St. Thomas in Houston, Texas, and a member of the board of +directors of the Houston Food Bank. +Terry H. Hunt — Mr. Hunt has served as a director of Patterson-UTI since +April 2003 and served as a director of UTI from 1994 to May 2001. Mr. Hunt is an energy consultant. Mr. Hunt served as Senior Vice President — Strategic Planning of PPL Corporation, an international energy and utility +holding company, from 1998 to 2000. Mr. Hunt served as the President and Chief Executive Officer of Penn Fuel Gas, Inc., a Pennsylvania-based natural gas and propane distribution company, from 1992 to 1999. Previously, Mr. Hunt was +President of Carnegie Natural Gas and Apollo Gas Company, both Appalachian natural gas distribution companies. He also previously served in senior management positions in natural gas project and venture development, oil and natural gas exploration +and development evaluation and operations and major production facilities construction with Texas Oil & Gas Corp. and Atlantic Richfield. Mr. Hunt holds a Bachelor of Engineering degree from the University of Saskatchewan, Canada and a +Masters of Business Administration from Southern Methodist University. +Tiffany J. Thom — Ms. Thom has served as +a director of Patterson-UTI since August 2014. Ms. Thom served four years as the Chief Financial Officer of EPL Oil & Gas, Inc., and was further appointed Executive Vice President in January 2014, and she served in those roles until +June 2014, when EPL was sold. Ms. Thom began her career with EPL as a Senior Asset Management Engineer, a position she held until she was appointed Director of Corporate Reserves in September 2001. Ms. Thom was named EPL’s Director of +Investor Relations in April 2006 and Vice President, Treasurer and Investor Relations in July 2008. In July 2009, Ms. Thom was designated as EPL’s Principal Financial Officer and, in September 2009, she was appointed Senior Vice President. +Ms. Thom has more than 20 years of energy industry experience and prior to joining EPL, she was a Senior Reservoir Engineer with Exxon Production Company and ExxonMobil Company with operational roles including reservoir engineering and +subsurface completion engineering for numerous offshore Gulf of Mexico properties. Ms. Thom holds a B.S. in Engineering from the University of Illinois and a Masters of Business Administration in Management with a concentration in Finance from +Tulane University. +Board Leadership Structure, Lead Director and Board Role in Risk Oversight +The Board evaluates its leadership structure and role in risk oversight on an ongoing basis. The decision on whether to combine or separate the +Chairman and Chief Executive Officer (“CEO”) role is determined on the basis of what the Board considers to be best for Patterson-UTI at any given point in time. Patterson-UTI’s current Board leadership structure separates the role of +Chairman and CEO. +The Board also believes part of an effective Board leadership structure is to have a lead independent director, the +“Lead Director.” The Board has appointed Mr. Huff as the Lead Director. The independent directors meet regu- +6 +larly in executive sessions at which only independent directors are present, and the Lead Director chairs those sessions. The Lead Director serves as a liaison between the Chairman and the +independent directors, consults with regard to Board and agenda items, and works with the chairpersons of Board committees as appropriate. +The Nominating and Corporate Governance Committee and the Board currently believe that the Board’s leadership structure, which includes +the separation of the role of CEO and Chairman and the appointment of an independent Lead Director, is appropriate because it, among other things, provides for sufficient independence between the Board and management and for an independent director +who provides board member leadership. +The Board has adopted Corporate Governance Guidelines, which can be accessed electronically in the +“Governance” section of Patterson-UTI’s website at www.patenergy.com . The Guidelines describe one of the Board’s primary responsibilities as overseeing Patterson-UTI’s processes for assessing and managing risks. The +Board discharges this responsibility, in part, through regular inquiries from the Chairman of the Board and/or the Lead Director to management, periodic communications from management to the Board of Directors of particular risks and events, and +discussions during Board meetings with and without management of general and specific risks to Patterson-UTI. +Meetings and Committees of the Board of +Directors +The Board of Directors met 11 times during the year ended December 31, 2014. Each director attended, in person or by +telephone, at least 75% of the aggregate of all meetings held by the Board during his or her service and meetings of each committee on which such director served. A majority of the members of the Board of Directors are independent within the meaning +of the Nasdaq Stock Market, Inc. (“Nasdaq”) listing standards. Specifically, the Board has determined that Messrs. Buckner, Conlon, Huff and Hunt and Ms. Thom are independent within the meaning of the Nasdaq listing standards. In +reaching this conclusion, the Board considered that Mr. Conlon retired in January 2012 as partner of a law firm that has provided legal services to the Company. The Board has determined that these transactions are not material to such firm, +Patterson-UTI or Mr. Conlon and that such transactions do not affect his independence under applicable rules and regulations. +The +Board of Directors has established four standing committees: an Executive Committee, an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee. +The Executive Committee, which currently is composed of Messrs. Siegel, Berns and Huff, has the authority, to the extent permitted by +applicable law, to act for the Board in all matters arising between regular or special meetings of the Board of Directors. +The Audit +Committee members are Messrs. Buckner (chairman), Huff and Hunt and Ms. Thom, each of whom is independent within the meaning of applicable rules under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and within +the meaning of the Nasdaq listing standards. The Audit Committee oversees management’s conduct of Patterson-UTI’s accounting and financial reporting process, including review of the financial reports and other financial information +provided by Patterson-UTI to the public and government and regulatory bodies, Patterson-UTI’s system of internal accounting, Patterson-UTI’s financial controls, and the annual independent audit of Patterson-UTI’s financial statements +and internal control over financial reporting. The Audit Committee also oversees compliance with Patterson-UTI’s codes of conduct and ethics and with legal and regulatory requirements. The Board has determined that Messrs. Buckner and Huff and +Ms. Thom are “audit committee financial experts” within the meaning of applicable SEC rules. The Audit Committee selects the independent registered public accounting firm to audit Patterson-UTI’s books and records and considers +and acts upon accounting matters as they arise. The Board of Directors has adopted a written charter for the Audit Committee. The Audit Committee held five meetings during the year ended December 31, 2014. Please see “Audit Committee +Report” elsewhere in this proxy statement. +The Compensation Committee members are Messrs. Hunt (chairman), Buckner, Conlon and Huff, +each of whom is independent as defined in the Nasdaq listing standards. Among other things, the Compensation Committee sets and administers the policies that govern the compensation of executive officers and directors of Patterson-UTI. The Board of +Directors has adopted a written charter for the Compensation Committee. The Compensation Committee held six meetings during the year ended December 31, 2014. Please see +7 +“Compensation Discussion and Analysis” and “Compensation Committee Report” elsewhere in this proxy statement for further information about the Compensation Committee. +The Nominating and Corporate Governance Committee members are Messrs. Conlon (chairman), Buckner and Huff, each of whom is independent as +defined in the Nasdaq listing standards. The purpose of the Nominating and Corporate Governance Committee is to, among other things, identify individuals qualified to become Board members, to recommend for selection by the Board director nominees +for the next annual meeting of stockholders, to review Patterson-UTI’s Code of Business Conduct, to develop and continually make recommendations with respect to the best corporate governance principles and to oversee the evaluation of the Board +and management. The Board of Directors has adopted a written charter for the Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee held three meetings during the year ended December 31, 2014. +On behalf of the Board, the Nominating and Governance Committee considers director nominees recommended by Patterson-UTI’s stockholders if +the recommendations are made in accordance with all legal requirements, including applicable provisions of Patterson-UTI’s restated certificate of incorporation and bylaws. In accordance with Patterson-UTI’s bylaws, in addition to any +other applicable requirements, nominations of persons for election to the Board may be made at a meeting of stockholders only by or at the direction of the Board or by a stockholder who is a stockholder of record on the date of the giving of the +notice provided for below and on the record date for the determination of stockholders entitled to vote at such annual meeting and gives timely notice of such nomination in writing to the Secretary of Patterson-UTI. To be timely with respect to the +2016 annual meeting of stockholders, a stockholder’s notice must be delivered to or mailed and received at Patterson-UTI’s principal executive offices not earlier than February 5, 2016 and not later than March 6, 2016; provided, +however, that in the event that the annual meeting is called for a date that is not within 30 days before or after June 4, 2016, notice by the stockholder must be received not later than the close of business on the tenth day following the day +on which such notice of the date of the meeting was mailed or public disclosure of the annual meeting date was made, whichever occurs first. +A stockholder’s notice to the Secretary of Patterson-UTI shall set forth: +Ÿ +as to each person whom the stockholder proposes to nominate for election or re-election as director, all information relating to such person that is required to be disclosed in solicitations of proxies for election of +directors, or is otherwise required, in each case pursuant to Regulation 14A promulgated under the Exchange Act, or any successor regulation thereto, +Ÿ +the name and record address of the stockholder proposing such nomination, +Ÿ +the class and number of shares of Patterson-UTI that are beneficially owned by the stockholder, +Ÿ +a description of all arrangements or understandings between such stockholder and each proposed nominee and any other person or persons (including their names) pursuant to which the nomination or nominations are to be +made by such stockholder, and +Ÿ +a representation that such stockholder intends to appear in person or by proxy at the meeting to nominate the persons named in the notice. +Such notice must be accompanied by a written consent of each proposed nominee to being named as a nominee and to serve as a director if +elected. +The Nominating and Corporate Governance Committee determines qualification criteria and procedures for the identification and +recruitment of candidates for election to serve as directors of Patterson-UTI. The Nominating and Corporate Governance Committee relies on the knowledge and relationships of Patterson-UTI and its officers and directors, as well as third parties when +it deems appropriate, to identify and evaluate nominees for director, including nominees recommended by stockholders. In evaluating a nominee for director, the Nominating and Corporate Governance Committee considers the nominee’s skills, +expertise, industry and other knowledge, personal and professional ethics, integrity and values, sound business judgment and willingness to commit sufficient time to the Board and be committed to representing the long-term interests of +Patterson-UTI’s stockholders. Although the Nominating and Corporate Governance Committee does not have a stand-alone policy with regard to consideration of diversity in identifying director nominees, it considers diversity in professional +back- +8 +ground, experience, expertise (including as to financial matters) and perspective (including as to age, gender and ethnicity) with respect to the Board of Directors composition as a whole when +evaluating a director nominee. +Succession Planning +The Board of Directors oversees processes and procedures to provide continuity of well-qualified executive leadership and to assess whether +such leadership possesses the skill and talent to execute Patterson-UTI’s long term business strategies. The Board of Directors reviews the succession plan for the Chief Executive Officer and the senior executives tailored to reflect the +Board’s standards for executive leadership and Patterson-UTI’s business strategy and vision. The succession plan addresses (i) both current and long term needs of Patterson-UTI and establishes a process for identifying and assessing +potential internal candidates; (ii) periodic review and assessment of readiness: (iii) contingency planning for temporary absences of the Chief Executive Officer due to disability or other unexpected event; and (iv) long term +continuity planning for succession to the Chief Executive Officer position. +Political Contributions +Patterson-UTI has a policy prohibiting the contribution of company funds to political parties or organizations or to candidates for any public +office or to influence the general public, or segments thereof, with respect to public elections or referenda. Patterson-UTI participates in certain trade organizations with purposes that include enhancement of the public image of our industry, +education about the industry and issues that affect the industry and industry best practices and standards. Many of the trade organizations also engage in legislative or political activity related to matters that affect the industry as a whole and +not a specific company. Patterson-UTI, as one of many members in various trade associations, does not direct the legislative activities of any trade organization of which it is a member. +Sustainability +Patterson-UTI is +committed to long-term sustainability with respect to the environment, our society and our long-term corporate success. A copy of Patterson-UTI’s sustainability commitment can be accessed electronically in the “Values” section of the +Patterson-UTI website at www.patenergy.com and in print to any stockholder who requests it from the Secretary of Patterson-UTI. +Communication +with the Board and its Independent Members +Persons may communicate with the Board, or directly with its Chairman, Mr. Siegel, by +submitting such communication in writing in care of Chairman of the Board of Directors, Patterson-UTI Energy, Inc., 450 Gears Road, Suite 500, Houston, Texas 77067. Persons may communicate with the independent members of the Board by submitting such +communication in writing to the Nominating and Corporate Governance Committee of the Board of Directors of Patterson-UTI Energy, Inc., 450 Gears Road, Suite 500, Houston, Texas 77067. +Although Patterson-UTI does not have a formal policy regarding attendance by members of the Board at its annual meetings of stockholders, +directors are invited to attend annual meetings of Patterson-UTI stockholders. All of the directors at the time of the 2014 annual meeting of stockholders attended the meeting either in person or by telephone. +Corporate Governance Documents Available on Patterson-UTI’s Website +Copies of each of the following documents can be accessed electronically in the “Governance” section of the Patterson-UTI website at +www.patenergy.com and in print to any stockholder who requests them from the Secretary of Patterson-UTI: +Ÿ +Audit Committee Charter; +Ÿ +Compensation Committee Charter; +Ÿ +Nominating and Corporate Governance Committee Charter; +9 +Ÿ +Corporate Governance Guidelines; +Ÿ +Code of Business Conduct for its employees, officers and directors; +Ÿ +Code of Business Conduct and Ethics for Senior Financial Executives; and +Ÿ +Global Anticorruption Policy. +PROPOSAL NO. 2 +ADVISORY APPROVAL OF EXECUTIVE COMPENSATION +In accordance with Section 14A of the Exchange Act, the Board of Directors is asking stockholders to approve a non-binding, advisory +resolution on the compensation of Patterson-UTI’s executive officers who are named in the Summary Compensation Table appearing in this proxy statement (the “Named Executive Officers”). The compensation of the Named Executive Officers +is described in the “Compensation Discussion and Analysis” and “Executive Compensation” sections of this proxy statement. +The compensation program for the Named Executive Officers is designed to attract and retain highly qualified individuals and to motivate and +reward them for performance that benefits Patterson-UTI and its stockholders. The Compensation Committee and the Board of Directors believe that the policies and procedures detailed in the “Compensation Discussion and Analysis” achieve +these goals by, among other things: +Ÿ +providing a mix of short-term compensation in the form of base salary and annual cash incentive bonuses and long-term compensation in the form of restricted stock, stock options and performance units, which strikes a +balance between offering competitive compensation packages and aligning compensation with long-term growth and creating value for stockholders; +Ÿ +emphasizing variable equity and cash compensation to link realized compensation to performance; +Ÿ +using a team-based compensation model for our senior executives; +Ÿ +reviewing annual base salaries, in part, based on Patterson-UTI’s financial results and position and performance compared to similarly situated companies, while recognizing that Patterson-UTI’s executive +compensation program has historically emphasized low comparative base compensation; +Ÿ +providing performance-based annual cash incentive bonuses designed to put a meaningful portion of total compensation at risk; +Ÿ +awarding stock options and performance units, whose value is tied to the achievement of certain performance goals and/or an increase in the price of the Common Stock; +Ÿ +awarding stock options, performance units and restricted stock with vesting periods of three years; and +Ÿ +establishing stock ownership guidelines. +The compensation program for the Named Executive +Officers has also been modified for 2015 to reduce the bonus and equity compensation potential for Mr. Siegel, our executive Chairman, given a transition in the roles of Mr. Siegel and Mr. Hendricks, our CEO. The nature and rationale for such +changes are described in greater detail under “Compensation Discussion and Analysis – Basic Compensation Philosophy and Executive Summary”. +The Board of Directors is asking stockholders to approve the following non-binding, advisory resolution at the Meeting: +“RESOLVED, that the stockholders of Patterson-UTI Energy, Inc. (the “Company”) approve, on an advisory basis, the compensation +of the Company’s named executive officers, as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the compensation tables and other narrative +discussion in the Proxy Statement for the 2015 Annual Meeting of Stockholders of the Company.” +10 +This advisory resolution, commonly referred to as a “say-on-pay” resolution, is +non-binding on the Board of Directors. Although non-binding, the Board of Directors and the Compensation Committee value the views of Patterson-UTI’s stockholders and will review and consider the voting results when (i) evaluating the +effectiveness of Patterson-UTI’s compensation policies and practices and (ii) making future compensation decisions for the Named Executive Officers. +The Board of Directors recommends a vote “FOR” the approval of the advisory resolution on executive +compensation . Approval of the advisory resolution requires the affirmative vote of the holders of a majority of the shares of Common Stock present in person or by proxy, and entitled to vote at the Meeting. Unless you give +contrary instructions in your proxy, your properly submitted proxy will be voted “FOR” such approval. Abstentions will be counted as shares entitled to vote on the proposal and will have the same effect as a vote “AGAINST” the +proposal. A broker non-vote will be counted for purposes of establishing a quorum, but will not be treated as a share entitled to vote on the proposal. This will have the effect of reducing the absolute number of shares necessary to approve the +proposal. +PROPOSAL NO. 3 +RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM +The Audit Committee appointed PricewaterhouseCoopers LLP as the independent registered public accounting firm to audit the financial statements +and internal control over financial reporting of Patterson-UTI for the fiscal year ending December 31, 2015, and directed that such engagement be submitted to the stockholders of Patterson-UTI for ratification. In recommending ratification by +the stockholders of such engagement, the Board of Directors is acting upon the recommendation of the Audit Committee, which has satisfied itself as to PricewaterhouseCoopers LLP’s independence, professional competence and standing. Although +ratification by stockholders of the engagement of PricewaterhouseCoopers LLP is not required by Delaware corporate law or Patterson-UTI’s restated certificate of incorporation or bylaws, the Audit Committee believes a decision of this nature +should be made with the consideration of Patterson-UTI’s stockholders. If the stockholders fail to ratify the appointment, the Audit Committee will reconsider whether to retain PricewaterhouseCoopers LLP and may retain that firm or another +without re-submitting the matter to our stockholders. Even if the appointment is ratified, the Audit Committee may, in its discretion, direct the appointment of a different independent registered public accounting firm at any time during the year if +it determines that such change would be in the best interests of Patterson-UTI and its stockholders. +It is expected that one or more +representatives of PricewaterhouseCoopers LLP will be present at the Meeting and will be given the opportunity to make a statement if they so desire. It also is expected that the representative(s) will be available to respond to appropriate +questions from the stockholders. +The Board of Directors recommends a vote “FOR” the ratification of PricewaterhouseCoopers +LLP as Patterson-UTI’s independent registered public accounting firm. Ratification of the selection of PricewaterhouseCoopers LLP requires the affirmative vote of the holders of a majority of the shares of Common +Stock present in person or by proxy, and entitled to vote at the Meeting. Unless you give contrary instructions in your proxy, your properly submitted proxy will be voted “FOR” such ratification. Abstentions will be counted as shares +entitled to vote on the proposal and will have the same effect as a vote “AGAINST” the proposal. Because the ratification of an independent registered public accounting firm is considered a routine matter, if you do not give instructions +to your brokerage firm, bank, broker-dealer, or other similar organization, the brokerage firm, bank, broker-dealer, or other similar organization will nevertheless be entitled to vote your shares in its discretion and may give or authorize the +giving of a proxy to vote the shares in its discretion on this proposal. +11 +EXECUTIVE OFFICERS +Set forth below is the name, age and position followed by a brief description of the business experience during at least the past five years +for each executive officer of Patterson-UTI who is not also a member of the Board of Directors. +Name +Age +Position +William Andrew Hendricks, Jr. +50 +President and Chief Executive Officer +John E. Vollmer III +59 +Senior Vice President — Corporate Development, Chief Financial Officer and Treasurer +Seth D. Wexler +43 +General Counsel and Secretary +James M. Holcomb +52 +President — Patterson-UTI Drilling Company LLC +William Andrew Hendricks, Jr. — Mr. Hendricks has served as President and Chief Executive +Officer of Patterson-UTI since October 2012. From April 2012 through September 2012, he served as Chief Operating Officer of Patterson-UTI. From May 2010 through March 2012, Mr. Hendricks served as President of Schlumberger Drilling & +Measurements, a division of Schlumberger Limited, a global provider of oilfield services. Prior to that date, Mr. Hendricks worked for Schlumberger in various worldwide locations and capacities since 1988, including serving in numerous +executive positions since 2003. Mr. Hendricks holds a Bachelor of Science in Petroleum Engineering from Texas A&M University. +John E. Vollmer III — Mr. Vollmer has served as Chief Financial Officer and Treasurer of Patterson-UTI since November 2005 and +Senior Vice President — Corporate Development of Patterson-UTI since May 2001. Mr. Vollmer also served as Secretary of Patterson-UTI from November 2005 to February 2007. Mr. Vollmer served as Senior Vice President, Chief Financial +Officer, Secretary and Treasurer of UTI from 1998 to May 2001. From 1992 until 1997, Mr. Vollmer served in a variety of capacities at Blockbuster Entertainment, including Senior Vice President — Finance and Chief Financial Officer of +Blockbuster Entertainment’s Music Division. Mr. Vollmer holds a Bachelor of Arts in Accounting from Michigan State University. +Seth D. Wexler — Mr. Wexler has served as General Counsel and Secretary of Patterson-UTI since August 2009. From March 1998 to +August 2009, he specialized in securities law and mergers and acquisitions for the law firm of Norton Rose Fulbright US LLP, including as a partner of such law firm since January 2007. Mr. Wexler holds a Bachelor of Business Administration in +Finance from the University of Texas at Austin, a Juris Doctorate from the University of Houston Law Center and a Masters of Business Administration from the University of Houston. +James M. Holcomb — Mr. Holcomb has served as President of Patterson-UTI Drilling Company LLC since January +2012. Mr. Holcomb came to Patterson-UTI in February 1998 with the acquisition of Robertson Onshore Drilling Company and since that time has served in numerous operational management roles, including as Senior Vice President of Operations +of Patterson-UTI Drilling Company LLC from April 2006 to January 2012. Mr. Holcomb has over 30 years of experience in contract drilling operations. Mr. Holcomb holds a Bachelor of Science Degree in Business Management from +LeTourneau University. +12 +COMPENSATION DISCUSSION AND ANALYSIS +For purposes of this Compensation Discussion and Analysis (“CD&A”), all references to the “top four Named Executive +Officers” refer to Mr. Hendricks (our current Chief Executive Officer) and Messrs. Siegel, Vollmer and Berns, except for periods prior to 2012 in which case the term refers to our former Chief Executive Officer and Messrs. Siegel, Vollmer +and Berns. +Basic Compensation Philosophy and Executive Summary +Compensation at Patterson-UTI has always been tied to our company’s performance. Incentive compensation, both in the form of short-term +cash and long-term equity, is determined primarily using Patterson-UTI financial performance, total shareholder return and total shareholder return relative to our peer group, but also measures of safety and operating performance and achievement of +strategic goals. In 2014, approximately 94% of total compensation of the top four Named Executive Officers was variable or incentive-based, tied to these performance measures. Two-thirds of that compensation value represents non-cash grants of +equity, options and performance units, the value of which is calculated and reported at the time of grant, but the ultimate realizable value to our top four Named Executive Officers is directly determined by the future performance of our stock. In +addition, because of the variable nature of this compensation, the ultimate value to the executive is directly correlated to the value provided to our stockholders. +The variable compensation provided to our executive management is considered and measured on an absolute basis or relative to peers, or both. +Our Compensation Committee engages in a rigorous annual review of the market, our performance against targets and peers and the specific goals and objectives that we seek to achieve with our compensation program. The Compensation Committee also +engages in a focused analysis of the performance of each of the key members of executive management and how our compensation program is designed and works with their particular circumstances and contributions. Our annual compensation review and the +related grants and allocation of the various components of compensation are based on industry and peer data, targeted performance objectives, a balanced allocation of incentives for both short and long-term performance and individual and team +objectives. +Patterson-UTI has also operated for many years based on a team approach to compensation for its executive management team. +Patterson-UTI has had both an active Chairman and Chief Executive Officer for more than the past ten years and overall compensation for the top four Named Executive Officers has been based on this team concept. Mr. Siegel’s role has +historically been that of managing the executive management team, focusing on long-term strategic planning and initiatives, Board focus and direction, and support to Patterson-UTI’s Chief Executive Officer, both internally and externally. In +April 2012, Patterson-UTI brought in Mr. Hendricks to succeed Patterson-UTI’s prior CEO upon his retirement. Mr. Hendricks became Patterson-UTI’s CEO in October 2012. A key responsibility of Mr. Siegel has been to provide a smooth +transition for Mr. Hendricks and facilitate his successful integration into Patterson-UTI. +With the continuing success of Mr. Hendricks in +his role as CEO, Mr. Siegel, as Chairman, and the Board have jointly determined that the role of the Executive Chairman should begin to be reduced. Accordingly, beginning in 2015, Mr. Siegel, the Compensation Committee and the Board agreed that it +would be appropriate to reduce his compensation to reflect the increased role of Mr. Hendricks and the reduced role of Mr. Siegel. As a result, for 2015, Mr. Siegel’s share of the team’s overall compensation package has been reduced by +approximately 40%, with the expectation that the percentage allocable to Mr. Siegel will decrease further over time. In addition, in recognition of the reduced percentage allocable to Mr. Siegel, the overall Adjusted EBITDA bonus pool has also been +reduced to reflect the lower percentage allocable to Mr. Siegel and to reduce overall compensation costs for Patterson-UTI on a dollar-for-dollar basis. Using this reduced percentage would have resulted in 2014 in a more than $1 million reduction in +Mr. Siegel’s cash compensation, and a more than $2.5 million reduction in the equity awards granted last year, valued as of the grant date, and a more than $3.5 million reduction in total compensation. The Compensation Committee recognizes that +Mr. Siegel has provided hands-on leadership for Patterson-UTI, and its predecessor company, for more than 20 years, through the tenures of four different CEOs, and has provided numerous strategic and operational insights that have added substantial +value to the Patterson-UTI stockholders. +13 +We believe that our compensation program has been successful in aligning the interests of our +management with stockholders and in creating stockholder value. Our equity-based grants are typically made in April of each year and in making these grants we have generally looked to Patterson-UTI’s total shareholder returns through +March 31 of each year. Our total shareholder returns compared to our peer group were as follows, with our management participating in this performance through their equity based compensation: +Ÿ +1 year total shareholder return through March 31, 2015: 65 th percentile +Ÿ +2 year total shareholder return through March 31, 2015: 68 th percentile +Ÿ +3 year total shareholder return through March 31, 2015: 87 th percentile +Ÿ +5 year total shareholder return through March 31, 2015: 84 th percentile +We also note that in circumstances where our total shareholder return has not been in the higher percentiles, management’s realizable +equity compensation has been significantly less than that reported for proxy purposes because of the lower realizable value of the equity based compensation. Accordingly, through our emphasis on equity based and variable compensation we have +historically seen a direct correlation between performance and realizable compensation. +Key Components of Patterson-UTI’s Compensation Program +Short-Term Cash Compensation +(25% to 40% of total direct compensation) +Base Salaries +Ÿ Relatively low fixed +component +Ÿ Less than 10% of the total compensation over the past 10 years +Fixed +Annual Cash Incentive Bonus +Ÿ Variable incentive compensation directly tied to financial +performance (annual Adjusted EBITDA) and the achievement of specific annual milestones (no bonuses are guaranteed, minimum Adjusted EBITDA threshold must be met and payout limited to $5 million per person) +Variable +Long-Term Equity Compensation +(60% to 75% of total direct compensation) +Restricted Stock +Ÿ 30% to 50% of equity based compensation +Ÿ Grant size aligned with prior year’s performance +Ÿ Shares vest over three years +Ÿ Aligns officers with stockholders by tying realized value to share price and facilitating long-term share ownership +Variable +Stock Options +Ÿ 25% to 40% of equity based compensation +Ÿ Grant size (Black-Scholes value) aligned with prior year’s performance +Ÿ Options vest over three years +Ÿ Aligns officers with stockholders by providing no value unless stock price increases from the date of grant and ten year term encourages a focus on longer-term performance +Variable +14 +Performance Units +Ÿ 25% to 35% of equity based compensation +Ÿ No payout unless shareholder return is positive for the three year performance period and, when compared to our peer group, is at or above the 25 th percentile +Ÿ Directly tied to stock performance with the +payout amount based upon total shareholder relative return against our peer group +Ÿ Aligns officers with stockholders by +requiring positive total shareholder return to obtain any payout and by emphasizing the importance of strong relative total shareholder return performance +Variable +2014 Relative Pay Components — Top Four Named Executive Officers +In managing our compensation program for our named executive officers, we have established a number of key +procedural policies and design criteria that we follow. These policies and criteria, which have evolved over the years, incorporate what we believe are best practices and the appropriate way to administer executive compensation for the benefit of +our company and its stockholders. We further believe that our compensation structure strongly links pay and performance through its emphasis on variable compensation based on performance. This link of pay to performance has helped to drive +operational achievements and superior returns that our company has achieved consistently over the past 15 years as noted below. +Long-Term Goals Supported by our Compensation Program +Ÿ Providing quality services for our customers +in a safe and efficient manner +Ÿ Generating strong financial performance for our stockholders +Ÿ Attracting and retaining highly qualified +individuals, with a strong emphasis on teams working together to capitalize on opportunities and solve problems +Ÿ Being a model corporate citizen in the +communities in which we work +15 +Key Governance Policies +Key Design Criteria +Ÿ No re-pricing of options +Ÿ No single trigger severance arrangements +Ÿ No new agreements with tax gross ups in last +five years +Ÿ Claw-back provisions that apply to all executive officers for financial statement restatements +Ÿ Share ownership requirements for our +executive officers and directors +Ÿ Share holding requirements for our executive officers and directors +Ÿ Anti-pledging policy for our executive +officers and directors +Ÿ Anti-hedging policy for our executive officers and directors +Ÿ Stock options have exercise prices equal to +or greater than the market price at time of grant and do not have vesting under one year +Ÿ Team-based compensation model for our top executives +Ÿ Total compensation targeted at the +approximate quartile of performance that is actually achieved +Ÿ Emphasis on variable equity and cash +compensation to link realized compensation to performance +Ÿ 60% or more of total compensation in the form +of long-term incentives +Ÿ We do not provide any perquisites to Named Executive Officers that are not widely available to our other employees +Ÿ The Committee engages an independent compensation advisor +Significant Operational and Financial Achievements over Past 15 Years +Ÿ Our company grew from a small +regional firm to a position of national industry leadership +Ÿ We have grown our fleet of +high-technology drilling rigs +Ÿ We have significantly expanded our pressure pumping business and added substantial pressure pumping horsepower +Ÿ We have diversified our customer and geographical base as well as regional capabilities +Ÿ We have positioned our company to +take advantage of the U.S. shale revolution +Ÿ We increased revenue from $307 million to approximately $3.2 billion in 2014. +Ÿ Our shareholders’ equity +grew from $310 million to approximately $2.9 billion +Ÿ We have returned more than $1.3 +billion back to our stockholders in the form of share repurchases and dividends +Our Business +Patterson-UTI is one of the largest land contract drilling companies in the United States, with operations in most of the major oil and gas +regions in the continental United States and western Canada. We also are a major provider of pressure pumping services in selected markets within the United States. Our industry is subject to wide swings in activity based on oil and natural gas +prices, demand for oil and natural gas and general economic activity. The North American oil and natural gas industry has experienced a significant transformation in recent years due to technological advances in the horizontal drilling and +completion of oil and natural gas wells. Today, approximately three-fourths of U.S. land drilling is focused on these types of wells, which typically require higher specification rigs and large amounts of horsepower for pressure pumping equipment. +During the last few years until the second half of 2014, oil prices were in the $80-100 per barrel range and natural gas prices were in the $2.00-4.00 per mcf range, which resulted in U.S. drilling activity becoming increasingly focused on +the exploration and development of oil and liquid hydrocarbon reservoirs versus natural gas. +16 +Recent Developments +Ÿ The WTI crude oil price averaged +approximately $92 per barrel for the five year period ended December 31, 2014 +Ÿ For 2014, WTI crude oil prices +peaked at $107.95 per barrel on June 20, 2014 +Ÿ In 2014, our stock price +increased 49% to $37.73 as of July 25, 2014 +Ÿ The WTI crude oil price declined +in the second half of 2014 and closed at $53.45 on December 31, 2014 +Ÿ In late 2014, our customers began +reducing their drilling activities in response to the sharp decline in crude oil prices +Ÿ Also in response to the crude oil +price decline and expected activity reductions, an industry-wide decline in stock prices occurred and our stock price declined to $16.59 as of December 31, 2014 +Ÿ The WTI crude oil price has +continued its decline in 2015 and reached a multi-year recent low of $43.39 on March 17, 2015 +Ÿ Our stock price declined to a +recent low of $13.65 on January 15, 2015 and closed at $22.49 on April 15, 2015 +Ÿ Our U.S. rig count declined from +207 rigs operating at December 31, 2014 to 132 rigs operating as of April 15, 2015 +Response to Recent Developments +Ÿ In anticipation of this industry +downturn, our management began reducing our cost structure in the fourth quarter of 2014 +Ÿ In 2015, we have continued to +reduce our cost structure and, to date, have reduced our drilling headcount at a rate in-line with the reduction of our rig count +Ÿ Our capital expenditure plans for +2015 have been reduced +Ÿ We now plan to only build new drilling rigs that are currently committed under term contracts +Ÿ We believe our company is +positioned well for the current downturn with: +Ÿ approximately $1.5 billion +of drilling revenue backlog as of December 31, 2014, and +Ÿ liquidity as of March 31, +2015 that includes $86.9 million of cash and almost $500 million available under our revolving credit facility +Progress on Long-Term Strategic Plan +In 2009, our Board adopted a long-term strategic plan that was designed to position our company for the future in light of the “shale +revolution.” Our plan contemplated an aggressive upgrade of our drilling rig fleet to address the need for higher specification equipment and an expansion of our pressure pumping business to participate in the growing hydraulic fracturing +market for horizontal wells. On the contract drilling side of our business, we sought to add new, high technology rigs to our rig fleet over a multi-year period, increase and protect our contract drilling market share in our key markets and +diversify our customer base. We also sought to become a recognized provider of high-end pressure pumping services in the markets in which we participate. In addition, our strategic plan focused on providing excellent value to our customers, being +nimble both in operations and in strategic decisions, and providing superior returns to our stockholders. Our Board has reviewed the long-term strategic plan each year to assess both our progress on the plan and any need for changes in the plan. +Since the beginning of 2009, we have expended over $5.0 billion for capital expenditures and acquisitions in our core businesses, +resulting in the addition of 118 new, high technology rigs and the upgrade of many of our existing rigs to serve the horizontal well market. We financed this growth primarily with internal cash flow and provided a financial underpinning for our new +build program through term contracts. Importantly, during 2014, more than 70% of our drilling earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) came from the operation of our new, advanced technology APEX ® rigs, demonstrating the significance of the strategic change we have undergone. +17 +During this same period, we also dramatically increased both the size and geographic footprint of +our pressure pumping business, which is an important core business. In October 2010, we completed an acquisition of pressure pumping assets, which essentially doubled the size of our fleet and expanded our operations into the Southwest. In 2011 and +2012, we added substantial capacity through internal organic growth and modestly expanded our fleet again in 2013. In 2014, we purchased new equipment and completed two acquisitions of pressure pumping assets, such that we have increased the +horsepower of our pressure pumping fleet by more than eight-fold since the beginning of 2009. These efforts resulted in a pressure pumping business that achieved its five highest revenue years during the last five years, including then-record +revenues in 2013 and record revenues in 2014. +In 2013, our Board and management engaged in a thorough, detailed review of our strategic +direction, including: +Ÿ +Accomplishments since 2009, +Ÿ +The competitive landscape, +Ÿ +Opportunities to improve execution, +Ÿ +An evaluation of international markets, and +Ÿ +An evaluation of complementary service businesses. +Our Board determined that excellent +progress had been made on the initial strategic plan and determined to continue the development of our two core businesses, contract land drilling and pressure pumping. Our Board also endorsed expenditures to evaluate and prepare for international +growth opportunities. Lastly, we retained our focus on providing excellent value to our customers, being nimble both in operations and in strategic decisions and providing superior returns to our stockholders. +In 2014, we continued to make significant progress in executing on our strategic direction. See Significant 2014 Accomplishments below. +Our efforts have translated into solid financial performance and growth since 2009. As seen in the chart below, our average revenue for the +past three years (2012 through 2014) has grown by 79% as compared to the three prior years (2009-2011), and our average Adjusted EBITDA has increased by 70% during that same period. For more information about our business, please see +“Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K filed with the SEC on February 12, 2015. +18 +2014 Financial and Business Highlights +See Recent Developments and Response to Recent Developments earlier in this CD&A for information about the recent industry environment and +its impact on Patterson-UTI. +As shown in the table below, 2014 was another year of significant accomplishments for our company. +In 2014, we achieved the highest revenue in our company’s history, record revenue in our +pressure pumping business, and the third highest level of Adjusted EBITDA — despite the significant decrease in oil prices during the second half of 2014. We had another year in which we continued to demonstrate a strong safety culture and +significantly improved our overall operational performance. Moreover, in 2014, Patterson-UTI continued to increase its organizational capability and improve its workforce through innovative recruiting and training programs. We also returned over $70 +million to our stockholders during 2014 and invested over $1.2 billion in capital expenditures and acquisitions. +We continued our +focus on financial discipline and effective capital management and maintained our strong balance sheet. Maintaining a flexible and conservative capital structure, along with a strong liquidity position, provides us with a protective cushion to +operate through difficult market conditions, as well as the ability to take advantage of new opportunities when they arise. In sum, Patterson-UTI’s businesses experienced excellent levels of performance, and Patterson-UTI is in a solid +position to address and take advantage of the industry downturn that started late in 2014. +Significant 2014 Accomplishments +Excellent Performance in a Challenging Marketplace +Ÿ +Revenues were $3.2 billion in 2014, a 17% increase over revenues of $2.7 billion in 2013. +Ÿ +Adjusted EBITDA of $1.0 billion in 2014, which was the third highest in our 30+ year history. +Ÿ +Net income of $163 million achieved in 2014. +Ÿ +Stockholders’ equity increased from $2.8 billion in 2013 to $2.9 billion in 2014, despite share repurchases and dividends totaling $76 million. +Ÿ +We continued to demonstrate a strong safety culture. +Ÿ +We significantly improved our APEX ® rig building efficiencies and reduced rig manufacturing costs. +Ÿ +Our contract drilling revenues were $1.8 billion, and we increased our drilling backlog by 63% during 2014 to approximately $1.5 billion. +Ÿ +We completed 21 new APEX-XK TM rigs, bringing our total fleet of APEX ® rigs to 145 as of the end of 2014. +Ÿ +We maintained a leadership position in natural gas and bi-fuel powered rigs and pressure pumping equipment. +Ÿ +We completed two acquisitions of pressure pumping assets totaling 180,000 hydraulic horsepower and increased our pressure pumping horsepower to approximately 1.0 million hydraulic horsepower. +Ÿ +Our pressure pumping business maintained reasonable margins and profitability despite continued oversupplied industry conditions and intense competition. +Ÿ +We significantly upgraded our supply chain organization with the addition of experienced professionals who have implemented further cost control along with other value-added processes. +Ÿ +We continued to improve and implement new recruiting and training programs to enhance the quality, diversity and retention of our workforce. +Ÿ +We continued to build our international organization with the establishment of legal entities, hiring of employees and engagement with prospective customers. +Ÿ +We doubled our quarterly dividend to $0.10 per share, further returning cash to our stockholders. +CEO Total Compensation Aligned With Performance +The compensation of our CEO and our other Named Executive Officers is heavily dependent upon performance, including our performance relative to +our peers. Consequently, there is potential for significant variation in reported compensation for our Named Executive Officers depending upon how the Company has performed over the prior one- and three-year periods. +19 +The table and chart below demonstrate this potential variation, applied to CEO compensation for +2014. We have compared actual CEO compensation, which resulted from top-quartile performance, to hypothetical CEO compensation assuming 50 th percentile and 25 th percentile performance of total shareholder return, revenue growth and Adjusted EBITDA. As shown, total compensation — particularly long-term incentive compensation — would have varied +significantly from what was actually approved, had the Company not performed in the top quartile for three year total shareholder return for the three year periods ended March 31, 2014 and March 31, 2015. +Component of Pay +2014 Compensation +Actual Performance +Above 75 th Percentile +2014 Compensation: Hypothetical Performance +Median/50 th Percentile +25 th Percentile +Base Salary +$ +600,000 +$ +600,000 +$ +600,000 +Annual Cash Incentive for 2014 +Performance +(2) +$ +1,912,639 +$ +1,515,000 +$ +1,165,000 +2014 Long-term Incentive Value +(3) +$ +4,758,559 +$ +3,200,000 +$ +1,700,000 +“Other” Compensation +(4) +$ +10,400 +$ +10,400 +$ +10,400 +2014 Total Direct +Compensation +$ +7,281,598 +$ +5,325,400 +$ +3,475,400 +Payout of 2012 – 2015 Performance +Units +(5) +200% of target +0% of target +0% of target +Performance Assumption +3 year +TSR 3/31/2014 +3 year TSR 3/31/2015 +1 year revenue growth (2013 to 2014) +Adjusted EBITDA as a percent of revenue (2014) +90 th percentile +87 th percentile +17% +31% +50 th percentile +50 th percentile +11% +26% +25 th percentile +25 th percentile +9% +21% +(1) +The hypothetical information in this graph and the table below was prepared by Pearl Meyer & Partners, the Compensation Committee’s compensation consultant, based on market data provided by S&P Capital IQ. +(2) +Annual cash incentive payouts for the 50 th and +25 th percentile performance hypothetical scenarios assume the Company’s revenue growth and Adjusted EBITDA as a percent of revenue match the actual results of the +20 +peer group at the 50 th and 25 th percentiles, respectively. We have assumed no change in +the approved Adjusted EBITDA payout percentage, although actual annual cash incentive payout would remain subject to further evaluation of the Adjusted EBITDA payout percentage by the Committee in light of actual performance and would be expected to +be lower after adjustment by the Committee as a result of the lesser performance. Hypothetical information was prepared by Pearl Meyer & Partners based on market data provided by S&P Capital IQ. +(3) +Long-term incentive grant value is reviewed and determined by the Committee generally based upon the Company’s relative performance through the end of the most recent 1, 2, 3, and 5 year periods ended +March 31. For the hypothetical scenarios, these same calculations were applied to determine the 50 th and 25 th percentile grant values for +our CEO, using our team-based approach. Hypothetical information was prepared by Pearl Meyer & Partners based on market data provided by S&P Capital IQ. +(4) +Other compensation includes only matching 401(k) contributions. +(5) +Had performance been at the peer group 50 th or 25 th percentile in terms of relative total shareholder return +performance through the end of the most recent performance period (3/31/2012 — 3/31/2015), our total shareholder return would have been negative and no payout would have been allowed under the performance unit agreements, regardless of +our performance relative to peers . +Alignment of Realized Long-Term Incentive Value with Performance +While grant date long-term incentive values approved by the Committee vary based upon our performance relative to peers, the realized value of +long-term incentive — including the impact of changes in our stock price — can vary significantly depending upon both our relative and absolute total shareholder return performance. +We believe that the compensation realized by our executive officers is well aligned with our performance. In order to demonstrate the alignment +of realizable pay with performance relative to peers, we compared: +(1) +realizable long-term incentive value as a percent of grant date/target value for the three-year period from March 2012 — March 2015, and the five-year period from March 2010 — March 2015, to +(2) +our performance relative to our peer group over the same two periods. +Components of Relative Alignment Review +Target/Grant Date Value +Realizable Long-term Incentive Value +Stock +Options +Grant date value of target annual award +In-the-money value of options granted during period — valued at 3/31/2015 +Restricted Stock +Grant date value of target annual award +Value of all shares granted during period at 3/31/2015 +Performance Units +Grant date value of target annual award +Ÿ Amount earned: for plans granted and earned based on performance during period +Ÿ Target award: for plans +granted during period but still outstanding at end of period — valued at 3/31/2015 +21 +As shown in the two charts below, as a result of the precipitous industry-wide decline in stock +prices that began in the second half of 2014, realizable long-term incentive value for our top four Named Executive Officers fell below the expected “fairway” and below 100% of the original grant date value, despite our strong performance +relative to peers during the period shown on the charts. This outcome further demonstrates the alignment of our executive compensation program with the interests of our stockholders. See Recent Developments earlier in this CD&A for discussion of +the Company’s recent stock performance. +Top Four Named Executive Officers Realizable Long-term Incentive Value Versus +Performance Against Peers +Consideration of Last Year’s “Say on Pay” Vote +In 2011 our Board recommended an annual advisory (nonbinding) vote on executive compensation that received 87% support, including abstentions +and excluding broker non-votes, and therefore determined to hold advisory (nonbinding) votes on executive compensation annually. We have reviewed the results of the stockholder “say on pay” advisory vote with respect to the 2013 +compensation actions and decisions for our Named Executive Officers set forth in the CD&A, the summary compensation table and the related compensation tables and narratives in last year’s proxy statement. Seventy-seven percent of the votes +cast (including abstentions and excluding broker non-votes) on the proposal voted in support of our compensation structure as described in the last year’s proxy statement. Based upon this level of support, as well as the Committee’s +assessment of the current program and its success in aligning the pay of our executives with our strategy, our financial performance, and the interests of our stockholders, the Compensation Committee made no material changes to the general structure +and philosophy of compensation for the Named Executive Officers for 2014. However, in light of the evolving roles of Mr. Siegel and Mr. Hendricks as noted above, Mr. Siegel and the Compensation Committee jointly determined to make the changes +described above to Mr. Siegel’s compensation for 2015. +The Committee values stockholder feedback and carefully considers that +feedback regarding our executive compensation program. Stockholders are invited to express their views to the Committee as described under the heading “Communication with Directors” in this proxy statement. The advisory vote on the +compensation of the Named Executive Officers provides stockholders with an opportunity to communicate their views on our executive compensation program, and we will consider those views in structuring our compensation arrangements. +You should read this CD&A in conjunction with the advisory vote that we are conducting on the compensation of the Named Executive Officers. +This CD&A, as well as the accompanying compensation tables, contains information that is relevant to your voting decision. +Compensation Philosophy +and Objectives +Our overriding philosophy for the compensation of our key executives is to link their compensation with the operational +and market performance of the Company and to establish incentives that reward them for their efforts +22 +in achieving both short-term tactical and long-term strategic objectives. In doing so, we seek to offer competitive compensation packages designed to attract and retain highly qualified +individuals and to motivate and reward our executives in achieving the Company’s goals. Our executive compensation program also seeks to reward excellence in performance and foster a collaborative team framework among our top executives. +Key Compensation Principles and Objectives +Our executive compensation program has historically emphasized the following key principles: (i) low comparative base compensation with +variable incentive cash compensation based on financial results, (ii) emphasis on equity-based compensation for long-term value creation and (iii) team compensation and incentives. +Emphasis on Long-Term Incentives +Our compensation program places a strong emphasis on creating long-term value through the use of long-term incentives. We seek to achieve a +proper balance in our compensation program between long-term and current compensation by using a combination of time-vested and performance based equity awards for long-term incentives and fixed and variable cash for short-term incentives. Our +compensation arrangements take into account the cyclical and volatile nature of our industry. +Our long-term incentive compensation relies +on equity-based awards, rather than cash, as a means of aligning the interests of management with the Company’s stockholders. Historically, equity awards for long-term incentives have represented between 60-75% of total compensation, while +fixed and variable cash for short-term incentives has typically represented between 25-40% of total compensation. Variations in these percentages may occur due to either an exceptionally strong or weak year in which the Company’s Adjusted +EBITDA and related cash bonus compensation fluctuate in tandem or there is market volatility affecting the grant date valuation of options and performance units using the methodologies required for reporting equity based compensation. +In 2014, the mix between long-term equity awards, and fixed and variable cash and short-term incentives, for our top four Named Executive +Officers was within our targeted range at 67% and 33%, respectively. +2014 Split Between Short-Term Compensation +(Fixed-Salary and Annual Cash Incentive) and Long-Term Compensation +(Top Four Named Executive Officers) +Cash Compensation Emphasizes Low Base Salaries with Higher Variable Cash Compensation Tied to +Financial Results +We have designed the cash component of our compensation program to be mostly variable by using comparatively low +base salaries and potentially higher cash bonuses tied to the Company’s Adjusted EBITDA. We enacted this program over ten years ago whereby we target a percentage of total Adjusted EBITDA for a potential executive management bonus pool that is +then allocated among the top executive officers. Our allocation in 2014 was a team bonus potential of up to 0.81% of Adjusted EBITDA, which was allocated among the top four Named Executive Officers. No bonuses are guaranteed under this program and +no bonuses will be paid unless a minimum Adjusted EBITDA threshold is achieved. If this performance goal was achieved, then the Compensation Committee was authorized to approve payments up to the maximum permitted payout of $5 million in a year or, +if less, the amount determined using the percentage of Adjusted EBITDA set by the Compensation Committee. +23 +For 2014, the Compensation Committee set a targeted Adjusted EBITDA percentage range of 0.55% to +0.81%. The actual percentage of 0.70% awarded was based on the Compensation Committee’s assessment of the Company’s and executive management’s progress toward achievement of certain strategic and other objectives and took into account +both the strategic and operational successes during the year as well as the impact in the fourth quarter of the significant market decline. The range set for 2014 was the same range that was used in 2013, with the ability of the Compensation +Committee to flex the actual payment based on performance. Based on the changes to Mr. Siegel’s compensation for 2015 in light of the evolving roles of Mr. Siegel and Mr. Hendricks, the effective Adjusted EBITDA percentage range for 2015 +will be approximately 0.47% to 0.69% of Adjusted EBITDA, reflecting the decline in Mr. Siegel’s sharing percentage. Other participants’ payout amounts will not increase or decrease as a result of the change. +The Compensation Committee has regularly adjusted the actual payout based on performance and results, giving consideration to non-Adjusted +EBITDA considerations such as team performance in executing on strategic goals, success in reducing costs of rig manufacturing, safety performance, market share improvements, margin and revenue per day results on an absolute basis and against direct +competitors, supply chain execution, steps to improve international growth and operational and financial successes. We do not provide a total shareholder return component to this component of variable compensation, as this component is focused on +specific financial performance, and our equity based compensation has a significant component tied to total shareholder return. +We do not +typically make changes to the base compensation of our top Named Executive Officers from year to year to promote the idea that management should not be focused on the fixed component of their compensation, but rather they should expect that variable +compensation — tied to the Company’s performance — will be the most significant part of their cash remuneration. +We believe +that the use of lower market-based salaries with higher variable bonuses aligns our executives’ annual cash compensation with our actual financial results. During periods of low earnings, such as we had in 2009 and is possible in 2015 due to +very challenging market conditions, total cash compensation will be materially lower and typically be in the lower quartiles against our peers but reflective of our results. During periods of higher earnings, such as we experienced in 2011-2014, +cash compensation will typically be in the top quartiles and be reflective of the Company’s higher cash generation. Accordingly, we look at our compensation program as a multi-year program that is targeted to provide cash compensation to our +top four Named Executive Officers that is (i) aligned with changes in earnings from year to year, and (ii) on a full cycle basis aligned with stockholder returns compared to our peers. +24 +Total executive compensation for our top four Named Executive Officers decreased in 2012 +primarily as a result of our Chief Executive Officer not receiving any equity compensation grants that year due to his notification to us of his desire to retire later that year. +Although there will be years where the cash compensation paid to our executives will be in the higher quartiles and our relative stock +performance may be at a lower quartile or vice versa, this result generally will occur during a period of transition within the industry where there exists a lag between market expectations and current activity. A good example of this was at the end +of 2008 when our drilling activity and operating results were at high levels, but the public market valuations of land drillers and pressure pumpers was falling on the expectation of a severe downturn that occurred months later in 2009. The same +conditions were also present at the end of 2014 when we generated record quarterly revenue and record revenues in our pressure pumping business, but our stock price was falling on the expectation of the current severe downturn. +We have considered in the past the use of more traditional bonus plans tied to annual budgets and performance against those budgets. We, +however, have concluded that given the extreme volatility in our industry those plans do not provide the incentives that we seek to achieve and could in fact create incentives for our management to focus only on the short-term. By tying a meaningful +portion of the top four Named Executive Officers’ compensation to Adjusted EBITDA, we believe their short-term cash compensation adjusts more quickly to actual financial performance, resulting in a better alignment with the stockholder’s +interests than occurs under a program tied to a budget or projected financial results. During periods of low earnings, such as is possible in 2015 due to very challenging market conditions, total cash compensation will be materially lower and +typically be in the lower quartiles against our peers but reflective of our results. +Emphasis on Equity for Long-Term Incentive +Compensation +We have historically targeted 60% or more of total compensation to be in the form of time-vested equity or +equity-based awards. This emphasis on equity-based compensation is aimed at aligning the financial interest of the top four Named Executive Officers with our stockholders and the total returns provided to stockholders. We believe that by making a +large portion of compensation tied to equity, our top four Named Executive Officers can only fully realize the potential benefits of the compensation if our stockholders also benefit. +Over the years we have adjusted the form of the equity incentives we provide to our top four Named Executive Officers from solely options to a +mix of options, restricted stock and performance units. We believe that this mix allows us to tailor our program to encourage the building of long-term value and, in the case of performance units, achievement of positive stockholder returns in +excess of our peer group. +The following charts set forth the allocation of the various forms of long-term equity-based incentives that we +have granted the top four Named Executive Officers from 2010-2014 and the allocation of these incentives that we used for 2014: +25 +Award Type +Discussion +Key Benefits to Stockholders and +Stockholder Alignment +Restricted Stock +We consider restricted stock as an additional form of basic compensation that provides value to the executive only if the executive remains in the employment of the Company during the +vesting period, with that value being subject to increases and decreases in value depending on the performance of our stock. We typically target restricted stock awards to represent approximately 30-50% of total equity-based compensation depending +on stock prices and volatility at the time of grant. +Ÿ Value dependent upon stock price +performance +Ÿ Enhances retention of executive talent +Ÿ Encourages long-term share +ownership +Stock Options +Stock options provide value to the executive only if the value of the Company’s stock appreciates. Consequently, we consider these awards to be performance-based. When we approve +grants of options to our executives, we take into account a number of different factors, including the stock price at the time of grant, the expected value of the option grant and prior option grant amounts. We typically target stock options to +represent 25% to 40% of total equity-based compensation. +Ÿ Inherently performance-based +Ÿ Value contingent upon positive +stock price performance +Ÿ Ten year term encourages a focus on longer-term performance +Performance +Units +We added performance units to the mix of equity-based compensation in 2009. We added this component in lieu of a portion of restricted stock and options that we would have otherwise +granted. Our use of performance units is intended to provide a direct link in the compensation of our top four Named Executive Officers to both the absolute performance of our stock and relative performance compared to our peer group. This component +will only have a payout if total shareholder return is positive for the performance period and, when compared to the peer group, is at or above the 25 th percentile. This component assures that the +value provided to those Named Executive Officers will not be created solely by an increase in stock price due to favorable market conditions, while it also provides an incentive to continue to outperform peers even in down cycles for the market or +our industry. We typically target performance units to represent 25% to 35% of total equity-based compensation. +Ÿ Performance-contingent +Ÿ Payout contingent on positive +stockholder returns and satisfying relative performance standards +Ÿ Value of shares dependent upon +stock price +We have considered the potential risks associated with tying a large portion of executive compensation to +equity. We do not believe that our program creates unreasonable risks for the following reasons: +Ÿ +The long-term nature of our equity based awards and the required vesting periods help minimize the potential for excessive risk taking and actions aimed at short-term stock gains. +Ÿ +Our use of different types of equity grants, in particular restricted stock, helps offset these risks. +Ÿ +We have meaningful share ownership guidelines. +Ÿ +We maintain an anti-hedging policy. +Ÿ +We maintain a clawback policy that applies to all of our executive officers for both cash and equity incentives. +Ÿ +Three of the top four Named Executive Officers have been with the Company for more than fifteen years and have an established track record of focus on growing long-term sustainable growth for the Company. +Our Board has also considered in its risk assessment of our executive compensation program its view that our management is +highly ethical and focused on creating true long-term value for stockholders and not focused on just short-term gains. The Board and its appropriate Committees monitor and consider risks associated with the Company’s compensation plans on a +regular basis. +26 +Team Compensation Structure +Our senior executive management has had the philosophy that they operate as a team, with each member being an important part of the team. As a +result, for more than the past ten years they have requested, and the Board has agreed, that as a general proposition our awards of cash and equity incentive compensation should be pooled and allocated among them as a team. Although the allocations +among the team members have changed over time due to changes in the executive management team and responsibilities, the allocations among the existing team have generally remained consistent. With the change in Mr. Siegel’s compensation for +2015 as noted above, the allocations will change in 2015. +In the past five years, when allocating the incentive compensation among our top +four Named Executive Officers, we have allocated 4/11 th to Mr. Siegel, our Executive Chairman, 3/11 th to Mr. Hendricks or his +predecessor, our President and Chief Executive Officer, and 2/11 th to each of Mr. Vollmer, our Senior Vice President-Corporate Development, Chief Financial Officer and Treasurer, and +Mr. Berns, our Senior Vice President, respectively. For 2015, the Compensation Committee has determined that, except for the changes described earlier providing for a lower allocation for Mr. Siegel and reduction in the overall bonus pool to +reflect that lower allocation, the allocation of annual cash incentive compensation among the top four Named Executive Officers will be the same as 2014. +We believe that the team-based approach for compensating our top four Named Executive Officers fosters effective decision-making and +collaborative efforts in executing Patterson-UTI’s long-term strategic and short-term tactical objectives. This approach has worked well for Patterson-UTI for over ten years. We expect to maintain this approach in the future, although we will +continue to monitor the team compensation approach to make sure that it continues to work in practice. +Board and Committee Processes and Policies for +Compensation Decisions +Committee Review Process +The Board of Directors has delegated the management of the Company’s executive compensation programs to the Compensation Committee. The +Compensation Committee meets on a regular basis to consider compensation matters and to review how the Company’s plans and policies work in practice. Each of the Committee’s current members is an independent director as defined by the +Nasdaq listing standards. +Compensation determinations and equity awards are conducted through a process that solicits the input from +management through Mr. Siegel as our Executive Chairman as well as from outside compensation consultants retained by the Compensation Committee. In addition to the recommendations of management and consultants, the Compensation Committee +considers reported trends in compensation, internal budgets, historical data for the Company and its peers, strategic planning updates and other information that it considers relevant. +Role of Chairman in Compensation Decision Process. Our Chairman periodically provides the Compensation Committee +with his review of the performance of other executive officers, including the other Named Executive Officers. The Compensation Committee also engages him in an annual dialog with our Committee Chairman and our Lead Director on our compensation +program and seek his input on and review of proposals for long-term incentive grants. This process results in a recommendation that is considered by our Compensation Committee as a whole. +Use of Independent, Outside Compensation Consultants. Our Compensation Committee regularly utilizes outside +compensation consultants in assessing and designing our executive compensation program. These consultants are paid on a basic fixed fee structure plus expenses. These outside consultants provide data and advice on historical compensation and +stockholder returns, market trends and peer compensation practices. The Compensation Committee has retained Pearl Meyer & Partners (“Pearl Meyer”) as its consultant and advisor for executive compensation matters since 2012. +27 +Our Compensation Committee regularly reviews the services provided by its outside consultants and +has determined that Pearl Meyer is independent in providing executive compensation consulting services. In making this determination, our Compensation Committee noted that during 2014: +Ÿ +Pearl Meyer did not provide any services to the Company or management other than services requested by or with the approval of the Compensation Committee, and it its services were limited to executive compensation +consulting and the Company’s participation in drilling management compensation surveys. Specifically, Pearl Meyer does not provide, directly or indirectly through affiliates, any non-executive compensation services, including pension +consulting or human resource outsourcing. +Ÿ +Fees we paid to Pearl Meyer were less than 1% of Pearl Meyer’s total revenue; +Ÿ +Pearl Meyer maintains a conflicts policy, which was provided to the Compensation Committee with specific policies and procedures designed to ensure independence. +Ÿ +None of the Pearl Meyer consultants working on Company matters had any business or personal relationship with Compensation Committee members. +Ÿ +None of the Pearl Meyer consultants working on Company matters (or any consultants at Pearl Meyer) had any business or personal relationship with any executive officer of the Company. +Ÿ +None of the Pearl Meyer consultants working on Company matters directly own Company stock. +The +Compensation Committee continues to monitor the independence of its compensation consultant on a periodic basis. +In 2014, Pearl Meyer +provided the Compensation Committee with information on the compensation practices of our peer group and other oilfield service companies and on the reasonableness of our program as compared to the compensation practices of our peer group. In so +doing, Pearl Meyer provided the Compensation Committee with information on each element of the total compensation of our executive officers as well as a comparison of our compensation against our peers based on data gathered from proxy statements +and other SEC filings. This comparison provided the Compensation Committee with various comparative market levels of compensation for our executive management team as well as a comparative position for each executive officer. Pearl Meyer also +provided the Compensation Committee with information on the cost and potential dilution to our stockholders of our equity-based incentives and compared that to our peer group. +When reviewing the peer compensation data provided to the Compensation Committee by its consultants, the Compensation Committee has generally +given greater weight to the comparative data for the team as a whole versus the data for individual positions at our peers given the team management approach followed by us as described above. We have found that total compensation for our top four +Named Executive Officers as a group has typically been between the 50-75 th percentile range depending on the year (a range of outcomes that is aligned with our performance relative to peers). +Although the Compensation Committee looks to various percentile ranges of compensation based on potential performance when setting compensation, the Compensation Committee does not target specific total compensation due to its emphasis on variable +compensation. +We have also found that under our team-based approach there has typically been a shift of compensation from the top two +Named Executive Officers to the rest of the team. +28 +Peer Group. In 2014 we used the following peer group for +compensation matters: +Ÿ Atwood Oceanics +Inc. +Ÿ Basic Energy Services, Inc. +Ÿ Diamond Offshore Drilling +Inc. +Ÿ FMC Technologies Inc. +Ÿ Helmerich & Payne +Inc. +Ÿ Nabors Industries Ltd. +Ÿ Noble Corp. +Ÿ Pioneer Energy Services Corp. +Ÿ Rowan Companies Inc. +Ÿ Weatherford International Ltd. +Ÿ Baker Hughes +Incorporated +Ÿ Cameron International Corporation +Ÿ Ensco plc +Ÿ Halliburton Company +Ÿ Key Energy Services, Inc. +Ÿ National Oilwell Varco Inc. +Ÿ Parker Drilling Company +Ÿ Precision Drilling Corporation +Ÿ Transocean Ltd. +Ÿ Unit Corp. +Our peer group for 2014 was selected in an effort to provide a broad base of companies of different sizes that +are involved in the markets that we compete or to which we believe our investors compare us with or benchmark our results against. The Committee reviews our peer group annually to determine whether changes should be made to the group. Importantly, +our peer group included Helmerich & Payne, Inc. and Nabors Industries, Ltd., which are our nearest direct competitors in domestic land drilling services, and other comparable drilling companies such as Atwood Oceanics Inc., Basic Energy +Services, Inc., Diamond Offshore Drilling, Inc., Ensco, Inc., Noble Corp., Parker Drilling Company, Pioneer Energy Services Corp., Precision Drilling Corporation, Rowan Companies, Transocean Ltd. and Unit Corp. +Our peer group also included Baker Hughes Incorporated, Halliburton Company and Weatherford International Ltd., which are sizeable competitors +of ours in the North American pressure pumping service market; Basic Energy Services, Inc. and Nabors Industries Ltd. are also competitors in this business. We are not aware of any public company primarily in either business that is similarly sized +to us and not included in our peer group. The remainder of our peer group included other energy service and manufacturing companies (some larger and some smaller than our company) with which we are often compared by investors, such as Cameron +International Corporation, FMC Technologies, Inc., Key Energy Services, Inc. and National Oilwell Varco Inc. +Many of the companies we view +as our most direct competitors in both land drilling and pressure pumping are companies significantly larger than us in market capitalization. Although many of these companies have a larger market capitalization than we do, we compete with them for +talent and customers. In fact many of our executive management have worked at the larger oilfield service companies before working with us. Our current CEO was recruited from Schlumberger and our prior CEO was recruited from Baker Hughes. +Cash Compensation +The Committee will generally review base compensation and the terms for bonus cash compensation for management in the fourth quarter of the +preceding year or in the first quarter of the year. When reviewing cash compensation the Committee will look at the total cash compensation received by the executives over a multi-year period, as well as the total cash compensation projected for the +current year. This approach allows the Committee to look at the cash compensation paid over a full cycle in order to obtain comparable data for benchmarking purposes. +The Committee also annually establishes the performance criteria for the cash bonus compensation paid to the Company’s executives in order +to meet the requirements for the performance-based compensation exception to the limitation on deductions under Section 162(m) of the Internal Revenue Code (as further described elsewhere in this proxy statement). Although a wide range of +criteria may be used, the criterion used historically has been the achievement of a threshold Adjusted EBITDA amount. The Compensation Committee makes regular adjustments to the threshold Adjusted EBITDA amounts in light of market conditions and the +growth in our businesses. +29 +Equity Compensation +The Compensation Committee’s practice for grants of equity-based compensation has generally been to consider the grant of stock options, +restricted stock and performance units to executive management following the conclusion of our first quarter. This grant is typically made in conjunction with regular quarterly Board meetings held prior to the Company’s public release of its +quarterly earnings. This timing also allows the Compensation Committee to receive market data from its consultants for prior year grants. Although this process does not result in calendar year comparisons for purposes of total shareholder return and +other calculations, the Compensation Committee believes that having year-end information allows it to make more informed decisions and the use of a consistent grant cycle for equity reduces risks associated with equity grants made on a random basis. +Patterson-UTI is able to obtain and use relevant peer data for calculating our peer total shareholder returns and reviewing comparable grants of equity based compensation. +When making grants of equity-based compensation, the Compensation Committee considers a number of factors, including competitive peer data, +prior year grants (both in terms of number of shares and total value), and potential dilution impact and current and historical stock prices. The Compensation Committee also takes into consideration the advice of its consultants as to peer and +market practices on the use and mix of restricted stock, options and performance units. +For restricted stock and stock options granted to +the top four Named Executive Officers, these awards are subject to three-year vesting with one-third vesting after the first year and 1/36th of the grant vesting each month over the next two years. The restricted stock grants also have a +performance-based vesting component, which for 2014 required that the Company achieve Adjusted EBITDA of at least $400 million for the nine months ended December 31, 2014, $500 million for the twelve months ended December 31, 2015 or $500 +million for the twelve months ended December 31, 2016. The performance units granted in 2014 are to be settled with shares of stock, with the number of shares to be issued based on the Company’s total stockholder return at the end of the +third year following the grant relative to the total stockholder return for our peer group of companies. Subject to a limited change of control exception, no payout will be provided on the performance units granted in 2014 unless total shareholder +return is positive for the performance period and, when compared to our peer group, the Company’s relative total stockholder return is at least at the 25 th percentile. +We have also adopted the following additional practices regarding equity grants: +Ÿ +Grants will not vest in less than one year. +Ÿ +Options will not be re-priced or exchanged. +Ÿ +Equity grants are subject to claw-back in the event that the Board learns that any misconduct by the Named Executive Officer contributed to the Company having to restate all or a portion of its financial statements. +Ÿ +Options are to have exercise prices equal to or greater than the fair market value on the date of grant. +Ÿ +Performance targets are not to be modified other than to give effect to acquisition or disposition of businesses or similar structural changes — market condition changes will not result in changes in performance +targets. +Overview of 2014 Performance and Compensation +As noted above under “2014 Financial and Business Highlights,” the Company had an excellent year in 2014 during which significant +progress was realized against our long-term strategic objectives as well as against our short-term operational and financial objectives. These positive results were realized by both of the Company’s core businesses and at the corporate level. +In addition to the financial and operational successes, the Company’s stock performed at between the 65 th and 87 th percentiles against our +peer group during each of the past one, two, three and five year periods ended March 31, 2015. +30 +Cash Compensation +Under the terms of the Company’s cash compensation plan described above, the top four Named Executives Officers earned the following cash +payments in respect of 2014. The payments under the plan were determined using a total bonus pool equal to 0.70% of the Company’s $1.0 billion of Adjusted EBITDA for 2014, reduced from the maximum target bonus potential under the plan of 0.81% +of Adjusted EBITDA. This bonus pool amount reflected the exemplary performance by senior management in 2014 in achieving the Company’s current and long-term objectives, but also took into account a decrease in net income and certain other +measures of performance. As a result, variable cash compensation for 2014 increased 9% for the Named Executive Officers compared to 2013. In accordance with past practice, the bonus pool was allocated among the top four Named Executive Officers as +described under “Team Compensation Structure” above. The Committee had fixed a $500 million minimum Adjusted EBITDA threshold for 2014, which was exceeded. +The Adjusted EBITDA payment percentage approved by the Committee, which was below the maximum allowable percentage for 2014, is subject to an +evaluation of performance measures other than Adjusted EBITDA, such as safety performance. The actual Adjusted EBITDA payment percentage approved for 2014 reflects the following considerations: the team’s performance in executing on our +strategic goals, our continued success in transforming our rig fleet to a higher spec fleet, increasing our pressure pumping capacity and share at an attractive price, reducing costs of rig manufacturing, continued improved safety performance, +market share improvements against competitors, margin and revenue per day results on an absolute basis and against direct competitors, supply chain execution and steps to improve international growth. The payment also took into account improvements +in Adjusted EBITDA after normalizing the effect of our write-offs to our mechanical rig fleet and large termination payments in 2013. The final payout also recognized and provided a lower payout for the down-turn in the fourth quarter and the impact +that the downturn had on what was otherwise on target to be an extraordinary year. +We believe that the design of our program is +particularly well suited to ensure alignment of our Named Executive Officers with our stockholders in the challenging environment we face for 2015, as incentive opportunities for our Named Executive Officers are directly aligned with our level of +profitability rather than how our profitability compares to budget. +CASH COMPENSATION +Name +Salary +Adjusted +EBITDA Incentive +(Percentage of +Company +Adjusted EBITDA) +Variable Cash +Compensation +Based on +Adjusted +EBITDA(1) +Total Cash +Compensation +William A. Hendricks, Jr. +$ +600,000 +0.1909 +% +$ +1,912,639 +$ +2,512,639 +John E. Vollmer III +$ +350,000 +0.1273 +% +$ +1,275,093 +$ +1,625,093 +Mark S. Siegel +$ +350,000 +0.2545 +% +$ +2,550,186 +$ +2,900,186 +Kenneth N. Berns +$ +265,000 +0.1273 +% +$ +1,275,093 +$ +1,540,093 +(1) +The maximum amount that can be awarded to an individual under our cash-based incentive plan during a 12–month period is $5,000,000. In order to reach this maximum amount and assuming a total bonus pool equal to the +top end of the target range (equal to 0.81% of Adjusted EBITDA), Adjusted EBITDA of $2.3 billion in the case of Mr. Hendricks, $1.7 billion in the case of Mr. Siegel and $3.4 billion in the case of Messrs. Vollmer and Berns +would have been needed. We did not establish a target bonus amount for the executives given the variable nature of our plan and its direct relationship to our financial results. The target bonus amount presented in the Grants of Plan-Based Awards +table is calculated for the respective officer based on Patterson-UTI’s actual Adjusted EBITDA for the fiscal year ended December 31, 2014, and the allocation formula applied to the bonus pool for distribution as noted above. +31 +Equity-Based Compensation +The Committee made the following equity-based grants to Messrs. Hendricks, Vollmer, Siegel and Berns, considering the Company’s 2013 +financial results and comparative total shareholder return performance over the one, two and three year periods ended in 2013 and with the objective that these grants would be commensurate with the Company’s percentile performance, based on +information available at the time of grant. +EQUITY-BASED GRANTS +Restricted Stock(1) +Stock Options(2) +Performance Unit +Awards(3) +Total +Value +Name +# Shares +Value +# Shares +Value +# Shares +Value +William A. Hendricks, Jr. +63,750 +$ +2,110,125 +117,750 +$ +1,178,854 +42,000 +$ +1,469,580 +$ +4,758,559 +John E. Vollmer III +42,500 +$ +1,406,750 +78,500 +$ +785,903 +28,000 +$ +979,720 +$ +3,172,373 +Mark S. Siegel +85,000 +$ +2,813,500 +157,000 +$ +1,571,806 +56,000 +$ +1,959,440 +$ +6,344,746 +Kenneth N. Berns +42,500 +$ +1,406,750 +78,500 +$ +785,903 +28,000 +$ +979,720 +$ +3,172,373 +(1) +Shares of restricted stock were awarded on April 22, 2014. The value indicated in the table is the value on the date of grant based on the closing price of Patterson-UTI’s common stock on the date of grant. +(2) +Options were awarded on April 22, 2014. The value indicated in the table was determined using the Black-Scholes option pricing model as of the date of grant. +(3) +Performance Units were awarded on April 22, 2014. The number of shares indicated in the table represents the target number of shares for each respective award. According to the terms of the awards, the actual +number of shares earned by the recipient can range from zero shares to two times the target number of shares depending on how Patterson-UTI performs in terms of total stockholder return relative to its peer group. The value indicated in the table +was determined based on a Monte-Carlo simulation model and represents the estimate of fair value on the date of grant. +The +grant of restricted stock, options and performance units to the top four Named Executive Officers were made following the vesting, term and other criteria described above. +The performance units granted in 2014 to Messrs. Siegel, Hendricks, Vollmer and Berns provide for the issuance of a target of 56,000 shares of +Common Stock to Mr. Siegel, 42,000 shares of Common Stock to Mr. Hendricks and 28,000 shares of Common Stock to each of Messrs. Vollmer and Berns, respectively, if Patterson-UTI’s total stockholder return is positive and, when +compared to the peer group, is at the 50 th percentile and two times the target if at the 75 th percentile or higher. If the Company’s total +stockholder return is positive, and, when compared to the peer group, is at the 25 th percentile, the recipients will only receive one-half of the target number of shares. The grant of shares when +achievement is between the 25th and 75th percentile will be determined on a pro-rata basis. +Total stockholder return for Patterson-UTI for +the 2014 performance unit grants is measured based on $100 invested in Common Stock on the first day of the performance period, with dividends reinvested. The performance period is the period from April 1, 2014 through March 31, 2017. No +shares will be issued in respect of the performance units granted in 2014 unless Patterson-UTI total stockholder return is positive for the performance period and, when compared to our peer group, is at or above the 25 th percentile. +Total Compensation and Relationship to Performance +The Committee considered the advice of Pearl Meyer when establishing its 2014 compensation program. In doing so, the Committee sought to offer +a total compensation package (cash and long-term) for the top four Named Executive Officers as a group that would be commensurate with the Company’s percentile performance versus peers. The Committee looked at financial and relative shareholder +return performance over one, two and three year bases, as noted below, in establishing the long-term incentive equity grants for 2014. When determin- +32 +ing the size of 2014 equity incentive awards in April 2014, the Committee considered the following measures of relative performance for Patterson-UTI against our peers: +Ÿ +1 year Total Shareholder Return through March 31, 2014: 54 th percentile +Ÿ +2 year Total Shareholder Return through March 31, 2014: 96 th percentile +Ÿ +3 year Total Shareholder Return through March 31, 2014: 90 th percentile +Although the Compensation Committee looks to various percentile ranges of compensation based on potential performance when setting +compensation, the Compensation Committee does not target specific total compensation due to its emphasis on variable compensation. +The +Compensation Committee established the 2014 equity incentive awards at a level that would deliver value to the top four Named Executive Officers at an approximate percentile range approximating the total shareholder return percentile that the +Company achieves (as defined by the Committee in consultation with Pearl Meyer). See “CEO Total Compensation Aligned with Performance” earlier in this CD&A. +We believe that Patterson-UTI has a strong and cohesive management team and that the compensation policies that it has implemented provide the +proper mix of current compensation and long-term incentives for building stockholder value. The Company’s above-market performance has supported the use of these policies and aligns the interest of management with the Company’s +stockholders. +With respect to the Company’s executive officers other than the top four Named Executive Officers, the Committee has +historically determined their compensation with a philosophy of using a combination of fixed and variable cash in the form of base salary and cash bonuses for short-term incentives and time-vested equity awards in the form of restricted stock and/or +stock options for long-term incentives. With respect to Mr. Holcomb, who serves as the President of the Company’s contract drilling subsidiaries, the Committee determined his non-equity incentive compensation for 2014 based on the level of +Adjusted EBITDA for the contract drilling business for 2014. The Committee had fixed a $400 million minimum Adjusted EBITDA threshold for the contract drilling business for 2014, which was exceeded. If this performance goal was achieved, then the +Compensation Committee was authorized to approve payment up to the maximum permitted payout of $5 million in a year or, if less, the amount determined using the percentage of Adjusted EBITDA for the contract drilling business set by the Compensation +Committee. In particular, the Committee considered a range of between 0.032% and 0.048% of Adjusted EBITDA for the contract drilling business and determined Mr. Holcomb’s non-equity incentive compensation to be .045% of Adjusted EBITDA for +the contract drilling business based on his individual performance and the following factors specific to the Company’s contract drilling business: +Ÿ +Safety and operational metrics; +Ÿ +Recruiting and training programs; +Ÿ +Generation and retention of customers; and +Ÿ +Development and management of new rig designs and rig construction. +The amount reflects +efforts towards achieving the Company’s current and long-term objectives in its contract drilling business. +Mr. Holcomb’s +equity-based, long-term incentive compensation was awarded in the form of restricted stock that vests in one-third increments over a three year period and is set forth in the “Grants of Plan-Based Awards Table” below. +Retirement Plans +Patterson-UTI offers a 401(k) plan to its employees, including its Named Executive Officers. Participants may contribute a portion of their +base salary to the 401(k) plan, subject to federal limits. Patterson-UTI makes matching contributions up to four percent of each participant’s eligible base salary. The Named Executive Officers of Patterson-UTI are eligible to participate in +the 401(k) plan on the same basis as other employees. Patterson-UTI does not have any other retirement plan. +33 +Other Policies and Practices Supporting Strong Compensation Governance +Share Ownership Guidelines and Stock Holding Requirements for Chief Executive Officer, Other Executive Officers and Directors +Our Nominating and Corporate Governance Committee has enacted share ownership guidelines applicable to all executive officers and +directors of Patterson-UTI. The guidelines require our Chief Executive Officer to own a number of shares of our Common Stock having a value at least equal to five times his or her base salary. The Chief Executive Officer has five years from the +adoption of these guidelines, or the date of appointment to the chief executive position, whichever is later, to satisfy the ownership guidelines. +The guidelines also require officers and directors to hold at all times, subject to a five year phase-in from the date first elected as an +officer or director, at least the following number of shares of Common Stock: +• +President and Chief Executive Officer +Number of shares equal to 5 times base salary +• +Executive Chairman +120,000 shares +• +COO/Senior Vice Presidents +60,000 shares +• +President — Drilling +30,000 shares +• +General Counsel +20,000 shares +• +Chief Accounting Officer +7,500 shares +• +Outside Directors +10,000 shares +• +Non-executive Inside Director +10,000 shares +For purposes of these ownership guidelines, equity incentive awards that have both time-based vesting and +performance-based vesting are counted when the performance-based component has been satisfied. Unvested equity incentive awards that have only time-based vesting are counted and unearned performance-based incentive awards are not counted. In +addition, each executive officer and director is required to maintain ownership of the net after-tax shares of Common Stock acquired from Patterson-UTI pursuant to any equity-based awards received from Patterson-UTI, unless such person has met his +or her individual ownership requirement. +Each of the Named Executive Officers and Directors was in compliance with these guidelines as of +the date of this proxy statement. +Clawback Policy +As provided for in Patterson-UTI’s Corporate Governance Guidelines and set forth in written agreements with its executive officers, +Patterson-UTI has implemented a claw-back policy that allows for the recovery of bonus, severance or incentive based compensation from an executive officer in the event the Board of Directors learns that any misconduct by such executive officer +contributed to Patterson-UTI having to restate all or a portion of its financial statements. The Board will take such action as it deems necessary to remedy the misconduct, prevent its recurrence, and if it deems appropriate based on the relevant +facts and circumstances, take remedial action against such executive officer, which may include requiring the reimbursement of any bonus or incentive compensation awarded to such executive officer or effect the cancellation of stock awards +previously granted to such executive officer if: (i) the amount of the bonus, incentive compensation or stock award was calculated based upon the achievement of certain financial results that were subsequently the subject of a restatement, +(ii) such executive officer engaged in intentional misconduct that caused or partially caused the need for the restatement, and (iii) the amount of the bonus, incentive compensation or stock award that would have been awarded to such +executive officer had the financial results been properly reported would have been lower than the amount actually awarded. +In addition to +a stand-alone policy, Patterson-UTI’s 2005 Long-Term Incentive Plan (the “2005 LTIP”) and 2014 Long-Term Incentive Plan (the “2014 LTIP”) provide that if Patterson-UTI is required to prepare an accounting restatement due to +the material noncompliance of Patterson-UTI, as a result of misconduct, with any financial reporting requirement under the securities laws, or if the participant is one of the persons subject to automatic forfeiture under Section 304 of the +Sarbanes-Oxley Act of 2002, the participant shall reimburse Patterson-UTI that +34 +amount of any payment in settlement of an award earned or accrued during the twelve-month period following the first public issuance or filing with the SEC (whichever just occurred) of the +financial document embodying such financial statement requirement. +Pay for Performance +The Compensation Committee feels that the actual pay received by our Named Executive Officers is appropriately linked to performance and the +results that were achieved, as a significant amount of pay is at risk for our Named Executive Officers under our incentive compensation plan design. +Anti-Hedging Policy +Patterson-UTI has an anti-hedging policy. Our directors and executive officers may not purchase, sell or write options on Patterson-UTI +securities or engage in transactions in other third-party derivative securities with respect to Company securities. +Anti-Pledging +Policy +Patterson-UTI has an anti-pledging policy. Our directors and executive officers may not engage in transactions in which +Patterson-UTI securities are used as collateral for any loan, including, but not limited to, “margin loans” in a brokerage account. +Perquisites and Personal Benefits +The Compensation Committee believes that benefits to executives should generally be aligned with those provided for other employees. No Named +Executive Officer received perquisites totaling more than $10,000, except that Mr. Holcomb received an automobile allowance of $12,000 in 2014. Accordingly, except for the automobile allowance, the perquisites do not meet the threshold that +would require disclosure in the Summary Compensation Table below. +Employment-Related Agreements and Other Matters +Change in Control, Severance and Employment Agreements +Change in Control Agreements and Tax Gross-Up Payments. Patterson-UTI has entered into change in control agreements with its top four +Named Executive Officers as further described elsewhere in this proxy statement. The Company believes that such agreements may under certain circumstances protect the interest of the Company by discouraging such Named Executive Officers from leaving +employment out of concern for the security of their jobs or being unable to concentrate on their work. We believe that the change in control agreements may also help Patterson-UTI attract and retain new key employees by reducing the personal +uncertainty and anxiety that arises from the possibility of a future business combination. Any future change in control or severance agreements will be approved subject to the circumstances existing at the time. +The change in control agreements with Messrs. Vollmer, Siegel and Berns contain a tax gross-up for the excise tax imposed on parachute +payments, which were customary when these agreements were entered into more than ten years ago. While the Committee believes the tax gross-up provision is a valuable tool for executive retention, the Committee recognizes that tax gross-up provisions +may no longer be viewed as customary. Going forward, the Committee does not plan to provide tax gross-ups in connection with compensation arrangements, and the change in control agreement entered into in April 2012 with Mr. Hendricks does +not include a tax gross-up provision. +Severance Agreements. Patterson-UTI has also entered into written letter agreements with +each of Messrs. Siegel, Berns and Vollmer pursuant to which Patterson-UTI has agreed to pay each such person within ten days of the termination of his employment with Patterson-UTI for any reason (including voluntary termination by him), an +amount in cash equal to his annual base salary at the time of such termination. Any payment made by Patterson-UTI pursuant to these letter agreements will reduce dollar for dollar any payment owed to such person, if any, pursuant to the change in +control agreements referenced above. +35 +Employment Agreement. Patterson-UTI entered into an employment agreement with +Mr. Holcomb in January 2012 in connection with his promotion to President of Patterson-UTI Drilling Company LLC. Pursuant to his employment agreement, Patterson-UTI agreed to employ Mr. Holcomb for an initial term of three years beginning +January 1, 2012 at an annualized salary of $325,000 per year, subject to any increases that may be granted in the future. The employment agreement provides that the agreement will renew on a year-to-year basis unless either party notifies the +other party at least 90 days before the expiration of the then-current initial term or renewal term. If during the term of the employment agreement, Mr. Holcomb’s employment is terminated due to his death or disability, by Patterson-UTI +without cause or by Mr. Holcomb for good reason (as such terms are defined in the employment agreement), he will continue to receive his base salary for 12 months following the date of termination. Please see “Employment-Related +Agreements” for further description of this agreement. +Section 162(m) Considerations +In considering compensation decisions for the executive management of Patterson-UTI, we routinely consider the potential effect of +Section 162(m) of the Internal Revenue Code. Section 162(m) imposes a limitation on corporate tax deductions for non-performance based compensation to certain officers that exceeds $1 million that can be taken by a publicly held +corporation for compensation paid to certain of its executive officers. While Patterson-UTI does not design its compensation programs for tax purposes, Patterson-UTI does design its plans to be tax efficient for Patterson-UTI where possible. +However, the Committee believes that tax deduction limitations should not compromise Patterson-UTI’s ability to establish and maintain appropriate executive compensation programs and reserves the right to award non-deductible compensation. +Compensation Committee Interlocks and Insider Participation +No member of the Committee was, during the year ended December 31, 2014, an officer or employee of Patterson-UTI or any of its +subsidiaries, or was formerly an officer of Patterson-UTI or any of its subsidiaries, or had any relationships requiring disclosure by Patterson-UTI under Item 404 of Regulation S-K. +During the year ended December 31, 2014, none of Patterson-UTI’s executive officers served as (i) a member of the compensation +committee (or other Board committee performing equivalent functions) of another entity, one of whose executive officers served on the Compensation Committee, (ii) a director of another entity, one of whose executive officers served on the +Compensation Committee, or (iii) a member of the compensation committee (or other Board committee performing equivalent functions) of another entity, one of whose executive officers served as a director of Patterson-UTI. +COMPENSATION COMMITTEE REPORT +The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis included in this proxy statement required by +Item 402(b) of Regulation S-K with management and, based upon such review and discussion, the Compensation Committee has recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement. +Terry H. Hunt, Chairman +Charles O. Buckner +Michael W. Conlon +Curtis W. Huff +36 +EXECUTIVE COMPENSATION +The following table sets forth information concerning compensation for the fiscal year ended December 31, 2014 with respect to the +principal executive officer, the principal financial officer and the other Named Executive Officers of Patterson-UTI: +SUMMARY +COMPENSATION TABLE +Name and Principal Position(s) +Year +Salary +($) +Bonus +($) +Stock +Awards +($)(1) +Option +Awards +($)(2) +Non-equity +Incentive plan +Compensation +($)(3) +All Other +Compensation +($) +Total +($) +William Andrew Hendricks, Jr. +2014 +$ +600,000 +$ +— +$ +3,579,705 +(4) +$ +1,178,854 +$ +1,912,639 +$ +10,400 +(5) +$ +7,281,598 +President & Chief +2013 +$ +600,000 +$ +— +$ +3,490,763 +$ +1,321,454 +$ +1,758,943 +$ +— +$ +7,171,160 +Executive Officer +2012 +$ +375,000 +$ +1,075,000 +(6) +$ +1,727,000 +$ +820,723 +$ +— +$ +— +$ +3,997,723 +John E. Vollmer III +2014 +$ +350,000 +$ +— +$ +2,386,470 +(7) +$ +785,903 +$ +1,275,093 +$ +10,400 +(8) +$ +4,807,866 +Senior Vice President — +2013 +$ +350,000 +$ +— +$ +2,327,175 +$ +880,969 +$ +1,172,628 +$ +10,200 +(8) +$ +4,740,972 +Corporate Development, Chief +2012 +$ +350,000 +$ +— +$ +1,543,920 +$ +998,704 +$ +1,397,022 +$ +10,000 +(8) +$ +4,299,646 +Financial Officer & Treasurer +Mark S. Siegel +2014 +$ +350,000 +$ +— +$ +4,772,940 +(9) +$ +1,571,806 +$ +2,550,186 +$ +— +$ +9,244,932 +Chairman of the Board +2013 +$ +350,000 +$ +— +$ +4,654,350 +$ +1,761,938 +$ +2,345,257 +$ +— +$ +9,111,545 +2012 +$ +350,000 +$ +— +$ +3,087,840 +$ +1,997,408 +$ +2,794,044 +$ +— +$ +8,229,292 +Kenneth N. Berns +2014 +$ +265,000 +$ +— +$ +2,386,470 +(7) +$ +785,903 +$ +1,275,093 +$ +— +$ +4,712,466 +Senior Vice President +2013 +$ +265,000 +$ +— +$ +2,327,175 +$ +880,969 +$ +1,172,628 +$ +— +$ +4,645,772 +2012 +$ +265,000 +$ +— +$ +1,543,920 +$ +998,704 +$ +1,397,022 +$ +— +$ +4,204,646 +James M. Holcomb +2014 +$ +325,000 +$ +— +$ +1,057,314 +(10) +$ +— +$ +343,111 +$ +22,400 +(11) +$ +1,747,825 +President — Patterson-UTI +2013 +$ +325,000 +$ +300,738 +$ +759,240 +$ +— +$ +— +$ +14,511 +(11) +$ +1,399,489 +Drilling Company LLC +2012 +$ +325,000 +$ +310,000 +$ +484,575 +$ +— +$ +— +$ +14,050 +(11) +$ +1,133,625 +(1) +Amounts set forth include the fair value of awards at the date of grant as determined in accordance with FASB ASC Topic 718 with respect to restricted stock awarded to the Named Executive Officer in the fiscal years +ended December 31, 2014, 2013 and 2012 and with respect to performance units awarded to Messrs. Hendricks, Vollmer, Siegel and Berns in the fiscal years ended December 31, 2014 and 2013 and performance units awarded to Messrs. Vollmer, +Siegel and Berns in the fiscal year ended December 31, 2012. Performance conditions for all awards of restricted stock had been satisfied as of December 31, 2014. Performance units were awarded to Messrs. Vollmer, Siegel and Berns in the +fiscal year ended December 31, 2011 with a performance period that ended on March 31, 2014. According to the terms of the 2011 awards, the actual number of shares earned by the recipients was equal to two times the target number of shares, +based upon Patterson-UTI achieving a 94 th percentile total stockholder return relative to its peer group. Shares of the Company’s Common Stock were issued to settle the 2011 performance units +as follows: Vollmer — 52,500 shares, Siegel — 105,000 shares, Berns — 52,500 shares. Compensation related to these awards was reported in the Summary Compensation Table for the fiscal year ended December 31, 2011, and no +compensation for the 2011 awards is included in subsequent years. For additional information related to the assumptions used and valuation of restricted stock and performance units see Note 10 to the consolidated financial statements in +Patterson-UTI’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014. +(2) +Amounts set forth represent the fair value at the date of grant as determined in accordance with FASB ASC Topic 718 with respect to stock options awarded to the Named Executive Officer in the fiscal years ended +December 31, 2014, 2013 and 2012. For additional information related to the assumptions used in connection with the valuation of stock options using the Black-Scholes option pricing model see Note 10 to the consolidated financial statements in +Patterson-UTI’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014. +(3) +Represents annual bonuses earned for the fiscal years ended December 31, 2014, 2013 and 2012. The bonus plan in each of those fiscal years for the top four executive officers provided for a bonus pool based on +Adjusted EBITDA, subject to a minimum Adjusted EBITDA of $500 million for 2014 and $400 million for 2013 and for 2012. The bonus pool was allocated among the participants based on a pre-determined sharing percentage. At the direction of the +Compensation Committee, the total amount paid out pursuant to the bonus pool to Messrs. Hendricks, Vollmer, Siegel and Berns was $7.01 million for 2014 and $6.45 million for 2013. At the direction of the Compensation Committee, the total amount +paid out pursuant to the bonus pool to our former Chief Executive Officer and Messrs. Vollmer, Siegel and Berns was $7.68 million for 2012. The bonus plan in 2014 for Mr. Holcomb provided for a bonus based on Adjusted EBITDA for +Patterson-UTI’s contract drilling business, subject to a minimum Adjusted EBITDA of $400 million for 2014. +37 +(4) +Includes $2,110,125 related to an award of shares of restricted stock and $1,469,580 related to an award of performance units during 2014. +(5) +Amounts set forth reflect contributions to a 401(k) plan by Patterson-UTI on behalf of Mr. Hendricks. +(6) +Amount includes a signing bonus of $275,000 paid to Mr. Hendricks following the commencement of his employment with Patterson-UTI and an annual bonus for the fiscal year ended December 31, 2012 of $800,000, +which was paid pursuant to the terms of the offer letter provided to Mr. Hendricks prior to his employment with Patterson-UTI. +(7) +Includes $1,406,750 related to an award of shares of restricted stock and $979,720 related to an award of performance units during 2014. +(8) +Amounts set forth reflect contributions to a 401(k) plan by Patterson-UTI on behalf of Mr. Vollmer. +(9) +Includes $2,813,500 related to an award of shares of restricted stock and $1,959,440 related to an award of performance units during 2014. +(10) +Amount set forth reflects an award of shares of restricted stock. +(11) +Includes $10,400 in 2014, $10,200 in 2013 and $10,000 in 2012 contributed to a 401(k) plan by Patterson-UTI on behalf of Mr. Holcomb, an automobile allowance of $12,000 in 2014, and $4,311 in 2013 and $4,050 in +2012 for the use of a Patterson-UTI automobile. +The following table sets forth information concerning grants of plan-based +awards during the fiscal year ended December 31, 2014 to the Named Executive Officers: +Grants of Plan-Based Awards +Estimated Future Payouts +under +Non-equity Incentive Plan Awards +Estimated Future Payouts under +Equity Incentive Plan Awards +All Other +Stock Awards: +Number of +Shares of +Stock or Units +(#)(4) +All Other +Option: Awards +Number of +Securities +Underlying +Options (#)(6) +Exercise or +Base Price +of Option +Awards +($/Sh) +Grant Date +Fair Value of +Stock and +Option Awards +($)(6) +Name +Grant +Date +Threshold +($) +Target +($) +Maximum +($) +Threshold +(#) +Target +(#) +Maximum +(#) +William Andrew Hendricks, Jr +2/04/14 +(1) +$ +750,000 +$ +1,912,639 +$ +5,000,000 +— +— +— +— +— +— +— +4/22/14 +(2) +— +— +— +21,000 +42,000 +84,000 +— +— +— +$ +1,469,580 +4/22/14 +— +— +— +— +— +— +63,750 +— +— +$ +2,110,125 +4/22/14 +— +— +— +— +— +— +— +117,750 +$ +33.10 +$ +1,178,854 +John E. Vollmer III +2/04/14 +(1) +$ +500,000 +$ +1,275,093 +$ +5,000,000 +— +— +— +— +— +— +— +4/22/14 +(2) +— +— +— +14,000 +28,000 +56,000 +— +— +— +$ +979,720 +4/22/14 +— +— +— +— +— +— +42,500 +— +— +$ +1,406,750 +4/22/14 +— +— +— +— +— +— +— +78,500 +$ +33.10 +$ +785,903 +Mark S. Siegel +2/04/14 +(1) +$ +1,000,000 +$ +2,550,186 +$ +5,000,000 +— +— +— +— +— +— +— +4/22/14 +(2) +— +— +— +28,000 +56,000 +112,000 +— +— +— +$ +1,959,440 +4/22/14 +— +— +— +— +— +— +85,000 +— +— +$ +2,813,500 +4/22/14 +— +— +— +— +— +— +— +157,000 +$ +33.10 +$ +1,571,806 +Kenneth N. Berns +2/04/14 +(1) +$ +500,000 +$ +1,275,093 +$ +5,000,000 +— +— +— +— +— +— +— +4/22/14 +(2) +— +— +— +14,000 +28,000 +56,000 +— +— +— +$ +979,720 +4/22/14 +— +— +— +— +— +— +42,500 +— +— +$ +1,406,750 +4/22/14 +— +— +— +— +— +— +— +78,500 +$ +33.10 +$ +785,903 +James M. Holcomb +2/21/14 +(3) +$ +128,000 +$ +343,111 +$ +5,000,000 +— +— +— +— +— +— +— +6/09/14 +— +— +— +— +— +— +31,300 +— +— +$ +1,057,314 +(1) +The 2014 bonus plan for the fiscal year ended December 31, 2014 was approved on February 4, 2014 for Messrs. Hendricks, Vollmer, Siegel and +Berns. The 2014 bonus plan provided for a bonus pool based on a percentage of Adjusted EBITDA for the fiscal year ended December 31, 2014, subject to a minimum Adjusted EBITDA of $500 million. The Compensation Committee set a targeted Adjusted +EBITDA percentage range of 0.55% to 0.81%. The actual percentage awarded was based on the Compensation Committee’s assessment of the Company’s and executive management’s progress toward and achievement of certain strategic and other +objectives. The Compensation Committee set the Adjusted EBITDA payment percentage at 0.70% based on these criteria. The bonus pool was allocated among Messrs. Hendricks, Vollmer, Siegel and Berns based on a pre-determined sharing percentage. The +threshold amount presented in this table is calculated for the respective officer based on the approved allocation formula and an assumed Adjusted EBITDA of $500 million using 0.55% of Adjusted EBITDA (the bottom of the target range) as set forth +when the plan was approved due to the fact that the bonus plan provided for no payment if the minimum Adjusted EBITDA of $500 million is not satisfied. The target amount is calculated based on Patterson-UTI’s actual Adjusted EBITDA for the +fiscal year ended December 31, 2014, the Adjusted EBITDA percentage as approved by the Compensation Committee and the allocation +38 +formula applied to the bonus pool for distribution. The cash bonuses awarded from the bonus pool were awarded under the 2005 LTIP, which was designed to meet the requirements of +Section 162(m) of the Code. Accordingly, if the $500 million Adjusted EBITDA performance goal was achieved, the Compensation Committee was authorized to approve payments to each of Messrs. Hendricks, Vollmer, Siegel and Berns up to +$5 million, the maximum amount that could be awarded to an individual under any cash-based performance award granted under the 2005 LTIP during a 12-month period, subject to reduction based on the percentage of the Adjusted EBITDA target set by +the Compensation Committee. +(2) +On April 22, 2014, Patterson-UTI granted performance unit awards to Messrs. Hendricks, Vollmer, Siegel and Berns. These awards provide for the recipients to receive shares of Common Stock upon the achievement of +certain performance goals established by Patterson-UTI during a specified period. The performance period is the period from April 1, 2014 through March 31, 2017. The performance goals are tied to Patterson-UTI’s total shareholder +return for the performance period as compared to total shareholder return for our peer group determined by the Compensation Committee. There is no payout unless total shareholder return is positive for the performance period and, when compared to +our peer group, is at or above the 25 th percentile. The recipients will receive a target number of shares if the Company’s total shareholder return is positive and, when compared to the peer +group, is at the 50 th percentile and two times the target if at the 75 th percentile or higher. If the Company’s total shareholder return +is positive, and, when compared to the peer group, is at the 25 th percentile, the recipients will only receive one-half of the target number of shares. The grant of shares when achievement is +between the 25 th and 75 th percentile will be determined on a pro-rata basis. +(3) +The 2014 bonus plan for Mr. Holcomb for the fiscal year ended December 31, 2014 was approved on February 21, 2014. The 2014 bonus plan for Mr. Holcomb provided for a bonus based on a percentage of +Adjusted EBITDA for the Company’s contract drilling business (“Adjusted Drilling EBITDA”) for the fiscal year ended December 31, 2014, subject to a minimum Adjusted Drilling EBITDA of $400 million. The Compensation Committee set +a targeted Adjusted Drilling EBITDA percentage range of 0.032% to 0.048%. The actual percentage awarded was based on the Compensation Committee’s assessment of Mr. Holcomb’s individual performance and certain factors specific to the +Company’s contract drilling business. The Compensation Committee set the Adjusted Drilling EBITDA payment percentage at 0.045% based on these criteria. The threshold amount presented in this table is calculated for Mr. Holcomb based on an +assumed Adjusted Drilling EBITDA of $400 million using 0.032% of Adjusted Drilling EBITDA (the bottom of the target range) as set forth when the plan was approved due to the fact that the bonus plan provided for no payment if the minimum Adjusted +Drilling EBITDA of $400 million is not satisfied. The target amount is calculated based on actual Adjusted Drilling EBITDA for the fiscal year ended December 31, 2014, and the Adjusted Drilling EBITDA percentage as approved by the Compensation +Committee. The cash bonus awarded to Mr. Holcomb was awarded under the 2005 LTIP, which was designed to meet the requirements of Section 162(m) of the Code. Accordingly, if the $400 million Adjusted Drilling EBITDA performance goal was +achieved, the Compensation Committee was authorized to approve payment to Mr. Holcomb up to $5 million, the maximum amount that could be awarded to an individual under any cash-based performance award granted under the 2005 LTIP during a 12-month +period, subject to reduction based on the percentage of the Adjusted Drilling EBITDA target set by the Compensation Committee. +(4) +Shares of restricted stock were awarded pursuant to the 2014 LTIP. Ordinary dividends are paid on unvested shares of restricted stock. The rate at which these dividends are paid is the same rate at which ordinary +dividends are paid on all other shares of Common Stock. The right to receive these dividends has been included in the grant date fair value of stock awards presented in the table. The shares awarded to Messrs. Hendricks, Vollmer, Siegel and Berns +vest over a three-year period as follows: one-third on April 22, 2015, and the remainder in equal monthly installments over the 24 months following April 22, 2015. The shares awarded to Mr. Holcomb vest over a three-year period as +follows: one-third on June 9, 2015, one-third on June 9, 2016 and one-third on June 9, 2017. +(5) +Options were granted pursuant to the 2014 LTIP. Options awarded to Messrs. Hendricks, Vollmer, Siegel and Berns vest over a three year period as follows: one-third on April 22, 2015, and the remaining two-thirds in +equal monthly installments over the 24 months following April 22, 2015. +(6) +The grant date fair value of restricted stock is based on the closing price of Patterson-UTI Common Stock on the date of grant, which is consistent +with the valuation used by Patterson-UTI for the recognition of +39 +compensation expense under FASB ASC Topic 718. The grant date fair value of stock options was determined using the Black-Scholes option pricing model, which is consistent with the valuation used +by Patterson-UTI for the recognition of compensation expense under FASB ASC Topic 718, with assumptions that are more fully described in Note 10 to the consolidated financial statements in Patterson-UTI’s Annual Report on Form 10-K for the +fiscal year ended December 31, 2014. The grant date fair value of performance unit awards was determined based on a Monte-Carlo simulation model which is consistent with the valuation used by Patterson-UTI for the recognition of compensation +expense under FASB ASC Topic 718. +The following table sets forth information concerning outstanding equity awards at +December 31, 2014 for the Named Executive Officers: +Outstanding Equity Awards +at Fiscal Year-End +Name +Option Awards +Stock Awards +Number of Shares +or Units of Stock +That Have +Not Vested (#) +Market Value of +Shares or Units of +Stock That Have +Not Vested ($)(1) +Equity Incentive +Plan Awards: +Number of +Unearned Shares, +Units or Other +Rights +that +Have Not Vested(2) +Equity Incentive +Plan Awards: Market +or Payout Value of +Unearned Shares, +Units or +Other +Rights that Have +Not Vested ($)(1) +Number of Securities +Underlying Unexercised +Options (#) +Option +Exercise +Price +($) +Option +Expiration +Date +Exercisable +Unexercisable +William Andrew Hendricks, Jr. +88,893 +11,107 +(3) +$ +17.27 +04/01/22 +135,418 +(4) +$ +2,246,585 +106,500 +(5) +$ +1,766,835 +18,055 +6,945 +(6) +$ +15.82 +09/30/22 +95,834 +76,666 +(7) +$ +22.88 +04/21/23 +— +117,750 +(8) +$ +33.10 +04/21/24 +John E. Vollmer III +75,000 +— +$ +24.63 +04/26/15 +73,389 +(9) +$ +1,217,524 +119,000 +(10) +$ +1,974,210 +125,000 +— +$ +28.16 +07/31/16 +150,000 +— +$ +24.17 +04/22/17 +119,000 +— +$ +29.31 +04/24/18 +175,000 +— +$ +13.17 +04/27/19 +177,500 +— +$ +14.83 +04/26/20 +69,000 +— +$ +31.20 +04/25/21 +142,222 +17,778 +(3) +$ +16.20 +04/23/22 +63,888 +51,112 +(7) +$ +22.88 +04/21/23 +— +78,500 +(8) +$ +33.10 +04/21/24 +Mark S. Siegel +150,000 +— +$ +24.63 +04/26/15 +146,778 +(11) +$ +2,435,047 +238,000 +(12) +$ +3,948,420 +250,000 +— +$ +28.16 +07/31/16 +300,000 +— +$ +24.17 +04/22/17 +238,000 +— +$ +29.31 +04/24/18 +350,000 +— +$ +13.17 +04/27/19 +355,000 +— +$ +14.83 +04/26/20 +138,000 +— +$ +31.20 +04/25/21 +284,444 +35,556 +(3) +$ +16.20 +04/23/22 +127,777 +102,223 +(7) +$ +22.88 +04/21/23 +— +157,000 +(8) +$ +33.10 +04/21/24 +Kenneth N. Berns +75,000 +— +$ +24.63 +04/26/15 +73,389 +(9) +$ +1,217,524 +119,000 +(10) +$ +1,974,210 +125,000 +— +$ +28.16 +07/31/16 +150,000 +— +$ +24.17 +04/22/17 +119,000 +— +$ +29.31 +04/24/18 +175,000 +— +$ +13.17 +04/27/19 +177,500 +— +$ +14.83 +04/26/20 +69,000 +— +$ +31.20 +04/25/21 +142,222 +17,778 +(3) +$ +16.20 +04/23/22 +63,888 +51,112 +(7) +$ +22.88 +04/21/23 +— +78,500 +(8) +$ +33.10 +04/21/24 +James M. Holcomb +— +— +— +— +66,134 +(13) +$ +1,097,163 +— +— +(1) +Based on the closing price of Patterson-UTI Common Stock on December 31, 2014 of $16.59 per share. +(2) +As of December 31, 2014, performance unit awards had been granted to Messrs. Hendricks, Vollmer, Siegel and Berns. The 2012 performance unit +awards were granted on April 24, 2012 and provide for an award of shares of Patterson-UTI common stock to the recipient based on Patterson-UTI’s total shareholder return compared to our peer group of companies for the performance period +from April 1, 2012 through March 31, 2015. The 2013 performance unit awards were granted +40 +on April 22, 2013 and provide for an award of shares of Patterson-UTI common stock to the recipient based on Patterson-UTI’s total shareholder return compared to our peer group of +companies for the performance period from April 1, 2013 through March 31, 2016. The 2014 performance unit awards were granted on April 22, 2014 and provide for an award of shares of Patterson-UTI common stock to the recipient based on +Patterson-UTI’s total shareholder return compared to our peer group of companies for the performance period from April 1, 2014 through March 31, 2017. All performance unit awards provide for a target payout based on a target level of +total shareholder return compared to the peer group. The amounts presented in this column represent the target payout under the performance unit awards. Based on Patterson-UTI’s total shareholder return during the performance period, the +recipients could receive a number of shares ranging from no shares to two times the target number of shares. There is no payout unless total shareholder return is positive for the performance period and, when compared to our peer group, is at or +above the 25 th percentile. +(3) +These options vest in equal monthly installments from January 24, 2015 through April 24, 2015. +(4) +These shares of restricted stock vest as follows: 33,334 on April 24, 2015; 38,334 shares in equal monthly installments from January 22, 2015 through April 22, 2016; 21,250 shares on April 22, 2015 +and 42,500 shares in equal monthly installments from May 22, 2015 through April 22, 2017. +(5) +Amount includes 64,500 shares related to the 2013 performance unit award and 42,000 shares related to the 2014 performance unit award. +(6) +These options vest in equal monthly installments from January 1, 2015 through October 1, 2015. +(7) +These options vest in equal monthly installments from January 22, 2015 through April 22, 2016. +(8) +These options vest as follows: one-third on April 22, 2015 and the remainder in equal monthly installments over the 24 months following April 22, 2015. +(9) +These shares of restricted stock vest as follows: 5,333 shares in equal monthly installments from January 24, 2015 through April 24, 2015; 25,556 shares in equal monthly installments from January 22, 2015 +through April 22, 2016; 14,167 shares on April 22, 2015 and 28,333 shares in equal monthly installments from May 22, 2015 through April 22, 2017. +(10) +Amount includes 48,000 shares related to the 2012 performance unit award, 43,000 shares related to the 2013 performance unit award and 28,000 shares related to the 2014 performance unit award. +(11) +These shares of restricted stock vest as follows: 10,666 shares in equal monthly installments from January 24, 2015 through April 24, 2015; 51,112 shares in equal monthly installments from January 22, +2015 through April 22, 2016; 28,333 shares on April 22, 2015 and 56,667 shares in equal monthly installments from May 22, 2015 through April 22, 2017. +(12) +Amount includes 96,000 shares related to the 2012 performance unit award, 86,000 shares related to the 2013 performance unit award and 56,000 shares related to the 2014 performance unit award. +(13) +These shares of restricted stock vest as follows: 33,267 shares on June 9, 2015; 22,433 shares on June 9, 2016 and 10,434 shares on June 9, 2017. +41 +The following table sets forth information concerning option exercises and stock awards vested +during the fiscal year ended December 31, 2014 for the Named Executive Officers: +OPTION EXERCISES AND STOCK VESTED +Option awards +Stock awards +Name +Number of +shares acquired +on exercise (#) +Value realized +on exercise ($) +Number of +shares acquired +on vesting (#) +Value realized +on vesting ($)(1) +William Andrew Hendricks, Jr. +— +$ +— +81,249 +$ +2,606,897 +John E. Vollmer III +60,000 +$ +784,800 +105,722 +$ +3,386,405 +Mark S. Siegel +120,000 +$ +1,569,600 +211,444 +$ +6,772,826 +Kenneth N. Berns +60,000 +$ +784,800 +105,722 +$ +3,386,405 +James M. Holcomb +44,445 +$ +947,052 +32,833 +$ +1,109,099 +(1) +Value realized on vesting is based on the closing price of Patterson-UTI common stock on the day the respective shares vested; provided that if the stock market was closed on the day the respective shares vested, the +value realized on vesting is based on the closing price of Patterson-UTI common stock on the day immediately prior to the day the respective shares vested. +Patterson-UTI provides no pension benefits for any of the Named Executive Officers. None of the Named Executive Officers had any items of +nonqualified deferred compensation during 2014. As a result, tables with respect to pension benefits and nonqualified deferred compensation have not been provided. +DIRECTOR COMPENSATION +The +following table sets forth information concerning compensation for the fiscal year ended December 31, 2014 with respect to the directors of Patterson-UTI who are not executive officers: +DIRECTOR COMPENSATION TABLE +Name +Fees earned or paid +in cash +($) +Stock awards +($)(1) +Option awards +($)(2) +All other +compensation +($) +Total +($) +Charles O. Buckner +$ +60,000 +$ +75,960 +$ +79,932 +$ +— +$ +215,892 +Michael W. Conlon +$ +45,000 +$ +75,960 +$ +79,932 +$ +— +$ +200,892 +Curtis W. Huff +$ +75,000 +$ +75,960 +$ +79,932 +$ +— +$ +230,892 +Terry H. Hunt +$ +60,000 +$ +75,960 +$ +79,932 +$ +— +$ +215,892 +Cloyce A. Talbott +$ +35,000 +$ +75,960 +$ +79,932 +$ +— +$ +190,892 +Tiffany J. Thom +$ +22,567 +$ +101,520 +$ +101,209 +$ +— +$ +225,296 +(1) +Amounts set forth represent the fair value at the date of grant as determined in accordance with FASB ASC Topic 718 with respect to restricted stock awarded to the directors in the fiscal year ended December 31, +2014. For additional information related to the assumptions used and valuation of restricted stock, see Note 10 to the consolidated financial statements in Patterson-UTI’s Annual Report on Form 10-K for the fiscal year ended December 31, +2014. Messrs. Buckner, Conlon, Huff, Hunt and Talbott each received an award of 3,000 shares of restricted stock on January 1, 2014 with a market value of $25.32 per share which fully vested on January 1, 2015. Ms. Thom received an +award of 3,000 shares of restricted stock on August 8, 2014 with a market value of $33.84 per share which fully vests on August 8, 2015. As of December 31, 2014, Messrs. Buckner, Conlon, Huff, Hunt and Talbott and Ms. Thom each +held 3,000 unvested shares of restricted stock. +(2) +Amounts set forth represent the fair value at the date of grant as determined in accordance with FASB ASC Topic 718 with respect to stock options +awarded to the directors in the fiscal year ended December 31, 2014. For additional information related to the assumptions used in connection with the valuation of stock options +42 +using the Black-Scholes option pricing model see Note 10 to the consolidated financial statements in Patterson-UTI’s Annual Report on Form 10-K for the fiscal year ended December 31, +2014. Messrs. Buckner, Conlon, Huff, Hunt and Talbott each received options to purchase 10,000 shares of stock on January 1, 2014 with a fair value of $7.99 per share, which fully vested on January 1, 2015. Ms. Thom received an award +of options to purchase 10,000 shares of stock on August 8, 2014 with a fair value of $10.12 per share, which fully vest on August 8, 2015. As of December 31, 2014, Messrs. Huff and Hunt each held options to purchase a total of 90,000 +shares of Common Stock, of which options to purchase 10,000 shares were unvested. As of December 31, 2014, Mr. Buckner held options to purchase a total of 70,000 shares of Common Stock, of which options to purchase 10,000 shares were +unvested. As of December 31, 2014, Mr. Conlon held options to purchase a total of 30,000 shares of Common Stock, of which options to purchase 10,000 shares were unvested. As of December 31, 2014, Mr. Talbott held options to +purchase a total of 320,000 shares of Common Stock, of which options to purchase 10,000 shares were unvested. As of December 31, 2014, Ms. Thom held 10,000 shares of Common Stock all of which were unvested. +Directors who are also employees of Patterson-UTI do not receive compensation for serving as a director or as a member of a committee of the +Board of Directors. All directors are reimbursed for reasonable out-of-pocket expenses incurred in connection with serving as a member of the Board of Directors. Each non-employee director receives annual cash compensation of $35,000 and +(i) 3,000 shares of restricted stock subject to one-year vesting (subject to acceleration in certain limited situations, including a change of control) and (ii) an option to purchase 10,000 shares of Common Stock at an exercise price equal +to the closing price of Common Stock on the grant date. The option has a 10-year term, vests after one-year (subject to acceleration in certain limited situations, including a change of control) and contains a right to exercise for three years +following cessation of the holder as a director (but not beyond the 10-year term). Each non-employee director that serves on the Audit Committee or the Compensation Committee receives additional annual cash compensation of $10,000 per committee on +which he or she serves, with the chairman of each such committee receiving $15,000. The Lead Director receives additional annual cash compensation of $20,000. +EMPLOYMENT-RELATED AGREEMENTS +Change +in Control +Patterson-UTI has entered into change in control agreements with Messrs. Siegel, Hendricks, Berns and Vollmer (each +agreement, a “CIC Agreement” and collectively, the “CIC Agreements”; and each individual, an “Employee” and collectively, the “Employees”). The CIC Agreements were entered into to protect the Employees should +a change in control occur, thereby encouraging the Employee to remain in the employ of Patterson-UTI and not be distracted from the performance of his duties to Patterson-UTI by the possibility of a change in control. +In the event of a change in control of Patterson-UTI in which an Employee’s employment is terminated by Patterson-UTI other than for cause +or by the Employee for good reason, the terms of the CIC Agreements would entitle the Employee to, among other things: +Ÿ +a bonus payment equal to the highest annual bonus paid after the CIC Agreement was entered into (such bonus payment prorated for the portion of the fiscal year preceding the termination date), +Ÿ +a payment equal to 2.5 times (in the case of Messrs. Siegel and Hendricks) or 2.0 times (in the case of Messrs. Berns and Vollmer) the sum of (i) the highest annual salary in effect for such Employee during the +term of the CIC Agreement and (ii) the average of the three annual bonuses earned by the Employee for the three fiscal years preceding the termination date, and +Ÿ +continued coverage under Patterson-UTI’s welfare plans for up to three years (in the case of Messrs. Siegel and Hendricks) or two years (in the case of Messrs. Berns and Vollmer). +The CIC Agreements with Messrs. Vollmer, Siegel and Berns contain a tax gross-up for the excise tax imposed on parachute payments, which were +customary when these agreements were entered into more than ten years ago. While the Compensation Committee believes the tax gross-up provision is a valuable tool for execu- +43 +tive retention, the Compensation Committee recognizes that tax gross-up provisions may no longer be viewed as customary. Going forward, the Compensation Committee does not plan to provide tax +gross-ups in connection with compensation arrangements, and the CIC Agreement entered into in April 2012 with Mr. Hendricks does not include a tax gross-up provision. +A “change in control” is principally defined by the CIC Agreement as: +Ÿ +an acquisition by any individual, entity or group of beneficial ownership of 35% or more of either Patterson-UTI’s then outstanding Common Stock or the combined voting power of the then outstanding voting +securities of Patterson-UTI entitled to vote in the election of directors, +Ÿ +a change occurs in which the members of the Board of Directors as of the date of the CIC Agreement cease to constitute at least a majority of Patterson-UTI’s Board of Directors unless that change occurs through a +vote of at least a majority of the incumbent members of the Board of Directors, or +Ÿ +a change in the beneficial ownership of Patterson-UTI following consummation of a reorganization, merger, consolidation, sale of Patterson-UTI or any subsidiary of Patterson-UTI or a disposition of all or substantially +all of the assets of Patterson-UTI, in which the beneficial owners immediately prior to the transaction own 65% or less of outstanding common stock of the newly combined or merged entity. +The CIC Agreements terminate on the first to occur of: +Ÿ +the Employee’s death, disability or retirement, +Ÿ +the termination of the Employee’s employment, or +Ÿ +January 29, 2016 although, unless otherwise terminated, the CIC Agreements automatically renew for successive 12-month periods until Patterson-UTI notifies the Employee at least 90 days before the expiration of the +initial term or the renewal period, as applicable, that the term will not be extended. Patterson-UTI has not provided any such notification to the Employees. +All unvested stock options and restricted stock awards held by Messrs. Siegel, Hendricks, Berns and Vollmer vest upon a change of control as +defined by the underlying award agreements. Upon a change in control as defined in the underlying performance unit award grants, Messrs. Hendricks, Vollmer, Siegel and Berns would receive the target number of shares issuable thereunder. All +restricted stock and performance unit awards held by Messrs. Siegel, Hendricks, Berns and Vollmer contain provisions that in the event of termination due to death or disability, the Named Executive Officer would vest in a portion of the award. +Amounts that each of the Named Executive Officers would be entitled to under the CIC Agreements (or in the case of Mr. Holcomb, his +employment agreement) and other award agreements if a change in control had occurred as of December 31, 2014 and the employee’s employment was terminated by Patterson-UTI other than for cause or terminated by the employee for good reason +(as defined in the CIC Agreements or in the case of Mr. Holcomb, his employment agreement, and other award agreements) are reflected in the following table: +Cash Payments +Other Benefits +Name +Bonus +Payment +($)(1) +Salary and +Bonus +($)(2) +Option +Awards +($)(3) +Stock +Awards +($)(3) +Performance +Unit Awards +($)(4) +Continued +Benefits +($)(5) +Total +($) +William Andrew Hendricks, Jr +$ +1,758,943 +$ +4,698,679 +$ +5,348 +$ +2,246,585 +$ +1,766,835 +$ +27,292 +$ +10,503,682 +John E. Vollmer III +$ +1,397,022 +$ +3,311,793 +$ +6,933 +$ +1,217,524 +$ +1,974,210 +$ +18,195 +$ +7,925,677 +Mark S. Siegel +$ +2,794,044 +$ +7,404,484 +$ +13,867 +$ +2,435,047 +$ +3,948,420 +$ +— +$ +16,595,862 +Kenneth N. Berns +$ +1,397,022 +$ +3,141,793 +$ +6,933 +$ +1,217,524 +$ +1,974,210 +$ +— +$ +7,737,482 +James M. Holcomb(6) +$ +— +$ +325,000 +$ +— +$ +— +$ +— +$ +9,097 +$ +334,097 +(1) +The assumed bonus payment is equal to the highest annual bonus paid from the time the CIC Agreements were entered into through December 31, 2014. +(2) +The assumed salary and bonus payment represents 2.5 times (in the case of Messrs. Siegel and Hendricks) or 2.0 times (in the case of Messrs. Berns and +Vollmer) of the sum of the 2014 salary in effect for each employee and the average of the annual bonuses earned by each employee for 2013, 2012 and 2011. Bonus amounts +44 +earned in 2014 were not considered in this calculation as they were not determined until after December 31, 2014. In the case of Mr. Holcomb, the payment represents twelve months of his +base salary as determined in accordance with his employment agreement. +(3) +Each of the option and stock award agreements for Messrs. Hendricks, Vollmer, Siegel and Berns provide that unvested options and awards will immediately vest upon a change in control. Amounts presented in the table +represent the value of unvested option and stock awards using the market price of Patterson-UTI Common Stock at December 31, 2014. +(4) +Share settled performance units awarded to Messrs. Vollmer, Siegel and Berns in 2012, 2013 and 2014 and to Mr. Hendricks in 2013 and 2014, include a provision that upon a change in control as defined in the +respective award agreements, the Named Executive Officer will receive an award of shares equal to the target amount set forth in each agreement. Amounts presented in the table represent the assumed award of the target number of shares if a change in +control had occurred on December 31, 2014 valued at the December 31, 2014 closing price of Patterson-UTI common stock of $16.59 per share. +(5) +Messrs. Hendricks, Vollmer and Holcomb participated in Patterson-UTI’s health and welfare plans as of December 31, 2014. The amounts presented represent Patterson-UTI’s portion of the premiums for three +years in the case of Mr. Hendricks, two years in the case of Mr. Vollmer and one year in the case of Mr. Holcomb based on the rates in effect at December 31, 2014. +(6) +Patterson-UTI has entered into an employment agreement with Mr. Holcomb that provides certain benefits if his employment is terminated by Patterson-UTI other than for cause or by him for good reason. +Severance Agreements +Patterson-UTI has entered into written letter agreements with each of Messrs. Siegel, Berns and Vollmer pursuant to which Patterson-UTI has +agreed to pay each such person within ten days of the termination of his employment with Patterson-UTI for any reason (including voluntary termination by him), an amount in cash equal to his annual base salary at the time of such termination. Any +payment made by Patterson-UTI pursuant to these letter agreements will reduce dollar for dollar any payment owed to such person, if any, pursuant to the change in control agreements discussed above. +Employment Agreement with Mr. Holcomb +In January 2012, Patterson-UTI entered into an employment agreement with Mr. Holcomb in connection with his promotion to President of +Patterson-UTI Drilling Company LLC. Pursuant to his employment agreement, Patterson-UTI agreed to employ Mr. Holcomb for an initial term of three years beginning January 1, 2012 at an annualized salary of $325,000 per year, subject to any +increases that may be granted in the future. The employment agreement provides that the agreement shall continue on a year to year basis unless either party notifies the other party at least 90 days before the expiration of the then-current initial +term or renewal term. Mr. Holcomb agreed to restrictions regarding Patterson-UTI’s confidential information and to not compete with Patterson-UTI or solicit its employees or customers for two years following the date of termination of his +employment. If during the term of the employment agreement, Mr. Holcomb’s employment is terminated due to his death or disability, by Patterson-UTI without cause or by Mr. Holcomb for good reason (as such terms are defined in the +employment agreement), he will continue to receive his base salary for 12 months following the date of termination. During the 12 month period following his termination, Mr. Holcomb and his eligible dependents as of the date of termination +shall continue to be covered by all medical, vision and dental plans (but not including life or disability insurance) at the same active employee premium cost as a similarly situated active employee; provided that such benefits shall cease if he +becomes entitled to any group health benefits from a new employer. Receipt of such benefits is conditioned on Mr. Holcomb’s execution of a general release of claims against Patterson-UTI. +Death or Disability +All restricted stock +and performance unit awards held by Messrs. Hendricks, Vollmer, Siegel and Berns provide that in the event of termination of employment due to death or disability, the holder would vest in a portion of the award. With respect to Mr. Hendricks, +such a termination at December 31, 2014 would have resulted +45 +in the accelerated vesting of 38,561 shares of restricted stock with a fair value of $639,727. With respect to Messrs. Vollmer and Berns, such a termination at December 31, 2014 would have +resulted in the accelerated vesting of 10,623 shares of restricted stock with a fair value of $176,236. With respect to Mr. Siegel, such a termination at December 31, 2014 would have resulted in the accelerated vesting of 21,248 shares of +restricted stock with a fair value of $352,504. In the event of termination of employment due to death or disability, the holders of performance units would vest in the portion of the performance unit award that was earned at the time of death or +disability. This payment would be determined at the end of the performance period and would equal the amount that the holder would have received at that time, pro-rated for the amount of time from the date of grant through the date of death or +disability. +Indemnification Agreements +Patterson-UTI has entered into an indemnification agreement with Messrs. Hendricks, Vollmer, Siegel and Berns and each of its directors +containing provisions that may require Patterson-UTI, among other things, to indemnify such executive officers and directors against liabilities that may arise by reason of their status or service as executive officers or directors (subject to +certain exceptions) and to advance expenses incurred as a result of any proceeding against them as to which they could be indemnified. +CERTAIN TRANSACTIONS +In +connection with the acquisition by REMY Capital Partners III, L.P. (“REMY Capital”) of an ownership interest in UTI Energy Corp. in March 1995, REMY Capital succeeded to a registration rights agreement with UTI. As the +successor-in-interest to UTI, Patterson-UTI assumed this registration rights agreement pursuant to which REMY Capital has the right to require Patterson-UTI to use its reasonable efforts to register shares held by REMY Capital under the Securities +Act of 1933, as amended. In the event that such rights are exercised in connection with a primary offering proposed by Patterson-UTI (or a secondary offering with which Patterson-UTI agrees to participate), REMY Capital would bear its pro rata share +of the costs of the offering, other than legal, accounting and printing costs, all of which Patterson-UTI would bear. In the event that REMY Capital elects to exercise such rights other than in connection with an offering in which Patterson-UTI +participates, REMY Capital would bear all costs of the offering. These rights continue so long as REMY Capital continues to own the Common Stock that it acquired in March 1995. As of the date of this proxy statement, REMY Capital continues to hold +605,000 shares of such Common Stock. +Mr. Siegel, Chairman of the Board of Patterson-UTI, is President and sole stockholder of REMY +Investors, which is the general partner of REMY Capital. Mr. Berns, a director and Senior Vice President of Patterson-UTI, is an executive of REMY Investors. +In connection with Mr. Vollmer’s appointment as Chief Financial Officer, Patterson-UTI delivered a letter to Mr. Vollmer dated +February 6, 2006 (the “Letter Agreement”). Pursuant to the Letter Agreement, Patterson-UTI generally agreed, to the extent permitted by law and provided that the applicable accounting restatement pending at that time did not result +from Patterson-UTI’s material non-compliance with financial reporting requirements under the federal securities laws as a result of knowing misconduct by Mr. Vollmer, not to make any claim against Mr. Vollmer for certain compensation +received or profits realized, or relating to securities acquired, prior to September 30, 2005. Patterson-UTI also generally agreed to indemnify Mr. Vollmer against all losses in connection with his defense of any claim against him under +Section 304 of the Sarbanes-Oxley Act of 2002 (“Section 304”) in contravention of the immediately preceding sentence. Notwithstanding court decisions that Patterson-UTI’s right to make any such claims appears doubtful, +Patterson-UTI entered into this agreement because of the breadth of language of Section 304 and the uncertainty as to how the statute may be interpreted by the courts in the future. +Patterson-UTI has a written policy with respect to related person transactions. In accordance with this policy, related person transactions are +reviewed by the Lead Director or the chair of the Audit Committee, each of whom has full delegated authority to approve, disapprove, ratify, amend, terminate or rescind any such transaction, or direct that such transaction be submitted to the Audit +Committee or the full Board of Directors for consideration. In approving or disapproving related person transactions, the relevant facts and circumstances of +46 +the related person transaction are considered, including whether such transaction is in, or not inconsistent with, the best interest of Patterson-UTI and whether, in appropriate cases, such +transaction is on commercial terms at least as favorable to Patterson-UTI as would otherwise be available to or from an unrelated third party or to Patterson-UTI’s employees generally. Related person transactions generally include transactions +in an amount that exceeds $50,000 between Patterson-UTI or any of its subsidiaries and an executive officer, a director (or nominee to become director), an immediate family member of any of the foregoing or any entity in which any of the foregoing +has a 10% or greater beneficial ownership interest or in which they are an executive officer, general partner, principal or engaged in a similar position. Certain related person transactions have been pre-approved under the terms of the policy, +including, subject to certain exceptions and limitations, the sale to or purchase from Patterson-UTI of goods and services by entities related to directors in the ordinary course of business that are immaterial to Patterson-UTI and with respect to +which the director has no direct economic interest or decision making authority. +SECURITY OWNERSHIP OF CERTAIN +BENEFICIAL OWNERS AND MANAGEMENT +The following table sets forth, as of April 10, 2015, the stock ownership of (i) the Named Executive Officers, directors and Board +nominees, individually, (ii) all directors, Board nominees and executive officers as a group and (iii) each person known by Patterson-UTI to be the beneficial owner of more than 5% of Common Stock. +Name of +Beneficial Owner +Amount and +Nature of +Beneficial +Ownership +Percent +of Class +Beneficial Owners of more than 5% of Patterson-UTI’s Common Stock: +Wellington Management Group LLP. +15,995,753 +(1) +10.9% +BlackRock, Inc. +10,621,267 +(2) +7.3% +The Vanguard Group +8,731,259 +(3) +6.0% +Artisan Partners Holdings LP +8,526,668 +(4) +5.8% +Directors and Named Executive Officers: +William Andrew Hendricks, Jr. +495,728 +(6) +* +John E. Vollmer III +1,887,782 +(7) +1.3% +Mark S. Siegel +3,746,199 +(5) +2.5% +Kenneth N. Berns +1,565,949 +(8) +1.1% +James M. Holcomb. +205,670 +(9) +* +Charles O. Buckner +97,000 +(10) +* +Michael W. Conlon +48,000 +(11) +* +Curtis W. Huff +150,880 +(12) +* +Terry H. Hunt +128,000 +(13) +* +Cloyce A. Talbott. +613,476 +(14) +* +Tiffany J. Thom. +6,000 +(15) +* +All directors and executive officers as a group (12 persons) +9,094,721 +(16) +6.0% +* +indicates less than 1.0% +(1) +Based solely on a Schedule 13G/A filed by Wellington Management Group LLP (“Wellington Management”) with the SEC on January 12, 2015. According to the report, Wellington Management, in its capacity as +investment adviser, may be deemed to beneficially own 15,995,753 shares that are held of record by clients of Wellington Management. Wellington Management has shared power to vote or to direct the vote of 10,327,871 shares and shared power to +dispose or to direct the disposition of 15,995,753 shares. The address of the principal business office of Wellington Management is 280 Congress Street, Boston, Massachusetts 02210. +47 +(2) +Based solely on a Schedule 13G/A filed by BlackRock, Inc. with the SEC on January 26, 2015. According to the report, BlackRock, Inc. has sole voting power with respect to 10,001,624 shares and sole dispositive +power with respect to 10,621,267 shares. The address of the principal business office of BlackRock, Inc. is 55 East 52 nd Street, New York, New York 10022. +(3) +Based solely on a Schedule 13G/A filed by The Vanguard Group with the SEC on February 11, 2015. According to the report, The Vanguard Group has sole voting power with respect to 96,783 shares, sole dispositive +power with respect to 8,645,676 shares and shared dispositive power with respect to 85,583 shares. The address of the principal business office of The Vanguard Group is 100 Vanguard Blvd., Malvern, Pennsylvania 19355. +(4) +Based solely on a Schedule 13G/A filed with the SEC on January 30, 2015 (the “Artisan Schedule 13G”). According to the report, Artisan Partners Limited Partnership (“APLP”) reports beneficial +ownership of the shares, with shared dispositive power over 8,526,668 shares and shared power to vote 8,292,959 shares. APLP filed the Artisan Schedule 13G jointly with Artisan Investments GP LLC (“Artisan Investments”), Artisan Partners +Holdings LP (“Artisan Holdings”), Artisan Partners Asset Management Inc. (“APAM”), and Artisan Partners Funds, Inc. (“Artisan Funds”). Artisan Holdings is the sole limited partner of APLP and the sole member of Artisan +Investments; Artisan Investments is the general partner of APLP; APAM is the general partner of Artisan Holdings. Persons other than APLP are entitled to receive all dividends from, and proceeds from the sale of, 5,905,750 shares held by APLP on +behalf of Artisan Funds. The address of the principal business office of APLP, Artisan Investments, Artisan Holdings, APAM and Artisan Funds is 875 East Wisconsin Avenue, Suite 800, Milwaukee, Wisconsin 53202. +(5) +Mr. Siegel is the President and sole stockholder of REMY Investors, which is the general partner of REMY Capital Partners III, L.P. (“REMY Capital”). The Common Stock beneficially owned by Mr. Siegel +includes 605,000 shares of Common Stock owned by REMY Capital. The Common Stock beneficially owned by Mr. Siegel also includes stock options held by Mr. Siegel, which are presently exercisable or become exercisable within 60 days, to +purchase 2,317,416 shares. Does not include 170,584 shares underlying stock options held by Mr. Siegel that are not presently exercisable and will not become exercisable within 60 days. Includes 129,194 shares of unvested restricted Common +Stock held by Mr. Siegel, over which he presently has voting power. The Common Stock beneficially owned by Mr. Siegel includes 49,900 shares held in trusts for which he is the trustee. +(6) +Includes shares underlying stock options held by Mr. Hendricks, which are presently exercisable or become exercisable within 60 days, to purchase 284,534 shares. Does not include 130,716 shares underlying stock +options held by Mr. Hendricks that are not presently exercisable and will not become exercisable within 60 days. Includes 128,230 shares of unvested restricted Common Stock held by Mr. Hendricks, over which he presently has voting power. +(7) +Includes shares underlying stock options held by Mr. Vollmer, which are presently exercisable or become exercisable within 60 days, to purchase 1,158,708 shares. Does not include 85,292 shares underlying stock +options held by Mr. Vollmer that are not presently exercisable and will not become exercisable within 60 days. Includes 64,597 shares of unvested restricted Common Stock held by Mr. Vollmer, over which he presently has voting power. The +Common Stock beneficially owned by Mr. Vollmer includes 200,000 shares held in trusts for which he is a trustee. +(8) +Includes shares underlying stock options held by Mr. Berns, which are presently exercisable or become exercisable within 60 days, to purchase 1,158,708 shares. Does not include 85,292 shares underlying stock +options that are not presently exercisable and will not become exercisable within 60 days. Includes 64,597 shares of unvested restricted Common Stock held by Mr. Berns, over which he presently has voting power. The Common Stock beneficially +owned by Mr. Berns includes 140,000 shares held in trusts for which he is the trustee. Does not include shares of Common Stock beneficially owned by REMY Investors. Mr. Berns disclaims beneficial ownership of such shares beneficially owned +by REMY Investors. +(9) +Includes 66,134 shares of unvested restricted Common Stock held by Mr. Holcomb, over which he presently has voting power. +(10) +Includes shares underlying presently exercisable stock options held by Mr. Buckner to purchase 70,000 shares. Does not include 10,000 shares +underlying stock options held by Mr. Buckner that are not presently +48 +exercisable and will not become exercisable within 60 days. Includes 3,000 shares of unvested restricted Common Stock held by Mr. Buckner, over which he presently has voting power. +(11) +Includes shares underlying presently exercisable stock options held by Mr. Conlon to purchase 30,000 shares. Does not include 10,000 shares underlying stock options held by Mr. Conlon that are not presently +exercisable and will not become exercisable within 60 days. Includes 3,000 shares of unvested restricted Common Stock held by Mr. Conlon, over which he presently has voting power. +(12) +Includes shares underlying presently exercisable stock options held by Mr. Huff to purchase 90,000 shares. Does not include 10,000 shares underlying stock options held by Mr. Huff that are not presently +exercisable and will not become exercisable within 60 days. Includes 3,000 shares of unvested restricted Common Stock held by Mr. Huff, over which he presently has voting power. +(13) +Includes shares underlying presently exercisable stock options held by Mr. Hunt to purchase 90,000 shares. Does not include 10,000 shares underlying stock options held by Mr. Hunt that are not presently +exercisable and will not become exercisable within 60 days. Includes 3,000 shares of unvested restricted Common Stock held by Mr. Hunt, over which he presently has voting power. +(14) +Includes shares underlying stock options held by Mr. Talbott, which are presently exercisable to purchase 320,000 shares. Does not include 10,000 shares underlying stock options held by Mr. Talbott that are +not presently exercisable and will not become exercisable within 60 days. Includes 3,000 shares of unvested restricted Common Stock held by Mr. Talbott, over which he presently has voting power. +(15) +Does not include 20,000 shares underlying stock options held by Ms. Thom that are not presently exercisable and will not become exercisable within 60 days. Includes 6,000 shares of unvested restricted Common Stock +held by Ms. Thom, over which she presently has voting power. +(16) +Includes shares underlying stock options, which are presently exercisable or become exercisable within 60 days, to purchase 5,519,366 shares of Common Stock. Does not include shares underlying stock options to purchase +541,884 shares held by such individuals that are not presently exercisable and will not become exercisable within 60 days. Includes an aggregate of 473,752 shares of unvested restricted Common Stock held by certain directors and executive officers, +over which they presently have voting power. +Except as stated herein, each stockholder has sole voting and investment power +with respect to Common Stock included in the above table. There are no arrangements known to Patterson-UTI which may result in a change in control. The business address of each of our directors and officers is 450 Gears Road, Suite 500, Houston, +Texas 77067. +Equity Compensation Plan Information +Equity compensation plan information as of December 31, 2014 follows: +Equity Compensation Plan Information +Plan Category +Number of +Securities to +be Issued upon +Exercise +of +Outstanding +Options, +Warrants and +Rights +Weighted- +Average Exercise +Price of +Outstanding +Options, +Warrants +and +Rights +Number of +Securities +Remaining Available +for Future Issuance +under Equity +Compensation +Plans +(Excluding +Securities Reflected +in Column(a)) +(a) +(b) +(c) +Equity compensation plans approved by security holders(1) +6,086,250 +$ +22.32 +6,478,876 +Equity compensation plans not approved by security holders +— +$ +— +— +Total +6,086,250 +$ +22.32 +6,478,876 +(1) +The 2014 LTIP provides for awards of incentive stock options, non-incentive stock options, tandem and freestanding stock appreciation rights, +restricted stock awards, other stock unit awards, performance share awards, performance unit awards and dividend equivalents to key employees (as defined in the 2014 LTIP), officers and +49 +directors, which are subject to certain vesting and forfeiture provisions. All options are granted with an exercise price equal to or greater than the fair market value of the common stock at the +time of grant. The vesting schedule and term are set by the Compensation Committee of the Board of Directors, except that the Board has the same power as the Compensation Committee with respect to awards to directors. All securities remaining +available for future issuance under equity compensation plans approved by security holders in column (c) are available under this plan. In addition to the 2014 LTIP, this Plan category also includes the 2005 LTIP and the Patterson-UTI Energy, +Inc. Amended and Restated 1997 Long-Term Incentive Plan, as amended (the “1997 LTIP”). In connection with the approval of the 2014 LTIP, the Board of Directors approved a resolution that no further options, restricted stock or other awards +would be granted under any equity compensation plan, other than the 2014 LTIP. Options granted under the 2005 LTIP typically vested over one year for non-employee directors and three years for employees. All options were granted with an exercise +price equal to the fair market value of the related common stock at the time of grant. Options granted under the 1997 LTIP typically vested over three or five years as dictated by the Compensation Committee. All options were granted with an exercise +price equal to the fair market value of the related common stock at the time of grant. +50 +AUDIT COMMITTEE REPORT +The following report of the Audit Committee does not constitute soliciting material and should not be deemed filed or incorporated by reference +into any other Patterson-UTI filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent Patterson-UTI specifically incorporates this report by reference therein. +The Audit Committee has reviewed and discussed the audited financial statements with management and Patterson-UTI’s independent registered +public accounting firm. +The Audit Committee has discussed with the independent registered public accounting firm the matters required to +be discussed by Auditing Standard 380, The Auditor’s Communication with those Charged with Governance , as adopted by the Public Company Accounting Oversight Board in Rule 3200T. +The Audit Committee has received and reviewed the written disclosures and the letter from the independent registered public accounting firm +required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent registered public accounting firm’s communications with the Audit Committee concerning independence, and has discussed with the +independent registered public accounting firm their independence. +Taking the foregoing into consideration, the undersigned Audit Committee +members recommended to the Board of Directors that the Board approve the inclusion of Patterson-UTI’s audited financial statements in the Annual Report on Form 10-K for the fiscal year ended December 31, 2014. +Audit Committee of the Board of Directors: +Charles O. Buckner, Chairman +Curtis W. Huff +Terry H. Hunt +Tiffany J. Thom +PricewaterhouseCoopers Fees for Fiscal Years 2014 and 2013 +In 2014 and 2013, Patterson-UTI and its subsidiaries incurred fees for services provided by PricewaterhouseCoopers LLP. +Description +Fees Incurred in +Fiscal Year +2014 +Fees Incurred in +Fiscal Year +2013 +Audit fees +$ +1,556,000 +$ +1,284,400 +Audit-related fees +— +— +Tax fees +40,000 +40,000 +All other fees +1,919 +1,919 +Total +$ +1,597,919 +$ +1,326,319 +The Audit Committee appoints the independent registered public accounting firm. The Audit Committee or +Mr. Buckner, as Chairman of the Audit Committee, approves all other engagements of the independent registered public accounting firm in advance. In the event Mr. Buckner approves any such engagement, he discusses such approval with the +Audit Committee at its next meeting. +“Audit fees” relate to audit services of PricewaterhouseCoopers LLP for fiscal 2014 and +2013 consisting of the examination of Patterson-UTI’s consolidated financial statements, quarterly reviews of Patterson-UTI’s interim financial statements and services to assess Patterson-UTI’s internal control over financial +reporting. “Tax fees” include federal, state, local and foreign tax compliance and related matters. “All other fees” consists of an annual subscription fee to a software product. The Audit Committee or Mr. Buckner, as +Chairman of the Audit Committee, approved in advance all of the services described above. +51 +The Audit Committee has discussed the non-audit services provided by PricewaterhouseCoopers LLP +and the related fees and has considered whether those services and fees are compatible with maintaining auditor independence. The Audit Committee determined that such non-audit services were consistent with the independence of PricewaterhouseCoopers +LLP. +OTHER MATTERS +Section 16(a) Beneficial Ownership Reporting Compliance +Section 16(a) of the Exchange Act requires Patterson-UTI’s officers and directors and persons who own more than 10 percent of a +registered class of Patterson-UTI’s equity securities, to file reports of ownership and changes in ownership with the SEC. Each of these persons is required by SEC regulation to furnish Patterson-UTI with copies of Section 16(a) filings. +Based solely upon a review of Forms 3 and 4 and amendments thereto furnished to Patterson-UTI during 2014 and Forms 5 and amendments thereto furnished to Patterson-UTI with respect to 2014, or a written representation from the reporting person that +no Form 5 is required, all filings required to be made by such officers, directors, and beneficial owners of more than 10 percent of a registered class of Patterson-UTI’s common stock were timely made. +Other Business +As of the date of this +proxy statement, management of Patterson-UTI was not aware of any matter to be presented at the Meeting other than as set forth herein. If any other matters are properly brought before the Meeting, however, the shares represented by valid proxies +will be voted with respect to such matters in accordance with the judgment of the persons voting them. +Stockholder Proposals for 2016 Annual Meeting +Proposals or Director Nominations for Inclusion in the Proxy Statement. Pursuant to Rule 14a-8 under the +Exchange Act, stockholders may present proper proposals or director nominations for inclusion in Patterson-UTI’s proxy statement and for consideration at the next annual meeting of stockholders by submitting their proposals or director +nominations to Patterson-UTI in a timely manner. In order to be included in Patterson-UTI’s proxy statement for the 2016 annual meeting of stockholders, proposals or director nominations from stockholders must be received by Patterson-UTI no +later than December 19, 2015, and must otherwise comply with the requirements of Rule 14a-8. +Proposals or Director Nominations not +Included in the Proxy Statement. In addition, Patterson-UTI’s bylaws establish an advance notice procedure with regard to stockholder proposals and director nominations not included in Patterson-UTI’s proxy +statement. For director nominations not included in Patterson-UTI’s proxy statement, please refer to “Election of Directors – Meetings and Committees of the Board of Directors.” For stockholder proposals to be properly brought +before the 2015 annual meeting, by a stockholder, the stockholder must be a stockholder of record on the date of the giving of the notice provided for below and on the record date for the determination of stockholders entitled to vote at such annual +meeting and must give timely notice of such business in writing to the Secretary of Patterson-UTI. To be timely with respect to the 2016 annual meeting, a stockholder’s notice must be delivered to or mailed and received at Patterson-UTI’s +principal executive offices not earlier than February 5, 2016 and not later than March 6, 2016; provided, however, that in the event that the annual meeting is called for a date that is not within 30 days before or after June 4, 2016, +notice by the stockholder to be timely must be received not later than the close of business on the tenth day following the day on which such notice of the date of the meeting was mailed or public disclosure of the annual meeting date was made, +whichever occurs first. +A stockholder’s notice to the Secretary of Patterson-UTI shall set forth: +Ÿ +a brief description of each matter desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, +Ÿ +the name and record address of the stockholder proposing such business, +52 +Ÿ +the class and number of shares of Patterson-UTI that are beneficially owned by the stockholder, +Ÿ +any material interest of the stockholder in such business, and +Ÿ +a representation that such stockholder intends to appear in person or by proxy at the annual meeting to bring such business before the annual meeting. +Patterson-UTI reserves the right to reject, rule out of order, or take other appropriate action with respect to any proposal or nomination that +does not comply with these and other applicable requirements. +Annual Report +A copy of Patterson-UTI’s annual report on Form 10-K accompanies this proxy statement only if you have requested that a copy of this proxy +statement be mailed to you. The annual report on Form 10-K also is available electronically by following the instructions in the Notice. The annual report on Form 10-K is not incorporated into this proxy statement and is not considered +proxy-soliciting material. +A copy of the annual report on Form 10-K, including the financial statements and financial statement +schedules, but excluding exhibits, may be obtained by stockholders without charge by written request to the Secretary of Patterson-UTI at 450 Gears Road, Suite 500, Houston, Texas 77067 or by accessing it on Patterson-UTI’s website at +www.patenergy.com in the investors section under the “financial reports” link. Patterson-UTI will furnish the exhibits to Form 10-K upon request and upon receipt of a reproduction fee. +Delivery of Documents to Stockholders Sharing an Address +The SEC’s rules allow companies to send a single Notice or single copy of annual reports, proxy statements, prospectuses and other +disclosure documents to two or more stockholders sharing the same address, subject to certain conditions. These rules are intended to provide greater convenience for stockholders, and cost savings for companies, by reducing the number of duplicate +documents that stockholders receive. If instructions for separate delivery have been received from any stockholder, Patterson-UTI will deliver promptly separate copies of the relevant disclosure materials. Similarly, if multiple copies of disclosure +materials are being delivered to a single address, stockholders can request a single copy for future deliveries. Written requests should be submitted to the Secretary of Patterson-UTI at 450 Gears Road, Suite 500, Houston, Texas 77067. Requests may +also be made by calling Investor Relations at (281) 765-7100. +53 +PATTERSON-UTI ENERGY, +INC. +450 GEARS ROAD, SUITE 500 +HOUSTON, TX 77067 +VOTE BY INTERNET - www.proxyvote.com +Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in +hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. +Electronic Delivery of Future PROXY MATERIALS +If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail +or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. +VOTE BY PHONE - 1-800-690-6903 +Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have +your proxy card in hand when you call and then follow the instructions. +VOTE BY MAIL +Mark, sign and date your +proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. +TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: +KEEP THIS PORTION FOR YOUR RECORDS +— — — — — — — — — — — — — — — — — — — — — +— — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — +DETACH AND RETURN THIS PORTION ONLY +THIS PROXY CARD IS VALID ONLY WHEN +SIGNED AND DATED. +The Board of +Directors recommends you vote +FOR the following: +For +All +Withhold +All +For All Except +To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the +nominee(s) on the line below. +¨ +¨ +¨ +1. +Election of Directors +Nominees +01 +Mark S. Siegel +02 Kenneth N. Berns +03 Charles O. Buckner +04 Michael W. Conlon +05 Curtis W. Huff +06 +Terry H. Hunt +07 Tiffany J. Thom +The Board of Directors recommends you +vote FOR proposals 2 and 3. +For +Against +Abstain +2 . +Approval of an advisory resolution on +Patterson-UTI’s compensation of its named executive officers. +¨ +¨ +¨ +3 . +Ratification of the selection of +PricewaterhouseCoopers LLP as the independent registered public accounting firm of Patterson-UTI for the fiscal year ending December 31, 2015. +¨ +¨ +¨ +NOTE: Such other business as may +properly come before the meeting or any adjournment thereof. +Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as +such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. +Signature [PLEASE SIGN WITHIN BOX] +Date +Signature (Joint Owners) +Date +0000233425_1 R1.0.0.51160 +Important Notice Regarding the Availability of Proxy Materials for the Annual +Meeting: The Annual Report, Notice & Proxy Statement is/are available at www.proxyvote.com . +— — — — +— — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — +— — — — — — — — — — — — — — — — — +PATTERSON-UTI ENERGY, INC. +Annual Meeting of Stockholders +June 4, 2015 10:00 AM +This proxy is solicited by the Board of Directors +The undersigned stockholder of Patterson-UTI Energy, Inc. (the +“Company”) hereby appoints Mark S. Siegel, William Andrew Hendricks, Jr. and John E. Vollmer III, and each of them, proxies to the undersigned, each with full power to act without the other and with full power of substitution, to vote all +of the shares which the undersigned is entitled to vote at the annual meeting of stockholders of the Company to be held Thursday, June 4, 2015, at 10:00 a.m., local time, at the Hyatt North Houston Hotel, 425 N. Sam Houston Parkway East, Houston, +Texas 77060, and at any and all adjournments or postponements thereof, with the same force and effect as if the undersigned were personally present. +The undersigned hereby instructs the above-named proxies to vote the shares represented by this proxy in the manner as directed for the undersigned on +the reverse side of this proxy card. If no directions are made, the proxies will vote “FOR” the nominees for directors, “FOR” the approval of the advisory resolution on executive compensation, and “FOR” the ratification +of the selection of PricewaterhouseCoopers LLP as set forth on the reverse side. If any other matter should be presented properly, this proxy will be voted in accordance with the discretion of the above-named proxies. +Continued and to be marked, dated and signed on reverse side +0000233425_2 R1.0.0.51160 \ No newline at end of file diff --git a/raw/proxies/0000889900/0001193125-15-135760/proxy_rpt.txt b/raw/proxies/0000889900/0001193125-15-135760/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..e69de29bb2d1d6434b8b29ae775ad8c2e48c5391 diff --git a/raw/proxies/0000889900/0001193125-16-543237/proxy.txt b/raw/proxies/0000889900/0001193125-16-543237/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..99311db2c0df9d65003e4a055cfcd834859f0c4f --- /dev/null +++ b/raw/proxies/0000889900/0001193125-16-543237/proxy.txt @@ -0,0 +1,3162 @@ +DEF 14A +1 +d131296ddef14a.htm +DEFINITIVE PROXY STATEMENT +Definitive Proxy Statement +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +Washington, D.C. 20549 +SCHEDULE 14A +INFORMATION +Proxy Statement Pursuant to Section 14(a) of the +Securities Exchange Act of 1934 +(Amendment No. ) +Filed by the +Registrant x Filed by +a Party other than the Registrant ¨ +Check the appropriate box: +¨ +Preliminary Proxy Statement +¨ +Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +x +Definitive Proxy Statement +¨ +Definitive Additional Materials +¨ +Soliciting Material under Rule 14a-12 +PATTERSON-UTI ENERGY, +INC. +(Name of registrant as specified in its charter) +(Name of person(s) filing proxy statement, if other than the registrant) +Payment of Filing Fee (Check the appropriate box): +x +No fee required. +¨ +Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. +(1) +Title of each class of securities to which transaction applies: +(2) +Aggregate number of securities to which transaction applies: +(3) +Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing +fee is calculated and state how it was determined): +(4) +Proposed maximum aggregate value of transaction: +(5) +Total fee paid: +¨ +Fee paid previously with preliminary materials. +¨ +Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement +number, or the Form or Schedule and the date of its filing. +(1) +Amount Previously Paid: +(2) +Form, Schedule or Registration Statement No.: +(3) +Filing Party: +(4) +Date Filed: +April 15, 2016 +Dear Stockholder: +We cordially invite you to +attend Patterson-UTI Energy, Inc.’s annual stockholders’ meeting. The annual meeting will be held Thursday, June 2, 2016, at 10:00 a.m., local time, at the Hyatt North Houston Hotel, 425 N. Sam Houston Parkway East, Houston, Texas +77060. +We are pleased to take advantage of Securities and Exchange Commission rules that allow us to furnish proxy materials to our +stockholders on the Internet. We believe that posting these materials on the Internet enables us to provide stockholders with the information that they need quickly, while lowering our costs of printing and delivery and supporting sustainability. We +are mailing to most of our stockholders a Notice of Internet Availability of Proxy Materials, rather than a paper copy of our proxy materials. The notice contains instructions on how to access the proxy materials, vote and obtain, if you so desire, +a paper copy of the proxy materials. +Your vote is important to us. Whether or not you plan to attend the Annual Meeting in person, we urge +you to promptly vote your shares by using the Internet or telephone, or if the accompanying proxy statement was mailed to you, by completing, signing, dating and returning your proxy card as soon as possible in the enclosed postage prepaid envelope. +Thank you for your support. +Sincerely, +M ARK S. S IEGEL +Chairman of the Board +W ILLIAM A NDREW H ENDRICKS , J R . +President and Chief Executive Officer +PATTERSON-UTI ENERGY, INC. +450 Gears Road, Suite 500 +Houston, Texas 77067 +NOTICE OF 2016 +ANNUAL MEETING OF STOCKHOLDERS +To Be Held June 2, 2016 +The 2016 annual meeting of the stockholders of Patterson-UTI Energy, Inc., a Delaware corporation (“Patterson-UTI”), will be held +Thursday, June 2, 2016, at 10:00 a.m., local time, at the Hyatt North Houston Hotel, 425 N. Sam Houston Parkway East, Houston, Texas 77060 (the “Meeting”), for the following purposes: +• +to elect seven directors named in this proxy statement to the Board of Directors of Patterson-UTI to serve until the next annual meeting of the stockholders or until their respective successors are elected and +qualified; +• +to approve, on an advisory basis, Patterson-UTI’s compensation of its named executive officers; +• +to ratify the selection of PricewaterhouseCoopers LLP as the independent registered public accounting firm of Patterson-UTI for the fiscal year ending December 31, 2016; and +• +to transact such other business as may properly come before the Meeting or any adjournment or postponement thereof. +Stockholders of record at the close of business on April 5, 2016 are entitled to notice of and to vote at the Meeting and any adjournment +or postponement thereof. +Your vote is important to us. Whether or not you plan to attend the Meeting in person, we urge you to promptly +vote your shares by using the Internet or telephone, or if the accompanying proxy statement was mailed to you, by completing, signing, dating and returning your proxy card as soon as possible in the enclosed postage prepaid envelope. +By order of the Board of Directors +S ETH D. W EXLER +General Counsel and Secretary +April 15, 2016 +Important Notice Regarding the +Availability of Proxy Materials for the Stockholder Meeting +to Be Held on June 2, 2016 +The proxy statement and annual report to stockholders are available at www.proxyvote.com . +PATTERSON-UTI ENERGY, INC. +450 Gears Road, Suite 500 +Houston, Texas 77067 +PROXY +STATEMENT +ANNUAL MEETING OF STOCKHOLDERS +To Be Held June 2, 2016 +GENERAL INFORMATION ABOUT THE ANNUAL MEETING AND VOTING +The Board of Directors (the “Board” or “Board of Directors”) of Patterson-UTI Energy, Inc., a Delaware corporation +(“Patterson-UTI”), has made this proxy statement and its 2015 annual report available to you on the Internet or, upon your request has delivered printed versions of these materials to you by mail beginning on or about April 18, 2016. +Patterson-UTI is furnishing this proxy statement in connection with the solicitation by the Board of Directors of proxies to be voted at the 2016 annual meeting of stockholders of Patterson-UTI (the “Meeting”). The Meeting will be held +Thursday, June 2, 2016, at 10:00 a.m., local time, at the Hyatt North Houston Hotel, 425 N. Sam Houston Parkway East, Houston, Texas 77060, or at any adjournment or postponement thereof. The Notice of Internet Availability of Proxy Materials +(the “Notice”) was mailed to each of Patterson-UTI’s stockholders (other than those who previously requested electronic delivery) entitled to vote at the Meeting on or about April 18, 2016. +Pursuant to the “notice and access” rules adopted by the Securities and Exchange Commission (the “SEC”), Patterson-UTI has +elected to provide stockholders access to its proxy materials on the Internet. Accordingly, Patterson-UTI sent a Notice to all of its stockholders as of the record date. The Notice includes instructions on how to access Patterson-UTI’s proxy +materials on the Internet and how to request a printed copy of these materials. In addition, by following the instructions in the Notice, stockholders may request to receive proxy materials in printed form by mail or electronically by email on an +ongoing basis. +Choosing to receive your future proxy materials by email will save us the cost of printing and mailing documents to you and +will support sustainability. If you choose to receive future proxy materials by email, you will receive an email next year with instructions containing a link to those materials and a link to the proxy voting site. Your election to receive proxy +materials by email will remain in effect until you terminate such election. +If your shares are registered directly in your name with our +transfer agent, Continental Stock Transfer & Trust Company, you are considered the “stockholder of record” with respect to those shares, and the Notice was sent directly to you. +If your shares are held in an account at a brokerage firm, bank, broker-dealer, or other similar organization, then you are the beneficial +owner of shares held in “street name,” and the Notice was forwarded to you by that organization. As a beneficial owner, you have the right to direct that organization on how to vote the shares held in your account. +Whether you are a “stockholder of record” or hold your shares in “street name,” you may direct your vote without attending +the Meeting in person. +If you are a stockholder of record, you may vote by using the Internet or telephone by following the instructions +in the Notice. If you request printed copies of the proxy materials by mail, you may also vote by completing, dating, signing and returning your proxy card by mail. You should sign your name exactly as it appears on the proxy card. If you are +signing in a representative capacity (for example, as guardian, executor, trustee, custodian, attorney or officer of a corporation), you should indicate your name and title or capacity. +1 +If you are the beneficial owner of shares held in street name, you may be eligible to vote your +shares electronically using the Internet or telephone by following the instructions in the Notice. If you request printed copies of the proxy materials by mail, you may also vote by signing the voter instruction card provided by your brokerage firm, +bank, broker-dealer, or other similar organization and returning it by mail. If you provide specific voting instructions by mail, telephone or the Internet, your shares will be voted by your brokerage firm, bank, broker-dealer, or similar +organization as you have directed. +Properly submitted proxies received either by mail, Internet, telephone or in person in time to be +counted for the Meeting will be voted as you have directed in your proxy, unless you revoke your proxy in the manner provided below. As to any matter for which you give no direction in your proxy, your shares will be voted as follows: +• +“FOR” the election of all of the nominees to the Board of Directors named in this proxy statement; +• +“FOR” the approval, on an advisory basis, of Patterson-UTI’s compensation of its named executive officers; +• +“FOR” the ratification of PricewaterhouseCoopers LLP as the independent registered public accounting firm of Patterson-UTI for the fiscal year ending December 31, 2016; and +• +“FOR” or “AGAINST” any other proposals that may be properly submitted at the Meeting at the discretion of the persons named in the proxy. +If you are a stockholder of record, you may revoke your proxy before the proxy is voted by either: +• +submitting a new proxy with a later date, including a proxy submitted using the Internet or telephone, in time to be counted for the Meeting; +• +notifying the Secretary of Patterson-UTI in writing before the Meeting that you have revoked your proxy; or +• +attending the Meeting and voting in person. +If your shares are held in street name, you must +obtain a proxy executed in your favor from the stockholder of record (that is, your brokerage firm, bank, broker-dealer or similar organization) to be able to vote at the Meeting. +The Board of Directors is making this solicitation. We have retained Georgeson LLC, 480 Washington Blvd., 26 th Floor, Jersey City, New Jersey 07310, for a fee of approximately $8,500 and the reimbursement of out of pocket costs and expenses, to assist in the solicitation of proxies on behalf of the Board. +Patterson-UTI’s officers and other employees, without compensation other than regular compensation, may also solicit proxies on behalf of the Board by mail, email, the Internet, telephone, electronic means and personal interview. Patterson-UTI +will pay all costs associated with this solicitation. +SHARES OUTSTANDING AND VOTING RIGHTS +Only stockholders of record of Patterson-UTI’s common stock, $.01 par value per share (the “Common Stock”), at the close of +business on April 5, 2016 are entitled to notice of and to vote at the Meeting or any adjournment or postponement thereof. At the close of business on April 5, 2016, there were 147,167,622 shares of Common Stock issued and outstanding. +Holders of record of Common Stock on April 5, 2016 will be entitled to one vote per share on all matters to properly come before the Meeting. A list of stockholders entitled to notice of and to vote at the Meeting will be made available at the +Meeting and during regular business hours at the offices of Patterson-UTI Energy, Inc., 450 Gears Road, Suite 500, Houston, Texas 77067 for the ten day period prior to the Meeting for examination by any stockholder for any purpose germane to the +Meeting. +A quorum is necessary to transact business at the Meeting. A majority of the shares of Common Stock outstanding on April 5, +2016 will constitute a quorum. The shares held by each stockholder who attends the Meeting in person, signs and timely returns the form of proxy or properly votes using the Internet or telephone will be counted for purposes of determining the +presence of a quorum at the Meeting. +2 +“Broker non-votes” will be considered present at the Meeting but will not be counted to +determine the total number of votes cast. Broker non-votes occur when nominees, such as brokerage firms, banks, broker-dealers, or other similar organizations holding shares on behalf of the beneficial owners, are prohibited from exercising +discretionary voting authority for beneficial owners who have not provided voting instructions. If you do not give instructions to your bank, brokerage firm or other agent, the bank, brokerage firm or other agent will nevertheless be entitled to +vote your shares of Common Stock in its discretion on “routine matters” and may give or authorize the giving of a proxy to vote the shares of Common Stock in its discretion on such matters. The ratification of an independent registered +public accounting firm is generally considered a routine matter, whereas the election of directors and advisory approval of executive compensation are not considered routine matters. For these reasons, please promptly vote in accordance with the +instructions provided by your brokerage firm, bank, broker-dealer, or other similar organization. +PROPOSAL NO. 1 +ELECTION OF DIRECTORS +Directors are elected to serve until the next annual meeting of stockholders and until their successors are elected and qualified. Under +Delaware law and Patterson-UTI’s bylaws, the affirmative vote of a plurality of shares present in person or represented by proxy at the meeting at which a quorum is present is required for the election of directors. +The enclosed form of proxy provides a means for you to either: +• +vote “FOR” the election of the nominees to the Board of Directors listed below, +• +withhold authority to vote for one or more of the nominees, or +• +withhold authority to vote for all of the nominees. +The Board of Directors recommends that +you vote “FOR” all of the nominees. Unless you give contrary instructions in your proxy, your proxy will be voted “FOR” the election of all of the nominees to the Board of Directors. If any nominee +should become unable or unwilling to accept the nomination or election, the person acting under the proxy will vote for the election of such other person as the Board of Directors may recommend. The Board has no reason, however, to believe that any +of the nominees will be unable or unwilling to serve if elected. +Because directors are elected by a plurality vote, shares as to which a +stockholder withholds authority to vote and broker non-votes will not affect the outcome of the election. A broker non-vote will be counted for purposes of establishing a quorum, but will not be treated as a vote cast with respect to the election of +directors. This will have the effect of reducing the absolute number of votes cast for the election of directors. +Our corporate governance +guidelines require that if a director receives in an uncontested election a greater number of “withhold” votes than votes cast “for” his or her election, the Nominating and Corporate Governance Committee of the Board of Directors +will undertake a prompt evaluation of the appropriateness of the director’s continued service on the Board of Directors. In performing this evaluation, the Nominating and Corporate Governance Committee will review all factors it deems relevant, +including the stated reasons why votes were withheld, the director’s length of service, his or her past contributions to Patterson-UTI and the availability of other qualified candidates. The Nominating and Corporate Governance Committee will +then make its recommendation to the Board. The Board of Directors will review the Nominating and Corporate Governance Committee’s recommendation and consider such further factors and information as it deems relevant. The Board of Directors will +act on the Nominating and Corporate Governance Committee’s recommendation no later than 90 days following the date of the stockholders’ meeting. If the Board of Directors determines remedial action is appropriate, the director shall +promptly take whatever action is requested by the Board. If the director does not promptly take the recommended remedial action or if the Board of Directors determines that immediate resignation is in the best interests of Patterson-UTI and its +stockholders, the Board of Directors may accept the director’s resignation that will have been tendered as follows. Each director will, as a condition to his or her +3 +appointment or election as a director or nomination as a director, agree in writing to comply with the terms of Patterson-UTI’s majority voting policy and provide to the Board of Directors +an irrevocable resignation that will be effective upon (i) the failure to receive the required vote at the next annual meeting at which such director faces re-election and (ii) the Board of Directors’ acceptance of such resignation. +Set forth below is the name, age, position and a brief description of the business experience during at least the past five years of each +of the members of Patterson-UTI’s Board of Directors, as well as specific qualifications, attributes and skills of such member that were identified by the Nominating and Corporate Governance Committee when concluding such member should be +nominated to serve on the Board of Directors. Each current member of Patterson-UTI’s Board of Directors is a nominee for election to the Board of Directors. There are no arrangements or understandings between any person and any of the directors +pursuant to which such director was selected as a nominee for election at the Meeting. There are no family relationships among any of the directors or executive officers of Patterson-UTI. +Name +Age +Position +Mark S. Siegel +65 +Chairman of the Board and Director +Kenneth N. Berns +56 +Senior Vice President and Director +Charles O. Buckner +71 +Director +Michael W. Conlon +69 +Director +Curtis W. Huff +58 +Director +Terry H. Hunt +67 +Director +Tiffany J. Thom +43 +Director +When considering whether directors and nominees have the experience, qualifications, attributes and skills, +taken as a whole, to enable the Board of Directors to satisfy its oversight responsibilities effectively in light of Patterson-UTI’s business and structure, the Nominating and Corporate Governance Committee and the Board of Directors focused +primarily on the information discussed in each of the directors’ individual biographies set forth below. +In particular, with regard +to Mr. Siegel, the Board of Directors considered his broad business and legal experience, as well as his expertise with respect to Patterson-UTI’s business. In addition, the Board considered Mr. Siegel’s demonstrated leadership +for more than 20 years in the aggregate of Patterson-UTI and one of its predecessor companies, UTI Energy Corp. (“UTI”). In addition, the Board considered Mr. Siegel’s prior leadership experience in other public companies and in +the oil services industry, and in numerous other businesses and industries. Mr. Siegel also brings substantial experience and expertise in mergers and acquisitions, capital structure transactions, strategic planning, and board and business +management. Mr. Siegel’s broad and deep experience and expertise allows him to provide Patterson-UTI with valuable leadership in all areas of its business endeavors. +With regard to Mr. Berns, the Board of Directors considered his more than 30 years of financial, mergers and acquisitions and +transactional experience, including more than 20 years in the oil and gas industry. This experience and background provides perspective on the cyclical nature of the oil and gas industry and allows Mr. Berns to provide valuable direction with +respect to Patterson-UTI’s financial affairs, corporate transactions and strategic decisions. +With regard to Mr. Buckner, the +Board of Directors considered his service as a director of oil and gas companies, as well as his experience, expertise and background with regard to accounting matters, which includes his role as the former chairman of Ernst & Young +LLP’s U.S. energy practice. +With regard to Mr. Conlon, the Board of Directors considered his more than 40 years of experience +handling corporate, securities and mergers and acquisition matters as a lawyer with an international law firm, as well as his service in a number of management roles throughout his tenure at the firm. The Board noted Mr. Conlon’s +experience in representing numerous public companies, including Patterson-UTI, and other energy services companies, allows him to provide valuable insight on legal, governance and regulatory issues facing Patterson-UTI. +With regard to Mr. Huff, the Board of Directors considered his background as an executive of publicly traded oilfield services companies +and as an owner and manager of a private investment firm focused on the oilfield service industry. The Board noted his knowledge and experience in a broad range of oilfield products and +4 +services and his current and historical experience in managing operations in both the United States and internationally. The Board also considered Mr. Huff’s expertise and background +with regard to accounting and legal matters, which, among other things, provides guidance to Patterson-UTI in assessing its corporate governance structure, policies and procedures. +With regard to Mr. Hunt, the Board of Directors considered his more than 25 years of experience covering most phases of the upstream oil +and natural gas industry in the United States and Canada, including the evaluation of exploration and development programs, oil and natural gas production and pipeline operations, and project development and major production facility construction. +This experience and background provides Patterson-UTI with an invaluable perspective of the oil and natural gas industry and its customers. In addition, Mr. Hunt’s many years of senior executive experience leading natural gas distribution, +storage and marketing companies provides insight into the management of multi-faceted businesses and the markets for natural gas in North America. +With regard to Ms. Thom, the Board of Directors considered her more than 20 years of operational and financial experience in the energy +industry. The Board noted her service in various operational roles, including as a reservoir engineer for a major oil and gas exploration and production company. The Board also noted Ms. Thom’s prior executive management experience, +including most recently as executive vice president and chief financial officer of a publicly traded independent oil and gas exploration and production company, which allows her to provide Patterson-UTI with valuable insight on financial and +strategic matters. +Mark S. Siegel — Mr. Siegel has served as Chairman of the Board and as a director of +Patterson-UTI since May 2001. Mr. Siegel served as Chairman of the Board and as a director of UTI from 1995 to May 2001, when UTI merged with and into Patterson-UTI. Mr. Siegel has been President of REMY Investors & Consultants, +Incorporated (“REMY Investors”) since 1993. From 1992 to 1993, Mr. Siegel was President, Music Division, Blockbuster Entertainment Corp. From 1988 through 1992, Mr. Siegel was an Executive Vice President of Shamrock Holdings, +Inc., a private investment company, and Managing Director of Shamrock Capital Advisors, Incorporated. Mr. Siegel holds a Bachelor of Arts degree from Colgate University and a J.D. from the University of California, Berkeley (Boalt Hall) School +of Law. +Kenneth N. Berns — Mr. Berns has served as Senior Vice President of Patterson-UTI since April 2003 and +as a director of Patterson-UTI since May 2001. Mr. Berns served as a director of UTI from 1995 to May 2001. Mr. Berns has been an executive with REMY Investors since 1994. Mr. Berns holds a Bachelor’s Degree in Business +Administration from San Diego State University and a Master’s Degree in Taxation from Golden Gate University. +Charles O. +Buckner — Mr. Buckner has served as a director of Patterson-UTI since February 2007. Mr. Buckner, a private investor, retired from the public accounting firm of Ernst & Young LLP in 2002 after 35 years of +service in a variety of client service and administrative roles, including chairmanship of Ernst & Young’s U.S. energy practice. Mr. Buckner has served as a director for KLR Energy Acquisition Corp., a newly organized blank check +company formed to source, acquire and, after its initial business combination, build an oil and gas exploration and production business (“KLR Energy”), since March 2016. Mr. Buckner served as a director of Energy Partners, Ltd., a +publicly held company with oil and natural gas exploration and production on the continental shelf in the Gulf of Mexico from 2009 to 2014, Global Industries, Ltd., a marine construction services company with global operations from 2010 to 2011, +Gateway Energy Corporation, a publicly held oil and gas pipeline company from 2008 to 2010, Horizon Offshore, Incorporated, a marine construction services company for the offshore oil and gas industry from 2003 to 2007, and Whittier Energy +Corporation, a publicly held company with domestic onshore oil and natural gas exploration and production from 2003 to 2007. Mr. Buckner is a Certified Public Accountant and holds a Bachelor of Business Administration from the University of +Texas and a Masters of Business Administration from the University of Houston. +Michael W. Conlon — Mr. Conlon +has served as a director of Patterson-UTI since September 2012. Mr. Conlon retired as a partner of the law firm, Norton Rose Fulbright US LLP, in January 2012 after 40 years with the firm. Mr. Conlon specialized in corporate, securities +and merger and acquisition matters. Mr. Conlon was partner-in-charge of the firm’s Houston office from 2007 to 2011, was co-partner-in-charge from 2001 to 2007 and partner-in-charge of its Washington, D.C. office from 1992 to 1998. +Mr. Conlon currently is an Advisory Director +5 +to Tailored Brands, Inc., a specialty retailer of men’s apparel and international supplier of corporatewear, and an NYSE listed company. Mr. Conlon holds a Bachelor of Arts degree in +Economics from Catholic University of America, where he graduated magna cum laude and as a member of Phi Beta Kappa, and a Juris Doctorate from the Duke University School of Law, where he graduated as a member of the Order of the Coif. +Curtis W. Huff — Mr. Huff has served as a director of Patterson-UTI since May 2001 and served as a director of UTI +from 1997 to May 2001. Mr. Huff is owner and Chairman of Freebird Partners, a private investment firm created in 2002 that is focused on oilfield service companies and technology. Mr. Huff was Managing Director of Intervale Capital, an +oilfield service private equity firm that Mr. Huff co-founded in 2006, and he was a senior advisor to that firm from 2012 to February 2015. Mr. Huff also serves as Chairman of Impact Fluid Solutions LP, which provides drilling and production +solutions for oil and gas operators and fluid companies. Mr. Huff served as the President and Chief Executive Officer of Grant Prideco, Inc., a provider of drill pipe and other drill stem products, from February 2001 to June 2002. From January +2000 to February 2001, Mr. Huff served as Executive Vice President, Chief Financial Officer and General Counsel of Weatherford International, Inc., one of the world’s largest international oilfield services companies. He served as Senior +Vice President and General Counsel of Weatherford from May 1998 to January 2000. Mr. Huff began his professional career in 1983 with the law firm of Norton Rose Fulbright US LLP where he specialized in corporate, securities and merger and +acquisition matters. Mr. Huff was made a partner in that firm in 1989 where he served until 1998 when he joined Weatherford. Mr. Huff holds a Bachelor of Arts degree and J.D. from the University of New Mexico, where he graduated as a +member of the Order of the Coif and cum laude, and a Masters of Law from New York University School of Law. Mr. Huff is a Vice Chairman of the Board of Directors of the University of St. Thomas in Houston, Texas, and a member of the board of +directors of the Houston Food Bank. +Terry H. Hunt — Mr. Hunt has served as a director of Patterson-UTI since +April 2003 and served as a director of UTI from 1994 to May 2001. Mr. Hunt is an energy consultant and retired senior natural gas and electric utility executive. Mr. Hunt served as Senior Vice President — Strategic Planning of PPL +Corporation, an international energy and utility holding company, from 1998 to 2000. Mr. Hunt served as the President and Chief Executive Officer of Penn Fuel Gas, Inc., a Pennsylvania-based natural gas and propane distribution company, from +1992 to 1999. Previously, Mr. Hunt was President of Carnegie Natural Gas and Apollo Gas Company, both Appalachian natural gas distribution companies. He also previously served in senior management positions in natural gas project and venture +development, oil and natural gas exploration and development evaluation and operations and major production facilities construction with Texas Oil & Gas Corp. and Atlantic Richfield. Mr. Hunt holds a Bachelor of Engineering degree from the +University of Saskatchewan, Canada and a Masters of Business Administration from Southern Methodist University. +Tiffany J. +Thom — Ms. Thom has served as a director of Patterson-UTI since August 2014. Ms. Thom has served as the Chief Financial Officer of KLR Energy since January 2015. Ms. Thom has served as a director of +Yates Petroleum Corporation, a privately owned, independent oil and gas exploration and production company, since October 2015. Ms. Thom served four years as the Chief Financial Officer of EPL Oil & Gas, Inc., and was further appointed +Executive Vice President in January 2014, and she served in those roles until June 2014, when EPL was sold. Ms. Thom began her career with EPL as a Senior Asset Management Engineer, a position she held until she was appointed Director of +Corporate Reserves in September 2001. Ms. Thom was named EPL’s Director of Investor Relations in April 2006 and Vice President, Treasurer and Investor Relations in July 2008. In July 2009, Ms. Thom was designated as EPL’s +Principal Financial Officer and, in September 2009, she was appointed Senior Vice President. Ms. Thom has more than 20 years of energy industry experience and prior to joining EPL, she was a Senior Reservoir Engineer with Exxon Production +Company and ExxonMobil Company with operational roles including reservoir engineering and subsurface completion engineering for numerous offshore Gulf of Mexico properties. Ms. Thom holds a B.S. in Engineering from the University of Illinois +and a Masters of Business Administration in Management with a concentration in Finance from Tulane University. +6 +Board Leadership Structure, Lead Director and Board Role in Risk Oversight +The Board evaluates its leadership structure and role in risk oversight on an ongoing basis. The decision on whether to combine or separate the +Chairman and Chief Executive Officer (“CEO”) role is determined on the basis of what the Board considers to be best for Patterson-UTI at any given point in time. Patterson-UTI’s current Board leadership structure separates the role of +Chairman and CEO. +The Board also believes part of an effective Board leadership structure is to have a lead independent director, the +“Lead Director.” The Board has appointed Mr. Huff as the Lead Director. The independent directors meet regularly in executive sessions at which only independent directors are present, and the Lead Director chairs those sessions. The +Lead Director serves as a liaison between the Chairman and the independent directors, consults with regard to Board and agenda items, and works with the chairpersons of Board committees as appropriate. +The Nominating and Corporate Governance Committee and the Board currently believe that the Board’s leadership structure, which includes +the separation of the role of CEO and Chairman and the appointment of an independent Lead Director, is appropriate because it, among other things, provides for sufficient independence between the Board and management and for an independent director +who provides board member leadership. +The Board has adopted Corporate Governance Guidelines, which can be accessed electronically in the +“Governance” section of Patterson-UTI’s website at www.patenergy.com . The Guidelines describe one of the Board’s primary responsibilities as overseeing Patterson-UTI’s processes for assessing and managing risks. The +Board discharges this responsibility, in part, through regular inquiries from the Chairman of the Board and/or the Lead Director to management, periodic communications from management to the Board of Directors of particular risks and events, and +discussions during Board meetings of general and specific risks to Patterson-UTI. +Meetings and Committees of the Board of Directors +The Board of Directors met eight times during the year ended December 31, 2015. Each director attended, in person or by telephone, at +least 75% of the aggregate of all meetings held by the Board and meetings of each committee on which such director served. A majority of the members of the Board of Directors are independent within the meaning of the Nasdaq Stock Market, Inc. +(“Nasdaq”) listing standards. Specifically, the Board has determined that Messrs. Buckner, Conlon, Huff and Hunt and Ms. Thom are independent within the meaning of the Nasdaq listing standards. In reaching this conclusion, the Board +considered that Mr. Conlon retired in January 2012 as partner of a law firm that has provided legal services to the Company. The Board has determined that these transactions are not material to such firm, Patterson-UTI or Mr. Conlon and +that such transactions do not affect his independence under applicable rules and regulations. +The Board of Directors has established four +standing committees: an Executive Committee, an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee. +The Executive Committee, which currently is composed of Messrs. Siegel, Berns and Huff, has the authority, to the extent permitted by +applicable law, to act for the Board in all matters arising between regular or special meetings of the Board of Directors. +The Audit +Committee members are Messrs. Buckner (chairman), Huff and Hunt and Ms. Thom, each of whom is independent within the meaning of applicable rules under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and within +the meaning of the Nasdaq listing standards. The Audit Committee oversees management’s conduct of Patterson-UTI’s accounting and financial reporting process, including review of the financial reports and other financial information +provided by Patterson-UTI to the public and government and regulatory bodies, Patterson-UTI’s system of internal accounting, Patterson-UTI’s financial controls, and the annual independent audit of Patterson-UTI’s financial statements +and internal control over financial reporting. The Audit Committee also oversees compliance with Patterson-UTI’s codes of conduct and ethics and with legal and regulatory requirements. The Board has determined that Messrs. Buckner and Huff and +Ms. Thom are “audit committee financial experts” within the meaning of applicable SEC rules. The Audit Committee selects the independent registered public accounting firm to audit Patterson-UTI’s books and records and considers +and acts upon accounting matters as they arise. The Board of Directors has adopted a written charter for the Audit Committee. The Audit Committee held five meetings during the year ended December 31, 2015. Please see “Audit Committee +Report” elsewhere in this proxy statement. +7 +The Compensation Committee members are Messrs. Hunt (chairman), Buckner, Conlon and Huff, each of +whom is independent as defined in the Nasdaq listing standards. Among other things, the Compensation Committee sets and administers the policies that govern the compensation of executive officers and directors of Patterson-UTI. The Board of +Directors has adopted a written charter for the Compensation Committee. The Compensation Committee held seven meetings during the year ended December 31, 2015. Please see “Compensation Discussion and Analysis” and “Compensation +Committee Report” elsewhere in this proxy statement for further information about the Compensation Committee. +The Nominating and +Corporate Governance Committee members are Messrs. Conlon (chairman), Buckner and Huff and Ms. Thom, each of whom is independent as defined in the Nasdaq listing standards. The purpose of the Nominating and Corporate Governance Committee is to, +among other things, identify individuals qualified to become Board members, to recommend for selection by the Board director nominees for the next annual meeting of stockholders, to recommend nominees for Board committees, to review +Patterson-UTI’s Code of Business Conduct and Corporate Governance Guidelines, to develop and continually make recommendations with respect to the best corporate governance principles and to oversee the annual review of the Board and management. +The Board of Directors has adopted a written charter for the Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee held one meeting during the year ended December 31, 2015. +On behalf of the Board, the Nominating and Governance Committee considers director nominees recommended by Patterson-UTI’s stockholders if +the recommendations are made in accordance with all legal requirements, including applicable provisions of Patterson-UTI’s restated certificate of incorporation and bylaws. In accordance with Patterson-UTI’s bylaws, in addition to any +other applicable requirements, nominations of persons for election to the Board may be made at a meeting of stockholders only by or at the direction of the Board or by a stockholder who is a stockholder of record on the date of the giving of the +notice provided for below and on the record date for the determination of stockholders entitled to vote at such annual meeting and gives timely notice of such nomination in writing to the Secretary of Patterson-UTI. To be timely with respect to the +2017 annual meeting of stockholders, a stockholder’s notice must be delivered to or mailed and received at Patterson-UTI’s principal executive offices not earlier than February 2, 2017 and not later than March 4, 2017; provided, +however, that in the event that the annual meeting is called for a date that is not within 30 days before or after June 2, 2017, notice by the stockholder must be received not later than the close of business on the tenth day following the day +on which such notice of the date of the meeting was mailed or public disclosure of the annual meeting date was made, whichever occurs first. +A stockholder’s notice to the Secretary of Patterson-UTI shall set forth: +• +as to each person whom the stockholder proposes to nominate for election or re-election as director, all information relating to such person that is required to be disclosed in solicitations of proxies for election of +directors, or is otherwise required, in each case pursuant to Regulation 14A promulgated under the Exchange Act, or any successor regulation thereto, +• +the name and record address of the stockholder proposing such nomination, +• +the class and number of shares of Patterson-UTI that are beneficially owned by the stockholder, +• +a description of all arrangements or understandings between such stockholder and each proposed nominee and any other person or persons (including their names) pursuant to which the nomination or nominations are to be +made by such stockholder, and +• +a representation that such stockholder intends to appear in person or by proxy at the meeting to nominate the persons named in the notice. +Such notice must be accompanied by a written consent of each proposed nominee to being named as a nominee and to serve as a director if +elected. +The Nominating and Corporate Governance Committee determines qualification criteria and procedures for the identification and +recruitment of candidates for election to serve as directors of Patterson-UTI. The Nominating and Corporate Governance Committee relies on the knowledge and relationships of Patterson-UTI and its officers and directors, as well as third parties when +it deems appropriate, to identify and evaluate nominees for +8 +director, including nominees recommended by stockholders. In evaluating a nominee for director, the Nominating and Corporate Governance Committee considers the nominee’s skills, expertise, +industry and other knowledge, personal and professional ethics, integrity and values, sound business judgment and willingness to commit sufficient time to the Board and be committed to representing the long-term interests of Patterson-UTI’s +stockholders. Although the Nominating and Corporate Governance Committee does not have a stand-alone policy with regard to consideration of diversity in identifying director nominees, it considers diversity in professional background, experience, +expertise (including as to financial matters) and perspective (including as to age, gender and ethnicity) with respect to the Board of Directors composition as a whole when evaluating a director nominee. +Succession Planning +The Board of +Directors oversees processes and procedures to provide continuity of well-qualified executive leadership and to assess whether such leadership possesses the skill and talent to execute Patterson-UTI’s long term business strategies. The Board of +Directors reviews the succession plan for the Chief Executive Officer and the senior executives tailored to reflect the Board’s standards for executive leadership and Patterson-UTI’s business strategy and vision. The succession plan +addresses (i) both current and long term needs of Patterson-UTI and establishes a process for identifying and assessing potential internal candidates; (ii) periodic review and assessment of readiness: (iii) contingency planning for +temporary absences of the Chief Executive Officer due to disability or other unexpected event; and (iv) long term continuity planning for succession to the Chief Executive Officer position. +Political Contributions +Patterson-UTI +has a policy prohibiting the contribution of company funds to political parties or organizations or to candidates for any public office or to influence the general public, or segments thereof, with respect to public elections or referenda. +Patterson-UTI participates in certain trade organizations with purposes that include enhancement of the public image of our industry, education about the industry and issues that affect the industry and industry best practices and standards. Many of +the trade organizations also engage in legislative or political activity related to matters that affect the industry as a whole and not a specific company. Patterson-UTI, as one of many members in various trade associations, does not direct the +legislative activities of any trade organization of which it is a member. +Sustainability +Patterson-UTI is committed to long-term sustainability with respect to the environment, our society and our long-term corporate success. A copy +of Patterson-UTI’s sustainability commitment can be accessed electronically in the “Values” section of the Patterson-UTI website at www.patenergy.com and in print to any stockholder who requests it from the Secretary of +Patterson-UTI. +Communication with the Board and its Independent Members +Persons may communicate with the Board, or directly with its Chairman, Mr. Siegel, by submitting such communication in writing in care of +Chairman of the Board of Directors, Patterson-UTI Energy, Inc., 450 Gears Road, Suite 500, Houston, Texas 77067. Persons may communicate with the independent members of the Board by submitting such communication in writing to the Nominating and +Corporate Governance Committee of the Board of Directors of Patterson-UTI Energy, Inc., 450 Gears Road, Suite 500, Houston, Texas 77067. +Although Patterson-UTI does not have a formal policy regarding attendance by members of the Board at its annual meetings of stockholders, +directors are invited to attend annual meetings of Patterson-UTI stockholders. All of the directors at the time of the 2015 annual meeting of stockholders attended the meeting either in person or by telephone. +9 +Corporate Governance Documents Available on Patterson-UTI’s Website +Copies of each of the following documents can be accessed electronically in the “Governance” section of the Patterson-UTI website at +www.patenergy.com and in print to any stockholder who requests them from the Secretary of Patterson-UTI: +• +Audit Committee Charter; +• +Compensation Committee Charter; +• +Nominating and Corporate Governance Committee Charter; +• +Corporate Governance Guidelines; +• +Code of Business Conduct and Ethics for its employees, officers and directors; +• +Code of Business Conduct and Ethics for Senior Financial Executives; and +• +Global Anticorruption Policy. +PROPOSAL NO. 2 +ADVISORY APPROVAL OF EXECUTIVE COMPENSATION +In accordance with Section 14A of the Exchange Act, the Board of Directors is asking stockholders to approve a non-binding, advisory +resolution on the compensation of Patterson-UTI’s executive officers who are named in the Summary Compensation Table appearing in this proxy statement (the “Named Executive Officers”). The compensation of the Named Executive Officers +is described in the “Compensation Discussion and Analysis” and “Executive Compensation” sections of this proxy statement. +The compensation program for the Named Executive Officers is designed to attract and retain highly qualified individuals and to motivate and +reward them for performance that benefits Patterson-UTI and its stockholders. The Compensation Committee and the Board of Directors believe that the policies and procedures detailed in the “Compensation Discussion and Analysis” achieve +these goals by, among other things: +• +providing a mix of short-term compensation in the form of base salary and annual cash incentive bonuses and long-term compensation in the form of restricted stock, stock options and performance units, which strikes a +balance between offering competitive compensation packages and aligning compensation with long-term growth and creating value for stockholders; +• +emphasizing variable equity and cash compensation to link realized compensation to performance; +• +using a team-based compensation model for our senior executives; +• +reviewing annual base salaries, in part, based on Patterson-UTI’s financial results and position and performance compared to similarly situated companies, while recognizing that Patterson-UTI’s executive +compensation program has historically emphasized low comparative base compensation; +• +providing performance-based annual cash incentive bonuses designed to put a meaningful portion of total compensation at risk; +• +awarding stock options and performance units, whose value is tied to the achievement of certain performance goals and/or an increase in the price of the Common Stock; +• +awarding stock options, performance units and restricted stock with vesting periods of three years; and +• +establishing stock ownership guidelines. +The compensation program for the Named Executive +Officers has also been modified beginning in 2015 and again in 2016 to reduce the bonus and equity compensation potential for Mr. Siegel, our Executive Chairman, given a transition in the roles of Mr. Siegel and Mr. Hendricks, our CEO. The nature +and rationale for such changes are described in greater detail under “Compensation Discussion and Analysis”. +10 +The Board of Directors is asking stockholders to approve the following non-binding, advisory +resolution at the Meeting: +“RESOLVED, that the stockholders of Patterson-UTI Energy, Inc. (the “Company”) approve, on an +advisory basis, the compensation of the Company’s named executive officers, as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the +compensation tables and other narrative discussion in the Proxy Statement for the 2016 Annual Meeting of Stockholders of the Company.” +This advisory resolution, commonly referred to as a “say-on-pay” resolution, is non-binding on the Board of Directors. Although +non-binding, the Board of Directors and the Compensation Committee value the views of Patterson-UTI’s stockholders and will review and consider the voting results when (i) evaluating the effectiveness of Patterson-UTI’s compensation +policies and practices and (ii) making future compensation decisions for the Named Executive Officers. +The Board of Directors +recommends a vote “FOR” the approval of the advisory resolution on executive compensation . Approval of the advisory resolution requires the affirmative vote of the holders of a majority of the shares of Common +Stock present in person or by proxy, and entitled to vote at the Meeting. Unless you give contrary instructions in your proxy, your properly submitted proxy will be voted “FOR” such approval. Abstentions will be counted as shares entitled +to vote on the proposal and will have the same effect as a vote “AGAINST” the proposal. A broker non-vote will be counted for purposes of establishing a quorum, but will not be treated as a share entitled to vote on the proposal. This will +have the effect of reducing the absolute number of shares necessary to approve the proposal. +PROPOSAL NO. 3 +RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM +The Audit Committee appointed PricewaterhouseCoopers LLP as the independent registered public accounting firm to audit the financial statements +and internal control over financial reporting of Patterson-UTI for the fiscal year ending December 31, 2016, and directed that such engagement be submitted to the stockholders of Patterson-UTI for ratification. In recommending ratification by +the stockholders of such engagement, the Board of Directors is acting upon the recommendation of the Audit Committee, which has satisfied itself as to PricewaterhouseCoopers LLP’s independence, professional competence and standing. Although +ratification by stockholders of the engagement of PricewaterhouseCoopers LLP is not required by Delaware corporate law or Patterson-UTI’s restated certificate of incorporation or bylaws, the Audit Committee believes a decision of this nature +should be made with the consideration of Patterson-UTI’s stockholders. If the stockholders fail to ratify the appointment, the Audit Committee will reconsider whether to retain PricewaterhouseCoopers LLP and may retain that firm or another +without re-submitting the matter to our stockholders. Even if the appointment is ratified, the Audit Committee may, in its discretion, direct the appointment of a different independent registered public accounting firm at any time during the year if +it determines that such change would be in the best interests of Patterson-UTI and its stockholders. +It is expected that one or more +representatives of PricewaterhouseCoopers LLP will be present at the Meeting and will be given the opportunity to make a statement if they so desire. It also is expected that the representative(s) will be available to respond to appropriate +questions from the stockholders. +The Board of Directors recommends a vote “FOR” the ratification of PricewaterhouseCoopers +LLP as Patterson-UTI’s independent registered public accounting firm. Ratification of the selection of PricewaterhouseCoopers LLP requires the affirmative vote of the holders of a majority of the shares of +Common Stock present in person or by proxy, and entitled to vote at the Meeting. Unless you give contrary instructions in your proxy, your properly submitted proxy will be voted “FOR” such ratification. Abstentions will be counted as +shares entitled to vote on the proposal and will have the same effect as a vote “AGAINST” the proposal. Because the ratification of an independent registered public accounting firm is considered a routine matter, if you do not give +instructions to your brokerage firm, bank, broker-dealer, or other similar organization, the brokerage firm, bank, broker-dealer, or other similar organization will nevertheless be entitled to vote your shares in its discretion and may give or +authorize the giving of a proxy to vote the shares in its discretion on this proposal. +11 +EXECUTIVE OFFICERS +Set forth below is the name, age and position followed by a brief description of the business experience during at least the past five years +for each executive officer of Patterson-UTI who is not also a member of the Board of Directors. +Name +Age +Position +William Andrew Hendricks, Jr. +51 +President and Chief Executive Officer +John E. Vollmer III +60 +Senior Vice President — Corporate Development, Chief Financial Officer and Treasurer +Seth D. Wexler +44 +General Counsel and Secretary +James M. Holcomb +53 +President — Patterson-UTI Drilling Company LLC +William Andrew Hendricks, Jr. — Mr. Hendricks has served as President and Chief Executive +Officer of Patterson-UTI since October 2012. From April 2012 through September 2012, he served as Chief Operating Officer of Patterson-UTI. From May 2010 through March 2012, Mr. Hendricks served as President of Schlumberger Drilling & +Measurements, a division of Schlumberger Limited, a global provider of oilfield services. Prior to that date, Mr. Hendricks worked for Schlumberger in various worldwide locations and capacities since 1988, including serving in numerous +executive positions since 2003. Mr. Hendricks holds a Bachelor of Science in Petroleum Engineering from Texas A&M University. +John E. Vollmer III — Mr. Vollmer has served as Chief Financial Officer and Treasurer of Patterson-UTI since November 2005 and +Senior Vice President — Corporate Development of Patterson-UTI since May 2001. Mr. Vollmer also served as Secretary of Patterson-UTI from November 2005 to February 2007. Mr. Vollmer served as Senior Vice President, Chief Financial +Officer, Secretary and Treasurer of UTI from 1998 to May 2001. From 1992 until 1997, Mr. Vollmer served in a variety of capacities at Blockbuster Entertainment, including Senior Vice President — Finance and Chief Financial Officer of +Blockbuster Entertainment’s Music Division. Mr. Vollmer holds a Bachelor of Arts in Accounting from Michigan State University. +Seth D. Wexler — Mr. Wexler has served as General Counsel and Secretary of Patterson-UTI since August 2009. From March 1998 to +August 2009, he specialized in securities law and mergers and acquisitions for the law firm of Norton Rose Fulbright US LLP, including as a partner of such law firm since January 2007. Mr. Wexler holds a Bachelor of Business Administration in +Finance from the University of Texas at Austin, a Juris Doctorate from the University of Houston Law Center and a Masters of Business Administration from the University of Houston. +James M. Holcomb — Mr. Holcomb has served as President of Patterson-UTI Drilling Company LLC since January +2012. Mr. Holcomb came to Patterson-UTI in February 1998 with the acquisition of Robertson Onshore Drilling Company and since that time has served in numerous operational management roles, including as Senior Vice President of Operations +of Patterson-UTI Drilling Company LLC from April 2006 to January 2012. Mr. Holcomb has over 30 years of experience in contract drilling operations. Mr. Holcomb holds a Bachelor of Science Degree in Business Management from +LeTourneau University. +12 +COMPENSATION DISCUSSION AND ANALYSIS +The following Compensation Discussion and Analysis (“CD&A”) sets forth the principal compensation policies and programs of Patterson-UTI for its key executive officers. All references in this CD&A to the “top four Named Executive Officers” refer to Mr. Hendricks (our current Chief Executive Officer) and Messrs. +Siegel, Vollmer and Berns, except for periods prior to 2012 in which case the term refers to our former Chief Executive Officer and Messrs. Siegel, Vollmer and Berns. +Executive Summary +The compensation program at Patterson-UTI, which is managed by the Compensation Committee, is specifically designed for Patterson-UTI and its +particular business and organizational structure. A guiding principle of our executive compensation program is to align the interests of our management with that of our stockholders and to create incentives that further the corporate goals of +Patterson-UTI and deliver value to our stockholders. +CONTINUED OUTSTANDING PERFORMANCE THROUGH GOOD AND BAD MARKETS AND DESPITE SEVERE INDUSTRY +DOWNTURN +Patterson-UTI Total Shareholder Return (Periods Ending December 31, 2015) has consistently demonstrated superb +relative performance as compared to our peer group over the past five years: +• +1-year total shareholder return: 100 th percentile (i.e. ranked number “1”) +• +2-year total shareholder return: 97 th percentile +• +3-year total shareholder return: 96 th percentile +• +5-year total shareholder return: 83 rd percentile +These returns have been delivered by our company through both good and down markets and during one of the most challenging times that our +industry has experienced in the past 30 years. The returns are reflective of our approach to building our business for the long-term and recognizing the cyclical nature of our industry. Our compensation structure mirrors this approach and seeks to +reward our executive management team for full cycle returns through a focus on variable and long-term compensation. +PAY FOR PERFORMANCE +Pay for performance is a fundamental component of our compensation program. We believe that a key indicator of a well-functioning compensation +program is alignment between total realizable compensation and company performance — pay-for-performance. As indicated in the following chart, Patterson-UTI’s record is outstanding when based on a pay-for-performance standard. +13 +We believe our program of having approximately 75% of targeted compensation for our top four Named Executive +Officers in the form of variable cash or equity-based compensation, with at least 50% of targeted compensation having some dependence on long-term results, has had the desired effect of aligning executive compensation with our stock performance. +Our annual cash incentive bonus compensation also directly links compensation to performance. This is accomplished in two ways: +• +First, the Compensation Committee establishes a total “potential” compensation pool that is tied to Patterson-UTI’s annual earnings before interest, taxes, depreciation, amortization and impairment +expense (“Adjusted EBITDA”). +• +Second, actual cash payouts from the pool are based on performance and results, giving consideration to non-Adjusted EBITDA criteria such as team performance in executing on strategic goals, maintaining excellent safety +performance, reducing costs of rig manufacturing, improving market share, comparing margin and revenue per day results on an absolute basis and against direct competitors, executing supply chain initiatives in a contracting industry, growth in +returns on equity and capital, management of capital expenditures in a down part of the industry cycle, expanding into international markets and achieving operational and financial successes. +Although Adjusted EBITDA is used to determine the maximum incentive cash compensation pool, Adjusted EBITDA is not the sole factor or metric +used. We believe that this structure provides a direct link between compensation and the financial performance of Patterson-UTI, while allowing for adjustments for individual performance and non-financial corporate results. +14 +SUBSTANTIALLY REDUCED COMPENSATION IN LIGHT OF INDUSTRY CONDITIONS +As noted above, Patterson-UTI’s compensation program has been designed to adjust compensation to market conditions. +There are four key principles by which our compensation program achieves its objectives: +• +Very modest fixed salaries for the top four Named Executive Officers (8% of compensation) +• +Annual cash incentive tied to Adjusted EBITDA and additional financial and operational measurements that are aligned with the Company’s business strategy and operational plans +• +Performance Units emphasize absolute shareholder return as well as relative shareholder return +• +Substantial portion of total compensation (60% or more) is linked to stock performance. +As a result of these policies and other downward adjustments (discussed below), total reported compensation for the top four Named +Executive Officers declined by more than 28% from 2014 to 2015. +SHAREHOLDER ALIGNMENT THROUGH EMPHASIS ON EQUITY-BASED COMPENSATION — +CEO COMPENSATION AT A GLANCE +Our compensation structure is designed to align the financial rewards of our executive management with +those of our shareholders. We have typically targeted 60% or more of total compensation to be in the form of time-vested equity or equity-based awards. We believe that this structure has the desired effect of aligning executive compensation with the +returns realized by our stockholders. In periods where our total shareholder return has not been in the higher percentiles or during periods of industry contraction such as we are now experiencing, the realizable equity compensation of our Named +Executive Officers may be significantly less than that reported in our proxy statements because of the lower realizable value of the equity-based compensation. Accordingly, as a result of our emphasis on equity-based and variable compensation, we +have historically seen a direct correlation between performance and realizable compensation. +15 +The following chart sets forth for our CEO the reported proxy compensation for 2015 and the +actual realized compensation for 2015. With the severe decline in our industry in 2015, total shareholder return for Patterson-UTI was negative as was the case with our entire peer group. Because of lower equity values, and notwithstanding top +relative performance by Patterson-UTI against its peers, the actual realized compensation for our CEO was substantially less than the reported compensation. +CEO Realizable Pay Only 51% of Pay as Reported in Summary Compensation Table +“As Reported” pay includes base salary, annual incentive award earned, and the grant-date fair +value of the equity-based incentives granted in 2015 +“Realizable” pay includes base salary, annual incentive award earned and the +market value as of March 31, 2016 of restricted stock granted in 2015, the in-the-money value as of March 31, 2016 of stock options granted in 2015, and the value based on performance through March 31, 2016 of performance units +granted in 2015. +LISTENING TO OUR SHAREHOLDERS +We believe that it is important for us to engage with our shareholders on executive compensation issues. Accordingly, we have discussed with +and sought input from our large stockholders on key executive compensation issues. Based on advice of our independent compensation consultant, stockholder feedback and review of published best practices and guidelines on compensation policies, +the Compensation Committee modified our 2016 peer group, which is used for executive compensation benchmarking and determining our relative performance results in the context of our long-term incentive program. The new peer group will be applicable +to future compensation decisions, but outstanding equity-based awards that were granted prior to 2016 will continue to be evaluated using the peer group in effect at the time those awards were granted. See “Consideration of “Say on +Pay” Voting Results and Engagement with Stockholders” and “Process for Determination of Executive Compensation — 2016 Peer Group.” +ADHERENCE TO GOOD GOVERNANCE AND COMPENSATION POLICIES +We are mindful of the positive impact that strong corporate governance can have on maintaining an executive compensation program that is +aligned with the interest of Patterson-UTI’s stockholders. Accordingly, Patterson-UTI has adopted the following practices: +• +No re-pricing of options, +• +No single trigger change of control arrangements, +16 +• +No new agreements with tax gross ups and none entered into in more than last five years, +• +Claw-back provisions that apply to our executive officers for financial statement restatements, +• +Share ownership requirements for our executive officers and directors, +• +Anti-pledging policy for our executive officers and directors, +• +Anti-hedging policy for our executive officers and directors, and +• +Stock options have exercise prices equal to or greater than the market price at time of grant and have a minimum one year vesting requirement. +Our executive compensation program has the following key design features, which we believe are reflective of strong corporate governance: +• +Emphasis on variable equity and cash compensation to link realized compensation to performance, +• +60% or more of total compensation in the form of long-term incentives, +• +No perquisites to top four Named Executive Officers that are not widely available to our other employees, +• +Use of advice from independent compensation consultant and feedback from stockholders, +• +Use of relevant peer data in benchmarking total compensation and specific components of compensation, +• +Rigorous annual review of market compensation and our performance against targets and peers, and +• +Variable and equity-based compensation measured on both an absolute basis and comparative basis relative to peers. +RECOGNITION OF CHANGES IN THE MANAGEMENT TEAM AND RELATED COMPENSATION +Patterson-UTI has operated for many years based on a team approach to executive management. Under this approach, Patterson-UTI has had both an +Executive Chairman and CEO for more than 15 years, with a division of responsibility between the two roles. With this team approach, compensation for the top four Named Executive Officers has been based on a total compensation package for the team +based on peer data, and then allocated by the Compensation Committee among the team members based on the recommendations of Mr. Siegel and Mr. Hendricks. Over the past three years, the allocations (which are discussed in greater detail +below) have evolved with changes in our executives and their respective responsibilities. +In late 2012, Mr. Hendricks became our CEO +with the expectation that over time Mr. Siegel, our Executive Chairman, would be able to reduce the amount of time devoted to Patterson-UTI and Mr. Hendricks would assume responsibility for many of the roles provided by Mr. Siegel. +Since joining Patterson-UTI, Mr. Hendricks has proven himself to be one of the top CEOs in the industry and has been instrumental in the continued transformation of Patterson-UTI. With the transition of Mr. Siegel to a less active +day-to-day executive management role, the Compensation Committee reviewed and approved Mr. Siegel’s request to lower his cash incentive and equity-based compensation allocation by 40% in 2015 and by an additional 40% in 2016. With the +reduction in Mr. Siegel’s compensation there has been a commensurate reduction in the size of the overall allocated cash incentive and equity-based compensation pools and related potential compensation of the Named Executive Officers. +The Compensation Committee believes that these refinements in the team compensation allow for compensation that properly rewards a talented +CEO, and also provides room for compensation for emerging managers. +17 +LONG-TERM GOALS SUPPORTED BY OUR EXECUTIVE COMPENSATION PROGRAM +The Compensation Committee believes that the compensation program effectively rewards our executive management for adhering to +Patterson-UTI’s long-term goals, which include: +• +Providing quality services for our customers in a safe and efficient manner, +• +Generating strong financial performance and returns for our stockholders, +• +Attracting and retaining highly qualified individuals, with a strong emphasis on teams working together to capitalize on opportunities and solve problems, and +• +Being a model corporate citizen in the communities in which we work. +While adherence to +these goals is vitally important, the Compensation Committee also recognizes that the current downturn in the oil and gas industry has called for creativity and nimbleness in addressing the hardships faced by all industry participants, including +employees, suppliers and customers. We believe that the combination of short and long-term incentives strikes the appropriate balance between these competing interests. We believe Patterson-UTI has generally been able to outperform the market during +this downturn due to the focus and efforts of our management team. +CONCLUSION +In summary, we believe that our compensation program for the Named Executive Officers achieves the objective of being able to attract and +retain strong executive management, while creating a structure that links pay to performance on both a corporate and individual basis. +Patterson-UTI’s Transformation in the Last 15 Years +• +Grew to a position of national industry leadership +• +Transformed its fleet to one of the most modern fleets of high-technology land drilling rigs +• +Became a major competitor in the U.S. pressure pumping with a fleet of over 1 million horsepower +• +Became an industry leader in safety +• +Diversified its customer and geographical base as well as regional capabilities +• +Became a technical leader in rig design and a leader in U.S. shale drilling +• +Increased revenue from $582 million to approximately $1.9 billion in 2015 +• +Organically grew shareholders’ equity from $481 million to approximately $2.6 billion in 2015 +• +Returned more than $1.4 billion back to our stockholders in the form of share repurchases and dividends +Our Business +Patterson-UTI is one of the largest land contract drilling companies in North America, with operations in most of the major oil and gas regions +in the continental United States and western Canada. We are also a major provider of pressure pumping services in selected markets within the United States. Our industry is subject to wide swings in activity based on oil and natural gas prices, +demand for oil and natural gas and general economic activity. +The North American oil and natural gas industry has experienced a +significant transformation in recent years due to technological advances in the horizontal drilling and completion of oil and natural gas wells. Today, more than 80% of U.S. land drilling is focused on these types of wells, which typically require +higher specification rigs and large amounts of pressure pumping horsepower. +Beginning in mid-2014 after a period of significant growth, +the oil and gas industry entered into downturn the extent and severity of which had not been seen since the mid-1980s. In a period of a year and half, crude oil +18 +prices fell more than 70% from their recent highs with drilling and completion activity levels following suit. Drilling activity in the United States declined by more than 60% in 2015 and has +declined by more than 75% since the middle of 2014. With the fall in commodity prices, oil and gas companies saw their cash flows precipitously decline and pricing across the industry for drilling and other services followed suit, with many +companies pricing their services at marginal cash costs in order to maintain business. The fall in drilling and completion activity has affected all sectors of the industry, with domestic drillers and pressure pumping companies like Patterson-UTI +being some of the hardest hit. These conditions have continued into 2016. +As the market began its decline in 2014, our executive +management immediately began taking aggressive action to right size our operations and to protect stockholder value by reducing head count and unnecessary costs and cutting and deferring capital expenditures where possible. These actions included +the following: +Our cost structure has been significantly lowered: +• Employee head count was reduced nearly 60% from approximately 8,850 at January 1, 2015, to +approximately 3,600 at December 31, 2015 +• Management aggressively cut costs in our drilling and pressure pumping businesses to be in line with a +significantly reduced level of business activity +• Supply chain management achieved over $50 million in drilling and pressure pumping savings +• Capital expenditures were cut nearly 30% in 2015 from $1.05 billion in 2014 to $744 million in 2015 +• Our capital expenditure plans for +2016 have been significantly reduced to less than $200 million – approximately a 75% reduction from the average of the capital expenditures for the past two years +Although the Company’s results, like others in our industry, have been materially negatively impacted by +these market conditions, Patterson-UTI was able to generate strong cash flow in 2015, maintain, and in some cases increase, market share and preserve cash and strengthen its balance sheet to weather the downturn. As of March 31, 2016, our +contract drilling backlog for future revenues under term contracts, which we define as contracts with a fixed term of six months or more, was approximately $580 million, our working capital was approximately $181 million, including $187 million of +cash and cash equivalents, and we had $500 million available under our revolving credit facility. +We believe Patterson-UTI has generally +been able to outperform the market during this downturn due to the focus and efforts of our executive management team. +Compensation Philosophy and +Objectives +Our overriding philosophy for the compensation of our key executives is to link their compensation with the operational and +market performance of the Company and to establish incentives that reward them for their achievement of both short-term tactical and long-term strategic objectives. In doing so, we seek to offer competitive compensation packages designed to +attract and retain highly qualified individuals and to motivate and reward our executives in achieving the Company’s goals. Our executive compensation program also seeks to reward excellence in performance and foster a collaborative team +framework among our top executives. +Key Compensation Principles +Our executive compensation program has historically emphasized the following key principles: (i) emphasis on long-term incentives, +(ii) low comparative base compensation with variable incentive cash compensation based on financial results, (iii) emphasis on equity-based compensation for long-term value creation and (iv) team compensation structure. +Emphasis on Long-Term Incentives +Our compensation program places a strong emphasis on creating long-term value through the use of long-term incentives. We seek to achieve a +proper balance in our compensation program between long-term and cur- +19 +rent compensation by using a combination of time-vested and performance based equity awards for long-term incentives and fixed and variable cash for short-term incentives. Our compensation +arrangements take into account the cyclical and volatile nature of our industry. +Our long-term incentive compensation relies on +equity-based awards, rather than cash, as a means of aligning the interests of executive management with the Company’s stockholders. Historically, equity awards for long-term incentives have represented between 60-75% of total compensation, +while fixed and variable cash for short-term incentives has typically represented between 25-40% of total compensation. Variations in these percentages may occur due to either an exceptionally strong or weak year in which the Company’s Adjusted +EBITDA and related cash bonus compensation fluctuate in tandem or there is market volatility affecting the grant date valuation of options and performance units using the methodologies required for reporting equity-based compensation. +In 2015, the mix between long-term equity awards, and fixed and variable cash and short-term incentives, for our top four Named Executive +Officers was within our targeted range at 71% and 29%, respectively. +2015 Split Between Short-Term Compensation +(Fixed-Salary and Annual Cash Incentive) and Long-Term Compensation +(Top Four Named Executive Officers) +Cash Compensation Emphasizes Low Base Salaries with Variable Cash Compensation Tied to Financial +Results +We have designed the cash component of our compensation program to be mostly variable by using comparatively low base +salaries and variable cash bonuses tied to the Company’s Adjusted EBITDA. The variable cash bonuses potentially could be lower during poor industry environments, such as what we experienced in 2009 and 2015 and are experiencing in 2016, and +could be higher during good industry environments. We enacted this variable cash component of our compensation program over ten years ago, whereby we establish a percentage of total Adjusted EBITDA for a maximum potential executive management bonus +pool that is then adjusted as explained below and allocated among the top four Named Executive Officers. Our allocation among the top four Named Executive Officers in 2015 was a team maximum bonus potential of up to 0.81% of Adjusted EBITDA. No +bonuses will be paid unless an Adjusted EBITDA threshold is achieved, and even then, no bonuses are guaranteed under this program. +The variable cash bonus pool is determined as follows: +• +Annually, the Compensation Committee sets an Adjusted EBITDA threshold amount (generally around 60% of the initial budgeted Adjusted EBITDA). If this threshold is not achieved, there are no cash bonuses for the period. +As a result of the cyclical nature of our business and the very strong correlation between oil and natural gas prices and our financial results, the threshold Adjusted EBITDA amount frequently changes from one year to the next in-line with our +budgeted expectations of activity for the year. The Adjusted EBITDA threshold for 2015 was $400 million, which reflected the current challenging environment that our industry is experiencing and maintained the same level of rigor as in the prior +year. The Adjusted EBITDA threshold requirement also is intended to address requirements of Section 162(m) of the Internal Revenue Code. +20 +• +The Compensation Committee then sets a team maximum bonus potential as a percent of Adjusted EBITDA. Our allocation among the top four Named Executive Officers in 2015 was a team maximum bonus potential of up to 0.81% +of Adjusted EBITDA. This percentage was determined in a manner to be consistent with the relative team compensation allocation discussed below under “Team Compensation Structure”. The bonus pool range for 2015 was 0.55% to 0.81% of +Adjusted EBITDA, but the effective bonus pool range for 2015 was zero to 0.81% of Adjusted EBITDA, since no bonuses would be paid if the Adjusted EBITDA threshold was not achieved and the Compensation Committee also had the authority to not award +any cash bonus, regardless of whether the Adjusted EBITDA threshold was achieved). The annual payout amount is also limited to $5 million to any individual in a year. +• +Annually, the Compensation Committee assesses executive management’s performance and determines the performance-adjusted bonus pool percentage that will be used to calculate the actual amount of the bonus pool. For +2015, the performance-adjusted bonus pool award to the top four Named Executive Officers was 0.78% of Adjusted EBITDA. The determination of the Adjusted EBITDA percentage for the top four Named Executives and the performance measures applied for +this group are described in the following paragraphs. +In early 2016, the Compensation Committee determined the actual, +performance-adjusted bonus pool percentage of 0.78% for 2015 based on the Compensation Committee’s assessment of the Company’s and executive management’s progress toward achievement of certain strategic and other objectives, including +those described in the following paragraph. The Compensation Committee took into account both the strategic and operational successes during the year as well as the impact during the year of the significant market decline. This bonus pool size was +reduced further to reflect Mr. Siegel’s compensation adjustment for 2015, as discussed previously, resulting in an actual total bonus pool award to the top four Named Executive Officers for 2015 of 0.66% of Adjusted EBITDA. Based on the +changes to Mr. Siegel’s compensation for 2015 and continuing into 2016 in light of the evolving roles of Mr. Siegel and Mr. Hendricks, the Adjusted EBITDA percentage range for 2016 will be approximately 0.42% to 0.62% of +Adjusted EBITDA, reflecting the decline in Mr. Siegel’s sharing percentage. Other participants’ potential cash incentive payment amounts will not increase or decrease as a result of the change in Mr. Siegel’s sharing +percentage. +In determining the performance-adjusted bonus pool percentage for 2015, the Compensation Committee considered many metrics +including: +• +The Company had a continued strong and improving safety performance that was driving the industry incident averages lower. The total recordable incident rate for the year was the lowest in the Company’s +history. +• +Average daily drilling margin increased nearly 6% through the year despite a severe industry downturn. +• +Management effectively reduced personnel counts in our drilling and pressure pumping businesses, in line with the severe contraction in activity. +• +Supply chain management effected over $50 million in savings in our drilling and pressure pumping businesses, allowing the Company’s operations to be more cost-effective and competitive. +• +Improved drilling efficiency and reduced rig down time together with effective customer relationship, contract and cost management allowed the Company to maintain better rig utilization than its competitors and to +increase its land drilling market share. +• +The Company maintained a strong balance sheet through the year, improved liquidity and reduced forward purchase commitments. +• +The Company effectively settled a longstanding legal dispute and put in place processes for compliance and monitoring. +Accordingly, the Compensation Committee determined that management had outstanding performance in a very difficult year. This +outstanding performance supported a slight increase of the percentage from 0.70 in 2014 to 0.78 in 2015, recognizing that the actual bonuses would be substantially reduced from 2014 primarily +21 +because of the significant reduction in Adjusted EBITDA and to a lesser extent the reduction in Mr. Siegel’s compensation. So, while the multiplier percentage increased by 0.08, the +actual executive bonus pool for 2015 was reduced by 45%, or over $3.1 million, from 2014. +In addition, although total shareholder +return is not directly used in determining the performance-adjusted bonus pool percentage, the Compensation Committee considered that the Company’s total shareholder return in 2015, though slightly negative on an absolute basis, largely due to +the strong correlation between our stock price and the price of crude oil, was: +• +the highest among its peer group of companies, +• +at approximately the 92 nd percentile among peers over the past two and three year periods, +• +significantly higher than its primary land drilling and pressure pumping peers, and +• +a substantially lower percentage decrease than the decrease in the bonuses paid. +We believe +that this variable cash compensation structure provides a direct link between compensation and the financial performance of Patterson-UTI, while allowing for adjustments for individual performance and non-financial corporate results. Accordingly, +although Adjusted EBITDA is used to determine the maximum incentive cash compensation pool, Adjusted EDITDA is not the sole factor or metric used. +We do not typically make changes to the base compensation of our top Named Executive Officers from year to year to promote the idea that +management should not be focused on the fixed component of their compensation, but rather they should expect that variable compensation — tied to the Company’s performance — will be the most significant part of their cash +remuneration. +We believe that the use of lower market-based salaries with potentially higher variable bonuses aligns our executives’ +annual cash compensation with our actual financial results. During periods of low earnings, such as we had in 2009 and in 2015 and which we expect for 2016 due to very challenging market conditions, total cash compensation will be materially +lower and typically be in the lower quartiles against our peers, but reflective of our lower cash generation. During periods of higher earnings, such as we experienced in 2011-2014, cash compensation will typically be in the top quartiles and be +reflective of the Company’s higher cash generation. Accordingly, we look at our compensation program as a multi-year program that is targeted to provide cash compensation to our top four Named Executive Officers that is (i) aligned with +changes in earnings from year to year, and (ii) on a full cycle basis aligned with stockholder returns compared to our peers. +22 +Although there will be years where the cash compensation paid to our executives will be in the +higher quartiles and our relative stock performance may be at a lower quartile or vice versa, this result generally will occur during a period of transition within the industry where there exists a lag between market expectations and current +activity. A good example of this was at the end of 2008 when our drilling activity and operating results were at high levels, but the public market valuations of land drillers and pressure pumpers were falling on the expectation of a severe downturn +that occurred months later in 2009. The same conditions were also present at the end of 2014 when we generated record quarterly revenue and record revenues in our pressure pumping business, but our stock price was falling on the expectation of the +current severe downturn. +We have considered in the past the use of more traditional bonus plans tied to annual budgets and performance +against those budgets. We have concluded, however, that given the extreme volatility in our industry those plans do not provide the incentives that we seek to achieve and could in fact create incentives for our management to focus only on the +short-term. By tying a meaningful portion of the Named Executive Officers’ compensation to Adjusted EBITDA, we believe their short-term cash compensation adjusts more quickly to actual financial performance, resulting in a better alignment with +the stockholder’s interests than occurs under a program tied to a budget or projected financial results. +Emphasis on Equity +for Long-Term Incentive Compensation +We have historically targeted 60% or more of total compensation to be in the form of +time-vested equity or equity-based awards. This emphasis on equity-based compensation is aimed at aligning the financial interest of the top four Named Executive Officers with our stockholders and the total returns provided to stockholders. We +believe that by making a large portion of compensation tied to equity, our top four Named Executive Officers can only fully realize the potential benefits of the compensation if our stockholders also benefit. +Over the years we have adjusted the form of the equity incentives we provide to our top four Named Executive Officers from solely options to a +mix of options, restricted stock and performance units. We believe that this mix allows us to tailor our program to encourage the building of long-term value and, in the case of performance units, achievement of positive stockholder returns in +excess of our peer group. +The following charts set forth the allocation of the various forms of long-term equity-based incentives that we +have granted the top four Named Executive Officers from 2011-2015 and the allocation of these incentives that we used for 2015: +23 +Award +Type +Discussion +Key Benefits to Stockholders and +Stockholder Alignment +Restricted Stock +We consider restricted stock as an additional form of basic compensation that provides value to the executive only if the executive remains in the employment of the Company during the +vesting period, with that value being subject to increases and decreases in value depending on the performance of our stock. We typically target restricted stock awards to represent approximately 30-50% of total equity-based compensation depending +on stock prices and volatility at the time of grant. +•Value dependent upon stock price performance +•Enhances retention of executive talent +•Encourages long-term share +ownership +Stock Options +Stock options provide value to the executive only if the value of the Company’s stock appreciates. Consequently, we consider these awards to be performance-based. When we approve +grants of options to our executives, we take into account a number of different factors, including the stock price at the time of grant, the expected value of the option grant and prior option grant amounts. We typically target stock options to +represent 25% to 40% of total equity-based compensation. +•Inherently performance-based +•Value contingent upon positive stock price performance +•Ten year term encourages a focus on +longer-term performance +•Enhances +retention of executive talent +Performance +Units +Our use of performance units is intended to provide a direct link in the compensation of our top four Named Executive Officers to both the absolute performance of our stock and relative +performance compared to our peer group. This component will not have a payout unless the three year total stockholder return is positive for the performance period and, when compared to the peer group, is at or above the 25 th percentile. This component assures that the value provided to those Named Executive Officers will not be created solely by an increase in stock price due to favorable market conditions, while it +also provides an incentive to continue to outperform peers even in down cycles for the market or our industry. We typically target performance units to represent 25% to 35% of total equity-based compensation. +•Performance-contingent +•Payout contingent on positive stockholder returns and shareholder return performance relative to peers +•Value of shares dependent upon stock +price +We have considered the potential risks associated with tying a large portion of executive compensation to +equity. We do not believe that our program creates unreasonable risks for the following reasons: +• +The long-term nature of our equity based awards and the required vesting periods help minimize the potential for excessive risk taking and actions aimed at short-term stock gains, +• +Our use of different types of equity grants, in particular restricted stock, helps offset these risks, +• +We have meaningful share ownership guidelines, +• +We maintain an anti-hedging policy, +• +We maintain a clawback policy that applies to all of our executive officers for both cash and equity incentives, and +• +Three of the top four Named Executive Officers have been with the Company for more than fifteen years and have an established track record of focus on growing long-term sustainable growth for the Company. +Our Board has also considered in its risk assessment of our executive compensation program its view that our management is +highly ethical and focused on creating true long-term value for stockholders and not focused on just short-term gains. The Board, primarily through its Compensation and Audit Committees, monitors and considers risks associated with the +Company’s compensation plans on a regular basis. +24 +Team Compensation Structure +Our senior executive management has had the philosophy that they operate as a team, with each member being an important part of the team. As a +result, for more than the past ten years the Board has determined that as a general proposition our awards of cash and equity incentive compensation should be pooled and allocated among them as a team. Although the allocations among the team members +have changed over time due to changes in the executive management team and responsibilities, the allocations among the existing team have generally remained consistent. With the reduction in Mr. Siegel’s compensation for 2015 as noted +above, the allocations changed in 2015 and again in 2016 to reflect a 40% reduction for Mr. Siegel in each of those years. +Prior to +2015 and for the five years prior, when allocating the incentive compensation among our top four Named Executive Officers, we allocated 4/11 th to Mr. Siegel, our Executive Chairman, 3/11 th to Mr. Hendricks or his predecessor, our President and Chief Executive Officer, and 2/11 th to each of Mr. Vollmer, our Senior Vice +President-Corporate Development, Chief Financial Officer and Treasurer, and Mr. Berns, our Senior Vice President, respectively. In 2015, for cash incentive compensation the allocation to Mr. Siegel was reduced, as noted +above, and we made no other changes. For equity-based compensation for 2015, we made the change for Mr. Siegel noted above, and made other reallocations so that the allocations from the equity-based compensation pool +would be 33.3% for Mr. Hendricks, 26.7% for Mr. Siegel and 20.0% for each of Messrs. Vollmer and Berns. This equity-based compensation sharing pool is expected to be further adjusted for 2016, with the reduction in +equity-based compensation being made for Mr. Siegel as noted above. +We believe that the team-based approach for compensating our top +four Named Executive Officers fosters effective decision-making and collaborative efforts in executing Patterson-UTI’s long-term strategic and short-term tactical objectives. This approach has worked well for Patterson-UTI for over ten years. +We expect to maintain this approach in the future, although we will continue to monitor the team compensation approach to make sure that it continues to work in practice. +Process for Determination of Executive Compensation +Compensation Committee +The Board of Directors has delegated the management of the Company’s executive compensation programs to the Compensation Committee. The +Compensation Committee meets on a regular basis to consider compensation matters and to review how the Company’s plans and policies work in practice. Each of the Committee’s current members is an independent director as defined by the +Nasdaq listing standards. +Compensation determinations and equity awards are conducted through a process that solicits the input from +management through our Executive Chairman and our CEO, as well as from outside compensation consultants retained by the Compensation Committee. In addition to the recommendations of management and consultants, the Compensation Committee considers +feedback from the Company’s stockholders, guidelines of proxy advisory firms, reported trends in compensation, internal budgets, historical data for the Company and its peers, strategic planning updates and other information that it considers +relevant. +Chairman and CEO +Our Chairman and, commencing in 2015, our CEO provide the Compensation Committee with reviews of the performance of other executive officers +and senior managers, including the other Named Executive Officers. The Compensation Committee also engages them in an annual dialog with our Committee Chairman and our Lead Director on our compensation program and seeks their input on and review of +proposals for long-term incentive grants. This process results in a recommendation that is considered by our Compensation Committee as a whole. +Independent, Outside Compensation Consultant +Our Compensation Committee regularly utilizes outside compensation consultants to help assess and design our executive compensation program. +These consultants are paid on a basic fixed fee structure plus expenses. These outside consultants provide data and advice on historical compensation and stockholder returns, market +25 +trends and peer compensation practices. The Compensation Committee has retained Pearl Meyer & Partners (“Pearl Meyer”) as its consultant and advisor for executive compensation +matters since 2012. +Our Compensation Committee regularly reviews the services provided by its outside consultants and has determined that +Pearl Meyer is independent in providing executive compensation consulting services. In making this determination, our Compensation Committee noted that during 2015: +• +Pearl Meyer did not provide any services to the Company or management other than services requested by or with the approval of the Compensation Committee, and its services were limited to executive compensation +consulting and the Company’s participation in drilling management compensation surveys. Specifically, Pearl Meyer does not provide, directly or indirectly through affiliates, any non-executive compensation services, including pension +consulting or human resource outsourcing. +• +Fees we paid to Pearl Meyer were less than 1% of Pearl Meyer’s total revenue; +• +Pearl Meyer maintains a conflicts policy, which was provided to the Compensation Committee with specific policies and procedures designed to ensure independence. +• +None of the Pearl Meyer consultants working on Company matters had any business or personal relationship with Compensation Committee members. +• +None of the Pearl Meyer consultants working on Company matters (or any consultants at Pearl Meyer) had any business or personal relationship with any executive officer of the Company. +• +None of the Pearl Meyer consultants working on Company matters directly own Company stock. +The +Compensation Committee receives a confirmation certification of independence from its consultants on an annual basis and continues to monitor the independence of its compensation consultant on a periodic basis. +In 2015, Pearl Meyer provided the Compensation Committee with information on the compensation practices of our peer group and other oilfield +service companies and on the reasonableness of our program as compared to the compensation practices of our peer group. In so doing, Pearl Meyer provided the Compensation Committee with information on each element of the total compensation of our +executive officers as well as a comparison of our compensation against our peers based on data gathered from proxy statements and other SEC filings and other sources available to Pearl Meyer. This comparison provided the Compensation Committee with +various comparative market levels of compensation for our executive management team as well as a comparative position for each executive officer. Pearl Meyer also provided the Compensation Committee with information on the cost and potential +dilution to our stockholders of our equity-based incentives and compared that to our peer group. +When reviewing the peer compensation data +provided to the Compensation Committee by its consultants, the Compensation Committee has generally given greater weight to the comparative data for the team as a whole versus the data for individual positions at our peers given the team management +approach followed by us as described above. We have found that total compensation for our top four Named Executive Officers as a group has typically been between the 50-75 th percentile range +depending on the year (a range of outcomes that is aligned with our performance relative to peers). Although the Compensation Committee looks to various percentile ranges of compensation based on potential performance when setting compensation, the +Compensation Committee does not target specific total compensation due to its emphasis on variable compensation. +26 +2015 Peer Group +In 2015 and for several years previously we used the following energy services peer group for compensation matters: +• Atwood Oceanics Inc. +• Basic Energy Services, Inc. +• Diamond Offshore Drilling Inc. +• FMC Technologies Inc. +• Helmerich & Payne Inc. +• Nabors Industries Ltd. +• Noble Corp. +• Pioneer Energy Services Corp. +• Rowan Companies Inc. +• Weatherford International +Ltd. +• Baker Hughes Incorporated +• Cameron International Corporation +• Ensco plc +• Halliburton Company +• Key Energy Services, Inc. +• National Oilwell Varco Inc. +• Parker Drilling Company +• Precision Drilling Corporation +• Transocean Ltd. +• Unit Corp. +2016 Peer Group +In early 2016, following extensive deliberations and consultation with our compensation advisor, the Compensation Committee determined to +update its peer group of energy service companies. The update also took into account feedback received from our engagement with significant stockholders, as well as a review of the peer groups as determined by the two major shareholder advisory +firms. +This update removed several outsized companies, reflected industry changes through merger and acquisition activity and accounted +for the severe contraction in industry participant scale and profitability. The update focused on energy service companies that directly compete with the Company’s businesses and/or are reasonably scaled to the Company’s operations and +financial measures. Specifically, this updated group of eighteen peers outlined below includes Helmerich & Payne, Inc., Nabors Industries, Ltd. and Precision Drilling Corporation, which are our primary competitors in land-based drilling in +North America. Atwood Oceanics Inc., Basic Energy Services, Inc., Diamond Offshore Drilling, Inc., Ensco, Inc., Noble Corp., Parker Drilling Company, Rowan Companies, Transocean Ltd. and Unit Corp. are other primarily drilling-based peers +Our updated peer group also includes Weatherford International Ltd., which is a significant competitor in the North American pressure pumping +service market and Forum Energy Technologies, Inc., FMC Technologies, Inc., Oceaneering International, Inc., Oil States International Inc. and Superior Energy Services, Inc., which are diversified energy services peers that are roughly comparable in +size to the Company. +With our revised peer group, we have included 16 of the 24 companies used by the two major shareholder advisory firms +in 2015, and the companies that we excluded were excluded either due to their much smaller size and market capitalization (e.g., Key Energy Services and Pioneer Energy Services) or because of their different operations (e.g., Bristow Group, Dresser +Rand Group and McDermott International). +We also excluded Halliburton Company and Baker Hughes Incorporated, which were in our peer group +in 2015, due to their larger size and complexity based on the input from our significant stockholders. We had previously included these companies due to their being our principal competitors in pressure pumping and our view that we compete for +executive management with these companies. However, based on stockholder input and the pending combination of Halliburton and Baker Hughes, the Compensation Committee concluded it was appropriate to exclude those companies from our peer group going +forward. +27 +For 2016 assessments, we will use the following energy service peer group for company performance +and compensation matters: +• Atwood Oceanics Inc. +• Basic Energy Services, Inc. +• Diamond Offshore Drilling Inc. +• Ensco plc. +• Forum Energy Technologies, Inc. +• FMC Technologies , Inc. +• Helmerich & Payne Inc. +• Nabors Industries Ltd. +• Oceaneering International +• Noble Corp. +• Oil States International Inc. +• Precision Drilling Corporation +• Parker Drilling Company +• Rowan Companies Inc. +• Superior Energy Services, Inc. +• Transocean Ltd. +• Unit Corp. +• Weatherford International Ltd. +The new peer group will be applicable to future compensation decisions, but equity-based awards that were +granted prior to 2016 will continue to be evaluated using the peer group in effect at the time those awards were granted. +Consideration of “Say on Pay” Voting Results and Engagement with Stockholders +In 2011 our Board recommended an annual advisory (nonbinding) vote on executive compensation that received 87% support, including abstentions +and excluding broker non-votes, and therefore determined to hold advisory (nonbinding) votes on executive compensation annually. +We have +reviewed the results of the stockholder “say on pay” advisory vote with respect to the 2014 compensation actions and decisions for our Named Executive Officers set forth in the CD&A, the summary compensation table and the related +compensation tables and narratives in last year’s proxy statement. Eighty-one percent of the votes cast (including abstentions and excluding broker non-votes) on the proposal voted in support of our compensation structure as described in the +last year’s proxy statement. Based upon this level of support, which we regard as marginally acceptable, we expanded our engagement with significant shareholders, particularly those who had expressed negative votes. The Compensation Committee +considered this feedback for determining executive compensation in 2015 and for assessing the overall executive compensation program and its success in aligning the pay of our executives with our strategy, our financial performance, and the +interests of our stockholders. +During 2015 and in early 2016, we directly engaged with our stockholders that had holdings that represented +over 60% of our outstanding shares at December 31, 2015, and carefully considered their feedback regarding our executive compensation program and other matters. Based on the results of our 2015 “Say on Pay” vote and the input of our +significant shareholders, the Compensation Committee updated the composition of our peer group for 2016 as discussed above to eliminate some of the larger peers included in past years. We will continue to engage with our stockholders, as we value +the insights gained from our discussions with our stockholders and find them to be helpful as our Compensation Committee considers and adopts policies affecting our executive compensation program. We will continue to consider the outcome of future +say-on-pay votes, as well as feedback received through our stockholder engagement activities throughout the year to understand their views on our executive compensation philosophy, policies, and practices, when making compensation decisions for our +executive officers. +In addition, stockholders are invited to express their views to the Committee as described under the heading +“Communication with Directors” in this proxy statement. You should read this CD&A in conjunction with the advisory vote that we are conducting on the compensation of the Named Executive Officers. This CD&A, as well as the +accompanying compensation tables, contains information that is relevant to your voting decision. +28 +Process and Considerations Relating to Determination of Cash Compensation +The Compensation Committee will generally review base compensation and the terms for bonus cash compensation for management early in the first +quarter of the year following the Company’s fiscal year. When reviewing cash compensation the Compensation Committee will look at the total cash compensation received by the executives over a multi-year period, as well as the total cash +compensation projected for the current year. This approach allows the Compensation Committee to consider the cash compensation paid over a full industry cycle in order to obtain comparable data for benchmarking purposes. +The Compensation Committee also annually sets an Adjusted EBITDA threshold amount (generally around 60% of the initial budgeted Adjusted +EBITDA). If this threshold is not achieved, there are no cash bonuses for the period . As a result of the cyclical nature of our business and the very strong correlation between oil and natural gas prices and our financial results, the +threshold Adjusted EBITDA amount frequently changes from one year to the next in-line with our budgeted expectations of activity for the year. The Adjusted EBITDA threshold requirement also is intended to address requirements of Section 162(m) +of the Internal Revenue Code. The Compensation Committee then sets a team maximum bonus potential as a percent of Adjusted EBITDA and a number of operational and financial factors are outlined for consideration of management’s performance. The +annual payout amount is limited to $5 million to any individual in a year, and no bonuses are guaranteed under this program. At the end of the performance period, the Compensation Committee assesses executive management’s performance and +determines the actual performance-adjusted bonus pool percentage that will be used to calculate the actual amount of the bonus pool. +Process and Considerations Relating to Determination of Equity Compensation +The Compensation Committee’s practice for grants of equity-based compensation has generally been to consider the grant of stock options, +restricted stock and performance units to executive management following the conclusion of our first quarter. This grant is typically made in conjunction with regular quarterly Board meetings held prior to the Company’s public release of its +quarterly earnings. This timing also allows the Compensation Committee to receive market data from its consultants for prior year grants. Although this process does not result in calendar year comparisons for purposes of total shareholder return and +other calculations, the Compensation Committee believes that having year-end information allows it to make more informed decisions and the use of a consistent grant cycle for equity reduces risks associated with equity grants made on a random basis. +Patterson-UTI is able to obtain and use relevant peer data for calculating our peer total shareholder returns and reviewing comparable grants of equity based compensation. +When making grants of equity-based compensation, the Compensation Committee considers a number of factors, including financial performance, +competitive peer data, prior year grants (both in terms of number of shares and total value), and potential dilution impact and current and historical stock prices. The Compensation Committee also takes into consideration the advice of its +consultants as to peer and market practices on the use and mix of restricted stock, options and performance units. +For restricted stock +and stock options granted to the top four Named Executive Officers, these awards are subject to three-year vesting, with one-third vesting after the first year and 1/36 th of the grant vesting each +month over the next two years. The restricted stock grants also have a performance-based vesting component, which for 2015 required that the Company achieve Adjusted EBITDA of at least $275 million for the nine months ending December 31, 2015, +$350 million for the twelve months ending December 31, 2016 or $350 million for the twelve months ending December 31, 2017. The performance units granted in 2015 are to be settled with shares of stock, with the number of shares to be +issued based on the Company’s total stockholder return at the end of the third year following the grant relative to the total stockholder return for our peer group of companies. Subject to a limited change of control exception, no payout will +be provided on the performance units granted in 2015 unless total shareholder return is positive for the performance period and, when compared to our peer group, the Company’s relative total stockholder return is at least at the 25 th percentile. +We have also adopted the following additional practices regarding equity +grants: +• +Grants will not vest in less than one year. +29 +• +Options will not be re-priced or exchanged. +• +Equity grants are subject to claw-back in the event that the Board learns that any misconduct by the Named Executive Officer contributed to the Company having to restate all or a portion of its financial statements. +• +Options are to have exercise prices equal to or greater than the fair market value on the date of grant. +• +Performance targets are not to be modified other than to give effect to acquisition or disposition of businesses or similar structural changes — market condition changes will not result in changes in performance +targets. +Overview of 2015 Performance and Compensation +As noted above under “Executive Summary” and “Business”, the Company performed exceptionally well in 2015 in the face of a +very challenging drilling and energy services marketplace. In addition to the financial and operational successes, the Company’s stock provided a strong performance relative to our industry peers in 2015. For the one year period ended +December 31, 2015, the Company had the highest total shareholder return among our updated 18 company peer group and delivered a total shareholder return at the 92 nd percentile among those +peers for the two and three year periods ended December 31, 2015. +Cash Compensation +As discussed above, in addition to their base salaries, the top four Named Executive Officers participate in a variable cash bonus program +based on Adjusted EBITDA and additional performance measurements. For 2015, the Compensation Committee set an Adjusted EBITDA threshold amount of $400 million, which was generally around 60% of our initial budgeted Adjusted EBITDA. As a result of +the cyclical nature of our business and the very strong correlation between oil and natural gas prices and our financial results, the threshold Adjusted EBITDA amount frequently changes from one year to the next in-line with our budgeted +expectations of activity for the year. Even though the threshold Adjusted EBITDA can fluctuate from year to year, the rigor of the metric is maintained on the same level and remains challenging. Accordingly, due to the severe downturn in our +industry and expectations for 2015, the Adjusted EBITDA threshold amount for 2015 was less than the threshold amount for 2014. The Compensation Committee then set a team maximum bonus potential as a percent of Adjusted EBITDA. Our allocation among +the top four Named Executive Officers in 2015 was a team maximum bonus potential of up to 0.81% of Adjusted EBITDA. +Under the terms of the +Company’s cash compensation plan described above, the top four Named Executive Officers earned cash payments in respect of 2015 based on a performance factor equal to 0.78% of the Company’s Adjusted EBITDA of $582 million for 2015, reduced +from the maximum bonus potential under the plan of 0.81% of Adjusted EBITDA. The total bonus pool was further reduced to reflect the 40% reduction in Mr. Siegel’s bonus from that calculated using the legacy team allocation formula. This +bonus pool amount reflected the Compensation Committee’s judgment that executive management had demonstrated exceptional performance and results in 2015 in leading the Company through the severe contraction in the energy industry. In +particular, the Compensation Committee noted the management team’s exemplary efforts in reducing and controlling costs in a rapidly declining market, their ability to maintain market share and operational profitability in a market where many +companies are operating at cash losses and continued industry leadership in safety performance. In determining the performance factor for 2015, the Compensation Committee considered many metrics including: +• +The Company had a continued strong and improving safety performance that was driving the industry incident averages lower. The total recordable incident rate for the year was the lowest in the Company’s +history. +• +Average daily drilling margin increased nearly 6% through the year despite a severe industry downturn. +• +Management effectively reduced personnel counts in our drilling and pressure pumping businesses, in line with the severe contraction in activity. +30 +• +Supply chain management effected over $50 million in savings in our drilling and pressure pumping businesses, allowing the Company’s operations to be more cost-effective and competitive. +• +Improved drilling efficiency and reduced rig down time together with effective customer relationship, contract and cost management allowed the Company to maintain better rig utilization than its competitors and to +increase its land drilling market share. +• +The Company maintained a strong balance sheet through the year, improved liquidity and reduced forward purchase commitments. +• +The Company effectively settled a longstanding legal dispute and put in place processes for compliance and monitoring. +The Compensation Committee also considered the specific performance of each of the individuals and the performance assessments recommendations +of Mr. Siegel and Mr. Hendricks on the team’s performance. Confirming the Company’s direct tie between financial performance and executive compensation, the total executive bonus pool for 2015 was reduced by 45% or over $3.1 +million from the 2014 level. In accordance with past practice, the bonus pool was allocated among the top four Named Executive Officers as described under “Team Compensation Structure” above. +We believe that the design of our program is particularly well suited to ensure alignment of our Named Executive Officers with our stockholders +in the continued challenging environment we face for 2016, as incentive opportunities for our Named Executive Officers are directly aligned with our level of profitability rather than how our profitability compares to budget. +2015 CASH COMPENSATION +Name +Salary +Adjusted +EBITDA Incentive +(Percentage of +Company +Adjusted EBITDA) +Variable Cash +Compensation +Based on +Adjusted +EBITDA(1) +Total Cash +Compensation +William A. Hendricks, Jr. +$ +600,000 +0.2127 +% +$ +1,238,885 +$ +1,838,885 +John E. Vollmer III +$ +350,000 +0.1418 +% +$ +825,924 +$ +1,175,924 +Mark S. Siegel +$ +350,000 +0.1702 +% +$ +991,108 +$ +1,341,108 +Kenneth N. Berns +$ +265,000 +0.1418 +% +$ +825,924 +$ +1,090,924 +(1) +The maximum amount that can be awarded to an individual under our cash-based incentive plan during a 12–month period is $5,000,000. In order to reach this maximum amount and assuming a total bonus pool equal to the +top end of the range (equal to 0.81% of Adjusted EBITDA), Adjusted EBITDA of $2.3 billion in the case of Mr. Hendricks, $2.8 billion in the case of Mr. Siegel and $3.4 billion in the case of Messrs. Vollmer and Berns would +have been needed. The target bonus amount presented in the Grants of Plan-Based Awards table is calculated for the respective officer based on Patterson-UTI’s actual Adjusted EBITDA for the fiscal year ended December 31, 2015, and the +allocation formula applied to the bonus pool for distribution as noted above. +Equity-Based Compensation +The Committee made the following equity-based grants in 2015 to Messrs. Hendricks, Vollmer, Siegel and Berns, considering the Company’s +2014 financial results and comparative total shareholder return performance over the one, two and three year periods ended March 31, 2015. +31 +2015 EQUITY-BASED GRANTS +Restricted Stock(1) +Stock Options(2) +Performance Unit +Awards(3) +Total +Value +Name +# Shares +Value +# Shares +Value +# Shares +Value +William A. Hendricks, Jr. +74,200 +$ +1,508,486 +257,000 +$ +1,508,164 +63,600 +$ +1,352,136 +$ +4,368,786 +John E. Vollmer III +44,500 +$ +904,685 +154,200 +$ +904,898 +38,100 +$ +810,006 +$ +2,619,589 +Mark S. Siegel +59,300 +$ +1,205,569 +205,600 +$ +1,206,531 +50,800 +$ +1,080,008 +$ +3,492,108 +Kenneth N. Berns +44,500 +$ +904,685 +154,200 +$ +904,898 +38,100 +$ +810,006 +$ +2,619,589 +(1) +Shares of restricted stock were awarded on April 21, 2015. The value indicated in the table is the value on the date of grant based on the closing price of Patterson-UTI’s common stock on the date of grant. +(2) +Options were awarded on April 21, 2015. The value indicated in the table was determined using the Black-Scholes option pricing model as of the date of grant. +(3) +Performance Units were awarded on April 21, 2015. The number of shares indicated in the table represents the target number of shares for each respective award. According to the terms of the awards, the actual +number of shares earned by the recipient can range from zero shares to two times the target number of shares depending on how Patterson-UTI performs in terms of total stockholder return relative to its peer group. The value indicated in the table +was determined based on a Monte-Carlo simulation model and represents the estimate of fair value on the date of grant. +The +grant of restricted stock, options and performance units to the top four Named Executive Officers were made following the vesting, term and other criteria described above. +The performance units granted in 2015 to Messrs. Hendricks, Siegel, Vollmer and Berns provide for the issuance of a target of 63,600 shares of +Common Stock to Mr. Hendricks, 50,800 shares of Common Stock to Mr. Siegel and 38,100 shares of Common Stock to each of Messrs. Vollmer and Berns, respectively, if Patterson-UTI’s total stockholder return over a three year period +is positive and, when compared to the peer group, is at the 50 th percentile and two times the target if at the 75 th percentile or higher. If +the Company’s total stockholder return is positive, and, when compared to the peer group, is at the 25 th percentile, the recipients will only receive one-half of the target number of shares. +The grant of shares when achievement is between the 25th and 75th percentile will be determined on a pro-rata basis. Total stockholder return for Patterson-UTI for the 2015 performance unit grants is measured based on $100 invested in Common Stock +on the first day of the performance period, with dividends reinvested. The performance period is the period from April 1, 2015 through March 31, 2018. +No shares will be issued in respect of the performance units granted in 2015 unless Patterson-UTI total stockholder return is positive for the +performance period and, when compared to our peer group, is at or above the 25 th percentile. +Total Compensation and Relationship to Performance +The Compensation Committee considered the advice of Pearl Meyer when establishing its 2015 compensation program. In doing so, the Compensation +Committee sought to offer a total compensation package (cash and long-term) for the top four Named Executive Officers as a group that would be commensurate with the Company’s percentile performance versus peers. The Compensation Committee +looked at financial and relative shareholder return performance over one, two and three year bases, as noted below, in establishing the long-term incentive equity grants for 2015. When determining the size of 2015 equity incentive awards in April +2015, the Compensation Committee considered the following measures of relative performance for Patterson-UTI against our peers: +• +1 year Total Shareholder Return through March 31, 2015: 65 th percentile +• +2 year Total Shareholder Return through March 31, 2015: 68 th percentile +• +3 year Total Shareholder Return through March 31, 2015: 87 th percentile +32 +Although the Compensation Committee looks to various percentile ranges of compensation based on +potential performance when setting compensation, the Compensation Committee does not target specific total compensation due to its emphasis on variable compensation. +The Compensation Committee established the 2015 equity incentive awards at a level that would deliver value to the top four Named Executive +Officers at an approximate percentile range approximating the total shareholder return percentile that the Company achieves (as defined by the Committee in consultation with Pearl Meyer) relative to its peer group. +We believe that Patterson-UTI has a strong and cohesive management team and that the compensation policies that it has implemented provide the +proper mix of current compensation and long-term incentives for building stockholder value. The Company’s better than peer performance has supported the use of these policies and aligns the interest of management with the Company’s +stockholders. +With respect to Mr. Holcomb, who serves as the President of the Company’s contract drilling subsidiaries, the +Compensation Committee determined his non-equity incentive compensation in a manner similar to the top four Named Executive Officers. The Compensation Committee sets an Adjusted EBITDA threshold for the contract drilling business that must be +achieved or Mr. Holcomb will not receive a bonus. The Compensation Committee also sets a range of the percent of Adjusted EBITDA for the contract drilling segment that will be used to determine the amount of any cash payout after the end of the +performance period. The actual performance factor to be used is based on the achievement of contract drilling operational and financial performance toward the Company’s business strategy and operational plans during the year. Any annual payout +amount to Mr. Holcomb is limited to $5 million in a year. +For 2015, in recognition of the severe industry downturn, the Compensation +Committee set a $300 million Adjusted EBITDA threshold for the contract drilling business and a performance factor range of 0.032% and 0.048% of Adjusted EBITDA for the contract drilling business. The Compensation Committee determined +Mr. Holcomb’s 2015 non-equity incentive compensation to be 0.04512% of Adjusted EBITDA for the contract drilling business based on Adjusted EBITDA of $527 million in 2015, his individual performance and the following factors specific to +the Company’s contract drilling business: +• +Improved safety results and operational and cost efficiencies; +• +Timely and efficient scaling of the business during a severe industry downturn; +• +Training and management development programs; +• +Generation of customers and management of existing relationships; and +• +Increase of Company market share in a severely contracting market. +The bonus amount reflects +efforts towards achieving the Company’s current and long-term objectives in its contract drilling business. +Mr. Holcomb’s +equity-based, long-term incentive compensation was awarded in the form of restricted stock that vests in one-third increments over a three year period and is set forth in the “Grants of Plan-Based Awards Table” below. +Alignment of Realized Long-Term Incentive Value with Performance +While grant date, long-term incentive values approved by the Compensation Committee vary based upon our performance relative to peers, the +realized value of long-term incentives — including the impact of changes in our stock price — can vary significantly depending upon both our relative and absolute total shareholder return performance. +33 +We believe that the compensation realized by our executive officers is well aligned with our +performance. In order to demonstrate the alignment of realizable pay with performance relative to peers, we compared: +(1) +realizable long-term incentive value as a percent of grant date/target value for the three-year period from March 2013 — March 2016, and the five-year period from March 2011 — March 2016, to +(2) +our performance relative to our peer group over the same two periods. +Components of Relative Alignment Review +Target/Grant Date Value +Realizable Long-term Incentive Value +Stock Options +Grant date value of target annual award +In-the-money value of options granted during period — valued at 3/31/2016 +Restricted Stock +Grant date value of target annual award +Value of all shares granted during period at 3/31/2016 +Performance Units +Grant date value of target annual award +• Amount earned: for plans granted and earned based on performance during period +• Target award: for plans granted during period but still outstanding at end of period — valued at +3/31/2016 +As shown in the two charts below, as a result of the precipitous industry-wide decline in stock prices that +began in the second half of 2014, realizable long-term incentive value for our top four Named Executive Officers fell below the expected “fairway” and below 100% of the original grant date value, despite our strong performance relative to +our new peer group during the period shown on the charts. This outcome further demonstrates the alignment of our executive compensation program with the interests of our stockholders. +Top Four Named Executive Officers Realizable Long-term Incentive Value Versus +Performance Against Peers +Retirement Plans +Patterson-UTI offers a 401(k) plan to its employees, including its Named Executive Officers. Participants may contribute a portion of their +base salary to the 401(k) plan, subject to federal limits. Patterson-UTI makes matching contributions up to four percent of each participant’s eligible base salary. The Named Executive Officers of Patterson-UTI are eligible to participate in +the 401(k) plan on the same basis as other employees. Patterson-UTI does not have any other retirement plan. +34 +Other Policies and Practices Supporting Strong Compensation Governance +Share Ownership Guidelines and Stock Holding Requirements for Chief Executive Officer, Other Executive Officers and Directors +Our Nominating and Corporate Governance Committee has enacted share ownership guidelines applicable to all executive officers and +directors of Patterson-UTI. The guidelines require our Chief Executive Officer to own a number of shares of our Common Stock having a value at least equal to five times his or her base salary. The Chief Executive Officer has five years from the +adoption of these guidelines, or the date of appointment to the chief executive position, whichever is later, to satisfy the ownership guidelines. +The guidelines also require officers and directors to hold at all times, subject to a five year phase-in from the date first elected as an +officer or director, at least the following number of shares of Common Stock: +• +President and Chief Executive Officer +Number of shares equal to 5 times base salary +• +Executive Chairman +120,000 shares +• +COO/Senior Vice Presidents +60,000 shares +• +President — Drilling +30,000 shares +• +General Counsel +20,000 shares +• +Outside Directors +10,000 shares +For purposes of these ownership guidelines, equity incentive awards that have both time-based vesting and +performance-based vesting are counted when the performance-based component has been satisfied. Unvested equity incentive awards that have only time-based vesting are counted and unearned performance-based incentive awards are not counted. In +addition, each executive officer and director is required to maintain ownership of the net after-tax shares of Common Stock acquired from Patterson-UTI pursuant to any equity-based awards received from Patterson-UTI, unless such person has met his +or her individual ownership requirement. +Each of the Named Executive Officers and Directors was in compliance with these guidelines as of +the date of this proxy statement. +Clawback Policy +As provided for in Patterson-UTI’s Corporate Governance Guidelines and set forth in written agreements with its executive officers, +Patterson-UTI has implemented a claw-back policy that allows for the recovery of bonus, severance or incentive based compensation from an executive officer in the event the Board of Directors learns that any misconduct by such executive officer +contributed to Patterson-UTI having to restate all or a portion of its financial statements. The Board will take such action as it deems necessary to remedy the misconduct, prevent its recurrence, and if it deems appropriate based on the relevant +facts and circumstances, take remedial action against such executive officer, which may include requiring the reimbursement of any bonus or incentive compensation awarded to such executive officer or effect the cancellation of stock awards +previously granted to such executive officer if: (i) the amount of the bonus, incentive compensation or stock award was calculated based upon the achievement of certain financial results that were subsequently the subject of a restatement, +(ii) such executive officer engaged in intentional misconduct that caused or partially caused the need for the restatement, and (iii) the amount of the bonus, incentive compensation or stock award that would have been awarded to such +executive officer had the financial results been properly reported would have been lower than the amount actually awarded. +In addition to +a stand-alone policy, Patterson-UTI’s 2005 Long-Term Incentive Plan (the “2005 LTIP”) and 2014 Long-Term Incentive Plan (the “2014 LTIP”) provide that if Patterson-UTI is required to prepare an accounting restatement due to +the material noncompliance of Patterson-UTI, as a result of misconduct, with any financial reporting requirement under the securities laws, or if the participant is one of the persons subject to automatic forfeiture under Section 304 of the +Sarbanes-Oxley Act of 2002, the participant shall reimburse Patterson-UTI that amount of any payment in settlement of an award earned or accrued during the twelve-month period following the first public issuance or filing with the SEC (whichever +just occurred) of the financial document embodying such financial statement requirement. +35 +Pay for Performance +The Compensation Committee feels that the actual pay received by our Named Executive Officers is appropriately linked to performance and the +results that were achieved, as a significant amount of pay is at risk for our Named Executive Officers under our incentive compensation plan design. See “Executive Summary” above. +Anti-Hedging Policy +Patterson-UTI has an anti-hedging policy. Our directors and executive officers may not purchase, sell or write options on Patterson-UTI +securities or engage in transactions in other third-party derivative securities with respect to Company securities. +Anti-Pledging +Policy +Patterson-UTI has an anti-pledging policy. Our directors and executive officers may not engage in transactions in which +Patterson-UTI securities are used as collateral for any loan, including, but not limited to, “margin loans” in a brokerage account. +Perquisites and Personal Benefits +The Compensation Committee believes that benefits to executives should generally be aligned with those provided for other employees. No Named +Executive Officer received perquisites totaling more than $10,000, except that Mr. Holcomb received an automobile allowance of $12,000 in 2015. Accordingly, except for the automobile allowance, the perquisites do not meet the threshold that +would require disclosure in the Summary Compensation Table below. +Employment-Related Agreements and Other Matters +Change in Control, Severance and Employment Agreements +Change in Control Agreements and Tax Gross-Up Payments. Patterson-UTI has entered into change in control agreements with its top four +Named Executive Officers as further described elsewhere in this proxy statement. The Company believes that such agreements may under certain circumstances protect the interest of the Company by discouraging such Named Executive Officers from leaving +employment out of concern for the security of their jobs or being unable to concentrate on their work. We believe that the change in control agreements may also help Patterson-UTI attract and retain new key employees by reducing the personal +uncertainty and anxiety that arises from the possibility of a future business combination. Any future change in control or severance agreements will be approved subject to the circumstances existing at the time. +The change in control agreements with Messrs. Vollmer, Siegel and Berns contain a tax gross-up for the excise tax imposed on parachute +payments, which were customary when these agreements were entered into more than ten years ago. While the Committee believes the tax gross-up provision is a valuable tool for executive retention, the Committee recognizes that tax gross-up provisions +may no longer be viewed as customary. Going forward, the Committee does not plan to provide tax gross-ups in connection with compensation arrangements, and the change in control agreement entered into in April 2012 with Mr. Hendricks does +not include a tax gross-up provision. +Severance Agreements. Patterson-UTI has also entered into written letter agreements with +each of Messrs. Siegel, Berns and Vollmer pursuant to which Patterson-UTI has agreed to pay each such person within ten days of the termination of his employment with Patterson-UTI for any reason (including voluntary termination by him), an +amount in cash equal to his annual base salary at the time of such termination. Any payment made by Patterson-UTI pursuant to these letter agreements will reduce dollar for dollar any payment owed to such person, if any, pursuant to the change in +control agreements referenced above. +Employment Agreement. Patterson-UTI entered into an employment agreement with Mr. Holcomb +in January 2012 in connection with his promotion to President of Patterson-UTI Drilling Company LLC. Pursuant to his employment agreement, Patterson-UTI agreed to employ Mr. Holcomb for an initial term of three years beginning January 1, +2012 at an annualized salary of $325,000 per year, subject to any increases that may be granted in the future. The employment agreement provides that the agreement will renew on a year-to-year basis +36 +unless either party notifies the other party at least 90 days before the expiration of the then-current initial term or renewal term. If during the term of the employment agreement, +Mr. Holcomb’s employment is terminated due to his death or disability, by Patterson-UTI without cause or by Mr. Holcomb for good reason (as such terms are defined in the employment agreement), he will continue to receive his base +salary for 12 months following the date of termination. Please see “Employment-Related Agreements” for further description of this agreement. +Section 162(m) Considerations +In considering compensation decisions for the executive management of Patterson-UTI, we routinely consider the potential effect of +Section 162(m) of the Internal Revenue Code. Section 162(m) imposes a limitation on corporate tax deductions for non-performance based compensation to certain officers that exceeds $1 million that can be taken by a publicly held +corporation for compensation paid to certain of its executive officers. While Patterson-UTI does not design its compensation programs for tax purposes, Patterson-UTI does design its plans to be tax efficient for Patterson-UTI where possible. +However, the Committee believes that tax deduction limitations should not compromise Patterson-UTI’s ability to establish and maintain appropriate executive compensation programs and reserves the right to award non-deductible compensation. +Compensation Committee Interlocks and Insider Participation +No member of the Committee was, during the year ended December 31, 2015, an officer or employee of Patterson-UTI or any of its +subsidiaries, or was formerly an officer of Patterson-UTI or any of its subsidiaries, or had any relationships requiring disclosure by Patterson-UTI under Item 404 of Regulation S-K. +During the year ended December 31, 2015, none of Patterson-UTI’s executive officers served as (i) a member of the compensation +committee (or other Board committee performing equivalent functions) of another entity, one of whose executive officers served on the Compensation Committee, (ii) a director of another entity, one of whose executive officers served on the +Compensation Committee, or (iii) a member of the compensation committee (or other Board committee performing equivalent functions) of another entity, one of whose executive officers served as a director of Patterson-UTI. +COMPENSATION COMMITTEE REPORT +The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis included in this proxy statement required by +Item 402(b) of Regulation S-K with management and, based upon such review and discussion, the Compensation Committee has recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement. +Terry H. Hunt, Chairman +Charles O. Buckner +Michael W. Conlon +Curtis W. Huff +37 +EXECUTIVE COMPENSATION +The following table sets forth information concerning compensation for the fiscal year ended December 31, 2015 with respect to the +principal executive officer, the principal financial officer and the other Named Executive Officers of Patterson-UTI: +SUMMARY +COMPENSATION TABLE +Name and Principal Position(s) +Year +Salary +($) +Bonus +($) +Stock +Awards +($)(1) +Option +Awards +($)(2) +Non-equity +Incentive plan +Compensation +($)(3) +All Other +Compensation +($)(4) +Total +($) +William Andrew Hendricks, Jr. +2015 +$ +600,000 +$ +— +$ +2,860,622 +(5) +$ +1,508,164 +$ +1,238,885 +$ +10,600 +$ +6,218,271 +President & Chief +2014 +$ +600,000 +$ +— +$ +3,579,705 +$ +1,178,854 +$ +1,912,639 +$ +10,400 +$ +7,281,598 +Executive Officer +2013 +$ +600,000 +$ +— +$ +3,490,763 +$ +1,321,454 +$ +1,758,943 +$ +— +$ +7,171,160 +John E. Vollmer III +2015 +$ +350,000 +$ +— +$ +1,714,691 +(6) +$ +904,898 +$ +825,924 +$ +10,600 +$ +3,806,113 +Senior Vice President — +2014 +$ +350,000 +$ +— +$ +2,386,470 +$ +785,903 +$ +1,275,093 +$ +10,400 +$ +4,807,866 +Corporate Development, Chief +2013 +$ +350,000 +$ +— +$ +2,327,175 +$ +880,969 +$ +1,172,628 +$ +10,200 +$ +4,740,972 +Financial Officer & Treasurer +Mark S. Siegel +2015 +$ +350,000 +$ +— +$ +2,285,577 +(7) +$ +1,206,531 +$ +991,108 +$ +— +$ +4,833,216 +Chairman of the Board +2014 +$ +350,000 +$ +— +$ +4,772,940 +$ +1,571,806 +$ +2,550,186 +$ +— +$ +9,244,932 +2013 +$ +350,000 +$ +— +$ +4,654,350 +$ +1,761,938 +$ +2,345,257 +$ +— +$ +9,111,545 +Kenneth N. Berns +2015 +$ +265,000 +$ +— +$ +1,714,691 +(6) +$ +904,898 +$ +825,924 +$ +— +$ +3,710,513 +Senior Vice President +2014 +$ +265,000 +$ +— +$ +2,386,470 +$ +785,903 +$ +1,275,093 +$ +— +$ +4,712,466 +2013 +$ +265,000 +$ +— +$ +2,327,175 +$ +880,969 +$ +1,172,628 +$ +— +$ +4,645,772 +James M. Holcomb +2015 +$ +325,000 +$ +— +$ +750,600 +(8) +$ +— +$ +237,874 +$ +22,600 +(9) +$ +1,336,074 +President — Patterson-UTI +2014 +$ +325,000 +$ +— +$ +1,057,314 +$ +— +$ +343,111 +$ +22,400 +(9) +$ +1,747,825 +Drilling Company LLC +2013 +$ +325,000 +$ +300,738 +$ +759,240 +$ +— +$ +— +$ +14,511 +(9) +$ +1,399,489 +(1) +Amounts include the fair value of awards at the date of grant as determined in accordance with FASB ASC Topic 718 with respect to restricted stock awarded to the Named Executive Officer in the fiscal years ended +December 31, 2015, 2014 and 2013 and with respect to performance units awarded to Messrs. Hendricks, Vollmer, Siegel and Berns in the fiscal years ended December 31, 2015, 2014 and 2013. Performance conditions for all awards of restricted +stock had been satisfied as of December 31, 2015. Performance units awarded to Messrs. Vollmer, Siegel and Berns in the fiscal year ended December 31, 2012 had a performance period that ended on March 31, 2015, and the actual number +of shares earned by the recipients was equal to two times the target number of shares, based upon the terms of the 2012 awards and Patterson-UTI achieving a 87 th percentile total stockholder +return relative to its peer group during the performance period. Shares of the Company’s Common Stock were issued to settle the 2012 performance units as follows: Vollmer — 96,000 shares, Siegel — 192,000 shares, Berns — 96,000 +shares. Compensation related to these awards was reported in the Summary Compensation Table for the fiscal year ended December 31, 2012, and no compensation for the 2012 awards is included in subsequent years. For additional information related +to the assumptions used and valuation of restricted stock and performance units, see Note 10 to the consolidated financial statements in Patterson-UTI’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015. +(2) +Amounts represent the fair value at the date of grant as determined in accordance with FASB ASC Topic 718 with respect to stock options awarded to the Named Executive Officer in the fiscal years ended December 31, +2015, 2014 and 2013. For additional information related to the assumptions used in connection with the valuation of stock options using the Black-Scholes-Merton option pricing model, see Note 10 to the consolidated financial statements in +Patterson-UTI’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015. +(3) +Represents annual cash bonuses earned for the fiscal years ended December 31, 2015, 2014 and 2013. The bonus plan in each of those fiscal years for the top four executive officers provided for a bonus pool based on +Adjusted EBITDA, subject to a minimum Adjusted EBITDA of $400 million for 2015, $500 million for 2014 and $400 million for 2013. The bonus pool was allocated among the participants based on a pre-determined sharing percentage. The total amount paid +from the bonus pool to Messrs. Hendricks, Vollmer, Siegel and Berns was $3.88 million for 2015, $7.01 million for 2014 and $6.45 million for 2013. The bonus plan in 2015 and 2014 for Mr. Holcomb provided for a bonus based on Adjusted +EBITDA for Patterson-UTI’s contract drilling business, subject to a minimum Adjusted EBITDA of $300 million for 2015 and $400 million for 2014. +38 +(4) +Amounts reflect contributions to a 401(k) plan by Patterson-UTI. +(5) +Amount includes $1,508,486 related to an award of shares of restricted stock and $1,352,136 related to an award of performance units during 2015. +(6) +Amount includes $904,685 related to an award of shares of restricted stock and $810,006 related to an award of performance units during 2015. +(7) +Amount includes $1,205,569 related to an award of shares of restricted stock and $1,080,008 related to an award of performance units during 2015. +(8) +Amount reflects an award of shares of restricted stock. +(9) +Amount includes $10,600 in 2015, $10,400 in 2014 and $10,200 in 2013 contributed to a 401(k) plan by Patterson-UTI on behalf of Mr. Holcomb, an automobile allowance of $12,000 in both 2015 and 2014 and $4,311 in +2013 for the use of a Patterson-UTI automobile. +The following table sets forth information concerning grants of plan-based +awards during the fiscal year ended December 31, 2015 to the Named Executive Officers: +Grants of Plan-Based Awards +Estimated Future Payouts +under +Non-equity Incentive Plan Awards +Estimated Future Payouts under +Equity Incentive Plan Awards +All Other +Stock Awards: +Number of +Shares of +Stock or Units +(#)(4) +All Other +Option Awards: +Number of +Securities +Underlying +Options (#)(5) +Exercise or +Base Price +of Option +Awards +($/Sh) +Grant Date +Fair Value of +Stock and +Option Awards +($)(6) +Name +Grant +Date +Threshold +($) +Target +($) +Maximum +($) +Threshold +(#) +Target +(#) +Maximum +(#) +William Andrew Hendricks, Jr +2/03/15 +(1) +$ +600,000 +$ +1,238,885 +$ +5,000,000 +— +— +— +— +— +— +— +4/21/15 +(2) +— +— +— +31,800 +63,600 +127,200 +— +— +— +$ +1,352,136 +4/21/15 +— +— +— +— +— +— +74,200 +— +— +$ +1,508,486 +4/21/15 +— +— +— +— +— +— +— +257,000 +$ +20.33 +$ +1,508,164 +John E. Vollmer III +2/03/15 +(1) +$ +400,000 +$ +825,924 +$ +5,000,000 +— +— +— +— +— +— +— +4/21/15 +(2) +— +— +— +19,050 +38,100 +76,200 +— +— +— +$ +810,006 +4/21/15 +— +— +— +— +— +— +44,500 +— +— +$ +904,685 +4/21/15 +— +— +— +— +— +— +— +154,200 +$ +20.33 +$ +904,898 +Mark S. Siegel +2/03/15 +(1) +$ +480,000 +$ +991,108 +$ +5,000,000 +— +— +— +— +— +— +— +4/21/15 +(2) +— +— +— +25,400 +50,800 +101,600 +— +— +— +$ +1,080,008 +4/21/15 +— +— +— +— +— +— +59,300 +— +— +$ +1,205,569 +4/21/15 +— +— +— +— +— +— +— +205,600 +$ +20.33 +$ +1,206,531 +Kenneth N. Berns +2/03/15 +(1) +$ +400,000 +$ +825,924 +$ +5,000,000 +— +— +— +— +— +— +— +4/21/15 +(2) +— +— +— +19,050 +38,100 +76,200 +— +— +— +$ +810,006 +4/21/15 +— +— +— +— +— +— +44,500 +— +— +$ +904,685 +4/21/15 +— +— +— +— +— +— +— +154,200 +$ +20.33 +$ +904,898 +James M. Holcomb +2/03/15 +(3) +$ +96,000 +$ +237,874 +$ +5,000,000 +— +— +— +— +— +— +— +6/09/15 +— +— +— +— +— +— +36,000 +— +— +$ +705,600 +(1) +The 2015 non-equity incentive cash bonus plan for the fiscal year ended December 31, 2015 was approved on +February 3, 2015 for Messrs. Hendricks, Vollmer, Siegel and Berns. The bonus plan provided for a bonus pool based on a percentage of Adjusted EBITDA for the fiscal year ended December 31, 2015, subject to an Adjusted EBITDA threshold of +$400 million. The Compensation Committee set an Adjusted EBITDA percentage range of 0.55% to 0.81% with the actual percentage awarded to be based on the Compensation Committee’s assessment of the Company’s and executive management’s +progress toward and achievement of certain strategic and other objectives. The Compensation Committee determined the actual Adjusted EBITDA payment percentage to be 0.78% based on this assessment. The bonus pool was allocated among Messrs. +Hendricks, Vollmer, Siegel and Berns based on a pre-determined sharing percentage. The threshold amount presented in this table is calculated for the respective officer based on the approved allocation formula and an assumed Adjusted EBITDA of $400 +million using 0.55% of Adjusted EBITDA (the bottom of the specified range) as set forth when the plan was approved due to the fact that the bonus plan provided for no payment if the Adjusted EBITDA threshold of $400 million was not satisfied. The +target amount is calculated based on Patterson-UTI’s actual Adjusted EBITDA for the fiscal year ended December 31, 2015, the actual Adjusted EBITDA percentage as determined by the Compensation Committee and the allocation formula applied +to the bonus pool for distribution. The cash bonuses awarded from the bonus pool were awarded under the 2014 LTIP, which was designed to meet the requirements of Section 162(m) of the Code. Accordingly, if the $400 million Adjusted EBITDA +performance goal was achieved, the Compensation Committee was authorized to approve payments to each of Messrs. Hendricks, Vollmer, +39 +Siegel and Berns up to $5 million, the maximum amount that could be awarded to an individual under any cash-based performance award granted under the 2014 LTIP during a 12-month period, +subject to reduction based on the percentage of the Adjusted EBITDA target set by the Compensation Committee. +(2) +On April 21, 2015, Patterson-UTI granted performance unit awards to Messrs. Hendricks, Vollmer, Siegel and Berns. These awards provide for the recipients to receive shares of Common Stock upon the achievement of +certain performance goals established by Patterson-UTI during a specified period. The performance period is the period from April 1, 2015 through March 31, 2018. The performance goals are tied to Patterson-UTI’s total shareholder +return for the performance period as compared to total shareholder return for our peer group determined by the Compensation Committee. There is no payout unless total shareholder return is positive for the performance period and, when compared to +our peer group, is at or above the 25 th percentile. The recipients will receive a target number of shares if the Company’s total shareholder return is positive and, when compared to the peer +group, is at the 50 th percentile and two times the target if at the 75 th percentile or higher. If the Company’s total shareholder return +is positive, and, when compared to the peer group, is at the 25 th percentile, the recipients will only receive one-half of the target number of shares. The grant of shares when achievement is +between the 25 th and 75 th percentile will be determined on a pro-rata basis. +(3) +The 2015 non-equity incentive cash bonus plan for Mr. Holcomb for the fiscal year ended December 31, 2015 was approved on February 3, 2015. The 2015 bonus plan for Mr. Holcomb provided for a bonus +based on a percentage of Adjusted EBITDA for the Company’s contract drilling business (“Adjusted Drilling EBITDA”) for the fiscal year ended December 31, 2015, subject to an Adjusted Drilling EBITDA threshold of $300 million. The +Compensation Committee set a targeted Adjusted Drilling EBITDA percentage range of 0.032% to 0.048%. The actual percentage awarded was based on the Compensation Committee’s assessment of Mr. Holcomb’s individual performance and +certain factors specific to the Company’s contract drilling business. The Compensation Committee set the Adjusted Drilling EBITDA payment percentage at 0.045% based on these criteria. The threshold amount presented in this table is calculated +for Mr. Holcomb based on an assumed Adjusted Drilling EBITDA of $300 million using 0.032% of Adjusted Drilling EBITDA (the bottom of the specified range) as set forth when the plan was approved due to the fact that the bonus plan provided for +no payment if the Adjusted Drilling EBITDA threshold of $300 million was not satisfied. The target amount is calculated based on actual Adjusted Drilling EBITDA for the fiscal year ended December 31, 2015, and the Adjusted Drilling EBITDA +percentage as determined by the Compensation Committee. The cash bonus awarded to Mr. Holcomb was awarded under the 2014 LTIP, which was designed to meet the requirements of Section 162(m) of the Code. Accordingly, if the $300 million +Adjusted Drilling EBITDA performance goal was achieved, the Compensation Committee was authorized to approve payment to Mr. Holcomb up to $5 million, the maximum amount that could be awarded to an individual under any cash-based performance award +granted under the 2014 LTIP during a 12-month period, subject to reduction based on the percentage of the Adjusted Drilling EBITDA target set by the Compensation Committee. +(4) +Shares of restricted stock were awarded pursuant to the 2014 LTIP. Ordinary dividends are paid on unvested shares of restricted stock. The rate at which these dividends are paid is the same rate at which ordinary +dividends are paid on all other shares of Common Stock. The right to receive these dividends has been included in the grant date fair value of stock awards presented in the table. The shares awarded to Messrs. Hendricks, Vollmer, Siegel and Berns +vest over a three-year period as follows: one-third on April 21, 2016, and the remainder in equal monthly installments over the 24 months following April 21, 2016. The shares awarded to Mr. Holcomb vest over a three-year period as +follows: one-third on June 9, 2016, one-third on June 9, 2017 and one-third on June 9, 2018. +(5) +Options were granted pursuant to the 2014 LTIP. Options awarded to Messrs. Hendricks, Vollmer, Siegel and Berns vest over a three year period as follows: one-third on April 21, 2016, and the remaining two-thirds in +equal monthly installments over the 24 months following April 21, 2016. +(6) +The grant date fair value of restricted stock was based on the closing price of Patterson-UTI Common Stock on the +date of grant, which is consistent with the valuation used by Patterson-UTI for the recognition of compensation expense under FASB ASC Topic 718. The grant date fair value of stock options was determined using the Black-Scholes option pricing model, +which is consistent with the valuation used by +40 +Patterson-UTI for the recognition of compensation expense under FASB ASC Topic 718, with assumptions that are more fully described in Note 10 to the consolidated financial statements in +Patterson-UTI’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015. The grant date fair value of performance unit awards was determined based on a Monte-Carlo simulation model, which is consistent with the valuation +used by Patterson-UTI for the recognition of compensation expense under FASB ASC Topic 718. +The following table sets forth +information concerning outstanding equity awards at December 31, 2015 for the Named Executive Officers: +Outstanding Equity Awards +at Fiscal Year-End +Name +Option Awards +Stock Awards +Number of Shares +or Units of Stock +That Have +Not Vested (#) +Market Value of +Shares or Units of +Stock That Have +Not Vested ($)(1) +Equity Incentive +Plan Awards: +Number of +Unearned Shares, +Units or Other +Rights +that +Have Not Vested(2) +Equity Incentive +Plan Awards: Market +or Payout Value of +Unearned Shares, +Units or +Other +Rights that Have +Not Vested ($)(1) +Number of Securities +Underlying Unexercised +Options (#) +Option +Exercise +Price +($) +Option +Expiration +Date +Exercisable +Unexercisable +William Andrew Hendricks, Jr. +100,000 +— +$ +17.27 +04/01/22 +112,117 +(3) +$ +1,690,724 +170,100 +(4) +$ +2,565,108 +25,000 +— +$ +15.82 +09/30/22 +153,334 +19,166 +(5) +$ +22.88 +04/21/23 +65,416 +52,334 +(6) +$ +33.10 +04/21/24 +— +257,000 +(7) +$ +20.33 +04/20/25 +John E. Vollmer III +125,000 +— +$ +28.16 +07/31/16 +69,777 +(8) +$ +1,052,237 +109,100 +(9) +$ +1,645,228 +150,000 +— +$ +24.17 +04/22/17 +119,000 +— +$ +29.31 +04/24/18 +175,000 +— +$ +13.17 +04/27/19 +177,500 +— +$ +14.83 +04/26/20 +69,000 +— +$ +31.20 +04/25/21 +160,000 +— +$ +16.20 +04/23/22 +102,222 +12,778 +(5) +$ +22.88 +04/21/23 +43,611 +34,889 +(6) +$ +33.10 +04/21/24 +— +154,200 +(7) +$ +20.33 +04/20/25 +Mark S. Siegel +250,000 +— +$ +28.16 +07/31/16 +109,856 +(10) +$ +1,656,628 +192,800 +(11) +$ +2,907,424 +300,000 +— +$ +24.17 +04/22/17 +238,000 +— +$ +29.31 +04/24/18 +350,000 +— +$ +13.17 +04/27/19 +355,000 +— +$ +14.83 +04/26/20 +138,000 +— +$ +31.20 +04/25/21 +320,000 +— +$ +16.20 +04/23/22 +204,444 +25,556 +(5) +$ +22.88 +04/21/23 +87,222 +69,778 +(6) +$ +33.10 +04/21/24 +— +205,600 +(7) +$ +20.33 +04/20/25 +Kenneth N. Berns +125,000 +— +$ +28.16 +07/31/16 +69,777 +(8) +$ +1,052,237 +109,100 +(9) +$ +1,645,228 +150,000 +— +$ +24.17 +04/22/17 +119,000 +— +$ +29.31 +04/24/18 +175,000 +— +$ +13.17 +04/27/19 +177,500 +— +$ +14.83 +04/26/20 +69,000 +— +$ +31.20 +04/25/21 +160,000 +— +$ +16.20 +04/23/22 +102,222 +12,778 +(5) +$ +22.88 +04/21/23 +43,611 +34,889 +(6) +$ +33.10 +04/21/24 +— +154,200 +(7) +$ +20.33 +04/20/25 +James M. Holcomb +— +— +— +— +68,867 +(12) +$ +1,038,514 +— +— +(1) +Based on the closing price of Patterson-UTI Common Stock on December 31, 2015 of $15.08 per share. +(2) +As of December 31, 2015, performance unit awards had been granted to Messrs. Hendricks, Vollmer, Siegel and +Berns. The 2013 performance unit awards were granted on April 22, 2013 and provide for an award of shares of Patterson-UTI common stock to the recipient based on Patterson-UTI’s total shareholder return compared to our peer group of +companies for the performance period from April 1, 2013 through March 31, 2016. The 2014 performance unit awards were granted on April 22, 2014 and provide for an award of shares of Patterson-UTI common stock to the recipient based on +Patterson-UTI’s +41 +total shareholder return compared to our peer group of companies for the performance period from April 1, 2014 through March 31, 2017. The 2015 performance unit awards were granted on +April 21, 2015 and provide for an award of shares of Patterson-UTI common stock to the recipient based on Patterson-UTI’s total shareholder return compared to our peer group of companies for the performance period from April 1, 2015 +through March 31, 2018. All performance unit awards provide for a target payout based on a target level of total shareholder return compared to the peer group. The amounts presented in this column represent the target payout under the +performance unit awards. Based on Patterson-UTI’s total shareholder return during the performance period, the recipients could receive a number of shares ranging from no shares to two times the target number of shares. There is no payout unless +total shareholder return is positive for the performance period and, when compared to our peer group, is at or above the 25 th percentile; except, that with respect to the 2013 performance unit +awards, if during the two year period ending March 31, 2018, the Company’s total shareholder return for any 30 consecutive day period equals or exceeds 18% on an annualized basis from April 1, 2013 through the end of such 30 +consecutive day period, then share issuances, if any, will be made based on the Company’s total shareholder return relative to the peer group as of March 31, 2016. +(3) +These shares of restricted stock vest as follows: 9,584 shares in equal monthly installments from January 22, 2016 through April 22, 2016; 28,333 shares in equal monthly installments from January 22, 2016 +through April 22, 2017; 24,733 shares on April 21, 2016 and 49,467 shares in equal monthly installments from May 21, 2016 through April 21, 2018. +(4) +Amount includes 64,500 shares related to the 2013 performance unit award, 42,000 shares related to the 2014 performance unit award and 63,600 shares related to the 2015 performance unit award. +(5) +These options vest in equal monthly installments from January 22, 2016 through April 22, 2016. +(6) +These options vest in equal monthly installments from January 22, 2016 through April 22, 2017. +(7) +These options vest as follows: one-third on April 21, 2016 and the remainder in equal monthly installments over the 24 months following April 21, 2016. +(8) +These shares of restricted stock vest as follows: 6,389 shares in equal monthly installments from January 22, 2016 through April 22, 2016; 18,888 shares in equal monthly installments from January 22, 2016 +through April 22, 2017; 14,833 shares on April 21, 2016 and 29,667 shares in equal monthly installments from May 21, 2016 through April 21, 2018. +(9) +Amount includes 43,000 shares related to the 2013 performance unit award, 28,000 shares related to the 2014 performance unit award and 38,100 shares related to the 2015 performance unit award. +(10) +These shares of restricted stock vest as follows: 12,778 shares in equal monthly installments from January 22, 2016 through April 22, 2016; 37,778 shares in equal monthly installments from January 22, +2016 through April 22, 2017; 19,766 shares on April 21, 2016 and 39,534 shares in equal monthly installments from May 21, 2016 through April 21, 2018. +(11) +Amount includes 86,000 shares related to the 2013 performance unit award, 56,000 shares related to the 2014 performance unit award and 50,800 shares related to the 2015 performance unit award. +(12) +These shares of restricted stock vest as follows: 34,433 shares on June 9, 2016; 22,434 shares on June 9, 2017 and 12,000 shares on June 9, 2018. +42 +The following table sets forth information concerning option exercises and stock awards vested +during the fiscal year ended December 31, 2015 for the Named Executive Officers: +OPTION EXERCISES AND STOCK VESTED +Option awards +Stock awards +Name +Number of +shares acquired +on exercise (#) +Value realized +on exercise ($) +Number of +shares acquired +on vesting (#) +Value realized +on vesting ($)(1) +William Andrew Hendricks, Jr. +— +$ +— +97,501 +$ +1,872,428 +John E. Vollmer III +— +$ +— +144,112 +$ +2,827,474 +Mark S. Siegel +— +$ +— +288,222 +$ +5,654,917 +Kenneth N. Berns +— +$ +— +144,112 +$ +2,827,474 +James M. Holcomb +— +$ +— +33,267 +$ +693,617 +(1) +Value realized on vesting is based on the closing price of Patterson-UTI common stock on the day the respective shares vested; provided that if the stock market was closed on the day the respective shares vested, the +value realized on vesting is based on the closing price of Patterson-UTI common stock on the day immediately prior to the day the respective shares vested. +NO PENSION BENEFITS OR NONQUALIFIED DEFERRED COMPENSATION +Patterson-UTI does not provide any pension benefits for any of the Named Executive Officers. None of the Named Executive Officers had any items +of nonqualified deferred compensation during 2015. As a result, tables with respect to pension benefits and nonqualified deferred compensation have not been provided. +DIRECTOR COMPENSATION +The +following table sets forth information concerning compensation for the fiscal year ended December 31, 2015 with respect to the directors of Patterson-UTI who are not executive officers: +DIRECTOR COMPENSATION TABLE +Name +Fees earned or paid +in cash +($) +Stock awards +($)(1) +Option awards +($)(2) +All other +compensation +($) +Total +($) +Charles O. Buckner +$ +60,000 +$ +49,770 +$ +47,196 +$ +— +$ +156,966 +Michael W. Conlon +$ +45,000 +$ +49,770 +$ +47,196 +$ +— +$ +141,966 +Curtis W. Huff +$ +75,000 +$ +49,770 +$ +47,196 +$ +— +$ +171,966 +Terry H. Hunt +$ +60,000 +$ +49,770 +$ +47,196 +$ +— +$ +156,966 +Cloyce A. Talbott +$ +12,056 +$ +49,770 +(3) +$ +47,196 +(3) +$ +— +$ +109,022 +Tiffany J. Thom +$ +45,000 +$ +49,770 +$ +47,196 +$ +— +$ +141,966 +(1) +Amounts set forth represent the fair value at the date of grant as determined in accordance with FASB ASC Topic 718 with respect to restricted stock awarded to the directors in the fiscal year ended December 31, 2015. +For additional information related to the assumptions used and valuation of restricted stock, see Note 10 to the consolidated financial statements in Patterson-UTI’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015. +Messrs. Buckner, Conlon, Huff, Hunt and Talbott and Ms. Thom each received an award of 3,000 shares of restricted stock on January 1, 2015 with a market value of $16.59 per share. The shares awarded to Messrs. Buckner, Conlon, Huff and Hunt and +Ms. Thom fully vested on January 1, 2016. As of December 31, 2015, Messrs. Buckner, Conlon, Huff and Hunt and Ms. Thom each held 3,000 unvested shares of restricted stock. +43 +(2) +Amounts set forth represent the fair value at the date of grant as determined in accordance with FASB ASC Topic 718 with respect to stock options awarded to the directors in the fiscal year ended December 31, 2015. For +additional information related to the assumptions used in connection with the valuation of stock options using the Black-Scholes-Merton option pricing model, see Note 10 to the consolidated financial statements in Patterson-UTI’s Annual Report +on Form 10-K for the fiscal year ended December 31, 2015. Messrs. Buckner, Conlon, Huff, Hunt and Talbott and Ms. Thom each received options to purchase 10,000 shares of stock on January 1, 2015 with a fair value of $4.72 per share. The options +awarded to Messrs. Buckner, Conlon, Huff and Hunt and Ms. Thom fully vested on January 1, 2016. As of December 31, 2015, Messrs. Buckner, Conlon, Huff and Hunt and Ms. Thom held the following options to purchase shares of Common Stock: +Number of Securities Underlying +Unexercised Options (#) +Name +Exercisable +Unexercisable +Total +Charles O. Buckner +70,000 +10,000 +80,000 +Michael W. Conlon +30,000 +10,000 +40,000 +Curtis W. Huff +90,000 +10,000 +100,000 +Terry H. Hunt +90,000 +10,000 +100,000 +Tiffany J. Thom +10,000 +10,000 +20,000 +(3) +The shares and stock options awarded to Mr. Talbott were forfeited when he retired as a director on June 4, 2015. +Directors who are also employees of Patterson-UTI do not receive compensation for serving as a director or as a member of a committee of the +Board of Directors. All directors are reimbursed for reasonable out-of-pocket expenses incurred in connection with serving as a member of the Board of Directors. Each non-employee director receives annual cash compensation of $35,000 and +(i) 3,000 shares of restricted stock subject to one-year vesting (subject to acceleration in certain limited situations, including a change of control) and (ii) an option to purchase 10,000 shares of Common Stock at an exercise price equal +to the closing price of Common Stock on the grant date. The option has a 10-year term, vests after one-year (subject to acceleration in certain limited situations, including a change of control) and contains a right to exercise for three years +following cessation of the holder as a director (but not beyond the 10-year term). Each non-employee director that serves on the Audit Committee or the Compensation Committee receives additional annual cash compensation of $10,000 per committee on +which he or she serves, with the chairman of each such committee receiving $15,000. The Lead Director receives additional annual cash compensation of $20,000. +EMPLOYMENT-RELATED AGREEMENTS +Change +in Control +Patterson-UTI has entered into change in control agreements with Messrs. Siegel, Hendricks, Berns and Vollmer (each +agreement, a “CIC Agreement” and collectively, the “CIC Agreements”; and each individual, an “Employee” and collectively, the “Employees”). The CIC Agreements were entered into to protect the Employees should +a change in control occur, thereby encouraging the Employee to remain in the employ of Patterson-UTI and not be distracted from the performance of his duties to Patterson-UTI by the possibility of a change in control. +In the event of a change in control of Patterson-UTI in which an Employee’s employment is terminated by Patterson-UTI other than for cause +or by the Employee for good reason, the terms of the CIC Agreements would entitle the Employee to, among other things: +• +a bonus payment equal to the highest annual bonus paid after the CIC Agreement was entered into (such bonus payment prorated for the portion of the fiscal year preceding the termination date), +44 +• +a payment equal to 2.5 times (in the case of Messrs. Siegel and Hendricks) or 2.0 times (in the case of Messrs. Berns and Vollmer) the sum of (i) the highest annual salary in effect for such Employee during the +term of the CIC Agreement and (ii) the average of the three annual bonuses earned by the Employee for the three fiscal years preceding the termination date, and +• +continued coverage under Patterson-UTI’s welfare plans for up to three years (in the case of Messrs. Siegel and Hendricks) or two years (in the case of Messrs. Berns and Vollmer). +The CIC Agreements with Messrs. Vollmer, Siegel and Berns contain a tax gross-up for the excise tax imposed on parachute payments, which were +customary when these agreements were entered into more than ten years ago. While the Compensation Committee believes the tax gross-up provision is a valuable tool for executive retention, the Compensation Committee recognizes that tax gross-up +provisions may no longer be viewed as customary. Going forward, the Compensation Committee does not plan to provide tax gross-ups in connection with compensation arrangements, and the CIC Agreement entered into in April 2012 with Mr. Hendricks +does not include a tax gross-up provision. +A “change in control” is principally defined by the CIC Agreement as: +• +an acquisition by any individual, entity or group of beneficial ownership of 35% or more of either Patterson-UTI’s then outstanding Common Stock or the combined voting power of the then outstanding voting +securities of Patterson-UTI entitled to vote in the election of directors, +• +a change occurs in which the members of the Board of Directors as of the date of the CIC Agreement cease to constitute at least a majority of Patterson-UTI’s Board of Directors unless that change occurs through a +vote of at least a majority of the incumbent members of the Board of Directors, or +• +a change in the beneficial ownership of Patterson-UTI following consummation of a reorganization, merger, consolidation, sale of Patterson-UTI or any subsidiary of Patterson-UTI or a disposition of all or substantially +all of the assets of Patterson-UTI, in which the beneficial owners immediately prior to the transaction own 65% or less of outstanding common stock of the newly combined or merged entity. +The CIC Agreements terminate on the first to occur of: +• +the Employee’s death, disability or retirement, +• +the termination of the Employee’s employment, or +• +January 29, 2017 although, unless otherwise terminated, the CIC Agreements automatically renew for successive 12-month periods until Patterson-UTI notifies the Employee at least 90 days before the expiration of the +initial term or the renewal period, as applicable, that the term will not be extended. Patterson-UTI has not provided any such notification to the Employees. +All unvested stock options and restricted stock awards held by Messrs. Siegel, Hendricks, Berns and Vollmer vest upon a change of control as +defined by the underlying award agreements. Upon a change in control as defined in the underlying performance unit award grants, Messrs. Hendricks, Vollmer, Siegel and Berns would receive the target number of shares issuable thereunder. All +restricted stock and performance unit awards held by Messrs. Siegel, Hendricks, Berns and Vollmer contain provisions that in the event of termination due to death or disability, the Named Executive Officer would vest in a portion of the award. +45 +Amounts that each of the Named Executive Officers would be entitled to under the CIC Agreements +(or in the case of Mr. Holcomb, his employment agreement) and other award agreements if a change in control had occurred as of December 31, 2015 and the employee’s employment was terminated by Patterson-UTI other than for cause or +terminated by the employee for good reason (as defined in the CIC Agreements or in the case of Mr. Holcomb, his employment agreement, and other award agreements) are reflected in the following table: +Cash Payments +Other Benefits +Name +Bonus +Payment +($)(1) +Salary and +Bonus +($)(2) +Option +Awards +($)(3) +Stock +Awards +($)(3) +Performance +Unit Awards +($)(4) +Continued +Benefits +($)(5) +Total +($) +William Andrew Hendricks, Jr +$ +1,912,639 +$ +5,226,318 +$ +— +$ +1,690,724 +$ +2,565,108 +$ +27,292 +$ +11,422,081 +John E. Vollmer III +$ +1,397,022 +$ +3,263,162 +$ +— +$ +1,052,237 +$ +1,645,228 +$ +18,195 +$ +7,375,844 +Mark S. Siegel +$ +2,794,044 +$ +7,282,906 +$ +— +$ +1,656,628 +$ +2,907,424 +$ +— +$ +14,641,002 +Kenneth N. Berns +$ +1,397,022 +$ +3,093,162 +$ +— +$ +1,052,237 +$ +1,645,228 +$ +— +$ +7,187,649 +James M. Holcomb(6) +$ +— +$ +325,000 +$ +— +$ +— +$ +— +$ +7,243 +$ +332,243 +(1) +The assumed bonus payment is equal to the highest annual bonus paid from the time the CIC Agreements were entered into through December 31, 2015. +(2) +The assumed salary and bonus payment represents 2.5 times (in the case of Messrs. Siegel and Hendricks) or 2.0 times (in the case of Messrs. Berns and Vollmer) of the sum of the 2015 salary in effect for each employee +and the average of the annual bonuses earned by each employee for 2014, 2013 and 2012. Bonus amounts earned in 2015 were not considered in this calculation as they were not determined until after December 31, 2015. In the case of +Mr. Holcomb, the payment represents twelve months of his base salary as determined in accordance with his employment agreement. +(3) +Each of the option and stock award agreements for Messrs. Hendricks, Vollmer, Siegel and Berns provide that unvested options and awards will immediately vest upon a change in control. Amounts presented in the table +represent the value of unvested option and stock awards using the market price of Patterson-UTI Common Stock at December 31, 2015. +(4) +Share settled performance units awarded to Messrs. Hendricks, Vollmer, Siegel and Berns in 2013, 2014 and 2015, include a provision that upon a change in control as defined in the respective award agreements, the Named +Executive Officer will receive an award of shares equal to the target amount set forth in each agreement. Amounts presented in the table represent the assumed award of the target number of shares if a change in control had occurred on +December 31, 2015 valued at the December 31, 2015 closing price of Patterson-UTI common stock of $15.08 per share. +(5) +Messrs. Hendricks, Vollmer and Holcomb participated in Patterson-UTI’s health and welfare plans as of December 31, 2015. The amounts presented represent Patterson-UTI’s portion of the premiums for three +years in the case of Mr. Hendricks, two years in the case of Mr. Vollmer and one year in the case of Mr. Holcomb based on the rates in effect at December 31, 2015. +(6) +Patterson-UTI has entered into an employment agreement with Mr. Holcomb that provides certain benefits if his employment is terminated by Patterson-UTI other than for cause or by him for good reason. +Severance Agreements +In order to address prior severance agreements between UTI Energy Corp. and each of Messrs. Siegel, Berns and Vollmer, Patterson-UTI has +entered into written letter agreements with each of these Named Executive Officers pursuant to which Patterson-UTI has agreed to pay each such person within ten days of the termination of his employment with Patterson-UTI for any reason (including +voluntary termination by him), an amount in cash equal to his annual base salary at the time of such termination. Any payment made by Patterson-UTI pursuant to these letter agreements will reduce dollar for dollar any payment owed to such person, if +any, pursuant to the change in control agreements discussed above. +46 +Employment Agreement with Mr. Holcomb +In January 2012, Patterson-UTI entered into an employment agreement with Mr. Holcomb in connection with his promotion to President of +Patterson-UTI Drilling Company LLC. Pursuant to his employment agreement, Patterson-UTI agreed to employ Mr. Holcomb for an initial term of three years beginning January 1, 2012 at an annualized salary of $325,000 per year, subject to any +increases that may be granted in the future. The employment agreement provides that the agreement shall continue on a year to year basis unless either party notifies the other party at least 90 days before the expiration of the then-current initial +term or renewal term. Mr. Holcomb agreed to restrictions regarding Patterson-UTI’s confidential information and to not compete with Patterson-UTI or solicit its employees or customers for two years following the date of termination of his +employment. If during the term of the employment agreement, Mr. Holcomb’s employment is terminated due to his death or disability, by Patterson-UTI without cause or by Mr. Holcomb for good reason (as such terms are defined in the +employment agreement), he will continue to receive his base salary for 12 months following the date of termination. During the 12 month period following his termination, Mr. Holcomb and his eligible dependents as of the date of termination +shall continue to be covered by all medical, vision and dental plans (but not including life or disability insurance) at the same active employee premium cost as a similarly situated active employee; provided that such benefits shall cease if he +becomes entitled to any group health benefits from a new employer. Receipt of such benefits is conditioned on Mr. Holcomb’s execution of a general release of claims against Patterson-UTI. +Death or Disability +All restricted stock +and performance unit awards held by the Named Executive Officers provide that in the event of termination of employment due to death or disability, the holder would vest in a portion of the award. With respect to Mr. Hendricks, such a +termination at December 31, 2015 would have resulted in the accelerated vesting of 18,415 shares of restricted stock with a fair value of $277,698. With respect to Messrs. Vollmer and Berns, such a termination at December 31, 2015 would +have resulted in the accelerated vesting of 11,124 shares of restricted stock with a fair value of $167,750. With respect to Mr. Siegel, such a termination at December 31, 2015 would have resulted in the accelerated vesting of 15,369 +shares of restricted stock with a fair value of $231,765. With respect to Mr. Holcomb, such a termination at December 31, 2015 would have resulted in the accelerated vesting of 19,289 shares of restricted stock with a fair value of +$290,878. In the event of termination of employment due to death or disability, the holders of performance units would vest in the portion of the performance unit award that was earned at the time of death or disability. This payment would be +determined at the end of the performance period and would equal the amount that the holder would have received at that time, pro-rated for the amount of time from the date of grant through the date of death or disability. +Indemnification Agreements +Patterson-UTI +has entered into an indemnification agreement with Messrs. Hendricks, Vollmer, Siegel and Berns and each of its directors containing provisions that may require Patterson-UTI, among other things, to indemnify such executive officers and directors +against liabilities that may arise by reason of their status or service as executive officers or directors (subject to certain exceptions) and to advance expenses incurred as a result of any proceeding against them as to which they could be +indemnified. +CERTAIN TRANSACTIONS +In connection with the acquisition by REMY Capital Partners III, L.P. (“REMY Capital”) of an ownership interest in UTI Energy Corp. +in March 1995, REMY Capital succeeded to a registration rights agreement with UTI. As the successor-in-interest to UTI, Patterson-UTI assumed this registration rights agreement pursuant to which REMY Capital has the right to require Patterson-UTI to +use its reasonable efforts to register shares held by REMY Capital under the Securities Act of 1933, as amended. In the event that such rights are exercised in connection with a primary offering proposed by Patterson-UTI (or a secondary offering +with which Patterson-UTI agrees to participate), REMY Capital would bear its pro rata share of the costs of the offering, other than legal, accounting and printing costs, all of which Patterson-UTI would bear. In the event that REMY Capital elects +to exercise such rights other than in connection with an offering in which Patterson-UTI participates, REMY Capital would bear all +47 +costs of the offering. These rights continue so long as REMY Capital continues to own the Common Stock that it acquired in March 1995. As of the date of this proxy statement, REMY Capital +continues to hold 605,000 shares of such Common Stock. +Mr. Siegel, Chairman of the Board of Patterson-UTI, is President and sole +stockholder of REMY Investors, which is the general partner of REMY Capital. Mr. Berns, a director and Senior Vice President of Patterson-UTI, is an executive of REMY Investors. +Patterson-UTI has a written policy with respect to related person transactions. In accordance with this policy, related person transactions are +reviewed by the Lead Director or the chair of the Audit Committee, each of whom has full delegated authority to approve, disapprove, ratify, amend, terminate or rescind any such transaction, or direct that such transaction be submitted to the Audit +Committee or the full Board of Directors for consideration. In approving or disapproving related person transactions, the relevant facts and circumstances of the related person transaction are considered, including whether such transaction is in, or +not inconsistent with, the best interest of Patterson-UTI and whether, in appropriate cases, such transaction is on commercial terms at least as favorable to Patterson-UTI as would otherwise be available to or from an unrelated third party or to +Patterson-UTI’s employees generally. Related person transactions generally include transactions in an amount that exceeds $50,000 between Patterson-UTI or any of its subsidiaries and an executive officer, a director (or nominee to become +director), an immediate family member of any of the foregoing or any entity in which any of the foregoing has a 10% or greater beneficial ownership interest or in which they are an executive officer, general partner, principal or engaged in a +similar position. Certain related person transactions have been pre-approved under the terms of the policy, including, subject to certain exceptions and limitations, the sale to or purchase from Patterson-UTI of goods and services by entities +related to directors in the ordinary course of business that are immaterial to Patterson-UTI and with respect to which the director has no direct economic interest or decision making authority. +SECURITY OWNERSHIP OF CERTAIN +BENEFICIAL OWNERS AND MANAGEMENT +The following table sets forth, as of April 11, 2016, the stock ownership of (i) the Named Executive Officers, directors and Board +nominees, individually, (ii) all directors, Board nominees and executive officers as a group and (iii) each person known by Patterson-UTI to be the beneficial owner of more than 5% of Common Stock. +Name of +Beneficial Owner +Amount and +Nature of +Beneficial +Ownership +Percent +of Class +Beneficial Owners of more than 5% of Patterson-UTI’s Common Stock: +Wellington Management Group LLP. +15,444,260 +(1) +10.5% +BlackRock, Inc. +11,124,316 +(2) +7.6% +The Vanguard Group +10,383,831 +(3) +7.1% +Dimensional Fund Advisors LP +8,566,543 +(4) +5.8% +Directors and Named Executive Officers: +William Andrew Hendricks, Jr. +733,565 +(5) +* +John E. Vollmer III +2,030,696 +(6) +1.4% +Mark S. Siegel +3,927,717 +(7) +2.6% +Kenneth N. Berns +1,690,118 +(8) +1.1% +James M. Holcomb. +232,252 +(9) +* +Charles O. Buckner +110,000 +(10) +* +Michael W. Conlon +61,000 +(11) +* +Curtis W. Huff +153,880 +(12) +* +Terry H. Hunt +131,000 +(13) +* +Tiffany J. Thom. +29,000 +(14) +* +All directors and executive officers as a group (11 persons) +9,272,008 +(15) +6.1% +* +indicates less than 1.0% +48 +(1) +Based solely on a Schedule 13G/A filed by Wellington Management Group LLP (“Wellington Management”) with the SEC on February 11, 2016. According to the report, Wellington Management, in its capacity as +investment adviser, may be deemed to beneficially own 15,444,260 shares that are held of record by clients of Wellington Management. Wellington Management has shared power to vote or to direct the vote of 6,587,220 shares and shared power to dispose +or to direct the disposition of 15,444,260 shares. The address of the principal business office of Wellington Management is 280 Congress Street, Boston, Massachusetts 02210. +(2) +Based solely on a Schedule 13G/A filed by BlackRock, Inc. with the SEC on January 27, 2016. According to the report, BlackRock, Inc. has sole voting power with respect to 10,576,599 shares and sole dispositive +power with respect to 11,124,316 shares. The address of the principal business office of BlackRock, Inc. is 55 East 52 nd Street, New York, New York 10055. +(3) +Based solely on a Schedule 13G/A filed by The Vanguard Group with the SEC on February 11, 2016. According to the report, The Vanguard Group has sole voting power with respect to 105,502 shares, sole dispositive +power with respect to 10,279,429 shares and shared dispositive power with respect to 104,402 shares. The address of the principal business office of The Vanguard Group is 100 Vanguard Blvd., Malvern, Pennsylvania 19355. +(4) +Based solely on a Schedule 13G filed by Dimensional Fund Advisors LP with the SEC on February 9, 2016. According to the report, Dimensional Fund Advisors LP has sole voting power with respect to 8,359,429 shares +and sole dispositive power with respect to 8,566,543 shares. The address of the principal business office of Dimensional Fund Advisors LP is Building One, 6300 Bee Cave Road, Austin, Texas 78746. +(5) +Includes shares underlying stock options held by Mr. Hendricks that are presently exercisable or become exercisable within 60 days to purchase 472,075 shares. Does not include 200,175 shares underlying stock +options held by Mr. Hendricks that are not presently exercisable and will not become exercisable within 60 days. Includes 99,616 shares of unvested restricted Common Stock held by Mr. Hendricks, over which he presently has voting power. +(6) +Includes shares underlying stock options held by Mr. Vollmer that are presently exercisable or become exercisable within 60 days to purchase 1,200,696 shares. Does not include 122,504 shares underlying stock +options held by Mr. Vollmer that are not presently exercisable and will not become exercisable within 60 days. Includes 61,445 shares of unvested restricted Common Stock held by Mr. Vollmer, over which he presently has voting power. The +Common Stock beneficially owned by Mr. Vollmer includes 200,000 shares held in trusts for which he is a trustee. +(7) +Mr. Siegel is the President and sole stockholder of REMY Investors, which is the general partner of REMY Capital Partners III, L.P. (“REMY Capital”). The Common Stock beneficially owned by Mr. Siegel +includes 605,000 shares of Common Stock owned by REMY Capital. The Common Stock beneficially owned by Mr. Siegel also includes stock options held by Mr. Siegel that are presently exercisable or become exercisable within 60 days to purchase +2,364,271 shares. Does not include 179,329 shares underlying stock options held by Mr. Siegel that are not presently exercisable and will not become exercisable within 60 days. Includes 93,190 shares of unvested restricted Common Stock held by +Mr. Siegel, over which he presently has voting power. The Common Stock beneficially owned by Mr. Siegel includes 49,900 shares held in trusts for which he is the trustee. +(8) +Includes shares underlying stock options held by Mr. Berns that are presently exercisable or become exercisable within 60 days to purchase 1,200,696 shares. Does not include 122,504 shares underlying stock options +held by Mr. Berns that are not presently exercisable and will not become exercisable within 60 days. Includes 61,445 shares of unvested restricted Common Stock held by Mr. Berns, over which he presently has voting power. The Common Stock +beneficially owned by Mr. Berns includes 140,000 shares held in trusts for which he is the trustee. Does not include shares of Common Stock beneficially owned by REMY Investors. Mr. Berns disclaims beneficial ownership of such shares +beneficially owned by REMY Investors. +(9) +Includes 68,867 shares of unvested restricted Common Stock held by Mr. Holcomb, over which he presently has voting power. +49 +(10) +Includes shares underlying presently exercisable stock options held by Mr. Buckner to purchase 80,000 shares. Does not include 10,000 shares underlying stock options held by Mr. Buckner that are not presently +exercisable and will not become exercisable within 60 days. Includes 3,000 shares of unvested restricted Common Stock held by Mr. Buckner, over which he presently has voting power. The Common Stock beneficially owned by Mr. Buckner +includes 27,000 shares held by CDT Investments, LP, a limited partnership for which he is the sole member of the sole general partner. +(11) +Includes shares underlying presently exercisable stock options held by Mr. Conlon to purchase 40,000 shares. Does not include 10,000 shares underlying stock options held by Mr. Conlon that are not presently +exercisable and will not become exercisable within 60 days. Includes 3,000 shares of unvested restricted Common Stock held by Mr. Conlon, over which he presently has voting power. +(12) +Includes shares underlying presently exercisable stock options held by Mr. Huff to purchase 90,000 shares. Does not include 10,000 shares underlying stock options held by Mr. Huff that are not presently +exercisable and will not become exercisable within 60 days. Includes 3,000 shares of unvested restricted Common Stock held by Mr. Huff, over which he presently has voting power. +(13) +Includes shares underlying presently exercisable stock options held by Mr. Hunt to purchase 90,000 shares. Does not include 10,000 shares underlying stock options held by Mr. Hunt that are not presently +exercisable and will not become exercisable within 60 days. Includes 3,000 shares of unvested restricted Common Stock held by Mr. Hunt, over which he presently has voting power. +(14) +Includes shares underlying presently exercisable stock options held by Ms. Thom to purchase 20,000 shares. Does not include 10,000 shares underlying stock options held by Ms. Thom that are not presently +exercisable and will not become exercisable within 60 days. Includes 3,000 shares of unvested restricted Common Stock held by Ms. Thom, over which she presently has voting power. +(15) +Includes shares underlying stock options, which are presently exercisable or become exercisable within 60 days, to purchase 5,572,738 shares of Common Stock. Does not include shares underlying stock options to purchase +674,512 shares held by such individuals that are not presently exercisable and will not become exercisable within 60 days. Includes an aggregate of 468,430 shares of unvested restricted Common Stock held by certain directors and executive officers, +over which they presently have voting power. +Except as stated herein, each stockholder has sole voting and investment power +with respect to Common Stock included in the above table. There are no arrangements known to Patterson-UTI which may result in a change in control. The business address of each of our directors and officers is 450 Gears Road, Suite 500, Houston, +Texas 77067. +50 +Equity Compensation Plan Information +Equity compensation plan information as of December 31, 2015 follows: +Equity Compensation Plan Information +Plan Category +Number of +Securities to +be Issued upon +Exercise of +Outstanding +Options, +Warrants and +Rights +Weighted- +Average Exercise +Price of +Outstanding +Options, +Warrants and +Rights +Number of +Securities +Remaining Available +for Future Issuance +under Equity +Compensation Plans +(Excluding +Securities Reflected +in +Column(a)) +(a) +(b) +(c) +Equity compensation plans approved by security holders(1) +6,307,250 +$ +21.68 +4,018,824 +Equity compensation plans not approved by security holders +— +$ +— +— +Total +6,307,250 +$ +21.68 +4,018,824 +(1) +The 2014 LTIP provides for awards of incentive stock options, non-incentive stock options, tandem and freestanding stock appreciation rights, restricted stock awards, other stock unit awards, performance share awards, +performance unit awards and dividend equivalents to key employees (as defined in the 2014 LTIP), officers and directors, which are subject to certain vesting and forfeiture provisions. All options are granted with an exercise price equal to or +greater than the fair market value of the common stock at the time of grant. The vesting schedule and term are set by the Compensation Committee of the Board of Directors, except that the Board has the same power as the Compensation Committee with +respect to awards to directors. All securities remaining available for future issuance under equity compensation plans approved by security holders in column (c) are available under this plan. In addition to the 2014 LTIP, this Plan category +also includes the 2005 LTIP. In connection with the approval of the 2014 LTIP, the Board of Directors approved a resolution that no further options, restricted stock or other awards would be granted under any equity compensation plan, other than the +2014 LTIP. Options granted under the 2005 LTIP typically vested over one year for non-employee directors and three years for employees. All options were granted with an exercise price equal to the fair market value of the related common stock at the +time of grant. +51 +AUDIT COMMITTEE REPORT +The following report of the Audit Committee does not constitute soliciting material and should not be deemed filed or incorporated by reference +into any other Patterson-UTI filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent Patterson-UTI specifically incorporates this report by reference therein. +The Audit Committee members are Messrs. Buckner (chairman), Huff and Hunt and Ms. Thom, each of whom is independent within the meaning of +applicable rules under the Exchange Act and within the meaning of the Nasdaq listing standards. The Board has determined that Messrs. Buckner and Huff and Ms. Thom are “audit committee financial experts” within the meaning of applicable +SEC rules. +The Audit Committee oversees management’s conduct of Patterson-UTI’s accounting and financial reporting process, +including review of: (i) financial reports and other financial information provided by Patterson-UTI to the public and government/regulatory bodies, (ii) Patterson-UTI’s system of internal control over financial reporting, and (iii) the annual +independent audit of Patterson-UTI’s consolidated financial statements and internal control over financial reporting. +The Audit +Committee’s role is one of review, and it recognizes that Patterson-UTI’s management is responsible for preparing Patterson-UTI’s consolidated financial statements and the independent auditors are responsible for auditing those +financial statements. In fulfilling its review and oversight responsibilities, the Audit Committee reviewed with management the audited financial statements included in Patterson-UTI’s Annual Report on Form 10-K for the year ended December 31, +2015, including a discussion of the quality, not just the acceptability, of the accounting principles used, the reasonableness of significant judgments made by management, and the clarity of disclosures provided in the financial statements. The +Audit Committee also discussed with management the basis for their assertion that Patterson-UTI maintained effective internal control over financial reporting as of December 31, 2015. +The Audit Committee discussed with Patterson-UTI’s independent registered public accounting firm (PricewaterhouseCoopers LLP) the overall +scope and plans for their integrated audit. The Audit Committee met with PricewaterhouseCoopers LLP, with and without management present, to discuss the results of their integrated audit, their evaluation of Patterson-UTI’s internal control +over financial reporting and the overall quality of Patterson-UTI’s financial reporting. The Audit Committee also reviewed with PricewaterhouseCoopers LLP their judgments as to the quality, not just the acceptability, of Patterson-UTI’s +accounting principles and discussed such other matters as are required by Auditing Standard 16. +The Audit Committee has received and +reviewed the written disclosures and the letter from PricewaterhouseCoopers LLP required by the Public Company Accounting Oversight Board regarding their independence, and their communications with the Audit Committee concerning independence. +Taking the foregoing into consideration, the undersigned Audit Committee members recommended to the Board of Directors that the Board approve +the inclusion of Patterson-UTI’s audited financial statements and management’s report on internal control over financial reporting in the Annual Report on Form 10-K for the fiscal year ended December 31, 2015. +Audit Committee of the Board of Directors: +Charles O. Buckner, Chairman +Curtis W. Huff +Terry H. Hunt +Tiffany J. Thom +52 +PricewaterhouseCoopers LLP Fees for Fiscal Years 2015 and 2014 +In 2015 and 2014, Patterson-UTI and its subsidiaries incurred fees for services provided by PricewaterhouseCoopers LLP. +Description +Fees Incurred in +Fiscal Year +2015 +Fees Incurred in +Fiscal Year +2014 +Audit fees +$ +1,658,800 +$ +1,556,000 +Audit-related fees +36,000 +— +Tax fees +40,000 +40,000 +All other fees +1,919 +1,919 +Total +$ +1,736,719 +$ +1,597,919 +The Audit Committee appoints the independent registered public accounting firm. The Audit Committee or +Mr. Buckner, as Chairman of the Audit Committee, approves all other engagements of the independent registered public accounting firm in advance. In the event Mr. Buckner approves any such engagement, he discusses such approval with the +Audit Committee at its next meeting. +“Audit fees” relate to audit services of PricewaterhouseCoopers LLP for fiscal 2015 and +2014 consisting of the integrated audit of Patterson-UTI’s consolidated financial statements and internal control over financial reporting, and quarterly reviews of Patterson-UTI’s interim financial statements. “Audit-related +fees” relate to the performance of certain agreed-upon procedures in connection with a bid for prospective work. “Tax fees” include federal, state, local and foreign tax compliance and related matters. “All other fees” +consists of an annual subscription fee to a software product. The Audit Committee or Mr. Buckner, as Chairman of the Audit Committee, approved in advance all of the services described above. +The Audit Committee has discussed the non-audit services provided by PricewaterhouseCoopers LLP and the related fees and has considered whether +those services and fees are compatible with maintaining auditor independence. The Audit Committee determined that such non-audit services were consistent with the independence of PricewaterhouseCoopers LLP. +OTHER MATTERS +Section 16(a) +Beneficial Ownership Reporting Compliance +Section 16(a) of the Exchange Act requires Patterson-UTI’s officers and directors +and persons who own more than 10 percent of a registered class of Patterson-UTI’s equity securities, to file reports of ownership and changes in ownership with the SEC. Each of these persons is required by SEC regulation to furnish +Patterson-UTI with copies of Section 16(a) filings. Based solely upon a review of Forms 3 and 4 and amendments thereto furnished to Patterson-UTI during 2015 and Forms 5 and amendments thereto furnished to Patterson-UTI with respect to 2015, or +a written representation from the reporting person that no Form 5 is required, all filings required to be made by such officers, directors, and beneficial owners of more than 10 percent of a registered class of Patterson-UTI’s common stock were +timely made. +Other Business +As of +the date of this proxy statement, management of Patterson-UTI was not aware of any matter to be presented at the Meeting other than as set forth herein. If any other matters are properly brought before the Meeting, however, the shares represented by +valid proxies will be voted with respect to such matters in accordance with the judgment of the persons voting them. +Stockholder Proposals for 2017 +Annual Meeting +Proposals or Director Nominations for Inclusion in the Proxy Statement. Pursuant to Rule +14a-8 under the Exchange Act, stockholders may present proper proposals or director nominations for inclusion in Patterson-UTI’s +53 +proxy statement and for consideration at the next annual meeting of stockholders by submitting their proposals or director nominations to Patterson-UTI in a timely manner. In order to be included +in Patterson-UTI’s proxy statement for the 2017 annual meeting of stockholders, proposals or director nominations from stockholders must be received by Patterson-UTI no later than December 18, 2016, and must otherwise comply with the +requirements of Rule 14a-8. +Proposals or Director Nominations not Included in the Proxy Statement. In +addition, Patterson-UTI’s bylaws establish an advance notice procedure with regard to stockholder proposals and director nominations not included in Patterson-UTI’s proxy statement. For director nominations not included in +Patterson-UTI’s proxy statement, please refer to “Election of Directors – Meetings and Committees of the Board of Directors.” For stockholder proposals to be properly brought before the 2016 annual meeting, by a stockholder, the +stockholder must be a stockholder of record on the date of the giving of the notice provided for below and on the record date for the determination of stockholders entitled to vote at such annual meeting and must give timely notice of such business +in writing to the Secretary of Patterson-UTI. To be timely with respect to the 2017 annual meeting, a stockholder’s notice must be delivered to or mailed and received at Patterson-UTI’s principal executive offices not earlier than +February 4, 2017 and not later than March 2, 2017; provided, however, that in the event that the annual meeting is called for a date that is not within 30 days before or after June 2, 2017, notice by the stockholder to be timely must +be received not later than the close of business on the tenth day following the day on which such notice of the date of the meeting was mailed or public disclosure of the annual meeting date was made, whichever occurs first. +A stockholder’s notice to the Secretary of Patterson-UTI shall set forth: +• +a brief description of each matter desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, +• +the name and record address of the stockholder proposing such business, +• +the class and number of shares of Patterson-UTI that are beneficially owned by the stockholder, +• +any material interest of the stockholder in such business, and +• +a representation that such stockholder intends to appear in person or by proxy at the annual meeting to bring such business before the annual meeting. +Patterson-UTI reserves the right to reject, rule out of order, or take other appropriate action with respect to any proposal or nomination that +does not comply with these and other applicable requirements. +Annual Report +A copy of Patterson-UTI’s annual report on Form 10-K accompanies this proxy statement only if you have requested that a copy of this proxy +statement be mailed to you. The annual report on Form 10-K also is available electronically by following the instructions in the Notice. The annual report on Form 10-K is not incorporated into this proxy statement and is not considered +proxy-soliciting material. +A copy of the annual report on Form 10-K, including the financial statements and financial statement +schedules, but excluding exhibits, may be obtained by stockholders without charge by written request to the Secretary of Patterson-UTI at 450 Gears Road, Suite 500, Houston, Texas 77067 or by accessing it on Patterson-UTI’s website at +www.patenergy.com in the investors section under the “Financial Reports” link. Patterson-UTI will furnish the exhibits to Form 10-K upon request and upon receipt of a reproduction fee. +Delivery of Documents to Stockholders Sharing an Address +The SEC’s rules allow companies to send a single Notice or single copy of annual reports, proxy statements, prospectuses and other +disclosure documents to two or more stockholders sharing the same address, subject to certain conditions. These rules are intended to provide greater convenience for stockholders, and cost savings for +54 +companies, by reducing the number of duplicate documents that stockholders receive. If instructions for separate delivery have been received from any stockholder, Patterson-UTI will deliver +promptly separate copies of the relevant disclosure materials. Similarly, if multiple copies of disclosure materials are being delivered to a single address, stockholders can request a single copy for future deliveries. Written requests should be +submitted to the Secretary of Patterson-UTI at 450 Gears Road, Suite 500, Houston, Texas 77067. Requests may also be made by calling Investor Relations at (281) 765-7100. +55 +PATTERSON-UTI ENERGY, +INC. +450 GEARS ROAD, SUITE 500 +HOUSTON, TX 77067 +VOTE BY INTERNET - www.proxyvote.com +Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the cut-off +date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. +Electronic Delivery of Future PROXY MATERIALS +If you would like to reduce the costs incurred by our company in mailing proxy materials, +you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when +prompted, indicate that you agree to receive or access proxy materials electronically in future years. +VOTE BY PHONE - 1-800-690-6903 +Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your +proxy card in hand when you call and then follow the instructions. +VOTE BY +MAIL +Mark, sign and date your proxy card and return it in the postage-paid envelope +we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. +TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: +KEEP THIS PORTION FOR YOUR RECORDS +DETACH AND RETURN THIS PORTION ONLY +THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. +For +All +Withhold +All +For All Except +To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below. +The Board of Directors recommends you vote FOR the following: +¨ +¨ +¨ +1. +Election of Directors +Nominees +01 +Mark S. Siegel 02 Kenneth N. Berns +03 Charles O. Buckner 04 Michael W. Conlon 05 +Curtis W. Huff +06 +Terry H. Hunt 07 Tiffany J. Thom +The Board of Directors recommends you vote FOR proposals +2. and 3. +For +Against +Abstain +2 . +Approval of an advisory resolution on Patterson-UTI’s +compensation of its named executive officers. +¨ +¨ +¨ +3 . +Ratification of the selection of +PricewaterhouseCoopers LLP as the independent registered public accounting firm of Patterson-UTI for the fiscal year ending December 31, 2016. +¨ +¨ +¨ +NOTE: Such other business as may properly come before the meeting or any adjournment thereof. +Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. +Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. +Signature [PLEASE SIGN WITHIN BOX] +Date +Signature (Joint Owners) +Date +Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Annual Report, Notice & +Proxy Statement are available at www.proxyvote.com +PATTERSON-UTI ENERGY, INC. +Annual Meeting of Stockholders +June 2, 2016 10:00 AM +This proxy is solicited by the Board of Directors +The undersigned stockholder of Patterson-UTI Energy, Inc. (the “Company”) hereby appoints Mark S. Siegel, William Andrew Hendricks, Jr. and John E. +Vollmer III, and each of them, proxies to the undersigned, each with full power to act without the other and with full power of substitution, to vote all of the shares which the undersigned is entitled to vote at the annual meeting of stockholders +of the Company to be held Thursday, June 2, 2016, at 10:00 a.m., local time, at the Hyatt North Houston Hotel, 425 N. Sam Houston Parkway East, Houston, Texas 77060, and at any and all adjournments or postponements thereof, with the same force and +effect as if the undersigned were personally present. +The undersigned hereby +instructs the above-named proxies to vote the shares represented by this proxy in the manner as directed for the undersigned on the reverse side of this proxy card. If no directions are made, the proxies will vote “FOR” the nominees for +directors, “FOR” the approval of the advisory resolution on executive compensation, and “FOR” the ratification of the selection of PricewaterhouseCoopers LLP as set forth on the reverse side. If any other matter should be +presented properly, this proxy will be voted in accordance with the discretion of the above-named proxies. +Continued and to be marked, dated and signed on reverse side \ No newline at end of file diff --git a/raw/proxies/0000889900/0001193125-16-543237/proxy_rpt.txt b/raw/proxies/0000889900/0001193125-16-543237/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..e69de29bb2d1d6434b8b29ae775ad8c2e48c5391 diff --git a/raw/proxies/0000889900/0001564590-17-011238/proxy.txt b/raw/proxies/0000889900/0001564590-17-011238/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..b91dd164602379cf8b8532b336a11fa9f56a79dc --- /dev/null +++ b/raw/proxies/0000889900/0001564590-17-011238/proxy.txt @@ -0,0 +1,3022 @@ +DEF 14A +1 +pten-def14a_20170629.htm +PTEN_DEF 14A +pten-def14a_20170629.htm +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +Washington, D.C. 20549 +SCHEDULE 14A INFORMATION +Proxy Statement Pursuant to Section 14(a) of the +Securities Exchange Act of 1934 +(Amendment No. ) +Filed by the Registrant ☒ +Filed by a Party other than the Registrant ☐ +Check the appropriate box: +☐ +Preliminary Proxy Statement +☐ +Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +☒ +Definitive Proxy Statement +☐ +Definitive Additional Materials +☐ +Soliciting Material under Rule 14a-12 +PATTERSON-UTI ENERGY, INC. +(Name of registrant as specified in its charter) +(Name of person(s) filing proxy statement, if other than the registrant) +Payment of Filing Fee (Check the appropriate box): +☒ +No fee required. +☐ +Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. +(1) +Title of each class of securities to which transaction applies: +(2) +Aggregate number of securities to which transaction applies: +(3) +Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): +(4) +Proposed maximum aggregate value of transaction: +(5) +Total fee paid: +☐ +Fee paid previously with preliminary materials. +☐ +Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. +(1) +Amount Previously Paid: +(2) +Form, Schedule or Registration Statement No.: +(3) +Filing Party: +(4) +Date Filed: +10713 West Sam Houston Parkway North, Suite 800 +Houston, Texas 77064 +(281) 765-7100 +May 17, 2017 +Dear Stockholder: +We cordially invite you to attend Patterson-UTI Energy, Inc.’s annual stockholders’ meeting. The annual meeting will be held Thursday, June 29, 2017, at 10:00 a.m., Central Time, via a live webcast at www.virtualshareholdermeeting.com/PTEN. You may attend the meeting via the Internet and vote during the meeting. This format enables us to use technology to open the annual meeting to stockholders everywhere and improve our communications with them. Details regarding how to participate in the annual meeting via webcast and the business to be conducted at the annual meeting are more fully described in the accompanying Notice of Annual Meeting of Stockholders. +We are pleased to take advantage of Securities and Exchange Commission rules that allow us to furnish proxy materials to our stockholders on the Internet. We believe that posting these materials on the Internet enables us to provide stockholders with the information that they need quickly, while lowering our costs of printing and delivery and supporting sustainability. We are mailing to most of our stockholders a Notice of Internet Availability of Proxy Materials, rather than a paper copy of our proxy materials. The notice contains instructions on how to access the proxy materials, vote and obtain, if you so desire, a paper copy of the proxy materials. +Your vote is important to us. Whether or not you plan to participate in the Annual Meeting in person, we urge you to promptly vote your shares by using the Internet or telephone, or if the accompanying proxy statement was mailed to you, by completing, signing, dating and returning your proxy card as soon as possible in the enclosed postage prepaid envelope. +Thank you for your support. +Sincerely, +M ark S. S iegel +Chairman of the Board +W illiam A ndrew H endricks , J r . +President and Chief Executive Officer +2 +PATTERSON-UTI ENERGY, INC. +10713 West Sam Houston Parkway North, Suite 800 +Houston, Texas 77064 +NOTICE OF 2017 ANNUAL MEETING OF STOCKHOLDERS +To Be Held June 29, 2017 +The 2017 annual meeting of the stockholders of Patterson-UTI Energy, Inc., a Delaware corporation (“Patterson-UTI”), will be held Thursday, June 29, 2017, at 10:00 a.m., Central Time, via a live webcast at www.virtualshareholdermeeting.com/PTEN (the “Meeting”), for the following purposes: +• +to elect seven directors named in this proxy statement to the Board of Directors of Patterson-UTI to serve until the next annual meeting of the stockholders or until their respective successors are elected and qualified; +• +to approve an amendment and restatement of Patterson-UTI’s 2014 Long-Term Incentive Plan; +• +to ratify the selection of PricewaterhouseCoopers LLP as the independent registered public accounting firm of Patterson-UTI for the fiscal year ending December 31, 2017; +• +to approve, on an advisory basis, Patterson-UTI’s compensation of its named executive officers; +• +to hold an advisory vote on the frequency of future advisory votes on executive compensation; and +• +to transact such other business as may properly come before the Meeting or any adjournment or postponement thereof. +You may attend the Meeting via the Internet and vote during the Meeting. To participate in the online Meeting, you will need the 16-digit control number included on your Notice, on your proxy card or on the instructions that accompany your proxy materials. Online check-in will begin at 9:45 a.m. Central Time. Please allow ample time for the online check-in procedures. +Stockholders of record at the close of business on May 1, 2017 are entitled to notice of and to vote at the Meeting and any adjournment or postponement thereof. +Your vote is important to us. Whether or not you plan to participate in the Meeting in person, we urge you to promptly vote your shares by using the Internet or telephone, or if the accompanying proxy statement was mailed to you, by completing, signing, dating and returning your proxy card as soon as possible in the enclosed postage prepaid envelope. +By order of the Board of Directors +S ETH D. W EXLER +Senior Vice President, General Counsel and Secretary +May 17, 2017 +Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting +to Be Held on June 29, 2017 +The proxy statement and annual report to stockholders are available at www.proxyvote.com . +3 +PATTERSON-UTI ENERGY, INC. +10713 West Sam Houston Parkway North, Suite 800 +Houston, Texas 77064 +PROXY STATEMENT +ANNUAL MEETING OF STOCKHOLDERS +To Be Held June 29, 2017 +GENERAL INFORMATION ABOUT THE ANNUAL MEETING AND VOTING +The Board of Directors (the “Board” or “Board of Directors”) of Patterson-UTI Energy, Inc., a Delaware corporation (“Patterson-UTI”), has made this proxy statement and its 2016 annual report available to you on the Internet or, upon your request has delivered printed versions of these materials to you by mail beginning on or about May 18, 2017. Patterson-UTI is furnishing this proxy statement in connection with the solicitation by the Board of Directors of proxies to be voted at the 2017 annual meeting of stockholders of Patterson-UTI (the “Meeting”). The Meeting will be held Thursday, June 29, 2017, at 10:00 a.m., Central Time, via a live webcast at www.virtualshareholdermeeting.com/PTEN, or at any adjournment or postponement thereof. You may attend the Meeting via the Internet and vote during the Meeting. +The Notice of Internet Availability of Proxy Materials (the “Notice”) was mailed to each of Patterson-UTI’s stockholders (other than those who previously requested electronic delivery) entitled to vote at the Meeting on or about May 18, 2017. +Pursuant to the “notice and access” rules adopted by the Securities and Exchange Commission (the “SEC”), Patterson-UTI has elected to provide stockholders access to its proxy materials on the Internet. Accordingly, Patterson-UTI sent a Notice to all of its stockholders as of the record date. The Notice includes instructions on how to access Patterson-UTI’s proxy materials on the Internet and how to request a printed copy of these materials. In addition, by following the instructions in the Notice, stockholders may request to receive proxy materials in printed form by mail or electronically by email on an ongoing basis. +Choosing to receive your future proxy materials by email will save us the cost of printing and mailing documents to you and will support sustainability. If you choose to receive future proxy materials by email, you will receive an email next year with instructions containing a link to those materials and a link to the proxy voting site. Your election to receive proxy materials by email will remain in effect until you terminate such election. +If your shares are registered directly in your name with our transfer agent, Continental Stock Transfer & Trust Company, you are considered the “stockholder of record” with respect to those shares, and the Notice was sent directly to you. +If your shares are held in an account at a brokerage firm, bank, broker-dealer, or other similar organization, then you are the beneficial owner of shares held in “street name,” and the Notice was forwarded to you by that organization. As a beneficial owner, you have the right to direct that organization on how to vote the shares held in your account. +Whether you are a “stockholder of record” or hold your shares in “street name,” you may direct your vote without participating in the Meeting in person. +If you are a stockholder of record, you may vote by using the Internet or telephone by following the instructions in the Notice. If you request printed copies of the proxy materials by mail, you may also vote by completing, dating, signing and returning your proxy card by mail. You should sign your name exactly as it appears on the proxy card. If you are signing in a representative capacity (for example, as guardian, executor, trustee, custodian, attorney or officer of a corporation), you should indicate your name and title or capacity. +If you are the beneficial owner of shares held in street name, you may be eligible to vote your shares electronically using the Internet or telephone by following the instructions in the Notice. If you request printed copies of the proxy materials by mail, you may also vote by signing the voter instruction card provided by your brokerage firm, bank, broker-dealer, or other similar organization and returning it by mail. If you provide specific voting instructions by mail, telephone or the Internet, your shares will be voted by your brokerage firm, bank, broker-dealer, or similar organization as you have directed. +Properly submitted proxies received either by mail, Internet, telephone or in person in time to be counted for the Meeting will be voted as you have directed in your proxy, unless you revoke your proxy in the manner provided below. As to any matter for which you give no direction in your proxy, your shares will be voted as follows: +• +“FOR” the election of all of the nominees to the Board of Directors named in this proxy statement; +• +“FOR” the approval of the amendment and restatement of Patterson-UTI’s 2014 Long-Term Incentive Plan; +4 +• +“FOR” the ratification of PricewaterhouseCoopers LLP as the independent registered public accounting firm of Patterson-UTI for the fiscal year ending December 31, 2017; +• +“FOR” the approval, on an advisory basis, of Patterson-UTI’s compensation of its named executive officers; +• +“ONE YEAR”, to approve, on an advisory basis, a future advisory vote to be held every year on executive compensation; and +• +“FOR” or “AGAINST” any other proposals that may be properly submitted at the Meeting at the discretion of the persons named in the proxy. +If you are a stockholder of record, you may revoke your proxy before the proxy is voted by either: +• +submitting a new proxy with a later date, including a proxy submitted using the Internet or telephone, in time to be counted for the Meeting; +• +notifying the Secretary of Patterson-UTI in writing before the Meeting that you have revoked your proxy; or +• +participating in the Meeting and voting in person. +If your shares are held in street name, you must obtain a proxy executed in your favor from the stockholder of record (that is, your brokerage firm, bank, broker-dealer or similar organization) to be able to vote at the Meeting. +The Board of Directors is making this solicitation. We have retained Georgeson LLC, 480 Washington Blvd., 26 th Floor, Jersey City, New Jersey 07310, for a fee of approximately $8,500 and the reimbursement of out of pocket costs and expenses, to assist in the solicitation of proxies on behalf of the Board. Patterson-UTI’s officers and other employees, without compensation other than regular compensation, may also solicit proxies on behalf of the Board by mail, email, the Internet, telephone, electronic means and personal interview. Patterson-UTI will pay all costs associated with this solicitation. +SHARES OUTSTANDING AND VOTING RIGHTS +Only stockholders of record of Patterson-UTI’s common stock, $.01 par value per share (the “Common Stock”), at the close of business on May 1, 2017 are entitled to notice of and to vote at the Meeting or any adjournment or postponement thereof. At the close of business on May 1, 2017, there were 211,973,554 shares of Common Stock issued and outstanding. Holders of record of Common Stock on May 1, 2017 will be entitled to one vote per share on all matters to properly come before the Meeting. A list of stockholders entitled to notice of and to vote at the Meeting will be made available at the Meeting and during regular business hours at the offices of Patterson-UTI Energy, Inc., 10713 West Sam Houston Parkway North, Suite 800, Houston, Texas 77064 for the ten day period prior to the Meeting for examination by any stockholder for any purpose germane to the Meeting. +A quorum is necessary to transact business at the Meeting. A majority of the shares of Common Stock outstanding on May 1, 2017 will constitute a quorum. The shares held by each stockholder who participates in the Meeting in person, signs and timely returns the form of proxy or properly votes using the Internet or telephone will be counted for purposes of determining the presence of a quorum at the Meeting. +“Broker non-votes” will be considered present at the Meeting but will not be counted to determine the total number of votes cast. Broker non-votes occur when nominees, such as brokerage firms, banks, broker-dealers, or other similar organizations holding shares on behalf of the beneficial owners, are prohibited from exercising discretionary voting authority for beneficial owners who have not provided voting instructions. If you do not give instructions to your bank, brokerage firm or other agent, the bank, brokerage firm or other agent will nevertheless be entitled to vote your shares of Common Stock in its discretion on “routine matters” and may give or authorize the giving of a proxy to vote the shares of Common Stock in its discretion on such matters. The ratification of an independent registered public accounting firm is generally considered a routine matter, whereas the election of directors, the approval of an amendment and restatement of Patterson-UTI’s 2014 Long-Term Incentive Plan, the advisory approval of executive compensation and the advisory vote on the frequency of such future advisory approvals are not considered routine matters. For these reasons, please promptly vote in accordance with the instructions provided by your brokerage firm, bank, broker-dealer, or other similar organization. +PROPOSAL NO. 1 +ELECTION OF DIRECTORS +Directors are elected to serve until the next annual meeting of stockholders and until their successors are elected and qualified. Under Delaware law and Patterson-UTI’s bylaws, the affirmative vote of a plurality of shares present in person or represented by proxy at the meeting at which a quorum is present is required for the election of directors. +5 +The enclosed form of proxy provides a means for you to either: +• +vote “FOR” the election of the nominees to the Board of Directors listed below, +• +withhold authority to vote for one or more of the nominees, or +• +withhold authority to vote for all of the nominees. +The Board of Directors recommends that you vote “FOR” all of the nominees. Unless you give contrary instructions in your proxy, your proxy will be voted “FOR” the election of all of the nominees to the Board of Directors. If any nominee should become unable or unwilling to accept the nomination or election, the person acting under the proxy will vote for the election of such other person as the Board of Directors may recommend. The Board has no reason, however, to believe that any of the nominees will be unable or unwilling to serve if elected. +Because directors are elected by a plurality vote, shares as to which a stockholder withholds authority to vote and broker non-votes will not affect the outcome of the election. A broker non-vote will be counted for purposes of establishing a quorum, but will not be treated as a vote cast with respect to the election of directors. This will have the effect of reducing the absolute number of votes cast for the election of directors. +Our corporate governance guidelines require that if a director receives in an uncontested election a greater number of “withhold” votes than votes cast “for” his or her election, the Nominating and Corporate Governance Committee of the Board of Directors will undertake a prompt evaluation of the appropriateness of the director’s continued service on the Board of Directors. In performing this evaluation, the Nominating and Corporate Governance Committee will review all factors it deems relevant, including the stated reasons why votes were withheld, the director’s length of service, his or her past contributions to Patterson-UTI and the availability of other qualified candidates. The Nominating and Corporate Governance Committee will then make its recommendation to the Board. The Board of Directors will review the Nominating and Corporate Governance Committee’s recommendation and consider such further factors and information as it deems relevant. The Board of Directors will act on the Nominating and Corporate Governance Committee’s recommendation no later than 90 days following the date of the stockholders’ meeting. If the Board of Directors determines remedial action is appropriate, the director shall promptly take whatever action is requested by the Board. If the director does not promptly take the recommended remedial action or if the Board of Directors determines that immediate resignation is in the best interests of Patterson-UTI and its stockholders, the Board of Directors may accept the director’s resignation that will have been tendered as follows. Each director will, as a condition to his or her appointment or election as a director or nomination as a director, agree in writing to comply with the terms of Patterson-UTI’s majority voting policy and provide to the Board of Directors an irrevocable resignation that will be effective upon (i) the failure to receive the required vote at the next annual meeting at which such director faces re-election and (ii) the Board of Directors’ acceptance of such resignation. +Set forth below is the name, age, position and a brief description of the business experience during at least the past five years of each of the members of, and nominees for election to, Patterson-UTI’s Board of Directors, as well as specific qualifications, attributes and skills of such member or nominee that were identified by the Nominating and Corporate Governance Committee when such member was nominated to serve on the Board of Directors. Each current member of Patterson-UTI’s Board of Directors is a nominee for election to the Board of Directors, except for Kenneth N. Berns, who is not standing for re-election. The Nominating and Corporate Governance Committee has selected Mr. Hendricks as a nominee for election to the Patterson-UTI Board of Directors. There are no arrangements or understandings between any person and any of the directors pursuant to which such director was selected as a nominee for election at the Meeting. There are no family relationships among any of the directors or executive officers of Patterson-UTI. +Name +Age +Position +Mark S. Siegel +66 +Chairman of the Board and Director +William A. Hendricks, Jr. +52 +President and Chief Executive Officer (and Director nominee) +Kenneth N. Berns +57 +Executive Vice President - Chief Commercial Officer and Director (not standing for re-election) +Charles O. Buckner +72 +Director +Michael W. Conlon +70 +Director +Curtis W. Huff +59 +Director +Terry H. Hunt +69 +Director +Tiffany J. Thom +44 +Director +When considering whether directors and nominees have the experience, qualifications, attributes and skills, taken as a whole, to enable the Board of Directors to satisfy its oversight responsibilities effectively in light of Patterson-UTI’s business and structure, the Nominating and Corporate Governance Committee and the Board of Directors focused primarily on the information discussed in each of the directors’ individual biographies set forth below. +6 +With regard to Mr. Siegel, the Board of Directors consid ered his broad business and legal experience, as well as his expertise with respect to Patterson-UTI’s business. In addition, the Board considered Mr. Siegel’s demonstrated leadership for more than 20 years in the aggregate of Patterson-UTI and one of its predecessor companies, UTI Energy Corp. (“UTI”). In addition, the Board considered Mr. Siegel’s prior leadership experience in other public companies and in the oil services industry, and in numerous other businesses and industries. Mr. Siegel also brings substantial experience and expertise in mergers and acquisitions, capital structure transactions, strategic planning, and board and business management. Mr. Siegel’s broad and deep experience and expertise allows him to provide Patterson-UTI with valuable leadership in all areas of its business endeavors. +With regard to Mr. Hendricks, the Board of Directors considered his more than 30 years of combined operational and managerial experience in the oil and gas industry. In addition, the Board noted his nearly five years of service as Patterson-UTI’s President and Chief Executive Officer and nearly ten years of service in numerous executive positions with Schlumberger Limited, a global provider of oilfield services, including nearly two years as President of Schlumberger Drilling & Measurements. The Board further considered Mr. Hendricks’ significant experience with evaluating the drivers for macro trends in the oil and gas industry, as well as managing the cyclical nature of the oil and gas service business, which allows Mr. Hendricks to provide valuable input into the development and implementation of Patterson-UTI’s corporate strategy. In addition, the Board noted that Mr. Hendricks’ operational experience brings valuable knowledge to the oversight of achieving safe and efficient operations. The Board also considered Mr. Hendricks’ significant experience working in numerous worldwide locations, which allows him to provide valuable counsel regarding possible expansion into markets outside of North America. +With regard to Mr. Berns, the Board of Directors considered his more than 30 years of financial, mergers and acquisitions and transactional experience, including more than 20 years in the oil and gas industry. This experience and background provides perspective on the cyclical nature of the oil and gas industry and allows Mr. Berns to provide valuable direction with respect to Patterson-UTI’s financial affairs, corporate transactions and strategic decisions. Mr. Berns is not standing for re-election to the Board of Directors, although he will continue to serve as the Company’s Executive Vice President – Chief Commercial Officer. +With regard to Mr. Buckner, the Board of Directors considered his service as a director of oil and gas companies, as well as his experience, expertise and background with regard to accounting matters, which includes his role as the former chairman of Ernst & Young LLP’s U.S. energy practice. +With regard to Mr. Conlon, the Board of Directors considered his more than 40 years of experience handling corporate, securities and mergers and acquisition matters as a lawyer with an international law firm, as well as his service in a number of management roles throughout his tenure at the firm. The Board noted Mr. Conlon’s experience in representing numerous public companies, including Patterson-UTI, and other energy services companies, allows him to provide valuable insight on legal, governance and regulatory issues facing Patterson-UTI. +With regard to Mr. Huff, the Board of Directors considered his background as an executive of publicly traded oilfield services companies and as an owner and manager of a private investment firm focused on the oilfield service industry. The Board noted his knowledge and experience in a broad range of oilfield products and services and his current and historical experience in managing operations in both the United States and internationally. The Board also considered Mr. Huff’s expertise and background with regard to accounting and legal matters, which, among other things, provides guidance to Patterson-UTI in assessing its corporate governance structure, policies and procedures. +With regard to Mr. Hunt, the Board of Directors considered his more than 25 years of experience covering most phases of the upstream oil and natural gas industry in the United States and Canada, including the evaluation of exploration and development programs, oil and natural gas production and pipeline operations, and project development and major production facility construction. This experience and background provides Patterson-UTI with an invaluable perspective of the oil and natural gas industry and its customers. In addition, Mr. Hunt’s many years of senior executive experience leading natural gas distribution, storage and marketing companies provides insight into the management of multi-faceted businesses and the markets for natural gas in North America. +With regard to Ms. Thom, the Board of Directors considered her more than 20 years of operational and financial experience in the energy industry. The Board noted her service in various operational roles, including as a reservoir engineer for a major oil and gas exploration and production company. The Board also noted Ms. Thom’s prior executive management experience, including most recently as executive vice president and chief financial officer of a publicly traded independent oil and gas exploration and production company, which allows her to provide Patterson-UTI with valuable insight on financial and strategic matters. +Mark S. Siegel — Mr. Siegel has served as Chairman of the Board and as a director of Patterson-UTI since May 2001. Mr. Siegel served as Chairman of the Board and as a director of UTI from 1995 to May 2001, when UTI merged with and into Patterson-UTI. Mr. Siegel has been President of REMY Investors & Consultants, Incorporated (“REMY Investors”) since 1993. From 1992 to 1993, Mr. Siegel was President, Music Division, Blockbuster Entertainment Corp. From 1988 through 1992, Mr. Siegel was an Executive Vice President of Shamrock Holdings, Inc., a private investment company, and Managing Director of Shamrock Capital Advisors, Incorporated. Mr. Siegel holds a Bachelor of Arts degree from Colgate University and a J.D. from the University of California, Berkeley (Boalt Hall) School of Law. +7 +William Andrew Hendricks, Jr. — Mr. Hendricks is a nominee for election to the Patterson-UTI Board of Directors. Mr. Hendricks has served as President and Chief Executive Officer of Patterson-UTI since October 2012. From April 2012 through Septe mber 2012, he served as Chief Operating Officer of Patterson-UTI. From May 2010 through March 2012, Mr. Hendricks served as President of Schlumberger Drilling & Measurements, a division of Schlumberger. Prior to that date, Mr. Hendricks worked for Schlumbe rger in various worldwide locations and capacities since 1988, including serving in numerous executive positions since 2003. Mr. Hendricks holds a Bachelor of Science in Petroleum Engineering from Texas A&M University. +Kenneth N. Berns — Mr. Berns has served as Executive Vice President – Chief Commercial Officer of Patterson-UTI since May 2017 and as a director of Patterson-UTI since May 2001. Mr. Berns served as Senior Vice President of Patterson-UTI from April 2003 to May 2017. Mr. Berns served as a director of UTI from 1995 to May 2001. Mr. Berns has been an executive with REMY Investors since 1994. Mr. Berns holds a Bachelor’s Degree in Business Administration from San Diego State University and a Master’s Degree in Taxation from Golden Gate University. +Charles O. Buckner — Mr. Buckner has served as a director of Patterson-UTI since February 2007. Mr. Buckner, a private investor, retired from the public accounting firm of Ernst & Young LLP in 2002 after 35 years of service in a variety of client service and administrative roles, including chairmanship of Ernst & Young’s U.S. energy practice. Mr. Buckner has served as a director for KLR Energy Acquisition Corp., a blank check company formed to source, acquire and, after its initial business combination, build an oil and gas exploration and production business (“KLR Energy”), since March 2016. Mr. Buckner served as a director of Energy Partners, Ltd., a publicly held company with oil and natural gas exploration and production on the continental shelf in the Gulf of Mexico from 2009 to 2014, Global Industries, Ltd., a marine construction services company with global operations from 2010 to 2011, Gateway Energy Corporation, a publicly held oil and gas pipeline company from 2008 to 2010, Horizon Offshore, Incorporated, a marine construction services company for the offshore oil and gas industry from 2003 to 2007, and Whittier Energy Corporation, a publicly held company with domestic onshore oil and natural gas exploration and production from 2003 to 2007. Mr. Buckner is a Certified Public Accountant and holds a Bachelor of Business Administration from the University of Texas and a Masters of Business Administration from the University of Houston. +Michael W. Conlon — Mr. Conlon has served as a director of Patterson-UTI since September 2012. Mr. Conlon retired as a partner of the law firm, Norton Rose Fulbright US LLP, in January 2012 after 40 years with the firm. Mr. Conlon specialized in corporate, securities and merger and acquisition matters. Mr. Conlon was partner-in-charge of the firm’s Houston office from 2007 to 2011, was co-partner-in-charge from 2001 to 2007 and partner-in-charge of its Washington, D.C. office from 1992 to 1998. Mr. Conlon currently is an Advisory Director to Tailored Brands, Inc., a specialty retailer of men’s apparel and international supplier of corporatewear, and an NYSE listed company. Mr. Conlon holds a Bachelor of Arts degree in Economics from Catholic University of America, where he graduated magna cum laude and as a member of Phi Beta Kappa, and a Juris Doctorate from the Duke University School of Law, where he graduated as a member of the Order of the Coif. +Curtis W. Huff — Mr. Huff has served as a director of Patterson-UTI since May 2001 and served as a director of UTI from 1997 to May 2001. Mr. Huff is owner and Chairman of Freebird Partners, a private investment firm created in 2002 that is focused on oilfield service companies and technology. Mr. Huff was Managing Director of Intervale Capital, an oilfield service private equity firm that Mr. Huff co-founded in 2006, and he was a senior advisor to that firm from 2012 to February 2015. Mr. Huff also serves as Chairman of Impact Fluid Solutions LP, which provides drilling and production solutions for oil and gas operators and fluid companies. Mr. Huff served as the President and Chief Executive Officer of Grant Prideco, Inc., a provider of drill pipe and other drill stem products, from February 2001 to June 2002. From January 2000 to February 2001, Mr. Huff served as Executive Vice President, Chief Financial Officer and General Counsel of Weatherford International, Inc., one of the world’s largest international oilfield services companies. He served as Senior Vice President and General Counsel of Weatherford from May 1998 to January 2000. Mr. Huff began his professional career in 1983 with the law firm of Norton Rose Fulbright US LLP where he specialized in corporate, securities and merger and acquisition matters. Mr. Huff was made a partner in that firm in 1989 where he served until 1998 when he joined Weatherford. Mr. Huff holds a Bachelor of Arts degree and J.D. from the University of New Mexico, where he graduated as a member of the Order of the Coif and cum laude, and a Masters of Law from New York University School of Law. Mr. Huff is a Vice Chairman of the Board of Directors of the University of St. Thomas in Houston, Texas, and a member of the board of directors of the Houston Food Bank. +Terry H. Hunt — Mr. Hunt has served as a director of Patterson-UTI since April 2003 and served as a director of UTI from 1994 to May 2001. Mr. Hunt is an energy consultant and retired senior natural gas and electric utility executive. Mr. Hunt served as Senior Vice President — Strategic Planning of PPL Corporation, an international energy and utility holding company, from 1998 to 2000. Mr. Hunt served as the President and Chief Executive Officer of Penn Fuel Gas, Inc., a Pennsylvania-based natural gas and propane distribution company, from 1992 to 1999. Previously, Mr. Hunt was President of Carnegie Natural Gas and Apollo Gas Company, both Appalachian natural gas distribution companies. He also previously served in senior management positions in natural gas project and venture development, oil and natural gas exploration and development evaluation and operations and major production facilities construction with Texas Oil & Gas Corp. and Atlantic Richfield. Mr. Hunt holds a Bachelor of Engineering degree from the University of Saskatchewan, Canada and a Masters of Business Administration from Southern Methodist University. +8 +Tiffany J. Thom — Ms. Thom has served as a director of Patterson-UTI since August 2014. Ms. Thom has served as the Chief Financial Officer of KLR Energy since January 2015. Ms. Thom served as a director of Yates Petroleum Corporat ion, a privately owned, independent oil and gas exploration and production company, from October 2015 to October 2016. Ms. Thom served four years as the Chief Financial Officer of EPL Oil & Gas, Inc., and was further appointed Executive Vice President in J anuary 2014, and she served in those roles until June 2014, when EPL was sold. Ms. Thom began her career with EPL as a Senior Asset Management Engineer, a position she held until she was appointed Director of Corporate Reserves in September 2001. Ms. Thom was named EPL’s Director of Investor Relations in April 2006 and Vice President, Treasurer and Investor Relations in July 2008. In July 2009, Ms. Thom was designated as EPL’s Principal Financial Officer and, in September 2009, she was appointed Senior Vice President. Ms. Thom has more than 20 years of energy industry experience and prior to joining EPL, she was a Senior Reservoir Engineer with Exxon Production Company and ExxonMobil Company with operational roles including reservoir engineering and subsurfa ce completion engineering for numerous offshore Gulf of Mexico properties. Ms. Thom holds a B.S. in Engineering from the University of Illinois and a Masters of Business Administration in Management with a concentration in Finance from Tulane University. +Board Leadership Structure, Lead Director and Board Role in Risk Oversight +The Board evaluates its leadership structure and role in risk oversight on an ongoing basis. The decision on whether to combine or separate the Chairman and Chief Executive Officer (“CEO”) role is determined on the basis of what the Board considers to be best for Patterson-UTI at any given point in time. Patterson-UTI’s current Board leadership structure separates the role of Chairman and CEO. +The Board also believes part of an effective Board leadership structure is to have a lead independent director, the “Lead Director.” The Board has appointed Mr. Huff as the Lead Director. The independent directors meet regularly in executive sessions at which only independent directors are present, and the Lead Director chairs those sessions. The Lead Director serves as a liaison between the Chairman and the independent directors, consults with regard to Board and agenda items, and works with the chairpersons of Board committees as appropriate. +The Nominating and Corporate Governance Committee and the Board currently believe that the Board’s leadership structure, which includes the separation of the role of CEO and Chairman and the appointment of an independent Lead Director, is appropriate because it, among other things, provides for sufficient independence between the Board and management and for an independent director who provides board member leadership. The Nominating and Corporate Governance Committee and the Board have also considered the impact of Mr. Berns’ decision not to stand for re-election and Mr. Hendricks’ election to the Patterson-UTI Board of Directors and concluded that the Board’s leadership structure would remain appropriate. +The Board has adopted Corporate Governance Guidelines, which can be accessed electronically in the “Governance” section of Patterson-UTI’s website at www.patenergy.com . The Guidelines describe one of the Board’s primary responsibilities as overseeing Patterson-UTI’s processes for assessing and managing risks. The Board discharges this responsibility, in part, through regular inquiries from the Chairman of the Board and/or the Lead Director to management, periodic communications from management to the Board of Directors of particular risks and events, and discussions during Board meetings of general and specific risks to Patterson-UTI. +Meetings and Committees of the Board of Directors +The Board of Directors met 10 times during the year ended December 31, 2016. Each director attended, in person or by telephone, at least 75% of the aggregate of all meetings held by the Board and meetings of each committee on which such director served. A majority of the members of the Board of Directors are independent within the meaning of the Nasdaq Stock Market, Inc. (“Nasdaq”) listing standards. Specifically, the Board has determined that Messrs. Buckner, Conlon, Huff and Hunt and Ms. Thom are independent within the meaning of the Nasdaq listing standards. In reaching this conclusion, the Board considered that Patterson-UTI’s pressure pumping business has rented mobile proppant management systems from an oilfield service company in which Mr. Huff indirectly owns a less than five percent, indirect equity interest. The Board has determined that these transactions are not material to such company, Patterson-UTI or Mr. Huff and that such transactions do not affect his independence under applicable rules and regulations. +The Board of Directors has established four standing committees: an Executive Committee, an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee. +The Executive Committee, which currently is composed of Messrs. Siegel, Berns and Huff, has the authority, to the extent permitted by applicable law, to act for the Board in all matters arising between regular or special meetings of the Board of Directors. Mr. Berns will cease his service on the Executive Committee immediately prior to the Annual Meeting. If Mr. Hendricks is elected to the Board of Directors at the Annual Meeting, he will become a member of the Executive Committee. +The Audit Committee members are Messrs. Buckner (chairman), Huff and Hunt and Ms. Thom, each of whom is independent within the meaning of applicable rules under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and within the meaning of the Nasdaq listing standards. The Audit Committee oversees management’s conduct of Patterson-UTI’s accounting and +9 +financial reporting process, including review of the financial reports and other financial information provided by Patterson-UTI to the public and government and regulatory bodies, Patterson-UTI’s system of internal accounting, Patter son-UTI’s financial controls, and the annual independent audit of Patterson-UTI’s financial statements and internal control over financial reporting. The Audit Committee also oversees compliance with Patterson-UTI’s codes of conduct and ethics and with leg al and regulatory requirements. The Board has determined that Messrs. Buckner and Huff and Ms. Thom are “audit committee financial experts” within the meaning of applicable SEC rules. The Audit Committee selects the independent registered public accounting firm to audit Patterson-UTI’s books and records and considers and acts upon accounting matters as they arise. The Board of Directors has adopted a written charter for the Audit Committee. The Audit Committee held six meetings during the year ended Decembe r 31, 2016. Please see “Audit Committee Report” elsewhere in this proxy statement. +The Compensation Committee members are Messrs. Hunt (chairman), Buckner, Conlon and Huff, each of whom is independent as defined in the Nasdaq listing standards. Among other things, the Compensation Committee sets and administers the policies that govern the compensation of executive officers and directors of Patterson-UTI. The Board of Directors has adopted a written charter for the Compensation Committee. The Compensation Committee held 12 meetings during the year ended December 31, 2016. Please see “Compensation Discussion and Analysis” and “Compensation Committee Report” elsewhere in this proxy statement for further information about the Compensation Committee. +The Nominating and Corporate Governance Committee members are Messrs. Conlon (chairman), Buckner and Huff and Ms. Thom, each of whom is independent as defined in the Nasdaq listing standards. The purpose of the Nominating and Corporate Governance Committee is to, among other things, identify individuals qualified to become Board members, to recommend for selection by the Board director nominees for the next annual meeting of stockholders, to recommend nominees for Board committees, to review Patterson-UTI’s Code of Business Conduct and Corporate Governance Guidelines, to develop and continually make recommendations with respect to the best corporate governance principles and to oversee the annual review of the Board and management. The Board of Directors has adopted a written charter for the Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee held two meetings during the year ended December 31, 2016. +On behalf of the Board, the Nominating and Governance Committee considers director nominees recommended by Patterson-UTI’s stockholders if the recommendations are made in accordance with all legal requirements, including applicable provisions of Patterson-UTI’s restated certificate of incorporation and bylaws. In accordance with Patterson-UTI’s bylaws, in addition to any other applicable requirements, nominations of persons for election to the Board may be made at a meeting of stockholders only by or at the direction of the Board or by a stockholder who is a stockholder of record on the date of the giving of the notice provided for below and on the record date for the determination of stockholders entitled to vote at such annual meeting and gives timely notice of such nomination in writing to the Secretary of Patterson-UTI. To be timely with respect to the 2018 annual meeting of stockholders, a stockholder’s notice must be delivered to or mailed and received at Patterson-UTI’s principal executive offices not earlier than March 1, 2018 and not later than March 31, 2018; provided, however, that in the event that the annual meeting is called for a date that is not within 30 days before or after June 29, 2018, notice by the stockholder must be received not later than the close of business on the tenth day following the day on which such notice of the date of the meeting was mailed or public disclosure of the annual meeting date was made, whichever occurs first. +A stockholder’s notice to the Secretary of Patterson-UTI shall set forth: +• +as to each person whom the stockholder proposes to nominate for election or re-election as director, all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A promulgated under the Exchange Act, or any successor regulation thereto, +• +the name and record address of the stockholder proposing such nomination, +• +the class and number of shares of Patterson-UTI that are beneficially owned by the stockholder, +• +a description of all arrangements or understandings between such stockholder and each proposed nominee and any other person or persons (including their names) pursuant to which the nomination or nominations are to be made by such stockholder, and +• +a representation that such stockholder intends to appear in person or by proxy at the meeting to nominate the persons named in the notice. +Such notice must be accompanied by a written consent of each proposed nominee to being named as a nominee and to serve as a director if elected. +The Nominating and Corporate Governance Committee determines qualification criteria and procedures for the identification and recruitment of candidates for election to serve as directors of Patterson-UTI. The Nominating and Corporate Governance Committee relies on the knowledge and relationships of Patterson-UTI and its officers and directors, as well as third parties when it deems appropriate, to identify and evaluate nominees for director, including nominees recommended by stockholders. In evaluating a nominee for director, the Nominating and Corporate Governance Committee considers the nominee’s skills, expertise, industry and +10 +other knowledge, personal and professional ethics, integrity and values, sound business judgment and willingness to commit suffici ent time to the Board and be committed to representing the long-term interests of Patterson-UTI’s stockholders. Although the Nominating and Corporate Governance Committee does not have a stand-alone policy with regard to consideration of diversity in ident ifying director nominees, it considers diversity in professional background, experience, expertise (including as to financial matters) and perspective (including as to age, gender and ethnicity) with respect to the Board of Directors composition as a whole when evaluating a director nominee. +Succession Planning +The Board of Directors oversees processes and procedures to provide continuity of well-qualified executive leadership and to assess whether such leadership possesses the skill and talent to execute Patterson-UTI’s long term business strategies. The Board of Directors reviews the succession plan for the Chief Executive Officer and the senior executives tailored to reflect the Board’s standards for executive leadership and Patterson-UTI’s business strategy and vision. The succession plan addresses (i) both current and long term needs of Patterson-UTI and establishes a process for identifying and assessing potential internal candidates; (ii) periodic review and assessment of readiness: (iii) contingency planning for temporary absences of the Chief Executive Officer due to disability or other unexpected event; and (iv) long term continuity planning for succession to the Chief Executive Officer position. +Political Contributions +Patterson-UTI has a policy prohibiting the contribution of company funds to political parties or organizations or to candidates for any public office or to influence the general public, or segments thereof, with respect to public elections or referenda. Patterson-UTI participates in certain trade organizations with purposes that include enhancement of the public image of our industry, education about the industry and issues that affect the industry and industry best practices and standards. Many of the trade organizations also engage in legislative or political activity related to matters that affect the industry as a whole and not a specific company. Patterson-UTI, as one of many members in various trade associations, does not direct the legislative activities of any trade organization of which it is a member. +Sustainability +Patterson-UTI is committed to long-term sustainability with respect to the environment, our society and our long-term corporate success. A copy of Patterson-UTI’s sustainability commitment can be accessed electronically in the “Values” section of the Patterson-UTI website at www.patenergy.com and in print to any stockholder who requests it from the Secretary of Patterson-UTI. +Communication with the Board and its Independent Members +Persons may communicate with the Board, or directly with its Chairman, Mr. Siegel, by submitting such communication in writing in care of Chairman of the Board of Directors, Patterson-UTI Energy, Inc., 10713 West Sam Houston Parkway North, Suite 800, Houston, Texas 77064. Persons may communicate with the independent members of the Board by submitting such communication in writing to the Nominating and Corporate Governance Committee of the Board of Directors of Patterson-UTI Energy, Inc., 10713 West Sam Houston Parkway North, Suite 800, Houston, Texas 77064. +Although Patterson-UTI does not have a formal policy regarding attendance by members of the Board at its annual meetings of stockholders, directors are invited to attend annual meetings of Patterson-UTI stockholders. All of the directors at the time of the 2016 annual meeting of stockholders attended the meeting either in person or by telephone. +Corporate Governance Documents Available on Patterson-UTI’s Website +Copies of each of the following documents can be accessed electronically in the “Governance” section of the Patterson-UTI website at www.patenergy.com and in print to any stockholder who requests them from the Secretary of Patterson-UTI: +• +Audit Committee Charter; +• +Compensation Committee Charter; +• +Nominating and Corporate Governance Committee Charter; +• +Corporate Governance Guidelines; +• +Code of Business Conduct and Ethics for its employees, officers and directors; +• +Code of Business Conduct and Ethics for Senior Financial Executives; and +• +Global Anticorruption Policy. +11 +PROPOSAL NO. 2 +APPROVAL OF THE PATTERSON-UTI ENERGY, INC. +AMENDED AND RESTATED 2014 LONG-TERM INCENTIVE PLAN +Background +The Patterson-UTI Energy, Inc. 2014 Long-Term Incentive Plan (the “2014 Plan”) was originally approved by Patterson-UTI’s stockholders effective as of April 17, 2014. Participation in the Company’s long-term incentive plan is broad based, with 272 employees, consultants and directors participating in 2016. Subject to the approval of our stockholders, our Board of Directors has approved the amendment and restatement of the 2014 Plan (the “Amended and Restated Plan”) to increase the number of shares available for issuance under the plan to 10,049,156 shares. +Stockholder approval of the Amended and Restated Plan is also expected to allow awards made pursuant to the Amended and Restated Plan to meet the requirements of “performance-based compensation” under section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”). +If the Amended and Restated Plan is not approved by stockholders, the 2014 Plan will remain in effect, and we will continue to grant performance -based awards to our covered executives under section 162(m) of the Code pursuant to prior stockholder approval until our 2019 annual meeting of stockholders. As of May 16, 2017, there were 249,156 shares of common stock remaining available for grant under the 2014 Plan assuming target performance is achieved under outstanding performance units granted in 2017 and no payout is made under performance units granted in prior years. If the Amended and Restated Plan is not approved by the stockholders, we will not be able to continue our equity-based long term incentive program, and we may be required to increase significantly the cash component of our executive compensation program in order to remain competitive and adequately compensate our employees. +Best Practices +Independent Oversight . The Compensation Committee, composed solely of non-employee independent directors, will approve all grants made to employees under the Amended and Restated Plan; provided, however, that the Compensation Committee may delegate to the Board or any committee of the Board, to one or more executive officers or a committee of executive officers its duties under the Amended and Restated Plan pursuant to such conditions or limitations as the Compensation Committee may establish, except that such delegation will not extend to the authority to make awards to participants who are executive officers of Patterson-UTI. +No Repricing of Options or SARs . The Amended and Restated Plan prohibits repricing and replacement of stock options or stock appreciation rights (“SARs”) at lower prices unless approved by our stockholders. +No Discounted Options or SARs . Stock options and SARs may not be granted with an exercise price below the closing price of our common stock on the date of grant. +No Dividends on Options or SARs . Dividends and dividend equivalents may not be paid or accrued on stock options or SARs. +Limited Terms for Options and SARs . Stock options and SARs granted under the Amended and Restated Plan are limited to 10-year terms. +No “Evergreen” Provision . Shares authorized for issuance under the Amended and Restated Plan will not be replenished automatically. Any additional shares to be issued over and above the amount for which shareholder approval has been obtained in connection with this restatement. +No Tax Gross-Ups . Participants do not receive tax gross-ups under the Amended and Restated Plan. +Annual Limitation on Director Awards . No non-employee director may be granted during any calendar year awards having a fair value determined on the date of grant that, when added to other fees paid in cash for such year, exceeds $500,000. +No Dividends or Dividend Equivalents Paid on Unvested Awards . Any dividends or dividend equivalents will only be paid if the underlying shares vest pursuant to the terms of the award. +Recoupment . All awards granted under the Amended and Restated Plan will be subject to any clawback policy adopted by us. See the description of our Clawback policy below under “Clawback”. In addition, if Patterson-UTI is required to prepare an accounting restatement due to the material noncompliance of Patterson-UTI, as a result of misconduct, with any financial reporting requirement under the securities laws, or if the participant is one of the persons subject to automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002, the participant shall reimburse the Company the amount of any payment in settlement of an award earned or accrued during the twelve-month period following the first public issuance or filing with the SEC (whichever just occurred) of the financial document embodying such financial reporting requirement. +12 +Minimum Vesting . Subject to a 5% carve-out, all awards are subject to a minimum vesting period of one year from the date of grant, except in the case of death, disability or change of control. +Key Equity Plan Metrics +The following table shows key equity compensation metrics for the years 2014-2016 under the 2014 Plan: +Fiscal Year +Time Based +Stock Options +Granted +Time-Based +RSAs and RSUs +Granted (1) +PSUs +Granted (2) +Actual PSUs +Earned +Total +Granted (3) +Weighted +Average # of +Common Shares +Burn Rate (4) +2016 +969,900 +963,740 +185,000 +- +2,897,380 +146,178,000 +1.98 +% +2015 +831,000 +817,700 +190,600 +384,000 +3,234,400 +145,416,000 +2.22 +% +2014 +491,750 +837,400 +154,000 +288,750 +2,744,050 +144,066,000 +1.90 +% +Average Three-Year Burn Rate +(2014-2016) +2.04 +% +(1) +Certain RSAs are also performance based. +(2) +Reflects target number of PSUs granted in applicable fiscal year. +(3) +Total number of shares granted in a particular fiscal year includes all stock options, RSUs and PSUs for which the performance criteria was certified as attained and earned during such fiscal year. RSAs, RSUs and PSUs count as two shares in the Total Granted amount. +(4) +PSU shares granted in the applicable fiscal year and not yet earned are excluded from the calculation of burn rate. +Description of the Amended and Restated Plan +The primary objective of the Amended and Restated Plan is to promote stockholder value by providing appropriate incentives to certain employees, consultants, advisors, officers and directors of Patterson-UTI and its subsidiaries. With respect to awards to participants other than directors, the Amended and Restated Plan is administered by the Compensation Committee of Patterson-UTI’s Board of Directors, which comprises exclusively non-employee independent directors. With respect to awards to directors, the Amended and Restated Plan is administered by the Board of Directors. The Amended and Restated Plan provides for the granting of incentive and non-incentive stock options, as well as other awards, such as tandem and freestanding stock appreciation rights, restricted stock awards, other stock unit awards, performance shares, performance units and dividend equivalents. Certain awards under the Amended and Restated Plan may be paid in cash or Common Stock, as determined by the Compensation Committee. The Compensation Committee has exclusive authority to select the participants to whom awards may be granted, and to determine the type, size and terms of each award, subject to the limitations set forth in the Amended and Restated Plan. The Compensation Committee will also make all determinations that it decides are necessary or desirable in the interpretation and administration of the Amended and Restated Plan. In addition, the Compensation Committee may, if consistent with applicable rules, regulations and Nasdaq requirements, delegate to a committee of one or more directors or to one or more executive officers the right to grant, cancel and suspend awards to employees who are not directors or executive officers of Patterson-UTI. +As of May 16, 2017, the equity awards outstanding under all equity plans, and their respective features, were as follows (1): +Options outstanding +6,077,150 +Full-value awards outstanding (2) +3,666,750 +Weighted-average exercise price of outstanding options +$20.34 +Weighted-average remaining contractual term of outstanding options +5.25 years +Shares available for grant under the 2014 Plan +249,156 +(1) No awards have been granted under the Amended and Restated Plan, and this table excludes the 9,800,000 shares requested in this proposal. In addition, the table includes 505,551 shares of Patterson-UTI common stock that could be issued pursuant to restricted stock unit awards under the Seventy Seven Energy Inc. 2016 Omnibus Incentive Plan, which was renamed the Patterson-UTI Energy, Inc. Omnibus Incentive Plan and assumed by Patterson-UTI in connection with the April 20, 2017 closing of the merger of Patterson-UTI and Seventy Seven Energy Inc. No additional awards will be made under this plan. +(2) Includes restricted stock, restricted stock units and performance units (at target). If the Amended and Restated Plan is not approved by the stockholders, we will settle certain outstanding performance units in cash rather than common stock, as permitted by the 2014 Plan, to the extent necessary to avoid the issuance of shares in excess of the amount of available shares under the 2014 Plan. +13 +General Terms +• +The aggregate number of shares of Common Stock authorized for grant under the Amended and Restated Plan is 18. 9 million , which includes the 9.1 million shares previously authorized under the 2014 Plan. Shares that are subject to options or SARs count as one share of Common Stock against the aggregate number. Shares that are subject to awards other than options and SARS count as two shares of Common Stock against the aggregate number. The closing price of a share of Common Stock on May 16, 2017 was $21.81. +• +Generally, if an award granted under the Amended and Restated Plan or the existing equity plans of Patterson-UTI expires, is forfeited, is settled in cash or otherwise terminates without the issuance of all or a portion of the shares of Common Stock subject to the award, the shares allocable to the expired, forfeited, cash settled, or terminated portion of the award will be available for awards again under the Amended and Restated Plan. Any shares of Common Stock that again become available for grant under the Amended and Restated Plan will be added back as one share if the shares were subject to options or SARs, and as two shares if the shares were subject to awards other than options or SARs, provided that shares subject to awards originally granted under the existing equity plans will be added back as the same number of shares with respect to which the original award counted against the pool of available shares. +• +If any shares subject to an award are used to exercise options, are not issued upon the settlement of a SAR, are withheld by Patterson-UTI for income or employment taxes on exercise of an option or SAR, or purchased on the open market with the exercise price for an option, such shares will not become available for grant under the Amended and Restated Plan. +• +With respect to awards to participants other than directors, the Amended and Restated Plan is administered by the Compensation Committee of Patterson-UTI’s Board of Directors, which comprises exclusively non-employee independent directors. With respect to awards to directors, the Amended and Restated Plan is administered by the Board of Directors. +• +Directors, employees, including officers, consultants and advisors are eligible for awards under the Amended and Restated Plan. As of May 16, 2017, approximately 6,700 employees, five directors and an indeterminate number of consultants and advisors would be eligible for awards under the Amended and Restated Plan. +• +The Amended and Restated Plan provides for awards of non-qualified stock options (“NQSOs”), incentive stock options (“ISOs”), tandem and freestanding SARs, restricted stock awards, other stock unit awards, performance awards and dividend equivalents. +• +The Board of Directors, at any time, may amend the terms of the Amended and Restated Plan, subject to the stockholder approval requirements of the Nasdaq Stock Market and other rules and regulations applicable to Patterson-UTI. +• +Under the Amended and Restated Plan, no participant may be granted options or SARs during any calendar year with respect to more than 1,000,000 shares of Common Stock or restricted stock, performance awards denominated in shares and/or other stock unit awards that are denominated in shares in any calendar year with respect to more than 500,000 shares. In addition to the foregoing limits, the maximum dollar value payable to any participant in with respect to performance awards denominated in cash in respect of any calendar year is $5,000,000. Any award will only be subject to one of the applicable per person limits set forth in the previous sentence. No director may be granted during any calendar year awards having a fair value determined on the date of grant that, when added to other fees paid in cash for such year, exceeds $500,000. +• +Except in connection with certain corporate transactions involving Patterson-UTI, the terms of outstanding options or SARs may not be amended to reduce the exercise price of outstanding options or SARs and outstanding options and SARs may not be cancelled in exchange for cash, other awards or options or SARs with an exercise price that is less than the exercise price of the original options or SARs without stockholder approval. +• +Subject to the exceptions in this bullet, no award and no shares subject to other stock unit awards that have not been issued or as to which any applicable restriction, performance or deferral period has not lapsed, may be sold, assigned, transferred, pledged or otherwise encumbered, other than by will or the laws of descent and distribution or pursuant to a domestic relations order, as determined by the Compensation Committee, and such award may be exercised during the life of the participant only by the participant or the participant’s guardian or legal representative. Notwithstanding the foregoing, a participant may assign or transfer an award with the consent of the Compensation Committee (i) for charitable donations; (ii) to the participant’s spouse, children or grandchildren (including any adopted and stepchildren and grandchildren), or (iii) a trust for the benefit of one or more of the participants or the persons referred to in clause (ii); provided that certain administrative conditions are met. Notwithstanding the foregoing, no ISOs granted under the Amended and Restated Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, all ISOs granted to a participant under the Amended and Restated Plan shall be exercisable during his or her lifetime only by such participant. +14 +• +Except with respect to 5% of the shares subject to the Amended and Restated Plan, no award may ve st prior to the first anniversary of the grant date other than in the case of death, disability , retirement or change of control. +• +No awards may be granted under the Amended and Restated Plan after June 29, 2027, the tenth anniversary of the effective date of the Amended and Restated Plan. +Options +• +The vesting schedule for options is set by the Compensation Committee; however, options may not fully vest sooner than one year from the date of grant for directors and three years from the date of grant for employees, except for certain limited exceptions involving substitute awards and newly hired employees (subject to the one year minimum vesting period on awards described above). +• +The term of options is set by the Compensation Committee, but may be no longer than 10 years. +• +The exercise price for options may be paid in cash, with previously acquired shares of Common Stock, or by other means approved by the Compensation Committee. +• +All options granted under the Amended and Restated Plan are granted with an exercise price equal to or greater than the fair market value of the Common Stock at the time the option is granted. +SARs +• +SARs may be granted alone or in connection with the grant of any option. +• +The vesting schedule for SARs is set by the Compensation Committee; however, SARs may not fully vest sooner than one year from the date of grant for directors and three years from the date of grant for employees, except for certain limited exceptions involving substitute awards and newly hired employees (subject to the one year minimum vesting period on awards described above). +• +SARs granted alone may be exercised at such times and be subject to such terms and conditions as the Compensation Committee may impose. SARs that are granted in tandem with options may be exercised only on the surrender of the right to purchase an equivalent number of shares under the related options and may be exercised only with respect to the shares of Common Stock for which the related options are then exercisable. +• +The term of SARs under the Amended and Restated Plan may be no longer than 10 years. +• +A SAR entitles a participant to surrender any then exercisable portion of the SAR and, if applicable, the related option, in exchange for an amount equal to the product of (1) the excess of the fair market value of a share of Common Stock on the date of surrender over the fair market value of a share of Common Stock on the date that the SAR was granted, or, if the SAR is related to an option, the per share exercise price of the option, multiplied by (2) the number of shares of Common Stock subject to the SAR and being surrendered. Payment on exercise of a SAR shall be, in the discretion of the Compensation Committee, shares of Common Stock, cash, or a combination of shares of Common Stock and cash. +• +All SARs granted under the Amended and Restated Plan are granted with an exercise price equal to or greater than the fair market value of the Common Stock at the time the SAR is granted. +Restricted Stock Awards +• +The Compensation Committee determines the material terms of the restricted stock awards, including the price, if any, to be paid by the recipient, and the vesting schedule and conditions, which may include the attainment of specified performance objectives described below. +• +A restricted stock award that is subject solely to continued employment restrictions of employees of Patterson-UTI may not fully vest sooner than three years from the date of grant, except for certain limited exceptions involving substitute awards and newly hired employees (subject to the one year minimum vesting period on awards described above). Notwithstanding the foregoing, five percent of the shares available for grant under the Amended and Restated Plan will not be subject to this restriction. +• +Beginning on the date of grant, a participant receiving a restricted stock award will become a stockholder of Patterson-UTI with respect to all shares of Common Stock subject to the restricted stock award, which, unless the Committee determines otherwise at the time of the grant, includes the right to vote the shares and receive dividends in respect of the shares; provided, however, that any dividends with respect to any restricted stock award as to which the restrictions have not yet lapsed shall be subject to the same restrictions as such restricted stock award. +15 +Other Stock Units +• +The Compensation Committee may grant other stock unit awards under the Amended and Restated Plan, which have a value equal to an identical number of shares of Common Stock. Other stock unit awards may also be a form of payment for other awards granted under the Amended and Restated Plan and other earned cash-based incentive compensation. +• +The payment of other stock units may be in cash, shares of Common Stock, other property, or any combination of the foregoing, and may be made in a lump sum or, in accordance with procedures established by the Compensation Committee, on a deferred basis subject to the requirements of section 409A of the Code. +• +Other stock unit awards that are subject solely to continued employment restrictions of employees of Patterson-UTI may not fully vest sooner than three years from the date of grant, except for certain limited exceptions involving substitute awards and newly hired employees (subject to the one year minimum vesting period on awards described above). Notwithstanding the foregoing, five percent of the shares available for grant under the Amended and Restated Plan will not be subject to this restriction. +Dividend Equivalent Rights +• +The Compensation Committee may grant dividend equivalent rights either in connection with awards or as separate awards under the Amended and Restated Plan. Amounts payable in respect of dividend equivalent rights will not be paid until the vesting, payment, settlement or other lapse of restrictions of the award to which the dividend equivalent rights relate. +• +No award of options or SARs will have dividend equivalent rights. +• +Dividend equivalent rights on performance awards will be subject to the same performance conditions as the underlying award. +Performance Awards +• +Performance awards are payable in cash, shares of Common Stock, other property, or a combination of the foregoing, and may be paid in a lump sum, in installments, or on a deferred basis in accordance with procedures established by the Compensation Committee. +• +The Compensation Committee determines the material terms of the performance awards, including a performance period over which the performance goal of such award shall be measured. Performance awards are subject to the one year minimum vesting period on awards described above. +Deferrals +• +The Compensation Committee may require or permit a participant to defer the receipt of cash or shares pursuant to any awards under the Amended and Restated Plan. Any deferral permitted under the Amended and Restated Plan will be administered in a manner that is intended to comply with section 409A of the Code. +Effect of Certain Transactions and Change of Control +The Compensation Committee may provide in the terms of an award under the Amended and Restated Plan that, on a change of control (as defined in the Amended and Restated Plan), +• +options and SARs outstanding on the date of the change of control immediately vest; +• +options and SARs outstanding on the date of the change of control may be cancelled and terminated without payment if the fair market value of a share of Common Stock on the date of the change of control is less than the per share exercise price of the option or SAR; +• +restrictions and deferral limitations on restricted stock lapse and the restricted stock becomes free of all restrictions and limitations and becomes fully vested; +• +all performance awards shall be considered to be earned and payable and any deferral or other restriction shall lapse and the performance awards shall be immediately settled or distributed; and +• +such other additional benefits as the Compensation Committee deems appropriate shall apply. +The Compensation Committee, in its discretion, may determine that, upon a change of control, each option and SAR shall terminate within a specified period of days after notice to the participant, or that with respect to such option or SAR each participant shall receive an amount equal to the excess of the fair market value of such share immediately prior to the occurrence of the change of control over the exercise price per share of such option or SAR. The payment may be made in one or more kinds of stock or property +16 +or a combination of stock or property. Further, in the event of changes in the capital or corporate structure of Patterson-UTI due to events such as recapitalization, stock split, merger, spin-off or similar tra nsaction, that affect the shares of Common Stock, the Compensation Committee, in its sole discretion, may determine that it is equitable or appropriate to make adjustments or substitutions to the Amended and Restated Plan or outstanding options and awards, including to the number, class, kind and option or exercise price or securities subject to awards. +Performance Criteria +If the Compensation Committee determines that a restricted stock award, performance award or other stock unit award is to be a qualified performance-based award under section 162(m) (see “Federal Income Tax Consequences — Performance Based Compensation” below) of the Code, the lapsing of restrictions on the award and the distribution of cash, shares or other property pursuant to such award, shall be subject to the achievement of one or more objective performance goals established by the Compensation Committee, which shall be based on attaining specified levels in one or more areas, such as: net sales; revenue growth; pre-tax income before allocation of corporate overhead and bonus; earnings per share; operating income or net income; return on stockholders’ equity; attainment of strategic and operational initiatives; appreciation in and/or maintenance of the price of the Common Stock or other publicly-traded securities of Patterson-UTI; market share; gross profits; earnings before taxes or before interest and taxes or before interest, taxes, depreciation, depletion and amortization; comparisons with various stock market indices; improvement in or attainment of expense levels or working capital levels; cash margins; safety records; and rig utilization and rig count growth. Performance goals may be measured solely by reference to Patterson-UTI’s performance or the performance of a subsidiary, division, business segment or business unit of Patterson-UTI, or based upon the relative performance of other companies or upon comparisons of any of the indicators of performance relative to other companies, in each case as specified by the Compensation Committee in the award. The Compensation Committee also may adjust performance goals to reflect the impact of specified events, occurrences or transactions, accounting or tax law changes or other infrequent, unusual or nonrecurring events. +Federal Income Tax Consequences +The following discussion summarizes certain federal income tax consequences of the issuance and receipt of options and awards pursuant to the Amended and Restated Plan under the law as in effect on the date of this proxy statement. The rules governing the tax treatment of such options and awards are quite technical, so the following discussion of tax consequences is necessarily general in nature and is not complete. In addition, statutory provisions are subject to change, as are their interpretations, and their application may vary in individual circumstances. This summary does not purport to cover all federal employment tax or other federal tax consequences associated with the Amended and Restated Plan, nor does it address state, local, or non-U.S. tax consequences. +ISOs . In general, a participant will not recognize income upon the grant or exercise of an ISO. However, upon the exercise of an ISO, the excess of the fair market value of the shares of Common Stock received upon the exercise of the ISO over the exercise price will increase the employee’s alternative minimum taxable income, which may cause the employee to incur the alternative minimum tax. Subject to certain exceptions for death or disability, if a participant exercises an ISO more than three months after termination of employment, the exercise of the option will be taxed as the exercise of a NQSO, as described below. +The general rule is that gain or loss from the sale or exchange of shares acquired on the exercise of an ISO will be treated as capital gain or loss. However, if shares acquired upon the exercise of an ISO are disposed of within two years from the date of grant or within one year after exercise (a “disqualifying disposition”), the participant generally will recognize ordinary income in the year of disposition in an amount equal to the fair market value of the shares at the time of exercise (or, if less, the amount realized on the disposition of the shares) less the exercise price. Any further gain (or loss) realized by the participant generally will be taxed as short- or long-term capital gain (or loss) depending on the holding period. +NQSOs, SARs, Performance Award, and Other Stock Unit Award . A participant generally is not required to recognize income on the grant of a NQSO, a SAR, performance award or other stock unit award. Instead, ordinary income generally is required to be recognized on the date the NQSO or SAR is exercised, or in the case of performance awards or other stock unit awards, upon the issuance of shares and/or the payment of cash pursuant to the terms of the award. In general, the amount of ordinary income required to be recognized is, (a) in the case of a NQSO or a SAR, an amount equal to the excess, if any, of the fair market value of the shares on the exercise date over the exercise price, and (b) in the case of performance awards or other stock unit awards, the amount of cash and/or the fair market value of any shares received in respect thereof, plus the amount of taxes withheld from such amounts. +Restricted Common Stock . Unless a participant who receives an award of restricted Common Stock makes an election under section 83(b) of the Code as described below, the participant generally is not required to recognize ordinary income on the award of restricted Common Stock. Instead, on the date the shares vest (i.e., become transferable and no longer subject to forfeiture), the participant will be required to recognize ordinary income in an amount equal to the excess, if any, of the fair market value of the shares on such date over the amount, if any, paid for such shares. If a section 83(b) election has not been made, any dividends received with respect to restricted Common Stock that are subject at that time to a risk of forfeiture or restrictions on transfer generally will be treated as compensation that is taxable as ordinary income to the recipient. If a participant makes a section 83(b) election within 30 days of the date of transfer of the restricted Common Stock, the participant will recognize ordinary income on the date the shares are +17 +awarded. The amount of ordinary income required to be recognized is an amount equal to the excess, if any, of the fair market value of the shares on the date of award over the amount, if any, paid for such s hares. In such case, the participant will not be required to recognize additional ordinary income when the shares vest. However, if the shares are later forfeited, a loss can only be recognized up to the amount the participant paid, if any, for the shares. +Gain or Loss on Sale or Exchange of Shares . In general, gain or loss from the sale or exchange of shares granted or awarded under the Amended and Restated Plan will be treated as capital gain or loss, provided that the shares are held as capital assets at the time of the sale or exchange. However, if certain holding period requirements are not satisfied at the time of a sale or exchange of shares acquired upon exercise of an ISO (a “disqualifying disposition,” see above), a participant generally will be required to recognize ordinary income upon such disposition. +Deductibility by Patterson-UTI . To the extent that a participant recognizes ordinary income in the circumstances described above, Patterson-UTI or the subsidiary for which the participant performs services will be entitled to a corresponding deduction, provided that, among other things, the income meets the test of reasonableness, is an ordinary and necessary business expense, is not an “excess parachute payment” within the meaning of section 280G of the Code and is not disallowed by the $1,000,000 limitation on certain executive compensation under section 162(m) of the Code (see Performance Based Compensation and Parachute Payments below). +Performance Based Compensation . In general, under section 162(m) of the Code, remuneration paid by a public corporation to its chief executive officer or any of its other top three named executive officers other than its chief financial officer, ranked by pay, is not deductible to the extent it exceeds $1 million for any year. Taxable payments or benefits under the Amended and Restated Plan may be subject to this deduction limit. However, under section 162(m), qualifying performance-based compensation, including income from stock options and other performance-based awards that are made under stockholder approved plans and that meet certain other requirements, is exempt from the deduction limitation. The Amended and Restated Plan has been designed so that the Compensation Committee in its discretion may grant qualifying exempt performance-based awards under the Amended and Restated Plan. However, the Compensation Committee may grant awards and compensations under the Amended and Restated Plan or otherwise that is or may become non-deductible. +Parachute Payments . The acceleration of the exercisability or the vesting of an award upon the occurrence of a change in control may result in an “excess parachute payment” within the meaning of section 280G of the Code. A “parachute payment” occurs when an employee receives payments contingent upon a change in control that exceed an amount equal to three times his or her “base amount.” The term “base amount” generally means the average annual compensation paid to such employee during the five calendar years preceding the calendar year in which the change in control occurs. An “excess parachute payment” is the excess of all parachute payments made to the employee on account of a change in control over the employee’s base amount. If any amount received by an employee is characterized as an excess parachute payment, the employee is subject to a 20% excise tax on the amount of the excess, and Patterson-UTI is denied a tax deduction with respect to such excess. +Withholding . Awards under the Amended and Restated Plan may be subject to tax withholding. Where an award results in income subject to withholding, Patterson-UTI may require the participant to remit the withholding amount to Patterson-UTI or cause shares of Common Stock to be withheld or sold in order to satisfy the tax withholding obligations. +Section 409A . Section 409A of the Code generally provides that any deferred compensation arrangement must satisfy specific requirements, both in operation and in form, regarding (i) the timing of payment, (ii) the election of deferrals and (iii) restrictions on the acceleration of payment. Failure to comply with section 409A may result in the early taxation (plus interest) to the participant of deferred compensation and the imposition of a 20% tax on the participant of the deferred amounts included in the participant’s income. Patterson-UTI intends to structure awards under the Amended and Restated Plan in a manner that is designed to be exempt from or comply with section 409A. +Awards Currently Contemplated Under the Amended and Restated Plan +Any future awards granted to employees, consultants and non-employee directors under the Amended and Restated Plan are subject to the discretion of the Compensation Committee or the Board, as applicable, and, therefore, are not determinable at this time. No awards have been granted that are contingent on the approval of the Amended and Restated Plan. The Grants of Plan-Based Awards table below sets forth information with respect to prior awards granted to our named executive officers under the 2014 Plan currently in effect. In addition, following the approval of the Amended and Restated Plan, our non-employee directors are expected to receive annual grants on January 1 consistent with the equity grants described below under “Director Compensation”. Because future awards are at the discretion of the Compensation Committee and the Board, the number of shares subject to future awards could increase or decrease and the type and terms of future awards could change as well, all without the need for future stockholder approval. +The Board of Directors recommends a vote “FOR” the approval of the Amended and Restated Plan . Approval of the proposal requires the affirmative vote of the holders of a majority of the shares of Common Stock present in person or by proxy and entitled to vote at the Meeting. Unless you give contrary instructions in your proxy, your properly submitted proxy will be voted “FOR” approval of the proposal. Abstentions will be counted as shares entitled to vote on the proposal and will have the same effect +18 +as a vote “AGAINST” the proposal. A broker non-vote will be counted for purposes of establishing a quorum, but will not be treated as a share entitled to vote on the proposal. Therefore, broker non-votes will have the effect of reducing the absolut e number of shares necessary to approve the proposal. +PROPOSAL NO. 3 +RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM +The Audit Committee appointed PricewaterhouseCoopers LLP as the independent registered public accounting firm to audit the financial statements and internal control over financial reporting of Patterson-UTI for the fiscal year ending December 31, 2017, and directed that such engagement be submitted to the stockholders of Patterson-UTI for ratification. In recommending ratification by the stockholders of such engagement, the Board of Directors is acting upon the recommendation of the Audit Committee, which has satisfied itself as to PricewaterhouseCoopers LLP’s independence, professional competence and standing. Although ratification by stockholders of the engagement of PricewaterhouseCoopers LLP is not required by Delaware corporate law or Patterson-UTI’s restated certificate of incorporation or bylaws, the Audit Committee believes a decision of this nature should be made with the consideration of Patterson-UTI’s stockholders. If the stockholders fail to ratify the appointment, the Audit Committee will reconsider whether to retain PricewaterhouseCoopers LLP and may retain that firm or another without re-submitting the matter to our stockholders. Even if the appointment is ratified, the Audit Committee may, in its discretion, direct the appointment of a different independent registered public accounting firm at any time during the year if it determines that such change would be in the best interests of Patterson-UTI and its stockholders. +It is expected that one or more representatives of PricewaterhouseCoopers LLP will be available to participate in the Meeting and will be given the opportunity to make a statement if they so desire. It also is expected that the representative(s) will be available to respond to appropriate questions from the stockholders. +The Board of Directors recommends a vote “FOR” the ratification of PricewaterhouseCoopers LLP as Patterson-UTI’s independent registered public accounting firm. Ratification of the selection of PricewaterhouseCoopers LLP requires the affirmative vote of the holders of a majority of the shares of Common Stock present in person or by proxy, and entitled to vote at the Meeting. Unless you give contrary instructions in your proxy, your properly submitted proxy will be voted “FOR” such ratification. Abstentions will be counted as shares entitled to vote on the proposal and will have the same effect as a vote “AGAINST” the proposal. Because the ratification of an independent registered public accounting firm is considered a routine matter, if you do not give instructions to your brokerage firm, bank, broker-dealer, or other similar organization, the brokerage firm, bank, broker-dealer, or other similar organization will nevertheless be entitled to vote your shares in its discretion and may give or authorize the giving of a proxy to vote the shares in its discretion on this proposal. +PROPOSAL NO. 4 +ADVISORY APPROVAL OF EXECUTIVE COMPENSATION +In accordance with Section 14A of the Exchange Act, the Board of Directors is asking stockholders to approve a non-binding, advisory resolution on the compensation of Patterson-UTI’s executive officers who are named in the Summary Compensation Table appearing in this proxy statement (the “Named Executive Officers”). The compensation of the Named Executive Officers is described in the “Compensation Discussion and Analysis” and “Executive Compensation” sections of this proxy statement. +The compensation program for the Named Executive Officers is designed to attract and retain highly qualified individuals and to motivate and reward them for performance that benefits Patterson-UTI and its stockholders. The Compensation Committee and the Board of Directors believe that the policies and procedures detailed in the “Compensation Discussion and Analysis” achieve these goals by, among other things: +• +providing a mix of short-term compensation in the form of base salary and annual cash incentive bonuses and long-term compensation in the form of restricted stock, performance units, and, in some years, stock options, which strikes a balance between offering competitive compensation packages and aligning compensation with long-term growth and creating value for stockholders; +• +emphasizing variable equity and cash compensation to link realized compensation to performance; +• +using a team-based compensation model for our senior executives; +• +reviewing annual base salaries, in part, based on Patterson-UTI’s financial results and position and performance compared to similarly situated companies, while recognizing that Patterson-UTI’s executive compensation program has historically emphasized low comparative base compensation; +• +providing performance-based annual cash incentive bonuses designed to put a meaningful portion of total compensation at risk; +19 +• +awarding performance units, an d, in some years, stock options, whose value is tied to the achievement of certain performance goals and/or an increase in the price of the Common Stock; +• +awarding restricted stock, performance units, and, in some years, stock options that generally vest over periods of three years; and +• +establishing stock ownership guidelines. +The Board of Directors is asking stockholders to approve the following non-binding, advisory resolution at the Meeting: +“RESOLVED, that the stockholders of Patterson-UTI Energy, Inc. (the “Company”) approve, on an advisory basis, the compensation of the Company’s named executive officers, as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the compensation tables and other narrative discussion in the Proxy Statement for the 2017 Annual Meeting of Stockholders of the Company.” +This advisory resolution, commonly referred to as a “say-on-pay” resolution, is non-binding on the Board of Directors. Although non-binding, the Board of Directors and the Compensation Committee value the views of Patterson-UTI’s stockholders and will review and consider the voting results when (i) evaluating the effectiveness of Patterson-UTI’s compensation policies and practices and (ii) making future compensation decisions for the Named Executive Officers. +The Board of Directors recommends a vote “FOR” the approval of the advisory resolution on executive compensation . Approval of the advisory resolution requires the affirmative vote of the holders of a majority of the shares of Common Stock present in person or by proxy, and entitled to vote at the Meeting. Unless you give contrary instructions in your proxy, your properly submitted proxy will be voted “FOR” such approval. Abstentions will be counted as shares entitled to vote on the proposal and will have the same effect as a vote “AGAINST” the proposal. A broker non-vote will be counted for purposes of establishing a quorum, but will not be treated as a share entitled to vote on the proposal. This will have the effect of reducing the absolute number of shares necessary to approve the proposal. +PROPOSAL NO. 5 +ADVISORY VOTE ON FREQUENCY OF +ADVISORY VOTES ON EXECUTIVE COMPENSATION +In accordance with Section 14A of the Exchange Act, the Board of Directors is asking stockholders to vote, on an advisory basis, on whether future advisory votes on the compensation of the Named Executive Officers (“Say-on-Pay Vote”) should occur every year, every two years or every three years. Stockholders may also abstain from casting a vote on this proposal. +At our annual meeting in 2011, our stockholders overwhelmingly approved our Board of Directors’ recommendation that the Say-on-Pay Vote be held every year. Our Board of Directors adopted this policy in 2011, and we have provided our stockholders an opportunity to cast a Say-on-Pay Vote each year since then. The Dodd-Frank Wall Street Reform and Consumer Protection Act, enacted in July 2010, requires that our stockholders be given the opportunity at least once every six years to cast another advisory vote on the frequency of the Say-on-Pay Vote. +After careful review and consideration, the Board of Directors, on recommendation of the Compensation Committee, has determined that an advisory vote on the compensation of the Named Executive Officers should continue to take place every year. In making its determination, the Board considered that an annual advisory vote on executive compensation will allow Patterson-UTI’s stockholders to provide their direct and timely feedback on Patterson-UTI’s compensation objectives, policies and practices. +This advisory vote on the frequency of future advisory votes on the compensation of the Named Executive Officers is non-binding on the Board. However, the Board of Directors and the Compensation Committee value the views of Patterson-UTI’s stockholders and will take into account the outcome of the voting when determining the frequency of such a vote. Stockholders will be able to specify one of four choices for this proposal on the proxy card: one year, two years, three years or abstain. Stockholders are not being asked to approve or disapprove the Board’s recommendation, but instead to indicate their choice among the frequency options (or to abstain). +The Board of Directors recommends a vote, on an advisory basis, for an annual (every one year) frequency of future advisory votes on executive compensation . Approval of the frequency of future advisory votes on executive compensation will be decided by the affirmative vote of a plurality of shares of the Common Stock present in person or by proxy, and entitled to vote at the Meeting. A “plurality” means that the frequency option that receives the greatest number of votes cast will be considered the preference of Patterson-UTI’s stockholders. If you do not vote against or abstain from voting, your proxy will be voted “ONE YEAR” to approve, on an advisory basis, a stockholder advisory vote every year on executive compensation. Abstentions and broker non-votes will have no effect on the outcome of this vote. +20 +EXECUTIVE OFFICERS +Set forth below is the name, age and position followed by a brief description of the business experience during at least the past five years for each executive officer of Patterson-UTI who is not also a member of, or nominee for election to, the Board of Directors. +Name +Age +Position +John E. Vollmer III +61 +Executive Vice President — Corporate Development, Chief Financial Officer and Treasurer +Seth D. Wexler +45 +Senior Vice President, General Counsel and Secretary +James M. Holcomb +54 +President — Patterson-UTI Drilling Company LLC +John E. Vollmer III — Mr. Vollmer has served as Executive Vice President – Corporate Development, Chief Financial Officer and Treasurer of Patterson-UTI since May 2017. Mr. Vollmer served as Senior Vice President – Corporate Development, Chief Financial Officer and Treasurer of Patterson-UTI from November 2005 to May 2017 and Senior Vice President — Corporate Development from May 2001 to November 2005. Mr. Vollmer also served as Secretary of Patterson-UTI from November 2005 to February 2007. Mr. Vollmer served as Senior Vice President, Chief Financial Officer, Secretary and Treasurer of UTI from 1998 to May 2001. From 1992 until 1997, Mr. Vollmer served in a variety of capacities at Blockbuster Entertainment, including Senior Vice President — Finance and Chief Financial Officer of Blockbuster Entertainment’s Music Division. Mr. Vollmer holds a Bachelor of Arts in Accounting from Michigan State University. +Seth D. Wexler — Mr. Wexler has served as Senior Vice President, General Counsel and Secretary of Patterson-UTI since February 2017. Mr. Wexler served as General Counsel and Secretary of Patterson-UTI from August 2009 to February 2017. From March 1998 to August 2009, he specialized in securities law and mergers and acquisitions for the law firm of Norton Rose Fulbright US LLP, including as a partner of such law firm since January 2007. Mr. Wexler holds a Bachelor of Business Administration in Finance from the University of Texas at Austin, a Juris Doctorate from the University of Houston Law Center and a Masters of Business Administration from the University of Houston. +James M. Holcomb — Mr. Holcomb has served as President of Patterson-UTI Drilling Company LLC since January 2012. Mr. Holcomb came to Patterson-UTI in February 1998 with the acquisition of Robertson Onshore Drilling Company and since that time has served in numerous operational management roles, including as Senior Vice President of Operations of Patterson-UTI Drilling Company LLC from April 2006 to January 2012. Mr. Holcomb has over 30 years of experience in contract drilling operations. Mr. Holcomb holds a Bachelor of Science Degree in Business Management from LeTourneau Universit y. +21 +COMPENSATION DISCUSSION AND ANALYSIS +The following Compensation Discussion and Analysis (“CD&A”) sets forth the principal compensation policies and programs of Patterson-UTI for our Named Executive Officers (“NEOs”). Except as otherwise specifically described below, the discussion in this CD&A applies to all of our NEOs. +Named Executive Officer (1) +Title +William Andrew Hendricks, Jr. +Chief Executive Officer and President +John E. Vollmer III(2) +Executive Vice President – Corporate Development, Chief Financial Officer and Treasurer +Mark S. Siegel +Executive Chairman of the Board +Kenneth N. Berns +Executive Vice President – Chief Commercial Officer +James M. Holcomb +President, Patterson-UTI Drilling Company LLC +(1) +References in this CD&A to the “top four NEOs” refer only to Messrs. Hendricks, Siegel, Vollmer and Berns. Mr. Holcomb’s compensation is addressed separately. +(2) +Mr. Vollmer notified the Company in May 2017 of his decision to retire, effective after a transition period following the employment of his successor, which Patterson-UTI expects to occur before the end of the year. +Executive Summary +The compensation program at Patterson-UTI is managed by the Compensation Committee and is designed to foster operational excellence and performance on both a long and short term basis for the benefit of Patterson-UTI and its shareholders. The Compensation Committee recently engaged in a redesign of the Patterson-UTI’s executive compensation program in recognition of the fact that Patterson-UTI has significantly changed over the past ten years and that the compensation structure that had served Patterson-UTI well in prior years no longer provided the best structure for the future growth and evolution of Patterson-UTI. This redesign further reflected the significant change in the size and complexity of Patterson-UTI following the acquisition of Seventy Seven Energy Inc. (“Seventy Seven” or “SSE”) in April 2017. +The following provides a discussion of the design and objectives of Patterson-UTI’s new executive compensation program, including the Compensation Committee’s rationale for the changes made in the program and how those changes are expected to strengthen the ties between pay and performance and align the interests of the executive management with that of our shareholders. Following the discussion of the new executive compensation program, there is a discussion of the compensation program that was in place for 2016 (the “Prior Compensation Plan”) and how it related to compensation of the NEOs in 2016. +22 +New Executive Compensation Program +Outstanding Company Performance +Any discussion of executive compensation must start with a discussion of the company’s performance. Patterson-UTI’s performance during the past five years has been exceptional. During this period, Patterson-UTI’s total shareholder return as compared to its peer group of 18 leading oil services companies has been: +• +Above the 90 th percentile (2 nd best performer for the 5-year period ended December 31, 2016) +• +At the 100 th percentile (top performer for the 3-year period ended December 31, 2016) +• +At the 89 th percentile (3 rd best performer for the 1-year ended December 31, 2016) +Patterson-UTI’s leading performance during the past five years reflects the Company becoming recognized as one of the pre-eminent oil-services companies, with leadership positions both in land drilling and pressure pumping – the two services that are the key drivers for the development of shale energy in the United States. Perhaps most noteworthy, Patterson-UTI’s strong performance during this period has included periods when oil and natural gas prices were high (with high utilization of Patterson-UTI’s assets) as well as periods with low commodity prices (along with low utilization of Patterson-UTI’s assets). In fact, this strong performance occurred during a period in which the U.S. rig count reached historic lows. +Patterson-UTI’s emergence as a premier oil services company has been driven by several key strategic decisions, which have been in place for over ten years: +• A commitment to building long-term shareholder value ; +• Adherence to a clear strategic plan focused on growth in its core businesses -- land drilling and pressure pumping -- with a recognition that the quality of the equipment and personnel would differentiate Patterson-UTI; +• A willingness to commit the needed capital so Patterson-UTI could provide its customers with the drilling rigs and pressure pumping equipment required for efficient and safe operations; +• A commitment to operational excellence , with an uncompromising focus on safety; +• A commitment to a diverse, well-trained and highly motivated workforce ; +• A commitment to a strong “fortress” balance sheet that permits the Patterson-UTI Board of Directors and management to focus on building a long-term, “built-to-last” company; and +• The creation of a “nimble” management organization that is, able to react smartly, quickly and decisively both when opportunities arise or when challenges are presented. +23 +I n the Contract Drilling business , since 2006, Patterson-UTI has built 162 APEX ® rigs, which are a type of “high-spec” rig that are in demand in the U.S. onshore drilling market, as they allow our customers to efficiently drill wells with long, horizontal laterals and to drill multiple wells from a single pad location. +In the Pressure Pumping business, Patterson-UTI has grown its fleet significantly over the past ten years, from a fleet of 43,000 hydraulic fracturing horsepower at year-end 2006 to more than one million hydraulic fracturing horsepower at year-end 2016. Patterson-UTI has grown its pressure pumping fleet based on the fundamental shift to unconventional resource plays, such as shale formations, which require increased pressure pumping horsepower and increased overall frac intensity. Patterson-UTI has grown its pressure pumping fleet through strategic acquisitions and through the construction of new equipment. Since 2010, Patterson-UTI has acquired pressure pumping assets totaling more than 350,000 hydraulic fracturing horsepower, excluding the merger with Seventy Seven (the “SSE acquisition”). In addition to the increased horsepower, these acquisitions expanded Patterson-UTI’s geographic footprint beyond its original focus in the northeast United States. Coincident with the acquisitions, Patterson-UTI has also organically grown its pressure pumping fleet through the construction of nearly 700,000 new hydraulic fracturing horsepower. +Seventy Seven Acquisition – A New Period in Patterson-UTI’s Development +Patterson-UTI entered a new phase in its development with its acquisition of Seventy Seven, which was announced on December 12, 2016 and closed on April 20, 2017. The SSE acquisition is by far the most significant transaction for the Company since the merger of Patterson Energy and UTI Energy in 2001. The SSE acquisition added approximately 50% additional horsepower in pressure pumping, which increased Patterson-UTI’s hydraulic fracturing horsepower from approximately 1.0 million to approximately 1.5 million. The acquisition also increased Patterson-UTI’s high-spec rig fleet from approximately 165 to 200. Prior to the SSE acquisition, there were only two companies with leading positions in both land drilling and pressure pumping; with the SSE acquisition, Patterson-UTI emerged with substantially enhanced positions in both drilling and pressure pumping. Following the SSE acquisition, we believe we are among the top two land drillers and among the top five pressure pumping companies in the United States. +New Executive Compensation Program +While Patterson-UTI has changed remarkably since 2001, the compensation program for the top four NEOs had remained relatively unchanged since the Patterson-UTI merger in 2001. As noted above, the Compensation Committee engaged in a complete review of Patterson-UTI’s executive compensation program earlier this year with the objective to create a program that would be designed for Patterson-UTI as it is today and that would be the foundation for executive compensation as Patterson-UTI continues to grow and mature. +24 +While we believe th e Prior Compensation Plan served the Company well for many years through a period of significant change and success , the Compensation Committee determined , with the assistance of its independent, outside compensation consultant, Pearl Meyer & Partners (“Pe arl Meyer”), that the Prior Compensation Plan no longer fit Patterson-UTI, given our growth and development , had elements that were no longer considered “best practices , ” and in some cases was not delivering the desired compensation results. +Several key considerations drove the Compensation Committee’s redesign effort: +1. +Best Practices respecting Compensation. +2. +Alignment between Shareholders and Management. +3. +Alignment between Compensation and Corporate Objectives. +Highlights of the Executive Compensation Changes (as explained in detail below): +1. +Eliminating the Team-Based Matrix – The Prior Compensation Plan was based on a “team-based” matrix that allocated incentive compensation among our top four NEOs using a sharing formula. During the last several years, the roles and responsibilities within this team evolved, but the basic matrix structure was maintained. For 2017 and going forward, the Compensation Committee determined that it would eliminate the matrix and set the compensation for each executive independently. The Compensation Committee believes that this change is consistent with best practices, alignment between shareholders and the management and alignment between the compensation and corporate objectives. +2. +Adopting a New Annual Cash Bonus Plan – The new bonus plan sets a target opportunity for each executive’s annual cash bonus as a percent of salary, with payout contingent upon meeting Patterson-UTI’s financial goals and selected key performance indicators (“KPIs”). For 2017, 70% of the annual cash bonus will be based on reaching the budgeted annual earnings before interest, taxes, depreciation, amortization and impairment expense (“Adjusted EBITDA”) for the year, and the remaining 30% will be based on three KPIs. These KPIs are: +• +Safety : maintenance of Patterson-UTI’s leadership position in operating and safety standards; +• +Merger integration : the successful integration of Seventy Seven; and +• +Fleet upgrade : the successful and cost-effective upgrade of Patterson-UTI’s rig fleet. +The Compensation Committee believes that the new annual cash bonus program, which relies upon multiple, pre-established objectives for determining bonus compensation and is similar to the approach widely used by Patterson-UTI’s peers, is considered by compensation experts to be consistent with best practices, and incentivizes achievement of the Company’s short-term goals tied to long-term growth and success of the Company. +A key change of this new plan is that annual cash bonus payments fall within a defined range established as a percent of target opportunity. Under the Prior Compensation Plan, each of the top four NEOs received a set percentage of Adjusted EBITDA as an annual cash bonus. Although this structure was believed to be appropriate while Patterson-UTI was a smaller company and tied bonus compensation to cash generation, the annual cash bonus payments were subject to substantial fluctuation that at various times could result in misalignment between shareholders and management. The maximum cash bonus opportunity for 2017 is limited to two times the executive’s target cash opportunity. +In designing the plan, the Compensation Committee determined that annual cash bonus compensation should be focused on several, annual performance objectives and structured so that if Patterson-UTI achieves its budgeted Adjusted EBITDA, is successful in achieving its three KPIs, and continues to perform in the upper quartile relative to its peers, CEO total cash compensation will also be at a comparable percentile of the peer group. +The overall annual cash bonus plan for 2017 remains, as in prior years, subject to the requirement that at least a threshold level of 60% of the budgeted or target Adjusted EBITDA is achieved for the year. Once that threshold requirement is met, the 70% of the annual cash bonus opportunity attributable to Adjusted EBITDA will be determined based on a measurement of actual Adjusted EBITDA relative to budgeted Adjusted EBITDA, with a 50% payout for threshold achievement of 80% of budget, 100% payout for target achievement of 100% of budget and 200% maximum payout for achievement of 120% of budget or more (and linear interpolation for levels of achievement between these points). The 30% of annual cash bonus opportunity attributable to KPIs will generally be determined independently of the Adjusted EBITDA component, with achievement judged in the discretion of the Compensation Committee. If Adjusted EBITDA is achieved at a level in excess of budgeted Adjusted EBITDA, however, the maximum amount payable pursuant to the KPI portion of the bonus will also be increased, subject to the overall limitation under the 2017 annual cash bonus plan of two times target cash bonus opportunity. +25 +The threshold, target and maximum annual cash bonuses for the NEOs for 2017 are set forth below: +Name +Threshold (1) +Target +Maximum +William Andrew Hendricks, Jr. +$ +437,500 +$ +1,250,000 +$ +2,500,000 +John E. Vollmer III (2) +$ +— +$ +— +$ +— +Mark S. Siegel +$ +350,000 +$ +1,000,000 +$ +2,000,000 +Kenneth N. Berns +$ +196,875 +$ +562,500 +$ +1,125,000 +James M. Holcomb (3) +$ +113,925 +$ +325,500 +$ +651,000 +(1) +Threshold is calculated based on the achievement of 80% of the Adjusted EBITDA component of the annual cash bonus opportunity, representing a 50% of target payout, with 0% achievement of the KPI component of the annual cash bonus opportunity. The actual bonus payout could be lower than this threshold amount if actual Adjusted EBITDA does not achieve the 80% level necessary for a 50% payout of the Adjusted EBITDA component of the 2017 annual bonus plan, but achievement of the KPI component of the annual cash bonus opportunity results in payment of that component of the bonus. +(2) +John E. Vollmer III notified the Company in May 2017 of his decision to retire, effective after a transition period following the employment of his successor, which Patterson-UTI expects to occur before the end of the year. Patterson-UTI currently expects to enter into a definitive retirement arrangement with Mr. Vollmer. +(3) +The budgeted or targeted Adjusted EBITDA for Mr. Holcomb is with respect to Patterson-UTI’s contract drilling business. +3. +Changing Executive Salaries – With the changed nature of Patterson-UTI and the modifications being made to the annual cash bonus plan, the Compensation Committee determined that the prior policy of targeting below market salaries would no longer be appropriate or competitive. Accordingly, the Compensation Committee increased the NEO salaries to be more in line with competitive practice. +The following table reflects the salaries for the NEOs in 2016 and the salary increases that became effective in January 2017 for Mr. Holcomb and May 2017 for the other NEOs: +Annual Salaries +Name +2016 +May 2017 +William Andrew Hendricks, Jr. +$ +600,000 +$ +1,000,000 +John E. Vollmer III +$ +350,000 +$ +450,000 +Mark S. Siegel +$ +350,000 +$ +800,000 +Kenneth N. Berns +$ +265,000 +$ +450,000 +James M. Holcomb +$ +325,000 +$ +465,000 +Prior to 2017, the salaries of Messrs. Siegel, Berns and Vollmer had not changed in more than 13, 10, and 9 years, respectively. +4. +Changing the Long-Term Incentive Program (“LTI program”) +a. +Using Restricted Stock and Performance Units, but Not Using Stock Options – In the past, the Compensation Committee had granted equity-based compensation to the top four NEOs in the form of restricted stock, stock options and performance units. The Compensation Committee has determined that grants under the LTI program for 2017 will include only restricted stock and performance units, with the mix based on individual assessment of each NEO’s role, responsibility and future expectations. The determination not to award stock options was based on several factors, including: (i) a much higher rate of share usage and shareholder dilution with stock options, and (ii) a decline during the last several years in the prevalence of stock options among our peers. Recognizing that most peer companies had made the same determination not to award stock options, the Compensation Committee believes the new approach is consistent with best practices, aligns shareholders and management, and better aligns the compensation and corporate objectives. +b. +Performance Units Without An Absolute Return Measure – Performance units awarded in 2013 and 2014, whose performance periods ended in March 2016 and 2017, respectively, produced no grant of common stock to our top four NEOs, despite total shareholder return well above the 75 th percentile. These awards required positive absolute performance as of the last day of the three-year performance period. Even a small miss of absolute performance could negate 100 th percentile relative performance. +The Compensation Committee believes that the absolute performance standard is not always consistent with alignment of compensation with performance and has negative retention impacts during cyclical or market downturns that have nothing to do management performance. The Compensation Committee believes that it is +26 +during such periods of downturn that relative performance is mos t important to both Patterson-UTI and its shareholders. The lack of alignment is easily seen in Patterson-UTI ’s outperformance during the worldwide downturn in the oil industry from November 2014 through March 2016. During that period, management demonstrated superior performance benefiting Patterson-UTI and its shareholders, and the failure of the performance units to provide any payout, despite superior relative performance, was inconsistent with the goals of the LTI program. Accordingly, in orde r to remain competitive and further the goals of incentive compensation, the Compensation Committee awarded performance units in 2017 that pay out based on relative performance, and do not have an absolute performance requirement. The impact of absolute pe rformance is still captured in the fact that awards are made in the form of shares, the value of which moves with our absolute performance. +The following table reflects the 2017 long-term incentive, equity-based awards that were granted in May 2017 to the top four NEOs (Mr. Holcomb’s annual long-term incentive, equity-based awards are expected to be made in June 2017): +2017 Long-Term Incentive Equity-Based Awards +Name +Shares of Restricted +Stock +Performance Units – Target Amount +William Andrew Hendricks, Jr. +194,535 +83,372 +John E. Vollmer III +84,298 +— +Mark S. Siegel +155,628 +66,698 +Kenneth N. Berns +84,298 +36,128 +5. +Summary Conclusion +The Compensation Committee’s objective has always been to tie pay for performance and to structure a total compensation arrangement for its CEO that would provide compensation at the top quartile for top quartile performance. In so doing, the Compensation Committee sought to provide incentives that were both understandable and that would deliver the desired results. This remains the fundamental objective and guideline for the Patterson-UTI’s executive compensation program. +27 +As the Compe nsation Committee reviewed the Prior Compensation Plan , it determined that the CEO’s compensation, as reported in the proxy statement , for the past four years had been between the 5 0 t h and 60 th percentiles within Patterson-UTI’s peer group, while relative stock holder return performance had been between 89 th a nd 100 th percentile, indicating a fundamental disconnect between pay and performance. Furthermore, with lack of payment on the performance units for the past two years, actual compensation (realizable value) was below the 50 th percentile for the CEO for 20 15 and 2016. The Compensation Committee also believes t hat the relatively low relative compensation for our executive management team subjected the Company to the significant risk of losing key executive talent. +The Compensation Committee believes that the new executive compensation program will provide a stronger tie between pay and performance and reduce the risk of similar disconnects in the future. The new executive compensation program is also expected to allow Patterson-UTI to be more competitive in recruiting and retaining key executives. Finally, the Compensation Committee believes that the new executive compensation program reflects the best policy for this stage in the evolution of Patterson-UTI and is in the best interest of Patterson-UTI’s shareholders. +6. +Payments For Management For the Transformative SSE Acquisition +The Compensation Committee believes that the recent SSE acquisition is a transformative transaction for Patterson-UTI and one that will set the stage for the future of the Company. The transaction was identified and negotiated at a time when our industry was in great stress and reflected a focused effort by our executive management to execute on our strategy to grow our core businesses in a disciplined manner for the benefit of our shareholders. The transaction was structured in a manner that combined discipline in price and operational fit, while maintaining Patterson-UTI’s strong balance sheet for future internal growth and other opportunities. +The Compensation Committee believes that executive management was primarily responsible for: +• +Identifying the SSE acquisition opportunity; +• +Persuading the key Seventy Seven constituents to consider a transaction with Patterson-UTI; +• +Achieving commercially acceptable transaction terms for the SSE acquisition; +• +Conducting reasonable due diligence and evaluating the risks and benefits of the SSE acquisition; +• +Negotiating and documenting the transaction with appropriate merger and shareholder agreements; +• +Securing a $150 million bridge financing agreement; +• +Securing commitment increases under Patterson-UTI’s revolving credit facility from $500 million to $632 million; +28 +• +Executing an equity financing for net proceeds of approximate $472 million on an overnight b asis, at very attractive pricing and a small discount from the closing price of Patterson-UTI Common Stock; and +• +Closing the SSE acquisition in a reasonable time period. +The Compensation Committee believes that special compensation was warranted for the executive management of Patterson-UTI in recognition of these outstanding accomplishments, and in recognition that: +• +the SSE acquisition added approximately 50% additional horsepower in pressure pumping, which increased Patterson-UTI’s hydraulic fracturing horsepower from approximately 1.0 million to approximately 1.5 million; +• +the SSE acquisition increased Patterson-UTI’s high-spec rig fleet from approximately 165 to 200; and +• +following the SSE acquisition, we believe we are among the top two land drillers and among the top five pressure pumping companies in the United States. +Accordingly, with respect to the NEOs, the Compensation Committee established a one-time pool of $7.0 million in cash and $7.0 million in Patterson-UTI restricted stock. The cash portion was paid in May 2017, and the restricted stock will vest in May 2018. The total pool value to the NEOs of $14.0 million was less than 1.0% of the value of the transaction and, based on the advice of its independent, outside compensation consultant, Pearl Meyer, was consistent and within the range of similar special merger and acquisition bonuses paid to executive management of other companies. The following table sets forth the awards that were made to the NEOs in May 2017 in respect of the SSE acquisition: +Merger-Related Awards +Name +Cash +Shares of Restricted +Stock +William Andrew Hendricks, Jr. +$ +2,250,000 +100,223 +John E. Vollmer III +$ +850,000 +37,862 +Mark S. Siegel +$ +2,550,000 +113,586 +Kenneth N. Berns +$ +850,000 +37,862 +James M. Holcomb +$ +500,000 +22,272 +Discussion of 2016 Executive Compensation +Patterson-UTI Total Shareholder Return (Periods Ended March 31, 2017) has consistently demonstrated superb relative performance as compared to our peer group over the past five years: +• +1-year total shareholder return: 84 th percentile +• +2-year total shareholder return: 100 th percentile +• +3-year total shareholder return: 100 th percentile +• +5-year total shareholder return: 100 th percentile +These returns have been delivered by Patterson-UTI through both good and down markets and during one of the most challenging times that our industry has experienced in the past 30 years. The returns are reflective of our approach to building our business for the long-term and recognizing the cyclical nature of our industry. Our compensation structure for 2016 mirrored this approach and followed the process of providing a compensation package for the executive management team that reflected full cycle returns through a focus on variable and long-term compensation. +29 +Pay for Performance +Pay for performance has and will continue to be a fundamental component of our compensation program. We believe that a key indicator of a well-functioning compensation program is alignment between total realizable compensation and company performance — pay-for-performance. As indicated in the following chart, Patterson-UTI’s record is outstanding when based on a pay-for-performance standard. +Under the Prior Compensation Plan, approximately 75% of targeted compensation for our top four NEOs was provided in the form of variable cash or equity-based compensation, with at least 60% of targeted compensation having some dependence on long-term results. This split was designed to align executive compensation with our stock performance. With the new executive compensation program, the Compensation Committee expects to continue to focus a large portion of targeted compensation on variable cash or equity-based compensation, but with potential variations in the percentages due to the decision to adjust base salaries to closer to market rates. +Our annual cash incentive bonus compensation in 2016 linked compensation to performance through a two tiered approach: +• +First, the Compensation Committee established a total “potential” compensation pool that has been tied to Patterson-UTI’s Adjusted EBITDA. +• +Second, actual cash payouts from the pool have been based on performance and results, giving consideration to criteria other than Adjusted EBITDA such as team performance in executing on strategic goals, maintaining excellent safety performance, reducing costs of rig manufacturing, improving market share, comparing margin and revenue per day results on an absolute basis and against direct competitors, executing supply chain initiatives in a contracting industry, growth in returns on equity and capital, management of capital expenditures in a down part of the industry cycle, expanding into international markets and achieving operational and financial successes. +Although the Prior Compensation Plan used Adjusted EBITDA to determine the maximum incentive cash compensation pool, Adjusted EBITDA was not the sole factor or metric used. Under the new executive compensation program, new specific non-financial metrics have been added to strengthen the tie between pay and performance. +30 +SUBSTANTIALLY REDUCED COMPENSATI ON IN LIGHT OF INDUSTRY CONDITIONS +As noted above, the Prior Compensation Plan had been designed as a multi-year compensation plan that would adjust compensation to market conditions and provide compensation based on full cycle returns. +The Prior Compensation Plan sought to achieve its objectives in the following manner: +• +Very modest fixed salaries were maintained for the top four NEOs (less than 25% of annual compensation). +• +Annual cash incentives were tied to Adjusted EBITDA, with additional financial and operational measurements that were aligned with Patterson-UTI’s business strategy and operational plans. +• +Performance Units that emphasized absolute shareholder return as well as relative shareholder return. +• +Substantial portion of total compensation (60% or more) was linked to stock performance. +As a result of these policies and other downward adjustments (discussed below), total reported compensation for the top four NEOs declined by more than 28% from 2014 to 2015 and more than 15% from 2015 to 2016. These declines followed the declines in Patterson-UTI’s Adjusted EBITDA, notwithstanding Patterson-UTI’s top tier performance against its peers. +SHAREHOLDER ALIGNMENT THROUGH EMPHASIS ON EQUITY-BASED COMPENSATION +Our compensation structure is designed to align the financial rewards of our executive management with those of our shareholders. In 2016 and in prior years we typically targeted 60% or more of total compensation to be in the form of equity-based awards, with time-based vesting, performance-based vesting, or both. +We believe our emphasis on equity-based awards has had the desired effect of aligning executive compensation with the returns realized by our stockholders. In periods where our total shareholder return has not been in the higher percentiles or during periods of industry contraction such as we have recently experienced, the realizable equity compensation of our NEOs may be significantly less than the grant value reported in our proxy statement. +LISTENING TO OUR SHAREHOLDERS +We believe that it is important for us to engage with our shareholders on executive compensation issues. Accordingly, we have discussed with and sought input from our large stockholders on key executive compensation issues. Based on stockholder feedback, advice of our independent compensation consultant, published best practices, guidelines on compensation policies, and an assessment of our current size and scope, the Compensation Committee modified our 2016 peer group. The peer group is used for executive compensation benchmarking and determining our relative performance results in the context of our long-term incentive program. The modified peer group was used in determining equity-based awards that were granted in 2016, although outstanding equity-based awards that were granted prior to 2016 will continue to be evaluated using the peer group in effect at the time those awards were granted. In May 2017, following deliberations and consultation with our compensation advisor, the Compensation Committee determined to update our peer group to account for the SSE acquisition and changing market landscape in which Patterson-UTI operates. See “Process for Determination of Executive Compensation — Peer Group” and “Consideration of ‘Say on Pay’ Voting Results and Engagement with Stockholders.” +We also took into account feedback we had received in designing the new executive compensation program, including the elimination of bonus compensation being calculated as a percentage of Adjusted EBITDA and adding new specific performance matrices for bonus compensation. +ADHERENCE TO GOOD GOVERNANCE AND COMPENSATION POLICIES +We are mindful of the positive impact that strong corporate governance can have on maintaining an executive compensation program that is aligned with the interest of Patterson-UTI’s stockholders. In designing the new executive compensation program, we sought to incorporate best practices in areas such as the design of how bonus compensation is determined, the use of multiple financial and non-financial metrics for bonus compensation and the use of individual benchmarks for executive compensation against peers for base and bonus compensation. +31 +Accordingly, Patterson-UTI has adopted the following practices that apply to the new executive compensation program and were applicable to the Prior Compensation Plan: +What We Do +What We Don’t Do +• 50% or more of compensation in the form of long-term incentives +• Variable compensation based upon absolute performance and performance versus peers +• Claw-back provisions that apply to our all of our executive officers +• Share ownership requirements for our executive officers and directors +• Anti-pledging policy for our executive officers and directors +• Anti-hedging policy for our executive officers and directors +• Use of advice from independent compensation consultant and feedback from stockholders +• No re-pricing of options, +• No single trigger change-of-control severance arrangements, +• No new agreements with tax gross-ups and none entered into in more than five years +• No perquisites to top four NEOs that are not widely available to our other employees +RECOGNITION OF CHANGES IN THE MANAGEMENT TEAM AND RELATED COMPENSATION +Under the Prior Compensation Plan, executive compensation for the top four NEOs was based on a “team-based” matrix previously discussed above. +Under the Prior Compensation Plan, 2016 compensation for the top four NEOs was based on a total compensation package for the team in aggregate based on peer data, and then allocated by the Compensation Committee among the team members based on the recommendations of Mr. Siegel and Mr. Hendricks. +In anticipation of a planned transition in 2015 of Mr. Siegel to a less active day-to-day executive management role, the Compensation Committee reviewed and approved a request by Mr. Siegel to lower his cash incentive and equity-based compensation allocation by 40% in 2015 and by an additional 40% in 2016, although as discussed below, the Compensation Committee determined that Mr. Siegel’s cash incentive payment for 2016 should not reflect an additional reduction from 2015 because his activity and contribution to Patterson-UTI in 2016 were far greater than originally planned. With the reduction in Mr. Siegel’s compensation there was also a commensurate reduction in the size of the overall allocated cash incentive and equity-based compensation pools and related potential compensation of the NEOs (i.e., the reduction in Mr. Siegel’s compensation was not re-allocated within the team). +In 2016, as Patterson-UTI actively pursued a growth strategy in light of market opportunities, Patterson-UTI utilized more of Mr. Siegel’s time and expertise to implement its strategy. This included Mr. Siegel’s efforts in identifying, negotiating and finalizing the SSE acquisition and the financing for the SSE acquisition. With the closing of the SSE acquisition, it is anticipated that Patterson-UTI will be pursuing further opportunities that would continue to utilize a large portion of Mr. Siegel’s time. Accordingly, under the new executive compensation program, Mr. Siegel’s compensation package reflects the services to be provided. +Going forward, the Compensation Committee determined that it would set the compensation for each executive separately based on market compensation trends and the role and expected contribution by the executive. The Compensation Committee believes that moving away from a team-based compensation structure to a more individual-based structure is more reflective of the needs of the Company as it has developed and is consistent with best practices. +LONG-TERM GOALS SUPPORTED BY OUR EXECUTIVE COMPENSATION PROGRAM +The Compensation Committee believes that the compensation program, as recently modified, effectively rewards our executive management for adhering to Patterson-UTI’s long-term goals, which include: +• +Providing quality services for our customers in a safe and efficient manner, +• +Generating strong financial performance and returns for our stockholders, +• +Attracting and retaining highly qualified individuals, with a strong emphasis on teams working together to capitalize on opportunities and solve problems, and +• +Being a model corporate citizen in the communities in which we work. +32 +CONCLUSION +In summary, as is evidenced by our results over the past ten years, the Prior Compensation Plan performed its objectives well and aligned the interests of our executives with our shareholders. The Prior Compensation Plan also succeeded in creating a strong relationship between pay and performance, with the exception as described earlier in regard to the Prior Compensation Plan delivering less actual compensation to our NEOs than was projected or desired, given extraordinary performance. +The Compensation Committee believes that the new executive compensation program will provide a stronger tie between pay and performance and reduce the risk of similar disconnects in the future. The new executive compensation program is also expected to allow Patterson-UTI to be more competitive in recruiting and retaining key executives. Finally, the Compensation Committee believes that the new executive compensation program reflects the best policy for this stage in the evolution of Patterson-UTI and is in the best interest of Patterson-UTI’s shareholders. +Patterson-UTI’s Transformation +• Grew to a position of national industry leadership, +• Transformed its fleet to one of the most modern fleets of high-technology land drilling rigs, +• Became a major competitor in the U.S. pressure pumping market with a current fleet of over 1.5 million horsepower, +• Became an industry leader in safety, +• Diversified its customer and geographical base as well as regional capabilities, +• Became a technical leader in rig design and a leader in U.S. shale drilling, +• Increased revenue from $582 million in 2000 to $916 million in 2016, +• Organically grew shareholders’ equity from $481 million in 2000 to approximately $2.25 billion in 2016, +• Returned more than $1.4 billion back to our stockholders in the form of share repurchases and dividends, and +• Completed the SSE acquisition, which added upon closing, among other things, 40 AC drilling rigs and approximately 500,000 fracturing horsepower to Patterson-UTI’s existing equipment fleet. +Our Business +Patterson-UTI is an oilfield services company that primarily owns and operates in the United States one of the largest fleets of land-based drilling rigs and a large fleet of pressure pumping equipment. Our contract drilling business operates in the continental United States and western Canada, and our pressure pumping and oilfield rental tools businesses operate primarily in Texas and the Mid-Continent and Appalachian regions. We are pursuing contract drilling opportunities outside of North America. We also manufacture and sell pipe handling components and related technology to drilling contractors in North America and other select markets. In addition, we own and invest, as a non-operating working interest owner, in oil and natural gas assets that are primarily located in Texas and New Mexico. Our industry is subject to wide swings in activity based on oil and natural gas prices, demand for oil and natural gas and general economic activity. +The North American oil and natural gas industry has experienced a significant transformation in recent years due to technological advances in the horizontal drilling and completion of oil and natural gas wells. Today, more than 80% of U.S. land drilling is focused on these types of wells, which typically require higher specification rigs and large amounts of pressure pumping horsepower. +Beginning in mid-2014 after a period of significant growth, the oil and gas industry entered into a downturn the extent and severity of which had not been seen since the mid-1980s. In a period of a year and a half, crude oil prices fell more than 70% from their recent highs with drilling and completion activity levels following suit. Drilling and completion activity in the United States declined significantly through the first part of 2016. With the fall in commodity prices, oil and gas companies saw their cash flows precipitously decline and pricing across the industry for drilling and other services followed suit, with many companies pricing their services at marginal cash costs in order to maintain business. The fall in drilling and completion activity affected all sectors of the industry, with domestic drillers and pressure pumping companies like Patterson-UTI being some of the hardest hit. These conditions continued into 2016, with the closing price of crude oil reaching a twelve-year low in February 2016. +33 +As the market began its decline in 2014, our executive management immediately began taking aggressive action to right size our operations and to protect stockholder value by reducing headcount and unnecessary costs and cutting and deferring capital ex penditures where possible. These actions included significantly lowering our cost structure through the downturn by the following: +• +Reduced Employee Headcount. Employee headcount was reduced nearly 74% from, approximately 9,100 at October 31, 2014 to approximately 2,400 at May 31, 2016. +• +Costs Cut to Match Activity Levels. Management aggressively cut costs in our drilling and pressure pumping businesses to be in line with a significantly reduced level of business activity. +• +Savings from Supply Chain. Supply chain management achieved over $40 million in drilling and pressure pumping savings in 2016. +• +Reduced Capital Expenditures. Capital expenditures were cut nearly 84% in 2016, from $744 million in 2015 to $120 million in 2016. +Oil and natural gas prices have recovered substantially from the lows experienced in the first quarter of 2016. During the fourth quarter of 2016, the Organization of Petroleum Producing Countries (“OPEC”) and certain non-OPEC countries, including Russia, announced an agreement to cut oil production. The announcement resulted in an increase in oil prices. In response to improved prices, U.S. rig counts have been increasing, and Patterson-UTI’s rig count has been steadily improving on a monthly basis since May 2016. +In mid-2016, our executive management continued to manage through the downturn, began taking actions to prepare for a recovery and continued to review strategic opportunities. These actions included the following: +• +Employee Hiring. Employee head count was increased approximately 37%, from approximately 2,400 at May 31, 2016 to approximately 3,300 at December 31, 2016. +• +Equipment Upgrades . Upgraded equipment on a strategic basis by adding high pressure circulating systems and walking systems to select drilling rigs. +• +Supply Chain Achievements. Renegotiated proppant contracts to ensure supply and favorable pricing for increasing activity, and designed and deployed an improved logistics solution for product movement to drive efficiency and savings. +• +Strategic Merger Agreement. Entered into a merger agreement in December 2016 with a provider of contract drilling, pressure pumping and oilfield rental services, which upon closing added, among other things, 40 AC drilling rigs and approximately 500,000 fracturing horsepower to Patterson-UTI’s existing equipment fleet. +Although Patterson-UTI’s financial results, like others in our industry, have been materially negatively impacted by adverse market conditions, Patterson-UTI was able to generate strong cash flow from operating activities in 2016, maintain, and in some cases increase, drilling market share, preserve cash and strengthen its balance sheet to weather the downturn and prepare for a recovery, and enter into a significant, strategic merger agreement. As of March 31, 2017, our contract drilling backlog for future revenues under term contracts, which we define as contracts with a fixed term of six months or more, was approximately $385 million (excluding backlog acquired through the SSE acquisition). Our liquidity as of March 31, 2017 included approximately $436 million in working capital, including $467 million of cash and cash equivalents, and $500 million available under our revolving credit facility. In connection with the consummation of the SSE acquisition on April 20, 2017, we repaid SSE’s outstanding indebtedness of $472 million ($403 million net of cash from SSE). As of May 17, 2017, we had $73.0 million outstanding under our revolving credit facility. +We believe Patterson-UTI has generally been able to outperform the market during this downturn and is well positioned for an industry recovery due to the focus and efforts of our executive management team. +Compensation Philosophy and Objectives +Our overriding philosophy for the compensation of our key executives is to link their compensation with Patterson-UTI’s operational and market performance and to establish incentives that reward them for their achievement of both short-term tactical and long-term strategic objectives. In doing so, we seek to offer competitive compensation packages designed to attract and retain highly qualified individuals and to motivate and reward our executives in achieving Patterson-UTI’s goals. Our executive compensation program also seeks to reward excellence in performance and foster a collaborative team framework among our top executives. +Key Compensation Principles Under the Prior Compensation Plan +The Prior Compensation Plan historically emphasized the following key principles: (i) emphasis on long-term incentives, (ii) low comparative base compensation with variable incentive cash compensation based on financial results, (iii) emphasis on equity-based compensation for long-term value creation and (iv) team compensation structure. +34 +Emphasis on Long-Term Incentives +Our compensation program in 2016 placed a strong emphasis on creating long-term value through the use of long-term incentives. The 2016 compensation program sought to achieve a proper balance in our compensation program between long-term and current compensation by using a combination of equity-based awards, with time-based vesting, performance-based vesting, or both, for long-term incentives and fixed and variable cash for short-term incentives. +The 2016 compensation program relied heavily on equity-based awards, rather than cash, as a means of aligning the interests of executive management with the Company’s stockholders. Historically, equity awards for long-term incentives typically represented between 60-75% of total compensation, while fixed and variable cash for short-term incentives typically represented between 25-40% of total compensation. Variations in these percentages have occurred due to either an exceptionally strong or weak year in which Patterson-UTI’s Adjusted EBITDA and related cash bonus compensation fluctuated in tandem or there was market volatility affecting the grant date valuation of options and performance units using the methodologies required for reporting equity-based compensation. +In 2016, the mix between long-term equity awards, and fixed and variable cash for short-term incentives, for our top four NEOs was 81% and 19%, respectively. +2016 Split Between Short-Term Compensation +(Fixed-Salary and Annual Cash Incentive) and Long-Term Compensation +(Top Four NEOs) +Cash Compensation Historically Emphasized Low Base Salaries with Variable Cash Compensation Tied to Financial Results +Under the Prior Compensation Plan, we designed the cash component of our compensation program to be mostly variable by using comparatively low base salaries and variable cash bonuses tied to Patterson-UTI’s Adjusted EBITDA. The variable cash bonuses potentially were lower during poor industry environments, such as what we experienced in 2009, 2015 and 2016, and were higher during good industry environments. We enacted this variable cash component of our compensation program more than 15 years ago, whereby we established a percentage of total Adjusted EBITDA for a maximum potential executive management bonus pool that was then adjusted as explained below and allocated among the top four NEOs. No bonuses were paid unless an Adjusted EBITDA threshold was achieved, and even then, no bonuses were guaranteed under this program. +The 2016 variable cash bonus pool was determined as follows: +• +The Compensation Committee set an Adjusted EBITDA threshold amount (generally around 60% of the initial budgeted Adjusted EBITDA) below which no bonus would be paid. The Adjusted EBITDA threshold for 2016 was $150 million, which reflected the severe contraction that the oil and gas industry experienced in 2015 and that was expected to continue in 2016. The Adjusted EBITDA threshold requirement also is intended to address requirements of Section 162(m) of the Internal Revenue Code. +• +The Compensation Committee then set a team maximum bonus potential as a percent of Adjusted EBITDA. Our allocation among the top four NEOs in 2016 was a team maximum bonus potential of up to 0.81% of Adjusted EBITDA. This percentage was determined in a manner to be consistent with the relative team compensation allocation, and this percentage is expressed throughout this CD&A prior to giving effect to the reduction attributable to Mr. Siegel. The bonus pool range for 2016 was 0.55% to 0.81% of Adjusted EBITDA, but the effective bonus pool range for 2016 was zero to 0.81% of Adjusted EBITDA, since no bonuses would be paid if the Adjusted EBITDA threshold was not achieved and the Compensation Committee also had the authority to not award any cash bonus, regardless of whether the Adjusted EBITDA threshold was achieved). The annual payout amount was also limited to $5 million to any individual in a year. +• +The Compensation Committee assessed executive management’s performance in light of multiple factors in addition to Adjusted EBITDA (progress toward achievement of certain strategic and other objectives, including those described below) +35 +and determine d the perf ormance-adjusted bonus pool percentage that w ould be used to calculate the actual amount of the bonus pool. For 2016, the performance-adjusted bonus pool award to the top four NEOs was 0.81% of Adjusted EBITDA. The determination of the Adjusted EBITDA perc entage for the top four NEOs and the performance measures applied for this group in 2016 are described in the following paragraphs. +In determining the 2016 payout, the Compensation Committee took into account both the strategic and operational successes during the year as well as the impact during the year of the significant industry decline and subsequent beginning of a recovery. This bonus pool size was reduced to reflect the same compensation adjustment for Mr. Siegel as was made in 2015, resulting in an actual total bonus pool award to the top four NEOs for 2016 of 0.69% of Adjusted EBITDA. Other participants’ cash incentive payment amounts did not increase or decrease as a result of the change in Mr. Siegel’s sharing percentage. +In determining the performance-adjusted bonus pool percentage for 2016, the Compensation Committee considered many metrics, including: +• +Strong and improving safety performance that drove the industry incident averages lower, and the total recordable incident rate for the year for the drilling company was the lowest in Patterson-UTI’s history. +• +Management agility and exceptional performance in responding to a continued industry slowd own in the first half of 2016 and to a sharp recovery of commodity prices and energy industry confidence in the second half of 2016. +• +Total shareholder return in 2016 was 80% , which placed it at the 89 th percentile among its peer group of companies. +• +Total shareholder return at the peer group 100 th percentile for the two- and three-year periods ended December 31, 2016. +• +Increased drilling market share year-over-year and activated 37 rigs from a low rig count in April 2016 through year-end. +• +Upgraded in a cost-effective manner nearly 30 rigs to the “new market and customer standard” and produced the highest high-spec rig utilization among Patterson-UTI’s peer drilling companies. +• +Quickly shifted from downsizing mode to expansion mode in the final one-third of the year and early 2017 by activating two new frac spreads in response to increased industry interest and modest pricing improvement. +• +Maintained a strong balance sheet throughout the year , which included reducing debt by $255 million. +• +Completed a significant technology-related acquisition of Warrior and signed a company-changing merger agreement. +Accordingly, the Compensation Committee determined that management had exceptional performance in a very challenging year. This outstanding performance supported a slight increase of the percentage from 0.78% in 2015 to 0.81% in 2016, recognizing that the actual amount of the bonuses would be substantially reduced from 2014 and 2015 because of the significant reduction in Patterson-UTI’s Adjusted EBITDA. So, while the multiplier percentage increased by 0.03% over 2015, the actual amount of the top four Named Executive Officer bonus pool for 2016 was reduced by 79%, or over $5.5 million, from 2014 and by 62%, or over $2.4 million, from 2015. +In addition, although total shareholder return was not directly used in determining the performance-adjusted bonus pool percentage, the Compensation Committee considered that Patterson-UTI’s total shareholder return was: +• +significantly higher than most of its primary land drilling and pressure pumping peers in 2016, and +• +a substantially higher percentage in 2016 than 2015, yet there was a substantial decrease in the amount of the bonuses paid. +36 +We believe that this variable cash compensation structure provide d a direct link between compensation and the financial per formance of Patterson-UTI, while allowing for adjustments for individual performance and non-financial corporate results. Accordingly, although Adjusted EBITDA wa s used to determine the maximum incentive cash compensation pool, Adjusted EDITDA wa s not the sole factor or metric used. +Emphasis on Equity for Long-Term Incentive Compensation +Under our Prior Compensation Plan, we historically targeted 60% or more of total compensation to be in the form of equity-based awards, with time-based vesting, performance-based vesting, or both. This emphasis on equity-based compensation was aimed at aligning the financial interest of the top four NEOs with our stockholders and the total returns provided to stockholders. We believe that by making a large portion of compensation tied to equity, our top four NEOs can only fully realize the potential benefits of the compensation if our stockholders also benefit. +Over the years we have adjusted the form of the equity incentives we provide to our top four NEOs from solely options to a mix of options, restricted stock and performance units. As described above, under the new executive compensation program, we expect that options will not typically be granted and equity-based compensation will be primarily in the form of restricted stock and performance units. We believe that a mix allows us to tailor our program to encourage the building of long-term value and, in the case of performance units, achievement of stockholder returns in excess of our peer group. +The following charts set forth the allocation of the various forms of long-term equity-based incentives that we granted the top four NEOs from 2012-2016 and the allocation of these incentives that we used for 2016: +37 +Award Type +Discussion of Grants Under Prior Compensation Program +Key Benefits to Stockholders and +Stockholder Alignment +Restricted Stock +We consider restricted stock as an additional form of basic compensation that provides value to the executive only if the executive remains in the employment of Patterson-UTI during the vesting period, with that value being subject to increases and decreases in value depending on the performance of our stock. Prior to 2017, we typically targeted restricted stock awards to represent approximately 30-50% of total equity-based compensation depending on stock prices and volatility at the time of grant. Under the new executive compensation program, the allocation will be based on various factors, including the role and responsibility of the executive and the incentive objectives at the time of grant. +• Value dependent upon stock price performance +• Enhances retention of executive talent +• Encourages long-term share ownership +Stock Options +Stock options provide value to the executive only if the value of Patterson-UTI’s stock appreciates. Consequently, we consider these awards to be performance-based. When we approve grants of options to our executives, we take into account a number of different factors, including the stock price at the time of grant, the expected value of the option grant and prior option grant amounts. Prior to 2017, we typically targeted stock options to represent 25% to 40% of total equity-based compensation. Going forward, we currently intend to limit the use of stock options. +• Inherently performance-based +• Value contingent upon positive stock price performance +• Ten year term encourages a focus on longer-term performance +• Enhances retention of executive talent +38 +Award Type +Discussion of Grants Under Prior Compensation Program +Key Benefits to Stockholders and +Stockholder Alignment +Performance Units +Our use of performance units has been intended to provide a direct link in the compensation of our top four NEOs to both the absolute performance of our stock and relative performance compared to our peer group. This component will not have a payout unless, when compared to the peer group, Patterson-UTI's stock performance is at or above the 25 th percentile, except the 2016 awards provided that if Patterson-UTI’s total shareholder return is negative and, when compared to the peer group, is at or above the 25 th percentile, then the recipients will receive one-half of the number of shares they would have received had Patterson-UTI’s total shareholder return been positive. Prior to 2016, payout also required that total stockholder return be positive for the performance period, and as noted above, the Compensation Committee determined that this requirement is no longer appropriate or competitive. The comparison component assures that the value provided to those NEOs will not be created solely by an increase in stock price due to favorable market conditions, while it also provides an incentive to continue to outperform peers even in down cycles for the market or our industry. Prior to 2017, we typically targeted performance units to represent 25% to 35% of total equity-based compensation. +• Performance-contingent +• Maximum payout contingent on shareholder return performance relative to peers +• Value of shares dependent upon stock price +We have considered the potential risks associated with tying a large portion of executive compensation to equity. We do not believe that our program creates unreasonable risks for the following reasons: +• +The long-term nature of our equity based awards and the required vesting periods help minimize the potential for excessive risk taking and actions aimed at short-term stock gains, +• +Our use of different types of equity grants, in particular restricted stock, helps offset these risks, +• +We have meaningful share ownership guidelines, +• +We maintain an anti-hedging policy, +• +We maintain a clawback policy that applies to all of our executive officers for both cash and equity incentives, and +• +Three of the top four NEOs have been with Patterson-UTI for more than fifteen years and have an established track record of focus on growing long-term sustainable growth for Patterson-UTI. +Our Board has also considered in its risk assessment of our executive compensation program its view that our management is highly ethical and focused on creating true long-term value for stockholders and not focused on just short-term gains. The Board, primarily through its Compensation Committee and Audit Committee, monitors and considers risks associated with Patterson-UTI’s compensation plans on a regular basis. +39 +Team Compensation Structure +Our senior executive management has had the philosophy that they operate as a team, with each member being an important part of the team. As a result, for more than the past ten years the Board determined that as a general proposition our awards of cash and equity incentive compensation should be pooled and allocated among them as a team. Although the allocations among the team members changed over time due to changes in the executive management team and responsibilities, the allocations among the existing team generally remained consistent through 2016. As discussed above, the allocations changed in 2015 and again in 2016 to reflect a reduction for Mr. Siegel in each of those years, except that the annual cash bonus for 2016 was not reduced because his activity and contribution to Patterson-UTI in 2016 were far greater than originally planned. +As discussed above, going forward, the Compensation Committee has determined that beginning in 2017 it would set the compensation for each executive separately based on market compensation trends and the role and expected contribution by the executive. The Compensation Committee believes that moving away from a team-based compensation structure to a more individual-based structure is more reflective of the needs of Patterson-UTI as it has developed and is consistent with best practices. +Process for Determination of Executive Compensation +Compensation Committee +The Board of Directors has delegated the management of Patterson-UTI’s executive compensation programs to the Compensation Committee. The Compensation Committee meets on a regular basis to consider compensation matters and to review how Patterson-UTI’s plans and policies work in practice. Each of the Compensation Committee’s current members is an independent director as defined by the Nasdaq listing standards. +Compensation determinations and equity awards are conducted through a process that solicits the input from management through our Executive Chairman and our CEO, as well as from outside compensation consultants retained by the Compensation Committee. In addition to the recommendations of management and consultants, the Compensation Committee considers feedback from Patterson-UTI’s stockholders, guidelines of proxy advisory firms, reported trends in compensation, internal budgets, historical data for the Company and its peers, strategic planning updates and other information that it considers relevant. +Chairman and CEO +Our Chairman and our CEO provide the Compensation Committee with reviews of the performance of other executive officers and senior managers, including the other NEOs. The Compensation Committee also engages them in an annual dialog with our Committee Chairman and our Lead Director on our compensation program and seeks their input on and review of proposals for long-term incentive grants. This process results in a recommendation that is considered by our Compensation Committee as a whole. +Independent, Outside Compensation Consultant +Our Compensation Committee regularly utilizes outside compensation consultants to help assess and design our executive compensation program. These consultants are paid on a basic fixed fee structure plus expenses. These outside consultants provide data and advice on historical compensation and stockholder returns, market trends and peer compensation practices. The Compensation Committee has retained Pearl Meyer & Partners (“Pearl Meyer”) as its consultant and advisor for executive compensation matters since 2012. +Our Compensation Committee regularly reviews the services provided by its outside consultants and has determined that Pearl Meyer is independent in providing executive compensation consulting services. In making this determination, our Compensation Committee noted that during 2016: +• +Pearl Meyer did not provide any services to Patterson-UTI or management other than services requested by or with the approval of the Compensation Committee, and its services were limited to executive compensation consulting and Patterson-UTI’s participation in drilling management compensation surveys. Specifically, Pearl Meyer does not provide, directly or indirectly through affiliates, any non-executive compensation services, including pension consulting or human resource outsourcing. +• +Fees we paid to Pearl Meyer were less than 1% of Pearl Meyer’s total revenue; +• +Pearl Meyer maintains a conflicts policy, which was provided to the Compensation Committee with specific policies and procedures designed to ensure independence. +• +None of the Pearl Meyer consultants working on Patterson-UTI matters had any business or personal relationship with Compensation Committee members. +40 +• +None of the Pearl Meyer consultants working on Patterson-UTI matters (or any consultants at Pearl Meyer) had any business or personal relationship with any executive officer of Patterson-UTI. +• +None of the Pearl Meyer consultants working on Patterson-UTI matters directly own Patterson-UTI stock. +The Compensation Committee receives a confirmation certification of independence from its consultants on an annual basis and continues to monitor the independence of its compensation consultant on a periodic basis. +In 2016, Pearl Meyer provided the Compensation Committee with information on the compensation practices of our peer group and other oilfield service companies and on the reasonableness of our program as compared to the compensation practices of our peer group. In so doing, Pearl Meyer provided the Compensation Committee with information on each element of the total compensation of our executive officers as well as a comparison of our compensation against our peers based on data gathered from proxy statements and other SEC filings and other sources available to Pearl Meyer. This comparison provided the Compensation Committee with various comparative market levels of compensation for our executive management team as well as a comparative position for each executive officer. Pearl Meyer also provided the Compensation Committee with information on the cost and potential dilution to our stockholders of our equity-based incentives and compared that to our peer group. +Under the Prior Compensation Plan, when reviewing the peer compensation data provided to the Compensation Committee by its consultants, the Compensation Committee has generally given greater weight to the comparative data for the team as a whole versus the data for individual positions at our peers given the team management approach followed by us as described above. As noted above, we have concluded that this approach is no longer appropriate and that targeted compensation will be based on data for individual positions at our peers, with the opportunity to earn top quartile compensation, assuming performance goals are achieved. +Peer Group +In early 2016, following extensive deliberations and consultation with our independent, outside compensation consultant, Pearl Meyer, the Compensation Committee determined to update our peer group of energy service companies. The update also took into account feedback received from our engagement with significant stockholders, as well as a review of the peer groups as determined by the two major shareholder advisory firms. +This update removed several outsized companies, reflected industry changes through merger and acquisition activity and accounted for the severe contraction in industry participant scale and profitability. The update focused on energy service companies that directly compete with Patterson-UTI’s businesses and/or are reasonably scaled to Patterson-UTI’s operations and financial measures. Specifically, this updated group of eighteen peers outlined below included Helmerich & Payne, Inc., Nabors Industries, Ltd. and Precision Drilling Corporation, which are our primary competitors in land-based drilling in North America. Atwood Oceanics Inc., Basic Energy Services, Inc., Diamond Offshore Drilling, Inc., Ensco, Inc., Noble Corp., Parker Drilling Company, Rowan Companies, Transocean Ltd. and Unit Corp. are other primarily drilling-based peers. +Our updated peer group for 2016 also included Weatherford International Ltd., which was a significant competitor in the North American pressure pumping service market until late 2016, and Forum Energy Technologies, Inc., FMC Technologies, Inc. (now TechnipFMC plc), Oceaneering International, Inc., Oil States International Inc. and Superior Energy Services, Inc., which are diversified energy services peers that were roughly comparable in size to Patterson-UTI. +With our revised peer group for 2016, we included 16 of the 24 companies used by the two major shareholder advisory firms in 2015, and the companies that we excluded were excluded either due to their much smaller size and market capitalization (e.g., Key Energy Services and Pioneer Energy Services) or because of their different operations (e.g., Bristow Group, Dresser Rand Group and McDermott International). +We also excluded Halliburton Company and Baker Hughes Incorporated from the 2016 peer group, which were in our peer group in 2015, due to their larger size and complexity based on the input from our significant stockholders. We had previously included these companies due to their being our principal competitors in pressure pumping and our view that we compete for executive management with these companies. However, based on stockholder input and the then-pending combination of Halliburton and Baker Hughes, the Compensation Committee concluded it was appropriate to exclude those companies from our peer group in 2016. +41 +Our 2016 peer group wa s the following energy service peer group for company performance and compensation matters: +• Atwood Oceanics Inc. +• Basic Energy Services, Inc. +• Diamond Offshore Drilling Inc. +• Ensco plc. +• Forum Energy Technologies, Inc. +• FMC Technologies, Inc. (now TechnipFMC plc) +• Helmerich & Payne Inc. +• Nabors Industries Ltd. +• Noble Corp. +• Oceaneering International +• Oil States International Inc. +• Precision Drilling Corporation +• Parker Drilling Company +• Rowan Companies Inc. +• Superior Energy Services, Inc. +• Transocean Ltd. +• Unit Corp. +• Weatherford International Ltd. +The peer group listed above was utilized for 2016 and 2017 compensation decisions, and equity-based awards that were granted prior to 2017 will continue to be evaluated using the peer group in effect at the time those awards were granted. +In May 2017, following deliberations and consultation with our independent, outside compensation consultant, Pearl Meyer, the Compensation Committee determined to update our peer group of energy service companies to account for the SSE acquisition and changing market landscape in which Patterson-UTI operates. This update removed Parker Drilling Company and Atwood Oceanics Inc. and added Halliburton Company and National-Oilwell Varco, Inc. to the peer group. The addition of Halliburton back into our peer group was based on our belief that Patterson-UTI is among the top three to five U.S. pressure pumping companies, depending on the manner in which number of fleets and activity level is calculated, and that Halliburton is the leader and principal competitor to the Patterson-UTI in the pressure pumping business. National-Oilwell Varco, Inc. was also added to our peer group because of our greater size following the SSE acquisition. +Our current peer group is the following energy service peer group for company performance and compensation matters: +• Basic Energy Services, Inc. +• Diamond Offshore Drilling Inc. +• Ensco plc. +• FMC Technologies, Inc. (now TechnipFMC plc) +• Forum Energy Technologies, Inc. +• Halliburton Company +• Helmerich & Payne Inc. +• Nabors Industries Ltd. +• National-Oilwell Varco, Inc. +• Noble Corp. +• Oceaneering International +• Oil States International Inc. +• Precision Drilling Corporation +• Rowan Companies Inc. +• Superior Energy Services, Inc. +• Transocean Ltd. +• Unit Corp. +• Weatherford International Ltd. +The peer group listed immediately above (the “2017 Peer Group”) was not utilized for 2017 compensation decisions; however, performance pursuant to the equity-based awards that were granted in 2017 will be evaluated using the 2017 Peer Group. +Consideration of “Say on Pay” Voting Results and Engagement with Stockholders +In 2011 our Board recommended an annual advisory (nonbinding) vote on executive compensation that received 87% support, including abstentions and excluding broker non-votes, and therefore determined to hold advisory (nonbinding) votes on executive compensation annually. +During 2015 and in early 2016, we directly engaged with our stockholders that had holdings that represented over 60% of our outstanding shares at December 31, 2015, and carefully considered their feedback regarding our executive compensation program and other matters. Based on the results of our 2015 “Say on Pay” vote and the input of our significant shareholders, the Compensation Committee updated the composition of our peer group for 2016 as discussed above to eliminate some of the larger peers included in past years. Ninety nine percent (99%) percent of the votes cast (including abstentions and excluding broker non-votes) in 2016 on the “Say on Pay” proposal were in support of Patterson-UTI’s executive compensation program. +42 +In designing our new executive compensation program, we again considered the feedback from our significant stockholders and others on our executive compensation structure. Our new executive compensation program reflects the in put of those stockholders as well as our independent, outside compensation consultant, Pearl Meyer, as to best practices. Among the changes that we made to our executive compensation program, was the elimination of the percentage of Adjusted EBITDA cash bo nus plan, the design structure of our annual cash bonus plan, and the addition of multiple performance targets for the annual cash bonus plan. +We will continue to engage with our stockholders, as we value the insights gained from our discussions with our stockholders and find them to be helpful as our Compensation Committee considers and adopts policies affecting our executive compensation program. We will continue to consider the outcome of future say-on-pay votes, as well as feedback received through our stockholder engagement activities throughout the year to understand their views on our executive compensation philosophy, policies, and practices, when making compensation decisions for our executive officers. +Process and Considerations Relating to Determination of Cash Compensation +The Compensation Committee will generally review base compensation and the terms for bonus cash compensation for management early in the first quarter of the year. +Under the Prior Compensation Plan, the Compensation Committee had historically set an annual Adjusted EBITDA threshold amount (generally around 60% of the initial budgeted Adjusted EBITDA). If this threshold was not achieved, there were no cash bonuses for the period . As a result of the cyclical nature of our business and the very strong correlation between oil and natural gas prices and our financial results, the threshold Adjusted EBITDA amount frequently changed from one year to the next in-line with our budgeted expectations of activity for the year. The Adjusted EBITDA threshold requirement also was intended to address requirements of Section 162(m) of the Internal Revenue Code. The Compensation Committee then set a team maximum bonus potential as a percent of Adjusted EBITDA and a number of operational and financial factors were outlined for consideration of management’s performance. The annual payout amount was limited to $5 million to any individual in a year, and no bonuses were guaranteed under this program. At the end of the performance period, the Compensation Committee assessed executive management’s performance and determined the actual performance-adjusted bonus pool percentage that would be used to calculate the actual amount of the bonus pool. Under the new executive compensation program, the process for setting the Section 162(m) thresholds will continue to be at the 60% of budgeted Adjusted EBITDA, but with other conditions applied for payout depending on the specific compensation item. +As discussed above, the Compensation Committee has modified the executive compensation program for 2017, including cash compensation. Going forward, the Compensation Committee has determined that it would set the compensation for each executive separately based on market compensation trends and the role and expected contribution by the executive. In addition, the Compensation Committee determined that the prior policy of targeting below market salaries would no longer be appropriate or competitive. Accordingly, the Compensation Committee increased the salaries of our NEOs to be more in line with competitive practice. +For 2017, the Compensation Committee also established a new annual cash bonus plan, which sets various targets for each executive’s annual cash bonus related to that executive’s salary, and makes the annual cash bonus contingent upon meeting both Patterson-UTI’s financial goals and other KPIs. The new annual cash bonus plan retains the threshold requirement of 60% of the Adjusted EBITDA target before any cash bonuses will be paid. In addition, under the new annual cash bonus plan, if Adjusted EBITDA is 20% or more below the Adjusted EBITDA target, then no portion of the cash bonus attributable to Adjusted EBITDA (which represents 70% of the 2017 annual cash bonus opportunity for our NEOs) will be paid. The remaining 30% of the 2017 cash bonus opportunity for our NEOs will be determined based on the achievements of KPIs related to safety, merger integration and fleet upgrade, as described above. +Process and Considerations Relating to Determination of Equity Compensation +The Compensation Committee’s practice for grants of equity-based compensation has generally been to consider the grant of equity-based compensation to executive management following the conclusion of our first quarter. This grant is typically made in conjunction with regular quarterly Board meetings held prior to Patterson-UTI’s public release of its quarterly earnings. This timing also allows the Compensation Committee to receive market data from its consultants for prior year grants. Although this process does not result in calendar year comparisons for purposes of total shareholder return and other calculations, the Compensation Committee believes that having year-end information allows it to make more informed decisions, and the use of a consistent grant cycle for equity reduces risks associated with equity grants made on a random basis. Patterson-UTI is able to obtain and use relevant peer data for calculating our peer total shareholder returns and reviewing comparable grants of equity based compensation. In 2017, the annual equity-based grants were made a few weeks later than usual, as the Compensation Committee was finalizing the structure of the new executive compensation program. Going forward, the Compensation Committee expects to return the prior timing for making the annual grants. +43 +When making grants of equity-based compensation, the Compensation Committee considers a number of factors, including financial performance, competitive peer data, prior year grants (both in terms of number of shares and total value), and potential dilution impact and current and historical stock prices. The Compensation Committee also takes into consideration the advice of its consultants as to peer and market prac tices on the use and mix of restricted stock, options and performance units. +For restricted stock and stock options granted to the top four NEOs, these awards are subject to three-year vesting, with one-third vesting after the first year and 1/36 th of the grant vesting each month over the next two years. The restricted stock grants also have a performance-based vesting component, which for 2016 required that Patterson-UTI achieve Adjusted EBITDA of at least $100 million for the nine months ending December 31, 2016, $150 million for the twelve months ending December 31, 2017 or $150 million for the twelve months ending December 31, 2018. The performance units granted in 2016 are to be settled with shares of stock, with the number of shares to be issued based on Patterson-UTI’s total stockholder return at the end of the third year following the grant relative to the total stockholder return for our peer group of companies. Subject to a limited change-of-control exception, no payout will be provided on the performance units granted in 2016 unless total shareholder return is positive for the performance period and, when compared to our peer group, Patterson-UTI’s relative total stockholder return is at least at the 25 th percentile, except that if Patterson-UTI’s total stockholder return is negative and, when compared to our peer group, is at or above the 25 th percentile, then the payout will be one-half of the number shares that would have been issued had Patterson-UTI’s total shareholder return been positive. +We have also adopted the following additional practices regarding equity grants: +• +Grants will not vest in less than one year. +• +Options will not be re-priced or exchanged. +• +Equity grants are subject to claw-back in the event that the Board learns that any misconduct by the Named Executive Officer contributed to Patterson-UTI having to restate all or a portion of its financial statements. +• +Options are to have exercise prices equal to or greater than the fair market value of a share of our common stock on the date of grant. +• +Performance targets are not to be modified other than to give effect to acquisition or disposition of businesses or similar structural changes — market condition changes will not result in changes in performance targets. +As discussed above, the Compensation Committee did not grant stock options under the LTI program for 2017. The determination not to award stock options was based on several factors, including: (i) a much higher rate of share usage and shareholder dilution, and (ii) a decline during the last several years in the prevalence of stock options among our peers. Recognizing that most peer companies had made the same determination not to award stock options, the Compensation Committee believes the new approach is consistent with best practices, aligns shareholders and management, and better aligns the compensation and corporate objectives. +Overview of 2016 Performance and Compensation +As noted above under “Executive Summary” and “Business”, Patterson-UTI performed exceptionally well in 2016 in the face of a very challenging drilling and energy services marketplace. In addition to the financial and operational successes, Patterson-UTI’s stock provided a strong performance relative to our industry peers in 2016. For the one-year period ended December 31, 2016, Patterson-UTI had a total shareholder return in the 89 th percentile among our peer group and delivered the highest total shareholder return among those peers for the two- and three- year periods ended December 31, 2016. +2016 Cash Compensation +As discussed above, in addition to their base salaries, the top four NEOs historically participated in a variable cash bonus program based on Adjusted EBITDA and additional performance measurements. For 2016, the Compensation Committee set an Adjusted EBITDA threshold amount of $150 million, which was generally around 60% of our initial budgeted Adjusted EBITDA. As a result of the cyclical nature of our business and the very strong correlation between oil and natural gas prices and our financial results, the threshold Adjusted EBITDA amount has frequently changed from one year to the next in-line with our budgeted expectations of activity for the year. Even though the threshold Adjusted EBITDA has fluctuated from year to year, the rigor of the metric has been maintained on the same level and remained challenging. Accordingly, due to the severe downturn in our industry and expectations for 2016, the Adjusted EBITDA threshold amount for 2016 was less than the threshold amount for 2015. The Compensation Committee then set a team maximum bonus potential as a percent of Adjusted EBITDA. Our allocation among the top four NEOs in 2016 was a team maximum bonus potential of up to 0.81% of Adjusted EBITDA. +Under the terms of the Company’s 2016 cash compensation plan described above, the top four NEOs earned cash payments in respect of 2016 based on a performance factor equal to 0.81% of Patterson-UTI’s Adjusted EBITDA of $212.277 million for 2016. The total bonus pool was further reduced to reflect the 40% reduction in Mr. Siegel’s bonus from that calculated using the legacy team allocation formula. This bonus pool amount reflected the Compensation Committee’s judgment that executive management had +44 +demonstrated exceptional performance and results in 2016 in leading Patterson-UTI through the severe contraction in the energy industry and positioning Patterson-UTI for a recovery. In particular, the Compensation Committee noted the management team’s exemplary efforts in reducing and controlling costs in a rapidly declining market, their ability to maintain market share and operational profitability in a market where many c ompanies are operating at cash losses and continued industry leadership in safety performance. In determining the performance factor for 2016, the Compensation Committee considered many metrics including those described in detail above. +The Compensation Committee also considered the specific performance of each of the individuals and the performance assessments recommendations of Mr. Siegel and Mr. Hendricks on the team’s performance. Confirming Patterson-UTI’s direct tie between financial performance and executive compensation, the total amount of the Named Executive Officer bonus pool for 2016 was reduced by 79%, or over $5.5 million, from 2014 and by 62%, or over $2.4 million, from 2015. +2016 CASH COMPENSATION +Name +Salary +Adjusted +EBITDA Incentive +(Percentage of +Company +Adjusted EBITDA) +Variable Cash +Compensation +Based on +Adjusted +EBITDA(1) +Total Cash +Compensation +William A. Hendricks, Jr. +$ +600,000 +0.2209 +% +$ +468,939 +$ +1,068,939 +John E. Vollmer III +$ +350,000 +0.1473 +% +$ +312,626 +$ +662,626 +Mark S. Siegel +$ +350,000 +0.1767 +% +$ +375,151 +$ +725,151 +Kenneth N. Berns +$ +265,000 +0.1473 +% +$ +312,626 +$ +577,626 +(1) +The maximum amount that could be awarded to an individual under our 2016 cash-based incentive plan during a 12–month period was $5,000,000. In order to reach this maximum amount and assuming a total bonus pool equal to the top end of the range (equal to 0.81% of Adjusted EBITDA), Adjusted EBITDA of $2.3 billion in the case of Mr. Hendricks, $2.8 billion in the case of Mr. Siegel and $3.4 billion in the case of Messrs. Vollmer and Berns would have been needed. The target bonus amount presented in the Grants of Plan-Based Awards table is calculated for each of the respective officers based on Patterson-UTI’s actual Adjusted EBITDA for the fiscal year ended December 31, 2016, and the allocation formula applied to the bonus pool for distribution as noted above. +As discussed above, as a result of, the continued growth and evolution of Patterson-UTI’s business, the recent closing of the SSE acquisition, and elements of the executive compensation program not delivering the desired compensation results, the Compensation Committee modified the executive compensation program in 2017, including the cash compensation. +2016 Equity-Based Compensation +The Compensation Committee made the following equity-based grants in 2016 to Messrs. Hendricks, Vollmer, Siegel and Berns, considering Patterson-UTI’s 2016 financial results and comparative total shareholder return performance over the one-, two- and three-year periods ended March 31, 2016, and in the case of Mr. Hendricks, the Compensation Committee made an additional restricted stock grant in connection with his entry into an employment agreement in 2016. Patterson-UTI desired to enter into an employment agreement with Mr. Hendricks to help insure that he would remain a long-term employee of the Company, and the additional restricted stock grant was awarded as an enticement for Mr. Hendricks to enter into the employment agreement. +45 +2016 EQUITY-BA SED GRANTS +Restricted Stock(1) +Stock Options(2) +Performance Unit +Awards(3) +Total +Name +# Shares +Value +# Shares +Value +# Shares +Value +Value +William A. Hendricks, Jr. +117,261 +$ +2,182,818 +315,400 +$ +1,526,508 +69,100 +$ +1,439,353 +$ +5,148,679 +John E. Vollmer III +48,300 +$ +895,482 +189,100 +$ +915,227 +41,400 +$ +862,362 +$ +2,673,071 +Mark S. Siegel +38,700 +$ +717,498 +151,300 +$ +732,278 +33,100 +$ +689,473 +$ +2,139,249 +Kenneth N. Berns +48,300 +$ +895,482 +189,100 +$ +915,227 +41,400 +$ +862,362 +$ +2,673,071 +(1) +Shares of restricted stock were awarded on April 26, 2016 and August 1, 2016 in the case of Mr. Hendricks and on April 26, 2016 in the case of Messrs. Vollmer, Siegel and Berns. The value indicated in the table is the value on the date of grant based on the closing price of Patterson-UTI’s common stock on the date of grant. +(2) +Options were awarded on April 26, 2016. The value indicated in the table was determined using the Black-Scholes option pricing model as of the date of grant. +(3) +Performance Units were awarded on April 26, 2016. The number of shares indicated in the table represents the target number of shares for each respective award. According to the terms of the awards, the actual number of shares earned by the recipient can range from zero shares to two times the target number of shares depending on how Patterson-UTI performs in terms of total stockholder return relative to its peer group. The value indicated in the table was determined based on a Monte-Carlo simulation model and represents the estimate of fair value on the date of grant. +The grant of restricted stock, options and performance units to the top four NEOs were made following the vesting, term and other criteria described above. +The performance units granted in 2016 to Messrs. Hendricks, Siegel, Vollmer and Berns provide for the issuance of a target of 69,100 shares of Common Stock to Mr. Hendricks, 33,100 shares of Common Stock to Mr. Siegel and 41,400 shares of Common Stock to each of Messrs. Vollmer and Berns, respectively, if Patterson-UTI’s total stockholder return over a three-year period is positive and, when compared to the peer group, is at the 50 th percentile and two times the target if at the 75 th percentile or higher. If Patterson-UTI’s total stockholder return is positive, and, when compared to the peer group, is at the 25 th percentile, the recipients will only receive one-half of the target number of shares. If Patterson-UTI’s total shareholder return is negative and, when compared to the peer group, is at or above the 25 th percentile, then the recipients will receive one-half of the number of shares they would have received had Patterson-UTI’s total shareholder return been positive for the performance period. The grant of shares when achievement is between the 25th and 75th percentile will be determined on a pro-rata basis. Total stockholder return for Patterson-UTI for the 2016 performance unit grants is measured based on $100 invested in Common Stock on the first day of the performance period, with dividends reinvested. The performance period is the period from April 1, 2016 through March 31, 2019. +As discussed above, as a result of, the continued growth and evolution of Patterson-UTI’s business, the recent closing of the SSE acquisition, and elements of the executive compensation program not delivering the desired compensation results, the Compensation Committee modified the executive compensation program in 2017, including equity-based compensation. +Total Compensation and Relationship to Performance +The Compensation Committee considered the advice of Pearl Meyer when establishing its 2016 compensation program. In doing so, the Compensation Committee sought to offer a total compensation package (cash and long-term) for the top four NEOs as a group that would be commensurate with Patterson-UTI’s percentile performance versus peers. The Compensation Committee looked at financial and relative shareholder return performance over one-, two- and three-year bases, as noted below, in establishing the long-term incentive equity grants for 2016. When determining the size of 2016 equity incentive awards in April 2016, the Compensation Committee considered the following measures of relative performance for Patterson-UTI against our peers: +• +1 year Total Shareholder Return through March 31, 2016: 100 th percentile +• +2 year Total Shareholder Return through March 31, 2016: 98 th percentile +• +3 year Total Shareholder Return through March 31, 2016: 96 th percentile +Although the Compensation Committee looked to various percentile ranges of compensation based on potential performance when setting compensation, the Compensation Committee does not target specific total compensation due to its emphasis on variable compensation, but would expect total compensation to be around the top quartile, assuming comparable performance and greater or lesser, depending on actual performance. +The Compensation Committee established the 2016 equity incentive awards at a level that would deliver value to the top four NEOs at an approximate percentile range approximating the total shareholder return percentile that Patterson-UTI achieves (as defined by the Committee in consultation with Pearl Meyer) relative to its peer group. +46 +With respect to Mr. Holcomb, who serves as the President of Patterson-UTI’s contract drilling subsidiaries, the Compensation Committee determined his 2016 non-equity incentive compensation in a manner similar to the top four NEOs. The Compensation Committee set an Adjusted EBITDA threshold for the contract drilling business that must be a chieved or Mr. Holcomb would not receive a bonus. The Compensation Committee also set a range of the percent of Adjusted EBITDA for the contract drilling segment that would be used to determine the amount of any cash payout after the end of the performance period. The actual performance factor to be used was based on the achievement of contract drilling operational and financial performance toward Patterson-UTI’s business strategy and operational plans during the year. Any annual payout amount to Mr. Holcom b was limited to $5 million in a year. +For 2016, in recognition of the severe industry downturn, the Compensation Committee set a $150 million Adjusted EBITDA threshold for the contract drilling business and a performance factor range of 0.032% and 0.048% of Adjusted EBITDA for the contract drilling business. The Compensation Committee determined Mr. Holcomb’s 2016 non-equity incentive compensation to be 0.048% of Adjusted EBITDA for the contract drilling business based on Adjusted EBITDA of $232.116 million in 2016, his individual performance and the following factors specific to the Company’s contract drilling business: +• +Improved safety results and operational and cost efficiencies; +• +Substantial positive EBITDA during all four calendar quarters in 2016; +• +Timely and efficient scaling of the business during a severe industry downturn; +• +Management of reactivation costs and timely and efficient scaling of the business as demand improved; +• +Successful upgrading of rigs; +• +Increased training programs; +• +Reorganized drilling company management structure; +• +Generation of customers and management of existing relationships; and +• +Increased drilling company market share in and out of a severely contracting market. +The bonus amount reflects efforts towards achieving Patterson-UTI’s current and long-term objectives in its contract drilling business. +Mr. Holcomb’s equity-based, long-term incentive compensation was awarded in the form of restricted stock that vests in one-third increments over a three year period and is set forth in the “Grants of Plan-Based Awards Table” below. +Alignment of Realized Long-Term Incentive Value with Performance +While grant date, long-term incentive values approved by the Compensation Committee vary based upon our performance relative to peers, the realized value of long-term incentives — including the impact of changes in our stock price — can vary significantly depending upon both our relative and absolute total shareholder return performance. +In order to evaluate the alignment of realizable pay with performance relative to peers, we compared: +(1) +realizable long-term incentive value as a percent of grant date/target value for the three-year period from March 2014 — March 2017, and the five-year period from March 2012 — March 2017, to +(2) +our performance relative to our peer group over the same two periods. +Components of Relative Alignment Review +Target/Grant Date Value +Realizable Long-term Incentive Value +Stock Options +Grant date value of target annual award +In-the-money value of options granted during period — valued at 3/31/2017 +Restricted Stock +Grant date value of target annual award +Value of all shares granted during period at 3/31/2017 +Performance Units +Grant date value of target annual award +• Amount earned: for plans granted and earned based on performance during period +• Target award: for plans granted during period but still outstanding at end of period — valued at 3/31/2017 +As shown in the two charts below, as a result of the precipitous industry-wide decline in stock prices that began in the second half of 2014, realizable long-term incentive value for our top four NEOs fell below the expected “fairway” and slightly above 100% of the original grant date value, despite our strong performance relative to our 2016 peer group during the period shown on the charts. This outcome further demonstrates the alignment of our executive compensation program with the interests of our stockholders. +47 +Top Four NEOs Realizable Long-term Incentive Value Versus +Performance Against Peers +Retirement Plans +Patterson-UTI offers a 401(k) plan to its employees, including its NEOs. Participants may contribute a portion of their base salary to the 401(k) plan, subject to federal limits. Patterson-UTI makes matching contributions up to four percent of each participant’s eligible base salary. The NEOs of Patterson-UTI are eligible to participate in the 401(k) plan on the same basis as other employees. Patterson-UTI does not have any other retirement plan. +Other Policies and Practices Supporting Strong Compensation Governance +Share Ownership Guidelines and Stock Holding Requirements for Chief Executive Officer, Other Executive Officers and Directors +Our Nominating and Corporate Governance Committee has enacted share ownership guidelines applicable to all executive officers and directors of Patterson-UTI. The guidelines require our Chief Executive Officer to own a number of shares of our common stock having a value at least equal to five times his or her base salary. The Chief Executive Officer has five years from the adoption of these guidelines, or the date of appointment to the chief executive position, whichever is later, to satisfy the ownership guidelines. +The guidelines also require officers and directors to hold at all times, subject to a five year phase-in from the date first elected to the applicable position, at least the following number of shares of Common Stock: +• +President and Chief Executive Officer +Number of shares equal to 5 times base salary +• +Executive Chairman +120,000 shares +• +COO/Executive Vice Presidents/Senior Vice Presidents (other than the General Counsel) +60,000 shares +• +General Counsel/President — Drilling +30,000 shares +• +Outside Directors +10,000 shares +For purposes of these ownership guidelines, equity incentive awards that have both time-based vesting and performance-based vesting are counted when the performance-based component has been satisfied. Unvested equity incentive awards that have only time-based vesting are counted and unearned performance-based incentive awards are not counted. In addition, each executive officer and director is required to maintain ownership of the net after-tax shares of Common Stock acquired from Patterson-UTI pursuant to any equity-based awards received from Patterson-UTI, unless such person has met his or her individual ownership requirement. +Each of the NEOs and Directors was in compliance with these guidelines as of the date of this proxy statement. +Clawback Policy +As provided for in Patterson-UTI’s Corporate Governance Guidelines and set forth in written agreements with its executive officers, Patterson-UTI has implemented a claw-back policy that allows for the recovery of bonus, severance or incentive based compensation from an executive officer in the event the Board of Directors learns that any misconduct by such executive officer contributed to Patterson-UTI having to restate all or a portion of its financial statements. The Board will take such action as it deems +48 +necessary to remedy the misconduct, prevent its recurrence, and if it deems appropriate based on the relevant facts and circumstances, take remedial action against such executive officer, which may include requiring the reimbursement of any bonus or incen tive compensation awarded to such executive officer or effect the cancellation of stock awards previously granted to such executive officer if: (i) the amount of the bonus, incentive compensation or stock award was calculated based upon the achievement of certain financial results that were subsequently the subject of a restatement, (ii) such executive officer engaged in intentional misconduct that caused or partially caused the need for the restatement, and (iii) the amount of the bonus, incentive compensa tion or stock award that would have been awarded to such executive officer had the financial results been properly reported would have been lower than the amount actually awarded. +In addition to a stand-alone policy, Patterson-UTI’s 2005 Long-Term Incentive Plan, 2014 Long-Term Incentive Plan and, if approved, the Amended and Restated Plan, provide that if Patterson-UTI is required to prepare an accounting restatement due to the material noncompliance of Patterson-UTI, as a result of misconduct, with any financial reporting requirement under the securities laws, or if the participant is one of the persons subject to automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002, the participant shall reimburse Patterson-UTI that amount of any payment in settlement of an award earned or accrued during the twelve-month period following the first public issuance or filing with the SEC (whichever just occurred) of the financial document embodying such financial statement requirement. +Pay for Performance +The Compensation Committee believes that the actual pay received by our NEOs has historically been appropriately linked to performance and a significant amount of pay was at risk for our NEOs under our incentive compensation plan design. As noted in the summary of the new executive compensation program, the Compensation Committee concluded that while the Prior Compensation Plan did provide a direct link between Patterson-UTI’s cash generation and bonus compensation, it did not provide the desired compensation link between the Patterson-UTI’s outstanding top tier performance and actual compensation. This result under the Prior Compensation Plan was one of the rationales for the changes that the Compensation Committee has made for 2017. +Anti-Hedging Policy +Patterson-UTI has an anti-hedging policy. Our directors and executive officers may not purchase, sell or write options on Patterson-UTI securities or engage in transactions in other third-party derivative securities with respect to Patterson-UTI securities. +Anti-Pledging Policy +Patterson-UTI has an anti-pledging policy. Our directors and executive officers may not engage in transactions in which Patterson-UTI securities are used as collateral for any loan, including, but not limited to, “margin loans” in a brokerage account. +Perquisites and Personal Benefits +The Compensation Committee believes that benefits to executives should generally be aligned with those provided for other employees. No Named Executive Officer received perquisites totaling more than $10,000, except that Mr. Holcomb received an automobile allowance of $13,398 in 2016 and $12,000 in each of 2015 and 2014. Accordingly, except for the automobile allowance, the perquisites do not meet the threshold that would require disclosure in the Summary Compensation Table below. +Employment-Related Agreements and Other Matters +Change in Control, Severance and Employment Agreements +Change in Control Agreements and Tax Gross-Up Payments. Patterson-UTI has entered into change-in-control agreements with Messrs. Siegel, Berns and Vollmer and employment agreements with Messrs. Holcomb and Hendricks that contain change-in-control provisions, as further described in “Employment-Related Agreements” below. Patterson-UTI believes that such agreements may under certain circumstances protect Patterson-UTI’s interest by discouraging the NEOs from leaving employment out of concern for the security of their jobs or being unable to concentrate on their work. We believe that the change in control agreements may also help Patterson-UTI attract and retain new key employees by reducing the personal uncertainty and anxiety that arises from the possibility of a future business combination. Any future change in control or severance agreements will be approved subject to the circumstances existing at the time. +As was customary when the change in control agreements with Messrs. Siegel, Berns and Vollmer were entered into more than ten years ago, each change-in-control agreement provides the executive with a full gross-up payment for any excise taxes imposed on payments and benefits received under the change-in-control agreement or otherwise, including other taxes that may be imposed as a result of the gross-up payment. As indicated above, the Compensation Committee subsequently adopted a policy, more than five years ago, to no longer approve tax gross-ups in connection with compensation arrangements, and the employment agreements entered into with Messrs. Hendricks in 2016 and Mr. Holcomb in 2017, which are described below, do not include a tax gross-up provision. +49 +Severance Agreements. In order to address prior severance agreements between UTI Energy Corp. and each of Messrs. Siegel, Berns and Vollmer, Patterson-UTI has entered into written letter agreements with each of these executives pursuant to whi ch Patterson-UTI has agreed to pay each such person within ten days of the termination of his employment with Patterson-UTI for any reason (including voluntary termination by him), an amount in cash equal to his annual base salary at the time of such termi nation. Any payment made by Patterson-UTI pursuant to these letter agreements will reduce dollar for dollar any payment owed to such person, if any, pursuant to the change-in-control agreements referenced above. +Employment Agreements. Patterson-UTI entered into an employment agreement with Mr. Hendricks in August 2016 and with Mr. Holcomb in January 2017. Each employment agreement generally has an initial three-year term, subject to automatic annual renewal. The employment agreement with Mr. Hendricks provides for an annualized salary of 600,000 per year, subject to any increases that may be granted in the future (his annualized salary was increased to $1,000,000 per year in May 2017), and the employment agreement with Mr. Holcomb provides for an annualized salary of $465,000, subject to any increases that may be granted in the future. Under specified circumstances, Patterson-UTI may terminate the executive’s employment under his employment agreement for cause (as defined in the employment agreement). The employment agreement also provides for, among other things, severance payments and the continuation of certain benefits following termination by Patterson-UTI of the executive other than for cause, or termination by the executive for good reason (as defined in the employment agreement). As discussed above and in more detail below, the employment agreements contain change in control provisions. +We believe the change-in-control agreements, severance agreements and the employment agreements are important components of our overall executive compensation program. The employment agreements currently in effect set forth the manner by which the employment relationship may be extended or terminated, the compensation and benefits that we provide during the term of employment and the obligations each party has in the event of termination of the executive officer’s employment. We believe that severance protections, particularly in the context of a change-in-control transaction, play a critical role in attracting and retaining key executive officers. Providing this type of protection is common in the oilfield services industry. In addition, these benefits serve our interests by promoting a continuity of management and aligning management’s interests with those of our stockholders in the context of an actual or threatened change in control transaction. +Please see “Employment-Related Agreements” below for further description of the change-in-control agreements, severance agreements and employment agreements. +Section 162(m) Considerations +In considering compensation decisions for the executive management of Patterson-UTI, we routinely consider the potential effect of Section 162(m) of the Internal Revenue Code. Section 162(m) imposes a limitation on corporate tax deductions for non-performance based compensation to certain officers that exceeds $1 million that can be taken by a publicly held corporation for compensation paid to certain of its executive officers. While Patterson-UTI does not design its compensation programs for tax purposes, Patterson-UTI does design its plans to be tax efficient for Patterson-UTI where possible. However, the Compensation Committee believes that tax deduction limitations should not compromise Patterson-UTI’s ability to establish and maintain appropriate executive compensation programs and reserves the right to award non-deductible compensation. +Compensation Committee Interlocks and Insider Participation +No member of the Compensation Committee was, during the year ended December 31, 2016, an officer or employee of Patterson-UTI or any of its subsidiaries, or was formerly an officer of Patterson-UTI or any of its subsidiaries, or had any relationships requiring disclosure by Patterson-UTI under Item 404 of Regulation S-K. +During the year ended December 31, 2016, none of Patterson-UTI’s executive officers served as (i) a member of the compensation committee (or other board committee performing equivalent functions) of another entity, one of whose executive officers served on the Compensation Committee, (ii) a director of another entity, one of whose executive officers served on the Compensation Committee, or (iii) a member of the compensation committee (or other board committee performing equivalent functions) of another entity, one of whose executive officers served as a director of Patterson-UTI. +Compensation Committee Report +The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based upon such review and discussion, the Compensation Committee has recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement. +Terry H. Hunt, Chairman +Charles O. Buckner +Michael W. Conlon +Curtis W. Huff +50 +EXECUTIVE COMPENSATION +The following table sets forth information concerning compensation for the fiscal year ended December 31, 2016 with respect to the principal executive officer, the principal financial officer and the other Named Executive Officers of Patterson-UTI: +SUMMARY COMPENSATION TABLE +Name and Principal Position(s) +Year +Salary +($) +Bonus +($) +Stock +Awards +($)(1) +Option +Awards +($)(2) +Non-equity +Incentive plan +Compensation +($)(3) +All Other +Compensation +($)(4) +Total +($) +William Andrew Hendricks, Jr. +2016 +$ +600,000 +$ +— +$ +3,622,171 +(5) +$ +1,526,508 +$ +468,939 +$ +10,600 +$ +6,228,218 +President & Chief +2015 +$ +600,000 +$ +— +$ +2,860,622 +$ +1,508,164 +$ +1,238,885 +$ +10,600 +$ +6,218,271 +Executive Officer +2014 +$ +600,000 +$ +— +$ +3,579,705 +$ +1,178,854 +$ +1,912,639 +$ +10,400 +$ +7,281,598 +John E. Vollmer III +2016 +$ +350,000 +$ +— +$ +1,757,844 +(6) +$ +915,227 +$ +312,626 +$ +10,600 +$ +3,346,297 +Executive Vice President — +2015 +$ +350,000 +$ +— +$ +1,714,691 +$ +904,898 +$ +825,924 +$ +10,600 +$ +3,806,113 +Corporate Development, +2014 +$ +350,000 +$ +— +$ +2,386,470 +$ +785,903 +$ +1,275,093 +$ +10,400 +$ +4,807,866 +Chief Financial Officer & Treasurer +Mark S. Siegel +2016 +$ +350,000 +$ +— +$ +1,406,971 +(7) +$ +732,278 +$ +375,151 +$ +— +$ +2,864,400 +Chairman of the Board +2015 +$ +350,000 +$ +— +$ +2,285,577 +$ +1,206,531 +$ +991,108 +$ +— +$ +4,833,216 +2014 +$ +350,000 +$ +— +$ +4,772,940 +$ +1,571,806 +$ +2,550,186 +$ +— +$ +9,244,932 +Kenneth N. Berns +2016 +$ +265,000 +$ +— +$ +1,757,844 +(6) +$ +915,227 +$ +312,626 +$ +— +$ +3,250,697 +Executive Vice President — +2015 +$ +265,000 +$ +— +$ +1,714,691 +$ +904,898 +$ +825,924 +$ +— +$ +3,710,513 +Chief Commercial Officer +2014 +$ +265,000 +$ +— +$ +2,386,470 +$ +785,903 +$ +1,275,093 +$ +— +$ +4,712,466 +James M. Holcomb +2016 +$ +325,000 +$ +— +$ +890,110 +(8) +$ +— +$ +111,416 +$ +23,998 +(9) +$ +1,350,524 +President — Patterson-UTI +2015 +$ +325,000 +$ +— +$ +750,600 +$ +— +$ +237,874 +$ +22,600 +(9) +$ +1,336,074 +Drilling Company LLC +2014 +$ +325,000 +$ +— +$ +1,057,314 +$ +— +$ +343,111 +$ +22,400 +(9) +$ +1,747,825 +(1) +Amounts include the fair value of awards at the date of grant as determined in accordance with FASB ASC Topic 718 with respect to restricted stock awarded to the Named Executive Officer in the fiscal years ended December 31, 2016, 2015 and 2014 and with respect to performance units awarded to Messrs. Hendricks, Vollmer, Siegel and Berns in the fiscal years ended December 31, 2016, 2015 and 2014. Performance conditions for all awards of restricted stock had been satisfied as of December 31, 2016. For additional information related to the assumptions used and valuation of restricted stock and performance units, see Note 11 to the consolidated financial statements in Patterson-UTI’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016. +(2) +Amounts represent the fair value at the date of grant as determined in accordance with FASB ASC Topic 718 with respect to stock options awarded to the Named Executive Officer in the fiscal years ended December 31, 2016, 2015 and 2014. For additional information related to the assumptions used in connection with the valuation of stock options using the Black-Scholes-Merton option pricing model, see Note 11 to the consolidated financial statements in Patterson-UTI’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016. +(3) +Represents annual cash bonuses earned for the fiscal years ended December 31, 2016, 2015 and 2014. The bonus plan in each of those fiscal years for the top four Named Executive Officers provided for a bonus pool based on Adjusted EBITDA, subject to a minimum Adjusted EBITDA of $150 million for 2016, $400 million for 2015 and $500 million for 2014. The bonus pool was allocated among the participants based on a pre-determined sharing percentage. The total amount paid from the bonus pool to Messrs. Hendricks, Vollmer, Siegel and Berns was $1.47 million for 2016, $3.88 million for 2015 and $7.01 million for 2014. The bonus plan in each of those fiscal years for Mr. Holcomb provided for a bonus based on Adjusted EBITDA for Patterson-UTI’s contract drilling business, subject to a minimum Adjusted EBITDA of $150 million for 2016, $300 million for 2015 and $400 million for 2014. +(4) +Amounts reflect contributions to a 401(k) plan by Patterson-UTI. +(5) +Amount includes $1,494,324 related to an award of shares of restricted stock, $688,494 related to an award of shares of restricted stock and $1,439,353 related to an award of performance units during 2016. Assuming maximum performance, the value of the performance unit award would be $2,878,706. +(6) +Amount includes $895,482 related to an award of shares of restricted stock and $862,362 related to an award of performance units during 2016. Assuming maximum performance, the value of the performance unit award would be $1,724,724. +(7) +Amount includes $717,498 related to an award of shares of restricted stock and $689,473 related to an award of performance units during 2016. Assuming maximum performance, the value of the performance unit award would be $1,378,946. +(8) +Amount reflects an award of shares of restricted stock. +(9) +Amount includes $10,600 contributed to a 401(k) plan by Patterson-UTI and an automobile allowance of $13,398. +51 +The following table sets forth information concerning grants of plan-based awards during the fiscal year e nded December 31, 2016 to the Named Executive Officers: +Grants of Plan-Based Awards +All Other +All Other +Estimated Future Payouts +Stock Awards: +Option Awards: +Exercise or +Grant Date +under +Estimated Future Payouts under +Number of +Number of +Base Price +Fair Value of +Non-equity Incentive Plan Awards +Equity Incentive Plan Awards +Shares of +Securities +of Option +Stock and +Name +Grant +Date +Threshold +($) +Target +($) +Maximum +($) +Threshold +(#) +Target +(#) +Maximum +($) +Stock or +Units (#)(4) +Underlying +Options (#)(5) +Awards +($/Sh) +Option Awards +($)(6) +William Andrew Hendricks, Jr +2/07/16 +(1) +$ +225,000 +$ +468,939 +$ +5,000,000 +— +— +— +— +— +— +— +4/26/16 +(2) +— +— +— +34,550 +69,100 +138,200 +— +— +— +$ +1,439,353 +4/26/16 +— +— +— +— +— +— +80,600 +— +— +$ +1,494,324 +4/26/16 +— +— +— +— +— +— +— +315,400 +$ +18.54 +$ +1,526,508 +8/01/16 +— +— +— +— +— +— +36,661 +— +— +$ +688,494 +John E. Vollmer III +2/07/16 +(1) +$ +150,000 +$ +312,626 +$ +5,000,000 +— +— +— +— +— +— +— +4/26/16 +(2) +— +— +— +20,700 +41,400 +82,800 +— +— +— +$ +862,362 +4/26/16 +— +— +— +— +— +— +48,300 +— +— +$ +895,482 +4/26/16 +— +— +— +— +— +— +— +189,100 +$ +18.54 +$ +915,227 +Mark S. Siegel +2/07/16 +(1) +$ +180,000 +$ +375,151 +$ +5,000,000 +— +— +— +— +— +— +— +4/26/16 +(2) +— +— +— +16,550 +33,100 +66,200 +— +— +— +$ +689,473 +4/26/16 +— +— +— +— +— +— +38,700 +— +— +$ +717,498 +4/26/16 +— +— +— +— +— +— +— +151,300 +$ +18.54 +$ +732,278 +Kenneth N. Berns +2/07/16 +(1) +$ +150,000 +$ +312,626 +$ +5,000,000 +— +— +— +— +— +— +— +4/26/16 +(2) +— +— +— +20,700 +41,400 +82,800 +— +— +— +$ +862,362 +4/26/16 +— +— +— +— +— +— +48,300 +— +— +$ +895,482 +4/26/16 +— +— +— +— +— +— +— +189,100 +$ +18.54 +$ +915,227 +James M. Holcomb +2/07/16 +(3) +$ +48,000 +$ +111,416 +$ +5,000,000 +— +— +— +— +— +— +— +6/09/16 +— +— +— +— +— +— +41,000 +— +— +$ +890,110 +(1) +The 2016 non-equity incentive cash bonus plan for the fiscal year ended December 31, 2016 was approved on February 2, 2016 for Messrs. Hendricks, Vollmer, Siegel and Berns. The bonus plan provided for a bonus pool based on a percentage of Adjusted EBITDA for the fiscal year ended December 31, 2016, subject to an Adjusted EBITDA threshold of $150 million. The Compensation Committee set an Adjusted EBITDA percentage range of approximately 0.55 to 0.81%, which percentage range was expressed prior to giving effect to the reduction in Mr. Siegel’s sharing percentage, with the actual percentage awarded to be based on the Compensation Committee’s assessment of Patterson-UTI’s and executive management’s progress toward and achievement of certain strategic and other objectives. The Compensation Committee determined the actual Adjusted EBITDA payment percentage to be 0.81% based on this assessment. The bonus pool was allocated among Messrs. Hendricks, Vollmer, Siegel and Berns based on a pre-determined sharing percentage, as adjusted to reflect a 40% reduction for Mr. Siegel as discussed in CD&A. The threshold amount presented in this table is calculated for the respective officer based on the approved allocation formula and an assumed Adjusted EBITDA of $150 million using 0.55% of Adjusted EBITDA (the bottom of the specified range) as set forth when the plan was approved due to the fact that the bonus plan provided for no payment if the Adjusted EBITDA threshold of $150 million was not satisfied. The target amount is calculated based on Patterson-UTI’s actual Adjusted EBITDA for the fiscal year ended December 31, 2016, the actual Adjusted EBITDA percentage as determined by the Compensation Committee and the allocation formula applied to the bonus pool for distribution. The cash bonuses awarded from the bonus pool were awarded under the 2014 LTIP, which was designed to meet the requirements of Section 162(m) of the Code. Accordingly, if the $150 million Adjusted EBITDA performance goal was achieved, the Compensation Committee was authorized to approve payments to each of Messrs. Hendricks, Vollmer, Siegel and Berns up to $5 million, the maximum amount that could be awarded to an individual under any cash-based performance award granted under the 2014 LTIP during a 12-month period, subject to reduction based on the percentage of the Adjusted EBITDA target set by the Compensation Committee. +(2) +On April 26, 2016, Patterson-UTI granted performance unit awards to Messrs. Hendricks, Vollmer, Siegel and Berns. These awards provide for the recipients to receive shares of Common Stock upon the achievement of certain performance goals established by Patterson-UTI during a specified period. The performance period is the period from April 1, 2016 through March 31, 2019. The performance goals are tied to Patterson-UTI’s total shareholder return for the performance period as compared to total shareholder return for our peer group determined by the Compensation Committee. The recipients will receive a target number of shares if Patterson-UTI’s total shareholder return is positive and, when compared to the peer group, is at the 50 th percentile and two times the target if at the 75 th percentile or higher. If Patterson-UTI’s total shareholder return is positive, and, when compared to the peer group, is at the 25 th percentile, the recipients will only receive one-half of the target number of shares. The grant of shares when achievement is between the 25 th and 75 th percentile will be determined on a pro-rata basis. If Patterson-UTI’s total shareholder return is negative and, when compared to the peer group, is at or above the 25 th percentile, then the recipients will receive one-half of the number of shares they would have received had Patterson-UTI’s total shareholder return been positive. +52 +(3) +The 2016 non-equity incentive cash bonus plan for Mr. Holcomb for the fiscal year ended December 31, 2016 was approved on February 2, 2016. The 2016 bonus plan for M r. Holcomb provided for a bonus based on a percentage of Adjusted EBITDA for Patterson-UTI’s contract drilling business (“Adjusted Drilling EBITDA”) for the fiscal year ended December 31, 2016, subject to an Adjusted Drilling EBITDA threshold of $150 milli on. The Compensation Committee set a targeted Adjusted Drilling EBITDA percentage range of 0.032% to 0.048%. The actual percentage awarded was based on the Compensation Committee’s assessment of Mr. Holcomb’s individual performance and certain factors spec ific to the Patterson-UTI’s contract drilling business. The Compensation Committee set the Adjusted Drilling EBITDA payment percentage at 0.048% based on these criteria. The threshold amount presented in this table is calculated for Mr. Holcomb based on an assumed Adjusted Drilling EBITDA of $150 million using 0.032% of Adjusted Drilling EBITDA (the bottom of the specified range) as set forth when the plan was approved due to the fact that the bonus plan provided for no payment if the Adjusted Drilling EBIT DA threshold of $150 million was not satisfied. The target amount is calculated based on actual Adjusted Drilling EBITDA for the fiscal year ended December 31, 2016, and the Adjusted Drilling EBITDA percentage as determined by the Compensation Committee. T he cash bonus awarded to Mr. Holcomb was awarded under the 2014 LTIP, which was designed to meet the requirements of Section 162(m) of the Code. Accordingly, if the $150 million Adjusted Drilling EBITDA performance goal was achieved, the Compensation Commi ttee was authorized to approve payment to Mr. Holcomb up to $5 million, the maximum amount that could be awarded to an individual under any cash-based performance award granted under the 2014 LTIP during a 12-month period, subject to reduction based on the percentage of the Adjusted Drilling EBITDA target set by the Compensation Committee. +(4) +Shares of restricted stock were awarded pursuant to the 2014 LTIP. Ordinary dividends are paid on unvested shares of restricted stock. The rate at which these dividends are paid is the same rate at which ordinary dividends are paid on all other shares of Common Stock. The right to receive these dividends has been included in the grant date fair value of stock awards presented in the table. The shares awarded to Messrs. Hendricks, Vollmer, Siegel and Berns vest over a three-year period as follows: one-third on April 26, 2017, and the remainder in equal monthly installments over the 24 months following April 26, 2017. The shares awarded to Mr. Holcomb vest over a three-year period as follows: one-third on June 9, 2017, one-third on June 9, 2018 and one-third on June 9, 2019. +(5) +Options were granted pursuant to the 2014 LTIP. Options awarded to Messrs. Hendricks, Vollmer, Siegel and Berns vest over a three-year period as follows: one-third on April 26, 2017, and the remaining two-thirds in equal monthly installments over the 24 months following April 26, 2017. +(6) +The grant date fair value of restricted stock was based on the closing price of Patterson-UTI Common Stock on the date of grant, which is consistent with the valuation used by Patterson-UTI for the recognition of compensation expense under FASB ASC Topic 718. The grant date fair value of stock options was determined using the Black-Scholes option pricing model, which is consistent with the valuation used by Patterson-UTI for the recognition of compensation expense under FASB ASC Topic 718, with assumptions that are more fully described in Note 11 to the consolidated financial statements in Patterson-UTI’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016. The grant date fair value of performance unit awards was determined based on a Monte-Carlo simulation model, which is consistent with the valuation used by Patterson-UTI for the recognition of compensation expense under FASB ASC Topic 718. +53 +The following table sets forth information concerning outstanding equity awards at December 31, 2016 for the Named Executive Officers: +Outstanding Equity Awards at Fiscal Year-End +Stock Awards +Number +Equity Incentive +Equity Incentive +of Shares +Plan Awards: +Plan Awards: Market +Option Awards +or Units of +Number of +or Payout Value of +Number of Securities +Option +Stock +Market Value of +Unearned Shares, +Unearned Shares, +Underlying Unexercised +Exercise +Option +That Have +Shares or Units of +Units or Other +Units or Other +Options (#) +Price +Expiration +Not +Stock That Have +Rights that +Rights that Have +Name +Exercisable +Unexercisable +($) +Date +Vested (#) +Not Vested ($)(1) +Have Not Vested(2) +Not Vested ($)(1) +William Andrew Hendricks, Jr. +100,000 +— +$ +17.27 +04/01/22 +157,322 +(3) +$ +4,235,108 +174,700 +(4) +$ +4,702,924 +25,000 +— +$ +15.82 +09/30/22 +172,500 +— +$ +22.88 +04/21/23 +104,666 +13,084 +(5) +$ +33.10 +04/21/24 +142,777 +114,223 +(6) +$ +20.33 +04/20/25 +— +315,400 +(7) +$ +18.54 +04/25/26 +John E. Vollmer III +150,000 +— +$ +24.17 +04/22/17 +72,800 +(8) +$ +1,959,776 +107,500 +(9) +$ +2,893,900 +119,000 +— +$ +29.31 +04/24/18 +175,000 +— +$ +13.17 +04/27/19 +177,500 +— +$ +14.83 +04/26/20 +69,000 +— +$ +31.20 +04/25/21 +160,000 +— +$ +16.20 +04/23/22 +115,000 +— +$ +22.88 +04/21/23 +69,777 +8,723 +(5) +$ +33.10 +04/21/24 +85,666 +68,534 +(6) +$ +20.33 +04/20/25 +— +189,100 +(7) +$ +18.54 +04/25/26 +Mark S. Siegel +300,000 +— +$ +24.17 +04/22/17 +74,501 +(10) +$ +2,005,567 +139,900 +(11) +$ +3,766,108 +238,000 +— +$ +29.31 +04/24/18 +350,000 +— +$ +13.17 +04/27/19 +355,000 +— +$ +14.83 +04/26/20 +138,000 +— +$ +31.20 +04/25/21 +320,000 +— +$ +16.20 +04/23/22 +230,000 +$ +22.88 +04/21/23 +139,555 +17,445 +(5) +$ +33.10 +04/21/24 +114,222 +91,378 +(6) +$ +20.33 +04/20/25 +— +151,300 +(7) +$ +18.54 +04/25/26 +Kenneth N. Berns +150,000 +— +$ +24.17 +04/22/17 +72,800 +(8) +$ +1,959,776 +107,500 +(9) +$ +2,893,900 +119,000 +— +$ +29.31 +04/24/18 +175,000 +— +$ +13.17 +04/27/19 +177,500 +— +$ +14.83 +04/26/20 +69,000 +— +$ +31.20 +04/25/21 +160,000 +— +$ +16.20 +04/23/22 +115,000 +— +$ +22.88 +04/21/23 +69,777 +8,723 +(5) +$ +33.10 +04/21/24 +85,666 +68,534 +(6) +$ +20.33 +04/20/25 +— +189,100 +(7) +$ +18.54 +04/25/26 +James M. Holcomb +— +— +— +— +75,434 +(12) +$ +2,030,683 +— +— +(1) +Based on the closing price of Patterson-UTI Common Stock on December 31, 2016 of $26.92 per share. +(2) +As of December 31, 2016, performance unit awards had been granted to Messrs. Hendricks, Vollmer, Siegel and Berns. The 2014, 2015 and 2016 performance unit awards were granted on April 22, 2014, April 21, 2015 and April 26, 2016, respectively, and provide for an award of shares of Patterson-UTI common stock to the recipient based on Patterson-UTI’s total shareholder return compared to our peer group of companies at the time of grant for the performance period from April 1 of the grant year through March 31 of the third year following the grant. All performance unit awards provide for a target payout based on a target level of total shareholder return compared to the peer group. The amounts presented in this column represent the target payout under the performance unit awards. Based on Patterson-UTI’s total shareholder return during the performance period, the recipients could receive a number of shares ranging from no shares to two times the target number of shares. For the Performance Units awarded prior to 2016, there is no payout unless Patterson-UTI’s total shareholder return is positive and, when compared to the peer group, is at or above the 25 th percentile. For the Performance Units granted in 2016, if Patterson-UTI’s total shareholder return is negative and, when compared to the peer group, is at or above the 25 th percentile, then the recipients will receive one-half of the number of shares they would have received had Patterson-UTI’s total shareholder return been positive. +(3) +These shares of restricted stock vest as follows: 7,083 shares in equal monthly installments from January 22, 2017 through April 22, 2017; 32,978 shares in equal monthly installments from January 21, 2017 through April 21, 2018; 26,866 shares on April 26, 2017; 53,734 shares in equal monthly installments from May 26, 2017 through April 26, 2019; 12,220 shares on August 1, 2017 and 24,441 shares in equal monthly installments from September 1, 2017 through August 1, 2019. +54 +(4) +Amount includes 42,000 shares related to the 2014 performance unit award, 63,600 shares related to the 2015 performance unit award and 69,100 shares related to the 2016 performance unit award. +(5) +These options vest in equal monthly installments from January 22, 2017 through April 22, 2017. +(6) +These options vest in equal monthly installments from January 21, 2017 through April 21, 2018. +(7) +These options vest as follows: one-third on April 26, 2017 and the remainder in equal monthly installments over the 24 months following April 26, 2017. +(8) +These shares of restricted stock vest as follows: 4,722 shares in equal monthly installments from January 22, 2017 through April 22, 2017; 19,778 shares in equal monthly installments from January 21, 2017 through April 21, 2018; 16,100 shares on April 26, 2017 and 32,200 shares in equal monthly installments from May 26, 2017 through April 26, 2019. +(9) +Amount includes 28,000 shares related to the 2014 performance unit award, 38,100 shares related to the 2015 performance unit award and 41,400 shares related to the 2016 performance unit award. +(10) +These shares of restricted stock vest as follows: 9,445 shares in equal monthly installments from January 22, 2017 through April 22, 2017; 26,356 shares in equal monthly installments from January 21, 2017 through April 21, 2018; 12,900 shares on April 26, 2017 and 25,800 shares in equal monthly installments from May 26, 2017 through April 26, 2019. +(11) +Amount includes 56,000 shares related to the 2014 performance unit award, 50,800 shares related to the 2015 performance unit award and 33,100 shares related to the 2016 performance unit award. +(12) +These shares of restricted stock vest as follows: 36,100 shares on June 9, 2017; 25,667 shares on June 9, 2018 and 13,667 shares on June 9, 2019. +The following table sets forth information concerning option exercises and stock awards vested during the fiscal year ended December 31, 2016 for the Named Executive Officers: +Option Exercises and Stock Vested +Option awards +Stock awards +Name +Number of +shares acquired +on exercise (#) +Value realized +on exercise ($) +Number of +shares acquired +on vesting (#) +Value realized +on vesting ($)(1) +William Andrew Hendricks, Jr. +— +$ +— +72,056 +$ +1,402,544 +John E. Vollmer III +— +$ +— +45,277 +$ +879,827 +Mark S. Siegel +— +$ +— +74,055 +$ +1,429,641 +Kenneth N. Berns +— +$ +— +45,277 +$ +879,827 +James M. Holcomb +— +$ +— +34,433 +$ +747,540 +(1) +Value realized on vesting is based on the closing price of Patterson-UTI common stock on the day the respective shares vested; provided that if the stock market was closed on the day the respective shares vested, the value realized on vesting is based on the closing price of Patterson-UTI common stock on the day immediately prior to the day the respective shares vested. +NO PENSION BENEFITS OR NONQUALIFIED DEFERRED COMPENSATION +Patterson-UTI does not provide any pension benefits for any of the Named Executive Officers. None of the Named Executive Officers had any items of nonqualified deferred compensation during 2016. As a result, tables with respect to pension benefits and nonqualified deferred compensation have not been provided. +DIRECTOR COMPENSATION +The following table sets forth information concerning compensation for the fiscal year ended December 31, 2016 with respect to the directors of Patterson-UTI who are not executive officers: +Name +Fees earned +or paid in cash +($) +Stock awards +($)(1) +Option awards +($)(2) +All other +compensation +($) +Total +($) +Charles O. Buckner +$ +63,333 +$ +45,240 +$ +43,276 +$ +— +$ +151,849 +Michael W. Conlon +$ +49,166 +$ +45,240 +$ +43,276 +$ +— +$ +137,682 +Curtis W. Huff +$ +78,333 +$ +45,240 +$ +43,276 +$ +— +$ +166,849 +Terry H. Hunt +$ +63,333 +$ +45,240 +$ +43,276 +$ +— +$ +151,849 +Tiffany J. Thom +$ +48,333 +$ +45,240 +$ +43,276 +$ +— +$ +136,849 +(1) +Amounts set forth represent the fair value at the date of grant as determined in accordance with FASB ASC Topic 718 with respect to restricted stock awarded to the directors in the fiscal year ended December 31, 2016. For additional information related to the assumptions used and valuation of restricted stock, see Note 11 to the consolidated financial statements in Patterson-UTI’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016. Messrs. Buckner, Conlon, Huff and +55 +Hunt and Ms. Thom each received an award of 3,000 shares of restricted stock on January 1, 2016 with a market value of $15.08 per share. The shares awarded to Messrs. Buckner, Conlon, Huff and Hunt and Ms. Thom fully ves ted on January 1, 2017. As of December 31, 2016, Messrs. Buckner, Conlon, Huff and Hunt and Ms. Thom each held 3,000 unvested shares of restricted stock. +(2) +Amounts set forth represent the fair value at the date of grant as determined in accordance with FASB ASC Topic 718 with respect to stock options awarded to the directors in the fiscal year ended December 31, 2016. For additional information related to the assumptions used in connection with the valuation of stock options using the Black-Scholes-Merton option pricing model, see Note 11 to the consolidated financial statements in Patterson-UTI’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016. Messrs. Buckner, Conlon, Huff and Hunt and Ms. Thom each received options to purchase 10,000 shares of stock on January 1, 2016 with a fair value of $4.33 per share. The options awarded to Messrs. Buckner, Conlon, Huff and Hunt and Ms. Thom fully vested on January 1, 2017. As of December 31, 2016, Messrs. Buckner, Conlon, Huff and Hunt and Ms. Thom held the following options to purchase shares of Common Stock: +Number of Securities Underlying +Unexercised Options (#) +Name +Exercisable +Unexercisable +Total +Charles O. Buckner +80,000 +10,000 +90,000 +Michael W. Conlon +40,000 +10,000 +50,000 +Curtis W. Huff +60,000 +10,000 +70,000 +Terry H. Hunt +80,000 +10,000 +90,000 +Tiffany J. Thom +20,000 +10,000 +30,000 +Directors who are also employees of Patterson-UTI do not receive compensation for serving as a director or as a member of a committee of the Board of Directors. All directors are reimbursed for reasonable out-of-pocket expenses incurred in connection with serving as a member of the Board of Directors. +Prior to October 2016, the compensation for the non-employee directors was as follows: Each non-employee director received annual cash compensation of $35,000 and (i) 3,000 shares of restricted stock subject to one-year vesting (subject to acceleration in certain limited situations, including a change of control) and (ii) an option to purchase 10,000 shares of Common Stock at an exercise price equal to the closing price of Common Stock on the grant date. The option had a 10-year term, vested after one-year (subject to acceleration in certain limited situations, including a change of control) and contained a right to exercise for three years following cessation of the holder as a director (but not beyond the 10-year term). Each non-employee director that served on the Audit Committee or the Compensation Committee received additional annual cash compensation of $10,000 per committee on which he or she served, with the chairman of each such committee receiving $15,000. The Lead Director received additional annual cash compensation of $20,000. +In October 2016, the Board of Directors approved modifications to the non-employee director compensation program, such that current compensation for the directors is as follows: Each non-employee director receives annual cash compensation of $75,000 and shares of restricted stock on January 1 of each year with a grant date value of $175,000, subject to one-year vesting (subject to acceleration in certain limited situations, including a change of control). Each non-employee director that serves on the Audit Committee or the Compensation Committee receives additional annual cash compensation of $10,000 per committee on which he or she serves, with the Chair of each such committee receiving $15,000. The Chair of the Nominating and Corporate Governance Committee receives additional annual cash compensation of $10,000. The Lead Director receives additional annual cash compensation of $20,000. +EMPLOYMENT-RELATED AGREEMENTS +Change in Control, Employment and Severance Agreements +Change in Control Agreements with Messrs. Siegel, Berns and Vollmer +Patterson-UTI has Change in Control Agreements with Messrs. Siegel, Berns and Vollmer (each agreement, a “CIC Agreement” and collectively, the “CIC Agreements”). The CIC Agreements were entered into to protect these executives should a change in control occur, thereby encouraging such executive to remain in the employ of Patterson-UTI and not be distracted from the performance of his duties to Patterson-UTI by the possibility of a change in control. +56 +Each CIC Agreement generally has an initial term with automatic twelve-month renewals unless Patterson-UTI notifies the executive at least ninety days before the end of such renewal period that the term will not be extended. If a change in control of Patterson-UTI occurs during the term of the CIC Agreement and the executive’s employment is terminated (i) by Patterson-UTI other than for cause or other than automatically as a result of death, disabil ity or retirement, or (ii) by the executive for good reason (as those terms are defined in the CIC Agreements), then the executive shall generally be entitled to, among other things: +• +a bonus payment equal to the highest bonus paid after the CIC Agreement was entered into (such bonus payment for each executive prorated for the portion of the fiscal year preceding the termination date); +• +a payment equal to 2.5 times (in the case of Mr. Siegel) or 2 times (in the case of Messrs. Berns and Vollmer) the sum of (i) the highest annual salary in effect for such executive and (ii) the average of the three annual bonuses earned by the executive for the three fiscal years preceding the termination date; and +• +continued coverage under Patterson-UTI’s welfare plans for up to three years (in the case of Mr. Siegel) or two years (in the case of Messrs. Berns and Vollmer). +As was customary when the CIC Agreements were entered into more than ten years ago, each CIC Agreement provides the executive with a full gross-up payment for any excise taxes imposed on payments and benefits received under the CIC Agreement or otherwise, including other taxes that may be imposed as a result of the gross-up payment. As indicated above, the Compensation Committee subsequently adopted a policy, more than five years ago, to no longer approve tax-gross ups in connection with compensation arrangements, and the employment agreements entered into with Mr. Hendricks in 2016 and Mr. Holcomb in 2017, which are described below, do not include a tax gross-up provision. +A “change in control” is principally defined by the CIC Agreement as: +• +an acquisition by any individual, entity or group of beneficial ownership of 35% or more of either Patterson-UTI’s then outstanding common stock or the combined voting power of the then outstanding voting securities of Patterson-UTI entitled to vote in the election of directors, +• +a change occurs in which the members of the Board of Directors as of the date of the CIC Agreement cease to constitute at least a majority of Patterson-UTI’s Board of Directors unless that change occurs through a vote of at least a majority of the incumbent members of the Board of Directors, or +• +a change in the beneficial ownership of Patterson-UTI following consummation of a reorganization, merger, consolidation, sale of Patterson-UTI or any subsidiary of Patterson-UTI or a disposition of all or substantially all of the assets of Patterson-UTI, in which the beneficial owners immediately prior to the transaction own 65% or less of outstanding common stock of the newly combined or merged entity. +Severance Agreements with Messrs. Siegel, Berns and Vollmer +In order to address prior severance agreements between UTI Energy Corp. and each of Messrs. Siegel, Berns and Vollmer, Patterson-UTI has entered into written letter agreements with each of these executives pursuant to which Patterson-UTI has agreed to pay each such executive within ten days of the termination of his employment with Patterson-UTI for any reason (including voluntary termination by him), an amount in cash equal to his annual base salary at the time of such termination. Any payment made by Patterson-UTI pursuant to these letter agreements will reduce dollar for dollar any payment owed to such person, if any, pursuant to the CIC Agreements. +57 +Employment Agreements with Messrs. Hendricks and Holcomb +Patterson-UTI has Employment Agreements with Messrs. Hendricks and Holcomb. Each Employment Agreement generally has an initial three-year term, subject to automatic annual renewal. The executive may terminate his employment under his Employment Agreement by providing written notice of such termination at least 30 days before the effective date of such termination. Under specified circumstances, Patterson-UTI may terminate the executive’s employment under his Employment Agreement for cause (as defined in the Employment Agreement) by either (i) providing written notice 10 days before the effective date of such termination and by granting at least 10 days to cure the cause for such termination or (ii) by providing written notice of such termination at least 30 days before the effective date of such termination and by granting at least 20 days to cure the cause for such termination, provided that if the matter is reasonably determined by Patterson-UTI to not be capable of being cured, the executive may be terminated for cause on the date the written notice is delivered. The Employment Agreement also provides for, among other things, severance payments and the continuation of certain benefits following termination by Patterson-UTI of the executive other than for cause, or termination by the executive for good reason (as defined in each Employment Agreement). Under these provisions, if the executive’s employment is terminated by Patterson-UTI without cause, or the executive terminates his employment for good reason: +• +the executive will have the right to receive a lump-sum payment consisting of 3 times (in the case of Mr. Hendricks) or 2.5 times (in the case of Mr. Holcomb) the sum of (i) his base salary and (ii) the average annual cash bonus received by him for the three years prior to the date of termination, +• +the executive will have the right to receive a pro-rated lump-sum payment equal to his annual cash bonus based on actual results for the year, payable at the same time as annual cash bonuses are paid to active employees, +• +Patterson-UTI will accelerate vesting of all options, restricted stock and performance unit awards on the 60th day following the executive’s termination, and +• +Patterson-UTI will pay the executive certain accrued obligations and certain obligations pursuant to the terms of employee benefit plans. +If a termination by Patterson-UTI other than for cause or by the executive for good reason occurs following a change in control (which is defined in a substantially similar manner to the definition in the CIC Agreements, and which for Mr. Holcomb also includes a change in control in certain circumstances of Patterson-UTI Drilling Company LLC), the executive will generally be entitled to the same severance payments and benefits described above except that the pro-rated lump-sum payment for annual cash bonuses will be based on his highest annual cash bonus for the last three years, and the executive will be entitled to 36 months (in the case of Mr. Hendricks) or 30 months (in the case of the Mr. Holcomb) of subsidized benefits continuation coverage. +Equity Award Agreements with Named Executive Officers +All unvested stock options and restricted stock awards held by Messrs. Siegel, Hendricks, Berns and Vollmer vest upon a change of control as defined by the underlying award agreements. Upon a change in control as defined in the underlying performance unit award grants, Messrs. Hendricks, Vollmer, Siegel and Berns would receive the target number of shares issuable thereunder. All restricted stock and performance unit awards held by the Named Executive Officers provide that in the event of termination of employment due to death or disability, the holder would vest in a portion of the award. With respect to Mr. Hendricks, such a termination at December 31, 2016 would have resulted in the accelerated vesting of 24,715 shares of restricted stock with a fair value of $665,328. With respect to Messrs. Vollmer and Berns, such a termination at December 31, 2016 would have resulted in the accelerated vesting of 11,802 shares of restricted stock with a fair value of $317,710. With respect to Mr. Siegel, such a termination at December 31, 2016 would have resulted in the accelerated vesting of 10,151 shares of restricted stock with a fair value of $273,265. With respect to Mr. Holcomb, such a termination at December 31, 2016 would have resulted in the accelerated vesting of 20,287 shares of restricted stock with a fair value of $546,126. In the event of termination of employment due to death or disability, the holders of performance units would vest in the portion of the performance unit award that was earned at the time of death or disability. This payment would be determined at the end of the performance period and would equal the amount that the holder would have received at that time, pro-rated for the amount of time from the date of grant through the date of death or disability. +58 +Potential Payments Upon a Termination or Change in Control +Amounts that each of the Named Executive Officers would be entitled to under the CIC Agreements (or in the case of Messrs. Hendricks and Holcomb, the Employment Agreements) and other award agreements if a change in control had occurred as of December 31, 2016 and the employee’s employment was terminated by Patterson-UTI other than for cause or terminated by the employee for good reason (as defined in the CIC Agreements or in the case of Messrs. Hendricks and Holcomb, the Employment Agreements, and other award agreements) are reflected in the following table: +Potential Payments Upon a Change in Control +Cash Payments +Other Benefits +Name +Bonus +Payment +($)(1) +Salary and +Bonus +($)(2) +Option +Awards +($)(3) +Stock +Awards +($)(3) +Performance +Unit Awards +($)(4) +Other +Benefits +($)(5) +Total +($) +William Andrew Hendricks, Jr +$ +1,912,639 +$ +6,710,467 +$ +3,395,782 +$ +4,235,108 +$ +4,702,924 +$ +28,068 +$ +20,984,988 +John E. Vollmer III +$ +1,397,022 +$ +2,882,430 +$ +2,036,297 +$ +1,959,776 +$ +2,893,900 +$ +18,712 +$ +11,188,137 +Mark S. Siegel +$ +2,794,044 +$ +5,780,459 +$ +1,870,075 +$ +2,005,567 +$ +3,766,108 +$ +— +$ +16,216,253 +Kenneth N. Berns +$ +1,397,022 +$ +2,712,430 +$ +2,036,297 +$ +1,959,776 +$ +2,893,900 +$ +— +$ +10,999,425 +James M. Holcomb(6) +$ +343,111 +$ +1,897,269 +$ +— +$ +2,030,683 +$ +— +$ +22,349 +$ +4,293,412 +(1) +In the case of Messrs. Hendricks and Holcomb, the assumed bonus is equal to the highest annual bonus paid in the three years prior to 2016. In the case of Messrs. Vollmer, Siegel and Berns, the assumed bonus payment is equal to the highest annual bonus paid from the time the CIC Agreements were entered into through December 31, 2016. +(2) +The assumed salary and bonus payment represents 3.0 times (in the case of Mr. Hendricks), 2.5 times (in the case of Messrs. Siegel and Holcomb) or 2.0 times (in the case of Messrs. Vollmer and Berns) of the sum of the 2016 salary in effect for each employee (except in the case of Mr. Holcomb, the 2017 salary was used because it was increased effective January 1, 2017) and the average of the annual bonuses earned by each employee for 2015, 2014 and 2013. Bonus amounts earned in 2016 were not considered in this calculation as they were not determined until after December 31, 2016. +(3) +Each of the option and stock award agreements for Messrs. Hendricks, Vollmer, Siegel and Berns provide that unvested options and awards will vest upon a change in control. Amounts presented in the table represent the value of unvested option and stock awards using the market price of Patterson-UTI common stock at December 31, 2016. +(4) +Share settled performance units awarded to Messrs. Hendricks, Vollmer, Siegel and Berns in 2014, 2015 and 2016, include a provision that upon a change in control as defined in the respective award agreements, the Named Executive Officer will receive an award of shares equal to the target amount set forth in each agreement. Amounts presented in the table represent the assumed award of the target number of shares if a change in control had occurred on December 31, 2016, valued at the December 31, 2016 closing price of Patterson-UTI common stock of $26.92 per share. +(5) +Messrs. Hendricks, Vollmer and Holcomb participated in Patterson-UTI’s health and welfare plans as of December 31, 2016. The amounts presented represent Patterson-UTI’s portion of the premiums for three years in the case of Mr. Hendricks, 30 months in the case of Mr. Holcomb and two years in the case of Mr. Vollmer. No tax gross-up payments would have been payable to Messrs. Siegel, Vollmer or Berns under the terms of their CIC Agreements. +(6) +The amounts for Mr. Holcomb assume his employment agreement that was entered into in January 2017 was in effect as of December 31, 2016. +In the event of a termination of employment of Messrs. Siegel, Berns or Vollmer for any reason, including voluntary termination, such executive would be entitled to an amount in cash equal to his annual base salary at the time of such termination. Any such payment made by Patterson-UTI will reduce dollar for dollar any payment owed to such person that is reflect in the table above. In the case of Messrs. Hendricks or Holcomb, if the executive’s employment was terminated by Patterson-UTI other than for cause or terminated by the executive for good reason (as defined in the Employment Agreement) and not in connection with a change-in-control, then the executive would be entitled to the same potential payments and benefits as set forth in the table above, except that Mr. Hendricks’ cash payment would be lower by $1,443,700 and Mr. Holcomb’s cash payment would be lower by $231,695 as a result of the calculation of the bonus payment for the year in which the termination occurred. +With respect to Messrs. Hendricks or Holcomb, the foregoing severance benefits (other than the accrued obligations and benefit obligations) are conditioned on the executive’s execution of a release within 50 days of his termination that is not revoked during any applicable revocation period provided in such release. Their employment agreements also contain covenants and restrictions, including non-competition and non-solicitation provisions pursuant to which the executive will not be permitted to compete with Patterson-UTI in certain circumstances for a period of one year following termination of employment. +59 +Indemnification Agreements +Patterson-UTI has entered into an indemnification agreement with Messrs. Hendricks, Vollmer, Siegel and Berns and each of its directors containing provisions that may require Patterson-UTI, among other things, to indemnify such executive officers and directors against liabilities that may arise by reason of their status or service as executive officers or directors (subject to certain exceptions) and to advance expenses incurred as a result of any proceeding against them as to which they could be indemnified. +CERTAIN TRANSACTIONS +Patterson-UTI has a written policy with respect to related person transactions. In accordance with this policy, related person transactions are reviewed by the Lead Director or the chair of the Audit Committee, each of whom has full delegated authority to approve, disapprove, ratify, amend, terminate or rescind any such transaction, or direct that such transaction be submitted to the Audit Committee or the full Board of Directors for consideration. In approving or disapproving related person transactions, the relevant facts and circumstances of the related person transaction are considered, including whether such transaction is in, or not inconsistent with, the best interest of Patterson-UTI and whether, in appropriate cases, such transaction is on commercial terms at least as favorable to Patterson-UTI as would otherwise be available to or from an unrelated third party or to Patterson-UTI’s employees generally. Related person transactions generally include transactions in an amount that exceeds $50,000 between Patterson-UTI or any of its subsidiaries and an executive officer, a director (or nominee to become director), an immediate family member of any of the foregoing or any entity in which any of the foregoing has a 10% or greater beneficial ownership interest or in which they are an executive officer, general partner, principal or engaged in a similar position. Certain related person transactions have been pre-approved under the terms of the policy, including, subject to certain exceptions and limitations, the sale to or purchase from Patterson-UTI of goods and services by entities related to directors in the ordinary course of business that are immaterial to Patterson-UTI and with respect to which the director has no direct economic interest or decision making authority. +In connection with the acquisition by REMY Capital Partners III, L.P. (“REMY Capital”) of an ownership interest in UTI Energy Corp. in March 1995, REMY Capital succeeded to a registration rights agreement with UTI. As the successor-in-interest to UTI, Patterson-UTI assumed this registration rights agreement pursuant to which REMY Capital has the right to require Patterson-UTI to use its reasonable efforts to register shares held by REMY Capital under the Securities Act of 1933, as amended. In the event that such rights are exercised in connection with a primary offering proposed by Patterson-UTI (or a secondary offering with which Patterson-UTI agrees to participate), REMY Capital would bear its pro rata share of the costs of the offering, other than legal, accounting and printing costs, all of which Patterson-UTI would bear. In the event that REMY Capital elects to exercise such rights other than in connection with an offering in which Patterson-UTI participates, REMY Capital would bear all costs of the offering. These rights continue so long as REMY Capital continues to own the Common Stock that it acquired in March 1995. As of the date of this proxy statement, REMY Capital continues to hold 605,000 shares of such Common Stock. +Mr. Siegel, Chairman of the Board of Patterson-UTI, is President and sole stockholder of REMY Investors, which is the general partner of REMY Capital. Mr. Berns, a director and Executive Vice President – Chief Commercial Officer of Patterson-UTI, is an executive of REMY Investors. +60 +SECURITY OWNERSHIP OF CERTAIN +BENEFICIAL OWNERS AND MANAGEMENT +The following table sets forth, as of May 10, 2017, the stock ownership of (i) the Named Executive Officers, directors and Board nominees, individually, (ii) all directors, Board nominees and executive officers as a group and (iii) each person known by Patterson-UTI to be the beneficial owner of more than 5% of Common Stock. +Name of +Beneficial Owner +Amount and +Nature of +Beneficial +Ownership +Percent +of Class +Beneficial Owners of more than 5% of Patterson-UTI’s Common Stock: +BlackRock, Inc. +12,613,308 +(1) +5.9 +% +Dimensional Fund Advisors LP +12,257,747 +(2) +5.8 +% +The Vanguard Group +11,926,415 +(3) +5.6 +% +Wellington Management Group LLP +11,103,499 +(4) +5.2 +% +Directors and Named Executive Officers: +William Andrew Hendricks, Jr. +1,374,493 +(5) +* +John E. Vollmer III +2,079,364 +(6) +* +Mark S. Siegel +3,866,686 +(7) +1.8 +% +Kenneth N. Berns +1,738,786 +(8) +* +James M. Holcomb +286,106 +(9) +* +Charles O. Buckner +118,511 +(10) +* +Michael W. Conlon +77,500 +(11) +* +Curtis W. Huff +162,184 +(12) +* +Terry H. Hunt +139,371 +(13) +* +Tiffany J. Thom +45,500 +(14) +* +All directors and executive officers as a group (11 persons) +10,115,135 +(15) +4.6 +% +* +indicates less than 1.0% +(1) +Based solely on a Schedule 13G/A filed by BlackRock, Inc. with the SEC on January 25, 2017. According to the report, BlackRock, Inc. has sole voting power with respect to 12,070,207 shares and sole dispositive power with respect to 12,613,308 shares. The address of the principal business office of BlackRock, Inc. is 55 East 52nd Street, New York, New York 10055. +(2) +Based solely on a Schedule 13G filed by Dimensional Fund Advisors LP with the SEC on February 9, 2017. According to the report, Dimensional Fund Advisors LP has sole voting power with respect to 12,075,938 shares and sole dispositive power with respect to 12,257,747 shares. The address of the principal business office of Dimensional Fund Advisors LP is Building One, 6300 Bee Cave Road, Austin, Texas 78746. +(3) +Based solely on a Schedule 13G/A filed by The Vanguard Group with the SEC on February 10, 2017. According to the report, The Vanguard Group has sole voting power with respect to 88,296 shares, shared voting power with respect to 16,743 shares, sole dispositive power with respect to 11,828,938 shares and shared dispositive power with respect to 97,477 shares. The address of the principal business office of The Vanguard Group is 100 Vanguard Blvd., Malvern, Pennsylvania 19355. +(4) +Based solely on a Schedule 13G/A filed by Wellington Management Group LLP (“Wellington Management Group”), Wellington Group Holdings LLP (“Wellington Holdings”), Wellington Investment Advisors Holdings LLP (“Wellington Investment Advisors”) and Wellington Management Company LLP (“Wellington Management Company”, and together with Wellington Management Group, Wellington Holdings and Wellington Investment Advisors, the “Wellington Entities”) with the SEC on February 9, 2017. According to the report, Wellington Management Group, in its capacity as investment adviser, may be deemed to beneficially own 11,103,499 shares that are held of record by clients of certain affiliated investment advisors. Wellington Management Group, Wellington Holdings and Wellington Investment Advisors have shared power to vote or to direct the vote of 4,601,515 shares and shared power to dispose or to direct the disposition of 11,103,499 shares. Wellington Management Company has shared power to vote or to direct the vote of 4,318,026 shares and shared power to dispose or to direct the disposition of 10,664,076 shares. The address of the principal business office of the Wellington Entities is c/o Wellington Management Company LLP, 280 Congress Street, Boston, Massachusetts 02210. +(5) +Includes shares underlying stock options held by Mr. Hendricks that are presently exercisable or become exercisable within 60 days to purchase 723,516 shares. Does not include 264,134 shares underlying stock options held by Mr. Hendricks that are not presently exercisable and will not become exercisable within 60 days. Includes 409,887 shares of unvested restricted Common Stock held by Mr. Hendricks, over which he presently has voting power. +61 +(6) +Includes shares underlying stock options held by Mr. Vollmer that are presently exercisable or become exercisable within 60 days to purchase 1,078,904 shares. Does not include 158,396 shares underlying stock options held by Mr. Vollmer that are not presently exercisable and will not become exercisable within 60 days. Includes 169,194 shares of un vested restricted Common Stock held by Mr. Vollmer, over which he presently has voting power. The Common Stock beneficially owned by Mr. Vollmer includes 200,000 shares held in trust(s) for which he is a trustee. +(7) +Mr. Siegel is the President and sole stockholder of REMY Investors, which is the general partner of REMY Capital Partners III, L.P. (“REMY Capital”). The Common Stock beneficially owned by Mr. Siegel includes 605,000 shares of Common Stock owned by REMY Capital. The Common Stock beneficially owned by Mr. Siegel also includes stock options held by Mr. Siegel that are presently exercisable or become exercisable within 60 days to purchase 1,995,326 shares. Does not include 149,574 shares underlying stock options held by Mr. Siegel that are not presently exercisable and will not become exercisable within 60 days. Includes 314,781 shares of unvested restricted Common Stock held by Mr. Siegel, over which he presently has voting power. The Common Stock beneficially owned by Mr. Siegel includes 49,900 shares held in trust(s) for which he is the trustee. +(8) +Includes shares underlying stock options held by Mr. Berns that are presently exercisable or become exercisable within 60 days to purchase 1,078,904 shares. Does not include 158,396 shares underlying stock options held by Mr. Berns that are not presently exercisable and will not become exercisable within 60 days. Includes 169,194 shares of unvested restricted Common Stock held by Mr. Berns, over which he presently has voting power. The Common Stock beneficially owned by Mr. Berns includes 140,000 shares held in trust(s) for which he is the trustee. Does not include shares of Common Stock beneficially owned by REMY Investors. Mr. Berns disclaims beneficial ownership of such shares beneficially owned by REMY Investors. +(9) +Includes 97,706 shares of unvested restricted Common Stock held by Mr. Holcomb, over which he presently has voting power. +(10) +Includes shares underlying presently exercisable stock options held by Mr. Buckner to purchase 80,000 shares. Includes 6,500 shares of unvested restricted Common Stock held by Mr. Buckner, over which he presently has voting power. The Common Stock beneficially owned by Mr. Buckner includes 27,000 shares held by CDT Investments, LP, a limited partnership for which he is the sole member of the sole general partner. +(11) +Includes shares underlying presently exercisable stock options held by Mr. Conlon to purchase 50,000 shares. Includes 6,500 shares of unvested restricted Common Stock held by Mr. Conlon, over which he presently has voting power. +(12) +Includes shares underlying presently exercisable stock options held by Mr. Huff to purchase 70,000 shares. Includes 6,500 shares of unvested restricted Common Stock held by Mr. Huff, over which he presently has voting power. +(13) +Includes shares underlying presently exercisable stock options held by Mr. Hunt to purchase 90,000 shares. Includes 6,500 shares of unvested restricted Common Stock held by Mr. Hunt, over which he presently has voting power. +(14) +Includes shares underlying presently exercisable stock options held by Ms. Thom to purchase 30,000 shares. Includes 6,500 shares of unvested restricted Common Stock held by Ms. Thom, over which she presently has voting power. +(15) +Includes shares underlying stock options, which are presently exercisable or become exercisable within 60 days, to purchase 5,211,650 shares of Common Stock. Does not include shares underlying stock options to purchase 730,500 shares held by such individuals that are not presently exercisable and will not become exercisable within 60 days. Includes an aggregate of 1,290,968 shares of unvested restricted Common Stock held by certain directors and executive officers, over which they presently have voting power. +Except as stated herein, each stockholder has sole voting and investment power with respect to Common Stock included in the above table. There are no arrangements known to Patterson-UTI which may result in a change in control. The business address of each of our directors and officers is 10713 West Sam Houston Parkway North, Suite 800, Houston, Texas 77064. +62 +Equity Compensation Plan Information +Equity compensation plan information as of December 31, 2016 follows: +Equity Compensation Plan Information +Plan Category +Number of +Securities to +be Issued upon +Exercise of +Outstanding +Options, +Warrants and +Rights +Weighted - +Average Exercise +Price of +Outstanding +Options, +Warrants and +Rights +Number of +Securities +Remaining +Available +for Future Issuance +under Equity +Compensation Plans +(Excluding +Securities Reflected +in Column(a)) +(a) +(b) +(c) +Equity compensation plans approved by security holders(1) +6,687,150 +$ +20.68 +1,784,452 +Equity compensation plans not approved by security holders(2) +— +$ +— +— +Total +6,687,150 +$ +20.68 +1,784,452 +(1) +The 2014 LTIP provides for awards of incentive stock options, non-incentive stock options, tandem and freestanding stock appreciation rights, restricted stock awards, other stock unit awards, performance share awards, performance unit awards and dividend equivalents to key employees (as defined in the 2014 LTIP), officers and directors, which are subject to certain vesting and forfeiture provisions. All options are granted with an exercise price equal to or greater than the fair market value of the common stock at the time of grant. The vesting schedule and term are set by the Compensation Committee of the Board of Directors, except that the Board has the same power as the Compensation Committee with respect to awards to directors. All securities remaining available for future issuance under equity compensation plans approved by security holders in column (c) are available under this plan. In addition to the 2014 LTIP, this Plan category also includes the 2005 LTIP. In connection with the approval of the 2014 LTIP, the Board of Directors approved a resolution that no further options, restricted stock or other awards would be granted under any equity compensation plan, other than the 2014 LTIP. Options granted under the 2005 LTIP typically vested over one year for non-employee directors and three years for employees. All options were granted with an exercise price equal to the fair market value of the related common stock at the time of grant. +(2) +In connection with the April 20, 2017 closing of the merger of Patterson-UTI and Seventy Seven Energy Inc. (“SSE”), Patterson-UTI assumed the Seventy Seven Energy Inc. 2016 Omnibus Incentive Plan and changed the name of such plan to the Patterson-UTI Energy, Inc. Omnibus Incentive Plan (the “Assumed Plan”). The awards under the Assumed Plan, previously issued in the form of restricted stock units of SSE, will be settled in the form of shares of Patterson-UTI Common Stock based on the agreed exchange ratio of 1.7851 established in connection with the merger. As of April 20, 2017, awards with respect to a total of 505,551 shares of Patterson-UTI common stock were outstanding pursuant to the terms of the Assumed Plan. The Assumed Plan was adopted in connection with SSE’s plan of reorganization pursuant to Chapter 11 of the United States Code, and has not been approved by shareholders. No additional grants may be made pursuant to the Assumed Plan. +63 +AUDIT COMMITTEE REPORT +The following report of the Audit Committee does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other Patterson-UTI filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent Patterson-UTI specifically incorporates this report by reference therein. +The Audit Committee members are Messrs. Buckner (chairman), Huff and Hunt and Ms. Thom, each of whom is independent within the meaning of applicable rules under the Exchange Act and within the meaning of the Nasdaq listing standards. The Board has determined that Messrs. Buckner and Huff and Ms. Thom are “audit committee financial experts” within the meaning of applicable SEC rules. +The Audit Committee oversees management’s conduct of Patterson-UTI’s accounting and financial reporting process, including review of: (i) financial reports and other financial information provided by Patterson-UTI to the public and government/regulatory bodies, (ii) Patterson-UTI’s system of internal control over financial reporting, and (iii) the annual independent audit of Patterson-UTI’s consolidated financial statements and internal control over financial reporting. +The Audit Committee’s role is one of review, and it recognizes that Patterson-UTI’s management is responsible for preparing Patterson-UTI’s consolidated financial statements and the independent auditors are responsible for auditing those financial statements. In fulfilling its review and oversight responsibilities, the Audit Committee reviewed with management the audited financial statements included in Patterson-UTI’s Annual Report on Form 10-K for the year ended December 31, 2016, including a discussion of the quality, not just the acceptability, of the accounting principles used, the reasonableness of significant judgments made by management, and the clarity of disclosures provided in the financial statements. The Audit Committee also discussed with management the basis for their assertion that Patterson-UTI maintained effective internal control over financial reporting as of December 31, 2016. +The Audit Committee discussed with Patterson-UTI’s independent registered public accounting firm (PricewaterhouseCoopers LLP) the overall scope and plans for their integrated audit. The Audit Committee met with PricewaterhouseCoopers LLP, with and without management present, to discuss the results of their integrated audit, their evaluation of Patterson-UTI’s internal control over financial reporting and the overall quality of Patterson-UTI’s financial reporting. The Audit Committee also reviewed with PricewaterhouseCoopers LLP their judgments as to the quality, not just the acceptability, of Patterson-UTI’s accounting principles and discussed such other matters as are required by Auditing Standard 16. +The Audit Committee has received and reviewed the written disclosures and the letter from PricewaterhouseCoopers LLP required by the Public Company Accounting Oversight Board regarding their independence, and their communications with the Audit Committee concerning independence. +Taking the foregoing into consideration, the undersigned Audit Committee members recommended to the Board of Directors that the Board approve the inclusion of Patterson-UTI’s audited financial statements and management’s report on internal control over financial reporting in the Annual Report on Form 10-K for the fiscal year ended December 31, 2016. +Audit Committee of the Board of Directors: +Charles O. Buckner, Chairman +Curtis W. Huff +Terry H. Hunt +Tiffany J. Thom +PricewaterhouseCoopers LLP Fees for Fiscal Years 2016 and 2015 +In 2016 and 2015, Patterson-UTI and its subsidiaries incurred fees for services provided by PricewaterhouseCoopers LLP. +Description +Fees Incurred in +Fiscal Year +2016 +Fees Incurred in +Fiscal Year +2015 +Audit fees +$ +1,775,000 +$ +1,658,800 +Audit-related fees +— +36,000 +Tax fees +40,000 +40,000 +All other fees +1,919 +1,919 +Total +$ +1,816,919 +$ +1,736,719 +The Audit Committee appoints the independent registered public accounting firm. The Audit Committee or Mr. Buckner, as Chairman of the Audit Committee, approves all other engagements of the independent registered public accounting firm in advance. In the event Mr. Buckner approves any such engagement, he discusses such approval with the Audit Committee at its next meeting. +64 +“Audit fees” relate to audit services of PricewaterhouseCoopers LLP for fiscal 2016 and 2015 consisting of the integrated audit of Patterson-UTI’s consolidated financial statements and internal control over financial reporting, and quarterly reviews of Pat terson-UTI’s interim financial statements and the audits of certain subsidiaries. “Audit-related fees” for 2015 relate to the performance of certain agreed-upon procedures in connection with a bid for prospective work. “Tax fees” include federal, state, lo cal and foreign tax compliance and related matters. “All other fees” consists of an annual subscription fee to a software product. The Audit Committee or Mr. Buckner, as Chairman of the Audit Committee, approved in advance all of the services described abo ve. +The Audit Committee has discussed the non-audit services provided by PricewaterhouseCoopers LLP and the related fees and has considered whether those services and fees are compatible with maintaining auditor independence. The Audit Committee determined that such non-audit services were consistent with the independence of PricewaterhouseCoopers LLP. +OTHER MATTERS +Section 16(a) Beneficial Ownership Reporting Compliance +Section 16(a) of the Exchange Act requires Patterson-UTI’s officers and directors and persons who own more than 10 percent of a registered class of Patterson-UTI’s equity securities, to file reports of ownership and changes in ownership with the SEC. Each of these persons is required by SEC regulation to furnish Patterson-UTI with copies of Section 16(a) filings. Based solely upon a review of Forms 3 and 4 and amendments thereto furnished to Patterson-UTI during 2016 and Forms 5 and amendments thereto furnished to Patterson-UTI with respect to 2016, or a written representation from the reporting person that no Form 5 is required, all filings required to be made by such officers, directors, and beneficial owners of more than 10 percent of a registered class of Patterson-UTI’s common stock were timely made. In February 2017, one Form 4 to reflect the exercise by Mr. Buckner of stock options was not timely filed due to a Patterson-UTI administrative error. +Other Business +As of the date of this proxy statement, management of Patterson-UTI was not aware of any matter to be presented at the Meeting other than as set forth herein. If any other matters are properly brought before the Meeting, however, the shares represented by valid proxies will be voted with respect to such matters in accordance with the judgment of the persons voting them. +Stockholder Proposals for 2018 Annual Meeting +Proposals or Director Nominations for Inclusion in the Proxy Statement. Pursuant to Rule 14a-8 under the Exchange Act, stockholders may present proper proposals or director nominations for inclusion in Patterson-UTI’s proxy statement and for consideration at the next annual meeting of stockholders by submitting their proposals or director nominations to Patterson-UTI in a timely manner. In order to be included in Patterson-UTI’s proxy statement for the 2018 annual meeting of stockholders, proposals or director nominations from stockholders must be received by Patterson-UTI no later than January 17, 2018, and must otherwise comply with the requirements of Rule 14a-8. +Proposals or Director Nominations not Included in the Proxy Statement. In addition, Patterson-UTI’s bylaws establish an advance notice procedure with regard to stockholder proposals and director nominations not included in Patterson-UTI’s proxy statement. For director nominations not included in Patterson-UTI’s proxy statement, please refer to “Election of Directors – Meetings and Committees of the Board of Directors.” For stockholder proposals to be properly brought before the 2017 annual meeting, by a stockholder, the stockholder must be a stockholder of record on the date of the giving of the notice provided for below and on the record date for the determination of stockholders entitled to vote at such annual meeting and must give timely notice of such business in writing to the Secretary of Patterson-UTI. To be timely with respect to the 2018 annual meeting, a stockholder’s notice must be delivered to or mailed and received at Patterson-UTI’s principal executive offices not earlier than March 1, 2018 and not later than March 31, 2018; provided, however, that in the event that the annual meeting is called for a date that is not within 30 days before or after June 29, 2018, notice by the stockholder to be timely must be received not later than the close of business on the tenth day following the day on which such notice of the date of the meeting was mailed or public disclosure of the annual meeting date was made, whichever occurs first. +A stockholder’s notice to the Secretary of Patterson-UTI shall set forth: +• +a brief description of each matter desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, +• +the name and record address of the stockholder proposing such business, +• +the class and number of shares of Patterson-UTI that are beneficially owned by the stockholder, +65 +• +any material interest of the stockholder in such business, and +• +a representation that such stockholder intends to appear in person or by proxy at the annual meeting to bring such business before the annual meeting. +Patterson-UTI reserves the right to reject, rule out of order, or take other appropriate action with respect to any proposal or nomination that does not comply with these and other applicable requirements. +Annual Report +A copy of Patterson-UTI’s annual report on Form 10-K accompanies this proxy statement only if you have requested that a copy of this proxy statement be mailed to you. The annual report on Form 10-K also is available electronically by following the instructions in the Notice. The annual report on Form 10-K is not incorporated into this proxy statement and is not considered proxy-soliciting material. +A copy of the annual report on Form 10-K, including the financial statements and financial statement schedules, but excluding exhibits, may be obtained by stockholders without charge by written request to the Secretary of Patterson-UTI at 10713 West Sam Houston Parkway North, Suite 800, Houston, Texas 77064 or by accessing it on Patterson-UTI’s website at www.patenergy.com in the investors section under the “Financial Reports” link. Patterson-UTI will furnish the exhibits to Form 10-K upon request and upon receipt of a reproduction fee. +Delivery of Documents to Stockholders Sharing an Address +The SEC’s rules allow companies to send a single Notice or single copy of annual reports, proxy statements, prospectuses and other disclosure documents to two or more stockholders sharing the same address, subject to certain conditions. These rules are intended to provide greater convenience for stockholders, and cost savings for companies, by reducing the number of duplicate documents that stockholders receive. If instructions for separate delivery have been received from any stockholder, Patterson-UTI will deliver promptly separate copies of the relevant disclosure materials. Similarly, if multiple copies of disclosure materials are being delivered to a single address, stockholders can request a single copy for future deliveries. Written requests should be submitted to the Secretary of Patterson-UTI at 10713 West Sam Houston Parkway North, Suite 800, Houston, Texas 77064. Requests may also be made by calling Investor Relations at (281) 765-7100. +66 +A NNEX A +PATTERSON-UTI ENERGY, INC. +2014 LONG-TERM INCENTIVE PLAN +(As Amended and Restated Effective June 29, 2017) +Patterson-UTI Energy, Inc. (the “ Company ”), a Delaware corporation, hereby establishes and adopts the following 2014 Long-Term Incentive Plan, as amended and restated effective as of June 29, 2017 (the “ Plan ”). +1. PURPOSE OF THE PLAN +The purpose of the Plan is to assist the Company and its Subsidiaries in attracting and retaining selected individuals to serve as directors, employees, consultants and/or advisors of the Company who are expected to contribute to the Company’s success and to achieve long-term objectives which will inure to the benefit of all stockholders of the Company through the additional incentives inherent in the Awards hereunder. +2. DEFINITIONS +2.1 “Award” shall mean any Option, Stock Appreciation Right, Restricted Stock Award, Performance Award, Other Stock Unit Award or any other right, interest or option relating to Shares or other property (including cash) granted pursuant to the provisions of the Plan. +2.2 “Award Agreement” shall mean any written agreement, contract or other instrument or document evidencing any Award granted by the Committee hereunder. +2.3 “Board” shall mean the board of directors of the Company. +2.4 “Change of Control of the Company” shall mean the occurrence of any of the following: +i +The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended) (a “Covered Person” ) of beneficial ownership (within the meaning of rule 13d-3 promulgated under the Exchange Act) of 35% or more of either (A) the then outstanding shares of the common stock of the Company (the “Outstanding Company Common Stock” ), or (B) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities” ); provided, however, that for purposes of this subsection (i) of this Section 2.4, the following acquisitions shall not constitute a Change of Control of the Company: (A) any acquisition directly from the Company, (B) any acquisition by the Company, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any entity controlled by the Company, or (D) any acquisition by any corporation pursuant to a transaction which complies with clauses (A), (B) and (C) of subsection (iii) of this Section 2.4; or +ii +Individuals who, as of the effective date of the Plan, constitute the Board (the “Incumbent Board” ) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the effective date of the Plan whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Covered Person other than the Board; or +iii +Consummation of (xx) a reorganization, merger or consolidation or sale of the Company or any subsidiary of the Company, or (yy) a disposition of all or substantially all of the assets of the Company (a “Business Combination” ), in each case, unless, following such Business Combination, (A) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, direct or indirectly, more than 65% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (B) no Covered Person (excluding any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 35% or +A-1 +more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corpora tion, except to the extent that such ownership existed prior to the Business Combination, and (C) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board a t the time of the execution of the initial agreement, or, if earlier, of the action of the Board, providing for such Business Combination. +2.5 “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time. +2.6 “Committee” shall mean the Compensation Committee of the Board, consisting of no fewer than two Directors, each of whom is (i) a “Non-Employee Director” within the meaning of Rule 16b-3 of the Exchange Act, (ii) an “outside director” within the meaning of Section 162(m) of the Code, and (iii) an “independent director” for purpose of the rules and regulations of the Nasdaq Stock Market. +2.7 “Covered Employee” shall mean a “covered employee” within the meaning of Section 162(m) of the Code. +2.8 “Director” shall mean a non-employee member of the Board. +2.9 “Dividend Equivalents” shall have the meaning set forth in Section 12.6. +2.10 “Employee” shall mean any employee of the Company or any Subsidiary and any prospective employee conditioned upon, and effective not earlier than, such person’s becoming an employee of the Company or any Subsidiary. Solely for purposes of the Plan, an Employee shall also mean any consultant or advisor who provides services to the Company or any Subsidiary, so long as such person (i) renders bona fide services that are not in connection with the offer and sale of the Company’s securities in a capital raising transaction and (ii) does not directly or indirectly promote or maintain a market for the Company’s securities. +2.11 “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended. +2.12 “Fair Market Value” shall mean, with respect to any property other than Shares, the market value of such property determined by such methods or procedures as shall be established from time to time by the Committee. The Fair Market Value of Shares as of any date shall be the per Share closing price of the Shares as reported on the Nasdaq Stock Market on that date (or if there were no reported prices on such date, on the last preceding date on which the prices were reported) or, if the Company is not then listed on the Nasdaq Stock Market, on the principal national securities exchange on which the Company is listed, and if the Company is not then listed on the Nasdaq Stock Market or any national securities exchange, the Fair Market Value of Shares shall be determined by the Committee in its sole discretion using appropriate criteria. +2.13 “Freestanding Stock Appreciation Right” shall have the meaning set forth in Section 6.1. +2.14 “Limitations” shall have the meaning set forth in Section 10.5. +2.15 “Option” shall mean any right granted to a Participant under the Plan allowing such Participant to purchase Shares at such price or prices and during such period or periods as the Committee shall determine. +2.16 “Other Stock Unit Award” shall have the meaning set forth in Section 8.1. +2.17 “Participant” shall mean an Employee or Director who is selected by the Committee to receive an Award under the Plan. +2.18 “Payee” shall have the meaning set forth in Section 13.1. +2.19 “Performance Award” shall mean any Award of Performance Shares or Performance Units granted pursuant to Article 9. +2.20 “Performance Period” shall mean that period established by the Committee at the time any Performance Award is granted or at any time thereafter during which any performance goals specified by the Committee with respect to such Award are to be measured. +2.21 “Performance Share” shall mean any grant pursuant to Section 9 of a unit valued by reference to a designated number of Shares, which value may be paid to the Participant by delivery of such property as the Committee shall determine, including cash, Shares, other property, or any combination thereof, upon achievement of such performance goals during the Performance Period as the Committee shall establish at the time of such grant or thereafter. +2.22 “Performance Unit” shall mean any grant pursuant to Section 9 of a unit valued by reference to a designated amount of property (including cash) other than Shares, which value may be paid to the Participant by delivery of such property as the Committee shall determine, including cash, Shares, other property, or any combination thereof, upon achievement of such performance goals during the Performance Period as the Committee shall establish at the time of such grant or thereafter. +2.23 “Permitted Assignee” shall have the meaning set forth in Section 12.3. +A-2 +2.24 “Prior Plans” shall mean , collectively, the Company’s Amended and Restated 1997 Long-Term Incentive Plan and the 2005 Long-Term Incentive Plan, as amended. +2.25 “Restricted Stock” shall mean any Share issued with the restriction that the holder may not sell, transfer, pledge or assign such Share and with such other restrictions as the Committee, in its sole discretion, may impose (including any restriction on the right to vote such Share and the right to receive any dividends), which restrictions may lapse separately or in combination at such time or times, in installments or otherwise, as the Committee may deem appropriate in its sole discretion. +2.26 “Restriction Period” shall have the meaning set forth in Section 7.1. +2.27 “Restricted Stock Award” shall have the meaning set forth in Section 7.1. +2.28 “Shares” shall mean the shares of common stock of the Company, par value $.01 per share. +2.29 “Stock Appreciation Right” shall mean the right granted to a Participant pursuant to Section 6. +2.30 “Subsidiary” shall mean any corporation or other entity, whether domestic or foreign, in which the Company has or obtains, directly or indirectly, a proprietary interest of more than fifty percent (50%) by reason of stock ownership or otherwise. +2.31 “Substitute Awards” shall mean Awards granted or Shares issued by the Company in assumption of, or in substitution or exchange for, awards previously granted, or the right or obligation to make future awards, by a company acquired by the Company or any Subsidiary or with which the Company or any Subsidiary combines. +2.32 “Tandem Stock Appreciation Right” shall have the meaning set forth in Section 6.1. +3. SHARES SUBJECT TO THE PLAN +3.1 Number of Shares . (a) Subject to adjustment as provided in Section 12.2 and this Section 3.1, the total number of Shares authorized for grant under the Plan shall be 18,900,000. Any Shares that are subject to Awards of Options or Stock Appreciation Rights, whether granted under the Prior Plans or under the Plan shall be counted against this limit as one (1) Share for every one (1) Share granted. Any Shares that are subject to Awards other than Options or Stock Appreciation Rights awarded under the Prior Plans during the period commencing on January 1, 2014 and ending on April 17, 2014 shall be counted against this limit as one and 35 one-hundredths (1.35) Shares for every one (1) Share awarded. Any Shares that are subject to Awards other than Options or Stock Appreciation Rights awarded under the Plan following April 17, 2014 shall be counted against this limit as two (2) Shares for every one (1) Share awarded. +(b) If any Shares subject to an Award or to an award under the Prior Plans are forfeited, expire or otherwise terminate without issuance of such Shares, or any Award or award under the Prior Plans is settled for cash or otherwise does not result in the issuance of all or a portion of the Shares subject to such Award, the Shares shall, to the extent of such forfeiture, expiration, termination, cash settlement or non-issuance, again be available for Awards under the Plan, subject to Section 3.1(d) below. Notwithstanding the foregoing, the following Shares shall not become available for grant under the Plan: (i) Shares subject to an Award are used to exercise Options, are not issued upon the settlement of a Stock Appreciation Right, or are withheld by the Company for income or employment taxes on exercise of an Option or Stock Appreciation Right or (ii) Shares repurchased on the open market with the proceeds of the Option exercise price. +(c) Substitute Awards shall not reduce the Shares authorized for grant under the Plan or authorized for grant to a Participant in any calendar year. Additionally, in the event that a company acquired by the Company or any Subsidiary or with which the Company or any Subsidiary combines has shares available under a pre-existing plan approved by shareholders and not adopted in contemplation of such acquisition or combination, the shares available for grant pursuant to the terms of such pre-existing plan (as adjusted, to the extent appropriate, using the exchange ratio or other adjustment or valuation ratio or formula used in such acquisition or combination to determine the consideration payable to the holders of common stock of the entities party to such acquisition or combination) may be used for Awards under the Plan and shall not reduce the Shares authorized for grant under the Plan; provided that Awards using such available shares shall only be made (i) until the last date that awards or grants could have been made under the terms of the pre-existing plan, absent the acquisition or combination, and (ii) to individuals who were not Employees or Directors prior to such acquisition or combination. +(d) Any Shares that again become available for grant pursuant to this Article shall be added back (x) as one (1) Share if such Shares were subject to Options or Stock Appreciation Rights granted under the Prior Plans or the Plan, (y) as one and thirty-five one hundredths (1.35) Shares if such Shares were subject to Awards other than Options or Stock Appreciation Rights that were granted under Prior Plans during the period commencing on January 1, 2014 and ending on April 17, 2014 or (z) as two (2) Shares if such Shares were subject to Awards other than Options or Stock Appreciation Rights that were granted under the Plan or the Prior Plans following April 17, 2014. +3.2 Character of Shares . Any Shares issued hereunder may consist, in whole or in part, of authorized and unissued shares, treasury shares or shares purchased in the open market or otherwise. +A-3 +3.3 Minimum Vesting for Awards . Subject to Section 12.1, all Awards shall provide for vesting based on employment or service which is at least one year from the date of grant, and there shall be no acceleration of vesting of an Award to vest more rapidly than one year from the date of grant, other than in the event of an earlier death, disability or retirement of the Participant or a Change of Co ntrol referred to in Article 11. Notwithstanding the foregoing, Awards with respect to up to five percent (5%) of the Shares authorized for grant pursuant to this Plan may be issued pursuant to Awards without regard to the limitations of this Section 3.3. +4. ELIGIBILITY AND ADMINISTRATION +4.1 Eligibility . Any Employee or Director shall be eligible to be selected as a Participant. +4.2 Administration . (a) The Plan shall be administered by the Committee. The Committee shall have full power and authority, subject to the provisions of the Plan and subject to such orders or resolutions not inconsistent with the provisions of the Plan as may from time to time be adopted by the Board, to, in its sole discretion,: (i) select the Employees and Directors to whom Awards may from time to time be granted hereunder; (ii) determine the type or types of Awards, not inconsistent with the provisions of the Plan, to be granted to each Participant hereunder; (iii) determine the number of Shares to be covered by each Award granted hereunder; (iv) determine the terms and conditions, not inconsistent with the provisions of the Plan, of any Award granted hereunder; (v) determine whether, to what extent and under what circumstances Awards may be settled in cash, Shares or other property, subject to Section 8.1; (vi) determine whether, to what extent, and under what circumstances cash, Shares, other property and other amounts payable with respect to an Award made under the Plan shall be deferred either automatically or at the election of the Participant; (vii) determine whether, to what extent and under what circumstances any Award shall be canceled or suspended; (viii) interpret and administer the Plan and any instrument or agreement entered into under or in connection with the Plan, including any Award Agreement; (ix) correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award in the manner and to the extent that the Committee shall deem desirable to carry it into effect; (x) establish such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of the Plan; (xi) determine whether any Award (other than Options or Stock Appreciation Rights) will have Dividend Equivalents; and (xii) make any other determination and take any other action that the Committee deems necessary or desirable for administration of the Plan. Notwithstanding the foregoing, the Board shall have the same powers as the Committee with respect to Awards to Directors. +(b) Decisions of t he Committee shall be final, conclusive and binding on all persons or entities, including the Company, any Participant, and any Subsidiary. A majority of the members of the Committee may determine its actions and fix the time and place of its meetings. +(c) To the extent not inconsistent with applicable law, including Section 162(m) of the Code, or the rules and regulations of the N asdaq Stock Market (or any other principal national securities exchange on which the Company is then listed), the Committee may delegate to a committee of one or more directors of the Company or, to the extent permitted by law, to one or more executive officers or a committee of executive officers the right to grant Awards to Employees who are not Directors or executive officers of the Company and the authority to take action on behalf of the Committee pursuant to the Plan to cancel or suspend Awards to Employees who are not Directors or executive officers of the Company; provided, however, (i) the resolution providing such authorization sets forth the total number of Awards such officer(s) may grant; and (ii) the officer(s) shall report periodically to the Committee regarding the nature and scope of the Awards granted pursuant to the authority delegated. +5. OPTIONS +5.1 Grant of Options . Options may be granted hereunder to Participants either alone or in addition to other Awards granted under the Plan; provided that incentive stock options may be granted only to eligible Employees of the Company or of any parent or subsidiary corporation (as permitted by Section 422 of the Code and the regulations thereunder). Any Option shall be subject to the terms and conditions of this Article and to such additional terms and conditions, not inconsistent with the provisions of the Plan, as the Committee shall determine in its sole discretion. +5.2 Award Agreements . All Options granted pursuant to this Article shall be evidenced by a written Award Agreement in such form and containing such terms and conditions as the Committee shall determine which are not inconsistent with the provisions of the Plan. The terms of Options need not be the same with respect to each Participant. Granting of an Option pursuant to the Plan shall impose no obligation on the recipient to exercise such Option. Any individual who is granted an Option pursuant to this Article may hold more than one Option granted pursuant to the Plan at the same time. The Award Agreement also shall specify whether the Option is intended to qualify as an “incentive stock option” as defined in Section 422 of the Code. +5.3 Option Price . Other than in connection with Substitute Awards or an adjustment in connection with Section 12.2, the option price per each Share purchasable under any Option granted pursuant to this Article shall not be less than 100% of the Fair Market Value of such Share on the date of grant of such Option. +5.4 Option Term . The term of each Option shall be fixed by the Committee in its sole discretion; provided that no Option shall be exercisable after the expiration of ten years from the date the Option is granted. +A-4 +5.5 Exercise of Options . Vested Options granted under the Plan shall be exercised by the Participant or by a Permitted Assignee thereof (or by the Participant’s executors, administrators, guardian or legal representative, as may be provided in an Award Agreement) as to all or part of the Shares covered thereby, by the giving of written notice of exercise to the Company or its designated agent, specifying the number of Shares to be purchased, accompanied by payment of the full purchase price for the Shares being purchased. Unless otherwise provided in an Award Agreement, full payment of such purchase price shall be made at the time of exercise and shall be made (a) in cash or cash equivalents (including cert ified check or bank check or wire transfer of immediately available funds), (b) by tendering previously acquired Shares (either actually or by attestation, valued at their then Fair Market Value) that have been owned for a period of at least six months (or such other period to avoid accounting charges against the Company’s earnings), (c) with the consent of the Committee, by delivery of other consideration (including, where permitted by law and the Committee, other Awards) having a Fair Market Value on the exercise date equal to the total purchase price, (d) with the consent of the Committee, by withholding Shares otherwise issuable in connection with the exercise of the Option, (e) through any other method specified in an Award Agreement, or (f) any combina tion of any of the foregoing. The notice of exercise, accompanied by such payment, shall be delivered to the Company at its principal business office or such other office as the Committee may from time to time direct, and shall be in such form, containing such further provisions consistent with the provisions of the Plan, as the Committee may from time to time prescribe. In no event may any Option granted hereunder be exercised for a fraction of a Share. No adjustment shall be made for cash dividends or other rights for which the record date is prior to the date of such issuance. +5.6 Form of Settlement . In its sole discretion, the Committee may provide, at the time of grant, that the Shares to be issued upon an Option’s exercise shall be in the form of Restricted Stock or other similar securities, or may reserve the right to provide so after the time of grant. +5.7 Vesting . Except for certain limited situations (including the death, disability or retirement of the Participant or a Change of Control referred to in Article 11), Options shall vest over a period of not less than (i) one year from date of grant for Directors or (ii) three years from the date of grant for Employees; provided that, subject to the limitations set forth in Section 3.3, such vesting shall not be required for any grants to new hires or with respect to any Substitute Awards. Subject to Section 3.3, Options may vest ratably over such vesting periods in any increments, including but not limited to annual increments, quarterly increments, monthly increments, or a combination thereof; provided, however, that such incremental vesting shall not be permitted prior to the first anniversary of the date of grant. The vesting schedule shall be set forth in the Award Agreement. +5.8 Incentive Stock Options . The Committee may grant Options intended to qualify as “incentive stock options” as defined in Section 422 of the Code, to any employee of the Company or any Subsidiary, subject to the requirements of Section 422 of the Code. Notwithstanding anything in Section 3.1 to the contrary and solely for the purposes of determining whether Shares are available for the grant of “incentive stock options” under the Plan, the maximum aggregate number of Shares with respect to which “incentive stock options” may be granted under the Plan shall be the number of Shares authorized for grant under Section 3.1. +5.9 No Repricing . Notwithstanding anything in the Plan to the contrary, except in connection with a corporate transaction involving the Company (including, without limitation, any stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination, or exchange of shares), the terms of outstanding Awards may not be amended without stockholder approval to (i) reduce the option price of outstanding Options, (ii) cancel outstanding Options in exchange for cash, other awards or Options with an option price that is less than the option price of the original Options, (iii) take any other action with respect to an Option that would be treated as a repricing under the rules and regulations of the principal national securities exchange on which they are listed or (iv) permit the grant of any Options that contains a so-called “reload” feature under which additional Options or other Awards are granted automatically to the Participant upon exercise of the original Option. +6. STOCK APPRECIATION RIGHTS +6.1 Grant and Exercise . The Committee may provide Stock Appreciation Rights (a) in conjunction with all or part of any Option granted under the Plan (“Tandem Stock Appreciation Right” ), (b) in conjunction with all or part of any Award (other than an Option) granted under the Plan, or (c) without regard to any Option or other Award (a “Freestanding Stock Appreciation Right” ), in each case upon such terms and conditions as the Committee may establish in its sole discretion. +6.2 Terms and Conditions . Stock Appreciation Rights shall be subject to such terms and conditions, not inconsistent with the provisions of the Plan, as shall be determined from time to time by the Committee, including the following: +(a) Except in the case of Substitute Awards or in connection with an adjustment provided in Section 12.2, the grant price of a Stock Appreciation Right shall not be less than the Fair Market Value of one Share on such date of grant of the right. Upon the exercise of a Stock Appreciation Right, the holder shall have the right to receive the excess of (i) the Fair Market Value of one Share on the date of exercise over (ii) the grant price of the right on the date of grant. +(b) Upon the exercise of a Stock Appreciation Right, payment shall be made in the sole discretion of the Committee in (i) whole Shares, (ii) cash or (iii) a combination of (i) or (ii). +(c) Any Tandem Stock Appreciation Right shall be granted at the same time as the related Option is granted. +A-5 +(d) Any Tandem Stock Appreciation Right related to an Option may be exercised only when the related Option would be exercisable and the Fair Market Value of the Shares subject to the related Option exceeds the option price at which Shares can be acquired pursuant to the Option. In addition, (i) if a Tandem Stock Appreciation Right exists with respect to less than the full number of Shares covered by a related Option, then an exercise or termination of such Option shall not reduce the number of Shares to which the Tandem Stock Appreciation Right applies until the number of Shares then exercisable under such Option equals the number of Shares to which the Tandem Stock Appreciation Right applies, and (ii) no Tandem Stock Appreciation Right granted under the Plan to a person then subject to Section 16 of the Exchange Act shall be exercised during the first six months of its term for cash, except as provid ed in Article 11. +(e) Any Option related to a Tandem Stock Appreciation Right shall no longer be exercisable to the extent the Tandem Stock Appreciation Right has been exercised. +(f) The provisions of Stock Appreciation Rights need not be the same with res pect to each recipient. +(g) Subject to Section 12.2, a Freestanding Stock Appreciation Right shall have the same terms and conditions as Options, including (i) an exercise price not less than Fair Market Value on the date of grant, (ii) a term not greater than ten years, and (iii) not being exercisable before the expiration of (1) one year from the date of grant to a Director or (2) three years from the date of grant to an Employee, except for, subject to the limitations set forth in Section 3.3, grants to new hires or Substitute Awards, under circumstances contemplated by Article 11 or as may be set forth in an Award Agreement with respect to (x) retirement, death or disability of a Participant or (y) special circumstances determined by the Committee, such as the achievement of performance objectives. Subject to Section 3.3, Stock Appreciation Rights may vest ratably over such vesting periods in any increments, including but not limited to annual increments, quarterly increments, monthly increments, or a combination thereof; provided, however, that such incremental vesting shall not be permitted prior to the first anniversary of the date of grant. In addition to the foregoing, but subject to Section 12.2, the base amount of any Stock Appreciation Right shall not be reduced after the date of grant. +(h) The Committee may impose such terms and conditions on Stock Appreciation Rights granted in conjunction with any Award (other than an Option) as the Committee shall determine in its sole discretion. +6.3 No Repricing . Notwithstanding anything in the Plan to the contrary, except in connection with a corporate transaction involving the Company (including, without limitation, any stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination, or exchange of shares), the terms of outstanding awards may not be amended without stockholder approval to (i) reduce the exercise price of outstanding Stock Appreciation Rights, (ii) cancel outstanding Stock Appreciation Rights in exchange for cash, other awards or Stock Appreciation Rights with an exercise price that is less than the exercise price of the original Stock Appreciation Rights (iii) take any other action with respect to the Stock Appreciation Rights that would be treated as a repricing under the rules and regulations of the principal national securities exchange on which they are listed or (iv) permit the grant of any Stock Appreciation Rights that contains a so-called “reload” feature under which additional Stock Appreciation Rights or other Awards are granted automatically to the Participant upon exercise of the original Stock Appreciation Rights. +7. RESTRICTED STOCK AWARDS +7.1 Grants. Awards of Restricted Stock may be issued hereunder to Participants either alone or in addition to other Awards granted under the Plan (a “Restricted Stock Award” ), and such Restricted Stock Awards shall also be available as a form of payment of Performance Awards and other earned cash-based incentive compensation. A Restricted Stock Award shall be subject to restrictions imposed by the Committee covering a period of time specified by the Committee (the “Restriction Period” ). The Committee has sole discretion to determine whether any consideration (other than services) is to be received by the Company or any Subsidiary as a condition precedent to the issuance of Restricted Stock. +7.2 Award Agreements . The terms of any Restricted Stock Award granted under the Plan shall be set forth in a written Award Agreement which shall contain provisions determined by the Committee and not inconsistent with the Plan. The terms of Restricted Stock Awards need not be the same with respect to each Participant. +7.3 Rights of Holders of Restricted Stock . Beginning on the date of grant of the Restricted Stock Award and subject to execution of the Award Agreement, the Participant shall become a shareholder of the Company with respect to all Shares subject to the Award Agreement and shall have all of the rights of a shareholder, including the right to vote such Shares and the right to receive distributions made with respect to such Shares unless otherwise provided in such Award Agreement; provided, however, that any Shares, any other property, or cash distributed as a dividend or otherwise with respect to any Restricted Stock as to which the restrictions have not yet lapsed shall be subject to the same restrictions as such Restricted Stock. +7.4 Minimum Vesting Period . Except for certain limited situations (including the death, disability or retirement of the Participant, or a Change of Control referred to in Article 11), or special circumstances determined by the Committee (such as the achievement of performance objectives) Restricted Stock Awards subject solely to continued employment restrictions of Employees shall have a Restriction Period of not less than three years from date of grant. Subject to Section 3.3, Restricted Stock Awards may +A-6 +vest ratably over such vesting period in any increments, including but not l imited to annual increments, quarterly increments, monthly increments, or a combination thereof ; provided, however, that such incremental vesting shall not be permitted prior to the first anniversary of the date of grant . Notwithstanding the foregoing, su bject to the limitations set forth in Section 3.3, the provisions of this Section shall not be applicable to any grants to new hires, Substitute Awards or grants of Restricted Stock in payment of Performance Awards and other earned cash-based incentive com pensation or grants to Directors. Subject to the foregoing three-year minimum vesting requirement, the Committee may, in its sole discretion and subject to the limitations imposed under Section 162(m) of the Code and the regulations thereunder in the case of a Restricted Stock Award intended to comply with the performance-based exception under Section 162(m) of the Code, waive the forfeiture period and any other conditions set forth in any Award Agreement subject to such terms and conditions as the Committ ee shall deem appropriate in its sole discretion. The maximum aggregate number of Shares with respect to which Restricted Stock Awards or Other Stock Units that are subject solely to continued employment or service restrictions of Employees or directors o f the Company or any Subsidiary with a Restriction Period of less than three years from date of grant (but permitting pro rata vesting over such time) shall be five percent (5%) of the number of Shares authorized for grant under Section 3.1 (as such number may be adjusted as provided in Sections 3.1 and 12.2); provided that this limit shall not be applicable to any grants to new hires, Substitute Awards or grants of Restricted Stock in payment of Performance Awards and other earned cash-based incentive comp ensation or grants to Directors. Any Restricted Stock Award or portion of such award that is subject to a Restriction Period of three years or more (notwithstanding the fact that a portion of such award may vest within three years of the date of grant due to pro rata vesting over the Restriction Period) or that meets the requirements of a Performance Award under Section 9 shall not be subject to the foregoing five-percent (5%) limitation. Notwithstanding the foregoing, all Restricted Stock Awards are subj ect to the provisions set forth in Section 3.3. +7.5 Section 83(b) Election . The Committee may provide in an Award Agreement that the Award of Restricted Stock is conditioned upon the Participant making or refraining from making an election with respect to the Award under Section 83(b) of the Code. If a Participant makes an election pursuant to Section 83(b) of the Code concerning a Restricted Stock Award, the Participant shall be required to file promptly a copy of such election with the Company. +8. OTHER STOCK UNIT AWARDS +8.1 Grants . Other Awards of units having a value equal to an identical number of Shares ( “Other Stock Unit Awards” ) may be granted hereunder to Participants, in addition to other Awards granted under the Plan. Other Stock Unit Awards shall also be available as a form of payment of other Awards granted under the Plan and other earned cash-based incentive compensation. +8.2 Award Agreements . The terms of Other Stock Unit Award granted under the Plan shall be set forth in a written Award Agreement which shall contain provisions determined by the Committee and not inconsistent with the Plan. The terms of such Awards need not be the same with respect to each Participant. +8.3 Vesting. Except for certain limited situations (including the death, disability or retirement of the Participant or a Change of Control referred to in Article 11), Other Stock Unit Awards subject solely to continued employment restrictions of Employees shall be subject to restrictions imposed by the Committee for a period of not less than three years from date of grant. Subject to Section 3.3, Other Stock Unit Awards may vest ratably over such vesting period in any increments, including but not limited to annual increments, quarterly increments, monthly increments, or a combination thereof; provided, however, that such incremental vesting shall not be permitted prior to the first anniversary of the date of grant. Notwithstanding the foregoing, subject to the limitations set forth in Section 3.3, such restrictions shall not be applicable to any grants to new hires, any Substitute Awards, grants of Other Stock Unit Awards in payment of Performance Awards pursuant to Article 9 and other earned cash-based incentive compensation, or grants of Other Stock Unit Awards on a deferred basis. The maximum aggregate number of Shares with respect to which Restricted Stock Awards or Other Stock Units that are subject solely to continued employment or service restrictions of Employees or directors of the Company or any Subsidiary with a Restriction Period of less than three years from date of grant (but permitting pro rata vesting over such time) shall be five percent (5%) of the number of Shares authorized for grant under Section 3.1 (as such number may be adjusted as provided in Sections 3.1 and 12.2); provided that this limit shall not be applicable to any grants to new hires, any Substitute Awards, grants of Other Stock Unit Awards in payment of Performance Awards pursuant to Article 9 and other earned cash-based incentive compensation, or grants of Other Stock Unit Awards on a deferred basis. Any Other Stock Unit Award or portion of such award that is subject to a Restriction Period of three years or more (notwithstanding the fact that a portion of such award may vest within three years of the date of grant due to pro rata vesting over the Restriction Period) or that meets the requirements of a Performance Award under Section 9 shall not be subject to the foregoing five-percent (5%) limitation. Notwithstanding the foregoing, all Other Stock Unit Awards are subject to the provisions set forth in Section 3.3. +8.4 Payment. Except as provided in Article 11 or as maybe provided in an Award Agreement, Other Stock Unit Awards may be paid in cash, Shares, other property, or any combination thereof, in the sole discretion of the Committee at the time of payment. Other Stock Unit Awards may be paid in a lump sum or in installments following the lapse of the restrictions applicable to such Awards, but, unless expressly provided in an Award Agreement, no later than 2½ months following the end of the calendar year in which such restrictions lapse, or in accordance with procedures established by the Committee, on a deferred basis subject to the requirements of Section 409A of the Code. +A-7 +9. PERFORMAN CE AWARDS +9.1 Grants. Performance Awards in the form of Performance Shares or Performance Units, as determined by the Committee in its sole discretion, may be granted hereunder to Participants, for no consideration or for such minimum consideration as may be required by applicable law, either alone or in addition to other Awards granted under the Plan. The performance goals to be achieved for each Performance Period shall be conclusively determined by the Committee and may be based upon the criteria set forth in Section 10.2. +9.2 Award Agreements. The terms of any Performance Award granted under the Plan shall be set forth in a written Award Agreement which shall contain provisions determined by the Committee and not inconsistent with the Plan, including whether such Awards shall have Dividend Equivalents. The terms of Performance Awards need not be the same with respect to each Participant. +9.3 Terms and Conditions . The performance criteria to be achieved during any Performance Period and the length of the Performance Period shall be determined by the Committee upon the grant of each Performance Award. Performance Awards shall be subject to the vesting requirements as set forth in Section 3.3. The amount of the Award to be distributed shall be conclusively determined by the Committee. +9.4 Payment. Except as provided in Article 11 or as may be provided in an Award Agreement, Performance Awards will be distributed only after the end of the relevant Performance Period. Performance Awards may be paid in cash, Shares, or any combination thereof, in the sole discretion of the Committee at the time of payment. Performance Awards may be paid in a lump sum or in installments, but, unless expressly provided in an Award Agreement, no later than 2½ months following the close of the calendar year that contains the end of the Performance Period or, in accordance with procedures established by the Committee, on a deferred basis subject to the requirements of Section 409A of the Code. +9.5 Performance Award Dividend Equivalents. Subject to the provisions of the Plan and any Award Agreement, the Committee in its sole discretion may award currently or on a deferred basis, Dividend Equivalents with respect to the number of Shares covered by a Performance Unit or Performance Share Award, provided, that such Dividend Equivalents (if any) shall be deemed to have been reinvested in additional Shares or Units and shall provide that such Dividend Equivalents are subject to the same performance conditions as the underlying Award. +10. CODE SECTION 162(m) PROVISIONS +10.1 Covered Employees. Notwithstanding any other provision of the Plan, if the Committee determines at the time a Restricted Stock Award, a Performance Award or an Other Stock Unit Award is granted to a Participant who is, or is likely to be, as of the end of the tax year in which the Company would claim a tax deduction in connection with such Award, a Covered Employee, then the Committee may provide that this Article 10 is applicable to such Award. +10.2 Performance Criteria. If the Committee determines that a Restricted Stock Award, a Performance Award or an Other Stock Unit Award is subject to this Article 10, the lapsing of restrictions thereon and the distribution of cash, Shares or other property pursuant thereto, as applicable, shall be subject to the achievement of one or more objective performance goals established by the Committee, which shall be based on the attainment of specified levels of one or any combination of the following: net sales; revenue growth; pre-tax income before allocation of corporate overhead and bonus; earnings per share; operating income, net income; division, group or corporate financial goals; return on stockholders’ equity; total stockholder return; return on assets; attainment of strategic and operational initiatives; appreciation in and/or maintenance of the price of the Shares or any other publicly-traded securities of the Company; market share; gross profits; earnings before taxes; earnings before interest and taxes; earnings before interest, taxes, depreciation, depletion and amortization; economic value-added models; comparisons with various stock market indices; reductions in costs; cash flow, cash flow per share; return on invested capital, cash flow return on investment; improvement in or attainment of expense levels or working capital levels; cash margins; safety records; and rig utilization and rig count growth. Such performance goals also may be based solely by reference to the Company’s performance or the performance of a Subsidiary, division, business segment or business unit of the Company, or based upon the relative performance of other companies or upon comparisons of any of the indicators of performance relative to other companies. The Committee may also exclude the impact of an event or occurrence which the Committee determines should appropriately be excluded, including (a) restructurings, discontinued operations, infrequent and unusual items, and other unusual or non-recurring charges, (b) an event either not directly related to the operations of the Company or not within the reasonable control of the Company’s management, or (c) the cumulative effects of tax or accounting changes in accordance with generally accepted accounting principles. Such performance goals shall be set by the Committee within the time period prescribed by, and shall otherwise comply with the requirements of, Section 162(m) of the Code, and the regulations thereunder. +10.3 Adjustments. Notwithstanding any provision of the Plan (other than Article 11), with respect to any Restricted Stock, Performance Award or Other Stock Unit Award that is subject to this Section 10, the Committee may adjust downwards, but not upwards, the amount payable pursuant to such Award, and the Committee may not waive the achievement of the applicable performance goals, except in the case of the death or disability of the Participant or as otherwise determined by the Committee in special circumstances. +A-8 +10.4 Restrictions. The Committee shall have the power to impose such other restrictions on Awards subject to this Article as it may deem necessary or appropriate in its sole discretion to ensure that such Awards satisfy all requirements for “performance-based compensation” within the meaning of Section 162(m) of the Code. +10.5 Limitations on Grants to Individual Participant . Subject to adjustment as provided in Section 12.2, no Participant may be granted (i) Options or Stock Appreciation Rights during any calendar year with respect to more than 1,000,000 Shares or (ii) Restricted Stock, Performance Awards denominated in Shares and/or Other Stock Unit Awards that are denominated in Shares in any calendar year with respect to more than 500,000 Shares (the “Limitations”). In addition to the foregoing, the maximum dollar value payable to any Participant in respect of any calendar year with respect to Performance Awards denominated in cash is $5,000,000. For the avoidance of doubt, any Award shall only be subject to one of the applicable per person limitations set forth in the previous two sentences. If an Award is cancelled, the cancelled Award shall continue to be counted toward the applicable Limitations. Further, no Director may be granted during any calendar year Awards having a fair value determined on the date of grant when added to all cash compensation paid to the Director during the same calendar year in excess of $500,000. +11. CHANGE OF CONTROL PROVISIONS +Impact of Change of Control . The terms of any Award may provide in the Award Agreement evidencing the Award that, upon a “Change of Control” of the Company, (a) Options and Stock Appreciation Rights outstanding as of the date of the Change of Control immediately vest and become fully exercisable, (b) that Options and Stock Appreciation Rights outstanding as of the date of the Change of Control may be cancelled and terminated without payment therefor if the Fair Market Value of one Share as of the date of the Change of Control is less than the per Share Option exercise price or Stock Appreciation Right grant price, (c) restrictions and deferral limitations on Restricted Stock lapse and the Restricted Stock become free of all restrictions and limitations and become fully vested, (d) all Performance Awards shall be considered to be earned and payable (either in full or pro rata based on the portion of Performance Period completed as of the date of the Change of Control), and any deferral or other restriction shall lapse and such Performance Awards shall be immediately settled or distributed to the extent permitted under Section 409A of the Code, (e) the restrictions and deferral limitations and other conditions applicable to any Other Stock Unit Awards or any other Awards shall lapse, and such Other Stock Unit Awards or such other Awards shall become free of all restrictions, limitations or conditions and become fully vested and transferable to the full extent of the original grant to the extent permitted under Section 409A of the Code, and (f) such other additional benefits as the Committee deems appropriate in its sole discretion shall apply, subject in each case to any terms and conditions contained in the Award Agreement evidencing such Award. Notwithstanding any other provision of the Plan, the Committee, in its sole discretion, may determine that, upon the occurrence of a Change of Control of the Company, each Option and Stock Appreciation Right outstanding shall terminate within a specified number of days after notice to the Participant, and/or that each Participant shall receive, with respect to each Share subject to such Option or Stock Appreciation Right, an amount equal to the excess, if any, of the Fair Market Value of such Share immediately prior to the occurrence of such Change of Control over the exercise price per share of such Option and/or Stock Appreciation Right; such amount to be payable in cash, in one or more kinds of stock or property (including the stock or property, if any, payable in the transaction) or in a combination thereof, as the Committee, in its sole discretion, shall determine. +12. GENERALLY APPLICABLE PROVISIONS +12.1 Amendment and Termination of the Plan. The Board may, from time to time, alter, amend, suspend or terminate the Plan as it shall deem advisable in its sole discretion, subject to any requirement for stockholder approval imposed by applicable law, including the rules and regulations of the Nasdaq Stock Market (or any other principal national securities exchange on which the Company is listed) provided that the Board may not amend the Plan in any manner that would result in noncompliance with Rule 16b-3 of the Exchange Act; and further provided that the Board may not, without the approval of the Company’s stockholders, amend the Plan to (a) increase the number of Shares that may be the subject of Awards under the Plan (except for adjustments pursuant to Section 12.2), (b) expand the types of awards available under the Plan, (c) materially expand the class of persons eligible to participate in the Plan, (d) amend any provision of Section 5.9, (e) increase the maximum permissible term of any Option specified by Section 5.4, (f) amend any provision of Section 6.3 or (g) amend any provision of Section 10.5. In addition, no amendments to, or termination of, the Plan shall in any way impair the rights of a Participant under any Award previously granted without such Participant’s consent. +12.2 Adjustments. In the event of any merger, reorganization, consolidation, recapitalization, dividend or distribution (whether in cash, shares or other property, other than a regular cash dividend), stock split, reverse stock split, spin-off or similar transaction or other change in corporate structure affecting the Shares or the value thereof, such adjustments and other substitutions shall be made to the Plan and to Awards as the Committee, in its sole discretion, deems equitable or appropriate, including such adjustments in the aggregate number, class and kind of securities that may be delivered under the Plan and, in the aggregate or to any one Participant, in the number, class, kind and option or exercise price of securities subject to outstanding Awards granted under the Plan (including, if the Committee deems appropriate, the substitution of similar options to purchase the shares of, or other awards denominated in the shares of, another company) as the Committee may determine to be appropriate in its sole discretion; provided, however, that the number of Shares subject to any Award shall always be a whole number. No adjustment or substitution pursuant to this Section 12.2 shall be made in a manner that results in noncompliance with the requirements of Section 409A of the Code, to the extent applicable. +A-9 +12.3 Transferability of Awards. Except as provided below, no Award and no Shares subject to Awards described in Article 8 that have not been issued or as to which any applicable restriction, performance or deferral period has not lapsed, may be sold, assigned, transferred, pledged or otherwise encumbered, other than by will or the laws of descent and di stribution or pursuant to a domestic relations order, as determined by the Committee, and such Award may be exercised during the life of the Participant only by the Participant or the Participant’s guardian or legal representative. Notwithstanding the for egoing, a Participant may assign or transfer an Award with the consent of the Committee (i) for charitable donations; (ii) to the Participant’s spouse, children or grandchildren (including any adopted and stepchildren and grandchildren), or (iii) a trust f or the benefit of one or more of the Participants or the persons referred to in clause (ii) (each transferee thereof, a “Permitted Assignee” ); provided that such Permitted Assignee shall be bound by and subject to all of the terms and conditions of the Pla n and the Award Agreement relating to the transferred Award and shall execute an agreement satisfactory to the Company evidencing such obligations; and provided further that such Participant shall remain bound by the terms and conditions of the Plan. The Company shall cooperate with any Permitted Assignee and the Company’s transfer agent in effectuating any transfer permitted under this Section. Notwithstanding the foregoing, no Incentive Stock Option granted under the Plan may be sold, transferred, pledg ed, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, all Incentive Stock Options granted to a Participant under the Plan shall be exercisable during his or her lifetime only by such P articipant. +12.4 Termination of Employment . The Committee shall determine and set forth in each Award Agreement whether any Awards granted in such Award Agreement will continue to be exercisable, and the terms of such exercise, on and after the date that a Participant ceases to be employed by or to provide services to the Company or any Subsidiary (including as a Director), whether by reason of death, disability, voluntary or involuntary termination of employment or services, or otherwise. The date of termination of a Participant’s employment or services will be determined by the Committee, which determination will be final. +12.5 Deferral. The Committee shall be authorized to establish procedures pursuant to which the payment of any Award may be deferred. Such deferrals shall be administered in a manner that is intended to comply with Section 409A of the Code and shall be construed and interpreted in accordance with such intent. +12.6 Dividend Equivalents. Subject to the provisions of the Plan and any Award Agreement, the recipient of an Award (including any deferred Award) may, if so determined by the Committee, be entitled to receive, on a deferred basis, cash, stock or other property dividends, or cash payments in amounts equivalent to cash, stock or other property dividends on Shares ( “Dividend Equivalents” ) with respect to the number of Shares covered by the Award, as determined by the Committee, in its sole discretion. Dividend Equivalents may accrue but will not, in any event, be payable until the vesting conditions of the underlying Award have been met. The Committee may provide that such amounts and Dividend Equivalents (if any) shall be deemed to have been reinvested in additional Shares or otherwise reinvested. Notwithstanding the foregoing, Dividend Equivalents shall not be made part of any Options or Stock Appreciation Rights. +13. MISCELLANEOUS +13.1 Tax Withholding . The Company shall have the right to make all payments or distributions pursuant to the Plan to a Participant (or a Permitted Assignee thereof) (any such person, a “Payee” ) net of any applicable federal, state and local taxes required to be paid or withheld as a result of (a) the grant of any Award, (b) the exercise of an Option or Stock Appreciation Right, (c) the delivery of Shares or cash, (d) the lapse of any restrictions in connection with any Award or (e) any other event occurring pursuant to the Plan. The Company or any Subsidiary shall have the right to withhold from wages or other amounts otherwise payable to such Payee such minimum statutory withholding taxes as may be required by law, or to otherwise require the Payee to pay such withholding taxes. If the Payee shall fail to make such tax payments as are required, the Company or its Subsidiaries shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to such Payee or to take such other action as may be necessary to satisfy such withholding obligations. The Committee shall be authorized to establish procedures for election by Participants to satisfy such obligation for the payment of such taxes by tendering previously acquired Shares (either actually or by attestation, valued at their then Fair Market Value) that have been owned for a period of at least six months (or such other period to avoid accounting charges against the Company’s earnings), or by directing the Company to retain Shares (up to the Participant’s minimum required tax withholding rate or such other rate that will not trigger a negative accounting impact) otherwise deliverable in connection with the Award. +13.2 Right of Discharge Reserved; Claims to Awards. Nothing in the Plan nor the grant of an Award hereunder shall confer upon any Employee or Director the right to continue in the employment or service of the Company or any Subsidiary or affect any right that the Company or any Subsidiary may have to terminate the employment or service of (or to demote or to exclude from future Awards under the Plan) any such Employee or Director at any time for any reason. Except as specifically provided by the Committee, the Company shall not be liable for the loss of existing or potential profit from an Award granted in the event of termination of an employment or other relationship. No Employee or Participant shall have any claim to be granted any Award under the Plan, and there is no obligation for uniformity of treatment of Employees or Participants under the Plan. +13.3 Prospective Recipient. The prospective recipient of any Award under the Plan shall not, with respect to such Award, be deemed to have become a Participant, or to have any rights with respect to such Award, until and unless such recipient shall have +A-10 +executed an agreement or other instrument (in written or electronic form, in such manner as may be designated by the Committee) evidencing the Award and delivered a copy thereof to the Company, and otherwise complie d with the then applicable terms and conditions. +13.4 Cancellation of Award. Notwithstanding anything to the contrary contained herein, all outstanding Awards granted to any Participant may be canceled if the Participant, without the consent of the Company, while employed by the Company or any Subsidiary or after termination of such employment or service, establishes a relationship with a competitor of the Company or any Subsidiary or engages in activity that is in conflict with or adverse to the interest of the Company or any Subsidiary, as determined by the Committee in its sole discretion. +13.5 Stop Transfer Orders. All certificates for Shares delivered under the Plan pursuant to any Award shall be subject to such stop-transfer orders and other restrictions as the Committee may deem advisable in its sole discretion under the rules, regulations and other requirements of the Securities and Exchange Commission, any stock exchange upon which the Shares are then listed, and any applicable federal or state securities law, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions. +13.6 Nature of Payments. All Awards made pursuant to the Plan are in consideration of services performed or to be performed for the Company or any Subsidiary, division or business unit of the Company. Neither Awards made under the Plan nor Shares or cash paid pursuant to such Awards, may be included as “compensation” for purposes of computing the benefits payable to any Participant under the Company’s or any Subsidiary’s retirement plans (both qualified and non-qualified), welfare benefit plans or other employee benefit plans unless such plan expressly provides that such compensation shall be taken into account in computing a participant’s benefit. +13.7 Other Plans. Nothing contained in the Plan shall prevent the Board from adopting other or additional compensation arrangements, subject to stockholder approval if such approval is required; and such arrangements may be either generally applicable or applicable only in specific cases. +13.8 Severability. If any provision of the Plan shall be held unlawful or otherwise invalid or unenforceable in whole or in part by a court of competent jurisdiction, such provision shall (a) be deemed limited to the extent that such court of competent jurisdiction deems it lawful, valid and/or enforceable and as so limited shall remain in full force and effect, and (b) not affect any other provision of the Plan or part thereof, each of which shall remain in full force and effect. If the making of any payment or the provision of any other benefit required under the Plan shall be held unlawful or otherwise invalid or unenforceable by a court of competent jurisdiction, such unlawfulness, invalidity or unenforceability shall not prevent any other payment or benefit from being made or provided under the Plan, and if the making of any payment in full or the provision of any other benefit required under the Plan in full would be unlawful or otherwise invalid or unenforceable, then such unlawfulness, invalidity or unenforceability shall not prevent such payment or benefit from being made or provided in part, to the extent that it would not be unlawful, invalid or unenforceable, and the maximum payment or benefit that would not be unlawful, invalid or unenforceable shall be made or provided under the Plan. +13.9 Construction. As used in the Plan, the words “include” and “including,” and variations thereof, shall not be deemed to be terms of limitation, but rather shall be deemed to be followed by the words “without limitation.” +13.10 Unfunded Status of the Plan. The Plan is intended to constitute an “unfunded” plan for incentive and deferred compensation. With respect to any payments not yet made to a Participant by the Company, nothing contained herein shall give any such Participant any rights that are greater than those of a general creditor of the Company. In its sole discretion, the Committee may authorize the creation of trusts or other arrangements to meet the obligations created under the Plan to deliver the Shares or payments in lieu of or with respect to Awards hereunder; provided, however, that the existence of such trusts or other arrangements is consistent with the unfunded status of the Plan. +13.11 Governing Law. The Plan and all determinations made and actions taken thereunder, to the extent not otherwise governed by the Code or the laws of the United States, shall be governed by the laws of the State of Delaware, without reference to principles of conflict of laws, and construed accordingly. +13.12 Effective Date of Plan; Termination of Plan. The Plan was originally approved by the Company’s stockholders on April 17, 2014. The Plan as amended and restated was approved by the Board on May 17, 2017 and by the Company's stockholders on June 29, 2017. Awards may be granted under the Plan at any time and from time to time on or prior to June 29, 2027, on which date the Plan will expire except as to Awards then outstanding under the Plan. Such outstanding Awards shall remain in effect until they have been exercised or terminated, or have expired. +13.13 Foreign Employees. Awards may be granted to Participants who are foreign nationals or employed outside the United States, or both, on such terms and conditions different from those applicable to Awards to Employees employed in the United States as may, in the Committee’s sole discretion, be necessary or desirable in order to recognize differences in local law or tax policy. The Committee also may impose conditions on the exercise or vesting of Awards in order to minimize the Company’s obligation with respect to tax equalization for Employees on assignments outside their home country. +A-11 +13.14 Section 409A of the Code. +(a) Awards made under the Plan are intended to comply with or be exempt from Section 409A of the Code, and ambiguous provisions hereof, if any, shall be construed and interpreted in a manner consistent with such intent. No payment, benefit or consideration shall be substituted for an Award if such action would result in the imposition of taxes under Section 409A of the Code. Notwithstanding anything in the Plan to the contrary, if any Plan provision or Award under the Plan would result in the imposition of an additional tax under Section 409A of the Code, that Plan provision or Award shall be reformed, to the extent permissible under Code Section 409A, to avoid imposition of the additional tax, and no such action shall be deemed to adversely affect the Participant’s rights to an Award. +(b) Unless the Committee provides otherwise in an Award Agreement, each Other Stock Unit Award or Performance Unit (or portion thereof if the Award is subject to a vesting schedule) shall be settled no later than the 15th day of the third month after the end of the first calendar year in which the Award (or such portion thereof) is no longer subject to a “substantial risk of forfeiture” within the meaning of Section 409A of the Code. If the Committee determines that an Other Stock Unit Award or Performance Unit is intended to be subject to Section 409A of the Code, the applicable Award Agreement shall include terms that are designed to satisfy the requirements of Section 409A of the Code. +(c) If the Participant is identified by the Company as a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code on the date on which the Participant has a “separation from service” (other than due to death) within the meaning of Treasury Regulation § 1.409A-1(h), any Award payable or settled on account of a separation from service that is deferred compensation subject to Section 409A of the Code shall be paid or settled on the earliest of (1) the first business day following the expiration of six months from the Participant’s separation from service, (2) the date of the Participant’s death, or (3) such earlier date as complies with the requirements of Section 409A of the Code. +13.15 Captions. The captions in the Plan are for convenience of reference only, and are not intended to narrow, limit or affect the substance or interpretation of the provisions contained herein. +13.16 Notification of Disqualifying Disposition. If any Participant shall make any disposition of Shares issued pursuant to the exercise of an incentive stock option under the circumstances described in Section 421(b) of the Code (relating to certain disqualifying dispositions), such Participant shall notify the Company of such disposition within ten (10) days thereof. +13.17 Sarbanes Oxley Act and Clawback Policy. If the Company is required to prepare an accounting restatement due to the material noncompliance of the Company, as a result of misconduct, with any financial reporting requirement under the securities laws, or if the Participant is one of the persons subject to automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002, the Participant shall reimburse the Company the amount of any payment in settlement of an Award earned or accrued during the twelve-month period following the first public issuance or filing with the United States Securities and Exchange Commission (whichever just occurred) of the financial document embodying such financial reporting requirement. Notwithstanding any other provisions in this Plan, any Award shall be subject to recovery or clawback by the Company under any applicable clawback policy adopted by the Company whether before or after the date of grant of the Award. +13.18 Indemnification. Each person who is or shall have been a member of the Board, or a Committee appointed by the Board, or an officer of the Company to whom authority was delegated in accordance with Section 4.2 shall be indemnified and held harmless by the Company against and from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him or her in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by him or her in settlement thereof, with the Company’s approval, or paid by him or her in satisfaction of any judgment in any such action, suit, or proceeding against him or her, provided he or she shall give the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf, unless such loss, cost, liability, or expense is a result of his or her own willful misconduct or except as expressly provided by statute. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company’s Certificate of Incorporation of Bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless. +A-12 +PATTERSON-UTI ENERGY, INC. +10713 WEST SAM HOUSTON PARKWAY NORTH +SUITE 800 +HOUSTON, TX 77064 +VOTE BY INTERNET - www.proxyvote.com +Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. +Electronic Delivery of Future PROXY MATERIALS +If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. +VOTE BY PHONE - 1-800-690-6903 +Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions. +VOTE BY MAIL +Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. +TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: +KEEP THIS PORTION FOR YOUR RECORDS +DETACH AND RETURN THIS PORTION ONLY +THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. +For +All +Withhold +All +For All Except +To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below. +The Board of Directors recommends you vote FOR the following: +☐ +☐ +☐ +1. +Election of Directors +Nominees +01 +Mark S. Siegel 02 Charles O. Buckner 03 Michael W. Conlon 04 William Andrew Hendricks, Jr. +05 +Curtis W. Huff 06 Terry H. Hunt 07 Tiffany J. Thom +The Board of Directors recommends you vote FOR proposals 2, 3 and 4. +For +Against +Abstain +2. +Approval of amendment and restatement of Patterson-UTI’s 2014 Long-Term Incentive Plan. +☐ +☐ +☐ +3. +Ratification of the selection of PricewaterhouseCoopers LLP as the independent registered public accounting firm of Patterson-UTI for the fiscal year ending December 31, 2017. +☐ +☐ +☐ +4. +Approval of an advisory resolution on Patterson-UTI’s compensation of its named executive officers. +☐ +☐ +☐ +The Board of Directors recommends you vote “ONE YEAR” on the following proposal: +5. +Advisory vote on the frequency of future advisory votes on executive compensation. +1 year +☐ +2 years +☐ +3 years +☐ +Abstain +☐ +NOTE: Such other business as may properly come before the meeting or any adjournment thereof. +Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. +Signature [PLEASE SIGN WITHIN BOX] +Date +Signature (Joint Owners) +Date +Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Annual Report, Notice & Proxy Statement are available at www.proxyvote.com +PATTERSON-UTI ENERGY, INC. +Annual Meeting of Stockholders +June 29, 2017 10:00 AM +This proxy is solicited by the Board of Directors +The undersigned stockholder of Patterson-UTI Energy, Inc. (the “Company”) hereby appoints Mark S. Siegel, William Andrew Hendricks, Jr. and John E. Vollmer III, and each of them, proxies to the undersigned, each with full power to act without the other and with full power of substitution, to vote all of the shares which the undersigned is entitled to vote at the annual meeting of stockholders of the Company to be held Thursday, June 29, 2017, at 10:00 a.m., Central Time, via a live webcast at www.virtualshareholdermeeting.com/PTEN, and at any and all adjournments or postponements thereof, with the same force and effect as if the undersigned were personally present. +The undersigned hereby instructs the above-named proxies to vote the shares represented by this proxy in the manner as directed for the undersigned on the reverse side of this proxy card. If no directions are made, the proxies will vote “FOR” the nominees for directors, “FOR” the approval of the amendment and restatement of the Patterson-UTI Energy, Inc. 2014 Long-Term Incentive plan, “FOR” the ratification of the selection of PricewaterhouseCoopers LLP, “FOR” the approval of the advisory resolution on executive compensation and “FOR” the approval, on an advisory basis, of a future advisory vote every year on executive compensation, as set forth on the reverse side. If any other matter should be presented properly, this proxy will be voted in accordance with the discretion of the above-named proxies. +Continued and to be marked, dated and signed on reverse side \ No newline at end of file diff --git a/raw/proxies/0000889900/0001564590-17-011238/proxy_rpt.txt b/raw/proxies/0000889900/0001564590-17-011238/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..e69de29bb2d1d6434b8b29ae775ad8c2e48c5391 diff --git a/raw/proxies/0000889900/0001564590-18-008801/proxy.txt b/raw/proxies/0000889900/0001564590-18-008801/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..1fd0abbc5af4a30c92fb195a2dcbab31661d9469 --- /dev/null +++ b/raw/proxies/0000889900/0001564590-18-008801/proxy.txt @@ -0,0 +1,2390 @@ +DEF 14A +1 +pten-def14a_20180614.htm +DEF 14A +pten-def14a_20180614.htm +V +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +Washington, D.C. 20549 +SCHEDULE 14A INFORMATION +Proxy Statement Pursuant to Section 14(a) of the +Securities Exchange Act of 1934 +(Amendment No. ) +Filed by the Registrant ☒ +Filed by a Party other than the Registrant ☐ +Check the appropriate box: +☐ +Preliminary Proxy Statement +☐ +Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +☒ +Definitive Proxy Statement +☐ +Definitive Additional Materials +☐ +Soliciting Material under Rule 14a-12 +PATTERSON-UTI ENERGY, INC. +(Name of registrant as specified in its charter) +(Name of person(s) filing proxy statement, if other than the registrant) +Payment of Filing Fee (Check the appropriate box): +☒ +No fee required. +☐ +Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. +(1) +Title of each class of securities to which transaction applies: +(2) +Aggregate number of securities to which transaction applies: +(3) +Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): +(4) +Proposed maximum aggregate value of transaction: +(5) +Total fee paid: +☐ +Fee paid previously with preliminary materials. +☐ +Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. +(1) +Amount Previously Paid: +(2) +Form, Schedule or Registration Statement No.: +(3) +Filing Party: +(4) +Date Filed: +10713 West Sam Houston Parkway North, Suite 800 +Houston, Texas 77064 +(281) 765-7100 +April 24, 2018 +Dear Stockholder: +We cordially invite you to attend Patterson-UTI Energy, Inc.’s annual stockholders’ meeting. The annual meeting will be held Thursday, June 14, 2018, at 10:00 a.m., Central Time, at our corporate headquarters, located at 10713 W. Sam Houston Parkway North, Suite 125, Houston, Texas, 77064 . +We are pleased to take advantage of Securities and Exchange Commission rules that allow us to furnish proxy materials to our stockholders on the Internet. We believe that posting these materials on the Internet enables us to provide stockholders with the information that they need quickly, while lowering our costs of printing and delivery and supporting sustainability. We are mailing to most of our stockholders a Notice of Internet Availability of Proxy Materials, rather than a paper copy of our proxy materials. The notice contains instructions on how to access the proxy materials, vote and obtain, if you so desire, a paper copy of the proxy materials. +Your vote is important to us. Whether or not you plan to attend the Annual Meeting in person, we urge you to promptly vote your shares by using the Internet or telephone, or if the accompanying proxy statement was mailed to you, by completing, signing, dating and returning your proxy card as soon as possible in the enclosed postage prepaid envelope. +Thank you for your support. +Sincerely, +M ark S. S iegel +Chairman of the Board +W illiam A ndrew H endricks , J r . +President, Chief Executive Officer and Director +2 +PATTERSON-UTI ENERGY, INC. +10713 West Sam Houston Parkway North, Suite 800 +Houston, Texas 77064 +NOTICE OF 2018 ANNUAL MEETING OF STOCKHOLDERS +To Be Held June 14, 2018 +The 2018 annual meeting of the stockholders of Patterson-UTI Energy, Inc., a Delaware corporation (“Patterson-UTI”), will be held Thursday, June 14, 2018, at 10:00 a.m., Central Time, at our corporate headquarters, located at 10713 W. Sam Houston Parkway North, Suite 125, Houston, Texas, 77064 (the “Meeting”), for the following purposes: +• +to elect eight directors named in this proxy statement to the Board of Directors of Patterson-UTI to serve until the next annual meeting of the stockholders or until their respective successors are elected and qualified; +• +to approve an amendment of Patterson-UTI’s Restated Certificate of Incorporation to increase the number of authorized shares of Patterson-UTI’s common stock; +• +to ratify the selection of PricewaterhouseCoopers LLP as the independent registered public accounting firm of Patterson-UTI for the fiscal year ending December 31, 2018; +• +to approve, on an advisory basis, Patterson-UTI’s compensation of its named executive officers; and +• +to transact such other business as may properly come before the Meeting or any adjournment or postponement thereof. +Stockholders of record at the close of business on April 16, 2018 are entitled to notice of and to vote at the Meeting and any adjournment or postponement thereof. +Your vote is important to us. Whether or not you plan to attend the Meeting in person, we urge you to promptly vote your shares by using the Internet or telephone, or if the accompanying proxy statement was mailed to you, by completing, signing, dating and returning your proxy card as soon as possible in the enclosed postage prepaid envelope. +By order of the Board of Directors +S ETH D. W EXLER +Senior Vice President, General Counsel and Secretary +April 24, 2018 +Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting +to Be Held on June 14, 2018 +The proxy statement and annual report to stockholders are available at www.proxyvote.com . +3 +PATTERSON-UTI ENERGY, INC. +10713 West Sam Houston Parkway North, Suite 800 +Houston, Texas 77064 +PROXY STATEMENT +ANNUAL MEETING OF STOCKHOLDERS +To Be Held June 14, 2018 +General Information About the Annual Meeting and Voting +The Board of Directors (the “Board” or “Board of Directors”) of Patterson-UTI Energy, Inc., a Delaware corporation (“Patterson-UTI” or the “Company”), has made this proxy statement and its 2017 annual report available to you on the Internet or, upon your request has delivered printed versions of these materials to you by mail beginning on or about April 30, 2018. Patterson-UTI is furnishing this proxy statement in connection with the solicitation by the Board of Directors of proxies to be voted at the 2018 annual meeting of stockholders of Patterson-UTI (the “Meeting”). The Meeting will be held Thursday, June 14, 2018, at 10:00 a.m., Central Time, at our corporate headquarters, located at 10713 W. Sam Houston Parkway North, Suite 125, Houston, Texas, 77064 , or at any adjournment or postponement thereof . +The Notice of Internet Availability of Proxy Materials (the “Notice”) was mailed to each of Patterson-UTI’s stockholders (other than those who previously requested electronic delivery) entitled to vote at the Meeting on or about April 30, 2018. +Pursuant to the “notice and access” rules adopted by the Securities and Exchange Commission (the “SEC”), Patterson-UTI has elected to provide stockholders access to its proxy materials on the Internet. Accordingly, Patterson-UTI sent a Notice to all of its stockholders as of the record date. The Notice includes instructions on how to access Patterson-UTI’s proxy materials on the Internet and how to request a printed copy of these materials. In addition, by following the instructions in the Notice, stockholders may request to receive proxy materials in printed form by mail or electronically by email on an ongoing basis. +Choosing to receive your future proxy materials by email will save us the cost of printing and mailing documents to you and will support sustainability. If you choose to receive future proxy materials by email, you will receive an email next year with instructions containing a link to those materials and a link to the proxy voting site. Your election to receive proxy materials by email will remain in effect until you terminate such election. +If your shares are registered directly in your name with our transfer agent, Continental Stock Transfer & Trust Company, you are considered the “stockholder of record” with respect to those shares, and the Notice was sent directly to you. +If your shares are held in an account at a brokerage firm, bank, broker-dealer, or other similar organization, then you are the beneficial owner of shares held in “street name,” and the Notice was forwarded to you by that organization. As a beneficial owner, you have the right to direct that organization on how to vote the shares held in your account. +Whether you are a “stockholder of record” or hold your shares in “street name,” you may direct your vote without attending the Meeting in person. +If you are a stockholder of record, you may vote by using the Internet or telephone by following the instructions in the Notice. If you request printed copies of the proxy materials by mail, you may also vote by completing, dating, signing and returning your proxy card by mail. You should sign your name exactly as it appears on the proxy card. If you are signing in a representative capacity (for example, as guardian, executor, trustee, custodian, attorney or officer of a corporation), you should indicate your name and title or capacity. +If you are the beneficial owner of shares held in street name, you may be eligible to vote your shares electronically using the Internet or telephone by following the instructions in the Notice. If you request printed copies of the proxy materials by mail, you may also vote by signing the voter instruction card provided by your brokerage firm, bank, broker-dealer, or other similar organization and returning it by mail. If you provide specific voting instructions by mail, telephone or the Internet, your shares will be voted by your brokerage firm, bank, broker-dealer, or similar organization as you have directed. +4 +Properly submitted proxies received either by mail, Internet, telephone or in person in time to be counted for the Meeting will be voted as you hav e directed in your proxy, unless you revoke your proxy in the manner provided below. As to any matter for which you give no direction in your proxy, your shares will be voted as follows: +• +“FOR” the election of all of the nominees to the Board of Directors named in this proxy statement; +• +“FOR” the approval of the amendment of Patterson-UTI’s Restated Certificate of Incorporation to increase the number of authorized shares of Patterson-UTI’s common stock, $.01 par value per share (the “Common Stock”); +• +“FOR” the ratification of PricewaterhouseCoopers LLP as the independent registered public accounting firm of Patterson-UTI for the fiscal year ending December 31, 2018; +• +“FOR” the approval, on an advisory basis, of Patterson-UTI’s compensation of its named executive officers; and +• +“FOR” or “AGAINST” any other proposals that may be properly submitted at the Meeting at the discretion of the persons named in the proxy. +If you are a stockholder of record, you may revoke your proxy before the proxy is voted by either: +• +submitting a new proxy with a later date, including a proxy submitted using the Internet or telephone, in time to be counted for the Meeting; +• +notifying the Secretary of Patterson-UTI in writing before the Meeting that you have revoked your proxy; or +• +attending the Meeting and voting in person. +If your shares are held in street name, you must obtain a proxy executed in your favor from the stockholder of record (that is, your brokerage firm, bank, broker-dealer or similar organization) to be able to vote at the Meeting. +The Board of Directors is making this solicitation. We have retained Georgeson LLC, 480 Washington Blvd., 26 th Floor, Jersey City, New Jersey 07310, for a fee of approximately $8,500 and the reimbursement of out of pocket costs and expenses, to assist in the solicitation of proxies on behalf of the Board. Patterson-UTI’s officers and other employees, without compensation other than regular compensation, may also solicit proxies on behalf of the Board by mail, email, the Internet, telephone, electronic means and personal interview. Patterson-UTI will pay all costs associated with this solicitation. +Shares Outstanding and Voting Rights +Only stockholders of record of Patterson-UTI’s Common Stock at the close of business on April 16, 2018 are entitled to notice of and to vote at the Meeting or any adjournment or postponement thereof. At the close of business on April 16, 2018, there were 221,569,305 shares of Common Stock issued and outstanding. Holders of record of Common Stock on April 16, 2018 will be entitled to one vote per share on all matters to properly come before the Meeting. A list of stockholders entitled to notice of and to vote at the Meeting will be made available at the Meeting and during regular business hours at the offices of Patterson-UTI Energy, Inc., 10713 West Sam Houston Parkway North, Suite 800, Houston, Texas 77064 for the ten day period prior to the Meeting for examination by any stockholder for any purpose germane to the Meeting. +A quorum is necessary to transact business at the Meeting. A majority of the shares of Common Stock outstanding on April 16, 2018 will constitute a quorum. The shares held by each stockholder who attends the Meeting in person, signs and timely returns the form of proxy or properly votes using the Internet or telephone will be counted for purposes of determining the presence of a quorum at the Meeting. +“Broker non-votes” will be considered present at the Meeting but will not be counted to determine the total number of votes cast. Broker non-votes occur when nominees, such as brokerage firms, banks, broker-dealers, or other similar organizations holding shares on behalf of the beneficial owners, are prohibited from exercising discretionary voting authority for beneficial owners who have not provided voting instructions. If you do not give instructions to your bank, brokerage firm or other agent, the bank, brokerage firm or other agent will nevertheless be entitled to vote your shares of Common Stock in its discretion on “routine matters” and may give or authorize the giving of a proxy to vote the shares of Common Stock in its discretion on such matters. The ratification of an independent registered public accounting firm and the approval of the amendment of Patterson-UTI’s Restated Certificate of Incorporation are generally considered routine matters, whereas the election of directors and the advisory approval of executive compensation are not considered routine matters. For these reasons, please promptly vote in accordance with the instructions provided by your brokerage firm, bank, broker-dealer, or other similar organization. +5 +PROPOSAL NO. 1 +ELECTION OF DIRECTORS +Directors are elected to serve until the next annual meeting of stockholders and until their successors are elected and qualified. Under Delaware law and Patterson-UTI’s bylaws, the affirmative vote of a plurality of shares present in person or represented by proxy at the meeting at which a quorum is present is required for the election of directors. +The enclosed form of proxy provides a means for you to either: +• +vote “FOR” the election of the nominees to the Board of Directors listed below, +• +withhold authority to vote for one or more of the nominees, or +• +withhold authority to vote for all of the nominees. +The Board of Directors recommends that you vote “FOR” all of the nominees. Unless you give contrary instructions in your proxy, your proxy will be voted “FOR” the election of all of the nominees to the Board of Directors. If any nominee should become unable or unwilling to accept the nomination or election, the person acting under the proxy will vote for the election of such other person as the Board of Directors may recommend. The Board has no reason, however, to believe that any of the nominees will be unable or unwilling to serve if elected. +Because directors are elected by a plurality vote, shares as to which a stockholder withholds authority to vote and broker non-votes will not affect the outcome of the election. A broker non-vote will be counted for purposes of establishing a quorum, but will not be treated as a vote cast with respect to the election of directors. This will have the effect of reducing the absolute number of votes cast for the election of directors. +Our corporate governance guidelines require that if a director receives in an uncontested election a greater number of “withhold” votes than votes cast “for” his or her election, the Nominating and Corporate Governance Committee of the Board of Directors will undertake a prompt evaluation of the appropriateness of the director’s continued service on the Board of Directors. In performing this evaluation, the Nominating and Corporate Governance Committee will review all factors it deems relevant, including the stated reasons why votes were withheld, the director’s length of service, his or her past contributions to Patterson-UTI and the availability of other qualified candidates. The Nominating and Corporate Governance Committee will then make its recommendation to the Board. The Board of Directors will review the Nominating and Corporate Governance Committee’s recommendation and consider such further factors and information as it deems relevant. The Board of Directors will act on the Nominating and Corporate Governance Committee’s recommendation no later than 90 days following the date of the stockholders’ meeting. If the Board of Directors determines remedial action is appropriate, the director shall promptly take whatever action is requested by the Board. If the director does not promptly take the recommended remedial action or if the Board of Directors determines that immediate resignation is in the best interests of Patterson-UTI and its stockholders, the Board of Directors may accept the director’s resignation that will have been tendered as follows. Each director will, as a condition to his or her appointment or election as a director or nomination as a director, agree in writing to comply with the terms of Patterson-UTI’s majority voting policy and provide to the Board of Directors an irrevocable resignation that will be effective upon (i) the failure to receive the required vote at the next annual meeting at which such director faces re-election and (ii) the Board of Directors’ acceptance of such resignation. +Set forth below is the name, age, position and a brief description of the business experience during at least the past five years of each of the members of Patterson-UTI’s Board of Directors, as well as specific qualifications, attributes and skills of such member that were identified by the Nominating and Corporate Governance Committee when such member was nominated to serve on the Board of Directors. Each current member of Patterson-UTI’s Board of Directors is a nominee for election to the Board of Directors. There are no arrangements or understandings between any person and any of the directors pursuant to which such director was selected as a nominee for election at the Meeting. There are no family relationships among any of the directors or executive officers of Patterson-UTI. +Name +Age +Position +Director Since +Mark S. Siegel +67 +Chairman of the Board and Director +2001 +William A. Hendricks, Jr. +53 +President and Chief Executive Officer +2017 +Charles O. Buckner +73 +Director +2007 +Tiffany (TJ) Thom Cepak +45 +Director +2014 +Michael W. Conlon +71 +Director +2012 +Curtis W. Huff +60 +Director +2001 +Terry H. Hunt +69 +Director +2003 +Janeen S. Judah +58 +Director +2018 +6 +The following charts show a snapshot of the average tenure, average age and gender diversity of the members of our Board of Directors. +When considering whether directors and nominees have the experience, qualifications, attributes and skills, taken as a whole, to enable the Board of Directors to satisfy its oversight responsibilities effectively in light of Patterson-UTI’s business and structure, the Nominating and Corporate Governance Committee and the Board of Directors focused primarily on the information discussed in each of the directors’ individual biographies set forth below. +Mark S. Siegel — Mr. Siegel has served as Chairman of the Board and as a director of Patterson-UTI since May 2001. Mr. Siegel served as Chairman of the Board and as a director of UTI from 1995 to May 2001, when UTI merged with and into Patterson-UTI. Mr. Siegel has been President of REMY Investors & Consultants, Incorporated (“REMY Investors”) since 1993. Mr. Siegel is the past chairman and a current member of the Board of Directors of the Cedars-Sinai Medical Center, and previously served on the Board of Trustees of the J. Paul Getty Trust from 2005 to 2017 (including as Chair from 2010 to 2015). From 1992 to 1993, Mr. Siegel was President, Music Division, Blockbuster Entertainment Corp. From 1988 through 1992, Mr. Siegel was an Executive Vice President of Shamrock Holdings, Inc., a private investment company, and Managing Director of Shamrock Capital Advisors, Incorporated. Mr. Siegel holds a Bachelor of Arts degree from Colgate University (Magna Cum Laude and Phi Beta Kappa) and a J.D. from the University of California, Berkeley (Boalt Hall) School of Law (Order of the Coif). +The Board of Directors considered Mr. Siegel’s broad business and legal experience, as well as his expertise with respect to Patterson-UTI’s business. In addition, the Board considered Mr. Siegel’s demonstrated leadership for more than 20 years in the aggregate of Patterson-UTI and one of its predecessor companies, UTI Energy Corp. (“UTI”). In addition, the Board considered Mr. Siegel’s prior leadership experience in other public companies and in the oil services industry, and in numerous other businesses and industries. Mr. Siegel also brings substantial experience and expertise in mergers and acquisitions, capital structure transactions, strategic planning, and board and business management. Mr. Siegel’s broad and deep experience and expertise allows him to provide Patterson-UTI with valuable leadership in all areas of its business endeavors. +William Andrew Hendricks, Jr. —Mr. Hendricks has served as President and Chief Executive Officer of Patterson-UTI since October 2012 and as a director of Patterson-UTI since June 2017. From April 2012 through September 2012, he served as Chief Operating Officer of Patterson-UTI. From May 2010 through March 2012, Mr. Hendricks served as President of Schlumberger Drilling & Measurements, a division of Schlumberger. Prior to that date, Mr. Hendricks worked for Schlumberger in various worldwide locations and capacities since 1988, including serving in numerous executive positions since 2003. Mr. Hendricks holds a Bachelor of Science in Petroleum Engineering from Texas A&M University. +The Board of Directors considered Mr. Hendricks’ more than 30 years of combined operational and managerial experience in the oil and gas industry. In addition, the Board noted his nearly six years of service as Patterson-UTI’s President and Chief Executive Officer and nearly ten years of service in numerous executive positions with Schlumberger Limited, a global provider of oilfield services, including nearly two years as President of Schlumberger Drilling & Measurements. The Board further considered Mr. Hendricks’ significant experience with evaluating the drivers for macro trends in the oil and gas industry, as well as managing the cyclical nature of the oil and gas service business, which allows Mr. Hendricks to provide valuable input into the development and implementation of Patterson-UTI’s corporate strategy. In addition, the Board noted that Mr. Hendricks’ operational experience brings valuable knowledge to the oversight of achieving safe and efficient operations. The Board also considered Mr. Hendricks’ significant experience working in numerous worldwide locations, which allows him to provide valuable counsel regarding possible expansion into markets outside of North America. +7 +Charles O. Buckner — Mr. Buckner has served as a director of Patterson-UTI since February 2007. Mr. Buckner, a private investor, retired from the public accounting firm of Ernst & Young LLP in 2002 after 35 years of service in a variety of client service and administrative roles, including chairmanship of Ernst & Young’s U.S. energy practice. Mr. Buckner served as a director for KLR Energy Acquisition Corp., a blank check company formed to source, acquire and, after its initial business combination, build an oil and gas exploration and production business (“KLR Energy”), from March 2016 to April 2017. Mr. Buckner served as a director of Energy Partners, Ltd., a publicly held company with oil and natural gas exploration and production on the continental shelf in the Gulf of Mexico from 2009 to 2014, Global Industries, Ltd., a marine construction services company with global operations from 2010 to 2011, Gateway Energy Corporation, a publicly held oil and gas pipeline company from 2008 to 2010, Horizon Offshore, Incorporated, a marine construction services company for the offshore oil and gas industry from 2003 to 2007, and Whittier Energy Corporation, a publicly held company with domestic onshore oil and natural gas exploration and production from 2003 to 2007. Mr. Buckner is a Certified Public Accountant and holds a Bachelor of Business Administration from the University of Texas and a Masters of Business Administration from the University of Houston. +The Board of Directors considered Mr. Buckner’s service as a director of oil and gas companies, as well as his experience, expertise and background with regard to accounting matters, which includes his role as the former chairman of Ernst & Young LLP’s U.S. energy practice. +Tiffany (TJ) Thom Cepak — Ms. Cepak has served as a director of Patterson-UTI since August 2014. Ms. Cepak has served as the Chief Financial Officer of Energy XXI Gulf Coast, Inc. since August 2017. Ms. Cepak served as the Chief Financial Officer of KLR Energy (and, subsequent to its business combination, Rosehill Resources Inc.) from January 2015 to June 2017. Ms. Cepak served as a director of Yates Petroleum Corporation, a privately owned, independent oil and gas exploration and production company, from October 2015 to October 2016. Ms. Cepak served four years as the Chief Financial Officer of EPL Oil & Gas, Inc., and was further appointed Executive Vice President in January 2014, and she served in those roles until June 2014, when EPL was sold. Ms. Cepak began her career with EPL as a Senior Asset Management Engineer, a position she held until she was appointed Director of Corporate Reserves in September 2001. Ms. Cepak was named EPL’s Director of Investor Relations in April 2006 and Vice President, Treasurer and Investor Relations in July 2008. In July 2009, Ms. Cepak was designated as EPL’s Principal Financial Officer and, in September 2009, she was appointed Senior Vice President. Ms. Cepak has more than 20 years of energy industry experience and prior to joining EPL, she was a Senior Reservoir Engineer with Exxon Production Company and ExxonMobil Company with operational roles including reservoir engineering and subsurface completion engineering for numerous offshore Gulf of Mexico properties. Ms. Cepak holds a B.S. in Engineering from the University of Illinois and a Masters of Business Administration in Management with a concentration in Finance from Tulane University. +The Board of Directors considered Ms. Cepak’s more than 20 years of operational and financial experience in the energy industry. The Board noted her service in various operational roles, including as a reservoir engineer for a major oil and gas exploration and production company. The Board also noted Ms. Cepak’s executive management experience, including most recently as chief financial officer of a publicly traded independent oil and gas exploration and production company, which allows her to provide Patterson-UTI with valuable insight on financial and strategic matters. The Board also considered Ms. Cepak’s diversity of perspective, which is exemplified by her recognition in 2018 as one of Oil and Gas Investor’s 25 Influential Women in Energy. +Michael W. Conlon — Mr. Conlon has served as a director of Patterson-UTI since September 2012. Mr. Conlon retired as a partner of the law firm, Norton Rose Fulbright US LLP, in January 2012 after 40 years with the firm. Mr. Conlon specialized in corporate, securities and merger and acquisition matters. Mr. Conlon was partner-in-charge of the firm’s Houston office from 2007 to 2011, was co-partner-in-charge from 2001 to 2007 and partner-in-charge of its Washington, D.C. office from 1992 to 1998. Mr. Conlon currently is an Advisory Director to Tailored Brands, Inc., a specialty retailer of men’s apparel and international supplier of corporatewear, and an NYSE listed company. Mr. Conlon holds a Bachelor of Arts degree in Economics from Catholic University of America, where he graduated magna cum laude and as a member of Phi Beta Kappa, and a Juris Doctorate from the Duke University School of Law, where he graduated as a member of the Order of the Coif. +The Board of Directors considered Mr. Conlon’s more than 40 years of experience handling corporate, securities and mergers and acquisition matters as a lawyer with an international law firm, as well as his service in a number of management roles throughout his tenure at the firm. The Board noted Mr. Conlon’s experience in representing numerous public companies, including Patterson-UTI, and other energy services companies, allows him to provide valuable insight on legal, governance and regulatory issues facing Patterson-UTI. +8 +Curtis W. Huff — Mr. Huff has served as a director of Patterson-UTI since May 2001 and served as a director of UTI from 1997 to May 2001. Mr. Huff is owner and Chairman of Freebird Partners, a private investment firm created in 2002 that is focused on oilfield service companies and technology. Mr. Huff was Managing Director of Intervale Capital, an oilfield service private equity firm that Mr. Huff co-founded in 2006, and he was a senior advisor to that firm from 2012 to February 2015. Mr. Huff also serves as Chairman of Impact Fluid Solutions LP, which provides drilling and production solutions for oil and gas operators and fluid companies. Mr. Huff served as the President and Chief Executive Officer of Grant Prideco, Inc., a provider of drill pipe and other drill stem products, from February 2001 to June 2002. From January 2000 to February 2001, Mr. Huff served as Executive Vice President, Chief Financial Officer and General Counsel of Weatherford International, Inc., one of the world’s largest international oilfield services companies. He served as Senior Vice President and General Counsel of Weatherford from May 1998 to January 2000. Mr. Huff began his professional career in 1983 with the law firm of Norton Rose Fulbright US LLP where he specialized in corporate, securities and merger and acquisition matters. Mr. Huff was made a partner in that firm in 1989 where he served until 1998 when he joined Weatherford. Mr. Huff holds a Bachelor of Arts degree and J.D. from the University of New Mexico, where he graduated as a member of the Order of the Coif and cum laude, and a Masters of Law from New York University School of Law. Mr. Huff is a Vice Chairman of the Board of Directors of the University of St. Thomas in Houston, Texas, and a member of the board of directors of the Houston Food Bank. +The Board of Directors considered Mr. Huff’s background as an executive of publicly traded oilfield services companies and as an owner and manager of a private investment firm focused on the oilfield service industry. The Board noted his knowledge and experience in a broad range of oilfield products and services and his current and historical experience in managing operations in both the United States and internationally. The Board also considered Mr. Huff’s expertise and background with regard to accounting and legal matters, which, among other things, provides guidance to Patterson-UTI in assessing its corporate governance structure, policies and procedures. +Terry H. Hunt — Mr. Hunt has served as a director of Patterson-UTI since April 2003 and served as a director of UTI from 1994 to May 2001. Mr. Hunt is an energy consultant and retired senior natural gas and electric utility executive. Mr. Hunt served as Senior Vice President — Strategic Planning of PPL Corporation, an international energy and utility holding company, from 1998 to 2000. Mr. Hunt served as the President and Chief Executive Officer of Penn Fuel Gas, Inc., a Pennsylvania-based natural gas and propane distribution company, from 1992 to 1999. Previously, Mr. Hunt was President of Carnegie Natural Gas and Apollo Gas Company, both Appalachian natural gas distribution companies. He also previously served in senior management positions in natural gas project and venture development, oil and natural gas exploration and development evaluation and operations and major production facilities construction with Texas Oil & Gas Corp. and Atlantic Richfield. Mr. Hunt holds a Bachelor of Engineering degree from the University of Saskatchewan, Canada and a Masters of Business Administration from Southern Methodist University. +The Board of Directors considered Mr. Hunt’s more than 25 years of experience covering most phases of the upstream oil and natural gas industry in the United States and Canada, including the evaluation of exploration and development programs, oil and natural gas production and pipeline operations, and project development and major production facility construction. This experience and background provides Patterson-UTI with an invaluable perspective of the oil and natural gas industry and its customers. In addition, Mr. Hunt’s many years of senior executive experience leading natural gas distribution, storage and marketing companies provides insight into the management of multi-faceted businesses and the markets for natural gas in North America. +9 +Janeen S. Judah — Ms. Judah has served as a director of Patterson-UTI since April 2018. Ms. Judah served as the President of the Society of Petroleum Engineers from September 2016 to October 2017 while on secondment from Chevron, and as a member of the Board of Directors of the Society of Petroleum Engineers from 2003 to 2006 and from 2012 to 2018. Ms. Judah held numerous leadership positions at Chevron, including general manager for Chevron’s Southern Africa business unit from August 2010 to September 2016, president of Chevron Environmental Management Company from August 2007 to August 2010 and general manager of reservoir and production engineering for Chevron Energy Technology Company from June 2004 to August 2007. Before joining Chevron in 1998, she held various upstream petroleum engineering positions for Texaco and Arco, starting in Midland in 1981. Ms. Judah holds Bachelor of Science and Masters of Science degrees in petroleum engineering from Texas A&M University, a Masters of Business Administration from the University of Texas of the Permian Basin and a Juris Doctorate from the University of Houston Law Center. +The Board of Directors considered Ms. Judah’s more than 35 years of operational, managerial and environmental experience in the oil and gas industry. The Board noted her experience derived from oil and gas industry positions held involving significant operational and management responsibilities, including positions with Chevron and upstream petroleum engineering positions. The Board also noted Ms. Judah’s e xtensive international experience, including most recently as general manager for Chevron’s Southern Africa business unit, which allows her to provide Patterson-UTI with valuable insight on international and strategic matters. The Board also considered Ms. Judah’s service as the President of the Society of Petroleum Engineers from 2017 to 2018, as well as her diversity of perspective, which is exemplified by her recognition in 2018 as one of Oil and Gas Investor’s 25 Influential Women in Energy. +Board Leadership Structure, Lead Director and Board Role in Risk Oversight +The Board evaluates its leadership structure and role in risk oversight on an ongoing basis. The decision on whether to combine or separate the Chairman and Chief Executive Officer (“CEO”) role is determined on the basis of what the Board considers to be best for Patterson-UTI at any given point in time. Patterson-UTI’s current Board leadership structure separates the role of Chairman and CEO. +The Board also believes part of an effective Board leadership structure is to have a lead independent director, the “Lead Director.” The Board has appointed Mr. Huff as the Lead Director. The independent directors meet regularly in executive sessions at which only independent directors are present, and the Lead Director chairs those sessions. The Lead Director serves as a liaison between the Chairman and the independent directors, consults with regard to Board and agenda items, and works with the chairpersons of Board committees as appropriate. +The Nominating and Corporate Governance Committee and the Board currently believe that the Board’s leadership structure, which includes the separation of the role of CEO and Chairman and the appointment of an independent Lead Director, is appropriate because it, among other things, provides for sufficient independence between the Board and management and for an independent director who provides board member leadership. +The Board has adopted Corporate Governance Guidelines, which can be accessed electronically in the “Governance” section of Patterson-UTI’s website at www.patenergy.com . The Guidelines describe one of the Board’s primary responsibilities as overseeing Patterson-UTI’s processes for assessing and managing risks. The Board discharges this responsibility, in part, through regular inquiries from the Chairman of the Board and/or the Lead Director to management, periodic communications from management to the Board of Directors of particular risks and events, and discussions during Board meetings of general and specific risks to Patterson-UTI. +Meetings and Committees of the Board of Directors +The Board of Directors met 12 times during the year ended December 31, 2017. Each director attended, in person or by telephone, at least 75% of the aggregate of all meetings held by the Board and meetings of each committee on which such director served. A majority of the members of the Board of Directors are independent within the meaning of the Nasdaq Stock Market, Inc. (“Nasdaq”) listing standards. Specifically, the Board has determined that Messrs. Buckner, Conlon, Huff and Hunt and Mses. Cepak and Judah are independent within the meaning of the Nasdaq listing standards. In reaching this conclusion, the Board considered that Patterson-UTI’s pressure pumping business has rented mobile proppant management systems from an oilfield service company in which Mr. Huff has a less than two percent indirect equity interest, which involved aggregate rental payments of approximately $300,000 between December 31, 2016 and March 31, 2018. Additionally, the Board considered that Mr. Huff has an indirect equity interest in two customers of Patterson-UTI’s oilfield rental tool business and in a vendor to Patterson-UTI’s contract drilling business, all of which entities received less than $10,000 from, or paid less than $10,000 to, Patterson-UTI since January 1, 2017. The Board has determined that these transactions are not material to any such company, Patterson-UTI or Mr. Huff and that such transactions do not affect his independence under applicable rules and regulations. +The Board of Directors has established four standing committees: an Executive Committee, an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee. +The Executive Committee, which currently is composed of Messrs. Siegel, Hendricks and Huff, has the authority, to the extent permitted by applicable law, to act for the Board in all matters arising between regular or special meetings of the Board of Directors. +10 +The Audit Committee members are Messrs. Buckner (chairman), Huff and Hunt and Ms. Cepak, each of whom is independent within the meaning of applicable rules under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), a nd within the meaning of the Nasdaq listing standards. The Audit Committee oversees management’s conduct of Patterson-UTI’s accounting and financial reporting process, including review of the financial reports and other financial information provided by Pa tterson-UTI to the public and government and regulatory bodies, Patterson-UTI’s system of internal accounting, Patterson-UTI’s financial controls, and the annual independent audit of Patterson-UTI’s financial statements and internal control over financial reporting. The Audit Committee also oversees compliance with Patterson-UTI’s codes of conduct and ethics and with legal and regulatory requirements. The Board has determined that Messrs. Buckner and Huff and Ms. Cepak are “audit committee financial experts ” within the meaning of applicable SEC rules. The Audit Committee selects the independent registered public accounting firm to audit Patterson-UTI’s books and records and considers and acts upon accounting matters as they arise. The Board of Directors has adopted a written charter for the Audit Committee. The Audit Committee held seven meetings during the year ended December 31, 2017. Please see “Audit Committee Report” elsewhere in this proxy statement. +The Compensation Committee members are Messrs. Hunt (chairman), Buckner, Conlon and Huff, each of whom is independent as defined in the Nasdaq listing standards. Among other things, the Compensation Committee sets and administers the policies that govern the compensation of executive officers and directors of Patterson-UTI. The Board of Directors has adopted a written charter for the Compensation Committee. The Compensation Committee held 12 meetings during the year ended December 31, 2017. Please see “Compensation Discussion and Analysis” and “Compensation Committee Report” elsewhere in this proxy statement for further information about the Compensation Committee. +The Nominating and Corporate Governance Committee members are Messrs. Conlon (chairman), Buckner and Huff and Ms. Cepak, each of whom is independent as defined in the Nasdaq listing standards. The purpose of the Nominating and Corporate Governance Committee is to, among other things, identify individuals qualified to become Board members, to recommend for selection by the Board director nominees for the next annual meeting of stockholders, to recommend nominees for Board committees, to review Patterson-UTI’s Code of Business Conduct and Corporate Governance Guidelines, to develop and continually make recommendations with respect to the best corporate governance principles and to oversee the annual review of the Board and management. The Board of Directors has adopted a written charter for the Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee held three meetings during the year ended December 31, 2017. +On behalf of the Board, the Nominating and Governance Committee considers director nominees recommended by Patterson-UTI’s stockholders if the recommendations are made in accordance with all legal requirements, including applicable provisions of Patterson-UTI’s restated certificate of incorporation and bylaws. In accordance with Patterson-UTI’s bylaws, in addition to any other applicable requirements, nominations of persons for election to the Board may be made at a meeting of stockholders only by or at the direction of the Board or by a stockholder who is a stockholder of record on the date of the giving of the notice provided for below and on the record date for the determination of stockholders entitled to vote at such annual meeting and gives timely notice of such nomination in writing to the Secretary of Patterson-UTI. To be timely with respect to the 2019 annual meeting of stockholders, a stockholder’s notice must be delivered to or mailed and received at Patterson-UTI’s principal executive offices not earlier than February 14, 2019 and not later than March 16, 2019; provided, however, that in the event that the annual meeting is called for a date that is not within 30 days before or after June 14, 2019, notice by the stockholder must be received not later than the close of business on the tenth day following the day on which such notice of the date of the meeting was mailed or public disclosure of the annual meeting date was made, whichever occurs first. +A stockholder’s notice to the Secretary of Patterson-UTI shall set forth: +• +as to each person whom the stockholder proposes to nominate for election or re-election as director, all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A promulgated under the Exchange Act, or any successor regulation thereto, +• +the name and record address of the stockholder proposing such nomination, +• +the class and number of shares of Patterson-UTI that are beneficially owned by the stockholder, +• +a description of all arrangements or understandings between such stockholder and each proposed nominee and any other person or persons (including their names) pursuant to which the nomination or nominations are to be made by such stockholder, and +• +a representation that such stockholder intends to appear in person or by proxy at the meeting to nominate the persons named in the notice. +11 +Such notice must be accompanied by a written consent of each proposed nominee to being named as a nominee and to serve as a director if elected. +The Nominating and Corporate Governance Committee determines qualification criteria and procedures for the identification and recruitment of candidates for election to serve as directors of Patterson-UTI. The Nominating and Corporate Governance Committee relies on the knowledge and relationships of Patterson-UTI and its officers and directors, as well as third parties when it deems appropriate, to identify and evaluate nominees for director, including nominees recommended by stockholders. In evaluating a nominee for director, the Nominating and Corporate Governance Committee considers the nominee’s skills, expertise, industry and other knowledge, personal and professional ethics, integrity and values, sound business judgment and willingness to commit sufficient time to the Board and be committed to representing the long-term interests of Patterson-UTI’s stockholders. Although the Nominating and Corporate Governance Committee does not have a stand-alone policy with regard to consideration of diversity in identifying director nominees, it considers diversity in professional background, experience, expertise (including as to financial matters) and perspective (including as to age, gender and ethnicity) with respect to the Board of Directors composition as a whole when evaluating a director nominee. +Succession Planning +The Board of Directors oversees processes and procedures to provide continuity of well-qualified executive leadership and to assess whether such leadership possesses the skill and talent to execute Patterson-UTI’s long term business strategies. The Board of Directors reviews the succession plan for the Chief Executive Officer and the senior executives tailored to reflect the Board’s standards for executive leadership and Patterson-UTI’s business strategy and vision. The succession plan addresses (i) both current and long term needs of Patterson-UTI and establishes a process for identifying and assessing potential internal candidates; (ii) periodic review and assessment of readiness: (iii) contingency planning for temporary absences of the Chief Executive Officer due to disability or other unexpected event; and (iv) long term continuity planning for succession to the Chief Executive Officer position. +Political Contributions +Patterson-UTI has a policy prohibiting the contribution of company funds to political parties or organizations or to candidates for any public office or to influence the general public, or segments thereof, with respect to public elections or referenda. Patterson-UTI participates in certain trade organizations with purposes that include enhancement of the public image of our industry, education about the industry and issues that affect the industry and industry best practices and standards. Many of the trade organizations also engage in legislative or political activity related to matters that affect the industry as a whole and not a specific company. Patterson-UTI, as one of many members in various trade associations, does not direct the legislative activities of any trade organization of which it is a member. +Sustainability +Patterson-UTI is committed to long-term sustainability with respect to the environment, our society and our long-term corporate success. A copy of Patterson-UTI’s sustainability commitment can be accessed electronically in the “Sustainability” section of the Patterson-UTI website at www.patenergy.com and in print to any stockholder who requests it from the Secretary of Patterson-UTI. +Communication with the Board and its Independent Members +Persons may communicate with the Board, or directly with its Chairman, Mr. Siegel, by submitting such communication in writing in care of Chairman of the Board of Directors, Patterson-UTI Energy, Inc., 10713 West Sam Houston Parkway North, Suite 800, Houston, Texas 77064. Persons may communicate with the independent members of the Board by submitting such communication in writing to the Nominating and Corporate Governance Committee of the Board of Directors of Patterson-UTI Energy, Inc., 10713 West Sam Houston Parkway North, Suite 800, Houston, Texas 77064. +Although Patterson-UTI does not have a formal policy regarding attendance by members of the Board at its annual meetings of stockholders, directors are invited to attend annual meetings of Patterson-UTI stockholders. All of the directors at the time of the 2017 annual meeting of stockholders attended the meeting by telephone. +12 +Corporate Governance Documents Available on Patterson-UTI’s Website +Copies of each of the following documents can be accessed electronically in the “Corporate Governance” section of the Patterson-UTI website at www.patenergy.com and in print to any stockholder who requests them from the Secretary of Patterson-UTI: +• +Audit Committee Charter; +• +Compensation Committee Charter; +• +Nominating and Corporate Governance Committee Charter; +• +Corporate Governance Guidelines; +• +Code of Business Conduct and Ethics for its employees, officers and directors; +• +Code of Business Conduct and Ethics for Senior Financial Executives; and +• +Global Anticorruption Policy. +PROPOSAL NO. 2 +APPROVAL OF THE AMENDMENT OF THE PATTERSON-UTI +RESTATED CERTIFICATE OF INCORPORATION +TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF PATTERSON-UTI’S COMMON STOCK +Background +Subject to the approval of the stockholders, the Board has approved a proposal to amend Patterson-UTI’s Restated Certificate of Incorporation to increase the number of authorized shares of Patterson-UTI’s Common Stock from 300 million to 400 million. If adopted by the stockholders, the amendment would become effective upon filing of an appropriate certificate of amendment with the Secretary of State of the State of Delaware. The proposed amendment would replace the first sentence of Article Fourth of the Restated Certificate of Incorporation with the following language: +“The total number of shares of stock that the Corporation shall have authority to issue is four hundred one million (401,000,000) shares, of which 400 million (400,000,000) shares shall be Common Stock, having a par value of $0.01 per share, and one million (1,000,000) shares shall be Preferred Stock, having a par value of $0.01 per share.” +As of March 31, 2018, Patterson-UTI had 300 million authorized shares of Common Stock, with approximately 222 million shares of Common Stock outstanding, approximately 45 million shares of Common Stock held as treasury shares, and approximately 15 million shares of Common Stock either underlying awards outstanding or still available for grant under our 2005 Long-Term Incentive Plan and 2014 Long-Term Incentive Plan, as amended and restated (the “Amended and Restated 2014 Long-Term Incentive Plan”). As a result, only approximately 19 million shares of Common Stock remain available for new issuance outside of the Amended and Restated 2014 Long-Term Incentive Plan as of March 31, 2018. +The Board believes it is in the best interest of Patterson-UTI to increase the number of authorized shares of Common Stock in order to give Patterson-UTI greater flexibility in considering and planning for future corporate needs, including, but not limited to, financings, potential strategic transactions, including mergers, acquisitions and business combinations, grants under equity compensation plans, stock dividends, and stock splits, as well as other general corporate purposes. The Board believes that additional authorized shares of Common Stock will enable Patterson-UTI to take timely advantage of market conditions and favorable financing and acquisition opportunities that become available to Patterson-UTI without the delay and expense associated with convening a special meeting of Patterson-UTI’s stockholders. +During the past two years, Patterson-UTI has used authorized shares of Common Stock to pursue important acquisitions and other business opportunities. For example, in 2017 Patterson-UTI issued 47.5 million shares in connection with its acquisition of Seventy Seven Energy Inc. and an additional 8.8 million shares in connection with its acquisition of MS Directional, LLC. Unless stockholders approve the proposed amendment to the Restated Certificate of Incorporation, Patterson-UTI may not have sufficient unissued and unreserved authorized shares to engage in similar transactions in the future. +13 +Patterson-UTI has no current plan, commitment, arrangement, understanding or agreement regarding the issuance of the additional shares of Common Stock that will result from Patterson-UTI’s adoption of the proposed amendment. Except as otherwise required by law or by a regulation of Nasdaq, the newly authorized shares of Common Stock will be available for issuance at the discretion of the Board (without further action by the stockholders) for various future corporate needs, including those outlined above. While adoption of the proposed amendment would not have any immediate dilutive effect on the proportionate votin g power or other rights of Patterson-UTI’s existing stockholders , any future issuance of additional authorized shares of Patterson-UTI’s Common Stock may, among other things, dilute the earnings per share of the Common Stock and the equity and voting right s of those holding Common Stock at the time the additional shares are issued. +In addition to the corporate purposes mentioned above, an increase in the number of authorized shares of Patterson-UTI’s Common Stock may make it more difficult to, or discourage an attempt to, obtain control of Patterson-UTI by means of a takeover bid that the Board determines is not in the best interest of Patterson-UTI and its stockholders. However, the Board does not intend or view the proposed increase in the number of authorized shares of Patterson-UTI’s Common Stock as an anti-takeover measure and is not aware of any attempt or plan to obtain control of Patterson-UTI. +Any newly authorized shares of Patterson-UTI’s Common Stock will be identical to the shares of Common Stock now authorized and outstanding. The proposed amendment will not affect the rights of current holders of Patterson-UTI’s Common Stock, none of whom have preemptive or similar rights to acquire the newly authorized shares. +The Board of Directors recommends a vote “FOR” the approval of the Amendment . Approval of the proposal requires the affirmative vote of the holders of a majority of the shares of Common Stock entitled to vote at the Meeting. As a result, abstentions will have the same effect as a vote “AGAINST” the proposal. Unless you give contrary instructions in your proxy, your properly submitted proxy will be voted “FOR” approval of the proposal. Because the approval of the amendment of Patterson-UTI’s Restated Certificate of Incorporation is considered a routine matter, if you do not give instructions to your brokerage firm, bank, broker-dealer, or other similar organization, the brokerage firm, bank, broker-dealer, or other similar organization will nevertheless be entitled to vote your shares in its discretion and may give or authorize the giving of a proxy to vote the shares in its discretion on this proposal. +PROPOSAL NO. 3 +RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM +The Audit Committee appointed PricewaterhouseCoopers LLP as the independent registered public accounting firm to audit the financial statements and internal control over financial reporting of Patterson-UTI for the fiscal year ending December 31, 2018, and directed that such engagement be submitted to the stockholders of Patterson-UTI for ratification. In recommending ratification by the stockholders of such engagement, the Board of Directors is acting upon the recommendation of the Audit Committee, which has satisfied itself as to PricewaterhouseCoopers LLP’s independence, professional competence and standing. Although ratification by stockholders of the engagement of PricewaterhouseCoopers LLP is not required by Delaware corporate law or Patterson-UTI’s restated certificate of incorporation or bylaws, the Audit Committee believes a decision of this nature should be made with the consideration of Patterson-UTI’s stockholders. If the stockholders fail to ratify the appointment, the Audit Committee will reconsider whether to retain PricewaterhouseCoopers LLP and may retain that firm or another without re-submitting the matter to our stockholders. Even if the appointment is ratified, the Audit Committee may, in its discretion, direct the appointment of a different independent registered public accounting firm at any time during the year if it determines that such change would be in the best interests of Patterson-UTI and its stockholders. +It is expected that one or more representatives of PricewaterhouseCoopers LLP will be available to participate in the Meeting and will be given the opportunity to make a statement if they so desire. It also is expected that the representative(s) will be available to respond to appropriate questions from the stockholders. +14 +The Board of Directors recommends a vote “FOR” the ratification of P ricewaterhouseCoopers LLP as Patterson-UTI’s independent registered public accounting firm. Ratification of the selection of PricewaterhouseCoopers LLP requires the affirmative vote of the holders of a majority of the shares of Common Stock present in p erson or by proxy, and entitled to vote at the Meeting. Unless you give contrary instructions in your proxy, your properly submitted proxy will be voted “FOR” such ratification. Abstentions will be counted as shares entitled to vote on the proposal and wil l have the same effect as a vote “AGAINST” the proposal. Because the ratification of an independent registered public accounting firm is considered a routine matter, if you do not give instructions to your brokerage firm, bank, broker-dealer, or other simi lar organization, the brokerage firm, bank, broker-dealer, or other similar organization will nevertheless be entitled to vote your shares in its discretion and may give or authorize the giving of a proxy to vote the shares in its discretion on this propos al. +PROPOSAL NO. 4 +ADVISORY APPROVAL OF EXECUTIVE COMPENSATION +In accordance with Section 14A of the Exchange Act, the Board of Directors is asking stockholders to approve a non-binding, advisory resolution on the compensation of Patterson-UTI’s executive officers who are named in the Summary Compensation Table appearing in this proxy statement (the “Named Executive Officers”). The compensation of the Named Executive Officers is described in the “Compensation Discussion and Analysis” and “Executive Compensation” sections of this proxy statement. +The compensation program for the Named Executive Officers is designed to attract and retain highly qualified individuals and to motivate and reward them for performance that benefits Patterson-UTI and its stockholders. The Compensation Committee and the Board of Directors believe that the policies and procedures detailed in the “Compensation Discussion and Analysis” achieve these goals by, among other things: +• +providing a mix of short-term compensation in the form of base salary and annual cash incentive bonuses and long-term compensation in the form of restricted stock, restricted stock units, performance units, and, in some years, stock options, which strikes a balance between offering competitive compensation packages and aligning compensation with long-term growth and creating value for stockholders; +• +emphasizing variable equity and cash compensation to link realized compensation to performance; +• +reviewing annual base salaries, in part, based on Patterson-UTI’s financial results and position and performance compared to similarly situated companies, while recognizing that Patterson-UTI’s executive compensation program has historically emphasized low comparative base compensation; +• +providing performance-based annual cash incentive bonuses designed to put a meaningful portion of total compensation at risk; +• +awarding performance units, and, in some years, stock options, whose value is tied to the achievement of certain performance goals and/or an increase in the price of the Common Stock; +• +awarding restricted stock, restricted stock units, performance units, and, in some years, stock options that generally vest over periods of three years; and +• +establishing stock ownership guidelines. +The Board of Directors is asking stockholders to approve the following non-binding, advisory resolution at the Meeting: +“RESOLVED, that the stockholders of Patterson-UTI Energy, Inc. (the “Company”) approve, on an advisory basis, the compensation of the Company’s named executive officers, as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the compensation tables and other narrative discussion in the Proxy Statement for the 2018 Annual Meeting of Stockholders of the Company.” +This advisory resolution, commonly referred to as a “say-on-pay” resolution, is non-binding on the Board of Directors. Although non-binding, the Board of Directors and the Compensation Committee value the views of Patterson-UTI’s stockholders and will review and consider the voting results when (i) evaluating the effectiveness of Patterson-UTI’s compensation policies and practices and (ii) making future compensation decisions for the Named Executive Officers. +15 +The Board of Directors recommends a vote “FOR” the approval of the advisory resolution on executive compensation . Approval of the advisory resolution requires the affirmative vote of the holders of a majority of the shares of Common Stock present in person or by proxy, and entitled to vote at the Meeting. Unless you give contrary instructions in your proxy, your properly submitted proxy will be voted “FOR” such approval. Abstentions will be count ed as shares entitled to vote on the proposal and will have the same effect as a vote “AGAINST” the proposal. A broker non-vote will be counted for purposes of establishing a quorum, but will not be treated as a share entitled to vote on the proposal. This will have the effect of reducing the absolute number of shares necessary to approve the proposal. +16 +EXECUTIVE OFFICERS +Set forth below is the name, age and position followed by a brief description of the business experience during at least the past five years for each executive officer of Patterson-UTI who is not also a member of, or nominee for election to, the Board of Directors. +Name +Age +Position +C. Andrew Smith +47 +Executive Vice President and Chief Financial Officer +Kenneth N. Berns +58 +Executive Vice President and Chief Commercial Officer +Seth D. Wexler +46 +Senior Vice President, General Counsel and Secretary +James M. Holcomb +55 +President — Patterson-UTI Drilling Company LLC +C. Andrew Smith — Mr. Smith has served as Executive Vice President and Chief Financial Officer of Patterson-UTI since September 2017. From April 2014 until September 2017, Mr. Smith served as Executive Vice President and Chief Financial Officer of Kirby Corporation, a marine transportation and diesel engine services company. From January 2014 to April 2014, Mr. Smith served as Executive Vice President – Finance of Kirby Corporation. Prior to joining Kirby Corporation, Mr. Smith served as Senior Vice President and Chief Financial Officer of Benthic Geotech and was previously Chief Financial Officer for both Global Industries, LTD and NATCO Group. Mr. Smith is a Certified Public Accountant and holds a degree in business administration from the University of Houston. +Kenneth N. Berns — Mr. Berns has served as Executive Vice President and Chief Commercial Officer of Patterson-UTI since May 2017. Mr. Berns served as a director of Patterson-UTI from May 2001 to June 2017 and as Senior Vice President of Patterson-UTI from April 2003 to May 2017. Mr. Berns served as a director of UTI from 1995 to May 2001. Mr. Berns has been an executive with REMY Investors since 1994. Mr. Berns holds a Bachelor’s Degree in Business Administration from San Diego State University and a Master’s Degree in Taxation from Golden Gate University. +Seth D. Wexler — Mr. Wexler has served as Senior Vice President, General Counsel and Secretary of Patterson-UTI since February 2017. Mr. Wexler served as General Counsel and Secretary of Patterson-UTI from August 2009 to February 2017. From March 1998 to August 2009, he specialized in securities law and mergers and acquisitions for the law firm of Norton Rose Fulbright US LLP, including as a partner of such law firm since January 2007. Mr. Wexler holds a Bachelor of Business Administration in Finance from the University of Texas at Austin, a Juris Doctorate from the University of Houston Law Center and a Masters of Business Administration from the University of Houston. +James M. Holcomb — Mr. Holcomb has served as President of Patterson-UTI Drilling Company LLC since January 2012. Mr. Holcomb came to Patterson-UTI in February 1998 with the acquisition of Robertson Onshore Drilling Company and since that time has served in numerous operational management roles, including as Senior Vice President of Operations of Patterson-UTI Drilling Company LLC from April 2006 to January 2012. Mr. Holcomb has over 30 years of experience in contract drilling operations. Mr. Holcomb holds a Bachelor of Science Degree in Business Management from LeTourneau University . +17 +COMPENSATION DISCUSSION AND ANALYSIS +The following Compensation Discussion and Analysis (“CD&A”) sets forth the principal compensation policies and programs of Patterson-UTI for our Named Executive Officers (“NEOs”). Except as otherwise specifically described below, the discussion in this CD&A applies to all of our NEOs. +Named Executive Officer (1) +Title +William Andrew Hendricks, Jr. +Chief Executive Officer and President +C. Andrew Smith(2) +Executive Vice President and Chief Financial Officer +John E. Vollmer III(3) +Former Executive Vice President – Corporate Development, Chief Financial Officer and Treasurer +Mark S. Siegel +Executive Chairman of the Board +Kenneth N. Berns +Executive Vice President and Chief Commercial Officer +James M. Holcomb +President, Patterson-UTI Drilling Company LLC +(1) +References in this CD&A to the “top four NEOs” refer only to Mr. Smith (our current Chief Financial Officer) and Messrs. Hendricks, Siegel and Berns, except for periods prior to September 8, 2017, in which case the term refers to Mr. Vollmer (our former Chief Financial Officer) and Messrs. Hendricks, Siegel and Berns. Mr. Holcomb’s compensation is addressed separately. +(2) +Mr. Smith was appointed as the Executive Vice President and Chief Financial Officer of the Company on September 8, 2017. +(3) +Mr. Vollmer retired as Patterson-UTI’s Executive Vice President – Corporate Development and Chief Financial Officer on September 8, 2017. Effective December 31, 2017, Patterson-UTI entered into an employment agreement with Mr. Vollmer whereby he currently serves as a consultant to Patterson-UTI through December 2021. +Executive Summary +Changes in our 2017 Compensation Program +The executive compensation program at Patterson-UTI is managed by our Compensation Committee. The program is designed to foster operational excellence and to reward strong financial performance on both a short-term and a long-term basis for the benefit of Patterson-UTI and its shareholders. +During 2017, the Committee engaged in a substantial redesign effort with the objective of establishing a program that would remain aligned with these goals, while providing a more appropriate foundation for Patterson-UTI as the Company continues to grow and mature. We believe that our prior program served the Company well for many years during a period of significant change and success. However, the Committee determined that the prior program no longer fit Patterson-UTI in its current stage of development, that it had elements that were no longer considered “best practices,” and, in some cases, that it was not delivering the desired compensation results. +What We Changed +Why We Changed +Adopted a more market-based approach to compensation determination by eliminating our historical team-based matrix for incentive award determination and tying individual compensation opportunities more closely to individual roles and responsibilities. +A more market-based approach to individual pay decisions is better aligned with the way in which our management team has evolved, ties us more closely to our competitive market, and provides a more solid foundation from which to attract, retain, and develop talent going forward. +Adopted a more holistic goal-based approach to short-term incentives , replacing our prior plan which funded bonuses as a percent of EBITDA with a plan based upon multiple pre-established financial and operational measures with target opportunities set as a percent of salary and payouts within a more limited range. +Our new program is better aligned with our peers and with generally accepted best practices of compensation governance and ties compensation more directly to specific short-term performance measures that are intended to drive long-term growth. +Eliminated stock options from our long-term incentive mix for 2017. +Stock options historically contributed to share usage and shareholder dilution to a greater extent than restricted stock or performance unit awards, and they continue to decline in prevalence among our peers. In addition, with the elimination of the performance-based pay exemption under Section 162(m) of the Internal Revenue Code (“Section 162(m)”), the ability of stock options to automatically qualify for this exemption to the Section 162(m) limitations is no longer a relevant consideration. +18 +Eliminated the absolute total shareholder return (TSR) metric in our performance unit awards, tying payouts directly to our rela tive level of performance versus peers. +Our previous program paid out 0% if absolute TSR was negative, regardless of our level of relative performance – a practice which resulted in 0% payouts for two performance periods during which the Company performed well above the peer group 75 th percentile. +The Committee believes that this design feature unfairly penalized management and created retention risks during a period of strong relative performance in the midst of an industry-wide downturn. The Committee also believes that settlement of performance units in the form of shares ensures that the realized value of awards will remain directly tied to absolute TSR performance with or without an additional performance condition. +The Compensation Committee’s objective has always been to tie pay to performance and to structure a total compensation program that would provide realized compensation at the top quartile of our peer group in return for top quartile performance. In so doing, the Compensation Committee sought to provide incentives that were understandable and based upon measures tied to long-term growth in shareholder value. +The Compensation Committee believes that the 2017 executive compensation program enhances the connection between pay and performance, reduces the risk of disconnects in the future, allows us to be more competitive in recruiting and retaining key executives, reflects the best policy for this stage in the evolution of our company, and is aligned with the best interests of our shareholders. +Adherence to Good Governance and Compensation Practices +We are mindful of the positive impact that strong corporate governance can have on maintaining an executive compensation program that is aligned with the interest of our stockholders. In designing the current executive compensation program, we sought to incorporate best practices for compensation governance including those summarized below. +What We Do +What We Don’t Do +☑ 50% or more of compensation in the form of long-term incentives +☑ Variable compensation based upon absolute performance and performance versus peers +☑ Claw-back provisions that apply to our all of our executive officers +☑ Share ownership requirements for our executive officers and directors +☑ Anti-pledging policy for our executive officers and directors +☑ Anti-hedging policy for our executive officers and directors +☑ Use of advice from independent compensation consultant and feedback from stockholders +☑ Hold an annual Say-on-Pay vote +☒ No re-pricing of options +☒ No single trigger change-of-control severance arrangements +☒ No dividends or dividend equivalents on unearned performance units +☒ No new agreements with tax gross-ups and none entered into in more than five years +☒ No perquisites to top four NEOs that are not widely available to our other employees +19 +2017 Performance Highlights +Our performance over the past five years has been exceptionally great, as evidenced by our total shareholder return (TSR) performance relative to our 18 company peer group through December 31, 2017. +Top Tier TSR Performance Relative to Peers and Broader Industry +• 74 th percentile for 2017 +• 100 th percentile for the past three-year period +• 93 rd percentile for the past five-year period +Over this period, the Company has been recognized as one of the pre-eminent North American oilfield services companies, with leadership positions both in land drilling and pressure pumping – the two services that are the key drivers for the development of shale energy in the United States. We have delivered this strong performance during a period that has included high commodity prices and high utilization of our assets, as well as low commodity prices and correspondingly low levels of asset utilization. +Our strong performance is evidence of our commitment to building long-term shareholder value and has been driven by several key strategic decisions that have been in place for over ten years: +Consistent Strategic Focus +Adherence to a clear strategic plan focused on growing our core businesses, while differentiating ourselves with quality equipment and personnel +Willingness to commit needed capital to provide customers with the quality of equipment required for efficient and safe operations +Commitment to operational excellence with an uncompromising focus on safety +Development of a diverse, well-trained and highly-motivated workforce +Maintenance of a strong “fortress” balance sheet that permits us to focus on building a long-term, “built-to-last” company +Creation of a “nimble” management organization that is able to react intelligently, quickly and decisively when opportunities or challenges arise +20 +Although our financial results, like others in our industry, have been materially negatively impacted by adverse market conditions, our strategic focus helped us to generate strong cash flow from operating activities in 2017 , increase drilling market share, increase pressure pumping market share, preserve cash, and strengthen our balance sheet to weather the downturn and prepare for a recovery. Specific actions taken during 2017 included the following: +• Strategic Merger with Seventy Seven Energy (SSE). Consummated a merger in April 2017 with a provider of contract drilling, pressure pumping and oilfield rental services, which added, among other things, 40 APEX® class drilling rigs and approximately 500,000 fracturing horsepower to Patterson-UTI’s existing equipment fleet. +• Equity Offering. Raised $472 million through an overnight equity offering at very attractive pricing and at a small discount to the closing price of Patterson-UTI’s stock price. +• Strengthened Balance Sheet. Reduced debt to total capitalization from 21% to 18%, increased the size of our revolving credit commitments and extended the maturity date of such commitments to March 2019. +• Growth. Achieved increased activity and revenue and Adjusted EBITDA growth in core businesses compared to 2016. +• Broadening Service Offerings. Consummated an acquisition in October 2017 of MS Directional, a leading directional drilling services company in the United States, which improved our position in the U.S. onshore drilling and completion markets by broadening our service offerings. Also, acquired oilfield rentals business through SSE merger. +• Solid Execution . Successful upgrade of drilling rigs, activation of pressure pumping spreads, cost control and reduction of operational downtime during 2017. +• Employee Hiring. Employee head count was increased approximately 138%, from approximately 3,200 at December 31, 2016 to approximately 7,600 at December 31, 2017. +• Achieved Investment Grade Rating. Moody’s and S&P provided indicative investment grade rating for Patterson-UTI in anticipation of January 2018 debt offering (which received investment grade rating). +Major Transactions Contributed to Continued Growth in Quality and Quantity of Rigs and Horsepower +What Guides Our Program +As discussed in greater detail in this CD&A, the majority of compensation for our NEOs is provided in the form of variable components, with realized value dependent upon annual financial performance or upon the multi-year performance of our common stock. As a result, target pay opportunity and the grant date value of equity awards as reported in the Summary Compensation Table can vary significantly from the compensation actually realized by our NEOs each year. +21 +The chart below provides a comparison of reported pay for our CEO for each of the past three years as compared to his realized pay for each year. +CEO Target Pay vs. Realized Pay 2015 – 2017 +Definitions of Pay +Base Salary +Annual Bonus +Performance Units +Restricted Stock +Stock Options +Reported pay +Actual paid +Target opportunity +Grant date (target) value for awards granted during year +Grant date value of shares granted during year +Grant date value of options granted during year +Realized pay +Actual paid +Actual paid based on annual performance +Market value of shares vested for performance periods ending during that year +Market value of shares vested during year +Value realized from options exercised during the year +Our overriding philosophy for the compensation of our key executives is to link their compensation with Patterson-UTI’s operational and market performance and to establish incentives that reward them for their achievement of both short-term tactical and long-term strategic objectives. In doing so, we seek to offer competitive compensation packages designed to attract and retain highly qualified individuals and to motivate and reward our executives in achieving Patterson-UTI’s goals. Specifically, the 2017 program was designed to reinforce the following goals: +• +Provide quality services for our customers in a safe and efficient manner; +• +Generate strong financial performance and returns for our stockholders; +• +Attract and retain highly qualified individuals, with a strong emphasis on teams working together to capitalize on opportunities and solve problems; and +• +Be a model corporate citizen in the communities in which we work. +22 +In order to accomplish these goals, we provide total direct compensation in the following three components: +Component +Description +Alignment with Shareholders +Base Salary +Fixed level of base compensation tied to core day to day responsibilities +• Critical to attraction and retention of executive talent +• Subject to periodic review based on market data and individual performance +Annual Cash Incentive (Bonus) +Annual cash bonus opportunity expressed as a percent of salary and tied to achievement relative to pre-established annual financial, operational and other defined goals +• Keeps a significant portion of annual compensation at-risk for achievement of key performance indicators (KPIs) that help drive long-term growth in value +Long-term Incentives +Annual grants of equity-based incentives in the form of time-vested and performance-based restricted stock and performance units that vest or must be earned over a multi-year period +• Holds management accountable for growing shareholder value over the long-term +• Maintains strong, direct alignment with shareholders through the use of equity +• Enhances retention by vesting awards over multiple years +For 2017, total direct compensation for our NEOs was most heavily weighted toward long-term incentives, as shown below. These charts for 2017 include cash and equity awards pursuant to the one-time pool described in “Special, One-Time Awards for the Transformative SSE Merger”. +2017 TOTAL DIRECT COMPENSATION +CEO and Chairman +Other NEOs +61% Long-term +93% Variable +Process for Determination of Executive Compensation +Role of the Compensation Committee +The Board of Directors has delegated the management of Patterson-UTI’s executive compensation program to the Compensation Committee. The Compensation Committee meets on a regular basis to consider compensation matters and to review how Patterson-UTI’s plans and policies work in practice. Each of the Compensation Committee’s current members is an independent director as defined by the Nasdaq listing standards. +Compensation determinations and equity awards are conducted through a process that solicits the input from management through our Executive Chairman and our CEO, as well as from outside compensation consultants retained by the Compensation Committee. In addition to the recommendations of management and consultants, the Compensation Committee considers feedback from Patterson-UTI’s stockholders, guidelines of proxy advisory firms, reported trends in compensation, internal budgets, historical data for the Company and its peers, strategic planning updates and other information that it considers relevant. +23 +Chairman and CEO +Our Chairman and our CEO provide the Compensation Committee with reviews of the performance of other executive officers and senior managers, including the other NEOs. The Compensation Committee also engages our Chairman and CEO in an annual dialog with our Committee Chairman and our Lead Director on our compensation program and seeks their input on and review of proposals for long-term incentive grants. This process results in a recommendation that is considered by our Compensation Committee as a whole. +Independent, Outside Compensation Consultant +Our Compensation Committee regularly utilizes outside compensation consultants to help assess and design our executive compensation program. These consultants are paid on a basic, fixed-fee structure plus expenses. These outside consultants provide data and advice on historical compensation and stockholder returns, market trends and peer compensation practices. The Compensation Committee has retained Pearl Meyer as its consultant and advisor for executive compensation matters since 2012. +Our Compensation Committee regularly reviews the services provided by its outside consultants and has determined that Pearl Meyer is independent in providing executive compensation consulting services. The Compensation Committee receives a confirmation certification of independence from its consultants annually. +In 2017, Pearl Meyer provided the Compensation Committee with information on the compensation practices of our peer group and other oilfield service companies and on the reasonableness of our program as compared to the compensation practices of our peer group. In so doing, Pearl Meyer provided the Compensation Committee with information on each element of total direct compensation for our executive officers as well as a comparison of our compensation against our peers and the broader oilfield services market. Pearl Meyer also provided the Compensation Committee with information on the cost and potential dilution to our stockholders of our equity-based incentives and compared that to our peer group. +Peer Group +In early 2016, following extensive deliberations and consultation with our independent, outside compensation consultant, Pearl Meyer, our Compensation Committee determined to update our peer group of energy service companies. The update also took into account feedback received from our engagement with significant stockholders, as well as a review of the peer groups as determined by the two major shareholder advisory firms. This update removed several outsized companies, reflected industry changes through merger and acquisition activity and accounted for the severe contraction in industry participant scale and profitability. The update focused on energy service companies that directly compete with Patterson-UTI’s businesses and/or are reasonably scaled to Patterson-UTI’s operations and financial measures. Specifically, this updated group of 18 peers is summarized below: +2016 Compensation Peers +Primary Land-based Drilling Peers +Other Drilling Companies +Similarly Sized Diversified Oilfield Services Companies +Other Key Pressure Pumping Peers +• Helmerich & Payne +• Nabors Industries +• Precision Drilling +• Atwood Oceanics +• Diamond Offshore +• Ensco plc +• Noble Corp +• Parker Drilling +• Rowan Companies +• Transocean Ltd +• Unit Corp +• Basic Energy Services +• Forum Energy Technologies +• FMC Technologies +• Oceaneering International +• Oil States International +• Superior Energy Services +• Weatherford International +The 2016 peer group listed above was utilized for 2016 and early 2017 compensation decisions. +In May 2017, following deliberations and consultation with Pearl Meyer, the Compensation Committee determined to update our peer group of energy service companies to account for the SSE merger and changing market landscape in which Patterson-UTI operates. This update removed Parker Drilling Company and Atwood Oceanics Inc. and added Halliburton Company and National-Oilwell Varco, Inc. to the peer group. The addition of Halliburton as a peer was based +24 +on our belief that Patterson-UTI is among the top three to five U.S. pressure pumping companies, depending on the manner in which number of fleets and activity level is calculated, and that Halliburton is the leader and principal co mpetitor to Patterson-UTI in the pressure pumping business. National-Oilwell Varco, Inc. was also added to our peer group because of our greater size following the SSE merger. +Our current peer group is the following energy service peer group for company performance and compensation matters: +2017 Compensation Peer Group +• Basic Energy Services, Inc. +• Diamond Offshore Drilling Inc. +• Ensco plc. +• FMC Technologies, Inc. (now TechnipFMC plc) +• Forum Energy Technologies, Inc. +• Halliburton Company +• Helmerich & Payne Inc. +• Nabors Industries Ltd. +• National-Oilwell Varco, Inc. +• Noble Corp. +• Oceaneering International +• Oil States International Inc. +• Precision Drilling Corporation +• Rowan Companies Inc. +• Superior Energy Services, Inc. +• Transocean Ltd. +• Unit Corp. +• Weatherford International Ltd. +The peer group listed immediately above (the “2017 Peer Group”) was not utilized for 2017 compensation decisions; however, performance pursuant to the equity-based awards that were granted in 2017 will be evaluated using the 2017 Peer Group. +As of March 31, 2018, our market capitalization was in the top quartile of the peer group, and our compensation consultant has advised us that based upon the SSE merger and MS Directional acquisition and our organic growth, the Company is projected to be in the top quartile for 2018 revenues. +Components of 2017 Compensation +Base Salary +While we have historically targeted NEO salaries overall well below the market median, as part of our 2017 program redesign the Committee approved increases for all of our NEOs in order to bring their salaries more in line with competitive practice. The Committee believes the salary increases were critical to executive retention, particularly as the Company had endured several years of an industry-wide downturn. In addition, the resulting base salaries fell within the market median range on average, based upon Pearl Meyer’s analysis. +ANNUAL SALARIES +2016 +2017 +William Andrew Hendricks, Jr. +$ +600,000 +$ +1,000,000 +C. Andrew Smith +$ +— +$ +450,000 +John E. Vollmer III +$ +350,000 +$ +450,000 +Mark S. Siegel +$ +350,000 +$ +800,000 +Kenneth N. Berns +$ +265,000 +$ +450,000 +James M. Holcomb +$ +325,000 +$ +465,000 +Due to past practice and the fact that 3 of the executives had not received an increase in base salary for as many as 13 years, increases in 2017 average more than 60% of 2016 salaries. +Annual Incentive Compensation +As part of our program redesign, the Committee adopted a new annual cash bonus program in 2017 that relies upon multiple, pre-established objectives for determining bonus compensation and is similar to the approach widely used by Patterson-UTI’s peers. The bonus plan adopted in 2017 sets a target opportunity for each executive’s annual cash bonus as a percent of salary, with payout contingent upon meeting Patterson-UTI’s financial goals and selected KPIs. The +25 +Compensation Committee considered the average ra nge of performance and payouts, and the Committee believes – based on advice from Pearl Meyer – that Patterson-UTI’s range is consistent with what is typical general industry practice. +For 2017, 70% of the annual cash bonus was based on reaching the budgeted annual earnings before interest, taxes, depreciation, amortization and impairment expense (“Adjusted EBITDA”) for the year, and the remaining 30% was based on three KPIs. The Compensation Committee was advised by Pearl Meyer that the use of an Adjusted EBITDA measure to gauge annual performance aligns with the majority of the Company’s peers. These KPIs were: +• +Safety : maintenance of Patterson-UTI’s leadership position in operating and safety standards; +• +Merger integration : the successful integration of Seventy Seven Energy; and +• +Fleet upgrade : the successful and cost-effective upgrade of Patterson-UTI’s rig fleet. +The overall annual cash bonus plan for 2017 was subject to the requirement that a minimum level of 60% of the budgeted or target Adjusted EBITDA was achieved for the year. Once that minimum requirement was met, the 70% of the annual cash bonus opportunity attributable to Adjusted EBITDA was determined based on a measurement of actual Adjusted EBITDA relative to budgeted Adjusted EBITDA, with a 50% payout for threshold achievement of 80% of budget, 100% payout for target achievement of 100% of budget and 200% maximum payout for achievement of 120% of budget or more. Linear interpolation was used to calculate payout for performance between achievement levels. +The 30% of annual cash bonus opportunity attributable to KPIs was intended to generally be determined independently of the Adjusted EBITDA component, with actual achievement ultimately subject to the discretion of the Compensation Committee. +The threshold, target and maximum annual cash bonuses for the NEOs for 2017 are set forth below: +ANNUAL INCENTIVE OPPORTUNITY +Threshold (1) +Target +Maximum +William Andrew Hendricks, Jr. +$ +625,000 +$ +1,250,000 +$ +2,500,000 +C. Andrew Smith (2) +$ +281,250 +$ +562,500 +$ +1,125,000 +John E. Vollmer III (3) +$ +— +$ +350,000 +$ +— +Mark S. Siegel +$ +500,000 +$ +1,000,000 +$ +2,000,000 +Kenneth N. Berns +$ +281,250 +$ +562,500 +$ +1,125,000 +James M. Holcomb (4) +$ +162,750 +$ +325,500 +$ +651,000 +(1) +Threshold was calculated based on the achievement of 80% of the Adjusted EBITDA component and threshold performance on each of the goals in the KPI component. +(2) +Mr. Smith was appointed as the Executive Vice President and Chief Financial Officer of the Company on September 8, 2017. Pursuant to his employment agreement, Mr. Smith was eligible for a full calendar year 2017 bonus. +(3) +Pursuant to Mr. Vollmer’s agreement in connection with his retirement, the Company paid to Mr. Vollmer a cash bonus of $350,000 at the time bonuses were paid to other executives of Patterson-UTI and a lump sum retirement payment of $450,000 on December 31, 2017 . +(4) +The budgeted or targeted Adjusted EBITDA for Mr. Holcomb was established with respect to Patterson-UTI’s contract drilling business. +The actual cash bonuses for 2017 for the NEOs were determined as follows: +Adjusted EBITDA (70% of 2017 Annual Cash Bonus Opportunity) +As a result of the SSE merger and based on the advice of its independent, outside compensation consultant, the Committee adjusted the budgeted or target Adjusted EBITDA and the reported Adjusted EBITDA for 2017 to exclude certain non-recurring merger and integration charges. As a result, the Committee determined that, as adjusted for merger and integration expenses, the reported Adjusted EBITDA of $565 million for 2017 exceeded the budgeted or target Adjusted EBITDA of $448 million by more than 26%. With respect to Mr. Holcomb, the reported Adjusted EBITDA for Patterson-UTI’s contract drilling business of $367 million exceeded the budgeted or target Adjusted EBITDA of $305.5 million by more than 20%. Accordingly, the Committee determined that the minimum level of Adjusted EBITDA needed for a payout was achieved, and a 200% maximum payout of the Adjusted EBITDA portion of the 2017 cash bonus opportunity was earned based on achievement of at least 120% of the budgeted or target Adjusted EBITDA for 2017. +Safety and Operational Standards (10% of 2017 Annual Cash Bonus Opportunity) +In January 2018, an accident at a drilling site in Pittsburg County, Oklahoma resulted in the losses of life of five people, including three of our employees. While this accident occurred during 2018, the NEOs unanimously requested +26 +that the Committee waive consideration of any payout attributable to this KPI. The Committee concurred with and approved the NEOs’ request, and the Committee determined to award no payout attributable to this KPI. +SSE Merger Integration (10% of 2017 Annual Cash Bonus Opportunity) +When the SSE merger was first announced, the Company publicly disclosed that it expected synergy savings in excess of $50 million. The Committee determined that the SSE merger was successfully completed and integrated with realized synergy savings in excess of this target $50 million. The Committee considered, among other things, the successful integration of the Nomac branded contract drilling business of SSE into the Patterson-UTI branded contract drilling business, as well as the Performance Technologies branded pressure pumping business of SSE and Universal Well Services branded pressure pumping business of Patterson-UTI into the Universal Pressure Pumping branded pressure pumping business of Patterson-UTI. The Committee also considered the successful acquisition and integration of MS Directional, a directional drilling company, during 2017. Based on the exceptional performance with respect to this KPI, the Committee awarded a 200% maximum payout of this portion of the 2017 cash bonus opportunity. +Rig Fleet Upgrade (10% of 2017 Annual Cash Bonus Opportunity) +The Committee determined that the Company had successfully upgraded a portion of the Company’s rig fleet in a capital-efficient manner. In particular, the Committee considered that a total of 36 rigs were upgraded and active with an increasing efficiency through the year that contributed to drilling capital expenditures being under budget for 2017. The quality of the upgrades resulted in high utilization and many term contracts for these rigs. The Company’s upgrade program increased the number of “super-spec” rigs, which are the rigs that have the highest utilization in the marketplace, at a much lower investment than building new rigs. Based on excellent performance with respect to this KPI, the Committee awarded a 150% payout of this portion of the 2017 cash bonus opportunity. +The Committee awarded actual cash bonuses for 2017 to the NEOs as set forth below: +ACTUAL PAYOUT OF ANNUAL INCENTIVE OPPORTUNITY +Adjusted EBITDA +Safety and Operational +Standards +SSE Merger Integration +Rig Fleet Upgrade +Total 2017 Cash Bonus +William Andrew Hendricks, Jr. +$ +1,750,000 +$ +0 +$ +250,000 +$ +187,500 +$ +2,187,500 +C. Andrew Smith (1) +$ +787,500 +$ +0 +$ +112,500 +$ +84,375 +$ +984,375 +John E. Vollmer III (2) +— +— +— +— +350,000 +Mark S. Siegel +$ +1,400,000 +$ +0 +$ +200,000 +$ +150,000 +$ +1,750,000 +Kenneth N. Berns +$ +787,500 +$ +0 +$ +112,500 +$ +84,375 +$ +984,375 +James M. Holcomb +$ +455,700 +$ +0 +$ +65,100 +$ +48,825 +$ +569,625 +(1) +Mr. Smith was appointed as the Executive Vice President and Chief Financial Officer of the Company on September 8, 2017. Pursuant to his employment agreement, Mr. Smith was eligible for a full calendar year 2017 bonus. +(2) +Pursuant to Mr. Vollmer’s agreement in connection with his retirement, the Company paid to Mr. Vollmer a cash bonus of $350,000 at the time bonuses were paid to other executives of Patterson-UTI and a lump sum retirement payment of $450,000 on December 31, 2017 . +While the Committee has not finalized the parameters of its 2018 cash bonus plan, it expects that 90% of the cash bonus opportunity will be quantitative and based on pre-established, objective financial targets. +Long-term Incentive Compensation +We have historically targeted 60% or more of total NEO compensation to be in the form of equity-based awards, with time-based vesting, performance-based vesting, or both. This emphasis on equity-based compensation was intended to enhance alignment between our executives and our stockholders. We plan to retain this emphasis going forward, and we believe that by tying a large portion of compensation to equity we ensure that our NEOs can only fully realize the potential value of their compensation if our stockholders also benefit. +Over the years we have adjusted the form of the equity incentives we provide to our top four NEOs from solely options to a mix of options, restricted stock, restricted stock units and performance units. As described above, under the current executive compensation program, we expect that options will not typically be granted and that equity-based compensation will be primarily in the form of restricted stock, restricted stock units and performance units. We believe this mix allows us to tailor our program to encourage a focus on building long-term value and, in the case of performance units, achievement of stockholder returns in excess of our peer group. +The following two charts set forth the allocation of total value to the various forms of long-term equity-based incentives that we granted the top four NEOs from 2013-2017. These charts exclude Mr. Smith, who joined the Company +27 +during 2017, and Mr. Holcomb, whose equity incentive grants have historically been in the form of restricted stock exclusively. +2017 Award Type +Basic Design +Alignment with Philsophy +Restricted Stock & Restricted Stock Units +• Time-vested shares of stock, or units that are settled in shares of stock +• 1/3 of each award vests after one year +• 1/36 of each award vests monthly thereafter +• Awards are also subject to a minimum performance restriction(1) +• Value dependent upon stock price performance +• Enhances retention of executive talent +• Encourages long-term share ownership +Performance Units +• Performance-vested units +• Number of units earned depends upon stock price performance relative to our peers over a full three year period +• No shares are earned for performance below the 25 th percentile +• Maximum shares are not earned unless performance is at the 75 th percentile or above +• Performance-contingent +• Number of shares dependent upon performance relative to peers +• Value of shares dependent upon stock price +(1) +The restricted stock grants and restricted stock unit grants also have a performance-based vesting component, which for 2017 required that Patterson-UTI achieve Adjusted EBITDA of at least $100 million for the nine months ending December 31, 2017, $200 million for the twelve months ending December 31, 2018 or $200 million for the twelve months ending December 31, 2019. +2017 Annual Equity-Based Compensation +The Compensation Committee made the following equity-based grants in 2017 to Messrs. Hendricks, Vollmer, Siegel and Berns, considering Patterson-UTI’s 2017 financial results and comparative total shareholder return performance over the one-, two- and three-year periods ended March 31, 2017, and in the case of Mr. Smith, the Compensation Committee made a restricted stock unit grant in connection with his entry into an employment agreement in September 2017. Patterson-UTI desired to enter into an employment agreement with Mr. Smith to help ensure that he would remain a long-term employee of the Company, which included his agreement to certain restrictive covenants. The restricted stock unit grant was awarded as an enticement for Mr. Smith to enter into the employment agreement and to replace value that Mr. Smith forfeited upon leaving his prior employer. +28 +2017 ANNUAL EQUITY-BASED GRANTS +Restricted +Shares/Units(1) +Performance Units(2) +# +Value +# +Value +Total Value +William Andrew Hendricks, Jr. +194,535 +$ +4,200,011 +83,372 +$ +2,587,867 +$ +6,787,878 +C. Andrew Smith +94,117 +$ +1,599,989 +— +$ +— +$ +1,599,989 +John E. Vollmer III +84,298 +$ +1,819,994 +— +$ +— +$ +1,819,994 +Mark S. Siegel +155,628 +$ +3,360,009 +66,698 +$ +2,070,306 +$ +5,430,315 +Kenneth N. Berns +84,298 +$ +1,819,994 +36,128 +$ +1,121,413 +$ +2,941,407 +James M. Holcomb +57,000 +$ +1,140,570 +— +$ +— +$ +1,140,570 +(1) +Shares of restricted stock were awarded on May 2, 2017 in the case of Messrs. Hendricks, Vollmer, Siegel and Berns, and restricted stock units were awarded to Mr. Holcomb on July 12, 2017 and to Mr. Smith upon his commencement of employment on September 8, 2017. The numbers shown do not include restricted shares granted in recognition of efforts regarding the SSE merger, which are addressed under “Merger-Related Awards” below. The value indicated in the table is the value on the date of grant based on the closing price of Patterson-UTI’s common stock on the date of grant. +(2) +Performance Units were awarded on May 2, 2017. The number of shares indicated in the table represents the target number of shares for each respective award. According to the terms of the awards, the actual number of shares earned by the recipient can range from zero shares to two times the target number of shares depending on how Patterson-UTI performs in terms of total stockholder return relative to its peer group. The value indicated in the table was determined based on a Monte-Carlo simulation model and represents the estimate of fair value on the date of grant. +The grants of restricted stock, restricted stock units and performance units were made following the vesting, term and other criteria described above, except that one-third of Mr. Holcomb’s restricted stock unit award vests equally and annually over a three-year period and one-half of Mr. Smith’s restricted stock unit award upon his commencement of employment vests equally and annually over a two-year period. +As discussed above, as a result of the continued growth and evolution of Patterson-UTI’s business, the recent closing of the SSE merger, and elements of the executive compensation program not delivering the desired compensation results, the Compensation Committee modified the executive compensation program in 2017, including equity-based compensation. +The performance units granted in 2017 to Messrs. Hendricks, Siegel and Berns provide for the issuance of a target of 83,372 shares of Common Stock to Mr. Hendricks, 66,698 shares of Common Stock to Mr. Siegel and 72,256 shares of Common Stock to Mr. Berns, respectively, if Patterson-UTI’s total stockholder return over a three-year period, when compared to the peer group, is at the 50 th percentile and two times the target if at the 75 th percentile or higher. If Patterson-UTI’s total stockholder return, when compared to the peer group, is at the 25 th percentile, the recipients will only receive one-half of the target number of shares. The grant of shares when achievement is between the 25th and 75th percentile will be determined using linear interpolation for levels of achievement between these points. Total stockholder return for Patterson-UTI for the 2017 performance unit grants is measured based on $100 invested in our common stock on the first day of the performance period, with dividends reinvested. The performance period is the period from May 1, 2017 through April 30, 2020. +Zero Payout in 2017 of 2014 Performance Unit Awards +For the three-year performance period that ended on March 31, 2017, Patterson-UTI’s total stockholder return, or TSR, was -19.9%. This performance was at the 89 t h percentile relative to our peers. However, despite performance in excess of the peer group 75 th percentile, no payout was earned under the plan due to the fact that our absolute TSR was negative . +2014 Performance Unit Awards +(Performance Period Ended in 2017) +Units Granted +(at target level) +Units Earned +# +Grant Value +# +Value at Vesting +William Andrew Hendricks, Jr. +42,000 +$ +1,263,825 +— +$ +— +C. Andrew Smith +— +$ +— +— +$ +— +John E. Vollmer III +28,000 +$ +979,720 +— +$ +— +Mark S. Siegel +56,000 +$ +1,959,440 +— +$ +— +Kenneth N. Berns +28,000 +$ +979,720 +— +$ +— +James M. Holcomb +— +$ +— +— +$ +— +29 +As noted previously, the Committee believes that these outcomes unfairly penalized our NEOs for preserving a relatively greater amount of shareholder value during a significantly challenging period over which all of our peers experienced negative TSR performance and over which two of our peers filed for Chapter 11 bankruptcy protection. +This was the second consecutive three-year performance period during which Patterson-UTI performed in the top quartile relative to peers but the performance unit recipients failed to earn a payout under our plan due to the negative absolute TSR modifier (Patterson-UTI achieved 96 th percentile performance for the 2013 – 2016 performance period, with absolute TSR performance of -8.0%). +Special, One-Time Awards For the Transformative SSE Merger +The Compensation Committee believes that the 2017 SSE merger was a transformative transaction for Patterson-UTI and one that will set the stage for the future of the Company. The transaction was identified and negotiated at a time when our industry was in great stress and reflected a focused effort by our executive management to execute on our strategy to grow our core businesses in a disciplined manner for the benefit of our shareholders. The transaction was structured in a manner that combined discipline in price and operational fit, while maintaining Patterson-UTI’s strong balance sheet for future internal growth and other opportunities. +The Compensation Committee believes that executive management was primarily responsible for: +• +Identifying the SSE merger opportunity; +• +Persuading the key Seventy Seven constituents to consider a transaction with Patterson-UTI; +• +Achieving commercially acceptable transaction terms for the SSE merger; +• +Conducting reasonable due diligence and evaluating the risks and benefits of the SSE merger; +• +Negotiating and documenting the transaction with appropriate merger and shareholder agreements; +• +Securing a $150 million bridge financing agreement; +• +Securing commitment increases under Patterson-UTI’s revolving credit facility from $500 million to $632 million; +• +Executing an equity financing for net proceeds of $472 million on an overnight basis, at very attractive pricing and a small discount from the closing price of Patterson-UTI Common Stock; and +• +Closing the SSE merger in a reasonable time period. +The Compensation Committee believed that special compensation was warranted for the executive management of Patterson-UTI in recognition of these outstanding accomplishments, and in recognition that: +• +The SSE merger added approximately 50% additional horsepower in pressure pumping , which increased Patterson-UTI’s fracturing horsepower from approximately 1.0 million to approximately 1.5 million; +• +The SSE merger increased Patterson-UTI’s high-spec rig fleet from approximately 165 to 200 ; and +• +Following the SSE merger, we believe Patterson-UTI is among the top two land drillers and among the top five pressure pumping companies in the United States . +Accordingly, with respect to the NEOs, the Compensation Committee established a one-time pool of $7.0 million in cash and $7.0 million in Patterson-UTI restricted stock. The cash portion was paid in May 2017, and the restricted stock will vest in May 2018. The total pool value to the NEOs of $14.0 million was less than 1.0% of the value of the transaction. Based on the advice of its independent, outside compensation consultant, the Committee believes this approach was within the range of similar special, one-time merger and acquisition bonuses paid to executive management of other companies. The following table sets forth the awards that were made to the NEOs in May 2017 in respect of the SSE merger: +30 +MERGER-RELATED AWARDS +Name +Cash +Restricted Shares +William Andrew Hendricks, Jr. +$ +2,250,000 +100,223 +C. Andrew Smith (1) +$ +— +— +John E. Vollmer III +$ +850,000 +37,862 +Mark S. Siegel +$ +2,550,000 +113,586 +Kenneth N. Berns +$ +850,000 +37,862 +James M. Holcomb +$ +500,000 +22,272 +(1) Mr. Smith did not commence his employment at Patterson-UTI until September 2017. +The Committee believes these special, one-time awards were warranted and for the reasons specified above. However, these awards have resulted in total compensation for the NEOs being significantly higher in 2017 than in prior years where there were no extraordinary and transformative transactions. +Retirement Plans +Patterson-UTI offers a 401(k) plan to its employees, including its NEOs. Participants may contribute a portion of their base salary to the 401(k) plan, subject to federal limits. Patterson-UTI makes matching contributions up to four percent of each participant’s eligible base salary. The NEOs of Patterson-UTI are eligible to participate in the 401(k) plan on the same basis as other employees. Patterson-UTI does not have any other retirement plan. Based on advice from Pearl Meyer, the Committee believes that many peer companies provide retirement plans beyond a 401(k) plan, as well as other perquisites, and on average, these additional benefits comprise roughly 5% of the mix of compensation for executives at peer companies. The Committee believes that benefits to executives should generally be aligned with those provided for other employees, and thus we generally do not provide these types of additional benefits for our executives. +Other Executive Compensation Matters +Share Ownership Guidelines and Stock Holding Requirements +Our Nominating and Corporate Governance Committee has enacted share ownership guidelines applicable to all executive officers and directors of Patterson-UTI. The guidelines require our Chief Executive Officer to own a number of shares of our common stock having a value at least equal to five times his or her base salary. The Chief Executive Officer has five years from the adoption of these guidelines, or the date of appointment to the chief executive position, whichever is later, to satisfy the ownership guidelines. +The guidelines also require officers and directors to hold at all times, subject to a five year phase-in from the date first elected to the applicable position, at least the following number of shares of Common Stock: +Share Ownership Guidelines +President and Chief Executive Officer +Number of shares equal to 5 times base salary +Executive Chairman +120,000 shares +COO/Executive Vice Presidents/Senior Vice Presidents (other than the General Counsel) +60,000 shares +General Counsel/President — Drilling +30,000 shares +Outside Directors +10,000 shares +Each executive officer and director is required to maintain ownership of the net after-tax shares of Common Stock pursuant to any equity-based awards received from Patterson-UTI, unless such person has met his or her individual ownership requirement. +Each of the NEOs and Directors was in compliance with these guidelines as of the date of this proxy statement. +Clawback Policy +As provided for in Patterson-UTI’s Corporate Governance Guidelines and set forth in written agreements with its executive officers, Patterson-UTI has implemented a claw-back policy that allows for the recovery of bonus, severance or incentive based compensation from an executive officer in the event the Board of Directors learns that any misconduct by such executive officer contributed to Patterson-UTI having to restate all or a portion of its financial statements. The Board will take such action as it deems necessary to remedy the misconduct, prevent its recurrence, and if it deems appropriate +31 +based on the relevant facts and circumsta nces, take remedial action against such executive officer, which may include requiring the reimbursement of any bonus or incentive compensation awarded to such executive officer or effect the cancellation of stock awards previously granted to such executiv e officer if: (i) the amount of the bonus, incentive compensation or stock award was calculated based upon the achievement of certain financial results that were subsequently the subject of a restatement, (ii) such executive officer engaged in intentional misconduct that caused or partially caused the need for the restatement, and (iii) the amount of the bonus, incentive compensation or stock award that would have been awarded to such executive officer had the financial results been properly reported would have been lower than the amount actually awarded. +In addition to a stand-alone policy, Patterson-UTI’s 2005 Long-Term Incentive Plan and the Amended and Restated 2014 Long-Term Incentive Plan provide that if Patterson-UTI is required to prepare an accounting restatement due to the material noncompliance of Patterson-UTI, as a result of misconduct, with any financial reporting requirement under the securities laws, or if the participant is one of the persons subject to automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002, the participant shall reimburse Patterson-UTI that amount of any payment in settlement of an award earned or accrued during the twelve-month period following the first public issuance or filing with the SEC (whichever just occurred) of the financial document embodying such financial statement requirement. +Anti-Hedging Policy +Patterson-UTI has an anti-hedging policy. Our directors and executive officers may not purchase, sell or write options on Patterson-UTI securities or engage in transactions in other third-party derivative securities with respect to Patterson-UTI securities. +Anti-Pledging Policy +Patterson-UTI has an anti-pledging policy. Our directors and executive officers may not engage in transactions in which Patterson-UTI securities are used as collateral for any loan, including, but not limited to, “margin loans” in a brokerage account. +Perquisites and Personal Benefits +The Compensation Committee believes that benefits to executives should generally be aligned with those provided for other employees. No Named Executive Officer received perquisites totaling more than $10,000, except that Mr. Holcomb received an automobile allowance of $12,000 in 2017, $13,398 in 2016 and $12,000 in 2015. Accordingly, except for the automobile allowance, the perquisites do not meet the threshold that would require disclosure in the Summary Compensation Table below. +Evaluation of Compensation Risk +We have considered the potential risks associated with the design of our program. We do not believe that our program creates unreasonable risks for the following reasons: +• +The emphasis on long-term equity based awards and the required vesting periods help minimize the potential for excessive risk taking and actions aimed at short-term stock gains; +• +Our use of different types of equity grants, in particular restricted stock and restricted stock units, helps offset these risks; +• +We have meaningful share ownership guidelines; +• +We maintain an anti-hedging policy; +• +We maintain a clawback policy that applies to all of our executive officers for both cash and equity incentives; and +• +Three of the top four NEOs have been with Patterson-UTI for more than six years and have an established track record of focus on growing long-term sustainable growth for Patterson-UTI. +32 +Our Board has also considered in its risk assessment of our executive compensation program its view that our management is highly ethical and focused on creating true long-term value for stockholders and not focused on just short-term gain s. The Board, primarily through its Compensation Committee and Audit Committee, monitors and considers risks associated with Patterson-UTI’s compensation plans on a regular basis. +Employment-Related Agreements and Other Matters +Change in Control, Severance and Employment Agreements +Change in Control Agreements and Tax Gross-Up Payments. Patterson-UTI has entered into change-in-control agreements with Messrs. Siegel and Berns and employment agreements with Messrs. Holcomb, Hendricks and Smith that contain change-in-control provisions, as further described in “Employment-Related Agreements” below. Patterson-UTI believes that such agreements may under certain circumstances protect Patterson-UTI’s interest by discouraging the NEOs from leaving employment out of concern for the security of their jobs or being unable to concentrate on their work. We believe that the change in control agreements may also help Patterson-UTI attract and retain new key employees by reducing the personal uncertainty and anxiety that arises from the possibility of a future business combination. Any future change in control or severance agreements will be approved subject to the circumstances existing at the time. +As was customary when the change in control agreements with Messrs. Siegel and Berns were entered into more than ten years ago, each change-in-control agreement provides the executive with a full gross-up payment for any excise taxes imposed on payments and benefits received under the change-in-control agreement or otherwise, including other taxes that may be imposed as a result of the gross-up payment. As indicated above, the Compensation Committee subsequently adopted a policy, more than five years ago, to no longer approve tax gross-ups in connection with compensation arrangements, and the employment agreements entered into with Mr. Hendricks in 2016 and Messrs. Holcomb and Smith in 2017, which are described below, do not include a tax gross-up provision. +Severance Agreements. In order to address prior severance agreements between UTI Energy Corp. and each of Messrs. Siegel and Berns, Patterson-UTI has entered into written letter agreements with each of these executives pursuant to which Patterson-UTI has agreed to pay each such person within ten days of the termination of his employment with Patterson-UTI for any reason (including voluntary termination by him), an amount in cash equal to his annual base salary at the time of such termination. Any payment made by Patterson-UTI pursuant to these letter agreements will reduce dollar for dollar any payment owed to such person, if any, pursuant to the change-in-control agreements referenced above. +Employment Agreements. Patterson-UTI entered into an employment agreement with Mr. Hendricks in August 2016, with Mr. Holcomb in January 2017 and with Mr. Smith in September 2017. Each employment agreement generally has an initial three-year term, subject to automatic annual renewal. The employment agreement with Mr. Hendricks provides for an annualized salary of 600,000 per year, subject to any increases that may be granted in the future (his annualized salary was increased to $1,000,000 per year in May 2017), the employment agreement with Mr. Holcomb provides for an annualized salary of $465,000, subject to any increases that may be granted in the future, and the employment agreement with Mr. Smith provides for an annualized salary of $450,000, subject to any increases that may be granted in the future. Under specified circumstances, Patterson-UTI may terminate the executive’s employment under his employment agreement for cause (as defined in the employment agreement). The employment agreement also provides for, among other things, severance payments and the continuation of certain benefits following termination by Patterson-UTI of the executive other than for cause, or termination by the executive for good reason (as defined in the employment agreement). As discussed above and in more detail below, the employment agreements contain change in control provisions. +We believe the change-in-control agreements, severance agreements and the employment agreements are important components of our overall executive compensation program. The employment agreements currently in effect set forth the manner by which the employment relationship may be extended or terminated, the compensation and benefits that we provide during the term of employment and the obligations each party has in the event of termination of the executive officer’s employment. We believe that severance protections, particularly in the context of a change-in-control transaction, play a critical role in attracting and retaining key executive officers. Providing this type of protection is common in the oilfield services industry. In addition, these benefits serve our interests by promoting a continuity of management and aligning management’s interests with those of our stockholders in the context of an actual or threatened change in control transaction. +Please see “Employment-Related Agreements” below for further description of the change-in-control agreements, severance agreements and employment agreements. +33 +Section 162(m) Considerations +We consider the impact of accounting and tax treatment when designing all aspects of compensation, but the primary driver of program design is the support of business objectives. In that regard, we review and consider the deductibility of executive compensation under Section 162(m) of the Internal Revenue Code, which limits the tax deductibility by a corporation of compensation in excess of $1 million paid to each covered employee. For 2017 and prior years, covered employees for this purpose included all of our Named Executive Officers other than the CFO, although any compensation that met the requirements of qualified performance-based compensation under Section 162(m) was not subject to this deduction limitation. Effective for tax years beginning after December 31, 2017, U.S. tax law changes expand the definition of covered employees under Section 162(m) to include any individual who is a Named Executive Officer in 2017 or any later calendar year and eliminate the performance-based compensation exception. +Under the tax laws in effect during 2017, compensation which qualified as “performance-based” could be excluded from the $1 million limit if, among other requirements, the compensation was payable only upon attainment of pre-established, objective performance goals under a plan approved by the corporation’s stockholders. Although some outstanding performance units, stock options and 2017 annual bonuses will not result in a compensation deduction until after 2017, we believe the transition rules in effect for binding contracts in effect on November 2, 2017 should continue to allow certain of these awards to maintain their exemption from the $1 million annual deduction limitation for so long as such grants are not materially modified. The Committee views the tax deductibility of executive compensation as one factor to be considered in the context of its overall compensation philosophy. The Committee reviews each material element of compensation on a continuing basis to determine whether deductibility can be accomplished without sacrificing flexibility and other important elements of the overall executive compensation program. The Committee has not adopted a policy that all compensation must be deductible; accordingly, it will continue to retain discretion to pay compensation that is subject to the $1 million deductibility limit. +Compensation Committee Interlocks and Insider Participation +No member of the Compensation Committee was, during the year ended December 31, 2017, an officer or employee of Patterson-UTI or any of its subsidiaries, or was formerly an officer of Patterson-UTI or any of its subsidiaries, or had any relationships requiring disclosure by Patterson-UTI under Item 404 of Regulation S-K. +During the year ended December 31, 2017, none of Patterson-UTI’s executive officers served as (i) a member of the compensation committee (or other board committee performing equivalent functions) of another entity, one of whose executive officers served on the Compensation Committee, (ii) a director of another entity, one of whose executive officers served on the Compensation Committee, or (iii) a member of the compensation committee (or other board committee performing equivalent functions) of another entity, one of whose executive officers served as a director of Patterson-UTI. +Compensation Committee Report +The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based upon such review and discussion, the Compensation Committee has recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement. +Terry H. Hunt, Chairman +Charles O. Buckner +Michael W. Conlon +Curtis W. Huff +34 +EXECUTIVE COMPENSATION +The following table sets forth information concerning compensation for the fiscal year ended December 31, 2017 with respect to the principal executive officer, the principal financial officer and the other Named Executive Officers of Patterson-UTI: +Summary Compensation Table +Name and Principal Position(s) +Year +Salary +($) +Bonus +($)(1) +Stock +Awards +($)(2) +Option +Awards +($)(3) +Non-equity +Incentive plan +Compensation +($)(4) +All Other +Compensation +($)(5) +Total +($) +William Andrew Hendricks, Jr. +2017 +853,846 +2,250,000 +8,951,693 +(6) +— +2,187,500 +10,800 +$ +14,253,839 +President & Chief +2016 +600,000 +— +3,622,171 +1,526,508 +468,939 +10,600 +$ +6,228,218 +Executive Officer +2015 +600,000 +— +2,860,622 +1,508,164 +1,238,885 +10,600 +$ +6,218,271 +C. Andrew Smith +2017 +122,885 +250,000 +1,599,989 +(7) +— +984,375 +4,154 +$ +2,961,403 +Executive Vice President & +Chief Financial Officer +John E. Vollmer III +2017 +413,462 +1,200,000 +2,637,435 +(8) +— +— +585,800 +(12) +$ +4,836,697 +Former Executive Vice +2016 +350,000 +— +1,757,844 +915,227 +312,626 +10,600 +$ +3,346,297 +President — Corporate +2015 +350,000 +— +1,714,691 +904,898 +825,924 +10,600 +$ +3,806,113 +Development, Chief Financial Officer & Treasurer +Mark S. Siegel +2017 +635,577 +2,550,000 +7,882,637 +(9) +— +1,750,000 +— +$ +12,818,214 +Chairman of the Board +2016 +350,000 +— +1,406,971 +732,278 +375,151 +— +$ +2,864,400 +2015 +350,000 +— +2,285,577 +1,206,531 +991,108 +— +$ +4,833,216 +Kenneth N. Berns +2017 +382,404 +850,000 +3,758,848 +(10) +— +984,375 +— +$ +5,975,627 +Executive Vice President & +2016 +265,000 +— +1,757,844 +915,227 +312,626 +— +$ +3,250,697 +Chief Commercial Officer +2015 +265,000 +— +1,714,691 +904,898 +825,924 +— +$ +3,710,513 +James M. Holcomb +2017 +460,692 +500,000 +1,621,422 +(11) +— +569,625 +22,800 +(13) +$ +3,174,539 +President — Patterson-UTI +2016 +325,000 +— +890,110 +— +111,416 +23,998 +$ +1,350,524 +Drilling Company LLC +2015 +325,000 +— +750,600 +— +237,874 +22,600 +$ +1,336,074 +(1) +Bonuses include, in the case of Messrs. Hendricks, Vollmer, Siegel, Berns and Holcomb, amounts awarded in respect of the SSE merger pursuant to the one-time pool discussed above. In the case of Mr. Smith, bonuses include amounts awarded upon his commencement of employment with the Company. In the case of Mr. Vollmer, includes a cash bonus of $350,000, which was paid at the time bonuses were paid to other executives of Patterson-UTI, pursuant to Mr. Vollmer’s agreement in connection with his retirement. +(2) +Amounts include the fair value of awards at the date of grant as determined in accordance with FASB ASC Topic 718 with respect to restricted stock or restricted stock units awarded to the Named Executive Officer in the fiscal years ended December 31, 2017, 2016 and 2015, with respect to performance units awarded to Messrs. Hendricks, Siegel and Berns in the fiscal year ended December 31, 2017, and with respect to performance units awarded to Messrs. Hendricks, Vollmer, Siegel and Berns in the fiscal years ended December 31, 2016 and 2015. Performance conditions for all awards of restricted stock had been satisfied as of December 31, 2017. For additional information related to the assumptions used and valuation of restricted stock, restricted stock units and performance units, see Note 10 to the consolidated financial statements in Patterson-UTI’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017. +(3) +Amounts represent the fair value at the date of grant as determined in accordance with FASB ASC Topic 718 with respect to stock options awarded to the Named Executive Officer in the fiscal years ended December 31, 2016 and 2015. No stock options were awarded in the fiscal year ended December 31, 2017. For additional information related to the assumptions used in connection with the valuation of stock options using the Black-Scholes-Merton option pricing model, see Note 10 to the consolidated financial statements in Patterson-UTI’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017. +(4) +Amounts represent annual cash bonuses earned for the fiscal years ended December 31, 2017, 2016 and 2015. For annual cash bonuses earned for the fiscal year ended December 31, 2017, the bonus plan set a target opportunity for each executive’s annual cash bonus as a percent of salary, with payout contingent upon meeting Patterson-UTI’s financial goals and selected KPIs as described above. For 2017, 70% of the annual cash bonus was based on a measurement of actual Adjusted EBITDA relative to budgeted Adjusted EBITDA, with a 50% payout for threshold achievement of 80% of budget, 100% payout for target achievement of 100% of budget and 200% maximum payout for achievement of 120% of budget or more (and linear interpolation for levels of achievement between these points), and the remaining 30% was based on three KPIs as described above. For annual cash bonuses earned for the fiscal years ended December 31, 2016 and 2015, the bonus plan in each of those fiscal years for the top four NEOs provided for a bonus pool based on Adjusted EBITDA. The bonus pool was allocated among the participants based on a pre-determined sharing percentage, except with respect to Mr. Holcomb the bonus was based on Adjusted EBITDA for Patterson-UTI’s contract drilling business. +(5) +Amounts reflect contributions to a 401(k) plan by Patterson-UTI. +(6) +Amount includes $4,200,011 related to an annual award of shares of restricted stock, $2,163,815 related to an award of shares of restricted stock pursuant to the one-time pool described above and $2,587,867 related to an award of performance units during 2017. Assuming maximum performance, the value of the performance unit award would be $5,175,734. +(7) +Amount reflects an award of restricted stock units upon his commencement of employment. +35 +(8) +Amount includes $1,819,994 related to an annual award of shares of restricted stock and $817,441 related to an award of shares of restricted stock pursuant to the one-time pool described above during 2017. +(9) +Amount includes $3,360,009 related to an annual award of shares of restricted stock, $2,452,322 related to an award of shares of restricted stock pursuant to the one-time pool described above and $2,070,306 related to an award of performance units during 2017. Assuming maximum performance, the value of the performance unit award would be $4,140,612. +(10) +Amount includes $1,819,994 related to an annual award of shares of restricted stock, $817,441 related to an award of shares of restricted stock pursuant to the one-time pool described above and $1,121,413 related to an award of performance units during 2017. Assuming maximum performance, the value of the performance unit award would be $2,242,826. +(11) +Amount includes $480,852 related to an award of shares of restricted stock pursuant to the one-time pool described above and $1,140,570 related to an annual award of restricted stock units during 2017. +(12) +Amount includes $10,800 contributed to a 401(k) plan by Patterson-UTI and, pursuant to Mr. Vollmer’s agreement in connection with his retirement, a lump sum retirement payment of $450,000 and an additional payment of $125,000 in settlement of any other owed compensation, including any accrued vacation or paid time off accruals through December 31, 2017 . +(13) +Amount includes $10,800 contributed to a 401(k) plan by Patterson-UTI and an automobile allowance of $12,000. +The following table sets forth information concerning grants of plan-based awards during the fiscal year ended December 31, 2017 to the Named Executive Officers: +Grants of Plan-Based Awards +Estimated Future Payouts under +Non-equity Incentive Plan Awards +Estimated Future Payouts under +Equity Incentive Plan Awards +All Other +Stock +Awards: +Number of +Shares of +Grant Date +Fair Value of +Stock and +Grant +Threshold +Target +Maximum +Threshold +Target +Maximum +Stock or Units +Option Awards +Name +Date +($) +($) +($) +(#) +(#) +($) +(#) +($)(6) +William Andrew Hendricks, Jr +5/02/17 +(1) +$ +437,500 +$ +1,250,000 +$ +2,500,000 +— +— +— +— +$ +— +5/02/17 +(2) +— +— +— +41,686 +83,372 +166,744 +— +$ +2,587,867 +5/02/17 +(3) +— +— +— +— +— +— +194,535 +$ +4,200,011 +5/02/17 +(4) +— +— +— +— +— +— +100,223 +$ +2,163,815 +C. Andrew Smith +9/08/17 +(1) +$ +196,875 +$ +562,500 +$ +1,125,000 +— +— +— +— +$ +— +9/08/17 +(3) +— +— +— +— +— +— +94,117 +$ +1,599,989 +John E. Vollmer III +5/02/17 +(3) +— +— +— +— +— +— +84,298 +$ +1,819,994 +5/02/17 +(4) +— +— +— +— +— +— +37,862 +$ +817,441 +Mark S. Siegel +5/02/17 +(1) +$ +350,000 +$ +1,000,000 +$ +2,000,000 +— +— +— +— +$ +— +5/02/17 +(2) +— +— +— +33,349 +66,698 +133,396 +— +$ +2,070,306 +5/02/17 +(3) +— +— +— +— +— +— +155,628 +$ +3,360,009 +5/02/17 +(4) +— +— +— +— +— +— +113,586 +$ +2,452,322 +Kenneth N. Berns +5/02/17 +(1) +$ +196,875 +$ +562,500 +$ +1,125,000 +— +— +— +— +$ +— +5/02/17 +(2) +— +— +— +18,064 +36,128 +72,256 +— +$ +1,121,413 +5/02/17 +(3) +— +— +— +— +— +— +84,298 +$ +1,819,994 +5/02/17 +(4) +— +— +— +— +— +— +37,862 +$ +817,441 +James M. Holcomb +5/02/17 +(5) +$ +113,925 +$ +325,500 +$ +651,000 +— +— +— +— +$ +— +5/02/17 +(4) +— +— +— +— +— +— +22,272 +$ +480,852 +7/12/17 +(3) +— +— +— +— +— +— +57,000 +$ +1,140,570 +(1) +The 2017 non-equity incentive cash bonus plan for the fiscal year ended December 31, 2017 was approved on May 2, 2017 for Messrs. Hendricks, Siegel and Berns and on September 8, 2017 for Mr. Smith. The bonus plan set a target opportunity for each executive’s annual cash bonus as a percent of salary, with payout contingent upon meeting Patterson-UTI’s financial goals and selected KPIs as described above. For 2017, 70% of the annual cash bonus was based on a measurement of actual Adjusted EBITDA relative to budgeted Adjusted EBITDA, with a 50% payout for threshold achievement of 80% of budget, 100% payout for target achievement of 100% of budget and 200% maximum payout for achievement of 120% of budget or more (and linear interpolation for levels of achievement between these points), and the remaining 30% was based on three KPIs as described above. The cash bonuses were awarded under the Amended and Restated 2014 Long-Term Incentive Plan, which was designed to meet the requirements of Section 162(m) of the Code. Please see the “Annual Incentive Compensation” section for a discussion of actual payments made in respect of the 2017 cash bonus plan. +(2) +On May 2, 2017, Patterson-UTI granted performance unit awards to Messrs. Hendricks, Siegel and Berns. These awards provide for the recipients to receive shares of Common Stock upon the achievement of certain performance goals established by Patterson-UTI during a specified period. The performance period is the period from May 1, 2017 through April 30, 2020. The performance goals are tied to Patterson-UTI’s total shareholder return for the performance period as compared to total shareholder return for our peer group determined by the Compensation Committee. The recipients will receive a target number of shares if Patterson-UTI’s total shareholder return when compared to the peer group, is at the 50 th percentile and two times the target if at the 75 th percentile or higher. If Patterson-UTI’s total stockholder return, when compared to the peer group, is at the 25 th percentile, the recipients will only receive one-half of the target number of shares. The grant of shares when achievement is between the 25th and 75th percentile will be determined using linear interpolation for levels of achievement between these points. +36 +(3) +Shares of restricted stock were awarded to Messrs. Hendricks, Vollmer, Siegel and Berns, and restricted stock units were awarded to Messrs. Smith and Holcomb, pursuant to the Amended and Restated 2014 Long-Term Ince ntive Plan. Ordinary dividends are paid on unvested shares of restricted stock. Ordinary dividends are accrued on unvested restricted stock units and paid upon vesting. The rate at which these dividends are paid or accrued is the same rate at which ordinar y dividends are paid on all other shares of Common Stock. The right to receive these dividends has been included in the grant date fair value of stock awards presented in the table. The restricted shares awarded to Messrs. Hendricks, Vollmer, Siegel and Be rns vest over a three-year period as follows: one-third on May 2, 2018, and the remainder in equal monthly installments over the 24 months following May 2, 2018. The restricted stock units awarded to Mr. Holcomb vest over a three-year period as follows: on e-third on July 12, 2018, one-third on July 12, 2019 and one-third on July 12, 2020. The restricted stock units awarded to Mr. Smith in connection with the commencement of his employment vest over a two-year period as follows: one-half on September 8, 2018 and one-half on September 8, 2019. +(4) +Shares of restricted stock were awarded to Messrs. Hendricks, Vollmer, Siegel, Berns and Holcomb in recognition of their accomplishments relating to the completion of the SSE merger. These shares of restricted stock were awarded pursuant to the Amended and Restated 2014 Long-Term Incentive Plan. Ordinary dividends are paid on unvested shares of restricted stock. The rate at which these dividends are paid is the same rate at which ordinary dividends are paid on all other shares of Common Stock. The right to receive these dividends has been included in the grant date fair value of stock awards presented in the table. The shares vest on May 2, 2018. +(5) +The 2017 non-equity incentive cash bonus plan for Mr. Holcomb for the fiscal year ended December 31, 2017 was approved on May 2, 2017. The 2017 bonus plan for Mr. Holcomb provided for a target opportunity for his annual cash bonus as a percent of salary, with payout contingent upon meeting the financial goals of Patterson-UTI’s contract drilling business and selected KPIs as described above. +(6) +The grant date fair value of restricted stock and restricted stock units was based on the closing price of Patterson-UTI Common Stock on the date of grant, which is consistent with the valuation used by Patterson-UTI for the recognition of compensation expense under FASB ASC Topic 718. The grant date fair value of performance unit awards was determined based on a Monte-Carlo simulation model, which is consistent with the valuation used by Patterson-UTI for the recognition of compensation expense under FASB ASC Topic 718. +37 +The following table sets forth information concerning outstanding equity awards at December 31, 2017 for the Named Executive Officers: +Outstanding Equity Awards at Fiscal Year-End +Stock Awards +Number +Equity Incentive +Equity Incentive +of Shares +Plan Awards: +Plan Awards: Market +Option Awards +or Units of +Number of +or Payout Value of +Number of Securities +Option +Stock +Market Value of +Unearned Shares, +Unearned Shares, +Underlying Unexercised +Exercise +Option +That Have +Shares or Units of +Units or Other +Units or Other +Options (#) +Price +Expiration +Not +Stock That Have +Rights that +Rights that Have +Name +Exercisable +Unexercisable +($) +Date +Vested (#) +Not Vested ($)(1) +Have Not Vested(2) +Not Vested ($)(1) +William Andrew Hendricks, Jr. +100,000 +— +$ +17.27 +4/1/2022 +359,194 +(3) +$ +8,265,054 +216,072 +(4) +$ +4,971,817 +25,000 +— +$ +15.82 +9/30/2022 +172,500 +— +$ +22.88 +4/21/2023 +117,750 +— +$ +33.10 +4/21/2024 +228,444 +28,556 +(5) +$ +20.33 +4/20/2025 +175,222 +140,178 +(6) +$ +18.54 +4/25/2026 +C. Andrew Smith +— +— +— +— +94,117 +(7) +$ +2,165,632 +— +— +John E. Vollmer III +119,000 +— +$ +29.31 +4/24/2018 +148,571 +(8) +$ +3,418,619 +79,500 +(9) +$ +1,829,295 +175,000 +— +$ +13.17 +4/27/2019 +177,500 +— +$ +14.83 +4/26/2020 +69,000 +— +$ +31.20 +4/25/2021 +160,000 +— +$ +16.20 +4/23/2022 +115,000 +— +$ +22.88 +4/21/2023 +78,500 +— +$ +33.10 +4/21/2024 +137,066 +17,134 +(5) +$ +20.33 +4/20/2025 +105,055 +84,045 +(6) +$ +18.54 +4/25/2026 +Mark S. Siegel +238,000 +— +$ +29.31 +4/24/2018 +293,003 +(10) +$ +6,741,999 +150,598 +(11) +$ +3,465,260 +350,000 +— +$ +13.17 +4/27/2019 +355,000 +— +$ +14.83 +4/26/2020 +138,000 +— +$ +31.20 +4/25/2021 +320,000 +— +$ +16.20 +4/23/2022 +230,000 +— +$ +22.88 +4/21/2023 +157,000 +— +$ +33.10 +4/21/2024 +182,755 +22,845 +(5) +$ +20.33 +4/20/2025 +84,055 +67,245 +(6) +$ +18.54 +4/25/2026 +Kenneth N. Berns +119,000 +— +$ +29.31 +4/24/2018 +148,571 +(8) +$ +3,418,619 +115,628 +(12) +$ +2,660,600 +175,000 +— +$ +13.17 +4/27/2019 +177,500 +— +$ +14.83 +4/26/2020 +69,000 +— +$ +31.20 +4/25/2021 +160,000 +— +$ +16.20 +4/23/2022 +115,000 +— +$ +22.88 +4/21/2023 +78,500 +— +$ +33.10 +4/21/2024 +137,066 +17,134 +(5) +$ +20.33 +4/20/2025 +105,055 +84,045 +(6) +$ +18.54 +4/25/2026 +James M. Holcomb +— +— +— +— +118,606 +(13) +$ +2,729,124 +— +— +(1) +Based on the closing price of Patterson-UTI Common Stock on December 29, 2017 of $23.01 per share. +(2) +As of December 31, 2017, performance unit awards had been granted to Messrs. Hendricks, Vollmer, Siegel and Berns. The 2015, 2016 and 2017 performance unit awards were granted on April 21, 2015, April 26, 2016 and May 2, 2017, respectively, and provide for an award of shares of Patterson-UTI common stock to the recipient based on Patterson-UTI’s total shareholder return compared to our peer group of companies at the time of grant for the performance period of April 1 of the grant year through March 31 of the third year following the grant for the awards in 2015 and 2016, and May 1 through April 30 of the third year following the grant for the awards in 2017. All performance unit awards provide for a target payout based on a target level of total shareholder return compared to the peer group. The amounts presented in this column represent the target payout under the performance unit awards. Based on Patterson-UTI’s total shareholder return during the performance period, the recipients could receive a number of shares ranging from no shares to two times the target number of shares. For the Performance Units granted in 2015, there is no payout unless Patterson-UTI’s total shareholder return is positive and, when compared to the peer group, is at or above the 25 th percentile. For the Performance Units granted in 2016, if Patterson-UTI’s total shareholder return is negative and, when compared to the peer group, is at or above the 25 th percentile, then the recipients will receive one-half of the number of shares they would have received had Patterson-UTI’s total shareholder return been positive. For the Performance Units granted in 2017, the payout is based on relative performance and does not have an absolute performance requirement. +(3) +These shares of restricted stock vest as follows: 8,245 shares in equal monthly installments from January 21, 2018 through April 21, 2018; 35,823 shares in equal monthly installments from January 26, 2018 through April 26, 2019; 20,368 shares in equal monthly installments from January 1, 2018 through August 1, 2019; 165,068 shares on May 2, 2018 and 129,690 in equal monthly installments from June 2, 2018 through May 2, 2020. +(4) +Amount includes 63,600 shares related to the 2015 performance unit award, 69,100 shares related to the 2016 performance unit award and 83,372 shares related to the 2017 performance unit award. +(5) +These options vest in equal monthly installments from January 21, 2018 through April 21, 2018. +38 +(6) +These options ves t in equal monthly installments from January 26, 2018 through April 26, 2019. +(7) +These restricted stock units vest as follows: 47,058 restricted stock units on September 8, 2018 and 47,059 restricted stock units on September 8, 2019. +(8) +These shares of restricted stock vest as follows: 4,945 shares in equal monthly installments from January 21, 2018 through April 21, 2018; 21,466 shares in equal monthly installments from January 26, 2018 through April 26, 2019; 65,961 shares on May 2, 2018 and 56,199 shares in equal monthly installments from June 2, 2018 through May 2, 2020. +(9) +Amount includes 38,100 shares related to the 2015 performance unit award and 41,400 shares related to the 2016 performance unit award. +(10) +These shares of restricted stock vest as follows: 6,589 shares in equal monthly installments from January 21, 2018 through April 21, 2018; 17,200 shares in equal monthly installments from January 26, 2018 through April 26, 2019; 165,462 shares on May 2, 2018 and 103,752 shares in equal monthly installments from June 2, 2018 through May 2, 2020. +(11) +Amount includes 50,800 shares related to the 2015 performance unit award, 33,100 shares related to the 2016 performance unit award and 66,698 shares related to the 2017 performance unit award. +(12) +Amount includes 38,100 shares related to the 2015 performance unit award, 41,400 shares related to the 2016 performance unit award and 36,128 shares related to the 2017 performance unit award. +(13) +These shares of restricted stock and restricted stock units vest as follows: 22,272 shares on May 2, 2018; 25,667 shares on June 9, 2018; 19,000 restricted stock units on July 12, 2018; 13,667 shares on June 9, 2019; 19,000 restricted stock units on July 12, 2019 and 19,000 restricted stock units on July 12, 2020. +The following table sets forth information concerning option exercises and stock awards vested during the fiscal year ended December 31, 2017 for the Named Executive Officers: +Option Exercises and Stock Vested +Option awards +Stock awards +Name +Number of +shares acquired +on exercise (#) +Value realized +on exercise ($) +Number of +shares acquired +on vesting (#) +Value realized +on vesting ($)(1) +William Andrew Hendricks, Jr. +— +$ +— +92,886 +$ +2,010,674 +C. Andrew Smith +— +$ +— +— +$ +— +John E. Vollmer III +— +$ +— +46,389 +$ +1,028,119 +Mark S. Siegel +— +$ +— +50,712 +$ +1,139,398 +Kenneth N. Berns +— +$ +— +46,389 +$ +1,028,119 +James M. Holcomb +— +$ +— +36,100 +$ +744,743 +(1) +Value realized on vesting is based on the closing price of Patterson-UTI common stock on the day the respective shares vested; provided that if the stock market was closed on the day the respective shares vested, the value realized on vesting is based on the closing price of Patterson-UTI common stock on the day immediately prior to the day the respective shares vested. +39 +Pay Ratio +Under rules adopted pursuant to the Dodd-Frank Act of 2010, we are required to calculate and disclose the total compensation paid to our median employee, as well as the ratio of the total compensation paid to the median employee as compared to the total compensation paid to our CEO. The paragraphs that follow describe our methodology and the resulting CEO pay ratio. +We identified the median employee using our employee population on December 31, 2017. At December 31, 2017, we had approximately 7,600 employees located in the United States, Canada and United Arab Emirates (UAE). +Pursuant to the de minimis exception, in identifying the median employee, we excluded approximately 148 employees in Canada and two employees in UAE, which together represent approximately 2% of our workforce. Additionally, we excluded approximately 376 employees that became our employees as a result of our acquisition of MS Directional in October 2017. +The compensation measure we used to identify the median employee was Box 1 of the Form W-2 issued by the IRS for federal tax purposes. We chose Form W-2 because our non-excluded employee population consisted solely of U.S. employees, and this compensation measure applies to all U.S. employees, allowing for accessibility and broad comparability. The total annual compensation for the year ended December 31, 2017 was calculated as $83,826 for our median employee and $14,253,838 for our CEO as reflected in the “Total” column of the Summary Compensation Table. The ratio of our CEO’s pay to that of our median employee for 2017 was approximately 170 times. The pay ratio provided is a reasonable estimate calculated in a manner consistent with SEC rules. +We believe that the pay ratio described above is significantly higher for 2017 than it would be in prior years, due to the special, one-time awards granted to the CEO and other Named Executive Officers in connection with the transformative SSE merger. +Because the SEC rules for identifying the median of the annual total compensation of our employees and calculating the pay ratio based on that employee’s annual total compensation allows companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices, the pay ratio reported by other companies may not be comparable to the pay ratio for our Company, as other companies have headquarters and offices in different states and countries, have different employee populations and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their pay ratios. +No Pension Benefits or Nonqualified Deferred Compensation +Patterson-UTI does not provide any pension benefits for any of the Named Executive Officers. None of the Named Executive Officers had any items of nonqualified deferred compensation during 2017. As a result, tables with respect to pension benefits and nonqualified deferred compensation have not been provided. +DIRECTOR COMPENSATION +The following table sets forth information concerning compensation for the fiscal year ended December 31, 2017 with respect to the directors of Patterson-UTI who are not executive officers: +Name +Fees earned +or paid in cash +($) +Stock awards +($)(1) +Option awards +($)(2) +All other +compensation +($) +Total +($) +Charles O. Buckner +$ +100,000 +$ +174,980 +$ +— +$ +— +$ +274,980 +Tiffany (TJ) Thom Cepak +$ +85,000 +$ +174,980 +$ +— +$ +— +$ +259,980 +Michael W. Conlon +$ +95,000 +$ +174,980 +$ +— +$ +— +$ +269,980 +Curtis W. Huff +$ +115,000 +$ +174,980 +$ +— +$ +— +$ +289,980 +Terry H. Hunt +$ +100,000 +$ +174,980 +$ +— +$ +— +$ +274,980 +(1) +Amounts set forth represent the fair value at the date of grant as determined in accordance with FASB ASC Topic 718 with respect to restricted stock awarded to the directors in the fiscal year ended December 31, 2017. For additional information related to the assumptions used and valuation of restricted stock, see Note 10 to the consolidated financial statements in Patterson-UTI’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017. Messrs. Buckner, Conlon, Huff and Hunt and Ms. Cepak each received an award of 6,500 shares of restricted stock on January 1, 2017 with a market value of $26.92 per share. The shares awarded to Messrs. Buckner, Conlon, Huff and Hunt and Ms. Cepak fully vested on January 1, 2018. As of December 31, 2017, Messrs. Buckner, Conlon, Huff and Hunt and Ms. Cepak each held 6,500 unvested shares of restricted stock. +40 +(2) +No options were issued to directors during the fiscal year ended December 31, 2017. As of December 31, 2017, Messrs. Buckner, Conlon, Huff and Hunt and Ms. Cepak held the following options to purchase shares of Common Stock: +Number of Securities Underlying +Unexercised Options (#) +Name +Exercisable +Unexercisable +Total +Charles O. Buckner +70,000 +— +70,000 +Tiffany (TJ) Thom Cepak +30,000 +— +30,000 +Michael W. Conlon +50,000 +— +50,000 +Curtis W. Huff +60,000 +— +60,000 +Terry H. Hunt +80,000 +— +80,000 +Directors who are also employees of Patterson-UTI do not receive compensation for serving as a director or as a member of a committee of the Board of Directors. All directors are reimbursed for reasonable out-of-pocket expenses incurred in connection with serving as a member of the Board of Directors. +The current compensation for non-employee directors is as follows: Each non-employee director receives annual cash compensation of $75,000 and shares of restricted stock on January 1 of each year with a grant date value of $175,000, subject to one-year vesting (subject to acceleration in certain limited situations, including a change of control). Each non-employee director that serves on the Audit Committee or the Compensation Committee receives additional annual cash compensation of $10,000 per committee on which he or she serves, with the Chair of each such committee receiving $15,000. The Chair of the Nominating and Corporate Governance Committee receives additional annual cash compensation of $10,000. The Lead Director receives additional annual cash compensation of $20,000. In December 2017, the Board of Directors modified the non-employee director compensation program to provide for grants of restricted stock units in lieu of shares of restricted stock. +EMPLOYMENT-RELATED AGREEMENTS +Change in Control, Employment and Severance Agreements +Change in Control Agreements with Messrs. Siegel and Berns +Patterson-UTI has Change in Control Agreements with Messrs. Siegel and Berns (each agreement, a “CIC Agreement” and collectively, the “CIC Agreements”). The CIC Agreements were entered into to protect these executives should a change in control occur, thereby encouraging such executive to remain in the employ of Patterson-UTI and not be distracted from the performance of his duties to Patterson-UTI by the possibility of a change in control. +Each CIC Agreement generally has an initial term with automatic twelve-month renewals unless Patterson-UTI notifies the executive at least ninety days before the end of such renewal period that the term will not be extended. If a change in control of Patterson-UTI occurs during the term of the CIC Agreement and the executive’s employment is terminated (i) by Patterson-UTI other than for cause or other than automatically as a result of death, disability or retirement, or (ii) by the executive for good reason (as those terms are defined in the CIC Agreements), then the executive shall generally be entitled to, among other things: +• +a bonus payment equal to the highest bonus paid after the CIC Agreement was entered into (such bonus payment for each executive prorated for the portion of the fiscal year preceding the termination date); +• +a payment equal to 2.5 times (in the case of Mr. Siegel) or 2 times (in the case of Mr. Berns) the sum of (i) the highest annual salary in effect for such executive and (ii) the average of the three annual bonuses earned by the executive for the three fiscal years preceding the termination date; and +• +continued coverage under Patterson-UTI’s welfare plans for up to three years (in the case of Mr. Siegel) or two years (in the case of Mr. Berns). +As was customary when the CIC Agreements were entered into more than ten years ago, each CIC Agreement provides the executive with a full gross-up payment for any excise taxes imposed on payments and benefits received under the CIC Agreement or otherwise, including other taxes that may be imposed as a result of the gross-up payment. As indicated above, the Compensation Committee subsequently adopted a policy, more than five years ago, to no longer approve tax-gross ups in connection with compensation arrangements, and the employment agreements entered into with Mr. Hendricks in 2016 and Messrs. Holcomb and Smith in 2017, which are described below, do not include a tax gross-up provision. +41 +A “change in control” is principally defined by the CIC Agreement as: +• +an acquisition by any individual, entity or group of beneficial ownership of 35% or more of either Patterson-UTI’s then outstanding common stock or the combined voting power of the then outstanding voting securities of Patterson-UTI entitled to vote in the election of directors, +• +a change occurs in which the members of the Board of Directors as of the date of the CIC Agreement cease to constitute at least a majority of Patterson-UTI’s Board of Directors unless that change occurs through a vote of at least a majority of the incumbent members of the Board of Directors, or +• +a change in the beneficial ownership of Patterson-UTI following consummation of a reorganization, merger, consolidation, sale of Patterson-UTI or any subsidiary of Patterson-UTI or a disposition of all or substantially all of the assets of Patterson-UTI, in which the beneficial owners immediately prior to the transaction own 65% or less of outstanding common stock of the newly combined or merged entity. +Severance Agreements with Messrs. Siegel and Berns +In order to address prior severance agreements between UTI Energy Corp. and each of Messrs. Siegel and Berns, Patterson-UTI has entered into written letter agreements with each of these executives pursuant to which Patterson-UTI has agreed to pay each such executive within ten days of the termination of his employment with Patterson-UTI for any reason (including voluntary termination by him), an amount in cash equal to his annual base salary at the time of such termination. Any payment made by Patterson-UTI pursuant to these letter agreements will reduce dollar for dollar any payment owed to such person, if any, pursuant to the CIC Agreements. +Employment Agreements with Messrs. Hendricks, Holcomb and Smith +Patterson-UTI has Employment Agreements with Messrs. Hendricks, Holcomb and Smith. Each Employment Agreement generally has an initial three-year term, subject to automatic annual renewal. The executive may terminate his employment under his Employment Agreement by providing written notice of such termination at least 30 days before the effective date of such termination. Under specified circumstances, Patterson-UTI may terminate the executive’s employment under his Employment Agreement for cause (as defined in the Employment Agreement) by either (i) providing written notice 10 days before the effective date of such termination and by granting at least 10 days to cure the cause for such termination or (ii) by providing written notice of such termination at least 30 days before the effective date of such termination and by granting at least 20 days to cure the cause for such termination, provided that if the matter is reasonably determined by Patterson-UTI to not be capable of being cured, the executive may be terminated for cause on the date the written notice is delivered. The Employment Agreement also provides for, among other things, severance payments and the continuation of certain benefits following termination by Patterson-UTI of the executive other than for cause, or termination by the executive for good reason (as defined in each Employment Agreement). Under these provisions, if the executive’s employment is terminated by Patterson-UTI without cause, or the executive terminates his employment for good reason: +• +the executive will have the right to receive a lump-sum payment consisting of 3 times (in the case of Mr. Hendricks) or 2.5 times (in the case of Messrs. Holcomb and Smith) the sum of (i) his base salary and (ii) the average annual cash bonus received by him for the three years prior to the date of termination, +• +the executive will have the right to receive a pro-rated lump-sum payment equal to his annual cash bonus based on actual results for the year, payable at the same time as annual cash bonuses are paid to active employees, +• +Patterson-UTI will accelerate vesting of all options, restricted stock and performance unit awards on the 60th day following the executive’s termination, and +• +Patterson-UTI will pay the executive certain accrued obligations and certain obligations pursuant to the terms of employee benefit plans. +If a termination by Patterson-UTI other than for cause or by the executive for good reason occurs following a change in control (which is defined in a substantially similar manner to the definition in the CIC Agreements, and which for Mr. Holcomb also includes a change in control in certain circumstances of Patterson-UTI Drilling Company LLC), the executive will generally be entitled to the same severance payments and benefits described above except that the pro-rated lump-sum payment for annual cash bonuses will be based on his highest annual cash bonus for the last three years, and the executive will be entitled to 36 months (in the case of Mr. Hendricks) or 30 months (in the case of Messrs. Holcomb and Smith) of subsidized benefits continuation coverage. +42 +Employment Agreement with Mr. Vollmer +Patterson-UTI entered into an employment agreement with Mr. Vollmer effective as of December 31, 2017, whereby Mr. Vollmer agreed to provide services to Patterson-UTI as a part-time employee with regard to such matters as Patterson-UTI may from time to time request, including the transition of the new Chief Financial Officer, assisting with the integration of the Seventy Seven Energy Inc. and MS Directional acquisitions and other matters reasonably requested by the Patterson-UTI ’s Chief Executive Officer. Mr. Vollmer receives a base salary of $250,000 per year and received a 2017 cash bonus of $350,000 at the time bonuses were paid to other executives of Patterson-UTI . Patterson-UTI also paid to Mr. Vollmer a lump sum retirement payment of $450,000 and an additional payment of $125,000 in settlement of any other owed compensation, including any accrued vacation or paid time off accruals through the date of his employment agreement. +Mr. Vollmer’s employment agreement has a four-year term. Mr. Vollmer may terminate his employment under his employment agreement by providing written notice of such termination at least 30 days before the effective date of such termination. After December 31, 2019, Mr. Vollmer may elect on 60 days advance notice to terminate the employment agreement and the corresponding non-compete and non-solicitation restrictions described below as of a date no earlier than December 31, 2020. Under specified circumstances, Patterson-UTI may terminate Mr. Vollmer’s employment under his employment agreement for “Cause” (as defined in the employment agreement). On the conclusion of the term of the employment agreement, Mr. Vollmer agrees to voluntarily terminate his employment. Upon termination of employment, (i) Mr. Vollmer will have the right to receive his unpaid base salary through the date of termination and (ii) his vested benefits pursuant to the terms of any employee benefit plans. +Mr. Vollmer executed a customary release in connection with his execution of the employed agreement. The employment agreement also contains a non-disparagement covenant and certain confidentiality covenants prohibiting Mr. Vollmer from, among other things, disclosing confidential information. The employment agreement also contains non-competition and non-solicitation restrictions, pursuant to which Mr. Vollmer will not be permitted to compete with Patterson-UTI in certain circumstances for the term of the employment agreement, subject to early termination as set forth in the employment agreement. +Equity Award Agreements with Named Executive Officers +All unvested stock options, restricted stock and restricted stock unit awards held by Messrs. Siegel, Hendricks, Berns, Vollmer and Smith, and all unvested restricted stock and restricted stock units awarded to Mr. Holcomb after 2016, vest upon a change of control as defined by the underlying award agreements. Upon a change in control as defined in the underlying performance unit award grants, Messrs. Hendricks, Siegel, Berns and Vollmer would receive the target number of shares issuable thereunder. All restricted stock, restricted stock unit and performance unit awards held by the Named Executive Officers provide that in the event of termination of employment due to death or disability, the holder would vest in a portion of the award. With respect to Mr. Hendricks, such a termination at December 31, 2017 would have resulted in the accelerated vesting of 112,017 shares of restricted stock with a fair value of $2,577,511. With respect to Messrs. Vollmer and Berns, such a termination at December 31, 2017 would have resulted in the accelerated vesting of 44,583 shares of restricted stock with a fair value of $1,025,855. With respect to Mr. Siegel, such a termination at December 31, 2017 would have resulted in the accelerated vesting of 110,908 shares of restricted stock with a fair value of $2,551,993. With respect to Mr. Smith, such a termination at December 31, 2017 would have resulted in the issuance of 14,697 shares pursuant to the accelerated vesting of restricted stock units with a fair value of $338,178. With respect to Mr. Holcomb, such a termination at December 31, 2017 would have resulted in the accelerated vesting of 29,247 shares of restricted stock and the issuance of 8,945 shares pursuant to the accelerated vesting of restricted stock units with a combined fair value of $878,798. In the event of termination of employment due to death or disability, the holders of performance units would vest in the portion of the performance unit award that was earned at the time of death or disability. This payment would be determined at the end of the performance period and would equal the amount that the holder would have received at that time, pro-rated for the amount of time from the date of grant through the date of death or disability. +43 +Potential Payments Upon a Termination or Change in Control +Amounts that each of the Named Executive Officers would be entitled to under the CIC Agreements (or in the case of Messrs. Hendricks, Smith and Holcomb, the Employment Agreements) and other award agreements if a change in control had occurred as of December 31, 2017 and the employee’s employment was terminated by Patterson-UTI other than for cause or terminated by the employee for good reason (as defined in the CIC Agreements or in the case of Messrs. Hendricks, Smith and Holcomb, the Employment Agreements, and other award agreements) are reflected in the following table: +Cash Payments +Other Benefits +Name +Bonus +Payment +($)(1) +Salary and +Bonus +($)(2) +Option +Awards +($)(3) +Stock +Awards +($)(3) +Performance +Unit Awards +($)(4) +Other +Benefits +($)(5) +Total +($) +William Andrew Hendricks, Jr +$ +1,912,639 +$ +6,620,463 +$ +703,126 +$ +8,265,054 +$ +4,971,817 +$ +28,805 +$ +22,501,904 +C. Andrew Smith +$ +— +$ +1,125,000 +$ +— +$ +2,165,632 +$ +— +$ +24,004 +$ +3,314,636 +John E. Vollmer III (6) +$ +— +$ +— +$ +421,600 +$ +3,418,619 +$ +1,829,295 +$ +— +$ +5,669,514 +Mark S. Siegel +$ +2,794,044 +$ +5,263,704 +$ +361,810 +$ +6,741,999 +$ +3,465,260 +$ +— +$ +18,626,817 +Kenneth N. Berns +$ +1,397,022 +$ +2,509,095 +$ +421,600 +$ +3,418,619 +$ +2,660,600 +$ +— +$ +10,406,936 +James M. Holcomb +$ +343,111 +$ +1,739,501 +$ +— +$ +2,729,124 +$ +— +$ +19,113 +$ +4,830,849 +(1) +In the case of Messrs. Hendricks, Smith and Holcomb, the assumed bonus is equal to the highest annual bonus paid in the three years prior to 2017. In the case of Messrs. Siegel and Berns, the assumed bonus payment is equal to the highest annual bonus paid from the time the CIC Agreements were entered into through December 31, 2017. Because Mr. Smith had not received an annual bonus as of December 31, 2017, his bonus payment for this table is assumed to be zero. +(2) +The assumed salary and bonus payment represents 3.0 times (in the case of Mr. Hendricks), 2.5 times (in the case of Messrs. Siegel, Smith and Holcomb) or 2.0 times (in the case of Mr. Berns) of the sum of the 2017 salary in effect for each employee and the average of the annual bonuses earned by each employee for 2016, 2015 and 2014. Bonus amounts earned in 2017 were not considered in this calculation as they were not determined until after December 31, 2017. Because Mr. Smith had not received an annual bonus for such years, this calculation reflects 2.5 times his annual salary (with bonus assumed to be zero). +(3) +Each of the option and stock award agreements for the Named Executive Officers (excluding, in the case of Mr. Holcomb, stock award agreements granted prior to 2017) provide that unvested options and awards will vest upon a change in control. Amounts presented in the table represent the value of unvested option and stock awards using the market price of Patterson-UTI common stock at December 31, 2017. +(4) +Share settled performance units awarded to Messrs. Hendricks, Siegel and Berns in 2015, 2016 and 2017, and Mr. Vollmer in 2015 and 2016, include a provision that upon a change in control as defined in the respective award agreements, the Named Executive Officer will receive an award of shares equal to the target amount set forth in each agreement. Amounts presented in the table represent the assumed award of the target number of shares if a change in control had occurred on December 31, 2017, valued at the December 29, 2017 closing price of Patterson-UTI common stock of $23.01 per share. +(5) +Messrs. Hendricks, Smith and Holcomb participated in Patterson-UTI’s health and welfare plans as of December 31, 2017. The amounts presented represent Patterson-UTI’s portion of the premiums for three years in the case of Mr. Hendricks and 30 months in the case of Messrs. Holcomb and Smith. No tax gross-up payments would have been payable to Messrs. Siegel or Berns under the terms of their CIC Agreements. +(6) +Mr. Vollmer’s change in control agreement terminated upon the execution of his employment agreement following his retirement as Executive Vice President – Corporate Development, Chief Financial Officer and Treasurer in 2017. The terms of his option and stock awards remained unchanged and such award agreements include a provision that unvested shares or options will automatically vest upon a change in control. +In the event of a termination of employment of Messrs. Siegel or Berns for any reason, including voluntary termination, such executive would be entitled to an amount in cash equal to his annual base salary at the time of such termination. Any such payment made by Patterson-UTI will reduce dollar for dollar any payment owed to such person that is reflect in the table above. In the case of Messrs. Hendricks, Smith or Holcomb, if the executive’s employment was terminated by Patterson-UTI other than for cause or terminated by the executive for good reason (as defined in the Employment Agreement) and not in connection with a change-in-control, then the executive would be entitled to the same potential payments and benefits as set forth in the table above, except that Mr. Hendricks’ cash payment would be higher by $274,861, Mr. Smith’s cash payment would be higher by $984,375 and Mr. Holcomb’s cash payment would be higher by $226,514 as a result of the calculation of the bonus payment for the year in which the termination occurred. +With respect to Messrs. Hendricks, Smith or Holcomb, the foregoing severance benefits (other than the accrued obligations and benefit obligations) are conditioned on the executive’s execution of a release within 50 days of his termination that is not revoked during any applicable revocation period provided in such release. Their employment agreements also contain covenants and restrictions, including non-competition and non-solicitation provisions pursuant to which the executive will not be permitted to compete with Patterson-UTI in certain circumstances for a period of one year following termination of employment. +44 +Indemnification Agreements +Patterson-UTI has entered into an indemnification agreement with Messrs. Hendricks, Vollmer, Smith, Siegel and Berns and each of its directors containing provisions that may require Patterson-UTI, among other things, to indemnify such executive officers and directors against liabilities that may arise by reason of their status or service as executive officers or directors (subject to certain exceptions) and to advance expenses incurred as a result of any proceeding against them as to which they could be indemnified. +CERTAIN TRANSACTIONS +Patterson-UTI has a written policy with respect to related person transactions. In accordance with this policy, related person transactions are reviewed by the Lead Director or the chair of the Audit Committee, each of whom has full delegated authority to approve, disapprove, ratify, amend, terminate or rescind any such transaction, or direct that such transaction be submitted to the Audit Committee or the full Board of Directors for consideration. In approving or disapproving related person transactions, the relevant facts and circumstances of the related person transaction are considered, including whether such transaction is in, or not inconsistent with, the best interest of Patterson-UTI and whether, in appropriate cases, such transaction is on commercial terms at least as favorable to Patterson-UTI as would otherwise be available to or from an unrelated third party or to Patterson-UTI’s employees generally. Related person transactions generally include transactions in an amount that exceeds $50,000 between Patterson-UTI or any of its subsidiaries and an executive officer, a director (or nominee to become director), an immediate family member of any of the foregoing or any entity in which any of the foregoing has a 10% or greater beneficial ownership interest or in which they are an executive officer, general partner, principal or engaged in a similar position. Certain related person transactions have been pre-approved under the terms of the policy, including, subject to certain exceptions and limitations, the sale to or purchase from Patterson-UTI of goods and services by entities related to directors in the ordinary course of business that are immaterial to Patterson-UTI and with respect to which the director has no direct economic interest or decision making authority. +In connection with the acquisition by REMY Capital Partners III, L.P. (“REMY Capital”) of an ownership interest in UTI Energy Corp. in March 1995, REMY Capital succeeded to a registration rights agreement with UTI. As the successor-in-interest to UTI, Patterson-UTI assumed this registration rights agreement pursuant to which REMY Capital has the right to require Patterson-UTI to use its reasonable efforts to register shares held by REMY Capital under the Securities Act of 1933, as amended. In the event that such rights are exercised in connection with a primary offering proposed by Patterson-UTI (or a secondary offering with which Patterson-UTI agrees to participate), REMY Capital would bear its pro rata share of the costs of the offering, other than legal, accounting and printing costs, all of which Patterson-UTI would bear. In the event that REMY Capital elects to exercise such rights other than in connection with an offering in which Patterson-UTI participates, REMY Capital would bear all costs of the offering. These rights continue so long as REMY Capital continues to own the Common Stock that it acquired in March 1995. As of the date of this proxy statement, REMY Capital continues to hold 605,000 shares of such Common Stock. +Mr. Siegel, Chairman of the Board of Patterson-UTI, is President and sole stockholder of REMY Investors, which is the general partner of REMY Capital. Mr. Berns, Executive Vice President and Chief Commercial Officer of Patterson-UTI, is an executive of REMY Investors. +45 +SECURITY OWNERSHIP OF CERTAIN +BENEFICIAL OWNERS AND MANAGEMENT +The following table sets forth, as of April 11, 2018, the stock ownership of (i) the Named Executive Officers, directors and Board nominees, individually, (ii) all directors, Board nominees and executive officers as a group and (iii) each person known by Patterson-UTI to be the beneficial owner of more than 5% of Common Stock. +Name of +Beneficial Owner +Amount and +Nature of +Beneficial +Ownership +Percent +of Class +Beneficial Owners of more than 5% of Patterson-UTI’s Common Stock: +BlackRock, Inc. +20,590,666 +(1) +9.3 +% +The Vanguard Group +18,639,477 +(2) +8.4 +% +Directors and Named Executive Officers: +William Andrew Hendricks, Jr. +1,537,127 +(3) +* +C. Andrew Smith +— +(4) +* +John E. Vollmer III +2,179,979 +(5) +* +Mark S. Siegel +3,970,029 +(6) +1.8 +% +Kenneth N. Berns +1,840,901 +(7) +* +James M. Holcomb +273,803 +(8) +* +Charles O. Buckner +109,631 +(9) +* +Tiffany (TJ) Thom Cepak +42,926 +(10) +* +Michael W. Conlon +77,500 +(11) +* +Curtis W. Huff +153,304 +(12) +* +Terry H. Hunt +120,491 +(13) +* +Janeen S. Judah +5,000 +(14) +* +All current directors and executive officers as a group (12 persons) +8,342,202 +(15) +3.7 +% +* +indicates less than 1.0% +(1) +Based solely on a Schedule 13G/A filed by BlackRock, Inc. with the SEC on January 29, 2018. According to the report, BlackRock, Inc. has sole voting power with respect to 19,724,266 shares and sole dispositive power with respect to 20,590,666 shares. The address of the principal business office of BlackRock, Inc. is 55 East 52nd Street, New York, New York 10055. +(2) +Based solely on a Schedule 13G/A filed by The Vanguard Group with the SEC on February 7, 2018. According to the report, The Vanguard Group has sole voting power with respect to 114,819 shares, shared voting power with respect to 35,543 shares, sole dispositive power with respect to 18,506,277 shares and shared dispositive power with respect to 133,200 shares. The address of the principal business office of The Vanguard Group is 100 Vanguard Blvd., Malvern, Pennsylvania 19355. +(3) +Includes shares underlying stock options held by Mr. Hendricks that are presently exercisable or become exercisable within 60 days to purchase 891,277 shares. Does not include 96,373 shares underlying stock options held by Mr. Hendricks that are not presently exercisable and will not become exercisable within 60 days. Includes 342,220 shares of unvested restricted Common Stock held by Mr. Hendricks, over which he presently has voting power. +(4) +Does not include 94,117 shares underlying unvested restricted stock units. +(5) +Includes shares underlying stock options held by Mr. Vollmer that are presently exercisable or become exercisable within 60 days to purchase 1,179,519 shares. Does not include 57,781 shares underlying stock options held by Mr. Vollmer that are not presently exercisable and will not become exercisable within 60 days. Includes 140,838 shares of unvested restricted Common Stock held by Mr. Vollmer, over which he presently has voting power. The Common Stock beneficially owned by Mr. Vollmer includes 200,000 shares held in trust(s) for which he is a trustee. +(6) +Mr. Siegel is the President and sole stockholder of REMY Investors, which is the general partner of REMY Capital Partners III, L.P. (“REMY Capital”). The Common Stock beneficially owned by Mr. Siegel includes 605,000 shares of Common Stock owned by REMY Capital. The Common Stock beneficially owned by Mr. Siegel also includes stock options held by Mr. Siegel that are presently exercisable or become exercisable within 60 days to purchase 2,098,669 shares. Does not include 46,231 shares underlying stock options held by Mr. Siegel that are not presently exercisable and will not become exercisable within 60 days. Includes 284,837 shares of unvested restricted Common Stock held by Mr. Siegel, over which he presently has voting power. The Common Stock beneficially owned by Mr. Siegel includes 49,900 shares held in trust(s) for which he is the trustee. +(7) +Includes shares underlying stock options held by Mr. Berns that are presently exercisable or become exercisable within 60 days to purchase 1,179,519 shares. Does not include 57,781 shares underlying stock options held by Mr. Berns that are not presently exercisable and will not become exercisable within 60 days. Includes 140,838 shares of unvested restricted Common Stock held by Mr. Berns, over which he presently has voting power. The Common Stock beneficially owned by Mr. Berns includes 140,000 shares held in trust(s) for which he is the trustee. Does not include shares of Common Stock beneficially owned by REMY Investors. Mr. Berns disclaims beneficial ownership of such shares beneficially owned by REMY Investors. +(8) +Includes 61,606 shares of unvested restricted Common Stock held by Mr. Holcomb, over which he presently has voting power. Does not include 57,000 shares underlying unvested restricted stock units. +46 +(9) +Includes shares underlying presently exercisable stock options held by Mr. Buckner to purchase 70,000 shares. Does not include 7,605 shares underlying unvested restricted stock units. The Common Stock beneficially owned by Mr. Buckner includes 27,000 shares held by CDT Investments, LP, a limited partnership for which he is the sole member of the so le general partner. +(10) +Includes shares underlying presently exercisable stock options held by Ms. Cepak to purchase 30,000 shares. Does not include 7,605 shares underlying unvested restricted stock units. +(11) +Includes shares underlying presently exercisable stock options held by Mr. Conlon to purchase 50,000 shares. Does not include 7,605 shares underlying unvested restricted stock units. +(12) +Includes shares underlying presently exercisable stock options held by Mr. Huff to purchase 60,000 shares. Does not include 7,605 shares underlying unvested restricted stock units. +(13) +Includes shares underlying presently exercisable stock options held by Mr. Hunt to purchase 70,000 shares. Does not include 7,605 shares underlying unvested restricted stock units. +(14) +Includes 5,000 shares of Common Stock held in a trust for which Ms. Judah is the trustee. Does not include 10,115 shares underlying unvested restricted stock units. +(15) +Includes shares underlying stock options, which are presently exercisable or become exercisable within 60 days, to purchase 4,464,465 shares of Common Stock. Does not include shares underlying stock options to purchase 200,385 shares held by such individuals that are not presently exercisable and will not become exercisable within 60 days. Includes an aggregate of 891,107 shares of unvested restricted Common Stock held by certain directors and executive officers, over which they presently have voting power. Does not include 256,257 shares underlying unvested restricted stock units held by certain directors and executive officers. +Except as stated herein, each stockholder has sole voting and investment power with respect to Common Stock included in the above table. There are no arrangements known to Patterson-UTI which may result in a change in control. The business address of each of our directors and officers is 10713 West Sam Houston Parkway North, Suite 800, Houston, Texas 77064. +Equity Compensation Plan Information +Equity compensation plan information as of March 31, 2018 follows: +Equity Compensation Plan Information +Plan Category +Number of +Securities to +be Issued upon +Exercise of +Outstanding +Options, +Warrants and +Rights +Weighted - +Average Exercise +Price of +Outstanding +Options, +Warrants and +Rights +Number of +Securities +Remaining +Available +for Future Issuance +under Equity +Compensation Plans +(Excluding +Securities Reflected +in Column(a)) +(a) +(b) +(c) +Equity compensation plans approved by security holders(1) +5,997,150 +$ +20.41 +6,867,494 +Equity compensation plans not approved by security holders +— +$ +— +— +Total +5,997,150 +$ +20.41 +6,867,494 +(1) +The Amended and Restated 2014 Long-Term Incentive Plan provides for awards of incentive stock options, non-incentive stock options, tandem and freestanding stock appreciation rights, restricted stock awards, other stock unit awards, performance share awards, performance unit awards and dividend equivalents to key employees (as defined in the Amended and Restated 2014 Long-Term Incentive Plan), officers and directors, which are subject to certain vesting and forfeiture provisions. All options are granted with an exercise price equal to or greater than the fair market value of the common stock at the time of grant. The vesting schedule and term are set by the Compensation Committee of the Board of Directors, except that the Board has the same power as the Compensation Committee with respect to awards to directors. All securities remaining available for future issuance under equity compensation plans approved by security holders in column (c) are available under this plan. In addition to the Amended and Restated 2014 Long-Term Incentive Plan, this Plan category also includes the 2005 Long-Term Incentive Plan. In connection with the approval of the Amended and Restated 2014 Long-Term Incentive Plan, the Board of Directors approved a resolution that no further options, restricted stock or other awards would be granted under any equity compensation plan, other than the Amended and Restated 2014 Long-Term Incentive Plan. Options granted under the 2005 Long-Term Incentive Plan typically vested over one year for non-employee directors and three years for employees. All options were granted with an exercise price equal to the fair market value of the related common stock at the time of grant. +47 +AUDIT COMMITTEE REPORT +The following report of the Audit Committee does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other Patterson-UTI filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent Patterson-UTI specifically incorporates this report by reference therein. +The Audit Committee members are Messrs. Buckner (chairman), Huff and Hunt and Ms. Cepak, each of whom is independent within the meaning of applicable rules under the Exchange Act and within the meaning of the Nasdaq listing standards. The Board has determined that Messrs. Buckner and Huff and Ms. Cepak are “audit committee financial experts” within the meaning of applicable SEC rules. +The Audit Committee oversees management’s conduct of Patterson-UTI’s accounting and financial reporting process, including review of: (i) financial reports and other financial information provided by Patterson-UTI to the public and government/regulatory bodies, (ii) Patterson-UTI’s system of internal control over financial reporting, and (iii) the annual independent audit of Patterson-UTI’s consolidated financial statements and internal control over financial reporting. +The Audit Committee’s role is one of review, and it recognizes that Patterson-UTI’s management is responsible for preparing Patterson-UTI’s consolidated financial statements and the independent auditors are responsible for auditing those financial statements. In fulfilling its review and oversight responsibilities, the Audit Committee reviewed with management the audited financial statements included in Patterson-UTI’s Annual Report on Form 10-K for the year ended December 31, 2017, including a discussion of the quality, not just the acceptability, of the accounting principles used, the reasonableness of significant judgments made by management, and the clarity of disclosures provided in the financial statements. The Audit Committee also discussed with management the basis for their assertion that Patterson-UTI maintained effective internal control over financial reporting as of December 31, 2017. +The Audit Committee discussed with Patterson-UTI’s independent registered public accounting firm (PricewaterhouseCoopers LLP) the overall scope and plans for their integrated audit. The Audit Committee met with PricewaterhouseCoopers LLP, with and without management present, to discuss the results of their integrated audit, their evaluation of Patterson-UTI’s internal control over financial reporting and the overall quality of Patterson-UTI’s financial reporting. The Audit Committee also reviewed with PricewaterhouseCoopers LLP their judgments as to the quality, not just the acceptability, of Patterson-UTI’s accounting principles and discussed such other matters as are required by Auditing Standard 16. +The Audit Committee has received and reviewed the written disclosures and the letter from PricewaterhouseCoopers LLP required by the Public Company Accounting Oversight Board regarding their independence, and their communications with the Audit Committee concerning independence. +Taking the foregoing into consideration, the undersigned Audit Committee members recommended to the Board of Directors that the Board approve the inclusion of Patterson-UTI’s audited financial statements and management’s report on internal control over financial reporting in the Annual Report on Form 10-K for the fiscal year ended December 31, 2017. +Audit Committee of the Board of Directors: +Charles O. Buckner, Chairman +Tiffany (TJ) Thom Cepak +Curtis W. Huff +Terry H. Hunt +PricewaterhouseCoopers LLP Fees for Fiscal Years 2017 and 2016 +In 2017 and 2016, Patterson-UTI and its subsidiaries incurred fees for services provided by PricewaterhouseCoopers LLP. +Description +Fees Incurred in +Fiscal Year +2017 +Fees Incurred in +Fiscal Year +2016 +Audit fees +$ +2,799,050 +$ +1,775,000 +Audit-related fees +572,500 +— +Tax fees +50,000 +40,000 +All other fees +2,893 +1,919 +Total +$ +3,424,443 +$ +1,816,919 +48 +The Audit Committee appoints the independent registered public accounting firm. The Audit Committee or Mr. Buckner, as Chairman of the Audit Committee, approves all other engagements of the independent registered public accounting firm in advance. In the e vent Mr. Buckner approves any such engagement, he discusses such approval with the Audit Committee at its next meeting. +“Audit fees” relate to audit services of PricewaterhouseCoopers LLP for fiscal 2017 and 2016 consisting of the integrated audit of Patterson-UTI’s consolidated financial statements and internal control over financial reporting, and quarterly reviews of Patterson-UTI’s interim financial statements and the audits of certain subsidiaries. “Audit-related fees” for 2017 relate to the performance of certain procedures in connection with the filing of various registration statements and Exchange Act reports and the offer and sale of our 3.95% Senior Notes due 2028. “Tax fees” include federal, state, local and foreign tax compliance and related matters. “All other fees” consists of an annual subscription fee to a software product. The Audit Committee or Mr. Buckner, as Chairman of the Audit Committee, approved in advance all of the services described above. +The Audit Committee has discussed the non-audit services provided by PricewaterhouseCoopers LLP and the related fees and has considered whether those services and fees are compatible with maintaining auditor independence. The Audit Committee determined that such non-audit services were consistent with the independence of PricewaterhouseCoopers LLP. +OTHER MATTERS +Section 16(a) Beneficial Ownership Reporting Compliance +Section 16(a) of the Exchange Act requires Patterson-UTI’s officers and directors and persons who own more than 10 percent of a registered class of Patterson-UTI’s equity securities, to file reports of ownership and changes in ownership with the SEC. Each of these persons is required by SEC regulation to furnish Patterson-UTI with copies of Section 16(a) filings. Based solely upon a review of Forms 3 and 4 and amendments thereto furnished to Patterson-UTI during 2016 and Forms 5 and amendments thereto furnished to Patterson-UTI with respect to 2017, or a written representation from the reporting person that no Form 5 is required, all filings required to be made by such officers, directors, and beneficial owners of more than 10 percent of a registered class of Patterson-UTI’s common stock were timely made, except that in February 2017, one Form 4 to reflect the exercise by Mr. Buckner of stock options was not timely filed due to a Patterson-UTI administrative error. +Other Business +As of the date of this proxy statement, management of Patterson-UTI was not aware of any matter to be presented at the Meeting other than as set forth herein. If any other matters are properly brought before the Meeting, however, the shares represented by valid proxies will be voted with respect to such matters in accordance with the judgment of the persons voting them. +Stockholder Proposals for 2019 Annual Meeting +Proposals or Director Nominations for Inclusion in the Proxy Statement. Pursuant to Rule 14a-8 under the Exchange Act, stockholders may present proper proposals or director nominations for inclusion in Patterson-UTI’s proxy statement and for consideration at the next annual meeting of stockholders by submitting their proposals or director nominations to Patterson-UTI in a timely manner. In order to be included in Patterson-UTI’s proxy statement for the 2019 annual meeting of stockholders, proposals or director nominations from stockholders must be received by Patterson-UTI no later than December 25, 2018, and must otherwise comply with the requirements of Rule 14a-8. +Proposals or Director Nominations not Included in the Proxy Statement. In addition, Patterson-UTI’s bylaws establish an advance notice procedure with regard to stockholder proposals and director nominations not included in Patterson-UTI’s proxy statement. For director nominations not included in Patterson-UTI’s proxy statement, please refer to “Election of Directors – Meetings and Committees of the Board of Directors.” For stockholder proposals to be properly brought before the 2018 annual meeting, by a stockholder, the stockholder must be a stockholder of record on the date of the giving of the notice provided for below and on the record date for the determination of stockholders entitled to vote at such annual meeting and must give timely notice of such business in writing to the Secretary of Patterson-UTI. To be timely with respect to the 2019 annual meeting, a stockholder’s notice must be delivered to or mailed and received at Patterson-UTI’s principal executive offices not earlier than February 14, 2019 and not later than March 16, 2019; provided, however, that in the event that the annual meeting is called for a date that is not within 30 days before or after June 14, 2019, notice by the stockholder to be timely must be received not later than the close of business on the tenth day following the day on which such notice of the date of the meeting was mailed or public disclosure of the annual meeting date was made, whichever occurs first. +49 +A stockholder’s notice to the Secretary of Patterson-UTI shall set forth: +• +a brief description of each matter desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, +• +the name and record address of the stockholder proposing such business, +• +the class and number of shares of Patterson-UTI that are beneficially owned by the stockholder, +• +any material interest of the stockholder in such business, and +• +a representation that such stockholder intends to appear in person or by proxy at the annual meeting to bring such business before the annual meeting. +Patterson-UTI reserves the right to reject, rule out of order, or take other appropriate action with respect to any proposal or nomination that does not comply with these and other applicable requirements. +Annual Report +A copy of Patterson-UTI’s annual report on Form 10-K accompanies this proxy statement only if you have requested that a copy of this proxy statement be mailed to you. The annual report on Form 10-K also is available electronically by following the instructions in the Notice. The annual report on Form 10-K is not incorporated into this proxy statement and is not considered proxy-soliciting material. +A copy of the annual report on Form 10-K, including the financial statements and financial statement schedules, but excluding exhibits, may be obtained by stockholders without charge by written request to the Secretary of Patterson-UTI at 10713 West Sam Houston Parkway North, Suite 800, Houston, Texas 77064 or by accessing it on Patterson-UTI’s website at www.patenergy.com in the investors section under the “Financial Information” link. Patterson-UTI will furnish the exhibits to Form 10-K upon request and upon receipt of a reproduction fee. +Delivery of Documents to Stockholders Sharing an Address +The SEC’s rules allow companies to send a single Notice or single copy of annual reports, proxy statements, prospectuses and other disclosure documents to two or more stockholders sharing the same address, subject to certain conditions. These rules are intended to provide greater convenience for stockholders, and cost savings for companies, by reducing the number of duplicate documents that stockholders receive. If instructions for separate delivery have been received from any stockholder, Patterson-UTI will deliver promptly separate copies of the relevant disclosure materials. Similarly, if multiple copies of disclosure materials are being delivered to a single address, stockholders can request a single copy for future deliveries. Written requests should be submitted to the Secretary of Patterson-UTI at 10713 West Sam Houston Parkway North, Suite 800, Houston, Texas 77064. Requests may also be made by calling Investor Relations at (281) 765-7100. +50 +THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below. 0 0 0 0 0 0 0 0 0 0 0 0 0000377190_1 R1.0.1.17 For Withhold For All All All Except The Board of Directors recommends you vote FOR the following: 1. Election of Directors Nominees 01 Mark S. Siegel 02 Charles O. Buckner 03 Tiffany (TJ) Thom Cepak 04 Michael W. Conlon 05 William A. Hendricks Jr 06 Curtis W. Huff 07 Terry H. Hunt 08 Janeen S. Judah PATTERSON-UTI ENERGY, INC. 10713 W. SAM HOUSTON PARKWAY NORTH SUITE 800 HOUSTON, TX 77064 VOTE BY INTERNET - www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. Electronic Delivery of Future PROXY MATERIALS If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. The Board of Directors recommends you vote FOR proposals 2, 3 and 4. For Against Abstain 2. Approval of amendment of Patterson-UTI's Restated Certificate of Incorporation. 3. Ratification of the selection of PricewaterhouseCoopers LLP as the independent registered public accounting firm of Patterson-UTI for the fiscal year ending December 31, 2018. 4. Approval of an advisory resolution on Patterson-UTI's compensation of its named executive officers. NOTE: Such other business as may properly come before the meeting or any adjournment thereof. Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. +0000377190_2 R1.0.1.17 Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Annual Report, Notice & Proxy Statement is/ are available at www.proxyvote.com PATTERSON-UTI ENERGY, INC. Annual Meeting of Stockholders June 14, 2018 10:00 AM This proxy is solicited by the Board of Directors The undersigned stockholder of Patterson-UTI Energy, Inc. (the "Company") hereby appoints Mark S. Siegel, William Andrew Hendricks, Jr. and C. Andrew Smith and each of them, proxies to the undersigned, each with full power to act without the other and with full power of substitution, to vote all of the shares which the undersigned is entitled to vote at the annual meeting of stockholders of the Company to be held Thursday, June 14, 2018, at 10:00 a.m., Central Time, at our corporate headquarters, located at 10713 W. Sam Houston Parkway North, Suite 125, Houston, Texas, 77064, and at any and all adjournments or postponements thereof, with the same force and effect as if the undersigned were personally present. The undersigned hereby instructs the above-named proxies to vote the shares represented by this proxy in the manner as directed for the undersigned on the reverse side of this proxy card. If no directions are made, the proxies will vote “FOR” the nominees for directors, “FOR” the approval of the amendment of the Patterson-UTI Energy, Inc. Restated Certificate of Incorporation, “FOR” the ratification of the selection of PricewaterhouseCoopers LLP and “FOR” the approval of the advisory resolution on executive compensation, as set forth on the reverse side. If any other matter should be presented properly, this proxy will be voted in accordance with the discretion of the above-named proxies. Continued and to be marked, dated and signed on reverse side \ No newline at end of file diff --git a/raw/proxies/0000889900/0001564590-18-008801/proxy_rpt.txt b/raw/proxies/0000889900/0001564590-18-008801/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..e69de29bb2d1d6434b8b29ae775ad8c2e48c5391 diff --git a/raw/proxies/0000889900/0001564590-19-011499/proxy.txt b/raw/proxies/0000889900/0001564590-19-011499/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..0056d5e5f1c22616ddbf2e3c6a0fcdaef2b66b4b --- /dev/null +++ b/raw/proxies/0000889900/0001564590-19-011499/proxy.txt @@ -0,0 +1,2630 @@ +DEF 14A +1 +pten-def14a_20190606.htm +DEF 14A +pten-def14a_20190606.htm +V +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +Washington, D.C. 20549 +SCHEDULE 14A INFORMATION +Proxy Statement Pursuant to Section 14(a) of the +Securities Exchange Act of 1934 +(Amendment No. ) +Filed by the Registrant ☒ +Filed by a Party other than the Registrant ☐ +Check the appropriate box: +☐ +Preliminary Proxy Statement +☐ +Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +☒ +Definitive Proxy Statement +☐ +Definitive Additional Materials +☐ +Soliciting Material under Rule 14a-12 +PATTERSON-UTI ENERGY, INC. +(Name of registrant as specified in its charter) +(Name of person(s) filing proxy statement, if other than the registrant) +Payment of Filing Fee (Check the appropriate box): +☒ +No fee required. +☐ +Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. +(1) +Title of each class of securities to which transaction applies: +(2) +Aggregate number of securities to which transaction applies: +(3) +Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): +(4) +Proposed maximum aggregate value of transaction: +(5) +Total fee paid: +☐ +Fee paid previously with preliminary materials. +☐ +Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. +(1) +Amount Previously Paid: +(2) +Form, Schedule or Registration Statement No.: +(3) +Filing Party: +(4) +Date Filed: +10713 West Sam Houston Parkway North, Suite 800 +Houston, Texas 77064 +(281) 765-7100 +April 12, 2019 +Dear Stockholder: +We cordially invite you to attend Patterson-UTI Energy, Inc.’s annual stockholders’ meeting. The annual meeting will be held Thursday, June 6, 2019, at 10:00 a.m., Central Time, at our corporate headquarters, located at 10713 W. Sam Houston Parkway North, Suite 125, Houston, Texas 77064 . +We are pleased to take advantage of Securities and Exchange Commission rules that allow us to furnish proxy materials to our stockholders on the Internet. We believe that posting these materials on the Internet enables us to provide stockholders with the information that they need quickly, while lowering our costs of printing and delivery and supporting our sustainability efforts. We are mailing to most of our stockholders a Notice of Internet Availability of Proxy Materials, rather than a paper copy of our proxy materials. The notice contains instructions on how to access the proxy materials, vote and obtain, if you so desire, a paper copy of the proxy materials. +Your vote is important to us. Whether or not you plan to attend the Annual Meeting in person, we urge you to promptly vote your shares by using the Internet or telephone, or if the accompanying proxy statement was mailed to you, by completing, signing, dating and returning your proxy card as soon as possible in the enclosed postage prepaid envelope. +Thank you for your support. +Sincerely, +M ark S. S iegel +Chairman of the Board +W illiam A ndrew H endricks , J r . +President, Chief Executive Officer and Director +PATTERSON-UTI ENERGY, INC. +10713 West Sam Houston Parkway North, Suite 800 +Houston, Texas 77064 +NOTICE OF 2019 ANNUAL MEETING OF STOCKHOLDERS +To Be Held June 6, 2019 +The 2019 annual meeting of the stockholders of Patterson-UTI Energy, Inc., a Delaware corporation (“Patterson-UTI”), will be held Thursday, June 6, 2019, at 10:00 a.m., Central Time, at our corporate headquarters, located at 10713 W. Sam Houston Parkway North, Suite 125, Houston, Texas 77064 (the “Meeting”), for the following purposes: +• +to elect eight directors named in this proxy statement to the Board of Directors of Patterson-UTI to serve until the next annual meeting of the stockholders or until their respective successors are elected and qualified; +• +to approve an amendment to Patterson-UTI’s Amended and Restated 2014 Long-Term Incentive Plan; +• +to ratify the selection of PricewaterhouseCoopers LLP as the independent registered public accounting firm of Patterson-UTI for the fiscal year ending December 31, 2019; +• +to approve, on an advisory basis, Patterson-UTI’s compensation of its named executive officers; and +• +to transact such other business as may properly come before the Meeting or any adjournment or postponement thereof. +Stockholders of record at the close of business on April 8, 2019 are entitled to notice of and to vote at the Meeting and any adjournment or postponement thereof. +Your vote is important to us. Whether or not you plan to attend the Meeting in person, we urge you to promptly vote your shares by using the Internet or telephone, or if the accompanying proxy statement was mailed to you, by completing, signing, dating and returning your proxy card as soon as possible in the enclosed postage prepaid envelope. +By order of the Board of Directors +S ETH D. W EXLER +Senior Vice President, General Counsel and Secretary +April 12, 2019 +Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting +to Be Held on June 6, 2019 +The proxy statement and annual report to stockholders are available at www.proxyvote.com . +PATTERSON-UTI ENERGY, INC. +10713 West Sam Houston Parkway North, Suite 800 +Houston, Texas 77064 +PROXY STATEMENT +ANNUAL MEETING OF STOCKHOLDERS +To Be Held June 6, 2019 +General Information About the Annual Meeting and Voting +The Board of Directors (the “Board” or “Board of Directors”) of Patterson-UTI Energy, Inc., a Delaware corporation (“Patterson-UTI” or the “Company”), has made this proxy statement and its 2018 annual report available to you on the Internet or, upon your request has delivered printed versions of these materials to you by mail beginning on or about April 15, 2019. Patterson-UTI is furnishing this proxy statement in connection with the solicitation by the Board of Directors of proxies to be voted at the 2019 annual meeting of stockholders of Patterson-UTI (the “Meeting”). The Meeting will be held Thursday, June 6, 2019, at 10:00 a.m., Central Time, at our corporate headquarters, located at 10713 W. Sam Houston Parkway North, Suite 125, Houston, Texas 77064 , or at any adjournment or postponement thereof . +The Notice of Internet Availability of Proxy Materials (the “Notice”) was mailed to each of Patterson-UTI’s stockholders (other than those who previously requested electronic delivery) entitled to vote at the Meeting on or about April 15, 2019. +Pursuant to the “notice and access” rules adopted by the Securities and Exchange Commission (the “SEC”), Patterson-UTI has elected to provide stockholders access to its proxy materials on the Internet. Accordingly, Patterson-UTI sent a Notice to all of its stockholders as of the record date. The Notice includes instructions on how to access Patterson-UTI’s proxy materials on the Internet and how to request a printed copy of these materials. In addition, by following the instructions in the Notice, stockholders may request to receive proxy materials in printed form by mail or electronically by email on an ongoing basis. +Choosing to receive your future proxy materials by email will save us the cost of printing and mailing documents to you and will support our sustainability efforts. If you choose to receive future proxy materials by email, you will receive an email next year with instructions containing a link to those materials and a link to the proxy voting site. Your election to receive proxy materials by email will remain in effect until you terminate such election. +If your shares are registered directly in your name with our transfer agent, Continental Stock Transfer & Trust Company, you are considered the “stockholder of record” with respect to those shares, and the Notice was sent directly to you. +If your shares are held in an account at a brokerage firm, bank, broker-dealer, or other similar organization, then you are the beneficial owner of shares held in “street name,” and the Notice was forwarded to you by that organization. As a beneficial owner, you have the right to direct that organization on how to vote the shares held in your account. +Whether you are a “stockholder of record” or hold your shares in “street name,” you may direct your vote without attending the Meeting in person. +If you are a stockholder of record, you may vote by using the Internet or telephone by following the instructions in the Notice. If you request printed copies of the proxy materials by mail, you may also vote by completing, dating, signing and returning your proxy card by mail. You should sign your name exactly as it appears on the proxy card. If you are signing in a representative capacity (for example, as guardian, executor, trustee, custodian, attorney or officer of a corporation), you should indicate your name and title or capacity. +If you are the beneficial owner of shares held in street name, you may be eligible to vote your shares electronically using the Internet or telephone by following the instructions in the Notice. If you request printed copies of the proxy materials by mail, you may also vote by signing the voter instruction card provided by your brokerage firm, bank, broker-dealer, or other similar organization and returning it by mail. If you provide specific voting instructions by mail, telephone or the Internet, your shares will be voted by your brokerage firm, bank, broker-dealer, or similar organization as you have directed. +1 +Properly submitted proxies received eithe r by mail, Internet, telephone or in person in time to be counted for the Meeting will be voted as you have directed in your proxy, unless you revoke your proxy in the manner provided below. As to any matter for which you give no direction in your proxy, y our shares will be voted as follows: +• +“FOR” the election of all of the nominees to the Board of Directors named in this proxy statement; +• +“FOR” the approval of the amendment to Patterson-UTI’s Amended and Restated 2014 Long-Term Incentive Plan; +• +“FOR” the ratification of PricewaterhouseCoopers LLP as the independent registered public accounting firm of Patterson-UTI for the fiscal year ending December 31, 2019; +• +“FOR” the approval, on an advisory basis, of Patterson-UTI’s compensation of its named executive officers; and +• +“FOR” or “AGAINST” any other proposals that may be properly submitted at the Meeting at the discretion of the persons named in the proxy. +If you are a stockholder of record, you may revoke your proxy before the proxy is voted by either: +• +submitting a new proxy with a later date, including a proxy submitted using the Internet or telephone, in time to be counted for the Meeting; +• +notifying the Secretary of Patterson-UTI in writing before the Meeting that you have revoked your proxy; or +• +attending the Meeting and voting in person. +If your shares are held in street name, you must obtain a proxy executed in your favor from the stockholder of record (that is, your brokerage firm, bank, broker-dealer or similar organization) to be able to vote at the Meeting. +The Board of Directors is making this solicitation. We have retained Georgeson LLC, 480 Washington Blvd., 26 th Floor, Jersey City, New Jersey 07310, for a fee of approximately $8,500 and the reimbursement of out of pocket costs and expenses, to assist in the solicitation of proxies on behalf of the Board. Patterson-UTI’s officers and other employees, without compensation other than regular compensation, may also solicit proxies on behalf of the Board by mail, email, the Internet, telephone, electronic means and personal interview. Patterson-UTI will pay all costs associated with this solicitation. +Shares Outstanding and Voting Rights +Only stockholders of record of Patterson-UTI’s common stock, $.01 par value per share (the “Common Stock”) at the close of business on April 8, 2019 are entitled to notice of and to vote at the Meeting or any adjournment or postponement thereof. At the close of business on April 8, 2019, there were 208,253,555 shares of Common Stock issued and outstanding. Holders of record of Common Stock on April 8, 2019 will be entitled to one vote per share on all matters to properly come before the Meeting. A list of stockholders entitled to notice of and to vote at the Meeting will be made available at the Meeting and during regular business hours at the offices of Patterson-UTI Energy, Inc., 10713 West Sam Houston Parkway North, Suite 800, Houston, Texas 77064 for the ten day period prior to the Meeting for examination by any stockholder for any purpose germane to the Meeting. +A quorum is necessary to transact business at the Meeting. A majority of the shares of Common Stock outstanding on April 8, 2019 will constitute a quorum. The shares held by each stockholder who attends the Meeting in person, signs and timely returns the form of proxy or properly votes using the Internet or telephone will be counted for purposes of determining the presence of a quorum at the Meeting. +“Broker non-votes” and abstentions will be considered present at the Meeting for the purpose of determining a quorum. Broker non-votes occur when nominees, such as brokerage firms, banks, broker-dealers, or other similar organizations holding shares on behalf of the beneficial owners, are prohibited from exercising discretionary voting authority for beneficial owners who have not provided voting instructions. If you do not give instructions to your bank, brokerage firm or other agent, the bank, brokerage firm or other agent will nevertheless be entitled to vote your shares of Common Stock in its discretion on “routine matters” and may give or authorize the giving of a proxy to vote the shares of Common Stock in its discretion on such matters. The ratification of an independent registered public accounting firm is generally considered a routine matter, whereas the election of directors, the approval of an amendment to Patterson-UTI’s Amended and Restated 2014 Long-Term Incentive Plan and the advisory approval of executive compensation are not considered routine matters. For these reasons, please promptly vote in accordance with the instructions provided by your brokerage firm, bank, broker-dealer, or other similar organization. +2 +PROPO SAL NO. 1 +ELECTION OF DIRECTORS +Directors are elected to serve until the next annual meeting of stockholders and until their successors are elected and qualified. Under Delaware law and Patterson-UTI’s bylaws, the affirmative vote of a plurality of shares present in person or represented by proxy at the meeting at which a quorum is present is required for the election of directors. +The enclosed form of proxy provides a means for you to either: +• +vote “FOR” the election of the nominees to the Board of Directors listed below, +• +withhold authority to vote for one or more of the nominees, or +• +withhold authority to vote for all of the nominees. +The Board of Directors recommends that you vote “FOR” all of the nominees. Unless you give contrary instructions in your proxy, your proxy will be voted “FOR” the election of all of the nominees to the Board of Directors. If any nominee should become unable or unwilling to accept the nomination or election, the person acting under the proxy will vote for the election of such other person as the Board of Directors may recommend. The Board has no reason, however, to believe that any of the nominees will be unable or unwilling to serve if elected. +Because directors are elected by a plurality vote, shares as to which a stockholder withholds authority to vote and broker non-votes will not affect the outcome of the election, although a broker non-vote will be counted for purposes of establishing a quorum. +Our corporate governance guidelines require that if a director receives in an uncontested election a greater number of “withhold” votes than votes cast “for” his or her election, the Nominating and Corporate Governance Committee of the Board of Directors will undertake a prompt evaluation of the appropriateness of the director’s continued service on the Board of Directors. In performing this evaluation, the Nominating and Corporate Governance Committee will review all factors it deems relevant, including the stated reasons why votes were withheld, the director’s length of service, his or her past contributions to Patterson-UTI and the availability of other qualified candidates. The Nominating and Corporate Governance Committee will then make its recommendation to the Board. The Board of Directors will review the Nominating and Corporate Governance Committee’s recommendation and consider such further factors and information as it deems relevant. The Board of Directors will act on the Nominating and Corporate Governance Committee’s recommendation no later than 90 days following the date of the stockholders’ meeting. If the Board of Directors determines remedial action is appropriate, the director shall promptly take whatever action is requested by the Board. If the director does not promptly take the recommended remedial action or if the Board of Directors determines that immediate resignation is in the best interests of Patterson-UTI and its stockholders, the Board of Directors may accept the director’s resignation that will have been tendered as follows. Each director will, as a condition to his or her appointment or election as a director or nomination as a director, agree in writing to comply with the terms of Patterson-UTI’s majority voting policy and provide to the Board of Directors an irrevocable resignation that will be effective upon (i) the failure to receive the required vote at the next annual meeting at which such director faces re-election and (ii) the Board of Directors’ acceptance of such resignation. +Set forth below is the name, age, position and a brief description of the business experience during at least the past five years of each of the members of Patterson-UTI’s Board of Directors, as well as specific qualifications, attributes and skills of such member that were identified by the Nominating and Corporate Governance Committee when such member was nominated to serve on the Board of Directors. Each current member of Patterson-UTI’s Board of Directors is a nominee for election to the Board of Directors. There are no arrangements or understandings between any person and any of the directors pursuant to which such director was selected as a nominee for election at the Meeting. There are no family relationships among any of the directors or executive officers of Patterson-UTI. +Name +Age +Position +Director Since +Mark S. Siegel +68 +Chairman of the Board and Director +2001 +William A. Hendricks, Jr. +54 +President and Chief Executive Officer +2017 +Charles O. Buckner +74 +Director +2007 +Tiffany (TJ) Thom Cepak +46 +Director +2014 +Michael W. Conlon +72 +Director +2012 +Curtis W. Huff +61 +Director +2001 +Terry H. Hunt +70 +Director +2003 +Janeen S. Judah +59 +Director +2018 +3 +The following charts show a snapshot of the average tenure, average age and gender diversity of the members of our Board of Directors. +When considering whether directors and nominees have the experience, qualifications, attributes and skills, taken as a whole, to enable the Board of Directors to satisfy its oversight responsibilities effectively in light of Patterson-UTI’s business and structure, the Nominating and Corporate Governance Committee and the Board of Directors focused primarily on the information discussed in each of the directors’ individual biographies set forth below. +Mark S. Siegel — Mr. Siegel has served as Chairman of the Board and as a director of Patterson-UTI since May 2001. Mr. Siegel served as Chairman of the Board and as a director of UTI from 1995 to May 2001, when UTI merged with and into Patterson-UTI. Mr. Siegel has been President of REMY Investors & Consultants, Incorporated (“REMY Investors”) since 1993. Mr. Siegel is the past chairman and a current member of the Board of Directors of the Cedars-Sinai Medical Center, and previously served on the Board of Trustees of the J. Paul Getty Trust from 2005 to 2017 (including as Chair from 2010 to 2015). From 1992 to 1993, Mr. Siegel was President, Music Division, Blockbuster Entertainment Corp. From 1988 through 1992, Mr. Siegel was an Executive Vice President of Shamrock Holdings, Inc., a private investment company, and Managing Director of Shamrock Capital Advisors, Incorporated. Mr. Siegel holds a Bachelor of Arts degree from Colgate University (Magna Cum Laude and Phi Beta Kappa) and a J.D. from the University of California, Berkeley (Boalt Hall) School of Law (Order of the Coif). +The Board of Directors considered Mr. Siegel’s broad business and legal experience, as well as his expertise with respect to Patterson-UTI’s business. In addition, the Board considered Mr. Siegel’s demonstrated leadership for more than 20 years in the aggregate of Patterson-UTI and one of its predecessor companies, UTI Energy Corp. (“UTI”). In addition, the Board considered Mr. Siegel’s prior leadership experience in other public companies and in the oil services industry, and in numerous other businesses and industries. Mr. Siegel also brings substantial experience and expertise in mergers and acquisitions, capital structure transactions, strategic planning, and board and business management. Mr. Siegel’s broad and deep experience and expertise allows him to provide Patterson-UTI with valuable leadership in all areas of its business endeavors. +William Andrew Hendricks, Jr. —Mr. Hendricks has served as President and Chief Executive Officer of Patterson-UTI since October 2012 and as a director of Patterson-UTI since June 2017. From April 2012 through September 2012, he served as Chief Operating Officer of Patterson-UTI. From May 2010 through March 2012, Mr. Hendricks served as President of Schlumberger Drilling & Measurements, a division of Schlumberger. Prior to that date, Mr. Hendricks worked for Schlumberger in various worldwide locations and capacities since 1988, including serving in numerous executive positions since 2003. Mr. Hendricks holds a Bachelor of Science in Petroleum Engineering from Texas A&M University. +The Board of Directors considered Mr. Hendricks’ more than 30 years of combined operational and managerial experience in the oil and gas industry. In addition, the Board noted his nearly six years of service as Patterson-UTI’s President and Chief Executive Officer and nearly ten years of service in numerous executive positions with Schlumberger Limited, a global provider of oilfield services, including nearly two years as President of Schlumberger Drilling & Measurements. The Board further considered Mr. Hendricks’ significant experience with evaluating the drivers for macro trends in the oil and gas industry, as well as managing the cyclical nature of the oil and gas service business, which allows Mr. Hendricks to provide valuable input into the development and implementation of Patterson-UTI’s corporate strategy. In addition, the Board noted that Mr. Hendricks’ operational experience brings valuable knowledge to the oversight of achieving safe and efficient operations. The Board also considered Mr. Hendricks’ significant experience working in numerous worldwide locations, which allows him to provide valuable counsel regarding possible expansion into markets outside of North America. +4 +Charles O. Buckner — Mr. Buckner has served as a director of Patterson-UTI since February 2007. Mr. Buckner, a private investor, retired from the public accounting firm of Ernst & Young LLP in 2002 after 35 years of service in a variety of client service and administrative roles, including chairmanship of Ernst & Young’s U.S. energy practice. Mr. Buckner served as a director for KLR Energy Acquisition Corp., a blank check company formed to source, acquire and, after its initial business combination, build an oil and gas exploration and production business (“KLR Energy”), from March 2016 to April 2017. Mr. Buckner served as a director of Energy Partners, Ltd., a publicly held company with oil and natural gas exploration and production on the continental shelf in the Gulf of Mexico from 2009 to 2014, Global Industries, Ltd., a marine construction services company with global operations from 2010 to 2011, Gateway Energy Corporation, a publicly held oil and gas pipeline company from 2008 to 2010, Horizon Offshore, Incorporated, a marine construction services company for the offshore oil and gas industry from 2003 to 2007, and Whittier Energy Corporation, a publicly held company with domestic onshore oil and natural gas exploration and production from 2003 to 2007. Mr. Buckner is a Certified Public Accountant and holds a Bachelor of Business Administration from the University of Texas and a Masters of Business Administration from the University of Houston. +The Board of Directors considered Mr. Buckner’s service as a director of oil and gas companies, as well as his experience, expertise and background with regard to accounting matters, which includes his role as the former chairman of Ernst & Young LLP’s U.S. energy practice. +Tiffany (TJ) Thom Cepak — Ms. Cepak has served as a director of Patterson-UTI since August 2014. Ms. Cepak served as the Chief Financial Officer of Energy XXI Gulf Coast, Inc. from August 2017 to October 2018. Ms. Cepak served as the Chief Financial Officer of KLR Energy (and, subsequent to its business combination, Rosehill Resources Inc.) from January 2015 to June 2017. Ms. Cepak served as a director of Yates Petroleum Corporation, a privately owned, independent oil and gas exploration and production company, from October 2015 to October 2016. Ms. Cepak served four years as the Chief Financial Officer of EPL Oil & Gas, Inc., and was further appointed Executive Vice President in January 2014, and she served in those roles until June 2014, when EPL was sold. Ms. Cepak began her career with EPL as a Senior Asset Management Engineer, a position she held until she was appointed Director of Corporate Reserves in September 2001. Ms. Cepak was named EPL’s Director of Investor Relations in April 2006 and Vice President, Treasurer and Investor Relations in July 2008. In July 2009, Ms. Cepak was designated as EPL’s Principal Financial Officer and, in September 2009, she was appointed Senior Vice President. Ms. Cepak has more than 20 years of energy industry experience and prior to joining EPL, she was a Senior Reservoir Engineer with Exxon Production Company and ExxonMobil Company with operational roles including reservoir engineering and subsurface completion engineering for numerous offshore Gulf of Mexico properties. Ms. Cepak holds a B.S. in Engineering from the University of Illinois and a Masters of Business Administration in Management with a concentration in Finance from Tulane University. +The Board of Directors considered Ms. Cepak’s more than 20 years of operational and financial experience in the energy industry. The Board noted her service in various operational roles, including as a reservoir engineer for a major oil and gas exploration and production company. The Board also noted Ms. Cepak’s executive management experience, including most recently as chief financial officer of a publicly traded independent oil and gas exploration and production company, which allows her to provide Patterson-UTI with valuable insight on financial and strategic matters. The Board also considered Ms. Cepak’s diversity of perspective, which is exemplified by her recognition in 2018 as one of Oil and Gas Investor’s 25 Influential Women in Energy. +5 +Michael W. Conlon — Mr. Conlon has served as a director of Patterson-UTI since September 2012. Mr. Conlon retired as a partner of the law firm, Norton Rose Fulbright US LLP, in January 2012 after 40 years with the firm. Mr. Conlon specialized in corporate, securities and merger and acquisition matters. Mr. Conlon was partner-in-charge of the firm’s Houston office from 2007 to 2011, was co-partner-in-charge from 2001 to 2007 and partner-in-charge of its Washington, D.C. office from 1992 to 1998. Mr. Conlon retired in February 2019 from his position as an Advisory Director to Tailored Brands, Inc., a specialty retailer of men’s apparel and international supplier of corporatewear, and an NYSE listed company. Mr. Conlon holds a Bachelor of Arts degree in Economics from Catholic University of America, where he graduated magna cum laude and as a member of Phi Beta Kappa, and a Juris Doctorate from the Duke University School of Law, where he graduated as a member of the Order of the Coif. +The Board of Directors considered Mr. Conlon’s more than 40 years of experience handling corporate, securities and mergers and acquisition matters as a lawyer with an international law firm, as well as his service in a number of management roles throughout his tenure at the firm. The Board noted Mr. Conlon’s experience in representing numerous public companies, including Patterson-UTI, and other energy services companies, allows him to provide valuable insight on legal, governance and regulatory issues facing Patterson-UTI. +Curtis W. Huff — Mr. Huff has served as a director of Patterson-UTI since May 2001 and served as a director of UTI from 1997 to May 2001. Mr. Huff is owner and Chairman of Freebird Partners, a private investment firm created in 2002 that is focused on oilfield service companies and technology. Mr. Huff was Managing Director of Intervale Capital, an oilfield service private equity firm that Mr. Huff co-founded, from 2006 to 2012. Mr. Huff also serves as Chairman of Impact Fluid Solutions LP, which provides drilling and production solutions for oil and gas operators and fluid companies. Mr. Huff also serves as a director at various of Freebird’s portfolio companies. Mr. Huff served as the President and Chief Executive Officer of Grant Prideco, Inc., a provider of drill pipe and other drill stem products, from February 2001 to June 2002. From January 2000 to February 2001, Mr. Huff served as Executive Vice President, Chief Financial Officer and General Counsel of Weatherford International, Inc., one of the world’s largest international oilfield services companies. He served as Senior Vice President and General Counsel of Weatherford from May 1998 to January 2000. Mr. Huff began his professional career in 1983 with the law firm of Norton Rose Fulbright US LLP where he specialized in corporate, securities and merger and acquisition matters. Mr. Huff was made a partner in that firm in 1989 where he served until 1998 when he joined Weatherford. Mr. Huff holds a Bachelor of Arts degree and J.D. from the University of New Mexico, where he graduated as a member of the Order of the Coif and cum laude, and a Masters of Law from New York University School of Law. Mr. Huff is a Vice Chairman of the Board of Directors of the University of St. Thomas in Houston, Texas, and a member of the board of directors of the Houston Food Bank. +The Board of Directors considered Mr. Huff’s background as an executive of publicly traded oilfield services companies and as an owner and manager of a private investment firm focused on the oilfield service industry. The Board noted his knowledge and experience in a broad range of oilfield products and services and his current and historical experience in managing operations in both the United States and internationally. The Board also considered Mr. Huff’s expertise and background with regard to accounting and legal matters, which, among other things, provides guidance to Patterson-UTI in assessing its corporate governance structure, policies and procedures. +6 +Terry H. Hunt — Mr. Hunt has served as a director of Patterson-UTI since April 2003 and served as a director of UTI from 1994 to May 2001. Mr. Hunt is an energy consultant and retired senior natural gas and electric utility executive. Mr. Hunt served as Senior Vice President — Strategic Planning of PPL Corporation, an international energy and utility holding company, from 1998 to 2000. Mr. Hunt served as the President and Chief Executive Officer of Penn Fuel Gas, Inc., a Pennsylvania-based natural gas and propane distribution company, from 1992 to 1999. Previously, Mr. Hunt was President of Carnegie Natural Gas and Apollo Gas Company, both Appalachian natural gas distribution companies. He also previously served in senior management positions in natural gas project and venture development, oil and natural gas exploration and development evaluation and operations and major production facilities construction with Texas Oil & Gas Corp. and Atlantic Richfield. Mr. Hunt holds a Bachelor of Engineering degree from the University of Saskatchewan, Canada and a Masters of Business Administration from Southern Methodist University. +The Board of Directors considered Mr. Hunt’s more than 25 years of experience covering most phases of the upstream oil and natural gas industry in the United States and Canada, including the evaluation of exploration and development programs, oil and natural gas production and pipeline operations, and project development and major production facility construction. This experience and background provides Patterson-UTI with an invaluable perspective of the oil and natural gas industry and its customers. In addition, Mr. Hunt’s many years of senior executive experience leading natural gas distribution, storage and marketing companies provides insight into the management of multi-faceted businesses and the markets for natural gas in North America. +Janeen S. Judah — Ms. Judah has served as a director of Patterson-UTI since April 2018. Ms. Judah has served as a director of the general partner of Crestwood Equity Partners LP since November 2018. Ms. Judah served as the President of the Society of Petroleum Engineers from September 2016 to October 2017 while on secondment from Chevron, and as a member of the Board of Directors of the Society of Petroleum Engineers from 2003 to 2006 and from 2012 to 2018. Ms. Judah held numerous leadership positions at Chevron, including general manager for Chevron’s Southern Africa business unit from August 2010 to September 2016, president of Chevron Environmental Management Company from August 2007 to August 2010 and general manager of reservoir and production engineering for Chevron Energy Technology Company from June 2004 to August 2007. Before joining Chevron in 1998, she held various upstream petroleum engineering positions for Texaco and Arco, starting in Midland in 1981. Ms. Judah holds Bachelor of Science and Masters of Science degrees in petroleum engineering from Texas A&M University, a Masters of Business Administration from the University of Texas of the Permian Basin and a Juris Doctorate from the University of Houston Law Center. +The Board of Directors considered Ms. Judah’s more than 35 years of operational, managerial and environmental experience in the oil and gas industry. The Board noted her experience derived from oil and gas industry positions held involving significant operational and management responsibilities, including positions with Chevron and upstream petroleum engineering positions. The Board also noted Ms. Judah’s extensive international experience, including most recently as general manager for Chevron’s Southern Africa business unit, which allows her to provide Patterson-UTI with valuable insight on international and strategic matters. The Board also considered Ms. Judah’s service as the President of the Society of Petroleum Engineers from 2017 to 2018, as well as her diversity of perspective, which is exemplified by her recognition in 2018 as one of Oil and Gas Investor’s 25 Influential Women in Energy. +7 +Board Leadership Structure, Lead Director and Board Role in Risk Oversight +The Board evaluates its leadership structure and role in risk oversight on an ongoing basis. The decision on whether to combine or separate the Chairman and Chief Executive Officer (“CEO”) role is determined on the basis of what the Board considers to be best for Patterson-UTI at any given point in time. Patterson-UTI’s current Board leadership structure separates the role of Chairman and CEO. +The Board also believes part of an effective Board leadership structure is to have a lead independent director, the “Lead Director.” The Board has appointed Mr. Huff as the Lead Director. The independent directors meet regularly in executive sessions at which only independent directors are present, and the Lead Director chairs those sessions. The Lead Director serves as a liaison between the Chairman and the independent directors, consults with regard to Board and agenda items, and works with the chairpersons of Board committees as appropriate. +The Nominating and Corporate Governance Committee and the Board currently believe that the Board’s leadership structure, which includes the separation of the role of CEO and Chairman and the appointment of an independent Lead Director, is appropriate because it, among other things, provides for sufficient independence between the Board and management and for an independent director who provides board member leadership. +The Board has adopted Corporate Governance Guidelines, which can be accessed electronically in the “Governance” section of Patterson-UTI’s website at www.patenergy.com . The Guidelines describe one of the Board’s primary responsibilities as overseeing Patterson-UTI’s processes for assessing and managing risks. The Board discharges this responsibility, in part, through regular inquiries from the Chairman of the Board and/or the Lead Director to management, periodic communications from management to the Board of Directors of particular risks and events, and discussions during Board meetings of general and specific risks to Patterson-UTI. +Meetings and Committees of the Board of Directors +The Board of Directors met 11 times during the year ended December 31, 2018. Each director attended, in person or by telephone, at least 75% of the aggregate of all meetings held by the Board and meetings of each committee on which such director served. A majority of the members of the Board of Directors are independent within the meaning of the Nasdaq Stock Market, Inc. (“Nasdaq”) listing standards. Specifically, the Board has determined that Messrs. Buckner, Conlon, Huff and Hunt and Mses. Cepak and Judah are independent within the meaning of the Nasdaq listing standards. +The Board of Directors has established four standing committees: an Executive Committee, an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee. +The Executive Committee, which currently is composed of Messrs. Siegel, Hendricks and Huff, has the authority, to the extent permitted by applicable law, to act for the Board in all matters arising between regular or special meetings of the Board of Directors. The Executive Committee did not meet or take any action in 2018. +The Audit Committee members are Mses. Cepak (chairwoman) and Judah, and Messrs. Buckner, Huff and Hunt, each of whom is independent within the meaning of applicable rules under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and within the meaning of the Nasdaq listing standards. The Audit Committee oversees management’s conduct of Patterson-UTI’s accounting and financial reporting process, including review of the financial reports and other financial information provided by Patterson-UTI to the public and government and regulatory bodies, Patterson-UTI’s system of internal accounting, Patterson-UTI’s financial controls, and the annual independent audit of Patterson-UTI’s financial statements and internal control over financial reporting. The Audit Committee also oversees compliance with Patterson-UTI’s codes of conduct and ethics and with legal and regulatory requirements. The Board has determined that Ms. Cepak and Messrs. Buckner and Huff and are “audit committee financial experts” within the meaning of applicable SEC rules. The Audit Committee selects the independent registered public accounting firm to audit Patterson-UTI’s books and records and considers and acts upon accounting matters as they arise. The Board of Directors has adopted a written charter for the Audit Committee. The Audit Committee held five meetings during the year ended December 31, 2018. Please see “Audit Committee Report” elsewhere in this proxy statement. +The Compensation Committee members are Messrs. Hunt (chairman), Conlon and Huff and Ms. Cepak, each of whom is independent as defined in the Nasdaq listing standards. Among other things, the Compensation Committee sets and administers the policies that govern the compensation of executive officers and directors of Patterson-UTI. The Board of Directors has adopted a written charter for the Compensation Committee. The Compensation Committee held eight meetings during the year ended December 31, 2018. Please see “Compensation Discussion and Analysis” and “Compensation Committee Report” elsewhere in this proxy statement for further information about the Compensation Committee. +8 +The Nominating and Corporate Governance Committee members are Messrs. Conlon (chairman), Buckner and Huff and Ms. Judah, each of whom is independent as defined in the Nasdaq listing standards. The purpose of the Nominating and Corporate Governance Committee is to, among other things, identify individuals qualified to become Board members, to recommend for selection by the Board director nominees for the next annual meeting of stockholders, to recommend nominees for Board committees, to review Patterson-UTI’s Code of Business Conduct and Corporate Governance Guidelines, to dev elop and continually make recommendations with respect to the best corporate governance principles and to oversee the annual review of the Board and management. The Board of Directors has adopted a written charter for the Nominating and Corporate Governanc e Committee. The Nominating and Corporate Governance Committee held three meetings during the year ended December 31, 2018 . +Consideration of Director Nominees +On behalf of the Board, the Nominating and Governance Committee considers director nominees recommended by Patterson-UTI’s stockholders if the recommendations are made in accordance with all legal requirements, including applicable provisions of Patterson-UTI’s restated certificate of incorporation and bylaws. A stockholder’s notice to the Secretary of Patterson-UTI shall contain certain information specified in Patterson-UTI’s bylaws regarding the stockholder and the proposed nominee. See “Other Matters—Stockholder Proposals for 2020 Annual Meeting” and Article I, Section 8 and Article I, Section 11 of Patterson-UTI’s bylaws. +The Nominating and Corporate Governance Committee determines qualification criteria and procedures for the identification and recruitment of candidates for election to serve as directors of Patterson-UTI. The Nominating and Corporate Governance Committee relies on the knowledge and relationships of Patterson-UTI and its officers and directors, as well as third parties when it deems appropriate, to identify and evaluate nominees for director, including nominees recommended by stockholders. In evaluating a nominee for director, the Nominating and Corporate Governance Committee considers the nominee’s skills, expertise, industry and other knowledge, personal and professional ethics, integrity and values, sound business judgment and willingness to commit sufficient time to the Board and be committed to representing the long-term interests of Patterson-UTI’s stockholders. The Nominating and Corporate Governance Committee also reviews the individual performance and qualifications of each director who wishes to be considered for nomination to the Board. Although the Nominating and Corporate Governance Committee does not have a stand-alone policy with regard to consideration of diversity in identifying director nominees, it considers diversity in professional background, experience, expertise (including as to financial matters) and perspective (including as to age, gender and ethnicity) with respect to the Board of Directors composition as a whole when evaluating a director nominee. +Board and Director Performance Assessments +The Nominating and Corporate Governance Committee annually reviews and evaluates the performance of the Board, each Committee of the Board, and each director in order to improve the effectiveness of the Board and each Committee of the Board. The Committee assesses the contributions of the Board as a whole and each of its Committees and identifies areas in which improvements may be made. The results of the evaluations are reviewed and discussed with the Board and its Committees, and recommendations are made, as appropriate, to the Board and its Committees. +The Nominating and Corporate Governance Committee also annually reviews the individual performance and qualifications of each director who wishes to be considered for nomination for reelection to the Board. +Continuing Education +Continuing education helps our directors strengthen their skills, deepen their understanding of our business and operations and stay current with emerging issues that affect our business, governance and compensation practices. It also helps directors keep abreast of governance developments and requirements and understand the issues we face in the context of our business. To further these goals , our Board’s continuing director education policy requires directors to participate in continuing education programs and reimburses directors for expenses incurred in connection with such education programs . +Succession Planning +The Board of Directors oversees processes and procedures to provide continuity of well-qualified executive leadership and to assess whether such leadership possesses the skill and talent to execute Patterson-UTI’s long term business strategies. The Board of Directors reviews succession planning for the Chief Executive Officer and the senior executives tailored to reflect the Board’s standards for executive leadership and Patterson-UTI’s business strategy and vision. The succession planning addresses (i) both current and long term needs of Patterson-UTI and establishes a process for identifying and assessing potential internal candidates; (ii) periodic review and assessment of readiness: (iii) contingency planning for temporary absences of the Chief Executive Officer due to disability or other unexpected event; and (iv) long term continuity planning for succession to the Chief Executive Officer position. +9 +Political Contributions +Patterson-UTI has a policy prohibiting the contribution of company funds to political parties or organizations or to candidates for any public office or to influence the general public, or segments thereof, with respect to public elections or referenda. Patterson-UTI participates in certain trade organizations with purposes that include enhancement of the public image of our industry, education about the industry and issues that affect the industry and industry best practices and standards. Many of the trade organizations also engage in legislative or political activity related to matters that affect the industry as a whole and not a specific company. Patterson-UTI, as one of many members in various trade associations, does not direct the legislative activities of any trade organization of which it is a member. +Sustainability +Patterson-UTI is committed to long-term sustainability with respect to the environment, our society and our long-term corporate success. A copy of Patterson-UTI’s sustainability commitment can be accessed electronically in the “Sustainability” section of the Patterson-UTI website at www.patenergy.com and in print to any stockholder who requests it from the Secretary of Patterson-UTI. +Communication with the Board and its Independent Members +Persons may communicate with the Board, or directly with its Chairman, Mr. Siegel, by submitting such communication in writing in care of Chairman of the Board of Directors, Patterson-UTI Energy, Inc., 10713 West Sam Houston Parkway North, Suite 800, Houston, Texas 77064. Persons may communicate with the independent members of the Board by submitting such communication in writing to the Nominating and Corporate Governance Committee of the Board of Directors of Patterson-UTI Energy, Inc., 10713 West Sam Houston Parkway North, Suite 800, Houston, Texas 77064. +Although Patterson-UTI does not have a formal policy regarding attendance by members of the Board at its annual meetings of stockholders, directors are invited to attend annual meetings of Patterson-UTI stockholders. All of the directors at the time of the 2018 annual meeting of stockholders attended the meeting either in person or by telephone. +Corporate Governance Documents Available on Patterson-UTI’s Website +Copies of each of the following documents can be accessed electronically in the “Corporate Governance” section of the Patterson-UTI website at www.patenergy.com and in print to any stockholder who requests them from the Secretary of Patterson-UTI: +• +Audit Committee Charter; +• +Compensation Committee Charter; +• +Nominating and Corporate Governance Committee Charter; +• +Corporate Governance Guidelines; +• +Code of Business Conduct and Ethics for its employees, officers and directors; +• +Code of Business Conduct and Ethics for Senior Financial Executives; and +• +Global Anticorruption Policy. +10 +PROPOSAL NO. 2 +APPROVAL OF AMENDMENT TO +AMENDED AND RESTATED 2014 LONG-TERM INCENTIVE PLAN +Background +The Patterson-UTI Energy, Inc. 2014 Long-Term Incentive Plan (the “2014 Plan”) was originally approved by Patterson-UTI’s stockholders effective as of April 17, 2014, and the amendment and restatement of the 2014 Plan (the “Amended and Restated Plan”) was approved by Patterson-UTI’s stockholders effective as of June 29, 2017. Participation in the Company’s long-term incentive plan is broad based, with 524 employees and directors participating in 2018. Subject to the approval of our stockholders, our Board of Directors has approved an amendment to the Amended and Restated Plan to increase the number of shares available for issuance under the plan by 9.5 million shares and to extend the latest date on which awards may be granted under the Amended and Restated Plan to June 6, 2029 (the “Amendment”). No other plan changes are proposed by the Amendment. Approval of the Amendment requires the affirmative vote of the holders of a majority of the shares of Common Stock that are present in person or by proxy and entitled to vote at the Meeting. +If the Amendment is not approved by stockholders, the Amended and Restated Plan will remain in effect with its current share pool and term. As of April 8, 2019, there were 2,004,682 shares of common stock remaining available for grant under the Amended and Restated Plan, assuming a target payout of all performance units currently outstanding. If the Amendment is not approved by the stockholders, we will not be able to continue our equity-based long term incentive program, and we may be required to increase significantly the cash component of our executive compensation program in order to remain competitive and adequately compensate our employees. +Certain material terms of the Amended and Restated Plan are discussed below; however, the description is subject to, and qualified by the full text of the Amended and Restated Plan, attached hereto as Annex A, which includes the Amendment highlighted in bold. Unless otherwise indicated, references to the “Amended and Restated Plan” in the following description of the material terms of the Amended and Restated Plan include the impact of the Amendment. +Best Practices +Independent Oversight . The Compensation Committee, composed solely of non-employee independent directors, will approve all grants made to employees under the Amended and Restated Plan; provided, however, that the Compensation Committee may delegate to the Board or any committee of the Board, to one or more executive officers or a committee of executive officers its right to grant awards under the Amended and Restated Plan to employees who are not executive officers of Patterson-UTI pursuant to such conditions or limitations as the Compensation Committee may establish. +No Repricing of Options or SARs . The Amended and Restated Plan prohibits repricing and replacement of stock options or stock appreciation rights (“SARs”) at lower exercise prices unless approved by our stockholders. +No Discounted Options or SARs . Stock options and SARs may not be granted with an exercise price below the fair market value of our common stock on the date of grant. +No Dividends on Options or SARs . Dividends and dividend equivalents may not be paid or accrued on stock options or SARs. +Limited Terms for Options and SARs . Stock options and SARs granted under the Amended and Restated Plan are limited to 10-year terms. +No “Evergreen” Provision . Shares authorized for issuance under the Amended and Restated Plan will not be replenished automatically. Any additional shares to be issued over and above the amount for which shareholder approval is being sought in connection with this Amendment will require further shareholder approval. +No Tax Gross-Ups . The Compensation Committee does not provide tax gross-ups in connection with awards under the Amended and Restated Plan. +Annual Limitation on Director Awards . The grant date fair value of awards to each non-employee director, when combined with other cash fees paid to the director in such year, may not exceed $500,000 in any calendar year. +No Dividends or Dividend Equivalents Paid on Unvested Awards . Any dividends or dividend equivalents will only be paid if and to the extent the underlying shares vest pursuant to the terms of the award. +11 +Recoupment . All awards granted under the Amended and Restated Plan will be subject to any clawback policy adopted by us. See the description of our current Clawback policy below under “Clawback Policy ”. In addition, if Patterson-UTI is required to prepare an accounting restatement due to the material noncompliance of Patterson-UTI, as a result of misconduct, with any financial reporting requirement under the securities laws, or if the participant is on e of the persons subject to automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002, the participant shall reimburse the Company the amount of any payment in settlement of an award earned or accrued during the twelve-month period following the first public issuance or filing with the SEC (whichever just occurred) of the financial document embodying such financial reporting requirement. +Minimum Vesting . Subject to a 5% carve-out, all awards are subject to a minimum vesting period of one year from the date of grant, except in the case of death, disability, retirement or a change of control. +Key Equity Plan Metrics +The following table shows key equity compensation metrics for the years 2016-2018 under the 2014 Plan and Amended and Restated Plan: +A +B +C +D +E +F +G +H +Fiscal Year +Stock Options +Granted +Time-Based +RSAs and RSUs +Granted (1) +Performance- +Based RSUs +Granted (2) +PSUs +Granted (2) +Actual PSUs +and +Performance- +Base RSUs +Earned +Total +(3) +Weighted +Average # of +Common Shares +as of FYE +Burn +Rate (4) +2018 +— +1,726,865 +359,315 +310,700 +419,200 +4,292,130 +218,643,000 +1.96 +% +2017 +— +2,015,596 +114,000 +186,198 +— +4,031,192 +198,477,000 +2.03 +% +2016 +969,900 +963,740 +185,000 +— +2,897,380 +146,178,000 +1.98 +% +Average Three-Year Burn +Rate (2016-2018) +1.99 +% +(1) +Excludes restricted stock unit (RSU) awards granted in connection with an acquisition completed in 2018, and RSUs assumed in connection with an acquisition completed in 2017. Certain RSAs are also performance-based. +(2) +Reflects target number of Performance-based RSUs and PSUs granted in applicable fiscal year. +(3) +Total number of shares in a particular fiscal year includes all time-based awards granted during such fiscal year, and all stock options, PSUs and RSUs for which the performance criteria was certified as attained and earned during such fiscal year. RSAs, RSUs and PSUs count as two shares in the Total amount. Accordingly, the number in this “Total” column for a particular fiscal year is derived as follows: (i) column A; plus (ii) column B, times two, plus (iii) column E, times two. +(4) +Performance-based RSUs and PSUs granted in the applicable fiscal year and not yet earned are excluded from the calculation of burn rate. +Description of the Amended and Restated Plan +The primary objective of the Amended and Restated Plan is to promote stockholder value by providing appropriate incentives to certain employees, consultants, advisors, officers and directors of Patterson-UTI and its subsidiaries. The Amended and Restated Plan provides for the granting of incentive and non-qualified stock options, tandem and freestanding stock appreciation rights, restricted stock awards, other stock unit awards, performance shares, performance units and dividend equivalents. Certain awards under the Amended and Restated Plan may be paid in cash or Common Stock, as determined by the Compensation Committee. The Compensation Committee has exclusive authority to select the participants to whom awards may be granted, and to determine the type, size and terms of each award, subject to the limitations set forth in the Amended and Restated Plan. The Compensation Committee will also make all determinations that it decides are necessary or desirable in the interpretation and administration of the Amended and Restated Plan. In addition, the Compensation Committee may, if consistent with applicable rules, regulations and Nasdaq requirements, delegate to a committee of one or more directors or to one or more executive officers the right to grant, cancel and suspend awards to employees who are not directors or executive officers of Patterson-UTI. +12 +As of April 8 , 2019 , the equity awards outstanding under the Amended and Restated Plan (the only equity plan under which new awards may be granted) , and their respective features, were as follows (1): +Options outstanding +5,501,150 +Full-value awards outstanding (2) +4,075,951 +Weighted-average exercise price of outstanding options +$ +19.63 +Weighted-average remaining contractual term of outstanding options +3.78 years +Shares available for grant under the Amended and Restated Plan +2,004,682 +Shares of Common Stock Outstanding +208,253,555 +(1) +This table excludes the 9.5 million shares requested in this proposal. +(2) +Includes restricted stock, restricted stock units and performance units (at target). +General Terms +• +Subject to adjustment in the event of certain corporate transactions, the aggregate number of shares of Common Stock authorized for grant under the Amended and Restated Plan (after giving effect to the Amendment) is 28.4 million, which includes the 18.9 million shares previously authorized under the Amended and Restated Plan. Shares that are subject to options or SARs count as one share of Common Stock against this aggregate limit. Shares that are subject to awards other than options and SARS count as two shares of Common Stock against this aggregate limit. The closing price of a share of Common Stock on April 8, 2019 was $15.32. +• +Generally, if an award granted under the Amended and Restated Plan or Patterson-UTI’s 2005 Long-Term Incentive Plan expires, is forfeited, is settled in cash or otherwise terminates without the issuance of all or a portion of the shares of Common Stock subject to the award, the shares allocable to the expired, forfeited, cash settled, or terminated portion of the award will be available for awards again under the Amended and Restated Plan. Any shares of Common Stock that again become available for grant under the Amended and Restated Plan will be added back as one share if the shares were subject to options or SARs, and as two shares if the shares were subject to awards other than options or SARs. +• +If any shares subject to an award are used to exercise options, are not issued upon the settlement of a SAR, are withheld by Patterson-UTI for income or employment taxes on exercise of an option or SAR, or are re-purchased on the open market with the exercise price for an option, such shares will not become available for grant under the Amended and Restated Plan. +• +With respect to awards to participants other than directors, the Amended and Restated Plan is administered by the Compensation Committee of Patterson-UTI’s Board of Directors, which comprises exclusively non-employee independent directors. With respect to awards to directors, the Amended and Restated Plan is administered by the Board of Directors. +• +Directors, employees, including officers, consultants and advisors are eligible for awards under the Amended and Restated Plan. As of April 1, 2019, approximately 7,500 employees, six directors and an indeterminate number of consultants and advisors would be eligible for awards under the Amended and Restated Plan, although Patterson-UTI has not historically granted awards under the Plan to consultants or advisors. +• +The Amended and Restated Plan provides for awards of non-qualified stock options (“NQSOs”), incentive stock options (“ISOs”), tandem and freestanding SARs, restricted stock awards, other stock unit awards, performance awards and dividend equivalents. +• +The Board of Directors, at any time, may amend the terms of the Amended and Restated Plan, subject to the stockholder approval requirements of the Nasdaq Stock Market and other rules and regulations applicable to Patterson-UTI. Generally, the Amended and Restated Plan also may not be amended without stockholder approval to permit the repricing of options or SARs, to increase applicable limits on awards granted to any individual participant or to extend the maximum 10-year term applicable to options. +13 +• +Subject to adjustment in the event of certain corporate transactions, u nder the Amended and Restated Plan, no participant may be granted options or SARs during any calendar year with respect to more than 1,000,000 shares or restricted stock, performance awards denominated in shares and/or other stock unit awards that are den ominated in shares in any calendar year with respect to more than 500,000 shares. In addition to the foregoing limits, the maximum dollar value payable to any participant in with respect to performance awards denominated in cash in respect of any calendar year is $5,000,000. Any award will only be subject to one of the applicable per person limits set forth in the previous sentence. No director may be granted during any calendar year awards having a fair value determined on the date of grant that, when adde d to other fees paid in cash for such year, exceeds $500,000. +• +Except in connection with certain corporate transactions involving Patterson-UTI, the terms of outstanding options or SARs may not be amended to reduce the applicable exercise price and outstanding options and SARs may not be cancelled in exchange for cash, other awards or options or SARs with an exercise price that is less than the exercise price of the original options or SARs, in each case without stockholder approval. +• +Subject to the exceptions in this bullet, awards may not be sold, assigned, transferred, pledged or otherwise encumbered, other than by will or the laws of descent and distribution or pursuant to a domestic relations order, as determined by the Compensation Committee, and awards may be exercised during the life of the participant only by the participant or the participant’s guardian or legal representative. Notwithstanding the foregoing, a participant may assign or transfer an award other than an incentive stock option with the consent of the Compensation Committee (i) for charitable donations; (ii) to the participant’s spouse, children or grandchildren (including any adopted and stepchildren and grandchildren), or (iii) a trust for the benefit of one or more of the participants or the persons referred to in clause (ii); provided that certain administrative conditions are met. +• +Except with respect to 5% of the shares authorized for grant under the Amended and Restated Plan, no award may vest prior to the first anniversary of the grant date other than in the case of death, disability, retirement or change of control. +• +No awards may be granted under the Amended and Restated Plan after June 6, 2029, the tenth anniversary of the effective date of the Amended and Restated Plan. +Options +• +The vesting schedule for options is set by the Compensation Committee; however, except in the case of death, disability, retirement or a change of control, options may not fully vest sooner than one year from the date of grant for directors and three years from the date of grant for employees, except for certain limited exceptions involving substitute awards and newly hired employees (subject to the one year minimum vesting period on awards described above). Awards may vest ratably in increments, but incremental vesting is not permitted prior to the first anniversary of the date of grant. Notwithstanding the foregoing, five percent of the shares available for grant under the Amended and Restated Plan will not be subject to this restriction. +• +The term of options is set by the Compensation Committee, but may be no longer than 10 years. +• +The exercise price for options may be paid in cash, with previously acquired shares of Common Stock, or by other means approved by the Compensation Committee. +• +All options granted under the Amended and Restated Plan are granted with an exercise price equal to or greater than the fair market value of the Common Stock at the time the option is granted. +SARs +• +SARs may be granted alone or in connection with the grant of any option. +• +The vesting schedule for SARs is set by the Compensation Committee; however, except in the case of death, disability, retirement or a change of control, SARs may not fully vest sooner than one year from the date of grant for directors and three years from the date of grant for employees, except for certain limited exceptions involving substitute awards and newly hired employees (subject to the one year minimum vesting period on awards described above). Awards may vest ratably in increments, but incremental vesting is not permitted prior to the first anniversary of the date of grant. Notwithstanding the foregoing, five percent of the shares available for grant under the Amended and Restated Plan will not be subject to this restriction. +14 +• +SA Rs granted alone may be exercised at such times and be subject to such terms and conditions as the Compensation Committee may impose. SARs that are granted in tandem with options may be exercised only on the surrender of the right to purchase an equivalent number of shares under the related options and may be exercised only with respect to the shares of Common Stock for which the related options are then exercisable. +• +The term of SARs under the Amended and Restated Plan may be no longer than 10 years. +• +A SAR entitles a participant to surrender any then exercisable portion of the SAR and, if applicable, the related option, in exchange for an amount equal to the product of (1) the excess of the fair market value of a share of Common Stock on the date of surrender over the fair market value of a share of Common Stock on the date that the SAR was granted, or, if the SAR is related to an option, the per share exercise price of the option, multiplied by (2) the number of shares of Common Stock subject to the SAR and being surrendered. Payment on exercise of a SAR shall be, in the discretion of the Compensation Committee, shares of Common Stock, cash, or a combination of shares of Common Stock and cash. +• +All SARs granted under the Amended and Restated Plan are granted with an exercise price equal to or greater than the fair market value of the Common Stock at the time the SAR is granted. +Restricted Stock Awards +• +The Compensation Committee determines the material terms of restricted stock awards, including the price, if any, to be paid by the recipient, and the vesting schedule and conditions, which may include the attainment of specified performance objectives described below. +• +A restricted stock award that is subject solely to continued employment restrictions of employees of Patterson-UTI may not fully vest sooner than three years from the date of grant, except in the case of death, disability, retirement or a change of control or for certain other limited exceptions involving substitute awards and newly hired employees (subject to the one year minimum vesting period on awards described above). Awards may vest ratably in increments, but incremental vesting is not permitted prior to the first anniversary of the date of grant. Notwithstanding the foregoing, five percent of the shares available for grant under the Amended and Restated Plan will not be subject to this restriction. +• +Beginning on the date of grant, a participant receiving a restricted stock award will become a stockholder of Patterson-UTI with respect to all shares of Common Stock subject to the restricted stock award, which, unless the Committee determines otherwise at the time of the grant, includes the right to vote the shares and receive dividends in respect of the shares; provided, however, that any dividends with respect to any restricted stock award as to which the restrictions have not yet lapsed shall be subject to the same restrictions as such restricted stock award. +Other Stock Units +• +The Compensation Committee may grant other stock unit awards under the Amended and Restated Plan, which have a value equal to an identical number of shares of Common Stock. Other stock unit awards may also be a form of payment for other awards granted under the Amended and Restated Plan and other earned cash-based incentive compensation. +• +The payment of other stock units may be in cash, shares of Common Stock, other property, or any combination of the foregoing, and may be made in a lump sum or, in accordance with procedures established by the Compensation Committee, on a deferred basis subject to the requirements of section 409A of the Code. +• +Other stock unit awards that are subject solely to continued employment restrictions of employees of Patterson-UTI may not fully vest sooner than three years from the date of grant, except in the case of death, disability, retirement or a change of control or for certain limited exceptions involving substitute awards and newly hired employees (subject to the one year minimum vesting period on awards described above). Awards may vest ratably in increments, but incremental vesting is not permitted prior to the first anniversary of the date of grant. Notwithstanding the foregoing, five percent of the shares available for grant under the Amended and Restated Plan will not be subject to this restriction. +15 +D ividend Equivalent Rights +• +The Compensation Committee may grant dividend equivalent rights either in connection with awards or as separate awards under the Amended and Restated Plan. Amounts payable in respect of dividend equivalent rights will not be paid until the vesting, payment, settlement or other lapse of restrictions of the award to which the dividend equivalent rights relate. +• +No award of options or SARs will have dividend equivalent rights. +• +Dividend equivalent rights on performance awards will be subject to the same performance conditions as the underlying award. +Performance Awards +• +Performance awards are payable in cash, shares of Common Stock, other property, or a combination of the foregoing, and may be paid in a lump sum, in installments, or on a deferred basis in accordance with procedures established by the Compensation Committee. +• +The Compensation Committee determines the material terms of the performance awards, including a performance period over which the performance goal of such award shall be measured. Performance awards are subject to the one year minimum vesting period on awards described above. +Deferrals +• +The Compensation Committee may require or permit a participant to defer the receipt of cash or shares pursuant to any awards under the Amended and Restated Plan. Any deferral permitted under the Amended and Restated Plan will be administered in a manner that is intended to comply with section 409A of the Code. +Effect of Certain Transactions and Change of Control +The Compensation Committee may provide in the terms of an award under the Amended and Restated Plan that, on a change of control (as defined in the Amended and Restated Plan), +• +options and SARs outstanding on the date of the change of control immediately vest; +• +options and SARs outstanding on the date of the change of control may be cancelled and terminated without payment if the fair market value of a share of Common Stock on the date of the change of control is less than the per share exercise price of the option or SAR; +• +restrictions and deferral limitations on restricted stock lapse and the restricted stock becomes free of all restrictions and limitations and becomes fully vested; +• +all performance awards shall be considered to be earned and payable and any deferral or other restriction shall lapse and the performance awards shall be immediately settled or distributed; +• +restrictions and deferral limitations and other conditions applicable to any other stock unit awards or other awards shall lapse, and such other stock unit awards or such other awards shall become free of all restrictions, limitations or conditions and become fully vested and transferable; and +• +such other additional benefits as the Compensation Committee deems appropriate shall apply. +The Compensation Committee, in its discretion, may determine that, upon a change of control, each option and SAR shall terminate within a specified period of days after notice to the participant, or that with respect to such option or SAR each participant shall receive an amount equal to the excess of the fair market value of such share immediately prior to the occurrence of the change of control over the exercise price per share of such option or SAR. The payment may be made in one or more kinds of stock or property or a combination of stock or property. Further, in the event of changes in the capital or corporate structure of Patterson-UTI due to events such as recapitalization, stock split, merger, spin-off or similar transaction, that affect the shares of Common Stock, the Compensation Committee, in its sole discretion, may determine that it is equitable or appropriate to make adjustments or substitutions to the Amended and Restated Plan or outstanding options and awards, including to the number, class, kind and option or exercise price or securities subject to awards. +16 +Performance Criteria +Generally, the lapsing of restrictions on an award and the distribution of cash, shares or other property pursuant to such award, may be subject to the achievement of one or more objective performance goals established by the Compensation Committee. The performance goals established by the Committee may be based on attaining specified levels in one or more areas, such as: net sales; revenue growth; pre-tax income before allocation of corporate overhead and bonus; earnings per share; operating income or net income; return on stockholders’ equity; attainment of strategic and operational initiatives; appreciation in and/or maintenance of the price of the Common Stock or other publicly-traded securities of Patterson-UTI; market share; gross profits; earnings before taxes or before interest and taxes or before interest, taxes, depreciation, depletion and amortization; comparisons with various stock market indices; improvement in or attainment of expense levels or working capital levels; cash margins; safety records; and rig utilization and rig count growth. Performance goals may be measured solely by reference to Patterson-UTI’s performance or the performance of a subsidiary, division, business segment or business unit of Patterson-UTI, or based upon the relative performance of other companies or upon comparisons of any of the indicators of performance relative to other companies, in each case as specified by the Compensation Committee in the award. The Compensation Committee also may adjust performance goals to reflect the impact of specified events, occurrences or transactions, accounting or tax law changes or other infrequent, unusual or nonrecurring events. +Federal Income Tax Consequences +The following discussion summarizes certain U.S. federal income tax consequences of the grant and receipt of awards pursuant to the Amended and Restated Plan under the law as in effect on the date of this proxy statement. The rules governing the tax treatment of such awards are quite technical, so the following discussion of tax consequences is necessarily general in nature and is not complete. In addition, statutory provisions are subject to change, as are their interpretations, and their application may vary in individual circumstances. This summary does not purport to cover all federal employment tax, estate tax, or other federal tax consequences associated with the Amended and Restated Plan, nor does it address state, local, or non-U.S. tax consequences. +ISOs . In general, a participant will not recognize income upon the grant or exercise of an ISO. However, upon the exercise of an ISO, the excess of the fair market value of the shares of Common Stock received upon the exercise of the ISO over the exercise price will increase the employee’s alternative minimum taxable income, which may cause the employee to incur the alternative minimum tax. Subject to certain exceptions for death or disability, if a participant exercises an ISO more than three months after termination of employment, the exercise of the option will be taxed as the exercise of a NQSO, as described below. +The general rule is that gain or loss from the sale or exchange of shares acquired on the exercise of an ISO will be treated as capital gain or loss. However, if shares acquired upon the exercise of an ISO are disposed of within two years from the date of grant or within one year after exercise (a “disqualifying disposition”), the participant generally will recognize ordinary income in the year of disposition in an amount equal to the fair market value of the shares at the time of exercise (or, if less, the amount realized on the disposition of the shares) less the exercise price. Any further gain (or loss) realized by the participant generally will be taxed as short- or long-term capital gain (or loss) depending on the holding period. +NQSOs, SARs, Performance Award, and Other Stock Unit Award . A participant generally is not required to recognize income on the grant of a NQSO, a SAR, performance award or other stock unit award. Instead, ordinary income generally is required to be recognized on the date the NQSO or SAR is exercised, or in the case of performance awards or other stock unit awards, upon the issuance of shares and/or the payment of cash pursuant to the terms of the award. In general, the amount of ordinary income required to be recognized is, (a) in the case of a NQSO or a SAR, an amount equal to the excess, if any, of the fair market value of the shares on the exercise date over the exercise price, and (b) in the case of performance awards or other stock unit awards, the amount of cash and/or the fair market value of any shares received in respect thereof, plus the amount of taxes withheld from such amounts. +Restricted Common Stock . Unless a participant who receives an award of restricted Common Stock makes an election under section 83(b) of the Code as described below, the participant generally is not required to recognize ordinary income on the grant of restricted Common Stock. Instead, on the date the shares vest (i.e., become transferable and no longer subject to forfeiture), the participant will be required to recognize ordinary income in an amount equal to the excess, if any, of the fair market value of the shares on such date over the amount, if any, paid for such shares. If a section 83(b) election has not been made, any dividends received with respect to restricted Common Stock that are subject at that time to a risk of forfeiture or restrictions on transfer generally will be treated as compensation that is taxable as ordinary income to the recipient. If a participant makes a section 83(b) election within 30 days following the date of transfer of the restricted Common Stock, the participant will recognize ordinary income on the date the shares are granted. The amount of ordinary income required to be recognized is an amount equal to the excess, if any, of the fair market value of the shares on the date of award over the amount, if any, paid for such shares. In such case, the participant will not be required to recognize additional ordinary income when the shares vest. However, if the shares are later forfeited, a loss can only be recognized up to the amount the participant paid, if any, for the shares. +17 +Gain or Loss on Sale or Exchange of Shares . In general, gain or loss from the sale or exchange of shares granted or awarded under the Amended and Restated Plan will be treat ed as capital gain or loss, provided that the shares are held as capital assets at the time of the sale or exchange. However, if certain holding period requirements are not satisfied at the time of a sale or exchange of shares acquired upon exercise of an ISO (a “disqualifying disposition,” see above), a participant generally will be required to recognize ordinary income upon such disposition. +Deductibility by Patterson-UTI . To the extent that a participant recognizes ordinary income in the circumstances described above, Patterson-UTI or the subsidiary for which the participant performs services will be entitled to a corresponding deduction, provided that, among other things, the income meets the test of reasonableness, is an ordinary and necessary business expense, is not an “excess parachute payment” within the meaning of section 280G of the Code and is not disallowed by the $1,000,000 limitation on certain executive compensation under section 162(m) of the Code (see Performance Based Compensation and Parachute Payments below). +Performance Based Compensation . In general, under section 162(m) of the Code, remuneration paid by a public corporation to certain “covered employees” is not deductible to the extent it exceeds $1 million for any year. Following the enactment of the Tax Cuts and Jobs Act, beginning with the 2018 calendar year, the covered employees subject to this $1 million annual deduction limitation include any individual who serves as chief executive officer, chief financial officer or one of the other three most highly compensated executive officers for 2017 or any subsequent calendar year, and, other than grandfathered arrangements in effect on or before November 2, 2017, there is no longer any exception to this limitation for qualified performance-based compensation (as was the case for periods prior to 2018). Thus, it is expected that compensation deductions for any covered employee with respect to awards under the Amended and Restated Plan will be subject to a $1 million annual deduction limitation. The Compensation Committee may grant awards under the Amended and Restated Plan or otherwise that is or may become non-deductible when it believes doing so is in the best interests of the Company and its stockholders. +Parachute Payments . The acceleration of the exercisability or the vesting of an award upon the occurrence of a change in control may result in an “excess parachute payment” within the meaning of section 280G of the Code. A “parachute payment” occurs when an employee receives payments contingent upon a change in control that exceed an amount equal to three times his or her “base amount.” The term “base amount” generally means the average annual compensation paid to such employee during the five calendar years preceding the calendar year in which the change in control occurs. An “excess parachute payment” is the excess of all parachute payments made to the employee on account of a change in control over the employee’s base amount. If any amount received by an employee is characterized as an excess parachute payment, the employee is subject to a 20% excise tax on the amount of the excess, and Patterson-UTI is denied a tax deduction with respect to such excess. +Withholding . Awards under the Amended and Restated Plan may be subject to tax withholding. Where an award results in income subject to withholding, Patterson-UTI may require the participant to remit the withholding amount to Patterson-UTI or cause shares of Common Stock to be withheld or sold in order to satisfy the tax withholding obligations. +Section 409A . Section 409A of the Code generally provides that any deferred compensation arrangement must satisfy specific requirements, both in operation and in form, regarding (i) the timing of payment, (ii) the election of deferrals and (iii) restrictions on the acceleration of payment. Failure to comply with section 409A may result in the early taxation (plus interest) to the participant of deferred compensation and the imposition of a 20% tax on the participant of the deferred amounts included in the participant’s income. Patterson-UTI intends to structure awards under the Amended and Restated Plan in a manner that is designed to be exempt from or comply with section 409A, but does not guarantee such treatment. +Existing Plan Benefits +The following table contains information regarding the number of shares subject to all options granted under the 2014 Plan and the Amended and Restated Plan since its adoption in 2014 through April 8, 2019. +Name and Principal Position +# of Shares Covered by Options +William Andrew Hendricks, Jr. +President & Chief Executive Officer +690,150 +C. Andrew Smith +Executive Vice President & Chief Financial Officer +— +Mark S. Siegel +Chairman of the Board +513,900 +Kenneth N. Berns +Executive Vice President & Chief Commercial Officer +421,800 +James M. Holcomb +President — Patterson-UTI Drilling Company LLC +— +All Current Executive Officers as a Group +1,625,850 +All Current Non-Employee Directors as a Group +110,000 +All Current Employees as a Group (Excluding Executive Officers and Directors) +496,800 +18 +Awards Currently Contemplated Under the Amended and Restated Plan +Any future awards granted to employees, consultants, advisors and non-employee directors under the Amended and Restated Plan are subject to the discretion of the Compensation Committee or the Board, as applicable, and, therefore, are not determinable at this time. The Grants of Plan-Based Awards table below sets forth information with respect to prior awards granted to our named executive officers under the Amended and Restated Plan currently in effect. No awards have been granted that are contingent on the approval of the Amendment. However, the Company expects to grant 2019 awards in our normal grant cycle that may be settled in cash or common stock, as permitted by the Amended and Restated Plan. If the shareholders do not approve the amendment to the Amended and Restated Plan and the Company exhausts the existing amount of available shares under the Amended and Restated Plan, then the Company will settle these future awards in cash rather than common stock, to the extent necessary to avoid the issuance of shares in excess of the amount of available shares under the Amended and Restated Plan. In addition, our non-employee directors are expected to receive annual grants on January 1 consistent with the equity grants described below under “Director Compensation”. Because future awards are at the discretion of the Compensation Committee and the Board, the number of shares subject to future awards could increase or decrease and the type and terms of future awards could change as well, all without the need for future stockholder approval. If the amendment is approved, Patterson-UTI intends to thereafter register the additional shares authorized for grant under the Amended and Restated Plan on a Registration Statement on Form S-8 filed with the Securities and Exchange Commission. +The Board of Directors recommends a vote “FOR” the approval of the Amendment. Approval of the proposal requires the affirmative vote of the holders of a majority of the shares of Common Stock present in person or by proxy and entitled to vote on the proposal. Unless you give contrary instructions in your proxy, your properly submitted proxy will be voted “FOR” approval of the proposal. Abstentions will be counted as shares entitled to vote on the proposal and will have the same effect as a vote “AGAINST” the proposal. A broker non-vote will be counted for purposes of establishing a quorum, but will not be treated as a share entitled to vote on the proposal. Accordingly, broker non-votes will have no effect on the outcome of the proposal. +PROPOSAL NO. 3 +RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM +The Audit Committee appointed PricewaterhouseCoopers LLP as the independent registered public accounting firm to audit the financial statements and internal control over financial reporting of Patterson-UTI for the fiscal year ending December 31, 2019, and directed that such engagement be submitted to the stockholders of Patterson-UTI for ratification. In recommending ratification by the stockholders of such engagement, the Board of Directors is acting upon the recommendation of the Audit Committee, which has satisfied itself as to PricewaterhouseCoopers LLP’s independence, professional competence and standing. Although ratification by stockholders of the engagement of PricewaterhouseCoopers LLP is not required by Delaware corporate law or Patterson-UTI’s restated certificate of incorporation or bylaws, the Audit Committee believes a decision of this nature should be made with the consideration of Patterson-UTI’s stockholders. If the stockholders fail to ratify the appointment, the Audit Committee will reconsider whether to retain PricewaterhouseCoopers LLP and may retain that firm or another without re-submitting the matter to our stockholders. Even if the appointment is ratified, the Audit Committee may, in its discretion, direct the appointment of a different independent registered public accounting firm at any time during the year if it determines that such change would be in the best interests of Patterson-UTI and its stockholders. +It is expected that one or more representatives of PricewaterhouseCoopers LLP will be available to participate in the Meeting and will be given the opportunity to make a statement if they so desire. It also is expected that the representative(s) will be available to respond to appropriate questions from the stockholders. +The Board of Directors recommends a vote “FOR” the ratification of PricewaterhouseCoopers LLP as Patterson-UTI’s independent registered public accounting firm. Ratification of the selection of PricewaterhouseCoopers LLP requires the affirmative vote of the holders of a majority of the shares of Common Stock entitled to vote on, and voted “FOR” or “AGAINST,” the proposal. Unless you give contrary instructions in your proxy, your properly submitted proxy will be voted “FOR” such ratification. Abstentions will not be counted as votes cast “FOR” or “AGAINST” the proposal and will have no effect on the outcome of the proposal. Because the ratification of an independent registered public accounting firm is considered a routine matter, if you do not give instructions to your brokerage firm, bank, broker-dealer, or other similar organization, the brokerage firm, bank, broker-dealer, or other similar organization will nevertheless be entitled to vote your shares in its discretion and may give or authorize the giving of a proxy to vote the shares in its discretion on this proposal. +19 +PROPOSAL NO. 4 +ADVISORY APPROVAL OF EXECUTIVE COMPENSATION +In accordance with Section 14A of the Exchange Act, the Board of Directors is asking stockholders to approve a non-binding, advisory resolution on the compensation of Patterson-UTI’s executive officers who are named in the Summary Compensation Table appearing in this proxy statement (the “Named Executive Officers”). The compensation of the Named Executive Officers is described in the “Compensation Discussion and Analysis” and “Executive Compensation” sections of this proxy statement. +For a discussion of our stockholder engagement and board responsiveness to the 2018 Say on Pay vote outcome, please see “Compensation Discussion and Analysis—Demonstrating Responsiveness to Stockholders: 2018 Say on Pay Vote Result, Stockholder Engagement and Board Responsiveness.” +The compensation program for the Named Executive Officers is designed to attract and retain highly qualified individuals and to motivate and reward them for performance that benefits Patterson-UTI and its stockholders. The Compensation Committee and the Board of Directors believe that the policies and procedures detailed in the “Compensation Discussion and Analysis” achieve these goals by, among other things: +• +providing a mix of short-term compensation in the form of base salary and annual cash incentive bonuses and long-term compensation in the form of restricted stock units, performance units, and, in some years, restricted stock and stock options, which strikes a balance between offering competitive compensation packages and aligning compensation with long-term growth and creating value for stockholders; +• +emphasizing variable equity and cash compensation to link realized compensation to performance; +• +reviewing annual base salaries, in part, based on Patterson-UTI’s financial results and position and performance compared to similarly situated companies; +• +providing performance-based annual cash incentive bonuses designed to put a meaningful portion of total compensation at risk; +• +awarding long-term equity incentives whose value is tied to the achievement of certain performance goals and/or an increase in the price of the Common Stock; +• +awarding long-term equity incentives that generally vest over periods of three years; and +• +maintaining stock ownership requirements. +The Board of Directors is asking stockholders to approve the following non-binding, advisory resolution at the Meeting: +“RESOLVED, that the stockholders of Patterson-UTI Energy, Inc. (the “Company”) approve, on an advisory basis, the compensation of the Company’s named executive officers, as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the compensation tables and other narrative discussion in the Proxy Statement for the 2019 Annual Meeting of Stockholders of the Company.” +This advisory resolution, commonly referred to as a “say-on-pay” resolution, is non-binding on the Board of Directors. Although non-binding, the Board of Directors and the Compensation Committee value the views of Patterson-UTI’s stockholders and will review and consider the voting results when (i) evaluating the effectiveness of Patterson-UTI’s compensation policies and practices and (ii) making future compensation decisions for the Named Executive Officers. +The Board of Directors recommends a vote “FOR” the approval of the advisory resolution on executive compensation . Approval of the advisory resolution requires the affirmative vote of the holders of a majority of the shares of Common Stock entitled to vote on, and voted “FOR” or “AGAINST,” the proposal. Unless you give contrary instructions in your proxy, your properly submitted proxy will be voted “FOR” such approval. Abstentions will not be counted as votes cast “FOR” or “AGAINST” the proposal and will have no effect on the outcome of the proposal. A broker non-vote will be counted for purposes of establishing a quorum, but will not be treated as a vote cast “FOR” or “AGAINST” the proposal and will have no effect on the outcome of the proposal. +20 +EXECUTIVE OFFICERS +Set forth below is the name, age and position followed by a brief description of the business experience during at least the past five years for each executive officer of Patterson-UTI who is not also a member of, or nominee for election to, the Board of Directors. +Name +Age +Position +C. Andrew Smith +48 +Executive Vice President and Chief Financial Officer +Kenneth N. Berns +59 +Executive Vice President and Chief Commercial Officer +Seth D. Wexler +47 +Senior Vice President, General Counsel and Secretary +James M. Holcomb +56 +President — Patterson-UTI Drilling Company LLC +C. Andrew Smith — Mr. Smith has served as Executive Vice President and Chief Financial Officer of Patterson-UTI since September 2017. From April 2014 until September 2017, Mr. Smith served as Executive Vice President and Chief Financial Officer of Kirby Corporation, a marine transportation and diesel engine services company. From January 2014 to April 2014, Mr. Smith served as Executive Vice President – Finance of Kirby Corporation. Prior to joining Kirby Corporation, Mr. Smith served as Senior Vice President and Chief Financial Officer of Benthic Geotech and was previously Chief Financial Officer for both Global Industries, LTD and NATCO Group. Mr. Smith holds a degree in business administration from the University of Houston. +Kenneth N. Berns — Mr. Berns has served as Executive Vice President and Chief Commercial Officer of Patterson-UTI since May 2017. Mr. Berns served as a director of Patterson-UTI from May 2001 to June 2017 and as Senior Vice President of Patterson-UTI from April 2003 to May 2017. Mr. Berns served as a director of UTI from 1995 to May 2001. Mr. Berns has been an executive with REMY Investors since 1994. Mr. Berns holds a Bachelor’s Degree in Business Administration from San Diego State University and a Master’s Degree in Taxation from Golden Gate University. +Seth D. Wexler — Mr. Wexler has served as Senior Vice President, General Counsel and Secretary of Patterson-UTI since February 2017. Mr. Wexler served as General Counsel and Secretary of Patterson-UTI from August 2009 to February 2017. From March 1998 to August 2009, he specialized in securities law and mergers and acquisitions for the law firm of Norton Rose Fulbright US LLP, including as a partner of such law firm since January 2007. Mr. Wexler holds a Bachelor of Business Administration in Finance from the University of Texas at Austin, a Juris Doctorate from the University of Houston Law Center and a Masters of Business Administration from the University of Houston. +James M. Holcomb — Mr. Holcomb has served as President of Patterson-UTI Drilling Company LLC since January 2012. Mr. Holcomb came to Patterson-UTI in February 1998 with the acquisition of Robertson Onshore Drilling Company and since that time has served in numerous operational management roles, including as Senior Vice President of Operations of Patterson-UTI Drilling Company LLC from April 2006 to January 2012. Mr. Holcomb has over 30 years of experience in contract drilling operations. Mr. Holcomb holds a Bachelor of Science Degree in Business Management from LeTourneau University . +21 +COMPENSATION DISCUSSION AND ANALYSIS +The following Compensation Discussion and Analysis (“CD&A”) sets forth the principal compensation policies and programs of Patterson-UTI for our Named Executive Officers (“NEOs”). +Named Executive Officer +Title +William Andrew Hendricks, Jr. +Chief Executive Officer and President +C. Andrew Smith +Executive Vice President and Chief Financial Officer +Mark S. Siegel +Executive Chairman of the Board +Kenneth N. Berns +Executive Vice President and Chief Commercial Officer +James M. Holcomb +President, Patterson-UTI Drilling Company LLC +Demonstrating Responsiveness to Stockholders: 2018 Say on Pay Vote Result, Stockholder Engagement and Board Responsiveness +We regularly engage in dialogue with stockholders to continue to reinforce our understanding of stockholder views regarding our compensation programs. The Board and the Compensation Committee value these discussions and also encourage stockholders to provide feedback about our executive compensation programs, as described under “Communications with the Board and its Independent Members.” +Historic Say on Pay Support +Our executive compensation programs have historically received strong stockholder support (averaging over 90 percent in the three years prior to 2018). +Stockholder Engagement Before and in Response to 2018 Say on Pay Outcome +We Heard You and We Have Acted on Your Concerns +After filing our 2018 proxy statement, the initial voting results showed that our 2018 Say on Pay proposal was encountering significant stockholder opposition. In order to proactively address stockholder concerns, our Lead Director held telephonic meetings with stockholders representing approximately 26 percent of our outstanding stock prior to the date of our 2018 stockholder meeting. +At the 2018 stockholder meeting, our Say on Pay proposal received only 24 percent stockholder support, which both the Board and the Compensation Committee believe is unacceptable. In response to the 2018 Say on Pay vote outcome, and in line with our commitment to ongoing stockholder engagement, we requested additional meetings with stockholders representing approximately 61 percent of our outstanding stock. We successfully arranged engagement meetings with stockholders representing approximately 41 percent of our outstanding stock after the 2018 stockholder meeting. Our Lead Director led each of these calls with stockholders, and he listened to areas of stockholder concern, communicated our compensation philosophy and the decision-making process with respect to the 2017 and 2018 compensation programs, and requested feedback regarding possible changes to our compensation program. +By the Numbers: Stockholder Engagement by Lead Director Following our 2018 Stockholder Meeting +22 +The key concerns raised by the stock holders during the calls with our Lead Director related to: +• +the appropriateness of the Seventy Seven Energy (“SSE”) transaction bonus that was paid in 2017 +• +the total compensation in 2017 of our CEO, our Executive Chairman and our NEOs as a group on both an absolute basis and as compared with our peers +• +our having an Executive Chairman with a compensation package equivalent to that of a Chief Executive Officer +• +our having more than 50% of the NEOs’ long-term incentive compensation in 2017 being only time-based and our not limiting a potential payout under our 2017 and 2018 performance units for grants when there is a negative absolute total shareholder return for the performance period +Stockholders also discussed their desire to see clear performance goals tied to operational and strategic objectives and for additional performance criteria such as return on equity and return on invested capital for long-term incentives. Various stockholder representatives also expressed the challenge they have had both within their firms and personally due to having experienced negative returns on their investments in the oil and gas industry (including Patterson UTI) during the past four years, while compensation in the industry has increased. +Our Lead Director’s conversations with our stockholders covered a wide range of topics, including: +• +The historical context of Patterson-UTI’s compensation program. +• +The changes made to Patterson-UTI’s compensation program in 2017 that moved the annual bonus plan structure for four of our top executives, including the CEO and the Executive Chairman, away from a fixed percentage of EBITDA to a more traditional plan, with bonuses paid based on performance against financial and non-financial metrics, with the bonus potential calculated as a multiple of base compensation. +• +The increase in 2017 to our NEO base salaries from bottom quartile levels as part of the restructuring of our executive compensation program to better align the program with stockholder expectations and our peer group. +• +Challenges Patterson-UTI experienced in 2016 and 2017 with our performance units in achieving the objectives sought (noting the fact that the units had previously had a binary provision that there would be no payout if the three-year total shareholder return used for the units was negative on an absolute basis, despite the fact that the Company had top quartile relative performance in those years). +• +Reliance on our outside compensation consultant for advice on the appropriateness of the SSE transaction bonus and on the mix and amount of the components of the 2017 compensation, including the elimination of the binary provision in the performance units in 2017. +• +The stockholders’ views on financial and operational metrics and peer group selection. +• +The specific operational KPIs used in 2017 and those that were set for 2018. +• +Our history of receiving a favorable vote on say-on-pay from stockholders, including a greater than 95% vote in 2015 and 2016. +• +Mr. Siegel’s role and responsibility as Executive Chairman and the historical compensation structure that had been in place for Mr. Siegel as Executive Chairman for over 15 years. +• +Mr. Siegel’s unsolicited request to reduce his compensation in half, in light of the negative say-on-pay vote and the Compensation Committee’s acceptance of the request. +All the feedback our stockholders provided was shared with and discussed by the Compensation Committee and the full Board, and the executive compensation feedback was considered as the Compensation Committee and the Board approved changes to our executive compensation program going forward. The following table details what the Compensation Committee heard throughout the course of these conversations and how we took action to address each concern and make changes responsive to this feedback. +23 +Executive Compensation Changes Implemented in Consideration of Stockholder Feedback +What We Heard +What We Did +One-time bonus in 2017 for Seventy Seven transaction was problematic. +We hear our stockholders loud and clear on this issue, and based on the stockholder feedback, if we could do it over again, we would not have granted the SSE transaction bonus in 2017. Accordingly, the Board and the Compensation Committee do not intend to grant these types of one-time transaction bonus awards to executive management in the future and did not award any special bonuses to the executive management in 2018. +Total and individual NEO compensation compared to peers was too high as a result of the one-time transaction bonus in 2017 and having a highly paid Executive Chairman. +Total 2017 compensation was increased over normal levels due to the SSE transaction bonus. The elimination of any future one-time transaction bonuses will reduce future total compensation on a comparative basis. +In November 2018, while the Compensation Committee was evaluating actions to take following the 2018 annual meeting, Mr. Siegel, our Executive Chairman, voluntarily requested, and the Compensation Committee accepted, a reduction in his overall compensation by 50%. +2017 annual cash bonus program was perceived as not having multiple clear metrics tied to business objectives. +Although we attempted to provide insight into the cash bonus program for 2017, we understand that our disclosure may not have been sufficiently clear. We will attempt to more clearly disclose the specific metrics going forward. +In our 2018 annual cash bonus program we added two specific and quantifiable business objectives for our executive management team for part of their annual bonus. Those metrics were an EBITDA per horsepower margin improvement target in pressure pumping of 15% and an operating free cash flow generation target of $100 million. In 2019, we have employed similar metrics in our annual cash bonus program. +Long-Term Incentive Program design: +• Having more than 50% of long-term compensation in restricted stock units with time vesting and no performance criteria was viewed as problematic. +• Stockholders would like to see a cap on payouts under the performance units when the absolute TSR is negative. +In response to stockholder feedback, the Compensation Committee and the Board expect that 50% or more by target value of all future long-term incentive compensation will be comprised of grants that have specific performance criteria in addition to time vesting. The Compensation Committee and Board will continue to consider stockholder feedback in determining the appropriate increased percentage of performance-based, long-term equity incentives. +While 2018 performance unit awards were granted prior to the receipt of stockholder feedback, the Compensation Committee and the Board intend that the grants of performance units in 2019 and thereafter will provide for a capped payout at the “target” amount if TSR during the performance period is negative. +Stockholders would like the Compensation Committee to consider using metrics such as return on invested capital and return on equity, in addition to TSR and other metrics currently used. +The Compensation Committee is evaluating how to best incorporate these metrics into the compensation program. The Committee, however, does not expect that 2019 long-term incentive grants will incorporate these additional metrics, as the Committee needs to ensure the use of these metrics will not have unintended consequences on stockholder value or the ongoing alignment between pay and performance. +Stockholders would like us to review the companies in our peer group to make sure that the peer group is appropriate. +Some stockholders would like for us to consider expanding the peer group to include companies outside of our industry. +Selecting a good peer group is a challenge for the Company. We have included the major land drilling companies in our peer group, as well as the larger pressure pumping companies. We have also included other diverse oilfield service companies who we compete with for executive talent. One challenge we have is that most of the “peer companies” are either larger, given that they are multiservice international companies who compete with us through one of their divisions, or smaller or single product or service companies. +Our intent is to select a representative group of companies who we compete with directly for talent. We acknowledge some potential benefits of incorporating companies outside of our industry in our peer group, but at this time do not feel that making that change would be appropriate. We will, however, continue to evaluate this stockholder feedback as we review our peer group in the future. +Other. +We have decided to retain a new compensation consultant for 2019 to provide the Compensation Committee and the Board with a “fresh” look at all compensation matters. +24 +Executive Summary +The executive compensation program at Patterson-UTI is managed by our Compensation Committee. The program is designed to foster operational excellence and to reward strong financial performance on both a short-term and a long-term basis for the benefit of Patterson-UTI and its stockholders. +Adherence to Good Governance and Compensation Practices +We are mindful of the positive impact that strong corporate governance can have on maintaining an executive compensation program that is aligned with the interest of our stockholders. In designing the current executive compensation program, we sought to incorporate best practices for compensation governance including those summarized below. +What We Do +What We Don’t Do +☑ 50% or more of compensation in the form of long-term incentives +☑ Variable compensation based upon absolute performance and performance versus peers +☑ Claw-back provisions that apply to our all of our executive officers +☑ Share ownership requirements for our executive officers and directors +☑ Anti-pledging policy for our executive officers and directors +☑ Anti-hedging policy for our executive officers and directors +☑ Use of advice from independent compensation consultant and feedback from stockholders +☑ Hold an annual Say-on-Pay vote +☒ No re-pricing of options +☒ No single trigger change-of-control severance arrangements +☒ No dividends or dividend equivalents on unearned performance units +☒ No new agreements with tax gross-ups and none entered into in more than five years +☒ No material perquisites to NEOs that are not widely available to our other employees +Our 2018 Compensation Program Helped Drive Performance +2018 Objectives +Relevant Incentive Metrics +How We Performed +Grow Adjusted EBITDA (1) +Adjusted EBITDA metric in Annual Incentive Plan +Adjusted EBITDA increased over 64% from $491.1 million in 2017 to $806.0 million in 2018 +Pursue and maintain a leadership position in safety and operating standards, including in our response to any safety and/or operational incident +Safety and Operational Performance metric in Annual Incentive Plan +The Committee determined that management met 90% of target based on the safety performance for the year and the many actions taken during 2018 to enhance safety, but also recognized the occurrence of a significant accident during 2018 (for which executive management requested and received no safety bonus in 2017) +Improve capital efficiencies in our pressure pumping business +Pressure Pumping Margin metric in Annual Incentive Plan +Adjusted EBITDA per horsepower increased by 12% year-over-year +Grow our operating cash flow to allow for return of capital to stockholders +Operating Cash Flow metric in Annual Incentive Plan +Generated $165 million of operating cash flow in 2018; Repurchased $150 million of shares and paid $31 million in dividends during 2018 +Achieve strong stock price performance compared to our peer group +Grant of long-term equity awards (performance units and restricted stock units) that vest over three-year period ; performance units earned based on relative TSR measured over full three-year period +The TSR performance period for the performance units issued in 2018 will be measured over the three-year period ending March 31, 2021. Relative to our peers, our performance over the three-year period ended March 31, 2018 was in the 89th percentile, and the Compensation Committee currently expects to certify that performance was above the 70th percentile for the three-year period ended March 31, 2019 +(1) +For a reconciliation and explanation of this non-GAAP measure, please see page 41 of our Annual Report on Form 10-K. +25 +What Guides Our Program +As discussed in greater detail in this CD&A, the majority of compensation for our NEOs is provided in the form of variable components, with actual realized value dependent primarily upon annual financial performance or upon the multi-year performance of our common stock. As a result, target pay opportunities and the grant date value of equity awards as reported in the Summary Compensation Table can vary significantly from the compensation actually realized by our NEOs each year. +The chart below provides a comparison of total target pay for our CEO for the past three years as compared to his total realized pay for the past three years. Between January 1, 2016 and December 31, 2018, our TSR was –30%. Consistent with the experience of our stockholders, our CEO realized less total compensation than was originally targeted (approximately 24% less). +HOW WE CALCULATE TARGET AND REALIZED PAY +Definitions of +Pay +Base Salary +Annual Bonus +Performance Units +Restricted Stock / +Restricted Stock +Units +Stock Options +Target pay +Actual paid +Target opportunity +Grant date (target) value for awards granted during year +Grant date value of shares/units granted during year +Grant date value of options granted during year +Realized pay +Actual paid +Actual paid based on annual performance +Market value of units vested for performance periods ending during that year +Market value of shares/units vested during year +Value realized from options exercised during the year +26 +Our overriding philosophy for the compensation of our key executives is to link their compensation with Patterson-UTI’s operational and market performance and to establish incentives that reward them for their achievement of both short-term tactical and long-term strategic objectives. In doing so, we seek to offer competitive compensation packages designed to attract and retain highly qualified individuals and to motivate and reward our executives in achieving Patterson-UTI’s goals. Specifically, the 2018 program was designed to reinforce the following goals : +Patterson-UTI Goals +How Goal Was Reinforced in Our 2018 Compensation Program +Provide quality services for our customers in a safe and efficient manner +• Our 2018 annual incentive plan included “safety and operational performance” as a distinct metric +• Our financial performance metrics required quality operational performance +Generate strong financial performance and returns for our stockholders +• The majority of executive compensation was delivered in the form of variable, at-risk compensation (as referenced in the charts below) +• The majority of the payout under our 2018 annual incentive plan was based on financial performance metrics (90%) +• Our 2018 annual incentive plan rewarded executives for cash flow generation through the use of Adjusted EBITDA and Operating Cash Flow as performance metrics, while also encouraging executives to generate higher pressure pumping margins through the use of Adjusted EBITDA per active horsepower as a performance metric +• Our long-term incentive plan incentivizes the creation of stockholder value on both an absolute and relative basis through the grant of equity compensation and the use of a relative TSR performance goal under our performance units +Attract and retain highly qualified individuals, with a strong emphasis on teams working together to capitalize on opportunities and solve problems +• We benchmarked our executive pay programs against broader oilfield services companies +• We did not target a specific market percentile for executive compensation. Instead, executive compensation was set based on a holistic review of several factors, including market pay levels, individual performance and qualifications, and executive tenure +• Our annual and long-term incentive programs generally reward company-wide results rather than performance against individual objectives +• The majority of our executives’ compensation was delivered in the form of long-term incentives that vest over a multi-year period to aid in retention of executives +For 2018, target total direct compensation for our NEOs was most heavily weighted toward long-term incentives, as shown below. +2018 TARGET TOTAL DIRECT COMPENSATION +As discussed above, going forward the Compensation Committee intends to provide 50% or more of long-term incentive compensation in the form of grants that have performance criteria in addition to time vesting. +27 +Process for Determination of Executive Compens ation +Role of the Compensation Committee +The Board of Directors has delegated the management of Patterson-UTI’s executive compensation program to the Compensation Committee. The Compensation Committee meets on a regular basis to consider compensation matters and to review how Patterson-UTI’s plans and policies work in practice. Each of the Compensation Committee’s current members is an independent director as defined by the Nasdaq listing standards. +Compensation determinations and equity awards are conducted through a process that solicits the input from management through our Executive Chairman and our CEO, as well as from outside compensation consultants retained by the Compensation Committee. In addition to the recommendations of management and consultants, the Compensation Committee considers feedback from Patterson-UTI’s stockholders, guidelines of proxy advisory firms, reported trends in compensation, internal budgets, historical data for the Company and its peers, strategic planning updates and other information that it considers relevant. +Chairman and CEO +Our Chairman and our CEO provide the Compensation Committee with reviews of the performance of other executive officers and senior managers, including the other NEOs. The Compensation Committee also engages our Chairman and CEO in an annual dialog with our Committee Chairman and our Lead Director on our compensation program and seeks their input on and review of proposals for long-term incentive grants. This process results in a recommendation that is considered by our Compensation Committee as a whole. +Independent, Outside Compensation Consultants +Our Compensation Committee regularly utilizes outside compensation consultants to help assess and design our executive compensation program. These consultants are paid on either a basic, fixed-fee structure plus expenses or an hourly rate structure plus expenses. These outside consultants provide data and advice on historical compensation and stockholder returns, market trends and peer compensation practices. The Compensation Committee retained Pearl Meyer as its consultant and advisor for executive compensation matters from 2012 to 2018. Following the 2018 negative Say on Pay vote, the Compensation Committee engaged Frederic W. Cook & Co., Inc. (“FW Cook”) to assist in responsiveness to stockholder concerns, including engagement efforts with stockholders and formulating revisions to the Company’s executive compensation practices. FW Cook has also been engaged to advise on executive compensation matters for 2019. +Our Compensation Committee regularly reviews the services provided by its outside consultants and has determined that the engagement of Pearl Meyer did not, and FW Cook does not, raise any conflicts of interest. The Compensation Committee receives a confirmation certification of independence from its consultants annually. +In 2018, Pearl Meyer provided the Compensation Committee with information on the compensation practices of our peer group and other oilfield service companies and on the reasonableness of our program as compared to the compensation practices of our peer group. In so doing, Pearl Meyer provided the Compensation Committee with information on each element of total direct compensation for our executive officers as well as a comparison of each such element of compensation against our peers and the broader oilfield services market. Pearl Meyer also provided the Compensation Committee with information on the cost and potential dilution to our stockholders of our equity-based incentives and compared our equity usage to that of our peer group. +Peer Group +The table below outlines the Company’s current peer group. This peer group is used by the Company and Compensation Committee to benchmark executive pay levels and to measure relative TSR performance for purposes of determining achievement under the Company’s performance units. +One of the challenges with developing a robust peer group for benchmarking executive compensation is that there are few companies in the broader oilfield services industry that are comparably sized to the Company. The Company is larger than most “mid-sized” oilfield services companies but not nearly as large as the “large-cap” oilfield services companies. In order to develop a robust group to benchmark executive compensation, the Company includes peers that are smaller (and which do not fully reflect the scale and complexity of the Company) and peers that are in some cases much larger than the Company. This approach results in the Company being positioned near the 75 th percentile for both revenue and market cap (as illustrated in the tables below). This relative positioning is an influencing factor in how executive compensation is administered at the Company (i.e., since we are larger than most of our peers, we would expect compensation to be positioned above the median of our peer group). +28 +Revenues and Market Capitalization of Peer Group +Revenues +Market Capitalization +For the Year Ended 12/31/18 ($ Millions) +as of 12/31/18 ($ Millions) +Halliburton (1) +$ +23,995 +Halliburton (1) +$ +23,285 +TechnipFMC +$ +12,553 +National Oilwell Varco +$ +9,853 +National Oilwell Varco +$ +8,453 +TechnipFMC +$ +8,818 +Weatherford +$ +5,744 +Helmerich & Payne +$ +5,227 +Patterson-UTI +$ +3,327 +Transocean +$ +4,229 +Nabors +$ +3,058 +Patterson-UTI +$ +2,248 +Transocean +$ +3,018 +Ensco +$ +1,547 +Helmerich & Payne +$ +2,494 +Diamond Offshore +$ +1,297 +Superior Energy +$ +2,130 +Oceaneering +$ +1,192 +Oceaneering +$ +1,909 +Rowan +$ +1,066 +Ensco +$ +1,705 +Oil States +$ +856 +Precision Drilling +$ +1,541 +Unit Corp +$ +772 +Oil States +$ +1,088 +Nabors +$ +716 +Forum Energy +$ +1,064 +Precision Drilling +$ +696 +Diamond Offshore +$ +1,060 +Noble Corp +$ +647 +Noble Corp +$ +1,036 +Weatherford +$ +560 +Basic Energy +$ +965 +Superior Energy +$ +518 +Unit Corp +$ +843 +Forum Energy +$ +448 +Rowan +$ +825 +Basic Energy +$ +102 +75th Percentile +$ +3,048 +75th Percentile +$ +3,558 +Median +$ +1,807 +Median +$ +961 +25th Percentile +$ +1,061 +25th Percentile +$ +659 +PTEN Rank +77 +% +PTEN Rank +72 +% +Source: S&P Capital IQ +(1) +The largest company in our peer group is a direct competitor in our pressure pumping business, and we believe we are one of the top five pressure pumping companies in terms of total horsepower in the United States. +Components of 2018 Compensation +Base Salary +The table below outlines the base salaries for our executives. In 2018, we held base salaries flat for all of the executives (with the exception of the decrease for Mr. Siegel). As previously discussed, while the Compensation Committee was evaluating actions to take following the 2018 annual meeting, Mr. Siegel requested, and the Compensation Committee accepted, a reduction in his overall compensation by 50%. As a result of these changes, Mr. Siegel’s base salary was reduced by $400,000 to $400,000, effective as of November 2, 2018. +2018 ANNUAL SALARIES +William Andrew Hendricks, Jr. +$ +1,000,000 +C. Andrew Smith +$ +450,000 +Mark S. Siegel +$ +400,000 +Kenneth N. Berns +$ +450,000 +James M. Holcomb +$ +465,000 +Annual Incentive Compensation +In 2018, the Committee adopted an annual cash bonus program that relied upon multiple, pre-established objectives for determining bonus compensation. The bonus plan set a target opportunity for each executive’s annual cash bonus as a percent of salary, with payout contingent upon meeting Patterson-UTI’s financial goals and other KPIs. The Compensation Committee considered the average range of performance and payouts, and the Committee believes – based on advice from its compensation consultant – that Patterson-UTI’s range was consistent with typical, general industry practice. +29 +The 2018 bonus metrics, along with the definition of each metric and the corresponding rationale , are provided in the table below. +2018 ANNUAL INCENTIVE METRICS +Metric (Weighting) +Description +Rationale +Adjusted EBITDA (70%) +Adjusted EBITDA is defined as net income (loss) plus net interest expense, income tax expense (benefit) and depreciation, depletion, amortization and impairment expense (including impairment of goodwill). Targeted Adjusted EBITDA was set at $911 million for 2018, which was 86%, or $491 million, higher than actual 2017 Adjusted EBITDA. +We use Adjusted EBITDA because we believe that this metric establishes a clear and consistent link between bonus compensation and our company’s financial performance. Additionally, Adjusted EBITDA is a significant consideration used by analysts in evaluating the Company and is therefore, we believe, a key driver of the Company’s stock price. +Safety and Operational Performance (10%) +Holistic evaluation of pursuing and/or maintaining Patterson-UTI’s leadership position in safety and operating standards, including the response to any safety and/or operational incident; incident rates; training programs; ability to work for all operators; and reinforcement of safety culture. +The safety of our employees and others is our highest priority. We believe there is no job worth performing if it can’t be performed safely. The ability to provide quality services in a safe and efficient manner is also critical to being able to meet our financial goals. +Pressure Pumping Margin (10%) +Improving pressure pumping segment Adjusted EBITDA per active horsepower from 2017 average to 2018 average by more than 15%. +Ensure that we are deploying our pressure pumping fleet in a capital efficient manner. +Operating Cash Flow (10%) +Generating positive operating cash flow (where operating cash flow is defined as Adjusted EBITDA less cash capital expenditures, in excess of $100 million, as adjusted for any Board-approved increase in capital expenditures). +Focus on cash flow generation furthers our goal of having a business model that is self-sustaining, can weather the ebbs and flows of the commodity and business cycle, and allows for return of capital to stockholders. +Note: For Mr. Holcomb’s annual cash bonus opportunity, Company-wide Adjusted EBITDA was replaced with Adjusted EBITDA of our contract drilling segment (targeted Adjusted EBITDA of $461 million) and the Pressure Pumping Margin metric was replaced with a Fleet Upgrade metric (which measured the successful and cost-effective upgrade of Patterson-UTI’s rig fleet). +The overall annual cash bonus plan for 2018 was subject to the requirement that for each metric, a minimum level of 70% of the target for such metric was achieved for the year. Once that minimum requirement was met, the annual cash bonus opportunity attributable to that metric was determined based on a measurement of actual performance relative to target performance, with a 40% payout for threshold achievement of 70% of target, 100% payout for achievement of 100% of target and 200% maximum payout for achievement of 120% of target or more; provided, that the threshold achievement and actual performance for the safety metric was based on a holistic evaluation of multiple factors described in footnote 1 of the “2018 Annual Incentive Metrics and Percentage Payout Calculations” table below, with actual achievement subject to the discretion of the Compensation Committee. Linear interpolation was used to calculate payout for performance between achievement levels. +The threshold, target and maximum annual cash opportunities for the NEOs for 2018 are set forth below: +2018 ANNUAL INCENTIVE OPPORTUNITY +Threshold +Target +Maximum +William Andrew Hendricks, Jr. +$ +500,000 +$ +1,250,000 +$ +2,500,000 +C. Andrew Smith +$ +225,000 +$ +562,500 +$ +1,125,000 +Mark S. Siegel (1) +$ +200,000 +$ +500,000 +$ +1,000,000 +Kenneth N. Berns +$ +225,000 +$ +562,500 +$ +1,125,000 +James M. Holcomb +$ +148,800 +$ +372,000 +$ +744,000 +( 1 ) +The Compensation Committee reviewed and accepted an unsolicited request by Mr. Siegel to reduce his overall compensation by 50%. As a result, Mr. Siegel’s cash bonus opportunity for 2018 was reduced in November 2018 by 50%, as reflected in the table above. +30 +The overall payout under the annual cash bonus plan for our NEOs was calculated as follows: +2018 ANNUAL INCENTIVE METRICS AND PERCENTAGE PAYOUT CALCULATIONS +Metrics +Weighting +Threshold Achievement +Target Achievement +Maximum Achievement +Actual Achievement +Payout +Adjusted EBITDA +70% +$638 million +$911 million +$1,093 million +$806 million +54% +Safety and Operating Performance +10% +(1) +8% +Pressure Pumping Margin Improvement +10% +10.5% +15% +18% +12% +6% +Operating Cash Flow +10% +$70 million +$100 million +$120 million +$165 million +20% +Total +100% +88% (2) +(1) +The Committee determined that the NEOs met 90% achievement for this metric based on (i) the NEOs receiving $0 for this metric for 2017 despite above-target performance during 2017, (ii) the Company’s 2018 drilling operations continuing to have a total recordable incident rate below the land drilling industry average, (iii) the Company’s overall total recordable incident rate decreasing for 2018 compared to 2017 and this rate being lower for December 2018 than December 2017, (iv) the Company’s pressure pumping business achieving an improved total recordable incident rate for 2018 compared to 2017, and (v) the actions taken by the business segments during 2018 to enhance safety. Although the Committee felt there had been significant success in continuous safety improvement, it believed that the achievement should be below target due to the occurrence of a significant accident that occurred at a drilling site in January 2018. As previously disclosed, the NEOs unanimously requested, and the Committee agreed to, waive consideration of any payout attributable to this metric for the Company’s 2017 annual cash bonus opportunity because of that event. When assessing payout for this KPI for 2018, the Committee took into account that despite high performance there was no payout for this KPI for 2017. +(2) +As discussed above, for Mr. Holcomb’s bonus opportunity, Company-wide Adjusted EBITDA was replaced with Adjusted EBITDA of our contract drilling segment and Pressure Pumping Margin was replaced with a Fleet Upgrade metric (which measured the successful and cost-effective upgrade of Patterson-UTI’s rig fleet). The actual payouts for Mr. Holcomb under these two replacement metrics were determined based on the achievement in 2018 of: drilling segment Adjusted EBITDA of $538 million (128.5%), which was well above the targeted Adjusted EBITDA for this segment, and the Committee’s assessment of successful Rig Fleet Upgrade (10%). As a result, Mr. Holcomb’s total payout under his bonus program was calculated as 166.5% of target. +The payout percentage under the relevant bonus programs was applied to each executive’s bonus target as follows to determine their actual 2018 cash bonus payment. +2018 ANNUAL INCENTIVE CASH PAYOUTS +NEO +Bonus Target +Bonus Payout +(as a % of Target) +Actual Bonus +William Andrew Hendricks, Jr. +$ +1,250,000 +88% +$ +1,100,000 +C. Andrew Smith +$ +562,500 +88% +$ +495,000 +Mark S. Siegel (1) +$ +500,000 +88% +$ +440,000 +Kenneth N. Berns +$ +562,500 +88% +$ +495,000 +James M. Holcomb +$ +372,000 +166.5% +$ +619,380 +(1) +As discussed above, this table reflects the 50% reduction in Mr. Siegel’s cash bonus opportunity for 2018. +31 +Long-term Incentive Compensation +We have historically targeted 60% or more of total NEO compensation to be in the form of equity-based awards, with time-based vesting, performance-based vesting, or both. This emphasis on equity-based compensation was intended to enhance alignment between our executives and our stockholders. We plan to retain this emphasis going forward, and we believe that by tying a large portion of compensation to equity we ensure that our NEOs can only fully realize the potential value of their compensation if our stockholders also benefit. The pie charts below illustrate our 2018 target total direct compensation for our NEOs (74% of which was in the form of long-term equity incentive awards) and our 2018 long-term incentive award mix. As described below, all of the long-term equity incentive awards granted in 2018 vest over a three-year period. +The allocation of long-term equity grants between Restricted Stock Units and Performance Units, as illustrated in the pie chart above, was made with the advice of the Committee’s compensation consultant and reflected the historical challenges that the Company has had with Performance Units when there has been top quartile relative TSR against peers but a negative absolute TSR due to market conditions. As discussed above, going forward the Committee intends to provide 50% or more of long-term incentive compensation in the form of grants that have performance criteria in addition to time vesting. +LONG-TERM INCENTIVE AWARDS +2018 Long- +Term Incentive +Award Type +2018 Design +Alignment with Philosophy +Planned 2019 Change +Restricted Stock Units +• Time-vested units that are settled in shares of stock +• 1/3 of each award vests after one year +• 1/36 of each award vests monthly thereafter (1) +• Value dependent upon stock price performance +• Enhances retention of executive talent +• Encourages long-term share ownership +• In response to stockholder feedback, the Compensation Committee and the Board expect that 50% or more by target value of all future long-term compensation will be comprised of grants that have specific performance criteria in addition to time vesting . The Compensation Committee and Board will continue to consider stockholder feedback in determining the appropriate increased percentage of performance-based, long-term equity incentives +• While 2018 performance unit awards were granted prior to the receipt of stockholder feedback, the Compensation Committee and the Board intend that the grants of performance units in 2019 and thereafter will provide for a capped payout at the “target” amount if TSR during the performance period is negative +Performance +Units +• Performance-vested units +• Number of units earned depends upon stock price performance relative to our peers over a full three year period +• No shares are earned for performance below the 25 th percentile +• Maximum shares are not earned unless performance is at the 75 th percentile or above +• Performance-contingent +• Number of shares dependent upon performance relative to peers +• Value of shares dependent upon stock price +(1) +For Mr. Holcomb, one-third of each award vests in annual installments over a three-year period. +32 +2018 Annual Equity-Based Compensation +The Compensation Committee made the following equity-based grants in 2018 to our NEOs, considering Patterson-UTI’s 2017 financial results and comparative total stockholder return performance over the one-, two- and three-year periods ended March 31, 2018. The target value of the grants was determined with the assistance of the Company’s compensation consultant and was set at levels that if target performance is achieved over the performance period, the total target compensation would be at the 75th percentile of the peer group. +2018 ANNUAL EQUITY-BASED GRANTS +Restricted +Stock Units(1) +Performance +Units(2) +# +Target +Value +# +Target +Value +Total +Target +Value +William Andrew Hendricks, Jr. +249,500 +$ +4,900,180 +106,900 +$ +2,099,516 +$ +6,999,696 +C. Andrew Smith +53,500 +$ +1,050,740 +22,900 +$ +449,756 +$ +1,500,496 +Mark S. Siegel +199,600 +$ +3,920,144 +85,500 +$ +1,679,220 +$ +5,599,364 +Kenneth N. Berns +92,700 +$ +1,820,628 +39,700 +$ +779,708 +$ +2,600,336 +James M. Holcomb +48,100 +$ +944,684 +20,600 +$ +404,584 +$ +1,349,268 +(1) +Restricted stock units were awarded on April 24, 2018. The target value indicated in the table is the value on the date of grant based on the closing price of Patterson-UTI’s common stock on the date of grant. +(2) +Performance u nits were awarded on April 24, 2018. The number of shares indicated in the table represents the target number of shares for each respective award. According to the terms of the awards, the actual number of shares earned by the recipient can range from zero shares to two times the target number of shares depending on how Patterson-UTI performs in terms of total stockholder return relative to its peer group. The target value indicated in the table is the value of the target number of shares on the date of grant based on the closing price of Patterson-UTI’s common stock on the date of grant. +The performance units granted in 2018 will be earned based on Patterson-UTI’s total stockholder return over a three-year period (April 1, 2018 to March 31, 2021), when compared to stockholder return of the members of the peer group as follows: +Performance Level +Relative TSR Percentile Rank +Payout (as a % of Target) +Below Threshold +<25 th Percentile +0% +Threshold +25 th Percentile +50% +Target +50 th Percentile +100% +Maximum +75 th Percentile +200% +The grant of shares when achievement is between the 25th and 50th percentile, and the 50th and 75th percentile, will be determined using linear interpolation for levels of achievement between these points. +Payout in 2018 of 2015 Performance Unit Awards +For the three-year performance period that ended on March 31, 2018, Patterson-UTI’s total stockholder return, or TSR, was 6.2%. This performance was at the 89 th percentile relative to our peers. Based on this performance, the 2015 performance units paid out at 200% of the target level. +2015 Performance Unit Awards +(Performance Period Ended in 2018) +Units Granted +Units Earned +# +Grant +Value +# +Value at +Vesting +William Andrew Hendricks, Jr. +63,600 +$ +1,352,136 +127,200 +$ +2,498,208 +C. Andrew Smith +— +$ +— +— +$ +— +Mark S. Siegel +50,800 +$ +1,080,008 +101,600 +$ +1,995,424 +Kenneth N. Berns +38,100 +$ +810,006 +76,200 +$ +1,496,568 +James M. Holcomb +— +$ +— +— +$ +— +TSR calculations for Patterson-UTI and our peers were measured based on the change in the value of the relevant stock from the first trading day of the performance period to the last trading day of the performance period, in each case measured using the average closing price of the relevant stock for the 20 trading day period ending on such trading day, with dividends reinvested. +33 +Capped Payout in 2019 of 2016 Performance Unit Awards +In late April of each year, the Compensation Committee reviews and certifies the performance results for the applicable performance period. While this review and certification has not occurred as of the date of this proxy statement, for the 2016 performance units with a three-year performance period ended March 31, 2019, relative to our peers we performed well, and the Compensation Committee currently expects to certify that performance was above the 70 th percentile. Because the Company’s total stockholder return for this performance period was negative, however, pursuant to the terms of the 2016 performance units, recipients will be entitled to only 50% of the number of shares they would have received had the Company’s total stockholder return been positive. +Retirement Plans +Patterson-UTI offers a 401(k) plan to its employees, including its NEOs. Participants may contribute a portion of their base salary to the 401(k) plan, subject to federal limits. Patterson-UTI makes matching contributions up to four percent of each participant’s eligible base salary. The NEOs of Patterson-UTI are eligible to participate in the 401(k) plan on the same basis as other employees. Patterson-UTI does not have any other retirement plan. The Committee believes that benefits to executives should generally be aligned with those provided for other employees, and thus we generally do not provide retirement plans beyond a 401(k) plan for our executives. +Other Executive Compensation Matters +Share Ownership Guidelines and Stock Holding Requirements +We have had significant share ownership requirements in place for more than 14 years. Our Nominating and Corporate Governance Committee recently approved an enhancement to our share ownership guidelines in order to better align our ownership requirements with those of our peers. Our share ownership guidelines are applicable to all Section 16 officers and directors of Patterson-UTI. The guidelines require our Chief Executive Officer to own a number of shares of our common stock having a value at least equal to five times his or her base salary, and require our other Section 16 officers to own a number of shares of our common stock having a value at least equal to two times his or her base salary. The guidelines also require our non-executive directors to own a number of shares of our common stock having a value at least equal to five times his or her annual base cash retainer. +Each Section 16 officer or non-executive Director has five years from the date of appointment or election to their position to satisfy the ownership guidelines. +Share Ownership Guidelines +President and Chief Executive Officer +Number of shares equal to 5 times base salary +Other Section 16 Officers +Number of shares equal to 2 times base salary +Outside Directors +Number of shares equal to 5 times annual base cash retainer +Each Section 16 officer and director is required to maintain ownership of the net after-tax shares of Common Stock pursuant to any equity-based awards received from Patterson-UTI, unless such person has met his or her individual ownership requirement. +Each person subject to this policy was in compliance with these guidelines as of the date of this proxy statement. +Clawback Policy +As provided for in Patterson-UTI’s Corporate Governance Guidelines and set forth in written agreements with its executive officers, Patterson-UTI has implemented a clawback policy that allows for the recovery of bonus, severance or incentive based compensation from an executive officer in the event the Board of Directors learns that any misconduct by such executive officer contributed to Patterson-UTI having to restate all or a portion of its financial statements. The Board will take such action as it deems necessary to remedy the misconduct, prevent its recurrence, and if it deems appropriate based on the relevant facts and circumstances, take remedial action against such executive officer, which may include requiring the reimbursement of any bonus or incentive compensation awarded to such executive officer or effecting the cancellation of stock awards previously granted to such executive officer if: (i) the amount of the bonus, incentive compensation or stock award was calculated based upon the achievement of certain financial results that were subsequently the subject of a restatement, (ii) such executive officer engaged in intentional misconduct that caused or partially caused the need for the restatement, and (iii) the amount of the bonus, incentive compensation or stock award that would have been awarded to such executive officer had the financial results been properly reported would have been lower than the amount actually awarded. +34 +In addition to a stand-alone policy, Patterson-UTI’s 2005 Long-Term Incentive Plan and the Amended and Restated 2014 Long-Term Incentive Plan provide that if Patterson-UTI is required to prepare an accounting resta tement due to the material noncompliance of Patterson-UTI, as a result of misconduct, with any financial reporting requirement under the securities laws, or if the participant is one of the persons subject to automatic forfeiture under Section 304 of the S arbanes-Oxley Act of 2002, the participant shall reimburse Patterson-UTI that amount of any payment in settlement of an award earned or accrued during the twelve-month period following the first public issuance or filing with the SEC (whichever just occurr ed) of the financial document embodying such financial statement requirement. +Anti-Hedging Policy +Patterson-UTI has an anti-hedging policy. Our directors and executive officers may not purchase, sell or write options on Patterson-UTI securities or engage in transactions in other third-party derivative securities with respect to Patterson-UTI securities. +Anti-Pledging Policy +Patterson-UTI has an anti-pledging policy. Our directors and executive officers may not engage in transactions in which Patterson-UTI securities are used as collateral for any loan, including, but not limited to, “margin loans” in a brokerage account. +Perquisites and Personal Benefits +The Compensation Committee believes that benefits to executives should generally be aligned with those provided for other employees. No Named Executive Officer received perquisites totaling more than $10,000, except that Mr. Holcomb received an automobile allowance of $12,000 in 2018, $12,000 in 2017 and $13,398 in 2016. Accordingly, except for this automobile allowance, the perquisites do not meet the threshold that would require disclosure in the Summary Compensation Table below. +Evaluation of Compensation Risk +We have considered the potential risks associated with the design of our compensation program for employees. With regard to our executive compensation program in particular, we do not believe that our program creates unreasonable risks for the following reasons: +• +The emphasis on long-term equity based awards and the required vesting periods help minimize the potential for excessive risk taking and actions aimed at short-term stock gains; +• +Our use of different types of equity grants helps offset these risks; +• +We have meaningful share ownership guidelines; +• +We maintain an anti-hedging policy; +• +We maintain a clawback policy that applies to all of our executive officers for both cash and equity incentives; and +• +Four of the NEOs have been with Patterson-UTI for more than seven years and have an established track record of focus on growing long-term sustainable growth for Patterson-UTI. +Our Board has also considered in its risk assessment of our compensation program its view that our management is highly ethical and focused on creating true long-term value for stockholders and not focused on just short-term gains. The Board, primarily through its Compensation Committee and Audit Committee, monitors and considers risks associated with Patterson-UTI’s compensation plans on a regular basis. +35 +Employment-Related Agreements and Other Matters +Change in Control, Severance and Employment Agreements +Change in Control Agreements and Tax Gross-Up Payments. Patterson-UTI has entered into change-in-control agreements with Messrs. Siegel and Berns and employment agreements with Messrs. Holcomb, Hendricks and Smith that contain change-in-control provisions, as further described in “Employment-Related Agreements” below. Patterson-UTI believes that such agreements may under certain circumstances protect Patterson-UTI’s interest by discouraging the NEOs from leaving employment out of concern for the security of their jobs or from otherwise being unable to concentrate on their work. We believe that the change in control agreements may also help Patterson-UTI attract and retain new key employees by reducing the personal uncertainty and anxiety that arises from the possibility of a future business combination. Any future change in control or severance agreements will be approved subject to the circumstances existing at the time. +As was customary when the change in control agreements with Messrs. Siegel and Berns were entered into more than ten years ago, each change-in-control agreement provides the executive with a full gross-up payment for any excise taxes imposed on payments and benefits received under the change-in-control agreement or otherwise, including other taxes that may be imposed as a result of the gross-up payment. As indicated above, the Compensation Committee subsequently adopted a policy, more than five years ago, to no longer approve tax gross-ups in connection with compensation arrangements, and the employment agreements entered into with Mr. Hendricks in 2016 and Messrs. Holcomb and Smith in 2017, which are described below, do not include a tax gross-up provision. +Severance Agreements. In order to address prior severance agreements between UTI Energy Corp. and each of Messrs. Siegel and Berns, Patterson-UTI has entered into written letter agreements with each of these executives pursuant to which Patterson-UTI has agreed to pay each such person within ten days of the termination of his employment with Patterson-UTI for any reason (including voluntary termination by him), an amount in cash equal to his annual base salary at the time of such termination. Any payment made by Patterson-UTI pursuant to these letter agreements will reduce dollar for dollar any payment owed to such person, if any, pursuant to the change-in-control agreements referenced above. +Employment Agreements. Patterson-UTI entered into an employment agreement with Mr. Hendricks in August 2016, with Mr. Holcomb in January 2017 and with Mr. Smith in September 2017. Each employment agreement generally has an initial three-year term, subject to automatic annual renewal thereafter. The employment agreement with Mr. Hendricks provides for an annualized salary of 600,000 per year, subject to any increases that may be granted in the future (his annualized salary was increased to $1,000,000 per year in May 2017), the employment agreement with Mr. Holcomb provides for an annualized salary of $465,000, subject to any increases that may be granted in the future, and the employment agreement with Mr. Smith provides for an annualized salary of $450,000, subject to any increases that may be granted in the future. Under specified circumstances, Patterson-UTI may terminate the executive’s employment under his employment agreement for cause (as defined in the employment agreement). The employment agreement also provides for, among other things, severance payments and the continuation of certain benefits following termination by Patterson-UTI of the executive other than for cause, or termination by the executive for good reason (as defined in the employment agreement). As discussed above and in more detail below, the employment agreements contain change in control provisions. +We believe the change-in-control agreements, severance agreements and the employment agreements are important components of our overall executive compensation program. The employment agreements currently in effect set forth the manner by which the employment relationship may be extended or terminated, the compensation and benefits that we provide during the term of employment and the obligations each party has in the event of termination of the executive officer’s employment. We believe that severance protections, particularly in the context of a change-in-control transaction, play a critical role in attracting and retaining key executive officers. Providing this type of protection is common in the oilfield services industry. In addition, these benefits serve our interests by promoting a continuity of management and aligning management’s interests with those of our stockholders in the context of an actual or threatened change in control transaction. +Please see “Employment-Related Agreements” below for further description of the change-in-control agreements, severance agreements and employment agreements. +36 +Section 162(m) Considerations +We consider the impact of accounting and tax treatment when designing all aspects of compensation, but the primary driver of program design is the support of business objectives. In that regard, we review and consider the deductibility of executive compensation under Section 162(m) of the Internal Revenue Code, which limits the tax deductibility by a corporation of compensation in excess of $1 million paid to each covered employee. As a result of a change in the law effective commencing with the 2018 tax year, covered employees for this purpose generally include any individual who serves as chief executive officer, chief financial officer or one of the other three most highly compensated executive officers for 2017 or any later calendar year. In addition, there is no longer any performance-based compensation exception to this limitation as was the case under prior law. However, some outstanding awards may be eligible for transition rules in effect for binding contracts in effect on November 2, 2017, which should continue to allow these awards to maintain their exemption from the $1 million annual deduction limitation for so long as such grants are not materially modified. The Compensation Committee views the tax deductibility of executive compensation as one factor to be considered in the context of its overall compensation philosophy, but it will continue to retain discretion to pay compensation that is subject to the $1 million deductibility limit. +Compensation Committee Report +The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based upon such review and discussion, the Compensation Committee has recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement. +Terry H. Hunt, Chairman +Tiffany (TJ) Thom Cepak +Michael W. Conlon +Curtis W. Huff +37 +EXECUTIVE COMPENSATION +The following table sets forth information concerning compensation for the fiscal year ended December 31, 2018 with respect to the principal executive officer, the principal financial officer and the other Named Executive Officers of Patterson-UTI: +Summary Compensation Table +Name and Principal Position(s) +Year +Salary +($) +Bonus +($)(1) +Stock +Awards +($)(2) +Option +Awards +($)(3) +Non-equity +Incentive plan +Compensation +($)(4) +All Other +Compensation +($)(5) +Total +($) +William Andrew Hendricks, Jr. +2018 +1,000,000 +— +7,653,924 +(6) +— +1,100,000 +11,000 +9,764,924 +President & Chief +2017 +853,846 +2,250,000 +8,951,693 +— +2,187,500 +10,800 +14,253,839 +Executive Officer +2016 +600,000 +— +3,622,171 +1,526,508 +468,939 +10,600 +6,228,218 +C. Andrew Smith +2018 +450,000 +200,000 +1,640,644 +(7) +— +495,000 +11,000 +2,796,644 +Executive Vice President & +2017 +122,885 +250,000 +1,599,989 +— +984,375 +4,154 +2,961,403 +Chief Financial Officer +Mark S. Siegel +2018 +752,308 +— +6,122,624 +(8) +— +440,000 +— +7,314,932 +Chairman of the Board +2017 +635,577 +2,550,000 +7,882,637 +— +1,750,000 +— +12,818,214 +2016 +350,000 +— +1,406,971 +732,278 +375,151 +— +2,864,400 +Kenneth N. Berns +2018 +450,000 +— +2,843,300 +(9) +— +495,000 +— +3,788,300 +Executive Vice President & +2017 +382,404 +850,000 +3,758,848 +— +984,375 +— +5,975,627 +Chief Commercial Officer +2016 +265,000 +— +1,757,844 +915,227 +312,626 +— +3,250,697 +James M. Holcomb +2018 +465,000 +— +1,475,340 +(10) +— +619,380 +23,000 +(11) +2,582,720 +President — Patterson-UTI +2017 +460,692 +500,000 +1,621,422 +— +569,625 +22,800 +3,174,539 +Drilling Company LLC +2016 +325,000 +— +890,110 +— +111,416 +23,998 +1,350,524 +(1) +Bonuses include amounts awarded in respect of the SSE merger pursuant to a one-time pool, except in the case of Mr. Smith, whose bonuses include fixed amounts awarded pursuant to his employment agreement as a condition to his commencement of employment with the Company. +(2) +Amounts include the fair value of awards at the date of grant as determined in accordance with FASB ASC Topic 718 with respect to restricted stock or restricted stock units awarded to the Named Executive Officer in the fiscal years ended December 31, 2018, 2017 and 2016, with respect to performance units awarded to the Named Executive Officer in the fiscal year ended December 31, 2018, and with respect to performance units awarded to Messrs. Hendricks, Siegel and Berns in the fiscal years ended December 31, 2017 and 2016. Performance conditions for all awards of restricted stock and restricted stock units had been satisfied as of December 31, 2018. For additional information related to the assumptions used and valuation of restricted stock, restricted stock units and performance units, see Note 11 to the consolidated financial statements in Patterson-UTI’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018. As described in the 10-K, the fair value of performance unit awards was determined based on a Monte-Carlo simulation model, which is consistent with the valuation used by Patterson-UTI for the recognition of compensation expense under FASB ASC Topic 718. The Monte-Carlo simulation model takes into account expected price movement of Patterson-UTI stock as compared to peer companies. As a result of Patterson-UTI’s pre-grant 2018 TSR performance relative to peer companies, the Monte-Carlo simulation model assigned a higher value to each 2018 performance unit award than the closing price of Patterson-UTI’s stock on the grant date. Therefore, the value reflected in the 2018 Summary Compensation Table does not reflect the target value shown in the 2018 Annual Equity-Based Compensation section of the Compensation Discussion and Analysis in this proxy statement. +(3) +Amounts represent the fair value at the date of grant as determined in accordance with FASB ASC Topic 718 with respect to stock options awarded to the Named Executive Officer in the fiscal year ended December 31, 2016. No stock options were awarded in the fiscal years ended December 31, 2018 and 2017. For additional information related to the assumptions used in connection with the valuation of stock options using the Black-Scholes-Merton option pricing model, see Note 11 to the consolidated financial statements in Patterson-UTI’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018. +(4) +Amounts represent annual cash bonuses earned for the fiscal years ended December 31, 2018, 2017 and 2016. +(5) +Amounts reflect contributions to a 401(k) plan by Patterson-UTI. +(6) +Amount includes $4,900,180 related to an annual award of restricted stock units and $2,753,744 related to an award of performance units during 2018. Assuming maximum performance, the value of the performance unit award would be $4,199,032 (calculated using the closing price of Patterson-UTI’s stock on the grant date and assuming maximum payout of two times the target number of shares). +(7) +Amount includes $1,050,740 related to an annual award of restricted stock units and $589,904 related to an award of performance units during 2018. Assuming maximum performance, the value of the performance unit award would be $899,512 (calculated using the closing price of Patterson-UTI’s stock on the grant date and assuming maximum payout of two times the target number of shares). +38 +(8) +Amount includes $ 3,920,144 related to an annual award of restricted stock units and $ 2,202,480 related to an award of performance units during 2018. Assuming maximum performance, the value of the performance unit award would be $ 3,358,440 (calculated using the closing price of Patterson-UTI’s stock on the grant date and assuming maxi mum payout of two times the target number of shares) . +(9) +Amount includes $1,820,628 related to an annual award of restricted stock units and $1,022,672 related to an award of performance units during 2018. Assuming maximum performance, the value of the performance unit award would be $1,559,416 (calculated using the closing price of Patterson-UTI’s stock on the grant date and assuming maximum payout of two times the target number of shares). +(10) +Amount includes $944,684 related to an annual award of restricted stock units and $530,656 related to an award of performance units during 2018. Assuming maximum performance, the value of the performance unit award would be $809,168 (calculated using the closing price of Patterson-UTI’s stock on the grant date and assuming maximum payout of two times the target number of shares). +(11) +Amount includes $11,000 contributed to a 401(k) plan by Patterson-UTI and an automobile allowance of $12,000. +The following table sets forth information concerning grants of plan-based awards during the fiscal year ended December 31, 2018 to the Named Executive Officers: +Grants of Plan-Based Awards +Estimated Future Payouts under +Non-equity Incentive Plan Awards +Estimated Future Payouts under +Equity Incentive Plan Awards +All Other +Stock +Awards: +Number of +Shares of +Grant Date +Fair Value of +Stock and +Grant +Threshold +Target +Maximum +Threshold +Target +Maximum +Stock or Units +Option Awards +Name +Date +($) +($) +($) +(#) +(#) +(#) +(#) +($)(5) +William Andrew Hendricks, Jr +4/24/18 +(1) +$ +500,000 +$ +1,250,000 +$ +2,500,000 +— +— +— +— +$ +— +4/24/18 +(2) +— +— +— +53,450 +106,900 +213,800 +— +$ +2,753,744 +4/24/18 +(3) +— +— +— +— +— +— +249,500 +$ +4,900,180 +C. Andrew Smith +4/24/18 +(1) +$ +225,000 +$ +562,500 +$ +1,125,000 +— +— +— +— +$ +— +4/24/18 +(2) +— +— +— +11,450 +22,900 +45,800 +— +$ +589,904 +4/24/18 +(3) +— +— +— +— +— +— +53,500 +$ +1,050,740 +Mark S. Siegel +4/24/18 +(1) +$ +400,000 +$ +1,000,000 +$ +2,000,000 +— +— +— +— +$ +— +4/24/18 +(2) +— +— +— +42,750 +85,500 +171,000 +— +$ +2,202,480 +4/24/18 +(3) +— +— +— +— +— +— +199,600 +$ +3,920,144 +Kenneth N. Berns +4/24/18 +(1) +$ +225,000 +$ +562,500 +$ +1,125,000 +— +— +— +— +$ +— +4/24/18 +(2) +— +— +— +19,850 +39,700 +79,400 +— +$ +1,022,672 +4/24/18 +(3) +— +— +— +— +— +— +92,700 +$ +1,820,628 +James M. Holcomb +4/24/18 +(4) +$ +148,800 +$ +372,000 +$ +744,000 +— +— +— +— +$ +— +4/24/18 +(2) +— +— +— +10,300 +20,600 +41,200 +— +$ +530,656 +4/24/18 +(3) +— +— +— +— +— +— +48,100 +$ +944,684 +(1) +The 2018 non-equity incentive cash bonus plan for the fiscal year ended December 31, 2018 was approved on April 24, 2018 for Messrs. Hendricks, Smith, Siegel and Berns. The bonus plan set a target opportunity for each executive’s annual cash bonus as a percent of salary, with payout contingent upon meeting Patterson-UTI’s financial goals and other KPIs as described above in “Compensation Discussion and Analysis”. The annual cash bonus opportunity attributable to each metric was determined based on a measurement of actual performance relative to target performance, with a 40% payout for threshold achievement of 70% of target, 100% payout for achievement of 100% of target and 200% maximum payout for achievement of 120% of target or more; provided, that the threshold achievement and actual performance for the safety metric was based on a holistic evaluation of multiple factors described in footnote 1 of the “2018 Annual Incentive Metrics and Percentage Payout Calculations” table above, with actual achievement subject to the discretion of the Compensation Committee. The cash bonuses were awarded under the Amended and Restated 2014 Long-Term Incentive Plan. On November 5, 2018, the Compensation Committee reviewed and approved a request by Mr. Siegel to reduce his overall compensation by 50%. As a result of these changes, Mr. Siegel’s original target opportunity for 2018, as presented in the table above, was reduced by 50%. Please see the “Annual Incentive Compensation” section for a discussion of actual payments made in respect of the 2018 cash bonus plan. +(2) +On April 24, 2018, Patterson-UTI granted performance unit awards to the Named Executive Officers. These awards provide for the recipients to receive shares of Common Stock upon the achievement of certain performance goals established by Patterson-UTI during a specified period. The performance period is the period from April 1, 2018 through March 31, 2021. The performance goals are tied to Patterson-UTI’s total shareholder return for the performance period as compared to total shareholder return for our peer group determined by the Compensation Committee. The recipients will receive a target number of shares if Patterson-UTI’s total shareholder return when compared to the peer group, is at the 50 th percentile and two times the target if at the 75 th percentile or higher. If Patterson-UTI’s total stockholder return, when compared to the peer group, is at the 25 th percentile, the recipients will only receive one-half of the target number of shares. The grant of shares when achievement is between the 25th and 75th percentile will be determined using linear interpolation for levels of achievement between these points. +39 +(3) +Restricted stock units were awarded to the Named Exe cutive Officers pursuant to the Amended and Restated 2014 Long-Term Incentive Plan. Ordinary dividends are accrued on unvested restricted stock units and paid upon vesting. The rate at which these dividends are paid or accrued is the same rate at which ord inary dividends are paid on all other shares of Common Stock. The restricted stock units awarded to Messrs. Hendricks, Smith, Siegel and Berns vest over a three-year period as follows: one-third on April 24, 2019, and the remainder in equal monthly install ments over the 24 months following April 24, 2019. The restricted stock units awarded to Mr. Holcomb vest over a three-year period as follows: one-third on April 24, 2019, one-third on April 24, 2020 and one-third on April 24, 2021. +(4) +The 2018 non-equity incentive cash bonus plan for Mr. Holcomb for the fiscal year ended December 31, 2018 was approved on April 24, 2018. The 2018 bonus plan for Mr. Holcomb provided for a target opportunity for his annual cash bonus as a percent of salary, with payout contingent upon meeting the financial and other goals of Patterson-UTI or its contract drilling business as described above in “Compensation Discussion and Analysis.” +(5) +The grant date fair value of restricted stock units was based on the closing price of Patterson-UTI Common Stock on the date of grant, which is consistent with the valuation used by Patterson-UTI for the recognition of compensation expense under FASB ASC Topic 718. The grant date fair value of performance unit awards was determined based on a Monte-Carlo simulation model, which is consistent with the valuation used by Patterson-UTI for the recognition of compensation expense under FASB ASC Topic 718. +The following table sets forth information concerning outstanding equity awards at December 31, 2018 for the Named Executive Officers: +Outstanding Equity Awards at Fiscal Year-End +Stock Awards +Number +Equity Incentive +Equity Incentive +of Shares +Plan Awards: +Plan Awards: Market +Option Awards +or Units of +Number of +or Payout Value of +Number of Securities +Option +Stock +Market Value of +Unearned Shares, +Unearned Shares, +Underlying Unexercised +Exercise +Option +That Have +Shares or Units of +Units or Other +Units or Other +Options (#) +Price +Expiration +Not +Stock That Have +Rights that +Rights that Have +Name +Exercisable +Unexercisable +($) +Date +Vested (#) +Not Vested ($)(1) +Have Not Vested(2) +Not Vested ($)(1) +William Andrew Hendricks, Jr. +100,000 +— +$ +17.27 +4/1/2022 +358,466 +(3) +$ +3,710,123 +259,372 +(4) +$ +2,684,500 +25,000 +— +$ +15.82 +9/30/2022 +172,500 +— +$ +22.88 +4/21/2023 +117,750 +— +$ +33.10 +4/21/2024 +257,000 +— +$ +20.33 +4/20/2025 +280,355 +35,045 +(5) +$ +18.54 +4/25/2026 +C. Andrew Smith +— +— +— +— +100,559 +(6) +$ +1,040,786 +22,900 +(7) +$ +237,015 +Mark S. Siegel +350,000 +— +$ +13.17 +4/27/2019 +277,391 +(8) +$ +2,870,997 +185,298 +(9) +$ +1,917,834 +355,000 +— +$ +14.83 +4/26/2020 +138,000 +— +$ +31.20 +4/25/2021 +320,000 +— +$ +16.20 +4/23/2022 +230,000 +— +$ +22.88 +4/21/2023 +157,000 +— +$ +33.10 +4/21/2024 +205,600 +— +$ +20.33 +4/20/2025 +134,488 +16,812 +(5) +$ +18.54 +4/25/2026 +Kenneth N. Berns +175,000 +— +$ +13.17 +4/27/2019 +137,874 +(10) +$ +1,426,996 +117,228 +(11) +$ +1,213,310 +177,500 +— +$ +14.83 +4/26/2020 +69,000 +— +$ +31.20 +4/25/2021 +160,000 +— +$ +16.20 +4/23/2022 +115,000 +— +$ +22.88 +4/21/2023 +78,500 +— +$ +33.10 +4/21/2024 +154,200 +— +$ +20.33 +4/20/2025 +168,088 +21,012 +(5) +$ +18.54 +4/25/2026 +James M. Holcomb +— +— +— +— +99,767 +(12) +$ +1,032,588 +20,600 +(13) +$ +213,210 +(1) +Based on the closing price of Patterson-UTI Common Stock on December 31, 2018 of $10.35 per share. +(2) +As of December 31, 2018, performance unit awards had been granted to the Named Executive Officers. The 2016, 2017 and 2018 performance unit awards were granted on April 26, 2016, May 2, 2017 and April 24, 2018, respectively, and provide for an award of shares of Patterson-UTI common stock to the recipient based on Patterson-UTI’s total shareholder return compared to our peer group of companies at the time of grant for the performance period of April 1 of the grant year through March 31 of the third year following the grant for the awards in 2016 and 2018, and May 1 through April 30 of the third year following the grant for the awards in 2017. All performance unit awards provide for a target payout based on a target level of total shareholder return compared to the peer group. The amounts presented in this column represent the target payout under the performance unit awards. Based on Patterson-UTI’s total shareholder return during the performance period, the recipients could receive a number of shares ranging from no shares to two times the target number of shares. For the performance units granted in 2016, if Patterson-UTI’s total shareholder return is negative and, when compared to the peer group, is at or above the 25th percentile, then the recipients will receive one-half of the number of shares they would have received had Patterson-UTI’s total shareholder return been positive. For the performance units granted in 2017 and 2018, the payout is based solely on relative performance. +40 +(3) +These shares of restricted stock and restricted stock units vest as follows: 8,956 shares in equal monthly installments from January 26, 2019 through April 26, 2019; 8,147 shares in equal monthly installments from January 1, 2019 through August 1, 2019; 91,863 in equal monthly installments from January 2, 2019 through May 2, 2020; 83,166 restricted stock units on April 24, 2019 and 166,334 restricted stock units in equal monthly installments from May 24, 2019 through April 24, 2021. +(4) +Amount includes 69,100 shares related to the 2016 performance unit award, 83,372 shares related to the 2017 performance unit award and 106,900 shares related to the 2018 performance unit award. +(5) +These options vest in equal monthly installments from January 26, 2019 through April 26, 2019. +(6) +These restricted stock units vest as follows: 47,059 restricted stock units on September 8, 2019; 17,833 restricted stock units on April 24, 2019 and 35,667 restricted stock units in equal monthly installments from May 24, 2019 through April 24, 2021. +(7) +Amount includes 22,900 shares related to the 2018 performance unit award. +(8) +These shares of restricted stock and restricted stock units vest as follows: 4,300 shares in equal monthly installments from January 26, 2019 through April 26, 2019; 73,491 shares in equal monthly installments from January 2, 2019 through May 2, 2020; 66,533 restricted stock units on April 24, 2019 and 133,067 restricted stock units in equal monthly installments from May 24, 2019 through April 24, 2021. +(9) +Amount includes 33,100 shares related to the 2016 performance unit award, 66,698 shares related to the 2017 performance unit award and 85,500 shares related to the 2018 performance unit award. +(10) +These shares of restricted stock and restricted stock units vest as follows: 5,366 shares in equal monthly installments from January 26, 2019 through April 26, 2019; 39,808 shares in equal monthly installments from January 2, 2019 through May 2, 2020; 30,900 restricted stock units on April 24, 2019 and 61,800 restricted stock units in equal monthly installments from May 24, 2019 through April 24, 2021. +(11) +Amount includes 41,400 shares related to the 2016 performance unit award, 36,128 shares related to the 2017 performance unit award and 39,700 shares related to the 2018 performance unit award. +(12) +These shares of restricted stock and restricted stock units vest as follows: 13,667 shares on June 9, 2019; 19,000 restricted stock units on each of July 12, 2019 and 2020; 16,033 restricted stock units on each of April 24, 2019 and 2020 and 16,034 restricted stock units on April 24, 2021. +(13) +Amount includes 20,600 shares related to the 2018 performance unit award. +The following table sets forth information concerning option exercises and stock awards vested during the fiscal year ended December 31, 2018 for the Named Executive Officers: +Option Exercises and Stock Vested +Option awards +Stock awards +Name +Number of +shares acquired +on exercise (#) +Value realized +on exercise ($) +Number of +shares acquired +on vesting (#) +Value realized +on vesting ($)(1) +William Andrew Hendricks, Jr. +— +$ +— +377,428 +$ +7,621,901 +C. Andrew Smith +— +$ +— +47,058 +$ +755,281 +Mark S. Siegel +— +$ +— +316,812 +$ +6,486,319 +Kenneth N. Berns +— +$ +— +179,597 +$ +3,603,942 +James M. Holcomb +— +$ +— +66,939 +$ +1,297,654 +(1) +Value realized on vesting is based on the closing price of Patterson-UTI common stock on the day the respective shares vested; provided that if the stock market was closed on the day the respective shares vested, the value realized on vesting is based on the closing price of Patterson-UTI common stock on the day immediately prior to the day the respective shares vested. +41 +Pay Ratio +Under rules adopted pursuant to the Dodd-Frank Act of 2010, we are required to calculate and disclose the total compensation paid to our median employee, as well as the ratio of the total compensation paid to the median employee as compared to the total compensation paid to our CEO. The paragraphs that follow describe our methodology and the resulting CEO pay ratio. +We identified the median employee using our employee population on December 31, 2018. At December 31, 2018, we had approximately 8,000 employees located in the United States, Canada and United Arab Emirates (UAE). +Pursuant to the de minimis exception, in identifying the median employee, we excluded approximately 135 employees in Canada and two employees in UAE, which together represented approximately 2% of our workforce. Additionally, we excluded approximately 55 employees that became our employees as a result of our acquisition of Current Power Solutions, Inc. in October 2018. +The compensation measure we used to identify the median employee was Box 1 of the Form W-2 issued by the IRS for federal tax purposes. We chose Form W-2 because our non-excluded employee population consisted solely of U.S. employees, and this compensation measure applied to all U.S. employees, allowing for accessibility and broad comparability. The total annual compensation for the year ended December 31, 2018 was calculated as $79,530 for our median employee and $9,764,924 for our CEO as reflected in the “Total” column of the Summary Compensation Table. The ratio of our CEO’s pay to that of our median employee for 2018 was approximately 123 times. The pay ratio provided is a reasonable estimate calculated in a manner consistent with SEC rules. +Because the SEC rules for identifying the median of the annual total compensation of our employees and calculating the pay ratio based on that employee’s annual total compensation allows companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices, the pay ratio reported by other companies may not be comparable to the pay ratio for our Company, as other companies have headquarters and offices in different states and countries, have different employee populations and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their pay ratios. +No Pension Benefits or Nonqualified Deferred Compensation +Patterson-UTI does not provide any pension benefits for any of the Named Executive Officers. None of the Named Executive Officers had any items of nonqualified deferred compensation during 2018. As a result, tables with respect to pension benefits and nonqualified deferred compensation have not been provided. +42 +DIRECTOR COMPENSATION +The following table sets forth information concerning compensation for the fiscal year ended December 31, 2018 with respect to the directors of Patterson-UTI who are not executive officers: +Name +Fees earned +or paid in cash +($) +Stock awards +($)(1) +Option awards +($)(2) +All other +compensation +($) +Total +($) +Charles O. Buckner +$ +90,542 +$ +174,991 +$ +— +$ +— +$ +265,533 +Tiffany (TJ) Thom Cepak +$ +94,458 +$ +174,991 +$ +— +$ +— +$ +269,449 +Michael W. Conlon +$ +95,000 +$ +174,991 +$ +— +$ +— +$ +269,991 +Curtis W. Huff +$ +115,000 +$ +174,991 +$ +— +$ +— +$ +289,991 +Terry H. Hunt +$ +100,000 +$ +174,991 +$ +— +$ +— +$ +274,991 +Janeen S. Judah +$ +68,389 +$ +174,990 +$ +— +$ +— +$ +243,379 +(1) +Amounts set forth represent the fair value at the date of grant as determined in accordance with FASB ASC Topic 718 with respect to restricted stock units awarded to the directors in the fiscal year ended December 31, 2018. For additional information related to the assumptions used and valuation of restricted stock units, see Note 11 to the consolidated financial statements in Patterson-UTI’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018. Messrs. Buckner, Conlon, Huff and Hunt and Ms. Cepak each received an award of 7,605 restricted stock units on January 1, 2018 with a grant date value of $23.01 per restricted stock unit. In connection with Ms. Judah’s appointment to the Board of Directors, she received an award of 10,115 restricted stock units on April 3, 2018 with a grant date value of $17.30 per restricted stock unit. As of December 31, 2018, Messrs. Buckner, Conlon, Huff and Hunt and Ms. Cepak each held 7,605 unvested restricted stock units and Ms. Judah held 10,115 unvested restricted stock units. The restricted stock units awarded on January 1, 2018 fully vested on January 1, 2019 and the restricted stock units awarded on April 3, 2018 fully vested on April 3, 2019. +(2) +No options were issued to directors during the fiscal year ended December 31, 2018. As of December 31, 2018, Messrs. Buckner, Conlon, Huff and Hunt and Ms. Cepak held the following options to purchase shares of Common Stock: +Number of Securities Underlying +Unexercised Options (#) +Name +Exercisable +Unexercisable +Total +Charles O. Buckner +70,000 +— +70,000 +Tiffany (TJ) Thom Cepak +30,000 +— +30,000 +Michael W. Conlon +50,000 +— +50,000 +Curtis W. Huff +60,000 +— +60,000 +Terry H. Hunt +70,000 +— +70,000 +Directors who are also employees of Patterson-UTI do not receive compensation for serving as a director or as a member of a committee of the Board of Directors. All directors are reimbursed for reasonable out-of-pocket expenses incurred in connection with serving as a member of the Board of Directors. +The current compensation for non-employee directors is as follows: Each non-employee director receives an annual base cash retainer of $75,000 and restricted stock units on January 1 of each year with a grant date value of $175,000, subject to one-year vesting (subject to acceleration in certain limited situations, including a change of control). Each non-employee director that serves on the Audit Committee or the Compensation Committee receives an additional annual cash retainer of $10,000 per committee on which he or she serves, with the Chair of each such committee receiving $15,000. The Chair of the Nominating and Corporate Governance Committee receives an additional annual cash retainer of $10,000. The Lead Director receives an additional annual cash retainer of $20,000. +43 +EMPLOYMENT-RELATED AGREEMENTS +Change in Control, Employment and Severance Agreements +Change in Control Agreements with Messrs. Siegel and Berns +Patterson-UTI has Change in Control Agreements with Messrs. Siegel and Berns (each agreement, a “CIC Agreement” and collectively, the “CIC Agreements”). The CIC Agreements were entered into to protect these executives should a change in control occur, thereby encouraging such executive to remain in the employ of Patterson-UTI and not be distracted from the performance of his duties to Patterson-UTI by the possibility of a change in control. +Each CIC Agreement generally has an initial term with automatic twelve-month renewals unless Patterson-UTI notifies the executive at least ninety days before the end of such renewal period that the term will not be extended. If a change in control of Patterson-UTI occurs during the term of the CIC Agreement and the executive’s employment is terminated (i) by Patterson-UTI other than for cause or other than automatically as a result of death, disability or retirement, or (ii) by the executive for good reason (as those terms are defined in the CIC Agreements), then the executive shall generally be entitled to, among other things: +• +a bonus payment equal to the highest bonus paid after the CIC Agreement was entered into (such bonus payment for each executive prorated for the portion of the fiscal year preceding the termination date); +• +a payment equal to 2.5 times (in the case of Mr. Siegel) or 2 times (in the case of Mr. Berns) the sum of (i) the highest annual salary in effect for such executive and (ii) the average of the three annual bonuses earned by the executive for the three fiscal years preceding the termination date; and +• +continued coverage under Patterson-UTI’s welfare plans for up to three years (in the case of Mr. Siegel) or two years (in the case of Mr. Berns). +As was customary when the CIC Agreements were entered into more than ten years ago, each CIC Agreement provides the executive with a full gross-up payment for any excise taxes imposed on payments and benefits received under the CIC Agreement or otherwise, including other taxes that may be imposed as a result of the gross-up payment. As indicated above, the Compensation Committee subsequently adopted a policy, more than five years ago, to no longer approve tax-gross ups in connection with compensation arrangements, and the employment agreements entered into with Mr. Hendricks in 2016 and Messrs. Holcomb and Smith in 2017, which are described below, do not include a tax gross-up provision. +A “change in control” is principally defined by the CIC Agreement as: +• +an acquisition by any individual, entity or group of beneficial ownership of 35% or more of either Patterson-UTI’s then outstanding common stock or the combined voting power of the then outstanding voting securities of Patterson-UTI entitled to vote in the election of directors, +• +a change occurs in which the members of the Board of Directors as of the date of the CIC Agreement cease to constitute at least a majority of Patterson-UTI’s Board of Directors unless that change occurs through a vote of at least a majority of the incumbent members of the Board of Directors, or +• +a change in the beneficial ownership of Patterson-UTI following consummation of a reorganization, merger, consolidation, sale of Patterson-UTI or any subsidiary of Patterson-UTI or a disposition of all or substantially all of the assets of Patterson-UTI, in which the beneficial owners immediately prior to the transaction own 65% or less of outstanding common stock of the newly combined or merged entity. +Severance Agreements with Messrs. Siegel and Berns +In order to address prior severance agreements between UTI Energy Corp. and each of Messrs. Siegel and Berns, Patterson-UTI has entered into written letter agreements with each of these executives pursuant to which Patterson-UTI has agreed to pay each such executive within ten days of the termination of his employment with Patterson-UTI for any reason (including voluntary termination by him), an amount in cash equal to his annual base salary at the time of such termination. Any payment made by Patterson-UTI pursuant to these letter agreements will reduce dollar for dollar any payment owed to such person, if any, pursuant to the CIC Agreements. +44 +Employment Agreements with Messrs. Hendricks, Holcomb and Smith +Patterson-UTI has Employment Agreements with Messrs. Hendricks, Holcomb and Smith. Each Employment Agreement generally has an initial three-year term, subject to automatic annual renewal thereafter. The executive may terminate his employment under his Employment Agreement by providing written notice of such termination at least 30 days before the effective date of such termination. Under specified circumstances, Patterson-UTI may terminate the executive’s employment under his Employment Agreement for cause (as defined in the Employment Agreement) by either (i) providing written notice 10 days before the effective date of such termination and by granting at least 10 days to cure the cause for such termination or (ii) by providing written notice of such termination at least 30 days before the effective date of such termination and by granting at least 20 days to cure the cause for such termination, provided that if the matter is reasonably determined by Patterson-UTI to not be capable of being cured, the executive may be terminated for cause on the date the written notice is delivered. The Employment Agreement also provides for, among other things, severance payments and the continuation of certain benefits following termination by Patterson-UTI of the executive other than for cause, or termination by the executive for good reason (as defined in each Employment Agreement). Under these provisions, if the executive’s employment is terminated by Patterson-UTI without cause, or the executive terminates his employment for good reason: +• +the executive will have the right to receive a lump-sum payment consisting of 3 times (in the case of Mr. Hendricks) or 2.5 times (in the case of Messrs. Holcomb and Smith) the sum of (i) his base salary and (ii) the average annual cash bonus received by him for the three years prior to the date of termination, +• +the executive will have the right to receive a pro-rated lump-sum payment equal to his annual cash bonus based on actual results for the year, payable at the same time as annual cash bonuses are paid to active employees, +• +Patterson-UTI will accelerate vesting of all options, restricted stock and performance unit awards on the 60th day following the executive’s termination, and +• +Patterson-UTI will pay the executive certain accrued obligations and certain obligations pursuant to the terms of employee benefit plans. +If a termination by Patterson-UTI other than for cause or by the executive for good reason occurs following a change in control (which is defined in a substantially similar manner to the definition in the CIC Agreements, and which for Mr. Holcomb also includes a change in control in certain circumstances of Patterson-UTI Drilling Company LLC), the executive will generally be entitled to the same severance payments and benefits described above except that the pro-rated lump-sum payment for annual cash bonuses will be based on his highest annual cash bonus for the last three years, and the executive will be entitled to 36 months (in the case of Mr. Hendricks) or 30 months (in the case of Messrs. Holcomb and Smith) of subsidized benefits continuation coverage. +Equity Award Agreements with Named Executive Officers +All unvested stock options, restricted stock and restricted stock unit awards held by Messrs. Siegel, Hendricks, Berns and Smith, and all unvested restricted stock and restricted stock units awarded to Mr. Holcomb after 2016, vest upon a change of control as defined by the underlying award agreements. Upon a change in control as defined in the underlying performance unit award grants, the Named Executive Officers would receive the target number of shares issuable thereunder. +All restricted stock, restricted stock unit and performance unit awards held by the Named Executive Officers provide that in the event of termination of employment due to death or disability, the holder would vest in a portion of the award. With respect to Mr. Hendricks, such a termination at December 31, 2018 would have resulted in the accelerated vesting of 6,677 shares of restricted stock and the issuance of 57,139 shares pursuant to the accelerated vesting of restricted stock units, with a combined fair value of $660,496. With respect to Mr. Berns, such a termination at December 31, 2018 would have resulted in the accelerated vesting of 2,522 shares of restricted stock and the issuance of 21,229 shares pursuant to the accelerated vesting of restricted stock units, with a combined fair value of $245,823. With respect to Mr. Siegel, such a termination at December 31, 2018 would have resulted in the accelerated vesting of 4,396 shares of restricted stock and the issuance of 45,711 shares pursuant to the accelerated vesting of restricted stock units, with a combined fair value of $518,607. With respect to Mr. Smith, such a termination at December 31, 2018 would have resulted in the issuance of 26,950 shares pursuant to the accelerated vesting of restricted stock units, with a fair value of $278,933. With respect to Mr. Holcomb, such a termination at December 31, 2018 would have resulted in the accelerated vesting of 7,676 shares of restricted stock and the issuance of 19,942 shares pursuant to the accelerated vesting of restricted stock units, with a combined fair value of $285,846. +45 +In the event of termination of employment due to death or disability, the holders of performance units wou ld vest in the portion of the performance unit award that was earned at the time of death or disability. This payment would be determined at the end of the performance period and would equal the amount that the holder would have received at that time, pro- rated for the amount of time from the date of grant through the date of death or disability . +Potential Payments Upon a Termination or Change in Control +Amounts that each of the Named Executive Officers would be entitled to under his CIC Agreement or Employment Agreement and other award agreements if a change in control had occurred as of December 31, 2018 and the employee’s employment was terminated by Patterson-UTI other than for cause or terminated by the employee for good reason (as defined in the CIC Agreement or the Employment Agreement and other award agreements) are reflected in the following table: +Cash Payments +Other Benefits +Name +Bonus +Payment +($)(1) +Salary and +Bonus +($)(2) +Option +Awards +($)(3) +Stock +Awards +($)(3) +Performance +Unit Awards +($)(4) +Other +Benefits +($)(5) +Total +($) +William Andrew Hendricks, Jr. +$ +2,187,500 +$ +6,895,324 +$ +— +$ +3,710,123 +$ +2,684,500 +$ +36,644 +$ +15,514,091 +C. Andrew Smith +$ +984,375 +$ +3,585,938 +$ +— +$ +1,040,786 +$ +237,015 +$ +26,665 +$ +5,874,779 +Mark S. Siegel +$ +2,794,044 +$ +3,596,883 +$ +— +$ +2,870,997 +$ +1,917,834 +$ +— +$ +11,179,758 +Kenneth N. Berns +$ +1,397,022 +$ +2,315,283 +$ +— +$ +1,426,996 +$ +1,213,310 +$ +— +$ +6,352,611 +James M. Holcomb +$ +569,625 +$ +1,928,263 +$ +— +$ +891,135 +$ +213,210 +$ +21,351 +$ +3,623,584 +(1) +In the case of Messrs. Hendricks, Smith and Holcomb, the assumed bonus is equal to the highest annual bonus paid in the three years prior to 2018. In the case of Messrs. Siegel and Berns, the assumed bonus payment is equal to the highest annual bonus paid from the time the CIC Agreements were entered into through December 31, 2018. +(2) +The assumed salary and bonus payment represents 3.0 times (in the case of Mr. Hendricks), 2.5 times (in the case of Messrs. Siegel, Smith and Holcomb) or 2.0 times (in the case of Mr. Berns) of the sum of the 2018 salary in effect for each employee and the average of the annual bonuses earned by each employee for 2017, 2016 and 2015. Bonus amounts earned in 2018 were not considered in this calculation as they were not determined until after December 31, 2018. +(3) +Each of the option and stock award agreements for the Named Executive Officers (excluding, in the case of Mr. Holcomb, stock award agreements granted prior to 2017) provide that unvested options and awards will vest upon a change in control. Amounts presented in the table represent the value of unvested option and stock awards using the market price of Patterson-UTI common stock at December 31, 2018. Messrs. Hendricks, Siegel and Berns hold unvested options that would have vested if a change in control had occurred on December 31, 2018, but the exercise price was greater than the closing price. +(4) +Share settled performance units awarded to Messrs. Hendricks, Siegel and Berns in 2016, 2017 and 2018, and Mr. Smith and Mr. Holcomb in 2018, include a provision that upon a change in control as defined in the respective award agreements, the Named Executive Officer will receive an award of shares equal to the target amount set forth in each agreement. Amounts presented in the table represent the assumed award of the target number of shares if a change in control had occurred on December 31, 2018, valued at the December 31, 2018 closing price of Patterson-UTI common stock of $10.35 per share. +(5) +Messrs. Hendricks, Smith and Holcomb participated in Patterson-UTI’s health and welfare plans as of December 31, 2018. The amounts presented represent Patterson-UTI’s portion of the premiums for three years in the case of Mr. Hendricks and 30 months in the case of Messrs. Holcomb and Smith. No tax gross-up payments would have been payable to Messrs. Siegel or Berns under the terms of their CIC Agreements. +46 +In the event of a termination of employment of Messrs. Siegel or Berns for any reason, including volun tary termination, such executive would be entitled to an amount in cash equal to his annual base salary at the time of such termination. Any such payment made by Patterson-UTI will reduce dollar for dollar any payment owed to such person that is reflect in the table above. In the case of Messrs. Hendricks, Smith or Holcomb, if the executive’s employment was terminated by Patterson-UTI other than for cause or terminated by the executive for good reason (as defined in the Employment Agreement) and not in conn ection with a change-in-control, then the executive would be entitled to the same potential payments and benefits as set forth in the table above, except that Mr. Hendricks’ cash payment would be lower by $ 1,087,500 , Mr. Smith’s cash payment would be lower by $ 489,375 and Mr. Holcomb’s cash payment would be higher by $ 49,755 as a result of the calculation of the bonus payment for the year in which the termination occurred. +With respect to Messrs. Hendricks, Smith or Holcomb, the foregoing severance benefits (other than the accrued obligations and benefit obligations) are conditioned on the executive’s execution of a release within 50 days of his termination that is not revoked during any applicable revocation period provided in such release. Their employment agreements also contain covenants and restrictions, including non-competition and non-solicitation provisions pursuant to which the executive will not be permitted to compete with Patterson-UTI in certain circumstances for a period of one year following termination of employment. +Indemnification Agreements +Patterson-UTI has entered into an indemnification agreement with Messrs. Hendricks, Smith, Siegel and Berns and each of its directors containing provisions that may require Patterson-UTI, among other things, to indemnify such executive officers and directors against liabilities that may arise by reason of their status or service as executive officers or directors (subject to certain exceptions) and to advance expenses incurred as a result of any proceeding against them as to which they could be indemnified. +CERTAIN TRANSACTIONS +Patterson-UTI has a written policy with respect to related person transactions. In accordance with this policy, related person transactions are reviewed by the Lead Director or the chair of the Audit Committee, each of whom has full delegated authority to approve, disapprove, ratify, amend, terminate or rescind any such transaction, or direct that such transaction be submitted to the Audit Committee or the full Board of Directors for consideration. In approving or disapproving related person transactions, the relevant facts and circumstances of the related person transaction are considered, including whether such transaction is in, or not inconsistent with, the best interest of Patterson-UTI and whether, in appropriate cases, such transaction is on commercial terms at least as favorable to Patterson-UTI as would otherwise be available to or from an unrelated third party or to Patterson-UTI’s employees generally. Related person transactions generally include transactions in an amount that exceeds $50,000 between Patterson-UTI or any of its subsidiaries and an executive officer, a director (or nominee to become director), an immediate family member of any of the foregoing or any entity in which any of the foregoing has a 10% or greater beneficial ownership interest or in which they are an executive officer, general partner, principal or engaged in a similar position. Certain related person transactions have been pre-approved under the terms of the policy, including, subject to certain exceptions and limitations, the sale to or purchase from Patterson-UTI of goods and services by entities related to directors in the ordinary course of business that are immaterial to Patterson-UTI and with respect to which the director has no direct economic interest or decision making authority. +In connection with the acquisition by REMY Capital Partners III, L.P. (“REMY Capital”) of an ownership interest in UTI Energy Corp. in March 1995, REMY Capital succeeded to a registration rights agreement with UTI. As the successor-in-interest to UTI, Patterson-UTI assumed this registration rights agreement pursuant to which REMY Capital has the right to require Patterson-UTI to use its reasonable efforts to register shares held by REMY Capital under the Securities Act of 1933, as amended. In the event that such rights are exercised in connection with a primary offering proposed by Patterson-UTI (or a secondary offering with which Patterson-UTI agrees to participate), REMY Capital would bear its pro rata share of the costs of the offering, other than legal, accounting and printing costs, all of which Patterson-UTI would bear. In the event that REMY Capital elects to exercise such rights other than in connection with an offering in which Patterson-UTI participates, REMY Capital would bear all costs of the offering. These rights continue so long as REMY Capital continues to own the Common Stock that it acquired in March 1995. As of the date of this proxy statement, REMY Capital continues to hold 605,000 shares of such Common Stock. +Mr. Siegel, Chairman of the Board of Patterson-UTI, is President and sole stockholder of REMY Investors, which is the general partner of REMY Capital. Mr. Berns, Executive Vice President and Chief Commercial Officer of Patterson-UTI, is an executive of REMY Investors. +47 +SECURITY OWNERSHIP OF CERTAIN +BENEFICIAL OWNERS AND MANAGEMENT +The following table sets forth, as of April 8, 2019, the stock ownership of (i) the Named Executive Officers, directors and Board nominees, individually, (ii) all directors, Board nominees and executive officers as a group and (iii) each person known by Patterson-UTI to be the beneficial owner of more than 5% of Common Stock. +Name of +Beneficial Owner +Amount and +Nature of +Beneficial +Ownership +Percent +of Class +Beneficial Owners of more than 5% of Patterson-UTI’s Common Stock: +BlackRock, Inc. +20,781,163 +(1) +10.0 +% +The Vanguard Group +19,354,997 +(2) +9.3 +% +Directors and Named Executive Officers: +William Andrew Hendricks, Jr. +1,735,788 +(3) +* +C. Andrew Smith +66,377 +(4) +* +Mark S. Siegel +3,834,801 +(5) +1.8 +% +Kenneth N. Berns +1,818,872 +(6) +* +James M. Holcomb +285,488 +(7) +* +Charles O. Buckner +117,236 +(8) +* +Tiffany (TJ) Thom Cepak +50,531 +(9) +* +Michael W. Conlon +85,105 +(10) +* +Curtis W. Huff +180,909 +(11) +* +Terry H. Hunt +128,096 +(12) +* +Janeen S. Judah +15,115 +(13) +* +All current directors and executive officers as a group (12 persons) +8,538,499 +(14) +4.0 +% +* +indicates less than 1.0% +(1) +Based solely on a Schedule 13G/A filed by BlackRock, Inc. with the SEC on February 6, 2019. According to the report, BlackRock, Inc. has sole voting power with respect to 19,889,833 shares and sole dispositive power with respect to 20,781,163 shares. The address of the principal business office of BlackRock, Inc. is 55 East 52nd Street, New York, New York 10055. +(2) +Based solely on a Schedule 13G/A filed by The Vanguard Group with the SEC on February 12, 2019. According to the report, The Vanguard Group has sole voting power with respect to 104,200 shares, shared voting power with respect to 37,843 shares, sole dispositive power with respect to 19,234,551 shares and shared dispositive power with respect to 120,446 shares. The address of the principal business office of The Vanguard Group is 100 Vanguard Blvd., Malvern, Pennsylvania 19355. +(3) +Includes shares underlying stock options held by Mr. Hendricks that are presently exercisable or become exercisable within 60 days to purchase 987,650 shares. Includes 76,561 shares of unvested restricted Common Stock held by Mr. Hendricks, over which he presently has voting power. Includes 90,097 shares underlying restricted stock units that will vest within 60 days. Does not include 159,403 shares underlying restricted stock units that will not vest within 60 days. +(4) +Includes 19,319 shares underlying restricted stock units held by Mr. Smith that will vest within 60 days. Does not include 81,240 shares underlying restricted stock units that will not vest within 60 days. +(5) +Mr. Siegel is the President and sole stockholder of REMY Investors, which is the general partner of REMY Capital Partners III, L.P. (“REMY Capital”). The Common Stock beneficially owned by Mr. Siegel includes 605,000 shares of Common Stock owned by REMY Capital. The Common Stock beneficially owned by Mr. Siegel also includes stock options held by Mr. Siegel that are presently exercisable or become exercisable within 60 days to purchase 1,906,900 shares. Includes 57,274 shares of unvested restricted Common Stock held by Mr. Siegel, over which he presently has voting power. Includes 72,077 shares underlying restricted stock units that will vest within 60 days. Does not include 127,523 shares underlying restricted stock units that will not vest within 60 days. The Common Stock beneficially owned by Mr. Siegel includes 83,400 shares held in trust(s) for which he is the trustee. +(6) +Includes shares underlying stock options held by Mr. Berns that are presently exercisable or become exercisable within 60 days to purchase 1,118,300 shares. Includes 31,782 shares of unvested restricted Common Stock held by Mr. Berns, over which he presently has voting power. Includes 33,475 shares underlying restricted stock units that will vest within 60 days. Does not include 59,225 shares underlying restricted stock units that will not vest within 60 days. The Common Stock beneficially owned by Mr. Berns includes 140,000 shares held in trust(s) for which he is the trustee. Does not include shares of Common Stock beneficially owned by REMY Investors. Mr. Berns disclaims beneficial ownership of such shares beneficially owned by REMY Investors. +(7) +Includes 13,667 shares of unvested restricted Common Stock held by Mr. Holcomb, over which he presently has voting power. Includes 16,033 shares underlying restricted stock units that will vest within 60 days. Does not include 70,067 shares underlying restricted stock units that will not vest within 60 days. +48 +(8) +Includes shares underlying presently exercisable stock options held by Mr. Buckner to purchase 70,000 shares. Does not include 16,908 shares underlying unve sted restricted stock units that will not vest within 60 days . The Common Stock beneficially owned by Mr. Buckner includes 27,000 shares held by CDT Investments, LP, a limited partnership for which he is the sole member of the sole general partner. +(9) +Includes shares underlying presently exercisable stock options held by Ms. Cepak to purchase 30,000 shares. Does not include 16,908 shares underlying unvested restricted stock units that will not vest within 60 days. +(10) +Includes shares underlying presently exercisable stock options held by Mr. Conlon to purchase 50,000 shares. Does not include 16,908 shares underlying unvested restricted stock units that will not vest within 60 days . +(11) +Includes shares underlying presently exercisable stock options held by Mr. Huff to purchase 60,000 shares. Does not include 16,908 shares underlying unvested restricted stock units that will not vest within 60 days. +(12) +Includes shares underlying presently exercisable stock options held by Mr. Hunt to purchase 70,000 shares. Does not include 16,908 shares underlying unvested restricted stock units that will not vest within 60 days . +(13) +Includes 5,000 shares of Common Stock held in a trust for which Ms. Judah is the trustee. Does not include 16,908 shares underlying unvested restricted stock units that will not vest within 60 days. +(14) +Includes shares underlying stock options, which are presently exercisable or become exercisable within 60 days, to purchase 4,307,850 shares of Common Stock. Includes an aggregate of 192,951 shares of unvested restricted Common Stock held by certain directors and executive officers, over which they presently have voting power. Includes 247,034 shares underlying restricted stock units held by certain directors and executive officers that will vest within 60 days. Does not include 668,973 shares underlying restricted stock units held by such individuals that will not vest within 60 days. +Except as stated herein, each stockholder has sole voting and investment power with respect to Common Stock included in the above table. There are no arrangements known to Patterson-UTI which may result in a change in control. The business address of each of our directors and officers is 10713 West Sam Houston Parkway North, Suite 800, Houston, Texas 77064. +Equity Compensation Plan Information +Equity compensation plan information as of December 31, 2018 follows: +Equity Compensation Plan Information +Plan Category +Number of +Securities to +be Issued upon +Exercise of +Outstanding +Options, +Warrants and +Rights +Weighted - +Average +Exercise +Price of +Outstanding +Options, +Warrants and +Rights +Number of +Securities +Remaining +Available +for Future +Issuance +under Equity +Compensation +Plans +(Excluding +Securities +Reflected +in Column(a)) +(a) +(b) +(c) +Equity compensation plans approved by security holders(1) +5,501,150 +$ +19.63 +2,471,800 +Equity compensation plans not approved by security holders +— +$ +— +— +Total +5,501,150 +$ +19.63 +2,471,800 +(1) +The Amended and Restated 2014 Long-Term Incentive Plan provides for awards of incentive stock options, non-incentive stock options, tandem and freestanding stock appreciation rights, restricted stock awards, other stock unit awards, performance share awards, performance unit awards and dividend equivalents to key employees (as defined in the Amended and Restated 2014 Long-Term Incentive Plan), officers and directors, which are subject to certain vesting and forfeiture provisions. All options are granted with an exercise price equal to or greater than the fair market value of the common stock at the time of grant. The vesting schedule and term are set by the Compensation Committee of the Board of Directors, except that the Board has the same power as the Compensation Committee with respect to awards to directors. All securities remaining available for future issuance under equity compensation plans approved by security holders in column (c) are available under this plan. In addition to the Amended and Restated 2014 Long-Term Incentive Plan, this Plan category also includes the 2005 Long-Term Incentive Plan. In connection with the approval of the Amended and Restated 2014 Long-Term Incentive Plan, the Board of Directors approved a resolution that no further options, restricted stock or other awards would be granted under any equity compensation plan, other than the Amended and Restated 2014 Long-Term Incentive Plan. Options granted under the 2005 Long-Term Incentive Plan typically vested over one year for non-employee directors and three years for employees. All options were granted with an exercise price equal to the fair market value of the related common stock at the time of grant. +49 +AUDIT COMMITTEE REPORT +The following report of the Audit Committee does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other Patterson-UTI filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent Patterson-UTI specifically incorporates this report by reference therein. +The Audit Committee members are Mses. Cepak (chairwoman) and Judah and Messrs. Buckner, Huff and Hunt, each of whom is independent within the meaning of applicable rules under the Exchange Act and within the meaning of the Nasdaq listing standards. The Board has determined that Ms. Cepak and Messrs. Buckner and Huff are “audit committee financial experts” within the meaning of applicable SEC rules. +The Audit Committee oversees management’s conduct of Patterson-UTI’s accounting and financial reporting process, including review of: (i) financial reports and other financial information provided by Patterson-UTI to the public and government/regulatory bodies, (ii) Patterson-UTI’s system of internal control over financial reporting, and (iii) the annual independent audit of Patterson-UTI’s consolidated financial statements and internal control over financial reporting. +The Audit Committee’s role is one of review, and it recognizes that Patterson-UTI’s management is responsible for preparing Patterson-UTI’s consolidated financial statements and the independent auditors are responsible for auditing those financial statements. In fulfilling its review and oversight responsibilities, the Audit Committee reviewed with management the audited financial statements included in Patterson-UTI’s Annual Report on Form 10-K for the year ended December 31, 2018, including a discussion of the quality, not just the acceptability, of the accounting principles used, the reasonableness of significant judgments made by management, and the clarity of disclosures provided in the financial statements. The Audit Committee also discussed with management the basis for their assertion that Patterson-UTI maintained effective internal control over financial reporting as of December 31, 2018. +The Audit Committee discussed with Patterson-UTI’s independent registered public accounting firm (PricewaterhouseCoopers LLP) the overall scope and plans for their integrated audit. The Audit Committee met with PricewaterhouseCoopers LLP, with and without management present, to discuss the results of their integrated audit, their evaluation of Patterson-UTI’s internal control over financial reporting and the overall quality of Patterson-UTI’s financial reporting. The Audit Committee also reviewed with PricewaterhouseCoopers LLP their judgments as to the quality, not just the acceptability, of Patterson-UTI’s accounting principles and discussed such other matters as are required by Auditing Standard 16. +The Audit Committee has received and reviewed the written disclosures and the letter from PricewaterhouseCoopers LLP required by the Public Company Accounting Oversight Board regarding their independence, and their communications with the Audit Committee concerning independence. +Taking the foregoing into consideration, the undersigned Audit Committee members recommended to the Board of Directors that the Board approve the inclusion of Patterson-UTI’s audited financial statements and management’s report on internal control over financial reporting in the Annual Report on Form 10-K for the fiscal year ended December 31, 2018. +Audit Committee of the Board of Directors: +Tiffany (TJ) Thom Cepak, Chairwoman +Charles O. Buckner +Curtis W. Huff +Terry H. Hunt +Janeen S. Judah +50 +PricewaterhouseCoopers LLP Fees for Fiscal Years 201 8 and 201 7 +In 2018 and 2017, Patterson-UTI and its subsidiaries incurred fees for services provided by PricewaterhouseCoopers LLP. +Description +Fees Incurred in +Fiscal Year +2018 +Fees Incurred in +Fiscal Year +2017 +Audit fees +$ +2,110,889 +$ +2,799,050 +Audit-related fees +240,000 +572,500 +Tax fees +96,500 +50,000 +All other fees +2,893 +2,893 +Total +$ +2,450,282 +$ +3,424,443 +The Audit Committee appoints the independent registered public accounting firm. The Audit Committee or Ms. Cepak, as Chairwoman of the Audit Committee, approves all other engagements of the independent registered public accounting firm in advance. In the event Ms. Cepak approves any such engagement, she discusses such approval with the Audit Committee at its next meeting. +“Audit fees” relate to audit services of PricewaterhouseCoopers LLP for fiscal 2018 and 2017 consisting of the integrated audit of Patterson-UTI’s consolidated financial statements and internal control over financial reporting, and quarterly reviews of Patterson-UTI’s interim financial statements and the audits of certain subsidiaries. “Audit-related fees” for 2017 and 2018 relate to the performance of certain procedures in connection with the filing of various registration statements and Exchange Act reports and the offer and sale of our 3.95% Senior Notes due 2028. “Tax fees” include federal, state, local and foreign tax compliance and related matters. “All other fees” consists of annual subscription fees to software products. The Audit Committee, Ms. Cepak, as Chairwoman of the Audit Committee, or Mr. Buckner, as former Chairman of the Audit Committee, approved in advance all of the services described above. +The Audit Committee has discussed the non-audit services provided by PricewaterhouseCoopers LLP and the related fees and has considered whether those services and fees are compatible with maintaining auditor independence. The Audit Committee determined that such non-audit services were consistent with the independence of PricewaterhouseCoopers LLP. +OTHER MATTERS +Section 16(a) Beneficial Ownership Reporting Compliance +Section 16(a) of the Exchange Act requires Patterson-UTI’s officers and directors and persons who own more than 10 percent of a registered class of Patterson-UTI’s equity securities, to file reports of ownership and changes in ownership with the SEC. Each of these persons is required by SEC regulation to furnish Patterson-UTI with copies of Section 16(a) filings. Based solely upon a review of Forms 3 and 4 and amendments thereto furnished to Patterson-UTI during 2018 and Forms 5 and amendments thereto furnished to Patterson-UTI with respect to 2018, or a written representation from the reporting person that no Form 5 is required, all filings required to be made by such officers, directors, and beneficial owners of more than 10 percent of a registered class of Patterson-UTI’s common stock were timely made. +Other Business +As of the date of this proxy statement, management of Patterson-UTI was not aware of any matter to be presented at the Meeting other than as set forth herein. If any other matters are properly brought before the Meeting, however, the shares represented by valid proxies will be voted with respect to such matters in accordance with the judgment of the persons voting them. +Stockholder Proposals for 2020 Annual Meeting +Proposals for Inclusion in the Proxy Statement. Pursuant to Rule 14a-8 under the Exchange Act, stockholders may present proper proposals for inclusion in Patterson-UTI’s proxy statement and for consideration at the next annual meeting of stockholders by submitting their proposals to Patterson-UTI in a timely manner. In order to be included in Patterson-UTI’s proxy statement for the 2020 annual meeting of stockholders, proposals from stockholders must be received by Patterson-UTI no later than December 17, 2019, and must otherwise comply with the requirements of Rule 14a-8. +51 +Proposals or Director Nominations not Included in the Proxy Statement. Patterson-UTI’s bylaws establish an advance notice procedure with regard to stockholder proposals and director nominations not included in Patterson-UTI’s pr oxy statement. For director nominations not included in Patterson-UTI’s proxy statement or stockholder proposals to be properly brought before the 2020 annual meeting by a stockholder, the stockholder must be a stockholder of record on the date of the givi ng of the notice provided for in Patterson-UTI’s bylaws and on the record date for the determination of stockholders entitled to vote at such annual meeting and must give timely notice of such business in writing to the Secretary of Patterson-UTI. To be ti mely with respect to the 2020 annual meeting of stockholders, a stockholder’s notice must be delivered to or mailed and received by the close of business at Patterson-UTI’s principal executive offices not earlier than February 7 , 2020 and not later than Ma rch 8 , 2020 , assuming the date of the 2020 annual meeting is not changed by more than 30 days before or after the anniversary date of the 2019 annual meeting . A stockholder’s notice to the Secretary of Patterson-UTI shall contain certain information specif ied in Patterson-UTI’s bylaws regarding the stockholder and the proposed nominee or stockholder proposal . See Article I, Section 8 of Patterson-UTI’s bylaws. +Proxy Access Procedures. Patterson-UTI’s bylaws permit a stockholder, or group of up to 20 stockholders, owning continuously for at least three years shares of Patterson-UTI stock representing an aggregate of at least 3% of our outstanding shares, to nominate and include in our proxy materials director nominees constituting up to the greater of two or 20% of our Board, provided that the stockholder(s) and nominee(s) satisfy the requirements in Patterson-UTI’s bylaws. See Article I, Section 11 of Patterson-UTI’s bylaws. Written notice of proxy access director nominees must be received by the close of business at Patterson-UTI’s principal executive offices not earlier than December 17, 2019 and not later than January 16, 2020, assuming the date of the 2020 annual meeting is not changed by more than 30 days before or after the anniversary date of the 2019 annual meeting. +Annual Report +A copy of Patterson-UTI’s annual report on Form 10-K accompanies this proxy statement only if you have requested that a copy of this proxy statement be mailed to you. The annual report on Form 10-K also is available electronically by following the instructions in the Notice. The annual report on Form 10-K is not incorporated into this proxy statement and is not considered proxy-soliciting material. +A copy of the annual report on Form 10-K, including the financial statements and financial statement schedules, but excluding exhibits, may be obtained by stockholders without charge by written request to the Secretary of Patterson-UTI at 10713 West Sam Houston Parkway North, Suite 800, Houston, Texas 77064 or by accessing it on Patterson-UTI’s website at www.patenergy.com in the investors section under the “Financial Information” link. Patterson-UTI will furnish the exhibits to Form 10-K upon request and upon receipt of a reproduction fee. +Delivery of Documents to Stockholders Sharing an Address +The SEC’s rules allow companies to send a single Notice or single copy of annual reports, proxy statements, prospectuses and other disclosure documents to two or more stockholders sharing the same address, subject to certain conditions. These rules are intended to provide greater convenience for stockholders, and cost savings for companies, by reducing the number of duplicate documents that stockholders receive. If instructions for separate delivery have been received from any stockholder, Patterson-UTI will deliver promptly separate copies of the relevant disclosure materials. Similarly, if multiple copies of disclosure materials are being delivered to a single address, stockholders can request a single copy for future deliveries. Written requests should be submitted to the Secretary of Patterson-UTI at 10713 West Sam Houston Parkway North, Suite 800, Houston, Texas 77064. Requests may also be made by calling Investor Relations at (281) 765-7100. +52 +ANNEX A +PATTERSON-UTI ENERGY, INC. +2014 LONG-TERM INCENTIVE PLAN +(As Amended and Restated Effective June 29, 2017) +Patterson-UTI Energy, Inc. (the “ Company ”), a Delaware corporation, hereby establishes and adopts the following 2014 Long-Term Incentive Plan, as amended and restated effective as of June 29, 2017 (the “ Plan ”). +1. PURPOSE OF THE PLAN +The purpose of the Plan is to assist the Company and its Subsidiaries in attracting and retaining selected individuals to serve as directors, employees, consultants and/or advisors of the Company who are expected to contribute to the Company’s success and to achieve long-term objectives which will inure to the benefit of all stockholders of the Company through the additional incentives inherent in the Awards hereunder. +2. DEFINITIONS +2.1 “Award” shall mean any Option, Stock Appreciation Right, Restricted Stock Award, Performance Award, Other Stock Unit Award or any other right, interest or option relating to Shares or other property (including cash) granted pursuant to the provisions of the Plan. +2.2 “Award Agreement” shall mean any written agreement, contract or other instrument or document evidencing any Award granted by the Committee hereunder. +2.3 “Board” shall mean the board of directors of the Company. +2.4 “Change of Control of the Company” shall mean the occurrence of any of the following: +i +The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended) (a “Covered Person” ) of beneficial ownership (within the meaning of rule 13d-3 promulgated under the Exchange Act) of 35% or more of either (A) the then outstanding shares of the common stock of the Company (the “Outstanding Company Common Stock” ), or (B) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities” ); provided, however, that for purposes of this subsection (i) of this Section 2.4, the following acquisitions shall not constitute a Change of Control of the Company: (A) any acquisition directly from the Company, (B) any acquisition by the Company, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any entity controlled by the Company, or (D) any acquisition by any corporation pursuant to a transaction which complies with clauses (A), (B) and (C) of subsection (iii) of this Section 2.4; or +ii +Individuals who, as of the effective date of the Plan, constitute the Board (the “Incumbent Board” ) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the effective date of the Plan whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Covered Person other than the Board; or +iii +Consummation of (xx) a reorganization, merger or consolidation or sale of the Company or any subsidiary of the Company, or (yy) a disposition of all or substantially all of the assets of the Company (a “Business Combination” ), in each case, unless, following such Business Combination, (A) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, direct or indirectly, more than 65% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (B) no Covered Person (excluding any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 35% or more of, respectively, the then outstanding shares +53 +of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation, except to the exten t that such ownership existed prior to the Business Combination, and (C) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the executi on of the initial agreement, or, if earlier, of the action of the Board, providing for such Business Combination. +2.5 “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time. +2.6 “Committee” shall mean the Compensation Committee of the Board, consisting of no fewer than two Directors, each of whom is (i) a “Non-Employee Director” within the meaning of Rule 16b-3 of the Exchange Act, (ii) an “outside director” within the meaning of Section 162(m) of the Code, and (iii) an “independent director” for purpose of the rules and regulations of the Nasdaq Stock Market. +2.7 “Covered Employee” shall mean a “covered employee” within the meaning of Section 162(m) of the Code. +2.8 “Director” shall mean a non-employee member of the Board. +2.9 “Dividend Equivalents” shall have the meaning set forth in Section 12.6. +2.10 “Employee” shall mean any employee of the Company or any Subsidiary and any prospective employee conditioned upon, and effective not earlier than, such person’s becoming an employee of the Company or any Subsidiary. Solely for purposes of the Plan, an Employee shall also mean any consultant or advisor who provides services to the Company or any Subsidiary, so long as such person (i) renders bona fide services that are not in connection with the offer and sale of the Company’s securities in a capital raising transaction and (ii) does not directly or indirectly promote or maintain a market for the Company’s securities. +2.11 “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended. +2.12 “Fair Market Value” shall mean, with respect to any property other than Shares, the market value of such property determined by such methods or procedures as shall be established from time to time by the Committee. The Fair Market Value of Shares as of any date shall be the per Share closing price of the Shares as reported on the Nasdaq Stock Market on that date (or if there were no reported prices on such date, on the last preceding date on which the prices were reported) or, if the Company is not then listed on the Nasdaq Stock Market, on the principal national securities exchange on which the Company is listed, and if the Company is not then listed on the Nasdaq Stock Market or any national securities exchange, the Fair Market Value of Shares shall be determined by the Committee in its sole discretion using appropriate criteria. +2.13 “Freestanding Stock Appreciation Right” shall have the meaning set forth in Section 6.1. +2.14 “Limitations” shall have the meaning set forth in Section 10.5. +2.15 “Option” shall mean any right granted to a Participant under the Plan allowing such Participant to purchase Shares at such price or prices and during such period or periods as the Committee shall determine. +2.16 “Other Stock Unit Award” shall have the meaning set forth in Section 8.1. +2.17 “Participant” shall mean an Employee or Director who is selected by the Committee to receive an Award under the Plan. +2.18 “Payee” shall have the meaning set forth in Section 13.1. +2.19 “Performance Award” shall mean any Award of Performance Shares or Performance Units granted pursuant to Article 9. +2.20 “Performance Period” shall mean that period established by the Committee at the time any Performance Award is granted or at any time thereafter during which any performance goals specified by the Committee with respect to such Award are to be measured. +2.21 “Performance Share” shall mean any grant pursuant to Section 9 of a unit valued by reference to a designated number of Shares, which value may be paid to the Participant by delivery of such property as the Committee shall determine, including cash, Shares, other property, or any combination thereof, upon achievement of such performance goals during the Performance Period as the Committee shall establish at the time of such grant or thereafter. +2.22 “Performance Unit” shall mean any grant pursuant to Section 9 of a unit valued by reference to a designated amount of property (including cash) other than Shares, which value may be paid to the Participant by delivery of such property as the Committee shall determine, including cash, Shares, other property, or any combination thereof, upon achievement of such performance goals during the Performance Period as the Committee shall establish at the time of such grant or thereafter. +54 +2.23 “Permitted Assignee” shall have the meaning set forth in Section 12.3. +2.24 “Prior Plans” shall mean, collectively, the Company’s Amended and Restated 1997 Long-Term Incentive Plan and the 2005 Long-Term Incentive Plan, as amended. +2.25 “Restricted Stock” shall mean any Share issued with the restriction that the holder may not sell, transfer, pledge or assign such Share and with such other restrictions as the Committee, in its sole discretion, may impose (including any restriction on the right to vote such Share and the right to receive any dividends), which restrictions may lapse separately or in combination at such time or times, in installments or otherwise, as the Committee may deem appropriate in its sole discretion. +2.26 “Restriction Period” shall have the meaning set forth in Section 7.1. +2.27 “Restricted Stock Award” shall have the meaning set forth in Section 7.1. +2.28 “Shares” shall mean the shares of common stock of the Company, par value $.01 per share. +2.29 “Stock Appreciation Right” shall mean the right granted to a Participant pursuant to Section 6. +2.30 “Subsidiary” shall mean any corporation or other entity, whether domestic or foreign, in which the Company has or obtains, directly or indirectly, a proprietary interest of more than fifty percent (50%) by reason of stock ownership or otherwise. +2.31 “Substitute Awards” shall mean Awards granted or Shares issued by the Company in assumption of, or in substitution or exchange for, awards previously granted, or the right or obligation to make future awards, by a company acquired by the Company or any Subsidiary or with which the Company or any Subsidiary combines. +2.32 “Tandem Stock Appreciation Right” shall have the meaning set forth in Section 6.1. +3. SHARES SUBJECT TO THE PLAN +3.1 Number of Shares . (a) Subject to adjustment as provided in Section 12.2 and this Section 3.1, the total number of Shares authorized for grant under the Plan shall be 18, 9 00,000 28,400,000 . Any Shares that are subject to Awards of Options or Stock Appreciation Rights, whether granted under the Prior Plans or under the Plan shall be counted against this limit as one (1) Share for every one (1) Share granted. Any Shares that are subject to Awards other than Options or Stock Appreciation Rights awarded under the Prior Plans during the period commencing on January 1, 2014 and ending on April 17, 2014 shall be counted against this limit as one and 35 one-hundredths (1.35) Shares for every one (1) Share awarded. Any Shares that are subject to Awards other than Options or Stock Appreciation Rights awarded under the Plan following April 17, 2014 shall be counted against this limit as two (2) Shares for every one (1) Share awarded. +(b) If any Shar es subject to an Award or to an award under the Prior Plans are forfeited, expire or otherwise terminate without issuance of such Shares, or any Award or award under the Prior Plans is settled for cash or otherwise does not result in the issuance of all or a portion of the Shares subject to such Award, the Shares shall, to the extent of such forfeiture, expiration, termination, cash settlement or non-issuance, again be available for Awards under the Plan, subject to Section 3.1(d) below. Notwithstanding the foregoing, the following Shares shall not become available for grant under the Plan: (i) Shares subject to an Award are used to exercise Options, are not issued upon the settlement of a Stock Appreciation Right, or are withheld by the Company for income or employment taxes on exercise of an Option or Stock Appreciation Right or (ii) Shares repurchased on the open market with the proceeds of the Option exercise price. +(c) Substitute Awards shall not reduce the Shares authorized for grant under the Plan or authorized for grant to a Participant in any calendar year. Additionally, in the event that a company acquired by the Company or any Subsidiary or with which the Company or any Subsidiary combines has shares available under a pre-existing plan approved by shareholders and not adopted in contemplation of such acquisition or combination, the shares available for grant pursuant to the terms of such pre-existing plan (as adjusted, to the extent appropriate, using the exchange ratio or other adjustment or valuation ratio or formula used in such acquisition or combination to determine the consideration payable to the holders of common stock of the entities party to such acquisition or combination) may be used for Awards under the Plan and shall not reduce the Shares authorized for grant under the Plan; provided that Awards using such available shares shall only be made (i) until the last date that awards or grants could have been made under the terms of the pre-existing plan, absent the acquisition or combination, and (ii) to individuals who were not Employees or Directors prior to such acquisition or combination. +55 +(d) Any Shares that again become available for grant pursuant to this Article shall be added back (x) as one (1) Share if such Shares were subject to Options or Stock Appreciation Rights granted under the Prior Plans or the Plan, (y) as one and thirty-five one hundredths (1.35) Shares if such Shares were subject to Awards other than Options or Stock Appreciation Rights that were granted under Prior Plan s during the period commencing on January 1, 2014 and ending on April 17, 2014 or (z) as two (2) Shares if such Shares were subject to Awards other than Options or Stock Appreciation Rights that were granted under the Plan or the Prior Plans following Apri l 17, 2014. +3.2 Character of Shares . Any Shares issued hereunder may consist, in whole or in part, of authorized and unissued shares, treasury shares or shares purchased in the open market or otherwise. +3.3 Minimum Vesting for Awards . Subject to Section 12.1, all Awards shall provide for vesting based on employment or service which is at least one year from the date of grant, and there shall be no acceleration of vesting of an Award to vest more rapidly than one year from the date of grant, other than in the event of an earlier death, disability or retirement of the Participant or a Change of Control referred to in Article 11. Notwithstanding the foregoing, Awards with respect to up to five percent (5%) of the Shares authorized for grant pursuant to this Plan may be issued pursuant to Awards without regard to the limitations of this Section 3.3. +4. ELIGIBILITY AND ADMINISTRATION +4.1 Eligibility . Any Employee or Director shall be eligible to be selected as a Participant. +4.2 Administration . (a) The Plan shall be administered by the Committee. The Committee shall have full power and authority, subject to the provisions of the Plan and subject to such orders or resolutions not inconsistent with the provisions of the Plan as may from time to time be adopted by the Board, to, in its sole discretion,: (i) select the Employees and Directors to whom Awards may from time to time be granted hereunder; (ii) determine the type or types of Awards, not inconsistent with the provisions of the Plan, to be granted to each Participant hereunder; (iii) determine the number of Shares to be covered by each Award granted hereunder; (iv) determine the terms and conditions, not inconsistent with the provisions of the Plan, of any Award granted hereunder; (v) determine whether, to what extent and under what circumstances Awards may be settled in cash, Shares or other property, subject to Section 8.1; (vi) determine whether, to what extent, and under what circumstances cash, Shares, other property and other amounts payable with respect to an Award made under the Plan shall be deferred either automatically or at the election of the Participant; (vii) determine whether, to what extent and under what circumstances any Award shall be canceled or suspended; (viii) interpret and administer the Plan and any instrument or agreement entered into under or in connection with the Plan, including any Award Agreement; (ix) correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award in the manner and to the extent that the Committee shall deem desirable to carry it into effect; (x) establish such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of the Plan; (xi) determine whether any Award (other than Options or Stock Appreciation Rights) will have Dividend Equivalents; and (xii) make any other determination and take any other action that the Committee deems necessary or desirable for administration of the Plan. Notwithstanding the foregoing, the Board shall have the same powers as the Committee with respect to Awards to Directors. +(b) Decisions of the Committee shall be final, conclusive and binding on all persons or entities, including the Company, any Participant, and any Subsidiary. A majority of the mem bers of the Committee may determine its actions and fix the time and place of its meetings. +(c) To the extent not inconsistent with applicable law, including Section 162(m) of the Code, or the rules and regulations of the Nasdaq Stock Market (or any other principal national securities exchange on which the Company is then listed), the Committee may delegate to a committee of one or more directors of the Company or, to the extent permitted by law, to one or more executive officers or a committee of executive officers the right to grant Awards to Employees who are not Directors or executive officers of the Company and the authority to take action on behalf of the Committee pursuant to the Plan to cancel or suspend Awards to Employees who are not Directors or executive officers of the Company; provided, however, (i) the resolution providing such authorization sets forth the total number of Awards such officer(s) may grant; and (ii) the officer(s) shall report periodically to the Committee regarding the nature and scope of the Awards granted pursuant to the authority delegated. +56 +5. OPTIONS +5.1 Grant of Options . Options may be granted hereunder to Participants either alone or in addition to other Awards granted under the Plan; provided that incentive stock options may be granted only to eligible Employees of the Company or of any parent or subsidiary corporation (as permitted by Section 422 of the Code and the regulations thereunder). Any Option shall be subject to the terms and conditions of this Article and to such additional terms and conditions, not inconsistent with the provisions of the Plan, as the Committee shall determine in its sole discretion. +5.2 Award Agreements . All Options granted pursuant to this Article shall be evidenced by a written Award Agreement in such form and containing such terms and conditions as the Committee shall determine which are not inconsistent with the provisions of the Plan. The terms of Options need not be the same with respect to each Participant. Granting of an Option pursuant to the Plan shall impose no obligation on the recipient to exercise such Option. Any individual who is granted an Option pursuant to this Article may hold more than one Option granted pursuant to the Plan at the same time. The Award Agreement also shall specify whether the Option is intended to qualify as an “incentive stock option” as defined in Section 422 of the Code. +5.3 Option Price . Other than in connection with Substitute Awards or an adjustment in connection with Section 12.2, the option price per each Share purchasable under any Option granted pursuant to this Article shall not be less than 100% of the Fair Market Value of such Share on the date of grant of such Option. +5.4 Option Term . The term of each Option shall be fixed by the Committee in its sole discretion; provided that no Option shall be exercisable after the expiration of ten years from the date the Option is granted. +5.5 Exercise of Options . Vested Options granted under the Plan shall be exercised by the Participant or by a Permitted Assignee thereof (or by the Participant’s executors, administrators, guardian or legal representative, as may be provided in an Award Agreement) as to all or part of the Shares covered thereby, by the giving of written notice of exercise to the Company or its designated agent, specifying the number of Shares to be purchased, accompanied by payment of the full purchase price for the Shares being purchased. Unless otherwise provided in an Award Agreement, full payment of such purchase price shall be made at the time of exercise and shall be made (a) in cash or cash equivalents (including certified check or bank check or wire transfer of immediately available funds), (b) by tendering previously acquired Shares (either actually or by attestation, valued at their then Fair Market Value) that have been owned for a period of at least six months (or such other period to avoid accounting charges against the Company’s earnings), (c) with the consent of the Committee, by delivery of other consideration (including, where permitted by law and the Committee, other Awards) having a Fair Market Value on the exercise date equal to the total purchase price, (d) with the consent of the Committee, by withholding Shares otherwise issuable in connection with the exercise of the Option, (e) through any other method specified in an Award Agreement, or (f) any combination of any of the foregoing. The notice of exercise, accompanied by such payment, shall be delivered to the Company at its principal business office or such other office as the Committee may from time to time direct, and shall be in such form, containing such further provisions consistent with the provisions of the Plan, as the Committee may from time to time prescribe. In no event may any Option granted hereunder be exercised for a fraction of a Share. No adjustment shall be made for cash dividends or other rights for which the record date is prior to the date of such issuance. +5.6 Form of Settlement . In its sole discretion, the Committee may provide, at the time of grant, that the Shares to be issued upon an Option’s exercise shall be in the form of Restricted Stock or other similar securities, or may reserve the right to provide so after the time of grant. +5.7 Vesting . Except for certain limited situations (including the death, disability or retirement of the Participant or a Change of Control referred to in Article 11), Options shall vest over a period of not less than (i) one year from date of grant for Directors or (ii) three years from the date of grant for Employees; provided that, subject to the limitations set forth in Section 3.3, such vesting shall not be required for any grants to new hires or with respect to any Substitute Awards. Subject to Section 3.3, Options may vest ratably over such vesting periods in any increments, including but not limited to annual increments, quarterly increments, monthly increments, or a combination thereof; provided, however, that such incremental vesting shall not be permitted prior to the first anniversary of the date of grant. The vesting schedule shall be set forth in the Award Agreement. +5.8 Incentive Stock Options . The Committee may grant Options intended to qualify as “incentive stock options” as defined in Section 422 of the Code, to any employee of the Company or any Subsidiary, subject to the requirements of Section 422 of the Code. Notwithstanding anything in Section 3.1 to the contrary and solely for the purposes of determining whether Shares are available for the grant of “incentive stock options” under the Plan, the maximum aggregate number of Shares with respect to which “incentive stock options” may be granted under the Plan shall be the number of Shares authorized for grant under Section 3.1. +57 +5.9 No Repricing . Notwithstanding anything in the Plan to the co ntrary, except in connection with a corporate transaction involving the Company (including, without limitation, any stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combi nation, or exchange of shares), the terms of outstanding Awards may not be amended without stockholder approval to (i) reduce the option price of outstanding Options, (ii) cancel outstanding Options in exchange for cash, other awards or Options with an opt ion price that is less than the option price of the original Options, (iii) take any other action with respect to an Option that would be treated as a repricing under the rules and regulations of the principal national securities exchange on which they are listed or (iv) permit the grant of any Options that contains a so-called “reload” feature under which additional Options or other Awards are granted automatically to the Participant upon exercise of the original Option. +6. STOCK APPRECIATION RIGHTS +6.1 Grant and Exercise . The Committee may provide Stock Appreciation Rights (a) in conjunction with all or part of any Option granted under the Plan (“Tandem Stock Appreciation Right” ), (b) in conjunction with all or part of any Award (other than an Option) granted under the Plan, or (c) without regard to any Option or other Award (a “Freestanding Stock Appreciation Right” ), in each case upon such terms and conditions as the Committee may establish in its sole discretion. +6.2 Terms and Conditions . Stock Appreciation Rights shall be subject to such terms and conditions, not inconsistent with the provisions of the Plan, as shall be determined from time to time by the Committee, including the following: +(a) Except in the case of Substitute Awards or in connection with an adjustment provided in Section 12.2, the grant price of a Stock Appreciation Right shall not be less than the Fair Market Value of one Share on such date of grant of the right. Upon the exercise of a Stock Appreciation Right, the holder shall have the right to receive the excess of (i) the Fair Market Value of one Share on the date of exercise over (ii) the grant price of the right on the date of grant. +(b) Upon the exercise of a Stock Appreciation Right, payment shall be made in the sole discretio n of the Committee in (i) whole Shares, (ii) cash or (iii) a combination of (i) or (ii). +(c) Any Tandem Stock Appreciation Right shall be granted at the same time as the related Option is granted. +(d) Any Tandem Stock Appreciation Right related to an Opt ion may be exercised only when the related Option would be exercisable and the Fair Market Value of the Shares subject to the related Option exceeds the option price at which Shares can be acquired pursuant to the Option. In addition, (i) if a Tandem Stock Appreciation Right exists with respect to less than the full number of Shares covered by a related Option, then an exercise or termination of such Option shall not reduce the number of Shares to which the Tandem Stock Appreciation Right applies until the number of Shares then exercisable under such Option equals the number of Shares to which the Tandem Stock Appreciation Right applies, and (ii) no Tandem Stock Appreciation Right granted under the Plan to a person then subject to Section 16 of the Exchange Act shall be exercised during the first six months of its term for cash, except as provided in Article 11. +(e) Any Option related to a Tandem Stock Appreciation Right shall no longer be exercisable to the extent the Tandem Stock Appreciation Right has bee n exercised. +(f) The provisions of Stock Appreciation Rights need not be the same with respect to each recipient. +(g) Subject to Section 12.2, a Freestanding Stock Appreciation Right shall have the same terms and conditions as Options, including (i) an e xercise price not less than Fair Market Value on the date of grant, (ii) a term not greater than ten years, and (iii) not being exercisable before the expiration of (1) one year from the date of grant to a Director or (2) three years from the date of grant to an Employee, except for, subject to the limitations set forth in Section 3.3, grants to new hires or Substitute Awards, under circumstances contemplated by Article 11 or as may be set forth in an Award Agreement with respect to (x) retirement, death or disability of a Participant or (y) special circumstances determined by the Committee, such as the achievement of performance objectives. Subject to Section 3.3, Stock Appreciation Rights may vest ratably over such vesting periods in any increments, including but not limited to annual increments, quarterly increments, monthly increments, or a combination thereof; provided, however, that such incremental vesting shall not be permitted prior to the first anniversary of the date of grant. In addition to the foregoing, but subject to Section 12.2, the base amount of any Stock Appreciation Right shall not be reduced after the date of grant. +58 +(h) The Committee may impose such terms and conditions on Stock Appreciation Rights granted in conjunction with any Award (other than an Option) as the Committee shall determine in its sole discretion. +6.3 No Repricing . Notwithstanding anything in the Plan to the contrary, except in connection with a corporate transaction involving the Company (including, without limitation, any stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination, or exchange of shares), the terms of outstanding awards may not be amended without stockholder approval to (i) reduce the exercise price of outstanding Stock Appreciation Rights, (ii) cancel outstanding Stock Appreciation Rights in exchange for cash, other awards or Stock Appreciation Rights with an exercise price that is less than the exercise price of the original Stock Appreciation Rights (iii) take any other action with respect to the Stock Appreciation Rights that would be treated as a repricing under the rules and regulations of the principal national securities exchange on which they are listed or (iv) permit the grant of any Stock Appreciation Rights that contains a so-called “reload” feature under which additional Stock Appreciation Rights or other Awards are granted automatically to the Participant upon exercise of the original Stock Appreciation Rights. +7. RESTRICTED STOCK AWARDS +7.1 Grants. Awards of Restricted Stock may be issued hereunder to Participants either alone or in addition to other Awards granted under the Plan (a “Restricted Stock Award” ), and such Restricted Stock Awards shall also be available as a form of payment of Performance Awards and other earned cash-based incentive compensation. A Restricted Stock Award shall be subject to restrictions imposed by the Committee covering a period of time specified by the Committee (the “Restriction Period” ). The Committee has sole discretion to determine whether any consideration (other than services) is to be received by the Company or any Subsidiary as a condition precedent to the issuance of Restricted Stock. +7.2 Award Agreements . The terms of any Restricted Stock Award granted under the Plan shall be set forth in a written Award Agreement which shall contain provisions determined by the Committee and not inconsistent with the Plan. The terms of Restricted Stock Awards need not be the same with respect to each Participant. +7.3 Rights of Holders of Restricted Stock . Beginning on the date of grant of the Restricted Stock Award and subject to execution of the Award Agreement, the Participant shall become a shareholder of the Company with respect to all Shares subject to the Award Agreement and shall have all of the rights of a shareholder, including the right to vote such Shares and the right to receive distributions made with respect to such Shares unless otherwise provided in such Award Agreement; provided, however, that any Shares, any other property, or cash distributed as a dividend or otherwise with respect to any Restricted Stock as to which the restrictions have not yet lapsed shall be subject to the same restrictions as such Restricted Stock. +7.4 Minimum Vesting Period . Except for certain limited situations (including the death, disability or retirement of the Participant, or a Change of Control referred to in Article 11), or special circumstances determined by the Committee (such as the achievement of performance objectives) Restricted Stock Awards subject solely to continued employment restrictions of Employees shall have a Restriction Period of not less than three years from date of grant. Subject to Section 3.3, Restricted Stock Awards may vest ratably over such vesting period in any increments, including but not limited to annual increments, quarterly increments, monthly increments, or a combination thereof; provided, however, that such incremental vesting shall not be permitted prior to the first anniversary of the date of grant. Notwithstanding the foregoing, subject to the limitations set forth in Section 3.3, the provisions of this Section shall not be applicable to any grants to new hires, Substitute Awards or grants of Restricted Stock in payment of Performance Awards and other earned cash-based incentive compensation or grants to Directors. Subject to the foregoing three-year minimum vesting requirement, the Committee may, in its sole discretion and subject to the limitations imposed under Section 162(m) of the Code and the regulations thereunder in the case of a Restricted Stock Award intended to comply with the performance-based exception under Section 162(m) of the Code, waive the forfeiture period and any other conditions set forth in any Award Agreement subject to such terms and conditions as the Committee shall deem appropriate in its sole discretion. The maximum aggregate number of Shares with respect to which Restricted Stock Awards or Other Stock Units that are subject solely to continued employment or service restrictions of Employees or directors of the Company or any Subsidiary with a Restriction Period of less than three years from date of grant (but permitting pro rata vesting over such time) shall be five percent (5%) of the number of Shares authorized for grant under Section 3.1 (as such number may be adjusted as provided in Sections 3.1 and 12.2); provided that this limit shall not be applicable to any grants to new hires, Substitute Awards or grants of Restricted Stock in payment of Performance Awards and other earned cash-based incentive compensation or grants to Directors. Any Restricted Stock Award or portion of such award that is subject to a Restriction Period of three years or more (notwithstanding the fact that a portion of such award may vest within three years of the date of grant due to pro rata vesting over the Restriction Period) or that meets the requirements of a Performance Award under Section 9 shall not be subject to the foregoing five-percent (5%) limitation. Notwithstanding the foregoing, all Restricted Stock Awards are subject to the provisions set forth in Section 3.3. +59 +7.5 Section 83(b) Election . The Committee may provide in an Award Agreement that the Award of Restricted Stock is condition ed upon the Participant making or refraining from making an election with respect to the Award under Section 83(b) of the Code. If a Participant makes an election pursuant to Section 83(b) of the Code concerning a Restricted Stock Award, the Participant sh all be required to file promptly a copy of such election with the Company. +8. OTHER STOCK UNIT AWARDS +8.1 Grants . Other Awards of units having a value equal to an identical number of Shares ( “Other Stock Unit Awards” ) may be granted hereunder to Participants, in addition to other Awards granted under the Plan. Other Stock Unit Awards shall also be available as a form of payment of other Awards granted under the Plan and other earned cash-based incentive compensation. +8.2 Award Agreements . The terms of Other Stock Unit Award granted under the Plan shall be set forth in a written Award Agreement which shall contain provisions determined by the Committee and not inconsistent with the Plan. The terms of such Awards need not be the same with respect to each Participant. +8.3 Vesting. Except for certain limited situations (including the death, disability or retirement of the Participant or a Change of Control referred to in Article 11), Other Stock Unit Awards subject solely to continued employment restrictions of Employees shall be subject to restrictions imposed by the Committee for a period of not less than three years from date of grant. Subject to Section 3.3, Other Stock Unit Awards may vest ratably over such vesting period in any increments, including but not limited to annual increments, quarterly increments, monthly increments, or a combination thereof; provided, however, that such incremental vesting shall not be permitted prior to the first anniversary of the date of grant. Notwithstanding the foregoing, subject to the limitations set forth in Section 3.3, such restrictions shall not be applicable to any grants to new hires, any Substitute Awards, grants of Other Stock Unit Awards in payment of Performance Awards pursuant to Article 9 and other earned cash-based incentive compensation, or grants of Other Stock Unit Awards on a deferred basis. The maximum aggregate number of Shares with respect to which Restricted Stock Awards or Other Stock Units that are subject solely to continued employment or service restrictions of Employees or directors of the Company or any Subsidiary with a Restriction Period of less than three years from date of grant (but permitting pro rata vesting over such time) shall be five percent (5%) of the number of Shares authorized for grant under Section 3.1 (as such number may be adjusted as provided in Sections 3.1 and 12.2); provided that this limit shall not be applicable to any grants to new hires, any Substitute Awards, grants of Other Stock Unit Awards in payment of Performance Awards pursuant to Article 9 and other earned cash-based incentive compensation, or grants of Other Stock Unit Awards on a deferred basis. Any Other Stock Unit Award or portion of such award that is subject to a Restriction Period of three years or more (notwithstanding the fact that a portion of such award may vest within three years of the date of grant due to pro rata vesting over the Restriction Period) or that meets the requirements of a Performance Award under Section 9 shall not be subject to the foregoing five-percent (5%) limitation. Notwithstanding the foregoing, all Other Stock Unit Awards are subject to the provisions set forth in Section 3.3. +8.4 Payment. Except as provided in Article 11 or as maybe provided in an Award Agreement, Other Stock Unit Awards may be paid in cash, Shares, other property, or any combination thereof, in the sole discretion of the Committee at the time of payment. Other Stock Unit Awards may be paid in a lump sum or in installments following the lapse of the restrictions applicable to such Awards, but, unless expressly provided in an Award Agreement, no later than 2½ months following the end of the calendar year in which such restrictions lapse, or in accordance with procedures established by the Committee, on a deferred basis subject to the requirements of Section 409A of the Code. +9. PERFORMANCE AWARDS +9.1 Grants. Performance Awards in the form of Performance Shares or Performance Units, as determined by the Committee in its sole discretion, may be granted hereunder to Participants, for no consideration or for such minimum consideration as may be required by applicable law, either alone or in addition to other Awards granted under the Plan. The performance goals to be achieved for each Performance Period shall be conclusively determined by the Committee and may be based upon the criteria set forth in Section 10.2. +9.2 Award Agreements. The terms of any Performance Award granted under the Plan shall be set forth in a written Award Agreement which shall contain provisions determined by the Committee and not inconsistent with the Plan, including whether such Awards shall have Dividend Equivalents. The terms of Performance Awards need not be the same with respect to each Participant. +9.3 Terms and Conditions . The performance criteria to be achieved during any Performance Period and the length of the Performance Period shall be determined by the Committee upon the grant of each Performance Award. Performance Awards shall be subject to the vesting requirements as set forth in Section 3.3. The amount of the Award to be distributed shall be conclusively determined by the Committee. +60 +9.4 Payment. Except as provided in Article 11 or as may be provided in an Award Agreement, Performance Awards will be distribute d only after the end of the relevant Performance Period. Performance Awards may be paid in cash, Shares, or any combination thereof, in the sole discretion of the Committee at the time of payment. Performance Awards may be paid in a lump sum or in instal lments, but, unless expressly provided in an Award Agreement, no later than 2½ months following the close of the calendar year that contains the end of the Performance Period or, in accordance with procedures established by the Committee, on a deferred bas is subject to the requirements of Section 409A of the Code. +9.5 Performance Award Dividend Equivalents. Subject to the provisions of the Plan and any Award Agreement, the Committee in its sole discretion may award currently or on a deferred basis, Dividend Equivalents with respect to the number of Shares covered by a Performance Unit or Performance Share Award, provided, that such Dividend Equivalents (if any) shall be deemed to have been reinvested in additional Shares or Units and shall provide that such Dividend Equivalents are subject to the same performance conditions as the underlying Award. +10. CODE SECTION 162(m) PROVISIONS +10.1 Covered Employees. Notwithstanding any other provision of the Plan, if the Committee determines at the time a Restricted Stock Award, a Performance Award or an Other Stock Unit Award is granted to a Participant who is, or is likely to be, as of the end of the tax year in which the Company would claim a tax deduction in connection with such Award, a Covered Employee, then the Committee may provide that this Article 10 is applicable to such Award. +10.2 Performance Criteria. If the Committee determines that a Restricted Stock Award, a Performance Award or an Other Stock Unit Award is subject to this Article 10, the lapsing of restrictions thereon and the distribution of cash, Shares or other property pursuant thereto, as applicable, shall be subject to the achievement of one or more objective performance goals established by the Committee, which shall be based on the attainment of specified levels of one or any combination of the following: net sales; revenue growth; pre-tax income before allocation of corporate overhead and bonus; earnings per share; operating income, net income; division, group or corporate financial goals; return on stockholders’ equity; total stockholder return; return on assets; attainment of strategic and operational initiatives; appreciation in and/or maintenance of the price of the Shares or any other publicly-traded securities of the Company; market share; gross profits; earnings before taxes; earnings before interest and taxes; earnings before interest, taxes, depreciation, depletion and amortization; economic value-added models; comparisons with various stock market indices; reductions in costs; cash flow, cash flow per share; return on invested capital, cash flow return on investment; improvement in or attainment of expense levels or working capital levels; cash margins; safety records; and rig utilization and rig count growth. Such performance goals also may be based solely by reference to the Company’s performance or the performance of a Subsidiary, division, business segment or business unit of the Company, or based upon the relative performance of other companies or upon comparisons of any of the indicators of performance relative to other companies. The Committee may also exclude the impact of an event or occurrence which the Committee determines should appropriately be excluded, including (a) restructurings, discontinued operations, infrequent and unusual items, and other unusual or non-recurring charges, (b) an event either not directly related to the operations of the Company or not within the reasonable control of the Company’s management, or (c) the cumulative effects of tax or accounting changes in accordance with generally accepted accounting principles. Such performance goals shall be set by the Committee within the time period prescribed by, and shall otherwise comply with the requirements of, Section 162(m) of the Code, and the regulations thereunder. +10.3 Adjustments. Notwithstanding any provision of the Plan (other than Article 11), with respect to any Restricted Stock, Performance Award or Other Stock Unit Award that is subject to this Section 10, the Committee may adjust downwards, but not upwards, the amount payable pursuant to such Award, and the Committee may not waive the achievement of the applicable performance goals, except in the case of the death or disability of the Participant or as otherwise determined by the Committee in special circumstances. +10.4 Restrictions. The Committee shall have the power to impose such other restrictions on Awards subject to this Article as it may deem necessary or appropriate in its sole discretion to ensure that such Awards satisfy all requirements for “performance-based compensation” within the meaning of Section 162(m) of the Code. +61 +10.5 Limitations on Grants to Individual Participant . Subject to adjustment as provided in Section 12.2, no Participant may be granted (i) Options or Stock Appreciati on Rights during any calendar year with respect to more than 1,000,000 Shares or (ii) Restricted Stock, Performance Awards denominated in Shares and/or Other Stock Unit Awards that are denominated in Shares in any calendar year with respect to more than 50 0,000 Shares (the “Limitations”). In addition to the foregoing, the maximum dollar value payable to any Participant in respect of any calendar year with respect to Performance Awards denominated in cash is $5,000,000. For the avoidance of doubt, any Awar d shall only be subject to one of the applicable per person limitations set forth in the previous two sentences. If an Award is cancelled, the cancelled Award shall continue to be counted toward the applicable Limitations. Further, no Director may be gra nted during any calendar year Awards having a fair value determined on the date of grant when added to all cash compensation paid to the Director during the same calendar year in excess of $500,000. +11. CHANGE OF CONTROL PROVISIONS +Impact of Change of Control . The terms of any Award may provide in the Award Agreement evidencing the Award that, upon a “Change of Control” of the Company, (a) Options and Stock Appreciation Rights outstanding as of the date of the Change of Control immediately vest and become fully exercisable, (b) that Options and Stock Appreciation Rights outstanding as of the date of the Change of Control may be cancelled and terminated without payment therefor if the Fair Market Value of one Share as of the date of the Change of Control is less than the per Share Option exercise price or Stock Appreciation Right grant price, (c) restrictions and deferral limitations on Restricted Stock lapse and the Restricted Stock become free of all restrictions and limitations and become fully vested, (d) all Performance Awards shall be considered to be earned and payable (either in full or pro rata based on the portion of Performance Period completed as of the date of the Change of Control), and any deferral or other restriction shall lapse and such Performance Awards shall be immediately settled or distributed to the extent permitted under Section 409A of the Code, (e) the restrictions and deferral limitations and other conditions applicable to any Other Stock Unit Awards or any other Awards shall lapse, and such Other Stock Unit Awards or such other Awards shall become free of all restrictions, limitations or conditions and become fully vested and transferable to the full extent of the original grant to the extent permitted under Section 409A of the Code, and (f) such other additional benefits as the Committee deems appropriate in its sole discretion shall apply, subject in each case to any terms and conditions contained in the Award Agreement evidencing such Award. Notwithstanding any other provision of the Plan, the Committee, in its sole discretion, may determine that, upon the occurrence of a Change of Control of the Company, each Option and Stock Appreciation Right outstanding shall terminate within a specified number of days after notice to the Participant, and/or that each Participant shall receive, with respect to each Share subject to such Option or Stock Appreciation Right, an amount equal to the excess, if any, of the Fair Market Value of such Share immediately prior to the occurrence of such Change of Control over the exercise price per share of such Option and/or Stock Appreciation Right; such amount to be payable in cash, in one or more kinds of stock or property (including the stock or property, if any, payable in the transaction) or in a combination thereof, as the Committee, in its sole discretion, shall determine. +12. GENERALLY APPLICABLE PROVISIONS +12.1 Amendment and Termination of the Plan. The Board may, from time to time, alter, amend, suspend or terminate the Plan as it shall deem advisable in its sole discretion, subject to any requirement for stockholder approval imposed by applicable law, including the rules and regulations of the Nasdaq Stock Market (or any other principal national securities exchange on which the Company is listed) provided that the Board may not amend the Plan in any manner that would result in noncompliance with Rule 16b-3 of the Exchange Act; and further provided that the Board may not, without the approval of the Company’s stockholders, amend the Plan to (a) increase the number of Shares that may be the subject of Awards under the Plan (except for adjustments pursuant to Section 12.2), (b) expand the types of awards available under the Plan, (c) materially expand the class of persons eligible to participate in the Plan, (d) amend any provision of Section 5.9, (e) increase the maximum permissible term of any Option specified by Section 5.4, (f) amend any provision of Section 6.3 or (g) amend any provision of Section 10.5. In addition, no amendments to, or termination of, the Plan shall in any way impair the rights of a Participant under any Award previously granted without such Participant’s consent. +12.2 Adjustments. In the event of any merger, reorganization, consolidation, recapitalization, dividend or distribution (whether in cash, shares or other property, other than a regular cash dividend), stock split, reverse stock split, spin-off or similar transaction or other change in corporate structure affecting the Shares or the value thereof, such adjustments and other substitutions shall be made to the Plan and to Awards as the Committee, in its sole discretion, deems equitable or appropriate, including such adjustments in the aggregate number, class and kind of securities that may be delivered under the Plan and, in the aggregate or to any one Participant, in the number, class, kind and option or exercise price of securities subject to outstanding Awards granted under the Plan (including, if the Committee deems appropriate, the substitution of similar options to purchase the shares of, or other awards denominated in the shares of, another company) as the Committee may determine to be appropriate in its sole discretion; provided, however, that the number of Shares subject to any Award shall always be a whole number. No adjustment or substitution pursuant to this Section 12.2 shall be made in a manner that results in noncompliance with the requirements of Section 409A of the Code, to the extent applicable. +62 +12.3 Transferability of Awards. Except as provided below, no Award and no Shares subject to Awards described in Article 8 that have not been issued or as to which any applicable restriction, performance or deferral period has not lapsed, may be sold, assigned, transferred, pledged or otherwise encumbered, other than by will or the laws of descent and distribution or pursuant to a domestic relations order, as determined by the Committee, and such Award may be exercised during the life of the Participant only by the Participant or the Participant’s guardian or lega l representative. Notwithstanding the foregoing, a Participant may assign or transfer an Award with the consent of the Committee (i) for charitable donations; (ii) to the Participant’s spouse, children or grandchildren (including any adopted and stepchild ren and grandchildren), or (iii) a trust for the benefit of one or more of the Participants or the persons referred to in clause (ii) (each transferee thereof, a “Permitted Assignee” ); provided that such Permitted Assignee shall be bound by and subject to all of the terms and conditions of the Plan and the Award Agreement relating to the transferred Award and shall execute an agreement satisfactory to the Company evidencing such obligations; and provided further that such Participant shall remain bound by t he terms and conditions of the Plan. The Company shall cooperate with any Permitted Assignee and the Company’s transfer agent in effectuating any transfer permitted under this Section. Notwithstanding the foregoing, no Incentive Stock Option granted unde r the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, all Incentive Stock Options granted to a Participant under the Plan shall be exercisable during his or her lifetime only by such Participant. +12.4 Termination of Employment . The Committee shall determine and set forth in each Award Agreement whether any Awards granted in such Award Agreement will continue to be exercisable, and the terms of such exercise, on and after the date that a Participant ceases to be employed by or to provide services to the Company or any Subsidiary (including as a Director), whether by reason of death, disability, voluntary or involuntary termination of employment or services, or otherwise. The date of termination of a Participant’s employment or services will be determined by the Committee, which determination will be final. +12.5 Deferral. The Committee shall be authorized to establish procedures pursuant to which the payment of any Award may be deferred. Such deferrals shall be administered in a manner that is intended to comply with Section 409A of the Code and shall be construed and interpreted in accordance with such intent. +12.6 Dividend Equivalents. Subject to the provisions of the Plan and any Award Agreement, the recipient of an Award (including any deferred Award) may, if so determined by the Committee, be entitled to receive, on a deferred basis, cash, stock or other property dividends, or cash payments in amounts equivalent to cash, stock or other property dividends on Shares ( “Dividend Equivalents” ) with respect to the number of Shares covered by the Award, as determined by the Committee, in its sole discretion. Dividend Equivalents may accrue but will not, in any event, be payable until the vesting conditions of the underlying Award have been met. The Committee may provide that such amounts and Dividend Equivalents (if any) shall be deemed to have been reinvested in additional Shares or otherwise reinvested. Notwithstanding the foregoing, Dividend Equivalents shall not be made part of any Options or Stock Appreciation Rights. +13. MISCELLANEOUS +13.1 Tax Withholding . The Company shall have the right to make all payments or distributions pursuant to the Plan to a Participant (or a Permitted Assignee thereof) (any such person, a “Payee” ) net of any applicable federal, state and local taxes required to be paid or withheld as a result of (a) the grant of any Award, (b) the exercise of an Option or Stock Appreciation Right, (c) the delivery of Shares or cash, (d) the lapse of any restrictions in connection with any Award or (e) any other event occurring pursuant to the Plan. The Company or any Subsidiary shall have the right to withhold from wages or other amounts otherwise payable to such Payee such minimum statutory withholding taxes as may be required by law, or to otherwise require the Payee to pay such withholding taxes. If the Payee shall fail to make such tax payments as are required, the Company or its Subsidiaries shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to such Payee or to take such other action as may be necessary to satisfy such withholding obligations. The Committee shall be authorized to establish procedures for election by Participants to satisfy such obligation for the payment of such taxes by tendering previously acquired Shares (either actually or by attestation, valued at their then Fair Market Value) that have been owned for a period of at least six months (or such other period to avoid accounting charges against the Company’s earnings), or by directing the Company to retain Shares (up to the Participant’s minimum required tax withholding rate or such other rate that will not trigger a negative accounting impact) otherwise deliverable in connection with the Award. +13.2 Right of Discharge Reserved; Claims to Awards. Nothing in the Plan nor the grant of an Award hereunder shall confer upon any Employee or Director the right to continue in the employment or service of the Company or any Subsidiary or affect any right that the Company or any Subsidiary may have to terminate the employment or service of (or to demote or to exclude from future Awards under the Plan) any such Employee or Director at any time for any reason. Except as specifically provided by the Committee, the Company shall not be liable for the loss of existing or potential profit from an Award granted in the event of termination of an employment or other relationship. No Employee or Participant shall have any claim to be granted any Award under the Plan, and there is no obligation for uniformity of treatment of Employees or Participants under the Plan. +63 +13.3 Prospective Recipient. The prospective recipient of any Award under the Plan shall not, with respect to such Award, be deemed to have become a Participant, or to have any rights with respect to such Award, un til and unless such recipient shall have executed an agreement or other instrument (in written or electronic form, in such manner as may be designated by the Committee) evidencing the Award and delivered a copy thereof to the Company, and otherwise complie d with the then applicable terms and conditions. +13.4 Cancellation of Award. Notwithstanding anything to the contrary contained herein, all outstanding Awards granted to any Participant may be canceled if the Participant, without the consent of the Company, while employed by the Company or any Subsidiary or after termination of such employment or service, establishes a relationship with a competitor of the Company or any Subsidiary or engages in activity that is in conflict with or adverse to the interest of the Company or any Subsidiary, as determined by the Committee in its sole discretion. +13.5 Stop Transfer Orders. All certificates for Shares delivered under the Plan pursuant to any Award shall be subject to such stop-transfer orders and other restrictions as the Committee may deem advisable in its sole discretion under the rules, regulations and other requirements of the Securities and Exchange Commission, any stock exchange upon which the Shares are then listed, and any applicable federal or state securities law, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions. +13.6 Nature of Payments. All Awards made pursuant to the Plan are in consideration of services performed or to be performed for the Company or any Subsidiary, division or business unit of the Company. Neither Awards made under the Plan nor Shares or cash paid pursuant to such Awards, may be included as “compensation” for purposes of computing the benefits payable to any Participant under the Company’s or any Subsidiary’s retirement plans (both qualified and non-qualified), welfare benefit plans or other employee benefit plans unless such plan expressly provides that such compensation shall be taken into account in computing a participant’s benefit. +13.7 Other Plans. Nothing contained in the Plan shall prevent the Board from adopting other or additional compensation arrangements, subject to stockholder approval if such approval is required; and such arrangements may be either generally applicable or applicable only in specific cases. +13.8 Severability. If any provision of the Plan shall be held unlawful or otherwise invalid or unenforceable in whole or in part by a court of competent jurisdiction, such provision shall (a) be deemed limited to the extent that such court of competent jurisdiction deems it lawful, valid and/or enforceable and as so limited shall remain in full force and effect, and (b) not affect any other provision of the Plan or part thereof, each of which shall remain in full force and effect. If the making of any payment or the provision of any other benefit required under the Plan shall be held unlawful or otherwise invalid or unenforceable by a court of competent jurisdiction, such unlawfulness, invalidity or unenforceability shall not prevent any other payment or benefit from being made or provided under the Plan, and if the making of any payment in full or the provision of any other benefit required under the Plan in full would be unlawful or otherwise invalid or unenforceable, then such unlawfulness, invalidity or unenforceability shall not prevent such payment or benefit from being made or provided in part, to the extent that it would not be unlawful, invalid or unenforceable, and the maximum payment or benefit that would not be unlawful, invalid or unenforceable shall be made or provided under the Plan. +13.9 Construction. As used in the Plan, the words “include” and “including,” and variations thereof, shall not be deemed to be terms of limitation, but rather shall be deemed to be followed by the words “without limitation.” +13.10 Unfunded Status of the Plan. The Plan is intended to constitute an “unfunded” plan for incentive and deferred compensation. With respect to any payments not yet made to a Participant by the Company, nothing contained herein shall give any such Participant any rights that are greater than those of a general creditor of the Company. In its sole discretion, the Committee may authorize the creation of trusts or other arrangements to meet the obligations created under the Plan to deliver the Shares or payments in lieu of or with respect to Awards hereunder; provided, however, that the existence of such trusts or other arrangements is consistent with the unfunded status of the Plan. +13.11 Governing Law. The Plan and all determinations made and actions taken thereunder, to the extent not otherwise governed by the Code or the laws of the United States, shall be governed by the laws of the State of Delaware, without reference to principles of conflict of laws, and construed accordingly. +13.12 Effective Date of Plan; Termination of Plan. The Plan was originally approved by the Company’s stockholders on April 17, 2014. The Plan as amended and restated was approved by the Board on May 17, 2017 and by the Company's stockholders on June 29, 2017. Awards may be granted under the Plan at any time and from time to time on or prior to June 29, 20 27 June 6, 2029 , on which date the Plan will expire except as to Awards then outstanding under the Plan. Such outstanding Awards shall remain in effect until they have been exercised or terminated, or have expired. +64 +13.13 Foreign Employees. Awards may be granted to Participants who are foreign nationals or employed outside the United States, or both, on such terms and conditions different from those applicable to Awards to Employees employed in the United States as may, in the Committee’s s ole discretion, be necessary or desirable in order to recognize differences in local law or tax policy. The Committee also may impose conditions on the exercise or vesting of Awards in order to minimize the Company’s obligation with respect to tax equaliz ation for Employees on assignments outside their home country. +13.14 Section 409A of the Code. +(a) Awards made under the Plan are intended to comply with or be exempt from Section 409A of the Code, and ambiguous provisions hereof, if any, shall be construe d and interpreted in a manner consistent with such intent. No payment, benefit or consideration shall be substituted for an Award if such action would result in the imposition of taxes under Section 409A of the Code. Notwithstanding anything in the Plan to the contrary, if any Plan provision or Award under the Plan would result in the imposition of an additional tax under Section 409A of the Code, that Plan provision or Award shall be reformed, to the extent permissible under Code Section 409A, to avoid imposition of the additional tax, and no such action shall be deemed to adversely affect the Participant’s rights to an Award. +(b) Unless the Committee provides otherwise in an Award Agreement, each Other Stock Unit Award or Performance Unit (or portion th ereof if the Award is subject to a vesting schedule) shall be settled no later than the 15th day of the third month after the end of the first calendar year in which the Award (or such portion thereof) is no longer subject to a “substantial risk of forfeiture” within the meaning of Section 409A of the Code. If the Committee determines that an Other Stock Unit Award or Performance Unit is intended to be subject to Section 409A of the Code, the applicable Award Agreement shall include terms that are designed to satisfy the requirements of Section 409A of the Code. +(c) If the Participant is identified by the Company as a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code on the date on which the Participant has a “separation from s ervice” (other than due to death) within the meaning of Treasury Regulation § 1.409A-1(h), any Award payable or settled on account of a separation from service that is deferred compensation subject to Section 409A of the Code shall be paid or settled on the earliest of (1) the first business day following the expiration of six months from the Participant’s separation from service, (2) the date of the Participant’s death, or (3) such earlier date as complies with the requirements of Section 409A of the Code. +13.15 Captions. The captions in the Plan are for convenience of reference only, and are not intended to narrow, limit or affect the substance or interpretation of the provisions contained herein. +13.16 Notification of Disqualifying Disposition. If any Participant shall make any disposition of Shares issued pursuant to the exercise of an incentive stock option under the circumstances described in Section 421(b) of the Code (relating to certain disqualifying dispositions), such Participant shall notify the Company of such disposition within ten (10) days thereof. +13.17 Sarbanes Oxley Act and Clawback Policy. If the Company is required to prepare an accounting restatement due to the material noncompliance of the Company, as a result of misconduct, with any financial reporting requirement under the securities laws, or if the Participant is one of the persons subject to automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002, the Participant shall reimburse the Company the amount of any payment in settlement of an Award earned or accrued during the twelve-month period following the first public issuance or filing with the United States Securities and Exchange Commission (whichever just occurred) of the financial document embodying such financial reporting requirement. Notwithstanding any other provisions in this Plan, any Award shall be subject to recovery or clawback by the Company under any applicable clawback policy adopted by the Company whether before or after the date of grant of the Award. +13.18 Indemnification. Each person who is or shall have been a member of the Board, or a Committee appointed by the Board, or an officer of the Company to whom authority was delegated in accordance with Section 4.2 shall be indemnified and held harmless by the Company against and from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him or her in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by him or her in settlement thereof, with the Company’s approval, or paid by him or her in satisfaction of any judgment in any such action, suit, or proceeding against him or her, provided he or she shall give the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf, unless such loss, cost, liability, or expense is a result of his or her own willful misconduct or except as expressly provided by statute. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company’s Certificate of Incorporation of Bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless. +65 +VOTE BY INTERNET - www.proxyvote.comUse the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the cut-off date ormeeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.Electronic Delivery of Future PROXY MATERIALSIf you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reportselectronically via e-mail or the internet. To sign up for electronic delivery, please follow the instructions above to vote using the internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years.VOTE BY PHONE - 1-800-690-6903Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions.VOTE BY MAILMark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 mercedes Way, Edgewood, NY 11717.PATTERSON-UT I ENERGY, INC.10713 W. SAM HOUSTON PARKWAY NORTH SUITE 800 HOUSTON, TTX 77064TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:KEEP THIS PORTION FOR YOUR RECORDSTHIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. DETACH AND RETURN THIS PORTION ONLYThe Board of Directors recommends you vote FOR all the nominees listed in proposal 1.For All Withhold All For all ExceptTo withhold authority to vote for any individual nominees(s), mark "For All Except"and write the number(s) of the nominee(s) on the line below.1. Election of DirectorsNominees01 Mark S. Siegel 02 Charles O. Buckner 03 Tiffany (TJ) Thoa Cepak 04 Michael W. Conlon 05 Willam A. Hendricks Jr06 Curtis W. Huff 07 Terry H. Hunt 08 Janeen S. JudahThe Board of Directors recommends you vote FOR proposals 2, 3 and 4. For Against Abstain2. Approval of amendment to Patterson-UTI's Amended and Restated 2014 Long-Term Incentive Plan.3. Ratification of the selection of PrincewaterhouseCoopers LLP as the independent registered public accounting firm of Patterson-UTI for the fiscal year ending December 31, 2019.4. Approval of an advisory resolution on Patterson-UTI's compensation of its named executive officers NOTE: I also authorize my proxies to vote in their discretion with respect to such other business as may properly come before the meeting or any adjournment there of Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign If a corporation or partnership, please sign in full corporate or partnership name by authorized officer Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date0000413080_1 R1.0.1.18 +0000413080_2 R1.0.1.18 Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice & Proxy Statement and Form 10-K, are available at www.proxyvote.com PATTERSON-UTI ENERGY, INC. Annual Meeting of Stockholders June 6, 2019 10:00 AM This proxy is solicited by the Board of Directors The undersigned stockholder of Patterson-UTI Energy, Inc. (the "Company") hereby appoints Mark S. Siegel, William Andrew Hendricks, Jr. and C. Andrew Smith and each of them, proxies to the undersigned, each with full power to act without the other and with full power of substitution, to vote all of the shares which the undersigned is entitled to vote at the annual meeting of stockholders of the Company to be held Thursday, June 6, 2019, at 10:00 a.m., Central Time, at our corporate headquarters, located at 10713 W. Sam Houston Parkway North, Suite 125, Houston, Texas, 77064, and at any and all adjournments or postponements thereof, with the same force and effect as if the undersigned were personally present. The undersigned hereby instructs the above-named proxies to vote the shares represented by this proxy in the manner as directed for the undersigned on the reverse side of this proxy card. If no directions are made, the proxies will vote “FOR” the nominees for directors, “FOR” the approval of the amendment to the Patterson-UTI Energy, Inc. Amended and Restated 2014 Long-Term Incentive Plan, “FOR” the ratification of the selection of PricewaterhouseCoopers LLP and “FOR” the approval of the advisory resolution on executive compensation, as set forth on the reverse side. If any other matter should be presented properly, this proxy will be voted in accordance with the discretion of the above-named proxies. Continued and to be marked, dated and signed on reverse side \ No newline at end of file diff --git a/raw/proxies/0000889900/0001564590-19-011499/proxy_rpt.txt b/raw/proxies/0000889900/0001564590-19-011499/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..e69de29bb2d1d6434b8b29ae775ad8c2e48c5391 diff --git a/raw/proxies/0000889900/0001564590-20-016287/proxy.txt b/raw/proxies/0000889900/0001564590-20-016287/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..939a0b58c839d05f9b1519830981ab15caae924d --- /dev/null +++ b/raw/proxies/0000889900/0001564590-20-016287/proxy.txt @@ -0,0 +1,1978 @@ +DEF 14A +1 +pten-def14a_20200604.htm +DEF 14A +pten-def14a_20200604.htm +V +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +Washington, D.C. 20549 +SCHEDULE 14A INFORMATION +Proxy Statement Pursuant to Section 14(a) of the +Securities Exchange Act of 1934 +(Amendment No. ) +Filed by the Registrant ☒ +Filed by a Party other than the Registrant ☐ +Check the appropriate box: +☐ +Preliminary Proxy Statement +☐ +Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +☒ +Definitive Proxy Statement +☐ +Definitive Additional Materials +☐ +Soliciting Material under Rule 14a-12 +PATTERSON-UTI ENERGY, INC. +(Name of registrant as specified in its charter) +(Name of person(s) filing proxy statement, if other than the registrant) +Payment of Filing Fee (Check the appropriate box): +☒ +No fee required. +☐ +Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. +(1) +Title of each class of securities to which transaction applies: +(2) +Aggregate number of securities to which transaction applies: +(3) +Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): +(4) +Proposed maximum aggregate value of transaction: +(5) +Total fee paid: +☐ +Fee paid previously with preliminary materials. +☐ +Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. +(1) +Amount Previously Paid: +(2) +Form, Schedule or Registration Statement No.: +(3) +Filing Party: +(4) +Date Filed: +10713 West Sam Houston Parkway North, Suite 800 +Houston, Texas 77064 +(281) 765-7100 +April 10, 2020 +Dear Stockholder: +We cordially invite you to attend Patterson-UTI Energy, Inc.’s annual stockholders’ meeting. The annual meeting will be held Thursday, June 4, 2020, at 10:00 a.m., Central Time, at our corporate headquarters, located at 10713 W. Sam Houston Parkway North, Suite 125, Houston, Texas 77064 . +We are pleased to take advantage of Securities and Exchange Commission rules that allow us to furnish proxy materials to our stockholders on the Internet. We believe that posting these materials on the Internet enables us to provide stockholders with the information that they need quickly, while lowering our costs of printing and delivery and supporting our sustainability efforts. We are mailing to most of our stockholders a Notice of Internet Availability of Proxy Materials, rather than a paper copy of our proxy materials. The notice contains instructions on how to access the proxy materials, vote and obtain, if you so desire, a paper copy of the proxy materials. +Your vote is important to us. Whether or not you plan to attend the Annual Meeting in person, we urge you to promptly vote your shares by using the Internet or telephone, or if the accompanying proxy statement was mailed to you, by completing, signing, dating and returning your proxy card as soon as possible in the enclosed postage prepaid envelope. +Thank you for your support. +Sincerely, +M ark S. S iegel +Chairman of the Board +W illiam A ndrew H endricks , J r . +President, Chief Executive Officer and Director +PATTERSON-UTI ENERGY, INC. +10713 West Sam Houston Parkway North, Suite 800 +Houston, Texas 77064 +NOTICE OF 2020 ANNUAL MEETING OF STOCKHOLDERS +To Be Held June 4, 2020 +The 2020 annual meeting of the stockholders of Patterson-UTI Energy, Inc., a Delaware corporation (“Patterson-UTI”), will be held Thursday, June 4, 2020, at 10:00 a.m., Central Time, at our corporate headquarters 1 , located at 10713 W. Sam Houston Parkway North, Suite 125, Houston, Texas 77064 (the “Meeting”), for the following purposes: +• +to elect six directors named in this proxy statement to the Board of Directors of Patterson-UTI to serve until the next annual meeting of the stockholders or until their respective successors are elected and qualified; +• +to ratify the selection of PricewaterhouseCoopers LLP as the independent registered public accounting firm of Patterson-UTI for the fiscal year ending December 31, 2020; +• +to approve, on an advisory basis, Patterson-UTI’s compensation of its named executive officers; and +• +to transact such other business as may properly come before the Meeting or any adjournment or postponement thereof. +Stockholders of record at the close of business on April 6, 2020 are entitled to notice of and to vote at the Meeting and any adjournment or postponement thereof. +Your vote is important to us. Whether or not you plan to attend the Meeting in person, we urge you to promptly vote your shares by using the Internet or telephone, or if the accompanying proxy statement was mailed to you, by completing, signing, dating and returning your proxy card as soon as possible in the enclosed postage prepaid envelope. +By order of the Board of Directors +S ETH D. W EXLER +Senior Vice President, General Counsel and Secretary +April 10, 2020 +Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting +to Be Held on June 4, 2020 +The proxy statement and annual report to stockholders are available at www.proxyvote.com . +1 +We are actively monitoring the public health and travel concerns relating to COVID-19 and the related recommendations and protocols issued by federal, state and local governments. In the event that it is not possible or advisable to hold our annual meeting in person as planned, we will announce alternative arrangements for the meeting as promptly as practicable, which may include holding the meeting solely by means of remote communication. Any such change, including details on how to participate and vote in a remote meeting, would be announced in advance, and details would be posted on our website at www.patenergy.com and filed with the Securities and Exchange Commission. It is important that you retain a copy of your control number found on the proxy card, voting instruction form or notice, as such number will be required in order to gain access to any remote meeting. As always, we encourage you to vote your shares prior to the annual meeting. +PATTERSON-UTI ENERGY, INC. +10713 West Sam Houston Parkway North, Suite 800 +Houston, Texas 77064 +PROXY STATEMENT +ANNUAL MEETING OF STOCKHOLDERS +To Be Held June 4, 2020 +General Information About the Annual Meeting and Voting +The Board of Directors (the “Board” or “Board of Directors”) of Patterson-UTI Energy, Inc., a Delaware corporation (“Patterson-UTI” or the “Company”), has made this proxy statement and its 2019 annual report available to you on the Internet or, upon your request has delivered printed versions of these materials to you by mail beginning on or about April 13, 2020. Patterson-UTI is furnishing this proxy statement in connection with the solicitation by the Board of Directors of proxies to be voted at the 2020 annual meeting of stockholders of Patterson-UTI (the “Meeting”). The Meeting will be held Thursday, June 4, 2020, at 10:00 a.m., Central Time, at our corporate headquarters, located at 10713 W. Sam Houston Parkway North, Suite 125, Houston, Texas 77064 , or at any adjournment or postponement thereof . +The Notice of Internet Availability of Proxy Materials (the “Notice”) was mailed to each of Patterson-UTI’s stockholders (other than those who previously requested electronic delivery) entitled to vote at the Meeting on or about April 13, 2020. +Pursuant to the “notice and access” rules adopted by the Securities and Exchange Commission (the “SEC”), Patterson-UTI has elected to provide stockholders access to its proxy materials on the Internet. Accordingly, Patterson-UTI sent a Notice to all of its stockholders as of the record date. The Notice includes instructions on how to access Patterson-UTI’s proxy materials on the Internet and how to request a printed copy of these materials. In addition, by following the instructions in the Notice, stockholders may request to receive proxy materials in printed form by mail or electronically by email on an ongoing basis. +Choosing to receive your future proxy materials by email will save us the cost of printing and mailing documents to you and will support our sustainability efforts. If you choose to receive future proxy materials by email, you will receive an email next year with instructions containing a link to those materials and a link to the proxy voting site. Your election to receive proxy materials by email will remain in effect until you terminate such election. +If your shares are registered directly in your name with our transfer agent, Continental Stock Transfer & Trust Company, you are considered the “stockholder of record” with respect to those shares, and the Notice was sent directly to you. +If your shares are held in an account at a brokerage firm, bank, broker-dealer, or other similar organization, then you are the beneficial owner of shares held in “street name,” and the Notice was forwarded to you by that organization. As a beneficial owner, you have the right to direct that organization on how to vote the shares held in your account. +Whether you are a “stockholder of record” or hold your shares in “street name,” you may direct your vote without attending the Meeting in person. +If you are a stockholder of record, you may vote by using the Internet or telephone by following the instructions in the Notice. If you request printed copies of the proxy materials by mail, you may also vote by completing, dating, signing and returning your proxy card by mail. You should sign your name exactly as it appears on the proxy card. If you are signing in a representative capacity (for example, as guardian, executor, trustee, custodian, attorney or officer of a corporation), you should indicate your name and title or capacity. +If you are the beneficial owner of shares held in street name, you may be eligible to vote your shares electronically using the Internet or telephone by following the instructions in the Notice. If you request printed copies of the proxy materials by mail, you may also vote by signing the voter instruction card provided by your brokerage firm, bank, broker-dealer, or other similar organization and returning it by mail. If you provide specific voting instructions by mail, telephone or the Internet, your shares will be voted by your brokerage firm, bank, broker-dealer, or similar organization as you have directed. +1 +Properly submitted proxies received either by mail, Internet, telephone or in person in time to be counted for the Meeting will be voted as you have directed in your proxy, unless you revoke your proxy in the manner provided below. As to any matter for which you give no direction in your proxy, your shares will be voted as follows: +• +“FOR” the election of all of the nominees to the Board of Directors named in this proxy statement; +• +“FOR” the ratification of PricewaterhouseCoopers LLP as the independent registered public accounting firm of Patterson-UTI for the fiscal year ending December 31, 2020; +• +“FOR” the approval, on an advisory basis, of Patterson-UTI’s compensation of its named executive officers; and +• +“FOR” or “AGAINST” any other proposals that may be properly submitted at the Meeting at the discretion of the persons named in the proxy. +If you are a stockholder of record, you may revoke your proxy before the proxy is voted by either: +• +submitting a new proxy with a later date, including a proxy submitted using the Internet or telephone, in time to be counted for the Meeting; +• +notifying the Secretary of Patterson-UTI in writing before the Meeting that you have revoked your proxy; or +• +attending the Meeting and voting in person. +If your shares are held in street name, you must obtain a proxy executed in your favor from the stockholder of record (that is, your brokerage firm, bank, broker-dealer or similar organization) to be able to vote at the Meeting. +The Board of Directors is making this solicitation. We have retained Georgeson LLC, 480 Washington Blvd., 26 th Floor, Jersey City, New Jersey 07310, for a fee of approximately $8,500 and the reimbursement of out of pocket costs and expenses, to assist in the solicitation of proxies on behalf of the Board. Patterson-UTI’s officers and other employees, without compensation other than regular compensation, may also solicit proxies on behalf of the Board by mail, email, the Internet, telephone, electronic means and personal interview. Patterson-UTI will pay all costs associated with this solicitation. +Shares Outstanding and Voting Rights +Only stockholders of record of Patterson-UTI’s common stock, $.01 par value per share (the “Common Stock”) at the close of business on April 6, 2020 are entitled to notice of and to vote at the Meeting or any adjournment or postponement thereof. At the close of business on April 6, 2020, there were 186,356,475 shares of Common Stock issued and outstanding. Holders of record of Common Stock on April 6, 2020 will be entitled to one vote per share on all matters to properly come before the Meeting. A list of stockholders entitled to notice of and to vote at the Meeting will be made available at the Meeting and during regular business hours at the offices of Patterson-UTI Energy, Inc., 10713 West Sam Houston Parkway North, Suite 800, Houston, Texas 77064 for the ten day period prior to the Meeting for examination by any stockholder for any purpose germane to the Meeting. +A quorum is necessary to transact business at the Meeting. A majority of the shares of Common Stock outstanding on April 6, 2020 will constitute a quorum. The shares held by each stockholder who attends the Meeting in person, signs and timely returns the form of proxy, or properly votes using the Internet or telephone will be counted for purposes of determining the presence of a quorum at the Meeting. +“Broker non-votes” and abstentions will be considered present at the Meeting for the purpose of determining a quorum. Broker non-votes occur when nominees, such as brokerage firms, banks, broker-dealers, or other similar organizations holding shares on behalf of the beneficial owners, are prohibited from exercising discretionary voting authority for beneficial owners who have not provided voting instructions. If you do not give instructions to your bank, brokerage firm or other agent, the bank, brokerage firm or other agent will nevertheless be entitled to vote your shares of Common Stock in its discretion on “routine matters” and may give or authorize the giving of a proxy to vote the shares of Common Stock in its discretion on such matters. The ratification of an independent registered public accounting firm is generally considered a routine matter, whereas the election of directors and the advisory approval of executive compensation are not considered routine matters. For these reasons, please promptly vote in accordance with the instructions provided by your brokerage firm, bank, broker-dealer, or other similar organization. +2 +PROPOSAL NO. 1 +ELECTION OF DIRECTORS +Directors are elected to serve until the next annual meeting of stockholders and until their successors are elected and qualified. Under Delaware law and Patterson-UTI’s bylaws, the affirmative vote of a plurality of shares present in person or represented by proxy at the meeting at which a quorum is present is required for the election of directors. +The enclosed form of proxy provides a means for you to either: +• +vote “FOR” the election of the nominees to the Board of Directors listed below, +• +withhold authority to vote for one or more of the nominees, or +• +withhold authority to vote for all of the nominees. +The Board of Directors recommends that you vote “FOR” all of the nominees. Unless you give contrary instructions in your proxy, your proxy will be voted “FOR” the election of all of the nominees to the Board of Directors. If any nominee should become unable or unwilling to accept the nomination or election, the person acting under the proxy will vote for the election of such other person as the Board of Directors may recommend. The Board has no reason, however, to believe that any of the nominees will be unable or unwilling to serve if elected. +Because directors are elected by a plurality vote, shares as to which a stockholder withholds authority to vote and broker non-votes will not affect the outcome of the election, although a broker non-vote will be counted for purposes of establishing a quorum. +Our corporate governance guidelines require that if a director receives in an uncontested election a greater number of “withhold” votes than votes cast “for” his or her election, the Nominating and Corporate Governance Committee of the Board of Directors will undertake a prompt evaluation of the appropriateness of the director’s continued service on the Board of Directors. In performing this evaluation, the Nominating and Corporate Governance Committee will review all factors it deems relevant, including the stated reasons why votes were withheld, the director’s length of service, his or her past contributions to Patterson-UTI and the availability of other qualified candidates. The Nominating and Corporate Governance Committee will then make its recommendation to the Board. The Board of Directors will review the Nominating and Corporate Governance Committee’s recommendation and consider such further factors and information as it deems relevant. The Board of Directors will act on the Nominating and Corporate Governance Committee’s recommendation no later than 90 days following the date of the stockholders’ meeting. If the Board of Directors determines remedial action is appropriate, the director shall promptly take whatever action is requested by the Board. If the director does not promptly take the recommended remedial action or if the Board of Directors determines that immediate resignation is in the best interests of Patterson-UTI and its stockholders, the Board of Directors may accept the director’s resignation that will have been tendered as follows. Each director will, as a condition to his or her appointment or election as a director or nomination as a director, agree in writing to comply with the terms of Patterson-UTI’s majority voting policy and provide to the Board of Directors an irrevocable resignation that will be effective upon (i) the failure to receive the required vote at the next annual meeting at which such director faces re-election and (ii) the Board of Directors’ acceptance of such resignation. +Set forth below is the name, age, position and a brief description of the business experience during at least the past five years of each of the nominees to Patterson-UTI’s Board of Directors, as well as specific qualifications, attributes and skills of such member that were identified by the Nominating and Corporate Governance Committee when such member was nominated to serve on the Board of Directors. Each current member of Patterson-UTI’s Board of Directors is a nominee for election to the Board of Directors, except for Mark S. Siegel and Charles O. Buckner, who have chosen to retire from the Board of Directors effective at the Meeting. As a result of the retirements, the Board of Directors expects to reduce the size of the Board to six members effective at the Meeting. There are no arrangements or understandings between any person and any of the directors pursuant to which such director was selected as a nominee for election at the Meeting. There are no family relationships among any of the directors or executive officers of Patterson-UTI. +Name +Age +Position +Director Since +Curtis W. Huff* +62 +Director +2001 +William A. Hendricks, Jr. +55 +President and Chief Executive Officer +2017 +Tiffany (TJ) Thom Cepak +47 +Director +2014 +Michael W. Conlon +73 +Director +2012 +Terry H. Hunt +71 +Director +2003 +Janeen S. Judah +60 +Director +2018 +* +Mr. Huff will become Chairman of the Board effective at the Meeting. +3 +The following charts show a snapshot of the average tenure, average age and gender diversity of the six nominees for election to our Board of Directors . +When considering whether directors and nominees have the experience, qualifications, attributes and skills, taken as a whole, to enable the Board of Directors to satisfy its oversight responsibilities effectively in light of Patterson-UTI’s business and structure, the Nominating and Corporate Governance Committee and the Board of Directors focused primarily on the information discussed in each of the directors’ individual biographies set forth below. +Curtis W. Huff — Mr. Huff has served as a director of Patterson-UTI since May 2001 and served as a director of UTI from 1997 to May 2001. Mr. Huff will become Chairman of the Board effective at the Meeting. Mr. Huff is owner and Chairman of Freebird Partners, a private investment firm created in 2002 that is focused on oilfield service companies and technology. Mr. Huff co-founded Intervale Capital, an oilfield service private equity firm, in 2006 and served as a Managing Director from 2006 to 2012, when he sold his interest in the firm. Mr. Huff also serves as Chairman of Impact Fluid Solutions LP, which provides drilling and production solutions for oil and gas operators and fluid companies. Mr. Huff also serves as a director at various of Freebird’s portfolio companies. Mr. Huff served as the President and Chief Executive Officer of Grant Prideco, Inc., a provider of drill pipe and other drill stem products, from February 2001 to June 2002. From January 2000 to February 2001, Mr. Huff served as Executive Vice President, Chief Financial Officer and General Counsel of Weatherford International, Inc., one of the world’s largest international oilfield services companies. He served as Senior Vice President and General Counsel of Weatherford from May 1998 to January 2000. Mr. Huff began his professional career in 1983 with the law firm of Norton Rose Fulbright US LLP where he specialized in corporate, securities and merger and acquisition matters. Mr. Huff was made a partner in that firm in 1989 where he served until 1998 when he joined Weatherford. Mr. Huff holds a Bachelor of Arts degree and J.D. from the University of New Mexico, where he graduated as a member of the Order of the Coif and cum laude, and a Masters of Law from New York University School of Law. Mr. Huff is the Chairman of the Board of Directors of the University of St. Thomas in Houston, Texas, and a member of the board of directors of the Houston Food Bank. +The Board of Directors considered Mr. Huff’s background as an executive of publicly traded oilfield services companies and as an owner and manager of a private investment firm focused on the oilfield service industry. The Board noted his knowledge and experience in a broad range of oilfield products and services and his current and historical experience in managing operations in both the United States and internationally. The Board also considered Mr. Huff’s expertise and background with regard to accounting and legal matters, which, among other things, provides guidance to Patterson-UTI in assessing its corporate governance structure, policies and procedures. +4 +William Andrew Hendricks, Jr. —Mr. Hendricks has served as President and Chief Executive Officer of Patterson-UTI since October 2012 and as a director of Patterson-UTI since June 2017. From April 2012 through September 2012, he served as Chief Operating Officer of Patterson-UTI. From May 2010 through March 2012, Mr. Hendricks served as President of Schlumberger Drilling & Measurements, a division of Schlumberger. Prior to that date, Mr. Hendricks worked for Schlumberger in various worldwide locations and capacities since 1988, including serving in numerous executive positions since 2003. Mr. Hendricks is a past Chair and member of the Executive Committee for the International Association of Drilling Contractors and a member of the Society of Petroleum Engineers. Mr. Hendricks holds a Bachelor of Science in Petroleum Engineering from Texas A&M University. +The Board of Directors considered Mr. Hendricks’ more than 30 years of combined operational and managerial experience in the oil and gas industry. In addition, the Board noted his nearly seven years of service as Patterson-UTI’s President and Chief Executive Officer and nearly ten years of service in numerous executive positions with Schlumberger Limited, a global provider of oilfield services, including nearly two years as President of Schlumberger Drilling & Measurements. The Board further considered Mr. Hendricks’ significant experience with evaluating the drivers for macro trends in the oil and gas industry, as well as managing the cyclical nature of the oil and gas service business, which allows Mr. Hendricks to provide valuable input into the development and implementation of Patterson-UTI’s corporate strategy. In addition, the Board noted that Mr. Hendricks’ operational experience brings valuable knowledge to the oversight of achieving safe and efficient operations. The Board also considered Mr. Hendricks’ significant experience working in numerous worldwide locations, which allows him to provide valuable counsel regarding possible expansion into markets outside of North America. +Tiffany (TJ) Thom Cepak — Ms. Cepak has served as a director of Patterson-UTI since August 2014. Ms. Cepak has served as a director of Penn Virginia Corporation since September 2019. Ms. Cepak served as the Chief Financial Officer of Energy XXI Gulf Coast, Inc. from August 2017 to October 2018. Ms. Cepak served as the Chief Financial Officer of KLR Energy (and, subsequent to its business combination, Rosehill Resources Inc.) from January 2015 to June 2017. Ms. Cepak served as a director of Yates Petroleum Corporation, a privately owned, independent oil and gas exploration and production company, from October 2015 to October 2016. Ms. Cepak served four years as the Chief Financial Officer of EPL Oil & Gas, Inc., and was further appointed Executive Vice President in January 2014, and she served in those roles until June 2014, when EPL was sold. Ms. Cepak began her career with EPL as a Senior Asset Management Engineer, a position she held until she was appointed Director of Corporate Reserves in September 2001. Ms. Cepak was named EPL’s Director of Investor Relations in April 2006 and Vice President, Treasurer and Investor Relations in July 2008. In July 2009, Ms. Cepak was designated as EPL’s Principal Financial Officer and, in September 2009, she was appointed Senior Vice President. Ms. Cepak has more than 20 years of energy industry experience and prior to joining EPL, she was a Senior Reservoir Engineer with Exxon Production Company and ExxonMobil Company with operational roles including reservoir engineering and subsurface completion engineering for numerous offshore Gulf of Mexico properties. Ms. Cepak holds a B.S. in Engineering from the University of Illinois and a Masters of Business Administration in Management with a concentration in Finance from Tulane University. +The Board of Directors considered Ms. Cepak’s more than 20 years of operational and financial experience in the energy industry. The Board noted her service in various operational roles, including as a reservoir engineer for a major oil and gas exploration and production company. The Board also noted Ms. Cepak’s executive management experience, including most recently as chief financial officer of a publicly traded independent oil and gas exploration and production company, which allows her to provide Patterson-UTI with valuable insight on financial and strategic matters. The Board also considered Ms. Cepak’s diversity of perspective, which is exemplified by her recognition in 2018 as one of Oil and Gas Investor’s 25 Influential Women in Energy. +5 +Michael W. Conlon — Mr. Conlon has served as a director of Patterson-UTI since September 2012. Mr. Conlon retired as a partner of the law firm, Norton Rose Fulbright US LLP, in January 2012 after 40 years with the firm. Mr. Conlon specialized in corporate, securities and merger and acquisition matters. Mr. Conlon was partner-in-charge of the firm’s Houston office from 2007 to 2011, was co-partner-in-charge from 2001 to 2007 and partner-in-charge of its Washington, D.C. office from 1992 to 1998. Mr. Conlon retired in February 2019 from his position as an Advisory Director to Tailored Brands, Inc., a specialty retailer of men’s apparel and international supplier of corporatewear, and an NYSE listed company. Mr. Conlon holds a Bachelor of Arts degree in Economics from Catholic University of America, where he graduated magna cum laude and as a member of Phi Beta Kappa, and a Juris Doctorate from the Duke University School of Law, where he graduated as a member of the Order of the Coif. +The Board of Directors considered Mr. Conlon’s more than 40 years of experience handling corporate, securities and mergers and acquisition matters as a lawyer with an international law firm, as well as his service in a number of management roles throughout his tenure at the firm. The Board noted Mr. Conlon’s experience in representing numerous public companies, including Patterson-UTI, and other energy services companies, allows him to provide valuable insight on legal, governance and regulatory issues facing Patterson-UTI. +Terry H. Hunt — Mr. Hunt has served as a director of Patterson-UTI since April 2003 and served as a director of UTI from 1994 to May 2001. Mr. Hunt is an energy consultant and retired senior natural gas and electric utility executive. Mr. Hunt served as Senior Vice President — Strategic Planning of PPL Corporation, an international energy and utility holding company, from 1998 to 2000. Mr. Hunt served as the President and Chief Executive Officer of Penn Fuel Gas, Inc., a Pennsylvania-based natural gas and propane distribution company, from 1992 to 1999. Previously, Mr. Hunt was President of Carnegie Natural Gas and Apollo Gas Company, both Appalachian natural gas distribution companies. He also previously served in senior management positions in natural gas project and venture development, oil and natural gas exploration and development evaluation and operations and major production facilities construction with Texas Oil & Gas Corp. and Atlantic Richfield. Mr. Hunt holds a Bachelor of Engineering degree from the University of Saskatchewan, Canada and a Masters of Business Administration from Southern Methodist University. +The Board of Directors considered Mr. Hunt’s more than 25 years of experience covering most phases of the upstream oil and natural gas industry in the United States and Canada, including the evaluation of exploration and development programs, oil and natural gas production and pipeline operations, and project development and major production facility construction. This experience and background provides Patterson-UTI with an invaluable perspective of the oil and natural gas industry and its customers. In addition, Mr. Hunt’s many years of senior executive experience leading natural gas distribution, storage and marketing companies provides insight into the management of multi-faceted businesses and the markets for natural gas in North America. +6 +Janeen S. Judah — Ms. Judah has served as a director of Patterson-UTI since April 2018. Ms. Judah has served as a director of the general partner of Crestwood Equity Partners LP since November 2018. Ms. Judah has also served as a director for privately held Aethon Energy III, LLC since June 2019. Ms. Judah served as a director of Jagged Peak Energy Inc. from April 2019 to January 2020, when Jagged Peak was acquired by Parsley Energy. Ms. Judah served as the President of the Society of Petroleum Engineers from September 2016 to October 2017 while on secondment from Chevron, and as a member of the Board of Directors of the Society of Petroleum Engineers from 2003 to 2006 and from 2012 to 2018. Ms. Judah held numerous leadership positions at Chevron, including general manager for Chevron’s Southern Africa business unit from August 2010 to September 2016, president of Chevron Environmental Management Company from August 2007 to August 2010 and general manager of reservoir and production engineering for Chevron Energy Technology Company from June 2004 to August 2007. Before joining Chevron in 1998, she held various upstream petroleum engineering positions for Texaco and Arco, starting in Midland in 1981. Ms. Judah holds Bachelor of Science and Masters of Science degrees in petroleum engineering from Texas A&M University, a Masters of Business Administration from the University of Texas of the Permian Basin and a Juris Doctorate from the University of Houston Law Center. +The Board of Directors considered Ms. Judah’s more than 35 years of operational, managerial and environmental experience in the oil and gas industry. The Board noted her experience derived from oil and gas industry positions held involving significant operational and management responsibilities, including positions with Chevron and upstream petroleum engineering positions. The Board also noted Ms. Judah’s extensive international experience, including most recently as general manager for Chevron’s Southern Africa business unit, which allows her to provide Patterson-UTI with valuable insight on international and strategic matters. The Board also considered Ms. Judah’s service as the President of the Society of Petroleum Engineers from 2017 to 2018, as well as her diversity of perspective, which is exemplified by her recognition in 2018 as one of Oil and Gas Investor’s 25 Influential Women in Energy. +7 +Boar d Leadership Structure, Lead Director and Board Role in Risk Oversight +The Board evaluates its leadership structure and role in risk oversight on an ongoing basis. The decision on whether to combine or separate the Chairman and Chief Executive Officer (“CEO”) role is determined on the basis of what the Board considers to be best for Patterson-UTI at any given point in time. Patterson-UTI’s current Board leadership structure separates the role of Chairman and CEO. Effective at the Meeting, Mr. Huff will become non-executive Chairman of the Board. +The Board has historically had an Executive Chairman and a lead independent director, the “Lead Director.” When Mr. Huff becomes non-executive Chairman of the Board, effective at the Meeting, the Board will no longer have a separate Lead Director. The independent directors meet regularly in executive sessions at which only independent directors are present, and the Lead Director (subsequent to the Meeting, the non-executive Chairman) chairs those sessions. The Lead Director (subsequent to the Meeting, the non-executive Chairman) serves as a liaison between the employee directors and independent directors, consults with regard to Board and agenda items, and works with the chairpersons of Board committees as appropriate. +The Nominating and Corporate Governance Committee and the Board currently believe that the Board’s leadership structure, which includes the separation of the role of CEO and Chairman and the appointment of an independent Lead Director, is appropriate because it, among other things, provides for sufficient independence between the Board and management and for an independent director who provides board member leadership. Subsequent to the Meeting, the Chairman will be an independent director and the separation of the CEO and Chairman roles will continue. +The Board has adopted Corporate Governance Guidelines, which can be accessed electronically in the “Governance” section of Patterson-UTI’s website at www.patenergy.com . The Guidelines describe one of the Board’s primary responsibilities as overseeing Patterson-UTI’s processes for assessing and managing risks. The Board discharges this responsibility, in part, through regular inquiries from the Chairman of the Board and/or the Lead Director to management, periodic communications from management to the Board of Directors of particular risks and events, and discussions during Board meetings of general and specific risks to Patterson-UTI. +Meetings and Committees of the Board of Directors +The Board of Directors met eight times during the year ended December 31, 2019. Each director attended, in person or by telephone, at least 75% of the aggregate of all meetings held by the Board and meetings of each committee on which such director served. A majority of the members of the Board of Directors are independent within the meaning of the Nasdaq Stock Market, Inc. (“Nasdaq”) listing standards. Specifically, the Board has determined that Messrs. Buckner, Conlon, Huff and Hunt and Mses. Cepak and Judah are independent within the meaning of the Nasdaq listing standards. +The Board of Directors has established four standing committees: an Executive Committee, an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee. +The Executive Committee, which currently is composed of Messrs. Siegel, Hendricks and Huff, has the authority, to the extent permitted by applicable law, to act for the Board in all matters arising between regular or special meetings of the Board of Directors. The Executive Committee did not meet or take any action in 2019. Effective at the Meeting, the Executive Committee will be composed of Messrs. Huff and Hendricks and Ms. Cepak. +The Audit Committee members are Mses. Cepak (chairwoman) and Judah, and Messrs. Buckner, Huff and Hunt, each of whom is independent within the meaning of applicable rules under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and within the meaning of the Nasdaq listing standards. The Audit Committee oversees management’s conduct of Patterson-UTI’s accounting and financial reporting process, including review of the financial reports and other financial information provided by Patterson-UTI to the public and government and regulatory bodies, Patterson-UTI’s system of internal accounting, Patterson-UTI’s financial controls, and the annual independent audit of Patterson-UTI’s financial statements and internal control over financial reporting. The Audit Committee also oversees compliance with Patterson-UTI’s codes of conduct and ethics and with legal and regulatory requirements. The Board has determined that Ms. Cepak and Messrs. Buckner and Huff and are “audit committee financial experts” within the meaning of applicable SEC rules. The Audit Committee selects the independent registered public accounting firm to audit Patterson-UTI’s books and records and considers and acts upon accounting matters as they arise. The Board of Directors has adopted a written charter for the Audit Committee. The Audit Committee held five meetings during the year ended December 31, 2019. Please see “Audit Committee Report” elsewhere in this proxy statement. +The Compensation Committee members are Messrs. Hunt (chairman), Conlon and Huff and Ms. Cepak, each of whom is independent as defined in the Nasdaq listing standards. Among other things, the Compensation Committee sets and administers the policies that govern the compensation of executive officers and directors of Patterson-UTI. The Board +8 +of Directors has adopted a written charter for the Compensation Committee . The Compensation Committee held four meetings during the year ended December 31, 201 9 . Please see “Compensation Discussion and Analysis” and “Compensation Committee Report” elsewhere in this proxy statement for further information about the Compensation Committee. +The Nominating and Corporate Governance Committee members are Messrs. Conlon (chairman), Buckner and Huff and Ms. Judah, each of whom is independent as defined in the Nasdaq listing standards. The purpose of the Nominating and Corporate Governance Committee is to, among other things, identify individuals qualified to become Board members, to recommend for selection by the Board director nominees for the next annual meeting of stockholders, to recommend nominees for Board committees, to review Patterson-UTI’s Code of Business Conduct and Corporate Governance Guidelines, to develop and continually make recommendations with respect to the best corporate governance principles and to oversee the annual review of the Board and management. The Board of Directors has adopted a written charter for the Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee held three meetings during the year ended December 31, 2019. +Due to his retirement from the Board, effective at the Meeting, Mr. Buckner will no longer serve on the Audit Committee and the Nominating and Corporate Governance Committee. +Consideration of Director Nominees +On behalf of the Board, the Nominating and Governance Committee considers director nominees recommended by Patterson-UTI’s stockholders if the recommendations are made in accordance with all legal requirements, including applicable provisions of Patterson-UTI’s restated certificate of incorporation and bylaws. A stockholder’s notice to the Secretary of Patterson-UTI shall contain certain information specified in Patterson-UTI’s bylaws regarding the stockholder and the proposed nominee. See “Other Matters—Stockholder Proposals for 2021 Annual Meeting” and Article I, Section 8 and Article I, Section 11 of Patterson-UTI’s bylaws. +The Nominating and Corporate Governance Committee determines qualification criteria and procedures for the identification and recruitment of candidates for election to serve as directors of Patterson-UTI. The Nominating and Corporate Governance Committee relies on the knowledge and relationships of Patterson-UTI and its officers and directors, as well as third parties when it deems appropriate, to identify and evaluate nominees for director, including nominees recommended by stockholders. In evaluating a nominee for director, the Nominating and Corporate Governance Committee considers the nominee’s skills, expertise, industry and other knowledge, personal and professional ethics, integrity and values, sound business judgment and willingness to commit sufficient time to the Board and be committed to representing the long-term interests of Patterson-UTI’s stockholders. The Nominating and Corporate Governance Committee also reviews the individual performance and qualifications of each director who wishes to be considered for nomination to the Board. Although the Nominating and Corporate Governance Committee does not have a stand-alone policy with regard to consideration of diversity in identifying director nominees, it considers diversity in professional background, experience, expertise (including as to financial matters) and perspective (including as to age, gender and ethnicity) with respect to the Board of Directors composition as a whole when evaluating a director nominee. +Board and Director Performance Assessments +The Nominating and Corporate Governance Committee annually reviews and evaluates the performance of the Board, each Committee of the Board, and each director in order to improve the effectiveness of the Board and each Committee of the Board. The Committee assesses the contributions of the Board as a whole and each of its Committees and identifies areas in which improvements may be made. The results of the evaluations are reviewed and discussed with the Board and its Committees, and recommendations are made, as appropriate, to the Board and its Committees. +The Nominating and Corporate Governance Committee also annually reviews the individual performance and qualifications of each director who wishes to be considered for nomination for reelection to the Board. +Continuing Education +Continuing education helps our directors strengthen their skills, deepen their understanding of our business and operations and stay current with emerging issues that affect our business, governance and compensation practices. It also helps directors keep abreast of governance developments and requirements and understand the issues we face in the context of our business. To further these goals , our Board’s continuing director education policy requires directors to participate in continuing education programs and reimburses directors for expenses incurred in connection with such education programs . +9 +Succession Planning +The Board of Directors oversees processes and procedures to provide continuity of well-qualified executive leadership and to assess whether such leadership possesses the skill and talent to execute Patterson-UTI’s long-term business strategies. The Board of Directors reviews succession planning for the Chief Executive Officer and the senior executives tailored to reflect the Board’s standards for executive leadership and Patterson-UTI’s business strategy and vision. The succession planning addresses (i) both current and long-term needs of Patterson-UTI and establishes a process for identifying and assessing potential internal candidates; (ii) periodic review and assessment of readiness; (iii) contingency planning for temporary absences of the Chief Executive Officer due to disability or other unexpected event; and (iv) long-term continuity planning for succession to the Chief Executive Officer position. +Political Contributions +Patterson-UTI has a policy prohibiting the contribution of company funds to political parties or organizations or to candidates for any public office or to influence the general public, or segments thereof, with respect to public elections or referenda. Patterson-UTI participates in certain trade organizations with purposes that include enhancement of the public image of our industry, education about the industry and issues that affect the industry and industry best practices and standards. Many of the trade organizations also engage in legislative or political activity related to matters that affect the industry as a whole and not a specific company. Patterson-UTI, as one of many members in various trade associations, does not direct the legislative activities of any trade organization of which it is a member. +Sustainability +Patterson-UTI is committed to long-term sustainability with respect to the environment, our society and our long-term corporate success. In 2019, Patterson-UTI issued its inaugural sustainability report. A copy of Patterson-UTI’s sustainability report can be accessed electronically in the “Sustainability” section of the Patterson-UTI website at www.patenergy.com and in print to any stockholder who requests it from the Secretary of Patterson-UTI. +Communication with the Board and its Independent Members +Persons may communicate with the Board, or directly with its Lead Director (subsequent to the Meeting, the non-executive Chairman), Mr. Huff, by submitting such communication in writing in care of Lead Director of the Board of Directors, Patterson-UTI Energy, Inc., 10713 West Sam Houston Parkway North, Suite 800, Houston, Texas 77064. Persons may communicate with the independent members of the Board by submitting such communication in writing to the Nominating and Corporate Governance Committee of the Board of Directors of Patterson-UTI Energy, Inc., 10713 West Sam Houston Parkway North, Suite 800, Houston, Texas 77064. +Although Patterson-UTI does not have a formal policy regarding attendance by members of the Board at its annual meetings of stockholders, directors are invited to attend annual meetings of Patterson-UTI stockholders. All of the directors attended the 2019 annual meeting of stockholders either in person or by telephone. +Corporate Governance Documents Available on Patterson-UTI’s Website +Copies of each of the following documents can be accessed electronically in the “Corporate Governance” section of the Patterson-UTI website at www.patenergy.com and in print to any stockholder who requests them from the Secretary of Patterson-UTI: +• +Audit Committee Charter; +• +Compensation Committee Charter; +• +Nominating and Corporate Governance Committee Charter; +• +Corporate Governance Guidelines; +• +Code of Business Conduct and Ethics for its employees, officers and directors; +• +Code of Business Conduct and Ethics for Senior Financial Executives; and +• +Global Anticorruption Policy. +10 +PROPOSAL NO. 2 +RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM +The Audit Committee appointed PricewaterhouseCoopers LLP as the independent registered public accounting firm to audit the financial statements and internal control over financial reporting of Patterson-UTI for the fiscal year ending December 31, 2020, and directed that such engagement be submitted to the stockholders of Patterson-UTI for ratification. In recommending ratification by the stockholders of such engagement, the Board of Directors is acting upon the recommendation of the Audit Committee, which has satisfied itself as to PricewaterhouseCoopers LLP’s independence, professional competence and standing. Although ratification by stockholders of the engagement of PricewaterhouseCoopers LLP is not required by Delaware corporate law or Patterson-UTI’s restated certificate of incorporation or bylaws, the Audit Committee believes a decision of this nature should be made with the consideration of Patterson-UTI’s stockholders. If the stockholders fail to ratify the appointment, the Audit Committee will reconsider whether to retain PricewaterhouseCoopers LLP and may retain that firm or another without re-submitting the matter to our stockholders. Even if the appointment is ratified, the Audit Committee may, in its discretion, direct the appointment of a different independent registered public accounting firm at any time during the year if it determines that such change would be in the best interests of Patterson-UTI and its stockholders. +It is expected that one or more representatives of PricewaterhouseCoopers LLP will be available to participate in the Meeting and will be given the opportunity to make a statement if they so desire. It also is expected that the representative(s) will be available to respond to appropriate questions from the stockholders. +The Board of Directors recommends a vote “FOR” the ratification of PricewaterhouseCoopers LLP as Patterson-UTI’s independent registered public accounting firm. Ratification of the selection of PricewaterhouseCoopers LLP requires the affirmative vote of the holders of a majority of the shares of Common Stock entitled to vote on, and voted “FOR” or “AGAINST,” the proposal. Unless you give contrary instructions in your proxy, your properly submitted proxy will be voted “FOR” such ratification. Abstentions will not be counted as votes cast “FOR” or “AGAINST” the proposal and will have no effect on the outcome of the proposal. Because the ratification of an independent registered public accounting firm is considered a routine matter, if you do not give instructions to your brokerage firm, bank, broker-dealer, or other similar organization, the brokerage firm, bank, broker-dealer, or other similar organization will nevertheless be entitled to vote your shares in its discretion and may give or authorize the giving of a proxy to vote the shares in its discretion on this proposal. +11 +PROPOSAL NO. 3 +ADVISORY APPROVAL OF EXECUTIVE COMPENSATION +In accordance with Section 14A of the Exchange Act, the Board of Directors is asking stockholders to approve a non-binding, advisory resolution on the compensation of Patterson-UTI’s executive officers who are named in the Summary Compensation Table appearing in this proxy statement (the “Named Executive Officers”). The compensation of the Named Executive Officers is described in the “Compensation Discussion and Analysis” and “Executive Compensation” sections of this proxy statement. +For a discussion of our stockholder engagement and board responsiveness to stockholders, please see “Compensation Discussion and Analysis— Aligning Compensation Programs with Stockholder Interests.” +The compensation program for the Named Executive Officers is designed to attract and retain highly qualified individuals and to motivate and reward them for performance that benefits Patterson-UTI and its stockholders. The Compensation Committee and the Board of Directors believe that the policies and procedures detailed in the “Compensation Discussion and Analysis” achieve these goals by, among other things: +• +providing a mix of short-term compensation in the form of base salary and annual cash incentive bonuses and long-term compensation in the form of restricted stock units, performance units, and, in some years, restricted stock and stock options, which strikes a balance between offering competitive compensation packages and aligning compensation with long-term growth and creating value for stockholders; +• +emphasizing variable equity and cash compensation to link realized compensation to performance; +• +reviewing annual base salaries, in part, based on Patterson-UTI’s financial results and position and performance compared to similarly situated companies; +• +providing performance-based annual cash incentive bonuses designed to put a meaningful portion of total compensation at risk; +• +awarding long-term equity incentives whose value is tied to the achievement of certain performance goals and/or an increase in the price of the Common Stock; +• +awarding long-term equity incentives that generally vest over periods of three years; and +• +maintaining stock ownership requirements. +The Board of Directors is asking stockholders to approve the following non-binding, advisory resolution at the Meeting: +“RESOLVED, that the stockholders of Patterson-UTI Energy, Inc. (the “Company”) approve, on an advisory basis, the compensation of the Company’s named executive officers, as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the compensation tables and other narrative discussion in the Proxy Statement for the 2020 Annual Meeting of Stockholders of the Company.” +This advisory resolution, commonly referred to as a “say-on-pay” resolution, is non-binding on the Board of Directors. Although non-binding, the Board of Directors and the Compensation Committee value the views of Patterson-UTI’s stockholders and will review and consider the voting results when (i) evaluating the effectiveness of Patterson-UTI’s compensation policies and practices and (ii) making future compensation decisions for the Named Executive Officers. +The Board of Directors recommends a vote “FOR” the approval of the advisory resolution on executive compensation . Approval of the advisory resolution requires the affirmative vote of the holders of a majority of the shares of Common Stock entitled to vote on, and voted “FOR” or “AGAINST,” the proposal. Unless you give contrary instructions in your proxy, your properly submitted proxy will be voted “FOR” such approval. Abstentions will not be counted as votes cast “FOR” or “AGAINST” the proposal and will have no effect on the outcome of the proposal. A broker non-vote will be counted for purposes of establishing a quorum, but will not be treated as a vote cast “FOR” or “AGAINST” the proposal and will have no effect on the outcome of the proposal. +12 +EXECUTIVE OFFICERS +Set forth below is the name, age and position followed by a brief description of the business experience during at least the past five years for each executive officer of Patterson-UTI who is not also a nominee for election to the Board of Directors. +Name +Age +Position +Mark S. Siegel (1) +69 +Executive Chairman of the Board +C. Andrew Smith +49 +Executive Vice President and Chief Financial Officer +Kenneth N. Berns +60 +Executive Vice President and Chief Commercial Officer +Seth D. Wexler +48 +Senior Vice President, General Counsel and Secretary +James M. Holcomb +57 +President — Patterson-UTI Drilling Company LLC +(1) +Mr. Siegel is not seeking re-election to the Board of Directors, and effective as of the Meeting, he will no longer be Executive Chairman and will be a part-time employee of Patterson-UTI. +Mark S. Siegel - Mr. Siegel has served as Executive Chairman of the Board and as a director of Patterson-UTI since May 2001. Mr. Siegel served as Chairman of the Board and as a director of UTI from 1995 to May 2001, when UTI merged with and into Patterson-UTI. Mr. Siegel has been President of REMY Investors & Consultants, Incorporated (“REMY Investors”) since 1993. Mr. Siegel is the past chairman and a current member of the Board of Directors of the Cedars-Sinai Medical Center, and previously served on the Board of Trustees of the J. Paul Getty Trust from 2005 to 2017 (including as Chair from 2010 to 2015). From 1992 to 1993, Mr. Siegel was President, Music Division, Blockbuster Entertainment Corp. From 1988 through 1992, Mr. Siegel was an Executive Vice President of Shamrock Holdings, Inc., a private investment company, and Managing Director of Shamrock Capital Advisors, Incorporated. Mr. Siegel holds a Bachelor of Arts degree from Colgate University (Magna Cum Laude and Phi Beta Kappa) and a J.D. from the University of California, Berkeley (Boalt Hall) School of Law (Order of the Coif). +C. Andrew Smith — Mr. Smith has served as Executive Vice President and Chief Financial Officer of Patterson-UTI since September 2017. From April 2014 until September 2017, Mr. Smith served as Executive Vice President and Chief Financial Officer of Kirby Corporation, a marine transportation and diesel engine services company. From January 2014 to April 2014, Mr. Smith served as Executive Vice President – Finance of Kirby Corporation. Prior to joining Kirby Corporation, Mr. Smith served as Senior Vice President and Chief Financial Officer of Benthic Geotech and was previously Chief Financial Officer for both Global Industries, LTD and NATCO Group. Mr. Smith holds a degree in business administration from the University of Houston. +Kenneth N. Berns — Mr. Berns has served as Executive Vice President and Chief Commercial Officer of Patterson-UTI since May 2017. Mr. Berns served as a director of Patterson-UTI from May 2001 to June 2017 and as Senior Vice President of Patterson-UTI from April 2003 to May 2017. Mr. Berns served as a director of UTI from 1995 to May 2001. Mr. Berns has been an executive with REMY Investors since 1994. Mr. Berns holds a Bachelor’s Degree in Business Administration from San Diego State University and a Master’s Degree in Taxation from Golden Gate University. +Seth D. Wexler — Mr. Wexler has served as Senior Vice President, General Counsel and Secretary of Patterson-UTI since February 2017. Mr. Wexler served as General Counsel and Secretary of Patterson-UTI from August 2009 to February 2017. From March 1998 to August 2009, he specialized in securities law and mergers and acquisitions for the law firm of Norton Rose Fulbright US LLP, including as a partner of such law firm since January 2007. Mr. Wexler holds a Bachelor of Business Administration in Finance from the University of Texas at Austin, a Juris Doctorate from the University of Houston Law Center and a Masters of Business Administration from the University of Houston. +James M. Holcomb — Mr. Holcomb has served as President of Patterson-UTI Drilling Company LLC since January 2012. Mr. Holcomb came to Patterson-UTI in February 1998 with the acquisition of Robertson Onshore Drilling Company and since that time has served in numerous operational management roles, including as Senior Vice President of Operations of Patterson-UTI Drilling Company LLC from April 2006 to January 2012. Mr. Holcomb has over 30 years of experience in contract drilling operations. Mr. Holcomb holds a Bachelor of Science Degree in Business Management from LeTourneau University . +13 +COMPENSATION DISCUSSION AND ANALYSIS +The following Compensation Discussion and Analysis (“CD&A”) sets forth the principal compensation policies and programs of Patterson-UTI for our Named Executive Officers (“NEOs”). +Named Executive Officer +Title +William Andrew Hendricks, Jr. +Chief Executive Officer and President +C. Andrew Smith +Executive Vice President and Chief Financial Officer +Mark S. Siegel (1) +Executive Chairman of the Board +Kenneth N. Berns +Executive Vice President and Chief Commercial Officer +Seth D. Wexler +Senior Vice President, General Counsel and Secretary +(1) +Mr. Siegel is not seeking re-election to the Board of Directors, and effective as of the Meeting, he will no longer be Executive Chairman and will be a part-time employee of Patterson-UTI. +Aligning Compensation Programs with Stockholder Interests +Changes to Our Compensation Program in 2019 to Strengthen Alignment with Stockholder Interests +At the 2018 stockholder meeting, our Say-on-Pay proposal received only 24 percent stockholder support, which both the Board and the Compensation Committee believed was unacceptable. In response to the 2018 Say-on-Pay vote outcome, and in line with our commitment to ongoing stockholder engagement, we requested additional meetings with stockholders representing approximately 61 percent of our outstanding shares. We successfully arranged engagement meetings with stockholders representing approximately 41 percent of our outstanding shares after the 2018 stockholder meeting. Our Lead Director led each of these calls with stockholders, and he listened to areas of stockholder concern, communicated our compensation philosophy and the decision-making process with respect to the 2017 and 2018 compensation programs, and requested feedback regarding possible changes to our compensation program. +Based on the feedback we received from our stockholders, we made changes to our compensation program to strengthen the alignment of the program with stockholder interests. Key changes to our program included: +• +Reduced the CEO’s target long-term incentive (LTI) grant for 2019 by 18%, or $1.25 million, from the 2018 LTI award; +• +Reduced the total compensation of our Executive Chairman by more than 50%; +• +Tied 100% of the annual cash bonus program to pre-established financial and operational metrics; +• +Increased the weighting of performance-based LTI to 51% of the target award value for our NEOs; and +• +Increased the rigor of our performance-based LTI program by requiring above median performance (55 th percentile) to receive a target payout under the program and capping payouts at target if absolute TSR is negative for the performance period. +Strong Stockholder Support for Say-on-Pay in 2019 +At our 2019 Annual General Meeting of Stockholders, we received 96% stockholder support for our Say-on-Pay proposal. The Compensation Committee strongly values the opinions of our stockholders as expressed in the Say-on-Pay vote and believes that our 2019 support level demonstrates a strong alignment of our compensation program with our stockholders’ interests. +The Compensation Committee will continue to consider the results of our future Say-on-Pay votes when making future compensation decisions for our NEOs. +14 +Volatile Market Conditions in the Drilling Industry Have Created Challenges +The energy industry has been in a prolonged decline that began in 2014 following a decline in oil prices. Although there was improvement in activity in 2017 and 2018, market conditions have since continued to be challenging, with declining capital budgets by operators, reduced customer access to capital, excess service capacity and intense competition. These conditions have resulted in low operating margins (in particular in our pressure pumping business) and declining cash flows for Patterson-UTI and the industry in general. +Although Patterson-UTI has generally performed well on a comparative basis against our peers in this challenging market, neither we nor others in our industry have delivered positive returns to our stockholders over the past five-year period. Over this period of time, crude oil prices have fallen by over 40%, and we have seen a 75% reduction in the market value of other industry peers (as referenced by the reduction in value of the PHLX Oil Service Sector Index between June 20, 201 4 and December 31, 2019). This decline in market value has continued into 2020 and has accelerated with the COVID-19 pandemic and the failure of OPEC and Russia to reach agreement on production reductions to address falling oil demand in light of the pandemic. We currently expect that 2020 will be an extremely difficult and challenging year and, as described later in this CD&A, we have taken action to significantly reduce executive compensation for 2020. +The Board of Directors and the Compensation Committee recognize the challenges of determining appropriate executive compensation in this environment. Accordingly, the Compensation Committee has sought to administer the Company’s executive compensation program in a way that is responsive to these negative industry conditions. Specifically, we recognize the utmost importance of aligning our compensation program with the Company’s performance and stockholder returns, and we intend to continue to utilize operational and financial metrics that are designed to create and preserve stockholder value and to use a combination of long-term and short term incentives that provide a substantial portion of total potential compensation tied to the creation of long-term stockholder value. +As demonstrated in the chart below, the Compensation Committee has reduced pay for the CEO to recognize the loss in stockholder value and challenging industry conditions between 2017 and 2019 ( and realized pay for the CEO was meaningfully lower than reported pay and target pay for the 2017-2019 period ). Over this period of time, reported pay decreased by 38%. Further reductions in target pay have been made for 2020 in light of expectations of substantially lower projected revenues and cash flow. +(1) Reported pay reflects compensation as disclosed in the summary compensation table. +15 +Over the past three years, the CEO’s realized pay was also lower than both reported pay and his target pay, which highlights how our compensation program is aligned with stockholders and demonstrates the rigor of our goal-setting process. Over this period of time, realized pay was 30% lower than reported pay and 12% lower than target pay. +(1) Average reported pay reflects compensation as disclosed in the summary compensation table +(2) Average target pay includes the base salary rate in place at the end of each year, target bonus opportunity for each year, grant date value of long-term incentives granted each year, and all other compensation as reported in the summary compensation table +(3) Average realized pay includes the actual base salary paid each year, actual bonus paid each year, market value of performance units and restricted stock / restricted stock units that vested each year, value realized from stock options exercised each year, and all other compensation as reported in the summary compensation table +Significant Reductions in Executive Compensation for 2020 +The falling oil demand in light of the COVID-19 pandemic and the failure of OPEC and Russia to reach agreement on production reductions have had a significantly negative impact on the price of crude oil and Patterson-UTI’s stock price. During the first quarter of 2020, the price of crude oil declined more than 60% and Patterson-UTI’s stock price declined more than 75%. Oil and gas activity in the markets in which we operate rapidly declined at the end of the first quarter of 2020, and we expect that Patterson-UTI’s activity level will be significantly reduced compared to 2019. Accordingly, we took decisive action to significantly reduce 2020 executive compensation. We: +• +Reduced the 2020 annual cash bonus plan payout by setting the maximum payout at 50% of the 2019 target for Messrs. Hendricks, Smith and Berns and 60% of the 2019 target for Mr. Wexler; +• +Used the following metrics for the 2020 annual cash bonus plan that were specifically designed to drive performance in 2020 in light of the current market challenges: (i) a targeted Adjusted EBITDA that would result in a company-wide positive cash flow number, (ii) safety performance, (iii) targeted operating cash flow from our drilling business and (iv) a 60% overall reduction in capital expenditures; +• +Reduced the target LTI value for the 2020 grants by approximately 75% relative to 2019 target LTI value in recognition of the significant decline in our stock price; and +• +Added a performance condition to the 2020 performance units that requires Patterson-UTI’s total stockholder return to be equal to or greater than the total return of the S&P 500 index during the three-year performance period in addition to a relative performance test against our peer group. +Mr. Siegel will n ot be eligible for any 2020 or future bonuses or new grants of incentive compensation as a result of his decision to step down from his Executive Chair position at the Meeting. +16 +Good Governance and Compensation Practi ces Aligned with Stockholders +We are mindful of the positive impact that strong corporate governance can have on maintaining an executive compensation program that is aligned with the interest of our stockholders. In designing the current executive compensation program, we sought to incorporate best practices for compensation governance, including those summarized below. +What We Do +What We Don’t Do +☑ Disclose specific metrics that make up our cash bonus program +☑ 50% or more of compensation in the form of long-term incentives +☑ More than 50% of long-term incentives (by target value) are performance-based +☑ Variable compensation based upon absolute performance and performance versus peers +☑ Claw-back provisions that apply to our all of our executive officers +☑ Share ownership requirements for our executive officers and directors +☑ Anti-pledging policy for our executive officers and directors +☑ Anti-hedging policy for our executive officers and directors +☑ Use of advice from independent compensation consultant and feedback from stockholders +☑ Hold an annual Say-on-Pay vote +☒ No re-pricing of options +☒ No single trigger change-of-control severance arrangements +☒ No dividends or dividend equivalents on unearned performance units +☒ No new agreements with tax gross-ups and none entered into in more than ten years +☒ No material perquisites to NEOs that are not widely available to our other employees +17 +What Guides Our Program +Our overriding philosophy for the compensation of our key executives is to link their compensation with Patterson-UTI’s operational and market performance and to establish incentives that reward them for their achievement of both short-term tactical and long-term strategic objectives. In doing so, we seek to offer competitive compensation designed to attract and retain highly qualified individuals and to motivate and reward our executives in achieving Patterson-UTI’s goals. Specifically, the 2019 program was designed to reinforce the following goals: +Patterson-UTI Goals +How Goal Was Reinforced in Our 2019 Compensation Program +Provide quality services for our customers in a safe and efficient manner +• Our 2019 annual cash bonus incentive plan included “safety performance” as a distinct metric +• Our financial performance metrics required quality operational performance +Generate strong financial performance and returns for our stockholders +• The majority of executive compensation was delivered in the form of variable, at-risk compensation (as referenced in the charts below) +• The majority of the payout under our 2019 annual cash bonus incentive plan was based on financial performance metrics (90%) +• Our 2019 annual cash bonus incentive plan rewarded executives for cash flow generation through the use of Adjusted EBITDA, Pressure Pumping Operating Cash Flow and Consolidated Operating Cash Flow as performance metrics +• Our long-term incentive plan incentivizes the creation of stockholder value on both an absolute and relative basis through the grant of equity compensation and the use of absolute and relative TSR performance goals under our performance units +Attract and retain highly qualified individuals, with a strong emphasis on teams working together to capitalize on opportunities and solve problems +• We benchmarked our executive pay programs against broader oilfield services companies +• We did not target a specific market percentile for executive compensation. Instead, executive compensation was set based on a holistic review of several factors, including market pay levels, individual performance and qualifications, and executive tenure +• Our annual and long-term incentive programs generally reward company-wide results rather than performance against individual objectives +• The majority of our executives’ compensation was delivered in the form of long-term incentives that vest over a multi-year period to aid in retention of executives +18 +For 2019, target total direct compensation for our NEOs was most heavily weighted toward long-term incentives, as shown below. +2019 TARGET TOTAL DIRECT COMPENSATION +In 2019 and going forward the Compensation Committee intends to provide more than 50% of long-term incentive compensation in the form of grants that have performance criteria in addition to time vesting. +Process for Determination of Executive Compensation +Role of the Compensation Committee +The Board of Directors has delegated the management of Patterson-UTI’s executive compensation program to the Compensation Committee. The Compensation Committee meets on a regular basis to consider compensation matters and to review how Patterson-UTI’s plans and policies work in practice. Each of the Compensation Committee’s current members is an independent director as defined by the Nasdaq listing standards. +Compensation determinations and equity awards have been conducted through a process that solicits the input from management through our Executive Chairman and our CEO, as well as from outside compensation consultants retained by the Compensation Committee. In addition to the recommendations of management and consultants, the Compensation Committee considers feedback from Patterson-UTI’s stockholders, guidelines of proxy advisory firms, reported trends in compensation, internal budgets, historical data for the Company and its peers, strategic planning updates and other information that it considers relevant. +Executive Chairman and CEO +Our Executive Chairman and our CEO have historically provided the Compensation Committee with reviews of the performance of other executive officers and senior managers, including the other NEOs. The Compensation Committee also has historically engaged our Executive Chairman and CEO in an annual dialogue with our Committee Chairman and our Lead Director on our compensation program and seeks their input on and review of proposals for long-term incentive grants. This process results in a recommendation that is considered by our Compensation Committee as a whole. Subsequent to the Meeting, we will no longer have an Executive Chairman, and our Lead Director will become non-executive Chairman of the Board. +19 +Independent, Outside Compensation Consultants +Our Compensation Committee regularly utilizes outside compensation consultants to help assess and design our executive compensation program. These consultants are paid on either a basic, fixed-fee structure plus expenses or an hourly rate structure plus expenses. These outside consultants provide data and advice on historical compensation and stockholder returns, market trends and peer compensation practices. The Compensation Committee has retained Frederick W. Cook & Co., Inc. (“FW Cook”) as its consultant and advisor for executive compensation matters since 2018 . The Compensation Committee engaged FW Cook in 2018 to assist in responsiveness to stockholder concerns, including engagement efforts with stockholders and formulating revisions to the Company’s executive compensation practices. +Our Compensation Committee regularly reviews the services provided by its outside consultants and has determined that the engagement of FW Cook does not raise any conflicts of interest. The Compensation Committee receives a confirmation certification of independence from its consultants annually. +In 2019, FW Cook provided the Compensation Committee with information on the compensation practices of our peer group and other oilfield service companies and on the reasonableness of our program as compared to the compensation practices of our peer group. In so doing, FW Cook provided the Compensation Committee with information on each element of total direct compensation for our executive officers as well as a comparison of each such element of compensation against our peers and the broader oilfield services market. FW Cook also provided the Compensation Committee with information on the cost and potential dilution to our stockholders of our equity-based incentives and compared our equity usage to that of our peer group. +Peer Group +The Company’s 2019 peer group consisted of the following 18 companies within the broader oilfield services industry. +2019 Peer Group +Basic Energy Services +Diamond Offshore Drilling +Ensco +Forum Energy Technologies +Halliburton +Helmerich & Payne +Nabors +National Oilwell Varco +Noble Corporation +Oceaneering International +Oil States International +Precision Drilling +Rowan Companies +Superior Energy Services +TechnipFMC +Transocean +Unit Corporation +Weatherford International +This peer group was used by the Company and Compensation Committee to benchmark executive pay levels and to measure relative TSR performance for purposes of determining achievement under the Company’s performance units. +One of the challenges with developing a robust peer group for benchmarking executive compensation is that there are few companies in the broader oilfield services industry that are comparably sized to the Company. The Company is larger than most “mid-sized” oilfield services companies but not nearly as large as the “large-cap” oilfield services companies. In order to develop a robust group to benchmark executive compensation, the Company includes peers that are smaller (and which do not fully reflect the scale and complexity of the Company) and peers that are in some cases much larger than the Company. +In 2020, the Compensation Committee reviewed the Company’s peer group used for executive benchmarking with the assistance of FW Cook. Following its review, the Compensation Committee removed seven peer companies and added nine peer companies. The new peer group consists of 20 companies within the oilfield services industry and oil and gas exploration and production industry. When developing the new peer group, the Committee considered the Company’s positioning versus peers on key metrics (Revenue, EBITDA, Total Assets, Market Capitalization, and Total Enterprise Value), the robustness of the peer group, and the business characteristics of each peer. +2020 Peer Group +Apergy +Archrock +Cimarex Energy +Diamond Offshore Drilling +EQT +Helmerich & Payne +Liberty Oilfield Services +Nabors +National Oilwell Varco +NexTier Oilfield Solutions +Noble Corporation +Oceaneering International +Oil States International +PDC Energy +Precision Drilling +Range Resources +TechnipFMC +Transocean +Valaris +WPX Energy +20 +Components of 2019 Compensation +Base Salary +In 2019, we held base salaries flat for most of the NEOs. In November 2018, Mr. Siegel voluntarily requested that his base salary be reduced by 50% (from $800,000 to $400,000). +2019 ANNUAL SALARIES +William Andrew Hendricks, Jr. +$ +1,000,000 +C. Andrew Smith +$ +450,000 +Mark S. Siegel +$ +400,000 +Kenneth N. Berns +$ +450,000 +Seth D. Wexler +$ +475,000 +Annual Incentive Compensation +In 2019, the Committee adopted an annual cash bonus program that relied upon multiple, pre-established objectives for determining bonus compensation. The bonus plan set a target opportunity for each executive’s annual cash bonus as a percent of salary, with payout contingent upon meeting Patterson-UTI’s financial goals and other KPIs. The Compensation Committee considered the average range of performance and payouts, and the Committee believes – based on advice from its compensation consultant – that Patterson-UTI’s range was consistent with typical, general industry practice. +The 2019 bonus metrics, along with the definition of each metric and the corresponding rationale, are provided in the table below. +2019 ANNUAL CASH INCENTIVE METRICS +Metric (Weighting) +Description +Rationale +Adjusted EBITDA (70%) +Adjusted EBITDA is defined as net income (loss) plus net interest expense, income tax expense (benefit) and depreciation, depletion, amortization and impairment expense (including impairment of goodwill). +Targeted Adjusted EBITDA for 2019 was set at $685 million, which was 14% lower than actual Adjusted EBITDA for 2018. We believe that the 2019 goal was rigorous despite being set below our 2018 actual results and was indicative of the challenging industry environment. As highlighted below, our actual 2019 Adjusted EBITDA came in below target, which we believe further highlights the rigor of the goal established. +We use Adjusted EBITDA because we believe that this metric establishes a clear and consistent link between bonus compensation and our company’s financial performance. Additionally, Adjusted EBITDA is a significant consideration used by analysts in evaluating the Company and is therefore, we believe, a key driver of the Company’s stock price. +Safety Performance (10%) +Holistic evaluation of factors including improvement in incident rates, regulatory compliance, auditing and training. +The safety of our employees and others is our highest priority. We believe there is no job worth performing if it can’t be performed safely. The ability to provide quality services in a safe and efficient manner is also critical to being able to meet our financial goals. +Pressure Pumping Operating Cash Flow (10%) +Generating positive operating cash flow in pressure pumping segment (where operating cash flow is defined as Adjusted EBITDA less cash capital expenditures). +This was a new metric in 2019, and the target was $20 million. +Focus on cash flow generation furthers our goal of having a pressure pumping business that is self-sustaining and can weather the ebbs and flows of the commodity and business cycle. +Consolidated Operating Cash Flow (10%) +Generating positive consolidated operating cash flow (where operating cash flow is defined as Adjusted EBITDA less cash capital expenditures). +Targeted consolidated operating cash flow for 2019 was set at $125 million. The 2019 target was 25% higher than the 2018 target and 24% lower than the actual 2018 result. We believe that the 2019 target was rigorous and was indicative of the challenging industry environment. +Focus on cash flow generation furthers our goal of having a business model that is self-sustaining, can weather the ebbs and flows of the commodity and business cycle, and allows for return of capital to stockholders. +21 +The overall annual cash bonus plan for 2019 was subject to the requirement that for each metric, a minimum level of the target for such metric was achieved for the year. Once the relevant minimum requirement was met, the annual cash bonus opportunity attri butable to each metric was determined based on a measurement of actual performance relative to target performance, with a 50% payout for threshold achievement, 100% payout for achievement of 100% of target and 200% maximum payout for maximum achievement; p rovided, that the threshold, target and maximum achievement levels and actual performance for the safety metric were determined as set forth below. Linear interpolation was used to calculate payout for performance between achievement levels. +Safety Performance comprised ten percent (10%) of the annual cash bonus opportunity and achievement was based on a holistic evaluation of multiple factors described in footnote 2 of the “2019 Annual Incentive Metrics and Percentage Payout Calculations” table below, with actual achievement subject to the discretion of the Compensation Committee. +The overall payout under the annual cash bonus plan for our NEOs was calculated as follows: +2019 ANNUAL INCENTIVE METRICS AND PERCENTAGE PAYOUT CALCULATIONS +Metrics +Weighting +Threshold +Achievement +Target +Achievement +Maximum +Achievement +Actual +Achievement +Payout +Adjusted EBITDA (1) +70% +$514 million +$685 million +$856 million +$588 million +50.1% +Safety Performance +10% +(2) +15.0% +Pressure Pumping Operating Cash Flow (3) +10% +$10 million +$20 million +$30 million +$25 million +15.0% +Operating Cash Flow (1) (4) +10% +$88 million +$125 million +$156 million +$240 million +20.0% +Total +100% +100.1% +(1) +In determining actual performance for the financial metrics, the Committee excluded certain extraordinary charges. Specifically, in calculating performance for Adjusted EBITDA and Consolidated Operating Cash Flow, the Committee excluded the impacts of (A) a $14.6 million charge associated with the winddown of the Warrior Rig Technologies business in Canada (the “Warrior Adjustment”) and (B) a $12.7 million charge to reduce the carrying value of a deposit for future sand purchases (the “Sand Deposit Adjustment”). The Committee believed these adjustments were appropriate and because in the case of the Warrior Adjustment, the charge related to a strategic decision made outside of the ordinary planning and budgeting process, and in the case of the Sand Deposit Adjustment, the charge related to a legacy sand deposit that was required at a time when sand was in short supply. Given the change in the market for sand in 2019, the deposit was adjusted due to an increase in market supply of sand and a reduction in market sand pricing below the contractual deposit pricing. +(2) +The Committee determined that the NEOs met 150% achievement for this metric based on: +● +the overall total recordable incident rate decreasing for 2019 by 14% compared to 2018; +● +the 2019 drilling operations continuing to have a total recordable incident rate below the land drilling industry average; +● +the 2019 pressure pumping operations’ total recordable incident rate decreasing by over 35% compared to 2018; +● +the overall motor vehicle incident rate decreasing for 2019 compared to 2018; +● +the actions taken to reduce the number of high potential incidents and near misses; +● +the reduction in the number of incidents with an environmental impact; +● +the improved operational audit and follow-up process; and +● +the improvement in training, including the development of new training and training of more people in the drilling and pressure pumping businesses. +(3) +In determining actual performance for this metric, the Committee calculated achievement as follows: $131.3 million of 2019 pressure pumping segment Adjusted EBITDA, minus $105.8 million of 2019 pressure pumping cash capital expenditures. +(4) +In determining actual performance for this metric, the Committee calculated achievement as follows: $560.5 million of 2019 Adjusted EBITDA, minus $347.6 million of 2019 cash capital expenditures, as adjusted as described in footnote 1. +22 +The payout percentage under the relevant bonus programs was applied to each executive’s bonus target as follows to determine their actual 2019 cash bonus payment: +2019 ANNUAL INCENTIVE CASH PAYOUTS +NEO +Bonus Target +Bonus +Payout (as a +% of Target) +Actual +Bonus +William Andrew Hendricks, Jr. +$ +1,250,000 +100.1% +$ +1,251,300 +C. Andrew Smith +$ +562,500 +100.1% +$ +563,100 +Mark S. Siegel +$ +500,000 +100.1% +$ +500,500 +Kenneth N. Berns +$ +562,500 +100.1% +$ +563,100 +Seth D. Wexler +$ +380,000 +100.1% +$ +380,400 +Long-term Incentive Compensation +We have historically delivered the majority of total NEO compensation in the form of equity-based awards. This emphasis on equity-based compensation was intended to enhance alignment between our executives and our stockholders. We plan to retain this emphasis going forward, and we believe that by tying a large portion of compensation to equity we ensure that our NEOs can only fully realize the potential value of their compensation if our stockholders also benefit. As described below, all of the long-term equity incentive awards granted in 2019 vest over a three-year period. The Committee intends in future years to continue to provide more than 50% of long-term incentive compensation in the form of grants that have performance criteria in addition to time vesting. +2019 Long- +Term Incentive +Award Type +2019 Design +Alignment with Philosophy +Restricted Stock Units +(49% of LTI Mix) +• Time-vested units that are settled in shares of stock +• 1/3 of each award vests after one year +• 1/36 of each award vests monthly thereafter (1) +• Value dependent upon stock price performance +• Enhances retention of executive talent +• Encourages long-term share ownership +Performance +Units +(51% of LTI Mix) +• Performance-vested units +• Number of units earned depends upon stock price performance relative to our peers over a full three-year period +• No shares are earned for performance below the 25 th percentile +• Target shares are not earned unless performance is at the 55th percentile (this was increased in 2019 from the 50 th percentile) +• Maximum shares are not earned unless performance is at the 75 th percentile or above +• Capped payout at “target” amount if absolute TSR during the performance period is not positive (this was a new feature for 2019) +• Performance-contingent +• Number of shares dependent upon performance relative to peers and absolute performance +• Value of shares dependent upon stock price +(1) +For Mr. Wexler, one-third of each award vests in annual installments over a three-year period. +23 +2019 Annual Equity-Based Compensation +The Compensation Committee established the following long-term incentive targets for our executives in 2019. The 2019 targets represented a 18.6% reduction from the 2018 targets on average for the executives. In determining the 2019 LTI grants, the Compensation Committee considered Patterson-UTI’s 2018 financial results and comparative total stockholder return performance over the one-, two- and three-year periods ended March 31, 2019. The target value of the grants was determined with the assistance of the Company’s compensation consultant and was set at levels that if target performance is achieved over the performance period, the total target compensation would be at the 75th percentile of the peer group. One executive, Mr. Smith, was given an increase in light of his strong performance as CFO, relative positioning versus other CFOs within the peer group, and internal pay equity compared to other executives at the Company. +Long-Term Incentive Grants +NEO +2018 Target +2019 Target +% Change +William Andrew Hendricks, Jr. +$7,000,000 +$5,750,000 +-17.9% +C. Andrew Smith +$1,500,000 +$1,700,000 +13.3% +Mark S. Siegel +$5,600,000 +$2,250,000 +-59.8% +Kenneth N. Berns +$2,600,000 +$2,150,000 +-17.3% +Seth D. Wexler +$1,350,000 +$1,200,000 +-11.1% +Payout in 2019 of 2016 Performance Unit Awards +For the three-year performance period that ended on March 31, 2019, Patterson-UTI’s total stockholder return, or TSR, was -6.9%. This performance was at the 78 th percentile relative to our peers. Because the Company’s total stockholder return for this performance period was negative, however, pursuant to the terms of the 2016 performance units, recipients were entitled to receive only 50% of the number of shares they would have received had the Company’s total stockholder return been positive . Based on this performance, the 2016 performance units paid out at 100% of the target level. +2016 Performance Unit Awards +(Performance Period Ended in 2019) +Units Granted +Units Earned +# +Grant +Value +# +Value at +Vesting +William Andrew Hendricks, Jr. +69,100 +$ +1,439,353 +69,100 +$ +1,093,853 +C. Andrew Smith +— +$ +— +— +$ +— +Mark S. Siegel +33,100 +$ +689,473 +33,100 +$ +523,973 +Kenneth N. Berns +41,400 +$ +862,362 +41,400 +$ +655,362 +Seth D. Wexler +— +$ +— +— +$ +— +TSR calculations for Patterson-UTI and our peers were measured based on the change in the value of the relevant stock from the first trading day of the performance period to the last trading day of the performance period, in each case measured using the average closing price of the relevant stock for the 20 trading day period ending on such trading day, with dividends reinvested. +Retirement Plans +Patterson-UTI offers a 401(k) plan to its employees, including its NEOs. Participants may contribute a portion of their base salary to the 401(k) plan, subject to federal limits. Patterson-UTI makes matching contributions up to four percent of each participant’s eligible base salary. The NEOs of Patterson-UTI are eligible to participate in the 401(k) plan on the same basis as other employees. Patterson-UTI does not have any other retirement plan. The Committee believes that benefits to executives should generally be aligned with those provided for other employees, and thus we generally do not provide retirement plans beyond a 401(k) plan for our executives. +24 +Other Executive Compensation Matters +Share Ownership Guidelines and Stock Holding Requirements +We have had significant share ownership requirements in place for more than 15 years. Our share ownership guidelines are applicable to all Section 16 officers and directors of Patterson-UTI. The guidelines require our Chief Executive Officer to own a number of shares of our common stock having a value at least equal to five times his or her base salary, and require our other Section 16 officers to own a number of shares of our common stock having a value at least equal to two times his or her base salary. The guidelines also require our non-executive directors to own a number of shares of our common stock having a value at least equal to five times his or her annual base cash retainer. +Each Section 16 officer or non-executive Director has five years from the date of appointment or election to their position to satisfy the ownership guidelines. +Share Ownership Guidelines +President and Chief Executive Officer +Number of shares equal to 5 times base salary +Other Section 16 Officers +Number of shares equal to 2 times base salary +Outside Directors +Number of shares equal to 5 times annual base cash retainer +Each Section 16 officer and director is required to maintain ownership of the net after-tax shares of Common Stock pursuant to any equity-based awards received from Patterson-UTI, unless such person has met his or her individual ownership requirement. +Each person subject to this policy was in compliance with these guidelines as of the date of this proxy statement. +Clawback Policy +As provided for in Patterson-UTI’s Corporate Governance Guidelines and set forth in written agreements with its executive officers, Patterson-UTI has implemented a clawback policy that allows for the recovery of bonus, severance or incentive based compensation from an executive officer in the event the Board of Directors learns that any misconduct by such executive officer contributed to Patterson-UTI having to restate all or a portion of its financial statements. The Board will take such action as it deems necessary to remedy the misconduct, prevent its recurrence, and if it deems appropriate based on the relevant facts and circumstances, take remedial action against such executive officer, which may include requiring the reimbursement of any bonus or incentive compensation awarded to such executive officer or effecting the cancellation of stock awards previously granted to such executive officer if: (i) the amount of the bonus, incentive compensation or stock award was calculated based upon the achievement of certain financial results that were subsequently the subject of a restatement, (ii) such executive officer engaged in intentional misconduct that caused or partially caused the need for the restatement, and (iii) the amount of the bonus, incentive compensation or stock award that would have been awarded to such executive officer had the financial results been properly reported would have been lower than the amount actually awarded. +In addition to a stand-alone policy, Patterson-UTI’s 2005 Long-Term Incentive Plan and the Amended and Restated 2014 Long-Term Incentive Plan provide that if Patterson-UTI is required to prepare an accounting restatement due to the material noncompliance of Patterson-UTI, as a result of misconduct, with any financial reporting requirement under the securities laws, or if the participant is one of the persons subject to automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002, the participant shall reimburse Patterson-UTI that amount of any payment in settlement of an award earned or accrued during the twelve-month period following the first public issuance or filing with the SEC (whichever just occurred) of the financial document embodying such financial statement requirement. +Anti-Hedging Policy +Patterson-UTI has an anti-hedging policy for directors and executive officers. Our directors and executive officers and their respective spouses and minor children are prohibited from engaging in hedging or monetization transactions, including but not limited to prepaid variable forward contracts, equity swaps, collars, exchange funds, purchasing, selling or writing options or transacting in other third-party derivative securities that primarily involve or reference Patterson-UTI equity securities. +Anti-Pledging Policy +Patterson-UTI has an anti-pledging policy. Our directors and executive officers may not engage in transactions in which Patterson-UTI securities are used as collateral for any loan, including, but not limited to, “margin loans” in a brokerage account. +25 +Pe rquisites and Personal Benefits +The Compensation Committee believes that benefits to executives should generally be aligned with those provided for other employees. No Named Executive Officer received perquisites totaling more than $10,000. +Evaluation of Compensation Risk +We have considered the potential risks associated with the design of our compensation program for employees. With regard to our executive compensation program in particular, we do not believe that our program creates unreasonable risks for the following reasons: +• +The emphasis on long-term equity based awards and the required vesting periods help minimize the potential for excessive risk taking and actions aimed at short-term stock gains; +• +Our use of different types of equity grants helps offset these risks; +• +We have meaningful share ownership guidelines; +• +We maintain an anti-hedging policy; +• +We maintain a clawback policy that applies to all of our executive officers for both cash and equity incentives; and +• +Four of the NEOs have been with Patterson-UTI for more than eight years and have an established track record of focus on managing Patterson-UTI for long-term success. +Our Board has also considered in its risk assessment of our compensation program its view that our management is highly ethical and focused on creating true long-term value for stockholders and not focused on just short-term gains. The Board, primarily through its Compensation Committee and Audit Committee, monitors and considers risks associated with Patterson-UTI’s compensation plans on a regular basis. +Employment-Related Agreements and Other Matters +Change in Control, Severance and Employment Agreements +Change in Control Agreements and Tax Gross-Up Payments. Patterson-UTI has entered into change-in-control agreements with Messrs. Siegel and Berns and employment agreements with Messrs. Wexler, Hendricks and Smith that contain change-in-control provisions, as further described in “Employment-Related Agreements” below. Patterson-UTI believes that such agreements may under certain circumstances protect Patterson-UTI’s interest by discouraging the NEOs from leaving employment out of concern for the security of their jobs or from otherwise being unable to concentrate on their work. We believe that the change in control agreements may also help Patterson-UTI attract and retain new key employees by reducing the personal uncertainty and anxiety that arises from the possibility of a future business combination. Any future change in control or severance agreements will be approved subject to the circumstances existing at the time. +As was customary when the change in control agreements with Messrs. Siegel and Berns were entered into more than ten years ago, each change-in-control agreement provides the executive with a full gross-up payment for any excise taxes imposed on payments and benefits received under the change-in-control agreement or otherwise, including other taxes that may be imposed as a result of the gross-up payment. As indicated above, the Compensation Committee subsequently adopted a policy, more than five years ago, to no longer approve tax gross-ups in connection with compensation arrangements, and the employment agreements entered into with Mr. Hendricks in 2016 and Messrs. Wexler and Smith in 2017, which are described below, do not include a tax gross-up provision. +Severance Agreements. In order to address prior severance agreements between UTI Energy Corp. and each of Messrs. Siegel and Berns, Patterson-UTI has entered into written letter agreements with each of these executives pursuant to which Patterson-UTI has agreed to pay each such person within ten days of the termination of his employment with Patterson-UTI for any reason (including voluntary termination by him), an amount in cash equal to his annual base salary at the time of such termination. Any payment made by Patterson-UTI pursuant to these letter agreements will reduce dollar for dollar any payment owed to such person, if any, pursuant to the change-in-control agreements referenced above. +26 +Employment Agreements. Patterson-UTI entered into an employment agreement with Mr. Hendricks in August 2016, with Mr. Wexler in January 2017 and with Mr. Smith in September 2017. Each employment agreement ge nerally has an initial three-year term, subject to automatic annual renewal thereafter. The employment agreement with Mr. Hendricks provides for an annualized salary of 600,000 per year, subject to any increases that may be granted in the future (his annua lized salary was increased to $1,000,000 per year in May 2017), the employment agreement with Mr. Wexler provides for an annualized salary of $440,000, subject to any increases that may be granted in the future (his annualized salary was increased to $475, 000 per year in April 2018), and the employment agreement with Mr. Smith provides for an annualized salary of $450,000, subject to any increases that may be granted in the future. Under specified circumstances, Patterson-UTI may terminate the executive’s e mployment under his employment agreement for cause (as defined in the employment agreement). The employment agreement also provides for, among other things, severance payments and the continuation of certain benefits following termination by Patterson-UTI of the executive other than for cause, or termination by the executive for good reason (as defined in the employment agreement). As discussed above and in more detail below, the employment agreements contain change in control provisions. +We believe the change-in-control agreements, severance agreements and the employment agreements are important components of our overall executive compensation program. The employment agreements currently in effect set forth the manner by which the employment relationship may be extended or terminated, the compensation and benefits that we provide during the term of employment and the obligations each party has in the event of termination of the executive officer’s employment. We believe that severance protections, particularly in the context of a change-in-control transaction, play a critical role in attracting and retaining key executive officers. Providing this type of protection is common in the oilfield services industry. In addition, these benefits serve our interests by promoting a continuity of management and aligning management’s interests with those of our stockholders in the context of an actual or threatened change in control transaction. +In connection with Mr. Siegel’s desire to not stand for re-election to the Board of Directors and to step down from his position of Executive Chairman at the Meeting, and consistent with Patterson-UTI’s historical retirement practices for top executives, including former Chief Executive Officers, Patterson-UTI entered into an employment agreement with Mr. Siegel in April 2020 . Pursuant to the employment agreement, effective at the time of the Meeting, Mr. Siegel will become a part-time employee, providing transition support services and advice and assistance on strategic and other specified operational and financial market matters as requested by the Chief Executive Officer or the Chairman of the Board. Mr. Siegel will receive a salary of $400,000 per year, and he will not be eligible for any 2020 or future bonuses or new grants of incentive compensation. Mr. Siegel’s pre-existing change of control agreement and severance agreement described above will terminate effective at the time of the Meeting, and, subject to Mr. Siegel’s execution of a customary release, Patterson-UTI will pay Mr. Siegel a lump sum payment of $400,000 (the amount that Mr. Siegel would have been due upon any termination of employment pursuant to his pre-existing severance agreement) to discharge Patterson-UTI’s obligations under the pre-existing severance agreement. +Mr. Siegel’s employment agreement runs for a five-year term expiring on June 4, 2025. This term was set in consideration of Mr. Siegel’s 25 years of experience with Patterson-UTI and in the oil and gas industry more generally and a desire to secure his advisory services for this full five-year period, particularly in light of the Company entering into a period of what appears to be extended, volatile and adverse market conditions. On the conclusion of the term, Mr. Siegel’s employment will automatically terminate. If Mr. Siegel resigns for any reason or is terminated by Patterson-UTI for “Cause” (as defined in the employment agreement) or as a result of death or disability prior to expiration of the term, he will not be entitled to any payments under the employment agreement other than (i) any unpaid base salary through the date of termination and (ii) any vested benefits he has pursuant to the terms of any employee benefit plans. +Mr. Siegel is required to execute a customary release in connection with his employment agreement. The employment agreement also contains certain confidentiality covenants prohibiting Mr. Siegel from, among other things, disclosing confidential information. The employment agreement also contains non-competition and non-solicitation restrictions, pursuant to which Mr. Siegel will not be permitted to compete with Patterson-UTI or solicit Patterson-UTI employees for the term of the employment agreement. +Please see “Employment-Related Agreements” elsewhere in the proxy statement for further description of the change-in-control agreements, severance agreements and employment agreements. +27 +Section 162(m) Considerations +We consider the impact of accounting and tax treatment when designing all aspects of compensation, but the primary driver of program design is the support of business objectives. In that regard, we review and consider the deductibility of executive compensation under Section 162(m) of the Internal Revenue Code, which limits the tax deductibility by a corporation of compensation in excess of $1 million paid to each covered employee. As a result of a change in the law effective commencing with the 2018 tax year, covered employees for this purpose generally include any individual who serves as chief executive officer, chief financial officer or one of the other three most highly compensated executive officers for that year, as well as any individual who was a covered employee for 2017 or any later calendar year. In addition, there is no longer any performance-based compensation exception to this limitation as was the case under prior law. However, some outstanding awards may be eligible for transition rules in effect for binding contracts in effect on November 2, 2017, which should continue to allow these awards to maintain their exemption from the $1 million annual deduction limitation for so long as such grants are not materially modified. The Compensation Committee views the tax deductibility of executive compensation as one factor to be considered in the context of its overall compensation philosophy, but it will continue to retain discretion to pay compensation that is subject to the $1 million deductibility limit. +Compensation Committee Report +The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based upon such review and discussion, the Compensation Committee has recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement. +Terry H. Hunt, Chairman +Tiffany (TJ) Thom Cepak +Michael W. Conlon +Curtis W. Huff +28 +EXECUTIVE COMPENSATION +The following table sets forth information concerning compensation for the fiscal year ended December 31, 2019 with respect to the principal executive officer, the principal financial officer and the other Named Executive Officers of Patterson-UTI: +Summary Compensation Table +Name and Principal Position(s) +Year +Salary +($) +Bonus +($)(1) +Stock +Awards +($)(2) +Non-equity +Incentive plan +Compensation +($)(3) +All Other +Compensation +($)(4) +Total +($) +William Andrew Hendricks, Jr. +2019 +1,000,000 +— +6,582,856 +(5) +1,251,300 +11,200 +8,845,356 +President & Chief +2018 +1,000,000 +— +7,653,924 +1,100,000 +11,000 +9,764,924 +Executive Officer +2017 +853,846 +2,250,000 +8,951,693 +2,187,500 +10,800 +14,253,839 +C. Andrew Smith +2019 +450,000 +200,000 +1,946,742 +(6) +563,100 +11,200 +3,171,042 +Executive Vice President & +2018 +450,000 +200,000 +1,640,644 +495,000 +11,000 +2,796,644 +Chief Financial Officer +2017 +122,885 +250,000 +1,599,989 +984,375 +4,154 +2,961,403 +Mark S. Siegel +2019 +400,000 +— +2,575,693 +(7) +500,500 +— +3,476,193 +Chairman of the Board +2018 +752,308 +— +6,122,624 +440,000 +— +7,314,932 +2017 +635,577 +2,550,000 +7,882,637 +1,750,000 +— +12,818,214 +Kenneth N. Berns +2019 +450,000 +— +2,463,147 +(8) +563,100 +— +3,476,247 +Executive Vice President & +2018 +450,000 +— +2,843,300 +495,000 +— +3,788,300 +Chief Commercial Officer +2017 +382,404 +850,000 +3,758,848 +984,375 +— +5,975,627 +Seth D. Wexler +2019 +475,000 +— +1,374,064 +(9) +380,400 +11,200 +2,240,664 +Senior Vice President, General +2018 +464,164 +— +1,475,340 +334,400 +11,000 +2,284,904 +Counsel & Secretary +2017 +440,000 +500,000 +1,621,422 +539,000 +10,800 +3,111,222 +(1) +Bonuses include amounts awarded in respect of the merger with Seventy Seven Energy pursuant to a one-time pool, except in the case of Mr. Smith, whose bonuses include fixed amounts awarded pursuant to his employment agreement as a condition to his commencement of employment with the Company. +(2) +Amounts include the fair value of awards at the date of grant as determined in accordance with FASB ASC Topic 718 with respect to restricted stock or restricted stock units awarded to the Named Executive Officer in the fiscal years ended December 31, 2019, 2018 and 2017, with respect to performance units awarded to the Named Executive Officer in the fiscal years ended December 31, 2019 and 2018, and with respect to performance units awarded to Messrs. Hendricks, Siegel and Berns in the fiscal year ended December 31, 2017. Performance conditions for all awards of restricted stock and restricted stock units had been satisfied as of December 31, 2019. For additional information related to the assumptions used and valuation of restricted stock, restricted stock units and performance units, see Note 11 to the consolidated financial statements in Patterson-UTI’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019. As described in the 10-K, the fair value of performance unit awards was determined based on a Monte-Carlo simulation model, which is consistent with the valuation used by Patterson-UTI for the recognition of compensation expense under FASB ASC Topic 718. The Monte-Carlo simulation model takes into account expected price movement of Patterson-UTI stock as compared to peer companies. As a result of Patterson-UTI’s pre-grant 2019 TSR performance relative to peer companies, the Monte-Carlo simulation model assigned a higher value to each 2019 performance unit award than the closing price of Patterson-UTI’s stock on the grant date. Therefore, the value reflected in the 2019 Summary Compensation Table does not reflect the target value shown in the 2019 Annual Equity-Based Compensation section of the Compensation Discussion and Analysis in this proxy statement. +( 3 ) +Amounts represent annual cash bonuses earned for the fiscal years ended December 31, 2019, 2018 and 2017. +( 4 ) +Amounts reflect contributions to a 401(k) plan by Patterson-UTI. +( 5 ) +Amount includes $2,817,740 related to an annual award of restricted stock units and $3,765,116 related to an award of performance units during 2019. Assuming maximum performance, the value of the performance unit award would be $5,863,432 (calculated using the closing price of Patterson-UTI’s stock on the grant date and assuming maximum payout of two times the target number of shares). +( 6 ) +Amount includes $832,658 related to an annual award of restricted stock units and $1,114,804 related to an award of performance units during 2019. Assuming maximum performance, the value of the performance unit award would be $1,734,968 (calculated using the closing price of Patterson-UTI’s stock on the grant date and assuming maximum payout of two times the target number of shares). +( 7 ) +Amount includes $1,101,768 related to an annual award of restricted stock units and $1,473,925 related to an award of performance units during 2019. Assuming maximum performance, the value of the performance unit award would be $2,295,350 (calculated using the closing price of Patterson-UTI’s stock on the grant date and assuming maximum payout of two times the target number of shares). +( 8 ) +Amount includes $1,054,278 related to an annual award of restricted stock units and $1,408,869 related to an award of performance units during 2019. Assuming maximum performance, the value of the performance unit award would be $2,194,038 (calculated using the closing price of Patterson-UTI’s stock on the grant date and assuming maximum payout of two times the target number of shares). +29 +( 9 ) +Amount includes $ 587,293 related to an annual award of restricted stock units and $ 786,771 related to an award of performance units during 201 9 . Assuming maximum performance, the value of the performance unit award would be $ 1,225,242 (calculated using the closing price of Patterson-UTI’s stock on the grant date and assuming maximum payout of two times the target number of shares) . +The following table sets forth information concerning grants of plan-based awards during the fiscal year ended December 31, 2019 to the Named Executive Officers: +Grants of Plan-Based Awards +Estimated Future Payouts under +Non-equity Incentive Plan Awards +Estimated Future Payouts under +Equity Incentive Plan Awards +All Other +Stock +Awards: +Number of +Shares of +Grant Date +Fair Value of +Stock and +Grant +Threshold +Target +Maximum +Threshold +Target +Maximum +Stock or Units +Option Awards +Name +Date +($) +($) +($) +(#) +(#) +(#) +(#) +($)(4) +William Andrew Hendricks, Jr +4/23/19 +(1) +$ +625,000 +$ +1,250,000 +$ +2,500,000 +— +— +— +— +$ +— +4/23/19 +(2) +— +— +— +92,600 +185,200 +370,400 +— +$ +3,765,116 +4/23/19 +(3) +— +— +— +— +— +— +178,000 +$ +2,817,740 +C. Andrew Smith +4/23/19 +(1) +$ +281,250 +$ +562,500 +$ +1,125,000 +— +— +— +— +$ +— +4/23/19 +(2) +— +— +— +27,400 +54,800 +109,600 +— +$ +1,114,084 +4/23/19 +(3) +— +— +— +— +— +— +52,600 +$ +832,658 +Mark S. Siegel +4/23/19 +(1) +$ +250,000 +$ +500,000 +$ +1,000,000 +— +— +— +— +$ +— +4/23/19 +(2) +— +— +— +36,250 +72,500 +145,000 +— +$ +1,473,925 +4/23/19 +(3) +— +— +— +— +— +— +69,600 +$ +1,101,768 +Kenneth N. Berns +4/23/19 +(1) +$ +281,250 +$ +562,500 +$ +1,125,000 +— +— +— +— +$ +— +4/23/19 +(2) +— +— +— +34,650 +69,300 +138,600 +— +$ +1,408,869 +4/23/19 +(3) +— +— +— +— +— +— +66,600 +$ +1,054,278 +Seth D. Wexler +4/23/19 +(1) +$ +190,000 +$ +380,000 +$ +760,000 +— +— +— +— +$ +— +4/23/19 +(2) +— +— +— +19,350 +38,700 +77,400 +— +$ +786,771 +4/23/19 +(3) +— +— +— +— +— +— +37,100 +$ +587,293 +(1) +The 2019 non-equity incentive cash bonus plan for the fiscal year ended December 31, 2019 was approved on April 23, 2019 for our Named Executive Officers. The bonus plan set a target opportunity for each executive’s annual cash bonus as a percent of salary, with payout contingent upon meeting Patterson-UTI’s financial goals and other KPIs as described above in “Compensation Discussion and Analysis”. The annual cash bonus opportunity attributable to each metric was determined based on a measurement of actual performance relative to target performance as described above in “Annual Incentive Compensation". The cash bonuses were awarded under the Amended and Restated 2014 Long-Term Incentive Plan. Please see the “Annual Incentive Compensation” section for a discussion of actual payments made in respect of the 2019 cash bonus plan. +(2) +On April 23, 2019, Patterson-UTI granted performance unit awards to the Named Executive Officers. These awards provide for the recipients to receive shares of Common Stock upon the achievement of certain performance goals established by Patterson-UTI during a specified period. The performance period is the period from April 1, 2019 through March 31, 2022. The performance goals are tied to Patterson-UTI’s total stockholder return for the performance period as compared to total stockholder return for our peer group determined by the Compensation Committee. The recipients will receive a target number of shares if Patterson-UTI’s total stockholder return when compared to the peer group, is at the 55 th percentile and two times the target if at the 75 th percentile or higher. If Patterson-UTI’s total stockholder return, when compared to the peer group, is at the 25 th percentile, the recipients will only receive one-half of the target number of shares. The grant of shares when achievement is between the 25th and 55 th percentile, or between the 55 th and 75 th percentile, will be determined using linear interpolation for levels of achievement between these points. If Patterson-UTI’s total stockholder return is negative or zero, the payout shall not exceed the target number of shares. +(3) +Restricted stock units were awarded to the Named Executive Officers pursuant to the Amended and Restated 2014 Long-Term Incentive Plan. Ordinary dividends are accrued on unvested restricted stock units and paid upon vesting. The rate at which these dividends are paid or accrued is the same rate at which ordinary dividends are paid on all other shares of Common Stock. The restricted stock units awarded to Messrs. Hendricks, Smith, Siegel and Berns vest over a three-year period as follows: one-third on April 23, 2020, and the remainder in equal monthly installments over the 24 months following April 23, 2020. The restricted stock units awarded to Mr. Wexler vest over a three-year period as follows: one-third on April 23, 2020, one-third on April 23, 2021 and one-third on April 23, 2022. +( 4 ) +The grant date fair value of restricted stock units was based on the closing price of Patterson-UTI Common Stock on the date of grant, which is consistent with the valuation used by Patterson-UTI for the recognition of compensation expense under FASB ASC Topic 718. The grant date fair value of performance unit awards was determined based on a Monte-Carlo simulation model, which is consistent with the valuation used by Patterson-UTI for the recognition of compensation expense under FASB ASC Topic 718. +30 +The followi ng table sets forth information concerning outstanding equity awards at December 31, 201 9 for the Named Executive Officers: +Outstanding Equity Awards at Fiscal Year-End +Stock Awards +Number +Equity Incentive +Equity Incentive +of Shares +Plan Awards: +Plan Awards: Market +Option Awards +or Units of +Market Value of +Number of +or Payout Value of +Number of Securities +Option +Stock +Shares or Units +Unearned Shares, +Unearned Shares, +Underlying Unexercised +Exercise +Option +That Have +of Stock +Units or Other +Units or Other +Options (#) +Price +Expiration +Not +That Have +Rights that Have +Rights that Have +Name +Exercisable +Unexercisable +($) +Date +Vested (#) +Not Vested ($)(1) +Not Vested(2) +Not Vested ($)(1) +William Andrew Hendricks, Jr. +100,000 +— +$ +17.27 +4/1/2022 +315,907 +(3) +$ +3,317,024 +375,472 +(4) +$ +3,942,456 +25,000 +— +$ +15.82 +9/30/2022 +172,500 +— +$ +22.88 +4/21/2023 +117,750 +— +$ +33.10 +4/21/2024 +257,000 +— +$ +20.33 +4/20/2025 +315,400 +— +$ +18.54 +4/25/2026 +C. Andrew Smith +— +— +— +— +76,378 +(5) +$ +801,969 +77,700 +(6) +$ +815,850 +Mark S. Siegel +355,000 +— +$ +14.83 +4/26/2020 +179,927 +(7) +$ +1,889,234 +224,698 +(8) +$ +2,359,329 +138,000 +— +$ +31.20 +4/25/2021 +320,000 +— +$ +16.20 +4/23/2022 +230,000 +— +$ +22.88 +4/21/2023 +157,000 +— +$ +33.10 +4/21/2024 +205,600 +— +$ +20.33 +4/20/2025 +151,300 +— +$ +18.54 +4/25/2026 +Kenneth N. Berns +177,500 +— +$ +14.83 +4/26/2020 +119,509 +(9) +$ +1,254,845 +145,128 +(10) +$ +1,523,844 +69,000 +— +$ +31.20 +4/25/2021 +160,000 +— +$ +16.20 +4/23/2022 +115,000 +— +$ +22.88 +4/21/2023 +78,500 +— +$ +33.10 +4/21/2024 +154,200 +— +$ +20.33 +4/20/2025 +189,100 +— +$ +18.54 +4/25/2026 +Seth D. Wexler +— +— +— +— +88,167 +(11) +$ +925,754 +59,300 +(12) +$ +622,650 +(1) +Based on the closing price of Patterson-UTI Common Stock on December 31, 2019 of $10.50 per share. +(2) +As of December 31, 2019, performance unit awards had been granted to the Named Executive Officers. The 2017, 2018 and 2019 performance unit awards were granted on May 2, 2017, April 24, 2018 and April 23, 2019, respectively, and provide for an award of shares of Patterson-UTI common stock to the recipient based on Patterson-UTI’s total stockholder return compared to our peer group of companies at the time of grant for the performance period of April 1 of the grant year through March 31 of the third year following the grant for the awards in 2018 and 2019, and May 1 through April 30 of the third year following the grant for the awards in 2017. All performance unit awards provide for a target payout based on a target level of total stockholder return compared to the peer group. The amounts presented in this column represent the target payout under the performance unit awards. Based on Patterson-UTI’s total stockholder return during the performance period, the recipients could receive a number of shares ranging from no shares to two times the target number of shares. For the performance units granted in 2019, if Patterson-UTI’s total stockholder return is negative, then the number of shares received by the recipients will be capped at the target number of shares. For the performance units granted in 2017 and 2018, the payout is based solely on relative performance. +(3) +These shares of restricted stock and restricted stock units vest as follows: 27,018 shares in equal monthly installments from January 2, 2020 through May 2, 2020; 110,889 restricted stock units in equal monthly installments from January 24, 2020 through April 24, 2021, 59,333 restricted stock units on April 23, 2020 and 118,667 restricted stock units in equal monthly installments from May 23, 2020 through April 23, 2022. +(4) +Amount includes 83,372 shares related to the 2017 performance unit award, 106,900 shares related to the 2018 performance unit award and 185,200 shares related to the 2019 performance unit award. +(5) +These restricted stock units vest as follows: 23,778 restricted stock units in equal monthly installments from January 24, 2020 through April 24, 2021, 17,533 restricted stock units on April 23, 2020 and 35,067 restricted stock units in equal monthly installments from May 23, 2020 through April 23, 2022. +(6) +Amount includes 22,900 shares related to the 2018 performance unit award and 54,800 shares related to the 2019 performance unit award. +(7) +These shares of restricted stock and restricted stock units vest as follows: 21,615 shares in equal monthly installments from January 2, 2020 through May 2, 2020; 88,712 restricted stock units in equal monthly installments from January 24, 2020 through April 24, 2021, 23,200 restricted stock units on April 23, 2020 and 46,400 restricted stock units in equal monthly installments from May 23, 2020 through April 23, 2022. +(8) +Amount includes 66,698 shares related to the 2017 performance unit award, 85,500 shares related to the 2018 performance unit award and 72,500 shares related to the 2019 performance unit award. +31 +(9) +These shares of restricted stock and restricted stock units vest as follows: 11,709 shares in equal monthly installments from January 2, 20 20 through May 2, 2020; 41,200 restricted stock units in equal monthly installments from January 24, 2020 through April 24, 2021, 22,200 restricted stock units on April 23, 2020 and 44,400 restricted stock units in equal monthly installments from May 23, 2 020 through April 23, 2022. +(10) +Amount includes 36,128 shares related to the 2017 performance unit award, 39,700 shares related to the 2018 performance unit award and 69,300 shares related to the 2019 performance unit award. +(11) +These restricted stock units vest as follows: 12,366 restricted stock units on April 23, 2020; 16,033 restricted stock units on April 24, 2020, 19,000 restricted stock units on July 12, 2020; 12,367 restricted stock units on each of April 23, 2021 and 2022 and 16,034 restricted stock units on April 24, 2021. +(12) +Amount includes 20,600 shares related to the 2018 performance unit award and 38,700 shares related to the 2019 performance unit award. +The following table sets forth information concerning option exercises and stock awards vested during the fiscal year ended December 31, 2019 for the Named Executive Officers: +Option Exercises and Stock Vested +Option awards +Stock awards +Name +Number of +shares acquired +on exercise (#) +Value realized +on exercise ($) +Number of +shares acquired +on vesting (#) +Value realized +on vesting ($)(1) +William Andrew Hendricks, Jr. +— +$ +— +289,659 +$ +3,830,609 +C. Andrew Smith +— +$ +— +76,781 +$ +809,989 +Mark S. Siegel +350,000 +$ +388,500 +200,164 +$ +2,595,834 +Kenneth N. Berns +175,000 +$ +194,250 +126,365 +$ +1,707,046 +Seth D. Wexler +— +$ +— +48,700 +$ +612,163 +(1) +Value realized on vesting is based on the closing price of Patterson-UTI common stock on the day the respective shares vested; provided that if the stock market was closed on the day the respective shares vested, the value realized on vesting is based on the closing price of Patterson-UTI common stock on the day immediately prior to the day the respective shares vested. +Pay Ratio +Under rules adopted pursuant to the Dodd-Frank Act of 2010, we are required to calculate and disclose the total compensation paid to our median employee, as well as the ratio of the total compensation paid to the median employee as compared to the total compensation paid to our CEO. The paragraphs that follow describe our methodology and the resulting CEO pay ratio. +We identified the median employee using our employee population on December 31, 2019. At December 31, 2019, we had approximately 5,800 employees located in the United States and Canada. +Pursuant to the de minimis exception, in identifying the median employee, we excluded approximately 50 employees in Canada, which represented approximately 1% of our workforce. +The compensation measure we used to identify the median employee was Box 1 of the Form W-2 issued by the IRS for federal tax purposes. We chose Form W-2 because our non-excluded employee population consisted solely of U.S. employees, and this compensation measure applied to all U.S. employees, allowing for accessibility and broad comparability. The total annual compensation for the year ended December 31, 2019 was calculated as $87,685 for our median employee and $8,845,356 for our CEO as reflected in the “Total” column of the Summary Compensation Table. The ratio of our CEO’s pay to that of our median employee for 2019 was approximately 101 times. The pay ratio provided is a reasonable estimate calculated in a manner consistent with SEC rules. +Because the SEC rules for identifying the median of the annual total compensation of our employees and calculating the pay ratio based on that employee’s annual total compensation allows companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices, the pay ratio reported by other companies may not be comparable to the pay ratio for our Company, as other companies have headquarters and offices in different states and countries, have different employee populations and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their pay ratios. +32 +No Pension Benefits or Nonqualified Deferred Compensation +Patterson-UTI does not provide any pension benefits for any of the Named Executive Officers. None of the Named Executive Officers had any items of nonqualified deferred compensation during 2019. As a result, tables with respect to pension benefits and nonqualified deferred compensation have not been provided. +DIRECTOR COMPENSATION +The following table sets forth information concerning compensation for the fiscal year ended December 31, 2019 with respect to the directors of Patterson-UTI who are not executive officers: +Name +Fees earned +or paid in cash +($) +Stock awards +($)(1) +Option awards +($)(2) +All other +compensation +($) +Total +($) +Charles O. Buckner +$ +85,000 +$ +174,998 +$ +— +$ +— +$ +259,998 +Tiffany (TJ) Thom Cepak +$ +100,000 +$ +174,998 +$ +— +$ +— +$ +274,998 +Michael W. Conlon +$ +95,000 +$ +174,998 +$ +— +$ +— +$ +269,998 +Curtis W. Huff +$ +115,000 +$ +174,998 +$ +— +$ +— +$ +289,998 +Terry H. Hunt +$ +100,000 +$ +174,998 +$ +— +$ +— +$ +274,998 +Janeen S. Judah +$ +85,000 +$ +174,998 +$ +— +$ +— +$ +259,998 +(1) +Amounts set forth represent the fair value at the date of grant as determined in accordance with FASB ASC Topic 718 with respect to restricted stock units awarded to the directors in the fiscal year ended December 31, 2019. For additional information related to the assumptions used and valuation of restricted stock units, see Note 11 to the consolidated financial statements in Patterson-UTI’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019. Each director received an award of 16,908 restricted stock units on January 1, 2019 with a grant date value of $10.35 per restricted stock unit. As of December 31, 2019, each director held 16,908 unvested restricted stock units. The restricted stock units awarded on January 1, 2019 fully vested on January 1, 2020. +(2) +No options were issued to directors during the fiscal year ended December 31, 2019. As of December 31, 2019, Messrs. Buckner, Conlon, Huff and Hunt and Ms. Cepak held the following options to purchase shares of Common Stock: +Number of Securities Underlying +Unexercised Options (#) +Name +Exercisable +Unexercisable +Total +Charles O. Buckner +60,000 +— +60,000 +Tiffany (TJ) Thom Cepak +30,000 +— +30,000 +Michael W. Conlon +50,000 +— +50,000 +Curtis W. Huff +60,000 +— +60,000 +Terry H. Hunt +60,000 +— +60,000 +Directors who are also employees of Patterson-UTI do not receive compensation for serving as a director or as a member of a committee of the Board of Directors. All directors are reimbursed for reasonable out-of-pocket expenses incurred in connection with serving as a member of the Board of Directors. +The current compensation for non-employee directors is as follows: Each non-employee director receives an annual base cash retainer of $75,000 and restricted stock units on January 1 of each year with a grant date value of $175,000, subject to one-year vesting (subject to acceleration in certain limited situations, including a change of control). Each non-employee director that serves on the Audit Committee or the Compensation Committee receives an additional annual cash retainer of $10,000 per committee on which he or she serves, with the Chair of each such committee receiving $15,000. The Chair of the Nominating and Corporate Governance Committee receives an additional annual cash retainer of $10,000. The non-Executive Chairman or, at times while the Board has an Executive Chairman, the Lead Director, receives an additional annual cash retainer of $20,000. +33 +EMPLOYMENT-RELATED AGREEMENTS +Change in Control, Employment and Severance Agreements +Change in Control Agreements with Messrs. Siegel and Berns +Patterson-UTI has Change in Control Agreements with Messrs. Siegel and Berns (each agreement, a “CIC Agreement” and collectively, the “CIC Agreements”). The CIC Agreements were entered into to protect these executives should a change in control occur, thereby encouraging such executive to remain in the employ of Patterson-UTI and not be distracted from the performance of his duties to Patterson-UTI by the possibility of a change in control. +Each CIC Agreement generally has an initial term with automatic twelve-month renewals unless Patterson-UTI notifies the executive at least ninety days before the end of such renewal period that the term will not be extended. If a change in control of Patterson-UTI occurs during the term of the CIC Agreement and the executive’s employment is terminated (i) by Patterson-UTI other than for cause or other than automatically as a result of death, disability or retirement, or (ii) by the executive for good reason (as those terms are defined in the CIC Agreements), then the executive shall generally be entitled to, among other things: +• +a bonus payment equal to the highest bonus paid after the CIC Agreement was entered into (such bonus payment for each executive prorated for the portion of the fiscal year preceding the termination date); +• +a payment equal to 2.5 times (in the case of Mr. Siegel) or 2 times (in the case of Mr. Berns) the sum of (i) the highest annual salary in effect for such executive and (ii) the average of the three annual bonuses earned by the executive for the three fiscal years preceding the termination date; and +• +continued coverage under Patterson-UTI’s welfare plans for up to three years (in the case of Mr. Siegel) or two years (in the case of Mr. Berns). +As was customary when the CIC Agreements were entered into more than ten years ago, each CIC Agreement provides the executive with a full gross-up payment for any excise taxes imposed on payments and benefits received under the CIC Agreement or otherwise, including other taxes that may be imposed as a result of the gross-up payment. As indicated above, the Compensation Committee subsequently adopted a policy, more than five years ago, to no longer approve tax-gross ups in connection with compensation arrangements, and the employment agreements entered into with Mr. Hendricks in 2016 and Messrs. Wexler and Smith in 2017, which are described below, do not include a tax gross-up provision. +A “change in control” is principally defined by the CIC Agreement as: +• +an acquisition by any individual, entity or group of beneficial ownership of 35% or more of either Patterson-UTI’s then outstanding common stock or the combined voting power of the then outstanding voting securities of Patterson-UTI entitled to vote in the election of directors, +• +a change occurs in which the members of the Board of Directors as of the date of the CIC Agreement cease to constitute at least a majority of Patterson-UTI’s Board of Directors unless that change occurs through a vote of at least a majority of the incumbent members of the Board of Directors, or +• +a change in the beneficial ownership of Patterson-UTI following consummation of a reorganization, merger, consolidation, sale of Patterson-UTI or any subsidiary of Patterson-UTI or a disposition of all or substantially all of the assets of Patterson-UTI, in which the beneficial owners immediately prior to the transaction own 65% or less of outstanding common stock of the newly combined or merged entity. +Severance Agreements with Messrs. Siegel and Berns +In order to address prior severance agreements between UTI Energy Corp. and each of Messrs. Siegel and Berns, Patterson-UTI has entered into written letter agreements with each of these executives pursuant to which Patterson-UTI has agreed to pay each such executive within ten days of the termination of his employment with Patterson-UTI for any reason (including voluntary termination by him), an amount in cash equal to his annual base salary at the time of such termination. Any payment made by Patterson-UTI pursuant to these letter agreements will reduce dollar for dollar any payment owed to such person, if any, pursuant to the CIC Agreements. +34 +Employment Agreements with Messrs. Hendricks, Wexler and Smith +Patterson-UTI has Employment Agreements with Messrs. Hendricks, Wexler and Smith. Each Employment Agreement generally has an initial three-year term, subject to automatic annual renewal thereafter. The executive may terminate his employment under his Employment Agreement by providing written notice of such termination at least 30 days before the effective date of such termination. Under specified circumstances, Patterson-UTI may terminate the executive’s employment under his Employment Agreement for cause (as defined in the Employment Agreement) by either (i) providing written notice 10 days before the effective date of such termination and by granting at least 10 days to cure the cause for such termination or (ii) by providing written notice of such termination at least 30 days before the effective date of such termination and by granting at least 20 days to cure the cause for such termination, provided that if the matter is reasonably determined by Patterson-UTI to not be capable of being cured, the executive may be terminated for cause on the date the written notice is delivered. The Employment Agreement also provides for, among other things, severance payments and the continuation of certain benefits following termination by Patterson-UTI of the executive other than for cause, or termination by the executive for good reason (as defined in each Employment Agreement). Under these provisions, if the executive’s employment is terminated by Patterson-UTI without cause, or the executive terminates his employment for good reason: +• +the executive will have the right to receive a lump-sum payment consisting of 3 times (in the case of Mr. Hendricks) or 2.5 times (in the case of Messrs. Wexler and Smith) the sum of (i) his base salary and (ii) the average annual cash bonus received by him for the three years prior to the date of termination, +• +the executive will have the right to receive a pro-rated lump-sum payment equal to his annual cash bonus based on actual results for the year, payable at the same time as annual cash bonuses are paid to active employees, +• +Patterson-UTI will accelerate vesting of all options, restricted stock and performance unit awards on the 60th day following the executive’s termination, and +• +Patterson-UTI will pay the executive certain accrued obligations and certain obligations pursuant to the terms of employee benefit plans. +If a termination by Patterson-UTI other than for cause or by the executive for good reason occurs following a change in control (which is defined in a substantially similar manner to the definition in the CIC Agreements), the executive will generally be entitled to the same severance payments and benefits described above except that the pro-rated lump-sum payment for annual cash bonuses will be based on his highest annual cash bonus for the last three years, and the executive will be entitled to 36 months (in the case of Mr. Hendricks) or 30 months (in the case of Messrs. Wexler and Smith) of subsidized benefits continuation coverage. +Employment Agreement with Mr. Siegel +In connection with Mr. Siegel’s desire to not stand for re-election to the Board of Directors and to step down from his position of Executive Chairman at the Meeting, and consistent with Patterson-UTI’s historical retirement practices for top executives, including former Chief Executive Officers, Patterson-UTI entered into an employment agreement with Mr. Siegel in April 2020 . Pursuant to the employment agreement, effective at the time of the Meeting, Mr. Siegel will become a part-time employee, providing transition support services and advice and assistance on strategic and other specified operational and financial market matters as requested by the Chief Executive Officer or the Chairman of the Board. Mr. Siegel will receive a salary of $400,000 per year and will not be eligible for any 2020 or future bonuses or new grants of incentive compensation. Mr. Siegel’s pre-existing change of control agreement and severance agreement described above will terminate effective at the time of the Meeting, and subject to Mr. Siegel’s execution of a customary release, Patterson-UTI will pay Mr. Siegel a lump sum payment of $400,000 (the amount that Mr. Siegel would have been due upon any termination of employment pursuant to his pre-existing severance agreement) to discharge Patterson-UTI’s obligations under the pre-existing severance agreement. +Mr. Siegel’s employment agreement runs for a five-year term expiring on June 4, 2025. This term was set in consideration of Mr. Siegel’s 25 years of experience with Patterson-UTI and in the oil and gas industry more generally and a desire to secure his advisory services for this full five-year period, particularly in light of the Company entering into a period of what appears to be extended, volatile and adverse market conditions. On the conclusion of the term, Mr. Siegel’s employment will automatically terminate. Mr. Siegel may terminate his employment under the employment agreement prior to expiration of the term by providing written notice of such termination at least 30 days before the effective date of such termination. Under specified circumstances, Patterson-UTI may terminate Mr. Siegel’s employment under the employment agreement for “Cause” (as defined in the employment agreement). If Mr. Siegel resigns for any reason or is terminated by Patterson-UTI for Cause or as a result of death or disability prior to expiration of the term, he +35 +will not be entitled to any payments under the e mployment a greement other than (i) any unpaid base salary through the date of termination and (ii) any vested benefits he has pursuant to the terms of any employee benefit plans . +Mr. Siegel is required to execute a customary release in connection with his employment agreement. The employment agreement also contains certain confidentiality covenants prohibiting Mr. Siegel from, among other things, disclosing confidential information. The employment agreement also contains non-competition and non-solicitation restrictions, pursuant to which Mr. Siegel will not be permitted to compete with Patterson-UTI or solicit Patterson-UTI employees for the term of the employment agreement. +Equity Award Agreements with Named Executive Officers +All unvested stock options, restricted stock and restricted stock unit awards held by the Named Executive Officers vest upon a change of control as defined by the underlying award agreements. Upon a change in control as defined in the underlying performance unit award grants, the Named Executive Officers would receive the target number of shares issuable thereunder. +All restricted stock, restricted stock unit and performance unit awards held by the Named Executive Officers provide that in the event of termination of employment due to death or disability, the holder would vest in a portion of the award. With respect to Mr. Hendricks, such a termination at December 31, 2019 would have resulted in the accelerated vesting of 5,186 shares of restricted stock and the issuance of 42,545 shares pursuant to the accelerated vesting of restricted stock units, with a combined fair value of $501,176. With respect to Mr. Berns, such a termination at December 31, 2019 would have resulted in the accelerated vesting of 2,248 shares of restricted stock and the issuance of 15,914 shares pursuant to the accelerated vesting of restricted stock units, with a combined fair value of $190,701. With respect to Mr. Siegel, such a termination at December 31, 2019 would have resulted in the accelerated vesting of 4,149 shares of restricted stock and the issuance of 17,297 shares pursuant to the accelerated vesting of restricted stock units, with a combined fair value of $225,183. With respect to Mr. Smith, such a termination at December 31, 2019 would have resulted in the issuance of 12,441 shares pursuant to the accelerated vesting of restricted stock units, with a fair value of $130,631. With respect to Mr. Wexler, such a termination at December 31, 2019 would have resulted in the issuance of 28,441 shares pursuant to the accelerated vesting of restricted stock units, with a fair value of $298,631. +In the event of termination of employment due to death or disability, the holders of performance units would vest in the portion of the performance unit award that was earned at the time of death or disability. This payment would be determined at the end of the performance period and would equal the amount that the holder would have received at that time, pro-rated for the amount of time from the date of grant through the date of death or disability. +Potential Payments Upon a Termination or Change in Control +Amounts that each of the Named Executive Officers would be entitled to under his CIC Agreement or Employment Agreement and other award agreements if a change in control had occurred as of December 31, 2019 and the employee’s employment was terminated by Patterson-UTI other than for cause or terminated by the employee for good reason (as defined in the CIC Agreement or the Employment Agreement and other award agreements) are reflected in the following table: +Cash Payments +Other Benefits +Name +Bonus +Payment +($)(1) +Salary and +Bonus +($)(2) +Option +Awards +($)(3) +Stock +Awards +($)(3) +Performance +Unit Awards +($)(4) +Other +Benefits +($)(5) +Total +($) +William Andrew Hendricks, Jr. +$ +2,187,500 +$ +6,756,439 +$ +— +$ +3,317,024 +$ +3,942,456 +$ +33,243 +$ +16,236,662 +C. Andrew Smith +$ +984,375 +$ +2,974,219 +$ +— +$ +801,969 +$ +815,850 +$ +24,200 +$ +5,600,613 +Mark S. Siegel +$ +2,794,044 +$ +3,137,626 +$ +— +$ +1,889,234 +$ +2,359,329 +$ +— +$ +10,180,233 +Kenneth N. Berns +$ +1,397,022 +$ +2,094,667 +$ +— +$ +1,254,845 +$ +1,523,844 +$ +— +$ +6,270,378 +Seth D. Wexler +$ +539,000 +$ +2,005,218 +$ +— +$ +925,754 +$ +622,650 +$ +27,703 +$ +4,120,325 +(1) +In the case of Messrs. Hendricks, Smith and Wexler, the assumed bonus is equal to the highest annual bonus paid in the three years prior to 2019. In the case of Messrs. Siegel and Berns, the assumed bonus payment is equal to the highest annual bonus paid from the time the CIC Agreements were entered into through December 31, 2019. +(2) +The assumed salary and bonus payment represents 3.0 times (in the case of Mr. Hendricks), 2.5 times (in the case of Messrs. Siegel, Smith and Wexler) or 2.0 times (in the case of Mr. Berns) of the sum of the 2019 salary in effect for each employee and the average of the annual bonuses earned by each employee for 2018, 2017 and 2016. Bonus amounts earned in 2019 were not considered in this calculation as they were not determined until after December 31, 2019. +36 +(3) +Each of the option and stock award agreements for the Named Executive Officers provide that unvested options and awards will vest upon a change in control. Amounts presented in the table represent the value of unvested option and stock awards using the market price of Patte rson-UTI common stock at December 31, 201 9 . Messrs. Hendricks, Siegel and Berns hold unvested options that would have vested if a change in control had occurred on December 31, 201 9 , but the exercise price was greater than the closing price. +(4) +Share settled performance units awarded to Messrs. Hendricks, Siegel and Berns in 2017, 2018 and 2019, and Mr. Smith and Mr. Wexler in 2018 and 2019, include a provision that upon a change in control as defined in the respective award agreements, the Named Executive Officer will receive an award of shares equal to the target amount set forth in each agreement. Amounts presented in the table represent the assumed award of the target number of shares if a change in control had occurred on December 31, 2019, valued at the December 31, 2019 closing price of Patterson-UTI common stock of $10.50 per share. +(5) +Messrs. Hendricks, Smith and Wexler participated in Patterson-UTI’s health and welfare plans as of December 31, 2019. The amounts presented represent Patterson-UTI’s portion of the premiums for three years in the case of Mr. Hendricks and 30 months in the case of Messrs. Wexler and Smith. No tax gross-up payments would have been payable to Messrs. Siegel or Berns under the terms of their CIC Agreements. +In the event of a termination of employment of Messrs. Siegel or Berns for any reason, including voluntary termination, such executive would be entitled to an amount in cash equal to his annual base salary at the time of such termination. Any such payment made by Patterson-UTI will reduce dollar for dollar any payment owed to such person that is reflected in the table above. In the case of Messrs. Hendricks, Smith or Wexler, if the executive’s employment was terminated by Patterson-UTI other than for cause or terminated by the executive for good reason (as defined in the Employment Agreement) and not in connection with a change-in-control, then the executive would be entitled to the same potential payments and benefits as set forth in the table above, except that Mr. Hendricks’ cash payment would be lower by $936,200, Mr. Smith’s cash payment would be lower by $421,275 and Mr. Wexler’s cash payment would be lower by $158,600 as a result of the calculation of the bonus payment for the year in which the termination occurred. +With respect to Messrs. Hendricks, Smith or Wexler, the foregoing severance benefits (other than the accrued obligations and benefit obligations) are conditioned on the executive’s execution of a release within 50 days of his termination that is not revoked during any applicable revocation period provided in such release. Their employment agreements also contain covenants and restrictions, including non-competition and non-solicitation provisions pursuant to which the executive will not be permitted to compete with Patterson-UTI in certain circumstances for a period of one year following termination of employment. +Indemnification Agreements +Patterson-UTI has entered into an indemnification agreement with each of its Named Executive Officers and each of its directors containing provisions that may require Patterson-UTI, among other things, to indemnify such executive officers and directors against liabilities that may arise by reason of their status or service as executive officers or directors (subject to certain exceptions) and to advance expenses incurred as a result of any proceeding against them as to which they could be indemnified. +CERTAIN TRANSACTIONS +Patterson-UTI has a written policy with respect to related person transactions. In accordance with this policy, related person transactions are reviewed by the Lead Director or the chair of the Audit Committee, each of whom has full delegated authority to approve, disapprove, ratify, amend, terminate or rescind any such transaction, or direct that such transaction be submitted to the Audit Committee or the full Board of Directors for consideration. In approving or disapproving related person transactions, the relevant facts and circumstances of the related person transaction are considered, including whether such transaction is in, or not inconsistent with, the best interest of Patterson-UTI and whether, in appropriate cases, such transaction is on commercial terms at least as favorable to Patterson-UTI as would otherwise be available to or from an unrelated third party or to Patterson-UTI’s employees generally. Related person transactions generally include transactions in an amount that exceeds $50,000 between Patterson-UTI or any of its subsidiaries and an executive officer, a director (or nominee to become director), an immediate family member of any of the foregoing or any entity in which any of the foregoing has a 10% or greater beneficial ownership interest or in which they are an executive officer, general partner, principal or engaged in a similar position. Certain related person transactions have been pre-approved under the terms of the policy, including, subject to certain exceptions and limitations, the sale to or purchase from Patterson-UTI of goods and services by entities related to directors in the ordinary course of business that are immaterial to Patterson-UTI and with respect to which the director has no direct economic interest or decision making authority. +37 +In connection with the acquisition by REMY Capital Partners III, L.P. (“REMY Capital”) of an ownership interest in UTI Energy Corp. in March 1995, REMY Capital succeeded to a registration rights agreement with UTI. As the successor-in-inter est to UTI, Patterson-UTI assumed this registration rights agreement pursuant to which REMY Capital has the right to require Patterson-UTI to use its reasonable efforts to register shares held by REMY Capital under the Securities Act of 1933, as amended. I n the event that such rights are exercised in connection with a primary offering proposed by Patterson-UTI (or a secondary offering with which Patterson-UTI agrees to participate), REMY Capital would bear its pro rata share of the costs of the offering, ot her than legal, accounting and printing costs, all of which Patterson-UTI would bear. In the event that REMY Capital elects to exercise such rights other than in connection with an offering in which Patterson-UTI participates, REMY Capital would bear all c osts of the offering. These rights continue so long as REMY Capital continues to own the Common Stock that it acquired in March 1995. As of the date of this proxy statement, REMY Capital continues to hold 605,000 shares of such Common Stock. +Mr. Siegel, Chairman of the Board of Patterson-UTI, is President and sole stockholder of REMY Investors, which is the general partner of REMY Capital. Mr. Berns, Executive Vice President and Chief Commercial Officer of Patterson-UTI, is an executive of REMY Investors. +38 +SECURITY OWNERSHIP OF CERTAIN +BENEFICIAL OWNERS AND MANAGEMENT +The following table sets forth, as of April 8, 2020, the stock ownership of (i) the Named Executive Officers, directors and Board nominees, individually, (ii) all directors, Board nominees and executive officers as a group and (iii) each person known by Patterson-UTI to be the beneficial owner of more than 5% of Common Stock. +Name of Beneficial Owner +Amount and +Nature of +Beneficial +Ownership +Percent +of Class +Beneficial Owners of more than 5% of Patterson-UTI’s Common Stock: +BlackRock, Inc. +19,704,929 +(1) +10.6 +% +The Vanguard Group +17,167,085 +(2) +9.2 +% +Dimensional Fund Advisors LP +13,711,625 +(3) +7.4 +% +Renaissance Technologies LLC +11,464,159 +(4) +6.2 +% +Massachusetts Financial Services Company +10,543,437 +(5) +5.7 +% +JPMorgan Chase & Co. +10,224,045 +(6) +5.5 +% +Directors and Named Executive Officers: +William Andrew Hendricks, Jr. +1,942,414 +(7) +1.0 +% +C. Andrew Smith +150,263 +(8) +* +Mark S. Siegel +3,595,627 +(9) +1.9 +% +Kenneth N. Berns +1,726,554 +(10) +* +Seth D. Wexler +238,794 +(11) +* +Charles O. Buckner +126,215 +(12) +* +Tiffany (TJ) Thom Cepak +82,439 +(13) +* +Michael W. Conlon +127,013 +(14) +* +Curtis W. Huff +332,817 +(15) +* +Terry H. Hunt +129,104 +(16) +* +Janeen S. Judah +52,023 +(17) +* +All current directors and executive officers as a group (12 persons) +8,824,768 +(18) +4.6 +% +* +indicates less than 1.0% +(1) +Based solely on a Schedule 13G/A filed by BlackRock, Inc. with the SEC on February 4, 2020. According to the report, BlackRock, Inc. has sole voting power with respect to 18,701,029 shares and sole dispositive power with respect to 19,704,929 shares. The address of the principal business office of BlackRock, Inc. is 55 East 52nd Street, New York, New York 10055. +(2) +Based solely on a Schedule 13G/A filed by The Vanguard Group with the SEC on February 12, 2020. According to the report, The Vanguard Group has sole voting power with respect to 98,169 shares, shared voting power with respect to 37,843 shares, sole dispositive power with respect to 17,056,179 shares and shared dispositive power with respect to 110,906 shares. The address of the principal business office of The Vanguard Group is 100 Vanguard Blvd., Malvern, Pennsylvania 19355. +(3) +Based solely on a Schedule 13G filed by Dimensional Fund Advisors LP with the SEC on February 12, 2020. According to the report, Dimensional Fund Advisors LP has sole voting power with respect to 13,435,839 shares and sole dispositive power with respect to 13,711,625 shares. The address of the principal business office of Dimensional Fund Advisors LP is Building One, 6300 Bee Cave Road, Austin, Texas 78746. +(4) +Based solely on a Schedule 13G filed by Renaissance Technologies LLC with the SEC on February 12, 2020. According to the report, Renaissance Technologies LLC has sole voting power with respect to 10,889,146 shares, sole dispositive power with respect to 11,365,936 shares and shared dispositive power with respect to 98,223 shares. The address of the principal business office of Renaissance Technologies LLC is 800 Third Avenue, New York, New York 10022. +(5) +Based solely on a Schedule 13G filed by Massachusetts Financial Services Company with the SEC on February 14, 2020. According to the report, Massachusetts Financial Services Company has sole voting power with respect to 10,441,302 shares and sole dispositive power with respect to 10,543,437 shares. The address of the principal business office of Massachusetts Financial Services Company is 111 Huntington Avenue, Boston, Massachusetts 02199. +(6) +Based solely on a Schedule 13G filed by JPMorgan Chase & Co. with the SEC on January 27, 2020. According to the report, JPMorgan Chase & Co. has sole voting power with respect to 9,724,638 shares and sole dispositive power with respect to 10,224,045 shares. The address of the principal business office of JPMorgan Chase & Co. is 383 Madison Avenue, New York, New York 10179. +39 +( 7 ) +Includes shares underlying stock options held by Mr. Hendricks that are presently exercisable to purchase 987,6 50 shares. Includes 5,403 shares of unvested restricted Common Stock held by Mr. Hendricks, over which he presently has voting power. Includes 78,138 shares underlying restricted stock units that will vest within 60 days. Does not include 545 , 960 shares underlying restricted stock units that will not vest within 60 days . +( 8 ) +Includes 21,966 shares underlying restricted stock units held by Mr. Smith that will vest within 60 days. Does not include 155,154 shares underlying restricted stock units that will not vest within 60 days. +( 9 ) +Mr. Siegel is the President and sole stockholder of REMY Investors, which is the general partner of REMY Capital Partners III, L.P. (“REMY Capital”). The Common Stock beneficially owned by Mr. Siegel includes 605,000 shares of Common Stock owned by REMY Capital. The Common Stock beneficially owned by Mr. Siegel also includes stock options held by Mr. Siegel that are presently exercisable to purchase 1,556,900 shares. Includes 4,323 shares of unvested restricted Common Stock held by Mr. Siegel, over which he presently has voting power. Includes 36,223 shares underlying restricted stock units that will vest within 60 days. Does not include 105,455 shares underlying restricted stock units that will not vest within 60 days. The Common Stock beneficially owned by Mr. Siegel includes 83,400 shares held in trust(s) for which he is the trustee. +( 10 ) +Includes shares underlying stock options held by Mr. Berns that are presently exercisable to purchase 943,300 shares. Includes 2,342 share s of unvested restricted Common Stock held by Mr. Berns, over which he presently has voting power. Includes 29,200 shares underlying restricted stock units that will vest within 60 days. Does not include 204,075 shares underlying restricted stock units that will not vest within 60 days. The Common Stock beneficially owned by Mr. Berns includes 140,000 shares held in trust(s) for which he is the trustee. Does not include shares of Common Stock beneficially owned by REMY Investors. Mr. Berns disclaims beneficial ownership of such shares beneficially owned by REMY Investors. +( 11 ) +Includes 28,399 shares underlying restricted stock units held by Mr. Wexler that will vest within 60 days. Does not include 133,968 shares underlying restricted stock units that will not vest within 60 days. +( 12 ) +Includes shares underlying presently exercisable stock options held by Mr. Buckner to purchase 60,000 shares. Does not include 16,666 shares underlying unvested restricted stock units that will not vest within 60 days. The Common Stock beneficially owned by Mr. Buckner includes 27,000 shares held by CDT Investments, LP, a limited partnership for which he is the sole member of the sole general partner. +( 13 ) +Includes shares underlying presently exercisable stock options held by Ms. Cepak to purchase 30,000 shares. Does not include 16,666 shares underlying unvested restricted stock units that will not vest within 60 days. +(1 4 ) +Includes shares underlying presently exercisable stock options held by Mr. Conlon to purchase 50,000 shares. Does not include 16,666 shares underlying unvested restricted stock units that will not vest within 60 days. +(1 5 ) +Includes shares underlying presently exercisable stock options held by Mr. Huff to purchase 60,000 shares. Does not include 16,666 shares underlying unvested restricted stock units that will not vest within 60 days. +(1 6 ) +Includes shares underlying presently exercisable stock options held by Mr. Hunt to purchase 60,000 shares. Does not include 16,666 shares underlying unvested restricted stock units that will not vest within 60 days. +(1 7 ) +Does not include 16,666 shares underlying unvested restricted stock units held by Ms. Judah that will not vest within 60 days. +(1 8 ) +Includes shares underlying stock options that are presently exercisable to purchase 3,747,850 shares of Common Stock. Includes an aggregate of 12,068 shares of unvested restricted Common Stock held by certain directors and executive officers, over which they presently have voting power. Includes 222,325 shares underlying restricted stock units held by certain directors and executive officers that will vest within 60 days. Does not include 1,378,576 shares underlying restricted stock units held by such individuals that will not vest within 60 days. +Except as stated herein, each stockholder has sole voting and investment power with respect to Common Stock included in the above table. There are no arrangements known to Patterson-UTI which may result in a change in control. The business address of each of our directors and officers is 10713 West Sam Houston Parkway North, Suite 800, Houston, Texas 77064. +40 +Equity Compensation Plan Information +Equity compensation plan information as of December 31, 2019 follows: +Equity Compensation Plan Information +Plan Category +Number of +Securities to +be Issued upon +Exercise of +Outstanding +Options, +Warrants and +Rights +Weighted - +Average +Exercise +Price of +Outstanding +Options, +Warrants and +Rights +Number of +Securities +Remaining +Available +for Future +Issuance +under Equity +Compensation +Plans +(Excluding +Securities +Reflected +in Column(a)) +(a) +(b) +(c) +Equity compensation plans approved by security holders(1) +4,766,150 +$ +20.62 +8,331,502 +Equity compensation plans not approved by security holders +— +$ +— +— +Total +4,766,150 +$ +20.62 +8,331,502 +(1) +The Amended and Restated 2014 Long-Term Incentive Plan, as amended, provides for awards of incentive stock options, non-incentive stock options, tandem and freestanding stock appreciation rights, restricted stock awards, other stock unit awards, performance share awards, performance unit awards and dividend equivalents to key employees (as defined in the Amended and Restated 2014 Long-Term Incentive Plan, as amended), officers and directors, which are subject to certain vesting and forfeiture provisions. All options are granted with an exercise price equal to or greater than the fair market value of the common stock at the time of grant. The vesting schedule and term are set by the Compensation Committee of the Board of Directors, except that the Board has the same power as the Compensation Committee with respect to awards to directors. All securities remaining available for future issuance under equity compensation plans approved by security holders in column (c) are available under this plan. In addition to the Amended and Restated 2014 Long-Term Incentive Plan, as amended, this Plan category also includes the 2005 Long-Term Incentive Plan. In connection with the approval of the Amended and Restated 2014 Long-Term Incentive Plan, the Board of Directors approved a resolution that no further options, restricted stock or other awards would be granted under any equity compensation plan, other than the Amended and Restated 2014 Long-Term Incentive Plan. Options granted under the 2005 Long-Term Incentive Plan typically vested over one year for non-employee directors and three years for employees. All options were granted with an exercise price equal to the fair market value of the related common stock at the time of grant. +41 +AUDIT COMMITTEE REPOR T +The following report of the Audit Committee does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other Patterson-UTI filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent Patterson-UTI specifically incorporates this report by reference therein. +The Audit Committee members are Mses. Cepak (chairwoman) and Judah and Messrs. Buckner, Huff and Hunt, each of whom is independent within the meaning of applicable rules under the Exchange Act and within the meaning of the Nasdaq listing standards. The Board has determined that Ms. Cepak and Messrs. Buckner and Huff are “audit committee financial experts” within the meaning of applicable SEC rules. +The Audit Committee oversees management’s conduct of Patterson-UTI’s accounting and financial reporting process, including review of: (i) financial reports and other financial information provided by Patterson-UTI to the public and government/regulatory bodies, (ii) Patterson-UTI’s system of internal control over financial reporting, and (iii) the annual independent audit of Patterson-UTI’s consolidated financial statements and internal control over financial reporting. +The Audit Committee’s role is one of review, and it recognizes that Patterson-UTI’s management is responsible for preparing Patterson-UTI’s consolidated financial statements and the independent auditors are responsible for auditing those financial statements. In fulfilling its review and oversight responsibilities, the Audit Committee reviewed with management the audited financial statements included in Patterson-UTI’s Annual Report on Form 10-K for the year ended December 31, 2019, including a discussion of the quality, not just the acceptability, of the accounting principles used, the reasonableness of significant judgments made by management, and the clarity of disclosures provided in the financial statements. The Audit Committee also discussed with management the basis for their assertion that Patterson-UTI maintained effective internal control over financial reporting as of December 31, 2019. +The Audit Committee discussed with Patterson-UTI’s independent registered public accounting firm (PricewaterhouseCoopers LLP) the overall scope and plans for their integrated audit. The Audit Committee met with PricewaterhouseCoopers LLP, with and without management present, to discuss the results of their integrated audit, their evaluation of Patterson-UTI’s internal control over financial reporting and the overall quality of Patterson-UTI’s financial reporting. The Audit Committee also reviewed with PricewaterhouseCoopers LLP their judgments as to the quality, not just the acceptability, of Patterson-UTI’s accounting principles and discussed such other matters as are required by the applicable requirements of the Public Company Accounting Oversight Board and the SEC. +The Audit Committee has received and reviewed the written disclosures and the letter from PricewaterhouseCoopers LLP required by the Public Company Accounting Oversight Board regarding their independence, and their communications with the Audit Committee concerning independence. +Taking the foregoing into consideration, the undersigned Audit Committee members recommended to the Board of Directors that the Board approve the inclusion of Patterson-UTI’s audited financial statements and management’s report on internal control over financial reporting in the Annual Report on Form 10-K for the fiscal year ended December 31, 2019. +Audit Committee of the Board of Directors: +Tiffany (TJ) Thom Cepak, Chairwoman +Charles O. Buckner +Curtis W. Huff +Terry H. Hunt +Janeen S. Judah +42 +PricewaterhouseCoopers LLP Fees for Fiscal Years 201 9 and 201 8 +In 2019 and 2018, Patterson-UTI and its subsidiaries incurred fees for services provided by PricewaterhouseCoopers LLP. +Description +Fees Incurred in +Fiscal Year +2019 +Fees Incurred in +Fiscal Year +2018 +Audit fees +$ +2,742,330 +$ +2,110,889 +Audit-related fees +136,000 +240,000 +Tax fees +65,000 +96,500 +All other fees +2,893 +2,893 +Total +$ +2,946,223 +$ +2,450,282 +The Audit Committee appoints the independent registered public accounting firm. The Audit Committee or Ms. Cepak, as Chairwoman of the Audit Committee, approves all other engagements of the independent registered public accounting firm in advance. In the event Ms. Cepak approves any such engagement, she discusses such approval with the Audit Committee at its next meeting. +“Audit fees” relate to audit services of PricewaterhouseCoopers LLP for fiscal 2019 and 2018 consisting of the integrated audit of Patterson-UTI’s consolidated financial statements and internal control over financial reporting, and quarterly reviews of Patterson-UTI’s interim financial statements and the audits of certain subsidiaries. “Audit-related fees” for 2018 and 2019 relate to the performance of certain procedures in connection with the filing of various registration statements and Exchange Act reports and the offer and sale of our 3.95% Senior Notes due 2028 and our 5.15% Senior Notes due 2029. “Tax fees” include federal, state, local and foreign tax compliance and related matters. “All other fees” consists of annual subscription fees to software products. The Audit Committee, Ms. Cepak, as Chairwoman of the Audit Committee, or Mr. Buckner, as former Chairman of the Audit Committee, approved in advance all of the services described above. +The Audit Committee has discussed the non-audit services provided by PricewaterhouseCoopers LLP and the related fees and has considered whether those services and fees are compatible with maintaining auditor independence. The Audit Committee determined that such non-audit services were consistent with the independence of PricewaterhouseCoopers LLP. +OTHER MATTERS +Other Business +As of the date of this proxy statement, management of Patterson-UTI was not aware of any matter to be presented at the Meeting other than as set forth herein. If any other matters are properly brought before the Meeting, however, the shares represented by valid proxies will be voted with respect to such matters in accordance with the judgment of the persons voting them. +Stockholder Proposals for 2021 Annual Meeting +Proposals for Inclusion in the Proxy Statement. Pursuant to Rule 14a-8 under the Exchange Act, stockholders may present proper proposals for inclusion in Patterson-UTI’s proxy statement and for consideration at the next annual meeting of stockholders by submitting their proposals to Patterson-UTI in a timely manner. In order to be included in Patterson-UTI’s proxy statement for the 2021 annual meeting of stockholders, proposals from stockholders must be received by Patterson-UTI no later than December 14, 2020, and must otherwise comply with the requirements of Rule 14a-8. +43 +Proposals or Director Nominations not Included in the Proxy Statement. Patterson-U TI’s bylaws establish an advance notice procedure with regard to stockholder proposals and director nominations not included in Patterson-UTI’s proxy statement. For director nominations not included in Patterson-UTI’s proxy statement or stockholder proposa ls to be properly brought before the 202 1 annual meeting by a stockholder, the stockholder must be a stockholder of record on the date of the giving of the notice provided for in Patterson-UTI’s bylaws and on the record date for the determination of stockh olders entitled to vote at such annual meeting and must give timely notice of such business in writing to the Secretary of Patterson-UTI. To be timely with respect to the 202 1 annual meeting of stockholders, a stockholder’s notice must be delivered to or m ailed and received by the close of business at Patterson-UTI’s principal executive offices not earlier than February 4 , 202 1 and not later than March 6 , 202 1 , assuming the date of the 202 1 annual meeting is not changed by more than 30 days before or after the anniversary date of the 20 20 annual meeting . A stockholder’s notice to the Secretary of Patterson-UTI shall contain certain information specified in Patterson-UTI’s bylaws regarding th e stockholder and the proposed nominee or stockholder proposal . See Article I, Section 8 of Patterson-UTI’s bylaws. +Proxy Access Procedures. Patterson-UTI’s bylaws permit a stockholder, or group of up to 20 stockholders, owning continuously for at least three years shares of Patterson-UTI stock representing an aggregate of at least 3% of our outstanding shares, to nominate and include in our proxy materials director nominees constituting up to the greater of two or 20% of our Board, provided that the stockholder(s) and nominee(s) satisfy the requirements in Patterson-UTI’s bylaws. See Article I, Section 11 of Patterson-UTI’s bylaws. Written notice of proxy access director nominees must be received by the close of business at Patterson-UTI’s principal executive offices not earlier than December 14, 2020 and not later than January 13, 2021, assuming the date of the 2021 annual meeting is not changed by more than 30 days before or after the anniversary date of the 2020 annual meeting. +Annual Report +A copy of Patterson-UTI’s annual report on Form 10-K accompanies this proxy statement only if you have requested that a copy of this proxy statement be mailed to you. The annual report on Form 10-K also is available electronically by following the instructions in the Notice. The annual report on Form 10-K is not incorporated into this proxy statement and is not considered proxy-soliciting material. +A copy of the annual report on Form 10-K, including the financial statements and financial statement schedules, but excluding exhibits, may be obtained by stockholders without charge by written request to the Secretary of Patterson-UTI at 10713 West Sam Houston Parkway North, Suite 800, Houston, Texas 77064 or by accessing it on Patterson-UTI’s website at www.patenergy.com in the investors section under the “Financial Information” link. Patterson-UTI will furnish the exhibits to Form 10-K upon request and upon receipt of a reproduction fee. +Delivery of Documents to Stockholders Sharing an Address +The SEC’s rules allow companies to send a single Notice or single copy of annual reports, proxy statements, prospectuses and other disclosure documents to two or more stockholders sharing the same address, subject to certain conditions. These rules are intended to provide greater convenience for stockholders, and cost savings for companies, by reducing the number of duplicate documents that stockholders receive. If instructions for separate delivery have been received from any stockholder, Patterson-UTI will deliver promptly separate copies of the relevant disclosure materials. Similarly, if multiple copies of disclosure materials are being delivered to a single address, stockholders can request a single copy for future deliveries. Written requests should be submitted to the Secretary of Patterson-UTI at 10713 West Sam Houston Parkway North, Suite 800, Houston, Texas 77064. Requests may also be made by calling Investor Relations at (281) 765-7100. +44 +0000413080_2 R1.0.1.18 Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice & Proxy Statement and Form 10-K, are available at www.proxyvote.com PATTERSON-UTI ENERGY, INC. Annual Meeting of Stockholders June 6, 2019 10:00 AM This proxy is solicited by the Board of Directors The undersigned stockholder of Patterson-UTI Energy, Inc. (the "Company") hereby appoints Mark S. Siegel, William Andrew Hendricks, Jr. and C. Andrew Smith and each of them, proxies to the undersigned, each with full power to act without the other and with full power of substitution, to vote all of the shares which the undersigned is entitled to vote at the annual meeting of stockholders of the Company to be held Thursday, June 6, 2019, at 10:00 a.m., Central Time, at our corporate headquarters, located at 10713 W. Sam Houston Parkway North, Suite 125, Houston, Texas, 77064, and at any and all adjournments or postponements thereof, with the same force and effect as if the undersigned were personally present. The undersigned hereby instructs the above-named proxies to vote the shares represented by this proxy in the manner as directed for the undersigned on the reverse side of this proxy card. If no directions are made, the proxies will vote “FOR” the nominees for directors, “FOR” the approval of the amendment to the Patterson-UTI Energy, Inc. Amended and Restated 2014 Long-Term Incentive Plan, “FOR” the ratification of the selection of PricewaterhouseCoopers LLP and “FOR” the approval of the advisory resolution on executive compensation, as set forth on the reverse side. If any other matter should be presented properly, this proxy will be voted in accordance with the discretion of the above-named proxies. Continued and to be marked, dated and signed on reverse side \ No newline at end of file diff --git a/raw/proxies/0000889900/0001564590-20-016287/proxy_rpt.txt b/raw/proxies/0000889900/0001564590-20-016287/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..e69de29bb2d1d6434b8b29ae775ad8c2e48c5391 diff --git a/raw/proxies/0000889900/0001564590-21-018510/proxy.txt b/raw/proxies/0000889900/0001564590-21-018510/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..f87e9d1e68dd0d0b2c4b9b4f07ad3f0703a706f9 --- /dev/null +++ b/raw/proxies/0000889900/0001564590-21-018510/proxy.txt @@ -0,0 +1,2306 @@ +DEF 14A +1 +pten-def14a_20210603.htm +DEF 14A +pten-def14a_20210603.htm +V +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +Washington, D.C. 20549 +SCHEDULE 14A INFORMATION +Proxy Statement Pursuant to Section 14(a) of the +Securities Exchange Act of 1934 +(Amendment No. ) +Filed by the Registrant ☒ +Filed by a Party other than the Registrant ☐ +Check the appropriate box: +☐ +Preliminary Proxy Statement +☐ +Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +☒ +Definitive Proxy Statement +☐ +Definitive Additional Materials +☐ +Soliciting Material under Rule 14a-12 +PATTERSON-UTI ENERGY, INC. +(Name of registrant as specified in its charter) +(Name of person(s) filing proxy statement, if other than the registrant) +Payment of Filing Fee (Check the appropriate box): +☒ +No fee required. +☐ +Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. +(1) +Title of each class of securities to which transaction applies: +(2) +Aggregate number of securities to which transaction applies: +(3) +Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): +(4) +Proposed maximum aggregate value of transaction: +(5) +Total fee paid: +☐ +Fee paid previously with preliminary materials. +☐ +Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. +(1) +Amount Previously Paid: +(2) +Form, Schedule or Registration Statement No.: +(3) +Filing Party: +(4) +Date Filed: +10713 West Sam Houston Parkway North, Suite 800 +Houston, Texas 77064 +(281) 765-7100 +April 12, 2021 +Dear Stockholder: +We cordially invite you to attend Patterson-UTI Energy, Inc.’s annual stockholders’ meeting. The annual meeting will be held Thursday, June 3, 2021, at 10:00 a.m., Central Time, at our corporate headquarters, located at 10713 W. Sam Houston Parkway North, Suite 125, Houston, Texas 77064 . +We are pleased to take advantage of Securities and Exchange Commission rules that allow us to furnish proxy materials to our stockholders on the Internet. We believe that posting these materials on the Internet enables us to provide stockholders with the information that they need quickly, while lowering our costs of printing and delivery and supporting our sustainability efforts. We are mailing to most of our stockholders a Notice of Internet Availability of Proxy Materials, rather than a paper copy of our proxy materials. The notice contains instructions on how to access the proxy materials, vote and obtain, if you so desire, a paper copy of the proxy materials. +Your vote is important to us. Whether or not you plan to attend the Annual Meeting in person, we urge you to promptly vote your shares by using the Internet or telephone, or if the accompanying proxy statement was mailed to you, by completing, signing, dating and returning your proxy card as soon as possible in the enclosed postage prepaid envelope. +Thank you for your support. +Sincerely, +Curtis W. Huff +Chairman of the Board +W illiam A ndrew H endricks , J r . +President, Chief Executive Officer and Director +PATTERSON-UTI ENERGY, INC. +10713 West Sam Houston Parkway North, Suite 800 +Houston, Texas 77064 +NOTICE OF 2021 ANNUAL MEETING OF STOCKHOLDERS +To Be Held June 3, 2021 +The 2021 annual meeting of the stockholders of Patterson-UTI Energy, Inc., a Delaware corporation (“Patterson-UTI”), will be held Thursday, June 3, 2021, at 10:00 a.m., Central Time, at our corporate headquarters, located at 10713 W. Sam Houston Parkway North, Suite 125, Houston, Texas 77064 (the “Meeting”), for the following purposes: +• +to elect six directors named in this proxy statement to the Board of Directors of Patterson-UTI to serve until the next annual meeting of the stockholders or until their respective successors are elected and qualified; +• +to approve Patterson-UTI’s 2021 Long-Term Incentive Plan; +• +to ratify the selection of PricewaterhouseCoopers LLP as the independent registered public accounting firm of Patterson-UTI for the fiscal year ending December 31, 2021; +• +to approve, on an advisory basis, Patterson-UTI’s compensation of its named executive officers; and +• +to transact such other business as may properly come before the Meeting or any adjournment or postponement thereof. +Stockholders of record at the close of business on April 6, 2021 are entitled to notice of and to vote at the Meeting and any adjournment or postponement thereof. +Your vote is important to us. Whether or not you plan to attend the Meeting in person, we urge you to promptly vote your shares by using the Internet or telephone, or if the accompanying proxy statement was mailed to you, by completing, signing, dating and returning your proxy card as soon as possible in the enclosed postage prepaid envelope. +By order of the Board of Directors +S ETH D. W EXLER +Senior Vice President, General Counsel and Secretary +April 12, 2021 +Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting +to Be Held on June 3, 2021 +The proxy statement and annual report to stockholders are available at www.proxyvote.com . +PATTERSON-UTI ENERGY, INC. +10713 West Sam Houston Parkway North, Suite 800 +Houston, Texas 77064 +PROXY STATEMENT +ANNUAL MEETING OF STOCKHOLDERS +To Be Held June 3, 2021 +General Information About the Annual Meeting and Voting +The Board of Directors (the “Board” or “Board of Directors”) of Patterson-UTI Energy, Inc., a Delaware corporation (“Patterson-UTI” or the “Company”), has made this proxy statement and its 2020 annual report available to you on the Internet or, upon your request has delivered printed versions of these materials to you by mail beginning on or about April 12, 2021. Patterson-UTI is furnishing this proxy statement in connection with the solicitation by the Board of Directors of proxies to be voted at the 2021 annual meeting of stockholders of Patterson-UTI (the “Meeting”). The Meeting will be held Thursday, June 3, 2021, at 10:00 a.m., Central Time, at our corporate headquarters, located at 10713 W. Sam Houston Parkway North, Suite 125, Houston, Texas 77064 , or at any adjournment or postponement thereof . +The Notice of Internet Availability of Proxy Materials (the “Notice”) was mailed to each of Patterson-UTI’s stockholders (other than those who previously requested electronic delivery) entitled to vote at the Meeting on or about April 12, 2021. +Pursuant to the “notice and access” rules adopted by the Securities and Exchange Commission (the “SEC”), Patterson-UTI has elected to provide stockholders access to its proxy materials on the Internet. Accordingly, Patterson-UTI sent a Notice to all of its stockholders as of the record date. The Notice includes instructions on how to access Patterson-UTI’s proxy materials on the Internet and how to request a printed copy of these materials. In addition, by following the instructions in the Notice, stockholders may request to receive proxy materials in printed form by mail or electronically by email on an ongoing basis. +Choosing to receive your future proxy materials by email will save us the cost of printing and mailing documents to you and will support our sustainability efforts. If you choose to receive future proxy materials by email, you will receive an email next year with instructions containing a link to those materials and a link to the proxy voting site. Your election to receive proxy materials by email will remain in effect until you terminate such election. +If your shares are registered directly in your name with our transfer agent, Continental Stock Transfer & Trust Company, you are considered the “stockholder of record” with respect to those shares, and the Notice was sent directly to you. +If your shares are held in an account at a brokerage firm, bank, broker-dealer, or other similar organization, then you are the beneficial owner of shares held in “street name,” and the Notice was forwarded to you by that organization. As a beneficial owner, you have the right to direct that organization on how to vote the shares held in your account. +Whether you are a “stockholder of record” or hold your shares in “street name,” you may direct your vote without attending the Meeting in person. +If you are a stockholder of record, you may vote by using the Internet or telephone by following the instructions in the Notice. If you request printed copies of the proxy materials by mail, you may also vote by completing, dating, signing and returning your proxy card by mail. You should sign your name exactly as it appears on the proxy card. If you are signing in a representative capacity (for example, as guardian, executor, trustee, custodian, attorney or officer of a corporation), you should indicate your name and title or capacity. +If you are the beneficial owner of shares held in street name, you may be eligible to vote your shares electronically using the Internet or telephone by following the instructions in the Notice. If you request printed copies of the proxy materials by mail, you may also vote by signing the voter instruction card provided by your brokerage firm, bank, broker-dealer, or other similar organization and returning it by mail. If you provide specific voting instructions by mail, telephone or the Internet, your shares will be voted by your brokerage firm, bank, broker-dealer, or similar organization as you have directed. +1 +Properly submitted proxies received either by mail, Internet, telephone or in person in time to be counted for the Meeting will be voted as you have directed in your proxy, unless you revoke your proxy in the manner provided below. As to any matter for which you give no direction in your proxy, your shares will be voted as follows: +• +“FOR” the election of all of the nominees to the Board of Directors named in this proxy statement; +• +“FOR” the approval of Patterson-UTI’s 2021 Long-Term Incentive Plan; +• +“FOR” the ratification of PricewaterhouseCoopers LLP as the independent registered public accounting firm of Patterson-UTI for the fiscal year ending December 31, 2021; +• +“FOR” the approval, on an advisory basis, of Patterson-UTI’s compensation of its named executive officers; and +• +“FOR” or “AGAINST” any other proposals that may be properly submitted at the Meeting at the discretion of the persons named in the proxy. +If you are a stockholder of record, you may revoke your proxy before the proxy is voted by either: +• +submitting a new proxy with a later date, including a proxy submitted using the Internet or telephone, in time to be counted for the Meeting; +• +notifying the Secretary of Patterson-UTI in writing before the Meeting that you have revoked your proxy; or +• +attending the Meeting and voting in person. +If your shares are held in street name, you must obtain a proxy executed in your favor from the stockholder of record (that is, your brokerage firm, bank, broker-dealer or similar organization) to be able to vote at the Meeting. +The Board of Directors is making this solicitation. We have retained Georgeson LLC, 480 Washington Blvd., 26 th Floor, Jersey City, New Jersey 07310, for a fee of approximately $8,500 and the reimbursement of out of pocket costs and expenses, to assist in the solicitation of proxies on behalf of the Board. Patterson-UTI’s officers and other employees, without compensation other than regular compensation, may also solicit proxies on behalf of the Board by mail, email, the Internet, telephone, electronic means and personal interview. Patterson-UTI will pay all costs associated with this solicitation. +Shares Outstanding and Voting Rights +Only stockholders of record of Patterson-UTI’s common stock, $0.01 par value per share (the “Common Stock”), at the close of business on April 6, 2021 are entitled to notice of and to vote at the Meeting or any adjournment or postponement thereof. At the close of business on April 6, 2021, there were 187,789,871 shares of Common Stock issued and outstanding. Holders of record of Common Stock on April 6, 2021 will be entitled to one vote per share on all matters to properly come before the Meeting. A list of stockholders entitled to notice of and to vote at the Meeting will be made available at the Meeting and during regular business hours at the offices of Patterson-UTI Energy, Inc., 10713 West Sam Houston Parkway North, Suite 800, Houston, Texas 77064 for the ten day period prior to the Meeting for examination by any stockholder for any purpose germane to the Meeting. +A quorum is necessary to transact business at the Meeting. A majority of the shares of Common Stock outstanding on April 6, 2021 will constitute a quorum. The shares held by each stockholder who attends the Meeting in person, signs and timely returns the form of proxy, or properly votes using the Internet or telephone will be counted for purposes of determining the presence of a quorum at the Meeting. +“Broker non-votes” and abstentions will be considered present at the Meeting for the purpose of determining a quorum. Broker non-votes occur when nominees, such as brokerage firms, banks, broker-dealers, or other similar organizations holding shares on behalf of the beneficial owners, are prohibited from exercising discretionary voting authority for beneficial owners who have not provided voting instructions. If you do not give instructions to your bank, brokerage firm or other agent, the bank, brokerage firm or other agent will nevertheless be entitled to vote your shares of Common Stock in its discretion on “routine matters” and may give or authorize the giving of a proxy to vote the shares of Common Stock in its discretion on such matters. The ratification of an independent registered public accounting firm is generally considered a routine matter, whereas the election of directors, the approval of Patterson-UTI’s 2021 Long-Term Incentive Plan and the advisory approval of executive compensation are not considered routine matters. For these reasons, please promptly vote in accordance with the instructions provided by your brokerage firm, bank, broker-dealer, or other similar organization. +2 +PROPOSAL NO. 1 +ELECTION OF DIRECTORS +Directors are elected to serve until the next annual meeting of stockholders and until their successors are elected and qualified. Under Delaware law and Patterson-UTI’s bylaws, the affirmative vote of a plurality of shares present in person or represented by proxy at the meeting at which a quorum is present is required for the election of directors. +The enclosed form of proxy provides a means for you to either: +• +vote “FOR” the election of the nominees to the Board of Directors listed below, +• +withhold authority to vote for one or more of the nominees, or +• +withhold authority to vote for all of the nominees. +The Board of Directors recommends that you vote “FOR” all of the nominees. Unless you give contrary instructions in your proxy, your proxy will be voted “FOR” the election of all of the nominees to the Board of Directors. If any nominee should become unable or unwilling to accept the nomination or election, the person acting under the proxy will vote for the election of such other person as the Board of Directors may recommend. The Board has no reason, however, to believe that any of the nominees will be unable or unwilling to serve if elected. +Because directors are elected by a plurality vote, shares as to which a stockholder withholds authority to vote and broker non-votes will not affect the outcome of the election, although a broker non-vote will be counted for purposes of establishing a quorum. +Our corporate governance guidelines require that if a director receives in an uncontested election a greater number of “withhold” votes than votes cast “for” his or her election, the Nominating and Corporate Governance Committee of the Board of Directors will undertake a prompt evaluation of the appropriateness of the director’s continued service on the Board of Directors. In performing this evaluation, the Nominating and Corporate Governance Committee will review all factors it deems relevant, including the stated reasons why votes were withheld, the director’s length of service, his or her past contributions to Patterson-UTI and the availability of other qualified candidates. The Nominating and Corporate Governance Committee will then make its recommendation to the Board. The Board of Directors will review the Nominating and Corporate Governance Committee’s recommendation and consider such further factors and information as it deems relevant. The Board of Directors will act on the Nominating and Corporate Governance Committee’s recommendation no later than 90 days following the date of the stockholders’ meeting. If the Board of Directors determines remedial action is appropriate, the director shall promptly take whatever action is requested by the Board. If the director does not promptly take the recommended remedial action or if the Board of Directors determines that immediate resignation is in the best interests of Patterson-UTI and its stockholders, the Board of Directors may accept the director’s resignation that will have been tendered as follows. Each director will, as a condition to his or her appointment or election as a director or nomination as a director, agree in writing to comply with the terms of Patterson-UTI’s majority voting policy and provide to the Board of Directors an irrevocable resignation that will be effective upon (i) the failure to receive the required vote at the next annual meeting at which such director faces re-election and (ii) the Board of Directors’ acceptance of such resignation. +Set forth below is the name, age, position and a brief description of the business experience during at least the past five years of each of the nominees to Patterson-UTI’s Board of Directors, as well as specific qualifications, attributes and skills of such member that were identified by the Nominating and Corporate Governance Committee when such member was nominated to serve on the Board of Directors. Each current member of Patterson-UTI’s Board of Directors is a nominee for election to the Board of Directors. There are no arrangements or understandings between any person and any of the directors pursuant to which such director was selected as a nominee for election at the Meeting. There are no family relationships among any of the directors or executive officers of Patterson-UTI. +Name +Age +Position +Director Since +Curtis W. Huff +63 +Chairman of the Board and Director +2001 +William A. Hendricks, Jr. +56 +President and Chief Executive Officer and Director +2017 +Tiffany (TJ) Thom Cepak +48 +Director +2014 +Michael W. Conlon +74 +Director +2012 +Terry H. Hunt +72 +Director +2003 +Janeen S. Judah +61 +Director +2018 +3 +The following charts show a snapshot of the average tenure, average age and gender diversity of the six nominees for election to our Board of Directors. +When considering whether directors and nominees have the experience, qualifications, attributes and skills, taken as a whole, to enable the Board of Directors to satisfy its oversight responsibilities effectively in light of Patterson-UTI’s business and structure, the Nominating and Corporate Governance Committee and the Board of Directors focused primarily on the information discussed in each of the directors’ individual biographies set forth below. +Curtis W. Huff — Mr. Huff has served as Chairman of the Board of Patterson-UTI since June 2020, as a director of Patterson-UTI since May 2001 and served as a director of UTI from 1997 to May 2001. Mr. Huff is owner and Chairman of Freebird Partners, a private investment firm created in 2002 that is focused on oilfield service companies and technology. Mr. Huff co-founded Intervale Capital, an oilfield service private equity firm, in 2006 and served as a Managing Director from 2006 to 2012, when he sold his interest in the firm. Mr. Huff also serves as Chairman of Impact Fluid Solutions LP, which provides drilling and production solutions for oil and gas operators and fluid companies. Mr. Huff also serves as a director at various of Freebird’s portfolio companies. Mr. Huff served as the President and Chief Executive Officer of Grant Prideco, Inc., a provider of drill pipe and other drill stem products, from February 2001 to June 2002. From January 2000 to February 2001, Mr. Huff served as Executive Vice President, Chief Financial Officer and General Counsel of Weatherford International, Inc., one of the world’s largest international oilfield services companies. He served as Senior Vice President and General Counsel of Weatherford from May 1998 to January 2000. Mr. Huff began his professional career in 1983 with the law firm of Norton Rose Fulbright US LLP where he specialized in corporate, securities and merger and acquisition matters. Mr. Huff was made a partner in that firm in 1989 where he served until 1998 when he joined Weatherford. Mr. Huff holds a Bachelor of Arts degree and J.D. from the University of New Mexico, where he graduated as a member of the Order of the Coif and cum laude, and a Masters of Law from New York University School of Law. Mr. Huff is the Chairman of the Board of Directors of the University of St. Thomas in Houston, Texas and is actively involved with various charities, including the Houston Food Bank. +The Board of Directors considered Mr. Huff’s background as an executive of publicly traded oilfield services companies and as an owner and manager of a private investment firm focused on the oilfield service industry. The Board noted his knowledge and experience in a broad range of oilfield products and services and his current and historical experience in managing operations in both the United States and internationally. The Board also considered Mr. Huff’s expertise and background with regard to accounting and legal matters, which, among other things, provides guidance to Patterson-UTI in assessing its corporate governance structure, policies and procedures. +William Andrew Hendricks, Jr. —Mr. Hendricks has served as President and Chief Executive Officer of Patterson-UTI since October 2012 and as a director of Patterson-UTI since June 2017. From April 2012 through September 2012, he served as Chief Operating Officer of Patterson-UTI. From May 2010 through March 2012, Mr. Hendricks served as President of Schlumberger Drilling & Measurements, a division of Schlumberger. Prior to that date, Mr. Hendricks worked for Schlumberger in various worldwide locations and capacities since 1988, including serving in numerous executive positions since 2003. Mr. Hendricks is a past Chair and member of the Executive Committee for the International Association of Drilling Contractors and a member of the Society of Petroleum Engineers. Mr. Hendricks holds a Bachelor of Science in Petroleum Engineering from Texas A&M University. +4 +The Board of Directors considered Mr. Hendricks’ more than 30 years of combined operational and managerial experience in the oil and gas industry. In addition, the Board noted his nearly seven years of service as Patterson-UTI’s President and Chief Executive Officer and nearly ten years of service in numerous executive positions with Schlumberger Limited, a global provider of oilfield services, including nearly two years as President of Schlumberger Drilling & Measurements. The Board further considered Mr. Hendricks’ significant experience with evaluating the drivers for macro trends in the oil and gas industry, as well as managing the cyclical nature of the oil and gas service business, which allows Mr. Hendricks to provide valuable input into the development and implementation of Patterson-UTI’s corporate strategy. In addition, the Board noted that Mr. Hendricks’ operational experience brings valuable knowledge to the oversight of achieving safe and efficient operations. The Board also considered Mr. Hendricks’ significant experience working in numerous worldwide locations, which allows him to provide valuable counsel regarding possible expansion into markets outside of North America. +Tiffany (TJ) Thom Cepak — Ms. Cepak has served as a director of Patterson-UTI since August 2014. Ms. Cepak has served as a director of Penn Virginia Corporation since September 2019 and as a director of California Resources Corporation since October 2020. Ms. Cepak served as the Chief Financial Officer of Energy XXI Gulf Coast, Inc. from August 2017 to October 2018. Ms. Cepak served as the Chief Financial Officer of KLR Energy (and, subsequent to its business combination, Rosehill Resources Inc.) from January 2015 to June 2017. Ms. Cepak served as a director of Yates Petroleum Corporation, a privately owned, independent oil and gas exploration and production company, from October 2015 to October 2016. Ms. Cepak served four years as the Chief Financial Officer of EPL Oil & Gas, Inc., and was further appointed Executive Vice President in January 2014, and she served in those roles until June 2014, when EPL was sold. Ms. Cepak began her career with EPL as a Senior Asset Management Engineer, a position she held until she was appointed Director of Corporate Reserves in September 2001. Ms. Cepak was named EPL’s Director of Investor Relations in April 2006 and Vice President, Treasurer and Investor Relations in July 2008. In July 2009, Ms. Cepak was designated as EPL’s Principal Financial Officer and, in September 2009, she was appointed Senior Vice President. Ms. Cepak has more than 20 years of energy industry experience and prior to joining EPL, she was a Senior Reservoir Engineer with Exxon Production Company and ExxonMobil Company with operational roles including reservoir engineering and subsurface completion engineering for numerous offshore Gulf of Mexico properties. Ms. Cepak holds a B.S. in Engineering from the University of Illinois and a Masters of Business Administration in Management with a concentration in Finance from Tulane University. +The Board of Directors considered Ms. Cepak’s more than 20 years of operational and financial experience in the energy industry. The Board noted her service in various operational roles, including as a reservoir engineer for a major oil and gas exploration and production company. The Board also noted Ms. Cepak’s executive management experience, including most recently as chief financial officer of a publicly traded independent oil and gas exploration and production company, which allows her to provide Patterson-UTI with valuable insight on financial and strategic matters. The Board also considered Ms. Cepak’s diversity of perspective, which is exemplified by her recognition in 2018 as one of Oil and Gas Investor’s 25 Influential Women in Energy. +Michael W. Conlon — Mr. Conlon has served as a director of Patterson-UTI since September 2012. Mr. Conlon retired as a partner of the law firm, Norton Rose Fulbright US LLP, in January 2012 after 40 years with the firm. Mr. Conlon specialized in corporate, securities and merger and acquisition matters. Mr. Conlon was partner-in-charge of the firm’s Houston office from 2007 to 2011, was co-partner-in-charge from 2001 to 2007 and partner-in-charge of its Washington, D.C. office from 1992 to 1998. Mr. Conlon retired in February 2019 from his position as an Advisory Director to Tailored Brands, Inc., a specialty retailer of men’s apparel and international supplier of corporatewear, and an NYSE listed company. Mr. Conlon holds a Bachelor of Arts degree in Economics from Catholic University of America, where he graduated magna cum laude and as a member of Phi Beta Kappa, and a Juris Doctorate from the Duke University School of Law, where he graduated as a member of the Order of the Coif. +The Board of Directors considered Mr. Conlon’s more than 40 years of experience handling corporate, securities and mergers and acquisition matters as a lawyer with an international law firm, as well as his service in a number of management roles throughout his tenure at the firm. The Board noted Mr. Conlon’s experience in representing numerous public companies, including Patterson-UTI, and other energy services companies, allows him to provide valuable insight on legal, governance and regulatory issues facing Patterson-UTI. +5 +Terry H. Hunt — Mr. Hunt has served as a director of Patterson-UTI since April 2003 and served as a director of UTI from 1994 to May 2001. Mr. Hunt is an energy consultant and retired senior natural gas and electric utility executive. Mr. Hunt served as Senior Vice President — Strategic Planning of PPL Corporation, an international energy and utility holding company, from 1998 to 2000. Mr. Hunt served as the President and Chief Executive Officer of Penn Fuel Gas, Inc., a Pennsylvania-based natural gas and propane distribution company, from 1992 to 1999. Previously, Mr. Hunt was President of Carnegie Natural Gas and Apollo Gas Company, both Appalachian natural gas distribution companies. He also previously served in senior management positions in natural gas project and venture development, oil and natural gas exploration and development evaluation and operations and major production facilities construction with Texas Oil & Gas Corp. and Atlantic Richfield. Mr. Hunt holds a Bachelor of Engineering degree from the University of Saskatchewan, Canada and a Masters of Business Administration from Southern Methodist University. +The Board of Directors considered Mr. Hunt’s more than 25 years of experience covering most phases of the upstream oil and natural gas industry in the United States and Canada, including the evaluation of exploration and development programs, oil and natural gas production and pipeline operations, and project development and major production facility construction. This experience and background provides Patterson-UTI with an invaluable perspective of the oil and natural gas industry and its customers. In addition, Mr. Hunt’s many years of senior executive experience leading natural gas distribution, storage and marketing companies provides insight into the management of multi-faceted businesses and the markets for natural gas in North America. +Janeen S. Judah — Ms. Judah has served as a director of Patterson-UTI since April 2018. Ms. Judah has served as a director of the general partner of Crestwood Equity Partners LP since November 2018. Ms. Judah has also served as a director for privately held Aethon Energy III, LLC since June 2019, and as a member of the University Lands Advisory Board since August 2020. Ms. Judah served as a director of Jagged Peak Energy Inc. from April 2019 to January 2020, when Jagged Peak was acquired by Parsley Energy. Ms. Judah served as the President of the Society of Petroleum Engineers from September 2016 to October 2017 while on secondment from Chevron, and as a member of the Board of Directors of the Society of Petroleum Engineers from 2003 to 2006 and from 2012 to 2018. Ms. Judah held numerous leadership positions at Chevron, including general manager for Chevron’s Southern Africa business unit from August 2010 to September 2016, president of Chevron Environmental Management Company from August 2007 to August 2010 and general manager of reservoir and production engineering for Chevron Energy Technology Company from June 2004 to August 2007. Before joining Chevron in 1998, she held various upstream petroleum engineering positions for Texaco and Arco, starting in Midland in 1981. Ms. Judah holds Bachelor of Science and Masters of Science degrees in petroleum engineering from Texas A&M University, a Masters of Business Administration from the University of Texas of the Permian Basin and a Juris Doctorate from the University of Houston Law Center. +The Board of Directors considered Ms. Judah’s more than 35 years of operational, managerial and environmental experience in the oil and gas industry. The Board noted her experience derived from oil and gas industry positions held involving significant operational and management responsibilities, including positions with Chevron and upstream petroleum engineering positions. The Board also noted Ms. Judah’s extensive international experience, including most recently as general manager for Chevron’s Southern Africa business unit, which allows her to provide Patterson-UTI with valuable insight on international and strategic matters. The Board also considered Ms. Judah’s service as the President of the Society of Petroleum Engineers from 2017 to 2018, as well as her diversity of perspective, which is exemplified by her recognition in 2018 as one of Oil and Gas Investor’s 25 Influential Women in Energy. +6 +Board Leadership Structure, Independent Chairman and Board Role in Risk Oversight +The Board evaluates its leadership structure and role in risk oversight on an ongoing basis. The decision on whether to combine or separate the Chairman and Chief Executive Officer (“CEO”) role is determined on the basis of what the Board considers to be best for Patterson-UTI at any given point in time. Patterson-UTI’s current Board leadership structure separates the role of Chairman and CEO, and our Chairman is an independent director. +The independent directors meet regularly in executive sessions at which only independent directors are present, and the Chairman chairs those sessions. The Chairman serves as a liaison between the employee directors and independent directors, consults with regard to Board and agenda items, and works with the chairpersons of Board committees as appropriate. +The Nominating and Corporate Governance Committee and the Board currently believe that the Board’s leadership structure, which includes the separation of the role of CEO and Chairman, is appropriate because it, among other things, provides for sufficient independence between the Board and management and for an independent director who provides board member leadership. +The Board has adopted Corporate Governance Guidelines, which can be accessed electronically in the “Governance” section of Patterson-UTI’s website at www.patenergy.com . The Guidelines describe one of the Board’s primary responsibilities as overseeing Patterson-UTI’s processes for assessing and managing risks. The Board discharges this responsibility, in part, through regular inquiries from the Chairman of the Board to management, periodic communications from management to the Board of Directors of particular risks and events, and discussions during Board meetings of general and specific risks to Patterson-UTI. +Meetings and Committees of the Board of Directors +The Board of Directors met eleven times during the year ended December 31, 2020. Each director attended, in person or by telephone, at least 75% of the aggregate of all meetings held by the Board and meetings of each committee on which such director served. A majority of the members of the Board of Directors are independent within the meaning of the Nasdaq Stock Market, Inc. (“Nasdaq”) listing standards. Specifically, the Board has determined that Messrs. Conlon, Huff and Hunt and Mses. Cepak and Judah are independent within the meaning of the Nasdaq listing standards. +The Board of Directors has established four standing committees: an Executive Committee, an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee. +The Executive Committee, which currently is composed of Messrs. Huff and Hendricks and Ms. Cepak, has the authority, to the extent permitted by applicable law, to act for the Board in all matters arising between regular or special meetings of the Board of Directors. The Executive Committee did not meet or take any action in 2020. +The Audit Committee members are Mses. Cepak (chair) and Judah, and Messrs. Huff and Hunt, each of whom is independent within the meaning of applicable rules under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and within the meaning of the Nasdaq listing standards. The Audit Committee oversees management’s execution of Patterson-UTI’s accounting and financial reporting process, including review of the financial reports and other financial information provided by Patterson-UTI to the public and government and regulatory bodies, Patterson-UTI’s system of internal accounting, Patterson-UTI’s financial controls, and the annual independent audit of Patterson-UTI’s financial statements and internal control over financial reporting. The Audit Committee also oversees compliance with Patterson-UTI’s codes of conduct and ethics and with legal and regulatory requirements. The Board has determined that Ms. Cepak and Mr. Huff are “audit committee financial experts” within the meaning of applicable SEC rules. The Audit Committee selects the independent registered public accounting firm to audit Patterson-UTI’s books and records and considers and acts upon accounting matters as they arise. The Board of Directors has adopted a written charter for the Audit Committee. The Audit Committee held five meetings during the year ended December 31, 2020. Please see “Audit Committee Report” elsewhere in this proxy statement. +The Compensation Committee members are Messrs. Hunt (chair), Conlon and Huff and Ms. Cepak, each of whom is independent as defined in the Nasdaq listing standards. Among other things, the Compensation Committee sets and administers the policies that govern the compensation of executive officers of Patterson-UTI and periodically reviews director compensation and recommends changes, as appropriate, to the Board of Directors for approval. The Board of Directors has adopted a written charter for the Compensation Committee. The Compensation Committee held five meetings during the year ended December 31, 2020. Please see “Compensation Discussion and Analysis” and “Compensation Committee Report” elsewhere in this proxy statement for further information about the Compensation Committee. +7 +The Nominating and Corporate Governance Committee members are Messrs. Conlon (chair) and Huff and Ms. Judah, each of whom is independent as defined in the Nasdaq listing standards. The purpose of the Nominating and Corporate Governance Committee is to, among other things, identify individuals qualified to become Board members, to recommend for selection by the Board director nominees for the annual meeting s of stockholders, to recommend nominees for Board committees, to review Patterson-UTI’s Code of Business Conduct and Corporate Governance Guidelines, to develop and continually make recommendations with respect to the best corporate governance principles and to oversee the annual review of the Board and management. The Nominating and Corporate Governance Committee is our primary governing body with oversight over sustainability issues and climate-related risks and opportunities . The Board of Directors has adopted a written charter for the Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee held four meetings during the year ended December 31, 20 20 . +Consideration of Director Nominees +On behalf of the Board, the Nominating and Governance Committee considers director nominees recommended by Patterson-UTI’s stockholders if the recommendations are made in accordance with all legal requirements, including applicable provisions of Patterson-UTI’s restated certificate of incorporation and bylaws. A stockholder’s notice to the Secretary of Patterson-UTI shall contain certain information specified in Patterson-UTI’s bylaws regarding the stockholder and the proposed nominee. See “Other Matters—Stockholder Proposals for 2022 Annual Meeting” and Article I, Section 8 and Article I, Section 11 of Patterson-UTI’s bylaws. +The Nominating and Corporate Governance Committee determines qualification criteria and procedures for the identification and recruitment of candidates for election to serve as directors of Patterson-UTI. The Nominating and Corporate Governance Committee relies on the knowledge and relationships of Patterson-UTI and its officers and directors, as well as third parties when it deems appropriate, to identify and evaluate nominees for director, including nominees recommended by stockholders. In evaluating a nominee for director, the Nominating and Corporate Governance Committee considers the nominee’s skills, expertise, industry and other knowledge, personal and professional ethics, integrity and values, sound business judgment and willingness to commit sufficient time to the Board and be committed to representing the long-term interests of Patterson-UTI’s stockholders. The Nominating and Corporate Governance Committee also reviews the individual performance and qualifications of each director who wishes to be considered for nomination to the Board. Although the Nominating and Corporate Governance Committee does not have a stand-alone policy with regard to consideration of diversity in identifying director nominees, it is required, in accordance with our Corporate Governance Guidelines, to consider diversity in professional background, experience, expertise (including as to financial matters) and perspective (including as to age, gender and ethnicity) with respect to the Board of Directors composition as a whole when evaluating a director nominee. +Board and Director Performance Assessments +The Nominating and Corporate Governance Committee annually reviews and evaluates the performance of the Board, each Committee of the Board, and each director in order to improve the effectiveness of the Board and each Committee of the Board. The Committee assesses the contributions of the Board as a whole and each of its Committees and identifies areas in which improvements may be made. The results of the evaluations are reviewed and discussed with the Board and its Committees, and recommendations are made, as appropriate, to the Board and its Committees. +The Nominating and Corporate Governance Committee also annually reviews the individual performance and qualifications of each director who wishes to be considered for nomination for reelection to the Board. +Continuing Education +Continuing education helps our directors strengthen their skills, deepen their understanding of our business and operations and stay current with emerging issues that affect our business, governance and compensation practices. It also helps directors keep abreast of governance developments and requirements and understand the issues we face in the context of our business. To further these goals , our Board’s continuing director education policy requires directors to participate in continuing education programs and reimburses directors for expenses incurred in connection with such education programs . +Succession Planning +The Board of Directors oversees processes and procedures to provide continuity of well-qualified executive leadership and to assess whether such leadership possesses the skill and talent to execute Patterson-UTI’s long-term business strategies. The Board of Directors reviews succession planning for the Chief Executive Officer and the senior executives tailored to reflect the Board’s standards for executive leadership and Patterson-UTI’s business strategy and vision. The succession planning addresses (i) both current and long-term needs of Patterson-UTI and establishes a +8 +process for identifying and assessing potential internal candidates; (ii) periodic review and assessment of readiness ; (iii) contingency planning for temporary absences of the Chief Executive Officer due to disability or other unexpected event; and (iv) long - term continuity planning for succession to the Chief Executive Officer position. +Political Contributions +Patterson-UTI has a policy prohibiting the contribution of company funds to political parties or organizations or to candidates for any public office or to influence the general public, or segments thereof, with respect to public elections or referenda. Patterson-UTI participates in certain trade organizations with purposes that include enhancement of the public image of our industry, education about the industry and issues that affect the industry and industry best practices and standards. Many of the trade organizations also engage in legislative or political activity related to matters that affect the industry as a whole and not a specific company. Patterson-UTI, as one of many members in various trade associations, does not direct the legislative activities of any trade organization of which it is a member. +Sustainability +Patterson-UTI strives to be a leader in our industry in the area of environmental, social, governance and other sustainability-related issues, and remains committed to managing these issues for the long-term benefit of our employees, communities and our business. We aim to minimize our environmental impact in the communities in which we work and live, while providing services for our customers in a safe and responsible manner. We invest extensively in the safety, health and well-being of our people, who are our most important asset and our greatest strength. Also, maintaining a rigorous focus on ethics and integrity at every level of our operations is a practice on which all of our success depends. +We encourage you to review our latest sustainability report for more detailed information regarding our sustainability programs and initiatives. A copy of Patterson-UTI’s sustainability report can be accessed electronically in the “Sustainability” section of the Patterson-UTI website at www.patenergy.com and in print to any stockholder who requests it from the Secretary of Patterson-UTI. Nothing on our website, including our sustainability report or sections thereof, shall be deemed incorporated by reference into this proxy statement or other filings that we make with the SEC. +Communication with the Board and its Independent Members +Persons may communicate with the Board, or directly with its Chairman, Mr. Huff, by submitting such communication in writing in care of Chairman of the Board of Directors, Patterson-UTI Energy, Inc., 10713 West Sam Houston Parkway North, Suite 800, Houston, Texas 77064. Persons may communicate with the independent members of the Board by submitting such communication in writing to the Nominating and Corporate Governance Committee of the Board of Directors of Patterson-UTI Energy, Inc., 10713 West Sam Houston Parkway North, Suite 800, Houston, Texas 77064. +Although Patterson-UTI does not have a formal policy regarding attendance by members of the Board at its annual meetings of stockholders, directors are invited to attend annual meetings of Patterson-UTI stockholders. All of the directors attended the 2020 annual meeting of stockholders either in person or by telephone. +Corporate Governance Documents Available on Patterson-UTI’s Website +Copies of each of the following documents can be accessed electronically in the “Corporate Governance” section of the Patterson-UTI website at www.patenergy.com and in print to any stockholder who requests them from the Secretary of Patterson-UTI: +• +Audit Committee Charter; +• +Compensation Committee Charter; +• +Nominating and Corporate Governance Committee Charter; +• +Corporate Governance Guidelines; +• +Code of Business Conduct and Ethics for its employees, officers and directors; +• +Code of Business Conduct and Ethics for Senior Financial Executives; and +• +Global Anticorruption Policy. +9 +PROPOSAL NO. 2 +APPROVAL OF 2021 LONG-TERM INCENTIVE PLAN +Background +On April 9, 2021, Patterson-UTI’s Board of Directors adopted the Patterson-UTI Energy, Inc. 2021 Long-Term Incentive Plan (the “2021 Plan”), subject to approval by Patterson-UTI’s stockholders. Subject to and effective upon the approval by the stockholders of the 2021 Plan, no future grants would be made under any other existing equity plans of Patterson-UTI. Participation in the Company’s long-term incentive plan is broad based, with approximately 320 employees and directors participating in 2020. Approval of the 2021 Plan requires the affirmative vote of the holders of a majority of the shares of Common Stock that are present in person or by proxy and entitled to vote at the Meeting. +If the 2021 Plan is not approved by stockholders, the Amended and Restated 2014 Long-Term Incentive Plan , as amended (the “2014 Plan”) will remain in effect with its current share pool and term. As of April 6, 2021, there were 4,867,480 shares of common stock remaining available for grant under the 2014 Plan, assuming a target payout of all performance-based restricted stock units (RSUs) and performance units (PSUs) then outstanding. If the 2021 Plan is not approved by stockholders, we will not be able to continue our equity-based long term incentive program, and we may be required to increase significantly the cash component of our executive compensation program in order to remain competitive and adequately compensate our employees. +Certain material terms of the 2021 Plan are discussed below; however, the description is subject to, and qualified by the full text of the 2021 Plan, attached hereto as Annex A. +Best Practices +Independent Oversight . The Compensation Committee, composed solely of non-employee independent directors, will approve all grants made to employees under the 2021 Plan; provided, however, that the Compensation Committee may delegate to the Board or any committee of the Board, to one or more executive officers or a committee of executive officers its right to grant awards under the 2021 Plan to employees who are not executive officers or directors of Patterson-UTI pursuant to such conditions or limitations as the Compensation Committee may establish. +No Repricing of Options or SARs . The 2021 Plan prohibits repricing and replacement of stock options or stock appreciation rights (“SARs”) at lower exercise prices unless approved by our stockholders. +No Discounted Options or SARs . Stock options and SARs may not be granted with an exercise price below the fair market value of our common stock on the date of grant. +No Dividends on Options or SARs . Dividends and dividend equivalents may not be paid or accrued on stock options or SARs. +Limited Terms for Options and SARs . Stock options and SARs granted under the 2021 Plan are generally limited to 10-year terms. +No “Evergreen” Provision . Shares authorized for issuance under the 2021 Plan will not be replenished automatically. Any additional shares to be issued over and above the amount for which shareholder approval is being sought in connection with the 2021 Plan will require further shareholder approval. +No Tax Gross-Ups . The Compensation Committee does not provide tax gross-ups in connection with awards under the 2021 Plan. +Annual Limitation on Director Compensation . The total compensation paid to each non-employee director for their service as such, whether in cash or in equity awards under the 2021 Plan (based on the grant date fair value of any such awards) during a single fiscal year may not exceed $750,000; however, the foregoing limit will instead be $1,000,000 for any fiscal year in which the non-employee director is first appointed to the Board or any fiscal year in which the non-employee director serves as chairman or lead director. +No Dividends or Dividend Equivalents Paid on Unvested Awards . Any dividends or dividend equivalents will only be paid if and to the extent the underlying shares vest pursuant to the terms of the award. +10 +Recoupment . All awards granted under the 2021 Plan will be subject to any clawback policy adopted by us. See the description of our current Clawback policy below under “ Clawback Policy ”. In addition, if Patterson-UTI is required to prepare an accounting restatement due to the material noncompliance of Patterson-UTI, as a result of misconduct, with any financial reporting requirement under the securities laws, or if the participant is one of the persons subject to automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002, the participant shall reimburse the Company the amount of any payment in settlement of an award earned or accrued during the twelve-month period following the first public issuance or filing with the SEC (whichever just occurred) of the financial document embodying such financial reporting requirement. +Minimum Vesting . Subject to a 5% carve-out, all awards are subject to a minimum vesting period of one year from the date of grant, except in the case of substitute awards, awards delivered in lieu of fully-vested cash obligations, certain awards to directors that vest in connection with an annual meeting, and acceleration of an existing award. +Key Equity Plan Metrics +The following table shows key equity compensation metrics for the years 2018-2020 under the 2014 Plan: +A +B +C +D +E +F +G +H +Fiscal Year +Stock +Options +Granted +Time-Based +RSUs +Granted (1) +Performance- +Based RSUs +Granted (2) +PSUs +Granted (2) +Actual PSUs +and +Performance- +Based RSUs +Earned +Total +(3) +Weighted +Average # of +Common Shares +as of FYE +Burn +Rate (4) +2020 +— +1,691,246 +— +500,500 +370,773 +4,124,038 +188,013,000 +2.19 +% +2019 +— +1,505,048 +— +489,800 +223,000 +3,456,096 +203,039,000 +1.70 +% +2018 +— +1,726,865 +359,315 +310,700 +419,200 +4,292,130 +218,643,000 +1.96 +% +Average Three-Year Burn +Rate (2018-2020) +1.95 +% +( 1 ) +Excludes 204,222 time-based RSUs granted in connection with an acquisition completed in 2018. +(2) +Reflects target number of Performance-based RSUs and PSUs granted in applicable fiscal year. +(3) +Total number of shares in a particular fiscal year includes all time-based awards granted during such fiscal year, and all stock options, PSUs and RSUs for which the performance criteria was certified as attained and earned during such fiscal year. Under the fungible ratio of the 2014 Plan, RSUs and PSUs count as two shares in the Total amount. Accordingly, the number in this “Total” column for a particular fiscal year is derived as follows: (i) column A; plus (ii) column B, times two, plus (iii) column E, times two. +(4) +Performance-based RSUs and PSUs granted in the applicable fiscal year and not yet earned are excluded from the calculation of burn rate. +Description of the 2021 Plan +The primary objective of the 2021 Plan is to assist Patterson-UTI and its subsidiaries in attracting and retaining selected individuals to serve as directors, employees, consultants and advisors of Patterson-UTI who are expected to contribute to its success and achieve long-term objectives which will inure to the benefit of its stockholders through the additional incentives inherent in awards under the 2021 Plan. The 2021 Plan provides for the granting of incentive and non-qualified stock options, tandem and freestanding stock appreciation rights, restricted stock awards, other stock unit awards, performance shares, performance units and dividend equivalents. Certain awards under the 2021 Plan may be paid in cash or Common Stock, as determined by the Compensation Committee. The Compensation Committee has exclusive authority to select the participants to whom awards may be granted, and to determine the type, size and terms of each award, subject to the limitations set forth in the 2021 Plan. The Compensation Committee will also make all determinations that it decides are necessary or desirable in the interpretation and administration of the 2021 Plan. In addition, the Compensation Committee may, if consistent with applicable rules, regulations and Nasdaq requirements, delegate to a committee of one or more directors or to one or more executive officers the right to grant, cancel and suspend awards to employees who are not directors or executive officers of Patterson-UTI. +11 +As of April 6, 2021 , the equity awards outstanding under Patterson-UTI ’s 2005 Long-Term Incentive Plan, as amended (the “2005 Plan”) and the 2014 Plan , and their respective features, were as follows (1) : +Options outstanding (2) +4,026,150 +Full-value awards outstanding (3) +4,297,814 +Weighted-average exercise price of outstanding options +$ +21.63 +Weighted-average remaining contractual term of outstanding options +2.95 years +Shares available for grant under the 2014 Plan (4) (5) +4,867,480 +Shares of Common Stock Outstanding +187,789,871 +( 1 ) +No awards have been granted under the 2021 Plan, and this table excludes the 8.6 million shares requested in this proposal. +(2) +Includes 1,793,500 options outstanding under the 2005 plan and 2,232,650 options outstanding under the 2014 plan. +(3) +Includes restricted stock, RSUs and PSUs (at target) under the 2014 Plan. No full-value awards are outstanding under the 2005 Plan. +(4) +Under the fungible counting provisions of the 2014 Plan, full-value awards count as two shares. +( 5 ) +No shares remain available for grant under the 2005 Plan. +General Terms +• +Subject to adjustment in the event of certain corporate transactions, the aggregate number of shares of Common Stock authorized for grant under the 2021 Plan is 8.6 million, plus the total number of shares of Common Stock remaining available for grant under the 2014 Plan as of April 9, 2021, the effective date of the 2021 Plan. Shares that are subject to options or SARs count as one share of Common Stock against this aggregate limit. Shares that are subject to awards other than options and SARS count as two shares of Common Stock against this aggregate limit. The closing price of a share of Common Stock on April 6, 2021 was $6.97. +• +Generally, if an award granted under the 2021 Plan, the 2014 Plan or the 2005 Plan expires, is forfeited, is settled in cash or otherwise terminates without the issuance of all or a portion of the shares of Common Stock subject to the award, the shares allocable to the expired, forfeited, cash settled, or terminated portion of the award will be available for awards again under the 2021 Plan. Any shares of Common Stock that again become available for grant under the 2021 Plan will be added back as one share if the shares were subject to options or SARs, and as two shares if the shares were subject to awards other than options or SARs. +• +If any shares subject to an award are used to exercise options, are not issued upon the settlement of a SAR, are withheld by Patterson-UTI for income or employment taxes on exercise of an option or SAR, or are re-purchased on the open market with the exercise price for an option, such shares will not become available for grant under the 2021 Plan. +• +With respect to awards to participants other than directors, the 2021 Plan is administered by the Compensation Committee of Patterson-UTI’s Board of Directors, which comprises exclusively non-employee independent directors. With respect to awards to directors, the 2021 Plan is administered by the Board of Directors. +• +Directors, employees, including officers, consultants and advisors are eligible for awards under the 2021 Plan. As of April 1, 2021, approximately 3,200 employees, five directors and an indeterminate number of consultants and advisors would be eligible for awards under the 2021 Plan, although Patterson-UTI has not historically granted awards under its long-term incentive plans to consultants or advisors. +• +The Board of Directors, at any time, may amend the terms of the 2021 Plan, subject to the stockholder approval requirements of the Nasdaq Stock Market and other rules and regulations applicable to Patterson-UTI. Generally, the 2021 Plan also may not be amended without stockholder approval to permit the repricing of options or SARs or to extend the generally applicable maximum 10-year term applicable to options. +• +Except in connection with certain corporate transactions involving Patterson-UTI, the terms of outstanding options or SARs may not be amended to reduce the applicable exercise price and outstanding options and SARs may not be cancelled in exchange for cash, other awards or options or SARs with an exercise price that is less than the exercise price of the original options or SARs, in each case without stockholder approval. +12 +• +Subject to the exceptions in this bullet, awards may not be sold, assigned, transferred, pledged or otherwise encumbered, other than by will or the laws of descent and distribution or pursuant to a domestic relations order, as determined by the Compensation Committee, and award s may be exercised during the life of the participant only by the participant or the participant’s guardian or legal representative. Notwithstanding the foregoing, a participant may assign or transfer an award other than an incentive stock option with the consent of the Compensation Committee ( i ) for charitable donations; (ii) to the participant’s spouse, children or grandchildren (including any adopted and stepchildren and grandchildren), or (iii) a trust for the benefit of one or more of the participants or the persons referred to in clause (ii); provided that certain administrative conditions are met. For the avoidance of doubt, awards (other than fully vested and unrestricted shares of Common Stock) may not be transferred to a third party for monetary value. +• +Except with respect to 5% of the shares authorized for grant under the 2021 Plan, no award may vest prior to the first anniversary of the grant date other than in the case of substitute awards, awards delivered in lieu of fully-vested cash obligations, certain awards to directors that vest in connection with an annual meeting, and acceleration of an existing award. +• +No awards may be granted under the 2021 Plan after April 9, 2031, the tenth anniversary of the effective date of the 2021 Plan. +Options +• +The vesting schedule for options is set by the Compensation Committee, subject to the minimum vesting requirements of the 2021 Plan. +• +The term of options is set by the Compensation Committee, but may be no longer than 10 years other than as a result of any extension of the term in compliance with applicable law as provided in an award agreement. +• +The exercise price for options may be paid in cash, with previously acquired shares of Common Stock, or by other means approved by the Compensation Committee. +• +All options granted under the 2021 Plan (other than substitute awards) are granted with an exercise price equal to or greater than the fair market value of the Common Stock at the time the option is granted. +SARs +• +SARs may be granted alone or in connection with the grant of any option. +• +The vesting schedule for SARs is set by the Compensation Committee, subject to the minimum vesting requirements of the 2021 Plan. +• +SARs granted alone may be exercised at such times and be subject to such terms and conditions as the Compensation Committee may impose. SARs that are granted in tandem with options may be exercised only on the surrender of the right to purchase an equivalent number of shares under the related options and may be exercised only with respect to the shares of Common Stock for which the related options are then exercisable. +• +The term of SARs under the 2021 Plan may be no longer than 10 years other than as a result of any extension of the term in compliance with applicable law as provided in an award agreement. +• +A SAR entitles a participant to surrender any then exercisable portion of the SAR and, if applicable, the related option, in exchange for an amount equal to the product of (i) the excess of the fair market value of a share of Common Stock on the date of surrender over the fair market value of a share of Common Stock on the date that the SAR was granted, or, if the SAR is related to an option, the per share exercise price of the option, multiplied by (ii) the number of shares of Common Stock subject to the SAR and being surrendered. Payment on exercise of a SAR shall be, in the discretion of the Compensation Committee, shares of Common Stock, cash, or a combination of shares of Common Stock and cash. +• +All SARs granted under the 2021 Plan (other than substitute awards) are granted with an exercise price equal to or greater than the fair market value of the Common Stock at the time the SAR is granted. +Restricted Stock Awards +• +The Compensation Committee determines the material terms of restricted stock awards, including the price, if any, to be paid by the recipient, and, subject to the minimum vesting requirements of the 2021 Plan, the vesting schedule and conditions, which may include the attainment of specified performance objectives. +13 +• +Beginning on the date of grant, a participant receiving a restricted stock award will become a stockholder of Patterson-UTI with respect to all shares of Common Stock subject to the restricted stock award, which, unless the Committee determines otherwise at the time of the grant, includes the right to vote the shares and receive dividends in respect of the shares; provided, however, that any dividends with respect to any restricted stock award as to which the restrictions have not yet lapsed shall be subject to the same restrictions as such restricted stock award . +Other Stock Unit Awards +• +The Compensation Committee may grant other stock unit awards under the 2021 Plan, which have a value equal to an identical number of shares of Common Stock. Other stock unit awards may also be a form of payment for other awards granted under the 2021 Plan and other earned cash-based incentive compensation. +• +The payment of other stock units may be in cash, shares of Common Stock, other property, or any combination of the foregoing, and may be made in a lump sum or, in accordance with procedures established by the Compensation Committee, on a deferred basis subject to the requirements of section 409A of the Code. +• +The vesting schedule for other stock unit awards is set by the Compensation Committee, subject to the minimum vesting requirements of the 2021 Plan. +Dividend Equivalent Rights +• +The Compensation Committee may grant dividend equivalent rights either in connection with awards or as separate awards under the 2021 Plan. +• +Amounts payable in respect of dividend equivalent rights will not be paid until the vesting, payment, settlement or other lapse of restrictions of the award to which the dividend equivalent rights relate, including with respect to any performance conditions applicable to the underlying award. +• +No award of options or SARs will have dividend equivalent rights. +Performance Awards +• +Performance awards are payable in cash, shares of Common Stock, other property, or a combination of the foregoing, and may be paid in a lump sum, in installments, or on a deferred basis in accordance with procedures established by the Compensation Committee. +• +The Compensation Committee determines the material terms of the performance awards, including a performance period over which the performance goal of such award shall be measured. Performance awards are subject to the one year minimum vesting requirements of the 2021 Plan. +Deferrals +• +The Compensation Committee may require or permit a participant to defer the receipt of cash or shares pursuant to any awards under the 2021 Plan. Any deferral permitted under the 2021 Plan will be administered in a manner that is intended to comply with section 409A of the Code. +Effect of Certain Transactions and Change of Control +The Compensation Committee, in its discretion, may determine that, unless otherwise specifically set forth in an award agreement or other agreement applicable to any award, upon a change of control (as defined in the 2021 Plan): +• +awards outstanding as of the date of the change of control immediately vest and become free of all restrictions and limitations and, to the extent applicable, become fully exercisable and/or immediately settled or distributed; +• +each option and SAR shall terminate within a specified period of days after notice to the participant; +• +each participant shall receive, with respect to each share subject to an award, an amount equal to the excess of the fair market value of such share immediately prior to the occurrence of the change of control over the exercise price per share, if applicable, of such award, with such payment being made in one or more kinds of stock or property or a combination of stock or property; +• +each option and SAR outstanding on the date of the change of control may be cancelled and terminated without payment if the fair market value of a share of Common Stock on the date of the change of control is less than the per share exercise price of the option or SAR; or +14 +• +such other additional adjustments or benefits as the Compensation Committee deems appropriate shall apply. +Further, in the event of changes in the capital or corporate structure of Patterson-UTI due to events such as recapitalization, stock split, merger, spin-off, joint venture, subsidiary or division sale or similar transaction, that affect the shares of Common Stock, the Compensation Committee, in its sole discretion, may determine that it is equitable or appropriate to make adjustments or substitutions to the 2021 Plan or outstanding options and awards, including to the number, class, kind and option or exercise price or securities subject to awards and to the terms and conditions of awards (including any applicable performance targets or criteria with respect thereto) . +Federal Income Tax Consequences +The following discussion summarizes certain U.S. federal income tax consequences of the grant and receipt of awards pursuant to the 2021 Plan under the law as in effect on the date of this proxy statement. The rules governing the tax treatment of such awards are quite technical, so the following discussion of tax consequences is necessarily general in nature and is not complete. In addition, statutory provisions are subject to change, as are their interpretations, and their application may vary in individual circumstances. This summary does not purport to cover all federal employment tax, estate tax, or other federal tax consequences associated with the 2021 Plan, nor does it address state, local, or non-U.S. tax consequences. +ISOs . In general, a participant will not recognize income upon the grant or exercise of an ISO. However, upon the exercise of an ISO, the excess of the fair market value of the shares of Common Stock received upon the exercise of the ISO over the exercise price will increase the employee’s alternative minimum taxable income, which may cause the employee to incur the alternative minimum tax. Subject to certain exceptions for death or disability, if a participant exercises an ISO more than three months after termination of employment, the exercise of the option will be taxed as the exercise of a NQSO, as described below. +The general rule is that gain or loss from the sale or exchange of shares acquired on the exercise of an ISO will be treated as capital gain or loss. However, if shares acquired upon the exercise of an ISO are disposed of within two years from the date of grant or within one year after exercise (a “disqualifying disposition”), the participant generally will recognize ordinary income in the year of disposition in an amount equal to the fair market value of the shares at the time of exercise (or, if less, the amount realized on the disposition of the shares) less the exercise price. Any further gain (or loss) realized by the participant generally will be taxed as short- or long-term capital gain (or loss) depending on the holding period. +NQSOs, SARs, Performance Award, and Other Stock Unit Award . A participant generally is not required to recognize income on the grant of a NQSO, a SAR, performance award or other stock unit award. Instead, ordinary income generally is required to be recognized on the date the NQSO or SAR is exercised, or in the case of performance awards or other stock unit awards, upon the issuance of shares and/or the payment of cash pursuant to the terms of the award. In general, the amount of ordinary income required to be recognized is, (a) in the case of a NQSO or a SAR, an amount equal to the excess, if any, of the fair market value of the shares on the exercise date over the exercise price, and (b) in the case of performance awards or other stock unit awards, the amount of cash and/or the fair market value of any shares received in respect thereof, plus the amount of taxes withheld from such amounts. +Restricted Common Stock . Unless a participant who receives an award of restricted Common Stock makes an election under section 83(b) of the Code as described below, the participant generally is not required to recognize ordinary income on the grant of restricted Common Stock. Instead, on the date the shares vest (i.e., become transferable and no longer subject to forfeiture), the participant will be required to recognize ordinary income in an amount equal to the excess, if any, of the fair market value of the shares on such date over the amount, if any, paid for such shares. If a section 83(b) election has not been made, any dividends received with respect to restricted Common Stock that are subject at that time to a risk of forfeiture or restrictions on transfer generally will be treated as compensation that is taxable as ordinary income to the recipient. If a participant makes a section 83(b) election within 30 days following the date of transfer of the restricted Common Stock, the participant will recognize ordinary income on the date the shares are granted in an amount equal to the excess, if any, of the fair market value of the shares on the date of award over the amount, if any, paid for such shares. In such case, the participant will not be required to recognize additional ordinary income when the shares vest. However, if the shares are later forfeited, a loss can only be recognized up to the amount the participant paid, if any, for the shares. +Gain or Loss on Sale or Exchange of Shares . In general, gain or loss from the sale or exchange of shares granted or awarded under the 2021 Plan will be treated as capital gain or loss, provided that the shares are held as capital assets at the time of the sale or exchange. However, if certain holding period requirements are not satisfied at the time of a sale or exchange of shares acquired upon exercise of an ISO (a “disqualifying disposition,” see above), a participant generally will be required to recognize ordinary income upon such disposition. +Deductibility by Patterson-UTI . To the extent that a participant recognizes ordinary income in the circumstances described above, Patterson-UTI or the subsidiary for which the participant performs services will be entitled to a corresponding deduction, provided that, among other things, the income meets the test of reasonableness, is an ordinary and necessary business expense, is not an “excess parachute payment” within the meaning of section 280G of the Code and is not disallowed by the $1,000,000 limitation on certain executive compensation under section 162(m) of the Code (see +15 +Parachute Payments below). In general, under section 162(m) of the Code, remuneration paid by a public corporation to certain “covered employees” (which includes any individual who serves as chief executive officer, chief financial officer or one of the other three most highly compensated executive officers for 2017 or any subsequent calendar year) is not deductible to the extent it exceeds $1 million for any year. It is expected that compensation deductions for any covered employee with respect to awards under the 2021 Plan will be subject to a $1 million annual deduction limitation. The Compensation Committee may grant awards under the 2021 Plan or otherwise that is or may become non-deductible when it believes doing so is in the best interests of the Company and its stockholders . +Parachute Payments . The acceleration of the exercisability or the vesting of an award upon the occurrence of a change in control may result in an “excess parachute payment” within the meaning of section 280G of the Code. A “parachute payment” occurs when an employee receives payments contingent upon a change in control that exceed an amount equal to three times his or her “base amount.” The term “base amount” generally means the average annual compensation paid to such employee during the five calendar years preceding the calendar year in which the change in control occurs. An “excess parachute payment” is the excess of all parachute payments made to the employee on account of a change in control over the employee’s base amount. If any amount received by an employee is characterized as an excess parachute payment, the employee is subject to a 20% excise tax on the amount of the excess, and Patterson-UTI is denied a tax deduction with respect to such excess. +Withholding . Awards under the 2021 Plan may be subject to tax withholding. Where an award results in income subject to withholding, Patterson-UTI may require the participant to remit the withholding amount to Patterson-UTI or cause shares of Common Stock to be withheld or sold in order to satisfy the tax withholding obligations. +Section 409A . Section 409A of the Code generally provides that any deferred compensation arrangement must satisfy specific requirements, both in operation and in form, regarding (i) the timing of payment, (ii) the election of deferrals and (iii) restrictions on the acceleration of payment. Failure to comply with section 409A may result in the early taxation (plus interest) to the participant of deferred compensation and the imposition of a 20% tax on the participant of the deferred amounts included in the participant’s income. Patterson-UTI intends to structure awards under the 2021 Plan in a manner that is designed to be exempt from or comply with section 409A, but does not guarantee such treatment. +New Plan Benefits +Any future awards granted to employees, consultants, advisors and non-employee directors under the 2021 Plan are subject to the discretion of the Compensation Committee or the Board, as applicable, and therefore, are not determinable at this time. The Grants of Plan-Based Awards table on page 34 below sets forth information with respect to prior awards granted to our named executive officers under the 2014 Plan during 2020. As of April 6, 2021, no awards have been granted that are contingent on the approval of the 2021 Plan; however, the Company expects to grant 2021 equity awards in our normal grant cycle under the 2021 Plan which will only be settled in Common Stock if the shareholders approve the 2021 Plan. If the shareholders do not approve the 2021 Plan, these awards will instead be settled in cash. Although the total number of shares of Common Stock subject to such awards will be determined as of the date of grant, it is expected that, subject to adjustments that may be based on market factors and peer group comparisons, the value of such awards at the grant date will be generally within the range of the values for the equity awards that were made in April 2019 and 2020, as described in detail in the Compensation Discussion and Analysis on page 20 and in the Grants of Plan-Based Awards Table on page 34, except that consistent with years prior to 2020, Mr. Hendricks will not receive any phantom units. +In addition, our non-employee directors are expected to receive annual grants on January 1 of each year consistent with the equity grants described below under “Director Compensation”. Because future awards are at the discretion of the Compensation Committee and the Board, the number of shares subject to future awards could increase or decrease and the type and terms of future awards could change as well, all without the need for future stockholder approval. If the 2021 Plan is approved, Patterson-UTI intends to thereafter register the additional shares authorized for grant under the 2021 Plan on a Registration Statement on Form S-8 filed with the Securities and Exchange Commission. +The Board of Directors recommends a vote “FOR” the approval of the 2021 Plan. Approval of the proposal requires the affirmative vote of the holders of a majority of the shares of Common Stock present in person or by proxy and entitled to vote on the proposal. Unless you give contrary instructions in your proxy, your properly submitted proxy will be voted “FOR” approval of the proposal. Abstentions will be counted as shares entitled to vote on the proposal and will have the same effect as a vote “AGAINST” the proposal. A broker non-vote will be counted for purposes of establishing a quorum, but will not be treated as a share entitled to vote on the proposal. Accordingly, broker non-votes will have no effect on the outcome of the proposal. +16 +PROPOSAL NO. 3 +RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM +The Audit Committee appointed PricewaterhouseCoopers LLP as the independent registered public accounting firm to audit the financial statements and internal control over financial reporting of Patterson-UTI for the fiscal year ending December 31, 2021, and directed that such engagement be submitted to the stockholders of Patterson-UTI for ratification. In recommending ratification by the stockholders of such engagement, the Board of Directors is acting upon the recommendation of the Audit Committee, which has satisfied itself as to PricewaterhouseCoopers LLP’s independence, professional competence and standing. Although ratification by stockholders of the engagement of PricewaterhouseCoopers LLP is not required by Delaware corporate law or Patterson-UTI’s restated certificate of incorporation or bylaws, the Audit Committee believes a decision of this nature should be made with the consideration of Patterson-UTI’s stockholders. If the stockholders fail to ratify the appointment, the Audit Committee will reconsider whether to retain PricewaterhouseCoopers LLP and may retain that firm or another without re-submitting the matter to our stockholders. Even if the appointment is ratified, the Audit Committee may, in its discretion, direct the appointment of a different independent registered public accounting firm at any time during the year if it determines that such change would be in the best interests of Patterson-UTI and its stockholders. +It is expected that one or more representatives of PricewaterhouseCoopers LLP will be available to participate in the Meeting and will be given the opportunity to make a statement if they so desire. It also is expected that the representative(s) will be available to respond to appropriate questions from the stockholders. +The Board of Directors recommends a vote “FOR” the ratification of PricewaterhouseCoopers LLP as Patterson-UTI’s independent registered public accounting firm. Ratification of the selection of PricewaterhouseCoopers LLP requires the affirmative vote of the holders of a majority of the shares of Common Stock entitled to vote on, and voted “FOR” or “AGAINST,” the proposal. Unless you give contrary instructions in your proxy, your properly submitted proxy will be voted “FOR” such ratification. Abstentions will not be counted as votes cast “FOR” or “AGAINST” the proposal and will have no effect on the outcome of the proposal. Because the ratification of an independent registered public accounting firm is considered a routine matter, if you do not give instructions to your brokerage firm, bank, broker-dealer, or other similar organization, the brokerage firm, bank, broker-dealer, or other similar organization will nevertheless be entitled to vote your shares in its discretion and may give or authorize the giving of a proxy to vote the shares in its discretion on this proposal. +17 +PROPOSAL NO. 4 +ADVISORY APPROVAL OF EXECUTIVE COMPENSATION +In accordance with Section 14A of the Exchange Act, the Board of Directors is asking stockholders to approve a non-binding, advisory resolution on the compensation of Patterson-UTI’s executive officers who are named in the Summary Compensation Table appearing in this proxy statement (the “Named Executive Officers”). The compensation of the Named Executive Officers is described in the “Compensation Discussion and Analysis” and “Executive Compensation” sections of this proxy statement. +For a discussion of our stockholder engagement and board responsiveness to stockholders, please see “Compensation Discussion and Analysis— Aligning Compensation Programs with Stockholder Interests.” +The compensation program for the Named Executive Officers is designed to attract and retain highly qualified individuals and to motivate and reward them for performance that benefits Patterson-UTI and its stockholders. The Compensation Committee and the Board of Directors believe that the policies and procedures detailed in the “Compensation Discussion and Analysis” achieve these goals by, among other things: +• +providing a mix of short-term compensation in the form of base salary and annual cash incentive bonuses and long-term compensation in the form of restricted stock units, performance units, and, in some years, restricted stock, stock options and phantom units, which strikes a balance between offering competitive compensation packages and aligning compensation with long-term growth and creating value for stockholders; +• +emphasizing variable equity and cash compensation to link realized compensation to performance; +• +reviewing annual base salaries, in part, based on Patterson-UTI’s financial results and position and performance compared to similarly situated companies; +• +providing performance-based annual cash incentive bonuses designed to put a meaningful portion of total compensation at risk; +• +awarding long-term equity incentives whose value is tied to the achievement of certain performance goals and/or an increase in the price of the Common Stock; +• +awarding long-term equity incentives that generally vest over periods of three years; and +• +maintaining stock ownership requirements. +The Board of Directors is asking stockholders to approve the following non-binding, advisory resolution at the Meeting: +“RESOLVED, that the stockholders of Patterson-UTI Energy, Inc. (the “Company”) approve, on an advisory basis, the compensation of the Company’s named executive officers, as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the compensation tables and other narrative discussion in the Proxy Statement for the 2021 Annual Meeting of Stockholders of the Company.” +This advisory resolution, commonly referred to as a “say-on-pay” resolution, is non-binding on the Board of Directors. Although non-binding, the Board of Directors and the Compensation Committee value the views of Patterson-UTI’s stockholders and will review and consider the voting results when (i) evaluating the effectiveness of Patterson-UTI’s compensation policies and practices and (ii) making future compensation decisions for the Named Executive Officers. +The Board of Directors recommends a vote “FOR” the approval of the advisory resolution on executive compensation . Approval of the advisory resolution requires the affirmative vote of the holders of a majority of the shares of Common Stock entitled to vote on, and voted “FOR” or “AGAINST,” the proposal. Unless you give contrary instructions in your proxy, your properly submitted proxy will be voted “FOR” such approval. Abstentions will not be counted as votes cast “FOR” or “AGAINST” the proposal and will have no effect on the outcome of the proposal. A broker non-vote will be counted for purposes of establishing a quorum, but will not be treated as a vote cast “FOR” or “AGAINST” the proposal and will have no effect on the outcome of the proposal. +18 +EXECUTIVE OFFICERS +Set forth below is the name, age and position followed by a brief description of the business experience during at least the past five years for each executive officer of Patterson-UTI who is not also a nominee for election to the Board of Directors. +Name +Age +Position +C. Andrew Smith +50 +Executive Vice President and Chief Financial Officer +Kenneth N. Berns +61 +Executive Vice President and Chief Commercial Officer +Seth D. Wexler +49 +Senior Vice President, General Counsel and Secretary +James M. Holcomb +58 +President — Patterson-UTI Drilling Company LLC +C. Andrew Smith — Mr. Smith has served as Executive Vice President and Chief Financial Officer of Patterson-UTI since September 2017. From April 2014 until September 2017, Mr. Smith served as Executive Vice President and Chief Financial Officer of Kirby Corporation, a marine transportation and diesel engine services company. From January 2014 to April 2014, Mr. Smith served as Executive Vice President – Finance of Kirby Corporation. Prior to joining Kirby Corporation, Mr. Smith served as Senior Vice President and Chief Financial Officer of Benthic Geotech and was previously Chief Financial Officer for both Global Industries, LTD and NATCO Group. Mr. Smith holds a degree in business administration from the University of Houston. +Kenneth N. Berns — Mr. Berns has served as Executive Vice President and Chief Commercial Officer of Patterson-UTI since May 2017. Mr. Berns served as a director of Patterson-UTI from May 2001 to June 2017 and as Senior Vice President of Patterson-UTI from April 2003 to May 2017. Mr. Berns served as a director of UTI from 1995 to May 2001. Mr. Berns has been an executive with REMY Investors since 1994. Mr. Berns holds a Bachelor’s Degree in Business Administration from San Diego State University and a Master’s Degree in Taxation from Golden Gate University. +Seth D. Wexler — Mr. Wexler has served as Senior Vice President, General Counsel and Secretary of Patterson-UTI since February 2017. Mr. Wexler served as General Counsel and Secretary of Patterson-UTI from August 2009 to February 2017. From March 1998 to August 2009, he specialized in securities law and mergers and acquisitions for the law firm of Norton Rose Fulbright US LLP, including as a partner of such law firm since January 2007. Mr. Wexler holds a Bachelor of Business Administration in Finance from the University of Texas at Austin, a Juris Doctorate from the University of Houston Law Center and a Masters of Business Administration from the University of Houston. +James M. Holcomb — Mr. Holcomb has served as President of Patterson-UTI Drilling Company LLC since January 2012. Mr. Holcomb came to Patterson-UTI in February 1998 with the acquisition of Robertson Onshore Drilling Company and since that time has served in numerous operational management roles, including as Senior Vice President of Operations of Patterson-UTI Drilling Company LLC from April 2006 to January 2012. Mr. Holcomb has over 30 years of experience in contract drilling operations. Mr. Holcomb holds a Bachelor of Science Degree in Business Management from LeTourneau University . +19 +COMPENSATION DISCUSSION AND ANALYSIS +The following Compensation Discussion and Analysis (“CD&A”) sets forth the principal compensation policies and programs of Patterson-UTI for our Named Executive Officers (“NEOs”). +Named Executive Officer +Title +William Andrew Hendricks, Jr. +Chief Executive Officer and President +C. Andrew Smith +Executive Vice President and Chief Financial Officer +Kenneth N. Berns +Executive Vice President and Chief Commercial Officer +Seth D. Wexler +Senior Vice President, General Counsel and Secretary +James M. Holcomb +President — Patterson-UTI Drilling Company LLC +Aligning Compensation Programs with Stockholder Interests +Strong Stockholder Support for Say-on-Pay +We received 96% stockholder support for our Say-on-Pay proposal at both our 2019 and 2020 Annual General Meetings of Stockholders. The Compensation Committee strongly values the opinions of our stockholders as expressed in the Say-on-Pay vote and believes that our 2019 and 2020 support levels demonstrate a strong alignment of our compensation program with our stockholders’ interests. +Although no specific changes were made to our compensation programs as a result of the 2020 Say-on-Pay vote, the Compensation Committee will continue to consider the results of our future Say-on-Pay votes when making future compensation decisions for our NEOs. +In line with our commitment to ongoing stockholder engagement, we arranged engagement meetings with several stockholders during 2020. Our Chairman led each of these calls with stockholders, and he listened to areas of stockholder concern, communicated our compensation philosophy and the decision-making process with respect to our compensation programs, and requested feedback regarding possible changes to our compensation program. +Significant Reduction in Executive Compensation for 2020 +The falling oil demand in light of the COVID-19 pandemic and the failure of OPEC and Russia to reach agreement on production reductions had a significantly negative impact on the price of crude oil and Patterson-UTI’s stock price in early 2020. During the first quarter of 2020, the price of crude oil declined more than 60% and Patterson-UTI’s stock price declined more than 75%. Oil and gas activity in the markets in which we operate rapidly declined at the end of the first quarter of 2020, and we expected that Patterson-UTI’s activity level would be significantly reduced compared to 2019. Accordingly, we took decisive action to set 2020 executive compensation at a significantly reduced level relative to 2019 to achieve better alignment with expected financial results and near-term stockholder returns. We: +• +Reduced the 2020 annual cash bonus plan maximum payout to 50% of the 2019 target for Messrs. Hendricks, Smith and Berns and 60% of the 2019 target for Messrs. Wexler and Holcomb (which, as discussed below, reduced the aggregate annual cash bonus plan payout to our NEOs by $3.2 million, or 66% less than it would have been without these caps); +• +Focused our 2020 annual cash bonus plan on the metrics listed below, which were our most important strategic priorities to respond to the significant COVID-19 pandemic- and oil price-related market challenges: +o +Adjusted EBITDA that would result in company-wide positive operating cash flow, +o +Health, Safety and Environmental performance, +o +Operating cash flow from our drilling business, and +o +Capital Expenditure reduction; +• +Reduced 2020 long-term incentive (LTI) awards by approximately 75% when compared to 2019 target LTI value in recognition of the significant decline in our stock price and to help mitigate shareholder dilution; and +• +Required total shareholder return performance that was equal to or greater than the S&P 500 Index to receive any payout under the 2020 performance units. +20 +The changes to our bonus program and LTI program significantly reduced reported 2020 compensation compared to previous years, as shown in the chart below: +Good Governance and Compensation Practices Aligned with Stockholders +We are mindful of the positive impact that strong corporate governance can have on maintaining an executive compensation program that is aligned with the interest of our stockholders. In designing the current executive compensation program, we sought to incorporate best practices for compensation governance, including those summarized below. +What We Do +What We Don’t Do +☑ Disclose specific metrics that make up our cash bonus program +☑ 50% or more of compensation in the form of long-term incentives +☑ More than 50% of long-term incentives (by target value) are performance-based +☑ Variable compensation based upon absolute performance and performance versus peers and broader market index +☑ Claw-back provisions that apply to our all of our executive officers +☑ Share ownership requirements for our executive officers and directors +☑ Anti-pledging policy for our executive officers and directors +☑ Anti-hedging policy for our executive officers and directors +☑ Engage independent compensation consultant and solicit feedback from stockholders +☑ Hold an annual Say-on-Pay vote +☒ No re-pricing of options +☒ No single trigger change-of-control severance arrangements +☒ No dividends or dividend equivalents on unearned performance units +☒ No new agreements with tax gross-ups and none entered into in more than ten years +☒ No material perquisites to NEOs that are not widely available to our other employees +☒ No new single trigger change-of-control equity-based grants for our executive officers +21 +What Guides Our Program +Our overriding philosophy for the compensation of our key executives is to link their compensation with Patterson-UTI’s operational and market performance and to establish incentives that reward them for their achievement of both short-term tactical and long-term strategic objectives. In doing so, we seek to offer competitive compensation designed to attract and retain highly qualified individuals and to motivate and reward our executives in achieving Patterson-UTI’s goals. Specifically, the 2020 program was designed to reinforce the following goals: +Patterson-UTI Goals +How Goal Was Reinforced in Our 2020 Compensation Program +Provide quality services for our customers in a safe and efficient manner +• Our 2020 annual cash bonus incentive plan included “Health, Safety and Environmental” performance as a distinct metric, and the proportion of the annual cash bonus incentive plan attributable to this metric was increased from 10% to 20% +• Our financial performance metrics required quality operational performance +Generate strong financial performance and returns for our stockholders +• The majority of executive compensation was delivered in the form of variable, at-risk compensation (as referenced in the charts below) +• The majority of the payout under our 2020 annual cash bonus incentive plan was based on financial performance metrics (80%) +• Our 2020 annual cash bonus incentive plan rewarded executives for cash flow generation through the use of Adjusted EBITDA, Capital Expenditure Reduction and Contract Drilling Operating Cash Flow as performance metrics +• Our long-term incentive plan incentivizes the creation of stockholder value on both an absolute and relative basis through the grant of equity compensation and the use of absolute and relative total stockholder return (TSR) performance goals under our performance units +Attract and retain highly qualified individuals, with a strong emphasis on teams working together to capitalize on opportunities and solve problems +• We benchmarked our executive pay programs against broader oilfield services companies and oil and gas exploration and production companies +• We did not target a specific market percentile for executive compensation. Instead, executive compensation was set based on a holistic review of several factors, including market pay levels, individual performance and qualifications, and executive tenure +• Our annual and long-term incentive programs generally reward company-wide results rather than performance against individual objectives +• The majority of our executives’ compensation was delivered in the form of long-term incentives that vest over a multi-year period to aid in retention of executives +Significantly reduce executive compensation to align with stockholders in light of challenging industry conditions +• We reduced the 2020 annual cash bonus plan payout by limiting the maximum payout to 50% of the 2019 target bonus amount for Messrs. Hendricks, Smith and Berns and 60% of the 2019 target bonus amount for Messrs. Wexler and Holcomb +• We reduced the LTI awards granted in 2020 by approximately 75% relative to 2019 target LTI value, reflecting the deep decline in our stock price that followed the onset of the COVID-19 pandemic that was temporary and not an appropriate benchmark for setting equity compensation values for 2020 +22 +For 2020, target total direct compensation for our NEOs was most heavily weighted toward long-term incentives, with at least 50% of such long-term incentive compensation including performance-based vesting criteria, as shown below. Our NEOs’ percentage of pay mix attributable to base salary was higher in 2020 due to the 75% reduction in LTI awards, as discussed above. +2020 TARGET TOTAL DIRECT COMPENSATION +Process for Determination of Executive Compensation +Role of the Compensation Committee and Management +The Board of Directors has delegated the management of Patterson-UTI’s executive compensation program to the Compensation Committee. The Compensation Committee meets on a regular basis to consider compensation matters and to review how Patterson-UTI’s plans and policies work in practice. Each of the Compensation Committee’s current members is an independent director as defined by the Nasdaq listing standards. +Compensation determinations, including equity award grants, have been approved through a process that solicits input from management through our CEO, as well as from outside compensation consultants retained by the Compensation Committee. In addition to the recommendations of management and consultants, the Compensation Committee considers feedback from Patterson-UTI’s stockholders, guidelines of proxy advisory firms, reported trends in compensation, internal budgets, historical data for the Company and its peers, strategic planning updates and other information that it considers relevant. +Our CEO provides the Compensation Committee with reviews of the performance of other executive officers and senior managers, including the other NEOs. The Compensation Committee also engages our CEO in an annual dialogue with our Committee Chairman and the Chairman of the Board on our compensation program and seeks their input on and review of proposals for long-term incentive grants. This process results in a recommendation that is then considered by our Compensation Committee as a whole. The Compensation Committee meets in executive session without our CEO present, and our CEO is not involved in decisions relating to his compensation. +Independent, Outside Compensation Consultants +Our Compensation Committee regularly utilizes outside compensation consultants to help assess and design our executive compensation program. These consultants are paid on either a basic, fixed-fee structure plus expenses or an hourly rate structure plus expenses. These outside consultants provide data and advice on historical compensation and stockholder returns, market trends and peer compensation practices. The Compensation Committee has retained Frederick W. Cook & Co., Inc. (“FW Cook”) as its consultant and advisor for executive compensation matters since 2018 . The Compensation Committee engaged FW Cook in 2018 to assist in responsiveness to stockholder concerns, including engagement efforts with stockholders and formulating revisions to the Company’s executive compensation practices. +Our Compensation Committee regularly reviews the services provided by its outside consultants and has determined that the engagement of FW Cook does not raise any conflicts of interest. The Compensation Committee receives a confirmation certification of independence from its consultants annually. +23 +In 2020, FW Cook provided the Compensation Committee with information on the compensation practices of our peer group and other oilfield service companies and on the reasonableness of our program as compared to the compensation practices of our peer group. In so doing, FW Cook provided the Compensation Committee with information on each element of total direct compensation for our executive officers as well as a comparison of each such element of compensation against our peers and the broader oilfield services market and oil and gas exploration and production market. FW Cook also provided the Compensation Committee with information on the cost and potential dilution to our stockholders of our equity-based incentives and compared our equity usage to that of our peer group . +Peer Group +The Company’s 2020 peer group consisted of the following 20 companies within the oilfield services industry and oil and gas exploration and production industry. When developing this peer group, the Compensation Committee considered the Company’s positioning versus peers on key metrics (Revenue, EBITDA, Total Assets, Market Capitalization, and Total Enterprise Value), the robustness of the peer group, and the business characteristics of each peer. Due to industry consolidation, the Compensation Committee elected to add five oil and gas exploration and production companies to the peer group to provide a more robust group for pay comparisons, while maintaining an emphasis on oilfield services companies. +2020 Peer Group +Archrock +ChampionX* +Cimarex Energy +Diamond Offshore Drilling +EQT +Helmerich & Payne +Liberty Oilfield Services +Nabors +National Oilwell Varco +NexTier Oilfield Solutions +Noble Corporation +Oceaneering International +Oil States International +PDC Energy +Precision Drilling +Range Resources +TechnipFMC +Transocean +Valaris +WPX Energy +* Apergy merged with ChampionX after the 2020 peer group was established. +This peer group was used by the Company and the Compensation Committee to benchmark executive pay levels and will be used to measure relative TSR performance for purposes of determining achievement under the Company’s performance units. +Components of 2020 Compensation +Base Salary +The table below outlines the base salaries for our executives . In 2020, we held base salaries flat for all of our NEOs. +2020 ANNUAL SALARIES +William Andrew Hendricks, Jr. +$ +1,000,000 +C. Andrew Smith +$ +450,000 +Kenneth N. Berns +$ +450,000 +Seth D. Wexler +$ +475,000 +James M. Holcomb +$ +465,000 +Annual Incentive Compensation +In 2020, the Compensation Committee adopted an annual cash bonus program that relied upon multiple, pre-established objectives for determining bonus compensation. The bonus plan set a target opportunity for each executive’s annual cash bonus as a percent of salary, with payout contingent upon meeting Patterson-UTI’s financial goals and other key performance indicators (KPIs). The Compensation Committee considered the average range of performance and payouts, and the Compensation Committee believed – based on advice from its compensation consultant – that Patterson-UTI’s range was consistent with typical, general industry practice and consistent with expectations that industry activity levels would be significantly reduced compared to 2019. +24 +The 2020 bonus metrics, along with the definition of each metric and the corresponding rationale for including the metric, are provided in the table below . +2020 ANNUAL CASH INCENTIVE METRICS +Metric (Weighting) +Description +Rationale +Adjusted EBITDA (30%) +Adjusted EBITDA is defined as net income (loss) plus net interest expense, income tax expense (benefit) and depreciation, depletion, amortization and impairment expense (including impairment of goodwill), excluding, for the purposes of the annual cash bonus program, any restructuring charges. +Targeted Adjusted EBITDA for 2020 was set at $135 million, which was significantly lower than actual Adjusted EBITDA for 2019. We believe that the 2020 goal was rigorous despite being set below our 2019 actual results because of the significant impact of COVID-19 pandemic- and oil price-related market challenges, which were beyond the Company’s control. +We used Adjusted EBITDA because we believe that this metric establishes a clear and consistent link between bonus compensation and our company’s financial performance. Additionally, Adjusted EBITDA is a significant consideration used by analysts in evaluating the Company and is therefore, we believe, a key driver of the Company’s stock price. +The Adjusted EBITDA target was also set at a level that, when combined with our targets for capital expenditure reductions, would provide for positive operating cash flow. +Health, Safety and Environmental (20%) +Holistic evaluation of factors including improvement in safety incident rates, environmental incidents, audits and training. +The Compensation Committee further believes that applying a holistic view to this factor is appropriate in that it allows for an assessment of overall health, safety, and environmental performance versus targeting a single objective target that may or may not reflect the Company’s overall safety results. +The Compensation Committee views attention to health, safety, and environmental factors as a component of the Company’s risk management and critical to the well-being of the Company’s employees, other personnel and the communities in which we work. +Capital Expenditure Reduction (35%) +Reducing overall capital expenditures by 60% relative to 2019 levels ( as adjusted for any Board-approved increase in capital expenditures ). +Cash capital expenditures in 2019 were $348 million. We believe that the 2020 goal was rigorous, as it required reducing capital expenditures to their lowest levels since 2016, when Patterson-UTI was a smaller organization. +We set a capital expenditure reduction goal in light of the significant COVID-19 pandemic- and oil price-related market challenges in early 2020 and expectations for the remainder of the year. Reducing capital expenditures furthered our goal for 2020 of preserving cash, improving shareholder returns and protecting our financial position. +Contract Drilling Operating Cash Flow (15%) +Generating $100 million of targeted operating cash flow in our contract drilling business, which would support an overall positive operating cash flow result for the Company in 2020. Operating cash flow is defined as Adjusted EBITDA, excluding, for the purposes of the annual cash bonus program, any restructuring charges, less cash capital expenditures ( as adjusted for any Board-approved increase in capital expenditures ). +Targeted contract drilling operating cash flow was significantly lower than contract drilling operating cash flow for 2019. We believe that the 2020 goal was rigorous despite being set below our 2019 actual results because of the significant impact of COVID-19 pandemic- and oil price-related market challenges, which were beyond the Company’s control. +Our focus on cash flow generation in our largest business during 2020 furthered our goal of having a business model that is self-sustaining, can weather the ebbs and flows of the commodity and business cycle (including the significant COVID-19 pandemic- and oil price-related market challenges in early 2020), and allows for return of capital to stockholders. +For Mr. Holcomb’s annual cash bonus opportunity, the metrics and allocations were Health, Safety and Environmental for the contract drilling business (20%), Capital Expenditure Reduction of 50% for the contract drilling business (40%), and Contract Drilling Operating Cash Flow (40%). Mr. Holcomb’s metrics were specifically tailored to the contract drilling business in order to focus on the portion of our business on which he has the most impact. +The overall annual cash bonus plan for 2020 was subject to the requirement that for each metric, a minimum threshold level of performance for such metric was achieved for the year. Once the relevant minimum requirement was met, the annual cash bonus opportunity attributable to each metric was calculated based on a measurement of actual +25 +performance, with a 50% payout for threshold achievement, 100% payout for target achievement and 200% maximum payout for maximum achievement, with l inear interpolation being used to calculate payout for performance between achievement levels ; provided, that threshold, target and maximum achievement levels and actual performance for the Health, Safety and Environmental KPI were determined based on a holistic evaluation of multiple factors described in footnote 2 of the “2020 Annual Incentive Metrics and Percentage Payout Calculations” table below, with the final determination of actual achievement of this KPI subject to the discretion of the Compensation Committee. +In light of challenging industry conditions and meaningfully lower year-over-year KPI targets, the maximum payout opportunity under the bonus program was adjusted to 50% of target for Messrs. Hendricks, Smith and Berns and 60% of target for Messrs. Wexler and Holcomb. As a result of the cap, the actual cash bonus payouts were significantly reduced despite performance well above target achievement levels for all of the NEOs. +The achievement levels under the annual cash bonus plan for our NEOs were calculated as follows: +Metrics (1) +Threshold +Target +Maximum +Actual +Metric Achievement Percentage +Metric +Weighting +Achievement Percentage +Adjusted EBITDA +$101 million +$135 million +$167 million +$222 million +200% +30% +60% +Health, Safety and Environmental +(2) +150% +20% +30% +Capital Expenditure Reduction +45% +60% +75% +60% +100% +35% +35% +Contract Drilling Operating Cash Flow +$75 million +$100 million +$125 million +$188 million +200% +15% +30% +Total +100% +155% +(1) +As discussed in “2020 Annual Cash Incentive Metrics,” actual performance on the financial metrics was calculated excluding the impact of restructuring charges and adjusting for any Board-approved increase in capital expenditures. Additionally, i n determining actual performance for the Adjusted EBITDA metric, the Committee excluded the impact of a $9.2 million charge to reduce the carrying value of a deposit for future sand purchases. The Committee believed this adjustment was appropriate because the charge related to a legacy sand deposit that was required at a time when sand was in short supply. Given the change in the market for sand in 2020, the deposit was adjusted due to an increase in market supply of sand and a reduction in market sand pricing below the contractual deposit pricing. +(2) +The Committee determined that the NEOs met 150% achievement for this metric based on: +● +the overall total recordable incident rate decreasing for 2020 by 32% compared to 2019; +● +the 2020 drilling operations continuing to have a total recordable incident rate below the land drilling industry average; +● +the reduction in the number of high potential incidents and near misses, and improvements in reporting; +● +the reduction in the number of incidents with an environmental impact; +● +the improved operational audit and follow-up process; and +● +the improvement in training, including the development of new training and training of more people. +As discussed above, for Mr. Holcomb’s bonus opportunity, the metrics and allocations were Health, Safety and Environmental for the contract drilling business (20%), Capital Expenditure Reduction for the contract drilling business (40%), and Contract Drilling Operating Cash Flow (40%). The calculated payouts for Mr. Holcomb for the two metrics unique to him were determined based on the achievement in 2020 of: (i) the Committee’s assessment of 175% achievement for the drilling segment on the Health, Safety and Environmental KPI; and (ii) drilling segment capital expenditure reduction of 49%, compared to a targeted reduction of 50% for this segment, resulting in 97% achievement. As a result, Mr. Holcomb’s payout under his bonus program was based on the achievement in 2020 of 153% of target. +26 +The pre-cap achievement percentage under the relevant bonus programs was applied to each executive’s bonus target as follows to determine their pre-cap bonus calculation, which was then reduced by the application of a cap to determine actual 2020 cash bonus payments : +2020 ANNUAL INCENTIVE CASH BONUS +NEO +Bonus +Target +Pre-Cap +Bonus +Multiplier +(as a % of +Target) +Pre-Cap +Bonus +Calculation +Post-Cap +Actual +Bonus +Amount +Percentage +Reduction +Due To +Cap +William Andrew Hendricks, Jr. +$ +1,250,000 +155% +$ +1,933,303 +$ +625,000 +68% +C. Andrew Smith +$ +562,500 +155% +$ +869,987 +$ +281,250 +68% +Kenneth N. Berns +$ +562,500 +155% +$ +869,987 +$ +281,250 +68% +Seth D. Wexler +$ +380,000 +155% +$ +587,724 +$ +228,000 +61% +James M. Holcomb +$ +372,000 +153% +$ +568,027 +$ +223,200 +61% +Long-Term Incentive Compensation +We have historically delivered the majority of total NEO compensation in the form of equity-based awards. This emphasis on equity-based compensation was intended to enhance alignment between our executives and our stockholders. We plan to retain this emphasis going forward, and we believe that by tying a large portion of compensation to equity we ensure that our NEOs can only fully realize the potential value of their compensation if our stockholders also benefit. As described below, all of the long-term incentive awards granted in 2020 vest over a three-year period. +Due to the Company’s depressed stock price at the time of the 2020 long-term incentive grants and the limitations on annual share award issuances under the Company’s Amended and Restated 2014 Long-Term Incentive Plan, as amended (the “2014 Plan”), the Compensation Committee was not able to provide its desired total 2020 target long-term incentive opportunity to Mr. Hendricks solely in the form of share-based awards. Accordingly, separate from the 2014 Plan, the Compensation Committee approved a grant of long-term, performance-based, cash settled phantom units for Mr. Hendricks in lieu of a portion of the share-based awards that the Compensation Committee would have customarily issued to Mr. Hendricks, but was unable to issue, due to these limitations. +The phantom units are subject to the same terms as the 2020 performance units granted to our NEOs; however, each phantom unit that becomes earned and vested at the end of the performance period will be settled in a cash payment equal to the average of the closing price of a share of stock for the 20 trading days preceding the last day of the performance period. The Compensation Committee does not expect to grant phantom units in future years. +27 +2020 Long- +Term Incentive +Award Type +2020 Design +Alignment with Philosophy +Restricted Stock Units +(49% of LTI Mix) +• Time-vested units that are settled in shares of stock +• 1/3 of each award vests annually over a three-year period +• Value dependent upon stock price performance +• Enhances retention of executive talent +• Encourages long-term share ownership +Performance +Units +(51% of LTI Mix)(1) +• Performance-vested units that are settled in shares of stock +• Number of units earned depends upon stock price performance relative to our peers over a full three-year period +• No shares are earned for performance below the 25 th percentile +• No shares are earned if TSR is not equal to or greater than the total return of the S&P 500 Index during the performance period (this was a new feature specific for 2020) +• Target shares are not earned unless performance is at the 55th percentile +• Maximum shares are not earned unless performance is at the 75 th percentile or above +• Capped payout at “target” amount if absolute TSR during the performance period is not positive +• Performance-contingent +• Number of shares dependent upon performance relative to peers, relative to the S&P 500 Index and absolute performance +• Value of shares dependent upon stock price +• Three-year performance period provides for a retention incentive +Performance Based +Phantom Units +• Performance-vested units that are settled in cash based on the same performance conditions and performance period as the 2020 performance units: +• Payout earned depends upon stock price performance relative to our peers over a full three-year period +• No payout earned for performance below the 25 th percentile +• No payout earned if TSR is not equal to or greater than the total return of the S&P 500 Index during the performance period +• Target payout is not earned unless performance is at the 55th percentile +• Maximum payout is not earned unless performance is at the 75 th percentile or above +• Capped payout at “target” amount if absolute TSR during the performance period is not positive +• Issued only to Mr. Hendricks in 2020 due to depressed stock price and related limitations on annual share award issuances under the 2014 Plan, which resulted in issuance of these awards in lieu of a portion of share-based awards +• Compensation Committee does not expect to grant phantom units in future years +• Performance-contingent +• Payout contingent upon performance relative to peers, relative to the S&P 500 Index and absolute performance +• Value of payout dependent upon stock price +• Three-year performance period provides for a retention incentive +(1) +For Mr. Hendricks, 51% of the target LTI mix in 2020 was achieved through a combination of Performance Units and Performance Based Phantom Units. +28 +2020 Long-Term Incentive Grants +Due to challenging industry conditions and the meaningful decline in stock price between the beginning of 2020 and the 2020 LTI grant date, the Compensation Committee elected to use a $8 notional stock price to determine the LTI grants for the executives. The $8 stock price was chosen as it approximated our recent average stock price prior to the COVID-related decline in stock prices. The use of an $8 notional stock price resulted in 2020 award levels that were approximately 75.6% lower than 2019 targets for the executives. The $8 notional value also provided the executives with the same potential long-term value as the 2019 grants assuming a recovery in the Company’s stock price, and the Company achieving the targeted performance goals. +Long-Term Incentive Grants +NEO +2019 Target +2020 Award (1) +% Change +William Andrew Hendricks, Jr. +$5,750,000 +$1,400,000 +-75.6% +C. Andrew Smith +$1,700,000 +$415,000 +-75.6% +Kenneth N. Berns +$2,150,000 +$525,000 +-75.6% +Seth D. Wexler +$1,200,000 +$293,000 +-75.6% +James M. Holcomb +$1,200,000 +$293,000 +-75.6% +(1) +Based on our stock price on April 7, 2020, when the Compensation Committee established 2020 award levels. +Payout in 2020 of 2017 Performance Unit Awards +For the three-year performance period that ended on April 30, 2020, Patterson-UTI’s total stockholder return, or TSR, was -52.9%. This performance was at the 70 th percentile relative to our peers. Based on this performance, the 2017 performance units paid out at 179% of the target level. Despite this payout level, the actual value of shares issued on settlement of the performance units was less than 20% of the grant date fair value as a result of our stock price performance. +2017 Performance Unit Awards +(Performance Period Ended in 2020) +Units Granted +Units Earned +# +Grant Date Fair Value / Share +Grant +Value +# +Share Price at Vesting +Value at +Vesting +William Andrew Hendricks, Jr. +83,372 +$ +31.04 +$ +2,587,867 +149,002 +$ +3.35 +$ +499,157 +C. Andrew Smith +— +$ +— +$ +— +— +$ +— +$ +— +Kenneth N. Berns +36,128 +$ +31.04 +$ +1,121,413 +64,568 +$ +3.35 +$ +216,303 +Seth D. Wexler +— +$ +— +$ +— +— +$ +— +$ +— +James M. Holcomb +— +$ +— +$ +— +— +$ +— +$ +— +TSR calculations for Patterson-UTI and our peers were measured based on the change in the value of the relevant stock from the first trading day of the performance period to the last trading day of the performance period, in each case measured using the average closing price of the relevant stock for the 20 trading day period ending on such trading day, with dividends reinvested. +All performance units issued since 2019 provide for a capped payout at the “target” amount if absolute TSR during the performance period is negative. +Retirement Plans +Patterson-UTI offers a 401(k) plan to its employees, including its NEOs. Participants may contribute a portion of their base salary to the 401(k) plan, subject to federal limits. Patterson-UTI makes matching contributions up to four percent of each participant’s eligible base salary. Our NEOs are eligible to participate in the 401(k) plan on the same basis as other employees. Patterson-UTI does not have any other retirement plan. The Committee believes that benefits to executives should generally be aligned with those provided for other employees, and thus we generally do not provide retirement plans beyond a 401(k) plan for our executives. +29 +Other Executive Compensation Matters +Share Ownership Guidelines and Stock Holding Requirements +We have had significant share ownership requirements in place for more than 15 years. Our share ownership guidelines are applicable to all Section 16 officers and directors of Patterson-UTI. We believe share ownership requirements are an important tool to ensure that officers and directors stay invested in Patterson-UTI and aligned with the interests of our stockholders. +Each Section 16 officer or non-executive Director has five years from the date of appointment or election to their position to satisfy the ownership guidelines. +Share Ownership Guidelines +President and Chief Executive Officer +Number of shares equal to 5 times base salary +Other Section 16 Officers +Number of shares equal to 2 times base salary +Outside Directors +Number of shares equal to 5 times annual base cash retainer +Each Section 16 officer and director is required to maintain ownership of the net after-tax shares of Common Stock pursuant to any equity-based awards received from Patterson-UTI, unless such person has met his or her individual ownership requirement. +Each person subject to this policy was in compliance with these guidelines as of the date of this proxy statement. +Clawback Policy +As provided for in Patterson-UTI’s Corporate Governance Guidelines and set forth in written agreements with its executive officers, Patterson-UTI has implemented a clawback policy that allows for the recovery of bonus, severance or incentive based compensation from an executive officer in the event the Board of Directors learns that any misconduct by such executive officer contributed to Patterson-UTI having to restate all or a portion of its financial statements. The Board will take such action as it deems necessary to remedy the misconduct, prevent its recurrence, and if it deems appropriate based on the relevant facts and circumstances, take remedial action against such executive officer, which may include requiring the reimbursement of any bonus or incentive compensation awarded to such executive officer or effecting the cancellation of stock awards previously granted to such executive officer if: (i) the amount of the bonus, incentive compensation or stock award was calculated based upon the achievement of certain financial results that were subsequently the subject of a restatement, (ii) such executive officer engaged in intentional misconduct that caused or partially caused the need for the restatement, and (iii) the amount of the bonus, incentive compensation or stock award that would have been awarded to such executive officer had the financial results been properly reported would have been lower than the amount actually awarded. +In addition to a stand-alone policy, Patterson-UTI’s long-term incentive plans (including the 2014 Plan and the 2021 Plan, described above under Proposal No. 2) provide that if Patterson-UTI is required to prepare an accounting restatement due to the material noncompliance of Patterson-UTI, as a result of misconduct, with any financial reporting requirement under the securities laws, or if the participant is one of the persons subject to automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002, the participant shall reimburse Patterson-UTI that amount of any payment in settlement of an award earned or accrued during the 12-month period following the first public issuance or filing with the SEC (whichever just occurred) of the financial document embodying such financial statement requirement. +Anti-Hedging Policy +Patterson-UTI has an anti-hedging policy for directors and executive officers. Our directors and executive officers and their respective spouses and minor children are prohibited from engaging in hedging or monetization transactions, including but not limited to prepaid variable forward contracts, equity swaps, collars, exchange funds, purchasing, selling or writing options or transacting in other third-party derivative securities that primarily involve or reference Patterson-UTI equity securities. This policy does not apply broadly to other employees. +Anti-Pledging Policy +Patterson-UTI has an anti-pledging policy. Our directors and executive officers may not engage in transactions in which Patterson-UTI securities are used as collateral for any loan, including, but not limited to, “margin loans” in a brokerage account. +30 +Perquisites and Personal Benefits +The Compensation Committee believes that benefits to executives should generally be aligned with those provided for other employees. No Named Executive Officer received perquisites during 2020 totaling more than $10,000. +Evaluation of Compensation Risk +We have considered the potential risks associated with the design of our compensation programs for employees. With regard to our executive compensation program in particular, we do not believe that our program creates unreasonable risks for the following reasons: +• +The emphasis on long-term equity based awards and the required vesting periods help minimize the potential for excessive risk taking and actions aimed at short-term stock gains; +• +Our use of different types of equity grants helps offset these risks; +• +We have meaningful share ownership guidelines; +• +We maintain an anti-hedging policy; +• +We maintain a clawback policy that applies to all of our executive officers for both cash and equity incentives; and +• +Four of the NEOs have been with Patterson-UTI for more than nine years and have an established track record of focus on managing Patterson-UTI for long-term success. +Our Board has also considered in its risk assessment of our compensation program its view that our management is highly ethical and focused on creating true long-term value for stockholders and not focused on just short-term gains. The Board, primarily through its Compensation Committee and Audit Committee, monitors and considers risks associated with Patterson-UTI’s compensation plans on a regular basis. +Employment-Related Agreements and Other Matters +Change in Control, Severance and Employment Agreements +Change in Control Agreements and Tax Gross-Up Payments. Patterson-UTI entered into a change-in-control agreement with Mr. Berns in 2004 and employment agreements with Messrs. Wexler, Hendricks, Smith and Holcomb in 2016 and 2017 that contain change-in-control provisions, as further described in “Employment-Related Agreements” below. Patterson-UTI believes that such agreements may under certain circumstances protect Patterson-UTI’s interest by discouraging the NEOs from leaving employment out of concern for the security of their jobs or from otherwise being unable to concentrate on their work. We believe that the change in control agreements may also help Patterson-UTI attract and retain new key employees by reducing the personal uncertainty and anxiety that arises from the possibility of a future business combination. Any future change in control or severance agreements will be approved subject to the circumstances existing at the time. +As was customary when the change in control agreement with Mr. Berns was entered into more than fifteen years ago , the change-in-control agreement provides Mr. Berns with a full gross-up payment for any excise taxes imposed on payments and benefits received under the change-in-control agreement or otherwise, including other taxes that may be imposed as a result of the gross-up payment. As indicated above, the Compensation Committee subsequently adopted a policy, more than five years ago, to no longer approve tax gross-ups in connection with compensation arrangements, and the employment agreements entered into with Mr. Hendricks in 2016 and Messrs. Wexler, Holcomb and Smith in 2017, which are described below, do not include a tax gross-up provision. +Severance Agreement. In order to address prior severance agreements between UTI Energy Corp. and Mr. Berns, Patterson-UTI has entered into a written letter agreement with Mr. Berns pursuant to which Patterson-UTI has agreed to pay Mr. Berns within ten days of the termination of his employment with Patterson-UTI for any reason (including voluntary termination by him), an amount in cash equal to his annual base salary at the time of such termination. Any payment made by Patterson-UTI pursuant to this letter agreement will reduce dollar for dollar any payment owed to Mr. Berns, if any, pursuant to the change-in-control agreement referenced above. +31 +Employment Agreements. Patterson-UTI entered into an employment agreement with Mr. Hendricks in August 2016, with Messrs. Wexler and Holcomb in January 2017 and with Mr. Smith in September 2017. Each employment agreement generally has an initial three-year term, subject to automatic annual renewal thereafter. Each employment agreement provides for a specified base salary, subject to any increases that may be granted in the future. The employment agreement also provides for, among other things, severance payments and the continuation of certain benefits following termination by Patterson-UTI of the executive other than for cause, or termination by the executive for good reason (as defined in the employment agreement). As discussed above and in more detail below, the employment agreements contain change in control provisions. +We believe the change-in-control agreement, severance agreement and the employment agreements are important components of our overall executive compensation program. The employment agreements currently in effect set forth the manner by which the employment relationship may be extended or terminated, the compensation and benefits that we provide during the term of employment and the obligations each party has in the event of termination of the executive officer’s employment. We believe that severance protections, particularly in the context of a change-in-control transaction, play a critical role in attracting and retaining key executive officers. Providing this type of protection is common in the oilfield services industry. In addition, these benefits serve our interests by promoting a continuity of management and aligning management’s interests with those of our stockholders in the context of an actual or threatened change in control transaction. +Please see “Employment-Related Agreements” elsewhere in the proxy statement for further description of the change-in-control agreement, severance agreement and employment agreements. +Section 162(m) Considerations +We consider the impact of accounting and tax treatment when designing all aspects of compensation, but the primary driver of program design is the support of business objectives. In that regard, we review and consider the deductibility of executive compensation under Section 162(m) of the Internal Revenue Code, which limits the tax deductibility by a corporation of compensation in excess of $1 million paid to each covered employee. Covered employees for this purpose generally include any individual who serves as chief executive officer, chief financial officer or one of the other three most highly compensated executive officers for that year, as well as any individual who was a covered employee for 2017 or any later calendar year. In addition, there is no longer any performance-based compensation exception to this limitation as was the case under prior law. However, some outstanding awards may be eligible for transition rules in effect for binding contracts in effect on November 2, 2017, which should continue to allow these awards to maintain their exemption from the $1 million annual deduction limitation for so long as such grants are not materially modified. The Compensation Committee views the tax deductibility of executive compensation as one factor to be considered in the context of its overall compensation philosophy, but it retains discretion to pay compensation that is subject to the $1 million deductibility limit. +Compensation Committee Report +The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based upon such review and discussion, the Compensation Committee has recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement. +Terry H. Hunt, Chair +Tiffany (TJ) Thom Cepak +Michael W. Conlon +Curtis W. Huff +32 +EXECUTIVE COMPENSATION +The following table sets forth information concerning compensation for the fiscal year ended December 31, 2020 with respect to the principal executive officer, the principal financial officer and the other Named Executive Officers of Patterson-UTI: +Summary Compensation Table +Name and Principal Position(s) +Year +Salary +($) +Bonus +($)(1) +Stock +Awards +($)(2) +Non-equity +Incentive plan +Compensation +($)(3) +All Other +Compensation +($)(4) +Total +($) +William Andrew Hendricks, Jr. +2020 +1,000,000 +— +2,086,115 +(5) +625,000 +11,400 +3,722,515 +President & Chief +2019 +1,000,000 +— +6,582,856 +1,251,300 +11,200 +8,845,356 +Executive Officer +2018 +1,000,000 +— +7,653,924 +1,100,000 +11,000 +9,764,924 +C. Andrew Smith +2020 +450,000 +— +399,656 +(6) +281,250 +11,400 +1,142,306 +Executive Vice President & +2019 +450,000 +200,000 +1,946,742 +563,100 +11,200 +3,171,042 +Chief Financial Officer +2018 +450,000 +200,000 +1,640,644 +495,000 +11,000 +2,796,644 +Kenneth N. Berns +2020 +450,000 +— +505,746 +(7) +281,250 +— +1,236,996 +Executive Vice President & +2019 +450,000 +— +2,463,147 +563,100 +— +3,476,247 +Chief Commercial Officer +2018 +450,000 +— +2,843,300 +495,000 +— +3,788,300 +Seth D. Wexler +2020 +475,000 +— +282,046 +(8) +228,000 +11,400 +996,446 +Senior Vice President, General +2019 +475,000 +— +1,374,064 +380,400 +11,200 +2,240,664 +Counsel & Secretary +2018 +464,164 +— +1,475,340 +334,400 +11,000 +2,284,904 +James M. Holcomb +2020 +465,000 +— +282,046 +(8) +223,200 +11,400 +981,646 +President--Patterson-UTI +2019 +465,000 +— +1,374,064 +358,200 +23,200 +(9) +2,220,464 +Drilling Company LLC +2018 +465,000 +— +1,475,340 +619,380 +23,000 +(9) +2,582,720 +(1) +Bonuses for Mr. Smith are fixed amounts awarded pursuant to his employment agreement as a condition to his commencement of employment with the Company. +(2) +Amounts include the fair value of awards at the date of grant as determined in accordance with FASB ASC Topic 718 with respect to restricted stock units awarded to the Named Executive Officer in the fiscal years ended December 31, 2020, 2019 and 2018, with respect to performance units awarded to the Named Executive Officer in the fiscal years ended December 31, 2020, 2019 and 2018, and with respect to phantom units awarded to Mr. Hendricks in 2020. For additional information related to the assumptions used and valuation of restricted stock units, performance units and phantom units, see Note 12 to the consolidated financial statements in Patterson-UTI’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020. As described in the Form 10-K, the fair value of performance unit and phantom unit awards was determined based on a Monte-Carlo simulation model, which is consistent with the valuation used by Patterson-UTI for the recognition of compensation expense under FASB ASC Topic 718. The Monte-Carlo simulation model takes into account expected price movement of Patterson-UTI stock as compared to peer companies and, for the 2020 performance unit and phantom unit awards, the S&P 500 Index. As a result of Patterson-UTI’s pre-grant 2020 TSR performance relative to peer companies and the S&P 500 Index, the Monte-Carlo simulation model assigned a lower value to each 2020 performance unit award than the closing price of Patterson-UTI’s stock on the grant date. While the compensation committee set 2020 award levels on April 7, 2020, Mr. Hendricks’ phantom unit award was not granted until May 11, 2020. As a result of the price movement of Patterson-UTI stock and Patterson-UTI’s TSR performance relative to peer companies and the S&P 500 Index between April 7, 2020 and May 11, 2020, the Monte-Carlo simulation model assigned a higher value to Mr. Hendricks’ phantom unit award. Therefore, the values reflected in the 2020 Summary Compensation Table do not reflect the award values shown in the 2020 Long-Term Incentive Grants section of the Compensation Discussion and Analysis in this proxy statement. +( 3 ) +Amounts represent annual cash bonuses earned for the fiscal years ended December 31, 2020, 2019 and 2018. +( 4 ) +Amounts reflect contributions to a 401(k) plan by Patterson-UTI. +( 5 ) +Amount includes $740,480 related to an annual award of restricted stock units, $118,800 related to an award of performance units and $1,226,835 related to an award of phantom units during 2020. Assuming maximum performance, the value of the performance unit award would be $299,520 (calculated using the closing price of Patterson-UTI’s stock on the grant date and assuming maximum payout of two times the target number of shares). Assuming maximum performance, the value of the phantom unit award would be $1,999,950 (calculated using the closing price of Patterson-UTI’s stock on the grant date and assuming maximum payout of two times the target number of units). +( 6 ) +Amount includes $218,816 related to an annual award of restricted stock units and $180,840 related to an award of performance units during 2020. Assuming maximum performance, the value of the performance unit award would be $455,936 (calculated using the closing price of Patterson-UTI’s stock on the grant date and assuming maximum payout of two times the target number of shares). +( 7 ) +Amount includes $277,056 related to an annual award of restricted stock units and $228,690 related to an award of performance units during 2020. Assuming maximum performance, the value of the performance unit award would be $576,576 (calculated using the closing price of Patterson-UTI’s stock on the grant date and assuming maximum payout of two times the target number of shares). +33 +( 8 ) +Amount includes $ 154,336 related to an annual award of restricted stock units and $ 127,710 related to an award of performance units during 20 20 . Assuming maximum performance, the value of the performance unit award would be $ 321,984 (calculated using the closing price of Patterson-UTI’s stock on the grant date and assuming maximum payout of two times the target number of shares) . +( 9 ) +Amounts include contributions to a 401(k) plan by Patterson-UTI and an automobile allowance of $12,000. +The following table sets forth information concerning grants of plan-based awards during the fiscal year ended December 31, 2020 to the Named Executive Officers: +Grants of Plan-Based Awards +Estimated Future Payouts under +Non-equity Incentive Plan Awards +Estimated Future Payouts under +Equity Incentive Plan Awards +All Other +Stock +Awards: +Number of +Shares of +Grant Date +Fair Value of +Stock and +Grant +Threshold +Target +Maximum +Threshold +Target +Maximum +Stock or Units +Option Awards +Name +Date +($) +($) +($) +(#) +(#) +(#) +(#) +($)(5) +William Andrew Hendricks, Jr +4/7/20 +(1) +$ +625,000 +$ +625,000 +$ +625,000 +— +— +— +— +$ +— +4/7/20 +(2) +— +— +— +36,000 +72,000 +144,000 +— +$ +118,800 +4/7/20 +(3) +— +— +— +— +— +— +356,000 +$ +740,480 +5/11/20 +(4) +— +— +— +149,250 +298,500 +597,000 +— +$ +1,226,835 +C. Andrew Smith +4/7/20 +(1) +$ +281,250 +$ +281,250 +$ +281,250 +— +— +— +— +$ +— +4/7/20 +(2) +— +— +54,800 +109,600 +219,200 +$ +180,840 +4/7/20 +(3) +— +— +— +— +— +— +105,200 +$ +218,816 +Kenneth N. Berns +4/7/20 +(1) +$ +281,250 +$ +281,250 +$ +281,250 +— +— +— +— +$ +— +4/7/20 +(2) +— +— +— +69,300 +138,600 +277,200 +— +$ +228,690 +4/7/20 +(3) +— +— +— +— +— +— +133,200 +$ +277,056 +Seth D. Wexler +4/7/20 +(1) +$ +190,000 +$ +228,000 +$ +228,000 +— +— +— +— +$ +— +4/7/20 +(2) +— +— +— +38,700 +77,400 +154,800 +— +$ +127,710 +4/7/20 +(3) +— +— +— +— +— +— +74,200 +$ +154,336 +James M. Holcomb +4/7/20 +(1) +$ +186,000 +$ +223,200 +223,200 +— +— +— +— +$ +— +4/7/20 +(2) +— +— +— +38,700 +77,400 +154,800 +— +$ +127,710 +4/7/20 +(3) +— +— +— +— +— +— +74,200 +$ +154,336 +(1) +The 2020 non-equity incentive cash bonus plan for the fiscal year ended December 31, 2020 was approved on April 7, 2020 for our Named Executive Officers. The bonus plan set a target opportunity for each executive’s annual cash bonus as a percent of salary, with payout contingent upon meeting Patterson-UTI’s financial goals and other KPIs as described above in “Compensation Discussion and Analysis”. The annual cash bonus opportunity attributable to each metric was determined based on a measurement of actual performance relative to target performance, with a cap applied to the calculated payouts as described above in “Annual Incentive Compensation". The target and maximum amounts shown above take into consideration the application of this cap. Please see the “Annual Incentive Compensation” section for a discussion of actual payments made in respect of the 2020 cash bonus plan. +(2) +On April 7, 2020, Patterson-UTI granted performance unit awards to the Named Executive Officers. These awards provide for the recipients to receive shares of Common Stock upon the achievement of certain performance goals established by Patterson-UTI during a specified period. The performance period is the period from April 1, 2020 through March 31, 2023. The performance goals are tied to Patterson-UTI’s total stockholder return for the performance period as compared to total stockholder return for our peer group determined by the Compensation Committee. The recipients will receive a target number of shares if Patterson-UTI’s total stockholder return when compared to the peer group, is at the 55 th percentile and two times the target if at the 75 th percentile or higher. If Patterson-UTI’s total stockholder return, when compared to the peer group, is at the 25 th percentile, the recipients will only receive one-half of the target number of shares. The grant of shares when achievement is between the 25th and 55 th percentile, or between the 55 th and 75 th percentile, will be determined using linear interpolation for levels of achievement between these points. If Patterson-UTI’s total stockholder return is negative or zero, the payout shall not exceed the target number of shares. Additionally, there will be no payout unless Patterson-UTI’s total stockholder return is equal to or greater than the total stockholder return of the S&P 500 Index for the performance period. +(3) +Restricted stock units were awarded to the Named Executive Officers pursuant to the Amended and Restated 2014 Long-Term Incentive Plan. Ordinary dividends are accrued on unvested restricted stock units and paid upon vesting. The rate at which these dividends are paid or accrued is the same rate at which ordinary dividends are paid on all other shares of Common Stock. The restricted stock units vest over a three-year period as follows: one-third on April 7, 2021, one-third on April 7, 2022 and one-third on April 7, 2023. +(4) +On May 11, 2020, Patterson-UTI granted a phantom unit award to Mr. Hendricks. Pursuant to this phantom unit grant, Mr. Hendricks may earn from 0% to 200% of a target award of 298,500 phantom units based on the achievement of the same performance conditions over the same performance period that applies to the performance units granted in April 2020, as described above. Earned phantom units, if any, will be settled in 2023, following completion of the three-year performance period, in a cash payment equal to the number of earned phantom units multiplied by the average trading price per share over the twenty consecutive trading days ending March 31, 2023. +34 +( 5 ) +The grant date fair value of restricted stock units was based on the closing price of Patterson-UTI Common Stock on the date of grant, which is consistent with the valuation used by Patterson-UTI for the recognition of compensation expense under FASB ASC Topic 718. The grant date fair value of performance unit and phantom unit awards was determined based on a Monte-Carlo simulation model, which is consistent with the valuation used by Patterson-UTI for the recognition of compensation expense under FASB ASC Topic 718. +The following table sets forth information concerning outstanding equity awards at December 31, 2020 for the Named Executive Officers: +Outstanding Equity Awards at Fiscal Year-End +Stock Awards +Number +Equity Incentive +Equity Incentive +of Shares +Plan Awards: +Plan Awards: Market +Option Awards +or Units of +Market Value of +Number of +or Payout Value of +Number of Securities +Option +Stock +Shares or Units +Unearned Shares, +Unearned Shares, +Underlying Unexercised +Exercise +Option +That Have +of Stock +Units or Other +Units or Other +Options (#) +Price +Expiration +Not +That Have +Rights that Have +Rights that Have +Name +Exercisable +Unexercisable +($) +Date +Vested (#) +Not Vested ($)(1) +Not Vested(2) +Not Vested ($)(1) +William Andrew Hendricks, Jr. +100,000 +— +$ +17.27 +4/1/2022 +462,835 +(3) +$ +2,434,512 +769,500 +(4) +$ +4,047,570 +25,000 +— +$ +15.82 +9/30/2022 +172,500 +— +$ +22.88 +4/21/2023 +117,750 +— +$ +33.10 +4/21/2024 +257,000 +— +$ +20.33 +4/20/2025 +315,400 +— +$ +18.54 +4/25/2026 +C. Andrew Smith +— +— +— +— +134,523 +(5) +$ +707,591 +210,200 +(6) +$ +1,105,652 +Kenneth N. Berns +69,000 +— +$ +31.20 +4/25/2021 +173,100 +(7) +$ +910,506 +287,300 +(8) +$ +1,511,198 +160,000 +— +$ +16.20 +4/23/2022 +115,000 +— +$ +22.88 +4/21/2023 +78,500 +— +$ +33.10 +4/21/2024 +154,200 +— +$ +20.33 +4/20/2025 +189,100 +— +$ +18.54 +4/25/2026 +Seth D. Wexler +— +— +— +— +114,968 +(9) +$ +604,732 +157,300 +(10) +$ +827,398 +James M. Holcomb +— +— +— +— +114,968 +(9) +$ +604,732 +157,300 +(10) +$ +827,398 +(1) +Based on the closing price of Patterson-UTI Common Stock on December 31, 2020 of $5.26 per share. +(2) +As of December 31, 2020, performance unit awards had been granted to the Named Executive Officers. The 2018, 2019 and 2020 performance unit awards were granted on April 24, 2018, April 23, 2019 and April 7, 2020, respectively, and provide for an award of shares of Patterson-UTI common stock to the recipient based on Patterson-UTI’s total stockholder return compared to our peer group of companies at the time of grant for the performance period of April 1 of the grant year through March 31 of the third year following the grant. All performance unit awards provide for a target payout based on a target level of total stockholder return compared to the peer group. The amounts presented in this column represent the maximum payout under the 2018 performance unit awards, the target payout under the 2019 and 2020 performance unit awards and the target payout under the 2020 phantom unit award. Based on Patterson-UTI’s total stockholder return during the performance period, the recipients could receive a number of shares ranging from no shares to two times the target number of shares. For the performance units granted in 2019 and 2020, if Patterson-UTI’s total stockholder return is negative, then the number of shares received by the recipients will be capped at the target number of shares. For the performance units granted in 2018, the payout is based solely on relative performance. For the performance units granted in 2020, there will be no payout unless Patterson-UTI’s total stockholder return is equal to or greater than the total stockholder return of the S&P 500 Index for the performance period. +(3) +These restricted stock units vest as follows: 27,723 restricted stock units in equal monthly installments from January 24, 2021 through April 24, 2021; 79,112 restricted stock units in equal monthly installments from January 23, 2021 through April 23, 2022; 118,666 restricted stock units on April 7, 2021 and 118,667 restricted stock units on each of April 7, 2022 and 2023. +(4) +Amount includes 213,800 shares related to the 2018 performance unit award; 185,200 shares related to the 2019 performance unit award; 72,000 shares related to the 2020 performance unit award and 298,500 shares related to the 2020 phantom unit award. +(5) +These restricted stock units vest as follows: 5,945 restricted stock units in equal monthly installments from January 24, 2021 through April 24, 2021; 23,378 restricted stock units in equal monthly installments from January 23, 2021 through April 23, 2022; 35,066 restricted stock units on April 7, 2021 and 35,067 restricted stock units on each of April 7, 2022 and 2023. +(6) +Amount includes 45,800 shares related to the 2018 performance unit award; 54,800 shares related to the 2019 performance unit award and 109,600 shares related to the 2020 performance unit award. +(7) +These restricted stock units vest as follows: 10,300 restricted stock units in equal monthly installments from January 24, 2021 through April 24, 2021; 29,600 restricted stock units in equal monthly installments from January 23, 2021 through April 23, 2022 and 44,400 restricted stock units on each of April 7, 2021, 2022 and 2023. +(8) +Amount includes 79,400 shares related to the 2018 performance unit award; 69,300 shares related to the 2019 performance unit award and 138,600 shares related to the 2020 performance unit award. +35 +(9) +These restricted stock units vest as follows: 24,733 restricted stock units on each of April 7, 2021 and 2022; 12,367 restricted stock units on each of April 23, 2021 and 2022; 16,034 restricted stock units on April 24, 2021 and 24,734 restricted stock units on April 7, 2023. +(10) +Amount includes 41,200 shares related to the 2018 performance unit award; 38,700 shares related to the 2019 performance unit award and 77,400 shares related to the 2020 performance unit award. +The following table sets forth information concerning option exercises and stock awards vested during the fiscal year ended December 31, 2020 for the Named Executive Officers: +Option Exercises and Stock Vested +Option awards +Stock awards +Name +Number of +shares acquired +on exercise (#) +Value realized +on exercise ($) +Number of +shares acquired +on vesting (#) +Value realized +on vesting ($)(1) +William Andrew Hendricks, Jr. +— +$ +— +358,074 +$ +1,338,922 +C. Andrew Smith +— +$ +— +47,055 +$ +172,489 +Kenneth N. Berns +— +$ +— +144,177 +$ +538,957 +Seth D. Wexler +— +$ +— +47,399 +$ +141,673 +James M. Holcomb +— +$ +— +47,399 +$ +141,673 +(1) +Value realized on vesting is based on the closing price of Patterson-UTI common stock on the day the respective shares vested; provided that if the stock market was closed on the day the respective shares vested, the value realized on vesting is based on the closing price of Patterson-UTI common stock on the last day the stock market was open immediately prior to the day the respective shares vested. +Pay Ratio +Under rules adopted pursuant to the Dodd-Frank Act of 2010, we are required to calculate and disclose the total compensation paid to our median employee, as well as the ratio of the total compensation paid to the median employee as compared to the total compensation paid to our CEO. The paragraphs that follow describe our methodology and the resulting CEO pay ratio. +We identified the median employee using our employee population on December 31, 2020. At December 31, 2020, we had approximately 3,000 employees located in the United States. +The compensation measure we used to identify the median employee was Box 1 of the Form W-2 issued by the IRS for federal tax purposes. We chose Form W-2 because our employee population consisted solely of U.S. employees, and this compensation measure applied to all U.S. employees, allowing for accessibility and broad comparability. The total annual compensation for the year ended December 31, 2020 was calculated as $86,277 for our median employee and $3,722,515 for our CEO as reflected in the “Total” column of the Summary Compensation Table. The ratio of our CEO’s pay to that of our median employee for 2020 was approximately 44 times. The pay ratio provided is a reasonable estimate calculated in a manner consistent with SEC rules. +Because the SEC rules for identifying the median of the annual total compensation of our employees and calculating the pay ratio based on that employee’s annual total compensation allows companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices, the pay ratio reported by other companies may not be comparable to the pay ratio for our Company, as other companies have headquarters and offices in different states and countries, have different employee populations and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their pay ratios. +No Pension Benefits or Nonqualified Deferred Compensation +Patterson-UTI does not provide any pension benefits for any of the Named Executive Officers. None of the Named Executive Officers had any items of nonqualified deferred compensation during 2020. As a result, tables with respect to pension benefits and nonqualified deferred compensation have not been provided. +36 +DIRECTOR COMPENSATION +The following table sets forth information concerning compensation for the fiscal year ended December 31, 2020 with respect to the directors of Patterson-UTI who are not executive officers: +Name +Fees earned +or paid in cash +($) +Stock awards +($)(1) +Option awards +($)(2) +All other +compensation +($) +Total +($) +Charles O. Buckner (3) +$ +42,500 +$ +174,993 +$ +— +$ +— +$ +217,493 +Tiffany (TJ) Thom Cepak +$ +100,000 +$ +174,993 +$ +— +$ +— +$ +274,993 +Michael W. Conlon +$ +95,000 +$ +174,993 +$ +— +$ +— +$ +269,993 +Curtis W. Huff +$ +115,000 +$ +174,993 +$ +— +$ +— +$ +289,993 +Terry H. Hunt +$ +100,000 +$ +174,993 +$ +— +$ +— +$ +274,993 +Janeen S. Judah +$ +85,000 +$ +174,993 +$ +— +$ +— +$ +259,993 +(1) +Amounts set forth represent the fair value at the date of grant as determined in accordance with FASB ASC Topic 718 with respect to restricted stock units awarded to the directors in the fiscal year ended December 31, 2020. For additional information related to the assumptions used and valuation of restricted stock units, see Note 12 to the consolidated financial statements in Patterson-UTI’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020. Each director received an award of 16,666 restricted stock units on January 1, 2020 with a grant date value of $10.50 per restricted stock unit. As of December 31, 2020, each current director held 16,666 unvested restricted stock units. The restricted stock units awarded on January 1, 2020 fully vested on January 1, 2021. +(2) +No options were issued to directors during the fiscal year ended December 31, 2020. As of December 31, 2020, Messrs. Buckner, Conlon, Huff and Hunt and Ms. Cepak held the following options to purchase shares of Common Stock: +Number of Securities Underlying +Unexercised Options (#) +Name +Exercisable +Unexercisable +Total +Charles O. Buckner +50,000 +— +50,000 +Tiffany (TJ) Thom Cepak +30,000 +— +30,000 +Michael W. Conlon +50,000 +— +50,000 +Curtis W. Huff +50,000 +— +50,000 +Terry H. Hunt +50,000 +— +50,000 +(3) +Mr. Buckner retired from the Board of Directors in June 2020. 7,123 of his restricted stock units granted on January 1, 2020 vested upon his retirement, and the remainder were forfeited. +Directors who are also employees of Patterson-UTI do not receive compensation for serving as a director or as a member of a committee of the Board of Directors. All directors are reimbursed for reasonable out-of-pocket expenses incurred in connection with serving as a member of the Board of Directors. +The current compensation for non-employee directors is as follows: Each non-employee director receives an annual base cash retainer of $75,000 and restricted stock units on January 1 of each year with a grant date value of $175,000. Each non-employee director that serves on the Audit Committee or the Compensation Committee receives an additional annual cash retainer of $10,000 per committee on which he or she serves, with the Chair of each such committee receiving $15,000. The Chair of the Nominating and Corporate Governance Committee receives an additional annual cash retainer of $10,000. The non-Executive Chairman receives an additional annual cash retainer of $50,000 and additional restricted stock units with a grant date value of $50,000. At times while the Board has an Executive Chairman, the Lead Director receives an additional annual cash retainer of $20,000. +The Board of Directors determined to limit the amount of the annual restricted stock unit grants made to non-employee directors on January 1, 2021 in recognition of the significant decline in our stock price. This limitation was accomplishing by determining the number of restricted stock units granted by dividing the grant date values set forth above by the greater of the market price at the time of grant and $8.00. As a result, the grant date value of restricted stock unit awards issued to non-employee directors on January 1, 2021 was reduced by approximately 34%. +37 +EMPLOYMENT-RELATED AGREEMENTS +Change in Control, Employment and Severance Agreements +Change in Control Agreement with Mr. Berns +Patterson-UTI has a Change in Control Agreement with Mr. Berns (the “CIC Agreement”). The CIC Agreement was entered into in 2004 to protect Mr. Berns should a change in control occur, thereby encouraging Mr. Berns to remain in the employ of Patterson-UTI and not be distracted from the performance of his duties to Patterson-UTI by the possibility of a change in control. +The CIC Agreement generally has an initial term with automatic 12-month renewals unless Patterson-UTI notifies Mr. Berns at least 90 days before the end of such renewal period that the term will not be extended. If a change in control of Patterson-UTI occurs during the term of the CIC Agreement and Mr. Berns’ employment is terminated (i) by Patterson-UTI other than for cause or other than automatically as a result of death, disability or retirement, or (ii) by Mr. Berns for good reason (as those terms are defined in the CIC Agreement), then Mr. Berns shall generally be entitled to, among other things: +• +a bonus payment equal to the highest bonus paid after the CIC Agreement was entered into (such bonus payment prorated for the portion of the fiscal year preceding the termination date); +• +a payment equal to 2 times the sum of (i) the highest annual salary in effect for Mr. Berns and (ii) the average of the three annual bonuses earned by Mr. Berns for the three fiscal years preceding the termination date; and +• +continued coverage under Patterson-UTI’s welfare plans for up to two years. +As was customary when the CIC Agreement was entered into more than fifteen years ago , the CIC Agreement provides Mr. Berns with a full gross-up payment for any excise taxes imposed on payments and benefits received under the CIC Agreement or otherwise, including other taxes that may be imposed as a result of the gross-up payment. As indicated above, the Compensation Committee subsequently adopted a policy, more than five years ago, to no longer approve tax gross-ups in connection with compensation arrangements, and the employment agreements entered into with Mr. Hendricks in 2016 and Messrs. Smith, Wexler and Holcomb in 2017, which are described below, do not include a tax gross-up provision. +A “change in control” is principally defined by the CIC Agreement as: +• +an acquisition by any individual, entity or group of beneficial ownership of 35% or more of either Patterson-UTI’s then outstanding common stock or the combined voting power of the then outstanding voting securities of Patterson-UTI entitled to vote in the election of directors, +• +a change occurs in which the members of the Board of Directors as of the date of the CIC Agreement cease to constitute at least a majority of Patterson-UTI’s Board of Directors unless that change occurs through a vote of at least a majority of the incumbent members of the Board of Directors, or +• +a change in the beneficial ownership of Patterson-UTI following consummation of a reorganization, merger, consolidation, sale of Patterson-UTI or any subsidiary of Patterson-UTI or a disposition of all or substantially all of the assets of Patterson-UTI, in which the beneficial owners immediately prior to the transaction own 65% or less of outstanding common stock of the newly combined or merged entity. +Severance Agreement with Mr. Berns +To address a prior severance agreement between UTI Energy Corp. and Mr. Berns, Patterson-UTI has entered into a written letter agreement with Mr. Berns pursuant to which Patterson-UTI has agreed to pay Mr. Berns within ten days of the termination of his employment with Patterson-UTI for any reason (including voluntary termination by him), an amount in cash equal to his annual base salary at the time of such termination. Any payment made by Patterson-UTI pursuant to this letter agreement will reduce dollar for dollar any payment owed to Mr. Berns, if any, pursuant to the CIC Agreement. +38 +Employment Agreements with Messrs. Hendricks, Smith , Wexler and Holcomb +Patterson-UTI has Employment Agreements with Messrs. Hendricks, Smith, Wexler and Holcomb. Each Employment Agreement generally has an initial three-year term, subject to automatic annual renewal thereafter. The executive may terminate his employment under his Employment Agreement by providing written notice of such termination at least 30 days before the effective date of such termination. Under specified circumstances, Patterson-UTI may terminate the executive’s employment under his Employment Agreement for cause (as defined in the Employment Agreement) by either (i) providing written notice 10 days before the effective date of such termination and by granting at least 10 days to cure the cause for such termination or (ii) by providing written notice of such termination at least 30 days before the effective date of such termination and by granting at least 20 days to cure the cause for such termination, provided that if the matter is reasonably determined by Patterson-UTI to not be capable of being cured, the executive may be terminated for cause on the date the written notice is delivered. Each Employment Agreement also provides for, among other things, severance payments and the continuation of certain benefits following termination by Patterson-UTI of the executive other than for cause, or termination by the executive for good reason (as defined in each Employment Agreement). Under these provisions, if the executive’s employment is terminated by Patterson-UTI without cause, or the executive terminates his employment for good reason: +• +the executive will have the right to receive a lump-sum payment consisting of 3 times (in the case of Mr. Hendricks) or 2.5 times (in the case of Messrs. Smith, Wexler and Holcomb) the sum of (i) his base salary and (ii) the average annual cash bonus received by him for the three years prior to the date of termination, +• +the executive will have the right to receive a pro-rated lump-sum payment equal to his annual cash bonus based on actual results for the year, payable at the same time as annual cash bonuses are paid to active employees, +• +Patterson-UTI will accelerate vesting of all time-based equity, phantom equity and long-term cash incentive awards on the 60th day following the executive’s termination, +• +Patterson-UTI will cause all performance-based equity, phantom equity and long-term cash incentive awards to continue in effect through the end of the applicable performance period and vest based on actual results as if the executive had remained employed through the end of the applicable performance period, and +• +Patterson-UTI will pay the executive certain accrued obligations and certain obligations pursuant to the terms of employee benefit plans. +However, if a termination by Patterson-UTI other than for cause or by the executive for good reason occurs following a change in control (which is defined in a substantially similar manner to the definition in the CIC Agreement), the executive will generally be entitled to the same severance payments and benefits described above except that (i) the pro-rated lump-sum payment for annual cash bonuses will be based on the executive’s highest annual cash bonus for the last three years, (ii) the executive will be entitled to 36 months (in the case of Mr. Hendricks) or 30 months (in the case of Messrs. Smith, Wexler and Holcomb) of subsidized benefits continuation coverage, and (iii) the performance-based equity, phantom equity and long-term cash incentive awards will be accelerated based on the target level of performance on the 60th day following the executive’s termination. +Equity Award Agreements with Named Executive Officers +All unvested stock options, restricted stock, restricted stock unit and phantom unit awards held by the Named Executive Officers vest upon a change of control as defined by the underlying award agreements. Upon a change in control as defined in the underlying performance unit award grants, the Named Executive Officers would receive the target number of shares issuable thereunder. Upon a change in control as defined in the phantom unit award grant, Mr. Hendricks would receive an amount equal to the product of the average of the closing price of Patterson-UTI common stock for the twenty consecutive trading days preceding the change in control and the target number of phantom units set forth in the agreement. +We expect that awards granted beginning in 2021 will no longer provide for acceleration solely upon a change in control and will instead provide for acceleration only upon the executive’s termination of employment without cause or termination by the executive for good reason following a change in control. +All restricted stock, restricted stock unit, performance unit and phantom unit awards held by the Named Executive Officers provide that in the event of termination of employment due to death or disability, the holder would vest in a portion of the award. With respect to Mr. Hendricks, such a termination at December 31, 2020 would have resulted in the issuance of 90,381 shares pursuant to the accelerated vesting of restricted stock units, with a fair value of $475,404. With respect to Mr. Smith, such a termination at December 31, 2020 would have resulted in the issuance of 26,564 shares pursuant to the accelerated vesting of restricted stock units, with a fair value of $139,727. With respect to Mr. Berns, such a termination at December 31, 2020 would have resulted in the issuance of 33,810 shares pursuant to the accelerated +39 +vesting of restricted stock units , with a fair value of $ 177,841 . With respect to M ess r s . Wexler and Holcomb , such a termination at December 31, 20 20 would have resulted in the issuance of 37,743 shares pursuant to the accelerated vesting of restricted stock units , with a fair value of $ 198,528 . +In the event of termination of employment due to death or disability, the holders of performance units and phantom units would vest in the portion of the award that was earned at the time of death or disability. This payment would be determined at the end of the performance period and would equal the amount that the holder would have received at that time, pro-rated for the amount of time from the date of grant through the date of death or disability. +Potential Payments Upon a Termination or Change in Control +Amounts that each of the Named Executive Officers would be entitled to under the employee’s CIC Agreement or Employment Agreement and other award agreements if a change in control had occurred as of December 31, 2020 and the employee’s employment was terminated by Patterson-UTI other than for cause or terminated by the employee for good reason (as defined in the CIC Agreement or the Employment Agreement and other award agreements) are reflected in the following table: +Cash Payments +Other Benefits +Name +Bonus +Payment +($)(1) +Salary and +Bonus +($)(2) +Stock +Awards +($)(3) +Performance +Unit Awards +($)(4) +Phantom +Unit Awards +($)(5) +Other +Benefits +($)(6) +Total +($) +William Andrew Hendricks, Jr. +$ +2,187,500 +$ +7,538,800 +$ +2,434,512 +$ +1,915,166 +$ +1,599,960 +$ +36,190 +$ +15,712,128 +C. Andrew Smith +$ +984,375 +$ +2,827,063 +$ +707,591 +$ +985,198 +$ +— +$ +28,951 +$ +5,533,178 +Kenneth N. Berns +$ +1,397,022 +$ +2,261,650 +$ +910,506 +$ +1,302,376 +$ +— +$ +— +$ +5,871,554 +Seth D. Wexler +$ +539,000 +$ +2,232,000 +$ +604,732 +$ +719,042 +$ +— +$ +30,159 +$ +4,124,933 +James M. Holcomb +$ +619,380 +$ +2,451,838 +$ +604,732 +$ +719,042 +$ +— +$ +16,039 +$ +4,411,031 +(1) +In the case of Messrs. Hendricks, Smith Wexler and Holcomb, the assumed bonus is equal to the highest annual bonus paid in the three years prior to 2020. In the case of Mr. Berns, the assumed bonus payment is equal to the highest annual bonus paid from the time the CIC Agreement was entered into through December 31, 2020. +(2) +The assumed salary and bonus payment represents 3.0 times (in the case of Mr. Hendricks), 2.5 times (in the case of Messrs. Smith, Wexler and Holcomb) or 2.0 times (in the case of Mr. Berns) of the sum of the 2020 salary in effect for each employee and the average of the annual bonuses earned by each employee for 2019, 2018 and 2017. Bonus amounts earned in 2020 were not considered in this calculation as they were not determined until after December 31, 2020. +(3) +Each of the stock award agreements for the Named Executive Officers provide that unvested awards will vest upon a change in control. Amounts presented in the table represent the value of unvested stock awards using the market price of Patterson-UTI common stock at December 31, 2020. +(4) +Share settled performance unit agreements for the Named Executive Officers include a provision that upon a change in control as defined in the respective award agreements, the Named Executive Officer will receive an award of shares equal to the target amount set forth in each agreement. Amounts presented in the table represent the assumed award of the target number of shares if a change in control had occurred on December 31, 2020, valued at the December 31, 2020 closing price of Patterson-UTI common stock of $5.26 per share. +(5) +The cash settled phantom unit agreement for Mr. Hendricks includes a provision that upon a change in control as defined in the award agreement, Mr. Hendricks will receive a payment equal to the product of the average of the closing price of Patterson-UTI common stock for the twenty consecutive trading days preceding the change in control and the target number of phantom units set forth in the agreement. The amount presented in the table represents the assumed payment if a change in control had occurred on December 31, 2020. The average of the closing price of Patterson-UTI common stock for the twenty consecutive trading days ending December 31, 2020 was $5.36 per share. +( 6 ) +Messrs. Hendricks, Smith, Wexler and Holcomb participated in Patterson-UTI’s health and welfare plans as of December 31, 2020. The amounts presented represent Patterson-UTI’s portion of the premiums for three years in the case of Mr. Hendricks and 30 months in the case of Messrs. Smith, Wexler and Holcomb . No tax gross-up payment would have been payable to Mr. Berns under the terms of his CIC Agreement. +In the event of a termination of employment of Mr. Berns for any reason, including voluntary termination, Mr. Berns would be entitled to an amount in cash equal to his annual base salary at the time of such termination. Any such payment made by Patterson-UTI will reduce dollar for dollar any payment owed to Mr. Berns that is reflected in the table above. In the case of Messrs. Hendricks, Smith, Wexler or Holcomb, if the executive’s employment was terminated by Patterson-UTI other than for cause or terminated by the executive for good reason (as defined in the Employment Agreement) and not in connection with a change-in-control, then the executive would be entitled to the same potential payments and benefits as set forth in the table above, except that Mr. Hendricks’ cash payment would be lower by $1,562,500; Mr. Smith’s cash payment would be lower by $703,125; Mr. Wexler’s cash payment would be lower by $311,000 and Mr. +40 +Holcomb’s cash payment would be lower by $ 396,180 as a result of the calculation of the bonus payment for the year in which the termination occurred. Additionally, upon a termination by Patterson-UTI other than for cause or a termination by the executive for good reason and not in connection with a change-in-control, the potential payments and benefits set forth in the table above with respect to the performance units and phantom units would not be paid at the time of such termination, as such awards would instead remain outstanding through the end of the applicable performance period, subject to achievement of the applicable performance measures. +With respect to Messrs. Hendricks, Smith, Wexler or Holcomb, the foregoing severance benefits (other than the accrued obligations and benefit obligations) are conditioned on the executive’s execution of a release within 50 days of his termination that is not revoked during any applicable revocation period provided in such release. Their employment agreements also contain covenants and restrictions, including non-competition and non-solicitation provisions pursuant to which the executive will not be permitted to compete with Patterson-UTI in certain circumstances for a period of one year following termination of employment. +Indemnification Agreements +Patterson-UTI has entered into an indemnification agreement with Messrs. Hendricks, Smith, Berns and Wexler and each of its directors containing provisions that may require Patterson-UTI, among other things, to indemnify such executive officers and directors against liabilities that may arise by reason of their status or service as executive officers or directors (subject to certain exceptions) and to advance expenses incurred as a result of any proceeding against them as to which they could be indemnified. +CERTAIN TRANSACTIONS +Patterson-UTI has a written policy with respect to related person transactions. In accordance with this policy, related person transactions are reviewed by the non-executive Chairman of the Board or the chair of the Audit Committee, each of whom has full delegated authority to approve, disapprove, ratify, amend, terminate or rescind any such transaction, or direct that such transaction be submitted to the Audit Committee or the full Board of Directors for consideration. In approving or disapproving related person transactions, the relevant facts and circumstances of the related person transaction are considered, including whether such transaction is in, or not inconsistent with, the best interest of Patterson-UTI and whether, in appropriate cases, such transaction is on commercial terms at least as favorable to Patterson-UTI as would otherwise be available to or from an unrelated third party or to Patterson-UTI’s employees generally. Related person transactions generally include transactions in an amount that exceeds $50,000 between Patterson-UTI or any of its subsidiaries and an executive officer, a director (or nominee to become director), an immediate family member of any of the foregoing or any entity in which any of the foregoing has a 10% or greater beneficial ownership interest or in which they are an executive officer, general partner, principal or engaged in a similar position. Certain related person transactions have been pre-approved under the terms of the policy, including, subject to certain exceptions and limitations, the sale to or purchase from Patterson-UTI of goods and services by entities related to directors in the ordinary course of business that are immaterial to Patterson-UTI and with respect to which the director has no direct economic interest or decision making authority. +In connection with the acquisition by REMY Capital Partners III, L.P. (“REMY Capital”) of an ownership interest in UTI Energy Corp. in March 1995, REMY Capital succeeded to a registration rights agreement with UTI. As the successor-in-interest to UTI, Patterson-UTI assumed this registration rights agreement pursuant to which REMY Capital has the right to require Patterson-UTI to use its reasonable efforts to register shares held by REMY Capital under the Securities Act of 1933, as amended. In the event that such rights are exercised in connection with a primary offering proposed by Patterson-UTI (or a secondary offering with which Patterson-UTI agrees to participate), REMY Capital would bear its pro rata share of the costs of the offering, other than legal, accounting and printing costs, all of which Patterson-UTI would bear. In the event that REMY Capital elects to exercise such rights other than in connection with an offering in which Patterson-UTI participates, REMY Capital would bear all costs of the offering. These rights continue so long as REMY Capital continues to own the Common Stock that it acquired in March 1995. As of the date of this proxy statement, REMY Capital continues to hold 605,000 shares of such Common Stock. +Mr. Berns, Executive Vice President and Chief Commercial Officer of Patterson-UTI, is an executive of REMY Investors, which is the general partner of REMY Capital. +41 +SECURITY OWNERSHIP OF CERTAIN +BENEFICIAL OWNERS AND MANAGEMENT +The following table sets forth, as of April 7, 2021, the stock ownership of (i) the Named Executive Officers, directors and Board nominees, individually, (ii) all directors, Board nominees and executive officers as a group and (iii) each person known by Patterson-UTI to be the beneficial owner of more than 5% of Common Stock. +Name of Beneficial Owner +Amount and +Nature of +Beneficial +Ownership +Percent +of Class +Beneficial Owners of more than 5% of Patterson-UTI’s Common Stock: +BlackRock, Inc. +29,143,312 +(1) +15.5 +% +The Vanguard Group +20,217,911 +(2) +10.8 +% +Dimensional Fund Advisors LP +9,755,884 +(3) +5.2 +% +Directors and Named Executive Officers: +William Andrew Hendricks, Jr. +2,301,577 +(4) +1.2 +% +C. Andrew Smith +210,671 +(5) +* +Kenneth N. Berns +1,708,547 +(6) +* +Seth D. Wexler +282,542 +(7) +* +James M. Holcomb +376,072 +(8) +* +Tiffany (TJ) Thom Cepak +99,105 +(9) +* +Michael W. Conlon +143,679 +(10) +* +Curtis W. Huff +339,483 +(11) +* +Terry H. Hunt +135,770 +(12) +* +Janeen S. Judah +68,689 +(13) +* +All current directors and executive officers as a group (10 persons) +5,666,135 +(14) +3.0 +% +* +indicates less than 1.0% +(1) +Based solely on a Schedule 13G/A filed by BlackRock, Inc. with the SEC on January 25, 2021. According to the report, BlackRock, Inc. has sole voting power with respect to 28,769,830 shares and sole dispositive power with respect to 29,143,312 shares. The address of the principal business office of BlackRock, Inc. is 55 East 52nd Street, New York, New York 10055. +(2) +Based solely on a Schedule 13G/A filed by The Vanguard Group with the SEC on February 10, 2021. According to the report, The Vanguard Group has shared voting power with respect to 186,130 shares, sole dispositive power with respect to 19,896,779 shares and shared dispositive power with respect to 321,132 shares. The address of the principal business office of The Vanguard Group is 100 Vanguard Blvd., Malvern, Pennsylvania 19355. +(3) +Based solely on a Schedule 13G/A filed by Dimensional Fund Advisors LP with the SEC on February 16, 2021. According to the report, Dimensional Fund Advisors LP has sole voting power with respect to 9,409,515 shares and sole dispositive power with respect to 9,755,884 shares. The address of the principal business office of Dimensional Fund Advisors LP is Building One, 6300 Bee Cave Road, Austin, Texas 78746. +( 4 ) +Includes shares underlying stock options held by Mr. Hendricks that are presently exercisable to purchase 987,650 shares. Includes 16,820 shares underlying restricted stock units that will vest within 60 days. Does not include 291,723 shares underlying restricted stock units that will not vest within 60 days. +( 5 ) +Includes 4,409 shares underlying restricted stock units held by Mr. Smith that will vest within 60 days. Does not include 86,207 shares underlying restricted stock units that will not vest within 60 days. +( 6 ) +Includes shares underlying stock options held by Mr. Berns that are presently exercisable to purchase 765,800 shares. Includes 6,275 shares underlying restricted stock units that will vest within 60 days. Does not include 109,150 shares underlying restricted stock units that will not vest within 60 days. The Common Stock beneficially owned by Mr. Berns includes 140,000 shares held in trust(s) for which he is the trustee. Does not include shares of Common Stock beneficially owned by REMY Investors. Mr. Berns disclaims beneficial ownership of such shares beneficially owned by REMY Investors. +( 7 ) +Includes 28,401 shares underlying restricted stock units held by Mr. Wexler that will vest within 60 days. Does not include 61,834 shares underlying restricted stock units that will not vest within 60 days. +(8) +Includes 28,401 shares underlying restricted stock units held by Mr. Holcomb that will vest within 60 days. Does not include 61,834 shares underlying restricted stock units that will not vest within 60 days. +( 9 ) +Includes shares underlying presently exercisable stock options held by Ms. Cepak to purchase 30,000 shares. Does not include 21,875 shares underlying unvested restricted stock units that will not vest within 60 days. +(1 0 ) +Includes shares underlying presently exercisable stock options held by Mr. Conlon to purchase 50,000 shares. Does not include 21,875 shares underlying unvested restricted stock units that will not vest within 60 days. +42 +(1 1 ) +Includes shares underlying presently exercisable stock options held by Mr. Huff to purchase 5 0,000 shares. Does not include 28,125 shares underlying unvested restricted stock units that will not vest within 60 days . +(1 2 ) +Includes shares underlying presently exercisable stock options held by Mr. Hunt to purchase 50,000 shares. Does not include 21,875 shares underlying unvested restricted stock units that will not vest within 60 days. +(1 3 ) +Does not include 21,875 shares underlying unvested restricted stock units held by Ms. Judah that will not vest within 60 days. +(1 4 ) +Includes shares underlying stock options that are presently exercisable to purchase 1,933,450 shares of Common Stock. Includes 84,306 shares underlying restricted stock units held by certain directors and executive officers that will vest within 60 days. Does not include 726,373 shares underlying restricted stock units held by such individuals that will not vest within 60 days. +Except as stated herein, each stockholder has sole voting and investment power with respect to Common Stock included in the above table. There are no arrangements known to Patterson-UTI which may result in a change in control. The business address of each of our directors and officers is 10713 West Sam Houston Parkway North, Suite 800, Houston, Texas 77064. +Equity Compensation Plan Information +Equity compensation plan information as of December 31, 2020 follows: +Equity Compensation Plan Information +Plan Category +Number of +Securities to +be Issued upon +Exercise of +Outstanding +Options, +Warrants and +Rights +Weighted - +Average +Exercise +Price of +Outstanding +Options, +Warrants and +Rights (2) +Number of +Securities +Remaining +Available +for Future +Issuance +under Equity +Compensation +Plans +(Excluding +Securities +Reflected +in Column(a)) +(a) +(b) +(c) +Equity compensation plans approved by security holders(1) +4,026,150 +$ +21.63 +4,986,392 +Equity compensation plans not approved by security holders +— +$ +— +— +Total +4,026,150 +$ +21.63 +4,986,392 +(1) +The Amended and Restated 2014 Long-Term Incentive Plan, as amended, provides for awards of incentive stock options, non-incentive stock options, tandem and freestanding stock appreciation rights, restricted stock awards, other stock unit awards, performance share awards, performance unit awards and dividend equivalents to key employees (as defined in the Amended and Restated 2014 Long-Term Incentive Plan, as amended), officers and directors, which are subject to certain vesting and forfeiture provisions. All options are granted with an exercise price equal to or greater than the fair market value of the common stock at the time of grant. The vesting schedule and term are set by the Compensation Committee of the Board of Directors, except that the Board has the same power as the Compensation Committee with respect to awards to directors. All securities remaining available for future issuance under equity compensation plans approved by security holders in column (c) are available under this plan. In addition to the Amended and Restated 2014 Long-Term Incentive Plan, as amended, this Plan category also includes the 2005 Long-Term Incentive Plan. In connection with the approval of the Amended and Restated 2014 Long-Term Incentive Plan, the Board of Directors approved a resolution that no further options, restricted stock or other awards would be granted under any equity compensation plan, other than the Amended and Restated 2014 Long-Term Incentive Plan. Options granted under the 2005 Long-Term Incentive Plan typically vested over one year for non-employee directors and three years for employees. All options were granted with an exercise price equal to the fair market value of the related common stock at the time of grant. +(2) +This column reflects the weighted average exercise price of options granted under the Amended and Restated 2014 Long-Term Incentive Plan and the 2005 Long-Term Incentive Plan that were outstanding on December 31, 2020. +43 +AUDIT COMMITTEE REPORT +The following report of the Audit Committee does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other Patterson-UTI filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent Patterson-UTI specifically incorporates this report by reference therein. +The Audit Committee members are Mses. Cepak (chair) and Judah and Messrs. Huff and Hunt, each of whom is independent within the meaning of applicable rules under the Exchange Act and within the meaning of the Nasdaq listing standards. The Board has determined that Ms. Cepak and Mr. Huff are “audit committee financial experts” within the meaning of applicable SEC rules. +The Audit Committee oversees management’s conduct of Patterson-UTI’s accounting and financial reporting process, including review of: (i) financial reports and other financial information provided by Patterson-UTI to the public and government/regulatory bodies, (ii) Patterson-UTI’s system of internal control over financial reporting, and (iii) the annual independent audit of Patterson-UTI’s consolidated financial statements and internal control over financial reporting. +The Audit Committee’s role is one of review, and it recognizes that Patterson-UTI’s management is responsible for preparing Patterson-UTI’s consolidated financial statements and the independent auditors are responsible for auditing those financial statements. In fulfilling its review and oversight responsibilities, the Audit Committee reviewed with management the audited financial statements included in Patterson-UTI’s Annual Report on Form 10-K for the year ended December 31, 2020, including a discussion of the quality, not just the acceptability, of the accounting principles used, the reasonableness of significant judgments made by management, and the clarity of disclosures provided in the financial statements. The Audit Committee also discussed with management the basis for their assertion that Patterson-UTI maintained effective internal control over financial reporting as of December 31, 2020. +The Audit Committee discussed with Patterson-UTI’s independent registered public accounting firm (PricewaterhouseCoopers LLP) the overall scope and plans for their integrated audit. The Audit Committee met with PricewaterhouseCoopers LLP, with and without management present, to discuss the results of their integrated audit, their evaluation of Patterson-UTI’s internal control over financial reporting and the overall quality of Patterson-UTI’s financial reporting. The Audit Committee also reviewed with PricewaterhouseCoopers LLP their judgments as to the quality, not just the acceptability, of Patterson-UTI’s accounting principles and discussed such other matters as are required by the applicable requirements of the Public Company Accounting Oversight Board and the SEC. +The Audit Committee has received and reviewed the written disclosures and the letter from PricewaterhouseCoopers LLP required by the Public Company Accounting Oversight Board regarding their independence, and their communications with the Audit Committee concerning independence. +Taking the foregoing into consideration, the undersigned Audit Committee members recommended to the Board of Directors that the Board approve the inclusion of Patterson-UTI’s audited financial statements and management’s report on internal control over financial reporting in the Annual Report on Form 10-K for the fiscal year ended December 31, 2020. +Audit Committee of the Board of Directors: +Tiffany (TJ) Thom Cepak, Chair +Curtis W. Huff +Terry H. Hunt +Janeen S. Judah +44 +PricewaterhouseCoopers LLP Fees for Fiscal Years 20 20 and 201 9 +In 2020 and 2019, Patterson-UTI and its subsidiaries incurred fees for services provided by PricewaterhouseCoopers LLP. +Description +Fees Incurred in +Fiscal Year +2020 +Fees Incurred in +Fiscal Year +2019 +Audit fees +$ +1,963,146 +$ +2,742,330 +Audit-related fees +— +136,000 +Tax fees +60,000 +65,000 +All other fees +2,893 +2,893 +Total +$ +2,026,039 +$ +2,946,223 +The Audit Committee appoints the independent registered public accounting firm. The Audit Committee or Ms. Cepak, as Chair of the Audit Committee, approves all other engagements of the independent registered public accounting firm in advance. In the event Ms. Cepak approves any such engagement, she discusses such approval with the Audit Committee at its next meeting. +“Audit fees” relate to audit services of PricewaterhouseCoopers LLP for fiscal 2020 and 2019 consisting of the integrated audit of Patterson-UTI’s consolidated financial statements and internal control over financial reporting, and quarterly reviews of Patterson-UTI’s interim financial statements and the audits of certain subsidiaries. “Audit-related fees” for 2019 relate to the performance of certain procedures in connection with the filing of various registration statements and Exchange Act reports and the offer and sale of our 5.15% Senior Notes due 2029. “Tax fees” include federal, state, local and foreign tax compliance and related matters. “All other fees” consists of annual subscription fees to software products. The Audit Committee or Ms. Cepak, as Chair of the Audit Committee, approved in advance all of the services described above. +The Audit Committee has discussed the non-audit services provided by PricewaterhouseCoopers LLP and the related fees and has considered whether those services and fees are compatible with maintaining auditor independence. The Audit Committee determined that such non-audit services were consistent with the independence of PricewaterhouseCoopers LLP. +OTHER MATTERS +Other Business +As of the date of this proxy statement, management of Patterson-UTI was not aware of any matter to be presented at the Meeting other than as set forth herein. If any other matters are properly brought before the Meeting, however, the shares represented by valid proxies will be voted with respect to such matters in accordance with the judgment of the persons voting them. +Stockholder Proposals for 2022 Annual Meeting +Proposals for Inclusion in the Proxy Statement. Pursuant to Rule 14a-8 under the Exchange Act, stockholders may present proper proposals for inclusion in Patterson-UTI’s proxy statement and for consideration at the next annual meeting of stockholders by submitting their proposals to Patterson-UTI in a timely manner. In order to be included in Patterson-UTI’s proxy statement for the 2022 annual meeting of stockholders, proposals from stockholders must be received by Patterson-UTI no later than December 13, 2021, and must otherwise comply with the requirements of Rule 14a-8. +Proposals or Director Nominations not Included in the Proxy Statement. Patterson-UTI’s bylaws establish an advance notice procedure with regard to stockholder proposals and director nominations not included in Patterson-UTI’s proxy statement. For director nominations not included in Patterson-UTI’s proxy statement or stockholder proposals to be properly brought before the 2022 annual meeting by a stockholder, the stockholder must be a stockholder of record on the date of the giving of the notice provided for in Patterson-UTI’s bylaws and on the record date for the determination of stockholders entitled to vote at such annual meeting and must give timely notice of such business in writing to the Secretary of Patterson-UTI. To be timely with respect to the 2022 annual meeting of stockholders, a stockholder’s notice must be delivered to or mailed and received by the close of business at Patterson-UTI’s principal executive offices not earlier than February 3, 2022 and not later than March 5, 2022, assuming the date of the 2022 annual meeting is not changed by more than 30 days before or after the anniversary date of the 2021 annual meeting. A stockholder’s notice to +45 +the Secretary of Patterson-UTI shall contain certain information specified in Patterson-UTI’s bylaws regarding the stockholder and the proposed nominee or stockholder proposal . See Article I, Section 8 of Patterson-UTI’s bylaws. +Proxy Access Procedures. Patterson-UTI’s bylaws permit a stockholder, or group of up to 20 stockholders, owning continuously for at least three years shares of Patterson-UTI stock representing an aggregate of at least 3% of our outstanding shares, to nominate and include in our proxy materials director nominees constituting up to the greater of two or 20% of our Board, provided that the stockholder(s) and nominee(s) satisfy the requirements in Patterson-UTI’s bylaws. See Article I, Section 11 of Patterson-UTI’s bylaws. Written notice of proxy access director nominees must be received by the close of business at Patterson-UTI’s principal executive offices not earlier than December 13, 2021 and not later than January 12, 2022, assuming the date of the 2022 annual meeting is not changed by more than 30 days before or after the anniversary date of the 2021 annual meeting. +Annual Report +A copy of Patterson-UTI’s annual report on Form 10-K accompanies this proxy statement only if you have requested that a copy of this proxy statement be mailed to you. The annual report on Form 10-K also is available electronically by following the instructions in the Notice. The annual report on Form 10-K is not incorporated into this proxy statement and is not considered proxy-soliciting material. +A copy of the annual report on Form 10-K, including the financial statements and financial statement schedules, but excluding exhibits, may be obtained by stockholders without charge by written request to the Secretary of Patterson-UTI at 10713 West Sam Houston Parkway North, Suite 800, Houston, Texas 77064 or by accessing it on Patterson-UTI’s website at www.patenergy.com in the investors section under the “Financial Information” link. Patterson-UTI will furnish the exhibits to Form 10-K upon request and upon receipt of a reproduction fee. +Delivery of Documents to Stockholders Sharing an Address +The SEC’s rules allow companies to send a single Notice or single copy of annual reports, proxy statements, prospectuses and other disclosure documents to two or more stockholders sharing the same address, subject to certain conditions. These rules are intended to provide greater convenience for stockholders, and cost savings for companies, by reducing the number of duplicate documents that stockholders receive. Unless different instructions were previously provided to Patterson-UTI, if two or more stockholders share a mailing address, such stockholders were deemed to have consented to receiving only one copy, and a single copy of this proxy statement and Patterson-UTI's annual report on Form 10-K (and/or a single copy of the Notice) has been sent to their address. If instructions for separate delivery have been received from any stockholder, Patterson-UTI will deliver promptly separate copies of the relevant disclosure materials. Similarly, if multiple copies of disclosure materials are being delivered to a single address, stockholders can request a single copy for future deliveries. Written requests should be submitted to the Secretary of Patterson-UTI at 10713 West Sam Houston Parkway North, Suite 800, Houston, Texas 77064. Requests may also be made by calling Investor Relations at (281) 765-7100. +46 +ANNEX A +PATTERSON-UTI ENERGY, INC. +2021 LONG-TERM INCENTIVE PLAN +Patterson-UTI Energy, Inc. (the “ Company ”), a Delaware corporation, hereby establishes and adopts the following 2021 Long-Term Incentive Plan (as amended from time to time, the “ Plan ”) effective as of April 9, 2021 (the “ Effective Date ”). +1. PURPOSE OF THE PLAN +The purpose of the Plan is to assist the Company and its Subsidiaries in attracting and retaining selected individuals to serve as directors, employees, consultants and/or advisors of the Company who are expected to contribute to the Company’s success and to achieve long-term objectives which will inure to the benefit of all stockholders of the Company through the additional incentives inherent in the Awards hereunder. +2. DEFINITIONS +2.1 “Award” shall mean any Option, Stock Appreciation Right, Restricted Stock Award, Performance Award, Performance Unit, Other Stock Unit Award or any other right, interest or option relating to Shares or other property (including cash) granted pursuant to the provisions of the Plan. +2.2 “ Award Agreement ” shall mean any agreement, contract or other instrument or document evidencing any Award granted by the Committee hereunder, which shall be in written or electronic form, as designated by the Committee. +2.3 “ Board ” shall mean the board of directors of the Company. +2.4 “ Change of Control ” shall mean, except as otherwise provided in an Award Agreement, the occurrence of any of the following: +(a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended) (a “ Covered Person ”) of beneficial ownership (within the meaning of rule 13d-3 promulgated under the Exchange Act) of 35% or more of either (i) the then outstanding shares of the common stock of the Company (the “ Outstanding Company Common Stock ”), or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “ Outstanding Company Voting Securities ”); provided, however, that for purposes of this Section 2.4(a) , the following acquisitions shall not constitute a Change of Control: (A) any acquisition directly from the Company, (B) any acquisition by the Company, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any entity controlled by the Company, or (D) any acquisition by any entity pursuant to a transaction which complies with clauses (A), (B) and (C) of Section 2.4(c) ; or +(b) Individuals who, as of the Effective Date, constitute the Board (the “ Incumbent Board ”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the Effective Date whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Covered Person other than the Board; or +(c) Consummation of (i) a reorganization, merger or consolidation or sale of the Company or any subsidiary of the Company, or (ii) a disposition of all or substantially all of the assets of the Company (a “ Business Combination ”), in each case, unless, immediately following such Business Combination: (A) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, direct or indirectly, more than 65% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may +be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be; (B) no Covered Person (excluding any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 35% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation, except to the extent that such ownership existed prior to the Business Combination; and (C) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or, if earlier, of the action of the Board, providing for such Business Combination. +2.5 “ Code ” shall mean the Internal Revenue Code of 1986, as amended from time to time. +2.6 “ Committee ” shall mean the Compensation Committee of the Board, consisting of no fewer than two Directors, each of whom is (a) a “Non-Employee Director” within the meaning of Rule 16b-3 of the Exchange Act and (b) an “independent director” for purpose of the rules and regulations of the Nasdaq Stock Market. +2.7 “ Director ” shall mean a non-employee member of the Board. +2.8 “ Disability ” shall, except as otherwise provided in an Award Agreement, exist (a) if the Participant qualifies for long-term disability benefits under a long-term disability program sponsored by the Company in which employees participate generally or (b) if the Company does not sponsor such a long-term disability program, if the Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months. +2.9 “ Employee ” shall mean any employee of the Company or any Subsidiary and any prospective employee conditioned upon, and effective not earlier than, such person’s becoming an employee of the Company or any Subsidiary. Solely for purposes of the Plan, an Employee shall also mean any consultant or advisor who provides services to the Company or any Subsidiary, so long as such person (a) renders bona fide services that are not in connection with the offer and sale of the Company’s securities in a capital raising transaction and (b) does not directly or indirectly promote or maintain a market for the Company’s securities. +2.10 “ Exchange Act ” shall mean the Securities Exchange Act of 1934, as amended. +2.11 “ Fair Market Value ” shall mean, with respect to any property other than Shares, the market value of such property determined by such methods or procedures as shall be established from time to time by the Committee. The Fair Market Value of Shares as of any date shall be the per Share closing price of the Shares as reported on the Nasdaq Stock Market on that date (or if there were no reported prices on such date, on the last preceding date on which the prices were reported) or, if the Company is not then listed on the Nasdaq Stock Market, on the principal national securities exchange on which the Company is listed, and if the Company is not then listed on the Nasdaq Stock Market or any national securities exchange, the Fair Market Value of Shares shall be determined by the Committee in its sole discretion using appropriate criteria. +2.12 “ Incentive Stock Option ” shall mean an Option intended to qualify as an “incentive stock option” as defined in Section 422 of the Code. +2.13 “ Option ” shall mean any right granted to a Participant under the Plan allowing such Participant to purchase Shares at such price or prices and during such period or periods as the Committee shall determine. +2.14 “ Participant ” shall mean an Employee or Director who is selected by the Committee to receive an Award under the Plan. +2.15 “ Performance Award ” shall mean any Award of Performance Shares or Performance Units granted pursuant to Article 9 . +2.16 “ Performance Period ” shall mean that period established by the Committee at the time any Performance Award is granted or at any time thereafter during which any performance goals specified by the Committee with respect to such Award are to be measured. +2.17 “ Performance Share ” shall mean any grant pursuant to Section 9 of a unit valued by reference to a designated number of Shares, which value may be paid to the Participant by delivery of such property as the Committee shall determine, including cash, Shares, other property, or any combination thereof, upon achievement of such performance goals during the Performance Period as the Committee shall establish at the time of such grant or thereafter. +2.18 “ Performance Unit ” shall mean any grant pursuant to Section 9 of a unit valued by reference to a designated amount of property (including cash) other than Shares, which value may be paid to the Participant by delivery of such property as the Committee shall determine, including cash, Shares, other property, or any combination thereof, upon achievement of such performance goals during the Performance Period as the Committee shall establish at the time of such grant or thereafter. +2.19 “ Prior Plans ” shall mean, collectively, the Company’s 2005 Long-Term Incentive Plan , as amended, and the Company’s Amended and Restated 2014 Long-Term Incentive Plan, as amended. +2.20 “ Restricted Stock ” shall mean any Share issued with the restriction that the holder may not sell, transfer, pledge or assign such Share and with such other restrictions as the Committee, in its sole discretion, may impose (including any restriction on the right to vote such Share and the right to receive any dividends), which restrictions may lapse separately or in combination at such time or times, in installments or otherwise, as the Committee may deem appropriate in its sole discretion. +2.21 “ Shares ” shall mean the shares of common stock of the Company, par value $.01 per share. +2.22 “ Stock Appreciation Right ” shall mean the right granted to a Participant pursuant to Section 6 . +2.23 “ Subsidiary ” shall mean any corporation or other entity, whether domestic or foreign, in which the Company has or obtains, directly or indirectly, a proprietary interest of more than 50% by reason of stock ownership or otherwise. +2.24 “ Substitute Awards ” shall mean Awards granted or Shares issued by the Company in assumption of, or in substitution or exchange for, awards previously granted, or the right or obligation to make future awards, by a company acquired by the Company or any Subsidiary or with which the Company or any Subsidiary combines. +3. SHARES SUBJECT TO THE PLAN +3.1 Number of Shares . +(a) Subject to adjustment as provided in Section 11.2 and this Section 3.1 , the total number of Shares authorized for grant under the Plan shall be the sum of (i) 8,600,000 Shares, plus (ii) the total number of Shares remaining available for grant under the Prior Plans as of the Effective Date. Any Shares that are subject to Awards of Options or Stock Appreciation Rights shall be counted against this limit as one Share for every one Share granted. Any Shares that are subject to Awards other than Options or Stock Appreciation Rights shall be counted against this limit as two Shares for every one Share awarded. Upon stockholder approval of the Plan, no further awards will be granted under any Prior Plans. +(b) If any Shares subject to an Award or to an award under the Prior Plans are forfeited, expire or otherwise terminate without issuance of such Shares, or any Award or award under the Prior Plans is settled for cash or otherwise does not result in the issuance of all or a portion of the Shares subject to such Award, the Shares shall, to the extent of such forfeiture, expiration, termination, cash settlement or non-issuance, again be (or become with respect to Shares subject to awards under the Prior Plans) available for grant subject to Awards under the Plan, subject to Section 3.1(d) below. Notwithstanding the foregoing, the following Shares shall not become available for grant under the Plan: (i) Shares subject to an Option or Stock Appreciation Right or to a stock option or stock appreciation right under the Prior Plans that are used to satisfy the exercise price of stock options, are not issued upon the stock-settlement of a stock appreciation right, or are withheld by the Company for income or employment taxes on exercise of an option or stock appreciation right or (ii) Shares repurchased on the open market with the proceeds of the option exercise price. +(c) Substitute Awards shall not reduce the Shares authorized for grant under the Plan. Additionally, in the event that a company acquired by the Company or any Subsidiary or with which the Company or any Subsidiary combines has shares available under a pre-existing plan approved by shareholders and not adopted in contemplation of such acquisition or combination, the shares available for grant pursuant to the terms of such pre-existing plan (as adjusted, to the extent appropriate, using the exchange ratio or other adjustment or valuation ratio or formula used in such acquisition or combination to determine the consideration payable to the holders of common stock of the entities party to such acquisition or combination) may be used for Awards under the Plan and shall not reduce the Shares authorized for grant under the Plan; provided that Awards using such available shares shall only be made ( i ) until the last date that awards or grants could have been made under the terms of the pre-existing plan, absent the acquisition or combination, and (ii) to individuals who were not Employees or Directors prior to such acquisition or combination. +(d) Any Shares that become available for grant pursuant to Section 3.1(b) shall be added to the share reserve set forth in Section 3.1(a): (i) as one Share if such Shares were subject to options or stock appreciation rights granted under the Plan or Prior Plans or (ii) as two Shares if such Shares were subject to awards other than options or stock appreciation rights that were granted under the Plan or the Prior Plans. +3.2 Character of Shares . Any Shares issued hereunder may consist, in whole or in part, of authorized and unissued shares, treasury shares or shares purchased in the open market or otherwise. +3.3 Minimum Vesting for Awards . Notwithstanding any other provision of the Plan to the contrary, Awards granted under the Plan (other than cash-based awards) shall vest no earlier than the first anniversary of the date on which the Award is granted; provided, however, that the following Awards shall not be subject to the foregoing minimum vesting requirement: (i) Substitute Awards, (ii) Shares delivered in lieu of fully-vested cash obligations, (iii) Awards to non-employee Directors that vest on the earlier of the one-year anniversary of the date of grant and the next annual meeting of stockholders which is at least 50 weeks after the immediately preceding year’s annual meeting, and (iv) any additional Awards the Committee may grant, up to a maximum of 5% of the available share reserve authorized for issuance under the Plan pursuant to Section 3.1 (subject to adjustment under Section 11.2 ); provided, further, that the foregoing restriction does not apply to the Committee’s discretion to provide for accelerated exercisability or vesting of any Award, including in cases of retirement, death, Disability or a Change in Control, in the terms of the Award Agreement or otherwise. +3.4 Limits on Non-Employee Director Compensation . The aggregate dollar value of equity-based Awards (based on the grant date fair value of such Awards for financial reporting purposes) and cash compensation granted under the Plan or otherwise during any fiscal year to any non-employee director for services provided as a director shall not exceed $750,000; provided, however, that in the fiscal year in which a non-employee director first joins the Board or during any fiscal year in which a non-employee director is designated as Chairman of the Board or Lead Director, the maximum aggregate dollar value of equity-based and cash compensation granted to the non-employee director for services provided as a director may be up to $1,000,000. +4. ELIGIBILITY AND ADMINISTRATION +4.1 Eligibility. Any Employee or Director shall be eligible to be selected as a Participant. +4.2 Administration. +(a) The Plan shall be administered by the Committee. The Committee shall have full power and authority, subject to the provisions of the Plan and subject to such orders or resolutions not inconsistent with the provisions of the Plan as may from time to time be adopted by the Board, to, in its sole discretion: (i) select the Employees and Directors to whom Awards may from time to time be granted hereunder; (ii) determine the type or types of Awards, not inconsistent with the provisions of the Plan, to be granted to each Participant hereunder; (iii) determine the number of Shares to be covered by each Award granted hereunder; (iv) determine the terms and conditions, not inconsistent with the provisions of the Plan, of any Award granted hereunder; (v) determine whether, to what extent and under what circumstances Awards may be settled in cash, Shares or other property, subject to Section 8.1 ; (vi) determine whether, to what extent, and under what circumstances cash, Shares, other property and other amounts payable with respect to an Award made under the Plan shall be (A) deferred either automatically or at the election of the Participant or (B) accelerated; (vii) determine whether, to what extent and under what circumstances any Award shall be canceled or suspended; (viii) interpret and administer the Plan and any instrument or agreement entered into under or in connection with the Plan, including any Award Agreement; (ix) correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award in the manner and to the extent +that the Committee shall deem desirable to carry it into effect; (x) establish such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of the Plan; (xi) determine whether any Award (other than Options or Stock Appreciation Rights) will have Dividend Equivalents; and (xii) make any other determination and take any other action that the Committee deems necessary or desirable for administration of the Plan. Notwithstanding the foregoing, the Board shall have the same powers as the Committee with respect to Awards to Directors. +(b) Decisions of the Committee shall be final, conclusive and binding on all persons or entities, including the Company, any Participant, and any Subsidiary. A majority of the members of the Committee may determine its actions and fix the time and place of its meetings. +(c) To the extent not inconsistent with applicable law or the rules and regulations of the Nasdaq Stock Market (or any other principal national securities exchange on which the Company is then listed), the Committee may delegate to a committee of one or more directors of the Company or, to the extent permitted by law, to one or more executive officers or a committee of executive officers the right to grant Awards to Employees who are not Directors or executive officers of the Company and the authority to take action on behalf of the Committee pursuant to the Plan to cancel or suspend Awards to Employees who are not Directors or executive officers of the Company; provided, however, (i) the resolution providing such authorization sets forth the total number of Shares subject to such Awards that such officer(s) may grant; and (ii) the officer(s) shall report periodically to the Committee regarding the nature and scope of the Awards granted pursuant to the authority delegated. +5. OPTIONS +5.1 Grant of Options . Options may be granted hereunder to Participants either alone or in addition to other Awards granted under the Plan; provided that Incentive Stock Options may be granted only to eligible Employees of the Company or of any parent or subsidiary corporation (as permitted by Section 422 of the Code and the regulations thereunder). Any Option shall be subject to the terms and conditions of this Article 5 and to such additional terms and conditions, not inconsistent with the provisions of the Plan, as the Committee shall determine in its sole discretion. +5.2 Award Agreements . All Options granted pursuant to this Article 5 shall be evidenced by an Award Agreement in such form and containing such terms and conditions as the Committee shall determine which are not inconsistent with the provisions of the Plan. The terms of Options need not be the same with respect to each Participant. Granting of an Option pursuant to the Plan shall impose no obligation on the recipient to exercise such Option. Any individual who is granted an Option pursuant to this Article 5 may hold more than one Option granted pursuant to the Plan at the same time. The Award Agreement also shall specify whether the Option is intended to qualify as an Incentive Stock Option. +5.3 Option Price. Other than in connection with Substitute Awards or an adjustment in connection with Section 11.2 , the option price per each Share purchasable under any Option granted pursuant to this Article 5 shall not be less than 100% of the Fair Market Value of such Share on the date of grant of such Option. +5.4 Option Term. The term of each Option shall be fixed by the Committee in its sole discretion; provided that no Option shall be exercisable after the expiration of ten years from the date the Option is granted other than as a result of any extension of the term in compliance with applicable law as provided in an Award Agreement. +5.5 Exercise of Options. Vested Options granted under the Plan shall be exercised by the Participant or by a Permitted Assignee thereof (or by the Participant’s executors, administrators, guardian or legal representative, as may be provided in an Award Agreement) as to all or part of the Shares covered thereby, by the giving of written notice of exercise to the Company or its designated agent, specifying the number of Shares to be purchased, accompanied by payment of the full purchase price for the Shares being purchased. Unless otherwise provided in an Award Agreement, full payment of such purchase price shall be made at the time of exercise and shall be made (a) in cash or cash equivalents (including certified check or bank check or wire transfer of immediately available funds), (b) by tendering previously acquired Shares (either actually or by attestation, valued at their then Fair Market Value) that have been owned for a period of at least six months (or such other period to avoid accounting charges against the Company’s earnings), (c) with the consent of the Committee, by delivery of other consideration (including, where permitted by law and the Committee, other Awards) having a Fair Market Value on the exercise date equal to the total purchase price, (d) with the consent of the Committee, by withholding Shares otherwise issuable in connection with the exercise of the Option, (e) through any other method specified in an Award Agreement, or (f) any combination of any of the foregoing. The notice of exercise, accompanied by such payment, shall be delivered to the Company at its principal business office or such other office as the Committee may from time to time direct, and shall be in such form, containing such further provisions +consistent with the provisions of the Plan, as the Committee may from time to time prescribe. In no event may any Option granted hereunder be exercised for a fraction of a Share. No adjustment shall be made for cash dividends or other rights for which the record date is prior to the date of such issuance. +5.6 Vesting. Subject to Section 3.3 , the vesting schedule shall be set forth in the Award Agreement. +5.7 Incentive Stock Options. The Committee may grant Options intended to qualify as Incentive Stock Options to any employee of the Company or any subsidiary corporation (as defined in Section 424 of the Code), subject to the requirements of Section 422 of the Code. Notwithstanding anything in Section 3.1 to the contrary and solely for the purposes of determining whether Shares are available for the grant of Incentive Stock Options under the Plan, the maximum aggregate number of Shares with respect to which Incentive Stock Options may be granted under the Plan shall be the number of Shares authorized for grant under Section 3.1 . +5.8 Form of Settlement. In its sole discretion, the Committee may provide, at the time of grant, that the Shares to be issued upon an Option’s exercise shall be in the form of Restricted Stock or other similar securities, or if provided for in the Award Agreement, may reserve the right to provide so after the time of grant. +5.9 No Repricing. Notwithstanding anything in the Plan to the contrary, except in connection with a corporate transaction involving the Company (including, without limitation, any stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination, or exchange of shares), the terms of outstanding Awards may not be amended without stockholder approval to (a) reduce the option price of outstanding Options, (b) cancel outstanding Options in exchange for cash, other awards or Options with an option price that is less than the option price of the original Options, (c) take any other action with respect to an Option that would be treated as a repricing under the rules and regulations of the principal national securities exchange on which they are listed or (d) permit the grant of any Options that contains a so-called “reload” feature under which additional Options or other Awards are granted automatically to the Participant upon exercise of the original Option. +6. STOCK APPRECIATION RIGHTS +6.1 Grant and Exercise . The Committee may provide Stock Appreciation Rights (a) in conjunction with all or part of any Option granted under the Plan (“ Tandem Stock Appreciation Right ”), (b) in conjunction with all or part of any Award (other than an Option) granted under the Plan, or (c) without regard to any Option or other Award (a “ Freestanding Stock Appreciation Right ”), in each case, upon such terms and conditions as the Committee may establish in its sole discretion. +6.2 Terms and Conditions . Stock Appreciation Rights shall be subject to such terms and conditions, not inconsistent with the provisions of the Plan, as shall be determined from time to time by the Committee, including the following: +(a) Except in the case of Substitute Awards or in connection with an adjustment provided in Section 11.2 , the grant price of a Stock Appreciation Right shall not be less than the Fair Market Value of one Share on such date of grant of the right. Upon the exercise of a Stock Appreciation Right, the holder shall have the right to receive the excess of (i) the Fair Market Value of one Share on the date of exercise over (ii) the grant price of the right on the date of grant. +(b) Upon the exercise of a Stock Appreciation Right, payment shall be made in the sole discretion of the Committee in (i) whole Shares, (ii) cash or (iii) a combination of (i) or (ii). +(c) Any Tandem Stock Appreciation Right shall be granted at the same time as the related Option is granted. +(d) Any Tandem Stock Appreciation Right related to an Option may be exercised only when the related Option would be exercisable and the Fair Market Value of the Shares subject to the related Option exceeds the option price at which Shares can be acquired pursuant to the Option. In addition, (i) if a Tandem Stock Appreciation Right exists with respect to less than the full number of Shares covered by a related Option, then an exercise or termination of such Option shall not reduce the number of Shares to which the Tandem Stock Appreciation Right applies until the number of Shares then exercisable under such Option equals the number of Shares to which the Tandem Stock Appreciation Right applies, and (ii) no Tandem Stock Appreciation Right granted under the Plan to a person then subject to Section 16 of the Exchange Act shall be exercised during the first six months of its term for cash, except as provided in Article 10 . +(e) Any Option related to a Tandem Stock Appreciation Right shall no longer be exercisable to the extent the Tandem Stock Appreciation Right has been exercised. +(f) The provisions of Stock Appreciation Rights need not be the same with respect to each recipient. +(g) Subject to Section 11.2 , a Freestanding Stock Appreciation Right shall have the same terms and conditions as Options, including (i) an exercise price not less than Fair Market Value on the date of grant and (ii) a term not greater than ten years other than as a result of any extension of the term in compliance with applicable law as provided in an Award Agreement. Subject to Section 3.3 , the vesting schedule shall be set forth in the Award Agreement. +(h) The Committee may impose such terms and conditions on Stock Appreciation Rights granted in conjunction with any Award (other than an Option) as the Committee shall determine in its sole discretion. +6.3 No Repricing . Notwithstanding anything in the Plan to the contrary, except in connection with a corporate transaction involving the Company (including, without limitation, any stock dividend, stock split, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination, or exchange of shares), the terms of outstanding awards may not be amended without stockholder approval to (a) reduce the exercise price of outstanding Stock Appreciation Rights, (b) cancel outstanding Stock Appreciation Rights in exchange for cash, other awards or Stock Appreciation Rights with an exercise price that is less than the exercise price of the original Stock Appreciation Rights, (c) take any other action with respect to the Stock Appreciation Rights that would be treated as a repricing under the rules and regulations of the principal national securities exchange on which they are listed, or (d) permit the grant of any Stock Appreciation Rights that contains a so-called “reload” feature under which additional Stock Appreciation Rights or other Awards are granted automatically to the Participant upon exercise of the original Stock Appreciation Rights. +7. RESTRICTED STOCK AWARDS +7.1 Grants . Awards of Restricted Stock may be issued hereunder to Participants either alone or in addition to other Awards granted under the Plan (a “ Restricted Stock Award ”), and such Restricted Stock Awards shall also be available as a form of payment of Performance Awards and other earned cash-based incentive compensation. A Restricted Stock Award shall be subject to restrictions imposed by the Committee covering a period of time specified by the Committee (the “ Restriction Period ”). The Committee has sole discretion to determine whether any consideration (other than services) is to be received by the Company or any Subsidiary as a condition precedent to the issuance of Restricted Stock. +7.2 Award Agreements . The terms of any Restricted Stock Award granted under the Plan shall be set forth in an Award Agreement which shall contain provisions determined by the Committee and not inconsistent with the Plan. The terms of Restricted Stock Awards need not be the same with respect to each Participant. +7.3 Rights of Holders of Restricted Stock . Beginning on the date of grant of the Restricted Stock Award and subject to execution of the Award Agreement, the Participant shall become a shareholder of the Company with respect to all Shares subject to the Award Agreement and shall have all of the rights of a shareholder, including the right to vote such Shares and the right to receive distributions made with respect to such Shares unless otherwise provided in such Award Agreement; provided, however, that any Shares, any other property, or cash distributed as a dividend or otherwise with respect to any Restricted Stock as to which the restrictions have not yet lapsed shall be subject to the same restrictions as such Restricted Stock. +7.4 Vesting . Subject to Section 3.3 , the vesting schedule shall be set forth in the Award Agreement. +7.5 Section 83(b) Election . The Committee may provide in an Award Agreement that the Award of Restricted Stock is conditioned upon the Participant making or refraining from making an election with respect to the Award under Section 83(b) of the Code. If a Participant makes an election pursuant to Section 83(b) of the Code concerning a Restricted Stock Award, the Participant shall be required to file promptly a copy of such election with the Company. +8. OTHER STOCK UNIT AWARDS +8.1 Grants . Other Awards of units having a value equal to an identical number of Shares (“ Other Stock Unit Awards ”) may be granted hereunder to Participants, in addition to other Awards granted under the Plan. Other Stock Unit +Awards shall also be available as a form of payment of other Awards granted under the Plan and other earned cash-based incentive compensation. +8.2 Award Agreements . The terms of Other Stock Unit Award granted under the Plan shall be set forth in an Award Agreement which shall contain provisions determined by the Committee and not inconsistent with the Plan. The terms of such Awards need not be the same with respect to each Participant. +8.3 Vesting . Subject to Section 3.3 , the vesting schedule shall be set forth in the Award Agreement. +8.4 Payment . Except as provided in Article 10 or as maybe provided in an Award Agreement, Other Stock Unit Awards may be paid in cash, Shares, other property, or any combination thereof, in the sole discretion of the Committee at the time of payment. Other Stock Unit Awards may be paid in a lump sum or in installments following the lapse of the restrictions applicable to such Awards, but, unless expressly provided in an Award Agreement, no later than two and one-half months following the end of the calendar year in which such restrictions lapse, or in accordance with procedures established by the Committee, on a deferred basis subject to the requirements of Section 409A of the Code. +9. PERFORMANCE AWARDS +9.1 Grants . Performance Awards in the form of Performance Shares or Performance Units, as determined by the Committee in its sole discretion, may be granted hereunder to Participants, for no consideration or for such minimum consideration as may be required by applicable law, either alone or in addition to other Awards granted under the Plan. The performance goals to be achieved for each Performance Period shall be conclusively determined by the Committee. +9.2 Award Agreements . The terms of any Performance Award granted under the Plan shall be set forth in an Award Agreement which shall contain provisions determined by the Committee and not inconsistent with the Plan, including whether such Awards shall have Dividend Equivalents. The terms of Performance Awards need not be the same with respect to each Participant. +9.3 Terms and Conditions . The performance criteria to be achieved during any Performance Period and the length of the Performance Period shall be determined by the Committee upon the grant of each Performance Award. Performance Awards shall be subject to the vesting requirements as set forth in Section 3.3 . The amount of the Award to be distributed shall be conclusively determined by the Committee. +9.4 Payment. Except as provided in Article 10 or as may be provided in an Award Agreement, Performance Awards will be distributed only after the end of the relevant Performance Period. Performance Awards may be paid in cash, Shares, or any combination thereof, in the sole discretion of the Committee at the time of payment. Performance Awards may be paid in a lump sum or in installments, but, unless expressly provided in an Award Agreement, no later than two and one-half months following the close of the calendar year that contains the end of the Performance Period or, in accordance with procedures established by the Committee, on a deferred basis subject to the requirements of Section 409A of the Code. +9.5 Performance Award Dividend Equivalents . Subject to the provisions of the Plan and any Award Agreement, the Committee in its sole discretion may award currently or on a deferred basis, Dividend Equivalents with respect to the number of Shares covered by a Performance Unit or Performance Share Award, provided, that such Dividend Equivalents (if any) shall be deemed to have been reinvested in additional Performance Shares or Performance Units and shall provide that such Dividend Equivalents are subject to the same vesting conditions as the underlying Award. +10. CHANGE OF CONTROL PROVISIONS +Upon the occurrence of a Change of Control, unless otherwise specifically set forth in an Award Agreement or other agreement applicable to any Award, the Committee may effect one or more of the following alternatives, which may vary among individual holders and which may vary among Awards held by any individual holder: +(a) Awards outstanding as of the date of the Change of Control immediately vest and become free of all restrictions and limitations and, to the extent applicable, become fully exercisable and/or immediately settled or distributed; +(b) Options and Stock Appreciation Rights outstanding shall terminate within a specified number of days after notice to the Participant; +(c) Participants shall receive, with respect to each Share subject to an Award (or vested portion thereof), an amount equal to the excess, if any, of the Fair Market Value of such Share immediately prior to the occurrence of such Change of Control over the exercise price per share, if applicable, of such Award, such amount to be payable in cash, in one or more kinds of stock or property (including the stock or property, if any, payable in the transaction) or in a combination thereof, as the Committee, in its sole discretion, shall determine; +(d) Options and Stock Appreciation Rights outstanding as of the date of the Change of Control may be cancelled and terminated without payment therefor if the Fair Market Value of one Share as of the date of the Change of Control is less than the per Share Option exercise price or Stock Appreciation Right grant price; or +(e) such other adjustments or benefits as the Committee deems appropriate in its sole discretion shall apply (including the substitution, assumption or continuation of Awards by the successor company or a parent or subsidiary thereof); +in each case, (i) to the extent permitted under Section 409A of the Code and (ii) subject to any terms and conditions contained in the Award Agreement evidencing such Award or other agreement applicable to such Award. +11. GENERALLY APPLICABLE PROVISIONS +11.1 Amendment and Termination of the Plan . The Board may, from time to time, alter, amend, suspend or terminate the Plan as it shall deem advisable in its sole discretion, subject to any requirement for stockholder approval imposed by applicable law, including the rules and regulations of the Nasdaq Stock Market (or any other principal national securities exchange on which the Company is listed) provided that the Board may not amend the Plan in any manner that would result in noncompliance with Rule 16b-3 of the Exchange Act; and further provided that the Board may not, without the approval of the Company’s stockholders, amend the Plan to (a) increase the number of Shares that may be the subject of Awards under the Plan (except for adjustments pursuant to Section 11.2 ), (b) expand the types of awards available under the Plan, (c) materially expand the class of persons eligible to participate in the Plan, (d) amend any provision of Section 5.9 , (e) increase the maximum permissible term of any Option specified by Section 5.4 or any Stock Appreciation Right specified by Section 6.2(g) , or (f) amend any provision of Section 6.3 . In addition, no amendments to, or termination of, the Plan shall in any way materially impair the rights of a Participant under any Award previously granted without such Participant’s consent. +11.2 Adjustments . In the event of any merger, reorganization, consolidation, recapitalization, dividend or distribution (whether in cash, shares or other property, other than a regular cash dividend), stock split, reverse stock split, spin-off, joint venture, subsidiary or division sale or similar transaction or other change in corporate structure affecting the Shares or the value thereof, such adjustments and other substitutions shall be made to the Plan and to Awards as the Committee, in its sole discretion, deems equitable or appropriate, including such adjustments (a) in the aggregate number, class and kind of securities that may be delivered under the Plan, in the aggregate or to any one Participant, (b) in the number, class, kind and option or exercise price of securities subject to outstanding Awards granted under the Plan (including, if the Committee deems appropriate, the substitution of similar options to purchase the shares of, or other awards denominated in the shares of, another company) and (c) to the terms and conditions of any outstanding Awards (including any applicable performance targets or criteria with respect thereto), in each case, as the Committee may determine to be appropriate in its sole discretion; provided, however, that the number of Shares subject to any Award shall always be a whole number. No adjustment or substitution pursuant to this Section 11.2 shall be made in a manner that results in noncompliance with the requirements of Section 409A of the Code, to the extent applicable. +11.3 Transferability of Awards . Except as provided below, no Award and no Shares subject to Other Stock Unit Awards or Performance Units that have not been issued or as to which any applicable restriction, performance or deferral period has not lapsed, may be sold, assigned, transferred, pledged or otherwise encumbered, other than by will or the laws of descent and distribution or pursuant to a domestic relations order, as determined by the Committee, and such Award may be exercised during the life of the Participant only by the Participant or the Participant’s guardian or legal representative. Notwithstanding the foregoing, a Participant may assign or transfer an Award with the consent of the Committee (a) for charitable donations; (b) to the Participant’s spouse, children or grandchildren (including any adopted and stepchildren and grandchildren), or (c) a trust for the benefit of one or more of the Participants or the persons referred to in clause (b) (each transferee thereof, a “ Permitted Assignee ”); provided that such Permitted Assignee shall be bound by and subject to all of the terms and conditions of the Plan and the Award Agreement relating to the transferred Award and shall execute an agreement satisfactory to the Company evidencing such obligations; and provided further that such Participant shall remain bound by the terms and conditions of the Plan. The Company shall cooperate with any Permitted Assignee and the Company’s transfer agent in effectuating any transfer permitted under this Section 11.3 . Notwithstanding the foregoing, no Incentive Stock Option granted under the Plan may be sold, transferred, pledged, +assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, all Incentive Stock Options granted to a Participant under the Plan shall be exercisable during his or her lifetime only by such Participant. For the avoidance of doubt, in no event may an Award (excluding any fully vested and unrestricted Shares received pursuant to an Award) be transferred by a Participant to a third party for monetary value. +11.4 Termination of Employment . The Committee shall determine and set forth in each Award Agreement whether any Awards granted in such Award Agreement will continue to be exercisable, and the terms of such exercise, on and after the date that a Participant ceases to be employed by or to provide services to the Company or any Subsidiary (including as a Director), whether by reason of death, Disability, voluntary or involuntary termination of employment or services, or otherwise. The date of termination of a Participant’s employment or services will be determined by the Committee, which determination will be final. +11.5 Deferral . The Committee shall be authorized to establish procedures pursuant to which the payment of any Award may be deferred. Such deferrals shall be administered in a manner that is intended to comply with Section 409A of the Code and shall be construed and interpreted in accordance with such intent. +11.6 Dividend Equivalents . Subject to the provisions of the Plan and any Award Agreement, the recipient of an Award (including any deferred Award) may, if so determined by the Committee, be entitled to receive, on a deferred basis, cash, stock or other property dividends, or cash payments in amounts equivalent to cash, stock or other property dividends on Shares (“ Dividend Equivalents ”) with respect to the number of Shares covered by the Award, as determined by the Committee, in its sole discretion. Dividend Equivalents may accrue but will not, in any event, be payable until the vesting conditions of the underlying Award have been met. The Committee may provide that such amounts and Dividend Equivalents (if any) shall be deemed to have been reinvested in additional Shares or otherwise reinvested. Notwithstanding the foregoing, Dividend Equivalents shall not be made part of any Options or Stock Appreciation Rights. +12. MISCELLANEOUS +12.1 Tax Withholding . The Company shall have the right to make all payments or distributions pursuant to the Plan to a Participant (or a Permitted Assignee thereof) (any such person, a “ Payee ”) net of any applicable federal, state and local taxes required to be paid or withheld as a result of (a) the grant of any Award, (b) the exercise of an Option or Stock Appreciation Right, (c) the delivery of Shares or cash, (d) the lapse of any restrictions in connection with any Award or (e) any other event occurring pursuant to the Plan. The Company or any Subsidiary shall have the right to withhold from wages or other amounts otherwise payable to such Payee such minimum statutory withholding taxes as may be required by law, or to otherwise require the Payee to pay such withholding taxes. If the Payee shall fail to make such tax payments as are required, the Company or its Subsidiaries shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to such Payee or to take such other action as may be necessary to satisfy such withholding obligations. The Committee shall be authorized to establish procedures for election by Participants to satisfy such obligation for the payment of such taxes by tendering previously acquired Shares (either actually or by attestation, valued at their then Fair Market Value) that have been owned for a period of at least six months (or such other period to avoid accounting charges against the Company’s earnings), or by directing the Company to retain Shares (up to the Participant’s minimum required tax withholding rate or such other rate that will not trigger a negative accounting impact) otherwise deliverable in connection with the Award. +12.2 Right of Discharge Reserved; Claims to Awards . Nothing in the Plan nor the grant of an Award hereunder shall confer upon any Employee or Director the right to continue in the employment or service of the Company or any Subsidiary or affect any right that the Company or any Subsidiary may have to terminate the employment or service of (or to demote or to exclude from future Awards under the Plan) any such Employee or Director at any time for any reason. Except as specifically provided by the Committee, the Company shall not be liable for the loss of existing or potential profit from an Award granted in the event of termination of an employment or other relationship. No Employee or Participant shall have any claim to be granted any Award under the Plan, and there is no obligation for uniformity of treatment of Employees or Participants under the Plan. +12.3 Prospective Recipient . Unless otherwise determined by the Committee, the prospective recipient of any Award under the Plan shall not, with respect to such Award, be deemed to have become a Participant, or to have any rights with respect to such Award, until and unless such recipient shall have executed or acknowledged an Award Agreement and delivered a copy thereof to the Company, in each case, in the manner prescribed by the Committee, and otherwise complied with the then applicable terms and conditions. +12.4 Cancellation of Award . Notwithstanding anything to the contrary contained herein, all outstanding Awards granted to any Participant may be canceled if the Participant, without the consent of the Company, while employed by the +Company or any Subsidiary or after termination of such employment or service, establishes a relationship with a competitor of the Company or any Subsidiary or engages in activity that is in conflict with or adverse to the interest of the Company or any Subsidiary, as determined by the Committee in its sole discretion. +12.5 Stop Transfer Orders . All certificates for Shares delivered under the Plan pursuant to any Award shall be subject to such stop-transfer orders and other restrictions as the Committee may deem advisable in its sole discretion under the rules, regulations and other requirements of the Securities and Exchange Commission, any stock exchange upon which the Shares are then listed, and any applicable federal or state securities law, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions. +12.6 Nature of Payments . All Awards made pursuant to the Plan are in consideration of services performed or to be performed for the Company or any Subsidiary, division or business unit of the Company. Neither Awards made under the Plan nor Shares or cash paid pursuant to such Awards, may be included as “compensation” for purposes of computing the benefits payable to any Participant under the Company’s or any Subsidiary’s retirement plans (both qualified and non-qualified), welfare benefit plans or other employee benefit plans unless such plan expressly provides that such compensation shall be taken into account in computing a participant’s benefit. +12.7 Other Plans . Nothing contained in the Plan shall prevent the Board from adopting other or additional compensation arrangements, subject to stockholder approval if such approval is required; and such arrangements may be either generally applicable or applicable only in specific cases. +12.8 Severability . If any provision of the Plan shall be held unlawful or otherwise invalid or unenforceable in whole or in part by a court of competent jurisdiction, such provision shall (a) be deemed limited to the extent that such court of competent jurisdiction deems it lawful, valid and/or enforceable and as so limited shall remain in full force and effect, and (b) not affect any other provision of the Plan or part thereof, each of which shall remain in full force and effect. If the making of any payment or the provision of any other benefit required under the Plan shall be held unlawful or otherwise invalid or unenforceable by a court of competent jurisdiction, such unlawfulness, invalidity or unenforceability shall not prevent any other payment or benefit from being made or provided under the Plan, and if the making of any payment in full or the provision of any other benefit required under the Plan in full would be unlawful or otherwise invalid or unenforceable, then such unlawfulness, invalidity or unenforceability shall not prevent such payment or benefit from being made or provided in part, to the extent that it would not be unlawful, invalid or unenforceable, and the maximum payment or benefit that would not be unlawful, invalid or unenforceable shall be made or provided under the Plan. +12.9 Interpretation . As used in the Plan, the words “include” and “including,” and variations thereof, shall not be deemed to be terms of limitation, but rather shall be deemed to be followed by the words “without limitation.” The captions in the Plan are for convenience of reference only, and are not intended to narrow, limit or affect the substance or interpretation of the provisions contained herein. +12.10 Unfunded Status of the Plan . The Plan is intended to constitute an “unfunded” plan for incentive and deferred compensation. With respect to any payments not yet made to a Participant by the Company, nothing contained herein shall give any such Participant any rights that are greater than those of a general creditor of the Company. In its sole discretion, the Committee may authorize the creation of trusts or other arrangements to meet the obligations created under the Plan to deliver the Shares or payments in lieu of or with respect to Awards hereunder; provided, however, that the existence of such trusts or other arrangements is consistent with the unfunded status of the Plan. +12.11 Governing Law . The Plan and all determinations made and actions taken thereunder, to the extent not otherwise governed by the Code or the laws of the United States, shall be governed by the laws of the State of Delaware, without reference to principles of conflict of laws, and construed accordingly. +12.12 Effective Date of Plan; Termination of Plan . The Plan is approved by the Board as of the Effective Date, subject to approval by the Company’s stockholders . Awards may be granted under the Plan at any time and from time to time on or prior to April 9, 2031, on which date the Plan will expire except as to Awards then outstanding under the Plan. Such outstanding Awards shall remain in effect until they have been exercised or terminated, or have expired. +12.13 Foreign Employees . Awards may be granted to Participants who are foreign nationals or employed outside the United States, or both, on such terms and conditions different from those applicable to Awards to Employees employed in the United States as may, in the Committee’s sole discretion, be necessary or desirable in order to recognize differences in local law or tax policy. The Committee also may impose conditions on the exercise or vesting of Awards in order to minimize the Company’s obligation with respect to tax equalization for Employees on assignments outside their home country. +12.14 Section 409A of the Code . +(a) Awards made under the Plan are intended to comply with or be exempt from Section 409A of the Code, and ambiguous provisions hereof, if any, shall be construed and interpreted in a manner consistent with such intent. No payment, benefit or consideration shall be substituted for an Award if such action would result in the imposition of taxes under Section 409A of the Code. Notwithstanding anything in the Plan to the contrary, if any Plan provision or Award under the Plan would result in the imposition of an additional tax under Section 409A of the Code, that Plan provision or Award shall be reformed, to the extent permissible under Section 409A of the Code, to avoid imposition of the additional tax, and no such action shall be deemed to adversely affect the Participant’s rights to an Award. +(b) Unless the Committee provides otherwise in an Award Agreement, each Other Stock Unit Award or Performance Unit (or portion thereof if the Award is subject to a vesting schedule) shall be settled no later than the 15th day of the third month after the end of the first calendar year in which the Award (or such portion thereof) is no longer subject to a “substantial risk of forfeiture” within the meaning of Section 409A of the Code. If the Committee determines that an Other Stock Unit Award or Performance Unit is intended to be subject to Section 409A of the Code, the applicable Award Agreement shall include terms that are designed to satisfy the requirements of Section 409A of the Code. +(c) If the Participant is identified by the Company as a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code on the date on which the Participant has a “separation from service” (other than due to death) within the meaning of Treasury Regulation § 1.409A-1(h), any Award payable or settled on account of a separation from service that is deferred compensation subject to Section 409A of the Code shall be paid or settled on the earliest of (i) the first business day following the expiration of six months from the Participant’s separation from service, (ii) the date of the Participant’s death, or (iii) such earlier date as complies with the requirements of Section 409A of the Code. +12.15 Notification of Disqualifying Disposition . If any Participant shall make any disposition of Shares issued pursuant to the exercise of an Incentive Stock Option under the circumstances described in Section 421(b) of the Code (relating to certain disqualifying dispositions), such Participant shall notify the Company of such disposition within ten days thereof. +12.16 Sarbanes Oxley Act and Clawback Policy . If the Company is required to prepare an accounting restatement due to the material noncompliance of the Company, as a result of misconduct, with any financial reporting requirement under the securities laws, or if the Participant is one of the persons subject to automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002, the Participant shall reimburse the Company the amount of any payment in settlement of an Award earned or accrued during the 12-month period following the first public issuance or filing with the United States Securities and Exchange Commission (whichever just occurred) of the financial document embodying such financial reporting requirement. Notwithstanding any other provisions in this Plan, any Award shall be subject to recovery or clawback by the Company under any applicable clawback policy adopted by the Company whether before or after the date of grant of the Award. +12.17 Indemnification . Each person who is or shall have been a member of the Board, or a Committee appointed by the Board, or an officer of the Company to whom authority was delegated in accordance with Section 4.2 shall be indemnified and held harmless by the Company against and from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him or her in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by him or her in settlement thereof, with the Company’s approval, or paid by him or her in satisfaction of any judgment in any such action, suit, or proceeding against him or her, provided he or she shall give the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf, unless such loss, cost, liability, or expense is a result of his or her own willful misconduct or except as expressly provided by statute. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company’s Certificate of Incorporation of Bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless. +0000413080_2 R1.0.1.18 Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice & Proxy Statement and Form 10-K, are available at www.proxyvote.com PATTERSON-UTI ENERGY, INC. Annual Meeting of Stockholders June 6, 2019 10:00 AM This proxy is solicited by the Board of Directors The undersigned stockholder of Patterson-UTI Energy, Inc. (the "Company") hereby appoints Mark S. Siegel, William Andrew Hendricks, Jr. and C. Andrew Smith and each of them, proxies to the undersigned, each with full power to act without the other and with full power of substitution, to vote all of the shares which the undersigned is entitled to vote at the annual meeting of stockholders of the Company to be held Thursday, June 6, 2019, at 10:00 a.m., Central Time, at our corporate headquarters, located at 10713 W. Sam Houston Parkway North, Suite 125, Houston, Texas, 77064, and at any and all adjournments or postponements thereof, with the same force and effect as if the undersigned were personally present. The undersigned hereby instructs the above-named proxies to vote the shares represented by this proxy in the manner as directed for the undersigned on the reverse side of this proxy card. If no directions are made, the proxies will vote “FOR” the nominees for directors, “FOR” the approval of the amendment to the Patterson-UTI Energy, Inc. Amended and Restated 2014 Long-Term Incentive Plan, “FOR” the ratification of the selection of PricewaterhouseCoopers LLP and “FOR” the approval of the advisory resolution on executive compensation, as set forth on the reverse side. If any other matter should be presented properly, this proxy will be voted in accordance with the discretion of the above-named proxies. 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The annual meeting will be held Thursday, June 5, 2025, at 9:00 a.m., Central Time, at our corporate headquarters, located at 10713 W. Sam Houston Parkway North, Suite 125, Houston, Texas 77064. +We are pleased to take advantage of Securities and Exchange Commission rules that allow us to furnish proxy materials to our stockholders on the Internet. We believe that posting these materials on the Internet enables us to provide stockholders with the information that they need quickly, while lowering our costs of printing and delivery and supporting our sustainability efforts. We are mailing to most of our stockholders a Notice of Internet Availability of Proxy Materials, rather than a paper copy of our proxy materials. The notice contains instructions on how to access the proxy materials, vote and obtain, if you so desire, a paper copy of the proxy materials. +Your vote is important to us. Whether or not you plan to attend the Annual Meeting in person, we urge you to promptly vote your shares by using the Internet or telephone, or if the accompanying proxy statement was mailed to you, by completing, signing, dating and returning your proxy card as soon as possible in the enclosed postage prepaid envelope. +Thank you for your support. +Sincerely, +C URTIS W. H UFF +Chairman of the Board +W ILLIAM A NDREW H ENDRICKS , J R . +President, Chief Executive Officer and Director +PATTERSON-UTI ENERGY, INC. +10713 West Sam Houston Parkway North, Suite 800 +Houston, Texas 77064 +___________________ +NOTICE OF 2025 ANNUAL MEETING OF STOCKHOLDERS +To Be Held June 5, 2025 +___________________ +The 2025 annual meeting of the stockholders of Patterson-UTI Energy, Inc., a Delaware corporation (“Patterson-UTI”), will be held Thursday, June 5, 2025, at 9:00 a.m., Central Time, at our corporate headquarters, located at 10713 W. Sam Houston Parkway North, Suite 125, Houston, Texas 77064 (the “Meeting”), for the following purposes: +• to elect eleven directors named in this proxy statement to the Board of Directors of Patterson-UTI to serve until the next annual meeting of the stockholders or until their respective successors are elected and qualified; +• to ratify the selection of PricewaterhouseCoopers LLP as the independent registered public accounting firm of Patterson-UTI for the fiscal year ending December 31, 2025; +• to approve, on an advisory basis, Patterson-UTI’s compensation of its named executive officers; and +• to transact such other business as may properly come before the Meeting or any adjournment or postponement thereof. +Stockholders of record at the close of business on April 8, 2025 are entitled to notice of and to vote at the Meeting and any adjournment or postponement thereof. +Your vote is important to us. Whether or not you plan to attend the Meeting in person, we urge you to promptly vote your shares by using the Internet or telephone, or if the accompanying proxy statement was mailed to you, by completing, signing, dating and returning your proxy card as soon as possible in the enclosed postage prepaid envelope. +By order of the Board of Directors +S ETH D. W EXLER +Executive Vice President, General Counsel and Secretary +April 10, 2025 +Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting +to Be Held on June 5, 2025 +The proxy statement and annual report to stockholders are available at www.proxyvote.com . +PATTERSON-UTI ENERGY, INC. +10713 West Sam Houston Parkway North, Suite 800 +Houston, Texas 77064 +______________________ +PROXY STATEMENT +______________________ +ANNUAL MEETING OF STOCKHOLDERS +To Be Held June 5, 2025 +General Information About the Annual Meeting and Voting +The Board of Directors (the “Board” or “Board of Directors”) of Patterson-UTI Energy, Inc., a Delaware corporation (“Patterson-UTI” or the “Company”), is expected to make this proxy statement and its 2024 annual report available to you on the Internet or, upon your request to deliver printed versions of these materials to you by mail beginning on or about April 10, 2025. Patterson-UTI is furnishing this proxy statement in connection with the solicitation by the Board of Directors of proxies to be voted at the 2025 annual meeting of stockholders of Patterson-UTI (the “Meeting”). The Meeting will be held Thursday, June 5, 2025, at 9:00 a.m., Central Time, at our corporate headquarters, located at 10713 W. Sam Houston Parkway North, Suite 125, Houston, Texas 77064, or at any adjournment or postponement thereof. +The Notice of Internet Availability of Proxy Materials (the “Notice”) is expected to be mailed to each of Patterson-UTI’s stockholders (other than those who previously requested electronic delivery) entitled to vote at the Meeting on or about April 10, 2025. +Pursuant to the “notice and access” rules adopted by the Securities and Exchange Commission (the “SEC”), Patterson-UTI has elected to provide stockholders access to its proxy materials on the Internet. Accordingly, Patterson-UTI sent a Notice to all of its stockholders as of the record date. The Notice includes instructions on how to access Patterson-UTI’s proxy materials on the Internet and how to request a printed copy of these materials. In addition, by following the instructions in the Notice, stockholders may request to receive proxy materials in printed form by mail or electronically by email on an ongoing basis. +Choosing to receive your future proxy materials by email will save us the cost of printing and mailing documents to you and will support our sustainability efforts. If you choose to receive future proxy materials by email, you will receive an email next year with instructions containing a link to those materials and a link to the proxy voting site. Your election to receive proxy materials by email will remain in effect until you terminate such election. +If your shares are registered directly in your name with our transfer agent, Continental Stock Transfer & Trust Company, you are considered the “stockholder of record” with respect to those shares, and the Notice was sent directly to you. +If your shares are held in an account at a brokerage firm, bank, broker-dealer, or other similar organization, then you are the beneficial owner of shares held in “street name,” and the Notice was forwarded to you by that organization. As a beneficial owner, you have the right to direct that organization on how to vote the shares held in your account. +Whether you are a “stockholder of record” or hold your shares in “street name,” you may direct your vote without attending the Meeting in person. +If you are a stockholder of record, you may vote by using the Internet or telephone by following the instructions in the Notice. If you request printed copies of the proxy materials by mail, you may also vote by completing, dating, signing and returning your proxy card by mail. You should sign your name exactly as it appears on the proxy card. If you are signing in a representative capacity (for example, as guardian, executor, trustee, custodian, attorney or officer of a corporation), you should indicate your name and title or capacity. +If you are the beneficial owner of shares held in street name, you may be eligible to vote your shares electronically using the Internet or telephone by following the instructions in the Notice. If you request printed copies of the proxy materials by mail, you may also vote by signing the voter instruction card provided by your brokerage firm, bank, broker-dealer, or other similar organization and returning it by mail. If you provide specific voting instructions by mail, telephone or the Internet, your shares will be voted by your brokerage firm, bank, broker-dealer, or similar organization as you have directed. +1 +Properly submitted proxies received either by mail, Internet, telephone or in person in time to be counted for the Meeting will be voted as you have directed in your proxy, unless you revoke your proxy in the manner provided below. As to any matter for which you give no direction in your proxy, your shares will be voted as follows: +• “FOR” the election of all of the nominees to the Board of Directors named in this proxy statement; +• “FOR” the ratification of PricewaterhouseCoopers LLP as the independent registered public accounting firm of Patterson-UTI for the fiscal year ending December 31, 2025; +• “FOR” the approval, on an advisory basis, of Patterson-UTI’s compensation of its named executive officers; and +• “FOR” or “AGAINST” any other proposals that may be properly submitted at the Meeting at the discretion of the persons named in the proxy. +If you are a stockholder of record, you may revoke your proxy before the proxy is voted by either: +• submitting a new proxy with a later date, including a proxy submitted using the Internet or telephone, in time to be counted for the Meeting; +• notifying the Secretary of Patterson-UTI in writing before the Meeting that you have revoked your proxy; or +• attending the Meeting and voting in person. +If your shares are held in street name, you must obtain a proxy executed in your favor from the stockholder of record (that is, your brokerage firm, bank, broker-dealer or similar organization) to be able to vote at the Meeting (see below). +The Board of Directors is making this solicitation. We have retained Georgeson LLC, 480 Washington Blvd., 26 th Floor, Jersey City, New Jersey 07310, for a fee of approximately $9,500 and the reimbursement of out of pocket costs and expenses, to assist in the solicitation of proxies on behalf of the Board. Patterson-UTI’s officers and other employees, without compensation other than regular compensation, may also solicit proxies on behalf of the Board by mail, email, the Internet, telephone, electronic means and personal interview. Patterson-UTI will pay all costs associated with this solicitation. +2 +Shares Outstanding and Voting Rights +Only stockholders of record of Patterson-UTI’s common stock, $0.01 par value per share (the “Common Stock”), at the close of business on April 8, 2025 are entitled to notice of and to vote at the Meeting or any adjournment or postponement thereof. At the close of business on April 8, 2025, there were 385,978,013 shares of Common Stock issued and outstanding. Holders of record of Common Stock on April 8, 2025 will be entitled to one vote per share on all matters to properly come before the Meeting. A list of stockholders entitled to notice of and to vote at the Meeting will be made available during regular business hours at the offices of Patterson-UTI Energy, Inc., 10713 West Sam Houston Parkway North, Suite 800, Houston, Texas 77064 for the ten day period ending on the day before the Meeting for examination by any stockholder for any purpose germane to the Meeting. +A quorum is necessary to transact business at the Meeting. A majority of the shares of Common Stock outstanding on April 8, 2025 will constitute a quorum. The shares held by each stockholder who attends the Meeting in person, signs and timely returns the form of proxy, or properly votes using the Internet or telephone will be counted for purposes of determining the presence of a quorum at the Meeting. +If your shares are held in an account at a brokerage firm, bank, broker-dealer, or other similar organization, then you are the beneficial owner of shares held in “street name.” As a beneficial owner, you have the right to direct that organization on how to vote the shares held in your account in the manner provided in the voting instructions you received from that organization. Street name stockholders are also invited to attend the Meeting. However, because a street name stockholder is not the stockholder of record, you may not vote your shares at the Meeting unless you follow the procedures of your brokerage firm, bank, broker-dealer, or other similar organization for obtaining a legal proxy. +“Broker non-votes” and abstentions will be considered present at the Meeting for the purpose of determining a quorum. Broker non-votes occur when nominees, such as brokerage firms, banks, broker-dealers, or other similar organizations holding shares on behalf of the beneficial owners, are prohibited from exercising discretionary voting authority for beneficial owners who have not provided voting instructions. If you do not give instructions to your bank, brokerage firm or other agent, the bank, brokerage firm or other agent does not have authority to vote on the applicable proposal except on “routine matters.” For these reasons, please promptly vote in accordance with the instructions provided by your brokerage firm, bank, broker-dealer, or other similar organization. +3 +PROPOSAL NO. 1 +ELECTION OF DIRECTORS +Directors are elected to serve until the next annual meeting of stockholders and until their successors are elected and qualified. Under Delaware law and Patterson-UTI’s bylaws, the affirmative vote of a plurality of shares present in person or represented by proxy at the meeting at which a quorum is present is required for the election of directors. +The enclosed form of proxy provides a means for you to either: +• vote “For All” with respect to the election of the nominees to the Board of Directors listed below, +• withhold authority to vote for one or more of the nominees (i.e., "For All Except"), or +• withhold authority to vote for all of the nominees (i.e., "Withhold All"). +The Board of Directors recommends that you vote “FOR” all of the nominees. Unless you give contrary instructions in your proxy, your properly submitted proxy will be voted “For All” with respect to the election of all of the nominees to the Board of Directors. If any nominee should become unable or unwilling to accept the nomination or election, the person acting under the proxy will vote for the election of such other person as the Board of Directors may recommend. The Board has no reason, however, to believe that any of the nominees will be unable or unwilling to serve if elected. As noted below, Leslie A. Beyer has been appointed to serve as Assistant Secretary of Land and Minerals Management at the U.S. Department of the Interior. If her appointment is confirmed by the U.S. Senate, Ms. Beyer may be required to resign from the Board. The Company will promptly announce any such resignation in accordance with the applicable rules of the SEC. +Because directors are elected by a plurality vote, shares as to which a stockholder withholds authority to vote and broker non-votes will not affect the outcome of the election, although a broker non-vote will be counted for purposes of establishing a quorum. +Our corporate governance guidelines require that if a director receives in an uncontested election a greater number of “withhold” votes than votes cast “for” his or her election, the Nominating and Corporate Governance Committee of the Board of Directors will undertake a prompt evaluation of the appropriateness of the director’s continued service on the Board of Directors. In performing this evaluation, the Nominating and Corporate Governance Committee will review all factors it deems relevant, including the stated reasons why votes were withheld, the director’s length of service, his or her past contributions to Patterson-UTI and the availability of other qualified candidates. The Nominating and Corporate Governance Committee will then make its recommendation to the Board. The Board of Directors will review the Nominating and Corporate Governance Committee’s recommendation and consider such further factors and information as it deems relevant. The Board of Directors will act on the Nominating and Corporate Governance Committee’s recommendation no later than 90 days following the date of the stockholders’ meeting. If the Board of Directors determines remedial action is appropriate, the director shall promptly take whatever action is requested by the Board. If the director does not promptly take the recommended remedial action or if the Board of Directors determines that immediate resignation is in the best interests of Patterson-UTI and its stockholders, the Board of Directors may accept the director’s resignation that will have been tendered as follows. Each director will, as a condition to his or her appointment or election as a director or nomination as a director, agree in writing to comply with the terms of Patterson-UTI’s majority voting policy and provide to the Board of Directors an irrevocable resignation that will be effective upon (i) the failure to receive the required vote at the next annual meeting at which such director faces re-election and (ii) the Board of Directors’ acceptance of such resignation. +Set forth below is the name, age, position and a brief description of the business experience during at least the past five years of each of the nominees to Patterson-UTI’s Board of Directors, as well as specific qualifications, attributes and skills of such member that were identified by the Nominating and Corporate Governance Committee when such member was nominated to serve on the Board of Directors. +4 +Each current member of Patterson-UTI’s Board of Directors is a nominee for election to the Board of Directors and was last elected at the 2024 annual meeting of stockholders. Other than the Governance Policy described below in “Consideration of Director Nominees and Governance Policy,” there are no arrangements or understandings between any person and any of the directors pursuant to which such director was selected as a nominee for election at the Meeting. There are no family relationships among any of the directors or executive officers of Patterson-UTI. +Name Age Position Director Since +Curtis W. Huff 67 Chairman of the Board and Director 2001 +Robert W. Drummond 64 Vice Chairman of the Board 2023 +William A. Hendricks, Jr. 60 President and Chief Executive Officer and Director 2017 +Leslie A. Beyer 49 Director 2023 +Tiffany (TJ) Thom Cepak 52 Director 2014 +Gary M. Halverson 66 Director 2023 +Cesar Jaime 66 Director 2022 +Janeen S. Judah 65 Director 2018 +Amy H. Nelson 56 Director 2023 +Julie J. Robertson 69 Director 2022 +James C. Stewart 62 Director 2023 +The following charts show a snapshot of the average tenure, age and gender diversity, of the eleven nominees for election to our Board of Directors. +The table below summarizes some of the skills and experience that the Board believes each director possesses and are relevant to such director’s Board and committee service. This summary is not intended to be an exhaustive list of each of our directors’ skills or contributions, and the lack of a checkmark for a particular item does not necessarily mean that the director does not possess that skill or experience. +5 +Beyer Cepak Drummond Halverson Hendricks Huff Jaime Judah Nelson Robertson Stewart +SKILLS AND EXPERIENCE +Accounting and Finance +Understanding of finance and public company financial reporting +ü ü ü ü ü ü ü ü ü +Corporate Finance/Capital Markets +Corporate finance, capital markets and/or merger and acquisition experience +ü ü ü ü ü ü ü ü +Corporate Governance +Corporate governance principles and process +ü ü ü ü ü ü ü ü ü ü +Environmental and Safety +Safety and environmental regulations +ü ü ü ü ü ü ü ü ü ü +Global +Management and/or work experience with businesses operating outside of the United States +ü ü ü ü ü ü ü ü ü +Human Resource Management +Human resource management and/or work experience +ü ü ü +Independent +Satisfies the independence requirements of Nasdaq and the Securities and Exchange Commission +ü ü ü ü ü ü ü ü ü ü +Industry and Operations +Operational and management experience in the oil and gas industry +ü ü ü ü ü ü ü ü ü ü ü +Leadership +Business and strategic management experience from service in a leadership position, such as a CEO, COO, CFO or other senior leadership position of a significant operating unit +ü ü ü ü ü ü ü ü ü ü +Legal Background +Practiced law and/or has law degree +ü ü +Prior Board Experience +Service on public company boards +ü ü ü ü ü ü ü ü +Risk Oversight +Understanding significant risks facing companies +ü ü ü ü ü ü ü ü ü ü ü +Technology +Developing and investing in new technologies +ü ü ü ü ü ü ü ü ü +6 +When considering whether directors and nominees have the experience, qualifications, attributes and skills, taken as a whole, to enable the Board of Directors to satisfy its oversight responsibilities effectively in light of Patterson-UTI’s business and structure, the Nominating and Corporate Governance Committee and the Board of Directors focused primarily on the information discussed in each of the directors’ individual biographies set forth below. +Curtis W. Huff — Mr. Huff has served as Chairman of the Board of Patterson-UTI since June 2020, as a director of Patterson-UTI since May 2001 and served as a director of UTI Energy Corp. (“UTI”) from 1997 to May 2001. Mr. Huff is owner and Chairman of Freebird Partners, a private investment firm created in 2002 that is focused on oilfield service companies and technology. Mr. Huff co-founded Intervale Capital, an oilfield service private equity firm, in 2006 and served as a Managing Director from 2006 to 2012, when he sold his interest in the firm. Mr. Huff also serves as Chairman of Impact Fluid Solutions LP, which provides drilling and production solutions for oil and gas operators and fluid companies. Mr. Huff also serves as a director at various of Freebird’s private portfolio companies. Mr. Huff served as the President and Chief Executive Officer of Grant Prideco, Inc., a provider of drill pipe and other drill stem products, from February 2001 to June 2002. From January 2000 to February 2001, Mr. Huff served as Executive Vice President, Chief Financial Officer and General Counsel of Weatherford International, Inc., one of the world’s largest international oilfield services companies. He served as Senior Vice President and General Counsel of Weatherford from May 1998 to January 2000. Mr. Huff began his professional career in 1983 with the law firm of Norton Rose Fulbright US LLP where he specialized in corporate, securities and merger and acquisition matters. Mr. Huff was made a partner in that firm in 1989 where he served until 1998 when he joined Weatherford. Mr. Huff holds a Bachelor of Arts degree and J.D. from the University of New Mexico, where he graduated as a member of the Order of the Coif and cum laude, and a Masters of Law from New York University School of Law. Mr. Huff is a past Chairman of the Board of Directors of the University of St. Thomas in Houston, Texas and is actively involved with various charities, including the Houston Food Bank. +The Board of Directors considered Mr. Huff’s background as an executive of publicly traded oilfield services companies and as an owner and manager of a private investment firm focused on the oilfield service industry. The Board noted his knowledge and experience in a broad range of oilfield products and services and his current and historical experience in managing operations in both the United States and internationally. The Board also considered Mr. Huff’s expertise and background with regard to accounting and legal matters, which, among other things, provides guidance to Patterson-UTI in assessing its corporate governance structure, policies and procedures. +Robert W. Drummond — Mr. Drummond has served as Vice Chairman of the Board and a director of Patterson-UTI since September 2023. Mr. Drummond served as a member of the board of directors of NexTier Oilfield Solutions Inc. (“NexTier”), an oilfield service company that merged with the Company in September 2023, from August 2018 to September 2023. He joined NexTier in August 2018 as Chief Executive Officer and was elected as President in October 2019, which position he held until September 2023. Prior to joining NexTier, Mr. Drummond served as the President & Chief Executive Officer of Key Energy Services, Inc. and served for more than 30 years at Schlumberger Limited in various executive positions. Mr. Drummond has served as a director of Expro Group Holdings N.V. (“Expro”) since May 2017, and as Chairman of the Board of Expro since May 2024. He has previously served on the board of directors of the National Ocean Industries Association, the Houston Offshore Energy Center, the Greater Houston Partnership, the API Upstream Committee, and as an Advisory Board Member of the University of Houston Global Energy Management Institute. Mr. Drummond attained his B.S. in Mineral/Petroleum Engineering from the University of Alabama. +The Board of Directors considered Mr. Drummond’s more than 30 years of leadership experience in the oil and gas industry, including his service as Chief Executive Officer and President of multiple oilfield service companies. The Board also considered Mr. Drummond’s experience in leading NexTier preceding its merger with Patterson-UTI, and the benefits to the Board from having Mr. Drummond’s institutional knowledge as a resource for the Board following the merger. In addition, the Board noted his extensive experience serving or previously serving on public company boards and on the board of directors of a variety of industry organizations. +7 +William Andrew Hendricks, Jr. —Mr. Hendricks has served as President and Chief Executive Officer of Patterson-UTI since October 2012 and as a director of Patterson-UTI since June 2017. From April 2012 through September 2012, he served as Chief Operating Officer of Patterson-UTI. Prior to Patterson-UTI, Mr. Hendricks worked in a number of positions at Schlumberger for 24 years, where he last served as a drilling division President, having lived and worked around the world in the energy industry, offshore and onshore, and conducting business at times in Spanish and French. As CEO at Patterson-UTI, he has focused on transformation through investments in people and technology, growth through strategic acquisitions, improving recruiting and leadership development and also enhancing the company’s sustainability and ESG position. Mr. Hendricks attended Texas A&M University, receiving a Bachelor of Science degree in Petroleum Engineering, and then began his career working on an offshore drilling rig in the Gulf of Mexico for Ocean Drilling & Exploration Company (currently Diamond Offshore). Mr. Hendricks is a past Chairman of the International Association of Drilling Contractors, IADC Contractor of the Year in 2021, a member of the Society of Petroleum Engineers, an energy contributor on CNBC and has testified on energy matters with the U.S. Senate Committee on Energy and Natural Resources in Washington D.C. +The Board of Directors considered Mr. Hendricks’ more than 30 years of combined operational and managerial experience in the oil and gas industry. In addition, the Board noted his nearly 12 years of service as Patterson-UTI’s President and Chief Executive Officer and nearly 10 years of service in numerous executive positions with Schlumberger Limited, a global provider of oilfield services, including nearly two years as President of Schlumberger Drilling & Measurements. The Board further considered Mr. Hendricks’ significant experience with evaluating the drivers for macro trends in the oil and gas industry, as well as managing the cyclical nature of the oil and gas service business, which allows Mr. Hendricks to provide valuable input into the development and implementation of Patterson-UTI’s corporate strategy. In addition, the Board noted that Mr. Hendricks’ operational experience brings valuable knowledge to the oversight of achieving safe and efficient operations. The Board also considered Mr. Hendricks’ significant experience working in numerous worldwide locations, which allows him to provide valuable counsel regarding possible expansion into new international markets. +Leslie A. Beyer — Ms. Beyer has served as a director of Patterson-UTI since September 2023. Ms. Beyer served as a member of NexTier’s board of directors from February 2023 to September 2023. Ms. Beyer has served as a director of Forum Energy Technologies since December 2023. In February 2025, Ms. Beyer was appointed, pending confirmation by the U.S. Senate, to serve as Assistant Secretary of Land and Minerals Management at the U.S. Department of the Interior. Ms. Beyer served as the Chief Executive Officer of the Energy Workforce & Technology Council (“EWTC”) from 2014 to 2023, the largest global energy technology and services association. She is a frequent speaker on issues facing the energy industry including the global energy market, regulatory environment and ESG best practices. Ms. Beyer has been an advocate for the energy services sector testifying before Congress and frequently appearing on national media outlets. She also serves on the Advisory Board of the Energy Advisory firm Veriten. Before joining EWTC, her career highlights include 15 years in Washington, D.C. serving in policy and public affairs roles in the U.S. Senate, multiple presidential campaigns, The White House – Executive Office of the President, U.S. State Department and U.S. Department of Housing and Urban Development. After government service, Ms. Beyer began a career in advocacy as Director, Member and Board Relations with the National Association of Manufacturers. Ms. Beyer holds a bachelor’s degree of arts in Latin American Studies from The University of Texas at Austin. +The Board of Directors considered Ms. Beyer’s leadership and advocacy for responsible operations in the energy sector and extensive experience supporting the energy services sector, and the depth and perspective that such experience would bring to the Board. The Board also noted Ms. Beyer’s leadership as Chief Executive Officer of the Energy Workforce & Technology Council and her deep understanding of regulatory and environmental issues, which allows her to provide Patterson-UTI with valuable insight into industry issues. +8 +Tiffany (TJ) Thom Cepak — Ms. Cepak has served as a director of Patterson-UTI since August 2014. Ms. Cepak has served as a director of Baytex Energy Corp., an upstream oil and gas company, since June 2023, as a director of California Resources Corporation, an upstream oil and gas company, since October 2020 (and as chair since April 2021). Ms. Cepak served as a director of EnLink Midstream, LLC, a midstream company, from December 2021 until its acquisition by ONEOK, Inc. in January 2025 and as a director of Ranger Oil Corporation, an upstream oil and gas company, from September 2019 until its acquisition by Baytex in 2023. Ms. Cepak served as the Chief Financial Officer of Energy XXI Gulf Coast, Inc., an upstream oil and gas company, from August 2017 to October 2018. Ms. Cepak served as the Chief Financial Officer of KLR Energy (and, subsequent to its business combination, Rosehill Resources Inc., an upstream oil and gas company) from January 2015 to June 2017. Ms. Cepak served as a director of Yates Petroleum Corporation, a privately owned, independent oil and gas exploration and production company, from October 2015 to October 2016. Ms. Cepak served four years as the Chief Financial Officer of EPL Oil & Gas, Inc., and was further appointed Executive Vice President in January 2014, and she served in those roles until June 2014, when EPL was sold. Ms. Cepak began her career with EPL as a Senior Asset Management Engineer, a position she held until she was appointed Director of Corporate Reserves in September 2001. Ms. Cepak was named EPL’s Director of Investor Relations in April 2006 and Vice President, Treasurer and Investor Relations in July 2008. In July 2009, Ms. Cepak was designated as EPL’s Principal Financial Officer and, in September 2009, she was appointed Senior Vice President. Ms. Cepak has more than 25 years of energy industry experience and prior to joining EPL, she was a Senior Reservoir Engineer with Exxon Production Company and ExxonMobil Company with operational roles including reservoir engineering and subsurface completion engineering for numerous offshore Gulf of Mexico properties. Ms. Cepak holds a B.S. in Engineering from the University of Illinois and a Masters of Business Administration in Management with a concentration in Finance from Tulane University. +The Board of Directors considered Ms. Cepak’s more than 25 years of operational and financial experience in the energy industry. The Board noted her service in various operational roles, including as a reservoir engineer for a major oil and gas exploration and production company. The Board also noted Ms. Cepak’s executive management experience, including as chief financial officer of a publicly traded independent oil and gas exploration and production company, which allows her to provide Patterson-UTI with valuable insight on financial and strategic matters. The Board also considered Ms. Cepak’s diversity of perspective, which is exemplified by her recognition in 2018 as one of Oil and Gas Investor’s 25 Influential Women in Energy. +Gary M. Halverson — Mr. Halverson has served as a director of Patterson-UTI since September 2023. Mr. Halverson served as a member of NexTier’s board of directors from September 2016 to September 2023. In 2016, Mr. Halverson became a Senior Advisor at First Reserve, a private equity firm that focuses on energy investments, and a Partner at 360 Development Partners, a commercial real estate firm. Mr. Halverson was formerly Group President of Drilling and Production Systems and Senior Vice President at Cameron International Corporation from 2014 to 2016 prior to its sale to Schlumberger in 2016. He has over 38 years of industry experience with Cameron, where he worked in various leadership roles across the U.S., Latin America and Asia. Mr. Halverson currently serves as a director on the board of the General Committee of Special Programs of the American Petroleum Institute, as a director on the board of the Well Control Institute, as a director on the board of FlexSteel Pipeline Technologies, Inc. and was the U.S. delegate to the World Petroleum Congress. Mr. Halverson previously served as Chairman of the Board of Directors of the Petroleum Equipment Suppliers Association. +The Board of Directors considered Mr. Halverson’s over 40 years of leadership and operational experience in the energy industry. The Board also noted Mr. Halverson’s extensive financial and investment experience, including as a senior advisor of an energy-focused private equity firm, which brings a valuable financial and strategic perspective to the Board. The Board also noted Mr. Halverson’s continued involvement in a variety of industry organizations, which brings a wide knowledge of industry perspectives to the Board. +9 +Cesar Jaime — Mr. Jaime has served as a director of Patterson-UTI since April 2022. Mr. Jaime previously served on the board of Summum Group Ltd, a provider of well servicing and oil and gas engineering and construction in Colombia, Mexico and Peru, from 2014 to 2022. Mr. Jaime previously served on the board of LAREIF, a renewable energy developer in Colombia, from 2014 to 2019. Mr. Jaime served in various management positions at Schlumberger between 1981 and 2010, including serving as President of Schlumberger’s Latin America business from 2008 to 2010. Mr. Jaime has served on the board of Alliance Schlumberger, a non-profit organization grouping former Schlumberger engineers, since 2019. Mr. Jaime holds a Bachelor of Science degree in electrical engineering from Pontificia Universidad Javeriana in Bogotá, Colombia. +The Board of Directors considered Mr. Jaime’s 30 years of experience in international oilfield services in Latin America, Europe and Africa for Schlumberger, including serving as President of Latin American operations. The Board also noted his international operations background in light of the Company’s drilling operations in Colombia and recent acquisition of Ulterra, which operates in many countries across the world. The Board also considered the breadth of his experience including in key management roles in operations, sales and human resource management. +Janeen S. Judah — Ms. Judah has served as a director of Patterson-UTI since April 2018. Ms. Judah has served as a director for privately held Aethon Energy III, LLC, an upstream oil and gas investment firm, since June 2019, and as a member of the University Lands Advisory Board since August 2020. Ms. Judah served as a director of the general partner of Crestwood Equity Partners LP, a midstream company, from November 2018 to November 2023, when Crestwood was acquired by Energy Transfer. Ms. Judah served as a director of Jagged Peak Energy Inc., an upstream oil and gas company, from April 2019 to January 2020, when Jagged Peak was acquired by Parsley Energy. Ms. Judah served as the President of the Society of Petroleum Engineers from September 2016 to October 2017 while on secondment from Chevron, and as a member of the Board of Directors of the Society of Petroleum Engineers from 2003 to 2006 and from 2012 to 2018. Ms. Judah held numerous leadership positions at Chevron, including general manager for Chevron’s Southern Africa business unit from August 2010 to September 2016, president of Chevron Environmental Management Company from August 2007 to August 2010 and general manager of reservoir and production engineering for Chevron Energy Technology Company from June 2004 to August 2007. Before joining Chevron in 1998, she held various upstream petroleum engineering positions for Texaco and Arco, starting in Midland in 1981. Ms. Judah holds Bachelor of Science and Masters of Science degrees in petroleum engineering from Texas A&M University, a Masters of Business Administration from the University of Texas of the Permian Basin and a Juris Doctorate from the University of Houston Law Center. Ms. Judah is a registered professional Engineer in Texas, currently serves on both the Texas A&M and University of Houston College of Engineering Advisory Councils, and has been a member of the Texas A&M Petroleum Engineering Industry Board since 1996. +The Board of Directors considered Ms. Judah’s more than 35 years of operational, managerial and environmental experience in the oil and gas industry. The Board noted her experience derived from oil and gas industry positions held involving significant operational and management responsibilities, including positions with Chevron and upstream petroleum engineering positions. The Board also noted Ms. Judah’s extensive international experience, including most recently as general manager for Chevron’s Southern Africa business unit, which allows her to provide Patterson-UTI with valuable insight on international and strategic matters. The Board also considered Ms. Judah’s service as the President of the Society of Petroleum Engineers from 2017 to 2018, as well as her diversity of perspective, which is exemplified by her recognition in 2018 as one of Oil and Gas Investor’s 25 Influential Women in Energy. +10 +Amy H. Nelson — Ms. Nelson has served as a director of Patterson-UTI since September 2023. Ms. Nelson served as a member of NexTier’s board of directors from October 2019 to September 2023. She is also the president of Greenridge Advisors, LLC, which she founded in 2007 as an energy services and equipment consulting firm focused on the development, execution, and financing of corporate and product line strategies. Ms. Nelson advises her clients on strategy development, capital allocation, acquisition evaluation and infrastructure development. Her clients span a broad range of oilfield service, product and geographic markets. She also joined the Helix Energy Solutions Group, Inc. board of directors and its audit committee in July of 2019, and in May of 2020 began serving as the chair of the audit committee. Ms. Nelson served as a member of APA Corporation's board of directors from February 2014 until May 2024. Ms. Nelson began her career at Amoco Production Company in a variety of engineering, project management and planning roles. From 2000 to 2007, Ms. Nelson served as a vice president of SCF Partners, an oilfield service and equipment-focused private equity firm, where she concentrated on investment strategy, investment execution and portfolio company management. During her tenure at SCF Partners and Greenridge Advisors, Ms. Nelson has served on the board of directors of several private companies. Ms. Nelson has devoted her career to serving companies in the oil and gas industry. +The Board of Directors considered Ms. Nelson’s extensive oilfield service experience through her founding and leadership of an energy services and equipment consulting firm, as well as her financial and strategic experience gained through her service at an oilfield service and equipment-focused private equity firm. The Board also considered Ms. Nelson’s extensive board of directors experience as a result of currently serving or previously serving on public company boards and a variety of private company boards, bringing valuable corporate governance, sustainability and oversight experience to the Board. +Julie J. Robertson — Ms. Robertson has served as a director of Patterson-UTI since April 2022. Ms. Robertson has served as a director of EOG Resources, Inc., an upstream oil and gas company, since January 2019, and as a director of Seadrill Limited, an offshore drilling contractor, since November 2021. Ms. Robertson served as a director of Superior Energy Services, Inc., an oilfield services company, from February 2021 until March 2025. Ms. Robertson served in the role of Executive Chairman of Noble Corporation plc (“Noble”), an offshore drilling contractor, from May 2020 until her retirement from Noble in February 2021. Previously, Ms. Robertson served as Chairman of the Board, President and Chief Executive Officer of Noble from January 2018 until May 2020. Ms. Robertson previously served in various other management roles for Noble and its subsidiaries, including (i) Executive Vice President from 2006 to January 2018, (ii) Senior Vice President — Administration from 2001 to 2006 and (iii) Vice President — Administration from 1996 to 2001. Ms. Robertson also served continuously as Corporate Secretary of Noble from 1993 until assuming the Chairman’s role in 2018. Ms. Robertson joined a predecessor subsidiary of Noble in 1979. Ms. Robertson holds a Bachelor of Journalism degree from the University of Texas at Austin and successfully completed the Harvard Business School Advanced Management Program in 1998. +The Board of Directors considered Ms. Robertson’s more than 40 years of operational, managerial, administrative and human resource experience at a leading global offshore drilling contractor, including as the Executive Chair and as the Chair of the Board, President and Chief Executive Officer. The Board noted Ms. Robertson’s extensive international experience, including working in over 45 countries, her experience in mergers and acquisitions and her experience in global compliance and risk mitigation, executive compensation, governance and sustainability matters and supply chain management. Ms. Robertson also has extensive board of directors experience as a result of currently serving or previously serving on four public company boards. The Board also considered Ms. Robertson’s recognition as 2013 Drilling Contractor of the Year by the International Association of Drilling Contractors, and her recognition in 2020 as one of Oil and Gas Investor’s 25 Influential Women in Energy. +11 +James C. Stewart — Mr. Stewart has served as a director of Patterson-UTI since September 2023. Mr. Stewart served as a member of Keane’s and, subsequently, NexTier’s board of directors from March 2011 to September 2023. He joined Keane (predecessor to NexTier) in March 2011 as Chairman and Chief Executive Officer and served as Executive Chairman from August 2018 to October 2019. Mr. Stewart has served as Chief Executive Officer of One X, a provider of flowback, production and sand management, and pressure control equipment rentals and associated services, since October 2023 . Prior to joining Keane, from 2007 to 2009, he served as the President and Chief Executive Officer of a privately held international drilling company. From 2006 to 2007, Mr. Stewart served as Vice President of Integrated Drilling Services for Weatherford International plc, based in London and Dubai, where he created and managed a global business unit that included a 50-rig international land contract drilling group and a global project management team. Mr. Stewart began his career with Schlumberger Limited, where he held senior leadership positions across the globe over the span of 22 years. +The Board considered Mr. Stewart’s more than 30 years of leadership experience in the oilfield services industry, including his service as former Chief Executive Officer of NexTier and of another oilfield service company. The Board also considered his extensive international experience and management of global business and project management teams, which brings perspective to the Board and allows him to provide Patterson-UTI with valuable insight on international and strategic matters. +12 +Board Leadership Structure and Independent Chairman +The Board evaluates its leadership structure on an ongoing basis. The decision on whether to combine or separate the Chairman and Chief Executive Officer (“CEO”) role is determined on the basis of what the Board considers to be best for Patterson-UTI at any given point in time. Patterson-UTI’s current Board leadership structure separates the role of Chairman and CEO, and our Chairman is an independent director. In addition to having an independent Chairman, the Board has an independent Vice Chairman who works with the independent Chairman to provide independent oversight and leadership of the Board. +The independent directors meet regularly in executive sessions at which only independent directors are present, and the Chairman chairs those sessions. The Chairman serves as a liaison between the independent directors and any employee directors, consults with regard to Board and agenda items, and works with the chairpersons of Board committees as appropriate. The Chairman also participates from time to time in meetings with large stockholders. +The Nominating and Corporate Governance Committee and the Board currently believe that the Board’s leadership structure, which includes the separation of the role of CEO and Chairman, is appropriate because it, among other things, provides for sufficient independence between the Board and management and for an independent director who provides board member leadership. +Board Role in Risk Oversight +The Board has adopted Corporate Governance Guidelines, which can be accessed electronically in the “Governance” section of Patterson-UTI’s website at www.patenergy.com. The Guidelines describe one of the Board’s primary responsibilities as overseeing Patterson-UTI’s processes for assessing and managing risks. The Board delegates to its committees responsibility for overseeing certain types of risk, as reflected in the chart below, and the committees in turn report regularly to the Board on their respective areas of oversight. +Board of Directors +• The Board oversees assessment of major risks facing the Company and, to the extent the Board deems it appropriate, evaluates options for their mitigation. The risks that the Board routinely oversees, either directly or by delegating to a committee, include those related to safety, operations, financial matters, strategy, technology, competition, legal and regulatory matters, and sustainability matters, including climate change-related matters. +• The Board and its committees discharge their oversight responsibility, in part, through regular inquiries from the Chairman of the Board and other directors to senior management, regular discussions during Board and committee meetings of general and specific risks to Patterson-UTI, and periodic communications with senior management regarding particular risks and events. +• The Board oversees risk management by our senior management team, in part, by reviewing and evaluating major financial objectives, critical strategies, and long-term plans, including major allocations of capital, significant proposed business acquisitions and divestitures, safety and operating performance, sustainability performance, and stockholder returns. +Audit Committee Compensation Committee Nominating and Corporate Governance Committee Sustainability Committee +• Financial statements and internal controls +• Independent auditors and internal audit function +• Financial reporting process +• Legal and ethics compliance programs +• Sustainability disclosures in SEC reports and financial statements +• Cybersecurity +• Compensation policies and related risks +• Compensation of executive officers, including KPIs +• Incentive compensation plan administration +• CD&A and report in proxy statement +• Corporate governance guidelines and code of business conduct +• Review of board performance +• Recommendation of director nominees and committee composition +• Executive succession planning +• Assistance with governance-related sustainability issues, including climate-related risks and opportunities +• Sustainability risks and opportunities, including climate-change related matters +• Sustainability report and related disclosure issues +• Sustainability-related strategy, policies and practices +• Health, safety and environmental protection policies; related risks +• Human and workplace rights and policies, including diversity and inclusion policies and human capital management +13 +Senior Management +Day-to-day responsibility for: +• Identifying corporate risks, including climate-related risks and opportunities +• Assessing the potential level of impact to the business from such risks +• Implementing appropriate risk management strategies, including integrating consideration of risk and risk management into business decision-making +• Reviewing the effectiveness of our risk management efforts +Management's Role in Risk Management +Our senior management identifies risks and opportunities through discussions with employees and other stakeholders, including customers, investors, trade associations and industry groups; engagement with environmental, social and governance (ESG) groups; and our own business risk assessments, as well as regular monitoring of legal, regulatory and policy changes with the potential to affect the industry as well as our company specifically. We believe that climate risks are inherently business risks, and our assessment of these climate-related transition and physical risks is integrated into our business risk assessment process. +Our senior management and representatives from our business units regularly communicate with the Board on risk management matters. Senior management conducts regular risk assessments to identify risks that have the potential to significantly affect our business over the short-, medium- and longer term and reviews with the Board risk mitigation and oversight measures, including prioritization of risk management and allocation of responsibility within the Company for the management of a particular risk. +Meetings and Committees of the Board of Directors; Director Independence +Meetings +The Board of Directors met nine times during the year ended December 31, 2024. Each then-serving director attended, in person or by telephone, at least 75% of the aggregate of all meetings held by the Board and meetings of each committee on which such director served. Although Patterson-UTI does not have a formal policy regarding attendance by members of the Board at its annual meetings of stockholders, directors are invited to attend annual meetings of Patterson-UTI stockholders. All but two of our directors attended the 2024 annual meeting of stockholders either in person or by telephone. +Director Independence +A majority of the members of the Board of Directors are independent within the meaning of the Nasdaq Stock Market, Inc. (“Nasdaq”) listing standards. Specifically, the Board has determined that Messrs. Drummond, Halverson, Huff, Jaime and Stewart and Mses. Beyer, Cepak, Judah, Nelson and Robertson are independent within the meaning of the Nasdaq listing standards. In making its independence determinations, the Board considered transactions occurring since the beginning of 2024 between Patterson-UTI and entities associated with the independent directors or their immediate family members. The Board considered that since October 2023, Mr. Stewart has been employed by an organization that does business in the ordinary course with a subsidiary of Patterson-UTI. The amount received by Patterson-UTI or such other organization in each of the last three fiscal years did not exceed the greater of $200,000 or 1% of either Patterson-UTI’s or such organization’s consolidated gross revenues. +Committees of the Board of Directors +The Board of Directors has established five standing committees: an Executive Committee, an Audit Committee, a Compensation Committee, a Nominating and Corporate Governance Committee and a Sustainability Committee. The Board of Directors has adopted a written charter for the Audit Committee, Compensation Committee, Nominating and Corporate Governance Committee and Sustainability Committee. +14 +Executive Committee +Current Composition: Messrs. Huff (chair), Drummond and Hendricks +Number of Meetings during 2024: None +The Executive Committee has the authority, to the extent permitted by applicable law, to act for the Board in all matters arising between regular or special meetings of the Board of Directors. +Audit Committee +Current Composition: Mses. Cepak (chair), Judah and Robertson, and Messrs. Halverson, Jaime and Stewart +Number of Meetings during 2024: Five +Primary oversight and responsibilities: +• oversee management’s execution of Patterson-UTI’s accounting and financial reporting process, including review of the financial reports and other financial information provided by Patterson-UTI to the public and government and regulatory bodies +• review system of internal accounting, financial controls, and the annual independent audit of Patterson-UTI’s financial statements +• review system of internal control over financial reporting +• review cybersecurity risks with management +• oversee compliance with Patterson-UTI’s codes of conduct and ethics and with legal and regulatory requirements +• select the independent registered public accounting firm to audit Patterson-UTI's books and records +• consider and act upon accounting matters as they arise +Each member is independent within the meaning of applicable rules under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and within the meaning of the Nasdaq listing standards. The Board has determined that Ms. Cepak is an “audit committee financial expert” within the meaning of applicable SEC rules. +Please see “Audit Committee Report” elsewhere in this proxy statement. +Compensation Committee +Current Composition: Messrs. Halverson (chair) and Huff and Mses. Cepak and Nelson +Number of Meetings during 2024: Eight +Primary oversight and responsibilities: +• set and administer the policies that govern the compensation of executive officers of Patterson-UTI +• periodically review director compensation and recommend changes, as appropriate, to the Board of Directors for approval +Each member is independent as defined in the Nasdaq listing standards. +Please see “Compensation Discussion and Analysis” and “Compensation Committee Report” elsewhere in this proxy statement for further information about the Compensation Committee. +Nominating and Corporate Governance Committee +Current Composition: Mses. Robertson (chair) and Beyer and Messrs. Huff and Stewart +Number of Meetings during 2024: Two +Primary oversight and responsibilities: +• identify individuals qualified to become Board members +• recommend for selection by the Board director nominees for the annual meetings of stockholders +• recommend nominees for Board committees +• review succession planning for executive officers of the Company +• review Patterson-UTI’s Code of Business Conduct and Corporate Governance Guidelines +• develop and make recommendations with respect to the best corporate governance principles +• oversee the annual review of the Board and management +• assist the Board’s Sustainability Committee in its oversight of governance-related sustainability issues, including climate-related risks and opportunities +Each member is independent as defined in the Nasdaq listing standards. +15 +Sustainability Committee +Current Composition: Mses. Nelson (chair), Beyer and Judah and Messrs. Drummond, Jaime and Stewart +Number of Meetings during 2024: Five +Primary oversight and responsibilities: +• review significant policies and performance and provide guidance on matters relating to sustainability +• oversee and monitor the Company’s vision and values relating to sustainability +• advise the Board and management on significant public issues related to sustainability matters +• assist management in setting strategy, establishing goals and integrating sustainability into strategic and tactical business activities across the Company to create long-term stockholder value +• review and recommend to the Board for approval any sustainability reporting to the public or governmental agencies +Each member is independent as defined in the Nasdaq listing standards. +Consideration of Director Nominees and Governance Policy +On behalf of the Board, the Nominating and Corporate Governance Committee considers director nominees recommended by Patterson-UTI’s stockholders if the recommendations are made in accordance with all legal requirements, including applicable provisions of Patterson-UTI’s restated certificate of incorporation and bylaws. A stockholder’s notice to the Secretary of Patterson-UTI shall contain certain information specified in Patterson-UTI’s bylaws regarding the stockholder and the proposed nominee. See “Other Matters—Stockholder Proposals for 2026 Annual Meeting” and Article I, Section 8 and Article I, Section 11 of Patterson-UTI’s bylaws. +The number of directors may be fixed or changed by amendment of Patterson-UTI's bylaws or by resolution of the Board. The Board assesses periodically, in connection with director refreshment and other considerations, whether a larger or smaller number of directors would be preferable. +The Nominating and Corporate Governance Committee determines qualification criteria and procedures for the identification and recruitment of candidates for election to serve as directors of Patterson-UTI. The Nominating and Corporate Governance Committee relies on the knowledge and relationships of Patterson-UTI and its officers and directors, as well as third parties when it deems appropriate, to identify and evaluate nominees for director, including nominees recommended by stockholders (which are evaluated in the same manner as nominees identified by other sources). In evaluating a nominee for director, the Nominating and Corporate Governance Committee considers the nominee’s skills, expertise, industry and other knowledge, personal and professional ethics, integrity and values, sound business judgment and willingness to commit sufficient time to the Board and be committed to representing the long-term interests of Patterson-UTI’s stockholders. The Nominating and Corporate Governance Committee also reviews the individual performance and qualifications of each director who wishes to be considered for nomination to the Board. Although the Nominating and Corporate Governance Committee does not have a stand-alone policy with regard to consideration of diversity in identifying director nominees, it is required, in accordance with our Corporate Governance Guidelines, to consider diversity in professional background, experience, expertise (including as to financial matters) and perspective (including as to age, gender and ethnicity) with respect to the Board of Directors composition as a whole when evaluating a director nominee. The Board assesses its effectiveness in this regard as part of the annual board and director evaluation process. +In connection with the closing of the NexTier merger in September 2023, the Board adopted a Governance Policy that sets forth certain requirements on the Board and its composition for a period of two years following completion of the NexTier merger. The Governance Policy provides that, at each of the 2024 and 2025 annual meetings of stockholders, the Patterson-UTI Board will re-nominate each Patterson-UTI and NexTier designee then serving on the Patterson-UTI Board for re-election by stockholders, subject to certain exceptions. In addition, until September 1, 2025, (i) the Nominating and Corporate Governance Committee will have an equal number of Patterson-UTI and NexTier designees, (ii) all other committees will have at least one NexTier designee, such that the membership of all the committees (excluding the Executive Committee) of the Patterson-UTI Board, taken as a whole, will have an equal number of Patterson-UTI and NexTier designees and (iii) the Executive Committee will consist of the Chairman, Vice Chairman and Chief Executive Officer. Mses. Cepak, Judah and Robertson and Messrs. Huff, Hendricks and Jaime are the current Patterson-UTI designees, and Mses. Nelson and Beyer and Messrs. Drummond, Halverson and Stewart are the current NexTier designees. +16 +Board and Director Performance Assessments +The Nominating and Corporate Governance Committee annually reviews and evaluates the performance of the Board, each Committee of the Board, and each director in order to improve the effectiveness of the Board and each Committee of the Board. The Committee assesses the contributions of the Board as a whole and each of its Committees and identifies areas in which improvements may be made. The results of the evaluations are reviewed and discussed with the Board and its Committees, and recommendations are made, as appropriate, to the Board and its Committees. +The Nominating and Corporate Governance Committee also annually reviews the individual performance and qualifications of each director who wishes to be considered for nomination for reelection to the Board. +Continuing Education +Continuing education helps our directors strengthen their skills, deepen their understanding of our business and operations and stay current with emerging issues that affect our business, governance and compensation practices. It also helps directors keep abreast of governance developments and requirements and understand the issues we face in the context of our business. To further these goals, our Board’s continuing director education policy requires directors to participate in continuing education programs and reimburses directors for expenses incurred in connection with such education programs. +Succession Planning +The Board of Directors oversees processes and procedures to provide continuity of well-qualified executive leadership and to assess whether such leadership possesses the skill and talent to execute Patterson-UTI’s long-term business strategies. The Board of Directors reviews succession planning for the Chief Executive Officer and the senior executives tailored to reflect the Board’s standards for executive leadership and Patterson-UTI’s business strategy and vision. The succession planning addresses (i) both current and long-term needs of Patterson-UTI and establishes a process for identifying and assessing potential internal candidates; (ii) periodic review and assessment of readiness; (iii) contingency planning for temporary absences of the Chief Executive Officer due to disability or other unexpected event; and (iv) long-term continuity planning for succession to the Chief Executive Officer position. +Political Contributions +Patterson-UTI has a policy prohibiting the contribution of company funds to political parties or organizations or to candidates for any public office or to influence the general public, or segments thereof, with respect to public elections or referenda. Patterson-UTI participates in certain trade organizations with purposes that include enhancement of the public image of our industry, education about the industry and issues that affect the industry and industry best practices and standards. Many of the trade organizations also engage in legislative or political activity related to matters that affect the industry as a whole and not a specific company. Patterson-UTI, as one of many members in various trade associations, does not direct the legislative activities of any trade organization of which it is a member. +Sustainability +We encourage you to review our latest sustainability report for information regarding our sustainability programs and initiatives. A copy of Patterson-UTI’s sustainability report can be accessed electronically in the “Sustainability” section of the Patterson-UTI website at www.patenergy.com and in print to any stockholder who requests it from the Secretary of Patterson-UTI. Nothing on our website, including our sustainability report or sections thereof, shall be deemed incorporated by reference into this proxy statement or other filings that we make with the SEC. Our ESG goals are aspirational and may change. Statements regarding our goals are not guarantees or promises that they will be met. +Patterson-UTI’s Code of Business Conduct and Ethics and Equal Employment Opportunity and Anti-Harassment Policy prohibit discrimination or harassment of any type and afford equal employment opportunities to all employees and applicants, without regard to age, race, sex, color, religion, national origin, disability, marital status, covered veteran status, genetic information, sexual orientation, gender identity or any other characteristic protected under state, federal or local law. Each employee is expected to demonstrate a shared +17 +commitment to Patterson-UTI’s values regarding diversity and inclusion, as well as mutual respect for all co-workers, vendors, customers, third parties, and business partners. +Communication with the Board and its Independent Members +Persons may communicate with the Board, or directly with its Chairman, Mr. Huff, by submitting such communication in writing in care of Chairman of the Board of Directors, Patterson-UTI Energy, Inc., 10713 West Sam Houston Parkway North, Suite 800, Houston, Texas 77064. Persons may communicate with the independent members of the Board by submitting such communication in writing to the Nominating and Corporate Governance Committee of the Board of Directors of Patterson-UTI Energy, Inc., 10713 West Sam Houston Parkway North, Suite 800, Houston, Texas 77064. +Insider Trading Policy +Patterson-UTI has adopted an Insider Trading Compliance Policy and Insider Trading Compliance Memorandum that set forth policies and procedures governing the purchase, sale, and other transactions in Company securities by directors, officers, employees and consultants, and persons related to directors, officers, employees and consultants. These policies and procedures, as well as procedures that the Company follows, are reasonably designed to promote compliance with insider trading laws, rules, and regulations and applicable listing standards. A copy of the Insider Trading Compliance Policy and Insider Trading Compliance Memorandum were filed as Exhibit 19.1 and 19.2 to the Company's Annual Report on Form 10-K for the year ended December 31, 2024. +Corporate Governance Documents Available on Patterson-UTI’s Website +Copies of each of the following documents can be accessed electronically in the “Corporate Governance” section of the Patterson-UTI website at www.patenergy.com and in print to any stockholder who requests them from the Secretary of Patterson-UTI: +• Audit Committee Charter; +• Compensation Committee Charter; +• Nominating and Corporate Governance Committee Charter; +• Sustainability Committee Charter; +• Corporate Governance Guidelines; +• Governance Policy; +• Code of Business Conduct and Ethics for its employees, officers and directors; +• Code of Business Conduct and Ethics for Senior Financial Executives; and +• Global Anticorruption Policy. +18 +PROPOSAL NO. 2 +RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM +The Audit Committee appointed PricewaterhouseCoopers LLP as the independent registered public accounting firm to audit the financial statements and internal control over financial reporting of Patterson-UTI for the fiscal year ending December 31, 2025, and directed that such engagement be submitted to the stockholders of Patterson-UTI for ratification. In recommending ratification by the stockholders of such engagement, the Board of Directors is acting upon the recommendation of the Audit Committee, which has satisfied itself as to PricewaterhouseCoopers LLP’s independence, professional competence and standing. Although ratification by stockholders of the engagement of PricewaterhouseCoopers LLP is not required by Delaware corporate law or Patterson-UTI’s restated certificate of incorporation or bylaws, the Audit Committee believes a decision of this nature should be made with the consideration of Patterson-UTI’s stockholders. If the stockholders fail to ratify the appointment, the Audit Committee will reconsider whether to retain PricewaterhouseCoopers LLP and may retain that firm or another without re-submitting the matter to our stockholders. Even if the appointment is ratified, the Audit Committee may, in its discretion, direct the appointment of a different independent registered public accounting firm at any time during the year if it determines that such change would be in the best interests of Patterson-UTI and its stockholders. +It is expected that one or more representatives of PricewaterhouseCoopers LLP will be available to participate in the Meeting and will be given the opportunity to make a statement if they so desire. It also is expected that the representative(s) will be available to respond to appropriate questions from the stockholders. +The Board of Directors recommends a vote “FOR” the ratification of PricewaterhouseCoopers LLP as Patterson-UTI’s independent registered public accounting firm. Ratification of the selection of PricewaterhouseCoopers LLP requires the affirmative vote of the holders of a majority of the shares of Common Stock entitled to vote on, and voted “FOR” or “AGAINST,” the proposal. Unless you give contrary instructions in your proxy, your properly submitted proxy will be voted “FOR” such ratification. Abstentions will not be counted as votes cast “FOR” or “AGAINST” the proposal and will have no effect on the outcome of the proposal. If you do not give instructions to your brokerage firm, bank, broker-dealer, or other similar organization, the brokerage firm, bank, broker-dealer, or other similar organization is expected to be entitled, but not required, to vote your shares in its discretion and may give or authorize the giving of a proxy to vote the shares in its discretion on this proposal. +19 +PROPOSAL NO. 3 +ADVISORY APPROVAL OF EXECUTIVE COMPENSATION +In accordance with Section 14A of the Exchange Act, the Board of Directors is asking stockholders to approve a non-binding, advisory resolution to approve the compensation of Patterson-UTI’s executive officers who are named in the Summary Compensation Table appearing in this proxy statement (the “Named Executive Officers”). The compensation of the Named Executive Officers is described in the “Compensation Discussion and Analysis” and “Executive Compensation” sections of this proxy statement. +For a discussion of our stockholder engagement and compensation program alignment with stockholder interests, please see “Compensation Discussion and Analysis— Aligning Compensation Programs with Stockholder Interests.” +The compensation program for the Named Executive Officers is designed to attract and retain highly qualified individuals and to motivate and reward them for performance that benefits Patterson-UTI and its stockholders. The Compensation Committee and the Board of Directors believe that the policies and procedures detailed in the “Compensation Discussion and Analysis” achieve these goals by, among other things: +• providing a mix of short-term compensation in the form of base salary and annual cash incentive bonuses and long-term compensation in the form of restricted stock units, performance units, and, in some years, restricted stock, stock options and phantom units, which strikes a balance between offering competitive compensation packages and aligning compensation with long-term growth and creating value for stockholders; +• emphasizing variable equity and cash compensation to link realized compensation to performance; +• reviewing annual base salaries, in part, based on Patterson-UTI’s financial results and position and performance compared to similarly situated companies; +• providing performance-based annual cash incentive bonuses designed to place a meaningful portion of total compensation at risk; +• awarding long-term equity incentives whose value is tied to the achievement of certain performance goals and/or an increase in the price of the Common Stock; +• awarding long-term equity incentives that generally vest over periods of three years; and +• maintaining stock ownership requirements. +The Board of Directors is asking stockholders to approve the following non-binding, advisory resolution at the Meeting: +“RESOLVED, that the stockholders of Patterson-UTI Energy, Inc. (the “Company”) approve, on an advisory basis, the compensation of the Company’s Named Executive Officers, as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the compensation tables and other narrative discussion in the Proxy Statement for the 2025 Annual Meeting of Stockholders of the Company.” +This advisory resolution, commonly referred to as a “say-on-pay” resolution, is non-binding on the Board of Directors. Although non-binding, the Board of Directors and the Compensation Committee value the views of Patterson-UTI’s stockholders and will review and consider the voting results when (i) evaluating the effectiveness of Patterson-UTI’s compensation policies and practices and (ii) making future compensation decisions for the Named Executive Officers. As recommended by our stockholders at the 2023 annual meeting, Patterson-UTI currently holds an annual “say-on-pay” vote and thus, unless the Company changes its policy, expects that the next such vote after the 2025 annual meeting will be held at the 2026 annual meeting of stockholders. +The Board of Directors recommends a vote “FOR” the approval of the advisory resolution on executive compensation . Approval of the advisory resolution requires the affirmative vote of the holders of a majority of the shares of Common Stock entitled to vote on, and voted “FOR” or “AGAINST,” the proposal. Unless you give contrary instructions in your proxy, your properly submitted proxy will be voted “FOR” approval of the proposal. Abstentions will not be counted as votes cast “FOR” or “AGAINST” the proposal and will have no effect on the outcome of the proposal. A broker non-vote will be counted for purposes of establishing a quorum, but will not be treated as a vote cast “FOR” or “AGAINST” the proposal and will have no effect on the outcome of the proposal. +20 +EXECUTIVE OFFICERS +Set forth below is the name, age and position followed by a brief description of the business experience during at least the past five years for each executive officer who is not also a nominee for election to the Board of Directors. Each of our executive officers is appointed by the Board of Directors and serves at the discretion of our Board of Directors. +Name Age Position +William A. Hendricks, Jr 60 President and Chief Executive Officer and Director +C. Andrew Smith 54 Executive Vice President and Chief Financial Officer +Kenneth N. Berns 65 Executive Vice President and Chief Commercial Officer +James M. Holcomb 62 Executive Vice President and Chief Business Officer +Seth D. Wexler 53 Executive Vice President, General Counsel and Secretary +C. Andrew Smith — Mr. Smith has served as Executive Vice President and Chief Financial Officer of Patterson-UTI since September 2017. From April 2014 until September 2017, Mr. Smith served as Executive Vice President and Chief Financial Officer of Kirby Corporation, a marine transportation and diesel engine services company. From January 2014 to April 2014, Mr. Smith served as Executive Vice President – Finance of Kirby Corporation. Prior to joining Kirby Corporation, Mr. Smith served as Senior Vice President and Chief Financial Officer of Benthic Geotech and was previously Chief Financial Officer for both Global Industries, LTD and NATCO Group. Mr. Smith holds a degree in business administration from the University of Houston. +Kenneth N. Berns — Mr. Berns has served as Executive Vice President and Chief Commercial Officer of Patterson-UTI since May 2017. Mr. Berns served as a director of Patterson-UTI from May 2001 to June 2017 and as Senior Vice President of Patterson-UTI from April 2003 to May 2017. Mr. Berns served as a director of UTI from 1995 to May 2001. Mr. Berns has been an executive with REMY Investors since 1994. Mr. Berns holds a Bachelor’s Degree in Business Administration from San Diego State University and a Master’s Degree in Taxation from Golden Gate University. +James M. Holcomb — Mr. Holcomb has served as Executive Vice President and Chief Business Officer since September 2023. Mr. Holcomb joined Patterson-UTI in February 1998 with the acquisition of Robertson Onshore Drilling Company, and since that time has served in numerous operational management roles, including as Chief Operating Officer from January 2023 to September 2023, as President of Patterson-UTI Drilling Company LLC, a wholly owned subsidiary of Patterson-UTI, from January 2012 to December 2022, and as Senior Vice President of Operations of Patterson-UTI Drilling Company LLC from April 2006 to January 2012. Mr. Holcomb has over 35 years of experience in contract drilling operations. Mr. Holcomb holds a Bachelor of Science Degree in Business Management from LeTourneau University. +Seth D. Wexler — Mr. Wexler has served as Executive Vice President, General Counsel and Secretary of Patterson-UTI since February 2024. Mr. Wexler served as Senior Vice President, General Counsel and Secretary of Patterson-UTI from February 2017 to February 2024, and as General Counsel and Secretary of Patterson-UTI from August 2009 to February 2017. From March 1998 to August 2009, he specialized in securities law and mergers and acquisitions for the law firm of Norton Rose Fulbright US LLP, including as a partner of such law firm since January 2007. Mr. Wexler holds a Bachelor of Business Administration in Finance from the University of Texas at Austin, a Juris Doctorate from the University of Houston Law Center and a Masters of Business Administration from the University of Houston. +21 +COMPENSATION DISCUSSION AND ANALYSIS +The following Compensation Discussion and Analysis (“CD&A”) sets forth the principal compensation policies and programs of Patterson-UTI for 2024 for our Named Executive Officers (“NEOs”). +Named Executive Officer Title +William Andrew Hendricks, Jr. Chief Executive Officer and President +C. Andrew Smith Executive Vice President and Chief Financial Officer +Kenneth N. Berns Executive Vice President and Chief Commercial Officer +James M. Holcomb +Executive Vice President and Chief Business Officer +Seth D. Wexler +Executive Vice President, General Counsel and Secretary (1) +(1) Mr. Wexler served as Senior Vice President, General Counsel and Secretary from January 1, 2024 to February 13, 2024. He was appointed Patterson-UTI’s Executive Vice President, General Counsel and Secretary on February 13, 2024. +2024 Company Highlights +In 2024, we achieved a number of key financial and strategic successes, including the following: +• Increased Operating Cash Flow compared to 2023; +• Returned over $400 million to shareholders in 2024 through share repurchases and dividends; +• Strengthened our balance sheet and improved our liquidity profile; +• Strengthened and maintained key customer relationships through delivery of top-tier operational performance, excellent customer service and new technologies, including the following successes: +◦ The Drilling Services segment successfully participated in the Company’s first integrated performance agreement, advanced deployment of multiple new technologies, and improved operational efficiencies; +◦ The Completion Services segment deployed additional next-generation, emissions-friendly equipment, deployed advanced field gas technology in its power solutions division, and expanded its wireline and cementing services; +◦ The Drilling Products segment had revenue outperformance relative to the U.S. rig count, and increased international revenue; and +• Completed our operational integrations of NexTier Oilfield Solutions Inc. (“NexTier”) and Ulterra Drilling Technologies, L.P. (“Ulterra”), following the NexTier merger and Ulterra acquisition, each of which closed in 2023. +Aligning Compensation Programs with Stockholder Interests +Strong Stockholder Support for Say-on-Pay +Year of Annual Meeting Stockholder Support for Say-on-Pay Proposal +2024 96% +2023 98% +2022 97% +2021 98% +2020 96% +We have received at least 96% support for our Say-on-Pay proposal at each of our last five Annual General Meetings of Stockholders. The Compensation Committee strongly values the opinions of our stockholders and believes that our recent support levels demonstrate a strong alignment of our compensation program with our stockholders’ interests. +22 +We regularly meet with stockholders to solicit feedback on areas of concern. With the strong stockholder support for our Say-on-Pay proposals at our recent Annual General Meetings of Stockholders, no specific changes were made to our compensation programs as a result of the 2024 Say-on-Pay vote or meetings with stockholders; however, the Compensation Committee will continue to consider the results of our future Say-on-Pay votes and other stockholder feedback when making future compensation decisions for our NEOs. +Good Governance and Compensation Practices Aligned with Stockholders +We are mindful of the positive impact that strong corporate governance has on maintaining an executive compensation program that is aligned with the interests of our stockholders. In designing the current executive compensation program, we sought to incorporate various best practices for compensation governance, including those summarized below. +What We Do What We Don’t Do +þ Provide a balanced mix of cash and equity compensation with long-term incentives accounting for 50% or more of total target compensation +þ Grant more than 50% of long-term incentives (by target value) with performance-based vesting conditions +þ Award variable compensation earned based on both absolute performance and performance versus peers +þ Impose clawback requirements that apply to all our executive officers +þ Maintain share ownership requirements for our executive officers and directors +þ Maintain an anti-pledging policy for our executive officers and directors (subject to a limited waiver for a legacy NexTier director, which is described in "Anti-Pledging Policy" below) +þ Maintain an anti-hedging policy for our executive officers and directors +þ Engage independent compensation consultant +þ Hold an annual Say-on-Pay vote and solicit more robust feedback from stockholders +x No re-pricing of options +x No single trigger change-of-control severance arrangements +x No dividends or dividend equivalents paid unless and until underlying award vests +x No new agreements with tax gross-ups and none entered into in more than 20 years +x No material perquisites to NEOs +x No single trigger change-of-control equity-based grants for our executive officers +23 +What Guides Our Program +Our overriding philosophy for the compensation of our key executives is to link their compensation with Patterson-UTI’s operational and market performance and to establish incentives that reward our executives for their achievement of both short-term tactical and long-term strategic objectives. In doing so, we seek to offer competitive compensation designed to attract and retain highly qualified individuals and to motivate and reward our executives in achieving Patterson-UTI’s goals. Specifically, the 2024 program was designed to reinforce the following goals: +Patterson-UTI Goals How Goal Was Reinforced in Our 2024 Compensation Program +Provide quality services for our customers in a safe and efficient manner +• Our 2024 annual cash bonus incentive plan included “Health, Safety and Environmental” performance as a distinct metric (weighted at 10%) +• Our financial performance metrics required quality operational performance +Generate strong financial performance and returns for our stockholders +• The majority of executive compensation was delivered in the form of variable, at-risk compensation (as referenced in the charts below) aligned with stockholder interests +• The majority of the target payout under our 2024 annual cash bonus incentive plan was based on financial performance metrics (80%) +• Our 2024 annual cash bonus incentive plan rewarded executives for cash flow generation and profitability through the use of Operating Cash Flow and Adjusted EBITDA as the primary performance metrics +• Our long-term incentive plan incentivizes the creation of stockholder value on both an absolute and relative basis through the grant of equity compensation and the use of absolute and relative TSR performance goals under our performance units +Attract and retain highly qualified individuals, with a strong emphasis on teams working together to capitalize on opportunities and solve problems +• We benchmarked our executive pay programs against oilfield services companies, oil and gas exploration and production companies and industrial companies +• We did not target a specific market percentile for executive compensation. Instead, executive compensation was set based on a holistic review of several factors, including market pay levels, individual performance and qualifications, and executive tenure +• Our annual and long-term incentive programs generally reward company-wide results rather than performance against individual objectives +• The majority of our executives’ compensation was delivered in the form of long-term incentives that vest over a multi-year period to aid in retention of executives +24 +For 2024, target total direct compensation for our NEOs was most heavily weighted toward long-term incentives, with the majority of long-term incentive compensation subject to performance-based vesting criteria, as shown below. +2024 TARGET TOTAL DIRECT COMPENSATION +Process for Determination of Executive Compensation +Role of the Compensation Committee +The Board of Directors has delegated the management of Patterson-UTI’s executive compensation program to the Compensation Committee. The Compensation Committee meets on a regular basis to consider compensation matters and to review how Patterson-UTI’s plans and policies work in practice. Each of the Compensation Committee’s current members is an independent director as defined by the Nasdaq listing standards. +Independent, Outside Compensation Consultant +Our Compensation Committee regularly utilizes outside compensation consultants to help assess and design our executive compensation program. These consultants are paid on either a basic, fixed-fee structure plus expenses or an hourly rate structure plus expenses. These outside consultants provide data and advice on historical compensation and stockholder returns, market trends and peer compensation practices. The Compensation Committee retained Compensation Advisory Partners (“CAP”) as its consultant and advisor for executive compensation matters from September 2023 to October 2024. In October 2024, the Compensation Committee began engaging Pay Governance LLC (“Pay Governance”) to advise on executive compensation matters. +Our Compensation Committee regularly reviews the services provided by its outside consultants and has determined that the engagement of CAP did not, and the engagement of Pay Governance does not, raise any conflicts of interest. The Compensation Committee receives a confirmation certification of independence from its consultants annually. +In 2024, CAP provided the Compensation Committee with information on the compensation practices of our peer group and other oilfield service companies and on the reasonableness of our program as compared to the compensation practices of our peer group. In so doing, CAP provided the Compensation Committee with information on each element of total direct compensation for our executive officers as well as a comparison of each such element of compensation against our peers and the broader oilfield services, oil and gas exploration and production and industrials markets. CAP also provided the Compensation Committee with information on the cost and potential dilution to our stockholders of our equity-based incentives and compared our equity usage to that of our peer group. During 2024, CAP and Pay Governance did not provide any services to us other than consulting services for the Compensation Committee and providing compensation benchmarking data for certain of our employee groups. The aggregate amount of fees paid to CAP and Pay Governance in 2024 for such compensation benchmarking data was $8,500. Although the decision to engage CAP and Pay Governance for this purpose was made by the Company’s human resources group, the Compensation Committee was aware of the engagement. +25 +In late 2023, CAP provided the Compensation Committee with advice regarding the establishment of a new peer group to benchmark executive pay levels for purposes of setting 2024 executive compensation, as described below. In 2025, Pay Governance reviewed this peer group with the Compensation Committee, which determined that no changes were necessary for purposes of setting 2025 executive compensation. +Role of Management and Feedback of Others +In making compensation determinations, including annual bonus plan design and equity award grants, the Compensation Committee also seeks input from management through our CEO. +Our CEO provides the Compensation Committee with reviews of the performance of other executive officers and senior managers, including the other NEOs. He also engages in an annual dialogue with our Committee Chairman and the Chairman of the Board on our compensation program and seeks their input on and review of proposals for long-term incentive grants. This process results in a recommendation that is then considered by our Compensation Committee as a whole. The Compensation Committee meets in executive session without our CEO present, and our CEO is not involved in decisions relating to his compensation. +In addition to the recommendations of management and consultants, the Compensation Committee considers feedback from Patterson-UTI’s stockholders, guidelines of proxy advisory firms, reported trends in compensation, internal budgets, historical data for the Company and its peers, strategic planning updates, executive retention risk and other information that it considers relevant. +2024 Compensation Peer Group +Following the NexTier merger, and in consideration of the Company’s larger size and increased complexity of operations, the Compensation Committee worked with CAP to establish the following 2024 compensation peer group to benchmark executive pay levels for purposes of setting 2024 executive compensation. At the time the 2024 compensation peer group was established, the Company was at the 43rd percentile for projected 2024 revenues as compared to the peer group and at the 62nd percentile for trailing twelve month EBITDA as compared to the peer group. +2024 Compensation Peer Group +Antero Resources Corporation +APA Corporation +ChampionX Corporation +Diamondback Energy, Inc. +Dover Corporation +Fluor Corporation +Halliburton Company +Helmerich & Payne, Inc. +Ingersoll Rand Inc. +KBR, Inc. +Liberty Energy Inc. +Nabors Industries Ltd. +NOV, Inc. +TechnipFMC plc +Weatherford International plc +2024 Performance Peer Group +In light of these same considerations following the NexTier merger and Ulterra acquisition, the Compensation Committee also worked with CAP to establish the following 2024 performance peer group, which is used to assess relative performance for the Company’s 2024 performance units. +2024 Performance Peer Group +Baker Hughes Company +Ensign Energy Services Inc. +Expro Group Holdings N.V. +Halliburton Company +Helmerich & Payne, Inc. +Liberty Energy Inc. +Nabors Industries Ltd. +Precision Drilling Corporation +ProFrac Holding Corp. +ProPetro Holding Corp. +Schlumberger Limited +Weatherford International plc +Components of 2024 Compensation +Base Salary +Base salaries are reviewed annually by the Compensation Committee, which considers, among other things, competitive pay practices, the results achieved by each executive, future potential contributions, scope of responsibilities and experience, tenure, executive retention risk, cost of living increases, and the magnitude of any recent increases. In December 2023, the Compensation Committee reviewed the base salaries of our NEOs and approved the following increases effective as of January 1, 2024. Prior to these increases, and other than in connection with a promotion, our NEOs had not received a base salary increase since +26 +2018 . The Compensation Committee considered the impact of our NexTier merger and Ulterra acquisition and the significant increase in responsibilities and scope of each NEO’s role. Salaries were set to competitive levels relative to our 2024 compensation peer group. +NEO 2023 ANNUAL BASE SALARY 2024 ANNUAL BASE SALARY +William Andrew Hendricks, Jr. $ 1,000,000 $ 1,300,000 +C. Andrew Smith $ 450,000 $ 680,000 +Kenneth N. Berns $ 450,000 $ 590,000 +James M. Holcomb $ 500,000 $ 670,000 +Seth D. Wexler $ 475,000 $ 650,000 +The annual review of base salaries by the Compensation Committee in December 2024 resulted in no changes to the base salaries of our NEOs for 2025 . +Annual Incentive Compensation +In 2024, the Compensation Committee adopted an annual cash bonus program that uses multiple, pre-established objectives for determining bonus compensation. The bonus plan set a target opportunity for each executive’s annual cash bonus as a percent of salary, with payout contingent upon meeting Patterson-UTI’s financial goals and other key performance indicators (KPIs). The Compensation Committee considered the average range of performance and payouts, and the Compensation Committee believed – based on advice from its compensation consultant – that Patterson-UTI’s performance range was consistent with typical, general industry practice. All of our NEOs participated in the 2024 consolidated group level annual cash bonus program, except for Mr. Holcomb, for whom a Drilling Services and Products annual cash bonus program applied, as discussed further below. +In December 2023, the Compensation Committee reviewed the target annual cash bonus opportunities as a percentage of base salary for our NEOs. To better align the bonus opportunities with the compensation peer group, the Compensation Committee approved the following changes for 2024: +NEO 2023 Target Annual Cash Bonus (as a percentage of base salary) 2024 Target Annual Cash Bonus (as a percentage of base salary) +William Andrew Hendricks, Jr. 125% 125% +C. Andrew Smith 125% 110% +Kenneth N. Berns 125% 100% +James M. Holcomb 100% 100% +Seth D. Wexler 80% 100% +The metrics for the 2024 annual cash bonus program were generally consistent with those used in our 2023 annual cash incentive plan, with a 10% increase in the Operating Cash Flow weighting and a 5% decrease in each of the Adjusted EBITDA and strategy weightings. +27 +A summary of the weighting, description and rationale for each metric is provided in the table below. +2024 ANNUAL CASH INCENTIVE METRICS +Metric (Weighting) Description Rationale +Operating Cash Flow (60%) +Operating Cash Flow is defined as Adjusted EBITDA (as defined below) less cash capital expenditures (as adjusted for any Board-approved increase in capital expenditures after targets are set). +Target Operating Cash Flow for 2024 was set at $583.0 million, which was a $52.1 million (or 10%) increase over actual Operating Cash Flow (for purposes of the annual cash bonus program) for 2023. +Our increased focus on cash flow generation during 2024 furthered our goal of having a business model that is self-sustaining, can weather the ebbs and flows of the commodity and business cycle, can endure extreme events, and allows for return of capital to stockholders. +Adjusted EBITDA (20%) +Adjusted EBITDA is defined as net income plus net interest expense, income tax expense and depreciation, depletion, amortization and impairment expense (including impairment of goodwill), excluding, for the purposes of the annual cash bonus program, any non-operating expenses such as M&A and restructuring costs. +Target Adjusted EBITDA for 2024 was set at $1,488.5 million, which was a $479.5 million (or 48%) increase over actual Adjusted EBITDA (for purposes of the annual cash bonus program) for 2023. +The Compensation Committee continued to include Adjusted EBITDA as a metric for the 2024 program as this metric establishes a clear and consistent link to the Company’s financial performance. Additionally, Adjusted EBITDA is a significant metric used by analysts in evaluating the Company and is therefore, we believe, a key driver of the Company’s stock price. +Health, Safety and Environmental (10%) +Holistic evaluation of HSE factors, including without limitation, maintenance of safety incident rates below industry average, reduction of motor vehicle incident rate, reduction of environmental incidents and improvement of operational audits and training. +The Compensation Committee views health, safety, and environmental factors as a component of the Company’s risk management and critical to the well-being of the Company’s employees, other personnel and the communities in which we work. +Strategy (10%) +Taking demonstrable and meaningful actions to maximize shareholder value. +This KPI represented actions that could position the Company for short-term and long-term success, such as positioning the Company to increase its return of capital to shareholders, successful integration of NexTier and Ulterra, improving the Company's balance sheet, strengthening customer relationships, pursuing strategic opportunities and taking actions in low-carbon emissions technology. +The Compensation Committee set a strategic action goal as it believed achievement of this goal would improve our competitive position, financial results and stockholder returns. +As compared to the 2023 annual cash bonus program, the Compensation Committee significantly increased the performance required to achieve a target payout under the financial metrics in light of anticipated improved market conditions when the targets were set and to align with strategic goals to grow Operating Cash Flow and Adjusted EBITDA. +The overall annual cash bonus plan for 2024 required achievement of a threshold level of 80% of target performance on both the Operating Cash Flow and Adjusted EBITDA metrics before any payouts with respect to such metrics could be earned. Once the relevant threshold was met, the annual cash bonus opportunity attributable to the Operating Cash Flow and Adjusted EBITDA metrics was calculated based on actual performance, with a 50% payout for threshold achievement, 100% payout for target achievement, and 200% payout for maximum achievement. Linear interpolation would be used to calculate the payouts for performance between achievement levels. +28 +For the Health, Safety and Environmental KPI and the Strategy KPI, the target annual cash bonus opportunity would be based on the Compensation Committee’s holistic assessment of the achievement of the elements of each KPI and any payout above target would require material outperformance. The achievement levels and actual performance of the Health, Safety and Environmental KPI and the Strategy KPI were determined based on an evaluation of the factors described in footnotes 2 and 3 of the “2024 Annual Incentive Metrics and Percentage Payout Calculations” table below. +The achievement levels under the annual cash bonus plan for our NEOs, other than Mr. Holcomb, were calculated as follows: +2024 ANNUAL INCENTIVE METRICS AND PERCENTAGE PAYOUT CALCULATIONS +($ in millions) +Metrics Threshold Target Maximum Actual Metric Achievement Percentage +Metric +Weighting +Weighted Achievement Percentage +Operating Cash Flow $ 466.4 $ 583.0 $ 699.6 $ 568.1 (1) 97% 60% 56% +Adjusted EBITDA $ 1,190.8 $ 1,488.5 $ 1,786.1 $ 1,205.7 (1) 53% 20% 11% +Health, Safety and Environmental (2) 200% 10% 20% +Strategy (3) 200% 10% 20% +Total 100% 107% +_________________________ +(1) As discussed above in “2024 Annual Cash Incentive Metrics,” the calculation of actual performance on the financial metrics excluded the impact of non-operating expenses, such as M&A and restructuring costs, and were adjusted for any Board-approved increase in capital expenditures after the targets were set. In addition, the Compensation Committee adjusted the metric achievement calculations to (i) exclude the impact on Adjusted EBITDA of severance costs related to the departure of a legacy NexTier executive, (ii) exclude the impact on Operating Cash Flow and Adjusted EBITDA of certain legal fees from an Ulterra legal proceeding and (iii) include in Operating Cash Flow the proceeds from the sale of assets. The Committee believed that the exclusion of these costs and fees, which resulted in immaterial changes to the calculated bonus payouts, was appropriate given that these costs and fees were substantially equivalent to M&A and restructuring costs. The Committee believed that the inclusion of proceeds from the sale of assets was advisable to appropriately reflect the net amount of capital expenditures during the year. +(2) The Committee determined that the NEOs met 200% achievement for this metric based on: +• the overall total recordable incident rate remaining well below the land drilling industry average (with this factor being given the most weight); +• the significant reduction in the motor vehicle incident rate; +• the improved training, reporting and investigations and other actions taken to reduce high potential incidents and near misses; +• maintaining regulatory compliance and the reduction in the number of incidents with an environmental impact; +• the improvement in operational audit and follow-up process; and +• the improvement in training generally, including the development of new training programs. +(3) The Committee determined that the NEOs met 200% achievement for this metric based on, among other things, (i) continued implementation of the Board’s commitment to capital discipline, the efficient management of cash flow and the return of over $400 million of capital to the Company’s shareholders in 2024, (ii) maintaining an investment grade credit rating at the three major credit ratings agencies, and the reduction of net debt, including leases, (iii) achieving synergies in excess of announced targets in respect of the NexTier merger and (iv) the addition of natural gas powered equipment to the Company’s completions fleet. The Committee further considered the Company’s successful performance under its first fully integrated drilling and completion arrangement. +Drilling Services and Products Program (for Mr. Holcomb) +In his role as Executive Vice President and Chief Business Officer, Mr. Holcomb oversees the Company’s Drilling Services and Drilling Products segments (collectively referred to herein as “Drilling Services and Products”). For Mr. Holcomb’s 2024 annual cash bonus opportunity, the metrics and weightings were Drilling Services and Products Operating Cash Flow (60%), Drilling Services and Products Adjusted EBITDA (20%), Health, Safety and Environmental for Drilling Services and Products (10%) and Strategy for Drilling Services and Products (10%). Mr. Holcomb’s metrics were specifically tailored to Drilling Services and Products in order to focus on the portion of our business over which he had the most impact during 2024 as Executive Vice President and Chief Business Officer. The calculated payouts for Mr. Holcomb in respect of these metrics were determined based on the achievement in 2024 of: +• Drilling Services and Products Operating Cash Flow of $491.9 million, compared to a targeted Operating Cash Flow of $535.3 million for Drilling Services and Products, resulting in 80% achievement of this metric. For the reasons discussed in Footnote 1 immediately above, the Committee adjusted the +29 +calculation by excluding the impact of certain legal fees from an Ulterra legal proceeding and including the proceeds from the sale of assets; +• Drilling Services and Products Adjusted EBITDA of $816.1 million, compared to a targeted Adjusted EBITDA of $876.1 million for Drilling Services and Products, resulting in 83% achievement of this metric. For the reasons discussed in Footnote 1 immediately above, the Committee adjusted the calculation by excluding the impact of certain legal fees from an Ulterra legal proceeding; +• the Committee’s assessment of 200% achievement for Drilling Services and Products on the Health, Safety and Environmental KPI as a result of the items listed in footnote 2 immediately above with respect to Drilling Services and Products; and +• the Committee’s assessment of 200% achievement for Drilling Services and Products on the Strategy KPI as a result of (i) notwithstanding his transition in responsibilities, his instrumental role in the operational and organizational integrations of both NexTier and Ulterra, (ii) advanced deployment of multiple new technologies and improved operational efficiencies in the Drilling Services segment and (iii) growth of international revenue in the Drilling Products segment. +As a result, Mr. Holcomb’s payout under his Drilling Services and Products bonus program was based on the achievement in 2024 of 104% of target. +The applicable payout percentage was applied to each executive’s bonus target as follows to determine actual 2024 cash bonus payments: +2024 ANNUAL INCENTIVE CASH BONUS +NEO Target Bonus +Bonus Payout +(as a % of Target, rounded) +Actual Bonus +William Andrew Hendricks, Jr. $ 1,625,000 107% $ 1,733,000 +C. Andrew Smith $ 748,000 107% $ 798,000 +Kenneth N. Berns $ 590,000 107% $ 629,000 +James M. Holcomb $ 670,000 104% $ 700,000 +Seth D. Wexler $ 650,000 107% $ 693,000 +Other Bonuses +As discussed in more detail in “Employment-Related Agreements and Other Matters” below, Mr. Holcomb also received retention payments totaling $1,000,000 during 2024 pursuant to his letter agreement entered into in connection with the NexTier merger and his transition from his role of Chief Operating Officer to Executive Vice President and Chief Business Officer. +In early 2024, the Compensation Committee approved cash bonus opportunities for Messrs. Smith, Wexler and Berns based on the achievement of integration-related objectives in connection with the NexTier merger. These integration objectives were designed to enhance alignment with our stockholders by incentivizing the achievement of specified synergy milestones. If the Company achieved total integration synergies of $125 million, Mr. Smith would receive $180,000, Mr. Wexler would receive $180,000, and Mr. Berns would receive $150,000. If the Company achieved total integration synergies of $200 million, Mr. Smith would receive an additional $180,000, Mr. Wexler would receive an additional $180,000, and Mr. Berns would receive an additional $150,000. These targets were achieved in March 2024 and May 2024, respectively, resulting in payments to Messrs. Smith, Wexler and Berns as described above. +In February 2024, the Compensation Committee also approved a promotion for Mr. Wexler to Executive Vice President, General Counsel and Secretary to reflect his level of experience and increased duties and responsibilities with the expanded company. In connection with this promotion, Mr. Wexler was paid a one-time cash bonus of $100,000. +30 +Long-Term Incentive Compensation +We have historically delivered the majority of total NEO compensation in the form of equity-based awards and continued to do so in 2024. This emphasis on equity-based compensation enhances alignment between our executives and our stockholders. We plan to retain this emphasis going forward, and we believe that by tying a large portion of compensation to equity we ensure that our NEOs can only fully realize the potential value of their compensation if our stockholders also benefit. As described below, all of the long-term incentive awards granted in 2024 vest over a three-year period. +2024 Long- +Term Incentive +Award Type +2024 Award Design Alignment with Philosophy +Restricted Stock Units +(49% of LTI Mix) +• Time-vested units that are settled in shares of stock +• 1/3 of each award vests annually over a three-year period +• Value dependent upon stock price performance +• Enhances retention of executive talent +• Encourages long-term share ownership +Performance +Units +(51% of LTI Mix) +• Performance-vested units that are settled in shares of stock +• Number of units earned depends upon TSR performance relative to our peers over one-, two- and three-year periods, each commencing on April 1, 2024 (each, a “ performance period ” ) +• No shares will vest and be delivered until after completion of the three-year performance period +• Relative TSR calculation for 2024 performance units includes the performance peer group members listed above +• For each of the performance periods: +◦ No shares are earned for performance below the 25 th percentile +◦ Target shares are not earned unless performance is at the 55 th percentile +◦ Maximum shares are not earned unless performance is at the 75 th percentile or above +◦ No greater than the target amount of shares may be earned for each of the one- and two-year performance periods, unless absolute TSR during the three-year performance period is greater than absolute TSR, as applicable, for the one- and/or two-year performance period, in which case, the number of shares earned in respect of the one- and/or two-year performance period, as applicable, will be determined as if our absolute TSR during the three-year performance period was our absolute TSR during the one- and/or two-year performance period +• Total payout is capped at “target” amount if absolute TSR during the three-year performance period is not positive +• Performance-contingent +• Number of shares dependent upon performance relative to peers and absolute performance +• Value of shares dependent upon stock price +• Above median performance is required to achieve a target payout +• Multiple performance periods during the three-year period incentivizes relative and absolute stock outperformance throughout the three-year period +• Three-year vesting period provides for a retention incentive +31 +2024 Long-Term Incentive Grants +The Compensation Committee approved the following long-term incentive target awards for our NEOs in 2024. In determining the 2024 LTI grants, the Compensation Committee considered Patterson-UTI’s 2023 financial results and comparative TSR performance over the one-, two- and three-year periods ended March 31, 2024. The target value of the grants was determined with the assistance of the Compensation Committee's compensation consultant and was set at levels that the compensation consultant viewed as reasonable in relation to the Company’s performance peer group. As described in the “Compensation Discussion and Analysis” section of our 2024 proxy statement, the Compensation Committee generally set 2023 target compensation at reduced levels for our NEOs relative to 2022, including generally reducing the aggregate target value of long-term incentives for the NEOs between 2022 and 2023. The 2024 LTI target value amounts were increased from the 2023 target value amounts due, in part, to the 2023 target value amounts having been set at a lower level relative to historical Company practices, as well as to position LTI target values near the compensation peer group market median range. +2024 Long-Term Incentive Grants +NEO 2024 Target Value +William Andrew Hendricks, Jr. $ 8,500,000 +C. Andrew Smith $ 2,100,000 +Kenneth N. Berns $ 1,750,000 +James M. Holcomb $ 2,000,000 +Seth D. Wexler $ 1,800,000 +Payout in 2024 of 2021 Performance Unit Awards +For the three-year performance period that ended on March 31, 2024, Patterson-UTI’s TSR was 51.4%. This performance was at the 47 th percentile relative to our 2021 peer group. Based on this performance, the 2021 performance units paid out at 87.9% of the target level. +2021 Performance Unit Awards +(Performance Period Ended in 2024) +Units Granted Payout Multiplier Units Earned +# % # +William Andrew Hendricks, Jr. 370,500 87.9% 325,669 +C. Andrew Smith 139,000 87.9% 122,181 +Kenneth N. Berns 138,600 87.9% 121,829 +James M. Holcomb 77,400 87.9% 68,034 +Seth D. Wexler 92,000 87.9% 80,868 +TSR calculations for Patterson-UTI and our peers were measured based on the change in the value per share of the relevant stock from the first trading day of the performance period to the last trading day of the performance period, in each case using the average closing price of the relevant stock for the 20-trading day period ending on such trading day, with dividends deemed reinvested. +Retirement Plans +Patterson-UTI offers a 401(k) plan to its employees, including its NEOs (the “Patterson-UTI 401(k) Plan”). Participants may contribute a portion of their base salary to the 401(k) plan, subject to federal limits. During 2024, Patterson-UTI made matching contributions up to 4% of each participant’s eligible base salary. As of January 1, 2025, Patterson-UTI makes matching contributions up to 100% of the first 4% of each participant’s eligible base salary, and up to 50% of the next 2% of each participant’s eligible base salary. Our NEOs are eligible to participate in the Patterson-UTI 401(k) plan on the same basis as other employees. Our NEOs do not participate in any other retirement plans, except for a qualified retiree program, which provides continued vesting for long-term and short-term incentive awards upon retirement of eligible retirees. For additional details, see “Employment-Related Agreements and Other Matters” below. +32 +Other Executive Compensation Matters +Share Ownership Guidelines and Stock Holding Requirements +We have had significant share ownership requirements in place for more than 15 years. Our share ownership guidelines are applicable to all Section 16 officers and directors of Patterson-UTI. We believe share ownership requirements are an important tool to ensure that officers and directors stay invested in Patterson-UTI and aligned with the interests of our stockholders. +Each Section 16 officer or non-executive Director has five years from the date of appointment or election to their position to satisfy the ownership guidelines. The Nominating and Corporate Governance Committee may, from time to time, reevaluate and revise an individual’s guidelines to incorporate pay changes, promotions or other events. +Share Ownership Guidelines +President and Chief Executive Officer Number of shares equal to 5 times base salary +Other Section 16 Officers Number of shares equal to 2 times base salary +Outside Directors Number of shares equal to 5 times annual base cash retainer +Share value for purposes of the guidelines is determined based on (i) the closing price on the date of grant for vested or unvested awards or, in the case of open market purchases, the closing price on the date of acquisition or (ii) the average closing price over the previous 12 months, whichever would result in a greater aggregate value. Share ownership for purposes of the guidelines includes unvested time-based equity incentive awards, and unvested performance-based equity incentive awards only once the performance-based component has been satisfied. +Each Section 16 officer and director is required to maintain ownership of the net after-tax shares of Common Stock acquired pursuant to any equity-based awards received from Patterson-UTI, unless such person has met his or her individual ownership requirement. +Each person subject to this policy was in compliance with these guidelines as of the date of this proxy statement. +Equity Award Grant Practices +Although Patterson-UTI does not currently grant stock options, restricted stock unit and performance unit award target values are typically approved at our regularly scheduled compensation committee meetings near the end of April. The number of units granted is then calculated based on our closing stock price after the completion of two full trading days following the filing of our Form 10-Q for the first quarter. Patterson-UTI may also grant awards at other times during the year, typically in connection with new hires or promotions, and may change its equity grant practices in the future. During 2024, the Compensation Committee did not consider material non-public information when determining the timing or terms of equity awards, and Patterson-UTI did not time the disclosure of material non-public information for the purpose of affecting the value of executive compensation. +Clawback Policy +Patterson-UTI has a Clawback Policy that complies with the requirements of Nasdaq Stock Market Listing Standard 5608 implementing Rule 10D-1 under the Securities Exchange Act of 1934, which requires the recovery of certain excess incentive-based compensation from an executive officer in the event that Patterson-UTI is required to prepare an accounting restatement of its financial statements due to its material non-compliance with any financial reporting requirement under the federal securities laws. +If the Compensation Committee determines the amount of incentive-based compensation received by an executive officer during the prior three fiscal years exceeds the amount that would have been received if determined or calculated based on Patterson-UTI’s restated financial results, such excess amount of incentive-based compensation shall be subject to recoupment by Patterson-UTI pursuant to the Clawback Policy. The Compensation Committee may effect any recovery pursuant to the Clawback Policy by requiring payment of amount(s) to Patterson-UTI, by set-off, by reducing future compensation, or by such other means or combination of means as the Compensation Committee determines to be appropriate. +In addition to this stand-alone policy, Patterson-UTI’s 2021 Plan, as amended, provides that if Patterson-UTI is required to prepare an accounting restatement due to the material noncompliance of Patterson-UTI, as a +33 +result of misconduct, with any financial reporting requirement under the securities laws, and if the participant is one of the persons subject to automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002 or the Participant engaged in such misconduct, such participant (regardless of whether a covered executive under the Clawback Policy) may be required to (or, if required by law, shall be required to) reimburse Patterson-UTI the amount of any payment in settlement of an award earned or accrued during the 12-month period following the first public issuance or filing with the SEC (whichever just occurred) of the financial document embodying such financial statement requirement. +Anti-Pledging Policy +Patterson-UTI has an anti-pledging policy. Our directors and executive officers generally may not engage in transactions in which Patterson-UTI securities are used as collateral for any loan, including, but not limited to, “margin loans” in a brokerage account. One of our directors, a former NexTier director, Mr. Stewart, had NexTier shares pledged as collateral for an asset-based loan prior to the closing of the NexTier merger. The Patterson-UTI Board of Directors approved a waiver of the anti-pledging policy with respect to Mr. Stewart’s pledged shares in connection with the closing of the NexTier merger, and in October 2024, approved an increase to the number of shares permitted to be pledged under this waiver. +Anti-Hedging Policy +Patterson-UTI has an anti-hedging policy for directors and executive officers. Our directors and executive officers and their respective spouses and minor children are prohibited from engaging in hedging or monetization transactions, including but not limited to prepaid variable forward contracts, equity swaps, collars, exchange funds, purchasing, selling or writing options or transacting in other third-party derivative securities that primarily involve or reference Patterson-UTI equity securities. This policy does not apply broadly to other employees. +Perquisites and Personal Benefits +The Compensation Committee believes that benefits to executives should generally be aligned with those provided for other employees. No Named Executive Officer received perquisites during 2024 with an aggregate incremental cost to the Company of more than $10,000. +Evaluation of Compensation Risk +We have considered the potential risks associated with the design of our compensation programs for employees. Regarding our executive compensation program in particular, we do not believe that our program creates unreasonable risks for the following reasons: +• The emphasis on long-term equity based awards and the required vesting periods help minimize the potential for excessive risk taking and actions aimed at short-term stock gains; +• Our use of different types of equity grants helps offset these risks; +• We have meaningful share ownership guidelines; +• We maintain an anti-hedging policy; +• We maintain a clawback policy that applies to all our executive officers for both cash and equity incentives; and +• The NEOs have been employed by Patterson-UTI for many years and have an established track record of focus on managing Patterson-UTI for long-term success. +Our Board has also considered in its risk assessment of our compensation program its view that our management is highly ethical and focused on creating true long-term value for stockholders and not focused on just short-term gains. The Board, primarily through its Compensation Committee and Audit Committee, monitors and considers risks associated with Patterson-UTI’s compensation plans on a regular basis. +34 +Employment-Related Agreements and Other Matters +Employment, Change in Control and Severance Agreements +Employment Agreements. Patterson-UTI is party to an employment agreement with each of Messrs. Hendricks, Wexler, Holcomb and Smith. Each employment agreement generally has an initial three-year term, and unless earlier terminated as provided therein, has a one year automatic annual extension each year. Each employment agreement provides for a specified base salary, subject to any increases that may be granted in the future. The employment agreements also provide for, among other things, severance payments following termination by Patterson-UTI of the executive other than for cause, or termination by the executive for good reason (as defined in the employment agreement). As discussed in more detail below, the employment agreements contain change in control provisions. +Holcomb Letter Agreements. Mr. Holcomb has served as an employee of the Company for over 25 years, including serving as a key member of the Company’s executive team for over 10 years, and the Compensation Committee believes that Mr. Holcomb is instrumental to the Company’s future success. Prior to the closing of the NexTier merger, Mr. Holcomb served as the Company’s Chief Operating Officer, with responsibility for overseeing the Company’s completions business. Pursuant to the terms of the merger agreement with NexTier, oversight of the Company’s completion business was removed from Mr. Holcomb’s duties, which triggered Mr. Holcomb's right to resign for "good reason" and receive severance benefits per his employment agreement. To encourage Mr. Holcomb to remain employed with the Company at the time of the closing of the NexTier merger, Patterson-UTI entered into a letter agreement with Mr. Holcomb that provided for his transition to the role of Executive Vice President and Chief Business Officer. This letter agreement further provided that, following the one-year anniversary of the closing of the NexTier merger, Mr. Holcomb would no longer have “good reason” to terminate his employment with Patterson-UTI due to the transition of his role in connection with the NexTier merger and any resulting changes in his authority, duties or responsibilities. The letter agreement also provides a $2 million cash retention bonus, payable in eight quarterly installments following the closing of the NexTier merger (with the first installment paid in December 2023), subject to Mr. Holcomb’s continued employment in good standing with Patterson-UTI on each applicable payment date. Any unpaid portions of Mr. Holcomb’s retention bonus will become payable if he is terminated by Patterson-UTI without cause or he resigns for good reason. +In August 2024, Patterson-UTI entered into a second letter agreement with Mr. Holcomb, modifying certain terms of his employment agreement. Specifically, Mr. Holcomb may continue in his role as Executive Vice President and Chief Business Officer of the Company until (i) December 31, 2026 (if Mr. Holcomb so elects and provides at least three months’ prior notice to the Company), or (ii) December 31, 2027 (as applicable, the “Transition Date”). From the Transition Date through September 30, 2030, Mr. Holcomb has agreed to serve as a non-executive advisor, providing transition and advisory services as and when reasonably requested by the Company’s Chief Executive Officer or his designee. During such advisory period, Mr. Holcomb will receive a reduced base salary at 55% of the level in effect on the Transition Date but will receive no further bonuses or grants under the Company’s cash or equity-based incentive programs. The Compensation Committee expects that Mr. Holcomb's continued service during his transition period will be highly beneficial to the Company due to his lengthy tenure with the Company, and in particular due to his experience with, and knowledge of, the Company's Drilling Services business. During the transition period, Mr. Holcomb is expected to provide, among other things, assistance with the retention of key customer relationships, as well as advice and support to executive leadership and the leadership teams within the Drilling Services, Completion Services and Drilling Products segments. +Mr. Holcomb will not be entitled to any severance payments and benefits upon his termination of employment on September 30, 2030, and if Mr. Holcomb voluntarily resigns prior to September 30, 2030, he will not be eligible for any benefits under the Company’s continuing award program for qualified retirees or accelerated vesting of any performance-based equity awards on account of a termination of employment due to retirement. Except as expressly modified by these letter agreements, the terms of Mr. Holcomb’s employment agreement remain in force and effect and govern the terms of his employment. +Change in Control Agreements and Tax Gross-Up Payments. Patterson-UTI entered into a change-in-control agreement with Mr. Berns in 2004 and employment agreements with Messrs. Hendricks, Smith, Holcomb and Wexler in recent years that contain change-in-control provisions, as further described below. Patterson-UTI believes that such agreements may under certain circumstances protect Patterson-UTI’s interest by discouraging the NEOs from leaving employment out of concern for the security of their jobs or from otherwise being unable to concentrate on their work. We believe that the change in control agreements may also help Patterson-UTI attract and retain new key employees by reducing the personal uncertainty and anxiety that arises from the possibility of a future business combination. Any future change in control or severance agreements will be approved subject to the circumstances existing at the time. +35 +As was customary when the change in control agreement with Mr. Berns was entered into more than twenty years ago, the change-in-control agreement provides Mr. Berns with a full gross-up payment for any excise taxes imposed on payments and benefits received under the change-in-control agreement or otherwise, including other taxes that may be imposed as a result of the gross-up payment. As indicated above, the Compensation Committee subsequently adopted a policy, more than ten years ago, to no longer approve tax gross-ups in connection with compensation arrangements, and the employment agreements entered into with Messrs. Hendricks, Smith, Holcomb and Wexler, which are described above, do not include a tax gross-up provision. +Severance Agreement. In order to address prior severance agreements between UTI Energy Corp. and Mr. Berns, Patterson-UTI has entered into a written letter agreement with Mr. Berns pursuant to which Patterson-UTI has agreed to pay Mr. Berns within ten days of the termination of his employment with Patterson-UTI for any reason (including voluntary termination by him), an amount in cash equal to his annual base salary at the time of such termination. Any payment made by Patterson-UTI pursuant to this letter agreement will reduce dollar for dollar any payment owed to Mr. Berns, if any, pursuant to the change-in-control agreement referenced above. +Qualified Retiree Program. During 2024, the Compensation Committee approved and adopted the Patterson-UTI Energy, Inc. Qualified Retiree Program (the “Retiree Program”) for certain senior employees of the Company, including the NEOs. Under the Retiree Program, eligible employees who retire after providing at least six months’ prior notice and (i) are at least 55 years of age and (ii) have completed at least five total years of service with Patterson-UTI (with at least five continuous years of service completed as of immediately prior to the retirement date), will receive the following benefits: +• continued vesting of any unvested equity-based awards outstanding as of the retirement date that are subject solely to time-based vesting conditions; and +• continued eligibility to earn a pro-rata annual bonus for the year of retirement based on actual Company performance relative to all applicable performance objectives. +If a participant in the Retiree Program is terminated by Patterson-UTI or any of its subsidiaries without cause after having provided the requisite notice of retirement but before his or her retirement date, the participant will also receive the benefits described above. We believe that the Retiree Program provides a framework for senior employees, including our NEOs, transitioning into retirement to remain incentivized to transfer knowledge and assist in long-term organizational success following their retirement, thereby benefiting Patterson-UTI. Messrs. Hendricks, Holcomb and Berns currently meet the age and service requirements for retirement under the Retiree Program. +We believe the employment agreements, the Holcomb letter agreements, the change-in-control agreement, the severance agreement and the Retiree Program are important components of our overall executive compensation program. These agreements and program set forth the manner by which the employment relationship may be extended or terminated, the compensation and benefits that we provide during the term of employment and the obligations each party has in the event of termination of the executive officer’s employment. We believe that severance protections, particularly in the context of a change-in-control transaction, play a critical role in attracting and retaining key executive officers. Providing this type of protection is common in the oilfield services industry. In addition, these benefits serve our interests by promoting a continuity of management and aligning management’s interests with those of our stockholders in the context of an actual or threatened change in control transaction. +Compensation Committee Report +The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based upon such review and discussion, the Compensation Committee has recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement. +Gary M. Halverson, Chair +Tiffany (TJ) Thom Cepak +Curtis W. Huff +Amy H. Nelson +36 +EXECUTIVE COMPENSATION +The following table sets forth information concerning compensation for the fiscal years ended December 31, 2024, December 31, 2023 and December 31, 2022 with respect to the principal executive officer, the principal financial officer and the other Named Executive Officers of Patterson-UTI: +Summary Compensation Table +Name and Principal Position(s) Year +Salary +($) +Bonus +($)(1) +Stock +Awards +($)(2) +Non-equity +Incentive plan +Compensation +($)(3) +All Other +Compensation +($)(4) +Total +($) +William Andrew Hendricks, Jr. 2024 1,300,000 — 9,004,376 (5) 1,733,000 13,800 12,051,176 +President & Chief 2023 1,000,000 — 5,930,679 1,340,129 13,200 8,284,008 +Executive Officer 2022 1,000,000 — 7,768,767 2,187,500 12,200 10,968,467 +C. Andrew Smith 2024 680,000 360,000 2,225,112 (6) 798,000 13,800 4,076,912 +Executive Vice President & 2023 450,000 — 2,076,670 603,058 13,200 3,142,928 +Chief Financial Officer 2022 450,000 — 2,718,489 984,375 12,200 4,165,064 +Kenneth N. Berns 2024 590,000 300,000 1,853,888 (7) 629,000 — 3,372,888 +Executive Vice President & 2023 450,000 — 1,976,893 603,058 — 3,029,951 +Chief Commercial Officer 2022 450,000 — 2,588,724 984,375 — 4,023,099 +James M. Holcomb 2024 670,000 1,000,000 2,118,692 (8) 700,000 13,800 4,502,492 +Executive Vice President & 2023 513,635 250,000 1,694,098 536,051 13,200 3,006,984 +Chief Business Officer 2022 465,000 224,000 1,553,892 651,000 12,200 2,906,092 +Seth D. Wexler 2024 650,000 460,000 1,907,098 (9) 693,000 13,800 3,723,898 +Executive Vice President, General 2023 475,000 — 1,531,624 407,399 13,200 2,427,223 +Counsel & Secretary 2022 475,000 — 2,007,723 665,000 12,200 3,159,923 +_____________ +(1) The bonuses paid to Messrs. Smith and Berns in 2024 were synergy milestone payments, as described in "Other Bonuses" above. The bonuses paid to Mr. Holcomb in 2024 and 2023 were retention payments pursuant to his letter agreement entered into in connection with the NexTier merger, as described in "Employment-Related Agreements and Other Matters–Holcomb Letter Agreements" above. The 2024 bonus paid to Mr. Wexler comprised $100,000 in connection with his promotion and $360,000 of synergy milestone payments as described in "Other Bonuses" above. Additionally, for Mr. Holcomb, the bonus amount for 2022 represents the incremental increase to his 2022 bonus approved in connection with his promotion to Chief Operating Officer on January 1, 2023. +(2) Amounts include the fair value of awards at the date of grant as determined in accordance with FASB ASC Topic 718 with respect to restricted stock units and performance units awarded to the Named Executive Officers in the fiscal years ended December 31, 2024, 2023 and 2022. For additional information related to the assumptions used in the valuation of restricted stock units and performance units, see Note 12 to the consolidated financial statements in Patterson-UTI’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024. The fair value of performance unit awards was determined based on a Monte-Carlo simulation model, which is consistent with the valuation used by Patterson-UTI for the recognition of compensation expense under FASB ASC Topic 718. The Monte-Carlo simulation model takes into account expected price movement of Patterson-UTI stock as compared to the applicable peer group and, for the 2022 and 2023 performance unit awards, the S&P 500 Index. The Monte-Carlo simulation model assigned a higher value to each 2024 performance unit award than the closing price of Patterson-UTI’s stock on the grant date. Therefore, the value reflected in the 2024 Summary Compensation Table does not reflect the target award values shown in the 2024 Long-Term Incentive Grants section of the "Compensation Discussion and Analysis" in this proxy statement. +(3) Amounts represent annual cash bonuses earned for the fiscal years ended December 31, 2024, 2023 and 2022. +(4) Amounts reflect contributions to the Company's 401(k) plan by Patterson-UTI. +(5) The 2024 amount includes $4,164,912 related to an annual award of restricted stock units and $4,839,464 related to an award of performance units during 2024. Assuming maximum performance, the value of the performance unit award would be $8,669,088 (calculated using the closing price of Patterson-UTI’s common stock on the grant date and assuming maximum payout of two times the target number of shares). +(6) The 2024 amount includes $1,028,952 related to an annual award of restricted stock units and $1,196,160 related to an award of performance units during 2024. Assuming maximum performance, the value of the performance unit award would be $2,142,720 (calculated using the closing price of Patterson-UTI’s common stock on the grant date and assuming maximum payout of two times the target number of shares). +37 +(7) The 2024 amount includes $857,088 related to an annual award of restricted stock units and $996,800 related to an award of performance units during 2024. Assuming maximum performance, the value of the performance unit award would be $1,785,600 (calculated using the closing price of Patterson-UTI’s common stock on the grant date and assuming maximum payout of two times the target number of shares). +(8) The 2024 amount includes $979,848 related to an annual award of restricted stock units and $1,138,844 related to an award of performance units during 2024. Assuming maximum performance, the value of the performance unit award would be $2,040,048 (calculated using the closing price of Patterson-UTI’s common stock on the grant date and assuming maximum payout of two times the target number of shares). +(9) The 2024 amount includes $881,640 related to an annual award of restricted stock units and $1,025,458 related to an award of performance units during 2024. Assuming maximum performance, the value of the performance unit award would be $1,836,936 (calculated using the closing price of Patterson-UTI’s common stock on the grant date and assuming maximum payout of two times the target number of shares). +The following table sets forth information concerning grants of plan-based awards during the fiscal year ended December 31, 2024 to the Named Executive Officers: +Grants of Plan-Based Awards +Estimated Future Payouts under +Non-equity Incentive Plan Awards (1) +Estimated Future Payouts under +Equity Incentive Plan Awards +All Other +Stock +Awards: +Number of +Shares of +Stock or Units +Grant Date +Fair Value of +Stock and +Option Awards +Grant Threshold Target Maximum Threshold Target Maximum +Name Date ($) ($) ($) (#) (#) (#) (#) ($)(2) +William Andrew Hendricks, Jr. 812,500 1,625,000 3,250,000 — — — — $ — +5/9/24 (3) — — — 194,200 388,400 776,800 — $ 4,839,464 +5/9/24 (4) — — — — — — 373,200 $ 4,164,912 +C. Andrew Smith 374,000 748,000 1,496,000 — — — — $ — +5/9/24 (3) — — — 48,000 96,000 192,000 — $ 1,196,160 +5/9/24 (4) — — — — — — 92,200 $ 1,028,952 +Kenneth N. Berns 295,000 590,000 1,180,000 — — — — $ — +5/9/24 (3) — — — 40,000 80,000 160,000 — $ 996,800 +5/9/24 (4) — — — — — — 76,800 $ 857,088 +James M. Holcomb 335,000 670,000 1,340,000 — — — — $ — +5/9/24 (3) — — — 45,700 91,400 182,800 — $ 1,138,844 +5/9/24 (4) — — — — — — 87,800 $ 979,848 +Seth D. Wexler 325,000 650,000 1,300,000 — — — — $ — +5/9/24 (3) — — — 41,150 82,300 164,600 — $ 1,025,458 +5/9/24 (4) — — — — — — 79,000 $ 881,640 +____________ +(1) The 2024 non-equity incentive cash bonus plan for the fiscal year ended December 31, 2024 set a target opportunity for each executive’s annual cash bonus as a percent of salary, with payout contingent upon meeting Patterson-UTI’s financial goals and other KPIs as described above in “Compensation Discussion and Analysis - Annual Incentive Compensation”. +(2) The grant date fair value of restricted stock units was based on the closing price of Patterson-UTI common stock on the date of grant, and the grant date fair value of performance unit awards was determined based on a Monte-Carlo simulation model, each of which is consistent with the valuation used by Patterson-UTI for the recognition of compensation expense under FASB ASC Topic 718. +(3) On May 9, 2024, Patterson-UTI granted performance unit awards to the Named Executive Officers. These awards provide for the recipients to receive shares of Patterson-UTI common stock upon the achievement of certain performance goals established by Patterson-UTI during a specified period, as described in “Compensation Discussion and Analysis – Long-Term Incentive Compensation”. +(4) Restricted stock units were awarded to the Named Executive Officers pursuant to the 2021 Long-Term Incentive Plan. Ordinary dividends are accrued on unvested restricted stock units and paid upon vesting. The rate at which these dividends are paid or accrued is the same rate at which ordinary dividends are paid on all other shares of common stock. The restricted stock units vest over a three-year period as follows: one-third on May 9, 2025, one-third on May 9, 2026 and one-third on May 9, 2027. +The following table sets forth information concerning outstanding equity awards at December 31, 2024 for the Named Executive Officers: +38 +Outstanding Equity Awards at Fiscal Year-End +Stock Awards +Option Awards Number +of Shares +or Units of +Stock +That Have +Not +Vested (#) Market Value of +Shares or Units +of Stock +That Have +Not Vested ($)(1) Equity Incentive +Plan Awards: +Number of +Unearned Shares, +Units or Other +Rights that Have +Not Vested(2) Equity Incentive +Plan Awards: Market +or Payout Value of +Unearned Shares, +Units or Other +Rights that Have +Not Vested ($)(1) +Name Number of +Securities +Underlying +Unexercised +Options (#) +Exercisable Option +Exercise +Price +($) Option +Expiration +Date +William Andrew Hendricks, Jr. 257,000 $ 20.33 4/20/2025 593,800 (3) $ 4,904,788 412,950 (4) $ 3,410,967 +315,400 $ 18.54 4/25/2026 +C. Andrew Smith — — — 169,467 (3) $ 1,399,797 124,550 (4) $ 1,028,783 +Kenneth N. Berns 154,200 $ 20.33 4/20/2025 150,334 (3) $ 1,241,759 112,900 (4) $ 932,554 +189,100 $ 18.54 4/25/2026 +James M. Holcomb — — — 145,734 (3) $ 1,203,763 100,200 (4) $ 827,652 +Seth D. Wexler — — — 136,000 (3) $ 1,123,360 97,650 (4) $ 806,589 +_____________ +(1) Based on the closing price of Patterson-UTI common stock on December 31, 2024 of $8.26 per share. +(2) The 2022, 2023 and 2024 performance unit awards reflected in this column were granted on April 29, 2022, May 5, 2023, and May 9, 2024, respectively. These awards provide for an award of shares of Patterson-UTI common stock to the recipient based on Patterson-UTI’s total stockholder return compared to our performance peer group at the time of grant. The 2022 and 2023 awards are subject to a performance period of April 1 of the grant year through March 31 of the third year following the grant year. The 2024 awards are subject to three separate performance periods—a one-year performance period, a two-year performance period and a three-year performance period, each commencing on April 1, 2024. All performance unit awards provide for a target payout based on a target level of total stockholder return compared to the performance peer group. The amounts presented in this column represent the threshold payout under the 2022, 2023, and 2024 performance unit awards. Based on Patterson-UTI’s total stockholder return during the performance period, the recipients could receive a number of shares ranging from no shares to two times the target number of shares granted. If Patterson-UTI’s total stockholder return is negative, then the number of shares received by the recipients will be capped at the target number of shares. +(3) These restricted stock units vest as follows: +4/29/2025 5/5/2025 5/9/2025 5/5/2026 5/9/2026 5/9/2027 Total +William Andrew Hendricks, Jr. 59,600 80,500 124,400 80,500 124,400 124,400 593,800 +C. Andrew Smith 20,867 28,200 30,733 28,200 30,733 30,734 169,467 +Kenneth N. Berns 19,867 26,833 25,600 26,834 25,600 25,600 150,334 +James M. Holcomb 11,934 23,000 29,266 23,000 29,267 29,267 145,734 +Seth D. Wexler 15,400 20,800 26,333 20,800 26,333 26,334 136,000 +(4) Includes performance unit awards as follows: +2022 Performance +Unit Awards 2023 Performance +Unit Awards 2024 Performance +Unit Awards Total +William Andrew Hendricks, Jr. 93,050 125,700 194,200 412,950 +C. Andrew Smith 32,550 44,000 48,000 124,550 +Kenneth N. Berns 31,000 41,900 40,000 112,900 +James M. Holcomb 18,600 35,900 45,700 100,200 +Seth D. Wexler 24,050 32,450 41,150 97,650 +The amounts presented in this table represent the threshold payout under the 2022, 2023, and 2024 performance unit awards, although relative TSR performance as of December 31, 2024 would result in no payout for these performance unit awards. +The following table sets forth information concerning options exercised and stock awards vested during the fiscal year ended December 31, 2024 for the Named Executive Officers. +39 +Option Exercises and Stock Vested +Option awards Stock awards +Name +Number of +shares acquired on exercise (#) +Value realized +on exercise ($) (1) +Number of +shares acquired +on vesting (#) +Value realized +on vesting ($)(1) +William Andrew Hendricks, Jr. — $ — 584,436 $ 6,499,710 +C. Andrew Smith — $ — 215,915 $ 2,401,973 +Kenneth N. Berns — $ — 212,929 $ 2,369,192 +James M. Holcomb — $ — 127,701 $ 1,417,403 +Seth D. Wexler — $ — 146,402 $ 1,627,888 +_____________ +(1) Value realized on vesting is based on the closing price of Patterson-UTI common stock on the day the respective shares vested; provided that if the stock market was closed on the day the respective awards vested, the value realized on vesting is based on the closing price of Patterson-UTI common stock on the last day the stock market was open immediately prior to the day the respective awards vested. +No Pension Benefits or Nonqualified Deferred Compensation +Patterson-UTI does not provide any pension benefits for any of the Named Executive Officers. None of the Named Executive Officers had any items of nonqualified deferred compensation during 2024. As a result, tables with respect to pension benefits and nonqualified deferred compensation have not been provided. +40 +EMPLOYMENT-RELATED AGREEMENTS +Employment, Change in Control and Severance Agreements +Employment Agreements with Messrs. Hendricks, Smith, Holcomb and Wexler +As described above under “Employment-Related Agreements and Other Matters - Employment, Change in Control and Severance Agreements,” Patterson-UTI has entered into Employment Agreements with Messrs. Hendricks, Smith, Holcomb and Wexler. Each Employment Agreement provides for, among other things, severance payments following termination by Patterson-UTI of the executive other than for cause, or termination by the executive for good reason (as defined in each Employment Agreement). Under these provisions, if the executive's employment is terminated by Patterson-UTI without cause, or the executive terminates his employment for good reason: +• the executive will have the right to receive a lump-sum payment consisting of 3 times (in the case of Mr. Hendricks) or 2.5 times (in the case of Messrs. Smith, Holcomb and Wexler) the sum of (i) his base salary and (ii) the average annual cash bonus received by him for the three years prior to the date of termination, +• the executive will have the right to receive a pro-rated lump-sum payment equal to his annual cash bonus based on actual results for the year, payable at the same time as annual cash bonuses are paid to active employees, +• Patterson-UTI will accelerate vesting of all time-based equity, phantom equity and long-term cash incentive awards on the 60th day following the executive’s termination, +• Patterson-UTI will cause all performance-based equity, phantom equity and long-term cash incentive awards to continue in effect through the end of the applicable performance period and vest based on actual results as if the executive had remained employed through the end of the applicable performance period, and +• Patterson-UTI will pay the executive certain accrued obligations and certain obligations pursuant to the terms of employee benefit plans. +However, if a termination by Patterson-UTI other than for cause or by the executive for good reason occurs following a change in control (which is defined in a substantially similar manner to the definition in Mr. Berns' CIC Agreement (as defined below)), the executive will generally be entitled to the same severance payments and benefits described above except that (i) the pro-rated lump-sum payment for annual cash bonuses will be based on the executive’s highest annual cash bonus for the last three years, (ii) the executive will be entitled to 36 months (in the case of Mr. Hendricks) or 30 months (in the case of Messrs. Smith, Holcomb and Wexler) of subsidized benefits continuation coverage, and (iii) the performance-based equity, phantom equity and long-term cash incentive awards will be accelerated based on the target level of performance on the 60th day following the executive’s termination. +As described above under “Holcomb Letter Agreements,” Mr. Holcomb has entered into a letter agreement with Patterson-UTI pursuant to which he may continue in his role as Executive Vice President and Chief Business Officer of the Company until (i) December 31, 2026 (if Mr. Holcomb so elects and provides at least three months' prior notice to the Company), or (ii) December 31, 2027 (as applicable, the "Transition Date"). From the Transition Date through September 30, 2030, Mr. Holcomb has agreed to serve as a non-executive advisor, providing transition and advisory services as and when reasonably requested by the Company's Chief Executive Officer or his designee. Mr. Holcomb will not be entitled to any severance payments and benefits upon his termination of employment on September 30, 2030, and if Mr. Holcomb voluntarily resigns prior to September 30, 2030, he will not be eligible for any benefits under the Retiree Program or accelerated vesting of any performance-based equity awards on account of a termination of employment due to retirement. +Change in Control Agreement with Mr. Berns +As described above under “Employment-Related Agreements and Other Matters - Employment, Change in Control and Severance Agreements,” Patterson-UTI has a Change in Control Agreement with Mr. Berns (the “CIC Agreement”). The CIC Agreement was entered into in 2004 to protect Mr. Berns should a change in control occur, thereby encouraging Mr. Berns to remain in the employ of Patterson-UTI and not be distracted from the performance of his duties to Patterson-UTI by the possibility of a change in control. +The CIC Agreement generally has an initial term with automatic 12-month renewals unless Patterson-UTI notifies Mr. Berns at least 90 days before the end of such renewal period that the term will not be extended. If a +41 +change in control of Patterson-UTI occurs during the term of the CIC Agreement and Mr. Berns’ employment is terminated (i) by Patterson-UTI other than for cause or other than automatically as a result of death, disability or retirement, or (ii) by Mr. Berns for good reason (as those terms are defined in the CIC Agreement), then Mr. Berns will generally be entitled to, among other things: +• a bonus payment equal to the highest bonus paid after the CIC Agreement was entered into (such bonus payment prorated for the portion of the fiscal year preceding the termination date); +• a payment equal to 2 times the sum of (i) the highest annual salary in effect for Mr. Berns and (ii) the average of the three annual bonuses earned by Mr. Berns for the three fiscal years preceding the termination date; and +• continued coverage under Patterson-UTI’s welfare plans for up to two years. +As was customary when the CIC Agreement was entered into more than fifteen years ago, the CIC Agreement provides Mr. Berns with a full gross-up payment for any excise taxes imposed on payments and benefits received under the CIC Agreement or otherwise, including other taxes that may be imposed as a result of the gross-up payment. As indicated above, the Compensation Committee subsequently adopted a policy, more than five years ago, to no longer approve tax gross-ups in connection with compensation arrangements, and the employment agreements entered into with Messrs. Hendricks, Smith, Holcomb and Wexler, which are described above, do not include a tax gross-up provision. +A “change in control” is principally defined by the CIC Agreement as: +• an acquisition by any individual, entity or group of beneficial ownership of 35% or more of either Patterson-UTI’s then outstanding common stock or the combined voting power of the then outstanding voting securities of Patterson-UTI entitled to vote in the election of directors, +• a change occurs in which the members of the Board of Directors as of the date of the CIC Agreement cease to constitute at least a majority of Patterson-UTI’s Board of Directors unless that change occurs through a vote of at least a majority of the incumbent members of the Board of Directors, or +• a change in the beneficial ownership of Patterson-UTI following consummation of a reorganization, merger, consolidation, sale of Patterson-UTI or any subsidiary of Patterson-UTI or a disposition of all or substantially all of the assets of Patterson-UTI, in which the beneficial owners immediately prior to the transaction own 65% or less of outstanding common stock of the newly combined or merged entity. +Severance Agreement with Mr. Berns +To address a prior severance agreement between UTI Energy Corp. and Mr. Berns, Patterson-UTI has entered into a written letter agreement with Mr. Berns pursuant to which Patterson-UTI has agreed to pay Mr. Berns within ten days of the termination of his employment with Patterson-UTI for any reason (including voluntary termination by him), an amount in cash equal to his annual base salary at the time of such termination. Any payment made by Patterson-UTI pursuant to this letter agreement will reduce dollar for dollar any payment owed to Mr. Berns, if any, pursuant to the CIC Agreement. +Qualified Retiree Program +During 2024, the Compensation Committee approved and adopted the Retiree Program, described above under “Employment-Related Agreements and Other Matters - Employment, Change in Control and Severance Agreements.” Under the Retiree Program, eligible retirees will receive: (1) continued vesting of any unvested equity-based awards outstanding as of the retirement date that are subject solely to time-based vesting conditions; and (2) continued eligibility to earn a pro-rata annual bonus for the year of retirement based on actual Company performance relative to all applicable performance objectives. As of December 31, 2024, each of Messrs. Hendricks, Holcomb and Berns met the age and service requirements under the Retiree Program. Had they delivered the requisite notice and retired on December 31, 2024, they would have been entitled to continued vesting in the following equity awards (that would have otherwise been unvested and forfeited; with the fair value based on the market price of Patterson-UTI common stock at December 31, 2024) and to receive +42 +the 2024 annual bonus amounts set forth in "Executive Compensation - Summary Compensation Table" above: +Shares Fair Value +William Andrew Hendricks, Jr. 593,800 $ 4,904,788 +Kenneth N. Berns 150,334 $ 1,241,759 +James M. Holcomb 145,734 $ 1,203,763 +Equity Award Agreements with Named Executive Officers +Outstanding awards held by the Named Executive Officers do not provide for acceleration solely upon a change in control, and instead provide for acceleration only upon the executive’s termination of employment without cause or termination by the executive for good reason following a change in control. +All restricted stock unit and performance unit awards held by the Named Executive Officers provide that in the event of termination of employment due to death or disability, the holder would vest in a portion of the award. Such terminations at December 31, 2024 would have resulted in the issuance of the following shares pursuant to the accelerated vesting of restricted stock units (with the fair value based on the market price of Patterson-UTI common stock at December 31, 2024): +Shares Fair Value +William Andrew Hendricks, Jr. 173,649 $ 1,434,341 +C. Andrew Smith 52,518 $ 433,799 +Kenneth N. Berns 47,624 $ 393,374 +James M. Holcomb 42,120 $ 347,911 +Seth D. Wexler 41,111 $ 339,577 +In the event of termination of employment due to death or disability, the holders of performance units and phantom units would vest in the portion of the award that was earned at the time of death or disability. This payment would be determined at the end of the performance period and would equal the amount that the holder would have received at that time, pro-rated for the amount of time from the date of grant through the date of death or disability. +Potential Payments Upon a Termination or Change in Control +Amounts that each of the Named Executive Officers would be entitled to under the employee’s CIC Agreement or Employment Agreement and other award agreements if a change in control had occurred as of December 31, 2024 and the employee’s employment was terminated by Patterson-UTI other than for cause or terminated by the employee for good reason (as defined in the CIC Agreement or the Employment Agreement and applicable award agreements) are reflected in the following table: +Cash Payments Other Benefits +Name +Bonus +Payment +($)(1) +Salary and +Bonus +($)(2) +Stock +Awards +($)(3) +Performance +Unit Awards +($)(4) +Other +Benefits +($)(5) +Total +($) +William Andrew Hendricks, Jr. $ 2,187,500 $ 8,990,129 $ 4,904,788 $ 6,821,934 $ 48,436 $ 22,952,787 +C. Andrew Smith $ 984,375 $ 3,608,798 $ 1,399,797 $ 2,057,566 $ 37,758 $ 8,088,294 +Kenneth N. Berns $ 1,397,022 $ 2,707,039 $ 1,241,759 $ 1,865,108 $ — $ 7,210,928 +James M. Holcomb $ 651,000 $ 3,051,709 $ 1,203,763 $ 1,655,304 $ 21,100 $ 6,582,876 +Seth D. Wexler $ 665,000 $ 2,914,499 $ 1,123,360 $ 1,613,178 $ 40,363 $ 6,356,400 +_______________ +(1) In the case of Messrs. Hendricks, Smith, Holcomb and Wexler, the assumed bonus is equal to the highest annual bonus paid in the three years prior to 2024. In the case of Mr. Berns, the assumed bonus payment is equal to the highest annual bonus paid from the time the CIC Agreement was entered into through December 31, 2024. +(2) The assumed salary and bonus payment represents 3.0 times (in the case of Mr. Hendricks), 2.5 times (in the case of Messrs. Smith, Holcomb and Wexler) or 2.0 times (in the case of Mr. Berns) of the sum of the 2024 +43 +salary in effect for each employee and the average of the annual bonuses earned by each employee for 2023, 2022 and 2021. Bonus amounts earned in 2024 were not considered in this calculation as they were not determined until after December 31, 2024. +(3) Each of the stock award agreements provide that unvested awards will vest upon the executive’s termination of employment without cause or termination by the executive for good reason following a change in control. Amounts presented in the table represent the value of unvested stock awards using the market price of Patterson-UTI common stock on December 31, 2024 of $8.26 per share. +(4) Share settled performance unit agreements include a provision that, upon the executive’s termination of employment without cause or termination by the executive for good reason following a change in control, the Named Executive Officer will receive an award of shares equal to the target amount set forth in each agreement. Amounts presented in the table represent the assumed award of the target number of shares if a change in control had occurred on December 31, 2024, valued at the December 31, 2024 closing price of Patterson-UTI common stock of $8.26 per share. +(5) Messrs. Hendricks, Smith, Holcomb and Wexler participated in Patterson-UTI’s health and welfare plans as of December 31, 2024. The amounts presented represent Patterson-UTI’s portion of the premiums for three years in the case of Mr. Hendricks and 30 months in the case of Messrs. Smith, Holcomb and Wexler. No tax gross-up payment would have been payable to Mr. Berns under the terms of his CIC Agreement. +In the event of a termination of employment of Mr. Berns for any reason, including voluntary termination, Mr. Berns would be entitled to an amount in cash equal to his annual base salary at the time of such termination. Any such payment made by Patterson-UTI will reduce dollar for dollar any payment owed to Mr. Berns that is reflected in the table above. In the case of Messrs. Hendricks, Smith, Holcomb or Wexler, if the executive’s employment was terminated by Patterson-UTI other than for cause or terminated by the executive for good reason (as defined in the Employment Agreement) and not in connection with a change-in-control, then the executive would be entitled to the same potential payments and benefits as set forth in the table above. Additionally, upon a termination by Patterson-UTI other than for cause or a termination by the executive for good reason and not in connection with a change-in-control, the potential payments and benefits set forth in the table above with respect to the performance units and phantom units would not be paid at the time of such termination, as such awards would instead remain outstanding through the end of the applicable performance period, subject to achievement of the applicable performance measures. +With respect to Messrs. Hendricks, Smith, Holcomb or Wexler, the foregoing severance benefits (other than the accrued obligations and benefit obligations) are conditioned on the executive’s execution of a release within 50 days of his termination that is not revoked during any applicable revocation period provided in such release. Their employment agreements also contain covenants and restrictions, including non-competition and non-solicitation provisions pursuant to which the executive will not be permitted to compete with Patterson-UTI in certain circumstances for a period of one year following termination of employment. +Pay Ratio +Under rules adopted pursuant to the Dodd-Frank Act of 2010, we are required to calculate and disclose the total compensation paid to our median employee, as well as the ratio of the total compensation paid to the median employee as compared to the total compensation paid to our CEO. The paragraphs that follow describe our methodology and the resulting CEO pay ratio for 2024. +We identified the median employee using our employee population on December 31, 2024. At December 31, 2024, we had 8,708 employees located in the United States and 367 employees located in other countries. +In identifying the median employee, in accordance with SEC rules, we relied on the de minimis exception to decrease the number of countries where we obtained data, which resulted in us excluding 367 employees in the following countries: Argentina (19 employees), Australia (7 employees), Canada (160 employees), Colombia (89 employees), Ecuador (17 employees), Mexico (14 employees), Oman (16 employees), Saudi Arabia (41 employees) and Ukraine (4 employees). +The compensation measure we used to identify the median employee was W-2 wages. We chose this compensation measure as it applied to all U.S. employees, allowing for accessibility and broad comparability. +The total annual compensation for the year ended December 31, 2024 was calculated as $140,204 for our median employee and $12,051,176 for our CEO as reflected in the “Total” column of the Summary Compensation Table. The ratio of our CEO’s pay to that of our median employee for 2024 was approximately 86 times. The pay ratio provided is a reasonable estimate calculated in a manner consistent with SEC rules. +Because the SEC rules for identifying the median of the annual total compensation of our employees and calculating the pay ratio based on that employee’s annual total compensation allows companies to adopt a +44 +variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices, the pay ratio reported by other companies may not be comparable to the pay ratio for our Company, as other companies have headquarters and offices in different states and countries, have different employee populations and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their pay ratios. +Pay Versus Performance +Pay Versus Performance Table +The following table sets forth specified executive compensation and financial performance measures for the Company’s five most recently completed fiscal years, and cumulative total shareholder return (TSR) information for the Company and a peer group for the 1-, 2-, 3-, 4- and 5-year periods commencing as of December 31, 2019, as required by Item 402(v) of Regulation S-K: +Value of Initial Fixed $100 Investment Based On: +Year Summary Compensation Table Total for +PEO ($) Compensation Actually Paid to PEO +($) (1) Average Summary Compensation Table Total for +Non-PEO Named Executive Officers ($) (2) Average Compensation Actually Paid to Non-PEO Named Executive Officers ($) (2) (3) Total Shareholder Return Peer Group Total Shareholder +Return (4) Net Income (Loss) ($ in +thousands) Operating Cash Flow ($ in +millions) (5) (6) +2024 $ 12,051,176 $ 6,373,765 $ 3,919,048 $ 2,454,344 87 102 $ ( 966,399 ) $ 568.1 +2023 $ 8,284,008 $ ( 9,501,753 ) $ 2,901,772 $ ( 2,575,133 ) 110 115 $ 245,952 $ 530.9 +2022 $ 10,968,467 $ 32,675,932 $ 3,563,545 $ 9,767,320 168 113 $ 154,658 $ 332.3 +2021 $ 8,017,005 $ 14,736,737 $ 2,696,782 $ 4,588,122 83 70 $ ( 654,545 ) $ 49.0 +2020 $ 3,722,515 $ 1,228,134 $ 1,089,349 $ 710,831 51 58 $ ( 803,692 ) $ 86.5 +(1) The dollar amounts reported in this column represent the amount of “compensation actually paid” to our Principal Executive Officer (“PEO”), as computed in accordance with Item 402(v) of Regulation S-K and do not reflect the total compensation actually realized or received . In accordance with these rules, these amounts reflect Total compensation as set forth in the Summary Compensation Table for each year, with adjustments made to 2024 Total compensation as shown below. Adjustments for prior fiscal years are reflected in the Pay Versus Performance Section of our 2023 and 2024 proxy statements. The fair value of performance unit and phantom unit awards was determined based on a Monte-Carlo simulation model that takes into account expected price movement of Patterson-UTI stock as compared to peer companies and relevant market indices, as of the relevant measurement dates. Assumptions used in the Monte-Carlo simulation model include assumptions regarding volatility, the risk-free interest rate, dividend yield, and stock beta. Due to differences in measurement dates, the assumptions used in these valuations could differ materially from the assumptions used to determine the fair value as of the grant date of such awards. +Compensation Actually Paid to PEO 2024 +Summary Compensation Table Total $ 12,051,176 +Less, value of Stock Awards reported in Summary Compensation Table $ 9,004,376 +Plus, year-end fair value of outstanding and unvested equity awards granted in the year $ 5,867,696 +Plus (less), year over year change in fair value of outstanding and unvested equity awards granted in prior years $ ( 3,350,624 ) +Plus (less), change in fair value from prior year-end to vesting date of equity awards granted in prior years that vested in the year $ 809,893 +Total $ 6,373,765 +(2) The non-PEO Named Executive Officers for each of the covered fiscal years are Messrs. Smith, Berns, Holcomb and Wexler. +(3) The dollar amounts reported in this column represent the average amount of “compensation actually paid” to the other Named Executive Officers, as computed in accordance with Item 402(v) of Regulation S-K and do not reflect the total compensation actually realized or received by the Named Executive Officers . In accordance with these rules, these amounts reflect average Total compensation as set forth in the Summary Compensation Table for each year, with adjustments made to average 2024 Total compensation as shown +45 +below. Adjustments for prior fiscal years are reflected in the Pay Versus Performance Section of our 2023 and 2024 proxy statements. The fair value of performance unit awards was determined based on a Monte-Carlo simulation model that takes into account expected price movement of Patterson-UTI stock as compared to peer companies and relevant market indices, as of the relevant measurement dates. Assumptions used in the Monte-Carlo simulation model include assumptions regarding volatility, the risk-free interest rate, dividend yield, and stock beta. Due to differences in measurement dates, the assumptions used in these valuations could differ materially from the assumptions used to determine the fair value as of the grant date of such awards. +Average Compensation Actually Paid to Other Named Executive Officers 2024 +Average Summary Compensation Table Total $ 3,919,048 +Less, average value of Stock Awards reported in Summary Compensation Table $ 2,026,198 +Plus, average year-end fair value of outstanding and unvested equity awards granted in the year $ 1,320,305 +Plus (less), average year over year change in fair value of outstanding and unvested equity awards granted in prior years $ ( 1,002,558 ) +Plus (less), change in fair value from prior year-end to vesting date of equity awards granted in prior years that vested in the year $ 243,747 +Total $ 2,454,344 +(4) The peer group used for the calculation of Peer Group Total Shareholder Return is the Oilfield Service Index(OSX). +(5) The Company-Selected Measure is Operating Cash Flow , which is not defined by U.S. GAAP. Operating cash flow is defined herein as Adjusted EBITDA less cash capital expenditures (as adjusted for any Board-approved increase in capital expenditures after incentive plan performance targets were set). Adjusted EBITDA is defined herein as net income (loss) plus net interest expense, income tax expense (benefit) and depreciation, depletion, amortization and impairment expense (including impairment of goodwill), excluding any M&A related or restructuring charges. For 2024, these measures were further adjusted to (i) exclude the impact on Adjusted EBITDA of severance costs related to the departure of a legacy NexTier executive, (ii) exclude the impact on Operating Cash Flow and Adjusted EBITDA of certain legal fees from an Ulterra legal proceeding and (iii) include in Operating Cash Flow the proceeds from the sale of assets. Adjustments to these measures for prior fiscal years are described in the 2023 and 2024 proxy statement. +(6) While SEC guidance under Item 402(v) of Regulation S-K does not permit the use of multi-year relative Total Shareholder Return as a permissible Company-Selected Measure for the table above, the Company views 3-year relative Total Shareholder Return as the most important measure used to link executive “compensation actually paid” to Company performance. +Other Financial and Non-Financial Measures Used +The Company considers the following financial and non-financial measures to be the most important measures used to link executive compensation actually paid to company performance for the most recently completed fiscal year: +Most Important Measures Used to Link Executive Compensation Actually Paid to Company Performance +Absolute Total Stockholder Return +Relative Total Stockholder Return +Operating Cash Flow +Adjusted EBITDA +Health, Safety and Environmental Performance +Please see “Compensation Discussion and Analysis” elsewhere in this proxy statement for additional information regarding these measures. +46 +Relationship Between Compensation Actually Paid and TSR, Net Income and Company-Selected Measure +The following chart(s) show a graphical relationship between Compensation Actually Paid (PEO and Average Other NEOs) to the Company’s TSR, Net Income, and Operating Cash Flow, as well as between the Company TSR and Peer Group TSR for the five-year period ended December 31, 2024: +47 +Indemnification Agreements +Patterson-UTI has entered into an indemnification agreement with each of the Named Executive Officers and each of its directors containing provisions that may require Patterson-UTI, among other things, to indemnify such executive officers and directors against liabilities that may arise by reason of their status or service as executive officers or directors (subject to certain exceptions) and to advance expenses incurred as a result of any proceeding against them as to which they could be indemnified. +48 +DIRECTOR COMPENSATION +The following table sets forth information concerning compensation for the fiscal year ended December 31, 2024 with respect to the directors of Patterson-UTI who are not executive officers: +Name +Fees earned +or paid in cash +($) +Stock awards +($)(1) +Option awards +($)(2) +All other +compensation +($) +Total +($) +Leslie A. Beyer +$ 115,000 $ 174,992 $ — $ — $ 289,992 +Tiffany (TJ) Thom Cepak $ 135,000 $ 174,992 $ — $ — $ 309,992 +Robert W. Drummond +$ 107,500 $ 174,992 $ — $ 2,475,000 (3) $ 2,757,492 +Gary M. Halverson +$ 130,000 $ 174,992 $ — $ — $ 304,992 +Curtis W. Huff $ 187,500 $ 244,998 $ — $ — $ 432,498 +Cesar Jaime $ 117,500 $ 174,992 $ — $ — $ 292,492 +Janeen S. Judah $ 117,500 $ 174,992 $ — $ — $ 292,492 +Amy H. Nelson +$ 125,000 $ 174,992 $ — $ — $ 299,992 +Julie Robertson $ 125,000 $ 174,992 $ — $ — $ 299,992 +James C. Stewart +$ 125,000 $ 174,992 $ — $ — $ 299,992 +_______________ +(1) Amounts represent the fair value at the date of grant as determined in accordance with FASB ASC Topic 718 with respect to restricted stock units awarded to the directors in the fiscal year ended December 31, 2024. For additional information related to the assumptions used and valuation of restricted stock units, see Note 12 to the consolidated financial statements in Patterson-UTI’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024. Mses. Beyer, Cepak, Judah, Nelson and Robertson and Messrs. Drummond, Halverson, Jaime and Stewart received an award of 16,203 restricted stock units, and Mr. Huff received an award of 22,685 restricted stock units, on January 1, 2024 with a grant date value of $10.80 per restricted stock unit. +(2) No options were issued to directors during the fiscal year ended December 31, 2024. As of December 31, 2024, Ms. Cepak and Mr. Huff held the following options to purchase shares of Common Stock: +Number of Securities Underlying +Unexercised Options (#) +Name Exercisable Unexercisable Total +Tiffany (TJ) Thom Cepak 10,000 — 10,000 +Curtis W. Huff 10,000 — 10,000 +(3) Amounts reflect severance paid to Mr. Drummond in 2024. Prior to the NexTier merger, NexTier and Mr. Drummond were party to an employment agreement pursuant to which Mr. Drummond became eligible to receive severance benefits upon his qualifying termination of employment, which occurred immediately following the closing of the NexTier merger in 2023. Accordingly, Mr. Drummond entered into a Separation Agreement and General Release of Claims with NexTier, effective as of September 1, 2023, which provides for, among other severance amounts, a cash amount equal to three times the sum of his annual base salary plus annual target bonus, payable over 36 months (of which $2,475,000 was paid in 2024). +Directors who are also employees of Patterson-UTI do not receive compensation for serving as a director or as a member of a committee of the Board of Directors. All directors are reimbursed for reasonable out-of-pocket expenses incurred in connection with serving as a member of the Board of Directors. The Compensation Committee annually reviews director compensation using a director compensation peer benchmarking process, and recommends any changes to the Board of Directors for approval. No changes were made to director compensation following the most recent annual review in December 2024. +The current compensation for non-employee directors is as follows: Each non-employee director receives an annual base cash retainer of $100,000 and an award of restricted stock units on January 1 of each year with a grant date value of $175,000. The non-Executive Chairman receives an additional annual cash retainer of $70,000 and an award of additional restricted stock units with a grant date value of $70,000. At times while the Board has an Executive Chairman, the Lead Director receives an additional annual cash retainer of $20,000. +49 +Each non-employee director receives additional annual cash retainers for the committees on which he or she serves as follows: +Chair Member +Compensation Committee $ 20,000 $ 10,000 +Nominating and Corporate Governance Committee $ 15,000 $ 7,500 +Audit Committee $ 25,000 $ 10,000 +Sustainability Committee $ 15,000 $ 7,500 +50 +CERTAIN TRANSACTIONS +Patterson-UTI has a written policy with respect to related person transactions. In accordance with this policy, related person transactions are reviewed by the chair of the Audit Committee, who has full delegated authority to approve, disapprove, ratify, amend, terminate or rescind any such transaction (if the aggregate amount involved in such transaction is $1,000,000 or less), or direct that such transaction be submitted to the Audit Committee for consideration. Any such transaction involving an aggregate amount exceeding $1,000,000 is submitted to the Audit Committee for consideration. In approving or disapproving related person transactions, the relevant facts and circumstances of the related person transaction are considered, including whether such transaction is in, or not inconsistent with, the best interest of Patterson-UTI and whether, in appropriate cases, such transaction is on commercial terms at least as favorable to Patterson-UTI as would otherwise be available to or from an unrelated third party or to Patterson-UTI’s employees generally. Related person transactions generally include transactions in an amount that exceeds $100,000 between Patterson-UTI or any of its subsidiaries and an executive officer, a director (or nominee to become director), an immediate family member of any of the foregoing or any entity in which any of the foregoing has a 10% or greater beneficial ownership interest or in which they are an executive officer, general partner, principal or engaged in a similar position. Certain related person transactions have been pre-approved under the terms of the policy, including, subject to certain exceptions and limitations, the sale to or purchase from Patterson-UTI of goods and services by entities related to directors in the ordinary course of business that are immaterial to Patterson-UTI and with respect to which the director has no direct economic interest or decision making authority, transactions with passive institutional stockholders that are in the ordinary course of both Patterson-UTI’s and such other company’s business and transactions with another publicly traded company where the related person’s interest arises solely from beneficial ownership of more than 5% of the common stock of Patterson-UTI and being a passive institutional stockholder of the other publicly traded company’s equity securities. +In connection with the acquisition by REMY Capital Partners III, L.P. (“REMY Capital”) of an ownership interest in UTI Energy Corp. in March 1995, REMY Capital succeeded to a registration rights agreement with UTI. As the successor-in-interest to UTI, Patterson-UTI assumed this registration rights agreement pursuant to which REMY Capital has the right to require Patterson-UTI to use its reasonable efforts to register shares held by REMY Capital under the Securities Act of 1933, as amended. In the event that such rights are exercised in connection with a primary offering proposed by Patterson-UTI (or a secondary offering with which Patterson-UTI agrees to participate), REMY Capital would bear its pro rata share of the costs of the offering, other than legal, accounting and printing costs, all of which Patterson-UTI would bear. In the event that REMY Capital elects to exercise such rights other than in connection with an offering in which Patterson-UTI participates, REMY Capital would bear all costs of the offering. These rights continue so long as REMY Capital continues to own the Common Stock that it acquired in March 1995. As of the date of this proxy statement, REMY Capital continues to hold 485,000 shares of such Common Stock. +Mr. Berns, Executive Vice President and Chief Commercial Officer of Patterson-UTI, is an executive of REMY Investors, which is the general partner of REMY Capital. +51 +SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT +The following table sets forth, as of March 31, 2025 (except as otherwise indicated), the ownership of Common Stock of (i) the Named Executive Officers, directors and Board nominees, individually, (ii) all directors, Board nominees and executive officers as a group and (iii) each person known by Patterson-UTI to be the beneficial owner of more than 5% of Common Stock. As of March 31, 2025, we had 385,978,013 shares of Common Stock outstanding. +Name of Beneficial Owner +Amount and +Nature of +Beneficial +Ownership +Percent +of Class +Beneficial Owners of more than 5% of Patterson-UTI’s Common Stock: +BlackRock, Inc. 61,260,446 (1) 15.9 % +The Vanguard Group 45,041,080 (2) 11.7 % +Blackstone 28,720,953 (3) 7.4 % +Directors and Named Executive Officers: +William Andrew Hendricks, Jr. 2,725,962 (4) * +C. Andrew Smith 537,685 (5) * +Kenneth N. Berns 1,246,586 (6) * +James M. Holcomb 396,326 (7) * +Seth D. Wexler 369,209 (8) * +Leslie A. Beyer 33,934 (9) * +Tiffany (TJ) Thom Cepak 133,284 (10) * +Robert W. Drummond 2,027,895 (11) * +Gary M. Halverson 146,785 (12) * +Curtis W. Huff 390,281 (13) * +Cesar Jaime 37,635 (14) * +Janeen S. Judah 137,868 (15) * +Amy H. Nelson 141,641 (16) * +Julie J. Robertson 37,635 (17) * +James C. Stewart 1,069,543 (18) * +All current directors and executive officers as a group (15 persons) 9,432,269 (19) 2.4 % +_______________ +* indicates less than 1.0% +(1) Based solely on a Schedule 13G/A filed by BlackRock, Inc. with the SEC on November 8, 2024 reporting ownership as of September 30, 2024. According to the report, BlackRock, Inc. has sole voting power with respect to 59,979,550 shares and sole dispositive power with respect to 61,260,446 shares. The address of the principal business office of BlackRock, Inc. is 50 Hudson Yards, New York, New York 10001. +(2) Based solely on a Schedule 13G/A filed by The Vanguard Group with the SEC on February 13, 2024 reporting ownership as of December 29, 2023. According to the report, The Vanguard Group has shared voting power with respect to 278,306 shares, sole dispositive power with respect to 44,437,638 shares and shared dispositive power with respect to 603,442 shares. The address of the principal business office of The Vanguard Group is 100 Vanguard Blvd., Malvern, Pennsylvania 19355. +(3) Based solely on a Schedule 13G/A filed by BEP Diamond Topco L.P., BEP Diamond Topco LLC, BEP Diamond Aggregator L.P., BCP VII/BEP II Holdings Manager L.L.C., Blackstone Energy Management Associates II L.L.C., Blackstone Management Associates VII L.L.C., BMA VII L.L.C., Blackstone EMA II L.L.C., Blackstone Holdings III L.P., Blackstone Holdings III GP L.P., Blackstone Holdings III GP Management L.L.C., Blackstone Inc., Blackstone Group Management L.L.C and Stephen A. Schwarzman ("Blackstone") with the SEC on February 9, 2024 reporting ownership as of December 31, 2023. According to the report, Blackstone has sole voting power with respect to 28,720,953 shares, sole dispositive power with respect to 26,618,180 shares and shared dispositive power with respect to 2,102,773 shares. The principal business address of Blackstone is 345 Park Avenue, New York, New York 10154. +(4) Includes shares underlying stock options held by Mr. Hendricks that are presently exercisable to purchase 572,400 shares. Includes 264,500 shares underlying restricted stock units that will vest within 60 days. Does not include 329,300 shares underlying restricted stock units that will not vest within 60 days. +52 +(5) Includes 79,800 shares underlying restricted stock units held by Mr. Smith that will vest within 60 days. Does not include 89,667 shares underlying restricted stock units that will not vest within 60 days. +(6) Includes shares underlying stock options held by Mr. Berns that are presently exercisable to purchase 343,300 shares. Includes 72,300 shares underlying restricted stock units that will vest within 60 days. Does not include 78,034 shares underlying restricted stock units that will not vest within 60 days. The Common Stock beneficially owned by Mr. Berns includes 34,000 shares held in trust(s) for which he is the trustee. Does not include shares of Common Stock beneficially owned by REMY Investors. Mr. Berns disclaims beneficial ownership of such shares beneficially owned by REMY Investors. +(7) Includes 64,200 shares underlying restricted stock units held by Mr. Holcomb that will vest within 60 days. Does not include 81,534 shares underlying restricted stock units that will not vest within 60 days. +(8) Includes 62,533 shares underlying restricted stock units held by Mr. Wexler that will vest within 60 days. Does not include 73,467 shares underlying restricted stock units that will not vest within 60 days. +(9) Does not include 21,186 shares underlying unvested restricted stock units held by Ms. Beyer that will not vest within 60 days. +(10) Includes shares underlying presently exercisable stock options held by Ms. Cepak to purchase 10,000 shares. Does not include 21,186 shares underlying unvested restricted stock units that will not vest within 60 days. +(11) Does not include 21,186 shares underlying unvested restricted stock units held by Mr. Drummond that will not vest within 60 days. The Common Stock beneficially owned by Mr. Drummond includes 500,000 shares held in trust(s) for which he is a trustee. +(12) Does not include 21,186 shares underlying unvested restricted stock units held by Mr. Halverson that will not vest within 60 days. +(13) Includes shares underlying presently exercisable stock options held by Mr. Huff to purchase 10,000 shares. Does not include 29,661 shares underlying unvested restricted stock units that will not vest within 60 days. +(14) Does not include 21,186 shares underlying unvested restricted stock units held by Mr. Jaime that will not vest within 60 days. +(15) Does not include 21,186 shares underlying unvested restricted stock units held by Ms. Judah that will not vest within 60 days. +(16) Does not include 21,186 shares underlying unvested restricted stock units held by Ms. Nelson that will not vest within 60 days. +(17) Does not include 21,186 shares underlying unvested restricted stock units held by Ms. Robertson that will not vest within 60 days. +(18) Does not include 21,186 shares underlying unvested restricted stock units held by Mr. Stewart that will not vest within 60 days. The Common Stock beneficially owned by Mr. Stewart includes 1,005,254 shares held by a limited partnership over which he exercises ownership and control. +(19) Includes shares underlying stock options that are presently exercisable to purchase 935,700 shares of Common Stock. Includes 543,333 shares underlying restricted stock units held by certain directors and executive officers that will vest within 60 days. Does not include 872,337 shares underlying restricted stock units held by such individuals that will not vest within 60 days. Does not include shares of Common Stock beneficially owned by REMY Investors. +Except as stated herein, each stockholder has sole voting and investment power with respect to Common Stock included in the above table. There are no arrangements known to Patterson-UTI which may result in a change in control. The business address of each of our directors and officers is 10713 West Sam Houston Parkway North, Suite 800, Houston, Texas 77064. +53 +Equity Compensation Plan Information +The following table presents equity compensation plan information as of December 31, 2024. +Equity Compensation Plan Information +Plan Category +Number of +Securities to +be Issued upon +Exercise of +Outstanding +Options, Warrants and Rights +Weighted - +Average +Exercise +Price of +Outstanding +Options, +Warrants and +Rights (2) +Number of Securities +Remaining Available +for Future Issuance +under Equity +Compensation Plans +(Excluding Securities +Reflected in Column(a)) +(a) (b) (c) +Equity compensation plans approved by security holders (1) +9,543,576 $ 22.26 17,520,596 +Equity compensation plans not approved by security holders — $ — — +Total 9,543,576 $ — 17,520,596 +______________ +(1) This plan category includes the Patterson-UTI Energy, Inc. 2021 Long-Term Incentive Plan, as amended (the "2021 Plan"), the NexTier Oilfield Solutions Inc. Equity and Incentive Award Plan (the "NexTier Plan"), the NexTier Oilfield Solutions Inc. (Former C&J Energy) Management Incentive Plan (the "Former C&J Energy Plan"), and the Patterson-UTI Energy, Inc. Amended and Restated 2014 Long-Term Incentive Plan, as amended (the "2014 Plan"). The 2021 Plan provides for awards of incentive stock options, non-incentive stock options, tandem and freestanding stock appreciation rights, restricted stock awards, other stock unit awards, performance share awards, performance unit awards and dividend equivalents to key employees, officers and directors, which are subject to certain vesting and forfeiture provisions. All options are granted with an exercise price equal to or greater than the fair market value of the common stock at the time of grant. Amount in column (a) assumes target payout of all performance units outstanding. The vesting schedule and term are set by the Compensation Committee of the Board of Directors, except that the Board has the same power as the Compensation Committee with respect to awards to directors. Certain awards outstanding under the NexTier Plan and the Former C&J Energy Plan at the time of the NexTier merger were converted into, as applicable, options or time-vesting restricted stock units with respect to shares of Patterson-UTI common stock. Additionally, certain options remain exercisable under the 2014 Plan. All securities remaining available for future issuance under equity compensation plans approved by security holders in column (c) are available under the 2021 Plan. In addition to the 2021 Plan, this plan category also includes the NexTier Plan, the Former C&J Energy Plan, and the 2014 Plan. No future awards will be granted under the NexTier Plan, the Former C&J Energy Plan, or the 2014 Plan. All options were granted with an exercise price equal to the fair market value of the related common stock at the time of grant. +(2) This column reflects the weighted average exercise price of options granted under the NexTier Plan, the Former C&J Energy Plan, and the 2014 Plan that were outstanding on December 31, 2024. No options have been granted under the 2021 Plan. This column excludes outstanding restricted stock units and performance units, for which no consideration is paid for the vesting of such awards into common stock. +54 +AUDIT COMMITTEE REPORT +The following report of the Audit Committee does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other Patterson-UTI filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent Patterson-UTI specifically incorporates this report by reference therein. +The Audit Committee members are Mses. Cepak (chair), Judah and Robertson, and Messrs. Halverson, Jaime and Stewart, each of whom is independent within the meaning of applicable rules under the Exchange Act and within the meaning of the Nasdaq listing standards. The Board has determined that Ms. Cepak is an “audit committee financial expert” within the meaning of applicable SEC rules. +The Audit Committee oversees management’s conduct of Patterson-UTI’s accounting and financial reporting process, including review of: (i) financial reports and other financial information provided by Patterson-UTI to the public and government/regulatory bodies, (ii) Patterson-UTI’s system of internal control over financial reporting, and (iii) the annual independent audit of Patterson-UTI’s consolidated financial statements and internal control over financial reporting. +The Audit Committee’s role is one of review, and it recognizes that Patterson-UTI’s management is responsible for preparing Patterson-UTI’s consolidated financial statements and the independent auditors are responsible for auditing those financial statements. In fulfilling its review and oversight responsibilities, the Audit Committee reviewed and discussed with management the audited financial statements included in Patterson-UTI’s Annual Report on Form 10-K for the year ended December 31, 2024, including a discussion of the quality, not just the acceptability, of the accounting principles used, the reasonableness of significant judgments made by management, and the clarity of disclosures provided in the financial statements. The Audit Committee also discussed with management the basis for their assertion that Patterson-UTI maintained effective internal control over financial reporting as of December 31, 2024. +The Audit Committee discussed with Patterson-UTI’s independent registered public accounting firm (PricewaterhouseCoopers LLP) the overall scope and plans for their integrated audit. The Audit Committee met with PricewaterhouseCoopers LLP, with and without management present, to discuss the results of their integrated audit, their evaluation of Patterson-UTI’s internal control over financial reporting and the overall quality of Patterson-UTI’s financial reporting. The Audit Committee also reviewed with PricewaterhouseCoopers LLP their judgments as to the quality, not just the acceptability, of Patterson-UTI’s accounting principles and discussed such other matters as are required by the applicable requirements of the Public Company Accounting Oversight Board and the SEC. +The Audit Committee has received and reviewed the written disclosures and the letter from PricewaterhouseCoopers LLP required by the Public Company Accounting Oversight Board regarding their independence, and their communications with the Audit Committee concerning independence, and has discussed with PricewaterhouseCoopers LLP its independence. +Taking the foregoing into consideration, the undersigned Audit Committee members recommended to the Board of Directors that the Board approve the inclusion of Patterson-UTI’s audited financial statements and management’s report on internal control over financial reporting in the Annual Report on Form 10-K for the fiscal year ended December 31, 2024. +Audit Committee of the Board of Directors: +Tiffany (TJ) Thom Cepak, Chair +Gary M. Halverson +Cesar Jaime +Janeen S. Judah +Julie J. Robertson +James C. Stewart +55 +PricewaterhouseCoopers LLP Fees for Fiscal Years 2024 and 2023 +For fiscal years 2024 and 2023, Patterson-UTI and its subsidiaries incurred fees for services provided by PricewaterhouseCoopers LLP. +Description +Fees Incurred for +Fiscal Year +2024 +Fees Incurred for +Fiscal Year +2023 +Audit fees $ 3,777,000 $ 3,630,000 +Audit-related fees $ — $ 865,000 +Tax fees $ 274,000 $ 176,100 +All other fees $ 202,000 $ 5,400 +Total $ 4,253,000 $ 4,676,500 +The Audit Committee appoints the independent registered public accounting firm. The Audit Committee or Ms. Cepak, as Chair of the Audit Committee, approves all other engagements of the independent registered public accounting firm in advance. In the event Ms. Cepak approves any such engagement, she discusses such approval with the Audit Committee at its next meeting. +“Audit fees” relate to audit services of PricewaterhouseCoopers LLP for fiscal 2024 and 2023 consisting of the integrated audit of Patterson-UTI’s consolidated financial statements and internal control over financial reporting, quarterly reviews of Patterson-UTI’s interim financial statements and the audits of certain subsidiaries. “Audit-related fees” for 2023 relate to professional services provided in connection with the NexTier merger, Ulterra acquisition, and $400 million senior notes offering. “Tax fees” included income tax compliance and consultation services. “All other fees” for 2024 relate to professional services regarding the review of controls in connection with the implementation of a human resources system, and annual subscription fees to software products. “All other fees” for 2023 relate to annual subscription fees to software products. The Audit Committee Charter includes procedures under which the Audit Committee or its delegate approves in advance all audit and non-audit services (subject to any de minimis exceptions permitted by law for non-audit services, which must, in any event, be approved annually by the Audit Committee prior to completion of the annual audit) provided by the Company's independent auditors. The Audit Committee or Ms. Cepak, as Chair of the Audit Committee, approved in advance all of the services described above. +The Audit Committee has discussed the non-audit services provided by PricewaterhouseCoopers LLP and the related fees and has considered whether those services and fees are compatible with maintaining auditor independence. The Audit Committee determined that such non-audit services were consistent with the independence of PricewaterhouseCoopers LLP. +56 +OTHER MATTERS +Other Business +As of the date of this proxy statement, management of Patterson-UTI was not aware of any matter to be presented at the Meeting other than as set forth herein. If any other matters are properly brought before the Meeting, however, the shares represented by valid proxies will be voted with respect to such matters in accordance with the judgment of the persons voting them. +Stockholder Proposals for 2026 Annual Meeting +Proposals for Inclusion in the Proxy Statement. Pursuant to Rule 14a-8 under the Exchange Act, stockholders may present proper proposals for inclusion in Patterson-UTI’s proxy statement and for consideration at the next annual meeting of stockholders by submitting their proposals to Patterson-UTI in a timely manner. In order to be included in Patterson-UTI’s proxy statement for the 2026 annual meeting of stockholders, proposals from stockholders must be received by Patterson-UTI no later than the close of business on December 11, 2025, and must otherwise comply with the requirements of Rule 14a-8. +Proposals or Director Nominations not Included in the Proxy Statement. Patterson-UTI’s bylaws establish an advance notice procedure with regard to stockholder proposals and director nominations not included in Patterson-UTI’s proxy statement. For director nominations not included in Patterson-UTI’s proxy statement or stockholder proposals to be properly brought before the 2026 annual meeting by a stockholder, the stockholder must be a stockholder of record on the date of the giving of the notice provided for in Patterson-UTI’s bylaws and on the record date for the determination of stockholders entitled to vote at such annual meeting and must give timely notice of such business in writing to the Secretary of Patterson-UTI. To be timely with respect to the 2026 annual meeting of stockholders, a stockholder’s notice must be delivered to or mailed and received by the close of business at Patterson-UTI’s principal executive offices not earlier than the close of business on February 5, 2026 and not later than the close of business on March 7, 2026, assuming the date of the 2026 annual meeting is not changed by more than 30 days before or after the anniversary date of the 2025 annual meeting. A stockholder’s notice to the Secretary of Patterson-UTI shall contain certain information specified in Patterson-UTI’s bylaws regarding the stockholder and the proposed nominee or stockholder proposal. See Article I, Section 8 of Patterson-UTI’s bylaws. In addition to giving notice pursuant to the advance notice provisions of Patterson-UTI’s bylaws, a stockholder who intends to solicit proxies in support of nominees submitted under these advance notice provisions must also provide the notice required pursuant to Rule 14a-19, the SEC’s universal proxy rule, to the Secretary of the Company regarding such intent no later than April 6, 2026. +Proxy Access Procedures. Patterson-UTI’s bylaws permit a stockholder, or group of up to 20 stockholders, owning continuously for at least three years shares of Patterson-UTI stock representing an aggregate of at least 3% of our outstanding shares, to nominate and include in our proxy materials director nominees constituting up to the greater of two or 20% of our Board, provided that the stockholder(s) and nominee(s) satisfy the requirements in Patterson-UTI’s bylaws. See Article I, Section 11 of Patterson-UTI’s bylaws. Written notice of proxy access director nominees must be received by the close of business at Patterson-UTI’s principal executive offices not earlier than December 11, 2025 and not later than January 10, 2026, assuming the date of the 2026 annual meeting is not changed by more than 30 days before or after the anniversary date of the 2025 annual meeting. +Delinquent Section 16(a) Reports +To our knowledge, based solely on a review of such reports that have been filed with the SEC and written representations that no other reports were required, we believe that during the year ended December 31, 2024, our officers, directors, and greater-than-10% shareholders timely filed all reports required by Section 16(a) of the Securities Exchange Act of 1934, except for one Form 4 for Matthew Gillard reporting four transactions relating to the exercise of RSUs and related tax withholdings. +57 +Annual Report +A copy of Patterson-UTI’s annual report on Form 10-K accompanies this proxy statement only if you have requested that a copy of this proxy statement be mailed to you. The annual report on Form 10-K also is available electronically by following the instructions in the Notice. The annual report on Form 10-K is not incorporated into this proxy statement and is not considered proxy-soliciting material. +A copy of the annual report on Form 10-K, including the financial statements and financial statement schedules, but excluding exhibits, may be obtained by stockholders without charge by written request to the Secretary of Patterson-UTI at 10713 West Sam Houston Parkway North, Suite 800, Houston, Texas 77064 or by accessing it on Patterson-UTI’s website at www.patenergy.com in the investors section under the “Financial Information” link. Patterson-UTI will furnish the exhibits to Form 10-K upon request and upon receipt of a reproduction fee. +Delivery of Documents to Stockholders Sharing an Address +The SEC’s rules allow companies to send a single Notice or single copy of annual reports, proxy statements, prospectuses and other disclosure documents to two or more stockholders sharing the same address, subject to certain conditions. These rules are intended to provide greater convenience for stockholders, and cost savings for companies, by reducing the number of duplicate documents that stockholders receive. Unless different instructions were previously provided to Patterson-UTI, if two or more stockholders share a mailing address, such stockholders were deemed to have consented to receiving only one copy, and a single copy of this proxy statement and Patterson-UTI's annual report on Form 10-K (and/or a single copy of the Notice) has been sent to their address. If instructions for separate delivery have been received from any stockholder, Patterson-UTI will deliver promptly separate copies of the relevant disclosure materials. Similarly, if multiple copies of disclosure materials are being delivered to a single address, stockholders can request a single copy for future deliveries. Written requests should be submitted to the Secretary of Patterson-UTI at 10713 West Sam Houston Parkway North, Suite 800, Houston, Texas 77064. Requests may also be made by calling Investor Relations at (281) 765-7100. +58 +59 +60 \ No newline at end of file diff --git a/raw/proxies/0000889900/0001628280-25-017335/proxy_rpt.txt b/raw/proxies/0000889900/0001628280-25-017335/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..e69de29bb2d1d6434b8b29ae775ad8c2e48c5391 diff --git a/raw/proxies/0000913241/0001019056-15-000383/proxy.txt b/raw/proxies/0000913241/0001019056-15-000383/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..84917d372b97b2494f14257e95d6667c58132ba6 --- /dev/null +++ b/raw/proxies/0000913241/0001019056-15-000383/proxy.txt @@ -0,0 +1,3823 @@ +DEF 14A +1 +smadden_def14a.htm +DEF 14A +UNITED +STATES +SECURITIES +AND EXCHANGE COMMISSION +Washington, +D.C. 20549 +SCHEDULE +14A +(Rule 14a-101) +INFORMATION +REQUIRED IN PROXY STATEMENT +SCHEDULE 14A INFORMATION +Proxy Statement Pursuant to Section 14(a) +of the +Securities +Exchange Act of 1934 (Amendment No. __) +Filed by the Registrant þ +Filed by a Party other than +the Registrant o +Check the appropriate box: +o Preliminary +Proxy Statement +o Confidential, +for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +þ Definitive +Proxy Statement +o Definitive +Additional Materials +o Soliciting +Material Pursuant to §240.14a-12 +Steven +Madden, Ltd. +(Name +of Registrant as Specified in Its Charter) +(Name +of Person(s) Filing Proxy Statement, if Other Than the Registrant) +Payment of Filing Fee (Check +the appropriate box): +þ No +fee required. +o Fee +computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. +(1) +Title +of each class of securities to which transaction applies: +(2) +Aggregate +number of securities to which transaction applies: +(3) +Per +unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which +the filing fee is calculated and state how it was determined): +(4) +Proposed +maximum aggregate value of transaction: +(5) +Total +fee paid: +o Fee +paid previously with preliminary materials. +o Check +box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting +fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of +its filing. +(1) +Amount +Previously Paid: +(2) +Form, +Schedule or Registration Statement No.: +(3) +Filing +Party: +(4) +Date +Filed: +Dear Shareholders, +2014 was a challenging year +for Steve Madden as we faced a difficult retail landscape and a footwear market with few significant fashion trends. For the year, +our consolidated net sales grew 2% to $1.3 billion, and diluted EPS declined 11% to $1.76. While our financial performance was +not up to our standards, we took important steps throughout the year to strengthen our business and position Steve Madden for +long-term success. We added new brands to our portfolio through acquisition, expanded our international business, invested in +our direct-to-consumer business and returned capital to shareholders through share repurchases – all investments that we +expect to drive EPS growth in 2015 and beyond. +Adding Strong Brands to +Our Portfolio +Expanding our brand portfolio +has been an important growth driver for the Company over the last several years, and, during 2014, we added two more powerful +brands to our mix with the acquisitions of Dolce Vita and Brian Atwood. +In August 2014, we acquired +Dolce Vita, one of the premier contemporary brands in the footwear industry and a strong complement to our portfolio as it targets +a customer and price point that we do not address with our other brands. We look forward to capitalizing on Dolce Vita’s +loyal consumer following and well-earned reputation for outstanding design while also making needed operational improvements, +including implementing processes for better control of inventory and operating expenses. +In March 2014, we acquired +an 80% interest in the Brian Atwood intellectual property. Brian Atwood is the first true global luxury brand in our portfolio, +and we believe there is significant untapped potential in both Brian Atwood and the B Brian Atwood diffusion brand. We plan to +re-launch B Brian Atwood for Fall 2015 with both footwear and handbag collections. +In early 2015, we added another +brand to our portfolio with our acquisition of the intellectual property and related assets of Blondo, a waterproof boot brand +with a heritage that dates back over 100 years. Weather-resistant footwear is an important category that we did not previously +have in our arsenal, and with approximately 70% of Blondo’s business currently done in Canada, we see significant opportunity +to expand the brand in other markets, particularly the United States. +Expanding Our International +Presence +One of our most important +long-term initiatives continues to be growing our business outside of the United States. In 2014, we further expanded our footprint +in international markets, acquiring our distributor in Mexico and forming a joint venture in South Africa. +On December 30, 2014, we closed +on the acquisition of our Mexican distributor, SM Mexico. SM Mexico has marketed the Steve Madden brand in Mexico since 2005 and +distributes products in the wholesale channel as well as through 21 Steve Madden branded retail stores. We see significant growth +opportunity in Mexico and plan to continue to expand in this important market by enhancing our presence in leading department +stores, entering new wholesale accounts, growing our retail store base and introducing certain of our other brands, like Dolce +Vita, into the Mexican market. +Additionally, we expanded +our partnership with House of Busby in South Africa during the year. Busby has been the distributor of our Steve Madden brand +in South Africa since 2011, and based on the success we have seen thus far, we elected to expand the partnership by forming a +joint venture. We now own 50.1% of the business in South Africa, which includes four Steve Madden retail stores and 20 Steve Madden +shop-in-shops in the leading South African retailer Edgars. +Enhancing Our Direct-To-Consumer +Offerings +In addition to our acquisition +activity in 2014, we also invested in our existing business. In March 2014, we launched a new, interactive e-commerce site that +enables stronger brand engagement with our customers. The new SteveMadden.com integrates social sharing, editorial commerce and +improved targeting to offer customers a speedier and superior shopping experience, particularly on mobile devices. We have been +pleased with the results we have seen thus far, which include a strong improvement in conversion rate on the site. We have also +received great feedback from consumers, who enjoy being able to interact with both the brand and other Steve Madden fans and are +responding to the ability to draw fashion, music and lifestyle inspiration from the site. +We also expanded our bricks +and mortar presence during the year with the opening of 15 Steve Madden outlet stores, bringing us to 32 outlet locations at the +end of 2014. +Returning Capital to Shareholders +Finally, as part of +our ongoing effort to maximize shareholder value, we returned $142 million in capital to our shareholders in 2014 in the form +of share repurchases. We repurchased 4.3 million shares during the year, or over 6% of the Company, at an average price of $33.38 +per share. +Looking Ahead +While weak industry trends +affected our performance during 2014, we operated our business with discipline, proactively managing our inventory levels and +promotional activities to lessen the impact of soft sales throughout the year. As discussed, we also focused on making strategic +investments that will enhance our growth prospects over the long term. As we look forward, we are encouraged by a number of positive +signs we are seeing currently, including emerging fashion footwear trends, improving performance at our retail stores and better +sell-through at our wholesale partners on new Spring product in both footwear and handbags. Today, our core Steve Madden business +remains a market leader, our portfolio of brands is stronger than ever, and we are making progress on a number of growth initiatives +that should enable us to grow the business in 2015 and for years to come. +In closing, we would like +to thank all of our employees for their hard work and dedication, our customers for their loyalty, and you, our shareholders, +for your continued support. +Sincerely, +EDWARD ROSENFELD +CHIEF EXECUTIVE +OFFICER +AWADHESH +SINHA +CHIEF OPERATING +OFFICER +ARVIND DHARIA +CHIEF FINANCIAL +OFFICER +NOTICE OF +ANNUAL MEETING OF STOCKHOLDERS +TO +BE HELD ON MAY 22, 2015 +TO THE STOCKHOLDERS: +The Annual Meeting +of Stockholders (the “Annual Meeting”) of Steven Madden, Ltd. (the “Company”) will be held on Friday, +May 22, 2015, at the Company’s showroom located at 1370 Avenue of the Americas, 14th Floor, New York, New York at 10:00 +a.m., local time, for the purposes stated below: +1. +to elect +eight (8) directors to the Board of Directors of the Company; +2. +to ratify +the appointment of EisnerAmper LLP as the Company’s independent registered public accounting firm for the fiscal year +ending December 31, 2015; +3. +to approve, +on a non-binding advisory basis, the compensation of certain executive officers as disclosed in the accompanying proxy statement; +and +4. +to transact such other business +as may properly come before the Annual Meeting or any adjournments thereof. +Only those +stockholders of record at the close of business on April 2, 2015, the record date for the Annual Meeting, are entitled to notice +of and to vote at the Annual Meeting and any adjournments thereof. Stockholders of record at the close of business on April 2, +2015, the record date for the Annual Meeting, will be admitted to the Annual Meeting upon presentation of valid, government-issued +photo identification, such as a driver’s license. Stockholders who own shares of the Company’s common stock beneficially +through a bank, broker or other nominee will be admitted to the Annual Meeting upon presentation of valid, government-issued photo +identification and proof of ownership or a valid proxy signed by the record holder. A recent brokerage statement or a letter from +a bank or broker are examples of proof of ownership. If you own shares of the Company’s common stock beneficially and want +to vote in person at the Annual Meeting, you should contact your broker or applicable agent in whose name the shares are registered +to obtain a broker’s proxy and bring it to the Annual Meeting in order to vote. +IMPORTANT NOTICE REGARDING THE +AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 22, 2015: THE NOTICE OF ANNUAL MEETING +AND PROXY STATEMENT, ANNUAL REPORT, ELECTRONIC PROXY CARD AND ANY OTHER MATERIALS CONCERNING THE ANNUAL MEETING, TOGETHER WITH +ANY AMENDMENTS TO ANY OF THESE MATERIALS, ARE AVAILABLE ON THE INTERNET AT WWW.PROXYVOTE.COM. +BY ORDER OF THE +BOARD OF DIRECTORS +April 8, 2015 +Long Island City, +New York +Arvind Dharia +Secretary +WHETHER OR NOT YOU EXPECT +TO BE PRESENT AT THE ANNUAL MEETING, PLEASE MARK, DATE AND SIGN THE ACCOMPANYING FORM OF PROXY AND MAIL IT PROMPTLY IN THE ENVELOPE +PROVIDED TO: VOTE PROCESSING, C/O BROADRIDGE, 51 MERCEDES WAY, EDGEWOOD, NEW YORK 11717. ALTERNATIVELY, YOU MAY VOTE YOUR SHARES +BY TELEPHONE OR THROUGH THE INTERNET AS DESCRIBED ON THE ACCOMPANYING PROXY CARD. +TABLE +OF CONTENTS +GENERAL INFORMATION +1 +Notice of Internet Availability of Proxy Materials +2 +QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING +2 +PROPOSAL ONE: ELECTION OF DIRECTORS +6 +Stockholder Nominations for Board Membership +6 +Nominees for Election to the Board of Directors +6 +CORPORATE GOVERNANCE +11 +The Board of Directors +11 +Director Independence +11 +Director Attendance at Meetings +11 +Director Election (Majority Voting) Policy +11 +Committees of the Board +12 +Board Leadership Structure, Risk Oversight, Executive Sessions of Non-Employee Directors, and Communications Between Stockholders and the Board +15 +Codes of Business Conduct and Ethics +16 +Corporate Governance Guidelines +16 +Stock Ownership Guidelines +17 +Prohibition on Hedging and Pledging of Our Common Stock +17 +Corporate Social Responsibility Policy +17 +Certain Relationships and Related Party Transactions +17 +Review, Approval or Ratification of Transactions with Related Persons +19 +COMPENSATION OF DIRECTORS IN THE 2014 FISCAL YEAR +20 +STOCK OWNERSHIP +21 +Security Ownership of Certain Beneficial Owners +22 +Security Ownership of Directors and Executive Officers +23 +Section 16(a) Beneficial Ownership Reporting Compliance +24 +EXECUTIVE COMPENSATION +24 +Compensation Discussion and Analysis +24 +Compensation Committee Interlocks and Insider Participation +32 +Executive Officers +33 +SUMMARY COMPENSATION TABLE +34 +Employment Arrangements +35 +GRANTS OF PLAN-BASED AWARDS IN THE 2014 FISCAL YEAR +40 +OUTSTANDING EQUITY AWARDS AT END OF THE 2014 FISCAL YEAR +41 +OPTION EXERCISES AND STOCK VESTED IN THE 2014 FISCAL YEAR +43 +SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS +43 +EQUITY COMPENSATION PLAN INFORMATION +44 +POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE-IN-CONTROL +45 +COMPENSATION COMMITTEE REPORT +47 +PROPOSAL TWO: RATIFICATION OF THE APPOINTMENT OF EISNERAMPER LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR ENDING DECEMBER 31, 2015 +48 +AUDIT COMMITTEE REPORT +50 +PROPOSAL THREE: NON-BINDING ADVISORY VOTE ON EXECUTIVE COMPENSATION +51 +i +STEVEN MADDEN, +LTD. +52-16 Barnett +Avenue +Long +Island City, New York 11104 +PROXY +STATEMENT +GENERAL +INFORMATION +The +Board of Directors of Steven Madden, Ltd. requests your proxy in connection with the Annual Meeting of Stockholders (the “Annual +Meeting”) of Steven Madden, Ltd. (the “Company”, “we” or “us”). The Annual Meeting will +be held at the Company’s showroom located at 1370 Avenue of the Americas, 14th Floor, New York, New York on Friday, May +22, 2015 at 10:00 a.m., local time. Proxies also may be voted at any adjournments or postponements of the Annual Meeting. +On +or about April 10, 2015, a notice containing instructions on how to access this Proxy Statement, the accompanying proxy card and +related materials online is being mailed to holders of record of common stock, $.0001 par value, of the Company (the “Common +Stock”) at the close of business on April 2, 2015 (the “Record Date”). The Company’s Annual Report for +the fiscal year ended December 31, 2014 (the “2014 Fiscal Year”), including audited financial statements, is included +in the materials that are accessible online. This Proxy Statement contains information about the Annual Meeting as well as information +regarding the voting process, director elections, our corporate governance programs and executive and director compensation, among +other things. We recommend that you read all of these materials. +The Annual +Meeting has been called to consider and take action on the following proposals: +· to +elect eight (8) directors to the Board of Directors of the Company to serve until the +next annual meeting of the Company’s stockholders; +· to +ratify the appointment of EisnerAmper LLP as the Company’s independent registered +public accounting firm for the fiscal year ending December 31, 2015; +· to +approve, on a non-binding advisory basis, the compensation of certain executive officers +as disclosed in this Proxy Statement; and +· to +transact such other business as may properly come before the Annual Meeting and any adjournments +thereof. +The +Board of Directors knows of no other matters to be presented for action at the Annual Meeting. However, if any other matters properly +come before the Annual Meeting, the persons named in the proxy will vote on such other matters and/or for other nominees for director +in accordance with their best judgment. The Company’s Board of Directors recommends that the stockholders vote “FOR” +each of the proposals. Only holders of record of Common Stock of the Company at the close of business on the Record Date will +be entitled to vote at the Annual Meeting. +1 +The +Company is incorporated in the State of Delaware. The principal executive offices of the Company are located at 52-16 Barnett +Avenue, Long Island City, New York 11104 and the telephone number of the Company is (718) 446-1800. +Notice of Internet Availability +of Proxy Materials +We +continue to take advantage of the Securities and Exchange Commission (the “SEC”) “e-proxy” rules allowing +us to furnish proxy materials through the Internet for the benefit and convenience of our stockholders. By using the e-proxy rules, +we can expedite the receipt by stockholders of proxy materials while lowering the costs and reducing the environmental impact +associated with our Annual Meeting. On or about April 10, 2015, we will furnish a Notice of Internet Availability of Proxy Materials +(the “Availability Notice”) to most of our stockholders containing instructions on how to access the proxy materials +and to vote online. In addition, instructions on how to request a printed copy of these materials will be found on the Availability +Notice. If you received an Availability Notice by mail, you will not receive a paper copy of the proxy materials unless you request +such materials by following the instructions contained in the Availability Notice. +For +more information on voting your Common Stock, please refer to the following “Questions and Answers” section. +QUESTIONS AND ANSWERS +ABOUT THE ANNUAL MEETING AND VOTING +1. +What is included in the proxy materials? What is a proxy statement and what is a proxy? +The +proxy materials for our Annual Meeting include the Notice of Annual Meeting, this Proxy Statement and our Annual Report on Form +10-K for the year ended December 31, 2014. If you received a paper copy of these materials, the proxy materials also include a +proxy card or voting instruction form. +A +proxy is the delegation of your right to vote the Common Stock you own to another person, who is called your proxy. When you designate +someone as your proxy in a written document, that document is called a proxy or a proxy card. SEC regulations require that we +furnish a proxy statement to you when we ask you to sign a proxy designating individuals to vote your shares of Common Stock on +your behalf. We have designated our officers Edward R. Rosenfeld and Arvind Dharia as proxies for the Annual Meeting. +2. +Who may vote at the Annual Meeting? +Only +stockholders of record are entitled to vote at the Annual Meeting. A stockholder of record is a stockholder of the Company as +of the close of business on the Record Date. On the Record Date, there were 63,601,164 shares of our Common Stock outstanding +(excluding treasury shares) held by approximately 110 registered holders of record and 20,388 beneficial owners. +3. What is the difference +between holding shares as a stockholder of record and as a beneficial owner? +If +your shares are registered directly in your name with the Company’s registrar and transfer agent, American Stock Transfer +& Trust Company, you are a “stockholder of record” with respect to those shares and, in such case, this Proxy +Statement and the accompanying proxy materials have been provided directly to you by the Company. If your shares are held in a +stock brokerage account or by a bank or nominee, your shares are held in “street name” and you are considered the +“beneficial owner” of those shares and, in such case, this Proxy Statement and the accompanying proxy materials have +been provided to you by your broker, bank or other stockholder of record. As the beneficial owner, you have the right to direct +your broker, bank or other stockholder of record how to vote your shares held in “street name.” +2 +4. What is considered a +quorum to conduct the Annual Meeting? +The +presence, in person or by proxy, of the holders of a majority of the shares eligible to vote is necessary to constitute a quorum +for the purpose of transacting business at the Annual Meeting. Under Delaware law (under which the Company is incorporated), abstentions +and broker non-votes (meaning proxies from brokers, banks or nominees indicating that such persons have not received instructions +on how to vote from the beneficial owner or other persons eligible to vote shares as to matters with respect to which the brokers, +banks or nominees do not have discretionary power to vote) are counted as present for purposes of determining the presence or +absence of a quorum for the transaction of business. If a quorum is not present, the Annual Meeting may be adjourned until a quorum +is obtained. +5. What is a “broker +non-vote”? +As +discussed in the response to question 3, if your shares are held in “street name” by a broker, bank or other nominee, +your broker, bank or other nominee is the record holder; however, the broker, bank or other nominee is required to vote the shares +in accordance with your instructions. If you do not give instructions to your broker, bank or other nominee, as the case may be, +the broker, bank or other nominee may, if permitted by the organizations of which it is a member, exercise discretionary voting +power to vote your shares. A “broker non-vote” occurs when a broker, bank or other nominee of record holding shares +for a beneficial owner has not received voting instructions from the beneficial owner and either chooses not to vote the shares +on a particular proposal as to which the holder has discretionary voting power or does not vote on a particular proposal because +that holder does not have discretionary voting power for that particular item. Broker non-votes are considered present in determining +whether a quorum is present. +If +you hold your shares in “street name,” we strongly encourage you to provide instructions regarding the voting of your +shares as your broker or nominee cannot vote your shares with respect to certain of the proposals being presented at the Annual +Meeting without voting instructions from you. +6. How many votes do I +have? What shares are included on the proxy card? +For +each share of Common Stock that you own on the Record Date you are entitled to one vote on each matter presented at the Annual +Meeting. +If +you are a record holder, you will receive an Availability Notice or proxy card for all of the shares of Common Stock you hold +in certificate form, in book-entry form and in any Company benefit plan. If you are a beneficial owner, you will receive information +containing voting instructions from the broker, bank or other nominee through which you own your shares of Common Stock. +7. How many votes are required +to approve each proposal and what is the effect of abstentions and broker non-votes? +Proposal +One (Election of Directors): Under Delaware law, directors are elected by the affirmative vote of a plurality of the shares +of Common Stock present in person or represented by proxy at the Annual Meeting and entitled to vote. This means that the director +nominees who receive the greatest number of affirmative votes cast are elected as directors, subject to our Director Election +(Majority Voting) Policy discussed in Proposal One below. +Proposal +Two (Ratification of Appointment of EisnerAmper LLP): The affirmative vote of a majority of the shares of Common Stock present +in person or represented by proxy at the Annual Meeting and entitled to vote is required to approve the ratification of the appointment +of EisnerAmper LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, +2015. +Proposal +Three (Non-Binding Advisory Vote on Executive Compensation): The affirmative vote of a majority of the shares of Common Stock +present in person or represented by proxy at the Annual Meeting and entitled to vote is required to approve, on a non-binding +advisory basis, the compensation of the Company’s Named Executive Officers as described in this Proxy Statement. +Other +Matters: If any other matters are presented at the Annual Meeting, they must receive the affirmative vote of a majority of +the shares of Common Stock present in person or represented by proxy at the Annual Meeting and entitled to vote in order to be +approved. +3 +Abstentions +will have no effect on the election of directors, but will be treated as present and entitled to vote on the remaining proposals +and, therefore, abstentions will have the effect of votes “AGAINST” such proposals. +Proposal +One (Election of Directors) will be decided by a plurality of the votes of the shares represented in person or by proxy. The approval +of each of Proposals Two (Ratification of EisnerAmper LLP) and Three (Advisory Vote on Executive Compensation) requires a favorable +vote of a majority of the shares present and entitled to vote on the applicable matter. As noted above, an abstention will have +no effect on the election of directors but will have the same effect as a vote “AGAINST” each other proposal. Broker +non-votes with respect to Proposals One, Two and Three will have no effect on the outcome of the vote with respect to that proposal. +8. How can I vote my shares? +Your +vote is important. Your shares can be voted at the Annual Meeting only if you are present in person or represented by proxy. Even +if you plan to attend the Annual Meeting, we urge you to authorize your proxy in advance. You may vote your shares by authorizing +a proxy over the Internet or by telephone. In addition, if you received a paper copy of the proxy materials by mail, you can also +submit a proxy by mail by following the instructions on the proxy card. Voting your shares by authorizing a proxy over the Internet, +by telephone or by written proxy card will ensure your representation at the Annual Meeting regardless of whether you attend in +person. +If +you are the record holder of your shares, please authorize your proxy electronically by going to the http://www.proxyvote.com +website or by calling the toll-free number listed below and on the proxy card. Please have your Proxy Statement or proxy card +in hand when going online or calling. If you authorize your proxy via the Internet or by phone you do not need to return your +proxy card. If you choose to authorize your proxy by mail, simply mark your proxy card and then date, sign and return it in the +postage-paid envelope provided. +VOTE +BY INTERNET +http://www.proxyvote.com +Use the Internet to transmit +your voting instructions and for electronic delivery of information. +VOTE +BY PHONE +1-800-690-6903 +Use any touch-tone telephone +to transmit your voting instructions. +VOTE +BY MAIL +Vote +Processing, c/o Broadridge +51 Mercedes Way +Edgewood, New York 11717 +If you receive paper +proxy materials, mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return +it to the address shown above. +If +you hold your shares beneficially in “street name” through a broker or nominee you may be able to authorize your proxy +by telephone or the Internet as well as by mail, but you will need to obtain and follow instructions from your broker or nominee +to vote these shares. +9. +May I revoke my proxy for the Annual Meeting once I have given it? +You may revoke +your proxy at any time before it is voted at the Annual Meeting by: +· properly +executing and delivering a later dated proxy (including a telephone or Internet proxy +authorization); +· voting +by ballot at the Annual Meeting; or +· sending +a written notice of revocation to the Corporate Secretary of the Company at Steven Madden, +Ltd., 52-16 Barnett Avenue, Long Island City, New York 11104. +10. How does the Board +of Directors recommend that I vote my shares? +The Board of +Directors of the Company recommends that you vote: +· “FOR” +the election of each of the eight director nominees; +4 +· “FOR” +the ratification of the appointment of EisnerAmper LLP as the Company’s independent +registered public accounting firm for the fiscal year ending December 31, 2015; and +· “FOR” +the approval, on a non-binding advisory basis, of the executive compensation of the Company’s +Named Executive Officers, as disclosed in this Proxy Statement. +ALL PROXIES +RECEIVED WILL BE VOTED IN ACCORDANCE WITH THE CHOICES SPECIFIED ON SUCH PROXIES. PROXIES WILL BE VOTED IN FAVOR OF A PROPOSAL +IF NO CONTRARY SPECIFICATION IS MADE. ALL VALID PROXIES OBTAINED WILL BE VOTED AT THE DISCRETION OF THE PERSONS NAMED IN THE PROXY +WITH RESPECT TO ANY OTHER BUSINESS THAT MAY PROPERLY COME BEFORE THE ANNUAL MEETING OR ANY ADJOURNMENTS OR POSTPONEMENTS THEREOF. +AS NOTED ABOVE, IF YOU HOLD YOUR SHARES BENEFICIALLY THROUGH A BROKER, BANK OR OTHER NOMINEE AND FAIL TO PROVIDE SPECIFIC VOTING +INSTRUCTIONS TO THAT BROKER, BANK OR OTHER NOMINEE, YOUR SHARES WILL NOT BE VOTED IN THE ELECTION OF DIRECTORS OR WITH RESPECT +TO THE ADVISORY VOTE ON EXECUTIVE COMPENSATION. +11. Who will bear the expenses +of this solicitation and how are proxies being solicited? +The +Company will pay the costs of soliciting proxies, including preparing, printing and mailing this Proxy Statement, any exhibits +hereto and the proxies solicited hereby. In addition to the use of the mails, proxies may be solicited on the Company’s +behalf by officers, directors and employees of the Company, without additional remuneration, by personal interviews, telephone +or electronic transmission. The Company will also request brokerage firms, nominees, custodians and fiduciaries to forward proxy +materials to the beneficial owners of shares of Common Stock held of record by them and will provide reimbursements for the cost +of forwarding the material in accordance with customary charges. The Company has entered into an agreement with D.F. King & +Co., Inc. to assist in the solicitation of proxies and provide related advice and informational support. The total expense of +this engagement, which will be borne by the Company, including customary disbursements, is not expected to exceed $20,000 in the +aggregate. +12. How will the voting +results be reported? +The +preliminary results of the voting on the proposals will be reported at the Annual Meeting. The final certified results will be +reported in a Current Report on Form 8-K that will be filed with the SEC within four business days following the Annual Meeting. +13. How do I submit a proposal +for action at the Company’s 2016 Annual Meeting of Stockholders? +In +accordance with rules promulgated by the SEC, any stockholder who wishes to submit a proposal for inclusion in the proxy materials +to be distributed by the Company in connection with the 2016 Annual Meeting of Stockholders of the Company (the “2016 Annual +Meeting”) must do so no later than December 10, 2015. In addition, in accordance with Article I, Section 7(f) of the Company’s +Amended and Restated By-Laws (the “By-Laws”), in order to be properly brought before the 2016 Annual Meeting, a matter +must be either (i) specified in the notice of such meeting given by or at the direction of the Board of Directors (or any duly +authorized committee thereof), (ii) otherwise properly brought before such meeting by or at the direction of the Board of Directors +(or any duly authorized committee thereof) or (iii) specified in a notice in proper written form given by a stockholder of record +on the date of the giving of the notice and on the record date for such meeting, which notice conforms to the requirements of +Article I, Section 7(f) of the By-Laws and is delivered to, or mailed and received at, the Company’s principal executive +offices not less than 120 days nor more than 150 days prior to the first anniversary of the date of the Company’s 2015 Annual +Meeting. Accordingly, any written notice given by or on behalf of a stockholder pursuant to the foregoing clause (iii) in connection +with the 2016 Annual Meeting must be received no later than January 23, 2016 and no earlier than December 24, 2015. In addition, +for business to be properly brought before the 2016 Annual Meeting by a stockholder pursuant to the foregoing clause (iii), such +stockholder shall have complied with any other applicable requirements, including, but not limited to, the requirements of Rule +14a-8 promulgated by the SEC. +5 +PROPOSAL +ONE: +ELECTION OF DIRECTORS +The +Company’s By-Laws provide that the Board of Directors of the Company shall be comprised of a minimum of one director and +that, subject to this limitation, the number of directors may be fixed from time to time by action of the directors. The Company’s +Board of Directors has fixed the number of directors to comprise the Board of Directors at eight directors and the Board of Directors +presently is comprised of eight directors. Directors serve a one-year term and the term of each of the directors will expire at +the Annual Meeting. +Stockholder Nominations +for Board Membership +The +Nominating/Corporate Governance Committee of the Board of Directors recommends to the Board director candidates for nomination +and election at each annual meeting of stockholders or for appointment to fill vacancies on the Board. The Nominating/Corporate +Governance Committee will review and evaluate the qualifications of proposed director candidates recommended to it from various +sources, including candidates proposed by stockholders of the Company in accordance with the procedures established for that purpose. +In accordance with Article II, Section 5 of the By-Laws, director nominations for the 2016 Annual Meeting can only be made by +a stockholder of the Company who (i) is a stockholder of record on the date of the giving of the notice of such director nominations +and on the record date for the determination of stockholders entitled to vote at the 2016 Annual Meeting and (ii) complies with +the notice requirements and procedures set forth in Article II, Section 5 of the By-Laws. A stockholder’s notice to the +Corporate Secretary with respect to any such nominations must be timely and in proper written form pursuant to Article II, Section +5 of the Company’s By-Laws, including containing certain information concerning the nominating or proposing stockholder +and certain information concerning the nominee, and the notice must be delivered to, or mailed and received at, the Company’s +principal executive offices not less than 120 days nor more than 150 days prior to the first anniversary of the date of the Company’s +2015 Annual Meeting. Accordingly, any written notice given by or on behalf of a stockholder pursuant to Article II, Section 5 +of the Company’s By-Laws in connection with the 2016 Annual Meeting must be received no later than January 23, 2016 and +no earlier than December 24, 2015. +Nominees for Election +to the Board of Directors +Upon +recommendation of the Nominating/Corporate Governance Committee of the Board of Directors, the Board of Directors has nominated +and is recommending to the stockholders the election of each of the eight nominees named below to serve as a director of the Company +until the next annual meeting of the Company’s stockholders and until his or her successor is duly elected and qualified +or until his or her earlier death, resignation or removal from office. All of the nominees were elected directors at last year’s +Annual Meeting of Stockholders and each has agreed to be named in this Proxy Statement and to serve if elected. +The +names and biographical summaries of the eight persons who have been recommended by the Nominating/ Corporate Governance Committee +of the Board of Directors and nominated by the Board of Directors to stand for election at the Annual Meeting are provided below +for your information. +6 +Our +Board of Directors is responsible for overseeing our business in a manner consistent with the Board’s fiduciary duty to +our stockholders. This significant responsibility requires that our directors consist of individuals who are well-qualified for +service on our Board and its committees and demonstrate a commitment to the success of the Company and to service in the best +interests of our stockholders. The Board and the Nominating/Corporate Governance Committee select nominees with a view to establishing +a Board of Directors that is comprised of individuals who have extensive business leadership experience, are independent, bring +diverse perspectives to the Board, possess high ethical standards and sound business judgment and acumen and a willingness to +devote the time necessary for the Board to effectively fulfill its responsibilities. We believe that all of the director nominees +possess these qualifications and provide the Board with a full complement of knowledge, business skills and expertise for the +effective management of our Company. In addition to these general qualifications, provided below for each nominee for director +is a discussion of the experience, qualifications, attributes and skills that led to the Board’s conclusion that the nominee +should serve as a director. +Name +Principal +Occupation +Age +Year +Became +a +Director +Edward +R. Rosenfeld +Chairman +of the Board and Chief Executive Officer, Steven Madden, Ltd. +39 +2008 +Rose +Peabody Lynch +Owner +of Marketing Strategies, LLC, New York based consulting firm of which she is founder and President, which focuses on strategic +marketing and operating issues for small to medium-sized companies +65 +2014 +John +L. Madden +Owner +of JLM Consultants, Inc., which provides consulting services to the Company with respect to international sales +68 +1993 +Peter +Migliorini +Sales +Manager, Greschlers, Inc., a building supplies company +66 +1996 +Richard +P. Randall +Retired +Executive Vice President and Chief Financial Officer, Direct Holdings Worldwide, LLC, the parent company of Lillian Vernon +Corp., a catalog and online retailer of gifts and household goods, and Time-Life, a music and video marketing company +77 +2006 +Ravi +Sachdev +Managing +Director, J.P. Morgan +38 +2008 +Thomas +H. Schwartz +Owner, +Sumner and Forge Investors LLC, a real estate investment and property management company +67 +2004 +Robert +Smith +Chief +Merchandising Officer, Haddad Brands, a global children’s apparel and accessories licensing partner for iconic American +brands such as Levi’s, Hurley, Nike, Jordan and Converse +49 +2014 +Additional Information +About the Director Nominees +Other +Public Company Directorships +Two +of our directors also currently serve as directors of other public companies: +· Mr. +Rosenfeld is a director and member of the Audit Committee of PVH Corp., one of the world’s +largest apparel companies. +· Mr. +Randall serves as a director and member of the Audit Committee of P&F Industries +Inc., a manufacturer and importer of tools sold principally to the industrial, retail +and automotive markets. +Other +Employment Information +Each +of our directors has been engaged in the principal occupation indicated in the foregoing table for more than the past five years, +except for Mr. Smith who has held his position with Haddad Brands since 2013. Prior thereto, from 2010 to 2012, Mr. Smith served +as Executive Vice President, Merchandising for Limited Brands, at Victoria’s Secret Direct, the largest direct-to-consumer +women’s apparel retailer in the United States. From 1998 through 2010, Mr. Smith held various senior merchandising positions +at Macy’s Inc. beginning with Vice President, Merchandise Manager, Macy’s West and culminating with Executive Vice +President, Merchandising for Juniors, Kids, Intimate Apparel, Dresses, Suits, Coats and Swimwear. +7 +Specific +Qualifications, Attributes, Skills and Experience of Director Nominees +Edward +R. Rosenfeld , who joined our executive management team in May 2005, has more than 17 years of experience +focused on the retail, apparel and footwear industries and possesses particular knowledge of and experience in the industry that +strengthens the Board’s collective qualifications, skills and experience. His background in finance and his analytical skills +gained through his years as a Vice President with Peter J. Solomon Company, an investment banking boutique, where he specialized +in mergers and acquisitions in the retail, apparel and footwear industries, provide the Board with insight and guidance with respect +to, among other things, strategic business development matters. Mr. Rosenfeld has strong leadership skills and an in-depth understanding +of the Company and its goals from his positions as the Chairman of the Board and Chief Executive Officer. Mr. Rosenfeld serves +as a director of PVH Corp., one of the world’s largest apparel companies, and is also a director of Summer Search New York +City, a non-profit corporation, whose mission is to help low-income teenagers develop skills and character traits to become college-educated +leaders. +Rose +Peabody Lynch will soon complete her first year of service as a director of the Company and as a member of the Audit Committee +and the Compensation Committee. She possesses over 30 years of business experience, including tenures as the President and in +other senior executive officer positions of major companies in the beauty and fashion industries, and has extensive executive +level financial and operating experience. Her experience serving as a director and as a senior executive for a range of companies, +including Victoria’s Secret, Trowbridge Gallery (a supplier of fine art to the interior design trade) and Danskin, Inc., +a leading manufacturer of women’s dance and active wear, enhances the Board’s leadership and oversight capabilities. +Ms. Lynch has served on a number of boards, including The Harmony Group-LeRoi Princeton (a manufacturer of children’s apparel), +Salant Corporation (Perry Ellis Menswear) and Frederick’s of Hollywood (a retailer of women’s apparel and lingerie). +She was a member of the Audit and Nominating and Governance Committees during her tenure at Salant and chaired the Compensation +Committee during her tenure on the board of Frederick’s of Hollywood. In addition, Ms. Lynch has held leadership positions +with a variety of charities and currently serves as a director of S.O.S. Children’s Villages, the U.S. arm of an international +non-profit organization dedicated to providing assistance to children. She currently serves on the Board of Directors of the Princeton +University Varsity Club and is President of her Princeton University class. Ms. Lynch is also a member of the Women and Foreign +Policy Advisory Council at the Council on Foreign Relations. +John +L. Madden has served as a director of the Company for more than 20 years. Mr. Madden owned a branch office of Tradeway +Securities Group, Inc., a brokerage firm, in Florida from April 1998 through September 2003 and, from May 1996 through December +1996, his consulting company, JLM Consultants, Inc., acted as a branch office of Merit Capital, Inc., a brokerage firm. Mr. Madden +has also served as Vice President of Investments for GKN Securities, Inc., a brokerage firm, and was employed by Biltmore Securities, +Inc., a brokerage firm, as Managing Director and registered sales representative. As a result of Mr. Madden’s numerous years +of experience in finance and investing, he possesses a proficiency in financial analysis and investing that strengthens the Board’s +collective qualifications, skills and experience and provides the Board with greater insight and guidance. His years in business +consulting and his strong financial background have provided him with expertise in addressing operational and management issues +and providing overall direction for complex corporations like ours. Mr. Madden brings a wealth of knowledge and a depth of experience +that comes from his lengthy tenure as a director of the Company. His knowledge of Company history and his understanding of the +Company in the context of the Company’s long-term strategic plan provides the Board with continuity of direction and focus. +Mr. Madden is the brother of Steven Madden, the Company’s founder and Creative and Design Chief. Please see the section +of this Proxy Statement captioned “Certain Relationships and Related Party Transactions.” +Peter +Migliorini has served as a director of the Company since October 1996 and has served on the Company’s Audit +Committee since October 1996, the Nominating/Corporate Governance Committee, as its Chair, since July 2004 and the Compensation +Committee, as its Chair, since July 2004. Mr. Migliorini is also Presiding Director over all executive sessions of the independent +directors. Mr. Migliorini possesses extensive executive level financial, sales and operations experience. Prior to serving as +sales manager for Greschlers, Inc., from 1987 to 1994, Mr. Migliorini served as Director of Operations for Mackroyce Group, a +construction company. Earlier, Mr. Migliorini held various positions of increasing responsibility from Assistant Buyer to Chief +Planner/Coordinator for several shoe companies, including Meldisco Shoes, Perry Shoes and Fasco Shoes. His numerous years of business +experience at various levels and in various industries provide the Board with a measure of practical orientation regarding the +Company’s operations and growth endeavors. Mr. Migliorini’s early experience in the shoe industry also provides relevant +knowledge and expertise in the Company’s specific industry. +8 +Richard +P. Randall has served as a director of the Company since April 2006 and has served on the Company’s Audit +Committee, as its Chair, since 2006, and on the Nominating/Corporate Governance Committee since September 2008. Mr. Randall has +decades of business experience, including tenures as Chief Financial Officer and Chief Operating Officer of both publicly traded +and privately held companies in the retail industry, including Direct Holdings Worldwide, LLC, the parent company of Lillian Vernon +Corp. and Time-Life, a music and video marketing company, and, prior thereto, Coach, Inc., a luxury leather goods company. Mr. +Randall possesses extensive knowledge of accounting and finance, the retail industry and the issues impacting a publicly traded +company. Mr. Randall has extensive executive level experience establishing his capabilities in management of complex organizations +and is a certified public accountant. His expertise in finance qualifies him to serve as the Audit Committee “audit committee +financial expert” and his service on the boards and board committees of other companies has allowed him to gain broad-based +experience and sensitivity regarding best practices, which he shares with the Board. Mr. Randall also provides a perspective on +proper governance for public companies. He currently serves as a member of the board of directors and Audit Committee of P&F +Industries, Inc., a manufacturer and importer of tools sold principally to the industrial, retail and automotive markets, as well +as residential hardware and, until December 31, 2014, served as a member of the board of directors and chair of the Audit and +Risk Committee of Aceto Corporation, a generic pharmaceutical, nutraceutical and chemical distribution company. Mr. Randall is +a former director and member of the Executive, Finance, Audit and Research Committees of The Burke Rehabilitation Hospital (“Burke”). +He currently serves as a Member Emeritus of Burke’s Executive Committee and retains a board seat on The Burke Foundation’s +board. Mr. Randall served as a director and chair of the Audit Committee of Universal Travel Group, a travel services provider +in the People’s Republic of China, and of Home Systems Group, a manufacturer and distributor of household appliances in +the People’s Republic of China, from 2007 until 2008 when he resigned from these boards. +Ravi +Sachdev has been a director of the Company since September 2008 and has served on the Company’s Audit Committee +since September 2008. As a Managing Director of J.P. Morgan, Mr. Sachdev focuses on the healthcare services subsector. Earlier, +Mr. Sachdev was a Managing Director at Deutsche Bank Securities, Inc. from January 2009 and prior to that held the position of +Director at Deutsche Bank from January 2007 until January 2009. Prior to joining Deutsche Bank in 2006 as a Vice President, Mr. +Sachdev served as a Vice President at Peter J. Solomon Company, an investment banking boutique, specializing in mergers and acquisitions +in the healthcare sector, from 1998 to 2006. Mr. Sachdev possesses knowledge of finance and the financial analytics used +to measure business performance. His 17 years of professional experience in investment banking brings to the Board a thorough +understanding of the financial issues affecting public companies and greater insights in business valuation together with a practical +orientation with respect to acquisitions and integrations. +Thomas +H. Schwartz has served as a director of the Company since May 2004 and has served on the Company’s Compensation +Committee since July 2004. With more than twenty years of experience as a Managing Director of Helmsley-Spear, Inc. and seven +years as the owner of his own real estate investment firm, Mr. Schwartz brings to the Board extensive executive level experience +in handling operations issues and practical expertise in management. +Robert +Smith will soon complete his first year of serving as a director of the Company and as a member of the Compensation +Committee and the Nominating/Corporate Governance Committee. Prior to his current and former positions with Haddad Brands and +Victoria’s Secret Direct, respectively, Mr. Smith held various senior merchandising positions at Macy’s Inc. between +1998 and 2010, beginning with Vice President, Merchandise Manager, Macy’s West and culminating with Executive Vice President, +Merchandising for Juniors, Kids, Intimate Apparel, Dresses, Suits, Coats and Swimwear. Earlier, Mr. Smith was a Merchandiser for +XOXO Apparel Company and held various positions with Burdine’s Department Stores. Mr. Smith possesses nearly 30 years of +business experience in the fashion industry and has extensive executive level expertise in merchandising. His experience in this +area will further enhance the Board’s depth of understanding of the industry. +9 +Required +Vote +Proxies +will be voted for the election of the eight nominees as directors of the Company unless otherwise specified in the proxy. A plurality +of the votes cast by the holders of shares of Common Stock present in person or represented by proxy and entitled to vote at the +Annual Meeting will be necessary to elect the nominees as directors. This means that the director nominees who receive the greatest +number of affirmative votes cast are elected as directors subject to our Director Election (Majority Voting) Policy, which is +described below. If, for any reason, any nominee is unable or unwilling to serve, the proxies will be voted for a substitute nominee +who will be designated by the Board of Directors at the Annual Meeting. Stockholders may abstain from voting by marking the appropriate +boxes on the accompanying proxy. Abstentions will be counted separately and used for purposes of calculating whether a quorum +is present at the Annual Meeting, but will have no effect on the outcome of the vote. +Director Election (Majority +Voting) Policy +It +is the policy of the Company that any nominee for director who receives a greater number of “WITHHOLD” votes than +“FOR” votes for his or her election must promptly submit a letter offering his or her resignation to the Nominating/Corporate +Governance Committee following the certification of the stockholder vote. In such event, the Nominating/Corporate Governance Committee +would then consider the offer of resignation and make a recommendation to the Board of Directors as to whether or not the resignation +should be accepted. This policy does not apply in contested elections. For more information about this policy, see “Corporate +Governance – Director Election (Majority Voting) Policy” below. +Recommendation of the Board +of Directors +The +Nominating/Corporate Governance Committee of the Board and the entire Board of Directors unanimously recommend a vote “FOR” +the election of Ms. Rose Peabody Lynch and Messrs. Edward R. Rosenfeld, John L. Madden, Peter Migliorini, Richard P. Randall, +Ravi Sachdev, Thomas H. Schwartz and Robert Smith. +10 +CORPORATE +GOVERNANCE +The Board of Directors +Our +business is managed under the direction and oversight of the Board of Directors who are elected by the Company’s stockholders. +Directors meet their responsibilities by participating in meetings of the Board of Directors and the various committees of the +Board on which they sit, as well as through communicating with our Chairman and Chief Executive Officer, other officers and employees +of the Company and by consulting with our independent registered public accounting firm and other third parties. +As +noted below, our Board is currently comprised of six independent and two non-independent directors. +Director Independence +The +Board of Directors has determined that the following director nominees are “independent” for purposes of the criteria +of the SEC and The Nasdaq Global Select Market listing standards: Ms. Lynch and Messrs. Migliorini, Randall, Sachdev, Schwartz +and Smith. If the eight nominees set forth above are elected, the Board will be comprised of a majority of independent directors. +The Board of Directors has held regularly scheduled executive sessions for the independent directors, with Peter Migliorini serving +as Presiding Director of such executive sessions. +Director Attendance at +Meetings +Attendance +at Annual Meetings of Stockholders +The +Company has no specific policy regarding director attendance at its annual meetings of stockholders. The Company encourages all +of its directors to attend annual meetings of the Company’s stockholders and two directors attended the Company’s +2014 annual meeting of stockholders. +Attendance +at Meetings of the Board of Directors +The +Board of Directors held four regularly scheduled meetings, one of which was not attended by Mr. Madden and one of which was not +attended by Ms. Lynch and Mr. Smith since they were not directors at the time of the meeting. The Board held two special meetings +during the 2014 Fiscal Year, one of which was not attended by Mr. Sachdev. The Board acted by unanimous written consent on four +occasions during the 2014 Fiscal Year. In 2014, each director attended at least 75% of the aggregate number of Board meetings, +and each director attended at least 75% of the aggregate number of meetings held by all committees on which he or she then served. +Director Election (Majority +Voting) Policy +The +Company has adopted a Director Election (Majority Voting) Policy. Pursuant to this policy, in an uncontested election of directors +(that is, an election where the number of nominees is equal to the number of seats open) any nominee for director who receives +a greater number of “WITHHOLD” votes than “FOR” votes for his or her election must promptly submit an +offer of resignation to the Nominating/Corporate Governance Committee following the certification of the stockholder vote for +consideration in accordance with the following procedures. +In +such event, upon receipt of the resignation, the Nominating/Corporate Governance Committee would promptly consider the appropriateness +of the director’s continued service on the Board of Directors and recommend to the Qualified Independent Directors (as defined +below) the action to be taken with respect to the resignation, which could include (1) accepting the resignation; (2) rejecting +the resignation; (3) retaining the director but addressing what the Qualified Independent Directors believe to be the underlying +cause of the “WITHHOLD” votes; or (4) determining that the director will not be renominated by the Board of Directors +in future elections. The Nominating/Corporate Governance Committee would consider factors such as (a) the reasons expressed +by the stockholders for withholding votes from such director; (b) any possibilities for curing the underlying cause of the +“WITHHOLD” votes; (c) the tenure and qualifications of the director and his or her past and expected future contributions +to the Company; (d) the overall composition of the Board of Directors, including, without limitation, whether accepting the +resignation would cause the Company to fail to meet any applicable SEC or Nasdaq requirement; (e) the availability of other qualified +candidates; and (f) the Company’s Board of Director Candidate Guidelines. +11 +The +Qualified Independent Directors would then act on the Nominating/Corporate Governance Committee’s recommendation no later +than 90 days following the date of the stockholders’ meeting at which the director election occurred. In considering the +Nominating/Corporate Governance Committee’s recommendation, the Qualified Independent Directors would review the factors +considered by the Nominating/Corporate Governance Committee and such additional information and factors that they believe to be +relevant. Following the Qualified Independent Directors’ decision, the Company would promptly disclose the decision in a +Current Report on Form 8-K. The Form 8-K would include a full explanation of the process by which the decision of the Qualified +Independent Directors was reached and, if applicable, the reasons why the offer of resignation was rejected. +In +the event that an offer of resignation were to be accepted, the Nominating/Corporate Governance Committee would recommend to the +Board of Directors whether to fill the vacancy or reduce the size of the Board of Directors accordingly. Any director required +to submit his or her resignation pursuant to this policy would not participate in the Nominating/Corporate Governance Committee’s +recommendation or the Qualified Independent Directors’ consideration of the resignation but, prior to voting on the director’s +resignation offer, the Qualified Independent Directors would provide to the director an opportunity to submit any information +or statement that he believes relevant to the Qualified Independent Directors’ consideration of the resignation. +For +purposes of this policy, “Qualified Independent Directors” means all directors who (1) are “independent” +for purposes of The Nasdaq Global Select Market listing standards and (2) are not required to offer their resignation in accordance +with this policy. If there are fewer than three independent directors then serving on the Board of Directors who are not required +to submit their resignations in accordance with this policy, then the Qualified Independent Directors shall consist of all of +the independent directors and each independent director who is required to offer his or her resignation in accordance with this +policy shall recuse himself or herself from the deliberations and voting only with respect to his or her individual offer to resign. +Committees of the Board +Among +other committees, the Board of Directors has a standing Audit Committee, Compensation Committee and Nominating/Corporate Governance +Committee. Each committee has a written charter. The table below provides current membership for each Board committee. +Committees +of the Board of Directors +Director +Audit +Compensation +Nominating/ +Corporate Governance +Edward +R. Rosenfeld +Rose +Peabody Lynch +Member +Member +John +L. Madden +Peter +Migliorini +Member +Chair +Chair +Richard +P. Randall +Chair +Member +Ravi +Sachdev +Member +Thomas +H. Schwartz +Member +Robert +Smith +Member +Member +Number +of meetings in +2014 Fiscal Year +4 +1* +4** +_______________________ +* +The Compensation Committee also acted by unanimous written consent on three occasions +during the 2014 Fiscal Year. +**The +Nominating/Corporate Governance Committee also acted by unanimous written consent on +two occasions during the 2014 Fiscal Year. +12 +Audit +Committee +The +Audit Committee is comprised of directors who are “independent” for purposes of The Nasdaq Global Select Market listing +standards and who meet the independence requirements contained in Securities Exchange Act of 1934, as amended (the “Exchange +Act”) Rule 10A-3(b)(1). The Board has determined that each of Messrs. Randall and Sachdev meets the SEC criteria of an “audit +committee financial expert” as defined in Item 407 of Regulation S-K under the Exchange Act. The Audit Committee is primarily +responsible for reviewing the services performed by the Company’s independent registered public accountants, evaluating +the Company’s accounting policies and its system of internal controls, and reviewing significant financial transactions. +The +Audit Committee is responsible for reviewing and striving to ensure the integrity of the Company’s financial statements +and oversight of our compliance with legal and regulatory requirements and our internal audit function. Among other matters, the +Audit Committee, with management and independent and internal auditors, reviews the adequacy of the Company’s internal accounting +controls that could significantly affect the Company’s financial statements. The Audit Committee is also directly and solely +responsible for the appointment, retention, compensation, oversight and termination of the Company’s independent registered +public accountants. In addition, the Audit Committee functions as the Company’s Qualified Legal Compliance Committee (the +“QLCC”). The purpose of the QLCC is to receive, retain and investigate reports made directly, or otherwise made known, +of evidence of material violations of any United States federal or state law, including any breach of fiduciary duty by the Company, +its officers, directors, employees or agents, and if the QLCC believes appropriate, to recommend courses of action to the Company. +Management +has primary responsibility for the Company’s financial statements and the overall reporting process, including the Company’s +system of internal controls. The Company’s independent registered public accountants audit the annual financial statements +prepared by management, express an opinion as to whether those financial statements present fairly the financial position, results +of operations and cash flows of the Company in conformity with accounting principles generally accepted in the United States and +discuss with the Audit Committee any issues they believe should be raised with the Audit Committee. +The +Audit Committee is also responsible for the oversight of the Company’s risk management process, which is discussed in the +“Risk Oversight” section below. +In +performing its functions, the Audit Committee meets with management on at least a quarterly basis to review and discuss the annual +audited financial statements, quarterly financial statements and related reports and to consider the adequacy of the Company’s +internal controls and the objectivity of its financial reporting. The Audit Committee discusses these matters with the Company’s +independent registered public accountants and with appropriate Company financial personnel. Meetings are held with the independent +registered public accountants, who have unrestricted access to the Audit Committee. In addition, the Audit Committee reviews the +Company’s financing plans and reports and makes recommendations to the full Board of Directors for approval and to authorize +action. The Board has adopted a written charter setting out the functions the Audit Committee is to perform. A copy of the Audit +Committee Charter is available on the Company’s website at www.stevemadden.com . +Nominating/Corporate +Governance Committee +The +Nominating/Corporate Governance Committee is comprised of directors who are “independent” for purposes of The Nasdaq +Global Select Market listing standards. +The +Nominating/Corporate Governance Committee provides oversight with respect to a wide range of issues relating to the composition +and operation of the Board, including consideration of and recommendations regarding the size and composition of the Board of +Directors and identification of potential candidates to serve as directors. The Nominating/Corporate Governance Committee identifies +candidates to the Board of Directors by introductions from management, members of the Board of Directors, employees of the Company +or other sources, including stockholders that satisfy the Company’s policy regarding stockholder recommended candidates. +The Nominating/Corporate Governance Committee does not evaluate director candidates recommended by stockholders differently than +director candidates recommended by other sources. +13 +Stockholders +wishing to submit recommendations for director nominations for the 2016 Annual Meeting should write to the Corporate Secretary, +Steven Madden, Ltd., 52-16 Barnett Avenue, Long Island City, New York 11104. Any such stockholder must (i) comply with the director +nomination provisions of the Company’s By-Laws, (ii) meet and evidence the minimum eligibility requirements specified in +Exchange Act Rule 14a-8, and (iii) submit, within the same timeframe for submitting a stockholder proposal required by Rule 14a-8: +(1) evidence in accordance with Rule 14a-8 of compliance with the stockholder eligibility requirements, (2) the written consent +of the candidate(s) for nomination as a director, (3) a resume or other written statement of the qualifications of the candidate(s) +for nomination as a director, and (4) all information regarding the candidate(s) and the submitting stockholder that would be +required to be disclosed in a proxy statement filed with the SEC if the candidate(s) were nominated for election to the Board +of Directors. +In +considering candidates for the Board of Directors, the Nominating/Corporate Governance Committee considers the Company’s +Board of Director Candidate Guidelines and Director Election (Majority Voting) Policy, available on the Company’s website +at www.stevemadden.com , the Company’s policy regarding stockholder recommended director candidates, as set forth +above, and all other factors that are deemed appropriate including, but not limited to, the individual’s character, education, +experience, knowledge and skills. While the Nominating/Corporate Governance Committee’s Board of Directors Candidate Guidelines +does not expressly identify diversity as a factor for consideration regarding the evaluation of director candidates, diversity +is among the many factors the Nominating/Corporate Governance Committee considers in the candidate evaluation process. To assess +the effectiveness of the mandate set forth in the Nominating/Corporate Governance Committee’s charter, the Nominating/Corporate +Governance Committee reviews annually with the Board the composition of the Board as a whole and recommends, if necessary, measures +to be taken so that the Board reflects the appropriate balance of knowledge, experience, skills, expertise and diversity required +for the Board as a whole. +In +addition, the Nominating/Corporate Governance Committee develops and recommends corporate governance principles for the Company; +makes recommendations to the Board of Directors in support of such principles; takes a leadership role in the shaping of the corporate +governance of the Company; and oversees the evaluation of the Board of Directors and management. The Nominating/Corporate Governance +Committee operates under a formal charter that governs the Committee’s composition, powers and responsibilities. A copy +of the Nominating/Corporate Governance Committee Charter is available on the Company’s website at www.stevemadden.com . +Compensation +Committee +The +Compensation Committee is comprised of directors who are “independent” for purposes of The Nasdaq Global Select Market +listing standards and applicable tax and securities rules. +The +Compensation Committee is responsible for establishing and overseeing the Company’s compensation and incentive plans and +programs; determining and approving compensation for the Company’s executive officers, including salaries, bonuses, perquisites +and equity awards; reviewing and approving compensation and awards for the Company’s executive officers under the Company’s +compensation and incentive plans and programs; administering the Company’s equity compensation plans; reviewing and approving +a compensation program for independent members of the Board; and assisting the Board in discharging the Board’s responsibilities +relating to management organization, performance, compensation and succession. The Compensation Committee operates under a formal +charter adopted by the Board of Directors that governs its composition, powers and responsibilities. A copy of the Compensation +Committee Charter is available on the Company’s website at www.stevemadden.com . +14 +Board Leadership Structure, +Risk Oversight, Executive Sessions of Non-Employee Directors, and Communications Between Stockholders and the Board +Board +Leadership Structure +As +noted above, our Board is currently comprised of six independent and two non-independent directors. +Mr. +Rosenfeld has served as Chairman of the Board and Chief Executive Officer since August 2008, and has been a member of the Board +since February 2008. The Board has designated one of the independent directors as Presiding Director to preside over executive +sessions. We believe that the number of independent, experienced directors that comprise our Board, along with the independent +oversight of our Presiding Director, benefits the Company and its stockholders. +We +recognize that different board leadership structures may be appropriate for companies in different situations and believe that +no one structure is suitable for all companies. We believe our current Board leadership structure is optimal for the Company because +it demonstrates to our employees, suppliers, customers, and other stakeholders that the Company is under strong leadership, with +a single person setting the tone and having primary responsibility for managing our operations and leading the Board in setting +long-term strategy. Having a single leader for both the Company and the Board eliminates confusion and duplication of efforts, +and provides clear leadership for the Company. We believe the Company, like many U.S. companies, has been well-served by this +leadership structure. +Because +the positions of Chairman of the Board and Chief Executive Officer are held by the same person, the Board believes it is appropriate +for the independent directors to elect one independent director to serve as a Presiding Director. In addition to presiding at +executive sessions of the independent directors, the Presiding Director has various responsibilities including coordinating with +the Chairman of the Board and Chief Executive Officer in establishing agenda and discussion items for Board meetings; retaining +independent advisors on behalf of the Board as the Board may determine to be necessary or appropriate and performing such other +functions as the independent directors may designate from time to time. Mr. Migliorini is currently serving as the Presiding Director. +Our +Board conducts an annual evaluation in order to determine whether it and its committees are functioning effectively. As part of +this annual self-evaluation, the Board evaluates whether the current leadership structure continues to be optimal for the Company +and its stockholders. +Risk +Oversight +Our +Board is responsible for overseeing the Company’s risk management process. The Board focuses on the Company’s general +risk management strategy, the most significant risks facing the Company, and ensures that appropriate risk mitigation strategies +are implemented by management. The Board is also apprised of particular risk management matters in connection with its general +oversight and approval of corporate matters. +The +Board has delegated to the Audit Committee oversight of the Company’s risk management process. Among its duties, the Audit +Committee reviews with management (a) the Company’s policies with respect to risk assessment and management of risks that +may be material to the Company, (b) the Company’s system of disclosure controls and system of internal controls over financial +reporting, and (c) the Company’s compliance with legal and regulatory requirements. The Audit Committee is also responsible +for reviewing major legislative and regulatory developments that could materially impact the Company’s contingent liabilities +and risks. Our other Board committees also consider and address risks as they perform their respective committee responsibilities. +All committees report to the full Board as appropriate, including when a matter rises to the level of a material or enterprise +level risk. +The +Company’s management is responsible for day-to-day risk management. Our risk management and internal audit areas serve as +the primary monitoring and testing function for company-wide policies and procedures, and manage the day-to-day oversight of the +risk management strategy for the ongoing business of the Company. This oversight includes identifying, evaluating, and addressing +potential risks that may exist at the enterprise, strategic, financial, operational, and compliance and reporting levels. +15 +We +believe the division of risk management responsibilities described above is an effective approach for addressing the risks facing +the Company and that our Board leadership structure supports this approach. +Executive +Sessions of Independent Directors +The +Board holds executive sessions of its independent directors generally at each regularly scheduled meeting. The Presiding Director +serves as the chairperson for these executive sessions. +Communications +between Stockholders and the Board +The +Company has adopted a procedure by which stockholders may send communications to one or more members of the Board of Directors +by writing to such director(s) or to the entire Board of Directors in care of the Corporate Secretary, Steven Madden, Ltd., 52-16 +Barnett Avenue, Long Island City, New York 11104. The Board has instructed the Corporate Secretary to review all communications +so received and to exercise his discretion not to forward to the Board correspondence that is inappropriate, such as business +solicitations, frivolous communications and advertising, routine business matters (i.e. business inquiries, complaints, or suggestions) +and personal grievances. However, any director may at any time request the Corporate Secretary to forward to such director any +and all communications received by the Corporate Secretary but not forwarded to the directors. +Codes of Business Conduct +and Ethics +The +Company has adopted a Code of Ethics for the Chief Executive Officer and Senior Financial Officers, which is applicable to our +Chief Executive Officer, Chief Financial Officer, controller, principal accounting officer, head of internal audit and other employees +of the Company who are designated from time to time as “senior financial officers” of the Company. In addition, the +individuals who serve on our Board of Directors are subject to a Code of Business Conduct and Ethics for the Board of Directors +and all of the Company’s employees are held accountable for adherence to the Company’s Code of Business Conduct and +Ethics. Each of the Code of Ethics for the Chief Executive Officer and Senior Financial Officers, the Code of Business Conduct +and Ethics for the Board of Directors and the Code of Business Conduct and Ethics (collectively, the “Conduct Code”) +is included as an exhibit to our Annual Report on Form 10-K and are available on the Company’s website at www.stevemadden.com +and, in addition, may be obtained by any stockholder without charge upon request by writing to the Corporate Secretary, Steven +Madden, Ltd., 52-16 Barnett Avenue, Long Island City, New York 11104. The Conduct Code is intended to establish standards necessary +to deter wrongdoing and to promote compliance with applicable governmental laws, rules and regulations and honest and ethical +conduct. The Conduct Code covers all areas of professional conduct, including conflicts of interest, fair dealing, financial reporting +and disclosure, protection of Company assets and confidentiality. Employees have an obligation to promptly report any known or +suspected violation of the Conduct Code without fear of retaliation. Waiver of any provision of the Conduct Code for executive +officers and directors may only be granted by the Board of Directors or one of its committees and any such waiver or modification +of the Conduct Code relating to such individuals will be disclosed by the Company. +Corporate Governance +Guidelines +The +Board of Directors has adopted Corporate Governance Guidelines as a set of guiding principles by which the Company is governed. +Various matters of corporate governance are addressed in the Corporate Governance Guidelines, such as board size and composition, +director qualifications and responsibilities, director compensation, limitations on service on other boards, board committees, +director orientation and education, director access to management, management development and succession planning and annual performance +evaluations for the Board. The Corporate Governance Guidelines also include a clawback of executive incentive compensation paid +to senior executive officers in the event of an accounting restatement by the Company due to intentional misconduct of an executive +officer. +16 +The +Nominating/Corporate Governance Committee reviews the Corporate Governance Guidelines annually to determine whether to recommend +changes to the Corporate Governance Guidelines to reflect new laws, rules and regulations and developing governance practices. +A copy of the Corporate Governance Guidelines is available on the Company’s website at www.stevemadden.com and may +also be obtained by any stockholder without charge upon request by writing to the Corporate Secretary, Steven Madden, Ltd., 52-16 +Barnett Avenue, Long Island City, New York 11104. +Stock Ownership Guidelines +The +Board of Directors has recently adopted Stock Ownership Guidelines, which require a level of ownership of shares of our Common +Stock by our directors and executive officers in order to align their interests with those of our stockholders. The Stock Ownership +Guidelines require our Chief Executive Officer to own shares of our Common Stock equal in value to five times his annual base +salary. Other executive officers of the Company are required to own shares of our Common Stock equal in value to two times their +annual base salary. The Stock Ownership Guidelines further require that non-employee directors of the Company must own shares +of our Common Stock equal in value to five times the cash portion of the directors’ annual retainer or the equivalent if +a retainer is not received in certain circumstances. Individuals subject to the Stock Ownership Guidelines must attain the required +level of share ownership by the fifth anniversary of the later of the Stock Ownership Guidelines’ adoption date and the +date that the individual became an executive officer or director and must retain an amount equal to 25% of the net shares of our +Common Stock received as a result of the exercise, vesting or payment of any equity award made by the Company until the share +ownership requirement is satisfied. +Prohibition on Hedging +and Pledging of Our Common Stock +Our +directors and executive officers are prohibited from entering into hedging transactions and from pledging our Common Stock pursuant +to a formal policy concerning such activities recently adopted by the Board of Directors. The Board of Directors has waived +compliance with the Company’s anti-pledging policy as to Board member, Richard Randall, with respect to a pre-existing pledge +of shares of the Company’s Common Stock owned by Mr. Randall and pledged as collateral security for a margin brokerage account +and have provided Mr. Randall with a grace period through December 31, 2015 in which to gain compliance. +Corporate Social Responsibility +Policy +The +Company is committed to operating its business in a socially responsible manner. We strive to incorporate this commitment into +every aspect of our business, including the design of our products, the quality, safety and sourcing of our products, the safety +and fair treatment of our employees, animal welfare and compliance with laws, including the Foreign Corrupt Practices Act and +the SEC’s Conflict Minerals rule. These guiding principles are set forth in our Corporate Social Responsibility Policy and +we expect all of our employees to be familiar with and to adhere to them. We strive to do business with vendors and suppliers +that share our views and commitments to quality products and ethical business principles. We will only engage vendors and suppliers +that demonstrate a commitment to meeting our standards. +Certain Relationships +and Related Party Transactions +JLM +Consultants, Inc., a company wholly-owned by John L. Madden. Since 2004, the Company has engaged JLM Consultants, Inc., +a company wholly-owned by John L. Madden, a member of the Board and the brother of Steven Madden, the Company’s founder +and Creative and Design Chief, to provide consulting services to the Company with respect to the development of international +sales of the Company. On February 23, 2012, the Company entered into a consulting agreement (the “JLM Consulting Agreement”) +with JLM Consultants, Inc. to replace a prior consulting agreement. The JLM Consulting Agreement expired by its terms on December +31, 2014, but Mr. Madden continues to provide consulting services to the Company and the Company continues to make payments to +JLM Consultants, Inc. consistent with those that would have been required under the expired consulting agreement. In accordance +with the terms of the JLM Consulting Agreement, for the 2014 Fiscal Year, JLM Consultants, Inc. received the following compensation +from the Company for services rendered: (a) a commission equal to 1% of net sales, excluding retail royalty income; (b) a commission +equal to 10% of retail royalty income; (c) 1% of any commission income to the International division that is not recognized in +net sales; (d) a monthly draw in the amount of $25,000, which amount is offset against commissions earned; (e) a $1,000 per month +travel allowance; and (f) monthly reimbursements, in the aggregate amount of $59,888 in the 2014 Fiscal Year, for health insurance +premiums for John L. Madden. Pursuant to this arrangement, JLM Consultants, Inc. received a total of $1,240,375 from the Company +in the 2014 Fiscal Year. +17 +Pursuant +to the JLM Consulting Agreement, on January 2, 2013, the Company issued 72,012 restricted shares of the Company’s Common +Stock to JLM Consultants, Inc. under the Steven Madden, Ltd. 2006 Stock Incentive Plan, as amended (the “2006 Plan”), +which shares will vest in twelve substantially equal quarterly installments over a three-year period commencing on April 1, 2013 +and continuing to vest quarterly thereafter until the final installment vests on January 1, 2016. +Steven +Madden Employment Agreement. Effective as of July 1, 2005, the Company amended and restated its employment agreement with +the Company’s founder and Creative and Design Chief, Steven Madden, pursuant to which Mr. Madden agreed to continue to serve +as the Company’s Creative and Design Chief. The term of Mr. Madden’s employment under his employment agreement commenced +on July 1, 2005 and, in accordance with the amendment of the agreement effective December 31, 2011, will end on December 31, 2023. +Prior to this recent amendment, the agreement had provided for an annual salary of $600,000, with a 7% increase of base salary +on a compound basis in each of the third, fifth, seventh and ninth years of the agreement. The agreement had also provided for +an annual cash bonus in an amount equal to at least 2% of the Company’s EBITDA (the “Annual Bonus”) and an annual +cash bonus in relation to “new business” (as defined in the agreement) in an amount equal to at least (i) 2.5% of +new business gross direct revenues plus (ii) 10% of all license or other fee income above $2,000,000 (the “New Business +Bonus”). The agreement, as amended, increases Mr. Madden’s annual base salary but eliminates the Annual Bonus and +the New Business Bonus and provides that all cash bonuses subsequent to the fiscal year ended December 31, 2011 will be at the +sole discretion of the Company’s Board of Directors. Under the agreement, as amended, Mr. Madden’s annual base salary +was fixed at $5,416,667 in 2012, $7,416,667 in 2013, $9,666,667 in 2014, $11,916,667 in 2015 and $10,697,917 in 2016 and in each +year thereafter through the end of the term of employment. In addition, the amended agreement entitles Mr. Madden to an annual +life insurance premium reimbursement of up to $200,000. The amendment also eliminates an annual non-accountable expense allowance +of $200,000 that had been previously provided to Mr. Madden under the agreement. Pursuant to the amended agreement, on February +8, 2012, Mr. Madden was granted 1,463,056 restricted shares of Common Stock (the number of shares indicated having been adjusted +for an October 1, 2013 three-for-two stock split effected as a stock dividend), valued at approximately $40 million, under the +2006 Plan. The restricted Common Stock will vest in equal annual installments over seven years commencing on December 31, 2017 +through December 31, 2023, subject to Mr. Madden’s continued employment with the Company on each such vesting date. +On +June 30, 2012, pursuant to an election right granted to him under the agreement, as amended, Mr. Madden notified the Company of +his election to receive an additional restricted stock award valued at $40 million in consideration of a reduction in his annual +base salary in years subsequent to 2012. Accordingly, on July 3, 2012, Mr. Madden was issued 1,893,342 restricted shares of Common +Stock (the number of shares indicated having been adjusted for an October 1, 2013 three-for-two stock split effected as a stock +dividend) under the 2006 Plan. The restricted Common Stock will vest in equal annual installments over six years commencing on +December 31, 2018 through December 31, 2023, subject to Mr. Madden’s continued employment with the Company on each such +vesting date. As a result of his election to receive an additional restricted stock award, Mr. Madden’s annual base salary +for years subsequent to 2012 has been reduced as follows: $4,000,000 in 2013, $6,125,000 in 2014, $8,250,000 in 2015 and $7,026,042 +in 2016 and in each year thereafter through the end of the term of employment. +Mr. +Madden is also eligible to receive annually, on or about the date of the Company’s annual meeting of stockholders (but not +later than June 30 th ), an option grant (the “Annual Option”) to purchase a number of shares of Common Stock, +with such number to be equal to the greater of (a) 100% of the largest aggregate number of shares of Common Stock available upon +the exercise of an option or options granted to any other continuing full-time employee of the Company during the preceding twelve-month +period and (b) 100,000 shares of Common Stock; provided, however, that a grant to Mr. Madden in excess of 150% of the number of +shares of Common Stock subject to options granted to such other continuing full-time employee would require stockholder approval. +Any Annual Option granted to Mr. Madden would vest quarterly over a one-year period following the grant date and would be exercisable +at a price equal to the closing price of the Company’s Common Stock on the grant date for a period of five years following +the grant date. In addition to the Annual Option, the agreement, as amended, provides for a potential additional one-time stock +option grant to purchase 750,000 shares of the Company’s Common Stock (the number of shares subject to this potential stock +option award having been adjusted for an October 1, 2013 three-for-two stock split effected as a stock dividend) in the event +that the Company achieves earnings per share, on a fully-diluted basis, equal to $3.00 in any fiscal year ending December 31, +2015 or after. If granted, the option would vest in equal annual installments of 20% over a five-year period and be exercisable +for a period of seven years at a price equal to the closing price of the Company’s Common Stock on the date immediately +preceding the grant date. +18 +In +the event of Mr. Madden’s death, his employment agreement provides for the payment to Mr. Madden’s estate of his base +salary for the 12-month period immediately subsequent to the date of his death. Further, in the event that Mr. Madden’s +employment agreement is terminated due to Mr. Madden’s total disability (as defined in the agreement), “for cause” +(as defined in the agreement) or due to Mr. Madden’s resignation, the Company is obligated to pay Mr. Madden the amount +of compensation that is accrued and unpaid through the date of termination. In the event Mr. Madden’s employment agreement +is terminated for any reason (other than “for cause” or due to his death, total disability or resignation), the Company +is obligated to pay Mr. Madden, in installments, the balance of his base salary that would have been paid by the Company under +the agreement for the full term of the agreement. If, during the period commencing 120 days prior to a “change of control” +(as defined in the employment agreement) transaction and ending on the first anniversary of a change of control transaction, Mr. +Madden’s employment is terminated by the Company other than for cause or by the resignation of Mr. Madden for “good +reason” (as defined in the employment agreement), or if Mr. Madden resigns for good reason or without good reason within +30 days following a change of control transaction, all unvested options to purchase shares of Common Stock held by Mr. Madden +will vest on the date of termination or resignation and Mr. Madden will be entitled to receive a lump sum cash payment equal to +the amount of compensation that is accrued and unpaid through the date of termination plus $35 million. Mr. Madden’s employment +agreement contains other customary provisions, including provisions regarding expense reimbursement, confidentiality, solicitation +and competition. +For +the 2014 Fiscal Year, Mr. Madden earned $6,125,000 in base salary and received $200,000 for the payment of an annual life insurance +premium. Mr. Madden opted to waive his right to the Annual Option for the 2014 Fiscal Year. +Loan +to Steven Madden. On June 25, 2007, the Company made a loan to Steven Madden, its Creative and Design Chief and a principal +stockholder of the Company, in the amount of $3,000,000, in order for Mr. Madden to satisfy a personal tax obligation resulting +from the exercise of a stock option which was due to expire and to hold the underlying shares of Common Stock. Mr. Madden executed +a promissory note in favor of the Company, which is secured by a pledge of 472,500 shares of the Company’s Common Stock +beneficially owned by Mr. Madden (the number of shares indicated having been adjusted for an October 1, 2013 three-for-two stock +split effected as a stock dividend). There have been successive amendments to the note, the most recent of which occurred on January +3, 2012, at which time the note was amended and restated to extend the maturity date of the obligation to December 31, 2023 and +eliminate the accrual of interest after December 31, 2011. Prior to the most recent amendment, the note had been accruing interest +at the rate of 6% per annum. In addition, the amended and restated note provides that, commencing on December 31, 2014 and annually +on each December 31 thereafter through the maturity date, one-tenth of the principal amount thereof, together with accrued interest, +will be cancelled by the Company provided that Mr. Madden continues to be employed by the Company on each such December 31. Contemporaneously, +the Company will release a number of pledged shares of Common Stock from the pledge generally correlating to the amount of indebtedness +cancelled on such date. As of December 31, 2011, interest in the amount of $1,090,000 had accrued on the principal amount of the +note and, as noted above, interest was eliminated after December 31, 2011. On December 31, 2014, the required one-tenth of the +principal amount of the note, together with accrued interest, was written-off by the Company. +Steven +Madden is the brother of John L. Madden, who has been a director of the Company since 1993. +Review, Approval or Ratification +of Transactions with Related Persons +The +Company’s written Conduct Code and Employee Handbook prohibit all conflicts of interest. Under the Conduct Code, conflicts +of interest occur when private or family interests interfere in any way, or even appear to interfere, with the interests of the +Company. The Company’s prohibition on conflicts of interest under the Conduct Code includes any related person transaction. +19 +Related +person transactions must be approved by the Board, or by a committee of the Board consisting solely of independent directors, +who will approve the transaction only if they determine that it is in the best interests of the Company. In considering the transaction, +the Board or committee will consider all relevant factors, including, as applicable, (i) the Company’s business rationale +for entering into the transaction; (ii) the alternatives to entering into a related person transaction; (iii) whether the transaction +is on terms comparable to those available to third parties or, in the case of employment relationships, to employees generally; +(iv) the potential for the transaction to lead to an actual or apparent conflict of interest and any safeguards imposed to prevent +such actual or apparent conflicts; and (v) the overall fairness of the transaction to the Company. +The +Company has multiple processes for reporting conflicts of interests, including related person transactions. Under the Conduct +Code, all employees are required to report any actual or apparent conflict of interest, or potential conflict of interest, to +management. The Chief Financial Officer distributes a questionnaire to the Company’s executive officers and management personnel +on a quarterly basis and distributes a questionnaire to the members of the Board of Directors on an annual basis requesting certain +information regarding, among other things, their immediate family members, employment and beneficial ownership interests, which +information is then reviewed for any conflicts of interest under the Conduct Code. +The +Board of Directors, the Audit Committee and the Disclosure Committee, which is comprised of management personnel, discuss the +related party transactions, specifically, and in connection with the regular review processes attendant to the Company’s +periodic filings, including related party transaction disclosures. +If +a director is a party to or in some manner involved in a transaction involving the Company, he or she will be recused from all +discussions and decisions about the transaction. The transaction must be approved in advance whenever practicable, and if not +practicable, must be ratified as promptly as practicable. +COMPENSATION +OF DIRECTORS IN THE 2014 FISCAL YEAR +The +Compensation Committee is responsible for establishing and overseeing all matters pertaining to compensation paid to directors +for service on the Board and its committees. +The +following table sets forth information concerning the compensation of the Company’s non-employee directors in the 2014 Fiscal +Year. Following the table is a discussion of material factors related to the information disclosed in the table. +Name +Fees +Earned or +Paid in +Cash +($) +Stock +Awards +($)(1) +All Other +Compensation +($) +Total +($) +Rose Peabody Lynch +62,292 +100,012 (2) +0 +162,304 +John L. Madden +0 +0 (3) +1,308,376 (4) +1,308,376 +Peter Migliorini +112,500 +100,012 (5) +0 +212,512 +Richard P. Randall +112,500 +100,012 (6) +0 +212,512 +Ravi Sachdev +87,500 +100,012 (7) +0 +187,512 +Thomas H. Schwartz +85,000 +100,012 (8) +0 +185,012 +Robert Smith +62,292 +100,012 (9) +0 +162,304 +(1) Reflects +the grant date fair value of stock awards calculated in accordance with the Financial Accounting Standards Board (“FASB”) +Accounting Standards Codification (“ASC”) Topic 718. Assumptions used in the calculation of these amounts are included +in Note I to the Company’s audited financial statements for the fiscal year ended December 31, 2014 included in the Company’s +Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 26, 2015. +(2) At +December 31, 2014, the aggregate number of shares of restricted Common Stock held by Ms. Lynch was 3,147, and Ms. Lynch had no +options outstanding. +20 +(3) At +December 31, 2014, the aggregate number of shares of restricted Common Stock held by JLM Consultants, Inc., a corporation wholly-owned +by Mr. Madden, was 30,012, and Mr. Madden had no options outstanding. +(4) Includes: +(a) the use of a corporate apartment valued at $68,001 and (b) $1,240,375 in fees, travel and health insurance premium allowance +paid to JLM Consultants, Inc., a company wholly-owned by Mr. John Madden, as consideration for consulting services provided by +JLM Consultants, Inc. with respect to the development of the Company’s international business. +(5) At +December 31, 2014, the aggregate number of shares of restricted Common Stock held by Mr. Migliorini was 3,147, and Mr. Migliorini +had no options outstanding. +(6) At +December 31, 2014, the aggregate number of shares of restricted Common Stock held by Mr. Randall was 3,147, and Mr. Randall had +no options outstanding. +(7) At +December 31, 2014, the aggregate number of shares of restricted Common Stock held by Mr. Sachdev was 3,147, and Mr. Sachdev had +no options outstanding. +(8) At +December 31, 2014, the aggregate number of shares of restricted Common Stock held by Mr. Schwartz was 3,147, and Mr. Schwartz +had no options outstanding. +(9) At +December 31, 2014, the aggregate number of shares of restricted Common Stock held by Mr. Smith was 3,147, and Mr. Smith had no +options outstanding. +_____________________ +Directors +who are also employees of the Company are not paid any fees or other remuneration for service on the Board of Directors or any +of its committees. In the 2014 Fiscal Year, each non-employee director, other than John L. Madden, received the following compensation: +(i) a grant of 3,147 shares of restricted Common Stock, vesting on the first anniversary of the grant date, June 12, 2015 and +(ii) $75,000. John L. Madden, who is a non-independent, non-employee director as a result of his ownership of JLM Consultants, +Inc., a provider of consulting services to the Company with respect to international sales, is not paid a fee for his service +on the Board of Directors. +In +the 2014 Fiscal Year, members of the Audit Committee, Nominating/Corporate Governance Committee and Compensation Committee each +received an additional $10,000 for serving on such committees, except that the Chairman of the Audit Committee and the Chairman +of the Compensation Committee received $25,000 instead of $10,000. In addition, in the 2014 Fiscal Year, each of Messrs. Sachdev, +Migliorini and Randall received $2,500 for serving on a special committee formed by the Board to investigate a claim against the +Company. The Company reimburses its directors for any out-of-pocket expenses incurred by them in connection with services provided +in such capacity. +STOCK +OWNERSHIP +Security Ownership of +Certain Beneficial Owners +The +following table sets forth information as of the Record Date (unless otherwise indicated) with respect to the beneficial ownership +of the Common Stock of the Company by each person known by the Company to be the beneficial owner of more than 5% of the outstanding +shares of the Common Stock of the Company. A person is deemed to be a beneficial owner of any securities which that person has +the right to acquire within 60 days. +21 +Name and +Address of Beneficial Owner +Amount +and Nature +of Beneficial +Ownership (1) +Percentage +of Class +Steven +Madden +c/o +Steven Madden, Ltd. +52-16 +Barnett Avenue +Long +Island City, NY 11104 +6,188,138 +9.73 %(2) +BOCAP +Corp. +c/o +Steven Madden, Ltd. +52-16 +Barnett Avenue +Long +Island City, NY 11104 +1,658,062 +2.61 %(3) +BlackRock +Inc. +55 +East 52 nd Street +New +York, NY 10022 +4,951,219 +7.79 %(4) +The +Vanguard Group +100 +Vanguard Boulevard +Malvern, +Pennsylvania 19355 +4,144,952 +6.52 %(5) +FMR +LLC +245 +Summer Street +Boston, +Massachusetts 02210 +3,467,614 +5.45 %(6) +Eagle +Asset Management, Inc. +880 +Carillon Parkway +St. +Petersburg, Florida 33716 +2,310,931 +3.63 %(7) +(1) Beneficial +ownership as reported in the table below has been determined in accordance with Item 403 of Regulation S-K and Rule 13d-3 of the +Exchange Act and based upon 63,601,164 shares of Common Stock outstanding (excluding treasury shares) as of the Record Date. +(2) Mr. +Madden’s beneficial ownership includes: (i) 1,658,062 shares of Common Stock held by BOCAP Corp, a corporation wholly-owned +by Mr. Madden; (ii) 3,356,398 shares of restricted Common Stock granted under the 2006 Plan (which restricted stock includes 1,463,056 +shares which will vest in equal annual installments over seven years commencing on December 31, 2017 through December 31, 2023 +and 1,893,342 shares which will vest in equal annual installments over six years commencing on December 31, 2018 through December +31, 2023, in each case subject to forfeiture pursuant to the terms of the 2006 Plan and of Mr. Madden’s employment agreement); +and (iii) 1,173,678 shares of Common Stock held by Mr. Madden directly. Mr. Madden has pledged to the Company 472,500 shares of +Common Stock beneficially owned by him to secure the repayment of a loan made by the Company to Mr. Madden, which loan is discussed +in the section of this Proxy Statement captioned “Certain Relationships and Related Party Transactions.” Excluded +are 341,215 shares of Common Stock beneficially owned by the Steven H. Madden 2012 Trust, an irrevocable trust established by +Mr. Madden for the benefit of his descendants, the trustee of which is unrelated to Mr. Madden and as to which Mr. Madden does +not, directly or indirectly, have or share voting or investment power; Mr. Madden disclaims beneficial ownership of the shares +of Common Stock beneficially owned by this trust. +(3) BOCAP +Corp is a corporation wholly-owned by Steven Madden. +(4) Based +solely on a Statement on Schedule 13G filed with the SEC on January 26, 2015 by BlackRock, Inc. (“BlackRock”), BlackRock +has sole voting power with respect to 4,823,088 of such shares and sole dispositive power with respect to all such shares. +(5) Based +solely on a Statement on Schedule 13G filed with the SEC on February 11, 2015 by The Vanguard Group (“Vanguard”), +Vanguard has sole voting power with respect to 77,993 of such shares, sole dispositive power with respect to 4,072,009 of such +shares and shared dispositive power with respect to 72,943 of such shares. +(6) Based +solely on a Statement on Schedule 13G filed with the SEC on February 13, 2015 by FMR LLC (“FMR”), FMR has sole voting +power with respect to 822,484 of such shares and sole dispositive power with respect to all such shares. +(7) Based +solely on a Statement on Schedule 13G filed with the SEC on January 14, 2015 by Eagle Asset Management, Inc. (“Eagle”), +Eagle has sole voting and dispositive power with respect to all such shares. +22 +Security Ownership of +Directors and Executive Officers +The +following table sets forth information as of the Record Date (unless otherwise indicated) with respect to the beneficial ownership +of Common Stock held by (a) each current director and nominee; (b) the Chief Executive Officer, the Chief Financial Officer and +the three most highly compensated executive officers of the Company other than the Chief Executive Officer and the Chief Financial +Officer (the “Named Executive Officers”); and (c) all current directors and executive officers as a group. A person +is deemed to be a beneficial owner of any securities which that person has the right to acquire within 60 days. Each director +and executive officer has sole voting power and sole dispositive power with respect to all shares beneficially owned by him or +her. +Name of Beneficial Owner (1) +Amount and Nature +of Beneficial +Ownership (2) +Percentage of +Class +Edward R. Rosenfeld +621,955 +*% (3) +Arvind Dharia +148,585 +*% (4) +Awadhesh Sinha +69,142 +*% (5) +Robert Schmertz +330,694 +*% (6) +Amelia Newton Varela +387,190 +*% (7) +Rose Peabody Lynch +3,147 +*% (8) +John L. Madden +36,012 +*% (9) +Peter Migliorini +3,147 +*% (10) +Richard P. Randall +30,481 +*% (11) +Ravi Sachdev +28,231 +*% (12) +Thomas H. Schwartz +14,394 +*% (13) +Robert Smith +3,147 +*% (14) +All Directors and Executive Officers as a Group (12 persons named above) +1,676,125 +2.64% (15) +* Indicates beneficial +ownership of less than 1%. +(1) The address for each of +the named individuals below is c/o Steven Madden, Ltd., 52-16 Barnett Avenue, Long Island City, New York 11104. +(2) Beneficial +ownership as reported in the table above has been determined in accordance with Item 403 of Regulation S-K and Rule 13d-3 of the +Exchange Act and based upon 63,601,164 shares of Common Stock outstanding (excluding treasury shares) as of the Record Date. +(3) Mr. +Rosenfeld’s beneficial ownership includes: (i) 337,500 shares of Common Stock that may be acquired through the exercise +of options that are exercisable as of, or will become exercisable within 60 days of, the Record Date; (ii) 163,138 shares of restricted +Common Stock; and (iii) 121,317 shares of Common Stock held by Mr. Rosenfeld. +(4) Mr. +Dharia’s beneficial ownership includes: (i) 23,506 shares of restricted Common Stock; and (ii) 125,079 shares of Common +Stock held by Mr. Dharia. +(5) Mr. +Sinha’s beneficial ownership includes: (i) 29,930 shares of restricted Common Stock; and (ii) 39,212 shares of Common Stock +held by Mr. Sinha. +(6) Mr. +Schmertz’s beneficial ownership includes: (i) 65,970 shares of restricted Common Stock; and (ii) 264,724 shares of Common +Stock held by Mr. Schmertz. +(7) Ms. +Varela’s beneficial ownership includes: (i) 324,534 shares of Common Stock that may be acquired through the exercise of +options that are exercisable as of, or will become exercisable within 60 days of, the Record Date; (ii) 43,308 shares of restricted +Common Stock; and (iii) 19,348 shares of Common Stock held by Ms. Varela. +(8) Ms. +Lynch’s beneficial ownership consists of 3,147 shares of restricted Common Stock. +(9) Mr. +Madden’s beneficial ownership includes: (1) 18,012 shares of restricted Common Stock held by JLM Consultants, Inc., a corporation +wholly-owned by Mr. Madden; and (ii) 18,000 shares of Common Stock held by JLM Consultants, Inc. +(10) +Mr. Migliorini’s beneficial ownership consists of 3,147 shares of restricted Common Stock. +(11) +Mr. Randall’s beneficial ownership includes: (i) 3,147 shares of restricted Common Stock; and (ii) 27,334 shares of Common +Stock held by Mr. Randall, all of which shares have been pledged by Mr. Randall as collateral security for a margin brokerage +account as allowed by a temporary waiver to the Company’s prohibition against pledging. +23 +(12) +Mr. Sachdev’s beneficial ownership includes: (i) 3,147 shares of restricted Common Stock; and (ii) 25,084 shares of Common +Stock held by Mr. Sachdev. +(13) +Mr. Schwartz’s beneficial ownership includes: (i) 3,147 shares of restricted Common Stock; and (ii) 11,247 shares of Common +Stock held by Mr. Schwartz. +(14) +Mr. Smith’s beneficial ownership consists of 3,147 shares of restricted Common Stock. +(15) Includes, +in the aggregate, 662,034 shares of Common Stock that may be acquired through the exercise of options that are exercisable as +of, or will become exercisable within 60 days of, the Record Date; (ii) 362,746 shares of restricted Common Stock; and (iii) 651,345 +shares of Common Stock held by such beneficial owners. +_________________ +Section 16(a) Beneficial +Ownership Reporting Compliance +Section +16(a) of the Exchange Act requires that the Company’s directors and officers, and persons who beneficially own more than +10% of a registered class of the Company’s equity securities, file with the SEC reports of initial ownership of Common Stock +and subsequent changes in that ownership and furnish the Company with copies of all forms they file with the SEC pursuant to Section +16(a) of the Exchange Act. A late report was filed on April 3, 2015 to report sales by JLM Consultants, Inc., a corporation wholly +owned by John L. Madden, of 8,000 shares of Common Stock on August 26, 2014 and 4,000 shares of Common Stock on August 29, 2014. +To the Company’s knowledge, based solely on a review of the copies of the reports furnished to the Company or written representations +received from the Company’s directors, officers and greater than 10% beneficial owners that no other reports were required, +all Section 16(a) filing requirements applicable to its officers, directors and greater than 10% beneficial owners were complied +with during, or in respect of, the 2014 Fiscal Year. +EXECUTIVE +COMPENSATION +Compensation Discussion +and Analysis +Executive +Summary +This +Compensation Discussion and Analysis describes the overall principals and objectives and specific features of our executive compensation +program, primarily focused on the executive compensation program’s application to our Chief Executive Officer and the other +executive officers of the Company included in the Summary Compensation Table, whom we refer to collectively in this Proxy Statement +as the “Named Executive Officers.” +Over +the last ten years our stock price has increased at an annual rate of 24.7%; however, we did experience a stock price reduction +in 2014 as our year-end stock price declined 13%. Our stock price has since rebounded and recouped all of these losses as of mid-March +2015. Our Company faced a number of challenges in 2014, including a tough retail landscape, a lack of significant fashion footwear +trends and, toward the tail end of the year, headwinds from the West Coast port slowdown as well as challenges caused by production +delays on goods from Mexico. For the full year ended December 31, 2014, net sales increased 1.6% to $1.33 billion from $1.31 billion +in the prior year. Net income was $111.9 million, or $1.76 per diluted share, for the year ended December 31, 2014. Net income +in fiscal year 2013 was $132.0 million, or $1.98 per diluted share, including a $1.0 million benefit related to recovery from +a litigation settlement. Excluding this benefit, net income for fiscal 2013 was $131.4 million, or $1.97 per diluted share. +With +the decline in our stock price, overall Named Executive Officer awarded compensation declined in the 2014 Fiscal Year by 35%. +Moreover, over the past two years, Named Executive Officer awarded compensation is up just 8% as compared with a 13% stock price +increase. As our general practice is to award bonuses and grant equity based on Named Executive Officer performance for +the preceding year, we are able to maintain relative alignment between pay and performance. +24 +Compensation +Objectives and Strategy +The +Company’s executive officer compensation program is designed to attract and retain the caliber of officers needed to ensure +the Company’s continued growth and profitability and to reward them for their performance, for the Company’s performance +and for creating longer-term value for our stockholders. The primary objectives of the program are to: +· align +rewards with performance that creates stockholder value; +· support +the Company’s strong team orientation; +· encourage +high-potential team players to build a career at the Company; and +· provide +rewards that are cost-efficient, competitive with other similarly-positioned organizations +and fair to employees and stockholders. +The +Company’s executive compensation programs are approved and administered by the Compensation Committee of the Board of Directors. +Working with management and outside advisors, the Compensation Committee has developed a compensation and benefits strategy that +rewards performance and reinforces a culture that the Compensation Committee believes will drive long-term success. +The +compensation program rewards team accomplishments while promoting individual accountability. The executive officer compensation +program depends in significant measure on Company results, but business unit results and individual accomplishments are also very +important factors in determining each executive’s compensation. The Company has a robust planning and goal-setting process +that is fully integrated into the compensation system, enhancing a strong relationship among individual efforts, Company results +and financial rewards. +A +major portion of total compensation is placed at risk through annual and long-term incentives. As noted below, discretionary bonuses +were paid to the Named Executive Officers. The combination of incentives is designed to balance annual operating objectives and +Company earnings performance with longer-term stockholder value creation. +To +implement its primary objectives, the Company seeks to provide competitive compensation that is commensurate with performance. +The Company targets compensation at the median of the market and calibrates both annual and long-term incentive opportunities +to generate less-than-median awards when goals are not fully achieved and greater-than-median awards when goals are exceeded. +The +Company believes that there is great value to the Company in having a team of long-tenured, seasoned managers and seeks to promote +a long-term commitment from its senior executives. The Company’s team-focused culture and management processes are designed +to foster this commitment. In addition, restricted Common Stock awards granted to Named Executive Officers in the 2014 Fiscal +Year reinforce this long-term orientation with annual vesting over three or five-year periods. +Role +of the Compensation Committee +General. +The Compensation Committee provides overall guidance for the Company’s executive compensation policies and determines +the amounts and elements of compensation for the Company’s executive officers and outside directors. The Compensation Committee +currently consists of four members of the Company’s Board of Directors, Ms. Lynch and Messrs. Peter Migliorini, Thomas Schwartz +and Robert Smith, each of whom is an independent director under Rule 5605 of The Nasdaq Global Select Market listing standards, +a “non-employee director” as defined under the SEC’s rules and an “outside director” as defined +under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”). +When +considering decisions concerning the compensation of executives, other than the Chief Executive Officer, the Compensation Committee +asks for the recommendations of the Chief Executive Officer, including his detailed evaluation of each executive’s performance. +No executive has a role in recommending compensation for outside directors. With respect to the application of the 2006 Plan to +non-employee directors, the Board of Directors functions as the Compensation Committee. +25 +Use +of Outside Advisors. In making its determinations with respect to executive compensation, the Compensation Committee has historically +engaged the services of an independent compensation consulting firm. The Compensation Committee has retained the services of Arthur +J. Gallagher & Co.’s Human Resources & Compensation Consulting Practice (“Gallagher”) since 2005 to +assist with its review of the compensation packages and employment agreements of the Chief Executive Officer and other executive +officers. In 2014, Gallagher worked with the Compensation Committee to assess the reasonableness of discretionary cash bonus payments +and equity grants to Messrs. Rosenfeld, Dharia, Sinha and Schmertz and Ms. Varela based on the Company’s and the individual’s +performance in the fiscal year ended December 31, 2013 and the reasonableness of the terms of new employment agreements for Mr. +Sinha and Ms. Varela as compared with comparable positions in the peer group listed below. Executive compensation for the other +Named Executive Officers was based on prior employment agreements with pay structures and levels guided by Gallagher’s market +studies just prior to the consummation of the agreements. Position-specific market studies were completed at the time of the employment +agreement extension in support of the design of these agreements. The Compensation Committee also consulted Gallagher with respect +to the establishment of a performance-based bonus pool based on a percentage of the Company’s net income in the 2014 Fiscal +Year. Gallagher provides only executive compensation consulting services and works with management only at the behest of the Compensation +Committee. +The +Compensation Committee retains Gallagher directly, although in carrying out assignments, Gallagher also interacts with Company +management, when necessary and appropriate, in order to obtain compensation and performance data for the executives and the Company. +In addition, Gallagher may, in its discretion, seek input and feedback from management regarding its consulting work product for +the Compensation Committee in order to confirm alignment with the Company’s business strategy and identify data questions +or other similar issues, if any, prior to completion of a project for the Compensation Committee. +Independence +of Outside Advisors. The Compensation Committee has the sole authority to retain, terminate, approve the fees and set the +terms of the Company’s relationship with any outside advisors who assist the Committee in carrying out its responsibilities, +and may select or receive advice from any compensation consultant or other advisor only after taking into consideration all factors +relevant to the consultant’s independence from management, including the factors set forth in the Nasdaq’s rules. +Accordingly, +the Compensation Committee reviews annually its relationship with Gallagher to ensure its independence on executive compensation +matters. Prior to selecting and receiving advice from Gallagher with respect to executive compensation in the 2014 Fiscal Year, +the Compensation Committee reviewed the independence of Gallagher and the individual representatives of Gallagher who served as +the committee’s advisors. The Compensation Committee determined that no conflicts of interest exist between the Company +and Gallagher (or any individuals working on the Company’s account on behalf of Gallagher). In reaching such determination, +the Compensation Committee considered, among other things, the following factors: (i) that Gallagher provides no services to the +Company other than the executive compensation consulting services; (ii) the fees paid by us to Gallagher as a percentage of Gallagher’s +total revenue; (iii) the representations by Gallagher as to its policies and procedures that are designed to prevent a conflict +of interest; (iv) any business or personal relationships between the individual representatives of Gallagher who advised +the Compensation Committee and any member of the Compensation Committee; and (v) any business or personal relationships between +our executive officers and Gallagher or the individual representatives of Gallagher. +Consideration +of 2014 Stockholder Say on Pay Vote. At our 2014 Annual Meeting of Stockholders, our stockholders overwhelmingly +approved, on an advisory basis, the compensation of our Named Executive Officers (94% of votes cast). The Compensation Committee +believes this level of stockholder support reflects a very strong endorsement of our compensation policies and decisions. The +Compensation Committee has considered the results of this advisory vote on executive compensation in determining the Company’s +compensation policies and decisions for 2015, and has determined that these policies and decisions are appropriate and in the +best interests of the Company and its stockholders at this time. +26 +Compensation +Structure +Pay +Elements - Overview +The Company +utilizes four main components of compensation: +· +base salary; +· +annual performance-based bonuses; +· +long-term equity incentives (consisting of stock options and/or restricted stock); and +· +benefits and perquisites. +Pay +Elements - Details +Base +Salary . The Company paid base salaries to each of the Named Executive Officers to provide them with fixed pay commensurate +with the Named Executive Officer’s role and responsibilities, experience, expertise and individual performance. As more +fully described in the section of this Proxy Statement captioned “Employment Arrangements,” as of December 31, 2014, +the Company had employment agreements with each of the Named Executive Officers. The Compensation Committee, as constituted at +the time the parties entered into the employment agreements or any amendments thereof, reviewed and approved the salary established +in each such agreement or amendment. The Compensation Committee considered each employee’s salary history, value in the +marketplace and performance (including at the Company and previous employment). +The +annual base salary of our Chief Executive Officer, Mr. Rosenfeld, was fixed at $607,754 for the 2014 Fiscal Year under an employment +agreement dated December 31, 2012 that remains in effect until December 31, 2015 and provides for an annual base salary of $638,142 +for the fiscal year ending December 31, 2015. The annual base salary of our Chief Operating Officer, Mr. Sinha, was fixed at $600,000 +for the 2014 Fiscal Year under an employment agreement dated January 10, 2014 that remains in effect through December 31, 2016, +and provides for an annual base salary of $630,000 and $661,500 for the fiscal years ending December 31, 2015 and 2016, respectively. +Under the employment agreement, as amended, of our Chief Financial Officer, Mr. Dharia’s annual base salary for the 2014 +Fiscal Year was $554,719. The employment agreement was extended until December 31, 2017 and amended to provide Mr. Dharia with +an annual base salary of $582,455 for the fiscal year ending December 31, 2015 and for the remainder of the extended term. The +annual base salary of our Brand Director, Mr. Schmertz, was fixed at $725,000 for the 2014 Fiscal Year under an employment agreement +dated January 2, 2013 that expired on December 31, 2014. By virtue of a new employment agreement dated March 9, 2015, the Company +extended Mr. Schmertz’s employment through December 31, 2016 at a fixed salary of $761,250. The annual base salary of our +Executive Vice President - Wholesale, Ms. Varela, was fixed at $500,000 for the 2014 Fiscal Year and for the remainder of the +term of her employment agreement dated January 10, 2014, which remains in effect through December 31, 2016. Please see the section +of this Proxy Statement captioned “Summary Compensation Table” and “Employment Arrangements” for a more +detailed description of their employment agreement and compensation. The 2015 salary increases, if any, for our Named Executive +Officers, as reflected in the following table, are generally consistent with those of other management employees. +Named Executive Officer +2014 Salary +2015 Salary +Edward R. Rosenfeld +$ 607,754 +$ 638,142 +Arvind Dharia +$ 554,719 +$ 582,455 +Awadhesh Sinha +$ 600,000 +$ 630,000 +Robert Schmertz +$ 725,000 +$ 761,250 * +Amelia Newton Varela +$ 500,000 +$ 500,000 +______________________ +*The +salary increase for Mr. Schmertz was effective as of March 9, 2015. See the section of this Proxy Statement captioned “Employment +Arrangements” for a more detailed description of Mr. Schmertz’s employment agreement and compensation. +27 +Annual +Performance-based Bonus - Based on Specific Performance Metrics . Annual performance-based cash bonuses, if any, for Named +Executive Officers are established in their respective employment agreements. The Compensation Committee reviewed and approved +the bonus provisions fixed in each such employment agreement at the time the parties entered into such agreements and any amendments +thereof. Such bonus provisions generally provide for variable or discretionary bonuses designed to reward attainment of business +goals. +Commencing +with the 2014 Fiscal Year, Mr. Sinha’s employment agreement entitles him to an annual performance-based bonus for each fiscal +year in an amount equal to 2% of the increase in the Company’s EBITDA for that year over the Company’s EBITDA for +the immediately preceding year, excluding from such bonus calculation EBITDA attributable to any business acquired after January +10, 2014 until the next fiscal quarter following the date of the acquisition, up to a maximum annual bonus of $600,000, the first +$300,000 of which will be payable in cash and for any amount of the annual bonus in excess of $300,000 by a grant of restricted +shares of the Company’s common stock, which restricted common stock will vest in three equal annual installments commencing +on the first anniversary of the grant date. This performance-based bonus was not achieved with respect to the 2014 Fiscal Year. +Under +Ms. Varela’s employment agreement, she is entitled to an annual performance-based cash bonus for each of the 2014 Fiscal +Year and the fiscal years ending December 31, 2015 and 2016 in an amount equal to 2% of the increase, if any, in Wholesale Division +EBIT for each such year over the Wholesale Division EBIT for the immediately preceding year, excluding from such bonus calculation +EBIT attributable to any business acquired after January 10, 2014 until the acquired business has been owned by the Company for +two full calendar years. This performance-based bonus was not achieved with respect to the 2014 Fiscal Year. +As +provided in the 2006 Plan, the maximum payment that may be made to an individual under any performance-based cash award during +any fiscal year and subject to the attainment of specified performance goals is $10,000,000. The Compensation Committee may, in +it sole discretion, elect to pay an individual an amount that is less than the individual’s target award regardless of the +degree of attainment of the performance goals. +For +the 2014 Fiscal Year, the Compensation Committee established a bonus pool for Named Executive Officers and other key executives +of the Company based on 6% of net income of the Company achieved in the 2014 Fiscal Year intended to comply with the provisions +of Section 162(m) of the Code. Net income was selected because it is highly correlated with stock price performance. The Compensation +Committee also fixed for each executive his or her maximum share of the 2014 bonus pool, which was 30% for Mr. Rosenfeld and 14% +for each of the other Named Executive Officers. In the 2014 Fiscal Year, the Company achieved net income of $111,880,000, which +resulted in a bonus pool of $6,712,800. The Compensation Committee determined to pay to the Named Executive Officers bonuses that +were significantly below their individual target awards for the 2014 Fiscal Year and to pay the bonuses exclusively in restricted +shares of Common Stock. Accordingly, on March 11, 2015, the Company paid a performance-based bonus in the form of restricted stock +to each Named Executive Officer as indicated in the following table. +Named Executive Officer +2015 +Restricted +Stock Grant +Value for +2014 +Performance +Number +of +Shares of +Restricted +Stock +Awarded* +Annual +Vesting +Edward R. Rosenfeld +$ 931,500 +25,326 +5 years +Arvind Dharia +$ 202,500 +5,506 +4 years +Awadhesh Sinha +$ 202,500 +5,506 +4 years +Robert Schmertz +$ 450,000 +12,235 +5 years +Amelia Newton Varela +$ 563,795 +15,329 +5 years +* +In accordance with applicable SEC rules, the Summary Compensation Table included in this Proxy Statement does not report the grant +date fair value of these restricted stock awards because, while earned in 2014, the grants were not made until after the close +of the 2014 Fiscal Year. The 2015 Summary Compensation Table to be included in our proxy statement for our 2016 Annual Meeting +of Stockholders will contain the grant date fair value of these restricted stock awards provided these individuals are named executive +officers in that proxy statement. +28 +The +decision to pay bonuses to the Named Executive Officers in the form of restricted stock was determined at the discretion of the +Compensation Committee, but within the parameters of the bonus pool for Named Executive Officers. The Compensation Committee evaluated +a variety of indicators of the Company’s stock price performance and overall financial performance, including revenue growth +and profitability, and assessed and made subjective judgments as to each of these executive’s individual contribution towards +the Company’s performance in the 2014 Fiscal Year in determining whether to pay bonuses to these executives and establishing +the amounts to be paid. With respect to the determination to award bonuses to Messrs. Dharia, Sinha and Schmertz and Ms. Varela, +the Compensation Committee also considered the recommendations of the Chief Executive Officer, Mr. Rosenfeld. +The +Compensation Committee consulted Gallagher regarding the establishment of the bonus pool and the individual target awards for +the 2014 Fiscal Year to ensure the bonus pool and the individual target awards were within market range for each executive. +Long-term +Equity Incentives . Management and the Compensation Committee believe that equity-based awards are an important factor in aligning +the long-term financial interest of the executive officers and stockholders. The Compensation Committee continually evaluates +the use of equity-based awards and intends to continue to use such awards in the future as part of designing and administering +the Company’s compensation program. Beginning in 2006, the Compensation Committee modified its prior practice of granting +equity incentives solely in the form of stock options with periodic awards of restricted stock in order to grant awards that contain +both substantial incentive and retention characteristics. These awards are designed to provide emphasis on preserving stockholder +value generated in recent years while providing significant incentives for continuing growth in stockholder value. +In +March 2014, the Company made grants of 22,265, 15,118 and 10,995 restricted shares of Common Stock to Mr. Rosenfeld, Ms. Varela +and Mr. Schmertz, respectively, for performance in the fiscal year ended December 31, 2013, each of which restricted stock awards +vests in five equal annual installments. In addition, Mr. Sinha received a restricted stock award of 29,886 shares of Common Stock, +which restricted stock award vests in three equal installments on each of December 15, 2014, December 15, 2015 and December 15, +2016, pursuant to his employment agreement, the terms of which were approved by the Compensation Committee. Gallagher reviewed +the individual grant values relative to market practice. All of the equity awards in the 2014 Fiscal Year were made under the +2006 Plan. +On +February 3, 2014, the Company awarded to Ms. Varela an option, under the Plan, to purchase 100,000 shares of Common Stock at an +exercise price of $32.59. The option has a term of seven years and will vest in four equal annual installments of 25,000 shares +on each anniversary of the date of grant, commencing on February 3, 2015. +The +Committee intends to continue to review the equity mix to achieve the ideal incentive for both performance and retention. With +respect to stock options, the 2006 Plan provides that the exercise price shall be the closing market price per share of the Company’s +Common Stock on the business day immediately preceding the grant date, which is fair market value for purposes of the 2006 Plan. +Other +Benefits and Perquisites . The Company’s executive compensation program also includes other benefits and perquisites. +These benefits and perquisites include annual matching contributions to executive officers’ 401(k) plan accounts, company-paid +medical benefits, automobile allowances and leased automobiles, and life insurance coverage. The Compensation Committee annually +reviews these other benefits and perquisites and makes adjustments as warranted based on competitive practices, the Company’s +performance and the individual’s responsibilities and performance. The Compensation Committee has approved these other benefits +and perquisites as a reasonable component of the Company’s executive officer compensation program. Please see the section +of this Proxy Statement captioned “Summary Compensation Table and, specifically, the column entitled “All Other Compensation” +and the corresponding footnotes. +29 +Pay +Mix +The +Company utilizes the particular elements of compensation described above because the Company believes that it provides a well-proportioned +mix of secure compensation, retention value and at-risk compensation, which produces short-term and long-term performance incentives +and rewards. By following this approach, the Company provides the executives a measure of security in the minimum expected level +of compensation, while motivating the executives to focus on business metrics and other variables within their particular sector +which will increase sales and margins and at the same time lower costs so as to produce a high level of short-term and long-term +performance for the Company and long-term wealth creation for the executives, as well as reducing the risk of recruitment of top +executive talent by competitors. The mix of metrics used for the annual performance bonuses and the Company’s long-term +incentive program likewise provides an appropriate balance between short-term financial performance and long-term stock performance. +For +the Named Executive Officers, the mix of compensation is weighted heavily toward at-risk pay (annual incentives and long-term +incentives). Maintaining this pay mix results fundamentally in a pay-for-performance orientation for the Company’s executives, +which is aligned with the Company’s stated compensation philosophy of providing compensation commensurate with performance. +Pay +Levels and Benchmarking +Pay +levels for executives are determined based on a number of factors, including the individual’s roles and responsibilities +within the Company, the individual’s experience and expertise, the pay levels for peers within the Company, pay levels in +the marketplace for similar positions and performance of the individual and the Company as a whole. The Compensation Committee +is responsible for approving pay levels for the Named Executive Officers. In determining the pay levels, the Compensation Committee +considers all forms of compensation and benefits. +The +Compensation Committee assesses “competitive market” compensation using a number of sources. The primary data source +used in setting competitive market levels for the Named Executive Officers is the information publicly disclosed by a peer group +of the Company, which will be reviewed annually and may change from year to year. For the 2014 Fiscal Year, executive compensation +and compensation design was reviewed in relation to the following peer companies: +American +Apparel Inc. +Genesco, +Inc. +Skechers +U.S.A. Inc. +Bebe +Stores, Inc. +Guess, +Inc. +Under +Armour, Inc. +Brown +Shoe Co. Inc. +Iconix +Brand Group, Inc. +Vera +Bradley, Inc. +Crocs, +Inc. +Kate +Spade & Co. +Weyco +Group, Inc. +Deckers +Outdoor Corp. +Lululemon +Athletica, Inc. +Wolverine +Worldwide +Delta +Apparel, Inc. +Movado +Group, Inc. +Perry +Ellis International, Inc. +Oxford +Industries, Inc. +G-III +Apparel Group, Ltd. +Rocky +Brands, Inc. +After +consideration of the data collected on external competitive levels of compensation and internal needs, the Compensation Committee +makes decisions regarding the Named Executive Officer’s target total compensation opportunities based on the need to attract, +motivate and retain an experienced and effective management team. Relative to the competitive market data, the Compensation Committee +generally intends that the base salary and target annual incentive compensation for each Named Executive Officer will be at the +median of the competitive market. +As +noted above, notwithstanding the Company’s overall pay positioning objectives, pay opportunities for specific individuals +vary based on a number of factors such as scope of duties, tenure, institutional knowledge and/or difficulty in recruiting a new +executive. Actual total compensation in a given year will vary above or below the target compensation levels based primarily on +the attainment of operating goals and the creation of stockholder value. +Compensation +Committee Discretion +The +Compensation Committee retains the discretion to decrease all forms of incentive payouts based on significant individual or Company +performance shortfalls, with the exception of any such payouts that are to be made pursuant to contractual commitments, such as +the bonuses that may be paid to Mr. Sinha and Ms. Varela, which are tied to the Company’s EBITDA and EBIT, respectively, +for the preceding year pursuant to their employment agreements. Similarly, the Compensation Committee retains the discretion to +increase payouts and/or consider special awards for significant achievements, including, but not limited to, superior asset management, +investment or strategic accomplishments and/or consummation of acquisitions, divestitures, capital improvements to existing properties, +or sales made by certain of the Company’s divisions. +30 +Risk Assessment +Bonus +payments to executives are based either on the discretion of the Compensation Committee or are tied to growth in various indicators +of financial performance, such as EBITDA and EBIT. Long-term incentives have been granted in the form of stock options and time-vested +restricted stock that generally vest over four or five years. These programs have been in place for several years and have proved +effective in rewarding performance while not encouraging inappropriate risk-taking. +The +Compensation Committee undertook to review and evaluate all of our executive and company-wide compensation plans and programs +to assess whether any aspect of these plans and programs would encourage inappropriate risk-taking by the Company’s executives +and non-executive employees that could have a material adverse effect on the Company and to confirm that the Company has adequate +risk management controls in place to ensure that executive and company-wide compensation is reasonable and achieves its intended +incentive without creating unacceptable risk. Based on such review and evaluation, the Compensation Committee believes there is +no material adverse risk to the Company that is related to our compensation programs for executives and non-executives. +This review +and evaluation of the risks associated with our compensation plans and programs consisted of: +· identifying +those business risks that could be material to the Company and identifying our existing +risk management system; +· reviewing +and analyzing our compensation plans and programs to identify plan and program features +that could potentially encourage or introduce excessive or imprudent risk taking of a +material nature; +· identifying +the business risks that our compensation plan and program features could potentially +encourage or create; +· balancing +these business risks against our existing internal control systems designed to manage +and mitigate these business risks; and +· analyzing +whether the unmitigated risks, as a whole, are reasonably likely to have a material adverse +effect on the Company. +Various +persons were consulted during the course of the assessment, including our executive officers and senior members of our human resources +department. The Compensation Committee engages Gallagher to review our executive and company-wide compensation plans and programs +and provide advice regarding appropriate levels of incentive. +The +Compensation Committee noted several features of our compensation structure that mitigate risk, including, for example: +· the +Company utilizes a pay mix that is well balanced between short-term financial performance +and long-term stock performance, comprised of secure compensation in the form of base +salary, short-term incentives in the form of potential for cash bonuses, and long-term +incentives in the form of stock options and time-vested restricted stock that generally +vest over four or five years; +· in +most instances, management or the Compensation Committee retains the discretion to decrease +all forms of incentive compensation based on significant individual or Company performance +shortfalls; +31 +· we +periodically benchmark our compensation plans and programs and target executive and non-executive +compensation within the normal limits of the competitive market; and +· the +Compensation Committee provides oversight of the Company’s compensation plans and +programs and compensation philosophy, makes recommendations to the Board with respect +to improvements to our compensation plans and programs, and is responsible for reviewing +and approving executive compensation and administering and awarding incentive, deferred +and equity compensation to our senior executives. +In light +of the assessment described above, it was concluded that the risks associated with our compensation plans and programs (executive +and company-wide) are not reasonably likely to have a material adverse effect on the Company. +Implications +of Tax and Accounting Matters +As +a general matter, the Compensation Committee considers the various tax and accounting implications of compensation vehicles employed +by the Company. While the Compensation Committee reviews and considers both the accounting and tax effects of various components +of compensation, these effects are not a significant factor in the Compensation Committee’s allocation of compensation among +the different components. +In +general, the Company believes that compensation paid to executive officers should be deductible for U.S. tax purposes. In certain +instances, however, the Compensation Committee also believes that it is in the Company’s best interests, and that of its +stockholders, to have the flexibility to pay compensation that is not deductible under the limitations of Section 162(m) of the +Code in order to provide a compensation package consistent with the Company’s objectives. For Fiscal Year 2014, the Compensation +Committee believes incentive compensation paid and awarded will not be subject to the limitations of Section 162(m). +As +more fully described below under the heading “Termination, Change-in-Control and Non-Competition/Non-Solicitation,” +all of our Named Executive Officers are entitled to receive certain compensation in the event of a termination of employment in +connection with a change-in-control event for the Company, which payments may trigger the application of the “golden parachute” +provisions of Sections 280G and 4999 of the Code. Section 280G of the Code disallows a tax deduction with respect to excess parachute +payments to certain executives of companies that undergo a change-in-control. In addition, Section 4999 of the Code imposes a +20% excise tax on the individual receiving the excess parachute payment. Excess parachute payments are golden parachute payments +that exceed an amount determined under Section 280G based on the executive’s prior compensation. In approving the compensation +arrangements of our Named Executive Officers, our Compensation Committee considers all elements of the cost to our Company of +providing such compensation, including the potential impact of Sections 280G and 4999, which, under certain circumstances, may +limit the deductibility to the Company of executive compensation. However, our Compensation Committee may determine, in its judgment, +to authorize compensation arrangements that could give rise to loss of deductibility under Section 280G and the imposition of +excise taxes under Section 4999 when it believes that such arrangements are appropriate to attract and retain executive talent. +Conclusion +The +level and mix of compensation that is finally decided upon as to each executive is considered within the context of both the objective +data from the Company’s competitive assessment of compensation and performance, as well as discussion of the subjective +factors as outlined above. The Compensation Committee believes that each of the compensation packages for the Named Executive +Officers is within the competitive range of practices when compared to the objective comparative data even where subjective factors +have influenced the compensation decisions. +Compensation Committee +Interlocks and Insider Participation +During +the 2014 Fiscal Year, the following directors served on the Compensation Committee: Peter Migliorini (Chairman), Thomas H. Schwartz, +Rose Peabody Lynch and Robert Smith. During the 2014 Fiscal Year: +32 +· none of the members of the +Compensation Committee was an officer (or former officer) or employee of the Company or any of its subsidiaries; +· none of the members of the +Compensation Committee had a direct or indirect material interest in any transaction in which the Company was a participant and +the amount involved exceeded $120,000; +· none of the Company’s +executive officers served on the compensation committee (or another board committee with similar functions or, if none, the entire +board of directors) of another entity where one of that entity’s executive officers served on the Company’s Compensation +Committee; +· none of the Company’s +executive officers was a director of another entity where one of that entity’s executive officers served on the Company’s +Compensation Committee; and +· none of the Company’s +executive officers served on the compensation committee (or another board committee with similar functions or, if none, the entire +board of directors) of another entity where one of that entity’s executive officers served as a director on the Company’s +Board of Directors. +Executive Officers +The following +table identifies the executive officers of the Company, and their ages and positions: +Name +Age +Position +Edward R. Rosenfeld +39 +Chairman of the Board +and Chief Executive Officer +Arvind Dharia +65 +Chief Financial Officer +and Secretary +Awadhesh Sinha +69 +Chief Operating Officer +Robert Schmertz +51 +Brand Director +Amelia Newton Varela +43 +Executive Vice President of Wholesale +Arvind +Dharia has been the Chief Financial Officer of the Company since October 1992 and was a director of the Company from December +1993 through May 2004. Mr. Dharia has been Secretary of the Company since 1993. From December 1988 until joining the Company in +September 1992, Mr. Dharia was Assistant Controller of Millennium III Real Estate Corp., a real estate management company. +Awadhesh +Sinha became the Chief Operating Officer of the Company in July 2005. Mr. Sinha was a director of the Company, from October 2002 +to July 2005, before joining the Company as its Chief Operating Officer. Mr. Sinha was the Chief Operating Officer and Chief Financial +Officer of WEAR ME Apparel Inc., a company that designs, manufactures and markets branded and non-branded children’s clothing, +from 2003 to July 2005. Prior to that, Mr. Sinha worked for Salant Corporation, a company that designs, manufactures and markets +men’s clothing, for 22 years, and held the position of Chief Operating Officer and Chief Financial Officer of Salant Corporation +from 1998 to 2003. +Robert +Schmertz has been the Brand Director since January 2006. Mr. Schmertz served as President of Steve Madden Women’s Wholesale +Division and Brand Manager from September 2001 through January 2006. Additionally, Mr. Schmertz served as President of Shoe Biz, +Inc., formerly a wholly owned subsidiary of Steven Madden Retail, Inc., from May 1998 through August 2001. Before joining the +Company, Mr. Schmertz was President of Daniel Scott Inc. from November 1995 to May 1998. Previously, Mr. Schmertz was the East +Coast Sales Manager for Impo International from January 1993 through November 1995. From April 1990 to December 1992, Mr. Schmertz +served as a sales representative for Espirit de Corp. based in San Francisco, California. +Amelia +Newton Varela has been Executive Vice President of Wholesale since April 2008. Ms. Varela was Executive Vice President of Wholesale +Sales from November 2004 to April 2008. Previously, she was Vice President of Sales for Steve Madden Women’s Wholesale Division +from January 2000. Prior to that, she was Account Executive for Steve Madden Women’s Wholesale Division from 1998. Before +joining the Company, Ms. Varela was the sales assistant to the Executive Vice President of Sales for Merrin Financial. She graduated +from The Fashion Institute of Technology in 1995. +33 +Please +see the section of this Proxy Statement captioned “Proposal One: Election of Directors -- Biographical Summaries of Nominees +for the Board of Directors” for information concerning the Company’s Chairman of the Board and Chief Executive Officer, +Edward R. Rosenfeld, and the Company’s other director nominees. +SUMMARY +COMPENSATION TABLE +The +following table sets forth the compensation information for the Company’s Chief Executive Officer, Chief Financial Officer +and the three most highly compensated executive officers other than the Chief Executive Officer and Chief Financial Officer relating +to the fiscal years ended December 31, 2014, 2013 and 2012, respectively. In this Proxy Statement, the Company refers to this +group of people as the Company’s “Named Executive Officers.” +In +accordance with applicable SEC rules, the Summary Compensation Table includes, for a particular fiscal year, only those stock +awards made during that fiscal year and not any awards made after year-end even if awarded for services rendered in that year. +SEC rules require that such awards be reflected in the year of grant and, as such, awards made after the end of the 2014 Fiscal +Year will appear in the Summary Compensation Table to be included in our proxy statement for our 2016 Annual Meeting of Stockholders. +Name +and Principal Position +Fiscal +Year +Salary +($) +Bonus +($) +Stock +Awards +($) (1) +Option +Awards +($)(1) +Non-Equity +Incentive +Plan +Compensation +($) +All Other +Compensation +($) +Total +Compensation +($) +Edward +R. Rosenfeld +2014 +607,754 +0 +816,680 +0 +0 +25,800 (2) +1,450,234 +Chief +Executive Officer +2013 +577,647 +0 +5,065,800 +0 +225,000 +21,232 (3) +5,889,679 +2012 +551,250 +0 +883,400 +0 +250,000 +15,000 (4) +1,699,650 +Arvind +Dharia +2014 +554,719 +0 +0 +0 +0 +107,168 (5) +661,887 +Chief +Financial Officer +2013 +554,719 +0 +0 +0 +225,000 +110,444 (6) +890,163 +2012 +554,719 +0 +623,050 +0 +250,000 +101,685 (7) +1,529,454 +Awadhesh +Sinha +2014 +600,000 +0 +999,986 +0 +0 +23,311 (8) +1,623,297 +Chief +Operating Officer +2013 +575,000 +0 +0 +0 +225,000 +24,760 (9) +824,760 +2012 +575,000 +0 +331,275 +0 +250,000 +21,317 (10) +1,177,592 +Robert +Schmertz +2014 +725,000 +0 +403,297 +0 +0 +26,492 (11) +1,154,789 +Brand +Director +2013 +722,250 +0 +1,201,976 +0 +100,000 +25,842 (12) +2,050,068 +2012 +660,000 +0 +0 +0 +100,000 +22,500 (13) +782,500 +Amelia +Newton Varela +2014 +500,000 +0 +554,528 +930,000 +0 +22,800 (14) +2,007,328 +Executive +Vice President +2013 +450,000 +0 +449,900 +0 +76,000 (15) +23,801 (16) +999,701 +Of Wholesale +2012 +450,000 +0 +506,762 +0 +216,999 (15) +22,500 (17) +1,196,261 +(1) The +amounts in this column reflect the aggregate grant date fair value of awards granted during the applicable year for the fiscal +years ended December 31, 2014, December 31, 2013 and December 31, 2012, respectively, calculated in accordance with ASC Topic +718. Assumptions used in the calculation of these amounts are included in Note I to the Company’s audited financial statements +for the fiscal years ended December 31, 2014, December 31, 2013 and December 31, 2012 included in the Company’s Annual Report +on Form 10-K filed with the Securities and Exchange Commission on February 26, 2015, February 27, 2014 and March 1, 2013, respectively. +(2) Consists +of an $18,000 automobile allowance and $7,800 in annual matching contributions to Mr. Rosenfeld’s 401(k) plan account. +(3) Consists of a $17,893 +automobile allowance and $3,339 in annual matching contributions to Mr. Rosenfeld’s 401(k) plan account. +(4) Consists +of a $15,000 automobile allowance. +34 +(5) Includes +the following: $13,427 automobile allowance, $85,941 life insurance premiums and $7,800 in annual matching contributions to Mr. +Dharia’s 401(k) plan account. +(6) Includes +the following: $11,792 automobile allowance, $87,514 life insurance premiums and $11,138 in annual matching contributions to Mr. +Dharia’s 401(k) plan account. +(7) Includes +the following: $11,381 automobile allowance, $82,804 life insurance premiums and $7,500 in annual matching contributions to Mr. +Dharia’s 401(k) plan account. +(8) Includes +the following: $15,511 automobile allowance and $7,800 in annual matching contributions to Mr. Sinha’s 401(k) plan account. +(9) Includes +the following: $14,183 automobile allowance and $10,577 in annual matching contributions to Mr. Sinha’s 401(k) plan account. +(10) +Includes the following: $13,817 automobile allowance and $7,500 in annual matching contributions to Mr. Sinha’s 401(k) plan +account.) +(11) +Includes the following: $18,692 automobile allowance and $7,800 in annual matching contributions to Mr. Schmertz’s 401(k) +plan account. +(12) +Includes the following: $17,936 automobile allowance and $7,906 in annual matching contributions to Mr. Schmertz’s 401(k) +plan account. +(13) +Includes the following: $15,000 automobile allowance and $7,500 in annual matching contributions to Mr. Schmertz’s 401(k) +plan account. +(14) +Includes the following: $15,000 automobile allowance and $7,800 in annual matching contributions to Ms. Varela’s 401(k) +plan account. +(15) +Represents a non-equity incentive payment made pursuant to a bonus formula in Ms. Varela’s employment agreement. See “Employment +Arrangements. +(16) +Includes the following: $15,051 automobile allowance and $8,750 in annual matching contributions to Ms. Varela’s 401(k) +plan account. +(17) Includes the following: +$15,000 automobile allowance and $7,500 in annual matching contributions to Ms. Varela’s 401(k) plan account. +Employment Arrangements +Edward +R. Rosenfeld. In November 2009, the Company entered into an employment agreement with Mr. Rosenfeld to replace the prior, +expiring employment agreement. Pursuant to the employment agreement Mr. Rosenfeld continued to serve as Chief Executive Officer +and executive Chairman of the Board of Directors of the Company and received a base salary of $551,250 commencing January 1, 2012 +until the employment agreement’s expiration on December 31, 2012. The November 2009 employment agreement provided that Mr. +Rosenfeld received a monthly automobile allowance of $1,250 and additional compensation and bonuses, if any, at the absolute discretion +of the Board of Directors. On December 31, 2012, the Company entered into a new employment agreement with Mr. Rosenfeld pursuant +to which Mr. Rosenfeld continues to serve as Chief Executive Officer and executive Chairman of the Board of Directors of the Company +until the agreement expires on December 31, 2015 or is sooner terminated in accordance with its terms. Mr. Rosenfeld’s current +agreement provides for an annual base salary of $578,813, $607,754 and $638,142 for the fiscal years 2013, 2014 and 2015, respectively, +and a monthly automobile allowance of $1,500. The current agreement provides that Mr. Rosenfeld will receive additional compensation +and bonuses, if any, at the absolute discretion of the Board of Directors. Pursuant to the current agreement, on January 2, 2013, +Mr. Rosenfeld was granted 150,000 shares of the Company’s Common Stock (the number of shares indicated having been adjusted +for an October 1, 2013 three-for-two stock split effected as a stock dividend), subject to certain restrictions. These restricted +shares of Common Stock, which were issued under the 2006 Plan, vest in five equal annual installments of 30,000 shares, which +commenced on December 1, 2013. +In +the event of his death, Mr. Rosenfeld’s employment agreement provides for the payment to his estate of his base salary for +the 12-month period immediately subsequent to the date of Mr. Rosenfeld’s death. The agreement also provides that if Mr. +Rosenfeld’s employment agreement is terminated due to his “total disability” (as defined in the agreement), +Mr. Rosenfeld will receive payment of his base salary for the 12-month period immediately subsequent to the date he is determined +to be totally disabled. Mr. Rosenfeld’s employment agreement allows the Company to terminate his employment with “cause” +(as defined in the employment agreement) or without cause. In the event that Mr. Rosenfeld’s employment is terminated by +the Company for cause, the Company will have no further obligations to Mr. Rosenfeld, and Mr. Rosenfeld will be entitled to no +further compensation from the Company, except for pro-rata amounts due to him on the date of his termination. In the event that +Mr. Rosenfeld’s employment is terminated by the Company without cause or by Mr. Rosenfeld’s resignation for “good +reason” (as defined in the employment agreement), Mr. Rosenfeld will be entitled to receive payment of his annual base salary, +payable at regular payroll intervals, from the date of termination of employment through the longer of the remainder of the term +of the agreement or six months. +35 +In +addition, if Mr. Rosenfeld’s employment is terminated by the Company without cause or by the resignation of Mr. Rosenfeld +for good reason during the period commencing 90 days prior to a “change of control” (as defined in the employment +agreement) transaction and ending 180 days following a change of control transaction, Mr. Rosenfeld will receive an amount equal +to three times the average amount of total W-2 compensation actually received by him during the preceding three calendar years +ending on the last previous December 31, except that in lieu of the actual base salary component received during such period, +there shall be substituted the annual base salary to which Mr. Rosenfeld was entitled as of the date of termination or resignation +(the “Change of Control Payment”). However, if the Change of Control Payment (or a portion thereof) is determined +to constitute an “excess parachute payment” under Sections 280G and 4999 of the Code, Mr. Rosenfeld shall be paid +either (i) the Change of Control Payment (which shall be subject to all applicable taxes to be paid by the executive including +the excise tax payable pursuant to Section 4999 and which shall be limited as to deductibility to the Company) or (ii) a reduced +amount, calculated in accordance with Section 280G, that may be paid to the executive without the imposition of an excise tax +under Section 4999 and which shall be fully deductible to the Company, whichever payment yields the greater after-tax benefit +to the executive. +Arvind +Dharia. In January 1998, the Company entered into an employment agreement with Arvind Dharia, which has been amended from +time to time, most recently on February 2, 2015. Pursuant to Mr. Dharia’s amended agreement, Mr. Dharia continues to serve +as the Company’s Chief Financial Officer. The term of Mr. Dharia’s employment under his agreement, as amended, extends +through December 31, 2017, and will be automatically extended for an additional one-year period unless either party timely notifies +the other of its intention not to extend the term. Prior to the most recent amendment of the agreement, Mr. Dharia received an +annual base salary of $554,719 during fiscal years 2012, 2013 and 2014. Commencing January 1, 2015, pursuant to the most recent +amendment of the agreement, Mr. Dharia’s annual base salary increased to and will remain $582,455 for the remaining term +of the agreement. Mr. Dharia received a monthly automobile allowance of $1,400 prior to the most recent amendment of the agreement +and, beginning January 1, 2015, his monthly car allowance increased to $1,600. The agreement provides that the Company will pay +life insurance premiums on Mr. Dharia’s behalf of approximately $80,000 per year. Mr. Dharia’s employment agreement, +as amended, provides for a grant of 15,000 shares of the Company’s Common Stock (the number of shares indicated having been +adjusted for an October 1, 2013 three-for-two stock split effected as a stock dividend), subject to certain restrictions. These +restricted shares of Common Stock were issued to Mr. Dharia on February 8, 2012 under the 2006 Plan and vest in three substantially +equal annual installments, which commenced on February 8, 2013. The most recent amendment of the agreement provides for a grant +of 15,000 shares of the Company’s Common Stock, subject to certain restrictions. These restricted shares of Common Stock +were issued to Mr. Dharia on February 2, 2015 under the 2006 Plan and will vest in five equal annual installments commencing on +February 2, 2016. In addition, the amended agreement provides that Mr. Dharia will receive an annual bonus in such amount, if +any, and at such time or times, as the Board of Directors may determine in its absolute discretion. Subject to availability of +shares under the 2006 Plan, or any other plan designated by the Board of Directors and approved by the Company’s stockholders, +Mr. Dharia is entitled to awards under such plan as may be determined by the Board of Directors, or a committee thereof, from +time to time in its absolute discretion. +The +agreement provides, in the event of Mr. Dharia’s death, for the payment to Mr. Dharia’s estate of his base salary +for the 12-month period immediately subsequent to the date of Mr. Dharia’s death. The agreement also provides that if Mr. +Dharia’s employment agreement is terminated due to his “total disability” (as defined in the agreement), Mr. +Dharia will receive payment of his base salary for the 12-month period immediately subsequent to the date he is determined to +be totally disabled. In the event that Mr. Dharia’s employment agreement is terminated “for cause” (as defined +in the agreement), the Company is obligated to pay Mr. Dharia the amount of compensation that is accrued and unpaid through the +date of termination. In the event that Mr. Dharia’s employment agreement is terminated for any reason (other than “for +cause” or due to his death or total disability), the Company is obligated to pay Mr. Dharia, in two installments, (a) an +amount equal to the product of (x) his base salary on the effective date of such termination plus the bonus paid or payable, if +any, for the fiscal year ended on the December 31st immediately preceding the termination date, multiplied by (y) the number of +years (and fraction of years) remaining in the term; and (b) the amount payable to him, or on his account, for what would have +been the balance of the term of his employment agreement with respect to certain benefits and plans as set forth in his employment +agreement. If the Company decides not to renew the agreement (other than “for cause” or due to his total disability), +then Mr. Dharia will be entitled to receive severance compensation, in cash, in an amount equal to his then-current base salary +for the 90-day period commencing on the expiration of the term. +36 +In +addition, in the event that there is a “change of control” transaction and Mr. Dharia’s employment has been +terminated by the Company other than “for cause” or if Mr. Dharia resigns “for good reason” (as such terms +are defined in the agreement), Mr. Dharia will receive an amount equal to three times the total compensation he was entitled to +receive under the agreement for the preceding 12-month period ending on the last previous December 31, except that in lieu of +the actual base salary component received during such period, there shall be substituted the annual base salary to which Mr. Dharia +was entitled to as of the date of termination or resignation (the “Change of Control Payment”). However, if the Change +of Control Payment (or a portion thereof) is determined to constitute an “excess parachute payment” under Sections +280G and 4999 of the Code, Mr. Dharia will be paid either (i) the Change of Control Payment (which shall be subject to all applicable +taxes to be paid by the executive including the excise tax payable pursuant to Section 4999 and which shall be limited as to deductibility +to the Company) or (ii) a reduced amount, calculated in accordance with Section 280G, that may be paid to the executive without +the imposition of an excise tax under Section 4999 and which shall be fully deductible to the Company, whichever payment yields +the greater after-tax benefit to the executive. +Awadhesh +Sinha. On December 1, 2010, the Company entered into an employment agreement with Mr. Sinha to replace the prior employment +agreement, which was to expire by its terms on December 31, 2010. Pursuant to the December 1, 2010 employment agreement, Mr. Sinha +continued to serve as Chief Operating Officer of the Company for a term that commenced on January 1, 2011 and expired on December +31, 2013, with an annual base salary of $575,000 for the term of the agreement. The December 1, 2010 employment agreement provided +Mr. Sinha with a monthly automobile allowance of $1,750 and obligated the Company to pay term life insurance premiums on his behalf +of approximately $3,500 per year. The agreement also provided for a grant of 78,750 shares of the Company’s Common Stock, +all of which have now vested. +On +January 10, 2014, the Company entered into a new employment agreement with Mr. Sinha pursuant to which Mr. Sinha continues to +serve as Chief Operating Officer of the Company until the agreement expires on December 31, 2016 or is sooner terminated in accordance +with its terms. Mr. Sinha’s current agreement provides for an annual base salary of $600,000, $630,000 and $661,500 for +the years 2014, 2015 and 2016, respectively, a monthly automobile allowance of $1,850 and the payment of term life insurance premiums +on Mr. Sinha’s behalf in the amount of approximately $3,500 per year. On January 15, 2014, pursuant to his current employment +agreement, Mr. Sinha was granted 29,886 shares of Common Stock, subject to certain restrictions. These restricted shares of Common +Stock, which were issued under the 2006 Plan, will vest in three equal annual installments of 9,962 shares, which commenced on +December 15, 2014. +In +addition, Mr. Sinha’s current agreement entitles him to an annual performance-based bonus for each of the fiscal years ended +December 31, 2014, 2015 and 2016 in an amount equal to 2% of the increase in the Company’s EBITDA for each such year over +the Company’s EBITDA for the immediately preceding year, up to a maximum annual bonus of $600,000, the first $300,000 of +which will be payable in cash and for any amount of the annual bonus in excess of $300,000 by a grant of restricted shares of +Common Stock, which restricted shares of Common Stock will vest in three equal annual installments commencing on the first anniversary +of the grant date. This performance-based bonus was not achieved with respect to the 2014 Fiscal Year. Bonuses and other incentive-based +compensation paid to Mr. Sinha are subject to recovery by the Company in the event of a determination that such compensation was +based upon materially inaccurate financial statements. +In +the event of his death, Mr. Sinha’s employment agreement provides for the payment to Mr. Sinha’s estate of his base +salary for the 12-month period immediately subsequent to the date of Mr. Sinha’s death. In addition, in the event of Mr. +Sinha’s “total disability” (as such term is defined in the agreement), the Company is obligated to continue +to pay Mr. Sinha’s base salary for the 12-month period immediately subsequent to the date of determination of such total +disability. In the event Mr. Sinha’s employment agreement is terminated “for cause” (as such terms are defined +in the agreement), or due to Mr. Sinha’s resignation without “good reason” (as such term is defined in the agreement), +the Company is obligated to pay Mr. Sinha the amount of compensation that is accrued and unpaid through the date of termination. +In the event Mr. Sinha’s employment agreement is terminated by the Company without cause or by the resignation of Mr. Sinha +for good reason, Mr. Sinha would be entitled to receive payment of his annual base salary, payable at regular payroll intervals, +from the date of termination of employment through the longer of (i) the remainder of the term or (ii) six months. +37 +In +addition, if Mr. Sinha’s employment is terminated by the Company without cause or if Mr. Sinha resigns for good reason during +the period commencing 120 days prior to a “change of control” (as defined in the agreement) and ending 90 days after +a change of control, Mr. Sinha would be entitled to receive a cash payment within ten days of the date of his termination or resignation +of employment in an amount equal to three times the total W-2 compensation and benefits actually received by him during the preceding +twelve-month period ending on the last previous December 31 st , except that, in lieu of the actual base salary compensation +received during such period, there shall be substituted the annual base salary to which Mr. Sinha was entitled to as of the date +of termination or resignation (the “Change of Control Payment”). However, if the Change of Control Payment (or a portion +thereof) is determined to constitute an “excess parachute payment” under Sections 280G and 4999 of the Code, Mr. Sinha +will be paid either (i) the Change of Control Payment (which shall be subject to all applicable taxes to be paid by the executive +including the excise tax payable pursuant to Section 4999 and which shall be limited as to deductibility to the Company) or (ii) +a reduced amount, calculated in accordance with Section 280G, that may be paid to the executive without the imposition of an excise +tax under Section 4999 and which shall be fully deductible to the Company, whichever payment yields the greater after-tax benefit +to the executive. +Robert +Schmertz. In October 2009, the Company entered into an new employment agreement with Mr. Schmertz to replace the prior employment +agreement, which was to expire by its terms on December 31, 2009. Under the October 2009 agreement, Mr. Schmertz continued to +serve as Brand Director of the Company for a term that commenced on October 7, 2009 and expired on December 31, 2012 and received +an annual base salary of $660,000 and a monthly automobile allowance of $1,250 in 2012. +On +January 2, 2013, the Company entered into an employment agreement with Mr. Schmertz to replace the prior, expired agreement, under +which Mr. Schmertz has served as the Company’s Brand Director for a term that commenced on January 1, 2013 and expired on +December 31, 2014. The 2013 agreement provided for an annual base salary of $725,000 and a monthly automobile allowance of $1,500 +during the term of the agreement and additional compensation and bonuses, if any, at the absolute discretion of the Board of Directors. +Pursuant to the 2013 agreement, on January 4, 2013, Mr. Schmertz was granted 25,000 shares of the Company’s Common Stock +(the number of shares indicated having been adjusted for an October 1, 2013 three-for-two stock split effected as a stock dividend), +subject to certain restrictions. These restricted shares of Common Stock, which were issued under the 2006 Plan, will vest in +five substantially equal annual installments, which commenced on January 4, 2014. +By +virtue of a new employment agreement dated March 9, 2015, the Company has extended Mr. Schmertz’s employment for a term +commencing March 9, 2015 through December 31, 2016 at an annual base salary of $761,250 and for a monthly car allowance of $1,500. +In addition, pursuant to such employment agreement, on March 20, 2015, Mr. Schmertz was granted 20,000 shares of the Company’s +Common Stock, subject to certain restrictions. These restricted shares of Common Stock, which were issued under the 2006 Plan, +will vest in three substantially equal annual installments, commencing on the third anniversary of the grant date. +In +the event of Mr. Schmertz’s death, the employment agreement provides for the payment to his estate of his base salary for +the 12-month period immediately subsequent to the date of Mr. Schmertz’s death. The agreement also provides that if Mr. +Schmertz’s employment agreement is terminated due to his “total disability” (as defined in the agreement), Mr. +Schmertz will receive payment of his base salary for the 12-month period immediately subsequent to the date he is determined to +be totally disabled. The Company may terminate the employment agreement for “cause” (as defined in the employment +agreement), in which event Mr. Schmertz would be entitled to receive only his accrued and unpaid base salary through the date +of termination. In the event that Mr. Schmertz’s employment is terminated by the Company without cause, he would be entitled +to receive payment of his annual base salary, payable at regular payroll intervals, from the date of termination through the remainder +of the term. In addition, if Mr. Schmertz’s employment is terminated by the Company without cause during the period commencing +30 days prior to a “change of control” (as defined in the employment agreement) transaction and ending 180 days after +a change of control transaction, he would be entitled to receive an amount equal to the lesser of (i) the average amount of total +compensation actually received by him during the preceding three calendar years multiplied by 3 and (ii) the maximum amount that +is tax deductible to the Company under Section 280G of the Code, such amount to be in lieu of and not in addition to any other +payments to which Mr. Schmertz would be entitled in the event of the termination of his employment. +38 +Amelia +Newton Varela. On January 31, 2011, the Company entered into a new employment agreement with Ms. Varela to replace the prior +employment agreement, which expired by its terms on December 31, 2010. Pursuant to the employment agreement, Ms. Varela continued +to serve as the Executive Vice President - Wholesale and received an annual base salary of $450,000 and a monthly automobile allowance +of $1,250 commencing January 1, 2011 until the employment agreement’s expiration on December 31, 2013. Pursuant to the January +31, 2011 employment agreement, Ms. Varela was granted an option to purchase 225,000 shares of the Company’s Common Stock +under the 2006 Plan, at an exercise price of $16.97 per share (the number of shares and exercise price indicated having been adjusted +for three-for-two stock splits effected as a stock dividend, which occurred on May 31, 2011 and October 1, 2013), which option +vested in four equal annual installments of 56,250 all of which installments have vested. The January 31, 2011 employment agreement +also provided an annual performance-based cash bonus to Ms. Varela for each of the fiscal years ended December 31, 2011, 2012 +and 2013 in an amount equal to 2% of the increase, if any, in the Wholesale Division EBIT for each such year over the Wholesale +Division EBIT for the immediately preceding year, provided that Wholesale Division EBIT attributable to any business acquired +by the Company after January 31, 2011 would not be included for the purpose of determining Ms. Varela’s bonus until the +acquired business has been owned by the Company for two full calendar years. Ms. Varela received a cash bonus of $76,000, $216,999 +and $63,351 for 2013 Wholesale Division EBIT performance, 2012 Wholesale Division EBIT performance and 2011 Wholesale Division +EBIT performance, respectively. +On +January 10, 2014, the Company entered into a new employment agreement with Ms. Varela to replace the prior agreement that expired +on December 31, 2013. Pursuant to the current employment agreement, Ms. Varela continues to serve as the Executive Vice President +- Wholesale of the Company for a term commencing on January 1, 2014 and expiring on December 31, 2016, unless sooner terminated +in accordance with the agreement’s terms. Ms. Varela’s current employment agreement provides for an annual base salary +during the term of $500,000 and a monthly automobile allowance of $1,250. In addition, pursuant to the agreement, on February +3, 2014, Ms. Varela was granted an option to purchase 100,000 shares of the Company’s Common Stock under the 2006 Plan, +at an exercise price of $32.59 per share, which option is exercisable in four equal annual installments of 25,000 on each anniversary +of the date of grant, which commenced on February 3, 2015. The current agreement also entitles Ms. Varela to an annual performance-based +cash bonus for each of the fiscal years ended December 31, 2014, 2015 and 2016 in an amount equal to 2% of the increase, if any, +in the Wholesale Division EBIT for each such year over the Wholesale Division EBIT for the immediately preceding year, provided +that Wholesale Division EBIT attributable to any business acquired by the Company after January 10, 2014 will not be included +for the purpose of determining Ms. Varela’s bonus until the acquired business has been owned by the Company for two full +calendar years. This performance-based bonus was not achieved with respect to the 2014 Fiscal Year. +In +the event that Ms. Varela’s employment agreement is terminated due to Ms. Varela’s “disability” (as defined +in the agreement) or death, the Company is obligated to pay Ms. Varela (or her estate) the amount of accrued and unpaid salary +through the date of termination plus any performance-based cash bonus that has accrued for the year prior to termination and is +unpaid at the time Ms. Varela’s employment is terminated due to her disability or death. The Company may terminate the agreement +for “cause” (as defined in the agreement) and, in such event, Ms. Varela will be entitled only to accrued and unpaid +salary through the date of termination of employment. In the event Ms. Varela’s employment is terminated by the Company +without cause, she would be entitled to receive payment of her annual base salary, payable at regular payroll intervals, from +the date of termination of employment through the remainder of the term plus any performance-based cash bonus that has accrued +but not yet been paid. In the event that Ms. Varela’s employment is terminated by the Company without cause during the period +commencing 30 days prior to a “change of control” (as defined in the agreement) transaction and ending 180 days following +a change of control transaction, she is entitled to receive an amount equal to the lesser of (i) the average amount of total compensation +actually received by her during the preceding three calendar years multiplied by 3 and (ii) the maximum amount that is tax deductible +to the Company under Section 280G of the Code. +39 +GRANTS +OF PLAN-BASED AWARDS IN THE 2014 FISCAL YEAR +The +following table sets forth information concerning awards under the Company’s equity and non-equity incentive plans granted +to each of the Named Executive Officers in the 2014 Fiscal Year, including performance-based awards and those using time-based +vesting. Following the table is a discussion of material factors related to the information disclosed in the table. +All Other +All Other +Stock +Option +Awards: +Awards: +Grant Date +Estimated future payouts under equity +Number of +Number of +Exercise or +Fair Value +incentive plan awards +Shares of +Securities +Base Price +of Stock and +Stock or +Underlying +of Option +Option +Grant +Threshold +Target +Maximum +Units +Options +Awards +Awards +Name +Date +($) +($) +($) +(#) +(#) +($/Sh) +($) +Edward R. Rosenfeld +03/17/14 +— +2,376,126 (1) +— +22,265 +— +— +816,680 +Arvind Dharia +n/a +— +1,108,859 (1) +— +— +— +— +— +Awadhesh Sinha +01/15/14 +— +1,108,859 (1) +— +29,886 +— +— +999,986 +Robert Schmertz +03/17/14 +— +1,108,859 (1) +— +10,995 +— +— +403,297 +Amelia Newton Varela +02/03/14 +— +1,108,859 (1) +— +— +100,000 +32.59 +930,000 +03/17/14 +— +15,118 +— +— +554,528 +n/a +— +76,000 (2) +— +— +— +— +— +(1) In the 2014 +Fiscal Year, the Compensation Committee established a bonus pool for Named Executive Officers and other key executives of the +Company based on 6% of net income of the Company achieved in the 2014 Fiscal Year and also fixed each executive’s maximum +share of the 2014 bonus pool, which was 30% for Mr. Rosenfeld and 14% for each of the other Named Executive Officers. Since the +bonus pool was established as a percentage of the Company’s 2014 Fiscal Year net income, it would not be possible to determine +the amount of these potential bonuses until the completion of the Company’s 2014 Fiscal Year. Accordingly, the amount indicated +is a representative payout amount and equals the maximum bonus the Named Executive Officer would have been eligible to receive +from a bonus pool of $7,920,420, which equals 6% of the $132,007,000 in net income of the Company achieved in the fiscal year +ended December 31, 2013. See the discussion of the 2014 bonus pool and the individual target awards of each of the Named Executive +Officers appearing above in the “Annual Performance-Based Bonus - Based on Specific Performance Metrics” section of +“Compensation Structure.” As disclosed therein, the Company paid these performance bonuses in restricted shares of +Common Stock granted on March 11, 2015. Accordingly, Messrs. Rosenfeld, Dharia, Sinha and Schmertz and Ms. Varela received grants +of 25,326, 5,506, 5,506, 12,235 and 15,329 restricted shares of Common Stock, respectively. In accordance with applicable SEC +rules, these restricted stock awards will appear in the Summary Compensation Table to be included in our proxy statement for our +2016 Annual Meeting of Stockholders provided the restricted stock award recipient is a named executive officer in that proxy statement. +(2) Under +an employment agreement dated January 10, 2014 between the Company and Ms. Varela, Ms. Varela is entitled to receive a cash bonus +under the Company’s 2006 Plan on or about March 15, 2015 in an amount equal to 2% of the increase, if any, in the Wholesale +division EBIT for the 2014 Fiscal Year over the Wholesale division EBIT for the 2013 fiscal year. Since it would not be possible +to determine the amount of Ms. Varela’s cash bonus, if any, until the completion of the 2014 Fiscal Year, the amount indicated +as the target bonus payout is a representative amount and based upon the actual increase in the EBIT performance of the Company’s +Wholesale division for the 2013 fiscal year over the EBIT performance of the Wholesale division for the 2012 fiscal year. See +the discussion of this grant to Ms. Varela appearing above in the “Annual Performance-Based Bonus - Based on Specific Performance +Metrics” section of “Compensation Structure” and above under “Employment Arrangements.” As disclosed +therein, this performance-based bonus was not achieved with respect to the 2014 Fiscal Year. +40 +Plan-Based Awards +2006 +Stock Incentive Plan +As +of March 10, 2006, the Board of Directors of the Company adopted the Company’s 2006 Stock Incentive Plan and, on May 26, +2006, the Company’s stockholders approved the adoption of the Company’s 2006 Stock Incentive Plan. The 2006 Stock +Incentive Plan was amended in 2007 and 2008. On April 6, 2009, the Board of Directors adopted an Amended and Restated 2006 Stock +Incentive Plan and, on May 22, 2009, the Company’s stockholders approved the Amended and Restated 2006 Stock Incentive Plan. +On April 5, 2012, the Board of Directors approved an amendment of the Amended and Restated 2006 Stock Incentive Plan primarily +to increase the number of shares of Common Stock available for issuance thereunder, subject to stockholder approval of such amendment. +The amendment to the Amended and Restated 2006 Stock Incentive Plan was approved by the Company’s stockholders at the 2012 +Annual Meeting of Stockholders on May 25, 2012. +The +Company’s Amended and Restated 2006 Stock Incentive Plan is referred to as the “2006 Plan” throughout this Proxy +Statement. The purpose of the 2006 Plan is to enhance the profitability and value of the Company for the benefit of its stockholders +by enabling the Company to offer eligible employees, consultants and non-employee directors cash and stock-based incentives in +the Company to attract, retain and reward such individuals and provide additional incentive for such persons to exert maximum +efforts for the success of the Company by encouraging stock ownership in the Company. The 2006 Plan serves as a means to strengthen +the mutuality of interests between such individuals and the Company’s stockholders. +The +maximum number of shares of Common Stock available for issuance under the 2006 Plan is 23,466,000 shares. As of the Record Date, +there were outstanding 4,097,190 unvested shares of restricted stock and options to purchase 2,271,964 shares of Common Stock; +options had been exercised, or restricted stock had vested, with respect to 12,917,386 shares of Common Stock; and 4,179,460 shares +of Common Stock remained available for grant under the 2006 Plan. +OUTSTANDING +EQUITY AWARDS AT END OF THE 2014 FISCAL YEAR +The +following table sets forth information concerning unexercised stock options, restricted stock that has not vested and stock awards +outstanding for each of the Named Executive Officers as of the end of the 2014 Fiscal Year. All awards that occurred prior to +the three-for-two split of the Company’s Common Stock effectuated as a stock dividend on or about April 30, 2010, the three-for-two +split of the Company’s Common Stock effectuated as a stock dividend on or about May 31, 2011 and the three-for-two split +of the Company’s Common Stock effectuated as a stock dividend on or about October 1, 2013 have been adjusted to account +for each such stock split, as applicable. +41 +Option Awards +Stock Awards +Equity +Incentive +Equity +Equity +Plan +Incentive Plan +Incentive Plan +Awards: +Awards: +Awards: +Number of +Market or +Number of +Number of +Number of +Unearned +Payout Value of +Securities +securities +Securities +Number of +Market Value +Shares, Units +Unearned +Underlying +Underlying +Underlying +Shares or +of Shares or +or Other +Shares, Units or +Unexercised +Unexercised +Unexercised +Option +Units of Stock +Units of Stock +Rights that +Other Rights +Options +Options +Unearned +Exercise +Option +That Have +That Have Not +Have Not +That Have Not +(#) +(#) +Options +Price +Expiration +Not Vested +Vested +Vested +Vested +Name +Exercisable +Unexercisable +(#) +($) +Date +(#) +($) +(#) +($) +Edward R. Rosenfeld +45,000 +— +— +5.3822 +3/24/2015 +165,515 (1) +5,268,342 +— +— +337,500 +— +— +5.5645 +4/1/2016 +— +— +— +— +Arvind Dharia +— +— +— +— +— +20,525 (2) +653,311 +— +— +Awadhesh Sinha +— +— +— +— +— +26,674 (3) +849,033 +— +— +Robert Schmertz +— +— +— +— +— +48,470 (4) +1,542,800 +— +— +Amelia Newton Varela +67,503 +— +— +5.7244 +4/29/2015 +37,447 (6) +1,191,938 +— +— +63,283 +— +— +5.5645 +4/1/2016 +— +— +— +— +50,625 +16,876 (5) +— +14.4578 +4/1/2017 +— +— +— +— +112,500 +56,250 (5) +— +16.9645 +2/1/2018 +— +— +— +— +25,000 +75,000 (5) +— +32.59 +2/3/2021 +(1) +On March 16, 2011, Mr. Rosenfeld was awarded 45,000 shares of restricted Common Stock, which shares vest in four equal annual +installments commencing on the first anniversary of the date awarded. On March 14, 2012, Mr. Rosenfeld was awarded +30,000 shares of restricted Common Stock, which shares vest in five equal annual installments commencing on the first anniversary +of the date awarded. On January 2, 2013, Mr. Rosenfeld was awarded 150,000 shares of restricted Common Stock, which +shares vest in five equal annual installments commencing on December 1, 2013 and on each December 1 st thereafter. On +March 15, 2013, Mr. Rosenfeld was awarded 30,000 shares of restricted Common Stock, which shares vest in five equal annual +installments commencing on the first anniversary of the date awarded. On March 17, 2014, Mr. Rosenfeld was awarded +22,265 shares of restricted Common Stock, which shares vest in five substantially equal annual installments commencing on +March 5, 2015. +(2) +On March 9, 2010, Mr. Dharia was awarded 27,000 shares of restricted Common Stock, which shares vest in five equal annual +installments commencing on April 1, 2011. On March 16, 2011, Mr. Dharia was awarded 22,500 shares of restricted +Common Stock, which shares vest in four equal annual installments commencing on the first anniversary of the date awarded. On +February 8, 2012, Mr. Dharia was awarded 15,000 shares of restricted Common Stock, which shares vest in three substantially +equal annual installments commencing on the first anniversary of the date awarded. On April 2, 2012, Mr. Dharia +was awarded 7,500 shares of restricted Common Stock, which shares vest in five equal annual installments commencing on the +first anniversary of the date awarded. +(3) +On March 14, 2012, Mr. Sinha was awarded 11,250 shares of restricted Common Stock, which shares vest in five equal annual +installments commencing on the first anniversary of the date awarded. On January 15, 2014, Mr. Sinha was awarded +29,886 shares of restricted Common Stock, which shares vest in three equal annual installments commencing on December 15, +2014. +(4) +On March 16, 2011, Mr. Schmertz was awarded 16,875 shares of restricted Common Stock, which shares vest in four equal annual +installments commencing on the first anniversary of the date awarded. On January 4, 2013, Mr. Schmertz was awarded +25,000 shares of restricted Common Stock, which shares vest in five substantially equal annual installments commencing on +the first anniversary of the date awarded. On March 15, 2013, Mr. Schmertz was awarded 16,564 shares of restricted +Common Stock, which shares vest in five substantially equal annual installments commencing on the first anniversary of the +date awarded. On March 17, 2014, Mr. Schmertz was awarded 10,995 shares of restricted Common Stock, which shares +vest in five substantially equal annual installments commencing on March 5, 2015. +42 +(5) +On April 1, 2010, Ms. Varela was granted an option to purchase 84,375 shares of the Company’s +Common Stock under the Company’s 2006 Plan, which option vests in five equal annual +installments commencing on the first anniversary of the date of grant. On February 1, +2011, Ms. Varela was granted an option to purchase 225,000 shares of the Company’s +Common Stock under the Company’s 2006 Plan, which option vests in four equal annual +installments commencing on the first anniversary of the date of grant. On February 3, +2014, Ms. Varela was granted an option to purchase 100,000 shares of the Company’s +Common Stock under the 2006 Plan, which option vests in four equal annual installments +commencing on the first anniversary of the date of grant. +(6) +On March 14, 2012, Ms. Varela was awarded 17,209 shares of restricted Common Stock, which shares vest in five substantially +equal annual installments commencing on the first anniversary of the date awarded. On March 15, 2013, Ms. Varela was awarded +15,000 shares of restricted Common Stock, which shares vest in five equal annual installments commencing on the first +anniversary of the date awarded. On March 17, 2014, Ms. Varela was awarded 15,118 shares of restricted Common Stock, which +shares vest in five substantially equal annual installments commencing on March 5, 2015. +OPTION +EXERCISES AND STOCK VESTED IN THE 2014 Fiscal Year +The +following table sets forth information concerning stock options exercised and restricted stock vested during the 2014 Fiscal Year +for each of the Named Executive Officers. The value realized from exercised options is deemed to be the market value of the Common +Stock on the date of exercise, less the exercise price of the option, multiplied by the number of shares of Common Stock underlying +the option. The value realized from the vesting of restricted stock is deemed to be the market value of the Common Stock on the +date of vesting multiplied by the number of shares vesting. +Option Awards +Stock Awards +Name +Number of Shares +Acquired on Exercise +(#) +Value Realized +on Exercise +($) +Number of Shares +Acquired on Vesting +(#) +Value Realized +on Vesting +($) +Edward R. Rosenfeld +45,000 +1,228,950 +87,000 +2,939,123 +Arvind Dharia +— +— +17,525 +622,882 +Awadhesh Sinha +— +— +12,212 +396,654 +Robert Schmertz +33,753 +776,665 +12,534 +455,987 +Amelia Newton Varela +— +— +6,441 +234,324 +SECURITIES +AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS +The +following table sets forth information as of December 31, 2014 with respect to compensation plans (including individual compensation +arrangements) under which shares of Common Stock are authorized for issuance, aggregated as follows: +· +All compensation plans previously approved +by security holders; and +· +All +compensation plans not previously approved by security holders. +43 +EQUITY +COMPENSATION PLAN INFORMATION +Number of +securities to be +issued upon +exercise of +outstanding +options, warrants +and rights +(#) +Weighted average +exercise price of +outstanding options, +warrants and rights +($) +Number of securities +remaining available +for future issuance +under equity +compensation plans +(excluding securities +reflected in +column (a)) +(#) +(a) +(b) +(c) +Equity compensation plans approved by security holders +3,428,000 +19.48 +4,594,492 +Equity compensation plans not approved by security holders +— +— +— +Total +3,428,000 +19.48 +4,594,492 +Termination, +Change in Control and Non-Competition/Non-Solicitation +The +employment agreements for each of the Named Executive Officers provide for a severance payment upon a termination of employment +in connection with a change-in-control of the Company. The employment agreements of Messrs. Rosenfeld, Dharia and Sinha also provide +for severance payment if the executive terminates his employment for good reason in connection with a change-in-control event. +The change-in-control severance payments may result in the application of the “golden parachute” provisions of Section +280G of the Code and, to the extent Section 280G applies, the Company may not deduct from its taxable income the severance payments +made to the Named Executive Officer. Moreover, Section 4999 of the Code would impose a 20% excise tax on the Named Executive Officer +receiving the severance payment. In the case of Mr. Schmertz and Ms. Varela, these severance payments in connection with a change-in-control, +however, are reduced if the severance payment, when added to any other benefits triggered by a change-of-control, is determined +to constitute an “excess parachute payment” under Sections 280G and 4999 of the Code, to the maximum amount that is +deductible to the Company under Section 280G of the Code. In the case of Messrs. Rosenfeld, Dharia and Sinha, the executive’s +change-in-control severance payment will only be reduced to the maximum amount that is deductible to the Company under Section +280G of the Code if the reduction provides the Named Executive Officer with the best after-tax result; otherwise, the Named Executive +Officer will receive the full amount of the severance payment and other benefits triggered by the change-in-control and be liable +for the 20% excise tax on the excess parachute payment in addition to all other applicable taxes and, in such case, the deduction +by the Company of the portion of the severance payment constituting an excess parachute payment will be disallowed. +The +Company’s employment agreements with each of the Named Executive Officers also provide for severance payments to the executive +if the Company terminates the executive’s employment without cause, or, in the case of Mr. Rosenfeld and Mr. Sinha, if the +Company gives him good reason to terminate employment. +Please +see the section of this Proxy Statement captioned “Employment Arrangements” for a summary description of the Named +Executive Officers’ employment agreements and such severance and change-in-control provisions. These benefits are described +and quantified in the section of this Proxy Statement captioned “Potential Payments Upon Termination or Change-In-Control” +below. +44 +The +Company believes that the severance payments and payments made upon change-in-control provisions in the employment agreements +provide appropriate protection to the Company’s executives, comparable to that available at peer companies, and, with regard +to the enhanced severance following a change-in-control, protects the Company from losing key executives during a period when +a change-in-control may be threatened or pending. These benefits are described and quantified in the section below captioned “Potential +Payments Upon Termination or Change-In-Control.” +Ms. +Varela has agreed to a non-compete and non-solicitation restriction through the expiration date of her employment agreement, December +31, 2016, in the event of a voluntary termination or termination for cause. Messrs. Rosenfeld and Sinha have each agreed to a +non-compete and non-solicitation restriction during the period of his employment and for a six-month period following the termination +of his employment for cause or in the event of his resignation without good reason. Mr. Schmertz has agreed to a non-compete and +non-solicitation restriction through December 31, 2015. Mr. Dharia does not have non-compete or non-solicitation provisions in +his employment agreement. +POTENTIAL +PAYMENTS UPON TERMINATION OR CHANGE-IN-CONTROL +The +Company’s employment agreements with the Named Executive Officers provide for payments to such individuals upon termination +of employment or a change-in-control of the Company. Please see the section of this Proxy Statement captioned “Employment +Arrangements.” The amounts set forth in the table below shall be payable to the respective Named Executive Officer if such +Named Executive Officer’s employment is terminated under the various scenarios set forth below. +NAME +CASH PAYMENT +CONTINUATION OF MEDICAL / WELFARE +BENEFITS (PRESENT VALUE) +ACCELERATION AND CONTINUATION OF +EQUITY AWARD +REDUCTION OF BENEFITS UPON A CHANGE-IN-CONTROL +(1) +TOTAL TERMINATION BENEFITS +($) +($) +($) +($) +($) +TERMINATION DUE TO DEATH +Edward R. Rosenfeld +638,142 (2) +7,051 (3) +— +— +645,193 +Arvind Dharia +582,455 (4) +14,650 (3) +— +— +597,105 +Awadhesh Sinha +630,000 (5) +14,650 (3) +— +— +644,650 +Robert Schmertz +761,250 (6) +— +— +— +761,250 +Amelia Newton Varela +— +— +— +— +— +TERMINATION DUE TO TOTAL DISABILITY +Edward R. Rosenfeld +638,142 (2) +— +— +— +638,142 +Arvind Dharia +582,455 (4) +— +— +— +582,455 +Awadhesh Sinha +630,000 (5) +— +— +— +630,000 +Robert Schmertz +761,250 (6) +— +— +— +761,250 +Amelia Newton Varela +— +— +— +— +— +TERMINATION FOR CAUSE; +RESIGNATION WITHOUT GOOD REASON +Edward R. Rosenfeld +— +— +— +— +— +Arvind Dharia +— +— +— +— +— +Awadhesh Sinha +— +— +— +— +— +Robert Schmertz +— +— +— +— +— +Amelia Newton Varela +— +— +— +— +— +TERMINATION OTHER THAN FOR CAUSE; RESIGNATION FOR GOOD REASON +Edward R. Rosenfeld +638,142 (7) +— +— +— +638,142 +Arvind Dharia +1,747,365 (8) +100,591 (9) +— +— +1,847,956 +Awadhesh Sinha +1,291,500 (10) +— +— +— +1,291,500 +Robert Schmertz +1,522,500 (11) +— +— +— +1,522,500 +Amelia Newton Varela +1,000,000 (12) +— +— +— +1,000,000 +TERMINATION UPON A CHANGE-IN-CONTROL +Edward R. Rosenfeld +8,033,896 (13) +— +5,268,342 +(14) +(3,971,488 ) +9,330,750 +(15) +Arvind Dharia +2,403,162 (16) +— +653,311 (14) +— +3,056,473 +Awadhesh Sinha +5,837,865 (17) +— +849,033 (14) +— +6,686,898 +Robert Schmertz +12,786,127 (18) +— +1,542,689 (14) +(2,088,635 ) +12,240,181 (15) +Amelia Newton Varela +8,063,573 (19) +— +1,485,024 (14) +(1,789,262 ) +7,759,335 (15) +45 +(1) The +employment agreements of two of the Named Executive Officers provide that severance payments +in connection with a change-in-control are reduced if the severance payment, when added +to any other benefits triggered by a change-of-control, is determined to constitute an +“excess parachute payment” under Sections 280G and 4999 of the Code, to the +maximum amount that is deductible to the Company under Section 280G of the Code. The +employment agreements of the remaining Named Executive Officers indicate that the executive’s +change-in-control severance payment will only be reduced to the maximum amount that is +deductible to the Company under Section 280G of the Code if the reduction provides the +Named Executive Officer with the best after-tax result; otherwise, the Named Executive +Officer will receive the full amount of the severance payment and other benefits triggered +by the change-in-control and be liable for the 20% excise tax on the excess parachute +payment in addition to all other applicable taxes and, in such case, the deduction by +the Company of the portion of the severance payment constituting an excess parachute +payment will be disallowed. +(2) Consists +of Mr. Rosenfeld’s 2015 base salary of $638,142, which would be paid at regular +intervals. +(3) Consists +of medical benefits. +(4) Consists +of Mr. Dharia’s 2015 base salary of $582,455, which would be paid at regular intervals. +(5) Consists +of Mr. Sinha’s 2015 base salary of $630,000, which would be paid at regular intervals. +(6) Consists +of Mr. Schmertz’s 2015 base salary of $761,250, which would be paid at regular +intervals. For purposes of calculating this hypothetical payment, Mr. Schmertz’s +March 9, 2015 employment agreement is deemed to be in effect as of December 31, 2014. +The section of this Proxy Statement captioned “Employment Arrangements” contains +a detailed description of the terms of this employment agreement. +(7) Consists of the base salary +of $638,142 that would have been paid to Mr. Rosenfeld during the remainder of the term of his employment until the expiration +of his employment agreement on December 31, 2015. Mr. Rosenfeld would receive these payments at regular intervals. +(8) Consists +of Mr. Dharia’s 2014 base salary of $582,455 multiplied by the number of years +(and fraction of years) remaining in the term of his employment agreement, which expires +on December 31, 2017. Mr. Dharia would receive 50% of this payment immediately and the +remaining 50% would be paid to him one year later (i.e., on December 31, 2015). +(9) Consists +of one times the sum of Mr. Dharia’s life insurance payment ($85,941 per year) +plus medical benefits ($14,650 per year). +(10) Consists +of the base salary of $630,000 for 2015 and $661,500 for 2016 that would have been paid +to Mr. Sinha during the remainder of the term of his employment until the expiration +of his employment agreement on December 31, 2016. Mr. Sinha would receive these payments +at regular intervals. +(11) Consists +of the base salary of $761,250 that would have been paid to Mr. Schmertz during the remainder +of the term of his employment until the expiration of his employment agreement on December +31, 2016. Mr. Schmertz would receive these payments at regular intervals. For purposes +of calculating this hypothetical payment, Mr. Schmertz’s March 9, 2015 employment +agreement is deemed to be in effect as of December 31, 2014. The section of this Proxy +Statement captioned “Employment Arrangements” contains a detailed description +of the terms of this employment agreement. +(12) Consists +of the base salary of $500,000 that would have been paid to Ms. Varela during the remainder +of the term of her employment until the expiration of her employment agreement on December +31, 2016. Ms. Varela would receive these payments at regular intervals. +(13) Consists +of three times the average total compensation Mr. Rosenfeld actually received for the +preceding three calendar years, except that in lieu of the actual base salary component +received during such period, there has been substituted the annual base salary to which +Mr. Rosenfeld was entitled as of the date of termination or resignation. Upon a change-in-control, +payments (or portions thereof) to Mr. Rosenfeld determined to constitute an “excess +parachute payment” may be reduced to the maximum amount that would be tax deductible +by the Company pursuant to Sections 280G of the Code. Upon a hypothetical December 31, +2014 change-in-control, this amount would have been reduced by $3,971,488 to reflect +the maximum amount that would be tax deductible by the Company pursuant to Section 280G +of the Code. See the “Implications of Tax and Accounting Matters” section +of “Compensation Discussion and Analysis” for a discussion of the applicability +of Sections 280G and 4999 of the Code to change-in-control payments generally. See also +the summary of Mr. Rosenfeld’s employment agreement under “Employment Arrangements.” +(14) The +amount disclosed represents the total value of the restricted stock and stock options +which would have received accelerated vesting upon a hypothetical change in control on +December 31, 2014. +(15) The +total amount does not include the amount deducted pursuant to Section 280G of the Code. +(16) Consists +of three times the total compensation Mr. Dharia actually received for the preceding +twelve calendar months, except that in lieu of the actual base salary component received +during such period, there has been substituted the annual base salary to which Mr. Dharia +was entitled as of the date of termination or resignation. Upon a change-in-control, +payments (or portions thereof) to Mr. Dharia determined to constitute an “excess +parachute payment” may be subject to reduction to the maximum amount that would +be tax deductible by the Company pursuant to Sections 280G of the Code. Upon a hypothetical +December 31, 2014 change-in-control, no payments to Mr. Dharia would have been subject +to reduction. See the “Implications of Tax and Accounting Matters” section +of “Compensation Discussion and Analysis” for a discussion of the applicability +of Sections 280G and 4999 of the Code to change-in-control payments generally. See also +the summary of Mr. Dharia’s employment agreement under “Employment Arrangements.” +(17) Consists +of three times the sum of base compensation and certain benefits Mr. Sinha actually received +for the preceding twelve calendar months, except that in lieu of the actual base salary +component received during such period, there has been substituted the annual base salary +to which Mr. Sinha was entitled as of the date of termination or resignation. Upon a +change-in-control, payments (or portions thereof) to Mr. Sinha determined to constitute +an “excess parachute payment” may be subject to reduction to the maximum +amount that would be tax deductible by the Company pursuant to Sections 280G of the Code. +Upon a hypothetical December 31, 2014 change-in-control, no payments to Mr. Sinha would +have been subject to reduction. See the “Implications of Tax and Accounting Matters” +section of “Compensation Discussion and Analysis” for a discussion of the +applicability of Sections 280G and 4999 of the Code to change-in-control payments generally. +See also the summary of Mr. Sinha’s employment agreement under “Employment +Arrangements.” +46 +(18) Consists +of three times the average total compensation Mr. Schmertz actually received for the +preceding three calendar years. Upon a hypothetical December 31, 2014 change-in-control, +this amount would have been reduced by $2,088,635 to reflect the maximum amount that +would be tax deductible by the Company pursuant to Section 280G of the Code. See the +“Implications of Tax and Accounting Matters” section of “Compensation +Discussion and Analysis” for a discussion of the applicability of Sections 280G +and 4999 of the Code to change-in-control payments generally. See also the summary of +Mr. Schmertz’s employment agreement under “Employment Arrangements.” +For purposes of calculating this hypothetical payment, Mr. Schmertz’s March 9, +2015 employment agreement is deemed to be in effect as of December 31, 2014. +(19) Consists +of three times the average total compensation Ms. Varela actually received for the preceding +three calendar years. Upon a hypothetical December 31, 2014 change-in-control, this amount +would have been reduced by $1,789,262 to reflect the maximum amount that would be tax +deductible by the Company pursuant to Section 280G of the Code. See the “Implications +of Tax and Accounting Matters” section of “Compensation Discussion and Analysis” +for a discussion of the applicability of Sections 280G and 4999 of the Code to change-in-control +payments generally. See also the summary of Ms. Varela’s employment agreement under +“Employment Arrangements.” +Compensation +Committee Report +The +Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with management, and based on the review +and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis +be included in this Proxy Statement. +Submitted by +the Compensation Committee of the Company’s Board of Directors: +Peter Migliorini (Chairman) +Rose +Peabody Lynch +Thomas H. Schwartz +Robert Smith +47 +PROPOSAL +TWO: +RATIFICATION +OF THE APPOINTMENT OF EISNERAMPER LLP AS THE COMPANY’S +INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS +FOR THE FISCAL YEAR ENDING DECEMBER 31, 2015 +The +Audit Committee has appointed EisnerAmper LLP as the Company’s independent registered public accounting firm to conduct +the audit of the Company’s books and records for the fiscal year ending December 31, 2015. EisnerAmper LLP has served as +the Company’s independent registered public accountants since 1995. +Before +making its determination on appointment, the Audit Committee carefully considers the qualifications and competence of candidates +for the independent registered public accountants. For EisnerAmper LLP, this has included a review of its performance in prior +years, its independence and processes for maintaining independence, the results of the most recent internal quality control review +or Public Company Accounting Oversight Board inspection, the key members of the audit engagement team, the firm’s approach +to resolving significant accounting and auditing matters including consultation with the firm’s national office, as well +as its reputation for integrity and competence in the fields of accounting and auditing. Although ratification by stockholders +is not required by the Company’s organizational documents or any applicable law, the Audit Committee has determined that +requesting ratification by stockholders of its appointment of EisnerAmper LLP as the Company’s independent registered public +accountants is a matter of good corporate practice. If stockholders do not ratify the selection, the Audit Committee will reconsider +whether or not to retain EisnerAmper LLP, but may still retain the accounting firm. Even if the selection is ratified, the Audit +Committee, in its discretion, may change the appointment at any time during the year if it determines that such a change would +be in the best interest of the Company and its stockholders. +Representatives +of EisnerAmper LLP are expected to be present at the Annual Meeting to respond to appropriate questions and to make a statement +should they so desire. +Required Vote +The +affirmative vote of the holders of a majority of the outstanding shares of Common Stock present or represented by proxy and entitled +to vote at the Annual Meeting is required to ratify the Audit Committee’s selection of EisnerAmper LLP. +Recommendation of the Board +of Directors +The +Board of Directors unanimously recommends a vote “FOR” the ratification of the appointment of EisnerAmper LLP as the +Company’s independent registered public accountants for the fiscal year ending December 31, 2015. Unless marked to the contrary, +proxies received from stockholders will be voted in favor of ratifying the appointment of EisnerAmper LLP as the Company’s +independent registered public accountants for the fiscal year ending December 31, 2015. +Independent Registered Public +Accounting Firm’s Fees and Services +The +aggregate fees billed to the Company by EisnerAmper LLP for professional services rendered for each of the past two years are +set forth below: +48 +Year Ended December 31, +2014 +2013 +Audit Fees (1) +$ 797,000 +$ 728,000 +Audit-Related Fees (2) +45,000 +45,000 +Tax Fees (3) +0 +91,000 +All Other Fees (4) +70,000 +41,500 +Total +$ 912,000 +$ 905,500 +(1) +Represents the aggregate fees billed for (a) the audit of the Company’s annual financial statements, +(b) the reviews of the financial statements included in the Company’s Quarterly Reports on Form 10-Q, (c) other statutory +and regulatory filings or engagements and (d) the audit of the Company’s internal controls over financial reporting. +(2) +Represents the aggregate fees billed for audit-related fees related to assurance and related services. Includes, among others, +the audit of the Company’s employee benefit plans and other accounting related consultations. +(3) +Represents the aggregate fees billed for tax compliance, tax advice and tax planning services. These professional services +include assistance in the preparation of the Company’s various federal, state and local tax returns, tax consultation and +various amendments. +(4) +Represents the aggregate fees billed (a) with respect to the 2014 Fiscal Year, for services rendered in connection with +the Company’s acquisition of a business and (b) with respect to the fiscal year ended December 31, 2013, for services +rendered in connection with the Company’s acquisition of a business in Canada. +Audit Committee’s +Pre-Approval Policies and Procedures +Consistent +with SEC policies regarding auditor independence, the Audit Committee has responsibility for appointing, setting compensation +and overseeing the work of the independent registered public accountants. In recognition of this responsibility, the Audit Committee +has established a policy to review and pre-approve all audit and permissible non-audit services provided by the independent registered +public accountants. These services may include audit services, audit-related services, tax services and other services. +Prior +to engagement of the independent auditor for next year’s audit, the Audit Committee will pre-approve all auditing services +and all permitted non-audit services (including the fees and terms thereof), except those excluded from requiring pre-approval +based upon the de minimus exception set forth in Section 10A(i)(1)(B) of the Exchange Act. +The +Audit Committee’s pre-approval policies and procedures are as follows: (a) prior to each fiscal year, the Audit Committee +pre-approves a schedule of estimated fees for proposed non-prohibited audit and non-audit services, and (b) actual amounts paid +are monitored by financial management of the Company and reported to the Audit Committee. +All +work performed by EisnerAmper LLP as described above under the captions Audit Fees, Audit-Related Fees, Tax Fees and All Other +Fees has been approved or pre-approved by the Audit Committee pursuant to the provisions of the Audit Committee’s charter. +The Audit Committee has considered and concluded that the provision of non-audit services is compatible with maintaining the independence +of EisnerAmper LLP. +49 +AUDIT +COMMITTEE REPORT +The +Audit Committee reviewed the Company’s audited financial statements for the 2014 Fiscal Year and met with both management +and representatives of EisnerAmper LLP, the Company’s independent registered public accountants, to discuss such audited +financial statements. Management and the Company’s independent registered public accountants have represented to the Audit +Committee that the financial statements were prepared in accordance with accounting principles generally accepted in the United +States of America. The Audit Committee has received from and discussed with EisnerAmper LLP the written disclosures and the letter +regarding EisnerAmper LLP’s communications with the Audit Committee concerning independence as required by applicable requirements +of the Public Company Accounting Oversight Board, and discussed with EisnerAmper LLP the independence of EisnerAmper LLP. The +Audit Committee also discussed with EisnerAmper LLP any matters required to be discussed by Statement on Auditing Standards No. +61, as amended, as adopted by the Public Company Accounting Oversight Board in Rule 3200T. Based on these reviews and discussions, +the Audit Committee recommended to the Board that the Company’s audited financial statements be included in the Company’s +Annual Report on Form 10-K for the 2014 Fiscal Year. +Submitted by +the Audit Committee of the Company’s Board of Directors: +Richard P. Randall (Chairman) +Rose +Peabody Lynch +Peter Migliorini +Ravi +Sachdev +50 +PROPOSAL +THREE: +NON-BINDING +ADVISORY VOTE ON EXECUTIVE COMPENSATION +Section +14A of the Exchange Act, as created by Section 951 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank +Act”), and the rules and regulations promulgated thereunder, require a publicly traded company to include a resolution in +its proxy statement at least once every three years seeking stockholder approval, on an advisory or non-binding basis, of the +compensation of the named executive officers as disclosed in such company’s proxy statement pursuant to the compensation +rules of the SEC. At our 2011 Annual Meeting of Stockholders, the Company’s stockholders approved, on an advisory basis, +the holding of an advisory vote to approve executive compensation (commonly known as a “say-on-pay” proposal) on an +annual basis. Based on these results, the Board of Directors determined to hold its advisory vote to approve executive compensation +annually until the next frequency vote, which is scheduled for the Company’s 2017 Annual Meeting of Stockholders. Accordingly, +we are providing stockholders with a non-binding advisory vote on the compensation of our Named Executive Officers. +As +described in more detail in the Compensation Discussion and Analysis section, which begins on page 24 of this Proxy Statement, +the overall objective of the Company’s executive compensation programs and practices is to support delivery of sustained +operating and financial performance results with the ultimate goal being to create and maximize value for our stockholders on +a long-term basis. We believe that our executive compensation programs and practices serve the interests of our stockholders by +enabling us to attract and retain an experienced and effective management team whose combined knowledge of our business and the +footwear and accessories industries has proved extremely valuable in delivering results for our stockholders. The Compensation +Committee and the Board of Directors believe that the Company’s compensation programs and practices as articulated in the +Compensation Discussion and Analysis section of this Proxy Statement effectively implement our philosophy of aligning compensation +to stockholder interests and that the compensation received by our Named Executive Officers in the 2014 Fiscal Year reflects and +supports such philosophy and goal and is commensurate with the performance and strategic position of the Company. We will continue +to review and modify our executive compensation programs to address evolving best practices and changing regulatory requirements. +We +encourage stockholders to read the Compensation Discussion and Analysis section of this Proxy Statement, as well as the Summary +Compensation Table and other related compensation tables and narrative disclosure contained in this Proxy Statement, all of which +describe and explain in detail the compensation of our Named Executive Officers in the 2014 Fiscal Year. +The following +resolution is submitted for stockholder approval: +“ RESOLVED , +that the stockholders of Steven Madden, Ltd. (the ‘Company’) approve, on a non-binding advisory basis, the compensation +paid to the Named Executive Officers of the Company as disclosed pursuant to the compensation disclosure rules of the Securities +and Exchange Commission, including the executive compensation as described in the section captioned ‘Compensation Discussion +and Analysis,’ the Summary Compensation Table and related tabular disclosure and narrative discussion regarding compensation +of Named Executive Officers under the caption ‘Executive Compensation’ contained in the Company’s Proxy Statement +dated April 8, 2015.” +This +vote is not intended to address any specific item of compensation, but rather the overall compensation of our Named Executive +Officers and the compensation programs and practices described in this Proxy Statement. While this advisory vote on executive +compensation, commonly referred to as a “say-on-pay” advisory vote, is required by Section 14A of the Exchange Act, +it is not binding on our Board of Directors and may not be construed as overruling any decision by the Board of Directors or the +Compensation Committee. However, we value the opinions of our stockholders. To the extent there is a significant vote +against the compensation of the Named Executive Officers as disclosed in this Proxy Statement, the Board of Directors and the +Compensation Committee will consider the outcome of the vote when considering future compensation arrangements and evaluate whether +any actions are necessary to address the stockholders’ concerns. +51 +Required Vote +Approval +of this resolution requires the affirmative vote of a majority of the shares of Common Stock present or represented by proxy and +entitled to vote at the Annual Meeting. +Recommendation of the Board +of Directors +The +Board of Directors unanimously recommends a vote “FOR” the resolution approving the overall compensation of the Named +Executive Officers for the 2014 Fiscal Year. +OTHER +MATTERS +At +the date of this Proxy Statement, the Company has no knowledge of any business other than that described above that will be presented +at the Annual Meeting. If any other business should properly come before the Annual Meeting in connection therewith, it is intended +that the persons named in the accompanying proxy will have discretionary authority to vote the shares which they represent. +A +copy of the applicable provisions of the Company’s By-Laws may be obtained by any stockholder, without charge, upon written +request to the Secretary of the Company at the address set forth above. +WHETHER +OR NOT YOU EXPECT TO BE PRESENT AT THE ANNUAL MEETING, PLEASE MARK, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY CARD PROMPTLY. +ALTERNATIVELY, YOU MAY VOTE YOUR SHARES BY TELEPHONE OR THROUGH THE INTERNET AS DESCRIBED ON THE ACCOMPANYING PROXY CARD. YOUR +VOTE IS IMPORTANT. IF YOU ARE A STOCKHOLDER OF RECORD AND ATTEND THE ANNUAL MEETING AND WISH TO VOTE IN PERSON, YOU MAY WITHDRAW +YOUR PROXY AT ANY TIME PRIOR TO THE VOTE. +STEVEN +MADDEN, LTD. +April 8, 2015 +By: +Arvind +Dharia +Secretary +52 +STEVEN MADDEN, LTD. +ATTN: ARVIND DHARIA +52-16 BARNETT AVENUE +LONG ISLAND CITY, NY 11104 +VOTE BY +INTERNET - www.proxyvote.com +Use the Internet to +transmit your voting instructions and for electronic delivery of information +up until 11:59 P.M. Eastern Time the day before the meeting date. Have your +proxy card in hand when you access the web site and follow the instructions +to obtain your records and to create an electronic voting instruction form. +ELECTRONIC +DELIVERY OF FUTURE PROXY MATERIALS +If you would like to +reduce the costs incurred by our company in mailing proxy materials, you can +consent to receiving all future proxy statements, proxy cards and annual +reports electronically via e-mail or the Internet. To sign up for electronic +delivery, please follow the instructions above to vote using the Internet +and, when prompted, indicate that you agree to receive or access proxy +materials electronically in future years. +VOTE BY +PHONE - 1-800-690-6903 +Use any touch-tone +telephone to transmit your voting instructions up until 11:59 P.M. Eastern +Time the day before the meeting date. Have your proxy card in hand when you +call and then follow the instructions. +VOTE BY +MAIL +Mark, sign and date +your proxy card and return it in the postage-paid envelope we have provided +or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, +NY 11717. +TO +VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: +KEEP +THIS PORTION FOR YOUR RECORDS +DETACH +AND RETURN THIS PORTION ONLY +THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. +For +All +Withhold +All +For All +Except +To withhold authority to +vote for any individual nominee(s), mark “For All Except” and write the +number(s) of the nominee(s) on the line below. +The Board +of Directors recommends you vote +FOR the +following: +o +o +o +1. +Election of Directors +Nominees +01 +06 +Edward R Rosenfeld 02 Rose Peabody Lynch 03 John +L Madden 04 Peter +Migliorini 05 Richard +P Randall +Ravi Sachdev 07 Thomas +H Schwartz 08 Robert +Smith +The Board +of Directors recommends you vote FOR proposals 2 and 3. +For +Against +Abstain +2. +TO RATIFY THE APPOINTMENT OF EISNERAMPER LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC +ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2015. +o +o +o +3. +TO APPROVE, BY NON-BINDING ADVISORY VOTE, THE EXECUTIVE COMPENSATION DESCRIBED IN THE STEVEN +MADDEN, LTD PROXY STATEMENT. +o +o +o +NOTE: In their +discretion, the proxies are authorized to vote upon such other business as +may properly be presented at the meeting or any adjournments or postponements +thereof. +Yes +No +Please indicate if you plan +to attend this meeting +o +o +Please sign exactly as your +name(s) appear(s) hereon. When signing as attorney, executor, administrator, +or other fiduciary, please give full title as such. Joint owners should each +sign personally. All holders must sign. If a corporation or partnership, +please sign in full corporate or partnership name, by authorized officer. +Signature [PLEASE SIGN +WITHIN BOX] +Date +Signature (Joint Owners) +Date +0000242217_1 R1.0.0.51160 +Important +Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice & Proxy Statement, Annual +Report with 10-K is/are available at www.proxyvote.com . +STEVEN MADDEN, LTD. +THIS PROXY IS BEING SOLICITED ON BEHALF OF +THE BOARD OF DIRECTORS +PLEASE CLEARLY INDICATE A RESPONSE BY CHECKING ONE OF THE +BOXES NEXT TO EACH OF THE PROPOSALS +The undersigned +stockholder(s) of Steven Madden, Ltd. (the “Company”) hereby appoint(s) +Edward R. Rosenfeld and Arvind Dharia, and each of them, as attorneys and +proxies, each with power of substitution and revocation, to represent the +undersigned at the Annual Meeting of Stockholders of the Company to be held +at the Company’s showroom located at 1370 Avenue of the Americas, 14th Floor, +New York, New York at 10:00 a.m., local time, on May 22, 2015 and at any +adjournments or postponements thereof, with authority to vote all shares of +Common Stock of the Company held or owned by the undersigned on April 2, +2015, in accordance with the directions indicated herein. +THIS PROXY WILL BE VOTED AS SPECIFIED HEREIN; UNLESS OTHERWISE INDICATED, THIS PROXY WILL +BE VOTED (1) FOR THE ELECTION OF THE EIGHT(8) NOMINEES NAMED IN ITEM 1, (2) FOR THE RATIFICATION OF THE APPOINTMENT +OF EISNERAMPER LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR 2015 AND (3) FOR +THE APPROVAL OF THE EXECUTIVE COMPENSATION DESCRIBED IN THE COMPANY’S PROXY STATEMENT. THIS PROXY WILL BE VOTED IN THE DISCRETION +OF THE PROXIES ON ANY OTHER MATTER THAT MAY PROPERLY COME BEFORE THE MEETING. +Continued and to be signed on reverse side +0000242217_2 R1.0.0.51160 \ No newline at end of file diff --git a/raw/proxies/0000913241/0001019056-15-000383/proxy_rpt.txt b/raw/proxies/0000913241/0001019056-15-000383/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..d6c38c8b0b8ad931c5115a4c66ffe7a8af763748 --- /dev/null +++ b/raw/proxies/0000913241/0001019056-15-000383/proxy_rpt.txt @@ -0,0 +1,139 @@ +and Related Party Transactions +JLM +Consultants, Inc., a company wholly-owned by John L. Madden. Since 2004, the Company has engaged JLM Consultants, Inc., +a company wholly-owned by John L. Madden, a member of the Board and the brother of Steven Madden, the Company’s founder +and Creative and Design Chief, to provide consulting services to the Company with respect to the development of international +sales of the Company. On February 23, 2012, the Company entered into a consulting agreement (the “JLM Consulting Agreement”) +with JLM Consultants, Inc. to replace a prior consulting agreement. The JLM Consulting Agreement expired by its terms on December +31, 2014, but Mr. Madden continues to provide consulting services to the Company and the Company continues to make payments to +JLM Consultants, Inc. consistent with those that would have been required under the expired consulting agreement. In accordance +with the terms of the JLM Consulting Agreement, for the 2014 Fiscal Year, JLM Consultants, Inc. received the following compensation +from the Company for services rendered: (a) a commission equal to 1% of net sales, excluding retail royalty income; (b) a commission +equal to 10% of retail royalty income; (c) 1% of any commission income to the International division that is not recognized in +net sales; (d) a monthly draw in the amount of $25,000, which amount is offset against commissions earned; (e) a $1,000 per month +travel allowance; and (f) monthly reimbursements, in the aggregate amount of $59,888 in the 2014 Fiscal Year, for health insurance +premiums for John L. Madden. Pursuant to this arrangement, JLM Consultants, Inc. received a total of $1,240,375 from the Company +in the 2014 Fiscal Year. +17 +Pursuant +to the JLM Consulting Agreement, on January 2, 2013, the Company issued 72,012 restricted shares of the Company’s Common +Stock to JLM Consultants, Inc. under the Steven Madden, Ltd. 2006 Stock Incentive Plan, as amended (the “2006 Plan”), +which shares will vest in twelve substantially equal quarterly installments over a three-year period commencing on April 1, 2013 +and continuing to vest quarterly thereafter until the final installment vests on January 1, 2016. +Steven +Madden Employment Agreement. Effective as of July 1, 2005, the Company amended and restated its employment agreement with +the Company’s founder and Creative and Design Chief, Steven Madden, pursuant to which Mr. Madden agreed to continue to serve +as the Company’s Creative and Design Chief. The term of Mr. Madden’s employment under his employment agreement commenced +on July 1, 2005 and, in accordance with the amendment of the agreement effective December 31, 2011, will end on December 31, 2023. +Prior to this recent amendment, the agreement had provided for an annual salary of $600,000, with a 7% increase of base salary +on a compound basis in each of the third, fifth, seventh and ninth years of the agreement. The agreement had also provided for +an annual cash bonus in an amount equal to at least 2% of the Company’s EBITDA (the “Annual Bonus”) and an annual +cash bonus in relation to “new business” (as defined in the agreement) in an amount equal to at least (i) 2.5% of +new business gross direct revenues plus (ii) 10% of all license or other fee income above $2,000,000 (the “New Business +Bonus”). The agreement, as amended, increases Mr. Madden’s annual base salary but eliminates the Annual Bonus and +the New Business Bonus and provides that all cash bonuses subsequent to the fiscal year ended December 31, 2011 will be at the +sole discretion of the Company’s Board of Directors. Under the agreement, as amended, Mr. Madden’s annual base salary +was fixed at $5,416,667 in 2012, $7,416,667 in 2013, $9,666,667 in 2014, $11,916,667 in 2015 and $10,697,917 in 2016 and in each +year thereafter through the end of the term of employment. In addition, the amended agreement entitles Mr. Madden to an annual +life insurance premium reimbursement of up to $200,000. The amendment also eliminates an annual non-accountable expense allowance +of $200,000 that had been previously provided to Mr. Madden under the agreement. Pursuant to the amended agreement, on February +8, 2012, Mr. Madden was granted 1,463,056 restricted shares of Common Stock (the number of shares indicated having been adjusted +for an October 1, 2013 three-for-two stock split effected as a stock dividend), valued at approximately $40 million, under the +2006 Plan. The restricted Common Stock will vest in equal annual installments over seven years commencing on December 31, 2017 +through December 31, 2023, subject to Mr. Madden’s continued employment with the Company on each such vesting date. +On +June 30, 2012, pursuant to an election right granted to him under the agreement, as amended, Mr. Madden notified the Company of +his election to receive an additional restricted stock award valued at $40 million in consideration of a reduction in his annual +base salary in years subsequent to 2012. Accordingly, on July 3, 2012, Mr. Madden was issued 1,893,342 restricted shares of Common +Stock (the number of shares indicated having been adjusted for an October 1, 2013 three-for-two stock split effected as a stock +dividend) under the 2006 Plan. The restricted Common Stock will vest in equal annual installments over six years commencing on +December 31, 2018 through December 31, 2023, subject to Mr. Madden’s continued employment with the Company on each such +vesting date. As a result of his election to receive an additional restricted stock award, Mr. Madden’s annual base salary +for years subsequent to 2012 has been reduced as follows: $4,000,000 in 2013, $6,125,000 in 2014, $8,250,000 in 2015 and $7,026,042 +in 2016 and in each year thereafter through the end of the term of employment. +Mr. +Madden is also eligible to receive annually, on or about the date of the Company’s annual meeting of stockholders (but not +later than June 30 th ), an option grant (the “Annual Option”) to purchase a number of shares of Common Stock, +with such number to be equal to the greater of (a) 100% of the largest aggregate number of shares of Common Stock available upon +the exercise of an option or options granted to any other continuing full-time employee of the Company during the preceding twelve-month +period and (b) 100,000 shares of Common Stock; provided, however, that a grant to Mr. Madden in excess of 150% of the number of +shares of Common Stock subject to options granted to such other continuing full-time employee would require stockholder approval. +Any Annual Option granted to Mr. Madden would vest quarterly over a one-year period following the grant date and would be exercisable +at a price equal to the closing price of the Company’s Common Stock on the grant date for a period of five years following +the grant date. In addition to the Annual Option, the agreement, as amended, provides for a potential additional one-time stock +option grant to purchase 750,000 shares of the Company’s Common Stock (the number of shares subject to this potential stock +option award having been adjusted for an October 1, 2013 three-for-two stock split effected as a stock dividend) in the event +that the Company achieves earnings per share, on a fully-diluted basis, equal to $3.00 in any fiscal year ending December 31, +2015 or after. If granted, the option would vest in equal annual installments of 20% over a five-year period and be exercisable +for a period of seven years at a price equal to the closing price of the Company’s Common Stock on the date immediately +preceding the grant date. +18 +In +the event of Mr. Madden’s death, his employment agreement provides for the payment to Mr. Madden’s estate of his base +salary for the 12-month period immediately subsequent to the date of his death. Further, in the event that Mr. Madden’s +employment agreement is terminated due to Mr. Madden’s total disability (as defined in the agreement), “for cause” +(as defined in the agreement) or due to Mr. Madden’s resignation, the Company is obligated to pay Mr. Madden the amount +of compensation that is accrued and unpaid through the date of termination. In the event Mr. Madden’s employment agreement +is terminated for any reason (other than “for cause” or due to his death, total disability or resignation), the Company +is obligated to pay Mr. Madden, in installments, the balance of his base salary that would have been paid by the Company under +the agreement for the full term of the agreement. If, during the period commencing 120 days prior to a “change of control” +(as defined in the employment agreement) transaction and ending on the first anniversary of a change of control transaction, Mr. +Madden’s employment is terminated by the Company other than for cause or by the resignation of Mr. Madden for “good +reason” (as defined in the employment agreement), or if Mr. Madden resigns for good reason or without good reason within +30 days following a change of control transaction, all unvested options to purchase shares of Common Stock held by Mr. Madden +will vest on the date of termination or resignation and Mr. Madden will be entitled to receive a lump sum cash payment equal to +the amount of compensation that is accrued and unpaid through the date of termination plus $35 million. Mr. Madden’s employment +agreement contains other customary provisions, including provisions regarding expense reimbursement, confidentiality, solicitation +and competition. +For +the 2014 Fiscal Year, Mr. Madden earned $6,125,000 in base salary and received $200,000 for the payment of an annual life insurance +premium. Mr. Madden opted to waive his right to the Annual Option for the 2014 Fiscal Year. +Loan +to Steven Madden. On June 25, 2007, the Company made a loan to Steven Madden, its Creative and Design Chief and a principal +stockholder of the Company, in the amount of $3,000,000, in order for Mr. Madden to satisfy a personal tax obligation resulting +from the exercise of a stock option which was due to expire and to hold the underlying shares of Common Stock. Mr. Madden executed +a promissory note in favor of the Company, which is secured by a pledge of 472,500 shares of the Company’s Common Stock +beneficially owned by Mr. Madden (the number of shares indicated having been adjusted for an October 1, 2013 three-for-two stock +split effected as a stock dividend). There have been successive amendments to the note, the most recent of which occurred on January +3, 2012, at which time the note was amended and restated to extend the maturity date of the obligation to December 31, 2023 and +eliminate the accrual of interest after December 31, 2011. Prior to the most recent amendment, the note had been accruing interest +at the rate of 6% per annum. In addition, the amended and restated note provides that, commencing on December 31, 2014 and annually +on each December 31 thereafter through the maturity date, one-tenth of the principal amount thereof, together with accrued interest, +will be cancelled by the Company provided that Mr. Madden continues to be employed by the Company on each such December 31. Contemporaneously, +the Company will release a number of pledged shares of Common Stock from the pledge generally correlating to the amount of indebtedness +cancelled on such date. As of December 31, 2011, interest in the amount of $1,090,000 had accrued on the principal amount of the +note and, as noted above, interest was eliminated after December 31, 2011. On December 31, 2014, the required one-tenth of the +principal amount of the note, together with accrued interest, was written-off by the Company. +Steven +Madden is the brother of John L. Madden, who has been a director of the Company since 1993. +Review, Approval or Ratification +of Transactions with Related Persons +The +Company’s written Conduct Code and Employee Handbook prohibit all conflicts of interest. Under the Conduct Code, conflicts +of interest occur when private or family interests interfere in any way, or even appear to interfere, with the interests of the +Company. The Company’s prohibition on conflicts of interest under the Conduct Code includes any related person transaction. +19 +Related +person transactions must be approved by the Board, or by a committee of the Board consisting solely of independent directors, +who will approve the transaction only if they determine that it is in the best interests of the Company. In considering the transaction, +the Board or committee will consider all relevant factors, including, as applicable, (i) the Company’s business rationale +for entering into the transaction; (ii) the alternatives to entering into a related person transaction; (iii) whether the transaction +is on terms comparable to those available to third parties or, in the case of employment relationships, to employees generally; +(iv) the potential for the transaction to lead to an actual or apparent conflict of interest and any safeguards imposed to prevent +such actual or apparent conflicts; and (v) the overall fairness of the transaction to the Company. +The +Company has multiple processes for reporting conflicts of interests, including related person transactions. Under the Conduct +Code, all employees are required to report any actual or apparent conflict of interest, or potential conflict of interest, to +management. The Chief Financial Officer distributes a questionnaire to the Company’s executive officers and management personnel +on a quarterly basis and distributes a questionnaire to the members of the Board of Directors on an annual basis requesting certain +information regarding, among other things, their immediate family members, employment and beneficial ownership interests, which +information is then reviewed for any conflicts of interest under the Conduct Code. +The +Board of Directors, the Audit Committee and the Disclosure Committee, which is comprised of management personnel, discuss the +related party transactions, specifically, and in connection with the regular review processes attendant to the Company’s +periodic filings, including related party transaction disclosures. +If +a director is a party to or in some manner involved in a transaction involving the Company, he or she will be recused from all +discussions and decisions about the transaction. The transaction must be approved in advance whenever practicable, and if not +practicable, must be ratified as promptly as practicable. +COMPENSATION \ No newline at end of file diff --git a/raw/proxies/0000913241/0001019056-16-001244/proxy.txt b/raw/proxies/0000913241/0001019056-16-001244/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..3e6abbc3774260d096192517acc736975891ddb0 --- /dev/null +++ b/raw/proxies/0000913241/0001019056-16-001244/proxy.txt @@ -0,0 +1,3960 @@ +DEF 14A +1 +smadden_def14a.htm +DEF 14A +UNITED +STATES +SECURITIES +AND EXCHANGE COMMISSION +Washington, +D.C. 20549 +SCHEDULE +14A +(Rule 14a-101) +INFORMATION +REQUIRED IN PROXY STATEMENT +SCHEDULE 14A INFORMATION +Proxy Statement Pursuant to Section 14(a) +of the +Securities +Exchange Act of 1934 (Amendment No. __) +Filed by the Registrant þ +Filed by a Party other than +the Registrant o +Check the appropriate box: +o Preliminary +Proxy Statement +o Confidential, +for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +þ Definitive +Proxy Statement +o Definitive +Additional Materials +o Soliciting +Material Pursuant to §240.14a-12 +Steven +Madden, Ltd. +(Name +of Registrant as Specified in Its Charter) +(Name +of Person(s) Filing Proxy Statement, if Other Than the Registrant) +Payment of Filing Fee (Check +the appropriate box): +þ No +fee required. +o Fee +computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. +(1) +Title +of each class of securities to which transaction applies: +(2) +Aggregate +number of securities to which transaction applies: +(3) +Per +unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which +the filing fee is calculated and state how it was determined): +(4) +Proposed +maximum aggregate value of transaction: +(5) +Total +fee paid: +o Fee +paid previously with preliminary materials. +o Check +box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting +fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of +its filing. +(1) +Amount +Previously Paid: +(2) +Form, +Schedule or Registration Statement No.: +(3) +Filing +Party: +(4) +Date +Filed: +Dear Shareholders, +After a challenging 2014, +Steve Madden bounced back in 2015. We successfully capitalized on new fashion footwear trends, recorded strong growth in our retail +/ e-commerce business, made significant progress in building our newly acquired Dolce Vita and Blondo brands and further expanded +our international presence. Our financial performance improved as the year progressed, and we finished the year with net sales +of $1.4 billion and diluted EPS of $1.85, each up 5% from 2014. +Driving Improvement in +Our Retail Segment +Entering 2015, our top priority +was turning around our retail business, which had struggled in 2014 as we faced a difficult environment with a lack of significant +fashion footwear trends. A year later, we’re proud to say that we executed on our goal, and our retail business is back +on track. Steve and his design team did an outstanding job of creating fashion-forward products that resonated with our customers +– with particular strength in the dress shoe and fashion sneaker categories – and the on-trend merchandise assortment +led to a dramatic improvement in performance in our retail segment. Despite headwinds from a soft retail environment, the West +Coast port slowdown in the first half and the unfavorable weather in the back half, our retail comparable store sales increased +11% for the year, and operating margin for our retail business expanded 260 basis points. +Integrating and Building +Our New Brands +Another highlight in 2015 +was the outstanding progress we made with the newest additions to our brand portfolio, Dolce Vita and Blondo. When we acquired +Dolce Vita in August 2014, the business was unprofitable, but we saw a clear path to profitability and great potential in the +Dolce Vita brand. Shortly after completing the acquisition, we closed ancillary businesses including men’s brand JD Fisk +and juniors brand DV8. In Spring 2015, we discontinued diffusion brand DV, which we have since relaunched as an exclusive brand +at Target. While these actions reduced sales in the short-term, they enabled us to focus our efforts on the flagship brand Dolce +Vita, which has strong brand equity, a unique positioning in the marketplace and significant untapped potential. The strategy +has already paid dividends. We have expanded and strengthened the Dolce Vita product offering while maintaining the brand’s +elevated contemporary positioning, and the response from customers has been outstanding. The brand was a clear outperformer in +a difficult retail environment in Fall 2015, and the momentum has continued into the first part of 2016. We have also made a number +of significant operational improvements in the business. Through increased initial mark-ups, improved inventory management and +better control of markdown allowances, we have driven dramatic gross margin improvement. The gross margin expansion, combined +with cost-cutting efforts that have substantially reduced operating expenses, enabled the business to improve from an operating +loss in 2014 to a 7% operating margin in 2015. +In January 2015, we acquired +Blondo, a waterproof boot brand based in Canada with a heritage that dates back over a century. Prior to the acquisition, approximately +70% of Blondo’s business was in Canada, and the primary rationale for the transaction was the growth opportunity we saw +for the business in the United States. After acquiring the business, we leveraged our strong customer relationships to significantly +expand Blondo’s presence in its existing U.S. accounts and to introduce the brand in a number of new accounts. Overall, +Blondo’s U.S. business increased approximately 50% in 2015, a notable achievement in light of the unfavorable weather that +we experienced in the back half of the year. +Expanding Our International +Business +One of our most important +long-term initiatives is growing our business in international markets, and we made significant progress in this area in 2015. +In late December 2014, we acquired SM Mexico, our former distributor in Mexico. The SM Mexico business had an outstanding first +year under our ownership, with retail comparable store sales in excess of 20% and wholesale sales up 50% in local currency. Our +distributor business was also strong, with net sales to international distributors growing 23% on the strength of robust gains +in Asia and the Middle East. Overall, international sales increased 33% in 2015. +Returning Capital to Shareholders +Finally, in 2015 we continued +to demonstrate our commitment to returning capital to shareholders. During the year, we repurchased 3.7 million shares, or approximately +6% of the Company, for a total of $136 million. Since 2013, we have repurchased approximately $380 million of our common stock. +Looking Ahead +Overall, 2015 was a strong +year for Steve Madden, as we rebounded after a challenging 2014 and also made significant progress on our key growth initiatives. +As we look ahead, we are pleased with the momentum in our business and are optimistic that the strength of our brands and our +business model will enable us to generate sales and earnings gains. We remain firm in our belief that continuing our laser focus +on developing outstanding products and delivering them to the market in a timely fashion will enable us to capitalize on the many +opportunities in our business in 2016 and beyond. +Our +success is the direct result of the efforts of our exceptional team. We thank them for their hard work and dedication, and we +thank you, our shareholders, for your continued support. +Sincerely, +EDWARD ROSENFELD +CHIEF EXECUTIVE OFFICER +AWADHESH SINHA +CHIEF OPERATING OFFICER +ARVIND DHARIA +CHIEF FINANCIAL OFFICER +NOTICE OF +ANNUAL MEETING OF STOCKHOLDERS +TO +BE HELD ON MAY 27, 2016 +TO THE STOCKHOLDERS: +The Annual Meeting +of Stockholders (the “Annual Meeting”) of Steven Madden, Ltd. (the “Company”) will be held on +Friday, May 27, 2016, at the Company’s showroom located at 1370 Avenue of the Americas, 14th Floor, New York, New York +at 10:00 a.m., local time, for the purposes stated below: +1. +to elect +eight (8) directors to the Board of Directors of the Company; +2. +to ratify +the appointment of EisnerAmper LLP as the Company’s independent registered public accounting firm for the fiscal year +ending December 31, 2016; +3. +to approve, +on a non-binding advisory basis, the compensation of certain executive officers as disclosed in the accompanying proxy statement; +and +4. +to transact such other business +as may properly come before the Annual Meeting or any adjournments thereof. +Only those +stockholders of record at the close of business on April 1, 2016, the record date for the Annual Meeting, are entitled to +notice of and to vote at the Annual Meeting and any adjournments thereof. Stockholders of record at the close of business on April 1, +2016, the record date for the Annual Meeting, will be admitted to the Annual Meeting upon presentation of valid, government-issued +photo identification, such as a driver’s license. Stockholders who own shares of the Company’s common stock beneficially +through a bank, broker or other nominee will be admitted to the Annual Meeting upon presentation of valid, government-issued photo +identification and proof of ownership or a valid proxy signed by the record holder. A recent brokerage statement or a letter from +a bank or broker are examples of proof of ownership. If you own shares of the Company’s common stock beneficially and want +to vote in person at the Annual Meeting, you should contact your broker or applicable agent in whose name the shares are registered +to obtain a broker’s proxy and bring it to the Annual Meeting in order to vote. +IMPORTANT NOTICE REGARDING THE +AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 27, 2016: THE NOTICE OF ANNUAL MEETING +AND PROXY STATEMENT, ANNUAL REPORT, ELECTRONIC PROXY CARD AND ANY OTHER MATERIALS CONCERNING THE ANNUAL MEETING, TOGETHER WITH +ANY AMENDMENTS TO ANY OF THESE MATERIALS, ARE AVAILABLE ON THE INTERNET AT WWW.PROXYVOTE.COM. +BY ORDER OF THE +BOARD OF DIRECTORS +April 8, 2016 +Long Island City, +New York +Arvind Dharia +Secretary +WHETHER OR NOT YOU EXPECT +TO BE PRESENT AT THE ANNUAL MEETING, PLEASE MARK, DATE AND SIGN THE ACCOMPANYING FORM OF PROXY AND MAIL IT PROMPTLY IN THE ENVELOPE +PROVIDED TO: VOTE PROCESSING, C/O BROADRIDGE, 51 MERCEDES WAY, EDGEWOOD, NEW YORK 11717. ALTERNATIVELY, YOU MAY VOTE YOUR +SHARES BY TELEPHONE OR THROUGH THE INTERNET AS DESCRIBED ON THE ACCOMPANYING PROXY CARD. +TABLE +OF CONTENTS +GENERAL INFORMATION +1 +Notice of Internet Availability of Proxy Materials +2 +QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING +2 +PROPOSAL ONE: ELECTION OF DIRECTORS +6 +Stockholder Nominations for Board Membership +6 +Nominees for Election to the Board of Directors +6 +CORPORATE GOVERNANCE +11 +The Board of Directors +11 +Director Independence +11 +Director Attendance at Meetings +11 +Director Election (Majority Voting) Policy +11 +Committees of the Board +12 +Board Leadership Structure, Risk Oversight, Executive Sessions of Non-Employee Directors, and Communications Between Stockholders and the Board +15 +Codes of Business Conduct and Ethics +16 +Corporate Governance Guidelines +16 +Stock Ownership Guidelines +17 +Prohibition on Hedging and Pledging of Our Common Stock +17 +Corporate Social Responsibility Policy +17 +Certain Relationships and Related Party Transactions +17 +Review, Approval or Ratification of Transactions with Related Persons +20 +COMPENSATION OF DIRECTORS IN THE 2015 FISCAL YEAR +20 +STOCK OWNERSHIP +22 +Security Ownership of Certain Beneficial Owners +22 +Security Ownership of Directors and Executive Officers +23 +Section 16(a) Beneficial Ownership Reporting Compliance +24 +EXECUTIVE COMPENSATION +24 +Compensation Discussion and Analysis +24 +Compensation Committee Interlocks and Insider Participation +34 +Executive Officers +34 +SUMMARY COMPENSATION TABLE +35 +Employment Arrangements +37 +GRANTS OF PLAN-BASED AWARDS IN THE 2015 FISCAL YEAR +42 +OUTSTANDING EQUITY AWARDS AT END OF THE 2015 FISCAL YEAR +44 +OPTION EXERCISES AND STOCK VESTED IN THE 2015 FISCAL YEAR +46 +SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS +46 +EQUITY COMPENSATION PLAN INFORMATION +47 +POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE-IN-CONTROL +48 +COMPENSATION COMMITTEE REPORT +49 +PROPOSAL TWO: RATIFICATION OF THE APPOINTMENT OF EISNERAMPER LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR ENDING DECEMBER 31, 2016 +50 +AUDIT COMMITTEE REPORT +52 +PROPOSAL THREE: NON-BINDING ADVISORY VOTE ON EXECUTIVE COMPENSATION +53 +i +STEVEN MADDEN, +LTD. +52-16 Barnett +Avenue +Long +Island City, New York 11104 +PROXY +STATEMENT +GENERAL +INFORMATION +The +Board of Directors of Steven Madden, Ltd. requests your proxy in connection with the Annual Meeting of Stockholders (the “Annual +Meeting”) of Steven Madden, Ltd. (the “Company”, “we” or “us”). The Annual Meeting +will be held at the Company’s showroom located at 1370 Avenue of the Americas, 14th Floor, New York, New York on Friday, +May 27, 2016 at 10:00 a.m., local time. Proxies also may be voted at any adjournments or postponements of the Annual Meeting. +On +or about April 8, 2016, a notice containing instructions on how to access this Proxy Statement, the accompanying proxy card and +related materials online is being mailed to holders of record of common stock, $.0001 par value, of the Company (the “Common +Stock”) at the close of business on April 1, 2016 (the “Record Date”). The Company’s Annual +Report for the fiscal year ended December 31, 2015 (the “2015 Fiscal Year”), including audited financial statements, +is included in the materials that are accessible online. This Proxy Statement contains information about the Annual Meeting as +well as information regarding the voting process, director elections, our corporate governance programs and executive and director +compensation, among other things. We recommend that you read all of these materials. +The Annual +Meeting has been called to consider and take action on the following proposals: +· to +elect eight (8) directors to the Board of Directors of the Company to serve until +the next annual meeting of the Company’s stockholders; +· to +ratify the appointment of EisnerAmper LLP as the Company’s independent registered +public accounting firm for the fiscal year ending December 31, 2016; +· to +approve, on a non-binding advisory basis, the compensation of certain executive officers +as disclosed in this Proxy Statement; and +· to +transact such other business as may properly come before the Annual Meeting and any adjournments +thereof. +The +Board of Directors knows of no other matters to be presented for action at the Annual Meeting. However, if any other matters properly +come before the Annual Meeting, the persons named in the proxy will vote on such other matters and/or for other nominees for director +in accordance with their best judgment. The Company’s Board of Directors recommends that the stockholders vote “FOR” +each of the proposals. Only holders of record of Common Stock of the Company at the close of business on the Record Date will +be entitled to vote at the Annual Meeting. +1 +The +Company is incorporated in the State of Delaware. The principal executive offices of the Company are located at 52-16 Barnett +Avenue, Long Island City, New York 11104 and the telephone number of the Company is (718) 446-1800. +Notice of Internet Availability +of Proxy Materials +We +continue to take advantage of the Securities and Exchange Commission (the “SEC”) “e-proxy” rules +allowing us to furnish proxy materials through the Internet for the benefit and convenience of our stockholders. By using the +e-proxy rules, we can expedite the receipt by stockholders of proxy materials while lowering the costs and reducing the environmental +impact associated with our Annual Meeting. On or about April 8, 2016, we will furnish a Notice of Internet Availability of Proxy +Materials (the “Availability Notice”) to most of our stockholders containing instructions on how to access the +proxy materials and to vote online. In addition, instructions on how to request a printed copy of these materials will be found +on the Availability Notice. If you received an Availability Notice by mail, you will not receive a paper copy of the proxy materials +unless you request such materials by following the instructions contained in the Availability Notice. +For +more information on voting your Common Stock, please refer to the following “Questions and Answers” section. +QUESTIONS AND ANSWERS +ABOUT THE ANNUAL MEETING AND VOTING +1. +What is included in the proxy materials? What is a proxy statement and what is a proxy? +The +proxy materials for our Annual Meeting include the Notice of Annual Meeting, this Proxy Statement and our Annual Report on Form +10-K for the year ended December 31, 2015. If you received a paper copy of these materials, the proxy materials also include +a proxy card or voting instruction form. +A +proxy is the delegation of your right to vote the Common Stock you own to another person, who is called your proxy. When you designate +someone as your proxy in a written document, that document is called a proxy or a proxy card. SEC regulations require that we +furnish a proxy statement to you when we ask you to sign a proxy designating individuals to vote your shares of Common Stock on +your behalf. We have designated our officers Edward R. Rosenfeld and Arvind Dharia as proxies for the Annual Meeting. +2. +Who may vote at the Annual Meeting? +Only +stockholders of record are entitled to vote at the Annual Meeting. A stockholder of record is a stockholder of the Company +as of the close of business on the Record Date. On the Record Date, there were 61,995,078 shares of our Common Stock +outstanding (excluding treasury shares) held by approximately 123 registered holders of record and 17,557 beneficial +owners. +3. What is the difference +between holding shares as a stockholder of record and as a beneficial owner? +If +your shares are registered directly in your name with the Company’s registrar and transfer agent, American Stock Transfer +& Trust Company, you are a “stockholder of record” with respect to those shares and, in such case, this Proxy +Statement and the accompanying proxy materials have been provided directly to you by the Company. If your shares are held in a +stock brokerage account or by a bank or nominee, your shares are held in “street name” and you are considered the +“beneficial owner” of those shares and, in such case, this Proxy Statement and the accompanying proxy materials have +been provided to you by your broker, bank or other stockholder of record. As the beneficial owner, you have the right to direct +your broker, bank or other stockholder of record how to vote your shares held in “street name.” +2 +4. What is considered a +quorum to conduct the Annual Meeting? +The +presence, in person or by proxy, of the holders of a majority of the shares eligible to vote is necessary to constitute a quorum +for the purpose of transacting business at the Annual Meeting. Under Delaware law (under which the Company is incorporated), abstentions +and broker non-votes (meaning proxies from brokers, banks or nominees indicating that such persons have not received instructions +on how to vote from the beneficial owner or other persons eligible to vote shares as to matters with respect to which the brokers, +banks or nominees do not have discretionary power to vote) are counted as present for purposes of determining the presence +or absence of a quorum for the transaction of business. If a quorum is not present, the Annual Meeting may be adjourned until +a quorum is obtained. +5. What is a “broker +non-vote”? +As +discussed in the response to question 3, if your shares are held in “street name” by a broker, bank or other nominee, +your broker, bank or other nominee is the record holder; however, the broker, bank or other nominee is required to vote the shares +in accordance with your instructions. If you do not give instructions to your broker, bank or other nominee, as the case may be, +the broker, bank or other nominee may, if permitted by the organizations of which it is a member, exercise discretionary voting +power to vote your shares. A “broker non-vote” occurs when a broker, bank or other nominee of record holding shares +for a beneficial owner has not received voting instructions from the beneficial owner and either chooses not to vote the shares +on a particular proposal as to which the holder has discretionary voting power or does not vote on a particular proposal because +that holder does not have discretionary voting power for that particular item. Broker non-votes are considered present in determining +whether a quorum is present. +If +you hold your shares in “street name,” we strongly encourage you to provide instructions regarding the voting of your +shares as your broker, bank or other nominee cannot vote your shares with respect to certain of the proposals being presented +at the Annual Meeting without voting instructions from you. +6. How many votes do I +have? What shares are included on the proxy card? +For +each share of Common Stock that you own on the Record Date you are entitled to one vote on each matter presented at the Annual +Meeting. +If +you are a record holder, you will receive an Availability Notice or proxy card for all of the shares of Common Stock you hold +in certificate form, in book-entry form and in any Company benefit plan. If you are a beneficial owner, you will receive information +containing voting instructions from the broker, bank or other nominee through which you own your shares of Common Stock. +7. How many votes are required +to approve each proposal and what is the effect of abstentions and broker non-votes? +Proposal +One (Election of Directors): Under Delaware law, directors are elected by the affirmative vote of a plurality of the shares +of Common Stock present in person or represented by proxy at the Annual Meeting and entitled to vote. This means that the director +nominees who receive the greatest number of affirmative votes cast are elected as directors, subject to our Director Election +(Majority Voting) Policy discussed in Proposal One below. +Proposal +Two (Ratification of Appointment of EisnerAmper LLP): The affirmative vote of a majority of the shares of Common Stock present +in person or represented by proxy at the Annual Meeting and entitled to vote is required to approve the ratification of the appointment +of EisnerAmper LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, +2016. +Proposal +Three (Non-Binding Advisory Vote on Executive Compensation): The affirmative vote of a majority of the shares of Common Stock +present in person or represented by proxy at the Annual Meeting and entitled to vote is required to approve, on a non-binding +advisory basis, the compensation of the Company’s Named Executive Officers as described in this Proxy Statement. +3 +Other +Matters: If any other matters are presented at the Annual Meeting, they must receive the affirmative vote of a majority of +the shares of Common Stock present in person or represented by proxy at the Annual Meeting and entitled to vote in order to be +approved. +Abstentions +will have no effect on the election of directors, but will be treated as present and entitled to vote on the remaining proposals +and, therefore, abstentions will have the effect of votes “AGAINST” such proposals. +Proposal +One (Election of Directors) will be decided by a plurality of the votes of the shares represented in person or by proxy. +The approval of each of Proposals Two (Ratification of EisnerAmper LLP) and Three (Advisory Vote on Executive Compensation) requires +a favorable vote of a majority of the shares present and entitled to vote on the applicable matter. As noted above, an abstention +will have no effect on the election of directors but will have the same effect as a vote “AGAINST” each other proposal. +Broker non-votes with respect to Proposals One, Two and Three will have no effect on the outcome of the vote with respect to that +proposal. +8. How can I vote my shares? +Your +vote is important. Your shares can be voted at the Annual Meeting only if you are present in person or represented by proxy. Even +if you plan to attend the Annual Meeting, we urge you to authorize your proxy in advance. You may vote your shares by authorizing +a proxy over the Internet or by telephone. In addition, if you received a paper copy of the proxy materials by mail, you can also +submit a proxy by mail by following the instructions on the proxy card. Voting your shares by authorizing a proxy over the Internet, +by telephone or by written proxy card will ensure your representation at the Annual Meeting regardless of whether you attend in +person. +If +you are the record holder of your shares, please authorize your proxy electronically by going to the http://www.proxyvote.com +website or by calling the toll-free number listed below and on the proxy card. Please have your Proxy Statement or proxy card +in hand when going online or calling. If you authorize your proxy via the Internet or by phone you do not need to return your +proxy card. If you choose to authorize your proxy by mail, simply mark your proxy card and then date, sign and return it in the +postage-paid envelope provided. +VOTE +BY INTERNET +http://www.proxyvote.com +Use the Internet to transmit +your voting instructions and for electronic delivery of information. +VOTE +BY PHONE +1-800-690-6903 +Use any touch-tone telephone +to transmit your voting instructions. +VOTE +BY MAIL +Vote +Processing, c/o Broadridge +51 Mercedes Way +Edgewood, New York 11717 +If you receive paper +proxy materials, mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return +it to the address shown above. +If +you hold your shares beneficially in “street name” through a broker or nominee you may be able to authorize your proxy +by telephone or the Internet as well as by mail, but you will need to obtain and follow instructions from your broker or nominee +to vote these shares. +9. +May I revoke my proxy for the Annual Meeting once I have given it? +You may revoke +your proxy at any time before it is voted at the Annual Meeting by: +· properly +executing and delivering a later dated proxy (including a telephone or Internet proxy +authorization); +· voting +by ballot at the Annual Meeting; or +· sending +a written notice of revocation to the Corporate Secretary of the Company at Steven Madden, +Ltd., 52-16 Barnett Avenue, Long Island City, New York 11104. +4 +10. How does the Board +of Directors recommend that I vote my shares? +The Board of +Directors of the Company recommends that you vote: +· “FOR” +the election of each of the eight director nominees; +· “FOR” +the ratification of the appointment of EisnerAmper LLP as the Company’s independent +registered public accounting firm for the fiscal year ending December 31, 2016; +and +· “FOR” +the approval, on a non-binding advisory basis, of the executive compensation of the Company’s +Named Executive Officers, as disclosed in this Proxy Statement. +ALL PROXIES +RECEIVED WILL BE VOTED IN ACCORDANCE WITH THE CHOICES SPECIFIED ON SUCH PROXIES. PROXIES WILL BE VOTED IN FAVOR OF A PROPOSAL +IF NO CONTRARY SPECIFICATION IS MADE. ALL VALID PROXIES OBTAINED WILL BE VOTED AT THE DISCRETION OF THE PERSONS NAMED IN THE PROXY +WITH RESPECT TO ANY OTHER BUSINESS THAT MAY PROPERLY COME BEFORE THE ANNUAL MEETING OR ANY ADJOURNMENTS OR POSTPONEMENTS +THEREOF. AS NOTED ABOVE, IF YOU HOLD YOUR SHARES BENEFICIALLY THROUGH A BROKER, BANK OR OTHER NOMINEE AND FAIL TO PROVIDE SPECIFIC +VOTING INSTRUCTIONS TO THAT BROKER, BANK OR OTHER NOMINEE, YOUR SHARES WILL NOT BE VOTED IN THE ELECTION OF DIRECTORS OR WITH +RESPECT TO THE ADVISORY VOTE ON EXECUTIVE COMPENSATION. +11. Who will bear the expenses +of this solicitation and how are proxies being solicited? +The +Company will pay the costs of soliciting proxies, including preparing, printing and mailing this Proxy Statement, any exhibits +hereto and the proxies solicited hereby. In addition to the use of the mails, proxies may be solicited on the Company’s +behalf by officers, directors and employees of the Company, without additional remuneration, by personal interviews, telephone +or electronic transmission. The Company will also request brokerage firms, nominees, custodians and fiduciaries to forward proxy +materials to the beneficial owners of shares of Common Stock held of record by them and will provide reimbursements for the cost +of forwarding the material in accordance with customary charges. The Company has entered into an agreement with D.F. King & +Co., Inc. to assist in the solicitation of proxies and provide related advice and informational support. The total expense of +this engagement, which will be borne by the Company, including customary disbursements, is not expected to exceed $20,000 in the +aggregate. +12. How will the voting +results be reported? +The +preliminary results of the voting on the proposals will be reported at the Annual Meeting. The final certified results will be +reported in a Current Report on Form 8-K that will be filed with the SEC within four business days following the Annual Meeting. +13. How do I submit a proposal +for action at the Company’s 2017 Annual Meeting of Stockholders? +In +accordance with rules promulgated by the SEC, any stockholder who wishes to submit a proposal for inclusion in the proxy materials +to be distributed by the Company in connection with the 2017 Annual Meeting of Stockholders of the Company (the “2017 Annual +Meeting”) must do so no later than December 8, 2016. In addition, in accordance with Article I, Section 7(f) of +the Company’s Amended and Restated By-Laws (the “By-Laws”), in order to be properly brought before the 2017 +Annual Meeting, a matter must be either (i) specified in the notice of such meeting given by or at the direction of the Board +of Directors (or any duly authorized committee thereof), (ii) otherwise properly brought before such meeting by or at the +direction of the Board of Directors (or any duly authorized committee thereof) or (iii) specified in a notice in proper +written form given by a stockholder of record on the date of the giving of the notice and on the record date for such meeting, +which notice conforms to the requirements of Article I, Section 7(f) of the By-Laws and is delivered to, or mailed +and received at, the Company’s principal executive offices not less than 120 days nor more than 150 days prior +to the first anniversary of the date of the Company’s 2016 Annual Meeting. Accordingly, any written notice given by or on +behalf of a stockholder pursuant to the foregoing clause (iii) in connection with the 2017 Annual Meeting must be received +no later than January 27, 2017 and no earlier than December 28, 2016. In addition, for business to be properly brought +before the 2017 Annual Meeting by a stockholder pursuant to the foregoing clause (iii), such stockholder shall have complied with +any other applicable requirements, including, but not limited to, the requirements of Rule 14a-8 promulgated by the SEC. +5 +PROPOSAL +ONE: +ELECTION OF DIRECTORS +The +Company’s By-Laws provide that the Board of Directors of the Company shall be comprised of a minimum of one director and +that, subject to this limitation, the number of directors may be fixed from time to time by action of the directors. The Company’s +Board of Directors has fixed the number of directors to comprise the Board of Directors at eight directors and the Board of Directors +presently is comprised of eight directors. Directors serve a one-year term and the term of each of the directors will expire at +the Annual Meeting. +Stockholder Nominations +for Board Membership +The +Nominating/Corporate Governance Committee of the Board of Directors recommends to the Board director candidates for nomination +and election at each annual meeting of stockholders or for appointment to fill vacancies on the Board. The Nominating/Corporate +Governance Committee will review and evaluate the qualifications of proposed director candidates recommended to it from various +sources, including candidates proposed by stockholders of the Company in accordance with the procedures established for that purpose. +In accordance with Article II, Section 5 of the By-Laws, director nominations for the 2017 Annual Meeting can only be +made by a stockholder of the Company who (i) is a stockholder of record on the date of the giving of the notice of such director +nominations and on the record date for the determination of stockholders entitled to vote at the 2017 Annual Meeting and (ii) complies +with the notice requirements and procedures set forth in Article II, Section 5 of the By-Laws. A stockholder’s +notice to the Corporate Secretary with respect to any such nominations must be timely and in proper written form pursuant to Article II, +Section 5 of the Company’s By-Laws, including containing certain information concerning the nominating or proposing +stockholder and certain information concerning the nominee, and the notice must be delivered to, or mailed and received at, the +Company’s principal executive offices not less than 120 days nor more than 150 days prior to the first anniversary +of the date of the Company’s 2016 Annual Meeting. Accordingly, any written notice given by or on behalf of a stockholder +pursuant to Article II, Section 5 of the Company’s By-Laws in connection with the 2017 Annual Meeting must be +received no later than January 27, 2017 and no earlier than December 28, 2016. +Nominees for Election +to the Board of Directors +Upon +recommendation of the Nominating/Corporate Governance Committee of the Board of Directors, the Board of Directors has nominated +and is recommending to the stockholders the election of each of the eight nominees named below to serve as a director of the Company +until the next annual meeting of the Company’s stockholders and until his or her successor is duly elected and qualified +or until his or her earlier death, resignation or removal from office. Seven of the nominees were elected directors at last year’s +Annual Meeting of Stockholders. At a meeting of the Board of Directors of the Company held on February 22, 2016, upon the +recommendation of the Nominating/ Corporate Governance Committee, the Board of Directors of the Company appointed Amelia Newton +Varela, the President of the Company, to fill the vacancy on the Board of Directors created by the passing of Board member John +Madden, who served as a director of the Company for over 20 years. Ms. Varela’s appointment to the board became effective +immediately. Ms. Varela and each of the other director nominees has agreed to be named in this Proxy Statement and to serve if +elected. +The +names and biographical summaries of the eight persons who have been recommended by the Nominating/ Corporate Governance Committee +of the Board of Directors and nominated by the Board of Directors to stand for election at the Annual Meeting are provided below +for your information. +6 +Our +Board of Directors is responsible for overseeing our business in a manner consistent with the Board’s fiduciary duty to +our stockholders. This significant responsibility requires that our directors consist of individuals who are well-qualified for +service on our Board and its committees and demonstrate a commitment to the success of the Company and to service in the best +interests of our stockholders. The Board and the Nominating/Corporate Governance Committee select nominees with a view to establishing +a Board of Directors that is comprised of individuals who have extensive business leadership experience, are independent, bring +diverse perspectives to the Board, possess high ethical standards and sound business judgment and acumen and a willingness to +devote the time necessary for the Board to effectively fulfill its responsibilities. We believe that all of the director nominees +possess these qualifications and provide the Board with a full complement of knowledge, business skills and expertise for the +effective management of our Company. In addition to these general qualifications, provided below for each nominee for director +is a discussion of the experience, qualifications, attributes and skills that led to the Board’s conclusion that the nominee +should serve as a director. +Name +Principal Occupation +Age +Year +Became +a +Director +Edward R. Rosenfeld +Chairman of the Board and Chief Executive Officer, Steven Madden, Ltd. +40 +2008 +Rose Peabody Lynch +Owner of Marketing Strategies, LLC, New York based consulting firm of which she is founder and President, which focuses on strategic marketing and operating issues for small to medium-sized companies +66 +2014 +Peter Migliorini +Sales Manager, Greschlers, Inc., a building supplies company +67 +1996 +Richard P. Randall +Retired Executive Vice President and Chief Financial Officer, Direct Holdings Worldwide, LLC, the parent company of Lillian Vernon Corp., a catalog and online retailer of gifts and household goods, and Time-Life, a music and video marketing company +78 +2006 +Ravi Sachdev +Partner, Clayton Dubilier & Rice, LLC +39 +2008 +Thomas H. Schwartz +Owner, Sumner and Forge Investors LLC, a real estate investment and property management company +68 +2004 +Robert Smith +Chief Merchandising Officer, Haddad Brands, a global children’s apparel and accessories licensing partner for iconic American brands such as Levi’s, Hurley, Nike, Jordan and Converse +50 +2014 +Amelia Newton Varela +President, Steven Madden, Ltd. +44 +2016 +Additional Information About +the Director Nominees +Other +Public Company Directorships +Two +of our directors also currently serve as directors of other public companies: +· Mr. Rosenfeld +is a director and member of the Audit Committee of PVH Corp., one of the world’s +largest apparel companies. +· Mr. Randall +serves as a director and member of the Audit Committee of P&F Industries Inc., a +manufacturer and importer of tools sold principally to the industrial, retail and automotive +markets. +7 +Other +Employment Information +Each +of our directors has been engaged in the principal occupation indicated in the foregoing table for more than the past five years, +with the exceptions of Mr. Smith and Mr. Sachdev. Mr. Smith has held his position with Haddad Brands since 2013. Prior thereto, +from 2010 to 2012, Mr. Smith served as Executive Vice President, Merchandising for Limited Brands, at Victoria’s Secret +Direct, the largest direct-to-consumer women’s apparel retailer in the United States. From 1998 through 2010, Mr. Smith +held various senior merchandising positions at Macy’s Inc. beginning with Vice President, Merchandise Manager, Macy’s +West and culminating with Executive Vice President, Merchandising for Juniors, Kids, Intimate Apparel, Dresses, Suits, Coats and +Swimwear. Mr. Sachdev has been a partner of Clayton Dubilier & Rice, LLC since 2015. Previously, from November 2010, he served +as a Managing Director and Co-Head of Healthcare Services at J.P. Morgan. +Specific +Qualifications, Attributes, Skills and Experience of Director Nominees +Edward +R. Rosenfeld has served as Chairman of the Board since August 2008 and has been a director of the Company since February +2008. Mr. Rosenfeld, who joined our executive management team in May 2005, has more than 18 years of experience +focused on the retail, apparel and footwear industries and possesses particular knowledge of and experience in the industry that +strengthens the Board’s collective qualifications, skills and experience. His background in finance and his analytical skills +gained through his years as a Vice President with Peter J. Solomon Company, an investment banking boutique, where he specialized +in mergers and acquisitions in the retail, apparel and footwear industries, provide the Board with insight and guidance with respect +to, among other things, strategic business development matters. Mr. Rosenfeld has strong leadership skills and an in-depth +understanding of the Company and its goals from his positions as the Chairman of the Board and Chief Executive Officer. Mr. Rosenfeld +serves as a director and member of the Audit & Risk Management Committee of PVH Corp., one of the world’s largest apparel +companies. +Rose +Peabody Lynch has served as a director of the Company since April 2014 and as a member of the Audit Committee and the +Compensation Committee since June 2014. She possesses over 30 years of business experience, including tenures as the President +and in other senior executive officer positions of major companies in the beauty and fashion industries, and has extensive executive +level financial and operating experience. Her experience serving as a director and as a senior executive for a range of companies, +including Victoria’s Secret, Trowbridge Gallery (a supplier of fine art to the interior design trade) and Danskin, +Inc., a leading manufacturer of women’s dance and active wear, enhances the Board’s leadership and oversight capabilities. +Ms. Lynch has served on a number of boards, including The Harmony Group-LeRoi Princeton (a manufacturer of children’s +apparel), Salant Corporation (Perry Ellis Menswear) and Frederick’s of Hollywood (a retailer of women’s apparel +and lingerie). She was a member of the Audit and Nominating and Governance Committees during her tenure at Salant and chaired +the Compensation Committee during her tenure on the board of Frederick’s of Hollywood. In addition, Ms. Lynch has held +leadership positions with a variety of charities and currently serves as a director of S.O.S. Children’s Villages, the U.S. +arm of an international non-profit organization dedicated to providing assistance to children. She currently serves on the Board +of Directors of the Princeton University Varsity Club, is President of her Princeton University class and serves on the Executive +Committee of the Princeton University Alumni Council. She is a new Member of the Board of Trustees of Concord Academy in Concord, +Massachusetts. Ms. Lynch is also a member of the Women and Foreign Policy Advisory Council at the Council on Foreign Relations. +Peter +Migliorini has served as a director of the Company since October 1996 and has served on the Company’s +Audit Committee since October 1996, the Nominating/Corporate Governance Committee, as its Chair, since July 2004 and the +Compensation Committee, as its Chair, since July 2004. Mr. Migliorini is also Presiding Director over all executive sessions +of the independent directors. Mr. Migliorini possesses extensive executive level financial, sales and operations experience. +Prior to serving as sales manager for Greschlers, Inc., from 1987 to 1994, Mr. Migliorini served as Director of Operations +for Mackroyce Group, a construction company. Earlier, Mr. Migliorini held various positions of increasing responsibility +from Assistant Buyer to Chief Planner/Coordinator for several shoe companies, including Meldisco Shoes, Perry Shoes and Fasco +Shoes. His numerous years of business experience at various levels and in various industries provide the Board with a measure +of practical orientation regarding the Company’s operations and growth endeavors. Mr. Migliorini’s early experience +in the shoe industry also provides relevant knowledge and expertise in the Company’s specific industry. +8 +Richard +P. Randall has served as a director of the Company since April 2006 and has served on the Company’s +Audit Committee, as its Chair, since 2006, and on the Nominating/Corporate Governance Committee since September 2008. Mr. Randall +has decades of business experience, including tenures as Chief Financial Officer and Chief Operating Officer of both publicly +traded and privately held companies in the retail industry, including Direct Holdings Worldwide, LLC, the parent company of Lillian +Vernon Corp. and Time-Life, a music and video marketing company, and, prior thereto, Coach, Inc., a luxury leather goods company. +Mr. Randall possesses extensive knowledge of accounting and finance, the retail industry and the issues impacting a publicly +traded company. Mr. Randall has extensive executive level experience establishing his capabilities in management of complex +organizations and is a certified public accountant. His expertise in finance qualifies him to serve as the Audit Committee “audit +committee financial expert” and his service on the boards and board committees of other companies has allowed him to gain +broad-based experience and sensitivity regarding best practices, which he shares with the Board. Mr. Randall also provides +a perspective on proper governance for public companies. He currently serves as a member of the board of directors and Audit Committee +of P&F Industries, Inc., a manufacturer and importer of tools sold principally to the industrial, retail and automotive markets, +as well as residential hardware and, until December 31, 2014, served as a member of the board of directors and chair of the +Audit and Risk Committee of Aceto Corporation, a generic pharmaceutical, nutraceutical and chemical distribution company. Mr. Randall +is a former director and member of the Executive, Finance, Audit and Research Committees of The Burke Rehabilitation Hospital +(“Burke”). He currently serves as a Member Emeritus of Burke’s Executive Committee and retains a board seat +on The Burke Foundation’s board. Mr. Randall served as a director and chair of the Audit Committee of Universal Travel +Group, a travel services provider in the People’s Republic of China, and of Home Systems Group, a manufacturer and distributor +of household appliances in the People’s Republic of China, from 2007 until 2008 when he resigned from these boards. +Ravi +Sachdev has been a director of the Company since September 2008 and has served on the Company’s Audit Committee +since September 2008. As a Partner of the private equity firm Clayton Dubilier & Rice, LLC since June 2015, Mr. Sachdev +focuses on the healthcare sector. Earlier, Mr. Sachdev was a Managing Director and Co-Head of Healthcare Services at J.P. +Morgan from November 2010 and prior to that held the positions of Managing Director at Deutsche Bank Securities, Inc. from January 2009 +until November 2010 and Director at Deutsche Bank from January 2007 until January 2009. Prior to joining Deutsche Bank +in 2006 as a Vice President, Mr. Sachdev served as a Vice President at Peter J. Solomon Company, an investment banking boutique, +specializing in mergers and acquisitions in the healthcare sector, from 1998 to 2006. Mr. Sachdev possesses knowledge +of finance and the financial analytics used to measure business performance. His 18 years of professional experience in investment +banking and private equity brings to the Board a thorough understanding of the financial issues affecting public companies and +greater insights in business valuation together with a practical orientation with respect to acquisitions and integrations. Mr. Sachdev +also serves on the Board of Directors of Healogics, a leading provider of wound healing services, and Vets First Choice, a veterinary +internet pharmacy. +Thomas +H. Schwartz has served as a director of the Company since May 2004 and has served on the Company’s Compensation +Committee since July 2004. With more than twenty years of experience as a Managing Director of Helmsley-Spear, Inc. and seven +years as the owner of his own real estate investment firm, Mr. Schwartz brings to the Board extensive executive level experience +in handling operations issues and practical expertise in management. +Robert +Smith has served as a director of the Company since April 2014 and as a member of the Compensation Committee and +the Nominating/Corporate Governance Committee since June 2014. Prior to his current and former positions with Haddad Brands and +Victoria’s Secret Direct, respectively, Mr. Smith held various senior merchandising positions at Macy’s Inc. +between 1998 and 2010, beginning with Vice President, Merchandise Manager, Macy’s West and culminating with Executive Vice +President, Merchandising for Juniors, Kids, Intimate Apparel, Dresses, Suits, Coats and Swimwear. Earlier, Mr. Smith was +a Merchandiser for XOXO Apparel Company and held various positions with Burdine’s Department Stores. Mr. Smith possesses +nearly 30 years of business experience in the fashion industry and has extensive executive level expertise in merchandising. His +experience in this area will further enhance the Board’s depth of understanding of the industry. +9 +Amelia +Newton Varela has been President of the Company since September 2015. Prior to this tenure, Ms. Varela was Executive +Vice President of Wholesale of the Company since April 2008 and Executive Vice President of Wholesale Footwear of the Company +from November 2004 to April 2008. Previously, she was Vice President of Sales for Steve Madden Women’s Wholesale Division from +January 2000. Ms. Varela began her career with the Company in 1998 in the role of Account Executive for Steve Madden Women’s +Wholesale Division. She graduated from The Fashion Institute of Technology in 1995. +Required +Vote +Proxies +will be voted for the election of the eight nominees as directors of the Company unless otherwise specified in the proxy. A plurality +of the votes cast by the holders of shares of Common Stock present in person or represented by proxy and entitled to vote at the +Annual Meeting will be necessary to elect the nominees as directors. This means that the director nominees who receive the greatest +number of affirmative votes cast are elected as directors subject to our Director Election (Majority Voting) Policy, which +is described below. If, for any reason, any nominee is unable or unwilling to serve, the proxies will be voted for a substitute +nominee who will be designated by the Board of Directors at the Annual Meeting. Stockholders may abstain from voting by marking +the appropriate boxes on the accompanying proxy. Abstentions will be counted separately and used for purposes of calculating whether +a quorum is present at the Annual Meeting, but will have no effect on the outcome of the vote. +Director Election (Majority +Voting) Policy +It +is the policy of the Company that any nominee for director who receives a greater number of “WITHHOLD” votes than +“FOR” votes for his or her election must promptly submit a letter offering his or her resignation to the Nominating/Corporate +Governance Committee following the certification of the stockholder vote. In such event, the Nominating/Corporate Governance Committee +would then consider the offer of resignation and make a recommendation to the Board of Directors as to whether or not the resignation +should be accepted. This policy does not apply in contested elections. For more information about this policy, see “Corporate +Governance – Director Election (Majority Voting) Policy” below. +Recommendation of the Board +of Directors +The +Nominating/Corporate Governance Committee of the Board and the entire Board of Directors unanimously recommend a vote “FOR” +the election of Ms. Rose Peabody Lynch, Ms. Amelia Newton Varela and Messrs. Edward R. Rosenfeld, Peter Migliorini, Richard +P. Randall, Ravi Sachdev, Thomas H. Schwartz and Robert Smith. +10 +CORPORATE +GOVERNANCE +The Board of Directors +Our +business is managed under the direction and oversight of the Board of Directors who are elected by the Company’s stockholders. +Directors meet their responsibilities by participating in meetings of the Board of Directors and the various committees of the +Board on which they sit, as well as through communicating with our Chairman and Chief Executive Officer, other officers and employees +of the Company and by consulting with our independent registered public accounting firm and other third parties. +As +noted below, our Board is currently comprised of six independent and two non-independent directors. +Director Independence +The +Board of Directors has determined that the following director nominees are “independent” for purposes of the criteria +of the SEC and The Nasdaq Global Select Market listing standards: Ms. Lynch and Messrs. Migliorini, Randall, Sachdev, Schwartz +and Smith. If the eight nominees set forth above are elected, the Board will be comprised of a majority of independent directors. +The Board of Directors has held regularly scheduled executive sessions for the independent directors, with Peter Migliorini serving +as Presiding Director of such executive sessions. +Director Attendance at +Meetings +Attendance +at Annual Meetings of Stockholders +The +Company has no specific policy regarding director attendance at its annual meetings of stockholders. The Company encourages all +of its directors to attend annual meetings of the Company’s stockholders and two directors attended the Company’s +2015 annual meeting of stockholders. +Attendance +at Meetings of the Board of Directors +The +Board of Directors held four regularly scheduled meetings during the 2015 Fiscal Year, one of which was not attended by Mr. Sachdev +and one of which was not attended by Mr. Migliorini. The Board also held two special meetings during the 2015 Fiscal Year, one +of which was not attended by Mr. Schwartz. The Board acted by unanimous written consent on four occasions during the 2015 Fiscal +Year. In the 2015 Fiscal Year, each director attended at least 75% of the aggregate number of Board meetings, and each director +attended at least 75% of the aggregate number of meetings held by all committees on which he or she then served. +Director Election (Majority +Voting) Policy +The +Company has adopted a Director Election (Majority Voting) Policy. Pursuant to this policy, in an uncontested election of +directors (that is, an election where the number of nominees is equal to the number of seats open) any nominee for director +who receives a greater number of “WITHHOLD” votes than “FOR” votes for his or her election must promptly +submit an offer of resignation to the Nominating/Corporate Governance Committee following the certification of the stockholder +vote for consideration in accordance with the following procedures. +In +such event, upon receipt of the resignation, the Nominating/Corporate Governance Committee would promptly consider the appropriateness +of the director’s continued service on the Board of Directors and recommend to the Qualified Independent Directors (as defined +below) the action to be taken with respect to the resignation, which could include (1) accepting the resignation; (2) rejecting +the resignation; (3) retaining the director but addressing what the Qualified Independent Directors believe to be the underlying +cause of the “WITHHOLD” votes; or (4) determining that the director will not be renominated by the Board of Directors +in future elections. The Nominating/Corporate Governance Committee would consider factors such as (a) the reasons expressed +by the stockholders for withholding votes from such director; (b) any possibilities for curing the underlying cause of the +“WITHHOLD” votes; (c) the tenure and qualifications of the director and his or her past and expected future contributions +to the Company; (d) the overall composition of the Board of Directors, including, without limitation, whether accepting the +resignation would cause the Company to fail to meet any applicable SEC or Nasdaq requirement; (e) the availability of other +qualified candidates; and (f) the Company’s Board of Director Candidate Guidelines. +11 +The +Qualified Independent Directors would then act on the Nominating/Corporate Governance Committee’s recommendation no later +than 90 days following the date of the stockholders’ meeting at which the director election occurred. In considering the +Nominating/Corporate Governance Committee’s recommendation, the Qualified Independent Directors would review the factors +considered by the Nominating/Corporate Governance Committee and such additional information and factors that they believe to be +relevant. Following the Qualified Independent Directors’ decision, the Company would promptly disclose the decision in a +Current Report on Form 8-K. The Form 8-K would include a full explanation of the process by which the decision of the Qualified +Independent Directors was reached and, if applicable, the reasons why the offer of resignation was rejected. +In +the event that an offer of resignation were to be accepted, the Nominating/Corporate Governance Committee would recommend to the +Board of Directors whether to fill the vacancy or reduce the size of the Board of Directors accordingly. Any director required +to submit his or her resignation pursuant to this policy would not participate in the Nominating/Corporate Governance Committee’s +recommendation or the Qualified Independent Directors’ consideration of the resignation but, prior to voting on the director’s +resignation offer, the Qualified Independent Directors would provide to the director an opportunity to submit any information +or statement that he believes relevant to the Qualified Independent Directors’ consideration of the resignation. +For +purposes of this policy, “Qualified Independent Directors” means all directors who (1) are “independent” +for purposes of The Nasdaq Global Select Market listing standards and (2) are not required to offer their resignation in +accordance with this policy. If there are fewer than three independent directors then serving on the Board of Directors who are +not required to submit their resignations in accordance with this policy, then the Qualified Independent Directors shall consist +of all of the independent directors and each independent director who is required to offer his or her resignation in accordance +with this policy shall recuse himself or herself from the deliberations and voting only with respect to his or her individual +offer to resign. +Committees of the Board +Among +other committees, the Board of Directors has a standing Audit Committee, Compensation Committee and Nominating/Corporate Governance +Committee. Each committee has a written charter. The table below provides current membership for each Board committee. +Committees +of the Board of Directors +Director +Audit +Compensation +Nominating/ +Corporate +Governance +Edward +R. Rosenfeld +Rose +Peabody Lynch +Member +Member +Peter +Migliorini +Member +Chair +Chair +Richard +P. Randall +Chair +Member +Ravi +Sachdev +Member +Thomas +H. Schwartz +Member +Robert +Smith +Member +Member +Amelia +Newton Varela +Number +of meetings in +2015 Fiscal Year +5 +4* +0** +* +The Compensation Committee also acted by unanimous written consent on two occasions during +the 2015 Fiscal Year. +**The +Nominating/Corporate Governance Committee acted by unanimous written consent on one occasion +during the 2015 Fiscal Year. +12 +Audit +Committee +The +Audit Committee is comprised of directors who are “independent” for purposes of The Nasdaq Global Select Market listing +standards and who meet the independence requirements contained in Securities Exchange Act of 1934, as amended (the “Exchange +Act”) Rule 10A-3(b)(1). The Board has determined that each of Messrs. Randall and Sachdev meets the SEC criteria +of an “audit committee financial expert” as defined in Item 407 of Regulation S-K under the Exchange Act. The +Audit Committee is primarily responsible for reviewing the services performed by the Company’s independent registered public +accountants, evaluating the Company’s accounting policies and its system of internal controls, and reviewing significant +financial transactions. +The +Audit Committee is responsible for reviewing and striving to ensure the integrity of the Company’s financial statements +and oversight of our compliance with legal and regulatory requirements and our internal audit function. Among other matters, the +Audit Committee, with management and independent and internal auditors, reviews the adequacy of the Company’s internal accounting +controls that could significantly affect the Company’s financial statements. The Audit Committee is also directly and solely +responsible for the appointment, retention, compensation, oversight and termination of the Company’s independent registered +public accountants. In addition, the Audit Committee functions as the Company’s Qualified Legal Compliance Committee (the +“QLCC”). The purpose of the QLCC is to receive, retain and investigate reports made directly, or otherwise made known, +of evidence of material violations of any United States federal or state law, including any breach of fiduciary duty by the Company, +its officers, directors, employees or agents, and if the QLCC believes appropriate, to recommend courses of action to the Company. +Management +has primary responsibility for the Company’s financial statements and the overall reporting process, including the Company’s +system of internal controls. The Company’s independent registered public accountants audit the annual financial statements +prepared by management, express an opinion as to whether those financial statements present fairly the financial position, results +of operations and cash flows of the Company in conformity with accounting principles generally accepted in the United States and +discuss with the Audit Committee any issues they believe should be raised with the Audit Committee. +The +Audit Committee is also responsible for the oversight of the Company’s risk management process, which is discussed in the +“Risk Oversight” section below. +In +performing its functions, the Audit Committee meets with management on at least a quarterly basis to review and discuss the annual +audited financial statements, quarterly financial statements and related reports and to consider the adequacy of the Company’s +internal controls and the objectivity of its financial reporting. The Audit Committee discusses these matters with the Company’s +independent registered public accountants and with appropriate Company financial personnel. Meetings are held with the independent +registered public accountants, who have unrestricted access to the Audit Committee. In addition, the Audit Committee reviews the +Company’s financing plans and reports and makes recommendations to the full Board of Directors for approval and to authorize +action. The Board has adopted a written charter setting out the functions the Audit Committee is to perform. A copy of the Audit +Committee Charter is available on the Company’s website at www.stevemadden.com . +Nominating/Corporate +Governance Committee +The +Nominating/Corporate Governance Committee is comprised of directors who are “independent” for purposes of The Nasdaq +Global Select Market listing standards. +The +Nominating/Corporate Governance Committee provides oversight with respect to a wide range of issues relating to the composition +and operation of the Board, including consideration of and recommendations regarding the size and composition of the Board of +Directors and identification of potential candidates to serve as directors. The Nominating/Corporate Governance Committee identifies +candidates to the Board of Directors by introductions from management, members of the Board of Directors, employees of the Company +or other sources, including stockholders that satisfy the Company’s policy regarding stockholder recommended candidates. +The Nominating/Corporate Governance Committee does not evaluate director candidates recommended by stockholders differently than +director candidates recommended by other sources. +13 +Stockholders +wishing to submit recommendations for director nominations for the 2017 Annual Meeting should write to the Corporate Secretary, +Steven Madden, Ltd., 52-16 Barnett Avenue, Long Island City, New York 11104. Any such stockholder must (i) comply with the +director nomination provisions of the Company’s By-Laws, (ii) meet and evidence the minimum eligibility requirements +specified in Exchange Act Rule 14a-8, and (iii) submit, within the same timeframe for submitting a stockholder proposal +required by Rule 14a-8: (1) evidence in accordance with Rule 14a-8 of compliance with the stockholder eligibility +requirements, (2) the written consent of the candidate(s) for nomination as a director, (3) a resume or other written +statement of the qualifications of the candidate(s) for nomination as a director, and (4) all information regarding +the candidate(s) and the submitting stockholder that would be required to be disclosed in a proxy statement filed with the +SEC if the candidate(s) were nominated for election to the Board of Directors. +In +considering candidates for the Board of Directors, the Nominating/Corporate Governance Committee considers the Company’s +Board of Director Candidate Guidelines and Director Election (Majority Voting) Policy, available on the Company’s website +at www.stevemadden.com , the Company’s policy regarding stockholder recommended director candidates, as set forth +above, and all other factors that are deemed appropriate including, but not limited to, the individual’s character, education, +experience, knowledge and skills. While the Nominating/Corporate Governance Committee’s Board of Directors Candidate Guidelines +does not expressly identify diversity as a factor for consideration regarding the evaluation of director candidates, diversity +is among the many factors the Nominating/Corporate Governance Committee considers in the candidate evaluation process. To assess +the effectiveness of the mandate set forth in the Nominating/Corporate Governance Committee’s charter, the Nominating/Corporate +Governance Committee reviews annually with the Board the composition of the Board as a whole and recommends, if necessary, measures +to be taken so that the Board reflects the appropriate balance of knowledge, experience, skills, expertise and diversity required +for the Board as a whole. +In +addition, the Nominating/Corporate Governance Committee develops and recommends corporate governance principles for the Company; +makes recommendations to the Board of Directors in support of such principles; takes a leadership role in the shaping of the corporate +governance of the Company; and oversees the evaluation of the Board of Directors and management. The Nominating/Corporate Governance +Committee operates under a formal charter that governs the Committee’s composition, powers and responsibilities. A copy +of the Nominating/Corporate Governance Committee Charter is available on the Company’s website at www.stevemadden.com . +Compensation +Committee +The +Compensation Committee is comprised of directors who are “independent” for purposes of The Nasdaq Global Select Market +listing standards and applicable tax and securities rules. +The +Compensation Committee is responsible for establishing and overseeing the Company’s compensation and incentive plans and +programs; determining and approving compensation for the Company’s executive officers, including salaries, bonuses, perquisites +and equity awards; reviewing and approving compensation and awards for the Company’s executive officers under the Company’s +compensation and incentive plans and programs; administering the Company’s equity compensation plans; reviewing and approving +a compensation program for independent members of the Board; and assisting the Board in discharging the Board’s responsibilities +relating to management organization, performance, compensation and succession. The Compensation Committee operates under a formal +charter adopted by the Board of Directors that governs its composition, powers and responsibilities. A copy of the Compensation +Committee Charter is available on the Company’s website at www.stevemadden.com . +14 +Board Leadership Structure, +Risk Oversight, Executive Sessions of Non-Employee Directors, and Communications Between Stockholders and the Board +Board +Leadership Structure +As +noted above, our Board is currently comprised of six independent and two non-independent directors. +Mr. Rosenfeld +has served as Chairman of the Board and Chief Executive Officer since August 2008, and has been a member of the Board since February 2008. +The Board has designated one of the independent directors as Presiding Director to preside over executive sessions. We believe +that the number of independent, experienced directors that comprise our Board, along with the independent oversight of our Presiding +Director, benefits the Company and its stockholders. +We +recognize that different board leadership structures may be appropriate for companies in different situations and believe that +no one structure is suitable for all companies. We believe our current Board leadership structure is optimal for the Company because +it demonstrates to our employees, suppliers, customers, and other stakeholders that the Company is under strong leadership, with +a single person setting the tone and having primary responsibility for managing our operations and leading the Board in setting +long-term strategy. Having a single leader for both the Company and the Board eliminates confusion and duplication of efforts, +and provides clear leadership for the Company. We believe the Company, like many U.S. companies, has been well-served by this +leadership structure. +Because +the positions of Chairman of the Board and Chief Executive Officer are held by the same person, the Board believes it is appropriate +for the independent directors to elect one independent director to serve as a Presiding Director. In addition to presiding at +executive sessions of the independent directors, the Presiding Director has various responsibilities including coordinating with +the Chairman of the Board and Chief Executive Officer in establishing agenda and discussion items for Board meetings; retaining +independent advisors on behalf of the Board as the Board may determine to be necessary or appropriate and performing such other +functions as the independent directors may designate from time to time. Mr. Migliorini is currently serving as the Presiding +Director. +Our +Board conducts an annual evaluation in order to determine whether it and its committees are functioning effectively. As part of +this annual self-evaluation, the Board evaluates whether the current leadership structure continues to be optimal for the Company +and its stockholders. +Risk +Oversight +Our +Board is responsible for overseeing the Company’s risk management process. The Board focuses on the Company’s general +risk management strategy, the most significant risks facing the Company, and ensures that appropriate risk mitigation strategies +are implemented by management. The Board is also apprised of particular risk management matters in connection with its general +oversight and approval of corporate matters. +The +Board has delegated to the Audit Committee oversight of the Company’s risk management process. Among its duties, the Audit +Committee reviews with management (a) the Company’s policies with respect to risk assessment and management of risks +that may be material to the Company, (b) the Company’s system of disclosure controls and system of internal controls +over financial reporting, and (c) the Company’s compliance with legal and regulatory requirements. The Audit Committee +is also responsible for reviewing major legislative and regulatory developments that could materially impact the Company’s +contingent liabilities and risks. Our other Board committees also consider and address risks as they perform their respective +committee responsibilities. All committees report to the full Board as appropriate, including when a matter rises to the level +of a material or enterprise level risk. +The +Company’s management is responsible for day-to-day risk management. Our risk management and internal audit areas serve as +the primary monitoring and testing function for company-wide policies and procedures, and manage the day-to-day oversight of the +risk management strategy for the ongoing business of the Company. This oversight includes identifying, evaluating, and addressing +potential risks that may exist at the enterprise, strategic, financial, operational, and compliance and reporting levels. +15 +We +believe the division of risk management responsibilities described above is an effective approach for addressing the risks facing +the Company and that our Board leadership structure supports this approach. +Executive +Sessions of Independent Directors +The +Board holds executive sessions of its independent directors generally at each regularly scheduled meeting. The Presiding Director +serves as the chairperson for these executive sessions. +Communications +between Stockholders and the Board +The +Company has adopted a procedure by which stockholders may send communications to one or more members of the Board of Directors +by writing to such director(s) or to the entire Board of Directors in care of the Corporate Secretary, Steven Madden, Ltd., +52-16 Barnett Avenue, Long Island City, New York 11104. The Board has instructed the Corporate Secretary to review all communications +so received and to exercise his discretion not to forward to the Board correspondence that is inappropriate, such as business +solicitations, frivolous communications and advertising, routine business matters (i.e. business inquiries, complaints, or suggestions) and +personal grievances. However, any director may at any time request the Corporate Secretary to forward to such director any and +all communications received by the Corporate Secretary but not forwarded to the directors. +Codes of Business Conduct +and Ethics +The +Company has adopted a Code of Ethics for the Chief Executive Officer and Senior Financial Officers, which is applicable to our +Chief Executive Officer, Chief Financial Officer, controller, principal accounting officer, head of internal audit and other employees +of the Company who are designated from time to time as “senior financial officers” of the Company. In addition, the +individuals who serve on our Board of Directors are subject to a Code of Business Conduct and Ethics for the Board of Directors +and all of the Company’s employees are held accountable for adherence to the Company’s Code of Business Conduct and +Ethics. Each of the Code of Ethics for the Chief Executive Officer and Senior Financial Officers, the Code of Business Conduct +and Ethics for the Board of Directors and the Code of Business Conduct and Ethics (collectively, the “Conduct Code”) is +included as an exhibit to our Annual Report on Form 10-K for the fiscal year ended December 31, 2014 and are available on the +Company’s website at www.stevemadden.com and, in addition, may be obtained by any stockholder without charge upon +request by writing to the Corporate Secretary, Steven Madden, Ltd., 52-16 Barnett Avenue, Long Island City, New York 11104. The +Conduct Code is intended to establish standards necessary to deter wrongdoing and to promote compliance with applicable governmental +laws, rules and regulations and honest and ethical conduct. The Conduct Code covers all areas of professional conduct, including +conflicts of interest, fair dealing, financial reporting and disclosure, protection of Company assets and confidentiality. Employees +have an obligation to promptly report any known or suspected violation of the Conduct Code without fear of retaliation. Waiver +of any provision of the Conduct Code for executive officers and directors may only be granted by the Board of Directors or one +of its committees and any such waiver or modification of the Conduct Code relating to such individuals will be disclosed by the +Company. +Corporate Governance +Guidelines +The +Board of Directors has adopted Corporate Governance Guidelines as a set of guiding principles by which the Company is governed. +Various matters of corporate governance are addressed in the Corporate Governance Guidelines, such as board size and composition, +director qualifications and responsibilities, director compensation, limitations on service on other boards, board committees, +director orientation and education, director access to management, management development and succession planning and annual performance +evaluations for the Board. The Corporate Governance Guidelines also include a clawback of executive incentive compensation paid +to senior executive officers in the event of an accounting restatement by the Company due to intentional misconduct of an executive +officer. +16 +The +Nominating/Corporate Governance Committee reviews the Corporate Governance Guidelines annually to determine whether to recommend +changes to the Corporate Governance Guidelines to reflect new laws, rules and regulations and developing governance practices. +A copy of the Corporate Governance Guidelines is available on the Company’s website at www.stevemadden.com and may +also be obtained by any stockholder without charge upon request by writing to the Corporate Secretary, Steven Madden, Ltd., 52-16 Barnett +Avenue, Long Island City, New York 11104. +Stock Ownership Guidelines +The +Board of Directors has adopted Stock Ownership Guidelines, which require a level of ownership of shares of our Common Stock by +our directors and executive officers in order to align their interests with those of our stockholders. The Stock Ownership Guidelines +require our Chief Executive Officer to own shares of our Common Stock equal in value to five times his annual base salary. Other +executive officers of the Company are required to own shares of our Common Stock equal in value to two times their annual base +salary. The Stock Ownership Guidelines further require that non-employee directors of the Company must own shares of our Common +Stock equal in value to two times the cash portion of the directors’ annual retainer or the equivalent if a retainer is +not received in certain circumstances. Individuals subject to the Stock Ownership Guidelines must attain the required level of +share ownership by the fifth anniversary of the later of the Stock Ownership Guidelines’ adoption date and the date that +the individual became an executive officer or director and must retain an amount equal to 25% of the net shares of our Common +Stock received as a result of the exercise, vesting or payment of any equity award made by the Company until the share ownership +requirement is satisfied. +Prohibition on Hedging +and Pledging of Our Common Stock +Our directors +and executive officers and certain other persons designated from time to time by the Company’s Chief Financial Officer are +prohibited from entering into hedging transactions and from pledging our Common Stock pursuant to a formal policy concerning such +activities adopted by the Board of Directors. +Corporate Social Responsibility +Policy +The +Company is committed to operating its business in a socially responsible manner. We strive to incorporate this commitment into +every aspect of our business, including the design of our products, the quality, safety and sourcing of our products, the safety +and fair treatment of our employees, animal welfare and compliance with laws, including the Foreign Corrupt Practices Act and +the SEC’s Conflict Minerals rule. These guiding principles are set forth in our Corporate Social Responsibility Policy and +we expect all of our employees to be familiar with and to adhere to them. We strive to do business with vendors and suppliers +that share our views and commitments to quality products and ethical business principles. We will only engage vendors and suppliers +that demonstrate a commitment to meeting our standards. +Certain Relationships +and Related Party Transactions +JLM +Consultants, Inc. Commencing in 2004, the Company engaged JLM Consultants, Inc., a company wholly-owned by John L. Madden, +who, until his passing in October 2015, had served as a director of the Company for more than 20 years, to provide consulting +services to the Company with respect to the development of international sales of the Company. Mr. Madden was the brother of Steven +Madden, the Company’s founder and Creative and Design Chief. The services were provided under a consulting agreement (the +“JLM Consulting Agreement”) dated February 23, 2012 between the Company and JLM Consultants, Inc. In accordance +with the terms of the JLM Consulting Agreement, for the 2015 Fiscal Year, JLM Consultants, Inc. received the following compensation +from the Company for services rendered: (a) a commission equal to 1% of net sales, excluding retail royalty income; (b) a +commission equal to 10% of retail royalty income; (c) 1% of any commission income to the International division that is not +recognized in net sales; (d) a monthly draw in the amount of $25,000, which amount is offset against commissions earned; +(e) a $1,000 per month travel allowance; and (f) monthly reimbursements, in the aggregate amount of $17,168 in the 2015 +Fiscal Year, for health insurance premiums for John L. Madden. Pursuant to this arrangement, JLM Consultants, Inc. received a +total of $1,372,721 from the Company in the 2015 Fiscal Year. +17 +Pursuant +to the JLM Consulting Agreement, on January 2, 2013, the Company issued 72,012 restricted shares of the Company’s Common +Stock (the number of shares indicated having been adjusted for an October 1, 2013 three-for-two stock split effected as a +stock dividend) to JLM Consultants, Inc. under the Steven Madden, Ltd. 2006 Stock Incentive Plan, as amended (the “2006 +Plan”). The shares vested in twelve substantially equal quarterly installments over a three-year period commencing on April 1, +2013 and ending on January 1, 2016. +Steven +Madden Employment Agreement. Effective as of July 1, 2005, the Company amended and restated its employment agreement with +the Company’s founder and Creative and Design Chief, Steven Madden, pursuant to which Mr. Madden agreed to continue +to serve as the Company’s Creative and Design Chief. The term of Mr. Madden’s employment under his employment +agreement commenced on July 1, 2005 and, in accordance with the amendment of the agreement effective December 31, 2011, will +end on December 31, 2023. Prior to this recent amendment, the agreement had provided for an annual salary of $600,000, with +a 7% increase of base salary on a compound basis in each of the third, fifth, seventh and ninth years of the agreement. The agreement +had also provided for an annual cash bonus in an amount equal to at least 2% of the Company’s EBITDA (the “Annual +Bonus”) and an annual cash bonus in relation to “new business” (as defined in the agreement) in an +amount equal to at least (i) 2.5% of new business gross direct revenues plus (ii) 10% of all license or other fee income +above $2,000,000 (the “New Business Bonus”). The agreement, as amended, increases Mr. Madden’s annual base +salary but eliminates the Annual Bonus and the New Business Bonus and provides that all cash bonuses subsequent to the fiscal +year ended December 31, 2011 will be at the sole discretion of the Company’s Board of Directors. Under the agreement, +as amended, Mr. Madden’s annual base salary was fixed at $5,416,667 in 2012, $7,416,667 in 2013, $9,666,667 in 2014, +$11,916,667 in 2015 and $10,697,917 in 2016 and in each year thereafter through the end of the term of employment. In addition, +the amended agreement entitles Mr. Madden to an annual life insurance premium reimbursement of up to $200,000. The amendment +also eliminates an annual non-accountable expense allowance of $200,000 that had been previously provided to Mr. Madden under +the agreement. Pursuant to the amended agreement, on February 8, 2012, Mr. Madden was granted 1,463,056 restricted shares +of Common Stock (the number of shares indicated having been adjusted for an October 1, 2013 three-for-two stock split effected +as a stock dividend), valued at approximately $40 million, under the 2006 Plan. The restricted Common Stock will vest in +equal annual installments over seven years commencing on December 31, 2017 through December 31, 2023, subject to Mr. Madden’s +continued employment with the Company on each such vesting date. +On +June 30, 2012, pursuant to an election right granted to him under the agreement, as amended, Mr. Madden notified the Company +of his election to receive an additional restricted stock award valued at $40 million in consideration of a reduction in +his annual base salary in years subsequent to 2012. Accordingly, on July 3, 2012, Mr. Madden was issued 1,893,342 restricted +shares of Common Stock (the number of shares indicated having been adjusted for an October 1, 2013 three-for-two stock split +effected as a stock dividend) under the 2006 Plan. The restricted Common Stock will vest in equal annual installments over +six years commencing on December 31, 2018 through December 31, 2023, subject to Mr. Madden’s continued +employment with the Company on each such vesting date. As a result of his election to receive an additional restricted stock award, +Mr. Madden’s annual base salary for years subsequent to 2012 has been reduced as follows: $4,000,000 in 2013, $6,125,000 +in 2014, $8,250,000 in 2015 and $7,026,042 in 2016 and in each year thereafter through the end of the term of employment. +Mr. Madden +is also eligible to receive annually, on or about the date of the Company’s annual meeting of stockholders (but not later +than June 30 th ), an option grant (the “Annual Option”) to purchase a number of shares of Common Stock, +with such number to be equal to the greater of (a) 100% of the largest aggregate number of shares of Common Stock available +upon the exercise of an option or options granted to any other continuing full-time employee of the Company during the preceding +twelve-month period and (b) 100,000 shares of Common Stock; provided, however, that a grant to Mr. Madden in excess +of 150% of the number of shares of Common Stock subject to options granted to such other continuing full-time employee would require +stockholder approval. Any Annual Option granted to Mr. Madden would vest quarterly over a one-year period following the grant +date and would be exercisable at a price equal to the closing price of the Company’s Common Stock on the grant date for +a period of five years following the grant date. In addition to the Annual Option, the agreement, as amended, provides for a potential +additional one-time stock option grant to purchase 750,000 shares of the Company’s Common Stock (the number of shares subject +to this potential stock option award having been adjusted for an October 1, 2013 three-for-two stock split effected as a +stock dividend) in the event that the Company achieves earnings per share, on a fully-diluted basis, equal to $3.00 in any +fiscal year ending December 31, 2015 or after. If granted, the option would vest in equal annual installments of 20% over +a five-year period and be exercisable for a period of seven years at a price equal to the closing price of the Company’s +Common Stock on the date immediately preceding the grant date. +18 +In +the event of Mr. Madden’s death, his employment agreement provides for the payment to Mr. Madden’s estate +of his base salary for the 12-month period immediately subsequent to the date of his death. Further, in the event that Mr. Madden’s +employment agreement is terminated due to Mr. Madden’s total disability (as defined in the agreement), “for cause” +(as defined in the agreement) or due to Mr. Madden’s resignation, the Company is obligated to pay Mr. Madden +the amount of compensation that is accrued and unpaid through the date of termination. In the event Mr. Madden’s employment +agreement is terminated for any reason (other than “for cause” or due to his death, total disability or resignation), +the Company is obligated to pay Mr. Madden, in installments, the balance of his base salary that would have been paid by +the Company under the agreement for the full term of the agreement. If, during the period commencing 120 days prior to a +“change of control” (as defined in the employment agreement) transaction and ending on the first anniversary +of a change of control transaction, Mr. Madden’s employment is terminated by the Company other than for cause or by +the resignation of Mr. Madden for “good reason” (as defined in the employment agreement), or if Mr. Madden +resigns for good reason or without good reason within 30 days following a change of control transaction, all unvested options +to purchase shares of Common Stock held by Mr. Madden will vest on the date of termination or resignation and Mr. Madden +will be entitled to receive a lump sum cash payment equal to the amount of compensation that is accrued and unpaid through the +date of termination plus $35 million. Mr. Madden’s employment agreement contains other customary provisions, including +provisions regarding expense reimbursement, confidentiality, solicitation and competition. +For +the 2015 Fiscal Year, Mr. Madden earned $8,250,000 in base salary and received $200,000 for the payment of an annual life +insurance premium. Mr. Madden opted to waive his right to the Annual Option for the 2015 Fiscal Year. +Loan +to Steven Madden. On June 25, 2007, the Company made a loan to Steven Madden, its Creative and Design Chief and a principal +stockholder of the Company, in the amount of $3,000,000, in order for Mr. Madden to satisfy a personal tax obligation resulting +from the exercise of a stock option which was due to expire and hold the underlying shares of Common Stock. The loan is evidenced +by a secured promissory note executed by Mr. Madden in favor of the Company, the security for which is a security interest in +a certain securities brokerage account maintained by Mr. Madden with his broker; none of the securities in the securities brokerage +account are shares of the Company’s Common Stock. There have been successive amendments to the secured promissory note, +the most recent of which occurred in April 2016, at which time the secured promissory note was amended to substitute the collateral +securing the secured promissory note from shares of the Company’s Common Stock to the security interest in Mr. Madden’s +securities brokerage account. Previously, on January 3, 2012, the secured promissory note was amended and restated to extend the +maturity date of the obligation to December 31, 2023 and eliminate the accrual of interest after December 31, 2011. +Prior to the January 3, 2012 amendment, the secured promissory note had been accruing interest at the rate of 6% per annum. In +addition, the secured promissory note provides that, commencing on December 31, 2014 and annually on each December 31 +thereafter through the maturity date, one-tenth of the principal amount thereof, together with accrued interest, will be cancelled +by the Company provided that Mr. Madden continues to be employed by the Company on each such December 31. Contemporaneously, +the Company will release its security interest in a portion of the securities held in Mr. Madden’s securities brokerage +account generally correlating to the amount of indebtedness cancelled on such date. As of December 31, 2011, interest in +the amount of $1,090,000 had accrued on the principal amount of the secured promissory note and, as noted above, interest was +eliminated after December 31, 2011. On December 31, 2015, the required one-tenth of the principal amount of the secured +promissory note, together with accrued interest, was written-off by the Company. +Steven +Madden is the brother of John L. Madden, who served as a director of the Company until his passing in October 2015. +19 +Review, Approval or Ratification +of Transactions with Related Persons +The +Company’s written Conduct Code and Employee Handbook prohibit all conflicts of interest. Under the Conduct Code, conflicts +of interest occur when private or family interests interfere in any way, or even appear to interfere, with the interests of the +Company. The Company’s prohibition on conflicts of interest under the Conduct Code includes any related person transaction. +Related +person transactions must be approved by the Board, or by a committee of the Board consisting solely of independent directors, +who will approve the transaction only if they determine that it is in the best interests of the Company. In considering the transaction, +the Board or committee will consider all relevant factors, including, as applicable, (i) the Company’s business rationale +for entering into the transaction; (ii) the alternatives to entering into a related person transaction; (iii) whether +the transaction is on terms comparable to those available to third parties or, in the case of employment relationships, to employees +generally; (iv) the potential for the transaction to lead to an actual or apparent conflict of interest and any safeguards +imposed to prevent such actual or apparent conflicts; and (v) the overall fairness of the transaction to the Company. +The +Company has multiple processes for reporting conflicts of interests, including related person transactions. Under the Conduct +Code, all employees are required to report any actual or apparent conflict of interest, or potential conflict of interest, to +management. The Chief Financial Officer distributes a questionnaire to the Company’s executive officers and management personnel +on a quarterly basis and distributes a questionnaire to the members of the Board of Directors on an annual basis requesting certain +information regarding, among other things, their immediate family members, employment and beneficial ownership interests, which +information is then reviewed for any conflicts of interest under the Conduct Code. +The +Board of Directors, the Audit Committee and the Disclosure Committee, which is comprised of management personnel, discuss the +related party transactions, specifically, and in connection with the regular review processes attendant to the Company’s +periodic filings, including related party transaction disclosures. +If +a director is a party to or in some manner involved in a transaction involving the Company, he or she will be recused from all +discussions and decisions about the transaction. The transaction must be approved in advance whenever practicable, and if not +practicable, must be ratified as promptly as practicable. +COMPENSATION +OF DIRECTORS IN THE 2015 FISCAL YEAR +The +Compensation Committee is responsible for establishing and overseeing all matters pertaining to compensation paid to directors +for service on the Board and its committees. +The +following table sets forth information concerning the compensation of the Company’s non-employee directors in the 2015 Fiscal +Year. Following the table is a discussion of material factors related to the information disclosed in the table. +Name +Fees Earned or +Paid in Cash +($) +Stock +Awards +($)(1) +All Other +Compensation +($) +Total +($) +Rose Peabody Lynch +95,000 +100,000 (2) +0 +195,000 +John L. Madden +0 +0 (3) +1,438,121 (4) +1,438,121 +Peter Migliorini +110,000 +100,000 (5) +0 +210,000 +Richard P. Randall +110,000 +100,000 (6) +0 +210,000 +Ravi Sachdev +85,000 +100,000 (7) +0 +185,000 +Thomas H. Schwartz +85,000 +100,000 (8) +0 +185,000 +Robert Smith +95,000 +100,000 (9) +0 +195,000 +(1) +Reflects the grant date fair value of stock awards calculated in accordance with the Financial Accounting Standards Board +(“FASB”) Accounting Standards Codification (“ASC”) Topic 718. Assumptions used in the +calculation of these amounts are included in Note I to the Company’s audited financial statements for the fiscal year +ended December 31, 2015 included in the Company’s Annual Report on Form 10-K filed with the Securities and +Exchange Commission on February 26, 2016. +(2) +At December 31, 2015, the aggregate number of shares of restricted Common Stock held by Ms. Lynch was 2,592, and +Ms. Lynch had no options outstanding. +20 +(3) +At December 31, 2015, the aggregate number of shares of restricted Common Stock held by JLM Consultants, Inc., a +corporation wholly-owned by Mr. Madden, was 6,001, and Mr. Madden had no options outstanding. +(4) +Includes: (a) the use of a corporate apartment valued at $65,400 and (b) $1,372,721 in fees paid to JLM +Consultants, Inc., a company wholly-owned by Mr. John Madden, as consideration for consulting services provided by JLM +Consultants, Inc. with respect to the development of the Company’s international business. +(5) At +December 31, 2015, the aggregate number of shares of restricted Common Stock held by Mr. Migliorini was 2,592, and Mr. Migliorini +had no options outstanding. +(6) At +December 31, 2015, the aggregate number of shares of restricted Common Stock held by Mr. Randall was 2,592, and Mr. Randall +had no options outstanding. +(7) At +December 31, 2015, the aggregate number of shares of restricted Common Stock held by Mr. Sachdev was 2,592, and Mr. Sachdev +had no options outstanding. +(8) At +December 31, 2015, the aggregate number of shares of restricted Common Stock held by Mr. Schwartz was 2,592, and Mr. Schwartz +had no options outstanding. +(9) At +December 31, 2015, the aggregate number of shares of restricted Common Stock held by Mr. Smith was 2,592, and Mr. Smith +had no options outstanding. +Directors +who are also employees of the Company are not paid any fees or other remuneration for service on the Board of Directors or any +of its committees. In the 2015 Fiscal Year, each non-employee director, other than John L. Madden, received the following compensation: +(i) a grant of 2,592 shares of restricted Common Stock, vesting on the first anniversary of the grant date, June 1, 2016 +and (ii) $75,000. John L. Madden, who passed away in October 2015, was a non-independent, non-employee director as a result +of his ownership of JLM Consultants, Inc., a provider of consulting services to the Company with respect to international sales. +He was not paid a fee for his service on the Board of Directors. +In +the 2015 Fiscal Year, members of the Audit Committee, Nominating/Corporate Governance Committee and Compensation Committee each +received an additional $10,000 for serving on such committees, except that the Chairman of the Audit Committee and the Chairman +of the Compensation Committee received $25,000 and $15,000, respectively, instead of $10,000. The Company reimburses its directors +for any out-of-pocket expenses incurred by them in connection with services provided in such capacity. +21 +STOCK +OWNERSHIP +Security Ownership of +Certain Beneficial Owners +The +following table sets forth information as of the Record Date (unless otherwise indicated) with respect to the beneficial +ownership of the Common Stock of the Company by each person known by the Company to be the beneficial owner of more than 5% of +the outstanding shares of the Common Stock of the Company. A person is deemed to be a beneficial owner of any securities which +that person has the right to acquire within 60 days. +Name and Address of Beneficial Owner +Amount and Nature +of Beneficial +Ownership (1) +Percentage of +Class +Steven Madden +c/o Steven Madden, Ltd. +52-16 Barnett Avenue +Long Island City, NY 11104 +5,316,036 +8.57 %(2) +BOCAP Corp. +c/o Steven Madden, Ltd. +52-16 Barnett Avenue +Long Island City, NY 11104 +1,458,062 +2.35 %(3) +BlackRock Inc. +55 East 52 nd Street +New York, NY 10055 +5,279,042 +8.52 %(4) +The Vanguard Group +100 Vanguard Boulevard +Malvern, Pennsylvania 19355 +4,233,136 +6.83 %(5) +FMR LLC +245 Summer Street +Boston, Massachusetts 02210 +3,701,694 +5.97 %(6) +Wellington Management Group LLP +280 Congress Street +Boston, MA 02210 +3,248,642 +5.24 %(7) +(1) Beneficial +ownership as reported in the table below has been determined in accordance with Item 403 of Regulation S-K and Rule 13d-3 +of the Exchange Act and based upon 61,995,078 shares of Common Stock outstanding (excluding treasury shares) as of the Record +Date. +(2) Mr. Madden’s +beneficial ownership includes: (i) 1,458,062 shares of Common Stock held by BOCAP Corp, a corporation wholly-owned by Mr. Madden; +(ii) 3,356,398 shares of restricted Common Stock granted under the 2006 Plan (which restricted stock includes 1,463,056 shares +which will vest in equal annual installments over seven years commencing on December 31, 2017 through December 31, 2023 +and 1,893,342 shares which will vest in equal annual installments over six years commencing on December 31, 2018 through +December 31, 2023, in each case subject to forfeiture pursuant to the terms of the 2006 Plan and of Mr. Madden’s +employment agreement, as amended); and (iii) 501,576 shares of Common Stock held by Mr. Madden directly. +(3) BOCAP +Corp is a corporation wholly-owned by Steven Madden. +(4) Based +solely on a Statement on Schedule 13G filed with the SEC on January 27, 2016 by BlackRock, Inc. (“BlackRock”), +BlackRock has sole voting power with respect to 5,154,001 of such shares and sole dispositive power with respect to all such shares. +22 +(5) Based +solely on a Statement on Schedule 13G filed with the SEC on February 10, 2016 by The Vanguard Group (“Vanguard”), +Vanguard has sole voting power with respect to 124,034 of such shares, shared voting power with respect to 3,500 of such shares, +sole dispositive power with respect to 4,109,052 of such shares and shared dispositive power with respect to 124,084 of such shares. +(6) Based solely on a Statement on Schedule 13G filed with the SEC on February 12, 2016 by FMR LLC (“FMR”), FMR has +sole voting power with respect to 669,264 of such shares and sole dispositive power with respect to all such shares. +(7) Based +solely on a Statement on Schedule 13G filed with the SEC on February 11, 2016 by Wellington Management Group LLP (“Wellington”), +Wellington has shared voting power with respect to 3,030,707 of such shares and shared dispositive power with respect to 3,248,642 +of such shares. +Security Ownership of +Directors and Executive Officers +The +following table sets forth information as of the Record Date (unless otherwise indicated) with respect to the beneficial +ownership of Common Stock held by (a) each current director and nominee; (b) the Chief Executive Officer, the Chief +Financial Officer and the three most highly compensated executive officers of the Company other than the Chief Executive Officer +and the Chief Financial Officer (the “Named Executive Officers”); and (c) all current directors and executive +officers as a group. A person is deemed to be a beneficial owner of any securities which that person has the right to acquire +within 60 days. Each director and executive officer has sole voting power and sole dispositive power with respect to all shares +beneficially owned by him or her. +Name of Beneficial Owner (1) +Amount and +Nature +of +Beneficial +Ownership (2) +Percentage +of +Class +Edward R. Rosenfeld +523,387 +* +% (3) +Amelia Newton Varela +380,159 +* +% (4) +Arvind Dharia +121,662 +* +% (5) +Awadhesh Sinha +72,243 +* +% (6) +Karla Frieders +195,745 +* +% (7) +Rose Peabody Lynch +5,739 +* +% (8) +Peter Migliorini +2,592 +* +% (9) +Richard P. Randall +26,573 +* +% (10) +Ravi Sachdev +30,823 +* +% (11) +Thomas H. Schwartz +8,442 +* +% (12) +Robert Smith +5,739 +* +% (13) +All Directors and Executive Officers as +a Group +(12 persons named above) +1,373,104 +2.20 +% (14) +* Indicates beneficial +ownership of less than 1%. +(1) The address for each +of the named individuals below is c/o Steven Madden, Ltd., 52-16 Barnett Avenue, Long Island City, New York 11104. +(2) Beneficial +ownership as reported in the table above has been determined in accordance with Item 403 of Regulation S-K and Rule 13d-3 +of the Exchange Act and based upon 61,995,078 shares of Common Stock outstanding (excluding treasury shares) as of the Record +Date. +(3) Mr. Rosenfeld’s +beneficial ownership includes: (i) 289,183 shares of restricted Common Stock; and (ii) 234,204 shares of Common Stock +held by Mr. Rosenfeld. +(4) Ms. Varela’s +beneficial ownership includes: (i) 286,251 shares of Common Stock that may be acquired through the exercise of options that +are exercisable as of, or will become exercisable within 60 days of, the Record Date; (ii) 44,560 shares of restricted Common +Stock; and (iii) 49,348 shares of Common Stock held by Ms. Varela. +23 +(5) Mr. Dharia’s +beneficial ownership includes: (i) 22,231 shares of restricted Common Stock; and (ii) 99,431 shares of Common Stock +held by Mr. Dharia. +(6) Mr. Sinha’s +beneficial ownership includes: (i) 19,444 shares of restricted Common Stock; and (ii) 52,799 shares of Common Stock +held by Mr. Sinha. +(7) Ms. +Frieders’ beneficial ownership includes: (i) 112,500 shares of Common Stock that may be acquired through the exercise of +options that are exercisable as of, or will become exercisable within 60 days of, the Record Date; (ii) 30,825 shares of restricted +Common Stock; and (ii) 52,420 shares of Common Stock held by Ms. Frieders. +(8) Ms. Lynch’s +beneficial ownership includes: (i) 2,592 shares of restricted Common Stock; and (ii) 3,147 shares of Common Stock held +by Ms. Lynch. +(9) Mr. Migliorini’s +beneficial ownership consists of 2,592 shares of restricted Common Stock. +(10) Mr. Randall’s +beneficial ownership includes: (i) 2,592 shares of restricted Common Stock; and (ii) 23,981 shares of Common Stock held +by Mr. Randall. +(11) Mr. Sachdev’s +beneficial ownership includes: (i) 2,592 shares of restricted Common Stock; and (ii) 28,231 shares of Common Stock held +by Mr. Sachdev. +(12) Mr. Schwartz’s +beneficial ownership includes: (i) 2,592 shares of restricted Common Stock; and (ii) 5,850 shares of Common Stock held +by Mr. Schwartz. +(13) Mr. Smith’s +beneficial ownership includes: (i) 2,592 shares of restricted Common Stock; and (ii) 3,147 shares of Common Stock held +by Mr. Smith. +(14) Includes, +in the aggregate, 398,751 shares of Common Stock that may be acquired through the exercise of options that are exercisable as +of, or will become exercisable within 60 days of, the Record Date; (ii) 421,795 shares of restricted Common Stock; and (iii) 552,558 +shares of Common Stock held by such beneficial owners. +Section 16(a) Beneficial +Ownership Reporting Compliance +Section 16(a) of +the Exchange Act requires that the Company’s directors and officers, and persons who beneficially own more than 10% of a +registered class of the Company’s equity securities, file with the SEC reports of initial ownership of Common Stock and +subsequent changes in that ownership and furnish the Company with copies of all forms they file with the SEC pursuant to Section 16(a) of +the Exchange Act. A late report was filed on March 23, 2015 to report the sale by Robert Schmertz of 20,000 shares of Common Stock +on March 17, 2015. A late report was filed on April 3, 2015 to report the sale by JLM Consultants, Inc., a corporation wholly +owned by John L. Madden, of 12,000 share of Common Stock on March 2, 2015. To the Company’s knowledge, based solely on a +review of the copies of the reports furnished to the Company or written representations received from the Company’s directors, +officers and greater than 10% beneficial owners that no other reports were required, all Section 16(a) filing requirements +applicable to its officers, directors and greater than 10% beneficial owners were complied with during, or in respect of, the +2015 Fiscal Year. +EXECUTIVE +COMPENSATION +Compensation Discussion +and Analysis +Executive +Summary +This +Compensation Discussion and Analysis describes the overall principals and objectives and specific features of our executive compensation +program, primarily focused on the executive compensation program’s application to our Chief Executive Officer and the other +executive officers of the Company included in the Summary Compensation Table, whom we refer to collectively in this Proxy Statement +as the “Named Executive Officers.” +24 +Over +the last ten years our stock price has increased at an annual rate of 18.3%; however, we did experience a stock price reduction +in 2015 as our 2015 year-end stock price declined 5.1% from our 2014 year-end stock price. Nevertheless, our one-year total stockholder +return was at the 81 st percentile as compared with our peer group for 2015 as many of our competitors also experienced +stock price declines. By mid-March 2016, our stock price had increased over 20% from our 2015 year-end stock price, more than +overcoming the stock price slippage that occurred in 2015. +During +2015, the Company delivered solid financial performance, successfully capitalized on some new fashion footwear trends, recorded +strong growth in our retail and e-commerce business, made significant progress in building our newly acquired Dolce Vita® +and Blondo® brands and further expanded our international presence. However, the overall retail environment was challenging +and our consolidated sales excluding acquisitions was approximately flat. For the full year ended December 31, 2015, net +sales increased 5% to $1.41 billion from $1.33 billion in the prior year. Net income was $112.9 million, or $1.85 per diluted +share, in the 2015 Fiscal Year. Net income in the fiscal year ended December 31, 2014 was $111.9 million, or $1.76 per diluted +share. +With +the decline in our stock price in 2015, overall Named Executive Officer bonus awards, which are primarily paid in the form of +time-vested restricted stock grants, declined 5.6% from the previous year. As our general practice is to award bonuses and grant +equity based on Named Executive Officer performance for the preceding year, we are able to maintain relative alignment between +pay and performance. +Compensation +Objectives and Strategy +The +Company’s executive officer compensation program is designed to attract and retain the caliber of officers needed to ensure +the Company’s continued growth and profitability and to reward them for their performance, for the Company’s performance +and for creating longer-term value for our stockholders. The primary objectives of the program are to: +· align +rewards with performance that creates stockholder value; +· support +the Company’s strong team orientation; +· encourage +high-potential team players to build a career at the Company; and +· provide +rewards that are cost-efficient, competitive with other similarly-positioned organizations +and fair to employees and stockholders. +The +Company’s executive compensation programs are approved and administered by the Compensation Committee of the Board of Directors. +Working with management and outside advisors, the Compensation Committee has developed a compensation and benefits strategy that +rewards performance and reinforces a culture that the Compensation Committee believes will drive long-term success. +The +compensation program rewards team accomplishments while promoting individual accountability. The executive officer compensation +program depends in significant measure on Company results, but business unit results and individual accomplishments are also very +important factors in determining each executive’s compensation. The Company has a robust planning and goal-setting process +that is fully integrated into the compensation system, enhancing a strong relationship among individual efforts, Company results +and financial rewards. +A +major portion of total compensation is placed at risk through annual and long-term incentives. As noted below, discretionary bonuses +were paid to the Named Executive Officers. The combination of incentives is designed to balance annual operating objectives and +Company earnings performance with longer-term stockholder value creation. +To +implement its primary objectives, the Company seeks to provide competitive compensation that is commensurate with performance. +The Company targets compensation at the median of the market and calibrates both annual and long-term incentive opportunities +to generate less-than-median awards when goals are not fully achieved and greater-than-median awards when goals are exceeded. +25 +The +Company believes that there is great value to the Company in having a team of long-tenured, seasoned managers and seeks to promote +a long-term commitment from its senior executives. The Company’s team-focused culture and management processes are designed +to foster this commitment. In addition, restricted Common Stock awards granted to Named Executive Officers in the 2015 Fiscal +Year reinforce this long-term orientation with annual vesting over three to five-year periods. +Role +of the Compensation Committee +General. +The Compensation Committee provides overall guidance for the Company’s executive compensation policies and determines +the amounts and elements of compensation for the Company’s executive officers and outside directors. The Compensation Committee +currently consists of four members of the Company’s Board of Directors, Ms. Lynch and Messrs. Peter Migliorini, Thomas +Schwartz and Robert Smith, each of whom is an independent director under Rule 5605 of The Nasdaq Global Select Market listing +standards, a “non-employee director” as defined under the SEC’s rules and an “outside director” +as defined under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”). +When +considering decisions concerning the compensation of executives, other than the Chief Executive Officer, the Compensation Committee +asks for the recommendations of the Chief Executive Officer, including his detailed evaluation of each executive’s performance. +No executive has a role in recommending compensation for outside directors. With respect to the application of the 2006 Plan to +non-employee directors, the Board of Directors functions as the Compensation Committee. +Use +of Outside Advisors. In making its determinations with respect to executive compensation, the Compensation Committee has historically +engaged the services of an independent compensation consulting firm. The Compensation Committee has retained the services of Arthur +J. Gallagher & Co.’s Human Resources & Compensation Consulting Practice (“Gallagher”) since +2005 to assist with its review of the compensation packages and employment agreements of the Chief Executive Officer and other +executive officers. In 2015 and 2016, Gallagher worked with the Compensation Committee to assess the reasonableness of discretionary +cash bonus payments and equity grants to Messrs. Rosenfeld, Dharia, Sinha and Schmertz and Ms. Varela and Ms. Frieders based +on the Company’s and the individual’s performance in the fiscal year ended December 31, 2015 and the reasonableness +of the terms of new employment agreements for Mr. Rosenfeld, Ms. Frieders and Ms. Varela, as compared with comparable +positions in the peer group listed below. Executive compensation for the other Named Executive Officers was based on prior employment +agreements with pay structures and levels guided by Gallagher’s market studies just prior to the consummation of the agreements. +Position-specific market studies were completed at the time of the employment agreement extension in support of the design of +these agreements. The Compensation Committee also consulted Gallagher with respect to the establishment of a performance-based +bonus pool based on a percentage of the Company’s net income in the 2015 Fiscal Year. Gallagher provides only executive +compensation consulting services and works with management only at the behest of the Compensation Committee. +The +Compensation Committee retains Gallagher directly, although in carrying out assignments, Gallagher also interacts with Company +management, when necessary and appropriate, in order to obtain compensation and performance data for the executives and the Company. +In addition, Gallagher may, in its discretion, seek input and feedback from management regarding its consulting work product for +the Compensation Committee in order to confirm alignment with the Company’s business strategy and identify data questions +or other similar issues, if any, prior to completion of a project for the Compensation Committee. +Independence +of Outside Advisors. The Compensation Committee has the sole authority to retain, terminate, approve the fees and set the +terms of the Company’s relationship with any outside advisors who assist the Committee in carrying out its responsibilities, +and may select or receive advice from any compensation consultant or other advisor only after taking into consideration all factors +relevant to the consultant’s independence from management, including the factors set forth in the Nasdaq’s rules. +26 +Accordingly, +the Compensation Committee reviews annually its relationship with Gallagher to ensure its independence on executive compensation +matters. Prior to selecting and receiving advice from Gallagher with respect to executive compensation in the 2015 Fiscal Year, +the Compensation Committee reviewed the independence of Gallagher and the individual representatives of Gallagher who served as +the committee’s advisors. The Compensation Committee determined that no conflicts of interest exist between the Company +and Gallagher (or any individuals working on the Company’s account on behalf of Gallagher). In reaching such determination, +the Compensation Committee considered, among other things, the following factors: (i) that Gallagher provides no services +to the Company other than the executive compensation consulting services; (ii) the fees paid by us to Gallagher as a percentage +of Gallagher’s total revenue; (iii) the representations by Gallagher as to its policies and procedures that are designed +to prevent a conflict of interest; (iv) any business or personal relationships between the individual representatives of +Gallagher who advised the Compensation Committee and any member of the Compensation Committee; and (v) any business or personal +relationships between our executive officers and Gallagher or the individual representatives of Gallagher. +Consideration +of 2015 Stockholder Say on Pay Vote. At our 2015 Annual Meeting of Stockholders, our stockholders overwhelmingly +approved, on an advisory basis, the compensation of our Named Executive Officers (98% of votes cast). This continues the string +of 94% or higher approvals that began with the initial say on pay vote in 2011. The Compensation Committee believes this level +of stockholder support reflects a very strong endorsement of our compensation policies and decisions. The Compensation Committee +has considered the results of this advisory vote on executive compensation in determining the Company’s compensation policies +and decisions for 2016, and has determined that these policies and decisions are appropriate and in the best interests of the +Company and its stockholders at this time. +Compensation +Structure +Pay +Elements - Overview +The Company +utilizes four main components of compensation: +· +base +salary; +· +annual +performance-based bonuses; +· +long-term +equity incentives (consisting of stock options and/or restricted stock); and +· +benefits +and perquisites. +Pay +Elements - Details +Base +Salary . The Company paid base salaries to each of the Named Executive Officers to provide them with fixed pay commensurate +with the Named Executive Officer’s role and responsibilities, experience, expertise and individual performance. As more +fully described in the section of this Proxy Statement captioned “Employment Arrangements,” as of December 31, +2015, the Company had employment agreements with each of the Named Executive Officers. The Compensation Committee, as constituted +at the time the parties entered into the employment agreements or any amendments thereof, reviewed and approved the salary established +in each such agreement or amendment. The Compensation Committee considered each employee’s salary history, value in the +marketplace and performance (including at the Company and previous employment). +27 +The +annual base salary of our Chief Executive Officer, Edward R. Rosenfeld, was fixed at $638,142 for the 2015 Fiscal Year under an +employment agreement dated December 31, 2012, which expired by its terms on December 31, 2015. Mr. Rosenfeld’s new +employment agreement dated December 31, 2015, which remains in effect until December 31, 2018, provides Mr. Rosenfeld with +an annual base salary of $800,000 for the fiscal year ending December 31, 2016. The annual base salary of our President, Amelia +Newton Varela, was fixed at $500,000 for the 2015 Fiscal Year under an employment agreement effective January 1, 2014, was increased +to $600,000 in connection with Ms. Varela’s promotion from Executive Vice President – Wholesale to President of the +Company in September 2015 pursuant to an amendment to the employment agreement effective September 4, 2015, and will remain $600,000 +until the expiration of the employment agreement on December 31, 2016. The annual base salary of our Chief Operating Officer, +Mr. Sinha, was fixed at $630,000 for the 2015 Fiscal Year under an employment agreement dated January 10, 2014 that +remains in effect through December 31, 2016, and provides for an annual base salary of $661,500 for the fiscal year ending +December 31, 2016. Under the employment agreement, as amended, of our Chief Financial Officer, Arvind Dharia, Mr. Dharia’s +annual base salary for the 2015 Fiscal Year was $582,455 and for the remainder of the term of the employment agreement, which +expires on December 31, 2017. The annual base salary of our former Brand Director, Mr. Schmertz, was fixed at $761,250 for +the 2015 Fiscal Year by virtue of a new employment agreement dated March 9, 2015; however, this employment agreement terminated +upon Mr. Schmertz’s resignation of employment effective June 4, 2015. In the 2015 Fiscal Year, prior to his resignation, +Mr. Schmertz received a total of $246,291 in base salary under his employment agreement and, after his resignation, Mr. Schmertz +received a total of $219,591 in severance payments pursuant to a resignation agreement and general release between Mr. Schmertz +and the Company. Under an employment agreement dated September 4, 2015, the annual base salary of our Chief Merchandising Officer, +Karla Frieders, was fixed at $440,000 for the 2015 Fiscal Year and for the remainder of the term of the employment agreement, +which will expire on December 31, 2017. Please see the section of this Proxy Statement captioned “Summary Compensation Table” +and “Employment Arrangements” for a more detailed description of their employment agreement and compensation. The +2016 salary increases, if any, for our Named Executive Officers, as reflected in the following table, are generally consistent +with those of other management employees. +Named Executive Officer +2015 Salary +2016 Salary +Edward R. Rosenfeld +$ 637,791 +$ 800,000 +Amelia Newton Varela +$ 600,000 * +$ 600,000 +Arvind Dharia +$ 582,152 +$ 582,445 +Awadhesh Sinha +$ 630,000 +$ 661,500 +Robert Schmertz +$ 761,250 ** +N/A** +Karla Frieders +$ 440,000 +$ 440,000 +*Ms. +Varela began the 2015 Fiscal Year with an annual base salary of $500,000 and, as noted above, received a salary increase to $600,000 +commencing September 4, 2015 in recognition of her promotion to President of the Company. See the section of this Proxy Statement +captioned “Employment Arrangements” for a more detailed description of Ms. Varela’s employment agreement and +compensation. +**The +salary for Mr. Schmertz was effective as of March 9, 2015. He resigned his employment effective June 4, 2015. In the 2015 Fiscal +Year, prior to his resignation, Mr. Schmertz was paid a total of $246,291 in base salary under his employment agreement and, after +his resignation, a total of $219,591 in severance payments pursuant to a resignation agreement and general release between Mr. +Schmertz and the Company. +Annual +Performance-based Bonus - Based on Specific Performance Metrics . Annual performance-based cash bonuses, if any, for Named +Executive Officers are established in their respective employment agreements. The Compensation Committee reviewed and approved +the bonus provisions fixed in each such employment agreement at the time the parties entered into such agreements and any amendments +thereof. Such bonus provisions generally provide for variable or discretionary bonuses designed to reward attainment of business +goals. +Commencing +with the 2014 Fiscal Year, Mr. Sinha’s employment agreement entitles him to an annual performance-based bonus for each +fiscal year in an amount equal to 2% of the increase in the Company’s EBITDA for that year over the Company’s EBITDA +for the immediately preceding year. For any business acquired after January 1, 2014, EBITDA from the acquired business is included +in the bonus calculation starting with the first full quarter under Company ownership, provided that the prior year’s EBITDA +will likewise be adjusted to include EBITDA from the acquired business for comparable quarters in the prior year on a pro forma +basis assuming the Company had owned the business. The maximum annual bonus is $600,000, the first $300,000 of which is payable +in cash and for any amount of the annual bonus in excess of $300,000 by a grant of restricted shares of the Company’s common +stock, which restricted common stock will vest in three equal annual installments commencing on the first anniversary of the grant +date. This performance-based bonus was not achieved with respect to the 2015 Fiscal Year. +28 +Under +Ms. Varela’s employment agreement, which was amended on September 4, 2015, she is entitled to an annual performance-based +cash bonus for the 2015 Fiscal Year in an amount equal to 2% of the increase, if any, in Wholesale Division EBIT for each such +year over the Wholesale Division EBIT for the immediately preceding year, excluding from such bonus calculation EBIT attributable +to any business acquired after January 10, 2014 until the acquired business has been owned by the Company for two full calendar +years. Ms. Varela’s employment agreement entitles her to an annual performance-based cash bonus for performance-based +bonus for the fiscal year ending December 31, 2016, in an amount equal to 2% of the increase in the Company’s total EBIT +for that year over the Company’s EBIT for the 2015 Fiscal Year, less any deductions as shall be required to be withheld +by any applicable laws or regulations. EBIT attributable to any business acquired by the Company after September 4, 2015 +will not be included in the calculation of this bonus. This performance-based bonus was not achieved with respect to the 2015 +Fiscal Year. +As +provided in the 2006 Plan, the maximum payment that may be made to an individual under any performance-based cash award during +any fiscal year and subject to the attainment of specified performance goals is $10,000,000. The Compensation Committee may, in +its sole discretion, elect to pay an individual an amount that is less than the individual’s target award regardless of +the degree of attainment of the performance goals. +For +the 2015 Fiscal Year, the Compensation Committee established a bonus pool for Named Executive Officers and other key executives +of the Company based on 6% of net income of the Company achieved in the 2015 Fiscal Year intended to comply with the provisions +of Section 162(m) of the Code. Net income was selected because it is highly correlated with stock price performance. +The Compensation Committee also fixed for each executive his or her maximum share of the 2015 bonus pool, which was 30% for Mr. Rosenfeld +and 14% for each of the other Named Executive Officers. In the 2015 Fiscal Year, the Company achieved net income of $112,938,000, +which resulted in a bonus pool of $6,776,280. The Compensation Committee determined to pay to the Named Executive Officers bonuses +that were significantly below their individual target awards for the 2015 Fiscal Year and to pay the bonuses primarily in restricted +shares of Common Stock that vest annually over four or five years. Accordingly, on March 15, 2016, the Company paid a performance-based +bonus in the form of restricted stock to each Named Executive Officer as indicated in the following table. +Named Executive Officer +2016 Restricted +Stock Grant +Value for 2015 +Performance +Number of +Shares of +Restricted +Stock +Awarded* +Annual +Vesting +Edward R. Rosenfeld +$ 1,036,100 +27,563 +5 +years +Amelia Newton Varela +$ 518,100 +13,782 +5 years +Arvind Dharia +$ 116,600 +3,101 +4 years +Karla Frieders +$ 207,200 +5,513 +5 years +Awadhesh Sinha +$ 116,600 +3,101 +4 years +* +In accordance with applicable SEC rules, the Summary Compensation Table included in this Proxy Statement does not report the grant +date fair value of these restricted stock awards because, while earned in 2015, the grants were not made until after the close +of the 2015 Fiscal Year. The 2016 Summary Compensation Table to be included in our proxy statement for our 2017 Annual Meeting +of Stockholders will contain the grant date fair value of these restricted stock awards provided these individuals are named executive +officers in that proxy statement. +The +decision to pay bonuses to the Named Executive Officers primarily in the form of restricted stock was determined at the discretion +of the Compensation Committee, but within the parameters of the bonus pool for Named Executive Officers. In addition, on March +15, 2016, Mr. Dharia and Mr. Sinha each received a cash bonus of $112,500. The Compensation Committee evaluated a variety of indicators +of the Company’s stock price performance and overall financial performance, including revenue growth and profitability, +and assessed and made subjective judgments as to each of these executive’s individual contribution towards the Company’s +performance in the 2015 Fiscal Year in determining whether to pay bonuses to these executives and establishing the amounts to +be paid. With respect to the determination to award bonuses to Messrs. Dharia and Sinha and Ms. Varela and Ms. Frieders, +the Compensation Committee also considered the recommendations of the Chief Executive Officer, Mr. Rosenfeld. +29 +The +Compensation Committee consulted Gallagher regarding the establishment of the bonus pool and the individual target awards for +the 2015 Fiscal Year to ensure the bonus pool and the individual target awards were within market range for each executive. +Long-term +Equity Incentives . Management and the Compensation Committee believe that equity-based awards are an important factor in aligning +the long-term financial interest of the executive officers and stockholders. The Compensation Committee continually evaluates +the use of equity-based awards and intends to continue to use such awards in the future as part of designing and administering +the Company’s compensation program. Beginning in 2006, the Compensation Committee modified its prior practice of granting +equity incentives solely in the form of stock options with periodic awards of restricted stock in order to grant awards that contain +both substantial incentive and retention characteristics. These awards are designed to provide emphasis on preserving stockholder +value generated in recent years while providing significant incentives for continuing growth in stockholder value. +On +March 11, 2015, the Company made grants of 25,326, 15,329 and 12,235 restricted shares of Common Stock to Mr. Rosenfeld, +Ms. Varela and the Company’s former Brand Director, Robert Schmertz, respectively, for performance in the fiscal year +ended December 31, 2014, each of which restricted stock awards vests in five equal annual installments. Mr. Schmertz forfeited +his stock award upon the resignation of his employment, which was effective June 4, 2015. In addition, on March 11, 2015, Messrs. Dharia +and Sinha each received a restricted stock award of 5,506 shares of Common Stock for performance in the fiscal year ended December +31, 2014, which vests in four equal annual installments. Gallagher reviewed the individual grant values relative to market practice. +All of the equity awards in the 2015 Fiscal Year were made under the 2006 Plan. +Other +restricted stock awards in the 2015 Fiscal Year included grants in relation to new or amended employment agreements. Mr. Rosenfeld +received a grant of 75,000 restricted shares of Common Stock on December 31, 2015 and an additional award of 75,000 restricted +shares of Common Stock on February 5, 2016 in relation to his new three-year employment agreement dated December 31, 2015. Mr. +Rosenfeld’s restricted stock awards will vest in five equal annual installments. On March 17, 2015, Robert Schmertz received +a grant of 20,000 restricted shares of Common Stock in relation to a new employment agreement; however, this stock award was forfeited +by Mr. Schmertz upon the resignation of his employment effective June 4, 2015. On March 2, 2015, Ms. Frieders received a grant +of 20,758 restricted shares of Common Stock in relation to a new three-year employment agreement, which shares vest in five substantially +equal annual installments commencing on March 2, 2016. On February 2, 2015, Mr. Dharia received a grant of 15,000 restricted shares +of Common Stock in relation to the amendment of an existing employment agreement, which shares will vest in equal annual installments +of 3,000 shares over a five-year period, commencing on February 2, 2016. +The +Committee intends to continue to review the equity mix to achieve the ideal incentive for both performance and retention. With +respect to stock options, the 2006 Plan provides that the exercise price shall be the closing market price per share of the Company’s +Common Stock on the business day immediately preceding the grant date, which is fair market value for purposes of the 2006 Plan. +Other +Benefits and Perquisites . The Company’s executive compensation program also includes other benefits and perquisites. +These benefits and perquisites include annual matching contributions to executive officers’ 401(k) plan accounts, company-paid +medical benefits, automobile allowances and leased automobiles, and life insurance coverage. The Compensation Committee annually +reviews these other benefits and perquisites and makes adjustments as warranted based on competitive practices, the Company’s +performance and the individual’s responsibilities and performance. The Compensation Committee has approved these other benefits +and perquisites as a reasonable component of the Company’s executive officer compensation program. Please see the section +of this Proxy Statement captioned “Summary Compensation Table and, specifically, the column entitled “All Other Compensation” +and the corresponding footnotes. +30 +Pay +Mix +The +Company utilizes the particular elements of compensation described above because the Company believes that it provides a well-proportioned +mix of secure compensation, retention value and at-risk compensation, which produces short-term and long-term performance incentives +and rewards. By following this approach, the Company provides the executives a measure of security in the minimum expected level +of compensation, while motivating the executives to focus on business metrics and other variables within their particular sector +which will increase sales and margins and at the same time lower costs so as to produce a high level of short-term and long-term +performance for the Company and long-term wealth creation for the executives, as well as reducing the risk of recruitment of top +executive talent by competitors. The mix of metrics used for the annual performance bonuses and the Company’s long-term +incentive program likewise provides an appropriate balance between short-term financial performance and long-term stock performance. +For +the Named Executive Officers, the mix of compensation is weighted heavily toward at-risk pay (annual incentives and long-term +incentives). Maintaining this pay mix results fundamentally in a pay-for-performance orientation for the Company’s executives, +which is aligned with the Company’s stated compensation philosophy of providing compensation commensurate with performance. +Pay +Levels and Benchmarking +Pay +levels for executives are determined based on a number of factors, including the individual’s roles and responsibilities +within the Company, the individual’s experience and expertise, the pay levels for peers within the Company, pay levels in +the marketplace for similar positions and performance of the individual and the Company as a whole. The Compensation Committee +is responsible for approving pay levels for the Named Executive Officers. In determining the pay levels, the Compensation Committee +considers all forms of compensation and benefits. +The +Compensation Committee assesses “competitive market” compensation using a number of sources. The primary data source +used in setting competitive market levels for the Named Executive Officers is the information publicly disclosed by a peer group +of the Company, which will be reviewed annually and may change from year to year. For the 2015 Fiscal Year, executive compensation +and compensation design was reviewed for the purpose of assessing bonus awards in early 2015 in the context of overall compensation +and in relation to the following peer companies: +American +Apparel Inc.* +Genesco, +Inc. +Skechers +U.S.A. Inc. +Bebe +Stores, Inc.* +Guess, +Inc. +Under +Armour, Inc. +Brown +Shoe Co. Inc. +Iconix +Brand Group, Inc.* +Vera +Bradley, Inc.* +Crocs, +Inc. +Kate +Spade & Co. +Weyco +Group, Inc.* +Deckers +Outdoor Corp. +Lululemon +Athletica, Inc. +Wolverine +Worldwide +Delta +Apparel, Inc.* +Movado +Group, Inc. +Perry +Ellis International, Inc. +Oxford +Industries, Inc. +G-III +Apparel Group, Ltd. +Rocky +Brands, Inc.* +* +The peer group was modified in August 2015 to eliminate these companies and replace them with Cato Corp., New York & Co., +and Shoe Carnival, Inc. +After +consideration of the data collected on external competitive levels of compensation and internal needs, the Compensation Committee +makes decisions regarding the Named Executive Officer’s target total compensation opportunities based on the need to attract, +motivate and retain an experienced and effective management team. Relative to the competitive market data, the Compensation Committee +generally intends that the base salary and target annual incentive compensation for each Named Executive Officer will be at the +median of the competitive market. +As +noted above, notwithstanding the Company’s overall pay positioning objectives, pay opportunities for specific individuals +vary based on a number of factors such as scope of duties, tenure, institutional knowledge and/or difficulty in recruiting a new +executive. Actual total compensation in a given year will vary above or below the target compensation levels based primarily on +the attainment of operating goals and the creation of stockholder value. +31 +In +August 2015, the peer group of companies was modified to (i) eliminate American Apparel Inc., Bebe Stores, Inc., Delta Apparel, +Inc., Iconix Brand Group, Inc., Rocky Brands, Inc., Vera Bradley, Inc. and Weyco Group, Inc. from the peer group because each +of these companies is much smaller than the Company and (ii) add Cato Corp., New York & Co., and Shoe Carnival, Inc. to the +peer group. The modified peer group was used to assess the reasonableness of the proposed compensation associated with the amendment +of an existing employment agreement for Ms. Varela in relation to her promotion to the role of President of the Company and a +new employment agreement for Ms. Frieders in relation to her promotion to the role of Chief Merchandising Officer of the Company. +Compensation +Committee Discretion +The +Compensation Committee retains the discretion to decrease all forms of incentive payouts based on significant individual or Company +performance shortfalls, with the exception of any such payouts that are to be made pursuant to contractual commitments, such as +the bonuses that may be paid to Mr. Sinha and Ms. Varela, which are tied to the Company’s EBITDA and EBIT, respectively, +for the preceding year pursuant to their employment agreements. Similarly, the Compensation Committee retains the discretion to +increase payouts and/or consider special awards for significant achievements, including, but not limited to, superior asset management, +investment or strategic accomplishments and/or consummation of acquisitions, divestitures, capital improvements to existing properties, +or sales made by certain of the Company’s divisions. +Risk Assessment +Bonus +payments to executives are based either on the discretion of the Compensation Committee or are tied to growth in various indicators +of financial performance, such as EBITDA and EBIT. Long-term incentives have been granted in the form of stock options and time-vested +restricted stock that generally vest over four or five years. These programs have been in place for several years and have proved +effective in rewarding performance while not encouraging inappropriate risk-taking. +The +Compensation Committee undertook to review and evaluate all of our executive and company-wide compensation plans and programs +to assess whether any aspect of these plans and programs would encourage inappropriate risk-taking by the Company’s executives +and non-executive employees that could have a material adverse effect on the Company and to confirm that the Company has adequate +risk management controls in place to ensure that executive and company-wide compensation is reasonable and achieves its intended +incentive without creating unacceptable risk. Based on such review and evaluation, the Compensation Committee believes there is +no material adverse risk to the Company that is related to our compensation programs for executives and non-executives. +This review +and evaluation of the risks associated with our compensation plans and programs consisted of: +· identifying +those business risks that could be material to the Company and identifying our existing +risk management system; +· reviewing +and analyzing our compensation plans and programs to identify plan and program features +that could potentially encourage or introduce excessive or imprudent risk taking of a +material nature; +· identifying +the business risks that our compensation plan and program features could potentially +encourage or create; +· balancing +these business risks against our existing internal control systems designed to manage +and mitigate these business risks; and +· analyzing +whether the unmitigated risks, as a whole, are reasonably likely to have a material adverse +effect on the Company. +Various +persons were consulted during the course of the assessment, including our executive officers and senior members of our human resources +department. The Compensation Committee engages Gallagher to review our executive and company-wide compensation plans and programs +and provide advice regarding appropriate levels of incentive. +32 +The +Compensation Committee noted several features of our compensation structure that mitigate risk, including, for example: +· the +Company utilizes a pay mix that is well balanced between short-term financial performance +and long-term stock performance, comprised of secure compensation in the form of base +salary, short-term incentives in the form of potential for cash bonuses, and long-term +incentives in the form of stock options and time-vested restricted stock that generally +vest over four or five years; +· in +most instances, management or the Compensation Committee retains the discretion to decrease +all forms of incentive compensation based on significant individual or Company performance +shortfalls; +· we +periodically benchmark our compensation plans and programs and target executive and non-executive +compensation within the normal limits of the competitive market; and +· the +Compensation Committee provides oversight of the Company’s compensation plans and +programs and compensation philosophy, makes recommendations to the Board with respect +to improvements to our compensation plans and programs, and is responsible for reviewing +and approving executive compensation and administering and awarding incentive, deferred +and equity compensation to our senior executives. +In light +of the assessment described above, it was concluded that the risks associated with our compensation plans and programs (executive +and company-wide) are not reasonably likely to have a material adverse effect on the Company. +Implications +of Tax and Accounting Matters +As +a general matter, the Compensation Committee considers the various tax and accounting implications of compensation vehicles employed +by the Company. While the Compensation Committee reviews and considers both the accounting and tax effects of various components +of compensation, these effects are not a significant factor in the Compensation Committee’s allocation of compensation among +the different components. +In +general, the Company believes that compensation paid to executive officers should be deductible for U.S. tax purposes. In certain +instances, however, the Compensation Committee also believes that it is in the Company’s best interests, and that of its +stockholders, to have the flexibility to pay compensation that is not deductible under the limitations of Section 162(m) of +the Code in order to provide a compensation package consistent with the Company’s objectives. For Fiscal Year 2015, the +Compensation Committee believes incentive compensation paid and awarded will not be subject to the limitations of Section 162(m). +As +more fully described below under the heading “Termination, Change-in-Control and +Non-Competition/Non-Solicitation,” with the exception of Ms. Frieders, all of our Named Executive Officers are entitled +to receive certain compensation in the event of a termination of employment in connection with a change-in-control event for +the Company, which payments may trigger the application of the “golden parachute” provisions of +Sections 280G and 4999 of the Code. Section 280G of the Code disallows a tax deduction with respect to excess parachute +payments to certain executives of companies that undergo a change-in-control. In addition, Section 4999 of the Code +imposes a 20% excise tax on the individual receiving the excess parachute payment. Excess parachute payments are golden +parachute payments that exceed an amount determined under Section 280G based on the executive’s prior +compensation. In approving the compensation arrangements of our Named Executive Officers, our Compensation Committee +considers all elements of the cost to our Company of providing such compensation, including the potential impact +of Sections 280G and 4999, which, under certain circumstances, may limit the deductibility to the Company of executive +compensation. However, our Compensation Committee may determine, in its judgment, to authorize compensation arrangements that +could give rise to loss of deductibility under Section 280G and the imposition of excise taxes under Section 4999 +when it believes that such arrangements are appropriate to attract and retain executive talent. +33 +Conclusion +The +level and mix of compensation that is finally decided upon as to each executive is considered within the context of both the objective +data from the Company’s competitive assessment of compensation and performance, as well as discussion of the subjective +factors as outlined above. The Compensation Committee believes that each of the compensation packages for the Named Executive +Officers is within the competitive range of practices when compared to the objective comparative data even where subjective factors +have influenced the compensation decisions. +Compensation Committee +Interlocks and Insider Participation +During +the 2015 Fiscal Year, the following directors served on the Compensation Committee: Peter Migliorini (Chairman), Thomas H. Schwartz, +Rose Peabody Lynch and Robert Smith. During the 2015 Fiscal Year: +· +none of the +members of the Compensation Committee was an officer (or former officer) or employee of the Company or any of its subsidiaries; +· +none of the members of +the Compensation Committee had a direct or indirect material interest in any transaction in which the Company was a participant +and the amount involved exceeded $120,000; +· +none +of the Company’s executive officers served on the compensation committee (or another board committee with similar functions +or, if none, the entire board of directors) of another entity where one of that entity’s executive officers served +on the Company’s Compensation Committee; +· +none +of the Company’s executive officers was a director of another entity where one of that entity’s executive officers +served on the Company’s Compensation Committee; and +· +none of the Company’s +executive officers served on the compensation committee (or another board committee with similar functions or, if none, the +entire board of directors) of another entity where one of that entity’s executive officers served as a director +on the Company’s Board of Directors. +Executive Officers +The following +table identifies the executive officers of the Company, and their ages and positions: +Name +Age +Position +Edward R. Rosenfeld +40 +Chairman of the Board +and Chief Executive Officer +Amelia Newton Varela +44 +President +Arvind Dharia +66 +Chief Financial Officer +and Secretary +Awadhesh Sinha +70 +Chief Operating Officer +Karla Frieders +39 +Chief Merchandising Officer +Amelia +Newton Varela has been President of the Company since September 2015. Previously, Ms. Varela was Executive Vice President of Wholesale +since April 2008. Ms. Varela was Executive Vice President of Wholesale Footwear from November 2004 to April 2008. Prior to this +tenure, she was Vice President of Sales for the Steve Madden Women’s Wholesale Division from January 2000. Prior to that, +she was an Account Executive for the Steve Madden Women’s Wholesale Division. She graduated from The Fashion Institute of +Technology in 1995. +Arvind +Dharia has been the Chief Financial Officer of the Company since October 1992 and was a director of the Company from December 1993 +through May 2004. Mr. Dharia has been Secretary of the Company since 1993. From December 1988 until joining the +Company in September 1992, Mr. Dharia was Assistant Controller of Millennium III Real Estate Corp., a real estate management +company. +34 +Awadhesh +Sinha became the Chief Operating Officer of the Company in July 2005. Mr. Sinha was a director of the Company, from October 2002 +to July 2005, before joining the Company as its Chief Operating Officer. Mr. Sinha was the Chief Operating Officer and Chief +Financial Officer of WEAR ME Apparel Inc., a company that designs, manufactures and markets branded and non-branded children’s +clothing, from 2003 to July 2005. Prior to that, Mr. Sinha worked for Salant Corporation, a company that designs, manufactures +and markets men’s clothing, for 22 years, and held the position of Chief Operating Officer and Chief Financial Officer +of Salant Corporation from 1998 to 2003. +Karla +Frieders has been the Chief Merchandising Officer of the Company since September 2015. Previously, Ms. Frieders served as the +President of Retail from January 2013 and the Vice President of Retail from October 2009 until January 2013. Prior to these roles, +Ms. Frieders held various buying positions at the Company from 1999. +Please +see the section of this Proxy Statement captioned “Proposal One: Election of Directors -- Biographical Summaries of Nominees +for the Board of Directors” for information concerning the Company’s Chairman of the Board and Chief Executive Officer, +Edward R. Rosenfeld, and the Company’s other director nominees. +SUMMARY +COMPENSATION TABLE +The +following table sets forth the compensation information for the Company’s Chief Executive Officer, Chief Financial Officer +and the three most highly compensated executive officers other than the Chief Executive Officer and Chief Financial Officer relating +to the fiscal years ended December 31, 2015, 2014 and 2013, respectively. In this Proxy Statement, the Company refers to +this group of people as the Company’s “Named Executive Officers.” +In +accordance with applicable SEC rules, the Summary Compensation Table includes, for a particular fiscal year, only those stock +awards made during that fiscal year and not any awards made after year-end even if awarded for services rendered in that year. +SEC rules require that such awards be reflected in the year of grant and, as such, awards made after the end of the 2015 Fiscal +Year will appear in the Summary Compensation Table to be included in our proxy statement for our 2017 Annual Meeting of Stockholders. +35 +Name and Principal +Position +Fiscal +Year +Salary +($) +Bonus +($) +Stock +Awards +($) (1) +Option +Awards +($)(1) +Non-Equity +Incentive Plan +Compensation +($) +All Other +Compensation +($) +Total +Compensation +($) +Edward R. Rosenfeld +2015 +637,791 +— +3,226,490 +— +— +25,950 +(2) +3,890,231 +Chief Executive Officer +2014 +607,754 +— +816,680 +— +— +25,800 +(3) +1,450,234 +2013 +577,647 +— +5,065,800 +— +225,000 +21,232 +(4) +5,889,679 +Amelia Newton Varela +2015 +531,154 +— +563,801 +— +— +22,950 +(5) +1,117,905 +President +2014 +500,000 +— +554,528 +930,000 +— +22,800 +(6) +2,007,328 +2013 +450,000 +— +449,900 +— +76,000 +(7) +23,801 +(8) +999,701 +Arvind Dharia +2015 +582,152 +— +720,011 +— +112,500 +101,817 +(9) +1,516,480 +Chief Financial Officer +2014 +554,719 +— +— +— +— +107,168 +(10) +661,887 +2013 +554,719 +— +— +— +225,000 +110,444 +(11) +890,163 +Awadhesh Sinha +2015 +629,654 +— +202,511 +— +112,500 +22,366 +(12) +967,031 +Chief Operating Officer +2014 +600,000 +— +999,986 +— +— +23,311 +(13) +1,623,297 +2013 +575,000 +— +— +— +225,000 +24,760 +(14) +824,760 +Robert Schmertz +2015 +246,291 +— +1,212,803 +— +— +230,208 +(15) +1,689,302 +Former Brand Director +2014 +725,000 +— +403,297 +— +— +26,492 +(16) +1,154,789 +2013 +722,250 +— +1,201,976 +— +100,000 +25,842 +(17) +2,050,068 +Karla Frieders +2015 +440,769 +— +745,835 +— +109,957 +(18) +1,296,561 +Chief Merchandising Officer +(1) +The amounts in this column reflect the aggregate grant date fair value of awards granted during the applicable year for the +fiscal years ended December 31, 2015, December 31, 2014 and December 31, 2013, respectively, calculated in +accordance with ASC Topic 718. Assumptions used in the calculation of these amounts are included in Note I to the +Company’s audited financial statements for the fiscal years ended December 31, 2015, December 31, 2014 and +December 31, 2013 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange +Commission on February 26, 2016, February 26, 2015 and February 27, 2014, respectively. +(2) +Consists of an $18,000 automobile allowance and $7,950 in annual match contributions to Mr. Rosenfelds 401(K) plan +account. +(3) Consists +of an $18,000 automobile allowance and $7,800 in annual matching contributions to Mr. Rosenfeld’s 401(k) plan +account. +(4) Consists of a +$17,893 automobile allowance and $3,339 in annual matching contributions to Mr. Rosenfeld’s 401(k) plan +account. +(5) +Includes the following: $15,000 automobile allowance and $7,950 in annual matching contributions to Ms. Varela’s +401(k) plan account.) +(6) +Includes the following: $15,000 automobile allowance and $7,800 in annual matching contributions to Ms. Varela’s +401(k) plan account. +(7) +Represents a non-equity incentive payment made pursuant to a bonus formula in Ms. Varela’s employment agreement. +See “Employment Arrangements. +(8) +Includes the following: $15,051 automobile allowance and $8,750 in annual matching contributions to Ms. Varela’s +401(k) plan account. +(9) Includes the +following: $12,876 automobile allowance, $80,991 life insurance premiums and $7,950 in annual match contributions to +Mr. Dharia’s 401(K) plan account. +(10) Includes +the following: $13,427 automobile allowance, $85,941 life insurance premiums and $7,800 in annual matching contributions to Mr. Dharia’s +401(k) plan account. +(11) Includes +the following: $11,792 automobile allowance, $87,514 life insurance premiums and $11,138 in annual matching contributions to Mr. Dharia’s +401(k) plan account. +(12) Includes +the following: $14,416 automobile allowance and $7,950 in annual matching contributions to Mr. Sinha’s 401(k) plan +account. +36 +(13) Includes +the following: $15,511 automobile allowance and $7,800 in annual matching contributions to Mr. Sinha’s 401(k) plan +account. +(14) Includes +the following: $14,183 automobile allowance and $10,577 in annual matching contributions to Mr. Sinha’s 401(k) plan +account. +(15) Includes +the following: $219,591 in severance payments pursuant to a resignation agreement and general release between Mr. Schmertz and +the Company, $6,923 automobile allowance and $3,694 in annual matching contributions to Mr. Schmertz’s 401(k) plan +account. +(16) Includes +the following: $18,692 automobile allowance and $7,800 in annual matching contributions to Mr. Schmertz’s 401(k) plan +account. +(17) Includes +the following: $17,936 automobile allowance and $7,906 in annual matching contributions to Mr. Schmertz’s 401(k) plan +account. +(18) +Includes the following: $102,007 living allowance and $7,950 in annual matching contributions to Ms. +Frieders’ 401(k) plan account. +Employment Arrangements +Edward +R. Rosenfeld. On December 31, 2012, the Company entered into an employment agreement with Mr. Rosenfeld to replace +a prior, expiring employment agreement. Pursuant to the December 31, 2012 employment agreement Mr. Rosenfeld continued to +serve as Chief Executive Officer and executive Chairman of the Board of Directors of the Company and received a base salary of +$578,813, $607,754 and $638,142 for the fiscal years 2013, 2014 and 2015, respectively, until the employment agreement’s +expiration on December 31, 2015. The December 31, 2012 employment agreement provided that Mr. Rosenfeld received a monthly automobile +allowance of $1,500 and additional compensation and bonuses, if any, at the absolute discretion of the Board of Directors. Pursuant +to the December 31, 2012 employment agreement, on January 2, 2013, Mr. Rosenfeld was granted 150,000 shares of the Company’s +Common Stock (the number of shares indicated having been adjusted for an October 1, 2013 three-for-two stock split effected as +a stock dividend), subject to certain restrictions. These restricted shares of Common Stock, which were issued under the 2006 +Plan, vest in five equal annual installments of 30,000 shares, which commenced on December 31, 2013. +On +December 31, 2015, Company entered into a new employment agreement with Mr. Rosenfeld which replaced the prior employment +agreement with the Company, which expired on December 31, 2015. Pursuant to the new employment agreement, Mr. Rosenfeld continues +to serve as Chief Executive Officer and executive Chairman of the Board of Directors of the Company until the agreement expires +on December 31, 2018 or is sooner terminated in accordance with its terms. Mr. Rosenfeld’s current employment +agreement provides for an annual base salary of $800,000, $850,000 and $900,000 for the fiscal years 2016, 2017 and 2018, respectively, +and a monthly automobile allowance of $1,500. The current agreement provides that Mr. Rosenfeld will receive additional compensation +and bonuses, if any, at the absolute discretion of the Board of Directors. Pursuant to the current agreement, on December 31, +2015, Mr. Rosenfeld was granted 75,000 shares of the Company’s Common Stock, subject to certain restrictions. These +restricted shares of Common Stock, which were issued under the 2006 Plan, will vest in five equal annual installments of 15,000 +shares commencing on December 1, 2016. In addition, pursuant to the current employment agreement, on February 5, 2016, Mr. +Rosenfeld received an additional award of 75,000 shares of the Company’s Common Stock, subject to certain restrictions. +These restricted shares of Common Stock, which were issued under the 2006 Plan, will also vest in five equal annual installments +of 15,000 shares in such case commencing on March 5, 2017. +In +the event of his death, Mr. Rosenfeld’s employment agreement provides for the payment to his estate of his base salary +for the 12-month period immediately subsequent to the date of Mr. Rosenfeld’s death. The agreement also provides that +if Mr. Rosenfeld’s employment agreement is terminated due to his “total disability” (as defined in the +agreement), Mr. Rosenfeld will receive payment of his base salary for the 12-month period immediately subsequent to the date +he is determined to be totally disabled. Mr. Rosenfeld’s employment agreement allows the Company to terminate his employment +with “cause” (as defined in the employment agreement) or without cause. In the event that Mr. Rosenfeld’s +employment is terminated by the Company for cause, the Company will have no further obligations to Mr. Rosenfeld, and Mr. Rosenfeld +will be entitled to no further compensation from the Company, except for pro-rata amounts due to him on the date of his termination. +In the event that Mr. Rosenfeld’s employment is terminated by the Company without cause or by Mr. Rosenfeld’s +resignation for “good reason” (as defined in the employment agreement), Mr. Rosenfeld will be entitled to receive +payment of his annual base salary, payable at regular payroll intervals, from the date of termination of employment through the +longer of the remainder of the term of the agreement or six months. +37 +In +addition, if Mr. Rosenfeld’s employment is terminated by the Company without cause or by the resignation of Mr. Rosenfeld +for good reason during the period commencing 90 days prior to a “change of control” (as defined in the employment +agreement) transaction and ending 180 days following a change of control transaction, Mr. Rosenfeld will receive an +amount equal to three times the average amount of total W-2 compensation actually received by him during the preceding three calendar +years ending on the last previous December 31, except that in lieu of the actual base salary component received during such +period, there shall be substituted the annual base salary to which Mr. Rosenfeld was entitled as of the date of termination +or resignation (the “Change of Control Payment”). However, if the Change of Control Payment (or a portion thereof) is +determined to constitute an “excess parachute payment” under Sections 280G and 4999 of the Code, Mr. Rosenfeld +shall be paid either (i) the Change of Control Payment (which shall be subject to all applicable taxes to be paid by the +executive including the excise tax payable pursuant to Section 4999 and which shall be limited as to deductibility to the +Company) or (ii) a reduced amount, calculated in accordance with Section 280G, that may be paid to the executive +without the imposition of an excise tax under Section 4999 and which shall be fully deductible to the Company, whichever +payment yields the greater after-tax benefit to the executive. +Amelia +Newton Varela. On January 31, 2011, the Company entered into a new employment agreement with Ms. Varela to replace +a prior employment agreement, which expired by its terms on December 31, 2010. Pursuant to the employment agreement, Ms. Varela +served as the Executive Vice President - Wholesale and received an annual base salary of $450,000 and a monthly automobile allowance +of $1,250 commencing January 1, 2011 until the employment agreement’s expiration on December 31, 2013. The January 31, +2011 employment agreement provided an annual performance-based cash bonus to Ms. Varela for the fiscal year ended December 31, +2013 in an amount equal to 2% of the increase, if any, in the Wholesale Division EBIT for such year over the Wholesale Division +EBIT for the immediately preceding year, provided that Wholesale Division EBIT attributable to any business acquired by the Company +after January 31, 2011 would not be included for the purpose of determining Ms. Varela’s bonus until the acquired +business has been owned by the Company for two full calendar years. Ms. Varela received a cash bonus of $76,000 for 2013 +Wholesale Division EBIT performance. +On +January 10, 2014, the Company entered into a new employment agreement with Ms. Varela to replace the prior agreement that expired +on December 31, 2013. The term of this employment agreement, which was amended on September 4, 2015 in connection with Ms. Varela’s +promotion to the newly-created position of President of the Company, will expire on December 31, 2016, unless sooner terminated +in accordance with the agreement’s terms. Prior to its amendment, the employment agreement provided for an annual base salary +during the term of $500,000 and a monthly automobile allowance of $1,250. The amendment of the employment agreement increases +Ms. Varela’s annual base salary to $600,000 for the 2015 Fiscal Year and through the end of the term of the agreement. In +addition, pursuant to the current employment agreement, on February 3, 2014, Ms. Varela was granted an option to purchase 100,000 +shares of the Company’s Common Stock under the 2006 Plan, at an exercise price of $32.59 per share, which option is exercisable +in four equal annual installments of 25,000 on each anniversary of the date of grant, which commenced on February 3, 2015. +Prior +to its amendment, the employment agreement entitled Ms. Varela to an annual performance-based cash bonus for each of the fiscal +years ended December 31, 2014, 2015 and 2016 in an amount equal to 2% of the increase, if any, in the Wholesale Division EBIT +for each such year over the Wholesale Division EBIT for the immediately preceding year, provided that Wholesale Division EBIT +attributable to any business acquired by the Company after January 10, 2014 will not be included for the purpose of determining +Ms. Varela’s bonus until the acquired business has been owned by the Company for two full calendar years. This performance-based +bonus was not achieved with respect to the 2015 Fiscal Year or the fiscal year ended December 31, 2014. As amended, with respect +to the fiscal year ending December 31, 2016, the employment agreement entitles Ms. Varela to a performance-based cash bonus in +an amount equal to 2% of the increase, if any, in the Company’s total EBIT for the fiscal year ending December 31, 2016 +over the Company’s total EBIT for the 2015 Fiscal Year, less any deductions required to be withheld by applicable laws and +regulations. EBIT attributable to any business acquired by the Company after September 4, 2015 will not be included in the calculation +for the purpose of determining Ms. Varela’s annual bonus. +38 +In +the event that Ms. Varela’s employment agreement is terminated due to Ms. Varela’s “disability” +(as defined in the agreement) or death, the Company is obligated to pay Ms. Varela (or her estate) the amount of +accrued and unpaid salary through the date of termination plus any performance-based cash bonus that has accrued for the year +prior to termination and is unpaid at the time Ms. Varela’s employment is terminated due to her disability or death. +The Company may terminate the agreement for “cause” (as defined in the agreement) and, in such event, Ms. Varela +will be entitled only to accrued and unpaid salary through the date of termination of employment. In the event Ms. Varela’s +employment is terminated by the Company without cause, she would be entitled to receive payment of her annual base salary, payable +at regular payroll intervals, from the date of termination of employment through the remainder of the term plus any performance-based +cash bonus that has accrued but not yet been paid. In the event that Ms. Varela’s employment is terminated by the Company +without cause during the period commencing 30 days prior to a “change of control” (as defined in the agreement) transaction +and ending 180 days following a change of control transaction, she is entitled to receive an amount equal to the lesser of (i) the +average amount of total compensation actually received by her during the preceding three calendar years multiplied by 3 and (ii) the +maximum amount that is tax deductible to the Company under Section 280G of the Code. +Arvind +Dharia. In January 1998, the Company entered into an employment agreement with Arvind Dharia, which has been amended +from time to time, most recently on February 2, 2015. Pursuant to Mr. Dharia’s amended agreement, Mr. Dharia +continues to serve as the Company’s Chief Financial Officer. The term of Mr. Dharia’s employment under his agreement, +as amended, extends through December 31, 2017, and will be automatically extended for an additional one-year period unless +either party timely notifies the other of its intention not to extend the term. Prior to the most recent amendment of the agreement, +Mr. Dharia received an annual base salary of $554,719 during fiscal years 2012, 2013 and 2014. Commencing January 1, +2015, pursuant to the most recent amendment of the agreement, Mr. Dharia’s annual base salary increased to and will +remain $582,455 for the remaining term of the agreement. Mr. Dharia received a monthly automobile allowance of $1,400 prior +to the most recent amendment of the agreement and, beginning January 1, 2015, his monthly car allowance increased to $1,600. +The agreement provides that the Company will pay life insurance premiums on Mr. Dharia’s behalf of approximately $80,000 +per year. Mr. Dharia’s employment agreement, as amended, provides for a grant of 15,000 shares of the Company’s +Common Stock (the number of shares indicated having been adjusted for an October 1, 2013 three-for-two stock split effected +as a stock dividend), subject to certain restrictions. These restricted shares of Common Stock were issued to Mr. Dharia +on February 8, 2012 under the 2006 Plan and vest in three substantially equal annual installments, which commenced on February 8, +2013. The most recent amendment of the agreement provides for a grant of 15,000 shares of the Company’s Common Stock, subject +to certain restrictions. These restricted shares of Common Stock were issued to Mr. Dharia on February 2, 2015 under +the 2006 Plan and will vest in five equal annual installments commencing on February 2, 2016. In addition, the amended agreement +provides that Mr. Dharia will receive an annual bonus in such amount, if any, and at such time or times, as the Board of +Directors may determine in its absolute discretion. Subject to availability of shares under the 2006 Plan, or any other plan designated +by the Board of Directors and approved by the Company’s stockholders, Mr. Dharia is entitled to awards under such plan +as may be determined by the Board of Directors, or a committee thereof, from time to time in its absolute discretion. +The +agreement provides, in the event of Mr. Dharia’s death, for the payment to Mr. Dharia’s estate of his base +salary for the 12-month period immediately subsequent to the date of Mr. Dharia’s death. The agreement also provides +that if Mr. Dharia’s employment agreement is terminated due to his “total disability” (as defined in the +agreement), Mr. Dharia will receive payment of his base salary for the 12-month period immediately subsequent to the date +he is determined to be totally disabled. In the event that Mr. Dharia’s employment agreement is terminated “for +cause” (as defined in the agreement), the Company is obligated to pay Mr. Dharia the amount of compensation that is +accrued and unpaid through the date of termination. In the event that Mr. Dharia’s employment agreement is terminated +for any reason (other than “for cause” or due to his death or total disability), the Company is obligated to pay Mr. Dharia, +in two installments, (a) an amount equal to the product of (x) his base salary on the effective date of such termination +plus the bonus paid or payable, if any, for the fiscal year ended on the December 31st immediately preceding the termination +date, multiplied by (y) the number of years (and fraction of years) remaining in the term; and (b) the amount payable +to him, or on his account, for what would have been the balance of the term of his employment agreement with respect to certain +benefits and plans as set forth in his employment agreement. If the Company decides not to renew the agreement (other than “for +cause” or due to his total disability), then Mr. Dharia will be entitled to receive severance compensation, in cash, +in an amount equal to his then-current base salary for the 90-day period commencing on the expiration of the term. +39 +In +addition, in the event that there is a “change of control” transaction and Mr. Dharia’s employment has +been terminated by the Company other than “for cause” or if Mr. Dharia resigns “for good reason” +(as such terms are defined in the agreement), Mr. Dharia will receive an amount equal to three times the total compensation +he was entitled to receive under the agreement for the preceding 12-month period ending on the last previous December 31, +except that in lieu of the actual base salary component received during such period, there shall be substituted the annual base +salary to which Mr. Dharia was entitled to as of the date of termination or resignation (the “Change of Control Payment”). +However, if the Change of Control Payment (or a portion thereof) is determined to constitute an “excess parachute payment” +under Sections 280G and 4999 of the Code, Mr. Dharia will be paid either (i) the Change of Control Payment (which +shall be subject to all applicable taxes to be paid by the executive including the excise tax payable pursuant to Section 4999 +and which shall be limited as to deductibility to the Company) or (ii) a reduced amount, calculated in accordance with +Section 280G, that may be paid to the executive without the imposition of an excise tax under Section 4999 and which +shall be fully deductible to the Company, whichever payment yields the greater after-tax benefit to the executive. +Awadhesh +Sinha. On December 1, 2010, the Company entered into an employment agreement with Mr. Sinha to replace a prior employment +agreement, which was to expire by its terms on December 31, 2010. Pursuant to the December 1, 2010 employment agreement, +Mr. Sinha continued to serve as Chief Operating Officer of the Company for a term that commenced on January 1, 2011 +and expired on December 31, 2013, with an annual base salary of $575,000 for the term of the agreement. The December 1, +2010 employment agreement provided Mr. Sinha with a monthly automobile allowance of $1,750 and obligated the Company to pay +term life insurance premiums on his behalf of approximately $3,500 per year. The agreement also provided for a grant of 78,750 +shares of the Company’s Common Stock, all of which have now vested. +On +January 10, 2014, the Company entered into a new employment agreement with Mr. Sinha pursuant to which Mr. Sinha +continues to serve as Chief Operating Officer of the Company until the agreement expires on December 31, 2016. Mr. Sinha’s +current agreement provides for an annual base salary of $600,000, $630,000 and $661,500 for the years 2014, 2015 and 2016, respectively, +a monthly automobile allowance of $1,850 and the payment of term life insurance premiums on Mr. Sinha’s behalf in the +amount of approximately $3,500 per year. On January 15, 2014, pursuant to his current employment agreement, Mr. Sinha +was granted 29,886 shares of Common Stock, subject to certain restrictions. These restricted shares of Common Stock, which were +issued under the 2006 Plan, will vest in three equal annual installments of 9,962 shares, which commenced on December 15, +2014. +In +addition, Mr. Sinha’s current agreement entitles him to an annual performance-based bonus for each of the fiscal years +ended December 31, 2014, 2015 and 2016 in an amount equal to 2% of the increase in the Company’s EBITDA for each such +year over the Company’s EBITDA for the immediately preceding year. For any business acquired after January 1, 2014, EBITDA +from the acquired business is included in the bonus calculation starting with the first full quarter under Company ownership, +provided that the prior year’s EBITDA will likewise be adjusted to include EBITDA from the acquired business for comparable +quarters in the prior year on a pro forma basis assuming the Company had owned the business. The maximum annual bonus is $600,000, +the first $300,000 of which will be payable in cash and for any amount of the annual bonus in excess of $300,000 by a grant of +restricted shares of Common Stock, which restricted shares of Common Stock will vest in three equal annual installments commencing +on the first anniversary of the grant date. This performance-based bonus was not achieved with respect to the fiscal years ended +December 31, 2015 and December 31, 2014. Bonuses and other incentive-based compensation paid to Mr. Sinha are subject to +recovery by the Company in the event of a determination that such compensation was based upon materially inaccurate financial +statements. +40 +In +the event of his death, Mr. Sinha’s employment agreement provides for the payment to Mr. Sinha’s estate +of his base salary for the 12-month period immediately subsequent to the date of Mr. Sinha’s death. In addition, in +the event of Mr. Sinha’s “total disability” (as such term is defined in the agreement), the Company is +obligated to continue to pay Mr. Sinha’s base salary for the 12-month period immediately subsequent to the date of +determination of such total disability. In the event Mr. Sinha’s employment agreement is terminated “for cause” +(as such terms are defined in the agreement), or due to Mr. Sinha’s resignation without “good reason” (as +such term is defined in the agreement), the Company is obligated to pay Mr. Sinha the amount of compensation that is accrued +and unpaid through the date of termination. In the event Mr. Sinha’s employment agreement is terminated by the Company +without cause or by the resignation of Mr. Sinha for good reason, Mr. Sinha would be entitled to receive payment of +his annual base salary, payable at regular payroll intervals, from the date of termination of employment through the longer of +(i) the remainder of the term or (ii) six months. +In +addition, if Mr. Sinha’s employment is terminated by the Company without cause or if Mr. Sinha resigns for good +reason during the period commencing 120 days prior to a “change of control” (as defined in the agreement) and +ending 90 days after a change of control, Mr. Sinha would be entitled to receive a cash payment within ten days of the date +of his termination or resignation of employment in an amount equal to three times the total W-2 compensation and benefits actually +received by him during the preceding twelve-month period ending on the last previous December 31 st , except that, +in lieu of the actual base salary compensation received during such period, there shall be substituted the annual base salary +to which Mr. Sinha was entitled to as of the date of termination or resignation (the “Change of Control Payment”). +However, if the Change of Control Payment (or a portion thereof) is determined to constitute an “excess parachute payment” +under Sections 280G and 4999 of the Code, Mr. Sinha will be paid either (i) the Change of Control Payment (which +shall be subject to all applicable taxes to be paid by the executive including the excise tax payable pursuant to Section 4999 +and which shall be limited as to deductibility to the Company) or (ii) a reduced amount, calculated in accordance with +Section 280G, that may be paid to the executive without the imposition of an excise tax under Section 4999 and which +shall be fully deductible to the Company, whichever payment yields the greater after-tax benefit to the executive. +Robert +Schmertz. On January 2, 2013, the Company entered into an employment agreement with Mr. Schmertz, the former Brand Director +of the Company, to replace a prior, expired agreement, under which Mr. Schmertz served as the Company’s Brand Director for +a term that commenced on January 1, 2013 and expired on December 31, 2014. The 2013 agreement provided for an annual base salary +of $725,000 and a monthly automobile allowance of $1,500 during the term of the agreement and additional compensation and bonuses, +if any, at the absolute discretion of the Board of Directors. Pursuant to the 2013 agreement, on January 4, 2013, Mr. Schmertz +was granted 25,000 shares of the Company’s Common Stock (the number of shares indicated having been adjusted for an October +1, 2013 three-for-two stock split effected as a stock dividend), subject to certain restrictions. These restricted shares of Common +Stock, which were issued under the 2006 Plan, were vesting in five substantially equal annual installments, which commenced on +January 4, 2014. By virtue of an employment agreement dated March 9, 2015, Mr. Schmertz was receiving an annual base salary of +$761,250 and a monthly car allowance of $1,500 for the 2015 Fiscal Year. In addition, pursuant to such employment agreement, on +March 20, 2015, Mr. Schmertz was granted 20,000 shares of the Company’s Common Stock, subject to certain restrictions. These +restricted shares of Common Stock, which were issued under the 2006 Plan, were scheduled to vest in three substantially equal +annual installments, commencing on the third anniversary of the grant date. On June 4, 2015, Mr. Schmertz tendered his resignation +of employment, effective immediately. In connection with his resignation of employment, the Company and Mr. Schmertz entered into +a resignation agreement and general release, pursuant to which Mr. Schmertz is receiving severance beginning May 29, 2015 and +continuing until December 31, 2016 at an annualized rate of $380,625 (one-half of Mr. Schmertz’s annual base salary for +the 2015 Fiscal Year) payable at regular payroll intervals. In the 2015 Fiscal Year, prior to his resignation, Mr. Schmertz received +a total of $246,291 in base salary under his employment agreement and, after his resignation, Mr. Schmertz received a total of +$219,591 in severance payments pursuant to the resignation agreement and general release between Mr. Schmertz and the Company. +All shares of Common Stock awarded to Mr. Schmertz under the 2006 Plan that were unvested on the date of Mr. Schmertz’s +resignation were automatically forfeited pursuant to the award forfeiture provisions of the 2006 Plan. +Karla +Frieders. On September 4, 2015, the Company entered into an employment agreement with Ms. Frieders, pursuant to which Ms. +Frieders serves as Chief Merchandising Officer of the Company for a term commencing on September 4, 2015 and ending on February +29, 2017. The employment agreement provides for an annual base salary during the term of $440,000 and an annual performance-based +bonus for each of the fiscal years ending December 31, 2015 and 2016 in an amount to be determined by the Company in its absolute +discretion. +41 +In +the event that Ms. Frieders’ employment is terminated due to Ms. Frieders’ “disability” (as defined in +the agreement) or death, the Company is obligated to pay Ms. Frieders (or her estate) the amount of accrued and unpaid salary +through the date of termination of employment. The Company may terminate Ms. Frieders’ employment for “cause” +(as defined in the agreement) and, in such event, Ms. Frieders will be entitled only to accrued and unpaid salary through the +date of termination of employment. In the event Ms. Frieders’ employment is terminated by the Company without cause, +she would be entitled to receive payment of her annual base salary, payable at regular payroll intervals, from the date of termination +of employment through the remainder of the term. +GRANTS +OF PLAN-BASED AWARDS IN THE 2015 FISCAL YEAR +The +following table sets forth information concerning awards under the Company’s equity and non-equity incentive plans granted +to each of the Named Executive Officers in the 2015 Fiscal Year, including performance-based awards and those using time-based +vesting. Following the table is a discussion of material factors related to the information disclosed in the table. +All Other +All Other +Stock +Option +Awards: +Awards: +Grant Date +Estimated future payouts under equity +Number of +Number of +Exercise or +Fair Value +incentive plan awards +Shares of +Securities +Base Price +of Stock and +Stock or +Underlying +of Option +Option +Grant +Threshold +Target +Maximum +Units +Options +Awards +Awards +Name +Date +($) +($) +($) +(#) +(#) +($/Sh) +($) +Edward R. Rosenfeld +03/11/15 +— +2,013,840 (1) +— +25,326 +— +— +931,490 +12/31/15 +— +— +— +75,000 +— +— +2,295,000 +Amelia Newton Varela +03/11/15 +— +939,792 (1) +— +15,329 +563,801 +n/a +— +0 (2) +— +— +— +— +— +Arvind Dharia +02/02/15 +— +— +— +15,000 +— +— +517,500 +03/11/15 +— +939,792 (1) +— +5,506 +— +— +202,511 +Awadhesh Sinha +03/11/15 +— +939,792 (1) +— +5,506 +— +— +202,511 +n/a +— +0 (3) +— +— +— +— +— +Robert Schmertz +03/11/15 +— +939,792 (1) +— +12,235 +— +— +450,003 +03/17/15 +— +— +— +20,000 +— +— +762,800 +Karla Frieders +03/02/15 +— +939,792 (1) +— +20,758 +— +— +745,835 +(1) In +the 2015 Fiscal Year, the Compensation Committee established a bonus pool for Named Executive Officers and other key executives +of the Company based on 6% of net income of the Company achieved in the 2015 Fiscal Year and also fixed each executive’s +maximum share of the 2015 bonus pool, which was 30% for Mr. Rosenfeld and 14% for each of the other Named Executive Officers. +Since the bonus pool was established as a percentage of the Company’s 2015 Fiscal Year net income, it would not be possible +to determine the amount of these potential bonuses until the completion of the Company’s 2015 Fiscal Year. Accordingly, +the amount indicated is a representative payout amount and equals the maximum bonus the Named Executive Officer would have been +eligible to receive from a bonus pool of $6,712,800, which equals 6% of the $111,880,000 in net income of the Company achieved +in the fiscal year ended December 31, 2014. See the discussion of the 2015 bonus pool and the individual target awards of +each of the Named Executive Officers appearing above in the “Annual Performance-Based Bonus - Based on Specific Performance +Metrics” section of “Compensation Structure.” As disclosed therein, the Company paid these performance bonuses +primarily in restricted shares of Common Stock granted on March 15, 2016 and, in addition, two of the Named Executive Officers +received a cash bonus. Accordingly, Messrs. Dharia and Sinha each received a performance-based cash bonus of $112,500 and Messrs. +Rosenfeld, Dharia and Sinha and Ms. Varela and Ms. Frieders received grants of 27,563, 3,101, 3,101, 13,782 and 5,513 restricted +shares of Common Stock, respectively. In accordance with applicable SEC rules, these restricted stock awards will appear in the +Summary Compensation Table to be included in our proxy statement for our 2017 Annual Meeting of Stockholders provided the restricted +stock award recipient is a named executive officer in that proxy statement. +42 +(2) +Under an employment agreement dated January 10, 2014 between the Company and Ms. Varela, Ms. Varela is +entitled to receive a cash bonus under the Company’s 2006 Plan on or about March 15, 2016 in an amount equal to 2% +of the increase, if any, in the Wholesale division EBIT for the 2015 Fiscal Year over the Wholesale division EBIT for the +fiscal year ended December 31, 2014. Since it would not be possible to determine the amount of Ms. Varela’s cash +bonus, if any, until the completion of the 2015 Fiscal Year, the amount indicated as the target bonus payout is a +representative amount and based upon the actual decrease in the EBIT performance of the Company’s Wholesale division +for the fiscal year ended December 31, 2014 from the EBIT performance of the Wholesale division for the fiscal year ended +December 31, 2013. See the discussion of this grant to Ms. Varela appearing above in the “Annual Performance-Based +Bonus - Based on Specific Performance Metrics” section of “Compensation Structure” and above under +“Employment Arrangements.” As disclosed therein, this performance-based bonus was not achieved with respect to +the 2015 Fiscal Year. +(3) +Under an employment agreement dated January 10, 2014 between the Company and Mr. Sinha, Mr. Sinha is entitled +to receive a cash bonus under the Company’s 2006 Plan on or about March 15, 2016 in an amount equal to 2% of the +increase, if any, in the Company’s EBITDA for the 2015 Fiscal Year over the Company’s EBITDA for the immediately +preceding fiscal year. The maximum annual bonus is $600,000, the first $300,000 of which is payable in cash and for any +amount of the annual bonus in excess of $300,000 by a grant of restricted shares of the Company’s common stock, which +restricted common stock will vest in three equal annual installments commencing on the first anniversary of the grant date. +Since it would not be possible to determine the amount of Mr. Sinha’s bonus, if any, until the completion of the 2015 +Fiscal Year, the amount indicated as the target bonus payout is a representative amount and based upon the actual decrease in +the EBITDA performance of the Company for the fiscal year ended December 31, 2014 from the EBITDA performance of the Company +for the fiscal year ended December 31, 2013. See the discussion of this grant to Mr. Sinha appearing above in the +“Annual Performance-Based Bonus - Based on Specific Performance Metrics” section of “Compensation +Structure” and above under “Employment Arrangements.” As disclosed therein, this performance-based bonus +was not achieved with respect to the 2015 Fiscal Year. +Plan-Based Awards +2006 +Stock Incentive Plan +As +of March 10, 2006, the Board of Directors of the Company adopted the Company’s 2006 Stock Incentive Plan and, on May 26, +2006, the Company’s stockholders approved the adoption of the Company’s 2006 Stock Incentive Plan. The 2006 Stock +Incentive Plan was amended in 2007 and 2008. On April 6, 2009, the Board of Directors adopted an Amended and Restated 2006 +Stock Incentive Plan and, on May 22, 2009, the Company’s stockholders approved the Amended and Restated 2006 Stock +Incentive Plan. On April 5, 2012, the Board of Directors approved an amendment of the Amended and Restated 2006 Stock Incentive +Plan primarily to increase the number of shares of Common Stock available for issuance thereunder, subject to stockholder approval +of such amendment. The amendment to the Amended and Restated 2006 Stock Incentive Plan was approved by the Company’s stockholders +at the 2012 Annual Meeting of Stockholders on May 25, 2012. +The +Company’s Amended and Restated 2006 Stock Incentive Plan is referred to as the “2006 Plan” throughout this Proxy +Statement. The purpose of the 2006 Plan is to enhance the profitability and value of the Company for the benefit of its stockholders +by enabling the Company to offer eligible employees, consultants and non-employee directors cash and stock-based incentives in +the Company to attract, retain and reward such individuals and provide additional incentive for such persons to exert maximum +efforts for the success of the Company by encouraging stock ownership in the Company. The 2006 Plan serves as a means to strengthen +the mutuality of interests between such individuals and the Company’s stockholders. +The +maximum number of shares of Common Stock available for issuance under the 2006 Plan is 23,466,000 shares. As of the Record Date, +there were outstanding 4,200,428 unvested shares of restricted stock and options to purchase 1,653,644 shares of Common Stock; +options had been exercised, or restricted stock had vested, with respect to 14,012,158 shares of Common Stock; and 3,599,770 shares +of Common Stock remained available for grant under the 2006 Plan. +43 +OUTSTANDING +EQUITY AWARDS AT END OF THE 2015 FISCAL YEAR +The +following table sets forth information concerning unexercised stock options, restricted stock that has not vested and stock awards +outstanding for each of the Named Executive Officers as of the end of the 2015 Fiscal Year. All awards that occurred prior to +the three-for-two split of the Company’s Common Stock effectuated as a stock dividend on or about April 30, 2010, the +three-for-two split of the Company’s Common Stock effectuated as a stock dividend on or about May 31, 2011 and the +three-for-two split of the Company’s Common Stock effectuated as a stock dividend on or about October 1, 2013 have +been adjusted to account for each such stock split, as applicable. +Option +Awards +Stock +Awards +Name +Number of +Securities +Underlying +Unexercised +Options +(#) Exercisable +Number of +securities +Underlying +Unexercised +Options +(#) Unexercisable +Equity +Incentive Plan +Awards: +Number of +Securities +Underlying +Unexercised +Unearned +Options +(#) +Option +Exercise +Price +($) +Option +Expiration +Date +Number of +Shares or +Units of Stock +That Have +Not Vested +(#) +Market Value +of Shares or +Units of Stock +That Have Not +Vested +($) +Equity +Incentive +Plan +Awards: +Number of +Unearned +Shares, Units +or Other +Rights that +Have Not +Vested +(#) +Equity +Incentive Plan +Awards: +Market or +Payout Value of +Unearned +Shares, Units or +Other Rights +That Have Not +Vested +($) +Edward R. Rosenfeld +225,000 +— +— +5.5645 +4/1/2016 +208,138 (1) +6,289,930 +— +— +— +— +Amelia Newton Varela +63,283 +— +— +5.5645 +4/1/2016 +43,309 (3) +1,308,797.98 +— +— +67,501 +— +— +14.4578 +4/1/2017 +— +— +— +— +168,750 +— +— +16.9645 +2/1/2018 +— +— +— +— +25,000 +75,000 (2) +— +32.5900 +2/3/2021 +Arvind Dharia +— +— +— +— +— +22,130 (4) +668,769 +— +— +Awadhesh Sinha +— +— +— +— +— +18,593 (5) +561,880 +— +— +Robert Schmertz +— +— +— +— +— +0 (6) +0 +— +— +Karla Frieders +33,750 +— +— +5.5600 +4/1/2016 +34,643 (7) +1,046,911 +— +— +67,500 +— +— +16.9600 +2/1/2017 +— +— +— +— +30,000 +30,000 (8) +— +28.1800 +1/2/2020 +— +— +— +— +(1) +On March 14, 2012, Mr. Rosenfeld was awarded 30,000 shares of restricted Common Stock, which shares vest in five +equal annual installments commencing on the first anniversary of the date awarded. On January 2, 2013, +Mr. Rosenfeld was awarded 150,000 shares of restricted Common Stock, which shares vest in five equal annual installments +commencing on December 1, 2013 and on each December 1 st thereafter. On March 15, 2013, +Mr. Rosenfeld was awarded 30,000 shares of restricted Common Stock, which shares vest in five equal annual installments +commencing on the first anniversary of the date awarded. On March 17, 2014, Mr. Rosenfeld was awarded +22,265 shares of restricted Common Stock, which shares vest in five substantially equal annual installments commencing on +March 5, 2015. On March 11, 2015, Mr. Rosenfeld was awarded 25,326 shares of restricted Common Stock, which +shares vest in five substantially equal annual installments commencing on March 5, 2016. On December 31, 2015, Mr. +Rosenfeld was awarded 75,000 shares of restricted Common Stock, which shares vest in five equal annual installments +commencing on December 31, 2016. +(2) On +February 3, 2014, Ms. Varela was granted an option to purchase 100,000 shares of the Company’s Common Stock +under the 2006 Plan, which option vests in four equal annual installments commencing on the first anniversary of the date of +grant. +(3) On +March 14, 2012, Ms. Varela was awarded 17,209 shares of restricted Common Stock, which shares vest in five +substantially equal annual installments commencing on the first anniversary of the date awarded. On March 15, 2013, +Ms. Varela was awarded 15,000 shares of restricted Common Stock, which shares vest in five equal annual installments +commencing on the first anniversary of the date awarded. On March 17, 2014, Ms. Varela was awarded +15,118 shares of restricted Common Stock, which shares vest in five substantially equal annual installments commencing +on March 5, 2015. On March 11, 2015, Ms. Varela was awarded 15,329 shares of restricted Common Stock, which shares vest +in five substantially equal annual installments commencing on March 5, 2016. +44 +(4) On +February 8, 2012, Mr. Dharia was awarded 15,000 shares of restricted Common Stock, which shares vest in three +substantially equal annual installments commencing on the first anniversary of the date awarded. On April 2, +2012, Mr. Dharia was awarded 7,500 shares of restricted Common Stock, which shares vest in five equal annual +installments commencing on the first anniversary of the date awarded. On February 2, 2015, Mr. Dharia was awarded +15,000 shares of restricted Common Stock, which shares vest in five equal annual installments commencing on the first +anniversary of the date awarded. On March 11, 2015, Mr. Dharia was awarded 5,506 shares of restricted Common Stock, which +shares vest in four substantially equal annual installments commencing on December 15, 2015. +(5) On +March 14, 2012, Mr. Sinha was awarded 11,250 shares of restricted Common Stock, which shares vest in five equal +annual installments commencing on the first anniversary of the date awarded. On January 15, 2014, +Mr. Sinha was awarded 29,886 shares of restricted Common Stock, which shares vest in three equal annual installments +commencing on December 15, 2014. On March 11, 2015, Mr. Sinha was awarded 5,506 shares of restricted Common +Stock, which shares vest in four substantially equal annual installments commencing on December 15, 2015. +(6) On January +4, 2013, Mr. Schmertz was awarded 25,000 shares of restricted Common Stock, which shares vest in five substantially equal +annual installments commencing on the first anniversary of the date awarded. On March 15, 2013, Mr. Schmertz was +awarded 16,564 shares of restricted Common Stock, which shares vest in five substantially equal annual installments +commencing on the first anniversary of the date awarded. On March 17, 2014, Mr. Schmertz was awarded 10,995 shares +of restricted Common Stock, which shares vest in five substantially equal annual installments commencing on March 5, +2015. On March 11, 2015, Mr. Schmertz was awarded 12,235 shares of restricted Common Stock, which shares vest in +five equal annual installments commencing on March 5, 2016. On March 20, 2015, Mr. Schmertz was awarded 20,000 +shares of restricted Common Stock, which shares vest in three substantially equal annual installments commencing on the first +anniversary of the date awarded. All restricted shares of Common Stock awarded to Mr. Schmertz that remained unvested as of +the date of Mr. Schmertz’s resignation, which was effective June 4, 2015, were automatically forfeited pursuant to the +award forfeiture provisions of the 2006 Plan. +(7) On March 2, +2015, Ms. Frieders was awarded 20,758 shares of restricted Common Stock, which shares vest in five substantially equal annual +installments commencing on the first anniversary of the date awarded. +(8) On January +2, 2013, Ms. Frieders was granted an option to purchase 60,000 shares of the Company’s Common Stock under the 2006 +Plan, which option vests in four equal annual installments commencing on the first anniversary of the date of grant. +45 +OPTION +EXERCISES AND STOCK VESTED IN THE 2015 Fiscal Year +The +following table sets forth information concerning stock options exercised and restricted stock vested during the 2015 Fiscal Year +for each of the Named Executive Officers. The value realized from exercised options is deemed to be the market value of the Common +Stock on the date of exercise, less the exercise price of the option, multiplied by the number of shares of Common Stock underlying +the option. The value realized from the vesting of restricted stock is deemed to be the market value of the Common Stock on the +date of vesting multiplied by the number of shares vesting. +Option Awards +Stock Awards +Name +Number of +Shares +Acquired on +Exercise +(#) +Value +Realized +on Exercise +($) +Number of +Shares +Acquired +on +Vesting +(#) +Value +Realized +on Vesting +($) +Edward R. Rosenfeld +157,500 +5,290,650 +57,703 +1,972,082 +Amelia Newton Varela +67,503 +2,031,947 +9,465 +346,828 +Arvind Dharia +— +— +18,902 +686,758 +Awadhesh Sinha +— +— +13,588 +433,351 +Robert Schmertz +— +— +14,731 +515,761 +Karla Frieders +33,753 +1,115,537 +5,179 +175,531 +SECURITIES +AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS +The +following table sets forth information as of December 31, 2015 with respect to compensation plans (including individual compensation +arrangements) under which shares of Common Stock are authorized for issuance, aggregated as follows: +· +All compensation plans previously approved +by security holders; and +· +All +compensation plans not previously approved by security holders. +46 +EQUITY +COMPENSATION PLAN INFORMATION +Number of +securities to be +issued upon +exercise of +outstanding +options, warrants +and rights +(#) +Weighted average +exercise price of +outstanding options, +warrants and rights +($) +Number of securities +remaining available +for future issuance +under equity +compensation plans +(excluding securities +reflected in +column (a)) +(#) +(a) +(b) +(c) +Equity compensation plans approved by security holders +2,016,000 +23.51 +4,177,000 +Equity compensation plans not approved by security holders +— +— +— +Total +2,016,000 +23.51 +4,177,000 +Termination, +Change in Control and Non-Competition/Non-Solicitation +The +employment agreements for Ms. Varela and Messrs. Rosenfeld, Dharia and Sinha provide for a severance payment upon a termination +of employment in connection with a change-in-control of the Company. The employment agreements of Messrs. Rosenfeld, Dharia and +Sinha also provide for severance payment if the executive terminates his employment for good reason in connection with a change-in-control +event. The change-in-control severance payments may result in the application of the “golden parachute” provisions +of Section 280G of the Code and, to the extent Section 280G applies, the Company may not deduct from its taxable income +the severance payments made to the Named Executive Officer. Moreover, Section 4999 of the Code would impose a 20% excise +tax on the Named Executive Officer receiving the severance payment. In the case of Ms. Varela, these severance payments in +connection with a change-in-control, however, are reduced if the severance payment, when added to any other benefits triggered +by a change-of-control, is determined to constitute an “excess parachute payment” under Sections 280G and 4999 +of the Code, to the maximum amount that is deductible to the Company under Section 280G of the Code. In the case of Messrs. +Rosenfeld, Dharia and Sinha, the executive’s change-in-control severance payment will only be reduced to the maximum amount +that is deductible to the Company under Section 280G of the Code if the reduction provides the Named Executive Officer with +the best after-tax result; otherwise, the Named Executive Officer will receive the full amount of the severance payment and other +benefits triggered by the change-in-control and be liable for the 20% excise tax on the excess parachute payment in addition to +all other applicable taxes and, in such case, the deduction by the Company of the portion of the severance payment constituting +an excess parachute payment will be disallowed. +The +Company’s employment agreements with Ms. Varela and Messrs. Rosenfeld, Dharia and Sinha also provide for severance payments +to the executive if the Company terminates the executive’s employment without cause, or, in the case of Mr. Rosenfeld +and Mr. Sinha, if the Company gives him good reason to terminate employment. +Please +see the section of this Proxy Statement captioned “Employment Arrangements” for a summary description of the Named +Executive Officers’ employment agreements and such severance and change-in-control provisions. These benefits are described +and quantified in the section of this Proxy Statement captioned “Potential Payments Upon Termination or Change-In-Control” +below. +47 +The +Company believes that the severance payments and payments made upon change-in-control provisions in the employment agreements +provide appropriate protection to the Company’s executives, comparable to that available at peer companies, and, with regard +to the enhanced severance following a change-in-control, protects the Company from losing key executives during a period when +a change-in-control may be threatened or pending. These benefits are described and quantified in the section below captioned “Potential +Payments Upon Termination or Change-In-Control.” +Ms. Varela +and Ms. Frieders have each agreed to a non-compete and non-solicitation restriction through the expiration date of her employment +agreements, December 31, 2016 and February 29, 2017, respectively, in the event of a voluntary termination or termination +for cause. Messrs. Rosenfeld and Sinha have each agreed to a non-compete and non-solicitation restriction during the period of +his employment and for a six-month period following the termination of his employment for cause or in the event of his resignation +without good reason. Mr. Dharia does not have non-compete or non-solicitation provisions in his employment agreement. +POTENTIAL +PAYMENTS UPON TERMINATION OR CHANGE-IN-CONTROL +The +Company’s employment agreements with the Named Executive Officers provide for payments to such individuals upon termination +of employment or a change-in-control of the Company. Please see the section of this Proxy Statement captioned “Employment +Arrangements.” The amounts set forth in the table below shall be payable to the respective Named Executive Officer if such +Named Executive Officer’s employment is terminated under the various scenarios set forth below. Mr. Schmertz is not included +in the table due to his resignation of employment, which was effective June 4, 2015. +NAME +CASH +PAYMENT +CONTINUATION +OF MEDICAL / +WELFARE +BENEFITS +(PRESENT +VALUE) +ACCELERATION +AND CONTINUATION +OF EQUITY +AWARD +REDUCTION OF +BENEFITS UPON A +CHANGE-IN-CONTROL (1) +TOTAL +TERMINATION +BENEFITS +($) +($) +($) +($) +($) +TERMINATION DUE TO DEATH +Edward R. Rosenfeld +800,000 (2) +17,477 (3) +— +— +817,477 +Arvind Dharia +582,455 (4) +13,298 (3) +— +— +595,753 +Awadhesh Sinha +661,500 (5) +13,298 (3) +— +674,798 +Karla Frieders +— +— +— +— +— +Amelia Newton Varela +— +— +— +— +— +TERMINATION DUE TO TOTAL DISABILITY +Edward R. Rosenfeld +800,000 (2) +— +— +— +800,000 +Amelia Newton Varela +— +— +— +— +— +Arvind Dharia +582,455 (4) +— +— +— +582,455 +Awadhesh Sinha +661,500 (5) +— +— +— +661,500 +Karla Frieders +— +— +— +— +— +TERMINATION FOR CAUSE; RESIGNATION WITHOUT GOOD REASON +Edward R. Rosenfeld +— +— +— +— +— +Amelia Newton Varela +— +— +— +— +— +Arvind Dharia +— +— +— +— +— +Awadhesh Sinha +— +— +— +— +— +Karla Frieders +— +— +— +— +— +TERMINATION OTHER THAN FOR CAUSE; RESIGNATION FOR GOOD REASON +Edward R. Rosenfeld +2,550,000 (6) +— +— +— +2,550,000 +Amelia Newton Varela +600,000 (7) +— +— +— +600,000 +Arvind Dharia +1,164,910 (8) +94,289 (9) +— +— +1,259,199 +Awadhesh Sinha +661,500 (10) +— +— +— +661,500 +Karla Frieders +513,333 (11) +— +— +— +513,333 +TERMINATION UPON A CHANGE-IN-CONTROL +Edward R. Rosenfeld +11,403,701 (12) +— +6,289,930 (13) +(4,501,684 ) +13,191,947 (14) +Amelia Newton Varela +4,520,805 (15) +— +1,308,798 (13) +— +5,829,603 +Arvind Dharia +4,618,818 (16) +— +668,769 (13) +— +5,287,587 +Awadhesh Sinha +3,823,857 (17) +— +561,850 (13) +— +4,385,707 +Karla Frieders +513,333 (18) +— +— +— +513,333 +(1) The +employment agreement of Ms. Varela provides that severance payments in connection with +a change-in-control are reduced if the severance payment, when added to any other benefits +triggered by a change-of-control, is determined to constitute an “excess parachute +payment” under Sections 280G and 4999 of the Code, to the maximum amount that +is deductible to the Company under Section 280G of the Code. The employment agreements +of Messrs. Rosenfeld, Dharia and Sinha indicate that the executive’s change-in-control +severance payment will only be reduced to the maximum amount that is deductible to the +Company under Section 280G of the Code if the reduction provides the Named Executive +Officer with the best after-tax result; otherwise, the Named Executive Officer will receive +the full amount of the severance payment and other benefits triggered by the change-in-control +and be liable for the 20% excise tax on the excess parachute payment in addition to all +other applicable taxes and, in such case, the deduction by the Company of the portion +of the severance payment constituting an excess parachute payment will be disallowed. +48 +(2) Consists +of Mr. Rosenfeld’s 2016 base salary of $800,000, which would be paid at regular +intervals. +(3) Consists +of medical benefits. +(4) Consists +of Mr. Dharia’s 2016 base salary of $582,455, which would be paid at regular +intervals. +(5) Consists +of Mr. Sinha’s 2016 base salary of $661,500, which would be paid at regular +intervals. +(6) Consists +of the base salary of $800,000 that would have been paid to Mr. Rosenfeld during +the remainder of the term of his employment until the expiration of his employment agreement +on December 31, 2016. Mr. Rosenfeld would receive these payments at regular +intervals. +(7) Consists +of the base salary of $600,000 that would have been paid to Ms. Varela during the +remainder of the term of her employment until the expiration of her employment agreement +on December 31, 2016. Ms. Varela would receive these payments at regular intervals. +(8) Consists +of Mr. Dharia’s 2015 base salary of $582,455 multiplied by the number of years +(and fraction of years) remaining in the term of his employment agreement, which +expires on December 31, 2017. Mr. Dharia would receive 50% of this payment +immediately and the remaining 50% would be paid to him one year later (i.e., on December 31, +2016). +(9) Consists +of one times the sum of Mr. Dharia’s life insurance payment ($80,991 per year) plus +medical benefits ($13,298 per year). +(10) Consists +of the base salary of $661,500 for 2016 that would have been paid to Mr. Sinha during +the remainder of the term of his employment until the expiration of his employment agreement +on December 31, 2016. Mr. Sinha would receive these payments at regular intervals. +(11) Consists +of the base salary of $440,000 that would have been paid to Ms. Frieders during +the remainder of the term of her employment until the expiration of her employment agreement +on February 29, 2017. Ms. Frieders would receive these payments at regular intervals. +(12) Consists +of three times the average total compensation Mr. Rosenfeld actually received for +the preceding three calendar years, except that in lieu of the actual base salary component +received during such period, there has been substituted the annual base salary to which +Mr. Rosenfeld was entitled as of the date of termination or resignation. Upon a +change-in-control, payments (or portions thereof) to Mr. Rosenfeld determined +to constitute an “excess parachute payment” may be reduced to the maximum +amount that would be tax deductible by the Company pursuant to Sections 280G of +the Code. Upon a hypothetical December 31, 2015 change-in-control, this amount would +have been reduced by $4,501,684 to reflect the maximum amount that would be tax deductible +by the Company pursuant to Section 280G of the Code. See the “Implications +of Tax and Accounting Matters” section of “Compensation Discussion and Analysis” +for a discussion of the applicability of Sections 280G and 4999 of the Code to change-in-control +payments generally. See also the summary of Mr. Rosenfeld’s employment agreement +under “Employment Arrangements.” +(13) The +amount disclosed represents the total value of the restricted stock and stock options +which would have received accelerated vesting upon a hypothetical change in control on +December 31, 2015. +(14) The +total amount does not include the amount deducted pursuant to Section 280G of the +Code. +(15) Consists +of three times the average total compensation Ms. Varela actually received for the +preceding three calendar years. Upon a change-in-control, payments (or portions thereof) to +Ms. Varela determined to constitute an “excess parachute payment” may +be subject to reduction to the maximum amount that would be tax deductible by the Company +pursuant to Sections 280G of the Code. Upon a hypothetical December 31, 2015 +change-in-control, no payments to Ms. Varela would have been subject to reduction. +See the “Implications of Tax and Accounting Matters” section of “Compensation +Discussion and Analysis” for a discussion of the applicability of Sections 280G +and 4999 of the Code to change-in-control payments generally. See also the summary of +Ms. Varela’s employment agreement under “Employment Arrangements.” +(16) Consists +of three times the total compensation Mr. Dharia actually received for the preceding +twelve calendar months, except that in lieu of the actual base salary component received +during such period, there has been substituted the annual base salary to which Mr. Dharia +was entitled as of the date of termination or resignation. Upon a change-in-control, +payments (or portions thereof) to Mr. Dharia determined to constitute an “excess +parachute payment” may be subject to reduction to the maximum amount that would +be tax deductible by the Company pursuant to Sections 280G of the Code. Upon a hypothetical +December 31, 2015 change-in-control, no payments to Mr. Dharia would have been +subject to reduction. See the “Implications of Tax and Accounting Matters” +section of “Compensation Discussion and Analysis” for a discussion of the +applicability of Sections 280G and 4999 of the Code to change-in-control payments +generally. See also the summary of Mr. Dharia’s employment agreement under +“Employment Arrangements.” +(17) Consists +of three times the sum of base compensation and certain benefits Mr. Sinha actually +received for the preceding twelve calendar months, except that in lieu of the actual +base salary component received during such period, there has been substituted the annual +base salary to which Mr. Sinha was entitled as of the date of termination or resignation. +Upon a change-in-control, payments (or portions thereof) to Mr. Sinha determined +to constitute an “excess parachute payment” may be subject to reduction to +the maximum amount that would be tax deductible by the Company pursuant to Sections 280G +of the Code. Upon a hypothetical December 31, 2015 change-in-control, no payments +to Mr. Sinha would have been subject to reduction. See the “Implications of +Tax and Accounting Matters” section of “Compensation Discussion and Analysis” +for a discussion of the applicability of Sections 280G and 4999 of the Code to change-in-control +payments generally. See also the summary of Mr. Sinha’s employment agreement +under “Employment Arrangements.” +(18) Consists +of the base salary of $440,000 that would have been paid to Ms. Frieders during +the remainder of the term of her employment until the expiration of her employment agreement +on February 29, 2017. Ms. Frieders would receive these payments at regular intervals. +COMPENSATION +COMMITTEE REPORT +The +Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with management, and based on the review +and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis +be included in this Proxy Statement. +Submitted by +the Compensation Committee of the Company’s Board of Directors: +Peter Migliorini (Chairman) +Rose +Peabody Lynch +Thomas H. Schwartz +Robert Smith +49 +PROPOSAL +TWO: +RATIFICATION OF THE APPOINTMENT OF EISNERAMPER LLP AS THE COMPANY’S +INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS +FOR THE FISCAL YEAR ENDING DECEMBER 31, 2016 +The +Audit Committee has appointed EisnerAmper LLP as the Company’s independent registered public accounting firm to conduct +the audit of the Company’s books and records for the fiscal year ending December 31, 2016. EisnerAmper LLP has served +as the Company’s independent registered public accountants since 1995. +Before +making its determination on appointment, the Audit Committee carefully considers the qualifications and competence of candidates +for the independent registered public accountants. For EisnerAmper LLP, this has included a review of its performance in prior +years, its independence and processes for maintaining independence, the results of the most recent internal quality control review +or Public Company Accounting Oversight Board inspection, the key members of the audit engagement team, the firm’s approach +to resolving significant accounting and auditing matters including consultation with the firm’s national office, as well +as its reputation for integrity and competence in the fields of accounting and auditing. Although ratification by stockholders +is not required by the Company’s organizational documents or any applicable law, the Audit Committee has determined that +requesting ratification by stockholders of its appointment of EisnerAmper LLP as the Company’s independent registered public +accountants is a matter of good corporate practice. If stockholders do not ratify the selection, the Audit Committee will reconsider +whether or not to retain EisnerAmper LLP, but may still retain the accounting firm. Even if the selection is ratified, the Audit +Committee, in its discretion, may change the appointment at any time during the year if it determines that such a change would +be in the best interest of the Company and its stockholders. +Representatives +of EisnerAmper LLP are expected to be present at the Annual Meeting to respond to appropriate questions and to make a statement +should they so desire. +Required Vote +The +affirmative vote of the holders of a majority of the outstanding shares of Common Stock present or represented by proxy and entitled +to vote at the Annual Meeting is required to ratify the Audit Committee’s selection of EisnerAmper LLP. +Recommendation of the Board +of Directors +The +Board of Directors unanimously recommends a vote “FOR” the ratification of the appointment of EisnerAmper LLP as the +Company’s independent registered public accountants for the fiscal year ending December 31, 2016. Unless marked to +the contrary, proxies received from stockholders will be voted in favor of ratifying the appointment of EisnerAmper LLP as the +Company’s independent registered public accountants for the fiscal year ending December 31, 2016. +50 +Independent Registered Public +Accounting Firm’s Fees and Services +The +aggregate fees billed to the Company by EisnerAmper LLP for professional services rendered for each of the past two years are +set forth below: +Year Ended December 31, +2015 +2014 +Audit Fees (1) +$ 786,000 +$ 797,000 +Audit-Related Fees (2) +46,000 +45,000 +Tax Fees (3) +95,000 +0 +All Other Fees (4) +70,000 +Total +$ 927,000 +$ 912,000 +(1) +Represents the aggregate fees billed for (a) the audit of the Company’s annual financial statements, (b) the +reviews of the financial statements included in the Company’s Quarterly Reports on Form 10-Q, (c) other statutory and +regulatory filings or engagements and (d) the audit of the Company’s internal controls over financial reporting. +(2) +Represents the aggregate fees billed for audit-related fees related to assurance and related services. Includes, among others, +the audit of the Company’s employee benefit plans and other accounting related consultations. +(3) +Represents the aggregate fees billed for tax compliance, tax advice and tax planning services. These professional services +include assistance in the preparation of the Company’s various federal, state and local tax returns, tax consultation and +various amendments. +(4) +Represents the aggregate fees billed with respect to the fiscal year ended December 31, 2014, for services rendered in connection +with the Company’s acquisition of a business. +Audit Committee’s +Pre-Approval Policies and Procedures +Consistent +with SEC policies regarding auditor independence, the Audit Committee has responsibility for appointing, setting compensation +and overseeing the work of the independent registered public accountants. In recognition of this responsibility, the Audit Committee +has established a policy to review and pre-approve all audit and permissible non-audit services provided by the independent registered +public accountants. These services may include audit services, audit-related services, tax services and other services. +Prior +to engagement of the independent auditor for next year’s audit, the Audit Committee will pre-approve all auditing services +and all permitted non-audit services (including the fees and terms thereof), except those excluded from requiring pre-approval +based upon the de minimus exception set forth in Section 10A(i)(1)(B) of the Exchange Act. +The +Audit Committee’s pre-approval policies and procedures are as follows: (a) prior to each fiscal year, the Audit Committee +pre-approves a schedule of estimated fees for proposed non-prohibited audit and non-audit services, and (b) actual amounts +paid are monitored by financial management of the Company and reported to the Audit Committee. +All +work performed by EisnerAmper LLP as described above under the captions Audit Fees, Audit-Related Fees, Tax Fees and All Other +Fees has been approved or pre-approved by the Audit Committee pursuant to the provisions of the Audit Committee’s charter. +The Audit Committee has considered and concluded that the provision of non-audit services is compatible with maintaining the independence +of EisnerAmper LLP. +51 +AUDIT +COMMITTEE REPORT +The +Audit Committee reviewed the Company’s audited financial statements for the 2015 Fiscal Year and met with both management +and representatives of EisnerAmper LLP, the Company’s independent registered public accountants, to discuss such audited +financial statements. Management and the Company’s independent registered public accountants have represented to the Audit +Committee that the financial statements were prepared in accordance with accounting principles generally accepted in the United +States of America. The Audit Committee has received from and discussed with EisnerAmper LLP the written disclosures and the letter +regarding EisnerAmper LLP’s communications with the Audit Committee concerning independence as required by applicable requirements +of the Public Company Accounting Oversight Board, and discussed with EisnerAmper LLP the independence of EisnerAmper LLP. The +Audit Committee also discussed with EisnerAmper LLP any matters required to be discussed by Statement on Auditing Standards No. +61, as amended, as adopted by the Public Company Accounting Oversight Board in Rule 3200T. Based on these reviews and discussions, +the Audit Committee recommended to the Board that the Company’s audited financial statements be included in the Company’s +Annual Report on Form 10-K for the 2015 Fiscal Year. +Submitted by +the Audit Committee of the Company’s Board of Directors: +Richard P. Randall (Chairman) +Rose +Peabody Lynch +Peter Migliorini +Ravi +Sachdev +52 +PROPOSAL +THREE: +NON-BINDING ADVISORY VOTE ON EXECUTIVE COMPENSATION +Section 14A +of the Exchange Act, as created by Section 951 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank +Act”), and the rules and regulations promulgated thereunder, require a publicly traded company to include a resolution in +its proxy statement at least once every three years seeking stockholder approval, on an advisory or non-binding basis, of the +compensation of the named executive officers as disclosed in such company’s proxy statement pursuant to the compensation +rules of the SEC. At our 2011 Annual Meeting of Stockholders, the Company’s stockholders approved, on an advisory basis, +the holding of an advisory vote to approve executive compensation (commonly known as a “say-on-pay” proposal) on +an annual basis. Based on these results, the Board of Directors determined to hold its advisory vote to approve executive compensation +annually until the next frequency vote, which is scheduled for the Company’s 2017 Annual Meeting of Stockholders. Accordingly, +we are providing stockholders with a non-binding advisory vote on the compensation of our Named Executive Officers. +As +described in more detail in the Compensation Discussion and Analysis section, which begins on page 24 of this Proxy Statement, +the overall objective of the Company’s executive compensation programs and practices is to support delivery of sustained +operating and financial performance results with the ultimate goal being to create and maximize value for our stockholders on +a long-term basis. We believe that our executive compensation programs and practices serve the interests of our stockholders by +enabling us to attract and retain an experienced and effective management team whose combined knowledge of our business and the +footwear and accessories industries has proved extremely valuable in delivering results for our stockholders. The Compensation +Committee and the Board of Directors believe that the Company’s compensation programs and practices as articulated in the +Compensation Discussion and Analysis section of this Proxy Statement effectively implement our philosophy of aligning compensation +to stockholder interests and that the compensation received by our Named Executive Officers in the 2015 Fiscal Year reflects and +supports such philosophy and goal and is commensurate with the performance and strategic position of the Company. We will continue +to review and modify our executive compensation programs to address evolving best practices and changing regulatory requirements. +We +encourage stockholders to read the Compensation Discussion and Analysis section of this Proxy Statement, as well as the Summary +Compensation Table and other related compensation tables and narrative disclosure contained in this Proxy Statement, all of which +describe and explain in detail the compensation of our Named Executive Officers in the 2015 Fiscal Year. +The following +resolution is submitted for stockholder approval: +“ RESOLVED , +that the stockholders of Steven Madden, Ltd. (the ‘Company’) approve, on a non-binding advisory basis, the compensation +paid to the Named Executive Officers of the Company as disclosed pursuant to the compensation disclosure rules of the Securities +and Exchange Commission, including the executive compensation as described in the section captioned ‘Compensation Discussion +and Analysis,’ the Summary Compensation Table and related tabular disclosure and narrative discussion regarding compensation +of Named Executive Officers under the caption ‘Executive Compensation’ contained in the Company’s Proxy Statement +dated April 8, 2016.” +This +vote is not intended to address any specific item of compensation, but rather the overall compensation of our Named Executive +Officers and the compensation programs and practices described in this Proxy Statement. While this advisory vote on executive +compensation, commonly referred to as a “say-on-pay” advisory vote, is required by Section 14A of the Exchange +Act, it is not binding on our Board of Directors and may not be construed as overruling any decision by the Board of Directors +or the Compensation Committee. However, we value the opinions of our stockholders. To the extent there is a significant +vote against the compensation of the Named Executive Officers as disclosed in this Proxy Statement, the Board of Directors and +the Compensation Committee will consider the outcome of the vote when considering future compensation arrangements and evaluate +whether any actions are necessary to address the stockholders’ concerns. +53 +Required Vote +Approval +of this resolution requires the affirmative vote of a majority of the shares of Common Stock present or represented by proxy and +entitled to vote at the Annual Meeting. +Recommendation of the Board +of Directors +The +Board of Directors unanimously recommends a vote “FOR” the resolution approving the overall compensation of the Named +Executive Officers for the 2015 Fiscal Year. +OTHER +MATTERS +At +the date of this Proxy Statement, the Company has no knowledge of any business other than that described above that will be presented +at the Annual Meeting. If any other business should properly come before the Annual Meeting in connection therewith, it is intended +that the persons named in the accompanying proxy will have discretionary authority to vote the shares which they represent. +A +copy of the applicable provisions of the Company’s By-Laws may be obtained by any stockholder, without charge, upon written +request to the Secretary of the Company at the address set forth above. +WHETHER +OR NOT YOU EXPECT TO BE PRESENT AT THE ANNUAL MEETING, PLEASE MARK, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY CARD PROMPTLY. +ALTERNATIVELY, YOU MAY VOTE YOUR SHARES BY TELEPHONE OR THROUGH THE INTERNET AS DESCRIBED ON THE ACCOMPANYING PROXY CARD. +YOUR VOTE IS IMPORTANT. IF YOU ARE A STOCKHOLDER OF RECORD AND ATTEND THE ANNUAL MEETING AND WISH TO VOTE IN PERSON, YOU MAY WITHDRAW +YOUR PROXY AT ANY TIME PRIOR TO THE VOTE. +STEVEN +MADDEN, LTD. +April 8, 2016 +By: +Arvind +Dharia +Secretary +54 +STEVEN MADDEN, LTD. +ATTN: ARVIND DHARIA +52-16 BARNETT AVENUE +LONG ISLAND CITY, NY 11104 +VOTE BY +INTERNET - www.proxyvote.com +Use the Internet to +transmit your voting instructions and for electronic delivery of information +up until 11:59 P.M. Eastern Time the day before the meeting date. Have your +proxy card in hand when you access the web site and follow the instructions +to obtain your records and to create an electronic voting instruction form. +ELECTRONIC +DELIVERY OF FUTURE PROXY MATERIALS +If you would like to +reduce the costs incurred by our company in mailing proxy materials, you can +consent to receiving all future proxy statements, proxy cards and annual +reports electronically via e-mail or the Internet. To sign up for electronic +delivery, please follow the instructions above to vote using the Internet +and, when prompted, indicate that you agree to receive or access proxy +materials electronically in future years. +VOTE BY +PHONE - 1-800-690-6903 +Use any touch-tone +telephone to transmit your voting instructions up until 11:59 P.M. Eastern +Time the day before the meeting date. Have your proxy card in hand when you +call and then follow the instructions. +VOTE BY +MAIL +Mark, sign and date +your proxy card and return it in the postage-paid envelope we have provided +or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, +NY 11717. +TO +VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: +KEEP +THIS PORTION FOR YOUR RECORDS +DETACH +AND RETURN THIS PORTION ONLY +THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. +For +All +Withhold +All +For All +Except +To withhold authority to +vote for any individual nominee(s), mark “For All Except” and write the +number(s) of the nominee(s) on the line below. +The Board +of Directors recommends you vote +FOR the +following: +o +o +o +1. +Election of Directors +Nominees +01 +06 +Edward R. Rosenfeld 02 Rose Peabody Lynch 03 Peter +Migliorini 04 Richard +P. Randall 05 Ravi +Sachdev +Thomas H. Schwartz +07 Robert Smith +08 Amelia Newton Varela +The Board +of Directors recommends you vote FOR proposals 2 and 3. +For +Against +Abstain +2. +TO RATIFY THE APPOINTMENT OF EISNERAMPER LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC +ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2016. +o +o +o +3. +TO APPROVE, BY NON-BINDING ADVISORY VOTE, THE EXECUTIVE COMPENSATION DESCRIBED IN THE STEVEN +MADDEN, LTD PROXY STATEMENT. +o +o +o +NOTE: In their +discretion, the proxies are authorized to vote upon such other business as +may properly be presented at the meeting or any adjournments or postponements +thereof. +Yes +No +Please indicate if you plan +to attend this meeting +o +o +Please sign exactly as your +name(s) appear(s) hereon. When signing as attorney, executor, administrator, +or other fiduciary, please give full title as such. Joint owners should each +sign personally. All holders must sign. If a corporation or partnership, +please sign in full corporate or partnership name, by authorized officer. +Signature [PLEASE SIGN +WITHIN BOX] +Date +Signature (Joint Owners) +Date +0000285339_1 R1.0.1.25 +Important +Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice & Proxy Statement, Annual +Report with 10-K is/are available at www.proxyvote.com . +STEVEN MADDEN, LTD. +THIS PROXY IS BEING SOLICITED ON BEHALF OF +THE BOARD OF DIRECTORS +PLEASE CLEARLY INDICATE A RESPONSE BY CHECKING ONE OF THE +BOXES NEXT TO EACH OF THE PROPOSALS +The undersigned +stockholder(s) of Steven Madden, Ltd. (the “Company”) hereby appoint(s) +Edward R. Rosenfeld and Arvind Dharia, and each of them, as attorneys and +proxies, each with power of substitution and revocation, to represent the +undersigned at the Annual Meeting of Stockholders of the Company to be held +at the Company’s showroom located at 1370 Avenue of the Americas, 14th Floor, +New York, New York at 10:00 a.m., local time, on May 27, 2016 and at any +adjournments or postponements thereof, with authority to vote all shares of +Common Stock of the Company held or owned by the undersigned on April 1, +2016, in accordance with the directions indicated herein. +THIS PROXY WILL BE VOTED AS SPECIFIED HEREIN; UNLESS OTHERWISE INDICATED, THIS PROXY WILL +BE VOTED (1) FOR THE ELECTION OF THE EIGHT(8) NOMINEES NAMED IN ITEM 1, (2) FOR THE RATIFICATION OF THE APPOINTMENT +OF EISNERAMPER LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR 2016 AND (3) FOR +THE APPROVAL OF THE EXECUTIVE COMPENSATION DESCRIBED IN THE COMPANY’S PROXY STATEMENT. THIS PROXY WILL BE VOTED IN THE DISCRETION +OF THE PROXIES ON ANY OTHER MATTER THAT MAY PROPERLY COME BEFORE THE MEETING. +Continued and to be signed on reverse side +0000285339_2 R1.0.1.25 \ No newline at end of file diff --git a/raw/proxies/0000913241/0001019056-16-001244/proxy_rpt.txt b/raw/proxies/0000913241/0001019056-16-001244/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..6473b11206e11f5cd5b9b880639244076145d92b --- /dev/null +++ b/raw/proxies/0000913241/0001019056-16-001244/proxy_rpt.txt @@ -0,0 +1,143 @@ +and Related Party Transactions +JLM +Consultants, Inc. Commencing in 2004, the Company engaged JLM Consultants, Inc., a company wholly-owned by John L. Madden, +who, until his passing in October 2015, had served as a director of the Company for more than 20 years, to provide consulting +services to the Company with respect to the development of international sales of the Company. Mr. Madden was the brother of Steven +Madden, the Company’s founder and Creative and Design Chief. The services were provided under a consulting agreement (the +“JLM Consulting Agreement”) dated February 23, 2012 between the Company and JLM Consultants, Inc. In accordance +with the terms of the JLM Consulting Agreement, for the 2015 Fiscal Year, JLM Consultants, Inc. received the following compensation +from the Company for services rendered: (a) a commission equal to 1% of net sales, excluding retail royalty income; (b) a +commission equal to 10% of retail royalty income; (c) 1% of any commission income to the International division that is not +recognized in net sales; (d) a monthly draw in the amount of $25,000, which amount is offset against commissions earned; +(e) a $1,000 per month travel allowance; and (f) monthly reimbursements, in the aggregate amount of $17,168 in the 2015 +Fiscal Year, for health insurance premiums for John L. Madden. Pursuant to this arrangement, JLM Consultants, Inc. received a +total of $1,372,721 from the Company in the 2015 Fiscal Year. +17 +Pursuant +to the JLM Consulting Agreement, on January 2, 2013, the Company issued 72,012 restricted shares of the Company’s Common +Stock (the number of shares indicated having been adjusted for an October 1, 2013 three-for-two stock split effected as a +stock dividend) to JLM Consultants, Inc. under the Steven Madden, Ltd. 2006 Stock Incentive Plan, as amended (the “2006 +Plan”). The shares vested in twelve substantially equal quarterly installments over a three-year period commencing on April 1, +2013 and ending on January 1, 2016. +Steven +Madden Employment Agreement. Effective as of July 1, 2005, the Company amended and restated its employment agreement with +the Company’s founder and Creative and Design Chief, Steven Madden, pursuant to which Mr. Madden agreed to continue +to serve as the Company’s Creative and Design Chief. The term of Mr. Madden’s employment under his employment +agreement commenced on July 1, 2005 and, in accordance with the amendment of the agreement effective December 31, 2011, will +end on December 31, 2023. Prior to this recent amendment, the agreement had provided for an annual salary of $600,000, with +a 7% increase of base salary on a compound basis in each of the third, fifth, seventh and ninth years of the agreement. The agreement +had also provided for an annual cash bonus in an amount equal to at least 2% of the Company’s EBITDA (the “Annual +Bonus”) and an annual cash bonus in relation to “new business” (as defined in the agreement) in an +amount equal to at least (i) 2.5% of new business gross direct revenues plus (ii) 10% of all license or other fee income +above $2,000,000 (the “New Business Bonus”). The agreement, as amended, increases Mr. Madden’s annual base +salary but eliminates the Annual Bonus and the New Business Bonus and provides that all cash bonuses subsequent to the fiscal +year ended December 31, 2011 will be at the sole discretion of the Company’s Board of Directors. Under the agreement, +as amended, Mr. Madden’s annual base salary was fixed at $5,416,667 in 2012, $7,416,667 in 2013, $9,666,667 in 2014, +$11,916,667 in 2015 and $10,697,917 in 2016 and in each year thereafter through the end of the term of employment. In addition, +the amended agreement entitles Mr. Madden to an annual life insurance premium reimbursement of up to $200,000. The amendment +also eliminates an annual non-accountable expense allowance of $200,000 that had been previously provided to Mr. Madden under +the agreement. Pursuant to the amended agreement, on February 8, 2012, Mr. Madden was granted 1,463,056 restricted shares +of Common Stock (the number of shares indicated having been adjusted for an October 1, 2013 three-for-two stock split effected +as a stock dividend), valued at approximately $40 million, under the 2006 Plan. The restricted Common Stock will vest in +equal annual installments over seven years commencing on December 31, 2017 through December 31, 2023, subject to Mr. Madden’s +continued employment with the Company on each such vesting date. +On +June 30, 2012, pursuant to an election right granted to him under the agreement, as amended, Mr. Madden notified the Company +of his election to receive an additional restricted stock award valued at $40 million in consideration of a reduction in +his annual base salary in years subsequent to 2012. Accordingly, on July 3, 2012, Mr. Madden was issued 1,893,342 restricted +shares of Common Stock (the number of shares indicated having been adjusted for an October 1, 2013 three-for-two stock split +effected as a stock dividend) under the 2006 Plan. The restricted Common Stock will vest in equal annual installments over +six years commencing on December 31, 2018 through December 31, 2023, subject to Mr. Madden’s continued +employment with the Company on each such vesting date. As a result of his election to receive an additional restricted stock award, +Mr. Madden’s annual base salary for years subsequent to 2012 has been reduced as follows: $4,000,000 in 2013, $6,125,000 +in 2014, $8,250,000 in 2015 and $7,026,042 in 2016 and in each year thereafter through the end of the term of employment. +Mr. Madden +is also eligible to receive annually, on or about the date of the Company’s annual meeting of stockholders (but not later +than June 30 th ), an option grant (the “Annual Option”) to purchase a number of shares of Common Stock, +with such number to be equal to the greater of (a) 100% of the largest aggregate number of shares of Common Stock available +upon the exercise of an option or options granted to any other continuing full-time employee of the Company during the preceding +twelve-month period and (b) 100,000 shares of Common Stock; provided, however, that a grant to Mr. Madden in excess +of 150% of the number of shares of Common Stock subject to options granted to such other continuing full-time employee would require +stockholder approval. Any Annual Option granted to Mr. Madden would vest quarterly over a one-year period following the grant +date and would be exercisable at a price equal to the closing price of the Company’s Common Stock on the grant date for +a period of five years following the grant date. In addition to the Annual Option, the agreement, as amended, provides for a potential +additional one-time stock option grant to purchase 750,000 shares of the Company’s Common Stock (the number of shares subject +to this potential stock option award having been adjusted for an October 1, 2013 three-for-two stock split effected as a +stock dividend) in the event that the Company achieves earnings per share, on a fully-diluted basis, equal to $3.00 in any +fiscal year ending December 31, 2015 or after. If granted, the option would vest in equal annual installments of 20% over +a five-year period and be exercisable for a period of seven years at a price equal to the closing price of the Company’s +Common Stock on the date immediately preceding the grant date. +18 +In +the event of Mr. Madden’s death, his employment agreement provides for the payment to Mr. Madden’s estate +of his base salary for the 12-month period immediately subsequent to the date of his death. Further, in the event that Mr. Madden’s +employment agreement is terminated due to Mr. Madden’s total disability (as defined in the agreement), “for cause” +(as defined in the agreement) or due to Mr. Madden’s resignation, the Company is obligated to pay Mr. Madden +the amount of compensation that is accrued and unpaid through the date of termination. In the event Mr. Madden’s employment +agreement is terminated for any reason (other than “for cause” or due to his death, total disability or resignation), +the Company is obligated to pay Mr. Madden, in installments, the balance of his base salary that would have been paid by +the Company under the agreement for the full term of the agreement. If, during the period commencing 120 days prior to a +“change of control” (as defined in the employment agreement) transaction and ending on the first anniversary +of a change of control transaction, Mr. Madden’s employment is terminated by the Company other than for cause or by +the resignation of Mr. Madden for “good reason” (as defined in the employment agreement), or if Mr. Madden +resigns for good reason or without good reason within 30 days following a change of control transaction, all unvested options +to purchase shares of Common Stock held by Mr. Madden will vest on the date of termination or resignation and Mr. Madden +will be entitled to receive a lump sum cash payment equal to the amount of compensation that is accrued and unpaid through the +date of termination plus $35 million. Mr. Madden’s employment agreement contains other customary provisions, including +provisions regarding expense reimbursement, confidentiality, solicitation and competition. +For +the 2015 Fiscal Year, Mr. Madden earned $8,250,000 in base salary and received $200,000 for the payment of an annual life +insurance premium. Mr. Madden opted to waive his right to the Annual Option for the 2015 Fiscal Year. +Loan +to Steven Madden. On June 25, 2007, the Company made a loan to Steven Madden, its Creative and Design Chief and a principal +stockholder of the Company, in the amount of $3,000,000, in order for Mr. Madden to satisfy a personal tax obligation resulting +from the exercise of a stock option which was due to expire and hold the underlying shares of Common Stock. The loan is evidenced +by a secured promissory note executed by Mr. Madden in favor of the Company, the security for which is a security interest in +a certain securities brokerage account maintained by Mr. Madden with his broker; none of the securities in the securities brokerage +account are shares of the Company’s Common Stock. There have been successive amendments to the secured promissory note, +the most recent of which occurred in April 2016, at which time the secured promissory note was amended to substitute the collateral +securing the secured promissory note from shares of the Company’s Common Stock to the security interest in Mr. Madden’s +securities brokerage account. Previously, on January 3, 2012, the secured promissory note was amended and restated to extend the +maturity date of the obligation to December 31, 2023 and eliminate the accrual of interest after December 31, 2011. +Prior to the January 3, 2012 amendment, the secured promissory note had been accruing interest at the rate of 6% per annum. In +addition, the secured promissory note provides that, commencing on December 31, 2014 and annually on each December 31 +thereafter through the maturity date, one-tenth of the principal amount thereof, together with accrued interest, will be cancelled +by the Company provided that Mr. Madden continues to be employed by the Company on each such December 31. Contemporaneously, +the Company will release its security interest in a portion of the securities held in Mr. Madden’s securities brokerage +account generally correlating to the amount of indebtedness cancelled on such date. As of December 31, 2011, interest in +the amount of $1,090,000 had accrued on the principal amount of the secured promissory note and, as noted above, interest was +eliminated after December 31, 2011. On December 31, 2015, the required one-tenth of the principal amount of the secured +promissory note, together with accrued interest, was written-off by the Company. +Steven +Madden is the brother of John L. Madden, who served as a director of the Company until his passing in October 2015. +19 +Review, Approval or Ratification +of Transactions with Related Persons +The +Company’s written Conduct Code and Employee Handbook prohibit all conflicts of interest. Under the Conduct Code, conflicts +of interest occur when private or family interests interfere in any way, or even appear to interfere, with the interests of the +Company. The Company’s prohibition on conflicts of interest under the Conduct Code includes any related person transaction. +Related +person transactions must be approved by the Board, or by a committee of the Board consisting solely of independent directors, +who will approve the transaction only if they determine that it is in the best interests of the Company. In considering the transaction, +the Board or committee will consider all relevant factors, including, as applicable, (i) the Company’s business rationale +for entering into the transaction; (ii) the alternatives to entering into a related person transaction; (iii) whether +the transaction is on terms comparable to those available to third parties or, in the case of employment relationships, to employees +generally; (iv) the potential for the transaction to lead to an actual or apparent conflict of interest and any safeguards +imposed to prevent such actual or apparent conflicts; and (v) the overall fairness of the transaction to the Company. +The +Company has multiple processes for reporting conflicts of interests, including related person transactions. Under the Conduct +Code, all employees are required to report any actual or apparent conflict of interest, or potential conflict of interest, to +management. The Chief Financial Officer distributes a questionnaire to the Company’s executive officers and management personnel +on a quarterly basis and distributes a questionnaire to the members of the Board of Directors on an annual basis requesting certain +information regarding, among other things, their immediate family members, employment and beneficial ownership interests, which +information is then reviewed for any conflicts of interest under the Conduct Code. +The +Board of Directors, the Audit Committee and the Disclosure Committee, which is comprised of management personnel, discuss the +related party transactions, specifically, and in connection with the regular review processes attendant to the Company’s +periodic filings, including related party transaction disclosures. +If +a director is a party to or in some manner involved in a transaction involving the Company, he or she will be recused from all +discussions and decisions about the transaction. The transaction must be approved in advance whenever practicable, and if not +practicable, must be ratified as promptly as practicable. +COMPENSATION \ No newline at end of file diff --git a/raw/proxies/0000913241/0001019056-17-000354/proxy.txt b/raw/proxies/0000913241/0001019056-17-000354/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..d1096b4733130252b230d6f015dcafd5ffad7e4f --- /dev/null +++ b/raw/proxies/0000913241/0001019056-17-000354/proxy.txt @@ -0,0 +1,3831 @@ +DEF 14A +1 +smadden_def14a.htm +DEF 14A +UNITED +STATES +SECURITIES +AND EXCHANGE COMMISSION +Washington, +D.C. 20549 +SCHEDULE +14A +(Rule 14a-101) +INFORMATION +REQUIRED IN PROXY STATEMENT +SCHEDULE 14A INFORMATION +Proxy Statement Pursuant to Section 14(a) +of the +Securities +Exchange Act of 1934 (Amendment No. __) +Filed by the Registrant þ +Filed by a Party other than +the Registrant o +Check the appropriate box: +o Preliminary +Proxy Statement +o Confidential, +for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +þ Definitive +Proxy Statement +o Definitive +Additional Materials +o Soliciting +Material Pursuant to §240.14a-12 +Steven +Madden, Ltd. +(Name +of Registrant as Specified in Its Charter) +(Name +of Person(s) Filing Proxy Statement, if Other Than the Registrant) +Payment of Filing Fee (Check +the appropriate box): +þ No +fee required. +o Fee +computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. +(1) +Title +of each class of securities to which transaction applies: +(2) +Aggregate +number of securities to which transaction applies: +(3) +Per +unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which +the filing fee is calculated and state how it was determined): +(4) +Proposed +maximum aggregate value of transaction: +(5) +Total +fee paid: +o Fee +paid previously with preliminary materials. +o Check +box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting +fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of +its filing. +(1) +Amount +Previously Paid: +(2) +Form, +Schedule or Registration Statement No.: +(3) +Filing +Party: +(4) +Date +Filed: +Dear Shareholders, +2016 was a good year for Steve +Madden in a challenging environment. As changes in consumer shopping behavior and the evolving retail landscape continued to +cause disruption in our industry, we maintained an unwavering focus on building our brands and delivering great products, +enabling us to deliver solid financial results despite the difficult retail climate. For the year, net sales were $1.4 +billion, approximately flat to the prior year, and diluted EPS was $2.03, a 10% increase compared to 2015. We also continued +to manage the business with a long-term perspective, making progress on a number of key strategic initiatives that position +us for earnings growth and value creation going forward. +Expanding Our Core Business +The highlight of 2016 was the +outstanding performance in our core Steve Madden Women’s wholesale footwear business, which is our most profitable +business and the foundation of our company. Steve and his design team created an exceptional product assortment with strength +across a range of categories. The trend-right merchandise enabled us to increase net sales in our Steve Madden Women’s +wholesale footwear division by 13% compared to the prior year despite the soft overall performance and de-stocking +initiatives of many of our largest wholesale customers. Strong sell-through at retail and disciplined inventory management +also resulted in significant gross margin expansion in this business. +Growing Our Retail Segment +The on-trend product line +also drove strong performance in our retail segment, where we delivered a 4% comparable store sales increase on top of an 11% +increase in the prior year. In addition, we expanded the store base from 169 stores at the end of 2015 to 189 stores at the end +of 2016, driven primarily by new outlet locations as well as openings in international markets. +Building Our Newer Brands +Another highlight in 2016 +was the outstanding progress we made with the newer additions to our brand portfolio. Dolce Vita net sales increased 29%, crossing +the $100 million mark, and operating margin expanded significantly. Blondo also saw strong growth, as customers responded favorably +to our introduction of more fashionable styling combined with the brand’s signature waterproof technology. +Expanding Our Digital +Presence +As consumers continue to migrate +to online purchasing, expanding our digital presence in both the wholesale and retail channels is a key priority for the Company. +Over the last several years, we have invested in people, systems and infrastructure to support our digital commerce initiatives, +and those investments are paying dividends. We recorded double-digit percentage sales increases in both our wholesale and retail +e-commerce businesses in 2016. +Developing Our International +Business +One of our most significant +long-term opportunities is growing our international business, and we took important steps in 2016 to position the Company for +future international expansion. We formed SM Europe, a joint venture with SPM Shoetrade, to manage the Steve Madden footwear and +handbag business in much of Europe. Previously, we operated in this territory through distributors, and by transitioning the business +to the joint venture model, we are able to better control the merchandising and overall brand positioning in the market. The new +joint venture is off to a strong start, and building our business in Europe will be a major area of focus for us going forward. +At the tail end of the year, we also wound down our relationship with our distributor in Asia in preparation for transitioning +to a new business model in that region in 2017. +Returning Capital to +Shareholders +During 2016, we continued +to demonstrate our commitment to returning capital to shareholders. We repurchased more than 2.4 million shares, or approximately +4% of the Company, for a total of $86 million. Since 2013, we have repurchased more than $460 million of our common stock. +2017 and Beyond +In early 2017, we took another +step to enhance the long-term growth potential of the Company when we acquired Schwartz & Benjamin, a company that specializes +in the design, sourcing and sale of licensed and private label footwear and is known for its outstanding capability in the designer +and accessible luxury space. Schwartz & Benjamin had 2016 net sales of $88 million, and its current brand partners include +Kate Spade, Rebecca Minkoff, Alice + Olivia and Avec Les Filles. We see significant opportunity to expand the business and enhance +its profitability by combining Schwartz & Benjamin’s strengths – which include premier execution in the design +and sourcing of high-quality footwear as well as a strong portfolio of brand partners – with our proven business model and +infrastructure. As we look ahead, we are confident that, by building on the strong momentum in our core business and continuing +to focus on the key strategic initiatives outlined above, we can drive sales and earnings growth despite the challenging retail +environment. We believe our strong brands and proven business model position us well relative to the competition. As always, we +will remain focused on creating value for shareholders over the long term. +We want to thank our exceptional +team of associates around the world. Our success is directly attributable to their talent and dedication. We also want to thank +you, our shareholders, for your continued support. +Sincerely, +Edward R. Rosenfeld +Chief Executive Officer +Awadhesh Sinha +Chief Operating Officer +Arvind Dharia +Chief Financial Officer +NOTICE OF +ANNUAL MEETING OF STOCKHOLDERS +TO BE HELD +ON MAY 26, 2017 +TO THE STOCKHOLDERS: +The Annual Meeting +of Stockholders (the “Annual Meeting”) of Steven Madden, Ltd. (the “Company”) will be held on +Friday, May 26, 2017, at the Company’s showroom located at 1370 Avenue of the Americas, 14th Floor, New York, New York +at 10:00 a.m., local time, for the purposes stated below: +1. +to elect +eight (8) directors to the Board of Directors of the Company; +2. +to ratify +the appointment of EisnerAmper LLP as the Company’s independent registered public accounting firm for the fiscal year +ending December 31, 2017; +3. +to approve, +on a non-binding advisory basis, the compensation of certain executive officers as disclosed in the accompanying proxy statement; +4. +to recommend, +on a non-binding advisory basis, the frequency of holding an advisory vote on executive compensation; and +5. +to transact such other business +as may properly come before the Annual Meeting or any adjournments thereof. +Only those +stockholders of record at the close of business on March 31, 2017, the record date for the Annual Meeting, are entitled to notice +of and to vote at the Annual Meeting and any adjournments thereof. Stockholders of record at the close of business on March 31, +2017, the record date for the Annual Meeting, will be admitted to the Annual Meeting upon presentation of valid, government-issued +photo identification, such as a driver’s license. Stockholders who own shares of the Company’s common stock beneficially +through a bank, broker or other nominee will be admitted to the Annual Meeting upon presentation of valid, government-issued photo +identification and proof of ownership or a valid proxy signed by the record holder. A recent brokerage statement or a letter from +a bank or broker are examples of proof of ownership. If you own shares of the Company’s common stock beneficially and want +to vote in person at the Annual Meeting, you should contact your broker or applicable agent in whose name the shares are registered +to obtain a broker’s proxy and bring it to the Annual Meeting in order to vote. +IMPORTANT NOTICE REGARDING THE +AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 26, 2017: THE NOTICE OF ANNUAL MEETING +AND PROXY STATEMENT, ANNUAL REPORT, ELECTRONIC PROXY CARD AND ANY OTHER MATERIALS CONCERNING THE ANNUAL MEETING, TOGETHER WITH +ANY AMENDMENTS TO ANY OF THESE MATERIALS, ARE AVAILABLE ON THE INTERNET AT WWW.PROXYVOTE.COM . +BY ORDER OF THE +BOARD OF DIRECTORS +April 5, 2017 +Long Island City, +New York +Arvind Dharia +Secretary +WHETHER OR NOT YOU EXPECT +TO BE PRESENT AT THE ANNUAL MEETING, PLEASE MARK, DATE AND SIGN THE ACCOMPANYING FORM OF PROXY AND MAIL IT PROMPTLY IN THE ENVELOPE +PROVIDED TO: VOTE PROCESSING, C/O BROADRIDGE, 51 MERCEDES WAY, EDGEWOOD, NEW YORK 11717. ALTERNATIVELY, YOU MAY VOTE YOUR +SHARES BY TELEPHONE OR THROUGH THE INTERNET AS DESCRIBED ON THE ACCOMPANYING PROXY CARD. +TABLE +OF CONTENTS +GENERAL INFORMATION +1 +Notice of Internet Availability of Proxy Materials +2 +QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING +2 +PROPOSAL ONE: ELECTION OF DIRECTORS +6 +Stockholder Nominations for Board Membership +6 +Nominees for Election to the Board of Directors +7 +CORPORATE GOVERNANCE +11 +The Board of Directors +11 +Director Independence +11 +Director Attendance at Meetings +11 +Director Election (Majority Voting) Policy +11 +Committees of the Board +12 +Board Leadership Structure, Risk Oversight, Executive Sessions of Non-Employee Directors, and Communications Between Stockholders and the Board +15 +Codes of Business Conduct and Ethics +16 +Corporate Governance Guidelines +16 +Stock Ownership Guidelines +17 +Prohibition on Hedging and Pledging of Our Common Stock +17 +Corporate Social Responsibility Policy +17 +Certain Relationships and Related Party Transactions +17 +Review, Approval or Ratification of Transactions with Related Persons +19 +COMPENSATION OF DIRECTORS IN THE 2016 FISCAL YEAR +20 +STOCK OWNERSHIP +21 +Security Ownership of Certain Beneficial Owners +21 +Security Ownership of Directors and Executive Officers +22 +Section 16(a) Beneficial Ownership Reporting Compliance +23 +EXECUTIVE COMPENSATION +23 +Compensation Discussion and Analysis +23 +Compensation Committee Interlocks and Insider Participation +32 +Executive Officers +33 +SUMMARY COMPENSATION TABLE +34 +Employment Arrangements +35 +GRANTS OF PLAN-BASED AWARDS IN THE 2016 FISCAL YEAR +40 +OUTSTANDING EQUITY AWARDS AT END OF THE 2016 FISCAL YEAR +42 +OPTION EXERCISES AND STOCK VESTED IN THE 2016 FISCAL YEAR +44 +SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS +44 +EQUITY COMPENSATION PLAN INFORMATION +45 +POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE-IN-CONTROL +46 +COMPENSATION COMMITTEE REPORT +47 +PROPOSAL TWO: RATIFICATION OF THE APPOINTMENT OF EISNERAMPER LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR ENDING DECEMBER 31, 2017 +48 +AUDIT COMMITTEE REPORT +50 +PROPOSAL THREE: NON-BINDING ADVISORY VOTE ON EXECUTIVE COMPENSATION +51 +PROPOSAL FOUR: NON-BINDING ADVISORY VOTE ON FREQUENCY OF ADVISORY VOTE ON EXECUTIVE COMPENSATION +53 +i +STEVEN MADDEN, +LTD. +52-16 Barnett +Avenue +Long +Island City, New York 11104 +PROXY +STATEMENT +GENERAL +INFORMATION +The +Board of Directors of Steven Madden, Ltd. requests your proxy in connection with the Annual Meeting of Stockholders (the “Annual +Meeting”) of Steven Madden, Ltd. (the “Company”, “we” or “us”). The Annual Meeting +will be held at the Company’s showroom located at 1370 Avenue of the Americas, 14th Floor, New York, New York on Friday, +May 26, 2017 at 10:00 a.m., local time. Proxies also may be voted at any adjournments or postponements of the Annual Meeting. +On +or about April 7, 2017, a notice containing instructions on how to access this Proxy Statement, the accompanying proxy card and +related materials online is being mailed to holders of record of common stock, $0.0001 par value, of the Company (the “Common +Stock”) at the close of business on March 31, 2017 (the “Record Date”). The Company’s Annual Report +for the fiscal year ended December 31, 2016 (the “2016 Fiscal Year”), including audited financial statements, +is included in the materials that are accessible online. This Proxy Statement contains information about the Annual Meeting as +well as information regarding the voting process, director elections, our corporate governance programs and executive and director +compensation, among other things. We recommend that you read all of these materials. +The Annual +Meeting has been called to consider and take action on the following proposals: +· to +elect eight (8) directors to the Board of Directors of the Company to serve until +the next annual meeting of the Company’s stockholders; +· to +ratify the appointment of EisnerAmper LLP as the Company’s independent registered +public accounting firm for the fiscal year ending December 31, 2017; +· to +approve, on a non-binding advisory basis, the compensation of certain executive officers +as disclosed in this Proxy Statement; +· to +recommend, on a non-binding advisory basis, the frequency of holding an advisory vote +on executive compensation; and +· to +transact such other business as may properly come before the Annual Meeting and any adjournments +thereof. +The +Board of Directors knows of no other matters to be presented for action at the Annual Meeting. However, if any other matters properly +come before the Annual Meeting, the persons named in the proxy will vote on such other matters and/or for other nominees for director +in accordance with their best judgment. With respect to the proposal concerning the frequency of advisory votes on executive compensation, +the Company’s Board of Directors recommends that the advisory vote take place every year. The Company’s Board of Directors +recommends that the stockholders vote “FOR” each of the other proposals. Only holders of record of Common Stock of +the Company at the close of business on the Record Date will be entitled to vote at the Annual Meeting. +1 +The +Company is incorporated in the State of Delaware. The principal executive offices of the Company are located at 52-16 Barnett +Avenue, Long Island City, New York 11104 and the telephone number of the Company is (718) 446-1800. +Notice of Internet Availability +of Proxy Materials +We +continue to take advantage of the Securities and Exchange Commission (the “SEC”) “e-proxy” rules +allowing us to furnish proxy materials through the Internet for the benefit and convenience of our stockholders. By using the +e-proxy rules, we can expedite the receipt by stockholders of proxy materials while lowering the costs and reducing the environmental +impact associated with our Annual Meeting. On or about April 7, 2017, we will furnish a Notice of Internet Availability of Proxy +Materials (the “Availability Notice”) to most of our stockholders containing instructions on how to access the +proxy materials and to vote online. In addition, instructions on how to request a printed copy of these materials will be found +on the Availability Notice. If you received an Availability Notice by mail, you will not receive a paper copy of the proxy materials +unless you request such materials by following the instructions contained in the Availability Notice. +For +more information on voting your Common Stock, please refer to the following “Questions and Answers” section. +QUESTIONS AND ANSWERS +ABOUT THE ANNUAL MEETING AND VOTING +1. +What is included in the proxy materials? What is a proxy statement and what is a proxy? +The +proxy materials for our Annual Meeting include the Notice of Annual Meeting, this Proxy Statement and our Annual Report on Form +10-K for the year ended December 31, 2016. If you received a paper copy of these materials, the proxy materials also include +a proxy card or voting instruction form. +A +proxy is the delegation of your right to vote the Common Stock you own to another person, who is called your proxy. When you designate +someone as your proxy in a written document, that document is called a proxy or a proxy card. SEC regulations require that we +furnish a proxy statement to you when we ask you to sign a proxy designating individuals to vote your shares of Common Stock on +your behalf. We have designated our officers Edward R. Rosenfeld and Arvind Dharia as proxies for the Annual Meeting. +2. +Who may vote at the Annual Meeting? +Only +stockholders of record are entitled to vote at the Annual Meeting. A stockholder of record is a stockholder of the Company as +of the close of business on the Record Date. On the Record Date, there were 59,754,670 shares of our Common Stock outstanding +(excluding treasury shares) held by approximately 138 registered holders of record and 18,559 beneficial owners. +3. What is the difference +between holding shares as a stockholder of record and as a beneficial owner? +If +your shares are registered directly in your name with the Company’s registrar and transfer agent, American Stock Transfer +& Trust Company, you are a “stockholder of record” with respect to those shares and, in such case, this Proxy +Statement and the accompanying proxy materials have been provided directly to you by the Company. If your shares are held in a +stock brokerage account or by a bank or nominee, your shares are held in “street name” and you are considered the +“beneficial owner” of those shares and, in such case, this Proxy Statement and the accompanying proxy materials have +been provided to you by your broker, bank or other stockholder of record. As the beneficial owner, you have the right to direct +your broker, bank or other stockholder of record how to vote your shares held in “street name.” +2 +4. What is considered a +quorum to conduct the Annual Meeting? +The +presence, in person or by proxy, of the holders of a majority of the shares eligible to vote is necessary to constitute a quorum +for the purpose of transacting business at the Annual Meeting. Under Delaware law (under which the Company is incorporated), abstentions +and broker non-votes (meaning proxies from brokers, banks or nominees indicating that such persons have not received instructions +on how to vote from the beneficial owner or other persons eligible to vote shares as to matters with respect to which the brokers, +banks or nominees do not have discretionary power to vote) are counted as present for purposes of determining the presence +or absence of a quorum for the transaction of business. If a quorum is not present, the Annual Meeting may be adjourned until +a quorum is obtained. +5. What is a “broker +non-vote”? +As +discussed in the response to question 3, if your shares are held in “street name” by a broker, bank or other nominee, +your broker, bank or other nominee is the record holder; however, the broker, bank or other nominee is required to vote the shares +in accordance with your instructions. If you do not give instructions to your broker, bank or other nominee, as the case may be, +the broker, bank or other nominee may, if permitted by the organizations of which it is a member, exercise discretionary voting +power to vote your shares. A “broker non-vote” occurs when a broker, bank or other nominee of record holding shares +for a beneficial owner has not received voting instructions from the beneficial owner and either chooses not to vote the shares +on a particular proposal as to which the holder has discretionary voting power or does not vote on a particular proposal because +that holder does not have discretionary voting power for that particular item. Broker non-votes are considered present in determining +whether a quorum is present. +If +you hold your shares in “street name,” we strongly encourage you to provide instructions regarding the voting of your +shares as your broker, bank or other nominee cannot vote your shares with respect to certain of the proposals being presented +at the Annual Meeting without voting instructions from you. +6. How many votes do I +have? What shares are included on the proxy card? +For +each share of Common Stock that you own on the Record Date you are entitled to one vote on each matter presented at the Annual +Meeting. +If +you are a record holder, you will receive an Availability Notice or proxy card for all of the shares of Common Stock you hold +in certificate form, in book-entry form and in any Company benefit plan. If you are a beneficial owner, you will receive information +containing voting instructions from the broker, bank or other nominee through which you own your shares of Common Stock. +7. How many votes are required +to approve each proposal and what is the effect of abstentions and broker non-votes? +Proposal +One (Election of Directors): Under Delaware law, directors are elected by the affirmative vote of a plurality of the shares +of Common Stock present in person or represented by proxy at the Annual Meeting and entitled to vote. This means that the director +nominees who receive the greatest number of affirmative votes cast are elected as directors, subject to our Director Election +(Majority Voting) Policy discussed in Proposal One below. +Proposal +Two (Ratification of Appointment of EisnerAmper LLP): The affirmative vote of a majority of the shares of Common Stock present +in person or represented by proxy at the Annual Meeting and entitled to vote is required to approve the ratification of the appointment +of EisnerAmper LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, +2017. +Proposal +Three (Non-Binding Advisory Vote on Executive Compensation): The affirmative vote of a majority of the shares of Common Stock +present in person or represented by proxy at the Annual Meeting and entitled to vote is required to approve, on a non-binding +advisory basis, the compensation of the Company’s Named Executive Officers as described in this Proxy Statement. +3 +Proposal +Four (Non-Binding Advisory Vote on Frequency of Advisory Vote on Executive Compensation): The voting requirement applicable +to the advisory vote on the frequency of the advisory vote on executive compensation is the affirmative vote of a majority of +the shares of Common Stock present in person or represented by proxy at the Annual Meeting and entitled to vote. This means that +the frequency (every one, two or three years) receiving a majority of the votes will be deemed to be the choice of the stockholders +with respect to the frequency of the advisory vote on executive compensation. +Other +Matters: If any other matters are presented at the Annual Meeting, they must receive the affirmative vote of a majority of +the shares of Common Stock present in person or represented by proxy at the Annual Meeting and entitled to vote in order to be +approved. +Abstentions +will have no effect on the election of directors and the advisory vote on the frequency of the advisory vote on executive compensation, +but will be treated as present and entitled to vote on the remaining proposals and, therefore, abstentions will have the effect +of votes “AGAINST” such proposals. +Proposal +One (Election of Directors) will be decided by a plurality of the votes of the shares represented in person or by proxy. +The approval of each of Proposals Two (Ratification of EisnerAmper LLP) and Three (Advisory Vote on Executive Compensation) requires +a favorable vote of a majority of the shares present and entitled to vote on the applicable matter. Proposal Four (Advisory Vote +on Frequency of Advisory Vote on Executive Compensation) will be decided by any of the three frequency choices (every one, two +or three years) receiving the vote of a majority of the shares present and entitled to vote. As noted above, an abstention will +have no effect on the election of directors and the advisory vote on the frequency of the advisory vote on executive compensation, +but will have the same effect as a vote “AGAINST” each other proposal. If you do not provide your broker, bank or +other nominee with instructions on how to vote your shares held in “street name”, your broker, bank or other nominee +will not be permitted to vote your shares on non-routine matters, and your shares will not affect the outcome of proposals concerning +non-routine matters. Proposals One, Three and Four are considered “non-routine” matters, which means that your broker +or other nominee does not have discretion to vote your shares with respect to these proposals without voting instructions from +you. If you hold your shares in “street name,” we strongly encourage you to provide instructions regarding the voting +of your shares to your broker, bank or other nominee. +8. How can I vote my shares? +Your +vote is important. Your shares can be voted at the Annual Meeting only if you are present in person or represented by proxy. Even +if you plan to attend the Annual Meeting, we urge you to authorize your proxy in advance. You may vote your shares by authorizing +a proxy over the Internet or by telephone. In addition, if you received a paper copy of the proxy materials by mail, you can also +submit a proxy by mail by following the instructions on the proxy card. Voting your shares by authorizing a proxy over the Internet, +by telephone or by written proxy card will ensure your representation at the Annual Meeting regardless of whether you attend in +person. +If +you are the record holder of your shares, please authorize your proxy electronically by going to the http://www.proxyvote.com +website or by calling the toll-free number listed below and on the proxy card. Please have your Proxy Statement or proxy card +in hand when going online or calling. If you authorize your proxy via the Internet or by phone you do not need to return your +proxy card. If you choose to authorize your proxy by mail, simply mark your proxy card and then date, sign and return it in the +postage-paid envelope provided. +VOTE +BY INTERNET +http://www.proxyvote.com +Use the Internet to transmit +your voting instructions and for electronic delivery of information. +VOTE +BY PHONE +1-800-690-6903 +Use any touch-tone telephone +to transmit your voting instructions. +VOTE +BY MAIL +Vote +Processing, c/o Broadridge +51 Mercedes Way +Edgewood, New York 11717 +If you receive paper +proxy materials, mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return +it to the address shown above. +4 +If +you hold your shares beneficially in “street name” through a broker or nominee you may be able to authorize your proxy +by telephone or the Internet as well as by mail, but you will need to obtain and follow instructions from your broker or nominee +to vote these shares. +9. +May I revoke my proxy for the Annual Meeting once I have given it? +You may revoke +your proxy at any time before it is voted at the Annual Meeting by: +· properly +executing and delivering a later dated proxy (including a telephone or Internet proxy +authorization); +· voting +by ballot at the Annual Meeting; or +· sending +a written notice of revocation to the Secretary of the Company at Steven Madden, Ltd., +52-16 Barnett Avenue, Long Island City, New York 11104. +10. How does the Board +of Directors recommend that I vote my shares? +The Board of +Directors of the Company recommends that you vote: +· “FOR” +the election of each of the eight director nominees; +· “FOR” +the ratification of the appointment of EisnerAmper LLP as the Company’s independent +registered public accounting firm for the fiscal year ending December 31, 2017; +· “FOR” +the approval, on a non-binding advisory basis, of the executive compensation of the Company’s +Named Executive Officers, as disclosed in this Proxy Statement; and +· “FOR” +the approval, on a non-binding advisory basis, of the recommendation to hold the advisory +vote on the approval of executive compensation every year. +ALL PROXIES +RECEIVED WILL BE VOTED IN ACCORDANCE WITH THE CHOICES SPECIFIED ON SUCH PROXIES. PROXIES WILL BE VOTED IN FAVOR OF A PROPOSAL +IF NO CONTRARY SPECIFICATION IS MADE. ALL VALID PROXIES OBTAINED WILL BE VOTED AT THE DISCRETION OF THE PERSONS NAMED IN THE PROXY +WITH RESPECT TO ANY OTHER BUSINESS THAT MAY PROPERLY COME BEFORE THE ANNUAL MEETING OR ANY ADJOURNMENTS OR POSTPONEMENTS +THEREOF. AS NOTED ABOVE, IF YOU HOLD YOUR SHARES BENEFICIALLY THROUGH A BROKER, BANK OR OTHER NOMINEE AND FAIL TO PROVIDE SPECIFIC +VOTING INSTRUCTIONS TO THAT BROKER, BANK OR OTHER NOMINEE, YOUR SHARES WILL NOT BE VOTED IN THE ELECTION OF DIRECTORS OR WITH +RESPECT TO THE ADVISORY VOTES ON EXECUTIVE COMPENSATION AND THE FREQUENCY OF THE ADVISORY VOTE ON EXECUTIVE COMPENSATION. +11. Who will bear the expenses +of this solicitation and how are proxies being solicited? +The +Company will pay the costs of soliciting proxies, including preparing, printing and mailing this Proxy Statement, any exhibits +hereto and the proxies solicited hereby. In addition to the use of the mails, proxies may be solicited on the Company’s +behalf by officers, directors and employees of the Company, without additional remuneration, by personal interviews, telephone +or electronic transmission. The Company will also request brokerage firms, nominees, custodians and fiduciaries to forward proxy +materials to the beneficial owners of shares of Common Stock held of record by them and will provide reimbursements for the cost +of forwarding the material in accordance with customary charges. The Company has entered into an agreement with D.F. King & +Co., Inc. to assist in the solicitation of proxies and provide related advice and informational support. The total expense of +this engagement, which will be borne by the Company, including customary disbursements, is not expected to exceed $20,000 in the +aggregate. +12. How will the voting +results be reported? +The +preliminary results of the voting on the proposals will be reported at the Annual Meeting. The final certified results will be +reported in a Current Report on Form 8-K that will be filed with the SEC within four business days following the Annual Meeting. +5 +13. How do I submit a proposal +for action at the Company’s 2018 Annual Meeting of Stockholders? +In +accordance with rules promulgated by the SEC, any stockholder who wishes to submit a proposal for inclusion in the proxy materials +to be distributed by the Company in connection with the 2018 Annual Meeting of Stockholders of the Company (the “2018 Annual +Meeting”) must do so no later than December 8, 2017. +In addition, in accordance with Article I, Section 7(f) of the Company’s Amended and Restated By-Laws (the +“By-Laws”), in order to be properly brought before the 2018 Annual Meeting, a matter must be either (i) specified +in the notice of such meeting given by or at the direction of the Board of Directors (or any duly authorized committee thereof), +(ii) otherwise properly brought before such meeting by or at the direction of the Board of Directors (or any duly authorized +committee thereof) or (iii) specified in a notice in proper written form given by a stockholder of record on the date +of the giving of the notice and on the record date for such meeting, which notice conforms to the requirements of Article I, +Section 7(f) of the By-Laws and is delivered to, or mailed and received at, the Company’s principal executive +offices not less than 120 days nor more than 150 days prior to the first anniversary of the date of the Company’s +2017 Annual Meeting. Accordingly, any written notice given by or on behalf of a stockholder pursuant to the foregoing clause (iii) in +connection with the 2018 Annual Meeting must be received no later than January 26, 2018 and no earlier than December 27, +2017. In addition, for business to be properly brought before the 2018 Annual Meeting by a stockholder pursuant to the foregoing +clause (iii), such stockholder shall have complied with any other applicable requirements, including, but not limited to, the +requirements of Rule 14a-8 promulgated by the SEC. +PROPOSAL +ONE: +ELECTION OF DIRECTORS +The +Company’s By-Laws provide that the Board of Directors of the Company shall be comprised of a minimum of one director and +that, subject to this limitation, the number of directors may be fixed from time to time by action of the directors. The Company’s +Board of Directors has fixed the number of directors to comprise the Board of Directors at eight directors and the Board of Directors +presently is comprised of eight directors. Directors serve a one-year term and the term of each of the directors will expire at +the Annual Meeting. +Stockholder Nominations +for Board Membership +The +Nominating/Corporate Governance Committee of the Board of Directors recommends to the Board director candidates for nomination +and election at each annual meeting of stockholders or for appointment to fill vacancies on the Board. The Nominating/Corporate +Governance Committee will review and evaluate the qualifications of proposed director candidates recommended to it from various +sources, including candidates proposed by stockholders of the Company in accordance with the procedures established for that purpose. +In accordance with Article II, Section 5 of the By-Laws, director nominations for the 2018 Annual Meeting can only be +made by a stockholder of the Company who (i) is a stockholder of record on the date of the giving of the notice of such director +nominations and on the record date for the determination of stockholders entitled to vote at the 2018 Annual Meeting and (ii) complies +with the notice requirements and procedures set forth in Article II, Section 5 of the By-Laws. A stockholder’s +notice to the Secretary of the Company with respect to any such nominations must be timely and in proper written form pursuant +to Article II, Section 5 of the Company’s By-Laws, including containing certain information concerning the nominating +or proposing stockholder and certain information concerning the nominee, and the notice must be delivered to, or mailed and received +at, the Company’s principal executive offices not less than 120 days nor more than 150 days prior to the first +anniversary of the date of the Company’s 2017 Annual Meeting. Accordingly, any written notice given by or on behalf of a +stockholder pursuant to Article II, Section 5 of the Company’s By-Laws in connection with the 2018 Annual Meeting +must be received no later than January 26, 2018 and no earlier than December 27, 2017. +6 +Nominees for Election +to the Board of Directors +Upon +recommendation of the Nominating/Corporate Governance Committee of the Board of Directors, the Board of Directors has nominated +and is recommending to the stockholders the election of each of the eight nominees named below to serve as a director of the Company +until the next annual meeting of the Company’s stockholders and until his or her successor is duly elected and qualified +or until his or her earlier death, resignation or removal from office. All of the nominees were elected directors at last year’s +Annual Meeting of Stockholders and each has agreed to be named in this Proxy Statement and to serve if elected. +The +names and biographical summaries of the eight persons who have been recommended by the Nominating/ Corporate Governance Committee +of the Board of Directors and nominated by the Board of Directors to stand for election at the Annual Meeting are provided below +for your information. +Our +Board of Directors is responsible for overseeing our business in a manner consistent with the Board’s fiduciary duty to +our stockholders. This significant responsibility requires that our directors consist of individuals who are well-qualified for +service on our Board and its committees and demonstrate a commitment to the success of the Company and to service in the best +interests of our stockholders. The Board and the Nominating/Corporate Governance Committee select nominees with a view to establishing +a Board of Directors that is comprised of individuals who have extensive business leadership experience, are independent, bring +diverse perspectives to the Board, possess high ethical standards and sound business judgment and acumen and a willingness to +devote the time necessary for the Board to effectively fulfill its responsibilities. We believe that all of the director nominees +possess these qualifications and provide the Board with a full complement of knowledge, business skills and expertise for the +effective management of our Company. In addition to these general qualifications, provided below for each nominee for director +is a discussion of the experience, qualifications, attributes and skills that led to the Board’s conclusion that the nominee +should serve as a director. +Name +Principal Occupation +Age +Year +Became a +Director +Edward R. Rosenfeld +Chairman of the Board and Chief +Executive Officer, Steven Madden, Ltd. +41 +2008 +Rose Peabody Lynch +Owner of Marketing Strategies, LLC, New York +based consulting firm of which she is founder and President, which focuses on strategic marketing and operating issues for +small to medium-sized companies +67 +2014 +Peter Migliorini +Sales Manager, Greschlers, Inc., a building +supplies company +68 +1996 +Richard P. Randall +Retired Executive Vice President and Chief Financial +Officer, Direct Holdings Worldwide, LLC, the parent company of Lillian Vernon Corp., a catalog and online retailer of gifts +and household goods, and Time-Life, a music and video marketing company +79 +2006 +Ravi Sachdev +Partner, Clayton Dubilier & Rice, LLC +40 +2008 +Thomas H. Schwartz +Owner, Sumner and Forge Investors LLC, a real +estate investment and property management company +69 +2004 +Robert Smith +Chief Merchandising Officer, Haddad Brands, +a global children’s apparel and accessories licensing partner for iconic American brands such as Levi’s, Hurley, +Nike, Jordan and Converse +51 +2014 +Amelia Newton Varela +President, Steven Madden, Ltd. +45 +2016 +7 +Additional Information About +the Director Nominees +Other +Public Company Directorships +Two +of our directors also currently serve as directors of other public companies: +· Mr. Rosenfeld +is a director and member of the Audit Committee of PVH Corp., one of the world’s +largest apparel companies. +· Mr. Randall +serves as a director and member of the Audit Committee of P&F Industries Inc., a +manufacturer and importer of tools sold principally to the industrial, retail and automotive +markets. +Other +Employment Information +Each +of our directors has been engaged in the principal occupation indicated in the foregoing table for more than the past five years, +with the exceptions of Mr. Smith and Mr. Sachdev. Mr. Smith has held his position with Haddad Brands since 2013. Prior thereto, +from 2010 to 2012, Mr. Smith served as Executive Vice President, Merchandising for Limited Brands, at Victoria’s Secret +Direct, the largest direct-to-consumer women’s apparel retailer in the United States. From 1998 through 2010, Mr. Smith +held various senior merchandising positions at Macy’s Inc. beginning with Vice President, Merchandise Manager, Macy’s +West and culminating with Executive Vice President, Merchandising for Juniors, Kids, Intimate Apparel, Dresses, Suits, Coats and +Swimwear. Mr. Sachdev has been a partner of Clayton Dubilier & Rice, LLC since 2015. Previously, from November 2010, he served +as a Managing Director and Co-Head of Healthcare Services at J.P. Morgan. +Specific +Qualifications, Attributes, Skills and Experience of Director Nominees +Edward +R. Rosenfeld has served as Chairman of the Board since August 2008 and has been a director of the Company since February +2008. Mr. Rosenfeld, who joined our executive management team in May 2005, has more than 19 years of experience +focused on the retail, apparel and footwear industries and possesses particular knowledge of and experience in the industry that +strengthens the Board’s collective qualifications, skills and experience. His background in finance and his analytical skills +gained through his years as a Vice President with Peter J. Solomon Company, an investment banking boutique, where he specialized +in mergers and acquisitions in the retail, apparel and footwear industries, provide the Board with insight and guidance with respect +to, among other things, strategic business development matters. Mr. Rosenfeld has strong leadership skills and an in-depth +understanding of the Company and its goals from his positions as the Chairman of the Board and Chief Executive Officer. Mr. Rosenfeld +serves as a director and member of the Audit & Risk Management Committee of PVH Corp., one of the world’s largest apparel +companies. +Rose +Peabody Lynch has served as a director of the Company since April 2014 and as a member of the Audit Committee and the +Compensation Committee since June 2014. She possesses over 30 years of business experience, including tenures as the President +and in other senior executive officer positions of major companies in the beauty and fashion industries, and has extensive executive +level financial and operating experience. Her experience serving as a director and as a senior executive for a range of companies, +including Victoria’s Secret, Trowbridge Gallery (a supplier of fine art to the interior design trade) and Danskin, +Inc., a leading manufacturer of women’s dance and active wear, enhances the Board’s leadership and oversight capabilities. +Ms. Lynch has served on a number of boards, including The Harmony Group-LeRoi Princeton (a manufacturer of children’s +apparel), Salant Corporation (Perry Ellis Menswear) and Frederick’s of Hollywood (a retailer of women’s apparel +and lingerie). She was a member of the Audit and Nominating and Governance Committees during her tenure at Salant and chaired +the Compensation Committee during her tenure on the board of Frederick’s of Hollywood. In addition, Ms. Lynch has held +leadership positions with a variety of charities and currently serves as a director of S.O.S. Children’s Villages, the U.S. +arm of an international non-profit organization dedicated to providing assistance to children. She currently serves on the Board +of Directors of the Princeton University Varsity Club, is President of her Princeton University class and serves on the Executive +Committee of the Princeton University Alumni Council. She also serves on the Board of Trustees of Concord Academy in Concord, +Massachusetts. Ms. Lynch is a member of the Women and Foreign Policy Advisory Council at the Council on Foreign Relations. +8 +Peter +Migliorini has served as a director of the Company since October 1996 and has served on the Company’s +Audit Committee since October 1996, the Nominating/Corporate Governance Committee, as its Chair, since July 2004 and the +Compensation Committee, as its Chair, since July 2004. Mr. Migliorini is also Presiding Director over all executive sessions +of the independent directors. Mr. Migliorini possesses extensive executive level financial, sales and operations experience. +Prior to serving as sales manager for Greschlers, Inc., from 1987 to 1994, Mr. Migliorini served as Director of Operations +for Mackroyce Group, a construction company. Earlier, Mr. Migliorini held various positions of increasing responsibility +from Assistant Buyer to Chief Planner/Coordinator for several shoe companies, including Meldisco Shoes, Perry Shoes and Fasco +Shoes. His numerous years of business experience at various levels and in various industries provide the Board with a measure +of practical orientation regarding the Company’s operations and growth endeavors. Mr. Migliorini’s early experience +in the shoe industry also provides relevant knowledge and expertise in the Company’s specific industry. +Richard +P. Randall has served as a director of the Company since April 2006 and has served on the Company’s +Audit Committee, as its Chair, since 2006, and on the Nominating/Corporate Governance Committee since September 2008. Mr. Randall +has decades of business experience, including tenures as Chief Financial Officer and Chief Operating Officer of both publicly +traded and privately held companies in the retail industry, including Direct Holdings Worldwide, LLC, the parent company of Lillian +Vernon Corp. and Time-Life, a music and video marketing company, and, prior thereto, Coach, Inc., a luxury leather goods company. +Mr. Randall possesses extensive knowledge of accounting and finance, the retail industry and the issues impacting a publicly +traded company. Mr. Randall has extensive executive level experience establishing his capabilities in management of complex +organizations and is a certified public accountant. His expertise in finance qualifies him to serve as the Audit Committee “audit +committee financial expert” and his service on the boards and board committees of other companies has allowed him to gain +broad-based experience and sensitivity regarding best practices, which he shares with the Board. Mr. Randall also provides +a perspective on proper governance for public companies. He currently serves as a member of the board of directors and Audit Committee +of P&F Industries, Inc., a manufacturer and importer of tools sold principally to the industrial, retail and automotive markets, +as well as residential hardware and, until December 31, 2014, served as a member of the board of directors and chair of the +Audit and Risk Committee of Aceto Corporation, a generic pharmaceutical, nutraceutical and chemical distribution company. Mr. Randall +is a former director and member of the Executive, Finance, Audit and Research Committees of The Burke Rehabilitation Hospital +(“Burke”). He currently serves as a Member Emeritus of Burke’s Executive Committee and retains a board seat +on The Burke Foundation’s board. Mr. Randall served as a director and chair of the Audit Committee of Universal Travel +Group, a travel services provider in the People’s Republic of China, and of Home Systems Group, a manufacturer and distributor +of household appliances in the People’s Republic of China, from 2007 until 2008 when he resigned from these boards. +Ravi +Sachdev has been a director of the Company since September 2008 and has served on the Company’s Audit Committee +since September 2008. As a Partner of the private equity firm Clayton Dubilier & Rice, LLC since June 2015, Mr. Sachdev +focuses on the healthcare sector. Earlier, Mr. Sachdev was a Managing Director and Co-Head of Healthcare Services at J.P. +Morgan from November 2010 and prior to that held the positions of Managing Director at Deutsche Bank Securities, Inc. from January 2009 +until November 2010 and Director at Deutsche Bank from January 2007 until January 2009. Prior to joining Deutsche Bank +in 2006 as a Vice President, Mr. Sachdev served as a Vice President at Peter J. Solomon Company, an investment banking boutique, +specializing in mergers and acquisitions in the healthcare sector, from 1998 to 2006. Mr. Sachdev possesses knowledge +of finance and the financial analytics used to measure business performance. His 19 years of professional experience in investment +banking and private equity brings to the Board a thorough understanding of the financial issues affecting public companies and +greater insights in business valuation together with a practical orientation with respect to acquisitions and integrations. Mr. Sachdev +also serves on the Board of Directors of Healogics, a leading provider of wound healing services, Vets First Choice, a veterinary +internet pharmacy, and Agilon Health, a technology-enabled services platform for the physicians market. +Thomas +H. Schwartz has served as a director of the Company since May 2004 and has served on the Company’s Compensation +Committee since July 2004. With more than twenty years of experience as a Managing Director of Helmsley-Spear, Inc. and eight +years as the owner of his own real estate investment firm, Mr. Schwartz brings to the Board extensive executive level experience +in handling operations issues and practical expertise in management. +9 +Robert +Smith has served as a director of the Company since April 2014 and as a member of the Compensation Committee and +the Nominating/Corporate Governance Committee since June 2014. Prior to his current and former positions with Haddad Brands and +Victoria’s Secret Direct, respectively, Mr. Smith held various senior merchandising positions at Macy’s Inc. +between 1998 and 2010, beginning with Vice President, Merchandise Manager, Macy’s West and culminating with Executive Vice +President, Merchandising for Juniors, Kids, Intimate Apparel, Dresses, Suits, Coats and Swimwear. Earlier, Mr. Smith was +a Merchandiser for XOXO Apparel Company and held various positions with Burdine’s Department Stores. Mr. Smith possesses +nearly 30 years of business experience in the fashion industry and has extensive executive level expertise in merchandising. His +experience in this area will further enhance the Board’s depth of understanding of the industry. +Amelia +Newton Varela has been President of the Company since September 2015. Prior to this tenure, Ms. Varela was Executive +Vice President of Wholesale of the Company since April 2008 and Executive Vice President of Wholesale Footwear of the Company +from November 2004 to April 2008. Previously, she was Vice President of Sales for Steve Madden Women’s Wholesale Division from +January 2000. Ms. Varela began her career with the Company in 1998 in the role of Account Executive for Steve Madden Women’s +Wholesale Division. She graduated from The Fashion Institute of Technology in 1995. +Required +Vote +Proxies +will be voted for the election of the eight nominees as directors of the Company unless otherwise specified in the proxy. A plurality +of the votes cast by the holders of shares of Common Stock present in person or represented by proxy and entitled to vote at the +Annual Meeting will be necessary to elect the nominees as directors. This means that the director nominees who receive the greatest +number of affirmative votes cast are elected as directors subject to our Director Election (Majority Voting) Policy, which +is described below. If, for any reason, any nominee is unable or unwilling to serve, the proxies will be voted for a substitute +nominee who will be designated by the Board of Directors at the Annual Meeting. Stockholders may abstain from voting by marking +the appropriate boxes on the accompanying proxy. Abstentions will be counted separately and used for purposes of calculating whether +a quorum is present at the Annual Meeting, but will have no effect on the outcome of the vote. +Director Election (Majority +Voting) Policy +It +is the policy of the Company that any nominee for director who receives a greater number of “WITHHOLD” votes than +“FOR” votes for his or her election must promptly submit a letter offering his or her resignation to the Nominating/Corporate +Governance Committee following the certification of the stockholder vote. In such event, the Nominating/Corporate Governance Committee +would then consider the offer of resignation and make a recommendation to the Board of Directors as to whether or not the resignation +should be accepted. This policy does not apply in contested elections. For more information about this policy, see “Corporate +Governance – Director Election (Majority Voting) Policy” below. +Recommendation of the Board +of Directors +The +Nominating/Corporate Governance Committee of the Board and the entire Board of Directors unanimously recommend a vote “FOR” +the election of Ms. Rose Peabody Lynch, Ms. Amelia Newton Varela and Messrs. Edward R. Rosenfeld, Peter Migliorini, Richard +P. Randall, Ravi Sachdev, Thomas H. Schwartz and Robert Smith. +10 +CORPORATE +GOVERNANCE +The Board of Directors +Our +business is managed under the direction and oversight of the Board of Directors who are elected by the Company’s stockholders. +Directors meet their responsibilities by participating in meetings of the Board of Directors and the various committees of the +Board on which they sit, as well as through communicating with our Chairman and Chief Executive Officer, other officers and employees +of the Company and by consulting with our independent registered public accounting firm and other third parties. +As +noted below, our Board is currently comprised of six independent and two non-independent directors. +Director Independence +The +Board of Directors has determined that the following director nominees are “independent” for purposes of the criteria +of the SEC and The Nasdaq Global Select Market listing standards: Ms. Lynch and Messrs. Migliorini, Randall, Sachdev, Schwartz +and Smith. If the eight nominees set forth above are elected, the Board will be comprised of a majority of independent directors. +The Board of Directors has held regularly scheduled executive sessions for the independent directors, with Peter Migliorini serving +as Presiding Director of such executive sessions. +Director Attendance at +Meetings +Attendance +at Annual Meetings of Stockholders +The +Company has no specific policy regarding director attendance at its annual meetings of stockholders. The Company encourages all +of its directors to attend annual meetings of the Company’s stockholders and two directors attended the Company’s +2016 annual meeting of stockholders. +Attendance +at Meetings of the Board of Directors +The +Board of Directors held four regularly scheduled meetings during the 2016 Fiscal Year. In the 2016 Fiscal Year, each director +attended at least 75% of the aggregate number of Board meetings, and each director attended at least 75% of the aggregate number +of meetings held by all committees on which he or she then served. +Director Election (Majority +Voting) Policy +The +Company has adopted a Director Election (Majority Voting) Policy. Pursuant to this policy, in an uncontested election of +directors (that is, an election where the number of nominees is equal to the number of seats open) any nominee for director +who receives a greater number of “WITHHOLD” votes than “FOR” votes for his or her election must promptly +submit an offer of resignation to the Nominating/Corporate Governance Committee following the certification of the stockholder +vote for consideration in accordance with the following procedures. +In +such event, upon receipt of the resignation, the Nominating/Corporate Governance Committee would promptly consider the appropriateness +of the director’s continued service on the Board of Directors and recommend to the Qualified Independent Directors (as defined +below) the action to be taken with respect to the resignation, which could include (1) accepting the resignation; (2) rejecting +the resignation; (3) retaining the director but addressing what the Qualified Independent Directors believe to be the underlying +cause of the “WITHHOLD” votes; or (4) determining that the director will not be renominated by the Board of Directors +in future elections. The Nominating/Corporate Governance Committee would consider factors such as (a) the reasons expressed +by the stockholders for withholding votes from such director; (b) any possibilities for curing the underlying cause of the +“WITHHOLD” votes; (c) the tenure and qualifications of the director and his or her past and expected future contributions +to the Company; (d) the overall composition of the Board of Directors, including, without limitation, whether accepting the +resignation would cause the Company to fail to meet any applicable SEC or Nasdaq requirement; (e) the availability of other +qualified candidates; and (f) the Company’s Board of Director Candidate Guidelines. +11 +The +Qualified Independent Directors would then act on the Nominating/Corporate Governance Committee’s recommendation no later +than 90 days following the date of the stockholders’ meeting at which the director election occurred. In considering the +Nominating/Corporate Governance Committee’s recommendation, the Qualified Independent Directors would review the factors +considered by the Nominating/Corporate Governance Committee and such additional information and factors that they believe to be +relevant. Following the Qualified Independent Directors’ decision, the Company would promptly disclose the decision in a +Current Report on Form 8-K. The Form 8-K would include a full explanation of the process by which the decision of the Qualified +Independent Directors was reached and, if applicable, the reasons why the offer of resignation was rejected. +In +the event that an offer of resignation were to be accepted, the Nominating/Corporate Governance Committee would recommend to the +Board of Directors whether to fill the vacancy or reduce the size of the Board of Directors accordingly. Any director required +to submit his or her resignation pursuant to this policy would not participate in the Nominating/Corporate Governance Committee’s +recommendation or the Qualified Independent Directors’ consideration of the resignation but, prior to voting on the director’s +resignation offer, the Qualified Independent Directors would provide to the director an opportunity to submit any information +or statement that he believes relevant to the Qualified Independent Directors’ consideration of the resignation. +For +purposes of this policy, “Qualified Independent Directors” means all directors who (1) are “independent” +for purposes of The Nasdaq Global Select Market listing standards and (2) are not required to offer their resignation in +accordance with this policy. If there are fewer than three independent directors then serving on the Board of Directors who are +not required to submit their resignations in accordance with this policy, then the Qualified Independent Directors shall consist +of all of the independent directors and each independent director who is required to offer his or her resignation in accordance +with this policy shall recuse himself or herself from the deliberations and voting only with respect to his or her individual +offer to resign. +Committees of the Board +Among +other committees, the Board of Directors has a standing Audit Committee, Compensation Committee and Nominating/Corporate Governance +Committee. Each committee has a written charter. The table below provides current membership for each Board committee. +Committees +of the Board of Directors +Director +Audit +Compensation +Nominating/ +Corporate +Governance +Edward +R. Rosenfeld +Rose +Peabody Lynch +Member +Member +Peter +Migliorini +Member +Chair +Chair +Richard +P. Randall +Chair +Member +Ravi +Sachdev +Member +Thomas +H. Schwartz +Member +Robert +Smith +Member +Member +Amelia +Newton Varela +Number +of meetings in +2016 Fiscal Year +4 +3 +1 +Audit +Committee +The +Audit Committee is comprised of directors who are “independent” for purposes of The Nasdaq Global Select Market listing +standards and who meet the independence requirements contained in Securities Exchange Act of 1934, as amended (the “Exchange +Act”) Rule 10A-3(b)(1). The Board has determined that each of Messrs. Randall and Sachdev meets the SEC criteria +of an “audit committee financial expert” as defined in Item 407 of Regulation S-K under the Exchange Act. The +Audit Committee is primarily responsible for reviewing the services performed by the Company’s independent registered public +accountants, evaluating the Company’s accounting policies and its system of internal controls, and reviewing significant +financial transactions. +12 +The +Audit Committee is responsible for reviewing and striving to ensure the integrity of the Company’s financial statements +and oversight of our compliance with legal and regulatory requirements and our internal audit function. Among other matters, the +Audit Committee, with management and independent and internal auditors, reviews the adequacy of the Company’s internal accounting +controls that could significantly affect the Company’s financial statements. The Audit Committee is also directly and solely +responsible for the appointment, retention, compensation, oversight and termination of the Company’s independent registered +public accountants. In addition, the Audit Committee functions as the Company’s Qualified Legal Compliance Committee (the +“QLCC”). The purpose of the QLCC is to receive, retain and investigate reports made directly, or otherwise made known, +of evidence of material violations of any United States federal or state law, including any breach of fiduciary duty by the Company, +its officers, directors, employees or agents, and if the QLCC believes appropriate, to recommend courses of action to the Company. +Management +has primary responsibility for the Company’s financial statements and the overall reporting process, including the Company’s +system of internal controls. The Company’s independent registered public accountants audit the annual financial statements +prepared by management, express an opinion as to whether those financial statements present fairly the financial position, results +of operations and cash flows of the Company in conformity with accounting principles generally accepted in the United States and +discuss with the Audit Committee any issues they believe should be raised with the Audit Committee. +The +Audit Committee is also responsible for the oversight of the Company’s risk management process, which is discussed in the +“Risk Oversight” section below. +In +performing its functions, the Audit Committee meets with management on at least a quarterly basis to review and discuss the annual +audited financial statements, quarterly financial statements and related reports and to consider the adequacy of the Company’s +internal controls and the objectivity of its financial reporting. The Audit Committee discusses these matters with the Company’s +independent registered public accountants and with appropriate Company financial personnel. Meetings are held with the independent +registered public accountants, who have unrestricted access to the Audit Committee. In addition, the Audit Committee reviews the +Company’s financing plans and reports and makes recommendations to the full Board of Directors for approval and to authorize +action. The Board has adopted a written charter setting out the functions the Audit Committee is to perform. A copy of the Audit +Committee Charter is available on the Company’s website at www.stevemadden.com . +Nominating/Corporate +Governance Committee +The +Nominating/Corporate Governance Committee is comprised of directors who are “independent” for purposes of The Nasdaq +Global Select Market listing standards. +The +Nominating/Corporate Governance Committee provides oversight with respect to a wide range of issues relating to the composition +and operation of the Board, including consideration of and recommendations regarding the size and composition of the Board of +Directors and identification of potential candidates to serve as directors. The Nominating/Corporate Governance Committee identifies +candidates to the Board of Directors by introductions from management, members of the Board of Directors, employees of the Company +or other sources, including stockholders that satisfy the Company’s policy regarding stockholder recommended candidates. +The Nominating/Corporate Governance Committee does not evaluate director candidates recommended by stockholders differently than +director candidates recommended by other sources. +13 +Stockholders +wishing to submit recommendations for director nominations for the 2018 Annual Meeting should write to the Secretary, Steven Madden, +Ltd., 52-16 Barnett Avenue, Long Island City, New York 11104. Any such stockholder must (i) comply with the director nomination +provisions of the Company’s By-Laws, (ii) meet and evidence the minimum eligibility requirements specified in Exchange +Act Rule 14a-8, and (iii) submit, within the same timeframe for submitting a stockholder proposal required by Rule 14a-8: +(1) evidence in accordance with Rule 14a-8 of compliance with the stockholder eligibility requirements, (2) the +written consent of the candidate(s) for nomination as a director, (3) a resume or other written statement of the qualifications +of the candidate(s) for nomination as a director, and (4) all information regarding the candidate(s) and the submitting +stockholder that would be required to be disclosed in a proxy statement filed with the SEC if the candidate(s) were nominated +for election to the Board of Directors. +In +considering candidates for the Board of Directors, the Nominating/Corporate Governance Committee considers the Company’s +Board of Director Candidate Guidelines and Director Election (Majority Voting) Policy, available on the Company’s website +at www.stevemadden.com , the Company’s policy regarding stockholder recommended director candidates, as set forth +above, and all other factors that are deemed appropriate including, but not limited to, the individual’s character, education, +experience, knowledge and skills. While the Nominating/Corporate Governance Committee’s Board of Directors Candidate Guidelines +does not expressly identify diversity as a factor for consideration regarding the evaluation of director candidates, diversity +is among the many factors the Nominating/Corporate Governance Committee considers in the candidate evaluation process. To assess +the effectiveness of the mandate set forth in the Nominating/Corporate Governance Committee’s charter, the Nominating/Corporate +Governance Committee reviews annually with the Board the composition of the Board as a whole and recommends, if necessary, measures +to be taken so that the Board reflects the appropriate balance of knowledge, experience, skills, expertise and diversity required +for the Board as a whole. +In +addition, the Nominating/Corporate Governance Committee develops and recommends corporate governance principles for the Company; +makes recommendations to the Board of Directors in support of such principles; takes a leadership role in the shaping of the corporate +governance of the Company; and oversees the evaluation of the Board of Directors and management. The Nominating/Corporate Governance +Committee operates under a formal charter that governs the Committee’s composition, powers and responsibilities. A copy +of the Nominating/Corporate Governance Committee Charter is available on the Company’s website at www.stevemadden.com . +Compensation +Committee +The +Compensation Committee is comprised of directors who are “independent” for purposes of The Nasdaq Global Select Market +listing standards and applicable tax and securities rules. +The +Compensation Committee is responsible for establishing and overseeing the Company’s compensation and incentive plans and +programs; determining and approving compensation for the Company’s executive officers, including salaries, bonuses, perquisites +and equity awards; reviewing and approving compensation and awards for the Company’s executive officers under the Company’s +compensation and incentive plans and programs; administering the Company’s equity compensation plans; reviewing and approving +a compensation program for independent members of the Board; and assisting the Board in discharging the Board’s responsibilities +relating to management organization, performance, compensation and succession. The Compensation Committee operates under a formal +charter adopted by the Board of Directors that governs its composition, powers and responsibilities. A copy of the Compensation +Committee Charter is available on the Company’s website at www.stevemadden.com . +14 +Board Leadership Structure, +Risk Oversight, Executive Sessions of Non-Employee Directors, and Communications Between Stockholders and the Board +Board +Leadership Structure +As +noted above, our Board is currently comprised of six independent and two non-independent directors. +Mr. Rosenfeld +has served as Chairman of the Board and Chief Executive Officer since August 2008, and has been a member of the Board since February 2008. +The Board has designated one of the independent directors as Presiding Director to preside over executive sessions. We believe +that the number of independent, experienced directors that comprise our Board, along with the independent oversight of our Presiding +Director, benefits the Company and its stockholders. +We +recognize that different board leadership structures may be appropriate for companies in different situations and believe that +no one structure is suitable for all companies. We believe our current Board leadership structure is optimal for the Company because +it demonstrates to our employees, suppliers, customers, and other stakeholders that the Company is under strong leadership, with +a single person setting the tone and having primary responsibility for managing our operations and leading the Board in setting +long-term strategy. Having a single leader for both the Company and the Board eliminates confusion and duplication of efforts, +and provides clear leadership for the Company. We believe the Company, like many U.S. companies, has been well-served by this +leadership structure. +Because +the positions of Chairman of the Board and Chief Executive Officer are held by the same person, the Board believes it is appropriate +for the independent directors to elect one independent director to serve as a Presiding Director. In addition to presiding at +executive sessions of the independent directors, the Presiding Director has various responsibilities including coordinating with +the Chairman of the Board and Chief Executive Officer in establishing agenda and discussion items for Board meetings; retaining +independent advisors on behalf of the Board as the Board may determine to be necessary or appropriate and performing such other +functions as the independent directors may designate from time to time. Mr. Migliorini is currently serving as the Presiding +Director. +Our +Board conducts an annual evaluation in order to determine whether it and its committees are functioning effectively. As part of +this annual self-evaluation, the Board evaluates whether the current leadership structure continues to be optimal for the Company +and its stockholders. +Risk +Oversight +Our +Board is responsible for overseeing the Company’s risk management process. The Board focuses on the Company’s general +risk management strategy, the most significant risks facing the Company, and ensures that appropriate risk mitigation strategies +are implemented by management. The Board is also apprised of particular risk management matters in connection with its general +oversight and approval of corporate matters. +The +Board has delegated to the Audit Committee oversight of the Company’s risk management process. Among its duties, the Audit +Committee reviews with management (a) the Company’s policies with respect to risk assessment and management of risks +that may be material to the Company, (b) the Company’s system of disclosure controls and system of internal controls +over financial reporting, and (c) the Company’s compliance with legal and regulatory requirements. The Audit Committee +is also responsible for reviewing major legislative and regulatory developments that could materially impact the Company’s +contingent liabilities and risks. Our other Board committees also consider and address risks as they perform their respective +committee responsibilities. All committees report to the full Board as appropriate, including when a matter rises to the level +of a material or enterprise level risk. +The +Company’s management is responsible for day-to-day risk management. Our risk management and internal audit areas serve as +the primary monitoring and testing function for company-wide policies and procedures, and manage the day-to-day oversight of the +risk management strategy for the ongoing business of the Company. This oversight includes identifying, evaluating, and addressing +potential risks that may exist at the enterprise, strategic, financial, operational, and compliance and reporting levels. +15 +We +believe the division of risk management responsibilities described above is an effective approach for addressing the risks facing +the Company and that our Board leadership structure supports this approach. +Executive +Sessions of Independent Directors +The +Board holds executive sessions of its independent directors generally at each regularly scheduled meeting. The Presiding Director +serves as the chairperson for these executive sessions. +Communications +between Stockholders and the Board +The +Company has adopted a procedure by which stockholders may send communications to one or more members of the Board of Directors +by writing to such director(s) or to the entire Board of Directors in care of the Secretary, Steven Madden, Ltd., 52-16 Barnett +Avenue, Long Island City, New York 11104. The Board has instructed the Secretary of the Company to review all communications so +received and to exercise his discretion not to forward to the Board correspondence that is inappropriate, such as business solicitations, +frivolous communications and advertising, routine business matters (i.e. business inquiries, complaints, or suggestions) and +personal grievances. However, any director may at any time request the Secretary to forward to such director any and all communications +received by the Secretary but not forwarded to the directors. +Codes of Business Conduct +and Ethics +The +Company has adopted a Code of Ethics for the Chief Executive Officer and Senior Financial Officers, which is applicable to our +Chief Executive Officer, Chief Financial Officer, controller, principal accounting officer, head of internal audit and other employees +of the Company who are designated from time to time as “senior financial officers” of the Company. In addition, the +individuals who serve on our Board of Directors are subject to a Code of Business Conduct and Ethics for the Board of Directors +and all of the Company’s employees are held accountable for adherence to the Company’s Code of Business Conduct and +Ethics. Each of the Code of Ethics for the Chief Executive Officer and Senior Financial Officers, the Code of Business Conduct +and Ethics for the Board of Directors and the Code of Business Conduct and Ethics (collectively, the “Conduct Code”) is +included as an exhibit to our Annual Report on Form 10-K for the fiscal year ended December 31, 2014 and are available on the +Company’s website at www.stevemadden.com and, in addition, may be obtained by any stockholder without charge upon +request by writing to the Secretary, Steven Madden, Ltd., 52-16 Barnett Avenue, Long Island City, New York 11104. The Conduct +Code is intended to establish standards necessary to deter wrongdoing and to promote compliance with applicable governmental laws, +rules and regulations and honest and ethical conduct. The Conduct Code covers all areas of professional conduct, including conflicts +of interest, fair dealing, financial reporting and disclosure, protection of Company assets and confidentiality. Employees have +an obligation to promptly report any known or suspected violation of the Conduct Code without fear of retaliation. Waiver of any +provision of the Conduct Code for executive officers and directors may only be granted by the Board of Directors or the Nominating/Corporate +Governance Committee and any such waiver or modification of the Conduct Code relating to such individuals will be disclosed by +the Company. +Corporate Governance +Guidelines +The +Board of Directors has adopted Corporate Governance Guidelines as a set of guiding principles by which the Company is governed. +Various matters of corporate governance are addressed in the Corporate Governance Guidelines, such as board size and composition, +director qualifications and responsibilities, director compensation, limitations on service on other boards, board committees, +director orientation and education, director access to management, management development and succession planning and annual performance +evaluations for the Board. The Corporate Governance Guidelines also include a clawback of executive incentive compensation paid +to senior executive officers in the event of an accounting restatement by the Company due to intentional misconduct of an executive +officer. +The +Nominating/Corporate Governance Committee reviews the Corporate Governance Guidelines annually to determine whether to recommend +changes to the Corporate Governance Guidelines to reflect new laws, rules and regulations and developing governance practices. +A copy of the Corporate Governance Guidelines may be obtained by any stockholder without charge upon request by writing to the +Secretary, Steven Madden, Ltd., 52-16 Barnett Avenue, Long Island City, New York 11104. +16 +Stock Ownership Guidelines +The +Board of Directors has adopted Stock Ownership Guidelines, which require a level of ownership of shares of our Common Stock by +our directors and executive officers in order to align their interests with those of our stockholders. The Stock Ownership Guidelines +require our Chief Executive Officer to own shares of our Common Stock equal in value to five times his annual base salary. Other +executive officers of the Company are required to own shares of our Common Stock equal in value to two times their annual base +salary. The Stock Ownership Guidelines further require that non-employee directors of the Company must own shares of our Common +Stock equal in value to two times the cash portion of the directors’ annual retainer or the equivalent if a retainer is +not received in certain circumstances. Individuals subject to the Stock Ownership Guidelines must attain the required level of +share ownership by the fifth anniversary of the later of the Stock Ownership Guidelines’ adoption date and the date that +the individual became an executive officer or director and must retain an amount equal to 25% of the net shares of our Common +Stock received as a result of the exercise, vesting or payment of any equity award made by the Company until the share ownership +requirement is satisfied. +Prohibition on Hedging +and Pledging of Our Common Stock +Our directors +and executive officers and certain other persons designated from time to time by the Company’s Chief Financial Officer are +prohibited from entering into hedging transactions and from pledging our Common Stock pursuant to a formal policy concerning such +activities adopted by the Board of Directors. +Corporate Social Responsibility +Policy +The +Company is committed to operating its business in a socially responsible manner. We strive to incorporate this commitment into +every aspect of our business, including the design of our products, the quality, safety and sourcing of our products, the safety +and fair treatment of our employees, animal welfare and compliance with laws, including the Foreign Corrupt Practices Act and +the SEC’s Conflict Minerals rule. These guiding principles are set forth in our Corporate Social Responsibility Policy and +we expect all of our employees to be familiar with and to adhere to them. We strive to do business with vendors and suppliers +that share our views and commitments to quality products and ethical business principles. We will only engage vendors and suppliers +that demonstrate a commitment to meeting our standards. +Certain Relationships +and Related Party Transactions +Steven +Madden Employment Agreement. Effective as of July 1, 2005, the Company amended and restated its employment agreement with +the Company’s founder and Creative and Design Chief, Steven Madden, pursuant to which Mr. Madden agreed to continue +to serve as the Company’s Creative and Design Chief. The term of Mr. Madden’s employment under his employment +agreement commenced on July 1, 2005 and, in accordance with the amendment of the agreement effective December 31, 2011, will +end on December 31, 2023. Prior to this recent amendment, the agreement had provided for an annual salary of $600,000, with +a 7% increase of base salary on a compound basis in each of the third, fifth, seventh and ninth years of the agreement. The agreement +had also provided for an annual cash bonus in an amount equal to at least 2% of the Company’s EBITDA (the “Annual +Bonus”) and an annual cash bonus in relation to “new business” (as defined in the agreement) in an +amount equal to at least (i) 2.5% of new business gross direct revenues plus (ii) 10% of all license or other fee income +above $2,000,000 (the “New Business Bonus”). The agreement, as amended, increases Mr. Madden’s annual base +salary but eliminates the Annual Bonus and the New Business Bonus and provides that all cash bonuses subsequent to the fiscal +year ended December 31, 2011 will be at the sole discretion of the Company’s Board of Directors. Under the agreement, +as amended, Mr. Madden’s annual base salary was fixed at $5,416,667 in 2012, $7,416,667 in 2013, $9,666,667 in 2014, +$11,916,667 in 2015 and $10,697,917 in 2016 and in each year thereafter through the end of the term of employment. In addition, +the amended agreement entitles Mr. Madden to an annual life insurance premium reimbursement of up to $200,000. The amendment +also eliminates an annual non-accountable expense allowance of $200,000 that had been previously provided to Mr. Madden under +the agreement. Pursuant to the amended agreement, on February 8, 2012, Mr. Madden was granted 1,463,056 restricted shares +of Common Stock (the number of shares indicated having been adjusted for an October 1, 2013 three-for-two stock split effected +as a stock dividend), valued at approximately $40 million, under the 2006 Plan. The restricted Common Stock will vest in +equal annual installments over seven years commencing on December 31, 2017 through December 31, 2023, subject to Mr. Madden’s +continued employment with the Company on each such vesting date. +17 +On +June 30, 2012, pursuant to an election right granted to him under the agreement, as amended, Mr. Madden notified the Company +of his election to receive an additional restricted stock award valued at $40 million in consideration of a reduction in +his annual base salary in years subsequent to 2012. Accordingly, on July 3, 2012, Mr. Madden was issued 1,893,342 restricted +shares of Common Stock (the number of shares indicated having been adjusted for an October 1, 2013 three-for-two stock split +effected as a stock dividend) under the 2006 Plan. The restricted Common Stock will vest in equal annual installments over +six years commencing on December 31, 2018 through December 31, 2023, subject to Mr. Madden’s continued +employment with the Company on each such vesting date. As a result of his election to receive an additional restricted stock award, +Mr. Madden’s annual base salary for years subsequent to 2012 has been reduced as follows: $4,000,000 in 2013, $6,125,000 +in 2014, $8,250,000 in 2015 and $7,026,042 in 2016 and in each year thereafter through the end of the term of employment. +Mr. Madden +is also eligible to receive annually, on or about the date of the Company’s annual meeting of stockholders (but not later +than June 30 th ), an option grant (the “Annual Option”) to purchase a number of shares of Common Stock, +with such number to be equal to the greater of (a) 100% of the largest aggregate number of shares of Common Stock available +upon the exercise of an option or options granted to any other continuing full-time employee of the Company during the preceding +twelve-month period and (b) 100,000 shares of Common Stock; provided, however, that a grant to Mr. Madden in excess +of 150% of the number of shares of Common Stock subject to options granted to such other continuing full-time employee would require +stockholder approval. Any Annual Option granted to Mr. Madden would vest quarterly over a one-year period following the grant +date and would be exercisable at a price equal to the closing price of the Company’s Common Stock on the grant date for +a period of five years following the grant date. In addition to the Annual Option, the agreement, as amended, provides for a potential +additional one-time stock option grant to purchase 750,000 shares of the Company’s Common Stock (the number of shares subject +to this potential stock option award having been adjusted for an October 1, 2013 three-for-two stock split effected as a +stock dividend) in the event that the Company achieves earnings per share, on a fully-diluted basis, equal to $3.00 in any +fiscal year ending December 31, 2015 or after. If granted, the option would vest in equal annual installments of 20% over +a five-year period and be exercisable for a period of seven years at a price equal to the closing price of the Company’s +Common Stock on the date immediately preceding the grant date. +In +the event of Mr. Madden’s death, his employment agreement provides for the payment to Mr. Madden’s estate +of his base salary for the 12-month period immediately subsequent to the date of his death. Further, in the event that Mr. Madden’s +employment agreement is terminated due to Mr. Madden’s total disability (as defined in the agreement), “for cause” +(as defined in the agreement) or due to Mr. Madden’s resignation, the Company is obligated to pay Mr. Madden +the amount of compensation that is accrued and unpaid through the date of termination. In the event Mr. Madden’s employment +agreement is terminated for any reason (other than “for cause” or due to his death, total disability or resignation), +the Company is obligated to pay Mr. Madden, in installments, the balance of his base salary that would have been paid by +the Company under the agreement for the full term of the agreement. If, during the period commencing 120 days prior to a +“change of control” (as defined in the employment agreement) transaction and ending on the first anniversary +of a change of control transaction, Mr. Madden’s employment is terminated by the Company other than for cause or by +the resignation of Mr. Madden for “good reason” (as defined in the employment agreement), or if Mr. Madden +resigns for good reason or without good reason within 30 days following a change of control transaction, all unvested options +to purchase shares of Common Stock held by Mr. Madden will vest on the date of termination or resignation and Mr. Madden +will be entitled to receive a lump sum cash payment equal to the amount of compensation that is accrued and unpaid through the +date of termination plus $35 million. Mr. Madden’s employment agreement contains other customary provisions, including +provisions regarding expense reimbursement, confidentiality, solicitation and competition. +18 +For +the 2016 Fiscal Year, Mr. Madden earned $7,026,042 in base salary and received $200,000 for the payment of an annual life +insurance premium. Mr. Madden also received as his Annual Option for the 2016 Fiscal Year an option to purchase 150,000 shares +of Common Stock at a price per share of $34.42. +Loan +to Steven Madden. On June 25, 2007, the Company made a loan to Steven Madden, its Creative and Design Chief and a principal +stockholder of the Company, in the amount of $3,000,000, in order for Mr. Madden to satisfy a personal tax obligation resulting +from the exercise of a stock option which was due to expire and hold the underlying shares of Common Stock. The loan is evidenced +by a secured promissory note executed by Mr. Madden in favor of the Company, the security for which is a security interest in +a certain securities brokerage account maintained by Mr. Madden with his broker; none of the securities in the securities brokerage +account are shares of the Company’s Common Stock. There have been successive amendments to the secured promissory note, +the most recent of which occurred in April 2016, at which time the secured promissory note was amended to substitute the collateral +securing the secured promissory note from shares of the Company’s Common Stock to the security interest in Mr. Madden’s +securities brokerage account. Previously, on January 3, 2012, the secured promissory note was amended and restated to extend the +maturity date of the obligation to December 31, 2023 and eliminate the accrual of interest after December 31, 2011. +Prior to the January 3, 2012 amendment, the secured promissory note had been accruing interest at the rate of 6% per annum. In +addition, the secured promissory note provides that, commencing on December 31, 2014 and annually on each December 31 +thereafter through the maturity date, one-tenth of the principal amount thereof, together with accrued interest, will be cancelled +by the Company provided that Mr. Madden continues to be employed by the Company on each such December 31. Contemporaneously, +the Company will release its security interest in a portion of the securities held in Mr. Madden’s securities brokerage +account generally correlating to the amount of indebtedness cancelled on such date. As of December 31, 2011, interest in +the amount of $1,090,000 had accrued on the principal amount of the secured promissory note and, as noted above, interest was +eliminated after December 31, 2011. On December 31, 2016, the required one-tenth of the principal amount of the secured +promissory note, together with accrued interest, was written-off by the Company. +Review, Approval or Ratification +of Transactions with Related Persons +The +Company’s written Conduct Code and Employee Handbook prohibit all conflicts of interest. Under the Conduct Code, conflicts +of interest occur when private or family interests interfere in any way, or even appear to interfere, with the interests of the +Company. The Company’s prohibition on conflicts of interest under the Conduct Code includes any related person transaction. +Related +person transactions must be approved by the Board, or by a committee of the Board consisting solely of independent directors, +who will approve the transaction only if they determine that it is in the best interests of the Company. In considering the transaction, +the Board or committee will consider all relevant factors, including, as applicable, (i) the Company’s business rationale +for entering into the transaction; (ii) the alternatives to entering into a related person transaction; (iii) whether +the transaction is on terms comparable to those available to third parties or, in the case of employment relationships, to employees +generally; (iv) the potential for the transaction to lead to an actual or apparent conflict of interest and any safeguards +imposed to prevent such actual or apparent conflicts; and (v) the overall fairness of the transaction to the Company. +The +Company has multiple processes for reporting conflicts of interests, including related person transactions. Under the Conduct +Code, all employees are required to report any actual or apparent conflict of interest, or potential conflict of interest, to +management. The Chief Financial Officer distributes a questionnaire to the Company’s executive officers and management personnel +on a quarterly basis and distributes a questionnaire to the members of the Board of Directors on an annual basis requesting certain +information regarding, among other things, their immediate family members, employment and beneficial ownership interests, which +information is then reviewed for any conflicts of interest under the Conduct Code. +The +Board of Directors, the Audit Committee and the Disclosure Committee, which is comprised of management personnel, discuss the +related party transactions, specifically, and in connection with the regular review processes attendant to the Company’s +periodic filings, including related party transaction disclosures. +If +a director is a party to or in some manner involved in a transaction involving the Company, he or she will be recused from all +discussions and decisions about the transaction. The transaction must be approved in advance whenever practicable, and if not +practicable, must be ratified as promptly as practicable. +19 +COMPENSATION +OF DIRECTORS IN THE 2016 FISCAL YEAR +The +Compensation Committee is responsible for establishing and overseeing all matters pertaining to compensation paid to directors +for service on the Board and its committees. +The +following table sets forth information concerning the compensation of the Company’s non-employee directors in the 2016 Fiscal +Year. Following the table is a discussion of material factors related to the information disclosed in the table. +Name +Fees Earned or +Paid in Cash +($) +Stock +Awards +($)(1) +All Other +Compensation +($) +Total +($) +Rose Peabody Lynch +95,000 +100,027 (2) +— +195,027 +Peter Migliorini +110,000 +100,027 (3) +— +210,027 +Richard P. Randall +110,000 +100,027 (4) +— +210,027 +Ravi Sachdev +85,000 +100,027 (5) +— +185,027 +Thomas H. Schwartz +85,000 +100,027 (6) +— +185,027 +Robert Smith +95,000 +100,027 (7) +— +195,027 +(1) Reflects +the grant date fair value of stock awards calculated in accordance with the Financial Accounting Standards Board (“FASB”) Accounting +Standards Codification (“ASC”) Topic 718. Assumptions used in the calculation of these amounts are included in +Note H to the Company’s audited financial statements for the fiscal year ended December 31, 2016 included in the Company’s +Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 28, 2017. +(2) +At December 31, 2016, the aggregate number of shares of restricted Common Stock held by Ms. Lynch was 2,977, and Ms. Lynch +had no options outstanding. +(3) +At December 31, 2016, the aggregate number of shares of restricted Common Stock held by Mr. Migliorini was 2,977, and +Mr. Migliorini had no options outstanding. +(4) At +December 31, 2016, the aggregate number of shares of restricted Common Stock held by Mr. Randall was 2,977, and Mr. Randall +had no options outstanding. +(5) At +December 31, 2016, the aggregate number of shares of restricted Common Stock held by Mr. Sachdev was 2,977, and Mr. Sachdev +had no options outstanding. +(6) At +December 31, 2016, the aggregate number of shares of restricted Common Stock held by Mr. Schwartz was 2,977, and Mr. Schwartz +had no options outstanding. +(7) At +December 31, 2016, the aggregate number of shares of restricted Common Stock held by Mr. Smith was 2,977, and Mr. Smith +had no options outstanding. +Directors +who are also employees of the Company are not paid any fees or other remuneration for service on the Board of Directors or any +of its committees. In the 2016 Fiscal Year, each non-employee director received the following compensation: (i) a grant of +2,977 shares of restricted Common Stock, vesting on the first anniversary of the grant date, June 14, 2017 and (ii) $75,000. +In +the 2016 Fiscal Year, members of the Audit Committee, Nominating/Corporate Governance Committee and Compensation Committee each +received an additional $10,000 for serving on such committees, except that the Chairman of the Audit Committee and the Chairman +of the Compensation Committee received $25,000 and $15,000, respectively, instead of $10,000. The Company reimburses its directors +for any out-of-pocket expenses incurred by them in connection with services provided in such capacity. +20 +STOCK +OWNERSHIP +Security Ownership of +Certain Beneficial Owners +The +following table sets forth information as of the Record Date (unless otherwise indicated) with respect to the beneficial +ownership of the Common Stock of the Company by each person known by the Company to be the beneficial owner of more than 5% of +the outstanding shares of the Common Stock of the Company. A person is deemed to be a beneficial owner of any securities which +that person has the right to acquire within 60 days. +Name and Address of Beneficial Owner +Amount and Nature +of Beneficial +Ownership (1) +Percentage +of Class +BlackRock +Inc. +55 East 52 nd Street +New York, NY 10055 +6,571,653 +11.00 %(2) +Steven Madden +c/o Steven Madden, Ltd. +52-16 Barnett Avenue +Long Island City, NY 11104 +4,928,536 +8.23 %(3) +FMR LLC +245 Summer Street +Boston, Massachusetts 02210 +4,612,180 +7.72 %(4) +The Vanguard Group +100 Vanguard Boulevard +Malvern, Pennsylvania 19355 +4,597,751 +7.69 %(5) +Wellington Management Group LLP +280 Congress Street +Boston, MA 02210 +2,743,346 +4.59 %(6) +(1) Beneficial +ownership as reported in the table below has been determined in accordance with Item 403 of Regulation S-K and Rule 13d-3 +of the Exchange Act and based upon 59,754,670 shares of Common Stock outstanding (excluding treasury shares) as of the Record +Date. +(2) Based +solely on a Statement on Schedule 13G filed with the SEC on January 17, 2017 by BlackRock, Inc. (“BlackRock”), +BlackRock has sole voting power with respect to 6,439,394 of such shares and sole dispositive power with respect to all such shares. +(3) Mr. Madden’s +beneficial ownership includes: (i) 958,062 shares of Common Stock held by BOCAP Corp, a corporation wholly-owned by Mr. Madden; +(ii) 3,356,398 shares of restricted Common Stock granted under the 2006 Plan (which restricted stock includes 1,463,056 shares +which will vest in equal annual installments over seven years commencing on December 31, 2017 through December 31, 2023 +and 1,893,342 shares which will vest in equal annual installments over six years commencing on December 31, 2018 through +December 31, 2023, in each case subject to forfeiture pursuant to the terms of the 2006 Plan and of Mr. Madden’s +employment agreement, as amended); (iii) 112,500 shares of Common Stock that may be acquired through the exercise of options that +are exercisable as of, or will become exercisable within 60 days of, the Record Date; and (iv) 501,576 shares of Common Stock +held by Mr. Madden directly. +(4) +Based solely on a Statement on Schedule 13G filed with the SEC on February 14, 2017 by FMR LLC (“FMR”), FMR has +sole voting power with respect to 1,031,150 of such shares and sole dispositive power with respect to all such shares. +(5) Based +solely on a Statement on Schedule 13G filed with the SEC on February 10, 2017 by The Vanguard Group (“Vanguard”), +Vanguard has sole voting power with respect to 119,659 of such shares, shared voting power with respect to 6,367 of such shares, +sole dispositive power with respect to 4,474,508 of such shares and shared dispositive power with respect to 123,243 of such shares. +21 +(6) Based +solely on a Statement on Schedule 13G filed with the SEC on February 9, 2017 by Wellington Management Group LLP (“Wellington”), +Wellington has shared voting power with respect to 2,415,970 of such shares and shared dispositive power with respect to all such +shares. +Security Ownership of +Directors and Executive Officers +The +following table sets forth information as of the Record Date (unless otherwise indicated) with respect to the beneficial +ownership of Common Stock held by (a) each current director and nominee; (b) the Chief Executive Officer, the Chief +Financial Officer and the three most highly compensated executive officers of the Company other than the Chief Executive Officer +and the Chief Financial Officer (the “Named Executive Officers”); and (c) all current directors and executive +officers as a group. A person is deemed to be a beneficial owner of any securities which that person has the right to acquire +within 60 days. Each director and executive officer has sole voting power and sole dispositive power with respect to all shares +beneficially owned by him or her. +Name of Beneficial Owner (1) +Amount and Nature +of Beneficial +Ownership (2) +Percentage +of Class +Edward R. Rosenfeld +491,148 +* %(3) +Amelia Newton Varela +357,849 +* %(4) +Arvind Dharia +86,662 +* %(5) +Awadhesh Sinha +77,183 +* %(6) +Michael Paradise +9,212 +* %(7) +Rose Peabody Lynch +6,994 +* %(8) +Peter Migliorini +2,977 +* %(9) +Richard P. Randall +24,675 +* %(10) +Ravi Sachdev +33,800 +* %(11) +Thomas H. Schwartz +11,419 +* %(12) +Robert Smith +8,716 +* %(13) +All Directors and Executive Officers as a Group (12 persons) +1,238,851 +2.06 %(14) +* Indicates beneficial +ownership of less than 1%. +(1) The address for each +of the named individuals below is c/o Steven Madden, Ltd., 52-16 Barnett Avenue, Long Island City, New York 11104. +(2) Beneficial +ownership as reported in the table above has been determined in accordance with Item 403 of Regulation S-K and Rule 13d-3 +of the Exchange Act and based upon 59,754,670 shares of Common Stock outstanding (excluding treasury shares) as of the Record +Date. +(3) Mr. Rosenfeld’s +beneficial ownership includes: (i) 242,046 shares of restricted Common Stock; and (ii) 249,102 shares of Common Stock +held by Mr. Rosenfeld. +(4) Ms. Varela’s +beneficial ownership includes: (i) 243,750 shares of Common Stock that may be acquired through the exercise of options that +are exercisable as of, or will become exercisable within 60 days of, the Record Date; (ii) 42,570 shares of restricted Common +Stock; and (iii) 71,529 shares of Common Stock held by Ms. Varela. +(5) Mr. Dharia’s +beneficial ownership includes: (i) 15,579 shares of restricted Common Stock; and (ii) 71,083 shares of Common Stock +held by Mr. Dharia. +(6) Mr. Sinha’s +beneficial ownership includes: (i) 33,248 shares of restricted Common Stock; and (ii) 43,935 shares of Common Stock +held by Mr. Sinha. +(7) Mr. +Paradise’s beneficial ownership consists of 9,212 shares of restricted Common Stock. +22 +(8) Ms. Lynch’s +beneficial ownership includes: (i) 2,977 shares of restricted Common Stock; and (ii) 4,017 shares of Common Stock held +by Ms. Lynch. +(9) Mr. Migliorini’s +beneficial ownership consists of 2,977 shares of restricted Common Stock. +(10) Mr. Randall’s +beneficial ownership includes: (i) 2,977 shares of restricted Common Stock; and (ii) 21,698 shares of Common Stock held +by Mr. Randall. +(11) Mr. Sachdev’s +beneficial ownership includes: (i) 2,977 shares of restricted Common Stock; and (ii) 30,823 shares of Common Stock held +by Mr. Sachdev. +(12) Mr. Schwartz’s +beneficial ownership includes: (i) 2,977 shares of restricted Common Stock; and (ii) 8,442 shares of Common Stock held +by Mr. Schwartz. +(13) Mr. Smith’s +beneficial ownership includes: (i) 2,977 shares of restricted Common Stock; and (ii) 5,739 shares of Common Stock held +by Mr. Smith. +(14) Includes, +in the aggregate, 303,750 shares of Common Stock that may be acquired through the exercise of options that are exercisable as +of, or will become exercisable within 60 days of, the Record Date; (ii) 380,909 shares of restricted Common Stock; and (iii) 554,192 +shares of Common Stock held by such beneficial owners. +Section 16(a) Beneficial +Ownership Reporting Compliance +Section 16(a) of +the Exchange Act requires that the Company’s directors and officers, and persons who beneficially own more than 10% of a +registered class of the Company’s equity securities, file with the SEC reports of initial ownership of Common Stock and +subsequent changes in that ownership and furnish the Company with copies of all forms they file with the SEC pursuant to Section 16(a) of +the Exchange Act. A late report was filed on March 23, 2016 to report the sale by Richard P. Randall of 1,000 shares of Common +Stock on March 18, 2016. Subject to the foregoing, to the Company’s knowledge, based solely on a review of the copies of +the reports furnished to the Company and/or written representations received from the Company’s directors, officers and +greater than 10% beneficial owners that no other reports were required, all Section 16(a) filing requirements applicable +to its officers, directors and greater than 10% beneficial owners were complied with during, or in respect of, the 2016 Fiscal +Year. +EXECUTIVE +COMPENSATION +Compensation Discussion +and Analysis +Executive +Summary +This +Compensation Discussion and Analysis describes the overall principals and objectives and specific features of our executive compensation +program, primarily focused on the executive compensation program’s application to our Chief Executive Officer and the other +executive officers of the Company included in the Summary Compensation Table, whom we refer to collectively in this Proxy Statement +as the “Named Executive Officers.” +Over +the last ten years our stock price has increased at an annual rate of 16.1%. Our 2016 year-end stock price increased 18.3% from +our 2015 year-end stock price. Our one-year total stockholder return was at the 76th percentile as compared with our peer group +for 2016. By mid-March 2017, our stock price had increased 6.3% from our 2016 year-end stock price. +During +2016, the Company delivered solid financial results, expanded our core Steve Madden Women’s business, recorded strong growth +in our retail and e-commerce business, continued to build our newer brands, including the Dolce Vita® and Blondo® brands, +expanded our digital presence, further developed our international business and continued to return capital to our shareholders. +However, the overall retail environment continued to be challenging and our consolidated sales for the year were approximately +flat. For the full year ended December 31, 2016, net sales decreased 0.4% to $1.40 billion from $1.41 billion in the prior +year. Net income was $120.9 million, or $2.03 per diluted share, in the 2016 Fiscal Year. Net income in the fiscal year ended +December 31, 2015 was $112.9 million, or $1.85 per diluted share. +23 +With +the increase in our stock price in 2016, overall Named Executive Officer bonus awards, which are primarily paid in the form of +time-vested restricted stock grants, increased 40.2% from the previous year. As our general practice is to award bonuses and grant +equity based on Named Executive Officer performance for the preceding year, we are able to maintain relative alignment between +pay and performance. +Compensation +Objectives and Strategy +The +Company’s executive officer compensation program is designed to attract and retain the caliber of officers needed to ensure +the Company’s continued growth and profitability and to reward them for their performance, for the Company’s performance +and for creating longer-term value for our stockholders. The primary objectives of the program are to: +· align +rewards with performance that creates stockholder value; +· support +the Company’s strong team orientation; +· encourage +high-potential team players to build a career at the Company; and +· provide +rewards that are cost-efficient, competitive with other similarly-positioned organizations +and fair to employees and stockholders. +The +Company’s executive compensation programs are approved and administered by the Compensation Committee of the Board of Directors. +Working with management and outside advisors, the Compensation Committee has developed a compensation and benefits strategy that +rewards performance and reinforces a culture that the Compensation Committee believes will drive long-term success. +The +compensation program rewards team accomplishments while promoting individual accountability. The executive officer compensation +program depends in significant measure on Company results, but business unit results and individual accomplishments are also very +important factors in determining each executive’s compensation. The Company has a robust planning and goal-setting process +that is fully integrated into the compensation system, enhancing a strong relationship among individual efforts, Company results +and financial rewards. +A +major portion of total compensation is placed at risk through annual and long-term incentives. As noted below, discretionary bonuses +were paid to the Named Executive Officers. The combination of incentives is designed to balance annual operating objectives and +Company earnings performance with longer-term stockholder value creation. +To +implement its primary objectives, the Company seeks to provide competitive compensation that is commensurate with performance. +The Company targets compensation at the median of the market and calibrates both annual and long-term incentive opportunities +to generate less-than-median awards when goals are not fully achieved and greater-than-median awards when goals are exceeded. +The +Company believes that there is great value to the Company in having a team of long-tenured, seasoned managers and seeks to promote +a long-term commitment from its senior executives. The Company’s team-focused culture and management processes are designed +to foster this commitment. In addition, restricted Common Stock awards granted to Named Executive Officers in the 2016 Fiscal +Year reinforce this long-term orientation with annual vesting over four to five-year periods. +Role +of the Compensation Committee +General. +The Compensation Committee provides overall guidance for the Company’s executive compensation policies and determines +the amounts and elements of compensation for the Company’s executive officers and outside directors. The Compensation Committee +currently consists of four members of the Company’s Board of Directors, Ms. Lynch and Messrs. Peter Migliorini, Thomas +Schwartz and Robert Smith, each of whom is an independent director under Rule 5605 of The Nasdaq Global Select Market listing +standards, a “non-employee director” as defined under the SEC’s rules and an “outside director” +as defined under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”). +24 +When +considering decisions concerning the compensation of executives, other than the Chief Executive Officer, the Compensation Committee +asks for the recommendations of the Chief Executive Officer, including his detailed evaluation of each executive’s performance. +No executive has a role in recommending compensation for outside directors. With respect to the application of the 2006 Plan to +non-employee directors, the Board of Directors functions as the Compensation Committee. +Use +of Outside Advisors. In making its determinations with respect to executive compensation, the Compensation Committee has historically +engaged the services of an independent compensation consulting firm. The Compensation Committee has retained the services of Arthur +J. Gallagher & Co.’s Human Resources & Compensation Consulting Practice (“Gallagher”) since +2005 to assist with its review of the compensation packages and employment agreements of the Chief Executive Officer and other +executive officers. In 2016 and 2017, Gallagher worked with the Compensation Committee to assess the reasonableness of discretionary +cash bonus payments and equity grants to Messrs. Rosenfeld, Dharia, Sinha and Paradise and Ms. Varela based on the Company’s +and the individual’s performance in the fiscal year ended December 31, 2016 and the reasonableness of the terms of +new employment agreements for Ms. Varela, Mr. Sinha and Mr. Paradise as compared with comparable positions in the peer group listed +below. Executive compensation for the other Named Executive Officers was based on prior employment agreements with pay structures +and levels guided by Gallagher’s market studies just prior to the consummation of the agreements. Position-specific market +studies were completed at the time of the employment agreement extension in support of the design of these agreements. The Compensation +Committee also consulted Gallagher with respect to the establishment of a performance-based bonus pool based on a percentage of +the Company’s net income in the 2016 Fiscal Year. Gallagher provides only executive compensation consulting services and +works with management only at the behest of the Compensation Committee. +The +Compensation Committee retains Gallagher directly, although in carrying out assignments, Gallagher also interacts with Company +management, when necessary and appropriate, in order to obtain compensation and performance data for the executives and the Company. +In addition, Gallagher may, in its discretion, seek input and feedback from management regarding its consulting work product for +the Compensation Committee in order to confirm alignment with the Company’s business strategy and identify data questions +or other similar issues, if any, prior to completion of a project for the Compensation Committee. +Independence +of Outside Advisors. The Compensation Committee has the sole authority to retain, terminate, approve the fees and set the +terms of the Company’s relationship with any outside advisors who assist the Committee in carrying out its responsibilities, +and may select or receive advice from any compensation consultant or other advisor only after taking into consideration all factors +relevant to the consultant’s independence from management, including the factors set forth in the Nasdaq’s rules. +Accordingly, +the Compensation Committee reviews annually its relationship with Gallagher to ensure its independence on executive compensation +matters. Prior to selecting and receiving advice from Gallagher with respect to executive compensation in the 2016 Fiscal Year, +the Compensation Committee reviewed the independence of Gallagher and the individual representatives of Gallagher who served as +the committee’s advisors. The Compensation Committee determined that no conflicts of interest exist between the Company +and Gallagher (or any individuals working on the Company’s account on behalf of Gallagher). In reaching such determination, +the Compensation Committee considered, among other things, the following factors: (i) that Gallagher provides no services +to the Company other than the executive compensation consulting services; (ii) the fees paid by us to Gallagher as a percentage +of Gallagher’s total revenue; (iii) the representations by Gallagher as to its policies and procedures that are designed +to prevent a conflict of interest; (iv) any business or personal relationships between the individual representatives of +Gallagher who advised the Compensation Committee and any member of the Compensation Committee; and (v) any business or personal +relationships between our executive officers and Gallagher or the individual representatives of Gallagher. +25 +Consideration +of 2016 Stockholder Say on Pay Vote. At our 2016 Annual Meeting of Stockholders, our stockholders overwhelmingly +approved, on an advisory basis, the compensation of our Named Executive Officers (97% of votes cast). This continues the string +of 94% or higher approvals that began with the initial say on pay vote in 2011. The Compensation Committee believes this level +of stockholder support reflects a very strong endorsement of our compensation policies and decisions. The Compensation Committee +has considered the results of this advisory vote on executive compensation in determining the Company’s compensation policies +and decisions for 2017, and has determined that these policies and decisions are appropriate and in the best interests of the +Company and its stockholders at this time. +Compensation +Structure +Pay +Elements - Overview +The Company +utilizes four main components of compensation: +· +base +salary; +· +annual +performance-based bonuses; +· +long-term +equity incentives (consisting of stock options and/or restricted stock); and +· +benefits +and perquisites. +Pay +Elements - Details +Base +Salary . The Company paid base salaries to each of the Named Executive Officers to provide them with fixed pay commensurate +with the Named Executive Officer’s role and responsibilities, experience, expertise and individual performance. As more +fully described in the section of this Proxy Statement captioned “Employment Arrangements,” as of December 31, +2016, the Company had employment agreements with each of the Named Executive Officers. The Compensation Committee, as constituted +at the time the parties entered into the employment agreements or any amendments thereof, reviewed and approved the salary established +in each such agreement or amendment. The Compensation Committee considered each employee’s salary history, value in the +marketplace and performance (including at the Company and previous employment). +The +annual base salary of our Chief Executive Officer, Edward R. Rosenfeld, was fixed at $800,000 for the 2016 Fiscal Year under an +employment agreement dated December 31, 2015, which remains in effect until December 31, 2018 and provides Mr. Rosenfeld +with an annual base salary of $850,000 for the fiscal year ending December 31, 2017. The annual base salary of our President, +Amelia Newton Varela, was fixed at $600,000 for the 2016 Fiscal Year under an employment agreement effective January 1, 2014, +as amended which expired by its terms on December 31, 2016. Ms. Varela’s new employment agreement dated December 30, 2016, +which remains in effect until December 31, 2019, provides Ms. Varela with an annual base salary of $630,000 for the fiscal year +ending December 31, 2017. The annual base salary of our Chief Operating Officer, Mr. Sinha, was fixed at $661,500 for the +2016 Fiscal Year under an employment agreement dated January 10, 2014, which expired by its terms on December 31, 2016. +Mr. Sinha’s new employment agreement dated December 30, 2016, which remains in effect until December 31, 2019, provides +Mr. Sinha with an annual base salary of $681,000 for the fiscal year ending December 31, 2017. Under the employment agreement, +as amended, of our Chief Financial Officer, Arvind Dharia, Mr. Dharia’s annual base salary for the 2016 Fiscal Year +was $582,455 and for the remainder of the term of the employment agreement, which expires on December 31, 2017. Under an +employment agreement dated April 5, 2016, the annual base salary of our Executive Vice President – General Counsel, Michael +Paradise, whose employment with the Company commenced on May 23, 2016, was fixed at $400,000 for the 2016 Fiscal Year and for +the remainder of the term of the employment agreement, which will expire on December 31, 2018. Mr. Paradise’s agreement +provides that his base salary will be subject to periodic increase during the term in the discretion of the Board of Directors +or the Compensation Committee. Please see the section of this Proxy Statement captioned “Summary Compensation Table” +and “Employment Arrangements” for a more detailed description of their employment agreement and compensation. The +2016 salary increases, if any, for our Named Executive Officers, as reflected in the following table, are generally consistent +with those of other management employees. +Named Executive Officer +2016 +Salary +2017 +Salary +Edward R. Rosenfeld +$ 800,000 +$ 850,000 +Amelia Newton Varela +$ 600,000 +$ 630,000 +Arvind Dharia +$ 582,445 +$ 582,445 +Awadhesh Sinha +$ 661,500 +$ 681,000 +Michael Paradise* +$ 400,000 +$ 400,000 +* +Mr. Paradise’s employment with the Company commenced on May 23, 2016. +26 +Cash +Bonus – Not Based on Specific Performance Metrics . In June 2016, Mr. Paradise received a $250,000 cash sign-on bonus +pursuant to his employment agreement dated April 5, 2016 and subject to the terms of a sign-on bonus agreement dated April 5, +2016 between the Company and Mr. Paradise, which provides that if Mr. Paradise voluntarily resigns from his employment with the +Company other than for “good reason” (as defined in the employment agreement) or Mr. Paradise’s employment is +terminated by the Company for “cause” (as defined in the employment agreement) within one year of the date of his +employment, Mr. Paradise will return the sign-on bonus to the Company. The Compensation Committee reviewed and approved the sign-on +bonus provision in Mr. Paradise’s employment agreement. +Annual +Performance-based Bonus - Based on Specific Performance Metrics . Annual performance-based cash bonuses, if any, for Named +Executive Officers are established in their respective employment agreements. The Compensation Committee reviewed and approved +the bonus provisions fixed in each such employment agreement at the time the parties entered into such agreements and any amendments +thereof. Such bonus provisions generally provide for variable or discretionary bonuses designed to reward attainment of business +goals. +Mr. Sinha’s +employment agreement entitles him to an annual performance-based bonus for the 2016 Fiscal Year in an amount equal to 2% of the +increase in the Company’s EBITDA for that year over the Company’s EBITDA for the immediately preceding year. For any +business acquired after January 1, 2014, EBITDA from the acquired business is included in the bonus calculation starting with +the first full quarter under Company ownership, provided that the prior year’s EBITDA will likewise be adjusted to include +EBITDA from the acquired business for comparable quarters in the prior year on a pro forma basis assuming the Company had owned +the business. The maximum annual bonus is $600,000, the first $300,000 of which is payable in cash and for any amount of the annual +bonus in excess of $300,000 by a grant of restricted shares of the Company’s common stock, which restricted common stock +will vest in three equal annual installments commencing on the first anniversary of the grant date. For the 2016 Fiscal Year, +Mr. Sinha’s annual performance-based cash bonus was $58,584, reflecting 2% of $2,929,206, the increase in 2016 EBITDA (exclusive +of EBITDA attributable to businesses acquired in the period beginning on January 2, 2014 and ending on December 31, 2016) over +that of 2015. +Ms. Varela’s +employment agreement entitles her to an annual performance-based cash bonus for the 2016 Fiscal Year in an amount equal to 2% +of the increase in the Company’s total EBIT for that year over the Company’s EBIT for the immediately preceding year, +less any deductions as shall be required to be withheld by any applicable laws or regulations. EBIT attributable to any business +acquired by the Company after September 4, 2015 will not be included in the calculation of this bonus. This performance-based +bonus was not achieved with respect to the 2016 Fiscal Year. +As +provided in the 2006 Plan, the maximum payment that may be made to an individual under any performance-based cash award during +any fiscal year and subject to the attainment of specified performance goals is $10,000,000. The Compensation Committee may, in +its sole discretion, elect to pay an individual an amount that is less than the individual’s target award regardless of +the degree of attainment of the performance goals. +For +the 2016 Fiscal Year, the Compensation Committee established a bonus pool for Named Executive Officers and other key executives +of the Company based on 6% of net income of the Company achieved in the 2016 Fiscal Year intended to comply with the provisions +of Section 162(m) of the Code. Net income was selected because it is highly correlated with stock price performance. +The Compensation Committee also fixed for each executive his or her maximum share of the 2016 bonus pool, which was 30% for Mr. Rosenfeld +and 14% for each of the other Named Executive Officers. In the 2016 Fiscal Year, the Company achieved net income of $120,911,000, +which resulted in a bonus pool of $7,254,660. The Compensation Committee determined to pay bonuses to certain of the Named Executive +Officers in amounts that were below their individual target awards for the 2016 Fiscal Year and to pay the bonuses in a combination +of cash and restricted shares of Common Stock that vest annually over five years. Accordingly, on March 15, 2017, the Company +paid performance-based cash bonuses of $250,000, $200,000, $141,416 and $75,000 to Messrs. Rosenfeld, Dharia, Sinha and Paradise, +respectively, and on March 15, 2017, the Company paid performance-based bonuses in the form of restricted stock to three +of our Named Executive Officers as indicated in the following table. +Named Executive Officer +2017 +Restricted +Stock Grant +Value for 2016 +Performance +Number +of +Shares of +Restricted +Stock Awarded* +Annual +Vesting +Edward R. Rosenfeld +$ 1,500,000 +39,894 +5 +years +Amelia Newton Varela +$ 500,000 +13,298 +5 +years +Arvind Dharia +— +— +— +Awadhesh Sinha +— +— +— +Michael Paradise +$ 75,000 +1,995 +5 +years +* +In accordance with applicable SEC rules, the Summary Compensation Table included in this Proxy Statement does not report the grant +date fair value of these restricted stock awards because, while earned in 2016, the grants were not made until after the close +of the 2016 Fiscal Year. The 2017 Summary Compensation Table to be included in our proxy statement for our 2018 Annual Meeting +of Stockholders will contain the grant date fair value of these restricted stock awards provided these individuals are named executive +officers in that proxy statement. +27 +The +decision to pay cash bonuses to Messrs. Rosenfeld, Dharia, Sinha and Paradise and to award restricted shares of Common Stock to +Mr. Rosenfeld, Ms. Varela and Mr. Paradise for the 2016 Fiscal Year and the amount of each such Named Executive Officer’s +bonus was determined at the discretion of the Compensation Committee, but within the parameters of the bonus pool for Named Executive +Officers. The Compensation Committee evaluated a variety of indicators of the Company’s stock price performance and overall +financial performance, including revenue growth and profitability, and assessed and made subjective judgments as to each of these +executive’s individual contribution towards the Company’s performance in the 2016 Fiscal Year in determining whether +to pay bonuses to these executives and establishing the amounts to be paid. With respect to the determination to award bonuses +to Messrs. Dharia, Sinha and Paradise and Ms. Varela, the Compensation Committee also considered the recommendations of the +Chief Executive Officer, Mr. Rosenfeld. +The +Compensation Committee consulted Gallagher regarding the establishment of the bonus pool and the individual target awards for +the 2016 Fiscal Year to ensure the bonus pool and the individual target awards were within market range for each executive. +Long-term +Equity Incentives . Management and the Compensation Committee believe that equity-based awards are an important factor in aligning +the long-term financial interest of the executive officers and stockholders. The Compensation Committee continually evaluates +the use of equity-based awards and intends to continue to use such awards in the future as part of designing and administering +the Company’s compensation program. Beginning in 2006, the Compensation Committee modified its prior practice of granting +equity incentives solely in the form of stock options with periodic awards of restricted stock in order to grant awards that contain +both substantial incentive and retention characteristics. These awards are designed to provide emphasis on preserving stockholder +value generated in recent years while providing significant incentives for continuing growth in stockholder value. +In +the 2016 Fiscal Year, the Company made grants of 27,563, 13,782, 3,101 and 3,101 restricted shares of Common Stock to Mr. Rosenfeld, +Ms. Varela, Mr. Dharia and Mr. Sinha, respectively, for performance in the fiscal year ended December 31, 2015. The +restricted stock awards made to Mr. Rosenfeld and Ms. Varela vest in five equal annual installments. The restricted stock awards +made to Messrs. Dharia and Sinha vest in four equal annual installments. Gallagher reviewed the individual grant values relative +to market practice. All of the equity awards in the 2016 Fiscal Year were made under the 2006 Plan. +The +restricted stock awards in the 2016 Fiscal Year also included a grant to (a) Mr. Rosenfeld of 75,000 restricted shares of Common +Stock on February 5, 2016 in relation to his new three-year employment agreement dated December 31, 2015, which restricted stock +award will vest in five equal annual installments and (b) Mr. Paradise of 7,217 restricted shares of Common Stock on June 1, 2016 +in relation to his employment agreement dated April 5, 2016, which restricted stock award will vest in four substantially equal +annual installments. +28 +The +Committee intends to continue to review the equity mix to achieve the ideal incentive for both performance and retention. With +respect to stock options, the 2006 Plan provides that the exercise price shall be the closing market price per share of the Company’s +Common Stock on the business day immediately preceding the grant date, which is fair market value for purposes of the 2006 Plan. +Other +Benefits and Perquisites . The Company’s executive compensation program also includes other benefits and perquisites. +These benefits and perquisites include annual matching contributions to executive officers’ 401(k) plan accounts, company-paid +medical benefits, automobile allowances and leased automobiles, and life insurance coverage. The Compensation Committee annually +reviews these other benefits and perquisites and makes adjustments as warranted based on competitive practices, the Company’s +performance and the individual’s responsibilities and performance. The Compensation Committee has approved these other benefits +and perquisites as a reasonable component of the Company’s executive officer compensation program. Please see the section +of this Proxy Statement captioned “Summary Compensation Table and, specifically, the column entitled “All Other Compensation” +and the corresponding footnotes. +Pay +Mix +The +Company utilizes the particular elements of compensation described above because the Company believes that it provides a well-proportioned +mix of secure compensation, retention value and at-risk compensation, which produces short-term and long-term performance incentives +and rewards. By following this approach, the Company provides the executives a measure of security in the minimum expected level +of compensation, while motivating the executives to focus on business metrics and other variables within their particular sector +which will increase sales and margins and at the same time lower costs so as to produce a high level of short-term and long-term +performance for the Company and long-term wealth creation for the executives, as well as reducing the risk of recruitment of top +executive talent by competitors. The mix of metrics used for the annual performance bonuses and the Company’s long-term +incentive program likewise provides an appropriate balance between short-term financial performance and long-term stock performance. +For +the Named Executive Officers, the mix of compensation is weighted heavily toward at-risk pay (annual incentives and long-term +incentives). Maintaining this pay mix results fundamentally in a pay-for-performance orientation for the Company’s executives, +which is aligned with the Company’s stated compensation philosophy of providing compensation commensurate with performance. +Pay +Levels and Benchmarking +Pay +levels for executives are determined based on a number of factors, including the individual’s roles and responsibilities +within the Company, the individual’s experience and expertise, the pay levels for peers within the Company, pay levels in +the marketplace for similar positions and performance of the individual and the Company as a whole. The Compensation Committee +is responsible for approving pay levels for the Named Executive Officers. In determining the pay levels, the Compensation Committee +considers all forms of compensation and benefits. +29 +The +Compensation Committee assesses “competitive market” compensation using a number of sources. The primary data source +used in setting competitive market levels for the Named Executive Officers is the information publicly disclosed by a peer group +of the Company, which will be reviewed annually and may change from year to year. For the 2016 Fiscal Year, executive compensation +and compensation design was reviewed for the purpose of assessing bonus awards in early 2016 in the context of overall compensation +and in relation to the following peer companies: +Caleres, +Inc. +Guess, +Inc. +Perry +Ellis International, Inc. +Cato +Corp. +Kate +Spade & Co. +Shoe +Carnival, Inc. +Crocs, +Inc. +Lululemon +Athletica, Inc. +Skechers +U.S.A. Inc. +Deckers +Outdoor Corp. +Movado +Group, Inc. +Under +Armour, Inc. +G-III +Apparel Group, Ltd. +New +York & Co. +Wolverine +Worldwide +Genesco, +Inc. +Oxford +Industries, Inc. +After +consideration of the data collected on external competitive levels of compensation and internal needs, the Compensation Committee +makes decisions regarding the Named Executive Officer’s target total compensation opportunities based on the need to attract, +motivate and retain an experienced and effective management team. Relative to the competitive market data, the Compensation Committee +generally intends that the base salary and target annual incentive compensation for each Named Executive Officer will be at the +median of the competitive market. +As +noted above, notwithstanding the Company’s overall pay positioning objectives, pay opportunities for specific individuals +vary based on a number of factors such as scope of duties, tenure, institutional knowledge and/or difficulty in recruiting a new +executive. Actual total compensation in a given year will vary above or below the target compensation levels based primarily on +the attainment of operating goals and the creation of stockholder value. +Compensation +Committee Discretion +The +Compensation Committee retains the discretion to decrease all forms of incentive payouts based on significant individual or Company +performance shortfalls, with the exception of any such payouts that are to be made pursuant to contractual commitments, such as +the bonuses that may be paid to Mr. Sinha and Ms. Varela, which are tied to the Company’s EBITDA and EBIT, respectively, +for the preceding year pursuant to their employment agreements. Similarly, the Compensation Committee retains the discretion to +increase payouts and/or consider special awards for significant achievements, including, but not limited to, superior asset management, +investment or strategic accomplishments and/or consummation of acquisitions, divestitures, capital improvements to existing properties, +or sales made by certain of the Company’s divisions. +Risk Assessment +Bonus +payments to executives are based either on the discretion of the Compensation Committee or are tied to growth in various indicators +of financial performance, such as EBITDA and EBIT. Long-term incentives have been granted in the form of stock options and time-vested +restricted stock that generally vest over four or five years. These programs have been in place for several years and have proved +effective in rewarding performance while not encouraging inappropriate risk-taking. +The +Compensation Committee undertook to review and evaluate all of our executive and company-wide compensation plans and programs +to assess whether any aspect of these plans and programs would encourage inappropriate risk-taking by the Company’s executives +and non-executive employees that could have a material adverse effect on the Company and to confirm that the Company has adequate +risk management controls in place to ensure that executive and company-wide compensation is reasonable and achieves its intended +incentive without creating unacceptable risk. Based on such review and evaluation, the Compensation Committee believes there is +no material adverse risk to the Company that is related to our compensation programs for executives and non-executives. +30 +This review +and evaluation of the risks associated with our compensation plans and programs consisted of: +· identifying +those business risks that could be material to the Company and identifying our existing +risk management system; +· reviewing +and analyzing our compensation plans and programs to identify plan and program features +that could potentially encourage or introduce excessive or imprudent risk taking of a +material nature; +· identifying +the business risks that our compensation plan and program features could potentially +encourage or create; +· balancing +these business risks against our existing internal control systems designed to manage +and mitigate these business risks; and +· analyzing +whether the unmitigated risks, as a whole, are reasonably likely to have a material adverse +effect on the Company. +Various +persons were consulted during the course of the assessment, including our executive officers and senior members of our human resources +department. The Compensation Committee engages Gallagher to review our executive and company-wide compensation plans and programs +and provide advice regarding appropriate levels of incentive. +The +Compensation Committee noted several features of our compensation structure that mitigate risk, including, for example: +· the +Company utilizes a pay mix that is well balanced between short-term financial performance +and long-term stock performance, comprised of secure compensation in the form of base +salary, short-term incentives in the form of potential for cash bonuses, and long-term +incentives in the form of stock options and time-vested restricted stock that generally +vest over four or five years; +· in +most instances, management or the Compensation Committee retains the discretion to decrease +all forms of incentive compensation based on significant individual or Company performance +shortfalls; +· we +periodically benchmark our compensation plans and programs and target executive and non-executive +compensation within the normal limits of the competitive market; and +· the +Compensation Committee provides oversight of the Company’s compensation plans and +programs and compensation philosophy, makes recommendations to the Board with respect +to improvements to our compensation plans and programs, and is responsible for reviewing +and approving executive compensation and administering and awarding incentive, deferred +and equity compensation to our senior executives. +In light +of the assessment described above, it was concluded that the risks associated with our compensation plans and programs (executive +and company-wide) are not reasonably likely to have a material adverse effect on the Company. +Implications +of Tax and Accounting Matters +As +a general matter, the Compensation Committee considers the various tax and accounting implications of compensation vehicles employed +by the Company. While the Compensation Committee reviews and considers both the accounting and tax effects of various components +of compensation, these effects are not a significant factor in the Compensation Committee’s allocation of compensation among +the different components. +In +general, the Company believes that compensation paid to executive officers should be deductible for U.S. tax purposes. In certain +instances, however, the Compensation Committee also believes that it is in the Company’s best interests, and that of its +stockholders, to have the flexibility to pay compensation that is not deductible under the limitations of Section 162(m) of +the Code in order to provide a compensation package consistent with the Company’s objectives. For Fiscal Year 2016, the +Compensation Committee believes incentive compensation paid and awarded will not be subject to the limitations of Section 162(m). +31 +As +more fully described below under the heading “Termination, Change-in-Control and Non-Competition/Non-Solicitation,” +all of our Named Executive Officers are entitled to receive certain compensation in the event of a termination of employment in +connection with a change-in-control event for the Company, which payments may trigger the application of the “golden parachute” +provisions of Sections 280G and 4999 of the Code. Section 280G of the Code disallows a tax deduction with respect to +excess parachute payments to certain executives of companies that undergo a change-in-control. In addition, Section 4999 +of the Code imposes a 20% excise tax on the individual receiving the excess parachute payment. Excess parachute payments are golden +parachute payments that exceed an amount determined under Section 280G based on the executive’s prior compensation. +In approving the compensation arrangements of our Named Executive Officers, our Compensation Committee considers all elements +of the cost to our Company of providing such compensation, including the potential impact of Sections 280G and 4999, which, +under certain circumstances, may limit the deductibility to the Company of executive compensation. However, our Compensation Committee +may determine, in its judgment, to authorize compensation arrangements that could give rise to loss of deductibility under Section 280G +and the imposition of excise taxes under Section 4999 when it believes that such arrangements are appropriate to attract +and retain executive talent. +Conclusion +The +level and mix of compensation that is finally decided upon as to each executive is considered within the context of both the objective +data from the Company’s competitive assessment of compensation and performance, as well as discussion of the subjective +factors as outlined above. The Compensation Committee believes that each of the compensation packages for the Named Executive +Officers is within the competitive range of practices when compared to the objective comparative data even where subjective factors +have influenced the compensation decisions. +Compensation Committee +Interlocks and Insider Participation +During +the 2016 Fiscal Year, the following directors served on the Compensation Committee: Peter Migliorini (Chairman), Thomas H. Schwartz, +Rose Peabody Lynch and Robert Smith. During the 2016 Fiscal Year: +· +none of the members of the Compensation Committee was an officer (or former officer) or employee of the Company or any of its subsidiaries; +· +none of the members of the Compensation Committee had a direct or indirect material interest in any transaction in which the Company was a participant and the amount involved exceeded $120,000; +· +none of the Company’s executive officers served on the compensation committee (or another board committee with similar functions or, if none, the entire board of directors) of another entity where one of that entity’s executive officers served on the Company’s Compensation Committee; +· +none of the Company’s executive +officers was a director of another entity where one of that entity’s executive officers served on the Company’s Compensation +Committee; and +· +none of the Company’s executive officers served on the compensation committee (or another board committee with similar functions or, if none, the entire board of directors) of another entity where one of that entity’s executive officers served as a director on the Company’s Board of Directors. +32 +Executive Officers +The following +table identifies the executive officers of the Company, and their ages and positions: +Name +Age +Position +Edward R. Rosenfeld +41 +Chairman of the Board +and Chief Executive Officer +Amelia Newton Varela +45 +President +Arvind Dharia +67 +Chief Financial Officer +and Secretary +Awadhesh Sinha +71 +Chief Operating Officer +Michael Paradise +55 +Executive Vice President – General +Counsel +Karla Frieders +40 +Chief Merchandising Officer +Amelia +Newton Varela has been President of the Company since September 2015. Previously, Ms. Varela was Executive Vice President of Wholesale +since April 2008. Ms. Varela was Executive Vice President of Wholesale Footwear from November 2004 to April 2008. Prior to this +tenure, she was Vice President of Sales for the Steve Madden Women’s Wholesale Division from January 2000. Prior to that, +she was an Account Executive for the Steve Madden Women’s Wholesale Division. She graduated from The Fashion Institute of +Technology in 1995. +Arvind +Dharia has been the Chief Financial Officer of the Company since October 1992 and was a director of the Company from December 1993 +through May 2004. Mr. Dharia has been Secretary of the Company since 1993. From December 1988 until joining the +Company in September 1992, Mr. Dharia was Assistant Controller of Millennium III Real Estate Corp., a real estate management +company. +Awadhesh +Sinha became the Chief Operating Officer of the Company in July 2005. Mr. Sinha was a director of the Company, from October 2002 +to July 2005, before joining the Company as its Chief Operating Officer. Mr. Sinha was the Chief Operating Officer and Chief +Financial Officer of WEAR ME Apparel Inc., a company that designs, manufactures and markets branded and non-branded children’s +clothing, from 2003 to July 2005. Prior to that, Mr. Sinha worked for Salant Corporation, a company that designs, manufactures +and markets men’s clothing, for 22 years, and held the position of Chief Operating Officer and Chief Financial Officer +of Salant Corporation from 1998 to 2003. +Michael +Paradise joined the Company in May 2016 as Executive Vice President – General Counsel. From 2009, prior to joining the Company, +Mr. Paradise was a partner at the New York City law firm of McLaughlin & Stern, LLP, where he practiced corporate, securities +and commercial law. He also practiced law at a number of medium and large law firms in New York City. Mr. Paradise received his +J.D. degree, with honors, from George Washington University Law School in 1987, and his B.A. degree, cum laude , from the +University of Rochester in 1984. +Karla +Frieders has been the Chief Merchandising Officer of the Company since September 2015. Previously, Ms. Frieders served as the +President of Retail from January 2013 and the Vice President of Retail from October 2009 until January 2013. Prior to these roles, +Ms. Frieders held various buying positions at the Company from 1999. +Please +see the section of this Proxy Statement captioned “Proposal One: Election of Directors -- Biographical Summaries of Nominees +for the Board of Directors” for information concerning the Company’s Chairman of the Board and Chief Executive Officer, +Edward R. Rosenfeld, and the Company’s other director nominees. +33 +SUMMARY +COMPENSATION TABLE +The +following table sets forth the compensation information for the Company’s Chief Executive Officer, Chief Financial Officer +and the three most highly compensated executive officers other than the Chief Executive Officer and Chief Financial Officer relating +to the fiscal years ended December 31, 2016, 2015 and 2014, respectively. In this Proxy Statement, the Company refers to +this group of people as the Company’s “Named Executive Officers.” +In +accordance with applicable SEC rules, the Summary Compensation Table includes, for a particular fiscal year, only those stock +awards made during that fiscal year and not any awards made after year-end even if awarded for services rendered in that year. +SEC rules require that such awards be reflected in the year of grant and, as such, awards made after the end of the 2016 Fiscal +Year will appear in the Summary Compensation Table to be included in our proxy statement for our 2018 Annual Meeting of Stockholders. +Name and Principal Position +Fiscal +Year +Salary +($) +Bonus +($) +Stock +Awards +($) (1) +Option +Awards +($) (1) +Non-Equity +Incentive Plan +Compensation +($) +All Other +Compensation +($) +Total +Compensation +($) +Edward R. +Rosenfeld +2016 +797,510 +— +3,350,593 +— +250,000 +25,950 (2) +4,424,053 +Chief Executive Officer +2015 +637,791 +— +3,226,490 +— +— +25,950 (3) +3,890,231 +2014 +607,754 +— +816,680 +— +— +25,800 (4) +1,450,234 +Amelia Newton Varela +2016 +600,000 +— +518,065 +— +— +22,950 (5) +1,141,015 +President +2015 +531,154 +— +563,801 +— +— +22,950 (6) +1,117,905 +2014 +500,000 +— +554,528 +930,000 +— +22,800 (7) +2,007,328 +Arvind Dharia +2016 +582,455 +— +116,567 +— +200,000 +108,912 (8) +1,007,934 +Chief Financial Officer +2015 +582,152 +— +720,011 +— +112,500 +101,817 (9) +1,516,480 +2014 +554,719 +— +— +— +— +107,168 (10) +661,887 +Awadhesh Sinha +2016 +661,015 +— +116,567 +— +200,000 (11) +23,656 (12) +1,001,238 +Chief Operating Officer +2015 +629,654 +— +202,511 +— +112,500 +22,366 (13) +967,031 +2014 +600,000 +— +999,986 +— +— +23,311 (14) +1,623,297 +Michael Paradise +2016 +238,462 +250,000 +249,997 +— +75,000 +7,154 (15) +820,613 +Executive Vice President +– General Counsel +(1) +The amounts in this column reflect the aggregate grant date fair value of awards granted during the applicable year for the fiscal +years ended December 31, 2016, December 31, 2015 and December 31, 2014, respectively, calculated in accordance +with ASC Topic 718. Assumptions used in the calculation of these amounts are included in Note H to the Company’s audited +financial statements for the fiscal year ended December 31, 2016 included in the Company’s Annual Report on Form 10-K +filed with the Securities and Exchange Commission on February 28, 2017 and in Note I to the Company’s audited financial +statements for the fiscal years ended December 31, 2015 and December 31, 2014 included in the Company’s Annual +Report on Form 10-K filed with the Securities and Exchange Commission on February 26, 2016 and February 26, 2015, respectively. +(2) Consists +of an $18,000 automobile allowance and $7,950 in annual match contributions to Mr. Rosenfeld’s 401(K) plan account. +(3) Consists +of an $18,000 automobile allowance and $7,950 in annual match contributions to Mr. Rosenfeld’s 401(K) plan account. +(4) Consists +of an $18,000 automobile allowance and $7,800 in annual matching contributions to Mr. Rosenfeld’s 401(k) plan +account. +(5) Includes +the following: $15,000 automobile allowance and $7,950 in annual matching contributions to Ms. Varela’s 401(k) plan +account. +(6) Includes +the following: $15,000 automobile allowance and $7,950 in annual matching contributions to Ms. Varela’s 401(k) plan +account. +(7) +Includes the following: $15,000 automobile allowance and $7,800 in annual matching contributions to Ms. Varela’s 401(k) plan +account. +(8) Includes the following: +$14,651 automobile allowance, $86,311 life insurance premiums and $7,950 in annual match contributions to Mr. Dharia’s +401(K) plan account. +(9) Includes the following: +$12,876 automobile allowance, $80,991 life insurance premiums and $7,950 in annual match contributions to Mr. Dharia’s +401(K) plan account. +34 +(10) Includes +the following: $13,427 automobile allowance, $85,941 life insurance premiums and $7,800 in annual matching contributions to Mr. Dharia’s +401(k) plan account. +(11) +Includes a non-equity incentive payment of $58,584 made pursuant to a bonus formula in Mr. Sinha’s employment agreement. +See “Employment Arrangements.” +(12) +Includes the following: $15,706 automobile allowance and $7,950 in annual matching contributions to Mr. Sinha’s 401(k) plan +account. +(13) Includes +the following: $14,416 automobile allowance and $7,950 in annual matching contributions to Mr. Sinha’s 401(k) plan +account. +(14) Includes +the following: $15,511 automobile allowance and $7,800 in annual matching contributions to Mr. Sinha’s 401(k) plan +account. +(15) +Consists of a $7,154 automobile allowance. +Employment Arrangements +Edward +R. Rosenfeld. On December 31, 2012, the Company entered into an employment agreement with Mr. Rosenfeld to replace +a prior, expiring employment agreement. Pursuant to the December 31, 2012 employment agreement Mr. Rosenfeld continued to +serve as Chief Executive Officer and executive Chairman of the Board of Directors of the Company and received a base salary of +$607,754 and $638,142 for the fiscal years 2014 and 2015, respectively, until the employment agreement’s expiration on December +31, 2015. The December 31, 2012 employment agreement provided that Mr. Rosenfeld received a monthly automobile allowance of $1,500 +and additional compensation and bonuses, if any, at the absolute discretion of the Board of Directors. +On +December 31, 2015, the Company entered into a new employment agreement with Mr. Rosenfeld which replaced the prior employment +agreement with the Company, which expired on December 31, 2015. Pursuant to the new employment agreement, Mr. Rosenfeld continues +to serve as Chief Executive Officer and executive Chairman of the Board of Directors of the Company until the agreement expires +on December 31, 2018 or is sooner terminated in accordance with its terms. Mr. Rosenfeld’s current employment +agreement provides for an annual base salary of $800,000, $850,000 and $900,000 for the fiscal years 2016, 2017 and 2018, respectively, +and a monthly automobile allowance of $1,500. The current agreement provides that Mr. Rosenfeld will receive additional compensation +and bonuses, if any, at the absolute discretion of the Board of Directors. Pursuant to the current agreement, on December 31, +2015, Mr. Rosenfeld was granted 75,000 shares of the Company’s Common Stock, subject to certain restrictions. These +restricted shares of Common Stock, which were issued under the 2006 Plan, will vest in five equal annual installments of 15,000 +shares commencing on December 1, 2016. In addition, pursuant to the current employment agreement, on February 5, 2016, Mr. +Rosenfeld received an additional award of 75,000 shares of the Company’s Common Stock, subject to certain restrictions. +These restricted shares of Common Stock, which were issued under the 2006 Plan, will also vest in five equal annual installments +of 15,000 shares in such case commencing on March 5, 2017. +In +the event of his death, Mr. Rosenfeld’s employment agreement provides for the payment to his estate of his base salary +for the 12-month period immediately subsequent to the date of Mr. Rosenfeld’s death. The agreement also provides that +if Mr. Rosenfeld’s employment agreement is terminated due to his “total disability” (as defined in the +agreement), Mr. Rosenfeld will receive payment of his base salary for the 12-month period immediately subsequent to the date +he is determined to be totally disabled. Mr. Rosenfeld’s employment agreement allows the Company to terminate his employment +with “cause” (as defined in the employment agreement) or without cause. In the event that Mr. Rosenfeld’s +employment is terminated by the Company for cause, the Company will have no further obligations to Mr. Rosenfeld, and Mr. Rosenfeld +will be entitled to no further compensation from the Company, except for pro-rata amounts due to him on the date of his termination. +In the event that Mr. Rosenfeld’s employment is terminated by the Company without cause or by Mr. Rosenfeld’s +resignation for “good reason” (as defined in the employment agreement), Mr. Rosenfeld will be entitled to receive +payment of his annual base salary, payable at regular payroll intervals, from the date of termination of employment through the +longer of the remainder of the term of the agreement or six months. +35 +In +addition, if Mr. Rosenfeld’s employment is terminated by the Company without cause or by the resignation of Mr. Rosenfeld +for good reason during the period commencing 90 days prior to a “change of control” (as defined in the employment +agreement) transaction and ending 180 days following a change of control transaction, Mr. Rosenfeld will receive an +amount equal to two and one-half times the sum of (i) the annual base salary to which he was entitled as of the date of termination +or resignation of employment plus (ii) the average cash bonus received by him for the preceding three-year period ending on the +last previous December 31 (the “Change of Control Payment”). However, if the Change of Control Payment (or a portion +thereof) is determined to constitute an “excess parachute payment” under Sections 280G and 4999 of the Code, +Mr. Rosenfeld shall be paid either (i) the Change of Control Payment (which shall be subject to all applicable taxes +to be paid by the executive including the excise tax payable pursuant to Section 4999 and which shall be limited as to deductibility +to the Company) or (ii) a reduced amount, calculated in accordance with Section 280G, that may be paid to the executive +without the imposition of an excise tax under Section 4999 and which shall be fully deductible to the Company, whichever +payment yields the greater after-tax benefit to the executive. +Amelia +Newton Varela. On January 10, 2014, the Company entered into an employment agreement with Ms. Varela to replace a prior agreement +that expired on December 31, 2013. The term of this employment agreement, which was amended on September 4, 2015 in connection +with Ms. Varela’s promotion from Executive Vice President – Wholesale to the newly-created position of President of +the Company. Prior to its amendment, the employment agreement provided for an annual base salary during the term of $500,000 and +a monthly automobile allowance of $1,250. The amendment of the employment agreement increased Ms. Varela’s annual base salary +to $600,000 for the fiscal years 2015 and 2016 until the employment agreement’s expiration on December 31, 2016. In addition, +pursuant to the employment agreement, on February 3, 2014, Ms. Varela was granted an option to purchase 100,000 shares of the +Company’s Common Stock under the 2006 Plan, at an exercise price of $32.59 per share, which option is exercisable in four +equal annual installments of 25,000 on each anniversary of the date of grant, which commenced on February 3, 2015. +On +December 30, 2016, the Company entered into a new employment agreement with Ms. Varela, which replaced the prior employment agreement +with the Company, which expired by its terms on December 31, 2016. Pursuant to the new employment agreement, Ms. Varela continues +to serve as President of the Company for a term commencing on January 1, 2017 and continuing for three years through December +31, 2019, unless sooner terminated in accordance with the terms of the agreement. Ms. Varela’s current employment agreement +provides for an annual base salary of $630,000, $650,000 and $670,000 for the years 2017, 2018 and 2019, respectively, and a monthly +automobile allowance of $1,250 in each year of the term. In addition, pursuant to the current employment agreement, on January +3, 2017, Ms. Varela was granted an option to purchase 100,000 shares of the Company’s Common Stock under the 2006 Plan, +at an exercise price of $35.75 per share, which option is exercisable in four equal annual installments of 25,000 shares on each +anniversary of the date of grant, commencing on January 3, 2018. +Before +its amendment, the prior employment agreement entitled Ms. Varela to an annual performance-based cash bonus for each of the fiscal +years ended December 31, 2014, 2015 and 2016 in an amount equal to 2% of the increase, if any, in the Wholesale Division EBIT +for each such year over the Wholesale Division EBIT for the immediately preceding year, provided that Wholesale Division EBIT +attributable to any business acquired by the Company after January 10, 2014 will not be included for the purpose of determining +Ms. Varela’s bonus until the acquired business has been owned by the Company for two full calendar years. As amended, with +respect to the 2016 Fiscal Year, the prior employment agreement entitled Ms. Varela to a performance-based cash bonus in an amount +equal to 2% of the increase, if any, in the Company’s total EBIT for the 2016 Fiscal Year over the Company’s total +EBIT for the fiscal year ended December 31, 2015, less any deductions required to be withheld by applicable laws and regulations. +EBIT attributable to any business acquired by the Company after September 4, 2015 will not be included in the calculation for +the purpose of determining Ms. Varela’s annual bonus. This performance-based bonus was not achieved with respect to the +fiscal years ended December 31, 2016, 2015 and 2014. +The +current employment agreement entitles Ms. Varela to an annual performance-based cash bonus for each of the fiscal years ended +December 31, 2017, 2018 and 2019 in an amount equal to 2% of the increase, if any, in the Company’s total EBIT for each +such year over the Company’s total EBIT for the immediately preceding year, less any deductions required to be withheld +by applicable laws and regulations. EBIT attributable to any business acquired by the Company after December 30, 2016 will not +be included in the calculation for the purpose of determining Ms. Varela’s annual bonus. +36 +In +the event that Ms. Varela’s employment agreement is terminated due to Ms. Varela’s “disability” +(as defined in the agreement) or death, the Company is obligated to pay Ms. Varela (or her estate) the amount of +accrued and unpaid salary through the date of termination plus any performance-based cash bonus that has accrued for the year +prior to termination and is unpaid at the time Ms. Varela’s employment is terminated due to her disability or death. +The Company may terminate the agreement for “cause” (as defined in the agreement) and, in such event, Ms. Varela +will be entitled only to accrued and unpaid salary through the date of termination of employment. In the event Ms. Varela’s +employment is terminated by the Company without cause, she would be entitled to receive payment of her annual base salary, payable +at regular payroll intervals, from the date of termination of employment through the remainder of the term plus any performance-based +cash bonus that has accrued but not yet been paid. In the event that Ms. Varela’s employment is terminated by the Company +without cause during the period commencing 30 days prior to a “change of control” (as defined in the agreement) transaction +and ending 180 days following a change of control transaction, she is entitled to receive an amount equal to the lesser of (i) the +average amount of total compensation actually received by her during the preceding three calendar years multiplied by 3 and (ii) the +maximum amount that is tax deductible to the Company under Section 280G of the Code. +Arvind +Dharia. In January 1998, the Company entered into an employment agreement with Arvind Dharia, which has been amended +from time to time, most recently on February 2, 2015. Pursuant to Mr. Dharia’s amended agreement, Mr. Dharia +continues to serve as the Company’s Chief Financial Officer. The term of Mr. Dharia’s employment under his agreement, +as amended, extends through December 31, 2017, and will be automatically extended for an additional one-year period unless +either party timely notifies the other of its intention not to extend the term. Prior to the most recent amendment of the agreement, +Mr. Dharia received an annual base salary of $554,719 during fiscal year 2014. Commencing January 1, 2015, pursuant +to the most recent amendment of the agreement, Mr. Dharia’s annual base salary increased to and will remain $582,455 +for the remaining term of the agreement. Mr. Dharia received a monthly automobile allowance of $1,400 prior to the most recent +amendment of the agreement and, beginning January 1, 2015, his monthly car allowance increased to $1,600. The agreement provides +that the Company will pay life insurance premiums on Mr. Dharia’s behalf of approximately $80,000 per year. The most +recent amendment of the agreement provides for a grant of 15,000 shares of the Company’s Common Stock, subject to certain +restrictions. These restricted shares of Common Stock were issued to Mr. Dharia on February 2, 2015 under the 2006 Plan +and will vest in five equal annual installments commencing on February 2, 2016. In addition, the amended agreement provides +that Mr. Dharia will receive an annual bonus in such amount, if any, and at such time or times, as the Board of Directors +may determine in its absolute discretion. Subject to availability of shares under the 2006 Plan, or any other plan designated +by the Board of Directors and approved by the Company’s stockholders, Mr. Dharia is entitled to awards under such plan +as may be determined by the Board of Directors, or a committee thereof, from time to time in its absolute discretion. +The +agreement provides, in the event of Mr. Dharia’s death, for the payment to Mr. Dharia’s estate of his base +salary for the 12-month period immediately subsequent to the date of Mr. Dharia’s death. The agreement also provides +that if Mr. Dharia’s employment agreement is terminated due to his “total disability” (as defined in the +agreement), Mr. Dharia will receive payment of his base salary for the 12-month period immediately subsequent to the date +he is determined to be totally disabled. In the event that Mr. Dharia’s employment agreement is terminated “for +cause” (as defined in the agreement), the Company is obligated to pay Mr. Dharia the amount of compensation that is +accrued and unpaid through the date of termination. In the event that Mr. Dharia’s employment agreement is terminated +for any reason (other than “for cause” or due to his death or total disability), the Company is obligated to pay Mr. Dharia, +in two installments, (a) an amount equal to the product of (x) his base salary on the effective date of such termination +plus the bonus paid or payable, if any, for the fiscal year ended on the December 31st immediately preceding the termination +date, multiplied by (y) the number of years (and fraction of years) remaining in the term; and (b) the amount payable +to him, or on his account, for what would have been the balance of the term of his employment agreement with respect to certain +benefits and plans as set forth in his employment agreement. If the Company decides not to renew the agreement (other than “for +cause” or due to his total disability), then Mr. Dharia will be entitled to receive severance compensation, in cash, +in an amount equal to his then-current base salary for the 90-day period commencing on the expiration of the term. +37 +In +addition, in the event that there is a “change of control” transaction and Mr. Dharia’s employment has +been terminated by the Company other than “for cause” or if Mr. Dharia resigns “for good reason” +(as such terms are defined in the agreement), Mr. Dharia will receive an amount equal to three times the total compensation +he was entitled to receive under the agreement for the preceding 12-month period ending on the last previous December 31, +except that in lieu of the actual base salary component received during such period, there shall be substituted the annual base +salary to which Mr. Dharia was entitled to as of the date of termination or resignation (the “Change of Control Payment”). +However, if the Change of Control Payment (or a portion thereof) is determined to constitute an “excess parachute payment” +under Sections 280G and 4999 of the Code, Mr. Dharia will be paid either (i) the Change of Control Payment (which +shall be subject to all applicable taxes to be paid by the executive including the excise tax payable pursuant to Section 4999 +and which shall be limited as to deductibility to the Company) or (ii) a reduced amount, calculated in accordance with +Section 280G, that may be paid to the executive without the imposition of an excise tax under Section 4999 and which +shall be fully deductible to the Company, whichever payment yields the greater after-tax benefit to the executive. +Awadhesh +Sinha. On January 10, 2014, the Company entered into an employment agreement with Mr. Sinha to replace a prior employment +agreement with the Company, which had expired on December 31, 2013. Pursuant to the employment agreement, Mr. Sinha, the Chief +Operating Officer of the Company, received a base salary of $600,000, $630,000 and $661,500 for the years 2014, 2015 and 2016, +respectively, until the employment agreement’s expiration on December 31, 2016. The employment agreement also entitled Mr. +Sinha to a monthly automobile allowance of $1,850 and the payment of term life insurance premiums on Mr. Sinha’s behalf +in the amount of approximately $3,500 per year. On January 15, 2014, pursuant to his employment agreement, Mr. Sinha +was granted 29,886 shares of Common Stock, subject to certain restrictions. These restricted shares of Common Stock, which were +issued under the 2006 Plan, will vest in three equal annual installments of 9,962 shares, which commenced on December 15, +2014. +On +December 30, 2016, the Company entered into a new employment agreement with Mr. Sinha, which replaced the prior employment agreement +with the Company, which expired on December 31, 2016. Pursuant to the new employment agreement, Mr. Sinha continues to serve as +Chief Operating Officer of the Company for a term that commenced on January 1, 2017 and will expire on December 31, 2019 unless +the agreement is sooner terminated in accordance with its terms. Mr. Sinha’s current employment agreement provides for an +annual base salary of $681,000, $702,000 and $723,000 for the years 2017, 2018 and 2019, respectively. The new employment agreement +also entitles Mr. Sinha to a monthly automobile allowance of $1,850 and the payment of term life insurance premiums on Mr. Sinha’s +behalf in the amount of approximately $3,500 per year. On January 3, 2017, pursuant to his new employment agreement, Mr. Sinha +was granted 28,169 shares of Common Stock, subject to certain restrictions. These restricted share of Common Stock, which were +issued under the 2006 Plan, will vest in three substantially equal installments commencing on December 15, 2017. +Mr. Sinha’s +prior employment agreement entitled him to an annual performance-based bonus for each of the fiscal years ended December 31, +2014, 2015 and 2016 in an amount equal to 2% of the increase in the Company’s EBITDA for each such year over the Company’s +EBITDA for the immediately preceding year. This performance-based bonus was not achieved with respect to the 2015 and 2014 fiscal +years. Mr. Sinha received a cash bonus of $58,584 for 2016 EBITDA performance. +The +current employment agreement entitles Mr. Sinha to an annual performance-based cash bonus for each of the fiscal years ended December +31, 2017, 2018 and 2019 in an amount equal to 2% of the increase, if any, in the Company’s EBITDA for each such year over +the Company’s EBITDA for the immediately preceding year. For any business acquired after December 30, 2016, EBITDA from +the acquired business is included in the bonus calculation starting with the first full quarter under Company ownership, provided +that the prior year’s EBITDA will likewise be adjusted to include EBITDA from the acquired business for comparable quarters +in the prior year on a pro forma basis assuming the Company had owned the business. The maximum annual bonus is $600,000, the +first $300,000 of which will be payable in cash and for any amount of the annual bonus in excess of $300,000 by a grant of restricted +shares of Common Stock, which restricted shares of Common Stock will vest in three equal annual installments commencing on the +first anniversary of the grant date. Bonuses and other incentive-based compensation paid to Mr. Sinha are subject to recovery +by the Company in the event of a determination that such compensation was based upon materially inaccurate financial statements. +38 +In +the event of his death, Mr. Sinha’s employment agreement provides for the payment to Mr. Sinha’s estate +of his base salary for the 12-month period immediately subsequent to the date of Mr. Sinha’s death. In addition, in +the event of Mr. Sinha’s “total disability” (as such term is defined in the agreement), the Company is +obligated to continue to pay Mr. Sinha’s base salary for the 12-month period immediately subsequent to the date of +determination of such total disability. In the event Mr. Sinha’s employment agreement is terminated “for cause” +(as such terms are defined in the agreement), or due to Mr. Sinha’s resignation without “good reason” (as +such term is defined in the agreement), the Company is obligated to pay Mr. Sinha the amount of compensation that is accrued +and unpaid through the date of termination. In the event Mr. Sinha’s employment agreement is terminated by the Company +without cause or by the resignation of Mr. Sinha for good reason, Mr. Sinha would be entitled to receive payment of +his annual base salary, payable at regular payroll intervals, from the date of termination of employment through the longer of +(i) the remainder of the term or (ii) six months. +In +addition, if Mr. Sinha’s employment is terminated by the Company without cause or if Mr. Sinha resigns for good +reason during the period commencing 120 days prior to a “change of control” (as defined in the agreement) and +ending 90 days after a change of control, Mr. Sinha would be entitled to receive a cash payment within ten days of the date +of his termination or resignation of employment in an amount equal to three times the total W-2 compensation and benefits actually +received by him during the preceding twelve-month period ending on the last previous December 31 st , except that, +in lieu of the actual base salary compensation received during such period, there shall be substituted the annual base salary +to which Mr. Sinha was entitled to as of the date of termination or resignation (the “Change of Control Payment”). +However, if the Change of Control Payment (or a portion thereof) is determined to constitute an “excess parachute payment” +under Sections 280G and 4999 of the Code, Mr. Sinha will be paid either (i) the Change of Control Payment (which +shall be subject to all applicable taxes to be paid by the executive including the excise tax payable pursuant to Section 4999 +and which shall be limited as to deductibility to the Company) or (ii) a reduced amount, calculated in accordance with +Section 280G, that may be paid to the executive without the imposition of an excise tax under Section 4999 and which +shall be fully deductible to the Company, whichever payment yields the greater after-tax benefit to the executive. +Michael +Paradise. On April 5, 2016, the Company entered into an employment agreement with Mr. Paradise, pursuant to which Mr. Paradise +serves as Executive Vice President – General Counsel of the Company for a term commencing on or about May 10, 2016 and ending +on December 31, 2018, unless the agreement is sooner terminated in accordance with its terms. The employment agreement provides +for an annual base salary of $400,000, subject to periodic increases during the term at the discretion of the Board of Directors +or its Compensation Committee, and a monthly automobile allowance of $1,000 during the term of the agreement. Mr. Paradise’s +agreement entitles him to an annual performance bonus for each of the fiscal years ended December 31, 2016, 2017 and 2018 in an +amount to be determined by the Company, each such bonus, if any, to be paid to him on or about March 15 with respect to the prior +year. On June 1, 2016, pursuant to his employment agreement, Mr. Paradise was granted 7,217 shares of Common Stock, subject to +certain restrictions. These restricted shares of Common Stock, which were issued under the 2006 Plan, will vest in four substantially +equal annual installments, commencing on the first anniversary of the grant date. +Mr. +Paradise received a $250,000 cash sign-on bonus pursuant to his employment agreement subject to the terms of a sign-on bonus agreement +dated April 5, 2016 between the Company and Mr. Paradise, which provides that if Mr. Paradise voluntarily resigns from his employment +with the Company other than for “good reason” (as defined in the employment agreement) or Mr. Paradise’s employment +is terminated by the Company for “cause” (as defined in the employment agreement) within one year of the date of his +employment, Mr. Paradise will return the sign-on bonus to the Company. +In +the event that Mr. Paradise’s employment agreement is terminated due to Mr. Paradise becoming “disabled” +(as defined in the agreement) or death, the Company is obligated to continue to pay Mr. Paradise (or his estate) his +base salary, payable at regular payroll intervals, for a period of six months after termination. The Company may terminate the +agreement for “cause” (as defined in the agreement) and, in such event, Mr. Paradise will be entitled only to +accrued and unpaid salary through the date of termination of employment. In the event Mr. Paradise’s employment is +terminated by the Company without cause or in the event Mr. Paradise resigns for good reason, he would be entitled to receive +payment of his annual base salary, payable at regular payroll intervals, from the date of termination of employment through the +remainder of the term. In the event that Mr. Paradise’s employment is terminated by the Company without cause during the +period commencing 30 days prior to a “change of control” (as defined in the agreement) transaction and ending +180 days following a change of control transaction, he is entitled to receive an amount equal to the lesser of (i) the average +amount of total compensation actually received by him during the preceding three calendar years multiplied by 3 and (ii) the +maximum amount that is tax deductible to the Company under Section 280G of the Code. +39 +GRANTS +OF PLAN-BASED AWARDS IN THE 2016 FISCAL YEAR +The +following table sets forth information concerning awards under the Company’s equity and non-equity incentive plans granted +to each of the Named Executive Officers in the 2016 Fiscal Year, including performance-based awards and those using time-based +vesting. Following the table is a discussion of material factors related to the information disclosed in the table. +All Other +All Other +Stock +Option +Awards: +Awards: +Grant Date +Number of +Number of +Exercise or +Fair Value +Estimated +future payouts under equity +incentive plan awards +Shares of +Stock or +Securities +Underlying +Base Price +of Option +of Stock and +Option +Grant +Threshold +Target +Maximum +Units +Options +Awards +Awards +Name +Date +($) +($) +($) +(#) +(#) +($/Sh) +($) +Edward R. Rosenfeld +02/05/16 +— +— +— +75,000 +— +— +2,314,500 +08/12/16 (1) +— +2,032,884 (2) +— +27,563 +— +— +1,036,093 +Amelia Newton Varela +08/12/16 (1) +— +948,679 (2) +— +13,782 +518,065 +n/a +— +— (3) +— +— +— +— +— +Arvind Dharia +03/15/16 +— +948,679 (2) +— +3,101 +— +— +116,567 +Awadhesh Sinha +08/12/16 (1) +— +948,679 (2) +— +3,101 +— +— +116,567 +n/a +— +— (4) +— +— +— +— +— +Michael Paradise +06/01/16 +— +— +— +7,217 +— +— +249,997 +(1) The restricted shares +of Common Stock were initially granted to Mr. Rosenfeld, Ms. Varela and Mr. Sinha on March 15, 2016; however, such awards were +forfeited and rescinded pursuant to a Forfeiture and Rescission of Awards Agreement between the Company and the Named Executive +Officer since the awards, while intended as qualified performance-based compensation under Section 162(m) of the Code, did not +qualify as qualified performance-based compensation under Section 162(m) of the Code on the initial grant date because the performance +goals in the 2006 Plan under which the awards were made had not yet been re-approved by the stockholders of the Company, as periodically +required by the 2006 Plan and Section 162(m) of the Code. The Company’s stockholders re-approved the performance goals contained +in the 2006 Plan at the 2016 Annual Meeting of Stockholders and the forfeited and rescinded awards of restricted shares of Common +Stock were re-granted to Mr. Rosenfeld, Ms. Varela and Mr. Sinha on August 12, 2016. +(2) In +the 2016 Fiscal Year, the Compensation Committee established a bonus pool for Named Executive Officers and other key executives +of the Company based on 6% of net income of the Company achieved in the 2016 Fiscal Year and also fixed each executive’s +maximum share of the 2016 bonus pool, which was 30% for Mr. Rosenfeld and 14% for each other Named Executive Officer. Since +the bonus pool was established as a percentage of the Company’s 2016 Fiscal Year net income, it would not be possible to +determine the amount of these potential bonuses until the completion of the Company’s 2016 Fiscal Year. Accordingly, the +amount indicated is a representative payout amount and equals the maximum bonus the Named Executive Officer would have been eligible +to receive from a bonus pool of $6,776,280, which equals 6% of the $112,938,000 in net income of the Company achieved in the fiscal +year ended December 31, 2015. See the discussion of the 2016 bonus pool and the individual target awards of the Named Executive +Officers appearing above in the “Annual Performance-Based Bonus - Based on Specific Performance Metrics” section of +“Compensation Structure.” As disclosed therein, the Company paid these performance bonuses in a combination of cash +and restricted shares of Common Stock granted on March 15, 2017. Accordingly, Mr. Rosenfeld, Mr. Dharia, Mr. Sinha and Mr. Paradise +received performance-based cash bonuses of $250,000, $200,000, $141,416 and $75,000, respectively, and Mr. Rosenfeld, Ms. Varela +and Mr. Paradise received grants of 39,894, 13,298, and 1,995 restricted shares of Common Stock, respectively. In accordance with +applicable SEC rules, these restricted stock awards will appear in the Summary Compensation Table to be included in our proxy +statement for our 2018 Annual Meeting of Stockholders provided the restricted stock award recipient is a named executive officer +in that proxy statement. +40 +(3) +Under an employment agreement dated January 10, 2014 between the Company and Ms. Varela, Ms. Varela is entitled +to receive a cash bonus under the Company’s 2006 Plan on or about March 15, 2017 in an amount equal to 2% of the increase, +if any, in the Company’s total EBIT for the 2016 Fiscal Year over the Company’s total EBIT for the fiscal year ended +December 31, 2015. Since it would not be possible to determine the amount of Ms. Varela’s cash bonus, if any, until +the completion of the 2016 Fiscal Year, the amount indicated as the target bonus payout is a representative amount and based upon +the actual decrease in the EBIT performance of the Company for the fiscal year ended December 31, 2015 from the EBIT performance +of the Company for the fiscal year ended December 31, 2014. See the discussion of this grant to Ms. Varela appearing above +in the “Annual Performance-Based Bonus - Based on Specific Performance Metrics” section of “Compensation Structure” +and above under “Employment Arrangements.” As disclosed therein, this performance-based bonus was not achieved with +respect to the 2016 Fiscal Year. +(4) +Under an employment agreement dated January 10, 2014 between the Company and Mr. Sinha, Mr. Sinha is entitled to +receive a cash bonus under the Company’s 2006 Plan on or about March 15, 2017 in an amount equal to 2% of the increase, +if any, in the Company’s EBITDA for the 2016 Fiscal Year over the Company’s EBITDA for the immediately preceding fiscal +year. The maximum annual bonus is $600,000, the first $300,000 of which is payable in cash and for any amount of the annual bonus +in excess of $300,000 by a grant of restricted shares of the Company’s common stock, which restricted common stock will +vest in three equal annual installments commencing on the first anniversary of the grant date. Since it would not be possible +to determine the amount of Mr. Sinha’s bonus, if any, until the completion of the 2016 Fiscal Year, the amount indicated +as the target bonus payout is a representative amount and based upon the actual decrease in the EBITDA performance of the Company +for the fiscal year ended December 31, 2015 from the EBITDA performance of the Company for the fiscal year ended December 31, +2014. See the discussion of this grant to Mr. Sinha appearing above in the “Annual Performance-Based Bonus - Based +on Specific Performance Metrics” section of “Compensation Structure” and above under “Employment Arrangements.” +As disclosed in the Summary Compensation Table above, Mr. Sinha received a cash bonus of $58,584 for 2016 EBITDA performance of +the Company. +Plan-Based Awards +2006 +Stock Incentive Plan +As +of March 10, 2006, the Board of Directors of the Company adopted the Company’s 2006 Stock Incentive Plan and, on May 26, +2006, the Company’s stockholders approved the adoption of the Company’s 2006 Stock Incentive Plan. The 2006 Stock +Incentive Plan was amended in 2007 and 2008. On April 6, 2009, the Board of Directors adopted an Amended and Restated 2006 +Stock Incentive Plan and, on May 22, 2009, the Company’s stockholders approved the Amended and Restated 2006 Stock +Incentive Plan. On April 5, 2012, the Board of Directors approved an amendment of the Amended and Restated 2006 Stock Incentive +Plan primarily to increase the number of shares of Common Stock available for issuance thereunder, subject to stockholder approval +of such amendment. The amendment to the Amended and Restated 2006 Stock Incentive Plan was approved by the Company’s stockholders +at the 2012 Annual Meeting of Stockholders on May 25, 2012. The Company’s stockholders re-approved the material terms +of the performance goals currently contained in the 2006 Stock Incentive Plan pursuant to the requirements of Section 162(m) of +the Code at the 2016 Annual Meeting of Stockholders on May 27, 2016. +The +Company’s Amended and Restated 2006 Stock Incentive Plan is referred to as the “2006 Plan” throughout this Proxy +Statement. The purpose of the 2006 Plan is to enhance the profitability and value of the Company for the benefit of its stockholders +by enabling the Company to offer eligible employees, consultants and non-employee directors cash and stock-based incentives in +the Company to attract, retain and reward such individuals and provide additional incentive for such persons to exert maximum +efforts for the success of the Company by encouraging stock ownership in the Company. The 2006 Plan serves as a means to strengthen +the mutuality of interests between such individuals and the Company’s stockholders. +The +maximum number of shares of Common Stock available for issuance under the 2006 Plan is 23,466,000 shares. As of the Record Date, +there were outstanding 4,228,715 unvested shares of restricted stock and options to purchase 2,323,004 shares of Common Stock; +options had been exercised, or restricted stock had vested, with respect to 14,699,600 shares of Common Stock; and 1,937,884 shares +of Common Stock remained available for grant under the 2006 Plan. +41 +OUTSTANDING +EQUITY AWARDS AT END OF THE 2016 FISCAL YEAR +The +following table sets forth information concerning unexercised stock options, restricted stock that has not vested and stock awards +outstanding for each of the Named Executive Officers as of the end of the 2016 Fiscal Year. All awards that occurred prior to +the three-for-two split of the Company’s Common Stock effectuated as a stock dividend on or about April 30, 2010, the +three-for-two split of the Company’s Common Stock effectuated as a stock dividend on or about May 31, 2011 and the +three-for-two split of the Company’s Common Stock effectuated as a stock dividend on or about October 1, 2013 have +been adjusted to account for each such stock split, as applicable. +Option +Awards +Stock +Awards +Name +Number +of +Securities +Underlying +Unexercised +Options +(#) Exercisable +Number +of +securities +Underlying +Unexercised +Options +(#) Unexercisable +Equity +Incentive Plan +Awards: +Number of +Securities +Underlying +Unexercised +Unearned +Options (#) +Option +Exercise +Price +($) +Option +Expiration +Date +Number +of +Shares or +Units of Stock +That Have +Not Vested +(#) +Market +Value +of Shares or +Units of Stock +That Have +Not Vested +($) +Equity +Incentive Plan +Awards: +Number of +Unearned +Shares, Units or +Other Rights +That Have +Not Vested +(#) +Equity +Incentive Plan +Awards: +Market or +Payout Value of +Unearned +Shares, Units or +Other Rights +That Have +Not Vested +($) +Edward R. Rosenfeld +— +— +— +— +— +244,183 (1) +8,729,542 +— +— +Amelia Newton Varela +168,750 +— +— +16.9645 +2/1/2018 +44,560 (3) +1,593,020 +— +— +50,000 +50,000 (2) +— +32.5900 +2/3/2021 +Arvind Dharia +— +— +— +— +— +18,579 (4) +664,199 +— +— +Awadhesh Sinha +— +— +— +— +— +7,329 (5) +262,012 +— +— +Michael Paradise +— +— +— +— +— +7,217 (6) +258,008 +— +— +(1) On March 14, 2012, Mr. Rosenfeld was awarded 30,000 shares of restricted Common Stock, which shares vest in five equal annual installments commencing on the first anniversary of the date awarded. On January 2, 2013, Mr. Rosenfeld was awarded 150,000 shares of restricted Common Stock, which shares vest in five equal annual installments commencing on December 1, 2013 and on each December 1 st thereafter. On March 15, 2013, Mr. Rosenfeld was awarded 30,000 shares of restricted Common Stock, which shares vest in five equal annual installments commencing on the first anniversary of the date awarded. On March 17, 2014, Mr. Rosenfeld was awarded 22,265 shares of restricted Common Stock, which shares vest in five substantially equal annual installments commencing on March 5, 2015. On March 11, 2015, Mr. Rosenfeld was awarded 25,326 shares of restricted Common Stock, which shares vest in five substantially equal annual installments commencing on March 5, 2016. On December 31, 2015, Mr. Rosenfeld was awarded 75,000 shares of restricted Common Stock, which shares vest in five equal annual installments commencing on December 31, 2016. On February 5, 2016, Mr. Rosenfeld was awarded 75,000 shares of restricted Common Stock, which shares vest in five equal annual installments commencing on March 5, 2017. On March 15, 2016, Mr. Rosenfeld was awarded 27,563 shares of restricted Common Stock, which shares vest in five substantially equal annual installments commencing on March 5, 2017. The above-referenced grants of restricted shares on March 11, 2015 and March 15, 2016 were forfeited and rescinded pursuant to a Forfeiture and Rescission of Awards Agreement between Mr. Rosenfeld and the Company because the grants, while intended as qualified performance-based compensation under Section 162(m) of the Code, did not qualify as qualified performance-based compensation under Section 162(m) of the Code on the grant date because the performance goals in the 2006 Plan under which the grants were made had not yet been re-approved by the stockholders of the Company, as periodically required by the 2006 Plan and Section 162(m of the Code. The Company’s stockholders re-approved the performance goals contained in the 2006 Plan at the 2006 Annual Meeting of Stockholders and the forfeited and rescinded grants of restricted shares were re-granted to Mr. Rosenfeld on August 12, 2016. +(2) On +February 3, 2014, Ms. Varela was granted an option to purchase 100,000 shares of the Company’s Common Stock under +the 2006 Plan, which option vests in four equal annual installments commencing on the first anniversary of the date of grant. +42 +(3) On March 14, 2012, Ms. Varela was awarded 17,209 shares of restricted Common Stock, which shares vest in five substantially equal annual installments commencing on the first anniversary of the date awarded. On March 15, 2013, Ms. Varela was awarded 15,000 shares of restricted Common Stock, which shares vest in five equal annual installments commencing on the first anniversary of the date awarded. On March 17, 2014, Ms. Varela was awarded 15,118 shares of restricted Common Stock, which shares vest in five substantially equal annual installments commencing on March 5, 2015. On March 11, 2015, Ms. Varela was awarded 15,329 shares of restricted Common Stock, which shares vest in five substantially equal annual installments commencing on March 5, 2016. On March 15, 2016, Ms. Varela was awarded 13,782 shares of restricted Common Stock, which shares vest in five substantially equal annual installments commencing on March 5, 2017. The above-referenced grants of restricted shares on March 11, 2015 and March 15, 2016 were forfeited and rescinded pursuant to a Forfeiture and Rescission of Awards Agreement between Ms. Varela and the Company because the grants, while intended as qualified performance-based compensation under Section 162(m) of the Code, did not qualify as qualified performance-based compensation under Section 162(m) of the Code on the grant date because the performance goals in the 2006 Plan under which the grants were made had not yet been re-approved by the stockholders of the Company, as periodically required by the 2006 Plan and Section 162(m of the Code. The Company’s stockholders re-approved the performance goals contained in the 2006 Plan at the 2006 Annual Meeting of Stockholders and the forfeited and rescinded grants of restricted shares were re-granted to Ms. Varela on August 12, 2016. +(4) On April 2, 2012, Mr. Dharia was awarded 7,500 shares of restricted Common Stock, which shares vest in five equal annual installments commencing on the first anniversary of the date awarded. On February 2, 2015, Mr. Dharia was awarded 15,000 shares of restricted Common Stock, which shares vest in five equal annual installments commencing on the first anniversary of the date awarded. On March 11, 2015, Mr. Dharia was awarded 5,506 shares of restricted Common Stock, which shares vest in four substantially equal annual installments commencing on December 15, 2015. On March 15, 2016, Mr. Dharia was awarded 3,101 shares of restricted Common Stock, which shares vest in four substantially equal annual installments commencing on December 15, 2016. +(5) On March 14, 2012, Mr. Sinha was awarded 11,250 shares of restricted Common Stock, which shares vest in five equal annual installments commencing on the first anniversary of the date awarded. On March 11, 2015, Mr. Sinha was awarded 5,506 shares of restricted Common Stock, which shares vest in four substantially equal annual installments commencing on December 15, 2015. On March 15, 2016, Mr. Sinha was awarded 3,101 shares of restricted Common Stock, which shares vest in four substantially equal annual installments commencing on December 15, 2016. The grant of restricted shares on March 15, 2016 was forfeited and rescinded pursuant to a Forfeiture and Rescission of Awards Agreement between Mr. Sinha and the Company because the grant, while intended as qualified performance-based compensation under Section 162(m) of the Code, did not qualify as qualified performance-based compensation under Section 162(m) of the Code on the grant date because the performance goals in the 2006 Plan under which the grant was made had not yet been re-approved by the stockholders of the Company, as periodically required by the 2006 Plan and Section 162(m of the Code. The Company’s stockholders re-approved the performance goals contained in the 2006 Plan at the 2006 Annual Meeting of Stockholders and the forfeited and rescinded grant of restricted shares was re-granted to Mr. Sinha on August 12, 2016. +(6) On +June 1, 2016, Mr. Paradise was awarded 7,217 shares of restricted Common Stock, which shares vest in four substantially equal +annual installments commencing on the first anniversary of the date awarded. +43 +OPTION +EXERCISES AND STOCK VESTED IN THE 2016 Fiscal Year +The +following table sets forth information concerning stock options exercised and restricted stock vested during the 2016 Fiscal Year +for each of the Named Executive Officers. The value realized from exercised options is deemed to be the market value of the Common +Stock on the date of exercise, less the exercise price of the option, multiplied by the number of shares of Common Stock underlying +the option. The value realized from the vesting of restricted stock is deemed to be the market value of the Common Stock on the +date of vesting multiplied by the number of shares vesting. +Option Awards +Stock Awards +Name +Number of +Shares +Acquired on +Exercise +(#) +Value +Realized +on Exercise +($) +Number of +Shares +Acquired +on Vesting +(#) +Value +Realized +on Vesting +($) +Edward R. Rosenfeld +225,000 +6,878,250 +66,518 +2,443,427 +Amelia Newton Varela +130,784 +3,523,812 +12,531 +455,520 +Arvind Dharia +— +— +6,652 +235,252 +Awadhesh Sinha +— +— +14,365 +548,620 +Michael Paradise +— +— +— +— +SECURITIES +AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS +The +following table sets forth information as of December 31, 2016 with respect to compensation plans (including individual compensation +arrangements) under which shares of Common Stock are authorized for issuance, aggregated as follows: +· +All compensation plans previously approved +by security holders; and +· +All +compensation plans not previously approved by security holders. +44 +EQUITY +COMPENSATION PLAN INFORMATION +Number of +securities to be +issued upon +exercise of +outstanding +options, warrants +and rights +(#) +Weighted average +exercise price of +outstanding options, +warrants and rights +($) +Number of securities +remaining available +for future issuance +under equity +compensation plans +(excluding securities +reflected in column (a)) +(#) +(a) +(b) +(c) +Equity compensation plans approved by security holders +1,499,000 +29.72 +3,151,000 +Equity compensation plans not approved by security holders +— +— +— +Total +1,499,000 +29.72 +3,151,000 +Termination, +Change in Control and Non-Competition/Non-Solicitation +The +employment agreements for Ms. Varela and Messrs. Rosenfeld, Dharia, Sinha and Paradise provide for a severance payment upon a +termination of employment in connection with a change-in-control of the Company. The employment agreements of Messrs. Rosenfeld, +Dharia and Sinha also provide for severance payment if the executive terminates his employment for good reason in connection with +a change-in-control event. The change-in-control severance payments may result in the application of the “golden parachute” +provisions of Section 280G of the Code and, to the extent Section 280G applies, the Company may not deduct from its +taxable income the severance payments made to the Named Executive Officer. Moreover, Section 4999 of the Code would impose +a 20% excise tax on the Named Executive Officer receiving the severance payment. In the case of Ms. Varela and Mr. Paradise, +these severance payments in connection with a change-in-control, however, are reduced if the severance payment, when added to +any other benefits triggered by a change-of-control, is determined to constitute an “excess parachute payment” under +Sections 280G and 4999 of the Code, to the maximum amount that is deductible to the Company under Section 280G of the +Code. In the case of Messrs. Rosenfeld, Dharia and Sinha, the executive’s change-in-control severance payment will only +be reduced to the maximum amount that is deductible to the Company under Section 280G of the Code if the reduction provides +the Named Executive Officer with the best after-tax result; otherwise, the Named Executive Officer will receive the full amount +of the severance payment and other benefits triggered by the change-in-control and be liable for the 20% excise tax on the excess +parachute payment in addition to all other applicable taxes and, in such case, the deduction by the Company of the portion of +the severance payment constituting an excess parachute payment will be disallowed. +The +Company’s employment agreements with Ms. Varela and Messrs. Rosenfeld, Dharia and Sinha also provide for severance payments +to the executive if the Company terminates the executive’s employment without cause, or, in the case of Mr. Rosenfeld, +Mr. Sinha and Mr. Paradise, if the Company gives him good reason to terminate employment. +Please +see the section of this Proxy Statement captioned “Employment Arrangements” for a summary description of the Named +Executive Officers’ employment agreements and such severance and change-in-control provisions. These benefits are described +and quantified in the section of this Proxy Statement captioned “Potential Payments Upon Termination or Change-In-Control” +below. +The +Company believes that the severance payments and payments made upon change-in-control provisions in the employment agreements +provide appropriate protection to the Company’s executives, comparable to that available at peer companies, and, with regard +to the enhanced severance following a change-in-control, protects the Company from losing key executives during a period when +a change-in-control may be threatened or pending. These benefits are described and quantified in the section below captioned “Potential +Payments Upon Termination or Change-In-Control.” +Mr. +Paradise and Ms. Varela have each agreed to a non-compete and non-solicitation restriction through the expiration date of +his or her employment agreement, December 31, 2018 and December 31, 2019, respectively, in the event of a voluntary termination +or termination for cause. Messrs. Rosenfeld and Sinha have each agreed to a non-compete and non-solicitation restriction during +the period of his employment and for a six-month period following the termination of his employment for cause or in the event +of his resignation without good reason. Mr. Dharia does not have non-compete or non-solicitation provisions in his employment +agreement. +45 +POTENTIAL +PAYMENTS UPON TERMINATION OR CHANGE-IN-CONTROL +The +Company’s employment agreements with the Named Executive Officers provide for payments to such individuals upon termination +of employment or a change-in-control of the Company. Please see the section of this Proxy Statement captioned “Employment +Arrangements.” The amounts set forth in the table below shall be payable to the respective Named Executive Officer if such +Named Executive Officer’s employment is terminated under the various scenarios set forth below. +NAME +CASH +PAYMENT +CONTINUATION +OF MEDICAL / +WELFARE +BENEFITS +(PRESENT +VALUE) +ACCELERATION +AND +CONTINUATION +OF EQUITY +AWARD +REDUCTION +OF +BENEFITS UPON A +CHANGE-IN- +CONTROL (1) +TOTAL +TERMINATION +BENEFITS +($) +($) +($) +($) +($) +TERMINATION DUE TO DEATH +Edward R. Rosenfeld +850,000 +(2) +18,499 +(3) +— +— +868,499 +Amelia Newton Varela +— +— +— +— +— +Arvind Dharia +582,455 +(4) +13,330 +(3) +— +— +595,785 +Awadhesh Sinha +681,000 +(5) +13,330 +(3) +— +694,330 +Michael Paradise +200,000 +(6) +— +— +— +200,000 +TERMINATION DUE TO TOTAL +DISABILITY +Edward R. Rosenfeld +850,000 +(2) +— +— +— +850,000 +Amelia Newton Varela +— +— +— +— +— +Arvind Dharia +582,455 +(4) +— +— +— +582,455 +Awadhesh Sinha +681,000 +(5) +13,330 +(3) +— +— +694,330 +Michael Paradise +200,000 +(6) +— +— +— +200,000 +TERMINATION FOR CAUSE; +RESIGNATION WITHOUT GOOD REASON +Edward R. Rosenfeld +— +— +— +— +— +Amelia Newton Varela +— +— +— +— +— +Arvind Dharia +— +— +— +— +— +Awadhesh Sinha +— +— +— +— +— +Michael Paradise +— +— +— +— +— +TERMINATION OTHER THAN +FOR CAUSE; RESIGNATION FOR GOOD REASON +Edward R. Rosenfeld +1,750,000 +(7) +— +— +— +1,750,000 +Amelia Newton Varela +1,950,000 +(8) +— +— +— +1,950,000 +Arvind Dharia +582,455 +(9) +99,641 +(10) +— +— +682,096 +Awadhesh Sinha +2,106,000 +(11) +— +— +— +2,106,000 +Michael Paradise +800,000 +(12) +— +— +— +800,000 +TERMINATION UPON A CHANGE-IN-CONTROL +Edward R. Rosenfeld +1,993,775 +(13) +— +8,729,542 +(14) +— +10,723,317 +Amelia Newton Varela +4,567,974 +(15) +— +1,751,020 +(14) +— +6,318,994 +Arvind Dharia +4,414,374 +(16) +— +664,190 +(14) +— +5,078,564 +Awadhesh Sinha +3,646,908 +(17) +— +1,269,045 +(14) +— +4,915,953 +Michael Paradise +1,486,848 +(18) +— +258,008 +(14) +(70,281 +) +1,674,575 +(19) +(1) The +employment agreements of Ms. Varela and Mr. Paradise provide that severance +payments in connection with a change-in-control are reduced if the severance payment, +when added to any other benefits triggered by a change-of-control, is determined to constitute +an “excess parachute payment” under Sections 280G and 4999 of the Code, +to the maximum amount that is deductible to the Company under Section 280G of the +Code. The employment agreements of Messrs. Rosenfeld, Dharia and Sinha indicate that +the executive’s change-in-control severance payment will only be reduced to the +maximum amount that is deductible to the Company under Section 280G of the Code +if the reduction provides the Named Executive Officer with the best after-tax result; +otherwise, the Named Executive Officer will receive the full amount of the severance +payment and other benefits triggered by the change-in-control and be liable for the 20% +excise tax on the excess parachute payment in addition to all other applicable taxes +and, in such case, the deduction by the Company of the portion of the severance payment +constituting an excess parachute payment will be disallowed. +(2) Consists +of Mr. Rosenfeld’s 2017 base salary of $850,000, which would be paid at regular +intervals. +(3) Consists +of medical benefits. +(4) Consists +of Mr. Dharia’s 2017 base salary of $582,455, which would be paid at regular +intervals. +(5) Consists +of Mr. Sinha’s 2017 base salary of $681,000, which would be +paid at regular intervals. +(6) Consists +of six months of Mr. Paradise’s 2016 base salary of $400,000, which would be paid +at regular intervals. +46 +(7) Consists +of the base salary of $850,000 and $900,000 for 2017 and 2018, respectively, that would +have been paid to Mr. Rosenfeld during the remainder of the term of his employment +until the expiration of his employment agreement on December 31, 2018. Mr. Rosenfeld +would receive these payments at regular intervals. +(8) Consists +of the base salary of $630,000, $650,000 and $670,000 for 2017, 2018 and 2019, respectively, +that would have been paid to Ms. Varela during the remainder of the term of her +employment until the expiration of her employment agreement on December 31, 2019. +Ms. Varela would receive these payments at regular intervals. +(9) Consists +of Mr. Dharia’s 2016 base salary of $582,455 multiplied by the number of years +(and fraction of years) remaining in the term of his employment agreement, which +expires on December 31, 2017. Mr. Dharia would receive 50% of this payment +immediately and the remaining 50% would be paid to him one year later (i.e., on December 31, +2017). +(10) Consists +of one times the sum of Mr. Dharia’s life insurance payment ($86,311 per year) plus +medical benefits ($13,330 per year). +(11) Consists +of the base salary of $681,000, $702,000 and $723,000 for 2017, 2018 and 2019, respectively, +that would have been paid to Mr. Sinha during the remainder of the term of his employment +until the expiration of his employment agreement on December 31, 2019. Mr. Sinha +would receive these payments at regular intervals. +(12) Consists +of the base salary of $400,000 that would have been paid to Mr. Paradise during +the remainder of the term of his employment until the expiration of his employment agreement +on December 31, 2018. Mr. Paradise would receive these payments at regular intervals. +(13) Consists +of two and one-half times the sum of (i) Mr. Rosenfeld’s 2016 base salary of $800,000 +plus (ii) the average cash bonus received by Mr. Rosenfeld for the three-year period +ending on December 31, 2015. Upon a change-in-control, payments (or portions thereof) to +Mr. Rosenfeld determined to constitute an “excess parachute payment” +may be reduced to the maximum amount that would be tax deductible by the Company pursuant +to Sections 280G of the Code. Upon a hypothetical December 31, 2016 change-in-control, +no payments to Mr. Rosenfeld would have been subject to reduction. See the “Implications +of Tax and Accounting Matters” section of “Compensation Discussion and Analysis” +for a discussion of the applicability of Sections 280G and 4999 of the Code to change-in-control +payments generally. See also the summary of Mr. Rosenfeld’s employment agreement +under “Employment Arrangements.” +(14) The +amount disclosed represents the total value of the restricted stock and stock options +which would have received accelerated vesting upon a hypothetical change in control on +December 31, 2016. +(15) Consists +of three times the average total compensation Ms. Varela actually received for the +preceding three calendar years. Upon a change-in-control, payments (or portions thereof) to +Ms. Varela determined to constitute an “excess parachute payment” may +be subject to reduction to the maximum amount that would be tax deductible by the Company +pursuant to Sections 280G of the Code. Upon a hypothetical December 31, 2016 +change-in-control, no payments to Ms. Varela would have been subject to reduction.] +See the “Implications of Tax and Accounting Matters” section of “Compensation +Discussion and Analysis” for a discussion of the applicability of Sections 280G +and 4999 of the Code to change-in-control payments generally. See also the summary of +Ms. Varela’s employment agreement under “Employment Arrangements.” +(16) Consists +of three times the total compensation Mr. Dharia actually received for the preceding +twelve calendar months, except that in lieu of the actual base salary component received +during such period, there has been substituted the annual base salary to which Mr. Dharia +was entitled as of the date of termination or resignation. Upon a change-in-control, +payments (or portions thereof) to Mr. Dharia determined to constitute an “excess +parachute payment” may be subject to reduction to the maximum amount that would +be tax deductible by the Company pursuant to Sections 280G of the Code. Upon a hypothetical +December 31, 2016 change-in-control, no payments to Mr. Dharia would have been +subject to reduction. See the “Implications of Tax and Accounting Matters” +section of “Compensation Discussion and Analysis” for a discussion of the +applicability of Sections 280G and 4999 of the Code to change-in-control payments +generally. See also the summary of Mr. Dharia’s employment agreement under +“Employment Arrangements.” +(17) Consists +of three times the sum of base compensation and certain benefits Mr. Sinha actually +received for the preceding twelve calendar months, except that in lieu of the actual +base salary component received during such period, there has been substituted the annual +base salary to which Mr. Sinha was entitled as of the date of termination or resignation. +Upon a change-in-control, payments (or portions thereof) to Mr. Sinha determined +to constitute an “excess parachute payment” may be subject to reduction to +the maximum amount that would be tax deductible by the Company pursuant to Sections 280G +of the Code. Upon a hypothetical December 31, 2016 change-in-control, no payments +to Mr. Sinha would have been subject to reduction. See the “Implications of +Tax and Accounting Matters” section of “Compensation Discussion and Analysis” +for a discussion of the applicability of Sections 280G and 4999 of the Code to change-in-control +payments generally. See also the summary of Mr. Sinha’s employment agreement +under “Employment Arrangements.” +(18) Consists +of three times the average total compensation Mr. Paradise actually received for the +preceding three calendar years. Upon a change-in-control, payments (or portions thereof) to +Mr. Paradise determined to constitute an “excess parachute payment” +may be subject to reduction to the maximum amount that would be tax deductible by the +Company pursuant to Sections 280G of the Code. Upon a hypothetical December 31, +2016 change-in-control, this amount would have been reduced by $70,281 to reflect the +maximum amount that would be tax deductible by the Company pursuant to Section 280G of +the Code. See the “Implications of Tax and Accounting Matters” section of +“Compensation Discussion and Analysis” for a discussion of the applicability +of Sections 280G and 4999 of the Code to change-in-control payments generally. See +also the summary of Mr. Paradise’s employment agreement under “Employment +Arrangements.” +(19) The +total amount does not include the amount deducted pursuant to Section 280G of the Code. +COMPENSATION +COMMITTEE REPORT +The +Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with management, and based on the review +and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis +be included in this Proxy Statement. +Submitted by +the Compensation Committee of the Company’s Board of Directors: +Peter Migliorini (Chairman) +Rose +Peabody Lynch +Thomas H. Schwartz +Robert Smith +47 +PROPOSAL +TWO: +RATIFICATION OF THE APPOINTMENT OF EISNERAMPER LLP AS THE COMPANY’S +INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS +FOR THE FISCAL YEAR ENDING DECEMBER 31, 2017 +The +Audit Committee has appointed EisnerAmper LLP as the Company’s independent registered public accounting firm to conduct +the audit of the Company’s books and records for the fiscal year ending December 31, 2017. EisnerAmper LLP has served +as the Company’s independent registered public accountants since 1995. +Before +making its determination on appointment, the Audit Committee carefully considers the qualifications and competence of candidates +for the independent registered public accountants. For EisnerAmper LLP, this has included a review of its performance in prior +years, its independence and processes for maintaining independence, the results of the most recent internal quality control review +or Public Company Accounting Oversight Board inspection, the key members of the audit engagement team, the firm’s approach +to resolving significant accounting and auditing matters including consultation with the firm’s national office, as well +as its reputation for integrity and competence in the fields of accounting and auditing. Although ratification by stockholders +is not required by the Company’s organizational documents or any applicable law, the Audit Committee has determined that +requesting ratification by stockholders of its appointment of EisnerAmper LLP as the Company’s independent registered public +accountants is a matter of good corporate practice. If stockholders do not ratify the selection, the Audit Committee will reconsider +whether or not to retain EisnerAmper LLP, but may still retain the accounting firm. Even if the selection is ratified, the Audit +Committee, in its discretion, may change the appointment at any time during the year if it determines that such a change would +be in the best interest of the Company and its stockholders. +Representatives +of EisnerAmper LLP are expected to be present at the Annual Meeting to respond to appropriate questions and to make a statement +should they so desire. +Required Vote +The +affirmative vote of the holders of a majority of the outstanding shares of Common Stock present or represented by proxy and entitled +to vote at the Annual Meeting is required to ratify the Audit Committee’s selection of EisnerAmper LLP. +Recommendation of the Board +of Directors +The +Board of Directors unanimously recommends a vote “FOR” the ratification of the appointment of EisnerAmper LLP as the +Company’s independent registered public accountants for the fiscal year ending December 31, 2017. Unless marked to +the contrary, proxies received from stockholders will be voted in favor of ratifying the appointment of EisnerAmper LLP as the +Company’s independent registered public accountants for the fiscal year ending December 31, 2017. +48 +Independent Registered Public +Accounting Firm’s Fees and Services +The +aggregate fees billed to the Company by EisnerAmper LLP for professional services rendered for each of the past two years are +set forth below: +Year Ended December 31, +2016 +2015 +Audit Fees (1) +$ 875,500 +$ 854,500 +Audit-Related Fees (2) +182,131 +46,000 +Tax Fees (3) +— +95,550 +All Other Fees +— +— +Total +$ 1,057,631 +$ 996,050 +(1) +Represents the aggregate fees billed for (a) the audit of the Company’s annual financial statements, (b) the +reviews of the financial statements included in the Company’s Quarterly Reports on Form 10-Q, (c) other statutory and +regulatory filings or engagements and (d) the audit of the Company’s internal controls over financial reporting. +(2) +Represents the aggregate fees billed for audit-related fees related to assurance and related services. Includes, among others, +the audit of the Company’s employee benefit plans and other accounting related consultations and, with respect to the 2016 +Fiscal Year, services rendered in connection with due diligence performed for the Company’s acquisition of a business. +(3) +Represents the aggregate fees billed for tax compliance, tax advice and tax planning services. These professional services +include assistance in the preparation of the Company’s various federal, state and local tax returns, tax consultation and +various amendments and, with respect to the fiscal year ended December 31, 2015, for services rendered in connection with a transfer +pricing study. +Audit Committee’s +Pre-Approval Policies and Procedures +Consistent +with SEC policies regarding auditor independence, the Audit Committee has responsibility for appointing, setting compensation +and overseeing the work of the independent registered public accountants. In recognition of this responsibility, the Audit Committee +has established a policy to review and pre-approve all audit and permissible non-audit services provided by the independent registered +public accountants. These services may include audit services, audit-related services, tax services and other services. +Prior +to engagement of the independent auditor for next year’s audit, the Audit Committee will pre-approve all auditing services +and all permitted non-audit services (including the fees and terms thereof), except those excluded from requiring pre-approval +based upon the de minimus exception set forth in Section 10A(i)(1)(B) of the Exchange Act. +The +Audit Committee’s pre-approval policies and procedures are as follows: (a) prior to each fiscal year, the Audit Committee +pre-approves a schedule of estimated fees for proposed non-prohibited audit and non-audit services, and (b) actual amounts +paid are monitored by financial management of the Company and reported to the Audit Committee. +All +work performed by EisnerAmper LLP as described above under the captions Audit Fees, Audit-Related Fees, Tax Fees and All Other +Fees has been approved or pre-approved by the Audit Committee pursuant to the provisions of the Audit Committee’s charter. +The Audit Committee has considered and concluded that the provision of non-audit services is compatible with maintaining the independence +of EisnerAmper LLP. +49 +AUDIT +COMMITTEE REPORT +The +Audit Committee reviewed the Company’s audited financial statements for the 2016 Fiscal Year and met with both management +and representatives of EisnerAmper LLP, the Company’s independent registered public accountants, to discuss such audited +financial statements. Management and the Company’s independent registered public accountants have represented to the Audit +Committee that the financial statements were prepared in accordance with accounting principles generally accepted in the United +States of America. The Audit Committee has received from and discussed with EisnerAmper LLP the written disclosures and the letter +regarding EisnerAmper LLP’s communications with the Audit Committee concerning independence as required by applicable requirements +of the Public Company Accounting Oversight Board, and discussed with EisnerAmper LLP the independence of EisnerAmper LLP. The +Audit Committee also discussed with EisnerAmper LLP any matters required to be discussed by Statement on Auditing Standards No. +61, as amended, as adopted by the Public Company Accounting Oversight Board in Rule 3200T. Based on these reviews and discussions, +the Audit Committee recommended to the Board that the Company’s audited financial statements be included in the Company’s +Annual Report on Form 10-K for the 2016 Fiscal Year. +Submitted by +the Audit Committee of the Company’s Board of Directors: +Richard P. Randall (Chairman) +Rose +Peabody Lynch +Peter Migliorini +Ravi +Sachdev +50 +PROPOSAL +THREE: +NON-BINDING ADVISORY VOTE ON EXECUTIVE COMPENSATION +Section 14A +of the Exchange Act, as created by Section 951 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank +Act”), and the rules and regulations promulgated thereunder, require a publicly traded company to include a resolution in +its proxy statement at least once every three years seeking stockholder approval, on an advisory or non-binding basis, of the +compensation of the named executive officers as disclosed in such company’s proxy statement pursuant to the compensation +rules of the SEC. At our 2011 Annual Meeting of Stockholders, the Company’s stockholders approved, on an advisory basis, +the holding of an advisory vote to approve executive compensation (commonly known as a “say-on-pay” proposal) on +an annual basis. Based on these results, the Board of Directors determined to hold its advisory vote to approve executive compensation +annually until the next frequency vote, which is scheduled to occur at the Annual Meeting this year as described in Proposal Four. +Accordingly, we are providing stockholders with a non-binding advisory vote on the compensation of our Named Executive Officers. +As +described in more detail in the Compensation Discussion and Analysis section, which begins on page 24 of this Proxy Statement, +the overall objective of the Company’s executive compensation programs and practices is to support delivery of sustained +operating and financial performance results with the ultimate goal being to create and maximize value for our stockholders on +a long-term basis. We believe that our executive compensation programs and practices serve the interests of our stockholders by +enabling us to attract and retain an experienced and effective management team whose combined knowledge of our business and the +footwear and accessories industries has proved extremely valuable in delivering results for our stockholders. The Compensation +Committee and the Board of Directors believe that the Company’s compensation programs and practices as articulated in the +Compensation Discussion and Analysis section of this Proxy Statement effectively implement our philosophy of aligning compensation +to stockholder interests and that the compensation received by our Named Executive Officers in the 2016 Fiscal Year reflects and +supports such philosophy and goal and is commensurate with the performance and strategic position of the Company. We will continue +to review and modify our executive compensation programs to address evolving best practices and changing regulatory requirements. +We +encourage stockholders to read the Compensation Discussion and Analysis section of this Proxy Statement, as well as the Summary +Compensation Table and other related compensation tables and narrative disclosure contained in this Proxy Statement, all of which +describe and explain in detail the compensation of our Named Executive Officers in the 2016 Fiscal Year. +The following +resolution is submitted for stockholder approval: +“ RESOLVED , +that the stockholders of Steven Madden, Ltd. (the ‘Company’) approve, on a non-binding advisory basis, the compensation +paid to the Named Executive Officers of the Company as disclosed pursuant to the compensation disclosure rules of the Securities +and Exchange Commission, including the executive compensation as described in the section captioned ‘Compensation Discussion +and Analysis,’ the Summary Compensation Table and related tabular disclosure and narrative discussion regarding compensation +of Named Executive Officers under the caption ‘Executive Compensation’ contained in the Company’s Proxy Statement +dated April 5, 2017.” +51 +This +vote is not intended to address any specific item of compensation, but rather the overall compensation of our Named Executive +Officers and the compensation programs and practices described in this Proxy Statement. While this advisory vote on executive +compensation, commonly referred to as a “say-on-pay” advisory vote, is required by Section 14A of the Exchange +Act, it is not binding on our Board of Directors and may not be construed as overruling any decision by the Board of Directors +or the Compensation Committee. However, we value the opinions of our stockholders. To the extent there is a significant +vote against the compensation of the Named Executive Officers as disclosed in this Proxy Statement, the Board of Directors and +the Compensation Committee will consider the outcome of the vote when considering future compensation arrangements and evaluate +whether any actions are necessary to address the stockholders’ concerns. +Required Vote +Approval +of this resolution requires the affirmative vote of a majority of the shares of Common Stock present or represented by proxy and +entitled to vote at the Annual Meeting. +Recommendation of the Board +of Directors +The +Board of Directors unanimously recommends a vote “FOR” the resolution approving the overall compensation of the Named +Executive Officers for the 2016 Fiscal Year. +52 +PROPOSAL +FOUR: +NON-BINDING +ADVISORY VOTE ON FREQUENCY OF ADVISORY VOTE ON EXECUTIVE COMPENSATION +Pursuant +to Section 14A of the Exchange Act, as created by Section 951 of the Dodd-Frank Act, and the rules and regulations promulgated +thereunder, we are required, at least once every six years, to afford our stockholders the opportunity to cast an advisory vote +on how often our stockholders shall have a non-binding advisory vote on the compensation of the Named Executive Officers, such +as Proposal Three above. Accordingly, we are asking our stockholders to vote on whether future non-binding advisory votes on the +Named Executive Officers’ compensation should occur every year, every two years, or every three years. In lieu of voting +for one of these options, stockholders may also abstain from voting. Our stockholders last voted on the frequency of +the advisory vote on executive compensation in 2011, when 71% of the votes cast recommended that such votes be held on an annual +basis. Accordingly, our stockholders have voted, on a non-binding advisory basis, on the compensation of our Named Executive Officers +annually since 2011. +After +careful consideration, the Board of Directors believes it is appropriate for executive compensation to continue to be submitted +to an advisory vote of stockholders on an annual basis. An annual advisory vote on the compensation of our Named Executive Officers +will allow us to continue to obtain our stockholders’ views with respect to the compensation of our Named Executive Officers +and our executive compensation program and practices on a consistent basis. Further, a vote every year is consistent with the +Company’s commitment to engage in regular dialogue with our stockholders on corporate governance matters, including our +executive compensation philosophy, policies and programs. +For +the reasons discussed above, the Board of Directors recommends that future non-binding advisory votes on executive compensation +be conducted every year. While the Board of Directors recommends that future non-binding advisory votes on executive compensation +be conducted every year, stockholders are not voting to approve or disapprove the Board’s recommendation. Rather, +stockholders are being asked to vote on the following resolution: +“ RESOLVED , +that the stockholders of Steven Madden, Ltd. (the ‘Company’) determine, on a non-binding advisory basis, that the +frequency with which the stockholders should have an advisory vote on executive compensation set forth in the Company’s +Proxy Statement for its annual meeting of stockholders, commencing with the 2018 Annual Meeting of Stockholders, is (i) every +year, (ii) every two years, or (iii) every three years.” +Stockholders +may choose among the three choices included in the resolution above, or may abstain from voting on this proposal. +While +this advisory vote is required by Section 14A of the Exchange Act, the voting result is not binding on our Board of Directors +and may not be construed as overruling any decision by the Board of Directors. However, the Board of Directors and the Compensation +Committee value the views of our stockholders and will review and give serious consideration to the outcome of the vote when making +the determination as to the frequency of future say-on-pay votes. It is expected that the next stockholder advisory vote as to +the frequency of presenting “say-on-pay” advisory votes will occur at the 2023 annual meeting of stockholders. +53 +Required +Vote +Approval +of this resolution requires that one of the three frequency choices receive a majority of the votes cast by the holders of shares +of Common Stock present in person or represented by proxy and entitled to vote at the Annual Meeting. +Recommendation +of the Board of Directors +The +Board of Directors recommends a vote for a frequency of every YEAR for future non-binding advisory votes on the compensation of +the Company’s Named Executive Officers. +OTHER +MATTERS +At +the date of this Proxy Statement, the Company has no knowledge of any business other than that described above that will be presented +at the Annual Meeting. If any other business should properly come before the Annual Meeting in connection therewith, it is intended +that the persons named in the accompanying proxy will have discretionary authority to vote the shares which they represent. +A +copy of the applicable provisions of the Company’s By-Laws may be obtained by any stockholder, without charge, upon written +request to the Secretary of the Company at the address set forth above. +WHETHER +OR NOT YOU EXPECT TO BE PRESENT AT THE ANNUAL MEETING, PLEASE MARK, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY CARD PROMPTLY. +ALTERNATIVELY, YOU MAY VOTE YOUR SHARES BY TELEPHONE OR THROUGH THE INTERNET AS DESCRIBED ON THE ACCOMPANYING PROXY CARD. +YOUR VOTE IS IMPORTANT. IF YOU ARE A STOCKHOLDER OF RECORD AND ATTEND THE ANNUAL MEETING AND WISH TO VOTE IN PERSON, YOU MAY WITHDRAW +YOUR PROXY AT ANY TIME PRIOR TO THE VOTE. +STEVEN +MADDEN, LTD. +April 5, 2017 +By: +Arvind +Dharia +Secretary +54 +STEVEN MADDEN, LTD. +ATTN: ARVIND DHARIA +52-16 BARNETT AVENUE +LONG ISLAND CITY, NY 11104 +VOTE BY +INTERNET - www.proxyvote.com +Use the Internet to +transmit your voting instructions and for electronic delivery of information +up until 11:59 P.M. Eastern Time the day before the meeting date. Have your +proxy card in hand when you access the web site and follow the instructions +to obtain your records and to create an electronic voting instruction form. +ELECTRONIC +DELIVERY OF FUTURE PROXY MATERIALS +If you would like to +reduce the costs incurred by our company in mailing proxy materials, you can +consent to receiving all future proxy statements, proxy cards and annual +reports electronically via e-mail or the Internet. To sign up for electronic +delivery, please follow the instructions above to vote using the Internet +and, when prompted, indicate that you agree to receive or access proxy +materials electronically in future years. +VOTE BY +PHONE - 1-800-690-6903 +Use any touch-tone +telephone to transmit your voting instructions up until 11:59 P.M. Eastern +Time the day before the meeting date. Have your proxy card in hand when you +call and then follow the instructions. +VOTE BY +MAIL +Mark, sign and date +your proxy card and return it in the postage-paid envelope we have provided +or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, +NY 11717. +TO +VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: +KEEP +THIS PORTION FOR YOUR RECORDS +DETACH +AND RETURN THIS PORTION ONLY +THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. +For +All +Withhold +All +For All +Except +To withhold authority to +vote for any individual nominee(s), mark “For All Except” and write the +number(s) of the nominee(s) on the line below. +The Board +of Directors recommends you vote +FOR the +following: +o +o +o +1. +Election of Directors +Nominees +01 +06 +Edward R. Rosenfeld 02 Rose Peabody Lynch 03 Peter +Migliorini 04 Richard +P. Randall 05 Ravi +Sachdev +Thomas H. Schwartz +07 Robert Smith +08 Amelia Newton Varela +The Board +of Directors recommends you vote FOR proposals 2 and 3. +For +Against +Abstain +2. +TO RATIFY THE APPOINTMENT OF EISNERAMPER LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC +ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2017. +o +o +o +3. +TO APPROVE, BY NON-BINDING ADVISORY VOTE, THE EXECUTIVE COMPENSATION DESCRIBED IN THE STEVEN +MADDEN, LTD PROXY STATEMENT. +o +o +o +The Board of Directors recommends +you vote “1 YEAR” on the following proposal: +1 year +2 years +3 years +Abstain +4. +TO RECOMMEND, BY NON-BINDING ADVISORY VOTE, THE FREQUENCY +OF FUTURE ADVISORY VOTES ON EXECUTIVE COMPENSATION. +o +o +o +o +NOTE: In their +discretion, the proxies are authorized to vote upon such other business as +may properly be presented at the meeting or any adjournments or postponements +thereof. +Yes +No +Please indicate if you plan +to attend this meeting +o +o +Please sign exactly as your +name(s) appear(s) hereon. When signing as attorney, executor, administrator, +or other fiduciary, please give full title as such. Joint owners should each +sign personally. All holders must sign. If a corporation or partnership, +please sign in full corporate or partnership name, by authorized officer. +Signature [PLEASE SIGN +WITHIN BOX] +Date +Signature (Joint Owners) +Date +0000321214_1 R1.0.1.15 +Important +Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice & Proxy Statement, Annual +Report with 10-K is/are available at www.proxyvote.com . +STEVEN MADDEN, LTD. +THIS PROXY IS BEING SOLICITED ON BEHALF OF +THE BOARD OF DIRECTORS +PLEASE CLEARLY INDICATE A RESPONSE BY CHECKING ONE OF THE +BOXES NEXT TO EACH OF THE PROPOSALS +The undersigned +stockholder(s) of Steven Madden, Ltd. (the “Company”) hereby appoint(s) +Edward R. Rosenfeld and Arvind Dharia, and each of them, as attorneys and +proxies, each with power of substitution and revocation, to represent the +undersigned at the Annual Meeting of Stockholders of the Company to be held +at the Company’s showroom located at 1370 Avenue of the Americas, 14th Floor, +New York, New York at 10:00 a.m., local time, on May 26, 2017 and at any +adjournments or postponements thereof, with authority to vote all shares of +Common Stock of the Company held or owned by the undersigned on March 31, +2017, in accordance with the directions indicated herein. +THIS PROXY WILL BE VOTED AS SPECIFIED HEREIN; UNLESS OTHERWISE INDICATED, THIS PROXY +WILL BE VOTED (1) FOR THE ELECTION OF THE EIGHT(8) NOMINEES NAMED IN ITEM 1, (2) FOR THE RATIFICATION OF THE +APPOINTMENT OF EISNERAMPER LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR +2017, (3) FOR THE APPROVAL OF THE EXECUTIVE COMPENSATION DESCRIBED IN THE COMPANY’S PROXY STATEMENT AND (4) FOR +A FREQUENCY OF EVERY 1 YEAR FOR FUTURE ADVISORY VOTES ON EXECUTIVE COMPENSATION. THIS PROXY WILL BE VOTED IN THE DISCRETION OF THE +PROXIES ON ANY OTHER MATTER THAT MAY PROPERLY COME BEFORE THE MEETING. +Continued and to be signed on reverse side +0000321214_2 R1.0.1.15 \ No newline at end of file diff --git a/raw/proxies/0000913241/0001019056-17-000354/proxy_rpt.txt b/raw/proxies/0000913241/0001019056-17-000354/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..8c5914f7727af1eb827438a0159ea69d8e8d3cd1 --- /dev/null +++ b/raw/proxies/0000913241/0001019056-17-000354/proxy_rpt.txt @@ -0,0 +1,123 @@ +and Related Party Transactions +Steven +Madden Employment Agreement. Effective as of July 1, 2005, the Company amended and restated its employment agreement with +the Company’s founder and Creative and Design Chief, Steven Madden, pursuant to which Mr. Madden agreed to continue +to serve as the Company’s Creative and Design Chief. The term of Mr. Madden’s employment under his employment +agreement commenced on July 1, 2005 and, in accordance with the amendment of the agreement effective December 31, 2011, will +end on December 31, 2023. Prior to this recent amendment, the agreement had provided for an annual salary of $600,000, with +a 7% increase of base salary on a compound basis in each of the third, fifth, seventh and ninth years of the agreement. The agreement +had also provided for an annual cash bonus in an amount equal to at least 2% of the Company’s EBITDA (the “Annual +Bonus”) and an annual cash bonus in relation to “new business” (as defined in the agreement) in an +amount equal to at least (i) 2.5% of new business gross direct revenues plus (ii) 10% of all license or other fee income +above $2,000,000 (the “New Business Bonus”). The agreement, as amended, increases Mr. Madden’s annual base +salary but eliminates the Annual Bonus and the New Business Bonus and provides that all cash bonuses subsequent to the fiscal +year ended December 31, 2011 will be at the sole discretion of the Company’s Board of Directors. Under the agreement, +as amended, Mr. Madden’s annual base salary was fixed at $5,416,667 in 2012, $7,416,667 in 2013, $9,666,667 in 2014, +$11,916,667 in 2015 and $10,697,917 in 2016 and in each year thereafter through the end of the term of employment. In addition, +the amended agreement entitles Mr. Madden to an annual life insurance premium reimbursement of up to $200,000. The amendment +also eliminates an annual non-accountable expense allowance of $200,000 that had been previously provided to Mr. Madden under +the agreement. Pursuant to the amended agreement, on February 8, 2012, Mr. Madden was granted 1,463,056 restricted shares +of Common Stock (the number of shares indicated having been adjusted for an October 1, 2013 three-for-two stock split effected +as a stock dividend), valued at approximately $40 million, under the 2006 Plan. The restricted Common Stock will vest in +equal annual installments over seven years commencing on December 31, 2017 through December 31, 2023, subject to Mr. Madden’s +continued employment with the Company on each such vesting date. +17 +On +June 30, 2012, pursuant to an election right granted to him under the agreement, as amended, Mr. Madden notified the Company +of his election to receive an additional restricted stock award valued at $40 million in consideration of a reduction in +his annual base salary in years subsequent to 2012. Accordingly, on July 3, 2012, Mr. Madden was issued 1,893,342 restricted +shares of Common Stock (the number of shares indicated having been adjusted for an October 1, 2013 three-for-two stock split +effected as a stock dividend) under the 2006 Plan. The restricted Common Stock will vest in equal annual installments over +six years commencing on December 31, 2018 through December 31, 2023, subject to Mr. Madden’s continued +employment with the Company on each such vesting date. As a result of his election to receive an additional restricted stock award, +Mr. Madden’s annual base salary for years subsequent to 2012 has been reduced as follows: $4,000,000 in 2013, $6,125,000 +in 2014, $8,250,000 in 2015 and $7,026,042 in 2016 and in each year thereafter through the end of the term of employment. +Mr. Madden +is also eligible to receive annually, on or about the date of the Company’s annual meeting of stockholders (but not later +than June 30 th ), an option grant (the “Annual Option”) to purchase a number of shares of Common Stock, +with such number to be equal to the greater of (a) 100% of the largest aggregate number of shares of Common Stock available +upon the exercise of an option or options granted to any other continuing full-time employee of the Company during the preceding +twelve-month period and (b) 100,000 shares of Common Stock; provided, however, that a grant to Mr. Madden in excess +of 150% of the number of shares of Common Stock subject to options granted to such other continuing full-time employee would require +stockholder approval. Any Annual Option granted to Mr. Madden would vest quarterly over a one-year period following the grant +date and would be exercisable at a price equal to the closing price of the Company’s Common Stock on the grant date for +a period of five years following the grant date. In addition to the Annual Option, the agreement, as amended, provides for a potential +additional one-time stock option grant to purchase 750,000 shares of the Company’s Common Stock (the number of shares subject +to this potential stock option award having been adjusted for an October 1, 2013 three-for-two stock split effected as a +stock dividend) in the event that the Company achieves earnings per share, on a fully-diluted basis, equal to $3.00 in any +fiscal year ending December 31, 2015 or after. If granted, the option would vest in equal annual installments of 20% over +a five-year period and be exercisable for a period of seven years at a price equal to the closing price of the Company’s +Common Stock on the date immediately preceding the grant date. +In +the event of Mr. Madden’s death, his employment agreement provides for the payment to Mr. Madden’s estate +of his base salary for the 12-month period immediately subsequent to the date of his death. Further, in the event that Mr. Madden’s +employment agreement is terminated due to Mr. Madden’s total disability (as defined in the agreement), “for cause” +(as defined in the agreement) or due to Mr. Madden’s resignation, the Company is obligated to pay Mr. Madden +the amount of compensation that is accrued and unpaid through the date of termination. In the event Mr. Madden’s employment +agreement is terminated for any reason (other than “for cause” or due to his death, total disability or resignation), +the Company is obligated to pay Mr. Madden, in installments, the balance of his base salary that would have been paid by +the Company under the agreement for the full term of the agreement. If, during the period commencing 120 days prior to a +“change of control” (as defined in the employment agreement) transaction and ending on the first anniversary +of a change of control transaction, Mr. Madden’s employment is terminated by the Company other than for cause or by +the resignation of Mr. Madden for “good reason” (as defined in the employment agreement), or if Mr. Madden +resigns for good reason or without good reason within 30 days following a change of control transaction, all unvested options +to purchase shares of Common Stock held by Mr. Madden will vest on the date of termination or resignation and Mr. Madden +will be entitled to receive a lump sum cash payment equal to the amount of compensation that is accrued and unpaid through the +date of termination plus $35 million. Mr. Madden’s employment agreement contains other customary provisions, including +provisions regarding expense reimbursement, confidentiality, solicitation and competition. +18 +For +the 2016 Fiscal Year, Mr. Madden earned $7,026,042 in base salary and received $200,000 for the payment of an annual life +insurance premium. Mr. Madden also received as his Annual Option for the 2016 Fiscal Year an option to purchase 150,000 shares +of Common Stock at a price per share of $34.42. +Loan +to Steven Madden. On June 25, 2007, the Company made a loan to Steven Madden, its Creative and Design Chief and a principal +stockholder of the Company, in the amount of $3,000,000, in order for Mr. Madden to satisfy a personal tax obligation resulting +from the exercise of a stock option which was due to expire and hold the underlying shares of Common Stock. The loan is evidenced +by a secured promissory note executed by Mr. Madden in favor of the Company, the security for which is a security interest in +a certain securities brokerage account maintained by Mr. Madden with his broker; none of the securities in the securities brokerage +account are shares of the Company’s Common Stock. There have been successive amendments to the secured promissory note, +the most recent of which occurred in April 2016, at which time the secured promissory note was amended to substitute the collateral +securing the secured promissory note from shares of the Company’s Common Stock to the security interest in Mr. Madden’s +securities brokerage account. Previously, on January 3, 2012, the secured promissory note was amended and restated to extend the +maturity date of the obligation to December 31, 2023 and eliminate the accrual of interest after December 31, 2011. +Prior to the January 3, 2012 amendment, the secured promissory note had been accruing interest at the rate of 6% per annum. In +addition, the secured promissory note provides that, commencing on December 31, 2014 and annually on each December 31 +thereafter through the maturity date, one-tenth of the principal amount thereof, together with accrued interest, will be cancelled +by the Company provided that Mr. Madden continues to be employed by the Company on each such December 31. Contemporaneously, +the Company will release its security interest in a portion of the securities held in Mr. Madden’s securities brokerage +account generally correlating to the amount of indebtedness cancelled on such date. As of December 31, 2011, interest in +the amount of $1,090,000 had accrued on the principal amount of the secured promissory note and, as noted above, interest was +eliminated after December 31, 2011. On December 31, 2016, the required one-tenth of the principal amount of the secured +promissory note, together with accrued interest, was written-off by the Company. +Review, Approval or Ratification +of Transactions with Related Persons +The +Company’s written Conduct Code and Employee Handbook prohibit all conflicts of interest. Under the Conduct Code, conflicts +of interest occur when private or family interests interfere in any way, or even appear to interfere, with the interests of the +Company. The Company’s prohibition on conflicts of interest under the Conduct Code includes any related person transaction. +Related +person transactions must be approved by the Board, or by a committee of the Board consisting solely of independent directors, +who will approve the transaction only if they determine that it is in the best interests of the Company. In considering the transaction, +the Board or committee will consider all relevant factors, including, as applicable, (i) the Company’s business rationale +for entering into the transaction; (ii) the alternatives to entering into a related person transaction; (iii) whether +the transaction is on terms comparable to those available to third parties or, in the case of employment relationships, to employees +generally; (iv) the potential for the transaction to lead to an actual or apparent conflict of interest and any safeguards +imposed to prevent such actual or apparent conflicts; and (v) the overall fairness of the transaction to the Company. +The +Company has multiple processes for reporting conflicts of interests, including related person transactions. Under the Conduct +Code, all employees are required to report any actual or apparent conflict of interest, or potential conflict of interest, to +management. The Chief Financial Officer distributes a questionnaire to the Company’s executive officers and management personnel +on a quarterly basis and distributes a questionnaire to the members of the Board of Directors on an annual basis requesting certain +information regarding, among other things, their immediate family members, employment and beneficial ownership interests, which +information is then reviewed for any conflicts of interest under the Conduct Code. +The +Board of Directors, the Audit Committee and the Disclosure Committee, which is comprised of management personnel, discuss the +related party transactions, specifically, and in connection with the regular review processes attendant to the Company’s +periodic filings, including related party transaction disclosures. +If +a director is a party to or in some manner involved in a transaction involving the Company, he or she will be recused from all +discussions and decisions about the transaction. The transaction must be approved in advance whenever practicable, and if not +practicable, must be ratified as promptly as practicable. +19 +COMPENSATION \ No newline at end of file diff --git a/raw/proxies/0000913241/0001019056-18-000514/proxy.txt b/raw/proxies/0000913241/0001019056-18-000514/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..119eb75843491f421a53706684602b722111718b --- /dev/null +++ b/raw/proxies/0000913241/0001019056-18-000514/proxy.txt @@ -0,0 +1,3747 @@ +DEF 14A +1 +smadden_def14a.htm +DEF 14A +UNITED +STATES +SECURITIES +AND EXCHANGE COMMISSION +Washington, +D.C. 20549 +SCHEDULE +14A +(Rule 14a-101) +INFORMATION +REQUIRED IN PROXY STATEMENT +SCHEDULE 14A INFORMATION +Proxy Statement Pursuant to Section 14(a) +of the +Securities +Exchange Act of 1934 (Amendment No. __) +Filed by the Registrant þ +Filed by a Party other than +the Registrant o +Check the appropriate box: +o Preliminary +Proxy Statement +o Confidential, +for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +þ Definitive +Proxy Statement +o Definitive +Additional Materials +o Soliciting +Material Pursuant to §240.14a-12 +Steven +Madden, Ltd. +(Name +of Registrant as Specified in Its Charter) +(Name +of Person(s) Filing Proxy Statement, if Other Than the Registrant) +Payment of Filing Fee (Check +the appropriate box): +þ No +fee required. +o Fee +computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. +(1) +Title +of each class of securities to which transaction applies: +(2) +Aggregate +number of securities to which transaction applies: +(3) +Per +unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which +the filing fee is calculated and state how it was determined): +(4) +Proposed +maximum aggregate value of transaction: +(5) +Total +fee paid: +o Fee +paid previously with preliminary materials. +o Check +box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting +fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of +its filing. +(1) +Amount +Previously Paid: +(2) +Form, +Schedule or Registration Statement No.: +(3) +Filing +Party: +(4) +Date +Filed: +Dear Shareholders, +2017 was a great year for Steve Madden. We delivered strong financial results despite a challenging and rapidly changing retail environment, demonstrating the strength of our brands and the effectiveness of our business model. For the year, net sales increased 10.5% to over $1.5 billion, and adjusted diluted EPS rose 10.3% to $2.24. We also made progress on a number of key initiatives that position the Company for earnings growth and value creation going forward. +EXPANDING OUR FLAGSHIP BRAND +The highlight of 2017 was the strong performance of our flagship Steve Madden brand, particularly in our core wholesale footwear business. Steve and his design team created trend-right products across a range of categories that resonated with consumers and enabled the Steve Madden Women’s brand to outperform the competition. In a difficult year for many of our largest wholesale customers, the Steve Madden Women's wholesale footwear division grew net sales in the mid-teens on a percentage basis, taking significant market share on the selling floors and websites of our key customers. +Steve Madden Men’s and Steve Madden Kids were also standout performers; each increased net sales over 20% compared to 2016. And the strength of our flagship brand extended to our diffusion brands as well. Both Madden Girl and Steven by Steve Madden grew net sales in the high single-digits on a percentage basis. We also had a successful launch of Madden NYC, a new brand distributed exclusively at Kohl’s. Madden NYC launched in 450 Kohl’s doors in Spring 2017 and, based on the strong initial performance at retail, we are expanding distribution of selected styles to 800 doors for Spring 2018. +The flagship brand was the highlight of our accessories business as well. Steve Madden handbag net sales increased in the mid-teens on a percentage basis, as we better aligned Steve Madden handbags and footwear in terms of styling, attitude and trend direction. As in footwear, the brand halo extended to diffusion brand Madden Girl, which also recorded a double-digit percentage net sales increase in the handbag category. +This robust performance across the +Steve Madden business was driven primarily by trend-right product assortments, but it was also buttressed by increased marketing +investment throughout 2017. We highlighted entrepreneurs in a campaign called Self Made; we worked with Caroline Vreeland as the +face of the brand; we opened a flagship location in the heart of Times Square in New York City; we collaborated with GQ on a capsule +collection of men's shoes and bags; we conducted a holiday campaign with pop star Cardi B; and at the tail end of the year, we +introduced Maddman: The Steve Madden Story , a documentary that chronicles the life of our founder. We believe the enhanced +marketing support was a significant contributor to further reinforcing the strength of the Steve Madden brand. +EXPANDING OUR INTERNATIONAL BUSINESS +We also made significant progress in 2017 on one of our most important long-term growth initiatives, which is expanding our international business. International net sales increased 15% for the year. Our directly-operated markets, Canada and Mexico, each delivered strong growth, and our SM Europe joint venture, which we launched in June 2016, continued to exceed expectations in both sales and earnings. In August 2017, we launched new joint ventures in mainland China and Taiwan. At year end, we had opened 24 locations in Asia and established an e-commerce presence in both mainland China and Taiwan. We believe Asia represents a major growth opportunity for the Company, and developing these new joint ventures will be a key priority for us going forward. +EXPANDING OUR CAPABILITIES THROUGH ACQUISITION +Another highlight of 2017 was the acquisition of Schwartz & Benjamin, the footwear licensee for Kate Spade and Avec Les Filles. Schwartz & Benjamin contributed $80 million in net sales in the eleven months that we have owned it in 2017, and it provides us with a platform to expand in the designer and accessible luxury footwear space as well as to build both brands and private labels that target a more mature, sophisticated customer. In 2018, we are re-launching our designer brand Brian Atwood on the Schwartz & Benjamin platform. Also in 2018, we will be adding the Anne Klein brand to the Schwartz & Benjamin portfolio, as we have signed an agreement to become the licensee for Anne Klein footwear and handbags starting with Fall 2018 shipments. The Anne Klein brand has a rich heritage that dates back 50 years, and with its dedication to timeless American classics, it is complementary to our other brands. +RETURNING CAPITAL TO SHAREHOLDERS +Finally, we continued to demonstrate our commitment to returning capital to shareholders. In 2017, we repurchased 2.6 million shares, or approximately 4% of the outstanding shares of the Company, for a total of $99 million. In addition, in early 2018, our Board of Directors approved the initiation of our first ever quarterly cash dividend. We view this as a significant milestone for the Company as well as a reflection of our confidence in the Company's long-term prospects and a testament to our commitment to enhance shareholder value. The dividend is intended to supplement continued investments in our business as well as acquisitions and share repurchases. +LOOKING AHEAD +In summary, 2017 was a strong year for Steve Madden, as we delivered robust financial results while also making important investments for the future. As we move forward, we have significant momentum in our flagship brand, increasing traction in our international business, and a business model that over the last few years has proven its resilience in the face of a challenging retail environment. We are well-positioned to continue to drive sales and earnings growth as well as generate shareholder returns over the long-term. +In closing, we would like to thank all of our employees for their hard work and dedication, our customers for their loyalty, and you, our shareholders, for your continued support. +Sincerely, +Edward R. Rosenfeld +Chief Executive Officer +Awadhesh Sinha +Chief Operating Officer +Arvind Dharia +Chief Financial Officer +NOTICE OF +ANNUAL MEETING OF STOCKHOLDERS +TO +BE HELD ON MAY 25, 2018 +TO THE STOCKHOLDERS: +The Annual Meeting +of Stockholders (the “Annual Meeting”) of Steven Madden, Ltd. (the “Company”) will be held on +Friday, May 25, 2018, at the Company’s showroom located at 1370 Avenue of the Americas, 14th Floor, New York, New York +at 10:00 a.m., local time, for the purposes stated below: +1. to elect nine (9) directors +to the Board of Directors of the Company; +2. to ratify the appointment +of EisnerAmper LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, +2018; +3. to approve, on a non-binding +advisory basis, the compensation of certain executive officers as disclosed in the accompanying proxy statement; and +4. to transact such other business +as may properly come before the Annual Meeting or any adjournments thereof. +Only those +stockholders of record at the close of business on March 29, 2018, the record date for the Annual Meeting, are entitled to notice +of and to vote at the Annual Meeting and any adjournments thereof. Stockholders of record at the close of business on March 29, +2018, the record date for the Annual Meeting, will be admitted to the Annual Meeting upon presentation of valid, government-issued +photo identification, such as a driver’s license. Stockholders who own shares of the Company’s common stock beneficially +through a bank, broker or other nominee will be admitted to the Annual Meeting upon presentation of valid, government-issued photo +identification and proof of ownership or a valid proxy signed by the record holder. A recent brokerage statement or a letter from +a bank or broker are examples of proof of ownership. If you own shares of the Company’s common stock beneficially and want +to vote in person at the Annual Meeting, you should contact your broker or applicable agent in whose name the shares are registered +to obtain a broker’s proxy and bring it to the Annual Meeting in order to vote. +IMPORTANT NOTICE REGARDING THE +AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 25, 2018: THE NOTICE OF ANNUAL MEETING +AND PROXY STATEMENT, ANNUAL REPORT, ELECTRONIC PROXY CARD AND ANY OTHER MATERIALS CONCERNING THE ANNUAL MEETING, TOGETHER WITH +ANY AMENDMENTS TO ANY OF THESE MATERIALS, ARE AVAILABLE ON THE INTERNET AT WWW.PROXYVOTE.COM. +BY ORDER OF THE +BOARD OF DIRECTORS +April 6, +2018 +Long Island City, +New York +Arvind Dharia +Secretary +WHETHER OR NOT YOU EXPECT +TO BE PRESENT AT THE ANNUAL MEETING, PLEASE MARK, DATE AND SIGN THE ACCOMPANYING FORM OF PROXY AND MAIL IT PROMPTLY IN THE ENVELOPE +PROVIDED TO: VOTE PROCESSING, C/O BROADRIDGE, 51 MERCEDES WAY, EDGEWOOD, NEW YORK 11717. ALTERNATIVELY, YOU MAY VOTE YOUR +SHARES BY TELEPHONE OR THROUGH THE INTERNET AS DESCRIBED ON THE ACCOMPANYING PROXY CARD. +TABLE +OF CONTENTS +GENERAL INFORMATION +2 +Notice of Internet Availability of Proxy Materials +3 +QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING +3 +PROPOSAL ONE: ELECTION OF DIRECTORS +7 +Stockholder Nominations for Board Membership +7 +Nominees for Election to the Board of Directors +7 +CORPORATE GOVERNANCE +12 +The Board of Directors +12 +Director Independence +12 +Director Attendance at Meetings +12 +Director Election (Majority Voting) Policy +12 +Committees of the Board +13 +Board Leadership Structure, Risk Oversight, Executive Sessions of Non-Employee Directors, and Communications Between Stockholders and the Board +16 +Codes of Business Conduct and Ethics +17 +Corporate Governance Guidelines +17 +Stock Ownership Guidelines +18 +Prohibition on Hedging and Pledging of Our Common Stock +18 +Corporate Social Responsibility Policy +18 +Certain Relationships and Related Party Transactions +18 +Review, Approval or Ratification of Transactions with Related Persons +20 +COMPENSATION OF DIRECTORS IN THE 2017 FISCAL YEAR +20 +STOCK OWNERSHIP +21 +Security Ownership of Certain Beneficial Owners +21 +Security Ownership of Directors and Executive Officers +22 +Section 16(a) Beneficial Ownership Reporting Compliance +24 +EXECUTIVE COMPENSATION +24 +Compensation Discussion and Analysis +24 +Pay Ratio +31 +Compensation Committee Interlocks and Insider Participation +34 +Executive Officers +34 +SUMMARY COMPENSATION TABLE +35 +Employment Arrangements +36 +GRANTS OF PLAN-BASED AWARDS IN THE 2017 FISCAL YEAR +41 +OUTSTANDING EQUITY AWARDS AT END OF THE 2017 FISCAL YEAR +43 +OPTION EXERCISES AND STOCK VESTED IN THE 2017 FISCAL YEAR +45 +SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS +45 +EQUITY COMPENSATION PLAN INFORMATION +45 +POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE-IN-CONTROL +46 +COMPENSATION COMMITTEE REPORT +48 +PROPOSAL TWO: RATIFICATION OF THE APPOINTMENT OF EISNERAMPER LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR ENDING DECEMBER 31, 2018 +49 +AUDIT COMMITTEE REPORT +51 +PROPOSAL THREE: NON-BINDING ADVISORY VOTE ON EXECUTIVE COMPENSATION +52 +1 +STEVEN MADDEN, +LTD. +52-16 Barnett +Avenue +Long +Island City, New York 11104 +PROXY +STATEMENT +GENERAL +INFORMATION +The +Board of Directors of Steven Madden, Ltd. requests your proxy in connection with the Annual Meeting of Stockholders (the “Annual +Meeting”) of Steven Madden, Ltd. (the “Company”, “we” or “us”). The Annual Meeting +will be held at the Company’s showroom located at 1370 Avenue of the Americas, 14th Floor, New York, New York on Friday, +May 25, 2018 at 10:00 a.m., local time. Proxies also may be voted at any adjournments or postponements of the Annual Meeting. +On +or about April 6, 2018, a notice containing instructions on how to access this Proxy Statement, the accompanying proxy card and +related materials online is being mailed to holders of record of common stock, $0.0001 par value, of the Company (the “Common +Stock”) at the close of business on March 29, 2018 (the “Record Date”). The Company’s Annual Report +for the fiscal year ended December 31, 2017 (the “2017 Fiscal Year”), including audited financial statements, +is included in the materials that are accessible online. This Proxy Statement contains information about the Annual Meeting as +well as information regarding the voting process, director elections, our corporate governance programs and executive and director +compensation, among other things. We recommend that you read all of these materials. +The Annual +Meeting has been called to consider and take action on the following proposals: +· to +elect nine (9) directors to the Board of Directors of the Company to serve until the +next annual meeting of the Company’s stockholders; +· to +ratify the appointment of EisnerAmper LLP as the Company’s independent registered +public accounting firm for the fiscal year ending December 31, 2018; +· to +approve, on a non-binding advisory basis, the compensation of certain executive officers +as disclosed in this Proxy Statement; and +· to +transact such other business as may properly come before the Annual Meeting and any adjournments +thereof. +The +Board of Directors knows of no other matters to be presented for action at the Annual Meeting. However, if any other matters properly +come before the Annual Meeting, the persons named in the proxy will vote on such other matters and/or for other nominees for director +in accordance with their best judgment. The Company’s Board of Directors recommends that the stockholders vote “FOR” +each of the proposals. Only holders of record of Common Stock of the Company at the close of business on the Record Date will +be entitled to vote at the Annual Meeting. +2 +The +Company is incorporated in the State of Delaware. The principal executive offices of the Company are located at 52-16 Barnett +Avenue, Long Island City, New York 11104 and the telephone number of the Company is (718) 446-1800. +Notice of Internet Availability +of Proxy Materials +We +continue to take advantage of the Securities and Exchange Commission (the “SEC”) “e-proxy” rules +allowing us to furnish proxy materials through the Internet for the benefit and convenience of our stockholders. By using the +e-proxy rules, we can expedite the receipt by stockholders of proxy materials while lowering the costs and reducing the environmental +impact associated with our Annual Meeting. On or about April 6, 2018, we will furnish a Notice of Internet Availability of Proxy +Materials (the “Availability Notice”) to most of our stockholders containing instructions on how to access the +proxy materials and to vote online. In addition, instructions on how to request a printed copy of these materials will be found +on the Availability Notice. If you received an Availability Notice by mail, you will not receive a paper copy of the proxy materials +unless you request such materials by following the instructions contained in the Availability Notice. +For +more information on voting your Common Stock, please refer to the following “Questions and Answers” section. +QUESTIONS AND ANSWERS +ABOUT THE ANNUAL MEETING AND VOTING +1. +What is included in the proxy materials? What is a proxy statement and what is a proxy? +The +proxy materials for our Annual Meeting include the Notice of Annual Meeting, this Proxy Statement and our Annual Report on Form +10-K for the year ended December 31, 2017. If you received a paper copy of these materials, the proxy materials also include +a proxy card or voting instruction form. +A +proxy is the delegation of your right to vote the Common Stock you own to another person, who is called your proxy. When you designate +someone as your proxy in a written document, that document is called a proxy or a proxy card. SEC regulations require that we +furnish a proxy statement to you when we ask you to sign a proxy designating individuals to vote your shares of Common Stock on +your behalf. We have designated our officers Edward R. Rosenfeld and Arvind Dharia as proxies for the Annual Meeting. +2. +Who may vote at the Annual Meeting? +Only +stockholders of record are entitled to vote at the Annual Meeting. A stockholder of record is a stockholder of the Company as +of the close of business on the Record Date. On the Record Date, there were 58,467,771 shares of our Common Stock outstanding +(excluding treasury shares) held by approximately 152 registered holders of record and 19,672 beneficial owners. +3. What is the difference +between holding shares as a stockholder of record and as a beneficial owner? +If +your shares are registered directly in your name with the Company’s registrar and transfer agent, American Stock Transfer +& Trust Company, you are a “stockholder of record” with respect to those shares and, in such case, this Proxy +Statement and the accompanying proxy materials have been provided directly to you by the Company. If your shares are held in a +stock brokerage account or by a bank or nominee, your shares are held in “street name” and you are considered the +“beneficial owner” of those shares and, in such case, this Proxy Statement and the accompanying proxy materials have +been provided to you by your broker, bank or other stockholder of record. As the beneficial owner, you have the right to direct +your broker, bank or other stockholder of record how to vote your shares held in “street name.” +3 +4. What is considered a +quorum to conduct the Annual Meeting? +The +presence, in person or by proxy, of the holders of a majority of the shares eligible to vote is necessary to constitute a quorum +for the purpose of transacting business at the Annual Meeting. Under Delaware law (under which the Company is incorporated), abstentions +and broker non-votes (meaning proxies from brokers, banks or nominees indicating that such persons have not received instructions +on how to vote from the beneficial owner or other persons eligible to vote shares as to matters with respect to which the brokers, +banks or nominees do not have discretionary power to vote) are counted as present for purposes of determining the presence +or absence of a quorum for the transaction of business. If a quorum is not present, the Annual Meeting may be adjourned until +a quorum is obtained. +5. What is a “broker +non-vote”? +As +discussed in the response to question 3, if your shares are held in “street name” by a broker, bank or other nominee, +your broker, bank or other nominee is the record holder; however, the broker, bank or other nominee is required to vote the shares +in accordance with your instructions. If you do not give instructions to your broker, bank or other nominee, as the case may be, +the broker, bank or other nominee may, if permitted by the organizations of which it is a member, exercise discretionary voting +power to vote your shares. A “broker non-vote” occurs when a broker, bank or other nominee of record holding shares +for a beneficial owner has not received voting instructions from the beneficial owner and either chooses not to vote the shares +on a particular proposal as to which the holder has discretionary voting power or does not vote on a particular proposal because +that holder does not have discretionary voting power for that particular item. Broker non-votes are considered present in determining +whether a quorum is present. +If +you hold your shares in “street name,” we strongly encourage you to provide instructions regarding the voting of your +shares as your broker, bank or other nominee cannot vote your shares with respect to certain of the proposals being presented +at the Annual Meeting without voting instructions from you. +6. How many votes do I +have? What shares are included on the proxy card? +For +each share of Common Stock that you own on the Record Date you are entitled to one vote on each matter presented at the Annual +Meeting. +If +you are a record holder, you will receive an Availability Notice or proxy card for all of the shares of Common Stock you hold +in certificate form, in book-entry form and in any Company benefit plan. If you are a beneficial owner, you will receive information +containing voting instructions from the broker, bank or other nominee through which you own your shares of Common Stock. +7. How many votes are required +to approve each proposal and what is the effect of abstentions and broker non-votes? +Proposal +One (Election of Directors): Under Delaware law, directors are elected by the affirmative vote of a plurality of the shares +of Common Stock present in person or represented by proxy at the Annual Meeting and entitled to vote. This means that the director +nominees who receive the greatest number of affirmative votes cast are elected as directors, subject to our Director Election +(Majority Voting) Policy discussed in Proposal One below. +Proposal +Two (Ratification of Appointment of EisnerAmper LLP): The affirmative vote of a majority of the shares of Common Stock present +in person or represented by proxy at the Annual Meeting and entitled to vote is required to approve the ratification of the appointment +of EisnerAmper LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, +2018. +Proposal +Three (Non-Binding Advisory Vote on Executive Compensation): The affirmative vote of a majority of the shares of Common Stock +present in person or represented by proxy at the Annual Meeting and entitled to vote is required to approve, on a non-binding +advisory basis, the compensation of the Company’s Named Executive Officers as described in this Proxy Statement. +Other +Matters: If any other matters are presented at the Annual Meeting, they must receive the affirmative vote of a majority of +the shares of Common Stock present in person or represented by proxy at the Annual Meeting and entitled to vote in order to be +approved. +4 +Abstentions +will have no effect on the election of directors, but will be treated as present and entitled to vote on the remaining proposals +and, therefore, abstentions will have the effect of votes “AGAINST” such proposals. +Proposal +One (Election of Directors) will be decided by a plurality of the votes of the shares represented in person or by proxy. +The approval of each of Proposals Two (Ratification of EisnerAmper LLP) and Three (Advisory Vote on Executive Compensation) requires +a favorable vote of a majority of the shares present and entitled to vote on the applicable matter. As noted above, an abstention +will have no effect on the election of directors, but will have the same effect as a vote “AGAINST” each other proposal. +If you do not provide your broker, bank or other nominee with instructions on how to vote your shares held in “street name”, +your broker, bank or other nominee will not be permitted to vote your shares on non-routine matters, and your shares will not +affect the outcome of proposals concerning non-routine matters. Proposals One and Three are considered “non-routine” +matters, which means that your broker or other nominee does not have discretion to vote your shares with respect to these proposals +without voting instructions from you. If you hold your shares in “street name,” we strongly encourage you to provide +instructions regarding the voting of your shares to your broker, bank or other nominee. +8. How can I vote my shares? +Your +vote is important. Your shares can be voted at the Annual Meeting only if you are present in person or represented by proxy. Even +if you plan to attend the Annual Meeting, we urge you to authorize your proxy in advance. You may vote your shares by authorizing +a proxy over the Internet or by telephone. In addition, if you received a paper copy of the proxy materials by mail, you can also +submit a proxy by mail by following the instructions on the proxy card. Voting your shares by authorizing a proxy over the Internet, +by telephone or by written proxy card will ensure your representation at the Annual Meeting regardless of whether you attend in +person. +If +you are the record holder of your shares, please authorize your proxy electronically by going to the http://www.proxyvote.com +website or by calling the toll-free number listed below and on the proxy card. Please have your Proxy Statement or proxy card +in hand when going online or calling. If you authorize your proxy via the Internet or by phone you do not need to return your +proxy card. If you choose to authorize your proxy by mail, simply mark your proxy card and then date, sign and return it in the +postage-paid envelope provided. +VOTE +BY INTERNET +http://www.proxyvote.com +Use the Internet to transmit +your voting instructions and for electronic delivery of information. +VOTE +BY PHONE +1-800-690-6903 +Use any touch-tone telephone +to transmit your voting instructions. +VOTE +BY MAIL +Vote +Processing, c/o Broadridge +51 Mercedes Way +Edgewood, New York 11717 +If you receive paper +proxy materials, mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return +it to the address shown above. +If +you hold your shares beneficially in “street name” through a broker or nominee you may be able to authorize your proxy +by telephone or the Internet as well as by mail, but you will need to obtain and follow instructions from your broker or nominee +to vote these shares. +9. +May I revoke my proxy for the Annual Meeting once I have given it? +You may revoke +your proxy at any time before it is voted at the Annual Meeting by: +· properly +executing and delivering a later dated proxy (including a telephone or Internet proxy +authorization); +· voting +by ballot at the Annual Meeting; or +· sending +a written notice of revocation to the Secretary of the Company at Steven Madden, Ltd., +52-16 Barnett Avenue, Long Island City, New York 11104. +5 +10. How does the Board +of Directors recommend that I vote my shares? +The Board of +Directors of the Company recommends that you vote: +· “FOR” +the election of each of the nine (9) director nominees; +· “FOR” +the ratification of the appointment of EisnerAmper LLP as the Company’s independent +registered public accounting firm for the fiscal year ending December 31, 2018; +and +· “FOR” +the approval, on a non-binding advisory basis, of the executive compensation of the Company’s +Named Executive Officers, as disclosed in this Proxy Statement. +ALL PROXIES +RECEIVED WILL BE VOTED IN ACCORDANCE WITH THE CHOICES SPECIFIED ON SUCH PROXIES. PROXIES WILL BE VOTED IN FAVOR OF A PROPOSAL +IF NO CONTRARY SPECIFICATION IS MADE. ALL VALID PROXIES OBTAINED WILL BE VOTED AT THE DISCRETION OF THE PERSONS NAMED IN THE PROXY +WITH RESPECT TO ANY OTHER BUSINESS THAT MAY PROPERLY COME BEFORE THE ANNUAL MEETING OR ANY ADJOURNMENTS OR POSTPONEMENTS +THEREOF. AS NOTED ABOVE, IF YOU HOLD YOUR SHARES BENEFICIALLY THROUGH A BROKER, BANK OR OTHER NOMINEE AND FAIL TO PROVIDE SPECIFIC +VOTING INSTRUCTIONS TO THAT BROKER, BANK OR OTHER NOMINEE, YOUR SHARES WILL NOT BE VOTED IN THE ELECTION OF DIRECTORS OR WITH +RESPECT TO THE ADVISORY VOTES ON EXECUTIVE COMPENSATION. +11. Who will bear the expenses +of this solicitation and how are proxies being solicited? +The +Company will pay the costs of soliciting proxies, including preparing, printing and mailing this Proxy Statement, any exhibits +hereto and the proxies solicited hereby. In addition to the use of the mails, proxies may be solicited on the Company’s +behalf by officers, directors and employees of the Company, without additional remuneration, by personal interviews, telephone +or electronic transmission. The Company will also request brokerage firms, nominees, custodians and fiduciaries to forward proxy +materials to the beneficial owners of shares of Common Stock held of record by them and will provide reimbursements for the cost +of forwarding the material in accordance with customary charges. The Company has entered into an agreement with D.F. King & +Co., Inc. to assist in the solicitation of proxies and provide related advice and informational support. The total expense of +this engagement, which will be borne by the Company, including customary disbursements, is not expected to exceed $20,000 in the +aggregate. +12. How will the voting +results be reported? +The +preliminary results of the voting on the proposals will be reported at the Annual Meeting. The final certified results will be +reported in a Current Report on Form 8-K that will be filed with the SEC within four business days following the Annual Meeting. +13. How do I submit a proposal +for action at the Company’s 2019 Annual Meeting of Stockholders? +In +accordance with rules promulgated by the SEC, any stockholder who wishes to submit a proposal for inclusion in the proxy materials +to be distributed by the Company in connection with the 2019 Annual Meeting of Stockholders of the Company (the “2019 Annual +Meeting”) must do so no later than December 7, 2018. In addition, in accordance with Article I, Section 7(f) of +the Company’s Amended and Restated By-Laws (the “By-Laws”), in order to be properly brought before the 2019 +Annual Meeting, a matter must be either (i) specified in the notice of such meeting given by or at the direction of the Board +of Directors (or any duly authorized committee thereof), (ii) otherwise properly brought before such meeting by or at the +direction of the Board of Directors (or any duly authorized committee thereof) or (iii) specified in a notice in proper +written form given by a stockholder of record on the date of the giving of the notice and on the record date for such meeting, +which notice conforms to the requirements of Article I, Section 7(f) of the By-Laws and is delivered to, or mailed +and received at, the Company’s principal executive offices not less than 120 days nor more than 150 days prior +to the first anniversary of the date of the Company’s 2018 Annual Meeting. Accordingly, any written notice given by or on +behalf of a stockholder pursuant to the foregoing clause (iii) in connection with the 2019 Annual Meeting must be received +no later than January 25, 2019 and no earlier than December 26, 2018. In addition, for business to be properly brought +before the 2019 Annual Meeting by a stockholder pursuant to the foregoing clause (iii), such stockholder shall have complied with +any other applicable requirements, including, but not limited to, the requirements of Rule 14a-8 promulgated by the SEC. +6 +PROPOSAL +ONE: +ELECTION OF DIRECTORS +The +Company’s By-Laws provide that the Board of Directors of the Company shall be comprised of a minimum of one director and +that, subject to this limitation, the number of directors may be fixed from time to time by action of the directors. The Board +of Directors recently voted to expand the size of the Board from eight to nine members. The expansion of the Board from eight +to nine members became effective as of April 2, 2018 when Mitchell S. Klipper joined the Board of Directors. Directors serve a +one-year term and the term of each of the directors will expire at the Annual Meeting. +Stockholder Nominations +for Board Membership +The +Nominating/Corporate Governance Committee of the Board of Directors recommends to the Board director candidates for nomination +and election at each annual meeting of stockholders or for appointment to fill vacancies on the Board. The Nominating/Corporate +Governance Committee will review and evaluate the qualifications of proposed director candidates recommended to it from various +sources, including candidates proposed by stockholders of the Company in accordance with the procedures established for that purpose. +In accordance with Article II, Section 5 of the By-Laws, director nominations for the 2019 Annual Meeting can only be +made by a stockholder of the Company who (i) is a stockholder of record on the date of the giving of the notice of such director +nominations and on the record date for the determination of stockholders entitled to vote at the 2019 Annual Meeting and (ii) complies +with the notice requirements and procedures set forth in Article II, Section 5 of the By-Laws. A stockholder’s +notice to the Secretary of the Company with respect to any such nominations must be timely and in proper written form pursuant +to Article II, Section 5 of the Company’s By-Laws, including containing certain information concerning the nominating +or proposing stockholder and certain information concerning the nominee, and the notice must be delivered to, or mailed and received +at, the Company’s principal executive offices not less than 120 days nor more than 150 days prior to the first +anniversary of the date of the Company’s 2018 Annual Meeting. Accordingly, any written notice given by or on behalf of a +stockholder pursuant to Article II, Section 5 of the Company’s By-Laws in connection with the 2019 Annual Meeting +must be received no later than January 25, 2019 and no earlier than December 26, 2018. +Nominees for Election +to the Board of Directors +Upon +recommendation of the Nominating/Corporate Governance Committee of the Board of Directors, the Board of Directors has nominated +and is recommending to the stockholders the election of each of the nine nominees named below to serve as a director of the Company +until the next annual meeting of the Company’s stockholders and until his or her successor is duly elected and qualified +or until his or her earlier death, resignation or removal from office. All of the nominees were elected directors at last year’s +Annual Meeting of Stockholders, other than Mr. Klipper, who was appointed to the Board of Directors to fill the newly-created +directorship resulting from the increase in the number of directors constituting the Board of Directors from eight to nine members. +The appointment of Mr. Klipper to the Board of Directors was effective as of April 2, 2018. All nominees have agreed to be named +in this Proxy Statement and to serve on the Board of Directors if elected. +The +names and biographical summaries of the nine persons who have been recommended by the Nominating/ Corporate Governance Committee +of the Board of Directors and nominated by the Board of Directors to stand for election at the Annual Meeting are provided below +for your information. +7 +Our +Board of Directors is responsible for overseeing our business in a manner consistent with the Board’s fiduciary duty to +our stockholders. This significant responsibility requires that our directors consist of individuals who are well-qualified for +service on our Board and its committees and demonstrate a commitment to the success of the Company and to service in the best +interests of our stockholders. The Board and the Nominating/Corporate Governance Committee select nominees with a view to establishing +a Board of Directors that is comprised of individuals who have extensive business leadership experience, are independent, bring +diverse perspectives to the Board, possess high ethical standards and sound business judgment and acumen and a willingness to +devote the time necessary for the Board to effectively fulfill its responsibilities. We believe that all of the director nominees +possess these qualifications and provide the Board with a full complement of knowledge, business skills and expertise for the +effective management of our Company. In addition to these general qualifications, provided below for each nominee for director +is a discussion of the experience, qualifications, attributes and skills that led to the Board’s conclusion that the nominee +should serve as a director. +Name +Principal +Occupation +Age +Year +Became a +Director +Edward R. Rosenfeld +Chairman of the Board and Chief Executive Officer, Steven Madden, Ltd. +42 +2008 +Mitchell S. Klipper +Retired Chief Executive Officer of Barnes & Noble, Inc.’s Retail Group, the nation’s +largest retail bookseller +60 +2018 +Rose Peabody Lynch +Owner of Marketing Strategies, LLC, New York based consulting firm of which she is founder +and President, which focuses on strategic marketing and operating issues for small to medium-sized companies +68 +2014 +Peter Migliorini +Sales Manager, Greschlers, Inc., a building supplies company +69 +1996 +Richard P. Randall +Retired Executive Vice President and Chief Financial Officer, Direct Holdings Worldwide, +LLC, the parent company of Lillian Vernon Corp., a catalog and online retailer of gifts and household goods, and Time-Life, +a music and video marketing company +80 +2006 +Ravi Sachdev +Partner, Clayton Dubilier & Rice, LLC +41 +2008 +Thomas H. Schwartz +Owner, Sumner and Forge Investors LLC, a real estate investment and property management +company +70 +2004 +Robert Smith +Founder and Chief Executive Officer of Phluid Project, a retail store and +community space, completely gender neutral, with a flagship Manhattan location and a website to offer products and programs +worldwide +52 +2014 +Amelia Newton Varela +President, Steven Madden, Ltd. +46 +2016 +Additional Information About +the Director Nominees +Other +Public Company Directorships +Three +of our directors also currently serve as directors of other public companies: +· Mr. Rosenfeld +is a director and member of the Audit Committee of PVH Corp., one of the world’s +largest apparel companies. +8 +· Mr. Randall +serves as a director and member of the Audit Committee of P&F Industries Inc., a +manufacturer and importer of tools sold principally to the industrial, retail and automotive +markets. +· Ms. +Lynch serves as a director and member of both the Pension and Nominating Committees of +General American Investors, Inc., a closed-end fund that manages a global portfolio of +investments consisting mainly of U.S. and foreign securities. +Other +Employment Information +Each +of our directors has been engaged in the principal occupation indicated in the foregoing table for more than the past five years, +with the exceptions of Mr. Smith and Mr. Sachdev. Prior to founding Phluid Project in 2018, for which he currently serves as Chief +Executive Officer, from 2013 to 2017, Mr. Smith was the Chief Merchandising Officer for Haddad Brands, a global children’s +apparel and accessories licensing partner for iconic brands such as Levi’s, Hurley, Nike, Jordan and Converse. Prior thereto, +from 2010 to 2012, Mr. Smith served as Executive Vice President, Merchandising for Limited Brands, at Victoria’s Secret +Direct, the largest direct-to-consumer women’s apparel retailer in the United States. Mr. Sachdev has been a partner of +Clayton Dubilier & Rice, LLC since 2015. Previously, from November 2010, he served as a Managing Director and Co-Head of Healthcare +Services at J.P. Morgan. +Specific +Qualifications, Attributes, Skills and Experience of Director Nominees +Edward +R. Rosenfeld has served as Chairman of the Board since August 2008 and has been a director of the Company since February +2008. Mr. Rosenfeld, who joined our executive management team in May 2005, has more than 19 years of experience +focused on the retail, apparel and footwear industries and possesses particular knowledge of and experience in the industry that +strengthens the Board’s collective qualifications, skills and experience. His background in finance and his analytical skills +gained through his years as a Vice President with Peter J. Solomon Company, an investment banking boutique, where he specialized +in mergers and acquisitions in the retail, apparel and footwear industries, provide the Board with insight and guidance with respect +to, among other things, strategic business development matters. Mr. Rosenfeld has strong leadership skills and an in-depth +understanding of the Company and its goals from his positions as the Chairman of the Board and Chief Executive Officer. Mr. Rosenfeld +serves as a director and member of the Audit & Risk Management Committee of PVH Corp., one of the world’s largest apparel +companies. +Mitchell +S. Klipper was recently appointed to serve as a director effective April 2, 2018. Mr. Klipper served as the Chief Executive +Officer of the Retail Group of Barnes & Noble, Inc., the nation’s largest retail bookseller, from March 2010 to May +2015. Mr. Klipper began his career at Barnes & Noble as Chief Financial Officer of B&N College in June 1986. He subsequently +held a number of executive positions at Barnes & Noble, Inc., including Executive Vice President, President of Barnes & +Noble Development and Chief Operating Officer. Prior to joining Barnes & Noble, Inc., Mr. Klipper was an Audit Manager with +KMG Main Hurdman, a certified public accounting firm and predecessor to KPMG. He has also served on the advisory board of Modell’s +Sporting Goods for the past 13 years. Mr. Klipper’s decades of relevant experience in retail management, general business +and accounting will enhance the leadership and oversight capabilities of the Board. +Rose +Peabody Lynch has served as a director of the Company since April 2014 and as a member of the Audit Committee and the +Compensation Committee since June 2014. She possesses over 30 years of business experience, including tenures as the President +and in other senior executive officer positions of major companies in the beauty and fashion industries, and has extensive executive +level financial and operating experience. Her experience serving as a director and as a senior executive for a range of companies, +including Victoria’s Secret, Trowbridge Gallery (a supplier of fine art to the interior design trade) and Danskin, +Inc., a leading manufacturer of women’s dance and active wear, enhances the Board’s leadership and oversight capabilities. +Ms. Lynch has served on a number of boards, including The Harmony Group-LeRoi Princeton (a manufacturer of children’s +apparel), Salant Corporation (Perry Ellis Menswear) and Frederick’s of Hollywood (a retailer of women’s apparel +and lingerie). Currently, Ms. Lynch serves on the board of General American Investors, Inc., and on both its Pension and Nominating +Committees. She was a member of the Audit and Nominating and Governance Committees during her tenure at Salant and chaired the +Compensation Committee during her tenure on the board of Frederick’s of Hollywood. In addition, Ms. Lynch has held +leadership positions with a variety of not-for-profit organizations. She currently serves on the Board of Directors of the Princeton +University Varsity Club and is President of her Princeton University class. She also serves on the Board of Trustees of Concord +Academy in Concord, Massachusetts. Ms. Lynch is a member of the Women and Foreign Policy Advisory Council at the Council +on Foreign Relations. +9 +Peter +Migliorini has served as a director of the Company since October 1996 and has served on the Company’s +Audit Committee since October 1996, the Nominating/Corporate Governance Committee, as its Chair, since July 2004 and the +Compensation Committee, as its Chair, since July 2004. Mr. Migliorini is also Presiding Director over all executive sessions +of the independent directors. Mr. Migliorini possesses extensive executive level financial, sales and operations experience. +Prior to serving as sales manager for Greschlers, Inc., from 1987 to 1994, Mr. Migliorini served as Director of Operations +for Mackroyce Group, a construction company. Earlier, Mr. Migliorini held various positions of increasing responsibility +from Assistant Buyer to Chief Planner/Coordinator for several shoe companies, including Meldisco Shoes, Perry Shoes and Fasco +Shoes. His numerous years of business experience at various levels and in various industries provide the Board with a measure +of practical orientation regarding the Company’s operations and growth endeavors. Mr. Migliorini’s early experience +in the shoe industry also provides relevant knowledge and expertise in the Company’s specific industry. +Richard +P. Randall has served as a director of the Company since April 2006 and has served on the Company’s +Audit Committee, as its Chair, since 2006, and on the Nominating/Corporate Governance Committee since September 2008. Mr. Randall +has decades of business experience, including tenures as Chief Financial Officer and Chief Operating Officer of both publicly +traded and privately held companies in the retail industry, including Direct Holdings Worldwide, LLC, the parent company of Lillian +Vernon Corp. and Time-Life, a music and video marketing company, and, prior thereto, Coach, Inc., a luxury leather goods company. +Mr. Randall possesses extensive knowledge of accounting and finance, the retail industry and the issues impacting a publicly +traded company. Mr. Randall has extensive executive level experience establishing his capabilities in management of complex +organizations and is a certified public accountant. His expertise in finance qualifies him to serve as the Audit Committee “audit +committee financial expert” and his service on the boards and board committees of other companies has allowed him to gain +broad-based experience and sensitivity regarding best practices, which he shares with the Board. Mr. Randall also provides +a perspective on proper governance for public companies. He currently serves as a member of the board of directors and Audit Committee +of P&F Industries, Inc., a manufacturer and importer of tools sold principally to the industrial, retail and automotive markets +and, until December 31, 2014, served as a member of the board of directors and chair of the Audit and Risk Committee of Aceto +Corporation, a generic pharmaceutical, nutraceutical and chemical distribution company. Mr. Randall is a former director +and member of the Executive, Finance, Audit and Research Committees of The Burke Rehabilitation Hospital (“Burke”). +He served as a Member Emeritus of Burke’s Executive Committee and retains a board seat on The Burke Foundation’s board. +Mr. Randall served as a director and chair of the Audit Committee of Universal Travel Group, a travel services provider in +the People’s Republic of China, and of Home Systems Group, a manufacturer and distributor of household appliances in the +People’s Republic of China, from 2007 until 2008 when he resigned from these boards. +Ravi +Sachdev has been a director of the Company since September 2008 and has served on the Company’s Audit Committee +since September 2008. As a Partner of the private equity firm Clayton Dubilier & Rice, LLC since June 2015, Mr. Sachdev +focuses on the healthcare sector. Earlier, Mr. Sachdev was a Managing Director and Co-Head of Healthcare Services at J.P. +Morgan from November 2010 and prior to that held the positions of Managing Director at Deutsche Bank Securities, Inc. from January 2009 +until November 2010 and Director at Deutsche Bank from January 2007 until January 2009. Prior to joining Deutsche Bank +in 2006 as a Vice President, Mr. Sachdev served as a Vice President at Peter J. Solomon Company, an investment banking boutique, +specializing in mergers and acquisitions in the healthcare sector, from 1998 to 2006. Mr. Sachdev possesses knowledge +of finance and the financial analytics used to measure business performance. His 20 years of professional experience in investment +banking and private equity brings to the Board a thorough understanding of the financial issues affecting public companies and +greater insights in business valuation together with a practical orientation with respect to acquisitions and integrations. Mr. Sachdev +also serves on the Board of Directors of Healogics, a leading provider of wound healing services, Vets First Choice, a veterinary +internet pharmacy, and Agilon Health, a technology-enabled services platform for the physicians market. +10 +Thomas +H. Schwartz has served as a director of the Company since May 2004 and has served on the Company’s Compensation +Committee since July 2004. With more than twenty years of experience as a Managing Director of Helmsley-Spear, Inc. and eight +years as the owner of his own real estate investment firm, Mr. Schwartz brings to the Board extensive executive level experience +in handling operations issues and practical expertise in management. +Robert +Smith has served as a director of the Company since April 2014 and as a member of the Compensation Committee and +the Nominating/Corporate Governance Committee since June 2014. Mr. Smith is the Chief Executive Officer of Phluid Project, a part +retail concept, part experiential platform, completely gender neutral, which he founded in 2018. Phluid Project’s flagship +retail store is located in Manhattan and its website reaches young consumers worldwide. Prior to Phluid Project and his former +positions with Haddad Brands and Victoria’s Secret Direct, Mr. Smith held various senior merchandising positions at +Macy’s Inc. between 1998 and 2010, beginning with Vice President, Merchandise Manager, Macy’s West and culminating +with Executive Vice President, Merchandising for Juniors, Kids, Intimate Apparel, Dresses, Suits, Coats and Swimwear. Earlier, +Mr. Smith was a Merchandiser for XOXO Apparel Company and held various positions with Burdine’s Department Stores. +Mr. Smith possesses nearly 30 years of business experience in the fashion industry and has extensive executive level expertise +in merchandising. His experience in this area further enhances the Board’s depth of understanding of the industry. +Amelia +Newton Varela has been President of the Company since September 2015. Prior to this tenure, Ms. Varela was Executive +Vice President of Wholesale of the Company since April 2008 and Executive Vice President of Wholesale Footwear of the Company +from November 2004 to April 2008. Previously, she was Vice President of Sales for Steve Madden Women’s Wholesale Division from +January 2000. Ms. Varela began her career with the Company in 1998 in the role of Account Executive for Steve Madden Women’s +Wholesale Division. She graduated from The Fashion Institute of Technology in 1995. +Required +Vote +Proxies +will be voted for the election of the nine nominees as directors of the Company unless otherwise specified in the proxy. A plurality +of the votes cast by the holders of shares of Common Stock present in person or represented by proxy and entitled to vote at the +Annual Meeting will be necessary to elect the nominees as directors. This means that the director nominees who receive the greatest +number of affirmative votes cast are elected as directors subject to our Director Election (Majority Voting) Policy, which +is described below. If, for any reason, any nominee is unable or unwilling to serve, the proxies will be voted for a substitute +nominee who will be designated by the Board of Directors at the Annual Meeting. Stockholders may abstain from voting by marking +the appropriate boxes on the accompanying proxy. Abstentions will be counted separately and used for purposes of calculating whether +a quorum is present at the Annual Meeting, but will have no effect on the outcome of the vote. +Director Election (Majority +Voting) Policy +It +is the policy of the Company that any nominee for director who receives a greater number of “WITHHOLD” votes than +“FOR” votes for his or her election must promptly submit a letter offering his or her resignation to the Nominating/Corporate +Governance Committee following the certification of the stockholder vote. In such event, the Nominating/Corporate Governance Committee +would then consider the offer of resignation and make a recommendation to the Board of Directors as to whether or not the resignation +should be accepted. This policy does not apply in contested elections. For more information about this policy, see “Corporate +Governance – Director Election (Majority Voting) Policy” below. +Recommendation of the Board +of Directors +The +Nominating/Corporate Governance Committee of the Board and the entire Board of Directors unanimously recommend a vote “FOR” +the election of Ms. Rose Peabody Lynch, Ms. Amelia Newton Varela and Messrs. Edward R. Rosenfeld, Mitchell S. Klipper, Peter +Migliorini, Richard P. Randall, Ravi Sachdev, Thomas H. Schwartz and Robert Smith. +11 +CORPORATE +GOVERNANCE +The Board of Directors +Our +business is managed under the direction and oversight of the Board of Directors who are elected by the Company’s stockholders. +Directors meet their responsibilities by participating in meetings of the Board of Directors and the various committees of the +Board on which they sit, as well as through communicating with our Chairman and Chief Executive Officer, other officers and employees +of the Company and by consulting with our independent registered public accounting firm and other third parties. +As +noted below, our Board is currently comprised of six independent and two non-independent directors. As part of the Company’s +corporate governance planning and upon the recommendation of the Nominating/Corporate Governance Committee, the Board recently +voted to expand the size of the Board from eight to nine members. The expansion of the Board from eight to nine members became +effective as of April 2, 2018 when Mitchell S. Klipper joined the Board of Directors as an independent director. +Director Independence +The +Board of Directors has determined that the following director nominees are “independent” for purposes of the criteria +of the SEC and The Nasdaq Global Select Market listing standards: Ms. Lynch and Messrs. Klipper, Migliorini, Randall, Sachdev, +Schwartz and Smith. If the nine nominees set forth above are elected, the Board will be comprised of a majority of independent +directors. The Board of Directors has held regularly scheduled executive sessions for the independent directors, with Peter Migliorini +serving as Presiding Director of such executive sessions. +Director Attendance at +Meetings +Attendance +at Annual Meetings of Stockholders +The +Company has no specific policy regarding director attendance at its annual meetings of stockholders. The Company encourages +all of its directors to attend annual meetings of the Company’s stockholders and one director attended the +Company’s 2017 annual meeting of stockholders. +Attendance +at Meetings of the Board of Directors +The +Board of Directors held four regularly scheduled meetings and one special meeting during the 2017 Fiscal Year. In the 2017 Fiscal +Year, each director attended at least 75% of the aggregate number of Board meetings, and each director attended at least 75% of +the aggregate number of meetings held by all committees on which he or she then served. +Director Election (Majority +Voting) Policy +The +Company has adopted a Director Election (Majority Voting) Policy. Pursuant to this policy, in an uncontested election of +directors (that is, an election where the number of nominees is equal to the number of seats open) any nominee for director +who receives a greater number of “WITHHOLD” votes than “FOR” votes for his or her election must promptly +submit an offer of resignation to the Nominating/Corporate Governance Committee following the certification of the stockholder +vote for consideration in accordance with the following procedures. +In +such event, upon receipt of the resignation, the Nominating/Corporate Governance Committee would promptly consider the appropriateness +of the director’s continued service on the Board of Directors and recommend to the Qualified Independent Directors (as defined +below) the action to be taken with respect to the resignation, which could include (1) accepting the resignation; (2) rejecting +the resignation; (3) retaining the director but addressing what the Qualified Independent Directors believe to be the underlying +cause of the “WITHHOLD” votes; or (4) determining that the director will not be renominated by the Board of Directors +in future elections. The Nominating/Corporate Governance Committee would consider factors such as (a) the reasons expressed +by the stockholders for withholding votes from such director; (b) any possibilities for curing the underlying cause of the +“WITHHOLD” votes; (c) the tenure and qualifications of the director and his or her past and expected future contributions +to the Company; (d) the overall composition of the Board of Directors, including, without limitation, whether accepting the +resignation would cause the Company to fail to meet any applicable SEC or Nasdaq requirement; (e) the availability of other +qualified candidates; and (f) the Company’s Board of Director Candidate Guidelines. +12 +The +Qualified Independent Directors would then act on the Nominating/Corporate Governance Committee’s recommendation no later +than 90 days following the date of the stockholders’ meeting at which the director election occurred. In considering the +Nominating/Corporate Governance Committee’s recommendation, the Qualified Independent Directors would review the factors +considered by the Nominating/Corporate Governance Committee and such additional information and factors that they believe to be +relevant. Following the Qualified Independent Directors’ decision, the Company would promptly disclose the decision in a +Current Report on Form 8-K. The Form 8-K would include a full explanation of the process by which the decision of the Qualified +Independent Directors was reached and, if applicable, the reasons why the offer of resignation was rejected. +In +the event that an offer of resignation were to be accepted, the Nominating/Corporate Governance Committee would recommend to the +Board of Directors whether to fill the vacancy or reduce the size of the Board of Directors accordingly. Any director required +to submit his or her resignation pursuant to this policy would not participate in the Nominating/Corporate Governance Committee’s +recommendation or the Qualified Independent Directors’ consideration of the resignation but, prior to voting on the director’s +resignation offer, the Qualified Independent Directors would provide to the director an opportunity to submit any information +or statement that he believes relevant to the Qualified Independent Directors’ consideration of the resignation. +For +purposes of this policy, “Qualified Independent Directors” means all directors who (1) are “independent” +for purposes of The Nasdaq Global Select Market listing standards and (2) are not required to offer their resignation in +accordance with this policy. If there are fewer than three independent directors then serving on the Board of Directors who are +not required to submit their resignations in accordance with this policy, then the Qualified Independent Directors shall consist +of all of the independent directors and each independent director who is required to offer his or her resignation in accordance +with this policy shall recuse himself or herself from the deliberations and voting only with respect to his or her individual +offer to resign. +Committees of the Board +Among +other committees, the Board of Directors has a standing Audit Committee, Compensation Committee and Nominating/Corporate Governance +Committee. Each committee has a written charter. The table below provides current membership for each Board committee and the +number of meetings held by each Board committee in the 2017 Fiscal Year. +Committees +of the Board of Directors +Director +Audit +Compensation +Nominating/ +Corporate +Governance +Edward R. Rosenfeld +Rose Peabody Lynch +Member +Member +Peter Migliorini +Member +Chair +Chair +Richard P. Randall +Chair +Member +Ravi Sachdev +Member +Thomas H. Schwartz +Member +Robert Smith +Member +Member +Amelia Newton Varela +Number of meetings in 2017 Fiscal Year +4 +3 +0 +13 +Audit +Committee +The +Audit Committee is comprised of directors who are “independent” for purposes of The Nasdaq Global Select Market listing +standards and who meet the independence requirements contained in Securities Exchange Act of 1934, as amended (the “Exchange +Act”) Rule 10A-3(b)(1). The Board has determined that each of Messrs. Randall and Sachdev meets the SEC criteria +of an “audit committee financial expert” as defined in Item 407 of Regulation S-K under the Exchange Act. The +Audit Committee is primarily responsible for reviewing the services performed by the Company’s independent registered public +accountants, evaluating the Company’s accounting policies and its system of internal controls, and reviewing significant +financial transactions. +The +Audit Committee is responsible for reviewing and striving to ensure the integrity of the Company’s financial statements +and oversight of our compliance with legal and regulatory requirements and our internal audit function. Among other matters, the +Audit Committee, with management and independent and internal auditors, reviews the adequacy of the Company’s internal accounting +controls that could significantly affect the Company’s financial statements. The Audit Committee is also directly and solely +responsible for the appointment, retention, compensation, oversight and termination of the Company’s independent registered +public accountants. In addition, the Audit Committee functions as the Company’s Qualified Legal Compliance Committee (the +“QLCC”). The purpose of the QLCC is to receive, retain and investigate reports made directly, or otherwise made known, +of evidence of material violations of any United States federal or state law, including any breach of fiduciary duty by the Company, +its officers, directors, employees or agents, and if the QLCC believes appropriate, to recommend courses of action to the Company. +Management +has primary responsibility for the Company’s financial statements and the overall reporting process, including the Company’s +system of internal controls. The Company’s independent registered public accountants audit the annual financial statements +prepared by management, express an opinion as to whether those financial statements present fairly the financial position, results +of operations and cash flows of the Company in conformity with accounting principles generally accepted in the United States and +discuss with the Audit Committee any issues they believe should be raised with the Audit Committee. +The +Audit Committee is also responsible for the oversight of the Company’s risk management process, which is discussed in the +“Risk Oversight” section below. +In +performing its functions, the Audit Committee meets with management on at least a quarterly basis to review and discuss the annual +audited financial statements, quarterly financial statements and related reports and to consider the adequacy of the Company’s +internal controls and the objectivity of its financial reporting. The Audit Committee discusses these matters with the Company’s +independent registered public accountants and with appropriate Company financial personnel. Meetings are held with the independent +registered public accountants, who have unrestricted access to the Audit Committee. In addition, the Audit Committee reviews the +Company’s financing plans and reports and makes recommendations to the full Board of Directors for approval and to authorize +action. The Board has adopted a written charter setting out the functions the Audit Committee is to perform. A copy of the Audit +Committee Charter is available on the Company’s website at www.stevemadden.com . +Nominating/Corporate +Governance Committee +The +Nominating/Corporate Governance Committee is comprised of directors who are “independent” for purposes of The Nasdaq +Global Select Market listing standards. +The +Nominating/Corporate Governance Committee provides oversight with respect to a wide range of issues relating to the composition +and operation of the Board, including consideration of and recommendations regarding the size and composition of the Board of +Directors and identification of potential candidates to serve as directors. The Nominating/Corporate Governance Committee identifies +candidates to the Board of Directors by introductions from management, members of the Board of Directors, employees of the Company +or other sources, including stockholders that satisfy the Company’s policy regarding stockholder recommended candidates. +The Nominating/Corporate Governance Committee does not evaluate director candidates recommended by stockholders differently than +director candidates recommended by other sources. +14 +Stockholders +wishing to submit recommendations for director nominations for the 2019 Annual Meeting should write to the Secretary, Steven Madden, +Ltd., 52-16 Barnett Avenue, Long Island City, New York 11104. Any such stockholder must (i) comply with the director nomination +provisions of the Company’s By-Laws, (ii) meet and evidence the minimum eligibility requirements specified in Exchange +Act Rule 14a-8, and (iii) submit, within the same timeframe for submitting a stockholder proposal required by Rule 14a-8: +(1) evidence in accordance with Rule 14a-8 of compliance with the stockholder eligibility requirements, (2) the +written consent of the candidate(s) for nomination as a director, (3) a resume or other written statement of the qualifications +of the candidate(s) for nomination as a director, and (4) all information regarding the candidate(s) and the submitting +stockholder that would be required to be disclosed in a proxy statement filed with the SEC if the candidate(s) were nominated +for election to the Board of Directors. +In +considering candidates for the Board of Directors, the Nominating/Corporate Governance Committee considers the Company’s +Board of Director Candidate Guidelines and Director Election (Majority Voting) Policy, available on the Company’s website +at www.stevemadden.com , the Company’s policy regarding stockholder recommended director candidates, as set forth +above, and all other factors that are deemed appropriate including, but not limited to, the individual’s character, education, +experience, knowledge and skills. While the Nominating/Corporate Governance Committee’s Board of Directors Candidate Guidelines +does not expressly identify diversity as a factor for consideration regarding the evaluation of director candidates, diversity +is among the many factors the Nominating/Corporate Governance Committee considers in the candidate evaluation process. To assess +the effectiveness of the mandate set forth in the Nominating/Corporate Governance Committee’s charter, the Nominating/Corporate +Governance Committee reviews annually with the Board the composition of the Board as a whole and recommends, if necessary, measures +to be taken so that the Board reflects the appropriate balance of knowledge, experience, skills, expertise and diversity required +for the Board as a whole. +In +addition, the Nominating/Corporate Governance Committee develops and recommends corporate governance principles for the Company; +makes recommendations to the Board of Directors in support of such principles; takes a leadership role in the shaping of the corporate +governance of the Company; and oversees the evaluation of the Board of Directors and management. The Nominating/Corporate Governance +Committee operates under a formal charter that governs the Committee’s composition, powers and responsibilities. A copy +of the Nominating/Corporate Governance Committee Charter is available on the Company’s website at www.stevemadden.com . +Compensation +Committee +The +Compensation Committee is comprised of directors who are “independent” for purposes of The Nasdaq Global Select Market +listing standards and applicable tax and securities rules. +The +Compensation Committee is responsible for establishing and overseeing the Company’s compensation and incentive plans and +programs; determining and approving compensation for the Company’s executive officers, including salaries, bonuses, perquisites +and equity awards; reviewing and approving compensation and awards for the Company’s executive officers under the Company’s +compensation and incentive plans and programs; administering the Company’s equity compensation plans; reviewing and approving +a compensation program for independent members of the Board; and assisting the Board in discharging the Board’s responsibilities +relating to management organization, performance, compensation and succession. The Compensation Committee operates under a formal +charter adopted by the Board of Directors that governs its composition, powers and responsibilities. A copy of the Compensation +Committee Charter is available on the Company’s website at www.stevemadden.com . +15 +Board Leadership Structure, +Risk Oversight, Executive Sessions of Non-Employee Directors, and Communications Between Stockholders and the Board +Board +Leadership Structure +As +noted above, our Board is currently comprised of six independent and two non-independent directors. +Mr. Rosenfeld +has served as Chairman of the Board and Chief Executive Officer since August 2008, and has been a member of the Board since February 2008. +The Board has designated one of the independent directors as Presiding Director to preside over executive sessions. We believe +that the number of independent, experienced directors that comprise our Board, along with the independent oversight of our Presiding +Director, benefits the Company and its stockholders. +We +recognize that different board leadership structures may be appropriate for companies in different situations and believe that +no one structure is suitable for all companies. We believe our current Board leadership structure is optimal for the Company because +it demonstrates to our employees, suppliers, customers, and other stakeholders that the Company is under strong leadership, with +a single person setting the tone and having primary responsibility for managing our operations and leading the Board in setting +long-term strategy. Having a single leader for both the Company and the Board eliminates confusion and duplication of efforts, +and provides clear leadership for the Company. We believe the Company, like many U.S. companies, has been well-served by this +leadership structure. +Because +the positions of Chairman of the Board and Chief Executive Officer are held by the same person, the Board believes it is appropriate +for the independent directors to elect one independent director to serve as a Presiding Director. In addition to presiding at +executive sessions of the independent directors, the Presiding Director has various responsibilities including coordinating with +the Chairman of the Board and Chief Executive Officer in establishing agenda and discussion items for Board meetings; retaining +independent advisors on behalf of the Board as the Board may determine to be necessary or appropriate and performing such other +functions as the independent directors may designate from time to time. Mr. Migliorini is currently serving as the Presiding +Director. +Our +Board conducts an annual evaluation in order to determine whether it and its committees are functioning effectively. As part of +this annual self-evaluation, the Board evaluates whether the current leadership structure continues to be optimal for the Company +and its stockholders. +Risk +Oversight +Our +Board is responsible for overseeing the Company’s risk management process. The Board focuses on the Company’s general +risk management strategy, the most significant risks facing the Company, and ensures that appropriate risk mitigation strategies +are implemented by management. The Board is also apprised of particular risk management matters in connection with its general +oversight and approval of corporate matters. +The +Board has delegated to the Audit Committee oversight of the Company’s risk management process. Among its duties, the Audit +Committee reviews with management (a) the Company’s policies with respect to risk assessment and management of risks +that may be material to the Company, (b) the Company’s system of disclosure controls and system of internal controls +over financial reporting, and (c) the Company’s compliance with legal and regulatory requirements. The Audit Committee +is also responsible for reviewing major legislative and regulatory developments that could materially impact the Company’s +contingent liabilities and risks. Our other Board committees also consider and address risks as they perform their respective +committee responsibilities. All committees report to the full Board as appropriate, including when a matter rises to the level +of a material or enterprise level risk. +The +Company’s management is responsible for day-to-day risk management. Our risk management and internal audit areas serve as +the primary monitoring and testing function for company-wide policies and procedures, and manage the day-to-day oversight of the +risk management strategy for the ongoing business of the Company. This oversight includes identifying, evaluating, and addressing +potential risks that may exist at the enterprise, strategic, financial, operational, and compliance and reporting levels. +16 +We +believe the division of risk management responsibilities described above is an effective approach for addressing the risks facing +the Company and that our Board leadership structure supports this approach. +Executive +Sessions of Independent Directors +The +Board holds executive sessions of its independent directors generally at each regularly scheduled meeting. The Presiding Director +serves as the chairperson for these executive sessions. +Communications +between Stockholders and the Board +The +Company has adopted a procedure by which stockholders may send communications to one or more members of the Board of Directors +by writing to such director(s) or to the entire Board of Directors in care of the Secretary, Steven Madden, Ltd., 52-16 Barnett +Avenue, Long Island City, New York 11104. The Board has instructed the Secretary of the Company to review all communications so +received and to exercise his discretion not to forward to the Board correspondence that is inappropriate, such as business solicitations, +frivolous communications and advertising, routine business matters (i.e. business inquiries, complaints, or suggestions) and +personal grievances. However, any director may at any time request the Secretary to forward to such director any and all communications +received by the Secretary but not forwarded to the directors. +Codes of Business Conduct +and Ethics +The +Company has adopted a Code of Ethics for the Chief Executive Officer and Senior Financial Officers, which is applicable to our +Chief Executive Officer, Chief Financial Officer, controller, principal accounting officer, head of internal audit and other employees +of the Company who are designated from time to time as “senior financial officers” of the Company. In addition, the +individuals who serve on our Board of Directors are subject to a Code of Business Conduct and Ethics for the Board of Directors +and all of the Company’s employees are held accountable for adherence to the Company’s Code of Business Conduct and +Ethics. Each of the Code of Ethics for the Chief Executive Officer and Senior Financial Officers, the Code of Business Conduct +and Ethics for the Board of Directors and the Code of Business Conduct and Ethics (collectively, the “Conduct Code”) is +included as an exhibit to our Annual Report on Form 10-K for the fiscal year ended December 31, 2014 and are available on the +Company’s website at www.stevemadden.com and, in addition, may be obtained by any stockholder without charge upon +request by writing to the Secretary, Steven Madden, Ltd., 52-16 Barnett Avenue, Long Island City, New York 11104. The Conduct +Code is intended to establish standards necessary to deter wrongdoing and to promote compliance with applicable governmental laws, +rules and regulations and honest and ethical conduct. The Conduct Code covers all areas of professional conduct, including conflicts +of interest, fair dealing, financial reporting and disclosure, protection of Company assets and confidentiality. Employees have +an obligation to promptly report any known or suspected violation of the Conduct Code without fear of retaliation. Waiver of any +provision of the Conduct Code for executive officers and directors may only be granted by the Board of Directors or the Nominating/Corporate +Governance Committee and any such waiver or modification of the Conduct Code relating to such individuals will be disclosed by +the Company. +Corporate Governance +Guidelines +The +Board of Directors has adopted Corporate Governance Guidelines as a set of guiding principles by which the Company is governed. +Various matters of corporate governance are addressed in the Corporate Governance Guidelines, such as board size and composition, +director qualifications and responsibilities, director compensation, limitations on service on other boards, board committees, +director orientation and education, director access to management, management development and succession planning and annual performance +evaluations for the Board. The Corporate Governance Guidelines include a policy for the clawback of executive incentive compensation +paid to senior executive officers in the event of an accounting restatement by the Company due to intentional misconduct of a +senior executive officer. In addition, in circumstances in which the Board of Directors believes it is appropriate, the clawback +policy allows for the reimbursement, forfeiture or cancellation of incentive compensation paid or awarded to a senior executive +officer of the Company who has engaged in willful misconduct in the performance of his or her duties that results in material +financial harm or significant reputational harm to the Company. +17 +The +Nominating/Corporate Governance Committee reviews the Corporate Governance Guidelines annually to determine whether to recommend +changes to the Corporate Governance Guidelines to reflect new laws, rules and regulations and developing governance practices. +A copy of the Corporate Governance Guidelines may be obtained by any stockholder without charge upon request by writing to the +Secretary, Steven Madden, Ltd., 52-16 Barnett Avenue, Long Island City, New York 11104. +Stock Ownership Guidelines +The +Board of Directors has adopted Stock Ownership Guidelines, which require a level of ownership of shares of our Common Stock by +our directors and executive officers in order to align their interests with those of our stockholders. The Stock Ownership Guidelines +require our Chief Executive Officer to own shares of our Common Stock equal in value to five times his annual base salary. Other +executive officers of the Company are required to own shares of our Common Stock equal in value to two times their annual base +salary. The Stock Ownership Guidelines further require that non-employee directors of the Company must own shares of our Common +Stock equal in value to two times the cash portion of the directors’ annual retainer or the equivalent if a retainer is +not received in certain circumstances. Individuals subject to the Stock Ownership Guidelines must attain the required level of +share ownership by the fifth anniversary of the later of the Stock Ownership Guidelines’ adoption date and the date that +the individual became an executive officer or director and must retain an amount equal to 25% of the net shares of our Common +Stock received as a result of the exercise, vesting or payment of any equity award made by the Company until the share ownership +requirement is satisfied. +Prohibition on Hedging +and Pledging of Our Common Stock +Our directors +and executive officers and certain other persons designated from time to time by the Company’s Chief Financial Officer are +prohibited from entering into hedging transactions and from pledging our Common Stock pursuant to a formal policy concerning such +activities adopted by the Board of Directors. +Corporate Social Responsibility +Policy +The +Company is committed to operating its business in a socially responsible manner. We strive to incorporate this commitment into +every aspect of our business, including the design of our products, the quality, safety and sourcing of our products, the safety +and fair treatment of our employees, animal welfare and compliance with laws, including the Foreign Corrupt Practices Act and +the SEC’s Conflict Minerals rule. These guiding principles are set forth in our Corporate Social Responsibility Policy and +we expect all of our employees to be familiar with and to adhere to them. We strive to do business with vendors and suppliers +that share our views and commitments to quality products and ethical business principles. We will only engage vendors and suppliers +that demonstrate a commitment to meeting our standards. +Certain Relationships +and Related Party Transactions +Steven +Madden Employment Agreement. Effective as of July 1, 2005, the Company amended and restated its employment agreement with +the Company’s founder and Creative and Design Chief, Steven Madden, pursuant to which Mr. Madden agreed to continue +to serve as the Company’s Creative and Design Chief. The term of Mr. Madden’s employment under his employment +agreement commenced on July 1, 2005 and, in accordance with the amendment of the agreement effective December 31, 2011, will +end on December 31, 2023. The amended agreement provides, among other things, for a base salary of $7,026,042 per annum for +the period between January 1, 2016 through the expiration of the term of employment, the potential for cash bonuses at the sole +discretion of the Company’s Board of Directors and an annual life insurance premium reimbursement of up to $200,000. Pursuant +to the amended agreement, on February 8, 2012, Mr. Madden was granted 1,463,056 restricted shares of Common Stock, valued +at approximately $40 million, under the 2006 Plan. The restricted Common Stock will vest in equal annual installments over +seven years commencing on December 31, 2017 through December 31, 2023, subject to Mr. Madden’s continued +employment with the Company on each such vesting date. On June 30, 2012, pursuant to an election right granted to him under the +agreement, as amended, Mr. Madden notified the Company of his election to receive an additional restricted stock award valued +at $40 million in consideration of a reduction in his annual base salary in years subsequent to 2012. Accordingly, on July +3, 2012, Mr. Madden was issued 1,893,342 restricted shares of Common Stock under the 2006 Plan. The restricted Common Stock +will vest in equal annual installments over six years commencing on December 31, 2018 through December 31, 2023, +subject to Mr. Madden’s continued employment with the Company on each such vesting date. +18 +Mr. Madden +is also eligible to receive annually, on or about the date of the Company’s annual meeting of stockholders (but not later +than June 30 th ), an option grant (the “Annual Option”) to purchase a number of shares of Common Stock, +with such number to be equal to the greater of (a) 100% of the largest aggregate number of shares of Common Stock available +upon the exercise of an option or options granted to any other continuing full-time employee of the Company during the preceding +twelve-month period and (b) 150,000 shares of Common Stock; provided, however, that a grant to Mr. Madden in excess +of 150% of the number of shares of Common Stock subject to options granted to such other continuing full-time employee would require +stockholder approval. Any Annual Option granted to Mr. Madden would vest quarterly over a one-year period following the grant +date and would be exercisable at a price equal to the closing price of the Company’s Common Stock on the grant date for +a period of five years following the grant date. In addition to the Annual Option, the agreement, as amended, provides for a potential +additional one-time stock option grant to purchase 750,000 shares of the Company’s Common Stock (the “EPS Option”) +in the event that the Company achieves earnings per share, on a fully-diluted basis, equal to $2.00 in any fiscal year ending +December 31, 2015 or after, which performance criteria was achieved for the fiscal year ended December 31, 2016. On March +1, 2017, Mr. Madden was granted the EPS Option at an exercise price of $37.35 per share. The EPS Option vests in equal annual +installments of 20% over a five-year period commencing on the first anniversary of the grant date. +In +the event of Mr. Madden’s death, his employment agreement provides for the payment to Mr. Madden’s estate +of his base salary for the 12-month period immediately subsequent to the date of his death. Further, in the event that Mr. Madden’s +employment agreement is terminated due to Mr. Madden’s total disability (as defined in the agreement), “for cause” +(as defined in the agreement) or due to Mr. Madden’s resignation, the Company is obligated to pay Mr. Madden +the amount of compensation that is accrued and unpaid through the date of termination. In the event Mr. Madden’s employment +agreement is terminated for any reason (other than “for cause” or due to his death, total disability or resignation), +the Company is obligated to pay Mr. Madden, in installments, the balance of his base salary that would have been paid by +the Company under the agreement for the full term of the agreement. If, during the period commencing 120 days prior to a +“change of control” (as defined in the employment agreement) transaction and ending on the first anniversary +of a change of control transaction, Mr. Madden’s employment is terminated by the Company other than for cause or by +the resignation of Mr. Madden for “good reason” (as defined in the employment agreement), or if Mr. Madden +resigns for good reason or without good reason within 30 days following a change of control transaction, all unvested options +to purchase shares of Common Stock held by Mr. Madden will vest on the date of termination or resignation and Mr. Madden +will be entitled to receive a lump sum cash payment equal to the amount of compensation that is accrued and unpaid through the +date of termination plus $35 million. Mr. Madden’s employment agreement contains other customary provisions, including +provisions regarding expense reimbursement, confidentiality, solicitation and competition. +For +the 2017 Fiscal Year, Mr. Madden earned $7,026,042 in base salary and received $200,000 for the payment of an annual life +insurance premium. Mr. Madden also received as his Annual Option for the 2017 Fiscal Year an option to purchase 150,000 shares +of Common Stock at a price per share of $40.15. In addition, Mr. Madden was granted the EPS Option at an exercise price of $37.35 +per share in the 2017 Fiscal Year as a result of the performance criteria for the EPS Option being achieved for the fiscal year +ended December 31, 2016. +19 +Loan +to Steven Madden. On June 25, 2007, the Company made a loan to Steven Madden, its Creative and Design Chief and a principal +stockholder of the Company, in the amount of $3,000,000, in order for Mr. Madden to satisfy a personal tax obligation resulting +from the exercise of a stock option which was due to expire and hold the underlying shares of Common Stock. The loan is evidenced +by a secured promissory note executed by Mr. Madden in favor of the Company, the security for which is a security interest in +a certain securities brokerage account maintained by Mr. Madden with his broker; none of the securities in the securities brokerage +account are shares of the Company’s Common Stock. There have been successive amendments to the secured promissory note, +the most recent of which occurred in April 2016, at which time the secured promissory note was amended to substitute the collateral +securing the secured promissory note from shares of the Company’s Common Stock to the security interest in Mr. Madden’s +securities brokerage account. Previously, on January 3, 2012, the secured promissory note was amended and restated to extend the +maturity date of the obligation to December 31, 2023 and eliminate the accrual of interest after December 31, 2011. +Prior to the January 3, 2012 amendment, the secured promissory note had been accruing interest at the rate of 6% per annum. In +addition, the secured promissory note provides that, commencing on December 31, 2014 and annually on each December 31 +thereafter through the maturity date, one-tenth of the principal amount thereof, together with accrued interest, will be cancelled +by the Company provided that Mr. Madden continues to be employed by the Company on each such December 31. Contemporaneously, +the Company will release its security interest in a portion of the securities held in Mr. Madden’s securities brokerage +account generally correlating to the amount of indebtedness cancelled on such date. As of December 31, 2011, interest in +the amount of $1,090,000 had accrued on the principal amount of the secured promissory note and, as noted above, interest was +eliminated after December 31, 2011. On December 31, 2017, the required one-tenth of the principal amount of the secured +promissory note, together with accrued interest, was written-off by the Company. +Review, Approval or Ratification +of Transactions with Related Persons +The +Company’s written Conduct Code and Employee Handbook prohibit all conflicts of interest. Under the Conduct Code, conflicts +of interest occur when private or family interests interfere in any way, or even appear to interfere, with the interests of the +Company. The Company’s prohibition on conflicts of interest under the Conduct Code includes any related person transaction. +Related +person transactions must be approved by the Board, or by a committee of the Board consisting solely of independent directors, +who will approve the transaction only if they determine that it is in the best interests of the Company. In considering the transaction, +the Board or committee will consider all relevant factors, including, as applicable, (i) the Company’s business rationale +for entering into the transaction; (ii) the alternatives to entering into a related person transaction; (iii) whether +the transaction is on terms comparable to those available to third parties or, in the case of employment relationships, to employees +generally; (iv) the potential for the transaction to lead to an actual or apparent conflict of interest and any safeguards +imposed to prevent such actual or apparent conflicts; and (v) the overall fairness of the transaction to the Company. +The +Company has multiple processes for reporting conflicts of interests, including related person transactions. Under the Conduct +Code, all employees are required to report any actual or apparent conflict of interest, or potential conflict of interest, to +management. The Chief Financial Officer distributes a questionnaire to the Company’s executive officers and management personnel +on a quarterly basis and distributes a questionnaire to the members of the Board of Directors on an annual basis requesting certain +information regarding, among other things, their immediate family members, employment and beneficial ownership interests, which +information is then reviewed for any conflicts of interest under the Conduct Code. +The +Board of Directors, the Audit Committee and the Disclosure Committee, which is comprised of management personnel, discuss the +related party transactions, specifically, and in connection with the regular review processes attendant to the Company’s +periodic filings, including related party transaction disclosures. +If +a director is a party to or in some manner involved in a transaction involving the Company, he or she will be recused from all +discussions and decisions about the transaction. The transaction must be approved in advance whenever practicable, and if not +practicable, must be ratified as promptly as practicable. +COMPENSATION +OF DIRECTORS IN THE 2017 FISCAL YEAR +The +Compensation Committee is responsible for establishing and overseeing all matters pertaining to compensation paid to directors +for service on the Board and its committees. +20 +The +following table sets forth information concerning the compensation of the Company’s non-employee directors in the 2017 Fiscal +Year. Following the table is a discussion of material factors related to the information disclosed in the table. +Name +Fees Earned or +Paid in Cash +($) +Stock +Awards +($)(1) +All Other +Compensation +($) +Total +($) +Peter Migliorini +110,000 +99,988 (2) +— +209,988 +Richard P. Randall +117,500 +99,988 (3) +— +217,488 +Ravi Sachdev +85,000 +99,988 (4) +— +184,988 +Thomas H. Schwartz +85,000 +99,988 (5) +— +184,988 +Rose Peabody Lynch +95,000 +99,988 (6) +— +194,988 +Robert Smith +95,000 +99,988 (7) +— +194,988 +(1) Reflects +the grant date fair value of stock awards calculated in accordance with the Financial Accounting Standards Board (“FASB”) Accounting +Standards Codification (“ASC”) Topic 718. Assumptions used in the calculation of these amounts are included in +Note H to the Company’s audited financial statements for the fiscal year ended December 31, 2017 included in the Company’s +Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 1, 2018. +(2) +At December 31, 2017, the aggregate number of shares of restricted Common Stock held by Ms. Lynch was 2,587, and Ms. Lynch +had no options outstanding. +(3) +At December 31, 2017, the aggregate number of shares of restricted Common Stock held by Mr. Migliorini was 2,587, and Mr. Migliorini +had no options outstanding. +(4) At +December 31, 2017, the aggregate number of shares of restricted Common Stock held by Mr. Randall was 2,587, and Mr. Randall +had no options outstanding. +(5) At +December 31, 2017, the aggregate number of shares of restricted Common Stock held by Mr. Sachdev was 2,587, and Mr. Sachdev +had no options outstanding. +(6) At +December 31, 2017, the aggregate number of shares of restricted Common Stock held by Mr. Schwartz was 2,587, and Mr. Schwartz +had no options outstanding. +(7) At +December 31, 2017, the aggregate number of shares of restricted Common Stock held by Mr. Smith was 2,587, and Mr. Smith +had no options outstanding. +Directors +who are also employees of the Company are not paid any fees or other remuneration for service on the Board of Directors or any +of its committees. In the 2017 Fiscal Year, each non-employee director received the following compensation: (i) a grant of +2,587 shares of restricted Common Stock, vesting on the first anniversary of the grant date, May 26, 2018 and (ii) $75,000. +In +the 2017 Fiscal Year, members of the Audit Committee, Nominating/Corporate Governance Committee and Compensation Committee each +received an additional $10,000 for serving on such committees, except that (a) the Chairman of the Audit Committee received $32,500 +as a result of an increase in compensation for serving in this role from $25,000 to $35,000 effective April 1, 2017 and (b) the +Chairman of the Compensation Committee received $15,000, instead of $10,000. The Company reimburses its directors for any out-of-pocket +expenses incurred by them in connection with services provided in such capacity. +STOCK +OWNERSHIP +Security Ownership of +Certain Beneficial Owners +The +following table sets forth information as of the Record Date (unless otherwise indicated) with respect to the beneficial +ownership of the Common Stock of the Company by each person known by the Company to be the beneficial owner of more than 5% of +the outstanding shares of the Common Stock of the Company. A person is deemed to be a beneficial owner of any securities which +that person has the right to acquire within 60 days. +21 +Name +and Address of Beneficial Owner +Amount +and Nature +of Beneficial +Ownership (1) +Percentage +of Class +BlackRock Inc. +55 +East 52 nd Street +New +York, NY 10055 +7,095,087 +12.14 %(2) +The Vanguard Group +100 +Vanguard Boulevard +Malvern, +Pennsylvania 19355 +4,894,772 +8.37 %(3) +Steven Madden +c/o +Steven Madden, Ltd. +52-16 +Barnett Avenue +Long +Island City, NY 11104 +4,513,059 +7.66 %(4) +FMR LLC +245 +Summer Street +Boston, +Massachusetts 02210 +2,841,055 +4.86 %(5) +(1) Beneficial +ownership as reported in the table below has been determined in accordance with Item 403 of Regulation S-K and Rule 13d-3 +of the Exchange Act and based upon 58,467,771 shares of Common Stock outstanding (excluding treasury shares) as of the Record +Date. +(2) Based +solely on a Statement on Schedule 13G filed with the SEC on January 19, 2018 by BlackRock, Inc. (“BlackRock”), +BlackRock has sole voting power with respect to 6,968,974 of such shares and sole dispositive power with respect to all such shares. +(3) Based +solely on a Statement on Schedule 13G filed with the SEC on February 9, 2018 by The Vanguard Group (“Vanguard”), +Vanguard has sole voting power with respect to 112,463 of such shares, shared voting power with respect to 7,267 of such shares, +sole dispositive power with respect to 4,778,825 of such shares and shared dispositive power with respect to 115,947 of such shares. +The business address of Vanguard is indicated in the table above. +(4) Mr. Madden’s +beneficial ownership includes: (i) 358,062 shares of Common Stock held by BOCAP Corp, a corporation wholly-owned by Mr. Madden; +(ii) 3,147,390 shares of restricted Common Stock granted under the 2006 Plan (which restricted stock includes 1,254,048 shares +which will vest in equal annual installments over six years commencing on December 31, 2018 through December 31, 2023 +and 1,893,342 shares which will vest in equal annual installments over six years commencing on December 31, 2018 through +December 31, 2023, in each case subject to forfeiture pursuant to the terms of the 2006 Plan and of Mr. Madden’s +employment agreement, as amended); (iii) 412,500 shares of Common Stock that may be acquired through the exercise of options that +are exercisable as of, or will become exercisable within 60 days of, the Record Date; and (iv) 595,107 shares of Common Stock +held by Mr. Madden directly. +(5) +Based solely on a Statement on Schedule 13G/A filed with the SEC on February 13, 2018 by FMR LLC (“FMR”) and +Abigail P. Johnson, who is a director, the Chairman and the Chief Executive Officer of FMR. The Schedule 13G/A indicates that +FMR has sole voting power with respect to 947,393 of such shares and sole dispositive power with respect to all such shares. The +business address of FMR is indicated in the table above. No business address for Abigail P. Johnson is provided in the Schedule +13G/A. +Security Ownership of +Directors and Executive Officers +The +following table sets forth information as of the Record Date (unless otherwise indicated) with respect to the beneficial +ownership of Common Stock held by (a) each current director and nominee; (b) the Chief Executive Officer, the Chief +Financial Officer and the three most highly compensated executive officers of the Company other than the Chief Executive Officer +and the Chief Financial Officer (the “Named Executive Officers”); and (c) all current directors and executive +officers as a group. A person is deemed to be a beneficial owner of any securities which that person has the right to acquire +within 60 days. Each director and executive officer has sole voting power and sole dispositive power with respect to all shares +beneficially owned by him or her. As of the Record Date, the director nominee Mitchell S. Klipper was not a beneficial owner of +any Common Stock. +22 +Name of Beneficial Owner (1) +Amount +and Nature +of Beneficial +Ownership (2) +Percentage +of Class +Edward R. Rosenfeld +479,007 +* %(3) +Amelia Newton Varela +233,084 +* %(4) +Arvind Dharia +66,662 +* %(5) +Awadhesh Sinha +61,845 +* %(6) +Karla Frieders +92,280 +* %(7) +Rose Peabody Lynch +7,341 +* %(8) +Peter Migliorini +5,564 +* %(9) +Richard P. Randall +22,808 +* %(10) +Ravi Sachdev +36,387 +* %(11) +Thomas H. Schwartz +14,006 +* %(12) +Robert Smith +11,303 +* %(13) +All Directors and Executive Officers as a Group (12 persons) +1,039,286 +1.77 %(14) +* Indicates beneficial +ownership of less than 1%. +(1) The address for each +of the named individuals below is c/o Steven Madden, Ltd., 52-16 Barnett Avenue, Long Island City, New York 11104. +(2) Beneficial +ownership as reported in the table above has been determined in accordance with Item 403 of Regulation S-K and Rule 13d-3 +of the Exchange Act and based upon 58,467,771 shares of Common Stock outstanding (excluding treasury shares) as of the Record +Date. +(3) Mr. Rosenfeld’s +beneficial ownership includes: (i) 219,704 shares of restricted Common Stock; and (ii) 259,303 shares of Common Stock +held by Mr. Rosenfeld. +(4) Ms. Varela’s +beneficial ownership includes: (i) 125,000 shares of Common Stock that may be acquired through the exercise of options that +are exercisable as of, or will become exercisable within 60 days of, the Record Date; (ii) 28,064 shares of restricted Common +Stock; and (iii) 80,020 shares of Common Stock held by Ms. Varela. +(5) Mr. Dharia’s +beneficial ownership includes: (i) 8,928 shares of restricted Common Stock; and (ii) 57,734 shares of Common Stock held +by Mr. Dharia. +(6) Mr. Sinha’s +beneficial ownership includes: (i) 23,370 shares of restricted Common Stock; and (ii) 38,475 shares of Common Stock +held by Mr. Sinha. +(7) Ms. +Frieders’ beneficial ownership consists of (i) 39,823 shares of restricted Common Stock; and (ii) 52,457 shares of Common +Stock held by Ms. Frieders. +(8) Ms. Lynch’s +beneficial ownership includes: (i) 2,587 shares of restricted Common Stock; and (ii) 4,754 shares of Common Stock held +by Ms. Lynch. +(9) Mr. Migliorini’s +beneficial ownership includes: (i) 2,587 shares of restricted Common Stock; and (ii) 2,977 shares of Common Stock held by Mr. +Migliorini. +(10) Mr. Randall’s +beneficial ownership includes: (i) 2,587 shares of restricted Common Stock; and (ii) 20,221 shares of Common Stock held +by Mr. Randall. +(11) Mr. Sachdev’s +beneficial ownership includes: (i) 2,587 shares of restricted Common Stock; and (ii) 33,800 shares of Common Stock held +by Mr. Sachdev. +(12) Mr. Schwartz’s +beneficial ownership includes: (i) 2,587 shares of restricted Common Stock; and (ii) 11,419 shares of Common Stock held +by Mr. Schwartz. +23 +(13) Mr. Smith’s +beneficial ownership includes: (i) 2,587 shares of restricted Common Stock; and (ii) 8,716 shares of Common Stock held +by Mr. Smith. +(14) Includes, +in the aggregate, 125,000 shares of Common Stock that may be acquired through the exercise of options that are exercisable as +of, or will become exercisable within 60 days of, the Record Date; (ii) 343,531 shares of restricted Common Stock; and (iii) 570,755 +shares of Common Stock held by such beneficial owners. +Section 16(a) Beneficial +Ownership Reporting Compliance +Section 16(a) of +the Exchange Act requires that the Company’s directors and officers, and persons who beneficially own more than 10% of a +registered class of the Company’s equity securities, file with the SEC reports of initial ownership of Common Stock and +subsequent changes in that ownership and furnish the Company with copies of all forms they file with the SEC pursuant to Section 16(a) of +the Exchange Act. A late report was filed on December 6, 2017 to report that 667 shares of Common Stock were withheld from Michael +Paradise on June 1, 2017 to satisfy Mr. Paradise’s tax obligations in connection with the vesting of 1,804 shares of restricted +Common Stock. A late report was filed on April 20, 2017 to report an April 11, 2017 grant of 20,000 restricted shares of Common +Stock to Karla Frieders. A late report was filed on April 5, 2017 to report a March 15, 2017 grant of 1,995 restricted shares +of Common Stock to Michael Paradise. Subject to the foregoing, to the Company’s knowledge, based solely on a review of the +copies of the reports furnished to the Company and/or written representations received from the Company’s directors, officers +and greater than 10% beneficial owners that no other reports were required, all Section 16(a) filing requirements applicable +to its officers, directors and greater than 10% beneficial owners were complied with during, or in respect of, the 2017 Fiscal +Year. +EXECUTIVE +COMPENSATION +Compensation Discussion +and Analysis +Executive +Summary +This +Compensation Discussion and Analysis describes the overall principals and objectives and specific features of our executive compensation +program, primarily focused on the executive compensation program’s application to our Chief Executive Officer and the other +executive officers of the Company included in the Summary Compensation Table, whom we refer to collectively in this Proxy Statement +as the “Named Executive Officers.” +Over +the last ten years our stock price has increased at an annual rate of 24.9%. Our 2017 year-end stock price increased 30.63% from +our 2016 year-end stock price. Our one-year total stockholder return was at the 68 th percentile as compared with our +peer group for 2017. In February 2018, the Company announced the initiation of a quarterly cash dividend of $0.20 per share on +the outstanding shares of Common Stock as part of its cash deployment strategy to drive shareholder value or enhance shareholder +returns. +During +2017, the Company delivered solid financial results, driven by strong performance of the Company’s core Steve Madden Women’s +business, coupled with growth in its Steve Madden Men’s, Madden Girl, Steve Madden Kids, and Blondo brands, as well as growth +in the Company’s SM Europe joint venture. Net sales for the 2017 Fiscal Year increased by 10.5% to $1.546 billion from $1.40 +billion in the year ended December 31, 2016. Net sales growth was driven by our acquisition of Schwartz & Benjamin, which +contributed net sales of $80 million, as well as growth in our core business. Net income was $117.9 million, or $2.04 per +diluted share, in the 2017 Fiscal Year as compared to net income in the fiscal year ended December 31, 2016 of $120.9 million, +or $2.03 per diluted share. +Due +to the Company’s financial performance in 2017, overall Named Executive Officer bonus awards, which are primarily paid in +the form of time-vested restricted stock grants, increased 76.6% from the previous year. As our general practice is to award bonuses +and grant equity based on Named Executive Officer performance for the preceding year, we are able to maintain relative alignment +between pay and performance. +24 +Compensation +Objectives and Strategy +The +Company’s executive officer compensation program is designed to attract and retain the caliber of officers needed to ensure +the Company’s continued growth and profitability and to reward them for their performance, for the Company’s performance +and for creating longer-term value for our stockholders. The primary objectives of the program are to: +· align +rewards with performance that creates stockholder value; +· support +the Company’s strong team orientation; +· encourage +high-potential team players to build a career at the Company; and +· provide +rewards that are cost-efficient, competitive with other similarly-positioned organizations +and fair to employees and stockholders. +The +Company’s executive compensation programs are approved and administered by the Compensation Committee of the Board of Directors. +Working with management and outside advisors, the Compensation Committee has developed a compensation and benefits strategy that +rewards performance and reinforces a culture that the Compensation Committee believes will drive long-term success. +The +compensation program rewards team accomplishments while promoting individual accountability. The executive officer compensation +program depends in significant measure on Company results, but business unit results and individual accomplishments are also very +important factors in determining each executive’s compensation. The Company has a robust planning and goal-setting process +that is fully integrated into the compensation system, enhancing a strong relationship among individual efforts, Company results +and financial rewards. +A +major portion of total compensation is placed at risk through annual and long-term incentives. As noted below, discretionary bonuses +were paid to the Named Executive Officers. The combination of incentives is designed to balance annual operating objectives and +Company earnings performance with longer-term stockholder value creation. +To +implement its primary objectives, the Company seeks to provide competitive compensation that is commensurate with performance. +The Company targets compensation at the median of the market and calibrates both annual and long-term incentive opportunities +to generate less-than-median awards when goals are not fully achieved and greater-than-median awards when goals are exceeded. +The +Company believes that there is great value to the Company in having a team of long-tenured, seasoned managers and seeks to promote +a long-term commitment from its senior executives. The Company’s team-focused culture and management processes are designed +to foster this commitment. In addition, restricted Common Stock awards granted to Named Executive Officers in the 2017 Fiscal +Year reinforce this long-term orientation with annual vesting over four to five-year periods. +Role +of the Compensation Committee +General. +The Compensation Committee provides overall guidance for the Company’s executive compensation policies and determines +the amounts and elements of compensation for the Company’s executive officers and outside directors. The Compensation Committee +currently consists of four members of the Company’s Board of Directors, Ms. Lynch and Messrs. Peter Migliorini, Thomas +Schwartz and Robert Smith, each of whom is an independent director under Rule 5605 of The Nasdaq Global Select Market listing +standards and a “non-employee director” as defined under the SEC’s rules. +When +considering decisions concerning the compensation of executives, other than the Chief Executive Officer, the Compensation Committee +asks for the recommendations of the Chief Executive Officer, including his detailed evaluation of each executive’s performance. +No executive has a role in recommending compensation for outside directors. With respect to the application of the 2006 Plan to +non-employee directors, the Board of Directors functions as the Compensation Committee. +25 +Use +of Outside Advisors. In making its determinations with respect to executive compensation, the Compensation Committee has historically +engaged the services of an independent compensation consulting firm. The Compensation Committee has retained the services of Arthur +J. Gallagher & Co.’s Human Resources & Compensation Consulting Practice (“Gallagher”) since +2005 to assist with its review of the compensation packages and employment agreements of the Chief Executive Officer and other +executive officers. In 2017 and 2018, Gallagher worked with the Compensation Committee to assess the reasonableness of discretionary +cash bonus payments and equity grants to Messrs. Rosenfeld, Dharia and Sinha and Ms. Frieders and Ms. Varela based on the +Company’s and the individual’s performance in the 2017 Fiscal Year and the reasonableness of the terms of a new employment +agreement for Ms. Frieders as compared with comparable positions in the peer group listed below. Executive compensation for the +other Named Executive Officers was based on prior employment agreements with pay structures and levels guided by Gallagher’s +market studies just prior to the consummation of the agreements. Position-specific market studies were completed at the time of +the employment agreement extension in support of the design of these agreements. The Compensation Committee also consulted Gallagher +with respect to the establishment of a performance-based bonus pool based on a percentage of the Company’s net income in +the 2017 Fiscal Year. Gallagher provides only executive compensation consulting services and works with management only at the +behest of the Compensation Committee. +The +Compensation Committee retains Gallagher directly, although in carrying out assignments, Gallagher also interacts with Company +management, when necessary and appropriate, in order to obtain compensation and performance data for the executives and the Company. +In addition, Gallagher may, in its discretion, seek input and feedback from management regarding its consulting work product for +the Compensation Committee in order to confirm alignment with the Company’s business strategy and identify data questions +or other similar issues, if any, prior to completion of a project for the Compensation Committee. +Independence +of Outside Advisors. The Compensation Committee has the sole authority to retain, terminate, approve the fees and set the +terms of the Company’s relationship with any outside advisors who assist the Committee in carrying out its responsibilities, +and may select or receive advice from any compensation consultant or other advisor only after taking into consideration all factors +relevant to the consultant’s independence from management, including the factors set forth in the Nasdaq’s rules. +Accordingly, +the Compensation Committee reviews annually its relationship with Gallagher to ensure its independence on executive compensation +matters. Prior to selecting and receiving advice from Gallagher with respect to executive compensation in the 2017 Fiscal Year, +the Compensation Committee reviewed the independence of Gallagher and the individual representatives of Gallagher who served as +the committee’s advisors. The Compensation Committee determined that no conflicts of interest exist between the Company +and Gallagher (or any individuals working on the Company’s account on behalf of Gallagher). In reaching such determination, +the Compensation Committee considered, among other things, the following factors: (i) that Gallagher provides no services +to the Company other than the executive compensation consulting services; (ii) the fees paid by us to Gallagher as a percentage +of Gallagher’s total revenue; (iii) the representations by Gallagher as to its policies and procedures that are designed +to prevent a conflict of interest; (iv) any business or personal relationships between the individual representatives of +Gallagher who advised the Compensation Committee and any member of the Compensation Committee; and (v) any business or personal +relationships between our executive officers and Gallagher or the individual representatives of Gallagher. +Consideration +of 2017 Stockholder Say on Pay Vote. At our 2017 Annual Meeting of Stockholders, our stockholders overwhelmingly +approved, on an advisory basis, the compensation of our Named Executive Officers (95% of votes cast). This continues the string +of 94% or higher approvals that began with the initial say on pay vote in 2011. The Compensation Committee believes this level +of stockholder support reflects a very strong endorsement of our compensation policies and decisions. The Compensation Committee +has considered the results of this advisory vote on executive compensation in determining the Company’s compensation policies +and decisions for 2018, and has determined that these policies and decisions are appropriate and in the best interests of the +Company and its stockholders at this time. +26 +Compensation +Structure +Pay +Elements - Overview +The Company +utilizes four main components of compensation: +· base salary; +· annual performance-based +bonuses; +· long-term equity incentives +(consisting of stock options and/or restricted stock); and +· benefits and perquisites. +Pay +Elements - Details +Base +Salary . The Company paid base salaries to each of the Named Executive Officers to provide them with fixed pay commensurate +with the Named Executive Officer’s role and responsibilities, experience, expertise and individual performance. As more +fully described in the section of this Proxy Statement captioned “Employment Arrangements,” as of December 31, +2017, the Company had employment agreements with each of the Named Executive Officers. The Compensation Committee, as constituted +at the time the parties entered into the employment agreements or any amendments thereof, reviewed and approved the salary established +in each such agreement or amendment. The Compensation Committee considered each employee’s salary history, value in the +marketplace and performance (including at the Company and previous employment). +The +annual base salary of our Chief Executive Officer, Edward R. Rosenfeld, was fixed at $850,000 for the 2017 Fiscal Year under an +employment agreement dated December 31, 2015, as amended, which remains in effect until December 31, 2018 and provides +Mr. Rosenfeld with an annual base salary of $900,000 for the fiscal year ending December 31, 2018. The annual base salary of our +President, Amelia Newton Varela, was fixed at $630,000 for the 2017 Fiscal Year under an employment agreement dated December 30, +2016, which remains in effect until December 31, 2019, and provides Ms. Varela with an annual base salary of $650,000 for the +fiscal year ending December 31, 2018. The annual base salary of our Chief Operating Officer, Mr. Sinha, was fixed at $681,000 +for the 2017 Fiscal Year under an employment agreement dated December 30, 2016, which remains in effect until December 31, 2019, +and provides Mr. Sinha with an annual base salary of $702,000 for the fiscal year ending December 31, 2018. Under the employment +agreement, as amended, of our Chief Financial Officer, Arvind Dharia, Mr. Dharia’s annual base salary for the 2017 +Fiscal Year was $582,455 and for the remainder of the term of the employment agreement, which expires on December 31, 2018. +Our Chief Merchandising Officer, Karla Frieders, began the 2017 Fiscal Year with an annual base salary of $440,000 under an employment +agreement dated September 4, 2015, which expired on February 29, 2017. Ms. Frieders’ new employment agreement dated April +11, 2017, which remains in effect through April 30, 2020, provides Ms. Frieders with an annual base salary of $550,000 from April +11, 2017 through April 30, 2018 and an annual base salary of $570,000 from May 1, 2018 through April 30, 2019. Please see the +section of this Proxy Statement captioned “Summary Compensation Table” and “Employment Arrangements” for +a more detailed description of their employment agreement and compensation. The 2017 salary increases, if any, for our Named Executive +Officers, as reflected in the following table, are generally consistent with those of other management employees. +Named Executive Officer +2017 Salary +2018 Salary +Edward R. Rosenfeld +$ 850,000 +$ 900,000 +Amelia Newton Varela +$ 630,000 +$ 650,000 +Arvind Dharia +$ 582,455 +$ 582,455 +Awadhesh Sinha +$ 681,000 +$ 702,000 +Karla Frieders +$ 550,000 * +$ 570,000 * +* +As noted above, Ms. Frieders began the 2017 Fiscal Year with an annual base salary of $440,000. Her annual base salary increased +to $550,000 for the period April 11, 2017 through April 30, 2018 and will increase to $570,000 for the period May 1, 2018 through +April 30, 2019. +27 +Annual +Performance-based Bonus - Based on Specific Performance Metrics . Annual performance-based cash bonuses, if any, for Named +Executive Officers are established in their respective employment agreements. The Compensation Committee reviewed and approved +the bonus provisions fixed in each such employment agreement at the time the parties entered into such agreements and any amendments +thereof. Such bonus provisions generally provide for variable or discretionary bonuses designed to reward attainment of business +goals. +Mr. Sinha’s +employment agreement entitles him to an annual performance-based bonus for the 2017 Fiscal Year in an amount equal to 2% of the +increase in the Company’s EBITDA for that year over the Company’s EBITDA for the immediately preceding year. For any +business acquired after December 30, 2016, EBITDA from the acquired business is included in the bonus calculation starting with +the first full quarter under Company ownership, provided that the prior year’s EBITDA will likewise be adjusted to include +EBITDA from the acquired business for comparable quarters in the prior year on a pro forma basis assuming the Company had owned +the business. The maximum annual bonus is $600,000, the first $300,000 of which is payable in cash and for any amount of the annual +bonus in excess of $300,000 by a grant of restricted shares of Common Stock, which restricted shares of Common Stock will vest +in three equal annual installments commencing on the first anniversary of the grant date. For the 2017 Fiscal Year, on March 15, +2018, Mr. Sinha received an annual performance-based bonus of $374,790, reflecting 2% of $18,739,505, the increase in 2017 EBITDA +over that of 2016, which annual performance-based bonus was paid $300,000 in cash and by a grant of 1,662 restricted shares of +Common Stock, which shares will vest in three equal annual installments, commencing on December 15, 2018. +Ms. Varela’s +employment agreement entitles her to an annual performance-based cash bonus for the 2017 Fiscal Year in an amount equal to 2% +of the increase in the Company’s total EBIT for that year over the Company’s EBIT for the immediately preceding year, +less any deductions as shall be required to be withheld by any applicable laws or regulations. EBIT attributable to any business +acquired by the Company after December 30, 2016 will not be included in the calculation of this bonus. For the 2017 Fiscal Year, +Ms. Varela’s annual performance-based cash bonus was $338,669, reflecting 2% of $16,933,469, the increase in 2017 EBIT over +that of 2016. +As +provided in the 2006 Plan, the maximum payment that may be made to an individual under any performance-based cash award during +any fiscal year and subject to the attainment of specified performance goals is $10,000,000. The Compensation Committee may, in +its sole discretion, elect to pay an individual an amount that is less than the individual’s target award regardless of +the degree of attainment of the performance goals. +For +the 2017 Fiscal Year, the Compensation Committee established a bonus pool for Named Executive Officers and other key executives +of the Company based on 6% of net income of the Company achieved in the 2017 Fiscal Year intended to comply with the provisions +of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”). Net income was selected +because it is highly correlated with stock price performance. The Compensation Committee also fixed for each executive his or +her maximum share of the 2017 bonus pool, which was 30% for Mr. Rosenfeld and 14% for each of the other Named Executive Officers. +In the 2017 Fiscal Year, the Company achieved net income of $117,948,000, which resulted in a bonus pool of $7,076,880. The Compensation +Committee determined to pay a bonus to Mr. Rosenfeld in an amount in excess of his individual target award and bonuses to certain +of the other Named Executive Officers in amounts that were below their individual target awards for the 2017 Fiscal Year and to +pay the bonuses in a combination of cash and restricted shares of Common Stock that vest annually over five years. Accordingly, +on March 15, 2018, the Company paid performance-based cash bonuses of $500,000, $220,000 and $100,000 to Mr. Rosenfeld, Mr. Dharia +and Ms. Frieders, respectively, and, on March 15, 2018, the Company paid performance-based bonuses in the form of restricted +stock to two of our Named Executive Officers as indicated in the following table. +Named Executive Officer +2018 Restricted +Stock Grant +Value for 2017 +Performance +Number of +Shares of +Restricted +Stock Awarded* +Annual +Vesting +Edward R. Rosenfeld +$ 3,016,682 +66,667 +5 years +Amelia Newton Varela +— +— +— +Arvind Dharia +— +— +— +Awadhesh Sinha +— +— +— +Karla Frieders +$ 502,773 +11,111 +5 years +* +In accordance with applicable SEC rules, the Summary Compensation Table included in this Proxy Statement does not report the grant +date fair value of these restricted stock awards because, while earned in 2017, the grants were not made until after the close +of the 2017 Fiscal Year. The 2018 Summary Compensation Table to be included in our proxy statement for our 2019 Annual Meeting +of Stockholders will contain the grant date fair value of these restricted stock awards provided these individuals are named executive +officers in that proxy statement. +28 +The +decision to pay cash bonuses to Messrs. Rosenfeld and Dharia and Ms. Frieders, and to award restricted shares of Common Stock +to Mr. Rosenfeld and Ms. Frieders for the 2017 Fiscal Year and the amount of each such Named Executive Officer’s bonus was +determined at the discretion of the Compensation Committee, but within the parameters of the bonus pool for Named Executive Officers, +with the exception of Mr. Rosenfeld who received in cash and restricted shares 49.7% of the 2017 bonus pool. The Compensation +Committee evaluated a variety of indicators of the Company’s stock price performance and overall financial performance, +including revenue growth and profitability, and assessed and made subjective judgments as to each of these executive’s individual +contribution towards the Company’s performance in the 2017 Fiscal Year in determining whether to pay bonuses to these executives +and establishing the amounts to be paid. With respect to the determination to award bonuses to Messrs. Dharia, Ms. Varela +and Ms. Frieders, the Compensation Committee also considered the recommendations of the Chief Executive Officer, Mr. Rosenfeld. +The +Compensation Committee consulted Gallagher regarding the establishment of the bonus pool and the individual target awards for +the 2017 Fiscal Year to ensure the bonus pool and the individual target awards were within market range for each executive. +Long-term +Equity Incentives . Management and the Compensation Committee believe that equity-based awards are an important factor in aligning +the long-term financial interest of the executive officers and stockholders. The Compensation Committee continually evaluates +the use of equity-based awards and intends to continue to use such awards in the future as part of designing and administering +the Company’s compensation program. Beginning in 2006, the Compensation Committee modified its prior practice of granting +equity incentives solely in the form of stock options with periodic awards of restricted stock in order to grant awards that contain +both substantial incentive and retention characteristics. These awards are designed to provide emphasis on preserving stockholder +value generated in recent years while providing significant incentives for continuing growth in stockholder value. +In +the 2017 Fiscal Year, the Company made grants of 39,894 and 13,298 restricted shares of Common Stock to Mr. Rosenfeld and +Ms. Varela, respectively, for performance in the fiscal year ended December 31, 2016. The restricted stock awards made +to Mr. Rosenfeld and Ms. Varela vest in five equal annual installments. Gallagher reviewed the individual grant values relative +to market practice. All of the equity awards in the 2017 Fiscal Year were made under the 2006 Plan. +The +restricted stock awards in the 2017 Fiscal Year also included a grant to (a) Mr. Sinha of 28,169 restricted shares of Common Stock +on January 3, 2017 in relation to his new three-year employment agreement dated December 30, 2016, which restricted stock award +will vest in three substantially equal annual installments and (b) Ms. Frieders of 20,000 restricted shares of Common Stock on +April 11, 2017 in relation to her new three-year employment agreement dated April 11, 2017, which restricted stock award will +vest in five equal annual installments. Each of those restricted stock awards was made under the 2006 Plan. +On +January 3, 2017, the Company awarded to Ms. Varela an option to purchase 100,000 shares of Common Stock at an exercise price of +$35.75 in relation to her new three-year employment agreement dated December 30, 2016. The option has a term of seven years and +will vest in four equal annual installments of 25,000 shares on each anniversary of the date of the grant, commencing on January +3, 2018. The option award to Ms. Varela was made under the 2006 Plan. +29 +The +Committee intends to continue to review the equity mix to achieve the ideal incentive for both performance and retention. With +respect to stock options, the 2006 Plan provides that the exercise price shall be the closing market price per share of the Company’s +Common Stock on the business day immediately preceding the grant date, which is fair market value for purposes of the 2006 Plan. +Other +Benefits and Perquisites . The Company’s executive compensation program also includes other benefits and perquisites. +These benefits and perquisites include annual matching contributions to executive officers’ 401(k) plan accounts, company-paid +medical benefits, automobile allowances and leased automobiles, and life insurance coverage. The Compensation Committee annually +reviews these other benefits and perquisites and makes adjustments as warranted based on competitive practices, the Company’s +performance and the individual’s responsibilities and performance. The Compensation Committee has approved these other benefits +and perquisites as a reasonable component of the Company’s executive officer compensation program. Please see the section +of this Proxy Statement captioned “Summary Compensation Table and, specifically, the column entitled “All Other Compensation” +and the corresponding footnotes. +Pay +Mix +The +Company utilizes the particular elements of compensation described above because the Company believes that it provides a well-proportioned +mix of secure compensation, retention value and at-risk compensation, which produces short-term and long-term performance incentives +and rewards. By following this approach, the Company provides the executives a measure of security in the minimum expected level +of compensation, while motivating the executives to focus on business metrics and other variables within their particular sector +which will increase sales and margins and at the same time lower costs so as to produce a high level of short-term and long-term +performance for the Company and long-term wealth creation for the executives, as well as reducing the risk of recruitment of top +executive talent by competitors. The mix of metrics used for the annual performance bonuses and the Company’s long-term +incentive program likewise provides an appropriate balance between short-term financial performance and long-term stock performance. +For +the Named Executive Officers, the mix of compensation is weighted heavily toward at-risk pay (annual incentives and long-term +incentives). Maintaining this pay mix results fundamentally in a pay-for-performance orientation for the Company’s executives, +which is aligned with the Company’s stated compensation philosophy of providing compensation commensurate with performance. +Pay +Levels and Benchmarking +Pay +levels for executives are determined based on a number of factors, including the individual’s roles and responsibilities +within the Company, the individual’s experience and expertise, the pay levels for peers within the Company, pay levels in +the marketplace for similar positions and performance of the individual and the Company as a whole. The Compensation Committee +is responsible for approving pay levels for the Named Executive Officers. In determining the pay levels, the Compensation Committee +considers all forms of compensation and benefits. +The +Compensation Committee assesses “competitive market” compensation using a number of sources. The primary data source +used in setting competitive market levels for the Named Executive Officers is the information publicly disclosed by a peer group +of the Company, which is reviewed annually and may change from year to year. For the 2017 Fiscal Year, executive compensation +and compensation design was reviewed for the purpose of assessing bonus awards in early 2017 in the context of overall compensation +and in relation to the following peer companies: +Caleres, +Inc. +Guess, +Inc. +Perry +Ellis International, Inc. +Cato +Corp. +Kate +Spade & Co. +Shoe +Carnival, Inc. +Crocs, +Inc. +Lululemon +Athletica, Inc. +Skechers +U.S.A. Inc. +Deckers +Outdoor Corp. +Movado +Group, Inc. +Under +Armour, Inc. +G-III +Apparel Group, Ltd. +New +York & Co. +Wolverine +Worldwide +Genesco, +Inc. +Oxford +Industries, Inc. +30 +After +consideration of the data collected on external competitive levels of compensation and internal needs, the Compensation Committee +makes decisions regarding the Named Executive Officer’s target total compensation opportunities based on the need to attract, +motivate and retain an experienced and effective management team. Relative to the competitive market data, the Compensation Committee +generally intends that the base salary and target annual incentive compensation for each Named Executive Officer will be at the +median of the competitive market. +As +noted above, notwithstanding the Company’s overall pay positioning objectives, pay opportunities for specific individuals +vary based on a number of factors such as scope of duties, tenure, institutional knowledge and/or difficulty in recruiting a new +executive. Actual total compensation in a given year will vary above or below the target compensation levels based primarily on +the attainment of operating goals and the creation of stockholder value. +Compensation +Committee Discretion +The +Compensation Committee retains the discretion to decrease all forms of incentive payouts based on significant individual or Company +performance shortfalls, with the exception of any such payouts that are to be made pursuant to contractual commitments, such as +the bonuses that may be paid to Mr. Sinha and Ms. Varela, which are tied to the Company’s EBITDA and EBIT, respectively, +for the preceding year pursuant to their employment agreements. Similarly, the Compensation Committee retains the discretion to +increase payouts and/or consider special awards for significant achievements, including, but not limited to, superior asset management, +investment or strategic accomplishments and/or consummation of acquisitions, divestitures, capital improvements to existing properties, +or sales made by certain of the Company’s divisions. +Pay +Ratio +On +August 5, 2015, the SEC adopted the final pay ratio rule implementing the mandate of the Dodd-Frank Wall Street Reform and Consumer +Protection Act (the “Dodd-Frank Act”) requiring public companies to determine the ratio of the compensation of their +principal executive officer (“PEO”) to the median compensation of their other employees and provide annual disclosure +in such regard. The Company’s PEO is Mr. Rosenfeld. The table below sets forth the total annual compensation for our PEO +and the median-paid employee of the Company, who is a part-time sales associate, and the ratio between the two. +Median employee annual total compensation +$ 15,694 +Mr. Rosenfeld annual total compensation +$ 2,883,011 +Ratio of PEO to median employee compensation +184:1 +We +determined our median employee as of October 1, 2017, which date is within the last three months of the 2017 Fiscal Year, as permitted +by the pay ratio rule. In determining our median employee, we applied the “de minimis” exemption under the rule, which +allows the exemption of 5% or less of the Company’s total global workforce in jurisdictions outside of the U.S., which amounts +to 183 employees based on our total global workforce of 3,670 employees. As such, we excluded all of our employees in each of +Hong Kong (26 employees), The Netherlands (21 employees) and South Africa (84 employees), which in total amount to 131 employees +or 4%. We did not exclude from consideration any employees who joined the Company during the 2017 Fiscal Year as the result of +a business acquisition or combination. Employees on leave of absence were excluded and wages and salaries were annualized for +those employees that were not employed for the entire 2017 Fiscal Year. To identify our median employee, we used payroll data +consisting of salary, hourly wage, overtime wage, bonus, commissions, vesting of equity awards and any similar payroll items for +all of our employees included in the calculation. +Once +we identified our median employee, we determined that employee’s annual total compensation amount for the 2017 Fiscal Year +using the same method required for calculating the PEO’s (and other named executive officers’) total annual compensation +for purposes of the Summary Compensation Table, except that, for simplicity, employer contributions to the Company’s 401(k) +plan and medical benefits were excluded as all employees, including the PEO, are offered the same benefits and the Company utilizes +the Internal Revenue Service safe harbor provision for 401(k) discrimination testing. +31 +The +ratio stated above is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K. It is based +on the methodologies, assumptions and estimates described below and is not necessarily comparable to the ratios reported by other +companies. +Risk Assessment +Bonus +payments to executives are based either on the discretion of the Compensation Committee or are tied to growth in various indicators +of financial performance, such as EBITDA and EBIT. Long-term incentives have been granted in the form of stock options and time-vested +restricted stock that generally vest over four or five years. These programs have been in place for several years and have proved +effective in rewarding performance while not encouraging inappropriate risk-taking. +The +Compensation Committee undertook to review and evaluate all of our executive and company-wide compensation plans and programs +to assess whether any aspect of these plans and programs would encourage inappropriate risk-taking by the Company’s executives +and non-executive employees that could have a material adverse effect on the Company and to confirm that the Company has adequate +risk management controls in place to ensure that executive and company-wide compensation is reasonable and achieves its intended +incentive without creating unacceptable risk. Based on such review and evaluation, the Compensation Committee believes there is +no material adverse risk to the Company that is related to our compensation programs for executives and non-executives. +This review +and evaluation of the risks associated with our compensation plans and programs consisted of: +· identifying +those business risks that could be material to the Company and identifying our existing +risk management system; +· reviewing +and analyzing our compensation plans and programs to identify plan and program features +that could potentially encourage or introduce excessive or imprudent risk taking of a +material nature; +· identifying +the business risks that our compensation plan and program features could potentially +encourage or create; +· balancing +these business risks against our existing internal control systems designed to manage +and mitigate these business risks; and +· analyzing +whether the unmitigated risks, as a whole, are reasonably likely to have a material adverse +effect on the Company. +Various +persons were consulted during the course of the assessment, including our executive officers and senior members of our human resources +department. The Compensation Committee engages Gallagher to review our executive and company-wide compensation plans and programs +and provide advice regarding appropriate levels of incentive. +The +Compensation Committee noted several features of our compensation structure that mitigate risk, including, for example: +· the +Company utilizes a pay mix that is well balanced between short-term financial performance +and long-term stock performance, comprised of secure compensation in the form of base +salary, short-term incentives in the form of potential for cash bonuses, and long-term +incentives in the form of stock options and time-vested restricted stock that generally +vest over four or five years; +32 +· in +most instances, management or the Compensation Committee retains the discretion to decrease +all forms of incentive compensation based on significant individual or Company performance +shortfalls; +· we +periodically benchmark our compensation plans and programs and target executive and non-executive +compensation within the normal limits of the competitive market; and +· the +Compensation Committee provides oversight of the Company’s compensation plans and +programs and compensation philosophy, makes recommendations to the Board with respect +to improvements to our compensation plans and programs, and is responsible for reviewing +and approving executive compensation and administering and awarding incentive, deferred +and equity compensation to our senior executives. +In light +of the assessment described above, it was concluded that the risks associated with our compensation plans and programs (executive +and company-wide) are not reasonably likely to have a material adverse effect on the Company. +Implications +of Tax and Accounting Matters +As +a general matter, the Compensation Committee considers the various tax and accounting implications of compensation vehicles employed +by the Company. While the Compensation Committee reviews and considers both the accounting and tax effects of various components +of compensation, those effects are not a significant factor in the Compensation Committee’s allocation of compensation among +the different components. +In +general, the Company believes that compensation paid to executive officers should be deductible for U.S. tax purposes. Section +162(m) of the Code limits the tax deductibility of certain compensation. In certain instances, the Compensation Committee believes +that it is in the Company’s best interests, and that of its stockholders, to have the flexibility to pay compensation that +is not deductible under the limitations of Section 162(m) of the Code, in order to provide a compensation package consistent +with the Company’s objectives. The Compensation Committee believes that the deduction for incentive compensation paid and +awarded for the 2017 Fiscal Year was not limited by Section 162(m). +As +more fully described below under the heading “Termination, Change-in-Control and Non-Competition/Non-Solicitation,” +with the exception of Ms. Frieders, all of our Named Executive Officers are entitled to receive certain compensation in the event +of a termination of employment in connection with a change-in-control event for the Company, which payments may trigger the application +of the “golden parachute” provisions of Sections 280G and 4999 of the Code. Section 280G of the Code disallows +a tax deduction with respect to excess parachute payments to certain executives of companies that undergo a change-in-control. +In addition, Section 4999 of the Code imposes a 20% excise tax on the individual receiving the excess parachute payment. +Excess parachute payments are golden parachute payments that exceed an amount determined under Section 280G based on the +executive’s prior compensation. In approving the compensation arrangements of our Named Executive Officers, our Compensation +Committee considers all elements of the cost to our Company of providing such compensation, including the potential impact of +Sections 280G and 4999, which, under certain circumstances, may limit the deductibility to the Company of executive compensation. +However, our Compensation Committee may determine, in its judgment, to authorize compensation arrangements that could give rise +to loss of deductibility under Section 280G and the imposition of excise taxes under Section 4999 when it believes that +such arrangements are appropriate to attract and retain executive talent. +Conclusion +The +level and mix of compensation that is finally decided upon as to each executive is considered within the context of both the objective +data from the Company’s competitive assessment of compensation and performance, as well as discussion of the subjective +factors as outlined above. The Compensation Committee believes that each of the compensation packages for the Named Executive +Officers is within the competitive range of practices when compared to the objective comparative data even where subjective factors +have influenced the compensation decisions. +33 +Compensation Committee +Interlocks and Insider Participation +During +the 2017 Fiscal Year, the following directors served on the Compensation Committee: Peter Migliorini (Chairman), Thomas H. Schwartz, +Rose Peabody Lynch and Robert Smith. During the 2017 Fiscal Year: +· +none of the members of the Compensation Committee was an officer (or former officer) or employee of the Company or any of its subsidiaries; +· +none of the members of the Compensation Committee had a direct or indirect material interest in any transaction in which the Company was a participant and the amount involved exceeded $120,000; +· +none of the Company’s executive officers served on the compensation committee (or another board committee with similar functions or, if none, the entire board of directors) of another entity where one of that entity’s executive officers served on the Company’s Compensation Committee; +· +none of the Company’s +executive officers was a director of another entity where one of that entity’s executive officers served on the Company’s +Compensation Committee; and +· +none of the Company’s executive officers served on the compensation committee (or another board committee with similar functions or, if none, the entire board of directors) of another entity where one of that entity’s executive officers served as a director on the Company’s Board of Directors. +Executive Officers +The following +table identifies the executive officers of the Company, and their ages and positions: +Name +Age +Position +Edward R. Rosenfeld +42 +Chairman of the Board and Chief Executive Officer +Amelia Newton Varela +46 +President +Arvind Dharia +68 +Chief Financial Officer and Secretary +Awadhesh Sinha +72 +Chief Operating Officer +Karla Frieders +41 +Chief Merchandising Officer +Michael Paradise +56 +Executive Vice President – General Counsel +Amelia +Newton Varela has been President of the Company since September 2015. Previously, Ms. Varela was Executive Vice President of Wholesale +since April 2008. Ms. Varela was Executive Vice President of Wholesale Footwear from November 2004 to April 2008. Prior to this +tenure, she was Vice President of Sales for the Steve Madden Women’s Wholesale Division from January 2000. Prior to that, +she was an Account Executive for the Steve Madden Women’s Wholesale Division. She graduated from The Fashion Institute of +Technology in 1995. +Arvind +Dharia has been the Chief Financial Officer of the Company since October 1992 and was a director of the Company from December 1993 +through May 2004. Mr. Dharia has been Secretary of the Company since 1993. From December 1988 until joining the +Company in September 1992, Mr. Dharia was Assistant Controller of Millennium III Real Estate Corp., a real estate management +company. +Awadhesh +Sinha became the Chief Operating Officer of the Company in July 2005. Mr. Sinha was a director of the Company, from October 2002 +to July 2005, before joining the Company as its Chief Operating Officer. Mr. Sinha was the Chief Operating Officer and Chief +Financial Officer of WEAR ME Apparel Inc., a company that designs, manufactures and markets branded and non-branded children’s +clothing, from 2003 to July 2005. Prior to that, Mr. Sinha worked for Salant Corporation, a company that designs, manufactures +and markets men’s clothing, for 22 years, and held the position of Chief Operating Officer and Chief Financial Officer +of Salant Corporation from 1998 to 2003. +34 +Karla +Frieders has been the Chief Merchandising Officer of the Company since September 2015. Previously, Ms. Frieders served as the +President of Retail from January 2013 and the Vice President of Retail from October 2009 until January 2013. Prior to these roles, +Ms. Frieders held various buying positions at the Company from 1999. +Michael +Paradise joined the Company in May 2016 as Executive Vice President – General Counsel. From 2009, prior to joining the Company, +Mr. Paradise was a partner at the New York City law firm of McLaughlin & Stern, LLP, where he practiced corporate, securities +and commercial law. He also practiced law at a number of medium and large law firms in New York City. Mr. Paradise received his +J.D. degree, with honors, from George Washington University Law School in 1987, and his B.A. degree, cum laude , from the +University of Rochester in 1984. +Please +see the section of this Proxy Statement captioned “Proposal One: Election of Directors -- Biographical Summaries of Nominees +for the Board of Directors” for information concerning the Company’s Chairman of the Board and Chief Executive Officer, +Edward R. Rosenfeld, and the Company’s other director nominees. +SUMMARY +COMPENSATION TABLE +The +following table sets forth the compensation information for the Company’s Chief Executive Officer, Chief Financial Officer +and the three most highly compensated executive officers other than the Chief Executive Officer and Chief Financial Officer relating +to the fiscal years ended December 31, 2017, 2016 and 2015, respectively. In this Proxy Statement, the Company refers to +this group of people as the Company’s “Named Executive Officers.” +In +accordance with applicable SEC rules, the Summary Compensation Table includes, for a particular fiscal year, only those stock +awards made during that fiscal year and not any awards made after year-end even if awarded for services rendered in that year. +SEC rules require that such awards be reflected in the year of grant and, as such, awards made after the end of the 2017 Fiscal +Year will appear in the Summary Compensation Table to be included in our proxy statement for our 2019 Annual Meeting of Stockholders. +Name +and Principal Position +Fiscal +Year +Salary +($) +Bonus +($) +Stock +Awards +($) (1) +Option +Awards +($)(1) +Non-Equity +Incentive Plan +Compensation +($) +All +Other +Compensation +($) +Total +Compensation +($) +Edward +R. Rosenfeld +2017 +849,039 +— +1,515,972 +— +500,000 +26,100 +(2) +2,891,111 +Chief +Executive Officer +2016 +797,510 +— +3,350,593 +— +250,000 +25,950 +(3) +4,424,053 +2015 +637,791 +— +3,226,490 +— +— +25,950 +(4) +3,890,231 +Amelia +Newton Varela +2017 +629,423 +— +505,324 +814,000 +338,669 +(5) +23,100 +(6) +2,310,516 +President +2016 +600,000 +— +518,065 +— +— +22,950 +(7) +1,141,015 +2015 +531,154 +— +563,801 +— +— +22,950 +(8) +1,117,905 +Arvind +Dharia +2017 +582,455 +— +— +220,000 +109,720 +(9) +912,175 +Chief +Financial Officer +2016 +582,455 +— +116,567 +— +200,000 +108,912 +(10) +1,007,934 +2015 +582,152 +— +720,011 +— +112,500 +101,817 +(11) +1,516,480 +Awadhesh +Sinha +2017 +680,625 +— +1,007,042 +— +300,000 +(12 +) +23,806 +(13) +2,011,473 +Chief +Operating Officer +2016 +661,015 +— +116,567 +— +200,000 +(14 +) +23,656 +(15) +1,001,238 +2015 +629,654 +— +202,511 +— +112,500 +22,366 +(16) +967,031 +Karla +Frieders +2017 +517,846 +— +751,000 +— +100,000 +29,822 +(17) +1,398,668 +Executive +Vice President of Wholesale +2016 +440,000 +— +207,234 +— +— +90,608 +(18) +737,842 +2015 +440,769 +— +745,835 +— +— +109,957 +(19) +1,296,561 +(1) The +amounts in this column reflect the aggregate grant date fair value of awards granted during the applicable year for the fiscal +years ended December 31, 2017, December 31, 2016 and December 31, 2015, respectively, calculated in accordance +with ASC Topic 718. Assumptions used in the calculation of these amounts are included in Note H to the Company’s audited +financial statements for the fiscal years ended December 31, 2017 and December 31, 2016 included in the Company’s Annual +Reports on Form 10-K filed with the Securities and Exchange Commission on March 1, 2018 and February 28, 2017, respectively, and +in Note I to the Company’s audited financial statements for the fiscal year ended December 31, 2015 included in the +Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 26, 2016. +35 +(2) Consists +of an $18,000 automobile allowance and $8,100 in annual match contributions to Mr. Rosenfeld’s 401(k) plan account. +(3) Consists +of an $18,000 automobile allowance and $7,950 in annual match contributions to Mr. Rosenfeld’s 401(k) plan account. +(4) Consists +of an $18,000 automobile allowance and $7,950 in annual matching contributions to Mr. Rosenfeld’s 401(k) plan +account. +(5) Consists +of a non-equity incentive payment of $338,669 made pursuant to a bonus formula in Ms. Varela’s employment agreement. See +“Employment Arrangements.” +(6) Consists +of a $15,000 automobile allowance and $8,100 in annual matching contributions to Ms. Varela’s 401(k) plan account. +(7) Consists +of a $15,000 automobile allowance and $7,950 in annual matching contributions to Ms. Varela’s 401(k) plan account. +(8) Consists +of a $15,000 automobile allowance and $7,950 in annual matching contributions to Ms. Varela’s 401(k) plan account. +(9) Consists of +a $14,763 automobile allowance, $86,857 life insurance premiums and $8,100 in annual match contributions to Mr. Dharia’s +401(k) plan account. +(10) Consists of +a $14,651 automobile allowance, $86,311 life insurance premiums and $7,950 in annual match contributions to Mr. Dharia’s +401(k) plan account. +(11) Consists +of a $12,876 automobile allowance, $80,991 life insurance premiums and $7,950 in annual match contributions to Mr. Dharia’s +401(k) plan account. +(12) Consists +of a non-equity incentive payment of $300,000 made pursuant to a bonus formula in Mr. Sinha’s employment agreement. See +“Employment Arrangements.” +(13) Consists +of a $15,706 automobile allowance and $8,100 in annual matching contributions to Mr. Sinha’s 401(k) plan account. +(14) Includes +a non-equity incentive payment of $58,584 made pursuant to a bonus formula in Mr. Sinha’s employment agreement. See “Employment +Arrangements.” +(15) Consists +of a $15,706 automobile allowance and $7,950 in annual matching contributions to Mr. Sinha’s 401(k) plan account. +(16) Consists +of a $14,416 automobile allowance and $7,950 in annual matching contributions to Mr. Sinha’s 401(k) plan account. +(17) Consists +of a $21,722 living allowance and $8,100 in annual matching contributions to Ms. Frieders’ 401(k) plan account. +(18) Consists +of a $82,658 living allowance and $7,950 in annual matching contributions to Ms. Frieders’ 401(k) plan account. +(19) Consists +of a $102,007 living allowance and $7,950 in annual matching contributions to Ms. Frieders’ 401(k) plan account. +Employment Arrangements +Edward +R. Rosenfeld. On December 31, 2012, the Company entered into an employment agreement with Mr. Rosenfeld to replace +a prior, expiring employment agreement. Pursuant to the December 31, 2012 employment agreement, Mr. Rosenfeld continued to +serve as Chief Executive Officer and executive Chairman of the Board of Directors of the Company and received a base salary of +$638,142 and a monthly automobile allowance of $1,500 for the fiscal year 2015, until the employment agreement’s expiration +on December 31, 2015. The December 31, 2012 employment agreement provided that Mr. Rosenfeld received additional compensation +and bonuses, if any, at the absolute discretion of the Board of Directors. +36 +On +December 31, 2015, the Company entered into a new employment agreement with Mr. Rosenfeld which replaced the prior employment +agreement with the Company, which expired on December 31, 2015. Pursuant to the new employment agreement, as amended, Mr. Rosenfeld +continues to serve as Chief Executive Officer and executive Chairman of the Board of Directors of the Company until the agreement +expires on December 31, 2018 or is sooner terminated in accordance with its terms. Mr. Rosenfeld’s current employment +agreement provides for an annual base salary of $800,000, $850,000 and $900,000 for the fiscal years 2016, 2017 and 2018, respectively, +and a monthly automobile allowance of $1,500. The current agreement provides that Mr. Rosenfeld will receive additional compensation +and bonuses, if any, at the absolute discretion of the Board of Directors. Pursuant to the current agreement, on December 31, +2015, Mr. Rosenfeld was granted 75,000 shares of the Company’s Common Stock, subject to certain restrictions. These +restricted shares of Common Stock, which were issued under the 2006 Plan, will vest in five equal annual installments of 15,000 +shares commencing on December 1, 2016. In addition, pursuant to the current employment agreement, on February 5, 2016, Mr. +Rosenfeld received an additional award of 75,000 shares of the Company’s Common Stock, subject to certain restrictions. +These restricted shares of Common Stock, which were issued under the 2006 Plan, will also vest in five equal annual installments +of 15,000 shares in such case commencing on March 5, 2017. +In +the event of his death, Mr. Rosenfeld’s employment agreement provides for the payment to his estate of his base salary +for the 12-month period immediately subsequent to the date of Mr. Rosenfeld’s death. The agreement also provides that +if Mr. Rosenfeld’s employment agreement is terminated due to his “total disability” (as defined in the +agreement), Mr. Rosenfeld will receive payment of his base salary for the 12-month period immediately subsequent to the date +he is determined to be totally disabled. Mr. Rosenfeld’s employment agreement allows the Company to terminate his employment +with “cause” (as defined in the employment agreement) or without cause. In the event that Mr. Rosenfeld’s +employment is terminated by the Company for cause, the Company will have no further obligations to Mr. Rosenfeld, and Mr. Rosenfeld +will be entitled to no further compensation from the Company, except for pro-rata amounts due to him on the date of his termination. +In the event that Mr. Rosenfeld’s employment is terminated by the Company without cause or by Mr. Rosenfeld’s +resignation for “good reason” (as defined in the employment agreement), Mr. Rosenfeld will be entitled to receive +payment of his annual base salary, payable at regular payroll intervals, from the date of termination of employment through the +longer of the remainder of the term of the agreement or six months. +In +addition, if Mr. Rosenfeld’s employment is terminated by the Company without cause or by the resignation of Mr. Rosenfeld +for good reason during the period commencing 90 days prior to a “change of control” (as defined in the employment +agreement) transaction and ending 180 days following a change of control transaction, Mr. Rosenfeld will receive an +amount equal to two and one-half times the sum of (i) the annual base salary to which he was entitled as of the date of termination +or resignation of employment plus (ii) the average cash bonus received by him for the preceding three-year period ending on the +last previous December 31 (the “Change of Control Payment”). However, if the Change of Control Payment (or a portion +thereof) is determined to constitute an “excess parachute payment” under Sections 280G and 4999 of the Code, +Mr. Rosenfeld shall be paid either (i) the Change of Control Payment (which shall be subject to all applicable taxes +to be paid by the executive including the excise tax payable pursuant to Section 4999 and which shall be limited as to deductibility +to the Company) or (ii) a reduced amount, calculated in accordance with Section 280G, that may be paid to the executive +without the imposition of an excise tax under Section 4999 and which shall be fully deductible to the Company, whichever +payment yields the greater after-tax benefit to the executive. +Amelia +Newton Varela. On January 10, 2014, the Company entered into an employment agreement with Ms. Varela to replace a prior agreement +that expired on December 31, 2013. The agreement was amended on September 4, 2015 in connection with Ms. Varela’s promotion +from Executive Vice President – Wholesale to the newly-created position of President of the Company to increase Ms. Varela’s +annual base salary to $600,000 for the fiscal years 2015 and 2016 until the employment agreement’s expiration on December +31, 2016. +On +December 30, 2016, the Company entered into a new employment agreement with Ms. Varela, which replaced the prior employment agreement +with the Company, which expired by its terms on December 31, 2016. Pursuant to the new employment agreement, Ms. Varela continues +to serve as President of the Company for a term commencing on January 1, 2017 and continuing for three years through December +31, 2019, unless sooner terminated in accordance with the terms of the agreement. Ms. Varela’s current employment agreement +provides for an annual base salary of $630,000, $650,000 and $670,000 for the years 2017, 2018 and 2019, respectively, and a monthly +automobile allowance of $1,250 in each year of the term. In addition, pursuant to the current employment agreement, on January +3, 2017, Ms. Varela was granted an option to purchase 100,000 shares of the Company’s Common Stock under the 2006 Plan, +at an exercise price of $35.75 per share, which option is exercisable in four equal annual installments of 25,000 shares on each +anniversary of the date of grant, commencing on January 3, 2018. +37 +Before +its amendment, the prior employment agreement entitled Ms. Varela to an annual performance-based cash bonus for each of the fiscal +years ended December 31, 2015 and 2016 in an amount equal to 2% of the increase, if any, in the Wholesale Division EBIT for each +such year over the Wholesale Division EBIT for the immediately preceding year, provided that Wholesale Division EBIT attributable +to any business acquired by the Company after January 10, 2014 will not be included for the purpose of determining Ms. Varela’s +bonus until the acquired business has been owned by the Company for two full calendar years. As amended, with respect to the fiscal +year ended December 31, 2016, the prior employment agreement entitled Ms. Varela to a performance-based cash bonus in an amount +equal to 2% of the increase, if any, in the Company’s total EBIT for the fiscal year ended December 31, 2016 over the Company’s +total EBIT for the fiscal year ended December 31, 2015, less any deductions required to be withheld by applicable laws and regulations. +EBIT attributable to any business acquired by the Company after September 4, 2015 will not be included in the calculation for +the purpose of determining Ms. Varela’s annual bonus. This performance-based bonus was not achieved with respect to the +fiscal years ended December 31, 2016 and 2015. +The +current employment agreement entitles Ms. Varela to an annual performance-based cash bonus for each of the fiscal years ended +December 31, 2017, 2018 and 2019 in an amount equal to 2% of the increase, if any, in the Company’s total EBIT for each +such year over the Company’s total EBIT for the immediately preceding year, less any deductions required to be withheld +by applicable laws and regulations. EBIT attributable to any business acquired by the Company after December 30, 2016 will not +be included in the calculation for the purpose of determining Ms. Varela’s annual bonus. Ms. Varela received a cash bonus +of $338,669 for 2017 EBIT performance. +In +the event that Ms. Varela’s employment agreement is terminated due to Ms. Varela’s “disability” +(as defined in the agreement) or death, the Company is obligated to pay Ms. Varela (or her estate) the amount of +accrued and unpaid salary through the date of termination plus any performance-based cash bonus that has accrued for the year +prior to termination and is unpaid at the time Ms. Varela’s employment is terminated due to her disability or death. +The Company may terminate the agreement for “cause” (as defined in the agreement) and, in such event, Ms. Varela +will be entitled only to accrued and unpaid salary through the date of termination of employment. In the event Ms. Varela’s +employment is terminated by the Company without cause, she would be entitled to receive payment of her annual base salary, payable +at regular payroll intervals, from the date of termination of employment through the remainder of the term plus any performance-based +cash bonus that has accrued but not yet been paid. In addition, pursuant to the most recent amendment of Ms. Varela’s employment +agreement on May 15, 2017, in the event that Ms. Varela’s employment is terminated by the Company without cause during +the period commencing 30 days prior to a “change of control” (as defined in the agreement, as amended) transaction +and ending 180 days following a change of control transaction, she is entitled to receive an amount equal to the lesser of (A) +two and one-half times the sum of (i) the annual base salary to which she was entitled as of the date of termination plus (ii) +the average cash bonus received by her for the preceding three-year period ending on the last previous December 31 or (B) the +maximum amount that is tax deductible to the Company under Section 280G of the Code. +Arvind +Dharia. In January 1998, the Company entered into an employment agreement with Arvind Dharia, which has been amended +from time to time, most recently on May 15, 2017. Pursuant to Mr. Dharia’s amended agreement, Mr. Dharia continues +to serve as the Company’s Chief Financial Officer. The term of Mr. Dharia’s employment under his agreement, as +amended, extends through December 31, 2018. Mr. Dharia’s employment agreement, as amended, provides for an annual base +salary of $582,455 and a monthly car allowance of $1,600 during the fiscal year 2015 and through the remaining term of the agreement. +The agreement provides that the Company will pay life insurance premiums on Mr. Dharia’s behalf of approximately $80,000 +per year. Pursuant to a February 2, 2015 amendment of the agreement, Mr. Dharia was granted 15,000 shares of the Company’s +Common Stock, subject to certain restrictions, on that date. These restricted shares of Common Stock, which were issued to Mr. Dharia +under the 2006 Plan, will vest in five equal annual installments commencing on February 2, 2016. In addition, the amended +agreement provides that Mr. Dharia will receive an annual bonus in such amount, if any, and at such time or times, as the +Board of Directors may determine in its absolute discretion. Subject to availability of shares under the 2006 Plan, or any other +plan designated by the Board of Directors and approved by the Company’s stockholders, Mr. Dharia is entitled to awards +under such plan as may be determined by the Board of Directors, or a committee thereof, from time to time in its absolute discretion. +38 +The +agreement provides, in the event of Mr. Dharia’s death, for the payment to Mr. Dharia’s estate of his base +salary for the 12-month period immediately subsequent to the date of Mr. Dharia’s death. The agreement also provides +that if Mr. Dharia’s employment agreement is terminated due to his “total disability” (as defined in the +agreement), Mr. Dharia will receive payment of his base salary for the 12-month period immediately subsequent to the date +he is determined to be totally disabled. In the event that Mr. Dharia’s employment agreement is terminated “for +cause” (as defined in the agreement), the Company is obligated to pay Mr. Dharia the amount of compensation that is +accrued and unpaid through the date of termination. In the event that Mr. Dharia’s employment agreement is terminated +for any reason (other than “for cause” or due to his death or total disability), the Company is obligated to pay Mr. Dharia, +in two installments, (a) an amount equal to the product of (x) his base salary on the effective date of such termination +plus the bonus paid or payable, if any, for the fiscal year ended on the December 31st immediately preceding the termination +date, multiplied by (y) the number of years (and fraction of years) remaining in the term; and (b) the amount payable +to him, or on his account, for what would have been the balance of the term of his employment agreement with respect to certain +benefits and plans as set forth in his employment agreement. If the Company decides not to renew the agreement (other than “for +cause” or due to his total disability), then Mr. Dharia will be entitled to receive severance compensation, in cash, +in an amount equal to his then-current base salary for the 90-day period commencing on the expiration of the term. +In +addition, pursuant to the most recent amendment of Mr. Dharia’s employment agreement on May 15, 2017, in the event that +there is a “change of control” transaction and Mr. Dharia’s employment has been terminated by the Company +other than “for cause” or if Mr. Dharia resigns “for good reason” (as such terms are defined in the +agreement), Mr. Dharia will receive an amount equal to two and one half times (i) the annual base salary to which he was +entitled as of the date of termination or resignation of employment plus (ii) the average cash bonus received by him for the preceding +three-year period ending on the last previous December 31 (the “Change of Control Payment”). However, if the Change +of Control Payment (or a portion thereof) is determined to constitute an “excess parachute payment” under Sections 280G +and 4999 of the Code, Mr. Dharia will be paid either (i) the Change of Control Payment (which shall be subject to all +applicable taxes to be paid by the executive including the excise tax payable pursuant to Section 4999 and which shall be +limited as to deductibility to the Company) or (ii) a reduced amount, calculated in accordance with Section 280G, +that may be paid to the executive without the imposition of an excise tax under Section 4999 and which shall be fully deductible +to the Company, whichever payment yields the greater after-tax benefit to the executive. +Awadhesh +Sinha. On January 10, 2014, the Company entered into an employment agreement with Mr. Sinha to replace a prior employment +agreement with the Company, which had expired on December 31, 2013. Pursuant to the employment agreement, Mr. Sinha, the Chief +Operating Officer of the Company, received a base salary of $630,000 and $661,500 for the years 2015 and 2016, respectively, until +the employment agreement’s expiration on December 31, 2016. The employment agreement also entitled Mr. Sinha to a monthly +automobile allowance of $1,850 and the payment of term life insurance premiums on Mr. Sinha’s behalf in the amount +of approximately $3,500 per year. +On +December 30, 2016, the Company entered into a new employment agreement with Mr. Sinha, which replaced the prior employment agreement +with the Company, which expired on December 31, 2016. Pursuant to the new employment agreement, Mr. Sinha continues to serve as +Chief Operating Officer of the Company for a term that commenced on January 1, 2017 and will expire on December 31, 2019 unless +the agreement is sooner terminated in accordance with its terms. Mr. Sinha’s current employment agreement provides for an +annual base salary of $681,000, $702,000 and $723,000 for the years 2017, 2018 and 2019, respectively. The new employment agreement +also entitles Mr. Sinha to a monthly automobile allowance of $1,850 and the payment of term life insurance premiums on Mr. Sinha’s +behalf in the amount of approximately $3,500 per year. On January 3, 2017, pursuant to his new employment agreement, Mr. Sinha +was granted 28,169 shares of Common Stock, subject to certain restrictions. These restricted share of Common Stock, which were +issued under the 2006 Plan, will vest in three substantially equal annual installments commencing on December 15, 2017. +Mr. Sinha’s +prior employment agreement entitled him to an annual performance-based bonus for each of the fiscal years ended December 31, +2015 and 2016 in an amount equal to 2% of the increase in the Company’s EBITDA for each such year over the Company’s +EBITDA for the immediately preceding year. This performance-based bonus was not achieved with respect to the 2015 fiscal year. +Mr. Sinha received a cash bonus of $58,584 for 2016 EBITDA performance. +39 +The +current employment agreement entitles Mr. Sinha to an annual performance-based cash bonus for each of the fiscal years ended December +31, 2017, 2018 and 2019 in an amount equal to 2% of the increase, if any, in the Company’s EBITDA for each such year over +the Company’s EBITDA for the immediately preceding year. For any business acquired after December 30, 2016, EBITDA from +the acquired business is included in the bonus calculation starting with the first full quarter under Company ownership, provided +that the prior year’s EBITDA will likewise be adjusted to include EBITDA from the acquired business for comparable quarters +in the prior year on a pro forma basis assuming the Company had owned the business. The maximum annual bonus is $600,000, the +first $300,000 of which will be payable in cash and for any amount of the annual bonus in excess of $300,000 by a grant of restricted +shares of Common Stock, which restricted shares of Common Stock will vest in three equal annual installments commencing on the +first anniversary of the grant date. Mr. Sinha received a cash bonus of $300,000 and a grant of 1,662 restricted shares of Common +Stock for 2017 EBITDA performance. Bonuses and other incentive-based compensation paid to Mr. Sinha are subject to recovery +by the Company in the event of a determination that such compensation was based upon materially inaccurate financial statements. +In +the event of his death, Mr. Sinha’s employment agreement provides for the payment to Mr. Sinha’s estate +of his base salary for the 12-month period immediately subsequent to the date of Mr. Sinha’s death. In addition, in +the event of Mr. Sinha’s “total disability” (as such term is defined in the agreement), the Company is +obligated to continue to pay Mr. Sinha’s base salary for the 12-month period immediately subsequent to the date of +determination of such total disability. In the event Mr. Sinha’s employment agreement is terminated “for cause” +(as such terms are defined in the agreement), or due to Mr. Sinha’s resignation without “good reason” (as +such term is defined in the agreement), the Company is obligated to pay Mr. Sinha the amount of compensation that is accrued +and unpaid through the date of termination. In the event Mr. Sinha’s employment agreement is terminated by the Company +without cause or by the resignation of Mr. Sinha for good reason, Mr. Sinha would be entitled to receive payment of +his annual base salary, payable at regular payroll intervals, from the date of termination of employment through the longer of +(i) the remainder of the term or (ii) six months. +In +addition, pursuant to an amendment of Mr. Sinha’s employment agreement on May 15, 2017, in the event that there is a “change +of control” transaction and Mr. Sinha’s employment has been terminated by the Company other than “for cause” +or if Mr. Sinha resigns “for good reason” (as such terms are defined in the agreement), Mr. Sinha will receive +an amount equal to two and one half times (i) the annual base salary to which he was entitled as of the date of termination or +resignation of employment plus (ii) the average cash bonus received by him for the preceding three-year period ending on the last +previous December 31 (the “Change of Control Payment”). However, if the Change of Control Payment (or a portion thereof) is +determined to constitute an “excess parachute payment” under Sections 280G and 4999 of the Code, Mr. Sinha +will be paid either (i) the Change of Control Payment (which shall be subject to all applicable taxes to be paid by the executive +including the excise tax payable pursuant to Section 4999 and which shall be limited as to deductibility to the Company) or +(ii) a reduced amount, calculated in accordance with Section 280G, that may be paid to the executive without the imposition +of an excise tax under Section 4999 and which shall be fully deductible to the Company, whichever payment yields the greater +after-tax benefit to the executive. +Karla +Frieders. On September 4, 2015, the Company entered into an employment agreement with Ms. Frieders, pursuant to which Ms. +Frieders served as Chief Merchandising Officer of the Company for a term commencing on September 4, 2015 and ending on February +29, 2017. The employment agreement provided for an annual base salary during the term of $440,000 and an annual performance-based +bonus for each of the fiscal years ending December 31, 2015 and 2016 in an amount to be determined by the Company in its absolute +discretion. +On +April 11, 2017, the Company entered into a new employment agreement with Ms. Frieders, which replaced the prior employment agreement, +which expired on February 29, 2017. Pursuant to the new employment agreement, Ms. Frieders continues to serve as Chief Merchandising +Officer of the Company for a term that commenced on April 11, 2017 and will expire on April 30, 2020 unless the agreement is sooner +terminated in accordance with its terms. Ms. Frieders current employment agreement provides for an annual base salary of $550,000 +from April 11, 2017 through April 30, 2018, $570,000 from May 1, 2018 through April 30, 2019 and $590,000 from May 1, 2019 through +April 30, 2020. The new employment agreement also entitles Ms. Frieders to an annual performance bonus for each of the fiscal +years ending December 31, 2017, 2018 and 2019 in an amount to be determined by the Company in its absolute discretion and paid +to her on or about March 15 with respect to the prior year. On April 11, 2017, pursuant to the new employment agreement, Ms. Frieders +was granted 20,000 shares of Common Stock, subject to certain restrictions. These restricted share of Common Stock, which were +issued under the 2006 Plan, will vest in five equal annual installments commencing on April 1, 2018. +40 +In +the event that Ms. Frieders’ employment is terminated due to Ms. Frieders’ “disability” (as defined in +the agreement) or death, the Company is obligated to pay Ms. Frieders (or her estate) the amount of accrued and unpaid salary +through the date of termination of employment. The Company may terminate Ms. Frieders’ employment for “cause” +(as defined in the agreement) and, in such event, Ms. Frieders will be entitled only to accrued and unpaid salary through the +date of termination of employment. In the event Ms. Frieders’ employment is terminated by the Company without cause, +she would be entitled to receive payment of her annual base salary, payable at regular payroll intervals, from the date of termination +of employment through the remainder of the term. +GRANTS +OF PLAN-BASED AWARDS IN THE 2017 FISCAL YEAR +The +following table sets forth information concerning awards under the Company’s equity and non-equity incentive plans granted +to each of the Named Executive Officers in the 2017 Fiscal Year, including performance-based awards and those using time-based +vesting. Following the table is a discussion of material factors related to the information disclosed in the table. +All +Other +All +Other +Estimated +future payouts under equity +Stock +Option +incentive +plan awards +Awards: +Awards: +Grant +Date +Number +of +Number +of +Exercise +or +Fair +Value +Shares +of +Securities +Base +Price +of +Stock and +Stock +or +Underlying +of +Option +Option +Threshold +Target +Maximum +Units +Options +Awards +Awards +Name +Grant +Date +($) +($) +($) +(#) +(#) +($/Sh) +($) +Edward +R. Rosenfeld +03/15/17 +— +2,176,398 (1) +— +39,894 +— +— +1,515,972 +Amelia +Newton Varela +01/03/17 +— +1,015,652 (1) +— +— +100,000 +35.75 +184,000 +03/15/17 +— +— +— +13,298 +— +— +505,324 +n/a +— (2) +— +— +— +— +— +Arvind +Dharia +n/a +— +1,015,652 (1) +— +— +— +— +— +Awadhesh +Sinha +01/03/17 +— +1,015,652 (1) +— +28,169 +— +— +1,007,042 +n/a +— +— (3) +— +— +— +— +— +Karla +Frieders +04/11/17 +— +1,015,652 (1) +— +20,000 +— +— +751,000 +(1) In +the 2017 Fiscal Year, the Compensation Committee established a bonus pool for Named Executive Officers and other key executives +of the Company based on 6% of net income of the Company achieved in the 2017 Fiscal Year and also fixed each executive’s +maximum share of the 2017 bonus pool, which was 30% for Mr. Rosenfeld and 14% for each other Named Executive Officer. Since +the bonus pool was established as a percentage of the Company’s 2017 Fiscal Year net income, it would not be possible to +determine the amount of these potential bonuses until the completion of the Company’s 2017 Fiscal Year. Accordingly, the +amount indicated is a representative payout amount and equals the maximum bonus the Named Executive Officer would have been eligible +to receive from a bonus pool of $7,254,660, which equals 6% of the $120,911,000 in net income of the Company achieved in the fiscal +year ended December 31, 2016. See the discussion of the 2017 bonus pool and the individual target awards of the Named Executive +Officers appearing above in the “Annual Performance-Based Bonus - Based on Specific Performance Metrics” section of +“Compensation Structure.” As disclosed therein, the Company paid these performance bonuses in a combination of cash +and restricted shares of Common Stock. Accordingly, on March 15, 2018, Mr. Rosenfeld, Mr. Dharia and Ms. Frieders received performance-based +cash bonuses of $500,000, $220,000 and $100,000, respectively, and, on March 15, 2018, Mr. Rosenfeld and Ms. Frieders received +grants of 66,667 and 11,111 restricted shares of Common Stock, respectively. In accordance with applicable SEC rules, these restricted +stock awards will appear in the Summary Compensation Table to be included in our proxy statement for our 2019 Annual Meeting of +Stockholders provided the restricted stock award recipient is a named executive officer in that proxy statement. +41 +(2) +Under an employment agreement dated December 30, 2016 between the Company and Ms. Varela, Ms. Varela is entitled to +receive a cash bonus under the Company’s 2006 Plan on or about March 15, 2018 in an amount equal to 2% of the increase, +if any, in the Company’s total EBIT for the 2017 Fiscal Year over the Company’s total EBIT for the fiscal year ended +December 31, 2016. Since it would not be possible to determine the amount of Ms. Varela’s cash bonus, if any, until +the completion of the 2017 Fiscal Year, the amount indicated as the target bonus payout is a representative amount and based upon +the actual decrease in the EBIT performance of the Company for the fiscal year ended December 31, 2016 from the EBIT performance +of the Company for the fiscal year ended December 31, 2015. See the discussion of this grant to Ms. Varela appearing above +in the “Annual Performance-Based Bonus - Based on Specific Performance Metrics” section of “Compensation Structure” +and above under “Employment Arrangements.” As disclosed in the Summary Compensation Table above, Ms. Varela received +a cash bonus of $338,669 for 2017 EBIT performance of the Company. +(3) Under +an employment agreement dated December 30, 2016 between the Company and Mr. Sinha, Mr. Sinha is entitled to receive +a cash bonus under the Company’s 2006 Plan on or about March 15, 2018 in an amount equal to 2% of the increase, if any, +in the Company’s EBITDA for the 2017 Fiscal Year over the Company’s EBITDA for the immediately preceding fiscal year. +The maximum annual bonus is $600,000, the first $300,000 of which is payable in cash and for any amount of the annual bonus in +excess of $300,000 by a grant of restricted shares of the Company’s common stock, which restricted common stock will vest +in three equal annual installments commencing on the first anniversary of the grant date. Since it would not be possible to determine +the amount of Mr. Sinha’s bonus, if any, until the completion of the 2017 Fiscal Year, the amount indicated as the target +bonus payout is a representative amount and based upon the actual decrease in the EBITDA performance of the Company for the fiscal +year ended December 31, 2016 from the EBITDA performance of the Company for the fiscal year ended December 31, 2015. See the discussion +of this grant to Mr. Sinha appearing above in the “Annual Performance-Based Bonus - Based on Specific Performance Metrics” +section of “Compensation Structure” and above under “Employment Arrangements.” Mr. Sinha received a cash +bonus of $300,000 and 1,662 restricted Shares of Common Stock for 2017 EBITDA performance of the Company. The cash bonus is disclosed +in the Summary Compensation Table above. In accordance with applicable SEC rules, the award of restricted shares will appear in +the Summary Compensation Table to be included in our proxy statement for our 2019 Annual Meeting of Stockholders provided Mr. +Sinha is a named executive officer in that proxy statement. +Plan-Based Awards +2006 +Stock Incentive Plan +As +of March 10, 2006, the Board of Directors of the Company adopted the Company’s 2006 Stock Incentive Plan and, on May 26, +2006, the Company’s stockholders approved the adoption of the Company’s 2006 Stock Incentive Plan. The 2006 Stock +Incentive Plan was amended in 2007 and 2008. On April 6, 2009, the Board of Directors adopted an Amended and Restated 2006 +Stock Incentive Plan and, on May 22, 2009, the Company’s stockholders approved the Amended and Restated 2006 Stock +Incentive Plan. On April 5, 2012, the Board of Directors approved an amendment of the Amended and Restated 2006 Stock Incentive +Plan primarily to increase the number of shares of Common Stock available for issuance thereunder, subject to stockholder approval +of such amendment. The amendment to the Amended and Restated 2006 Stock Incentive Plan was approved by the Company’s stockholders +at the 2012 Annual Meeting of Stockholders on May 25, 2012. The Company’s stockholders re-approved the material terms +of the performance goals currently contained in the 2006 Stock Incentive Plan pursuant to the requirements of Section 162(m) of +the Code as then in effect at the 2016 Annual Meeting of Stockholders on May 27, 2016. +The +Company’s Amended and Restated 2006 Stock Incentive Plan is referred to as the “2006 Plan” throughout this Proxy +Statement. The purpose of the 2006 Plan is to enhance the profitability and value of the Company for the benefit of its stockholders +by enabling the Company to offer eligible employees, consultants and non-employee directors cash and stock-based incentives in +the Company to attract, retain and reward such individuals and provide additional incentive for such persons to exert maximum +efforts for the success of the Company by encouraging stock ownership in the Company. The 2006 Plan serves as a means to strengthen +the mutuality of interests between such individuals and the Company’s stockholders. +The +maximum number of shares of Common Stock available for issuance under the 2006 Plan is 23,466,000 shares. As of the Record Date, +there were outstanding 3,943,797 unvested shares of restricted stock and options to purchase 2,047,780 shares of Common Stock; +options had been exercised, or restricted stock had vested, with respect to 15,832,647 shares of Common Stock; and 1,173,957 shares +of Common Stock remained available for grant under the 2006 Plan. +42 +OUTSTANDING +EQUITY AWARDS AT END OF THE 2017 FISCAL YEAR +The +following table sets forth information concerning unexercised stock options, restricted stock that has not vested and stock awards +outstanding for each of the Named Executive Officers as of the end of the 2017 Fiscal Year. All awards that occurred prior to +the three-for-two split of the Company’s Common Stock effectuated as a stock dividend on or about April 30, 2010, the +three-for-two split of the Company’s Common Stock effectuated as a stock dividend on or about May 31, 2011 and the +three-for-two split of the Company’s Common Stock effectuated as a stock dividend on or about October 1, 2013 have +been adjusted to account for each such stock split, as applicable. +Option +Awards +Stock +Awards +Name +Number +of +Securities +Underlying +Unexercised +Options +(#) Exercisable +Number +of +Securities +Underlying +Unexercised Options +(#) Unexercisable +Equity +Incentive +Plan +Awards: +Number of +Securities +Underlying +Unexercised +Unearned +Options +(#) +Option +Exercise +Price +($) +Option +Expiration +Date +Number +of +Shares or Units +of Stock That +Have Not +Vested +(#) +Market +Value of +Shares or Units +of Stock That +Have Not Vested +($) +Equity +Incentive Plan +Awards: +Number of +Unearned +Shares, Units +or Other +Rights that +Have Not +Vested +(#) +Equity +Incentive +Plan Awards: +Market or +Payout Value of +Unearned +Shares, Units or +Other Rights +That Have Not +Vested +($) +Edward +R. Rosenfeld +— +— +— +— +— +197,047 +(1) +9,202,095 +— +— +Amelia +Newton Varela +75,000 +25,000 (2) +— +32.5900 +02/03/2021 +42,570 (3) +1,988,019 +— +— +— +100,000 +(2) +— +35.7500 +01/03/2024 +Arvind +Dharia +— +— +— +— +— +11,928 (4) +557,038 +— +— +Awadhesh +Sinha +— +— +— +— +— +21,708 (5) +1,013,764 +— +— +Karla +Frieders +— +— +— +— +— +40,392 (6) +1,886,306 +— +— +(1) On March 15, 2013, Mr. Rosenfeld was awarded 30,000 shares of restricted Common Stock, which shares vest in five equal annual installments commencing on the first anniversary of the date awarded. On March 17, 2014, Mr. Rosenfeld was awarded 22,265 shares of restricted Common Stock, which shares vest in five substantially equal annual installments commencing on March 5, 2015. On March 11, 2015, Mr. Rosenfeld was awarded 25,326 shares of restricted Common Stock, which shares vest in five substantially equal annual installments commencing on March 5, 2016. On December 31, 2015, Mr. Rosenfeld was awarded 75,000 shares of restricted Common Stock, which shares vest in five equal annual installments commencing on December 31, 2016. On February 5, 2016, Mr. Rosenfeld was awarded 75,000 shares of restricted Common Stock, which shares vest in five equal annual installments commencing on March 5, 2017. On March 15, 2016, Mr. Rosenfeld was awarded 27,563 shares of restricted Common Stock, which shares vest in five substantially equal annual installments commencing on March 5, 2017. On March 15, 2017, Mr. Rosenfeld was awarded 39,894 shares of restricted Common Stock, which shares vest in five substantially equal annual installments commencing on March 5, 2018. The above-referenced grants of restricted shares on March 11, 2015 and March 15, 2016 were forfeited and rescinded pursuant to a Forfeiture and Rescission of Awards Agreement between Mr. Rosenfeld and the Company because the grants, while intended as qualified performance-based compensation under Section 162(m) of the Code, did not qualify as qualified performance-based compensation under Section 162(m) of the Code on the grant date because the performance goals in the 2006 Plan under which the grants were made had not yet been re-approved by the stockholders of the Company, as periodically required by the 2006 Plan and Section 162(m) of the Code as then in effect. The Company’s stockholders re-approved the performance goals contained in the 2006 Plan at the 2016 Annual Meeting of Stockholders and the forfeited and rescinded grants of restricted shares were re-granted to Mr. Rosenfeld on August 12, 2016. +(2) On February 3, 2014, Ms. Varela was granted an option to purchase 100,000 shares of the Company’s Common Stock under the 2006 Plan, which option vests in four equal annual installments commencing on the first anniversary of the date of grant. On January 3, 2017, Ms. Varela was granted an option to purchase 100,000 shares of the Company’s Common Stock under the 2006 Plan, which option vests in four equal annual installments commencing on the first anniversary of the date of grant. +43 +(3) On March 15, 2013, Ms. Varela was awarded 15,000 shares of restricted Common Stock, which shares vest in five equal annual installments commencing on the first anniversary of the date awarded. On March 17, 2014, Ms. Varela was awarded 15,118 shares of restricted Common Stock, which shares vest in five substantially equal annual installments commencing on March 5, 2015. On March 11, 2015, Ms. Varela was awarded 15,329 shares of restricted Common Stock, which shares vest in five substantially equal annual installments commencing on March 5, 2016. On March 15, 2016, Ms. Varela was awarded 13,782 shares of restricted Common Stock, which shares vest in five substantially equal annual installments commencing on March 5, 2017. On March 15, 2017, Ms. Varela was awarded 13,298 shares of restricted Common Stock, which shares vest in five substantially equal annual installments commencing on March 5, 2018. The above-referenced grants of restricted shares on March 11, 2015 and March 15, 2016 were forfeited and rescinded pursuant to a Forfeiture and Rescission of Awards Agreement between Ms. Varela and the Company because the grants, while intended as qualified performance-based compensation under Section 162(m) of the Code, did not qualify as qualified performance-based compensation under Section 162(m) of the Code on the grant date because the performance goals in the 2006 Plan under which the grants were made had not yet been re-approved by the stockholders of the Company, as periodically required by the 2006 Plan and Section 162(m) of the Code as then in effect. The Company’s stockholders re-approved the performance goals contained in the 2006 Plan at the 2016 Annual Meeting of Stockholders and the forfeited and rescinded grants of restricted shares were re-granted to Ms. Varela on August 12, 2016. +(4) On February 2, 2015, Mr. Dharia was awarded 15,000 shares of restricted Common Stock, which shares vest in five equal annual installments commencing on the first anniversary of the date awarded. On March 11, 2015, Mr. Dharia was awarded 5,506 shares of restricted Common Stock, which shares vest in four substantially equal annual installments commencing on December 15, 2015. On March 15, 2016, Mr. Dharia was awarded 3,101 shares of restricted Common Stock, which shares vest in four substantially equal annual installments commencing on December 15, 2016. +(5) On March 11, 2015, Mr. Sinha was awarded 5,506 shares of restricted Common Stock, which shares vest in four substantially equal annual installments commencing on December 15, 2015. On March 15, 2016, Mr. Sinha was awarded 3,101 shares of restricted Common Stock, which shares vest in four substantially equal annual installments commencing on December 15, 2016. On January 3, 2017, Mr. Sinha was awarded 28,169 shares of restricted Common Stock, which shares vest in three substantially equal annual installments commencing on December 15, 2017. The grant of restricted shares on March 15, 2016 was forfeited and rescinded pursuant to a Forfeiture and Rescission of Awards Agreement between Mr. Sinha and the Company because the grant, while intended as qualified performance-based compensation under Section 162(m) of the Code, did not qualify as qualified performance-based compensation under Section 162(m) of the Code on the grant date because the performance goals in the 2006 Plan under which the grant was made had not yet been re-approved by the stockholders of the Company, as periodically required by the 2006 Plan and Section 162(m) of the Code as then in effect. The Company’s stockholders re-approved the performance goals contained in the 2006 Plan at the 2016 Annual Meeting of Stockholders and the forfeited and rescinded grant of restricted shares was re-granted to Mr. Sinha on August 12, 2016. +(6) On March 15, 2013, Ms. Frieders was awarded 6,625 shares of restricted Common Stock, which shares vest in five substantially equal annual installments commencing on the first anniversary of the date awarded. On March 17, 2014, Ms. Frieders was awarded 5,498 shares of restricted Common Stock, which shares vest in five substantially equal annual installments commencing on March 5, 2015. On March 2, 2015, Ms. Frieders was awarded 20,758 shares of restricted Common Stock, which shares vest in five substantially equal annual installments commencing on the first anniversary of the date awarded. On March 15, 2016, Ms. Frieders was awarded 5,513 shares of restricted Common Stock, which shares vest in five substantially equal annual installments commencing on the first anniversary of the date awarded. On April 11, 2017, Ms. Frieders was awarded 20,000 shares of restricted Common Stock, which shares vest in five equal annual instalments commencing on April 1, 2018. The grant of restricted shares on March 15, 2016 was forfeited and rescinded pursuant to a Forfeiture and Rescission of Awards Agreement between Ms. Frieders and the Company because the grant, while intended as qualified performance-based compensation under Section 162(m) of the Code, did not qualify as qualified performance-based compensation under Section 162(m) of the Code on the grant date because the performance goals in the 2006 Plan under which the grant was made had not yet been re-approved by the stockholders of the Company, as periodically required by the 2006 Plan and Section 162(m) of the Code as then in effect. The Company’s stockholders re-approved the performance goals contained in the 2006 Plan at the 2016 Annual Meeting of Stockholders and the forfeited and rescinded grant of restricted shares was re-granted to Ms. Frieders on August 12, 2016. +44 +OPTION +EXERCISES AND STOCK VESTED IN THE 2017 Fiscal Year +The +following table sets forth information concerning stock options exercised and restricted stock vested during the 2017 Fiscal Year +for each of the Named Executive Officers. The value realized from exercised options is deemed to be the market value of the Common +Stock on the date of exercise, less the exercise price of the option, multiplied by the number of shares of Common Stock underlying +the option. The value realized from the vesting of restricted stock is deemed to be the market value of the Common Stock on the +date of vesting multiplied by the number of shares vesting. +Option Awards +Stock Awards +Name +Number +of Shares +Acquired +on Exercise +(#) +Value Realized +on Exercise +($) +Number +of Shares +Acquired +on Vesting +(#) +Value Realized +on Vesting +($) +Edward R. Rosenfeld +— +— +87,030 +3,485,462 +Amelia Newton Varela +168,750 +3,955,500 +15,288 +574,036 +Arvind Dharia +— +— +6,651 +255,992 +Awadhesh Sinha +— +— +13,790 +594,091 +Karla Frieders +60,000 +648,379 +10,433 +386,802 +SECURITIES +AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS +The +following table sets forth information as of December 31, 2017 with respect to compensation plans (including individual compensation +arrangements) under which shares of Common Stock are authorized for issuance, aggregated as follows: +· +All compensation plans previously approved +by security holders; and +· +All compensation plans not +previously approved by security holders. +EQUITY +COMPENSATION PLAN INFORMATION +Number of +securities to be +issued upon +exercise of +outstanding +options, warrants +and rights +(#) +Weighted average +exercise price of +outstanding options, +warrants and rights +($) +Number of securities +remaining available +for future issuance +under equity +compensation plans +(excluding securities +reflected in +column (a)) +(#) +(a) +(b) +(c) +Equity compensation plans approved by security holders +1,897,000 +35.80 +1,648,000 +Equity compensation plans not approved by security holders +— +— +— +Total +1,897,000 +35.80 +1,648,000 +45 +Termination, +Change in Control and Non-Competition/Non-Solicitation +The +employment agreements for Ms. Varela and Messrs. Rosenfeld, Dharia and Sinha provide for a severance payment upon a termination +of employment in connection with a change-in-control of the Company. The employment agreements of Messrs. Rosenfeld, Dharia and +Sinha also provide for severance payment if the executive terminates his employment for good reason in connection with a change-in-control +event. The change-in-control severance payments may result in the application of the “golden parachute” provisions +of Section 280G of the Code and, to the extent Section 280G applies, the Company may not deduct from its taxable income +the severance payments made to the Named Executive Officer. Moreover, Section 4999 of the Code would impose a 20% excise +tax on the Named Executive Officer receiving the severance payment. In the case of Ms. Varela, these severance payments in +connection with a change-in-control, however, are reduced if the severance payment, when added to any other benefits triggered +by a change-of-control, is determined to constitute an “excess parachute payment” under Sections 280G and 4999 +of the Code, to the maximum amount that is deductible to the Company under Section 280G of the Code. In the case of Messrs. +Rosenfeld, Dharia and Sinha, the executive’s change-in-control severance payment will only be reduced to the maximum amount +that is deductible to the Company under Section 280G of the Code if the reduction provides the Named Executive Officer with +the best after-tax result; otherwise, the Named Executive Officer will receive the full amount of the severance payment and other +benefits triggered by the change-in-control and be liable for the 20% excise tax on the excess parachute payment in addition to +all other applicable taxes and, in such case, the deduction by the Company of the portion of the severance payment constituting +an excess parachute payment will be disallowed. +The +Company’s employment agreements with Ms. Varela and Messrs. Rosenfeld, Dharia and Sinha also provide for severance payments +to the executive if the Company terminates the executive’s employment without cause, or, in the case of Mr. Rosenfeld +and Mr. Sinha, if the Company gives him good reason to terminate employment. +Please +see the section of this Proxy Statement captioned “Employment Arrangements” for a summary description of the Named +Executive Officers’ employment agreements and such severance and change-in-control provisions. These benefits are described +and quantified in the section of this Proxy Statement captioned “Potential Payments Upon Termination or Change-In-Control” +below. +The +Company believes that the severance payments and payments made upon change-in-control provisions in the employment agreements +provide appropriate protection to the Company’s executives, comparable to that available at peer companies, and, with regard +to the enhanced severance following a change-in-control, protects the Company from losing key executives during a period when +a change-in-control may be threatened or pending. These benefits are described and quantified in the section below captioned “Potential +Payments Upon Termination or Change-In-Control.” +Ms. +Frieders and Ms. Varela have each agreed to a non-compete and non-solicitation restriction through the expiration date of +her employment agreement, April 30, 2020 and December 31, 2019, respectively, in the event of a voluntary termination or +termination for cause. Messrs. Rosenfeld and Sinha have each agreed to a non-compete and non-solicitation restriction during the +period of his employment and for a six-month period following the termination of his employment for cause or in the event of his +resignation without good reason. Mr. Dharia does not have non-compete or non-solicitation provisions in his employment agreement. +POTENTIAL +PAYMENTS UPON TERMINATION OR CHANGE-IN-CONTROL +The +Company’s employment agreements with the Named Executive Officers provide for payments to such individuals upon termination +of employment or a change-in-control of the Company. Please see the section of this Proxy Statement captioned “Employment +Arrangements.” The amounts set forth in the table below shall be payable to the respective Named Executive Officer if such +Named Executive Officer’s employment is terminated under the various scenarios set forth below. +46 +NAME +CASH +PAYMENT +CONTINUATION +OF MEDICAL / +WELFARE +BENEFITS +(PRESENT +VALUE) +ACCELERATION +AND +CONTINUATION +OF EQUITY +AWARD +REDUCTION +OF BENEFITS +UPON A +CHANGE-IN- +CONTROL (1) +TOTAL +TERMINATION +BENEFITS +($) +($) +($) +($) +($) +TERMINATION +DUE TO DEATH +Edward +R. Rosenfeld +900,000 (2) +17,387 (3) +— +— +917,387 +Amelia Newton Varela +— +— +— +— +— +Arvind Dharia +582,455 (4) +13,236 (3) +— +— +595,691 +Awadhesh Sinha +702,000 (5) +13,236 (3) +— +715,236 +Karla Frieders +— +— +— +— +TERMINATION +DUE TO TOTAL DISABILITY +Edward R. Rosenfeld +900,000 (2) +— +— +— +900,000 +Amelia Newton Varela +— +— +— +— +— +Arvind Dharia +582,455 (4) +— +— +— +582,455 +Awadhesh Sinha +702,000 (5) +13,236 (3) +— +— +715,236 +Karla Frieders +— +— +— +— +— +TERMINATION +FOR CAUSE; RESIGNATION WITHOUT GOOD REASON +Edward R. Rosenfeld +— +— +— +— +— +Amelia Newton Varela +— +— +— +— +— +Arvind Dharia +— +— +— +— +— +Awadhesh Sinha +— +— +— +— +— +Karla Frieders +— +— +— +— +— +TERMINATION +OTHER THAN FOR CAUSE; RESIGNATION FOR GOOD REASON +Edward R. Rosenfeld +900,000 (6) +— +— +— +900,000 +Amelia Newton Varela +1,320,000 (7) +— +— +— +1,320,000 +Arvind Dharia +582,455 (8) +100,093 (9) +— +— +682,548 +Awadhesh Sinha +1,425,000 (10) +— +— +— +1,425,000 +Karla Frieders +1,343,333 (11) +— +— +— +1,343,333 +TERMINATION +UPON A CHANGE-IN-CONTROL +Edward R. Rosenfeld +2,330,930 (12) +— +9,202,067 (13) +— +11,532,997 +Amelia Newton Varela +8,373,777 (14) +— +2,809,285 (13) +(1,801,448 ) +9,381,614 +(15) +Arvind Dharia +3,094,983 (16) +— +556,991 (13) +— +3,651,974 +Awadhesh Sinha +4,068,849 (17) +— +1,013,717 (13) +— +5,082,566 +Karla Frieders +1,343,333 (18) +— +— +— +1,343,333 +(1) The +employment agreement of Ms. Varela provides that severance payments in connection with +a change-in-control are reduced if the severance payment, when added to any other benefits +triggered by a change-of-control, is determined to constitute an “excess parachute +payment” under Sections 280G and 4999 of the Code, to the maximum amount that +is deductible to the Company under Section 280G of the Code. The employment agreements +of Messrs. Rosenfeld, Dharia and Sinha indicate that the executive’s change-in-control +severance payment will only be reduced to the maximum amount that is deductible to the +Company under Section 280G of the Code if the reduction provides the Named Executive +Officer with the best after-tax result; otherwise, the Named Executive Officer will receive +the full amount of the severance payment and other benefits triggered by the change-in-control +and be liable for the 20% excise tax on the excess parachute payment in addition to all +other applicable taxes and, in such case, the deduction by the Company of the portion +of the severance payment constituting an excess parachute payment will be disallowed. +(2) Consists +of Mr. Rosenfeld’s 2018 base salary of $900,000, which would be paid at regular +intervals. +(3) Consists +of medical benefits. +(4) Consists +of Mr. Dharia’s 2018 base salary of $582,455, which would be paid at regular +intervals. +(5) Consists +of Mr. Sinha’s 2018 base salary of $702,000, which would be paid at regular +intervals. +(6) Consists +of the base salary of $900,000 for 2018 that would have been paid to Mr. Rosenfeld +during the remainder of the term of his employment until the expiration of his employment +agreement on December 31, 2018. Mr. Rosenfeld would receive these payments +at regular intervals. +47 +(7) Consists +of the base salary of $650,000 and $670,000 for 2018 and 2019, respectively, that would +have been paid to Ms. Varela during the remainder of the term of her employment +until the expiration of her employment agreement on December 31, 2019. Ms. Varela +would receive these payments at regular intervals. +(8) Consists +of Mr. Dharia’s 2017 base salary of $582,455 multiplied by the number of years +(and fraction of years) remaining in the term of his employment agreement, which +expires on December 31, 2018. Mr. Dharia would receive 50% of this payment +immediately and the remaining 50% would be paid to him one year later (i.e., on December 31, +2018). +(9) Consists +of one times the sum of Mr. Dharia’s life insurance payment ($86,857 per year) plus +medical benefits ($13,236 per year). +(10) Consists +of the base salary of $702,000 and $723,000 for 2018 and 2019, respectively, that would +have been paid to Mr. Sinha during the remainder of the term of his employment until +the expiration of his employment agreement on December 31, 2019. Mr. Sinha +would receive these payments at regular intervals. +(11) Consists +of the base salary that would have been paid to Ms. Frieders during the remainder of +the term of her employment until the expiration of her employment agreement on April +30, 2020, consisting of $183,333 payable for the period from January 1, 2018 through +April 30, 2018; $570,000 payable for the period from May 1, 2018 through April 30, 2019; +and $590,000 payable for the period from May 1, 2019 through April 30, 2020. Ms. Frieders +would receive these payments at regular intervals. +(12) Consists +of two and one-half times the sum of (i) Mr. Rosenfeld’s 2017 base salary of $850,000 +plus (ii) the average cash bonus received by Mr. Rosenfeld for the three-year period +ending on December 31, 2016. Upon a change-in-control, payments (or portions thereof) to +Mr. Rosenfeld determined to constitute an “excess parachute payment” +may be reduced to the maximum amount that would be tax deductible by the Company pursuant +to Sections 280G of the Code. Upon a hypothetical December 31, 2017 change-in-control, +no payments to Mr. Rosenfeld would have been subject to reduction. See the “Implications +of Tax and Accounting Matters” section of “Compensation Discussion and Analysis” +for a discussion of the applicability of Sections 280G and 4999 of the Code to change-in-control +payments generally. See also the summary of Mr. Rosenfeld’s employment agreement +under “Employment Arrangements.” +(13) The +amount disclosed represents the total value of the restricted stock and stock options +which would have received accelerated vesting upon a hypothetical change in control on +December 31, 2017. +(14) Consists +of two and one-half times the sum of (i) Ms. Varela’s 2017 base salary of $630,000 +plus (ii) the average cash bonus received by Ms. Varela for the three-year period ending +on December 31, 2016. Upon a change-in-control, payments (or portions thereof) to +Ms. Varela determined to constitute an “excess parachute payment” may +be subject to reduction to the maximum amount that would be tax deductible by the Company +pursuant to Sections 280G of the Code. Upon a hypothetical December 31, 2017 +change-in-control, this amount would have been reduced by $1,801,448 to reflect the maximum +amount that would be tax deductible by the Company pursuant to Section 280G of the Code. +See the “Implications of Tax and Accounting Matters” section of “Compensation +Discussion and Analysis” for a discussion of the applicability of Sections 280G +and 4999 of the Code to change-in-control payments generally. See also the summary of +Ms. Varela’s employment agreement under “Employment Arrangements.” +(15) The +total amount does not include the amount deducted pursuant to Section 280G of the Code. +(16) Consists +of two and one-half times the sum of (i) Mr. Dharia’s 2017 base salary of $582,455 +plus (ii) the average cash bonus received by Mr. Dharia for the three-year period ended +on December 31, 2016. Upon a change-in-control, payments (or portions thereof) to +Mr. Dharia determined to constitute an “excess parachute payment” may +be subject to reduction to the maximum amount that would be tax deductible by the Company +pursuant to Sections 280G of the Code. Upon a hypothetical December 31, 2017 +change-in-control, no payments to Mr. Dharia would have been subject to reduction. +See the “Implications of Tax and Accounting Matters” section of “Compensation +Discussion and Analysis” for a discussion of the applicability of Sections 280G +and 4999 of the Code to change-in-control payments generally. See also the summary of +Mr. Dharia’s employment agreement under “Employment Arrangements.” +(17) Consists +of two and one-half times the sum of (i) Mr. Sinha’s 2017 base salary of $681,000 +plus (ii) the average cash bonus received by Mr. Sinha for the three-year period ended +on December 31, 2016. Upon a change-in-control, payments (or portions thereof) to +Mr. Sinha determined to constitute an “excess parachute payment” may +be subject to reduction to the maximum amount that would be tax deductible by the Company +pursuant to Sections 280G of the Code. Upon a hypothetical December 31, 2017 +change-in-control, no payments to Mr. Sinha would have been subject to reduction. +See the “Implications of Tax and Accounting Matters” section of “Compensation +Discussion and Analysis” for a discussion of the applicability of Sections 280G +and 4999 of the Code to change-in-control payments generally. See also the summary of +Mr. Sinha’s employment agreement under “Employment Arrangements.” +(18) Consists +of the base salary that would have been paid to Ms. Frieders during the remainder of +the term of her employment until the expiration of her employment agreement on April +30, 2020, consisting of $183,333 payable for the period from January 1, 2018 through +April 30, 2018; $570,000 payable for the period from May 1, 2018 through April 30, 2019; +and $590,000 payable for the period from May 1, 2019 through April 30, 2020. Ms. Frieders +would receive these payments at regular intervals. +COMPENSATION +COMMITTEE REPORT +The +Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with management, and based on the review +and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis +be included in this Proxy Statement. +Submitted by +the Compensation Committee of the Company’s Board of Directors: +Peter Migliorini (Chairman) +Rose Peabody Lynch +Thomas H. Schwartz +Robert Smith +48 +PROPOSAL +TWO: +RATIFICATION OF THE APPOINTMENT OF EISNERAMPER LLP AS THE COMPANY’S +INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS +FOR THE FISCAL YEAR ENDING DECEMBER 31, 2018 +The +Audit Committee has appointed EisnerAmper LLP as the Company’s independent registered public accounting firm to conduct +the audit of the Company’s books and records for the fiscal year ending December 31, 2018. EisnerAmper LLP has served +as the Company’s independent registered public accountants since 1995. +Before +making its determination on appointment, the Audit Committee carefully considers the qualifications and competence of candidates +for the independent registered public accountants. For EisnerAmper LLP, this has included a review of its performance in prior +years, its independence and processes for maintaining independence, the results of the most recent internal quality control review +or Public Company Accounting Oversight Board inspection, the key members of the audit engagement team, the firm’s approach +to resolving significant accounting and auditing matters including consultation with the firm’s national office, as well +as its reputation for integrity and competence in the fields of accounting and auditing. Although ratification by stockholders +is not required by the Company’s organizational documents or any applicable law, the Audit Committee has determined that +requesting ratification by stockholders of its appointment of EisnerAmper LLP as the Company’s independent registered public +accountants is a matter of good corporate practice. If stockholders do not ratify the selection, the Audit Committee will reconsider +whether or not to retain EisnerAmper LLP, but may still retain the accounting firm. Even if the selection is ratified, the Audit +Committee, in its discretion, may change the appointment at any time during the year if it determines that such a change would +be in the best interest of the Company and its stockholders. +Representatives +of EisnerAmper LLP are expected to be present at the Annual Meeting to respond to appropriate questions and to make a statement +should they so desire. +Required Vote +The +affirmative vote of the holders of a majority of the outstanding shares of Common Stock present or represented by proxy and entitled +to vote at the Annual Meeting is required to ratify the Audit Committee’s selection of EisnerAmper LLP. +Recommendation of the Board +of Directors +The +Board of Directors unanimously recommends a vote “FOR” the ratification of the appointment of EisnerAmper LLP as the +Company’s independent registered public accountants for the fiscal year ending December 31, 2018. Unless marked to +the contrary, proxies received from stockholders will be voted in favor of ratifying the appointment of EisnerAmper LLP as the +Company’s independent registered public accountants for the fiscal year ending December 31, 2018. +49 +Independent Registered Public +Accounting Firm’s Fees and Services +The +aggregate fees billed to the Company by EisnerAmper LLP for professional services rendered for each of the past two years are +set forth below: +Year Ended December 31, +2017 +2016 +Audit Fees (1) +$ 1,067,500 +$ 875,500 +Audit-Related Fees (2) +49,500 +182,131 +Tax Fees +— +— +All Other Fees +— +— +Total +$ 1,117,000 +$ 1,057,631 +(1) +Represents the aggregate fees billed for (a) the audit of the Company’s annual financial statements, (b) the +reviews of the financial statements included in the Company’s Quarterly Reports on Form 10-Q, (c) other statutory and +regulatory filings or engagements and (d) the audit of the Company’s internal controls over financial reporting. +(2) +Represents the aggregate fees billed for audit-related fees related to assurance and related services. Includes, among others, +the audit of the Company’s employee benefit plans and other accounting related consultations and, with respect to 2016, +services rendered in connection with due diligence performed for the Company’s acquisition of a business. +Audit Committee’s +Pre-Approval Policies and Procedures +Consistent +with SEC policies regarding auditor independence, the Audit Committee has responsibility for appointing, setting compensation +and overseeing the work of the independent registered public accountants. In recognition of this responsibility, the Audit Committee +has established a policy to review and pre-approve all audit and permissible non-audit services provided by the independent registered +public accountants. These services may include audit services, audit-related services, tax services and other services. +Prior +to engagement of the independent auditor for next year’s audit, the Audit Committee will pre-approve all auditing services +and all permitted non-audit services (including the fees and terms thereof), except those excluded from requiring pre-approval +based upon the de minimus exception set forth in Section 10A(i)(1)(B) of the Exchange Act. +The +Audit Committee’s pre-approval policies and procedures are as follows: (a) prior to each fiscal year, the Audit Committee +pre-approves a schedule of estimated fees for proposed non-prohibited audit and non-audit services, and (b) actual amounts +paid are monitored by financial management of the Company and reported to the Audit Committee. +All +work performed by EisnerAmper LLP as described above under the captions Audit Fees, Audit-Related Fees, Tax Fees and All Other +Fees has been approved or pre-approved by the Audit Committee pursuant to the provisions of the Audit Committee’s charter. +The Audit Committee has considered and concluded that the provision of non-audit services is compatible with maintaining the independence +of EisnerAmper LLP. +50 +AUDIT +COMMITTEE REPORT +The +Audit Committee reviewed the Company’s audited financial statements for the 2017 Fiscal Year and met with both management +and representatives of EisnerAmper LLP, the Company’s independent registered public accountants, to discuss such audited +financial statements. Management and the Company’s independent registered public accountants have represented to the Audit +Committee that the financial statements were prepared in accordance with accounting principles generally accepted in the United +States of America. The Audit Committee has received from and discussed with EisnerAmper LLP the written disclosures and the letter +regarding EisnerAmper LLP’s communications with the Audit Committee concerning independence as required by applicable requirements +of the Public Company Accounting Oversight Board, and discussed with EisnerAmper LLP the independence of EisnerAmper LLP. The +Audit Committee also discussed with EisnerAmper LLP any matters required to be discussed by Auditing Standards No. 1301, “Communications +with Audit Committees” issued by the Public Company Accounting Oversight Board. Based on these reviews +and discussions, the Audit Committee recommended to the Board that the Company’s audited financial statements be included +in the Company’s Annual Report on Form 10-K for the 2017 Fiscal Year. +Submitted by +the Audit Committee of the Company’s Board of Directors: +Richard P. Randall (Chairman) +Rose Peabody Lynch +Peter Migliorini +Ravi Sachdev +51 +PROPOSAL +THREE: +NON-BINDING ADVISORY VOTE ON EXECUTIVE COMPENSATION +Section 14A +of the Exchange Act, as created by Section 951 of the Dodd-Frank Act, and the rules and regulations promulgated thereunder, +require a publicly traded company to include a resolution in its proxy statement at least once every three years seeking stockholder +approval, on an advisory or non-binding basis, of the compensation of the named executive officers as disclosed in such company’s +proxy statement pursuant to the compensation rules of the SEC. At our 2017 Annual Meeting of Stockholders, the Company’s +stockholders approved, on an advisory basis, the holding of an advisory vote to approve executive compensation (commonly known +as a “say-on-pay” proposal) on an annual basis. Based on these results, the Board of Directors determined to +hold its advisory vote to approve executive compensation annually until the next frequency vote, which is scheduled to occur at +the 2023 annual meeting of stockholders. Accordingly, we are providing stockholders with a non-binding advisory vote on the compensation +of our Named Executive Officers. +As +described in more detail in the Compensation Discussion and Analysis section, which begins on page 24 of this Proxy Statement, +the overall objective of the Company’s executive compensation programs and practices is to support delivery of sustained +operating and financial performance results with the ultimate goal being to create and maximize value for our stockholders on +a long-term basis. We believe that our executive compensation programs and practices serve the interests of our stockholders by +enabling us to attract and retain an experienced and effective management team whose combined knowledge of our business and the +footwear and accessories industries has proved extremely valuable in delivering results for our stockholders. The Compensation +Committee and the Board of Directors believe that the Company’s compensation programs and practices as articulated in the +Compensation Discussion and Analysis section of this Proxy Statement effectively implement our philosophy of aligning compensation +to stockholder interests and that the compensation received by our Named Executive Officers in the 2017 Fiscal Year reflects and +supports such philosophy and goal and is commensurate with the performance and strategic position of the Company. We will continue +to review and modify our executive compensation programs to address evolving best practices and changing regulatory requirements. +We +encourage stockholders to read the Compensation Discussion and Analysis section of this Proxy Statement, as well as the Summary +Compensation Table and other related compensation tables and narrative disclosure contained in this Proxy Statement, all of which +describe and explain in detail the compensation of our Named Executive Officers in the 2017 Fiscal Year. +The following +resolution is submitted for stockholder approval: +“ RESOLVED , +that the stockholders of Steven Madden, Ltd. (the ‘Company’) approve, on a non-binding advisory basis, the compensation +paid to the Named Executive Officers of the Company as disclosed pursuant to the compensation disclosure rules of the Securities +and Exchange Commission, including the executive compensation as described in the section captioned ‘Compensation Discussion +and Analysis,’ the Summary Compensation Table and related tabular disclosure and narrative discussion regarding compensation +of Named Executive Officers under the caption ‘Executive Compensation’ contained in the Company’s Proxy Statement +dated April 6, 2018.” +This +vote is not intended to address any specific item of compensation, but rather the overall compensation of our Named Executive +Officers and the compensation programs and practices described in this Proxy Statement. While this advisory vote on executive +compensation, commonly referred to as a “say-on-pay” advisory vote, is required by Section 14A of the Exchange +Act, it is not binding on our Board of Directors and may not be construed as overruling any decision by the Board of Directors +or the Compensation Committee. However, we value the opinions of our stockholders. To the extent there is a significant +vote against the compensation of the Named Executive Officers as disclosed in this Proxy Statement, the Board of Directors and +the Compensation Committee will consider the outcome of the vote when considering future compensation arrangements and evaluate +whether any actions are necessary to address the stockholders’ concerns. +52 +Required Vote +Approval +of this resolution requires the affirmative vote of a majority of the shares of Common Stock present or represented by proxy and +entitled to vote at the Annual Meeting. +Recommendation of the Board +of Directors +The +Board of Directors unanimously recommends a vote “FOR” the resolution approving the overall compensation of the Named +Executive Officers for the 2017 Fiscal Year. +OTHER +MATTERS +At +the date of this Proxy Statement, the Company has no knowledge of any business other than that described above that will be presented +at the Annual Meeting. If any other business should properly come before the Annual Meeting in connection therewith, it is intended +that the persons named in the accompanying proxy will have discretionary authority to vote the shares which they represent. +A +copy of the applicable provisions of the Company’s By-Laws may be obtained by any stockholder, without charge, upon written +request to the Secretary of the Company at the address set forth above. +WHETHER +OR NOT YOU EXPECT TO BE PRESENT AT THE ANNUAL MEETING, PLEASE MARK, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY CARD PROMPTLY. +ALTERNATIVELY, YOU MAY VOTE YOUR SHARES BY TELEPHONE OR THROUGH THE INTERNET AS DESCRIBED ON THE ACCOMPANYING PROXY CARD. +YOUR VOTE IS IMPORTANT. IF YOU ARE A STOCKHOLDER OF RECORD AND ATTEND THE ANNUAL MEETING AND WISH TO VOTE IN PERSON, YOU MAY WITHDRAW +YOUR PROXY AT ANY TIME PRIOR TO THE VOTE. +STEVEN +MADDEN, LTD. +April +6, 2018 +By: +Arvind +Dharia +Secretary +53 +STEVEN MADDEN, LTD. +ATTN: ARVIND DHARIA +52-16 BARNETT AVENUE +LONG ISLAND CITY, NY 11104 +VOTE BY +INTERNET - www.proxyvote.com +Use the Internet to +transmit your voting instructions and for electronic delivery of information +up until 11:59 P.M. Eastern Time the day before the meeting date. Have your +proxy card in hand when you access the web site and follow the instructions +to obtain your records and to create an electronic voting instruction form. +ELECTRONIC +DELIVERY OF FUTURE PROXY MATERIALS +If you would like to +reduce the costs incurred by our company in mailing proxy materials, you can +consent to receiving all future proxy statements, proxy cards and annual +reports electronically via e-mail or the Internet. To sign up for electronic +delivery, please follow the instructions above to vote using the Internet +and, when prompted, indicate that you agree to receive or access proxy +materials electronically in future years. +VOTE BY +PHONE - 1-800-690-6903 +Use any touch-tone +telephone to transmit your voting instructions up until 11:59 P.M. Eastern +Time the day before the meeting date. Have your proxy card in hand when you +call and then follow the instructions. +VOTE BY +MAIL +Mark, sign and date +your proxy card and return it in the postage-paid envelope we have provided +or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, +NY 11717. +TO +VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: +KEEP +THIS PORTION FOR YOUR RECORDS +DETACH +AND RETURN THIS PORTION ONLY +THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. +For +All +Withhold +All +For All +Except +To withhold authority to +vote for any individual nominee(s), mark “For All Except” and write the +number(s) of the nominee(s) on the line below. +The Board +of Directors recommends you vote +FOR the +following: +o +o +o +1. +Election of Directors +Nominees +01 +06 +Edward R. Rosenfeld 02 Rose Peabody Lynch 03 Mitchell +S. Klipper +04 Peter +Migliorini +05 Richard P. +Randall +Ravi +Sachdev +07 Thomas H. +Schwartz +08 Robert Smith 09 Amelia Newton +Varela +The Board +of Directors recommends you vote FOR proposals 2 and 3. +For +Against +Abstain +2. +TO RATIFY THE APPOINTMENT OF EISNERAMPER LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC +ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2018. +o +o +o +3. +TO APPROVE, BY NON-BINDING ADVISORY VOTE, THE EXECUTIVE COMPENSATION DESCRIBED IN THE STEVEN +MADDEN, LTD PROXY STATEMENT. +o +o +o +NOTE: In their +discretion, the proxies are authorized to vote upon such other business as +may properly be presented at the meeting or any adjournments or postponements +thereof. +Yes +No +Please indicate if you plan +to attend this meeting +o +o +Please sign exactly as your +name(s) appear(s) hereon. When signing as attorney, executor, administrator, +or other fiduciary, please give full title as such. Joint owners should each +sign personally. All holders must sign. If a corporation or partnership, +please sign in full corporate or partnership name by authorized officer. +Signature [PLEASE SIGN +WITHIN BOX] +Date +Signature (Joint Owners) +Date +0000374209_1 R1.0.1.17 +Important +Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice & Proxy Statement, Annual +Report with 10-K is/are available at www.proxyvote.com . +STEVEN MADDEN, LTD. +THIS PROXY IS BEING SOLICITED ON BEHALF OF +THE BOARD OF DIRECTORS +PLEASE CLEARLY INDICATE A RESPONSE BY CHECKING ONE OF THE +BOXES NEXT TO EACH OF THE PROPOSALS +The undersigned +stockholder(s) of Steven Madden, Ltd. (the “Company”) hereby appoint(s) +Edward R. Rosenfeld and Arvind Dharia, and each of them, as attorneys and +proxies, each with power of substitution and revocation, to represent the +undersigned at the Annual Meeting of Stockholders of the Company to be held +at the Company’s showroom located at 1370 Avenue of the Americas, 14th Floor, +New York, New York at 10:00 a.m., local time, on May 25, 2018 and at any +adjournments or postponements thereof, with authority to vote all shares of +Common Stock of the Company held or owned by the undersigned on March 29, +2018, in accordance with the directions indicated herein. +THIS PROXY WILL BE VOTED AS SPECIFIED HEREIN; UNLESS OTHERWISE INDICATED, THIS PROXY +WILL BE VOTED (1) FOR THE ELECTION OF THE NINE (9) NOMINEES NAMED IN ITEM 1, (2) FOR THE RATIFICATION OF THE +APPOINTMENT OF EISNERAMPER LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR 2018 +and (3) FOR THE APPROVAL OF THE EXECUTIVE COMPENSATION DESCRIBED IN THE COMPANY’S PROXY STATEMENT. THIS PROXY +WILL BE VOTED IN THE DISCRETION OF THE PROXIES ON ANY OTHER MATTER THAT MAY PROPERLY COME BEFORE THE MEETING. +Continued and to be signed on reverse side +0000374209_2 R1.0.1.17 \ No newline at end of file diff --git a/raw/proxies/0000913241/0001019056-18-000514/proxy_rpt.txt b/raw/proxies/0000913241/0001019056-18-000514/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..93c7dc7f86ca411a51427bd7274ebd0fb096ba3b --- /dev/null +++ b/raw/proxies/0000913241/0001019056-18-000514/proxy_rpt.txt @@ -0,0 +1,108 @@ +and Related Party Transactions +Steven +Madden Employment Agreement. Effective as of July 1, 2005, the Company amended and restated its employment agreement with +the Company’s founder and Creative and Design Chief, Steven Madden, pursuant to which Mr. Madden agreed to continue +to serve as the Company’s Creative and Design Chief. The term of Mr. Madden’s employment under his employment +agreement commenced on July 1, 2005 and, in accordance with the amendment of the agreement effective December 31, 2011, will +end on December 31, 2023. The amended agreement provides, among other things, for a base salary of $7,026,042 per annum for +the period between January 1, 2016 through the expiration of the term of employment, the potential for cash bonuses at the sole +discretion of the Company’s Board of Directors and an annual life insurance premium reimbursement of up to $200,000. Pursuant +to the amended agreement, on February 8, 2012, Mr. Madden was granted 1,463,056 restricted shares of Common Stock, valued +at approximately $40 million, under the 2006 Plan. The restricted Common Stock will vest in equal annual installments over +seven years commencing on December 31, 2017 through December 31, 2023, subject to Mr. Madden’s continued +employment with the Company on each such vesting date. On June 30, 2012, pursuant to an election right granted to him under the +agreement, as amended, Mr. Madden notified the Company of his election to receive an additional restricted stock award valued +at $40 million in consideration of a reduction in his annual base salary in years subsequent to 2012. Accordingly, on July +3, 2012, Mr. Madden was issued 1,893,342 restricted shares of Common Stock under the 2006 Plan. The restricted Common Stock +will vest in equal annual installments over six years commencing on December 31, 2018 through December 31, 2023, +subject to Mr. Madden’s continued employment with the Company on each such vesting date. +18 +Mr. Madden +is also eligible to receive annually, on or about the date of the Company’s annual meeting of stockholders (but not later +than June 30 th ), an option grant (the “Annual Option”) to purchase a number of shares of Common Stock, +with such number to be equal to the greater of (a) 100% of the largest aggregate number of shares of Common Stock available +upon the exercise of an option or options granted to any other continuing full-time employee of the Company during the preceding +twelve-month period and (b) 150,000 shares of Common Stock; provided, however, that a grant to Mr. Madden in excess +of 150% of the number of shares of Common Stock subject to options granted to such other continuing full-time employee would require +stockholder approval. Any Annual Option granted to Mr. Madden would vest quarterly over a one-year period following the grant +date and would be exercisable at a price equal to the closing price of the Company’s Common Stock on the grant date for +a period of five years following the grant date. In addition to the Annual Option, the agreement, as amended, provides for a potential +additional one-time stock option grant to purchase 750,000 shares of the Company’s Common Stock (the “EPS Option”) +in the event that the Company achieves earnings per share, on a fully-diluted basis, equal to $2.00 in any fiscal year ending +December 31, 2015 or after, which performance criteria was achieved for the fiscal year ended December 31, 2016. On March +1, 2017, Mr. Madden was granted the EPS Option at an exercise price of $37.35 per share. The EPS Option vests in equal annual +installments of 20% over a five-year period commencing on the first anniversary of the grant date. +In +the event of Mr. Madden’s death, his employment agreement provides for the payment to Mr. Madden’s estate +of his base salary for the 12-month period immediately subsequent to the date of his death. Further, in the event that Mr. Madden’s +employment agreement is terminated due to Mr. Madden’s total disability (as defined in the agreement), “for cause” +(as defined in the agreement) or due to Mr. Madden’s resignation, the Company is obligated to pay Mr. Madden +the amount of compensation that is accrued and unpaid through the date of termination. In the event Mr. Madden’s employment +agreement is terminated for any reason (other than “for cause” or due to his death, total disability or resignation), +the Company is obligated to pay Mr. Madden, in installments, the balance of his base salary that would have been paid by +the Company under the agreement for the full term of the agreement. If, during the period commencing 120 days prior to a +“change of control” (as defined in the employment agreement) transaction and ending on the first anniversary +of a change of control transaction, Mr. Madden’s employment is terminated by the Company other than for cause or by +the resignation of Mr. Madden for “good reason” (as defined in the employment agreement), or if Mr. Madden +resigns for good reason or without good reason within 30 days following a change of control transaction, all unvested options +to purchase shares of Common Stock held by Mr. Madden will vest on the date of termination or resignation and Mr. Madden +will be entitled to receive a lump sum cash payment equal to the amount of compensation that is accrued and unpaid through the +date of termination plus $35 million. Mr. Madden’s employment agreement contains other customary provisions, including +provisions regarding expense reimbursement, confidentiality, solicitation and competition. +For +the 2017 Fiscal Year, Mr. Madden earned $7,026,042 in base salary and received $200,000 for the payment of an annual life +insurance premium. Mr. Madden also received as his Annual Option for the 2017 Fiscal Year an option to purchase 150,000 shares +of Common Stock at a price per share of $40.15. In addition, Mr. Madden was granted the EPS Option at an exercise price of $37.35 +per share in the 2017 Fiscal Year as a result of the performance criteria for the EPS Option being achieved for the fiscal year +ended December 31, 2016. +19 +Loan +to Steven Madden. On June 25, 2007, the Company made a loan to Steven Madden, its Creative and Design Chief and a principal +stockholder of the Company, in the amount of $3,000,000, in order for Mr. Madden to satisfy a personal tax obligation resulting +from the exercise of a stock option which was due to expire and hold the underlying shares of Common Stock. The loan is evidenced +by a secured promissory note executed by Mr. Madden in favor of the Company, the security for which is a security interest in +a certain securities brokerage account maintained by Mr. Madden with his broker; none of the securities in the securities brokerage +account are shares of the Company’s Common Stock. There have been successive amendments to the secured promissory note, +the most recent of which occurred in April 2016, at which time the secured promissory note was amended to substitute the collateral +securing the secured promissory note from shares of the Company’s Common Stock to the security interest in Mr. Madden’s +securities brokerage account. Previously, on January 3, 2012, the secured promissory note was amended and restated to extend the +maturity date of the obligation to December 31, 2023 and eliminate the accrual of interest after December 31, 2011. +Prior to the January 3, 2012 amendment, the secured promissory note had been accruing interest at the rate of 6% per annum. In +addition, the secured promissory note provides that, commencing on December 31, 2014 and annually on each December 31 +thereafter through the maturity date, one-tenth of the principal amount thereof, together with accrued interest, will be cancelled +by the Company provided that Mr. Madden continues to be employed by the Company on each such December 31. Contemporaneously, +the Company will release its security interest in a portion of the securities held in Mr. Madden’s securities brokerage +account generally correlating to the amount of indebtedness cancelled on such date. As of December 31, 2011, interest in +the amount of $1,090,000 had accrued on the principal amount of the secured promissory note and, as noted above, interest was +eliminated after December 31, 2011. On December 31, 2017, the required one-tenth of the principal amount of the secured +promissory note, together with accrued interest, was written-off by the Company. +Review, Approval or Ratification +of Transactions with Related Persons +The +Company’s written Conduct Code and Employee Handbook prohibit all conflicts of interest. Under the Conduct Code, conflicts +of interest occur when private or family interests interfere in any way, or even appear to interfere, with the interests of the +Company. The Company’s prohibition on conflicts of interest under the Conduct Code includes any related person transaction. +Related +person transactions must be approved by the Board, or by a committee of the Board consisting solely of independent directors, +who will approve the transaction only if they determine that it is in the best interests of the Company. In considering the transaction, +the Board or committee will consider all relevant factors, including, as applicable, (i) the Company’s business rationale +for entering into the transaction; (ii) the alternatives to entering into a related person transaction; (iii) whether +the transaction is on terms comparable to those available to third parties or, in the case of employment relationships, to employees +generally; (iv) the potential for the transaction to lead to an actual or apparent conflict of interest and any safeguards +imposed to prevent such actual or apparent conflicts; and (v) the overall fairness of the transaction to the Company. +The +Company has multiple processes for reporting conflicts of interests, including related person transactions. Under the Conduct +Code, all employees are required to report any actual or apparent conflict of interest, or potential conflict of interest, to +management. The Chief Financial Officer distributes a questionnaire to the Company’s executive officers and management personnel +on a quarterly basis and distributes a questionnaire to the members of the Board of Directors on an annual basis requesting certain +information regarding, among other things, their immediate family members, employment and beneficial ownership interests, which +information is then reviewed for any conflicts of interest under the Conduct Code. +The +Board of Directors, the Audit Committee and the Disclosure Committee, which is comprised of management personnel, discuss the +related party transactions, specifically, and in connection with the regular review processes attendant to the Company’s +periodic filings, including related party transaction disclosures. +If +a director is a party to or in some manner involved in a transaction involving the Company, he or she will be recused from all +discussions and decisions about the transaction. The transaction must be approved in advance whenever practicable, and if not +practicable, must be ratified as promptly as practicable. +COMPENSATION \ No newline at end of file diff --git a/raw/proxies/0000913241/0001019056-19-000239/proxy.txt b/raw/proxies/0000913241/0001019056-19-000239/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..a4279505fdb95d1c1e812d6e9e8461edec5b5d3f --- /dev/null +++ b/raw/proxies/0000913241/0001019056-19-000239/proxy.txt @@ -0,0 +1,6255 @@ +DEF 14A +1 +smadden_def14a.htm +DEF 14A +UNITED +STATES +SECURITIES +AND EXCHANGE COMMISSION +Washington, +D.C. 20549 +SCHEDULE +14A +(Rule 14a-101) +INFORMATION +REQUIRED IN PROXY STATEMENT +SCHEDULE 14A INFORMATION +Proxy Statement Pursuant to Section 14(a) +of the +Securities +Exchange Act of 1934 (Amendment No. __) +Filed by the Registrant þ +Filed by a Party other than +the Registrant o +Check the appropriate box: +o Preliminary +Proxy Statement +o Confidential, +for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +þ Definitive +Proxy Statement +o Definitive +Additional Materials +o Soliciting +Material Pursuant to §240.14a-12 +Steven +Madden, Ltd. +(Name +of Registrant as Specified in Its Charter) +(Name +of Person(s) Filing Proxy Statement, if Other Than the Registrant) +Payment of Filing Fee (Check +the appropriate box): +þ No +fee required. +o Fee +computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. +(1) +Title +of each class of securities to which transaction applies: +(2) +Aggregate +number of securities to which transaction applies: +(3) +Per +unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which +the filing fee is calculated and state how it was determined): +(4) +Proposed +maximum aggregate value of transaction: +(5) +Total +fee paid: +o Fee +paid previously with preliminary materials. +o Check +box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting +fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of +its filing. +(1) +Amount +Previously Paid: +(2) +Form, +Schedule or Registration Statement No.: +(3) +Filing +Party: +(4) +Date +Filed: +DEAR +SHAREHOLDERS, +2018 +was a great year for Steve Madden. We delivered strong financial results, with net sales increasing 7% to over $1.6 billion and +adjusted diluted EPS rising 23% to $1.83. We also made progress on a number of key initiatives that position the Company for growth +and shareholder value creation going forward. +STRENGTHENING +OUR CORE BUSINESS +The +highlight of 2018 was the strong performance of our flagship Steve Madden brand. Steve and his design team created on-trend product +assortments, with strength across a range of product categories, that resonated with consumers. In our core Steve Madden women’s +U.S. wholesale footwear division, net sales increased mid-single digits on a percentage basis on top of mid-teen percentage sales +growth in the prior year, as we consolidated the market share gains we made over the past few years. Most importantly, our sell-through +performance at retail for our key wholesale customers continued to outpace the competition. +The strength +of our flagship brand extended to our diffusion brands as well. Steven by Steve Madden grew net sales mid-teens on a percentage +basis on top of high-single digit growth in the prior year. In addition, Madden NYC, the new brand exclusive to Kohl’s that +we launched in Spring 2017, had an outstanding second year. We have now rolled out selected women’s styles to all doors +at Kohl’s, and for Spring 2019, we launched men’s in 50 doors. +DEEPENING +PENETRATION IN INTERNATIONAL MARKETS +We +also made significant progress in 2018 on one of our most important long-term growth initiatives, which is expanding our business +outside of the United States. International net sales increased 22% compared to the prior year, with strong increases in our owned +markets, Canada and Mexico, as well as greater than 40% growth in our SM Europe joint venture and in our distributor business, +led by robust gains with our distribution partners in the Middle East, India and Italy. At the end of the year, we also transitioned +another key market from the distributor model to an ownership model with the formation of a joint venture in Israel. +BUILDING +OUR NEWER BRANDS +Another +highlight in 2018 was the performance of Blondo, the waterproof footwear brand we acquired in 2015. Blondo’s combination +of fashionable styling with waterproof functionality continues to resonate with consumers, and its net sales increased more than +50% for the year. In addition to continued outstanding performance in its core category of women’s waterproof boots, the +brand also saw success in newer categories such as women’s sneakers and men’s. And in Fall, we introduced a Blondo +diffusion line called Aqua College into the United States. +We +also added a new brand to our portfolio, Anne Klein. In January 2018, we signed an agreement to become the licensee for Anne Klein +footwear and handbags and began shipping product in Fall 2018. With its dedication to timeless American classics, the Anne Klein +brand is complementary to the other brands in our portfolio. We were pleased with its initial performance under our umbrella in +Fall 2018 and are optimistic about the prospects for this brand in 2019 and beyond. +EXPANDING +OUR WHOLESALE ACCESSORIES BUSINESS +Another +bright spot in 2018 was our wholesale accessories business, which had net sales growth of 17% compared to 2017. Our Steve Madden +handbag business continues to benefit from an improved product assortment that is better aligned with our fashion-forward footwear +styling. Steve Madden handbag wholesale net sales grew nearly 20% on top of a mid-teen percentage increase in the prior year. +In addition, our private label handbag business delivered outstanding growth driven by strong gains with mass merchant customers. +And Cejon, our cold weather accessories business, recorded significant improvement in profitability as we expanded gross margin +and cut costs. Finally, our wholesale accessories segment benefited from the addition of Anne Klein handbags in Fall. +GROWING +OUR DIGITAL COMMERCE BUSINESS +We +also implemented a number of new initiatives related to our digital commerce business in 2018. We revamped our digital marketing +strategies, heightening our focus on our most valuable, full-price customers with a strengthened online offering including free +two-day shipping and earlier access to new styles. We also migrated our e-commerce sites to the Shopify Plus platform, a cloud-based +solution that is reducing our operating costs while improving our speed and flexibility and enhancing our ability to add new features +and functionality to the site. As a result, our stevemadden.com business saw significant sequential improvement throughout the +year in both net sales and gross margin, and we are confident we can deliver continued improvement in 2019. +RETURNING +CAPITAL TO SHAREHOLDERS +Finally, +in 2018 we continued to utilize our strong balance sheet and healthy free cash flow to return capital to shareholders. We bought +back 3.4 million shares, or approximately 4% of the Company, for $106 million. We also initiated our first regular quarterly dividend +in first quarter 2018 and paid a total of $47 million in dividends to our shareholders in 2018. +LOOKING +FORWARD +In +summary, 2018 was a strong year for Steve Madden, as we delivered robust financial results and also made progress on a number +of key strategic initiatives that position us for growth in the future. As we look ahead, we are encouraged by the strength we +are seeing in our flagship Steve Madden brand, the runway we have in international markets, the growth opportunity in newer brands +like Blondo and Anne Klein, the momentum we have in accessories and the acceleration in our digital commerce business. While the +rapidly changing retail landscape continues to pose challenges such as the recent bankruptcy of our private label customer Payless +ShoeSource, we are pleased with the underlying strength in our business and are optimistic that our strong brands and proven business +model will enable us to drive sales and earnings growth and generate significant value for shareholders over the long-term. +In +closing, we would like to thank all of our employees for their hard work and dedication, our customers for their loyalty, and +you, our shareholders, for your continued support. +Sincerely, +EDWARD +ROSENFELD +CHIEF +EXECUTIVE OFFICER +AWADHESH +SINHA +CHIEF +OPERATING OFFICER +ARVIND +DHARIA +CHIEF +FINANCIAL OFFICER +STEVEN MADDEN, +LTD. +52-16 Barnett +Avenue +Long +Island City, New York 11104 +NOTICE +OF ANNUAL MEETING OF STOCKHOLDERS +TO BE HELD ON MAY +24, 2019 +TO THE STOCKHOLDERS: +The Annual Meeting +of Stockholders (the “Annual Meeting”) of Steven Madden, Ltd. (the “Company”) will be held on +Friday, May 24, 2019, at the Company’s showroom located at 1370 Avenue of the Americas, 14th Floor, New York, New York at +10:00 a.m, local time, for the purposes stated below: +1. +to elect +nine (9) directors to the Board of Directors of the Company; +2. +to approve +an amendment to the Company’s Certificate of Incorporation to increase the total number of authorized shares of the +Company’s common stock, $0.0001 par value, from 135,000,000 shares to 245,000,000 shares; +3. +to approve +the Steven Madden, Ltd. 2019 Incentive Compensation Plan; +4. +to ratify +the appointment of EisnerAmper LLP as the Company’s independent registered public accounting firm for the fiscal year +ending December 31, 2019; +5. +to approve, +on a non-binding advisory basis, the compensation of certain executive officers as disclosed in the accompanying proxy statement; +6. +to consider +and vote upon a stockholder proposal, if properly presented at the Annual Meeting, requesting that the Company prepare a human +rights risk assessment report and make it available on our website no later than December 31, 2019; and +7. +to transact +such other business as may properly come before the Annual Meeting or any adjournments thereof. +Only those +stockholders of record at the close of business on March 29, 2019, the record date for the Annual Meeting, are entitled to notice +of and to vote at the Annual Meeting and any adjournments thereof. Stockholders of record at the close of business on March 29, +2019 will be admitted to the Annual Meeting upon presentation of valid, government-issued photo identification, such as a driver’s +license. Stockholders who own shares of the Company’s common stock beneficially through a bank, broker or other nominee +will be admitted to the Annual Meeting upon presentation of valid, government-issued photo identification and proof of ownership +or a valid proxy signed by the record holder. A recent brokerage statement or a letter from a bank or broker are examples of proof +of ownership. If you own shares of the Company’s common stock beneficially and want to vote in person at the Annual Meeting, +you should contact your broker or applicable agent in whose name the shares are registered to obtain a broker’s proxy and +bring it to the Annual Meeting in order to vote. +IMPORTANT NOTICE REGARDING THE +AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 24, 2019: THE NOTICE OF ANNUAL MEETING +AND PROXY STATEMENT, ANNUAL REPORT, ELECTRONIC PROXY CARD AND ANY OTHER MATERIALS CONCERNING THE ANNUAL MEETING, TOGETHER WITH +ANY AMENDMENTS TO ANY OF THESE MATERIALS, ARE AVAILABLE ON THE INTERNET AT WWW.PROXYVOTE.COM . +BY ORDER OF THE +BOARD OF DIRECTORS +April 8, +2019 +Long Island City, +New York +Arvind Dharia +Secretary +WHETHER OR NOT YOU EXPECT +TO BE PRESENT AT THE ANNUAL MEETING, PLEASE MARK, DATE AND SIGN THE ACCOMPANYING FORM OF PROXY AND MAIL IT PROMPTLY IN THE ENVELOPE +PROVIDED TO: VOTE PROCESSING, C/O BROADRIDGE, 51 MERCEDES WAY, EDGEWOOD, NEW YORK 11717. ALTERNATIVELY, YOU MAY VOTE YOUR +SHARES BY TELEPHONE OR THROUGH THE INTERNET AS DESCRIBED ON THE ACCOMPANYING PROXY CARD. +TABLE OF +CONTENTS +GENERAL INFORMATION +1 +Notice of Internet Availability of Proxy Materials +2 +QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING +2 +PROPOSAL ONE: ELECTION OF DIRECTORS +6 +Stockholder Nominations for Board Membership +6 +Nominees for Election to the Board of Directors +7 +CORPORATE GOVERNANCE +13 +The Board of Directors +13 +Director Independence +13 +Director Attendance at Meetings +13 +Director Election (Majority Voting) Policy +13 +Committees of the Board +14 +Board Leadership Structure, Risk Oversight, Executive Sessions of Non-Employee Directors, and Communications Between Stockholders and the Board +17 +Codes of Business Conduct and Ethics +18 +Corporate Governance Guidelines +18 +Stock Ownership Guidelines +19 +Prohibition on Hedging and Pledging of Our Common Stock +19 +Corporate Social Responsibility Policy +19 +Certain Relationships and Related Party Transactions +19 +Review, Approval or Ratification of Transactions with Related Persons +21 +COMPENSATION OF DIRECTORS IN THE 2018 FISCAL YEAR +22 +STOCK OWNERSHIP +23 +Security Ownership of Certain Beneficial Owners +23 +Security Ownership of Directors and Executive Officers +24 +Section 16(a) Beneficial Ownership Reporting Compliance +25 +EXECUTIVE COMPENSATION +25 +Compensation Discussion and Analysis +25 +Compensation Committee Interlocks and Insider Participation +35 +Executive Officers +36 +SUMMARY COMPENSATION TABLE +36 +Employment Arrangements +38 +GRANTS OF PLAN-BASED AWARDS IN THE 2018 FISCAL YEAR +43 +OUTSTANDING EQUITY AWARDS AT END OF THE 2018 FISCAL YEAR +45 +OPTION EXERCISES AND STOCK VESTED IN THE 2018 Fiscal Year +47 +SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS +47 +EQUITY COMPENSATION PLAN INFORMATION +47 +POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE-IN-CONTROL +49 +COMPENSATION COMMITTEE REPORT +50 +PROPOSAL TWO: +APPROVAL OF AN AMENDMENT TO THE CERTIFICATE OF INCORPORATION OF STEVEN MADDEN, LTD +51 +PROPOSAL THREE: +APPROVAL OF THE ADOPTION OF STEVEN MADDEN, LTD. 2019 INCENTIVE COMPENSATION PLAN +54 +PROPOSAL FOUR: +RATIFICATION OF THE APPOINTMENT OF EISNERAMPER LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR ENDING DECEMBER 31, 2019 +61 +AUDIT COMMITTEE REPORT +63 +PROPOSAL FIVE: NON-BINDING ADVISORY VOTE ON EXECUTIVE COMPENSATION +64 +PROPOSAL SIX: STOCKHOLDER PROPOSAL REGARDING HUMAN RIGHTS RISK ASSESSMENT REPORT +66 +i +STEVEN MADDEN, +LTD. +52-16 Barnett +Avenue +Long +Island City, New York 11104 +PROXY STATEMENT +GENERAL +INFORMATION +The +Board of Directors of Steven Madden, Ltd. requests your proxy in connection with the Annual Meeting of Stockholders (the “Annual +Meeting”) of Steven Madden, Ltd. (the “Company”, “we” or “us”). The Annual Meeting +will be held at the Company’s showroom located at 1370 Avenue of the Americas, 14th Floor, New York, New York on Friday, +May 24, 2019 at 10:00 a.m., local time. Proxies also may be voted at any adjournments or postponements of the Annual Meeting. +On +or about April 8, 2019 a notice containing instructions on how to access this Proxy Statement, the accompanying proxy card +and related materials online is being mailed to holders of record of common stock, $0.0001 par value, of the Company (the “Common +Stock”) at the close of business on March 29, 2019 (the “Record Date”). The Company’s Annual Report +for the fiscal year ended December 31, 2018 (the “2018 Fiscal Year”), including audited financial statements, +is included in the materials that are accessible online. This Proxy Statement contains information about the Annual Meeting as +well as information regarding the voting process, director elections, our corporate governance programs and executive and director +compensation, among other things. We recommend that you read all of these materials. +The Annual +Meeting has been called to consider and take action on the following proposals: +· to +elect nine (9) directors to the Board of Directors of the Company to serve until the +next annual meeting of the Company’s stockholders; +· to +approve an amendment to the Company’s Certificate of Incorporation to increase +the total number of authorized shares of the Company’s common stock, $0.0001 par +value, from 135,000,000 shares to 245,000,000 shares; +· to +approve the Steven Madden, Ltd. 2019 Incentive Compensation Plan; +· to +ratify the appointment of EisnerAmper LLP as the Company’s independent registered +public accounting firm for the fiscal year ending December 31, 2019; +· to +approve, on a non-binding advisory basis, the compensation of certain executive officers +as disclosed in this Proxy Statement; +· to +consider and vote upon a stockholder proposal, if properly presented at the Annual Meeting, +requesting that the Company prepare a human rights risk assessment report and make it +available on our website no later than December 31, 2019; and +· to +transact such other business as may properly come before the Annual Meeting and any adjournments +thereof. +1 +The +Board of Directors knows of no other matters to be presented for action at the Annual Meeting. However, if any other matters properly +come before the Annual Meeting, the persons named in the proxy will vote on such other matters and/or for other nominees for director +in accordance with their best judgment. The Company’s Board of Directors recommends that the stockholders vote “FOR” +each of Proposals One, Two, Three, Four and Five and “AGAINST” Proposal Six. Only holders of record of Common Stock +of the Company at the close of business on the Record Date will be entitled to vote at the Annual Meeting. +The +Company is incorporated in the State of Delaware. The principal executive offices of the Company are located at 52-16 Barnett +Avenue, Long Island City, New York 11104 and the telephone number of the Company is (718) 446-1800. +Notice +of Internet Availability of Proxy Materials +We +continue to take advantage of the Securities and Exchange Commission (the “SEC”) “e-proxy” rules +allowing us to furnish proxy materials through the Internet for the benefit and convenience of our stockholders. By using the +e-proxy rules, we can expedite the receipt by stockholders of proxy materials while lowering the costs and reducing the environmental +impact associated with our Annual Meeting. On or about April 8, 2019, we will furnish a Notice of Internet Availability +of Proxy Materials (the “Availability Notice”) to most of our stockholders containing instructions on how to +access the proxy materials and to vote online. In addition, instructions on how to request a printed copy of these materials will +be found on the Availability Notice. If you received an Availability Notice by mail, you will not receive a paper copy of the +proxy materials unless you request such materials by following the instructions contained in the Availability Notice. +For +more information on voting your Common Stock, please refer to the following “Questions and Answers” section. +QUESTIONS +AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING +1. What is included in the proxy materials? What is a proxy +statement and what is a proxy? +The +proxy materials for our Annual Meeting include the Notice of Annual Meeting, this Proxy Statement and our Annual Report on Form +10-K for the year ended December 31, 2018. If you received a paper copy of these materials, the proxy materials also include +a proxy card or voting instruction form. +A +proxy is the delegation of your right to vote the Common Stock you own to another person, who is called your proxy. When you designate +someone as your proxy in a written document, that document is called a proxy or a proxy card. SEC regulations require that we +furnish a proxy statement to you when we ask you to sign a proxy designating individuals to vote your shares of Common Stock on +your behalf. We have designated our officers Edward R. Rosenfeld and Arvind Dharia as proxies for the Annual Meeting. +2. Who may vote at the Annual Meeting? +Only +stockholders of record are entitled to vote at the Annual Meeting. A stockholder of record is a stockholder of the Company as +of the close of business on the Record Date. On the Record Date, there were 85,782,610 shares of our Common Stock outstanding +(excluding treasury shares) held by approximately 168 registered holders of record and 18,858 beneficial owners. +3. What is the difference between holding shares as a stockholder +of record and as a beneficial owner? +If +your shares are registered directly in your name with the Company’s registrar and transfer agent, American Stock Transfer & Trust Company, you are a “stockholder of record” with respect to those shares and, in such case, this Proxy +Statement and the accompanying proxy materials have been provided directly to you by the Company. If your shares are held in a +stock brokerage account or by a bank or nominee, your shares are held in “street name” and you are considered the +“beneficial owner” of those shares and, in such case, this Proxy Statement and the accompanying proxy materials have +been provided to you by your broker, bank or other stockholder of record. As the beneficial owner, you have the right to direct +your broker, bank or other stockholder of record how to vote your shares held in “street name.” +2 +4. What is considered a quorum to conduct the Annual Meeting? +The +presence, in person or by proxy, of the holders of a majority of the shares eligible to vote is necessary to constitute a quorum +for the purpose of transacting business at the Annual Meeting. Under Delaware law (under which the Company is incorporated), abstentions +and broker non-votes (meaning proxies from brokers, banks or nominees indicating that such persons have not received instructions +on how to vote from the beneficial owner or other persons eligible to vote shares as to matters with respect to which the brokers, +banks or nominees do not have discretionary power to vote) are counted as present for purposes of determining the presence +or absence of a quorum for the transaction of business. If a quorum is not present, the Annual Meeting may be adjourned until +a quorum is obtained. +5. What is a “broker non-vote”? +As +discussed in the response to question 3, if your shares are held in “street name” by a broker, bank or other nominee, +your broker, bank or other nominee is the record holder; however, the broker, bank or other nominee is required to vote the shares +in accordance with your instructions. If you do not give instructions to your broker, bank or other nominee, as the case may be, +the broker, bank or other nominee may, if permitted by the organizations of which it is a member, exercise discretionary voting +power to vote your shares. A “broker non-vote” occurs when a broker, bank or other nominee of record holding shares +for a beneficial owner has not received voting instructions from the beneficial owner and either chooses not to vote the shares +on a particular proposal as to which the holder has discretionary voting power or does not vote on a particular proposal because +that holder does not have discretionary voting power for that particular item. Broker non-votes are considered present in determining +whether a quorum is present. +If +you hold your shares in “street name,” we strongly encourage you to provide instructions regarding the voting of your +shares as your broker, bank or other nominee cannot vote your shares with respect to certain of the proposals being presented +at the Annual Meeting without voting instructions from you. +6. How many votes do I have? What shares are included on +the proxy card? +For +each share of Common Stock that you own on the Record Date you are entitled to one vote on each matter presented at the Annual +Meeting. +If +you are a record holder, you will receive an Availability Notice or proxy card for all of the shares of Common Stock you hold +in certificate form, in book-entry form and in any Company benefit plan. If you are a beneficial owner, you will receive information +containing voting instructions from the broker, bank or other nominee through which you own your shares of Common Stock. +7. How many votes are required to approve each proposal +and what is the effect of abstentions and broker non-votes? +Proposal +One (Election of Directors): Under Delaware law, directors are elected by the affirmative vote of a plurality of the shares +of Common Stock present in person or represented by proxy at the Annual Meeting and entitled to vote. This means that the director +nominees who receive the greatest number of affirmative votes cast are elected as directors, subject to our Director Election +(Majority Voting) Policy discussed in Proposal One below. +Proposal +Two (Amendment of Certificate of Incorporation to Increase Authorized Shares): The affirmative vote of a majority of the +shares of Common Stock outstanding and entitled to vote at the Annual Meeting is required to approve the proposal to amend the +Company’s Certificate of Incorporation to increase the total number of shares of Common Stock that the Company is authorized +to issue. +3 +Proposal +Three (Adoption of 2019 Incentive Compensation Plan): The affirmative vote of a majority of the shares of Common Stock present +in person or represented by proxy at the Annual Meeting and entitled to vote is required to approve the adoption of the Steven +Madden, Ltd. 2019 Incentive Compensation Plan. +Proposal +Four (Ratification of Appointment of EisnerAmper LLP): The affirmative vote of a majority of the shares of Common Stock present +in person or represented by proxy at the Annual Meeting and entitled to vote is required to approve the ratification of the appointment +of EisnerAmper LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, +2019. +Proposal +Five (Non-Binding Advisory Vote on Executive Compensation): The affirmative vote of a majority of the shares of Common Stock +present in person or represented by proxy at the Annual Meeting and entitled to vote is required to approve, on a non-binding +advisory basis, the compensation of the Company’s Named Executive Officers as described in this Proxy Statement. +Proposal +Six (Stockholder Proposal Regarding Human Rights Risk Assessment Report): The affirmative vote of a majority of the shares +of Common Stock present in person or represented by proxy at the Annual Meeting and entitled to vote is required to approve the +stockholder proposal. +Other +Matters: If any other matters are presented at the Annual Meeting, they must receive the affirmative vote of a majority of +the shares of Common Stock present in person or represented by proxy at the Annual Meeting and entitled to vote in order to be +approved. +Abstentions +will have no effect on the election of directors, but will be treated as present and entitled to vote on the remaining proposals +and, therefore, abstentions will have the effect of votes “AGAINST” such proposals. +If +you do not provide your broker, bank or other nominee with instructions on how to vote your shares held in “street name”, +your broker, bank or other nominee will not be permitted to vote your shares on non-routine matters, and your shares will not +affect the outcome of proposals concerning non-routine matters. Proposal Four is considered a routine matter under applicable +rules. Proposals One, Two, Three, Five and Six are considered “non-routine” matters, which means that your broker +or other nominee does not have discretion to vote your shares with respect to these proposals without voting instructions from +you. If you hold your shares in “street name,” we strongly encourage you to provide instructions regarding the voting +of your shares to your broker, bank or other nominee. +8. How can I vote my shares? +Your +vote is important. Your shares can be voted at the Annual Meeting only if you are present in person or represented by proxy. Even +if you plan to attend the Annual Meeting, we urge you to authorize your proxy in advance. You may vote your shares by authorizing +a proxy over the Internet or by telephone. In addition, if you received a paper copy of the proxy materials by mail, you can also +submit a proxy by mail by following the instructions on the proxy card. Voting your shares by authorizing a proxy over the Internet, +by telephone or by written proxy card will ensure your representation at the Annual Meeting regardless of whether you attend in +person. +If +you are the record holder of your shares, please authorize your proxy electronically by going to the http://www.proxyvote.com +website or by calling the toll-free number listed below and on the proxy card. Please have your Proxy Statement or proxy card +in hand when going online or calling. If you authorize your proxy via the Internet or by phone you do not need to return your +proxy card. If you choose to authorize your proxy by mail, simply mark your proxy card and then date, sign and return it in the +postage-paid envelope provided. +VOTE +BY INTERNET +http://www.proxyvote.com +Use the Internet to transmit +your voting instructions and for electronic delivery of information. +VOTE +BY PHONE +1-800-690-6903 +Use any touch-tone telephone +to transmit your voting instructions. +VOTE +BY MAIL +Vote +Processing, c/o Broadridge +51 Mercedes Way +Edgewood, New York 11717 +If you receive paper +proxy materials, mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return +it to the address shown above. +4 +If +you hold your shares beneficially in “street name” through a broker or nominee you may be able to authorize your proxy +by telephone or the Internet as well as by mail, but you will need to obtain and follow instructions from your broker or nominee +to vote these shares. +9. May I revoke my proxy for the Annual Meeting once +I have given it? +You may revoke +your proxy at any time before it is voted at the Annual Meeting by: +· properly +executing and delivering a later dated proxy (including a telephone or Internet proxy +authorization); +· voting +by ballot at the Annual Meeting; or +· sending +a written notice of revocation to the Secretary of the Company at Steven Madden, Ltd., +52-16 Barnett Avenue, Long Island City, New York 11104. +10. How does the Board of Directors recommend that I vote +my shares? +The Board of +Directors of the Company recommends that you vote: +· “FOR” +the election of each of the nine (9) director nominees; +· “FOR” +the approval of an amendment to the Company’s Certificate of Incorporation that +increases the total number of shares of Common Stock authorized for issuance; +· “FOR” +the adoption of the Steven Madden, Ltd. 2019 Incentive Compensation Plan; +· “FOR” +the ratification of the appointment of EisnerAmper LLP as the Company’s independent +registered public accounting firm for the fiscal year ending December 31, 2019; +· “FOR” +the approval, on a non-binding advisory basis, of the executive compensation of the Company’s +Named Executive Officers, as disclosed in this Proxy Statement; and +· “AGAINST” +the stockholder proposal regarding a human rights risk assessment report. +ALL PROXIES +RECEIVED WILL BE VOTED IN ACCORDANCE WITH THE CHOICES SPECIFIED ON SUCH PROXIES. PROXIES WILL BE VOTED IN FAVOR OF PROPOSALS ONE, +TWO, THREE, FOUR AND FIVE IF NO CONTRARY SPECIFICATION IS MADE. PROXIES WILL BE VOTED AGAINST PROPOSAL SIX IF NO CONTRARY SPECIFICATION +IS MADE. ALL VALID PROXIES OBTAINED WILL BE VOTED AT THE DISCRETION OF THE PERSONS NAMED IN THE PROXY WITH RESPECT TO ANY OTHER +BUSINESS THAT MAY PROPERLY COME BEFORE THE ANNUAL MEETING OR ANY ADJOURNMENTS OR POSTPONEMENTS THEREOF. AS NOTED ABOVE, IF +YOU HOLD YOUR SHARES BENEFICIALLY THROUGH A BROKER, BANK OR OTHER NOMINEE AND FAIL TO PROVIDE SPECIFIC VOTING INSTRUCTIONS TO +THAT BROKER, BANK OR OTHER NOMINEE, YOUR SHARES WILL NOT BE VOTED IN THE ELECTION OF DIRECTORS, THE APPROVAL OF THE AMENDMENT +TO THE COMPANY’S CERTIFICATE OF INCORPORATION, THE APPROVAL OF THE ADOPTION OF THE 2019 INCENTIVE COMPENSATION PLAN, THE +ADVISORY VOTE ON EXECUTIVE COMPENSATION OR THE APPROVAL OF THE STOCKHOLDER PROPOSAL REGARDING A HUMAN RIGHTS RISK ASSESSMENT REPORT. +11. Who will bear the expenses of this solicitation and +how are proxies being solicited? +The +Company will pay the costs of soliciting proxies, including preparing, printing and mailing this Proxy Statement, any exhibits +hereto and the proxies solicited hereby. In addition to the use of the mails, proxies may be solicited on the Company’s +behalf by officers, directors and employees of the Company, without additional remuneration, by personal interviews, telephone +or electronic transmission. The Company will also request brokerage firms, nominees, custodians and fiduciaries to forward proxy +materials to the beneficial owners of shares of Common Stock held of record by them and will provide reimbursements for the cost +of forwarding the material in accordance with customary charges. The Company has entered into an agreement with D.F. King & +Co., Inc. to assist in the solicitation of proxies and provide related advice and informational support. The total expense of +this engagement, which will be borne by the Company, including customary disbursements, is not expected to exceed $20,000 in the +aggregate. +5 +12. How will the voting results be reported? +The +preliminary results of the voting on the proposals will be reported at the Annual Meeting. The final certified results will be +reported in a Current Report on Form 8-K that will be filed with the SEC within four business days following the Annual Meeting. +13. How do I submit a proposal for action at the Company’s +2020 Annual Meeting of Stockholders? +In +accordance with rules promulgated by the SEC, any stockholder who wishes to submit a proposal for inclusion in the proxy materials +to be distributed by the Company in connection with the 2020 Annual Meeting of Stockholders of the Company (the “2020 Annual +Meeting”) must do so no later than December 10, 2019. In addition, in accordance with Article I, +Section 7(f) of the Company’s Amended and Restated By-Laws (the “By-Laws”), in order to be properly +brought before the 2020 Annual Meeting, a matter must be either (i) specified in the notice of such meeting given by or at +the direction of the Board of Directors (or any duly authorized committee thereof), (ii) otherwise properly brought before +such meeting by or at the direction of the Board of Directors (or any duly authorized committee thereof) or (iii) specified +in a notice in proper written form given by a stockholder of record on the date of the giving of the notice and on the record +date for such meeting, which notice conforms to the requirements of Article I, Section 7(f) of the By-Laws and +is delivered to, or mailed and received at, the Company’s principal executive offices not less than 120 days nor more +than 150 days prior to the first anniversary of the date of the Company’s 2019 Annual Meeting. Accordingly, any written +notice given by or on behalf of a stockholder pursuant to the foregoing clause (iii) in connection with the 2020 Annual Meeting +must be received no later than January 25, 2020 and no earlier than December 26, 2019. In addition, for business to +be properly brought before the 2020 Annual Meeting by a stockholder pursuant to the foregoing clause (iii), such stockholder shall +have complied with any other applicable requirements, including, but not limited to, the requirements of Rule 14a-8 promulgated +by the SEC. +PROPOSAL ONE: +ELECTION +OF DIRECTORS +The +Company’s By-Laws provide that the Board of Directors of the Company shall be comprised of a minimum of one director and +that, subject to this limitation, the number of directors may be fixed from time to time by action of the directors. The Board +of Directors has fixed the number of directors comprising the Board of Directors at nine members. Directors serve a one-year term +and the term of each of the directors will expire at the Annual Meeting. +Stockholder Nominations +for Board Membership +The +Nominating/Corporate Governance Committee of the Board of Directors recommends to the Board director candidates for nomination +and election at each annual meeting of stockholders or for appointment to fill vacancies on the Board. The Nominating/Corporate +Governance Committee will review and evaluate the qualifications of proposed director candidates recommended to it from various +sources, including candidates proposed by stockholders of the Company in accordance with the procedures established for that purpose. +In accordance with Article II, Section 5 of the By-Laws, director nominations for the 2020 Annual Meeting can only be +made by a stockholder of the Company who (i) is a stockholder of record on the date of the giving of the notice of such director +nominations and on the record date for the determination of stockholders entitled to vote at the 2020 Annual Meeting and (ii) complies +with the notice requirements and procedures set forth in Article II, Section 5 of the By-Laws. A stockholder’s +notice to the Secretary of the Company with respect to any such nominations must be timely and in proper written form pursuant +to Article II, Section 5 of the Company’s By-Laws, including containing certain information concerning the nominating +or proposing stockholder and certain information concerning the nominee, and the notice must be delivered to, or mailed and received +at, the Company’s principal executive offices not less than 120 days nor more than 150 days prior to the first +anniversary of the date of the Company’s 2019 Annual Meeting. Accordingly, any written notice given by or on behalf of a +stockholder pursuant to Article II, Section 5 of the Company’s By-Laws in connection with the 2020 Annual Meeting +must be received no later than January 25, 2020 and no earlier than December 26, 2019. A copy of the Company’s +By-Laws may be obtained by any stockholder, without charge, upon written request to the Secretary of the Company at the address +set forth above. +6 +Nominees for Election +to the Board of Directors +Upon +recommendation of the Nominating/Corporate Governance Committee of the Board of Directors, the Board of Directors has nominated +and is recommending to the stockholders the election of each of the nine nominees named below to serve as a director of the Company +until the next annual meeting of the Company’s stockholders and until his or her successor is duly elected and qualified +or until his or her earlier death, resignation or removal from office. All of the nominees were elected directors at last year’s +Annual Meeting of Stockholders. All nominees have agreed to be named in this Proxy Statement and to serve on the Board of Directors +if elected. +The +names and biographical summaries of the nine persons who have been recommended by the Nominating/ Corporate Governance Committee +of the Board of Directors and nominated by the Board of Directors to stand for election at the Annual Meeting are provided below +for your information. +Our +Board of Directors is responsible for overseeing our business in a manner consistent with the Board’s fiduciary duty to +our stockholders. This significant responsibility requires that our directors consist of individuals who are well-qualified for +service on our Board and its committees and demonstrate a commitment to the success of the Company and to service in the best +interests of our stockholders. +The +following matrix identifies the relevant skills, experience and qualifications of the director nominees. The skills and experience +identified below are reviewed by the Nominating/Corporate Governance Committee, in addition to other qualifications, and nominees +are selected with a view to establishing a Board of Directors that is comprised of individuals who have extensive business leadership +experience, are independent, bring diverse perspectives to the Board, possess high ethical standards and sound business judgment +and acumen and a willingness to devote the time necessary for the Board to effectively fulfill its responsibilities. We believe +that all of the director nominees possess these qualifications and provide the Board with a full complement of knowledge, business +skills and expertise for the effective management of our Company. +7 +In +addition to these general qualifications, provided below for each nominee for director is a discussion of the experience, qualifications, +attributes and skills that led to the Board’s conclusion that the nominee should serve as a director. +Name +Principal +Occupation +Age +Year +Became +a +Director +Edward +R. Rosenfeld +Chairman +of the Board and Chief Executive Officer, Steven Madden, Ltd. +43 +2008 +Mitchell +S. Klipper +Retired +Chief Executive Officer of Barnes & Noble, Inc.’s Retail Group, the nation’s largest retail bookseller +61 +2018 +Rose +Peabody Lynch +Owner +of Marketing Strategies, LLC, New York based consulting firm of which she is founder and President, which focuses on strategic +marketing and operating issues for small to medium-sized companies +69 +2014 +Peter +Migliorini +Sales +Manager, Greschlers, Inc., a building supplies company +70 +1996 +8 +Name +Principal +Occupation +Age +Year +Became +a +Director +Richard +P. Randall +Retired +Executive Vice President and Chief Financial Officer, Direct Holdings Worldwide, LLC, the parent company of Lillian Vernon +Corp., a catalog and online retailer of gifts and household goods, and Time-Life, a music and video marketing company +81 +2006 +Ravi +Sachdev +Partner, +Clayton Dubilier & Rice, LLC +42 +2008 +Thomas +H. Schwartz +Owner, +Sumner and Forge Investors LLC, a real estate investment and property management company +71 +2004 +Robert +Smith +Founder +and Chief Executive Officer of Phluid Project, a retail store and community space, completely gender neutral, with a flagship +Manhattan location and a website to offer products and programs worldwide +53 +2014 +Amelia +Newton Varela +President, +Steven Madden, Ltd. +47 +2016 +Additional Information +About the Director Nominees +Other +Public Company Directorships +Four +of our directors also currently serve as directors of other public companies: +· Mr. Rosenfeld +is a director and member of the Audit Committee of PVH Corp., one of the world’s +largest apparel companies. +· Mr. Randall +serves as a director and member of the Audit, Corporate Governance and Nominating and +Strategic Planning and Risk Assessment Committees of P&F Industries Inc., a manufacturer +and importer of tools sold principally to the industrial, retail and automotive markets. +· Mr. Sachdev +is a director and member of the Strategy and Compensation Committees of Covetrus, Inc., +a global animal-health technology and services company. +· Ms. +Lynch serves as a director and member of both the Pension and Nominating Committees of +General American Investors, Inc., a closed-end fund that manages a global portfolio of +investments consisting mainly of U.S. and foreign securities. +Other +Employment Information +Each +of our directors has been engaged in the principal occupation indicated in the foregoing table for more than the past five years, +with the exceptions of Mr. Smith and Mr. Sachdev. Prior to founding Phluid Project in 2018, for which he currently serves as Chief +Executive Officer, from 2013 to 2017, Mr. Smith was the Chief Merchandising Officer for Haddad Brands, a global children’s +apparel and accessories licensing partner for iconic brands such as Levi’s, Hurley, Nike, Jordan and Converse. Prior thereto, +from 2010 to 2012, Mr. Smith served as Executive Vice President, Merchandising for Limited Brands, at Victoria’s Secret +Direct, the largest direct-to-consumer women’s apparel retailer in the United States. Mr. Sachdev has been a partner of +Clayton Dubilier & Rice, LLC since 2015. Previously, from November 2010, he served as a Managing Director and Co-Head of Healthcare +Services at J.P. Morgan. +9 +Specific +Qualifications, Attributes, Skills and Experience of Director Nominees +Edward +R. Rosenfeld has served as Chairman of the Board and Chief Executive Officer since August 2008 and has been a director +of the Company since February 2008. Mr. Rosenfeld, who joined our executive management team in May 2005, has +more than two decades of experience focused on the retail, apparel and footwear industries and possesses particular knowledge +of and experience in the industry that strengthens the Board’s collective qualifications, skills and experience. His background +in finance and his analytical skills gained through his years as a Vice President with Peter J. Solomon Company, an investment +banking boutique, where he specialized in mergers and acquisitions in the retail, apparel and footwear industries, provide the +Board with insight and guidance with respect to, among other things, strategic business development matters. Mr. Rosenfeld +has strong leadership skills and an in-depth understanding of the Company and its goals from his positions as the Chairman of +the Board and Chief Executive Officer. Mr. Rosenfeld serves as a director and member of the Audit & Risk Management Committee +of PVH Corp., one of the world’s largest apparel companies. +Mitchell +S. Klipper has served as a director of the Company since April 2018 and as a member of the Audit Committee since June +2018. Mr. Klipper served as the Chief Executive Officer of the Retail Group of Barnes & Noble, Inc., the nation’s largest +retail bookseller, from March 2010 to May 2015. Mr. Klipper began his career at Barnes & Noble as Chief Financial Officer +of B&N College in June 1986. He subsequently held a number of executive positions at Barnes & Noble, Inc., including Executive +Vice President, President of Barnes & Noble Development and Chief Operating Officer. Prior to joining Barnes & Noble, +Inc., Mr. Klipper was an Audit Manager with KMG Main Hurdman, a certified public accounting firm and predecessor to KPMG. He has +also served on the advisory board of Modell’s Sporting Goods for the past 14 years. Mr. Klipper’s decades of +relevant experience in retail management, general business and accounting will enhance the leadership and oversight capabilities +of the Board. +Rose +Peabody Lynch has served as a director of the Company since April 2014 and as a member of the Audit Committee and the +Compensation Committee since June 2014. She possesses over 30 years of business experience, including tenures as the President +and in other senior executive officer positions of major companies in the beauty and fashion industries, and has extensive executive +level financial and operating experience. Her experience serving as a director and as a senior executive for a range of companies, +including Victoria’s Secret, Trowbridge Gallery (a supplier of fine art to the interior design trade) and Danskin, +Inc., a leading manufacturer of women’s dance and active wear, enhances the Board’s leadership and oversight capabilities. +Ms. Lynch has served on a number of boards, including The Harmony Group-LeRoi Princeton (a manufacturer of children’s +apparel), Salant Corporation (Perry Ellis Menswear) and Frederick’s of Hollywood (a retailer of women’s apparel +and lingerie). Currently, Ms. Lynch serves on the board of General American Investors, Inc., and on both its Pension and Nominating +Committees. She was a member of the Audit and Nominating and Governance Committees during her tenure at Salant and chaired the +Compensation Committee during her tenure on the board of Frederick’s of Hollywood. In addition, Ms. Lynch has held +leadership positions with a variety of not-for-profit organizations. She currently serves on the Board of Directors of the Princeton +University Varsity Club and is President of her Princeton University class. She also serves on the Board of Trustees of Concord +Academy in Concord, Massachusetts. Ms. Lynch is a member of the Women and Foreign Policy Advisory Council at the Council +on Foreign Relations. +Peter +Migliorini has served as a director of the Company since October 1996 and has served on the Nominating/Corporate +Governance Committee, as its Chair, since July 2004 and the Compensation Committee, as its Chair, since July 2004. Mr. Migliorini +formerly served on the Company’s Audit Committee, from October 1996 until June 2018. Mr. Migliorini is the Presiding +Director over all executive sessions of the independent directors. Mr. Migliorini possesses extensive executive level financial, +sales and operations experience. Prior to serving as sales manager for Greschlers, Inc., from 1987 to 1994, Mr. Migliorini +served as Director of Operations for Mackroyce Group, a construction company. Earlier, Mr. Migliorini held various positions +of increasing responsibility from Assistant Buyer to Chief Planner/Coordinator for several shoe companies, including Meldisco +Shoes, Perry Shoes and Fasco Shoes. His numerous years of business experience at various levels and in various industries provide +the Board with a measure of practical orientation regarding the Company’s operations and growth endeavors. Mr. Migliorini’s +early experience in the shoe industry also provides relevant knowledge and expertise in the Company’s specific industry. +10 +Richard +P. Randall has served as a director of the Company since April 2006 and has served on the Company’s +Audit Committee, as its Chair, since 2006, and on the Nominating/Corporate Governance Committee since September 2008. Mr. Randall +has decades of business experience, including tenures as Chief Financial Officer and Chief Operating Officer of both publicly +traded and privately held companies in the retail industry, including Direct Holdings Worldwide, LLC, the parent company of Lillian +Vernon Corp. and Time-Life, a music and video marketing company, and, prior thereto, Coach, Inc., a luxury leather goods company. +Mr. Randall possesses extensive knowledge of accounting and finance, the retail industry and the issues impacting a publicly +traded company. Mr. Randall has extensive executive level experience establishing his capabilities in management of complex +organizations and is a certified public accountant. His expertise in finance qualifies him to serve as the Audit Committee “audit +committee financial expert” and his service on the boards and board committees of other companies has allowed him to gain +broad-based experience and sensitivity regarding best practices, which he shares with the Board. Mr. Randall also provides +a perspective on proper governance for public companies. He currently serves as a member of the board of directors and Audit Committee, +Corporate Governance and Nominating Committee and Strategic Planning and Risk Assessment Committee of P&F Industries, Inc., +a manufacturer and importer of tools sold principally to the industrial, retail and automotive markets and, until December 31, +2014, served as a member of the board of directors and chair of the Audit and Risk Committee of Aceto Corporation, a generic pharmaceutical, +nutraceutical and chemical distribution company. Mr. Randall is a former director and member of the Executive, Finance, Audit +and Research Committees of The Burke Rehabilitation Hospital (“Burke”). He served as a Member Emeritus of Burke’s +Executive Committee and retains a board seat on The Burke Foundation’s board. Mr. Randall served as a director and +chair of the Audit Committee of Universal Travel Group, a travel services provider in the People’s Republic of China, and +of Home Systems Group, a manufacturer and distributor of household appliances in the People’s Republic of China, from 2007 +until 2008 when he resigned from these boards. +Ravi +Sachdev has been a director of the Company since September 2008 and has served on the Company’s Audit Committee +since September 2008. As a Partner of the private equity firm Clayton Dubilier & Rice, LLC since June 2015, Mr. Sachdev +focuses on the healthcare sector. Earlier, Mr. Sachdev was a Managing Director and Co-Head of Healthcare Services at J.P. +Morgan from November 2010 and prior to that held the positions of Managing Director at Deutsche Bank Securities, Inc. from January 2009 +until November 2010 and Director at Deutsche Bank from January 2007 until January 2009. Prior to joining Deutsche Bank +in 2006 as a Vice President, Mr. Sachdev served as a Vice President at Peter J. Solomon Company, an investment banking boutique, +specializing in mergers and acquisitions in the healthcare sector, from 1998 to 2006. Mr. Sachdev possesses knowledge +of finance and the financial analytics used to measure business performance. His 20 years of professional experience in investment +banking and private equity brings to the Board a thorough understanding of the financial issues affecting public companies and +greater insights in business valuation together with a practical orientation with respect to acquisitions and integrations. Mr. Sachdev +also serves on the Board of Directors and the Strategy Committee and Compensation Committee of Covetrus, Inc., a global animal-health +technology and services company, Agilon Health, a technology-enabled services platform for the physicians market, and naviHealth, +Inc., a technology-enabled services provider in the value-based care sector. +Thomas +H. Schwartz has served as a director of the Company since May 2004 and has served on the Company’s Compensation +Committee since July 2004. With more than twenty years of experience as a Managing Director of Helmsley-Spear, Inc. and twelve +years as the owner of his own real estate investment firm, Mr. Schwartz brings to the Board extensive executive level experience +in handling operations issues and practical expertise in management. +Robert +Smith has served as a director of the Company since April 2014 and as a member of the Compensation Committee and +the Nominating/Corporate Governance Committee since June 2014. Mr. Smith is the Chief Executive Officer of Phluid Project, a part +retail concept, part experiential platform, completely gender neutral, which he founded in 2018. Phluid Project’s flagship +retail store is located in Manhattan and its website reaches young consumers worldwide. Prior to Phluid Project and his former +positions with Haddad Brands and Victoria’s Secret Direct, Mr. Smith held various senior merchandising positions at +Macy’s Inc. between 1998 and 2010, beginning with Vice President, Merchandise Manager, Macy’s West and culminating +with Executive Vice President, Merchandising for Juniors, Kids, Intimate Apparel, Dresses, Suits, Coats and Swimwear. Earlier, +Mr. Smith was a Merchandiser for XOXO Apparel Company and held various positions with Burdine’s Department Stores. +Mr. Smith possesses nearly 30 years of business experience in the fashion industry and has extensive executive level expertise +in merchandising. His experience in this area further enhances the Board’s depth of understanding of the industry. +Amelia +Newton Varela has been President of the Company since September 2015 and has served as a director of the Company since +2016. Prior to this tenure, Ms. Varela was Executive Vice President of Wholesale of the Company since April 2008 and Executive +Vice President of Wholesale Footwear of the Company from November 2004 to April 2008. Previously, she was Vice President of Sales +for Steve Madden Women’s Wholesale Division from January 2000. Ms. Varela began her career with the Company in 1998 +in the role of Account Executive for Steve Madden Women’s Wholesale Division. She graduated from The Fashion Institute of +Technology in 1995. +11 +Required +Vote +Proxies +will be voted for the election of the nine nominees as directors of the Company unless otherwise specified in the proxy. A plurality +of the votes cast by the holders of shares of Common Stock present in person or represented by proxy and entitled to vote at the +Annual Meeting will be necessary to elect the nominees as directors. This means that the director nominees who receive the greatest +number of affirmative votes cast are elected as directors subject to our Director Election (Majority Voting) Policy, which +is described below. If, for any reason, any nominee is unable or unwilling to serve, the proxies will be voted for a substitute +nominee who will be designated by the Board of Directors at the Annual Meeting. Stockholders may abstain from voting by marking +the appropriate boxes on the accompanying proxy. Abstentions will be counted separately and used for purposes of calculating whether +a quorum is present at the Annual Meeting, but will have no effect on the outcome of the vote. +Director Election (Majority +Voting) Policy +It +is the policy of the Company that any nominee for director who receives a greater number of “WITHHOLD” votes than +“FOR” votes for his or her election must promptly submit a letter offering his or her resignation to the Nominating/Corporate +Governance Committee following the certification of the stockholder vote. In such event, the Nominating/Corporate Governance Committee +would then consider the offer of resignation and make a recommendation to the Board of Directors as to whether or not the resignation +should be accepted. This policy does not apply in contested elections. For more information about this policy, see “Corporate +Governance – Director Election (Majority Voting) Policy” below. +Recommendation of the Board +of Directors +The +Nominating/Corporate Governance Committee of the Board and the entire Board of Directors unanimously recommend a vote “FOR” +the election of Ms. Rose Peabody Lynch, Ms. Amelia Newton Varela and Messrs. Edward R. Rosenfeld, Mitchell S. Klipper, Peter +Migliorini, Richard P. Randall, Ravi Sachdev, Thomas H. Schwartz and Robert Smith. +12 +CORPORATE +GOVERNANCE +The Board of Directors +Our +business is managed under the direction and oversight of the Board of Directors who are elected by the Company’s stockholders. +Directors meet their responsibilities by participating in meetings of the Board of Directors and the various committees of the +Board on which they sit, as well as through communicating with our Chairman and Chief Executive Officer, other officers and employees +of the Company and by consulting with our independent registered public accounting firm and other third parties. The size of the +Board is fixed at nine members, seven of whom are independent and two of whom are non-independent directors. +Director Independence +The +Board of Directors has determined that the following director nominees are “independent” for purposes of the criteria +of the SEC and The Nasdaq Global Select Market listing standards: Ms. Lynch and Messrs. Klipper, Migliorini, Randall, Sachdev, +Schwartz and Smith. If the nine nominees set forth above are elected, the Board will be comprised of a majority of independent +directors. The Board of Directors has held regularly scheduled executive sessions for the independent directors, with Mr. Migliorini +serving as Presiding Director of such executive sessions. +Director Attendance at +Meetings +Attendance +at Annual Meetings of Stockholders +The +Company has no specific policy regarding director attendance at its annual meetings of stockholders. The Company encourages all +of its directors to attend annual meetings of the Company’s stockholders and three directors attended the Company’s +2018 annual meeting of stockholders. +Attendance +at Meetings of the Board of Directors +The +Board of Directors held four regularly scheduled meetings during the 2018 Fiscal Year and acted by unanimous written consent on +three occasions during the 2018 Fiscal Year. In the 2018 Fiscal Year, each director attended at least 75% of the aggregate number +of Board meetings, and each director attended at least 75% of the aggregate number of meetings held by all committees on which +he or she then served. +Director Election (Majority +Voting) Policy +The +Company has adopted a Director Election (Majority Voting) Policy. Pursuant to this policy, in an uncontested election of +directors (that is, an election where the number of nominees is equal to the number of seats open) any nominee for director +who receives a greater number of “WITHHOLD” votes than “FOR” votes for his or her election must promptly +submit an offer of resignation to the Nominating/Corporate Governance Committee following the certification of the stockholder +vote for consideration in accordance with the following procedures. +In +such event, upon receipt of the resignation, the Nominating/Corporate Governance Committee would promptly consider the appropriateness +of the director’s continued service on the Board of Directors and recommend to the Qualified Independent Directors (as defined +below) the action to be taken with respect to the resignation, which could include (1) accepting the resignation; (2) rejecting +the resignation; (3) retaining the director but addressing what the Qualified Independent Directors believe to be the underlying +cause of the “WITHHOLD” votes; or (4) determining that the director will not be renominated by the Board of Directors +in future elections. The Nominating/Corporate Governance Committee would consider factors such as (a) the reasons expressed +by the stockholders for withholding votes from such director; (b) any possibilities for curing the underlying cause of the +“WITHHOLD” votes; (c) the tenure and qualifications of the director and his or her past and expected future contributions +to the Company; (d) the overall composition of the Board of Directors, including, without limitation, whether accepting the +resignation would cause the Company to fail to meet any applicable SEC or Nasdaq requirement; (e) the availability of other +qualified candidates; and (f) the Company’s Board of Director Candidate Guidelines. +13 +The +Qualified Independent Directors would then act on the Nominating/Corporate Governance Committee’s recommendation no later +than 90 days following the date of the stockholders’ meeting at which the director election occurred. In considering the +Nominating/Corporate Governance Committee’s recommendation, the Qualified Independent Directors would review the factors +considered by the Nominating/Corporate Governance Committee and such additional information and factors that they believe to be +relevant. Following the Qualified Independent Directors’ decision, the Company would promptly disclose the decision in a +Current Report on Form 8-K. The Form 8-K would include a full explanation of the process by which the decision of the Qualified +Independent Directors was reached and, if applicable, the reasons why the offer of resignation was rejected. +In +the event that an offer of resignation were to be accepted, the Nominating/Corporate Governance Committee would recommend to the +Board of Directors whether to fill the vacancy or reduce the size of the Board of Directors accordingly. Any director required +to submit his or her resignation pursuant to this policy would not participate in the Nominating/Corporate Governance Committee’s +recommendation or the Qualified Independent Directors’ consideration of the resignation but, prior to voting on the director’s +resignation offer, the Qualified Independent Directors would provide to the director an opportunity to submit any information +or statement that he believes relevant to the Qualified Independent Directors’ consideration of the resignation. +For +purposes of this policy, “Qualified Independent Directors” means all directors who (1) are “independent” +for purposes of The Nasdaq Global Select Market listing standards and (2) are not required to offer their resignation in +accordance with this policy. If there are fewer than three independent directors then serving on the Board of Directors who are +not required to submit their resignations in accordance with this policy, then the Qualified Independent Directors shall consist +of all of the independent directors and each independent director who is required to offer his or her resignation in accordance +with this policy shall recuse himself or herself from the deliberations and voting only with respect to his or her individual +offer to resign. +Committees of the Board +Among +other committees, the Board of Directors has a standing Audit Committee, Compensation Committee and Nominating/Corporate Governance +Committee. Each committee has a written charter. The table below provides current membership for each Board committee and the +number of meetings held by each Board committee in the 2018 Fiscal Year. +Committees +of the Board of Directors +Director +Audit +Compensation +Nominating/ +Corporate +Governance +Edward +R. Rosenfeld +Mitchell +S. Klipper +Member +Rose +Peabody Lynch +Member +Member +Peter +Migliorini +Chair +Chair +Richard +P. Randall +Chair +Member +Ravi +Sachdev +Member +Thomas +H. Schwartz +Member +Robert +Smith +Member +Member +Amelia +Newton Varela +Number +of Meetings in 2018 Fiscal Year +4 +3* +1* +* +In +the 2018 Fiscal Year, each of the Compensation Committee and the Nominating/Corporate Governance Committee acted by unanimous +written consent on one occasion. +14 +Audit +Committee +The +Audit Committee is comprised of directors who are “independent” for purposes of The Nasdaq Global Select Market listing +standards and who meet the independence requirements contained in Securities Exchange Act of 1934, as amended (the “Exchange +Act”) Rule 10A-3(b)(1). The Board has determined that each of Messrs. Randall and Sachdev meets the SEC criteria +of an “audit committee financial expert” as defined in Item 407 of Regulation S-K under the Exchange Act. The +Audit Committee is primarily responsible for reviewing the services performed by the Company’s independent registered public +accountants, evaluating the Company’s accounting policies and its system of internal controls, and reviewing significant +financial transactions. +The +Audit Committee is responsible for reviewing and striving to ensure the integrity of the Company’s financial statements +and oversight of our compliance with legal and regulatory requirements and our internal audit function. Among other matters, the +Audit Committee, with management and independent and internal auditors, reviews the adequacy of the Company’s internal accounting +controls that could significantly affect the Company’s financial statements. The Audit Committee is also directly and solely +responsible for the appointment, retention, compensation, oversight and termination of the Company’s independent registered +public accountants. In addition, the Audit Committee functions as the Company’s Qualified Legal Compliance Committee (the +“QLCC”). The purpose of the QLCC is to receive, retain and investigate reports made directly, or otherwise made known, +of evidence of material violations of any United States federal or state law, including any breach of fiduciary duty by the Company, +its officers, directors, employees or agents, and if the QLCC believes appropriate, to recommend courses of action to the Company. +Management +has primary responsibility for the Company’s financial statements and the overall reporting process, including the Company’s +system of internal controls. The Company’s independent registered public accountants audit the annual financial statements +prepared by management, express an opinion as to whether those financial statements present fairly the financial position, results +of operations and cash flows of the Company in conformity with accounting principles generally accepted in the United States and +discuss with the Audit Committee any issues they believe should be raised with the Audit Committee. +The +Audit Committee is also responsible for the oversight of the Company’s risk management process, which is discussed in the +“Risk Oversight” section below. +In +performing its functions, the Audit Committee meets with management on at least a quarterly basis to review and discuss the annual +audited financial statements, quarterly financial statements and related reports and to consider the adequacy of the Company’s +internal controls and the objectivity of its financial reporting. The Audit Committee discusses these matters with the Company’s +independent registered public accountants and with appropriate Company financial personnel. Meetings are held with the independent +registered public accountants, who have unrestricted access to the Audit Committee. In addition, the Audit Committee reviews the +Company’s financing plans and reports and makes recommendations to the full Board of Directors for approval and to authorize +action. The Board has adopted a written charter setting out the functions the Audit Committee is to perform. A copy of the Audit +Committee Charter is available on the Company’s website at www.stevemadden.com . +Nominating/Corporate +Governance Committee +The +Nominating/Corporate Governance Committee is comprised of directors who are “independent” for purposes of The Nasdaq +Global Select Market listing standards. +The +Nominating/Corporate Governance Committee provides oversight with respect to a wide range of issues relating to the composition +and operation of the Board, including consideration of and recommendations regarding the size and composition of the Board of +Directors and identification of potential candidates to serve as directors. The Nominating/Corporate Governance Committee identifies +candidates to the Board of Directors by introductions from management, members of the Board of Directors, employees of the Company +or other sources, including stockholders that satisfy the Company’s policy regarding stockholder recommended candidates. +The Nominating/Corporate Governance Committee does not evaluate director candidates recommended by stockholders differently than +director candidates recommended by other sources. +15 +Stockholders +wishing to submit recommendations for director nominations for the 2020 Annual Meeting should write to the Secretary, Steven Madden, +Ltd., 52-16 Barnett Avenue, Long Island City, New York 11104. Any such stockholder must (i) comply with the director nomination +provisions of the Company’s By-Laws, (ii) meet and evidence the minimum eligibility requirements specified in Exchange +Act Rule 14a-8, and (iii) submit, within the same timeframe for submitting a stockholder proposal required by Rule 14a-8: +(1) evidence in accordance with Rule 14a-8 of compliance with the stockholder eligibility requirements, (2) the +written consent of the candidate(s) for nomination as a director, (3) a resume or other written statement of the qualifications +of the candidate(s) for nomination as a director and (4) all information regarding the candidate(s) and the submitting +stockholder that would be required to be disclosed in a proxy statement filed with the SEC if the candidate(s) were nominated +for election to the Board of Directors. +In +considering candidates for the Board of Directors, the Nominating/Corporate Governance Committee considers the Company’s +Board of Director Candidate Guidelines and Director Election (Majority Voting) Policy, available on the Company’s website +at www.stevemadden.com , the Company’s policy regarding stockholder recommended director candidates, as set forth +above, and all other factors that are deemed appropriate including, but not limited to, the individual’s character, education, +experience, knowledge and skills. While the Nominating/Corporate Governance Committee’s Board of Directors Candidate Guidelines +does not expressly identify diversity as a factor for consideration regarding the evaluation of director candidates, diversity +is among the many factors the Nominating/Corporate Governance Committee considers in the candidate evaluation process. To assess +the effectiveness of the mandate set forth in the Nominating/Corporate Governance Committee’s charter, the Nominating/Corporate +Governance Committee reviews annually with the Board the composition of the Board as a whole and recommends, if necessary, measures +to be taken so that the Board reflects the appropriate balance of knowledge, experience, skills, expertise and diversity required +for the Board as a whole. +In +addition, the Nominating/Corporate Governance Committee develops and recommends corporate governance principles for the Company; +makes recommendations to the Board of Directors in support of such principles; takes a leadership role in the shaping of the corporate +governance of the Company; and oversees the evaluation of the Board of Directors and management. The Nominating/Corporate Governance +Committee operates under a formal charter that governs the Committee’s composition, powers and responsibilities. A copy +of the Nominating/Corporate Governance Committee Charter is available on the Company’s website at www.stevemadden.com . +Compensation +Committee +The +Compensation Committee is comprised of directors who are “independent” for purposes of The Nasdaq Global Select Market +listing standards and applicable tax and securities rules. +The +Compensation Committee is responsible for establishing and overseeing the Company’s compensation and incentive plans and +programs; determining and approving compensation for the Company’s executive officers, including salaries, bonuses, perquisites +and equity awards; reviewing and approving compensation and awards for the Company’s executive officers under the Company’s +compensation and incentive plans and programs; administering the Company’s equity compensation plans; reviewing and approving +a compensation program for independent members of the Board; and assisting the Board in discharging the Board’s responsibilities +relating to management organization, performance, compensation and succession. The Compensation Committee operates under a formal +charter adopted by the Board of Directors that governs its composition, powers and responsibilities. A copy of the Compensation +Committee Charter is available on the Company’s website at www.stevemadden.com . +16 +Board Leadership Structure, +Risk Oversight, Executive Sessions of Non-Employee Directors, and Communications Between Stockholders and the Board +Board +Leadership Structure +As +noted above, our Board is currently comprised of seven independent and two non-independent directors. +Mr. Rosenfeld +has served as Chairman of the Board and Chief Executive Officer since August 2008, and has been a member of the Board since February 2008. +The Board has designated one of the independent directors as Presiding Director to preside over executive sessions. We believe +that the number of independent, experienced directors that comprise our Board, along with the independent oversight of our Presiding +Director, benefits the Company and its stockholders. +We +recognize that different board leadership structures may be appropriate for companies in different situations and believe that +no one structure is suitable for all companies. We believe our current Board leadership structure is optimal for the Company because +it demonstrates to our employees, suppliers, customers, and other stakeholders that the Company is under strong leadership, with +a single person setting the tone and having primary responsibility for managing our operations and leading the Board in setting +long-term strategy. Having a single leader for both the Company and the Board eliminates confusion and duplication of efforts, +and provides clear leadership for the Company. We believe the Company, like many U.S. companies, has been well-served by this +leadership structure. +Because +the positions of Chairman of the Board and Chief Executive Officer are held by the same person, the Board believes it is appropriate +for the independent directors to elect one independent director to serve as a Presiding Director. In addition to presiding at +executive sessions of the independent directors, the Presiding Director has various responsibilities including coordinating with +the Chairman of the Board and Chief Executive Officer in establishing agenda and discussion items for Board meetings; retaining +independent advisors on behalf of the Board as the Board may determine to be necessary or appropriate and performing such other +functions as the independent directors may designate from time to time. Mr. Migliorini is currently serving as the Presiding +Director. +Our +Board conducts an annual evaluation in order to determine whether it and its committees are functioning effectively. As part of +this annual self-evaluation, the Board evaluates whether the current leadership structure continues to be optimal for the Company +and its stockholders. +Risk +Oversight +Our +Board is responsible for overseeing the Company’s risk management process. The Board focuses on the Company’s general +risk management strategy, the most significant risks facing the Company, and ensures that appropriate risk mitigation strategies +are implemented by management. The Board is also apprised of particular risk management matters in connection with its general +oversight and approval of corporate matters. +The +Board has delegated to the Audit Committee oversight of the Company’s risk management process. Among its duties, the Audit +Committee reviews with management (a) the Company’s policies with respect to risk assessment and management of risks +that may be material to the Company, (b) the Company’s system of disclosure controls and system of internal controls +over financial reporting, and (c) the Company’s compliance with legal and regulatory requirements. The Audit Committee +is also responsible for reviewing major legislative and regulatory developments that could materially impact the Company’s +contingent liabilities and risks. Our other Board committees also consider and address risks as they perform their respective +committee responsibilities. All committees report to the full Board as appropriate, including when a matter rises to the level +of a material or enterprise level risk. +The +Company’s management is responsible for day-to-day risk management. Our risk management and internal audit areas serve as +the primary monitoring and testing function for company-wide policies and procedures, and manage the day-to-day oversight of the +risk management strategy for the ongoing business of the Company. This oversight includes identifying, evaluating, and addressing +potential risks that may exist at the enterprise, strategic, financial, operational, and compliance and reporting levels. +17 +We +believe the division of risk management responsibilities described above is an effective approach for addressing the risks facing +the Company and that our Board leadership structure supports this approach. +Executive +Sessions of Independent Directors +The +Board holds executive sessions of its independent directors generally at each regularly scheduled meeting. The Presiding Director +serves as the chairperson for these executive sessions. +Communications +between Stockholders and the Board +The +Company has adopted a procedure by which stockholders may send communications to one or more members of the Board of Directors +by writing to such director(s) or to the entire Board of Directors in care of the Secretary, Steven Madden, Ltd., 52-16 Barnett +Avenue, Long Island City, New York 11104. The Board has instructed the Secretary of the Company to review all communications so +received and to exercise his discretion not to forward to the Board correspondence that is inappropriate, such as business solicitations, +frivolous communications and advertising, routine business matters (i.e. business inquiries, complaints, or suggestions) and +personal grievances. However, any director may at any time request that the Secretary forward to such director any and all communications +received by the Secretary but not forwarded to the directors. +Codes of Business Conduct +and Ethics +The +Company has adopted a Code of Ethics for the Chief Executive Officer and Senior Financial Officers, which is applicable to our +Chief Executive Officer, Chief Financial Officer, controller, principal accounting officer, head of internal audit and other employees +of the Company who are designated from time to time as “senior financial officers” of the Company. In addition, the +individuals who serve on our Board of Directors are subject to a Code of Business Conduct and Ethics for the Board of Directors +and all of the Company’s employees are held accountable for adherence to a Code of Conduct. Each of the Code of Ethics for +the Chief Executive Officer and senior financial officers and the Code of Business Conduct and Ethics for the Board of Directors +is included as an exhibit to our Annual Report on Form 10-K for the fiscal year ended December 31, 2014. The Code of Conduct applicable +to all of our employees is an exhibit to the Company’s Annual Report on Form 10-K for the 2018 Fiscal Year. The Code of +Ethics for the Chief Executive Officer and senior financial officers, the Code of Business Conduct and Ethics for the Board of +Directors and the Code of Conduct applicable to all of our employees (collectively, the “Conduct Code”) are available +on the Company’s website at www.stevemadden.com and, in addition, may be obtained by any stockholder without charge +upon request by writing to the Secretary, Steven Madden, Ltd., 52-16 Barnett Avenue, Long Island City, New York 11104. The Conduct +Code is intended to establish standards necessary to deter wrongdoing and to promote compliance with applicable governmental laws, +rules and regulations and honest and ethical conduct. The Conduct Code covers all areas of professional conduct, including conflicts +of interest, fair dealing, financial reporting and disclosure, protection of Company assets and confidentiality. Employees have +an obligation to promptly report any known or suspected violation of the Conduct Code without fear of retaliation. Waiver of any +provision of the Conduct Code for executive officers and directors may only be granted by the Board of Directors or the Nominating/Corporate +Governance Committee and any such waiver or modification of the Conduct Code relating to such individuals will be disclosed by +the Company. +Corporate Governance +Guidelines +The +Board of Directors has adopted Corporate Governance Guidelines as a set of guiding principles by which the Company is governed. +Various matters of corporate governance are addressed in the Corporate Governance Guidelines, such as board size and composition, +director qualifications and responsibilities, director compensation, limitations on service on other boards, board committees, +director orientation and education, director access to management, management development and succession planning and annual performance +evaluations for the Board. The Corporate Governance Guidelines include a policy for the clawback of executive incentive compensation +paid to senior executive officers in the event of an accounting restatement by the Company due to intentional misconduct of a +senior executive officer. In addition, in circumstances in which the Board of Directors believes it is appropriate, the clawback +policy allows for the reimbursement, forfeiture or cancellation of incentive compensation paid or awarded to a senior executive +officer of the Company who has engaged in willful misconduct in the performance of his or her duties that results in material +financial harm or significant reputational harm to the Company. +18 +The +Nominating/Corporate Governance Committee reviews the Corporate Governance Guidelines annually to determine whether to recommend +changes to the Corporate Governance Guidelines to reflect new laws, rules and regulations and developing governance practices. +A copy of the Corporate Governance Guidelines may be obtained by any stockholder without charge upon request by writing to the +Secretary, Steven Madden, Ltd., 52-16 Barnett Avenue, Long Island City, New York 11104. +Stock Ownership Guidelines +The +Board of Directors has adopted Stock Ownership Guidelines, which require a level of ownership of shares of our Common Stock by +our directors and executive officers in order to align their interests with those of our stockholders. The Stock Ownership Guidelines +require our Chief Executive Officer to own shares of our Common Stock equal in value to five times his annual base salary. Other +executive officers of the Company are required to own shares of our Common Stock equal in value to two times their annual base +salary. The Stock Ownership Guidelines further require that non-employee directors of the Company must own shares of our Common +Stock equal in value to two times the cash portion of the directors’ annual retainer or the equivalent if a retainer is +not received in certain circumstances. Individuals subject to the Stock Ownership Guidelines must attain the required level of +share ownership by the fifth anniversary of the later of the Stock Ownership Guidelines’ adoption date and the date that +the individual became an executive officer or director and must retain an amount equal to 25% of the net shares of our Common +Stock received as a result of the exercise, vesting or payment of any equity award made by the Company until the share ownership +requirement is satisfied. +Prohibition on Hedging +and Pledging of Our Common Stock +Our directors +and executive officers and certain other persons designated from time to time by the Company’s Chief Financial Officer are +prohibited from entering into hedging transactions and from pledging our Common Stock pursuant to a formal policy concerning such +activities adopted by the Board of Directors. +Corporate Social Responsibility +Policy +The +Company is committed to operating its business in a socially responsible manner. We strive to incorporate this commitment into +every aspect of our business, including the design of our products, the quality, safety and sourcing of our products, the safety +and fair treatment of our employees, animal welfare and compliance with laws, including the Foreign Corrupt Practices Act and +the SEC’s Conflict Minerals rule. These guiding principles are set forth in our Corporate Social Responsibility Policy and +we expect all of our employees to be familiar with and to adhere to them. We strive to do business with vendors and suppliers +that share our views and commitments to quality products and ethical business principles. We will only engage vendors and suppliers +that demonstrate a commitment to meeting our standards. +Certain Relationships +and Related Party Transactions +Steven +Madden Employment Agreement. The Company believes that Steven Madden, the Company’s founder and Creative and Design +Chief, provides unique and significant value in guiding the leadership of the Company’s creative process, both in his hands +on work for the Company and his collaboration with the Company’s designers, product professionals and marketing executives. +In addition, the public’s association of Mr. Madden’s name and likeness with our branded products is significant, +meaningful, and integral to the Company’s success and has been, and continues to be, instrumental in creating long-term +stockholder value. Based upon that belief, the Company further believes that his continuing involvement with the Company is essential +and to this end has for many years had an employment agreement with Mr. Madden as described below. +19 +Mr. +Madden’s agreement in its current form dates back to July 1, 2005, as subsequently amended on various occasions most recently +on March 25, 2019 (the “SM Employment Agreement”). Under the SM Employment Agreement, Mr. Madden has agreed to continue +to serve as the Company’s Creative and Design Chief for a term continuing through December 31, 2026, for a base salary of +$7,026,042 per annum together with the potential for cash bonuses at the sole discretion of the Company’s Board of Directors +and an annual life insurance premium reimbursement of up to $200,000. Pursuant to the SM Agreement, on February 8, 2012, Mr. Madden +was granted 2,194,584 restricted shares of Common Stock (the number of shares indicated having been adjusted for an October 11, +2018 three-for-two stock split effected as a stock dividend), valued at approximately $40 million, under the Company’s Amended +and Restated 2006 Stock Incentive Plan, which is referred to herein as the “2006 Plan,” vesting in equal annual installments +over seven years commencing on December 31, 2017 through December 31, 2023, subject to Mr. Madden’s continued employment +with the Company on each such vesting date. On June 30, 2012, as allowed under the SM Agreement, Mr. Madden elected to receive +an additional restricted stock award valued at approximately $40 million in consideration of a reduction in his annual base salary +in years subsequent to 2012 to the amount reflected above. As a consequence, on July 3, 2012, Mr. Madden received 2,840,013 restricted +shares of Common Stock vesting in six annual installments commencing on December 31, 2018 through December 31, 2023, again, subject +to his continued employment with the Company on each such vesting date. +Under +the SM Agreement, Mr. Madden is also eligible to receive annually, on or about the date of the Company’s annual meeting +of stockholders (but not later than June 30th), an option (the “Annual Option”) to purchase shares of Common Stock +equal to the greater of (a) 100% of the largest aggregate number of shares of Common Stock available upon the exercise of an option +or options granted to any other continuing full-time employee of the Company during the preceding twelve-month period and (b) +225,000 shares of Common Stock; provided, however, that a grant to Mr. Madden in excess of 150% of the number of shares of Common +Stock subject to options granted to such other continuing full-time employee would require stockholder approval. Any Annual Option +so granted vests quarterly over a one-year period and is exercisable at a price equal to the closing price of the Company’s +Common Stock on the grant date for a period of five years. In addition, pursuant to the SM Agreement, on March 1, 2017, Mr. Madden +received a one-time stock option grant to purchase 1,125,000 shares of the Company’s Common Stock at an exercise price of +$24.90 as a result of the Company having achieved for the fiscal year ended December 31, 2016 earnings per share performance criteria +set forth in the SM Agreement; such option vests in equal annual installments over a five-year period which commenced on the first +anniversary of the grant date. +Under +the SM Agreement, in the event of Mr. Madden’s death, his estate would receive a payment equal to his base salary for the +12-month period immediately subsequent to the date of his death. Further, in the event that Mr. Madden’s employment is terminated +due to his total disability (as defined in the agreement), “for cause” (as defined in the agreement) or due to Mr. +Madden’s resignation, the Company is obligated to pay Mr. Madden the amount of compensation that is accrued and unpaid through +the date of termination. In the event that Mr. Madden’s employment is terminated for any reason (other than “for cause” +or due to his death, total disability or resignation), the Company is obligated to pay Mr. Madden, in installments, the balance +of his base salary through the end of the term of the SM Agreement. If, during the period commencing 120 days prior to a “change +of control” transaction (as defined in the agreement) and ending on the first anniversary of a change of control transaction, +Mr. Madden’s employment is terminated other than for cause or by his resignation for “good reason” (as defined +in the agreement), or if Mr. Madden resigns for good reason or without good reason within 30 days following a change of control +transaction, all unvested options held by Mr. Madden will be accelerated and vest on the date of termination or resignation and +Mr. Madden will be entitled to receive a lump sum cash payment equal to the amount of compensation that is accrued and unpaid +through the date of termination plus $35 million. The SM Agreement contains other customary provisions, including provisions regarding +expense reimbursement, confidentiality, solicitation and competition. +For +the 2018 Fiscal Year, Mr. Madden earned $7,026,042 in base salary and received $200,000 for the payment of an annual life insurance +premium. Mr. Madden also received as his Annual Option for the 2018 Fiscal Year an option to purchase 225,000 shares of Common +Stock at a price per share of $35.95. +The +most recent amendment entered into on March 25, 2019, effected the extension of the term of the SM Agreement for three years through +December 31, 2026. In consideration of this extension, the Company has granted to Mr. Madden 200,000 shares of Common Stock under +the 2006 Plan, which shares are subject to certain restrictions including, without limitation, that the Employee will not sell, +transfer, pledge, hypothecate, assign or otherwise dispose of the restricted shares except as set forth under the 2006 Plan or +Mr. Madden’s award agreement. Vesting of the shares occurs in annual installments over three years commencing on December +31, 2024 on which date 66,666 shares will vest and continuing to vest thereafter on each of December 31, 2025 and December 31, +2026 when 66,667 shares will vest; provided, in each case, that Mr. Madden continues to be employed by the Company on each such +date through December 31, 2026. +20 +Loan +to Steven Madden. On June 25, 2007, the Company made a loan to Mr. Madden in the amount of $3,000,000, in order for Mr. Madden +to satisfy a personal tax obligation resulting from the exercise of a stock option which was due to expire and hold the underlying +shares of Common Stock. The loan is evidenced by a secured promissory note executed by Mr. Madden in favor of the Company, the +security for which is a security interest in a certain securities brokerage account maintained by Mr. Madden with his broker; +none of the securities in the securities brokerage account are shares of the Company’s Common Stock. There have been successive +amendments to the secured promissory note, the most recent of which occurred in April 2016, at which time the secured promissory +note was amended to substitute the collateral securing the secured promissory note from shares of the Company’s Common Stock +to the security interest in Mr. Madden’s securities brokerage account noted above. Previously, on January 3, 2012, the secured +promissory note was amended and restated to extend the maturity date of the obligation to December 31, 2023 and eliminate the +accrual of interest after December 31, 2011. Prior to the January 3, 2012 amendment, the secured promissory note had been accruing +interest at the rate of 6% per annum. In addition, the secured promissory note provides that, commencing on December 31, 2014 +and annually on each December 31 thereafter through the maturity date, one-tenth of the principal amount thereof, together with +accrued interest, will be cancelled by the Company provided that Mr. Madden continues to be employed by the Company on each such +December 31. Contemporaneously, on each such December 31, the Company will release its security interest in a portion of the securities +held in Mr. Madden’s securities brokerage account generally correlating to the amount of indebtedness cancelled on such +date. As of December 31, 2011, interest in the amount of $1,090,000 had accrued on the principal amount of the secured promissory +note and, as noted above, interest was eliminated after December 31, 2011. On December 31, 2018, the required one-tenth of the +principal amount of the secured promissory note, together with accrued interest, was written-off by the Company. +Review, Approval or Ratification +of Transactions with Related Persons +The +Company’s written Conduct Code and Employee Handbook prohibit all conflicts of interest. Under the Conduct Code, conflicts +of interest occur when private or family interests interfere in any way, or even appear to interfere, with the interests of the +Company. The Company’s prohibition on conflicts of interest under the Conduct Code includes any related person transaction. +Related +person transactions must be approved by the Board, or by a committee of the Board consisting solely of independent directors, +who will approve the transaction only if they determine that it is in the best interests of the Company. In considering the transaction, +the Board or committee will consider all relevant factors, including, as applicable, (i) the Company’s business rationale +for entering into the transaction; (ii) the alternatives to entering into a related person transaction; (iii) whether +the transaction is on terms comparable to those available to third parties or, in the case of employment relationships, to employees +generally; (iv) the potential for the transaction to lead to an actual or apparent conflict of interest and any safeguards +imposed to prevent such actual or apparent conflicts; and (v) the overall fairness of the transaction to the Company. +The +Company has multiple processes for reporting conflicts of interests, including related person transactions. Under the Conduct +Code, all employees are required to report any actual or apparent conflict of interest, or potential conflict of interest, to +management. The Chief Financial Officer distributes a questionnaire to the Company’s executive officers and management personnel +on a quarterly basis and distributes a questionnaire to the members of the Board of Directors on an annual basis requesting certain +information regarding, among other things, their immediate family members, employment and beneficial ownership interests, which +information is then reviewed for any conflicts of interest under the Conduct Code. +The +Board of Directors, the Audit Committee and the Disclosure Committee, which is comprised of management personnel, discuss the +related party transactions, specifically, and in connection with the regular review processes attendant to the Company’s +periodic filings, including related party transaction disclosures. +If +a director is a party to or in some manner involved in a transaction involving the Company, he or she will be recused from all +discussions and decisions about the transaction. The transaction must be approved in advance whenever practicable, and if not +practicable, must be ratified as promptly as practicable. +21 +COMPENSATION +OF DIRECTORS IN THE 2018 FISCAL YEAR +The +Compensation Committee is responsible for establishing and overseeing all matters pertaining to compensation paid to directors +for service on the Board and its committees. +The +following table sets forth information concerning the compensation of the Company’s non-employee directors in the 2018 Fiscal +Year. Following the table is a discussion of material factors related to the information disclosed in the table. +Name +Fees Earned or +Paid in Cash +($) +Stock +Awards +($)(1) +All Other +Compensation +($) +Total +($) +Mitchell S. Klipper +63,750 (2) +121,017 (3) +— +184,767 +Peter Migliorini +105,000 +121,017 (4) +— +226,017 +Richard P. Randall +120,000 +121,017 (5) +— +241,017 +Ravi Sachdev +85,000 +121,017 (6) +— +206,017 +Thomas H. Schwartz +85,000 +121,017 (7) +— +206,017 +Rose Peabody Lynch +95,000 +121,017 (8) +— +216,017 +Robert Smith +95,000 +121,017 (9) +— +216,017 +(1) Reflects the grant date fair value of stock awards calculated +in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic +718. Assumptions used in the calculation of these amounts are included in Note I to the Company’s audited financial statements +for the fiscal year ended December 31, 2018 included in the Company’s Annual Report on Form 10-K filed with the Securities +and Exchange Commission on February 28, 2019. +(2) Mr. Klipper joined the Board of Directors on April 2, +2018 and, therefore, did not receive first quarter director fees. +(3) At December 31, 2018, the aggregate number of shares +of restricted Common Stock held by Mr. Klipper was 3,393, all of which was issued in the 2018 Fiscal Year, and Mr. Klipper +had no options outstanding. +(4) At December 31, 2018, the aggregate number of shares +of restricted Common Stock held by Mr. Migliorini was 3,393, all of which was issued in the 2018 Fiscal Year, and Mr. Migliorini +had no options outstanding. +(5) At December 31, 2018, the aggregate number of shares +of restricted Common Stock held by Mr. Randall was 3,393, all of which was issued in the 2018 Fiscal Year, and Mr. Randall +had no options outstanding. +(6) At December 31, 2018, the aggregate number of shares +of restricted Common Stock held by Mr. Sachdev was 3,393, all of which was issued in the 2018 Fiscal Year, and Mr. Sachdev +had no options outstanding. +(7) At December 31, 2018, the aggregate number of shares +of restricted Common Stock held by Mr. Schwartz was 3,393, all of which was issued in the 2018 Fiscal Year, and Mr. Schwartz +had no options outstanding. +(8) At December 31, 2018, the aggregate number of shares +of restricted Common Stock held by Ms. Lynch was 3,393, all of which was issued in the 2018 Fiscal Year, and Ms. Lynch +had no options outstanding. +(9) At December 31, 2018, the aggregate number of shares +of restricted Common Stock held by Mr. Smith was 3,393, all of which was issued in the 2018 Fiscal Year, and Mr. Smith +had no options outstanding. +Directors +who are also employees of the Company are not paid any fees or other remuneration for service on the Board of Directors or any +of its committees. In the 2018 Fiscal Year, each non-employee director received the following compensation: (i) a grant of +3,393 shares of restricted Common Stock, vesting on the first anniversary of the grant date, May 25, 2019 and (ii) $75,000. +In +the 2018 Fiscal Year, members of the Audit Committee, Nominating/Corporate Governance Committee and Compensation Committee each +received an additional $10,000 for serving on such committees, except that (a) the Chairman of the Audit Committee received $35,000 +for serving in this role and (b) the Chairman of the Compensation Committee received $15,000, instead of $10,000. The Company +reimburses its directors for any out-of-pocket expenses incurred by them in connection with services provided in such capacity. +22 +STOCK +OWNERSHIP +Security Ownership of +Certain Beneficial Owners +The +following table sets forth information as of the Record Date (unless otherwise indicated) with respect to the beneficial +ownership of the Common Stock of the Company by each person known by the Company to be the beneficial owner of more than 5% of +the outstanding shares of the Common Stock of the Company. A person is deemed to be a beneficial owner of any securities which +that person has the right to acquire within 60 days. +Name and Address of Beneficial Owner +Amount and Nature +of Beneficial +Ownership (1) +Percentage of Class +BlackRock Inc. +55 East 52 nd Street +New York, NY 10055 +11,790,955 +13.5 % (2) +The Vanguard Group +100 Vanguard Boulevard +Malvern, Pennsylvania 19355 +8,025,146 +9.17 % (3) +Steven Madden +c/o Steven Madden, Ltd. +52-16 Barnett Avenue +Long Island City, NY 11104 +6,375,327 +7.34 % (4) +(1) Beneficial +ownership as reported in the table below has been determined in accordance with Item +403 of Regulation S-K and Rule 13d-3 of the Exchange Act and based upon 85,782,610 +shares of Common Stock outstanding (excluding treasury shares) as of the Record +Date. +(2) Based solely on a Statement on Schedule 13G filed with +the SEC on January 31, 2019 by BlackRock, Inc. (“BlackRock”), BlackRock has sole voting power with respect to +11,596,816 of such shares and sole dispositive power with respect to all such shares. +(3) Based solely on a Statement on Schedule 13G filed with +the SEC on February 11, 2019 by The Vanguard Group (“Vanguard”), Vanguard has sole voting power with respect +to 177,906 of such shares, shared voting power with respect to 10,900 of such shares, sole dispositive power with respect to 7,843,814 +of such shares and shared dispositive power with respect to 181,332 of such shares. +(4) Mr. Madden’s beneficial ownership includes: +(i) 50,000 shares of Common Stock held by BOCAP Corp, a corporation wholly-owned by Mr. Madden; (ii) 4,134,238 +shares of restricted Common Stock granted under the 2006 Plan (which restricted stock includes (A) 1,567,560 shares which will +vest in equal annual installments over five years commencing on December 31, 2019 through December 31, 2023, (B) 2,366,678 +shares which will vest in equal annual installments over five years commencing on December 31, 2019 through December 31, +2023 and (C) 200,000 shares which will vest in substantially equal annual installments over three years commencing on December +31, 2024, in each case subject to forfeiture pursuant to the terms of the 2006 Plan and of Mr. Madden’s employment +agreement, as amended); (iii) 1,068,750 shares of Common Stock that may be acquired through the exercise of options that are exercisable +as of, or will become exercisable within 60 days of, the Record Date; and (iv) 1,122,339 shares of Common Stock held by Mr. Madden +directly. +23 +Security Ownership of +Directors and Executive Officers +The +following table sets forth information as of the Record Date (unless otherwise indicated) with respect to the beneficial +ownership of Common Stock held by (a) each current director and nominee; (b) the Chief Executive Officer, the Chief +Financial Officer and the three most highly compensated executive officers of the Company other than the Chief Executive Officer +and the Chief Financial Officer (the “Named Executive Officers”); and (c) all current directors and executive +officers as a group. A person is deemed to be a beneficial owner of any securities which that person has the right to acquire +within 60 days. Each director and executive officer has sole voting power and sole dispositive power with respect to all shares +beneficially owned by him or her. +Name +of Beneficial Owner (1) +Amount +and Nature +of Beneficial +Ownership (2) +Percentage +of Class +Edward R. +Rosenfeld +935,666 +1.09 %(3) +Amelia Newton Varela +231,276 +* %(4) +Arvind Dharia +109,607 +* %(5) +Awadhesh Sinha +86,767 +* %(6) +Karla Frieders +123,207 +* %(7) +Mitchell S. Klipper +3,393 +* %(8) +Rose Peabody Lynch +10,654 +* %(9) +Peter Migliorini +10,239 +* %(10) +Richard P. Randall +34,105 +* %(11) +Ravi Sachdev +57,973 +* %(12) +Thomas H. Schwartz +24,402 +* %(13) +Robert Smith +20,347 +* %(14) +All Directors and Executive +Officers as a Group (13 persons) +1,679,476 +1.96 %(15) +* Indicates beneficial ownership +of less than 1%. +(1) The address for each of the individuals named above +is c/o Steven Madden, Ltd., 52-16 Barnett Avenue, Long Island City, New York 11104. +(2) Beneficial +ownership as reported in the table above has been determined in accordance with Item +403 of Regulation S-K and Rule 13d-3 of the Exchange Act and based upon 85,782,610 +shares of Common Stock outstanding (excluding treasury shares) as of the Record +Date. +(3) Mr. Rosenfeld’s beneficial ownership includes: +(i) 496,587 shares of restricted Common Stock; and (ii) 439,079 shares of Common Stock held by Mr. Rosenfeld. +(4) Ms. Varela’s beneficial ownership includes: +(i) 75,000 shares of Common Stock that may be acquired through the exercise of options that are exercisable as of, or will +become exercisable within 60 days of, the Record Date; (ii) 24,838 shares of restricted Common Stock; and (iii) 131,438 +shares of Common Stock held by Ms. Varela. +(5) Mr. Dharia’s beneficial ownership includes: +(i) 18,163 shares of restricted Common Stock; and (ii) 91,444 shares of Common Stock held by Mr. Dharia. +(6) Mr. Sinha’s beneficial ownership includes: +(i) 16,910 shares of restricted Common Stock; and (ii) 69,857 shares of Common Stock held by Mr. Sinha. +(7) Ms. Frieders’ beneficial ownership consists of +(i) 62,130 shares of restricted Common Stock; and (ii) 61,077 shares of Common Stock held by Ms. Frieders. +(8) Mr. Klipper’s beneficial ownership consists of +3,393 shares of restricted Common Stock. +(9) Ms. Lynch’s beneficial ownership consists +of (i) 3,393 shares of restricted Common Stock; and (ii) 7,261 shares of Common Stock held by Ms. Lynch. +(10) Mr. Migliorini’s beneficial ownership includes: +(i) 3,393 shares of restricted Common Stock; and (ii) 6,846 shares of Common Stock held by Mr. Migliorini. +(11) Mr. Randall’s beneficial ownership includes: +(i) 3,393 shares of restricted Common Stock; and (ii) 30,712 shares of Common Stock held by Mr. Randall. +(12) Mr. Sachdev’s beneficial ownership includes: +(i) 3,393 shares of restricted Common Stock; and (ii) 54,580 shares of Common Stock held by Mr. Sachdev. +(13) Mr. Schwartz’s beneficial ownership includes: +(i) 3,393 shares of restricted Common Stock; and (ii) 21,009 shares of Common Stock held by Mr. Schwartz. +(14) Mr. Smith’s beneficial ownership includes: +(i) 3,393 shares of restricted Common Stock; and (ii) 16,954 shares of Common Stock held by Mr. Smith. +(15) Includes, in the aggregate, 75,000 shares of Common +Stock that may be acquired through the exercise of options that are exercisable as of, or will become exercisable within 60 days +of, the Record Date; (ii) 670,501 shares of restricted Common Stock; and (iii) 933,975 shares of Common Stock held by +such beneficial owners. +24 +Section 16(a) Beneficial +Ownership Reporting Compliance +Section 16(a) of +the Exchange Act requires that the Company’s directors and officers, and persons who beneficially own more than 10% of a +registered class of the Company’s equity securities, file with the SEC reports of initial ownership of Common Stock and +subsequent changes in that ownership and furnish the Company with copies of all forms they file with the SEC pursuant to Section 16(a) of +the Exchange Act. +Based +solely on our review of the copies of such forms received by us, or written representations received from certain Section 16(a) +reporting persons, the Company believes that, during the fiscal year ended December 31, 2018, all Section 16(a) filing requirements +applicable to its officers, directors and greater than 10% beneficial owners were complied with during, or in respect of, the +2018 Fiscal Year. +EXECUTIVE +COMPENSATION +Compensation Discussion +and Analysis +Executive +Summary +This +Compensation Discussion and Analysis describes the overall principals and objectives and specific features of our executive compensation +program, primarily focused on the executive compensation program’s application to our Chief Executive Officer and the other +executive officers of the Company included in the Summary Compensation Table, whom we refer to collectively in this Proxy Statement +as the “Named Executive Officers.” +Over +the last ten years our stock price has increased at an annual rate of 21.8% after adjusting for stock splits. Our 2018 year-end +stock price decreased 2.8% from our 2017 year-end stock price after adjusting for a three-for-two stock split of our Common Stock +that occurred on October 11, 2018. However, after including the effect of dividends, total stockholder return declined just 0.8%. +This resulted in a one-year total stockholder return at the 35 th percentile as compared with our peer group for 2019. +In +February 2018, the Board of Directors of the Company approved the initiation of a quarterly cash dividend on the Company’s +outstanding shares of Common Stock as part of its cash deployment strategy to drive shareholder value or enhance shareholder returns. +A quarterly cash dividend of $0.13 per share was paid to stockholders on each of March 29, 2018, June 29, 2018 and September 28, +2018 and a quarterly cash dividend of $0.14 per share was paid to stockholders on December 31, 2018. +On +September 11, 2018, the Company’s Board of Directors declared a three-for-two stock split of the Company’s outstanding +shares of Common Stock, effected in the form of a stock dividend on the Company’s outstanding Common Stock. Stockholders +of record at the close of business on October 1, 2018 received one additional share for every two shares of Common Stock owned +on that date. The additional shares were distributed to the Company’s stockholders on October 11, 2018. All share data provided +herein gives effect to this stock split, applied retroactively. +During +2018, the Company delivered solid financial results, driven by the strong performance of the Company’s Steve Madden and +Blondo businesses in both domestic and international markets as well as strong growth in Steve Madden and private label handbags. +Net sales for the 2018 Fiscal Year increased by 7.0% to $1.65 billion from $1.55 billion in the year ended December 31, 2017. +Net income was $129.1 million, or $1.50 per diluted share, for the 2018 Fiscal Year as compared to net income of $117.9 million, +or $1.36 per diluted share, for the year ended December 31, 2017. On an adjusted basis, net income was $157.7 million, or $1.83 +per diluted share, for the 2018 Fiscal Year as compared to net income of $129.3 million, or $1.49 per diluted share, for the year +ended December 31, 2017. 1 +Reflecting +the Company’s financial and stock price performance in 2018, overall Named Executive Officer bonus awards, which are paid +in the form of both cash and time-vested restricted stock grants, decreased 3.9% from the previous year. As our general practice +is to award bonuses and grant equity based on Named Executive Officer performance for the preceding year, we are able to maintain +relative alignment between pay and performance. +1 +A reconciliation of adjusted results is included in Annex A to this Proxy Statement. +25 +Compensation +Objectives and Strategy +The +Company’s executive officer compensation program is designed to attract and retain the caliber of officers needed to ensure +the Company’s continued growth and profitability and to reward them for their performance, for the Company’s performance +and for creating longer-term value for our stockholders. The primary objectives of the program are to: +· align +rewards with performance that creates stockholder value; +· support +the Company’s strong team orientation; +· encourage +high-potential team players to build a career at the Company; and +· provide +rewards that are cost-efficient, competitive with other similarly-positioned organizations +and fair to employees and stockholders. +The +Company’s executive compensation programs are approved and administered by the Compensation Committee of the Board of Directors. +Working with management and outside advisors, the Compensation Committee has developed a compensation and benefits strategy that +rewards performance and reinforces a culture that the Compensation Committee believes will drive long-term success. +The +compensation program rewards team accomplishments while promoting individual accountability. The executive officer compensation +program depends in significant measure on Company results, but business unit results and individual accomplishments are also very +important factors in determining each executive’s compensation. The Company has a robust planning and goal-setting process +that is fully integrated into the compensation system, enhancing a strong relationship among individual efforts, Company results +and financial rewards. +A +major portion of total compensation is placed at risk through annual and long-term incentives. As noted below, discretionary bonuses +were paid to the Named Executive Officers. The combination of incentives is designed to balance annual operating objectives and +Company earnings performance with longer-term stockholder value creation. +To +implement its primary objectives, the Company seeks to provide competitive compensation that is commensurate with performance. +The Company targets compensation at the median of the market and calibrates both annual and long-term incentive opportunities +to generate less-than-median awards when goals are not fully achieved and greater-than-median awards when goals are exceeded. +The +Company believes that there is great value to the Company in having a team of long-tenured, seasoned managers and seeks to promote +a long-term commitment from its senior executives. The Company’s team-focused culture and management processes are designed +to foster this commitment. In addition, restricted Common Stock awards granted to Named Executive Officers in the 2018 Fiscal +Year reinforce this long-term orientation with annual vesting over four to five-year periods. +Role +of the Compensation Committee +General. +The Compensation Committee provides overall guidance for the Company’s executive compensation policies and determines +the amounts and elements of compensation for the Company’s executive officers and outside directors. The Compensation Committee +currently consists of four members of the Company’s Board of Directors, Ms. Lynch and Messrs. Migliorini, Schwartz +and Smith, each of whom is an independent director under Rule 5605 of The Nasdaq Global Select Market listing standards and +a “non-employee director” as defined under the SEC’s rules. +26 +When +considering decisions concerning the compensation of executives, other than the Chief Executive Officer, the Compensation Committee +asks for the recommendations of the Chief Executive Officer, including his detailed evaluation of each executive’s performance. +No executive has a role in recommending compensation for outside directors. With respect to the application of the Company’s +incentive compensation plans to non-employee directors, the Board of Directors functions as the Compensation Committee. +Use +of Outside Advisors. In making its determinations with respect to executive compensation, the Compensation Committee has historically +engaged the services of an independent compensation consulting firm. The Compensation Committee has retained the services of Arthur +J. Gallagher & Co.’s Human Resources & Compensation Consulting Practice (“Gallagher”) since +2005 to assist with its review of the compensation packages and employment agreements of the Chief Executive Officer and other +executive officers. In 2018 and 2019, Gallagher worked with the Compensation Committee to assess the reasonableness of discretionary +cash bonus payments and equity grants to Messrs. Rosenfeld, Dharia and Sinha and Mses. Frieders and Varela based on the Company’s +and the individual’s performance in the 2018 Fiscal Year and the reasonableness of the terms of a new employment agreement +for Mr. Rosenfeld and an amendment of Mr. Dharia’s employment agreement as compared with comparable positions in the peer +group listed below. Executive compensation for the Named Executive Officers was based on employment agreements with pay structures +and levels guided by Gallagher’s market studies just prior to the consummation of the agreements. Position-specific market +studies were completed at the time of the employment agreement extension in support of the design of these agreements. The Compensation +Committee also consulted Gallagher with respect to the establishment of a performance-based bonus pool based on a percentage of +the Company’s net income in the 2018 Fiscal Year as well as the adoption of the Steven Madden, Ltd. 2019 Incentive Compensation +Plan (the “2019 Plan”), which will replace the 2006 Plan, the term of which will expire on April 6, 2019. Gallagher +provides only executive compensation consulting services and works with management only at the behest of the Compensation Committee. +The +Compensation Committee retains Gallagher directly, although in carrying out assignments, Gallagher also interacts with Company +management, when necessary and appropriate, in order to obtain compensation and performance data for the executives and the Company. +In addition, Gallagher may, in its discretion, seek input and feedback from management regarding its consulting work product for +the Compensation Committee in order to confirm alignment with the Company’s business strategy and identify data questions +or other similar issues, if any, prior to completion of a project for the Compensation Committee. +Independence +of Outside Advisors. The Compensation Committee has the sole authority to retain, terminate, approve the fees and set the +terms of the Company’s relationship with any outside advisors who assist the Committee in carrying out its responsibilities, +and may select or receive advice from any compensation consultant or other advisor only after taking into consideration all factors +relevant to the consultant’s independence from management, including the factors set forth in the Nasdaq’s rules. +Accordingly, +the Compensation Committee reviews annually its relationship with Gallagher to ensure its independence on executive compensation +matters. Prior to selecting and receiving advice from Gallagher with respect to executive compensation in the 2018 Fiscal Year, +the Compensation Committee reviewed the independence of Gallagher and the individual representatives of Gallagher who served as +the committee’s advisors. The Compensation Committee determined that no conflicts of interest exist between the Company +and Gallagher (or any individuals working on the Company’s account on behalf of Gallagher). In reaching such determination, +the Compensation Committee considered, among other things, the following factors: (i) that Gallagher provides no services +to the Company other than the executive compensation consulting services; (ii) the fees paid by us to Gallagher as a percentage +of Gallagher’s total revenue; (iii) the representations by Gallagher as to its policies and procedures that are designed +to prevent a conflict of interest; (iv) any business or personal relationships between the individual representatives of +Gallagher who advised the Compensation Committee and any member of the Compensation Committee; and (v) any business or personal +relationships between our executive officers and Gallagher or the individual representatives of Gallagher. +27 +Consideration +of 2018 Stockholder Say on Pay Vote. At our 2018 Annual Meeting of Stockholders, our stockholders overwhelmingly +approved, on an advisory basis, the compensation of our Named Executive Officers (96% of votes cast). This continues the string +of 94% or higher approvals that began with the initial say on pay vote in 2011. The Compensation Committee believes this level +of stockholder support reflects a very strong endorsement of our compensation policies and decisions. The Compensation Committee +has considered the results of this advisory vote on executive compensation in determining the Company’s compensation policies +and decisions for 2019, and has determined that these policies and decisions are appropriate and in the best interests of the +Company and its stockholders at this time. +Compensation +Structure +Pay +Elements - Overview +The Company +utilizes four main components of compensation: +· +base +salary; +· +annual +performance-based bonuses; +· +long-term +equity incentives (consisting of stock options and/or restricted stock); and +· +benefits +and perquisites. +Pay +Elements - Details +Base +Salary . The Company paid base salaries to each of the Named Executive Officers to provide them with fixed pay commensurate +with the Named Executive Officer’s role and responsibilities, experience, expertise and individual performance. As more +fully described in the section of this Proxy Statement captioned “Employment Arrangements,” as of December 31, +2018, the Company had employment agreements with each of the Named Executive Officers. The Compensation Committee, as constituted +at the time the parties entered into the employment agreements or any amendments thereof, reviewed and approved the salary established +in each such agreement or amendment. The Compensation Committee considered each employee’s salary history, value in the +marketplace and performance (including at the Company and previous employment). +The +annual base salary of our Chief Executive Officer, Edward R. Rosenfeld, was fixed at $900,000 for the 2018 Fiscal Year under his +prior employment agreement which expired on December 31, 2018. Mr. Rosenfeld’s new employment agreement dated December 31, +2018, which remains in effect until December 31, 2021, provides Mr. Rosenfeld with an annual base salary of $945,000 for the year +ending December 31, 2019, $992,250 for the year ending December 31, 2020 and $1,041,863 for the year ending December 31, 2021. +The annual base salary of our President, Amelia Newton Varela, was fixed at $650,000 for the year ended December 31, 2018 and +is $670,000 for the year ending December 31, 2019 under an employment agreement dated December 30, 2016, which remains in effect +until December 31, 2019. The annual base salary of our Chief Operating Officer, Awadhesh Sinha, was fixed at $702,000 for the +year ended December 31, 2018 and is $723,000 for the year ending December 31, 2019 under an employment agreement dated December +30, 2016, which remains in effect until December 31, 2019. Under the employment agreement, as amended, of our Chief Financial +Officer, Arvind Dharia, which remains in effect until December 31, 2020, Mr. Dharia’s annual base salary was $582,455 +for the year ended December 31, 2019 and is $611,578 for the year ending December 31, 2019 and $642,157 for the year ending December +31, 2020. Our Chief Merchandising Officer, Karla Frieders, began the 2018 Fiscal Year with an annual base salary of $550,000 under +an employment agreement dated April 11, 2017, which remains in effect through April 30, 2020, and provides Ms. Frieders with an +annual base salary of $570,000 from May 1, 2018 through April 30, 2019 and an annual base salary of $590,000 from May 1, 2019 +through April 30, 2020. Please see the section of this Proxy Statement captioned “Summary Compensation Table” and +“Employment Arrangements” for a more detailed description of their employment agreement and compensation. The 2019 +salary increases, if any, for our Named Executive Officers, as reflected in the following table, are generally consistent with +those of other management employees. +Named Executive Officer +2018 Salary +2019 Salary +Edward R. Rosenfeld +$ 900,000 +$ 945,000 +Amelia Newton Varela +$ 650,000 +$ 670,000 +Arvind Dharia +$ 582,455 +$ 611,578 +Awadhesh Sinha +$ 702,000 +$ 723,000 +Karla Frieders +$ 570,000 * +$ 590,000 * +* As noted above, Ms. Frieders +began the 2018 Fiscal Year with an annual base salary of $550,000. Her annual base salary increased to $570,000 for the period +May 1, 2018 through April 30, 2019 and will increase to $590,000 for the period May 1, 2019 through April 30, 2020. +28 +Annual +Performance-based Bonus - Based on Specific Performance Metrics . Annual performance-based cash bonuses, if any, for Named +Executive Officers are established in their respective employment agreements. The Compensation Committee reviewed and approved +the bonus provisions fixed in each such employment agreement at the time the parties entered into such agreements and any amendments +thereof. Such bonus provisions generally provide for variable or discretionary bonuses designed to reward attainment of business +goals. +Mr. Sinha’s +employment agreement entitles him to an annual performance-based bonus for the 2018 Fiscal Year in an amount equal to 2% of the +increase in the Company’s EBITDA for that year over the Company’s EBITDA for the immediately preceding year. For any +business acquired after December 30, 2016, EBITDA from the acquired business is included in the bonus calculation starting with +the first full quarter under Company ownership, provided that the prior year’s EBITDA will likewise be adjusted to include +EBITDA from the acquired business for comparable quarters in the prior year on a pro forma basis assuming the Company had owned +the business. The maximum annual bonus is $600,000, the first $300,000 of which is payable in cash and for any amount of the annual +bonus in excess of $300,000 by a grant of restricted shares of Common Stock, which restricted shares of Common Stock will vest +in three equal annual installments commencing on the first anniversary of the grant date. For the 2018 Fiscal Year, on March 15, +2019, Mr. Sinha received an annual performance-based cash bonus of $274,600, reflecting 2% of $13,729,980, the increase in 2018 +EBITDA over that of 2017. +Ms. Varela’s +employment agreement entitles her to an annual performance-based cash bonus for the 2018 Fiscal Year in an amount equal to 2% +of the increase in the Company’s total EBIT for that year over the Company’s EBIT for the immediately preceding year, +less any deductions as shall be required to be withheld by any applicable laws or regulations. EBIT attributable to any business +acquired by the Company after December 30, 2016 will not be included in the calculation of this bonus. For the 2018 Fiscal Year, +on March 15, 2019, Ms. Varela received an annual performance-based cash bonus of $263,302, reflecting 2% of $13,165,123, the increase +in 2018 EBIT over that of 2017. +As +provided in the 2006 Plan and the 2019 Plan, the maximum payment that may be made to an individual under any performance-based +cash award during any fiscal year and subject to the attainment of specified performance goals is $10,000,000. The Compensation +Committee may, in its sole discretion, elect to pay an individual an amount that is less than the individual’s target award +regardless of the degree of attainment of the performance goals. +29 +For +the 2018 Fiscal Year, the Compensation Committee established a bonus pool for Named Executive Officers and other key executives +of the Company based on 6% of net income of the Company achieved in the 2018 Fiscal Year. Net income was selected because it is +highly correlated with stock price performance. The Compensation Committee also fixed for each executive his or her maximum share +of the 2018 bonus pool, which was 30% for Mr. Rosenfeld and 14% for each of the other Named Executive Officers. In the 2018 +Fiscal Year, the Company achieved net income of $129,136,000, which resulted in a bonus pool of $7,748,160. The Compensation Committee +determined to pay a bonus to Mr. Rosenfeld in an amount in excess of his individual target award and bonuses to certain of the +other Named Executive Officers in amounts that were below their individual target awards for the 2018 Fiscal Year and to pay the +bonuses in a combination of cash and restricted shares of Common Stock that vest annually over five years. Accordingly, on March +15, 2019, the Company paid performance-based cash bonuses of $500,000, $220,000 and $100,000 to Mr. Rosenfeld, Mr. Dharia and +Ms. Frieders, respectively, and, on March 15, 2019, the Company paid performance-based bonuses in the form of restricted +stock to two of our Named Executive Officers as indicated in the following table. +Named Executive Officer +2019 +Restricted +Stock Grant +Value for 2018 +Performance +Number +of +Shares of +Restricted Stock +Awarded* +Annual +Vesting +Edward R. Rosenfeld +$ 2,981,686 +91,547 +5 years +Amelia Newton Varela +— +— +— +Arvind Dharia +— +— +— +Awadhesh Sinha +— +— +— +Karla Frieders +$ 496,953 +15,258 +5 years +* In accordance with applicable +SEC rules, the Summary Compensation Table included in this Proxy Statement does not report the grant date fair value of these +restricted stock awards because, while earned in 2018, the grants were not made until after the close of the 2018 Fiscal Year. +The 2019 Summary Compensation Table to be included in our proxy statement for our 2020 Annual Meeting of Stockholders will contain +the grant date fair value of these restricted stock awards provided these individuals are named executive officers in that proxy +statement. +The +decision to pay cash bonuses to Messrs. Rosenfeld and Dharia and Ms. Frieders, and to award restricted shares of Common Stock +to Mr. Rosenfeld and Ms. Frieders for the 2018 Fiscal Year and the amount of each such Named Executive Officer’s bonus was +determined at the discretion of the Compensation Committee, but within the parameters of the bonus pool for Named Executive Officers, +with the exception of Mr. Rosenfeld who received in cash and restricted shares 44.9% of the 2018 bonus pool. The Compensation +Committee evaluated a variety of indicators of the Company’s overall financial performance, including total shareholder +return, operating income, earnings per share and return on invested capital, and assessed and made subjective judgments as to +each of these executive’s individual contribution towards the Company’s performance in the 2018 Fiscal Year in determining +whether to pay bonuses to these executives and establishing the amounts to be paid. With respect to the determination to award +bonuses to Mr. Dharia and Ms. Frieders, the Compensation Committee also considered the recommendations of the Chief Executive +Officer, Mr. Rosenfeld. +The +Compensation Committee consulted Gallagher regarding the establishment of the bonus pool and the individual target awards for +the 2018 Fiscal Year to ensure the bonus pool and the individual target awards were within market range for each executive. +Long-term +Equity Incentives . Management and the Compensation Committee believe that equity-based awards are an important factor in aligning +the long-term financial interest of the executive officers and stockholders. The Compensation Committee continually evaluates +the use of equity-based awards and intends to continue to use such awards in the future as part of designing and administering +the Company’s compensation program. Beginning in 2006, the Compensation Committee modified its prior practice of granting +equity incentives solely in the form of stock options with periodic awards of restricted stock in order to grant awards that contain +both substantial incentive and retention characteristics. These awards are designed to provide emphasis on preserving stockholder +value generated in recent years while providing significant incentives for continuing growth in stockholder value. +In +the 2018 Fiscal Year, the Company made grants of 100,000 and 16,666 restricted shares of Common Stock to Mr. Rosenfeld and +Ms. Frieders, respectively, for performance in the fiscal year ended December 31, 2017. The restricted stock awards +made to Mr. Rosenfeld and Ms. Frieders vest in five equal annual installments. Gallagher reviewed the individual grant values +relative to market practice. These equity awards in the 2018 Fiscal Year were made under the 2006 Plan. +30 +The +restricted stock awards in the 2018 Fiscal Year also included a grant to (a) Mr. Sinha of 2,493 restricted shares of Common Stock +on March 15, 2018, which restricted stock award will vest in three equal annual installments on December 15, 2018, December 15, +2019 and December 15, 2020, and was awarded as a portion of his annual performance-based bonus based on the increase in 2017 EBITDA +over that of 2016, (b) Mr. Dharia of 18,750 restricted shares of Common Stock on May 1, 2018 in respect of an April 20, 2018 amendment +of his employment agreement, which restricted stock award will vest in three nearly equal installments on December 15, 2018, December +15, 2019 and December 15, 2020 and (c) Mr. Rosenfeld of 87,500 restricted shares of Common Stock on December 31, 2018 in respect +of his new three-year employment agreement, which restricted stock award will vest in five equal annual installments commencing +on December 1, 2019. Each of these restricted stock awards was made under the 2006 Plan. +The +Committee intends to continue to review the equity mix to achieve the ideal incentive for both performance and retention. With +respect to stock options, the 2019 Plan provides generally that the exercise price shall be the fair market value of the Company’s +Common Stock at the time of grant, which is defined for purposes of the 2019 Plan to mean the closing price reported for the Common +Stock on the applicable date (a) as reported on the principal national securities exchange on which it is then traded or (b) if +not traded on any such national securities exchange, the last sale price quoted in the principal over-the-counter market on which +the Common Stock is quoted. +Other +Benefits and Perquisites . The Company’s executive compensation program also includes other benefits and perquisites. +These benefits and perquisites include annual matching contributions to executive officers’ 401(k) plan accounts, company-paid +medical benefits, automobile allowances and leased automobiles and life insurance coverage. The Compensation Committee annually +reviews these other benefits and perquisites and makes adjustments as warranted based on competitive practices, the Company’s +performance and the individual’s responsibilities and performance. The Compensation Committee has approved these other benefits +and perquisites as a reasonable component of the Company’s executive officer compensation program. Please see the section +of this Proxy Statement captioned “Summary Compensation Table and, specifically, the column entitled “All Other Compensation” +and the corresponding footnotes. +Pay +Mix +The +Company utilizes the particular elements of compensation described above because the Company believes that it provides a well-proportioned +mix of secure compensation, retention value and at-risk compensation, which produces short-term and long-term performance incentives +and rewards. By following this approach, the Company provides the executives a measure of security in the minimum expected level +of compensation, while motivating the executives to focus on business metrics and other variables within their particular sector +which will increase sales and margins and at the same time lower costs so as to produce a high level of short-term and long-term +performance for the Company and long-term wealth creation for the executives, as well as reducing the risk of recruitment of top +executive talent by competitors. The mix of metrics used for the annual performance bonuses and the Company’s long-term +incentive program likewise provides an appropriate balance between short-term financial performance and long-term stock performance. +For +the Named Executive Officers, the mix of compensation is weighted heavily toward at-risk pay (annual incentives and long-term +incentives). Maintaining this pay mix results fundamentally in a pay-for-performance orientation for the Company’s executives, +which is aligned with the Company’s stated compensation philosophy of providing compensation commensurate with performance. +Pay +Levels and Benchmarking +Pay +levels for executives are determined based on a number of factors, including the individual’s roles and responsibilities +within the Company, the individual’s experience and expertise, the pay levels for peers within the Company, pay levels in +the marketplace for similar positions and performance of the individual and the Company as a whole. The Compensation Committee +is responsible for approving pay levels for the Named Executive Officers. In determining the pay levels, the Compensation Committee +considers all forms of compensation and benefits. +31 +The +Compensation Committee assesses “competitive market” compensation using a number of sources. The primary data source +used in setting competitive market levels for the Named Executive Officers is the information publicly disclosed by a peer group +of the Company, which is reviewed annually and may change from year to year. For the 2018 Fiscal Year, executive compensation +and compensation design was reviewed for the purpose of assessing bonus awards in early 2018 in the context of overall compensation +and in relation to the following peer companies: +Caleres, +Inc. +Guess, +Inc. +RTW +Retailwinds, Inc. +Cato +Corp. +Kate +Spade & Co.* +Shoe +Carnival, Inc. +Crocs, +Inc. +Lululemon +Athletica, Inc. +Skechers +U.S.A. Inc. +Deckers +Outdoor Corp. +Movado +Group, Inc. +Under +Armour, Inc. +G-III +Apparel Group, Ltd. +Oxford +Industries, Inc. +Wolverine +World Wide, Inc. +Genesco, +Inc. +Perry +Ellis International, Inc.* +* Kate Spade & Co. was +acquired by Tapestry, Inc. (f./k/a Coach, Inc.) and Perry Ellis International, Inc. became a privately held company subsequent +to the competitive market study. +The +market capitalization and trailing twelve months revenue of the Company and each peer company follows: +Company +Market Cap* +TTM Revenue** +Steven Madden, Ltd. +$ 2.65 B +$ 1.65 B +Caleres, Inc. +$ 1.19 B +$ 2.83 B +Cato Corp. +$ 0.35 B +$ 0.82 B +Crocs, Inc. +$ 1.74 B +$ 1.09 B +Deckers Outdoor Corp. +$ 3.73 B +$ 2.03 B +G-III Apparel Group, Ltd. +$ 1.38 B +$ 3.08 B +Genesco, Inc. +$ 0.89 B +$ 2.19 B +Guess, Inc. +$ 1.68 B +$ 2.63 B +Kate Spade & Co. +— +— +Lululemon Athletica, Inc. +$ 16.10 B +$ 2.65 B +Movado Group, Inc. +$ 0.73 B +$ 0.57 B +Oxford Industries, Inc. +$ 1.20 B +$ 1.10 B +Perry Ellis International, Inc. +— +— +RTW Retailwinds, Inc. +$ 0.18 B +$ 0.89 B +Shoe Carnival, Inc. +$ 0.52 B +$ 1.02 B +Skechers U.S.A. Inc. +$ 3.61 B +$ 4.66 B +Under Armour, Inc. +$ 7.58 B +$ 5.19 B +Wolverine World Wide, Inc. +$ 2.92 B +$ 2.24 B +* Market capitalization is +as of 12/31/2018. +** TTM is last four quarters +of publicly reported revenue. +After +consideration of the data collected on external competitive levels of compensation and internal needs, the Compensation Committee +makes decisions regarding the Named Executive Officer’s target total compensation opportunities based on the need to attract, +motivate and retain an experienced and effective management team. Relative to the competitive market data, the Compensation Committee +generally intends that the base salary and target annual incentive compensation for each Named Executive Officer will be at the +median of the competitive market. +As +noted above, notwithstanding the Company’s overall pay positioning objectives, pay opportunities for specific individuals +vary based on a number of factors such as scope of duties, tenure, institutional knowledge and/or difficulty in recruiting a new +executive. Actual total compensation in a given year will vary above or below the target compensation levels based primarily on +the attainment of operating goals and the creation of stockholder value. +32 +Compensation +Committee Discretion +The +Compensation Committee retains the discretion to decrease all forms of incentive payouts based on significant individual or Company +performance shortfalls, with the exception of any such payouts that are to be made pursuant to contractual commitments, such as +the bonuses that may be paid to Mr. Sinha and Ms. Varela, which are tied to the Company’s EBITDA and EBIT, respectively, +for the preceding year pursuant to their employment agreements. Similarly, the Compensation Committee retains the discretion to +increase payouts and/or consider special awards for significant achievements, including, but not limited to, superior asset management, +investment or strategic accomplishments and/or consummation of acquisitions, divestitures, capital improvements to existing properties, +or sales made by certain of the Company’s divisions. +Pay +Ratio +As +required by the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), the following disclosure +provides the relationship of the total annual compensation of our median-paid employee to the total annual compensation of our +Chief Executive Officer, Mr. Rosenfeld. The table below sets forth the total annual compensation for Mr. Rosenfeld and the median-paid +employee of the Company, who is a full-time stock associate, and the ratio between the two. +Median employee annual total compensation +$ 23,416 +Mr. Rosenfeld annual total compensation +$ 7,081,968 +Ratio of Chief Executive Officer to median employee compensation +302:1 +We +determined our median employee as of October 1, 2018, which date is within the last three months of the 2018 Fiscal Year, as permitted +by the pay ratio rule under the Dodd-Frank Act. In determining our median employee, we applied the “de minimis” exemption +under the rule, which allows the exemption of 5% or less of the Company’s total global workforce in jurisdictions outside +of the U.S., which amounts to 184 employees based on our total global workforce of 3,688 employees. As such, we excluded all of +our employees in each of Hong Kong (28 employees), The Netherlands (28 employees) and South Africa (84 employees), which in total +amount to 140 employees or 4%. We did not exclude from consideration any employees who joined the Company during the 2018 Fiscal +Year as the result of a business acquisition or combination. Employees on leave of absence were excluded and wages and salaries +were annualized for those employees that were not employed for the entire 2018 Fiscal Year. To identify our median employee, we +used payroll data consisting of salary, hourly wage, overtime wage, bonus, commissions, vesting of equity awards and any similar +payroll items for all of our employees included in the calculation. +Once +we identified our median employee, we determined that employee’s annual total compensation amount for the 2018 Fiscal Year +using the same method required for calculating our Chief Executive Officer’s (and other named executive officers’) +total annual compensation for purposes of the Summary Compensation Table, except that, for simplicity, employer contributions +to the Company’s 401(k) plan and medical benefits were excluded as all employees, including our Chief Executive Officer, +are offered the same benefits and the Company utilizes the Internal Revenue Service safe harbor provision for 401(k) discrimination +testing. +The +ratio stated above is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K. It is based +on the methodologies, assumptions and estimates described below and is not necessarily comparable to the ratios reported by other +companies. +Risk Assessment +Bonus +payments to executives are based either on the discretion of the Compensation Committee or are tied to growth in various indicators +of financial performance, such as EBITDA and EBIT. Long-term incentives have been granted in the form of stock options and time-vested +restricted stock that generally vest over four or five years. These programs have been in place for several years and have proved +effective in rewarding performance while not encouraging inappropriate risk-taking. +33 +The +Compensation Committee undertook to review and evaluate all of our executive and company-wide compensation plans and programs +to assess whether any aspect of these plans and programs would encourage inappropriate risk-taking by the Company’s executives +and non-executive employees that could have a material adverse effect on the Company and to confirm that the Company has adequate +risk management controls in place to ensure that executive and company-wide compensation is reasonable and achieves its intended +incentive without creating unacceptable risk. Based on such review and evaluation, the Compensation Committee believes there is +no material adverse risk to the Company that is related to our compensation programs for executives and non-executives. +This review +and evaluation of the risks associated with our compensation plans and programs consisted of: +· identifying +those business risks that could be material to the Company and identifying our existing +risk management system; +· reviewing +and analyzing our compensation plans and programs to identify plan and program features +that could potentially encourage or introduce excessive or imprudent risk taking of a +material nature; +· identifying +the business risks that our compensation plan and program features could potentially +encourage or create; +· balancing +these business risks against our existing internal control systems designed to manage +and mitigate these business risks; and +· analyzing +whether the unmitigated risks, as a whole, are reasonably likely to have a material adverse +effect on the Company. +Various +persons were consulted during the course of the assessment, including our executive officers and senior members of our human resources +department. The Compensation Committee engages Gallagher to review our executive and company-wide compensation plans and programs +and provide advice regarding appropriate levels of incentive. +The +Compensation Committee noted several features of our compensation structure that mitigate risk, including, for example: +· the +Company utilizes a pay mix that is well balanced between short-term financial performance +and long-term stock performance, comprised of secure compensation in the form of base +salary, short-term incentives in the form of potential for cash bonuses, and long-term +incentives in the form of stock options and time-vested restricted stock that generally +vest over four or five years; +· in +most instances, management or the Compensation Committee retains the discretion to decrease +all forms of incentive compensation based on significant individual or Company performance +shortfalls; +· we +periodically benchmark our compensation plans and programs and target executive and non-executive +compensation within the normal limits of the competitive market; and +· the +Compensation Committee provides oversight of the Company’s compensation plans and +programs and compensation philosophy, makes recommendations to the Board with respect +to improvements to our compensation plans and programs, and is responsible for reviewing +and approving executive compensation and administering and awarding incentive, deferred +and equity compensation to our senior executives. +In light +of the assessment described above, it was concluded that the risks associated with our compensation plans and programs (executive +and company-wide) are not reasonably likely to have a material adverse effect on the Company. +34 +Implications +of Tax and Accounting Matters +As +a general matter, the Compensation Committee considers the various tax and accounting implications of compensation vehicles employed +by the Company. While the Compensation Committee reviews and considers both the accounting and tax effects of various components +of compensation, those effects are not a significant factor in the Compensation Committee’s allocation of compensation among +the different components. +As +a result of changes to federal tax laws, which became effective in 2018, compensation paid to certain executive officers under +arrangements entered into or materially modified after November 2, 2017 generally are not deductible to the extent they result +in compensation that exceeds $1 million in any one year for any such executive officer. Before 2018, a deduction was allowed for +certain performance-based pay in excess of $1 million for executive officers who were subject to the limitation. Recognizing the +importance of linking pay and performance, the Company intends to continue to impose performance conditions on a portion of the +compensation of our executive officers. +As +more fully described below under the heading “Termination, Change-in-Control and Non-Competition/Non-Solicitation,” +with the exception of Ms. Frieders, all of our Named Executive Officers are entitled to receive certain compensation in the event +of a termination of employment in connection with a change-in-control event for the Company, which payments may trigger the application +of the “golden parachute” provisions of Sections 280G and 4999 of the Code. Section 280G of the Code disallows +a tax deduction with respect to excess parachute payments to certain executives of companies that undergo a change-in-control. +In addition, Section 4999 of the Code imposes a 20% excise tax on the individual receiving the excess parachute payment. +Excess parachute payments are golden parachute payments that exceed an amount determined under Section 280G based on the +executive’s prior compensation. In approving the compensation arrangements of our Named Executive Officers, our Compensation +Committee considers all elements of the cost to our Company of providing such compensation, including the potential impact of +Sections 280G and 4999, which, under certain circumstances, may limit the deductibility to the Company of executive compensation. +However, our Compensation Committee may determine, in its judgment, to authorize compensation arrangements that could give rise +to loss of deductibility under Section 280G and the imposition of excise taxes under Section 4999 when it believes that +such arrangements are appropriate to attract and retain executive talent. +Conclusion +The +level and mix of compensation that is finally decided upon as to each executive is considered within the context of both the objective +data from the Company’s competitive assessment of compensation and performance, as well as discussion of the subjective +factors as outlined above. The Compensation Committee believes that each of the compensation packages for the Named Executive +Officers is within the competitive range of practices when compared to the objective comparative data even where subjective factors +have influenced the compensation decisions. +Compensation Committee +Interlocks and Insider Participation +During +the 2018 Fiscal Year, the following directors served on the Compensation Committee: Peter Migliorini (Chairman), Thomas H. Schwartz, +Rose Peabody Lynch and Robert Smith. During the 2018 Fiscal Year: +· +none +of the members of the Compensation Committee was an officer (or former officer) or employee of the Company or any of +its subsidiaries; +· +none +of the members of the Compensation Committee had a direct or indirect material interest in any transaction in which the Company +was a participant and the amount involved exceeded $120,000; +· +none +of the Company’s executive officers served on the compensation committee (or another board committee with similar functions +or, if none, the entire board of directors) of another entity where one of that entity’s executive officers served +on the Company’s Compensation Committee; +· +none +of the Company’s executive officers was a director of another entity where one +of that entity’s executive officers served on the Company’s Compensation +Committee; and +· +none +of the Company’s executive officers served on the compensation committee (or another board committee with similar functions +or, if none, the entire board of directors) of another entity where one of that entity’s executive officers served +as a director on the Company’s Board of Directors. +35 +Executive Officers +The following +table identifies the executive officers of the Company, and their ages and positions: +Name +Age +Position +Edward R. Rosenfeld +43 +Chairman of the Board +and Chief Executive Officer +Amelia Newton Varela +47 +President +Arvind Dharia +69 +Chief Financial Officer +and Secretary +Awadhesh Sinha +73 +Chief Operating Officer +Karla Frieders +42 +Chief Merchandising Officer +Michael Paradise +57 +Executive Vice President – General +Counsel +Arvind +Dharia has been the Chief Financial Officer of the Company since October 1992 and was a director of the Company from December 1993 +through May 2004. Mr. Dharia has been Secretary of the Company since 1993. From December 1988 until joining the +Company in September 1992, Mr. Dharia was Assistant Controller of Millennium III Real Estate Corp., a real estate management +company. +Awadhesh +Sinha became the Chief Operating Officer of the Company in July 2005. Mr. Sinha was a director of the Company, from October 2002 +to July 2005, before joining the Company as its Chief Operating Officer. Mr. Sinha was the Chief Operating Officer and Chief +Financial Officer of WEAR ME Apparel Inc., a company that designs, manufactures and markets branded and non-branded children’s +clothing, from 2003 to July 2005. Prior to that, Mr. Sinha worked for Salant Corporation, a company that designs, manufactures +and markets men’s clothing, for 22 years, and held the position of Chief Operating Officer and Chief Financial Officer +of Salant Corporation from 1998 to 2003. +Karla +Frieders has been the Chief Merchandising Officer of the Company since September 2015. Previously, Ms. Frieders served as the +President of Retail from January 2013 and the Vice President of Retail from October 2009 until January 2013. Prior to these roles, +Ms. Frieders held various buying positions at the Company from 1999. +Michael +Paradise joined the Company in May 2016 as Executive Vice President – General Counsel. From 2009, prior to joining the Company, +Mr. Paradise was a partner at the New York City law firm of McLaughlin & Stern, LLP, where he practiced corporate, securities +and commercial law. He also practiced law at a number of medium and large law firms in New York City. Mr. Paradise received his +J.D. degree, with honors, from George Washington University Law School in 1987, and his B.A. degree, cum laude, from the University +of Rochester in 1984. +Please +see the section of this Proxy Statement captioned “Proposal One: Election of Directors” for biographical summaries +and other information concerning the Company’s Chairman of the Board and Chief Executive Officer, Edward R. Rosenfeld, and +its President, Amelia Newton Varela, as well as the Company’s other director nominees. +SUMMARY +COMPENSATION TABLE +The +following table sets forth the compensation information for the Company’s Chief Executive Officer, Chief Financial Officer +and the three most highly compensated executive officers other than the Chief Executive Officer and Chief Financial Officer relating +to the fiscal years ended December 31, 2018, 2017 and 2016, respectively. In this Proxy Statement, the Company refers to +this group of people as the Company’s “Named Executive Officers.” +36 +In +accordance with applicable SEC rules, the Summary Compensation Table includes, for a particular fiscal year, only those stock +awards made during that fiscal year and not any awards made after year-end even if awarded for services rendered in that year. +SEC rules require that such awards be reflected in the year of grant and, as such, awards made after the end of the 2018 Fiscal +Year will appear in the Summary Compensation Table to be included in our proxy statement for our 2020 Annual Meeting of Stockholders. +Name and Principal +Position +Fiscal +Year +Salary +($) +Bonus +($) +Stock +Awards +($) (1) +Option +Awards +($)(1) +Non-Equity +Incentive +Plan +Compensation +($) +All Other +Compensation +($) +Total +Compensation +($) +Edward R. Rosenfeld +2018 +899,038 +— +5,664,780 +— +500,000 +26,250 (2) +7,090,068 +Chief Executive Officer +2017 +849,039 +— +1,515,972 +— +500,000 +26,100 (3) +2,891,111 +2016 +797,510 +— +3,350,593 +— +250,000 +25,950 (4) +4,424,053 +Amelia Newton Varela +2018 +649,615 +— +— +— +263,302 (5) +23,250 (6) +936,167 +President +2017 +629,423 +— +505,324 +814,000 +338,669 (7) +23,100 (8) +2,310,516 +2016 +600,000 +— +518,065 +— +— +22,950 (9) +1,141,015 +Arvind Dharia +2018 +582,455 +— +602,438 +— +220,000 +106,565 (10) +1,511,458 +Chief Financial Officer +2017 +582,455 +— +— +— +220,000 +109,720 (11) +912,175 +2016 +582,455 +— +116,567 +— +200,000 +108,912 (12) +1,007,934 +Awadhesh Sinha +2018 +701,596 +— +75,214 +— +274,600 (13) +23,708 (14) +1,075,118 +Chief Operating Officer +2017 +680,625 +— +1,007,042 +— +300,000 (15) +23,806 (16) +2,011,473 +2016 +661,015 +— +116,567 +— +200,000 (17) +23,656 (18) +1,001,238 +Karla Frieders +2018 +563,000 +— +502,843 +— +100,000 +8,250 (19) +1,174,093 +Executive Vice President +of Wholesale +2017 +517,846 +— +751,000 +— +100,000 +29,822 (20) +1,398,668 +2016 +440,000 +— +207,234 +— +— +90,608 (21) +737,842 +(1) The amounts in this column +reflect the aggregate grant date fair value of awards granted during the applicable year for the fiscal years ended December 31, +2018, December 31, 2017 and December 31, 2016, respectively, calculated in accordance with ASC Topic 718. Assumptions +used in the calculation of these amounts are included in Note I to the Company’s audited financial statements for the fiscal +year ended December 31, 2018 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange +Commission on February 28, 2019 and in Note H to the Company’s audited financial statements for the fiscal years ended December +31, 2017 and December 31, 2016 included in the Company’s Annual Reports on Form 10-K filed with the Securities and Exchange +Commission on March 1, 2018 and February 28, 2017, respectively. +(2) Consists of an $18,000 automobile +allowance and $8,250 in annual match contributions to Mr. Rosenfeld’s 401(k) plan account. +(3) Consists of an $18,000 automobile +allowance and $8,100 in annual match contributions to Mr. Rosenfeld’s 401(k) plan account. +(4) Consists of an $18,000 automobile +allowance and $7,950 in annual match contributions to Mr. Rosenfeld’s 401(k) plan account. +(5) Consists of a non-equity +incentive payment of $263,302 made pursuant to a bonus formula in Ms. Varela’s employment agreement. See “Employment +Arrangements.” +(6) Consists of a $15,000 automobile +allowance and $8,250 in annual matching contributions to Ms. Varela’s 401(k) plan account. +(7) Consists of a non-equity +incentive payment of $338,669 made pursuant to a bonus formula in Ms. Varela’s employment agreement. See “Employment +Arrangements.” +(8) Consists of a $15,000 automobile +allowance and $8,100 in annual matching contributions to Ms. Varela’s 401(k) plan account. +(9) Consists of a $15,000 automobile +allowance and $7,950 in annual matching contributions to Ms. Varela’s 401(k) plan account. +(10) Consists of a $14,348 automobile +allowance, $83,967 life insurance premiums and $8,250 in annual match contributions to Mr. Dharia’s 401(k) plan +account. +(11) Consists of a $14,763 automobile +allowance, $86,857 life insurance premiums and $8,100 in annual match contributions to Mr. Dharia’s 401(k) plan +account. +(12) Consists of a $14,651 automobile +allowance, $86,311 life insurance premiums and $7,950 in annual match contributions to Mr. Dharia’s 401(k) plan +account. +(13) Consists of a non-equity +incentive payment of $274,600 made pursuant to a bonus formula in Mr. Sinha’s employment agreement. See “Employment +Arrangements.” +(14) Consists of a $15,458 automobile +allowance and $8,250 in annual matching contributions to Mr. Sinha’s 401(k) plan account. +37 +(15) Consists of a non-equity +incentive payment of $300,000 made pursuant to a bonus formula in Mr. Sinha’s employment agreement. See “Employment +Arrangements.” +(16) Consists of a $15,706 automobile +allowance and $8,100 in annual matching contributions to Mr. Sinha’s 401(k) plan account. +(17) Includes a non-equity incentive +payment of $58,584 made pursuant to a bonus formula in Mr. Sinha’s employment agreement. See “Employment Arrangements.” +(18) Consists of a $15,706 automobile +allowance and $7,950 in annual matching contributions to Mr. Sinha’s 401(k) plan account. +(19) Consists of $8,250 in annual +matching contributions to Ms. Frieders’ 401(k) plan account. +(20) Consists of a $21,722 living +allowance and $8,100 in annual matching contributions to Ms. Frieders’ 401(k) plan account. +(21) Consists of a $82,658 living +allowance and $7,950 in annual matching contributions to Ms. Frieders’ 401(k) plan account. +Employment Arrangements +Edward +R. Rosenfeld. On December 31, 2015, the Company entered into an employment agreement with Mr. Rosenfeld to replace +a prior, expiring employment agreement (the “Rosenfeld 2015 Agreement”). Pursuant to the Rosenfeld 2015 Agreement, +Mr. Rosenfeld continued to serve as Chief Executive Officer and executive Chairman of the Board of Directors of the Company +and received an annual base salary of $800,000, $850,000 and $900,000 for the fiscal years 2016, 2017 and 2018, respectively, +and a monthly automobile allowance of $1,500. The Rosenfeld 2015 Agreement, which expired on December 31, 2018, provided that +Mr. Rosenfeld would receive additional compensation and bonuses, if any, at the absolute discretion of the Board of Directors. +Pursuant to the Rosenfeld 2015 Agreement, on February 5, 2016, Mr. Rosenfeld received an award of 112,500 shares of the Company’s +Common Stock, subject to certain restrictions. These restricted shares of Common Stock, which were issued under the 2006 Plan, +vest in five equal annual installments of 22,500 shares, which vesting commenced on March 5, 2017. +On +December 31, 2018, the Company entered into a new employment agreement (the “Rosenfeld 2018 Agreement”) with Mr. Rosenfeld +to replace the Rosenfeld 2015 Agreement, which expired on that date. Pursuant to the Rosenfeld 2018 Agreement, Mr. Rosenfeld +continues to serve as Chief Executive Officer and executive Chairman of the Board of Directors of the Company through December 31, +2021 unless sooner terminated in accordance with the terms of the agreement. The Rosenfeld 2018 Agreement provides for an annual +base salary of $945,000, $992,250 and $1,041,863 for the fiscal years 2019, 2020 and 2021, respectively, and a monthly automobile +allowance of $1,500. Pursuant to the Rosenfeld 2018 Agreement, on December 31, 2018, Mr. Rosenfeld was granted 87,500 shares +of the Company’s Common Stock, subject to certain restrictions. These restricted shares of Common Stock, which were issued +under the 2006 Plan, will vest in five equal annual installments of 17,500 shares commencing on December 1, 2019. In addition, +on February 1, 2019, Mr. Rosenfeld received an additional award of 87,500 shares of the Company’s Common Stock, subject +to certain restrictions. These restricted shares of Common Stock, which were issued under the 2006 Plan, will also vest in five +equal annual installments of 17,500 shares commencing on February 1, 2020. The Rosenfeld 2018 Agreement provides that Mr. Rosenfeld +will receive additional compensation and bonuses, if any, at the absolute discretion of the Board of Directors. +In +the event of his death, the Rosenfeld 2018 Agreement provides for the payment to Mr. Rosenfeld’s estate of his base salary +for the 12-month period immediately subsequent to the date of his death. The agreement also provides that if Mr. Rosenfeld’s +employment is terminated due to his “total disability” (as defined in the agreement), Mr. Rosenfeld will receive +payment of his base salary for the 12-month period immediately subsequent to the date on which he is determined to be totally +disabled. The Rosenfeld 2018 Agreement allows the Company to terminate his employment with “cause” (as defined therein) or +without cause. In the event that Mr. Rosenfeld’s employment is terminated by the Company with cause, the Company will +have no further obligations to Mr. Rosenfeld, and Mr. Rosenfeld will be entitled to no further compensation from the +Company, except for pro-rata amounts due to him on the date of his termination. In the event that Mr. Rosenfeld’s employment +is terminated by the Company without cause or by Mr. Rosenfeld’s resignation for “good reason” (as defined +in the Rosenfeld 2018 Agreement), Mr. Rosenfeld will be entitled to receive payment of his annual base salary, payable at +regular payroll intervals, from the date of termination of employment through the longer of the remainder of the term of the agreement +or six months. +38 +In +addition, if Mr. Rosenfeld’s employment is terminated by the Company without cause or by the resignation of Mr. Rosenfeld +for good reason during the period commencing 90 days prior to a “change of control” (as defined in the Rosenfeld +2018 Agreement) transaction and ending 180 days following a change of control transaction, Mr. Rosenfeld will receive an +amount equal to two and one-half times the sum of (i) the annual base salary to which he was entitled as of the date of termination +or resignation of employment plus (ii) the average cash bonus received by him for the preceding three-year period ending on the +last previous December 31 (the “Change of Control Payment”). However, if the Change of Control Payment (or a portion +thereof) is determined to constitute an “excess parachute payment” under Sections 280G and 4999 of the Internal +Revenue Code of 1986, as amended (the “Code”), Mr. Rosenfeld shall be paid either (i) the Change of Control +Payment (which shall be subject to all applicable taxes to be paid by the executive including the excise tax payable pursuant +to Section 4999 and which shall be limited as to deductibility to the Company) or (ii) a reduced amount, calculated +in accordance with Section 280G, that may be paid to the executive without the imposition of an excise tax under Section 4999 +and which shall be fully deductible to the Company, whichever payment yields the greater after-tax benefit to the executive. +Amelia +Newton Varela. On January 10, 2014, the Company entered into an employment agreement with Ms. Varela to replace a prior, expiring +employment agreement. The agreement was amended on September 4, 2015 in connection with Ms. Varela’s promotion from Executive +Vice President – Wholesale to the newly-created position of President of the Company to increase Ms. Varela’s annual +base salary to $600,000 for the fiscal years 2015 and 2016 until the employment agreement’s expiration on December 31, 2016. +On +December 30, 2016, the Company entered into a new employment agreement with Ms. Varela, which replaced the prior, expiring employment +agreement (the “Varela 2016 Agreement”). Pursuant to the Varela 2016 Agreement, Ms. Varela continues to serve as President +of the Company for a term of three years through December 31, 2019, unless sooner terminated in accordance with the terms of the +agreement. The Varela 2016 Agreement provides for an annual base salary of $630,000, $650,000 and $670,000 for the years 2017, +2018 and 2019, respectively, and a monthly automobile allowance of $1,250 in each year of the term. In addition, pursuant to the +Varela 2016 Agreement, on January 3, 2017, Ms. Varela was granted an option to purchase 150,000 shares of the Company’s +Common Stock under the 2006 Plan, at an exercise price of $23.83 per share, which option vests in four equal annual installments +of 37,500 shares on each anniversary of the date of grant, which commenced on January 3, 2018. +Before +its amendment, the prior employment agreement entitled Ms. Varela to an annual performance-based cash bonus for the fiscal years +ended December 31, 2015 and 2016 in an amount equal to 2% of the increase, if any, in the Wholesale Division EBIT for each such +year over the Wholesale Division EBIT for the immediately preceding year, provided that Wholesale Division EBIT attributable to +any business acquired by the Company after January 10, 2014 would not be included for the purpose of determining Ms. Varela’s +bonus until the acquired business has been owned by the Company for two full calendar years. As amended, with respect to the fiscal +year ended December 31, 2016, the prior employment agreement entitled Ms. Varela to a performance-based cash bonus in an amount +equal to 2% of the increase, if any, in the Company’s total EBIT for the fiscal year ended December 31, 2016 over the Company’s +total EBIT for the fiscal year ended December 31, 2015, less any deductions required to be withheld by applicable laws and regulations. +EBIT attributable to any business acquired by the Company after September 4, 2015 would not be included in the calculation for +the purpose of determining Ms. Varela’s annual bonus. This performance-based bonus was not achieved with respect to the +fiscal years ended December 31, 2016 and 2015. +The +Varela 2016 Agreement entitles Ms. Varela to an annual performance-based cash bonus for each of the fiscal years ended December +31, 2017, 2018 and 2019 in an amount equal to 2% of the increase, if any, in the Company’s total EBIT for each such year +over the Company’s total EBIT for the immediately preceding year, less any deductions required to be withheld by applicable +laws and regulations. EBIT attributable to any business acquired by the Company after December 30, 2016 will not be included in +the calculation for the purpose of determining Ms. Varela’s annual bonus. Ms. Varela received a cash bonus of $263,302 for +2018 EBIT performance and a cash bonus of $338,669 for 2017 EBIT performance. +39 +In +the event that the Varela 2016 Agreement is terminated due to Ms. Varela’s “disability” (as defined in +the agreement) or death, the Company is obligated to pay Ms. Varela (or her estate) the amount of accrued and unpaid +salary through the date of termination plus any performance-based cash bonus that has accrued for the year prior to termination +and is unpaid at the time Ms. Varela’s employment is terminated due to her disability or death. The Company may terminate +the agreement for “cause” (as defined in the agreement) and, in such event, Ms. Varela will be entitled +only to accrued and unpaid salary through the date of termination of employment. In the event Ms. Varela’s employment +is terminated by the Company without cause, she would be entitled to receive payment of her annual base salary, payable at regular +payroll intervals, from the date of termination of employment through the remainder of the term plus any performance-based cash +bonus that has accrued but not yet been paid. In addition, pursuant to the most recent amendment of the Varela 2016 Agreement +entered into on May 15, 2017, in the event that Ms. Varela’s employment is terminated by the Company without cause +during the period commencing 30 days prior to a “change of control” (as defined in the agreement, as amended) transaction +and ending 180 days following a change of control transaction, she is entitled to receive an amount equal to the lesser of (A) +two and one-half times the sum of (i) the annual base salary to which she was entitled as of the date of termination plus (ii) +the average cash bonus received by her for the preceding three-year period ending on the last previous December 31 or (B) the +maximum amount that is tax deductible to the Company under Section 280G of the Code. +Arvind +Dharia. In January 1998, the Company entered into an employment agreement with Arvind Dharia, which has been amended +from time to time, most recently on April 20, 2018 (the “Dharia Agreement”). Pursuant to the Dharia Agreement, Mr. Dharia +continues to serve as the Company’s Chief Financial Officer and will do so for a term extending through December 31, +2020. Pursuant to the Dharia Agreement, as amended, Mr. Dharia received an annual base salary of $582,455 for the period commencing +January 1, 2015 and ending December 31, 2018 and will receive an annual base salary of $611,578 and $642,157 for the years 2019 +and 2020, respectively. The Dharia Agreement also provides for a monthly car allowance of $1,600 through the term and payment +of life insurance premiums on Mr. Dharia’s behalf of approximately $80,000 per year. Pursuant to the Dharia Agreement, +as amended, on May 1, 2018, Mr. Dharia was granted 18,750 shares of the Company’s Common Stock, subject to certain restrictions. +These restricted shares of Common Stock, which were issued to Mr. Dharia under the 2006 Plan, vest in three equal annual +installments, which vesting commenced on December 15, 2018. Under the Dharia Agreement, as amended, Mr. Dharia is entitled +to awards under such plan as may be determined by the Board of Directors, or a committee thereof, from time to time in its absolute +discretion. The Dharia Agreement provides that Mr. Dharia will receive an annual bonus in such amount, if any, and at such +time or times, as the Board of Directors may determine in its absolute discretion. +Pursuant +to the Dharia Agreement, in the event of Mr. Dharia’s death, the Company will make a payment to Mr. Dharia’s +estate of his base salary for the 12-month period immediately subsequent to the date of Mr. Dharia’s death. The Dharia +Agreement also provides that if Mr. Dharia’s employment is terminated due to his “total disability” (as +defined in the agreement), Mr. Dharia will receive payment of his base salary for the 12-month period immediately subsequent +to the date he is determined to be totally disabled. In the event that Mr. Dharia’s employment is terminated “for +cause” (as defined in the Dharia Agreement), the Company is obligated to pay Mr. Dharia the amount of compensation +that is accrued and unpaid through the date of termination. In the event that Mr. Dharia’s employment is terminated +for any reason (other than “for cause” or due to his death or total disability), the Company is obligated to pay Mr. Dharia, +in two installments, (a) an amount equal to the product of (x) his base salary on the effective date of such termination +plus the bonus paid or payable, if any, for the fiscal year ended on the December 31st immediately preceding the termination +date, multiplied by (y) the number of years (and fraction of years) remaining in the term; and (b) the amount payable +to him, or on his account, for what would have been the balance of the term of the Dharia Agreement with respect to certain benefits +and plans as set forth in the Dharia Agreement. If the Company decides not to renew the Dharia Agreement (other than “for +cause” or due to his total disability), then Mr. Dharia will be entitled to receive severance compensation, in cash, +in an amount equal to his then-current base salary for the 90-day period commencing on the expiration of the term. +In +addition, in the event that there is a “change of control” transaction and Mr. Dharia’s employment has +been terminated by the Company other than “for cause” or if Mr. Dharia resigns “for good reason” +(as such terms are defined in the agreement), Mr. Dharia will receive an amount equal to two and one half times (i) the annual +base salary to which he was entitled as of the date of termination or resignation of employment plus (ii) the average cash bonus +received by him for the preceding three-year period ending on the last previous December 31 (the “Change of Control Payment”). +However, if the Change of Control Payment (or a portion thereof) is determined to constitute an “excess parachute payment” +under Sections 280G and 4999 of the Code, Mr. Dharia will be paid either (i) the Change of Control Payment (which +shall be subject to all applicable taxes to be paid by the executive including the excise tax payable pursuant to Section 4999 +and which shall be limited as to deductibility to the Company) or (ii) a reduced amount, calculated in accordance with +Section 280G, that may be paid to the executive without the imposition of an excise tax under Section 4999 and which +shall be fully deductible to the Company, whichever payment yields the greater after-tax benefit to the executive. +40 +Awadhesh +Sinha. On January 10, 2014, the Company entered into an employment agreement with Mr. Sinha to replace a prior, +expiring employment agreement. Pursuant to the employment agreement, Mr. Sinha continued to serve in his position of Chief Operating +Officer of the Company and received a base salary of $661,500 for the year 2016 until the employment agreement’s expiration +on December 31, 2016. The employment agreement also entitled Mr. Sinha to a monthly automobile allowance of $1,850 and the payment +of term life insurance premiums on Mr. Sinha’s behalf in the amount of approximately $3,500 per year. +On +December 30, 2016, the Company entered into a new employment agreement (the “Sinha Agreement”) with Mr. Sinha to replace +the prior, expiring employment agreement. Pursuant to the Sinha Agreement, Mr. Sinha continues to serve as Chief Operating Officer +of the Company through December 31, 2019 unless sooner terminated in accordance with its terms. The Sinha Agreement provides for +an annual base salary of $681,000, $702,000 and $723,000 for the years 2017, 2018 and 2019, respectively, and entitles Mr. Sinha +to a monthly automobile allowance of $1,850 and the payment of term life insurance premiums on Mr. Sinha’s behalf in the +amount of approximately $3,500 per year. On January 3, 2017, pursuant to the Sinha Agreement, Mr. Sinha was granted 42,253 shares +of Common Stock, subject to certain restrictions. These restricted share of Common Stock, which were issued under the 2006 Plan, +will vest in three substantially equal annual installments, which vesting commenced on December 15, 2017. +Mr. Sinha’s +prior employment agreement entitled him to an annual performance-based bonus for each of the fiscal years ended December 31, +2015 and 2016 in an amount equal to 2% of the increase in the Company’s EBITDA for each such year over the Company’s +EBITDA for the immediately preceding year. Mr. Sinha received a cash bonus of $58,584 for 2016 EBITDA performance. +The +Sinha Agreement entitles Mr. Sinha to an annual performance-based bonus for each of the fiscal years ended December 31, 2017, +2018 and 2019 in an amount equal to 2% of the increase, if any, in the Company’s EBITDA for each such year over the Company’s +EBITDA for the immediately preceding year. For any business acquired after December 30, 2016, EBITDA from the acquired business +is included in the bonus calculation starting with the first full quarter under Company ownership, provided that the prior year’s +EBITDA will likewise be adjusted to include EBITDA from the acquired business for comparable quarters in the prior year on a pro +forma basis assuming the Company had owned the business. The maximum annual bonus is $600,000, the first $300,000 of which will +be payable in cash and for any amount of the annual bonus in excess of $300,000 by a grant of restricted shares of Common Stock, +which restricted shares of Common Stock will vest in three equal annual installments commencing on the first anniversary of the +grant date. Mr. Sinha received a cash bonus of $300,000 and a grant of 2,493 restricted shares of Common Stock for 2017 EBITDA +performance. Mr. Sinha received a cash bonus of $274,600 for 2018 EBITDA performance. Bonuses and other incentive-based compensation +paid to Mr. Sinha are subject to recovery by the Company in the event of a determination that such compensation was based +upon materially inaccurate financial statements. +In +the event of his death, the Sinha Agreement provides for the payment to Mr. Sinha’s estate of his base salary for the +12-month period immediately subsequent to the date of Mr. Sinha’s death. In addition, in the event of Mr. Sinha’s +“total disability” (as such term is defined in the agreement), the Company is obligated to continue to pay Mr. Sinha’s +base salary for the 12-month period immediately subsequent to the date of determination of such total disability. In the event +that Mr. Sinha’s employment is terminated “for cause” (as such terms are defined in the Sinha Agreement), +or due to Mr. Sinha’s resignation without “good reason” (as such term is defined in the Sinha Agreement), +the Company is obligated to pay Mr. Sinha the amount of compensation that is accrued and unpaid through the date of termination. +In the event that Mr. Sinha’s employment is terminated by the Company without cause or by the resignation of Mr. Sinha +for good reason, Mr. Sinha would be entitled to receive payment of his annual base salary, payable at regular payroll intervals, +from the date of termination of employment through the longer of (i) the remainder of the term or (ii) six months. +41 +In +addition, in the event that there is a “change of control” transaction and Mr. Sinha’s employment has been +terminated by the Company other than “for cause” or if Mr. Sinha resigns “for good reason” (as such +terms are defined in the agreement), Mr. Sinha will receive an amount equal to two and one half times (i) the annual base +salary to which he was entitled as of the date of termination or resignation of employment plus (ii) the average cash bonus received +by him for the preceding three-year period ending on the last previous December 31 (the “Change of Control Payment”). +However, if the Change of Control Payment (or a portion thereof) is determined to constitute an “excess parachute payment” +under Sections 280G and 4999 of the Code, Mr. Sinha will be paid either (i) the Change of Control Payment (which +shall be subject to all applicable taxes to be paid by the executive including the excise tax payable pursuant to Section 4999 +and which shall be limited as to deductibility to the Company) or (ii) a reduced amount, calculated in accordance with +Section 280G, that may be paid to the executive without the imposition of an excise tax under Section 4999 and which +shall be fully deductible to the Company, whichever payment yields the greater after-tax benefit to the executive. +Karla +Frieders. On September 4, 2015, the Company entered into an employment agreement with Ms. Frieders, pursuant to which Ms. +Frieders served as Chief Merchandising Officer of the Company for a term commencing on September 4, 2015 and ending on February +29, 2017. The employment agreement provided for an annual base salary during the term of $440,000 and an annual performance-based +bonus for each of the fiscal years ending December 31, 2015 and 2016 in an amount to be determined by the Company in its absolute +discretion. +On +April 11, 2017, the Company entered into a new employment agreement (the “Frieders Agreement”) with Ms. Frieders, +which replaced the prior employment agreement, which had expired on February 29, 2017. Pursuant to the Frieders Agreement, Ms. +Frieders continues to serve as Chief Merchandising Officer of the Company through April 30, 2020 unless the Frieders Agreement +is sooner terminated in accordance with its terms. The Frieders Agreement provides to Ms. Frieders an annual base salary of $550,000 +from April 11, 2017 through April 30, 2018, $570,000 from May 1, 2018 through April 30, 2019 and $590,000 from May 1, 2019 through +April 30, 2020. The Frieders Agreement also entitles Ms. Frieders to an annual performance bonus for each of the fiscal years +ending December 31, 2017, 2018 and 2019 in an amount to be determined by the Company in its absolute discretion and paid to her +on or about March 15 with respect to the prior year. On April 11, 2017, pursuant to the Frieders Agreement, Ms. Frieders was granted +30,000 shares of Common Stock, subject to certain restrictions. These restricted share of Common Stock, which were issued under +the 2006 Plan, will vest in five equal annual installments, which vesting commenced on April 1, 2018. +In +the event that Ms. Frieders’ employment is terminated due to Ms. Frieders’ “disability” (as defined in +the agreement) or death, the Company is obligated to pay Ms. Frieders (or her estate) the amount of accrued and unpaid salary +through the date of termination of employment. The Company may terminate Ms. Frieders’ employment for “cause” +(as defined in the agreement) and, in such event, Ms. Frieders will be entitled only to accrued and unpaid salary through the +date of termination of employment. In the event Ms. Frieders’ employment is terminated by the Company without cause, +she would be entitled to receive payment of her annual base salary, payable at regular payroll intervals, from the date of termination +of employment through the remainder of the term. +42 +GRANTS +OF PLAN-BASED AWARDS IN THE 2018 FISCAL YEAR +The +following table sets forth information concerning awards under the Company’s equity and non-equity incentive plans granted +to each of the Named Executive Officers in the 2018 Fiscal Year, including performance-based awards and those using time-based +vesting. Following the table is a discussion of material factors related to the information disclosed in the table. +All +Other +All +Other +Estimated +future payouts under equity +Stock +Option +incentive +plan awards +Awards: +Awards: +Grant +Date +Number +of +Number +of +Exercise +or +Fair +Value +Shares +of +Securities +Base +Price +of +Stock and +Stock +or +Underlying +of +Option +Option +Threshold +Target +Maximum +Units +Options +Awards +Awards +Name +Grant +Date +($) +($) +($) +(#) +(#) +($/Sh) +($) +Edward R. Rosenfeld +n/a +— +2,123,064 (1) +— +— +— +— +— +03/15/18 +— +— +— +100,000 +— +— +3,017,030 +12/31/18 +— +— +— +87,500 +— +— +2,647,750 +Amelia Newton +Varela +n/a +— +990,763 (1) +— +— +— +— +— +03/15/18 +— +338,669 (2) +— +— +— +— +— +Arvind Dharia +n/a +— +990,763 (1) +— +— +— +— +— +05/01/18 +— +— +— +18,750 +— +— +602,438 +Awadhesh Sinha +n/a +— +990,763 (1) +— +— +— +— +— +03/15/18 +— +374,790 (3) +— +2,493 (3) +— +— +75,214 (3) +Karla Frieders +n/a +— +990,763 (1) +— +— +— +— +— +03/15/18 +— +— +— +16,666 +— +— +502,843 +(1) In the 2018 Fiscal Year, +the Compensation Committee established a bonus pool for Named Executive Officers and other key executives of the Company based +on 6% of net income of the Company achieved in the 2018 Fiscal Year and also fixed each executive’s maximum share of the +2018 bonus pool, which was 30% for Mr. Rosenfeld and 14% for each other Named Executive Officer. Since the bonus pool was +established as a percentage of the Company’s 2018 Fiscal Year net income, it would not be possible to determine the amount +of these potential bonuses until the completion of the Company’s 2018 Fiscal Year. Accordingly, the amount indicated is +a representative payout amount and equals the maximum bonus the Named Executive Officer would have been eligible to receive from +a bonus pool of $7,076,880, which equals 6% of the $117,948,000 in net income of the Company achieved in the fiscal year ended +December 31, 2017. See the discussion of the 2018 bonus pool and the individual target awards of the Named Executive Officers +appearing above in the “Annual Performance-Based Bonus - Based on Specific Performance Metrics” section of “Compensation +Structure.” As disclosed therein, the Company paid these performance bonuses in a combination of cash and restricted shares +of Common Stock. Accordingly, on March 15, 2019, Mr. Rosenfeld, Mr. Dharia and Ms. Frieders received performance-based cash bonuses +of $500,000, $220,000 and $100,000, respectively, and, on March 15, 2019, Mr. Rosenfeld and Ms. Frieders received grants of 91,547 +and 15,258 restricted shares of Common Stock, respectively. In accordance with applicable SEC rules, these restricted stock awards +will appear in the Summary Compensation Table to be included in our proxy statement for our 2020 Annual Meeting of Stockholders +provided the restricted stock award recipient is a named executive officer in that proxy statement. +(2) Under an employment agreement +dated December 30, 2016 between the Company and Ms. Varela, Ms. Varela is entitled to receive a cash bonus under the +Company’s 2006 Plan on or about March 15, 2019 in an amount equal to 2% of the increase, if any, in the Company’s +total EBIT for the 2018 Fiscal Year over the Company’s total EBIT for the fiscal year ended December 31, 2017. Since it +would not be possible to determine the amount of Ms. Varela’s cash bonus, if any, until the completion of the 2018 +Fiscal Year, the amount indicated as the target bonus payout is a representative amount and based upon the actual increase in +the EBIT performance of the Company for the fiscal year ended December 31, 2017 from the EBIT performance of the Company for the +fiscal year ended December 31, 2016. See the discussion of this grant to Ms. Varela appearing above in the “Annual +Performance-Based Bonus - Based on Specific Performance Metrics” section of “Compensation Structure” and above +under “Employment Arrangements.” As disclosed in the Summary Compensation Table above, Ms. Varela received a cash +bonus of $263,302 for 2018 EBIT performance of the Company. +(3) Under an employment agreement +dated December 30, 2016 between the Company and Mr. Sinha, Mr. Sinha is entitled to receive a bonus under the Company’s +2006 Plan on or about March 15, 2019 in an amount equal to 2% of the increase, if any, in the Company’s EBITDA for the 2018 +Fiscal Year over the Company’s EBITDA for the immediately preceding fiscal year. The maximum annual bonus is $600,000, the +first $300,000 of which is payable in cash and for any amount of the annual bonus in excess of $300,000 by a grant of restricted +shares of the Company’s common stock, which restricted common stock will vest in three equal annual installments commencing +on the first anniversary of the grant date. Since it would not be possible to determine the amount of Mr. Sinha’s bonus, +if any, until the completion of the 2018 Fiscal Year, the amount indicated as the target bonus payout is a representative amount +and based upon the actual increase in the EBITDA performance of the Company for the fiscal year ended December 31, 2017 from the +EBITDA performance of the Company for the fiscal year ended December 31, 2016. See the discussion of this grant to Mr. Sinha +appearing above in the “Annual Performance-Based Bonus - Based on Specific Performance Metrics” section of “Compensation +Structure” and above under “Employment Arrangements.” As disclosed in the Summary Compensation Table above, +Mr. Sinha received a cash bonus of $274,600 for 2018 EBITDA performance of the Company. +43 +Plan-Based Awards +2006 +Stock Incentive Plan +As +of March 10, 2006, the Board of Directors of the Company adopted the Company’s 2006 Stock Incentive Plan and, on May 26, +2006, the Company’s stockholders approved the adoption of the Company’s 2006 Stock Incentive Plan. The 2006 Stock +Incentive Plan was amended in 2007 and 2008. On April 6, 2009, the Board of Directors adopted an Amended and Restated 2006 +Stock Incentive Plan and, on May 22, 2009, the Company’s stockholders approved the Amended and Restated 2006 Stock +Incentive Plan. On April 5, 2012, the Board of Directors approved an amendment of the Amended and Restated 2006 Stock Incentive +Plan primarily to increase the number of shares of Common Stock available for issuance thereunder, subject to stockholder approval +of such amendment. The amendment to the Amended and Restated 2006 Stock Incentive Plan was approved by the Company’s stockholders +at the 2012 Annual Meeting of Stockholders on May 25, 2012. The Company’s stockholders re-approved the material terms +of the performance goals currently contained in the 2006 Stock Incentive Plan pursuant to the requirements of Section 162(m) of +the Code as then in effect at the 2016 Annual Meeting of Stockholders on May 27, 2016. +The +Company’s Amended and Restated 2006 Stock Incentive Plan is referred to as the “2006 Plan” throughout this Proxy +Statement. The purpose of the 2006 Plan is to enhance the profitability and value of the Company for the benefit of its stockholders +by enabling the Company to offer eligible employees, consultants and non-employee directors cash and stock-based incentives in +the Company to attract, retain and reward such individuals and provide additional incentive for such persons to exert maximum +efforts for the success of the Company by encouraging stock ownership in the Company. The 2006 Plan serves as a means to strengthen +the mutuality of interests between such individuals and the Company’s stockholders. +The +maximum number of shares of Common Stock available for issuance under the 2006 Plan is 35,199,000 shares. As of the Record Date, +there were outstanding 5,455,111 unvested shares of restricted stock and options to purchase 1,536,050 shares of +Common Stock; options had been exercised, or restricted stock had vested, with respect to 35,132,379 shares of Common Stock; +and 66,621 shares of Common Stock remained available for grant under the 2006 Plan. +2019 +Incentive Compensation Plan +On +February 25, 2019, upon recommendation of the Compensation Committee, the Board unanimously approved the adoption of the Steven +Madden, Ltd. 2019 Incentive Compensation Plan, subject to stockholder approval. If approved by the stockholders at the Annual +Meeting, the Steven Madden, Ltd. 2019 Incentive Compensation Plan will become effective as of the date on which the Board of Directors +approved its adoption and be a successor to the 2006 Plan, the term of which is set to expire on April 6, 2019. +44 +OUTSTANDING +EQUITY AWARDS AT END OF THE 2018 FISCAL YEAR +The +following table sets forth information concerning unexercised stock options, restricted stock that has not vested and stock awards +outstanding for each of the Named Executive Officers as of the end of the 2018 Fiscal Year. All awards that occurred prior to +the three-for-two split of the Company’s Common Stock effectuated as a stock dividend on or about October 1, 2013 and +the three-for-two split of the Company’s Common Stock effectuated as a stock dividend on or about October 11, 2018 have +been adjusted to account for each such stock split, as applicable. +Option +Awards +Stock +Awards +Name +Number of +Securities +Underlying +Unexercised +Options +(#) Exercisable +Number of +Securities +Underlying +Unexercised +Options +(#) Unexercisable +Equity +Incentive +Plan +Awards: +Number of +Securities +Underlying +Unexercised +Unearned +Options +(#) +Option +Exercise +Price +($) +Option +Expiration +Date +Number of +Shares or +Units of +Stock That +Have Not +Vested +(#) +Market Value +of +Shares or +Units of +Stock That +Have Not +Vested +($) +Equity Incentive +Plan Awards: +Number of +Unearned +Shares, Units or +Other +Rights that +Have Not +Vested +(#) +Equity Incentive +Plan Awards: +Market or +Payout Value of +Unearned +Shares, Units or +Other +Rights That +Have Not +Vested +($) +Edward R. +Rosenfeld +— +— +— +— +— +394,559 +(1) +11,939,355 +— +— +Amelia Newton +Varela +37,500 +112,500 (2) +— +23.83 +01/03/2024 +42,097 (3) +1,273,855 +— +— +Arvind Dharia +— +— +— +— +— +22,663 (4) +685,782 +— +— +Awadhesh Sinha +— +— +— +— +— +16,910 (5) +511,697 +— +— +Karla Frieders +— +— +— +— +— +59,737 (6) +1,807,642 +— +— +(1) On March 17, 2014, +Mr. Rosenfeld was awarded 33,397 shares of restricted Common Stock, which shares vest in five substantially equal annual +installments commencing on March 5, 2015. On March 11, 2015, Mr. Rosenfeld was awarded 37,989 shares of restricted Common +Stock, which shares vest in five substantially equal annual installments commencing on March 5, 2016. On December 31, 2015, Mr. +Rosenfeld was awarded 112,500 shares of restricted Common Stock, which shares vest in five equal annual installments commencing +on December 31, 2016. On February 5, 2016, Mr. Rosenfeld was awarded 112,500 shares of restricted Common Stock, which shares vest +in five equal annual installments commencing on March 5, 2017. On March 15, 2016, Mr. Rosenfeld was awarded 41,344 shares of restricted +Common Stock, which shares vest in five substantially equal annual installments commencing on March 5, 2017. On March 15, 2017, +Mr. Rosenfeld was awarded 59,841 shares of restricted Common Stock, which shares vest in five substantially equal annual installments +commencing on March 5, 2018. On March 15, 2018, Mr. Rosenfeld was awarded 100,000 shares of restricted Common Stock, which shares +vest in five equal installments commencing on March 5, 2019. On December 31, 2018, Mr. Rosenfeld was awarded 87,500 shares of +restricted Common Stock, which shares vest in five equal installments commencing on December 1, 2019. The above-referenced grants +of restricted shares on March 11, 2015 and March 15, 2016 were forfeited and rescinded pursuant to a Forfeiture and Rescission +of Awards Agreement between Mr. Rosenfeld and the Company because the grants, while intended as qualified performance-based compensation +under Section 162(m) of the Code, did not qualify as qualified performance-based compensation under Section 162(m) of the Code +on the grant date because the performance goals in the 2006 Plan under which the grants were made had not yet been re-approved +by the stockholders of the Company, as periodically required by the 2006 Plan and Section 162(m) of the Code as then in effect. +The Company’s stockholders re-approved the performance goals contained in the 2006 Plan at the 2016 Annual Meeting of Stockholders +and the forfeited and rescinded grants of restricted shares were re-granted to Mr. Rosenfeld on August 12, 2016. +45 +(2) On January 3, 2017, Ms. Varela +was granted an option to purchase 150,000 shares of the Company’s Common Stock under the 2006 Plan, which option vests in +four equal annual installments commencing on the first anniversary of the date of grant. +(3) On March 17, 2014, +Ms. Varela was awarded 22,677 shares of restricted Common Stock, which shares vest in five substantially equal annual +installments commencing on March 5, 2015. On March 11, 2015, Ms. Varela was awarded 22,993 shares of restricted Common Stock, +which shares vest in five substantially equal annual installments commencing on March 5, 2016. On March 15, 2016, Ms. Varela was +awarded 20,673 shares of restricted Common Stock, which shares vest in five substantially equal annual installments commencing +on March 5, 2017. On March 15, 2017, Ms. Varela was awarded 19,947 shares of restricted Common Stock, which shares vest in five +substantially equal annual installments commencing on March 5, 2018. The above-referenced grants of restricted shares on March +11, 2015 and March 15, 2016 were forfeited and rescinded pursuant to a Forfeiture and Rescission of Awards Agreement between Ms. +Varela and the Company because the grants, while intended as qualified performance-based compensation under Section 162(m) of +the Code, did not qualify as qualified performance-based compensation under Section 162(m) of the Code on the grant date because +the performance goals in the 2006 Plan under which the grants were made had not yet been re-approved by the stockholders of the +Company, as periodically required by the 2006 Plan and Section 162(m) of the Code as then in effect. The Company’s stockholders +re-approved the performance goals contained in the 2006 Plan at the 2016 Annual Meeting of Stockholders and the forfeited and +rescinded grants of restricted shares were re-granted to Ms. Varela on August 12, 2016. +(4) On February 2, 2015, Mr. +Dharia was awarded 22,500 shares of restricted Common Stock, which shares vest in five equal annual installments commencing on +the first anniversary of the date awarded. On March 15, 2016, Mr. Dharia was awarded 4,651 shares of restricted Common Stock, +which shares vest in four substantially equal annual installments commencing on December 15, 2016. On May 1, 2018, Mr. Dharia +was awarded 18,750 shares of restricted Common Stock, which shares vest in three equal annual installments commencing on December +15, 2018. +(5) On March 15, 2016, Mr. Sinha +was awarded 4,651 shares of restricted Common Stock, which shares vest in four substantially equal annual installments commencing +on December 15, 2016. On January 3, 2017, Mr. Sinha was awarded 42,253 shares of restricted Common Stock, which shares vest in +three substantially equal annual installments commencing on December 15, 2017. On March 15, 2018, Mr. Sinha was awarded 2,493 +shares of restricted Common Stock, which shares vest in three equal annual installments commencing on December 15, 2018. The grant +of restricted shares on March 15, 2016 was forfeited and rescinded pursuant to a Forfeiture and Rescission of Awards Agreement +between Mr. Sinha and the Company because the grant, while intended as qualified performance-based compensation under Section +162(m) of the Code, did not qualify as qualified performance-based compensation under Section 162(m) of the Code on the grant +date because the performance goals in the 2006 Plan under which the grant was made had not yet been re-approved by the stockholders +of the Company, as periodically required by the 2006 Plan and Section 162(m) of the Code as then in effect. The Company’s +stockholders re-approved the performance goals contained in the 2006 Plan at the 2016 Annual Meeting of Stockholders and the forfeited +and rescinded grant of restricted shares was re-granted to Mr. Sinha on August 12, 2016. +(6) On March 17, 2014, Ms. Frieders +was awarded 8,247 shares of restricted Common Stock, which shares vest in five substantially equal annual installments commencing +on March 5, 2015. On March 2, 2015, Ms. Frieders was awarded 31,137 shares of restricted Common Stock, which shares vest in five +substantially equal annual installments commencing on the first anniversary of the date awarded. On March 15, 2016, Ms. Frieders +was awarded 8,269 shares of restricted Common Stock, which shares vest in five substantially equal annual installments commencing +on the first anniversary of the date awarded. On April 11, 2017, Ms. Frieders was awarded 30,000 shares of restricted Common Stock, +which shares vest in five equal annual installments commencing on April 1, 2018. On March 15, 2018, Ms. Frieders was awarded 16,666 +shares of restricted Common Stock, which shares vest in five equal installments commencing on March 5, 2019. The grant of restricted +shares on March 15, 2016 was forfeited and rescinded pursuant to a Forfeiture and Rescission of Awards Agreement between Ms. Frieders +and the Company because the grant, while intended as qualified performance-based compensation under Section 162(m) of the Code, +did not qualify as qualified performance-based compensation under Section 162(m) of the Code on the grant date because the performance +goals in the 2006 Plan under which the grant was made had not yet been re-approved by the stockholders of the Company, as periodically +required by the 2006 Plan and Section 162(m) of the Code as then in effect. The Company’s stockholders re-approved the performance +goals contained in the 2006 Plan at the 2016 Annual Meeting of Stockholders and the forfeited and rescinded grant of restricted +shares was re-granted to Ms. Frieders on August 12, 2016. +46 +OPTION +EXERCISES AND STOCK VESTED IN THE 2018 Fiscal Year +The +following table sets forth information concerning stock options exercised and restricted stock vested during the 2018 Fiscal Year +for each of the Named Executive Officers. The value realized from exercised options is deemed to be the market value of the Common +Stock on the date of exercise, less the exercise price of the option, multiplied by the number of shares of Common Stock underlying +the option. The value realized from the vesting of restricted stock is deemed to be the market value of the Common Stock on the +date of vesting multiplied by the number of shares vesting. +Option Awards +Stock Awards +Name +Number of Shares +Acquired on +Exercise +(#) +Value Realized +on Exercise +($) +Number of Shares +Acquired on Vesting +(#) +Value Realized +on Vesting +($) +Edward R. Rosenfeld +— +— +88,512 +2,739,333 +Amelia Newton Varela +150,000 +1,809,000 +21,757 +659,767 +Arvind Dharia +— +— +13,979 +409,282 +Awadhesh Sinha +— +— +18,145 +525,298 +Karla Frieders +— +— +17,519 +513,983 +SECURITIES +AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS +The +following table sets forth information as of December 31, 2018 with respect to compensation plans (including individual compensation +arrangements) under which shares of Common Stock are authorized for issuance, aggregated as follows: +· +All compensation plans previously approved +by security holders; and +· +All +compensation plans not previously approved by security holders. +EQUITY +COMPENSATION PLAN INFORMATION +Number of +securities to be +issued upon +exercise of +outstanding +options, +warrants +and rights +(#) +Weighted average +exercise price of +outstanding options, +warrants and rights +($) +Number of securities +remaining available +for future issuance +under equity +compensation plans +(excluding securities +reflected in +column (a)) +(#) +(a) +(b) +(c) +Equity compensation plans approved by security holders +2,815,450 +26.03 +1,067,134 +Equity compensation plans not approved by security holders +— +— +— +Total +2,815,450 +26.03 +1,067,134 +47 +Termination, +Change-in-Control and Non-Competition/Non-Solicitation +The +employment agreements for Ms. Varela and Messrs. Rosenfeld, Dharia and Sinha provide for a severance payment upon a termination +of employment in connection with a change-in-control of the Company. The employment agreements of Messrs. Rosenfeld, Dharia and +Sinha also provide for severance payment if the executive terminates his employment for good reason in connection with a change-in-control +event. The change-in-control severance payments may result in the application of the “golden parachute” provisions +of Section 280G of the Code and, to the extent Section 280G applies, the Company may not deduct from its taxable income +the severance payments made to the Named Executive Officer. Moreover, Section 4999 of the Code would impose a 20% excise +tax on the Named Executive Officer receiving the severance payment. In the case of Ms. Varela, these severance payments in +connection with a change-in-control, however, are reduced if the severance payment, when added to any other benefits triggered +by a change-of-control, is determined to constitute an “excess parachute payment” under Sections 280G and 4999 +of the Code, to the maximum amount that is deductible to the Company under Section 280G of the Code. In the case of Messrs. +Rosenfeld, Dharia and Sinha, the executive’s change-in-control severance payment will only be reduced to the maximum amount +that is deductible to the Company under Section 280G of the Code if the reduction provides the Named Executive Officer with +the best after-tax result; otherwise, the Named Executive Officer will receive the full amount of the severance payment and other +benefits triggered by the change-in-control and be liable for the 20% excise tax on the excess parachute payment in addition to +all other applicable taxes and, in such case, the deduction by the Company of the portion of the severance payment constituting +an excess parachute payment will be disallowed. +The +Company’s employment agreements with Ms. Varela and Messrs. Rosenfeld, Dharia and Sinha also provide for severance payments +to the executive if the Company terminates the executive’s employment without cause, or, in the case of Mr. Rosenfeld +and Mr. Sinha, if the Company gives him good reason to terminate employment. +Please +see the section of this Proxy Statement captioned “Employment Arrangements” for a summary description of the Named +Executive Officers’ employment agreements and such severance and change-in-control provisions. These benefits are described +and quantified in the section of this Proxy Statement captioned “Potential Payments Upon Termination or Change-In-Control” +below. +The +Company believes that the severance payments and payments made upon change-in-control provisions in the employment agreements +provide appropriate protection to the Company’s executives, comparable to that available at peer companies, and, with regard +to the enhanced severance following a change-in-control, protects the Company from losing key executives during a period when +a change-in-control may be threatened or pending. These benefits are described and quantified in the section below captioned “Potential +Payments Upon Termination or Change-In-Control.” +Mses. +Frieders and Varela have each agreed to a non-compete and non-solicitation restriction through the expiration date of her employment +agreement, April 30, 2020 and December 31, 2019, respectively, in the event of a voluntary termination or termination for +cause. Messrs. Rosenfeld and Sinha have each agreed to a non-compete and non-solicitation restriction during the period of his +employment and for a six-month period following the termination of his employment for cause or in the event of his resignation +without good reason. Mr. Dharia does not have non-compete or non-solicitation provisions in his employment agreement. +48 +POTENTIAL +PAYMENTS UPON TERMINATION OR CHANGE-IN-CONTROL +The +Company’s employment agreements with the Named Executive Officers provide for payments to such individuals upon termination +of employment or a change-in-control of the Company. Please see the section of this Proxy Statement captioned “Employment +Arrangements.” The amounts set forth in the table below shall be payable to the respective Named Executive Officer if such +Named Executive Officer’s employment is terminated under the various scenarios set forth below. +NAME +CASH +PAYMENT +CONTINUATION +OF MEDICAL / +WELFARE +BENEFITS +(PRESENT VALUE) +ACCELERATION +AND +CONTINUATION +OF EQUITY +AWARD +REDUCTION +OF BENEFITS +UPON A +CHANGE-IN- +CONTROL (1) +TOTAL +TERMINATION +BENEFITS +($) +($) +($) +($) +($) +TERMINATION +DUE TO DEATH +Edward +R. Rosenfeld +945,000 (2) +18,425 (3) +— +— +963,425 +Amelia Newton Varela +— +— +— +— +— +Arvind Dharia +611,578 (4) +14,026 (3) +— +— +625,604 +Awadhesh Sinha +723,000 (5) +14,026 (3) +— +737,026 +Karla Frieders +— +— +— +— +TERMINATION +DUE TO TOTAL DISABILITY +Edward R. Rosenfeld +945,000 (2) +— +— +— +945,000 +Amelia Newton Varela +— +— +— +— +— +Arvind Dharia +611,578 (4) +— +— +— +611,578 +Awadhesh Sinha +723,000 (5) +14,026 (3) +— +— +737,026 +Karla Frieders +— +— +— +— +— +TERMINATION +FOR CAUSE; RESIGNATION WITHOUT GOOD REASON +Edward R. Rosenfeld +— +— +— +— +— +Amelia Newton Varela +— +— +— +— +— +Arvind Dharia +— +— +— +— +— +Awadhesh Sinha +— +— +— +— +— +Karla Frieders +— +— +— +— +— +TERMINATION +OTHER THAN FOR CAUSE; RESIGNATION FOR GOOD REASON +Edward R. Rosenfeld +2,979,113 (6) +— +— +— +2,979,113 +Amelia Newton Varela +670,000 (7) +— +— +— +670,000 +Arvind Dharia +1,223,156 (8) +195,986 (9) +— +— +1,419,142 +Awadhesh Sinha +723,000 (10) +— +— +— +723,000 +Karla Frieders +780,000 (11) +— +— +— +780,000 +TERMINATION +UPON A CHANGE-IN-CONTROL +Edward R. Rosenfeld +2,875,000 (12) +— +11,939,355 (13) +— +14,814,355 +Amelia Newton Varela +1,907,224 (14) +— +4,678,105 (13) +— +6,585,329 +Arvind Dharia +1,899,888 (15) +— +685,782 (13) +— +2,585,670 +Awadhesh Sinha +2,265,417 (16) +— +511,697 (13) +— +2,777,114 +Karla Frieders +780,000 (17) +— +— +— +780,000 +(1) The employment agreement +of Ms. Varela provides that severance payments in connection with a change-in-control are reduced if the severance payment, when +added to any other benefits triggered by a change-of-control, is determined to constitute an “excess parachute payment” +under Sections 280G and 4999 of the Code, to the maximum amount that is deductible to the Company under Section 280G +of the Code. The employment agreements of Messrs. Rosenfeld, Dharia and Sinha indicate that the executive’s change-in-control +severance payment will only be reduced to the maximum amount that is deductible to the Company under Section 280G of the +Code if the reduction provides the Named Executive Officer with the best after-tax result; otherwise, the Named Executive Officer +will receive the full amount of the severance payment and other benefits triggered by the change-in-control and be liable for +the 20% excise tax on the excess parachute payment in addition to all other applicable taxes and, in such case, the deduction +by the Company of the portion of the severance payment constituting an excess parachute payment will be disallowed. +(2) Consists of Mr. Rosenfeld’s +2019 base salary of $945,000, which would be paid at regular intervals. +(3) Consists of medical benefits. +49 +(4) Consists of Mr. Dharia’s +2019 base salary of $611,578, which would be paid at regular intervals. +(5) Consists of Mr. Sinha’s +2019 base salary of $723,000, which would be paid at regular intervals. +(6) Consists of the base salary +of $945,000, $992,250 and $1,041,863 for 2019, 2020 and 2021, respectively, that would have been paid to Mr. Rosenfeld during +the remainder of the term of his employment until the expiration of his employment agreement on December 31, 2021. Mr. Rosenfeld +would receive these payments at regular intervals. +(7) Consists of the base salary +of $670,000 for 2019 that would have been paid to Ms. Varela during the remainder of the term of her employment until the +expiration of her employment agreement on December 31, 2019. Ms. Varela would receive these payments at regular intervals. +(8) Consists of Mr. Dharia’s +2018 base salary of $611,578 multiplied by the number of years (and fraction of years) remaining in the term of his employment +agreement, which expires on December 31, 2020. Mr. Dharia would receive 50% of this payment immediately and the remaining +50% would be paid to him one year later (i.e., on December 31, 2019). +(9) Consists of two times the +sum of Mr. Dharia’s life insurance payment ($83,967 per year) plus medical benefits ($14,026 per year). +(10) Consists of the base salary +of $723,000 for 2019 that would have been paid to Mr. Sinha during the remainder of the term of his employment until the +expiration of his employment agreement on December 31, 2019. Mr. Sinha would receive these payments at regular intervals. +(11) Consists of the base salary +that would have been paid to Ms. Frieders during the remainder of the term of her employment until the expiration of her employment +agreement on April 30, 2020, consisting of $190,000 payable for the period from January 1, 2018 through April 30, 2019; and $590,000 +payable for the period from May 1, 2019 through April 30, 2020. Ms. Frieders would receive these payments at regular intervals. +(12) Consists of two and one-half +times the sum of (i) Mr. Rosenfeld’s 2018 base salary of $900,000 plus (ii) the average cash bonus received by Mr. Rosenfeld +for the three-year period ending on December 31, 2017. Upon a change-in-control, payments (or portions thereof) to Mr. Rosenfeld +determined to constitute an “excess parachute payment” may be reduced to the maximum amount that would be tax deductible +by the Company pursuant to Sections 280G of the Code. Upon a hypothetical December 31, 2018 change-in-control, no payments +to Mr. Rosenfeld would have been subject to reduction. See the “Implications of Tax and Accounting Matters” section +of “Compensation Discussion and Analysis” for a discussion of the applicability of Sections 280G and 4999 of +the Code to change-in-control payments generally. See also the summary of Mr. Rosenfeld’s employment agreement under +“Employment Arrangements.” +(13) The amount disclosed represents +the total value of the restricted stock and stock options which would have received accelerated vesting upon a hypothetical change-in-control on December 31, 2018. +(14) Consists of two and one-half +times the sum of (i) Ms. Varela’s 2018 base salary of $650,000 plus (ii) the average cash bonus received by Ms. Varela for +the three-year period ending on December 31, 2017. Upon a change-in-control, payments (or portions thereof) to Ms. Varela +determined to constitute an “excess parachute payment” may be subject to reduction to the maximum amount that would +be tax deductible by the Company pursuant to Sections 280G of the Code. Upon a hypothetical December 31, 2018 change-in-control, +no payments to Ms. Varela would have been subject to reduction. See the “Implications of Tax and Accounting Matters” +section of “Compensation Discussion and Analysis” for a discussion of the applicability of Sections 280G and +4999 of the Code to change-in-control payments generally. See also the summary of Ms. Varela’s employment agreement +under “Employment Arrangements.” +(15) Consists of two and one-half +times the sum of (i) Mr. Dharia’s 2018 base salary of $582,455 plus (ii) the average cash bonus received by Mr. Dharia for +the three-year period ended on December 31, 2017. Upon a change-in-control, payments (or portions thereof) to Mr. Dharia +determined to constitute an “excess parachute payment” may be subject to reduction to the maximum amount that would +be tax deductible by the Company pursuant to Sections 280G of the Code. Upon a hypothetical December 31, 2017 change-in-control, +no payments to Mr. Dharia would have been subject to reduction. See the “Implications of Tax and Accounting Matters” +section of “Compensation Discussion and Analysis” for a discussion of the applicability of Sections 280G and +4999 of the Code to change-in-control payments generally. See also the summary of Mr. Dharia’s employment agreement +under “Employment Arrangements.” +(16) Consists of two and one-half +times the sum of (i) Mr. Sinha’s 2018 base salary of $702,000 plus (ii) the average cash bonus received by Mr. Sinha for +the three-year period ended on December 31, 2017. Upon a change-in-control, payments (or portions thereof) to Mr. Sinha +determined to constitute an “excess parachute payment” may be subject to reduction to the maximum amount that would +be tax deductible by the Company pursuant to Sections 280G of the Code. Upon a hypothetical December 31, 2018 change-in-control, +no payments to Mr. Sinha would have been subject to reduction. See the “Implications of Tax and Accounting Matters” +section of “Compensation Discussion and Analysis” for a discussion of the applicability of Sections 280G and +4999 of the Code to change-in-control payments generally. See also the summary of Mr. Sinha’s employment agreement +under “Employment Arrangements.” +(17) Consists of the base salary +that would have been paid to Ms. Frieders during the remainder of the term of her employment until the expiration of her employment +agreement on April 30, 2020, consisting of $190,000 payable for the period from January 1, 2018 through April 30, 2019; and $590,000 +payable for the period from May 1, 2019 through April 30, 2020. Ms. Frieders would receive these payments at regular intervals. +COMPENSATION +COMMITTEE REPORT +The +Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with management, and based on the review +and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis +be included in this Proxy Statement. +Submitted by +the Compensation Committee of the Company’s Board of Directors: +Peter Migliorini (Chairman) +Rose +Peabody Lynch +Thomas H. Schwartz +Robert Smith +50 +PROPOSAL +TWO: +APPROVAL OF AN AMENDMENT TO +THE CERTIFICATE OF INCORPORATION OF STEVEN MADDEN, LTD. +Under +Delaware law, a Delaware corporation may only issue shares of its capital stock to the extent such shares have been authorized +for issuance under the corporation’s certificate of incorporation. Under the Company’s Certificate of Incorporation, +we are authorized to issue 140,000,000 shares of stock, 135,000,000 of which shares have been designated as shares of Common Stock +and 5,000,000 of which shares have been designated as shares of preferred stock. Our Board of Directors has determined that it +is in the best interests of the Company and our stockholders to amend our Certificate of Incorporation to increase the total number +of shares of Common Stock that the Company is authorized to issue by 110,000,000 shares from 135,000,000 shares to 245,000,000 +shares. The Board of Directors has unanimously approved the proposed amendment to the Certificate of Incorporation subject to +approval of our stockholders and recommends that the stockholders approve and adopt such amendment. The following resolution is +submitted for stockholder approval: +“RESOLVED , +that the Certificate of Incorporation of Steven Madden, Ltd. (the ‘Company’) be, and it hereby is, amended by deleting +the first paragraph of Article FOURTH thereof and substituting in lieu thereof a new first paragraph to read as follows: +“FOURTH: +The total number of shares of all classes of stock which the corporation shall have authority to issue is two hundred fifty million +(250,000,000) shares, consisting of two hundred forty-five million (245,000,000) shares of common stock, $0.0001 par value per +share, and five million (5,000,000) shares of preferred stock, $0.0001 par value per share.” +; +and that such amendment is hereby authorized, approved and adopted as and for the action of the stockholders of the Company.” +If +the amendment to the Company’s Certificate of Incorporation is approved by our stockholders, the amendment will become effective +upon the filing of a certificate of amendment with the Secretary of State of the State of Delaware, which filing is expected to +occur promptly after the Annual Meeting. +Purpose +of the Amendment +The +purpose of the amendment to the Company’s Certificate of Incorporation is to increase the total number of shares of Common +Stock that the Company is authorized to issue from 135,000,000 shares to 245,000,000 shares. The number of shares of the Company’s +authorized Common Stock was last increased in 2013, when the Company’s stockholders approved an amendment to the Company’s +Certificate of Incorporation to increase the authorized Common Stock from 60,000,000 to 135,000,000. As of the Record Date, the +Company had 85,782,610 shares of Common Stock issued and outstanding. In addition to the shares outstanding on the Record +Date, there were 1,536,050 shares of our Common Stock issuable upon the exercise of options, 66,621 shares of our +Common Stock reserved for future issuance under the Company’s Amended and Restated 2006 Stock Incentive Plan and 46,751,198 +shares of our Common Stock held in treasury. If the Company were to issue all of the shares of Common Stock reserved, subject +to or contemplated for issuance as described above (including the reissuance of treasury shares), a total of 134,136,479 +shares of Common Stock would be issued and outstanding. +51 +In +addition, on April 6, 2019, the Company’s Amended and Restated 2006 Stock Incentive Plan will reach the end of its ten-year +term and expire. As described under Proposal Three below, stockholder approval is being sought for the Company’s 2019 Incentive +Compensation Plan. Stockholder approval of the 2019 Incentive Compensation Plan would constitute approval of the issuance under +the such plan of up to 11,000,000 shares of Common Stock. Without an increase in our authorized shares, there would not be sufficient +authorized shares of Common Stock available for reservation and issuance under the Company’s 2019 Incentive Compensation +Plan. +As +a result of the foregoing, the Company does not believe that the number of currently authorized shares of Common Stock available +for future issuance provides the Company with the necessary flexibility to be able to continue to grow the Company and its operations +in 2019 and future years. The Board of Directors believes that the amendment is advisable and in the best interests of our Company +and our stockholders in order to maintain our flexibility in considering and planning for future corporate needs in today’s +competitive and fast-changing environment. +The +Board believes that the authorized Common Stock should be increased to provide sufficient shares for issuance under the Company’s +2019 Incentive Compensation Plan and other general corporate purposes as may be determined by the Board of Directors in the exercise +of its discretion. These general corporate purposes may include future stock splits like the three-for two stock splits effected +by the Company in each of 2010, 2011, 2013 and 2018 in the event our Board of Directors were to determine such a stock split is +advisable based upon then existing market conditions and other factors. Other purposes may include the issuance of Common Stock +to facilitate potential acquisitions of or mergers with other companies, acquisitions of businesses or product lines, attracting +and retaining employees by the issuance of additional securities under equity compensation plans and other transactions and such +other corporate purposes that the Board of Directors deems are in our Company’s best interests. The Board of Directors believes +that additional authorized shares of Common Stock would enable us to take timely advantage of market conditions and favorable +opportunities that may arise for these types of transactions, in most cases without the delay and expense associated with convening +a special meeting of stockholders before such issuances. Other than issuances pursuant to the Company’s Amended and Restated +2006 Stock Incentive Plan and the Company’s 2019 Incentive Compensation Plan, as of the date of this Proxy Statement, we +have no current plans, commitments, agreements, arrangements or understandings regarding the issuance of additional shares of +Common Stock. +Possible +Effects of the Amendment to the Company’s Certificate of Incorporation +Upon +issuance, the additional shares of authorized Common Stock would have rights identical to the currently outstanding shares of +Common Stock. Adoption of the amendment would not have immediate dilutive effect on the proportionate voting power or other rights +of existing stockholders. However, as is true for shares presently authorized but unissued, the future issuance of Common Stock +authorized by the amendment may, among other things, dilute the earnings per share of the Common Stock, decrease existing stockholders’ +percentage equity ownership and, depending on the price at which they are issued, could be dilutive to the voting rights of existing +stockholders and have a negative effect on the market price of the Common Stock. Current stockholders have no preemptive or similar +rights, which means that current stockholders do not have a prior right to purchase any new issue of Common Stock in order to +maintain their proportionate ownership thereof. +We +have not proposed the increase in the number of authorized shares of Common Stock with the intention of using the additional authorized +shares for anti-takeover purposes, but our Company would be able to use the additional shares to oppose a hostile takeover attempt +or delay or prevent changes in control or management of our Company. For example, without further stockholder approval, the Board +of Directors could sell shares of Common Stock in a private transaction to purchasers who would oppose a takeover or favor our +current Board of Directors. Such a sale could have the effect of discouraging an attempt by another person or entity, through +the acquisition of a substantial number of shares of our Common Stock, to acquire our Company since the issuance could be used +to dilute the stock ownership of the acquirer. +We +could also use the additional shares of Common Stock as consideration for potential strategic transactions, including, among other +things, acquisitions, strategic partnerships, joint ventures, restructurings, business combinations and investments although we +have no immediate plans to do so. +52 +Our +Board of Directors is authorized, subject to certain limitations prescribed by law, without further stockholder approval, to issue +from time to time up to an aggregate of 5,000,000 shares of preferred stock in one or more series and to fix or alter the designations, +preferences, rights and any qualifications, limitation or restrictions of shares of each such series thereof, including the dividend +rights, dividend rates, conversion rights, voting rights and terms of redemption of shares constituting any series or designations +of such series. The rights of the holders of Common Stock will be subject to and may be adversely affected by, the rights of holders +of preferred stock that may be issued in the future. Issuance of preferred stock could have the effect of making it more difficult +for a third party to acquire or of discouraging a third party from acquiring a majority of the outstanding voting stock of the +Company. +Required Vote +Approval +of this resolution requires the affirmative vote of the holders of a majority of the outstanding shares of Common Stock. +Recommendation of the Board +of Directors +The Board of +Directors unanimously recommends a vote “FOR” the approval of the amendment to the Certificate of Incorporation of +Steven Madden, Ltd. +53 +PROPOSAL +THREE: +APPROVAL OF THE ADOPTION OF STEVEN MADDEN, LTD. 2019 INCENTIVE COMPENSATION PLAN +On +February 25, 2019, upon recommendation of the Compensation Committee, the Board unanimously approved the adoption of the Steven +Madden, Ltd. 2019 Incentive Compensation Plan (the “2019 Plan” or the “Plan”), subject to stockholder +approval. If approved by the stockholders at the Annual Meeting, the 2019 Plan will become effective as of the date on which the +Board of Directors approved the 2019 Plan. If approved, the 2019 Plan would be a successor to the Company’s Amended and +Restated 2006 Stock Incentive Plan, the term of which is set to expire on April 6, 2019. The Board believes that approval of the +2019 Plan is essential for the Company’s ability to continue to utilize incentive awards to retain and attract +the services of key individuals essential to the Company’s long-term growth and financial success and to further align their +interests with those of the Company’s stockholders. +If +the 2019 Plan is approved by our stockholders, subject to adjustments described in the Plan, 11 million new shares of our Common +Stock will be authorized for issuance under the Plan. As described under Proposal Two above, stockholder approval is being sought +to amend the Company’s Certificate of Incorporation to increase the total number of shares of Common Stock that the Company +is authorized to issue from 135,000,000 shares to 245,000,000 shares. Without an increase in the authorized shares, the Company +would not have sufficient authorized shares of Common Stock available for reservation and issuance under the Plan. +Description +of the 2019 Plan +The +following is a brief description of certain important features of the 2019 Plan. This summary is qualified in its entirety by +reference to the full text of the 2019 Plan, which is attached as Annex B to this Proxy Statement. If Proposal Three is +approved, we intend to file a registration statement on Form S-8, pursuant to the Securities Act of 1933, as amended, to register +the additional shares of Common Stock authorized for grant under the 2019 Plan promptly after receipt of such approval. +Administration. +The 2019 Plan requires that it be administered by a committee consisting of two or more non-employee directors, each of whom +will be, to the extent required, a “non-employee director” as defined in Rule 16b-3 of the Exchange Act and an “independent +director” as defined under NASDAQ Rule 5605(a)(2) (the “Committee”). The Committee has full authority under +the 2019 Plan to administer and interpret the 2019 Plan, to grant discretionary awards, to determine the individuals to whom awards +will be granted, to determine the types of awards to be granted, to determine the terms and conditions of each award, to determine +the number of shares of Common Stock to be covered by each award and to make all other determinations in connection with the 2019 +Plan and the awards thereunder. The terms and conditions of individual awards are to be set forth in written agreements that are +consistent with the terms of the 2019 Plan and awards may not be made on or after ten years after the effective date of the 2019 +Plan. Currently, the Compensation Committee of the Board serves as the Committee under the 2019 Plan. +Eligibility +and Types of Awards. As of April 1, 2019, the Company had 3,793 employees, all of whom were eligible to participate +under the 2019 Plan. Our non-employee directors, currently seven directors, as well as individuals providing consulting or advisory +services to the Company or its affiliates pursuant to a written agreement, are also eligible to receive awards under the 2019 +Plan. The types of awards available under the 2019 Plan consist of nonqualified stock options, stock appreciation rights, performance +shares, restricted stock, restricted stock units, other stock-based awards and performance-based cash awards. In addition, the +Company’s employees and employees of the Company’s affiliates that qualify as subsidiaries or parent corporations +(as defined under Section 424 of the Code) are eligible to be granted incentive stock options under the 2019 Plan. +54 +Available +Shares and Limits on Awards. Assuming that the stockholders approve the 2019 Plan, a total of 11,000,000 shares will be reserved +for issuance under the 2019 Plan. The maximum number of shares of Common Stock with respect to which any stock option, stock appreciation +right or shares of restricted stock that are subject to the attainment of specified performance goals that may be granted under +the Plan during any fiscal year to any eligible employee or consultant will be 1,000,000 shares per type of award, subject to +a total limit on the number of shares of Common Stock with respect to all awards of 1,200,000 shares during any fiscal year. There +is no annual limit on the number of shares of Common Stock with respect to an award to eligible employees or consultants of restricted +stock that is not subject to the attainment of specified performance goals. The maximum number of shares of Common Stock with +respect to any award of performance shares to an eligible employee or consultant during any fiscal year is 1,000,000 shares. The +maximum payment that may be made to an eligible employee or consultant under any performance-based cash award during any fiscal +year and subject to the attainment of specified performance goals is $10,000,000. +The +maximum number of shares of Common Stock with respect to which any stock option (other than incentive stock options), stock appreciation +right, or other share appreciation awards that may be granted under the Plan during any fiscal year to any non-employee director +will be 120,000 shares per type of award, subject to a total limit on the number of shares of Common Stock with respect to all +awards of 160,000 shares during any fiscal year. Any award of Restricted Stock, Restricted Stock Units and any other awards other +than stock options, stock appreciation rights and other share appreciation awards which may be granted under this Plan during +any fiscal year of the Company to each non-employee director shall be 40,000 shares per type of award, provided that the maximum +number of shares of Common Stock for all such awards does not exceed 60,000 with respect to any fiscal year of the Company. In +no event shall the aggregate grant of awards to non-employee directors (when combined with certain other awards) exceed 5% of +the total number of shares of Common Stock reserved for awards under the Plan. +The +2019 Plan requires the Committee to appropriately adjust the individual maximum share limitations, the aggregate number of shares +of Common Stock available for the grant of awards, and the exercise price of an award to reflect any change in the Company’s +capital structure or business by reason of certain corporate transactions or events. +Under +the 2019 Plan, the number of shares of Common Stock available for awards is reduced by (i) the total number of options or stock +appreciation rights exercised, regardless of whether any of the shares of Common Stock underlying such awards are actually issued +to the participant as the result of a net settlement, (ii) any shares of Common Stock used to pay any exercise price or tax withholding +obligation with respect to any award and (iii) any shares of Common Stock repurchased by the Company on the open market with the +proceeds of a stock option exercise price. +Fungible +Share Limit. The 2019 Plan includes a “fungible share limit” to manage authorized shares. Under the 2019 Plan’s +fungible share design: +· +shares +of Common Stock subject to awards that are not appreciation awards count against the 2019 Plan’s share reserve as 3.0 +shares for every share of Common Stock granted; +· +each share of Common +Stock underlying an appreciation award granted that expires, terminates, is cancelled or is forfeited for any reason, is added +back to the 2019 Plan’s aggregate maximum share limit and is again available for grant; and +· +each share of Common +Stock underlying an award that is not an appreciation award that expires, terminates, is cancelled or is forfeited for any +reason, is added back to the 2019 Plan’s share reserve as 3.0 shares of Common Stock and is again available for +grant. +The 2019 Plan’s +fungible share limit has the effect of reducing the maximum number of awards under the 2019 Plan because awards that are not appreciation +awards (such as awards of restricted stock) count against the 2019 Plan’s share reserve as 3.0 shares for every share of +Common Stock granted, rather than one share, as is the case for options and other appreciation awards. +55 +Awards +Under the 2019 Plan. The following types of awards are available under the 2019 Plan: +Stock +Options. The Committee may grant nonqualified stock options and incentive stock options (only to eligible employees) to purchase +shares of Common Stock. The Committee will determine the number of shares of Common Stock subject to each option, the term of +each option, which may not exceed seven years (or five years in the case of an incentive stock option granted to a 10% stockholder), +the exercise price, the vesting schedule (if any), and the other material terms of each option. No incentive stock option or nonqualified +stock option may have an exercise price less than the fair market value of the Common Stock at the time of grant (or, in the case +of an incentive stock option granted to a 10% stockholder, 110% of fair market value). +Options +will be exercisable at such time and subject to such terms and conditions as determined by the Committee at grant and the exercisability +of such options may be accelerated by the Committee in its sole discretion, provided that no option is exercisable more than seven +years after the date the option is granted and, in the case of a ten percent stockholder, five years from the date an incentive +stock option is granted. Upon the exercise of an option, the participant must make payment of the full exercise price, either +(i) in cash, check, bank draft or money order; (ii) solely to the extent permitted by law, through the delivery of irrevocable +instructions to a broker reasonably acceptable to the Company to deliver promptly to the Company an amount equal to the purchase +price; or (iii) on such other terms and condition as may be acceptable to the Committee. +Stock +Appreciation Rights. The Committee may grant stock appreciation rights (“SARs”) either with a stock option which +may be exercised only at such times and to the extent the related option is exercisable (“Tandem SAR”) or independent +of a stock option (“Non-Tandem SARs”). A SAR is a right to receive a payment in Common Stock or cash (as determined +by the Committee) equal in value to the excess of the fair market value of one share of Common Stock on the date of exercise over +the exercise price per share established in connection with the grant of the SAR. The term of each SAR may not exceed seven years. +The base price per share covered by a SAR will be the exercise price per share of the related option in the case of a Tandem SAR +and will be the fair market value of the Common Stock on the date of grant in the case of a Non-Tandem SAR. The Committee may +also grant “limited SARs,” either as Tandem SARs or Non-Tandem SARs, which may become exercisable only upon the occurrence +of a change in control (as defined in the 2019 Plan) or such other event as the Committee may, in its sole discretion, designate +at the time of grant or thereafter. +Restricted +Stock. The Committee may award shares of restricted stock. Except as otherwise provided by the Committee upon the award of +restricted stock, the recipient generally has the rights of a stockholder with respect to the shares, including the right to receive +dividends, the right to vote the shares of restricted stock and, conditioned upon full vesting of shares of restricted stock, +the right to tender such shares, subject to the conditions and restrictions generally applicable to restricted stock or specifically +set forth in the recipient’s restricted stock agreement. The Committee may determine at the time of award, that the payment +of dividends, if any, will be deferred until the expiration of the applicable restriction period. Recipients of restricted stock +are required to enter into a restricted stock agreement with the Company, which states the restrictions to which the shares are +subject, which may include satisfaction of pre-established performance goals, and the criteria or date or dates on which such +restrictions will lapse. +If +the grant of restricted stock or the lapse of the relevant restrictions is based on the attainment of performance goals, the Committee +will establish for each recipient the applicable performance goals, formulae or standards and the applicable vesting percentages +with reference to the attainment of such goals or satisfaction of such formulas or standards. Such performance goals may incorporate +provisions for disregarding (or adjusting for) changes in accounting methods, corporate transactions (including, without limitation, +dispositions and acquisitions) and other similar events or circumstances. The performance goals for performance-based restricted +stock are based on one or more of the objective criteria set forth on Exhibit A to the 2019 Plan and discussed in general below. +Restricted +Stock Units. The Committee may award restricted stock units (“RSUs”). An RSU conveys a right to payment of Common +Stock or the cash value of Common Stock after the date on which the award is granted and subject to such conditions, including +vesting and performance conditions, as the Committee may determine. Except as otherwise provided upon the award of RSUs, the recipient +does not have the rights of a stockholder with respect to the underlying shares, including with respect to voting and dividends +or the right to tender shares, until the conditions on the award have been satisfied and the shares have been delivered to the +recipient. If the grant of restricted stock or the lapse of the relevant restrictions is based on the attainment of performance +goals, the Committee will establish for each recipient the applicable performance goals, formulae or standards and the applicable +vesting percentages with reference to the attainment of such goals or satisfaction of such formulae or standards. Such performance +goals may incorporate provisions for disregarding (or adjusting for) changes in accounting methods, corporate transactions (including, +without limitation, dispositions and acquisitions) and other similar events or circumstances. The performance goals for performance-based +restricted stock are based on one or more of the objective criteria set forth on Exhibit A to the 2019 Plan and discussed in general +below. +56 +Performance +Shares. The Committee may award performance shares. A performance share is counted as one share of Common Stock. The performance +goals for performance shares are based on one or more of the objective criteria set forth on Exhibit A to the 2019 Plan and discussed +in general below. A minimum level of acceptable achievement will also be established by the Committee. If, by the end of the performance +period, the recipient has achieved the specified performance goals, he or she will be deemed to have fully earned the performance +shares. To the extent earned, the performance shares will be paid to the recipient at the time and in the manner determined by +the Committee in cash, shares of Common Stock or any combination thereof. +Other +Stock-Based Awards. The Committee may, subject to limitations under applicable law, make a grant of such other stock-based +awards (including, without limitation, performance units, dividend equivalent units, stock equivalent units, restricted stock +units and deferred stock units) under the 2019 Plan that are payable in cash or denominated or payable in or valued by shares +of Common Stock or factors that influence the value of such shares. The Committee will determine the terms and conditions of any +such other awards, which may include the achievement of certain minimum performance goals and/or a minimum vesting period. The +performance goals for performance-based other stock-based awards are based on one or more of the objective criteria set forth +on Exhibit A to the 2019 Plan and discussed in general below. +Performance-Based +Cash Awards. The Committee may, subject to limitations under applicable law, make a grant of individual target awards either +alone or in tandem with stock options, SARs or restricted stock under the 2019 Plan that are contingent upon the satisfaction +of certain pre-established performance goals that are reached within a specified performance period, each of which, together with +any other terms and conditions, shall be determined by the Committee in its sole discretion at the time of grant. At the time +the performance goals are established, the Committee will prescribe a formula to determine the percentages (which may be greater +than 100%) of the individual target award which may be payable based upon the degree of attainment of the performance goals during +the calendar year. The Committee may, in its sole discretion, elect to pay a participant an amount that is less than the participant’s +individual target award regardless of the degree of attainment of the performance goals; provided that no such discretion to reduce +a performance-based cash award earned based on achievement of the applicable performance goals will be permitted for a calendar +year in which a change in control occurs. The performance goals for performance-based cash awards are based on one or more of +the objective criteria set forth on Exhibit A to the 2019 Plan and discussed in general below. +Limitation. +Notwithstanding any other provisions in the 2019 Plan or in any employment agreement, the restrictions or vesting conditions, +as applicable, on restricted stock awards, restricted stock units, other stock-based awards and performance-based awards can be +no less than (i) one year, if the lapsing of restrictions or vesting schedule, as applicable, is based (in whole or in part) on +the attainment of one or more performance goals, and (ii) three years, if the lapsing of restrictions or the vesting schedule, +as applicable, is based solely on the continued performance of services by the Plan participant (with restrictions as to no more +than 1/3 rd of shares of Common Stock subject thereto lapsing on each of the first three anniversaries of the date of +grant); provided that, the Committee is authorized to provide for earlier lapsing of the restrictions or acceleration of vesting, +as applicable, in the event of a change in control of the Company or a participant’s retirement, death or disability. The +preceding limitation does not apply with respect to up to 5% (when combined with the 5% limitation for non-employee director +award grants) of the total number of shares of Common Stock reserved for awards under the Plan. +57 +Performance +Goals . The Committee may grant awards of restricted stock, restricted stock units, performance shares, performance-based cash +awards and other stock-based awards that may be granted, vest and be paid based on attainment of specified performance goals established +by the Committee. These performance goals are based on the attainment of a certain target level of, or a specified increase or +decrease in, one or more of the following criteria selected by the Committee: +· +earnings +per share, earnings before interest and taxes or earnings before interest, taxes, depreciation and amortization; +· +gross profit or gross +profit return on investment; +· +gross margin or gross +margin return on investment; +· +operating income, +net income, cash flow or economic value added; +· +return on assets; +return on capital; revenue growth; +· +working capital; +· +specified objectives +with regard to limiting the level of increase in all or a portion of, the Company’s bank debt or other long-term or +short-term public or private debt or other similar financial obligations of the Company, which may be calculated net of cash +balances and/or other offsets and adjustments as may be established by the Committee; +· +return on equity, +assets or capital; +· +total shareholder +return; +· +fair market value +of the shares of the Common Stock; +· +market share and/or +market segment share; +· +the growth in the +value of an investment in the Common Stock assuming the reinvestment of dividends; +· +customer satisfaction, +customer loyalty, brand recognition and/or brand acceptance; +· +style indexes; +· +employee retention; +· +number of new patents, +new product innovation and/or introduction; +· +product release schedules +and/or ship targets; or +· +reduction in expenses +and/or product cost reduction through advanced technology. +The +Committee may also exclude the impact of an event or occurrence such as restructurings, discontinued operations, extraordinary +items and other unusual or non-recurring charges, an event either not directly related to the operations of the Company or not +within the reasonable control of the Company’s management, or a change in accounting standards required by generally accepted +accounting principles, which the Committee determines should be appropriately excluded. Performance goals may also be based on +individual participant performance goals, as determined by the Committee in its sole discretion, or they may be based upon the +attainment of specified levels of Company (or subsidiary, division or other operational unit of the Company) performance under +one or more of the measures described above relative to the performance of other corporations. The Committee may designate additional +business criteria on which the performance goals may be based or adjust, modify or amend those criteria. +Change +in Control . In the event of a change in control (as defined in the 2019 Plan) of the Company, awards under the 2019 Plan may +be assumed and continued or substituted in accordance with applicable law. If and to the extent that a successor to the Company converts, assumes, substitutes or +replaces an award, the vesting restrictions and/or forfeiture provisions applicable to such award will not accelerate or lapse +by reason of the change in control. However, if the participant’s employment or other service is terminated, other than +for cause, within 12 months coincident with or immediately following the change in control, unvested awards will become fully +vested and exercisable. If the award is not continued as provided above, the awards generally shall become fully exercisable +or payable immediately prior to the change in control, +and such awards shall terminate at the effective time of the change in control. +58 +Term, +Amendment and Termination. The term of the 2019 Plan extends for a period of ten years from February 25, 2019 and, accordingly, +will remain in effect through February 24, 2029, unless sooner terminated. Notwithstanding any other provision of the 2019 Plan, +the Board may at any time amend any or all of the provisions of the 2019 Plan, or suspend or terminate it entirely, retroactively +or otherwise; provided, however, that, unless otherwise required by law or specifically provided in the 2019 Plan, the rights +of a participant with respect to awards granted prior to such amendment, suspension or termination may not be adversely affected +without the consent of such participant and, provided further that the approval of the Company’s stockholders will be obtained +to the extent required by Delaware law, Section 422 of the Code, The Nasdaq Global Select Market or the rules of such other applicable +stock exchange, as specified in the 2019 Plan. +Repricing +Options and Stock Appreciation Rights. The 2019 Plan includes an additional express prohibition against repricing stock options +and stock appreciation rights. The Company may not, without stockholder approval, either (i) reduce the exercise price of an outstanding +stock option or stock appreciation right or (ii) simultaneously cancel stock options or stock appreciation rights for which the +exercise price exceeds the then current fair market value of the underlying Common Stock and grant a new stock option or stock +appreciation right with an exercise price equal to the then current fair market value of the underlying Common Stock. +Miscellaneous. +Awards granted under the 2019 Plan are generally nontransferable (other than by will or the laws of descent and distribution), +except that the Committee may provide for the transferability of nonqualified stock options at the time of grant or thereafter +to certain family members. +Certain U.S. +Federal Income Tax Consequences +The +rules concerning the federal income tax consequences with respect to options granted and to be granted pursuant to the 2019 Plan +are quite technical. Moreover, the applicable statutory provisions are subject to change, as are their interpretations and applications, +which may vary in individual circumstances. Therefore, the following is designed to provide a general understanding of the federal +income tax consequences. In addition, the following discussion does not set forth any gift, estate, Social Security or state or +local tax consequences that may be applicable and is limited to the U.S. federal income tax consequences to individuals who are +citizens or residents of the U.S., other than those individuals who are taxed on a residence basis in a foreign country. +Incentive +Stock Options. In general, an employee will not recognize taxable income upon either the grant or the exercise of an incentive +stock option and the Company will not be entitled to an income tax deduction at either such time. In general, however, for purposes +of the alternative minimum tax, the excess of the fair market value of the shares of Common Stock acquired upon exercise of an +incentive stock option (determined at the time of exercise) over the exercise price of the incentive stock option will be considered +income. If the recipient is continuously employed on the date of grant until the date three months prior to the date of exercise +and such recipient does not sell Common Stock received pursuant to the exercise of the incentive stock option within either (i) +two years after the date of the grant of the incentive stock option or (ii) one year after the date of exercise, a subsequent +sale of Common Stock will result in long-term capital gain or loss to the recipient and will not result in a tax deduction to +the Company. +If +the recipient is not continuously employed on the date of grant until the date three months prior to the date of exercise or such +recipient disposes of Common Stock acquired upon exercise of the incentive stock option within either of the above-mentioned time +periods, the recipient will generally recognize as ordinary income an amount equal to the lesser of (i) the fair market value +of Common Stock on the date of exercise over the exercise price, or (ii) the amount realized upon disposition over the exercise +price. In such event, subject to the limitations of Section 280G of the Code (as described below), the Company generally will +be allowed an income tax deduction equal to the amount recognized as ordinary income. Any gain in excess of such amount recognized +by the recipient as ordinary income would be taxed at the rates applicable to short-term or long-term capital gains (depending +on the holding period). +To +the extent that the aggregate fair market value (determined as of the time of grant) of the Common Stock with respect to which +incentive stock options are exercisable for the first time by a participant during any calendar year under the 2019 Plan and/or +any other stock option plan of the Company or affiliate exceeds $100,000, such options are treated as non-qualified stock options. +59 +Nonqualified +Stock Options . A recipient will not recognize any taxable income upon the grant of a nonqualified stock option and the Company +will not be entitled to a deduction at the time of such grant unless such option has a readily ascertainable fair market value +(as determined under applicable tax law) at the time of grant. Upon exercise of a nonqualified stock option, the recipient generally +will recognize ordinary income in an amount equal to the excess of the fair market value of Common Stock on the date of exercise +over the exercise price. Upon a subsequent sale of Common Stock by the recipient, the recipient will recognize short-term or long-term +capital gain or loss depending upon his or her holding period for Common Stock. Subject to the limitations of Section 280G of +the Code (as described below), the Company will generally be allowed an income tax deduction equal to the amount recognized by +the recipient as ordinary income. +All +Options. With regard to both incentive stock options and nonqualified stock options, the following also apply: (i) any of +the Company’s officers and directors subject to Section 16(b) of the Exchange Act may be subject to special tax rules regarding +the income tax consequences concerning their stock options, (ii) any entitlement to a tax deduction on the part of the Company +is subject to the applicable tax rules, and (iii) in the event that the exercisability or vesting of any award is accelerated +because of a change in control, payments relating to the awards (or a portion thereof), either alone or together with certain +other payments, may constitute parachute payments under Section 280G of the Code, which excess amounts may be subject to excise +taxes and may be nondeductible by the Company. +Section +409A of the Code provides that all amounts deferred under a nonqualified deferred compensation plan are includible in a participant’s +gross income to the extent such amounts are not subject to a substantial risk of forfeiture, unless certain requirements are satisfied. +If the requirements are not satisfied, in addition to current income inclusion, interest at the underpayment rate plus 1% will +be imposed on the participant’s underpayments that would have occurred had the deferred compensation been includible in +gross income for the taxable year in which first deferred or, if later, the first taxable year in which such deferred compensation +is not subject to a substantial risk of forfeiture. The amount required to be included in income is also subject to an additional +20% tax. While most awards under the 2019 Plan are anticipated to be exempt from the requirements of Section 409A of the Code, +awards not exempt from Section 409A of the Code are intended to comply with Section 409A of the Code. +The +2019 Plan is not subject to any of the requirements of the Employee Retirement Income Security Act of 1974, as amended. The 2019 +Plan is not, nor is it intended to be, a “tax-qualified” plan under Section 401(a) of the Code. +Required +Vote +Approval +of this resolution requires the affirmative vote of a majority of the shares of Common Stock present or represented by proxy and +entitled to vote at the Annual Meeting. +Recommendation +of the Board of Directors +The +Board of Directors unanimously recommends a vote “FOR” the approval of the Steven Madden, Ltd. 2019 Incentive Compensation +Plan. +60 +PROPOSAL +FOUR: +RATIFICATION OF THE APPOINTMENT OF EISNERAMPER LLP AS THE COMPANY’S +INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS +FOR THE FISCAL YEAR ENDING DECEMBER 31, 2019 +The +Audit Committee has appointed EisnerAmper LLP as the Company’s independent registered public accounting firm to conduct +the audit of the Company’s books and records for the fiscal year ending December 31, 2019. EisnerAmper LLP has served +as the Company’s independent registered public accountants since 1995. +Before +making its determination on appointment, the Audit Committee carefully considers the qualifications and competence of candidates +for the independent registered public accountants. For EisnerAmper LLP, this has included a review of its performance in prior +years, its independence and processes for maintaining independence, the results of the most recent internal quality control review +or Public Company Accounting Oversight Board inspection, the key members of the audit engagement team, the firm’s approach +to resolving significant accounting and auditing matters including consultation with the firm’s national office, as well +as its reputation for integrity and competence in the fields of accounting and auditing. Although ratification by stockholders +is not required by the Company’s organizational documents or any applicable law, the Audit Committee has determined that +requesting ratification by stockholders of its appointment of EisnerAmper LLP as the Company’s independent registered public +accountants is a matter of good corporate practice. If stockholders do not ratify the selection, the Audit Committee will reconsider +whether or not to retain EisnerAmper LLP, but may still retain the accounting firm. Even if the selection is ratified, the Audit +Committee, in its discretion, may change the appointment at any time during the year if it determines that such a change would +be in the best interest of the Company and its stockholders. +Representatives +of EisnerAmper LLP are expected to be present at the Annual Meeting to respond to appropriate questions and to make a statement +should they so desire. +Required Vote +The +affirmative vote of the holders of a majority of the outstanding shares of Common Stock present or represented by proxy and entitled +to vote at the Annual Meeting is required to ratify the Audit Committee’s selection of EisnerAmper LLP. +Recommendation of the Board +of Directors +The +Board of Directors unanimously recommends a vote “FOR” the ratification of the appointment of EisnerAmper LLP as the +Company’s independent registered public accountants for the fiscal year ending December 31, 2019. Unless marked to +the contrary, proxies received from stockholders will be voted in favor of ratifying the appointment of EisnerAmper LLP as the +Company’s independent registered public accountants for the fiscal year ending December 31, 2019. +61 +Independent Registered Public +Accounting Firm’s Fees and Services +The +aggregate fees billed to the Company by EisnerAmper LLP for professional services rendered for each of the past two years are +set forth below: +Year Ended December 31, +2018 +2017 +Audit Fees (1) +$ 1,310,000 +$ 1,067,500 +Audit-Related Fees (2) +235,284 +49,500 +Tax Fees +— +— +All Other Fees +— +— +Total +$ 1,545,284 +$ 1,117,000 +(1) Represents the aggregate +fees billed for (a) the audit of the Company’s annual financial statements, (b) the reviews of the financial statements +included in the Company’s Quarterly Reports on Form 10-Q, (c) other statutory and regulatory filings or engagements +and (d) the audit of the Company’s internal controls over financial reporting. +(2) Represents the aggregate +fees billed for audit-related fees related to assurance and related services. Includes, among others, the audit of the Company’s +employee benefit plans and other accounting related consultations and, with respect to 2017, a transfer pricing study and, with +respect to 2018, services rendered in connection with due diligence performed for the Company’s acquisition of a business. +Audit Committee’s +Pre-Approval Policies and Procedures +Consistent +with SEC policies regarding auditor independence, the Audit Committee has responsibility for appointing, setting compensation +and overseeing the work of the independent registered public accountants. In recognition of this responsibility, the Audit Committee +has established a policy to review and pre-approve all audit and permissible non-audit services provided by the independent registered +public accountants. These services may include audit services, audit-related services, tax services and other services. +Prior +to engagement of the independent auditor for next year’s audit, the Audit Committee will pre-approve all auditing services +and all permitted non-audit services (including the fees and terms thereof), except those excluded from requiring pre-approval +based upon the de minimus exception set forth in Section 10A(i)(1)(B) of the Exchange Act. +The +Audit Committee’s pre-approval policies and procedures are as follows: (a) prior to each fiscal year, the Audit Committee +pre-approves a schedule of estimated fees for proposed non-prohibited audit and non-audit services, and (b) actual amounts +paid are monitored by financial management of the Company and reported to the Audit Committee. +All +work performed by EisnerAmper LLP as described above under the captions Audit Fees, Audit-Related Fees, Tax Fees and All Other +Fees has been approved or pre-approved by the Audit Committee pursuant to the provisions of the Audit Committee’s charter. +The Audit Committee has considered and concluded that the provision of non-audit services is compatible with maintaining the independence +of EisnerAmper LLP. +62 +AUDIT +COMMITTEE REPORT +The +Audit Committee reviewed the Company’s audited financial statements for the 2018 Fiscal Year and met with both management +and representatives of EisnerAmper LLP, the Company’s independent registered public accountants, to discuss such audited +financial statements. Management and the Company’s independent registered public accountants have represented to the Audit +Committee that the financial statements were prepared in accordance with accounting principles generally accepted in the United +States of America. The Audit Committee has received from and discussed with EisnerAmper LLP the written disclosures and the letter +regarding EisnerAmper LLP’s communications with the Audit Committee concerning independence as required by applicable requirements +of the Public Company Accounting Oversight Board, and discussed with EisnerAmper LLP the independence of EisnerAmper LLP. The +Audit Committee also discussed with EisnerAmper LLP any matters required to be discussed by Auditing Standards No. 1301, “Communications +with Audit Committees” issued by the Public Company Accounting Oversight Board. Based on these reviews and discussions, +the Audit Committee recommended to the Board that the Company’s audited financial statements be included in the Company’s +Annual Report on Form 10-K for the 2018 Fiscal Year. +Submitted by +the Audit Committee of the Company’s Board of Directors: +Richard P. Randall (Chairman) +Rose +Peabody Lynch +Mitchell S. Klipper +Ravi +Sachdev +63 +PROPOSAL +FIVE: +NON-BINDING ADVISORY VOTE ON EXECUTIVE COMPENSATION +Section 14A +of the Exchange Act, as created by Section 951 of the Dodd-Frank Act, and the rules and regulations promulgated thereunder, +require a publicly traded company to include a resolution in its proxy statement at least once every three years seeking stockholder +approval, on an advisory or non-binding basis, of the compensation of the named executive officers as disclosed in such company’s +proxy statement pursuant to the compensation rules of the SEC. At our 2018 Annual Meeting of Stockholders, the Company’s +stockholders approved, on an advisory basis, the holding of an advisory vote to approve executive compensation (commonly known +as a “say-on-pay” proposal) on an annual basis. Based on these results, the Board of Directors determined to +hold its advisory vote to approve executive compensation annually until the next frequency vote, which is scheduled to occur at +the 2023 annual meeting of stockholders. Accordingly, we are providing stockholders with a non-binding advisory vote on the compensation +of our Named Executive Officers. +As +described in more detail in the Compensation Discussion and Analysis section, which begins on page 25 of this Proxy Statement, +the overall objective of the Company’s executive compensation programs and practices is to support delivery of sustained +operating and financial performance results with the ultimate goal being to create and maximize value for our stockholders on +a long-term basis. We believe that our executive compensation programs and practices serve the interests of our stockholders by +enabling us to attract and retain an experienced and effective management team whose combined knowledge of our business and the +footwear and accessories industries has proved extremely valuable in delivering results for our stockholders. The Compensation +Committee and the Board of Directors believe that the Company’s compensation programs and practices as articulated in the +Compensation Discussion and Analysis section of this Proxy Statement effectively implement our philosophy of aligning compensation +to stockholder interests and that the compensation received by our Named Executive Officers in the 2018 Fiscal Year reflects and +supports such philosophy and goal and is commensurate with the performance and strategic position of the Company. We will continue +to review and modify our executive compensation programs to address evolving best practices and changing regulatory requirements. +We +encourage stockholders to read the Compensation Discussion and Analysis section of this Proxy Statement, as well as the Summary +Compensation Table and other related compensation tables and narrative disclosure contained in this Proxy Statement, all of which +describe and explain in detail the compensation of our Named Executive Officers in the 2018 Fiscal Year. +The following +resolution is submitted for stockholder approval: +“ RESOLVED , +that the stockholders of Steven Madden, Ltd. (the ‘Company’) approve, on a non-binding advisory basis, the compensation +paid to the Named Executive Officers of the Company as disclosed pursuant to the compensation disclosure rules of the Securities +and Exchange Commission, including the executive compensation as described in the section captioned ‘Compensation Discussion +and Analysis,’ the Summary Compensation Table and related tabular disclosure and narrative discussion regarding compensation +of Named Executive Officers under the caption ‘Executive Compensation’ contained in the Company’s Proxy Statement +dated April 8, 2019.” +64 +This +vote is not intended to address any specific item of compensation, but rather the overall compensation of our Named Executive +Officers and the compensation programs and practices described in this Proxy Statement. While this advisory vote on executive +compensation, commonly referred to as a “say-on-pay” advisory vote, is required by Section 14A of the Exchange +Act, it is not binding on our Board of Directors and may not be construed as overruling any decision by the Board of Directors +or the Compensation Committee. However, we value the opinions of our stockholders. To the extent there is a significant +vote against the compensation of the Named Executive Officers as disclosed in this Proxy Statement, the Board of Directors and +the Compensation Committee will consider the outcome of the vote when considering future compensation arrangements and evaluate +whether any actions are necessary to address the stockholders’ concerns. +Required Vote +Approval +of this resolution requires the affirmative vote of a majority of the shares of Common Stock present or represented by proxy and +entitled to vote at the Annual Meeting. +Recommendation of the Board +of Directors +The +Board of Directors unanimously recommends a vote “FOR” the resolution approving the overall compensation of the Named +Executive Officers for the 2018 Fiscal Year. +65 +PROPOSAL +SIX: +STOCKHOLDER PROPOSAL REGARDING HUMAN RIGHTS RISK ASSESSMENT REPORT +The +following stockholder proposal was submitted by the New York State Common Retirement Fund, the beneficial owner of 123,896 shares +of the Company’s Common Stock. The New York State Common Retirement Fund is located at 110 State Street, 14 th +Floor, Albany, New York 12244-0001. The Board of Directors unanimously recommends a vote “AGAINST” this stockholder +proposal. +Stockholder +Proposal and Supporting Statement +“ RESOLVED , +that stockholders of Steven Madden, Ltd. (“Steve Madden”), urge the Board of Directors to report to stockholders, +at reasonable cost and omitting proprietary information, on Steve Madden’s process for identifying and analyzing potential +and actual human rights risks of Steve Madden’s operations and supply chain (referred to herein as a “human rights +risk assessment”) addressing the following: +· Human +rights principles used to frame the assessment +· Frequency +of assessment +· Methodology +used to track and measure performance +· Nature +and extent of consultation with relevant stakeholders in connection with the assessment +· How +the results of the assessment are incorporated into company policies and decision making +The +report should be made available to stockholders on the Steve Madden website no later than December 31, 2019. The report asked +for by this proposal is separate and distinct from a sustainability report or adoption of human rights policy statement. +Supporting +Statement +As +long-term stockholders, we favor policies and practices protecting and enhancing the value of our investments. There is increasing +recognition among corporations and investors alike that risks related to human rights violations, such as litigation, reputational +damage, and project delays and disruptions, can adversely affect stockholder value. +The +importance of human rights risk assessment is reflected in the United Nations Guiding Principles on Business and Human Rights +approved by the UN Human Rights Council in 2011. The principles urge that “business enterprises should carry out human rights +due diligence assessing actual and potential human rights impacts, integrating and acting upon the findings, tracking responses, +and communicating how impacts are addressed.” +Because +Steve Madden relies on its private label brands for a substantial part of its revenue and over 90 percent of private label production +is estimated to be outsourced to developing countries, the company is exposed to risks that substandard treatment of workers in +the company’s supply chain could result in disruptions in production or reputational harm. +In +Steve Madden’s 2018 Form 10-K, the company recognizes the reputational risks associated with public scrutiny of labor practices +embedded in its supply chain. However, there is no evidence that the company has undertaken any initiatives to monitor or proactively +address these concerns. +Steve +Madden has not developed standards in its supplier code of conduct to address human rights issues. Furthermore, Steve Madden has +not adequately demonstrated to investors its ability to assess and report the risks to stockholder value posed by human rights +practices in its operations and supply chain in order to effectively translate principles into protective practices. +66 +The +best practices for addressing these risks are: establishing labor management policies meeting stringent international norms, implementing +programs to verify compliance with the policies in the supply chain, and introducing incentives for compliance among suppliers. +Human +rights risk assessment and reporting would help Steve Madden management to identify and mitigate such risks and stockholders to +understand their potential effect on stockholder value.” +The Board +of Directors’ Statement in Opposition +We +share the proponent stockholder’s concerns for human rights and are committed to supporting and maintaining standards of +ethical conduct and respect for human rights. The Board of Directors has carefully considered the above proposal, however, and +believes that this type of report is unnecessary and not in the best interest of the stockholders in light of the Company’s +development of policies that address fundamental human rights principles and because the costs and resources required to create +an additional, separate report on human rights risks would be an unnecessary burden and expense and a diversion of corporate resources +without corresponding significant benefit to stockholders. +We +have established a comprehensive vendor compliance program, reflected in our Corporate Social Responsibility Policy, which sets +forth our expectations for our manufacturers, vendors and suppliers (collectively, “Vendors”) and is codified, with +other policies, in our Vendor Compliance Manual. The primary goals of the program are the following: +· to +ensure compliance with all applicable local laws, industry standards and the Company’s +expectations concerning, among other things, the use of child, prison or forced labor, +the proper and timely payment of wages, the reduction of health and safety hazards and +the management of working hours; +· where +noncompliance exists, to identify the cause of the noncompliance and establish attainable, +time-phased progress milestones to work toward improvement where possible; and +· to +monitor and promote long-term compliance with our Vendor Compliance Manual and any related +requirements as local law and industry standards mandate. +Our +Vendor Code of Conduct (the “Vendor Code”), which is available at https://stevemadden.gcs-web.com/corporate-governance/highlights , +specifically reinforces our commitment to managing our supply chain in accordance with the International Labor Organization’s +Declaration on Fundamental Principles and Rights at Work and the United Nations Guiding Principles on Business and Human Rights. +The Company seeks to do business with vendors and suppliers that demonstrate commitment to meeting our standards and the Company +may terminate a relationship with any Vendor found to be in violation of the standards. +To +evaluate compliance with our policies in the supply chain, including, without limitation, compliance with the Company’s +standards regarding human trafficking and slavery in supply chains, we periodically review our Vendor Compliance Manual and distribute +revised versions to our Vendors asking that they review, acknowledge and agree to the terms contained in the revised manual. Additionally, +under the terms of the manual, we have the right to audit our Vendors, conduct on-site inspections of Vendor facilities and engage +in announced and unannounced monitoring activities, including confidential employee interviews, to ensure compliance. The Company +reviews and monitors its Vendor relationships and may terminate a relationship with any Vendor found to be in violation of the +guidelines. +67 +The +Company also is crafting a comprehensive training program for all employees, management and key contacts at supply chains detailing +the applicable laws and the Company’s standards regarding human trafficking, slavery, and child labor in supply chains. +The training program will ultimately include a combination of in-person training sessions and online training tools to reiterate +the importance of compliance with the applicable laws and Company-specific policies and procedures regarding human trafficking, +slavery, and child labor in supply chains. +Further, +the Company maintains a robust risk assessment program. As more fully discussed in the section captioned “Corporate Governance +– Risk Oversight” above, our management and internal audit areas provide day-to-day oversight of risk management strategy +for the ongoing business operations of the Company. This oversight includes identifying, evaluating and addressing potential risks +that may exist at the enterprise, strategic, financial, operation, and compliance and reporting levels. These assessments are +periodically reviewed with the Audit Committee of the Board of Directors. +In +light of our commitment to human rights demonstrated by our existing policies and vendor compliance programs as well as our commitment +to training and robust oversight, we believe that the additional human rights risk assessment report requested by this proposal +is unnecessary and a diversion of management’s attention and of stockholders’ resources. +Required Vote +Approval +of this resolution requires the affirmative vote of a majority of the shares of Common Stock present or represented by proxy and +entitled to vote at the Annual Meeting. +Recommendation of the Board +of Directors +For +all of the above reasons, the Board of Directors unanimously recommends a vote “AGAINST” this stockholder proposal. +Proxies received by the Board of Directors will be so voted unless stockholders specify a contrary choice in their proxies. +OTHER +MATTERS +At +the date of this Proxy Statement, the Company has no knowledge of any business other than that described above that will be presented +at the Annual Meeting. If any other business should properly come before the Annual Meeting in connection therewith, it is intended +that the persons named in the accompanying proxy will have discretionary authority to vote the shares which they represent. +WHETHER +OR NOT YOU EXPECT TO BE PRESENT AT THE ANNUAL MEETING, PLEASE MARK, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY CARD PROMPTLY. +ALTERNATIVELY, YOU MAY VOTE YOUR SHARES BY TELEPHONE OR THROUGH THE INTERNET AS DESCRIBED ON THE ACCOMPANYING PROXY CARD. +YOUR VOTE IS IMPORTANT. IF YOU ARE A STOCKHOLDER OF RECORD AND ATTEND THE ANNUAL MEETING AND WISH TO VOTE IN PERSON, YOU MAY WITHDRAW +YOUR PROXY AT ANY TIME PRIOR TO THE VOTE. +STEVEN +MADDEN, LTD. +April +8, 2019 +By: +Arvind +Dharia +Secretary +68 +ANNEX A - RECONCILIATION OF ADJUSTED RESULTS (NON-GAAP) +The within Proxy Statement provides the Company’s financial results both in accordance with generally accepted accounting principles in the United States (“GAAP”) and using certain non-GAAP financial measures. In particular, the Proxy Statement provides the Company’s historic net income and income per diluted share adjusted to exclude certain charges and recoveries, which are non-GAAP financial measures. The Company uses non-GAAP financial information to evaluate its operating performance and in order to represent the manner in which the Company conducts and views its business. Additionally, the Company believes the information assists investors in comparing the Company’s performance across reporting periods on a consistent basis by excluding items that are not indicative of its core business. The non-GAAP financial information is provided in addition to, and not as an alternative to, the Company’s reported results prepared in accordance with GAAP. +Reconciliation +of Net Income and Diluted Income Per Share (GAAP Basis) to Adjusted Net Income and Adjusted Diluted Income Per Share (Non-GAAP +Basis) +Twelve +Months +Ended +December 31, +2018 +Twelve +Months +Ended +December 31, +2017 +GAAP +net income attributable to Steven Madden, Ltd. +$ 129,136 +$ 117,948 +After-tax +impact of non-cash expense associated with the purchase accounting fair value adjustment of inventory acquired in the Schwartz +& Benjamin acquisition +— +402 +After-tax +impact of expense in connection with provision for legal and early lease termination charges +2,478 +7,457 +After-tax +impact of benefit in connection with post-closing amendment to the equity purchase agreement relating to the Schwartz & +Benjamin acquisition +— +(6,435 ) +After-tax +impact of expense in connection with the integration of the Schwartz & Benjamin acquisition and the related restructuring +1,536 +2,293 +After-tax +impact of expense in connection with a warehouse consolidation +914 +— +After-tax +impact of impairment preferred interest in Brian Atwood Italia Holding, LLC +1,028 +1,701 +After-tax +impact of bad debt expense and write-off of an unamortized buying agency support payment agreement associated with the Payless +ShoeSource bankruptcies +11,481 +4,799 +After-tax +impact of impairment of Wild Pair trademark +— +630 +Tax +expense resulting from the Tax Cuts and Jobs Act transition tax and taxing authorities audit and prepaid tax adjustments related +to prior years +$ 11,136 +$ 463 +Adjusted +net income attributable to Steven Madden, Ltd. +$ 157,710 +$ 129,257 +GAAP +diluted income per share +$ 1.50 +$ 1.36 +Adjusted +diluted income per share +$ 1.83 +$ 1.49 +Diluted +shares +86,097 +86,745 +ANNEX B +Steven Madden, +Ltd. 2019 Incentive Compensation Plan +(Adopted by +the Board of Directors on February 25, 2019 and +Approved by +the Stockholders on ____________, 2019) +TABLE +OF CONTENTS +Page +ARTICLE I +ESTABLISHMENT OF PLAN +1 +ARTICLE II +DEFINITIONS +1 +ARTICLE III +ADMINISTRATION +7 +ARTICLE IV +SHARE LIMITATION +10 +ARTICLE V +ELIGIBILITY – GENERAL REQUIREMENTS FOR AWARDS +14 +ARTICLE VI +STOCK OPTIONS +14 +ARTICLE VII +STOCK APPRECIATION RIGHTS +17 +ARTICLE VIII +RESTRICTED STOCK +20 +ARTICLE IX +RESTRICTED STOCK UNITS +22 +ARTICLE X +PERFORMANCE SHARES +24 +ARTICLE XI +OTHER STOCK-BASED AWARDS +25 +ARTICLE XII +PERFORMANCE-BASED CASH AWARDS +27 +ARTICLE XIII +TERMINATION +29 +ARTICLE XIV +CHANGE IN CONTROL PROVISIONS +30 +ARTICLE XV +TERMINATION OR AMENDMENT OF PLAN +31 +ARTICLE XVI +UNFUNDED PLAN +32 +ARTICLE XVII +GENERAL PROVISIONS +33 +ARTICLE XVIII +EFFECTIVE DATE OF PLAN +36 +ARTICLE XIX +TERM OF PLAN +36 +ARTICLE XX +NAME OF PLAN +36 +EXHIBIT A +PERFORMANCE GOALS +A-1 +lxx +STEVEN +MADDEN, LTD. +2019 +INCENTIVE COMPENSATION PLAN +(Adopted +by the Board of Directors on February 25, 2019 and +Approved by the Stockholders on ____________________) +ARTICLE +I +ESTABLISHMENT OF PLAN +1.1 Establishment +of the Plan . Steven Madden, Ltd (“the Company”) established this incentive compensation plan to permit the +granting of Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock +Units, Performance Shares, Performance Share Units, Other Stock-Based Awards and Performance-Based Cash Awards to the persons +and for the purposes described herein. +1.2 Purposes +of the Plan . The purposes of the Plan are to induce certain individuals to remain in the employ, or to continue to serve +as directors of, or consultants or advisors to, the Company and its present and future Subsidiaries, to attract new individuals +to enter into such employment or service and to encourage such individuals to secure or increase on reasonable terms their stock +ownership in the Company. The Board believes that the granting of Awards under the Plan will promote continuity of management +and increased incentive and personal interest in the welfare of the Company by those who are or may become primarily responsible +for shaping and carrying out the long range plans of the Company and securing its continued growth and financial success. +1.3 Duration +of the Plan . No Award may be granted under the Plan after February 24, 2029, or such earlier date as the Board shall determine. +The Plan will remain in effect with respect to outstanding Awards until no Awards remain outstanding. +ARTICLE +II +DEFINITIONS +For +purposes of this Plan, the following terms shall have the following meanings: +2.1 “ Acquisition +Event ” means a merger or consolidation in which the Company is not the surviving entity, any transaction that results +in the acquisition of all or substantially all of the Company’s outstanding Common Stock by a single person or entity or +by a group of persons and/or entities acting in concert, or the sale or transfer of all or substantially all of the Company’s +assets. +2.2 “ Affiliate ” +means each of the following: (a) any Subsidiary; (b) any Parent; (c) any corporation, trade or business (including, +without limitation, a partnership or limited liability company) which is directly or indirectly controlled 50% or more (whether +by ownership of stock, assets or an equivalent ownership interest or voting interest) by the Company; (d) any corporation, trade +or business (including, without limitation, a partnership or limited liability company) which directly or indirectly controls +50% or more (whether by ownership of stock, assets or an equivalent ownership interest or voting interest) of the Company; and +(e) any other entity in which the Company or any of its Affiliates has a material equity interest and which is designated +as an “Affiliate” by resolution of the Committee; provided that the Common Stock subject to any Award constitutes +“service recipient stock” for purposes of Section 409A of the Code or otherwise does not subject the Award to Section +409A of the Code. +1 +2.3 “ Appreciation +Award ” means any Award under this Plan of any Stock Option, Stock Appreciation Right or Other Stock-Based Award, +provided that such Other Stock-Based Award is based on the appreciation in value of a share of Common Stock in excess of an amount +equal to at least the Fair Market Value of the Common Stock on the date such Other Stock-Based Award is granted. +2.4 “ Award ” +means any award under this Plan of any Stock Option, Stock Appreciation Right, Restricted Stock, Performance Share, Other +Stock-Based Award or Performance-Based Cash Awards. All Awards shall be granted by, confirmed by, and subject to the terms of, +a written agreement executed by the Company and the Participant. +2.5 “ Board ” +means the Board of Directors of the Company. +2.6 “ Cause ” +means with respect to a Participant’s Termination of Employment or Termination of Consultancy from and after the date +hereof, the following: (a) in the case where there is no employment agreement, consulting agreement, change in control agreement +or similar agreement in effect between the Company or an Affiliate and the Participant at the time of the grant of the Award (or +where there is such an agreement but it does not define “cause” (or words of like import)), termination due to: (i) +a Participant’s conviction of, or plea of guilty or nolo contendere to, a felony; (ii) perpetration by a Participant of +an illegal act, or fraud which could cause significant economic injury to the Company; (iii) continuing willful and deliberate +failure by the Participant to perform the Participant’s duties in any material respect, provided that the Participant is +given notice and an opportunity to effectuate a cure as determined by the Committee; or (iv) a Participant’s willful misconduct +with regard to the Company that could have a material adverse effect on the Company; or (b) in the case where there is an employment +agreement, consulting agreement, change in control agreement or similar agreement in effect between the Company or an Affiliate +and the Participant at the time of the grant of the Award that defines “cause” (or words of like import), “cause” +as defined under such agreement; provided, however, that with regard to any agreement under which the definition of “cause” +only applies on occurrence of a change in control, such definition of “cause” shall not apply until a change in control +actually takes place and then only with regard to a termination thereafter. With respect to a Participant’s Termination +of Directorship, “cause” means an act or failure to act that constitutes cause for removal of a director under applicable +Delaware law. +2.7 “ Change +in Control ” has the meaning set forth in Section 14.3. +2.8 “ Change +in Control Price ” has the meaning set forth in Section 14.1. +2 +2.9 “ Code ” +means the Internal Revenue Code of 1986, as amended. Any reference to any section of the Code shall also be a reference to +any successor provision and any Treasury Regulation promulgated thereunder. +2.10 “ Committee ” +means a committee or subcommittee of the Board appointed from time to time by the Board, which committee or subcommittee shall +consist of two or more non-employee directors, each of whom shall be (i) a “non-employee director” as defined in Rule +16b-3; and (ii) an “independent director” as defined under Nasdaq Rule 5605(a)(2) or such other applicable stock exchange +rule. To the extent that no Committee exists that has the authority to administer this Plan, the functions of the Committee shall +be exercised by the Board. If for any reason the appointed Committee does not meet the requirements of Rule 16b-3, such noncompliance +shall not affect the validity of Awards, grants, interpretations or other actions of the Committee. +2.11 “ Common +Stock ” means the Common Stock, $0.0001 par value per share, of the Company. +2.12 “ Company ” +means Steven Madden, Ltd., a Delaware corporation, and its successors by operation of law. +2.13 “ Consultant ” +means any natural person who provides bona fide consulting or advisory services to the Company or its Affiliates pursuant +to a written agreement, which are not in connection with the offer and sale of securities in a capital-raising transaction. +2.14 “ Disability ” +means with respect to a Participant’s Termination, a permanent and total disability as defined in Section 22(e)(3) of +the Code. A Disability shall only be deemed to occur at the time of the determination by the Committee of the Disability. Notwithstanding +the foregoing, for Awards that are subject to Section 409A of the Code, Disability shall mean that a Participant is disabled under +Section 409A(a)(2)(C)(i) or (ii) of the Code. +2.15 “ Effective +Date ” means the effective date of this Plan as defined in Article XVIII. +2.16 “ Eligible +Employees ” means each employee of the Company or an Affiliate. +2.17 “ Exchange +Act ” means the Securities Exchange Act of 1934, as amended. Any references to any section of the Exchange Act shall +also be a reference to any successor provision. +2.18 “ Fair +Market Value ” means, unless otherwise required by any applicable provision of the Code or any regulations issued +thereunder, as of any date and except as provided below, the closing price reported for the Common Stock on the applicable date: +(a) as reported on the principal national securities exchange in the United States on which it is then traded, or (b) if not traded +on any such national securities exchange, the last sale price quoted in the principal over-the-counter market on which the Common +Stock is quoted, as determined by the Committee. If the Common Stock is not traded, listed or otherwise reported or quoted, then +Fair Market Value means the fair market value of the Common Stock as determined by the Committee in good faith in whatever manner +it considers appropriate taking into account the requirements of Section 422 of the Code and/or Section 409A of the Code, as applicable. +For purposes of the grant of any Award, the applicable date shall be the trading day immediately prior to the date on which the +Award is granted. For purposes of the exercise of any Award, the applicable date shall be the date a notice of exercise is received +by the Committee or, if not a day on which the applicable market is open, the next day that it is open. +3 +2.19 “ Family +Member ” means “family member” as defined in Section A.1.(5) of the general instructions of Form S-8, +as may be amended from time to time. +2.20 “ GAAP ” +has the meaning set forth in Section 12.2(c)(ii). +2.21 “ Incentive +Stock Option ” means any Stock Option awarded to an Eligible Employee of the Company, its Subsidiaries and its Parent +(if any) under this Plan intended to be and designated as an “Incentive Stock Option” within the meaning of Section +422 of the Code. +2.22 “ Limited +Stock Appreciation Right ” means a Tandem Stock Appreciation Right or Non-Tandem Stock Appreciation Right exercisable +only upon the occurrence of a Change in Control or other event as determined by the Committee as provided in Section 7.5. +2.23 “ Non-Employee +Director ” means a director of the Company who is not an active employee of the Company or an Affiliate. +2.24 “ Non-Qualified +Stock Option ” means any Stock Option awarded under this Plan that is not an Incentive Stock Option. +2.25 “ Non-Tandem +Stock Appreciation Right ” means the right to receive cash or a number of shares of Common Stock (as determined by +the Committee, in its sole discretion, on the date of grant) equal to the difference between (i) the Fair Market Value of a share +of Common Stock on the date such right is exercised, and (ii) the aggregate exercise price of such right, otherwise than on surrender +of a Stock Option. +2.26 “ Other +Stock-Based Award ” means an Award under Article XI of this Plan that is valued in whole or in part by reference +to, or is payable in or otherwise based on, Common Stock, including, without limitation, a restricted stock unit or other Award +valued by reference to an Affiliate. +2.27 “ Parent ” +means any parent corporation of the Company within the meaning of Section 424(e) of the Code. +2.28 “ Participant ” +means an Eligible Employee, Non-Employee Director or Consultant to whom an Award has been granted pursuant to this Plan. +2.29 “ Performance +Goals ” means the performance goals set forth on Exhibit A hereto. +2.30 “ Performance-Based +Cash Award ” means a cash Award under Article XII of this Plan that is payable or otherwise based on the attainment +of certain pre-established performance goals during a Performance Period. +4 +2.31 “ Performance +Period ” means the duration of the period during which receipt of an Award is subject to the satisfaction of performance +criteria, such period as determined by the Committee in its sole discretion. +2.32 “ Performance +Share ” means an Award made pursuant to Article X of this Plan of the right to receive Common Stock or cash of an +equivalent value at the end of a specified Performance Period. +2.33 “ Person ” +means any individual, corporation, partnership, limited liability company, firm, joint venture, association, joint-stock company, +trust, incorporated organization, governmental or regulatory or other entity. +2.34 “ Plan ” +means this Steven Madden, Ltd. 2019 Incentive Compensation Plan, as it may be amended from time to time. +2.35 “ Prior +Plan ” means the Steven Madden, Ltd. 2006 Stock Incentive Plan, as in effect immediately prior to the Effective Date. +2.36 “ Reference +Stock Option ” has the meaning set forth in Section 7.1. +2.37 “ Restricted +Stock ” means an Award of shares of Common Stock under this Plan that is subject to restrictions under Article VIII. +2.38 “ Restricted +Stock Unit ” means an Award described in Article IX. +2.39 “ Restriction +Period ” has the meaning set forth in Subsection 8.3(a). +2.40 “ Retirement ” +means a voluntary Termination of Employment at or after age 65 or such earlier date after age 50 as may be approved by the +Committee, in its sole discretion at the time of grant or thereafter provided that the exercise of such discretion does not make +the applicable Award subject to Section 409A of the Code, except that Retirement shall not include any Termination by the Company +with or without Cause. With respect to a Participant’s Termination of Directorship, Retirement means the failure to stand +for reelection or the failure to be reelected on or after a Participant has attained age 65 or, with the consent of the Board, +before age 65 but after age 50, provided that the exercise of such discretion does not make the applicable Award subject to Section +409A of the Code. +2.41 “ Rule +16b-3 ” means Rule 16b-3 under Section 16(b) of the Exchange Act as then in effect or any successor provision. +2.42 “ Section +409A of the Code ” means the nonqualified deferred compensation rules under Section 409A of the Code and any applicable +Treasury regulations thereunder. +2.43 “ Securities +Act ” means the Securities Act of 1933, as amended and all rules and regulations promulgated thereunder. Any reference +to any section of the Securities Act shall also be a reference to any successor provision. +5 +2.44 “ Stock +Appreciation Right” means a Non-Tandem Stock Appreciation Right or a Tandem Stock Appreciation Right. +2.45 “Stock +Option ” or “ Option ” means any option to purchase shares of Common Stock granted to Eligible +Employees, Non-Employee Directors or Consultants granted pursuant to Article VI. +2.46 “ Subsidiary ” +means any subsidiary corporation of the Company within the meaning of Section 424(f) of the Code. +2.47 “ Tandem +Stock Appreciation Right ” means the right to surrender to the Company all (or a portion) of a Stock Option in exchange +for cash or a number of shares of Common Stock (as determined by the Committee, in its sole discretion, on the date of grant) +equal to the difference between (a) the Fair Market Value on the date such Stock Option (or such portion thereof) is surrendered, +of the Common Stock covered by such Stock Option (or such portion thereof), and (b) the aggregate exercise price of such Stock +Option (or such portion thereof). +2.48 “ Ten +Percent Stockholder ” means an Eligible Employee owning stock possessing more than 10% of the total combined voting +power of all classes of stock of the Company, its Subsidiaries or its Parent. +2.49 “ Termination ” +means a Termination of Consultancy, Termination of Directorship or Termination of Employment, as applicable. +2.50 “ Termination +of Consultancy ” means: (a) that the Consultant is no longer acting as a consultant to the Company or an Affiliate; +or (b) when an entity which is retaining a Participant as a Consultant ceases to be an Affiliate unless the Participant otherwise +is, or thereupon becomes, a Consultant to the Company or another Affiliate at the time the entity ceases to be an Affiliate. In +the event that a Consultant becomes an Eligible Employee or a Non-Employee Director upon the termination of his or her consultancy, +unless otherwise determined by the Committee, in its sole discretion, no Termination of Consultancy shall be deemed to occur until +such time as such Consultant is no longer a Consultant, an Eligible Employee or a Non-Employee Director. Notwithstanding the foregoing, +the Committee may, in its sole discretion, otherwise define Termination of Consultancy in the Award agreement or, if no rights +of a Participant are reduced, may otherwise define Termination of Consultancy thereafter. +2.51 “ Termination +of Directorship ” means that the Non-Employee Director has ceased to be a director of the Company; except that if +a Non-Employee Director becomes an Eligible Employee or a Consultant upon the termination of his or her directorship, his or her +ceasing to be a director of the Company shall not be treated as a Termination of Directorship unless and until the Participant +has a Termination of Employment or Termination of Consultancy, as the case may be. +6 +2.52 “ Termination +of Employment ” means: (a) a termination of employment (for reasons other than a military or personal leave +of absence granted by the Company) of a Participant from the Company and its Affiliates; or (b) when an entity which is employing +a Participant ceases to be an Affiliate, unless the Participant otherwise is, or thereupon becomes, employed by the Company or +another Affiliate at the time the entity ceases to be an Affiliate. In the event that an Eligible Employee becomes a Consultant +or a Non-Employee Director upon the termination of his or her employment, unless otherwise determined by the Committee, in its +sole discretion, no Termination of Employment shall be deemed to occur until such time as such Eligible Employee is no longer +an Eligible Employee, a Consultant or a Non-Employee Director. Notwithstanding the foregoing, the Committee may, in its sole discretion, +otherwise define Termination of Employment in the Award agreement or, if no rights of a Participant are reduced, may otherwise +define Termination of Employment thereafter. +2.53 “ Transfer ” +means: (a) when used as a noun, any direct or indirect transfer, sale, assignment, pledge, hypothecation, encumbrance or other +disposition (including the issuance of equity in a Person), whether for value or no value and whether voluntary or involuntary +(including by operation of law), and (b) when used as a verb, to directly or indirectly transfer, sell, assign, pledge, encumber, +charge, hypothecate or otherwise dispose of (including the issuance of equity in a Person) whether for value or for no value and +whether voluntarily or involuntarily (including by operation of law). “Transferred” and “Transferrable” +shall have a correlative meaning. +ARTICLE +III +ADMINISTRATION +3.1 The +Committee . This Plan shall be administered and interpreted by the Committee. +3.2 Grants +of Awards . The Committee shall have full authority to grant, pursuant to the terms of this Plan, to Eligible Employees, +Consultants and Non-Employee Directors: (i) Stock Options, (ii) Stock Appreciation Rights, (iii) Restricted Stock, +(iv) Restricted Stock Units, (v) Performance Shares; (vi) Other Stock-Based Awards, and (vii) Performance-Based +Cash Awards . In particular, the Committee shall have the authority: +(a) to +select the Eligible Employees, Consultants and Non-Employee Directors to whom Awards +may from time to time be granted hereunder; +(b) to +determine whether and to what extent Awards, or any combination thereof, are to be granted +hereunder to one or more Eligible Employees, Consultants or Non-Employee Directors; +(c) to +determine the number of shares of Common Stock to be covered by each Award granted hereunder; +(d) to +determine the terms and conditions, not inconsistent with the terms of this Plan, of +any Award granted hereunder (including, but not limited to, the exercise or purchase +price (if any), any restriction or limitation, any vesting schedule or acceleration thereof, +or any forfeiture restrictions or waiver thereof, regarding any Award and the shares +of Common Stock relating thereto, based on such factors, if any, as the Committee shall +determine, in its sole discretion); +7 +(e) to +determine whether, to what extent and under what circumstances grants of Options and +other Awards under this Plan are to operate on a tandem basis and/or in conjunction with +or apart from other awards made by the Company outside of this Plan; +(f) to +determine whether and under what circumstances a Stock Option may be settled in cash, +Common Stock and/or Restricted Stock under Section 6.3(d); +(g) to +determine whether, to what extent and under what circumstances Common Stock and other +amounts payable with respect to an Award under this Plan shall be deferred either automatically +or at the election of the Participant in any case, in a manner intended to comply with, +Section 409A of the Code; +(h) to +determine whether a Stock Option is an Incentive Stock Option or Non-Qualified Stock +Option; +(i) to +determine whether to require a Participant, as a condition of the granting of any Award, +to not sell or otherwise dispose of shares acquired pursuant to the exercise of an Award +for a period of time as determined by the Committee, in its sole discretion, following +the date of the acquisition of such Award; and +(j) to +set the performance criteria and the Performance Period with respect to any Award for +which the grant, vesting or payment of such Award is conditioned upon the attainment +of specified performance criteria and to certify the attainment of any such performance +criteria. +3.3 Guidelines . +Subject to Article XV hereof, the Committee shall, in its sole discretion, have the authority to adopt, alter and repeal such +administrative rules, guidelines and practices governing this Plan and perform all acts, including the delegation of its responsibilities +(to the extent permitted by applicable law and applicable stock exchange rules), as it shall, from time to time, deem advisable; +to construe and interpret the terms and provisions of this Plan and any Award issued under this Plan (and any agreements relating +thereto); and to otherwise supervise the administration of this Plan . The Committee may, in its sole discretion, correct +any defect, supply any omission or reconcile any inconsistency in this Plan or in any agreement relating thereto in the manner +and to the extent it shall deem necessary to effectuate the purpose and intent of this Plan . The Committee may, in its +sole discretion, adopt special guidelines and provisions for persons who are residing in or employed in, or subject to, the taxes +of, any domestic or foreign jurisdictions to comply with applicable tax and securities laws of such domestic or foreign jurisdictions . +This Plan is intended to comply with the applicable requirements of Rule 16b-3, and this Plan shall be limited, construed +and interpreted in a manner so as to comply therewith. +3.4 Decisions +Final . Any decision, interpretation or other action made or taken in good faith by or at the direction of the Company, +the Board or the Committee (or any of its members) arising out of or in connection with this Plan shall be within the absolute +discretion of all and each of them, as the case may be, and shall be final, binding and conclusive on the Company and all employees +and Participants and their respective heirs, executors, administrators, successors and assigns. +8 +3.5 Procedures . +If the Committee is appointed, the Board shall designate one of the members of the Committee as chairman and the Committee shall +hold meetings, subject to the By-Laws of the Company, at such times and places as it shall deem advisable, including, without +limitation, by telephone conference or by written consent to the extent permitted by applicable law. A majority of the Committee +members shall constitute a quorum. All determinations of the Committee shall be made by a majority of its members. Any decision +or determination reduced to writing and signed by all the Committee members in accordance with the By-Laws of the Company shall +be fully effective as if it had been made by a vote at a meeting duly called and held. The Committee shall keep minutes of its +meetings and shall make such rules and regulations for the conduct of its business as it shall deem advisable. +3.6 Delegation +of Authority and Employment of Consultants . +(a) The +Committee may, in its sole discretion, designate employees of the Company and professional +advisors to assist the Committee in the administration of this Plan and (to the extent +permitted by applicable law and applicable exchange rules) may grant authority to officers +to grant Awards and/or execute agreements or other documents on behalf of the Committee. +(b) The +Committee may, in its sole discretion, employ such legal counsel, consultants and agents +as it may deem desirable for the administration of this Plan and may rely upon any opinion +received from any such counsel or consultant and any computation received from any such +consultant or agent. Expenses incurred by the Committee or the Board in the engagement +of any such counsel, consultant or agent shall be paid by the Company. The Committee, +its members and any person designated pursuant to sub-section (a) above shall not be +liable for any action or determination made in good faith with respect to this Plan. +To the maximum extent permitted by applicable law, no officer of the Company or member +or former member of the Committee or of the Board shall be liable for any action or determination +made in good faith with respect to this Plan or any Award granted under it. +3.7 Indemnification . +To the maximum extent permitted by applicable law and the Certificate of Incorporation and By-Laws of the Company and to the extent +not covered by insurance directly insuring such person, each officer or employee of the Company or any Affiliate and member or +former member of the Committee or the Board shall be indemnified and held harmless by the Company against any cost or expense +(including reasonable fees of counsel reasonably acceptable to the Committee) or liability (including any sum paid in settlement +of a claim with the approval of the Committee), and advanced amounts necessary to pay the foregoing at the earliest time and to +the fullest extent permitted, arising out of any act or omission to act in connection with the administration of this Plan, except +to the extent arising out of such officer’s, employee’s, member’s or former member’s fraud. Such indemnification +shall be in addition to any rights of indemnification the officers, employees, directors or members or former officers, directors +or members may have under applicable law or under the Certificate of Incorporation or By-Laws of the Company or any Affiliate. +Notwithstanding anything else herein, this indemnification will not apply to the actions or determinations made by an individual +with regard to Awards granted to him or her under this Plan. +9 +ARTICLE +IV +SHARE LIMITATION +4.1 Shares . +(a) General +Limitations . The aggregate number of shares of Common Stock that may be issued or +used for reference purposes or with respect to which Awards may be granted under this +Plan shall not exceed 11,000,000 shares (subject to any increase or decrease pursuant +to Section 4.2), which may be either authorized and unissued Common Stock or Common Stock +held in or acquired for the treasury of the Company or both. Any shares of Common Stock +that are subject to Awards that are not Appreciation Awards shall be counted against +this limit as 3.0 shares for every share granted. If any Appreciation Award granted under +this Plan expires, terminates, is cancelled or is forfeited for any reason, the number +of shares of Common Stock underlying any such Award shall again be available for the +purpose of Awards under this Plan and added back to the aggregate maximum limit. If any +Awards that are not Appreciation Awards granted under this Plan to a Participant expire, +terminate, are cancelled or are forfeited for any reason, 3.0 shares of Common Stock +shall again be available for the purposes of Awards under this Plan and added back to +the aggregate maximum limit. If a Tandem Stock Appreciation Right or a Limited Stock +Appreciation Right is granted in tandem with an Option, such grant shall only apply once +against the maximum number of shares of Common Stock which may be issued under this Plan. +The number of shares of Common Stock available for the purpose of Awards under this Plan +shall be reduced by (i) the total number of Stock Options or Stock Appreciation Rights +exercised, regardless of whether any of the shares of Common Stock underlying such Awards +are not actually issued to the Participant as the result of a net settlement, (ii) any +shares of Common Stock used to pay any exercise price or tax withholding obligation with +respect to any Award and (iii) any shares of Common Stock repurchased by the Company +on the open market with the proceeds of an Stock Option exercise price. +(b) Individual +Participant Limitations . +(i) The +maximum number of shares of Common Stock subject to any Award of Stock Options, Stock Appreciation Rights, shares of Restricted +Stock or Awards parts of Restricted Stock Units for which the grant of such Award or the lapse of the relevant Restriction Period +is subject to the attainment of Performance Goals which may be granted under this Plan during any fiscal year of the Company to +each Eligible Employee or Consultant shall be 1,000,000 shares per type of Award (which shall be subject to any further increase +or decrease pursuant to Section 4.2), provided that the maximum number of shares of Common Stock for all types of Awards does +not exceed 1,200,000 (which shall be subject to any further increase or decrease pursuant to Section 4.2) with respect to any +fiscal year of the Company. If a Tandem Stock Appreciation Right is granted or a Limited Stock Appreciation Right is granted in +tandem with a Stock Option, it shall apply against the Eligible Employee’s or Consultant’s individual share limitations +for both Stock Appreciation Rights and Stock Options. +10 +(ii) The +maximum number of shares of Common Stock subject to (A) any Award of Stock Options (other than Incentive Stock Options), Stock +Appreciation Rights and any other share appreciation awards which may be granted under this Plan during any fiscal year of the +Company to each Non-Employee Director shall be 120,000 shares per type of Award (which shall be subject to any further increase +or decrease pursuant to Section 4.2), provided that the maximum number of shares of Common Stock for all such Awards does not +exceed 160,000 (which shall be subject to any further increase or decrease pursuant to Section 4.2) with respect to any fiscal +year of the Company, and (B) any Award of Restricted Stock, Restricted Stock Units and any other Awards other than Awards described +in Section 4.1(b)(ii)(A) which may be granted under this Plan during any fiscal year of the Company to each Non-Employee Director +shall be 40,000 shares per type of Award (which shall be subject to any further increase or decrease pursuant to Section 4.2), +provided that the maximum number of shares of Common Stock for all such Awards does not exceed 60,000 (which shall be subject +to any further increase or decrease pursuant to Section 4.2) with respect to any fiscal year of the Company; provided further, +that in no event shall the aggregate grant of Awards to Non-Employee Directors exceed 5% (when combined with the 5% limitation +set forth in Sections 6.3(c), 8.3(a)(iv), 9.3(c), 10.2(f) and 11.2(c) of this Plan) of the total number of shares of Common Stock +reserved for Awards under this Plan. If a Tandem Stock Appreciation Right is granted or a Limited Stock Appreciation Right is +granted in tandem with a Stock Option, it shall apply against the Non-Employee Director’s individual share limitations for +both Stock Appreciation Rights and Stock Options. +(iii) There +are no annual individual Eligible Employee or Consultant share limitations on Restricted Stock for which the grant of such Award +or the lapse of the relevant Restriction Period is not subject to attainment of Performance Goals in accordance with Section 8.3(a)(ii) +hereof. +(iv) The +maximum number of shares of Common Stock subject to any Award of Performance Shares which may be granted under this Plan during +any fiscal year of the Company to each Eligible Employee or Consultant shall be 1,000,000 (which shall be subject to any further +increase or decrease pursuant to Section 4.2) with respect to any fiscal year of the Company. Each Performance Share shall be +referenced to one share of Common Stock and shall be charged against the available shares under this Plan at the time the unit +value measurement is converted to a referenced number of shares of Common Stock in accordance with Section 10.1. +11 +(v) The +maximum payment under any Performance-Based Cash Award payable with respect to any fiscal year of the Company and for which the +grant of such Award is subject to the attainment of Performance Goals in accordance with Section 12.2(c) herein which may be granted +under this Plan with respect to any fiscal year of the Company to each Eligible Employee or Consultant shall be $10,000,000. +(vi) The +individual Participant limitations set forth in this Section 4.1(b) shall be cumulative; that is, to the extent that shares of +Common Stock for which Awards are permitted to be granted to an Eligible Employee or a Consultant during a fiscal year are not +covered by an Award to such Eligible Employee or Consultant in a fiscal year, the number of shares of Common Stock available for +Awards to such Eligible Employee or Consultant shall automatically increase in the subsequent fiscal years during the term of +the Plan until used. +4.2 Changes . +(a) The +existence of this Plan and the Awards granted hereunder shall not affect in any way the +right or power of the Board or the stockholders of the Company to make or authorize (i) +any adjustment, recapitalization, reorganization or other change in the Company’s +capital structure or its business, (ii) any merger or consolidation of the Company or +any Affiliate, (iii) any issuance of bonds, debentures, preferred or prior preference +stock ahead of or affecting the Common Stock, (iv) the dissolution or liquidation of +the Company or any Affiliate, (v) any sale or transfer of all or part of the assets or +business of the Company or any Affiliate or (vi) any other corporate act or proceeding. +(b) Subject +to the provisions of Section 4.2(d), if there shall occur any such change in the capital +structure of the Company by reason of any stock split, reverse stock split, stock dividend, +subdivision, combination or reclassification of shares that may be issued under the Plan, +any recapitalization, any merger, any consolidation, any spin off, any reorganization +or any partial or complete liquidation, or any other corporate transaction or event having +an effect similar to any of the foregoing (a “ Section 4.2 Event ”), +then (i) the aggregate number and/or kind of shares that thereafter may be issued under +the Plan, (ii) the number and/or kind of shares or other property (including cash) to +be issued upon exercise of an outstanding Award or under other Awards granted under the +Plan, (iii) the purchase price thereof, and/or (iv) the individual Participant limitations +set forth in Section 4.1(b) (other than those based on cash limitations) shall be appropriately +adjusted. In addition, subject to Section 4.2(d), if there shall occur any change in +the capital structure or the business of the Company that is not a Section 4.2 Event +(an “ Other Extraordinary Event ”), including by reason of any extraordinary +dividend (whether cash or stock), any conversion, any adjustment, any issuance of any +class of securities convertible or exercisable into, or exercisable for, any class of +stock, or any sale or transfer of all or substantially all the Company’s assets +or business, then the Committee, in its sole discretion, may adjust any Award and make +such other adjustments to the Plan. Any adjustment pursuant to this Section 4.2 shall +be consistent with the applicable Section 4.2 Event or the applicable Other Extraordinary +Event, as the case may be, and in such manner as the Committee may, in its sole discretion, +deem appropriate and equitable to prevent substantial dilution or enlargement of the +rights granted to, or available for, Participants under the Plan. Any such adjustment +determined by the Committee shall be final, binding and conclusive on the Company and +all Participants and their respective heirs, executors, administrators, successors and +permitted assigns. Except as expressly provided in this Section 4.2 or in the applicable +Award agreement, a Participant shall have no rights by reason of any Section 4.2 Event +or any Other Extraordinary Event. +12 +(c) Fractional +shares of Common Stock resulting from any adjustment in Awards pursuant to Section 4.2(a) +or (b) shall be aggregated until, and eliminated at, the time of exercise by rounding-down +for fractions less than one-half and rounding-up for fractions equal to or greater than +one-half. No cash settlements shall be made with respect to fractional shares eliminated +by rounding. Notice of any adjustment shall be given by the Committee to each Participant +whose Award has been adjusted and such adjustment (whether or not such notice is given) +shall be effective and binding for all purposes of this Plan. +(d) In +the event of an Acquisition Event, the Committee may, in its sole discretion, terminate +all outstanding and unexercised Stock Options or Stock Appreciation Rights or any Other +Stock Based Award that provides for a Participant-elected exercise effective as of the +date of the Acquisition Event, by delivering notice of termination to each Participant +at least 20 days prior to the date of consummation of the Acquisition Event, in which +case during the period from the date on which such notice of termination is delivered +to the consummation of the Acquisition Event, each such Participant shall have the right +to exercise in full all of his or her vested Stock Options or Stock Appreciation Rights +that are then outstanding (without regard to any limitations on exercisability otherwise +contained in the Award agreements), but any such exercise shall be contingent on the +occurrence of the Acquisition Event, and, provided that, if the Acquisition Event does +not take place within a specified period after giving such notice for any reason whatsoever, +the notice and exercise pursuant thereto shall be null and void. +If an +Acquisition Event occurs but the Committee does not terminate the outstanding Awards pursuant to this Section 4.2(d), the provisions +of Section 4.2(b) and Article XIV shall apply. +4.3 Minimum +Purchase Price . Notwithstanding any provision of this Plan to the contrary, if authorized but previously unissued shares +of Common Stock are issued under this Plan, such shares shall not be issued for a consideration that is less than as permitted +under applicable law. +13 +ARTICLE +V +ELIGIBILITY – GENERAL REQUIREMENTS FOR AWARDS +5.1 General +Eligibility . All Eligible Employees, Consultants, Non-Employee Directors and prospective employees and consultants are +eligible to be granted Awards, subject to the terms and conditions of this Plan. Eligibility for the grant of Awards and actual +participation in this Plan shall be determined by the Committee in its sole discretion. +5.2 Incentive +Stock Options . Notwithstanding anything herein to the contrary, only Eligible Employees of the Company, its Subsidiaries +and its Parent (if any) are eligible to be granted Incentive Stock Options under this Plan. Eligibility for the grant of an Incentive +Stock Option and actual participation in this Plan shall be determined by the Committee in its sole discretion. +5.3 General +Requirement . The vesting and exercise of Awards granted to a prospective employee or consultant are conditioned upon such +individual actually becoming an Eligible Employee or Consultant. +5.4 Issuance +of Shares . Shares shall not be issued pursuant to the exercise of an Award unless the exercise of such Award and the issuance +and delivery of such shares shall comply with all applicable laws, and shall be further subject to the approval of the Company +with respect to such compliance. As a condition of the exercise of an Award, the Company may require the person exercising such +Award to represent and warrant at the time of such exercise that the shares are being purchased only for investment and without +any present intention to sell or distribute such shares if, as determined by the Company, such a representation is required by +any applicable law. +ARTICLE +VI +STOCK OPTIONS +6.1 Options . +Stock Options may be granted alone or in addition to other Awards granted under this Plan. Each Stock Option granted under this +Plan shall be of one of two types: (a) an Incentive Stock Option or (b) a Non-Qualified Stock Option. +6.2 Grants . +The Committee shall, in its sole discretion, have the authority to grant to any Eligible Employee (subject to Section 5.2) Incentive +Stock Options, Non-Qualified Stock Options, or both types of Stock Options, and shall designate the type or types of option in +the Award. The Committee shall, in its sole discretion, have the authority to grant Non-Qualified Stock Options to any Consultant +or Non-Employee Director. To the extent that any Stock Option does not qualify as an Incentive Stock Option (whether because of +its provisions or the time or manner of its exercise or otherwise), such Stock Option or the portion thereof which does not qualify +shall constitute a separate Non-Qualified Stock Option. If the Stock Option does not specify whether it is an Incentive Stock +Option in whole or part, the Stock Option shall be a Non-Qualified Stock Option. +14 +6.3 Terms +of Options . Options granted under this Plan shall be subject to the following terms and conditions and shall be in such +form and contain such additional terms and conditions, not inconsistent with the terms of this Plan, as the Committee, in its +sole discretion, shall deem desirable: +(a) Exercise +Price . The exercise price per share of Common Stock subject to a Stock Option shall +be determined by the Committee at the time of grant, provided that the per share exercise +price of a Stock Option shall not be less than 100% (or, in the case of an Incentive +Stock Option granted to a Ten Percent Stockholder, 110%) of the Fair Market Value of +the Common Stock at the time of grant. +(b) Stock +Option Term . The term of each Stock Option shall be fixed by the Committee, provided +that no Stock Option shall be exercisable more than seven (7) years after the date the +Option is granted; and provided further that the term of an Incentive Stock Option granted +to a Ten Percent Stockholder shall not exceed five (5) years. +(c) Exercisability . +(i) Stock Options shall be exercisable at such time or times and subject to such +terms and conditions as shall be determined by the Committee at grant. +(ii) +Notwithstanding any other provision of this Plan to the contrary, the vesting period with respect to any Option Award shall +be no less than (A) one year, if the vesting is based (in whole or in part) on the attainment of one or more Performance Goals, +and (B) three years, if the vesting is based solely on the continued performance of services by the Participant (with vesting +as to no more than one-third of the shares of Common Stock subject thereto on each of the first three anniversaries of the date +of grant). +(iii) Subject +to the limitations set forth in Section 4.1(b), the Committee shall be authorized (at the time of grant or thereafter) to provide +for earlier vesting in the event of a Participant’s Retirement, death or Disability. +Option +Awards may be granted without the foregoing limitations with respect to up to 5% (when combined with the 5% limitation set forth +in Sections 4.1(b)(ii), 8.3(a)(iv), 9.3(c), 10.2(f) and 11.2(c) of this Plan) of the total number of shares of Common Stock reserved +for Awards under this Plan. +(d) Method +of Exercise . Subject to whatever installment exercise and waiting period provisions +apply under subsection (c) above, to the extent vested, Stock Options may be exercised +in whole or in part at any time during the Option term, by giving written notice of exercise +to the Company specifying the number of shares of Common Stock to be purchased. Such +notice shall be in a form acceptable to the Company and shall be accompanied by payment +in full of the purchase price as follows: (i) in cash or by check, bank draft or money +order payable to the order of the Company; (ii) solely to the extent permitted by applicable +law, if the Common Stock is traded on The Nasdaq Stock Market or another national securities +exchange or quoted in the over-the-counter market, and the Committee authorizes, through +a procedure whereby the Participant delivers irrevocable instructions to a broker reasonably +acceptable to the Committee to deliver promptly to the Company an amount equal to the +purchase price; (iii) by cashless exercise; or (iv) on such other terms and conditions +as may be acceptable to the Committee (including, without limitation, payment in full +or in part in the form of delivery of Common Stock owned by the Participant based on +the Fair Market Value of the Common Stock on the payment date as determined by the Committee, +in its sole discretion). No shares of Common Stock shall be issued until payment therefor, +as provided herein, has been made or provided for. +15 +(e) Non-Transferability +of Options . No Stock Option shall be Transferable by the Participant other than by +will or by the laws of descent and distribution, and all Stock Options shall be exercisable, +during the Participant’s lifetime, only by the Participant. Notwithstanding the +foregoing, the Committee may determine, in its sole discretion, at the time of grant +or thereafter that a Non-Qualified Stock Option that is otherwise not Transferable pursuant +to this Section is Transferable to a Family Member in whole or in part and in such circumstances, +and under such conditions, as determined by the Committee, in its sole discretion. A +Non-Qualified Stock Option that is Transferred to a Family Member pursuant to the preceding +sentence (i) may not be subsequently Transferred otherwise than by will or by the laws +of descent and distribution and (ii) remains subject to the terms of this Plan and the +applicable Award agreement. Any shares of Common Stock acquired upon the exercise of +a Non-Qualified Stock Option by a permissible transferee of a Non-Qualified Stock Option +or a permissible transferee pursuant to a Transfer after the exercise of the Non-Qualified +Stock Option shall be subject to the terms of this Plan and the applicable Award agreement. +(f) Incentive +Stock Option Limitations . To the extent that the aggregate Fair Market Value (determined +as of the time of grant) of the Common Stock with respect to which Incentive Stock Options +are exercisable for the first time by an Eligible Employee during any calendar year under +this Plan and/or any other stock option plan of the Company, any Subsidiary or any Parent +exceeds $100,000, such Options shall be treated as Non-Qualified Stock Options. Should +any provision of this Plan not be necessary in order for the Stock Options to qualify +as Incentive Stock Options, or should any additional provisions be required, the Committee +may, in its sole discretion, amend this Plan accordingly, without the necessity of obtaining +the approval of the stockholders of the Company. +(g) Form, +Modification, Extension and Renewal of Stock Options . Subject to the terms and conditions +and within the limitations of this Plan, Stock Options shall be evidenced by such form +of agreement or grant as is approved by the Committee, and the Committee may, in its +sole discretion (i) modify or extend outstanding Stock Options granted under this Plan +(provided that the rights of a Participant are not reduced without his or her consent +and provided further that such action does not subject the Stock Options to tax under +Section 409A of the Code), and (ii) accept the surrender of outstanding Stock Options +(up to the extent not theretofore exercised) and authorize the granting of new Stock +Options in substitution therefor (to the extent not theretofore exercised). Notwithstanding +the foregoing, an outstanding Option may not be modified to reduce the exercise price +thereof nor may a new Option at a lower price be substituted for a surrendered Option +(other than adjustments or substitutions in accordance with Section 4.2), unless such +action is approved by the stockholders of the Company. +16 +(h) Early +Exercise . The Committee may provide that a Stock Option include a provision whereby +the Participant may elect at any time before the Participant’s Termination to exercise +the Stock Option as to any part or all of the shares of Common Stock subject to the Stock +Option prior to the full vesting of the Stock Option, and such shares shall be subject +to the provisions of Article VIII and treated as Restricted Stock. Any unvested shares +of Common Stock so purchased may be subject to a repurchase option in favor of the Company +or to any other restriction the Committee determines to be appropriate. +(i) Other +Terms and Conditions . Stock Options may contain such other provisions, which shall +not be inconsistent with any of the terms of this Plan, as the Committee shall, in its +sole discretion, deem appropriate. +ARTICLE +VII +STOCK APPRECIATION RIGHTS +7.1 Tandem +Stock Appreciation Rights . Stock Appreciation Rights may be granted in conjunction with all or part of any Stock Option +(a “Reference Stock Option”) granted under this Plan (“Tandem Stock Appreciation Rights”). In the case +of a Non-Qualified Stock Option, such rights may be granted either at or after the time of the grant of such Reference Stock Option. +In the case of an Incentive Stock Option, such rights may be granted only at the time of the grant of such Reference Stock Option. +7.2 Terms +and Conditions of Tandem Stock Appreciation Rights . Tandem Stock Appreciation Rights granted hereunder shall be subject +to such terms and conditions, not inconsistent with the provisions of this Plan, as shall be determined from time to time by the +Committee in its sole discretion, and the following: +(a) Base +Price . The exercise price per share of Common Stock subject to a Tandem Stock Appreciation +Right shall be determined by the Committee at the time of grant, provided that the per +share base price of a Tandem Stock Appreciation Right shall not be less than 100% of +the Fair Market Value of the Common Stock at the time of grant. +(b) Term . +A Tandem Stock Appreciation Right or applicable portion thereof granted with respect +to a Reference Stock Option shall terminate and no longer be exercisable upon the termination +or exercise of the Reference Stock Option, except that, unless otherwise determined by +the Committee, in its sole discretion, at the time of grant, a Tandem Stock Appreciation +Right granted with respect to less than the full number of shares covered by the Reference +Stock Option shall not be reduced until and then only to the extent the exercise or termination +of the Reference Stock Option causes the number of shares covered by the Tandem Stock +Appreciation Right to equal or exceed the number of shares remaining available and unexercised +under the Reference Stock Option. +17 +(c) Exercisability . +Tandem Stock Appreciation Rights shall be exercisable only at such time or times and +to the extent that the Reference Stock Options to which they relate shall be exercisable +in accordance with the provisions of Article VI, and shall be subject to the provisions +of Section 6.3(c). +(d) Method +of Exercise . A Tandem Stock Appreciation Right may be exercised by the Participant +by surrendering the applicable portion of the Reference Stock Option. Upon such exercise +and surrender, the Participant shall be entitled to receive an amount determined in the +manner prescribed in this Section 7.2. Stock Options which have been so surrendered, +in whole or in part, shall no longer be exercisable to the extent the related Tandem +Stock Appreciation Rights have been exercised. +(e) Payment . +Upon the exercise of a Tandem Stock Appreciation Right, a Participant shall be entitled +to receive up to, but no more than, an amount in cash or a number of shares of Common +Stock (as determined by the Committee, in its sole discretion, on the date of grant) +equal in value to the excess of the Fair Market Value of one share of Common Stock over +the Option exercise price per share specified in the Reference Stock Option agreement, +multiplied by the number of shares in respect of which the Tandem Stock Appreciation +Right shall have been exercised. +(f) Deemed +Exercise of Reference Stock Option . Upon the exercise of a Tandem Stock Appreciation +Right, the Reference Stock Option or part thereof to which such Stock Appreciation Right +is related shall be deemed to have been exercised for the purpose of the limitation set +forth in Article IV of the Plan on the number of shares of Common Stock to be issued +under the Plan. +(g) Non-Transferability . +Tandem Stock Appreciation Rights shall be Transferable only when and to the extent that +the underlying Stock Option would be Transferable under Section 6.3(e) of the Plan. +7.3 Non-Tandem +Stock Appreciation Rights . Non-Tandem Stock Appreciation Rights may also be granted without reference to any Stock Options +granted under this Plan. +7.4 Terms +and Conditions of Non-Tandem Stock Appreciation Rights . Non-Tandem Stock Appreciation Rights granted hereunder shall be +subject to such terms and conditions, not inconsistent with the provisions of this Plan, as shall be determined from time to time +by the Committee in its sole discretion, and the following: +(a) Exercise +Price . The base price per share of Common Stock subject to a Non-Tandem Stock Appreciation +Right shall be determined by the Committee at the time of grant, provided that the per +share base price of a Non-Tandem Stock Appreciation Right shall not be less than 100% +of the Fair Market Value of the Common Stock at the time of grant. +18 +(b) Term . +The term of each Non-Tandem Stock Appreciation Right shall be fixed by the Committee, +but shall not be greater than 7 years after the date the right is granted. +(c) Exercisability . +Non-Tandem Stock Appreciation Rights shall be exercisable at such time or times and subject +to such terms and conditions as shall be determined by the Committee at grant. Notwithstanding +any other provision of this Plan to the contrary, the vesting period with respect to +any such right shall be no less than (A) one year, if the vesting is based (in whole +or in part) on the attainment of one or more Performance Goals, and (B) three years, +if the vesting is based solely on the continued performance of services by the Participant +(with vesting as to no more than one-third of the shares of Common Stock subject thereto +on each of the first three anniversaries of the date of grant). +(d) Method +of Exercise . Subject to whatever installment exercise and waiting period provisions +apply under subsection (c) above, Non-Tandem Stock Appreciation Rights may be exercised +in whole or in part at any time in accordance with the applicable Award agreement, by +giving written notice of exercise to the Company specifying the number of Non-Tandem +Stock Appreciation Rights to be exercised. +(e) Payment . +Upon the exercise of a Non-Tandem Stock Appreciation Right, a Participant shall be entitled +to receive, for each right exercised, up to, but no more than, an amount in cash or a +number of shares of Common Stock (as determined by the Committee, in its sole discretion, +on the date of grant) equal in value to the excess of the Fair Market Value of one share +of Common Stock on the date the right is exercised over the Fair Market Value of one +share of Common Stock on the date the right was awarded to the Participant. +(f) Non-Transferability . +No Non-Tandem Stock Appreciation Rights shall be Transferable by the Participant otherwise +than by will or by the laws of descent and distribution, and all such rights shall be +exercisable, during the Participant’s lifetime, only by the Participant. +7.5 Limited +Stock Appreciation Rights . The Committee may, in its sole discretion, grant Tandem and Non-Tandem Stock Appreciation Rights +either as a general Stock Appreciation Right or as a Limited Stock Appreciation Right. Limited Stock Appreciation Rights may be +exercised only upon the occurrence of a Change in Control or such other event as the Committee may, in its sole discretion, designate +at the time of grant or thereafter. Upon the exercise of Limited Stock Appreciation Rights, except as otherwise provided in an +Award agreement, the Participant shall receive in cash or Common Stock, as determined by the Committee, an amount equal to the +amount (a) set forth in Section 7.2(e) with respect to Tandem Stock Appreciation Rights, or (b) set forth in Section +7.4(e) with respect to Non-Tandem Stock Appreciation Rights, as applicable. +19 +ARTICLE +VIII +RESTRICTED STOCK +8.1 Awards +of Restricted Stock . Shares of Restricted Stock may be issued either alone or in addition to other Awards granted under +the Plan. The Committee shall, in its sole discretion, determine the Eligible Employees, Consultants and Non-Employee Directors, +to whom, and the time or times at which, grants of Restricted Stock shall be made, the number of shares to be awarded, the price +(if any) to be paid by the Participant (subject to Section 8.2), the time or times within which such Awards may be subject to +forfeiture, the vesting schedule and rights to acceleration thereof, and all other terms and conditions of the Awards. The Committee +may condition the grant or vesting of Restricted Stock upon the attainment of specified performance targets (including, the Performance +Goals specified in Exhibit A attached hereto) or such other factors as the Committee may determine, in its sole discretion. +8.2 Awards +and Certificates . Eligible Employees, Consultants and Non-Employee Directors selected to receive Restricted Stock shall +not have any rights with respect to such Award, unless and until such Participant has delivered a fully executed copy of the agreement +evidencing the Award to the Company and has otherwise complied with the applicable terms and conditions of such Award. Further, +such Award shall be subject to the following conditions: +(a) Purchase +Price . The purchase price of Restricted Stock, if any, shall be fixed by the Committee. +Subject to Section 4.3, the purchase price for shares of Restricted Stock may be zero +to the extent permitted by applicable law, and, to the extent not so permitted, such +purchase price may not be less than par value. +(b) Acceptance . +Awards of Restricted Stock must be accepted within a period of 60 days (or such other +period as the Committee may specify) after the grant date, by execution of a Restricted +Stock agreement and by payment of the purchase price (if any) the Committee has designated +thereunder. +(c) Legend . +Each Participant receiving Restricted Stock shall be issued a stock certificate in respect +of such shares of Restricted Stock, unless the Committee elects to use another system, +such as book entries by the transfer agent, as evidencing ownership of shares of Restricted +Stock. Such certificate shall be registered in the name of such Participant, and shall, +in addition to such legends required by applicable securities laws, bear an appropriate +legend referring to the terms, conditions, and restrictions applicable to such Award, +substantially in the following form: +“The +anticipation, alienation, attachment, sale, transfer, assignment, pledge, encumbrance or charge of the shares of stock represented +hereby are subject to the terms and conditions (including forfeiture) of the Steven Madden, Ltd. 2019 Stock Incentive Plan and +an agreement entered into between the registered owner and the Company dated __________. Copies of such Plan and agreement are +on file at the principal office of the Company.” +20 +(d) Custody . +If stock certificates are issued in respect of shares of Restricted Stock, the Committee +may require that any stock certificates evidencing such shares be held in custody by +the Company until the restrictions thereon shall have lapsed, and that, as a condition +of any grant of Restricted Stock, the Participant shall have delivered a duly signed +stock power, endorsed in blank, relating to the Common Stock covered by such Award. +8.3 Restrictions +and Conditions . The shares of Restricted Stock awarded pursuant to this Plan shall be subject to the following restrictions +and conditions: +(a) Restriction +Period . (i) General. The Participant shall not be permitted to Transfer shares +of Restricted Stock awarded under this Plan during the period or periods set by the Committee +(the “Restriction Period”) commencing on the date of such Award, as set forth +in a Restricted Stock Award agreement, and such agreement shall set forth a vesting schedule +and any events which would accelerate vesting of the shares of Restricted Stock. Within +those limits, the Committee may condition the grant or provide for the lapse of such +restrictions in installments in whole or in part, or may accelerate the vesting of Restricted +Stock. +(ii) Objective +Performance Goals, Formulae or Standards . If the grant of shares of Restricted Stock or the lapse of restrictions is based +on the attainment of Performance Goals, the Committee shall establish the Performance Goals and the applicable vesting percentage +of the Restricted Stock Award applicable to each Participant or class of Participants in writing prior to the beginning of the +applicable Performance Period or at such later date as otherwise determined by the Committee. Such Performance Goals may incorporate +provisions for disregarding (or adjusting for) changes in accounting methods, corporate transactions (including, without limitation, +dispositions and acquisitions) and other similar type events or circumstances. The applicable Performance Goals shall be based +on one or more of the performance criteria set forth in Exhibit A hereto or such other criteria as the Committee may determine +from time to time. +(iii) Limitations . +Notwithstanding any other provision of this Plan to the contrary, the Restriction Period with respect to any Restricted Stock +Award shall be no less than (A) one year, if the lapsing of restrictions is based (in whole or in part) on the attainment of one +or more Performance Goals, and (B) three years, if the lapsing of restrictions is based solely on the continued performance of +services by the Participant (with restrictions as to no more than one-third of the shares of Common Stock subject thereto lapsing +on each of the first three anniversaries of the date of grant). +(iv) Acceleration. +Subject to the terms of this Plan, the Committee shall be authorized (at the time of grant or thereafter) to provide for the +earlier lapsing of restrictions in the event of a Participant’s Retirement, death or Disability. +Subject +to the limitations set forth in Section 4.1(b), Restricted Stock Awards may be granted without the foregoing limitations with +respect to up to 5% (when combined with the 5% limitation set forth in Sections 4.1(b)(ii), 6.3(c), 9.3(c), 10.2(f) and 11.2(c) +of this Plan) of the total number of shares of Common Stock reserved for Awards under this Plan. +21 +(b) Rights +as a Stockholder . Except as provided in this subsection (b) and subsection (a) above +and as otherwise determined by the Committee, the Participant shall have, with respect +to the shares of Restricted Stock, all of the rights of a holder of shares of Common +Stock of the Company including, without limitation, the right to receive any dividends, +the right to vote such shares and, subject to and conditioned upon the full vesting of +shares of Restricted Stock, the right to tender such shares. The Committee may, in its +sole discretion, determine at the time of grant that dividends shall be accumulated and +payment deferred until, and conditioned upon, the expiration of the applicable Restriction +Period. +(c) Lapse +of Restrictions . If and when the Restriction Period expires without a prior forfeiture +of the Restricted Stock, the certificates for such shares shall be delivered to the Participant. +All legends shall be removed from said certificates at the time of delivery to the Participant, +except as otherwise required by applicable law or other limitations imposed by the Committee. +ARTICLE +IX +RESTRICTED STOCK UNITS +9.1 Award +of Restricted Stock Units . Restricted Stock Units may be granted either alone or in addition to other Awards granted under +the Plan. The Committee shall, in its sole discretion, determine the Eligible Employees, Consultants and Non-Employee Directors, +to whom, and the time or times at which, Restricted Stock Units shall be awarded, the number of Restricted Stock Units to be awarded, +the time or times within which such Awards may be subject to forfeiture, the vesting schedule and rights to acceleration thereof, +and all other terms and conditions of the Awards. The Committee may condition the grant or vesting of Restricted Stock Units upon +the attainment of specified performance targets (including, the Performance Goals specified in Exhibit A attached hereto) or such +other factors as the Committee may determine, in its sole discretion. +9.2 Nature +of Award . An award of a Restricted Stock Unit conveys a right to payment of Common Stock or the cash value of Common Stock +after the date on which the Award is granted and subject to such conditions, including vesting and performance conditions, as +the Committee may determine. +9.3 Vesting +and Performance Conditions . +(a) General . +Restricted Stock Units shall be subject to such limits and conditions as are set forth +in an Award Agreement, which shall set forth a vesting schedule and any events which +would accelerate vesting of the Restricted Stock Units. Notwithstanding any other provision +of this Plan to the contrary, the vesting period with respect to any Restricted Stock +Unit shall be no less than (A) one year, if the vesting is based (in whole or in part) +on the attainment of one or more Performance Goals, and (B) three years, if the vesting +is based solely on the continued performance of services by the Participant (with vesting +as to no more than one-third of the shares of Common Stock subject thereto on each of +the first three anniversaries of the date of grant. +22 +(b) Objective +Performance Goals, Formulae or Standards . If the grant or vesting of Restricted Stock +Units is based on the attainment of Performance Goals, the Committee shall establish +the Performance Goals and the applicable vesting percentage of the Restricted Stock Unit +Award applicable to each Participant or class of Participants in writing prior to the +beginning of the applicable Performance Period or at such later date as otherwise determined +by the Committee. Such Performance Goals may incorporate provisions for disregarding +(or adjusting for) changes in accounting methods, corporate transactions (including, +without limitation, dispositions and acquisitions) and other similar type events or circumstances. +The applicable Performance Goals shall be based on one or more of the performance criteria +set forth in Exhibit A hereto or such other criteria as the Committee may determine from +time to time. +(c) Acceleration . +Subject to the terms of this Plan, the Committee shall be authorized (at the time of +grant or thereafter) to provide for the earlier lapsing of restrictions in the event +of a Participant’s Retirement, death or Disability. +Subject +to the limitations set forth in Section 4.1(b), Restricted Stock Unit Awards may be granted without the foregoing limitations +with respect to up to 5% (when combined with the 5% limitation set forth in Sections 4.1(b)(ii), 6.3(c), 8.3(a)(iv), 10.2(f) and +11.2(c) of this Plan) of the total number of shares of Common Stock reserved for Awards under this Plan. +9.4 Form +and Timing of Payment . Except as otherwise provided under the terms of the Plan or a Participant’s Award agreement, +payment of Restricted Stock Units shall be made at a specified settlement date that shall not be earlier than the last day of +the vesting or restriction period. The Committee, in its sole discretion, may pay Restricted Stock Units by delivery of a number +of shares of Common Stock or by payment in cash in an amount equal to the Fair Market Value of such Common Stock, or a combination +thereof. The Committee may provide that settlement of Restricted Stock Units shall be deferred further, on a mandatory basis or +at the election of the Participant. +9.5 Rights +as a Shareholder . A Participant shall not have the rights of a shareholder until and unless the Award of a Restricted +Stock Unit has been settled by the issuance of shares of Common Stock to the Participant. At the discretion of the Committee, +Restricted Stock Units granted pursuant to the Plan may provide Participants with the right to receive dividend equivalents, which +may be paid currently or credited to an account for the Participant, and which may be settled in Common Stock or cash, as determined +by the Committee in its sole discretion, subject in each case to such terms and conditions as the Committee may establish, which +may differ from the terms and conditions applicable to shares of Common Stock payable under the Restricted Stock Unit. The Committee +shall not be under any obligation to pay dividend equivalents. +23 +ARTICLE +X +PERFORMANCE SHARES +10.1 Award +of Performance Shares . Performance Shares may be awarded either alone or in addition to other Awards granted under this +Plan. The Committee shall, in its sole discretion, determine the Eligible Employees, Consultants and Non-Employee Directors, to +whom, and the time or times at which, Performance Shares shall be awarded, the number of Performance Shares to be awarded to any +person, the Performance Period during which, and the conditions under which, receipt of the Shares will be deferred, and the other +terms and conditions of the Award in addition to those set forth in Section 10.2. +Except +as otherwise provided herein, the Committee shall condition the right to payment of any Performance Share upon the attainment +of specified objective performance goals (including, the Performance Goals specified in Exhibit A attached hereto) established +pursuant to Section 10.2(c) below and such other factors as the Committee may determine, in its sole discretion. +10.2 Terms +and Conditions . Performance Shares awarded pursuant to this Article X shall be subject to the following terms and conditions: +(a) Earning +of Performance Share Award . At the expiration of the applicable Performance Period, +the Committee shall determine the extent to which the Performance Goals established pursuant +to Section 10.2(c) are achieved and the percentage of each Performance Share Award that +has been earned. +(b) Non-Transferability . +Subject to the applicable provisions of the Award agreement and this Plan, Performance +Shares may not be Transferred during the Performance Period. +(c) Objective +Performance Goals, Formulae or Standards . The Committee shall establish the objective +Performance Goals for the earning of Performance Shares based on a Performance Period +applicable to each Participant or class of Participants in writing prior to the beginning +of the applicable Performance Period or at such later date as the Committee shall determine. +Such Performance Goals may incorporate provisions for disregarding (or adjusting for) +changes in accounting methods, corporate transactions (including, without limitation, +dispositions and acquisitions) and other similar type events or circumstances. The applicable +Performance Goals shall be based on one or more of the performance criteria set forth +in Exhibit A hereto or such other performance criteria as the Committee shall establish. +(d) Dividends . +Unless otherwise determined by the Committee at the time of grant, amounts equal to any +dividends declared during the Performance Period with respect to the number of shares +of Common Stock covered by a Performance Share will not be paid to the Participant. +24 +(e) Payment . +Following the Committee’s determination in accordance with subsection (a) above, +shares of Common Stock or, as determined by the Committee in its sole discretion, the +cash equivalent of such shares shall be delivered to the Eligible Employee, Consultant +or Non-Employee Director, or his legal representative, in an amount equal to such individual’s +earned Performance Shares. Notwithstanding the foregoing, the Committee may, in its sole +discretion, award an amount less than the earned Performance Shares and/or subject the +payment of all or part of any Performance Shares to additional vesting, forfeiture and +deferral conditions as it deems appropriate. +(f) Vesting . +(i) General. +The Award agreement shall set forth a vesting schedule and any events which would accelerate vesting of the Performance Share +Award. The vesting schedule with respect to any Performance Share Award shall be no less than one year and shall be based in whole +or in part on the attainment of one or more Performance Goals. +(ii) Acceleration. Subject to the terms of this Plan, the Committee shall be authorized (at the time of grant or thereafter) +to provide for the earlier lapsing of restrictions in the event of a Participant’s Retirement, death or Disability. +Subject +to the limitations set forth in Section 4.1(b), Performance Share Awards may be granted without the foregoing limitations with +respect to up to 5% (when combined with the 5% limitation set forth in Sections 4.1(b)(ii), 6.3(c), 8.3(a)(iv), 9.3(c), and 11.2(c) +of this Plan) of the total number of shares of Common Stock reserved for Awards under this Plan. +ARTICLE +XI +OTHER STOCK-BASED AWARDS +11.1 Other +Awards . The Committee, in its sole discretion, is authorized to grant to Eligible Employees, Consultants and Non-Employee +Directors Other Stock-Based Awards that are payable in, valued in whole or in part by reference to, or otherwise based on or related +to shares of Common Stock, including, but not limited to, shares of Common Stock awarded purely as a bonus and not subject to +any restrictions or conditions, shares of Common Stock in payment of the amounts due under an incentive or performance plan sponsored +or maintained by the Company or an Affiliate, performance units, dividend equivalent units, stock equivalent units, restricted +stock units and deferred stock units . To the extent permitted by law, the Committee may, in its sole discretion, permit +Eligible Employees and/or Non-Employee Directors to defer all or a portion of their cash compensation in the form of Other Stock-Based +Awards granted under this Plan, subject to the terms and conditions of any deferred compensation arrangement established by the +Company, which shall be intended to comply with Section 409A of the Code . Other Stock-Based Awards may be granted either +alone or in addition to or in tandem with other Awards granted under the Plan. +25 +Subject +to the provisions of this Plan, the Committee shall, in its sole discretion, have authority to determine the Eligible Employees, +Consultants and Non-Employee Directors, to whom, and the time or times at which, such Awards shall be made, the number of shares +of Common Stock to be awarded pursuant to such Awards, and all other conditions of the Awards . The Committee may also provide +for the grant of Common Stock under such Awards upon the completion of a specified Performance Period. +The Committee +may condition the grant or vesting of Other Stock-Based Awards upon the attainment of specified Performance Goals set forth on +Exhibit A as the Committee may determine, in its sole discretion. +11.2 Terms +and Conditions . Other Stock-Based Awards made pursuant to this Article XII shall be subject to the following terms and +conditions: +(a) Non-Transferability . +Subject to the applicable provisions of the Award agreement and this Plan, shares of +Common Stock subject to Awards made under this Article XI may not be Transferred prior +to the date on which the shares are issued, or, if later, the date on which any applicable +restriction, performance or deferral period lapses. +(b) Dividends . +Unless otherwise determined by the Committee at the time of Award, subject to the provisions +of the Award agreement and this Plan, the recipient of an Award under this Article XI +shall not be entitled to receive, currently or on a deferred basis, dividends or dividend +equivalents with respect to the number of shares of Common Stock covered by the Award. +(c) Vesting . +(i) +General. The vesting schedule with respect to any Award shall be no less than (A) one year, if the vesting period is +based (in whole or in part) on the attainment of one or more Performance Goals, and (B) three years, if the vesting period is +based solely on the continued performance of services by the Participant (with restrictions as to no more than one-third of the +shares of Common Stock subject thereto lapsing on each of the first three anniversaries of the date of grant). +(ii) +Acceleration. Subject to the terms of this Plan, the Committee shall be authorized (at the time of grant or thereafter) +to provide for the earlier lapsing of restrictions in the event of a Change in Control or a Participant’s Retirement, death +or Disability. +Subject +to the limitations set forth in Section 4.1(b), Other Stock-Based Awards may be granted without the foregoing limitations with +respect to up to 5% (when combined with the 5% limitation set forth in Sections 4.1(b)(ii), 6.3(c), 8.3(a)(iv), 9.3(c), and 10.2(f) +of this Plan) of the total number of shares of Common Stock reserved for Awards under this Plan. +26 +(d) Price . +Common Stock issued on a bonus basis under this Article XI may be issued for no cash +consideration; Common Stock purchased pursuant to a purchase right awarded under this +Article XI shall be priced, as determined by the Committee in its sole discretion. +(e) Payment . +The form of payment for the Other Stock-Based Award shall be specified in the Award agreement. +ARTICLE +XII +PERFORMANCE-BASED CASH AWARDS +12.1 Performance-Based +Cash Awards . Performance-Based Cash Awards may be granted either alone or in addition to or in tandem with Stock Options, +Stock Appreciation Rights, or Restricted Stock. Subject to the provisions of this Plan, the Committee shall, in its sole discretion, +have authority to determine the Eligible Employees, Consultants and Non-Employee Directors to whom, and the time or times at which, +such Awards shall be made, the dollar amount to be awarded pursuant to such Awards, and all other conditions of the Awards. The +Committee may also provide for the payment of dollar amount under such Awards upon the completion of a specified Performance Period. +For each +Participant, the Committee may specify a targeted performance award. The individual target award may be expressed, at the Committee’s +discretion, as a fixed dollar amount, a percentage of base pay or total pay (excluding payments made under the Plan), or an amount +determined pursuant to an objective formula or standard. Establishment of an individual target award for a Participant for a calendar +year shall not imply or require that the same level individual target award (if any such award is established by the Committee +for the relevant Participant) be set for any subsequent calendar year. At the time the Performance Goals are established, the +Committee shall prescribe a formula to determine the percentages (which may be greater than 100%) of the individual target award +which may be payable based upon the degree of attainment of the Performance Goals during the calendar year. Notwithstanding anything +else herein, the Committee may, in its sole discretion, elect to pay a Participant an amount that is less than the Participant’s +individual target award (or attained percentage thereof) regardless of the degree of attainment of the Performance Goals; provided +that no such discretion to reduce an Award earned based on achievement of the applicable Performance Goals shall be permitted +for the calendar year in which a Change in Control of the Company occurs, or during such calendar year with regard to the prior +calendar year if the Awards for the prior calendar year have not been made by the time of the Change in Control of the Company, +with regard to individuals who were Participants at the time of the Change in Control of the Company. +12.2 Terms +and Conditions . Performance-Based Cash Awards made pursuant to this Article XII shall be subject to the following terms +and conditions: +27 +(a) Vesting of Performance-Based +Cash Award . (i) General . The vesting schedule with respect to any Performance Share Award shall be no less than +one year, and shall be based in whole or in part on the attainment of one or more Performance Goals. +(ii) Waiver of Limitation . The Committee shall be authorized (at the time of grant or thereafter) to provide for earlier vesting +in the event of a Participant’s Retirement, death or Disability. +(b) Objective +Performance Goals, Formulae or Standards . +(i) The +Committee shall establish the objective Performance Goals and the individual target award (if any) applicable to each Participant +or class of Participants in writing prior to the beginning of the applicable Performance Period or at such later date as the Committee +may determine. Such Performance Goals may incorporate provisions for disregarding (or adjusting for) changes in accounting methods, +corporate transactions (including, without limitation, dispositions and acquisitions) and other similar type events or circumstances. +The applicable Performance Goals shall be based on one or more of the performance criteria set forth in Exhibit A hereto or such +other performance criteria as the Committee shall establish. +(ii) The +measurements used in Performance Goals set under the Plan shall be determined in accordance with Accounting Principles Generally +Accepted in the United States of America (“GAAP”) except, to the extent that any objective Performance Goals are used, +if any measurements require deviation from GAAP, such deviation shall be at the discretion of the Committee at the time the Performance +Goals are set or at such later time to the extent determined by the Committee. +(c) Payment . +Following the Committee’s determination and certification in accordance with subsection +(a) above, the Performance-Based Cash Award amount shall be delivered to the Eligible +Employee, Consultant or Non-Employee Director, or his legal representative, in accordance +with the terms and conditions of the Award agreement. If the Award agreement does not +provide when such amount will be paid, except as provided in the next sentence, such +amount shall be paid by no later than the later of: (i) March 15 of the year following +the year in which the applicable Performance Period ends; or (ii) two and one-half (2½) +months after the expiration of the fiscal year of the Company in which the applicable +Performance Period ends. Notwithstanding the foregoing, the Committee may place such +conditions on the payment of the payment of all or any portion of any Performance-Based +Cash Award as the Committee may determine and the Committee may (x) provide that the +payment of all or any portion of any Performance-Based Cash Award shall be deferred and +(y) permit a Participant to elect to defer receipt of all or a portion of any Performance-Based +Cash Award. To the extent applicable, any deferral under this Section 12.2(d) shall be +made in a manner intended to comply with the applicable requirements of Section 409A +of the Code. +28 +ARTICLE +XIII +TERMINATION +13.1 Termination . +The following rules apply with regard to the Termination of the Participant’s service. +(a) Rules +Applicable to Stock Options and Stock Appreciation Rights . Unless otherwise +determined by the Committee at grant (or, if no rights of the Participant are reduced, +thereafter): +(i) Termination +by Reason of Retirement, Death, or Disability. If a Participant’s Termination is by reason of the Participant’s +Retirement, death or Disability, all Stock Options or Stock Appreciation Rights that are held by such Participant that are vested +and exercisable at the time of the Participant’s Termination may be exercised by the Participant (or, in the case of death, +by the legal representative of the Participant’s estate) at any time within a one-year period from the date of such Termination, +but in no event beyond the expiration of the stated term of such Stock Options or Stock Appreciation Rights; provided, however, +if the Participant dies within such exercise period, all unexercised Stock Options or Stock Appreciation Rights held by such Participant +shall thereafter be exercisable, to the extent to which they were exercisable at the time of death, for a period of one year from +the date of such death, but in no event beyond the expiration of the stated term of such Stock Options or Stock Appreciation Rights. +(ii) Involuntary +Termination Without Cause. If a Participant’s Termination is by involuntary termination without Cause, all Stock Options +or Stock Appreciation Rights that are held by such Participant that are vested and exercisable at the time of the Participant’s +Termination may be exercised by the Participant at any time within a period of 90 days from the date of such Termination, but +in no event beyond the expiration of the stated term of such Stock Options or Stock Appreciation Rights. +(iii) Voluntary +Termination. If a Participant’s Termination is voluntary (other than a voluntary termination described in Section 13.2(a)(iv)(2) +below), all Stock Options or Stock Appreciation Rights that are held by such Participant that are vested and exercisable at the +time of the Participant’s Termination may be exercised by the Participant at any time within a period of 30 days from the +date of such Termination, but in no event beyond the expiration of the stated terms of such Stock Options or Stock Appreciation +Rights. +(iv) Termination +for Cause. If a Participant’s Termination: (1) is for Cause or (2) is a voluntary Termination (as provided in sub-section +(iii) above) after the occurrence of an event that would be grounds for a Termination for Cause, all Stock Options or Stock Appreciation +Rights, whether vested or not vested, that are held by such Participant shall thereupon terminate and expire as of the date of +such Termination. +29 +(v) Unvested +Stock Options and Stock Appreciation Rights. Stock Options or Stock Appreciation Rights that are not vested as of the date +of a Participant’s Termination for any reason shall terminate and expire as of the date of such Termination. +(b) Rules +Applicable to Restricted Stock, Restricted Stock Units, Performance Shares, Other Stock-Based +Awards and Performance-Based Cash Awards . Unless otherwise determined by the +Committee at grant or thereafter, and except as otherwise provided in Article XIV, upon +a Participant’s Termination for any reason: (i) during the relevant Restriction +Period, all Restricted Stock still subject to restriction shall be forfeited; and (ii) any +unvested Restricted Stock Units, Performance Shares, Other Stock-Based Awards or Performance-Based +Cash Awards shall be forfeited. +ARTICLE +XIV +CHANGE IN CONTROL +14.1 Treatment +of Awards . Notwithstanding any other provision of the Plan to the contrary, in the event of a Change in Control: +(a) If and to the extent that +a successor to the Company converts, assumes, substitutes or replaces an Award, the vesting restrictions and/or forfeiture provisions +applicable to such Award shall not be accelerated or lapse, and all such vesting restrictions and/or forfeiture provisions shall +continue with respect to any shares of the successor or other consideration that may be received with respect to such Award; provided, +however, that if the Participant’s employment or other service is terminated, other than for Cause, within 12 months coincident +with or immediately following such Change in Control, any unvested Awards shall become fully vested and exercisable upon such +termination of employment or other service. +(b) If and to the extent that +such Awards are not converted, assumed, substituted for or replaced by a successor to the Company, Participants will receive an +amount equal to the consideration per share of Common Stock in such Change in Control (or, in the case of an Appreciation Award, +the consideration per share of Common Stock minus the exercise price or base price of such Award). +14.2 Assumption . +For the purposes of this Article XIV, an Award shall be considered converted, assumed, substituted for or replaced by a successor +if following the Change in Control the option or right confers the right to purchase or receive, for each share of Common Stock +subject to the Award immediately prior to the Change in Control, the consideration (whether stock, cash or other securities or +property) received in the Change in Control by holders of Common Stock for each share held on the effective date of the transaction +(and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding +shares); provided, however, that if such consideration received in the Change in Control is not solely common stock of the successor, +the Committee may, with the consent of the successor, provide for the consideration to be received pursuant to the Award, for +each share of Common Stock subject thereto, to be solely common stock of the successor substantially equal in fair market value +to the per share consideration received by holders of Common Stock in the Change in Control. The determination of such substantial +equality of value of consideration shall be made by the Committee, and its determination shall be conclusive and binding. +30 +14.3 Change +in Control . Unless otherwise determined by the Committee in the applicable Award agreement (or other written agreement +approved by the Committee including, without limitation, an employment agreement), a “Change in Control” shall be +deemed to occur following any transaction if: (a) any “person” as such term is used in Sections 13(d) and 14(d) of +the Exchange Act (other than the Company, any trustee or other fiduciary holding securities under any employee benefit plan of +the Company, or any company owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions +as their ownership of Common Stock of the Company), becomes the “beneficial owner” (as defined in Rule 13d-3 under +the Exchange Act), directly or indirectly, of 50% or more of the combined voting power of the then outstanding securities of the +Company (or its successor corporation); provided, however, that a merger or consolidation effected solely to implement a recapitalization +of the Company shall not constitute a Change in Control of the Company; or (b) the stockholders of the Company approve a plan +of complete liquidation of the Company; provided , that this subsection (b) shall not constitute a Change in Control with +respect to the amount of any payment pursuant to an Award under this Plan, or any portion thereof, that is triggered upon a Change +in Control and that is intended to constitute “non-qualified deferred compensation” pursuant to Section 409A of the +Code; or (c) the consummation of the sale or disposition by the Company of all or substantially all of the Company’s assets +other than (i) the sale or disposition of all or substantially all of the assets of the Company to a person or persons who beneficially +own, directly or indirectly, at least 50% or more of the combined voting power of the outstanding voting securities of the Company +at the time of the sale or (ii) pursuant to a spinoff-type transaction, directly or indirectly, of such assets to the stockholders +of the Company (as further addressed by Section 4.2(b)). +ARTICLE +XV +TERMINATION OR AMENDMENT OF PLAN +15.1 Termination +or Amendment . Notwithstanding any other provision of this Plan, the Board or the Committee may at any time, and from time +to time, amend, in whole or in part, any or all of the provisions of this Plan, or suspend or terminate it entirely, retroactively +or otherwise; provided, however, that, unless otherwise required by law or specifically provided herein, the rights of a Participant +with respect to Awards granted prior to such amendment, suspension or termination, may not be impaired without the consent of +such Participant and, provided further, that without the approval of the stockholders of the Company in accordance with the laws +of the State of Delaware, to the extent required by the applicable provisions of Rule 16b-3, pursuant to the requirements of Nasdaq +Rule 5635(c) or such other applicable stock exchange rule, or, to the extent applicable to Incentive Stock Options under Section +422 of the Code, no amendment may be made which would: +31 +(a) increase +the aggregate number of shares of Common Stock that may be issued under this Plan pursuant +to Section 4.1 (except by operation of Section 4.2); +(b) increase +the maximum individual Participant limitations for a fiscal year under Section 4.1(b) +(except by operation of Section 4.2); +(c) change +the classification of Eligible Employees or Consultants eligible to receive Awards under +this Plan; +(d) decrease +the minimum option price of any Stock Option or Stock Appreciation Right; +(e) extend +the maximum option period under Section 6.3; +(f) other +than adjustments or substitutions in accordance with Section 4.2, amend the terms of +outstanding Awards to reduce the exercise price or base amount of outstanding Stock Options +or Stock Appreciation Rights or to cancel outstanding Stock Options or Stock Appreciation +Rights in exchange for cash, other Awards or Stock Options or Stock Appreciation Rights +with an exercise price or base amount that is less than the exercise price or base amount +of the original Stock Options or Stock Appreciation Rights; +(g) award +any Stock Option or Stock Appreciation Right in replacement of a canceled Stock Option +or Stock Appreciation Right with a higher exercise price, except in accordance with Section +6.3(g); or +(h) require +stockholder approval in order for this Plan to continue to comply with the applicable +provisions of Section 422 of the Code. +The Committee +may amend the terms of any Award theretofore granted, prospectively or retroactively, but, subject to Article IV above or as otherwise +specifically provided herein, no such amendment or other action by the Committee shall impair the rights of any holder without +the holder’s consent. +ARTICLE +XVI +UNFUNDED PLAN +16.1 Unfunded +Status of Plan . This Plan is an “unfunded” plan for incentive and deferred compensation. With respect to any +payments as to which a Participant has a fixed and vested interest but which are not yet made to a Participant by the Company, +nothing contained herein shall give any such Participant any rights that are greater than those of a general unsecured creditor +of the Company. +32 +ARTICLE +XVII +GENERAL PROVISIONS +17.1 Legend . +The Committee may require each person receiving shares of Common Stock pursuant to a Stock Option or other Award under the Plan +to represent to and agree with the Company in writing that the Participant is acquiring the shares without a view to distribution +thereof. In addition to any legend required by this Plan, the certificates for such shares may include any legend that the Committee, +in its sole discretion, deems appropriate to reflect any restrictions on Transfer. +All certificates +for shares of Common Stock delivered under the Plan shall be subject to such stop transfer orders and other restrictions as the +Committee may, in its sole discretion, deem advisable under the rules, regulations and other requirements of the Securities and +Exchange Commission, The Nasdaq Stock Market or any other national securities exchange system upon whose system the Common Stock +is then quoted, any applicable federal or state securities law, and any applicable corporate law, and the Committee may cause +a legend or legends to be put on any such certificates to make appropriate reference to such restrictions. +17.2 Other +Plans . Nothing contained in this Plan shall prevent the Board from adopting other or additional compensation arrangements, +subject to stockholder approval if such approval is required; and such arrangements may be either generally applicable or applicable +only in specific cases. +17.3 No +Right to Employment/Directorship/Consultancy . Neither this Plan nor the grant of any Option or other Award hereunder shall +give any Participant or other employee, Consultant or Non-Employee Director any right with respect to continuance of employment, +consultancy or directorship by the Company or any Affiliate, nor shall they be a limitation in any way on the right of the Company +or any Affiliate by which an employee is employed or a Consultant or Non-Employee Director is retained to terminate his or her +employment, consultancy or directorship at any time. +17.4 Tax +Withholding . The Company shall have the right to deduct from any payment to be made pursuant to this Plan, or to otherwise +require, prior to the issuance or delivery of any shares of Common Stock or the payment of any cash hereunder, payment by the +Participant of, any federal, state or local taxes required by law to be withheld. Upon the vesting of Restricted Stock (or other +Award that is taxable upon vesting), or upon making an election under Section 83(b) of the Code, a Participant shall pay all required +withholding to the Company. Any statutorily required withholding obligation with regard to any Participant may be satisfied, subject +to the advance consent of the Committee, by reducing the number of shares of Common Stock otherwise deliverable or by delivering +shares of Common Stock already owned. Any fraction of a share of Common Stock required to satisfy such tax obligations shall be +disregarded and the amount due shall be paid instead in cash by the Participant. +17.5 No +Assignment of Benefits . No Award or other benefit payable under this Plan shall, except as otherwise specifically provided +by law or permitted by the Committee, be Transferable in any manner, and any attempt to Transfer any such benefit shall be void, +and any such benefit shall not in any manner be liable for or subject to the debts, contracts, liabilities, engagements or torts +of any person who shall be entitled to such benefit, nor shall it be subject to attachment or legal process for or against such +person. +33 +17.6 Listing +and Other Conditions . +(a) Unless +otherwise determined by the Committee, as long as the Common Stock is listed on a national +securities exchange or quoted in the over-the-counter market, the issuance of any shares +of Common Stock pursuant to an Award shall be conditioned upon such shares being listed +on such exchange or quoted in such market. The Company shall have no obligation to issue +such shares unless and until such shares are so listed or quoted, and the right to exercise +any Option or other Award with respect to such shares shall be suspended until such listing +has been effected. +(b) If +at any time counsel to the Company shall be of the opinion that any sale or delivery +of shares of Common Stock pursuant to an Option or other Award is or may in the circumstances +be unlawful or result in the imposition of excise taxes on the Company under the statutes, +rules or regulations of any applicable jurisdiction, the Company shall have no obligation +to make such sale or delivery, or to make any application or to effect or to maintain +any qualification or registration under the Securities Act or otherwise, with respect +to shares of Common Stock or Awards, and the right to exercise any Option or other Award +shall be suspended until, in the opinion of said counsel, such sale or delivery shall +be lawful or will not result in the imposition of excise taxes on the Company. +(c) Upon +termination of any period of suspension under this Section 17.6, any Award affected by +such suspension which shall not then have expired or terminated shall be reinstated as +to all shares available before such suspension and as to shares which would otherwise +have become available during the period of such suspension, but no such suspension shall +extend the term of any Award. +(d) A +Participant shall be required to supply the Company with any certificates, representations +and information that the Company requests and otherwise cooperate with the Company in +obtaining any listing, registration, qualification, exemption, consent or approval the +Company deems necessary or appropriate. +17.7 Governing +Law . This Plan and actions taken in connection herewith shall be governed and construed in accordance with the laws of +the State of Delaware (regardless of the law that might otherwise govern under applicable Delaware principles of conflict of laws). +17.8 Construction . +Wherever any words are used in this Plan in the masculine gender they shall be construed as though they were also used in the +feminine gender in all cases where they would so apply, and wherever any words are used herein in the singular form they shall +be construed as though they were also used in the plural form in all cases where they would so apply. +34 +17.9 Other +Benefits . No Award granted or paid out under this Plan shall be deemed compensation for purposes of computing benefits +under any retirement plan of the Company or its Affiliates nor affect any benefits under any other benefit plan now or subsequently +in effect under which the availability or amount of benefits is related to the level of compensation. +17.10 Costs . +The Company shall bear all expenses associated with administering this Plan, including expenses of issuing Common Stock pursuant +to any Awards hereunder. +17.11 No +Right to Same Benefits . The provisions of Awards need not be the same with respect to each Participant, and such Awards +to individual Participants need not be the same in subsequent years. +17.12 Death/Disability . +The Committee may in its sole discretion require the transferee of a Participant to supply it with written notice of the Participant’s +death or Disability and to supply it with a copy of the will (in the case of the Participant’s death) or such other evidence +as the Committee deems necessary to establish the validity of the transfer of an Award. The Committee may, in its discretion, +also require the agreement of the transferee to be bound by all of the terms and conditions of the Plan. +17.13 Section +16(b) of the Exchange Act . All elections and transactions under this Plan by persons subject to Section 16 of the Exchange +Act involving shares of Common Stock are intended to comply with any applicable exemptive condition under Rule 16b-3. The +Committee may, in its sole discretion, establish and adopt written administrative guidelines, designed to facilitate compliance +with Section 16(b) of the Exchange Act, as it may deem necessary or proper for the administration and operation of this Plan and +the transaction of business thereunder. +17.14 Section +409A of the Code . The Company does not guarantee the particular tax treatment of an Award granted under this Plan. Awards +made under this Plan are intended to comply with, or be exempt from, the applicable requirements of Section 409A of the Code and +this Plan, and any Award agreement hereunder shall be limited, construed and interpreted in accordance with such intent. In no +event whatsoever shall the Company or any of its Affiliates be liable for any additional tax, interest or penalties that may be +imposed on a Participant by Section 409A of the Code or any damages for failing to comply with Section 409A of the Code. +17.15 Successor +and Assigns . The Plan shall be binding on all successors and permitted assigns of a Participant, including, without limitation, +the estate of such Participant and the executor, administrator or trustee of such estate. +17.16 Severability +of Provisions . If any provision of the Plan shall be held invalid or unenforceable, such invalidity or unenforceability +shall not affect any other provisions hereof, and the Plan shall be construed and enforced as if such provisions had not been +included. +17.17 Payments +to Minors, Etc . Any benefit payable to or for the benefit of a minor, an incompetent person or other person incapable +of receipt thereof shall be deemed paid when paid to such person’s guardian or to the party providing or reasonably appearing +to provide for the care of such person, and such payment shall fully discharge the Committee, the Board, the Company, its Affiliates +and their employees, agents and representatives with respect thereto. +35 +17.18 Headings +and Captions . The headings and captions herein are provided for reference and convenience only, shall not be considered +part of the Plan, and shall not be employed in the construction of the Plan. +17.19 Effect +of Prior Plan . All awards under the Prior Plan shall remain subject to the terms of the Prior Plan and any agreement +under which such Award was granted; provided, however, that no award under the Prior Plan that was limited by the application +of Section 162(m) shall be subject to the application of negative discretion after December 31, 2018. +ARTICLE +XVIII +EFFECTIVE DATE OF PLAN +The +Plan is was adopted by the Board on February 25, 2019 , and approved by the stockholders of the Company on __________________ . +The Effective Date is the date on which the Board adopted the Plan, subject to stockholder approval within 12 months following +the date on which the Board approved the Plan. +ARTICLE +XIX +TERM OF PLAN +No +Award shall be granted pursuant to this Plan on or after the tenth anniversary of initial Board approval, as further set forth +in Article XVIII, but Awards granted before that date may extend beyond that date. +ARTICLE +XX +NAME OF PLAN +This +Plan shall be known as “The Steven Madden, Ltd. 2019 Incentive Compensation Plan.” +36 +EXHIBIT +A +PERFORMANCE GOALS +1. Performance +goals established for purposes of the grant or vesting of Awards shall be based on the +attainment of certain target levels of, or a specified increase or decrease (as applicable) +in one or more of the following performance goals (“Performance Goals”): +(a) earnings +per share; +(b) operating +income; +(c) net +income; +(d) cash +flow; +(e) gross +profit; +(f) gross +profit return on investment; +(g) gross +margin return on investment; +(h) gross +margin; +(i) working +capital; +(j) earnings +before interest and taxes; +(k) earnings +before interest, tax, depreciation and amortization; +(l) return +on equity; +(m) return +on assets; +(n) return +on capital; +(o) revenue +growth; +(p) total +shareholder return; +(q) economic +value added; +(r) specified +objectives with regard to limiting the level of increase in all or a portion of the Company’s +bank debt or other long-term or short-term public or private debt or other similar financial +obligations of the Company, which may be calculated net of cash balances and/or other +offsets and adjustments as may be established by the Committee in its sole discretion; +(s) the +Fair Market Value of the shares of the Company’s Common Stock; +A- 1 +(t) the +growth in the value of an investment in the Company’s Common Stock assuming the +reinvestment of dividends; +(u) reduction +in expenses; +(v) customer +satisfaction; +(w) customer +loyalty; +(x) style +indexes; +(y) number +of new patents; +(z) employee +retention; +(aa) market +share; +(bb) market +segment share; +(cc) product +release schedules; +(dd) new +product innovation; +(ee) new +product introduction; +(ff) product +cost reduction through advanced technology; +(gg) brand +recognition and/or acceptance; +(hh) ship +targets; or +(ii) such other goals as the +Committee may determine. +2. The +Committee may, in its sole discretion, also exclude, or adjust to reflect, the impact +of an event or occurrence which the Committee determines should be appropriately excluded +or adjusted, including: +(a) restructurings, +discontinued operations, extraordinary items or events, and other unusual or non-recurring +charges as described in Accounting Standards Codification (ASC) 225 and/or ASC 360 and/or +management’s discussion and analysis of financial condition and results of operations +appearing or incorporated by reference in the Company’s Form 10-K for the applicable +year; +(b) an +event either not directly related to the operations of the Company or not within the +reasonable control of the Company’s management; or +(c) a +change in tax law or accounting standards required by GAAP. +A- 2 +3. Performance +goals may also be based upon individual Participant performance goals, as determined +by the Committee, in its sole discretion. +4. In +addition, such Performance Goals may be based upon the attainment of specified levels +of Company (or subsidiary, division, other operational unit or administrative department +of the Company) performance under one or more of the measures described above relative +to the performance of other corporations. The Committee may: +(a) designate +additional business criteria on which the performance goals may be based; or +(b) adjust, +modify or amend the aforementioned business criteria. +A- 3 +STEVEN MADDEN, LTD. +ATTN: ARVIND DHARIA +52-16 BARNETT AVENUE +LONG ISLAND CITY, NY 11104 +VOTE +BY INTERNET - www.proxyvote.com +Use the Internet to transmit your voting instructions and +for electronic delivery of information up until 11:59 p.m. Eastern Time on May 23, 2019. +Have your proxy card in hand when you access the web site and follow the instructions +to obtain your records and to create an electronic voting instruction form. +ELECTRONIC +DELIVERY OF FUTURE PROXY MATERIALS +If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving +all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for +electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that +you agree to receive or access proxy materials electronically in future years. +VOTE +BY PHONE - 1-800-690-6903 +Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time on May +23, 2019. Have your proxy card in hand when you call and then follow the instructions. +VOTE +BY MAIL +Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, +c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. +TO +VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: +E72378-P22114 KEEP THIS PORTION FOR YOUR RECORDS +DETACH +AND RETURN THIS PORTION ONLY +THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. +STEVEN MADDEN, +LTD. +For +All +Withhold +All +For All +Except +To withhold authority +to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the +line below. +The Board of Directors +recommends you vote +FOR the following: +1. +Election of Directors +o +o +o +Nominees: +01) +Edward +R. Rosenfeld +06 ) +Ravi +Sachdev +02) +Mitchell +S. Klipper +07 ) +Thomas +H. Schwartz +03) +Rose +Peabody Lynch +08 ) +Robert +Smith +04) +Peter +Migliorini +09 ) +Amelia +Newton Varela +05) +Richard +P. Randall +The Board of Directors +recommends you vote FOR proposals 2, 3, 4 and 5. +For +Against +Abstain +The Board of Directors +recommends you vote AGAINST Proposal 6. +For +Against +Abstain +2. +TO APPROVE AN +AMENDMENT TO THE COMPANY’S CERTIFICATE OF INCORPORATION TO INCREASE THE TOTAL NUMBER OF AUTHORIZED SHARES OF THE COMPANY’S +COMMON STOCK, $0.0001 PAR VALUE, FROM 135,000,000 SHARES TO 245,000,000 SHARES. +o +o +o +6. +TO CONSIDER AND VOTE UPON A STOCKHOLDER PROPOSAL, IF PROPERLY PRESENTED, REGARDING A HUMAN RIGHTS RISK ASSESSMENT REPORT. +o +o +o +NOTE: In their discretion, +the proxies are authorized to vote upon such other business as may properly be presented at the meeting or any adjournments +or postponements thereof. +3. +TO APPROVE THE STEVEN MADDEN, LTD. 2019 +INCENTIVE COMPENSATION PLAN. +o +o +o +4. +TO RATIFY THE APPOINTMENT +OF EISNERAMPER LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, +2019. +o +o +o +5. +TO APPROVE, BY NON-BINDING +ADVISORY VOTE, THE EXECUTIVE COMPENSATION DESCRIBED IN THE STEVEN MADDEN, LTD. PROXY STATEMENT. +o +o +o +Yes +No +Please indicate if you plan to attend this meeting. +o +o +Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. +Signature [PLEASE SIGN WITHIN +BOX] +Date +Signature (Joint Owners) +Date +Important Notice Regarding the Availability +of Proxy Materials for the Annual Meeting: +The Notice and Proxy Statement and Annual Report with 10-K are available +at www.proxyvote.com. +E72379-P22114 +STEVEN MADDEN, LTD. +THIS PROXY IS BEING SOLICITED ON BEHALF OF +THE BOARD OF DIRECTORS +PLEASE CLEARLY INDICATE A RESPONSE BY CHECKING ONE OF THE +BOXES NEXT TO EACH OF THE PROPOSALS +The undersigned stockholder(s) of Steven Madden, Ltd. (the “Company”) hereby +appoint(s) Edward R. Rosenfeld and Arvind Dharia, and each of them, as attorneys and proxies, each with power of substitution +and revocation, to represent the undersigned at the Annual Meeting of Stockholders of the Company to be held at the Company’s +showroom located at 1370 Avenue of the Americas, 14th Floor, New York, New York at 10:00 a.m., local time, on May 24, 2019 and at +any adjournments or postponements thereof, with authority to vote all shares of Common Stock of the Company held or owned by the undersigned +on March 29, 2019, in accordance with the directions indicated herein. +THIS PROXY WILL BE VOTED AS SPECIFIED HEREIN; +UNLESS OTHERWISE INDICATED, THIS PROXY WILL BE VOTED (1) FOR THE ELECTION OF THE NINE (9) NOMINEES NAMED +IN ITEM 1, (2) FOR THE APPROVAL OF AN AMENDMENT TO THE COMPANY’S CERTIFICATE OF INCORPORATION TO +INCREASE THE TOTAL NUMBER of AUTHORIZED SHARES OF THE COMPANY’S COMMON STOCK, $0.0001 PAR VALUE, FROM +135,000,000 SHARES TO 245,000,000 SHARES, (3) FOR THE APPROVAL OF THE STEVEN MADDEN, LTD. 2019 INCENTIVE +COMPENSATION PLAN, (4) FOR THE RATIFICATION OF THE APPOINTMENT OF EISNERAMPER LLP AS THE COMPANY’S +INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR 2019, (5) FOR THE APPROVAL OF THE EXECUTIVE +COMPENSATION DESCRIBED IN THE COMPANY’S PROXY STATEMENT, AND (6) AGAINST A STOCKHOLDER PROPOSAL +REGARDING A HUMAN RIGHTS RISK ASSESSMENT REPORT. THIS PROXY WILL BE VOTED IN THE DISCRETION OF THE PROXIES ON +ANY OTHER MATTER THAT MAY PROPERLY COME BEFORE THE MEETING. +Continued and to be signed on reverse side \ No newline at end of file diff --git a/raw/proxies/0000913241/0001019056-19-000239/proxy_rpt.txt b/raw/proxies/0000913241/0001019056-19-000239/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..8e99ca76243989f8bcf68c10be1e9ee977dfa4d5 --- /dev/null +++ b/raw/proxies/0000913241/0001019056-19-000239/proxy_rpt.txt @@ -0,0 +1,117 @@ +and Related Party Transactions +Steven +Madden Employment Agreement. The Company believes that Steven Madden, the Company’s founder and Creative and Design +Chief, provides unique and significant value in guiding the leadership of the Company’s creative process, both in his hands +on work for the Company and his collaboration with the Company’s designers, product professionals and marketing executives. +In addition, the public’s association of Mr. Madden’s name and likeness with our branded products is significant, +meaningful, and integral to the Company’s success and has been, and continues to be, instrumental in creating long-term +stockholder value. Based upon that belief, the Company further believes that his continuing involvement with the Company is essential +and to this end has for many years had an employment agreement with Mr. Madden as described below. +19 +Mr. +Madden’s agreement in its current form dates back to July 1, 2005, as subsequently amended on various occasions most recently +on March 25, 2019 (the “SM Employment Agreement”). Under the SM Employment Agreement, Mr. Madden has agreed to continue +to serve as the Company’s Creative and Design Chief for a term continuing through December 31, 2026, for a base salary of +$7,026,042 per annum together with the potential for cash bonuses at the sole discretion of the Company’s Board of Directors +and an annual life insurance premium reimbursement of up to $200,000. Pursuant to the SM Agreement, on February 8, 2012, Mr. Madden +was granted 2,194,584 restricted shares of Common Stock (the number of shares indicated having been adjusted for an October 11, +2018 three-for-two stock split effected as a stock dividend), valued at approximately $40 million, under the Company’s Amended +and Restated 2006 Stock Incentive Plan, which is referred to herein as the “2006 Plan,” vesting in equal annual installments +over seven years commencing on December 31, 2017 through December 31, 2023, subject to Mr. Madden’s continued employment +with the Company on each such vesting date. On June 30, 2012, as allowed under the SM Agreement, Mr. Madden elected to receive +an additional restricted stock award valued at approximately $40 million in consideration of a reduction in his annual base salary +in years subsequent to 2012 to the amount reflected above. As a consequence, on July 3, 2012, Mr. Madden received 2,840,013 restricted +shares of Common Stock vesting in six annual installments commencing on December 31, 2018 through December 31, 2023, again, subject +to his continued employment with the Company on each such vesting date. +Under +the SM Agreement, Mr. Madden is also eligible to receive annually, on or about the date of the Company’s annual meeting +of stockholders (but not later than June 30th), an option (the “Annual Option”) to purchase shares of Common Stock +equal to the greater of (a) 100% of the largest aggregate number of shares of Common Stock available upon the exercise of an option +or options granted to any other continuing full-time employee of the Company during the preceding twelve-month period and (b) +225,000 shares of Common Stock; provided, however, that a grant to Mr. Madden in excess of 150% of the number of shares of Common +Stock subject to options granted to such other continuing full-time employee would require stockholder approval. Any Annual Option +so granted vests quarterly over a one-year period and is exercisable at a price equal to the closing price of the Company’s +Common Stock on the grant date for a period of five years. In addition, pursuant to the SM Agreement, on March 1, 2017, Mr. Madden +received a one-time stock option grant to purchase 1,125,000 shares of the Company’s Common Stock at an exercise price of +$24.90 as a result of the Company having achieved for the fiscal year ended December 31, 2016 earnings per share performance criteria +set forth in the SM Agreement; such option vests in equal annual installments over a five-year period which commenced on the first +anniversary of the grant date. +Under +the SM Agreement, in the event of Mr. Madden’s death, his estate would receive a payment equal to his base salary for the +12-month period immediately subsequent to the date of his death. Further, in the event that Mr. Madden’s employment is terminated +due to his total disability (as defined in the agreement), “for cause” (as defined in the agreement) or due to Mr. +Madden’s resignation, the Company is obligated to pay Mr. Madden the amount of compensation that is accrued and unpaid through +the date of termination. In the event that Mr. Madden’s employment is terminated for any reason (other than “for cause” +or due to his death, total disability or resignation), the Company is obligated to pay Mr. Madden, in installments, the balance +of his base salary through the end of the term of the SM Agreement. If, during the period commencing 120 days prior to a “change +of control” transaction (as defined in the agreement) and ending on the first anniversary of a change of control transaction, +Mr. Madden’s employment is terminated other than for cause or by his resignation for “good reason” (as defined +in the agreement), or if Mr. Madden resigns for good reason or without good reason within 30 days following a change of control +transaction, all unvested options held by Mr. Madden will be accelerated and vest on the date of termination or resignation and +Mr. Madden will be entitled to receive a lump sum cash payment equal to the amount of compensation that is accrued and unpaid +through the date of termination plus $35 million. The SM Agreement contains other customary provisions, including provisions regarding +expense reimbursement, confidentiality, solicitation and competition. +For +the 2018 Fiscal Year, Mr. Madden earned $7,026,042 in base salary and received $200,000 for the payment of an annual life insurance +premium. Mr. Madden also received as his Annual Option for the 2018 Fiscal Year an option to purchase 225,000 shares of Common +Stock at a price per share of $35.95. +The +most recent amendment entered into on March 25, 2019, effected the extension of the term of the SM Agreement for three years through +December 31, 2026. In consideration of this extension, the Company has granted to Mr. Madden 200,000 shares of Common Stock under +the 2006 Plan, which shares are subject to certain restrictions including, without limitation, that the Employee will not sell, +transfer, pledge, hypothecate, assign or otherwise dispose of the restricted shares except as set forth under the 2006 Plan or +Mr. Madden’s award agreement. Vesting of the shares occurs in annual installments over three years commencing on December +31, 2024 on which date 66,666 shares will vest and continuing to vest thereafter on each of December 31, 2025 and December 31, +2026 when 66,667 shares will vest; provided, in each case, that Mr. Madden continues to be employed by the Company on each such +date through December 31, 2026. +20 +Loan +to Steven Madden. On June 25, 2007, the Company made a loan to Mr. Madden in the amount of $3,000,000, in order for Mr. Madden +to satisfy a personal tax obligation resulting from the exercise of a stock option which was due to expire and hold the underlying +shares of Common Stock. The loan is evidenced by a secured promissory note executed by Mr. Madden in favor of the Company, the +security for which is a security interest in a certain securities brokerage account maintained by Mr. Madden with his broker; +none of the securities in the securities brokerage account are shares of the Company’s Common Stock. There have been successive +amendments to the secured promissory note, the most recent of which occurred in April 2016, at which time the secured promissory +note was amended to substitute the collateral securing the secured promissory note from shares of the Company’s Common Stock +to the security interest in Mr. Madden’s securities brokerage account noted above. Previously, on January 3, 2012, the secured +promissory note was amended and restated to extend the maturity date of the obligation to December 31, 2023 and eliminate the +accrual of interest after December 31, 2011. Prior to the January 3, 2012 amendment, the secured promissory note had been accruing +interest at the rate of 6% per annum. In addition, the secured promissory note provides that, commencing on December 31, 2014 +and annually on each December 31 thereafter through the maturity date, one-tenth of the principal amount thereof, together with +accrued interest, will be cancelled by the Company provided that Mr. Madden continues to be employed by the Company on each such +December 31. Contemporaneously, on each such December 31, the Company will release its security interest in a portion of the securities +held in Mr. Madden’s securities brokerage account generally correlating to the amount of indebtedness cancelled on such +date. As of December 31, 2011, interest in the amount of $1,090,000 had accrued on the principal amount of the secured promissory +note and, as noted above, interest was eliminated after December 31, 2011. On December 31, 2018, the required one-tenth of the +principal amount of the secured promissory note, together with accrued interest, was written-off by the Company. +Review, Approval or Ratification +of Transactions with Related Persons +The +Company’s written Conduct Code and Employee Handbook prohibit all conflicts of interest. Under the Conduct Code, conflicts +of interest occur when private or family interests interfere in any way, or even appear to interfere, with the interests of the +Company. The Company’s prohibition on conflicts of interest under the Conduct Code includes any related person transaction. +Related +person transactions must be approved by the Board, or by a committee of the Board consisting solely of independent directors, +who will approve the transaction only if they determine that it is in the best interests of the Company. In considering the transaction, +the Board or committee will consider all relevant factors, including, as applicable, (i) the Company’s business rationale +for entering into the transaction; (ii) the alternatives to entering into a related person transaction; (iii) whether +the transaction is on terms comparable to those available to third parties or, in the case of employment relationships, to employees +generally; (iv) the potential for the transaction to lead to an actual or apparent conflict of interest and any safeguards +imposed to prevent such actual or apparent conflicts; and (v) the overall fairness of the transaction to the Company. +The +Company has multiple processes for reporting conflicts of interests, including related person transactions. Under the Conduct +Code, all employees are required to report any actual or apparent conflict of interest, or potential conflict of interest, to +management. The Chief Financial Officer distributes a questionnaire to the Company’s executive officers and management personnel +on a quarterly basis and distributes a questionnaire to the members of the Board of Directors on an annual basis requesting certain +information regarding, among other things, their immediate family members, employment and beneficial ownership interests, which +information is then reviewed for any conflicts of interest under the Conduct Code. +The +Board of Directors, the Audit Committee and the Disclosure Committee, which is comprised of management personnel, discuss the +related party transactions, specifically, and in connection with the regular review processes attendant to the Company’s +periodic filings, including related party transaction disclosures. +If +a director is a party to or in some manner involved in a transaction involving the Company, he or she will be recused from all +discussions and decisions about the transaction. The transaction must be approved in advance whenever practicable, and if not +practicable, must be ratified as promptly as practicable. +21 +COMPENSATION \ No newline at end of file diff --git a/raw/proxies/0000913241/0001019056-20-000260/proxy.txt b/raw/proxies/0000913241/0001019056-20-000260/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..5a7b0ba609993cb4675d43415ae8436bf1b87d1e --- /dev/null +++ b/raw/proxies/0000913241/0001019056-20-000260/proxy.txt @@ -0,0 +1,4273 @@ +DEF 14A +1 +smadden_def14a.htm +DEF 14A +UNITED +STATES +SECURITIES AND EXCHANGE COMMISSION +WASHINGTON, D.C. 20549 +SCHEDULE +14A +(RULE 14A-101) +INFORMATION +REQUIRED IN PROXY STATEMENT +SCHEDULE 14A INFORMATION +PROXY +STATEMENT PURSUANT TO SECTION 14(A) OF THE +SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. __) +Filed by the +Registrant þ +Filed +by a Party other than the Registrant o +Check +the appropriate box: +o +Preliminary Proxy Statement +o +Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +þ +Definitive Proxy Statement +o +Definitive Additional Materials +o +Soliciting Material Pursuant to §240.14a-12 +Steven +Madden, Ltd. +(Name of Registrant as Specified in Its Charter) +(Name +of Person(s) Filing Proxy Statement, if Other Than the Registrant) +Payment +of Filing Fee (Check the appropriate box): +þ +No fee required. +o +Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. +(1) Title +of each class of securities to which transaction applies: +(2) Aggregate +number of securities to which transaction applies: +(3) Per +unit price or other underlying value of transaction computed pursuant to Exchange Act +Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it +was determined): +(4) Proposed +maximum aggregate value of transaction: +(5) Total +fee paid: +o +Fee paid previously with preliminary materials. +o +Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and +identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, +or the Form or Schedule and the date of its filing. +(1) Amount +Previously Paid: +(2) Form, +Schedule or Registration Statement No.: +(3) Filing +Party: +(4) Date +Filed: +STEVEN MADDEN, +LTD. +52-16 Barnett Avenue +Long Island City, New York 11104 +March +18, 2020 +DEAR +STOCKHOLDERS, +As I write this, +the spread of COVID-19 is having a devastating impact on communities across the globe. My heart goes out to all those who have +been impacted, and our top priority at Steve Madden is doing our part to protect the health and well-being of our employees, customers +and the broader community while also ensuring the long-term viability of our business. This letter accompanies our 2019 Annual +Report, so it will look back at last year’s achievements, but rest assured that 100% of our focus is now on supporting our +people and communities and protecting our business during this challenging time. +2019 +SUMMARY +2019 +was a strong year for Steve Madden. We delivered robust financial results, with revenue increasing 6.5% to over $1.7 billion and +adjusted diluted EPS rising 6.2% to $1.95 despite significant headwinds from the bankruptcy of Payless ShoeSource and the tariffs +implemented on accessories, footwear and apparel from China. We also made progress on a number of key initiatives, which I will +outline below. +STRENGTHENING +OUR CORE BUSINESS +The highlight +of 2019 was the outstanding performance of our flagship Steve Madden brand. Once again, Steve and his design team created trend-right +product assortments that resonated with consumers and enabled us to outpace the competition and take market share. On the wholesale +side, our core Steve Madden Women’s U.S. footwear business had another strong year, growing revenue by 7% despite the challenging +overall performance of many of its largest wholesale customers. Our Steve Madden U.S. wholesale handbag business grew even faster +despite operating in an even more challenging category, recording 28% growth in revenue for the year, our third consecutive double-digit +annual increase in that division. +GROWING +OUR RETAIL BUSINESS THROUGH DIGITAL COMMERCE +In our +retail segment, we delivered a 6.1% overall comparable store sales increase for the year, powered by a 60% sales increase on stevemadden.com. +We saw the benefits of a number of the initiatives we implemented in 2018 – including the introduction of free two-day shipping, +the migration to the Shopify Plus platform and the addition of the AfterPay payment option – and we built on that with new +initiatives in 2019, including enhanced paid social advertising and influencer collaborations. +EXPANDING +STEVE MADDEN IN INTERNATIONAL MARKETS +One +of our most important long-term growth initiatives is expanding our business – particularly our Steve Madden brand – +outside of the United States, and in 2019, our flagship brand continued to build momentum in international markets. Steve Madden +brand international revenue increased high single-digits on a percentage basis for the year. The highlight was the performance +in our European joint venture, which again expanded with both existing and new wholesale accounts. In addition, in September, +we formed a new joint venture in China with Channelink, a partner with strong capabilities both online and offline. +MAKING +STRATEGIC ACQUISITIONS +We also +completed two acquisitions that provide the Company with meaningful growth opportunities going forward. +On August +12, we announced that we had acquired GREATS, a Brooklyn-based, digitally native sneaker brand. Founded in 2014, GREATS has attracted +a devoted following, particularly among Millennials, based on stylish, classic designs that fit today’s more casual lifestyle +along with unique marketing that connects the brand to culture. We see GREATS as highly complementary to the other brands in our +portfolio and are optimistic that we can grow this business significantly in the coming years with an enhanced product assortment +and expanded distribution. +On August 13, +we announced we had acquired BB Dakota, a California–based contemporary women’s apparel company. We have been following +BB Dakota for many years, as we have long thought that the BB Dakota brand and product assortments were aligned with the spirt +of the Steve Madden brand and that BB Dakota would make an ideal apparel partner for us, so we were thrilled when the opportunity +arose to acquire it. Beginning Fall 2020, we are transitioning the majority of the BB Dakota offering to become a co-branded BB +Dakota Steve Madden line, and we see significant opportunity for the BB Dakota Steve Madden collection in BB Dakota’s existing +distribution as well as new distribution both domestically and abroad. +RETURNING +CAPITAL TO SHAREHOLDERS +In 2019, we +continued to utilize our strong balance sheet and healthy free cash flow to return capital to shareholders. We bought back just +over 2.9 million shares, or approximately 4% of the Company, for $101.8 million. We also raised the quarterly dividend by 7% and +paid a total of $48 million in dividends to our shareholders in 2019. Since 2013, we have returned more than $865 million to our +shareholders in the form of share repurchases and dividends. +BUILDING +A FOUNDATION FOR CORPORATE SOCIAL RESPONSIBILITY +At +Steve Madden, we believe that how we do business is just as important as how well we do. In 2019, we took a number of significant +steps to formalize and enhance our corporate social responsibility (“CSR”) efforts as well as to increase the transparency +and disclosure about those activities. We established a dedicated CSR team and a CSR committee of the Board of Directors. We also +implemented initiatives throughout our business to protect human rights, limit environmental impact, promote diversity and inclusion, +and engage with our communities. You will be able to learn about these initiatives in our first CSR Report, which we plan to publish +in the coming months. +LOOKING +FORWARD +Overall, 2019 +was a very good year for Steve Madden. Now, however, we face extraordinary challenges due to the COVID-19 pandemic. As we move +forward, our focus will be on protecting the safety of our employees, customers and the broader community, as well as mitigating +the financial impact to our business while preserving the strength of our brands. We are heartened by the strength of our +balance sheet – which had $305 million in cash and marketable securities and no debt as of December 31, 2019 – and +the resilience of our employees, who continue to amaze me with their hard work and dedication. +Now +more than ever, we want to thank our employees for their tireless devotion, our customers for their loyalty, and you, our shareholders, +for your support. +Sincerely, +EDWARD ROSENFELD +CHAIRMAN AND +CHIEF EXECUTIVE OFFICER +STEVEN +MADDEN, LTD. +52-16 Barnett Avenue +Long Island City, New York 11104 +NOTICE +OF ANNUAL MEETING OF STOCKHOLDERS +TO BE HELD ON MAY 22, 2020 +TO THE +STOCKHOLDERS: +The +Annual Meeting of Stockholders (the “Annual Meeting”) of Steven Madden, Ltd. (the “Company”) will be held +on Friday, May 22, 2020, at the Company’s showroom located at 1370 Avenue of the Americas, 14th Floor, New York, New York +at 10:00 a.m, local time, for the purposes stated below: +1. to +elect nine (9) directors to the Board of Directors of the Company; +2. to +ratify the appointment of Ernst & Young LLP as the Company’s independent registered +public accounting firm for the fiscal year ending December 31, 2020; +3. to +approve, on a non-binding advisory basis, the compensation of certain executive officers +as disclosed in the accompanying proxy statement; and +4. to +transact such other business as may properly come before the Annual Meeting or any adjournments +thereof. +Only +those stockholders of record at the close of business on March 30, 2020, the record date for the Annual Meeting, are entitled +to notice of and to vote at the Annual Meeting and any adjournments thereof. Stockholders of record at the close of business on +March 30, 2020, will be admitted to the Annual Meeting upon presentation of valid, government-issued photo identification, such +as a driver’s license. Stockholders who own shares of the Company’s common stock beneficially through a bank, broker +or other nominee will be admitted to the Annual Meeting upon presentation of valid, government-issued photo identification and +proof of ownership or a valid proxy signed by the record holder. A recent brokerage statement or a letter from a bank or broker +are examples of proof of ownership. If you own shares of the Company’s common stock beneficially and want to vote in person +at the Annual Meeting, you should contact your broker or applicable agent in whose name the shares are registered to obtain a +broker’s proxy and bring it to the Annual Meeting in order to vote. +IMPORTANT +NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 22, 2020: THE NOTICE +OF ANNUAL MEETING AND PROXY STATEMENT, ANNUAL REPORT, ELECTRONIC PROXY CARD AND ANY OTHER MATERIALS CONCERNING THE ANNUAL MEETING, +TOGETHER WITH ANY AMENDMENTS TO ANY OF THESE MATERIALS, ARE AVAILABLE ON THE INTERNET AT WWW.PROXYVOTE.COM . +BY ORDER OF THE BOARD OF DIRECTORS +April 6, 2020 +Long Island City, +New York +Arvind Dharia +Secretary +WHETHER +OR NOT YOU EXPECT TO BE PRESENT AT THE ANNUAL MEETING, PLEASE MARK, DATE AND SIGN THE ACCOMPANYING FORM OF PROXY AND MAIL IT PROMPTLY +IN THE ENVELOPE PROVIDED TO: VOTE PROCESSING, C/O BROADRIDGE, 51 MERCEDES WAY, EDGEWOOD, NEW YORK 11717. ALTERNATIVELY, YOU MAY +VOTE YOUR SHARES BY TELEPHONE OR THROUGH THE INTERNET AS DESCRIBED ON THE ACCOMPANYING PROXY CARD. +TABLE +OF CONTENTS +GENERAL INFORMATION +1 +Notice of Internet Availability of Proxy Materials +2 +QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING +2 +PROPOSAL ONE: ELECTION OF DIRECTORS +6 +Stockholder Nominations for Board Membership +6 +Directors and Nominees for Election to the Board of Directors +6 +CORPORATE GOVERNANCE +12 +The Board of Directors +12 +Director Independence +12 +Director Attendance at Meetings +12 +Director Election (Majority Voting) Policy +12 +Committees of the Board +13 +Board Leadership Structure, Risk Oversight, Executive Sessions of Non-Employee Directors, and Communications Between Stockholders and the Board +16 +Codes of Business Conduct and Ethics +18 +Corporate Governance Guidelines +18 +Stock Ownership Guidelines +18 +Prohibition on Hedging and Pledging of Our Common Stock +19 +Corporate Social Responsibility Policy +19 +Certain Relationships and Related Party Transactions +19 +Review, Approval or Ratification of Transactions with Related Persons +20 +COMPENSATION OF DIRECTORS IN THE 2019 FISCAL YEAR +21 +STOCK OWNERSHIP +22 +Security Ownership of Certain Beneficial Owners +22 +Security Ownership of Directors and Executive Officers +23 +EXECUTIVE COMPENSATION +24 +Compensation Discussion and Analysis +24 +Compensation Committee Interlocks and Insider Participation +34 +Executive Officers +34 +SUMMARY COMPENSATION TABLE +35 +Employment Arrangements +37 +GRANTS OF PLAN-BASED AWARDS IN THE 2019 FISCAL YEAR +41 +OUTSTANDING EQUITY AWARDS AT END OF THE 2019 FISCAL YEAR +44 +OPTION EXERCISES AND STOCK VESTED IN THE 2019 FISCAL YEAR +46 +SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS +46 +EQUITY COMPENSATION PLAN INFORMATION +47 +POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE-IN-CONTROL +48 +COMPENSATION COMMITTEE REPORT +50 +PROPOSAL TWO: RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR ENDING DECEMBER 31, 2020 +51 +AUDIT COMMITTEE REPORT +53 +PROPOSAL THREE: NON-BINDING ADVISORY VOTE ON EXECUTIVE COMPENSATION +54 +i +STEVEN MADDEN, +LTD. +52-16 Barnett Avenue +Long Island City, New York 11104 +PROXY +STATEMENT +GENERAL +INFORMATION +The +Board of Directors of Steven Madden, Ltd. requests your proxy in connection with the Annual Meeting of Stockholders (the “Annual +Meeting”) of Steven Madden, Ltd. (the “Company,” “we,” “us,” or “our”). +The Annual Meeting will be held at our showroom located at 1370 Avenue of the Americas, 14th Floor, New York, New York, on Friday, +May 22, 2020 at 10:00 a.m., local time. Proxies also may be voted at any adjournments or postponements of the Annual Meeting. +On +or about April 6, 2020 a notice containing instructions on how to access this Proxy Statement, the accompanying proxy card and +related materials online is being mailed to holders of record of our common stock, $0.0001 par value (the “Common Stock”), +at the close of business on March 30, 2020 (the “Record Date”). Our Annual Report for the fiscal year ended December +31, 2019 (the “2019 Fiscal Year”), including audited financial statements, is included in the materials that are accessible +online. This Proxy Statement contains information about the Annual Meeting as well as information regarding the voting process, +director elections, our corporate governance programs and executive and director compensation, among other things. We recommend +that you read all of these materials. +The +Annual Meeting has been called to consider and take action on the following proposals: +· to +elect nine (9) directors to our Board of Directors to serve until the next annual meeting +of our stockholders and until his or her successor is elected and qualified; +· to +ratify the appointment of Ernst & Young LLP as our independent registered public +accounting firm for the fiscal year ending December 31, 2020; +· to +approve, on a non-binding advisory basis, the compensation of certain executive officers +as disclosed in this Proxy Statement; and +· to +transact such other business as may properly come before the Annual Meeting and any adjournments +thereof. +The +Board of Directors knows of no other matters to be presented for action at the Annual Meeting. However, if any other matters properly +come before the Annual Meeting, the persons named in the proxy will vote on such other matters or for other nominees for director +in accordance with their best judgment. Our Board of Directors recommends that the stockholders vote “FOR” each of +Proposals One, Two and Three. Only holders of record of our Common Stock at the close of business on the Record Date will be entitled +to vote at the Annual Meeting. +We +are incorporated in the State of Delaware. Our principal executive offices are located at 52-16 Barnett Avenue, Long Island City, +New York 11104, and our telephone number is (718) 446-1800. +1 +Notice +of Internet Availability of Proxy Materials +We +continue to take advantage of the Securities and Exchange Commission (the “SEC”) “e-proxy” rules allowing +us to furnish proxy materials through the Internet for the benefit and convenience of our stockholders. By using the e-proxy rules, +we can expedite the receipt by stockholders of proxy materials while lowering the costs and reducing the environmental impact +associated with our Annual Meeting. On or about April 6, 2020, we will furnish a Notice of Internet Availability of Proxy Materials +(the “Availability Notice”) to most of our stockholders containing instructions on how to access the proxy materials +and to vote online. In addition, instructions on how to request a printed copy of these materials will be found on the Availability +Notice. If you received an Availability Notice by mail, you will not receive a paper copy of the proxy materials unless you request +such materials by following the instructions contained in the Availability Notice. +For +more information on voting your Common Stock, please refer to the following “Questions and Answers” section. +QUESTIONS +AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING +1. What is included +in the proxy materials? What is a proxy statement and what is a proxy? +The +proxy materials for our Annual Meeting include the Notice of Annual Meeting, this Proxy Statement and our Annual Report on Form +10-K for the year ended December 31, 2019. If you received a paper copy of these materials, the proxy materials also include a +proxy card or voting instruction form. +A +proxy is the delegation of your right to vote the Common Stock you own to another person, who is called your proxy. When you designate +someone as your proxy in a written document, that document is called a proxy or a proxy card. SEC regulations require that we +furnish a proxy statement to you when we ask you to designate a proxy to vote your shares of Common Stock on your behalf. We have +designated our officers Edward R. Rosenfeld and Arvind Dharia as proxies for the Annual Meeting. +2. Who may vote at the +Annual Meeting? +Only +stockholders of record are entitled to vote at the Annual Meeting. A stockholder of record is a stockholder of our Company as +of the close of business on the Record Date. On the Record Date, there were +83,169,060 shares of our Common Stock outstanding (excluding treasury shares) held by approximately 169 registered holders of +record and 17,700 beneficial owners. +3. What is the difference +between holding shares as a stockholder of record and as a beneficial owner? +If +your shares are registered directly in your name with our registrar and transfer agent, American Stock Transfer & Trust Company, +you are a “stockholder of record” with respect to those shares, and in such case, we have provided this Proxy Statement +and the accompanying proxy materials directly to you. If your shares are held in a stock brokerage account or by a bank or nominee, +your shares are held in “street name” and you are considered the “beneficial owner” of those shares. In +that case, your broker, bank or other stockholder of record has provided this Proxy Statement and the accompanying proxy materials +to you. As the beneficial owner, you have the right to direct your broker, bank or other stockholder of record how to vote your +shares held in “street name.” +4. What is considered +a quorum to conduct the Annual Meeting? +The +presence, in person or by proxy, of the holders of a majority of the shares entitled to vote is necessary to constitute a quorum +for the purpose of transacting business at the Annual Meeting. Under Delaware law, abstentions and broker non-votes as described +below are counted as present for purposes of determining the presence or absence of a quorum for the transaction of business. +If a quorum is not present, the Annual Meeting may be adjourned until a quorum is obtained. +2 +5. What is a “broker +non-vote”? +If +your shares are held in “street name” by a broker, bank or other nominee, your broker, bank or other nominee is the +record holder; however, the broker, bank or other nominee is required to vote the shares in accordance with your instructions. +If you do not give instructions to your broker, bank or other nominee, it may, if permitted by the organizations of which it is +a member, exercise discretionary voting power to vote your shares. A “broker non-vote” occurs when a broker, bank +or other nominee of record holding shares for a beneficial owner has not received voting instructions from the beneficial owner +and either chooses not to vote the shares on a particular proposal as to which the holder has discretionary voting power or does +not vote on a particular proposal because that holder does not have discretionary voting power for that particular item. Broker +non-votes are considered present in determining whether a quorum is present. +If +you hold your shares in “street name,” we strongly encourage you to provide instructions regarding the voting of your +shares, because your broker, bank or other nominee cannot vote your shares with respect to certain of the proposals being presented +at the Annual Meeting without voting instructions from you. +6. How many votes do +I have? What shares are included on the proxy card? +For +each share of Common Stock that you own on the Record Date you are entitled to one vote on each matter presented at the Annual +Meeting. +If +you are a record holder, you will receive an Availability Notice or proxy card for all of the shares of Common Stock you hold +in certificate form, in book-entry form and in any Company benefit plan. If you are a beneficial owner, you will receive information +containing voting instructions from the broker, bank or other nominee through which you own your shares of Common Stock. +7. How +many votes are required to approve each proposal and what is the effect of abstentions +and broker non-votes? +Proposal +One (Election of Directors): Under Delaware law, directors are elected by the affirmative vote of a plurality of the shares +of Common Stock present in person or represented by proxy at the Annual Meeting and entitled to vote on this proposal. This means +that the director nominees who receive the greatest number of affirmative votes cast are elected as directors, subject to our +Director Election (Majority Voting) Policy discussed in Proposal One below. Although the number of directors constituting our +Board of Directors is fixed at ten, our Nominating Corporate Governance Committee has nominated only nine of the current directors +to stand for election. Proxies cannot be voted for a greater number of persons than the number of nominees named. +Proposal +Two (Ratification of Appointment of Ernst & Young LLP): The affirmative vote of a majority of the shares of Common Stock +present in person or represented by proxy at the Annual Meeting and entitled to vote on this proposal is required to approve the +ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year +ending December 31, 2020. +Proposal +Three (Non-Binding Advisory Vote on Executive Compensation): The affirmative vote of a majority of the shares of Common Stock +present in person or represented by proxy at the Annual Meeting and entitled to vote on this proposal is required to approve, +on a non-binding advisory basis, the compensation of our Named Executive Officers as described in this Proxy Statement. +Other +Matters: If any other matters are presented at the Annual Meeting, they must receive the affirmative vote of a majority of +the shares of Common Stock present in person or represented by proxy at the Annual Meeting and entitled to vote on the matter +in order to be approved. +Abstentions +will have no effect on the election of directors, but will be treated as present and entitled to vote on the remaining proposals. +Therefore, abstentions will have the effect of votes “AGAINST” such proposals. +If +you do not provide your broker, bank or other nominee with instructions on how to vote your shares held in “street name,” +your broker, bank or other nominee will not be permitted to vote your shares on non-routine matters, and your shares will not +affect the outcome of proposals concerning non-routine matters. Proposal Two is considered a routine matter under applicable rules. +Proposals One and Three are considered “non-routine” matters, which means that your broker or other nominee does not +have discretion to vote your shares with respect to those proposals without voting instructions from you. If you hold your shares +in “street name,” we strongly encourage you to provide instructions regarding the voting of your shares to your broker, +bank or other nominee. +3 +8. How can I vote my +shares? +Your +vote is important. Your shares can be voted at the Annual Meeting only if you are present in person or represented by proxy. Even +if you plan to attend the Annual Meeting, we urge you to authorize your proxy in advance. You may vote your shares by authorizing +a proxy over the Internet or by telephone. In addition, if you received a paper copy of the proxy materials by mail, you can submit +a proxy by mail by following the instructions on the proxy card. Voting your shares by authorizing a proxy over the Internet, +by telephone or by written proxy card will ensure your representation at the Annual Meeting regardless of whether you attend in +person. +If +you are the record holder of your shares, please authorize your proxy electronically by going to the http://www.proxyvote.com +website or by calling the toll-free number listed below and on the proxy card. Please have your Proxy Statement or proxy card +in hand when going online or calling. If you authorize your proxy via the Internet or by phone you do not need to return your +proxy card. If you choose to authorize your proxy by mail, simply mark your proxy card and then date, sign and return it in the +postage-paid envelope provided. +VOTE +BY INTERNET +http://www.proxyvote.com +Use the Internet to transmit your voting instructions and for electronic delivery of information. +VOTE +BY PHONE +1-800-690-6903 +Use any touch-tone telephone to transmit your voting instructions. +VOTE +BY MAIL +Vote Processing, c/o Broadridge +51 Mercedes Way +Edgewood, New York 11717 +If you receive paper proxy materials, mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to the address shown above. +If +you hold your shares beneficially in “street name” through a broker or nominee, you may be able to authorize your +proxy by telephone or the Internet as well as by mail, but you will need to obtain and follow instructions from your broker or +nominee to vote these shares. +9. May I revoke my proxy +for the Annual Meeting once I have given it? +You +may revoke your proxy at any time before it is voted at the Annual Meeting by: +· properly +executing and delivering a later-dated proxy (including a telephone or Internet proxy +authorization); +· voting +by ballot at the Annual Meeting; or +· sending +a written notice of revocation to the Secretary of the Company at Steven Madden, Ltd., +52-16 Barnett Avenue, Long Island City, New York 11104. +10. How does the Board +of Directors recommend that I vote my shares? +Our +Board of Directors recommends that you vote: +· “FOR” +the election of each of the nine (9) director nominees; +· “FOR” +the ratification of the appointment of Ernst & Young LLP as our independent registered +public accounting firm for the fiscal year ending December 31, 2020; and +· “FOR” +the approval, on a non-binding advisory basis, of the executive compensation of our Named +Executive Officers, as disclosed in this Proxy Statement. +4 +ALL PROXIES +RECEIVED WILL BE VOTED IN ACCORDANCE WITH THE CHOICES SPECIFIED ON SUCH PROXIES. PROXIES WILL BE VOTED IN FAVOR OF PROPOSALS ONE, +TWO, AND THREE. IF NO CONTRARY SPECIFICATION IS MADE. ALL VALID PROXIES OBTAINED WILL BE VOTED AT THE DISCRETION OF THE PERSONS +NAMED IN THE PROXY WITH RESPECT TO ANY OTHER BUSINESS THAT MAY PROPERLY COME BEFORE THE ANNUAL MEETING OR ANY ADJOURNMENTS OR +POSTPONEMENTS THEREOF. AS NOTED ABOVE, IF YOU HOLD YOUR SHARES BENEFICIALLY THROUGH A BROKER, BANK OR OTHER NOMINEE AND FAIL TO +PROVIDE SPECIFIC VOTING INSTRUCTIONS TO THAT BROKER, BANK OR OTHER NOMINEE, YOUR SHARES WILL NOT BE VOTED IN THE ELECTION OF DIRECTORS +OR THE ADVISORY VOTE ON EXECUTIVE COMPENSATION. +11. Who will bear the +expenses of this solicitation and how are proxies being solicited? +We +will pay the costs of soliciting proxies, including preparing, printing and mailing this Proxy Statement, any exhibits hereto +and the proxies solicited hereby. In addition to the use of the mails, proxies may be solicited on our behalf by our officers, +directors and employees, without additional remuneration, by personal interviews, by telephone or by electronic transmission. +We will also request brokerage firms, nominees, custodians and fiduciaries to forward proxy materials to the beneficial owners +of shares of Common Stock held of record by them and will provide reimbursements for the cost of forwarding the material in accordance +with customary charges. We have entered into an agreement with D.F. King & Co., Inc. to assist in the solicitation of proxies +and provide related advice and informational support. The total expense of this engagement, which will be borne by us, including +customary disbursements, is not expected to exceed $20,000 in the aggregate. +12. How +will the voting results be reported? +The +preliminary results of the voting on the proposals will be reported at the Annual Meeting. The final certified results will be +reported in a Current Report on Form 8-K that will be filed with the SEC within four business days following the Annual Meeting. +13. How do I submit +a proposal for action at the Company’s 2021 Annual Meeting of Stockholders? +In +accordance with rules promulgated by the SEC, any stockholder who wishes to submit a proposal for inclusion in the proxy materials +to be distributed by us in connection with the 2021 Annual Meeting of Stockholders (the “2021 Annual Meeting”) must +do so no later than December 7, 2020. In addition, in accordance with Article I, Section 7(f) of our Amended and Restated By-Laws +(the “By-Laws”), in order to be properly brought before the 2021 Annual Meeting, a matter must be either (i) specified +in the notice of such meeting given by or at the direction of the Board of Directors (or any duly authorized committee thereof), +(ii) otherwise properly brought before such meeting by or at the direction of the Board of Directors (or any duly authorized committee +thereof) or (iii) specified in a notice in proper written form given by a stockholder of record on the date of the giving of the +notice and on the record date for such meeting, which notice conforms to the requirements of Article I, Section 7(f) of the By-Laws +and is delivered to, or mailed and received at, our principal executive offices not less than 120 days nor more than 150 days +prior to the first anniversary of the date of our 2020 Annual Meeting. Accordingly, any written notice given by or on behalf of +a stockholder pursuant to the foregoing clause (iii) in connection with the 2021 Annual Meeting must be received no later than +January 23, 2021 and no earlier than December 24, 2020. In addition, for business to be properly brought before the 2021 Annual +Meeting by a stockholder pursuant to the foregoing clause (iii), such stockholder shall have complied with any other applicable +requirements, including, but not limited to, the requirements of Rule 14a-8 promulgated by the SEC. +5 +PROPOSAL +ONE: +ELECTION OF DIRECTORS +Our +By-Laws provide that our Board of Directors shall consist of a minimum of one director and that, subject to this limitation, the +number of directors may be fixed from time to time by action of the directors. The Board of Directors has fixed the number of +directors comprising the Board of Directors at ten members. Directors are elected to serve until the next annual meeting of stockholders, +and the term of each of the current directors will expire at the Annual Meeting. +Stockholder +Nominations for Board Membership +The +Nominating/Corporate Governance Committee of the Board of Directors recommends to the Board director candidates for nomination +and election at each annual meeting of stockholders or for appointment to fill vacancies on the Board. The Nominating/Corporate +Governance Committee will review and evaluate the qualifications of proposed director candidates recommended to it from various +sources, including candidates proposed by our stockholders in accordance with the procedures established for that purpose. In +accordance with Article II, Section 5 of the By-Laws, director nominations for the 2021 Annual Meeting can only be made by a stockholder +of our Company who (i) is a stockholder of record on the date of the giving of the notice of such director nominations and on +the record date for the determination of stockholders entitled to vote at the 2021 Annual Meeting and (ii) complies with the notice +requirements and procedures set forth in Article II, Section 5 of the By-Laws. A stockholder’s notice to the Secretary of +the Company with respect to any such nominations must be timely and in proper written form pursuant to Article II, Section 5 of +the By-Laws, including containing certain information concerning the nominating or proposing stockholder and certain information +concerning the nominee. The notice must be delivered to, or mailed and received at, our principal executive offices not less than +120 days nor more than 150 days prior to the first anniversary of the date of our 2020 Annual Meeting. Accordingly, any written +notice given by or on behalf of a stockholder pursuant to Article II, Section 5 of our By-Laws in connection with the 2021 Annual +Meeting must be received no later than January 23, 2021 and no earlier than December 24, 2020. A copy of our By-Laws may be obtained +by any stockholder, without charge, upon written request to the Secretary of the Company at the address set forth above. +Directors +and Nominees for Election to the Board of Directors +Upon +recommendation of the Nominating/Corporate Governance Committee of the Board of Directors, the Board of Directors has nominated +and is recommending to the stockholders the election of each of the nine nominees named below to serve as a director of our Company +until the next annual meeting of our stockholders and until his or her successor is duly elected and qualified or until his or +her earlier death, resignation or removal from office. All of the nominees except for Mr. Ferrara were elected directors at last +year’s Annual Meeting of Stockholders. Mr. Ferrara was appointed by the Board to serve as a director in July 2019, when +the number of directors was expanded to ten. All nominees have agreed to be named in this Proxy Statement and to serve on the +Board of Directors if elected. Richard Randall, who is a current director, is retiring as a director effective on the date of +the 2020 Annual Meeting and, therefore, was not nominated for election to the Board. Even though the number of directors constituting +our Board of Directors is fixed at ten, proxies cannot be voted for a greater number of persons than the number of nominees named. +The +names and biographical summaries of our directors, including the nine persons who have been recommended by the Nominating/ Corporate +Governance Committee of the Board of Directors and nominated by the Board of Directors to stand for election at the Annual Meeting, +are provided below for your information. +Our +Board of Directors is responsible for overseeing our business in a manner consistent with the Board’s fiduciary duty to +our stockholders. This significant responsibility requires that our directors consist of individuals who are well-qualified for +service on our Board and its committees and demonstrate a commitment to the success of our Company and to service in the best +interests of our stockholders. +6 +The +following matrix identifies the relevant skills, experience and qualifications of our directors, which include the nine director +nominees. The skills and experience identified below are reviewed by the Nominating/Corporate Governance Committee, in addition +to other qualifications, and nominees are selected with a view to establishing a Board of Directors that consists of individuals +who have extensive business leadership experience, are independent, bring diverse perspectives to the Board, and possess high +ethical standards, sound business judgment and acumen, and a willingness to devote the time necessary for the Board to effectively +fulfill its responsibilities. We believe that all of the director nominees possess these qualifications and provide the Board +with a full complement of knowledge, business skills and expertise for the effective management of our Company. +In +addition to these general qualifications, provided below for each nominee for director is a discussion of the experience, qualifications, +attributes and skills that led to the Board’s conclusion that the nominee should serve as a director. +7 +Name +Principal +Occupation +Age +Year +Became a +Director +Edward R. Rosenfeld +Chairman of the Board and Chief Executive +Officer, Steven Madden, Ltd. +44 +2008 +Al Ferrara +Retired National Director +of the Retail and Consumer Products +Division of BDO USA, LLP, +a major international accounting firm +69 +2019 +Mitchell S. Klipper +Retired Chief Executive Officer of Barnes +& Noble, Inc.’s Retail Group, the largest retail bookseller in the United States +62 +2018 +Rose Peabody Lynch +Owner of Marketing Strategies, LLC, New +York based consulting firm of which she is founder and President, which focuses on strategic marketing and operating issues +for small to medium-sized companies +70 +2014 +Peter Migliorini +Sales Manager, Greschlers, Inc., a building +supplies company +71 +1996 +Richard P. Randall* +Retired Executive Vice President and Chief +Financial Officer, Direct Holdings Worldwide, LLC, the parent company of Lillian Vernon Corp., a catalog and online retailer +of gifts and household goods, and Time-Life, a music and video marketing company +82 +2006 +Ravi Sachdev +Partner, Clayton Dubilier & Rice, LLC +43 +2008 +Thomas H. Schwartz +Owner, Sumner and Forge Investors LLC, +a real estate investment and property management company +72 +2004 +Robert G. Smith +Founder and Chief Executive Officer of +Phluid Project, part retail concept and part experimental platform, completely gender neutral, with a website to offer products +and programs worldwide +54 +2014 +Amelia Newton Varela +President, Steven Madden, Ltd. +48 +2016 +* Mr. +Randall is not a nominee for election at the Annual Meeting. +Additional +Information About the Directors +Other +Public Company Directorships +Four +of our directors also currently serve as directors of other public companies: +· Mr. +Rosenfeld is a director and member of the Audit & Risk Management Committee of PVH +Corp., one of the world’s largest apparel companies. +· Mr. +Sachdev is a director and member of the Strategy Committee and Compensation Committees +of Covetrus, Inc., a global animal-health technology and services company. +· Ms. +Lynch is a director and member of both the Pension Committee and Nominating Committee +of General American Investors Company, Inc., a closed-end fund that manages a global +portfolio of investments consisting mainly of U.S. and foreign securities. +· Mr. +Randall serves as a director and member of the Audit Committee, Corporate Governance +and Nominating Committee, and Strategic Planning and Risk Assessment Committees of P&F +Industries Inc., a manufacturer and importer of tools sold principally to the industrial, +retail and automotive markets. +8 +Other +Employment Information +Each +of our directors has been engaged in the principal occupation indicated in the foregoing table for more than the past five years, +with the exceptions of Mr. Smith and Mr. Sachdev. Prior to founding Phluid Project in 2018, for which he currently serves as Chief +Executive Officer, from 2013 to 2017, Mr. Smith was the Chief Merchandising Officer for Haddad Brands, a global children’s +apparel and accessories licensing partner for iconic brands such as Levi’s, Hurley, Nike, Jordan and Converse. Prior thereto, +from 2010 to 2012, Mr. Smith served as Executive Vice President, Merchandising for Limited Brands, at Victoria’s Secret +Direct, the largest direct-to-consumer women’s apparel retailer in the United States. Mr. Sachdev has been a partner of +Clayton Dubilier & Rice, LLC since 2015. Previously, from November 2010, he served as a Managing Director and Co-Head of Healthcare +Services at J.P. Morgan. +Specific +Qualifications, Attributes, Skills and Experience of Directors +Edward +R. Rosenfeld has served as our Chairman of the Board and Chief Executive Officer since August 2008 and has been a director +of our Company since February 2008. Mr. Rosenfeld, who joined our executive management team in May 2005, has more +than two decades of experience focused on the retail, apparel and footwear industries and possesses particular knowledge of and +experience in the industry that strengthens the Board’s collective qualifications, skills and experience. His background +in finance and his analytical skills gained through his years as a Vice President with Peter J. Solomon Company, an investment +banking boutique, where he specialized in mergers and acquisitions in the retail, apparel and footwear industries, provide the +Board with insight and guidance with respect to, among other things, strategic business development matters. Mr. Rosenfeld has +strong leadership skills and an in-depth understanding of our Company and its goals from his positions as the Chairman of the +Board and Chief Executive Officer. Mr. Rosenfeld serves as a director and member of the Audit & Risk Management Committee +of PVH Corp. (NYSE: PVH), one of the world’s largest apparel companies. +Al +Ferrara has served as a director of our Company and as a member of the Audit Committee since July 2019. He is a certified +public accountant having retired from his position as a partner with BDO USA, LLP, a major international accounting firm, in August +2016 after 25 years with the firm, most recently serving as National Director of the Retail & Consumer Products Division. +Mr. Ferrara also served as a director on the firm’s Board of Directors from 2003 through 2010 and was also a director and +BDO representative on the Board of Directors of BDO Capital Advisors, LLC from 2000 to 2015. Mr. Ferrara served as a member of +the Board of Directors of Barnes & Noble, Inc., the nation’s largest retail bookseller, from 2016 until its sale in +August 2019 and also served on its Audit Committee and Compensation Committee. Mr. Ferrara’s decades of relevant experience +as a certified public accountant, the director of retail practice at a major international accounting firm, and as a member of +the audit committee of a public company enhance the financial oversight capabilities of our Board and its Audit Committee. +Mitchell +S. Klipper has served as a director of our Company since April 2018, as a member of the Audit Committee since June 2018 +and as a member of the Corporate Social Responsibility Committee since August 2019. Mr. Klipper served as the Chief Executive +Officer of the Retail Group of Barnes & Noble, Inc., the nation’s largest retail bookseller, from March 2010 to May +2015. Mr. Klipper began his career at Barnes & Noble as Chief Financial Officer of B&N College in June 1986. He subsequently +held several executive positions at Barnes & Noble, Inc., including Executive Vice President, President of Barnes & Noble +Development and Chief Operating Officer. Prior to joining Barnes & Noble, Inc., Mr. Klipper was an Audit Manager with KMG +Main Hurdman, a certified public accounting firm and predecessor to KPMG. He also served on the advisory board of Modell’s +Sporting Goods from 2006 through 2018. Mr. Klipper’s decades of relevant experience in retail management, general business +and accounting enhance the leadership and oversight capabilities of our Board. +9 +Rose +Peabody Lynch has served as a director of our Company since April 2014, as a member of the Compensation Committee since +June 2014, and as a member of the Corporate Social Responsibility Committee since August 2019. Ms. Lynch formerly served on the +Audit Committee from June 2014 to July 2019, when she became a member of the Corporate Social Responsibility Committee. She possesses +over 30 years of business experience, including tenures as the President and in other senior executive officer positions of major +companies in the beauty and fashion industries, and has extensive executive level financial and operating experience. Her experience +serving as a director and as a senior executive for a range of companies, including Victoria’s Secret, Trowbridge Gallery +(a supplier of fine art to the interior design trade) and Danskin, Inc., a leading manufacturer of women’s dance and active +wear, enhances the Board’s leadership and oversight capabilities. Ms. Lynch has served on several boards, including The +Harmony Group-LeRoi Princeton (a manufacturer of children’s apparel), Salant Corporation (Perry Ellis Menswear) and Frederick’s +of Hollywood (a retailer of women’s apparel and lingerie). Currently, Ms. Lynch serves on the board of General American +Investors Company, Inc. (NYSE: GAM), and on both its Pension Committee and Nominating Committee. She was a member of the Audit +Committee and Nominating and Governance Committees during her tenure at Salant and chaired the Compensation Committee during her +tenure on the board of Frederick’s of Hollywood. In addition, Ms. Lynch has held leadership positions with a variety of +not-for-profit organizations. She currently serves on the Board of Directors of the Princeton University Varsity Club and is President +of her Princeton University class. She also serves on the Board of Trustees of Concord Academy in Concord, Massachusetts. Ms. +Lynch is a member of the Women and Foreign Policy Advisory Council at the Council on Foreign Relations. +Peter +Migliorini has served as a director of our Company since October 1996 and has served on the Nominating/Corporate +Governance Committee, as its Chair, since July 2004 and the Compensation Committee, as its Chair, since July 2004. Mr. Migliorini +formerly served on the Audit Committee, from October 1996 until June 2018. Mr. Migliorini is the Presiding Director over all executive +sessions of the independent directors. Mr. Migliorini possesses extensive executive level financial, sales and operations experience. +Prior to serving as sales manager for Greschlers, Inc., from 1987 to 1994, Mr. Migliorini served as Director of Operations for +Mackroyce Group, a construction company. Earlier, Mr. Migliorini held various positions of increasing responsibility from Assistant +Buyer to Chief Planner/Coordinator for several shoe companies, including Meldisco Shoes, Perry Shoes and Fasco Shoes. His numerous +years of business experience at various levels and in various industries provide the Board with a measure of practical orientation +regarding our operations and growth endeavors. Mr. Migliorini’s early experience in the shoe industry also provides relevant +knowledge and expertise in our specific industry. +Richard +P. Randall has served as a director of our Company since April 2006 and has served on the Company’s Audit +Committee, as its Chair, since 2006, and on the Nominating/Corporate Governance Committee since September 2008. Mr. Randall has +decades of business experience, including tenures as Chief Financial Officer and Chief Operating Officer of both publicly traded +and privately held companies in the retail industry, including Direct Holdings Worldwide, LLC, the parent company of Lillian Vernon +Corp. and Time-Life, a music and video marketing company, and, prior thereto, Coach, Inc., a luxury leather goods company. Mr. +Randall possesses extensive knowledge of accounting and finance, the retail industry and the issues impacting a publicly traded +company. Mr. Randall has extensive executive level experience establishing his capabilities in management of complex organizations +and is a certified public accountant. His expertise in finance qualifies him to serve as the Audit Committee “audit committee +financial expert” and his service on the boards and board committees of other companies has allowed him to gain broad-based +experience and sensitivity regarding best practices, which he shares with the Board. Mr. Randall also provides a perspective on +proper governance for public companies. He currently serves as a member of the board of directors and Audit Committee, Corporate +Governance and Nominating Committee and Strategic Planning and Risk Assessment Committee of P&F Industries, Inc. (NASDAQ: +PFIN), a manufacturer and importer of tools sold principally to the industrial, retail and automotive markets and, until December +31, 2014, served as a member of the board of directors and chair of the Audit and Risk Committee of Aceto Corporation, a generic +pharmaceutical, nutraceutical and chemical distribution company. Mr. Randall is a former director and member of the Executive, +Finance, Audit and Research Committees of The Burke Rehabilitation Hospital (“Burke”). He served as a Member Emeritus +of Burke’s Executive Committee and retains a board seat on The Burke Foundation’s board. Mr. Randall served as a director +and chair of the Audit Committee of Universal Travel Group, a travel services provider in the People’s Republic of China, +and of Home Systems Group, a manufacturer and distributor of household appliances in the People’s Republic of China, from +2007 until 2008 when he resigned from these boards. Mr. Randall’s term as a member of our board of directors will end at +the Annual Meeting, and we thank him for his distinguished service. +10 +Ravi +Sachdev has been a director of our Company since September 2008 and has served on the Audit Committee since September +2008 and on the Nominating Corporate Governance Committee since August 2019. As a Partner of the private equity firm Clayton Dubilier +& Rice, LLC since June 2015, Mr. Sachdev focuses on the healthcare sector. Earlier, Mr. Sachdev was a Managing Director and +Co-Head of Healthcare Services at J.P. Morgan from November 2010 and prior to that held the positions of Managing Director at +Deutsche Bank Securities, Inc. from January 2009 until November 2010 and Director at Deutsche Bank from January 2007 until January +2009. Prior to joining Deutsche Bank in 2006 as a Vice President, Mr. Sachdev served as a Vice President at Peter J. Solomon Company, +an investment banking boutique, specializing in mergers and acquisitions in the healthcare sector, from 1998 to 2006. Mr. +Sachdev possesses knowledge of finance and the financial analytics used to measure business performance. His 20 years of professional +experience in investment banking and private equity brings to the Board a thorough understanding of the financial issues affecting +public companies and greater insights in business valuation together with a practical orientation with respect to acquisitions +and integrations. Mr. Sachdev also serves on the Board of Directors and the Strategy Committee and Compensation Committee of Covetrus, +Inc. (NASDAQ GS: CVET), a global animal-health technology and services company, and the Board of Directors of Agilon Health, Inc., +a technology-enabled services platform for the physicians market, and naviHealth, Inc., a technology-enabled services provider +in the value-based care sector. +Thomas +H. Schwartz has served as a director of our Company since May 2004 and has served on the Compensation Committee +since July 2004. With more than twenty years of experience as a Managing Director of Helmsley-Spear, Inc. and twelve years as +the owner of his own real estate investment firm, Mr. Schwartz brings to the Board extensive executive level experience in handling +operations issues and practical expertise in management. +Robert +G. Smith has served as a director of our Company since April 2014 and has served on the Compensation Committee +since June 2014 and on the Corporate Social Responsibility Committee, as its Chair, since August 2019. Mr. Smith formerly served +on the Nominating/Corporate Governance Committee from June 2014 to July 2019, when he became a member of the Corporate Social +Responsibility Committee. Mr. Smith is the Chief Executive Officer of Phluid Project, a part retail concept, part experiential +platform, completely gender neutral, which he founded in 2018. Prior to Phluid Project and his former positions with Haddad Brands +and Victoria’s Secret Direct, Mr. Smith held various senior merchandising positions at Macy’s Inc. between 1998 and +2010, beginning with Vice President, Merchandise Manager, Macy’s West and culminating with Executive Vice President, Merchandising +for Juniors, Kids, Intimate Apparel, Dresses, Suits, Coats and Swimwear. Earlier, Mr. Smith was a Merchandiser for XOXO Apparel +Company and held various positions with Burdine’s Department Stores. Mr. Smith possesses nearly 30 years of business experience +in the fashion industry and has extensive executive level expertise in merchandising. His experience in this area further enhances +the Board’s depth of understanding of the industry. +Amelia +Newton Varela has been President of our Company since September 2015 and has served as a director since 2016. Prior to +this tenure, Ms. Varela was Executive Vice President of Wholesale of our Company since April 2008 and Executive Vice President +of Wholesale Footwear of our Company from November 2004 to April 2008. Previously, she was Vice President of Sales for Steve Madden +Women’s Wholesale Division from January 2000. Ms. Varela began her career with our Company in 1998 in the role of Account +Executive for Steve Madden Women’s Wholesale Division. She graduated from The Fashion Institute of Technology in 1995. +Required +Vote +Proxies +will be voted for the election of the nine nominees as directors of our Company unless otherwise specified in the proxy. A plurality +of the votes cast by the holders of shares of Common Stock present in person or represented by proxy and entitled to vote at the +Annual Meeting will be necessary to elect the nominees as directors. This means that the director nominees who receive the greatest +number of affirmative votes cast are elected as directors subject to our Director Election (Majority Voting) Policy, which is +described below. If, for any reason, any nominee is unable or unwilling to serve, the proxies will be voted for a substitute nominee +who will be designated by the Board of Directors at the Annual Meeting. Stockholders may abstain from voting by marking the appropriate +boxes on the accompanying proxy. Abstentions will be counted separately and used for purposes of calculating whether a quorum +is present at the Annual Meeting, but will have no effect on the outcome of the vote. +11 +Director +Election (Majority Voting) Policy +It +is our policy that any nominee for director who receives a greater number of “WITHHOLD” votes than “FOR” +votes for his or her election must promptly submit a letter offering his or her resignation to the Nominating/Corporate Governance +Committee following the certification of the stockholder vote. In such event, the Nominating/Corporate Governance Committee would +then consider the offer of resignation and make a recommendation to the Board of Directors as to whether or not the resignation +should be accepted. This policy does not apply in contested elections. For more information about this policy, see “Corporate +Governance – Director Election (Majority Voting) Policy” below. +Recommendation +of the Board of Directors +The +Nominating/Corporate Governance Committee of the Board and the entire Board of Directors unanimously recommend a vote “FOR” +the election of Ms. Rose Peabody Lynch, Ms. Amelia Newton Varela and Messrs. Edward R. Rosenfeld, Al Ferrara, Mitchell S. Klipper, +Peter Migliorini, Ravi Sachdev, Thomas H. Schwartz and Robert G. Smith. +CORPORATE +GOVERNANCE +The +Board of Directors +Our +business is managed under the direction and oversight of the Board of Directors, who are elected by our stockholders. Directors +meet their responsibilities by participating in meetings of the Board of Directors and the various committees of the Board on +which they sit. They also communicate with our Chairman and Chief Executive Officer and other officers and employees of our Company +and consult with our independent registered public accounting firm and other third parties. The size of the Board is fixed at +ten members. Eight current directors and seven of the nominees for election as directors are independent and two are not independent. +The Nominating/Corporate Governance Committee determined to nominate nine current directors for election to our Board, because +it has been unable to find a suitable replacement for Richard Randall, who was not renominated. +Director +Independence +The +Board of Directors has determined that the following director nominees are “independent” for purposes of the criteria +of the SEC and The Nasdaq Global Select Market listing standards: Ms. Lynch and Messrs. Ferrara, Klipper, Migliorini, Sachdev, +Schwartz and Smith. If the nine nominees set forth above are elected, the Board will consist of a majority of independent directors. +The Board of Directors has held regularly scheduled executive sessions for the independent directors, with Mr. Migliorini serving +as Presiding Director of such executive sessions. +Director +Attendance at Meetings +Attendance +at Annual Meetings of Stockholders +We +have no specific policy regarding director attendance at our annual meetings of stockholders. We encourage all of our directors +to attend annual meetings of our stockholders and two directors attended our 2019 annual meeting of stockholders. +Attendance +at Meetings of the Board of Directors +The +Board of Directors held six regularly scheduled meetings during the 2019 Fiscal Year and acted by unanimous written consent on +three occasions during the 2019 Fiscal Year. In the 2019 Fiscal Year, each director attended at least 75% of the aggregate of +the total number of Board meetings and the total number of meetings held by all committees on which he or she then served. +Director +Election (Majority Voting) Policy +We +have adopted a Director Election (Majority Voting) Policy. Pursuant to this policy, in an uncontested election of directors (that +is, an election where the number of nominees is equal to the number of seats open) any nominee for director who receives a greater +number of “WITHHOLD” votes than “FOR” votes for his or her election must promptly submit an offer of resignation +to the Nominating/Corporate Governance Committee following the certification of the stockholder vote for consideration in accordance +with the following procedures. +12 +In +such event, upon receipt of the resignation, the Nominating/Corporate Governance Committee would promptly consider the appropriateness +of the director’s continued service on the Board of Directors and recommend to the Qualified Independent Directors (as defined +below) the action to be taken with respect to the resignation, which could include (1) accepting the resignation; (2) rejecting +the resignation; (3) retaining the director but addressing what the Qualified Independent Directors believe to be the underlying +cause of the “WITHHOLD” votes; or (4) determining that the director will not be renominated by the Board of Directors +in future elections. The Nominating/Corporate Governance Committee would consider factors such as (a) the reasons expressed by +the stockholders for withholding votes from such director; (b) any possibilities for curing the underlying cause of the “WITHHOLD” +votes; (c) the tenure and qualifications of the director and his or her past and expected future contributions to our Company; +(d) the overall composition of the Board of Directors, including, without limitation, whether accepting the resignation would +cause us to fail to meet any applicable SEC or Nasdaq requirement; (e) the availability of other qualified candidates; and (f) +our Board of Director Candidate Guidelines. +The +Qualified Independent Directors would then act on the Nominating/Corporate Governance Committee’s recommendation no later +than 90 days following the date of the stockholders’ meeting at which the director election occurred. In considering the +Nominating/Corporate Governance Committee’s recommendation, the Qualified Independent Directors would review the factors +considered by the Nominating/Corporate Governance Committee and such additional information and factors that they believe to be +relevant. Following the Qualified Independent Directors’ decision, we would promptly disclose the decision in a Current +Report on Form 8-K. The Form 8-K would include a full explanation of the process by which the decision of the Qualified Independent +Directors was reached and, if applicable, the reasons why the offer of resignation was rejected. +If +an offer of resignation were to be accepted, the Nominating/Corporate Governance Committee would recommend to the Board of Directors +whether to fill the vacancy or reduce the size of the Board of Directors accordingly. Any director required to submit his or her +resignation pursuant to this policy would not participate in the Nominating/Corporate Governance Committee’s recommendation +or the Qualified Independent Directors’ consideration of the resignation. Prior to voting on the director’s resignation +offer, the Qualified Independent Directors would provide to the director an opportunity to submit any information or statement +that he or she believes relevant to the Qualified Independent Directors’ consideration of the resignation. +For +purposes of this policy, “Qualified Independent Directors” means all directors who (1) are “independent” +for purposes of The Nasdaq Global Select Market listing standards and (2) are not required to offer their resignation in accordance +with this policy. If there are fewer than three independent directors then serving on the Board of Directors who are not required +to submit their resignations in accordance with this policy, then the Qualified Independent Directors shall consist of all of +the independent directors and each independent director who is required to offer his or her resignation in accordance with this +policy shall recuse himself or herself from the deliberations and voting only with respect to his or her individual offer to resign. +Committees +of the Board +Among +other committees, the Board of Directors has a standing Audit Committee, Compensation Committee, Nominating/Corporate Governance +Committee, and Corporate Social Responsibility Committee. Each committee has a written charter. The table below provides current +membership for each Board committee and the number of meetings held, and the number of actions taken by written consent, by each +Board committee in the 2019 Fiscal Year. +13 +Committees +of the Board of Directors +Director +Audit +Compensation +Nominating/ +Corporate +Governance +Corporate +Social +Responsibility +Edward +R. Rosenfeld +Al +Ferrara +Member +Mitchell +S. Klipper +Member +Member +Rose +Peabody Lynch +Member +Member +Peter +Migliorini +Chair +Chair +Richard +P. Randall +Chair +Member +Ravi +Sachdev +Member +Member +Thomas +H. Schwartz +Member +Robert +G. Smith +Member +Chair +Amelia +Newton Varela +Number +of Meetings in 2019 Fiscal Year +5* +2* +3* +1 +* In +the 2019 Fiscal Year, each of the Audit Committee and the Nominating/Corporate Governance +Committee acted by unanimous written consent on one occasion, and the Compensation Committee +acted by unanimous written consent on two occasions. +Audit +Committee +The +Audit Committee consists of directors who are “independent” for purposes of The Nasdaq Global Select Market listing +standards and who meet the independence requirements contained in Securities Exchange Act of 1934, as amended (the “Exchange +Act”) Rule 10A-3(b)(1). The Board has determined that each of Messrs. Randall, Ferrara, Klipper, and Sachdev meets the SEC +criteria of an “audit committee financial expert” as defined in Item 407 of Regulation S-K under the Exchange Act. +The Audit Committee is primarily responsible for reviewing the services performed by our independent registered public accountants, +evaluating our accounting policies and our system of internal controls, and reviewing significant financial transactions. +The +Audit Committee is responsible for reviewing and striving to ensure the integrity of our financial statements and oversight of +our compliance with legal and regulatory requirements and our internal audit function. Among other matters, the Audit Committee, +with management and independent and internal auditors, reviews the adequacy of our internal accounting controls that could significantly +affect our financial statements. The Audit Committee is also directly and solely responsible for the appointment, retention, compensation, +oversight and termination of our independent registered public accountants. In addition, the Audit Committee functions as our +Company’s Qualified Legal Compliance Committee (the “QLCC”). The purpose of the QLCC is to receive, retain and +investigate reports made directly, or otherwise made known, of evidence of material violations of any United States federal or +state law, including any breach of fiduciary duty by our Company or our officers, directors, employees or agents and, if the QLCC +believes appropriate, to recommend courses of action to us. +Management +has primary responsibility for our financial statements and the overall reporting process, including our system of internal controls. +Our independent registered public accountants audit our annual financial statements prepared by management, express an opinion +as to whether those financial statements present fairly our financial position, results of operations and cash flows in conformity +with accounting principles generally accepted in the United States of America and discuss with the Audit Committee any issues +they believe should be raised with the Audit Committee. +The +Audit Committee is also responsible for the oversight of our risk management process, which is discussed in the “Risk Oversight” +section below. +14 +In +performing its functions, the Audit Committee meets with management on at least a quarterly basis to review and discuss the annual +audited financial statements, quarterly financial statements and related reports and to consider the adequacy of our internal +controls and the objectivity of its financial reporting. The Audit Committee discusses these matters with our independent registered +public accountants and with appropriate Company financial personnel. Meetings are held with the independent registered public +accountants, who have unrestricted access to the Audit Committee. In addition, the Audit Committee reviews our financing plans +and reports and makes recommendations to the full Board of Directors for approval and to authorize action. The Board has adopted +a written charter setting out the functions the Audit Committee is to perform. A copy of the Audit Committee Charter is available +on our website at https://stevemadden.gcs-web.com . +Nominating/Corporate +Governance Committee +The +Nominating/Corporate Governance Committee consists of directors who are “independent” for purposes of The Nasdaq Global +Select Market listing standards. +The +Nominating/Corporate Governance Committee provides oversight with respect to a wide range of issues relating to the composition +and operation of the Board, including consideration of and recommendations regarding the size and composition of the Board of +Directors and identification of potential candidates to serve as directors. The Nominating/Corporate Governance Committee identifies +candidates to the Board of Directors by introductions from management, members of the Board of Directors, employees of our Company +or other sources, including stockholders that satisfy our policy regarding stockholder recommended candidates. The Nominating/Corporate +Governance Committee does not evaluate director candidates recommended by stockholders differently than director candidates recommended +by other sources. +Stockholders +wishing to submit recommendations for director nominations for the 2021 Annual Meeting should write to the Secretary, Steven Madden, +Ltd., 52-16 Barnett Avenue, Long Island City, New York 11104. Any such stockholder must (i) comply with the director nomination +provisions of our By-Laws, (ii) meet and evidence the minimum eligibility requirements specified in Exchange Act Rule 14a-8, and +(iii) submit, within the same timeframe for submitting a stockholder proposal required by Rule 14a-8: (1) evidence in accordance +with Rule 14a-8 of compliance with the stockholder eligibility requirements, (2) the written consent of the candidate(s) for nomination +as a director, (3) a resume or other written statement of the qualifications of the candidate(s) for nomination as a director +and (4) all information regarding the candidate(s) and the submitting stockholder that would be required to be disclosed in a +proxy statement filed with the SEC if the candidate(s) were nominated for election to the Board of Directors. +In +considering candidates for the Board of Directors, the Nominating/Corporate Governance Committee considers our Board of Director +Candidate Guidelines and Director Election (Majority Voting) Policy, available on our website at https://stevemadden.gcs-web.com , +our policy regarding stockholder recommended director candidates, as set forth above, and all other factors that it deems appropriate, +including the individual’s character, education, experience, knowledge and skills. While the Nominating/Corporate Governance +Committee’s Board of Directors Candidate Guidelines do not expressly identify diversity as a factor for consideration regarding +the evaluation of director candidates, diversity is among the many factors the Nominating/Corporate Governance Committee considers +in the candidate evaluation process. To assess the effectiveness of the mandate set forth in the Nominating/Corporate Governance +Committee’s charter, the Nominating/Corporate Governance Committee reviews annually with the Board the composition of the +Board as a whole and recommends, if necessary, measures to be taken so that the Board reflects the appropriate balance of knowledge, +experience, skills, expertise and diversity required for the Board as a whole. +In +addition, the Nominating/Corporate Governance Committee develops and recommends corporate governance principles for our Company; +makes recommendations to the Board of Directors in support of such principles; takes a leadership role in the shaping of the corporate +governance of our Company; and oversees the evaluation of the Board of Directors and management. The Nominating/Corporate Governance +Committee operates under a formal charter that governs the Committee’s composition, powers and responsibilities. A copy +of the Nominating/Corporate Governance Committee Charter is available on our website at https://stevemadden.gcs-web.com . +Compensation +Committee +The +Compensation Committee consists of directors who are “independent” for purposes of The Nasdaq Global Select Market +listing standards and applicable tax and securities law rules. +15 +The +Compensation Committee is responsible for establishing and overseeing our compensation and incentive plans and programs; determining +and approving compensation for our executive officers, including salaries, bonuses, perquisites and equity awards; reviewing and +approving compensation and awards for our executive officers under our compensation and incentive plans and programs; administering +our equity compensation plans; reviewing and approving a compensation program for independent members of the Board; and assisting +the Board in discharging the Board’s responsibilities relating to management organization, performance, compensation and +succession. The Compensation Committee operates under a formal charter adopted by the Board of Directors that governs its composition, +powers and responsibilities. A copy of the Compensation Committee Charter is available on our website at https://stevemadden.gcs-web.com . +Corporate +Social Responsibility Committee +The Corporate +Social Responsibility Committee consists of directors who are “independent” for purposes of The Nasdaq Global Select +Market listing standards. +The Corporate +Social Responsibility Committee is responsible for assisting the Board in its oversight of our initiatives, plans and practices +with respect to corporate social responsibility matters of significance to us and the communities in which we operate. Corporate +social responsibility matters include ethical and sustainable sourcing; human rights; the environment; supplier conduct; labor +conditions; climate change; diversity in employment; charitable giving; government relations; and political spending. The Committee’s +responsibility includes oversight of: +· managements +evaluation of risks and opportunities with respect to corporate social responsibility +matters; +· management’s +creation of key strategic initiatives, plans and practices with respect to corporate +social responsibility matters; +· our +governance of, and performance relative to, such key strategic initiatives; +· corporate +social responsibility reporting, stakeholder engagement, and transparency; and +· management’s +assessment of the identity and scope of matters comprising corporate social responsibility. +The Corporate Social Responsibility +Committee operates under a formal charter that governs the Committee’s composition, powers and responsibilities. A copy +of the Corporate Social Responsibility Committee Charter is available on our website at https://stevemadden.gcs-web.com . +Board +Leadership Structure, Risk Oversight, Executive Sessions of Non-Employee Directors, and Communications Between Stockholders and +the Board +Board +Leadership Structure +As +noted above, our Board currently comprises eight independent and two non-independent directors. +Mr. +Rosenfeld has served as Chairman of the Board and Chief Executive Officer since August 2008 and has been a member of the Board +since February 2008. The Board has designated one of the independent directors as Presiding Director to preside over executive +sessions. We believe that the number of independent, experienced directors who comprise our Board, along with the independent +oversight of our Presiding Director, benefits us and our stockholders. +We +recognize that different board leadership structures may be appropriate for companies in different situations and believe that +no one structure is suitable for all companies. We believe our current Board leadership structure is optimal for our Company because +it demonstrates to our employees, suppliers, customers, and other stakeholders that we are under strong leadership, with a single +person setting the tone and having primary responsibility for managing our operations and leading our Board in setting long-term +strategy. Having a single leader for both our Company and our Board eliminates confusion and duplication of efforts and provides +clear leadership for our Company. We believe our Company, like many U.S. companies, has been well-served by this leadership structure. +16 +Because +the positions of Chairman of the Board and Chief Executive Officer are held by the same person, the Board believes it is appropriate +for the independent directors to elect one independent director to serve as a Presiding Director. In addition to presiding at +executive sessions of the independent directors, the Presiding Director has responsibilities that include coordinating with the +Chairman of the Board and Chief Executive Officer in establishing agenda and discussion items for Board meetings; retaining independent +advisors on behalf of the Board as the Board may determine to be necessary or appropriate; and performing such other functions +as the independent directors may designate from time to time. Mr. Migliorini is currently serving as the Presiding Director. +Our +Board conducts an annual evaluation in order to determine whether it and its committees are functioning effectively. As part of +this annual self-evaluation, the Board evaluates whether the current leadership structure continues to be optimal for our Company +and our stockholders. +Risk +Oversight +Our +Board is responsible for overseeing our risk management process. It focuses on our general risk management strategy and the most +significant risks facing our Company and ensures that management implements appropriate risk mitigation strategies. Management +also apprises the Board of particular risk management matters in connection with its general oversight and approval of corporate +matters. +The +Board has delegated to the Audit Committee oversight of our risk management process. Among its duties, the Audit Committee reviews +with management (a) our policies with respect to risk assessment and management of risks that may be material to us, (b) our system +of disclosure controls and system of internal controls over financial reporting, and (c) our compliance with legal and regulatory +requirements. The Audit Committee is also responsible for reviewing major legislative and regulatory developments that could materially +impact our contingent liabilities and risks. Our other Board committees also consider and address risks as they perform their +respective committee responsibilities. All committees report to the full Board as appropriate, including when a matter rises to +the level of a material or enterprise level risk. +Our +management is responsible for day-to-day risk management. Our risk management and internal audit areas serve as the primary monitoring +and testing function for company-wide policies and procedures and manage the day-to-day oversight of the risk management strategy +for our ongoing business. This oversight includes identifying, evaluating, and addressing potential risks that may exist at the +enterprise, strategic, financial, operational, and compliance and reporting levels. +We +believe the division of risk management responsibilities described above is an effective approach for addressing the risks facing +us and that our Board leadership structure supports this approach. +Executive +Sessions of Independent Directors +The +Board holds executive sessions of its independent directors generally at each regularly scheduled meeting. The Presiding Director +serves as the chairperson for these executive sessions. +Communications +between Stockholders and the Board +We +have adopted a procedure by which stockholders may send communications to one or more members of the Board of Directors by writing +to such director(s) or to the entire Board of Directors in care of the Secretary, Steven Madden, Ltd., 52-16 Barnett Avenue, Long +Island City, New York 11104. The Board has instructed the Secretary of the Company to review all communications so received and +to exercise his discretion not to forward to the Board correspondence that is inappropriate, such as business solicitations, frivolous +communications and advertising, routine business matters (i.e. business inquiries, complaints, or suggestions) and personal grievances. +However, any director may at any time request that the Secretary forward to such director any and all communications received +by the Secretary but not forwarded to the directors. +17 +Codes +of Business Conduct and Ethics +We +have adopted a Code of Ethics for the Chief Executive Officer and Senior Financial Officers, which is applicable to our Chief +Executive Officer, Chief Financial Officer, controller, principal accounting officer, head of internal audit and other employees +who are designated from time to time as “senior financial officers.” In addition, the individuals who serve on our +Board of Directors are subject to a Code of Business Conduct and Ethics for the Board of Directors, and all of our employees are +held accountable for adherence to our Code of Conduct. Each of the Code of Ethics for the Chief Executive Officer and senior financial +officers and the Code of Business Conduct and Ethics for the Board of Directors is included as an exhibit to our Annual Report +on Form 10-K for the fiscal year ended December 31, 2014. The Code of Conduct applicable to all of our employees is an exhibit +to our Annual Report on Form 10-K for the fiscal year ended December 31, 2018. The Code of Ethics for the Chief Executive Officer +and senior financial officers, the Code of Business Conduct and Ethics for the Board of Directors and the Code of Conduct applicable +to all of our employees (collectively, the “Conduct Codes”) are available on our website at https://stevemadden.gcs-web.com +and may be obtained by any stockholder without charge upon request by writing to the Secretary, Steven Madden, Ltd., 52-16 +Barnett Avenue, Long Island City, New York 11104. The Conduct Codes are intended to establish standards necessary to deter wrongdoing +and to promote compliance with applicable governmental laws, rules and regulations and honest and ethical conduct. The Conduct +Codes cover all areas of professional conduct, including conflicts of interest, fair dealing, financial reporting and disclosure, +protection of our assets and confidentiality. Employees have an obligation to promptly report any known or suspected violation +of the Conduct Codes without fear of retaliation. Waiver of any provision of the Conduct Codes for executive officers and directors +may only be granted by the Board of Directors or the Nominating/Corporate Governance Committee, and we will disclose any such +waiver or modification of the Conduct Codes relating to such individuals. +Corporate +Governance Guidelines +The +Board of Directors has adopted Corporate Governance Guidelines as a set of guiding principles by which our Company is governed. +The Corporate Governance Guidelines address various matters of corporate governance such as board size and composition, director +qualifications and responsibilities, director compensation, limitations on service on other boards, board committees, director +orientation and education, director access to management, management development and succession planning, and annual performance +evaluations for the Board. They include a policy for the clawback of executive incentive compensation paid to senior executive +officers if there is an accounting restatement by our Company due to intentional misconduct of a senior executive officer. In +addition, in circumstances in which the Board of Directors believes it is appropriate, the clawback policy allows for the reimbursement, +forfeiture or cancellation of incentive compensation paid or awarded to a senior executive officer who has engaged in willful +misconduct in the performance of his or her duties that results in material financial harm or significant reputational harm to +us. +The +Nominating/Corporate Governance Committee reviews the Corporate Governance Guidelines annually to determine whether to recommend +changes to the Corporate Governance Guidelines to reflect new laws, rules and regulations and developing governance practices. +A copy of the Corporate Governance Guidelines may be obtained by any stockholder without charge upon request by writing to the +Secretary, Steven Madden, Ltd., 52-16 Barnett Avenue, Long Island City, New York 11104. +Stock +Ownership Guidelines +The +Board of Directors has adopted Stock Ownership Guidelines, which require a level of ownership of shares of our Common Stock by +our directors and executive officers in order to align their interests with those of our stockholders. The Stock Ownership Guidelines +require our Chief Executive Officer to own shares of our Common Stock equal in value to five times his annual base salary. Other +executive officers are required to own shares of our Common Stock equal in value to two times their annual base salary. The Stock +Ownership Guidelines further require that each non-employee director must own shares of our Common Stock equal in value to two +times the cash portion of the directors’ annual retainer or the equivalent if a retainer is not received in certain circumstances. +Individuals subject to the Stock Ownership Guidelines must attain the required level of share ownership by the fifth anniversary +of the later of the Stock Ownership Guidelines’ adoption date and the date that the individual became an executive officer +or director and must retain an amount equal to 25% of the net shares of our Common Stock received as a result of the exercise, +vesting or payment of any equity award we make until the share ownership requirement is satisfied. +18 +Prohibition +on Hedging and Pledging of Our Common Stock +Our +directors and executive officers and certain other persons designated from time to time by our Chief Financial Officer are prohibited +from entering into hedging transactions and from pledging our Common Stock pursuant to a formal policy concerning such activities +adopted by the Board of Directors. This policy does not apply to other employees of our Company. +Corporate +Social Responsibility Policy +We +are committed to operating our business in a socially responsible manner. We strive to incorporate this commitment into every +aspect of our business, including the design of our products, the quality, safety and sourcing of our products, the safety and +fair treatment of our employees, animal welfare and compliance with laws, including the Foreign Corrupt Practices Act and the +SEC’s Conflict Minerals rule. These guiding principles are set forth in our Corporate Social Responsibility Policy, and +we expect all of our employees to be familiar with and to adhere to them. We strive to do business with vendors and suppliers +that share our views and commitments to quality products and ethical business principles. We will only engage vendors and suppliers +that demonstrate a commitment to meeting our standards. Our Corporate Social Responsibility Committee assists the Board in its +oversight of management’s social responsibility obligations. +Certain +Relationships and Related Party Transactions +Steven +Madden Employment Agreement. We believe that Steven Madden, our founder and Creative and Design Chief, provides unique and +significant value in guiding the leadership of our creative process, both in his hands-on work for us and his collaboration with +our designers, product professionals and marketing executives. In addition, the public’s association of Mr. Madden’s +name and likeness with our branded products is significant, meaningful, and integral to our success and has been, and continues +to be, instrumental in creating long-term stockholder value. Based upon that belief, we further believe that his continuing involvement +with our Company is essential, and to this end, we have for many years had an employment agreement with Mr. Madden as described +below. +Mr. +Madden’s agreement in its current form dates back to July 1, 2005, as subsequently amended on various occasions, most recently +on March 25, 2019 (the “SM Agreement”). Under the SM Agreement, Mr. Madden has agreed to continue to serve as our +Creative and Design Chief for a term continuing through December 31, 2026, for a base salary of $7,026,042 per annum together +with the potential for cash bonuses at the sole discretion of our Board of Directors and an annual life insurance premium reimbursement +of up to $200,000. Pursuant to the SM Agreement, on February 8, 2012, Mr. Madden was granted 2,194,584 restricted shares of Common +Stock (as adjusted for our 2018 three-for-two stock split effected as a stock dividend), valued at approximately $40 million, +under our Amended and Restated 2006 Stock Incentive Plan, which is referred to herein as the “2006 Plan.” The restricted +stock vests in equal annual installments over seven years commencing on December 31, 2017 through December 31, 2023, subject to +Mr. Madden’s continued employment with our Company on each such vesting date. On June 30, 2012, as allowed under the SM +Agreement, Mr. Madden elected to receive an additional restricted stock award valued at approximately $40 million in consideration +of a reduction in his annual base salary in years after 2012 to the amount reflected above. As a consequence, on July 3, 2012, +Mr. Madden received 2,840,013 additional restricted shares of Common Stock vesting in six annual installments commencing on December +31, 2018 through December 31, 2023, subject to his continued employment with our Company on each such vesting date. +Under +the SM Agreement, Mr. Madden is also eligible to receive annually, on or about the date of our annual meeting of stockholders +(but not later than June 30), an option (the “Annual Option”) to purchase shares of Common Stock equal to the greater +of (a) 100% of the largest aggregate number of shares of Common Stock available upon the exercise of an option or options granted +to any other continuing full-time employee of our Company during the preceding twelve-month period or (b) 225,000 shares of Common +Stock; provided, however, that a grant to Mr. Madden in excess of 150% of the number of shares of Common Stock subject to options +granted to such other continuing full-time employee would require stockholder approval. Any Annual Option so granted vests quarterly +over a one-year period and is exercisable for a period of five years at a price equal to the closing price of our Common Stock +on the grant date. In addition, pursuant to the SM Agreement, on March 1, 2017, Mr. Madden received a one-time stock option grant +to purchase 1,125,000 shares of our Common Stock at an exercise price of $24.90 as a result of our having achieved for the fiscal +year ended December 31, 2016 earnings per share performance criteria set forth in the SM Agreement; such option vests in equal +annual installments over a five-year period, which commenced on the first anniversary of the grant date. +19 +Under +the SM Agreement, if Mr. Madden’s dies, his estate would receive a payment equal to his base salary for the 12-month period +immediately after the date of his death. Further, if Mr. Madden’s employment is terminated due to his total disability (as +defined in the agreement), “for cause” (as defined in the agreement) or due to Mr. Madden’s resignation, we +are obligated to pay Mr. Madden the amount of compensation that is accrued and unpaid through the date of termination. If Mr. +Madden’s employment is terminated for any reason (other than “for cause” or due to his death, total disability +or resignation), we are obligated to pay Mr. Madden, in installments, the balance of his base salary through the end of the term +of the SM Agreement. If, during the period commencing 120 days prior to a “change of control” transaction (as defined +in the SM Agreement) and ending on the first anniversary of a change of control transaction, Mr. Madden’s employment is +terminated other than for cause or by his resignation for “good reason” (as defined in the SM Agreement), or if Mr. +Madden resigns within 30 days following a change of control transaction, all unvested options held by Mr. Madden will be accelerated +and vest on the date of termination or resignation, and Mr. Madden will be entitled to receive a lump sum cash payment equal to +the amount of compensation that is accrued and unpaid through the date of termination plus $35 million. The SM Agreement contains +other customary provisions, including provisions regarding expense reimbursement, confidentiality, non-solicitation and non-competition. +For +the 2019 Fiscal Year, Mr. Madden earned $7,026,042 in base salary and received $200,000 for the payment of an annual life insurance +premium. Mr. Madden also received as his Annual Option for the 2019 Fiscal Year to purchase 225,000 shares of Common Stock at +a price per share of $30.14. +The +most recent amendment entered into on March 25, 2019, effected the extension of the term of the SM Agreement for three years through +December 31, 2026. In consideration of this extension, we have granted to Mr. Madden 200,000 shares of Common Stock under the +2006 Plan, which shares are subject to certain restrictions, including that he will not sell, transfer, pledge, hypothecate, assign +or otherwise dispose of the restricted shares except as set forth under the 2006 Plan or his award agreement. The shares will +vest in substantially equal annual installments over three years commencing on December 31, 2024, provided that Mr. Madden continues +to be employed by us on each vesting date through December 31, 2026. +Loan +to Steven Madden. On June 25, 2007, we made a loan to Mr. Madden in the amount of $3,000,000 to enable Mr. Madden to satisfy +a personal tax obligation resulting from the exercise of a stock option that was due to expire. The loan is evidenced by a secured +promissory note executed by Mr. Madden in our favor, the security for which is a certain securities brokerage account maintained +by Mr. Madden with his broker; none of the securities in the securities brokerage account are shares of Common Stock. There have +been successive amendments to the secured promissory note, the most recent of which occurred in April 2016. At that time the secured +promissory note was amended to substitute the collateral securing the secured promissory note from shares of our Common Stock +to the security interest in Mr. Madden’s securities brokerage account. Previously, on January 3, 2012, the secured promissory +note was amended and restated to extend the maturity date of the obligation to December 31, 2023 and eliminate the accrual of +interest after December 31, 2011. Prior to the January 3, 2012 amendment, the secured promissory note had been accruing interest +at the rate of 6% per annum. In addition, the secured promissory note provides that, commencing on December 31, 2014 and annually +on each December 31 thereafter through the maturity date, one-tenth of the principal amount thereof, together with accrued interest, +will be cancelled by us provided that we have employed Mr. Madden on each such December 31. Contemporaneously, on each such December +31, we will release our security interest in a portion of the securities held in Mr. Madden’s securities brokerage account +generally correlating to the amount of indebtedness cancelled on such date. As of December 31, 2011, interest in the amount of +$1,090,000 had accrued on the principal amount of the secured promissory note and, as noted above, interest was eliminated after +December 31, 2011. On December 31, 2019, we released Mr. Madden from his obligation to pay the required one-tenth of the original +principal amount of the secured promissory note, together with accrued interest. +Review, +Approval or Ratification of Transactions with Related Persons +Our +Conduct Codes and Employee Handbook prohibit all conflicts of interest. Under the Conduct Codes, conflicts of interest occur when +private or family interests interfere in any way, or even appear to interfere, with our interests. Our prohibition on conflicts +of interest under the Conduct Code includes any related person transaction. +20 +Related +person transactions must be approved by the Board, or by a committee of the Board consisting solely of independent directors, +who will approve the transaction only if they determine that it is in our best interests. In considering the transaction, the +Board or committee will consider all relevant factors, including, as applicable, (i) the business rationale for entering into +the transaction; (ii) the alternatives to entering into a related person transaction; (iii) whether the transaction is on terms +comparable to those available to third parties or, in the case of employment relationships, to employees generally; (iv) the potential +for the transaction to lead to an actual or apparent conflict of interest and any safeguards imposed to prevent such actual or +apparent conflicts; and (v) the overall fairness of the transaction to us. +We +have multiple processes for reporting conflicts of interest, including related person transactions. Under the Conduct Codes, all +employees are required to report any actual or apparent conflict of interest, or potential conflict of interest, to management. +The Chief Financial Officer distributes a questionnaire to our executive officers and management personnel quarterly and distributes +a questionnaire to the members of the Board of Directors annually requesting certain information regarding, among other things, +their immediate family members, employment and beneficial ownership interests, which information is then reviewed for any conflicts +of interest under the Conduct Code. +The +Board of Directors, the Audit Committee and the Disclosure Committee, which consists of management personnel, discuss the related +party transactions, specifically, and in connection with the regular review processes attendant to our periodic filings, including +related party transaction disclosures. +If +a director is a party to or in some manner involved in a transaction involving us, he or she will be recused from all discussions +and decisions about the transaction. The transaction must be approved in advance whenever practicable, and if not practicable, +must be ratified as promptly as practicable. +COMPENSATION +OF DIRECTORS IN THE 2019 FISCAL YEAR +The +Compensation Committee is responsible for establishing and overseeing all matters pertaining to compensation paid to directors +for service on the Board and its committees. +The +following table sets forth information concerning the compensation of our non-employee directors in the 2019 Fiscal Year. Following +the table is a discussion of material factors related to the information disclosed in the table. +Name +Fees +Earned or +Paid in Cash +($) +Stock +Awards +($)(1) +All +Other +Compensation +($) +Total +($) +Al Ferrara +36,620 +(2) +— +— +36,620 +Mitchell S. Klipper +89,167 +102,706 +(3) +— +191,873 +Peter Migliorini +100,000 +102,706 +(4) +— +202,706 +Richard P. Randall +120,000 +102,706 +(5) +— +222,706 +Ravi Sachdev +89,167 +102,706 +(6) +— +191,873 +Thomas H. Schwartz +85,000 +102,706 +(7) +— +187,706 +Rose Peabody Lynch +95,000 +102,706 +(8) +— +197,706 +Robert G. Smith +95,000 +102,706 +(9) +— +197,706 +(1) Reflects +the grant date fair value of stock awards calculated in accordance with the Financial +Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) +Topic 718. Assumptions used in the calculation of these amounts are included in Note +J to our audited financial statements for the fiscal year ended December 31, 2019 included +in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on +March 2, 2020. +(2) Mr. +Ferrara joined the Board of Directors on July 26, 2019, and therefore, did not receive +first or second quarter director fees. +(3) At +December 31, 2019, the aggregate number of shares of restricted Common Stock held by +Mr. Klipper was 3,965, all of which was issued in the 2019 Fiscal Year, and Mr. Klipper +had no options outstanding. +(4) At +December 31, 2019, the aggregate number of shares of restricted Common Stock held by +Mr. Migliorini was 3,965, all of which was issued in the 2019 Fiscal Year, and Mr. Migliorini +had no options outstanding. +(5) At +December 31, 2019, the aggregate number of shares of restricted Common Stock held by +Mr. Randall was 3,965, all of which was issued in the 2019 Fiscal Year, and Mr. Randall +had no options outstanding. +21 +(6) At +December 31, 2019, the aggregate number of shares of restricted Common Stock held by +Mr. Sachdev was 3,965, all of which was issued in the 2019 Fiscal Year, and Mr. Sachdev +had no options outstanding. +(7) At +December 31, 2019, the aggregate number of shares of restricted Common Stock held by +Mr. Schwartz was 3,965, all of which was issued in the 2019 Fiscal Year, and Mr. Schwartz +had no options outstanding. +(8) At +December 31, 2019, the aggregate number of shares of restricted Common Stock held by +Ms. Lynch was 3,965, all of which was issued in the 2019 Fiscal Year, and Ms. Lynch had +no options outstanding. +(9) At +December 31, 2019, the aggregate number of shares of restricted Common Stock held by +Mr. Smith was 3,965, all of which was issued in the 2019 Fiscal Year, and Mr. Smith had +no options outstanding. +Directors +who are also our employees are not paid any fees or other remuneration for service on the Board of Directors or any of its committees. +In the 2019 Fiscal Year, each non-employee director (other than Mr. Ferrara) received the following compensation for service on +the Board: (i) a grant of 3,965 shares of restricted Common Stock, vesting on the first anniversary of the grant date, June 3, +2020, and (ii) $75,000. +In +the 2019 Fiscal Year, members of the Audit Committee, Nominating/Corporate Governance Committee and Compensation Committee each +received an additional $10,000 for serving on such committees, except that (a) the Chairman of the Audit Committee received $35,000 +for serving in this role and (b) the Chairman of the Compensation Committee received $15,000, instead of $10,000. We reimburse +our directors for any out-of-pocket expenses incurred by them in connection with services provided in such capacity. +STOCK +OWNERSHIP +Security +Ownership of Certain Beneficial Owners +The +following table sets forth information as of March 20, 2020 (unless otherwise indicated) with respect to the beneficial ownership +of our Common Stock by each person known by us to be the beneficial owner of more than 5% of the outstanding shares of our Common +Stock. A person is deemed to be a beneficial owner of any securities that that person has the right to acquire within 60 days. +Name +and Address of Beneficial Owner +Amount +and +Nature of +Beneficial +Ownership (1) +Percentage +of Class +BlackRock Inc. +55 +East 52 nd Street +New +York, NY 10055 +12,191,095 +14.55 +%(2) +The Vanguard Group +100 +Vanguard Boulevard +Malvern, +Pennsylvania 19355 +7,966,888 +9.51 +%(3) +Steven Madden +c/o +Steven Madden, Ltd. +52-16 +Barnett Avenue +Long +Island City, NY 11104 +5,454,222 +6.56 +%(4) +(1) Beneficial +ownership as reported in the table below has been determined in accordance with Item +403 of Regulation S-K and Rule 13d-3 of the Exchange Act and based upon 83,134,060 shares +of Common Stock outstanding (excluding treasury shares) as of March 20, 2020. +(2) Based +solely on a Statement on Schedule 13G filed with the SEC on February 4, 2020 by BlackRock, +Inc. (“BlackRock”), BlackRock has sole voting power with respect to 11,964,668 +of such shares and sole dispositive power with respect to all such shares. +22 +(3) Based +solely on a Statement on Schedule 13G filed with the SEC on February 12, 2020 by The +Vanguard Group (“Vanguard”), Vanguard has sole voting power with respect +to 175,046 of such shares, shared voting power with respect to 17,827 of such shares, +sole dispositive power with respect to 7,784,339 of such shares and shared dispositive +power with respect to 182,549 of such shares. +(4) Mr. +Madden’s beneficial ownership includes: (i) 3,347,390 shares of restricted Common +Stock granted under the 2006 Plan (which restricted stock includes (A) 1,254,048 shares +which will vest in equal annual installments over five years commencing on December 31, +2019 through December 31, 2023, (B) 1,893,342 shares which will vest in equal annual +installments over five years commencing on December 31, 2019 through December 31, 2023 +and (C) 200,000 shares which will vest in substantially equal annual installments over +three years commencing on December 31, 2024, in each case subject to forfeiture pursuant +to the terms of the 2006 Plan and of Mr. Madden’s employment agreement, as amended); +(ii) 1,518,750 shares of Common Stock that may be acquired through the exercise of options +that are exercisable as of, or will become exercisable within 60 days of, March 20, 2020; +and (iii) 588,082 shares of Common Stock held by Mr. Madden directly. +Security +Ownership of Directors and Executive Officers +The +following table sets forth information as of March 20, 2020 (unless otherwise indicated) with respect to the beneficial ownership +of Common Stock held by (a) each current director and nominee; (b) our Chief Executive Officer, our Chief Financial Officer and +our three most highly compensated executive officers other than the Chief Executive Officer and the Chief Financial Officer (the +“Named Executive Officers”); and (c) all current directors and executive officers as a group. A person is deemed to +be a beneficial owner of any securities which that person has the right to acquire within 60 days. Each director and executive +officer has sole voting power and sole dispositive power with respect to all shares beneficially owned by him or her. +Name +of Beneficial Owner (1) +Amount +and +Nature of +Beneficial +Ownership (2) +Percentage +of Class +Edward R. Rosenfeld +969,947 +1.2 +%(3) +Amelia Newton Varela +165,657 +* +(4) +Arvind Dharia +87,107 +* +(5) +Awadhesh Sinha +77,960 +* +(6) +Karla Frieders +100,761 +* +(7) +Al Ferrara +1,000 +* +Mitchell S. Klipper +7,358 +* +(8) +Rose Peabody Lynch +8,469 +* +(9) +Peter Migliorini +11,204 +* +(10) +Richard P. Randall +34,565 +* +(11) +Ravi Sachdev +61,938 +* +(12) +Thomas H. Schwartz +11,053 +* +(13) +Robert Smith +11,652 +* +(14) +All Directors and Executive Officers as +a Group (13 persons) +1,548,671 +1.9 +%(15) +* Indicates +beneficial ownership of less than 1%. +(1) The +address for each of the individuals named above is c/o Steven Madden, Ltd., 52-16 Barnett +Avenue, Long Island City, New York 11104. +(2) Beneficial +ownership as reported in the table above has been determined in accordance with Item +403 of Regulation S-K and Rule 13d-3 of the Exchange Act and based upon 83,134,060 shares +of Common Stock outstanding (excluding treasury shares) as of March 20, 2020. +(3) Mr. +Rosenfeld’s beneficial ownership includes: (i) 458,475 shares of restricted Common +Stock; and (ii) 511,472 shares of Common Stock held by Mr. Rosenfeld. +23 +(4) Ms. +Varela’s beneficial ownership includes: (i) 114,113 shares of restricted Common +Stock; and (iii) 51,544 shares of Common Stock held by Ms. Varela. +(5) Mr. +Dharia’s beneficial ownership includes: (i) 6,250 shares of restricted Common Stock; +and (ii) 80,857 shares of Common Stock held by Mr. Dharia. +(6) Mr. +Sinha’s beneficial ownership includes: (i) 12,429 shares of restricted Common Stock; +and (ii) 65,531 shares of Common Stock held by Mr. Sinha. +(7) Ms. +Frieders’ beneficial ownership consists of (i) 41,863 shares of restricted Common +Stock; and (ii) 58,898 shares of Common Stock held by Ms. Frieders. +(8) Mr. +Klipper’s beneficial ownership consists of (i) 3,965 shares of restricted Common +Stock; and (ii) 3,393 shares of Common Stock held by Mr. Klipper. +(9) Ms. +Lynch’s beneficial ownership consists of (i) 3,965 shares of restricted Common +Stock; and (ii) 4,504 shares of Common Stock held by Ms. Lynch. +(10) Mr. +Migliorini’s beneficial ownership includes: (i) 3,965 shares of restricted Common +Stock; and (ii) 7,239 shares of Common Stock held by Mr. Migliorini. +(11) Mr. +Randall’s beneficial ownership includes: (i) 3,965 shares of restricted Common +Stock; and (ii) 30,600 shares of Common Stock held by Mr. Randall. +(12) Mr. +Sachdev’s beneficial ownership includes: (i) 3,965 shares of restricted Common +Stock; and (ii) 57,973 shares of Common Stock held by Mr. Sachdev. +(13) Mr. +Schwartz’s beneficial ownership includes: (i) 3,965 shares of restricted Common +Stock; and (ii) 7,088 shares of Common Stock held by Mr. Schwartz. +(14) Mr. +Smith’s beneficial ownership includes: (i) 3,965 shares of restricted Common Stock; +and (ii) 7,687 shares of Common Stock held by Mr. Smith. +(15) Includes, +in the aggregate, (i) 660,885 shares of restricted Common Stock; and (iii) 887,786 shares +of Common Stock held by such beneficial owners. +EXECUTIVE +COMPENSATION +Compensation +Discussion and Analysis +Executive +Summary +This +Compensation Discussion and Analysis describes the overall principles and objectives and specific features of our executive compensation +program, primarily focused on the executive compensation program’s application to our Chief Executive Officer and our other +executive officers included in the Summary Compensation Table, whom we refer to collectively in this Proxy Statement as the “Named +Executive Officers.” +Over +the last ten years our stock price has increased at an annual rate of 18.1% after adjusting for stock splits. Our 2019 year-end +stock price increased 42.1% from our 2018 year-end stock price. Including the effect of dividends, total stockholder return increased +46.1%. This resulted in a one-year total stockholder return at the 77 th percentile as compared with our peer group +for 2019. +In +February 2018, our Board of Directors approved our first quarterly cash dividend on outstanding Common Stock as part of our cash +deployment strategy to drive stockholder value and enhance stockholder returns. We paid quarterly cash dividend of $0.13 per share +on each of March 29, 2018, June 29, 2018 and September 28, 2018, a quarterly cash dividend of $0.14 per share on each of December +31, 2018, March 29, 2019, June 28, 2019, and September 27, 2019, and a $0.15 quarterly cash dividend on December 27, 2019. +24 +During +2019, our Company delivered solid financial results, driven by the strong performance of our flagship Steve Madden brand in both +domestic and international markets as well as strong growth in Steve Madden and private label handbags. Total revenue for the +2019 Fiscal Year increased by 6.5% to $1.8 billion from $1.7 billion in the year ended December 31, 2018. Net income was $141.3 +million, or $1.69 per diluted share, for the 2019 Fiscal Year as compared to net income of $129.1 million, or $1.50 per diluted +share, for the year ended December 31, 2018. On an adjusted basis, net income was $162.8 million, or $1.95 per diluted share, +for the 2019 Fiscal Year as compared to adjusted net income of $157.7 million, or $1.83 per diluted share, for the year ended +December 31, 2018. 1 +Reflecting +our financial and stock price performance in 2019, overall Named Executive Officer bonus awards, which are paid in the form of +both cash and time-vested restricted stock grants, decreased from the previous year. The principal reason for the decrease was +the lower rate of earnings growth in 2019 as compared to 2018. Because our general practice is to award bonuses and grant equity +based on Named Executive Officer performance for the preceding year, we believe that we are able to maintain relative alignment +between pay and performance. +Compensation +Objectives and Strategy +Our +executive officer compensation program is designed to attract and retain the caliber of officers needed to ensure our continued +growth and profitability and to reward them for their performance, for our performance and for creating long-term value for our +stockholders. The primary objectives of the program are to: +· align +rewards with performance that creates stockholder value; +· support +our strong team orientation; +· encourage +high-potential team players to build a career at our Company; and +· provide +rewards that are cost-efficient, competitive with other similarly positioned organizations +and fair to employees and stockholders. +Our +executive compensation programs are approved and administered by the Compensation Committee of the Board of Directors. Working +with management and outside advisors, the Compensation Committee has developed a compensation and benefits strategy that rewards +performance and reinforces a culture that the Compensation Committee believes will drive long-term success. +The +compensation program rewards team accomplishments while promoting individual accountability. The executive officer compensation +program depends in significant measure on our results, but business unit results and individual accomplishments are also very +important factors in determining each executive’s compensation. We have a robust planning and goal-setting process that +is fully integrated into the compensation system, enhancing a strong relationship among individual efforts, Company results and +financial rewards. +A +major portion of total compensation is placed at risk through annual and long-term incentives. As noted below, we also paid discretionary +bonuses to the Named Executive Officers. The combination of incentives is designed to balance annual operating objectives and +Company earnings performance with longer-term stockholder value creation. +To +implement our primary objectives, we seek to provide competitive compensation that is commensurate with performance. We target +compensation at the median of the market and calibrate both annual and long-term incentive opportunities to generate less-than-median +awards when goals are not fully achieved and greater-than-median awards when goals are exceeded. +We +believe that there is great value to our Company in having a team of long-tenured, seasoned managers and seek to promote a long-term +commitment from our senior executives. Our team-focused culture and management processes are designed to foster this commitment. +In addition, restricted Common Stock awards granted to Named Executive Officers in the 2019 Fiscal Year reinforce this long-term +orientation with annual vesting over four to five years. +1 +A reconciliation of adjusted results is included in Annex A to this Proxy Statement. +25 +Role +of the Compensation Committee +General. +The Compensation Committee provides overall guidance for our executive compensation policies and determines the amounts and +elements of compensation for our executive officers and outside directors. The Compensation Committee currently consists of four +members of the Board of Directors, Ms. Lynch and Messrs. Migliorini, Schwartz and Smith, each of whom is an independent director +under Rule 5605 of The Nasdaq Global Select Market listing standards and a “non-employee director” as defined under +the SEC’s rules. +When +considering decisions concerning the compensation of executives, other than the Chief Executive Officer, the Compensation Committee +asks for the recommendations of the Chief Executive Officer, including his detailed evaluation of each executive’s performance. +No executive has a role in recommending compensation for outside directors. With respect to the application of our incentive compensation +plans to non-employee directors, the Board of Directors functions as the Compensation Committee. +Use +of Outside Advisors. In making its determinations with respect to executive compensation, the Compensation Committee has historically +engaged the services of an independent compensation consulting firm. The Compensation Committee has retained the services of Arthur +J. Gallagher & Co.’s Human Resources & Compensation Consulting Practice (“Gallagher”) since 2005 to +assist with its review of the compensation packages and employment agreements of the Chief Executive Officer and other executive +officers. In 2019 and 2020, Gallagher worked with the Compensation Committee to assess the reasonableness of discretionary cash +bonus payments and equity grants to Messrs. Rosenfeld, Dharia and Sinha and Mses. Frieders and Varela based on our and the individual’s +performance in the 2019 Fiscal Year and the reasonableness of the terms of new employment agreements for Ms. Varela and Mr. Sinha +as compared with comparable positions in the peer group listed below. Executive compensation for the Named Executive Officers +was based on employment agreements with pay structures and levels guided by Gallagher’s market studies just prior to the +consummation of the agreements. Gallagher completed position-specific market studies at the time of the employment agreement extensions +in support of the design of these agreements. The Compensation Committee also consulted Gallagher with respect to the establishment +of a performance-based bonus pool based on a percentage of our net income in the 2019 Fiscal Year. Gallagher provides only executive +compensation consulting services and works with management only at the behest of the Compensation Committee. +The +Compensation Committee retains Gallagher directly, although in carrying out assignments, Gallagher also interacts with our management, +when necessary and appropriate, in order to obtain compensation and performance data for us and our executives. In addition, Gallagher +may, in its discretion, seek input and feedback from management regarding its consulting work product for the Compensation Committee +in order to confirm alignment with our business strategy and identify data questions or other similar issues, if any, prior to +completion of a project for the Compensation Committee. +Independence +of Outside Advisors. The Compensation Committee has the sole authority to retain, terminate, approve the fees and set the +terms of our relationship with any outside advisors who assist the Committee in carrying out its responsibilities. It may select +or receive advice from any compensation consultant or other advisor only after taking into consideration all factors relevant +to the consultant’s independence from management, including the factors set forth in Nasdaq rules. +Accordingly, +the Compensation Committee reviews annually its relationship with Gallagher to ensure its independence on executive compensation +matters. Prior to selecting and receiving advice from Gallagher with respect to executive compensation in the 2019 Fiscal Year, +the Compensation Committee reviewed Gallagher’s independence and that of Gallagher’s individual representatives who +served as the Committee’s advisors. The Compensation Committee determined that no conflicts of interest exist between us +and Gallagher or its representatives. In reaching such determination, the Compensation Committee considered, among other things, +the following factors: (i) that Gallagher provides no services to us other than executive compensation consulting services; (ii) +the fees paid by us to Gallagher as a percentage of Gallagher’s total revenue; (iii) the representations by Gallagher as +to its policies and procedures that are designed to prevent a conflict of interest; (iv) any business or personal relationships +between the individual representatives of Gallagher who advised the Compensation Committee and any member of the Compensation +Committee; and (v) any business or personal relationships between our executive officers and Gallagher or its individual representatives. +26 +Consideration +of 2019 Stockholder Say-on-Pay Vote. At our 2019 Annual Meeting of Stockholders, our stockholders overwhelmingly +approved, on an advisory basis, the compensation of our Named Executive Officers (97% of votes cast). This continues the string +of 94% or higher approvals that began with the initial say-on-pay vote in 2011. The Compensation Committee believes this level +of stockholder support reflects a very strong endorsement of our compensation policies and decisions. The Compensation Committee +has considered the results of this advisory vote on executive compensation in determining our compensation policies and decisions +for 2020 and has determined that these policies and decisions are appropriate and in our best interests and those of our stockholders +at this time. +Compensation +Structure +Pay +Elements - Overview +We +use four main components of compensation: +· base +salary; +· annual +performance-based bonuses; +· long-term +equity incentives (consisting of stock options and restricted stock); and +· benefits +and perquisites. +Pay +Elements - Details +Base +Salary . We paid base salaries to each of the Named Executive Officers to provide them with fixed pay commensurate with the +Named Executive Officer’s role and responsibilities, experience, expertise and individual performance. As more fully described +in the section of this Proxy Statement captioned “Employment Arrangements,” as of December 31, 2019, we had employment +agreements with each of the Named Executive Officers. The Compensation Committee, as constituted at the time the parties entered +into the employment agreements or any amendments thereof, reviewed and approved the salary established in each such agreement +or amendment. The Compensation Committee considered each employee’s salary history, value in the marketplace and performance +(including at our Company and previous employment). +The +annual base salary of our Chief Executive Officer, Edward R. Rosenfeld, was fixed at $945,000 for the 2019 Fiscal Year under his +employment agreement, which remains in effect until December 31, 2021. His 2018 employment agreement provides him with an annual +base salary of $992,250 for the year ending December 31, 2020 and $1,041,863 for the year ending December 31, 2021. The annual +base salary of our President, Amelia Newton Varela, was fixed at $670,000 for the year ended December 31, 2019 under an employment +agreement dated December 30, 2016, which expired on December 31, 2019. Ms. Varela’s new employment agreement, dated December +27, 2019, which remains in effect until December 31, 2022, provides her with an annual base salary of $700,000 for the year ending +December 31, 2020, $725,000 for the year ending December 31, 2021, and $750,000 for the year ending December 31, 2022. The annual +base salary of our Chief Operating Officer, Awadhesh Sinha, was fixed at $723,000 for the year ended December 31, 2019 under an +employment agreement dated December 30, 2016, which expired on December 31, 2019. Mr. Sinha’s new employment agreement, +dated December 27, 2019, which remains in effect until December 31, 2021, provides him with an annual base salary of $745,000 +for the year ending December 31, 2020, and $767,000 for the year ending December 31, 2021. Under the employment agreement, as +amended, of our Chief Financial Officer, Arvind Dharia, which remains in effect until December 31, 2020, Mr. Dharia’s annual +base salary was $611,578 for the year ended December 31, 2019 and is $642,157 for the year ending December 31, 2020. Our Chief +Merchandising Officer, Karla Frieders, began the 2019 Fiscal Year with an annual base salary of $570,000 under an employment agreement +dated April 11, 2017, which remains in effect through April 30, 2020, and provides Ms. Frieders with an annual base salary of +$590,000 from May 1, 2019 through April 30, 2020. Please see the section of this Proxy Statement captioned “Summary Compensation +Table” and “Employment Arrangements” for a more detailed description of their employment agreements and compensation. +The 2020 salary increases, if any, for our Named Executive Officers, as reflected in the following table, are generally consistent +with those of other management employees. +27 +Named Executive Officer +2019 Salary +2020 Salary +Edward R. Rosenfeld +$ 943,961 +$ 992,250 +Amelia Newton Varela +$ 669,538 +$ 700,000 +Arvind Dharia +$ 611,321 +$ 642,157 +Awadhesh Sinha +$ 724,220 +$ 745,000 +Karla Frieders +$ 583,875 * +$ 590,000 * +Annual +Performance-based Bonus - Based on Specific Performance Metrics . Annual performance-based cash bonuses, if any, for Named +Executive Officers are established in their respective employment agreements. The Compensation Committee reviewed and approved +the bonus provisions fixed in each such employment agreement at the time the parties entered into such agreements and any amendments +thereof. Such bonus provisions generally provide for variable or discretionary bonuses designed to reward attainment of business +goals. +Mr. +Sinha’s prior employment agreement entitled him to an annual performance-based bonus for the 2019 Fiscal Year in an amount +equal to 2% of the increase in our EBITDA for that year over our EBITDA for the immediately preceding year. For any business acquired +after December 30, 2016, EBITDA from the acquired business was included in the bonus calculation starting with the first full +quarter under our ownership, provided that the prior year’s EBITDA was likewise adjusted to include EBITDA from the acquired +business for comparable quarters in the prior year on a pro forma basis assuming we had owned the business. His maximum annual +bonus was $600,000, the first $300,000 of which was payable in cash and for any amount of the annual bonus in excess of $300,000 +by a grant of restricted shares of Common Stock, which vests in three equal annual installments commencing on the first anniversary +of the grant date. For the 2019 Fiscal Year, on March 13, 2020, Mr. Sinha received an annual performance-based cash bonus of $200,000, +reflecting 2% of $6,794,739, the increase in 2019 EBITDA over that of 2018 (after excluding EBITDA relating to certain business +acquisitions) and an additional discretionary bonus of $64,105. +Ms. +Varela’s prior employment agreement entitled her to an annual performance-based cash bonus for the 2019 Fiscal Year in an +amount equal to 2% of the increase in our total EBIT for that year over our EBIT for the immediately preceding year, less any +deductions as shall be required to be withheld by any applicable laws or regulations. EBIT attributable to any business acquired +by us after December 30, 2016 was not included in the calculation of this bonus. For the 2019 Fiscal Year, on March 13, 2020, +Ms. Varela received an annual performance-based cash bonus of $182,006, reflecting 2% of $9,100,278, the increase in 2019 EBIT +over that of 2018 (after excluding EBIT relating to certain business acquisitions). +As +provided in the 2006 Plan and the 2019 Plan, the maximum payment that may be made to an individual under any performance-based +cash award during any fiscal year and subject to the attainment of specified performance goals is $10,000,000. The Compensation +Committee may, in its sole discretion, elect to pay an individual an amount that is less than the individual’s target award +regardless of the degree of attainment of the performance goals. +For +the 2019 Fiscal Year, the Compensation Committee established a bonus pool for Named Executive Officers and our other key +executives based on 6% of our net income achieved in the 2019 Fiscal Year. Net income was selected because it is highly +correlated with stock price performance. The Compensation Committee also fixed for each executive his or her maximum share of +the 2019 bonus pool, which was 30% for Mr. Rosenfeld and 14% for each of the other Named Executive Officers. In the 2019 +Fiscal Year, we achieved net income of $141,311,000, which resulted in a bonus pool of $8,478,660. The Compensation Committee +determined to pay a bonus to Mr. Rosenfeld in an amount in excess of his individual target award and bonuses to certain of +the other Named Executive Officers in amounts that were below their individual target awards for the 2019 Fiscal Year and to +pay the bonus to Mr. Rosenfeld in a combination of cash and restricted shares of Common Stock that vest annually over five +years. Accordingly, on March 13, 2020, we paid performance-based cash bonuses of $500,000, $200,000 and $100,000 to Mr. +Rosenfeld, Mr. Dharia and Ms. Frieders, respectively, and, on March 16, 2020, we paid performance-based bonuses in the form +of restricted stock to one of our Named Executive Officers as indicated in the following table. +* As noted above, Ms. +Frieders began the 2019 Fiscal Year with an annual base salary of $570,000. Her annual base salary increased to $590,000 for the +period May 1, 2019 through April 30, 2020. +28 +Named +Executive Officer +2020 +Restricted +Stock Grant +Value for 2019 +Performance +Number +of +Shares of +Restricted Stock +Awarded * +Annual +Vesting +Edward R. Rosenfeld +$ +3,000,000 +108,030 +5 +years +Amelia Newton Varela +— +— +— +Arvind Dharia +— +— +— +Awadhesh Sinha +— +— +— +Karla Frieders +$ +— +— +— +* In +accordance with applicable SEC rules, the Summary Compensation Table included in this +Proxy Statement does not report the grant date fair value of these restricted stock awards +because, while earned in 2018, the grants were not made until after the close of the +2018 Fiscal Year. The 2019 Summary Compensation Table to be included in our proxy statement +for our 2020 Annual Meeting of Stockholders will contain the grant date fair value of +these restricted stock awards provided these individuals are named executive officers +in that proxy statement. +The +decision to pay cash bonuses to Messrs. Rosenfeld and Dharia and Ms. Frieders and to award restricted shares of Common Stock to +Mr. Rosenfeld for the 2019 Fiscal Year and the amount of each such Named Executive Officer’s bonus was determined at the +discretion of the Compensation Committee. These payments were within the parameters of the bonus pool for Named Executive Officers, +with the exception of Mr. Rosenfeld who received in cash and restricted shares equal to 43% of the 2019 bonus pool. The Compensation +Committee evaluated a variety of indicators of our overall financial performance, including total shareholder return, operating +income, earnings per share and return on invested capital, and assessed and made subjective judgments as to each executive’s +individual contribution towards our performance in the 2019 Fiscal Year in determining whether to pay bonuses to them and establishing +the amounts to be paid. With respect to the determination to award bonuses to Mr. Dharia and Ms. Frieders, the Compensation Committee +also considered the recommendations of our Chief Executive Officer, Mr. Rosenfeld. +The +Compensation Committee consulted Gallagher regarding the establishment of the bonus pool and the individual target awards for +the 2019 Fiscal Year to ensure the bonus pool and the individual target awards were within market range for each executive. +Long-term +Equity Incentives . Management and the Compensation Committee believe that equity-based awards are an important factor in aligning +the long-term financial interest of the executive officers and stockholders. The Compensation Committee continually evaluates +the use of equity-based awards and intends to continue to use such awards in the future as part of designing and administering +our compensation program. Beginning in 2006, the Compensation Committee modified its prior practice of granting equity incentives +solely in the form of stock options and included periodic awards of restricted stock in order to grant awards that contain both +substantial incentive and retention characteristics. These awards are designed to provide emphasis on preserving stockholder value +generated in recent years while providing significant incentives for continuing growth in stockholder value. +In +the 2019 Fiscal Year, we made grants of 91,547 and 15,258 restricted shares of Common Stock to Mr. Rosenfeld and Ms. Frieders, +respectively, for performance in the fiscal year ended December 31, 2018. The restricted stock awards made to Mr. Rosenfeld and +Ms. Frieders vest in five equal annual installments. Gallagher reviewed the individual grant values relative to market practice. +These equity awards in the 2019 Fiscal Year were made under the 2006 Plan. +The +Committee intends to continue to review the equity mix to achieve the ideal incentive for both performance and retention. With +respect to stock options, the 2019 Plan provides generally that the exercise price shall be the fair market value of our Common +Stock at the time of grant, which is defined for purposes of the 2019 Plan to mean the closing price reported for the Common Stock +on the applicable date (a) as reported on the principal national securities exchange on which it is then traded or (b) if not +traded on any such national securities exchange, the last sale price quoted in the principal over-the-counter market on which +the Common Stock is quoted. +29 +Other +Benefits and Perquisites . Our executive compensation program also includes other benefits and perquisites. These benefits +and perquisites include annual matching contributions to executive officers’ 401(k) plan accounts, company-paid medical +benefits, automobile allowances and leased automobiles and life insurance coverage. The Compensation Committee annually reviews +these other benefits and perquisites and makes adjustments as warranted based on competitive practices, our performance and the +individual’s responsibilities and performance. The Compensation Committee has approved these other benefits and perquisites +as a reasonable component of our executive officer compensation program. Please see the section of this Proxy Statement captioned +“Summary Compensation Table” and, specifically, the column entitled “All Other Compensation” and the corresponding +footnotes. +Pay +Mix +We +use the particular elements of compensation described above because we believe that it provides a well-proportioned mix of secure +compensation, retention value and at-risk compensation, which produces short-term and long-term performance incentives and rewards. +By following this approach, we provide the executives a measure of security in the minimum expected level of compensation, while +motivating the executives to focus on business metrics and other variables within their particular sector that will increase sales +and margins and at the same time lower costs so as to produce a high level of short-term and long-term performance for us and +long-term wealth creation for the executives, as well as reducing the risk of recruitment of top executive talent by competitors. +The mix of metrics used for the annual performance bonuses and our long-term incentive program likewise provides an appropriate +balance between short-term financial performance and long-term stock performance. +For +the Named Executive Officers, the mix of compensation is weighted heavily toward at-risk pay (annual incentives and long-term +incentives). Maintaining this pay mix results fundamentally in a pay-for-performance orientation for our executives, which is +aligned with our stated compensation philosophy of providing compensation commensurate with performance. +Pay +Levels and Benchmarking +Pay +levels for our executives are determined based on several factors, including the individual’s roles and responsibilities +within our Company, the individual’s experience and expertise, the pay levels for peers within our Company, pay levels in +the marketplace for similar positions, and performance of the individual and our Company as a whole. The Compensation Committee +is responsible for approving pay levels for the Named Executive Officers. In determining the pay levels, the Compensation Committee +considers all forms of compensation and benefits. +The +Compensation Committee assesses “competitive market” compensation using several sources. The primary data source used +in setting competitive market levels for the Named Executive Officers is the information publicly disclosed by a peer group of +our Company, which is reviewed annually and may change from year to year. For the 2019 Fiscal Year, the Compensation Committee +reviewed executive compensation and compensation design for the purpose of assessing bonus awards in early 2019 in the context +of overall compensation and in relation to the following peer companies: +Caleres, +Inc. +G-III +Apparel Group, Ltd. +Shoe Carnival, +Inc. +Cato Corp. +Genesco, Inc. +Skechers U.S.A. Inc. +Crocs, Inc. +Guess, Inc. +Under Armour, Inc. +Deckers Outdoor Corp. +Lululemon Athletica, +Inc. +Wolverine World Wide, +Inc. +Designer Brands, Inc. +Oxford Industries, +Inc. +30 +The +market capitalization and trailing twelve months revenue of our Company and each peer company follows: +Company +Market +Cap* +TTM +Revenue** +Steven Madden, Ltd. +$ +3.62 +B +$ +1.77 +B +Caleres, Inc. +$ +0.96 B +$ +2.92 B +Cato Corp. +$ +0.43 B +$ +0.83 B +Crocs, Inc. +$ +2.87 B +$ +1.23 B +Deckers Outdoor Corp. +$ +4.72 B +$ +2.15 B +Designer Brands, Inc. +$ +1.13 B +$ +3.50 B +G-III Apparel Group, Ltd. +$ +1.60 B +$ +3.16 B +Genesco, Inc. +$ +0.70 B +$ +2.20 B +Guess, Inc. +$ +1.47 B +$ +2.68 B +Lululemon Athletica, Inc. +$ +30.19 B +$ +3.75 B +Oxford Industries, Inc. +$ +1.29 B +$ +1.12 B +Shoe Carnival, Inc. +$ +0.53 B +$ +1.04 B +Skechers U.S.A. Inc. +$ +6.77 B +$ +5.22 B +Under Armour, Inc. +$ +9.20 B +$ +5.27 B +Wolverine World Wide, Inc. +$ +2.73 B +$ +2.27 B +* Market +capitalization is as of 12/31/2019. +** TTM +is last four quarters of publicly reported revenue. +After +consideration of the data collected on external competitive levels of compensation and internal needs, the Compensation Committee +makes decisions regarding the Named Executive Officer’s target total compensation opportunities based on the need to attract, +motivate and retain an experienced and effective management team. Relative to the competitive market data, the Compensation Committee +generally intends that the base salary and target annual incentive compensation for each Named Executive Officer will be at the +median of the competitive market. +As +noted above, notwithstanding our overall pay positioning objectives, pay opportunities for specific individuals vary based on +factors such as scope of duties, tenure, institutional knowledge and difficulty in recruiting a new executive. Actual total compensation +in a given year will vary above or below the target compensation levels based primarily on the attainment of operating goals and +the creation of stockholder value. +Compensation +Committee Discretion +The +Compensation Committee retains the discretion to decrease all forms of incentive payouts based on significant individual or Company +performance shortfalls, with the exception of any such payouts that are to be made pursuant to contractual commitments, such as +the bonuses that may be paid to Mr. Sinha and Ms. Varela. Similarly, the Compensation Committee retains the discretion to increase +payouts and consider special awards for significant achievements, including, but not limited to, superior asset management, investment +or strategic accomplishments, consummation of acquisitions or divestitures, capital improvements to existing properties, or sales +made by certain of our divisions. +Pay +Ratio +As +required by the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), the following disclosure +provides the relationship of the total annual compensation of our median-paid employee to the total annual compensation of our +Chief Executive Officer, Mr. Rosenfeld. The table below sets forth the total annual compensation for Mr. Rosenfeld and our median-paid +employee, who is a full-time stock associate, and the ratio between the two. Our median-paid employee is unchanged from our 2018 +fiscal year because we believe that there has ben no change in our employee population or employee compensation arrangements that +would significantly impact the pay ratio disclosure. +31 +Median employee annual total +compensation +$ +23,903 +Mr. Rosenfeld annual total compensation +$ +7,335,172 +Ratio of Chief Executive Officer to median +employee compensation +306.9 +We +determined our median employee as of October 1, 2019, which date is within the last three months of the 2019 Fiscal Year, as permitted +by the pay ratio rule under the Dodd-Frank Act. In determining our median employee, we applied the “de minimis” exemption +under the rule, which allows the exemption of 5% or less of our total global workforce in jurisdictions outside of the U.S., which +amounts to 191 employees based on our total global workforce of 3,820 employees. As such, we excluded all of our employees in +each of Hong Kong (28 employees), the Netherlands (37 employees) and South Africa (81 employees), which in total amount to 146 +employees or 4%. We did not exclude from consideration any employees who joined us during the 2019 Fiscal Year as the result of +a business acquisition or combination. Employees on leave of absence were excluded and wages and salaries were annualized for +those employees who were not employed for the entire 2019 Fiscal Year. To identify our median employee, we used payroll data consisting +of salary, hourly wage, overtime wage, bonus, commissions, vesting of equity awards and any similar payroll items for all of our +employees included in the calculation. +After +we identified our median employee, we determined that employee’s annual total compensation for the 2019 Fiscal Year using +the same method required for calculating our Chief Executive Officer’s (and other Named Executive Officers’) total +annual compensation for purposes of the Summary Compensation Table. However, for simplicity, we excluded employer contributions +to our 401(k) plan and medical benefits, because all employees, including our Chief Executive Officer, are offered the same benefits, +and we use the Internal Revenue Service safe harbor provision for 401(k) discrimination testing. +We +believe that the ratio stated above is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation +S-K. It is based on the methodologies, assumptions and estimates described above and is not necessarily comparable to the ratios +reported by other companies. +Risk +Assessment +Bonus +payments to executives are based either on the discretion of the Compensation Committee or are tied to growth in various indicators +of financial performance, such as EBITDA and EBIT. We have established long-term incentives in the form of stock options and time-vested +restricted stock that generally vest over four or five years. These programs have been in place for several years and have proved +effective in rewarding performance while not encouraging inappropriate risk-taking. +The +Compensation Committee undertook to review and evaluate all of our executive and company-wide compensation plans and programs +to assess whether any aspect of these plans and programs would encourage inappropriate risk-taking by our executives and non-executive +employees that could have a material adverse effect on us and to confirm that we have adequate risk management controls in place +to ensure that executive and company-wide compensation is reasonable and achieves its intended incentive without creating unacceptable +risk. Based on such review and evaluation, the Compensation Committee believes there is no material risk to us that is related +to our compensation programs for executives and non-executives. +This +review and evaluation of the risks associated with our compensation plans and programs consisted of: +· identifying +those business risks that could be material to us and identifying our existing risk management +system; +· reviewing +and analyzing our compensation plans and programs to identify plan and program features +that could potentially encourage or introduce excessive or imprudent risk taking of a +material nature; +· identifying +the business risks that our compensation plan and program features could potentially +encourage or create; +· balancing +these business risks against our existing internal control systems designed to manage +and mitigate these business risks; and +· analyzing +whether the unmitigated risks, as a whole, are reasonably likely to have a material adverse +effect on us. +32 +Various +persons were consulted during the course of the assessment, including our executive officers and senior members of our human resources +department. The Compensation Committee engages Gallagher to review our executive and company-wide compensation plans and programs +and provide advice regarding appropriate levels of incentive. +The +Compensation Committee noted several features of our compensation structure that mitigate risk, including, for example: +· we +use a pay mix that is well balanced between short-term financial performance and long-term +stock performance, consisting of secure compensation in the form of base salary, short-term +incentives in the form of potential for cash bonuses, and long-term incentives in the +form of stock options and time-vested restricted stock that generally vest over four +or five years; +· in +most instances, management or the Compensation Committee retains the discretion to decrease +all forms of incentive compensation based on significant individual or Company performance +shortfalls; +· we +periodically benchmark our compensation plans and programs and target executive and non-executive +compensation within the normal limits of the competitive market; and +· the +Compensation Committee provides oversight of our compensation plans and programs and +compensation philosophy, makes recommendations to the Board with respect to improvements +to our compensation plans and programs, and is responsible for reviewing and approving +executive compensation and administering and awarding incentive, deferred and equity +compensation to our senior executives. +In +light of the assessment described above, the Compensation Committee concluded that the risks associated with our compensation +plans and programs (executive and company-wide) are not reasonably likely to have a material adverse effect on our Company. +Implications +of Tax and Accounting Matters +As +a general matter, the Compensation Committee considers the various tax and accounting implications of compensation vehicles that +we employ. Although the Compensation Committee reviews and considers both the accounting and tax effects of various components +of compensation, those effects are not a significant factor in the Compensation Committee’s allocation of compensation among +the different components. +As +a result of changes to federal tax laws, which became effective in 2018, compensation paid to certain executive officers under +arrangements entered into or materially modified after November 2, 2017 generally are not deductible to the extent they result +in compensation that exceeds $1 million in any one year for any such executive officer. Before 2018, a deduction was allowed for +certain performance-based pay in excess of $1 million for executive officers who were subject to the limitation. Recognizing the +importance of linking pay and performance, we intend to continue to include performance conditions on a portion of the compensation +of our executive officers. +As +more fully described below under the heading “Termination, Change-in-Control and Non-Competition/Non-Solicitation,” +with the exception of Ms. Frieders, all of our Named Executive Officers are entitled to receive certain compensation in the event +of a termination of employment in connection with a change-in-control event for our Company, which payments may trigger the application +of the “golden parachute” provisions of Sections 280G and 4999 of the Code. Section 280G of the Code disallows a tax +deduction with respect to excess parachute payments to certain executives of companies that undergo a change-in-control. In addition, +Section 4999 of the Code imposes a 20% excise tax on the individual receiving the excess parachute payment. Excess parachute payments +are golden parachute payments that exceed an amount determined under Section 280G based on the executive’s prior compensation. +In approving the compensation arrangements of our Named Executive Officers, our Compensation Committee considers all elements +of the cost to us of providing such compensation, including the potential impact of Sections 280G and 4999, which, under certain +circumstances, may limit the deductibility of executive compensation. However, our Compensation Committee may determine, in its +judgment, to authorize compensation arrangements that could give rise to loss of deductibility under Section 280G and the imposition +of excise taxes under Section 4999 when it believes that such arrangements are appropriate to attract and retain executive talent. +33 +Conclusion +The +level and mix of compensation that the Compensation Committee finally decides upon as to each executive is considered within the +context of both the objective data from our competitive assessment of compensation and performance, as well as the subjective +factors as outlined above. The Compensation Committee believes that each of the compensation packages for the Named Executive +Officers is within the competitive range of practices when compared to the objective comparative data even where subjective factors +have influenced the compensation decisions. +Compensation +Committee Interlocks and Insider Participation +During +the 2019 Fiscal Year, the following directors served on the Compensation Committee: Peter Migliorini (Chairman), Thomas H. Schwartz, +Rose Peabody Lynch and Robert Smith. During the 2019 Fiscal Year: +· none +of the members of the Compensation Committee was an officer (or former officer) or employee +of our Company or any of our subsidiaries; +· none +of the members of the Compensation Committee had a direct or indirect material interest +in any transaction in which we were a participant and the amount involved exceeded $120,000; +· none +of our executive officers served on the compensation committee (or another board committee +with similar functions or, if none, the entire board of directors) of another entity +where one of that entity’s executive officers served on our Compensation Committee; +· none +of our executive officers was a director of another entity where one of that entity’s +executive officers served on our Compensation Committee; and +· none +of our executive officers served on the compensation committee (or another board committee +with similar functions or, if none, the entire board of directors) of another entity +where one of that entity’s executive officers served as a director on our Board +of Directors. +Executive +Officers +The +following table identifies the executive officers of the Company, and their ages and positions: +Name +Age +Position +Edward R. Rosenfeld +44 +Chairman of the Board and Chief Executive +Officer +Amelia Newton Varela +48 +President +Arvind Dharia +70 +Chief Financial Officer and Secretary +Awadhesh Sinha +74 +Chief Operating Officer +Karla Frieders +43 +Chief Merchandising Officer +Lisa Keith +35 +Vice President and General Counsel +Arvind +Dharia has been our Chief Financial Officer since October 1992 and was a director of our Company from December 1993 through May +2004. Mr. Dharia has been Secretary of the Company since 1993. From December 1988 until joining us in September 1992, Mr. Dharia +was Assistant Controller of Millennium III Real Estate Corp., a real estate management company. +Awadhesh +Sinha became our Chief Operating Officer in July 2005. Mr. Sinha was a director of our Company from October 2002 to July 2005, +before joining us as our Chief Operating Officer. Mr. Sinha was the Chief Operating Officer and Chief Financial Officer of WEAR +ME Apparel Inc., a company that designs, manufactures and markets branded and non-branded children’s clothing, from 2003 +to July 2005. Prior to that, Mr. Sinha worked for Salant Corporation, a company that designs, manufactures and markets men’s +clothing, for 22 years, and held the position of Chief Operating Officer and Chief Financial Officer of Salant Corporation from +1998 to 2003. +34 +Karla +Frieders has been our Chief Merchandising Officer since September 2015. Previously, Ms. Frieders served as President of Retail +from January 2013 and Vice President of Retail from October 2009 until January 2013. Prior to these roles, Ms. Frieders held various +buying positions at our Company from 1999. +Lisa +Keith has been our Vice President and General Counsel since November 1, 2019. Ms. Keith joined our Company as Vice President, +Associate General Counsel in May 2017 and served as Vice President, Deputy General Counsel from February 2019 to October 2019. +Prior to joining us, Ms. Keith practiced intellectual property law and litigation with the New York City law firms of Davis Wright +Tremaine LLP from 2012 to 2017, and Gibson, Dunn & Crutcher LLP from 2009 to 2012. Ms. Keith received her J.D degree from +New York University School of Law and her B.A. degree from Brandeis University. +Please +see the section of this Proxy Statement captioned “Proposal One: Election of Directors” for biographical summaries +and other information concerning our Chairman of the Board and Chief Executive Officer, Edward R. Rosenfeld, and our President, +Amelia Newton Varela, as well as our other director nominees. +SUMMARY +COMPENSATION TABLE +The +following table sets forth the compensation information for our Chief Executive Officer, Chief Financial Officer and the three +most highly compensated executive officers other than the Chief Executive Officer and Chief Financial Officer relating to the +fiscal years ended December 31, 2019, 2018 and 2017, respectively. In this Proxy Statement, we refer to this group of people as +our “Named Executive Officers.” +In +accordance with applicable SEC rules, the Summary Compensation Table includes, for a particular fiscal year, only those stock +awards made during that fiscal year and not any awards made after year-end even if awarded for services rendered in that year. +SEC rules require that such awards be reflected in the year of grant and, as such, awards made after the end of the 2019 Fiscal +Year will appear in the Summary Compensation Table to be included in our proxy statement for our 2021 Annual Meeting of Stockholders. +Name +and Principal +Position +Fiscal +Year +Salary +($) +Bonus +($) +Stock +Awards +($) (1) +Option +Awards +($)(1) +Non-Equity +Incentive +Plan +Compensation +($) +All +Other +Compensation +($) +Total +Compensation +($) +Edward R. Rosenfeld +2019 +943,961 +— +5,864,811 +— +500,000 +26,400 +(2) +7,335,172 +Chief +Executive Officer +2018 +899,038 +— +5,664,780 +— +500,000 +26,250 +(3) +7,090,068 +2017 +849,039 +— +1,515,972 +— +500,000 +26,100 +(4) +2,891,111 +Amelia +Newton Varela +2019 +669,538 +— +— +— +182,006 +(5) +23,400 +(6) +874,944 +President +2018 +649,615 +— +— +— +263,302 +(7) +23,250 +(8) +936,167 +2017 +629,423 +— +505,324 +814,000 +338,669 +(9) +23,100 +(10) +2,310,516 +Arvind +Dharia +2019 +611,321 +— +— +— +200,000 +106,691 +(11) +918,012 +Chief +Financial Officer +2018 +582,455 +— +602,438 +— +220,000 +106,565 +(12) +1,511,458 +2017 +582,455 +— +— +— +220,000 +109,720 +(13) +912,175 +Awadhesh +Sinha +2019 +724,220 +— +— +— +200,000 +(14) +24,101 +(15) +948,321 +Chief +Operating Officer +2018 +701,596 +— +75,214 +— +274,600 +(16) +23,708 +(17) +1,100,518 +2017 +680,625 +— +1,007,042 +— +300,000 +(18) +23,806 +(19) +1,911,473 +Karla +Frieders +2019 +583,875 +— +496,953 +100,000 +8,400 +(20) +1,189,228 +Chief +Merchandising Officer +2018 +563,000 +— +502,843 +— +100,000 +8,250 +(21) +1,174,093 +2017 +517,846 +— +751,000 +— +100,000 +29,822 +(22) +1,398,668 +(1) The +amounts in this column reflect the total grant date fair value of awards granted during +the applicable year for the fiscal years ended December 31, 2019, December 31, 2018 and +December 31, 2017, respectively, calculated in accordance with ASC Topic 718. Assumptions +used in the calculation of these amounts are included in Note J to our audited financial +statements for the fiscal year ended December 31, 2019 included in our Annual Report +on Form 10-K filed with the Securities and Exchange Commission on March 2, 2020 and in +Note H to our audited financial statements for the fiscal years ended December 31, 2018 +and December 31, 2017 included in our Annual Reports on Form 10-K filed with the Securities +and Exchange Commission on February 28, 2019 and March 1, 2018, respectively. +35 +(2) Consists +of an $18,000 automobile allowance and $8,400 in annual match contributions to Mr. Rosenfeld’s +401(k) plan account. +(3) Consists +of an $18,000 automobile allowance and $8,250 in annual match contributions to Mr. Rosenfeld’s +401(k) plan account. +(4) Consists +of an $18,000 automobile allowance and $8,100 in annual match contributions to Mr. Rosenfeld’s +401(k) plan account. +(5) Consists +of a non-equity incentive payment of $182,006 made pursuant to a bonus formula in Ms. +Varela’s employment agreement. See “Employment Arrangements.” +(6) Consists +of a $15,000 automobile allowance and $8,400 in annual matching contributions to Ms. +Varela’s 401(k) plan account. +(7) Consists +of a non-equity incentive payment of $263,302 made pursuant to a bonus formula in Ms. +Varela’s employment agreement. See “Employment Arrangements.” +(8) Consists +of a $15,000 automobile allowance and $8,350 in annual matching contributions to Ms. +Varela’s 401(k) plan account. +(9) Consists +of a non-equity incentive payment of $338,669 made pursuant to a bonus formula in Ms. +Varela’s employment agreement. See “Employment Arrangements.” +(10) Consists +of a $15,000 automobile allowance and $8,100 in annual matching contributions to Ms. +Varela’s 401(k) plan account. +(11) Consists +of a $14,645 automobile allowance, $83,646 life insurance premiums and $8,400 in annual +match contributions to Mr. Dharia’s 401(k) plan account. +(12) Consists +of a $14,348 automobile allowance, $86,967 life insurance premiums and $8,250 in annual +match contributions to Mr. Dharia’s 401(k) plan account. +(13) Consists +of a $14,763 automobile allowance, $86,857 life insurance premiums and $8,100 in annual +match contributions to Mr. Dharia’s 401(k) plan account. +(14) Consists +of a non-equity incentive payment of $135,895 made pursuant to a bonus formula in Mr. +Sinha’s employment agreement and an additional non-equity incentive payment of +$64,105. See “Employment Arrangements.” +(15) Consists +of a $15,701 automobile allowance and $8,400 in annual matching contributions to Mr. +Sinha’s 401(k) plan account. +(16) Consists +of a non-equity incentive payment of $274,600 made pursuant to a bonus formula in Mr. +Sinha’s employment agreement. See “Employment Arrangements.” +(17) Consists +of a $15,458 automobile allowance and $8,250 in annual matching contributions to Mr. +Sinha’s 401(k) plan account. +(18) Includes +a non-equity incentive payment of $300,000 made pursuant to a bonus formula in Mr. Sinha’s +employment agreement. See “Employment Arrangements.” +(19) Consists +of a $15,706 automobile allowance and $8,100 in annual matching contributions to Mr. +Sinha’s 401(k) plan account. +(20) Consists +of $8,400 in annual matching contributions to Ms. Frieders’ 401(k) plan account. +(21) Consists +of $8,250 in annual matching contributions to Ms. Frieders’ 401(k) plan account. +(22) Consists +of a $21,722 living allowance and $8,100 in annual matching contributions to Ms. Frieders’ +401(k) plan account. +36 +Employment +Arrangements +Edward +R. Rosenfeld. On December 31, 2018, we entered into a new employment agreement (the “Rosenfeld 2018 Agreement”) +with Mr. Rosenfeld to replace our employment agreement, which expired on December 31, 2018. Pursuant to the Rosenfeld 2018 Agreement, +Mr. Rosenfeld continues to serve as our Chief Executive Officer and executive Chairman of the Board of Directors through December +31, 2021 unless sooner terminated in accordance with the terms of the agreement. The Rosenfeld 2018 Agreement provides for an +annual base salary of $945,000, $992,250 and $1,041,863 for fiscal years 2019, 2020 and 2021, respectively, and a monthly automobile +allowance of $1,500. Pursuant to the Rosenfeld 2018 Agreement, on December 31, 2018, Mr. Rosenfeld was granted 87,500 shares of +Common Stock, subject to certain restrictions. Those restricted shares of Common Stock, which were issued under the 2006 Plan, +vest in five equal annual installments of 17,500 shares that commenced on December 1, 2019. In addition, on February 1, 2019, +Mr. Rosenfeld received an additional award of 87,500 shares of our Common Stock, subject to certain restrictions. These restricted +shares of Common Stock, which were issued under the 2006 Plan, will also vest in five equal annual installments of 17,500 shares +commencing on February 1, 2020. The Rosenfeld 2018 Agreement provides that Mr. Rosenfeld will receive additional compensation +and bonuses, if any, at the absolute discretion of the Board of Directors. +In +the event of his death, the Rosenfeld 2018 Agreement provides for the payment to Mr. Rosenfeld’s estate of his base salary +for the 12-month period immediately after the date of his death. The agreement also provides that if Mr. Rosenfeld’s employment +is terminated due to his “total disability” (as defined in the Rosenfeld 2018 Agreement), Mr. Rosenfeld will receive +payment of his base salary for the 12-month period immediately after the date on which he is determined to be totally disabled. +The Rosenfeld 2018 Agreement allows us to terminate his employment for “cause” (as defined therein) or without cause. +If we terminate Mr. Rosenfeld’s employment for cause, we will have no further obligations to Mr. Rosenfeld, and Mr. Rosenfeld +will be entitled to no further compensation from us, except for pro-rata amounts due to him on the date of his termination. If +we terminate Mr. Rosenfeld’s employment without cause or if Mr. Rosenfeld resigns for “good reason” (as defined +in the Rosenfeld 2018 Agreement), Mr. Rosenfeld will be entitled to receive payment of his annual base salary, payable at regular +payroll intervals, from the date of termination of employment through the longer of the remainder of the term of the agreement +or six months. +In +addition, if we terminate Mr. Rosenfeld’s employment without cause or if he resigns for good reason during the period commencing +90 days prior to a “change of control” (as defined in the Rosenfeld 2018 Agreement) and ending 180 days following +a change of control, Mr. Rosenfeld will receive an amount equal to two and one-half times the sum of (i) the annual base salary +to which he was entitled as of the date of termination or resignation of plus (ii) the average cash bonus he received for the +preceding three-year period ending on the last previous December 31 (the “Change of Control Payment”). However, if +the Change of Control Payment (or a portion thereof) is determined to constitute an “excess parachute payment” under +Sections 280G and 4999 of the Internal Revenue Code of 1986, as amended (the “Code”), Mr. Rosenfeld will be paid either +(i) the Change of Control Payment (which will be subject to all applicable taxes to be paid by him including the excise tax payable +pursuant to Section 4999 and which will be limited as to deductibility to our Company) or (ii) a reduced amount, calculated in +accordance with Section 280G, that may be paid to the executive without the imposition of an excise tax under Section 4999 and +which shall be fully deductible to the Company, whichever payment yields the greater after-tax benefit to him. +37 +Amelia +Varela. On December 30, 2016, we entered into an employment agreement with Ms. Varela (the “Varela 2016 Agreement”), +which replaced her prior, expiring employment agreement. Pursuant to the Varela 2016 Agreement, Ms. Varela continued to serve +our President for a term of three years through December 31, 2019. The Varela 2016 Agreement provided for an annual base salary +of $630,000, $650,000 and $670,000 for the years 2017, 2018 and 2019, respectively, and a monthly automobile allowance of $1,250 +in each year of the term. In addition, pursuant to the Varela 2016 Agreement, on January 3, 2017, Ms. Varela was granted an option +to purchase 150,000 shares of our Common Stock under the 2006 Plan, at an exercise price of $23.83 per share, which option vests +in four equal annual installments of 37,500 shares on each anniversary of the date of grant, which commenced on January 3, 2018. +The +Varela 2016 Agreement entitled Ms. Varela to an annual performance-based cash bonus for each of the fiscal years ended December +31, 2017, 2018 and 2019 in an amount equal to 2% of the increase, if any, in our total earnings before interest and taxes (“EBIT”) +for each such year over our total EBIT for the immediately preceding year, less any deductions required to be withheld by applicable +laws and regulations. EBIT attributable to any business that we acquired after December 30, 2016 was not included in the calculation +for the purpose of determining Ms. Varela’s annual bonus. Ms. Varela received a cash bonus of $182,006 for 2019 EBIT performance, +$263,302 for 2018 EBIT performance, and $338,669 for 2017 EBIT performance. +On +December 27, 2019, we entered into a new employment agreement (the “Varela 2019 Agreement”) with Ms. Varela, pursuant +to which she will continue to serve as our President through December 31, 2022, unless sooner terminated in accordance with the +terms of the agreement. The Varela 2019 Agreement replaces the Varela 2016 Agreement, which expired on December 31, 2019. The +Varela 2019 Agreement provides for an annual base salary of $700,000, $725,000, and $750,000 for fiscal years 2020, 2021, and +2022 and an annual automobile allowance of $15,000 in each year of the term. In addition, on January 2, 2020, pursuant to the +Varela 2019 Agreement, Ms. Varela was granted 27,000 restricted shares of Common Stock, which will vest in five equal annual installments +on each anniversary of the date of grant, commencing on January 2, 2021. +The +Varela 2019 Agreement entitles Ms. Varela to an annual performance-based cash bonus for each of the fiscal years ended December +31, 2020, 2021 and 2022 in an amount equal to 2% of the increase, if any, in our total EBIT for each such year over our total +EBIT for the immediately preceding year, less any deductions required to be withheld by applicable laws and regulations. EBIT +attributable to any business that we acquire after January 1, 2020 will be included in the calculation for the purpose of determining +Ms. Varela’s annual bonus after one year of Company ownership. +If +the Varela 2019 Agreement is terminated due to Ms. Varela’s “disability” (as defined in the agreement) or death, +we are obligated to pay Ms. Varela (or her estate) the amount of accrued and unpaid salary through the date of termination plus +any performance-based cash bonus that has accrued for the year prior to termination and is unpaid at the time Ms. Varela’s +employment is terminated. We may terminate the agreement for “cause” (as defined in the Varela 2019 Agreement), in +which case she will be entitled only to accrued and unpaid salary through the date of termination of employment. If we terminate +Ms. Varela’s employment without cause, she would be entitled to receive payment of her annual base salary, payable at regular +payroll intervals, from the date of termination of employment through the remainder of the term plus any performance-based cash +bonus that has accrued but not yet been paid. In addition, if we terminate Ms. Varela’s employment without cause during +the period commencing 30 days prior to a “change of control” (as defined in the Varela 2019 Agreement) transaction +and ending 180 days following a change of control transaction, she is entitled to receive an amount equal to the lesser of (A) +two and one-half times the sum of (i) the annual base salary to which she was entitled as of the date of termination plus (ii) +the average cash bonus received by her for the preceding three-year period ending on the last previous December 31 or (B) the +maximum amount that is tax deductible to us under Section 280G of the Code. +Arvind +Dharia. In January 1998, we entered into an employment agreement with Arvind Dharia, which has been amended from time to time, +most recently on April 20, 2018 (the “Dharia Agreement”). Pursuant to the Dharia Agreement, Mr. Dharia will continue +to serve as our Chief Financial Officer for a term extending through December 31, 2020. Pursuant to the Dharia Agreement, as amended, +Mr. Dharia received an annual base salary of $582,455 for the period commencing January 1, 2015 and ending December 31, 2018 and +$611,578 for 2019 and will receive an annual base salary of $642,157 for 2020. The Dharia Agreement also provides for a monthly +car allowance of $1,600 through the term and payment of life insurance premiums on Mr. Dharia’s behalf of approximately +$80,000 per year. Pursuant to the Dharia Agreement, on May 1, 2018, Mr. Dharia was granted 18,750 shares of Common Stock, subject +to certain restrictions. These restricted shares of Common Stock, which were issued to Mr. Dharia under the 2006 Plan, vest in +three equal annual installments, which vesting commenced on December 15, 2018. Under the Dharia Agreement, Mr. Dharia is entitled +to awards under such plan as may be determined by the Board of Directors, or a committee thereof, from time to time in its absolute +discretion. The Dharia Agreement provides that he will receive an annual bonus in such amount, if any, and at such time or times, +as the Board of Directors may determine in its absolute discretion. +38 +Pursuant +to the Dharia Agreement, in the event of Mr. Dharia’s death, we will make a payment to Mr. Dharia’s estate of his +base salary for the 12-month period immediately after the date of Mr. Dharia’s death. The Dharia Agreement also provides +that if we terminate his employment due to his “total disability” (as defined in the Dharia Agreement), he will receive +payment of his base salary for the 12-month period immediately after the date he is determined to be totally disabled. If we terminate +Mr. Dharia’s employment “for cause” (as defined in the Dharia Agreement), we will be obligated to pay Mr. Dharia +the amount of compensation that is accrued and unpaid through the date of termination and will have no further obligations to +him. If we terminate Mr. Dharia’s employment for any reason other than “for cause” or his death or total disability, +we will be is obligated to pay Mr. Dharia, in two installments, (a) an amount equal to the product of (x) his base salary on the +effective date of such termination plus the bonus paid or payable, if any, for the fiscal year ended on the December 31st immediately +preceding the termination date, multiplied by (y) the number of years (and fraction of years) remaining in the term; and (b) the +amount payable to him, or on his account, for what would have been the balance of the term of the Dharia Agreement with respect +to certain benefits and plans as set forth in the Dharia Agreement. If we decide not to renew the Dharia Agreement, then Mr. Dharia +will be entitled to receive severance compensation, in cash, in an amount equal to his then-current base salary for the 90-day +period commencing on the expiration of the term. +If +there is a “change of control” and we terminate Mr. Dharia’s employment other than “for cause” or +if Mr. Dharia resigns “for good reason” (as such terms are defined in the Dharia Agreement), he will receive an amount +equal to two and one half times (i) the annual base salary to which he was entitled as of the date of termination or resignation +plus (ii) the average cash bonus received by him for the preceding three-year period ending on the last previous December 31 (the +“Change of Control Payment”). However, if the Change of Control Payment (or a portion thereof) is determined to constitute +an “excess parachute payment” under Sections 280G and 4999 of the Code, Mr. Dharia will be paid either (i) the Change +of Control Payment (which shall be subject to all applicable taxes to be paid by the executive including the excise tax payable +pursuant to Section 4999 and which shall be limited as to deductibility to us) or (ii) a reduced amount, calculated in accordance +with Section 280G, that may be paid to him without the imposition of an excise tax under Section 4999 and which shall be fully +deductible to us, whichever payment yields the greater after-tax benefit to him. +Awadhesh +Sinha. On December 30, 2016, we entered into an employment agreement (the “Sinha 2016 Agreement”) with Mr. Sinha +to replace his prior, expiring employment agreement. Pursuant to the Sinha 2016 Agreement, Mr. Sinha continued to serve as our +Chief Operating Officer through December 31, 2019. The Sinha 2016 Agreement provided for an annual base salary of $681,000, $702,000 +and $723,000 for the years 2017, 2018 and 2019, respectively, and entitled Mr. Sinha to a monthly automobile allowance of $1,850 +and the payment of term life insurance premiums on Mr. Sinha’s behalf in the amount of approximately $3,500 per year. On +January 3, 2017, pursuant to the Sinha 2016 Agreement, Mr. Sinha was granted 42,253 shares of Common Stock, subject to certain +restrictions. These restricted shares of Common Stock, which were issued under the 2006 Plan, vested in three substantially equal +annual installments, which vesting commenced on December 15, 2017. +The +Sinha 2016 Agreement entitled Mr. Sinha to an annual performance-based bonus for each of the fiscal years ended December 31, 2017, +2018 and 2019 in an amount equal to 2% of the increase, if any, in our earnings before interest, taxes, depreciation and amortization +(“EBITDA”) for each such year over our EBITDA for the immediately preceding year. For any business acquired after +December 30, 2016, EBITDA from the acquired business was included in the bonus calculation starting with the first full quarter +under our ownership, provided that the prior year’s EBITDA will likewise be adjusted to include EBITDA from the acquired +business for comparable quarters in the prior year on a pro forma basis assuming that we had owned the business. The maximum annual +bonus was $600,000, the first $300,000 of which was be payable in cash and for any amount of the annual bonus in excess of $300,000 +by a grant of restricted shares of Common Stock, which vested in three equal annual installments commencing on the first anniversary +of the grant date. Mr. Sinha received (i) a cash bonus of $300,000 and a grant of 2,493 restricted shares of Common Stock for +2017 EBITDA performance; (ii) a cash bonus of $274,600 for 2018 EBITDA performance; and (iii) a cash bonus of $135,895 for 2019 +EBITDA performance plus an additional discretionary cash bonus of $64,105. We are entitled to claw back bonuses and other incentive-based +compensation paid to Mr. Sinha if we determine that such compensation was based upon materially inaccurate financial statements. +39 +On +December 27, 2019, we entered into a new employment agreement (the “Sinha 2019 Agreement”) with Mr. Sinha, pursuant +to which he will continue to serve as our Chief Operating Officer through December 31, 2021, unless sooner terminated in accordance +with the terms of the agreement. The Sinha 2019 Agreement replaces the Sinha 2016 Agreement, the initial term of which expired +on December 31, 2019. Under the Sinha 2019 Employment Agreement, Mr. Sinha will receive an annual base salary of $745,000 and +$767,000 for fiscal years 2020 and 2021, respectively, and an annual automobile allowance of $22,500 in each year of the term. +We will also pay term life insurance premiums on his behalf in the amount of approximately $11,000 per year less deductions required +to be withheld by applicable laws and regulations. In accordance with the terms of the Sinha 2019 Agreement, on January 2, 2020, +we granted Mr. Sinha 11,598 restricted shares of Common Stock, which vest in two equal installments on December 15, 2020 and December +15, 2021. +The +Sinha 2019 Agreement entitles Mr. Sinha to an annual performance-based bonus for each of the fiscal years ended December 31, 2020 +and 2021 in an amount equal to 2% of the increase, if any, in our EBITDA for each such year over our EBITDA for the immediately +preceding year. For any business acquired after January 1, 2020, EBITDA from the acquired business is included in the bonus calculation +starting with the first full quarter under our ownership, provided that the prior year’s EBITDA will likewise be adjusted +to include EBITDA from the acquired business for comparable quarters in the prior year on a pro forma basis assuming we had owned +the business. We are entitled to claw back bonuses and other incentive-based compensation paid to Mr. Sinha if we determine that +such compensation was based upon materially inaccurate financial statements. +In +the event of Mr. Sinha’s death, the Sinha 2019 Agreement provides for the payment to his estate of his base salary for the +12-month period immediately after the date of Mr. Sinha’s death. In addition, in the event of Mr. Sinha’s “total +disability” (as such term is defined in the Sinha 2019 Agreement), we will be obligated to continue to pay his base salary +for the 12-month period immediately after the date of determination of such total disability. If we terminate Mr. Sinha’s +employment “for cause” (as such term is defined in the Sinha 2019 Agreement), or Mr. Sinha resigns without “good +reason” (as such term is defined in the Sinha 2019 Agreement), we will be obligated to pay Mr. Sinha the amount of compensation +that is accrued and unpaid through the date of termination. If we terminate Mr. Sinha’s employment without cause or he resigns +for good reason, he will be entitled to receive payment of his annual base salary, payable at regular payroll intervals, from +the date of termination of employment through the longer of (i) the remainder of the term or (ii) six months. +If +there is a “change of control” transaction and we have terminated his employment other than “for cause” +or if he resigns “for good reason,” Mr. Sinha will receive an amount equal to two and one half times the sum of (i) +the annual base salary to which he was entitled as of the date of termination or resignation of employment plus (ii) the average +cash bonus received by him for the preceding three-year period ending on the last previous December 31 (the “Change of Control +Payment”). However, if the Change of Control Payment (or a portion thereof) is determined to constitute an “excess +parachute payment” under Sections 280G and 4999 of the Code, we will pay Mr. Sinha either (i) the Change of Control Payment +(which shall be subject to all applicable taxes to be paid by him, including the excise tax payable pursuant to Section 4999, +and which shall be limited as to deductibility to us) or (ii) a reduced amount, calculated in accordance with Section 280G, that +may be paid to him without the imposition of an excise tax under Section 4999 and which shall be fully deductible to us, whichever +payment yields the greater after-tax benefit to Mr. Sinha. +Karla +Frieders. On September 4, 2015, we entered into an employment agreement with Ms. Frieders, pursuant to which she served as +our Chief Merchandising Officer for a term commencing on September 4, 2015 and ending on February 29, 2017. The employment agreement +provided for an annual base salary during the term of $440,000 and an annual performance-based bonus for each of the fiscal years +ending December 31, 2015 and 2016 in an amount to be determined by us in our absolute discretion. +On +April 11, 2017, we entered into a new employment agreement (the “Frieders Agreement”) with Ms. Frieders, which replaced +the prior employment agreement, which had expired on February 29, 2017. Pursuant to the Frieders Agreement, Ms. Frieders will +continue to serve as our Chief Merchandising Officer through April 30, 2020 unless the Frieders Agreement is sooner terminated +in accordance with its terms. The Frieders Agreement provides to Ms. Frieders an annual base salary of $550,000 from April 11, +2017 through April 30, 2018, $570,000 from May 1, 2018 through April 30, 2019 and $590,000 from May 1, 2019 through April 30, +2020. The Frieders Agreement also entitles Ms. Frieders to an annual performance bonus for each of the fiscal years ending December +31, 2017, 2018 and 2019 in an amount to be determined by us in our absolute discretion and paid to her on or about March 15 with +respect to the prior year. On April 11, 2017, under the Frieders Agreement, Ms. Frieders was granted 30,000 shares of Common Stock, +subject to certain restrictions. These restricted shares of Common Stock, which were issued under the 2006 Plan, vest in five +equal annual installments, commencing on April 1, 2018. +40 +If +we terminate Ms. Frieders’ employment due to her “disability” (as defined in the Freider’s Agreement) +or her death, we are obligated to pay her (or her estate) the amount of accrued and unpaid salary through the date of termination +of employment. We may terminate Ms. Frieders’ employment for “cause” (as defined in the agreement) and, in such +event, she will be entitled only to accrued and unpaid salary through the date of termination of employment. If we terminate Ms. +Frieders’ employment without cause, she would be entitled to receive payment of her annual base salary, payable at regular +payroll intervals, from the date of termination of employment through the remainder of the term. +GRANTS +OF PLAN-BASED AWARDS IN THE 2019 FISCAL YEAR +The +following table sets forth information concerning awards under our equity and non-equity incentive plans granted to each of the +Named Executive Officers in the 2019 Fiscal Year, including performance-based awards and those using time-based vesting. Following +the table is a discussion of material factors related to the information disclosed in the table. +All Other +All Other +Estimated +future payouts under equity +Stock +Option +incentive +plan awards +Awards: +Awards: +Grant Date +Number of +Number of +Exercise or +Fair Value +Shares of +Securities +Base Price +of Stock and +Stock or +Underlying +of Option +Option +Threshold +Target +Maximum +Units +Options +Awards +Awards +Name +Grant +Date +($) +($) +($) +(#) +(#) +($/Sh) +($) +Edward R. Rosenfeld +n/a +— +2,324,448 +(1) +— +— +— +— +— +02/01/19 +— +— +87,500 +— +— +2,883,125 +03/15/19 +— +— +— +91,547 +— +— +2,981,686 +Amelia Newton Varela +n/a +— +1,084,742 +(1) +— +— +— +— +— +03/15/19 +— +263,302 +(2) +— +— +— +— +— +Arvind Dharia +n/a +— +1,084,742 +(1) +— +— +— +— +— +Awadhesh Sinha +n/a +— +1,084,742 +(1) +— +— +— +— +— +03/15/19 +— +274,600 +(3) +— +— +— +— +— +Karla Frieders +n/a +— +1,084,742 +(1) +— +— +— +— +— +03/15/19 +— +— +— +15,258 +— +— +496,953 +(1) In +the 2019 Fiscal Year, the Compensation Committee established a bonus pool for our Named +Executive Officers and other key executives based on 6% of our net income achieved in +the 2019 Fiscal Year and also fixed each executive’s maximum share of the 2019 +bonus pool, which was 30% for Mr. Rosenfeld and 14% for each other Named Executive Officer. +Because the bonus pool was established as a percentage of our 2019 Fiscal Year net income, +it would not be possible to determine the amount of these potential bonuses until the +completion of the 2019 Fiscal Year. Accordingly, the amount indicated is a representative +payout amount and equals the maximum bonus the Named Executive Officer would have been +eligible to receive from a bonus pool of $8,478,000, which equals 6% of the $141,311,000 +in net income we achieved in the fiscal year ended December 31, 2019. See the discussion +of the 2019 bonus pool and the individual target awards of the Named Executive Officers +appearing above in the “Annual Performance-Based Bonus - Based on Specific Performance +Metrics” section of “Compensation Structure.” As disclosed therein, +we paid these performance bonuses in a combination of cash and restricted shares of Common +Stock. Accordingly, on March 13, 2020, Mr. Rosenfeld, Mr. Dharia and Ms. Frieders received +performance-based cash bonuses of $500,000, $200,000 and $100,000, respectively, and, +on March 16, 2020, Mr. Rosenfeld received a grant of 108,030 restricted shares of Common +Stock. In accordance with applicable SEC rules, these restricted stock awards will appear +in the Summary Compensation Table to be included in our proxy statement for our 2021 +Annual Meeting of Stockholders provided the restricted stock award recipient is a Named +Executive Officer in that proxy statement. +41 +(2) Under +an employment agreement dated December 30, 2016 between us and Ms. Varela, Ms. Varela +is entitled to receive a cash bonus under our 2019 Plan on or about March 15, 2020 in +an amount equal to 2% of the increase, if any, in our total EBIT for the 2019 Fiscal +Year over our total EBIT for the fiscal year ended December 31, 2018. Since it would +not be possible to determine the amount of Ms. Varela’s cash bonus, if any, until +the completion of the 2019 Fiscal Year, the amount indicated as the target bonus payout +is a representative amount and based upon the actual increase in our EBIT performance +for the fiscal year ended December 31, 2018 from our EBIT performance for the fiscal +year ended December 31, 2017. See the discussion of this grant to Ms. Varela appearing +above in the “Annual Performance-Based Bonus - Based on Specific Performance Metrics” +section of “Compensation Structure” and above under “Employment Arrangements.” +As disclosed in the Summary Compensation Table above, Ms. Varela received a cash bonus +of $182,006 for our 2019 EBIT performance. +(3) Under +an employment agreement dated December 30, 2016 between us and Mr. Sinha, Mr. Sinha is +entitled to receive a bonus under our 2019 Plan on or about March 15, 2020 in an amount +equal to 2% of the increase, if any, in our EBITDA for the 2019 Fiscal Year over our +EBITDA for the immediately preceding fiscal year. The maximum annual bonus is $600,000, +the first $300,000 of which is payable in cash and for any amount of the annual bonus +in excess of $300,000 by a grant of restricted shares of Common Stock, which restricted +Common Stock will vest in three equal annual installments commencing on the first anniversary +of the grant date. Since it would not be possible to determine the amount of Mr. Sinha’s +bonus, if any, until the completion of the 2019 Fiscal Year, the amount indicated as +the target bonus payout is a representative amount and based upon the actual increase +in our EBITDA performance for the fiscal year ended December 31, 2018 from our EBITDA +performance for the fiscal year ended December 31, 2017. See the discussion of this grant +to Mr. Sinha appearing above in the “Annual Performance-Based Bonus - Based on +Specific Performance Metrics” section of “Compensation Structure” and +above under “Employment Arrangements.” As disclosed in the Summary Compensation +Table above, Mr. Sinha received a cash bonus of $135,895 for our 2019 EBITDA performance +and an additional discretionary cash bonus of $64,105. +Plan-Based +Awards +2006 +Stock Incentive Plan +As +of March 10, 2006, our Board of Directors adopted the Steven Madden, Ltd. 2006 Stock Incentive Plan (the “2006 Plan”) +and on May 26, 2006, our stockholders approved the adoption of the 2006 Plan. The 2006 Plan was amended in 2007 and 2008. On April +6, 2009, our Board of Directors adopted an Amended and Restated 2006 Stock Incentive Plan, and on May 22, 2009, our stockholders +approved the Amended and Restated 2006 Stock Incentive Plan. On April 5, 2012, our Board of Directors approved an amendment of +the Amended and Restated 2006 Stock Incentive Plan primarily to increase the number of shares of Common Stock available for issuance +thereunder, subject to stockholder approval of such amendment. The amendment to the Amended and Restated 2006 Stock Incentive +Plan was approved by our stockholders at the 2012 Annual Meeting of Stockholders on May 25, 2012. Our stockholders re-approved +the material terms of the performance goals contained in the 2006 Plan pursuant to the requirements of Section 162(m) of the Code +as then in effect at the 2016 Annual Meeting of Stockholders on May 27, 2016. +Our +Amended and Restated 2006 Stock Incentive Plan is referred to as the “2006 Plan” throughout this Proxy Statement. +The purpose of the 2006 Plan was to enhance the profitability and value of our Company for the benefit of our stockholders by +enabling us to offer eligible employees, consultants and non-employee directors cash and stock-based incentives in our Company +to attract, retain and reward such individuals and provide additional incentive for such persons to exert maximum efforts for +success by encouraging stock ownership in our Company. The 2006 Plan serves as a means to strengthen the mutuality of interests +between such individuals and our stockholders. +42 +The +maximum number of shares of Common Stock available for issuance under the 2006 Plan was 35,199,000 shares. As of March 20, 2020, +there were outstanding 4,164,530 unvested shares of restricted stock and options to purchase 2,506,603 shares of Common Stock; +options had been exercised, or restricted stock had vested, with respect to 28,526,524 shares of Common Stock; and 1,343 shares +of Common Stock remained available for grant under the 2006 Plan when it expired on April 6, 2019. +2019 +Incentive Compensation Plan +On +February 25, 2019, upon recommendation of the Compensation Committee, the Board unanimously approved the adoption of the Steven +Madden, Ltd. 2019 Incentive Compensation Plan (the “2019 Plan”), and on May 24, 2019, our stockholders approved the +adoption of the 2019 Plan. The 2019 Plan is the successor to the 2006 Plan, the term of which expired on April 6, 2019. +Our +2019 Incentive Compensation Plan is referred to as the “2019 Plan” throughout this Proxy Statement. The purpose of +the 2019 Plan is to enhance our profitability and value for the benefit of our stockholders by enabling us to offer eligible employees, +consultants and non-employee directors cash and stock-based incentives to attract, retain and reward such individuals and provide +additional incentive for such persons to exert maximum efforts for our success by encouraging stock ownership in our Company. +The 2019 Plan serves as a means to strengthen the mutuality of interests between such individuals and our stockholders. +The +maximum number of shares of Common Stock available for issuance under the 2019 Plan is 11,000,000 shares. As of March 20, 2020, +there were outstanding 1,097,643 unvested shares of restricted stock and unvested options to purchase 501,750 shares of Common +Stock; no options and no shares of restricted stock had vested as of March 20, 2020, and 9,591,550 shares of Common Stock remained +available for grant under the 2019 Plan. +43 +OUTSTANDING +EQUITY AWARDS AT END OF THE 2019 FISCAL YEAR +The +following table sets forth information concerning unexercised stock options, restricted stock that has not vested and stock awards +outstanding for each of the Named Executive Officers as of the end of the 2019 Fiscal Year. All awards that occurred prior to +the three-for-two split of our Common Stock effectuated as a stock dividend on or about October 1, 2013 and the three-for-two +split of our Common Stock effectuated as a stock dividend on or about October 11, 2018 have been adjusted to account for each +such stock split, as applicable. +Option +Awards +Stock +Awards +Name +Number +of +Securities +Underlying +Unexercised +Options +(#) Exercisable +Number +of +Securities +Underlying +Unexercised +Options +(#) Unexercisable +Equity +Incentive +Plan +Awards: +Number of +Securities +Underlying +Unexercised +Unearned +Options +(#) +Option +Exercise +Price +($) +Option +Expiration +Date +Number +of +Shares or +Units of +Stock That +Have Not +Vested +(#) +Market +Value +of Shares or +Units of +Stock That +Have Not +Vested +($) +Equity +Incentive +Plan Awards: +Number of +Unearned +Shares, Units +or Other +Rights that +Have Not +Vested +(#) +Equity +Incentive +Plan Awards: +Market or +Payout Value +of Unearned +Shares, Units +or Other +Rights That +Have Not +Vested +($) +Edward +R. Rosenfeld +— +— +— +— +— +458,590 +(1) +19,637,935 +— +— +Amelia +Newton Varela +— +75,000 +(2) +— +23.83 +01/03/2024 +24,837 +(3) +1,068,239 +— +— +Arvind +Dharia +— +— +— +— +— +10,750 +(4) +462,357 +— +— +Awadhesh +Sinha +— +— +— +— +— +831 +(5) +35,741 +— +— +Karla +Frieders +— +— +— +— +— +5,795 +(6) +249,243 +— +— +(1) On +March 11, 2015, Mr. Rosenfeld was awarded 37,989 shares of restricted Common Stock, which +shares vest in five substantially equal annual installments commencing on March 5, 2016. +On December 31, 2015, Mr. Rosenfeld was awarded 112,500 shares of restricted Common Stock, +which shares vest in five equal annual installments commencing on December 31, 2016. +On February 5, 2016, Mr. Rosenfeld was awarded 112,500 shares of restricted Common Stock, +which shares vest in five equal annual installments commencing on March 5, 2017. On March +15, 2016, Mr. Rosenfeld was awarded 41,344 shares of restricted Common Stock, which shares +vest in five substantially equal annual installments commencing on March 5, 2017. On +March 15, 2017, Mr. Rosenfeld was awarded 59,841 shares of restricted Common Stock, which +shares vest in five substantially equal annual installments commencing on March 5, 2018. +On March 15, 2018, Mr. Rosenfeld was awarded 100,000 shares of restricted Common Stock, +which shares vest in five equal installments commencing on March 5, 2019. On December +31, 2018, Mr. Rosenfeld was awarded 87,500 shares of restricted Common Stock, which shares +vest in five equal installments commencing on December 1, 2019. On February 1, 2019, +Mr. Rosenfeld was awarded 87,500 shares of restricted Common stock, which vest in five +equal annual installments commencing on commenced on February 1, 2020. On March 15, 2019, +Mr. Rosenfeld was awarded 91,547 shares of restricted Common Stock, which vest in five +equal annual installments commencing on March 1, 2020. The above-referenced grants of +restricted shares on March 11, 2015 and March 15, 2016 were forfeited and rescinded pursuant +to a Forfeiture and Rescission of Awards Agreement between Mr. Rosenfeld and us because +the grants, while intended as qualified performance-based compensation under Section +162(m) of the Code, did not qualify as qualified performance-based compensation under +Section 162(m) of the Code on the grant date because the performance goals in the 2006 +Plan under which the grants were made had not yet been re-approved by our stockholders, +as periodically required by the 2006 Plan and Section 162(m) of the Code as then in effect. +Our stockholders re-approved the performance goals contained in the 2006 Plan at the +2016 Annual Meeting of Stockholders and the forfeited and rescinded grants of restricted +shares were re-granted to Mr. Rosenfeld on August 12, 2016. +44 +2) On +January 3, 2017, Ms. Varela was granted an option to purchase 150,000 shares of our Common +Stock under the 2006 Plan, which option vests in four equal annual installments commencing +on the first anniversary of the date of grant. +(3) On +March 11, 2015, Ms. Varela was awarded 22,993 shares of restricted Common Stock, which +shares vest in five substantially equal annual installments commencing on March 5, 2016. +On March 15, 2016, Ms. Varela was awarded 20,673 shares of restricted Common Stock, which +shares vest in five substantially equal annual installments commencing on March 5, 2017. +On March 15, 2017, Ms. Varela was awarded 19,947 shares of restricted Common Stock, which +shares vest in five substantially equal annual installments commencing on March 5, 2018. +The above-referenced grants of restricted shares on March 11, 2015 and March 15, 2016 +were forfeited and rescinded pursuant to a Forfeiture and Rescission of Awards Agreement +between Ms. Varela and us, because the grants, while intended as qualified performance-based +compensation under Section 162(m) of the Code, did not qualify as qualified performance-based +compensation under Section 162(m) of the Code on the grant date because the performance +goals in the 2006 Plan under which the grants were made had not yet been re-approved +by our stockholders, as periodically required by the 2006 Plan and Section 162(m) of +the Code as then in effect. Our stockholders re-approved the performance goals contained +in the 2006 Plan at the 2016 Annual Meeting of Stockholders and the forfeited and rescinded +grants of restricted shares were re-granted to Ms. Varela on August 12, 2016. +(4) On +February 2, 2015, Mr. Dharia was awarded 22,500 shares of restricted Common Stock, which +shares vested in five equal annual installments commencing on the first anniversary of +the date awarded. On March 15, 2016, Mr. Dharia was awarded 4,651 shares of restricted +Common Stock, which shares vested in four substantially equal annual installments commencing +on December 15, 2016. On May 1, 2018, Mr. Dharia was awarded 18,750 shares of restricted +Common Stock, which shares vest in three equal annual installments commencing on December +15, 2018. +(5) On +March 15, 2016, Mr. Sinha was awarded 4,651 shares of restricted Common Stock, which +shares vested in four substantially equal annual installments commencing on December +15, 2016. On January 3, 2017, Mr. Sinha was awarded 42,253 shares of restricted Common +Stock, which shares vested in three substantially equal annual installments commencing +on December 15, 2017. On March 15, 2018, Mr. Sinha was awarded 2,493 shares of restricted +Common Stock, which shares vest in three equal annual installments commencing on December +15, 2018. The grant of restricted shares on March 15, 2016 was forfeited and rescinded +pursuant to a Forfeiture and Rescission of Awards Agreement between Mr. Sinha and us, +because the grant, while intended as qualified performance-based compensation under Section +162(m) of the Code, did not qualify as qualified performance-based compensation under +Section 162(m) of the Code on the grant date because the performance goals in the 2006 +Plan under which the grant was made had not yet been re-approved by our stockholders, +as periodically required by the 2006 Plan and Section 162(m) of the Code as then in effect. +Our stockholders re-approved the performance goals contained in the 2006 Plan at the +2016 Annual Meeting of Stockholders and the forfeited and rescinded grant of restricted +shares was re-granted to Mr. Sinha on August 12, 2016. +(6) On +March 2, 2015, Ms. Frieders was awarded 31,137 shares of restricted Common Stock, which +shares vest in five substantially equal annual installments commencing on the first anniversary +of the date awarded. On March 15, 2016, Ms. Frieders was awarded 8,269 shares of restricted +Common Stock, which shares vest in five substantially equal annual installments commencing +on the first anniversary of the date awarded. On April 11, 2017, Ms. Frieders was awarded +30,000 shares of restricted Common Stock, which shares vest in five equal annual installments +commencing on April 1, 2018. On March 15, 2018, Ms. Frieders was awarded 16,666 shares +of restricted Common Stock, which shares vest in five equal installments commencing on +March 5, 2019. The grant of restricted shares on March 15, 2016 was forfeited and rescinded +pursuant to a Forfeiture and Rescission of Awards Agreement between Ms. Frieders and +us, because the grant, while intended as qualified performance-based compensation under +Section 162(m) of the Code, did not qualify as qualified performance-based compensation +under Section 162(m) of the Code on the grant date because the performance goals in the +2006 Plan under which the grant was made had not yet been re-approved by our stockholders, +as periodically required by the 2006 Plan and Section 162(m) of the Code as then in effect. +Our stockholders re-approved the performance goals contained in the 2006 Plan at the +2016 Annual Meeting of Stockholders and the forfeited and rescinded grant of restricted +shares was re-granted to Ms. Frieders on August 12, 2016. +45 +OPTION +EXERCISES AND STOCK VESTED IN THE 2019 FISCAL YEAR +The +following table sets forth information concerning stock options exercised and restricted stock vested during the 2019 Fiscal Year +for each of the Named Executive Officers. The value realized from exercised options is deemed to be the market value of the Common +Stock on the date of exercise, less the exercise price of the option, multiplied by the number of shares of Common Stock underlying +the option. The value realized from the vesting of restricted stock is deemed to be the market value of the Common Stock on the +date of vesting multiplied by the number of shares vesting. +Option +Awards +Stock +Awards +Name +Number +of Shares +Acquired on +Exercise +(#) +Value +Realized +on Exercise +($) +Number +of Shares +Acquired on Vesting +(#) +Value +Realized +on Vesting +($) +Edward +R. Rosenfeld +— +— +117,016 +4,224,155 +Amelia +Newton Varela +75,000 +1,328,773 +54,760 +1,694,282 +Arvind +Dharia +— +— +11,913 +465,323 +Awadhesh +Sinha +— +— +16,079 +680,463 +Karla +Frieders +— +— +18,865 +629,253 +SECURITIES +AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS +The +following table sets forth information as of December 31, 2019 with respect to compensation plans (including individual compensation +arrangements) under which shares of Common Stock are authorized for issuance, aggregated as follows: +· All +compensation plans previously approved by security holders; and +· All +compensation plans not previously approved by security holders. +46 +EQUITY +COMPENSATION PLAN INFORMATION +Number +of +securities to be +issued upon +exercise of +outstanding +options, +warrants +and rights +(#) +Weighted +average +exercise price of +outstanding options, +warrants and rights +($) +Number +of securities +remaining available +for future issuance +under equity +compensation plans +(excluding securities +reflected in +column (a)) +(#) +Equity +compensation plans approved by security holders +2,081,812 +26.85 +10,516,815 +Equity +compensation plans not approved by security holders +— +— +— +Total +2,081,812 +26.85 +10,516,815 +Termination, +Change-in-Control and Non-Competition/Non-Solicitation +The +employment agreements for Ms. Varela and Messrs. Rosenfeld, Dharia and Sinha provide for a severance payment upon a termination +of employment in connection with a change-in-control of our Company. The employment agreements of Messrs. Rosenfeld, Dharia and +Sinha also provide for severance payment if the executive terminates his employment for good reason in connection with a change-in-control. +The change-in-control severance payments may result in the application of the “golden parachute” provisions of Section +280G of the Code, and to the extent Section 280G applies, we will may not be permitted to deduct from our taxable income the severance +payments made to the Named Executive Officer. Moreover, Section 4999 of the Code would impose a 20% excise tax on the Named Executive +Officer receiving the severance payment. In the case of Ms. Varela, these severance payments in connection with a change-in-control, +however, are reduced if the severance payment, when added to any other benefits triggered by a change-of-control, is determined +to constitute an “excess parachute payment” under Sections 280G and 4999 of the Code, to the maximum amount that we +can deduct under Section 280G of the Code. In the case of Messrs. Rosenfeld, Dharia and Sinha, the executive’s change-in-control +severance payment will only be reduced to the maximum amount that we can deduct under Section 280G of the Code if the reduction +provides the Named Executive Officer with the best after-tax result; otherwise, the Named Executive Officer will receive the full +amount of the severance payment and other benefits triggered by the change-in-control and be liable for the 20% excise tax on +the excess parachute payment in addition to all other applicable taxes. In such case, our deduction of the portion of the severance +payment constituting an excess parachute payment will be disallowed. +Our +employment agreements with Ms. Varela and Messrs. Rosenfeld, Dharia and Sinha also provide for severance payments to the executive +if we terminate the executive’s employment without cause, or in the case of Mr. Rosenfeld and Mr. Sinha, if we give him +good reason to terminate employment. +Please +see the section of this Proxy Statement captioned “Employment Arrangements” for a summary description of the Named +Executive Officers’ employment agreements and such severance and change-in-control provisions. These benefits are described +and quantified in the section of this Proxy Statement captioned “Potential Payments Upon Termination or Change-In-Control” +below. +We +believe that the severance payments and payments made upon change-in-control provisions in the employment agreements provide appropriate +protection to our executives, comparable to that available at peer companies and, with regard to the enhanced severance following +a change-in-control, protect us from losing key executives during a period when a change-in-control may be threatened or pending. +These benefits are described and quantified in the section below captioned “Potential Payments Upon Termination or Change-In-Control.” +47 +Mses. +Frieders and Varela have each agreed to a non-compete and non-solicitation restriction through the expiration date of her employment +agreement, April 30, 2020 and December 31, 2022, respectively, in the event of a voluntary termination or termination for cause. +Messrs. Rosenfeld and Sinha have each agreed to a non-compete and non-solicitation restriction during the period of his employment +and for a six-month period following the termination of his employment for cause or in the event of his resignation without good +reason. Mr. Dharia does not have non-compete or non-solicitation provisions in his employment agreement. +POTENTIAL +PAYMENTS UPON TERMINATION OR CHANGE-IN-CONTROL +Our +employment agreements with the Named Executive Officers provide for payments to such individuals upon termination of employment +or a change-in-control of our Company. Please see the section of this Proxy Statement captioned “Employment Arrangements.” +The table below assumes that the termination of employment has occurred on December 31, 2019 and that the amounts would be payable +to the respective Named Executive Officer if such Named Executive Officer’s employment is terminated under the various scenarios +set forth below. +NAME +CASH +PAYMENT +($) +CONTINUATION +OF MEDICAL / +WELFARE +BENEFITS +(PRESENT VALUE) +($) +ACCELERATION +AND +CONTINUATION +OF EQUITY +AWARD +($) +REDUCTION +OF BENEFITS +UPON A +CHANGE-IN- +CONTROL (1) +($) +TOTAL +TERMINATION +BENEFITS +($) +TERMINATION +DUE TO DEATH +Edward +R. Rosenfeld +992,250 +(2) +22,508 +(3) +— +— +1,014,758 +Amelia +Newton Varela +— +— +— +— +— +Arvind +Dharia +642,157 +(4) +15,134 +(3) +— +— +657,291 +Awadhesh +Sinha +745,000 +(5) +15,134 +(3) +— +— +760,134 +Karla +Frieders +— +— +— +— +— +TERMINATION +DUE TO TOTAL DISABILITY +Edward +R. Rosenfeld +992,250 +(2) +— +— +— +992,250 +Amelia +Newton Varela +— +— +— +— +— +Arvind +Dharia +642,157 +(4) +— +— +— +642,157 +Awadhesh +Sinha +745,000 +(5) +15,134 +(3) +— +— +760,134 +Karla +Frieders +— +— +— +— +— +TERMINATION +FOR CAUSE; RESIGNATION WITHOUT GOOD REASON +Edward +R. Rosenfeld +— +— +— +— +— +Amelia +Newton Varela +— +— +— +— +— +Arvind +Dharia +— +— +— +— +— +Awadhesh +Sinha +— +— +— +— +— +Karla +Frieders +— +— +— +— +— +TERMINATION +OTHER THAN FOR CAUSE; RESIGNATION FOR GOOD REASON +Edward +R. Rosenfeld +2,034,113 +(6) +— +— +— +2,034,113 +Amelia +Newton Varela +2,175,000 +(7) +— +— +— +2,175,000 +Arvind +Dharia +642,157 +(8) +182,426 +(9) +— +— +824,583 +Awadhesh +Sinha +1,512,000 +(10) +— +— +— +1,512,000 +Karla +Frieders +196,667 +(11) +— +— +— +196,667 +TERMINATION +UPON A CHANGE-IN-CONTROL +Edward +R. Rosenfeld +3,404,167 +(12) +— +8,752,961 +(13) +— +12,157,127 +Amelia +Newton Varela +2,176,643 +(14) +— +429,146 +(13) +— +2,605,788 +Arvind +Dharia +2,062,278 +(15) +— +39,021 +(13) +— +2,101,299 +Awadhesh +Sinha +2,453,000 +(16) +— +4,858 +(13) +— +2,457,858 +Karla +Frieders +196,667 +(17) +— +— +— +196,667 +(1) Ms. +Varela’s employment agreement provides that severance payments in connection with +a change-in-control are reduced if the severance payment, when added to any other benefits +triggered by a change-of-control, is determined to constitute an “excess parachute +payment” under Sections 280G and 4999 of the Code, to the maximum amount that is +deductible to us under Section 280G of the Code. The employment agreements of Messrs. +Rosenfeld, Dharia and Sinha provide that the executive’s change-in-control severance +payment will only be reduced to the maximum amount that is deductible to us under Section +280G of the Code if the reduction provides the Named Executive Officer with the best +after-tax result; otherwise, the Named Executive Officer will receive the full amount +of the severance payment and other benefits triggered by the change-in-control and be +liable for the 20% excise tax on the excess parachute payment in addition to all other +applicable taxes. In such case, our deduction of the portion of the severance payment +constituting an excess parachute payment will be disallowed. +48 +(2) Consists +of Mr. Rosenfeld’s 2020 base salary of $992,250, which would be paid at regular +intervals. +(3) Consists +of medical benefits. +(4) Consists +of Mr. Dharia’s 2020 base salary of $642,157, which would be paid at regular intervals. +(5) Consists +of Mr. Sinha’s 2020 base salary of $745,000, which would be paid at regular intervals. +(6) Consists +of the base salary of $992,250 and $1,041,863 for 2020 and 2021, respectively, that would +have been paid to Mr. Rosenfeld during the remainder of the term of his employment until +the expiration of his employment agreement on December 31, 2021. Mr. Rosenfeld would +receive these payments at regular intervals. +(7) Consists +of the base salary of $700,000, $725,000, and $750,000 for 2020, 2021, and 2022 that +would have been paid to Ms. Varela during the remainder of the term of her employment +until the expiration of her employment agreement on December 31, 2022. Ms. Varela would +receive these payments at regular intervals. +(8) Consists +of Mr. Dharia’s 2020 base salary of $642,157 multiplied by the number of years +(and fraction of years) remaining in the term of his employment agreement, which expires +on December 31, 2020. Mr. Dharia would receive 50% of this payment immediately and the +remaining 50% would be paid to him one year later (i.e., on December 31, 2020). +(9) Consists +of two times the sum of Mr. Dharia’s life insurance payment ($83,646 per year) +plus medical benefits ($15,134 per year). +(10) Consists +of the base salary of $745,000 and $767,000 for 2020 and 2021 that would have been paid +to Mr. Sinha during the remainder of the term of his employment until the expiration +of his employment agreement on December 31, 2021. Mr. Sinha would receive these payments +at regular intervals. +(11) Consists +of the base salary that would have been paid to Ms. Frieders during the remainder of +the term of her employment until the expiration of her employment agreement on April +30, 2020, consisting of $196,667 payable for the period from January 1, 2020 through +April 30, 2020. +(12) Consists +of two and one-half times the sum of (i) Mr. Rosenfeld’s 2019 base salary of $945,000 +plus (ii) the average cash bonus received by Mr. Rosenfeld for the three-year period +ending on December 31, 2018. Upon a change-in-control, payments (or portions thereof) +to Mr. Rosenfeld determined to constitute an “excess parachute payment” may +be reduced to the maximum amount that would be tax deductible by us pursuant to Sections +280G of the Code. Upon a hypothetical December 31, 2019 change-in-control, no payments +to Mr. Rosenfeld would have been subject to reduction. See the “Implications of +Tax and Accounting Matters” section of “Compensation Discussion and Analysis” +for a discussion of the applicability of Sections 280G and 4999 of the Code to change-in-control +payments generally. See also the summary of Mr. Rosenfeld’s employment agreement +under “Employment Arrangements.” +(13) The +amount disclosed represents the total value of the restricted stock and stock options +which would have received accelerated vesting upon a hypothetical change-in-control on +December 31, 2019. +(14) Consists +of two and one-half times the sum of (i) Ms. Varela’s 2019 base salary of $670,000 +plus (ii) the average cash bonus received by Ms. Varela for the three-year period ending +on December 31, 2018. Upon a change-in-control, payments (or portions thereof) to Ms. +Varela determined to constitute an “excess parachute payment” may be subject +to reduction to the maximum amount that would be tax deductible by us pursuant to Sections +280G of the Code. Upon a hypothetical December 31, 2019 change-in-control, no payments +to Ms. Varela would have been subject to reduction. See the “Implications of Tax +and Accounting Matters” section of “Compensation Discussion and Analysis” +for a discussion of the applicability of Sections 280G and 4999 of the Code to change-in-control +payments generally. See also the summary of Ms. Varela’s employment agreement under +“Employment Arrangements.” +49 +(15) Consists +of two and one-half times the sum of (i) Mr. Dharia’s 2019 base salary of $611,578 +plus (ii) the average cash bonus received by Mr. Dharia for the three-year period ended +on December 31, 2018. Upon a change-in-control, payments (or portions thereof) to Mr. +Dharia determined to constitute an “excess parachute payment” may be subject +to reduction to the maximum amount that would be tax deductible by us pursuant to Sections +280G of the Code. Upon a hypothetical December 31, 2019 change-in-control, no payments +to Mr. Dharia would have been subject to reduction. See the “Implications of Tax +and Accounting Matters” section of “Compensation Discussion and Analysis” +for a discussion of the applicability of Sections 280G and 4999 of the Code to change-in-control +payments generally. See also the summary of Mr. Dharia’s employment agreement under +“Employment Arrangements.” +(16) Consists +of two and one-half times the sum of (i) Mr. Sinha’s 2019 base salary of $723,000 +plus (ii) the average cash bonus received by Mr. Sinha for the three-year period ended +on December 31, 2018. Upon a change-in-control, payments (or portions thereof) to Mr. +Sinha determined to constitute an “excess parachute payment” may be subject +to reduction to the maximum amount that would be tax deductible by us pursuant to Sections +280G of the Code. Upon a hypothetical December 31, 2019 change-in-control, no payments +to Mr. Sinha would have been subject to reduction. See the “Implications of Tax +and Accounting Matters” section of “Compensation Discussion and Analysis” +for a discussion of the applicability of Sections 280G and 4999 of the Code to change-in-control +payments generally. See also the summary of Mr. Sinha’s employment agreement under +“Employment Arrangements.” +(17) Consists +of the base salary that would have been paid to Ms. Frieders during the remainder of +the term of her employment until the expiration of her employment agreement on April +30, 2020, consisting of $196,667 payable for the period from January 1, 2020 through +April 30, 2020. Ms. Frieders would receive these payments at regular intervals. +COMPENSATION +COMMITTEE REPORT +The +Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with management, and based on the review +and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis +be included in this Proxy Statement. +Submitted +by the Compensation Committee of the Company’s Board of Directors: +Peter Migliorini (Chairman) +Rose Peabody Lynch +Thomas H. Schwartz +Robert G. Smith +50 +PROPOSAL +TWO: +RATIFICATION +OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY’S +INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS +FOR THE FISCAL YEAR ENDING DECEMBER 31, 2020 +On +March 6, 2020, the Audit Committee appointed Ernst & Young LLP (“EY”) as our independent registered public accounting +firm to conduct the audit of our books and records for the fiscal year ending December 31, 2020. Prior to the appointment of EY, +EisnerAmper LLP (“EisnerAmper”) served as our independent registered public accountants since 1995. +In +evaluating the selection of an independent registered public accounting firm for 2020, the Audit Committee considered several +factors relating to potential candidates, including audit quality, the benefits of our existing auditor’s familiarity with +our Company versus a fresh perspective, the key members of the audit engagement team, the most recent internal quality control +review or Public Company Accounting Oversight Board inspection, auditor independence and its process for maintaining independence, +the risks of a change of auditors, and the firm’s international scope and presence. In addition, the Audit Committee evaluated +our Company’s requirements in light of the growth and complexity of its business and the increasing international aspects +of its operations. As a result of this evaluation, the Audit Committee selected EY as our Company’s independent registered +public accounting firm for the fiscal year ending December 31, 2020. +Although +ratification by stockholders is not required by our organizational documents or any applicable law, the Audit Committee has determined +that requesting ratification by stockholders of its appointment of EY as our independent registered public accountants is a matter +of good corporate practice. If stockholders do not ratify the selection, the Audit Committee will reconsider whether or not to +retain EY, but may still retain that accounting firm. Even if the selection is ratified, the Audit Committee, in its discretion, +may change the appointment at any time during the year if it determines that such a change would be in our best interest and that +of our stockholders. +Representatives +of EY are expected to be present at the Annual Meeting to respond to appropriate questions and to make a statement should they +so desire. Representatives of EisnerAmper are not expected to attend the Annual Meeting. +Required +Disclosures +As +reported on our Current Report on Form 8-K filed with the SEC on March 11, 2020: +On +March 6, 2020, the Audit Committee dismissed EisnerAmper as our independent registered public accounting firm effective immediately. +EisnerAmper’s +reports on our consolidated financial statements for the years ended December 31, 2019 and 2018 did not contain an adverse opinion +or a disclaimer of opinion, and were not qualified or modified as to uncertainty, audit scope, or accounting principles. +During +our two most recent fiscal years ended December 31, 2019 and 2018, and the subsequent interim period through March 6, 2020, there +were (i) no disagreements, within the meaning of Item 304(a)(1)(iv) of Regulation S-K promulgated under the Securities Exchange +Act of 1934, as amended (“Regulation S-K”), and the related instructions thereto, with EisnerAmper on any matter of +accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not +resolved to the satisfaction of EisnerAmper, would have caused it to make reference to the subject matter of the disagreements +in connection with its reports on our consolidated financial statements for such years, and (ii) no “reportable events” +within the meaning of Item 304(a)(1)(v) of Regulation S-K and the related instructions thereto. +On +March 6, 2020, the Audit Committee approved the appointment of EY as our independent registered public accounting firm, effective +upon dismissal of EisnerAmper on March 5, 2020. During our two most recent fiscal years ended December 31, 2019 and 2018, and +the subsequent interim period through March 5, 2020, neither we nor anyone acting on our behalf consulted with EY regarding any +of the matters or events set forth in Item 304(a)(2) of Regulation S-K. +Required +Vote +The +affirmative vote of the holders of a majority of the outstanding shares of Common Stock present or represented by proxy and entitled +to vote at the Annual Meeting is required to ratify the Audit Committee’s selection of Ernst & Young LLP. +Recommendation +of the Board of Directors +The +Board of Directors unanimously recommends a vote “FOR” the ratification of the appointment of Ernst & Young LLP +as our independent registered public accountants for the fiscal year ending December 31, 2020. Unless marked to the contrary, +proxies received from stockholders will be voted in favor of ratifying the appointment of Ernst & Young LLP as our independent +registered public accountants for the fiscal year ending December 31, 2020. +51 +Independent +Registered Public Accounting Firm’s Fees and Services +The +aggregate fees billed to us by EisnerAmper LLP for professional services rendered for each of the past two years are set forth +below: +Year Ended December 31, +2019 +2018 +Audit Fees (1) +$ 1,259,500 +$ 1,310,000 +Audit-Related Fees (2) +127,500 +235,284 +Tax Fees +— +— +All Other Fees (3) +120,000 +— +Total +$ 1,507,000 +$ 1,545,284 +(1) Represents +the aggregate fees billed for (a) the audit of our annual financial statements, (b) the +reviews of the financial statements included in our Quarterly Reports on Form 10-Q, (c) +other statutory and regulatory filings or engagements and (d) the audit of our internal +controls over financial reporting. +(2) Represents +the aggregate fees billed for audit-related fees related to assurance and related services. +Includes, among others, the audit of our employee benefit plans and other accounting +related consultations and services rendered in connection with due diligence performed +for our business acquisitions. +(3) Represents +fees in connection with the audit process and internal controls relating to the newly +adopted lease accounting standard. +52 +Audit +Committee’s Pre-Approval Policies and Procedures +Consistent +with SEC policies regarding auditor independence, the Audit Committee has responsibility for appointing, setting compensation +and overseeing the work of our independent registered public accountants. In recognition of this responsibility, the Audit Committee +has established a policy to review and pre-approve all audit and permissible non-audit services provided by the independent registered +public accountants. These services may include audit services, audit-related services, tax services and other services. +Prior +to engagement of the independent auditor for next year’s audit, the Audit Committee will pre-approve all auditing services +and all permitted non-audit services (including the fees and terms thereof), except those excluded from requiring pre-approval +based upon the de minimus exception set forth in Section 10A(i)(1)(B) of the Exchange Act. +The +Audit Committee’s pre-approval policies and procedures are as follows: (a) prior to each fiscal year, the Audit Committee +pre-approves a schedule of estimated fees for proposed non-prohibited audit and non-audit services, and (b) actual amounts paid +are monitored by our financial management and reported to the Audit Committee. +All +work performed by EisnerAmper LLP as described above under the captions Audit Fees, Audit-Related Fees, Tax Fees and All Other +Fees has been approved or pre-approved by the Audit Committee pursuant to the provisions of the Audit Committee’s charter. +The Audit Committee has considered and concluded that the provision of non-audit services is compatible with maintaining the independence +of EisnerAmper LLP. +AUDIT +COMMITTEE REPORT +The +Audit Committee reviewed the Company’s audited financial statements for the 2019 Fiscal Year and met with both management +and representatives of EisnerAmper LLP, our independent registered public accountants for that year, to discuss such audited financial +statements. Management and our independent registered public accountants have represented to the Audit Committee that the financial +statements were prepared in accordance with accounting principles generally accepted in the United States of America. The Audit +Committee has received from and discussed with EisnerAmper LLP the written disclosures and the letter regarding EisnerAmper LLP’s +communications with the Audit Committee concerning independence as required by applicable requirements of the Public Company Accounting +Oversight Board and discussed with EisnerAmper LLP the independence of EisnerAmper LLP. The Audit Committee also discussed with +EisnerAmper LLP any matters required to be discussed by applicable requirements of the Public Company Accounting Oversight Board +and the SEC. Based on these reviews and discussions, the Audit Committee recommended to the Board that the Company’s audited +financial statements be included in the Company’s Annual Report on Form 10-K for the 2019 Fiscal Year. +Submitted +by the Audit Committee of the Company’s Board of Directors: +Richard P. Randall (Chairman) +Al Ferrara +Mitchell S. Klipper +Ravi Sachdev +53 +PROPOSAL +THREE: +NON-BINDING +ADVISORY VOTE ON EXECUTIVE COMPENSATION +Section +14A of the Exchange Act, as created by Section 951 of the Dodd-Frank Act, and the rules and regulations promulgated thereunder, +require a publicly traded company to include a resolution in its proxy statement at least once every three years seeking stockholder +approval, on an advisory or non-binding basis, of the compensation of the named executive officers as disclosed in such company’s +proxy statement pursuant to the compensation rules of the SEC. At our 2018 Annual Meeting of Stockholders, our stockholders approved, +on an advisory basis, the holding of an advisory vote to approve executive compensation (commonly known as a “say-on-pay” +proposal) annually. Based on these results, the Board of Directors determined to hold its advisory vote to approve executive compensation +annually until the next frequency vote, which is scheduled to occur at the 2023 annual meeting of stockholders. Accordingly, we +are providing stockholders with a non-binding advisory vote on the compensation of our Named Executive Officers. +As +described in more detail in the Compensation Discussion and Analysis section, which begins on page 24 of this Proxy Statement, +the overall objective of our executive compensation programs and practices is to support delivery of sustained operating and financial +performance results with the ultimate goal being to create and maximize value for our stockholders on a long-term basis. We believe +that our executive compensation programs and practices serve the interests of our stockholders by enabling us to attract and retain +an experienced and effective management team whose combined knowledge of our business and the fashion footwear and accessories +industries has proved extremely valuable in delivering results for our stockholders. The Compensation Committee and the Board +of Directors believe that our compensation programs and practices as articulated in the Compensation Discussion and Analysis section +of this Proxy Statement effectively implement our philosophy of aligning compensation to stockholder interests and that the compensation +received by our Named Executive Officers in the 2019 Fiscal Year reflects and supports such philosophy and goal and is commensurate +with our performance and strategic position. We will continue to review and modify our executive compensation programs to address +evolving best practices and changing regulatory requirements. +We +encourage stockholders to read the Compensation Discussion and Analysis section of this Proxy Statement, as well as the Summary +Compensation Table and other related compensation tables and narrative disclosure contained in this Proxy Statement, all of which +describe and explain in detail the compensation of our Named Executive Officers in the 2019 Fiscal Year. +The +following resolution is submitted for stockholder approval: +RESOLVED , +that the stockholders of Steven Madden, Ltd. (the “Company”) approve, on a non-binding advisory basis, the compensation +paid to the Named Executive Officers of the Company as disclosed pursuant to the compensation disclosure rules of the Securities +and Exchange Commission, including the executive compensation as described in the section captioned “Compensation Discussion +and Analysis,” the Summary Compensation Table and related tabular disclosure and narrative discussion regarding compensation +of Named Executive Officers under the caption “Executive Compensation” contained in the Company’s Proxy Statement +dated April 6, 2019. +54 +This +vote is not intended to address any specific item of compensation, but rather the overall compensation of our Named Executive +Officers and the compensation programs and practices described in this Proxy Statement. While this advisory vote on executive +compensation, commonly referred to as a “say-on-pay” advisory vote, is required by Section 14A of the Exchange Act, +it is not binding on our Board of Directors and may not be construed as overruling any decision by the Board of Directors or the +Compensation Committee. However, we value the opinions of our stockholders. To the extent there is a significant vote against +the compensation of the Named Executive Officers as disclosed in this Proxy Statement, the Board of Directors and the Compensation +Committee will consider the outcome of the vote when considering future compensation arrangements and evaluate whether any actions +are necessary to address the stockholders’ concerns. +Required +Vote +Approval +of this resolution requires the affirmative vote of a majority of the shares of Common Stock present or represented by proxy and +entitled to vote at the Annual Meeting. +Recommendation +of the Board of Directors +The +Board of Directors unanimously recommends a vote “FOR” the resolution approving the overall compensation of the Named +Executive Officers for the 2019 Fiscal Year. +OTHER +MATTERS +At +the date of this Proxy Statement, we have no knowledge of any business other than that described above that will be presented +at the Annual Meeting. If any other business should properly come before the Annual Meeting in connection therewith, it is intended +that the persons named in the accompanying proxy will have discretionary authority to vote the shares that they represent. +WHETHER +OR NOT YOU EXPECT TO BE PRESENT AT THE ANNUAL MEETING, PLEASE MARK, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY CARD PROMPTLY. +ALTERNATIVELY, YOU MAY VOTE YOUR SHARES BY TELEPHONE OR THROUGH THE INTERNET AS DESCRIBED ON THE ACCOMPANYING PROXY CARD. YOUR +VOTE IS IMPORTANT. IF YOU ARE A STOCKHOLDER OF RECORD AND ATTEND THE ANNUAL MEETING AND WISH TO VOTE IN PERSON, YOU MAY WITHDRAW +YOUR PROXY AT ANY TIME PRIOR TO THE VOTE. +STEVEN MADDEN, LTD. +April 6, 2020 +By: +Arvind Dharia +Secretary +55 +ANNEX +A - RECONCILIATION OF ADJUSTED RESULTS (NON-GAAP) +The within +Proxy Statement provides our financial results both in accordance with generally accepted accounting principles in the United +States (“GAAP”) and using certain non-GAAP financial measures. In particular, the Proxy Statement provides our historic +net income and income per diluted share adjusted to exclude certain charges and recoveries, which are non-GAAP financial measures. +We use non-GAAP financial information to evaluate its operating performance and in order to represent the manner in which we conduct +and view our business. Additionally, we believe the information assists investors in comparing our performance across reporting +periods on a consistent basis by excluding items that are not indicative of its core business. The non-GAAP financial information +is provided in addition to, and not as an alternative to, our reported results prepared in accordance with GAAP. +Reconciliation +of Net Income and Diluted Income Per Share (GAAP Basis) to Adjusted Net Income and Adjusted Diluted Income Per Share (Non-GAAP +Basis) +Twelve Months +Ended +December 31, +2019 +Twelve Months +Ended +December 31, +2018 +GAAP net income attributable to Steven Madden, Ltd. +$ 141,311 +$ 129,136 +After-tax impact of expense in connection with provision for legal settlement and related fees +3,016 +2,135 +After-tax impact of expense in connection with early lease termination charges and the impairment of lease right of use assets +4,063 +343 +After-tax impact of expense in connection with the termination of a joint venture +204 +— +After-tax impact of expense in connection with the acquisitions of GREATS and BB Dakota +839 +— +After-tax impact of expense in connection with divisional headquarters relocation +501 +— +After-tax impact of the net benefit in connection with the change in a contingent liability and the acceleration of amortization related to the termination of the Kate Spade license agreement +(1,399 ) +— +After-tax impact associated with the impairment related to the Brian Atwood trademark +3,033 +— +Tax expense in connection with deferred tax and other tax adjustments +2,590 +— +After-tax impact of expense in connection with the integration of the Schwartz & Benjamin acquisition and the related restructuring +— +1,536 +After-tax impact of expense in connection with a warehouse consolidation +— +914 +After-tax impact of impairment preferred interest in Brian Atwood +Italia Holding, LLC +— +1,028 +After-tax impact of bad debt expense and write-off of an unamortized buying agency support payment agreement associated with the Payless ShoeSource bankruptcies +8,602 +11,481 +Tax expense resulting from the Tax Cuts and Jobs Act transition +tax and taxing authorities audit and prepaid tax adjustments +related to prior years +— +$ 11,136 +Adjusted net income attributable to Steven Madden, Ltd. +$ 162,760 +$ 157,710 +GAAP diluted income per share +$ 1.69 +$ 1.50 +Adjusted diluted income per share +$ 1.95 +$ 1.83 +Diluted shares +83,646 +86,097 +STEVE MADDEN +STEVEN MADDEN, LTD. +ATTN: ARVIND DHARIA +52-16 BARNETT AVENUE +LONG ISLAND CITY, NY 11104 +VOTE +BY INTERNET - www.proxyvote.com +Use the Internet to transmit your voting instructions and +for electronic delivery of information up until 11:59 p.m. Eastern Time on May 21, 2020. +Have your proxy card in hand when you access the web site and follow the instructions +to obtain your records and to create an electronic voting instruction form. +ELECTRONIC +DELIVERY OF FUTURE PROXY MATERIALS +If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving +all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for +electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that +you agree to receive or access proxy materials electronically in future years. +VOTE +BY PHONE - 1-800-690-6903 +Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time on May +21, 2020. Have your proxy card in hand when you call and then follow the instructions. +VOTE +BY MAIL +Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, +c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. +TO +VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: +D10014-P34277 KEEP THIS PORTION FOR YOUR RECORDS +DETACH +AND RETURN THIS PORTION ONLY +THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. +STEVEN MADDEN, +LTD. +For +All +Withhold +All +For All +Except +To withhold authority +to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the +line below. +The Board of Directors +recommends you vote +FOR the following: +1. +Election of Directors +o +o +o +Nominees: +01) +Edward +R. Rosenfeld +06 ) +Ravi +Sachdev +02) +Al +Ferrara +07 ) +Thomas +H. Schwartz +03) +Mitchell +S. Klipper +08 ) +Robert +G. Smith +04) +Rose +Peabody Lynch +09 ) +Amelia +Newton Varela +05) +Peter +Migliorini +The Board of Directors recommends you vote FOR proposals 2 and 3. +For +Against +Abstain +2. +TO RATIFY THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2020. +o +o +o +3. +TO APPROVE, BY NON-BINDING ADVISORY VOTE, THE EXECUTIVE COMPENSATION DESCRIBED IN THE STEVEN MADDEN, LTD. PROXY STATEMENT. +o +o +o +NOTE: +In their discretion, the proxies are authorized to vote upon such other business as may properly be presented at the meeting +or any adjournments or postponements thereof. +Yes +No +Please indicate if you plan to attend this meeting. +o +o +Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. +Signature [PLEASE SIGN WITHIN +BOX] +Date +Signature (Joint Owners) +Date +Important Notice Regarding the Availability +of Proxy Materials for the Annual Meeting: +The Notice and Proxy Statement and 2019 Annual Report on 10-K are available +at www.proxyvote.com. +D100015-P34277 +STEVEN MADDEN, LTD. +THIS PROXY IS BEING SOLICITED ON BEHALF OF +THE BOARD OF DIRECTORS +PLEASE CLEARLY INDICATE A RESPONSE BY CHECKING ONE OF THE +BOXES NEXT TO EACH OF THE PROPOSALS +The undersigned stockholder(s) of Steven Madden, Ltd. (the “Company”) hereby +appoint(s) Edward R. Rosenfeld and Arvind Dharia, and each of them, as attorneys and proxies, each with power of substitution +and revocation, to represent the undersigned at the Annual Meeting of Stockholders of the Company to be held at the Company’s +showroom located at 1370 Avenue of the Americas, 14th Floor, New York, New York at 10:00 a.m., local time, on May 22, 2020 and at +any adjournments or postponements thereof, with authority to vote all shares of Common Stock of the Company held or owned by the undersigned +on March 30, 2020, in accordance with the directions indicated herein. +THIS +PROXY WILL BE VOTED AS SPECIFIED HEREIN; UNLESS OTHERWISE INDICATED, THIS PROXY WILL +BE VOTED (1) FOR THE ELECTION OF THE NINE (9) NOMINEES NAMED IN ITEM 1, (2) FOR +THE RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY’S INDEPENDENT +REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR 2020, AND (3) FOR THE APPROVAL +OF THE EXECUTIVE COMPENSATION DESCRIBED IN THE COMPANY’S PROXY STATEMENT. THIS PROXY +WILL BE VOTED IN THE DISCRETION OF THE PROXIES ON ANY OTHER MATTER THAT MAY PROPERLY +COME BEFORE THE MEETING. +Continued and to be signed on reverse side \ No newline at end of file diff --git a/raw/proxies/0000913241/0001019056-20-000260/proxy_rpt.txt b/raw/proxies/0000913241/0001019056-20-000260/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..50ef35aff457e16f22711afb6b99c7344200d51f --- /dev/null +++ b/raw/proxies/0000913241/0001019056-20-000260/proxy_rpt.txt @@ -0,0 +1,6 @@ +related party transaction disclosures. +If +a director is a party to or in some manner involved in a transaction involving us, he or she will be recused from all discussions +and decisions about the transaction. The transaction must be approved in advance whenever practicable, and if not practicable, +must be ratified as promptly as practicable. +COMPENSATION \ No newline at end of file diff --git a/raw/proxies/0000913241/0001019056-21-000235/proxy.txt b/raw/proxies/0000913241/0001019056-21-000235/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..3bafe1b0bb1e8640a97b36f170b899ecf7c46389 --- /dev/null +++ b/raw/proxies/0000913241/0001019056-21-000235/proxy.txt @@ -0,0 +1,4253 @@ +DEF 14A +1 +smadden_def14a.htm +DEF 14A +UNITED +STATES +SECURITIES AND EXCHANGE COMMISSION +WASHINGTON, D.C. 20549 +SCHEDULE +14A +(RULE 14A-101) +INFORMATION +REQUIRED IN PROXY STATEMENT +SCHEDULE 14A INFORMATION +PROXY +STATEMENT PURSUANT TO SECTION 14(A) OF THE +SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. __) +Filed by the +Registrant þ +Filed +by a Party other than the Registrant o +Check +the appropriate box: +o +Preliminary Proxy Statement +o +Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +þ +Definitive Proxy Statement +o +Definitive Additional Materials +o +Soliciting Material Pursuant to §240.14a-12 +Steven +Madden, Ltd. +(Name of Registrant as Specified in Its Charter) +(Name +of Person(s) Filing Proxy Statement, if Other Than the Registrant) +Payment +of Filing Fee (Check the appropriate box): +þ +No fee required. +o +Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. +(1) Title +of each class of securities to which transaction applies: +(2) Aggregate +number of securities to which transaction applies: +(3) Per +unit price or other underlying value of transaction computed pursuant to Exchange Act +Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it +was determined): +(4) Proposed +maximum aggregate value of transaction: +(5) Total +fee paid: +o +Fee paid previously with preliminary materials. +o +Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and +identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, +or the Form or Schedule and the date of its filing. +(1) Amount +Previously Paid: +(2) Form, +Schedule or Registration Statement No.: +(3) Filing +Party: +(4) Date +Filed: +STEVEN +MADDEN, LTD. +52-16 Barnett Avenue +Long Island City, New York 11104 +March 23, 2021 +DEAR STAKEHOLDERS, +Due to the +devastating impact of COVID-19, 2020 was the most challenging year in our company’s history. While the pandemic had a severe +negative impact on our business and our financial results, we relied on our strengths – an agile business model, a strong +balance sheet, and our talented and resourceful employees – to successfully navigate the crisis and position the company +for an accelerated recovery. We continued investing in our brands and our digital capabilities while reducing expenses in other +areas, and we utilized our test-and-react strategy and speed-to-market capability to quickly adjust our product mix to align with +changing consumer preferences. We also made significant progress on our ESG initiatives. Outlined below are some of the year’s +accomplishments. +PROTECTING +OUR EMPLOYEES & THE BROADER COMMUNITY +Since the +crisis began, our top priority has been protecting the safety and well-being of our employees and the broader community. I’m +proud of the steps we took to safeguard the health of our employees and our customers – including proactively closing our +stores earlier and keeping them closed longer than most of our industry peers – and how we supported our communities through +donations of medical grade masks to hospitals, non-medical face coverings to homeless shelters, meals for health care workers, +financial assistance for organizations combating hunger, and more. +PRESERVING +LIQUIDITY & ENHANCING FINANCIAL FLEXIBILITY +When the +severe impact of COVID-19 became clear, we quickly implemented a number of precautionary measures to preserve liquidity and enhance +financial flexibility, including suspending dividends and share repurchases; cutting operating expenses, capital expenditures, +and inventory receipts; and putting in place a new $150 million asset-based revolving credit facility. These actions enabled us +to generate strong free cash flow through the crisis, and we ended 2020 with $287 million in cash and short-term investments and +no debt. Based on our strong financial position at year end, our Board of Directors approved the reinstatement of a quarterly +cash dividend of $0.15 per share beginning in the first quarter of 2021, and we announced our plan to resume share repurchases +in future periods. +ADAPTING +TO THE CHANGING MARKETPLACE +With COVID-19 +driving meaningful shifts in consumer behavior, we took swift action to address the rapidly changing marketplace. In terms of +product, we utilized our test-and-react strategy and industry-leading speed-to-market capability to quickly adjust our merchandise +assortments to align with changed consumer preferences, pivoting toward more casual and comfortable styles while de-emphasizing +dressier products. And with respect to distribution, we significantly accelerated our digital commerce initiatives, increasing +investment in that area even as we pulled back spending in other parts of the business. We added high-level talent to the organization, +invested in our data science capabilities, accelerated digital marketing spend, launched our new Try Before You Buy payment option, +rolled out Buy Online Pick Up In Store to all U.S. full-price retail stores, introduced new enhanced delivery and return options, +and more. Overall, our company-operated e-commerce revenue grew nearly 50% in 2020 on top of 58% growth in 2019, including 55% +growth in our Steve Madden e-commerce business on top of a 51% increase in 2019. Importantly, company-operated e-commerce profit +margins also expanded meaningfully for the third year in a row. +BUILDING +UPON OUR FOUNDATION FOR CORPORATE SOCIAL RESPONSIBILITY +The challenges +we all faced in 2020 emphasized to us our responsibility to all our stakeholders and the opportunity we have to create positive +change for our people and our communities. In addition to the COVID-19 relief efforts mentioned above, we made donations to various +organizations promoting social justice and announced a partnership with the Fearless Fund, an organization working to bridge the +gap in venture capital funding for women of color. We also made progress in lessening our environmental impact by introducing +new Steve Madden shoeboxes that are 100% recyclable, partnering with industry trade group FDRA on a pre-consumer waste management +project, piloting a new shoe takeback program in our stores, and increasing the use of recycled and renewable materials in products +across our business. In Spring 2021, we launched Cool Planet by Steve Madden, a new brand offering fashion footwear using recycled, +renewable, and other environmentally preferred materials. For every pair of Cool Planet shoes sold, we will plant a tree in partnership +with One Tree Planted, a non-profit organization dedicated to reforestation efforts around the world. +Overall, +we are committed to meaningful and measurable improvement in the impacts we have – and to being transparent about our actions. +In July, we published our first Sustainability report, which outlines our overall corporate social responsibility roadmap and +how we intend to ensure that CSR and sustainability are embedded in everything we do going forward, and we look forward to updating +you on our progress when we publish our next report later this year. +LOOKING +FORWARD +Overall, +our company was tested like never before in 2020, and I’m extremely proud of how our teams responded and all they were able +to accomplish. As we look to 2021, our focus remains on creating trend-right product and getting it to market quickly, deepening +connections with our consumers through enhanced marketing, driving our digital commerce agenda, expanding in international markets, +and efficiently managing our inventory and our expenses – all while working to create positive change for our people and +our communities. And while the ongoing pandemic will continue to impact the business in the near term, I’m confident that +the steps we have taken during the crisis – combined with the strength of our brands and our business model – leave +us well-positioned to capitalize on market share opportunities and create value for our stakeholders over the long term. +I’d +like to thank our employees for their perseverance and dedication, our customers for their loyalty, and you, our stakeholders, +for your continued support. +Sincerely, +EDWARD ROSENFELD +CHAIRMAN +AND CEO +STEVEN +MADDEN, LTD. +52-16 Barnett Avenue +Long Island City, New York 11104 +NOTICE +OF ANNUAL MEETING OF STOCKHOLDERS +TO BE HELD ON MAY 26, 2021 +TO THE +STOCKHOLDERS: +The +Annual Meeting of Stockholders (the “Annual Meeting”) of Steven Madden, Ltd. (the “Company”) will be held +on Wednesday, May 26, 2021, at 10:00 a.m. Eastern time in a virtual-only format, for the purposes stated below: +1. to +elect nine (9) directors to the Board of Directors of the Company; +2. to +ratify the appointment of Ernst & Young LLP as the Company’s independent registered +public accounting firm for the fiscal year ending December 31, 2021; +3. to +approve, on a non-binding advisory basis, the compensation of certain executive officers +as disclosed in the accompanying proxy statement; and +4. to +transact such other business as may properly come before the Annual Meeting or any adjournments +thereof. +Only stockholders of record at the +close of business on March 29, 2021, the record date for the Annual Meeting, are entitled to notice of and to vote at the Annual +Meeting and any adjournments thereof. Stockholders who own shares of the Company’s common stock beneficially through a bank, +broker or other nominee will also be entitled to attend the Annual Meeting. To participate in the Annual Meeting at www.virtualshareholdermeeting.com/SHOO2021, +you must enter the 16-digit control number found on your proxy card or your Notice of Availability of Proxy Materials. Whether +or not you plan to attend the Annual Meeting, we urge you to vote in advance of the Annual Meeting by one of the methods described +below. If you have voted by Internet, by phone or by mail before the Annual Meeting, you do not need to vote again. Guests may +listen to the Annual Meeting, but are not entitled to participate. +IMPORTANT +NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 26, 2021: THE NOTICE +OF ANNUAL MEETING AND PROXY STATEMENT, ANNUAL REPORT, ELECTRONIC PROXY CARD AND ANY OTHER MATERIALS CONCERNING THE ANNUAL MEETING, +TOGETHER WITH ANY AMENDMENTS TO ANY OF THESE MATERIALS, ARE AVAILABLE ON THE INTERNET AT WWW.PROXYVOTE.COM . +April 8, 2021 +BY ORDER OF THE BOARD OF DIRECTORS +Long Island City, New York +Lisa Keith +Secretary +WHETHER +OR NOT YOU EXPECT TO BE PRESENT AT THE ANNUAL MEETING, PLEASE MARK, DATE AND SIGN THE ACCOMPANYING FORM OF PROXY AND MAIL IT PROMPTLY +IN THE ENVELOPE PROVIDED TO: VOTE PROCESSING, C/O BROADRIDGE, 51 MERCEDES WAY, EDGEWOOD, NEW YORK 11717. ALTERNATIVELY, YOU MAY +VOTE YOUR SHARES BY TELEPHONE OR THROUGH THE INTERNET AS DESCRIBED ON THE ACCOMPANYING PROXY CARD. +TABLE +OF CONTENTS +GENERAL INFORMATION +1 +Notice of Internet Availability of Proxy Materials +1 +QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING +2 +PROPOSAL ONE: ELECTION OF DIRECTORS +6 +Stockholder Nominations for Board Membership +6 +Directors and Nominees for Election to the Board of Directors +7 +CORPORATE GOVERNANCE +12 +The Board of Directors +12 +Director Independence +12 +Director Attendance at Meetings +12 +Director Election (Majority Voting) Policy +12 +Committees of the Board +13 +Board Leadership Structure, Risk Oversight, Executive Sessions of Non-Employee Directors, and Communications Between Stockholders and the Board +16 +Codes of Business Conduct and Ethics +17 +Corporate Governance Guidelines +17 +Stock Ownership Guidelines +18 +Prohibition on Hedging and Pledging of Our Common Stock +18 +Corporate Social Responsibility Policy +18 +Certain Relationships and Related Party Transactions +18 +Review, Approval or Ratification of Transactions with Related Persons +20 +COMPENSATION OF DIRECTORS IN THE 2020 FISCAL YEAR +21 +STOCK OWNERSHIP +22 +Security Ownership of Certain Beneficial Owners +22 +Security Ownership of Directors and Executive Officers +23 +EXECUTIVE COMPENSATION +25 +Compensation Discussion and Analysis +25 +Compensation Committee Interlocks and Insider Participation +34 +Executive Officers +34 +SUMMARY COMPENSATION TABLE +36 +Employment Arrangements +37 +GRANTS OF PLAN-BASED AWARDS IN THE 2020 FISCAL YEAR +43 +OUTSTANDING EQUITY AWARDS AT END OF THE 2020 FISCAL YEAR +44 +OPTION EXERCISES AND STOCK VESTED IN THE 2020 FISCAL YEAR +45 +SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS +46 +EQUITY COMPENSATION PLAN INFORMATION +46 +POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE-IN-CONTROL +47 +COMPENSATION COMMITTEE REPORT +50 +PROPOSAL TWO: RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR ENDING DECEMBER 31, 2021 +50 +AUDIT COMMITTEE REPORT +52 +PROPOSAL THREE: NON-BINDING ADVISORY VOTE ON EXECUTIVE COMPENSATION +53 +i +STEVEN +MADDEN, LTD. +52-16 Barnett Avenue +Long Island City, New York 11104 +PROXY +STATEMENT +GENERAL INFORMATION +The +Board of Directors of Steven Madden, Ltd. requests your proxy in connection with the Annual Meeting of Stockholders (the “Annual +Meeting”) of Steven Madden, Ltd. (the “Company,” “we,” “us,” or “our”). +The Annual Meeting will be held on Wednesday, May 26, 2021, at 10:00 a.m. Eastern time in a virtual-only format. Proxies also +may be voted at any adjournments or postponements of the Annual Meeting. You will not be able to attend the Annual Meeting physically +in person. +On +or about April 9, 2021 a notice containing instructions on how to access this Proxy Statement, the accompanying proxy card and +related materials online is being mailed to holders of record of our common stock, $0.0001 par value (the “Common Stock”), +at the close of business on March 29, 2021 (the “Record Date”). Our Annual Report for the fiscal year ended December +31, 2020 (the “2020 Fiscal Year”), including audited financial statements, is included in the materials that are accessible +online. This Proxy Statement contains information about the Annual Meeting as well as information regarding the voting process, +director elections, our corporate governance programs, and executive and director compensation, among other things. We recommend +that you read all of these materials. +The +Annual Meeting has been called to consider and take action on the following proposals: +· to +elect nine (9) directors to our Board of Directors to serve until the next annual meeting +of our stockholders and until his or her successor is elected and qualified; +· to +ratify the appointment of Ernst & Young LLP as our independent registered public +accounting firm for the fiscal year ending December 31, 2021; +· to +approve, on a non-binding advisory basis, the compensation of certain executive officers +as disclosed in this Proxy Statement; and +· to +transact such other business as may properly come before the Annual Meeting and any adjournments +thereof. +The +Board of Directors knows of no other matters to be presented for action at the Annual Meeting. However, if any other matters properly +come before the Annual Meeting, the persons named in the proxy will vote on such other matters or for other nominees for director +in accordance with their best judgment. Our Board of Directors recommends that the stockholders vote “FOR” each of +Proposals One, Two and Three. Only holders of record of our Common Stock at the close of business on the Record Date will be entitled +to vote at the Annual Meeting. +We +are incorporated in the State of Delaware. Our principal executive offices are located at 52-16 Barnett Avenue, Long Island City, +New York 11104, and our telephone number is (718) 446-1800. +Notice +of Internet Availability of Proxy Materials +We +continue to take advantage of the Securities and Exchange Commission (the “SEC”) “e-proxy” rules allowing +us to furnish proxy materials through the Internet for the benefit and convenience of our stockholders. By using the e-proxy rules, +we can expedite the receipt by stockholders of proxy materials while lowering the costs and reducing the environmental impact +associated with our Annual Meeting. On or about April 9, 2021, we will furnish a Notice of Internet Availability of Proxy Materials +(the “Availability Notice”) to most of our stockholders containing instructions on how to access the proxy materials +and to vote online. In addition, instructions on how to request a printed copy of these materials will be found on the Availability +Notice. If you received an Availability Notice by mail, you will not receive a paper copy of the proxy materials unless you request +such materials by following the instructions contained in the Availability Notice. +For +more information on voting your Common Stock, please refer to the following “Questions and Answers” section. +1 +QUESTIONS +AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING +1. What is included in the +proxy materials? What is a proxy statement and what is a proxy? +The +proxy materials for our Annual Meeting include the Notice of Annual Meeting, this Proxy Statement and our Annual Report on Form +10-K for the year ended December 31, 2020. If you received a paper copy of these materials, the proxy materials also include a +proxy card or voting instruction form. +A +proxy is the delegation of your right to vote the Common Stock you own to another person, who is called your proxy. When you designate +someone as your proxy in a written document, that document is called a proxy or a proxy card. SEC regulations require that we +furnish a proxy statement to you when we ask you to designate a proxy to vote your shares of Common Stock on your behalf. We have +designated our officers Edward R. Rosenfeld and Lisa Keith as proxies for the Annual Meeting. +2. Who may vote at the Annual +Meeting? +Because +we are holding the Annual Meeting entirely online, both stockholders of record and beneficial owners of our Common Stock as of +the close of business on the Record Date are entitled to vote at the Annual Meeting. On the Record Date, there were 82,823,862 +shares of our Common Stock outstanding (excluding treasury shares) held by approximately 165 registered holders of record and +23,750 beneficial owners. +3. What is the difference +between holding shares as a stockholder of record and as a beneficial owner? +If +your shares were registered as of the Record Date directly in your name with our registrar and transfer agent, American Stock +Transfer & Trust Company, you are a “stockholder of record” with respect to those shares, and in such case, we +have provided the Availability Notice directly to you. Upon your request, we will send this Proxy Statement and the accompanying +proxy materials directly to you. If your shares were held as of the Record Date in a stock brokerage account or by a bank or nominee, +your shares are held in “street name” and you are considered the “beneficial owner” of those shares. In +that case, your broker, bank or other stockholder of record has provided the Availability Notice to you and, upon your request, +will provide this Proxy Statement and the accompanying proxy materials to you. As the beneficial owner, you have the right to +direct your broker, bank or other stockholder of record how to vote your shares held in “street name.” +4. What is considered a quorum +to conduct the Annual Meeting? +The +presence, in person or by proxy, of the holders of a majority of the shares entitled to vote is necessary to constitute a quorum +for the purpose of transacting business at the Annual Meeting. Under Delaware law, abstentions and broker non-votes as described +below are counted as present for purposes of determining the presence or absence of a quorum for the transaction of business. +If a quorum is not present, the Annual Meeting may be adjourned until a quorum is obtained. +5. What is a “broker +non-vote”? +If +your shares are held in “street name” by a broker, bank or other nominee, your broker, bank or other nominee is the +record holder; however, the broker, bank or other nominee is required to vote the shares in accordance with your instructions. +If you do not give instructions to your broker, bank or other nominee, it may, if permitted by the organizations of which it is +a member, exercise discretionary voting power to vote your shares. A “broker non-vote” occurs when a broker, bank +or other nominee of record holding shares for a beneficial owner has not received voting instructions from the beneficial owner +and either chooses not to vote the shares on a particular proposal as to which the holder has discretionary voting power or does +not vote on a particular proposal because that holder does not have discretionary voting power for that particular item. Broker +non-votes are considered present in determining whether a quorum is present. +2 +If +you hold your shares in “street name,” we strongly encourage you to provide instructions regarding the voting of your +shares, because your broker, bank or other nominee cannot vote your shares with respect to certain of the proposals being presented +at the Annual Meeting without voting instructions from you. +6. How many votes do I have? +What shares are included on the proxy card? +For +each share of Common Stock that you own on the Record Date you are entitled to one vote on each matter presented at the Annual +Meeting. +If +you are a record holder, you will receive an Availability Notice or proxy card for all of the shares of Common Stock you hold +in certificate form, in book-entry form and in any Company benefit plan. If you are a beneficial owner, you will receive information +containing voting instructions from the broker, bank or other nominee through which you own your shares of Common Stock. +7. How +many votes are required to approve each proposal and what is the effect of abstentions +and broker non-votes? +Proposal +One (Election of Directors): Under Delaware law, directors are elected by the affirmative vote of a plurality of the shares +of Common Stock present in person or represented by proxy at the Annual Meeting and entitled to vote on this proposal. This means +that the director nominees who receive the greatest number of affirmative votes cast are elected as directors, subject to our +Director Election (Majority Voting) Policy discussed in Proposal One below. Although the number of directors constituting our +Board of Directors is fixed at ten, our Nominating/Corporate Governance Committee has nominated only nine of the current directors +to stand for election. Proxies cannot be voted for a greater number of persons than the number of nominees named. +Proposal +Two (Ratification of Appointment of Ernst & Young LLP): The affirmative vote of a majority of the shares of Common Stock +present in person or represented by proxy at the Annual Meeting and entitled to vote on this proposal is required to approve the +ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year +ending December 31, 2021. +Proposal +Three (Non-Binding Advisory Vote on Executive Compensation): The affirmative vote of a majority of the shares of Common Stock +present in person or represented by proxy at the Annual Meeting and entitled to vote on this proposal is required to approve, +on a non-binding advisory basis, the compensation of our Named Executive Officers as described in this Proxy Statement. +Other +Matters: If any other matters are presented at the Annual Meeting, they must receive the affirmative vote of a majority of +the shares of Common Stock present in person or represented by proxy at the Annual Meeting and entitled to vote on the matter +in order to be approved. +Abstentions +will have no effect on the election of directors, but will be treated as present and entitled to vote on the remaining proposals. +Therefore, abstentions will have the effect of votes “AGAINST” such proposals. +If +you do not provide your broker, bank or other nominee with instructions on how to vote your shares held in “street name,” +your broker, bank or other nominee will not be permitted to vote your shares on non-routine matters, and your shares will not +affect the outcome of proposals concerning non-routine matters. Proposal Two is considered a routine matter under applicable rules. +Proposals One and Three are considered “non-routine” matters, which means that your broker or other nominee does not +have discretion to vote your shares with respect to those proposals without voting instructions from you. If you hold your shares +in “street name,” we strongly encourage you to provide instructions regarding the voting of your shares to your broker, +bank or other nominee. +8. How can I attend and participate +in the Annual Meeting? +Our +virtual 2021 Annual Meeting will be conducted on the Internet via live audio webcast. You will be able to participate online and +submit your questions during the Annual Meeting by visiting www.virtualshareholdermeeting.com/SHOO2021 , beginning +at 10:00 a.m. Eastern time on May 26, 2021. Stockholders will be able to vote their shares electronically during the Annual Meeting. +3 +To +participate in the Annual Meeting, you will need the 16-digit control number included on your proxy card or your Availability +Notice. The Annual Meeting will begin promptly at 10:00 a.m. Eastern time. We encourage you to access the Annual Meeting prior +to the start time. Online access will begin at 9:45 a.m. Eastern time. Guests may listen to a live audio webcast of the virtual +Annual Meeting by visiting www.virtualshareholdermeeting.com/SHOO2021 , beginning at 9:45 a.m. Eastern time, but are +not entitled to participate. +The +virtual Annual Meeting platform is fully supported across browsers (Internet Explorer, Firefox, Chrome, and Safari) and devices +(desktops, laptops, tablets, and cell phones) running the most updated version of applicable software and plugins. Participants +should ensure they have a strong Internet connection wherever they intend to participate in the Annual Meeting. Participants should +also allow plenty of time to log in and ensure that they can hear streaming audio prior to the start of the Annual Meeting. +9. How can I vote my shares? +Your +vote is important. Your shares can be voted at the Annual Meeting only if you attend the Annual Meeting or are represented by +proxy. Both stockholders of record and beneficial owners can vote their shares at the Annual Meeting. To attend the Annual Meeting +and vote your shares electronically, you will need the 16-digit control number included on your Availability Notice, on your proxy +card, or on the instructions that accompanied your proxy materials. +Even +if you plan to attend the Annual Meeting, we urge you to authorize your proxy in advance. You may vote your shares in advance +of the Annual Meeting by authorizing a proxy over the Internet or by telephone. In addition, if you received a paper copy of the +proxy materials by mail, you can submit a proxy by mail by following the instructions on the proxy card. Voting your shares by +authorizing a proxy over the Internet, by telephone or by written proxy card will ensure your representation at the Annual Meeting +regardless of whether you attend the Annual Meeting. +If +you are the record holder of your shares, please authorize your proxy electronically by going to the http://www.proxyvote.com +website or by calling the toll-free number listed below and on the proxy card. Please have your Proxy Statement or proxy card +in hand when going online or calling. If you authorize your proxy via the Internet or by phone, you do not need to return your +proxy card. If you choose to authorize your proxy by mail, simply mark your proxy card and then date, sign and return it in the +postage-paid envelope provided. +VOTE +BY INTERNET +http://www.proxyvote.com +Use the Internet to transmit +your voting instructions and for electronic delivery of information. +VOTE +BY PHONE +1-800-690-6903 +Use any touch-tone telephone +to transmit your voting instructions. +VOTE +BY MAIL +Vote Processing, c/o Broadridge +51 Mercedes Way +Edgewood, New York 11717 +If you receive paper proxy +materials, mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it +to the address shown above. +If +you hold your shares beneficially in “street name” through a broker or nominee, you may be able to authorize your +proxy by telephone or the Internet as well as by mail, but you will need to obtain and follow instructions from your broker or +nominee to vote these shares. +10. May I revoke my proxy for +the Annual Meeting once I have given it? +You +may revoke your proxy at any time before it is voted at the Annual Meeting by: +· properly +executing and delivering a later-dated proxy (including a telephone or Internet proxy +authorization); +· voting +your shares electronically at the Annual Meeting; or +· sending +a written notice of revocation to the Secretary of the Company at Steven Madden, Ltd., +52-16 Barnett Avenue, Long Island City, New York 11104. +4 +11. How does the Board of Directors +recommend that I vote my shares? +Our +Board of Directors recommends that you vote: +· “FOR” +the election of each of the nine (9) director nominees; +· “FOR” +the ratification of the appointment of Ernst & Young LLP as our independent registered +public accounting firm for the fiscal year ending December 31, 2021; and +· “FOR” +the approval, on a non-binding advisory basis, of the executive compensation of our Named +Executive Officers, as disclosed in this Proxy Statement. +ALL PROXIES +RECEIVED WILL BE VOTED IN ACCORDANCE WITH THE CHOICES SPECIFIED ON SUCH PROXIES. PROXIES WILL BE VOTED IN FAVOR OF PROPOSALS ONE, +TWO, AND THREE, IF NO CONTRARY SPECIFICATION IS MADE. ALL VALID PROXIES OBTAINED WILL BE VOTED AT THE DISCRETION OF THE PERSONS +NAMED IN THE PROXY WITH RESPECT TO ANY OTHER BUSINESS THAT MAY PROPERLY COME BEFORE THE ANNUAL MEETING OR ANY ADJOURNMENTS OR +POSTPONEMENTS THEREOF. AS NOTED ABOVE, IF YOU HOLD YOUR SHARES BENEFICIALLY THROUGH A BROKER, BANK OR OTHER NOMINEE AND FAIL TO +PROVIDE SPECIFIC VOTING INSTRUCTIONS TO THAT BROKER, BANK OR OTHER NOMINEE, YOUR SHARES WILL NOT BE VOTED IN THE ELECTION OF DIRECTORS +OR THE ADVISORY VOTE ON EXECUTIVE COMPENSATION. +12. Who will bear the expenses +of this solicitation and how are proxies being solicited? +We +will pay the costs of soliciting proxies, including preparing, printing and mailing this Proxy Statement, any exhibits hereto +and the proxies solicited hereby. In addition to the use of the mails, proxies may be solicited on our behalf by our officers, +directors and employees, without additional remuneration, by personal interviews, by telephone or by electronic transmission. +We will also request brokerage firms, nominees, custodians and fiduciaries to forward proxy materials to the beneficial owners +of shares of Common Stock held of record by them and will provide reimbursements for the cost of forwarding the material in accordance +with customary charges. We have entered into an agreement with D.F. King & Co., Inc. to assist in the solicitation of proxies +and provide related advice and informational support. The total expense of this engagement, which will be borne by us, including +customary disbursements, is not expected to exceed $20,000 in the aggregate. +13. Will I be able to ask questions +at the Annual Meeting? +Edward +R. Rosenfeld, our Chairman and Chief Executive Officer, will be available to answer questions submitted by stockholders at the +conclusion of the Annual Meeting. Stockholders may submit questions for the Annual Meeting after logging in, beginning at 10:00 +a.m. Eastern time on May 26, 2021. If you wish to submit a question, you may do so by logging into the virtual meeting platform +at www.virtualshareholdermeeting.com/SHOO2021 , typing your question into the “Ask a Question” field, and +clicking “Submit.” Please submit any questions during the meeting. +Additional +information regarding the ability of stockholders to ask questions during the Annual Meeting, related rules of conduct and other +materials for the Annual Meeting will be available at www.virtualshareholdermeeting.com/SHOO202 1 . +14. What can I do if I have +technical difficulties in accessing the 2021 Annual Meeting? +Technical +support, including related technical support phone numbers, will be available on the virtual meeting platform at www.virtualshareholdermeeting.com/SHOO2021 beginning +at 9:30 a.m. Eastern time on May 26, 2021 through the conclusion of the Annual Meeting. +5 +15. How will the voting results +be reported? +The +preliminary results of the voting on the proposals will be reported at the Annual Meeting. The final certified results will be +reported in a Current Report on Form 8-K that will be filed with the SEC within four business days following the Annual Meeting. +16. How do I submit a proposal +for action at the Company’s 2022 Annual Meeting of Stockholders? +In +accordance with rules promulgated by the SEC, any stockholder who wishes to submit a proposal for inclusion in the proxy materials +to be distributed by us in connection with the 2022 Annual Meeting of Stockholders (the “2022 Annual Meeting”) must +do so no later than December 10, 2021. In addition, in accordance with Article I, Section 7(f) of our Amended and Restated By-Laws +(the “By-Laws”), in order to be properly brought before the 2022 Annual Meeting, a matter must be either (i) specified +in the notice of such meeting given by or at the direction of the Board of Directors (or any duly authorized committee thereof), +(ii) otherwise properly brought before such meeting by or at the direction of the Board of Directors (or any duly authorized committee +thereof) or (iii) specified in a notice in proper written form given by a stockholder of record on the date of the giving of the +notice and on the record date for such meeting, which notice conforms to the requirements of Article I, Section 7(f) of the By-Laws +and is delivered to, or mailed and received at, our principal executive offices not less than 120 days nor more than 150 days +prior to the first anniversary of the date of our 2021 Annual Meeting. Accordingly, any written notice given by or on behalf of +a stockholder pursuant to the foregoing clause (iii) in connection with the 2022 Annual Meeting must be received no later than +January 26, 2022 and no earlier than December 27, 2021. In addition, for business to be properly brought before the 2022 Annual +Meeting by a stockholder pursuant to the foregoing clause (iii), such stockholder shall have complied with any other applicable +requirements, including, but not limited to, the requirements of Rule 14a-8 promulgated by the SEC. +PROPOSAL +ONE: +ELECTION +OF DIRECTORS +Our +By-Laws provide that our Board of Directors shall consist of a minimum of one director and that, subject to this limitation, the +number of directors may be fixed from time to time by action of the directors. The Board of Directors has fixed the number of +directors comprising the Board of Directors at ten members. Directors are elected to serve until the next annual meeting of stockholders, +and the term of each of the current directors will expire at the Annual Meeting. +Stockholder +Nominations for Board Membership +The +Nominating/Corporate Governance Committee of the Board of Directors recommends to the Board director candidates for nomination +and election at each annual meeting of stockholders or for appointment to fill vacancies on the Board. The Nominating/Corporate +Governance Committee will review and evaluate the qualifications of proposed director candidates recommended to it from various +sources, including candidates proposed by our stockholders in accordance with the procedures established for that purpose. In +accordance with Article II, Section 5 of the By-Laws, director nominations for the 2022 Annual Meeting can only be made by a stockholder +of our Company who (i) is a stockholder of record on the date of the giving of the notice of such director nominations and on +the record date for the determination of stockholders entitled to vote at the 2022 Annual Meeting and (ii) complies with the notice +requirements and procedures set forth in Article II, Section 5 of the By-Laws. A stockholder’s notice to the Secretary of +the Company with respect to any such nominations must be timely and in proper written form pursuant to Article II, Section 5 of +the By-Laws, including containing certain information concerning the nominating or proposing stockholder and certain information +concerning the nominee. The notice must be delivered to, or mailed and received at, our principal executive offices not less than +120 days nor more than 150 days prior to the first anniversary of the date of our 2021 Annual Meeting. Accordingly, any written +notice given by or on behalf of a stockholder pursuant to Article II, Section 5 of our By-Laws in connection with the 2022 Annual +Meeting must be received no later than January 26, 2022 and no earlier than December 27, 2021. A copy of our By-Laws may be obtained +by any stockholder, without charge, upon written request to the Secretary of the Company at the address set forth above. +6 +Directors +and Nominees for Election to the Board of Directors +Upon +recommendation of the Nominating/Corporate Governance Committee of the Board of Directors, the Board of Directors has nominated +and is recommending to the stockholders the election of each of the nine nominees named below to serve as a director of our Company +until the next annual meeting of our stockholders and until his or her successor is duly elected and qualified or until his or +her earlier death, resignation or removal from office. All of the nominees except Maria Teresa Kumar were elected directors at +last year’s Annual Meeting of Stockholders. Ms. Kumar was appointed by the Board to serve as a director in January 2020, +when the number of directors was expanded to ten. All nominees have agreed to be named in this Proxy Statement and to serve on +the Board of Directors if elected. Thomas H. Schwartz, who is a current director, has not been renominated for election to the +Board, and his term as a director will end upon completion of the Annual Meeting. Even though the number of directors constituting +our Board of Directors is fixed at ten, proxies cannot be voted for a greater number of persons than the number of nominees named. +The +names and biographical summaries of our directors, including the nine persons who have been recommended by the Nominating/Corporate +Governance Committee of the Board of Directors and nominated by the Board of Directors to stand for election at the Annual Meeting, +are provided below for your information. +Our +Board of Directors is responsible for overseeing our business in a manner consistent with the Board’s fiduciary duty to +our stockholders. This significant responsibility requires that our directors consist of individuals who are well-qualified for +service on our Board and its committees and demonstrate a commitment to the success of our Company and to service in the best +interests of our stockholders. +The +following matrix identifies the relevant skills, experience and qualifications of our directors, which include the nine director +nominees. The skills and experience identified below are reviewed by the Nominating/Corporate Governance Committee, in addition +to other qualifications, and nominees are selected with a view to establishing a Board of Directors that consists of individuals +who have extensive business leadership experience, are independent, bring diverse perspectives to the Board, and possess high +ethical standards, sound business judgment and acumen, and a willingness to devote the time necessary for the Board to effectively +fulfill its responsibilities. We believe that all of the director nominees possess these qualifications and provide the Board +with a full complement of knowledge, business skills and expertise for the effective management of our Company. +Rosenfeld +Ferrara +Klipper +Kumar +Lynch +Migliorini +Sachdev +Schwartz +Smith +Varela +Knowledge, +Skills and Experience +Public +Company Board Experience +· +· +· +· +Finance/Accounting +· +· +· +· +· +· +Executive +Leadership Experience +· +· +· +· +· +· +· +· +· +· +Risk +Oversight/Management +· +· +· +Retail +Industry Experience +· +· +· +· +· +· +· +Independence +· +· +· +· +· +· +· +· +7 +In +addition to these general qualifications, provided below for each nominee for director is a discussion of the experience, qualifications, +attributes and skills that led to the Board’s conclusion that the nominee should serve as a director. +Name +Principal +Occupation +Age +Year +Became a +Director +Edward R. Rosenfeld +Chairman of the Board and Chief Executive +Officer, Steven Madden, Ltd. +45 +2008 +Al Ferrara +Retired National Director of the Retail +and Consumer Products Division of BDO USA, LLP, a major international accounting firm +70 +2019 +Mitchell S. Klipper +Retired Chief Executive Officer of Barnes +& Noble, Inc.’s Retail Group, the largest retail bookseller in the United States +63 +2018 +Maria Teresa Kumar +President and CEO of Voto Latino +47 +2021 +Rose Peabody Lynch +Retired owner of Marketing Strategies, +LLC, New York based consulting firm of which she was founder and President, which focused on strategic marketing and operating +issues for small to medium-sized companies +71 +2014 +Peter Migliorini +Sales Manager, Greschlers, Inc., a building +supplies company +72 +1996 +Ravi Sachdev +Partner, Clayton Dubilier & Rice, LLC +44 +2008 +Thomas H. Schwartz* +Owner, Sumner and Forge Investors LLC, +a real estate investment and property management company +73 +2004 +Robert Smith +Founder and Chief Executive Officer of +Phluid Project, part retail concept and part experimental platform, completely gender neutral, with a website to offer products +and programs worldwide +55 +2014 +Amelia Newton Varela +President, Steven Madden, Ltd. +49 +2016 +* Mr. Schwartz is not a nominee +for election at the Annual Meeting +Additional +Information About the Directors +Other +Public Company Directorships +Four +of our directors also currently serve as directors of other public companies: +· Mr. +Rosenfeld is a director and chairman of the Audit & Risk Management Committee of +PVH Corp., one of the world’s largest apparel companies. +· Mr. +Ferrara is a director and chairman of the Audit Committee of VIVAKOR, Inc., a socially +responsible operator, acquirer and developer of clean energy technologies and environmental +solutions. Mr. Ferrara also served as a member of the Board of Directors of Barnes & +Noble, Inc., the nation’s largest retail bookseller, from 2016 until its sale in +August 2019. +· Ms. +Lynch is a director and member of both the Pension Committee and Nominating Committee +of General American Investors Company, Inc., a closed-end fund that manages a global +portfolio of investments consisting mainly of U.S. and foreign securities. +· Mr. +Sachdev is a director and member of the Strategy Committee and Compensation Committees +of Covetrus, Inc., a global animal-health technology and services company. +8 +Other +Employment Information +Each +of our directors has been engaged in the principal occupation indicated in the foregoing table for more than the past five years, +with the exceptions of Mr. Smith. Prior to founding Phluid Project in 2018, for which he currently serves as Chief Executive Officer, +from 2013 to 2017, Mr. Smith was the Chief Merchandising Officer for Haddad Brands, a global children’s apparel and accessories +licensing partner for iconic brands such as Levi’s, Hurley, Nike, Jordan and Converse. Prior thereto, from 2010 to 2012, +Mr. Smith served as Executive Vice President, Merchandising for Limited Brands, at Victoria’s Secret Direct, the largest +direct-to-consumer women’s apparel retailer in the United States. +Specific +Qualifications, Attributes, Skills and Experience of Directors +Edward +R. Rosenfeld has served as our Chairman of the Board and Chief Executive Officer since August 2008 and has been a director +of our Company since February 2008. Mr. Rosenfeld, who joined our executive management team in May 2005, has more +than two decades of experience focused on the retail, apparel and footwear industries and possesses particular knowledge of and +experience in the industry that strengthens the Board’s collective qualifications, skills and experience. His background +in finance and his analytical skills gained through his years as a Vice President with Peter J. Solomon Company, an investment +banking boutique, where he specialized in mergers and acquisitions in the retail, apparel and footwear industries, provide the +Board with insight and guidance with respect to, among other things, strategic business development matters. Mr. Rosenfeld has +strong leadership skills and an in-depth understanding of our Company and its goals from his positions as the Chairman of the +Board and Chief Executive Officer. Mr. Rosenfeld serves as a director and chairman of the Audit & Risk Management Committee +of PVH Corp. (NYSE: PVH), one of the world’s largest apparel companies. +Al +Ferrara has served as a director of our Company and as a member of the Audit Committee since July 2019. In May 2020, Mr. +Ferrara became the Chairman of the Audit Committee and a member of the Nominating/Corporate Governance Committee. He is a retired +certified public accountant having retired from his position as a partner with BDO USA, LLP, a major international accounting +firm, in August 2016 after 25 years with the firm, most recently serving as National Director of the Retail & Consumer Products +Division. Mr. Ferrara also served as a director on the firm’s Board of Directors from 2003 through 2010 and was also a director +and BDO representative on the Board of Directors of BDO Capital Advisors, LLC from 2000 to 2015. Mr. Ferrara served as a member +of the Board of Directors of Barnes & Noble, Inc., the nation’s largest retail bookseller, from 2016 until its sale +in August 2019 and also served on its Audit Committee and Compensation Committee. In September 2020, Mr. Ferrara was appointed +to the Board of Directors of VIVAKOR, Inc., a socially responsible operator, acquirer and developer of clean energy technologies +and environmental solutions, where he serves as the Chairman of its Audit Committee. Mr. Ferrara’s decades of relevant experience +as a certified public accountant, the director of retail practice at a major international accounting firm, and as a member of +the audit committee of a public company enhance the financial oversight capabilities of our Board and its Audit Committee. +Mitchell +S. Klipper has served as a director of our Company since April 2018, as a member of the Audit Committee since June 2018 +and as a member of the Corporate Social Responsibility Committee since August 2019. Mr. Klipper served as the Chief Executive +Officer of the Retail Group of Barnes & Noble, Inc., the nation’s largest retail bookseller, from March 2010 to May +2015. Mr. Klipper began his career at Barnes & Noble as Chief Financial Officer of B&N College in June 1986. He subsequently +held several executive positions at Barnes & Noble, Inc., including Executive Vice President, President of Barnes & Noble +Development and Chief Operating Officer. Prior to joining Barnes & Noble, Inc., Mr. Klipper was an Audit Manager with KMG +Main Hurdman, a certified public accounting firm and predecessor to KPMG. He also served on the advisory board of Modell’s +Sporting Goods from 2006 through 2018. Mr. Klipper’s decades of relevant experience in retail management, general business +and accounting enhance the leadership and oversight capabilities of our Board. +Maria +Teresa Kumar has served as a director of our Company and as a member of the Corporate Social Responsibility Committee +since January 2021. Ms. Kumar is the President and CEO of Voto Latino, America’s largest Latinx voter registration and advocacy +organization, which she co-founded in 2004. She is also a regular on-air contributor for MSNBC. Ms. Kumar serves on the Boards +of Emily’s List and the World Economic Forum’s Global Shapers and is a World Economic Forum Young Global Leader and +a Council on Foreign Relations Life Member. Ms. Kumar graduated from U.C. Davis with a B.A. in International Affairs and earned +her Masters’ in Public Policy from Harvard’s Kennedy School. Ms. Kumar’s extensive experience in management, +leadership, social advocacy and working with non-profits enhances Board leadership and management oversight with a unique perspective +on corporate social responsibility. +9 +Rose +Peabody Lynch has served as a director of our Company since April 2014, as a member of the Compensation Committee since +June 2014, and as a member of the Corporate Social Responsibility Committee since August 2019. Ms. Lynch formerly served on the +Audit Committee from June 2014 to July 2019, when she became a member of the Corporate Social Responsibility Committee. Until +recently, Ms. Lynch operated her own New York based consulting business, Market Strategies, LLC, which focused on strategic marketing +and operating issues for small to medium-sized companies. She possesses over 30 years of business experience, including tenures +as the President and in other senior executive officer positions of major companies in the beauty and fashion industries, and +has extensive executive level financial and operating experience. Her experience serving as a director and as a senior executive +for a range of companies, including Victoria’s Secret, Trowbridge Gallery (a supplier of fine art to the interior design +trade) and Danskin, Inc., a leading manufacturer of women’s dance and active wear, enhances the Board’s leadership +and oversight capabilities. Ms. Lynch has served on several boards, including The Harmony Group-LeRoi Princeton (a manufacturer +of children’s apparel), Salant Corporation (Perry Ellis Menswear) and Frederick’s of Hollywood (a retailer of women’s +apparel and lingerie). Currently, Ms. Lynch serves on the board of General American Investors Company, Inc. (NYSE: GAM). In her +role on the GAM Board, she serves on the Compensation Committee, along with Pension and Nominating Committees. She was a member +of the Audit Committee and Nominating and Governance Committees during her tenure at Salant and chaired the Compensation Committee +during her tenure on the board of Frederick’s of Hollywood. In addition, Ms. Lynch has held leadership positions with a +variety of not-for-profit organizations. She currently serves on the Board of Directors of the Princeton University Varsity Club +and is President of her Princeton University class. She also serves on the Board of Trustees of Concord Academy in Concord, Massachusetts. +Ms. Lynch is a member of the Women and Foreign Policy Advisory Council at the Council on Foreign Relations. +Peter +Migliorini has served as a director of our Company since October 1996 and has served on the Nominating/Corporate +Governance Committee, as its Chair, since July 2004 and the Compensation Committee, as its Chair, since July 2004. Mr. Migliorini +formerly served on the Audit Committee, from October 1996 until June 2018. Mr. Migliorini is the Presiding Director over all executive +sessions of the independent directors. Mr. Migliorini possesses extensive executive level financial, sales and operations experience. +Mr. Migliorini currently serves as sales manager for Greschlers, Inc., a building supplies company. Prior to joining Greschlers, +Mr. Migliorini served as Director of Operations for Mackroyce Group, a construction company, from 1987 to 1994. Earlier, Mr. Migliorini +held various positions of increasing responsibility from Assistant Buyer to Chief Planner/Coordinator for several shoe companies, +including Meldisco Shoes, Perry Shoes and Fasco Shoes. His numerous years of business experience at various levels and in various +industries provide the Board with a measure of practical orientation regarding our operations and growth endeavors. Mr. Migliorini’s +early experience in the shoe industry also provides relevant knowledge and expertise in our specific industry. +Ravi +Sachdev has served as a director of our Company and as a member of the Audit Committee since September 2008 and as a member +of the Nominating/Corporate Governance Committee since August 2019. As a Partner of the private equity firm Clayton Dubilier & +Rice, LLC since June 2015, Mr. Sachdev focuses on the healthcare sector. Earlier, Mr. Sachdev was a Managing Director and Co-Head +of Healthcare Services at J.P. Morgan from November 2010 and prior to that held the positions of Managing Director at Deutsche +Bank Securities, Inc. from January 2009 until November 2010 and Director at Deutsche Bank from January 2007 until January 2009. +Prior to joining Deutsche Bank in 2006 as a Vice President, Mr. Sachdev served as a Vice President at Peter J. Solomon Company, +an investment banking boutique, specializing in mergers and acquisitions in the healthcare sector, from 1998 to 2006. Mr. +Sachdev possesses knowledge of finance and the financial analytics used to measure business performance. His 20 years of professional +experience in investment banking and private equity brings to the Board a thorough understanding of the financial issues affecting +public companies and greater insights in business valuation together with a practical orientation with respect to acquisitions +and integrations. Mr. Sachdev also serves on the Board of Directors and the Strategy Committee and Compensation Committee of Covetrus, +Inc. (NASDAQ GS: CVET), a global animal-health technology and services company, and the Board of Directors of Agilon Health, Inc., +a technology-enabled services platform for the physicians’ market. +10 +Thomas +H. Schwartz has served as a director of our Company since May 2004 and has served on the Compensation Committee +since July 2004. Mr. Schwartz currently owns and operates Sumner and Forge Investors, LLC, a real estate investment and property +management company. With more than twenty years of experience as a Managing Director of Helmsley-Spear, Inc. and twelve years +as the owner of his own real estate investment firm, Mr. Schwartz brings to the Board extensive executive level experience in +handling operations issues and practical expertise in management. Mr. Schwartz’s term as a member of our Board of Directors +will end at the Annual Meeting, and we thank him for his distinguished service. +Robert +Smith has served as a director of our Company since April 2014 and has served on the Compensation Committee since +June 2014 and on the Corporate Social Responsibility Committee, as its Chair, since August 2019. Mr. Smith formerly served on +the Nominating/Corporate Governance Committee from June 2014 to July 2019, when he became a member of the Corporate Social Responsibility +Committee. Mr. Smith is the Chief Executive Officer of Phluid Project and GET Phluid, which he founded in 2018. Prior to Phluid +Project and his former positions with Haddad Brands and Victoria’s Secret Direct, Mr. Smith held various senior merchandising +positions at Macy’s Inc. between 1998 and 2010, beginning with Vice President, Merchandise Manager, Macy’s West and +culminating with Executive Vice President, Merchandising for Juniors, Kids, Intimate Apparel, Dresses, Suits, Coats and Swimwear. +Earlier, Mr. Smith was a Merchandiser for XOXO Apparel Company and held various positions with Burdine’s Department Stores. +Mr. Smith possesses nearly 30 years of business experience in the fashion industry and has extensive executive level expertise +in merchandising. His experience in this area further enhances the Board’s depth of understanding of the industry. +Amelia +Newton Varela has served as President of our Company since September 2015 and has been a director since 2016. Prior to +this tenure, Ms. Varela was Executive Vice President of Wholesale of our Company since April 2008 and Executive Vice President +of Wholesale Footwear of our Company from November 2004 to April 2008. Previously, she was Vice President of Sales for Steve Madden +Women’s Wholesale Division from January 2000. Ms. Varela began her career with our Company in 1998 in the role of Account +Executive for Steve Madden Women’s Wholesale Division. She graduated from The Fashion Institute of Technology in 1995. +Required +Vote +Proxies +will be voted for the election of the nine nominees as directors of our Company unless otherwise specified in the proxy. A plurality +of the votes cast by the holders of shares of Common Stock present in person or represented by proxy and entitled to vote at the +Annual Meeting will be necessary to elect the nominees as directors. This means that the director nominees who receive the greatest +number of affirmative votes cast are elected as directors, subject to our Director Election (Majority Voting) Policy, which is +described below. If, for any reason, any nominee is unable or unwilling to serve, the proxies will be voted for a substitute nominee, +who will be designated by the Board of Directors at the Annual Meeting. Stockholders may abstain from voting by marking the appropriate +boxes on the accompanying proxy. Abstentions will be counted separately and used for purposes of calculating whether a quorum +is present at the Annual Meeting, but will have no effect on the outcome of the vote. +Director +Election (Majority Voting) Policy +It +is our policy that any nominee for director who receives a greater number of “WITHHOLD” votes than “FOR” +votes for his or her election must promptly submit a letter offering his or her resignation to the Nominating/Corporate Governance +Committee following the certification of the stockholder vote. In such event, the Nominating/Corporate Governance Committee would +then consider the offer of resignation and make a recommendation to the Board of Directors as to whether or not the resignation +should be accepted. This policy does not apply in contested elections. For more information about this policy, see “Corporate +Governance – Director Election (Majority Voting) Policy” below. +Recommendation +of the Board of Directors +The +Nominating/Corporate Governance Committee of the Board and the entire Board of Directors unanimously recommend a vote “FOR” +the election of Ms. Maria Teresa Kumar, Ms. Rose Peabody Lynch, Ms. Amelia Newton Varela and Messrs. Edward R. Rosenfeld, Al Ferrara, +Mitchell S. Klipper, Peter Migliorini, Ravi Sachdev, and Robert Smith. +11 +CORPORATE +GOVERNANCE +The +Board of Directors +Our +business is managed under the direction and oversight of the Board of Directors, who are elected by our stockholders. Directors +meet their responsibilities by participating in meetings of the Board of Directors and the various committees of the Board on +which they sit. They also communicate with our Chairman and Chief Executive Officer and other officers and employees of our Company +and consult with our independent registered public accounting firm and other third parties. The size of the Board is fixed at +ten members. Eight current directors and seven of the nominees for election as directors are independent, and two current directors +are not independent. The Nominating/Corporate Governance Committee determined to nominate nine current directors for election +to our Board, because it has been unable to find a suitable replacement for Thomas H. Schwartz, who has not been renominated to +serve as a director. +Director +Independence +The +Board of Directors has determined that the following director nominees are “independent” for purposes of the criteria +of the SEC and The Nasdaq Global Select Market listing standards: Ms. Kumar, Ms. Lynch and Messrs. Ferrara, Klipper, Migliorini, +Sachdev, and Smith. If the nine nominees set forth above are elected, the Board will consist of a majority of independent directors. +The Board of Directors has held regularly scheduled executive sessions for the independent directors, with Mr. Migliorini serving +as Presiding Director of such executive sessions. +Director +Attendance at Meetings +Attendance +at Annual Meetings of Stockholders +We +have no specific policy regarding director attendance at our annual meetings of stockholders. We encourage all of our directors +to attend annual meetings of our stockholders and five directors attended our 2020 annual meeting of stockholders. +Attendance +at Meetings of the Board of Directors +The +Board of Directors held five regularly scheduled meetings during the 2020 Fiscal Year and acted by unanimous written consent on +three occasions during the 2020 Fiscal Year. In the 2020 Fiscal Year, each director attended 75% or more of the total number of +Board meetings and the total number of meetings held by all committees on which he or she then served. +Director +Election (Majority Voting) Policy +We +have adopted a Director Election (Majority Voting) Policy. Pursuant to this policy, in an uncontested election of directors (that +is, an election where the number of nominees is equal to the number of seats open) any nominee for director who receives a greater +number of “WITHHOLD” votes than “FOR” votes for his or her election must promptly submit an offer of resignation +to the Nominating/Corporate Governance Committee following the certification of the stockholder vote for consideration in accordance +with the following procedures. In such event, upon receipt of the resignation, the Nominating/Corporate Governance Committee would +promptly consider the appropriateness of the director’s continued service on the Board of Directors and recommend to the +Qualified Independent Directors (as defined below) the action to be taken with respect to the resignation, which could include +(1) accepting the resignation; (2) rejecting the resignation; (3) retaining the director but addressing what the Qualified Independent +Directors believe to be the underlying cause of the “WITHHOLD” votes; or (4) determining that the director will not +be renominated by the Board of Directors in future elections. The Nominating/Corporate Governance Committee would consider factors +such as (a) the reasons expressed by the stockholders for withholding votes from such director; (b) any possibilities for curing +the underlying cause of the “WITHHOLD” votes; (c) the tenure and qualifications of the director and his or her past +and expected future contributions to our Company; (d) the overall composition of the Board of Directors, including, without limitation, +whether accepting the resignation would cause us to fail to meet any applicable SEC or Nasdaq requirement; (e) the availability +of other qualified candidates; and (f) our Board of Director Candidate Guidelines. +12 +The +Qualified Independent Directors would then act on the Nominating/Corporate Governance Committee’s recommendation no later +than 90 days following the date of the stockholders’ meeting at which the director election occurred. In considering the +Nominating/Corporate Governance Committee’s recommendation, the Qualified Independent Directors would review the factors +considered by the Nominating/Corporate Governance Committee and such additional information and factors that they believe to be +relevant. Following the Qualified Independent Directors’ decision, we would promptly disclose the decision in a Current +Report on Form 8-K. The Form 8-K would include a full explanation of the process by which the decision of the Qualified Independent +Directors was reached and, if applicable, the reasons why the offer of resignation was rejected. +If +an offer of resignation were to be accepted, the Nominating/Corporate Governance Committee would recommend to the Board of Directors +whether to fill the vacancy or reduce the size of the Board of Directors accordingly. Any director required to submit his or her +resignation pursuant to this policy would not participate in the Nominating/Corporate Governance Committee’s recommendation +or the Qualified Independent Directors’ consideration of the resignation. Prior to voting on the director’s resignation +offer, the Qualified Independent Directors would provide to the director an opportunity to submit any information or statement +that he or she believes relevant to the Qualified Independent Directors’ consideration of the resignation. +For +purposes of this policy, “Qualified Independent Directors” means all directors who (1) are “independent” +for purposes of The Nasdaq Global Select Market listing standards and (2) are not required to offer their resignation in accordance +with this policy. If there are fewer than three independent directors then serving on the Board of Directors who are not required +to submit their resignations in accordance with this policy, then the Qualified Independent Directors shall consist of all of +the independent directors and each independent director who is required to offer his or her resignation in accordance with this +policy shall recuse himself or herself from the deliberations and voting only with respect to his or her individual offer to resign. +Committees +of the Board +Among +other committees, the Board of Directors has a standing Audit Committee, Compensation Committee, Nominating/Corporate Governance +Committee, and Corporate Social Responsibility Committee. Each committee has a written charter. The table below provides current +membership for each Board committee and the number of meetings held, and the number of actions taken by written consent, by each +Board committee in the 2020 Fiscal Year. +Committees +of the Board of Directors +Director +Audit +Compensation +Nominating/ +Corporate +Governance +Corporate +Social +Responsibility +Al +Ferrara +Chair +Member +Mitchell +S. Klipper +Member +Member +Maria +Teresa Kumar * +Member +Rose +Peabody Lynch +Member +Member +Peter +Migliorini +Chair +Chair +Edward +R. Rosenfeld +Ravi +Sachdev +Member +Member +Thomas +H. Schwartz +Member +Robert +Smith +Member +Chair +Amelia +Newton Varela +Number +of Meetings in 2020 Fiscal Year +4 +5 +2 +4 +* In +the 2020 Fiscal Year, Maria Teresa Kumar was not a member of the Board and did not attend +any Board or committee meetings. +Audit +Committee +The +Audit Committee consists of directors who are “independent” for purposes of The Nasdaq Global Select Market listing +standards and who meet the independence requirements contained in Securities Exchange Act of 1934, as amended (the “Exchange +Act”), Rule 10A-3(b)(1). The Board has determined that each of Messrs. Ferrara, Klipper, and Sachdev meets the SEC criteria +of an “audit committee financial expert” as defined in Item 407 of Regulation S-K under the Exchange Act. The Audit +Committee is primarily responsible for reviewing the services performed by our independent registered public accountants, evaluating +our accounting policies, our system of internal controls over financial reporting (ICFR), and information security and technology, +including cybersecurity, and reviewing significant financial transactions. +13 +The +Audit Committee is responsible for reviewing and striving to ensure the integrity of our financial statements and oversight of +our compliance with legal and regulatory requirement, our internal audit function and our information security and technology. +Among other matters, the Audit Committee, with management and independent and internal auditors, reviews the adequacy of our internal +accounting controls that could significantly affect our financial statements. The Audit Committee is also directly and solely +responsible for the appointment, retention, compensation, oversight and termination of our independent registered public accountants. +In addition, the Audit Committee functions as our Company’s Qualified Legal Compliance Committee (the “QLCC”). +The purpose of the QLCC is to receive, retain and investigate reports made directly, or otherwise made known, of evidence of material +violations of any United States federal or state law, including any breach of fiduciary duty by our Company or our officers, directors, +employees or agents and, if the QLCC believes appropriate, to recommend courses of action to us. +Management +has primary responsibility for our financial statements and the overall reporting process, including our system of internal controls +over financial reporting. Our independent registered public accountants audit our annual financial statements prepared by management, +express an opinion as to whether those financial statements present fairly our financial position, results of operations and cash +flows in conformity with accounting principles generally accepted in the United States of America and discuss with the Audit Committee +any issues they believe should be raised with the Audit Committee. Our independent registered public accountants also issue an +opinion on our internal controls over financial reporting. +The +Audit Committee is also responsible for the oversight of our risk management process, which is discussed in the “Risk Oversight” +section below. +In +performing its functions, the Audit Committee meets with management on at least a quarterly basis to review and discuss the annual +audited financial statements, quarterly financial statements and related reports and to consider the adequacy of our internal +controls and the objectivity of our financial reporting. From time to time, the Audit Committee, with management, identifies and +reviews other areas of risks related to our operations and at least quarterly receives reports on and reviews cybersecurity risks +as well as our approach to managing such risks. Our Chief Information Security Officer presents to the Audit Committee regarding +cybersecurity on at least a quarterly basis. The Audit Committee discusses these matters with our independent registered public +accountants and with appropriate Company financial personnel. Meetings are held with the independent registered public accountants, +who have unrestricted access to the Audit Committee. In addition, the Audit Committee reviews our financing plans and reports +and makes recommendations to the full Board of Directors for approval and to authorize action. The Board has adopted a written +charter setting out the functions the Audit Committee is to perform. A copy of the Audit Committee Charter is available on our +website at https://stevemadden.com . +Nominating/Corporate +Governance Committee +The +Nominating/Corporate Governance Committee consists of directors who are “independent” for purposes of The Nasdaq Global +Select Market listing standards. +The +Nominating/Corporate Governance Committee provides oversight with respect to a wide range of issues relating to the composition +and operation of the Board, including consideration of and recommendations regarding the size and composition of the Board of +Directors and identification of potential candidates to serve as directors. The Nominating/Corporate Governance Committee identifies +candidates to the Board of Directors by introductions from management, members of the Board of Directors, employees of our Company +or other sources, including stockholders that satisfy our policy regarding stockholder recommended candidates. The Nominating/Corporate +Governance Committee does not evaluate director candidates recommended by stockholders differently than director candidates recommended +by other sources. +14 +Stockholders +wishing to submit recommendations for director nominations for the 2022 Annual Meeting should write to the Secretary, Steven Madden, +Ltd., 52-16 Barnett Avenue, Long Island City, New York 11104. Any such stockholder must (i) comply with the director nomination +provisions of our By-Laws, (ii) meet and evidence the minimum eligibility requirements specified in Exchange Act Rule 14a-8, and +(iii) submit, within the same timeframe for submitting a stockholder proposal required by Rule 14a-8: (1) evidence in accordance +with Rule 14a-8 of compliance with the stockholder eligibility requirements, (2) the written consent of the candidate(s) for nomination +as a director, (3) a resume or other written statement of the qualifications of the candidate(s) for nomination as a director +and (4) all information regarding the candidate(s) and the submitting stockholder that would be required to be disclosed in a +proxy statement filed with the SEC if the candidate(s) were nominated for election to the Board of Directors. +In +considering candidates for the Board of Directors, the Nominating/Corporate Governance Committee considers our Board of Director +Candidate Guidelines and Director Election (Majority Voting) Policy, available on our website at https://stevemadden.com , +our policy regarding stockholder recommended director candidates, as set forth above, and all other factors that it deems appropriate, +including the individual’s character, education, experience, knowledge and skills. While the Nominating/Corporate Governance +Committee’s Board of Directors Candidate Guidelines do not expressly identify diversity as a factor for consideration regarding +the evaluation of director candidates, diversity is among the many factors the Nominating/Corporate Governance Committee considers +in the candidate evaluation process. To assess the effectiveness of the mandate set forth in the Nominating/Corporate Governance +Committee’s charter, the Nominating/Corporate Governance Committee reviews annually with the Board the composition of the +Board as a whole and recommends, if necessary, measures to be taken so that the Board reflects the appropriate balance of knowledge, +experience, skills, expertise and diversity required for the Board as a whole. +In +addition, the Nominating/Corporate Governance Committee develops and recommends corporate governance principles for our Company; +makes recommendations to the Board of Directors in support of such principles; takes a leadership role in the shaping of the corporate +governance of our Company; and oversees the evaluation of the Board of Directors and management. The Nominating/Corporate Governance +Committee operates under a formal charter that governs the Committee’s composition, powers and responsibilities. A copy +of the Nominating/Corporate Governance Committee Charter is available on our website at https://stevemadden.com . +Compensation +Committee +The +Compensation Committee consists of directors who are “independent” for purposes of The Nasdaq Global Select Market +listing standards and applicable tax and securities law rules. +The +Compensation Committee is responsible for establishing and overseeing our compensation and incentive plans and programs; determining +and approving compensation for our executive officers, including salaries, bonuses, perquisites and equity awards; reviewing and +approving compensation and awards for our executive officers under our compensation and incentive plans and programs; administering +our equity compensation plans; reviewing and approving a compensation program for independent members of the Board; and assisting +the Board in discharging the Board’s responsibilities relating to management organization, performance, compensation and +succession. The Compensation Committee operates under a formal charter adopted by the Board of Directors that governs its composition, +powers and responsibilities. A copy of the Compensation Committee Charter is available on our website at https://stevemadden.com . +Corporate +Social Responsibility Committee +The +Corporate Social Responsibility Committee consists of directors who are “independent” for purposes of The Nasdaq Global +Select Market listing standards. +15 +The +Corporate Social Responsibility Committee is responsible for assisting the Board in its oversight of our initiatives, plans and +practices with respect to corporate social responsibility matters of significance to us and the communities in which we operate. +Corporate social responsibility matters include ethical and sustainable sourcing; human rights; the environment; supplier conduct; +labor conditions; climate change; diversity in employment; charitable giving; government relations; and political spending. The +Committee’s responsibility includes oversight of: +· management’s +evaluation of risks and opportunities with respect to corporate social responsibility +matters; +· management’s +creation of key strategic initiatives, plans and practices with respect to corporate +social responsibility matters; +· our +governance of, and performance relative to, such key strategic initiatives; +· corporate +social responsibility reporting, stakeholder engagement, and transparency; and +· management’s +assessment of the identity and scope of matters comprising corporate social responsibility. +The Corporate +Social Responsibility Committee operates under a formal charter that governs the Committee’s composition, powers and responsibilities. +A copy of the Corporate Social Responsibility Committee Charter is available on our website at https://stevemadden.com . +Board +Leadership Structure, Risk Oversight, Executive Sessions of Non-Employee Directors, and Communications Between Stockholders and +the Board +Board +Leadership Structure +As +noted above, our Board currently comprises eight independent and two non-independent directors. +Mr. +Rosenfeld has served as Chairman of the Board and Chief Executive Officer since August 2008 and has been a member of the Board +since February 2008. The Board has designated one of the independent directors as Presiding Director to preside over executive +sessions. We believe that the number of independent, experienced directors who comprise our Board, along with the independent +oversight of our Presiding Director, benefits us and our stockholders. +We +recognize that different board leadership structures may be appropriate for companies in different situations and believe that +no one structure is suitable for all companies. We believe our current Board leadership structure is optimal for our Company because +it demonstrates to our employees, suppliers, customers, and other stakeholders that we are under strong leadership, with a single +person setting the tone and having primary responsibility for managing our operations and leading our Board in setting long-term +strategy. Having a single leader for both our Company and our Board eliminates confusion and duplication of efforts and provides +clear leadership for our Company. We believe our Company, like many U.S. companies, has been well-served by this leadership structure. +Because +the positions of Chairman of the Board and Chief Executive Officer are held by the same person, the Board believes it is appropriate +for the independent directors to elect one independent director to serve as a Presiding Director. In addition to presiding at +executive sessions of the independent directors, the Presiding Director has responsibilities that include coordinating with the +Chairman of the Board and Chief Executive Officer in establishing agenda and discussion items for Board meetings; retaining independent +advisors on behalf of the Board as the Board may determine to be necessary or appropriate; and performing such other functions +as the independent directors may designate from time to time. Mr. Migliorini is currently serving as the Presiding Director. +Our +Board conducts an annual evaluation in order to determine whether it and its committees are functioning effectively. As part of +this annual self-evaluation, the Board evaluates whether the current leadership structure continues to be optimal for our Company +and our stockholders. +Risk +Oversight +Our +Board is responsible for overseeing our risk management process. It focuses on our general risk management strategy and the most +significant risks facing our Company and ensures that management implements appropriate risk mitigation strategies. Management +also apprises the Board of particular risk management matters in connection with its general oversight and approval of corporate +matters. +The +Board has delegated to the Audit Committee oversight of our risk management process. Among its duties, the Audit Committee reviews +with management (a) our policies with respect to risk assessment and management of risks that may be material to us, (b) our system +of disclosure controls and system of internal controls over financial reporting, (c) our compliance with legal and regulatory +requirements, and (d) our systems and processes related to information security and technology, including cybersecurity. The Audit +Committee is also responsible for reviewing major legislative and regulatory developments that could materially impact our contingent +liabilities and risks. Our other Board committees also consider and address risks as they perform their respective committee responsibilities. +All committees report to the full Board as appropriate, including when a matter rises to the level of a material or enterprise +level risk. +16 +Our +management is responsible for day-to-day risk management. Our risk management and internal audit areas serve as the primary monitoring +and testing function for company-wide policies and procedures and manage the day-to-day oversight of the risk management strategy +for our ongoing business. This oversight includes identifying, evaluating, and addressing potential risks that may exist at the +enterprise, strategic, financial, operational, and compliance and reporting levels. +We +believe the division of risk management responsibilities described above is an effective approach for addressing the risks facing +us and that our Board leadership structure supports this approach. +Executive +Sessions of Independent Directors +The +Board holds executive sessions of its independent directors generally at each regularly scheduled meeting. The Presiding Director +serves as the chairperson for these executive sessions. +Communications +between Stockholders and the Board +We +have adopted a procedure by which stockholders may send communications to one or more members of the Board of Directors by writing +to such director(s) or to the entire Board of Directors in care of the Secretary, Steven Madden, Ltd., 52-16 Barnett Avenue, Long +Island City, New York 11104. The Board has instructed the Secretary of the Company to review all communications so received and +to exercise her discretion not to forward to the Board correspondence that is inappropriate, such as business solicitations, frivolous +communications and advertising, routine business matters ( i.e. , business inquiries, complaints, or suggestions) and personal +grievances. However, any director may at any time request that the Secretary forward to such director any and all communications +received by the Secretary but not forwarded to the directors. +Codes +of Business Conduct and Ethics +We +have adopted a Code of Ethics for the Chief Executive Officer and Senior Financial Officers, which is applicable to our Chief +Executive Officer, Chief Financial Officer, controller, principal accounting officer, head of internal audit and other employees +who are designated from time to time as “senior financial officers.” In addition, the individuals who serve on our +Board of Directors are subject to a Code of Business Conduct and Ethics for the Board of Directors, and all of our employees are +held accountable for adherence to our Code of Conduct. Each of the Code of Ethics for the Chief Executive Officer and Senior Financial +Officers and the Code of Business Conduct and Ethics for the Board of Directors is included as an exhibit to our Annual Report +on Form 10-K for the fiscal year ended December 31, 2014. The Code of Conduct applicable to all of our employees is an exhibit +to our Annual Report on Form 10-K for the fiscal year ended December 31, 2018. The Code of Ethics for the Chief Executive Officer +and Senior Financial Officers, the Code of Business Conduct and Ethics for the Board of Directors and the Code of Conduct applicable +to all of our employees (collectively, the “Conduct Codes”) are available on our website at https://stevemadden.com +and may be obtained by any stockholder without charge upon request by writing to the Secretary, Steven Madden, Ltd., 52-16 +Barnett Avenue, Long Island City, New York 11104. The Conduct Codes are intended to establish standards necessary to deter wrongdoing +and to promote compliance with applicable governmental laws, rules and regulations and honest and ethical conduct. The Conduct +Codes cover all areas of professional conduct, including conflicts of interest, fair dealing, financial reporting and disclosure, +protection of our assets and confidentiality. Employees have an obligation to promptly report any known or suspected violation +of the Conduct Codes without fear of retaliation. Waiver of any provision of the Conduct Codes for executive officers and directors +may only be granted by the Board of Directors or the Nominating/Corporate Governance Committee, and we will disclose any such +waiver or modification of the Conduct Codes relating to such individuals. +Corporate +Governance Guidelines +The +Board of Directors has adopted Corporate Governance Guidelines as a set of guiding principles by which our Company is governed. +The Corporate Governance Guidelines address various matters of corporate governance such as board size and composition, director +qualifications and responsibilities, director compensation, limitations on service on other boards, board committees, director +orientation and education, director access to management, management development and succession planning, and annual performance +evaluations for the Board. They include a policy for the clawback of executive incentive compensation paid to senior executive +officers if there is an accounting restatement by our Company due to intentional misconduct of a senior executive officer. In +addition, in circumstances in which the Board of Directors believes it is appropriate, the clawback policy allows for the reimbursement, +forfeiture or cancellation of incentive compensation paid or awarded to a senior executive officer who has engaged in willful +misconduct in the performance of his or her duties that results in material financial harm or significant reputational harm to +us. +17 +The +Nominating/Corporate Governance Committee reviews the Corporate Governance Guidelines annually to determine whether to recommend +changes to the Corporate Governance Guidelines to reflect new laws, rules and regulations and developing governance practices. +A copy of the Corporate Governance Guidelines may be obtained by any stockholder without charge upon request by writing to the +Secretary, Steven Madden, Ltd., 52-16 Barnett Avenue, Long Island City, New York 11104. +Stock +Ownership Guidelines +The +Board of Directors has adopted Stock Ownership Guidelines, which require a level of ownership of shares of our Common Stock by +our directors and executive officers in order to align their interests with those of our stockholders. The Stock Ownership Guidelines +require our Chief Executive Officer to own shares of our Common Stock equal in value to five times his annual base salary. Other +executive officers are required to own shares of our Common Stock equal in value to two times their annual base salary. The Stock +Ownership Guidelines further require that each non-employee director must own shares of our Common Stock equal in value to two +times the cash portion of the directors’ annual retainer or the equivalent if a retainer is not received in certain circumstances. +Individuals subject to the Stock Ownership Guidelines must attain the required level of share ownership by the fifth anniversary +of the later of the Stock Ownership Guidelines’ adoption date and the date that the individual became an executive officer +or director and must retain an amount equal to 25% of the net shares of our Common Stock received as a result of the exercise, +vesting or payment of any equity award we make until the share ownership requirement is satisfied. +Prohibition +on Hedging and Pledging of Our Common Stock +Our +directors and executive officers and certain other persons designated from time to time by our Chief Financial Officer are prohibited +from entering into hedging transactions and from pledging our Common Stock pursuant to a formal policy concerning such activities +adopted by the Board of Directors. This policy does not apply to other employees of our Company. +Corporate +Social Responsibility Policy +We +are committed to operating our business in a socially responsible manner. We strive to incorporate this commitment into every +aspect of our business, including the design of our products, the quality, safety and sourcing of our products, the safety and +fair treatment of our employees, animal welfare and compliance with laws, including the Foreign Corrupt Practices Act and the +SEC’s Conflict Minerals rule. These guiding principles are set forth in our Corporate Social Responsibility Policy, and +we expect all of our employees to be familiar with and to adhere to them. We strive to do business with vendors and suppliers +that share our views and commitments to quality products and ethical business principles. We will only engage vendors and suppliers +that demonstrate a commitment to meeting our standards. Our Corporate Social Responsibility Committee assists the Board in its +oversight of management’s social responsibility obligations. +Certain +Relationships and Related Party Transactions +Steven +Madden Employment Agreement. We believe that Steven Madden, our founder and Creative and Design Chief, provides unique and +significant value in guiding the leadership of our creative process, both in his hands-on work for us and his collaboration with +our designers, product professionals and marketing executives. In addition, the public’s association of Mr. Madden’s +name and likeness with our branded products is significant, meaningful, and integral to our success and has been, and continues +to be, instrumental in creating long-term stockholder value. Based upon that belief, we further believe that his continuing involvement +with our Company is essential, and to this end, we have for many years had an employment agreement with Mr. Madden as described +below. +18 +Mr. +Madden’s agreement in its current form dates back to July 1, 2005, as subsequently amended on various occasions, most recently +on March 25, 2019 (the “SM Agreement”). Under the SM Agreement, Mr. Madden has agreed to continue to serve as our +Creative and Design Chief for a term continuing through December 31, 2026, for a base salary of $7,026,042 per annum together +with the potential for cash bonuses at the sole discretion of our Board of Directors and an annual life insurance premium reimbursement +of up to $200,000. Pursuant to the SM Agreement, on February 8, 2012, Mr. Madden was granted 2,194,584 restricted shares of Common +Stock (as adjusted for our 2018 three-for-two stock split effected as a stock dividend), valued at approximately $40 million, +under our Amended and Restated 2006 Stock Incentive Plan, which is referred to herein as the “2006 Plan.” The restricted +stock vests in equal annual installments over seven years commencing on December 31, 2017 through December 31, 2023, subject to +Mr. Madden’s continued employment with our Company on each such vesting date. On June 30, 2012, as allowed under the SM +Agreement, Mr. Madden elected to receive an additional restricted stock award valued at approximately $40 million in consideration +of a reduction in his annual base salary in years after 2012 to the amount reflected above. As a consequence, on July 3, 2012, +Mr. Madden received 2,840,013 additional restricted shares of Common Stock vesting in six annual installments commencing on December +31, 2018 through December 31, 2023, subject to his continued employment with our Company on each such vesting date. +Under +the SM Agreement, Mr. Madden is also eligible to receive annually, on or about the date of our annual meeting of stockholders +(but not later than June 30), an option (the “Annual Option”) to purchase shares of Common Stock equal to the greater +of (a) 100% of the largest aggregate number of shares of Common Stock available upon the exercise of an option or options granted +to any other continuing full-time employee of our Company during the preceding twelve-month period or (b) 225,000 shares of Common +Stock; provided, however, that a grant to Mr. Madden in excess of 150% of the number of shares of Common Stock subject to options +granted to such other continuing full-time employee would require stockholder approval. Any Annual Option so granted vests quarterly +over a one-year period and is exercisable for a period of five years at a price equal to the closing price of our Common Stock +on the grant date. In addition, pursuant to the SM Agreement, on March 1, 2017, Mr. Madden received a one-time stock option grant +to purchase 1,125,000 shares of our Common Stock at an exercise price of $24.90 as a result of our having achieved for the fiscal +year ended December 31, 2016 earnings per share performance criteria set forth in the SM Agreement; such option vests in equal +annual installments over a five-year period, which commenced on the first anniversary of the grant date. +Under +the SM Agreement, if Mr. Madden dies, his estate would receive a payment equal to his base salary for the 12-month period immediately +after the date of his death. Further, if Mr. Madden’s employment is terminated due to his total disability (as defined in +the agreement), “for cause” (as defined in the agreement) or due to Mr. Madden’s resignation, we are obligated +to pay Mr. Madden the amount of compensation that is accrued and unpaid through the date of termination. If Mr. Madden’s +employment is terminated for any reason (other than “for cause” or due to his death, total disability or resignation), +we are obligated to pay Mr. Madden, in installments, the balance of his base salary through the end of the term of the SM Agreement. +If, during the period commencing 120 days prior to a “change of control” transaction (as defined in the SM Agreement) +and ending on the first anniversary of a change of control transaction, Mr. Madden’s employment is terminated other than +for cause or by his resignation for “good reason” (as defined in the SM Agreement), or if Mr. Madden resigns within +30 days following a change of control transaction, all unvested options held by Mr. Madden will be accelerated and vest on the +date of termination or resignation, and Mr. Madden will be entitled to receive a lump sum cash payment equal to the amount of +compensation that is accrued and unpaid through the date of termination plus $35 million. The SM Agreement contains other customary +provisions, including provisions regarding expense reimbursement, confidentiality, non-solicitation and non-competition. +For +the 2020 Fiscal Year, Mr. Madden earned $3,513,021 in base salary and received $200,000 for the payment of an annual life insurance +premium. Mr. Madden also received as his Annual Option for the 2020 Fiscal Year to purchase 225,000 shares of Common Stock at +a price per share of $24.83. +The +most recent amendment entered into on March 25, 2019, effected the extension of the term of the SM Agreement for three years through +December 31, 2026. In consideration of this extension, we have granted to Mr. Madden 200,000 shares of Common Stock under the +2006 Plan, which shares are subject to certain restrictions, including that he will not sell, transfer, pledge, hypothecate, assign +or otherwise dispose of the restricted shares except as set forth under the 2006 Plan or his award agreement. The shares will +vest in substantially equal annual installments over three years commencing on December 31, 2024, provided that Mr. Madden continues +to be employed by us on each vesting date through December 31, 2026. +19 +Loan +to Steven Madden. On June 25, 2007, we made a loan to Mr. Madden in the amount of $3,000,000 to enable Mr. Madden to satisfy +a personal tax obligation resulting from the exercise of a stock option that was due to expire. The loan is evidenced by a secured +promissory note executed by Mr. Madden in our favor, the security for which is a certain securities brokerage account maintained +by Mr. Madden with his broker; none of the securities in the securities brokerage account are shares of Common Stock. There have +been successive amendments to the secured promissory note, the most recent of which occurred in April 2016. At that time the secured +promissory note was amended to substitute the collateral securing the secured promissory note from shares of our Common Stock +to the security interest in Mr. Madden’s securities brokerage account. Previously, on January 3, 2012, the secured promissory +note was amended and restated to extend the maturity date of the obligation to December 31, 2023 and eliminate the accrual of +interest after December 31, 2011. Prior to the January 3, 2012 amendment, the secured promissory note had been accruing interest +at the rate of 6% per annum. In addition, the secured promissory note provides that, commencing on December 31, 2014 and annually +on each December 31 thereafter through the maturity date, one-tenth of the principal amount thereof, together with accrued interest, +will be cancelled by us provided that we have employed Mr. Madden on each such December 31. Contemporaneously, on each such December +31, we will release our security interest in a portion of the securities held in Mr. Madden’s securities brokerage account +generally correlating to the amount of indebtedness cancelled on such date. As of December 31, 2011, interest in the amount of +$1,090,000 had accrued on the principal amount of the secured promissory note and, as noted above, interest was eliminated after +December 31, 2011. On December 31, 2020, we released Mr. Madden from his obligation to pay the required one-tenth of the original +principal amount of the secured promissory note, together with accrued interest. +Review, +Approval or Ratification of Transactions with Related Persons +Our +Conduct Codes and Employee Handbook prohibit all conflicts of interest. Under the Conduct Codes, conflicts of interest occur when +private or family interests interfere in any way, or even appear to interfere, with our interests. Our prohibition on conflicts +of interest under the Conduct Codes includes any related person transaction. +Related +person transactions must be approved by the Board, or by a committee of the Board consisting solely of independent directors, +who will approve the transaction only if they determine that it is in our best interests. In considering the transaction, the +Board or committee will consider all relevant factors, including, as applicable, (i) the business rationale for entering into +the transaction; (ii) the alternatives to entering into a related person transaction; (iii) whether the transaction is on terms +comparable to those available to third parties or, in the case of employment relationships, to employees generally; (iv) the potential +for the transaction to lead to an actual or apparent conflict of interest and any safeguards imposed to prevent such actual or +apparent conflicts; and (v) the overall fairness of the transaction to us. +We +have multiple processes for reporting conflicts of interest, including related person transactions. Under the Conduct Codes, all +employees are required to report any actual or apparent conflict of interest, or potential conflict of interest, to management. +The Chief Financial Officer distributes a questionnaire to our executive officers and management personnel quarterly and distributes +a questionnaire to the members of the Board of Directors annually requesting certain information regarding, among other things, +their immediate family members, employment and beneficial ownership interests, which information is then reviewed for any conflicts +of interest under the Conduct Codes. +The +Board of Directors, the Audit Committee and the Disclosure Committee, which consists of management personnel, discuss the related +party transactions, specifically, and in connection with the regular review processes attendant to our periodic filings, including +related party transaction disclosures. +If +a director is a party to or in some manner involved in a transaction involving us, he or she will be recused from all discussions +and decisions about the transaction. The transaction must be approved in advance whenever practicable, and if not practicable, +must be ratified as promptly as practicable. +20 +COMPENSATION +OF DIRECTORS IN THE 2020 FISCAL YEAR +The +Compensation Committee is responsible for establishing and overseeing all matters pertaining to compensation paid to directors +for service on the Board and its committees. +The +following table sets forth information concerning the compensation of our non-employee directors in the 2020 Fiscal Year. Following +the table is a discussion of material factors related to the information disclosed in the table. +Name +Fees Earned or +Paid in Cash +($) +Stock +Awards +($)(1) +All Other +Compensation +($) +Total +($) +Al Ferrara +51,250 (2) +101,371 (3) +— +139,352 +Mitchell S. Klipper +47,500 +101,371 (4) +— +135,602 +Richard P. Randall(5) +30,000 (6) +— +— +30,000 +Peter Migliorini +50,000 +101,371 (7) +— +138,102 +Ravi Sachdev +47,500 +101,371 (8) +— +135,602 +Thomas H. Schwartz +42,500 +101,371 (9) +— +130,602 +Rose Peabody Lynch +47,500 +101,371 (10) +— +135,602 +Robert Smith +47,500 +101,371 (11) +— +135,602 +(1) Reflects +the grant date fair value of stock awards calculated in accordance with the Financial +Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) +Topic 718. Assumptions used in the calculation of these amounts are included in Note +J to our audited financial statements for the fiscal year ended December 31, 2020 included +in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on +March 16, 2021. +(2) Mr. +Ferrara became chairman of the Audit Committee in June 2020 and received compensation +as chairman only in the fourth quarter of 2020. He waived his right to receive such compensation +for the third quarter. +(3) At +December 31, 2020, the aggregate number of shares of restricted Common Stock held by +Mr. Ferrara was 4,245, all of which was issued in the 2020 Fiscal Year, and Mr. Ferrara +had no options outstanding. +(4) At +December 31, 2020, the aggregate number of shares of restricted Common Stock held by +Mr. Klipper was 4,245, all of which was issued in the 2020 Fiscal Year, and Mr. Klipper +had no options outstanding. +(5) Mr. +Randal retired as a director effective on the date of the 2020 Annual Meeting of Stockholders, +June 5, 2020. +(6) Upon +Mr. Randall’s retirement, he ceased to be chairman of the Audit Committee. Accordingly, +he received compensation as chairman of the Audit Committee only for the first quarter +of 2020 and waived payment of such compensation for the second quarter. +(7) At +December 31, 2020, the aggregate number of shares of restricted Common Stock held by +Mr. Migliorini was 4,245, all of which was issued in the 2020 Fiscal Year, and Mr. Migliorini +had no options outstanding. +(8) At +December 31, 2020, the aggregate number of shares of restricted Common Stock held by +Mr. Sachdev was 4,245, all of which was issued in the 2020 Fiscal Year, and Mr. Sachdev +had no options outstanding. +(9) At +December 31, 2020, the aggregate number of shares of restricted Common Stock held by +Mr. Schwartz was 4,245, all of which was issued in the 2020 Fiscal Year, and Mr. Schwartz +had no options outstanding. +(10) At +December 31, 2020, the aggregate number of shares of restricted Common Stock held by +Ms. Lynch was 4,245, all of which was issued in the 2020 Fiscal Year, and Ms. Lynch had +no options outstanding. +(11) At +December 31, 2020, the aggregate number of shares of restricted Common Stock held by +Mr. Smith was 4,245, all of which was issued in the 2020 Fiscal Year, and Mr. Smith had +no options outstanding. +21 +Directors +who are also our employees are not paid any fees or other remuneration for service on the Board of Directors or any of its committees. +In the 2020 Fiscal Year, each non-employee director received for service on the Board a grant of 4,245 shares of restricted Common +Stock, vesting on July 1, 2021, the first anniversary of the grant date, and was entitled to receive $75,000 for such service. +Due to the suspension of directors’ compensation from April 1, 2020, through September 30, 2020, as a result of the impact +of COVID-19, each director agreed to waive payment of $37,500 of compensation that would have been paid to him or her for service +as a director during that period. +In +the 2020 Fiscal Year, members of the Audit Committee, Nominating/Corporate Governance Committee, Compensation Committee and Corporate +Social Responsibility Committee were each entitled to receive an additional $10,000 for serving on such committees, except that +(a) the Chairman of the Audit Committee was entitled to receive $35,000 for serving in this role and (b) the Chairman of the Compensation +Committee was entitled to receive $15,000, instead of $10,000. Due to the suspension of directors’ compensation from April +1, 2020, through September 30, 2020, as a result of the impact of COVID-19, (i) each member of the Audit Committee, the Nominating/Corporate +Governance Committee, Compensation Committee and Corporate Social Responsibility Committee agreed to waive payment of $5,000 of +compensation that would have been paid to him or her for service on such committee during that period, (ii) the Chairman of the +Audit Committee agreed to waive payment of $17,500 for his service as Chairman, and (iii) the Chairman of the Compensation Committee +agreed to waive payment of $7,500 for his service as Chairman. We reimburse our directors for any out-of-pocket expenses incurred +by them in connection with services provided in such capacity. +STOCK +OWNERSHIP +Security +Ownership of Certain Beneficial Owners +The +following table sets forth information as of March 20, 2021 (unless otherwise indicated) with respect to the beneficial ownership +of our Common Stock by each person known by us to be the beneficial owner of more than 5% of the outstanding shares of our Common +Stock. A person is deemed to be a beneficial owner of any securities that that person has the right to acquire within 60 days. +Name +and Address of Beneficial Owner +Amount +and +Nature of +Beneficial +Ownership(1) +Percentage +of Class +BlackRock Inc. +55 +East 52 nd Street +New +York, NY 10055 +11,998,936 +14.40% +(2) +The Vanguard Group +100 +Vanguard Boulevard +Malvern, +Pennsylvania 19355 +8,022,669 +9.64% +(3) +Macquarie Group Limited +50 Martin Place +Sydney, New South Wales +Australia +5,407,438 +6.50% +(4) +Steven Madden +c/o Steven Madden, Ltd. +52-16 Barnett Avenue +Long Island City, NY +11104 +5,431,776 +6.41% +(5) +T. Rowe Price Associates, Inc. +10 +E. Pratt Street +Baltimore, +MD 21202 +4,490,948 +5.30% +(6) +(1) Beneficial +ownership as reported in the table below has been determined in accordance with Item +403 of Regulation S-K and Rule 13d-3 of the Exchange Act and based upon 82,838,362 shares +of Common Stock outstanding (excluding treasury shares) as of March 20, 2021. +22 +(2) Based +solely on a Statement on Schedule 13G/A filed with the SEC on January 26, 2021 by BlackRock, +Inc. (“BlackRock”), BlackRock has sole voting power with respect to 11,858,670 +of such shares and sole dispositive power with respect to all such shares. +(3) Based +solely on a Statement on Schedule 13G/A filed with the SEC on February 10, 2021 by The +Vanguard Group (“Vanguard”), Vanguard has shared voting power with respect +to 126,811of such shares, sole dispositive power with respect to 7,832,041 of such shares +and shared dispositive power with respect to 190,628 of such shares. +(4) Based +solely on a Statement on Schedule 13G filed with the SEC on February 12, 2021 by Macquarie +Group Limited (“Macquarie Group”), Macquarie Group is the beneficial owner +of the following shares of Common Stock by virtue of its direct or indirect ownership +of the following companies: (i) Macquarie Investment Management Business Trust (“Macquarie +IM Business Trust”), which has sole voting power and sold dispositive power with +respect to 5,381,042 shares and (ii) Macquarie Investment Management Group Limited (“Macquarie +IM Group”), which has sole voting power and sole dispositive power with respect +to 2,155 shares. In addition, Macquarie Bank Limited (“Macquarie Bank”) is +deemed to be the beneficial owner of 5,407,438 +shares by virtue of its direct or indirect ownership of Macquarie IM Business Trust and +Macquarie IM Group; and Macquarie Investment Management Holdings Inc. (“Macquarie +IM Holdings”) is deemed to be the beneficial owner of 5,381,042 shares by virtue +of its ownership of Macquarie IM Business Trust. The address of Macquarie IM Holdings +and Macquarie IM Business trust is 2005 Market +Street, Philadelphia, PA 19103. The address of Macquarie Bank and Macquarie Group is +50 Martin Place Sydney, New South Wales, Australia. +(5) Mr. +Madden’s beneficial ownership includes: (i) 2,560,543 shares of restricted Common +Stock granted under the 2006 Plan (which restricted stock includes (A) 940,536 shares +which will vest in equal annual installments over three years commencing on December +31, 2021 through December 31, 2023, (B) 1,420,007 shares which will vest in equal annual +installments over three years commencing on December 31, 2021 through December 31, 2023 +and (C) 200,000 shares which will vest in substantially equal annual installments over +three years commencing on December 31, 2024, in each case subject to forfeiture pursuant +to the terms of the 2006 Plan and of Mr. Madden’s employment agreement, as amended); +(ii) 1,912,500 shares of Common Stock that may be acquired through the exercise of options +that are exercisable as of, or will become exercisable within 60 days of, March 20, 2020; +and (iii) 918,733 shares of Common Stock held by Mr. Madden directly. +(6) Based +solely on a Statement on Schedule 13G filed with the SEC on February 16, 2021 by T. Rowe +Price Associates, Inc. (“T. Rowe Price”), T. Rowe Price has sole voting power +with respect to 1,383,166 of such shares, and sole dispositive power with respect to +all such shares. +Security +Ownership of Directors and Executive Officers +The +following table sets forth information as of March 20, 2021 (unless otherwise indicated) with respect to the beneficial ownership +of Common Stock held by (a) each current director and nominee; (b) our Chief Executive Officer, our Chief Financial Officer and +our three most highly compensated executive officers other than the Chief Executive Officer and the Chief Financial Officer (the +“Named Executive Officers”); and (c) all current directors and executive officers as a group. A person is deemed to +be a beneficial owner of any securities that that person has the right to acquire within 60 days. Each director and executive +officer has sole voting power and sole dispositive power with respect to all shares beneficially owned by him or her. +23 +Name +of Beneficial Owner(1) +Amount +and +Nature of +Beneficial +Ownership(2) +Percentage +of Class +Edward R. Rosenfeld +912,476 +1.10 +%(3) +Amelia Newton Varela +260,181 +* +(4) +Zine Mazouzi +46,558 +* +(5) +Awadhesh Sinha +49,036 +* +(6) +Karla Frieders +130,599 +* +(7) +Al Ferrara +5,245 +* +(8) +Mitchell S. Klipper +11,603 +* +(9) +Maria Theresa Kumar +— +— +Rose Peabody Lynch +12,714 +* +(10) +Peter Migliorini +15,449 +* +(11) +Ravi Sachdev +66,183 +* +(12) +Thomas H. Schwartz +15,298 +* +(13) +Robert Smith +15,897 +* +(14) +All Directors and Executive Officers as +a Group (13 persons) +1,541,239 +1.88 +%(15) +* Indicates +beneficial ownership of less than 1%. +(1) The +address for each of the individuals named above is c/o Steven Madden, Ltd., 52-16 Barnett +Avenue, Long Island City, New York 11104. +(2) Beneficial +ownership as reported in the table above has been determined in accordance with Item +403 of Regulation S-K and Rule 13d-3 of the Exchange Act and based upon 82,838,362 shares +of Common Stock outstanding (excluding treasury shares) as of March 20, 2021. +(3) Mr. +Rosenfeld’s beneficial ownership includes: (i) 348,890 shares of restricted Common +Stock; and (ii) 563,586 shares of Common Stock held by Mr. Rosenfeld without restriction. +(4) Ms. +Varela’s beneficial ownership includes: (i) 51,939 shares of restricted Common +Stock; (ii) 75,000 shares of Common Stock that may be acquired through the exercise of +options that are exercisable as of, or will become exercisable within 60 days of, March +20, 2020; and (iii) 133,242 shares of Common Stock held by Ms. Varela without restriction. +(5) Mr. +Mazouzi’s beneficial ownership includes: (i) 45,990 shares of restricted Common +Stock; and (ii) 568 shares of Common Stock held by Mr. Mazouzi without restriction. +(6) Mr. +Sinha’s beneficial ownership includes: (i) 5,799 shares of restricted Common Stock; +and (ii) 43,507 shares of Common Stock held by Mr. Sinha without restriction. +(7) Ms. +Frieders’ beneficial ownership consists of (i) 70,696 shares of restricted Common +Stock; and (ii) 59,903 shares of Common Stock held by Ms. Frieders without restriction. +(8) Mr. +Ferrara’s beneficial ownership consists of (i) 4,245 shares of restricted Common +Stock; and (ii) 1,000 shares of Common Stock held by Mr. Ferrara without restriction. +(9) Mr. Klipper’s beneficial +ownership consists of (i) 4,245 shares of restricted Common Stock; and (ii) 7,358 shares of Common Stock held by Mr. Klipper without +restriction. +(10) Ms. +Lynch’s beneficial ownership consists of (i) 4,245 shares of restricted Common +Stock; and (ii) 8,469 shares of Common Stock held by Ms. Lynch without restriction. +(11) Mr. +Migliorini’s beneficial ownership includes: (i) 4,245 shares of restricted Common +Stock; and (ii) 11,204 shares of Common Stock held by Mr. Migliorini without restriction. +24 +(12) Mr. +Sachdev’s beneficial ownership includes: (i) 4,245 shares of restricted Common +Stock; and (ii) 61,938 shares of Common Stock held by Mr. Sachdev without restriction. +(13) Mr. +Schwartz’s beneficial ownership includes: (i) 4,245 shares of restricted Common +Stock; and (ii) 11,053 shares of Common Stock held by Mr. Schwartz without restriction. +(14) Mr. Smith’s beneficial +ownership includes: (i) 4,245 shares of restricted Common Stock; and (ii) 11,652 shares of Common Stock held by Mr. Smith without +restriction. +(15) Includes, in the aggregate, +(i) 565,256 shares of restricted Common Stock; (ii) 75,000 shares of Common Stock that may be acquired through the exercise of +options that are exercisable as of, or will become exercisable within 60 days of, March 20, 2020; and (iii) 916,188 shares of +Common Stock held by such beneficial owners. +EXECUTIVE +COMPENSATION +Compensation +Discussion and Analysis +Executive +Summary +This +Compensation Discussion and Analysis describes the overall principles and objectives and specific features of our executive compensation +program, primarily focused on the executive compensation program’s application to our Chief Executive Officer and our other +executive officers included in the Summary Compensation Table, whom we refer to collectively in this Proxy Statement as the “Named +Executive Officers.” +In +developing and evaluating our executive compensation program, the Compensation Committee reviews our total stockholder return +and annual financial results for prior years and the extent to which those indicia correlate with executive compensation. +Over the last ten years, our total stockholder return increased 10.3% on an annualized basis. In 2020, our total stockholder +return decreased 19.4%, placing us in the 34 th percentile as compared with our peer group for the year. +During +the ten-year period preceding 2020, our Company experienced substantial growth. Revenue increased 236% from $532.6 million +in 2009 to $1.8 billion in 2019, while net income attributable to Steven Madden, Ltd. grew 182% from $50.1 million in 2009 to +$141.3 million in 2019. Recognizing the strong financial performance of our Company in prior years, we believe that our +executive compensation program has successfully rewarded our Named Executive Officers for our Company’s long-term performance +and has achieved its goal of retaining those Named Executive Officers with our Company. +Due +to the impact of the COVID-19 global pandemic, however, our financial results were significantly impacted in the 2020 Fiscal Year. +Revenue for the 2020 Fiscal Year declined 32.8% to $1.2 billion from $1.8 billion in the year ended December 21, 2019. Net loss +was $18.4 million, or $0.23 per basic share, for the 2020 Fiscal Year as compared to net income of $141.3 million, or $1.69 per +diluted share, for the 2019 Fiscal Year. On an adjusted basis, net income was $51.8 million, or $0.64 per diluted share, for the +2020 Fiscal Year compared to net income of $162.8 million, or $1.95 per diluted share, in the 2019 Fiscal Year. 1 Upon +the onset of the COVID-19 pandemic, our management team took immediate precautionary actions to preserve liquidity and enhance +our financial flexibility. These cost cutting actions aided in mitigating the net loss in the second and third quarter of +2020 and, when combined with improving business trends due to easing government restrictions towards the latter part of the year, +enabled our Company to return to profitability in the fourth quarter of 2020. Further, these actions enabled the Company +to generate strong free cash flow through the crisis, and we ended 2020 with $287 million in cash and short-term investments and +no debt. Based on our strong financial position at year end, our Board of Directors approved the reinstatement of a $0.15 quarterly +cash dividend beginning with the first quarter of 2021. +Reflecting +our financial and stock performance in 2020, we did not pay any cash bonuses to the Named Executive Officers for their performance +during that year. +1 +A reconciliation of adjusted results is included in Annex A to this Proxy Statement. +25 +Compensation +Objectives and Strategy +Our +executive officer compensation program is designed to attract and retain the caliber of officers needed to ensure our continued +growth and profitability and to reward them for their performance, for our performance and for creating long-term value for our +stockholders. The primary objectives of the program are to: +· align +rewards with performance that creates stockholder value; +· support +our strong team orientation; +· encourage +high-potential team players to build a career at our Company; and +· provide +rewards that are cost-efficient, competitive with other similarly positioned organizations +and fair to employees and stockholders. +Our +executive compensation programs are approved and administered by the Compensation Committee of the Board of Directors. Working +with management and outside advisors, the Compensation Committee has developed a compensation and benefits strategy that rewards +performance and reinforces a culture that the Compensation Committee believes will drive long-term success. +The +compensation program rewards team accomplishments while promoting individual accountability. The executive officer compensation +program depends in significant measure on our results, but business unit results and individual accomplishments are also very +important factors in determining each executive’s compensation. We have a robust planning and goal-setting process that +is fully integrated into the compensation system, enhancing a strong relationship among individual efforts, Company results and +financial rewards. +A +major portion of total compensation is placed at risk through annual and long-term incentives. However, we may also pay discretionary +bonuses to the Named Executive Officers based on their performance during the year. The combination of incentives is designed +to balance annual operating objectives and Company earnings performance with longer-term stockholder value creation. +To +implement our primary objectives, we seek to provide competitive compensation that is commensurate with performance. We target +compensation at the median of the market and calibrate both annual and long-term incentive opportunities to generate less-than-median +awards when goals are not fully achieved and greater-than-median awards when goals are exceeded. +We +believe that there is great value to our Company in having a team of long-tenured, seasoned managers and seek to promote a long-term +commitment from our senior executives. Our team-focused culture and management processes are designed to foster this commitment. +In addition, restricted Common Stock awards granted to Named Executive Officers in the 2020 Fiscal Year reinforce this long-term +orientation with annual vesting over four to five years. +Role +of the Compensation Committee +General. +The Compensation Committee provides overall guidance for our executive compensation policies and determines the amounts and +elements of compensation for our executive officers and outside directors. The Compensation Committee currently consists of four +members of the Board of Directors, Ms. Lynch and Messrs. Migliorini, Schwartz and Smith, each of whom is an independent director +under Rule 5605 of The Nasdaq Global Select Market listing standards and a “non-employee director” as defined under +the SEC’s rules. +When +considering decisions concerning the compensation of executives, other than the Chief Executive Officer, the Compensation Committee +asks for the recommendations of the Chief Executive Officer, including his detailed evaluation of each executive’s performance. +No executive has a role in recommending compensation for outside directors. With respect to the application of our incentive compensation +plans to non-employee directors, the Board of Directors functions as the Compensation Committee. +26 +Use +of Outside Advisors. In making its determinations with respect to executive compensation, the Compensation Committee has historically +engaged the services of an independent compensation consulting firm. The Compensation Committee has retained the services of Arthur +J. Gallagher & Co.’s Human Resources & Compensation Consulting Practice (“Gallagher”) since 2005 to +assist with its review of the compensation packages and employment agreements of the Chief Executive Officer and other executive +officers. In 2020 and 2021, Gallagher worked with the Compensation Committee to assess the reasonableness of grants of restricted +Common Stock to Mr. Rosenfeld, Mr. Mazouzi, and Ms. Frieders, the terms of the new employment agreements for Ms. Frieders and +Mr. Mazouzi, and the amendments of the employment agreements for Ms. Varela and Mr. Sinha, in each case as compared with comparable +positions in the peer group listed below. Executive compensation for the Named Executive Officers was based on employment agreements +with pay structures and levels guided by Gallagher’s market studies just prior to the consummation of the agreements. Gallagher +completed position-specific market studies when we entered into the employment agreement extension with Ms. Frieders, the new +agreement with Mr. Mazouzi, the amendments to employment agreements with Ms. Varela and Mr. Sinha in support of the design of +these agreements, and the grants of restricted Common Stock made to Mr. Rosenfeld, Mr. Mazouzi, and Ms. Frieders. Gallagher provides +only executive compensation consulting services and works with management only at the behest of the Compensation Committee. +The +Compensation Committee retains Gallagher directly, although in carrying assignments for us, Gallagher also interacts with our +management, when necessary and appropriate, in order to obtain compensation and performance data for us and our executives. In +addition, Gallagher may, in its discretion, seek input and feedback from management regarding its consulting work product for +the Compensation Committee in order to confirm alignment with our business strategy and identify data questions or other similar +issues, if any, prior to completion of a project for the Compensation Committee. +Independence +of Outside Advisors. The Compensation Committee has the sole authority to retain, terminate, approve the fees and set the +terms of our relationship with any outside compensation advisors who assist the Committee in carrying out its responsibilities. +It may select or receive advice from any compensation consultant or other advisor only after taking into consideration all factors +relevant to the consultant’s independence from management, including the factors set forth in Nasdaq rules. +Accordingly, +the Compensation Committee reviews annually its relationship with Gallagher to ensure its independence on executive compensation +matters. Prior to selecting and receiving advice from Gallagher with respect to executive compensation in the 2020 Fiscal Year, +the Compensation Committee reviewed Gallagher’s independence and that of Gallagher’s individual representatives who +served as the Committee’s advisors. The Compensation Committee determined that no conflicts of interest exist between us +and Gallagher or its representatives. In reaching such determination, the Compensation Committee considered, among other things, +the following factors: (i) that Gallagher provides no services to us other than executive compensation consulting services; (ii) +the fees paid by us to Gallagher as a percentage of Gallagher’s total revenue; (iii) the representations by Gallagher as +to its policies and procedures that are designed to prevent a conflict of interest; (iv) any business or personal relationships +between the individual representatives of Gallagher who advised the Compensation Committee and any member of the Compensation +Committee; and (v) any business or personal relationships between our executive officers and Gallagher or its individual representatives. +Consideration +of 2020 Stockholder Say-on-Pay Vote. At our 2020 Annual Meeting of Stockholders, our stockholders overwhelmingly +approved, on an advisory basis, the compensation of our Named Executive Officers (96% of votes cast). This continues the string +of 94% or higher approvals that began with the initial say-on-pay vote in 2011. The Compensation Committee believes this level +of stockholder support reflects a very strong endorsement of our compensation policies and decisions. The Compensation Committee +has considered the results of this advisory vote on executive compensation in determining our compensation policies and decisions +for 2021 and has determined that these policies and decisions are appropriate and in our best interests and those of our stockholders +at this time. +Compensation +Structure +Pay +Elements - Overview +We +use four main components of compensation: +· base +salary; +· annual +performance-based bonuses; +· long-term +equity incentives (consisting of stock options and restricted stock); and +· benefits +and perquisites. +27 +Pay +Elements - Details +Base +Salary . We paid base salaries to each of the Named Executive Officers to provide them with fixed pay commensurate with the +Named Executive Officer’s role and responsibilities, experience, expertise and individual performance. As more fully described +in the section of this Proxy Statement captioned “Employment Arrangements,” as of December 31, 2020, we had employment +agreements with each of the Named Executive Officers. The Compensation Committee, as constituted at the time the parties entered +into the employment agreements or any amendments thereof, reviewed and approved the salary established in each such agreement +or amendment. The Compensation Committee considered each employee’s salary history, value in the marketplace and performance +(including at our Company and previous employment). Notwithstanding the base salaries provided for in their respective employment +agreements, the Compensation Committee requested, and each of the Named Executive Officers Agreed to, reductions in their base +salary due to the adverse impact of the COVID-19 pandemic on our business as described below. +The +annual base salary of our Chief Executive Officer, Edward R. Rosenfeld, under Mr. Rosenfeld’s employment agreement dated +December 31, 2018, which remains in effect until December 31, 2021, is $1,041,863 for the year ending December 31, 2021. The annual +base salary of our President, Amelia Newton Varela, under Ms. Varela’s employment agreement dated December 27, 2019, which +remains in effect until December 31, 2022, is $725,000 for the year ending December 31, 2021, and $750,000 for the year ending +December 31, 2022. The annual base salary of our Chief Operating Officer, Awadhesh Sinha, under Mr. Sinha’s employment agreement +dated December 27, 2019, as amended, which remains in effect until December 31, 2023, is $767,000 for the year ending December +31, 2021, and $500,000 for the year ending December 31, 2022, for his services as our Chief Operating Officer through 2022, and +$300,000 for his services as a Senior Advisor in 2023. The annual base salary of Arvind Dharia, who served as our Chief Financial +Officer until December 31, 2020, was $642,157 for the year ending December 31, 2020. The annual base salary of Zine Mazouzi, who +became our Chief Financial Officer on January 1, 2021, under Mr. Mazouzi’s employment agreement dated as of December 8, +2020, is $550,000 for the year ending December 31, 2021, $575,000 for the year ending December 31, 2022, and $600,000 for the +year ending December 31, 2023. Our Chief Merchandising Officer, Karla Frieders, began the 2020 Fiscal Year with an annual base +salary of $590,000 under an employment agreement dated April 11, 2017, which expired on April 30, 2020. Ms. Frieders’s new +employment agreement, dated May 11, 2020, which remains in effect until April 30, 2023, also provides for an annual base salary +of $590,000 for each of the contract years ending April 30, 2021, 2022, and 2023. +Effective +April 1, 2020, as a result of the impact of the COVID-19 pandemic on our business, Mr. Rosenfeld agreed to waive payment of his +base salary and the other four Named Executive Officers agreed to reduce their base salary by 30%. Effective on August 1, 2020, +we restored the payment of the full base salary of each of our Named Executive Officers other than Mr. Rosenfeld; and effective +October 1, 2020, we restored the payment of Mr. Rosenfeld’s base salary. As a result of those reductions, we paid each of +the Named Executive Officers the base salary listed in the table below. Please see the section of this Proxy Statement captioned +“Summary Compensation Table” and “Employment Arrangements” for a more detailed description of the employment +agreements and compensation of the Named Executive Officers. The 2021 salary increases, if any, for our Named Executive Officers, +as reflected in the following table, are generally consistent with those of other management employees. +Named Executive Officer +2020 +Salary +2021 +Salary +Edward R. Rosenfeld +$ 494,853 +$ 1,041,863 +Amelia Newton Varela +$ 628,115 +$ 725,000 +Arvind Dharia +$ 576,130 +$ — +Zine Mazouzi(1) +$ — +$ 550,000 +Awadhesh Sinha +$ 668,762 +$ 767,000 +Karla Frieders +$ 530,092 +$ 590,000 * +1 Mr. Mazouzi became our Chief +Financial Officer on January 1, 2021. Even though he was not a Named Executive Officer in the 2020 Fiscal Year, we have included +him in this table because he will be a Named Executive Officer in the 2021 Fiscal year. +28 +Annual +Performance-based Bonus . Annual performance-based cash bonuses, if any, for Named Executive Officers are established in their +respective employment agreements. The Compensation Committee reviewed and approved the bonus provisions fixed in each such employment +agreement at the time the parties entered into such agreements and any amendments thereof. Such bonus provisions generally provide +for variable or discretionary bonuses designed to reward attainment of business goals. +Ms. +Varela’s employment agreement entitles her to an annual performance-based cash bonus for each of the fiscal years ended +December 31, 2020, 2021 and 2022 in an amount equal to 2% of the increase, if any, in our total earnings before interest and taxes +(“EBIT”) for each such year over our total EBIT for the immediately preceding year, less any deductions required to +be withheld by applicable laws and regulations. EBIT attributable to any business that we acquire after January 1, 2020 will be +included in the calculation for the purpose of determining Ms. Varela’s annual bonus after one year of Company ownership. +Under the February 25, 2021 amendment to Ms. Varela’s employment agreement, her performance-based bonus is capped at $450,000. +Because there was no increase in our EBIT in 2020 over EBIT in 2019 due in large part to the impact of the COVID-19 pandemic, +Ms. Varela did not receive a bonus for the 2020 Fiscal Year. +Mr. +Sinha’s employment agreement entitles him to an annual performance-based bonus for each of the fiscal years ended December +31, 2020, 2021 and 2023 in an amount equal to 2% of the increase, if any, in our earnings before interest, taxes, depreciation +and amortization (“EBITDA”) for each such year over our EBITDA for the immediately preceding year. For any business +acquired after January 1, 2020, EBITDA from the acquired business is included in the bonus calculation starting with the first +full quarter under our ownership, provided that the prior year’s EBITDA will likewise be adjusted to include EBITDA from +the acquired business for comparable quarters in the prior year on a pro forma basis assuming we had owned the business. Under +the February 25, 2021 amendment to Mr. Sinha’s employment agreement, his performance-based bonus is capped at $450,000 for +2021 and $200,000 for 2022. Because there was no increase in our EBITDA in 2020 over EBITDA in 2019 due in large part to the impact +of the COVID-19 pandemic, Mr. Sinha did not receive a bonus for the 2020 Fiscal Year. +As +provided in the 2006 Plan and the 2019 Plan, the maximum payment that may be made to an individual under any performance-based +cash award during any fiscal year and subject to the attainment of specified performance goals is $10,000,000. The Compensation +Committee may, in its sole discretion, elect to pay an individual an amount that is less than the individual’s target award +regardless of the degree of attainment of the performance goals. +For +the 2020 Fiscal Year, the Compensation Committee established a bonus pool for Named Executive Officers and our other key executives +based on 6% of our net income achieved in the 2020 Fiscal Year. However, because we did not have net income for the 2020 Fiscal +Year, no bonuses were awarded under that compensation plan. +Long-term +Equity Incentives . Management and the Compensation Committee believe that equity-based awards are an important factor in aligning +the long-term financial interest of the executive officers and stockholders. The Compensation Committee continually evaluates +the use of equity-based awards and intends to continue to use such awards in the future as part of designing and administering +our compensation program. Beginning in 2006, the Compensation Committee modified its prior practice of granting equity incentives +solely in the form of stock options and included periodic awards of restricted stock in order to grant awards that contain both +substantial incentive and retention characteristics. These awards are designed to provide emphasis on preserving stockholder value +generated in recent years while providing significant incentives for continuing growth in stockholder value. +In +the 2020 Fiscal Year, we made a grant of 108,040 restricted shares of Common Stock to Mr. Rosenfeld for performance in the fiscal +year ended December 31, 2019. The restricted stock award made to Mr. Rosenfeld vests in five equal annual installments. Gallagher +reviewed the individual grant values relative to market practice. These equity awards in the 2020 Fiscal Year were made under +the 2019 Plan. No equity-based awards were made to the Named Executive Officers for performance in the 2020 Fiscal Year, because +we did not have net income for the year as provided for in the bonus plan. +On +March 15, 2021, we made a grant of 50,569 restricted shares of Common Stock Mr. Rosenfeld, a grant of 5,057 shares of restricted +Common Stock to Mr. Mazouzi, and a grant of 10,114 shares of restricted Common Stock to Ms. Frieders. Each of those grants vest +20% per year over five years commencing on the first anniversary of the date of grant. We also made a grant of 26,350 restricted +shares of Common Stock to Ms. Varela in connection with the amendment to her employment agreement and a grant of 29,155 shares +of restricted Common Stock to Mr. Mazouzi on January 24, 2021 in connection with his new employment agreement. See “Employment +Arrangements” below for a further discussion of the equity-based awards made to Ms. Varela and Mr. Mazouzi. +29 +The +Committee intends to continue to review the equity mix to achieve the ideal incentive for both performance and retention. With +respect to stock options, the 2019 Plan provides generally that the exercise price shall be the fair market value of our Common +Stock at the time of grant, which is defined for purposes of the 2019 Plan to mean the closing price reported for the Common Stock +on the applicable date (a) as reported on the principal national securities exchange on which it is then traded or (b) if not +traded on any such national securities exchange, the last sale price quoted in the principal over-the-counter market on which +the Common Stock is quoted. +Other +Benefits and Perquisites . Our executive compensation program also includes other benefits and perquisites. These benefits +and perquisites include annual matching contributions to executive officers’ 401(k) plan accounts, company-paid medical +benefits, automobile allowances and leased automobiles, and life insurance coverage. The Compensation Committee annually reviews +these other benefits and perquisites and makes adjustments as warranted based on competitive practices, our performance and the +individual’s responsibilities and performance. The Compensation Committee has approved these other benefits and perquisites +as a reasonable component of our executive officer compensation program. Please see the section of this Proxy Statement captioned +“Summary Compensation Table” and, specifically, the column entitled “All Other Compensation” and the corresponding +footnotes. +Pay +Mix +We +use the particular elements of compensation described above because we believe that it provides a well-proportioned mix of secure +compensation, retention value and at-risk compensation, which produces short-term and long-term performance incentives and rewards. +By following this approach, we provide the executives a measure of security in the minimum expected level of compensation, while +motivating the executives to focus on business metrics and other variables within their particular sector that will increase sales +and margins and at the same time lower costs so as to produce a high level of short-term and long-term performance for us and +long-term wealth creation for the executives, as well as reducing the risk of recruitment of top executive talent by competitors. +The mix of metrics used for the annual performance bonuses and our long-term incentive program likewise provides an appropriate +balance between short-term financial performance and long-term stock performance. +For +the Named Executive Officers, the mix of compensation is weighted heavily toward at-risk pay (annual incentives and long-term +incentives). Maintaining this pay mix results fundamentally in a pay-for-performance orientation for our executives, which is +aligned with our stated compensation philosophy of providing compensation commensurate with performance. +Pay +Levels and Benchmarking +Pay +levels for our executives are determined based on several factors, including the individual’s roles and responsibilities +within our Company, the individual’s experience and expertise, the pay levels for peers within our Company, pay levels in +the marketplace for similar positions, and performance of the individual and our Company as a whole. The Compensation Committee +is responsible for approving pay levels for the Named Executive Officers. In determining the pay levels, the Compensation Committee +considers all forms of compensation and benefits. +The +Compensation Committee assesses “competitive market” compensation using several sources. The primary data source used +in setting competitive market levels for the Named Executive Officers is the information publicly disclosed by a peer group of +our Company, which is reviewed annually and may change from year to year. For the 2020 Fiscal Year, the Compensation Committee +reviewed executive compensation and compensation design for the purpose of assessing bonus awards in early 2020 in the context +of overall compensation and in relation to the following peer companies: +30 +Buckle, Inc. +G-III Apparel Group, Ltd. +RTW Retailwinds, Inc. +Caleres, Inc. +Genesco, Inc. +Oxford Industries, Inc. +Cato Corp. +Guess, Inc. +Shoe Carnival, Inc. +Crocs, Inc. +Lands’ End, Inc. +Skechers U.S.A. Inc. +Deckers Outdoor Corp. +Lululemon Athletica, Inc. +Wolverine World Wide, Inc. +Designer Brands, Inc. +Movado Group, Inc. +Zumiez, Inc. +Express, Inc. +The market capitalization +and trailing twelve months revenue of our Company and each peer company follows: +Company +Market +Cap* +TTM +Revenue** +Steven +Madden, Ltd. +$ +2.94 +$ +1.20 +Buckle, Inc. +$ +1.44 +$ +0.90 +Caleres, Inc. +$ +0.59 +$ +2.25 +Cato Corp. +$ +0.22 +$ +0.61 +Crocs, Inc. +$ +4.13 +$ +1.39 +Deckers Outdoor Corp. +$ +8.05 +$ +2.36 +Designer Brands, +Inc. +$ +0.55 +$ +2.45 +Express, Inc. +$ +0.06 +$ +1.21 +G-III Apparel +Group, Ltd. +$ +1.15 +$ +2.28 +Genesco, Inc. +$ +0.45 +$ +1.83 +Guess, Inc. +$ +1.44 +$ +2.07 +Lands’ End, Inc. +$ +0.70 +$ +1.43 +Lululemon Athletica, +Inc. +$ +45.36 +$ +4.07 +Movado Group, Inc. +$ +0.39 +$ +0.52 +RTW Retailwinds, +Inc.*** +$ +N/A +$ +N/A +Oxford Industries, Inc. +$ +1.11 +$ +0.83 +Shoe Carnival, +Inc. +$ +0.55 +$ +0.96 +Skechers U.S.A. Inc. +$ +5.63 +$ +4.61 +Wolverine World +Wide, Inc. +$ +2.56 +$ +1.79 +Zumiez, Inc. +$ +0.94 +$ +0.99 +* Market +capitalization is as of December 31, 2020 and is stated in billions. +** TTM +is last four quarters of publicly reported revenue stated in billions. +*** RTW +Retailwinds, Inc. filed for bankruptcy protection in July 2021 and is no longer a public +reporting company, and as such its Market Cap and TTM Revenue are not publicly available. +Because +only three peer companies disclose compensation for a Chief Merchandising Officer, seven additional companies were added with +respect to the consideration of Ms. Frieders’s compensation: Big Lots Inc., Boot Barn Holdings, Burlington Stores Inc., +Dollar General Inc., and aged date from two former public companies, Finish Line Inc. and Stage Stores Inc. +After +consideration of the data collected on external competitive levels of compensation and internal needs, the Compensation Committee +makes decisions regarding the Named Executive Officer’s target total compensation opportunities based on the need to attract, +motivate and retain an experienced and effective management team. Relative to the competitive market data, the Compensation Committee +generally intends that the base salary and target annual incentive compensation for each Named Executive Officer will be at the +median of the competitive market. +As +noted above, notwithstanding our overall pay positioning objectives, pay opportunities for specific individuals vary based on +factors such as scope of duties, tenure, institutional knowledge and difficulty in recruiting a new executive. Actual total compensation +in a given year will vary above or below the target compensation levels based primarily on the attainment of operating goals and +the creation of stockholder value. +Compensation +Committee Discretion +The +Compensation Committee has complete discretion whether to make cash performance bonuses or equity-based incentive awards, with +the exception of any such payouts that are to be made pursuant to contractual commitments, such as the bonuses that may be paid +to Ms. Varela and Mr. Sinha. Factors to be considered in making such awards are described under “Annual Performance-Based +Bonuses” and “Long-term Equity Incentives” above. +31 +Pay +Ratio +As +required by the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), the following disclosure +provides the relationship of the total annual compensation of our median-paid employee to the total annual compensation of our +Chief Executive Officer, Mr. Rosenfeld. The table below sets forth the total annual compensation for Mr. Rosenfeld and our median-paid +employee, who is a sales supervisor, and the ratio between the two. Our median-paid employee has changed from our 2019 fiscal +year because there has been a change in our employee population or employee compensation arrangements that would significantly +impact the pay ratio disclosure due to the reduction in force and furloughs necessitated by cost-savings measures taken to address +the impact of COVID-19 on our business. +Median employee annual total compensation +$ 23,543 +Mr. Rosenfeld annual total compensation +$ 2,872,859 +Ratio of Chief Executive Officer to median employee compensation +122:1 +We +determined our median employee as of October 1, 2020, which date is within the last three months of the 2020 Fiscal Year, as permitted +by the pay ratio rule under the Dodd-Frank Act. In determining our median employee, we applied the “de minimis” exemption +under the rule, which allows the exemption of 5% or less of our total global workforce in jurisdictions outside of the U.S., which +amounts to 142 employees based on our total global workforce of 2,833 employees. As such, we excluded all of our employees in +each of Hong Kong (21 employees), the Netherlands (44 employees) and South Africa (56 employees), which in total amount to 121 +employees or 4%. We did not exclude from consideration any employees who joined us during the 2020 Fiscal Year as the result of +a business acquisition or combination. Employees on leave of absence were excluded and wages and salaries were annualized for +those employees who were not employed for the entire 2020 Fiscal Year. To identify our median employee, we used payroll data consisting +of salary, hourly wage, overtime wage, bonus, commissions, vesting of equity awards and any similar payroll items for all of our +employees included in the calculation. +After +we identified our median employee, we determined that employee’s annual total compensation for the 2020 Fiscal Year using +the same method required for calculating our Chief Executive Officer’s (and other Named Executive Officers’) total +annual compensation for purposes of the Summary Compensation Table. However, for simplicity, we excluded employer contributions +to our 401(k) plan and medical benefits, because all employees, including our Chief Executive Officer, are offered the same benefits, +and we use the Internal Revenue Service safe harbor provision for 401(k) discrimination testing. +We +believe that the ratio stated above is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation +S-K. It is based on the methodologies, assumptions and estimates described above and is not necessarily comparable to the ratios +reported by other companies. +Risk +Assessment +Bonus +payments to executives are based either on the discretion of the Compensation Committee or are tied to growth in various indicators +of financial performance, such as EBITDA and EBIT. We have established long-term incentives in the form of stock options and time-vested +restricted stock that generally vest over four or five years. These programs have been in place for several years and have proved +effective in rewarding performance while not encouraging inappropriate risk-taking. +The +Compensation Committee undertook to review and evaluate all of our executive and company-wide compensation plans and programs +to assess whether any aspect of these plans and programs would encourage inappropriate risk-taking by our executives and non-executive +employees that could have a material adverse effect on us and to confirm that we have adequate risk management controls in place +to ensure that executive and company-wide compensation is reasonable and achieves its intended incentive without creating unacceptable +risk. Based on such review and evaluation, the Compensation Committee believes there is no material risk to us that is related +to our compensation programs for executives and non-executives. +32 +This +review and evaluation of the risks associated with our compensation plans and programs consisted of: +· identifying +those business risks that could be material to us and identifying our existing risk management +system; +· reviewing +and analyzing our compensation plans and programs to identify plan and program features +that could potentially encourage or introduce excessive or imprudent risk taking of a +material nature; +· identifying +the business risks that our compensation plan and program features could potentially +encourage or create; +· balancing +these business risks against our existing internal control systems designed to manage +and mitigate these business risks; and +· analyzing +whether the unmitigated risks, as a whole, are reasonably likely to have a material adverse +effect on us. +Various +persons were consulted during the course of the assessment, including our executive officers and senior members of our human resources +department. The Compensation Committee engages Gallagher to review our executive and company-wide compensation plans and programs +and provide advice regarding appropriate levels of incentive. +The +Compensation Committee noted several features of our compensation structure that mitigate risk, including, for example: +· we +use a pay mix that is well balanced between short-term financial performance and long-term +stock performance, consisting of secure compensation in the form of base salary, short-term +incentives in the form of potential for cash bonuses, and long-term incentives in the +form of stock options and time-vested restricted stock that generally vest over four +or five years; +· in +most instances, management or the Compensation Committee retains the discretion to decrease +all forms of incentive compensation based on significant individual or Company performance +shortfalls; +· we +periodically benchmark our compensation plans and programs and target executive and non-executive +compensation within the normal limits of the competitive market; and +· the +Compensation Committee provides oversight of our compensation plans and programs and +compensation philosophy, makes recommendations to the Board with respect to improvements +to our compensation plans and programs, and is responsible for reviewing and approving +executive compensation and administering and awarding incentive, deferred and equity +compensation to our senior executives. +In +light of the assessment described above, the Compensation Committee concluded that the risks associated with our compensation +plans and programs (executive and company-wide) are not reasonably likely to have a material adverse effect on our Company. +Implications +of Tax and Accounting Matters +As +a general matter, the Compensation Committee considers the various tax and accounting implications of compensation vehicles that +we employ. Although the Compensation Committee reviews and considers both the accounting and tax effects of various components +of compensation, those effects are not a significant factor in the Compensation Committee’s allocation of compensation among +the different components. +As +a result of changes to federal tax laws, which became effective in 2018, compensation paid to certain executive officers under +arrangements entered into or materially modified after November 2, 2017 generally are not deductible to the extent that they result +in compensation that exceeds $1 million in any one year for any such executive officer. Before 2018, a deduction was allowed for +certain performance-based pay in excess of $1 million for executive officers who were subject to the limitation. Recognizing the +importance of linking pay and performance, we intend to continue to include performance conditions on a portion of the compensation +of our executive officers. +33 +As +more fully described below under the heading “Termination, Change-in-Control and Non-Competition/Non-Solicitation,” +with the exception of Ms. Frieders, all of our Named Executive Officers are entitled to receive certain compensation in the event +of a termination of employment in connection with a change-in-control event for our Company, which payments may trigger the application +of the “golden parachute” provisions of Sections 280G and 4999 of the Code. Section 280G of the Code disallows a tax +deduction with respect to excess parachute payments to certain executives of companies that undergo a change-in-control. In addition, +Section 4999 of the Code imposes a 20% excise tax on the individual receiving the excess parachute payment. Excess parachute payments +are golden parachute payments that exceed an amount determined under Section 280G based on the executive’s prior compensation. +In approving the compensation arrangements of our Named Executive Officers, our Compensation Committee considers all elements +of the cost to us of providing such compensation, including the potential impact of Sections 280G and 4999, which, under certain +circumstances, may limit the deductibility of executive compensation. However, our Compensation Committee may determine, in its +judgment, to authorize compensation arrangements that could give rise to loss of deductibility under Section 280G and the imposition +of excise taxes under Section 4999 when it believes that such arrangements are appropriate to attract and retain executive talent. +Conclusion +The +level and mix of compensation that the Compensation Committee finally decides upon as to each executive is considered within the +context of both the objective data from our competitive assessment of compensation and performance, as well as the subjective +factors as outlined above. The Compensation Committee believes that each of the compensation packages for the Named Executive +Officers is within the competitive range of practices when compared to the objective comparative data even where subjective factors +have influenced the compensation decisions. +Compensation +Committee Interlocks and Insider Participation +During +the 2020 Fiscal Year, the following directors served on the Compensation Committee: Peter Migliorini (Chairman), Thomas H. Schwartz, +Rose Peabody Lynch and Robert Smith. During the 2020 Fiscal Year: +· none +of the members of the Compensation Committee was an officer (or former officer) or employee +of our Company or any of our subsidiaries; +· none +of the members of the Compensation Committee had a direct or indirect material interest +in any transaction in which we were a participant and the amount involved exceeded $120,000; +· none +of our executive officers served on the compensation committee (or another board committee +with similar functions or, if none, the entire board of directors) of another entity +where one of that entity’s executive officers served on our Compensation Committee; +· none +of our executive officers was a director of another entity where one of that entity’s +executive officers served on our Compensation Committee; and +· none +of our executive officers served on the compensation committee (or another board committee +with similar functions or, if none, the entire board of directors) of another entity +where one of that entity’s executive officers served as a director on our Board +of Directors. +Executive +Officers +The +following table identifies the executive officers of the Company, and their ages and positions: +Name +Age +Position +Edward R. Rosenfeld +45 +Chairman of the Board and Chief Executive +Officer +Amelia Newton Varela +49 +President +Zine Mazouzi +49 +Chief Financial Officer +Awadhesh Sinha +75 +Chief Operating Officer +Karla Frieders +44 +Chief Merchandising Officer +Lisa Keith +36 +Vice President, General Counsel and Secretary +34 +Zine +Mazouzi has been our Chief Financial Officer since January 1, 2021, and previously served as our Chief Accounting Officer +and Senior Vice President—Finance and Operations from January 2019 until his appointment as our Chief Financial Officer. +Prior to joining our Company, he held various senior positions at Sears Holdings as the Chief Financial Officer of Sears Footwear +Group from 2016 to 2017, Head of the Footwear Group from 2017 to 2018 and Head of the Footwear, Home and Jewelry Groups in 2018. +Prior to that, he worked at Nine West Group from 1998 to 2015, where he held a number of increasingly senior positions, including +Chief Financial Officer from 2014 to 2015. Mr. Mazouzi received his Bachelor’s Degree in Finance and a Master of Business +Administration from Iona College. +Awadhesh +Sinha has been our Chief Operating Officer since July 2005. Mr. Sinha was a director of our Company from October 2002 to July +2005, before joining us as our Chief Operating Officer. Mr. Sinha was the Chief Operating Officer and Chief Financial Officer +of WEAR ME Apparel Inc., a company that designs, manufactures and markets branded and non-branded children’s clothing, from +2003 to July 2005. Prior to that, Mr. Sinha worked for Salant Corporation, a company that designs, manufactures and markets men’s +clothing, for 22 years, and held the position of Chief Operating Officer and Chief Financial Officer of Salant Corporation from +1998 to 2003. +Karla +Frieders has been our Chief Merchandising Officer since September 2015. Previously, Ms. Frieders served as President of Retail +from January 2013 and Vice President of Retail from October 2009 until January 2013. Prior to these roles, Ms. Frieders held various +buying positions at our Company from 1999. +Lisa +Keith has been our General Counsel since November 2019. Mrs. Keith joined Steve Madden’s Legal Department in May 2017 +and previously served as Vice President and Deputy General Counsel. Prior to joining the Company, Mrs. Keith was a senior associate +at Davis Wright Tremaine LLP, where she represented clients in the fashion, technology and luxury goods industries. Mrs. Keith +began her legal career at Gibson, Dunn & Crutcher LLP, where she practiced in the litigation department. She earned her J.D. +from New York University School of Law and her B.A., summa cum laude, from Brandeis University, where she was Phi Beta Kappa. +Please +see the section of this Proxy Statement captioned “Proposal One: Election of Directors” for biographical summaries +and other information concerning our Chairman of the Board and Chief Executive Officer, Edward R. Rosenfeld, and our President, +Amelia Newton Varela, as well as our other director nominees. +SUMMARY +COMPENSATION TABLE +The +following table sets forth the compensation information for our Chief Executive Officer, Chief Financial Officer and the three +most highly compensated executive officers other than the Chief Executive Officer and Chief Financial Officer relating to the +fiscal years ended December 31, 2020, 2019 and 2018, respectively. In this Proxy Statement, we refer to this group of people as +our “Named Executive Officers.” +In +accordance with applicable SEC rules, the Summary Compensation Table includes, for a particular fiscal year, only those stock +awards made during that fiscal year and not any awards made after year-end even if awarded for services rendered in that year. +SEC rules require that such awards be reflected in the year of grant and, as such, awards made after the end of the 2020 Fiscal +Year will appear in the Summary Compensation Table to be included in our proxy statement for our 2022 Annual Meeting of Stockholders. +35 +Name +and Principal +Position +Fiscal +Year +Salary +($) +Bonus +($) +Stock +Awards +($)(1) +Option +Awards +($)(1) +Non-Equity +Incentive +Plan +Compensation +($) +All +Other +Compensation +($) +Total +Compensation +($) +Edward R. +Rosenfeld +2020 +494,853 (2) +— +2,360,456 +— +— +17,550 (3) +2, +872,859 +Chief Executive +Officer +2019 +943,961 +— +5,864,811 +— +500,000 +26,400 (4) +7,335,172 +2018 +899,038 +— +5,664,780 +— +500,000 +26,250 (5) +7,090,068 +Amelia Newton +Varela +2020 +628,115 (6) +— +1,163,970 +— +— +23,550 (7) +1,815,635 +President +2019 +669,538 +— +— +— +182,006 (8) +23,400 (9) +874,944 +2018 +649,615 +— +— +— +263,302 (10) +23,250 (11) +936,167 +Arvind Dharia (12) +2020 +576,130 (13) +— +— +— +— +91,841 (14) +667,971 +Chief Financial +Officer +2019 +611,321 +— +— +— +200,000 +106,691 (15) +918,012 +2018 +582,455 +— +602,438 +— +220,000 +106,565 (16) +1,511,458 +Awadhesh +Sinha +2020 +668,762 (17) +— +499,990 +— +— +23,268 (18) +1,192,020 +Chief Operating +Officer +2019 +724,220 +— +— +— +200,000 (19) +24,101 (20) +948,321 +2018 +701,596 +— +75,214 +— +274,600 (21) +23,708 (22) +1,100,518 +Karla Frieders +2020 +530,092 (23) +— +750,158 +— +— +8,550 (24) +1,288,800 +Chief Merchandising +Officer +2019 +583,875 +— +496,953 +— +100,000 +8,400 (25) +1,189,228 +2018 +563,000 +— +502,843 +— +100,000 +8,250 (26) +1,174,093 +(1) The +amounts in this column reflect the total grant date fair value of awards granted during +the applicable year for the fiscal years ended December 31, 2020, December 31, 2019, +and December 31, 2018, respectively, calculated in accordance with ASC Topic 718. Assumptions +used in the calculation of these amounts are included in Note J to our audited financial +statements for the fiscal years ended December 31, 2020 and December 31, 2019, included +in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on +March 16, 2021, and March 2, 2019, respectively, and in Note H to our audited financial +statements for the fiscal year ended December 31, 2018, included in our Annual Report +on Form 10-K filed with the Securities and Exchange Commission on February 28, 2019. +(2) Mr. +Rosenfeld agreed to waive payment of his base salary from April 1, 2020, through September +30, 2020. +(3) Consists +of a $9,000 automobile allowance and $8,550 in annual match contributions to Mr. Rosenfeld’s +401(k) plan account. Mr. Rosenfeld agreed to waive payment of his automobile allowance +from April 1, 2020, through September 30, 2020. +(4) Consists +of an $18,000 automobile allowance and $8,400 in annual match contributions to Mr. Rosenfeld’s +401(k) plan account. +(5) Consists +of an $18,000 automobile allowance and $8,250 in annual match contributions to Mr. Rosenfeld’s +401(k) plan account. +(6) Ms. +Varela agreed to waive payment of 30% of her base salary from April 1, 2020, through +August 31, 2020. +(7) Consists +of a $15,000 automobile allowance and $8,550 in annual matching contributions to Ms. +Varela’s 401(k) plan account. +(8) Consists +of a non-equity incentive payment of $182,006 made pursuant to a bonus formula in Ms. +Varela’s employment agreement. See “Employment Arrangements.” +(9) Consists +of a $15,000 automobile allowance and $8,400 in annual matching contributions to Ms. +Varela’s 401(k) plan account. +(10) Consists +of a non-equity incentive payment of $263,302 made pursuant to a bonus formula in Ms. +Varela’s employment agreement. See “Employment Arrangements.” +36 +(11) Consists +of a $15,000 automobile allowance and $8,250 in annual matching contributions to Ms. +Varela’s 401(k) plan account. +(12) Mr. +Dharia retired as Chief Financial Officer effective December 31, 2020. +(13) Mr. +Dharia agreed to waive payment of 30% of his base salary from April 1, 2020, through +August 31, 2020. +(14) Consists +of a $14,645 automobile allowance, $68,646 life insurance premiums and $8,550 in annual +match contributions to Mr. Dharia’s 401(k) plan account. +(15) Consists +of a $14,645 automobile allowance, $83,646 life insurance premiums and $8,400 in annual +match contributions to Mr. Dharia’s 401(k) plan account. +(16) Consists +of a $14,348 automobile allowance, $86,967 life insurance premiums and $8,250 in annual +match contributions to Mr. Dharia’s 401(k) plan account. +(17) Mr. +Sinha agreed to waive payment of 30% of his base salary from April 1, 2020, through August +31, 2020. +(18) Consists +of a $15,718 automobile allowance and $8,550 in annual matching contributions to Mr. +Sinha’s 401(k) plan account. +(19) Consists +of a non-equity incentive payment of $135,895 made pursuant to a bonus formula in Mr. +Sinha’s employment agreement and an additional non-equity incentive payment of +$64,105. See “Employment Arrangements.” +(20) Consists +of a $15,701 automobile allowance and $8,400 in annual matching contributions to Mr. +Sinha’s 401(k) plan account. +(21) Includes +a non-equity incentive payment of $274,600 made pursuant to a bonus formula in Mr. Sinha’s +employment agreement. See “Employment Arrangements.” +(22) Consists +of a $15,458 automobile allowance and $8,250 in annual matching contributions to Mr. +Sinha’s 401(k) plan account. +(23) Ms. +Frieders agreed to waive payment of 30% of her base salary from April 1, 2020, through +August 31, 2020. +(24) Consists +of $8,550 in annual matching contributions to Ms. Frieders’ 401(k) plan account. +(25) Consists +of $8,400 in annual matching contributions to Ms. Frieders’ 401(k) plan account. +(26) Consists +of $8,250 in annual matching contributions to Ms. Frieders’ 401(k) plan account. +Employment +Arrangements +Edward +R. Rosenfeld. On December 31, 2018, we entered into a new employment agreement (the “Rosenfeld 2018 Agreement”) +with Mr. Rosenfeld to replace our employment agreement, which expired on December 31, 2018. Pursuant to the Rosenfeld 2018 Agreement, +Mr. Rosenfeld continues to serve as our Chief Executive Officer and executive Chairman of the Board of Directors through December +31, 2021, unless sooner terminated in accordance with the terms of the agreement. The Rosenfeld 2018 Agreement provides for an +annual base salary of $945,000, $992,250 and $1,041,863 for fiscal years 2019, 2020 and 2021, respectively, and a monthly automobile +allowance of $1,500. Due to the impact of the COVID-19 pandemic on our business, Mr. Rosenfeld agreed to waive payment of his +entire base salary from April 1 through September 30, 2020. Pursuant to the Rosenfeld 2018 Agreement, on December 31, 2018, Mr. +Rosenfeld was granted 87,500 shares of Common Stock, subject to certain restrictions. Those restricted shares of Common Stock, +which were issued under the 2006 Plan, vest in five equal annual installments of 17,500 shares that commenced on December 1, 2019. +In addition, Mr. Rosenfeld received the following awards under the Rosenfeld 2018 Agreement: (i) on February 1, 2019, Mr. Rosenfeld +received an award of 87,500 shares of our Common Stock under the 2006 Plan, subject to certain restrictions, which vest in five +equal annual installments of 17,500 shares commencing on February 1, 2020; and (ii) on March 16, 2020, Mr. Rosenfeld received +an award of 108,030 shares of our Common Stock under the 2019 Plan, subject to certain restrictions, which vest in five equal +annual installments of 21,606 shares commencing on March 1, 2021. The Rosenfeld 2018 Agreement provides that Mr. Rosenfeld will +receive additional compensation and bonuses, if any, at the absolute discretion of the Board of Directors. +37 +In +the event of his death, the Rosenfeld 2018 Agreement provides for the payment to Mr. Rosenfeld’s estate of his base salary +for the 12-month period immediately after the date of his death. The agreement also provides that if Mr. Rosenfeld’s employment +is terminated due to his “total disability” (as defined in the Rosenfeld 2018 Agreement), Mr. Rosenfeld will receive +payment of his base salary for the 12-month period immediately after the date on which he is determined to be totally disabled. +The Rosenfeld 2018 Agreement allows us to terminate his employment for “cause” (as defined therein) or without cause. +If we terminate Mr. Rosenfeld’s employment for cause, we will have no further obligations to Mr. Rosenfeld, and Mr. Rosenfeld +will be entitled to no further compensation from us, except for pro-rata amounts due to him on the date of his termination. If +we terminate Mr. Rosenfeld’s employment without cause or if Mr. Rosenfeld resigns for “good reason” (as defined +in the Rosenfeld 2018 Agreement), Mr. Rosenfeld will be entitled to receive payment of his annual base salary, payable at regular +payroll intervals, from the date of termination of employment through the longer of the remainder of the term of the agreement +or six months. +In +addition, if we terminate Mr. Rosenfeld’s employment without cause or if he resigns for good reason during the period commencing +90 days prior to a “change of control” (as defined in the Rosenfeld 2018 Agreement) and ending 180 days following +a change of control, Mr. Rosenfeld will receive an amount equal to two and one-half times the sum of (i) the annual base salary +to which he was entitled as of the date of termination or resignation of plus (ii) the average cash bonus he received for the +preceding three-year period ending on the last previous December 31 (the “Change of Control Payment”). However, if +the Change of Control Payment (or a portion thereof) is determined to constitute an “excess parachute payment” under +Sections 280G and 4999 of the Internal Revenue Code of 1986, as amended (the “Code”), Mr. Rosenfeld will be paid either +(i) the Change of Control Payment (which will be subject to all applicable taxes to be paid by him including the excise tax payable +pursuant to Section 4999 and which will be limited as to deductibility to our Company) or (ii) a reduced amount, calculated in +accordance with Section 280G, that may be paid to the executive without the imposition of an excise tax under Section 4999 and +which shall be fully deductible to the Company, whichever payment yields the greater after-tax benefit to him. +Amelia +Newton Varela. On December 30, 2016, we entered into an employment agreement with Ms. Varela (the “Varela 2016 Agreement”), +which replaced her prior, expiring employment agreement. Pursuant to the Varela 2016 Agreement, Ms. Varela continued to serve +our President for a term of three years through December 31, 2019. The Varela 2016 Agreement provided for an annual base salary +of $630,000, $650,000 and $670,000 for the years 2017, 2018 and 2019, respectively, and a monthly automobile allowance of $1,250 +in each year of the term. In addition, pursuant to the Varela 2016 Agreement, on January 3, 2017, Ms. Varela was granted an option +to purchase 150,000 shares of our Common Stock under the 2006 Plan, at an exercise price of $23.83 per share, which option vests +in four equal annual installments of 37,500 shares on each anniversary of the date of grant, which commenced on January 3, 2018. +The +Varela 2016 Agreement entitled Ms. Varela to an annual performance-based cash bonus for each of the fiscal years ended December +31, 2017, 2018 and 2019 in an amount equal to 2% of the increase, if any, in our total earnings before interest and taxes (“EBIT”) +for each such year over our total EBIT for the immediately preceding year, less any deductions required to be withheld by applicable +laws and regulations. EBIT attributable to any business that we acquired after December 30, 2016 was not included in the calculation +for the purpose of determining Ms. Varela’s annual bonus. Ms. Varela received a cash bonus of $182,006 for 2019 EBIT performance, +$263,302 for 2018 EBIT performance, and $338,669 for 2017 EBIT performance. +On +December 27, 2019, we entered into a new employment agreement (the “Varela 2019 Agreement”) with Ms. Varela, pursuant +to which she will continue to serve as our President through December 31, 2022, unless sooner terminated in accordance with the +terms of the agreement. The Varela 2019 Agreement replaced her previous employment agreement, which expired on December 31, 2019. +The Varela 2019 Agreement provides for an annual base salary of $700,000, $725,000, and $750,000 for fiscal years 2020, 2021, +and 2022 and an annual automobile allowance of $15,000 in each year of the term. Due to the impact of the COVID-19 pandemic on +our business, Ms. Varela agreed to a 30% reduction in her base salary from April 1 through July 31, 2020. In addition, on January +2, 2020, pursuant to the Varela 2019 Agreement, Ms. Varela was granted 27,000 restricted shares of Common Stock, which will vest +in five equal annual installments on each anniversary of the date of grant, commencing on January 2, 2021. +38 +The +Varela 2019 Agreement entitles Ms. Varela to an annual performance-based cash bonus for each of the fiscal years ended December +31, 2020, 2021 and 2022 in an amount equal to 2% of the increase, if any, in our total earnings before interest and taxes (“EBIT”) +for each such year over our total EBIT for the immediately preceding year, less any deductions required to be withheld by applicable +laws and regulations. EBIT attributable to any business that we acquire after January 1, 2020 will be included in the calculation +for the purpose of determining Ms. Varela’s annual bonus after one year of Company ownership. +If +the Varela 2019 Agreement is terminated due to Ms. Varela’s “disability” (as defined in the agreement) or death, +we are obligated to pay Ms. Varela (or her estate) the amount of accrued and unpaid salary through the date of termination plus +any performance-based cash bonus that has accrued for the year prior to termination and is unpaid at the time Ms. Varela’s +employment is terminated. We may terminate the agreement for “cause” (as defined in the Varela 2019 Agreement), in +which case she will be entitled only to accrued and unpaid salary through the date of termination of employment. If we terminate +Ms. Varela’s employment without cause, she would be entitled to receive payment of her annual base salary, payable at regular +payroll intervals, from the date of termination of employment through the remainder of the term plus any performance-based cash +bonus that has accrued but not yet been paid. In addition, if we terminate Ms. Varela’s employment without cause during +the period commencing 30 days prior to a “change of control” (as defined in the Varela 2019 Agreement) transaction +and ending 180 days following a change of control transaction, she is entitled to receive an amount equal to the lesser of (A) +two and one-half times the sum of (i) the annual base salary to which she was entitled as of the date of termination plus (ii) +the average cash bonus received by her for the preceding three-year period ending on the last previous December 31 or (B) the +maximum amount that is tax deductible to us under Section 280G of the Code. +On +February 25, 2021, we entered into Amendment No. 1 to Employment Agreement with Ms. Varela (the “Varela Amendment”), +which amended the Varela 2019 Agreement. The Varela Amendment amended the Varela 2019 Agreement by setting a cap of $450,000 on +bonuses payable to Ms. Varela based on our financial performance in 2021 and 2022. In addition, the Varela Amendment provided +that on March 1, 2021, we will grant Ms. Varela the number of restricted shares of our Common Stock determined by dividing $1 +million by the closing price of our Common Stock on March 1, 2021. The shares of restricted Common Stock will vest 25% per year +commencing on March 1, 2022. As provided in the Varela Amendment, we issued 26,350 restricted shares of Common Stock to Ms. Varela +on March 1, 2021. All of the other terms and provisions of the Varela 2019 Agreement remain in full force and effect. +Arvind +Dharia. In January 1998, we entered into an employment agreement with Arvind Dharia, which has been amended from time to time, +most recently on April 20, 2018 (the “Dharia Agreement”). Pursuant to the Dharia Agreement, Mr. Dharia continued to +serve as our Chief Financial Officer for a term extending through December 31, 2020. Mr. Dharia retired as our Chief Financial +Officer upon expiration of the Dharia Agreement. Pursuant to the Dharia Agreement, as amended, Mr. Dharia received an annual base +salary of $582,455 for the period commencing January 1, 2015 and ending December 31, 2018 and $611,578 for 2019 and $642,157 for +2020. Due to the impact of the COVID-19 pandemic on our business, Mr. Dharia agreed to a 30% reduction in his base salary from +April 1 through July 31, 2020. The Dharia Agreement also provided for a monthly car allowance of $1,600 through the term and payment +of life insurance premiums on Mr. Dharia’s behalf of approximately $80,000 per year. Pursuant to the Dharia Agreement, on +May 1, 2018, Mr. Dharia was granted 18,750 shares of Common Stock, subject to certain restrictions. These restricted shares of +Common Stock, which were issued to Mr. Dharia under the 2006 Plan, vest in three equal annual installments, which vesting commenced +on December 15, 2018. Under the Dharia Agreement, Mr. Dharia is entitled to awards under such plan as may be determined by the +Board of Directors, or a committee thereof, from time to time in its absolute discretion. The Dharia Agreement provides that he +will receive an annual bonus in such amount, if any, and at such time or times, as the Board of Directors may determine in its +absolute discretion. Due to the expiration of the Dharia Agreement and Mr. Dharia’s subsequent retirement, the terms of +the Dharia Agreement relating to payments upon his death, total disability, termination of employment and a change of control +of our Company are no longer applicable. +39 +Zine +Mazouzi . On December 8, 2020, we entered into an employment agreement with Zine Mazouzi ( the +“Mazouzi Employment Agreement”) , pursuant to which Mr. Mazouzi will serve as our Chief Financial Officer. The +term of the Mazouzi Employment Agreement commenced on January 1, 2021, and will continue for a term of three years through December +31, 2023, unless sooner terminated in accordance with the terms thereof. Pursuant to the terms of the Mazouzi Employment Agreement, +Mr. Mazouzi will receive an annual base salary during the term of $550,000 for the calendar year 2021, $575,000 for the calendar +year 2022, and $600,000 for the calendar year 2023 and an automobile allowance of $1,250 per month in each year of the term. In +addition, on January 4, 2021, pursuant to the Mazouzi Employment Agreement, Mr. Mazouzi was granted 29,155 shares of restricted +Common Stock vesting 20% per year for five years commencing on the first anniversary of the grant date. +In +addition, the terms of the Mazouzi Employment Agreement entitle Mr. Mazouzi to an annual performance-based cash bonus for each +of the fiscal years ended December 31, 2021, 2022 and 2023 based on the following schedule: +Diluted +EPS +Bonus +as % of Salary +Maximum +(130% of Plan) +80% +Target +(100% of Plan) +50% +Threshold +(90% of Plan) +20% +For +actual diluted EPS amounts between the Threshold and Target amounts or between the Target and Maximum amounts, the bonus payable +shall be calculated based on a straight-line interpolation between the respective amounts. +Pursuant +to the terms of the Mazouzi Employment Agreement, we may terminate Mr. Mazouzi’s employment “for cause” (as +defined in the Mazouzi Employment Agreement), in which event Mr. Mazouzi would be entitled to receive only his accrued and unpaid +base salary through the date of termination. If we terminate Mr. Mazouzi’s employment without cause or Mr. Mazouzi terminates +the Mazouzi Employment Agreement “for good reason” (as defined in the Mazouzi Employment Agreement), Mr. Mazouzi would +be entitled to receive payment of his annual base salary, payable at regular payroll intervals, from the date of termination of +employment through the remainder of the term plus any performance-based cash bonus that has accrued but not yet been paid. In +addition, if we terminate Mr. Mazouzi’s employment without cause or Mr. Mazouzi terminates the Mazouzi Employment Agreement +for good reason during the period commencing 30 days prior to a “Change of Control” (as defined in the Mazouzi Employment +Agreement) and ending 180 days following a Change of Control, he will be entitled to receive an amount equal to the lesser of +(A) two and one-half times the sum of (i) the annual base salary to which he was entitled as of the date of termination plus (ii) +the average cash bonus received by him for the preceding three-year period ending on the last previous December 31 or (B) the +maximum amount that is tax deductible to the Company under Section 280G of the Internal Revenue Code of 1986, as amended. +Awadhesh +Sinha. On December 30, 2016, we entered into an employment agreement (the “Sinha 2016 Agreement”) with Mr. Sinha +to replace his prior, expiring employment agreement. Pursuant to the Sinha 2016 Agreement, Mr. Sinha continued to serve as our +Chief Operating Officer through December 31, 2019. The Sinha 2016 Agreement provided for an annual base salary of $681,000, $702,000 +and $723,000 for the years 2017, 2018 and 2019, respectively, and entitled Mr. Sinha to a monthly automobile allowance of $1,850 +and the payment of term life insurance premiums on Mr. Sinha’s behalf in the amount of approximately $3,500 per year. On +January 3, 2017, pursuant to the Sinha 2016 Agreement, Mr. Sinha was granted 42,253 shares of Common Stock, subject to certain +restrictions. These restricted shares of Common Stock, which were issued under the 2006 Plan, vested in three substantially equal +annual installments, which vesting commenced on December 15, 2017. +The +Sinha 2016 Agreement entitled Mr. Sinha to an annual performance-based bonus for each of the fiscal years ended December 31, 2017, +2018 and 2019 in an amount equal to 2% of the increase, if any, in our earnings before interest, taxes, depreciation and amortization +(“EBITDA”) for each such year over our EBITDA for the immediately preceding year. For any business acquired after +December 30, 2016, EBITDA from the acquired business was included in the bonus calculation starting with the first full quarter +under our ownership, provided that the prior year’s EBITDA will likewise be adjusted to include EBITDA from the acquired +business for comparable quarters in the prior year on a pro forma basis assuming that we had owned the business. The maximum annual +bonus was $600,000, the first $300,000 of which was be payable in cash and for any amount of the annual bonus in excess of $300,000 +by a grant of restricted shares of Common Stock, which vested in three equal annual installments commencing on the first anniversary +of the grant date. Mr. Sinha received (i) a cash bonus of $300,000 and a grant of 2,493 restricted shares of Common Stock for +2017 EBITDA performance; (ii) a cash bonus of $274,600 for 2018 EBITDA performance; and (iii) a cash bonus of $135,895 for 2019 +EBITDA performance plus an additional discretionary cash bonus of $64,105. We are entitled to claw back bonuses and other incentive-based +compensation paid to Mr. Sinha if we determine that such compensation was based upon materially inaccurate financial statements. +40 +On +December 27, 2019, we entered into a new employment agreement (the “Sinha 2019 Agreement”) with Mr. Sinha, pursuant +to which he will continue to serve as our Chief Operating Officer through December 31, 2021, unless sooner terminated in accordance +with the terms of the agreement. The Sinha 2019 Agreement replaces his previous employment agreement, which expired on December +31, 2019. Under the Sinha 2019 Employment Agreement, Mr. Sinha will receive an annual base salary of $745,000 and $767,000 for +fiscal years 2020 and 2021, respectively, and an annual automobile allowance of $22,500 in each year of the term. Due to the impact +of the COVID-19 pandemic on our business, Mr. Sinha agreed to a 30% reduction in his base salary from April 1 through July 31, +2020. We will also pay term life insurance premiums on his behalf in the amount of approximately $11,000 per year less deductions +required to be withheld by applicable laws and regulations. In accordance with the terms of the Sinha 2019 Agreement, on January +2, 2020, we granted Mr. Sinha 11,598 restricted shares of Common Stock, which vest in two equal installments on December 15, 2020 +and December 15, 2021. +The +Sinha 2019 Agreement entitles Mr. Sinha to an annual performance-based bonus for each of the fiscal years ended December 31, 2020 +and 2021 in an amount equal to 2% of the increase, if any, in our earnings before interest, taxes, depreciation and amortization +(“EBITDA”) for each such year over our EBITDA for the immediately preceding year. For any business acquired after +January 1, 2020, EBITDA from the acquired business is included in the bonus calculation starting with the first full quarter under +our ownership, provided that the prior year’s EBITDA will likewise be adjusted to include EBITDA from the acquired business +for comparable quarters in the prior year on a pro forma basis assuming we had owned the business. We are entitled to claw back +bonuses and other incentive-based compensation paid to Mr. Sinha if we determine that such compensation was based upon materially +inaccurate financial statements. +In +the event of Mr. Sinha’s death, the Sinha 2019 Agreement provides for the payment to his estate of his base salary for the +12-month period immediately after the date of Mr. Sinha’s death. In addition, in the event of Mr. Sinha’s “total +disability” (as such term is defined in the Sinha 2019 Agreement), we will be obligated to continue to pay his base salary +for the 12-month period immediately after the date of determination of such total disability. If we terminate Mr. Sinha’s +employment “for cause” (as such term is defined in the Sinha 2019 Agreement), or Mr. Sinha resigns without “good +reason” (as such term is defined in the Sinha 2019 Agreement), we will be obligated to pay Mr. Sinha the amount of compensation +that is accrued and unpaid through the date of termination. If we terminate Mr. Sinha’s employment without cause or he resigns +for good reason, he will be entitled to receive payment of his annual base salary, payable at regular payroll intervals, from +the date of termination of employment through the longer of (i) the remainder of the term or (ii) six months. +If +there is a “change of control” transaction and we have terminated his employment other than “for cause” +or if he resigns “for good reason,” Mr. Sinha will receive an amount equal to two and one half times the sum of (i) +the annual base salary to which he was entitled as of the date of termination or resignation of employment plus (ii) the average +cash bonus received by him for the preceding three-year period ending on the last previous December 31 (the “Change of Control +Payment”). However, if the Change of Control Payment (or a portion thereof) is determined to constitute an “excess +parachute payment” under Sections 280G and 4999 of the Code, we will pay Mr. Sinha either (i) the Change of Control Payment +(which shall be subject to all applicable taxes to be paid by him, including the excise tax payable pursuant to Section 4999, +and which shall be limited as to deductibility to us) or (ii) a reduced amount, calculated in accordance with Section 280G, that +may be paid to him without the imposition of an excise tax under Section 4999 and which shall be fully deductible to us, whichever +payment yields the greater after-tax benefit to Mr. Sinha. +41 +On +February 25, 2021, we entered into Amendment No. 1 to Employment Agreement with Mr. Sinha (the “Sinha Amendment”), +which amended the Sinha 2019 Agreement. The Sinha Amendment extended the term of Mr. Sinha’s employment with us through +December 31, 2023. Under the Sinha Amendment, Mr. Sinha will be required to devote not more than four days per week to his duties +as Chief Operating Officer beginning on January 1, 2022, and on January 1, 2023, he will become a Senior Advisor to the Company +and will be required to devote not more than two days per week to such executive-level duties as are reasonably assigned to him +by our Chief Executive Officer. The Sinha Amendment (i) provides that Mr. Sinha’s base compensation will be $500,000 for +calendar year 2022 and $300,000 for calendar year 2023, (ii) his bonus based on our financial performance in 2021 will be capped +at $450,000, (iii) his bonus based on our financial performance in 2022 will be capped at $200,000, and (iv) he will not be entitled +to a performance bonus for 2023. All of the other terms and provisions of the Sinha Original Agreement remain in full force and +effect. +Karla +Frieders. On April 11, 2017, we entered into a new employment agreement (the “Frieders 2017 Agreement”) with Ms. +Frieders, which replaced the prior employment agreement, which had expired on February 29, 2017. Pursuant to the Frieders 2017 +Agreement, Ms. Frieders continued to serve as our Chief Merchandising Officer through April 30, 2020. The Frieders 2017 Agreement +provided Ms. Frieders an annual base salary of $550,000 from April 11, 2017 through April 30, 2018, $570,000 from May 1, 2018 +through April 30, 2019, and $590,000 from May 1, 2019 through April 30, 2020. The Frieders 2017 Agreement also entitled Ms. Frieders +to an annual performance bonus for each of the fiscal years ending December 31, 2017, 2018 and 2019 in an amount to be determined +by us in our absolute discretion and paid to her on or about March 15 with respect to the prior year. On April 11, 2017, under +the Frieders 2017 Agreement, Ms. Frieders was granted 30,000 shares of Common Stock, subject to certain restrictions. These restricted +shares of Common Stock, which were issued under the 2006 Plan, vest in five equal annual installments, commencing on April 1, +2018. +On +May 11, 2020, we entered into a new employment agreement with Ms. Frieders (the “Frieders 2020 Agreement”) pursuant +to which Ms. Frieders will continue to serve as our Chief Merchandising Officer. The Frieders 2020 Agreement is effective as of +May 1, 2020. The Frieders 2020 Agreement replaces the Frieders 2017 Agreement, which expired by its terms on April 30, 2020. +The +term of the Frieders 2020 Agreement commenced on May 1, 2020 and will continue for a term of three years through April 30, 2023, +unless sooner terminated in accordance with the terms thereof. Pursuant to the terms of the Frieders 2020 Agreement, Ms. Frieders +will receive an annual base salary during the term of $590,000. Due to the impact of the COVID-19 pandemic on our business, Ms. +Frieders agreed to a 30% reduction in her base salary from April 1 through July 31, 2020. In addition, the Frieders 2020 Agreement +entitles Ms. Frieders to an annual performance-based bonus for each of the fiscal years ending December 31, 2020, 2021 and 2022 +in an amount to be determined by the Company in its absolute discretion, which bonus, if any, will be paid to her on or about +March 15 of the year immediately following the year in which it was earned. In addition, on May 11, 2020, pursuant to the Frieders +2020 Agreement, Ms. Frieders was awarded 32,758 restricted shares of our Common Stock, which will vest in five equal annual installments +commencing on May 1, 2021. +If +we terminate Ms. Frieders’ employment due to her “disability” (as defined in the Frieder’s Agreement) +or her death, we are obligated to pay her (or her estate) the amount of accrued and unpaid salary through the date of termination +of employment. We may terminate Ms. Frieders’s employment for “cause” (as defined in the Frieders 2020 Agreement), +in which event Ms. Frieders would be entitled to receive only her accrued and unpaid salary through the date of termination. The +Frieders 2020 Agreement provides that if we terminate Ms. Frieders’s employment without cause, Ms. Frieders would be entitled +to receive payment of her annual base salary, payable at regular payroll intervals, from the date of termination of employment +through the remainder of the term. +42 +GRANTS +OF PLAN-BASED AWARDS IN THE 2020 FISCAL YEAR +The +following table sets forth information concerning awards under our equity and non-equity incentive plans granted to each of the +Named Executive Officers in the 2020 Fiscal Year. +All Other +All Other +Stock +Option +Awards: +Awards: +Grant Date +Number +of +Number +of +Exercise +or +Fair Value +Shares +of +Securities +Base Price +of Stock +Stock or +Underlying +of Option +and Option +Units +Options +Awards +Awards +Name +Grant Date +(#) +(#) +($/Sh) +($) +Edward R. Rosenfeld +03/16/20 +108,030 +— +— +2,360,456 +Amelia Newton Varela +01/02/20 +27,000 +— +— +1,163,970 +Arvind Dharia +n/a +— +— +— +— +Awadhesh Sinha +01/02/20 +11,598 +— +— +499,990 +Karla Frieders +05/11/20 +32,758 +— +— +750,158 +Plan-Based +Awards +2006 +Stock Incentive Plan +As +of March 10, 2006, our Board of Directors adopted the Steven Madden, Ltd. 2006 Stock Incentive Plan (the “2006 Plan”) +and on May 26, 2006, our stockholders approved the adoption of the 2006 Plan. The 2006 Plan was amended in 2007 and 2008. On April +6, 2009, our Board of Directors adopted an Amended and Restated 2006 Stock Incentive Plan, and on May 22, 2009, our stockholders +approved the Amended and Restated 2006 Stock Incentive Plan. On April 5, 2012, our Board of Directors approved an amendment of +the Amended and Restated 2006 Stock Incentive Plan primarily to increase the number of shares of Common Stock available for issuance +thereunder, subject to stockholder approval of such amendment. The amendment to the Amended and Restated 2006 Stock Incentive +Plan was approved by our stockholders at the 2012 Annual Meeting of Stockholders on May 25, 2012. Our stockholders re-approved +the material terms of the performance goals contained in the 2006 Plan pursuant to the requirements of Section 162(m) of the Code +as then in effect at the 2016 Annual Meeting of Stockholders on May 27, 2016. +Our +Amended and Restated 2006 Stock Incentive Plan is referred to as the “2006 Plan” throughout this Proxy Statement. +The purpose of the 2006 Plan was to enhance the profitability and value of our Company for the benefit of our stockholders by +enabling us to offer eligible employees, consultants and non-employee directors cash and stock-based incentives in our Company +to attract, retain and reward such individuals and provide additional incentive for such persons to exert maximum efforts for +success by encouraging stock ownership in our Company. The 2006 Plan serves as a means to strengthen the mutuality of interests +between such individuals and our stockholders. +The +maximum number of shares of Common Stock available for issuance under the 2006 Plan was 35,199,000 shares. As of March 20, 2021, +there were outstanding 3,012,406 unvested shares of restricted stock and options to purchase 281,496 shares of Common Stock; options +had been exercised, or restricted stock had vested, with respect to 31,223,797 shares of Common Stock; and 1,343 shares of Common +Stock remained available for grant under the 2006 Plan when it expired on April 6, 2019. +2019 +Incentive Compensation Plan +On +February 25, 2019, upon recommendation of the Compensation Committee, the Board unanimously approved the adoption of the Steven +Madden, Ltd. 2019 Incentive Compensation Plan (the “2019 Plan”), and on May 24, 2019, our stockholders approved the +adoption of the 2019 Plan. The 2019 Plan is the successor to the 2006 Plan, the term of which expired on April 6, 2019. +43 +Our +2019 Incentive Compensation Plan is referred to as the “2019 Plan” throughout this Proxy Statement. The purpose of +the 2019 Plan is to enhance our profitability and value for the benefit of our stockholders by enabling us to offer eligible employees, +consultants and non-employee directors cash and stock-based incentives to attract, retain and reward such individuals and provide +additional incentive for such persons to exert maximum efforts for our success by encouraging stock ownership in our Company. +The 2019 Plan serves as a means to strengthen the mutuality of interests between such individuals and our stockholders. +The +maximum number of shares of Common Stock available for issuance under the 2019 Plan is 11,000,000 shares. As of March 20, 2021, +there were outstanding 593,585 unvested shares of restricted stock and unvested options to purchase 175,467 shares of Common Stock; +527,750 options and 88,235 shares of restricted stock had vested as of March 20, 2021; and 8,877,844 shares of Common Stock remained +available for grant under the 2019 Plan. +OUTSTANDING +EQUITY AWARDS AT END OF THE 2020 FISCAL YEAR +The +following table sets forth information concerning unexercised stock options, restricted stock that has not vested and stock awards +outstanding for each of the Named Executive Officers as of the end of the 2020 Fiscal Year. All awards that occurred prior to +the three-for-two split of our Common Stock effectuated as a stock dividend on or about October 1, 2013 and the three-for-two +split of our Common Stock effectuated as a stock dividend on or about October 11, 2018 have been adjusted to account for each +such stock split, as applicable. +Option +Awards +Stock +Awards +Name +Number +of +Securities +Underlying +Unexercised +Options +(#) +Exercisable +Number +of +Securities +Underlying +Unexercised +Options +(#) +Unexercisable +Equity +Incentive +Plan +Awards: +Number of +Securities +Underlying +Unexercised +Unearned +Options +(#) +Option +Exercise +Price +($) +Option +Expiration +Date +Number +of +Shares or +Units of +Stock That +Have Not +Vested +(#) +Market +Value +of Shares or +Units of +Stock That +Have Not +Vested +($) +Equity +Incentive +Plan Awards: +Number of +Unearned +Shares, Units +or Other +Rights that +Have Not +Vested +(#) +Equity +Incentive +Plan Awards: +Market or +Payout Value +of Unearned +Shares, Units +or Other +Rights That +Have Not +Vested +($) +Edward R. Rosenfeld +— +— +— +— +— +418,475 +(1) +14,780,537 +— +— +Amelia Newton Varela +— +37,500 +(2) +— +23.83 +01/03/2024 +39,113 +(3) +1,381,471 +— +— +Arvind Dharia +— +— +— +— +— +— +— +— +— +Awadhesh Sinha +— +— +— +— +— +5,799 +(4) +204,821 +— +— +Karla Frieders +— +— +— +— +— +68,621 +(5) +2,423,694 +— +— +(1) On +February 5, 2016, Mr. Rosenfeld was awarded 112,500 shares of restricted Common Stock, +which shares vest in five equal annual installments commencing on March 5, 2017. On March +15, 2016, Mr. Rosenfeld was awarded 41,344 shares of restricted Common Stock, which shares +vest in five substantially equal annual installments commencing on March 5, 2017. On +March 15, 2017, Mr. Rosenfeld was awarded 59,841 shares of restricted Common Stock, which +shares vest in five substantially equal annual installments commencing on March 5, 2018. +On March 15, 2018, Mr. Rosenfeld was awarded 100,000 shares of restricted Common Stock, +which shares vest in five equal installments commencing on March 5, 2019. On December +31, 2018, Mr. Rosenfeld was awarded 87,500 shares of restricted Common Stock, which shares +vest in five equal installments commencing on December 1, 2019. On February 1, 2019, +Mr. Rosenfeld was awarded 87,500 shares of restricted Common stock, which vest in five +equal annual installments commencing on commenced on February 1, 2020. On March 15, 2019, +Mr. Rosenfeld was awarded 91,547 shares of restricted Common Stock, which vest in five +equal annual installments commencing on March 1, 2020. On March 16, 2020, Mr. Rosenfeld +was awarded 108,030 shares of restricted Common Stock, which vest in five equal annual +installments commencing on March 1, 2021. The above-referenced grant of restricted shares +on March 15, 2016 was forfeited and rescinded pursuant to a Forfeiture and Rescission +of Awards Agreement between Mr. Rosenfeld and us because the grants, while intended as +qualified performance-based compensation under Section 162(m) of the Code, did not qualify +as qualified performance-based compensation under Section 162(m) of the Code on the grant +date because the performance goals in the 2006 Plan under which the grants were made +had not yet been re-approved by our stockholders, as periodically required by the 2006 +Plan and Section 162(m) of the Code as then in effect. Our stockholders re-approved the +performance goals contained in the 2006 Plan at the 2016 Annual Meeting of Stockholders +and the forfeited and rescinded grant of restricted shares was re-granted to Mr. Rosenfeld +on August 12, 2016. +44 +(2) On +January 3, 2017, Ms. Varela was granted an option to purchase 150,000 shares of our Common +Stock under the 2006 Plan, which option vests in four equal annual installments commencing +on the first anniversary of the date of grant. +(3) On +March 15, 2016, Ms. Varela was awarded 20,673 shares of restricted Common Stock, which +shares vest in five substantially equal annual installments commencing on March 5, 2017. +On March 15, 2017, Ms. Varela was awarded 19,947 shares of restricted Common Stock, which +shares vest in five substantially equal annual installments commencing on March 5, 2018. +On January 2, 2020, Ms. Varela was awarded 27,000 restricted shares of Common Stock, +which will vest in five equal annual installments on each anniversary of the date of +grant, commencing on January 2, 2021. The above-referenced grant of restricted shares +on March 15, 2016 was forfeited and rescinded pursuant to a Forfeiture and Rescission +of Awards Agreement between Ms. Varela and us, because the grants, while intended as +qualified performance-based compensation under Section 162(m) of the Code, did not qualify +as qualified performance-based compensation under Section 162(m) of the Code on the grant +date because the performance goals in the 2006 Plan under which the grants were made +had not yet been re-approved by our stockholders, as periodically required by the 2006 +Plan and Section 162(m) of the Code as then in effect. Our stockholders re-approved the +performance goals contained in the 2006 Plan at the 2016 Annual Meeting of Stockholders +and the forfeited and rescinded grant of restricted shares was re-granted to Ms. Varela +on August 12, 2016. +(4) On +January 2, 2020, Mr. Sinha was awarded 11,598 restricted shares of Common Stock, which +vest in two equal installments on December 15, 2020 and December 15, 2021. +(5) On +March 15, 2016, Ms. Frieders was awarded 8,269 shares of restricted Common Stock, which +shares vest in five substantially equal annual installments commencing on the first anniversary +of the date awarded. On April 11, 2017, Ms. Frieders was awarded 30,000 shares of restricted +Common Stock, which shares vest in five equal annual installments commencing on April +1, 2018. On March 15, 2018, Ms. Frieders was awarded 16,666 shares of restricted Common +Stock, which shares vest in five equal installments commencing on March 5, 2019. On May +11, 2020, Ms. Frieders was awarded 32,758 restricted shares of our Common Stock, which +will vest in five equal annual installments commencing on May 1, 2021. The grant of restricted +shares on March 15, 2016 was forfeited and rescinded pursuant to a Forfeiture and Rescission +of Awards Agreement between Ms. Frieders and us, because the grant, while intended as +qualified performance-based compensation under Section 162(m) of the Code, did not qualify +as qualified performance-based compensation under Section 162(m) of the Code on the grant +date because the performance goals in the 2006 Plan under which the grant was made had +not yet been re-approved by our stockholders, as periodically required by the 2006 Plan +and Section 162(m) of the Code as then in effect. Our stockholders re-approved the performance +goals contained in the 2006 Plan at the 2016 Annual Meeting of Stockholders and the forfeited +and rescinded grant of restricted shares was re-granted to Ms. Frieders on August 12, +2016. +OPTION +EXERCISES AND STOCK VESTED IN THE 2020 FISCAL YEAR +The +following table sets forth information concerning stock options exercised and restricted stock vested during the 2020 Fiscal Year +for each of the Named Executive Officers. The value realized from exercised options is deemed to be the market value of the Common +Stock on the date of exercise, less the exercise price of the option, multiplied by the number of shares of Common Stock underlying +the option. The value realized from the vesting of restricted stock is deemed to be the market value of the Common Stock on the +date of vesting multiplied by the number of shares vesting. +45 +Option +Awards +Stock +Awards +Name +Number +of Shares +Acquired on +Exercise +(#) +Value +Realized +on Exercise +($) +Number +of Shares +Acquired on Vesting +(#) +Value +Realized +on Vesting +($) +Edward R. Rosenfeld +— +— +146,145 +4,838,622 +Amelia Newton Varela +— +— +12,724 +417,220 +Arvind Dharia +— +— +10,750 +381,145 +Awadhesh Sinha +— +— +6,630 +220,249 +Karla Frieders +— +— +20,267 +606,360 +SECURITIES +AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS +The +following table sets forth information as of December 31, 2020 with respect to compensation plans (including individual compensation +arrangements) under which shares of Common Stock are authorized for issuance, aggregated as follows: +· All +compensation plans previously approved by security holders; and +· All +compensation plans not previously approved by security holders. +EQUITY +COMPENSATION PLAN INFORMATION +Number +of +securities to be +issued upon +exercise of +outstanding +options, +warrants +and rights +(#) +Weighted +average +exercise price of +outstanding options, +warrants and rights +($) +Number +of securities +remaining available +for future issuance +under equity +compensation plans +(excluding securities +reflected in +column (a)) +(#) +Equity +compensation plans approved by security holders +2,674,000 +26.80 +8,873,044 +Equity +compensation plans not approved by security holders +— +— +— +Total +2,674,000 +26.80 +8,873,044 +Termination, Change-in-Control +and Non-Competition/Non-Solicitation +The +employment agreements for Ms. Varela and Messrs. Rosenfeld, Dharia and Sinha provide for a severance payment upon a termination +of employment in connection with a change-in-control of our Company. The employment agreements of Messrs. Rosenfeld, Dharia and +Sinha also provide for a severance payment if the executive terminates his employment for good reason in connection with a change-in-control. +The change-in-control severance payments may result in the application of the “golden parachute” provisions of Section +280G of the Code, and to the extent Section 280G applies, we may not be permitted to deduct from our taxable income the severance +payments made to the Named Executive Officer. Moreover, Section 4999 of the Code would impose a 20% excise tax on the Named Executive +Officer receiving the severance payment. In the case of Ms. Varela, these severance payments in connection with a change-in-control, +however, are reduced if the severance payment, when added to any other benefits triggered by a change-of-control, is determined +to constitute an “excess parachute payment” under Sections 280G and 4999 of the Code, to the maximum amount that we +can deduct under Section 280G of the Code. In the case of Messrs. Rosenfeld, Dharia and Sinha, the executive’s change-in-control +severance payment will only be reduced to the maximum amount that we can deduct under Section 280G of the Code if the reduction +provides the Named Executive Officer with the best after-tax result; otherwise, the Named Executive Officer will receive the full +amount of the severance payment and other benefits triggered by the change-in-control and be liable for the 20% excise tax on +the excess parachute payment in addition to all other applicable taxes. In such case, our deduction of the portion of the severance +payment constituting an excess parachute payment will be disallowed. +46 +Our +employment agreements with Ms. Varela and Messrs. Rosenfeld, Dharia and Sinha also provide for severance payments to the executive +if we terminate the executive’s employment without cause, or in the case of Mr. Rosenfeld and Mr. Sinha, if we give either +executive good reason to terminate their respective employment. +Please +see the section of this Proxy Statement captioned “Employment Arrangements” for a summary description of the Named +Executive Officers’ employment agreements and such severance and change-in-control provisions. These benefits are described +and quantified in the section of this Proxy Statement captioned “Potential Payments Upon Termination or Change-In-Control” +below. +We +believe that the severance payments and payments made upon change-in-control provisions in the employment agreements provide appropriate +protection to our executives, comparable to that available at peer companies and, with regard to the enhanced severance following +a change-in-control, protect us from losing key executives during a period when a change-in-control may be threatened or pending. +These benefits are described and quantified in the section below captioned “Potential Payments Upon Termination or Change-In-Control.” +Mses. +Frieders and Varela have each agreed to a non-compete and non-solicitation restriction through the expiration date of their employment +agreement, April 30, 2023 and December 31, 2022, respectively, in the event of a voluntary termination or termination for cause. +Messrs. Rosenfeld and Sinha have each agreed to non-compete and non-solicitation restrictions during the period of their employment +and for a six-month period following the termination of their employment for cause or in the event of their resignation without +good reason. Mr. Dharia does not have non-compete or non-solicitation provisions in his employment agreement. +POTENTIAL +PAYMENTS UPON TERMINATION OR CHANGE-IN-CONTROL +Our +employment agreements with the Named Executive Officers provide for payments to such individuals upon termination of employment +or a change-in-control of our Company. Please see the section of this Proxy Statement captioned “Employment Arrangements.” +The table below assumes that the termination of employment has occurred on December 31, 2020 and that the amounts would be payable +to the respective Named Executive Officer if such Named Executive Officer’s employment is terminated under the various scenarios +set forth below. Because Mr. Dharia’s employment agreement expired on December 31, 2020 and he retired as our Chief Financial +Officer effective on that date, the termination provisions of his employment agreement are no longer applicable, and the amounts +provided in the table below are for illustrative purposes only. +47 +NAME +CASH +PAYMENT +($) +CONTINUATION +OF MEDICAL / +WELFARE +BENEFITS +(PRESENT +VALUE) +($) +ACCELERATION +AND +CONTINUATION +OF EQUITY +AWARD +($) +REDUCTION +OF BENEFITS +UPON A +CHANGE-IN- +CONTROL (1) +($) +TOTAL +TERMINATION +BENEFITS +($) +TERMINATION +DUE TO DEATH +Edward +R. Rosenfeld +1,041,863 +(2) +22,174 +(3) +— +— +1,064,037 +Amelia +Newton Varela +— +— +— +— +— +Arvind +Dharia +— +(4) +— +— +— +— +Awadhesh +Sinha +767,000 +(5) +11,504 +(3) +— +— +778,504 +Karla +Frieders +— +— +— +— +— +TERMINATION +DUE TO TOTAL DISABILITY +Edward +R. Rosenfeld +1,041,863 +(2) +— +— +— +1,041,863 +Amelia +Newton Varela +— +— +— +— +— +Arvind +Dharia +— +(4) +— +— +— +— +Awadhesh +Sinha +767,000 +(5) +11,504 +(3) +— +— +778,504 +Karla +Frieders +— +— +— +— +— +TERMINATION +FOR CAUSE; RESIGNATION WITHOUT GOOD REASON +Edward +R. Rosenfeld +— +— +— +— +— +Amelia +Newton Varela +— +— +— +— +— +Arvind +Dharia +— +— +— +— +— +Awadhesh +Sinha +— +— +— +— +— +Karla +Frieders +— +— +— +— +— +TERMINATION +OTHER THAN FOR CAUSE; RESIGNATION FOR GOOD REASON +Edward +R. Rosenfeld +1,041,863 +(6) +— +— +— +1,041,863 +Amelia +Newton Varela +1,575,000 +(7) +— +— +— +Arvind +Dharia +158,340 +(8) +— +(9) +— +— +158,340 +Awadhesh +Sinha +767,000 +(10) +— +— +— +767,000 +Karla +Frieders +1,376,667 +(11) +— +— +— +1,376,667 +TERMINATION +UPON A CHANGE-IN-CONTROL +Edward +R. Rosenfeld +3,730,625 +(12) +— +4,986,495 +(13) +— +8,717,120 +Amelia +Newton Varela +2,405,314 +(14) +— +533,158 +(13) +— +2,936,472 +Arvind +Dharia +2,122,059 +(15) +— +— +— +2,122,059 +Awadhesh +Sinha +2,508,000 +(16) +— +49,945 +(13) +— +2,557,945 +Karla +Frieders +1,376.667 +(17) +— +807,984 +— +2,184,651 +(1) Ms. +Varela’s employment agreement provides that severance payments in connection with +a change-in-control are reduced if the severance payment, when added to any other benefits +triggered by a change-of-control, is determined to constitute an “excess parachute +payment” under Sections 280G and 4999 of the Code, to the maximum amount that is +deductible to us under Section 280G of the Code. The employment agreements of Messrs. +Rosenfeld, Dharia and Sinha provide that the executive’s change-in-control severance +payment will only be reduced to the maximum amount that is deductible to us under Section +280G of the Code if the reduction provides the Named Executive Officer with the best +after-tax result; otherwise, the Named Executive Officer will receive the full amount +of the severance payment and other benefits triggered by the change-in-control and be +liable for the 20% excise tax on the excess parachute payment in addition to all other +applicable taxes. In such case, our deduction of the portion of the severance payment +constituting an excess parachute payment will be disallowed. +(2) Consists +of Mr. Rosenfeld’s 2021 base salary of $1,041,863, which would be paid at regular +intervals. +48 +(3) Consists +of medical benefits. +(4) Because +Mr. Dharia’s estate would be entitled to receive his base salary for the 12-month +period immediately after the date of his death or total disability and his employment +agreement terminated on December 31, 2020, he would not have been entitled to any payment +had he died or been terminated as a result of a total disability on that date. +(5) Consists +of Mr. Sinha’s 2021 base salary of $767,000, which would be paid at regular intervals. +(6) Consists +of the base salary of $1,041,863 for 2021 that would have been paid to Mr. Rosenfeld +during the remainder of the term of his employment until the expiration of his employment +agreement on December 31, 2021. Mr. Rosenfeld would receive these payments at regular +intervals. +(7) Consists +of the base salary of $725,000 and $750,000 for 2021 and 2022 that would have been paid +to Ms. Varela during the remainder of the term of her employment until the expiration +of her employment agreement on December 31, 2022. Ms. Varela would receive these payments +at regular intervals. +(8) Because +Mr. Dharia’s employment agreement expired on December 31, 2020, and we did not +renew it, he is entitled to receive his base salary for 90 days after the expiration +of his employment agreement. +(9) Because +Mr. Dharia’s employment agreement expired on December 31, 2020, we would not have +been obligated to pay an amount equal to certain benefits to which he would have been +entitled had the term of his employment agreement extended beyond December 31, 2020. +(10) Consists +of the base salary of $767,000 for 2021 that would have been paid to Mr. Sinha during +the remainder of the term of his employment until the expiration of his employment agreement +on December 31, 2021. Mr. Sinha would receive these payments at regular intervals. +(11) Consists +of the base salary of $590,000 per year that would have been paid to Ms. Frieders during +the remainder of the term of her employment until the expiration of her employment agreement +on April 30, 2023. +(12) Consists +of two and one-half times the sum of (i) Mr. Rosenfeld’s 2020 base salary of $992,250 +plus (ii) the average cash bonus received by Mr. Rosenfeld for the three-year period +ending on December 31, 2019. Upon a change-in-control, payments (or portions thereof) +to Mr. Rosenfeld determined to constitute an “excess parachute payment” may +be reduced to the maximum amount that would be tax deductible by us pursuant to Sections +280G of the Code. Upon a hypothetical December 31, 2020 change-in-control, no payments +to Mr. Rosenfeld would have been subject to reduction. See the “Implications of +Tax and Accounting Matters” section of “Compensation Discussion and Analysis” +for a discussion of the applicability of Sections 280G and 4999 of the Code to change-in-control +payments generally. See also the summary of Mr. Rosenfeld’s employment agreement +under “Employment Arrangements.” +(13) The +amount disclosed represents the total value of the restricted stock and stock options +that would have received accelerated vesting upon a hypothetical change-in-control on +December 31, 2020. +(14) Consists +of two and one-half times the sum of (i) Ms. Varela’s 2020 base salary of $700,000 +plus (ii) the average cash bonus received by Ms. Varela for the three-year period ending +on December 31, 2019. Upon a change-in-control, payments (or portions thereof) to Ms. +Varela determined to constitute an “excess parachute payment” may be subject +to reduction to the maximum amount that would be tax deductible by us pursuant to Sections +280G of the Code. Upon a hypothetical December 31, 2020 change-in-control, no payments +to Ms. Varela would have been subject to reduction. See the “Implications of Tax +and Accounting Matters” section of “Compensation Discussion and Analysis” +for a discussion of the applicability of Sections 280G and 4999 of the Code to change-in-control +payments generally. See also the summary of Ms. Varela’s employment agreement under +“Employment Arrangements.” +(15) Consists +of two and one-half times the sum of (i) Mr. Dharia’s 2020 base salary of $642,157 +plus (ii) the average cash bonus received by Mr. Dharia for the three-year period ended +on December 31, 2019. Upon a change-in-control, payments (or portions thereof) to Mr. +Dharia determined to constitute an “excess parachute payment” may be subject +to reduction to the maximum amount that would be tax deductible by us pursuant to Sections +280G of the Code. Upon a hypothetical December 31, 2020 change-in-control, no payments +to Mr. Dharia would have been subject to reduction. See the “Implications of Tax +and Accounting Matters” section of “Compensation Discussion and Analysis” +for a discussion of the applicability of Sections 280G and 4999 of the Code to change-in-control +payments generally. See also the summary of Mr. Dharia’s employment agreement under +“Employment Arrangements.” +49 +(16) Consists +of two and one-half times the sum of (i) Mr. Sinha’s 2020 base salary of $745,000 +plus (ii) the average cash bonus received by Mr. Sinha for the three-year period ended +on December 31, 2019. Upon a change-in-control, payments (or portions thereof) to Mr. +Sinha determined to constitute an “excess parachute payment” may be subject +to reduction to the maximum amount that would be tax deductible by us pursuant to Sections +280G of the Code. Upon a hypothetical December 31, 2020 change-in-control, no payments +to Mr. Sinha would have been subject to reduction. See the “Implications of Tax +and Accounting Matters” section of “Compensation Discussion and Analysis” +for a discussion of the applicability of Sections 280G and 4999 of the Code to change-in-control +payments generally. See also the summary of Mr. Sinha’s employment agreement under +“Employment Arrangements.” +(17) Consists +of the base salary that would have been paid to Ms. Frieders during the remainder of +the term of her employment until the expiration of her employment agreement on April +30, 2023, consisting of $590,000 per year payable for the period from January 1, 2021 +through April 30, 2023. Ms. Frieders would receive these payments at regular intervals. +COMPENSATION +COMMITTEE REPORT +The +Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with management, and based on the review +and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis +be included in this Proxy Statement. +Submitted +by the Compensation Committee of the Board of Directors: +Peter Migliorini (Chairman) +Rose Peabody Lynch +Thomas H. Schwartz +Robert Smith +PROPOSAL +TWO: +RATIFICATION +OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY’S +INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS +FOR THE FISCAL YEAR ENDING DECEMBER 31, 2021 +On +March 6, 2020, the Audit Committee initially appointed Ernst & Young LLP (“EY”) as our independent registered +public accounting firm to conduct the audit of our books and records for the fiscal year ending December 31, 2020, and has appointed +EY as our independent registered public accounting firm to conduct the audit of our books and records for the fiscal year ending +December 31, 2021. Prior to the appointment of EY, EisnerAmper LLP (“EisnerAmper”) audited our financial statements +for the fiscal year ended December 31, 2019. On March 6, 2020, the Audit Committee dismissed EisnerAmper as our independent registered +public accounting firm. +In +connection with the audits of our consolidated financial statements for each of the two fiscal years ended December 31, 2019 and +2018, and in the subsequent interim period through March 6, 2020, there were (i) no disagreements between us and EisnerAmper on +any matters of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, +if not resolved to the satisfaction of EisnerAmper, would have caused it to make reference to the subject matter of the disagreements +in connection with its report on the financial statements for such years and (ii) no “reportable events” as defined +in Section 304(a)(1)(v) of SEC Regulation S-K and the related instructions thereto. +50 +In +evaluating the selection of an independent registered public accounting firm for 2021, the Audit Committee considered several +factors relating to potential candidates, including audit quality, the benefits of our existing auditor’s familiarity with +our Company versus a fresh perspective, the key members of the audit engagement team, the most recent internal quality control +review or Public Company Accounting Oversight Board inspection, auditor independence and its process for maintaining independence, +the risks of a change of auditors, and the firm’s international scope and presence. In addition, the Audit Committee evaluated +our Company’s requirements in light of the growth and complexity of its business and the increasing international aspects +of its operations. As a result of this evaluation, the Audit Committee selected EY as our Company’s independent registered +public accounting firm for the fiscal year ending December 31, 2021. +Although +ratification by stockholders is not required by our organizational documents or any applicable law, the Audit Committee has determined +that requesting ratification by stockholders of its appointment of EY as our independent registered public accountants is a matter +of good corporate practice. If stockholders do not ratify the selection, the Audit Committee will reconsider whether or not to +retain EY, but may still retain that accounting firm. Even if the selection is ratified, the Audit Committee, in its discretion, +may change the appointment at any time during the year if it determines that such a change would be in our best interest and that +of our stockholders. +Representatives +of EY are expected to be present at the Annual Meeting to respond to appropriate questions and to make a statement should they +so desire. +Required +Vote +The +affirmative vote of the holders of a majority of the outstanding shares of Common Stock present or represented by proxy and entitled +to vote at the Annual Meeting is required to ratify the Audit Committee’s selection of Ernst & Young LLP. +Recommendation +of the Board of Directors +The +Board of Directors unanimously recommends a vote “FOR” the ratification of the appointment of Ernst & Young LLP +as our independent registered public accountants for the fiscal year ending December 31, 2021. Unless marked to the contrary, +proxies received from stockholders will be voted in favor of ratifying the appointment of Ernst & Young LLP as our independent +registered public accountants for the fiscal year ending December 31, 2021. +Independent +Registered Public Accounting Firm’s Fees and Services +The +aggregate fees billed to us by EY and EisnerAmper for professional services rendered for each of 2020 and 2019, respectively, +are set forth below: +Year Ended December 31, +2020 +2019 +Audit Fees (1) +$ 2,085,000 +$ 1,259,500 +Audit-Related Fees (2) +— +127,500 +Tax Fees (3) +399,700 +— +All Other Fees (4) +25,000 +120,000 +Total +$ 2,509,700 +$ 1,507,000 +(1) Represents +the aggregate fees billed for (a) the audit of our annual financial statements, (b) the +reviews of the financial statements included in our Quarterly Reports on Form 10-Q, (c) +other statutory and regulatory filings or engagements and (d) the audit of our internal +controls over financial reporting. +(2) Represents +the aggregate fees billed for audit-related fees related to assurance and related services. +Includes, among others, the audit of our employee benefit plans and other accounting +related consultations and services rendered in connection with due diligence performed +for our business acquisitions. +(3) Represents +aggregate fees billed for tax advice, tax compliance and consulting. Includes, among +others, review and advice with respect to transfer pricing. We incurred fees for similar +services provided by EY in 2019. +(4) Represents +fees (i) in 2020 principally in connection with global incentives and relief programs, +and (ii) in 2019 in connection with the audit process and internal controls relating +to the newly adopted lease accounting standard. +51 +Audit +Committee’s Pre-Approval Policies and Procedures +Consistent +with SEC policies regarding auditor independence, the Audit Committee has responsibility for appointing, setting compensation +and overseeing the work of our independent registered public accountants. In recognition of this responsibility, the Audit Committee +has established a policy to review and pre-approve all audit and permissible non-audit services provided by the independent registered +public accountants. These services may include audit services, audit-related services, tax services and other services. +Prior +to engagement of the independent auditor for next year’s audit, the Audit Committee will pre-approve all auditing services +and all permitted non-audit services (including the fees and terms thereof), except those excluded from requiring pre-approval +based upon the de minimus exception set forth in Section 10A(i)(1)(B) of the Exchange Act. +The +Audit Committee’s pre-approval policies and procedures are as follows: (a) prior to each fiscal year, the Audit Committee +pre-approves a schedule of estimated fees for proposed non-prohibited audit and non-audit services, and (b) actual amounts paid +are monitored by our financial management and reported to the Audit Committee. +All +work performed by EY and EisnerAmper as described above under the captions Audit Fees, Audit-Related Fees, Tax Fees and All Other +Fees has been approved or pre-approved by the Audit Committee pursuant to the provisions of the Audit Committee’s charter. +The Audit Committee has considered and concluded that the provision of non-audit services is compatible with maintaining the independence +of EY and EisnerAmper. +AUDIT +COMMITTEE REPORT +The +Audit Committee reviewed the Company’s audited financial statements for the 2020 Fiscal Year and met with both management +and representatives of EY, our independent registered public accountants for that year, to discuss such audited financial statements. +Management and our independent registered public accountants have represented to the Audit Committee that the financial statements +were prepared in accordance with accounting principles generally accepted in the United States of America. The Audit Committee +has received from and discussed with EY the written disclosures and the letter regarding EY’s communications with the Audit +Committee concerning independence as required by applicable requirements of the Public Company Accounting Oversight Board and +discussed with EY the independence of EY. The Audit Committee also discussed with EY any matters required to be discussed by applicable +requirements of the Public Company Accounting Oversight Board and the SEC. Based on these reviews and discussions, the Audit Committee +recommended to the Board that the Company’s audited financial statements be included in the Company’s Annual Report +on Form 10-K for the 2020 Fiscal Year. +Submitted +by the Audit Committee of the Board of Directors: +Al Ferrara +Mitchell S. Klipper +Ravi Sachdev +52 +PROPOSAL +THREE: +NON-BINDING +ADVISORY VOTE ON EXECUTIVE COMPENSATION +Section +14A of the Exchange Act, as created by Section 951 of the Dodd-Frank Act, and the rules and regulations promulgated thereunder +require a publicly traded company to include a resolution in its proxy statement at least once every three years seeking stockholder +approval, on an advisory or non-binding basis, of the compensation of the named executive officers as disclosed in such company’s +proxy statement pursuant to the compensation rules of the SEC. At our 2018 Annual Meeting of Stockholders, our stockholders approved, +on an advisory basis, the holding of an advisory vote to approve executive compensation (commonly known as a “say-on-pay” +proposal) annually. Based on these results, the Board of Directors determined to hold its advisory vote to approve executive compensation +annually until the next frequency vote, which is scheduled to occur at the 2023 annual meeting of stockholders. Accordingly, we +are providing stockholders with a non-binding advisory vote on the compensation of our Named Executive Officers. +As +described in more detail in the Compensation Discussion and Analysis section, which begins on page 25 of this Proxy Statement, +the overall objective of our executive compensation programs and practices is to support delivery of sustained operating and financial +performance results with the ultimate goal being to create and maximize value for our stockholders on a long-term basis. We believe +that our executive compensation programs and practices serve the interests of our stockholders by enabling us to attract and retain +an experienced and effective management team whose combined knowledge of our business and the fashion footwear and accessories +industries has proved extremely valuable in delivering results for our stockholders. The Compensation Committee and the Board +of Directors believe that our compensation programs and practices as articulated in the Compensation Discussion and Analysis section +of this Proxy Statement effectively implement our philosophy of aligning compensation to stockholder interests and that the compensation +received by our Named Executive Officers in the 2020 Fiscal Year reflects and supports such philosophy and goal and is commensurate +with our performance and strategic position. We will continue to review and modify our executive compensation programs to address +evolving best practices and changing regulatory requirements. +We +encourage stockholders to read the Compensation Discussion and Analysis section of this Proxy Statement, as well as the Summary +Compensation Table and other related compensation tables and narrative disclosure contained in this Proxy Statement, all of which +describe and explain in detail the compensation of our Named Executive Officers in the 2020 Fiscal Year. +The +following resolution is submitted for stockholder approval: +RESOLVED , +that the stockholders of Steven Madden, Ltd. (the “Company”) approve, on a non-binding advisory basis, the compensation +paid to the Named Executive Officers of the Company as disclosed pursuant to the compensation disclosure rules of the Securities +and Exchange Commission, including the executive compensation as described in the section captioned “Compensation Discussion +and Analysis,” the Summary Compensation Table and related tabular disclosure and narrative discussion regarding compensation +of Named Executive Officers under the caption “Executive Compensation” contained in the Company’s Proxy Statement +dated April 8, 2021. +This +vote is not intended to address any specific item of compensation, but rather the overall compensation of our Named Executive +Officers and the compensation programs and practices described in this Proxy Statement. While this advisory vote on executive +compensation, commonly referred to as a “say-on-pay” advisory vote, is required by Section 14A of the Exchange Act, +it is not binding on our Board of Directors and may not be construed as overruling any decision by the Board of Directors or the +Compensation Committee. However, we value the opinions of our stockholders. To the extent there is a significant vote against +the compensation of the Named Executive Officers as disclosed in this Proxy Statement, the Board of Directors and the Compensation +Committee will consider the outcome of the vote when considering future compensation arrangements and evaluate whether any actions +are necessary to address the stockholders’ concerns. +53 +Required +Vote +Approval +of this resolution requires the affirmative vote of a majority of the shares of Common Stock present or represented by proxy and +entitled to vote at the Annual Meeting. +Recommendation +of the Board of Directors +The +Board of Directors unanimously recommends a vote “FOR” the resolution approving the overall compensation of the Named +Executive Officers for the 2020 Fiscal Year. +OTHER +MATTERS +At +the date of this Proxy Statement, we have no knowledge of any business other than that described above that will be presented +at the Annual Meeting. If any other business should properly come before the Annual Meeting in connection therewith, it is intended +that the persons named in the accompanying proxy will have discretionary authority to vote the shares that they represent. +WHETHER +OR NOT YOU EXPECT TO BE PRESENT AT THE ANNUAL MEETING, PLEASE MARK, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY CARD PROMPTLY. +ALTERNATIVELY, YOU MAY VOTE YOUR SHARES BY TELEPHONE OR THROUGH THE INTERNET AS DESCRIBED ON THE ACCOMPANYING PROXY CARD. YOUR +VOTE IS IMPORTANT. IF YOU ARE A STOCKHOLDER OF RECORD AND ATTEND THE ANNUAL MEETING AND WISH TO VOTE IN PERSON, YOU MAY WITHDRAW +YOUR PROXY AT ANY TIME PRIOR TO THE VOTE. +STEVEN MADDEN, LTD. +April 8, 2021 +By: +Lisa Keith +Secretary +54 +ANNEX A - +RECONCILIATION OF ADJUSTED RESULTS (NON-GAAP) +The within Proxy +Statement provides our financial results both in accordance with generally accepted accounting principles in the United States +(“GAAP”) and using certain non-GAAP financial measures. In particular, the Proxy Statement provides our historic net +income and income per diluted share adjusted to exclude certain charges and recoveries, which are non-GAAP financial measures. +We use non-GAAP financial information to evaluate its operating performance and in order to represent the manner in which we conduct +and view our business. Additionally, we believe the information assists investors in comparing our performance across reporting +periods on a consistent basis by excluding items that are not indicative of its core business. The non-GAAP financial information +is provided in addition to, and not as an alternative to, our reported results prepared in accordance with GAAP. +Reconciliation +of Net Income and Diluted Income Per Share (GAAP Basis) to Adjusted Net Income and Adjusted Diluted Income Per Share (Non-GAAP +Basis) +Twelve Months Ended +December 31, +2020 +December 31, +2019 +GAAP net (loss) / income attributable to Steven Madden, Ltd. +$ (18,397 ) +$ 141,311 +After-tax impact of expense in connection with payments / provision for early lease termination charges +10,277 +4,063 +After-tax impact of expense in connection with impairment of certain trademarks +33,817 +3,033 +After-tax impact of benefit in connection with the change in valuation of contingent considerations +(4,761 ) +— +After-tax impact of (recovery) / bad debt expense in connection with the Payless ShoeSource bankruptcy +(932 ) +8,602 +After-tax impact of expense in connection with restructuring and related charges +5,434 +501 +After-tax impact of expense in connection with impairment of store fixed assets and lease right-of-use assets +27,949 +— +After-tax impact of expense in connection with benefits provided to furlough employees +1,519 +— +After-tax impact of expense in connection with a provision for legal settlement and related fees +— +3,016 +After-tax impact of (gain) / loss in connection with the termination of a joint venture +(399 ) +408 +After-tax impact of expense in connection with provision for loan receivable +532 +— +After-tax impact of expense in connection with the acquisitions of GREATS and BB Dakota +— +839 +After-tax impact of net benefit in connection with the change in a contingent liability and the acceleration of amortization related to the termination of the Kate Spade license agreement +— +(1,399 ) +Tax benefit in connection with the net operating loss carryback provision of the CARES Act +(4,191 ) +— +Tax (benefit) / expense in connection with deferred and foreign uncertain tax position +1,921 +2,590 +Less: Adjustments attributable to noncontrolling interest +(933 ) +(204 ) +Adjusted net income attributable to Steven Madden, Ltd. +$ 51,836 +$ 162,760 +GAAP diluted income / (loss) per share +$ (0.23 ) +$ 1.69 +Adjusted diluted income per share +$ 0.64 +$ 1.95 +STEVE MADDEN +STEVEN MADDEN, LTD. +ATTN: LISA KEITH +52-16 BARNETT AVENUE +LONG ISLAND CITY, NY 11104 +VOTE +BY INTERNET - www.proxyvote.com +Use the Internet to transmit your voting instructions and +for electronic delivery of information up until 11:59 p.m. Eastern Time on May 25, 2021. +Have your proxy card in hand when you access the web site and follow the instructions +to obtain your records and to create an electronic voting instruction form. +ELECTRONIC +DELIVERY OF FUTURE PROXY MATERIALS +If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving +all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for +electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that +you agree to receive or access proxy materials electronically in future years. +VOTE +BY PHONE - 1-800-690-6903 +Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time on May +25, 2021. Have your proxy card in hand when you call and then follow the instructions. +VOTE +BY MAIL +Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, +c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. +TO +VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: +D47817-P50169 KEEP THIS PORTION FOR YOUR RECORDS +DETACH +AND RETURN THIS PORTION ONLY +THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. +STEVEN MADDEN, +LTD. +For +All +Withhold +All +For All +Except +To withhold authority +to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the +line below. +The Board of Directors +recommends you vote +FOR the following: +1. +Election of Directors +o +o +o +Nominees: +01) +Edward +R. Rosenfeld +06 ) +Peter Migliorini +02) +Al +Ferrara +07 ) +Ravi Sachdev +03) +Mitchell +S. Klipper +08 ) +Robert Smith +04) +Maria Teresa Kumar +09 ) +Amelia +Newton Varela +05) +Rose Peabody Lynch +The Board of Directors recommends you vote FOR proposals 2 and 3. +For +Against +Abstain +2. +TO RATIFY THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2021. +o +o +o +3. +TO APPROVE, BY NON-BINDING ADVISORY VOTE, THE EXECUTIVE COMPENSATION DESCRIBED IN THE STEVEN MADDEN, LTD. PROXY STATEMENT. +o +o +o +NOTE: +In their discretion, the proxies are authorized to vote upon such other business as may properly be presented at the meeting +or any adjournments or postponements thereof. +Yes +No +Please indicate if you plan to attend this meeting. +o +o +Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. +Signature [PLEASE SIGN WITHIN +BOX] +Date +Signature (Joint Owners) +Date +Important Notice Regarding the Availability +of Proxy Materials for the Annual Meeting: +The Notice and Proxy Statement and 2020 Annual Report on 10-K are available +at www.proxyvote.com. +D47818-P50169 +STEVEN MADDEN, LTD. +THIS PROXY IS BEING SOLICITED ON BEHALF OF +THE BOARD OF DIRECTORS +PLEASE CLEARLY INDICATE A RESPONSE BY CHECKING ONE OF THE +BOXES NEXT TO EACH OF THE PROPOSALS +The undersigned stockholder(s) of Steven Madden, Ltd. (the “Company”) hereby +appoint(s) Edward R. Rosenfeld and Lisa Keith, and each of them, as attorneys and proxies, each with power of substitution and revocation, to represent the undersigned at the Annual Meeting of Stockholders of the Company to be held in a virtual-only format at 10:00 a.m., Eastern time, on May 26, 2021, and at any adjournments or postponements thereof, with authority to vote all shares of Common Stock of the Company held or owned by the undersigned on March 29, 2021, in accordance with the directions indicated herein. +THIS +PROXY WILL BE VOTED AS SPECIFIED HEREIN; UNLESS OTHERWISE INDICATED, THIS PROXY WILL +BE VOTED (1) FOR THE ELECTION OF THE NINE (9) NOMINEES NAMED IN ITEM 1, (2) FOR +THE RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY’S INDEPENDENT +REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR 2021, AND (3) FOR THE APPROVAL +OF THE EXECUTIVE COMPENSATION DESCRIBED IN THE COMPANY’S PROXY STATEMENT. THIS PROXY +WILL BE VOTED IN THE DISCRETION OF THE PROXIES ON ANY OTHER MATTER THAT MAY PROPERLY +COME BEFORE THE MEETING. +Continued and to be signed on reverse side \ No newline at end of file diff --git a/raw/proxies/0000913241/0001019056-21-000235/proxy_rpt.txt b/raw/proxies/0000913241/0001019056-21-000235/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..674039cb8cad74ba25c8ae68188c5474fb17eacc --- /dev/null +++ b/raw/proxies/0000913241/0001019056-21-000235/proxy_rpt.txt @@ -0,0 +1,7 @@ +related party transaction disclosures. +If +a director is a party to or in some manner involved in a transaction involving us, he or she will be recused from all discussions +and decisions about the transaction. The transaction must be approved in advance whenever practicable, and if not practicable, +must be ratified as promptly as practicable. +20 +COMPENSATION \ No newline at end of file diff --git a/raw/proxies/0000913241/0001019056-22-000328/proxy.txt b/raw/proxies/0000913241/0001019056-22-000328/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..fd38f9105f807f8498874cbdc442770db0a40c54 --- /dev/null +++ b/raw/proxies/0000913241/0001019056-22-000328/proxy.txt @@ -0,0 +1,4146 @@ +DEF 14A +1 +smadden_def14a.htm +DEF 14A +UNITED +STATES +SECURITIES AND EXCHANGE COMMISSION +WASHINGTON, D.C. 20549 +SCHEDULE +14A +(RULE 14A-101) +INFORMATION +REQUIRED IN PROXY STATEMENT +SCHEDULE 14A INFORMATION +PROXY +STATEMENT PURSUANT TO SECTION 14(A) OF THE +SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. __) +Filed by the +Registrant þ +Filed +by a Party other than the Registrant o +Check +the appropriate box: +o Preliminary +Proxy Statement +o Confidential, +for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +þ Definitive +Proxy Statement +o Definitive +Additional Materials +o Soliciting +Material under §240.14a-12 +Steven +Madden, Ltd. +(Name of Registrant as Specified in Its Charter) +(Name +of Person(s) Filing Proxy Statement, if other than the Registrant) +Payment +of Filing Fee (Check all boxes that apply): +þ No +fee required. +o Fee +paid previously with preliminary materials. +o Fee +computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) +and 0-11. +STEVEN +MADDEN, LTD. +52-16 Barnett Avenue +Long Island City, New York 11104 +April 11, 2022 +DEAR SHAREHOLDERS, +2021 +was an outstanding year for Steve Madden, as we rebounded from the pandemic-induced decline we experienced in 2020 to record the +highest annual revenue and earnings in our history. Consolidated revenue was $1.9 billion, an increase of 55% vs. 2020 and 4% +vs. 2019. Adjusted diluted EPS was $2.50, up 290% vs. 2020 and 28% vs. 2019. The exceptional financial performance was the result +of our team’s disciplined execution of our strategic initiatives, as outlined below. +DEEPENING OUR CONNECTION +WITH CONSUMERS +Our +primary initiative is continuing to deepen our connection with our consumers through the combination of on-trend product and effective +full-funnel marketing. In 2021, we utilized our proven model – which combines talented design teams, a test-and-react strategy +and an industry-leading speed-to-market capability – to deliver trend-right product assortments that enabled us to outperform +the competition and take market share, most notably in our Steve Madden and Dolce Vita brands. We supported this great product +with enhanced marketing and engagement with our consumers, including halo brand campaigns like our Maddenverse campaign in Fall +as well as always-on digital marketing and influencer activities. +DRIVING DIRECT-TO-CONSUMER +LED BY DIGITAL +Our +strengthened connections with our core consumers enabled us to deliver exceptional growth in our DTC channels. DTC revenue in +2021 increased 52% compared to 2019. E-commerce, which now represents over 50% of our DTC business, led the way, with revenue +increasing 89% vs. 2020 and 181% vs. 2019, as our ongoing investments in talent, digital marketing and site enhancements continued +to pay dividends. Our brick-and-mortar business was strong as well, with revenue trends accelerating each quarter throughout the +year and global brick-and-mortar comparable store sales increasing 9% for the full year compared to 2019. +EXPANDING OUTSIDE OF +FOOTWEAR +Over +the last several years, we made significant investments in building the Steve Madden handbag business, and we continued to reap +the rewards from those efforts in 2021. Steve Madden handbag revenue increased 18% compared to 2019, driven by exceptional performance +in DTC channels. And in apparel, our BB Dakota Steve Madden business saw strong sell-through performance and increased open-to-buy +commitments at its key wholesale customers. Based on the momentum we have – and the significant long-term opportunity we +see for Steve Madden apparel – we have decided to transition from the BB Dakota Steve Madden co-branded label to the Steve +Madden brand in Fall 2022. +GROWING OUR INTERNATIONAL +BUSINESS +Another +of our key priorities – and one of our largest long-term growth opportunities – is growing our international business. +A highlight in 2021 was our acquisition in April of the remaining 49.9% interest that we did not already own in our Europe joint +venture. Europe has been our fastest-growing market in recent years, and our momentum there has only accelerated since we took +full ownership in the region. For the year, the Europe business we acquired grew revenue 57% vs. 2020 and 91% vs. 2019, leading +the way for our EMEA region to exceed $100 million in annual revenue for the first time. +STRENGTHENING OUR CORE +U.S. WHOLESALE FOOTWEAR BUSINESS +As +we drive DTC, product category expansion and international growth, we also continue to focus on strengthening our core U.S. wholesale +footwear business. While revenue in that business was still under significant pressure in the first half of 2021, our sell-through +performance was strong throughout the year, and eventually our wholesale customers responded with a significant acceleration in +orders in the back half of 2021. Our second half U.S. wholesale footwear revenue increased 12% compared to 2019. Our two largest +brands drove this performance: Steve Madden brand U.S. wholesale footwear revenue increased 30% in the back half compared to 2019 +– including a 42% increase in Steve Madden women’s – and Dolce Vita delivered a 43% back-half increase vs. 2019. +ADVANCING OUR CORPORATE +SOCIAL RESPONSIBILITY GOALS +We +also continued to make meaningful progress on our corporate social responsibility initiatives, as we work to minimize our negative +environmental impacts and maximize the positive impacts we have on our people and our communities. Highlights from the last year +included: +· our +partnership with the Fearless Fund, an organization working to bridge the gap in venture +capital funding for women of color; +· the +launch of our Cool Planet by Steve Madden collection of fashion footwear made with environmentally +preferred materials; +· the +launch of our Steve Madden kids’ adaptive collection; +· our +partnership with the business school at Howard University to reimagine its retail curriculum; +· the +establishment of the Steve Madden Foundation for charitable giving; and +· the +launch of Re-Booted and Re:Vita, resale marketplaces for Steve Madden and Dolce Vita +that will extend the average life of our products and keep them out of landfills – +marking an important initial step in our journey toward circularity. +Going +forward, continuing to advance our CSR goals – and ensuring that CSR is embedded in everything we do – will remain +a critical part of our strategy. +RETURNING CAPITAL TO +SHAREHOLDERS +Finally, +in 2021 we continued to utilize our strong balance sheet and healthy free cash flow to return capital to shareholders. We bought +back 2.8 million shares, or approximately 3% of the Company, for $123 million. We also resumed our quarterly cash dividend after +its suspension in 2020, paying a total of $49 million in dividends to our shareholders in 2021. Since 2013, we have returned approximately +$1.1 billion to our shareholders in the form of share repurchases and dividends. +LOOKING FORWARD +Overall, +2021 was an exceptional year for Steve Madden. We delivered record results, and we made meaningful progress on each of our key +strategic initiatives. Looking ahead, I’m confident that our continued focus on these initiatives positions us for strong +growth and value creation for years to come. +I’d +like to thank our employees for their hard work and dedication, our customers for their loyalty, and you, our shareholders, for +your continued support. +Sincerely, +EDWARD ROSENFELD +CHAIRMAN AND CEO +STEVEN +MADDEN, LTD. +52-16 Barnett Avenue +Long Island City, New York 11104 +NOTICE +OF ANNUAL MEETING OF STOCKHOLDERS +TO BE HELD ON MAY 25, 2022 +TO THE STOCKHOLDERS: +The Annual +Meeting of Stockholders (the “Annual Meeting”) of Steven Madden, Ltd. (the “Company”) will be held on +Wednesday, May 25, 2022, at 10:00 a.m. Eastern time in a virtual-only format, for the purposes stated below: +1. to +elect eleven (11) directors to the Board of Directors of the Company; +2. to +ratify the appointment of Ernst & Young LLP as the Company’s independent registered +public accounting firm for the fiscal year ending December 31, 2022; +3. to +approve, on a non-binding advisory basis, the compensation of certain executive officers +as disclosed in the accompanying proxy statement; and +4. to +transact such other business as may properly come before the Annual Meeting or any adjournments +thereof. +Only stockholders of record at the +close of business on March 29, 2022, the record date for the Annual Meeting, are entitled to notice of and to vote at the Annual +Meeting and any adjournments thereof. Stockholders who own shares of the Company’s common stock beneficially through a bank, +broker or other nominee will also be entitled to attend the Annual Meeting. To participate in the Annual Meeting at www.virtualshareholdermeeting.com/SHOO2022 , +you must enter the 16-digit control number found on your proxy card or your Notice of Availability of Proxy Materials. A list +of stockholders entitled to vote at the Annual Meeting will be accessible via the Internet at the Annual Meeting, once you have +accessed the Annual Meeting with your control number. Whether or not you plan to attend the Annual Meeting, we urge you to vote +in advance of the Annual Meeting by one of the methods described below. If you have voted by Internet, by phone or by mail before +the Annual Meeting, you do not need to vote again. Guests may listen to the Annual Meeting, but are not entitled to participate. +IMPORTANT NOTICE REGARDING +THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 25, 2022: THE NOTICE OF ANNUAL MEETING +AND PROXY STATEMENT, ANNUAL REPORT, ELECTRONIC PROXY CARD AND ANY OTHER MATERIALS CONCERNING THE ANNUAL MEETING, TOGETHER WITH +ANY AMENDMENTS TO ANY OF THESE MATERIALS, ARE AVAILABLE ON THE INTERNET AT HTTP://WWW.PROXYVOTE.COM . +April 11, 2022 +BY ORDER OF THE BOARD OF DIRECTORS +Long Island City, New York +Lisa Keith +Secretary +WHETHER OR NOT YOU EXPECT +TO BE PRESENT AT THE ANNUAL MEETING, PLEASE MARK, DATE AND SIGN THE ACCOMPANYING FORM OF PROXY AND MAIL IT PROMPTLY IN THE ENVELOPE +PROVIDED TO: VOTE PROCESSING, C/O BROADRIDGE, 51 MERCEDES WAY, EDGEWOOD, NEW YORK 11717. ALTERNATIVELY, YOU MAY VOTE YOUR SHARES +BY TELEPHONE OR THROUGH THE INTERNET AS DESCRIBED ON THE ACCOMPANYING PROXY CARD. +TABLE +OF CONTENTS +GENERAL INFORMATION +1 +Notice of Internet Availability of Proxy Materials +1 +QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING +2 +PROPOSAL ONE: ELECTION OF DIRECTORS +7 +Stockholder Nominations for Board Membership +7 +Directors and Nominees for Election to the Board of Directors +7 +CORPORATE GOVERNANCE +13 +The Board of Directors +13 +Director Independence +13 +Involvement in Certain Legal Proceedings +13 +Director Attendance at Meetings +14 +Director Election (Majority Voting) Policy +14 +Committees of the Board +15 +Board Leadership Structure, Risk Oversight, Executive Sessions of Non-Employee Directors, and Communications Between Stockholders and the Board +18 +Codes of Business Conduct and Ethics +19 +Corporate Governance Guidelines +20 +Stock Ownership Guidelines +20 +Prohibition on Hedging and Pledging of Our Common Stock +20 +Corporate Social Responsibility Policy +20 +Certain Relationships and Related Party Transactions +21 +Review, Approval or Ratification of Transactions with Related Persons +22 +COMPENSATION OF DIRECTORS IN THE 2021 FISCAL YEAR +23 +STOCK OWNERSHIP +24 +Security Ownership of Certain Beneficial Owners +24 +Security Ownership of Directors and Executive Officers +25 +Delinquent Section 16(a) Reports +26 +EXECUTIVE COMPENSATION +26 +Compensation Discussion and Analysis +26 +Executive Officers +36 +Summary Compensation Table for the 2021 Fiscal Year +37 +Employment Arrangements +38 +Grants of Plan-Based Awards in the 2021 Fiscal Year +42 +Outstanding Equity Awards at End of the 2021 Fiscal Year +43 +Option Exercises and Stock Vested in the 2021 Fiscal Year +44 +Securities Authorized for Issuance Under Equity Compensation Plans +44 +Equity Compensation Plan Information +44 +Termination, Change-In-Control and Non-Competition/Non-Solicitation +45 +Compensation Committee Report +48 +PROPOSAL TWO: RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR ENDING DECEMBER 31, 2022 +49 +AUDIT COMMITTEE REPORT +50 +PROPOSAL THREE: NON-BINDING ADVISORY VOTE ON EXECUTIVE COMPENSATION +51 +OTHER MATTERS +52 +i +SPECIAL NOTE REGARDING +FORWARD-LOOKING STATEMENTS +Certain +statements in this document regarding anticipated financial, business, legal or other outcomes including business and market conditions, +outlook and other similar statements relating the Company’s future events, developments, or financial or operational performance +or results, are “forward-looking statements” made pursuant to the safe harbor provisions of the Private Securities +Litigation Reform Act of 1995 and other federal securities laws. These forward-looking statements are identified by the use of +words such as “may,” “will,” “should,” “expect,” “estimate,” “believe,” +“intend,” “forecast,” “anticipate,” “guidance,” and other similar language. However, +the absence of these or similar words or expressions does not mean a statement is not forward-looking. While we believe these +forward-looking statements are reasonable when made, forward-looking statements are not guarantees of future performance or events +and undue reliance should not be placed on these statements. Although we believe the expectations reflected in any forward-looking +statements are based on reasonable assumptions, we can give no assurance these expectations will be attained, and it is possible +actual results may differ materially from those indicated by these forward-looking statements due to a variety of risks and uncertainties. +Forward-looking statements are only as of the date they are made, and the Company undertakes no duty to update its forward-looking +statements except as required by law. +Our operations are subject +to a number of risks and uncertainties including, but not limited to, those risk factors described in our SEC filings. When considering +an investment in our securities, you should carefully read and consider these risks, together with all other information in our +Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and our other filings and submissions to the SEC. If any of the events +described in the risk factors actually occur, our business, financial condition or operating results, as well as the market price +of our securities, could be materially adversely affected. +ii +STEVEN +MADDEN, LTD. +52-16 Barnett Avenue +Long Island City, New York 11104 +PROXY +STATEMENT +GENERAL INFORMATION +The Board +of Directors of Steven Madden, Ltd. requests your proxy in connection with the Annual Meeting of Stockholders (the “Annual +Meeting”) of Steven Madden, Ltd. (the “Company,” “we,” or “our”). The Annual Meeting +will be held on Wednesday, May 25, 2022, at 10:00 a.m. Eastern time in a virtual-only format. Proxies also may be voted at any +adjournments or postponements of the Annual Meeting. You will not be able to attend the Annual Meeting physically in person. +On or +about April 11, 2022, a notice containing instructions on how to access this Proxy Statement, the accompanying proxy card and +related materials online is being mailed to holders of record of our common stock, $0.0001 par value (the “Common Stock”), +at the close of business on March 29, 2022 (the “Record Date”). Our Annual Report for the fiscal year ended December +31, 2021 (the “2021 Fiscal Year”), including audited financial statements, is included in the materials that are accessible +online. This Proxy Statement contains information about the Annual Meeting as well as information regarding the voting process, +director elections, our corporate governance programs, and executive and director compensation, among other things. We recommend +that you read all of these materials. +The Annual +Meeting has been called to consider and take action on the following proposals: +· to +elect eleven (11) directors to our Board of Directors to serve until the next annual +meeting of our stockholders and until his or her successor is elected and qualified; +· to +ratify the appointment of Ernst & Young LLP as our independent registered public +accounting firm for the fiscal year ending December 31, 2022; +· to +approve, on a non-binding advisory basis, the compensation of certain executive officers +as disclosed in this Proxy Statement; and +· to +transact such other business as may properly come before the Annual Meeting and any adjournments +thereof. +The Board +of Directors knows of no other matters to be presented for action at the Annual Meeting. However, if any other matters properly +come before the Annual Meeting, the persons named in the proxy will vote on such other matters or for other nominees for director +in accordance with their best judgment. Our Board of Directors recommends that the stockholders vote “FOR” each of +the eleven (11) director nominees in Proposal One and “FOR” Proposals Two and Three. Only holders of record of our +Common Stock at the close of business on the Record Date will be entitled to vote at the Annual Meeting. +We are +incorporated in the State of Delaware. Our principal executive offices are located at 52-16 Barnett Avenue, Long Island City, +New York 11104, and our telephone number is (718) 446-1800. +Notice of Internet Availability +of Proxy Materials +We continue +to take advantage of the Securities and Exchange Commission (the “SEC”) “e-proxy” rules allowing the Company +to furnish proxy materials through the Internet for the benefit and convenience of our stockholders. By using the e-proxy rules, +we can expedite the receipt by stockholders of proxy materials while lowering the costs and reducing the environmental impact +associated with our Annual Meeting. On or about April 11, 2022, we will furnish a Notice of Internet Availability of Proxy Materials +(the “Availability Notice”) to most of our stockholders containing instructions on how to access the proxy materials +and to vote online. In addition, instructions on how to request a printed copy of these materials will be found on the Availability +Notice. If you received an Availability Notice by mail, you will not receive a paper copy of the proxy materials unless you request +such materials by following the instructions contained in the Availability Notice. +1 +For more +information on voting your Common Stock, please refer to the following “Questions and Answers” section. +QUESTIONS AND ANSWERS ABOUT +THE ANNUAL MEETING AND VOTING +1. What is included in the +proxy materials? What is a proxy statement and what is a proxy? +The proxy +materials for our Annual Meeting include the Notice of Annual Meeting, this Proxy Statement and our Annual Report on Form 10-K +for the year ended December 31, 2021. If you received a paper copy of these materials, the proxy materials also include a proxy +card or voting instruction form. +A proxy +is the delegation of your right to vote the Common Stock you own to another person, who is called your proxy. When you designate +someone as your proxy in a written document, that document is called a proxy or a proxy card. SEC regulations require that we +furnish a proxy statement to you when we ask you to designate a proxy to vote your shares of Common Stock on your behalf. We have +designated our officers Edward R. Rosenfeld and Lisa Keith as proxies for the Annual Meeting. +2. Who may vote at the Annual +Meeting? +Only holders +of record of the 79,862,501 shares of our Common Stock outstanding as of the close of business on March 29, 2022, can vote by +virtual presence online at or prior to the Annual Meeting. Each of these stockholders has one vote for each share of our Common +Stock held on that date. +3. What is the difference +between holding shares as a stockholder of record and as a beneficial owner? +If your +shares were registered as of the Record Date directly in your name with our registrar and transfer agent, American Stock Transfer +& Trust Company, then you are a “stockholder of record” with respect to those shares, and in such case, we have +provided the Availability Notice directly to you. Upon your request, we will send this Proxy Statement and the accompanying proxy +materials directly to you. If your shares were held as of the Record Date in a stock brokerage account or by a bank or nominee, +then your shares are held in “street name” and you are considered the “beneficial owner” of those shares. +In that case, your broker, bank or other stockholder of record has provided the Availability Notice to you and, upon your request, +will provide this Proxy Statement and the accompanying proxy materials to you. As the beneficial owner, you have the right to +direct your broker, bank or other stockholder of record how to vote your shares held in “street name.” +4. What is considered a quorum +to conduct the Annual Meeting? +The presence, +in person or by proxy, of the holders of a majority of the shares entitled to vote is necessary to constitute a quorum for the +purpose of transacting business at the Annual Meeting. Under Delaware law, abstentions and broker non-votes as described below +are counted as present for purposes of determining the presence or absence of a quorum for the transaction of business. If a quorum +is not present, the Annual Meeting may be adjourned until a quorum is obtained. +5. What is a “broker +non-vote”? +If your shares +are held in “street name” by a broker, bank or other nominee, your broker, bank or other nominee is the record holder; +however, the broker, bank or other nominee is required to vote the shares in accordance with your instructions. If you do not +give instructions to your broker, bank or other nominee, it may, if permitted by the organizations of which it is a member, exercise +discretionary voting power to vote your shares. A “broker non-vote” occurs when a broker, bank or other nominee of +record holding shares for a beneficial owner has not received voting instructions from the beneficial owner and either chooses +not to vote the shares on a particular proposal as to which the holder has discretionary voting power or does not vote on a particular +proposal because that holder does not have discretionary voting power for that particular item. Broker non-votes are considered +present in determining whether a quorum is present. +2 +If you +hold your shares in “street name,” we strongly encourage you to provide instructions regarding the voting of your +shares, because your broker, bank or other nominee cannot vote your shares with respect to certain of the proposals being presented +at the Annual Meeting without voting instructions from you. +6. How many votes do I have? +What shares are included on the proxy card? +For each +share of Common Stock that you own on the Record Date, you are entitled to one vote on each matter presented at the Annual Meeting. +If you +are a record holder, you will receive an Availability Notice or proxy card for all of the shares of Common Stock you hold in certificate +form, in book-entry form and in any Company benefit plan. If you are a beneficial owner, you will receive information containing +voting instructions from the broker, bank or other nominee through which you own your shares of Common Stock. +7. How +many votes are required to approve each proposal and what is the effect of abstentions +and broker non-votes? +Proposal +One (Election of Directors): Under Delaware law, directors are elected by the affirmative vote of a plurality of the shares +of Common Stock present in person or represented by proxy at the Annual Meeting and entitled to vote on this proposal. This means +that the director nominees who receive the greatest number of affirmative votes cast are elected as directors, subject to our +Director Election (Majority Voting) Policy discussed in Proposal One below. +Proposal +Two (Ratification of Appointment of Ernst & Young LLP): The affirmative vote of a majority of the shares of Common Stock +present in person or represented by proxy at the Annual Meeting and entitled to vote on this proposal is required to approve the +ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year +ending December 31, 2022. +Proposal +Three (Non-Binding Advisory Vote on Executive Compensation): The affirmative vote of a majority of the shares of Common Stock +present in person or represented by proxy at the Annual Meeting and entitled to vote on this proposal is required to approve, +on a non-binding advisory basis, the compensation of our Named Executive Officers as described in this Proxy Statement. +Other +Matters: If any other matters are presented at the Annual Meeting, they must receive the affirmative vote of a majority of +the shares of Common Stock present in person or represented by proxy at the Annual Meeting and entitled to vote on the matter +to be approved. +Abstentions +will have no effect on the election of directors, but will be treated as present and entitled to vote on the remaining proposals. +Therefore, abstentions will have the effect of votes “AGAINST” such proposals. +If you +do not provide your broker, bank or other nominee with instructions on how to vote your shares held in “street name,” +your broker, bank or other nominee will not be permitted to vote your shares on non-routine matters, and your shares will not +affect the outcome of proposals concerning non-routine matters. Proposal Two is considered a routine matter under applicable rules. +Proposals One and Three are considered “non-routine” matters, which means that your broker or other nominee does not +have discretion to vote your shares with respect to those proposals without voting instructions from you. If you hold your shares +in “street name,” we strongly encourage you to provide instructions regarding the voting of your shares to your broker, +bank or other nominee. +8. How can I attend and participate +in the Annual Meeting? +Our virtual Annual +Meeting will be conducted on the Internet via live audio webcast. You will be able to participate online and submit your questions +during the Annual Meeting by visiting www.virtualshareholdermeeting.com/SHOO2022 , beginning at 10:00 a.m. Eastern time +on May 25, 2022. Stockholders will be able to vote their shares electronically during the Annual Meeting. +3 +To participate +in the Annual Meeting, you will need the 16-digit control number included on your proxy card or your Availability Notice. The +Annual Meeting will begin promptly at 10:00 a.m. Eastern time. We encourage you to access the Annual Meeting prior to the start +time. Online access will begin at 9:45 a.m. Eastern time. Guests may listen to a live audio webcast of the virtual Annual Meeting +by visiting www.virtualshareholdermeeting.com/SHOO2022 , beginning at 9:45 a.m. Eastern time, but are not entitled to participate. +The virtual Annual +Meeting platform is fully supported across browsers (Internet Explorer, Firefox, Chrome, and Safari) and devices (desktops, laptops, +tablets, and cell phones) running the most updated version of applicable software and plugins. Participants should ensure they +have a strong Internet connection wherever they intend to participate in the Annual Meeting. Participants should also allow plenty +of time to log in and ensure that they can hear streaming audio prior to the start of the Annual Meeting. +9. Where can I find a list +of stockholders entitled to vote at the Annual Meeting? +For the ten days +prior to the Annual Meeting, a list of stockholders entitled to vote at the Annual Meeting will be available for examination by +any stockholder of record for any purpose germane to the Annual Meeting at the Company’s principal executive offices upon +appointment. Please contact the Company’s Secretary at Steven Madden, Ltd., 52-16 Barnett Avenue, Long Island City, New +York 11104 to set up an appointment. This stockholder list will also be accessible via the Internet at the Annual Meeting, once +you have accessed the Annual Meeting with your control number. +10. How can I vote my shares? +If the +records of our transfer agent show that you own shares in your name at the close of business on March 29, 2022, then you may vote +at the Annual Meeting. To attend the Annual Meeting and vote your shares electronically, you will need the 16-digit control number +included on your Availability Notice, on your proxy card, or on the instructions that accompanied your proxy materials. +Even if +you plan to attend the Annual Meeting, we urge you to authorize your proxy in advance. You may vote your shares in advance of +the Annual Meeting by authorizing a proxy over the Internet or by telephone. In addition, if you received a paper copy of the +proxy materials by mail, you can submit a proxy by mail by following the instructions on the proxy card. Voting your shares by +authorizing a proxy over the Internet, by telephone or by written proxy card will ensure your representation at the Annual Meeting +regardless of whether you attend the Annual Meeting. +If you +are the record holder of your shares, please authorize your proxy electronically by going to the http://www.proxyvote.com +website or by calling the toll-free number listed below and on the proxy card. Please have your Proxy Statement or proxy card +in hand when going online or calling. If you authorize your proxy via the Internet or by phone, you do not need to return your +proxy card. If you choose to authorize your proxy by mail, simply mark your proxy card and then date, sign and return it in the +postage-paid envelope provided. +VOTE +BY INTERNET +http://www.proxyvote.com +Use the Internet to transmit +your voting instructions and for electronic delivery of information. +VOTE BY PHONE +1-800-690-6903 +Use any touch-tone telephone +to transmit your voting instructions. +VOTE BY MAIL +Vote Processing, c/o Broadridge +51 Mercedes Way +Edgewood, New York 11717 +If you receive paper proxy +materials, mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it +to the address shown above. +If you +hold your shares beneficially in “street name” through a broker or nominee, you may be able to authorize your proxy +by telephone or the Internet as well as by mail, but you will need to obtain and follow instructions from your broker or nominee +to vote these shares. +4 +11. May I revoke my proxy +for the Annual Meeting once I have given it? +You may +revoke your proxy at any time before it is voted at the Annual Meeting by: +· properly +executing and delivering a later-dated proxy (including a telephone or Internet proxy +authorization); +· voting +your shares electronically at the Annual Meeting; or +· sending +a written notice of revocation to the Secretary of the Company at Steven Madden, Ltd., +52-16 Barnett Avenue, Long Island City, New York 11104. +12. How does the Board of +Directors recommend that I vote my shares? +Our Board +of Directors recommends that you vote: +· “FOR” +the election of each of the eleven (11) director nominees; +· “FOR” +the ratification of the appointment of Ernst & Young LLP as our independent registered +public accounting firm for the fiscal year ending December 31, 2022; and +· “FOR” +the approval, on a non-binding advisory basis, of the executive compensation of our Named +Executive Officers, as disclosed in this Proxy Statement. +ALL PROXIES +RECEIVED WILL BE VOTED IN ACCORDANCE WITH THE CHOICES SPECIFIED ON SUCH PROXIES. PROXIES WILL BE VOTED IN FAVOR OF PROPOSALS ONE, +TWO, AND THREE IF NO CONTRARY SPECIFICATION IS MADE. ALL VALID PROXIES OBTAINED WILL BE VOTED AT THE DISCRETION OF THE PERSONS +NAMED IN THE PROXY WITH RESPECT TO ANY OTHER BUSINESS THAT MAY PROPERLY COME BEFORE THE ANNUAL MEETING OR ANY ADJOURNMENTS OR +POSTPONEMENTS THEREOF. AS NOTED ABOVE, IF YOU HOLD YOUR SHARES BENEFICIALLY THROUGH A BROKER, BANK OR OTHER NOMINEE AND FAIL TO +PROVIDE SPECIFIC VOTING INSTRUCTIONS TO THAT BROKER, BANK OR OTHER NOMINEE, YOUR SHARES WILL NOT BE VOTED IN THE ELECTION OF DIRECTORS +OR THE ADVISORY VOTE ON EXECUTIVE COMPENSATION UNLESS YOU ARE PRESENT AND VOTE AT THE MEETING. +13. Who will bear the expenses +of this solicitation and how are proxies being solicited? +We will +pay the costs of soliciting proxies, including preparing, printing and mailing this Proxy Statement, any exhibits hereto and the +proxies solicited hereby. In addition to the use of the mails, proxies may be solicited on our behalf by our officers, directors +and employees, without additional remuneration, by personal interviews, by telephone or by electronic transmission. We will also +request brokerage firms, nominees, custodians and fiduciaries to forward proxy materials to the beneficial owners of shares of +Common Stock held of record by them and will provide reimbursements for the cost of forwarding the material in accordance with +customary charges. +14. Will I be able to ask +questions at the Annual Meeting? +Edward +R. Rosenfeld, our Chairman and Chief Executive Officer, will be available to answer questions submitted by the stockholders during +the Annual Meeting related to the items of business at the Annual Meeting. Stockholders may submit questions for the Annual Meeting +after logging in, beginning at 10:00 a.m. Eastern time on May 25, 2022. If you wish to submit a question, you may do so by logging +into the virtual meeting platform at www.virtualshareholdermeeting.com/SHOO2022 , typing your question into the “Ask +a Question” field, and clicking “Submit.” Please submit any questions during the meeting. +Additional +information regarding the ability of stockholders to ask questions during the Annual Meeting, related rules of conduct and other +materials for the Annual Meeting will be available at www.virtualshareholdermeeting.com/SHOO2022 . +15. What can I do if I have +technical difficulties in accessing the 2022 Annual Meeting? +Technical support, +including related technical support phone numbers, will be available on the virtual meeting platform at www.virtualshareholdermeeting.com/SHOO2022 +beginning at 9:30 a.m. Eastern time on May 25, 2022 through the conclusion of the Annual Meeting. +5 +16. How will the voting results +be reported? +The preliminary +results of the voting on the proposals will be reported at the Annual Meeting. The final certified results will be reported in +a Current Report on Form 8-K that will be filed with the SEC within four business days following the Annual Meeting. +17. How do I submit a proposal +for action at the Company’s 2023 Annual Meeting of Stockholders? +Stockholder +proposals submitted in accordance with Rule 14a-8 under Securities Exchange Act of 1934, as amended (the “Exchange Act”), +must be received at our principal executive offices no later than December 12, 2022 to be considered for inclusion in the proxy +materials to be distributed by the Company in connection with the 2023 Annual Meeting of Stockholders (the “2023 Annual +Meeting”). +Alternatively, +Article I, Section 7(f) of our Amended and Restated By-Laws (the “By-Laws”), requires that any stockholder proposal +that is not submitted for inclusion in the proxy materials for the 2023 Annual Meeting under Rule 14a-8 under the Exchange Act, +but is instead sought to be presented directly at the 2023 Annual Meeting, must be (i) specified in the notice of such meeting +given by or at the direction of the Board of Directors (or any duly authorized committee thereof), (ii) otherwise properly brought +before such meeting by or at the direction of the Board of Directors (or any duly authorized committee thereof) or (iii) specified +in a notice in proper written form given by a stockholder of record on the date of the giving of the notice and on the record +date for such meeting, which notice conforms to the requirements of Article I, Section 7(f) of the By-Laws and is delivered to, +or mailed and received at, our principal executive offices no sooner than November 12, 2022 and no later than December 12, 2022 +not less than 120 days nor more than 150 days prior to the first anniversary of the date of our 2022 Annual Meeting. Accordingly, +any written notice given by or on behalf of a stockholder pursuant to the foregoing clause (iii) in connection with the 2023 Annual +Meeting must be received no later than January 25, 2023 and no earlier than December 26, 2022. +6 +PROPOSAL +ONE: +ELECTION +OF DIRECTORS +Our By-Laws +provide that our Board of Directors the number of directors may be fixed from time to time by action of the directors. The Board +of Directors has fixed the number of directors comprising the Board of Directors at eleven members. Directors are elected to serve +until the next annual meeting of stockholders, and the term of each of the current directors will expire at the Annual Meeting. +Stockholder Nominations +for Board Membership +The Nominating/Corporate +Governance Committee of the Board of Directors recommends to the Board director candidates for nomination and election at each +annual meeting of stockholders or for appointment to fill vacancies on the Board. +The Nominating/Corporate +Governance Committee will review and evaluate the qualifications of proposed director candidates recommended to it from various +sources, including candidates proposed by our stockholders in accordance with the procedures established for that purpose. To +enable the Nominating/Corporate Governance Committee to consider a stockholder recommendation in connection with the 2023 Annual +Meeting, we must receive the recommendation on or before December 12, 2022. +In accordance +with Article II, Section 5 of the By-Laws, director nominations for the 2023 Annual Meeting can only be made by a stockholder +of the Company who (i) is a stockholder of record on the date of the giving of the notice of such director nominations and on +the record date for the determination of stockholders entitled to vote at the 2023 Annual Meeting and (ii) complies with the notice +requirements and procedures set forth in Article II, Section 5 of the By-Laws. A stockholder’s notice to the Secretary of +the Company with respect to any such nominations must be timely and in proper written form pursuant to Article II, Section 5 of +the By-Laws, including containing certain information concerning the nominating or proposing stockholder and certain information +concerning the nominee. The notice must be delivered to, or mailed and received at, our principal executive offices not less than +120 days nor more than 150 days prior to the first anniversary of the date of our 2022 Annual Meeting. Accordingly, any written +notice given by or on behalf of a stockholder pursuant to Article II, Section 5 of our By-Laws in connection with the 2023 Annual +Meeting must be received no later than January 25, 2023 and no earlier than December 26, 2022. A copy of our By-Laws may be obtained +by any stockholder, without charge, upon written request to the Secretary of the Company at the address set forth above. +Directors and Nominees +for Election to the Board of Directors +Upon recommendation +of the Nominating/Corporate Governance Committee of the Board of Directors, the Board of Directors has nominated and is recommending +to the stockholders the election of each of the eleven nominees named below to serve as a director of the Company until the next +annual meeting of our stockholders and until his or her successor is duly elected and qualified or until his or her earlier death, +resignation or removal from office. All of the nominees except Mr. Peter A. Davis and Ms. Arian Simone Reed were elected +directors at last year’s Annual Meeting of Stockholders. Mr. Davis and Ms. Reed were appointed by the Board to +serve as directors in January 2022, when the number of directors was expanded to eleven. Mr. Davis and Ms. Reed were +recommended as director nominees by the Nominating/Corporate Governance Committee, based on the Company’s guiding principle +that the composition of a board should reflect a diversity of thought, backgrounds, skills, experiences and expertise, racial +and/or gender diversity, and a range of tenures that are appropriate given the Company’s current and anticipated circumstances. +All nominees have agreed to be named in this Proxy Statement and to serve on the Board of Directors if elected. +The names +and biographical summaries of the eleven persons who have been recommended by the Nominating/Corporate Governance Committee of +the Board of Directors and nominated by the Board of Directors to stand for election at the Annual Meeting are provided below +for your information. +7 +Our Board +of Directors is responsible for overseeing our business in a manner consistent with the Board’s fiduciary duty to our stockholders. +This significant responsibility requires that our directors consist of individuals who are well-qualified for service on our Board +and its committees and demonstrate a commitment to the success of the Company and to serve in the best interests of our stockholders. +The following +matrix identifies the relevant skills, experience and qualifications of our eleven director nominees. The skills and experience +identified below are reviewed by the Nominating/Corporate Governance Committee, in addition to other qualifications, and nominees +are selected with a view to establishing a Board of Directors that consists of individuals who have extensive business leadership +experience, are independent, bring diverse perspectives to the Board, and possess high ethical standards, sound business judgment +and acumen, and a willingness to devote the time necessary for the Board to effectively fulfill its responsibilities. We believe +that all of the director nominees possess these qualifications and provide the Board with a full complement of knowledge, business +skills and expertise for the effective management of the Company. +Rosenfeld +Davis +Ferrara +Klipper +Kumar +Lynch +Migliorini +Reed +Sachdev +Smith +Varela +Knowledge, +Skills and Experience +Public +Company Board Experience +· +· +· +· +Finance/Accounting +· +· +· +· +· +· +Executive +Leadership Experience +· +· +· +· +· +· +· +· +· +· +· +Risk +Oversight/ Management +· +· +· +· +Retail +Industry Experience +· +· +· +· +· +· +· +· +Independence +· +· +· +· +· +· +· +· +· +8 +This table +provides a summary view of the diversity attributes of the current Board of Directors as of March 21, 2022. Each of the categories +listed in the table below has the meaning as it is used in Nasdaq Rule 5605(f). +Board +Diversity Matrix (As of March 21, 2022) +Total Number +of Directors +11 +Part +I: Gender Identity +Female +Male +Non-Binary +Did +Not Disclose Gender +Directors +4 +7 +0 +0 +Part II: Demographic Background +African American +or Black +1 +1 +0 +0 +Alaskan Native +or Native American +0 +0 +0 +0 +Asian +0 +1 +0 +0 +Hispanic or Latinx +1 +0 +0 +0 +Native Hawaiian +or Pacific Islander +0 +1 +0 +0 +White +2 +4 +0 +0 +Two or More Races +or Ethnicities +0 +0 +0 +0 +LGBTQ+ +1 +Did Not Disclose +Demographic Background +0 +In addition to +these general qualifications and attributes, provided below for each nominee for director is a discussion of the specific experience, +qualifications, attributes and skills that led to the Board’s conclusion that the nominee should serve as a director. +Name +Principal +Occupation +Age +Year +Became a +Director +Edward R. Rosenfeld +Chairman of the Board and Chief Executive +Officer, Steven Madden, Ltd. +46 +2008 +Peter A. Davis +Retired executive in the footwear and apparel +industry and Founder and Managing Director of Pete Davis Basketball, LLC, a grassroots community youth basketball organization +68 +2022 +Al Ferrara +Retired National Director of the Retail +and Consumer Products Division of BDO USA, LLP, a major international accounting firm +71 +2019 +Mitchell S. Klipper +Retired Chief Executive Officer of Barnes +& Noble, Inc.’s Retail Group, one of the largest retail booksellers in the United States +64 +2018 +Maria Teresa Kumar +President and CEO of Voto Latino, which +she co-founded in 2004 and built into America’s largest Latinx voter registration and advocacy organization +48 +2021 +Rose Peabody Lynch +Retired owner of Marketing Strategies, +LLC, New York based consulting firm of which she was founder and President, which focused on strategic marketing and operating +issues for small to medium-sized companies +72 +2014 +Peter Migliorini +Sales Manager, Greschlers, Inc., a building +supplies company +73 +1996 +Arian Simone Reed +President and Chief Executive Officer of +Fearless Fund, a venture capital fund that she co-founded in 2018 +41 +2022 +Ravi Sachdev +Partner, Clayton Dubilier & Rice, LLC, +a global alternative investment firm +45 +2008 +Robert Smith +Founder and Chief Executive Officer of +Phluid Project, part retail concept and part experimental platform, completely gender neutral, with a website to offer products +and programs worldwide +56 +2014 +Amelia Newton Varela +President, Steven Madden, Ltd. +50 +2016 +9 +Additional +Information About the Directors +Other +Public Company Directorships +Four of +our directors also currently serve as directors of other public companies: +· Mr. Rosenfeld +is a director and chairman of the Audit & Risk Management Committee of PVH Corp. +(NYSE: PVH), one of the world’s largest apparel companies. +· Mr. Ferrara +is a director and chairman of the Audit Committee of VIVAKOR, Inc. (NASDAQ: VIVK), a +socially responsible operator, acquirer and developer of clean energy technologies and +environmental solutions. +· Ms. Lynch +is a director and member of the Compensation Committee, Pension Committee, and Nominating +Committee of General American Investors Company, Inc. (NYSE: GAM), a closed-end fund +that manages a global portfolio of investments consisting mainly of U.S. and foreign +securities. +· Mr. Sachdev +is a director and member of the Strategy Committee and Compensation Committee of Covetrus, +Inc. (NASDAQ: CVET), a global animal-health technology and services company and the Board +of Directors of Agilon Health, Inc. (NYSE: AGL), a technology-enabled services platform +for the physicians’ market. +Specific +Qualifications, Attributes, Skills and Experience of Directors +Edward +R. Rosenfeld has served as our Chairman of the Board and Chief Executive Officer since August 2008 and has been a director +of the Company since February 2008. Mr. Rosenfeld, who joined our executive management team in May 2005, has +more than two decades of experience focused on the retail, apparel and footwear industries and possesses particular knowledge +of and experience in the industry that strengthens the Board’s collective qualifications, skills and experience. His background +in finance and his analytical skills gained through his years as a Vice President with Peter J. Solomon Company, an investment +banking boutique, where he specialized in mergers and acquisitions in the retail, apparel and footwear industries, provide the +Board with insight and guidance with respect to, among other things, strategic business development matters. Mr. Rosenfeld +has strong leadership skills and an in-depth understanding of the Company and its goals from his positions as the Chairman of +the Board and Chief Executive Officer. Mr. Rosenfeld serves as a director and chairman of the Audit & Risk Management +Committee of PVH Corp. (NYSE: PVH), one of the world’s largest apparel companies. +Peter +A. Davis has served as a director of the Company and as a member of the Compensation Committee since January 2022. +Mr. Davis has over 30 years of experience in the footwear and apparel industry, having held executive leadership positions +in sales and marketing with companies including Skechers, Fila, Reebok, Joy & Mario, and Dynasty Footwear. He also founded +The Infamous Black Sheep Brand, an urban action sports lifestyle brand. A former player in the NBA, Mr. Davis founded Pete +Davis Basketball, LLC, a grassroots community youth basketball organization, in 2019 and today serves as its Managing Director. +Prior to founding Pete Davis Basketball, LLC, Mr. Davis was the Senior Vice President of Footwear for Joy & Mario Footwear, +a footwear company based in Southern California from 2013 to 2018. Mr. Davis’ years of experience in our industry provide +relevant knowledge, expertise, and leadership to the Board. +Al +Ferrara has served as a director of the Company and as a member of the Audit Committee since July 2019. In May 2020, Mr. Ferrara +became the Chairman of the Audit Committee and a member of the Nominating/Corporate Governance Committee. He is a retired certified +public accountant having retired from his position as a partner with BDO USA, LLP, a major international accounting firm, in August +2016 after 25 years with the firm, most recently serving as National Director of the Retail & Consumer Products Division. +Mr. Ferrara also served as a director on the firm’s Board of Directors from 2003 through 2010 and was also a director +and BDO representative on the Board of Directors of BDO Capital Advisors, LLC from 2000 to 2015. Mr. Ferrara served as a +member of the Board of Directors of Barnes & Noble, Inc., the nation’s largest retail bookseller, from 2016 until its +sale in August 2019 and also served on its Audit Committee and Compensation Committee. In September 2020, Mr. Ferrara was +appointed to the Board of Directors of VIVAKOR, Inc. (NASDAQ: VIVK), a socially responsible operator, acquirer and developer of +clean energy technologies and environmental solutions, where he serves as the Chairman of its Audit Committee. Mr. Ferrara’s +decades of relevant experience as a certified public accountant, the director of retail practice at a major international accounting +firm, and as a member of the audit committee of a public company enhance the financial oversight capabilities of our Board and +its Audit Committee. +10 +Mitchell +S. Klipper has served as a director of the Company since April 2018, as a member of the Audit Committee since June 2018 +and as a member of the Corporate Social Responsibility Committee since August 2019. Mr. Klipper served as the Chief Executive +Officer of the Retail Group of Barnes & Noble, Inc., one of the nation’s largest retail booksellers, from March 2010 +to May 2015. Mr. Klipper began his career at Barnes & Noble as Chief Financial Officer of B&N College in June 1986. +He subsequently held several executive positions at Barnes & Noble, Inc., including Executive Vice President, President of +Barnes & Noble Development and Chief Operating Officer. Prior to joining Barnes & Noble, Inc., Mr. Klipper was an +Audit Manager with KMG Main Hurdman, a certified public accounting firm and predecessor to KPMG. He also served on the advisory +board of Modell’s Sporting Goods, a sporting goods retailer, from 2006 through 2018. Mr. Klipper’s decades of +relevant experience in retail management, general business and accounting enhance the leadership and oversight capabilities of +our Board. +Maria +Teresa Kumar has served as a director of the Company and as a member of the Corporate Social Responsibility Committee +since January 2021. Ms. Kumar is the President and CEO of Voto Latino, America’s largest Latinx voter registration +and advocacy organization, which she co-founded in 2004. She is also a regular on-air contributor for MSNBC. Ms. Kumar serves +on the Boards of Emily’s List and the World Economic Forum’s Global Shapers and is a World Economic Forum Young Global +Leader and a Council on Foreign Relations Life Member. Ms. Kumar graduated from U.C. Davis with a B.A. in International Affairs +and earned her Masters’ in Public Policy from Harvard’s Kennedy School. Ms. Kumar’s extensive experience +in management, leadership, social advocacy and working with non-profits enhance Board leadership and management oversight with +a unique perspective on corporate social responsibility. +Rose +Peabody Lynch has served as a director of the Company since April 2014, as a member of the Compensation Committee since +June 2014, and as a member of the Corporate Social Responsibility Committee since August 2019. Ms. Lynch formerly served +on the Audit Committee from June 2014 to July 2019, when she became a member of the Corporate Social Responsibility Committee. +Until recently, Ms. Lynch operated her own New York based consulting business, Market Strategies, LLC, which focused on strategic +marketing and operating issues for small to medium-sized companies. She possesses over 30 years of business experience, including +tenures as the President and in other senior executive officer positions of major companies in the beauty and fashion industries, +and has extensive executive level financial and operating experience. Her experience serving as a director and as a senior executive +for a range of companies, including Victoria’s Secret (a lingerie, clothing, and beauty retailer), Trowbridge Gallery (a +supplier of fine art to the interior design trade) and Danskin, Inc. (a leading manufacturer of women’s dance and active +wear), enhances the Board’s leadership and oversight capabilities. Ms. Lynch has served on several boards, including +The Harmony Group-LeRoi Princeton (a manufacturer of children’s apparel), Salant Corporation (Perry Ellis Menswear) and +Frederick’s of Hollywood (a retailer of women’s apparel and lingerie). Currently, Ms. Lynch serves on the board +of General American Investors Company, Inc. (NYSE: GAM). In her role on the GAM Board, she serves on the Compensation Committee, +along with the Pension and Nominating Committees. She was a member of the Audit Committee and Nominating and Governance Committees +during her tenure at Salant and chaired the Compensation Committee during her tenure on the board of Frederick’s of Hollywood. +In addition, Ms. Lynch has held leadership positions with a variety of not-for-profit organizations. She currently serves +on the Board of Directors of the Princeton University Varsity Club and is President of her Princeton University class. She also +served two terms on the Board of Trustees of Concord Academy in Concord, Massachusetts and rotated off the Board in July 2021. +Ms. Lynch is a member of the Women and Foreign Policy Advisory Council at the Council on Foreign Relations. +Peter +Migliorini has served as a director of the Company since October 1996 and has served on the Nominating/Corporate +Governance Committee, as its Chair, since July 2004 and the Compensation Committee, as its Chair, since July 2004. Mr. Migliorini +formerly served on the Audit Committee, from October 1996 until June 2018. Mr. Migliorini is the Presiding Director over +all executive sessions of the independent directors. Mr. Migliorini possesses extensive executive level financial, sales +and operations experience. Mr. Migliorini currently serves as sales manager for Greschlers, Inc., a building supplies company. +Prior to joining Greschlers, Mr. Migliorini served as Director of Operations for Mackroyce Group, a construction company, +from 1987 to 1994. Earlier, Mr. Migliorini held various positions of increasing responsibility from Assistant Buyer to Chief +Planner/Coordinator for several shoe companies, including Meldisco Shoes, Perry Shoes and Fasco Shoes. His numerous years of business +experience at various levels and in various industries provide the Board with a measure of practical orientation regarding our +operations and growth endeavors. Mr. Migliorini’s early experience in the shoe industry also provides relevant knowledge +and expertise in our specific industry. +11 +Arian +Simone Reed has served as a director of the Company and as a member of the Nominating/Corporate Governance Committee since +January 2022. Ms. Reed is the President and Chief Executive Officer of Fearless Fund, a venture capital fund that invests +in women of color led businesses, which she co-founded in 2018. Prior to Fearless Fund, Ms. Reed was the owner of AR PR Marketing, +a publicity and marketing strategy firm from 2004 to 2017. Ms. Reed serves as a member on the Board of Directors for the +Birmingham Civil Rights Institute. In 2021, she was the recipient of the 15th Annual General Motors African Ancestry Network Black +History Month Celebration Entrepreneurial Spirit Award and the Detroit Branch NAACP Great Expectations Award. Ms. Reed’s +marketing expertise, leadership, social advocacy, and working with entrepreneurs will enhance Board leadership, strategic business +development, and provide a unique perspective on corporate social responsibility. +Ravi +Sachdev has served as a director of the Company and as a member of the Audit Committee since September 2008 and as a member +of the Nominating/Corporate Governance Committee since August 2019. As a Partner of the private equity firm Clayton Dubilier & +Rice, LLC since June 2015, Mr. Sachdev focuses on the healthcare sector. Earlier, Mr. Sachdev worked at several investment +banks. He was a Managing Director and Co-Head of Healthcare Services at J.P. Morgan from November 2010 and prior to that held +the positions of Managing Director at Deutsche Bank Securities, Inc. from January 2009 until November 2010 and Director at Deutsche +Bank from January 2007 until January 2009. Prior to joining Deutsche Bank in 2006 as a Vice President, Mr. Sachdev served +as a Vice President at Peter J. Solomon Company, an investment banking boutique, specializing in mergers and acquisitions in the +healthcare sector, from 1998 to 2006. Mr. Sachdev possesses knowledge of finance and the financial analytics used +to measure business performance. His 20 years of professional experience in investment banking and private equity brings to the +Board a thorough understanding of the financial issues affecting public companies and greater insights in business valuation together +with a practical orientation with respect to acquisitions and integrations. Mr. Sachdev also serves on the Board of Directors +and the Strategy Committee and Compensation Committee of Covetrus, Inc. (NASDAQ: CVET), a global animal-health technology and +services company and the Board of Directors of Agilon Health, Inc. (NYSE: AGL), a technology-enabled services platform for the +physicians’ market. +Robert +Smith has served as a director of the Company since April 2014 and has served on the Compensation Committee since +June 2014 and on the Corporate Social Responsibility Committee, as its Chair, since August 2019. Mr. Smith formerly served +on the Nominating/Corporate Governance Committee from June 2014 to July 2019, when he became a member of the Corporate Social +Responsibility Committee. Mr. Smith is the Chief Executive Officer of Phluid Project and GET Phluid, which he founded in +2018. Prior to Phluid Project, Mr. Smith was the Chief Merchandising Officer for Haddad Brands from 2013 to 2017, a global +children’s apparel and accessories licensing partner for iconic brands such as Levi’s, Hurley, Nike, Jordan and Converse. +Before his former position with Haddad Brands, Mr. Smith served as Executive Vice President, Merchandising from 2010 to 2012 +for Limited Brands, at Victoria’s Secret Direct, the largest direct-to-consumer women’s apparel retailer in the United +States. Prior thereto, Mr. Smith held various senior merchandising positions at Macy’s Inc. between 1998 and 2010, +beginning with Vice President, Merchandise Manager, Macy’s West and culminating with Executive Vice President, Merchandising +for Juniors, Kids, Intimate Apparel, Dresses, Suits, Coats and Swimwear. Earlier, Mr. Smith was a Merchandiser for XOXO Apparel +Company and held various positions with Burdine’s Department Stores. Mr. Smith possesses nearly 30 years of business +experience in the fashion industry and has extensive executive level expertise in merchandising. His experience in this area further +enhances the Board’s depth of understanding of the industry. +Amelia +Newton Varela has served as President of the Company since September 2015 and has been a director since 2016. Prior to +this tenure, Ms. Varela was Executive Vice President of Wholesale of the Company since April 2008 and Executive Vice President +of Wholesale Footwear of the Company from November 2004 to April 2008. Previously, she was Vice President of Sales for Steve Madden +Women’s Wholesale Division from January 2000. Ms. Varela began her career with the Company in 1998 in the role of Account +Executive for Steve Madden Women’s Wholesale Division. She graduated from The Fashion Institute of Technology in 1995. Ms. Varela’s +over 20 years of experience at the Company provides relevant industry knowledge and expertise, and leadership to the Board. +12 +Required Vote +Proxies +will be voted for the election of the eleven nominees as directors of the Company unless otherwise specified in the proxy. A plurality +of the votes cast by the holders of shares of Common Stock present in person or represented by proxy and entitled to vote at the +Annual Meeting will be necessary to elect the nominees as directors. This means that the director nominees who receive the greatest +number of affirmative votes cast are elected as directors, subject to our Director Election (Majority Voting) Policy, which is +described below. If, for any reason, any nominee is unable or unwilling to serve, the proxies will be voted for a substitute nominee, +who will be designated by the Board of Directors at the Annual Meeting. Stockholders may abstain from voting by marking the appropriate +boxes on the accompanying proxy. Abstentions will be counted separately and used for purposes of calculating whether a quorum +is present at the Annual Meeting, but will have no effect on the outcome of the vote. +Director Election (Majority +Voting) Policy +In uncontested +elections, it is our policy that any nominee for director who receives a greater number of “WITHHOLD” votes than “FOR” +votes for his or her election must promptly submit a letter offering his or her resignation to the Nominating/Corporate Governance +Committee following the certification of the stockholder vote. In such event, the Nominating/Corporate Governance Committee would +then consider the offer of resignation and make a recommendation to the independent member of the Board of Directors as to whether +or not the resignation should be accepted. For more information about this policy, see “Corporate Governance – Director +Election (Majority Voting) Policy” below. +Recommendation of the Board +of Directors +The Nominating/Corporate +Governance Committee of the Board and the entire Board of Directors unanimously recommend a vote “FOR” the election +of Ms. Maria Teresa Kumar, Ms. Rose Peabody Lynch, Ms. Arian Simone Reed, Ms. Amelia Newton Varela and Messrs. +Edward R. Rosenfeld, Peter A. Davis, Al Ferrara, Mitchell S. Klipper, Peter Migliorini, Ravi Sachdev, and Robert Smith. +CORPORATE GOVERNANCE +The Board of Directors +Our business +is managed under the direction and oversight of the Board of Directors, who are elected by our stockholders. Directors meet their +responsibilities by participating in meetings of the Board of Directors and the various committees of the Board on which they +sit. They also communicate with our Chairman and Chief Executive Officer and other officers and employees of the Company and consult +with our independent registered public accounting firm and other third parties. The size of the Board is fixed at eleven members. +Nine current directors are independent and two current directors are not independent. The Nominating/Corporate Governance Committee +determined to nominate all eleven current directors for election to our Board. +Director Independence +The Board +of Directors has determined that the following director nominees are “independent” for purposes of the criteria of +the SEC and The Nasdaq Global Select Market listing standards: Ms. Kumar, Ms. Lynch, Ms. Reed, and Messrs. Davis, +Ferrara, Klipper, Migliorini, Sachdev, and Smith. If the eleven nominees set forth above are elected, the Board will consist of +a majority of independent directors. The Board of Directors has held regularly scheduled executive sessions for the independent +directors, with Mr. Migliorini serving as Presiding Director of such executive sessions. +Involvement in Certain Legal +Proceedings +During +the past ten years none of the persons currently serving as executive officers and/or directors of the Company has been the subject +matter of any legal proceedings that are required to be disclosed pursuant to Item 401(f) of Regulation S-K. Nor are any such +legal proceedings believed to be contemplated by governmental authorities against any director or executive officer. Further, +no executive officers, directors, beneficial owners of more than five percent of the Company’s common stock, or any other +actor mentioned in Item 103(c)(2) of Regulation S-K is a party adverse to the Company in a material proceeding or has a material +interest adverse to the Company. +13 +Director Attendance at Meetings +Attendance +at Annual Meetings of Stockholders +We have +no specific policy regarding director attendance at our annual meetings of stockholders. We encourage all our directors to attend +annual meetings of our stockholders and three directors attended our 2021 annual meeting of stockholders. +Attendance +at Meetings of the Board of Directors +The Board +of Directors held four regularly scheduled meetings and one special meeting during the 2021 Fiscal Year and acted by unanimous +written consent on four occasions during the 2021 Fiscal Year. In the 2021 Fiscal Year, each director attended 75% or more of +the total number of Board meetings and the total number of meetings held by all committees on which he or she then served. In +the 2021 Fiscal Year, Peter A. Davis and Arian Simone Reed were not members of the Board. +Director Election (Majority +Voting) Policy +We have +adopted a Director Election (Majority Voting) Policy. Pursuant to this policy, in an uncontested election of directors (that is, +an election where the number of nominees is equal to the number of seats open) any nominee for director who receives a greater +number of “WITHHOLD” votes than “FOR” votes for his or her election must promptly submit an offer of resignation +to the Nominating/Corporate Governance Committee following the certification of the stockholder vote for consideration in accordance +with the following procedures. In such event, upon receipt of the resignation, the Nominating/Corporate Governance Committee would +promptly consider the appropriateness of the director’s continued service on the Board of Directors and recommend to the +Qualified Independent Directors (as defined below) the action to be taken with respect to the resignation, which could include +(1) accepting the resignation; (2) rejecting the resignation; (3) retaining the director but addressing what the Qualified Independent +Directors believe to be the underlying cause of the “WITHHOLD” votes; or (4) determining that the director will not +be renominated by the Board of Directors in future elections. The Nominating/Corporate Governance Committee would consider factors +such as (a) the reasons expressed by the stockholders for withholding votes from such director; (b) any possibilities for curing +the underlying cause of the “WITHHOLD” votes; (c) the tenure and qualifications of the director and his or her past +and expected future contributions to the Company; (d) the overall composition of the Board of Directors, including, without limitation, +whether accepting the resignation would cause the Company to fail to meet any applicable SEC or Nasdaq requirement; (e) the availability +of other qualified candidates; and (f) our Board of Director Candidate Guidelines. +The Qualified +Independent Directors would then act on the Nominating/Corporate Governance Committee’s recommendation no later than 90 +days following the date of the stockholders’ meeting at which the director election occurred. In considering the Nominating/Corporate +Governance Committee’s recommendation, the Qualified Independent Directors would review the factors considered by the Nominating/Corporate +Governance Committee and such additional information and factors that they believe to be relevant. Following the Qualified Independent +Directors’ decision, we would promptly disclose the decision in a Current Report on Form 8-K. The Form 8-K would include +a full explanation of the process by which the decision of the Qualified Independent Directors was reached and, if applicable, +the reasons why the offer of resignation was rejected. +If an +offer of resignation were to be accepted, the Nominating/Corporate Governance Committee would recommend to the Board of Directors +whether to fill the vacancy or reduce the size of the Board of Directors accordingly. Any director required to submit his or her +resignation pursuant to this policy would not participate in the Nominating/Corporate Governance Committee’s recommendation +or the Qualified Independent Directors’ consideration of the resignation. Prior to voting on the director’s resignation +offer, the Qualified Independent Directors would provide to the director an opportunity to submit any information or statement +that he or she believes relevant to the Qualified Independent Directors’ consideration of the resignation. +For purposes +of this policy, “Qualified Independent Directors” means all directors who (1) are “independent” for purposes +of The Nasdaq Global Select Market listing standards and (2) are not required to offer their resignation in accordance with this +policy. If there are fewer than three independent directors then serving on the Board of Directors who are not required to submit +their resignations in accordance with this policy, then the Qualified Independent Directors shall consist of all of the independent +directors and each independent director who is required to offer his or her resignation in accordance with this policy shall recuse +himself or herself from the deliberations and voting only with respect to his or her individual offer to resign. +14 +Committees of the Board +Among +other committees, the Board of Directors has a standing Audit Committee, Compensation Committee, Nominating/Corporate Governance +Committee, and Corporate Social Responsibility Committee. Each committee has a written charter. The table below provides current +membership for each Board committee and the number of meetings held by each Board committee in the 2021 Fiscal Year. +Committees +of the Board of Directors +Director +Audit +Compensation +Nominating/ +Corporate +Governance +Corporate +Social +Responsibility +Al Ferrara +Chair +Member +Peter A. Davis* +Member +Mitchell S. Klipper +Member +Member +Maria Teresa Kumar +Member +Rose Peabody Lynch +Member +Member +Peter Migliorini +Chair +Chair +Arian Simone Reed* +Member +Edward R. Rosenfeld +Ravi Sachdev +Member +Member +Robert Smith +Member +Chair +Amelia Newton Varela +Number of Meetings in +2021 Fiscal Year +4 +4 +2 +4 +Number +of Actions by Written Consents in 2021 Fiscal Year +1 +2 +0 +0 +* In +the 2021 Fiscal Year, Peter A. Davis and Arian Simone Reed were not members of the Board. +Audit +Committee +The Audit +Committee consists entirely of directors who are “independent” for purposes of The Nasdaq Global Select Market listing +standards and who meet the independence requirements contained in Exchange Act, Rule 10A-3(b)(1). The Board has determined that +each of Messrs. Ferrara, Klipper, and Sachdev meets the SEC criteria of an “audit committee financial expert” as defined +in Item 407(d)(5) of Regulation S-K under the Exchange Act. The Audit Committee is primarily responsible for reviewing the services +performed by our independent registered public accountants, evaluating our accounting policies, our system of internal controls +over financial reporting (ICFR), and information security and technology, including cybersecurity, and reviewing significant financial +transactions. +The Audit +Committee is responsible for reviewing and striving to ensure the integrity of our financial statements and oversight of our compliance +with legal and regulatory requirement, our internal audit function and our information security and technology. Among other matters, +the Audit Committee, with management and independent and internal auditors, reviews the adequacy of our internal accounting controls +that could significantly affect our financial statements. The Audit Committee is also directly and solely responsible for the +appointment, retention, compensation, oversight and termination of our independent registered public accountants. In addition, +the Audit Committee functions as the Company’s Qualified Legal Compliance Committee (the “QLCC”). The purpose +of the QLCC is to receive, retain and investigate reports made directly, or otherwise made known, of evidence of material violations +of any United States federal or state law, including any material breach of fiduciary duty, by the Company or our officers, directors, +employees or agents and, if an investigation was necessary, to recommend an appropriate response to the Company. +Management +has primary responsibility for our financial statements and the overall reporting process, including our system of internal controls +over financial reporting. Our independent registered public accountants audit our annual financial statements prepared by management, +express an opinion as to whether those financial statements present fairly our financial position, results of operations and cash +flows in conformity with accounting principles generally accepted in the United States of America and discuss with the Audit Committee +any issues they believe should be raised. Our independent registered public accountants also issue an opinion on our internal +controls over financial reporting. +15 +The Audit +Committee is also responsible for the oversight of our risk management process, which is discussed in the “Risk Oversight” +section below. +In performing +its functions, the Audit Committee meets with management on at least a quarterly basis to review and discuss the quarterly financial +statements, annual audited financial statements and related reports and to consider the adequacy of our internal controls and +the objectivity of our financial reporting. From time to time, the Audit Committee, with management, identifies and reviews other +areas of risks related to our operations and at least quarterly receives reports on and reviews cybersecurity risks as well as +our approach to managing such risks. Our Chief Information Security Officer presents to the Audit Committee regarding cybersecurity +on at least a quarterly basis. The Audit Committee discusses these matters with our independent registered public accountants +and with appropriate Company financial personnel. Meetings are held with the independent registered public accountants, who have +unrestricted access to the Audit Committee. In addition, the Audit Committee reviews our financing plans and reports and makes +recommendations to the full Board of Directors for approval and to authorize action. The Board has adopted a written charter setting +out the functions the Audit Committee is to perform. A copy of the Audit Committee Charter is available on our website at https://investor.stevemadden.com/corporate-governance/highlights . +The Audit Committee held four meetings and undertook one action by written consent during fiscal year 2021. +Nominating/Corporate +Governance Committee +The Nominating/Corporate +Governance Committee consists of directors who are “independent” for purposes of The Nasdaq Global Select Market listing +standards and the requirements of the National Association of Security Dealers. +The Nominating/Corporate +Governance Committee provides oversight with respect to a wide range of issues relating to the operation of the Board, including +consideration of and recommendations regarding the size and composition of the Board of Directors and identification of potential +candidates to serve as directors. The Nominating/Corporate Governance Committee identifies candidates to the Board of Directors +by introductions from management, members of the Board of Directors, employees of the Company or other sources, including stockholders +that satisfy our policy regarding stockholder recommended candidates (as described below). To enable the Nominating/Corporate +Governance Committee to consider a stockholder recommendation in connection with the 2023 Annual Meeting, we must receive the +recommendation on or before December 12, 2022. The Nominating/Corporate Governance Committee does not evaluate director candidates +recommended by stockholders that satisfy our policy differently than director candidates recommended by other sources. +Stockholders +wishing to submit director nominations for the 2023 Annual Meeting should write to the Secretary, Steven Madden, Ltd., 52-16 Barnett +Avenue, Long Island City, New York 11104. In accordance with Article II, Section 5 of the By-Laws, director nominations for the +2023 Annual Meeting can only be made by a stockholder of the Company who (i) is a stockholder of record on the date of the giving +of the notice of such director nominations and on the record date for the determination of stockholders entitled to vote at the +2023 Annual Meeting and (ii) complies with the notice requirements and procedures set forth in Article II, Section 5 of the By-Laws. +A stockholder’s notice to the Secretary of the Company with respect to any such nominations must be timely and in proper +written form pursuant to Article II, Section 5 of the By-Laws, including containing certain information concerning the nominating +or proposing stockholder and certain information concerning the nominee. The notice must be delivered to, or mailed and received +at, our principal executive offices not less than 120 days nor more than 150 days prior to the first anniversary of the date of +our 2022 Annual Meeting. Accordingly, any written notice given by or on behalf of a stockholder pursuant to Article II, Section +5 of our By-Laws in connection with the 2023 Annual Meeting must be received no later than January 25, 2023 and no earlier than +December 26, 2022. If the notice is received outside of that time frame, then we are not required to include the nominees in our +proxy materials for the 2023 Annual Meeting. +16 +In considering +candidates for the Board of Directors, the Nominating/Corporate Governance Committee considers our Board of Director Candidate +Guidelines and Director Election (Majority Voting) Policy, available on our website at https://investor.stevemadden.com/corporate-governance/highlights , +our policy regarding stockholder recommended director candidates, as set forth above, and all other factors that it deems appropriate, +including the individual’s character, education, experience, knowledge and skills. While our Board of Director Candidate +Guidelines do not expressly identify diversity as a factor for consideration regarding the evaluation of director candidates, +diversity is among the many factors the Nominating/Corporate Governance Committee considers in the candidate evaluation process. +To assess the effectiveness of the mandate set forth in the Nominating/Corporate Governance Committee’s charter, the Nominating/Corporate +Governance Committee reviews annually with the Board the composition of the Board as a whole and recommends, if necessary, measures +to be taken so that the Board reflects the appropriate balance of knowledge, experience and diversity required for the Board as +a whole. +Additionally, +the Nominating/Corporate Governance Committee takes a leadership role in shaping the corporate governance of the Company. The +Nominating/Corporate Governance Committee develops and recommends corporate governance principles for the Company, makes recommendations +to the Board of Directors in support of such principles, and oversees the evaluation of the Board of Directors, its committees, +and the Company’s senior executives. The Nominating/Corporate Governance Committee operates under a formal charter that +governs the Committee’s composition, powers and responsibilities. A copy of the Nominating/Corporate Governance Committee +Charter is available on our website at https://investor.stevemadden.com/corporate-governance/highlights . The Nominating/Corporate +Governance Committee held two meetings during fiscal year 2021. +Compensation +Committee +The Compensation +Committee consists of directors who are “independent” for purposes of The Nasdaq Global Select Market listing standards, +who are “non-employee directors” pursuant to Exchange Act Rule 16b-3, and “outside directors” for purposes +of Section 162(m) of the Internal Revenue Code of 1986. +The Compensation +Committee is responsible for establishing and overseeing our compensation and incentive plans and program; determining and approving +compensation for our executive officers, including salaries, bonuses, perquisites and equity awards; reviewing and approving compensation +and awards for our executive officers under our compensation and incentive plans and program; administering our equity compensation +plans; reviewing and approving a compensation program for independent members of the Board; and assisting the Board in discharging +the Board’s responsibilities relating to management organization, performance, compensation and succession. The Compensation +Committee also reviews executive education and development programs; evaluates the competitiveness of the compensation of the +Company’s executive officers; reviews and approves of the corporate goals and objectives used to determine executive compensation; +and monitors the amount of Company equity used for compensation. The Compensation Committee has the authority to seek the advice +of compensation consultants in carrying out its duties and responsibilities; however the Compensation Committee must assess the +independence of the consultant before retaining them or receiving any advice. Independence factors that the Compensation Committee +should consider are described in the “Role of the Compensation Committee – Independence of Outside Advisors” +section below. The Compensation Committee operates under a formal charter adopted by the Board of Directors that governs its composition, +powers and responsibilities. A copy of the Compensation Committee Charter is available on our website at https://investor.stevemadden.com/corporate-governance/highlights . +The Compensation Committee held four meetings and undertook two actions by written consent during fiscal year 2021. +Corporate +Social Responsibility Committee +The Corporate +Social Responsibility Committee consists of directors who are “independent” for purposes of The Nasdaq Global Select +Market listing standards. +17 +The Corporate +Social Responsibility Committee is responsible for assisting the Board in its oversight of our initiatives, plans and practices +with respect to corporate social responsibility matters of significance to the Company and the communities in which we operate. +Corporate social responsibility matters include ethical and sustainable sourcing; human rights; the environment; supplier conduct; +labor conditions; climate change; diversity in employment; charitable giving; government relations; and political spending. The +Committee’s responsibility includes oversight of: +· management’s +evaluation of risks and opportunities with respect to corporate social responsibility +matters; +· management’s +creation of key strategic initiatives, plans and practices with respect to corporate +social responsibility matters; +· our +governance of, and performance relative to, such key strategic initiatives; +· corporate +social responsibility reporting, stakeholder engagement, and transparency; and +· management’s +assessment of the identity and scope of matters comprising corporate social responsibility. +The Corporate Social Responsibility +Committee operates under a formal charter that governs the Committee’s composition, powers and responsibilities. The Corporate +Social Responsibility Committee Charter requires that a majority of the committee’s members not be officers or employees +of the Company or its affiliates. A copy of the Corporate Social Responsibility Committee Charter is available on our website +at https://investor.stevemadden.com/corporate-governance/highlights . The Corporate Social Responsibility Committee held +four meetings during fiscal year 2021. +Board Leadership Structure, +Risk Oversight, Executive Sessions of Non-Employee Directors, and Communications Between Stockholders and the Board +Board +Leadership Structure +As noted +above, our Board currently comprises nine independent and two non-independent directors. +Mr. Rosenfeld +has served as Chairman of the Board and Chief Executive Officer since August 2008 and has been a member of the Board since February +2008. Mr. Migliorini is currently serving as the Presiding Director. The Presiding Director is elected by the Board’s +independent directors and presides over executive sessions of the independent directors. We believe that the number of independent, +experienced directors who comprise our Board, along with the independent oversight of our Presiding Director, benefits the Company +and our stockholders. +We recognize +that different board leadership structures may be appropriate for companies in different situations and believe that no one structure +is suitable for all companies. We believe our current Board leadership structure is optimal for the Company because it demonstrates +to our employees, suppliers, customers, and other stakeholders that we are under strong leadership, with a single person setting +the tone and having primary responsibility for managing our operations and leading our Board in setting long-term strategy. Having +a single leader for both the Company and our Board eliminates confusion and duplication of efforts and provides clear leadership +for the Company. We believe the Company, like many U.S. companies, has been well-served by this leadership structure. +Because +the positions of Chairman of the Board and Chief Executive Officer are held by the same person, the Board believes it is appropriate +for the independent directors to elect one independent director to serve as a Presiding Director. In addition to presiding at +executive sessions of the independent directors, the Presiding Director has responsibilities that include coordinating with the +Chairman of the Board and Chief Executive Officer in establishing agenda and discussion items for Board meetings; retaining independent +advisors on behalf of the Board as the Board may determine to be necessary or appropriate; and performing such other functions +as the independent directors may designate from time to time. +Our Board +conducts an annual evaluation to determine whether it and its committees are functioning effectively. As part of this annual self-evaluation, +the Board evaluates whether the current leadership structure continues to be optimal for the Company and our stockholders. +Risk +Oversight +Our Board +is responsible for overseeing our risk management process. It focuses on our general risk management strategy and the most significant +risks facing the Company and ensures that management implements appropriate risk mitigation strategies. Management also apprises +the Board of particular risk management matters in connection with its general oversight and approval of corporate matters. +18 +The Board +has delegated to the Audit Committee oversight of our risk management process. Among its duties, the Audit Committee reviews with +management (a) our policies with respect to risk assessment and management of risks that may be material to the Company, (b) our +system of disclosure controls and system of internal controls over financial reporting, (c) our compliance with legal and regulatory +requirements, and (d) our systems and processes related to information security and technology, including cybersecurity. The Audit +Committee is also responsible for reviewing major legislative and regulatory developments that could materially impact our contingent +liabilities and risks. Our other Board committees also consider and address risks as they perform their respective committee responsibilities. +All committees report to the full Board as appropriate, including when a matter rises to the level of a material or enterprise +level risk. +Our management +is responsible for day-to-day risk management. Our risk management and internal audit areas serve as the primary monitoring and +testing function for company-wide policies and procedures and manage the day-to-day oversight of the risk management strategy +for our ongoing business. This oversight includes identifying, evaluating, and addressing potential risks that may exist at the +enterprise, strategic, financial, operational, and compliance and reporting levels. +We believe +the division of risk management responsibilities described above is an effective approach for addressing the risks facing the +Company and that our Board leadership structure supports this approach. +Executive +Sessions of Independent Directors +The Board +holds executive sessions of its independent directors generally at each regularly scheduled meeting. The Presiding Director serves +as the chairperson for these executive sessions. +Communications +between Stockholders and the Board +We have +adopted a procedure by which stockholders may send communications to one or more members of the Board of Directors by writing +to such director(s) or to the entire Board of Directors in care of the Secretary at Steven Madden, Ltd., 52-16 Barnett Avenue, +Long Island City, New York 11104. The Board has instructed the Secretary of the Company to review all communications so received +and to exercise discretion not to forward to the Board correspondence that he or she decides is inappropriate, such as business +solicitations, frivolous communications and advertising, routine business matters ( i.e. , business inquiries, complaints, +or suggestions) and personal grievances. However, any director may at any time request that the Secretary forward to such director +any and all communications received by the Secretary, but not forwarded to the directors. +Codes of Business Conduct +and Ethics +We have adopted +a Code of Ethics for the Chief Executive Officer and Senior Financial Officers, which is applicable to our Chief Executive Officer, +Chief Financial Officer, controller, principal accounting officer, head of internal audit and such other employees of the Company +as the Audit Committee may from time to time designate as “senior financial officers.” In addition, the individuals +who serve on our Board of Directors are subject to a Code of Business Conduct and Ethics for the Board of Directors, and all of +our employees are held accountable for adherence to our Code of Conduct. Each of the Code of Ethics for the Chief Executive Officer +and Senior Financial Officers and the Code of Business Conduct and Ethics for the Board of Directors is included as an exhibit +to our Annual Report on Form 10-K for the fiscal year ended December 31, 2014. The Code of Conduct applicable to all of our employees +is an exhibit to our Annual Report on Form 10-K for the fiscal year ended December 31, 2018. The Code of Ethics for the Chief +Executive Officer and Senior Financial Officers, the Code of Business Conduct and Ethics for the Board of Directors and the Code +of Conduct applicable to all of our employees (collectively, the “Conduct Codes”) are available on our website at +https://investor.stevemadden.com/corporate-governance/highlights and may be obtained by any stockholder without charge +upon request by writing to the Secretary at Steven Madden, Ltd., 52-16 Barnett Avenue, Long Island City, New York 11104. The Conduct +Codes are intended to establish standards necessary to deter wrongdoing and to promote compliance with applicable governmental +laws, rules and regulations and honest and ethical conduct. The Conduct Codes cover all areas of professional conduct, including +conflicts of interest, fair dealing, financial reporting and disclosure, protection of our assets and confidentiality. Employees +have an obligation to promptly report any known or suspected violation of the Conduct Codes without fear of retaliation. Waiver +of any provision of the Conduct Codes for executive officers and directors may only be granted by the Board of Directors or the +Nominating/Corporate Governance Committee, and we will disclose any such waiver or modification of the Conduct Codes relating +to such individuals. +19 +Corporate Governance Principles +The Board +of Directors has adopted Corporate Governance Principles as a set of guiding guidelines by which the Company is governed. The +Corporate Governance Principles address various matters of corporate governance such as board size and composition, director qualifications +and responsibilities, director compensation, limitations on service on other boards, board committees, director orientation and +education, director access to management, management development and succession planning, and annual performance evaluations for +the Board. They include a policy for the clawback of executive incentive compensation paid to senior executive officers if there +is an accounting restatement by the Company due to intentional misconduct of a senior executive officer. In addition, in circumstances +in which the Board of Directors believes it is appropriate, the clawback policy allows for the reimbursement, forfeiture or cancellation +of incentive compensation paid or awarded to a senior executive officer who has engaged in willful misconduct in the performance +of his or her duties that results in material financial harm or significant reputational harm to the Company. +The Nominating/Corporate +Governance Committee reviews the Corporate Governance Principles annually to determine whether to recommend changes to the Corporate +Governance Guidelines to reflect new laws, rules and regulations and governance best practices. A copy of the Corporate Governance +Principles may be obtained by any stockholder without charge upon request by writing to the Secretary at Steven Madden, Ltd., +52-16 Barnett Avenue, Long Island City, New York 11104. +Stock Ownership Guidelines +The Board +of Directors has adopted Stock Ownership Guidelines, which require a level of ownership of shares of our Common Stock by our directors +and executive officers to align their interests with the long-term interests of our stockholders. The Stock Ownership Guidelines +require our Chief Executive Officer to own shares of our Common Stock equal in value to five times his annual base salary. Other +executive officers are required to own shares of our Common Stock equal in value to two times their annual base salary. The Stock +Ownership Guidelines further require that each non-employee director must own shares of our Common Stock equal in value to two +times the cash portion of the directors’ annual retainer or the equivalent if a retainer is not received in certain circumstances. +Individuals subject to the Stock Ownership Guidelines must attain the required level of share ownership by the fifth anniversary +of the later of (i) the effective date of the adoption of the Stock Ownership Guidelines and (ii) the date that the individual +became a named executive officer or director. The named executive officer or director must retain an amount equal to 25% of the +net shares of our Common Stock received as a result of the exercise, vesting or payment of any equity award we make until the +applicable share ownership requirement is satisfied. +Prohibition on Hedging +and Pledging of Our Common Stock +Our directors +and executive officers and certain other persons designated from time to time by our Chief Financial Officer are prohibited from +entering into hedging transactions and from pledging our Common Stock pursuant to a formal policy concerning such activities adopted +by the Board of Directors. This policy does not apply to other employees of the Company. +Corporate Social Responsibility +Policy +We are +committed to operating our business in a socially responsible manner. We strive to incorporate this commitment into every aspect +of our business, including the design of our products, the quality, safety and sourcing of our products, the safety and fair treatment +of our employees, animal welfare and compliance with laws, including the Foreign Corrupt Practices Act and the SEC’s Conflict +Minerals rule. These guiding principles are set forth in our Corporate Social Responsibility Policy, and we expect all our employees +to be familiar with and to adhere to them. We strive to do business with vendors and suppliers that share our views and commitments +to quality products and ethical business principles. We will only engage vendors and suppliers that demonstrate a commitment to +meeting our standards. Our Corporate Social Responsibility Committee assists the Board in its oversight of management’s +social responsibility obligations. +20 +Certain Relationships and +Related Party Transactions +Steven +Madden Employment Agreement. We believe that Steven Madden, our founder and Creative and Design Chief, provides unique and +significant value in guiding the leadership of our creative process, both in his hands-on work for the Company and his collaboration +with our designers, product professionals and marketing executives. Mr. Madden is a beneficial owner of more than 5% of the +outstanding shares of our Common Stock. In addition, the public’s association of Mr. Madden’s name and likeness +with our branded products is significant, meaningful, and integral to our success and has been, and continues to be, instrumental +in creating long-term stockholder value. Based upon that belief, we further believe that his continuing involvement with the Company +is essential, and to this end, we have for many years had an employment agreement with Mr. Madden as described below. +Mr. Madden’s +agreement in its current form dates back to July 1, 2005, as subsequently amended on various occasions, most recently on March +25, 2019 (the “SM Agreement”). Under the SM Agreement, Mr. Madden has agreed to continue to serve as our Creative +and Design Chief for a term continuing through December 31, 2026, for a base salary of $7,026,042 per annum together with the +potential for cash bonuses at the sole discretion of our Board of Directors and an annual life insurance premium reimbursement +of up to $200,000. Pursuant to the SM Agreement, on February 8, 2012, Mr. Madden was granted 2,194,584 restricted shares +of Common Stock (as adjusted for our 2018 three-for-two stock split effected as a stock dividend), valued at approximately $40 +million, under our Amended and Restated 2006 Stock Incentive Plan, which is referred to herein as the “2006 Plan.” +The restricted stock vests in equal annual installments over seven years commencing on December 31, 2017 through December 31, +2023, subject to Mr. Madden’s continued employment with the Company on each such vesting date. On June 30, 2012, as +allowed under the SM Agreement, Mr. Madden elected to receive an additional restricted stock award valued at approximately +$40 million in consideration of a reduction in his annual base salary in years after 2012 to the amount reflected above. As a +consequence, on July 3, 2012, Mr. Madden received 2,840,013 additional restricted shares of Common Stock vesting in six annual +installments commencing on December 31, 2018 through December 31, 2023, subject to his continued employment with the Company on +each such vesting date. +Under the +SM Agreement, Mr. Madden is also eligible to receive annually, on or about the date of our annual meeting of stockholders +(but not later than June 30), an option (the “Annual Option”) to purchase shares of Common Stock equal to the greater +of (a) 100% of the largest aggregate number of shares of Common Stock available upon the exercise of an option or options granted +to any other continuing full-time employee of the Company during the preceding twelve-month period or (b) 225,000 shares of Common +Stock; provided, however, that a grant to Mr. Madden in excess of 150% of the number of shares of Common Stock subject to +options granted to such other continuing full-time employee would require stockholder approval. Any Annual Option so granted vests +quarterly over a one-year period and is exercisable for a period of five years at a price equal to the closing price of our Common +Stock on the grant date. In addition, pursuant to the SM Agreement, on March 1, 2017, Mr. Madden received a one-time stock +option grant to purchase 1,125,000 shares of our Common Stock at an exercise price of $24.90 as a result of our having achieved +for the fiscal year ended December 31, 2016 earnings per share performance criteria set forth in the SM Agreement; such option +vests in equal annual installments over a five-year period, which commenced on the first anniversary of the grant date. +Under the +SM Agreement, if Mr. Madden dies, his estate would receive a payment equal to his base salary for the 12-month period immediately +after the date of his death. Further, if Mr. Madden’s employment is terminated due to his total disability (as defined +in the agreement), “for cause” (as defined in the agreement) or due to Mr. Madden’s resignation, we are +obligated to pay Mr. Madden the amount of compensation that is accrued and unpaid through the date of termination. If Mr. Madden’s +employment is terminated for any reason (other than “for cause” or due to his death, total disability or resignation), +we are obligated to pay Mr. Madden, in installments, the balance of his base salary through the end of the term of the SM +Agreement. If, during the period commencing 120 days prior to a “change of control” transaction (as defined in the +SM Agreement) and ending on the first anniversary of a change of control transaction, Mr. Madden’s employment is terminated +other than for cause or by his resignation for “good reason” (as defined in the SM Agreement), or if Mr. Madden +resigns within 30 days following a change of control transaction, all unvested options held by Mr. Madden will be accelerated +and vest on the date of termination or resignation, and Mr. Madden will be entitled to receive a lump sum cash payment equal +to the amount of compensation that is accrued and unpaid through the date of termination plus $35 million. The SM Agreement contains +other customary provisions, including provisions regarding expense reimbursement, confidentiality, non-solicitation and non-competition. +21 +For the +2021 Fiscal Year, Mr. Madden earned $7,026,042 in base salary and received $200,000 for the payment of an annual life insurance +premium. Mr. Madden also received his Annual Option for the 2021 Fiscal Year to purchase 225,000 shares of Common Stock at +a price per share of $43.83. +The most +recent amendment entered into on March 25, 2019, effected the extension of the term of the SM Agreement for three years through +December 31, 2026. In consideration of this extension, we have granted to Mr. Madden 200,000 shares of Common Stock, which +shares are subject to certain restrictions, including that he will not sell, transfer, pledge, hypothecate, assign or otherwise +dispose of the restricted shares except as set forth under his award agreement. The shares will vest in substantially equal annual +installments over three years commencing on December 31, 2024, provided that Mr. Madden continues to be employed by the Company +on each vesting date through December 31, 2026. +Loan +to Steven Madden. On June 25, 2007, we made a loan to Mr. Madden in the amount of $3,000,000 to enable Mr. Madden +to satisfy a personal tax obligation resulting from the exercise of a stock option that was due to expire. The loan is evidenced +by a secured promissory note executed by Mr. Madden in our favor, the security for which is a certain securities brokerage +account maintained by Mr. Madden with his broker; none of the securities in the securities brokerage account are shares of +Common Stock. There have been successive amendments to the secured promissory note, the most recent of which occurred in April +2016. At that time the secured promissory note was amended to substitute the collateral securing the secured promissory note from +shares of our Common Stock to the security interest in Mr. Madden’s securities brokerage account. Previously, on January +3, 2012, the secured promissory note was amended and restated to extend the maturity date of the obligation to December 31, 2023 +and eliminate the accrual of interest after December 31, 2011. Prior to the January 3, 2012 amendment, the secured promissory +note had been accruing interest at the rate of 6% per annum. In addition, the secured promissory note provides that, commencing +on December 31, 2014 and annually on each December 31 thereafter through the maturity date, one-tenth of the principal amount +thereof, together with accrued interest, will be cancelled by the Company provided that we have employed Mr. Madden on each +such December 31. Contemporaneously, on each such December 31, we will release our security interest in a portion of the securities +held in Mr. Madden’s securities brokerage account generally correlating to the amount of indebtedness cancelled on +such date. As of December 31, 2011, interest in the amount of $1,090,000 had accrued on the principal amount of the secured promissory +note and, as noted above, interest was eliminated after December 31, 2011. On December 31, 2021, we released Mr. Madden from +his obligation to pay the required one-tenth of the original principal amount of the secured promissory note, together with accrued +interest. +Review, Approval or Ratification +of Transactions with Related Persons +Our Conduct +Codes and Employee Handbook prohibit all conflicts of interest. Under the Conduct Codes, conflicts of interest occur when personal +or professional interests interfere in any way, or even appear to interfere, with our interests. Our prohibition on conflicts +of interest under the Conduct Codes includes any related party transaction. +Related +person transactions must be approved by the Board, or by a committee of the Board consisting solely of independent directors, +who will approve the transaction only if they determine that it is in our best interests. In considering the transaction, the +Board or committee will consider all relevant factors, including, as applicable, (i) the business rationale for entering into +the transaction; (ii) the alternatives to entering into a related person transaction; (iii) whether the transaction is on terms +comparable to those available to third parties or, in the case of employment relationships, to employees generally; (iv) the potential +for the transaction to lead to an actual or apparent conflict of interest and any safeguards imposed to prevent such actual or +apparent conflicts; and (v) the overall fairness of the transaction to the Company. +We have +multiple processes for reporting conflicts of interest, including related party transactions. Under the Conduct Codes, all employees +are required to report any actual or apparent conflict of interest, or potential conflict of interest, to management. The Chief +Financial Officer distributes a questionnaire to our executive officers and management personnel quarterly and distributes a questionnaire +to the members of the Board of Directors annually requesting certain information regarding, among other things, their immediate +family members, employment and beneficial ownership interests, which information is then reviewed for any conflicts of interest +under the Conduct Codes. +22 +The Board +of Directors, the Audit Committee and the Disclosure Committee, which consists of management personnel, discuss the related party +transactions, specifically, and in connection with the regular review processes attendant to our periodic filings, including related +party transaction disclosures. +If a director +is a party to or in some manner involved in a transaction involving the Company, he or she will be recused from all discussions +and decisions about the transaction. The transaction must be approved in advance whenever practicable, and if not practicable, +must be ratified as promptly as practicable. +COMPENSATION OF DIRECTORS +IN THE 2021 FISCAL YEAR +The Compensation +Committee is responsible for establishing and overseeing all matters pertaining to compensation paid to directors for service +on the Board and its committees. +The following +table sets forth information concerning the 2021 Fiscal Year compensation of our non-employee directors who served in the 2021 +Fiscal Year. Following the table is a discussion of material factors related to the information disclosed in the table. Mr. Rosenfeld +and Ms. Varela do not receive any compensation for their service on the Board. +Name +Fees +Earned or +Paid in Cash +($) +Stock +Awards +($)(1) +All +Other +Compensation +($) +Total +($) +Al Ferrara +120,000 +119,980 (2) +— +239,980 +Mitchell S. Klipper +95,000 +119,980 (3) +— +214,980 +Maria Teresa Kumar (4) +85,000 +119,980 (5) +— +204,980 +Peter Migliorini +100,000 +119,980 (6) +— +219,980 +Ravi Sachdev +95,000 +119,980 (7) +— +214,980 +Thomas H. Schwartz (8) +42,500 +— +— +42,500 +Rose Peabody Lynch +95,000 +119,980 (9) +— +214,980 +Robert Smith +95,000 +119,980 (10) +— +214,980 +(1) Reflects +the grant date fair value of stock awards calculated in accordance with the Financial +Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) +Topic 718. Assumptions used in the calculation of these amounts are included in Note +I to our audited financial statements for the fiscal year ended December 31, 2021 included +in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on +March 1, 2022. +(2) At +December 31, 2021, the aggregate number of shares of restricted Common Stock held by +Mr. Ferrara was 2,889, all of which was issued in the 2021 Fiscal Year, and Mr. Ferrara +had no options outstanding. +(3) At +December 31, 2021, the aggregate number of shares of restricted Common Stock held by +Mr. Klipper was 2,889, all of which was issued in the 2021 Fiscal Year, and Mr. Klipper +had no options outstanding. +(4) Ms. Kumar +was appointed as a director on January 4, 2021. +(5) At +December 31, 2021, the aggregate number of shares of restricted Common Stock held by +Ms. Kumar was 2,889, all of which was issued in the 2021 Fiscal Year, and Ms. Kumar +had no options outstanding. +(6) At +December 31, 2021, the aggregate number of shares of restricted Common Stock held by +Mr. Migliorini was 2,889, all of which was issued in the 2021 Fiscal Year, and Mr. Migliorini +had no options outstanding. +(7) At +December 31, 2021, the aggregate number of shares of restricted Common Stock held by +Mr. Sachdev was 2,889, all of which was issued in the 2021 Fiscal Year, and Mr. Sachdev +had no options outstanding. +(8) Mr. Schwartz +served as a director until May 26, 2021. +(9) At +December 31, 2021, the aggregate number of shares of restricted Common Stock held by +Ms. Lynch was 2,889, all of which was issued in the 2021 Fiscal Year, and Ms. Lynch +had no options outstanding. +(10) At +December 31, 2021, the aggregate number of shares of restricted Common Stock held by +Mr. Smith was 2,889, all of which was issued in the 2021 Fiscal Year, and Mr. Smith +had no options outstanding. +23 +Directors +who are also our employees are not paid any fees or other remuneration for service on the Board of Directors or any of its committees. +In the 2021 Fiscal Year, each non-employee director received for service on the Board a grant of 2,889 shares of restricted Common +Stock, vesting on May 24, 2022, the first anniversary of the grant date, and was entitled to receive $75,000 for such service. +In the +2021 Fiscal Year, members of the Audit Committee, Nominating/Corporate Governance Committee, Compensation Committee and Corporate +Social Responsibility Committee were each entitled to receive an additional $10,000 for serving on such committees, except that +(a) the Chairman of the Audit Committee was entitled to receive $35,000 for serving in this role and (b) the Chairman of the Compensation +Committee was entitled to receive $15,000, instead of $10,000. We reimburse our directors for any out-of-pocket expenses incurred +by them in connection with services provided in such capacity, in accordance with our business expense reimbursement guidelines. +STOCK OWNERSHIP +Security Ownership of Certain +Beneficial Owners +The following +table sets forth information as of March 21, 2022 (unless otherwise indicated) with respect to the beneficial ownership of our +Common Stock by each person known by the Company to be the beneficial owner of more than 5% of the outstanding shares of our Common +Stock. A person is deemed to be a beneficial owner of any securities that that person has the right to acquire within 60 days. +Name +and Address of Beneficial Owner +Amount +and +Nature of +Beneficial +Ownership (1) +Percentage +of Class +BlackRock +Inc. +55 East 52 nd Street +New York, NY 10055 +12,006,241 +15.05 % (2) +The +Vanguard Group +100 Vanguard Boulevard +Malvern, PA 19355 +8,414,282 +10.44 % (3) +Wellington +Management Group LLP +c/o Wellington Management Company LLP +280 Congress Street +Boston, MA 02210 +6,880,727 +8.63 % (4) +Steven +Madden +c/o Steven Madden, Ltd. +52-16 Barnett Avenue +Long Island City, NY 11104 +5,189,744 +6.34 % (5) +(1) Beneficial +ownership as reported in the table below has been determined in accordance with Item +403 of Regulation S-K and Rule 13d-3 of the Exchange Act and based upon 79,757,011 shares +of Common Stock outstanding (excluding treasury shares) as of March 21, 2022. +(2) Based +solely on a Statement on Schedule 13G/A filed with the SEC on January 27, 2022 by BlackRock, +Inc. (“BlackRock”), BlackRock has sole voting power with respect to 11,854,778 +of such shares and sole dispositive power with respect to all such shares. +(3) Based +solely on a Statement on Schedule 13G/A filed with the SEC on February 10, 2022 by The +Vanguard Group (“Vanguard”), Vanguard has shared voting power with respect +to 152,135 of such shares, sole dispositive power with respect to 8,192,503 of such shares +and shared dispositive power with respect to 221,779 of such shares. +(4) Based +solely on a Statement on Schedule 13G filed with the SEC on February 4, 2022 by Wellington +Management Group LLP (“Wellington”), Wellington has shared voting power with +respect to 5,998,082 of such shares and shared dispositive power with respect to all +such shares. +(5) Mr. Madden’s +beneficial ownership includes: (i) 1,773,695 shares of restricted Common Stock (which +restricted stock includes (A) 627,024 shares which will vest in equal annual installments +over two years commencing on December 31, 2022 through December 31, 2023, (B) 946,671 +shares which will vest in equal annual installments over two years commencing on December +31, 2022 through December 31, 2023 and (C) 200,000 shares which will vest in substantially +equal annual installments over three years commencing on December 31, 2024, in each case +subject to forfeiture pursuant to the terms of the 2006 Plan and of Mr. Madden’s +employment agreement, as amended); (ii) 2,137,500 shares of Common Stock that may be +acquired through the exercise of options that are exercisable as of, or will become exercisable +within 60 days of, March 21, 2022; and (iii) 1,278,549 shares of Common Stock held +by Mr. Madden directly. +24 +Security Ownership of Directors +and Executive Officers +The following +table sets forth information as of March 21, 2022 (unless otherwise indicated) with respect to the beneficial ownership of Common +Stock held by (a) each current director and nominee; (b) our Chief Executive Officer, our Chief Financial Officer and our three +most highly compensated executive officers as of December 31, 2021 other than the Chief Executive Officer and the Chief Financial +Officer (the “Named Executive Officers”); and (c) all current directors and executive officers as a group. A person +is deemed to be a beneficial owner of any securities that that person has the right to acquire within 60 days. Each director and +executive officer has sole voting power and sole dispositive power with respect to all shares beneficially owned by him or her. +Name +of Beneficial Owner (1) +Amount +and +Nature of +Beneficial +Ownership (2) +Percentage +of Class +Edward +R. Rosenfeld +1,024,210 +1.28 % (3) +Peter +A. Davis +— +— +Al +Ferrara +8,134 +* (4) +Karla +Frieders +121,063 +* (5) +Mitchell +S. Klipper +14,492 +* (6) +Maria +Theresa Kumar +2,889 +* (7) +Rose +Peabody Lynch +15,603 +* (8) +Zine +Mazouzi +49,096 +* (9) +Peter +Migliorini +12,838 +* (10) +Arian +Simone Reed +25 +* (11) +Ravi +Sachdev +69,072 +* (12) +Awadhesh +Sinha +55,507 +* (13) +Robert +Smith +7,389 +* (14) +Amelia +Newton Varela +183,199 +* (15) +All +Directors and Executive Officers as a Group (15 persons) +1,578,629 +1.98 % (16) +* Indicates +beneficial ownership of less than 1%. +(1) The +address for each of the individuals named above is c/o Steven Madden, Ltd., 52-16 Barnett +Avenue, Long Island City, New York 11104. +(2) Beneficial +ownership as reported in the table above has been determined in accordance with Item +403 of Regulation S-K and Rule 13d-3 of the Exchange Act and based upon 79,757,011 shares +of Common Stock outstanding (excluding treasury shares) as of March 21, 2022. +(3) Mr. Rosenfeld’s +beneficial ownership includes: (i) 445,083 shares of restricted Common Stock; (ii) 345,127 +shares of Common Stock held by Mr. Rosenfeld without restriction, and (iii) 234,000 +shares of Common Stock held by the Rosenfeld 2021 Family Trust (the “Trust”). +The Trust is for the benefit of Mr. Rosenfeld’s spouse and children and his +spouse is the sole trustee. Mr. Rosenfeld disclaims beneficial ownership of the +Common Stock held by the Trust. +(4) Mr. Ferrara’s +beneficial ownership consists of (i) 2,889 shares of restricted Common Stock and (ii) +5,245 shares of Common Stock held by Mr. Ferrara without restriction. +(5) Ms. Frieders’ +beneficial ownership consists of (i) 62,627 shares of restricted Common Stock and (ii) +58,436 shares of Common Stock held by Ms. Frieders without restriction. +(6) Mr. Klipper’s +beneficial ownership consists of (i) 2,889 shares of restricted Common Stock and (ii) +11,603 shares of Common Stock held by Mr. Klipper without restriction. +(7) Ms. Kumar’s +beneficial ownership consists of 2,889 shares of restricted Common Stock. +(8) Ms. Lynch’s +beneficial ownership consists of (i) 2,889 shares of restricted Common Stock and (ii) +12,714 shares of Common Stock held by Ms. Lynch without restriction. +(9) Mr. Mazouzi’s +beneficial ownership includes: (i) 42,489 shares of restricted Common Stock and (ii) +6,607 shares of Common Stock held by Mr. Mazouzi without restriction. +(10) Mr. Migliorini’s +beneficial ownership includes: (i) 2,889 shares of restricted Common Stock and (ii) 9,949 +shares of Common Stock held by Mr. Migliorini without restriction. +25 +(11) Ms. Reed’s +beneficial ownership includes 25 shares of Common Stock held by Ms. Reed without +restriction. +(12) Mr. Sachdev’s +beneficial ownership includes: (i) 2,889 shares of restricted Common Stock and (ii) 66,183 +shares of Common Stock held by Mr. Sachdev without restriction. +(13) Mr. Sinha’s +beneficial ownership includes 55,507 shares of Common Stock held by Mr. Sinha without +restriction. +(14) Mr. Smith’s +beneficial ownership includes: (i) 2,889 shares of restricted Common Stock and (ii) 4,500 +shares of Common Stock held by Mr. Smith without restriction. +(15) Ms. Varela’s +beneficial ownership includes: (i) 42,408 shares of restricted Common Stock and (ii) +140,791 shares of Common Stock held by Ms. Varela without restriction. +(16) Includes, +in the aggregate, (i) 622,834 shares of restricted Common Stock; (ii) 721,795 shares +of Common Stock held by such beneficial owners; and (iii) 234,000 shares of Common Stock +held indirectly by the Trust. +Delinquent +Section 16(a) Reports +We are +not aware of any late or delinquent filings under Section 16(a) of the Securities Exchange Act of 1934, except that one late Form +4 was filed on behalf of (1) Zine Mazouzi in January 2021 reporting three transactions, (2) Amelia Newton Varela in January 2021 +reporting one transaction, (3) Karla Frieders in May 2021 reporting one transaction, and (4) Awadhesh Sinha in December 2021 reporting +one transaction. +EXECUTIVE COMPENSATION +Compensation Discussion +and Analysis +Executive +Summary +This Compensation +Discussion and Analysis describes the overall principles and objectives and specific features of our executive compensation program, +primarily focused on the executive compensation program’s application to our Chief Executive Officer and our other executive +officers included in the Summary Compensation Table, whom we refer to collectively in this Proxy Statement as the “Named +Executive Officers.” +In +developing and evaluating our executive compensation program, the Compensation Committee reviews our total stockholder return +and annual financial results for prior years and the extent to which those indicia correlate with executive compensation. +As +part of our cash deployment strategy to drive stockholder value and enhance stockholder returns, our Board of Directors approved +four quarterly cash dividends on outstanding Common Stock during 2021. We paid a quarterly cash dividend of $0.15 per share on +each of March 26, 2021, June 25, 2021, September 27, 2021, and December 27, 2021, returning a total of $49.2 million to stockholders +during the period in the form of dividends. We also repurchased 2,841,405 shares of our Common Stock for approximately $123.2 +million during 2021, which includes shares acquired through the net settlement of employee stock awards. Excluding our fiscal +year 2020, the Company has repurchased an average of $112 million in shares per year since 2013. +The +2021 Fiscal Year was a record year for Steve Madden, as we recorded the highest annual revenue and earnings in our history. Total +revenue for the 2021 Fiscal Year increased by 55.3% to $1.9 billion from $1.2 billion in the year ended December 31, 2020. Net +income was $190.7 million, or $2.34 per diluted share, for the 2021 Fiscal Year as compared to a net loss of ($18.4) million, +or ($0.23) per basic share, for the year ended December 31, 2020. On an adjusted basis, net income was $203.7 million, or $2.50 +per diluted share, for the 2021 Fiscal Year as compared to adjusted net income of $51.8 million, or $0.64 per diluted share, for +the year ended December 31, 2020. +The preceding +discussion includes financial measures that are adjusted from the GAAP financial measures. We include a reconciliation of these +adjusted financial measures to the corresponding GAAP financial measures in Annex A to this Proxy Statement. +Reflecting +our financial and stock performance in 2021, we paid the bonuses reflected in the Summary Compensation Table to our Named Executive +Officers, which represented an increase over 2020, when we did not pay any cash bonuses to the named executive officers for 2020. +Because our general practice is to award bonuses and grant equity based on Named Executive Officer performance for the preceding +year, we believe that we are able to maintain relative alignment between pay and performance. +26 +Compensation +Objectives and Strategy +Our executive +officer compensation program is designed to attract and retain the caliber of officers needed to ensure our continued growth and +profitability and to reward them for their performance, for our performance and for creating long-term value for our stockholders. +The primary objectives of the program are to: +· align +rewards with performance that creates stockholder value; +· support +our strong team orientation; +· encourage +high-potential team players to build a career at the Company; and +· provide +rewards that are cost-efficient, competitive with other similarly positioned organizations +and fair to employees and stockholders. +The Compensation +Committee of the Board of Directors approves and administers our executive compensation program. Working with management and outside +advisors, the Compensation Committee has developed a compensation and benefits strategy that rewards performance and reinforces +a culture that the Compensation Committee believes will drive long-term success and value creation. +The compensation +program rewards team accomplishments while promoting individual accountability. The executive officer compensation program depends +in significant measure on our results, but business unit results and individual accomplishments are also very important factors +in determining each executive’s compensation. We have a robust planning and goal-setting process that is fully integrated +into the compensation system, enhancing a strong relationship among individual efforts, Company results and financial rewards. +We place +a major portion of total compensation at risk through annual and long-term incentives. However, we may also pay discretionary +bonuses to the Named Executive Officers based on their performance during the preceding year. We designed the combination of incentives +to balance annual operating objectives and Company earnings performance with longer-term stockholder value creation. +To implement +our primary objectives, we seek to provide competitive compensation that is commensurate with performance. We target compensation +at the median of the market, as discussed below under “Pay Levels and Benchmarking,” and calibrate both annual and +long-term incentive opportunities to generate less-than-median awards when we do not fully achieve goals and greater-than-median +awards when we exceed goals. +We believe +that there is great value to the Company in having a team of long-tenured, seasoned managers and seek to promote a long-term commitment +from our senior executives. We have designed our team-focused culture and management processes to foster this commitment. In addition, +restricted Common Stock awards granted to Named Executive Officers in the 2021 Fiscal Year reinforce this long-term orientation +with annual vesting over four to five years. +Role +of the Compensation Committee +General. +The Compensation Committee provides overall guidance for our executive compensation policies and determines the amounts and +elements of compensation for our executive officers and outside directors. The Compensation Committee currently consists of four +members of the Board of Directors, Ms. Lynch and Messrs. Davis, Migliorini, and Smith, each of whom is an independent director +under Rule 5605 of The Nasdaq Global Select Market listing standards and a “non-employee director” as defined under +the SEC’s rules. +When considering +decisions concerning the compensation of executives, other than the Chief Executive Officer, the Compensation Committee asks for +the recommendations of the Chief Executive Officer, including his detailed evaluation of each executive’s performance. +27 +Use +of Outside Advisors. In making its determinations with respect to executive compensation, the Compensation Committee has historically +engaged the services of an independent compensation consulting firm. The Compensation Committee has retained the services of Arthur +J. Gallagher & Co.’s Human Resources & Compensation Consulting Practice (“Gallagher”) since 2005 to +assist with its review of the compensation packages and employment agreements of the Chief Executive Officer and other executive +officers. In 2020, 2021, and 2022, Gallagher worked with the Compensation Committee to assess the reasonableness of grants of +restricted Common Stock to Mr. Rosenfeld, Ms. Varela, Mr. Mazouzi, and Ms. Frieders, the terms of the new +employment agreement for Mr. Rosenfeld, and the amendments of the employment agreements for Ms. Varela and Mr. Sinha, +in each case as compared with comparable positions in the peer group that we list below. Gallagher also worked with the Compensation +Committee to establish a bonus pool and individual allocations from the pool for 2021. We based executive compensation for the +Named Executive Officers on employment agreements with pay structures and levels that we set with reference to competitive market +studies that Gallagher performed just prior to the consummation of the agreements. Gallagher completed position-specific competitive +market studies when we entered into the new employment agreement with Mr. Rosenfeld and the amendments to employment agreements +with Ms. Varela and Mr. Sinha and when we approved the grants of restricted Common Stock to Mr. Rosenfeld, Ms. Varela, +Mr. Mazouzi, and Ms. Frieders in 2021. Gallagher provides only executive compensation consulting services and works +with management only at the behest of the Compensation Committee. +The Compensation +Committee retains Gallagher directly, although in carrying out assignments for the Company, Gallagher also interacts with our +management, when necessary and appropriate, to obtain compensation and performance data for the Company and our executives. In +addition, Gallagher may, in its discretion, seek input and feedback from management regarding its consulting work product for +the Compensation Committee to confirm alignment with our business strategy and identify data questions or other similar issues, +if any, prior to completion of a project for the Compensation Committee. +Independence +of Outside Advisors. The Compensation Committee has the sole authority to retain, terminate, approve the fees and set the +terms of our relationship with any outside compensation advisors who assist the Committee in carrying out its responsibilities. +It may select or receive advice from any compensation consultant or other advisor only after taking into consideration all factors +relevant to the consultant’s independence from management, including the factors set forth in Nasdaq rules and in the Compensation +Committee Charter. Independence factors that the Compensation Committee should consider under its charter include: (a) any other +services that the consultant provides to the Company, (b) any business or personal relationships the consultant has with a committee +member or an executive officer of the Company, and (c) whether the consultant has any policies in place to prevent conflicts of +interest. +Accordingly, +the Compensation Committee reviews annually its relationship with Gallagher to ensure Gallagher’s independence on executive +compensation matters. Prior to selecting and receiving advice from Gallagher with respect to executive compensation in the 2021 +Fiscal Year, the Compensation Committee reviewed Gallagher’s independence and that of Gallagher’s individual representatives +who served as the Committee’s advisors. The Compensation Committee determined that no conflicts of interest exist between +the Company and Gallagher or its representatives. In reaching such determination, the Compensation Committee considered, among +other things, the following factors: (i) that Gallagher provides no services to the Company other than executive compensation +consulting services; (ii) the fees we paid to Gallagher as a percentage of Gallagher’s total revenue; (iii) the representations +by Gallagher as to its policies and procedures that are designed to prevent a conflict of interest; (iv) any business or personal +relationships between the individual representatives of Gallagher who advised the Compensation Committee and any member of the +Compensation Committee; and (v) any business or personal relationships between our executive officers and Gallagher or its individual +representatives. +Consideration +of 2021 Stockholder Say-on-Pay Vote. At our 2021 Annual Meeting of Stockholders, our stockholders overwhelmingly +approved, on an advisory basis, the compensation of our Named Executive Officers (96% of votes cast). This continues the string +of 94% or higher approvals that began with the initial say-on-pay vote in 2011. The Compensation Committee believes this level +of stockholder support reflects a very strong endorsement of our compensation policies and decisions. The Compensation Committee +has considered the results of this advisory vote on executive compensation in determining our compensation policies and decisions +for 2022 and has determined that these policies and decisions are appropriate and in our best interests and those of our stockholders +at this time. +28 +Compensation +Structure +Pay +Elements - Overview +We use +four main components of compensation: +· base salary; +· annual performance-based bonuses; +· long-term equity incentives (consisting of stock options and restricted stock); and +· benefits and perquisites. +Pay Elements - Details +Base +Salary . We paid base salaries to each of the Named Executive Officers to provide them with fixed pay commensurate with the +Named Executive Officer’s role and responsibilities, experience, expertise, and individual performance. As we describe more +fully in the section of this Proxy Statement captioned “Employment Arrangements,” as of December 31, 2021, we had +employment agreements with each of the Named Executive Officers. The Compensation Committee, as constituted at the time the parties +entered into the employment agreements or any amendments to those agreements, reviewed and approved the salary that each such +agreement or amendment established. The Compensation Committee considered each employee’s salary history, value in our competitive +market and performance (including at the Company and previous employment). +The annual +base salary of our Chief Executive Officer, Edward R. Rosenfeld, under Mr. Rosenfeld’s employment agreement dated December +31, 2021, which remains in effect until December 31, 2024, is $1,083,538 for the year ending December 31, 2022, $1,126,879 for +the year ending December 31, 2023, and $1,171,954 for the year ending December 31, 2024. His previous employment agreement established +his base salary for 2021, which we report below. The annual base salary of our President, Amelia Newton Varela, under Ms. Varela’s +employment agreement dated December 27, 2019, which remains in effect until December 31, 2022, is $750,000 for the year ending +December 31, 2022. Her employment agreement also established her base salary for 2021, which we report below. The annual base +salary of our Chief Operating Officer, Awadhesh Sinha, under Mr. Sinha’s employment agreement dated December 27, 2019, +as amended, which remains in effect until December 31, 2023, is $500,000 for the year ending December 31, 2022, for his services +as our Chief Operating Officer through 2022, and $300,000 for his services as a Senior Advisor in 2023. His employment agreement +also established his base salary for 2021, which we report below. The annual base salary of Zine Mazouzi, who became our Chief +Financial Officer on January 1, 2021, under Mr. Mazouzi’s employment agreement dated as of December 8, 2020, is $575,000 +for the year ending December 31, 2022, and $600,000 for the year ending December 31, 2023. His employment agreement also established +his base salary for 2021, which we report below. The employment agreement, dated May 11, 2020, for our Chief Merchandising Officer, +Karla Frieders, which remains in effect until April 30, 2023, provides for an annual base salary of $590,000 for each of the contract +years ending April 30, 2022 and 2023. Her employment agreement also established her base salary for 2021, which we report below. +Please +see the section of this Proxy Statement captioned “Summary Compensation Table for the Fiscal Year 2021” and “Employment +Arrangements” for a more detailed description of the employment agreements and compensation of the Named Executive Officers. +The 2021 and 2022 salary increases, if any, for our Named Executive Officers, as reflected in the following table, are generally +consistent with those of other management employees. +29 +Named +Executive Officer +2020 +Salary +2021 +Salary +2022 +Salary +Edward +R. Rosenfeld +$ 494,853 +$ 1,041,863 +$ 1,083,538 +Amelia +Newton Varela +$ 628,115 +$ 725,000 +$ 750,000 +Zine +Mazouzi +$ — +$ 550,000 +$ 575,000 +Awadhesh +Sinha +$ 668,762 +$ 767,000 +$ 500,000 +Karla +Frieders +$ 530,092 +$ 590,000 +$ 590,000 +Annual +Performance-based Bonus . The respective employment agreements for our Named Executive Officers establish the structures for +their annual performance-based cash bonuses, if any. The Compensation Committee reviewed and approved the bonus provisions fixed +in each such employment agreement at the time the parties entered into such agreements and any amendments to those agreements. +Such bonus provisions generally provide for variable or discretionary bonuses that the Committee designed to reward attainment +of business goals. +Ms. Varela’s +employment agreement entitles her to an annual performance-based cash bonus for each of the fiscal years ended December 31, 2021 +and 2022 in an amount equal to 2% of the increase, if any, in our total earnings before interest and taxes (“EBIT”) +for each such year over our total EBIT for the immediately preceding year. EBIT attributable to any business that we acquire after +January 1, 2020 is included in the calculation for the purpose of determining Ms. Varela’s annual bonus after one year +of Company ownership. As we previously disclosed, the February 25, 2021 amendment to Ms. Varela’s employment agreement +caps her performance-based bonus at $450,000 in 2021 and 2022. In exchange for agreeing to the cap on her performance-based bonus, +Ms. Varela received a grant of restricted stock on March 1, 2021 with a value of $1.0 million, subject to vesting at a rate +of 25% per year. +Mr. Mazouzi’s +employment agreement entitles him to an annual performance-based cash bonus for each of the fiscal years ended December 31, 2021, +2022 and 2023 based on the following schedule: +Diluted +EPS +Bonus +as % of Salary +Maximum (130% of Plan) +80% +Target (100% of Plan) +50% +Threshold (90% of Plan) +20% +Mr. Sinha’s +employment agreement entitles him to an annual performance-based bonus for each of the fiscal years ended December 31, 2021 and +2022 in an amount equal to 2% of the increase, if any, in our earnings before interest, taxes, depreciation and amortization (“EBITDA”) +for each such year over our EBITDA for the immediately preceding year. For any business that we acquired after January 1, 2020, +EBITDA from the acquired business is included in the bonus calculation starting with the first full quarter under our ownership, +provided that the prior year’s EBITDA will likewise be adjusted to include EBITDA from the acquired business for comparable +quarters in the prior year on a pro forma basis assuming we had owned the business. As we previously disclosed, under the February +25, 2021 amendment to Mr. Sinha’s employment agreement, his performance-based bonus is capped at $450,000 for 2021 +and $200,000 for 2022, and he will not be entitled to a performance bonus for 2023. +As provided +in the Steven Madden, Ltd. 2019 Incentive Compensation Plan, the maximum payment that we may make to an individual under any performance-based +cash award during any fiscal year and subject to the attainment of specified performance goals is $10,000,000. The Compensation +Committee may, in its sole discretion, elect to pay an individual an amount that is less than the individual’s target award +regardless of the degree of attainment of the performance goals. +Taking into account +Gallagher’s recommendations based on comparisons with our peer group companies, including target annual incentive compensation +(which we discuss below under “Pay Levels and Benchmarking”), and the individual performance of our Named Executive +Officers, the Compensation Committee approved the following cash payments based on performance during the Fiscal Year 2021: +30 +Named +Executive Officer +2021 +Cash +Award Value +Edward R. Rosenfeld +$ 1,000,000 +Amelia Newton Varela +$ 450,000 +Zine Mazouzi +$ 440,000 +Awadhesh Sinha +$ 550,000 +Karla Frieders +$ 100,000 +In Fiscal +Year 2021, we had established a bonus pool equal to 6% of our net income out of which any bonuses earned by our Named Executive +Officers and other key executives would be paid. The bonus pool, based on net income of $190.7 million for Fiscal Year 2021, was +approximately $11.4 million. In future years, due to changes in the applicable tax laws, we do not anticipate using a bonus pool. +Instead, we anticipate setting bonus targets and payout amounts for our Named Executive Officers based on benchmarking data relating +to the competitive marketplace, individual roles, individual and corporate performance, and employment agreements. +Long-term +Equity Incentives . Management and the Compensation Committee believe that equity-based awards are an important factor in aligning +the long-term financial interest of the executive officers and stockholders. The Compensation Committee continually evaluates +the use of equity-based awards and intends to continue to use such awards in the future as part of designing and administering +our compensation program. In the Fiscal Year 2021, the Compensation Committee continued its practice in recent years of granting +equity incentives in the form of restricted stock, which the Compensation Committee believes provides both substantial incentive +and retention characteristics. The Committee designed these awards to provide emphasis on preserving stockholder value generated +in recent years while providing significant incentives for continuing growth in stockholder value. +We determined +the amounts of the equity-based awards that we granted to our Named Executive Officers in 2021 based on the Committee’s +evaluation of our performance during Fiscal Year 2020, Gallagher’s recommendations based on comparisons with our peer group +companies, including target incentive compensation (which we discuss below under “Pay Levels and Benchmarking”), and +the individual performance of the Named Executive Officers. On March 15, 2021, we made a grant of 50,569 shares of restricted +Common Stock to Mr. Rosenfeld, a grant of 5,057 shares of restricted Common Stock to Mr. Mazouzi, and a grant of 10,114 +shares of restricted Common Stock to Ms. Frieders. Each of those grants vests 20% per year over five years commencing on +the first anniversary of the date of grant. We also made a grant of 29,155 shares of restricted Common Stock to Mr. Mazouzi +on January 4, 2021 in connection with his new employment agreement and a grant of 26,350 shares of restricted Common Stock to +Ms. Varela on March 1, 2021 in connection with the amendment to her employment agreement that we discussed above. See “Employment +Arrangements” below for a further discussion of the equity-based awards we made to Ms. Varela and Mr. Mazouzi. +We also made a grant of 75,317 shares of restricted Common Stock to Mr. Rosenfeld on December 31, 2021 to ensure his target +compensation included what the Committee believed to be competitive levels of long-term incentive compensation and to further +align his incentives with the interests of our shareholders. +The Committee +intends to continue to review the types of equity awards we grant to achieve appropriate incentives for both performance and retention. +For the Fiscal Year 2022, the Committee adopted an equity grant practice of using March 15 as the fixed, annual grant date for +future equity grants. +Other +Benefits and Perquisites . Our executive compensation program also includes other benefits and perquisites that may vary among +individual executive officers. These benefits and perquisites include annual matching contributions to executive officers’ +401(k) plan accounts, company-paid medical benefits, automobile allowances and leased automobiles, and life insurance coverage. +The Compensation Committee annually reviews these other benefits and perquisites and makes adjustments as warranted based on competitive +practices, our performance and the individual’s responsibilities and performance. The Compensation Committee has approved +these other benefits and perquisites as a reasonable component of our executive officer compensation program. Please see the section +of this Proxy Statement captioned “Summary Compensation Table” and, specifically, the column entitled “All Other +Compensation” and the corresponding footnotes. +31 +Pay +Mix +We use +the particular elements of compensation that we described above because we believe that doing so provides a well-proportioned +mix of secure compensation, retention value and at-risk compensation, which produces short-term and long-term performance incentives +and rewards. By following this approach, we seek to motivate the executives to focus on business metrics and other variables within +their particular sector that will increase sales and margins and at the same time lower costs so as to produce a high level of +short-term and long-term performance for the Company and long-term wealth creation for the executives, as well as reducing the +risk of recruitment of top executive talent by competitors. The mix of metrics that we used for the annual performance bonuses +and our long-term incentive program likewise provides an appropriate balance between short-term financial performance and long-term +stock performance. +For the +Named Executive Officers, we have weighted the mix of compensation heavily toward at-risk pay (annual incentives and long-term +incentives). Maintaining this pay mix results fundamentally in a pay-for-performance orientation for our executives, which is +aligned with our stated compensation philosophy of providing compensation commensurate with performance. +Pay +Levels and Benchmarking +We determine +pay levels for our executives based on several factors, including the individual’s roles and responsibilities within the +Company, the individual’s experience and expertise, the pay levels for peers within the Company, pay levels in our competitive +market for similar positions, and performance of the individual and the Company as a whole. The Compensation Committee is responsible +for approving pay levels for the Named Executive Officers. In determining the pay levels, the Compensation Committee considers +all forms of compensation and benefits. +The Compensation +Committee assesses the “competitive market” for compensation using several sources. The primary data source that the +Committee used in setting competitive market levels for the Named Executive Officers is the information publicly disclosed by +a peer group of the Company, which the Committee reviews annually and may change from year to year. For the 2021 Fiscal Year, +the Compensation Committee reviewed executive compensation and compensation design for the purpose of assessing bonus awards in +early 2021 in the context of overall compensation and in relation to the following peer companies: +Boot Barn Holdings, Inc. +Designer Brands Inc. +Movado Group, Inc. +The Buckle, Inc. +Express, Inc. +Oxford Industries, Inc. +Caleres, Inc. +G-III Apparel Group, Ltd. +Shoe Carnival, Inc. +The Children’s Place, Inc. +Genesco Inc. +Skechers U.S.A., Inc. +Crocs, Inc. +Guess?, Inc. +Wolverine World Wide, Inc. +Deckers Outdoor Corporation +Lands’ End, Inc. +Zumiez Inc. +32 +The market capitalization +and trailing twelve months revenue of the Company and each peer company follows: +Company +Market +Cap* +TTM +Revenue** +Steven +Madden, Ltd. +$ 3.78 +$ 1.87 +Boot Barn Holdings, +Inc. +$ 3.64 +$ 1.36 +The Buckle, Inc. +$ 2.07 +$ 1.23 +Caleres, Inc. +$ 0.86 +$ 2.67 +The Children’s +Place, Inc. +$ 1.14 +$ 1.88 +Crocs, Inc. +$ 7.55 +$ 2.31 +Deckers Outdoor Corporation +$ 10.05 +$ 2.98 +Designer Brands Inc. +$ 1.04 +$ 2.98 +Express, Inc. +$ 0.21 +$ 1.71 +G-III Apparel Group, +Ltd. +$ 1.34 +$ 2.54 +Genesco Inc. +$ 0.94 +$ 2.33 +Guess?, Inc. +$ 1.54 +$ 2.44 +Lands’ End, Inc. +$ 0.65 +$ 1.62 +Movado Group, Inc. +$ 0.96 +$ 0.70 +Oxford Industries, +Inc. +$ 1.71 +$ 1.06 +Shoe Carnival, Inc. +$ 1.10 +$ 1.27 +Skechers U.S.A., Inc. +$ 6.76 +$ 6.31 +Wolverine World Wide, +Inc. +$ 2.37 +$ 2.41 +Zumiez Inc. +$ 1.10 +$ 1.17 +* Market +capitalization is as of December 31, 2021 and is stated in billions. +** TTM +is last four quarters of publicly reported revenue and is stated in billions. +Because +only four peer companies disclose compensation for a Chief Merchandising Officer, the Committee added four additional companies +with respect to the consideration of Ms. Frieders’ compensation: Big Lots Inc., Burlington Stores Inc., Citi Trends +Inc., and Dollar General Inc. +After +consideration of data on external competitive levels of compensation and internal needs, the Compensation Committee makes decisions +regarding the Named Executive Officers’ target total compensation opportunities based on the need to attract, motivate and +retain an experienced and effective management team. Relative to the competitive market data, the Compensation Committee generally +intends that the base salary and target incentive compensation, including both cash bonuses and equity-based compensation, for +each Named Executive Officer will be at the median of the competitive market. +As noted +above, despite our overall pay positioning objectives, pay opportunities for specific individuals vary based on factors such as +scope of duties, tenure, institutional knowledge and difficulty in recruiting a new executive. Actual total compensation in a +given year will vary above or below the target compensation levels based primarily on the attainment of operating goals and the +creation of stockholder value. +Compensation +Committee Discretion +The Compensation +Committee has complete discretion whether to make cash performance bonuses or equity-based incentive awards, with the exception +of any such payouts that are to be made pursuant to contractual commitments, such as the bonuses that may be paid to Ms. Varela +and Mr. Sinha. We describe factors to consider in making such awards under “Annual Performance-Based Bonuses” +and “Long-term Equity Incentives” above. +Pay +Ratio +As required +by the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), the following disclosure +provides the relationship of the total annual compensation of our median-paid employee to the total annual compensation of our +Chief Executive Officer, Mr. Rosenfeld. +33 +For purposes +of this disclosure, as permitted by SEC regulations, we used the same median-paid employee as in our proxy statement filed during +2021, because, pursuant to the instructions to Item 402(u) of Regulation S-K, there has been no material change in our employee +population or employee compensation arrangements in 2021 that would result in a significant change to our pay ratio disclosure. +The table +below sets forth the total annual compensation for Mr. Rosenfeld and our median-paid employee, who is a sales supervisor, +and the ratio between the two. +Median +employee annual total compensation +$ 25,726 +Mr. Rosenfeld +annual total compensation +$ 7,566,831 +Ratio of Chief Executive +Officer to median employee compensation +294:1 +We determined +our median-paid employee as of October 1, 2020, which date was within the last three months of the 2020 fiscal year, as permitted +by the pay ratio rule under the Dodd-Frank Act. In determining our median employee, we applied the “de minimis” exemption +under the rule, which allows the exemption of 5% or less of our total global workforce in jurisdictions outside of the U.S., which +amounted to 142 employees based on our total global workforce as of October 1, 2020 of 2,833 employees. As such, we excluded all +of our employees in each of Hong Kong (21 employees), the Netherlands (44 employees) and South Africa (56 employees), which in +total amounted to 121 employees, or 4%. We did not exclude from consideration any employees who joined the Company during the +2020 fiscal year as the result of a business acquisition or combination. Employees on leave of absence were excluded and wages +and salaries were annualized for those employees who were not employed for the entire 2020 fiscal year. To identify our median +employee, we used payroll data consisting of salary, hourly wage, overtime wage, bonus, commissions, vesting of equity awards +and any similar payroll items for all of our employees included in the calculation. +For purposes +of determining the ratio, we determined our median-paid employee’s annual total compensation for the 2021 Fiscal Year using +the same method required for calculating our Chief Executive Officer’s (and other Named Executive Officers’) total +annual compensation for purposes of the Summary Compensation Table. +We believe +that the ratio stated above is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K. It +is based on the methodologies, assumptions and estimates described above and is not necessarily comparable to the ratios reported +by other companies. +Risk +Assessment +Bonus +payments to executives either are based on the discretion of the Compensation Committee or are tied to growth in various indicators +of financial performance, such as EBITDA and EBIT. We have established long-term incentives in the form of time-vested restricted +stock that generally vest over four or five years. These forms of compensation have been in place for several years and have proved +effective in rewarding performance while not encouraging inappropriate risk-taking. +The Compensation +Committee undertook to review and evaluate our executive and company-wide compensation program and plans to assess whether any +aspect of the program and these plans would encourage inappropriate risk-taking by our executives and non-executive employees +that could have a material adverse effect on the Company and to confirm that we have adequate risk management controls in place +to ensure that executive and company-wide compensation is reasonable and achieves its intended incentive without creating unacceptable +risk. Based on such review and evaluation, the Compensation Committee believes there is no material risk to the Company that is +related to our compensation program for executives and non-executive employees. +This review +and evaluation of the risks associated with our compensation program and plans consisted of: +· identifying +those business risks that could be material to the Company and identifying our existing +risk management system; +· reviewing +and analyzing our compensation program and plans to identify program and plan features +that could potentially encourage or introduce excessive or imprudent risk taking of a +material nature; +· identifying +the business risks that our compensation plan and program features could potentially +encourage or create; +· balancing +these business risks against our existing internal control systems designed to manage +and mitigate these business risks; and +· analyzing +whether the unmitigated risks, in part or as a whole, are reasonably likely to have a +material adverse effect on the Company. +34 +The Committee +consulted various persons during the course of the assessment, including our executive officers and senior members of our human +resources department. The Compensation Committee engages Gallagher to review our executive and company-wide compensation program +and plans and provide advice regarding appropriate levels of incentive. +The Compensation +Committee noted several features of our compensation structure that mitigate risk, including, for example: +· we +use a pay mix that is well-balanced between short-term financial performance and long-term +stock performance, consisting of secure compensation in the form of base salary, short-term +incentives in the form of potential for cash bonuses, and long-term incentives in the +form of stock options and time-vested restricted stock that generally vest over four +or five years; +· in +most instances, management or the Compensation Committee retains the discretion to decrease +all forms of incentive compensation based on significant individual or Company performance +shortfalls; +· we +periodically benchmark our compensation program and plans and target executive and non-executive +compensation within the normal limits of the competitive market; and +· the +Compensation Committee provides oversight of our compensation program and plans and compensation +philosophy, makes recommendations to the Board with respect to improvements to our compensation +program and plans, and is responsible for reviewing and approving executive compensation +and administering and awarding incentive, deferred and equity compensation to our senior +executives. +In light +of the assessment described above, the Compensation Committee concluded that the risks associated with our compensation program +and plans (executive and company-wide) are not reasonably likely to have a material adverse effect on the Company. +Implications +of Tax and Accounting Matters +As a general +matter, the Compensation Committee considers the various tax and accounting implications of compensation vehicles that we employ. +Although the Compensation Committee reviews and considers both the accounting and tax effects of various components of compensation, +those effects are not a significant factor in the Compensation Committee’s allocation of compensation among the different +components. +Compensation +paid to certain covered employees, generally including our Named Executive Officers, generally is not deductible to the extent +that the compensation exceeds $1 million in any one year for any such covered employee under Code Section 162(m). The Compensation +Committee believes that our interests and those of our stockholders are best served by providing competitive levels of compensation, +even if not fully deductible, so some of the compensation that we have provided to our Named Executive Officers in the past, and +that we provide to our executive officers in the future, may not be deductible under Code Section 162(m). +As more +fully described below under the heading “Termination, Change-in-Control and Non-Competition/Non-Solicitation,” with +the exception of Ms. Frieders, all of our Named Executive Officers are entitled to receive certain compensation in the event +of a termination of employment in connection with a change-in-control event for the Company, which payments may trigger the application +of the “golden parachute” provisions of Sections 280G and 4999 of the Code. Section 280G of the Code disallows a tax +deduction with respect to excess parachute payments to certain executives of companies that undergo a change-in-control. In addition, +Section 4999 of the Code imposes a 20% excise tax on the individual receiving the excess parachute payment. Excess parachute payments +are golden parachute payments that exceed an amount determined under Section 280G based on the executive’s prior compensation. +In approving the compensation arrangements of our Named Executive Officers, our Compensation Committee considers all elements +of the cost to the Company of providing such compensation, including the potential impact of Sections 280G and 4999, which, under +certain circumstances, may limit the deductibility of executive compensation. However, our Compensation Committee may determine, +in its judgment, to authorize compensation arrangements that could give rise to loss of deductibility under Section 280G and the +imposition of excise taxes under Section 4999 when it believes that such arrangements are appropriate to attract and retain executive +talent. +35 +Conclusion +The Compensation +Committee considers the level and mix of compensation that it finally decides upon as to each executive within the context of +both the objective data from our competitive assessment of compensation and performance, as well as the subjective factors as +outlined above. The Compensation Committee believes that each of the compensation packages for the Named Executive Officers is +within the competitive range of practices when compared to the objective comparative data even where subjective factors may have +influenced the compensation decisions. +Executive +Officers +The following +table identifies the executive officers of the Company, and their ages and positions: +Name +Age +Position +Edward R. Rosenfeld +46 +Chairman of the Board and Chief Executive Officer +Amelia Newton Varela +50 +President +Zine Mazouzi +50 +Chief Financial Officer +Awadhesh Sinha +76 +Chief Operating Officer +Karla Frieders +45 +Chief Merchandising Officer +Lisa Keith +37 +Vice President, General Counsel and Secretary +Edward +R. Rosenfeld has served as our Chairman of the Board and Chief Executive Officer since August 2008 and has been a director +of the Company since February 2008. Mr. Rosenfeld, who joined our executive management team in May 2005, has +more than two decades of experience focused on the retail, apparel and footwear industries and possesses particular knowledge +of and experience in the industry that strengthens the Board’s collective qualifications, skills and experience. His background +in finance and his analytical skills gained through his years as a Vice President with Peter J. Solomon Company, an investment +banking boutique, where he specialized in mergers and acquisitions in the retail, apparel and footwear industries, provide the +Board with insight and guidance with respect to, among other things, strategic business development matters. Mr. Rosenfeld +has strong leadership skills and an in-depth understanding of the Company and its goals from his positions as the Chairman of +the Board and Chief Executive Officer. Mr. Rosenfeld serves as a director and chairman of the Audit & Risk Management +Committee of PVH Corp. (NYSE: PVH), one of the world’s largest apparel companies. +Amelia +Newton Varela has served as President of the Company since September 2015 and has been a director since 2016. Prior to +this tenure, Ms. Varela was Executive Vice President of Wholesale of the Company since April 2008 and Executive Vice President +of Wholesale Footwear of the Company from November 2004 to April 2008. Previously, she was Vice President of Sales for Steve Madden +Women’s Wholesale Division from January 2000. Ms. Varela began her career with the Company in 1998 in the role of Account +Executive for Steve Madden Women’s Wholesale Division. She graduated from The Fashion Institute of Technology in 1995. Ms. Varela’s +over 20 years of experience at the Company provides relevant industry knowledge and expertise, and leadership to the Board. +Zine +Mazouzi has been our Chief Financial Officer since January 1, 2021, and previously served as our Chief Accounting Officer +and Senior Vice President—Finance and Operations from January 2019 until his appointment as our Chief Financial Officer. +Prior to joining the Company, he held various senior positions at Sears Holdings, a holding company for department stores, as +the Chief Financial Officer of Sears Footwear Group from 2016 to 2017, Head of the Footwear Group from 2017 to 2018 and Head of +the Footwear, Home and Jewelry Groups in 2018. Prior to that, he worked at Nine West Group from 1998 to 2015, where he held a +number of increasingly senior positions, including Chief Financial Officer from 2014 to 2015. Mr. Mazouzi received his Bachelor’s +Degree in Finance and a Master of Business Administration from Iona College. +36 +Awadhesh +Sinha has been our Chief Operating Officer since July 2005. Mr. Sinha was a director of the Company from October +2002 to July 2005, before joining the Company as our Chief Operating Officer. Mr. Sinha was the Chief Operating Officer and +Chief Financial Officer of WEAR ME Apparel Inc., a company that designs, manufactures and markets branded and non-branded children’s +clothing, from 2003 to July 2005. Prior to that, Mr. Sinha worked for Salant Corporation, a company that designs, manufactures +and markets men’s clothing, for 22 years, and held the position of Chief Operating Officer and Chief Financial Officer of +Salant Corporation from 1998 to 2003. +Karla +Frieders has been our Chief Merchandising Officer since September 2015. Previously, Ms. Frieders served as President +of Retail from January 2013 and Vice President of Retail from October 2009 until January 2013. Prior to these roles, Ms. Frieders +held various buying positions at the Company from 1999. +Lisa +Keith has been our General Counsel since November 2019 and our Corporate Secretary since January 2021. Ms. Keith +joined Steve Madden’s Legal Department in May 2017 and previously served as Vice President and Deputy General Counsel. Prior +to joining the Company, Mrs. Keith was a senior associate at Davis Wright Tremaine LLP, a law firm, where she represented clients +in the fashion, technology and luxury goods industries. Ms. Keith began her legal career at Gibson, Dunn & Crutcher LLP, +where she practiced in the litigation department. She earned her J.D. from New York University School of Law and her B.A., summa +cum laude, from Brandeis University, where she was Phi Beta Kappa. +Please +see the section of this Proxy Statement captioned “Proposal One: Election of Directors” for biographical summaries +and other information concerning our Chairman of the Board and Chief Executive Officer, Edward R. Rosenfeld, and our President, +Amelia Newton Varela, as well as our other director nominees. +Summary +Compensation Table for the 2021 Fiscal Year +The following +table sets forth the compensation information for our Chief Executive Officer, Chief Financial Officer and the three most highly +compensated executive officers other than the Chief Executive Officer and Chief Financial Officer relating to the fiscal years +ended December 31, 2021, 2020 and 2019, respectively. In this Proxy Statement, we refer to this group of people as our “Named +Executive Officers.” +In accordance +with applicable SEC rules, the Summary Compensation Table includes, for a particular fiscal year, only those stock awards made +during that fiscal year and not any awards made after year-end even if awarded for services rendered in that year. SEC rules require +that such awards be reflected in the year of grant and, as such, awards made after the end of the 2021 Fiscal Year will appear +in the Summary Compensation Table to be included in our proxy statement for our 2023 Annual Meeting of Stockholders. +37 +Name +and Principal +Position +Fiscal +Year +Salary +($) +Bonus +($) +Stock +Awards +($) (1) +Option +Awards +($) +Non-Equity +Incentive +Plan +Compensation +($) +All +Other +Compensation +($) +Total +Compensation +($) +Edward +R. Rosenfeld +2021 +1,040,146 +— +5,499,985 +— +1,000,000 +26,700 (2) +7,566,831 +Chief +Executive Officer +2020 +494,853 +— +2,360,456 +— +— +17,550 +2,872,859 +2019 +943,961 +— +5,864,811 +— +500,000 +26,400 +7,335,172 +Amelia +Newton Varela +2021 +724,135 +— +999,983 +— +450,000 +23,700 (3) +2,197,818 +President +2020 +628,115 +— +1,163,970 +— +— +23,550 +1,815,635 +2019 +669,538 +— +— +— +182,006 +23,400 +874,944 +Zine Mazouzi (4) +2021 +544,808 +— +1,200,021 +— +440,000 +23,700 (5) +2,208,529 +Chief +Financial Officer +Awadhesh +Sinha +2021 +766,238 +— +— +— +550,000 +24,401 (6) +1,340,639 +Chief +Operating Officer +2020 +668,762 +— +499,990 +— +— +23,268 +1,192,020 +2019 +724,220 +— +— +— +200,000 +24,101 +948,321 +Karla +Frieders +2021 +590,000 +— +400,009 +— +100,000 +8,700 (7) +1,098,709 +Chief +Merchandising Officer +2020 +530,092 +— +750,158 +— +— +8,550 +1,288,800 +2019 +583,875 +— +496,953 +— +100,000 +8,400 +1,189,228 +(1) The +amounts in this column reflect the total grant date fair value of awards granted during +the applicable year for the fiscal years ended December 31, 2021, December 31, 2020, +and December 31, 2019, respectively, calculated in accordance with ASC Topic 718. Assumptions +used in the calculation of these amounts are included in Note I, Note J and Note J, respectively, +to our audited financial statements for the fiscal years ended December 31, 2021, December +31, 2020, and December 2019 included in our Annual Report on Form 10-K filed with the +Securities and Exchange Commission on March 1, 2022, March 16, 2021, and March 2, 2019, +respectively. +(2) Consists +of an $18,000 automobile allowance and $8,700 in annual match contributions to Mr. Rosenfeld’s +401(k) plan account. +(3) Consists +of a $15,000 automobile allowance and $8,700 in annual matching contributions to Ms. Varela’s +401(k) plan account. +(4) Mr. Mazouzi +became our Chief Financial Officer effective January 1, 2021. +(5) Consists +of a $15,000 automobile allowance and $8,700 in annual match contributions to Mr. Mazouzi’s +401(k) plan account. +(6) Consists +of a $15,701 automobile allowance and $8,700 in annual matching contributions to Mr. Sinha’s +401(k) plan account. +(7) Consists +of $8,700 in annual matching contributions to Ms. Frieders’ 401(k) plan account. +Employment +Arrangements +Edward +R. Rosenfeld. On December 31, 2021, we entered into a new employment agreement (the “Rosenfeld 2021 Agreement”) +with Mr. Rosenfeld to replace our employment agreement, which expired on December 31, 2021. Pursuant to the Rosenfeld 2021 +Agreement, Mr. Rosenfeld continues to serve as our Chief Executive Officer and executive Chairman of the Board of Directors +through December 31, 2024, unless sooner terminated in accordance with the terms of the agreement. The Rosenfeld 2021 Agreement +provides for an annual base salary of $1,083,538, $1,126,879 and $1,171,954 for fiscal years 2022, 2023 and 2024, respectively, +and a monthly automobile allowance of $1,500. Pursuant to the Rosenfeld 2021 Agreement, on December 31, 2021, Mr. Rosenfeld +was granted 75,317 shares of Common Stock, subject to certain restrictions. Those restricted shares of Common Stock, which were +issued under the Steven Madden, Ltd. 2019 Incentive Compensation Plan, vest in five annual installments of 15,063, 15,063, 15,063, +15,064, and 15,064 shares respectively, commencing on December 1, 2022. In addition, on February 1, 2022, Mr. Rosenfeld received +an award of 60,532 shares of our Common Stock under the 2019 Plan, subject to certain restrictions, which vest in five substantially +equal annual installments of 12,106 shares commencing on February 1, 2023. The Rosenfeld 2021 Agreement provides that Mr. Rosenfeld +will receive additional compensation and bonuses, if any, at the absolute discretion of the Board of Directors. +38 +In the +event of his death, the Rosenfeld 2021 Agreement provides for the payment to Mr. Rosenfeld’s estate of his base salary +for the 12-month period immediately after the date of his death. The agreement also provides that if Mr. Rosenfeld’s +employment is terminated due to his “total disability” (as defined in the Rosenfeld 2021 Agreement), Mr. Rosenfeld +will receive payment of his base salary for the 12-month period immediately after the date on which he is determined to be totally +disabled. The Rosenfeld 2021 Agreement allows the Company to terminate his employment for “cause” (as defined therein) +or without cause. If we terminate Mr. Rosenfeld’s employment for cause, we will have no further obligations to Mr. Rosenfeld, +and Mr. Rosenfeld will be entitled to no further compensation from the Company, except for pro-rata amounts due to him on +the date of his termination. If we terminate Mr. Rosenfeld’s employment without cause or if Mr. Rosenfeld resigns +for “good reason” (as defined in the Rosenfeld 2021 Agreement), Mr. Rosenfeld will be entitled to receive payment +of his annual base salary, payable at regular payroll intervals, from the date of termination of employment through the longer +of the remainder of the term of the agreement or six months. +In addition, +if we terminate Mr. Rosenfeld’s employment without cause or if he resigns for good reason during the period commencing +90 days prior to a “change of control” (as defined in the Rosenfeld 2021 Agreement) and ending 180 days following +a change of control, Mr. Rosenfeld will receive an amount equal to two and one-half times the sum of (i) the annual base +salary to which he was entitled as of the date of termination or resignation of employment plus (ii) the average cash bonus he +received for the preceding three-year period ending on the last previous December 31 (the “Change of Control Payment”). +However, if the Change of Control Payment (or a portion thereof) is determined to constitute an “excess parachute payment” +under Sections 280G and 4999 of the Internal Revenue Code of 1986, as amended (the “Code”), Mr. Rosenfeld will +be paid either (i) the Change of Control Payment (which will be subject to all applicable taxes to be paid by him including the +excise tax payable pursuant to Section 4999 and which will be limited as to deductibility to the Company) or (ii) a reduced amount, +calculated in accordance with Section 280G, that may be paid to the executive without the imposition of an excise tax under Section +4999 and which shall be fully deductible to the Company, whichever payment yields the greater after-tax benefit to him. +Amelia +Newton Varela. On December 27, 2019, we entered into an employment agreement (the “Varela 2019 Agreement”) with +Ms. Varela, pursuant to which she will continue to serve as our President through December 31, 2022, unless sooner terminated +in accordance with the terms of the agreement. The Varela 2019 Agreement replaced her previous employment agreement, which expired +on December 31, 2019. The Varela 2019 Agreement provides for an annual base salary of $700,000, $725,000, and $750,000 for fiscal +years 2020, 2021, and 2022 and an annual automobile allowance of $15,000 in each year of the term. Due to the impact of the COVID-19 +pandemic on our business, Ms. Varela agreed to a 30% reduction in her base salary from April 1, 2020 through July 31, 2020. +In addition, on January 2, 2020, pursuant to the Varela 2019 Agreement, Ms. Varela was granted 27,000 restricted shares of +Common Stock, which will vest in five equal annual installments on each anniversary of the date of grant, commencing on January +2, 2021. +The Varela +2019 Agreement entitles Ms. Varela to an annual performance-based cash bonus for each of the fiscal years ended December +31, 2020, 2021 and 2022 in an amount equal to 2% of the increase, if any, in our total earnings before interest and taxes (“EBIT”) +for each such year over our total EBIT for the immediately preceding year, less any deductions required to be withheld by applicable +laws and regulations. EBIT attributable to any business that we acquire after January 1, 2020 will be included in the calculation +for the purpose of determining Ms. Varela’s annual bonus after one year of Company ownership. +If the +Varela 2019 Agreement is terminated due to Ms. Varela’s “disability” (as defined in the agreement) or death, +we are obligated to pay Ms. Varela (or her estate) the amount of accrued and unpaid salary through the date of termination +plus any performance-based cash bonus that has accrued for the year prior to termination and is unpaid at the time Ms. Varela’s +employment is terminated. We may terminate the agreement for “cause” (as defined in the Varela 2019 Agreement), in +which case she will be entitled only to accrued and unpaid salary through the date of termination of employment. If we terminate +Ms. Varela’s employment without cause, she would be entitled to receive payment of her annual base salary, payable +at regular payroll intervals, from the date of termination of employment through the remainder of the term plus any performance-based +cash bonus that has accrued but not yet been paid. In addition, if we terminate Ms. Varela’s employment without cause +during the period commencing 30 days prior to a “change of control” (as defined in the Varela 2019 Agreement) transaction +and ending 180 days following a change of control transaction, she is entitled to receive an amount equal to the lesser of (A) +two and one-half times the sum of (i) the annual base salary to which she was entitled as of the date of termination plus (ii) +the average cash bonus received by her for the preceding three-year period ending on the last previous December 31 or (B) the +maximum amount that is tax deductible to the Company under Section 280G of the Code. +39 +On February 25, +2021, we entered into Amendment No. 1 to Employment Agreement with Ms. Varela (the “Varela Amendment”), which +amended the Varela 2019 Agreement. The Varela Amendment amended the Varela 2019 Agreement by setting a cap of $450,000 on bonuses +payable to Ms. Varela based on our financial performance in 2021 and 2022. In addition, the Varela Amendment provided that +on March 1, 2021, we will grant Ms. Varela the number of restricted shares of our Common Stock determined by dividing $1 +million by the closing price of our Common Stock on March 1, 2021. The shares of restricted Common Stock will vest 25% per year +commencing on March 1, 2022. As provided in the Varela Amendment, we issued 26,350 restricted shares of Common Stock to Ms. Varela +on March 1, 2021. All of the other terms and provisions of the Varela 2019 Agreement remain in full force and effect. +Zine Mazouzi . +On December 8, 2020, we entered into an employment agreement with Zine Mazouzi ( the “Mazouzi +Employment Agreement”) , pursuant to which Mr. Mazouzi serves as our Chief Financial Officer. The term of the +Mazouzi Employment Agreement commenced on January 1, 2021, and will continue for a term of three years through December 31, 2023, +unless sooner terminated in accordance with the terms thereof. Pursuant to the terms of the Mazouzi Employment Agreement, Mr. Mazouzi +will receive an annual base salary during the term of $550,000 for the calendar year 2021, $575,000 for the calendar year 2022, +and $600,000 for the calendar year 2023 and an automobile allowance of $1,250 per month in each year of the term. In addition, +on January 4, 2021, pursuant to the Mazouzi Employment Agreement, Mr. Mazouzi was granted 29,155 shares of restricted Common +Stock vesting 20% per year for five years commencing on the first anniversary of the grant date. +In addition, +the terms of the Mazouzi Employment Agreement entitle Mr. Mazouzi to an annual performance-based cash bonus for each of the +fiscal years ended December 31, 2021, 2022 and 2023 based on the following schedule: +Diluted +EPS +Bonus +as % of Salary +Maximum (130% of Plan) +80% +Target (100% of Plan) +50% +Threshold (90% of Plan) +20% +For actual diluted +EPS amounts between the Threshold and Target amounts or between the Target and Maximum amounts, the bonus payable shall be calculated +based on a straight-line interpolation between the respective amounts. +Pursuant to the +terms of the Mazouzi Employment Agreement, we may terminate Mr. Mazouzi’s employment “for cause” (as defined +in the Mazouzi Employment Agreement), in which event Mr. Mazouzi would be entitled to receive only his accrued and unpaid +base salary through the date of termination. If we terminate Mr. Mazouzi’s employment without cause or Mr. Mazouzi +terminates the Mazouzi Employment Agreement “for good reason” (as defined in the Mazouzi Employment Agreement), Mr. Mazouzi +would be entitled to receive payment of his annual base salary, payable at regular payroll intervals, from the date of termination +of employment through the remainder of the term plus any performance-based cash bonus that has accrued but not yet been paid. +In addition, if we terminate Mr. Mazouzi’s employment without cause or Mr. Mazouzi terminates the Mazouzi Employment +Agreement for good reason during the period commencing 30 days prior to a “Change of Control” (as defined in the Mazouzi +Employment Agreement) and ending 180 days following a Change of Control, he will be entitled to receive an amount equal to the +lesser of (A) two and one-half times the sum of (i) the annual base salary to which he was entitled as of the date of termination +plus (ii) the average cash bonus received by him for the preceding three-year period ending on the last previous December 31 or +(B) the maximum amount that is tax deductible to the Company under Section 280G of the Internal Revenue Code of 1986, as amended. +Awadhesh +Sinha. On December 27, 2019, we entered into an employment agreement (the “Sinha 2019 Agreement”) with Mr. Sinha, +pursuant to which he will continue to serve as our Chief Operating Officer through December 31, 2021, unless sooner terminated +in accordance with the terms of the agreement. The Sinha 2019 Agreement replaced his previous employment agreement, which expired +on December 31, 2019. Under the Sinha 2019 Employment Agreement, Mr. Sinha will receive an annual base salary of $745,000 +and $767,000 for fiscal years 2020 and 2021, respectively, and an annual automobile allowance of $22,500 in each year of the term. +Due to the impact of the COVID-19 pandemic on our business, Mr. Sinha agreed to a 30% reduction in his base salary from April +1, 2020 through July 31, 2020. We will also pay term life insurance premiums on his behalf in the amount of approximately $11,000 +per year less deductions required to be withheld by applicable laws and regulations. In accordance with the terms of the Sinha +2019 Agreement, on January 2, 2020, we granted Mr. Sinha 11,598 restricted shares of Common Stock, which vest in two substantially +equal installments on December 15, 2020 and December 15, 2021. +40 +The Sinha +2019 Agreement entitles Mr. Sinha to an annual performance-based bonus for each of the fiscal years ended December 31, 2020 +and 2021 in an amount equal to 2% of the increase, if any, in our earnings before interest, taxes, depreciation and amortization +(“EBITDA”) for each such year over our EBITDA for the immediately preceding year. For any business acquired after +January 1, 2020, EBITDA from the acquired business is included in the bonus calculation starting with the first full quarter under +our ownership, provided that the prior year’s EBITDA will likewise be adjusted to include EBITDA from the acquired business +for comparable quarters in the prior year on a pro forma basis assuming we had owned the business. We are entitled to claw back +bonuses and other incentive-based compensation paid to Mr. Sinha if we determine that such compensation was based upon materially +inaccurate financial statements. +In the +event of Mr. Sinha’s death, the Sinha 2019 Agreement provides for the payment to his estate of his base salary for +the 12-month period immediately after the date of Mr. Sinha’s death. In addition, in the event of Mr. Sinha’s +“total disability” (as such term is defined in the Sinha 2019 Agreement), we will be obligated to continue to pay +his base salary for the 12-month period immediately after the date of determination of such total disability. If we terminate +Mr. Sinha’s employment “for cause” (as such term is defined in the Sinha 2019 Agreement), or Mr. Sinha +resigns without “good reason” (as such term is defined in the Sinha 2019 Agreement), we will be obligated to pay Mr. Sinha +the amount of compensation that is accrued and unpaid through the date of termination. If we terminate Mr. Sinha’s +employment without cause or he resigns for good reason, he will be entitled to receive payment of his annual base salary, payable +at regular payroll intervals, from the date of termination of employment through the longer of (i) the remainder of the term or +(ii) six months. +If there +is a “change of control” transaction and we have terminated his employment other than “for cause” or if +he resigns “for good reason,” Mr. Sinha will receive an amount equal to two and one half times the sum of (i) +the annual base salary to which he was entitled as of the date of termination or resignation of employment plus (ii) the average +cash bonus received by him for the preceding three-year period ending on the last previous December 31 (the “Change of Control +Payment”). However, if the Change of Control Payment (or a portion thereof) is determined to constitute an “excess +parachute payment” under Sections 280G and 4999 of the Code, we will pay Mr. Sinha either (i) the Change of Control +Payment (which shall be subject to all applicable taxes to be paid by him, including the excise tax payable pursuant to Section +4999, and which shall be limited as to deductibility to the Company) or (ii) a reduced amount, calculated in accordance with Section +280G, that may be paid to him without the imposition of an excise tax under Section 4999 and which shall be fully deductible to +the Company, whichever payment yields the greater after-tax benefit to Mr. Sinha. +On February +25, 2021, we entered into Amendment No. 1 to Employment Agreement with Mr. Sinha (the “Sinha Amendment”), which +amended the Sinha 2019 Agreement. The Sinha Amendment extended the term of Mr. Sinha’s employment with the Company +through December 31, 2023. Under the Sinha Amendment, Mr. Sinha will be required to devote not more than four days per week +to his duties as Chief Operating Officer beginning on January 1, 2022, and on January 1, 2023, he will become a Senior Advisor +to the Company and will be required to devote not more than two days per week to such executive-level duties as are reasonably +assigned to him by our Chief Executive Officer. The Sinha Amendment (i) provides that Mr. Sinha’s base compensation +will be $500,000 for calendar year 2022 and $300,000 for calendar year 2023, (ii) his bonus based on our financial performance +in 2021 will be capped at $450,000, (iii) his bonus based on our financial performance in 2022 will be capped at $200,000, and +(iv) he will not be entitled to a performance bonus for 2023. All of the other terms and provisions of the Sinha Original Agreement +remain in full force and effect. +41 +Karla Frieders. +On May 11, 2020, we entered into an employment agreement with Ms. Frieders (the “Frieders 2020 Agreement”) +pursuant to which Ms. Frieders will continue to serve as our Chief Merchandising Officer. The Frieders 2020 Agreement is +effective as of May 1, 2020. +The +term of the Frieders 2020 Agreement commenced on May 1, 2020 and will continue for a term of three years through April 30, 2023, +unless sooner terminated in accordance with the terms thereof. Pursuant to the terms of the Frieders 2020 Agreement, Ms. Frieders +will receive an annual base salary during the term of $590,000. Due to the impact of the COVID-19 pandemic on our business, Ms. Frieders +agreed to a 30% reduction in her base salary from April 1, 2020 through July 31, 2020. In addition, the Frieders 2020 Agreement +entitles Ms. Frieders to an annual performance-based bonus for each of the fiscal years ending December 31, 2020, 2021 and +2022 in an amount to be determined by the Company in its absolute discretion, which bonus, if any, will be paid to her on or about +March 15 of the year immediately following the year in which it was earned. In addition, on May 11, 2020, pursuant to the Frieders +2020 Agreement, Ms. Frieders was awarded 32,758 restricted shares of our Common Stock, which will vest in five substantially +equal annual installments commencing on May 1, 2021. +If +we terminate Ms. Frieders’ employment due to her “disability” (as defined in the Frieder’s Agreement) +or her death, we are obligated to pay her (or her estate) the amount of accrued and unpaid salary through the date of termination +of employment. We may terminate Ms. Frieders’s employment for “cause” (as defined in the Frieders 2020 +Agreement), in which event Ms. Frieders would be entitled to receive only her accrued and unpaid salary through the date +of termination. The Frieders 2020 Agreement provides that if we terminate Ms. Frieders’s employment without cause, +Ms. Frieders would be entitled to receive payment of her annual base salary, payable at regular payroll intervals, from the +date of termination of employment through the remainder of the term. +Grants +of Plan-Based Awards in the 2021 Fiscal Year +The following +table sets forth information concerning awards under our equity and non-equity incentive plans granted to each of the Named Executive +Officers in the 2021 Fiscal Year. +All +Other +All +Other +Stock +Option +Awards: +Awards: +Grant +Date +Estimated +Future Payouts Under +Number +of +Number +of +Exercise +or +Fair +Value +Non-Equity +Incentive Plan +Shares +of +Securities +Base +Price +of +Stock +Awards +(1) +Stock +or +Underlying +of +Option +and +Option +Threshold +Target +Maximum +Units +Options +Awards +Awards +Name +Grant +Date +($) +($) +($) +(#) +(#) +($/Sh) +($) +Edward R. Rosenfeld +N/A +— +— (1) +— +— +— +— +3/15/21 +50,569 +2,000,004 +12/31/21 +— +— +— +75,317 +— +— +3,499,981 +Amelia Newton +Varela +N/A +— +— (1) +450,000 +— +— +— +— +3/1/21 +— +— +— +26,350 +— +— +999,983 +Zine Mazouzi +N/A +110,000 +275,000 +440,000 +— +— +— +— +1/4/21 +— +— +— +29,155 +— +— +1,000,017 +3/15/21 +5,057 +200,004 +Awadhesh Sinha +N/A +— +— (1) +450,000 +— +— +— +— +Karla Frieders +N/A +— +— (1) +— +— +— +— +— +3/15/21 +— +— +— +10,114 +— +— +400,009 +(1) Consistent +with SEC regulations, because there were no thresholds, targets or maximums for the 2021 +annual bonus program for these Named Executive Officers, the amounts shown in the target +column (other than for Mr. Mazouzi) are representative amounts based on 2020 performance. +For Ms. Varela and Mr. Sinha, the bonuses were capped at $450,000 pursuant +to their employment agreements. For Mr. Mazouzi, the amounts shown are based on +the annual bonus amounts set forth in his employment agreement. The bonus amounts actually +earned for 2021 are shown in the Non-Equity Incentive Plan Compensation column of the +Summary Compensation Table above. +Plan-Based Awards +On February +25, 2019, upon recommendation of the Compensation Committee, the Board unanimously approved the adoption of the Steven Madden, +Ltd. 2019 Incentive Compensation Plan (the “2019 Plan”), and on May 24, 2019, our stockholders approved the adoption +of the 2019 Plan. The purpose of the 2019 Plan is to enhance our profitability and value for the benefit of our stockholders by +enabling the Company to offer eligible employees, consultants and non-employee directors cash and stock-based incentives to attract, +retain and reward such individuals and provide additional incentive for such persons to exert maximum efforts for our success +by encouraging stock ownership in the Company. The 2019 Plan serves as a means to strengthen the mutuality of interests between +such individuals and our stockholders. All of the equity- and non-equity incentive awards granted to our Named Executive Officers +in Fiscal Year 2021 were granted under the 2019 Plan. +42 +Outstanding +Equity Awards at End of the 2021 Fiscal Year +The following +table sets forth information concerning restricted stock that has not vested and stock awards outstanding for each of the Named +Executive Officers as of the end of the 2021 Fiscal Year. +Option +Awards +Stock +Awards +Name +Number +of +Securities +Underlying +Unexercised +Options +(#) +Exercisable +Number +of +Securities +Underlying +Unexercised +Options +(#) +Unexercisable +Equity +Incentive +Plan +Awards: +Number of +Securities +Underlying +Unexercised +Unearned +Options +(#) +Option +Exercise +Price +($) +Option +Expiration +Date +Number +of +Shares or +Units of +Stock That +Have Not +Vested +(#) +Market +Value +of Shares or +Units of +Stock That +Have Not +Vested +($) +Equity +Incentive +Plan Awards: +Number of +Unearned +Shares, Units +or Other +Rights that +Have Not +Vested +(#) +Equity +Incentive +Plan Awards: +Market or +Payout Value +of Unearned +Shares, +Units +or Other +Rights That +Have Not +Vested +($ ) +Edward R. Rosenfeld +— +— +— +— +— +406,707 (1) +18,899,674 +— +— +Amelia Newton Varela +— +— +— +— +— +51,939 (2) +2,413,605 +— +— +Zine Mazouzi +— +— +— +— +— +44,990 (3) +2,090,685 +— +— +Awadhesh Sinha +— +— +— +— +— +— +— +— +Karla Frieders +— +— +— +— +— +58,145 (4) +2,701,998 +— +— +(1) On +March 15, 2017, Mr. Rosenfeld was awarded 59,841 shares of restricted Common Stock, +which shares vest in five substantially equal annual installments commencing on March +5, 2018. On March 15, 2018, Mr. Rosenfeld was awarded 100,000 shares of restricted +Common Stock, which shares vest in five substantially equal installments commencing on +March 5, 2019. On December 31, 2018, Mr. Rosenfeld was awarded 87,500 shares of +restricted Common Stock, which shares vest in five substantially equal installments commencing +on December 1, 2019. On February 1, 2019, Mr. Rosenfeld was awarded 87,500 shares +of restricted Common stock, which vest in five equal annual installments commencing on +commenced on February 1, 2020. On March 15, 2019, Mr. Rosenfeld was awarded 91,547 +shares of restricted Common Stock, which vest in five equal annual installments commencing +on March 1, 2020. On March 16, 2020, Mr. Rosenfeld was awarded 108,030 shares of +restricted Common Stock, which vest in five equal annual installments commencing on March +1, 2021. On December 31, 2021, Mr. Rosenfeld was awarded 75,317 shares of restricted +Common Stock, which shares vest in five annual installments of 15,063, 15,063, 15,063, +15,064, and 15,064 shares respectively, commencing on December 1, 2022. +(2) On +March 15, 2016, Ms. Varela was awarded 20,673 shares of restricted Common Stock, +which shares vest in five substantially equal annual installments commencing on March +5, 2017. On March 15, 2017, Ms. Varela was awarded 19,947 shares of restricted Common +Stock, which shares vest in five substantially equal annual installments commencing on +March 5, 2018. On January 2, 2020, Ms. Varela was awarded 27,000 restricted shares +of Common Stock, which will vest in five equal annual installments on each anniversary +of the date of grant, commencing on January 2, 2021. On March 1, 2021, Ms. Varela +was awarded 26,350 restricted shares of Common Stock, which will vest in four substantially +equal annual installments on each anniversary of the date of grant, commencing on March +1, 2022. +(3) On +January 2, 2019, Mr. Mazouzi was awarded 8,202 restricted shares of Common Stock, +which vest in five substantially equal installments commencing on the first anniversary +of the date awarded. On January 2, 2020, Mr. Mazouzi was awarded 2,320 restricted +shares of Common Stock, which vest in five substantially equal installments commencing +on the first anniversary of the date awarded. On August 3, 2020, Mr. Mazouzi was +awarded 5,000 restricted shares of Common Stock, which vest in five substantially equal +installments commencing on the first anniversary of the date awarded. On January 4, 2021, +Mr. Mazouzi was awarded 29,155 restricted shares of Common Stock, which vest in +five substantially equal installments commencing on the first anniversary of the date +awarded. On March 15, 2021, Mr. Mazouzi was awarded 5,057 restricted shares of Common +Stock, which vest in five substantially equal installments commencing on March 1, 2022. +(4) On +April 11, 2017, Ms. Frieders was awarded 30,000 shares of restricted Common Stock, +which shares vest in five equal annual installments commencing on April 1, 2018. On March +15, 2018, Ms. Frieders was awarded 16,666 shares of restricted Common Stock, which +shares vest in five substantially equal installments commencing on March 5, 2019. On +May 11, 2020, Ms. Frieders was awarded 32,758 restricted shares of our Common Stock, +which will vest in five substantially equal annual installments commencing on May 1, +2021. On March 15, 2021, Ms. Frieders was awarded 10,114 restricted shares of our +Common Stock, which will vest in five substantially equal annual installments commencing +on March 1, 2022. +43 +Option +Exercises and Stock Vested in the 2021 Fiscal Year +The following +table sets forth information concerning stock options exercised and restricted stock vested during the 2021 Fiscal Year for each +of the Named Executive Officers. The value realized from exercised options is deemed to be the market value of the Common Stock +on the date of exercise, less the exercise price of the option, multiplied by the number of shares of Common Stock underlying +the option. The value realized from the vesting of restricted stock is deemed to be the market value of the Common Stock on the +date of vesting multiplied by the number of shares vesting. +Option +Awards +Stock +Awards +Name +Number +of Shares +Acquired +on +Exercise +(#) +Value +Realized +on +Exercise +($) +Number +of Shares +Acquired +on Vesting +(#) +Value +Realized +on +Vesting +($) +Edward +R. Rosenfeld +— +— +137,654 +5,106,246 +Amelia Newton Varela +75,000 +1,977,255 +13,524 +480,186 +Zine Mazouzi +— +— +3,104 +117,693 +Awadhesh Sinha +— +— +5,799 +272,843 +Karla Frieders +— +— +20,590 +779,968 +Securities +Authorized for Issuance Under Equity Compensation Plans +The following +table sets forth information as of December 31, 2021 with respect to compensation plans (including individual compensation arrangements) +under which shares of Common Stock are authorized for issuance, aggregated as follows: +· All +compensation plans previously approved by security holders; and +· All +compensation plans not previously approved by security holders. +Equity +Compensation Plan Information +Number +of +securities to be +issued upon +exercise of +outstanding +options, +warrants +and rights +(#) +Weighted +average +exercise price of +outstanding options, +warrants and rights +($) +Number +of securities +remaining available +for future issuance +under equity +compensation +plans +(excluding securities +reflected in +column (a)) +(#) +Equity +compensation plans approved by security holders +2,531,000 +29.06 +7,431,000 +Equity compensation +plans not approved by security holders +— +— +— +Total +2,531,000 +29.06 +7,431,000 +44 +Termination, +Change-in-Control and Non-Competition/Non-Solicitation +The employment +agreements for Ms. Varela and Messrs. Rosenfeld, Mazouzi and Sinha provide for a severance payment upon a termination of +employment in connection with a change-in-control of the Company. The employment agreements of Messrs. Rosenfeld, Mazouzi and +Sinha also provide for a severance payment if the executive terminates his employment for good reason in connection with a change-in-control. +The change-in-control severance payments may result in the application of the “golden parachute” provisions of Section +280G of the Code, and to the extent Section 280G applies, we may not be permitted to deduct from our taxable income the severance +payments made to the Named Executive Officer. Moreover, Section 4999 of the Code would impose a 20% excise tax on the Named Executive +Officer receiving the severance payment. In the case of Ms. Varela, these severance payments in connection with a change-in-control, +however, are reduced if the severance payment, when added to any other benefits triggered by a change-of-control, is determined +to constitute an “excess parachute payment” under Sections 280G and 4999 of the Code, to the maximum amount that we +can deduct under Section 280G of the Code. In the case of Messrs. Rosenfeld, Mazouzi and Sinha, the executive’s change-in-control +severance payment will only be reduced to the maximum amount that we can deduct under Section 280G of the Code if the reduction +provides the Named Executive Officer with the best after-tax result; otherwise, the Named Executive Officer will receive the full +amount of the severance payment and other benefits triggered by the change-in-control and be liable for the 20% excise tax on +the excess parachute payment in addition to all other applicable taxes. In such case, our deduction of the portion of the severance +payment constituting an excess parachute payment will be disallowed. +Our employment +agreements with Ms. Varela and Messrs. Rosenfeld, Mazouzi and Sinha also provide for severance payments to the executive +if we terminate the executive’s employment without cause or if we give any of these executives good reason to terminate +their respective employment. +Please +see the section of this Proxy Statement captioned “Employment Arrangements” for a summary description of the Named +Executive Officers’ employment agreements and such severance and change-in-control provisions. These benefits are described +and quantified in the section of this Proxy Statement captioned “Potential Payments Upon Termination or Change-In-Control” +below. +We believe +that the severance payments and payments made upon change-in-control provisions in the employment agreements provide appropriate +protection to our executives, comparable to that available at peer companies and, with regard to the enhanced severance following +a change-in-control, protect the Company from losing key executives during a period when a change-in-control may be threatened +or pending. These benefits are described and quantified in the section below captioned “Potential Payments Upon Termination +or Change-In-Control.” +Mses. Frieders +and Varela and Mr. Mazouzi have each agreed to a non-compete and non-solicitation restriction through the expiration date +of their employment agreement, April 30, 2023, December 31, 2022, and December 31, 2023 respectively, in the event of a voluntary +termination or termination for cause. Messrs. Rosenfeld and Sinha have each agreed to non-compete and non-solicitation restrictions +during the period of their employment and for a six-month period following the termination of their employment for cause or in +the event of their resignation without good reason. +45 +Potential Payments Upon +Termination or Change-In-Control +Our employment +agreements with the Named Executive Officers provide for payments to such individuals upon termination of employment or a change-in-control +of the Company. Please see the section of this Proxy Statement captioned “Employment Arrangements.” The table below +assumes that the termination of employment has occurred on December 31, 2021 and that the amounts would be payable to the respective +Named Executive Officer if such Named Executive Officer’s employment is terminated under the various scenarios set forth +below. +Name +Cash +Payment +($) +Continuation +of Medical / +Welfare +Benefits +(Present +Value) +($) +Acceleration +and +Continuation +of Equity +Award +($) +Total +Termination +Benefits (1) +($) +Termination +Due To Death +Edward +R. Rosenfeld +1,083,538 (2) +22,569 (3) +— +1,106,107 +Amelia Newton Varela +— +— +— +— +Zine Mazouzi +— +— +— +— +Awadhesh Sinha +500,000 (4) +8,568 (3) +— +508,568 +Karla Frieders +— +— +— +— +Termination +Due To Total Disability +Edward R. Rosenfeld +1,083,538 (2) +— +— +1,083,538 +Amelia Newton Varela +— +— +— +— +Zine Mazouzi +— +— +— +— +Awadhesh Sinha +500,000 (4) +8,568 (3) +— +508,568 +Karla Frieders +— +— +— +— +Termination +For Cause; +Resignation Without Good Reason +Edward R. Rosenfeld +— +— +— +— +Amelia Newton Varela +— +— +— +— +Zine Mazouzi +— +— +— +— +Awadhesh Sinha +— +— +— +— +Karla Frieders +— +— +— +— +Termination +Other Than For Cause; +Resignation For Good Reason +Edward R. Rosenfeld +3,382,371 (5) +— +— +3,382,371 +Amelia Newton Varela +750,000 (6) +— +— +750,000 +Zine Mazouzi +1,175,000 (7) +— +— +1,175,000 +Awadhesh Sinha +800,000 (8) +— +— +800,000 +Karla Frieders +786,667 (9) +— +— +786,667 +Termination +Upon A Change-In-Control +Edward R. Rosenfeld +3,854,658 (10) +— +7,061,936 (11) +10,916,594 +Amelia Newton Varela +2,465,814 (12) +— +946,038 (11) +3,411,852 +Zine Mazouzi +2,475,000 (13) +— +1,064,532 (11) +3,689,532 +Awadhesh Sinha +2,563,000 (14) +— +— +2,563,000 +Karla Frieders +1,376,667 (15) +— +812,955 (11) +2,189,622 +(1) Ms. Varela’s +employment agreement provides that severance payments in connection with a change-in-control +are reduced if the severance payment, when added to any other benefits triggered by a +change-of-control, is determined to constitute an “excess parachute payment” +under Sections 280G and 4999 of the Code, to the maximum amount that is deductible to +the Company under Section 280G of the Code. The employment agreements of Messrs. Rosenfeld, +Mazouzi and Sinha provide that the executive’s change-in-control severance payment +will only be reduced to the maximum amount that is deductible to the Company under Section +280G of the Code if the reduction provides the Named Executive Officer with the best +after-tax result; otherwise, the Named Executive Officer will receive the full amount +of the severance payment and other benefits triggered by the change-in-control and be +liable for the 20% excise tax on the excess parachute payment in addition to all other +applicable taxes. In such case, our deduction of the portion of the severance payment +constituting an excess parachute payment will be disallowed. Because our agreements with +the Named Executive Officers do not under any circumstances provide for an increase in +severance or other benefits due to the application of Sections 280G and 4999 of the Code, +for purposes of the disclosure above, we have calculated the potential amounts payable +without taking into account the application of Sections 280G and 4999 of the Code. Upon +the occurrence of a change-of-control, the amounts may be reduced due to the application +of Section 280G and 4999 of the Code. +(2) Consists +of Mr. Rosenfeld’s 2022 base salary of $1,083,538, which would be paid at +regular intervals. +46 +(3) Consists +of medical benefits. +(4) Consists +of Mr. Sinha’s 2022 base salary of $500,000, which would be paid at regular +intervals. +(5) Consists +of the base salary of $1,083,538, $1,126,879, and $1,171,954 for 2022, 2023, and 2024 +respectively that would have been paid to Mr. Rosenfeld during the remainder of +the term of his employment until the expiration of his employment agreement on December +31, 2024. Mr. Rosenfeld would receive these payments at regular intervals. +(6) Consists +of the base salary of $750,000 for 2022 that would have been paid to Ms. Varela +during the remainder of the term of her employment until the expiration of her employment +agreement on December 31, 2022. Ms. Varela would receive these payments at regular +intervals. +(7) Consists +of the base salary of $575,000 and $600,000 for 2022 and 2023 respectively that would +have been paid to Mr. Mazouzi during the remainder of the term of his employment +until the expiration of his employment agreement on December 31, 2023. Mr. Mazouzi +would receive these payments at regular intervals. +(8) Consists +of the base salary of $500,000 and $300,000 for 2022 and 2023 that would have been paid +to Mr. Sinha during the remainder of the term of his employment until the expiration +of his employment agreement on December 31, 2023. Mr. Sinha would receive these +payments at regular intervals. +(9) Consists +of the base salary of $590,000 per year that would have been paid to Ms. Frieders +during the remainder of the term of her employment until the expiration of her employment +agreement on April 30, 2023. +(10) Consists +of two and one-half times the sum of (i) Mr. Rosenfeld’s 2021 base salary +of $1,041,863 plus (ii) the average cash bonus received by Mr. Rosenfeld for the +three-year period ending on December 31, 2020. Upon a change-in-control, payments (or +portions thereof) to Mr. Rosenfeld determined to constitute an “excess parachute +payment” may be reduced to the maximum amount that would be tax deductible by the +Company pursuant to Sections 280G of the Code. See the “Implications of Tax and +Accounting Matters” section of “Compensation Discussion and Analysis” +for a discussion of the applicability of Sections 280G and 4999 of the Code to change-in-control +payments generally. See also the summary of Mr. Rosenfeld’s employment agreement +under “Employment Arrangements.” +(11) The +amount disclosed represents the total value of the restricted stock and stock options +that would have received accelerated vesting upon a hypothetical change-in-control on +December 31, 2021. +(12) Consists +of two and one-half times the sum of (i) Ms. Varela’s 2021 base salary of +$725,000 plus (ii) the average cash bonus received by Ms. Varela for the three-year +period ending on December 31, 2020. Upon a change-in-control, payments (or portions thereof) +to Ms. Varela determined to constitute an “excess parachute payment” +may be subject to reduction to the maximum amount that would be tax deductible by the +Company pursuant to Sections 280G of the Code. See the “Implications of Tax and +Accounting Matters” section of “Compensation Discussion and Analysis” +for a discussion of the applicability of Sections 280G and 4999 of the Code to change-in-control +payments generally. See also the summary of Ms. Varela’s employment agreement +under “Employment Arrangements.” +(13) Consists +of two and one-half times the sum of (i) Mr. Mazouzi’s 2021 base salary of +$550,000 plus (ii) the $440,000, which was Mr. Mazouzi’s bonus for 2021. This +formula in Mr. Mazouzi’s agreement would refer to his average bonus over the +preceding three years in the event of an actual termination, but because Mr. Mazouzi +did not receive a bonus for years prior to 2021 we have used his bonus for 2021 as an +estimate. Upon a change-in-control, payments (or portions thereof) to Mr. Mazouzi +determined to constitute an “excess parachute payment” may be subject to +reduction to the maximum amount that would be tax deductible by the Company pursuant +to Sections 280G of the Code. See the “Implications of Tax and Accounting Matters” +section of “Compensation Discussion and Analysis” for a discussion of the +applicability of Sections 280G and 4999 of the Code to change-in-control payments generally. +See also the summary of Mr. Mazouzi’s employment agreement under “Employment +Arrangements.” +(14) Consists +of two and one-half times the sum of (i) Mr. Sinha’s 2021 base salary of $767,000 +plus (ii) the average cash bonus received by Mr. Sinha for the three-year period +ended on December 31, 2020. Upon a change-in-control, payments (or portions thereof) +to Mr. Sinha determined to constitute an “excess parachute payment” +may be subject to reduction to the maximum amount that would be tax deductible by the +Company pursuant to Sections 280G of the Code. See the “Implications of Tax and +Accounting Matters” section of “Compensation Discussion and Analysis” +for a discussion of the applicability of Sections 280G and 4999 of the Code to change-in-control +payments generally. See also the summary of Mr. Sinha’s employment agreement +under “Employment Arrangements.” +(15) Consists +of the base salary that would have been paid to Ms. Frieders during the remainder +of the term of her employment until the expiration of her employment agreement on April +30, 2023, consisting of $590,000 per year payable for the period from January 1, 2021 +through April 30, 2023. Ms. Frieders would receive these payments at regular intervals. +47 +Compensation +Committee Report +The Compensation +Committee has reviewed and discussed the Compensation Discussion and Analysis with management, and based on the review and discussions, +the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in +this Proxy Statement. +Submitted +by the Compensation Committee of the Board of Directors: +Peter Migliorini (Chairman) +Peter A. Davis +Rose Peabody Lynch +Robert Smith +48 +PROPOSAL +TWO: +RATIFICATION +OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY’S +INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS +FOR THE FISCAL YEAR ENDING DECEMBER 31, 2022 +On March 6, 2020, +the Audit Committee initially appointed Ernst & Young LLP (“EY”) as our independent registered public accounting +firm to conduct the audit of our books and records for the fiscal year ending December 31, 2020, and the Committee has appointed +EY as our independent registered public accounting firm to conduct the audit of our books and records for the fiscal years ending +December 31, 2021 and December 31, 2022. Prior to the appointment of EY, EisnerAmper LLP (“EisnerAmper”) audited our +financial statements for the fiscal year ended December 31, 2019. On March 6, 2020, the Audit Committee dismissed EisnerAmper +as our independent registered public accounting firm. +The +audit reports of EisnerAmper on our consolidated financial statements for each of the fiscal years ended December 31, 2019 and +December 31, 2018 did not contain an adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, +audit scope or accounting principles. For each of these fiscal years and the subsequent interim period through EisnerAmper’s +dismissal on March 6, 2020, there were (i) no disagreements between the Company and EisnerAmper on any matters of accounting principles +or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction +of EisnerAmper, would have caused it to make reference to the subject matter of the disagreements in connection with its report +on the financial statements for such years and (ii) no “reportable events” as defined in Section 304(a)(1)(v) of SEC +Regulation S-K and the related instructions thereto. +In +evaluating the selection of an independent registered public accounting firm for 2022, the Audit Committee considered several +factors relating to potential candidates, including audit quality, the benefits of our existing auditor’s familiarity with +the Company versus a fresh perspective, the key members of the audit engagement team, the most recent internal quality control +review or Public Company Accounting Oversight Board inspection, auditor independence and its process for maintaining independence, +the risks of a change of auditors, and the firm’s international scope and presence. In addition, the Audit Committee evaluated +the Company’s requirements in light of the growth and complexity of its business and the increasing international aspects +of its operations. As a result of this evaluation, the Audit Committee selected EY as the Company’s independent registered +public accounting firm for the fiscal year ending December 31, 2022. +Although +ratification by stockholders is not required by our organizational documents or any applicable law, the Audit Committee has determined +that requesting ratification by stockholders of its appointment of EY as our independent registered public accountants is a matter +of good corporate practice. If stockholders do not ratify the selection, the Audit Committee will reconsider whether or not to +retain EY, but may still retain that accounting firm. Even if the selection is ratified, the Audit Committee, in its discretion, +may change the appointment at any time during the year if it determines that such a change would be in our best interest and that +of our stockholders. +Representatives +of EY are expected to be present at the Annual Meeting to respond to appropriate questions and to make a statement should they +so desire. +Required Vote +The affirmative +vote of the holders of a majority of the outstanding shares of Common Stock present or represented by proxy and entitled to vote +at the Annual Meeting is required to ratify the Audit Committee’s selection of Ernst & Young LLP. +Recommendation of the Board +of Directors +The Board +of Directors unanimously recommends a vote “FOR” the ratification of the appointment of Ernst & Young LLP as our +independent registered public accountants for the fiscal year ending December 31, 2022. Unless marked to the contrary, proxies +received from stockholders will be voted in favor of ratifying the appointment of Ernst & Young LLP as our independent registered +public accountants for the fiscal year ending December 31, 2022. +49 +Independent Registered +Public Accounting Firm’s Fees and Services +The aggregate +fees billed to the Company by EY for professional services rendered for each of 2021 and 2020, respectively, are set forth below: +Year +Ended December 31, +2021 +2020 +Audit Fees (1) +$ 2,062,500 +$ 2,085,000 +Audit-Related Fees +— +— +Tax Fees (2) +421,000 +399,700 +All Other Fees (3) +2,200 +25,000 +Total +$ 2,485,700 +$ 2,509,700 +(1) Represents +the aggregate fees billed for (a) the audit of our annual financial statements, (b) the +reviews of the financial statements included in our Quarterly Reports on Form 10-Q, (c) +other statutory and regulatory filings or engagements and (d) the audit of our internal +controls over financial reporting. +(2) Represents +aggregate fees billed for tax advice, tax compliance and consulting. Includes, among +others, review and advice with respect to transfer pricing. +(3) Represents +fees (i) for annual subscriptions to accounting reference tools in 2021 and (ii) principally +in connection with global incentives and relief programs in 2020. +Audit Committee’s +Pre-Approval Policies and Procedures +Consistent +with SEC policies regarding auditor independence, the Audit Committee has responsibility for appointing, setting compensation +and overseeing the work of our independent registered public accountants. In recognition of this responsibility, the Audit Committee +has established a policy to review and pre-approve all audit and permissible non-audit services provided by the independent registered +public accountants. These services may include audit services, audit-related services, tax services and other services. +Prior +to engagement of the independent auditor for next year’s audit, the Audit Committee will pre-approve all auditing services +and all permitted non-audit services (including the fees and terms thereof), except those excluded from requiring pre-approval +based upon the de minimus exception set forth in Section 10A(i)(1)(B) of the Exchange Act and Rule 2-01(c)(7)(i)(C) of +Regulation S-X. +The Audit +Committee’s pre-approval policies and procedures are as follows: (a) prior to each fiscal year, the Audit Committee pre-approves +a schedule of estimated fees for proposed non-prohibited audit and non-audit services; and (b) actual amounts paid are monitored +by our financial management and reported to the Audit Committee. +All work +performed by EY as described above under the captions Audit Fees, Audit-Related Fees, Tax Fees and All Other Fees has been approved +or pre-approved by the Audit Committee pursuant to the provisions of the Audit Committee’s charter. The Audit Committee +did not approve any of the Audit Fees, Audit-Related Fees, Tax Fees and All Other Fees described above pursuant to a de minimis +exception set forth in Rule 2-01(c)(7)(i)(C) of Regulation S-X. The Audit Committee has considered and concluded that +the provision of non-audit services is compatible with maintaining the independence of EY. +AUDIT +COMMITTEE REPORT +The Audit +Committee reviewed the Company’s audited financial statements for the 2021 Fiscal Year and met with both management and +representatives of EY, our independent registered public accountants for that year, to discuss such audited financial statements. +Management and our independent registered public accountants have represented to the Audit Committee that the financial statements +were prepared in accordance with accounting principles generally accepted in the United States of America. The Audit Committee +has received from and discussed with EY the written disclosures and the letter regarding EY’s communications with the Audit +Committee concerning independence as required by applicable requirements of the Public Company Accounting Oversight Board and +discussed with EY the independence of EY. The Audit Committee also discussed with EY any matters required to be discussed by applicable +requirements of the Public Company Accounting Oversight Board and the SEC. Based on these reviews and discussions, the Audit Committee +recommended to the Board that the Company’s audited financial statements be included in the Company’s Annual Report +on Form 10-K for the 2021 Fiscal Year. +Submitted +by the Audit Committee of the Board of Directors: +Al Ferrara (Chairman) +Mitchell S. Klipper +Ravi Sachdev +50 +PROPOSAL +THREE: +NON-BINDING +ADVISORY VOTE ON EXECUTIVE COMPENSATION +Section +14A of the Exchange Act, as created by Section 951 of the Dodd-Frank Act, and the rules and regulations promulgated thereunder +require a publicly traded company to include a resolution in its proxy statement at least once every three years seeking stockholder +approval, on an advisory or non-binding basis, of the compensation of the named executive officers as disclosed in such company’s +proxy statement pursuant to the compensation rules of the SEC. At our 2017 Annual Meeting of Stockholders, our stockholders approved, +on an advisory basis, the holding of an advisory vote to approve executive compensation (commonly known as a “say-on-pay” +proposal) annually. Based on these results, the Board of Directors determined to hold its advisory vote to approve executive compensation +annually until the next frequency vote, which is scheduled to occur at the 2023 annual meeting of stockholders. Accordingly, we +are providing stockholders with a non-binding advisory vote on the compensation of our Named Executive Officers. +As described +in more detail in the Compensation Discussion and Analysis section, which begins on page 25 of this Proxy Statement, the overall +objective of our executive compensation program and plans is to support delivery of sustained operating and financial performance +results with the ultimate goal being to create and maximize value for our stockholders on a long-term basis. We believe that our +executive compensation program and plans serve the interests of our stockholders by enabling the Company to attract and retain +an experienced and effective management team whose combined knowledge of our business and the fashion footwear and accessories +industries has proved extremely valuable in delivering results for our stockholders. The Compensation Committee and the Board +of Directors believe that our compensation program and plans as articulated in the Compensation Discussion and Analysis section +of this Proxy Statement effectively implement our philosophy of aligning compensation to stockholder interests and that the compensation +received by our Named Executive Officers in the 2021 Fiscal Year reflects and supports such philosophy and goal and is commensurate +with our performance and strategic position. We will continue to review and modify our executive compensation program to address +evolving best practices and changing regulatory requirements. +We encourage +stockholders to read the Compensation Discussion and Analysis section of this Proxy Statement, as well as the Summary Compensation +Table and other related compensation tables and narrative disclosure contained in this Proxy Statement, all of which describe +and explain in detail the compensation of our Named Executive Officers in the 2021 Fiscal Year. +The following +resolution is submitted for stockholder approval: +RESOLVED , that +the stockholders of Steven Madden, Ltd. (the “Company”) approve, on a non-binding advisory basis, the compensation +paid to the Named Executive Officers of the Company as disclosed pursuant to the compensation disclosure rules of the Securities +and Exchange Commission, including the executive compensation as described in the section captioned “Compensation Discussion +and Analysis,” the Summary Compensation Table and related tabular disclosure and narrative discussion regarding compensation +of Named Executive Officers under the caption “Executive Compensation” contained in the Company’s Proxy Statement +for the 2022 Annual Meeting of Stockholders. +This vote +is not intended to address any specific item of compensation, but rather the overall compensation of our Named Executive Officers +and the compensation program and plans described in this Proxy Statement. While this advisory vote on executive compensation, +commonly referred to as a “say-on-pay” advisory vote, is required by Section 14A of the Exchange Act, it is not binding +on our Board of Directors and may not be construed as overruling any decision by the Board of Directors or the Compensation Committee. +However, we value the opinions of our stockholders. To the extent there is a significant vote against the compensation of the +Named Executive Officers as disclosed in this Proxy Statement, the Board of Directors and the Compensation Committee will consider +the outcome of the vote when considering future compensation arrangements and evaluate whether any actions are necessary to address +the stockholders’ concerns. +51 +Required Vote +Approval +of this resolution requires the affirmative vote of a majority of the shares of Common Stock present or represented by proxy and +entitled to vote at the Annual Meeting. +Recommendation of the Board +of Directors +The Board +of Directors unanimously recommends a vote “FOR” the resolution approving the overall compensation of the Named Executive +Officers for the 2021 Fiscal Year. +OTHER MATTERS +At the +date of this Proxy Statement, we have no knowledge of any business other than that described above that will be presented at the +Annual Meeting. If any other business should properly come before the Annual Meeting in connection therewith, it is intended that +the persons named in the accompanying proxy will have discretionary authority to vote the shares that they represent. +WHETHER +OR NOT YOU EXPECT TO BE PRESENT AT THE ANNUAL MEETING, PLEASE MARK, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY CARD PROMPTLY. +ALTERNATIVELY, YOU MAY VOTE YOUR SHARES BY TELEPHONE OR THROUGH THE INTERNET AS DESCRIBED ON THE ACCOMPANYING PROXY CARD. YOUR +VOTE IS IMPORTANT. IF YOU ARE A STOCKHOLDER OF RECORD AND ATTEND THE ANNUAL MEETING AND WISH TO VOTE IN PERSON, YOU MAY WITHDRAW +YOUR PROXY AT ANY TIME PRIOR TO THE VOTE. +STEVEN MADDEN, LTD. +April 11, 2022 +By: +Lisa Keith +Secretary +52 +ANNEX A - RECONCILIATION OF ADJUSTED +RESULTS (NON-GAAP) +The Proxy Statement provides our +financial results both in accordance with generally accepted accounting principles in the United States (“GAAP”) and +using certain non-GAAP financial measures. In particular, the Proxy Statement provides our historic net income and income per +diluted share adjusted to exclude certain charges and recoveries, which are non-GAAP financial measures. We use non-GAAP financial +information to evaluate its operating performance and to represent the manner in which we conduct and view our business. Additionally, +we believe the information assists investors in comparing our performance across reporting periods on a consistent basis by excluding +items that are not indicative of its core business. The non-GAAP financial information is provided in addition to, and not as +an alternative to, our reported results prepared in accordance with GAAP. +Reconciliation of Net +Income / (Loss) and Diluted Income / (Loss) Per Share (GAAP Basis) to Adjusted Net Income and Adjusted Diluted Income Per Share +(Non-GAAP Basis) +Year +Ended December 31, +2021 +2020 +GAAP +net income / (loss) attributable to Steven Madden, Ltd. +$ 190,678 +$ (18,397 ) +After-tax +impact of expense in connection with payments / provision for early lease termination charges +7,549 +10,277 +After-tax +impact of benefit in connection with the sale of a trademark +(6,107 ) +— +After-tax +impact of expense in connection with impairment of certain trademarks +2,010 +33,817 +After-tax +impact of expense / (benefit) in connection with the change in valuation of contingent considerations +9,098 +(4,761 ) +After-tax +impact of recovery in connection with the Payless ShoeSource bankruptcy +(716 ) +(932 ) +After-tax +impact of expense in connection with restructuring and related charges +1,061 +5,434 +After-tax +impact of expense in connection with impairment of store fixed assets and lease right-of-use assets +1,080 +27,949 +After-tax +impact of expense in connection with benefits provided to furlough employees +— +1,519 +After-tax +impact of gain in connection with the termination of a joint venture +— +(399 ) +After-tax +impact of expense in connection with provision for loan receivable +— +532 +After-tax +impact of expense in connection with the write-off of an investment +382 +— +Tax +benefit in connection with the net operating loss carryback provision of the CARES Act +— +(4,191 ) +Tax +expense in connection with deferred and foreign uncertain tax position +— +1,921 +Tax +benefit in connection with the release of a liability for an uncertain tax position +(1,316 ) +— +Less: +Adjustments attributable to noncontrolling interest +(37 ) +(933 ) +Adjusted +net income attributable to Steven Madden, Ltd. +$ 203,682 +$ 51,836 +GAAP +diluted income / (loss) per share +$ 2.34 +$ (0.23 ) +Adjusted +diluted income per share +$ 2.50 +$ 0.64 +STEVE MADDEN +STEVEN MADDEN, LTD. +ATTN: LISA KEITH +52-16 BARNETT AVENUE +LONG ISLAND CITY, NY 11104 +VOTE +BY INTERNET +Before +The Meeting - Go to www.proxyvote.com or +scan the QR Barcode above +Use +the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Time +on May 24, 2022. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records +and to create an electronic voting instruction form. +During The Meeting - Go to www.virtualshareholdermeeting.com/SHOO2022 +You may attend the meeting via the Internet and vote during the meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions. +VOTE +BY PHONE - 1-800-690-6903 +Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time on May 24, 2022. Have your proxy card in hand when you call and then follow the instructions. +VOTE +BY MAIL +Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. +TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: +KEEP THIS PORTION FOR YOUR RECORDS +DETACH +AND RETURN THIS PORTION ONLY +THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. +STEVEN MADDEN, +LTD. +For +All +Withhold +All +For All +Except +To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below. +The Board of Directors +recommends you vote +FOR all the nominees listed below. +1. +To elect eleven directors to the Board of Directors. +o +o +o +Nominees: +01) +Edward R. Rosenfeld +07 ) +Peter Migliorini +02) +Peter A. Davis +08 ) +Arian Simone Reed +03) +Al Ferrara +09 ) +Ravi Sachdev +04) +Mitchell S. Klipper +10 ) +Robert Smith +05) +Maria Teresa Kumar +11 ) +Amelia Newton Varela +06) +Rose Peabody Lynch +The Board of Directors +recommends you vote FOR proposals 2 and 3. +For +Against +Abstain +2. +TO RATIFY THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL +YEAR ENDING DECEMBER 31, 2022. +o +o +o +3. +TO APPROVE, BY NON-BINDING ADVISORY VOTE, THE EXECUTIVE COMPENSATION DESCRIBED IN THE STEVEN MADDEN, LTD. PROXY STATEMENT. +o +o +o +NOTE: +In their discretion, the proxies are authorized to vote upon such other business as may properly be presented at the meeting or any adjournments or +postponements thereof. +Authorized Signatures - This section must be completed for your vote to be counted. Date and Sign Below. +Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint +owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. +Signature [PLEASE SIGN WITHIN +BOX] +Date +Signature (Joint Owners) +Date +Important +Notice Regarding the Availability of Proxy Materials for the Annual Meeting: +The Notice and Proxy Statement and 2021 Annual Report on +Form 10-K are available at www.proxyvote.com . +STEVEN MADDEN, LTD. +THIS PROXY IS BEING SOLICITED ON BEHALF OF +THE BOARD OF DIRECTORS +PLEASE CLEARLY INDICATE A RESPONSE BY CHECKING ONE OF THE +BOXES NEXT TO EACH OF THE PROPOSALS +The undersigned stockholder(s) of Steven Madden, Ltd. (the "Company") hereby appoint(s) Edward R. Rosenfeld and Lisa Keith, and each of them, as attorneys and proxies, each with power of substitution and revocation, to represent the undersigned at the Annual Meeting of Stockholders of the Company to be held in a virtual-only format at 10:00 a.m., Eastern Time, on May 25, 2022, and at any adjournments or postponements thereof, with authority to vote all shares of Common Stock of the Company held or owned by the undersigned on March 29, 2022, in accordance with the directions indicated herein. +Without +limiting the generality of this Proxy, Mr. Rosenfeld and Ms. Keith are each authorized +to vote: (a) as specified upon the proposals listed hereon and described in the Proxy +Statement for the Meeting; and (b) in their discretion upon any matter that may properly +come before the Meeting to the extent authorized by Rule 14a-4(c) under the Securities +Exchange Act of 1934, as amended. +THIS +PROXY WILL BE VOTED AS SPECIFIED HEREIN; UNLESS OTHERWISE INDICATED, THIS PROXY WILL +BE VOTED (i) FOR THE ELECTION OF THE ELEVEN (11) NOMINEES NAMED (PROPOSAL 1), +(ii) FOR THE RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY'S +INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR 2022 (PROPOSAL 2), +AND (iii) FOR THE APPROVAL OF THE EXECUTIVE COMPENSATION DESCRIBED IN THE COMPANY'S +PROXY STATEMENT (PROPOSAL 3). THIS PROXY WILL BE VOTED IN THE DISCRETION OF THE PROXIES +ON ANY OTHER MATTER THAT MAY PROPERLY COME BEFORE THE MEETING. +Continued and to be signed on reverse side \ No newline at end of file diff --git a/raw/proxies/0000913241/0001019056-22-000328/proxy_rpt.txt b/raw/proxies/0000913241/0001019056-22-000328/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..343c0693e14629cd4a3c09a8c64c19bbe1d62c14 --- /dev/null +++ b/raw/proxies/0000913241/0001019056-22-000328/proxy_rpt.txt @@ -0,0 +1,111 @@ +Related Party Transactions +Steven +Madden Employment Agreement. We believe that Steven Madden, our founder and Creative and Design Chief, provides unique and +significant value in guiding the leadership of our creative process, both in his hands-on work for the Company and his collaboration +with our designers, product professionals and marketing executives. Mr. Madden is a beneficial owner of more than 5% of the +outstanding shares of our Common Stock. In addition, the public’s association of Mr. Madden’s name and likeness +with our branded products is significant, meaningful, and integral to our success and has been, and continues to be, instrumental +in creating long-term stockholder value. Based upon that belief, we further believe that his continuing involvement with the Company +is essential, and to this end, we have for many years had an employment agreement with Mr. Madden as described below. +Mr. Madden’s +agreement in its current form dates back to July 1, 2005, as subsequently amended on various occasions, most recently on March +25, 2019 (the “SM Agreement”). Under the SM Agreement, Mr. Madden has agreed to continue to serve as our Creative +and Design Chief for a term continuing through December 31, 2026, for a base salary of $7,026,042 per annum together with the +potential for cash bonuses at the sole discretion of our Board of Directors and an annual life insurance premium reimbursement +of up to $200,000. Pursuant to the SM Agreement, on February 8, 2012, Mr. Madden was granted 2,194,584 restricted shares +of Common Stock (as adjusted for our 2018 three-for-two stock split effected as a stock dividend), valued at approximately $40 +million, under our Amended and Restated 2006 Stock Incentive Plan, which is referred to herein as the “2006 Plan.” +The restricted stock vests in equal annual installments over seven years commencing on December 31, 2017 through December 31, +2023, subject to Mr. Madden’s continued employment with the Company on each such vesting date. On June 30, 2012, as +allowed under the SM Agreement, Mr. Madden elected to receive an additional restricted stock award valued at approximately +$40 million in consideration of a reduction in his annual base salary in years after 2012 to the amount reflected above. As a +consequence, on July 3, 2012, Mr. Madden received 2,840,013 additional restricted shares of Common Stock vesting in six annual +installments commencing on December 31, 2018 through December 31, 2023, subject to his continued employment with the Company on +each such vesting date. +Under the +SM Agreement, Mr. Madden is also eligible to receive annually, on or about the date of our annual meeting of stockholders +(but not later than June 30), an option (the “Annual Option”) to purchase shares of Common Stock equal to the greater +of (a) 100% of the largest aggregate number of shares of Common Stock available upon the exercise of an option or options granted +to any other continuing full-time employee of the Company during the preceding twelve-month period or (b) 225,000 shares of Common +Stock; provided, however, that a grant to Mr. Madden in excess of 150% of the number of shares of Common Stock subject to +options granted to such other continuing full-time employee would require stockholder approval. Any Annual Option so granted vests +quarterly over a one-year period and is exercisable for a period of five years at a price equal to the closing price of our Common +Stock on the grant date. In addition, pursuant to the SM Agreement, on March 1, 2017, Mr. Madden received a one-time stock +option grant to purchase 1,125,000 shares of our Common Stock at an exercise price of $24.90 as a result of our having achieved +for the fiscal year ended December 31, 2016 earnings per share performance criteria set forth in the SM Agreement; such option +vests in equal annual installments over a five-year period, which commenced on the first anniversary of the grant date. +Under the +SM Agreement, if Mr. Madden dies, his estate would receive a payment equal to his base salary for the 12-month period immediately +after the date of his death. Further, if Mr. Madden’s employment is terminated due to his total disability (as defined +in the agreement), “for cause” (as defined in the agreement) or due to Mr. Madden’s resignation, we are +obligated to pay Mr. Madden the amount of compensation that is accrued and unpaid through the date of termination. If Mr. Madden’s +employment is terminated for any reason (other than “for cause” or due to his death, total disability or resignation), +we are obligated to pay Mr. Madden, in installments, the balance of his base salary through the end of the term of the SM +Agreement. If, during the period commencing 120 days prior to a “change of control” transaction (as defined in the +SM Agreement) and ending on the first anniversary of a change of control transaction, Mr. Madden’s employment is terminated +other than for cause or by his resignation for “good reason” (as defined in the SM Agreement), or if Mr. Madden +resigns within 30 days following a change of control transaction, all unvested options held by Mr. Madden will be accelerated +and vest on the date of termination or resignation, and Mr. Madden will be entitled to receive a lump sum cash payment equal +to the amount of compensation that is accrued and unpaid through the date of termination plus $35 million. The SM Agreement contains +other customary provisions, including provisions regarding expense reimbursement, confidentiality, non-solicitation and non-competition. +21 +For the +2021 Fiscal Year, Mr. Madden earned $7,026,042 in base salary and received $200,000 for the payment of an annual life insurance +premium. Mr. Madden also received his Annual Option for the 2021 Fiscal Year to purchase 225,000 shares of Common Stock at +a price per share of $43.83. +The most +recent amendment entered into on March 25, 2019, effected the extension of the term of the SM Agreement for three years through +December 31, 2026. In consideration of this extension, we have granted to Mr. Madden 200,000 shares of Common Stock, which +shares are subject to certain restrictions, including that he will not sell, transfer, pledge, hypothecate, assign or otherwise +dispose of the restricted shares except as set forth under his award agreement. The shares will vest in substantially equal annual +installments over three years commencing on December 31, 2024, provided that Mr. Madden continues to be employed by the Company +on each vesting date through December 31, 2026. +Loan +to Steven Madden. On June 25, 2007, we made a loan to Mr. Madden in the amount of $3,000,000 to enable Mr. Madden +to satisfy a personal tax obligation resulting from the exercise of a stock option that was due to expire. The loan is evidenced +by a secured promissory note executed by Mr. Madden in our favor, the security for which is a certain securities brokerage +account maintained by Mr. Madden with his broker; none of the securities in the securities brokerage account are shares of +Common Stock. There have been successive amendments to the secured promissory note, the most recent of which occurred in April +2016. At that time the secured promissory note was amended to substitute the collateral securing the secured promissory note from +shares of our Common Stock to the security interest in Mr. Madden’s securities brokerage account. Previously, on January +3, 2012, the secured promissory note was amended and restated to extend the maturity date of the obligation to December 31, 2023 +and eliminate the accrual of interest after December 31, 2011. Prior to the January 3, 2012 amendment, the secured promissory +note had been accruing interest at the rate of 6% per annum. In addition, the secured promissory note provides that, commencing +on December 31, 2014 and annually on each December 31 thereafter through the maturity date, one-tenth of the principal amount +thereof, together with accrued interest, will be cancelled by the Company provided that we have employed Mr. Madden on each +such December 31. Contemporaneously, on each such December 31, we will release our security interest in a portion of the securities +held in Mr. Madden’s securities brokerage account generally correlating to the amount of indebtedness cancelled on +such date. As of December 31, 2011, interest in the amount of $1,090,000 had accrued on the principal amount of the secured promissory +note and, as noted above, interest was eliminated after December 31, 2011. On December 31, 2021, we released Mr. Madden from +his obligation to pay the required one-tenth of the original principal amount of the secured promissory note, together with accrued +interest. +Review, Approval or Ratification +of Transactions with Related Persons +Our Conduct +Codes and Employee Handbook prohibit all conflicts of interest. Under the Conduct Codes, conflicts of interest occur when personal +or professional interests interfere in any way, or even appear to interfere, with our interests. Our prohibition on conflicts +of interest under the Conduct Codes includes any related party transaction. +Related +person transactions must be approved by the Board, or by a committee of the Board consisting solely of independent directors, +who will approve the transaction only if they determine that it is in our best interests. In considering the transaction, the +Board or committee will consider all relevant factors, including, as applicable, (i) the business rationale for entering into +the transaction; (ii) the alternatives to entering into a related person transaction; (iii) whether the transaction is on terms +comparable to those available to third parties or, in the case of employment relationships, to employees generally; (iv) the potential +for the transaction to lead to an actual or apparent conflict of interest and any safeguards imposed to prevent such actual or +apparent conflicts; and (v) the overall fairness of the transaction to the Company. +We have +multiple processes for reporting conflicts of interest, including related party transactions. Under the Conduct Codes, all employees +are required to report any actual or apparent conflict of interest, or potential conflict of interest, to management. The Chief +Financial Officer distributes a questionnaire to our executive officers and management personnel quarterly and distributes a questionnaire +to the members of the Board of Directors annually requesting certain information regarding, among other things, their immediate +family members, employment and beneficial ownership interests, which information is then reviewed for any conflicts of interest +under the Conduct Codes. +22 +The Board +of Directors, the Audit Committee and the Disclosure Committee, which consists of management personnel, discuss the related party +transactions, specifically, and in connection with the regular review processes attendant to our periodic filings, including related +party transaction disclosures. +If a director +is a party to or in some manner involved in a transaction involving the Company, he or she will be recused from all discussions +and decisions about the transaction. 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+2022-01-01 +2022-12-31 +iso4217:USD +xbrli:shares +iso4217:USD +xbrli:shares +xbrli:pure +UNITED +STATES +SECURITIES +AND EXCHANGE COMMISSION +WASHINGTON, +D.C. 20549 +SCHEDULE +14A +(RULE +14A-101) +INFORMATION +REQUIRED IN PROXY STATEMENT +SCHEDULE +14A INFORMATION +PROXY +STATEMENT PURSUANT TO SECTION 14(A) OF THE +SECURITIES +EXCHANGE ACT OF 1934 (AMENDMENT NO. __) +Filed +by the Registrant ☒ +Filed +by a Party other than the Registrant ☐ +Check +the appropriate box: +☐ +Preliminary +Proxy Statement +☐ +Confidential, +for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +☒ +Definitive +Proxy Statement +☐ +Definitive +Additional Materials +☐ +Soliciting +Material under §240.14a-12 +Steven +Madden, Ltd. +(Name +of Registrant as Specified in Its Charter) +(Name +of Person(s) Filing Proxy Statement, if other than the Registrant) +Payment +of Filing Fee (Check all boxes that apply): +☒ +No +fee required. +☐ +Fee +paid previously with preliminary materials. +☐ +Fee +computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11. +STEVEN +MADDEN, LTD. +52-16 +Barnett Avenue +Long +Island City, New York 11104 +April +10, 2023 +DEAR +STOCKHOLDERS, +2022 +was a strong year for Steve Madden. We achieved record financial performance – crossing the $2 billion mark in revenue for the +first time – and delivered double-digit percentage growth in both revenue and earnings. These results demonstrate the power of +our brands, the strength of our business model, and the disciplined execution of our strategic initiatives, as outlined below. +DEEPENING +OUR CONNECTION WITH CONSUMERS +Our +primary initiative is continuing to create deeper connections with our consumers through the combination of outstanding product and effective +marketing. By utilizing our proven model – which combines our talented design teams, test-and-react strategy, and industry-leading +speed-to-market capability – we are consistently creating on-trend product assortments and getting them to market ahead of the +competition. We are supporting this great product with a full-funnel marketing and consumer engagement strategy that includes halo brand +campaigns like our global Maddenwood campaign in Fall 2022 as well as “always-on” digital marketing and influencer activities. +DRIVING +DIRECT-TO-CONSUMER LED BY DIGITAL +Strengthening +connections with our consumers is enabling us to drive growth in our direct-to-consumer channels. In 2022, our DTC revenue increased +7% over 2021 and exceeded $500 million for the first time. Compared to pre-COVID 2019, DTC revenue grew 62%, including a 192% increase +in digital, and we increased our overall DTC penetration from 18% to 25% of consolidated revenue over this period. +EXPANDING +OUTSIDE OF FOOTWEAR +The +investments we have made over the past several years to expand outside of the footwear category also continue to pay dividends. In 2022, +our accessories and apparel business exceeded $400 million in revenue and increased 13% over 2021. Steve Madden handbags grew 19% for +the year. In apparel, we successfully transitioned from the BB Dakota Steve Madden co-brand to the Steve Madden brand for Fall 2022, +and overall apparel revenue for the year increased 38%. +GROWING +OUR INTERNATIONAL BUSINESS +Another +of our key priorities – and one of our largest long-term growth opportunities – is growing our international business. In +2022, we grew our business in international markets by 56% compared to 2021. For the year, our international business represented 16% +of our consolidated revenue, up from 11% in pre-COVID 2019. We also continue to make investments to drive international growth going +forward, including the formation in December 2022 of a new joint venture in the Middle East with leading regional player Apparel Group. +STREGTHENING +OUR CORE U.S. WHOLESALE FOOTWEAR BUSINESS +As +we grow DTC, expand our non-footwear product categories, and deepen our penetration in international markets, we also remain laser-focused +on strengthening our core U.S. wholesale footwear business. In 2022, U.S. wholesale footwear revenue reached the $1 billion mark, increasing +13% over 2021, including more than 20% year-over-year growth in each of our four largest brands – Steve Madden, Dolce Vita, Anne +Klein, and Betsey Johnson. +RETURNING +CAPITAL TO STOCKHOLDERS +At +Steve Madden, we have a long history of consistently returning capital to stockholders. In 2022, we utilized our strong balance sheet +and robust free cash flow to repurchase $149 million in stock and pay $66 million in dividends. Since 2013, we have returned approximately +$1.3 billion to stockholders in the form of share repurchases and dividends. +ADVANCING +OUR CORPORATE SOCIAL RESPONSIBILITY GOALS +We +also continue to make meaningful progress on our corporate social responsibility initiatives, as we work to minimize the negative impacts +we have on the environment and maximize the positive impacts we have on our people and our communities. Highlights from 2022 included: +● +measuring +our carbon footprint and setting science-based targets for its reduction going forward; +● +aligning +our climate reporting with the CDP and TCFD frameworks; +● +launching +resale platforms for Steve Madden, Dolce Vita, and Betsey Johnson; +● +forming +a new partnership with the Harlem Festival of Culture; +● +introducing +De la Sole, a new employee resource group for Hispanic employees; and +● +providing +support for the relief effort in Ukraine. +LOOKING +FORWARD +Overall, +2022 was an outstanding year for Steve Madden, as we delivered record financial performance and demonstrated tangible progress on each +of our key strategic initiatives. As we have moved into 2023, we face a challenging operating environment that includes an uncertain +consumer spending outlook and a pullback in orders from our wholesale customers as they prioritize inventory control. That said, we have +a proven ability to navigate difficult market conditions and a track record of taking market share during challenging economic periods, +due largely to our agile business model which enables us to operate with lean inventories and chase goods in season more effectively +than competitors. And looking out further, we remain confident that we can leverage our core strengths – our people, our brands, +and our business model – to continue to drive progress on our key strategic initiatives, which in turn will enable us to deliver +sustainable growth and create value for our stakeholders over the long term. +I’d +like to thank our employees for their dedication, our customers for their loyalty, and you, our stockholders, for your support. +Sincerely, +EDWARD +ROSENFELD +CHAIRMAN +AND CEO +STEVEN +MADDEN, LTD. +52-16 +Barnett Avenue +Long +Island City, New York 11104 +NOTICE +OF ANNUAL MEETING OF STOCKHOLDERS +TO +BE HELD ON MAY 24, 2023 +TO +THE STOCKHOLDERS: +The +Annual Meeting of Stockholders (the “Annual Meeting”) of Steven Madden, Ltd. (the “Company”) will be held on +Wednesday, May 24, 2023, at 10:00 a.m. Eastern time in a virtual-only format, for the purposes stated below: +1. +to +elect eleven (11) directors to the Board of Directors of the Company; +2. +to +ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal +year ending December 31, 2023; +3. +to +approve, on a non-binding advisory basis, the compensation of the Company’s named executive officers as disclosed in the accompanying +proxy statement; +4. +to +recommend, on a non-binding advisory basis, the frequency of the advisory vote on the compensation of the Company’s named executive +officers; and +5. +to +transact such other business as may properly come before the Annual Meeting or any adjournments thereof. +Only +stockholders of record at the close of business on March 27, 2023, the record date for the Annual Meeting, are entitled to notice of +and to vote at the Annual Meeting and any adjournments thereof. Stockholders who own shares of the Company’s common stock beneficially +through a bank, broker or other nominee will also be entitled to attend the Annual Meeting. To participate in the Annual Meeting at www.virtualshareholdermeeting.com/SHOO2023 , +you must enter the 16-digit control number found on your proxy card or your Notice of Availability of Proxy Materials. Whether or not +you plan to attend the Annual Meeting, we urge you to vote in advance of the Annual Meeting by one of the methods described below. If +you have voted by Internet, by phone or by mail before the Annual Meeting, you do not need to vote again. Guests may listen to the Annual +Meeting, but are not entitled to participate. +IMPORTANT +NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 24, 2023: THE NOTICE OF +ANNUAL MEETING AND PROXY STATEMENT, ANNUAL REPORT, ELECTRONIC PROXY CARD AND ANY OTHER MATERIALS CONCERNING THE ANNUAL MEETING, TOGETHER +WITH ANY AMENDMENTS TO ANY OF THESE MATERIALS, ARE AVAILABLE ON THE INTERNET AT HTTP://WWW.PROXYVOTE.COM . +April 10, 2023 +BY ORDER OF THE BOARD OF DIRECTORS +Long Island City, New York +Lisa Keith +Secretary +WHETHER +OR NOT YOU EXPECT TO BE PRESENT AT THE ANNUAL MEETING, PLEASE MARK, DATE AND SIGN THE ACCOMPANYING FORM OF PROXY AND MAIL IT PROMPTLY +IN THE ENVELOPE PROVIDED TO: VOTE PROCESSING, C/O BROADRIDGE, 51 MERCEDES WAY, EDGEWOOD, NEW YORK 11717. ALTERNATIVELY, YOU MAY VOTE +YOUR SHARES BY TELEPHONE OR THROUGH THE INTERNET AS DESCRIBED ON THE ACCOMPANYING PROXY CARD. +TABLE +OF CONTENTS +GENERAL INFORMATION +1 +Notice of Internet Availability of Proxy Materials +1 +QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING +2 +PROPOSAL ONE: ELECTION OF DIRECTORS +7 +Stockholder Nominations for Board Membership +7 +Directors and Nominees for Election to the Board of Directors +7 +CORPORATE GOVERNANCE +14 +The Board of Directors +14 +Director Independence +14 +Involvement in Certain Legal Proceedings +14 +Director Attendance at Meetings +14 +Director Election (Majority Voting) Policy +15 +Committees of the Board +15 +Board Leadership Structure, Risk Oversight, Executive Sessions of Non-Employee Directors, and Communications Between Stockholders and the Board +19 +Codes of Business Conduct and Ethics +21 +Corporate Governance Principles +21 +Stock Ownership Guidelines +21 +Prohibition on Hedging and Pledging of Our Common Stock +22 +Corporate Social Responsibility Policy +22 +2022 Amendment to Bylaws +22 +Certain Relationships and Related Party Transactions +22 +Review, Approval or Ratification of Transactions with Related Persons +24 +COMPENSATION OF DIRECTORS IN THE 2022 FISCAL YEAR +24 +STOCK OWNERSHIP +26 +Security Ownership of Certain Beneficial Owners +26 +Security Ownership of Directors and Executive Officers +27 +Delinquent Section 16(a) Reports +28 +EXECUTIVE COMPENSATION +28 +Compensation Discussion and Analysis +28 +Executive Officers +38 +Summary Compensation Table for the 2022 Fiscal Year +39 +Employment Arrangements +40 +Grants of Plan-Based Awards in the 2022 Fiscal Year +44 +Outstanding Equity Awards at End of the 2022 Fiscal Year +45 +Option Exercises and Stock Vested in the 2022 Fiscal Year +46 +Securities Authorized for Issuance Under Equity Compensation Plans +46 +Equity Compensation Plan Information +47 +Termination, Change-In-Control and Non-Competition/Non-Solicitation +47 +Compensation Committee Report +51 +Pay Versus Performance +51 +PROPOSAL TWO: RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR ENDING DECEMBER 31, 2023 +58 +i +AUDIT COMMITTEE REPORT +59 +PROPOSAL THREE: NON-BINDING ADVISORY VOTE ON EXECUTIVE COMPENSATION +60 +PROPOSAL FOUR: NON-BINDING ADVISORY VOTE ON FREQUENCY OF ADVISORY VOTE ON EXECUTIVE COMPENSATION +62 +OTHER MATTERS +63 +ii +SPECIAL +NOTE REGARDING FORWARD-LOOKING STATEMENTS +Certain +statements in this document regarding anticipated financial, business, legal or other outcomes, including business and market conditions, +outlook and other similar statements relating to the Company’s future events, developments, or financial or operational performance +or results, are “forward-looking statements” made pursuant to the safe harbor provisions of the Private Securities Litigation +Reform Act of 1995 and other federal securities laws. These forward-looking statements are identified by the use of words such as “may,” +“will,” “should,” “expect,” “estimate,” “believe,” “intend,” +“forecast,” “anticipate,” “guidance,” and other similar language. However, the absence of these or +similar words or expressions does not mean a statement is not forward-looking. While we believe these forward-looking statements are +reasonable when made, forward-looking statements are not guarantees of future performance or events and undue reliance should not be +placed on these statements. Although we believe the expectations reflected in any forward-looking statements are based on reasonable +assumptions, we can give no assurance these expectations will be attained, and it is possible actual results may differ materially from +those indicated by these forward-looking statements due to a variety of risks and uncertainties. Forward-looking statements are only +as of the date they are made, and the Company undertakes no duty to update its forward-looking statements except as required by law. +Our +operations are subject to a number of risks and uncertainties including, but not limited to, those risk factors described in our SEC +filings. When considering an investment in our securities, you should carefully read and consider these risks, together with all other +information in our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and our other filings and submissions to the SEC. If any +of the events described in the risk factors actually occur, our business, financial condition or operating results, as well as the market +price of our securities, could be materially adversely affected. +iii +STEVEN +MADDEN, LTD. +52-16 +Barnett Avenue +Long +Island City, New York 11104 +PROXY +STATEMENT +GENERAL +INFORMATION +The +Board of Directors of Steven Madden, Ltd. requests your proxy in connection with the Annual Meeting of Stockholders (the “Annual +Meeting”) of Steven Madden, Ltd. (the “Company,” “we,” or “our”). The Annual Meeting will be +held on Wednesday, May 24, 2023, at 10:00 a.m. Eastern time in a virtual-only format. Proxies also may be voted at any adjournments or +postponements of the Annual Meeting. You will not be able to attend the Annual Meeting physically in person. +On +or about April 10, 2023, a notice containing instructions on how to access this Proxy Statement, the accompanying proxy card and related +materials online is being mailed to holders of record of our common stock, $0.0001 par value (the “Common Stock”), at the +close of business on March 27, 2023 (the “Record Date”). Our Annual Report for the fiscal year ended December 31, 2022 (the +“2022 Fiscal Year”), including audited financial statements, is included in the materials that are accessible online. This +Proxy Statement contains information about the Annual Meeting as well as information regarding the voting process, director elections, +our corporate governance programs, and executive and director compensation, among other things. We recommend that you read all of these +materials. +The +Annual Meeting has been called to consider and take action on the following proposals: +● +to +elect eleven (11) directors to our Board of Directors to serve until the next annual meeting of our stockholders and until his or +her successor is elected and qualified; +● +to +ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December +31, 2023; +● +to +approve, on a non-binding advisory basis, the compensation of the Company’s named executive officers as disclosed in this Proxy +Statement; +● +to +recommend, on a non-binding advisory basis, the frequency of the advisory vote on the compensation of the Company’s named executive +officers; and +● +to +transact such other business as may properly come before the Annual Meeting and any adjournments thereof. +The +Board of Directors knows of no other matters to be presented for action at the Annual Meeting. However, if any other matters properly +come before the Annual Meeting, the persons named in the proxy will vote on such other matters or for other nominees for director in +accordance with their best judgment. Our Board of Directors recommends that the stockholders vote “FOR” each of the eleven +(11) director nominees in Proposal One, “FOR” Proposals Two and Three, and “FOR” a frequency of every year in +Proposal Four. Only holders of record of our Common Stock at the close of business on the Record Date will be entitled to vote at the +Annual Meeting. +We +are incorporated in the State of Delaware. Our principal executive offices are located at 52-16 Barnett Avenue, Long Island City, New +York 11104, and our telephone number is (718) 446-1800. +Notice +of Internet Availability of Proxy Materials +We +continue to take advantage of the Securities and Exchange Commission (the “SEC”) “e-proxy” rules allowing the +Company to furnish proxy materials through the Internet for the benefit and convenience of our stockholders. By using the e-proxy rules, +we can expedite the receipt by stockholders of proxy materials while lowering the costs and reducing the environmental impact associated +with our Annual Meeting. On or about April +1 +10, 2023, we will furnish a Notice of Internet Availability of Proxy Materials (the “Availability +Notice”) to most of our stockholders containing instructions on how to access the proxy materials and to vote online. In addition, +instructions on how to request a printed copy of these materials will be found on the Availability Notice. If you received an Availability +Notice by mail, you will not receive a paper copy of the proxy materials unless you request such materials by following the instructions +contained in the Availability Notice. +For +more information on voting your Common Stock, please refer to the following “Questions and Answers” section. +QUESTIONS +AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING +1. +What +is included in the proxy materials? What is a proxy statement and what is a proxy? +The +proxy materials for our Annual Meeting include the Notice of Annual Meeting, this Proxy Statement and our Annual Report on Form 10-K +for the year ended December 31, 2022. If you received a paper copy of these materials, the proxy materials also include a proxy card +or voting instruction form. +A +proxy is the delegation of your right to vote the Common Stock you own to another person, who is called your proxy. When you designate +someone as your proxy in a written document, that document is called a proxy or a proxy card. SEC regulations require that we furnish +a proxy statement to you when we ask you to designate a proxy to vote your shares of Common Stock on your behalf. We have designated +our officers Edward R. Rosenfeld and Lisa Keith as proxies for the Annual Meeting. +2. +Who +may vote at the Annual Meeting? +Only +holders of record of the 76,022,847 shares of our Common Stock outstanding as of the close of business on March 27, 2023, can vote by +virtual presence online at or prior to the Annual Meeting. Each of these stockholders has one vote for each share of our Common Stock +held on that date. +3. +What +is the difference between holding shares as a stockholder of record and as a beneficial owner? +If +your shares were registered as of the Record Date directly in your name with our registrar and transfer agent, American Stock Transfer +& Trust Company, then you are a “stockholder of record” with respect to those shares, and in such case, we have provided +the Availability Notice directly to you. Upon your request, we will send this Proxy Statement and the accompanying proxy materials directly +to you. If your shares were held as of the Record Date in a stock brokerage account or by a bank or nominee, then your shares are held +in “street name” and you are considered the “beneficial owner” of those shares. In that case, your broker, bank +or other stockholder of record has provided the Availability Notice to you and, upon your request, will provide this Proxy Statement +and the accompanying proxy materials to you. As the beneficial owner, you have the right to direct your broker, bank or other stockholder +of record how to vote your shares held in “street name.” +4. +What +is considered a quorum to conduct the Annual Meeting? +The +presence, in person or by proxy, of the holders of a majority of the shares entitled to vote is necessary to constitute a quorum for +the purpose of transacting business at the Annual Meeting. Under Delaware law, abstentions and broker non-votes as described below are +counted as present for purposes of determining the presence or absence of a quorum for the transaction of business. If a quorum is not +present, the Annual Meeting may be adjourned until a quorum is obtained. +5. +What +is a “broker non-vote”? +If +your shares are held in “street name” by a broker, bank or other nominee, your broker, bank or other nominee is the record +holder; however, the broker, bank or other nominee is required to vote the shares in accordance with your instructions. If you do not +give instructions to your broker, bank or other nominee, it may, if permitted by the organizations of which it is a member, exercise +discretionary voting power to vote your shares. A “broker non-vote” occurs when a broker, bank or other nominee of record +holding shares for a beneficial owner has not received voting instructions from the beneficial owner and either chooses not to vote the +shares on a particular +2 +proposal as to which the holder has discretionary voting power or does not vote on a particular proposal because +that holder does not have discretionary voting power for that particular item. Broker non-votes are considered present in determining +whether a quorum is present. +If +you hold your shares in “street name,” we strongly encourage you to provide instructions regarding the voting of your shares, +because your broker, bank or other nominee cannot vote your shares with respect to certain of the proposals being presented at the Annual +Meeting without voting instructions from you. +6. +How +many votes do I have? What shares are included on the proxy card? +For +each share of Common Stock that you own on the Record Date, you are entitled to one vote on each matter presented at the Annual Meeting. +If +you are a record holder, you will receive an Availability Notice or proxy card for all of the shares of Common Stock you hold in certificate +form, in book-entry form and in any Company benefit plan. If you are a beneficial owner, you will receive information containing voting +instructions from the broker, bank or other nominee through which you own your shares of Common Stock. +7. +How +many votes are required to approve each proposal and what is the effect of abstentions and broker non-votes? +Proposal +One (Election of Directors): Under Delaware law, directors are elected by the affirmative vote of a plurality of the shares of Common +Stock present in person or represented by proxy at the Annual Meeting and entitled to vote on this proposal. This means that the director +nominees who receive the greatest number of affirmative votes cast are elected as directors, subject to our Director Election (Majority +Voting) Policy discussed in Proposal One below. +Proposal +Two (Ratification of Appointment of Ernst & Young LLP): The affirmative vote of a majority of the votes cast by the shares of +Common Stock present in person or represented by proxy at the Annual Meeting and entitled to vote on this proposal is required to approve +the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year +ending December 31, 2023. +Proposal +Three (Non-Binding Advisory Vote on Executive Compensation): The affirmative vote of a majority of the votes cast by the shares of +Common Stock present in person or represented by proxy at the Annual Meeting and entitled to vote on this proposal is required to approve, +on a non-binding advisory basis, the compensation of our Named Executive Officers as described in this Proxy Statement. +Proposal +Four (Non-Binding Advisory Vote on Frequency of Advisory Vote on Executive Compensation): The voting requirement applicable to the +non-binding advisory vote on the frequency of the advisory vote on the compensation of our Named Executive Officers is the affirmative +vote of a plurality of the shares of Common Stock present in person or represented by proxy at the Annual Meeting and entitled to vote +on this proposal. This means that the frequency (every one, two, or three years) receiving the greatest number of affirmative votes cast +will be considered by the Board of Directors as the stockholders’ recommendation with respect to the frequency of future advisory +votes on the compensation of our Named Executive Officers. +Other +Matters: If any other matters are presented at the Annual Meeting, they must receive the affirmative vote of a majority of the votes +cast by the shares of Common Stock present in person or represented by proxy at the Annual Meeting and entitled to vote on the matter +to be approved. +Abstentions +will have no effect on the outcome of each proposal but will be treated as present and entitled to vote with respect to each proposal +and used for purposes of calculating whether a quorum is present at the Annual Meeting. +Proposal +One (Election of Directors) will be decided by a plurality of the votes of the shares represented in person or by proxy and entitled +to vote. The approval of each of Proposal Two (Ratification of Ernst & Young LLP) and Proposal Three (Non-Binding Advisory Vote on +Executive Compensation) requires a favorable vote of a majority of the votes cast by the shares present in person or by proxy and entitled +to vote on the applicable matter. +3 +Proposal Four (Non-Binding Advisory Vote on Frequency of Advisory Vote on Executive Compensation) will +be decided by a plurality of the votes of the shares present in person or by proxy and entitled to vote. As noted above, abstentions +will have no effect on the outcome of each proposal. +If +you do not provide your broker, bank or other nominee with instructions on how to vote your shares held in “street name,” +your broker, bank or other nominee will not be permitted to vote your shares on non-routine matters, and your shares will not affect +the outcome of proposals concerning non-routine matters. Proposal Two is considered a routine matter under applicable rules. Proposals +One, Three, and Four are considered “non-routine” matters, which means that your broker or other nominee does not have discretion +to vote your shares with respect to those proposals without voting instructions from you. If you hold your shares in “street name,” +we strongly encourage you to provide instructions regarding the voting of your shares to your broker, bank or other nominee. +8. +How +can I attend and participate in the Annual Meeting? +Our +virtual Annual Meeting will be conducted on the Internet via live audio webcast. You will be able to participate online and submit your +questions during the Annual Meeting by visiting www.virtualshareholdermeeting.com/SHOO2023 , beginning at 10:00 a.m. Eastern time +on May 24, 2023. Stockholders will be able to vote their shares electronically during the Annual Meeting. +To +participate in the Annual Meeting, you will need the 16-digit control number included on your proxy card or your Availability Notice. +The Annual Meeting will begin promptly at 10:00 a.m. Eastern time. We encourage you to access the Annual Meeting prior to the start time. +Online access will begin at 9:45 a.m. Eastern time. Guests may listen to a live audio webcast of the virtual Annual Meeting by visiting +www.virtualshareholdermeeting.com/SHOO2023 , beginning at 9:45 a.m. Eastern time, but are not entitled to participate. +The +virtual Annual Meeting platform is fully supported across browsers (Internet Explorer, Firefox, Chrome, and Safari) and devices (desktops, +laptops, tablets, and cell phones) running the most updated version of applicable software and plugins. Participants should ensure they +have a strong Internet connection wherever they intend to participate in the Annual Meeting. Participants should also allow plenty of +time to log in and ensure that they can hear streaming audio prior to the start of the Annual Meeting. +9. +Where +can I find a list of stockholders entitled to vote at the Annual Meeting? +For +the ten days prior to the Annual Meeting, a list of stockholders entitled to vote at the Annual Meeting will be available for examination +by any stockholder of record for any purpose germane to the Annual Meeting at the Company’s principal executive offices upon appointment. +Please contact the Company’s Secretary at Steven Madden, Ltd., 52-16 Barnett Avenue, Long Island City, New York 11104 to set up +an appointment. +10. +How +can I vote my shares? +If +the records of our transfer agent show that you own shares in your name at the close of business on March 27, 2023, then you may vote +at the Annual Meeting. To attend the Annual Meeting and vote your shares electronically, you will need the 16-digit control number included +on your Availability Notice, on your proxy card, or on the instructions that accompanied your proxy materials. +Even +if you plan to attend the Annual Meeting, we urge you to authorize your proxy in advance. You may vote your shares in advance of the +Annual Meeting by authorizing a proxy over the Internet or by telephone. In addition, if you received a paper copy of the proxy materials +by mail, you can submit a proxy by mail by following the instructions on the proxy card. Voting your shares by authorizing a proxy over +the Internet, by telephone or by written proxy card will ensure your representation at the Annual Meeting regardless of whether you attend +the Annual Meeting. +If +you are the record holder of your shares, please authorize your proxy electronically by going to the http://www.proxyvote.com +website or by calling the toll-free number listed below and on the proxy card. Please have your Proxy Statement or proxy card in hand +when going online or calling. If you authorize your proxy via the +4 +Internet +or by phone, you do not need to return your proxy card. If you choose to authorize your proxy by mail, simply mark your proxy card and +then date, sign and return it in the postage-paid envelope provided. +VOTE +BY INTERNET +http://www.proxyvote.com +Use +the Internet to transmit your voting instructions and for electronic delivery of information. +VOTE +BY PHONE +1-800-690-6903 +Use +any touch-tone telephone to transmit your voting instructions. +VOTE +BY MAIL +Vote +Processing, c/o Broadridge +51 +Mercedes Way +Edgewood, +New York 11717 +If +you receive paper proxy materials, mark, sign and date your proxy card and return it in the postage-paid envelope we have provided +or return it to the address shown above. +If +you hold your shares beneficially in “street name” through a broker or nominee, you may be able to authorize your proxy by +telephone or the Internet as well as by mail, but you will need to obtain and follow instructions from your broker or nominee to vote +these shares. +11. +May +I revoke my proxy for the Annual Meeting once I have given it? +You +may revoke your proxy at any time before it is voted at the Annual Meeting by: +● +properly +executing and delivering a later-dated proxy (including a telephone or Internet proxy authorization); +● +voting +your shares electronically at the Annual Meeting; or +● +sending +a written notice of revocation to the Secretary of the Company at Steven Madden, Ltd., 52-16 Barnett Avenue, Long Island City, New +York 11104. +12. +How +does the Board of Directors recommend that I vote my shares? +Our +Board of Directors recommends that you vote: +● +“FOR” +the election of each of the eleven (11) director nominees; +● +“FOR” +the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal +year ending December 31, 2023; +● +“FOR” +the approval, on a non-binding advisory basis, of the executive compensation of our Named Executive Officers, as disclosed in this +Proxy Statement; and +● +“FOR” +the approval, on a non-binding advisory basis, of the recommendation to hold the advisory vote on the approval of executive compensation +every year. +ALL +PROXIES RECEIVED WILL BE VOTED IN ACCORDANCE WITH THE CHOICES SPECIFIED ON SUCH PROXIES. PROXIES WILL BE VOTED IN FAVOR OF PROPOSALS +ONE, TWO, AND THREE AND FOR A FREQUENCY OF EVERY YEAR IN PROPOSAL FOUR IF NO CONTRARY SPECIFICATION IS MADE. ALL VALID PROXIES OBTAINED +WILL BE VOTED AT THE DISCRETION OF THE PERSONS NAMED IN THE PROXY WITH RESPECT TO ANY OTHER BUSINESS THAT MAY PROPERLY COME BEFORE THE +ANNUAL MEETING OR ANY ADJOURNMENTS OR POSTPONEMENTS THEREOF. AS NOTED ABOVE, IF YOU HOLD YOUR SHARES BENEFICIALLY THROUGH A BROKER, BANK +OR OTHER NOMINEE AND FAIL TO PROVIDE SPECIFIC VOTING INSTRUCTIONS TO THAT BROKER, BANK OR OTHER NOMINEE, YOUR SHARES WILL NOT BE VOTED +IN THE ELECTION OF DIRECTORS, THE ADVISORY VOTE ON EXECUTIVE COMPENSATION, OR THE ADVISORY VOTE ON THE FREQUENCY OF THE ADVISORY VOTE +ON EXECUTIVE COMPENSATION UNLESS YOU ARE PRESENT AND VOTE AT THE MEETING. +13. +Who +will bear the expenses of this solicitation and how are proxies being solicited? +We +will pay the costs of soliciting proxies, including preparing, printing and mailing this Proxy Statement, any exhibits hereto and the +proxies solicited hereby. In addition to the use of the mails, proxies may be solicited on our behalf by our officers, directors and +employees, without additional remuneration, by personal interviews, by +5 +telephone or by electronic transmission. We will also request +brokerage firms, nominees, custodians and fiduciaries to forward proxy materials to the beneficial owners of shares of Common Stock held +of record by them and will provide reimbursements for the cost of forwarding the material in accordance with customary charges. We do +not currently intend to retain a professional solicitor to assist in the solicitation of proxies; however, we may later elect to do so. +14. +Will +I be able to ask questions at the Annual Meeting? +Edward +R. Rosenfeld, our Chairman and Chief Executive Officer, will be available to answer questions submitted by the stockholders during the +Annual Meeting related to the items of business at the Annual Meeting. Stockholders may submit questions for the Annual Meeting after +logging in, beginning at 10:00 a.m. Eastern time on May 24, 2023. If you wish to submit a question, you may do so by logging into the +virtual meeting platform at www.virtualshareholdermeeting.com/SHOO2023 , typing your question into the “Ask a Question” +field, and clicking “Submit.” Please submit any questions during the meeting. +Additional +information regarding the ability of stockholders to ask questions during the Annual Meeting, related rules of conduct and other materials +for the Annual Meeting will be available at www.virtualshareholdermeeting.com/SHOO2023 . +15. +What +can I do if I have technical difficulties in accessing the 2023 Annual Meeting? +Technical +support, including related technical support phone numbers, will be available on the virtual meeting platform at www.virtualshareholdermeeting.com/SHOO2023 +beginning at 9:30 a.m. Eastern time on May 24, 2023 through the conclusion of the Annual Meeting. +16. +How +will the voting results be reported? +The +preliminary results of the voting on the proposals will be reported at the Annual Meeting. The final certified results will be reported +in a Current Report on Form 8-K that will be filed with the SEC within four business days following the Annual Meeting. +17. +How +do I submit a proposal for action at the Company’s 2024 Annual Meeting of Stockholders? +Stockholder +proposals submitted in accordance with Rule 14a-8 under Securities Exchange Act of 1934, as amended (the “Exchange Act”), +must be received at our principal executive offices no later than December 12, 2023 to be considered for inclusion in the proxy materials +to be distributed by the Company in connection with the 2024 Annual Meeting of Stockholders (the “2024 Annual Meeting”). +Alternatively, +Article I, Section 7(f) of our Second Amended and Restated By-Laws (the “By-Laws”), requires that any stockholder proposal +that is not submitted for inclusion in the proxy materials for the 2024 Annual Meeting under Rule 14a-8 under the Exchange Act, but is +instead sought to be presented directly at the 2024 Annual Meeting, must be (i) specified in the notice of such meeting given by or at +the direction of the Board of Directors (or any duly authorized committee thereof), (ii) otherwise properly brought before such meeting +by or at the direction of the Board of Directors (or any duly authorized committee thereof) or (iii) specified in a notice in proper +written form given by a stockholder of record on the date of the giving of the notice and on the record date for such meeting, which +notice conforms to the requirements of Article I, Section 7(f) of the By-Laws and is delivered to, or mailed and received at, our principal +executive offices not less than 120 days nor more than 150 days prior to the first anniversary of the date of our 2023 Annual Meeting. +Accordingly, any written notice given by or on behalf of a stockholder pursuant to the foregoing clause (iii) in connection with the +2024 Annual Meeting must be received no later than January 25, 2024 and no earlier than December 26, 2023. +Under +Article II, Section 5 of the By-Laws, for a stockholder to nominate one or more persons for election to the Board of Directors at the +2024 Annual Meeting, complete and timely notice must be given in writing and in proper form to our Secretary no later than January 25, +2024 and no earlier than December 26, 2023. Any notice must contain the specific information required by the By-Laws, including, among +other things, information about any proposed nominee and any agreements, arrangements or understandings the stockholder may have with +any proposed nominee or other parties relating to the nomination or other proposal. Such information must be updated, if +6 +necessary, +to be true and correct as of the record date for the 2024 Annual Meeting and as of the date that is 10 business days prior to the date +of the 2024 Annual Meeting. This summary information regarding the By-Laws is qualified in its entirety by reference to the full text +of the By-Laws, a copy of which may be obtained by any stockholder, without charge, upon written request to our Secretary, Steven Madden, +Ltd., 52-16 Barnett Avenue, Long Island City, New York 11104. If a nomination is not timely and properly made in accordance with the +procedures set forth in the By-Laws, or does not contain the specific information required by the By-Laws, such nomination will be defective +and will not be brought before the 2024 Annual Meeting. In addition, to comply with the universal proxy rules, stockholders who intend +to solicit proxies in support of director nominees other than the nominees of our Board of Directors must comply with the additional +requirements of Rule 14a-19 under the Exchange Act, including providing a statement that such stockholder intends to solicit the holders +of shares representing at least 67% of the voting power of our shares entitled to vote on the election of directors in support of director +nominees other than our nominees, as required by Rule 14a-19(b). We intend to file a proxy statement and WHITE proxy card with the SEC +in connection with the solicitation of proxies for the 2024 Annual Meeting. +18. +I +share an address with another stockholder and we received only one Notice of Internet Availability of Proxy Materials or one paper +copy of the proxy materials, as applicable. How may I obtain an additional copy? +If +two or more stockholders share an address, we may send a single copy of this Proxy Statement and other soliciting materials, as well +as our Annual Report for the 2022 Fiscal Year, to the shared address, unless we have received contrary instructions from one or more +of the stockholders sharing the address. If a single copy has been sent to multiple stockholders at a shared address, we will deliver +a separate proxy card for each stockholder entitled to vote. Additionally, we will send an additional copy of this Proxy Statement, other +soliciting materials and our Annual Report for the 2022 Fiscal Year, promptly upon oral or written request by any stockholder to the +Secretary at Steven Madden, Ltd., 52-16 Barnett Avenue, Long Island City, New York 11104; telephone number (718) 446-1800. If any stockholders +sharing an address receive multiple copies of this Proxy Statement, other soliciting materials and our Annual Report for the 2022 Fiscal +Year and would prefer in the future to receive only one copy, such stockholders may make such request to the Secretary at the same address +or telephone number. +PROPOSAL +ONE: +ELECTION +OF DIRECTORS +Our +By-Laws provide that our Board of Directors the number of directors may be fixed from time to time by action of the directors. The Board +of Directors has fixed the number of directors comprising the Board of Directors at eleven members. Directors are elected to serve until +the next annual meeting of stockholders, and the term of each of the current directors will expire at the Annual Meeting. +Stockholder +Nominations for Board Membership +The +Nominating/Corporate Governance Committee of the Board of Directors recommends to the Board director candidates for nomination and election +at each annual meeting of stockholders or for appointment to fill vacancies on the Board. +The +Nominating/Corporate Governance Committee will review and evaluate the qualifications of proposed director candidates recommended to +it from various sources, including candidates proposed by our stockholders in accordance with the procedures established for that purpose. +To enable the Nominating/Corporate Governance Committee to consider a stockholder recommendation in connection with the 2024 Annual Meeting, +we must receive the recommendation on or before December 12, 2023. +Directors +and Nominees for Election to the Board of Directors +Upon +recommendation of the Nominating/Corporate Governance Committee of the Board of Directors, the Board of Directors has nominated and is +recommending to the stockholders the election of each of the eleven +7 +nominees +named below to serve as a director of the Company until the next annual meeting of our stockholders and until his or her successor is +duly elected and qualified or until his or her earlier death, resignation or removal from office. All of the nominees were elected directors +at last year’s Annual Meeting of Stockholders. All nominees have agreed to be named in this Proxy Statement and to serve on the +Board of Directors if elected. +The +names and biographical summaries of the eleven persons who have been recommended by the Nominating/Corporate Governance Committee of +the Board of Directors and nominated by the Board of Directors to stand for election at the Annual Meeting are provided below for your +information. +Our +Board of Directors is responsible for overseeing our business in a manner consistent with the Board’s fiduciary duty to our stockholders. +This significant responsibility requires that our directors consist of individuals who are well-qualified for service on our Board and +its committees and demonstrate a commitment to the success of the Company and to serve in the best interests of our stockholders. +The +following matrix identifies the relevant skills, experience and qualifications of our eleven director nominees. The skills and experience +identified below are reviewed by the Nominating/Corporate Governance Committee, in addition to other qualifications, and nominees are +selected with a view to establishing a Board of Directors that consists of individuals who have extensive business leadership experience, +are independent, bring diverse perspectives to the Board, and possess high ethical standards, sound business judgment and acumen, and +a willingness to devote the time necessary for the Board to effectively fulfill its responsibilities. We believe that all of the director +nominees possess these qualifications and provide the Board with a full complement of knowledge, business skills and expertise for the +effective management of the Company. +Rosenfeld +Davis +Ferrara +Klipper +Kumar +Lynch +Migliorini +Reed +Sachdev +Smith +Varela +Knowledge, Skills and Experience +Public Company Board Experience +● +● +● +● +Finance/Accounting +● +● +● +● +● +● +Executive Leadership Experience +● +● +● +● +● +● +● +● +● +● +● +Risk Oversight/ Management +● +● +● +● +Retail Industry Experience +● +● +● +● +● +● +● +● +● +Independence +● +● +● +● +● +● +● +● +● +8 +The +below table provide a summary view of the diversity attributes of the Board of Directors as of March 20, 2023. Each of the categories +listed in the table below has the meaning as it is used in Nasdaq Rule 5605(f). +Board +Diversity Matrix (As of March 20, 2023) (1) +Total +Number of Directors +11 +Part +I: Gender Identity +Female +Male +Non-Binary +Did +Not Disclose Gender +Directors +4 +6 +1 +0 +Part +II: Demographic Background +African +American or Black +1 +1 +0 +0 +Alaskan +Native or Native American +0 +0 +1 +0 +Asian +0 +1 +0 +0 +Hispanic +or Latinx +1 +0 +0 +0 +Native +Hawaiian or Pacific Islander +0 +0 +0 +0 +White +2 +4 +0 +0 +Two +or More Races or Ethnicities +0 +0 +0 +0 +LGBTQ+ +1 +Did +Not Disclose Demographic Background +0 +(1) The +only changes from our last reported Board Diversity Matrix (included in our proxy statement +for our 2022 Annual Meeting of Stockholders) is that one of our directors now identifies +as a non-binary individual with a Native American demographic background. +9 +In +addition to these general qualifications and attributes, provided below for each nominee for director is a discussion of the specific +experience, qualifications, attributes and skills that led to the Board’s conclusion that the nominee should serve as a director. +Name +Principal Occupation +Age +Year Became a Director +Edward R. Rosenfeld +Chairman of the Board and Chief Executive Officer, Steven Madden, Ltd. +47 +2008 +Peter A. Davis +Retired executive in the footwear and apparel industry and Founder and Managing Director of Pete Davis Basketball, LLC, a grassroots community youth basketball organization +69 +2022 +Al Ferrara +Retired National Director of the Retail and Consumer Products Division of BDO USA, LLP, a major international accounting firm +72 +2019 +Mitchell S. Klipper +Retired Chief Executive Officer of Barnes & Noble, Inc.’s Retail Group, one of the largest retail booksellers in the United States +65 +2018 +Maria Teresa Kumar +President and CEO of Voto Latino, which she co-founded in 2004 and built into America’s largest Latinx voter registration and advocacy organization +49 +2021 +Rose Peabody Lynch +Retired owner of Marketing Strategies, LLC, a New York based consulting firm of which she was founder and President, which focused on strategic marketing and operating issues for small to medium-sized companies +73 +2014 +Peter Migliorini +Sales Manager, Greschlers, Inc., a building supplies company +74 +1996 +Arian Simone Reed +Co-Founder and Chief Executive Officer of Fearless Fund, a venture capital fund that she co-founded in 2018 +42 +2022 +Ravi Sachdev +Partner, Clayton Dubilier & Rice, LLC, a global alternative investment firm +46 +2008 +Robert Smith +Founder and Chief Executive Officer of Phluid Project, part retail concept and part experimental platform, completely gender neutral, with a website that offers products and programs worldwide +57 +2014 +Amelia Newton Varela +President, Steven Madden, Ltd. +51 +2016 +Additional +Information About the Directors +Other +Public Company Directorships +Four +of our directors also currently serve or recently served as directors of other public companies: +● +Mr. +Rosenfeld is a director and chairman of the Audit & Risk Management Committee of PVH Corp. (NYSE: PVH), one of the world’s +largest apparel companies. +● +Mr. +Ferrara was a director and the chairman of the Audit Committee of VIVAKOR, Inc. (NASDAQ: VIVK), a socially responsible operator, +acquirer and developer of clean energy technologies and environmental solutions, from September 2020 until November 2022. +10 +● +Ms. +Lynch is a director and member of the Compensation Committee, Pension Committee, and Nominating Committee of General American Investors +Company, Inc. (NYSE: GAM), a closed-end fund that manages a global portfolio of investments consisting mainly of U.S. and foreign +securities. +● +Mr. +Sachdev is a director of Agilon Health, Inc. (NYSE: AGL), a technology-enabled services platform for the physicians’ market, +and was a director and member of the Strategy Committee and Compensation Committee of Covetrus, Inc. (NASDAQ: CVET), a global animal-health +technology and services company, from February 2019 until October 2022. +Specific +Qualifications, Attributes, Skills and Experience of Directors +Edward +R. Rosenfeld has served as our Chairman of the Board and Chief Executive Officer since August 2008 and has been a director of +the Company since February 2008. Mr. Rosenfeld, who joined our executive management team in May 2005, has more than two decades of experience +focused on the retail, apparel and footwear industries and possesses particular knowledge of and experience in the industry that strengthens +the Board’s collective qualifications, skills and experience. He has strong leadership skills and an in-depth understanding of +the Company and its goals from his positions as the Chairman of the Board and Chief Executive Officer. His background in finance and +his analytical skills gained through his years as a Vice President with Peter J. Solomon Company, an investment banking boutique, where +he specialized in mergers and acquisitions in the retail, apparel and footwear industries, provide the Board with insight and guidance +with respect to, among other things, strategic business development matters. Mr. Rosenfeld serves as a director and chairman of the Audit +& Risk Management Committee of PVH Corp. (NYSE: PVH), one of the world’s largest apparel companies. +Peter +A. Davis has served as a director of the Company and as a member of the Compensation Committee since January 2022. Mr. Davis +has over 30 years of experience in the footwear and apparel industry, having held executive leadership positions in sales and marketing +with companies including Skechers, Fila, Reebok, Joy & Mario and Dynasty Footwear. He also founded The Infamous Black Sheep Brand, +an urban action sports lifestyle brand. A former player in the NBA, Mr. Davis founded Pete Davis Basketball, LLC, a grassroots community +youth basketball organization, in 2019 and today serves as its Managing Director. Prior to founding Pete Davis Basketball, LLC, Mr. Davis +was the Senior Vice President of Footwear for Joy & Mario Footwear, a footwear company based in Southern California from 2013 to +2018. Mr. Davis’ years of experience in our industry provide relevant knowledge, expertise and leadership to the Board. +Al +Ferrara has served as a director of the Company and as a member of the Audit Committee since July 2019. In May 2020, Mr. Ferrara +became the Chairman of the Audit Committee and a member of the Nominating/Corporate Governance Committee. He is a retired certified public +accountant having retired from his position as a partner with BDO USA, LLP, a major international accounting firm, in August 2016 after +25 years with the firm, most recently serving as National Director of the Retail & Consumer Products Division. Mr. Ferrara also served +as a director on the firm’s Board of Directors from 2003 through 2010 and was also a director and BDO representative on the Board +of Directors of BDO Capital Advisors, LLC from 2000 to 2015. Mr. Ferrara served as a member of the Board of Directors of Barnes & +Noble, Inc., the nation’s largest retail bookseller, from 2016 until its sale in August 2019 and also served on its Audit Committee +and Compensation Committee. In September 2020, Mr. Ferrara was appointed to the Board of Directors of VIVAKOR, Inc. (NASDAQ: VIVK), a +socially responsible operator, acquirer and developer of clean energy technologies and environmental solutions, where he served as the +Chairman of its Audit Committee. Mr. Ferrara resigned from VIVAKOR’s Board of Directors in November 2022 after the appointment +of a new CEO at VIVAKOR. Mr. Ferrara’s decades of relevant experience as a certified public accountant, the director of the retail +practice at a major international accounting firm, and as a member of the audit committee of a public company enhance the financial oversight +capabilities of our Board and its Audit Committee. +Mitchell +S. Klipper has served as a director of the Company since April 2018, as a member of the Audit Committee since June 2018 and as +a member of the Corporate Social Responsibility Committee since August 2019. Mr. Klipper served as the Chief Executive Officer of Barnes +& Noble, Inc.’s Retail Group, one of the nation’s largest retail booksellers, from March 2010 to May 2015. Mr. Klipper +began his career at Barnes & Noble as Chief Financial Officer of B&N College in June 1986. He subsequently held several executive +positions at Barnes & Noble, Inc., including Executive Vice President, President of Barnes & Noble Development and Chief Operating +Officer. Prior to joining Barnes & Noble, Inc., Mr. Klipper was an Audit Manager with KMG Main Hurdman, a +11 +certified public accounting +firm and predecessor to KPMG. He also served on the advisory board of Modell’s Sporting Goods, a sporting goods retailer, from +2006 through 2018. Mr. Klipper’s decades of relevant experience in retail management, general business and accounting enhance the +leadership and oversight capabilities of our Board. +Maria +Teresa Kumar has served as a director of the Company and as a member of the Corporate Social Responsibility Committee since January +2021. Ms. Kumar is the President and CEO of Voto Latino, America’s largest Latinx voter registration and advocacy organization, +which she co-founded in 2004. She is also a regular on-air contributor for MSNBC. Ms. Kumar serves on the Boards of Emily’s List +and the World Economic Forum’s Global Shapers and is a World Economic Forum Young Global Leader and a Council on Foreign Relations +Life Member. Ms. Kumar graduated from U.C. Davis with a B.A. in International Affairs and earned her Masters’ in Public Policy +from Harvard’s Kennedy School. Ms. Kumar’s extensive experience in management, leadership, social advocacy and working with +non-profits enhance Board leadership and management oversight with a unique perspective on corporate social responsibility. +Rose +Peabody Lynch has served as a director of the Company since April 2014, as a member of the Compensation Committee since June +2014, and as a member of the Corporate Social Responsibility Committee since August 2019. Ms. Lynch formerly served on the Audit Committee +from June 2014 to July 2019, when she became a member of the Corporate Social Responsibility Committee. Until recently, Ms. Lynch operated +her own New York based consulting business, Market Strategies, LLC, which focused on strategic marketing and operating issues for small +to medium-sized companies. She possesses over 30 years of business experience, including tenures as the President and in other senior +executive officer positions of major companies in the beauty and fashion industries, and has extensive executive level financial and +operating experience. Her experience serving as a director and as a senior executive for a range of companies, including Victoria’s +Secret (a lingerie, clothing, and beauty retailer), Trowbridge Gallery (a supplier of fine art to the interior design trade) and Danskin, +Inc. (a leading manufacturer of women’s dance and active wear), enhances the Board’s leadership and oversight capabilities. +Ms. Lynch has served on several boards, including The Harmony Group-LeRoi Princeton (a manufacturer of children’s apparel), Salant +Corporation (Perry Ellis Menswear) and Frederick’s of Hollywood (a retailer of women’s apparel and lingerie). Currently, +Ms. Lynch serves on the board of General American Investors Company, Inc. (NYSE: GAM). In her role on the GAM Board, she serves on the +Compensation Committee, along with the Pension and Nominating Committees. She was a member of the Audit Committee and Nominating and +Governance Committees during her tenure at Salant and chaired the Compensation Committee during her tenure on the board of Frederick’s +of Hollywood. In addition, Ms. Lynch has held leadership positions with a variety of not-for-profit organizations. She currently serves +on the Board of Directors of the Princeton University Varsity Club. She also served two terms on the Board of Trustees of Concord Academy +in Concord, Massachusetts and rotated off the Board in July 2021. Ms. Lynch is a member of the Women and Foreign Policy Advisory Council +at the Council on Foreign Relations. +Peter +Migliorini has served as a director of the Company since October 1996 and has served on the Nominating/Corporate Governance Committee, +as its Chair, since July 2004 and the Compensation Committee, as its Chair, since July 2004. Mr. Migliorini formerly served on the Audit +Committee, from October 1996 until June 2018. Mr. Migliorini is the Presiding Director over all executive sessions of the independent +directors. Mr. Migliorini possesses extensive executive level financial, sales and operations experience. Mr. Migliorini currently serves +as sales manager for Greschlers, Inc., a building supplies company. Prior to joining Greschlers, Mr. Migliorini served as Director of +Operations for Mackroyce Group, a construction company, from 1987 to 1994. Earlier, Mr. Migliorini held various positions of increasing +responsibility from Assistant Buyer to Chief Planner/Coordinator for several shoe companies, including Meldisco Shoes, Perry Shoes and +Fasco Shoes. His numerous years of business experience at various levels and in various industries provide the Board with a measure of +practical orientation regarding our operations and growth endeavors. Mr. Migliorini’s early experience in the shoe industry also +provides relevant knowledge and expertise in our specific industry. +Arian +Simone Reed has served as a director of the Company and as a member of the Nominating/Corporate Governance Committee since January +2022. Ms. Reed is the Co-Founder and Chief Executive Officer of Fearless Fund, a venture capital fund that invests in women of color +led businesses, which she co-founded in 2018. Prior to Fearless Fund, Ms. Reed was the owner of AR PR Marketing, a publicity and marketing +strategy firm from 2004 to 2017. Ms. Reed serves as a member on the Board of Directors for the Birmingham Civil Rights Institute. In +2021, she was the recipient of the 15th Annual General Motors African Ancestry Network Black History Month Celebration Entrepreneurial +Spirit Award and the Detroit Branch NAACP Great Expectations Award. Ms. Reed’s +12 +marketing expertise, leadership, social advocacy, +and working with entrepreneurs will enhance Board leadership, strategic business development, and provide a unique perspective on corporate +social responsibility. +Ravi +Sachdev has served as a director of the Company and as a member of the Audit Committee since September 2008 and as a member of +the Nominating/Corporate Governance Committee since August 2019. As a Partner of the private equity firm Clayton Dubilier & Rice, +LLC since June 2015, Mr. Sachdev focuses on the healthcare sector. Earlier, Mr. Sachdev worked at several investment banks. He was a +Managing Director and Co-Head of Healthcare Services at J.P. Morgan from November 2010 until June 2015 and prior to that held the positions +of Managing Director at Deutsche Bank Securities, Inc. from January 2009 until November 2010 and Director at Deutsche Bank from January +2007 until January 2009. Prior to joining Deutsche Bank in 2006 as a Vice President, Mr. Sachdev served as a Vice President at Peter +J. Solomon Company, an investment banking boutique, specializing in mergers and acquisitions in the healthcare sector, from 1998 to 2006. +Mr. Sachdev possesses knowledge of finance and the financial analytics used to measure business performance. His 20 years of professional +experience in investment banking and private equity brings to the Board a thorough understanding of the financial issues affecting public +companies and greater insights in business valuation together with a practical orientation with respect to acquisitions and integrations. +Mr. Sachdev also serves on the Board of Directors of Agilon Health, Inc. (NYSE: AGL), a technology-enabled services platform for the +physicians’ market and served on the Board of Directors and the Strategy Committee and Compensation Committee of Covetrus, Inc. +(NASDAQ: CVET), a global animal-health technology and services company, from February 2019 until October 2022. +Robert +Smith has served as a director of the Company since April 2014 and has served on the Compensation Committee since June 2014 and +on the Corporate Social Responsibility Committee, as its Chair, since August 2019. Mr. Smith formerly served on the Nominating/Corporate +Governance Committee from June 2014 to July 2019, when he became a member of the Corporate Social Responsibility Committee. Mr. Smith +is the Chief Executive Officer of Phluid Project and GET Phluid, which he founded in 2018. Prior to Phluid Project, Mr. Smith was the +Chief Merchandising Officer for Haddad Brands from 2013 to 2017, a global children’s apparel and accessories licensing partner +for iconic brands such as Levi’s, Hurley, Nike, Jordan and Converse. Before his former position with Haddad Brands, Mr. Smith served +as Executive Vice President, Merchandising from 2010 to 2012 for Limited Brands, at Victoria’s Secret Direct, the largest direct-to-consumer +women’s apparel retailer in the United States. Prior thereto, Mr. Smith held various senior merchandising positions at Macy’s +Inc. between 1998 and 2010, beginning with Vice President, Merchandise Manager, Macy’s West and culminating with Executive Vice +President, Merchandising for Juniors, Kids, Intimate Apparel, Dresses, Suits, Coats and Swimwear. Earlier, Mr. Smith was a Merchandiser +for XOXO Apparel Company and held various positions with Burdine’s Department Stores. Mr. Smith possesses nearly 30 years of business +experience in the fashion industry and has extensive executive level expertise in merchandising. His experience in this area further +enhances the Board’s depth of understanding of the industry. +Amelia +Newton Varela has served as President of the Company since September 2015 and has been a director since 2016. Prior to this tenure, +Ms. Varela was Executive Vice President of Wholesale of the Company since April 2008 and Executive Vice President of Wholesale Footwear +of the Company from November 2004 to April 2008. Previously, she was Vice President of Sales for Steve Madden Women’s Wholesale +Division from January 2000. Ms. Varela began her career with the Company in 1998 in the role of Account Executive for Steve Madden Women’s +Wholesale Division. She graduated from The Fashion Institute of Technology in 1995. Ms. Varela’s over 20 years of experience at +the Company provides relevant industry knowledge and expertise, and leadership to the Board. +Required +Vote +Proxies +will be voted for the election of the eleven nominees as directors of the Company unless otherwise specified in the proxy. A plurality +of the votes cast by the holders of shares of Common Stock present in person or represented by proxy and entitled to vote at the Annual +Meeting will be necessary to elect the nominees as directors. This means that the director nominees who receive the greatest number of +affirmative votes cast are elected as directors, subject to our Director Election (Majority Voting) Policy, which is described below. +If, for any reason, any nominee is unable or unwilling to serve, the proxies will be voted for a substitute nominee, who will be designated +by the Board of Directors at the Annual Meeting. Stockholders may abstain from voting by marking the +13 +appropriate boxes on the accompanying +proxy. Abstentions will be counted separately and used for purposes of calculating whether a quorum is present at the Annual Meeting, +but will have no effect on the outcome of the vote. +Director +Election (Majority Voting) Policy +In +uncontested elections, it is our policy that any nominee for director who receives a greater number of “WITHHOLD” votes than +“FOR” votes for his or her election must promptly submit a letter offering his or her resignation to the Nominating/Corporate +Governance Committee following the certification of the stockholder vote. In such event, the Nominating/Corporate Governance Committee +would then consider the offer of resignation and make a recommendation to the independent member of the Board of Directors as to whether +or not the resignation should be accepted. For more information about this policy, see “Corporate Governance – Director Election +(Majority Voting) Policy” below. +Recommendation +of the Board of Directors +The +Nominating/Corporate Governance Committee of the Board and the entire Board of Directors unanimously recommend a vote “FOR” +the election of Mr. Edward R. Rosenfeld, Mr. Peter A. Davis, Mr. Al Ferrara, Mr. Mitchell S. Klipper, Ms. Maria Teresa Kumar, Ms. Rose +Peabody Lynch, Mr. Peter Migliorini, Ms. Arian Simone Reed, Mr. Ravi Sachdev, Mr. Robert Smith, and Ms. Amelia Newton Varela. +CORPORATE +GOVERNANCE +The +Board of Directors +Our +business is managed under the direction and oversight of the Board of Directors, whose members are elected by our stockholders. Directors +meet their responsibilities by participating in meetings of the Board of Directors and the various committees of the Board on which they +sit. They also communicate with our Chairman and Chief Executive Officer and other officers and employees of the Company and consult +with our independent registered public accounting firm and other third parties. The size of the Board is fixed at eleven members. Nine +current directors are independent and two current directors are not independent. The Nominating/Corporate Governance Committee determined +to nominate all eleven current directors for election to our Board. +Director +Independence +The +Board of Directors has determined that the following director nominees are “independent” for purposes of the criteria of +the SEC and The Nasdaq Global Select Market listing standards: Mr. Davis, Mr. Ferrara, Mr. Klipper, Ms. Kumar, Ms. Lynch, Mr. Migliorini, +Ms. Reed, Mr. Sachdev, and Mr. Smith. There is also no family relationship among any of the directors and executive officers of the Company. +If the eleven nominees set forth above are elected, the Board will consist of a majority of independent directors. The Board of Directors +has held regularly scheduled executive sessions for the independent directors, with Mr. Migliorini serving as Presiding Director of such +executive sessions. +Involvement +in Certain Legal Proceedings +During +the past ten years none of the persons currently serving as executive officers and/or directors of the Company has been the subject matter +of any legal proceedings that are required to be disclosed pursuant to Item 401(f) of Regulation S-K. Nor are any such legal proceedings +believed to be contemplated by governmental authorities against any director or executive officer. Further, no executive officers, directors, +beneficial owners of more than five percent of the Company’s common stock, or any other actor mentioned in Item 103(c)(2) of Regulation +S-K is a party adverse to the Company in a material proceeding or has a material interest adverse to the Company. +Director +Attendance at Meetings +Attendance +at Annual Meetings of Stockholders +We +have no specific policy regarding director attendance at our annual meetings of stockholders. We encourage all our directors to attend +annual meetings of our stockholders, and nine directors attended our 2022 annual meeting of stockholders. +14 +Attendance +at Meetings of the Board of Directors +The +Board of Directors held four regularly scheduled meetings during the 2022 Fiscal Year and acted by unanimous written consent on three +occasions during the 2022 Fiscal Year. In the 2022 Fiscal Year, each director attended 75% or more of the total number of Board meetings +and meetings held by all committees on which he or she then served. +Director +Election (Majority Voting) Policy +We +have adopted a Director Election (Majority Voting) Policy. Pursuant to this policy, in an uncontested election of directors (that is, +an election where the number of nominees is equal to the number of seats open) any nominee for director who receives a greater number +of “WITHHOLD” votes than “FOR” votes for his or her election must promptly submit an offer of resignation to +the Nominating/Corporate Governance Committee following the certification of the stockholder vote for consideration in accordance with +the following procedures. In such event, upon receipt of the resignation, the Nominating/Corporate Governance Committee would promptly +consider the appropriateness of the director’s continued service on the Board of Directors and recommend to the Qualified Independent +Directors (as defined below) the action to be taken with respect to the resignation, which could include (1) accepting the resignation; +(2) rejecting the resignation; (3) retaining the director but addressing what the Qualified Independent Directors believe to be the underlying +cause of the “WITHHOLD” votes; or (4) determining that the director will not be renominated by the Board of Directors in +future elections. The Nominating/Corporate Governance Committee would consider factors such as (a) the reasons expressed by the stockholders +for withholding votes from such director; (b) any possibilities for curing the underlying cause of the “WITHHOLD” votes; +(c) the tenure and qualifications of the director and his or her past and expected future contributions to the Company; (d) the overall +composition of the Board of Directors, including, without limitation, whether accepting the resignation would cause the Company to fail +to meet any applicable SEC or Nasdaq requirement; (e) the availability of other qualified candidates; and (f) our Board of Director Candidate +Guidelines. +The +Qualified Independent Directors would then act on the Nominating/Corporate Governance Committee’s recommendation no later than +90 days following the date of the stockholders’ meeting at which the director election occurred. In considering the Nominating/Corporate +Governance Committee’s recommendation, the Qualified Independent Directors would review the factors considered by the Nominating/Corporate +Governance Committee and such additional information and factors that they believe to be relevant. Following the Qualified Independent +Directors’ decision, we would promptly disclose the decision in a Current Report on Form 8-K. The Form 8-K would include a full +explanation of the process by which the decision of the Qualified Independent Directors was reached and, if applicable, the reasons why +the offer of resignation was rejected. +If +an offer of resignation were to be accepted, the Nominating/Corporate Governance Committee would recommend to the Board of Directors +whether to fill the vacancy or reduce the size of the Board of Directors accordingly. Any director required to submit his or her resignation +pursuant to this policy would not participate in the Nominating/Corporate Governance Committee’s recommendation or the Qualified +Independent Directors’ consideration of the resignation. Prior to voting on the director’s resignation offer, the Qualified +Independent Directors would provide to the director an opportunity to submit any information or statement that he or she believes relevant +to the Qualified Independent Directors’ consideration of the resignation. +For +purposes of this policy, “Qualified Independent Directors” means all directors who (1) are “independent” for +purposes of The Nasdaq Global Select Market listing standards and (2) are not required to offer their resignation in accordance with +this policy. If there are fewer than three independent directors then serving on the Board of Directors who are not required to submit +their resignations in accordance with this policy, then the Qualified Independent Directors shall consist of all of the independent directors +and each independent director who is required to offer his or her resignation in accordance with this policy shall recuse himself or +herself from the deliberations and voting only with respect to his or her individual offer to resign. +Committees +of the Board +Among +other committees, the Board of Directors has a standing Audit Committee, Compensation Committee, Nominating/Corporate Governance Committee, +and Corporate Social Responsibility Committee. Each +15 +committee has a written +charter. The table below provides current membership for each Board committee and the number of meetings held by each Board committee +in the 2022 Fiscal Year. +Committees +of the Board of Directors +Director +Audit +Compensation +Nominating/ +Corporate +Governance +Corporate +Social +Responsibility +Edward +R. Rosenfeld +Peter +A. Davis +Member +Al +Ferrara +Chair +Member +Mitchell +S. Klipper +Member +Member +Maria +Teresa Kumar +Member +Rose +Peabody Lynch +Member +Member +Peter +Migliorini +Chair +Chair +Arian +Simone Reed +Member +Ravi +Sachdev +Member +Member +Robert +Smith +Member +Chair +Amelia +Newton Varela +Number +of Meetings in 2022 Fiscal Year +5 +3 +1 +4 +Number +of Actions by Written Consents in 2022 Fiscal Year +1 +1 +1 +0 +Audit +Committee +The +Audit Committee consists entirely of directors who are “independent” for purposes of The Nasdaq Global Select Market listing +standards and who meet the independence requirements contained in Exchange Act, Rule 10A-3(b)(1). The Board has determined that each +of Messrs. Ferrara, Klipper, and Sachdev meets the SEC criteria of an “audit committee financial expert” as defined in Item +407(d)(5) of Regulation S-K. No member of the Audit Committee may serve simultaneously on the audit committee of more than two other +public companies without prior approval of the Board. The Audit Committee is primarily responsible for reviewing the services performed +by our independent registered public accountants, evaluating our accounting policies, our system of internal controls over financial +reporting (ICFR), our risk management policies, and information security and technology, including cybersecurity, and reviewing significant +financial transactions. +The +Audit Committee is responsible for reviewing and striving to ensure the integrity of our financial statements and oversight of our compliance +with legal and regulatory requirement, our internal audit function and our information security and technology. Among other matters, +the Audit Committee, with management, independent registered public accountants and internal auditors, reviews the adequacy of our internal +controls that could significantly affect our financial statements. Additionally, the Audit Committee reviews any potential related party +transactions as well as any other potential conflicts of interest situations on an ongoing basis. The Audit Committee is also directly +and solely responsible for the appointment, retention, compensation, oversight and termination of our independent registered public accountants. +In addition, the Audit Committee functions as the Company’s Qualified Legal Compliance Committee (the “QLCC”). The +purpose of the QLCC is to receive, retain and investigate reports made directly, or otherwise made known, of evidence of material violations +of any United States federal or state law, including any material breach of fiduciary duty, by the Company or its officers, directors, +employees or agents and, if an investigation was necessary, to recommend an appropriate response to the Company. +Management +has primary responsibility for our financial statements and the overall reporting process, including our system of internal controls +over financial reporting. Our independent registered public accountants audit our annual financial statements prepared by management, +express an opinion as to whether those financial statements present fairly our financial position, results of operations and cash flows +in conformity with accounting principles generally accepted in the United States of America and discuss with the Audit Committee any +issues they believe should be raised. Our independent registered public accountants also issue an opinion on our internal controls over +financial reporting. +16 +The +Audit Committee is also responsible for the oversight of our risk management process, which is discussed in the “Risk Oversight” +section below. +In +performing its functions, the Audit Committee meets with management on at least a quarterly basis to review and discuss the quarterly +financial statements, annual audited financial statements and related reports and to consider the adequacy of our internal controls and +the objectivity of our financial reporting. The Audit Committee then recommends to the Board whether the audited financial statements +should be included in our Annual Report on Form 10-K. From time to time, the Audit Committee, with management, identifies and reviews +other areas of risks related to our operations and at least quarterly receives reports on and reviews cybersecurity risks as well as +our approach to managing such risks. Our Chief Information Security Officer presents to the Audit Committee regarding cybersecurity on +at least a quarterly basis. The Audit Committee discusses these matters with our independent registered public accountants and with appropriate +Company personnel. Meetings are held with the independent registered public accountants, who have unrestricted access to the Audit Committee. +In addition, the Audit Committee reviews our financing plans and reports and makes recommendations to the full Board of Directors for +approval and to authorize action. The Board has adopted a written charter setting out the functions the Audit Committee is to perform. +A copy of the Audit Committee Charter is available on our website at https://investor.stevemadden.com/corporate-governance/highlights . +The Audit Committee held five meetings and undertook one action by written consent during the 2022 Fiscal Year. +Nominating/Corporate +Governance Committee +The +Nominating/Corporate Governance Committee consists of directors who are “independent” for purposes of The Nasdaq Global Select +Market listing standards. +The +Nominating/Corporate Governance Committee provides oversight with respect to a wide range of issues relating to the operation of the +Board, including consideration of and recommendations regarding the size and composition of the Board of Directors and its committees +along with the identification of potential candidates to serve as directors. The Nominating/Corporate Governance Committee identifies +candidates to the Board of Directors by introductions from management, members of the Board of Directors, employees of the Company or +other sources, including stockholders that satisfy our policy regarding stockholder recommended candidates (as described below). To enable +the Nominating/Corporate Governance Committee to consider a stockholder recommendation in connection with the 2024 Annual Meeting, we +must receive the recommendation on or before December 12, 2023. The Nominating/Corporate Governance Committee does not evaluate director +candidates recommended by stockholders that satisfy our policy differently than director candidates recommended by other sources. +Stockholders +wishing to submit director nominations for the 2024 Annual Meeting should write to the Secretary, Steven Madden, Ltd., 52-16 Barnett +Avenue, Long Island City, New York 11104. In accordance with Article II, Section 5 of the By-Laws, director nominations for the 2024 +Annual Meeting can only be made by a stockholder of the Company who (i) is a stockholder of record on the date of the giving of the notice +of such director nominations and on the record date for the determination of stockholders entitled to vote at the 2024 Annual Meeting +and (ii) complies with the notice requirements and procedures set forth in Article II, Section 5 of the By-Laws. A stockholder’s +notice to the Secretary of the Company with respect to any such nominations must be timely and in proper written form pursuant to Article +II, Section 5 of the By-Laws, including containing certain information concerning the nominating or proposing stockholder and certain +information concerning the proposed nominee, such as any agreements, arrangements or understandings the stockholder may have with the +proposed nominee or other parties relating to the nomination or other proposal. Such information must be updated, if necessary, to be +true and correct as of the record date for the 2024 Annual Meeting and as of the date that is 10 business days prior to the date of the +2024 Annual Meeting. The notice must be delivered to, or mailed and received at, our principal executive offices not less than 120 days +nor more than 150 days prior to the first anniversary of the date of our 2023 Annual Meeting. Accordingly, any written notice given by +or on behalf of a stockholder pursuant to Article II, Section 5 of our By-Laws in connection with the 2024 Annual Meeting must be received +no later than January 25, 2024 and no earlier than December 26, 2023. This summary information regarding the By-Laws is qualified in +its entirety by reference to the full text of the By-Laws, a copy of which may be obtained by any stockholder, without charge, upon written +request to the Secretary of the Company at the address set forth above. If a nomination is not timely and properly made in accordance +with the procedures set forth in the By-Laws, or does not contain the specific information required by the By-Laws, such nomination will +be defective and will not be brought before the 2024 +17 +Annual Meeting. In addition, to comply with the universal proxy rules, stockholders +who intend to solicit proxies in support of director nominees other than the nominees of our Board of Directors must comply with the +additional requirements of Rule 14a-19 under the Exchange Act, including providing a statement that such stockholder intends to solicit +the holders of shares representing at least 67% of the voting power of our shares entitled to vote on the election of directors in support +of director nominees other than our nominees, as required by Rule 14a-19(b). We intend to file a proxy statement and WHITE proxy card +with the SEC in connection with the solicitation of proxies for the 2024 Annual Meeting. +In +considering candidates for the Board of Directors, the Nominating/Corporate Governance Committee considers our Board of Director Candidate +Guidelines and Director Election (Majority Voting) Policy, available on our website at https://investor.stevemadden.com/corporate-governance/highlights , +our policy regarding stockholder recommended director candidates, as set forth above, and all other factors that it deems appropriate, +including the individual’s character, education, experience, knowledge and skills. While our Board of Director Candidate Guidelines +do not expressly identify diversity as a factor for consideration regarding the evaluation of director candidates, diversity is among +the many factors the Nominating/Corporate Governance Committee considers in the candidate evaluation process. To assess the effectiveness +of the mandate set forth in the Nominating/Corporate Governance Committee’s charter, the Nominating/Corporate Governance Committee +reviews annually with the Board the composition of the Board as a whole and recommends, if necessary, measures to be taken so that the +Board reflects the appropriate balance of knowledge, experience and diversity required for the Board as a whole. +Additionally, +the Nominating/Corporate Governance Committee takes a leadership role in shaping the corporate governance of the Company. The Nominating/Corporate +Governance Committee develops and recommends corporate governance principles for the Company, makes recommendations to the Board of Directors +in support of such principles, and monitors compliance with our Conduct Codes (as defined and discussed in the “Codes of Business +Conduct and Ethics” section below). The Nominating/Corporate Governance Committee also oversees the evaluation of the Board of +Directors, its committees, and the Company’s senior executives and periodically reviews the succession plan for our senior executives +with the Chairman of the Board and Chief Executive Officer. The Nominating/Corporate Governance Committee operates under a formal charter +that governs the Committee’s composition, powers and responsibilities. A copy of the Nominating/Corporate Governance Committee +Charter is available on our website at https://investor.stevemadden.com/corporate-governance/highlights . The Nominating/Corporate +Governance Committee held one meeting and undertook one action by written consent during the 2022 Fiscal Year. +Compensation +Committee +The +Compensation Committee consists of directors who are “independent” for purposes of The Nasdaq Global Select Market listing +standards and “non-employee directors” pursuant to Exchange Act Rule 16b-3. +The +Compensation Committee is responsible for establishing and overseeing our compensation and incentive plans and program; determining and +approving compensation for our executive officers, including salaries, bonuses, perquisites and equity awards; reviewing and approving +compensation and awards for our executive officers under our compensation and incentive plans and program; considering the results of +say-on-pay proposals; assessing whether our compensation and incentive plans and programs encourage excessive risk-taking and evaluating +compensation policies that could mitigate such risk; administering our equity compensation plans; reviewing and approving a compensation +program for independent members of the Board; developing and monitoring compliance with policies for the clawback of erroneously paid +compensation; and assisting the Board in discharging the Board’s responsibilities relating to management organization, performance, +compensation and succession. The Compensation Committee also reviews executive education and development programs; evaluates the competitiveness +of the compensation of the Company’s executive officers; reviews and approves of the corporate goals and objectives used to determine +executive compensation; and monitors the amount of Company equity used for compensation. The Compensation Committee has the authority +to seek the advice of compensation consultants in carrying out its duties and responsibilities; however, the Compensation Committee must +assess the independence of the consultant before retaining them or receiving any advice. Independence factors that the Compensation Committee +should consider are described in the “Role of the Compensation Committee – Independence of Outside Advisors” section +below. The Compensation Committee operates under a formal charter adopted by the Board of Directors that governs its composition, powers +and responsibilities. A copy of the +18 +Compensation Committee Charter is available on our website at https://investor.stevemadden.com/corporate-governance/highlights . +The Compensation Committee held three meetings and undertook one action by written consent during the 2022 Fiscal Year. +Corporate +Social Responsibility Committee +The +Corporate Social Responsibility Committee consists of directors who are “independent” for purposes of The Nasdaq Global Select +Market listing standards. +The +Corporate Social Responsibility Committee is responsible for assisting the Board in its oversight of our initiatives, plans and practices +with respect to corporate social responsibility matters of significance to the Company and the communities in which we operate. Corporate +social responsibility matters include ethical and sustainable sourcing; human rights; the environment; supplier conduct; labor conditions; +climate change; diversity in employment; charitable giving; government relations; and political spending. The Committee’s responsibility +includes oversight of: +● +management’s +evaluation of risks and opportunities with respect to corporate social responsibility matters; +● +management’s +creation of key strategic initiatives, goals, strategies, policies, and procedures to address corporate social responsibility risks +and opportunities; +● +our +governance of, and performance relative to, such key strategic initiatives, goals, strategies, policies, and procedures; +● +the +policies and procedures used to prepare corporate social responsibility related disclosures; +● +engagement +with stockholders, other key stakeholders, and proxy advisory firms regarding corporate social responsibility matters; +● +our +response to corporate social responsibility related stockholder proposals; +● +management’s +assessment of the identity and scope of matters comprising corporate social responsibility; and +● +our +government relations strategies and activities. +The +Corporate Social Responsibility Committee operates under a formal charter that governs the Committee’s composition, powers and +responsibilities. The Corporate Social Responsibility Committee Charter requires that a majority of the committee’s members not +be officers or employees of the Company or its affiliates. A copy of the Corporate Social Responsibility Committee Charter is available +on our website at https://investor.stevemadden.com/corporate-governance/highlights . The Corporate Social Responsibility Committee +held four meetings during the 2022 Fiscal Year. +Board +Leadership Structure, Risk Oversight, Executive Sessions of Non-Employee Directors, and Communications Between Stockholders and the Board +Board +Leadership Structure +As +noted above, our Board currently comprises nine independent and two non-independent directors. +Mr. +Rosenfeld has served as Chairman of the Board and Chief Executive Officer since August 2008 and has been a member of the Board since +February 2008. Mr. Migliorini is currently serving as the Presiding Director. The Presiding Director is elected by the Board’s +independent directors and presides over executive sessions of the independent directors. We believe that the number of independent, experienced +directors who comprise our Board, along with the independent oversight of our Presiding Director, benefits the Company and our stockholders. +We +recognize that different board leadership structures may be appropriate for companies in different situations and believe that no one +structure is suitable for all companies. We believe our current Board leadership structure is optimal for the Company because it demonstrates +to our employees, suppliers, customers, and other stakeholders that we are under strong leadership, with a single person setting the +tone and having primary responsibility for managing our operations and leading our Board in setting long-term strategy. Having a single +leader for both the Company and our Board eliminates confusion and duplication of efforts and provides clear leadership for the Company. +We believe the Company, like many U.S. companies, has been well-served by this leadership structure. +19 +Because +the positions of Chairman of the Board and Chief Executive Officer are held by the same person, the Board believes it is appropriate +for the independent directors to elect one independent director to serve as a Presiding Director. In addition to presiding at executive +sessions of the independent directors, the Presiding Director has responsibilities that include coordinating with the Chairman of the +Board and Chief Executive Officer in establishing agenda and discussion items for Board meetings; retaining independent advisors on behalf +of the Board as the Board may determine to be necessary or appropriate; and performing such other functions as the independent directors +may designate from time to time. +Our +Board conducts an annual evaluation to determine whether it and its committees are functioning effectively. As part of this annual self-evaluation, +the Board evaluates whether the current leadership structure continues to be optimal for the Company and our stockholders. +Risk +Oversight +Our +Board is responsible for overseeing our risk management process. It focuses on our general risk management strategy and the most significant +risks facing the Company and ensures that management implements appropriate risk mitigation strategies. Management also apprises the +Board of particular risk management matters in connection with its general oversight and approval of corporate matters. +The +Board has delegated to the Audit Committee oversight of our risk management process. Among its duties, the Audit Committee reviews with +management (a) our policies, guidelines, and processes with respect to risk assessment and management of risks that may be material to +the Company, (b) our system of disclosure controls and system of internal controls over financial reporting, (c) our compliance with +legal and regulatory requirements, and (d) our systems and processes related to information security and technology, including cybersecurity. +The Audit Committee is also responsible for reviewing major legislative and regulatory developments that could materially impact our +contingent liabilities and other financial risks. Our other Board committees also consider and address risks as they perform their respective +committee responsibilities. All committees report to the full Board as appropriate, including when a matter rises to the level of a material +or enterprise level risk. +Our +management is responsible for day-to-day risk management. Our risk management and internal audit areas serve as the primary monitoring +and testing function for company-wide policies and procedures and manage the day-to-day oversight of the risk management strategy for +our ongoing business. This oversight includes identifying, evaluating, and addressing potential risks that may exist at the enterprise, +strategic, financial, operational, and compliance and reporting levels. +We +believe the division of risk management responsibilities described above is an effective approach for addressing the risks facing the +Company and that our Board leadership structure supports this approach. +Executive +Sessions of Independent Directors +The +Board holds executive sessions of its independent directors generally at each regularly scheduled meeting. The Presiding Director serves +as the chairperson for these executive sessions. +Communications +between Stockholders and the Board +We +have adopted a procedure by which stockholders may send communications to one or more members of the Board of Directors by writing to +such director(s) or to the entire Board of Directors in care of the Secretary at Steven Madden, Ltd., 52-16 Barnett Avenue, Long Island +City, New York 11104. The Board has instructed the Secretary of the Company to review all communications so received and to exercise +discretion not to forward to the Board correspondence that he or she decides is inappropriate, such as business solicitations, frivolous +communications and advertising, routine business matters ( i.e. , business inquiries, complaints, or suggestions) and personal grievances. +However, any director may at any time request that the Secretary forward to such director any and all communications received by the +Secretary, but not forwarded to the directors. +20 +Codes +of Business Conduct and Ethics +We +have adopted a Code of Ethics for the Chief Executive Officer and Senior Financial Officers, which is applicable to our Chief Executive +Officer, Chief Financial Officer, controller, principal accounting officer, head of internal audit and such other employees of the Company +as the Audit Committee may from time to time designate as “senior financial officers.” In addition, the individuals who serve +on our Board of Directors are subject to a Code of Business Conduct and Ethics for the Board of Directors, and all of our employees are +held accountable for adherence to our Code of Conduct. Each of the Code of Ethics for the Chief Executive Officer and Senior Financial +Officers and the Code of Business Conduct and Ethics for the Board of Directors is included as an exhibit to our Annual Report on Form +10-K for the fiscal year ended December 31, 2014. The Code of Conduct applicable to all of our employees is an exhibit to our Annual +Report on Form 10-K for the fiscal year ended December 31, 2018. The Code of Ethics for the Chief Executive Officer and Senior Financial +Officers, the Code of Business Conduct and Ethics for the Board of Directors and the Code of Conduct applicable to all of our employees +(collectively, the “Conduct Codes”) are available on our website at https://investor.stevemadden.com/corporate-governance/highlights +and may be obtained by any stockholder without charge upon request by writing to the Secretary at Steven Madden, Ltd., 52-16 Barnett +Avenue, Long Island City, New York 11104. The Conduct Codes are intended to establish standards necessary to deter wrongdoing and to +promote compliance with applicable governmental laws, rules and regulations and honest and ethical conduct. The Conduct Codes cover all +areas of professional conduct, including conflicts of interest, fair dealing, financial reporting and disclosure, protection of our assets +and confidentiality. Employees have an obligation to promptly report any known or suspected violation of the Conduct Codes without fear +of retaliation. Waiver of any provision of the Conduct Codes for executive officers and directors may only be granted by the Board of +Directors or the Nominating/Corporate Governance Committee, and we will disclose any such waiver or modification of the Conduct Codes +relating to such individuals. +Corporate +Governance Principles +The +Board of Directors has adopted Corporate Governance Principles as a set of guiding guidelines by which the Company is governed. The Corporate +Governance Principles address various matters of corporate governance such as board size and composition, director qualifications and +responsibilities, director compensation, limitations on service on other boards, board committees, director orientation and education, +director access to management, management development and succession planning, and annual performance evaluations for the Board. They +include a policy for the clawback of executive incentive compensation paid to senior executive officers if there is an accounting restatement +by the Company due to intentional misconduct of a senior executive officer. In addition, in circumstances in which the Board of Directors +believes it is appropriate, the clawback policy allows for the reimbursement, forfeiture or cancellation of incentive compensation paid +or awarded to a senior executive officer who has engaged in willful misconduct in the performance of his or her duties that results in +material financial harm or significant reputational harm to the Company. +The +Nominating/Corporate Governance Committee reviews the Corporate Governance Principles annually to determine whether to recommend changes +to the Corporate Governance Guidelines to reflect new laws, rules and regulations and governance best practices. The Corporate Governance +Principles are available on our website at https://investor.stevemadden.com/corporate-governance/highlights and may be obtained +by any stockholder without charge upon request by writing to the Secretary at Steven Madden, Ltd., 52-16 Barnett Avenue, Long Island +City, New York 11104. +Stock +Ownership Guidelines +The +Board of Directors has adopted Stock Ownership Guidelines, which require a level of ownership of shares of our Common Stock by our directors +and executive officers to align their interests with the long-term interests of our stockholders. The Stock Ownership Guidelines require +our Chief Executive Officer to own shares of our Common Stock equal in value to five times his annual base salary. Other executive officers +are required to own shares of our Common Stock equal in value to two times their annual base salary. The Stock Ownership Guidelines further +require that each non-employee director must own shares of our Common Stock equal in value to two times the cash portion of the directors’ +annual retainer or the equivalent if a retainer is not received in certain circumstances. Individuals subject to the Stock Ownership +Guidelines must attain the required level of share ownership by the fifth anniversary of the later of (i) the effective date of the adoption +of the Stock Ownership Guidelines and (ii) the date that the individual became a named executive officer or director. The named executive +21 +officer or director must retain an amount equal to 25% of the net shares of our Common Stock received as a result of the exercise, vesting +or payment of any equity award we make until the applicable share ownership requirement is satisfied. The Compensation Committee monitors +the compliance of our Chief Executive Officer and other executive officers with the Stock Ownership Guidelines. +Prohibition +on Hedging and Pledging of Our Common Stock +Our +directors and executive officers and certain other persons designated from time to time by our Chief Financial Officer are prohibited +from entering into hedging transactions and from pledging our Common Stock pursuant to a formal policy concerning such activities adopted +by the Board of Directors. This policy does not apply to other employees of the Company. +Corporate +Social Responsibility Policy +We +are committed to operating our business in a socially responsible manner. We strive to incorporate this commitment into every aspect +of our business, including the design, quality, safety and sourcing of our products, the safety and fair treatment of our employees, +animal welfare and compliance with laws, including the Foreign Corrupt Practices Act and the SEC’s Conflict Minerals rule. These +guiding principles are set forth in our Corporate Social Responsibility Policy, and we expect all our employees to be familiar with and +to adhere to them. We strive to do business with vendors and suppliers that share our views and commitments to quality products and ethical +business principles. We will only engage vendors and suppliers that demonstrate a commitment to meeting our standards. Our Corporate +Social Responsibility Committee assists the Board in its oversight of management’s social responsibility obligations. +2022 +Amendment to Bylaws +On +November 1, 2022, the Board approved and adopted an amendment and restatement of our bylaws (the “Amended and Restated By-Laws”), +including updating the procedural mechanics and disclosure requirements for stockholder nominations of directors in light of the new +“universal proxy” rules. These “universal proxy” rules, Rule 14a-19 under the Exchange Act, require companies +to include all stockholder director nominees on their proxy card under certain conditions. The Amended and Restated By-Laws also reflect +recent updates to the Delaware General Corporation Law, such as the provisions regarding notice of an adjournment of any meeting of stockholders +and the availability of a list of stockholders entitled to vote at a stockholder meeting. The full text of the Amended and Restated By-Laws +is filed as Exhibit 3.1 to our Current Report on Form 8-K filed with the SEC on November 2, 2022. +Certain +Relationships and Related Party Transactions +Steven +Madden Employment Agreement. We believe that Steven Madden, our founder and Creative and Design Chief, provides unique and significant +value in guiding the leadership of our creative process, both in his hands-on work for the Company and his collaboration with our designers, +product professionals and marketing executives. Mr. Madden is a beneficial owner of more than 5% of the outstanding shares of our Common +Stock. In addition, the public’s association of Mr. Madden’s name and likeness with our branded products is significant, +meaningful, and integral to our success and has been, and continues to be, instrumental in creating long-term stockholder value. Based +upon that belief, we further believe that his continuing involvement with the Company is essential, and to this end, we have for many +years had an employment agreement with Mr. Madden as described below. +Mr. +Madden’s agreement in its current form dates back to July 1, 2005, as subsequently amended on various occasions, most recently +on March 25, 2019 (the “SM Agreement”). Under the SM Agreement, Mr. Madden has agreed to continue to serve as our Creative +and Design Chief for a term continuing through December 31, 2026, for a base salary of $7,026,042 per annum together with the potential +for cash bonuses at the sole discretion of our Board of Directors and an annual life insurance premium reimbursement of up to $200,000. +Pursuant to the SM Agreement, on February 8, 2012, Mr. Madden was granted 2,194,584 restricted shares of Common Stock (as adjusted for +our 2018 three-for-two stock split effected as a stock dividend), valued at approximately $40 million, under our Amended and Restated +2006 Stock Incentive Plan, which is referred to herein as the “2006 Plan.” The restricted stock vests in equal annual installments +over seven years commencing on December 31, 2017 through +22 +December 31, 2023, subject to Mr. Madden’s continued employment with the +Company on each such vesting date. On June 30, 2012, as allowed under the SM Agreement, Mr. Madden elected to receive an additional restricted +stock award valued at approximately $40 million in consideration of a reduction in his annual base salary in years after 2012 to the +amount reflected above. As a consequence, on July 3, 2012, Mr. Madden received 2,840,013 additional restricted shares of Common Stock +vesting in six annual installments commencing on December 31, 2018 through December 31, 2023, subject to his continued employment with +the Company on each such vesting date. +Under +the SM Agreement, Mr. Madden is also eligible to receive annually, on or about the date of our annual meeting of stockholders (but not +later than June 30), an option (the “Annual Option”) to purchase shares of Common Stock equal to the greater of (a) 100% +of the largest aggregate number of shares of Common Stock available upon the exercise of an option or options granted to any other continuing +full-time employee of the Company during the preceding twelve-month period or (b) 225,000 shares of Common Stock; provided, however, +that a grant to Mr. Madden in excess of 150% of the number of shares of Common Stock subject to options granted to such other continuing +full-time employee would require stockholder approval. Any Annual Option so granted vests quarterly over a one-year period and is exercisable +for a period of five years at a price equal to the closing price of our Common Stock on the grant date. In addition, pursuant to the +SM Agreement, on March 1, 2017, Mr. Madden received a one-time stock option grant to purchase 1,125,000 shares of our Common Stock at +an exercise price of $24.90 as a result of our having achieved for the fiscal year ended December 31, 2016 earnings per share performance +criteria set forth in the SM Agreement; such option vests in equal annual installments over a five-year period, which commenced on the +first anniversary of the grant date. +Under +the SM Agreement, if Mr. Madden dies, his estate would receive a payment equal to his base salary for the 12-month period immediately +after the date of his death. Further, if Mr. Madden’s employment is terminated due to his total disability (as defined in the agreement), +“for cause” (as defined in the agreement) or due to Mr. Madden’s resignation, we are obligated to pay Mr. Madden the +amount of compensation that is accrued and unpaid through the date of termination. If Mr. Madden’s employment is terminated for +any reason (other than “for cause” or due to his death, total disability or resignation), we are obligated to pay Mr. Madden, +in installments, the balance of his base salary through the end of the term of the SM Agreement. If, during the period commencing 120 +days prior to a “change of control” transaction (as defined in the SM Agreement) and ending on the first anniversary of a +change of control transaction, Mr. Madden’s employment is terminated other than for cause or by his resignation for “good +reason” (as defined in the SM Agreement), or if Mr. Madden resigns within 30 days following a change of control transaction, all +unvested options held by Mr. Madden will be accelerated and vest on the date of termination or resignation, and Mr. Madden will be entitled +to receive a lump sum cash payment equal to the amount of compensation that is accrued and unpaid through the date of termination plus +$35 million. The SM Agreement contains other customary provisions, including provisions regarding expense reimbursement, confidentiality, +non-solicitation and non-competition. +For +the 2022 Fiscal Year, Mr. Madden earned $7,026,042 in base salary and received $200,000 for the payment of an annual life insurance premium. +Mr. Madden also received his Annual Option for the 2022 Fiscal Year to purchase 225,000 shares of Common Stock at a price per share of +$36.00. +The +most recent amendment entered into on March 25, 2019, effected the extension of the term of the SM Agreement for three years through +December 31, 2026. In consideration of this extension, we have granted to Mr. Madden 200,000 shares of Common Stock, which shares are +subject to certain restrictions, including that he will not sell, transfer, pledge, hypothecate, assign or otherwise dispose of the restricted +shares except as set forth under his award agreement. The shares will vest in substantially equal annual installments over three years +commencing on December 31, 2024, provided that Mr. Madden continues to be employed by the Company on each vesting date through December +31, 2026. +Loan +to Steven Madden. On June 25, 2007, we made a loan to Mr. Madden in the amount of $3,000,000 to enable Mr. Madden to satisfy a personal +tax obligation resulting from the exercise of a stock option that was due to expire. The loan is evidenced by a secured promissory note +executed by Mr. Madden in our favor, the security for which is a certain securities brokerage account maintained by Mr. Madden with his +broker; none of the securities in the securities brokerage account are shares of Common Stock. There have been successive amendments +to the secured promissory note, the most recent of which occurred in April 2016. At that time the secured promissory note was amended +to substitute the collateral securing the secured promissory note from shares of our Common Stock to the security interest in Mr. Madden’s +securities brokerage account. Previously, on January 3, 2012, the secured +23 +promissory note was amended and restated to extend the maturity +date of the obligation to December 31, 2023 and eliminate the accrual of interest after December 31, 2011. Prior to the January 3, 2012 +amendment, the secured promissory note had been accruing interest at the rate of 6% per annum. In addition, the secured promissory note +provides that, commencing on December 31, 2014 and annually on each December 31 thereafter through the maturity date, one-tenth of the +principal amount thereof, together with accrued interest, will be cancelled by the Company provided that we have employed Mr. Madden +on each such December 31. Contemporaneously, on each such December 31, we will release our security interest in a portion of the securities +held in Mr. Madden’s securities brokerage account generally correlating to the amount of indebtedness cancelled on such date. As +of December 31, 2011, interest in the amount of $1,090,000 had accrued on the principal amount of the secured promissory note and, as +noted above, interest was eliminated after December 31, 2011. On December 31, 2022, we released Mr. Madden from his obligation to pay +the required one-tenth of the original principal amount of the secured promissory note, together with accrued interest. +Review, +Approval or Ratification of Transactions with Related Persons +Our +Conduct Codes and Employee Handbook prohibit all conflicts of interest. Under the Conduct Codes, conflicts of interest occur when personal +or professional interests interfere in any way, or even appear to interfere, with our interests. Our prohibition on conflicts of interest +under the Conduct Codes includes any related party transaction. +Related +person transactions must be approved by the Board, or by a committee of the Board consisting solely of independent directors, who will +approve the transaction only if they determine that it is in our best interests. In considering the transaction, the Board or committee +will consider all relevant factors, including, as applicable, (i) the business rationale for entering into the transaction; (ii) the +alternatives to entering into a related person transaction; (iii) whether the transaction is on terms comparable to those available to +third parties or, in the case of employment relationships, to employees generally; (iv) the potential for the transaction to lead to +an actual or apparent conflict of interest and any safeguards imposed to prevent such actual or apparent conflicts; and (v) the overall +fairness of the transaction to the Company. +We +have multiple processes for reporting conflicts of interest, including related party transactions. Under the Conduct Codes, all employees +are required to report any actual or apparent conflict of interest, or potential conflict of interest, to management. The Chief Financial +Officer distributes a questionnaire to our executive officers and management personnel quarterly and distributes a questionnaire to the +members of the Board of Directors annually requesting certain information regarding, among other things, their immediate family members, +employment and beneficial ownership interests, which information is then reviewed for any conflicts of interest under the Conduct Codes. +The +Board of Directors, the Audit Committee and the Disclosure Committee, which consists of management personnel, discuss the related party +transactions, specifically, and in connection with the regular review processes attendant to our periodic filings, including related +party transaction disclosures. +If +a director is a party to or in some manner involved in a transaction involving the Company, he or she will be recused from all discussions +and decisions about the transaction. The transaction must be approved in advance whenever practicable, and if not practicable, must be +ratified as promptly as practicable. +COMPENSATION +OF DIRECTORS IN THE 2022 FISCAL YEAR +The +Compensation Committee is responsible for establishing and overseeing all matters pertaining to compensation paid to directors for service +on the Board and its committees. +The +following table sets forth information concerning the 2022 Fiscal Year compensation of our non-employee directors who served in the 2022 +Fiscal Year. Following the table is a discussion of material factors related to the information disclosed in the table. Mr. Rosenfeld +and Ms. Varela do not receive any compensation for their service on the Board. +24 +Name +Fees Earned or +Paid in Cash +($) +Stock +Awards +($) (1) +All Other +Compensation +($) +Total +($) +Peter A. Davis (2) +85,000 +119,988 (3) +— +204,988 +Al Ferrara +120,000 +119,988 (4) +— +239,988 +Mitchell S. Klipper +95,000 +119,988 (5) +— +214,988 +Maria Teresa Kumar +85,000 +119,988 (6) +— +204,988 +Rose Peabody Lynch +95,000 +119,988 (7) +— +214,988 +Peter Migliorini +100,000 +119,988 (8) +— +219,988 +Arian Simone Reed (9) +85,000 +119,988 (10) +— +204,988 +Ravi Sachdev +95,000 +119,988 (11) +— +214,988 +Robert Smith +95,000 +119,988 (12) +— +214,988 +(1) +Reflects +the grant date fair value of stock awards calculated in accordance with the Financial Accounting Standards Board (“FASB”) +Accounting Standards Codification (“ASC”) Topic 718. Assumptions used in the calculation of these amounts are included +in Note H to our audited financial statements for the fiscal year ended December 31, 2022 included in our Annual Report on Form 10-K +filed with the Securities and Exchange Commission on March 1, 2023. +(2) +Mr. +Davis was appointed as a director on January 7, 2022. +(3) +At +December 31, 2022, the aggregate number of shares of restricted Common Stock held by Mr. Davis was 3,333, all of which were issued +in the 2022 Fiscal Year, and Mr. Davis had no options outstanding. +(4) +At +December 31, 2022, the aggregate number of shares of restricted Common Stock held by Mr. Ferrara was 3,333, all of which were issued +in the 2022 Fiscal Year, and Mr. Ferrara had no options outstanding. +(5) +At +December 31, 2022, the aggregate number of shares of restricted Common Stock held by Mr. Klipper was 3,333, all of which were issued +in the 2022 Fiscal Year, and Mr. Klipper had no options outstanding. +(6) +At +December 31, 2022, the aggregate number of shares of restricted Common Stock held by Ms. Kumar was 3,333, all of which were issued +in the 2022 Fiscal Year, and Ms. Kumar had no options outstanding. +(7) +At +December 31, 2022, the aggregate number of shares of restricted Common Stock held by Ms. Lynch was 3,333, all of which were issued +in the 2022 Fiscal Year, and Ms. Lynch had no options outstanding. +(8) +At +December 31, 2022, the aggregate number of shares of restricted Common Stock held by Mr. Migliorini was 3,333, all of which were +issued in the 2022 Fiscal Year, and Mr. Migliorini had no options outstanding. +(9) +Ms. +Reed was appointed as a director on January 7, 2022. +(10) +At +December 31, 2022, the aggregate number of shares of restricted Common Stock held by Ms. Reed was 3,333, all of which were issued +in the 2022 Fiscal Year, and Ms. Reed had no options outstanding. +(11) +At +December 31, 2022, the aggregate number of shares of restricted Common Stock held by Mr. Sachdev was 3,333, all of which were issued +in the 2022 Fiscal Year, and Mr. Sachdev had no options outstanding. +(12) +At +December 31, 2022, the aggregate number of shares of restricted Common Stock held by Mr. Smith was 3,333, all of which were issued +in the 2022 Fiscal Year, and Mr. Smith had no options outstanding. +Directors +who are also our employees are not paid any fees or other remuneration for service on the Board of Directors or any of its committees. +In the 2022 Fiscal Year, each non-employee director received for service on the Board a grant of 3,333 shares of restricted Common Stock, +vesting on May 23, 2023, the first anniversary of the grant date, and was entitled to receive $75,000 for such service. +In +the 2022 Fiscal Year, members of the Audit Committee, Nominating/Corporate Governance Committee, Compensation Committee and Corporate +Social Responsibility Committee were each entitled to receive an additional $10,000 for serving on such committees. Additionally, the +Chairman of the Audit Committee was entitled to receive $35,000 for serving in this role and the Chairman of the Compensation Committee +was entitled to receive an additional $15,000. We reimburse our directors for any out-of-pocket expenses incurred by them in connection +with services provided in such capacity, in accordance with our business expense reimbursement guidelines. +25 +STOCK +OWNERSHIP +Security +Ownership of Certain Beneficial Owners +The +following table sets forth information as of March 20, 2023 (unless otherwise indicated) with respect to the beneficial ownership of +our Common Stock by each person known by the Company to be the beneficial owner of more than 5% of the outstanding shares of our Common +Stock. A person is deemed to be a beneficial owner of any securities that that person has the right to acquire within 60 days. +Name and Address of Beneficial Owner +Amount and +Nature of +Beneficial +Ownership (1) +Percentage +of Class +BlackRock Inc. +55 East 52 nd Street +New York, NY 10055 +12,223,694 +16.05 % (2) +The Vanguard Group +100 Vanguard Boulevard +Malvern, PA 19355 +8,424,567 +11.06 % (3) +Wellington Management Group LLP +c/o Wellington Management Company LLP +280 Congress Street +Boston, MA 02210 +7,051,594 +9.26 % (4) +Macquarie Group Limited +50 Martin Place +Sydney, New South Wales +Australia +5,204,206 +6.83 % (5) +Steven Madden +c/o Steven Madden, Ltd. +52-16 Barnett Avenue +Long Island City, NY 11104 +4,801,001 +6.11 % (6) +(1) +Beneficial +ownership as reported in the table below has been determined in accordance with Item 403 of Regulation S-K and Rule 13d-3 of the +Exchange Act and based upon 76,165,602 shares of Common Stock outstanding (excluding treasury shares) as of March 20, 2023. +(2) +Based +solely on a Statement on Schedule 13G/A filed with the SEC on January 23, 2023 by BlackRock, Inc. (“BlackRock”), BlackRock +has sole voting power with respect to 12,092,599 of such shares and sole dispositive power with respect to all such shares. +(3) +Based +solely on a Statement on Schedule 13G/A filed with the SEC on February 9, 2023 by The Vanguard Group (“Vanguard”), Vanguard +has shared voting power with respect to 131,155 of such shares, sole dispositive power with respect to 8,216,676 of such shares and +shared dispositive power with respect to 207,891 of such shares. +(4) +Based +solely on a Statement on Schedule 13G/A filed with the SEC on February 6, 2023 by Wellington Management Group LLP (“Wellington”), +Wellington has shared voting power with respect to 6,217,466 of such shares and shared dispositive power with respect to all such +shares. +(5) +Based +solely on a Statement on Schedule 13G/A filed with the SEC on February 14, 2023 by Macquarie Group Limited (“Macquarie Group”), +Macquarie Group is the beneficial owner of the following shares of Common Stock by virtue of its direct or indirect ownership of +the following companies: (i) Macquarie Investment Management Business Trust (“Macquarie IM Business Trust”), which has +sole voting power and sole dispositive power with respect to 5,156,023 shares and (ii) Macquarie Management Holdings Inc. (“Macquarie +Holdings”), which is deemed to be the beneficial owner of 5,204,206 shares by virtue of its direct or indirect ownership interest +in Macquarie IM Business Trust. The address of Macquarie Holdings and Macquarie IM Business Trust is 2005 Market Street, Philadelphia, +PA 19103. +26 +(6) +Mr. +Madden’s beneficial ownership includes: (i) 986,848 shares of restricted Common Stock (which restricted stock includes (A) +786,848 shares which will vest on December 31, 2023 and (B) 200,000 shares which will vest in substantially equal annual installments +over three years commencing on December 31, 2024, in each case subject to forfeiture pursuant to the terms of the 2006 Plan and of +Mr. Madden’s employment agreement, as amended); (ii) 2,418,750 shares of Common Stock that may be acquired through the exercise +of options that are exercisable as of, or will become exercisable within 60 days of, March 20, 2023; and (iii) 1,395,403 shares of +Common Stock held by Mr. Madden directly. +Security +Ownership of Directors and Executive Officers +The +following table sets forth information as of March 20, 2023 (unless otherwise indicated) with respect to the beneficial ownership of +Common Stock held by (a) each current director and nominee; (b) our Chief Executive Officer, our Chief Financial Officer and our three +most highly compensated executive officers as of December 31, 2022 other than the Chief Executive Officer and the Chief Financial Officer +(the “Named Executive Officers”); and (c) all current directors and executive officers as a group. A person is deemed to +be a beneficial owner of any securities that that person has the right to acquire within 60 days. Each director and executive officer +has sole voting power and sole dispositive power with respect to all shares beneficially owned by him or her. +Name of Beneficial Owner (1) +Amount and +Nature of +Beneficial +Ownership (2) +Percentage +of Class +Edward R. Rosenfeld +975,041 +1.28 +% (3) +Peter A. Davis +3,333 +* (4) +Al Ferrara +11,467 +* (5) +Karla Frieders +107,952 +* (6) +Mitchell S. Klipper +17,825 +* (7) +Maria Theresa Kumar +6,222 +* (8) +Rose Peabody Lynch +16,079 +* (9) +Zine Mazouzi +51,994 +* (10) +Peter Migliorini +16,171 +* (11) +Arian Simone Reed +3,358 +* (12) +Ravi Sachdev +72,405 +* (13) +Awadhesh Sinha +55,507 +* (14) +Robert Smith +8,500 +* (15) +Amelia Newton Varela +218,542 +* (16) +All Directors and Executive Officers as a Group (15 persons) +1,527,590 +2.01 +% (17) +* +Indicates +beneficial ownership of less than 1%. +(1) +The +address for each of the individuals named above is c/o Steven Madden, Ltd., 52-16 Barnett Avenue, Long Island City, New York 11104. +(2) +Beneficial +ownership as reported in the table above has been determined in accordance with Item 403 of Regulation S-K and Rule 13d-3 of the +Exchange Act and based upon 76,165,602 shares of Common Stock outstanding (excluding treasury shares) as of March 20, 2023. +(3) +Mr. +Rosenfeld’s beneficial ownership includes: (i) 383,895 shares of restricted Common Stock; (ii) 357,146 shares of Common Stock +held by Mr. Rosenfeld without restriction, and (iii) 234,000 shares of Common Stock held by the Rosenfeld 2021 Family Trust (the +“Trust”). The Trust is for the benefit of Mr. Rosenfeld’s spouse and children and his spouse is the sole trustee. +Mr. Rosenfeld disclaims beneficial ownership of the Common Stock held by the Trust. +(4) +Mr. +Davis’ beneficial ownership consists of 3,333 shares of restricted Common Stock. +(5) +Mr. +Ferrara’s beneficial ownership consists of (i) 3,333 shares of restricted Common Stock and (ii) 8,134 shares of Common Stock +held by Mr. Ferrara without restriction. +27 +(6) +Ms. +Frieders’ beneficial ownership consists of (i) 39,088 shares of restricted Common Stock and (ii) 68,864 shares of Common Stock +held by Ms. Frieders without restriction. +(7) +Mr. +Klipper’s beneficial ownership consists of (i) 3,333 shares of restricted Common Stock and (ii) 14,492 shares of Common Stock +held by Mr. Klipper without restriction. +(8) +Ms. +Kumar’s beneficial ownership consists of (i) 3,333 shares of restricted Common Stock and (ii) 2,889 shares of Common Stock +held by Ms. Kumar without restriction. +(9) +Ms. +Lynch’s beneficial ownership consists of (i) 3,333 shares of restricted Common Stock and (ii) 12,746 shares of Common Stock +held by Ms. Lynch without restriction. +(10) +Mr. +Mazouzi’s beneficial ownership includes: (i) 38,459 shares of restricted Common Stock and (ii) 13,535 shares of Common Stock +held by Mr. Mazouzi without restriction. +(11) +Mr. +Migliorini’s beneficial ownership includes: (i) 3,333 shares of restricted Common Stock and (ii) 12,838 shares of Common Stock +held by Mr. Migliorini without restriction. +(12) +Ms. +Reed’s beneficial ownership includes: (i) 3,333 shares of restricted Common Stock and (ii) 25 shares of Common Stock held by +Ms. Reed without restriction. +(13) +Mr. +Sachdev’s beneficial ownership includes: (i) 3,333 shares of restricted Common Stock and (ii) 69,072 shares of Common Stock +held by Mr. Sachdev without restriction. +(14) +Mr. +Sinha’s beneficial ownership includes 55,507 shares of Common Stock held by Mr. Sinha without restriction. +(15) +Mr. +Smith’s beneficial ownership includes: (i) 3,333 shares of restricted Common Stock and (ii) 5,167 shares of Common Stock held +by Mr. Smith without restriction. +(16) +Ms. +Varela’s beneficial ownership includes: (i) 71,516 shares of restricted Common Stock and (ii) 147,026 shares of Common Stock +held by Ms. Varela without restriction. +(17) +Includes, +in the aggregate, (i) 574,748 shares of restricted Common Stock; (ii) 718,842 shares of Common Stock held by such beneficial owners; +and (iii) 234,000 shares of Common Stock held indirectly by the Trust. Excludes Mr. Sinha who is a named executive officer for the +2022 Fiscal Year, but is no longer an executive officer of the Company. +Delinquent +Section 16(a) Reports +We +are not aware of any late or delinquent filings under Section 16(a) of the Securities Exchange Act of 1934, except that a late Form 3 +was filed on behalf of (1) Peter A. Davis in January 2022 and (2) Arian Simone Reed in January 2022. +EXECUTIVE +COMPENSATION +Compensation +Discussion and Analysis +Executive +Summary +This +Compensation Discussion and Analysis describes the overall principles and objectives and specific features of our executive compensation +program, primarily focused on the executive compensation program’s application to our Chief Executive Officer and our other executive +officers included in the Summary Compensation Table, whom we refer to collectively in this Proxy Statement as the “Named Executive +Officers.” +In +developing and evaluating our executive compensation program, the Compensation Committee reviews our total stockholder return and annual +financial results for prior years and the extent to which those indicia correlate with executive compensation. +As +part of our cash deployment strategy to drive stockholder value and enhance stockholder returns, our Board of Directors approved four +quarterly cash dividends on outstanding Common Stock during 2022. We paid a quarterly cash dividend of $0.21 per share on each of March +25, 2022, June 24, 2022, September 26, 2022, and December 30, 2022, returning a total of $66.0 million to stockholders during the period +in the form of dividends. We also repurchased 4,188,381 shares of our Common Stock for approximately $148.9 million during 2022, which +includes shares acquired through the net settlement of employee stock awards. Excluding fiscal year 2020, the Company has repurchased +an average of $116.1 million in shares per year since 2013. +The +2022 Fiscal Year was a record year for Steve Madden, as we recorded the highest annual revenue and earnings in our history. Total revenue +for the 2022 Fiscal Year increased by 13.7% to $2.1 billion from $1.9 billion +28 +in the year ended December 31, 2021. Net income attributable +to the Company was $216.1 million, or $2.77 per diluted share, for the 2022 Fiscal Year as compared to net income of $190.7 million, +or $2.34 per diluted share, for the year ended December 31, 2021. On an adjusted basis, net income attributable to the Company was $218.3 +million, or $2.80 per diluted share, for the 2022 Fiscal Year as compared to adjusted net income of $203.7 million, or $2.50 per diluted +share, for the year ended December 31, 2021. +The +preceding discussion includes financial measures that are adjusted from the corresponding GAAP financial measures. We include a reconciliation +of these adjusted financial measures to the corresponding GAAP financial measures in Annex A to this Proxy Statement. +Reflecting +our financial and stock performance in the 2022 Fiscal Year, we paid the bonuses reflected in the Summary Compensation Table to our Named +Executive Officers, which represented a decrease compared to 2021. Because our general practice is to award bonuses and grant equity +based on Named Executive Officer performance for the preceding year, we believe that we are able to maintain relative alignment between +pay and performance. +Compensation +Objectives and Strategy +Our +executive officer compensation program is designed to attract and retain the caliber of officers needed to ensure our continued growth +and profitability and to reward them for their performance, for our performance and for creating long-term value for our stockholders. +The primary objectives of the program are to: +● +align +rewards with performance that creates stockholder value; +● +support +our strong team orientation; +● +encourage +high-potential team players to build a career at the Company; and +● +provide +rewards that are cost-efficient, competitive with other similarly positioned organizations and fair to employees and stockholders. +The +Compensation Committee of the Board of Directors approves and administers our executive compensation program. Working with management +and outside advisors, the Compensation Committee has developed a compensation and benefits strategy that rewards performance and reinforces +a culture that the Compensation Committee believes will drive long-term success and value creation. +The +compensation program rewards team accomplishments while promoting individual accountability. The executive officer compensation program +depends in significant measure on our results, but business unit results and individual accomplishments are also very important factors +in determining each executive’s compensation. We have a robust planning and goal-setting process that is fully integrated into +the compensation system, enhancing a strong relationship among individual efforts, Company results and financial rewards. +We +place a major portion of total compensation at risk through annual and long-term incentives. However, we may also pay discretionary bonuses +to the Named Executive Officers based on their performance during the preceding year. We designed the combination of incentives to balance +annual operating objectives and Company earnings performance with longer-term stockholder value creation. +To +implement our primary objectives, we seek to provide competitive compensation that is commensurate with performance. We target compensation +at the median of the market, as discussed below under “Pay Levels and Benchmarking,” and calibrate both annual and long-term +incentive opportunities to generate less-than-median awards when we do not fully achieve goals and greater-than-median awards when we +exceed goals. +We +believe that there is great value to the Company in having a team of long-tenured, seasoned managers and seek to promote a long-term +commitment from our senior executives. We have designed our team-focused culture and management processes to foster this commitment. +In addition, restricted Common Stock awards that we granted to Named Executive Officers in the 2022 Fiscal Year reinforce this long-term +orientation with annual vesting over four to five years. +29 +Role +of the Compensation Committee +General. +The Compensation Committee provides overall guidance for our executive compensation policies and determines the amounts and elements +of compensation for our executive officers and outside directors. The Compensation Committee currently consists of four members of the +Board of Directors, Ms. Lynch and Messrs. Davis, Migliorini, and Smith, each of whom is an independent director under Rule 5605 of The +Nasdaq Global Select Market listing standards and a “non-employee director” as defined under the SEC’s rules. +When +considering decisions concerning the compensation of executives, other than the Chief Executive Officer, the Compensation Committee asks +for the recommendations of the Chief Executive Officer, including his detailed evaluation of each executive’s performance. +In +accordance with the Compensation Committee Charter, the Compensation Committee may form and delegate authority to subcommittees when +appropriate. Additionally, the Compensation Committee may delegate its authority to the Company’s officers with respect to the +compensation of employees who are not officers of the Company for purposes of Section 16 of the Exchange Act when appropriate. +Use +of Outside Advisors. In making its determinations with respect to executive compensation, the Compensation Committee has historically +engaged the services of an independent compensation consulting firm. The Compensation Committee has retained the services of Arthur J. +Gallagher & Co.’s Human Resources & Compensation Consulting Practice (“Gallagher”) since 2005 to assist with +its review of the compensation packages and employment agreements of the Chief Executive Officer and other executive officers. In 2020, +2021, 2022, and 2023, Gallagher worked with the Compensation Committee to assess the reasonableness of grants of restricted Common Stock +to Mr. Rosenfeld, Ms. Varela, Mr. Mazouzi and Ms. Frieders, the terms of the new employment agreement for Mr. Rosenfeld and Mr. Mazouzi, +and the amendments of the employment agreements for Ms. Varela and Mr. Sinha, in each case as compared with comparable positions in the +peer group that we list below. Gallagher also worked with the Compensation Committee to establish a bonus pool and individual allocations +from the pool for 2022. We based executive compensation for the Named Executive Officers on employment agreements with pay structures +and levels that we set with reference to competitive market studies that Gallagher performed just prior to the consummation of the agreements. +Gallagher completed position-specific competitive market studies when we entered into the new employment agreement with Mr. Rosenfeld +and the amendments to employment agreements with Ms. Varela and Mr. Sinha and when we approved the grants of restricted Common Stock +to Mr. Rosenfeld, Ms. Varela, Mr. Mazouzi, and Ms. Frieders in the 2022 Fiscal Year. Gallagher provides only executive compensation consulting +services and works with management only at the behest of the Compensation Committee. +The +Compensation Committee retains Gallagher directly, although in carrying out assignments for the Company, Gallagher also interacts with +our management, when necessary and appropriate, to obtain compensation and performance data for the Company and our executives. In addition, +Gallagher may, in its discretion, seek input and feedback from management regarding its consulting work product for the Compensation +Committee to confirm alignment with our business strategy and identify data questions or other similar issues, if any, prior to completion +of a project for the Compensation Committee. +Independence +of Outside Advisors. The Compensation Committee has the sole authority to retain, terminate, approve the fees and set the terms of +our relationship with any outside compensation advisors who assist the Committee in carrying out its responsibilities. It may select +or receive advice from any compensation consultant or other advisor only after taking into consideration all factors relevant to the +consultant’s independence from management, including the factors set forth in Nasdaq rules and in the Compensation Committee Charter. +Independence factors that the Compensation Committee should consider under its charter include: (a) any other services that the consultant +provides to the Company, (b) any business or personal relationships the consultant has with a committee member or an executive officer +of the Company, and (c) whether the consultant has any policies in place to prevent conflicts of interest. +Accordingly, +the Compensation Committee reviews annually its relationship with Gallagher to ensure Gallagher’s independence on executive compensation +matters. Prior to selecting and receiving advice from Gallagher with respect to executive compensation in the 2022 Fiscal Year, the Compensation +Committee reviewed Gallagher’s independence and that of Gallagher’s individual representatives who served as the Committee’s +advisors. The Compensation Committee determined that no conflicts of interest exist between the Company and +30 +Gallagher or its representatives. +In reaching such determination, the Compensation Committee considered, among other things, the following factors: (i) that Gallagher +provides no services to the Company other than executive compensation consulting services; (ii) the fees we paid to Gallagher as a percentage +of Gallagher’s total revenue; (iii) the representations by Gallagher as to its policies and procedures that are designed to prevent +a conflict of interest; (iv) any business or personal relationships between the individual representatives of Gallagher who advised the +Compensation Committee and any member of the Compensation Committee; and (v) any business or personal relationships between our executive +officers and Gallagher or its individual representatives. +Consideration +of 2022 Stockholder Say-on-Pay Vote. At our 2022 Annual Meeting of Stockholders, our stockholders overwhelmingly approved, on an +advisory basis, the compensation of our Named Executive Officers (94% of votes cast). This continues the string of 94% or higher approvals +that began with the initial say-on-pay vote in 2011. The Compensation Committee believes this level of stockholder support reflects a +very strong endorsement of our compensation policies and decisions. The Compensation Committee has considered the results of this advisory +vote on executive compensation in determining our compensation policies and decisions for 2023 and has determined that these policies +and decisions are appropriate and in our best interests and those of our stockholders at this time. +Compensation +Structure +Pay +Elements - Overview +We +use four main components of compensation: +● +base +salary; +● +annual +performance-based bonuses; +● +long-term +equity incentives (consisting of stock options and restricted stock); and +● +benefits +and perquisites. +Pay +Elements - Details +Base +Salary . We paid base salaries to each of the Named Executive Officers to provide them with fixed pay commensurate with the Named +Executive Officer’s role and responsibilities, experience, expertise, and individual performance. As we describe more fully in +the section of this Proxy Statement captioned “Employment Arrangements,” as of December 31, 2022, we had employment agreements +with each of the Named Executive Officers. The Compensation Committee, as constituted at the time the parties entered into the employment +agreements or any amendments to those agreements, reviewed and approved the salary that each such agreement or amendment established. +The Compensation Committee considered each employee’s salary history, value in our competitive market and performance (including +at the Company and previous employment). +The +annual base salary of our Chief Executive Officer, Edward R. Rosenfeld, under Mr. Rosenfeld’s employment agreement dated December +31, 2021, which remains in effect until December 31, 2024, was $1,083,538 for the year ending December 31, 2022 and is $1,126,879 for +the year ending December 31, 2023 and $1,171,954 for the year ending December 31, 2024. The annual base salary of our President, Amelia +Newton Varela, under Ms. Varela’s employment agreement dated December 21, 2022, which remains in effect until December 31, 2025, +was $750,000 for the year ending December 31, 2022 and is $775,000 for the year ending December 31, 2023, $800,000 for the year ending +December 31, 2024, and $825,000 for the year ending December 31, 2025. The annual base salary of our Chief Financial Officer, Zine Mazouzi, +under Mr. Mazouzi’s employment agreement dated as of December 8, 2020, which remains in effect until December 31, 2023, was $575,000 +for the year ending December 31, 2022 and is $600,000 for the year ending December 31, 2023. The annual base salary of Awadhesh Sinha, +who became our Executive Vice President of Operations on January 1, 2023, under Mr. Sinha’s employment agreement dated December +27, 2019, as amended, which remains in effect until December 31, 2023, was $500,000 for the year ending December 31, 2022 and is $400,000 +for the year ending December 31, 2023. The employment agreement, dated May 11, 2020, for our Chief Merchandising Officer, Karla Frieders, +which remains in effect until April 30, 2023, provided for an annual base salary of $590,000 for the contract years ending April 30, +2022 and 2023. +Please +see the section of this Proxy Statement captioned “Summary Compensation Table for the Fiscal Year 2022” and “Employment +Arrangements” for a more detailed description of the employment agreements and +31 +compensation of the Named Executive Officers. The +2021 and 2022 salary increases, if any, for our Named Executive Officers, as reflected in the following table, are generally consistent +with those of other management employees. +Named Executive Officer +2021 Salary +2022 Salary +2023 Salary +Edward R. Rosenfeld +$ 1,041,863 +$ 1,083,538 +$ 1,126,879 +Amelia Newton Varela +$ 725,000 +$ 750,000 +$ 775,000 +Zine Mazouzi +$ 550,000 +$ 575,000 +$ 600,000 +Awadhesh Sinha +$ 767,000 +$ 500,000 +$ 400,000 +Karla Frieders +$ 590,000 +$ 590,000 +$ 590,000 +Annual +Performance-based Bonus . The respective employment agreements for our Named Executive Officers establish the structures for their +annual performance-based cash bonuses, if any. The Compensation Committee reviewed and approved the bonus provisions fixed in each such +employment agreement at the time the parties entered into such agreements and any amendments to those agreements. Such bonus provisions +generally provide for variable or discretionary bonuses that the Committee designed to reward attainment of business goals that create +stockholder value. +Mr. +Rosenfeld’s current employment agreement does not entitle him to any annual performance-based cash bonuses. The amount of such +bonuses, if any, is at the absolute discretion of the Board of Directors. +Ms. +Varela’s previous employment agreement entitled her to an annual performance-based cash bonus for each of the fiscal years ended +December 31, 2021 and 2022 in an amount equal to 2% of the increase, if any, in our total earnings before interest and taxes (“EBIT”) +for each such year over our total EBIT for the immediately preceding year. EBIT attributable to any business that we acquire after January +1, 2020 is included in the calculation for the purpose of determining Ms. Varela’s annual bonus after one year of Company ownership. +As we previously disclosed, the February 25, 2021 amendment to Ms. Varela’s employment agreement caps her performance-based bonus +at $450,000 in 2021 and 2022. In exchange for agreeing to the cap on her performance-based bonus, Ms. Varela received a grant of restricted +stock on March 1, 2021 with a value of $1.0 million, subject to vesting at a rate of 25% per year. +Ms. +Varela’s current employment agreement entitles her to an annual performance-based cash bonus based on our EBIT for each of the +fiscal years ended December 31, 2023, 2024 and 2025 based on the following schedule: +EBIT +Bonus as % of Salary +Maximum (130% of Plan) +80% +Target (100% of Plan) +50% +Threshold (90% of Plan) +30% +Mr. +Mazouzi’s employment agreement entitles him to an annual performance-based cash bonus for each of the fiscal years ended December +31, 2021, 2022 and 2023 based on the following schedule: +Diluted EPS +Bonus as % of Salary +Maximum (130% of Plan) +80% +Target (100% of Plan) +50% +Threshold (90% of Plan) +20% +Mr. +Sinha’s employment agreement entitled him to an annual performance-based bonus for each of the fiscal years ended December 31, +2021 and 2022 in an amount equal to 2% of the increase, if any, in our earnings before interest, taxes, depreciation and amortization +(“EBITDA”) for each such year over our EBITDA for the immediately preceding year. For any business that we acquired after +January 1, 2020, EBITDA from the acquired business is included in the bonus calculation starting with the first full quarter under our +ownership, provided that the prior year’s EBITDA will likewise be adjusted to include EBITDA from the acquired business for comparable +quarters in the prior year on a pro forma basis assuming we had owned the business. As we previously disclosed, under the February 25, +2021 amendment to Mr. Sinha’s employment agreement, his performance-based bonus is +32 +capped at $450,000 for 2021 and $200,000 for +2022. Under the December 21, 2022 amendment to Mr. Sinha’s employment agreement, he will be eligible to receive a discretionary +annual performance based on our financial performance in 2023. +Ms. +Frieders’ current employment agreement entitled her to an annual performance-based bonus for each of the fiscal years ending December +31, 2020, 2021 and 2022 in an amount to be determined by the Company in its absolute discretion, which bonus, if any, is paid to her +on or about March 15 of the year immediately following the year in which it was earned. +As +provided in the Steven Madden, Ltd. 2019 Incentive Compensation Plan, the maximum payment that we may make to an individual under any +performance-based cash award during any fiscal year and subject to the attainment of specified performance goals is $10,000,000. The +Compensation Committee may, in its sole discretion, elect to pay an individual an amount that is less than the individual’s target +award regardless of the degree of attainment of the performance goals. +Taking +into account Gallagher’s recommendations based on comparisons with our peer group companies, including target annual incentive +compensation (which we discuss below under “Pay Levels and Benchmarking”), and the individual performance of our Named Executive +Officers, the Compensation Committee approved the following cash payments based on performance during the Fiscal Year 2022: +Named Executive Officer +2022 Cash +Award Value +Edward R. Rosenfeld +$ 1,000,000 +Amelia Newton Varela +$ 414,086 +Zine Mazouzi +$ 287,500 +Awadhesh Sinha +$ 200,000 +Karla Frieders +$ 100,000 +In +Fiscal Year 2022, we had established a bonus pool equal to 6% of our net income out of which any bonuses earned by our Named Executive +Officers and other key executives would be paid. The bonus pool, based on net income of $216.1 million for Fiscal Year 2022, was approximately +$13.0 million. +Long-term +Equity Incentives . Management and the Compensation Committee believe that equity-based awards are an important factor in aligning +the long-term financial interest of the executive officers and stockholders. The Compensation Committee continually evaluates the use +of equity-based awards and intends to continue to use such awards in the future as part of designing and administering our compensation +program. In the Fiscal Year 2022, the Compensation Committee continued its practice in recent years of granting equity incentives in +the form of restricted stock, which the Compensation Committee believes provides both substantial incentive and retention characteristics. +The Committee designed these awards to provide emphasis on preserving stockholder value generated in recent years while providing significant +incentives for continuing growth in stockholder value. +We +determined the amounts of the equity-based awards that we granted to our Named Executive Officers in the 2022 Fiscal Year based on the +Committee’s evaluation of our performance during Fiscal Year 2021, Gallagher’s recommendations based on comparisons with +our peer group companies, including target incentive compensation (which we discuss below under “Pay Levels and Benchmarking”), +and the individual performance of the Named Executive Officers. On March 15, 2022, we made a grant of 77,340 shares of restricted Common +Stock to Mr. Rosenfeld, a grant of 6,445 shares of restricted Common Stock to Ms. Varela, a grant of 6,445 shares of restricted Common +Stock to Mr. Mazouzi, and a grant of 12,890 shares of restricted Common Stock to Ms. Frieders. Each of those grants vests 20% per year +over five years commencing on March 1, 2023. We also made a grant of 35,177 shares of restricted Common Stock to Ms. Varela on January +3, 2023 in connection with her new employment agreement that we discussed above. See “Employment Arrangements” below for +a further discussion of the equity-based awards we made to Ms. Varela. +The +Committee intends to continue to review the types of equity awards we grant to achieve appropriate incentives for both performance and +retention. During the Fiscal Year 2022, the Committee adopted an equity grant practice of using March 15 as the fixed, annual grant date +for future equity grants. +33 +Other +Benefits and Perquisites . Our executive compensation program also includes other benefits and perquisites that may vary among individual +executive officers. These benefits and perquisites include annual matching contributions to executive officers’ 401(k) plan accounts, +company-paid medical benefits, automobile allowances and leased automobiles, and life insurance coverage. The Compensation Committee +annually reviews these other benefits and perquisites and makes adjustments as warranted based on competitive practices, our performance +and the individual’s responsibilities and performance. The Compensation Committee has approved these other benefits and perquisites +as a reasonable component of our executive officer compensation program. Please see the section of this Proxy Statement captioned “Summary +Compensation Table” and, specifically, the column entitled “All Other Compensation” and the corresponding footnotes. +Pay +Mix +We +use the particular elements of compensation that we described above because we believe that doing so provides a well-proportioned mix +of secure compensation, retention value and at-risk compensation, which produces short-term and long-term performance incentives and +rewards. By following this approach, we seek to motivate the executives to focus on business metrics and other variables within their +particular sector that will increase sales and margins and at the same time lower costs so as to produce a high level of short-term and +long-term performance for the Company and long-term wealth creation for the executives, as well as reducing the risk of recruitment of +top executive talent by competitors. The mix of metrics that we used for the annual performance bonuses and our long-term incentive program +likewise provides an appropriate balance between short-term financial performance and long-term stock performance. +For +the Named Executive Officers, we have weighted the mix of compensation heavily toward at-risk pay (annual incentives and long-term incentives). +Maintaining this pay mix results fundamentally in a pay-for-performance orientation for our executives, which is aligned with our stated +compensation philosophy of providing compensation commensurate with performance. +Pay +Levels and Benchmarking +We +determine pay levels for our executives based on several factors, including the individual’s roles and responsibilities within +the Company, the individual’s experience and expertise, the pay levels for peers within the Company, pay levels in our competitive +market for similar positions, and performance of the individual and the Company as a whole. The Compensation Committee is responsible +for approving pay levels for the Named Executive Officers. In determining the pay levels, the Compensation Committee considers all forms +of compensation and benefits. +The +Compensation Committee assesses the “competitive market” for compensation using several sources. The primary data source +that the Committee used in setting competitive market levels for the Named Executive Officers is the information publicly disclosed by +a peer group of the Company, which the Committee reviews annually and may change from year to year. For the 2022 Fiscal Year, the Compensation +Committee reviewed executive compensation and compensation design for the purpose of assessing bonus awards in early 2023 in the context +of overall compensation and in relation to the following peer companies: +Boot +Barn Holdings, Inc. +Designer +Brands Inc. +Movado +Group, Inc. +The +Buckle, Inc. +Express, +Inc. +Oxford +Industries, Inc. +Caleres, +Inc. +G-III +Apparel Group, Ltd. +Shoe +Carnival, Inc. +The +Children’s Place, Inc. +Genesco +Inc. +Skechers +U.S.A., Inc. +Crocs, +Inc. +Guess?, +Inc. +Wolverine +World Wide, Inc. +Deckers +Outdoor Corporation +Lands’ +End, Inc. +Zumiez +Inc. +34 +The +market capitalization and trailing twelve months revenue of the Company and each peer company follows: +Company +Market Cap* +TTM Revenue** +Steven Madden, Ltd. +$ 2.49 +$ 2.12 +Boot Barn Holdings, Inc. +$ 1.86 +$ 1.62 +The Buckle, Inc. +$ 2.23 +$ 1.32 +Caleres, Inc. +$ 0.79 +$ 2.95 +The Children’s Place, Inc. +$ 0.45 +$ 1.76 +Crocs, Inc. +$ 6.70 +$ 3.56 +Deckers Outdoor Corporation +$ 10.57 +$ 3.57 +Designer Brands Inc. +$ 0.62 +$ 3.38 +Express, Inc. +$ 0.07 +$ 1.95 +G-III Apparel Group, Ltd. +$ 0.65 +$ 3.12 +Genesco Inc. +$ 0.58 +$ 2.39 +Guess?, Inc. +$ 1.13 +$ 2.67 +Lands’ End, Inc. +$ 0.25 +$ 1.58 +Movado Group, Inc. +$ 0.72 +$ 0.76 +Oxford Industries, Inc. +$ 1.47 +$ 1.33 +Shoe Carnival, Inc. +$ 0.65 +$ 1.29 +Skechers U.S.A., Inc. +$ 6.51 +$ 7.45 +Wolverine World Wide, Inc. +$ 0.86 +$ 2.69 +Zumiez Inc. +$ 0.42 +$ 1.03 +* +Market +capitalization is as of December 31, 2022 and is stated in billions. +** +TTM +is the last four quarters of publicly reported revenue as of the Compensation Committee’s review of executive compensation +in early 2023 and is stated in billions. +Because +only four peer companies disclose compensation for a Chief Merchandising Officer, the Committee added six additional companies with respect +to the consideration of Ms. Frieders’ compensation: Big Lots Inc., Burlington Stores Inc., Carter’s Inc., Citi Trends Inc., +Dollar General Inc., and Vince Holding Corp. +After +consideration of data on external competitive levels of compensation and internal needs, the Compensation Committee makes decisions regarding +the Named Executive Officers’ target total compensation opportunities based on the need to attract, motivate and retain an experienced +and effective management team. Relative to the competitive market data, the Compensation Committee generally intends that the base salary +and target incentive compensation, including both cash bonuses and equity-based compensation, for each Named Executive Officer will be +at the median of the competitive market. +As +noted above, despite our overall pay positioning objectives, pay opportunities for specific individuals vary based on factors such as +scope of duties, tenure, institutional knowledge and difficulty in recruiting a new executive. Actual total compensation in a given year +will vary above or below the target compensation levels based primarily on the attainment of operating goals and the creation of stockholder +value. +Compensation +Committee Discretion +The +Compensation Committee has complete discretion whether to make cash performance bonuses or equity-based incentive awards, with the exception +of any such payouts that are to be made pursuant to contractual commitments, such as the bonuses that may be paid to Ms. Varela and Mr. +Mazouzi. We describe factors to consider in making such awards under “Annual Performance-Based Bonuses” and “Long-term +Equity Incentives” above. +Pay +Ratio +As +required by the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), the following disclosure +provides the relationship of the total annual compensation of our median-paid employee to the total annual compensation of our Chief +Executive Officer, Mr. Rosenfeld. +35 +Our +median-paid employee has changed from our proxy statement filed during 2021 because, pursuant to the instructions to Item 402(u) of Regulation +S-K, there has been a material change in our employee population or employee compensation arrangements in the 2022 Fiscal Year that would +result in a significant change to our pay ratio disclosure due to an increase in our workforce. +The +table below sets forth the total annual compensation for Mr. Rosenfeld and our median-paid employee, who is a store assistant manager, +and the ratio between the two. +Median employee annual total compensation +$ 24,473 +Mr. Rosenfeld annual total compensation +$ 7,609,075 +Ratio of Chief Executive Officer to median employee compensation +311:1 +We +determined our median-paid employee as of December 31, 2022, which date was within the last three months of the 2022 Fiscal Year, as +permitted by the pay ratio rule under the Dodd-Frank Act. In determining our median employee, we applied the “de minimis” +exemption under the rule, which allows the exemption of 5% or less of our total global workforce in jurisdictions outside of the U.S., +which amounted to 200 employees based on our total global workforce as of December 31, 2022 of 4,000 employees. As such, we excluded +all of our employees in each of Hong Kong (21 employees), China (65 employees), the Netherlands (57 employees) and Taiwan (54 employees), +which in total amounted to 197 employees, or 5%. We did not exclude from consideration any employees who joined the Company during the +2022 Fiscal Year as the result of a business acquisition or combination. Employees on leave of absence were excluded and wages and salaries +were annualized for those employees who were not employed for the entire 2022 Fiscal Year. To identify our median employee, we used payroll +data consisting of salary, hourly wage, overtime wage, bonus, commissions, vesting of equity awards and any similar payroll items for +all of our employees included in the calculation. +For +purposes of determining the ratio, we determined our median-paid employee’s annual total compensation for the 2022 Fiscal Year +using the same method required for calculating our Chief Executive Officer’s (and other Named Executive Officers’) total +annual compensation for purposes of the Summary Compensation Table. +We +believe that the ratio stated above is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K. It +is based on the methodologies, assumptions and estimates described above and is not necessarily comparable to the ratios reported by +other companies. +Risk +Assessment +Bonus +payments to executives are either based on the discretion of the Compensation Committee or are tied to growth in various indicators of +financial performance, such as EBIT and earnings per share. We have established long-term incentives in the form of time-vested restricted +stock that generally vest over four or five years. These forms of compensation have been in place for several years and have proved effective +in rewarding performance while not encouraging inappropriate risk-taking. +The +Compensation Committee undertook to review and evaluate our executive and company-wide compensation program and plans to assess whether +any aspect of the program and these plans would encourage inappropriate risk-taking by our executives and non-executive employees that +could have a material adverse effect on the Company and to confirm that we have adequate risk management controls in place to ensure +that executive and company-wide compensation is reasonable and achieves its intended incentive without creating unacceptable risk. Based +on such review and evaluation, the Compensation Committee believes there is no material risk to the Company that is related to our compensation +program for executives and non-executive employees. +This +review and evaluation of the risks associated with our compensation program and plans consisted of: +● +identifying +those business risks that could be material to the Company and identifying our existing risk management system; +● +reviewing +and analyzing our compensation program and plans to identify program and plan features that could potentially encourage or introduce +excessive or imprudent risk taking of a material nature; +● +identifying +the business risks that our compensation plan and program features could potentially encourage or create; +36 +● +balancing +these business risks against our existing internal control systems designed to manage and mitigate these business risks; and +● +analyzing +whether the unmitigated risks, in part or as a whole, are reasonably likely to have a material adverse effect on the Company. +The +Committee consulted various persons during the course of the assessment, including our executive officers and senior members of our human +resources department. The Compensation Committee engages Gallagher to review our executive and company-wide compensation program and +plans and provide advice regarding appropriate levels of incentive. +The +Compensation Committee noted several features of our compensation structure that mitigate risk, including, for example: +● +we +use a pay mix that is well-balanced between short-term financial performance and long-term stock performance, consisting of secure +compensation in the form of base salary, short-term incentives in the form of potential for cash bonuses, and long-term incentives +in the form of stock options and time-vested restricted stock that generally vest over four or five years; +● +in +most instances, management or the Compensation Committee retains the discretion to decrease all forms of incentive compensation based +on significant individual or Company performance shortfalls; +● +we +periodically benchmark our compensation program and plans and target executive and non-executive compensation within the normal limits +of the competitive market; and +● +the +Compensation Committee provides oversight of our compensation program and plans and compensation philosophy, makes recommendations +to the Board with respect to improvements to our compensation program and plans, and is responsible for reviewing and approving executive +compensation and administering and awarding incentive, deferred and equity compensation to our senior executives. +In +light of the assessment described above, the Compensation Committee concluded that the risks associated with our compensation program +and plans (executive and company-wide) are not reasonably likely to have a material adverse effect on the Company. +Implications +of Tax and Accounting Matters +As +a general matter, the Compensation Committee considers the various tax and accounting implications of compensation vehicles that we employ. +Although the Compensation Committee reviews and considers both the accounting and tax effects of various components of compensation, +those effects are not a significant factor in the Compensation Committee’s allocation of compensation among the different components. +Compensation +paid to certain covered employees, generally including our Named Executive Officers, generally is not deductible to the extent that the +compensation exceeds $1 million in any one year for any such covered employee under Code Section 162(m). The Compensation Committee believes +that our interests and those of our stockholders are best served by providing competitive levels of compensation, even if not fully deductible, +so some of the compensation that we have provided to our Named Executive Officers in the past, and that we provide to our executive officers +in the future, may not be deductible under Code Section 162(m). +As +more fully described below under the heading “Termination, Change-in-Control and Non-Competition/Non-Solicitation,” with +the exception of Ms. Frieders, all of our Named Executive Officers are entitled to receive certain compensation in the event of a termination +of employment in connection with a change-in-control event for the Company, which payments may trigger the application of the “golden +parachute” provisions of Sections 280G and 4999 of the Code. Section 280G of the Code disallows a tax deduction with respect to +excess parachute payments to certain executives of companies that undergo a change-in-control. In addition, Section 4999 of the Code +imposes a 20% excise tax on the individual receiving the excess parachute payment. Excess parachute payments are golden parachute payments +that exceed an amount determined under Section 280G based on the executive’s prior compensation. In approving the compensation +arrangements of our Named Executive Officers, our Compensation Committee considers all elements of the cost to the Company of providing +such compensation, including the potential impact of Sections 280G and 4999, which, under certain circumstances, may limit the deductibility +of executive compensation. However, our Compensation Committee may determine, in its judgment, to authorize compensation arrangements +that could give rise to loss of deductibility under Section 280G and the +37 +imposition of excise taxes under Section 4999 when it believes +that such arrangements are appropriate to attract and retain executive talent. +Conclusion +The +Compensation Committee considers the level and mix of compensation that it finally decides upon as to each executive within the context +of both the objective data from our competitive assessment of compensation and performance, as well as the subjective factors as outlined +above. The Compensation Committee believes that each of the compensation packages for the Named Executive Officers is within the competitive +range of practices when compared to the objective comparative data even where subjective factors may have influenced the compensation +decisions. +Executive +Officers +The +following table identifies the executive officers of the Company as of the date of this Proxy Statement, and their ages and positions: +Name +Age +Position +Edward +R. Rosenfeld +47 +Chairman +of the Board and Chief Executive Officer +Amelia +Newton Varela +51 +President +Zine +Mazouzi +51 +Chief +Financial Officer +Karla +Frieders +46 +Chief +Merchandising Officer +Lisa +Keith +38 +Executive +Vice President, General Counsel and Secretary +Edward +R. Rosenfeld has served as our Chairman of the Board and Chief Executive Officer since August 2008 and has been a director of +the Company since February 2008. Mr. Rosenfeld, who joined our executive management team in May 2005, has more than two decades of experience +focused on the retail, apparel and footwear industries and possesses particular knowledge of and experience in the industry that strengthens +the Board’s collective qualifications, skills and experience. He has strong leadership skills and an in-depth understanding of +the Company and its goals from his positions as the Chairman of the Board and Chief Executive Officer. His background in finance and +his analytical skills gained through his years as a Vice President with Peter J. Solomon Company, an investment banking boutique, where +he specialized in mergers and acquisitions in the retail, apparel and footwear industries, provide the Board with insight and guidance +with respect to, among other things, strategic business development matters. Mr. Rosenfeld serves as a director and chairman of the Audit +& Risk Management Committee of PVH Corp. (NYSE: PVH), one of the world’s largest apparel companies. +Amelia +Newton Varela has served as President of the Company since September 2015 and has been a director since 2016. Prior to this tenure, +Ms. Varela was Executive Vice President of Wholesale of the Company since April 2008 and Executive Vice President of Wholesale Footwear +of the Company from November 2004 to April 2008. Previously, she was Vice President of Sales for Steve Madden Women’s Wholesale +Division from January 2000. Ms. Varela began her career with the Company in 1998 in the role of Account Executive for Steve Madden Women’s +Wholesale Division. She graduated from The Fashion Institute of Technology in 1995. Ms. Varela’s over 20 years of experience at +the Company provides relevant industry knowledge and expertise, and leadership to the Board. +Zine +Mazouzi has been our Chief Financial Officer since January 1, 2021 and previously served as our Chief Accounting Officer and +Senior Vice President—Finance and Operations from January 2019 until his appointment as our Chief Financial Officer. Prior to joining +the Company, he held various senior positions at Sears Holdings, a holding company for department stores, as the Chief Financial Officer +of Sears Footwear Group from 2016 to 2017, Head of the Footwear Group from 2017 to 2018 and Head of the Footwear, Home and Jewelry Groups +in 2018. Prior to that, he worked at Nine West Group from 1998 to 2015, where he held a number of increasingly senior positions, including +Chief Financial Officer from 2014 to 2015. Mr. Mazouzi received his Bachelor’s Degree in Finance and a Master of Business Administration +from Iona University. +Karla +Frieders has been our Chief Merchandising Officer since September 2015. Previously, Ms. Frieders served as President of Retail +from January 2013 until September 2015 and Vice President of Retail from October 2009 until January 2013. Prior to these roles, Ms. Frieders +held various buying positions at the Company since 1999. +38 +Lisa +Keith has been our General Counsel since November 2019 and our Corporate Secretary since January 2021. Ms. Keith joined Steve +Madden’s Legal Department in May 2017 and previously served as Vice President and Deputy General Counsel. Prior to joining the +Company, Mrs. Keith was a senior associate at Davis Wright Tremaine LLP, a law firm, where she represented clients in the fashion, technology +and luxury goods industries. Ms. Keith began her legal career at Gibson, Dunn & Crutcher LLP, where she practiced in the litigation +department. She earned her J.D. from New York University School of Law and her B.A., summa cum laude, from Brandeis University, where +she was Phi Beta Kappa. +Please +see the section of this Proxy Statement captioned “Proposal One: Election of Directors” for biographical summaries and other +information concerning our Chairman of the Board and Chief Executive Officer, Edward R. Rosenfeld, and our President, Amelia Newton Varela, +as well as our other director nominees. +Summary +Compensation Table for the 2022 Fiscal Year +The +following table sets forth the compensation information for our Chief Executive Officer, Chief Financial Officer and the three most highly +compensated executive officers other than the Chief Executive Officer and Chief Financial Officer relating to the fiscal years ended +December 31, 2022, 2021 and 2020, respectively. In this Proxy Statement, we refer to this group of people as our “Named Executive +Officers.” +In +accordance with applicable SEC rules, the Summary Compensation Table includes, for a particular fiscal year, only those stock awards +made during that fiscal year and not any awards made after year-end even if awarded for services rendered in that year. SEC rules require +that such awards be reflected in the year of grant and, as such, awards made after the end of the 2022 Fiscal Year will appear in the +Summary Compensation Table to be included in our proxy statement for our 2024 Annual Meeting of Stockholders. +Name and Principal +Position +Fiscal +Year +Salary +($) +Bonus +($) +Stock +Awards +($) (1) +Option +Awards +($) +Non-Equity +Incentive +Plan +Compensation +($) +All Other +Compensation +($) +Total +Compensation +($) +Edward R. Rosenfeld +2022 +1,081,935 +— +5,499,990 +— +1,000,000 +27,150 (2) +7,609,075 +Chief Executive Officer +2021 +1,040,146 +— +5,499,985 +— +1,000,000 +26,700 +7,566,831 +2020 +494,853 +— +2,360,456 +— +— +17,550 +2,872,859 +Zine Mazouzi (3) +2022 +574,038 +— +250,002 +— +287,500 +24,150 (4) +1,135,690 +Chief Financial Officer +2021 +544,808 +— +1,200,021 +— +440,000 +23,700 +2,208,529 +Amelia Newton Varela +2022 +749,038 +— +250,002 +— +414,086 +24,150 (5) +1,437,276 +President +2021 +724,135 +— +999,983 +— +450,000 +23,700 +2,197,818 +2020 +628,115 +— +1,163,970 +— +— +23,550 +1,815,635 +Karla Frieders +2022 +590,000 +— +500,003 +— +100,000 +6,354 (6) +1,196,357 +Chief Merchandising Officer +2021 +590,000 +— +400,009 +— +100,000 +8,700 +1,098,709 +2020 +530,092 +— +750,158 +— +— +8,550 +1,288,800 +Awadhesh Sinha* +2022 +510,269 +— +— +— +200,000 +34,812 (7) +745,081 +Chief Operating Officer +2021 +766,238 +— +— +— +550,000 +24,401 +1,340,639 +2020 +668,762 +— +499,990 +— +— +23,268 +1,192,020 +39 +(1) +The +amounts in this column reflect the total grant date fair value of awards granted during the applicable year for the fiscal years +ended December 31, 2022, December 31, 2021, and December 31, 2020, respectively, calculated in accordance with ASC Topic 718. Assumptions +used in the calculation of these amounts are included in Note H, Note I and Note J, respectively, to our audited financial statements +for the fiscal years ended December 31, 2022, December 31, 2021, and December 2020 included in our Annual Report on Form 10-K filed +with the Securities and Exchange Commission on March 1, 2023, March 1, 2022, and March 16, 2021, respectively. +(2) +Consists +of an $18,000 automobile allowance and $9,150 in annual match contributions to Mr. Rosenfeld’s 401(k) plan account. +(3) +Mr. +Mazouzi became our Chief Financial Officer effective January 1, 2021. +(4) +Consists +of a $15,000 automobile allowance and $9,150 in annual match contributions to Mr. Mazouzi’s 401(k) plan account. +(5) +Consists +of a $15,000 automobile allowance and $9,150 in annual matching contributions to Ms. Varela’s 401(k) plan account. +(6) +Consists +of $6,354 in annual matching contributions to Ms. Frieders’ 401(k) plan account. +(7) +Consists +of a $25,662 automobile allowance and $9,150 in annual matching contributions to Mr. Sinha’s 401(k) plan account. +* +Mr. +Sinha became our Executive Vice President of Operations effective January 1, 2023 and is no longer considered to be an executive +officer. +Employment +Arrangements +Edward +R. Rosenfeld. On December 31, 2021, we entered into a new employment agreement (the “Rosenfeld 2021 Agreement”) with +Mr. Rosenfeld to replace our employment agreement, which expired on December 31, 2021. Pursuant to the Rosenfeld 2021 Agreement, Mr. +Rosenfeld continues to serve as our Chief Executive Officer and executive Chairman of the Board of Directors through December 31, 2024, +unless sooner terminated in accordance with the terms of the agreement. The Rosenfeld 2021 Agreement provides for an annual base salary +of $1,083,538, $1,126,879 and $1,171,954 for fiscal years 2022, 2023 and 2024, respectively, and a monthly automobile allowance of $1,500. +Pursuant to the Rosenfeld 2021 Agreement, on December 31, 2021, Mr. Rosenfeld was granted 75,317 shares of Common Stock, subject to certain +restrictions. Those restricted shares of Common Stock, which were issued under the Steven Madden, Ltd. 2019 Incentive Compensation Plan, +vest in five annual installments of 15,063, 15,063, 15,063, 15,064, and 15,064 shares respectively, commencing on December 1, 2022. In +addition, on February 1, 2022, Mr. Rosenfeld received an award of 60,532 shares of our Common Stock under the 2019 Plan, subject to certain +restrictions, which vest in five substantially equal annual installments of 12,106 shares commencing on February 1, 2023. The Rosenfeld +2021 Agreement provides that Mr. Rosenfeld will receive additional compensation and bonuses, if any, at the absolute discretion of the +Board of Directors. +In +the event of his death, the Rosenfeld 2021 Agreement provides for the payment to Mr. Rosenfeld’s estate of his base salary for +the 12-month period immediately after the date of his death. The agreement also provides that if Mr. Rosenfeld’s employment is +terminated due to his “total disability” (as defined in the Rosenfeld 2021 Agreement), Mr. Rosenfeld will receive payment +of his base salary for the 12-month period immediately after the date on which he is determined to be totally disabled. The Rosenfeld +2021 Agreement allows the Company to terminate his employment for “cause” (as defined therein) or without cause. If we terminate +Mr. Rosenfeld’s employment for cause, we will have no further obligations to Mr. Rosenfeld, and Mr. Rosenfeld will be entitled +to no further compensation from the Company, except for pro-rata amounts due to him on the date of his termination. If we terminate Mr. +Rosenfeld’s employment without cause or if Mr. Rosenfeld resigns for “good reason” (as defined in the Rosenfeld 2021 +Agreement), Mr. Rosenfeld will be entitled to receive payment of his annual base salary, payable at regular payroll intervals, from the +date of termination of employment through the longer of the remainder of the term of the agreement or six months. +In +addition, if we terminate Mr. Rosenfeld’s employment without cause or if he resigns for good reason during the period commencing +90 days prior to a “change of control” (as defined in the Rosenfeld 2021 Agreement) and ending 180 days following a change +of control, Mr. Rosenfeld will receive an amount equal to two and one-half times the sum of (i) the annual base salary to which he was +entitled as of the date of termination or resignation of employment plus (ii) the average cash bonus he received for the preceding three-year +period ending on the last previous December 31 (the “Change of Control Payment”). However, if the Change of Control Payment +(or a +40 +portion thereof) is determined to constitute an “excess parachute payment” under Sections 280G and 4999 of the Internal +Revenue Code of 1986, as amended (the “Code”), Mr. Rosenfeld will be paid either (i) the Change of Control Payment (which +will be subject to all applicable taxes to be paid by him including the excise tax payable pursuant to Section 4999 and which will be +limited as to deductibility to the Company) or (ii) a reduced amount, calculated in accordance with Section 280G, that may be paid to +the executive without the imposition of an excise tax under Section 4999 and which is fully deductible to the Company, whichever payment +yields the greater after-tax benefit to him. +Zine +Mazouzi . On December 8, 2020, we entered into an employment agreement with Zine Mazouzi ( the +“Mazouzi Employment Agreement”) pursuant to which Mr. Mazouzi serves as our Chief Financial Officer. The term of the +Mazouzi Employment Agreement commenced on January 1, 2021, and will continue for three years through December 31, 2023, unless sooner +terminated in accordance with the terms thereof. Pursuant to the terms of the Mazouzi Employment Agreement, Mr. Mazouzi will receive +an annual base salary during the term of $550,000 for the calendar year 2021, $575,000 for the calendar year 2022, and $600,000 for the +calendar year 2023 and an automobile allowance of $1,250 per month in each year of the term. In addition, on January 4, 2021, pursuant +to the Mazouzi Employment Agreement, Mr. Mazouzi was granted 29,155 shares of restricted Common Stock vesting 20% per year for five years +commencing on the first anniversary of the grant date. +In +addition, the terms of the Mazouzi Employment Agreement entitle Mr. Mazouzi to an annual performance-based cash bonus for each of the +fiscal years ended December 31, 2021, 2022 and 2023 based on the following schedule: +Diluted EPS +Bonus as % of Salary +Maximum (130% of Plan) +80% +Target (100% of Plan) +50% +Threshold (90% of Plan) +20% +For +actual diluted earnings per share (EPS) amounts between the Threshold and Target amounts or between the Target and Maximum amounts, the +bonus payable is to be calculated based on a straight-line interpolation between the respective amounts. +Pursuant +to the terms of the Mazouzi Employment Agreement, we may terminate Mr. Mazouzi’s employment for “cause” (as defined +in the Mazouzi Employment Agreement), in which event Mr. Mazouzi would be entitled to receive only his accrued and unpaid base salary +through the date of termination. If we terminate Mr. Mazouzi’s employment without cause or Mr. Mazouzi terminates the Mazouzi Employment +Agreement “for good reason” (as defined in the Mazouzi Employment Agreement), Mr. Mazouzi would be entitled to receive payment +of his annual base salary, payable at regular payroll intervals, from the date of termination of employment through the remainder of +the term plus any performance-based cash bonus that has accrued but not yet been paid. In addition, if we terminate Mr. Mazouzi’s +employment without cause or Mr. Mazouzi terminates the Mazouzi Employment Agreement for good reason during the period commencing 30 days +prior to a “Change of Control” (as defined in the Mazouzi Employment Agreement) and ending 180 days following a Change of +Control, he will be entitled to receive an amount equal to the lesser of (A) two and one-half times the sum of (i) the annual base salary +to which he was entitled as of the date of termination plus (ii) the average cash bonus received by him for the preceding three-year +period ending on the last previous December 31 or (B) the maximum amount that is tax deductible to the Company under Section 280G of +the Internal Revenue Code of 1986, as amended. +Amelia +Newton Varela. On December 21, 2022, we entered into an employment agreement (the “Varela 2022 Agreement”) with Ms. Varela, +pursuant to which she will continue to serve as our President through December 31, 2025, unless sooner terminated in accordance with +the terms of the agreement. The Varela 2022 Agreement replaced her previous employment agreement, which expired on December 31, 2022. +The Varela 2022 Agreement provides for an annual base salary of $775,000, $800,000, and $825,000 for fiscal years 2023, 2024, and 2025 +and a monthly automobile allowance of $1,250 during each month of the term. In addition, on January 3, 2023, pursuant to the Varela 2022 +Agreement, Ms. Varela was granted 35,177 restricted shares of Common Stock, which will vest 25% per year commencing on January 3, 2024. +41 +In +addition, the terms of the Varela 2022 Agreement entitle Ms. Varela to an annual performance-based cash bonus based on the Company’s +EBIT for each of the fiscal years ended December 31, 2023, 2024 and 2025 based on the following schedule: +EBIT +Bonus +as % of Salary +Maximum (130% of Plan) +80% +Target (100% of Plan) +50% +Threshold (90% of Plan) +30% +For +actual EBIT amounts between the Threshold and Target amounts or between the Target and Maximum amounts, the bonus payable is to be calculated +based on a straight-line interpolation between the respective amounts. +If +the Varela 2022 Agreement is terminated due to Ms. Varela’s “disability” (as defined in the agreement) or death, we +are obligated to pay Ms. Varela (or her estate) the amount of accrued and unpaid salary through the date of termination plus any performance-based +cash bonus that has accrued for the year prior to termination and is unpaid at the time Ms. Varela’s employment is terminated. +We may terminate the agreement for “cause” (as defined in the Varela 2022 Agreement), in which event she would be entitled +to receive only her accrued and unpaid salary through the date of termination. If we terminate Ms. Varela’s employment without +cause, she would be entitled to receive payment of her annual base salary, payable at regular payroll intervals, from the date of termination +of employment through the remainder of the term plus any performance-based cash bonus that has accrued but not yet been paid. In addition, +if we terminate Ms. Varela’s employment without cause during the period commencing 30 days prior to a “change of control” +(as defined in the Varela 2022 Agreement) transaction and ending 180 days after such change of control transaction, she would be entitled +to receive a cash payment in an amount equal to the lesser of (A) two and one-half times the sum of (i) the annual base salary to which +she was entitled as of the date of termination of employment plus (ii) the average cash bonus that she received for the preceding three +years ending on the last previous December 31 or (B) the maximum amount that is tax deductible to the Company under Section 280G of the +Code. +Karla +Frieders. On May 11, 2020, we entered into an employment agreement with Ms. Frieders (the “Frieders 2020 Agreement”) +pursuant to which Ms. Frieders will continue to serve as our Chief Merchandising Officer. The Frieders 2020 Agreement is effective as +of May 1, 2020. +The +term of the Frieders 2020 Agreement commenced on May 1, 2020 and will continue for a term of three years through April 30, 2023, unless +sooner terminated in accordance with the terms thereof. Pursuant to the terms of the Frieders 2020 Agreement, Ms. Frieders will receive +an annual base salary during the term of $590,000. Due to the impact of the COVID-19 pandemic on our business, Ms. Frieders agreed to +a 30% reduction in her base salary from April 1, 2020 through July 31, 2020. In addition, the Frieders 2020 Agreement entitles Ms. Frieders +to an annual performance-based bonus for each of the fiscal years ending December 31, 2020, 2021 and 2022 in an amount to be determined +by the Company in its absolute discretion, which bonus, if any, will be paid to her on or about March 15 of the year immediately following +the year in which it was earned. In addition, on May 11, 2020, pursuant to the Frieders 2020 Agreement, Ms. Frieders was awarded 32,758 +restricted shares of our Common Stock, which will vest in five substantially equal annual installments commencing on May 1, 2021. +If +we terminate Ms. Frieders’ employment due to her “disability” (as defined in the Frieder’s Agreement) or her +death, we are obligated to pay her (or her estate) the amount of accrued and unpaid salary through the date of termination of employment. +We may terminate Ms. Frieders’ employment for “cause” (as defined in the Frieders 2020 Agreement), in which event Ms. +Frieders would be entitled to receive only her accrued and unpaid salary through the date of termination. The Frieders 2020 Agreement +provides that if we terminate Ms. Frieders’ employment without cause, Ms. Frieders would be entitled to receive payment of her +annual base salary, payable at regular payroll intervals, from the date of termination of employment through the remainder of the term. +Awadhesh +Sinha. On December 27, 2019, we entered into an employment agreement (the “Sinha 2019 Agreement”) with Mr. Sinha, pursuant +to which he will continue to serve as our Chief Operating Officer through December 31, 2021, unless sooner terminated in accordance with +the terms of the agreement. The Sinha 2019 Agreement replaced his previous employment agreement, which expired on December 31, 2019. +Under the Sinha 2019 Employment Agreement, Mr. Sinha will receive an annual base salary of $745,000 and $767,000 for fiscal +42 +years 2020 +and 2021, respectively, and an annual automobile allowance of $22,500 in each year of the term. Due to the impact of the COVID-19 pandemic +on our business, Mr. Sinha agreed to a 30% reduction in his base salary from April 1, 2020 through July 31, 2020. We will also pay term +life insurance premiums on his behalf in the amount of approximately $11,000 per year less deductions required to be withheld by applicable +laws and regulations. In accordance with the terms of the Sinha 2019 Agreement, on January 2, 2020, we granted Mr. Sinha 11,598 restricted +shares of Common Stock, which vest in two substantially equal installments on December 15, 2020 and December 15, 2021. +The +Sinha 2019 Agreement entitles Mr. Sinha to an annual performance-based bonus for each of the fiscal years ended December 31, 2020 and +2021 in an amount equal to 2% of the increase, if any, in our earnings before interest, taxes, depreciation and amortization (“EBITDA”) +for each such year over our EBITDA for the immediately preceding year. For any business acquired after January 1, 2020, EBITDA from the +acquired business is included in the bonus calculation starting with the first full quarter under our ownership, provided that the prior +year’s EBITDA will likewise be adjusted to include EBITDA from the acquired business for comparable quarters in the prior year +on a pro forma basis assuming we had owned the business. We are entitled to claw back bonuses and other incentive-based compensation +paid to Mr. Sinha if we determine that such compensation was based upon materially inaccurate financial statements. +In +the event of Mr. Sinha’s death, the Sinha 2019 Agreement provides for the payment to his estate of his base salary for the 12-month +period immediately after the date of Mr. Sinha’s death. In addition, in the event of Mr. Sinha’s “total disability” +(as such term is defined in the Sinha 2019 Agreement), we will be obligated to continue to pay his base salary for the 12-month period +immediately after the date of determination of such total disability. If we terminate Mr. Sinha’s employment for “cause” +(as such term is defined in the Sinha 2019 Agreement), or Mr. Sinha resigns without “good reason” (as such term is defined +in the Sinha 2019 Agreement), we will be obligated to pay Mr. Sinha the amount of compensation that is accrued and unpaid through the +date of termination. If we terminate Mr. Sinha’s employment without cause or he resigns for good reason, he will be entitled to +receive payment of his annual base salary, payable at regular payroll intervals, from the date of termination of employment through the +longer of (i) the remainder of the term or (ii) six months. +If +there is a “change of control” transaction and we have terminated his employment other than “for cause” or if +he resigns “for good reason,” Mr. Sinha will receive an amount equal to two and one half times the sum of (i) the annual +base salary to which he was entitled as of the date of termination or resignation of employment plus (ii) the average cash bonus received +by him for the preceding three-year period ending on the last previous December 31 (the “Change of Control Payment”). However, +if the Change of Control Payment (or a portion thereof) is determined to constitute an “excess parachute payment” under Sections +280G and 4999 of the Code, we will pay Mr. Sinha either (i) the Change of Control Payment (which shall be subject to all applicable taxes +to be paid by him, including the excise tax payable pursuant to Section 4999, and which shall be limited as to deductibility to the Company) +or (ii) a reduced amount, calculated in accordance with Section 280G, that may be paid to him without the imposition of an excise tax +under Section 4999 and which is fully deductible to the Company, whichever payment yields the greater after-tax benefit to Mr. Sinha. +On +February 25, 2021, we entered into Amendment No. 1 to Employment Agreement with Mr. Sinha (the “Sinha 2021 Amendment”), which +amended the Sinha 2019 Agreement. The Sinha 2021 Amendment extended the term of Mr. Sinha’s employment with the Company through +December 31, 2023. Under the Sinha 2021 Amendment, Mr. Sinha will be required to devote not more than four days per week to his duties +as Chief Operating Officer beginning on January 1, 2022, and on January 1, 2023, he will become a Senior Advisor to the Company and will +be required to devote not more than two days per week to such executive-level duties as are reasonably assigned to him by our Chief Executive +Officer. The Sinha 2021 Amendment (i) provides that Mr. Sinha’s base compensation will be $500,000 for calendar year 2022 and $300,000 +for calendar year 2023, (ii) his bonus based on our financial performance in 2021 will be capped at $450,000, (iii) his bonus based on +our financial performance in the 2022 Fiscal Year will be capped at $200,000, and (iv) he will not be entitled to a performance bonus +for 2023. All of the other terms and provisions of the Sinha 2019 Agreement remain in full force and effect. +On +December 21, 2022, we entered into Amendment No. 2 to Employment Agreement with Mr. Sinha (the “Sinha 2022 Amendment”), which +amended the Sinha 2019 Agreement, as amended by the Sinha 2021 Amendment. Under the Sinha 2022 Amendment, effective January 1, 2023, +Mr. Sinha became Executive Vice +43 +President of Operations for the Company and will be required to devote not more than three days per week +to such executive-level duties as are reasonably assigned to him by our Chief Executive Officer. Based on his change of title and responsibilities, +Mr. Sinha is no longer considered to be an executive officer of the Company. The Sinha 2022 Amendment provides that (i) Mr. Sinha’s +base compensation will be $400,000 for the calendar year 2023 and (ii) he will be eligible to receive a discretionary annual performance +bonus based on the Company’s financial performance in 2023. All of the other terms and provisions of the Sinha 2019 Agreement, +as amended by the Sinha 2021 Amendment, remain in full force and effect. +Grants +of Plan-Based Awards in the 2022 Fiscal Year +The +following table sets forth information concerning awards under our equity and non-equity incentive plans granted to each of the Named +Executive Officers in the 2022 Fiscal Year. +Estimated Future Payouts Under +Non-Equity Incentive Plan +Awards (1) +All Other +Stock +Awards: +Number of +Shares of +Stock or +All Other +Option +Awards: +Number of +Securities +Underlying +Exercise or +Base Price +of Option +Grant Date +Fair Value +of Stock +and Option +Threshold +Target +Maximum +Units +Options +Awards +Awards +Name +Grant Date +($) +($) +($) +(#) +(#) +($/Sh) +($) +Edward R. Rosenfeld +N/A +— +1,000,000 (1) +— +— +— +— +— +2/1/22 +— +— +— +60,532 +— +— +2,499,972 +3/15/22 +— +— +— +77,340 +— +— +3,000,019 +Zine Mazouzi +N/A +115,000 +287,500 +460,000 +— +— +— +— +3/15/22 +— +— +— +6,445 +— +— +250,002 +Amelia Newton Varela +N/A +— +450,000 (1) +450,000 +— +— +— +— +3/15/22 +— +— +— +6,445 +— +— +250,002 +Karla Frieders +N/A +— +100,000 (1) +— +— +— +— +— +3/15/22 +— +— +— +12,890 +— +— +500,003 +Awadhesh Sinha* +N/A +— +550,000 (1) +200,000 +— +— +— +— +(1) +Consistent +with SEC regulations, because there were no thresholds, targets or maximums for the 2022 annual bonus program for these Named Executive +Officers, the amounts shown in the target column (other than for Mr. Mazouzi) are representative amounts based on 2021 performance. +For Ms. Varela and Mr. Sinha, the bonuses were capped at $450,000 and $200,000, respectively, pursuant to their employment agreements. +For Mr. Mazouzi, the amounts shown are based on the annual bonus amounts set forth in his employment agreement. The bonus amounts +actually earned for 2022 are shown in the Non-Equity Incentive Plan Compensation column of the Summary Compensation Table above. +* +Mr. +Sinha became our Executive Vice President of Operations effective January 1, 2023 and is no longer considered to be an executive +officer. +Plan-Based +Awards +On +February 25, 2019, upon recommendation of the Compensation Committee, the Board unanimously approved the adoption of the Steven Madden, +Ltd. 2019 Incentive Compensation Plan (the “2019 Plan”), and on May 24, 2019, our stockholders approved the adoption of the +2019 Plan. The purpose of the 2019 Plan is to enhance our profitability and value for the benefit of our stockholders by enabling the +Company to offer eligible employees, consultants and non-employee directors cash and stock-based incentives to attract, retain and reward +such individuals and provide additional incentive for such persons to exert maximum efforts for our success by encouraging stock ownership +in the Company. The 2019 Plan serves as a means to strengthen the mutuality of +44 +interests between such individuals and our stockholders. +All of the equity and non-equity incentive awards granted to our Named Executive Officers in Fiscal Year 2022 were granted under the +2019 Plan. +Outstanding +Equity Awards at End of the 2022 Fiscal Year +The +following table sets forth information concerning restricted stock that has not vested and stock awards outstanding for each of the Named +Executive Officers as of the end of the 2022 Fiscal Year. +Option Awards +Stock Awards +Name +Number +of +Securities +Underlying +Unexercised +Options +(#) +Exercisable +Number +of +Securities +Underlying +Unexercised +Options +(#) +Unexercisable +Equity +Incentive +Plan +Awards: +Number of +Securities +Underlying +Unexercised +Unearned +Options +(#) +Option +Exercise +Price +($) +Option +Expiration +Date +Number +of +Shares or +Units of +Stock That +Have Not +Vested +(#) +Market +Value +of Shares or +Units of +Stock That +Have Not +Vested +($) +Equity +Incentive +Plan Awards: +Number of +Unearned +Shares, Units +or Other +Rights that +Have Not +Vested +(#) +Equity +Incentive +Plan Awards: +Market or +Payout Value +of Unearned +Shares, Units +or Other +Rights That +Have Not +Vested +($) +Edward +R. Rosenfeld +— +— +— +— +— +412,520 (1) +13,184,139 +— +— +Zine +Mazouzi +— +— +— +— +— +41,489 (2) +1,325,988 +— +— +Amelia +Newton Varela +— +— +— +— +— +42,408 (3) +1,355,360 +— +— +Karla +Frieders +— +— +— +— +— +50,076 (4) +1,600,429 +— +— +Awadhesh +Sinha* +— +— +— +— +— +— +— +— +(1) +On +March 15, 2017, Mr. Rosenfeld was awarded 59,841 shares of restricted Common Stock, which shares vest in five substantially equal +annual installments commencing on March 5, 2018. On March 15, 2018, Mr. Rosenfeld was awarded 100,000 shares of restricted Common +Stock, which shares vest in five substantially equal installments commencing on March 5, 2019. On December 31, 2018, Mr. Rosenfeld +was awarded 87,500 shares of restricted Common Stock, which shares vest in five substantially equal installments commencing on December +1, 2019. On February 1, 2019, Mr. Rosenfeld was awarded 87,500 shares of restricted Common stock, which vest in five equal annual +installments commencing on February 1, 2020. On March 15, 2019, Mr. Rosenfeld was awarded 91,547 shares of restricted Common Stock, +which vest in five equal annual installments commencing on March 1, 2020. On March 16, 2020, Mr. Rosenfeld was awarded 108,030 shares +of restricted Common Stock, which vest in five equal annual installments commencing on March 1, 2021. On December 31, 2021, Mr. Rosenfeld +was awarded 75,317 shares of restricted Common Stock, which shares vest in five annual installments of 15,063, 15,063, 15,063, 15,064, +and 15,064 shares respectively, commencing on December 1, 2022. On March 15, 2022, Mr. Rosenfeld was awarded 77,340 shares of restricted +Common Stock, which shares will vest in five equal annual installments commencing on March 1, 2023. +(2) +On +January 2, 2019, Mr. Mazouzi was awarded 8,202 restricted shares of Common Stock, which vest in five substantially equal installments +commencing on the first anniversary of the date awarded. On January 2, 2020, Mr. Mazouzi was awarded 2,320 restricted shares of Common +Stock, which vest in five substantially equal installments commencing on the first anniversary of the date awarded. On August 3, +2020, Mr. Mazouzi was awarded 5,000 restricted shares of Common Stock, which vest in five substantially equal installments commencing +on the first anniversary of the date awarded. On January 4, 2021, Mr. Mazouzi was awarded 29,155 restricted shares of Common Stock, +which vest in five substantially equal installments commencing on the first anniversary of the date awarded. On March 15, 2021, Mr. +Mazouzi was awarded 5,057 restricted shares of Common Stock, which vest in five substantially equal installments commencing on March +1, 2022. On March 15, 2022, Mr. Mazouzi was awarded 6,445 restricted shares of Common Stock, which will vest in five equal annual +installments commencing on March 1, 2023. +45 +(3) +On +March 15, 2017, Ms. Varela was awarded 19,947 shares of restricted Common Stock, which shares vest in five substantially equal annual +installments commencing on March 5, 2018. On January 2, 2020, Ms. Varela was awarded 27,000 restricted shares of Common Stock, which +will vest in five equal annual installments on each anniversary of the date of grant, commencing on January 2, 2021. On March 1, +2021, Ms. Varela was awarded 26,350 restricted shares of Common Stock, which will vest in four substantially equal annual installments +on each anniversary of the date of grant, commencing on March 1, 2022. On March 15, 2022, Ms. Varela was awarded 6,445 restricted +shares of Common Stock, which will vest in five equal annual installments commencing on March 1, 2023. +(4) +On +April 11, 2017, Ms. Frieders was awarded 30,000 shares of restricted Common Stock, which shares vest in five equal annual installments +commencing on April 1, 2018. On March 15, 2018, Ms. Frieders was awarded 16,666 shares of restricted Common Stock, which shares vest +in five substantially equal installments commencing on March 5, 2019. On May 11, 2020, Ms. Frieders was awarded 32,758 restricted +shares of our Common Stock, which will vest in five substantially equal annual installments commencing on May 1, 2021. On March 15, +2021, Ms. Frieders was awarded 10,114 restricted shares of our Common Stock, which will vest in five substantially equal annual installments +commencing on March 1, 2022. On March 15, 2022, Ms. Frieders was awarded 12,890 restricted shares of Common Stock, which will vest +in five equal annual installments commencing on March 1, 2023. +* +Mr. +Sinha became our Executive Vice President of Operations effective January 1, 2023 and is no longer considered to be an executive +officer. +Option +Exercises and Stock Vested in the 2022 Fiscal Year +The +following table sets forth information concerning stock options exercised and restricted stock vested during the 2022 Fiscal Year for +each of the Named Executive Officers. The value realized from exercised options is deemed to be the market value of the Common Stock +on the date of exercise, less the exercise price of the option, multiplied by the number of shares of Common Stock underlying the option. +The value realized from the vesting of restricted stock is deemed to be the market value of the Common Stock on the date of vesting multiplied +by the number of shares vesting. +Option Awards +Stock Awards +Name +Number of Shares +Acquired on +Exercise +(#) +Value Realized +on Exercise +($) +Number of Shares +Acquired on +Vesting +(#) +Value Realized +on Vesting +($) +Edward R. Rosenfeld +— +— +132,059 +5,191,391 +Zine Mazouzi +— +— +9,946 +444,608 +Amelia Newton Varela +— +— +15,976 +681,800 +Karla Frieders +— +— +20,959 +838,438 +Awadhesh Sinha* +— +— +— +— +* +Mr. +Sinha became our Executive Vice President of Operations effective January 1, 2023 and is no longer considered to be an executive +officer. +Securities +Authorized for Issuance Under Equity Compensation Plans +The +following table sets forth information as of December 31, 2022 with respect to compensation plans (including individual compensation +arrangements) under which shares of Common Stock are authorized for issuance, aggregated as follows: +● +All +compensation plans previously approved by security holders; and +● +All +compensation plans not previously approved by security holders. +46 +Equity +Compensation Plan Information +Number of +securities to be +issued upon +exercise of +outstanding +options, +warrants +and rights +(#) +Weighted average +exercise price of +outstanding options, +warrants and rights +($) +Number of securities +remaining available +for future issuance +under equity +compensation plans +(excluding securities +reflected in +column (a)) +(#) +Equity compensation plans approved by security holders +2,756,000 +29.80 +5,934,000 +Equity compensation plans not approved by security holders +— +— +— +Total +2,756,000 +29.80 +5,934,000 +Termination, +Change-in-Control and Non-Competition/Non-Solicitation +The +employment agreements for Ms. Varela and Messrs. Rosenfeld, Mazouzi and Sinha provide for a severance payment upon a termination of employment +in connection with a change-in-control of the Company. The employment agreements of Messrs. Rosenfeld, Mazouzi and Sinha also provide +for a severance payment if the executive terminates his employment for good reason in connection with a change-in-control. The change-in-control +severance payments may result in the application of the “golden parachute” provisions of Section 280G of the Code, and to +the extent Section 280G applies, we may not be permitted to deduct from our taxable income the severance payments made to the Named Executive +Officer. Moreover, Section 4999 of the Code would impose a 20% excise tax on the Named Executive Officer receiving the severance payment. +In the case of Ms. Varela, these severance payments in connection with a change-in-control, however, are reduced if the severance payment, +when added to any other benefits triggered by a change-of-control, is determined to constitute an “excess parachute payment” +under Sections 280G and 4999 of the Code, to the maximum amount that we can deduct under Section 280G of the Code. In the case of Messrs. +Rosenfeld, Mazouzi and Sinha, the executive’s change-in-control severance payment will only be reduced to the maximum amount that +we can deduct under Section 280G of the Code if the reduction provides the Named Executive Officer with the best after-tax result; otherwise, +the Named Executive Officer will receive the full amount of the severance payment and other benefits triggered by the change-in-control +and be liable for the 20% excise tax on the excess parachute payment in addition to all other applicable taxes. In such case, our deduction +of the portion of the severance payment constituting an excess parachute payment will be disallowed. +Our +employment agreements with Ms. Varela and Messrs. Rosenfeld, Mazouzi and Sinha also provide for severance payments to the executive if +we terminate the executive’s employment without cause or if we give any of these executives good reason to terminate their respective +employment. +Please +see the section of this Proxy Statement captioned “Employment Arrangements” for a summary description of the Named Executive +Officers’ employment agreements and such severance and change-in-control provisions. These benefits are described and quantified +in the section of this Proxy Statement captioned “Potential Payments Upon Termination or Change-In-Control” below. +We +believe that the severance payments and payments made upon change-in-control provisions in the employment agreements provide appropriate +protection to our executives, comparable to that available at peer companies and, with regard to the enhanced severance following a change-in-control, +protect the Company from losing key executives during a period when a change-in-control may be threatened or pending. These benefits +are described and quantified in the section below captioned “Potential Payments Upon Termination or Change-In-Control.” +Mses. +Frieders and Varela and Mr. Mazouzi have each agreed to a non-compete and non-solicitation restriction through the expiration date of +their employment agreement, April 30, 2023, December 31, 2025, and December 31, 2023 respectively, in the event of a voluntary termination +or termination for cause. Messrs. Rosenfeld +47 +and Sinha have each agreed to non-compete and non-solicitation restrictions during the period +of their employment and for a six-month period following the termination of their employment for cause or in the event of their resignation +without good reason. +Potential +Payments Upon Termination or Change-In-Control +Our +employment agreements with the Named Executive Officers provide for payments to such individuals upon termination of employment or a +change-in-control of the Company. Please see the section of this Proxy Statement captioned “Employment Arrangements.” The +table below assumes that the termination of employment has occurred on December 31, 2022 and that the amounts would be payable to the +respective Named Executive Officer if such Named Executive Officer’s employment is terminated under the various scenarios set forth +below. +48 +Name +Cash +Payment +($) +Continuation +of Medical / +Welfare +Benefits +(Present +Value) +($) +Acceleration +and +Continuation +of Equity +Award +($) +Total +Termination +Benefits (1) +($) +Termination Due To Death +Edward R. Rosenfeld +1,126,879 (2) +22,725 (3) +— +1,149,604 +Zine Mazouzi +— +— +— +— +Amelia Newton Varela +— +— +— +— +Karla Frieders +— +— +— +— +Awadhesh Sinha* +300,000 (4) +8,651 (3) +— +308,651 +Termination Due To Total Disability +Edward R. Rosenfeld +1,126,879 (2) +— +— +1,126,879 +Zine Mazouzi +— +— +— +— +Amelia Newton Varela +— +— +— +— +Karla Frieders +— +— +— +— +Awadhesh Sinha* +300,000 (4) +8,651 (3) +— +308,651 +Termination For Cause; +Resignation Without Good Reason +Edward R. Rosenfeld +— +— +— +— +Zine Mazouzi +— +— +— +— +Amelia Newton Varela +— +— +— +— +Karla Frieders +— +— +— +— +Awadhesh Sinha* +— +— +— +— +Termination Other Than For Cause; +Resignation For Good Reason +Edward R. Rosenfeld +2,298,833 (5) +— +— +2,298,833 +Zine Mazouzi +600,000 (6) +— +— +600,000 +Amelia Newton Varela +2,400,000 (7) +— +— +2,400,000 +Karla Frieders +196,667 (8) +— +— +196,667 +Awadhesh Sinha* +300,000 (9) +— +— +300,000 +Termination Upon A Change-In-Control +Edward R. Rosenfeld +3,958,845 (10) +— +5,800,304 (11) +9,759,149 +Zine Mazouzi +2,537,500 (12) +— +631,663 (11) +3,169,163 +Amelia Newton Varela +2,401,672 (13) +— +483,449 (11) +2,885,121 +Karla Frieders +590,000 (14) +— +524,029 (11) +1,114,029 +Awadhesh Sinha* +1,875,000 (15) +— +— +1,875,000 +49 +(1) +Ms. +Varela’s employment agreement provides that severance payments in connection with a change-in-control are reduced if the severance +payment, when added to any other benefits triggered by a change-of-control, is determined to constitute an “excess parachute +payment” under Sections 280G and 4999 of the Code, to the maximum amount that is deductible to the Company under Section 280G +of the Code. The employment agreements of Messrs. Rosenfeld, Mazouzi and Sinha provide that the executive’s change-in-control +severance payment will only be reduced to the maximum amount that is deductible to the Company under Section 280G of the Code if +the reduction provides the Named Executive Officer with the best after-tax result; otherwise, the Named Executive Officer will receive +the full amount of the severance payment and other benefits triggered by the change-in-control and be liable for the 20% excise tax +on the excess parachute payment in addition to all other applicable taxes. In such case, our deduction of the portion of the severance +payment constituting an excess parachute payment will be disallowed. Because our agreements with the Named Executive Officers do +not under any circumstances provide for an increase in severance or other benefits due to the application of Sections 280G and 4999 +of the Code, for purposes of the disclosure above, we have calculated the potential amounts payable without taking into account the +application of Sections 280G and 4999 of the Code. Upon the occurrence of a change-of-control, the amounts may be reduced due to +the application of Section 280G and 4999 of the Code. +(2) +Consists +of Mr. Rosenfeld’s 2023 base salary of $1,126,879, which would be paid at regular intervals. +(3) +Consists +of medical benefits. +(4) +Consists +of Mr. Sinha’s 2023 base salary of $300,000, which would be paid at regular intervals. +(5) +Consists +of the base salary of $1,126,879 and $1,171,954 for 2023 and 2024, respectively, that would have been paid to Mr. Rosenfeld during +the remainder of the term of his employment until the expiration of his employment agreement on December 31, 2024. Mr. Rosenfeld +would receive these payments at regular intervals. +(6) +Consists +of the base salary of $600,000 for 2023 that would have been paid to Mr. Mazouzi during the remainder of the term of his employment +until the expiration of his employment agreement on December 31, 2023. Mr. Mazouzi would receive these payments at regular intervals. +(7) +Consists +of the base salary of $775,000, $800,000, and $825,000 for 2023, 2024, and 2025, respectively, that would have been paid to Ms. Varela +during the remainder of the term of her employment until the expiration of her employment agreement on December 31, 2025. Ms. Varela +would receive these payments at regular intervals. +(8) +Consists +of the base salary of $590,000 per year that would have been paid to Ms. Frieders during the remainder of the term of her employment +until the expiration of her employment agreement on April 30, 2023. +(9) +Consists +of the base salary of $300,000 for 2023 that would have been paid to Mr. Sinha during the remainder of the term of his employment +until the expiration of his employment agreement on December 31, 2023. Mr. Sinha would receive these payments at regular intervals. +(10) +Consists +of two and one-half times the sum of (i) Mr. Rosenfeld’s 2022 base salary of $1,083,538 plus (ii) the average cash bonus received +by Mr. Rosenfeld for the three-year period ending on December 31, 2021. Upon a change-in-control, payments (or portions thereof) +to Mr. Rosenfeld determined to constitute an “excess parachute payment” may be reduced to the maximum amount that would +be tax deductible by the Company pursuant to Sections 280G of the Code. See the “Implications of Tax and Accounting Matters” +section of “Compensation Discussion and Analysis” for a discussion of the applicability of Sections 280G and 4999 of +the Code to change-in-control payments generally. See also the summary of Mr. Rosenfeld’s employment agreement under “Employment +Arrangements.” +(11) +The +amount disclosed represents the total value of the restricted stock and stock options that would have received accelerated vesting +upon a hypothetical change-in-control on December 31, 2022. +(12) +Consists +of two and one-half times the sum of (i) Mr. Mazouzi’s 2022 base salary of $575,000 plus (ii) $440,000, which was Mr. Mazouzi’s +bonus for 2021. This formula in Mr. Mazouzi’s agreement would refer to his average bonus over the preceding three years in +the event of an actual termination, but because Mr. Mazouzi was not an executive officer for years prior to 2021, we have used his +bonus for 2021 as an estimate. Upon a change-in-control, payments (or portions thereof) to Mr. Mazouzi determined to constitute an +“excess parachute payment” may be subject to reduction to the maximum amount that would be tax deductible by the Company +pursuant to Sections 280G of the Code. See the “Implications of Tax and Accounting Matters” section of “Compensation +Discussion and Analysis” for a discussion of the applicability of Sections 280G and 4999 of the Code to change-in-control payments +generally. See also the summary of Mr. Mazouzi’s employment agreement under “Employment Arrangements.” +50 +(13) +Consists +of two and one-half times the sum of (i) Ms. Varela’s 2022 base salary of $750,000 plus (ii) the average cash bonus received +by Ms. Varela for the three-year period ending on December 31, 2021. Upon a change-in-control, payments (or portions thereof) to +Ms. Varela determined to constitute an “excess parachute payment” may be subject to reduction to the maximum amount that +would be tax deductible by the Company pursuant to Sections 280G of the Code. See the “Implications of Tax and Accounting Matters” +section of “Compensation Discussion and Analysis” for a discussion of the applicability of Sections 280G and 4999 of +the Code to change-in-control payments generally. See also the summary of Ms. Varela’s employment agreement under “Employment +Arrangements.” +(14) +Consists +of the base salary that would have been paid to Ms. Frieders during the remainder of the term of her employment until the expiration +of her employment agreement on April 30, 2023, consisting of $590,000 per year payable for the period from January 1, 2022 through +April 30, 2023. Ms. Frieders would receive these payments at regular intervals. +(15) +Consists +of two and one-half times the sum of (i) Mr. Sinha’s 2022 base salary of $500,000 plus (ii) the average cash bonus received +by Mr. Sinha for the three-year period ended on December 31, 2021. Upon a change-in-control, payments (or portions thereof) to Mr. +Sinha determined to constitute an “excess parachute payment” may be subject to reduction to the maximum amount that would +be tax deductible by the Company pursuant to Sections 280G of the Code. See the “Implications of Tax and Accounting Matters” +section of “Compensation Discussion and Analysis” for a discussion of the applicability of Sections 280G and 4999 of +the Code to change-in-control payments generally. See also the summary of Mr. Sinha’s employment agreement under “Employment +Arrangements.” +* +Mr. +Sinha became our Executive Vice President of Operations effective January 1, 2023 and is no longer considered to be an executive +officer. +Compensation +Committee Report +The +Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with management, and based on the review and +discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included +in this Proxy Statement. +Submitted +by the Compensation Committee of the Board of Directors: +Peter +Migliorini (Chairman) +Peter +A. Davis +Rose +Peabody Lynch +Robert +Smith +Pay +Versus Performance +As +required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(v) of Regulation S-K, we are +providing the following information about the relationship between executive compensation actually paid and certain financial performance +of the Company. For further information concerning the Company’s variable pay-for-performance philosophy and how the Company aligns +executive compensation with the Company’s performance, refer to “Executive Compensation – Compensation Discussion and +Analysis.” +51 +Year +Summary Compensation Table Total for PEO 1 +Compensation Actually Paid to PEO 2 +Average Summary Compensation Table Total for Non-PEO NEOs 3 +Average Compensation Actually Paid to Non-PEO NEOs 4 +Total Shareholder Return 5 +Peer Group Total Shareholder Return 6 +Net Income +(in thousands) 7 +Adjusted EBIT +(in thousands) 8 +Value of Initial Fixed $100 Investment Based On: +Year +Summary Compensation Table Total for PEO 1 +Compensation Actually Paid to PEO 2 +Average Summary Compensation Table Total for Non-PEO NEOs 3 +Average Compensation Actually Paid to Non-PEO NEOs 4 +Total Shareholder Return 5 +Peer Group Total Shareholder Return 6 +Net Income +(in thousands) 7 +Adjusted EBIT +(in thousands) 8 +(a) +(b) +(c) +(d) +(e) +(f) +(g) +(h) +(i) +2022 +$ +7,609,075 +$ +1,935,729 +$ +1,148,601 +$ +686,226 +$ +110.96 +$ +192.41 +$ +216,061 +$ +281,025 +2021 +$ +7,566,831 +$ +11,498,936 +$ +1,711,424 +$ +2,175,266 +$ +157.42 +$ +210.40 +$ +190,678 +$ +259,450 +2020 +$ +2,872,859 +$ +562,398 +$ +1,074,114 +$ +1,210,677 +$ +117.95 +$ +150.13 +$ +( 18,397 +) +$ +63,627 +(1) +The +dollar amounts reported in column (b) are the amounts of total compensation reported for Mr. Rosenfeld (our Chief Executive Officer) +for each corresponding year in the “Total” column of the Summary Compensation Table. Refer to “Executive Compensation +– Summary Compensation Table for the 2022 Fiscal Year.” +(2) +The +dollar amounts reported in column (c) represent the amount of “compensation actually paid” to Mr. Rosenfeld, as computed +in accordance with Item 402(v) of Regulation S-K. The dollar amounts do not reflect the actual amount of compensation earned by or +paid to Mr. Rosenfeld during the applicable year. In accordance with the requirements of Item 402(v) of Regulation S-K, the following +adjustments were made to Mr. Rosenfeld’s total compensation for each year to determine the compensation actually paid: +Year +Reported Summary Compensation Table Total for PEO +Reported Value of Equity +Awards (a) +Equity Award +Adjustments (b) +Compensation Actually Paid to PEO +2022 +$ 7,609,075 +$ ( 5,499,990 ) +$ ( 173,356 ) +$ 1,935,729 +2021 +$ 7,566,831 +$ ( 5,499,985 ) +$ 9,432,090 +$ 11,498,936 +2020 +$ 2,872,859 +$ ( 2,360,456 ) +$ 49,995 +$ 562,398 +(a) +The +grant date fair value of equity awards represents the total of the amounts reported in the “Stock Awards” and “Option +Awards” columns in the Summary Compensation Table for the applicable year. +(b) +The +equity award adjustments for each applicable year include the addition (or subtraction, as applicable) of the following: (i) the +year-end fair value of any equity awards granted in the applicable year that are outstanding and unvested as of the end of the year; +(ii) the amount of change as of the end of the applicable year (from the end of the prior fiscal year) in fair value of any awards +granted in prior years that are outstanding and unvested as of the end of the applicable year; (iii) for awards that are granted +and vest in same applicable year, the fair value as of the vesting date; (iv) for awards granted in prior years that vest in the +applicable year, the amount equal to the change as of the vesting date (from the end of the prior fiscal year) in fair value; (v) +for awards granted in prior years that are determined to fail to meet the applicable vesting conditions during the applicable year, +a deduction for the amount equal to the fair value at the end of the prior fiscal year; and (vi) the dollar value of any dividends +or other earnings paid on stock or option awards in the applicable year prior to the vesting date that are not otherwise reflected +in the fair value of such award or included in any other component of total compensation for the applicable year. The amounts deducted +or added in calculating the equity award adjustments are as follows: +52 +Year +Year End Fair Value of Equity Awards +Year over Year Change in Fair Value of Outstanding and Unvested Equity Awards +Year over Year Change in Fair Value of Equity Awards Granted in Prior Years that Vested in the Year +Value of Dividends or other Earnings Paid on Stock or Option Awards not Otherwise Reflected in Fair Value or Total Compensation +Total Equity Award +Adjustments +2022 +$ 4,406,389 +$ ( 3,985,142 ) +$ ( 945,391 ) +$ 350,788 +$ ( 173,356 ) +2021 +$ 5,849,922 +$ 3,131,154 +$ 244,307 +$ 206,707 +$ 9,432,090 +2020 +$ 3,815,620 +$ ( 2,387,322 ) +$ ( 1,447,074 ) +$ 68,771 +$ 49,995 +(3) +The +dollar amounts reported in column (d) represent the average of the amounts reported for the Company’s named executive officers +(NEOs) as a group (excluding Mr. Rosenfeld, who has served as our CEO since 2008) in the “Total” column of the Summary +Compensation Table in each applicable year. The names of each of the NEOs (excluding Mr. Rosenfeld) included for purposes of calculating +the average amounts in each applicable year are as follows: (i) for 2022, Zine Mazouzi, Amelia Newton Varela, Karla Frieders, and +Awadhesh Sinha; (ii) for 2021, Zine Mazouzi, Amelia Newton Varela, Karla Frieders, and Awadhesh Sinha; and (iii) for 2020, Arvind +Dharia, Amelia Newton Varela, Karla Frieders, and Awadhesh Sinha. +(4) +The +dollar amounts reported in column (e) represent the average amount of “compensation actually paid” to the NEOs as a group +(excluding Mr. Rosenfeld), as computed in accordance with Item 402(v) of Regulation S-K. The dollar amounts do not reflect the actual +average amount of compensation earned by or paid to the NEOs as a group (excluding Mr. Rosenfeld) during the applicable year. In +accordance with the requirements of Item 402(v) of Regulation S-K, the following adjustments were made to average total compensation +for the NEOs as a group (excluding Mr. Rosenfeld) for each year to determine the compensation actually paid, using the same methodology +described above in Note 2: +Year +Average Reported Summary Compensation Table Total for Non-PEO NEOs +Average Reported +Value of Equity Awards +Average Equity Award Adjustments (a) +Average Compensation Actually Paid to Non-PEO NEOs +2022 +$ 1,148,601 +$ ( 250,002 ) +$ ( 212,373 ) +$ 686,226 +2021 +$ 1,711,424 +$ ( 650,003 ) +$ 1,113,845 +$ 2,175,266 +2020 +$ 1,074,114 +$ ( 804,706 ) +$ 583,231 +$ 1,210,677 +(a) +The +amounts deducted or added in calculating the total average equity award adjustments are as follows: +53 +Year +Average Year End Fair Value of Equity Awards +Year over Year Average Change in Fair Value of Outstanding and Unvested Equity Awards +Year over Year Average Change in Fair Value of Equity Awards Granted in Prior Years that Vested in the Year +Average Value of Dividends or other Earnings Paid on Stock or Option Awards not Otherwise Reflected in Fair Value or Total Compensation +Total Average Equity Award Adjustments +2022 +$ 205,982 +$ ( 392,470 ) +$ ( 53,429 ) +$ 27,544 +$ ( 212,373 ) +2021 +$ 821,078 +$ 235,259 +$ 32,832 +$ 24,676 +$ 1,113,845 +2020 +$ 840,098 +$ ( 108,114 ) +$ ( 153,423 ) +$ 4,670 +$ 583,231 +(5) +Cumulative +TSR is calculated by dividing the sum of (i) the cumulative amount of dividends for the measurement period, assuming dividend reinvestment, +and (ii) the difference between the Company’s share price at the end and the beginning of the measurement period by the Company’s +share price at the beginning of the measurement period. +(6) +Represents +the weighted peer group TSR, weighted according to the respective companies’ stock market capitalization at the beginning of +each period for which a return is indicated. The peer group used for this purpose comes from the performance graph included in our +Annual Report on Form 10-K for the year ended December 31, 2022 and consists of seven companies: Caleres, Inc., Crocs, Inc., Deckers +Outdoor Corporation, Genesco Inc., Skechers U.S.A., Inc., Designer Brands Inc. and Wolverine World Wide, Inc. +(7) +The +dollar amounts reported represent the amount of net income reflected in the Company’s audited financial statements for the +applicable year. +(8) +The +Company has determined that Adjusted Earnings Before Interest and Taxes (EBIT) is the financial performance measure that represents +the most important performance measure used by the Company to link compensation actually paid to the Company’s NEOs in the +2022 Fiscal Year to Company performance. Adjusted EBIT is a non-GAAP measure that adjusts GAAP net income for certain items that +are outside of the Company’s core, on-going business activities. Adjusted EBIT excludes interest and other income/(expenses) +– net and the provision/(benefit) for income taxes. For the 2022 Fiscal Year, Adjusted EBIT further excludes (a) expenses in +connection with the accelerated amortization of a trademark, (b) the benefit of a change in the valuation of contingent consideration, +and (c) the benefit of the exit of a lease. We also refer to Adjusted EBIT as Adjusted income from operations. A reconciliation of +GAAP income from operations to Adjusted income from operations is included in the press release filed as Exhibit 99.1 to our Current +Report on Form 8-K filed with the SEC on February 23, 2023. +Financial +Performance Measures +As +described in greater detail in “Executive Compensation – Compensation Discussion and Analysis,” the Company’s +executive compensation program reflects a variable pay-for-performance philosophy. The metrics that the Company uses for both our long-term +and short-term incentive awards are selected based on an objective of incentivizing our NEOs to increase the value of our enterprise +for our stockholders. The most important financial performance measures used by the Company to link executive compensation actually paid +to the Company’s NEOs, for the most recently completed fiscal year, to the Company’s performance are as follows: +● +Adjusted +EBIT +● +Adjusted EBITDA +● +Adjusted +Diluted Earnings per Share +● +Revenue +● +Return +on Invested Capital +54 +Analysis +of the Information Presented in the Pay versus Performance Table +As +described in more detail in the section “Executive Compensation – Compensation Discussion and Analysis,” the Company’s +executive compensation program reflects a variable pay-for-performance philosophy. While the Company utilizes several performance measures +to align executive compensation with Company performance, all of those Company measures are not presented in the Pay Versus Performance +table. Moreover, the Company generally seeks to incentivize long-term performance, and therefore does not specifically align the Company’s +performance measures with compensation that is actually paid (as computed in accordance with Item 402(v) of Regulation S-K) for a particular +year. In accordance with Item 402(v) of Regulation S-K, the Company is providing the following graphs of the relationships between information +presented in the Pay Versus Performance table. +The +following graph reflects the relationship between the amount of compensation actually paid to Mr. Rosenfeld, the average amount of compensation +actually paid to the Company’s NEOs as a group (excluding Mr. Rosenfeld) and the Company’s cumulative TSR over the three +years presented in the table. +The +following graph reflects the relationship between the amount of compensation actually paid to Mr. Rosenfeld, the average amount of compensation +actually paid to the Company’s NEOs as a group (excluding Mr. Rosenfeld) and the Company’s net income over the three years +presented in the table. +55 +The +following graph reflects the relationship between the amount of compensation actually paid to Mr. Rosenfeld, the average amount of compensation +actually paid to the Company’s NEOs as a group (excluding Mr. Rosenfeld) and the Company’s Adjusted EBIT over the three years +presented in the table. +The +following graph reflects the relationship between the cumulative TSR of the Company and its peer group over the three year period presented +in the table. For detail regarding the composition of the peer group, see footnote 6 to the table above. +56 +57 +PROPOSAL +TWO: +RATIFICATION +OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY’S +INDEPENDENT +REGISTERED PUBLIC ACCOUNTANTS +FOR +THE FISCAL YEAR ENDING DECEMBER 31, 2022 +On +March 6, 2020, the Audit Committee initially appointed Ernst & Young LLP (“EY”) as our independent registered public +accounting firm to conduct the audit of our books and records for the fiscal year ending December 31, 2020, and the Committee has appointed +EY as our independent registered public accounting firm to conduct the audit of our books and records for the fiscal years ending December +31, 2021, December 31, 2022, and December 31, 2023. +In +evaluating the selection of an independent registered public accounting firm for 2023, the Audit Committee considered several factors +relating to potential candidates, including audit quality, the benefits of our existing auditor’s familiarity with the Company +versus a fresh perspective, the key members of the audit engagement team, the most recent internal quality control review or Public Company +Accounting Oversight Board inspection, auditor independence and its process for maintaining independence, the risks of a change of auditors, +and the firm’s international scope and presence. In addition, the Audit Committee evaluated the Company’s requirements in +light of the growth and complexity of its business and the increasing international aspects of its operations. As a result of this evaluation, +the Audit Committee selected EY as the Company’s independent registered public accounting firm for the fiscal year ending December +31, 2023. +Although +ratification by stockholders is not required by our organizational documents or any applicable law, the Audit Committee has determined +that requesting ratification by stockholders of its appointment of EY as our independent registered public accountants is a matter of +good corporate practice. If stockholders do not ratify the selection, the Audit Committee will reconsider whether or not to retain EY, +but may still retain that accounting firm. Even if the selection is ratified, the Audit Committee, in its discretion, may change the +appointment at any time during the year if it determines that such a change would be in our best interest and that of our stockholders. +Representatives +of EY are expected to be present at the Annual Meeting to respond to appropriate questions and to make a statement should they so desire. +Required +Vote +The +affirmative vote of a majority of the votes cast by the holders of outstanding shares of Common Stock present or represented by proxy +and entitled to vote at the Annual Meeting is required to ratify the Audit Committee’s selection of EY. +Recommendation +of the Board of Directors +The +Board of Directors unanimously recommends a vote “FOR” the ratification of the appointment of EY as our independent registered +public accountants for the fiscal year ending December 31, 2023. Unless marked to the contrary, proxies received from stockholders will +be voted in favor of ratifying the appointment of EY as our independent registered public accountants for the fiscal year ending December +31, 2023. +Independent +Registered Public Accounting Firm’s Fees and Services +The +aggregate fees billed to the Company by EY for professional services rendered for each of 2022 and 2021, respectively, are set forth +below: +58 +Year Ended December 31, +2022 +2021 +Audit Fees (1) +$ 2,372,000 +$ 2,062,500 +Audit-Related Fees +— +— +Tax Fees (2) +506,000 +421,000 +All Other Fees (3) +— +2,200 +Total +$ 2,878,000 +$ 2,485,700 +(1) +Represents +the aggregate fees billed for (a) the audit of our annual financial statements, (b) the reviews of the financial statements included +in our Quarterly Reports on Form 10-Q, (c) other statutory and regulatory filings or engagements and (d) the audit of our internal +controls over financial reporting. +(2) +Represents +aggregate fees billed for tax advice, tax compliance and consulting. Includes, among others, review and advice with respect to transfer +pricing. +(3) +Represents +fees for annual subscriptions to accounting reference tools in 2021. +Audit +Committee’s Pre-Approval Policies and Procedures +Consistent +with SEC policies regarding auditor independence, the Audit Committee has responsibility for appointing, setting compensation and overseeing +the work of our independent registered public accountants. In recognition of this responsibility, the Audit Committee has established +a policy to review and pre-approve all audit and permissible non-audit services provided by the independent registered public accountants. +These services may include audit services, audit-related services, tax services and other services. +Prior +to engagement of the independent auditor for next year’s audit, the Audit Committee will pre-approve all auditing services and +all permitted non-audit services (including the fees and terms thereof), except those excluded from requiring pre-approval based upon +the de minimus exception set forth in Section 10A(i)(1)(B) of the Exchange Act and Rule 2-01(c)(7)(i)(C) of Regulation S-X. +The +Audit Committee’s pre-approval policies and procedures are as follows: (a) prior to each fiscal year, the Audit Committee pre-approves +a schedule of estimated fees for proposed non-prohibited audit and non-audit services; and (b) actual amounts paid are monitored by our +financial management and reported to the Audit Committee. +All +work performed by EY as described above under the captions Audit Fees, Audit-Related Fees, Tax Fees and All Other Fees has been approved +or pre-approved by the Audit Committee pursuant to the provisions of the Audit Committee’s charter. The Audit Committee did not +approve any of the Audit Fees, Audit-Related Fees, Tax Fees and All Other Fees described above pursuant to a de minimis exception +set forth in Rule 2-01(c)(7)(i)(C) of Regulation S-X. The Audit Committee has considered and concluded that the provision of non-audit +services is compatible with maintaining the independence of EY. +AUDIT +COMMITTEE REPORT +The +Audit Committee reviewed the Company’s audited financial statements for the 2022 Fiscal Year and met with both management and representatives +of EY, our independent registered public accountants for that year, to discuss such audited financial statements. Management and our +independent registered public accountants have represented to the Audit Committee that the financial statements were prepared in accordance +with accounting principles generally accepted in the United States of America. The Audit Committee has received from and discussed with +EY the written disclosures and the letter regarding EY’s communications with the Audit Committee concerning independence as required +by applicable requirements of the Public Company Accounting Oversight Board and discussed with EY the independence of EY. The Audit Committee +also discussed with EY any matters required to be discussed by applicable requirements of the Public Company Accounting Oversight Board +and the SEC. Based on these reviews and discussions, the Audit Committee recommended to the Board that the Company’s audited financial +statements be included in the Company’s Annual Report on Form 10-K for the 2022 Fiscal Year. +Submitted +by the Audit Committee of the Board of Directors: +Al +Ferrara (Chairman) +Mitchell +S. Klipper +Ravi +Sachdev +59 +PROPOSAL +THREE: +NON-BINDING +ADVISORY VOTE ON EXECUTIVE COMPENSATION +Section +14A of the Exchange Act, as created by Section 951 of the Dodd-Frank Act, and the rules and regulations promulgated thereunder require +a publicly traded company to include a resolution in its proxy statement at least once every three years seeking stockholder approval, +on an advisory or non-binding basis, of the compensation of the named executive officers as disclosed in such company’s proxy statement +pursuant to the compensation rules of the SEC. At our 2017 Annual Meeting of Stockholders, our stockholders approved, on an advisory +basis, the holding of an advisory vote to approve executive compensation (commonly known as a “say-on-pay” proposal) annually. +Based on these results, the Board of Directors determined to hold its advisory vote to approve executive compensation annually until +the next frequency vote, which is scheduled to occur at the Annual Meeting as described in Proposal Four. Accordingly, we are providing +stockholders with a non-binding advisory vote on the compensation of our Named Executive Officers. +As +described in more detail in the Compensation Discussion and Analysis section, which begins on page 28 of this Proxy Statement, the +overall objective of our executive compensation program and plans is to support delivery of sustained operating and financial performance +results with the ultimate goal being to create and maximize value for our stockholders on a long-term basis. We believe that our executive +compensation program and plans serve the interests of our stockholders by enabling the Company to attract and retain an experienced and +effective management team whose combined knowledge of our business and the fashion footwear and accessories industries has proved extremely +valuable in delivering results for our stockholders. The Compensation Committee and the Board of Directors believe that our compensation +program and plans as articulated in the Compensation Discussion and Analysis section of this Proxy Statement effectively implement our +philosophy of aligning compensation to stockholder interests and that the compensation received by our Named Executive Officers in the +2022 Fiscal Year reflects and supports such philosophy and goal and is commensurate with our performance and strategic position. We will +continue to review and modify our executive compensation program to address evolving best practices and changing regulatory requirements. +We +encourage stockholders to read the Compensation Discussion and Analysis section of this Proxy Statement, as well as the Summary Compensation +Table and other related compensation tables and narrative disclosure contained in this Proxy Statement, all of which describe and explain +in detail the compensation of our Named Executive Officers in the 2022 Fiscal Year. +The +following resolution is submitted for stockholder approval: +RESOLVED , +that the stockholders of Steven Madden, Ltd. (the “Company”) approve, on a non-binding advisory basis, the compensation paid +to the Named Executive Officers of the Company as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange +Commission, including the executive compensation as described in the section captioned “Compensation Discussion and Analysis,” +the Summary Compensation Table and related tabular disclosure and narrative discussion regarding compensation of Named Executive Officers +under the caption “Executive Compensation” contained in the Company’s Proxy Statement for the 2023 Annual Meeting of +Stockholders. +This +vote is not intended to address any specific item of compensation, but rather the overall compensation of our Named Executive Officers +and the compensation program and plans described in this Proxy Statement. While this advisory vote on executive compensation, commonly +referred to as a “say-on-pay” advisory vote, is required by Section 14A of the Exchange Act, it is not binding on our Board +of Directors and may not be construed as overruling any decision by the Board of Directors or the Compensation Committee. However, we +value the opinions of our stockholders. To the extent there is a significant vote against the compensation of the Named Executive Officers +as disclosed in this Proxy Statement, the Board of Directors and the Compensation Committee will consider +60 +the outcome of the vote when +considering future compensation arrangements and evaluate whether any actions are necessary to address the stockholders’ concerns. +Required +Vote +Approval +of this resolution requires the affirmative vote of a majority of the votes cast by the shares of Common Stock present or represented +by proxy and entitled to vote at the Annual Meeting. +Recommendation +of the Board of Directors +The +Board of Directors unanimously recommends a vote “FOR” the resolution approving the overall compensation of the Named Executive +Officers for the 2022 Fiscal Year. +61 +PROPOSAL +FOUR: +NON-BINDING +ADVISORY VOTE ON FREQUENCY OF ADVISORY VOTE ON EXECUTIVE COMPENSATION +Pursuant +to Section 14A of the Exchange Act, as created by Section 951 of the Dodd-Frank Act, and the rules and regulations promulgated thereunder, +we are required, at least once every six years, to afford our stockholders the opportunity to cast an advisory vote on how often our +stockholders shall have a non-binding advisory vote on the compensation of the Named Executive Officers, such as Proposal Three above. +Accordingly, we are asking our stockholders to vote on whether future non-binding advisory votes on the Named Executive Officers’ +compensation should occur every year, every two years, or every three years. In lieu of voting for one of these options, stockholders +may also abstain from voting. Our stockholders last voted on the frequency of the advisory vote on executive compensation in 2017, when +85% of the votes cast recommended that such votes be held on an annual basis. Accordingly, our stockholders have voted, on a non-binding +advisory basis, on the compensation of our Named Executive Officers annually since 2017. +After +careful consideration, the Board of Directors believes it is appropriate for executive compensation to continue to be submitted to an +advisory vote of stockholders on an annual basis. An annual advisory vote on the compensation of our Named Executive Officers will allow +us to continue to obtain our stockholders’ views with respect to the compensation of our Named Executive Officers and our executive +compensation program and practices on a consistent basis. Further, a vote every year is consistent with the Company’s commitment +to engage in regular dialogue with our stockholders on corporate governance matters, including our executive compensation philosophy, +policies and programs. +For +the reasons discussed above, the Board of Directors recommends that future non-binding advisory votes on executive compensation be conducted +every year. While the Board of Directors recommends that future non-binding advisory votes on executive compensation be conducted every +year, stockholders are not voting to approve or disapprove the Board’s recommendation. Rather, the following resolution is submitted +for stockholder approval: +“ RESOLVED , +that the stockholders of Steven Madden, Ltd. (the ‘Company’) determine, on a non-binding advisory basis, that the frequency +with which the stockholders should have an advisory vote on executive compensation set forth in the Company’s Proxy Statement for +its annual meeting of stockholders, commencing with the 2024 Annual Meeting of Stockholders, is (i) every year, (ii) every two years, +or (iii) every three years.” +Stockholders +may choose among the three choices included in the resolution above or may abstain from voting on this proposal. +While +this frequency of the advisory vote on executive compensation is required by Section 14A of the Exchange Act, it is not binding on our +Board of Directors and may not be construed as overruling any decision by the Board of Directors or the Compensation Committee. However, +we value the opinions of our stockholders and the Board of Directors and the Compensation Committee will consider the outcome of the +vote when making the determination as to the frequency of future “say-on-pay” votes. It is expected that the next stockholder +advisory vote as to the frequency of presenting “say-on-pay” advisory votes will occur at the 2029 annual meeting of stockholders. +Required +Vote +This +resolution will be decided by a plurality of the votes cast by the holders of shares of Common Stock present in person or represented +by proxy and entitled to vote at the Annual Meeting. This means that the frequency choice (every one, two, or three years) receiving +the greatest number of affirmative votes cast will be considered by the Board of Directors as the stockholders’ recommendation +with respect to the frequency of future advisory votes on the compensation of our Named Executive Officers. +62 +Recommendation +of the Board of Directors +The +Board of Directors unanimously recommends a vote “FOR” a frequency of EVERY YEAR for future non-binding advisory votes on +the compensation of the Company’s Named Executive Officers. +OTHER +MATTERS +At +the date of this Proxy Statement, we have no knowledge of any business other than that described above that will be presented at the +Annual Meeting. If any other business should properly come before the Annual Meeting in connection therewith, it is intended that the +persons named in the accompanying proxy will have discretionary authority to vote the shares that they represent. +WHETHER +OR NOT YOU EXPECT TO BE PRESENT AT THE ANNUAL MEETING, PLEASE MARK, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY CARD PROMPTLY. ALTERNATIVELY, +YOU MAY VOTE YOUR SHARES BY TELEPHONE OR THROUGH THE INTERNET AS DESCRIBED ON THE ACCOMPANYING PROXY CARD. YOUR VOTE IS IMPORTANT. IF +YOU ARE A STOCKHOLDER OF RECORD AND ATTEND THE ANNUAL MEETING AND WISH TO VOTE IN PERSON, YOU MAY WITHDRAW YOUR PROXY AT ANY TIME PRIOR +TO THE VOTE. +STEVEN MADDEN, LTD. +April 10, 2023 +By: +Lisa Keith +Secretary +63 +ANNEX +A - RECONCILIATION OF ADJUSTED RESULTS (NON-GAAP) +The +Proxy Statement provides our financial results both in accordance with generally accepted accounting principles in the United States +(“GAAP”) and using certain non-GAAP financial measures. In particular, the Proxy Statement provides our historic net income +and income per diluted share adjusted to exclude certain charges and recoveries, which are non-GAAP financial measures. We use non-GAAP +financial information to evaluate its operating performance and to represent the manner in which we conduct and view our business. Additionally, +we believe the information assists investors in comparing our performance across reporting periods on a consistent basis by excluding +items that are not indicative of its core business. The non-GAAP financial information is provided in addition to, and not as an alternative +to, our reported results prepared in accordance with GAAP. +Reconciliation +of Net Income and Diluted Income Per Share (GAAP Basis) to Adjusted Net Income and Adjusted Diluted Income Per Share +(Non-GAAP Basis) +Year Ended December 31, +2022 +2021 +GAAP net income attributable to Steven Madden, Ltd. +$ 216,061 +$ 190,678 +After-tax impact of expense in connection with the accelerated amortization of a trademark +5,393 +— +After-tax impact of (benefit) / expense in connection with the change in valuation of contingent consideration +(4,441 ) +9,098 +After-tax impact of benefit in connection with the exit of a lease +(245 ) +— +After-tax impact of expense in connection with payments / provision for early lease termination charges +— +7,549 +After-tax impact of benefit in connection with the sale of a trademark +— +(6,107 ) +After-tax impact of expense in connection with impairment of certain trademarks +— +2,010 +After-tax impact of recovery in connection with the Payless ShoeSource bankruptcy +— +(716 ) +After-tax impact of expense in connection with restructuring and related charges +— +1,061 +After-tax impact of expense in connection with impairment of store fixed assets and lease right-of-use assets +— +1,080 +After-tax impact of expense in connection with the write-off of an investment +— +382 +Tax benefit in connection with the release of a liability for an uncertain tax position +— +(1,316 ) +Tax expense in connection with a deferred tax adjustment +1,525 +— +Less: Adjustments attributable to noncontrolling interest +— +(37 ) +Adjusted net income attributable to Steven Madden, Ltd. +$ 218,293 +$ 203,682 +GAAP diluted income per share +$ 2.77 +$ 2.34 +Adjusted diluted income per share +$ 2.80 +$ 2.50 \ No newline at end of file diff --git a/raw/proxies/0000913241/0001493152-23-011667/proxy_rpt.txt b/raw/proxies/0000913241/0001493152-23-011667/proxy_rpt.txt new file 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SECTION 14(A) OF THE +SECURITIES +EXCHANGE ACT OF 1934 (AMENDMENT NO. __) +Filed +by the Registrant ☒ +Filed +by a Party other than the Registrant ☐ +Check +the appropriate box: +☐ +Preliminary +Proxy Statement +☐ +Confidential, +for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +☒ +Definitive +Proxy Statement +☐ +Definitive +Additional Materials +☐ +Soliciting +Material under §240.14a-12 +Steven +Madden, Ltd. +(Name +of Registrant as Specified in Its Charter) +(Name +of Person(s) Filing Proxy Statement, if other than the Registrant) +Payment +of Filing Fee (Check all boxes that apply): +☒ +No +fee required. +☐ +Fee +paid previously with preliminary materials. +☐ +Fee +computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11. +STEVEN +MADDEN, LTD. +52-16 +Barnett Avenue +Long +Island City, New York 11104 +April +10, 2024 +DEAR +STOCKHOLDERS, +2023 +was a challenging year for Steve Madden, as our wholesale customers took a cautious approach to orders and consumers pulled back on discretionary +spending. For the year, our revenue declined 7% to $2.0 billion, and Adjusted diluted EPS decreased 12% to $2.45. While our financial +performance was not up to our standards, we drove sequential improvement each quarter throughout the year in both revenue and earnings +compared to the prior year, and we took important steps to position Steve Madden for long-term success. Despite the headwinds, our team +remained focused on executing our strategy for long-term growth, the foundation of which is driving closer connections with consumers +through the combination of consistently trend-right product assortments and effective consumer engagement, thereby enabling success with +our four key long-term business drivers, outlined below. +GROWING +OUR INTERNATIONAL BUSINESS +Our +international business has been the fastest-growing part of our company over the last several years, and the momentum continued in 2023 +despite the challenging macro environment. International revenue grew 11% to $381 million, or 19% of total revenue. The EMEA region was +a standout, with revenue increasing 24% compared to 2022 driven by strong growth in Europe, South Africa and our new Middle East joint +venture. We also saw exceptional performance in Mexico, with revenue increasing 36% as we capitalized on our market-leading position +there. +EXPANDING +OUTSIDE OF FOOTWEAR +Expanding +our business in categories outside of footwear like accessories and apparel is another of our key growth initiatives. In 2023, our overall +accessories and apparel revenue increased 10% compared to 2022, or 1% excluding our new acquisition Almost Famous. Our Steve Madden handbag +business was the highlight, with revenue increasing 37% including strong growth in both wholesale and direct-to-consumer channels and +both domestic and international markets. We also broadened our footprint outside of footwear with the acquisition of Almost Famous, a +designer and marketer of women’s apparel. Almost Famous’ core expertise is in the junior apparel category and in value-priced +distribution channels, making it a strong complement to our existing Steve Madden apparel business, which is focused on contemporary +styling and is primarily distributed in department stores and e-commerce retailers. We intend to utilize the Almost Famous platform to +introduce Madden Girl apparel and grow Madden NYC apparel. This will enable us to implement in apparel the strategy that has been successful +for us in footwear and accessories, which is to utilize the Steve Madden brand portfolio – including Steve Madden, Madden Girl +and Madden NYC – to reach customers in all tiers of distribution from premium channels through mass. +DRIVING +DIRECT-TO-CONSUMER LED BY DIGITAL +Our +third key business driver is driving our direct-to-consumer business, led by digital. After strong growth in this business in 2021 and +2022, our DTC revenue declined 3% in 2023. If we compare to pre-COVID 2019, however, our DTC business is up nearly 60% in revenue and +nearly 200% in operating profit. We expect to return to year-over-year growth in this business in 2024, and going forward, continuing +to drive expansion in DTC channels will remain a top priority. +STRENGTHENING +OUR CORE U.S. WHOLESALE FOOTWEAR BUSINESS +Our +final key long-term business driver is strengthening our core U.S. wholesale footwear business. 2023 was a uniquely challenging year +in the U.S. wholesale footwear channel, as many of our customers entered the year with excess inventory and reduced orders significantly +in efforts to right-size inventory levels. After a steep revenue decline in the first half, the trend in this business improved significantly +in the back half. Looking ahead, inventories in the channel are much healthier than they were a year ago, and we are positioned to return +to year-over-year revenue growth in this business beginning in Spring 2024. +RETURNING +CAPITAL TO STOCKHOLDERS +At +Steve Madden, we have a long history of consistently returning capital to stockholders. In 2023, we utilized our strong balance sheet +and robust free cash flow to repurchase $142 million in stock and pay $63 million in dividends. Since 2013, we have returned approximately +$1.5 billion to stockholders in the form of share repurchases and dividends. +ADVANCING +OUR CORPORATE SOCIAL RESPONSIBILITY GOALS +We +also continue to make meaningful progress on our corporate social responsibility initiatives, as we work to minimize the negative impacts +we have on the environment and maximize the positive impacts we have on our people and our communities. Highlights from 2023 included: +● receiving +approval from the Science-Based Targets initiative for our Scope 1-3 carbon reduction targets; +● procuring +global renewable energy credits with the goal of reducing our absolute Scope 2 emissions +by 100%; +● expanding +our offerings of extended sizes and wide calf boots within the Steve Madden and Dolce Vita +brands; +● continuing +to support the international humanitarian organization CARE with its Made by Women programs; +● continuing +our multi-year partnership with Howard University through an exclusive retail training boot +camp; and +● presenting +a design challenge for Harlem-based designers in partnership with the Harlem Festival of +Culture Foundation. +LOOKING +FORWARD +Overall, +while 2023 was a challenging year, we drove sequential improvement throughout the year and made important progress on the key strategic +initiatives that position Steve Madden for long-term growth. As we have moved into 2024, while the operating environment remains choppy, +we believe the on-trend product assortments created by Steve and his team have us well-positioned. And looking out further, we are confident +that the combination of our strong brands and proven business model will enable us to drive sustainable revenue and earnings growth for +years to come. +I’d +like to thank our employees for their dedication, our customers for their loyalty, and you, our stockholders, for your support. +Sincerely, +EDWARD +ROSENFELD +CHAIRMAN +AND CEO +STEVEN +MADDEN, LTD. +52-16 +Barnett Avenue +Long +Island City, New York 11104 +NOTICE +OF ANNUAL MEETING OF STOCKHOLDERS +TO +BE HELD ON MAY 22, 2024 +TO +THE STOCKHOLDERS: +The +Annual Meeting of Stockholders (the “Annual Meeting”) of Steven Madden, Ltd. (the “Company”) will be held on +Wednesday, May 22, 2024, at 10:00 a.m. Eastern time in a virtual-only format, for the purposes stated below: +1. to +elect eleven (11) directors to the Board of Directors of the Company; +2. to +ratify the appointment of Ernst & Young LLP as the Company’s independent registered +public accounting firm for the fiscal year ending December 31, 2024; +3. to +approve, on a non-binding advisory basis, the compensation of the Company’s named executive +officers as disclosed in the accompanying proxy statement; +4. to +adopt an Amended and Restated Certificate of Incorporation of the Company to incorporate +new Delaware law provisions regarding officer exculpation and to integrate prior amendments; +5. to +approve amendments to the Steven Madden, Ltd. 2019 Incentive Compensation Plan; and +6. to +transact such other business as may properly come before the Annual Meeting or any adjournments +thereof. +Only +stockholders of record at the close of business on March 28, 2024, the record date for the Annual Meeting, are entitled to notice of +and to vote at the Annual Meeting and any adjournments thereof. Stockholders who own shares of the Company’s common stock beneficially +through a bank, broker or other nominee will also be entitled to attend the Annual Meeting. To participate in the Annual Meeting at www.virtualshareholdermeeting.com/SHOO2024, +you must enter the 16-digit control number found on your proxy card or your Notice of Availability of Proxy Materials. Whether or +not you plan to attend the Annual Meeting, we urge you to vote in advance of the Annual Meeting by one of the methods described below. +If you have voted over the Internet, by phone or by mail before the Annual Meeting, you do not need to vote again. Guests may listen +to the Annual Meeting, but are not entitled to participate. +IMPORTANT +NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 22, 2024: THE NOTICE OF +ANNUAL MEETING AND PROXY STATEMENT, ANNUAL REPORT, ELECTRONIC PROXY CARD AND ANY OTHER MATERIALS CONCERNING THE ANNUAL MEETING, TOGETHER +WITH ANY AMENDMENTS TO ANY OF THESE MATERIALS, ARE AVAILABLE ON THE INTERNET AT HTTP://WWW.PROXYVOTE.COM. +April +10, 2024 +BY +ORDER OF THE BOARD OF DIRECTORS +Long +Island City, New York +Lisa +Keith +Secretary +WHETHER +OR NOT YOU EXPECT TO BE PRESENT AT THE ANNUAL MEETING, PLEASE MARK, DATE AND SIGN THE ACCOMPANYING FORM OF PROXY AND MAIL IT PROMPTLY +IN THE ENVELOPE PROVIDED TO: VOTE PROCESSING, C/O BROADRIDGE, 51 MERCEDES WAY, EDGEWOOD, NEW YORK 11717. ALTERNATIVELY, YOU MAY VOTE +YOUR SHARES BY TELEPHONE OR OVER THE INTERNET AS DESCRIBED ON THE ACCOMPANYING PROXY CARD. +TABLE +OF CONTENTS +GENERAL +INFORMATION +1 +Notice +of Internet Availability of Proxy Materials +1 +QUESTIONS +AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING +2 +PROPOSAL +ONE: ELECTION OF DIRECTORS +8 +Stockholder +Nominations for Board Membership +8 +Directors +and Nominees for Election to the Board of Directors +8 +CORPORATE +GOVERNANCE +14 +The +Board of Directors +14 +Director +Independence +14 +Involvement +in Certain Legal Proceedings +14 +Director +Attendance at Meetings +14 +Director +Election (Majority Voting) Policy +14 +Committees +of the Board +16 +Board +Leadership Structure, Risk Oversight, Executive Sessions of Non-Employee Directors, and Communications Between Stockholders and the +Board +19 +Codes +of Business Conduct and Ethics +20 +Corporate +Governance Principles +21 +Stock +Ownership Guidelines +21 +Prohibition +on Hedging and Pledging of Our Common Stock +21 +Corporate +Social Responsibility Policy +21 +Clawback +Policy +22 +Certain +Relationships and Related Party Transactions +22 +Review, +Approval or Ratification of Transactions with Related Persons +23 +COMPENSATION +OF DIRECTORS IN THE 2023 FISCAL YEAR +24 +STOCK +OWNERSHIP +25 +Security +Ownership of Certain Beneficial Owners +25 +Security +Ownership of Directors and Executive Officers +26 +Delinquent +Section 16(a) Reports +27 +EXECUTIVE +COMPENSATION +27 +Compensation +Discussion and Analysis +27 +Executive +Officers +37 +Summary +Compensation Table for the 2023 Fiscal Year +38 +Employment +Arrangements +39 +Grants +of Plan-Based Awards in the 2023 Fiscal Year +44 +Outstanding +Equity Awards at End of the 2023 Fiscal Year +45 +Option +Exercises and Stock Vested in the 2023 Fiscal Year +46 +Securities +Authorized for Issuance Under Equity Compensation Plans +46 +Equity +Compensation Plan Information +47 +Termination, +Change-In-Control and Non-Competition/Non-Solicitation +47 +Compensation +Committee Report +50 +Pay +Versus Performance +50 +PROPOSAL +TWO: RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS FOR +THE FISCAL YEAR ENDING DECEMBER 31, 2024 +56 +AUDIT +COMMITTEE REPORT +57 +PROPOSAL +THREE: NON-BINDING ADVISORY VOTE ON EXECUTIVE COMPENSATION +58 +i +PROPOSAL +FOUR: ADOPTION OF AN AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF THE COMPANY TO INCORPORATE NEW DELAWARE LAW PROVISIONS +REGARDING OFFICER EXCULPATION AND TO INTEGRATE PRIOR AMENDMENTS +60 +PROPOSAL +FIVE: APPROVAL OF AMENDMENTS TO THE STEVEN MADDEN, LTD. 2019 INCENTIVE COMPENSATION PLAN +62 +OTHER +MATTERS +68 +ANNEX +A – RECONCILIATION OF ADJUSTED RESULTS (NON-GAAP) +A-1 +ANNEX +B – PROPOSED AMENDED AND RESTATED CERTIFICATE OF INCORPORATION +B-1 +ANNEX +C – AMENDMENTS TO THE STEVEN MADDEN, LTD. 2019 INCENTIVE COMPENSATION PLAN +C-1 +ii +SPECIAL +NOTE REGARDING FORWARD-LOOKING STATEMENTS +Certain +statements in this document regarding anticipated financial, business, legal or other outcomes, including business and market conditions, +outlook and other similar statements relating to the Company’s future events, developments, or financial or operational performance +or results, are “forward-looking statements” made pursuant to the safe harbor provisions of the Private Securities Litigation +Reform Act of 1995 and other federal securities laws. These forward-looking statements are identified by the use of words such as “may,” +“will,” “should,” “expect,” “estimate,” “believe,” “intend,” +“forecast,” “anticipate,” “guidance,” and other similar language. However, the absence of these or +similar words or expressions does not mean a statement is not forward-looking. While we believe these forward-looking statements are +reasonable when made, forward-looking statements are not guarantees of future performance or events and undue reliance should not be +placed on these statements. Although we believe the expectations reflected in any forward-looking statements are based on reasonable +assumptions, we can give no assurance these expectations will be attained, and it is possible actual results may differ materially from +those indicated by these forward-looking statements due to a variety of risks and uncertainties. Forward-looking statements are only +as of the date they are made, and the Company undertakes no duty to update its forward-looking statements except as required by law. +Our +operations are subject to a number of risks and uncertainties including, but not limited to, those risk factors described in our SEC +filings. Refer to “Risk Factors” under Item 1.A of the Company’s Annual Report on Form 10-K for the year ended December +31, 2023 for a discussion of additional risk factors and a more complete discussion of some of the cautionary statements noted above. +If any of the events described in the risk factors actually occur, our business, financial condition or operating results, as well as +the market price of our securities, could be materially adversely affected. +iii +STEVEN +MADDEN, LTD. +52-16 +Barnett Avenue +Long +Island City, New York 11104 +PROXY +STATEMENT +GENERAL +INFORMATION +The +Board of Directors of Steven Madden, Ltd. requests your proxy in connection with the Annual Meeting of Stockholders (the “Annual +Meeting”) of Steven Madden, Ltd. (the “Company,” “we,” or “our”). The Annual Meeting will be +held on Wednesday, May 22, 2024, at 10:00 a.m. Eastern time in a virtual-only format. Proxies also may be voted at any adjournments or +postponements of the Annual Meeting. You will not be able to attend the Annual Meeting physically in person. +On +or about April 10, 2024, a notice containing instructions on how to access this Proxy Statement, the accompanying proxy card and related +materials online is being mailed to holders of record of our common stock, $0.0001 par value (the “Common Stock”), at the +close of business on March 28, 2024 (the “Record Date”). Our Annual Report for the fiscal year ended December 31, 2023 (the +“2023 Fiscal Year”), including audited financial statements, is included in the materials that are accessible online. This +Proxy Statement contains information about the Annual Meeting as well as information regarding the voting process, director elections, +our corporate governance programs, and executive and director compensation, among other things. We recommend that you read all of these +materials. +The +Annual Meeting has been called to consider and take action on the following proposals: +1. to +elect eleven (11) directors to our Board of Directors to serve until the next annual meeting +of our stockholders and until his, her, or their successor is elected and qualified; +2. to +ratify the appointment of Ernst & Young LLP as our independent registered public accounting +firm for the fiscal year ending December 31, 2024; +3. to +approve, on a non-binding advisory basis, the compensation of the Company’s named executive +officers as disclosed in this Proxy Statement; +4. to +adopt an Amended and Restated Certificate of Incorporation of the Company to incorporate +new Delaware law provisions regarding officer exculpation and to integrate prior amendments; +5. to +approve amendments to the Steven Madden, Ltd. 2019 Incentive Compensation Plan; and +6. to +transact such other business as may properly come before the Annual Meeting and any adjournments +thereof. +The +Board of Directors knows of no other matters to be presented for action at the Annual Meeting. However, if any other matters properly +come before the Annual Meeting, the persons named in the proxy will vote on such other matters or for other nominees for director in +accordance with their best judgment. Our Board of Directors recommends that the stockholders vote “FOR” each of the eleven +(11) director nominees in Proposal One, and “FOR” Proposals Two, Three, Four and Five. Only holders of record of our Common +Stock at the close of business on the Record Date will be entitled to vote at the Annual Meeting. +We +are incorporated in the State of Delaware. Our principal executive offices are located at 52-16 Barnett Avenue, Long Island City, New +York 11104, and our telephone number is (718) 446-1800. +Notice +of Internet Availability of Proxy Materials +Your +vote is very important. We continue to take advantage of the Securities and Exchange Commission (the “SEC”) “e-proxy” +rules allowing the Company to furnish proxy materials through the Internet for the benefit and convenience of our stockholders. By using +the e-proxy rules, we can expedite the receipt by stockholders of proxy materials while lowering the costs and reducing the environmental +impact associated with our Annual Meeting. On or about April 10, 2024, we will furnish a Notice of Internet Availability of Proxy Materials +(the “Availability Notice”) +1 +to most of our stockholders containing instructions on how to access the proxy materials and +to vote online. In addition, instructions on how to request a printed copy of these materials will be found on the Availability Notice. +If you received an Availability Notice by mail, you will not receive a paper copy of the proxy materials unless you request such materials +by following the instructions contained in the Availability Notice. +Whether +or not you plan to attend the Annual Meeting virtually, please vote at your earliest convenience by following the instructions in the +Availability Notice, the proxy card or voting instruction form you received in the mail. You may revoke your proxy at any time before +it is voted. For more information on voting your Common Stock, please refer to the following “Questions and Answers” section. +QUESTIONS +AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING +1. What +is included in the proxy materials? What is a proxy statement and what is a proxy? +The +proxy materials for our Annual Meeting include the Notice of Annual Meeting, this Proxy Statement and our Annual Report on Form 10-K +for the year ended December 31, 2023. If you received a paper copy of these materials, the proxy materials also include a proxy card +or voting instruction form. +A +proxy is the delegation of your right to vote the Common Stock you own to another person, who is called your proxy. When you designate +someone as your proxy in a written document, that document is called a proxy or a proxy card. SEC regulations require that we furnish +a proxy statement to you when we ask you to designate a proxy to vote your shares of Common Stock on your behalf. We have designated +our officers Edward R. Rosenfeld and Lisa Keith as proxies for the Annual Meeting. +2. Who +may vote at the Annual Meeting? +Only +holders of record of the 73,328,113 shares of our Common Stock outstanding as of the close of business on the Record Date can vote by +virtual presence online at or prior to the Annual Meeting. Each of these stockholders has one vote for each share of our Common Stock +held on that date. +3. What +is the difference between holding shares as a stockholder of record and as a beneficial owner? +If +your shares were registered as of the Record Date directly in your name with our registrar and transfer agent, American Stock Transfer +& Trust Company, then you are a “stockholder of record” with respect to those shares, and in such case, we have provided +the Availability Notice directly to you. Upon your request, we will send this Proxy Statement and the accompanying proxy materials directly +to you. If your shares were held as of the Record Date in a stock brokerage account or by a bank or nominee, then your shares are held +in “street name” and you are considered the “beneficial owner” of those shares. In that case, your broker, bank +or other stockholder of record has provided the Availability Notice to you and, upon your request, will provide this Proxy Statement +and the accompanying proxy materials to you. As the beneficial owner, you have the right to direct your broker, bank or other stockholder +of record how to vote your shares held in “street name.” +4. What +is considered a quorum to conduct the Annual Meeting? +The +presence, in person or by proxy, of the holders of a majority of the shares entitled to vote is necessary to constitute a quorum for +the purpose of transacting business at the Annual Meeting. Under Delaware law, abstentions and broker non-votes as described below are +counted as present for purposes of determining the presence or absence of a quorum for the transaction of business. If a quorum is not +present, the Annual Meeting may be adjourned until a quorum is obtained. +5. What +is a “broker non-vote”? +If +your shares are held in “street name” by a broker, bank or other nominee, your broker, bank or other nominee is the record +holder; however, the broker, bank or other nominee is required to vote the shares in accordance with your instructions. If you do not +give instructions to your broker, bank or other nominee, it may, if permitted by the organizations of which it is a member, exercise +discretionary voting power to vote your shares. A “broker non- vote” occurs when a broker, bank or other nominee of record +holding shares for a beneficial owner has not received voting instructions from the beneficial owner and either chooses not to vote the +shares on a particular proposal as to which the holder has discretionary voting power or does not vote on a particular proposal because +that holder does not +2 +have discretionary voting power for that particular item. Broker non-votes are considered present in determining +whether a quorum is present. +If +you hold your shares in “street name,” we strongly encourage you to provide instructions regarding the voting of your shares, +because your broker, bank or other nominee cannot vote your shares with respect to certain of the proposals being presented at the Annual +Meeting without voting instructions from you. +6. How +many votes do I have? What shares are included on the proxy card? +For +each share of Common Stock that you own on the Record Date, you are entitled to one vote on each matter presented at the Annual Meeting. +If +you are a record holder, you will receive an Availability Notice or proxy card for all of the shares of Common Stock you hold in certificate +form, in book-entry form and in any Company benefit plan. If you are a beneficial owner, you will receive information containing voting +instructions from the broker, bank or other nominee through which you own your shares of Common Stock. +7. How +many votes are required to approve each proposal and what is the effect of abstentions and +broker non-votes? +Proposal +One (Election of Directors): Directors are elected by the affirmative vote of a plurality of the shares of Common Stock present in +person or represented by proxy at the Annual Meeting and entitled to vote on this proposal. This means that the director nominees who +receive the greatest number of affirmative votes cast are elected as directors, subject to our Director Election (Majority Voting) Policy +discussed in Proposal One below. +Proposal +Two (Ratification of Appointment of Ernst & Young LLP): The affirmative vote of a majority of the votes cast by the shares of +Common Stock present in person or represented by proxy at the Annual Meeting and entitled to vote on this proposal is required to approve +the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year +ending December 31, 2024. +Proposal +Three (Non-Binding Advisory Vote on Executive Compensation): The affirmative vote of a majority of the votes cast by the shares of +Common Stock present in person or represented by proxy at the Annual Meeting and entitled to vote on this proposal is required to approve, +on a non-binding advisory basis, the compensation of our Named Executive Officers as described in this Proxy Statement. +Proposal +Four (Adoption of an Amended and Restated Certificate of Incorporation of the Company to incorporate new Delaware law provisions regarding +officer exculpation and to integrate prior amendments): The affirmative vote of a majority of the shares of Common Stock outstanding +and entitled to vote at the Annual Meeting is required to approve and adopt an Amended and Restated Certificate of Incorporation of the +Company to incorporate new Delaware law provisions regarding officer exculpation and to integrate prior amendments. Abstentions and broker +non-votes will have the same effect as a vote AGAINST the proposal. +Proposal +Five (Approval of Amendments to Incentive Compensation Plan ): The affirmative vote of a majority of the votes cast by the shares +of Common Stock present in person or represented by proxy at the Annual Meeting and entitled to vote on this proposal is required to +approve amendments to the Steven Madden, Ltd. 2019 Incentive Compensation Plan. +Other +Matters: If any other matters are presented at the Annual Meeting, they must receive the affirmative vote of a majority of the votes +cast by the shares of Common Stock present in person or represented by proxy at the Annual Meeting and entitled to vote on the matter +to be approved. +Abstentions +and broker non-votes will have no effect on the outcome of each proposal except for Proposal Four but will be treated as present and +entitled to vote with respect to each proposal and used for purposes of calculating whether a quorum is present at the Annual Meeting. +Abstentions and broker non-votes will have the same effect as a vote “Against” Proposal Four. +Proposal +One (Election of Directors) will be decided by a plurality of the votes of the shares represented in person or by proxy and entitled +to vote. The approval of each of Proposal Two (Ratification of Ernst & Young LLP), Proposal Three (Non-Binding Advisory Vote on Executive +Compensation), and Proposal Five (Approval of +3 +Amendments to Incentive Compensation Plan) requires a favorable vote of a majority of the +votes cast by the shares present in person or by proxy and entitled to vote on the applicable matter. Proposal Four (Adoption of an Amended +and Restated Certificate of Incorporation of the Company to Incorporate New Delaware Law Provisions Regarding Officer Exculpation and +to Integrate Prior Amendments) requires the approval of a majority of the shares of Common Stock outstanding and entitled to vote at +the Annual Meeting. As noted above, abstentions and broker-non votes will have no effect on the outcome of each proposal except Proposal +Four, and abstentions and broker non-votes will have the same effect as a vote “Against” Proposal Four. +If +you do not provide your broker, bank or other nominee with instructions on how to vote your shares held in “street name,” +your broker, bank or other nominee will not be permitted to vote your shares on non-routine matters, and your shares will not affect +the outcome of proposals concerning non-routine matters. Proposal Two is considered a routine matter under applicable rules. Proposals +One, Three, Four, and Five are considered “non-routine” matters, which means that your broker or other nominee does not have +discretion to vote your shares with respect to those proposals without voting instructions from you. If you hold your shares in “street +name,” we strongly encourage you to provide instructions regarding the voting of your shares to your broker, bank or other nominee. +8. How +can I attend and participate in the Annual Meeting? +Our +virtual Annual Meeting will be conducted on the Internet via live audio webcast. You will be able to participate online and submit your +questions during the Annual Meeting by visiting www.virtualshareholdermeeting.com/SHOO2024, beginning at 10:00 a.m. Eastern time +on May 22, 2024. Stockholders will be able to vote their shares electronically during the Annual Meeting. +To +participate in the Annual Meeting, you will need the 16-digit control number included on your proxy card or your Availability Notice. +The Annual Meeting will begin promptly at 10:00 a.m. Eastern time. We encourage you to access the Annual Meeting prior to the start time. +Online access will begin at 9:45 a.m. Eastern time. Guests may listen to a live audio webcast of the virtual Annual Meeting by visiting +www.virtualshareholdermeeting.com/SHOO2024 , beginning at 9:45 a.m. Eastern time, but are not entitled to participate. +The +virtual Annual Meeting platform is fully supported across browsers (Internet Explorer, Firefox, Chrome, and Safari) and devices (desktops, +laptops, tablets, and cell phones) running the most updated version of applicable software and plugins. Participants should ensure they +have a strong Internet connection wherever they intend to participate in the Annual Meeting. Participants should also allow plenty of +time to log in and ensure that they can hear streaming audio prior to the start of the Annual Meeting. +9. Where +can I find a list of stockholders entitled to vote at the Annual Meeting? +For +the ten days prior to the Annual Meeting, a list of stockholders entitled to vote at the Annual Meeting will be available for examination +by any stockholder of record for any purpose germane to the Annual Meeting at the Company’s principal executive offices upon appointment. +Please contact the Company’s Secretary at Steven Madden, Ltd., 52-16 Barnett Avenue, Long Island City, New York 11104 to set up +an appointment. +10. How +can I vote my shares? +If +the records of our transfer agent show that you own shares in your name at the close of business on March 28, 2024, then you may vote +at the Annual Meeting. To attend the Annual Meeting and vote your shares electronically, you will need the 16-digit control number included +on your Availability Notice, on your proxy card, or on the instructions that accompanied your proxy materials. +Even +if you plan to attend the Annual Meeting, we urge you to authorize your proxy in advance. You may vote your shares in advance of the +Annual Meeting by authorizing a proxy over the Internet or by telephone. In addition, if you received a paper copy of the proxy materials +by mail, you can submit a proxy by mail by following the instructions on the proxy card. Voting your shares by authorizing a proxy over +the Internet, by telephone or by written proxy card will ensure your representation at the Annual Meeting regardless of whether you attend +the Annual Meeting. +If +you are the record holder of your shares, please authorize your proxy electronically by going to the http: //www.proxyvote.com +website or by calling the toll-free number listed below and on the proxy card. Please have +4 +your Proxy Statement or proxy card in hand +when going online or calling. If you authorize your proxy via the Internet or by phone, you do not need to return your proxy card. If +you choose to authorize your proxy by mail, simply mark your proxy card and then date, sign and return it in the postage-paid envelope +provided. +VOTE +OVER THE INTERNET +http://www.proxyvote.com +VOTE +BY PHONE 1-800-690-6903 +VOTE +BY MAIL Vote Processing, c/o Broadridge 51 Mercedes Way Edgewood, New York 11717 +Use +the Internet to transmit your voting instructions and for electronic delivery of information. +Use +any touch-tone telephone to transmit your voting instructions. +If +you receive paper proxy materials, mark, sign and date your proxy card and return it in the postage-paid envelope we have provided +or return it to the address shown above. +If +you hold your shares beneficially in “street name” through a broker or nominee, you may be able to authorize your proxy by +telephone or the Internet as well as by mail, but you will need to obtain and follow instructions from your broker or nominee to vote +these shares. +11. May +I revoke my proxy for the Annual Meeting once I have given it? +You +may revoke your proxy at any time before it is voted at the Annual Meeting by: +● properly +executing and delivering a later-dated proxy (including a telephone or Internet proxy authorization); +● voting +your shares electronically at the Annual Meeting; or +● sending +a written notice of revocation to the Secretary of the Company at Steven Madden, Ltd., 52-16 +Barnett Avenue, Long Island City, New York 11104. +12. How +does the Board of Directors recommend that I vote my shares? +Our +Board of Directors recommends that you vote: +● “FOR” +the election of each of the eleven (11) director nominees; +● “FOR” +the ratification of the appointment of Ernst & Young LLP as our independent registered +public accounting firm for the fiscal year ending December 31, 2024; +● “FOR” +the approval, on a non-binding advisory basis, of the executive compensation of our Named +Executive Officers, as disclosed in this Proxy Statement; +● “FOR” +the adoption of an Amended and Restated Certificate of Incorporation of the Company to incorporate +new Delaware law provisions regarding officer exculpation and to integrate prior amendments; +and +● “FOR” +the approval of amendments to the Steven Madden, Ltd. 2019 Incentive Compensation Plan. +ALL +PROXIES RECEIVED WILL BE VOTED IN ACCORDANCE WITH THE CHOICES SPECIFIED ON SUCH PROXIES. PROXIES WILL BE VOTED FOR EACH NOMINEE IN PROPOSAL +ONE AND IN FAVOR OF PROPOSALS TWO, THREE, FOUR AND FIVE IF NO CONTRARY SPECIFICATION IS MADE. ALL VALID PROXIES OBTAINED WILL BE VOTED +AT THE DISCRETION OF THE PERSONS NAMED IN THE PROXY WITH RESPECT TO ANY OTHER BUSINESS THAT MAY PROPERLY COME BEFORE THE ANNUAL MEETING +OR ANY ADJOURNMENTS OR POSTPONEMENTS THEREOF. AS NOTED ABOVE, IF YOU HOLD YOUR SHARES BENEFICIALLY THROUGH A BROKER, BANK OR OTHER NOMINEE +AND FAIL TO PROVIDE SPECIFIC VOTING INSTRUCTIONS TO THAT BROKER, BANK OR OTHER NOMINEE, YOUR SHARES WILL NOT BE VOTED IN THE ELECTION +OF DIRECTORS, THE ADVISORY VOTE ON EXECUTIVE COMPENSATION, THE ADOPTION OF AN AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF THE +COMPANY TO INCORPORATE NEW DELAWARE LAW PROVISIONS REGARDING OFFICER EXCULPATION AND TO INTEGRATE PRIOR AMENDMENTS, OR THE APPROVAL OF +AMENDMENTS TO THE STEVEN MADDEN, LTD. 2019 INCENTIVE COMPENSATION PLAN UNLESS YOU ARE PRESENT AND VOTE AT THE MEETING. +5 +13. +Who +will bear the expenses of this solicitation and how are proxies being solicited? +We +will pay the costs of soliciting proxies, including preparing, printing and mailing this Proxy Statement, any exhibits hereto and the +proxies solicited hereby. In addition to the use of the mails, proxies may be solicited on our behalf by our officers, directors and +employees, without additional remuneration, by personal interviews, by telephone or by electronic transmission. We will also request +brokerage firms, nominees, custodians and fiduciaries to forward proxy materials to the beneficial owners of shares of Common Stock held +of record by them and will provide reimbursements for the cost of forwarding the material in accordance with customary charges. We do +not currently intend to retain a professional solicitor to assist in the solicitation of proxies; however, we may later elect to do so. +14. Will +I be able to ask questions at the Annual Meeting? +Edward +R. Rosenfeld, our Chairman and Chief Executive Officer, will be available to answer questions submitted by the stockholders during the +Annual Meeting related to the items of business at the Annual Meeting. Stockholders may submit questions for the Annual Meeting after +logging in, beginning at 10:00 a.m. Eastern time on May 22, 2024. If you wish to submit a question, you may do so by logging into the +virtual meeting platform at www.virtualshareholdermeeting.com/SHOO2024 , typing your question into the “Ask a Question” +field, and clicking “Submit.” Please submit any questions during the meeting. +Additional +information regarding the ability of stockholders to ask questions during the Annual Meeting, related rules of conduct and other materials +for the Annual Meeting will be available at www.virtualshareholdermeeting.com/SHOO2024 . +15. What +can I do if I have technical difficulties in accessing the 2024 Annual Meeting? +Technical +support, including related technical support phone numbers, will be available on the virtual meeting platform at www.virtualshareholdermeeting.com/SHOO2024 +beginning at 9:30 a.m. Eastern time on May 22, 2024 through the conclusion of the Annual Meeting. +16. How +will the voting results be reported? +The +preliminary results of the voting on the proposals will be reported at the Annual Meeting. The final certified results will be reported +in a Current Report on Form 8-K that will be filed with the SEC within four business days following the Annual Meeting. +17. How +do I submit a proposal for action at the Company’s 2025 Annual Meeting of Stockholders? +Stockholder +proposals submitted in accordance with Rule 14a-8 under Securities Exchange Act of 1934, as amended (the “Exchange Act”), +must be received at our principal executive offices no later than December 11, 2024 to be considered for inclusion in the proxy materials +to be distributed by the Company in connection with the 2025 Annual Meeting of Stockholders (the “2025 Annual Meeting”). +Alternatively, +Article I, Section 7(f) of our Second Amended and Restated By-Laws (the “By-Laws”), requires that any stockholder proposal +that is not submitted for inclusion in the proxy materials for the 2025 Annual Meeting under Rule 14a-8 under the Exchange Act, but is +instead sought to be presented directly at the 2025 Annual Meeting, must be (i) specified in the notice of such meeting given by or at +the direction of the Board of Directors (or any duly authorized committee thereof), (ii) otherwise properly brought before such meeting +by or at the direction of the Board of Directors (or any duly authorized committee thereof) or (iii) specified in a notice in proper +written form given by a stockholder of record on the date of the giving of the notice and on the record date for such meeting, which +notice conforms to the requirements of Article I, Section 7(f) of the By-Laws and is delivered to, or mailed and received at, our principal +executive offices not less than 120 days nor more than 150 days prior to the first anniversary of the date of our 2024 Annual Meeting. +Accordingly, any written notice given by or on behalf of a stockholder pursuant to the foregoing clause (iii) in connection with the +2025 Annual Meeting must be received no later than January 22, 2025 and no earlier than December 23, 2024. +Under +Article II, Section 5 of the By-Laws, for a stockholder to nominate one or more persons for election to the Board of Directors at the +2025 Annual Meeting, complete and timely notice must be given in writing and in proper form to our Secretary no later than January 22, +2025 and no earlier than December 23, 2024. Any notice must +6 +contain the specific information required by the By-Laws, including, among +other things, information about any proposed nominee and any agreements, arrangements or understandings the stockholder may have with +any proposed nominee or other parties relating to the nomination or other proposal. Such information must be updated, if necessary, to +be true and correct as of the record date for the 2025 Annual Meeting and as of the date that is 10 business days prior to the date of +the 2025 Annual Meeting. This summary information regarding the By-Laws is qualified in its entirety by reference to the full text of +the By-Laws, a copy of which may be obtained by any stockholder, without charge, upon written request to our Secretary, Steven Madden, +Ltd., 52-16 Barnett Avenue, Long Island City, New York 11104. If a nomination is not timely and properly made in accordance with the +procedures set forth in the By- Laws, or does not contain the specific information required by the By-Laws, such nomination will be defective +and will not be brought before the 2025 Annual Meeting. In addition, to comply with the universal proxy rules, stockholders who intend +to solicit proxies in support of director nominees other than the nominees of our Board of Directors must comply with the additional +requirements of Rule 14a-19 under the Exchange Act, including providing a statement that such stockholder intends to solicit the holders +of shares representing at least 67% of the voting power of our shares entitled to vote on the election of directors in support of director +nominees other than our nominees, as required by Rule 14a-19(b). We intend to file a proxy statement and WHITE proxy card with the SEC +in connection with the solicitation of proxies for the 2025 Annual Meeting. +18. I +share an address with another stockholder and we received only one Notice of Internet Availability +of Proxy Materials or one paper copy of the proxy materials, as applicable. How may I obtain +an additional copy? +If +two or more stockholders share an address, we may send a single copy of this Proxy Statement and other soliciting materials, as well +as our Annual Report for the 2023 Fiscal Year, to the shared address, unless we have received contrary instructions from one or more +of the stockholders sharing the address. If a single copy has been sent to multiple stockholders at a shared address, we will deliver +a separate proxy card for each stockholder entitled to vote. Additionally, we will send an additional copy of this Proxy Statement, other +soliciting materials and our Annual Report for the 2023 Fiscal Year, promptly upon oral or written request by any stockholder to the +Secretary at Steven Madden, Ltd., 52-16 Barnett Avenue, Long Island City, New York 11104; telephone number (718) 446-1800. If any stockholders +sharing an address receive multiple copies of this Proxy Statement, other soliciting materials and our Annual Report for the 2023 Fiscal +Year and would prefer in the future to receive only one copy, such stockholders may make such request to the Secretary at the same address +or telephone number. +7 +PROPOSAL +ONE: +ELECTION +OF DIRECTORS +Our +By-Laws provide that the number of directors constituting our whole Board of Directors may be fixed from time to time by action of the +directors. The Board of Directors has fixed the number of directors comprising the Board of Directors at eleven members. Directors are +elected to serve until the next annual meeting of stockholders, and the term of each of the current directors will expire at the Annual +Meeting. +Stockholder +Nominations for Board Membership +The +Nominating/Corporate Governance Committee of the Board of Directors recommends to the Board director candidates for nomination and election +at each annual meeting of stockholders or for appointment to fill vacancies on the Board. +The +Nominating/Corporate Governance Committee will review and evaluate the qualifications of proposed director candidates recommended to +it from various sources, including candidates proposed by our stockholders in accordance with the procedures established for that purpose. +To enable the Nominating/Corporate Governance Committee to consider a stockholder recommendation in connection with the 2025 Annual Meeting, +we must receive the recommendation on or before December 11, 2024. +Directors +and Nominees for Election to the Board of Directors +Upon +recommendation of the Nominating/Corporate Governance Committee of the Board of Directors, the Board of Directors has nominated and is +recommending to the stockholders the election of each of the eleven nominees named below to serve as a director of the Company until +the next annual meeting of our stockholders and until his, her, or their successor is duly elected and qualified or until his, her, or +their earlier death, resignation or removal from office. All of the nominees were elected directors at last year’s Annual Meeting +of Stockholders. All nominees have agreed to be named in this Proxy Statement and to serve on the Board of Directors if elected. +The +names and biographical summaries of the eleven persons who have been recommended by the Nominating/Corporate Governance Committee of +the Board of Directors and nominated by the Board of Directors to stand for election at the Annual Meeting are provided below for your +information. +Our +Board of Directors is responsible for overseeing our business in a manner consistent with the Board’s fiduciary duty to our stockholders. +This significant responsibility requires that our directors consist of individuals who are well-qualified for service on our Board and +its committees and demonstrate a commitment to the success of the Company and to serve in the best interests of our stockholders. +The +following matrix identifies the relevant skills, experience and qualifications of our eleven director nominees. The skills and experience +identified below are reviewed by the Nominating/Corporate Governance Committee, in addition to other qualifications, and nominees are +selected with a view to establishing a Board of Directors that consists of individuals who have extensive business leadership experience, +are independent, bring diverse perspectives to the Board, and possess high ethical standards, sound business judgment and acumen, and +a willingness to devote the time necessary for the Board to effectively fulfill its responsibilities. We believe that all of the director +nominees possess these qualifications and provide the Board with a full complement of knowledge, business skills and expertise for the +effective management of the Company. +8 +Rosenfeld +Davis +Ferrara +Klipper +Kumar +Lynch +Migliorini +Reed +Sachdev +Smith +Varela +Knowledge, +Skills and Experience +Public +Company Board Experience +● +● +● +● +Finance/Accounting +● +● +● +● +● +● +Executive +Leadership Experience +● +● +● +● +● +● +● +● +● +● +● +Risk +Oversight/ Management +● +● +● +● +Retail +Industry Experience +● +● +● +● +● +● +● +● +● +Independence +● +● +● +● +● +● +● +● +● +The +below table provides a summary view of the diversity attributes of the Board of Directors as of April 10, 2024. Each of the categories +listed in the table below has the meaning as it is used in Nasdaq Rule 5605(f). +Board +Diversity Matrix (As of April 10, 2024) +Total +Number of Directors +11 +Part +I: Gender Identity +Female +Male +Non-Binary +Did +Not +Disclose +Gender +Directors +4 +6 +1 +0 +Part +II: Demographic Background +African +American or Black +1 +1 +0 +0 +Alaskan +Native or Native American +0 +0 +1 +0 +Asian +0 +1 +0 +0 +Hispanic +or Latinx +1 +0 +0 +0 +Native +Hawaiian or Pacific Islander +0 +0 +0 +0 +White +2 +4 +0 +0 +Two +or More Races or Ethnicities +0 +0 +1 +0 +LGBTQ+ +1 +Did +Not Disclose Demographic Background +0 +9 +In +addition to these general qualifications and attributes, provided below for each nominee for director is a discussion of the specific +experience, qualifications, attributes and skills that led to the Board’s conclusion that the nominee is qualified to serve as +a director. +Name +Principal +Occupation +Age +Year +Became a +Director +Edward +R. Rosenfeld +Chairman +of the Board and Chief Executive Officer, Steven Madden, Ltd. +48 +2008 +Peter +A. Davis +Retired +executive in the footwear and apparel industry and Founder and Managing Director of Pete +Davis Basketball, LLC, a grassroots community youth +basketball +organization +70 +2022 +Al +Ferrara +Retired +National Director of the Retail and Consumer Products Division of BDO USA, LLP, a major international accounting firm +73 +2019 +Mitchell +S. Klipper +Retired +Chief Executive Officer of Barnes & Noble, Inc.’s +Retail +Group, one of the largest retail booksellers in the United States +66 +2018 +Maria +Teresa Kumar +President +and CEO of Voto Latino, which she co-founded in 2004 and built into America’s largest +Latinx voter +registration +and advocacy organization +50 +2021 +Rose +Peabody Lynch +Retired +owner of Marketing Strategies, LLC, a New York based consulting firm of which she was founder +and President, which focused on strategic marketing and +operating +issues for small to medium-sized companies +74 +2014 +Peter +Migliorini +Sales +Manager, Greschlers, Inc., a building supplies company +75 +1996 +Arian +Simone Reed +Co-Founder +and Chief Executive Officer of Fearless Fund, a venture capital fund that she co-founded in 2018 +43 +2022 +Ravi +Sachdev +Partner, +Clayton Dubilier & Rice, LLC, a global alternative investment firm +47 +2008 +Robert +Smith +Founder +and Chief Executive Officer of Phluid Project, part retail concept and part experimental +platform, +completely +gender neutral, with a website that offers products and programs worldwide +58 +2014 +Amelia +Newton Varela +President, +Steven Madden, Ltd. +52 +2016 +Additional +Information About the Directors +Other +Public Company Directorships +Three +of our directors also currently serve or recently served as directors of other public companies: +● Mr. +Rosenfeld served as a director and chairman of the Audit & Risk Management Committee +of PVH Corp. (NYSE: PVH), one of the world’s largest apparel companies, from March +24, 2013 until December 11, 2023. +● Ms. +Lynch is a director and member of the Compensation Committee, Pension Committee, and Nominating +Committee of General American Investors Company, Inc. (NYSE: GAM), a closed-end fund that +manages a global portfolio of investments consisting mainly of U.S. and foreign securities. +10 +● +Mr. +Sachdev serves as a director of Agilon Health, Inc. (NYSE: AGL), a technology-enabled services +platform for the physicians’ market. +Specific +Qualifications, Attributes, Skills and Experience of Directors +Edward +R. Rosenfeld has served as our Chairman of the Board and Chief Executive Officer since August 2008 and has been a director of +the Company since February 2008. Mr. Rosenfeld, who joined our executive management team in May 2005, has more than two decades of experience +focused on the retail, apparel and footwear industries and possesses particular knowledge of and experience in the industry that strengthens +the Board’s collective qualifications, skills and experience. He has strong leadership skills and an in-depth understanding of +the Company and its goals from his positions as the Chairman of the Board and Chief Executive Officer. His background in finance and +his analytical skills gained through his years as a Vice President with Peter J. Solomon Company, an investment banking boutique, where +he specialized in mergers and acquisitions in the retail, apparel and footwear industries, provide the Board with insight and guidance +with respect to, among other things, strategic business development matters. Mr. Rosenfeld served as a director and chairman of the Audit +& Risk Management Committee of PVH Corp. (NYSE: PVH), one of the world’s largest apparel companies, from March 24, 2013 until +December 11, 2023. +Peter +A. Davis has served as a director of the Company and as a member of the Compensation Committee since January 2022. Mr. Davis +has over 30 years of experience in the footwear and apparel industry, having held executive leadership positions in sales and marketing +with companies including Skechers, Fila, Reebok, Joy & Mario and Dynasty Footwear. He also founded The Infamous Black Sheep Brand, +an urban action sports lifestyle brand. A former player in the NBA, Mr. Davis founded Pete Davis Basketball, LLC, a grassroots community +youth basketball organization, in 2019 and today serves as its Managing Director. Prior to founding Pete Davis Basketball, LLC, Mr. Davis +was the Senior Vice President of Footwear for Joy & Mario Footwear, a company based in Southern California from 2013 to 2018. Mr. +Davis’ years of experience in our industry provide relevant knowledge, expertise and leadership to the Board. +Al +Ferrara has served as a director of the Company and as a member of the Audit Committee since July 2019. In May 2020, Mr. Ferrara +became the Chairman of the Audit Committee and a member of the Nominating/Corporate Governance Committee. He is a retired certified public +accountant having retired from his position as a partner with BDO USA, LLP, a major international accounting firm, in August 2016 after +25 years with the firm, most recently serving as National Director of the Retail & Consumer Products Division. Mr. Ferrara also served +as a director on the firm’s Board of Directors from 2003 through 2010 and was also a director and BDO representative on the Board +of Directors of BDO Capital Advisors, LLC from 2000 to 2015. Mr. Ferrara served as a member of the Board of Directors of Barnes & +Noble, Inc., the nation’s largest retail bookseller, from 2016 until its sale in August 2019 and also served on its Audit Committee +and Compensation Committee. In September 2020, Mr. Ferrara was appointed to the Board of Directors of VIVAKOR, Inc. (NASDAQ: VIVK), a +socially responsible operator, acquirer and developer of clean energy technologies and environmental solutions, where he served as the +Chairman of its Audit Committee. Mr. Ferrara resigned from VIVAKOR’s Board of Directors in November 2022 after the appointment +of a new CEO at VIVAKOR. Mr. Ferrara’s decades of relevant experience as a certified public accountant, the director of the retail +practice at a major international accounting firm, and as a member of the audit committee of a public company enhance the financial oversight +capabilities of our Board and its Audit Committee. +Mitchell +S. Klipper has served as a director of the Company since April 2018, as a member of the Audit Committee since June 2018 and as +a member of the Corporate Social Responsibility Committee since August 2019. Mr. Klipper served as the Chief Executive Officer of Barnes +& Noble, Inc.’s Retail Group, one of the nation’s largest retail booksellers, from March 2010 to May 2015. Mr. Klipper +began his career at Barnes & Noble as Chief Financial Officer of B&N College in June 1986. He subsequently held several executive +positions at Barnes & Noble, Inc., including Executive Vice President, President of Barnes & Noble Development and Chief Operating +Officer. Prior to joining Barnes & Noble, Inc., Mr. Klipper was an Audit Manager with KMG Main Hurdman, a certified public accounting +firm and predecessor to KPMG. He also served on the advisory board of Modell’s Sporting Goods, a sporting goods retailer, from +2006 through 2018. Mr. Klipper’s decades of relevant experience in retail management, general business and accounting enhance the +leadership and oversight capabilities of our Board. +Maria +Teresa Kumar has served as a director of the Company and as a member of the Corporate Social Responsibility Committee since January +2021. Ms. Kumar is the President and CEO of Voto Latino, America’s largest Latinx voter registration and advocacy organization, +which she co-founded in 2004. She is also a regular on-air contributor for MSNBC. Ms. Kumar serves on the Boards of Emily’s List +and the World Economic Forum’s Global Shapers and is a World Economic Forum Young Global Leader and a Council on Foreign Relations +Life Member. +11 +Ms. Kumar graduated from U.C. Davis with a B.A. in International Affairs and earned her Masters’ in Public Policy +from Harvard’s Kennedy School. Ms. Kumar’s extensive experience in management, leadership, social advocacy and working with +non-profits enhance Board leadership and management oversight with a unique perspective on corporate social responsibility. +Rose +Peabody Lynch has served as a director of the Company since April 2014, as a member of the Compensation Committee since June +2014, and as a member of the Corporate Social Responsibility Committee since August 2019. Ms. Lynch formerly served on the Audit Committee +from June 2014 to July 2019, when she became a member of the Corporate Social Responsibility Committee. Until recently, Ms. Lynch operated +her own New York based consulting business, Market Strategies, LLC, which focused on strategic marketing and operating issues for small +to medium-sized companies. She possesses over 30 years of business experience, including tenures as the President and in other senior +executive officer positions of major companies in the beauty and fashion industries, and has extensive executive level financial and +operating experience. Her experience serving as a director and as a senior executive for a range of companies, including Victoria’s +Secret (a lingerie, clothing, and beauty retailer), Trowbridge Gallery (a supplier of fine art to the interior design trade) and Danskin, +Inc. (a leading manufacturer of women’s dance and active wear), enhances the Board’s leadership and oversight capabilities. +Ms. Lynch has served on several boards, including The Harmony Group-LeRoi Princeton (a manufacturer of children’s apparel), Salant +Corporation (Perry Ellis Menswear) and Frederick’s of Hollywood (a retailer of women’s apparel and lingerie). Currently, +Ms. Lynch serves on the board of General American Investors Company, Inc. (NYSE: GAM). In her role on the GAM Board, she serves on the +Compensation Committee, along with the Pension and Nominating Committees. She was a member of the Audit Committee and Nominating and +Governance Committees during her tenure at Salant and chaired the Compensation Committee during her tenure on the board of Frederick’s +of Hollywood. In addition, Ms. Lynch has held leadership positions with a variety of not-for-profit organizations. She currently serves +on the Board of Directors of the Princeton University Varsity Club. She also served two terms on the Board of Trustees of Concord Academy +in Concord, Massachusetts and rotated off the Board in July 2021. Ms. Lynch is a member of the Women and Foreign Policy Advisory Council +at the Council on Foreign Relations. +Peter +Migliorini has served as a director of the Company since October 1996 and has served on the Nominating/Corporate Governance Committee, +as its Chair, since July 2004 and the Compensation Committee, as its Chair, since July 2004. Mr. Migliorini formerly served on the Audit +Committee, from October 1996 until June 2018. Mr. Migliorini is the Presiding Director over all executive sessions of the independent +directors. Mr. Migliorini possesses extensive executive level financial, sales and operations experience. Mr. Migliorini currently serves +as sales manager for Greschlers, Inc., a building supplies company. Prior to joining Greschlers, Mr. Migliorini served as Director of +Operations for Mackroyce Group, a construction company, from 1987 to 1994. Earlier, Mr. Migliorini held various positions of increasing +responsibility from Assistant Buyer to Chief Planner/Coordinator for several shoe companies, including Meldisco Shoes, Perry Shoes and +Fasco Shoes. His numerous years of business experience at various levels and in various industries provide the Board with a measure of +practical orientation regarding our operations and growth endeavors. Mr. Migliorini’s early experience in the shoe industry also +provides relevant knowledge and expertise in our specific industry. +Arian +Simone Reed has served as a director of the Company and as a member of the Nominating/Corporate Governance Committee since January +2022. Ms. Reed is the Co-Founder and Chief Executive Officer of Fearless Fund, a venture capital fund that invests in women of color +led businesses, which she co-founded in 2018. Prior to Fearless Fund, Ms. Reed was the owner of AR PR Marketing, a publicity and marketing +strategy firm from 2004 to 2017. Ms. Reed serves as a member on the Board of Directors for the Birmingham Civil Rights Institute. In +2021, she was the recipient of the 15th Annual General Motors African Ancestry Network Black History Month Celebration Entrepreneurial +Spirit Award and the Detroit Branch NAACP Great Expectations Award. Ms. Reed’s marketing expertise, leadership, social advocacy, +and working with entrepreneurs will enhance Board leadership, strategic business development, and provide a unique perspective on corporate +social responsibility. +Ravi +Sachdev has served as a director of the Company and as a member of the Audit Committee since September 2008 and as a member of +the Nominating/Corporate Governance Committee since August 2019. As a Partner of the private equity firm Clayton Dubilier & Rice, +LLC since June 2015, Mr. Sachdev focuses on the healthcare sector. Earlier, Mr. Sachdev worked at several investment banks. He was a +Managing Director and Co- Head of Healthcare Services at J.P. Morgan from November 2010 until June 2015 and prior to that held the positions +of Managing Director at Deutsche Bank Securities, Inc. from January 2009 until November 2010 and Director at Deutsche Bank from January +2007 until January 2009. Prior to joining Deutsche Bank in 2006 as a Vice President, Mr. Sachdev served as a Vice President at Peter +J. Solomon Company, an investment banking boutique, specializing in mergers and acquisitions in the healthcare sector, from 1998 to 2006. +Mr. Sachdev possesses knowledge of finance +12 +and the financial analytics used to measure business performance. His 20 years of professional +experience in investment banking and private equity brings to the Board a thorough understanding of the financial issues affecting public +companies and greater insights in business valuation together with a practical orientation with respect to acquisitions and integrations. +Mr. Sachdev also serves on the Board of Directors of Agilon Health, Inc. (NYSE: AGL), a technology-enabled services platform for the +physicians’ market and served on the Board of Directors and the Strategy Committee and Compensation Committee of Covetrus, Inc. +(NASDAQ: CVET), a global animal-health technology and services company, from February 2019 until October 2022. +Robert +Smith has served as a director of the Company since April 2014 and has served on the Compensation Committee since June 2014 and +on the Corporate Social Responsibility Committee, as its Chair, since August 2019. Mr. Smith formerly served on the Nominating/Corporate +Governance Committee from June 2014 to July 2019, when he became a member of the Corporate Social Responsibility Committee. Mr. Smith +is the Chief Executive Officer of Phluid Project and GET Phluid, which he founded in 2018. Prior to Phluid Project, Mr. Smith was the +Chief Merchandising Officer for Haddad Brands from 2013 to 2017, a global children’s apparel and accessories licensing partner +for iconic brands such as Levi’s, Hurley, Nike, Jordan and Converse. Before his former position with Haddad Brands, Mr. Smith served +as Executive Vice President, Merchandising from 2010 to 2012 for Limited Brands, at Victoria’s Secret Direct, the largest direct-to-consumer +women’s apparel retailer in the United States. Prior thereto, Mr. Smith held various senior merchandising positions at Macy’s +Inc. between 1998 and 2010, beginning with Vice President, Merchandise Manager, Macy’s West and culminating with Executive Vice +President, Merchandising for Juniors, Kids, Intimate Apparel, Dresses, Suits, Coats and Swimwear. Earlier, Mr. Smith was a Merchandiser +for XOXO Apparel Company and held various positions with Burdine’s Department Stores. Mr. Smith possesses nearly 30 years of business +experience in the fashion industry and has extensive executive level expertise in merchandising. His experience in this area further +enhances the Board’s depth of understanding of the industry. +Amelia +Newton Varela has served as President of the Company since September 2015 and has been a director since 2016. Prior to this tenure, +Ms. Varela was Executive Vice President of Wholesale of the Company since April 2008 and Executive Vice President of Wholesale Footwear +of the Company from November 2004 to April 2008. Previously, she was Vice President of Sales for Steve Madden Women’s Wholesale +Division from January 2000. Ms. Varela began her career with the Company in 1998 in the role of Account Executive for Steve Madden Women’s +Wholesale Division. She graduated from The Fashion Institute of Technology in 1995. Ms. Varela’s over 25 years of experience at +the Company provides relevant industry knowledge and expertise, and leadership to the Board. +Required +Vote +Proxies +will be voted for the election of the eleven nominees as directors of the Company unless otherwise specified in the proxy. A plurality +of the votes cast by the holders of shares of Common Stock present in person or represented by proxy and entitled to vote at the Annual +Meeting will be necessary to elect the nominees as directors. This means that the director nominees who receive the greatest number of +affirmative votes cast are elected as directors, subject to our Director Election (Majority Voting) Policy, which is described below. +If, for any reason, any nominee is unable or unwilling to serve, the proxies will be voted for a substitute nominee, who will be designated +by the Board of Directors at the Annual Meeting. Stockholders may abstain from voting by marking the appropriate boxes on the accompanying +proxy. Abstentions will be counted separately and used for purposes of calculating whether a quorum is present at the Annual Meeting, +but will have no effect on the outcome of the vote. +Director +Election (Majority Voting) Policy +In +uncontested elections, it is our policy that any nominee for director who receives a greater number of “WITHHOLD” votes than +“FOR” votes for his, her, or their election must promptly submit a letter offering his, her, or their resignation to the +Nominating/Corporate Governance Committee following the certification of the stockholder vote. In such event, the Nominating/Corporate +Governance Committee would then consider the offer of resignation and make a recommendation to the independent member of the Board of +Directors as to whether or not the resignation should be accepted. For more information about this policy, see “Corporate Governance +– Director Election (Majority Voting) Policy” below. +Recommendation +of the Board of Directors +The +Nominating/Corporate Governance Committee of the Board and the entire Board of Directors unanimously recommend a vote “FOR” +the election of Mr. Edward R. Rosenfeld, Mr. Peter A. Davis, Mr. Al Ferrara, +13 +Mr. Mitchell S. Klipper, Ms. Maria Teresa Kumar, Ms. Rose +Peabody Lynch, Mr. Peter Migliorini, Ms. Arian Simone Reed, Mr. Ravi Sachdev, Mr. Robert Smith, and Ms. Amelia Newton Varela. +CORPORATE +GOVERNANCE +The +Board of Directors +Our +business is managed under the direction and oversight of the Board of Directors, whose members are elected by our stockholders. Directors +meet their responsibilities by participating in meetings of the Board of Directors and the various committees of the Board on which they +sit. They also communicate with our Chairman and Chief Executive Officer and other officers and employees of the Company and consult +with our independent registered public accounting firm and other third parties. The size of the Board is fixed at eleven members. Nine +current directors are independent and two current directors are not independent. The Nominating/Corporate Governance Committee determined +to nominate all eleven current directors for election to our Board. +Director +Independence +The +Board of Directors has determined that the following director nominees are “independent” for purposes of the criteria of +the SEC and The Nasdaq Global Select Market listing standards: Mr. Davis, Mr. Ferrara, Mr. Klipper, Ms. Kumar, Ms. Lynch, Mr. Migliorini, +Ms. Reed, Mr. Sachdev, and Mr. Smith. There is also no family relationship among any of the directors and executive officers of the Company. +If the eleven nominees set forth above are elected, the Board will consist of a majority of independent directors. The Board of Directors +has held regularly scheduled executive sessions for the independent directors, with Mr. Migliorini serving as Presiding Director of such +executive sessions. +Involvement +in Certain Legal Proceedings +During +the past ten years none of the persons currently serving as executive officers and/or directors of the Company has been the subject matter +of any legal proceedings that are required to be disclosed pursuant to Item 401(f) of Regulation S-K. Nor are any such legal proceedings +believed to be contemplated by governmental authorities against any director or executive officer. Further, no executive officers, directors, +beneficial owners of more than five percent of the Company’s common stock, or any other actor mentioned in Item 103(c)(2) of Regulation +S-K is a party adverse to the Company in a material proceeding or has a material interest adverse to the Company. +Director +Attendance at Meetings +Attendance +at Annual Meetings of Stockholders +We +have no specific policy regarding director attendance at our annual meetings of stockholders. We encourage all our directors to attend +annual meetings of our stockholders, and nine directors attended our 2023 annual meeting of stockholders. +Attendance +at Meetings of the Board of Directors +The +Board of Directors held four regularly scheduled meetings and one special meeting during the 2023 Fiscal Year and acted by unanimous +written consent on two occasions during the 2023 Fiscal Year. In the 2023 Fiscal Year, each director attended 75% or more of the total +number of Board meetings and meetings held by all committees on which they then served. +Director +Election (Majority Voting) Policy +We +have adopted a Director Election (Majority Voting) Policy. Pursuant to this policy, in an uncontested election of directors (that is, +an election where the number of nominees is equal to the number of seats open) any nominee for director who receives a greater number +of “WITHHOLD” votes than “FOR” votes for his, her, or their election must promptly submit an offer of resignation +to the Nominating/Corporate Governance Committee following the certification of the stockholder vote for consideration in accordance +with the following procedures. In such event, upon receipt of the resignation, the Nominating/Corporate Governance Committee would promptly +consider the appropriateness of the director’s continued service on the Board of Directors and recommend to the Qualified Independent +Directors (as defined below) the action to be taken with respect to the resignation, which could include +14 +(1) accepting the resignation; +(2) rejecting the resignation; (3) retaining the director but addressing what the Qualified Independent Directors believe to be the underlying +cause of the “WITHHOLD” votes; or (4) determining that the director will not be renominated by the Board of Directors in +future elections. The Nominating/Corporate Governance Committee would consider factors such as (a) the reasons expressed by the stockholders +for withholding votes from such director; (b) any possibilities for curing the underlying cause of the “WITHHOLD” votes; +(c) the tenure and qualifications of the director and his, her, or their past and expected future contributions to the Company; (d) the +overall composition of the Board of Directors, including, without limitation, whether accepting the resignation would cause the Company +to fail to meet any applicable SEC or Nasdaq requirement; (e) the availability of other qualified candidates; and (f) our Board of Director +Candidate Guidelines. +The +Qualified Independent Directors would then act on the Nominating/Corporate Governance Committee’s recommendation no later than +90 days following the date of the stockholders’ meeting at which the director election occurred. In considering the Nominating/Corporate +Governance Committee’s recommendation, the Qualified Independent Directors would review the factors considered by the Nominating/Corporate +Governance Committee and such additional information and factors that they believe to be relevant. Following the Qualified Independent +Directors’ decision, we would promptly disclose the decision in a Current Report on Form 8-K. The Form 8-K would include a full +explanation of the process by which the decision of the Qualified Independent Directors was reached and, if applicable, the reasons why +the offer of resignation was rejected. +If +an offer of resignation were to be accepted, the Nominating/Corporate Governance Committee would recommend to the Board of Directors +whether to fill the vacancy or reduce the size of the Board of Directors accordingly. Any director required to submit his, her, or their +resignation pursuant to this policy would not participate in the Nominating/Corporate Governance Committee’s recommendation or +the Qualified Independent Directors’ consideration of the resignation. Prior to voting on the director’s resignation offer, +the Qualified Independent Directors would provide to the director an opportunity to submit any information or statement that they believe +is relevant to the Qualified Independent Directors’ consideration of the resignation. +For +purposes of this policy, “Qualified Independent Directors” means all directors who (1) are “independent” for +purposes of The Nasdaq Global Select Market listing standards and (2) are not required to offer their resignation in accordance with +this policy. If there are fewer than three independent directors then serving on the Board of Directors who are not required to submit +their resignations in accordance with this policy, then the Qualified Independent Directors shall consist of all of the independent directors +and each independent director who is required to offer their resignation in accordance with this policy shall recuse himself or herself +from the deliberations and voting only with respect to their individual offer to resign. +15 +Committees +of the Board +Among +other committees, the Board of Directors has a standing Audit Committee, Compensation Committee, Nominating/Corporate Governance Committee, +and Corporate Social Responsibility Committee. Each committee has a written charter. The table below provides current membership for +each Board committee and the number of meetings held by each Board committee in the 2023 Fiscal Year. +Committees +of the Board of Directors +Director +Audit +Compensation +Nominating/ +Corporate +Governance +Corporate +Social +Responsibility +Edward +R. Rosenfeld +Peter +A. Davis +Member +Al +Ferrara +Chair +Member +Mitchell +S. Klipper +Member +Member +Maria +Teresa Kumar +Member +Rose +Peabody Lynch +Member +Member +Peter +Migliorini +Chair +Chair +Arian +Simone Reed +Member +Ravi +Sachdev +Member +Member +Robert +Smith +Member +Chair +Amelia +Newton Varela +Number +of Meetings in 2023 Fiscal Year +4 +3 +1 +4 +Number +of Actions by Written Consents in 2023 Fiscal Year +1 +2 +2 +1 +Audit +Committee +The +Audit Committee consists entirely of directors who are “independent” for purposes of The Nasdaq Global Select Market listing +standards and who meet the independence requirements contained in Exchange Act, Rule 10A- 3(b)(1). The Board has determined that each +of Messrs. Ferrara, Klipper, and Sachdev meets the SEC criteria of an “audit committee financial expert” as defined in Item +407(d)(5) of Regulation S-K. No member of the Audit Committee may serve simultaneously on the audit committee of more than two other +public companies without prior approval of the Board. The Audit Committee is primarily responsible for reviewing the services performed +by our independent registered public accountants, evaluating our accounting policies, our system of internal controls over financial +reporting (ICFR), our risk management policies, and information security and technology, including cybersecurity, and reviewing significant +financial transactions. +The +Audit Committee is responsible for reviewing and striving to ensure the integrity of our financial statements and oversight of our compliance +with legal and regulatory requirement, our internal audit function and our information security and technology. Among other matters, +the Audit Committee, with management, independent registered public accountants and internal auditors, reviews the adequacy of our internal +controls that could significantly affect our financial statements. Additionally, the Audit Committee reviews any potential related party +transactions as well as any other potential conflicts of interest situations on an ongoing basis. The Audit Committee is also directly +and solely responsible for the appointment, retention, compensation, oversight and termination of our independent registered public accountants. +In addition, the Audit Committee functions as the Company’s Qualified Legal Compliance Committee (the “QLCC”). The +purpose of the QLCC is to receive, retain and investigate reports made directly, or otherwise made known, of evidence of material violations +of any United States federal or state law, including any material breach of fiduciary duty, by the Company or its officers, directors, +employees or agents and, if an investigation was necessary, to recommend an appropriate response to the Company. +Management +has primary responsibility for our financial statements and the overall reporting process, including our system of internal controls +over financial reporting. Our independent registered public accountants audit our annual financial statements prepared by management, +express an opinion as to whether those financial statements present fairly our financial position, results of operations and cash flows +in conformity with accounting principles generally accepted in the United States of America and discuss with the Audit Committee any +issues they believe +16 +should be raised. Our independent registered public accountants also issue an opinion on our internal controls over +financial reporting. +The +Audit Committee is also responsible for the oversight of our risk management process, which is discussed in the “Risk Oversight” +section below. +In +performing its functions, the Audit Committee meets with management on at least a quarterly basis to review and discuss the quarterly +financial statements, annual audited financial statements and related reports and to consider the adequacy of our internal controls and +the objectivity of our financial reporting. The Audit Committee then recommends to the Board whether the audited financial statements +should be included in our Annual Report on Form 10-K. From time to time, the Audit Committee, with management, identifies and reviews +other areas of risks related to our operations and at least quarterly receives reports on and reviews cybersecurity risks as well as +our approach to managing such risks. Our Chief Information Security Officer presents to the Audit Committee regarding cybersecurity on +at least a quarterly basis. The Audit Committee discusses these matters with our independent registered public accountants and with appropriate +Company personnel. Meetings are held with the independent registered public accountants, who have unrestricted access to the Audit Committee. +In addition, the Audit Committee reviews our financing plans and reports and makes recommendations to the full Board of Directors for +approval and to authorize action. The Board has adopted a written charter setting out the functions the Audit Committee is to perform. +A copy of the Audit Committee Charter is available on our website at https://investor.stevemadden.com/corporate-governance/highlights . +The Audit Committee held four meetings and undertook one action by written consent during the 2023 Fiscal Year. +Nominating/Corporate +Governance Committee +The +Nominating/Corporate Governance Committee consists of directors who are “independent” for purposes of The Nasdaq Global Select +Market listing standards. +The +Nominating/Corporate Governance Committee provides oversight with respect to a wide range of issues relating to the operation of the +Board, including consideration of and recommendations regarding the size and composition of the Board of Directors and its committees +along with the identification of potential candidates to serve as directors. The Nominating/Corporate Governance Committee identifies +candidates to the Board of Directors by introductions from management, members of the Board of Directors, employees of the Company or +other sources, including stockholders that satisfy our policy regarding stockholder recommended candidates (as described below). To enable +the Nominating/Corporate Governance Committee to consider a stockholder recommendation in connection with the 2025 Annual Meeting, we +must receive the recommendation on or before December 11, 2024. The Nominating/Corporate Governance Committee does not evaluate director +candidates recommended by stockholders that satisfy our policy differently than director candidates recommended by other sources. +Stockholders +wishing to submit director nominations for the 2025 Annual Meeting should write to the Secretary, Steven Madden, Ltd., 52-16 Barnett +Avenue, Long Island City, New York 11104. In accordance with Article II, Section 5 of the By-Laws, director nominations for the 2025 +Annual Meeting can only be made by a stockholder of the Company who (i) is a stockholder of record on the date of the giving of the notice +of such director nominations and on the record date for the determination of stockholders entitled to vote at the 2025 Annual Meeting +and (ii) complies with the notice requirements and procedures set forth in Article II, Section 5 of the By-Laws. A stockholder’s +notice to the Secretary of the Company with respect to any such nominations must be timely and in proper written form pursuant to Article +II, Section 5 of the By-Laws, including containing certain information concerning the nominating or proposing stockholder and certain +information concerning the proposed nominee, such as any agreements, arrangements or understandings the stockholder may have with the +proposed nominee or other parties relating to the nomination or other proposal. Such information must be updated, if necessary, to be +true and correct as of the record date for the 2025 Annual Meeting and as of the date that is 10 business days prior to the date of the +2025 Annual Meeting. The notice must be delivered to, or mailed and received at, our principal executive offices not less than 120 days +nor more than 150 days prior to the first anniversary of the date of our 2024 Annual Meeting. Accordingly, any written notice given by +or on behalf of a stockholder pursuant to Article II, Section 5 of our By- Laws in connection with the 2025 Annual Meeting must be received +no later than January 22, 2025 and no earlier than December 23, 2024. This summary information regarding the By-Laws is qualified in +its entirety by reference to the full text of the By-Laws, a copy of which may be obtained by any stockholder, without charge, upon written +request to the Secretary of the Company at the address set forth above. If a nomination is not timely and properly made in accordance +with the procedures set forth in the By-Laws, or does not contain the specific information required by the By-Laws, such nomination will +be defective and will not be brought before the 2025 Annual Meeting. In addition, to +17 +comply with the universal proxy rules, stockholders +who intend to solicit proxies in support of director nominees other than the nominees of our Board of Directors must comply with the +additional requirements of Rule 14a-19 under the Exchange Act, including providing a statement that such stockholder intends to solicit +the holders of shares representing at least 67% of the voting power of our shares entitled to vote on the election of directors in support +of director nominees other than our nominees, as required by Rule 14a-19(b). We intend to file a proxy statement and WHITE proxy card +with the SEC in connection with the solicitation of proxies for the 2025 Annual Meeting. +In +considering candidates for the Board of Directors, the Nominating/Corporate Governance Committee considers our Board of Director Candidate +Guidelines and Director Election (Majority Voting) Policy, available on our website at https://investor.stevemadden.com/corporate-governance/highlights , +our policy regarding stockholder recommended director candidates, as set forth above, and all other factors that it deems appropriate, +including the individual’s character, education, experience, knowledge and skills. While our Board of Director Candidate Guidelines +do not expressly identify diversity as a factor for consideration regarding the evaluation of director candidates, diversity is among +the many factors the Nominating/Corporate Governance Committee considers in the candidate evaluation process. To assess the effectiveness +of the mandate set forth in the Nominating/Corporate Governance Committee’s charter, the Nominating/Corporate Governance Committee +reviews annually with the Board the composition of the Board as a whole and recommends, if necessary, measures to be taken so that the +Board reflects the appropriate balance of knowledge, experience and diversity required for the Board as a whole. +Additionally, +the Nominating/Corporate Governance Committee takes a leadership role in shaping the corporate governance of the Company. The Nominating/Corporate +Governance Committee develops and recommends corporate governance principles for the Company, makes recommendations to the Board of Directors +in support of such principles, and monitors compliance with our Conduct Codes (as defined and discussed in the “Codes of Business +Conduct and Ethics” section below). The Nominating/Corporate Governance Committee also oversees the evaluation of the Board of +Directors, its committees, and the Company’s senior executives and periodically reviews the succession plan for our senior executives +with the Chairman of the Board and Chief Executive Officer. The Nominating/Corporate Governance Committee operates under a formal charter +that governs the Committee’s composition, powers and responsibilities. A copy of the Nominating/Corporate Governance Committee +Charter is available on our website at https://investor.stevemadden.com/corporate-governance/highlights . The Nominating/Corporate +Governance Committee held one meeting and undertook two actions by written consent during the 2023 Fiscal Year. +Compensation +Committee +The +Compensation Committee consists of directors who are “independent” for purposes of The Nasdaq Global Select Market listing +standards and “non-employee directors” pursuant to Exchange Act Rule 16b-3. +The +Compensation Committee is responsible for establishing and overseeing our compensation and incentive plans and programs; determining +and approving compensation for our executive officers, including salaries, bonuses, perquisites and equity awards; reviewing and approving +compensation and awards for our executive officers under our compensation and incentive plans and program; considering the results of +say-on-pay proposals; assessing whether our compensation and incentive plans and programs encourage excessive risk-taking and evaluating +compensation policies that could mitigate such risk; administering our equity compensation plans; reviewing and approving a compensation +program for independent members of the Board; developing and monitoring compliance with policies for the clawback of erroneously paid +compensation; and assisting the Board in discharging the Board’s responsibilities relating to management organization, performance, +compensation and succession. The Compensation Committee also reviews executive education and development programs; evaluates the competitiveness +of the compensation of the Company’s executive officers; reviews and approves of the corporate goals and objectives used to determine +executive compensation; and monitors the amount of Company equity used for compensation. The Compensation Committee has the authority +to seek the advice of compensation consultants in carrying out its duties and responsibilities; however, the Compensation Committee must +assess the independence of the consultant before retaining them or receiving any advice. Independence factors that the Compensation Committee +should consider are described in the “Role of the Compensation Committee – Independence of Outside Advisors” section +below. The Compensation Committee operates under a formal charter adopted by the Board of Directors that governs its composition, powers +and responsibilities. A copy of the Compensation Committee Charter is available on our website at https://investor.stevemadden.com/corporate-governance/highlights . +The Compensation Committee held three meetings and undertook two actions by written consent during the 2023 Fiscal Year. +18 +Corporate +Social Responsibility Committee +The +Corporate Social Responsibility Committee consists of directors who are “independent” for purposes of The Nasdaq Global Select +Market listing standards. +The +Corporate Social Responsibility Committee is responsible for assisting the Board in its oversight of our initiatives, plans and practices +with respect to corporate social responsibility matters of significance to the Company and the communities in which we operate. Corporate +social responsibility matters include ethical and sustainable sourcing; human rights; the environment; supplier conduct; labor conditions; +climate change; diversity in employment; charitable giving; government relations; and political spending. The Committee’s responsibility +includes oversight of: +● management’s +evaluation of risks and opportunities with respect to corporate social responsibility matters; +● management’s +creation of key strategic initiatives, goals, strategies, policies, and procedures to address +corporate social responsibility risks and opportunities; +● our +governance of, and performance relative to, such key strategic initiatives, goals, strategies, +policies, and procedures; +● the +policies and procedures used to prepare corporate social responsibility related disclosures; +● engagement +with stockholders, other key stakeholders, and proxy advisory firms regarding corporate social +responsibility matters; +● our +response to corporate social responsibility related stockholder proposals; +● management’s +assessment of the identity and scope of matters comprising corporate social responsibility; +and +● our +government relations strategies and activities. +The +Corporate Social Responsibility Committee operates under a formal charter that governs the Committee’s composition, powers and +responsibilities. The Corporate Social Responsibility Committee Charter requires that a majority of the committee’s members not +be officers or employees of the Company or its affiliates. A copy of the Corporate Social Responsibility Committee Charter is available +on our website at https://investor.stevemadden.com/corporate-governance/highlights . The Corporate Social Responsibility Committee +held four meetings and undertook one action by written consent during the 2023 Fiscal Year. +Board +Leadership Structure, Risk Oversight, Executive Sessions of Non-Employee Directors, and Communications Between Stockholders and the Board +Board +Leadership Structure +As +noted above, our Board currently comprises nine independent and two non-independent directors. +Mr. +Rosenfeld has served as Chairman of the Board and Chief Executive Officer since August 2008 and has been a member of the Board since +February 2008. Mr. Migliorini is currently serving as the Presiding Director. The Presiding Director is elected by the Board’s +independent directors and presides over executive sessions of the independent directors. We believe that the number of independent, experienced +directors who comprise our Board, along with the independent oversight of our Presiding Director, benefits the Company and our stockholders. +We +recognize that different board leadership structures may be appropriate for companies in different situations and believe that no one +structure is suitable for all companies. We believe our current Board leadership structure is optimal for the Company because it demonstrates +to our employees, suppliers, customers, and other stakeholders that we are under strong leadership, with a single person setting the +tone and having primary responsibility for managing our operations and leading our Board in setting long-term strategy. Having a single +leader for both the Company and our Board eliminates confusion and duplication of efforts and provides clear leadership for the Company. +We believe the Company, like many U.S. companies, has been well-served by this leadership structure. +Because +the positions of Chairman of the Board and Chief Executive Officer are held by the same person, the Board believes it is appropriate +for the independent directors to elect one independent director to serve as a Presiding Director. In addition to presiding at executive +sessions of the independent directors, the Presiding Director has responsibilities that include coordinating with the Chairman of the +Board and Chief Executive Officer in establishing agenda and discussion items for Board meetings; retaining independent advisors on behalf +of the Board as the Board may determine to be necessary or appropriate; and performing such other functions as the independent directors +may designate from time to time. +19 +Our +Board conducts an annual evaluation to determine whether it and its committees are functioning effectively. As part of this annual self-evaluation, +the Board evaluates whether the current leadership structure continues to be optimal for the Company and our stockholders. +Risk +Oversight +Our +Board is responsible for overseeing our risk management process. It focuses on our general risk management strategy and the most significant +risks facing the Company and ensures that management implements appropriate risk mitigation strategies. Management also apprises the +Board of particular risk management matters in connection with its general oversight and approval of corporate matters. +The +Board has delegated to the Audit Committee oversight of our risk management process. Among its duties, the Audit Committee reviews with +management (a) our policies, guidelines, and processes with respect to risk assessment and management of risks that may be material to +the Company, (b) our system of disclosure controls and system of internal controls over financial reporting, (c) our compliance with +legal and regulatory requirements, and (d) our systems and processes related to information security and technology, including cybersecurity. +The Audit Committee is also responsible for reviewing major legislative and regulatory developments that could materially impact our +contingent liabilities and other financial risks. Our other Board committees also consider and address risks as they perform their respective +committee responsibilities. All committees report to the full Board as appropriate, including when a matter rises to the level of a material +or enterprise level risk. +Our +management is responsible for day-to-day risk management. Our risk management and internal audit areas serve as the primary monitoring +and testing function for company-wide policies and procedures and manage the day-to-day oversight of the risk management strategy for +our ongoing business. This oversight includes identifying, evaluating, and addressing potential risks that may exist at the enterprise, +strategic, financial, operational, and compliance and reporting levels. +We +believe the division of risk management responsibilities described above is an effective approach for addressing the risks facing the +Company and that our Board leadership structure supports this approach. +Executive +Sessions of Independent Directors +The +Board holds executive sessions of its independent directors generally at each regularly scheduled meeting. The Presiding Director serves +as the chairperson for these executive sessions. +Communications +between Stockholders and the Board +We +have adopted a procedure by which stockholders may send communications to one or more members of the Board of Directors by writing to +such director(s) or to the entire Board of Directors in care of the Secretary at Steven Madden, Ltd., 52-16 Barnett Avenue, Long Island +City, New York 11104. The Board has instructed the Secretary of the Company to review all communications so received and to exercise +discretion not to forward to the Board correspondence that he or she decides is inappropriate, such as business solicitations, frivolous +communications and advertising, routine business matters ( i.e. , business inquiries, complaints, or suggestions) and personal grievances. +However, any director may at any time request that the Secretary forward to such director any and all communications received by the +Secretary, but not forwarded to the directors. +Codes +of Business Conduct and Ethics +We +have adopted a Code of Ethics for the Chief Executive Officer and Senior Financial Officers, which is applicable to our Chief Executive +Officer, Chief Financial Officer, controller, principal accounting officer, head of internal audit and such other employees of the Company +as the Audit Committee may from time to time designate as “senior financial officers.” In addition, the individuals who serve +on our Board of Directors are subject to a Code of Business Conduct and Ethics for the Board of Directors, and all of our employees are +held accountable for adherence to our Code of Conduct. Each of the Code of Ethics for the Chief Executive Officer and Senior Financial +Officers and the Code of Business Conduct and Ethics for the Board of Directors is included as an exhibit to our Annual Report on Form +10-K for the fiscal year ended December 31, 2023. The Code of Conduct applicable to all of our employees is an exhibit to our Annual +Report on Form 10-K for the fiscal year ended December 31, 2018. The Code of Ethics for the Chief Executive Officer and Senior Financial +Officers, the Code of Business Conduct and Ethics for the Board of Directors and the Code of Conduct applicable to all of our employees +(collectively, the “Conduct Codes”) are available +20 +on our website at https://investor.stevemadden.com/corporate-governance/highlights +and may be obtained by any stockholder without charge upon request by writing to the Secretary at Steven Madden, Ltd., 52-16 Barnett +Avenue, Long Island City, New York 11104. The Conduct Codes are intended to establish standards necessary to deter wrongdoing and to +promote compliance with applicable governmental laws, rules and regulations and honest and ethical conduct. The Conduct Codes cover all +areas of professional conduct, including conflicts of interest, fair dealing, financial reporting and disclosure, protection of our assets +and confidentiality. Employees have an obligation to promptly report any known or suspected violation of the Conduct Codes without fear +of retaliation. Waiver of any provision of the Conduct Codes for executive officers and directors may only be granted by the Board of +Directors or the Nominating/Corporate Governance Committee, and we will disclose any such waiver or modification of the Conduct Codes +relating to such individuals. +Corporate +Governance Principles +The +Board of Directors has adopted Corporate Governance Principles as a set of guiding guidelines by which the Company is governed. The Corporate +Governance Principles address various matters of corporate governance such as board size and composition, director qualifications and +responsibilities, director compensation, limitations on service on other boards, board committees, director orientation and education, +director access to management, management development and succession planning, and annual performance evaluations for the Board. +The +Nominating/Corporate Governance Committee reviews the Corporate Governance Principles annually to determine whether to recommend changes +to the Corporate Governance Guidelines to reflect new laws, rules and regulations and governance best practices. The Corporate Governance +Principles are available on our website at https://investor.stevemadden.com/corporate-governance/highlights and may be obtained +by any stockholder without charge upon request by writing to the Secretary at Steven Madden, Ltd., 52-16 Barnett Avenue, Long Island +City, New York 11104. +Stock +Ownership Guidelines +The +Board of Directors has adopted Stock Ownership Guidelines, which require a level of ownership of shares of our Common Stock by our directors +and executive officers to align their interests with the long-term interests of our stockholders. The Stock Ownership Guidelines require +our Chief Executive Officer to own shares of our Common Stock equal in value to five times his annual base salary. Other executive officers +are required to own shares of our Common Stock equal in value to two times their annual base salary. The Stock Ownership Guidelines further +require that each non-employee director must own shares of our Common Stock equal in value to two times the cash portion of the directors’ +annual retainer or the equivalent if a retainer is not received in certain circumstances. Individuals subject to the Stock Ownership +Guidelines must attain the required level of share ownership by the fifth anniversary of the later of (i) the effective date of the adoption +of the Stock Ownership Guidelines and (ii) the date that the individual became a named executive officer or director. The named executive +officer or director must retain an amount equal to 25% of the net shares of our Common Stock received as a result of the exercise, vesting +or payment of any equity award we make until the applicable share ownership requirement is satisfied. The Compensation Committee monitors +the compliance of our Chief Executive Officer and other executive officers with the Stock Ownership Guidelines. +Prohibition +on Hedging and Pledging of Our Common Stock +Our +directors and executive officers and certain other persons designated from time to time by our Chief Financial Officer are prohibited +from entering into hedging transactions and from pledging our Common Stock pursuant to a formal policy concerning such activities adopted +by the Board of Directors. This policy does not apply to other employees of the Company. +Corporate +Social Responsibility Policy +We +are committed to operating our business in a socially responsible manner. We strive to incorporate this commitment into every aspect +of our business, including the design, quality, safety and sourcing of our products, the safety and fair treatment of our employees, +animal welfare and compliance with laws, including the Foreign Corrupt Practices Act and the SEC’s Conflict Minerals rule. These +guiding principles are set forth in our Corporate Social Responsibility Policy, and we expect all our employees to be familiar with and +to adhere to them. We strive to do business with vendors and suppliers that share our views and commitments to quality products and ethical +business principles. We will only engage vendors and suppliers that demonstrate a commitment to meeting our standards. Our +21 +Corporate +Social Responsibility Committee assists the Board in its oversight of management’s social responsibility obligations. +Clawback +Policy +During +2023, we adopted the Clawback Policy, which applies to our executive officers, including the named executive officers, and provides for +the repayment of certain incentive compensation received over a covered period if the Company is required to prepare an accounting restatement +due to the material noncompliance of the Company with any financial reporting requirement under the securities laws. See “Executive +Compensation – Compensation Discussion and Analysis – Clawback Policy” for further discussion of the Clawback Policy. +Certain +Relationships and Related Party Transactions +Steven +Madden Employment Agreement. We believe that Steven Madden, our founder and Creative and Design Chief, provides unique and significant +value in guiding the leadership of our creative process, both in his hands-on work for the Company and his collaboration with our designers, +product professionals and marketing executives. In addition, the public’s association of Mr. Madden’s name and likeness with +our branded products is significant, meaningful, and integral to our success and has been, and continues to be, instrumental in creating +long- term stockholder value. Based upon that belief, we further believe that his continuing involvement with the Company is essential, +and to this end, we have for many years had an employment agreement with Mr. Madden as described below. +Mr. +Madden’s agreement in its current form dates back to July 1, 2005, as subsequently amended on various occasions, most recently +on November 10, 2023 (the “SM Agreement”). Under the SM Agreement, Mr. Madden has agreed to continue to serve as our Creative +and Design Chief for a term continuing through December 31, 2031, for a base salary of $7,026,042 per annum through December 31, 2026, +together with the potential for cash bonuses at the sole discretion of our Board of Directors and an annual life insurance premium reimbursement +of up to $200,000. Effective January 1, 2027, Mr. Madden’s base salary will increase to $7,377,374 until December 31, 2028, and +effective January 1, 2029, through the remainder of the term, Mr. Madden’s base salary will be increased to $7,746,211. Pursuant +to the SM Agreement, on February 8, 2012, Mr. Madden was granted 2,194,584 restricted shares of Common Stock (as adjusted for our 2018 +three-for-two stock split effected as a stock dividend), valued at approximately $40 million, under our Amended and Restated 2006 Stock +Incentive Plan, which is referred to herein as the “2006 Plan.” The restricted stock vested in equal annual installments +over seven years commencing on December 31, 2017 through December 31, 2023. On June 30, 2012, as allowed under the SM Agreement, Mr. +Madden elected to receive an additional restricted stock award valued at approximately $40 million in consideration of a reduction in +his annual base salary in years after 2012 to the amount reflected above. As a consequence, on July 3, 2012, Mr. Madden received 2,840,013 +additional restricted shares of Common Stock which vested in six annual installments commencing on December 31, 2018 through December +31, 2023, subject to his continued employment with the Company on each such vesting date. +Under +the SM Agreement, Mr. Madden is also eligible to receive annually, on or about the date of our annual meeting of stockholders (but not +later than June 30), an option (the “Annual Option”) to purchase shares of Common Stock equal to the greater of (a) 100% +of the largest aggregate number of shares of Common Stock available upon the exercise of an option or options granted to any other continuing +full-time employee of the Company during the preceding twelve-month period or (b) 225,000 shares of Common Stock; provided, however, +that a grant to Mr. Madden in excess of 150% of the number of shares of Common Stock subject to options granted to such other continuing +full-time employee would require stockholder approval. Any Annual Option so granted vests quarterly over a one-year period and is exercisable +for a period of five years at a price equal to the closing price of our Common Stock on the grant date. In addition, pursuant to the +SM Agreement, on March 1, 2017, Mr. Madden received a one- time stock option grant to purchase 1,125,000 shares of our Common Stock at +an exercise price of $24.90 as a result of our having achieved for the fiscal year ended December 31, 2016 earnings per share performance +criteria set forth in the SM Agreement; such option vests in equal annual installments over a five-year period, which commenced on the +first anniversary of the grant date. +Under +the SM Agreement, if Mr. Madden dies, his estate would receive a payment equal to his base salary for the 24-month period immediately +after the date of his death. Further, if Mr. Madden’s employment is terminated due to his total disability (as defined in the agreement), +“for cause” (as defined in the agreement) or due to Mr. Madden’s resignation, we are obligated to pay Mr. Madden the +amount of compensation that is accrued and unpaid through the date of termination. If Mr. Madden’s employment is terminated for +any reason (other than “for cause” or +22 +due to his death, total disability or resignation), we are obligated to pay Mr. Madden, +in installments, the balance of his base salary through the end of the term of the SM Agreement. If, during the period commencing 120 +days prior to a “change of control” transaction (as defined in the SM Agreement) and ending on the first anniversary of a +change of control transaction, Mr. Madden’s employment is terminated other than “for cause” (as defined in the SM Agreement) +all unvested options held by Mr. Madden will be accelerated and vest on the date of termination or resignation, or if the employment +termination occurred prior to the change of control, on the date of such change of control, and Mr. Madden will be entitled to receive +a lump sum cash payment equal to the amount of compensation that is accrued and unpaid through the date of termination plus $35 million. +The SM Agreement contains other customary provisions, including provisions regarding expense reimbursement, confidentiality, non-solicitation +and non-competition. +For +the 2023 Fiscal Year, Mr. Madden earned $7,026,042 in base salary and received $200,000 for the payment of an annual life insurance premium. +Mr. Madden also received his Annual Option for the 2023 Fiscal Year to purchase 225,000 shares of Common Stock at a price per share of +$30.63. +The +most recent amendment entered into on November 10, 2023, effected the extension of the term of the SM Agreement for five years through +December 31, 2031. In connection with the extension, we agreed to pay Mr. Madden a base salary of $7,026,042 for the annual periods ending +December 31, 2023, 2024, 2025, and 2026; +$7,377,374 +for the annual periods ending December 31, 2027 and 2028; and $7,746,211 for the annual periods through the remainder of the term. Additionally, +on the first business day of January 2024, and then annually on the first business day of successive years through December 31, 2031, +Mr. Madden will receive a restricted stock award under our 2019 Incentive Compensation Plan for a number of shares of Common Stock valued +at (i) $10 million each year for the years ended December 31, 2024, 2025, and 2026, and (ii) $9 million each year for the years ended +December 31, 2027, 2028, 2029, 2030, and 2031, and each such award will vest in accordance with the terms of the amendment. +Loan +to Steven Madden. On June 25, 2007, we made a loan to Mr. Madden in the amount of $3,000,000 to enable Mr. Madden to satisfy a personal +tax obligation resulting from the exercise of a stock option that was due to expire. The loan is evidenced by a secured promissory note +executed by Mr. Madden in our favor, the security for which is a certain securities brokerage account maintained by Mr. Madden with his +broker; none of the securities in the securities brokerage account are shares of Common Stock. There have been successive amendments +to the secured promissory note, the most recent of which occurred in April 2016. At that time the secured promissory note was amended +to substitute the collateral securing the secured promissory note from shares of our Common Stock to the security interest in Mr. Madden’s +securities brokerage account. Previously, on January 3, 2012, the secured promissory note was amended and restated to extend the maturity +date of the obligation to December 31, 2023 and eliminate the accrual of interest after December 31, 2011. Prior to the January 3, 2012 +amendment, the secured promissory note had been accruing interest at the rate of 6% per annum. In addition, the secured promissory note +provides that, commencing on December 31, 2014 and annually on each December 31 thereafter through the maturity date, one-tenth of the +principal amount thereof, together with accrued interest, will be cancelled by the Company provided that we have employed Mr. Madden +on each such December 31. Contemporaneously, on each such December 31, we will release our security interest in a portion of the securities +held in Mr. Madden’s securities brokerage account generally correlating to the amount of indebtedness cancelled on such date. As +of December 31, 2011, interest in the amount of $1,090,000 had accrued on the principal amount of the secured promissory note and, as +noted above, interest was eliminated after December 31, 2011. On December 31, 2023, the remaining balance outstanding under the promissory +note was forgiven by the Company, no amounts remain outstanding, and neither the Company nor Mr. Madden have any outstanding obligations +under the note. +Review, +Approval or Ratification of Transactions with Related Persons +Our +Conduct Codes and Employee Handbook prohibit all conflicts of interest. Under the Conduct Codes, conflicts of interest occur when personal +or professional interests interfere in any way, or even appear to interfere, with our interests. Our prohibition on conflicts of interest +under the Conduct Codes includes any related party transaction. +Related +person transactions must be approved by the Board, or by a committee of the Board consisting solely of independent directors, who will +approve the transaction only if they determine that it is in our best interests. In considering the transaction, the Board or committee +will consider all relevant factors, including, as applicable, (i) the business rationale for entering into the transaction; (ii) the +alternatives to entering into a related person transaction; (iii) whether the transaction is on terms comparable to those available to +third parties or, in the case of employment relationships, to employees generally; (iv) the potential for the transaction to lead to +an actual or apparent conflict of +23 +interest and any safeguards imposed to prevent such actual or apparent conflicts; and (v) the overall +fairness of the transaction to the Company. +We +have multiple processes for reporting conflicts of interest, including related party transactions. Under the Conduct Codes, all employees +are required to report any actual or apparent conflict of interest, or potential conflict of interest, to management. The Chief Financial +Officer distributes a questionnaire to our executive officers and management personnel quarterly and distributes a questionnaire to the +members of the Board of Directors annually requesting certain information regarding, among other things, their immediate family members, +employment and beneficial ownership interests, which information is then reviewed for any conflicts of interest under the Conduct Codes. +The +Board of Directors, the Audit Committee and the Disclosure Committee, which consists of management personnel, discuss the related party +transactions, specifically, and in connection with the regular review processes attendant to our periodic filings, including related +party transaction disclosures. +If +a director is a party to or in some manner involved in a transaction involving the Company, they will be recused from all discussions +and decisions about the transaction. The transaction must be approved in advance whenever practicable, and if not practicable, must be +ratified as promptly as practicable. +COMPENSATION +OF DIRECTORS IN THE 2023 FISCAL YEAR +The +Compensation Committee is responsible for establishing and overseeing all matters pertaining to compensation paid to directors for service +on the Board and its committees. +The +following table sets forth information concerning the 2023 Fiscal Year compensation of our non- employee directors who served in the +2023 Fiscal Year. Following the table is a discussion of material factors related to the information disclosed in the table. Mr. Rosenfeld +and Ms. Varela do not receive any compensation for their service on the Board. +Name +Fees +Earned +or +Paid +in Cash +($) +Stock +Awards +($)(1) +All +Other +Compensation +($) +Total +($) +Peter +A. Davis +85,000 +120,008 (2) +— +205,008 +Al +Ferrara +120,000 +120,008 (3) +— +240,008 +Mitchell +S. Klipper +95,000 +120,008 (4) +— +215,008 +Maria +Teresa Kumar +85,000 +120,008 (5) +— +205,008 +Rose +Peabody Lynch +95,000 +120,008 (6) +— +215,008 +Peter +Migliorini +100,000 +120,008 (7) +— +220,008 +Arian +Simone Reed +85,000 +120,008 (8) +— +205,008 +Ravi +Sachdev +95,000 +120,008 (9) +— +215,008 +Robert +Smith +95,000 +120,008 (10) +— +215,008 +(1) Reflects +the grant date fair value of stock awards calculated in accordance with the Financial Accounting +Standards Board (“FASB”) Accounting Standards Codification (“ASC”) +Topic 718. Assumptions used in the calculation of these amounts are included in Note H to +our audited financial statements for the fiscal year ended December 31, 2023 included in +our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March +4, 2024. +(2) At +December 31, 2023, the aggregate number of shares of restricted Common Stock held by Mr. +Davis was 3,918, all of which were issued in the 2023 Fiscal Year, and Mr. Davis had no options +outstanding. +(3) At +December 31, 2023, the aggregate number of shares of restricted Common Stock held by Mr. +Ferrara was 3,918, all of which were issued in the 2023 Fiscal Year, and Mr. Ferrara had +no options outstanding. +(4) At +December 31, 2023, the aggregate number of shares of restricted Common Stock held by Mr. +Klipper was 3,918, all of which were issued in the 2023 Fiscal Year, and Mr. Klipper had +no options outstanding. +(5) At +December 31, 2023, the aggregate number of shares of restricted Common Stock held by Ms. +Kumar was 3,918, all of which were issued in the 2023 Fiscal Year, and Ms. Kumar had no options +outstanding. +(6) At +December 31, 2023, the aggregate number of shares of restricted Common Stock held by Ms. +Lynch was 3,918, all of which were issued in the 2023 Fiscal Year, and Ms. Lynch had no options +outstanding. +24 +(7) +At +December 31, 2023, the aggregate number of shares of restricted Common Stock held by Mr. +Migliorini was 3,918, all of which were issued in the 2023 Fiscal Year, and Mr. Migliorini +had no options outstanding. +(8) At +December 31, 2023, the aggregate number of shares of restricted Common Stock held by Ms. +Reed was 3,918, all of which were issued in the 2023 Fiscal Year, and Ms. Reed had no options +outstanding. +(9) At +December 31, 2023, the aggregate number of shares of restricted Common Stock held by Mr. +Sachdev was 3,918, all of which were issued in the 2023 Fiscal Year, and Mr. Sachdev had +no options outstanding. +(10) At +December 31, 2023, the aggregate number of shares of restricted Common Stock held by Mr. +Smith was 3,918, all of which were issued in the 2023 Fiscal Year, and Mr. Smith had no options +outstanding. +Directors +who are also our employees are not paid any fees or other remuneration for service on the Board of Directors or any of its committees. +In the 2023 Fiscal Year, each non-employee director received for service on the Board a grant of 3,918 shares of restricted Common Stock, +vesting on May 24, 2024, the first anniversary of the grant date, and was entitled to receive $75,000 for such service. +In +the 2023 Fiscal Year, members of the Audit Committee, Nominating/Corporate Governance Committee, Compensation Committee and Corporate +Social Responsibility Committee were each entitled to receive an additional $10,000 for serving on such committees. Additionally, the +Chairman of the Audit Committee was entitled to receive $35,000 for serving in this role and the Chairman of the Compensation Committee +was entitled to receive an additional $15,000. We reimburse our directors for any out-of-pocket expenses incurred by them in connection +with services provided in such capacity, in accordance with our business expense reimbursement guidelines. +STOCK +OWNERSHIP +Security +Ownership of Certain Beneficial Owners +The +following table sets forth information as of March 19, 2024 (unless otherwise indicated) with respect to the beneficial ownership of +our Common Stock by each person known by the Company to be the beneficial owner of more than 5% of the outstanding shares of our Common +Stock. A person is deemed to be a beneficial owner of any securities that that person has the right to acquire within 60 days. +Name +and Address of Beneficial Owner +Amount +and +Nature +of +Beneficial +Ownership(1) +Percentage +of +Class +BlackRock +Inc. +55 +East 52 nd Street New York, +NY +10055 +11,123,776 +15.15 % (2) +The +Vanguard Group +100 Vanguard Boulevard +Malvern, +PA 19355 +8,241,420 +11.22 % (3) +Wellington +Management Group LLP +c/o +Wellington Management Company LLP +280 Congress Street Boston, MA 02210 +6,198,043 +8.44 % (4) +Macquarie +Group Limited 50 +Martin +Place Sydney, +New +South Wales +Australia +5,174,755 +7.05 % (5) +(1) +Beneficial +ownership as reported in the table below has been determined in accordance with Item 403 of Regulation S-K and Rule 13d-3 of the Exchange +Act and based upon 73,433,032 shares of Common Stock outstanding (excluding treasury shares) as of March 19, 2024. +(2) +Based +solely on a Statement on Schedule 13G/A filed with the SEC on January 22, 2024 +by BlackRock, Inc. (“BlackRock”), BlackRock has sole voting power with respect to 11,005,531 of such shares and sole dispositive +power with respect to 11,123,776 of such shares. +(3) +Based +solely on a Statement on Schedule 13G/A filed with the SEC on February 13, 2024 by The Vanguard Group (“Vanguard”), Vanguard +has shared voting power with respect to 138,409 of such shares, sole dispositive power with respect to 8,026,950 of such shares and +shared dispositive power with respect to 214,470 of such shares. +25 +(4) +Based +solely on a Statement on Schedule 13G/A filed with the SEC on February 8, 2024 by Wellington Management Group LLP (“Wellington”), +Wellington has shared voting power with respect to 5,487,082 of such shares and shared dispositive power with respect to 6,198,043 +of such shares. +(5) +Based +solely on a Statement on Schedule 13G/A filed with the SEC on February 14, 2024 by Macquarie Group Limited (“Macquarie Group”), +Macquarie Group is the beneficial owner of the following shares of Common Stock by virtue of its direct or indirect ownership of the +following companies: (i) Macquarie Investment Management Business Trust (“Macquarie IM Business Trust”), which has sole +voting power and sole dispositive power with respect to 5,174,755 shares and (ii) Macquarie Management Holdings Inc. (“Macquarie +Holdings”), which is deemed to be the beneficial owner of 5,174,755 , shares by virtue of its direct or indirect ownership interest +in Macquarie IM Business Trust. The address of Macquarie Holdings and Macquarie IM Business Trust is 2005 Market Street, Philadelphia, +PA 19103. +Security +Ownership of Directors and Executive Officers +The +following table sets forth information as of March 19, 2024 (unless otherwise indicated) with respect to the beneficial ownership of +Common Stock held by (a) each current director and nominee; (b) our Chief Executive Officer, our Chief Financial Officer and our three +most highly compensated executive officers as of December 31, 2023 other than the Chief Executive Officer and the Chief Financial Officer +(the “Named Executive Officers”); and (c) all current directors and executive officers as a group. A person is deemed to +be a beneficial owner of any securities that that person has the right to acquire within 60 days. Each director and executive officer +has sole voting power and sole dispositive power with respect to all shares beneficially owned by him or her. +Name +of Beneficial Owner(1) +Amount +and +Nature +of +Beneficial +Ownership(2) +Percentage +of +Class +Edward +R. Rosenfeld +931,038 +1.27 % (3) +Peter +A. Davis +5,751 +* (4) +Al +Ferrara +15,385 +* (5) +Karla +Frieders +102,179 +* (6) +Lisa +Keith +20,687 +* (7) +Mitchell +S. Klipper +21,743 +* (8) +Maria +Teresa Kumar +10,140 +* (9) +Rose +Peabody Lynch +19,997 +* (10) +Zine +Mazouzi +74,790 +* (11) +Peter +Migliorini +16,100 +* (12) +Arian +Simone Reed +7,276 +* (13) +Ravi +Sachdev +76,323 +* (14) +Robert +Smith +12,418 +* (15) +Amelia +Newton Varela +212,335 +* (16) +All +Directors and Executive Officers as a Group (14 persons) +1,526,162 +2.08 % (17) +* +Indicates +beneficial ownership of less than 1%. +(1) +The +address for each of the individuals named above is c/o Steven Madden, Ltd., 52-16 Barnett Avenue, Long Island City, New York 11104. +(2) +Beneficial +ownership as reported in the table above has been determined in accordance with Item 403 of Regulation S-K and Rule 13d-3 of the Exchange +Act and based upon 73,433,032 shares of Common Stock outstanding (excluding treasury shares) as of March 19, 2024. +(3) +Mr. +Rosenfeld’s beneficial ownership includes: (i) 320,603 shares of restricted Common Stock; (ii) 376,435 shares of Common Stock +held by Mr. Rosenfeld without restriction, and (iii) 234,000 shares of Common Stock held by the Rosenfeld 2021 Family Trust (the “Trust”). +The Trust is for the benefit of Mr. Rosenfeld’s spouse and children and his spouse is the sole trustee. Mr. Rosenfeld disclaims +beneficial ownership of the Common Stock held by the Trust. +(4) +Mr. +Davis’ beneficial ownership consists of 3,918 shares of restricted Common Stock and (ii) 1,833 shares of Common Stock held by +Mr. Davis without restriction. +(5) +Mr. +Ferrara’s beneficial ownership consists of (i) 3,918 shares of restricted Common Stock and (ii) 11,467 shares of Common Stock +held by Mr. Ferrara without restriction. +(6) +Ms. +Frieders’ beneficial ownership consists of (i) 48,500 shares of restricted Common Stock and (ii) 53,679 shares of Common Stock +held by Ms. Frieders without restriction. +26 +(7) +Ms. +Keith’s beneficial ownership consists of (i) 14,019 shares of restricted Common Stock +and (ii) 6,668 shares of Common Stock held by Ms. Keith without restriction. +(8) Mr. +Klipper’s beneficial ownership consists of (i) 3,918 shares of restricted Common Stock +and (ii) 17,825 shares of Common Stock held by Mr. Klipper without restriction. +(9) Ms. +Kumar’s beneficial ownership consists of (i) 3,918 shares of restricted Common Stock +and (ii) 6,222 shares of Common Stock held by Ms. Kumar without restriction. +(10) +Ms. +Lynch’s beneficial ownership consists of (i) 3,918 shares of restricted Common Stock and (ii) 16,079 shares of Common Stock held +by Ms. Lynch without restriction. +(11) +Mr. +Mazouzi’s beneficial ownership includes: (i) 60,574 shares of restricted Common Stock and (ii) 14,216 shares of Common Stock +held by Mr. Mazouzi without restriction. +(12) +Mr. +Migliorini’s beneficial ownership includes: (i) 3,918 shares of restricted Common Stock and (ii) 12,182 shares of Common Stock +held by Mr. Migliorini without restriction. +(13) +Ms. +Reed’s beneficial ownership includes: (i) 3,918 shares of restricted Common Stock and (ii) 3,358 shares of Common Stock held +by Ms. Reed without restriction. +(14) +Mr. +Sachdev’s beneficial ownership includes: (i) 3,918 shares of restricted Common Stock and (ii) 72,405 shares of Common Stock held +by Mr. Sachdev without restriction. +(15) +Mr. +Smith’s beneficial ownership includes: (i) 3,918 shares of restricted Common Stock and (ii) 8,500 shares of Common Stock held +by Mr. Smith without restriction. +(16) +Ms. +Varela’s beneficial ownership includes: (i) 54,007 shares of restricted Common Stock and (ii) 158,328 shares of Common Stock +held by Ms. Varela without restriction. +(17) +Includes, +in the aggregate, (i) 532,965 shares of restricted Common Stock; (ii) 759,197 shares of Common Stock held by such beneficial owners; +and (iii) 234,000 shares of Common Stock held indirectly by the Trust. +Delinquent +Section 16(a) Reports +We +are not aware of any late or delinquent filings under Section 16(a) of the Securities Exchange Act of 1934, except that (i) a late Form +4 was filed on behalf of Amelia Newton Varela in January 2023, and (ii) a late Form 4 was filed on behalf of Peter A. Davis on February +14, 2024. +EXECUTIVE +COMPENSATION +Compensation +Discussion and Analysis +Executive +Summary +This +Compensation Discussion and Analysis describes the overall principles and objectives and specific features of our executive compensation +program, primarily focused on the executive compensation program’s application to our Chief Executive Officer and our other executive +officers included in the Summary Compensation Table, whom we refer to collectively in this Proxy Statement as the “Named Executive +Officers.” +In +developing and evaluating our executive compensation program, the Compensation Committee reviews our total stockholder return and annual +financial results for prior years and the extent to which those indicia correlate with executive compensation. +As +part of our cash deployment strategy to drive stockholder value and enhance stockholder returns, our Board of Directors approved four +quarterly cash dividends on outstanding Common Stock during 2023. We paid a quarterly cash dividend of $0.21 per share on each of March +24, 2023, June 23, 2023, September 25, 2023, and December 29, 2023, returning a total of $63.2 million to stockholders during the period +in the form of dividends. We also repurchased 3,978,467 shares of our Common Stock for approximately $142.3 million during 2023, which +includes shares acquired through the net settlement of employee stock awards. Since fiscal year 2013, the Company has returned approximately +$1.5 billion to stockholders in the form of share repurchases and dividends demonstrating our commitment to creating stockholder value. +Total +revenue for the 2023 Fiscal Year decreased by 6.6% to $2.0 billion from $2.1 billion in the year ended December 31, 2022. Net income +attributable to the Company was $171.6 million, or $2.30 per diluted share, for the 2023 Fiscal Year as compared to net income of $216.1 +million, or $2.77 per diluted share, for the year ended December 31, 2022. On an adjusted basis, net income attributable to the Company +was $182.7 million, or $2.45 per diluted share, for the 2023 Fiscal Year as compared to adjusted net income of $218.3 million, or $2.80 +per diluted share, for the year ended December 31, 2022. +27 +The +preceding discussion includes financial measures that are adjusted from the corresponding GAAP financial measures. We include a reconciliation +of these adjusted financial measures to the corresponding GAAP financial measures in Annex A to this Proxy Statement. +Reflecting +our financial and stock performance in the 2023 Fiscal Year, we paid the bonuses reflected in the Summary Compensation Table to our Named +Executive Officers, which represented a decrease compared to 2022. Because our general practice is to award bonuses and grant equity +based on Named Executive Officer performance for the preceding year, we believe that we are able to maintain relative alignment between +pay and performance. +Compensation +Objectives and Strategy +Our +executive officer compensation program is designed to attract and retain the caliber of officers needed to ensure our continued growth +and profitability and to reward them for their performance, for our performance and for creating long-term value for our stockholders. +The primary objectives of the program are to: +● align +rewards with performance that creates stockholder value; +● support +our strong team orientation; +● encourage +high-potential team players to build a career at the Company; and +● provide +rewards that are cost-efficient, competitive with other similarly positioned organizations +and fair to employees and stockholders. +The +Compensation Committee of the Board of Directors approves and administers our executive compensation program. Working with management +and outside advisors, the Compensation Committee has developed a compensation and benefits strategy that rewards performance and reinforces +a culture that the Compensation Committee believes will drive long-term success and value creation. +The +compensation program rewards team accomplishments while promoting individual accountability. The executive officer compensation program +depends in significant measure on our results, but business unit results and individual accomplishments are also very important factors +in determining each executive’s compensation. We have a robust planning and goal-setting process that is fully integrated into +the compensation system, enhancing a strong relationship among individual efforts, Company results and financial rewards. +We +place a major portion of total compensation at risk through annual and long-term incentives. However, we may also pay discretionary bonuses +to the Named Executive Officers based on their performance during the preceding year. We designed the combination of incentives to balance +annual operating objectives and Company earnings performance with longer-term stockholder value creation. +To +implement our primary objectives, we seek to provide competitive compensation that is commensurate with performance. We target compensation +at the median of the market, as discussed below under “Pay Levels and Benchmarking,” and calibrate both annual and long-term +incentive opportunities to generate less-than-median awards when we do not fully achieve goals and greater-than-median awards when we +exceed goals. +We +believe that there is great value to the Company in having a team of long-tenured, seasoned managers and seek to promote a long-term +commitment from our senior executives. We have designed our team-focused culture and management processes to foster this commitment. +In addition, restricted Common Stock awards that we granted to Named Executive Officers in the 2023 Fiscal Year reinforce this long-term +orientation with annual vesting over four to five years. +Role +of the Compensation Committee +General. +The Compensation Committee provides overall guidance for our executive compensation policies and determines the amounts and elements +of compensation for our executive officers and outside directors. The Compensation Committee currently consists of four members of the +Board of Directors, Ms. Lynch and Messrs. Davis, Migliorini, and Smith, each of whom is an independent director under Rule 5605 of The +Nasdaq Global Select Market listing standards and a “non-employee director” as defined under the SEC’s rules. +28 +When +considering decisions concerning the compensation of executives, other than the Chief Executive Officer, the Compensation Committee asks +for the recommendations of the Chief Executive Officer, including his detailed evaluation of each executive’s performance. +In +accordance with the Compensation Committee Charter, the Compensation Committee may form and delegate authority to subcommittees when +appropriate. Additionally, the Compensation Committee may delegate its authority to the Company’s officers with respect to the +compensation of employees who are not officers of the Company for purposes of Section 16 of the Exchange Act when appropriate. +Use +of Outside Advisors. In making its determinations with respect to executive compensation, the Compensation Committee has historically +engaged the services of an independent compensation consulting firm. The Compensation Committee has retained the services of Arthur J. +Gallagher & Co.’s Human Resources & Compensation Consulting Practice (“Gallagher”) since 2005 to assist with +its review of the compensation packages and employment agreements of the Chief Executive Officer and other executive officers. In 2023, +Gallagher worked with the Compensation Committee to assess the reasonableness of grants of restricted Common Stock to Mr. Rosenfeld, +Ms. Varela, Mr. Mazouzi and Ms. Frieders, the terms of the new employment agreement for Ms. Frieders and Mr. Mazouzi, in each case as +compared with comparable positions in the peer group that we list below. Gallagher also worked with the Compensation Committee to establish +a bonus pool and individual allocations from the pool for 2023. We based executive compensation for the Named Executive Officers on employment +agreements with pay structures and levels that we set with reference to competitive market studies that Gallagher performed just prior +to the consummation of the agreements. Gallagher completed position-specific competitive market studies when we entered into the new +employment agreement with Ms. Frieders and Mr. Mazouzi and when we approved the grants of restricted Common Stock to Mr. Rosenfeld, Ms. +Varela, Mr. Mazouzi, and Ms. Frieders in the 2023 Fiscal Year. Gallagher provides only executive compensation consulting services and +works with management only at the behest of the Compensation Committee. +The +Compensation Committee retains Gallagher directly, although in carrying out assignments for the Company, Gallagher also interacts with +our management, when necessary and appropriate, to obtain compensation and performance data for the Company and our executives. In addition, +Gallagher may, in its discretion, seek input and feedback from management regarding its consulting work product for the Compensation +Committee to confirm alignment with our business strategy and identify data questions or other similar issues, if any, prior to completion +of a project for the Compensation Committee. +Independence +of Outside Advisors. The Compensation Committee has the sole authority to retain, terminate, approve the fees and set the terms of +our relationship with any outside compensation advisors who assist the Committee in carrying out its responsibilities. It may select +or receive advice from any compensation consultant or other advisor only after taking into consideration all factors relevant to the +consultant’s independence from management, including the factors set forth in Nasdaq rules and in the Compensation Committee Charter. +Independence factors that the Compensation Committee should consider under its charter include: (a) any other services that the consultant +provides to the Company, (b) any business or personal relationships the consultant has with a committee member or an executive officer +of the Company, and (c) whether the consultant has any policies in place to prevent conflicts of interest. +Accordingly, +the Compensation Committee reviews annually its relationship with Gallagher to ensure Gallagher’s independence on executive compensation +matters. Prior to selecting and receiving advice from Gallagher with respect to executive compensation in the 2023 Fiscal Year, the Compensation +Committee reviewed Gallagher’s independence and that of Gallagher’s individual representatives who served as the Committee’s +advisors. The Compensation Committee determined that no conflicts of interest exist between the Company and Gallagher or its representatives. +In reaching such determination, the Compensation Committee considered, among other things, the following factors: (i) that Gallagher +provides no services to the Company other than executive compensation consulting services; (ii) the fees we paid to Gallagher as a percentage +of Gallagher’s total revenue; (iii) the representations by Gallagher as to its policies and procedures that are designed to prevent +a conflict of interest; (iv) any business or personal relationships between the individual representatives of Gallagher who advised the +Compensation Committee and any member of the Compensation Committee; and (v) any business or personal relationships between our executive +officers and Gallagher or its individual representatives. +Consideration +of 2023 Stockholder Say-on-Pay Vote. At our 2023 Annual Meeting of Stockholders, our stockholders overwhelmingly approved, on an +advisory basis, the compensation of our Named Executive Officers (96% of votes cast). This continues the string of 94% or higher approvals +that began with the initial say-on-pay vote +29 +in 2011. The Compensation Committee believes this level of stockholder support reflects a +very strong endorsement of our compensation policies and decisions. The Compensation Committee has considered the results of this advisory +vote on executive compensation in determining our compensation policies and decisions for 2024 and has determined that these policies +and decisions are appropriate and in our best interests and those of our stockholders at this time. +Compensation +Structure +Pay +Elements - Overview +We +use four main components of compensation: +● base +salary; +● annual +performance-based bonuses; +● long-term +equity incentives (consisting of stock options and restricted stock); and +● benefits +and perquisites. +Pay +Elements - Details +Base +Salary . We paid base salaries to each of the Named Executive Officers to provide them with fixed pay commensurate with the Named +Executive Officer’s role and responsibilities, experience, expertise, and individual performance. As we describe more fully in +the section of this Proxy Statement captioned “Employment Arrangements,” during 2023, we had employment agreements with each +of the Named Executive Officers that specified their base salary levels for 2023. The Compensation Committee, as constituted at the time +the parties entered into the employment agreements or any amendments to those agreements, reviewed and approved the salary that each +such agreement or amendment established. The Compensation Committee considered each employee’s salary history, value in our competitive +market and performance (including at the Company and previous employment). +The +annual base salary of our Chief Executive Officer, Edward R. Rosenfeld, under Mr. Rosenfeld’s employment agreement dated December +31, 2021, was $1,126,879 for the year ending December 31, 2023 and $1,171,954 for the year ended December 31, 2024. We and Mr. Rosenfeld +entered into an employment agreement, effective March 1, 2024, which superseded and replaced his prior agreement, pursuant to which his +salary for the period from March 1, 2024 through February 28, 2025 is $1,171,954. +The +annual base salary of our President, Amelia Newton Varela, under Ms. Varela’s employment agreement dated December 21, 2022, which +remains in effect until December 31, 2025, was $775,000 for the year ending December 31, 2023, and is $800,000 for the year ending December +31, 2024, and $825,000 for the year ending December 31, 2025. +The +annual base salary of our Chief Financial Officer, Zine Mazouzi, under Mr. Mazouzi’s employment agreement dated as of December +8, 2020, which remained in effect until December 31, 2023, was $600,000 for the year ending December 31, 2023. On November 10, 2023, +we entered into a new employment agreement with Mr. Mazouzi, which replaced Mr. Mazouzi’s prior agreement. The annual base salary +of Mr. Mazouzi under the new employment agreement, dated as of November 10, 2023, which remains in effect until December 31, 2026, is +$675,000 for the year ending December 31, 2024, $700,000 for the year ending December 31, 2025, and $725,000 for the year ending December +31, 2026. +The +employment agreement, dated May 11, 2020, for our Chief Merchandising Officer, Karla Frieders, which remained in effect until April 30, +2023, provided for an annual base salary of $590,000 for the contract year ending 2023. On May 11, 2023, we entered into a new employment +agreement with Ms. Frieders, effective as of May 1, 2023, which remains in effect until April 30, 2025. Pursuant to the terms of the +new employment agreement, the annual base salary of Ms. Frieders is $590,000 through April 30, 2025. +The +annual base salary of our General Counsel, Lisa Keith, under Ms. Keith’s employment agreement dated as of January 22, 2021, which +remained in effect until January 31, 2023, was $375,000 for the year ended January 31, 2023. On January 17, 2023, we entered into a new +employment agreement with Ms. Keith, effective February 1, 2023, pursuant to which we agreed to pay her an annual base salary of $400,000 +for the year ended January 31, 2024. On January 24, 2024, we entered into an employment agreement with Ms. Keith, effective as of February +1, 2024, which remains in effect until January 31, 2027, pursuant to which her annual base salary is $425,000 from February 1, 2024 +30 +through +January 31, 2025, $450,000 from February 1, 2025 through January 31, 2026, and $475,000 from February 1, 2026 through January 31, 2027. +Please +see the section of this Proxy Statement captioned “Summary Compensation Table for the Fiscal Year 2023” and “Employment +Arrangements” for a more detailed description of the employment agreements and compensation of the Named Executive Officers. The +2022 and 2023 salary increases, if any, for our Named Executive Officers, as reflected in the following table, are generally consistent +with those of other management employees. +Named +Executive Officer +2022 +Salary +2023 +Salary +2024 +Salary +Edward +R. Rosenfeld +$ 1,083,538 +$ 1,126,879 +$ 1,171,954 +Amelia +Newton Varela +$ 750,000 +$ 775,000 +$ 800,000 +Zine +Mazouzi +$ 575,000 +$ 600,000 +$ 675,000 +Lisa +Keith +$ 375,000 +$ 400,000 +$ 425,000 +Karla +Frieders +$ 590,000 +$ 590,000 +$ 590,000 +Annual +Performance-based Bonus . The respective employment agreements for our Named Executive Officers establish the structures for their +annual performance-based cash bonuses, if any. The Compensation Committee reviewed and approved the bonus provisions fixed in each such +employment agreement at the time the parties entered into such agreements and any amendments to those agreements. Such bonus provisions +generally provide for variable or discretionary bonuses that the Committee designed to reward attainment of business goals that create +stockholder value. +Mr. +Rosenfeld’s employment agreement as in effect in 2023 did not entitle him to any annual performance- based cash bonuses. The amount +of such bonuses, if any, was at the absolute discretion of the Board of Directors. +Ms. +Varela’s previous employment agreement entitled her to an annual performance-based cash bonus for each of the fiscal years ended +December 31, 2021 and 2022 in an amount equal to 2% of the increase, if any, in our total earnings before interest and taxes (“EBIT”) +for each such year over our total EBIT for the immediately preceding year. EBIT attributable to any business that we acquire after January +1, 2020 is included in the calculation for the purpose of determining Ms. Varela’s annual bonus after one year of Company ownership. +As we previously disclosed, the February 25, 2021 amendment to Ms. Varela’s employment agreement caps her performance-based bonus +at $450,000 in 2021 and 2022. In exchange for agreeing to the cap on her performance-based bonus, Ms. Varela received a grant of restricted +stock on March 1, 2021 with a value of $1.0 million, subject to vesting at a rate of 25% per year. +Ms. +Varela’s current employment agreement entitles her to an annual performance-based cash bonus based on our EBIT for each of the +fiscal years ended December 31, 2023, 2024 and 2025 based on the following schedule: +EBIT +Bonus +as % of +Salary +Maximum +(130% of Plan) +80 % +Target +(100% of Plan) +50 % +Threshold +(90% of Plan) +30 % +Mr. +Mazouzi’s prior employment agreement entitled him to an annual performance-based cash bonus for the fiscal year ended December +31, 2023 based on the following schedule: +Diluted +EPS +Bonus +as % of +Salary +Maximum +(130% of Plan) +80 % +Target +(100% of Plan) +50 % +Threshold +(90% of Plan) +20 % +Mr. +Mazouzi’s current employment agreement entitles him to an annual performance-based cash bonus for each of the fiscal years ended +December 31, 2024, December 31, 2025, and December 31, 2026 based on the following schedule: +31 +Diluted +EPS +Bonus +as % of +Salary +Maximum +(130% of Plan) +90 % +Target +(100% of Plan) +60 % +Threshold +(90% of Plan) +40 % +Ms. +Keith’s prior and current employment agreements entitle her to an annual performance-based bonus for each of the fiscal years ending +December 31, 2023, 2024, 2025, and 2026 in an amount to be determined by the Company in its absolute discretion, which bonus, if any, +is paid to her on or about March 15 of the year immediately following the year in which it was earned. +Ms. +Frieders’ prior and current employment agreements entitle her to an annual performance-based bonus for each of the fiscal years +ending December 31, 2020, 2021 and 2022, 2023, and 2024 in an amount to be determined by the Company in its absolute discretion, which +bonus, if any, is paid to her on or about March 15 of the year immediately following the year in which it was earned. +As +provided in the Steven Madden, Ltd. 2019 Incentive Compensation Plan, the maximum payment that we may make to an individual under any +performance-based cash award during any fiscal year and subject to the attainment of specified performance goals is $10,000,000. The +Compensation Committee may, in its sole discretion, elect to pay an individual an amount that is less than the individual’s target +award regardless of the degree of attainment of the performance goals. +Taking +into account Gallagher’s recommendations based on comparisons with our peer group companies, including target annual incentive +compensation (which we discuss below under “Pay Levels and Benchmarking”), and the individual performance of our Named Executive +Officers, the Compensation Committee approved the following cash payments based on performance during the Fiscal Year 2023: +Named +Executive Officer +2023 Cash +Award Value +Edward +R. Rosenfeld +$ 880,000 +Amelia +Newton Varela +$ 303,708 +Zine +Mazouzi +$ 264,000 +Lisa +Keith +$ 100,000 +Karla +Frieders +$ - +In +Fiscal Year 2023, we had established a bonus pool equal to 6% of our net income out of which any bonuses earned by our Named Executive +Officers and other key executives would be paid. The bonus pool, based on net income of $171.6 million for Fiscal Year 2023, was approximately +$10.3 million. +Long-term +Equity Incentives . Management and the Compensation Committee believe that equity-based awards are an important factor in aligning +the long-term financial interest of the executive officers and stockholders. The Compensation Committee continually evaluates the use +of equity-based awards and intends to continue to use such awards in the future as part of designing and administering our compensation +program. In the Fiscal Year 2023, the Compensation Committee continued its practice in recent years of granting equity incentives in +the form of restricted stock, which the Compensation Committee believes provides both substantial incentive and retention characteristics. +The Committee designed these awards to provide emphasis on preserving stockholder value generated in recent years while providing significant +incentives for continuing growth in stockholder value. +We +determined the amounts of the equity-based awards that we granted to our Named Executive Officers in the 2023 Fiscal Year based on the +Committee’s evaluation of our performance during Fiscal Year 2022, Gallagher’s recommendations based on comparisons with +our peer group companies, including target incentive compensation (which we discuss below under “Pay Levels and Benchmarking”), +and the individual performance of the Named Executive Officers. On February 1, 2023, we made a grant of 4,808 shares of restricted Common +Stock to Ms. Keith which vests 20% per year over five years beginning on February 1, 2024. On March 15, 2023, we made a grant of 86,480 +shares of restricted Common Stock to Mr. Rosenfeld, a grant of 7,207 shares of restricted Common Stock to Ms. Varela, and a grant of +7,207 shares of restricted Common Stock to Mr. Mazouzi. Each of those grants vests 20% per year over five years commencing on March 1, +2024. On June 1, 2023, we made a grant of 21,214 shares of restricted Common Stock to Ms. Frieders, which vests 20% per year over five +years commencing on June 1, 2024. On December 1, 2023, we made a grant of 5,147 shares to Mr. Mazouzi which vests 20% per year over five +years +32 +commencing on December 1, 2024. We also made a grant of 35,177 shares of restricted Common Stock to Ms. Varela on January 3, 2023 +in connection with her new employment agreement that we discussed above. See “Employment Arrangements” below for a further +discussion of the equity-based awards we made to our Named Executive Officers. +The +Committee intends to continue to review the types of equity awards we grant to achieve appropriate incentives for both performance and +retention. During the Fiscal Year 2022, the Committee adopted an equity grant practice of using March 15 as the fixed, annual grant date +for future equity grants relating to performance in the prior fiscal year. +Other +Benefits and Perquisites . Our executive compensation program also includes other benefits and perquisites that may vary among individual +executive officers. These benefits and perquisites include annual matching contributions to executive officers’ 401(k) plan accounts, +company-paid medical benefits, automobile allowances and leased automobiles, and life insurance coverage. The Compensation Committee +annually reviews these other benefits and perquisites and makes adjustments as warranted based on competitive practices, our performance +and the individual’s responsibilities and performance. The Compensation Committee has approved these other benefits and perquisites +as a reasonable component of our executive officer compensation program. Please see the section of this Proxy Statement captioned “Summary +Compensation Table” and, specifically, the column entitled “All Other Compensation” and the corresponding footnotes. +Pay +Mix +We +use the particular elements of compensation that we described above because we believe that doing so provides a well-proportioned mix +of secure compensation, retention value and at-risk compensation, which produces short-term and long-term performance incentives and +rewards. By following this approach, we seek to motivate the executives to focus on business metrics and other variables within their +particular sector that will increase sales and margins and at the same time lower costs so as to produce a high level of short-term and +long-term performance for the Company and long-term wealth creation for the executives, as well as reducing the risk of recruitment of +top executive talent by competitors. The mix of metrics that we used for the annual performance bonuses and our long- term incentive +program likewise provides an appropriate balance between short-term financial performance and long- term stock performance. +For +the Named Executive Officers, we have weighted the mix of compensation heavily toward at-risk pay (annual incentives and long-term incentives). +Maintaining this pay mix results fundamentally in a pay-for-performance orientation for our executives, which is aligned with our stated +compensation philosophy of providing compensation commensurate with performance. +Pay +Levels and Benchmarking +We +determine pay levels for our executives based on several factors, including the individual’s roles and responsibilities within +the Company, the individual’s experience and expertise, the pay levels for peers within the Company, pay levels in our competitive +market for similar positions, and performance of the individual and the Company as a whole. The Compensation Committee is responsible +for approving pay levels for the Named Executive Officers. In determining the pay levels, the Compensation Committee considers all forms +of compensation and benefits. +The +Compensation Committee assesses the “competitive market” for compensation using several sources. The primary data source +that the Committee used in setting competitive market levels for the Named Executive Officers is the information publicly disclosed by +a peer group of the Company, which the Committee reviews annually and may change from year to year. For the 2023 Fiscal Year, the Compensation +Committee reviewed executive compensation and compensation design for the purpose of assessing bonus awards in early 2024 in the context +of overall compensation and in relation to the following peer companies: +Boot +Barn Holdings, Inc. +Designer +Brands Inc. +Movado +Group, Inc. +The +Buckle, Inc. +Express, +Inc. +Oxford +Industries, Inc. +Caleres, +Inc. +G-III +Apparel Group, Ltd. +Shoe +Carnival, Inc. +The +Children’s Place, Inc. +Genesco +Inc. +Skechers +U.S.A., Inc. +Crocs, +Inc. +Guess?, +Inc. +Wolverine +World Wide, Inc. +Deckers +Outdoor Corporation +Lands’ +End, Inc. +Zumiez +Inc. +33 +The +market capitalization and trailing twelve months revenue of the Company and each peer company follows: +Company +Market +Cap* +TTM +Revenue** +Steven +Madden, Ltd. +$ 3.1B +$ 1.98 +Boot +Barn Holdings, Inc. +$ 2.3B +$ 1.70 +The +Buckle, Inc. +$ 2.4B +$ 1.28 +Caleres, +Inc. +$ 1.1B +$ 2.82 +The +Children’s Place, Inc. +$ 0.3B +$ 1.60 +Crocs, +Inc. +$ 5.7B +$ 3.96 +Deckers +Outdoor Corporation +$ 17.2B +$ 4.12 +Designer +Brands Inc. +$ 0.5B +$ 3.08 +Express, +Inc. +$ 0.03B +$ 1.79 +G-III +Apparel Group, Ltd. +$ 1.6B +$ 3.19 +Genesco +Inc. +$ 0.4B +$ 2.70 +Guess?, +Inc. +$ 1.2B +$ 2.31 +Lands’ +End, Inc. +$ 0.3B +$ 1.49 +Movado +Group, Inc. +$ 0.5B +$ 0.69 +Oxford +Industries, Inc. +$ 1.6B +$ 1.55 +Shoe +Carnival, Inc. +$ 0.8B +$ 1.19 +Skechers +U.S.A., Inc. +$ 9.6B +$ 8.00 +Wolverine +World Wide, Inc. +$ 0.7B +$ 2.24 +Zumiez +Inc. +$ 0.4B +$ 0.87 +* +Market +capitalization is as of December 31, 2023 and is stated in billions. +** +TTM +is the last four quarters of publicly reported revenue as of the Compensation Committee’s review of executive compensation in +early 2024 and is stated in billions. +Because +only five peer companies disclose compensation for a Chief Merchandising Officer, the Committee added six additional companies with respect +to the consideration of Ms. Frieders’ compensation: Big Lots Inc., Burlington Stores Inc., Carter’s Inc., Citi Trends Inc., +Dollar General Inc., and Vince Holding Corp. +After +consideration of data on external competitive levels of compensation and internal needs, the Compensation Committee makes decisions regarding +the Named Executive Officers’ target total compensation opportunities based on the need to attract, motivate and retain an experienced +and effective management team. Relative to the competitive market data, the Compensation Committee generally intends that the base salary +and target incentive compensation, including both cash bonuses and equity-based compensation, for each Named Executive Officer will be +at the median of the competitive market. +As +noted above, despite our overall pay positioning objectives, pay opportunities for specific individuals vary based on factors such as +scope of duties, tenure, institutional knowledge and difficulty in recruiting a new executive. Actual total compensation in a given year +will vary above or below the target compensation levels based primarily on the attainment of operating goals and the creation of stockholder +value. +Compensation +Committee Discretion +The +Compensation Committee has complete discretion whether to make cash performance bonuses or equity- based incentive awards, with the exception +of any such payouts that are to be made pursuant to contractual commitments, such as the bonuses that may be paid to Ms. Varela and Mr. +Mazouzi. We describe factors to consider in making such awards under “Annual Performance-Based Bonuses” and “Long-term +Equity Incentives” above. +Pay +Ratio +As +required by the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), the following disclosure +provides the relationship of the total annual compensation of our median-paid employee to the total annual compensation of our Chief +Executive Officer, Mr. Rosenfeld. +For +the purposes of this disclosure, as permitted by SEC regulations, we used the same median-paid employee as in our proxy statement filed +during 2023, because, pursuant to the instructions to Item 402(u) of Regulation S-K, +34 +there has been no material change in our employee +population or employee compensation arrangements in the 2023 Fiscal Year that would result in a significant change to our pay ratio disclosure. +The +table below sets forth the total annual compensation for Mr. Rosenfeld and our median-paid employee, who is a store assistant manager, +and the ratio between the two. +Median +employee annual total compensation +$ 32,136 +Mr. +Rosenfeld annual total compensation +$ 5,033,103 +Ratio +of Chief Executive Officer to median employee compensation +157:1 +We +determined our median-paid employee as of December 31, 2023, which date was within the last three months of the 2023 Fiscal Year, as +permitted by the pay ratio rule under the Dodd-Frank Act. In determining our median employee, we applied the “de minimis” +exemption under the rule, which allows the exemption of 5% or less of our total global workforce in jurisdictions outside of the U.S., +which amounted to 210 employees based on our total global workforce as of December 31, 2023 of 4,200 employees. As such, we excluded +all of our employees in each of Portugal, 14 employees; Taiwan, 50 employees; the Netherlands, 63 employees; and Malaysia, 78 employees, +which in total amounted to 205 employees, which was less than 5%. We did not exclude from consideration any employees who joined the +Company during the 2023 Fiscal Year as the result of a business acquisition or combination. Employees on leave of absence were excluded +and wages and salaries were annualized for those employees who were not employed for the entire 2023 Fiscal Year. To identify our median +employee, we used payroll data consisting of salary, hourly wage, overtime wage, bonus, commissions, vesting of equity awards and any +similar payroll items for all of our employees included in the calculation. +For +purposes of determining the ratio, we determined our median-paid employee’s annual total compensation for the 2023 Fiscal Year +using the same method required for calculating our Chief Executive Officer’s (and other Named Executive Officers’) total +annual compensation for purposes of the Summary Compensation Table. +We +believe that the ratio stated above is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K. It +is based on the methodologies, assumptions and estimates described above and is not necessarily comparable to the ratios reported by +other companies. +Risk +Assessment +Bonus +payments to executives are either based on the discretion of the Compensation Committee or are tied to growth in various indicators of +financial performance, such as EBIT and earnings per share. We have established long-term incentives in the form of time-vested restricted +stock that generally vest over four or five years. These forms of compensation have been in place for several years and have proved effective +in rewarding performance while not encouraging inappropriate risk-taking. +The +Compensation Committee undertook to review and evaluate our executive and company-wide compensation program and plans to assess whether +any aspect of the program and these plans would encourage inappropriate risk-taking by our executives and non-executive employees that +could have a material adverse effect on the Company and to confirm that we have adequate risk management controls in place to ensure +that executive and company-wide compensation is reasonable and achieves its intended incentive without creating unacceptable risk. Based +on such review and evaluation, the Compensation Committee believes there is no material risk to the Company that is related to our compensation +program for executives and non-executive employees. +This +review and evaluation of the risks associated with our compensation program and plans consisted of: +● identifying +those business risks that could be material to the Company and identifying our existing risk +management system; +● reviewing +and analyzing our compensation program and plans to identify program and plan features that +could potentially encourage or introduce excessive or imprudent risk taking of a material +nature; +● identifying +the business risks that our compensation plan and program features could potentially encourage +or create; +● balancing +these business risks against our existing internal control systems designed to manage and +mitigate these business risks; and +● analyzing +whether the unmitigated risks, in part or as a whole, are reasonably likely to have a material +adverse effect on the Company. +35 +The +Committee consulted various persons during the course of the assessment, including our executive officers and senior members of our human +resources department. The Compensation Committee engages Gallagher to review our executive and company-wide compensation program and +plans and provide advice regarding appropriate levels of incentive. +The +Compensation Committee noted several features of our compensation structure that mitigate risk, including, for example: +● we +use a pay mix that is well-balanced between short-term financial performance and long-term +stock performance, consisting of secure compensation in the form of base salary, short-term +incentives in the form of potential for cash bonuses, and long-term incentives in the form +of stock options and time-vested restricted stock that generally vest over four or five years; +● in +most instances, management or the Compensation Committee retains the discretion to decrease +all forms of incentive compensation based on significant individual or Company performance +shortfalls; +● we +periodically benchmark our compensation program and plans and target executive and non-executive +compensation within the normal limits of the competitive market; and +● the +Compensation Committee provides oversight of our compensation program and plans and compensation +philosophy, makes recommendations to the Board with respect to improvements to our compensation +program and plans, and is responsible for reviewing and approving executive compensation +and administering and awarding incentive, deferred and equity compensation to our senior +executives. +In +light of the assessment described above, the Compensation Committee concluded that the risks associated with our compensation program +and plans (executive and company-wide) are not reasonably likely to have a material adverse effect on the Company. +Implications +of Tax and Accounting Matters +As +a general matter, the Compensation Committee considers the various tax and accounting implications of compensation vehicles that we employ. +Although the Compensation Committee reviews and considers both the accounting and tax effects of various components of compensation, +those effects are not a significant factor in the Compensation Committee’s allocation of compensation among the different components. +Compensation +paid to certain covered employees, generally including our Named Executive Officers, generally is not deductible to the extent that the +compensation exceeds $1 million in any one year for any such covered employee under Code Section 162(m). The Compensation Committee believes +that our interests and those of our stockholders are best served by providing competitive levels of compensation, even if not fully deductible, +so some of the compensation that we have provided to our Named Executive Officers in the past, and that we provide to our executive officers +in the future, may not be deductible under Code Section 162(m). +As +more fully described below under the heading “Termination, Change-in-Control and Non- Competition/Non-Solicitation,” with +the exception of Ms. Frieders, all of our Named Executive Officers are entitled to receive certain compensation in the event of a termination +of employment in connection with a change-in-control event for the Company, which payments may trigger the application of the “golden +parachute” provisions of Sections 280G and 4999 of the Code. Section 280G of the Code disallows a tax deduction with respect to +excess parachute payments to certain executives of companies that undergo a change-in-control. In addition, Section 4999 of the Code +imposes a 20% excise tax on the individual receiving the excess parachute payment. Excess parachute payments are golden parachute payments +that exceed an amount determined under Section 280G based on the executive’s prior compensation. In approving the compensation +arrangements of our Named Executive Officers, our Compensation Committee considers all elements of the cost to the Company of providing +such compensation, including the potential impact of Sections 280G and 4999, which, under certain circumstances, may limit the deductibility +of executive compensation. However, our Compensation Committee may determine, in its judgment, to authorize compensation arrangements +that could give rise to loss of deductibility under Section 280G and the imposition of excise taxes under Section 4999 when it believes +that such arrangements are appropriate to attract and retain executive talent. +36 +Clawback +Policy +During +2023, we adopted a Recovery Policy (the “Clawback Policy”), which became effective October 2, 2023 (applying to compensation +received after such date) and designed to comply with NASDAQ Listing Rule 5608 relating to such policies (with such listing rule itself +having been adopted as required by SEC rules adopted pursuant to the Dodd-Frank Act). The Clawback Policy applies to our executive officers, +including the named executive officers, and provides for the repayment of certain incentive compensation received over a covered period +if the Company is required to prepare an accounting restatement due to the material noncompliance of the Company with any financial reporting +requirement under the securities laws. The covered period under the Clawback Policy is the three full fiscal years prior to the date +the Company is required to prepare an accounting restatement. Compensation subject to recovery is the amount of incentive-based compensation +received that exceeds the amount of incentive- based compensation that otherwise would have been received had it been determined based +on the restated amounts. The Clawback Policy is included as an exhibit to our Annual Report on Form 10-K for the fiscal year ended December +31, 2023. +Conclusion +The +Compensation Committee considers the level and mix of compensation that it finally decides upon as to each executive within the context +of both the objective data from our competitive assessment of compensation and performance, as well as the subjective factors as outlined +above. The Compensation Committee believes that each of the compensation packages for the Named Executive Officers is within the competitive +range of practices when compared to the objective comparative data even where subjective factors may have influenced the compensation +decisions. +Executive +Officers +The +following table identifies the executive officers of the Company as of the date of this Proxy Statement, and their ages and positions: +Name +Age +Position +Edward +R. Rosenfeld +48 +Chairman +of the Board and Chief Executive Officer +Amelia +Newton Varela +52 +President +Zine +Mazouzi +52 +Chief +Financial Officer and Executive Vice President of Operations +Karla +Frieders +47 +Chief +Merchandising Officer +Lisa +Keith +39 +Executive +Vice President, General Counsel and Secretary +Edward +R. Rosenfeld has served as our Chairman of the Board and Chief Executive Officer since August 2008 and has been a director of +the Company since February 2008. Mr. Rosenfeld, who joined our executive management team in May 2005, has more than two decades of experience +focused on the retail, apparel and footwear industries and possesses particular knowledge of and experience in the industry that strengthens +the Board’s collective qualifications, skills and experience. He has strong leadership skills and an in-depth understanding of +the Company and its goals from his positions as the Chairman of the Board and Chief Executive Officer. His background in finance and +his analytical skills gained through his years as a Vice President with Peter J. Solomon Company, an investment banking boutique, where +he specialized in mergers and acquisitions in the retail, apparel and footwear industries, provide the Board with insight and guidance +with respect to, among other things, strategic business development matters. Mr. Rosenfeld served as a director and chairman of the Audit +& Risk Management Committee of PVH Corp. (NYSE: PVH), one of the world’s largest apparel companies, from March 24, 2013 until +December 11, 2023. +Amelia +Newton Varela has served as President of the Company since September 2015 and has been a director since 2016. Prior to this tenure, +Ms. Varela was Executive Vice President of Wholesale of the Company since April 2008 and Executive Vice President of Wholesale Footwear +of the Company from November 2004 to April 2008. Previously, she was Vice President of Sales for Steve Madden Women’s Wholesale +Division from January 2000. Ms. Varela began her career with the Company in 1998 in the role of Account Executive for Steve Madden Women’s +Wholesale Division. She graduated from The Fashion Institute of Technology in 1995. Ms. Varela’s over 20 years of experience at +the Company provides relevant industry knowledge and expertise, and leadership to the Board. +Zine +Mazouzi has been our Chief Financial Officer since January 1, 2021 and previously served as our Chief Accounting Officer and +Senior Vice President of Finance and Operations from January 2019 until his appointment as our Chief Financial Officer. Prior to joining +the Company, he held various senior positions at Sears Holdings, a holding +37 +company for department stores, as the Chief Financial Officer +of Sears Footwear Group from 2016 to 2017, Head of the Footwear Group from 2017 to 2018 and Head of the Footwear, Home and Jewelry Groups +in 2018. Prior to that, he worked at Nine West Group from 1998 to 2015, where he held a number of increasingly senior positions, including +Chief Financial Officer from 2014 to 2015. Mr. Mazouzi received his Bachelor’s Degree in Finance and a Master of Business Administration +from Iona University. +Karla +Frieders has been our Chief Merchandising Officer since September 2015. Previously, Ms. Frieders served as President of Retail +from January 2013 until September 2015 and Vice President of Retail from October 2009 until January 2013. Prior to these roles, Ms. Frieders +held various buying positions at the Company since 1999. +Lisa +Keith has been our General Counsel since November 2019 and our Corporate Secretary since January 2021. Ms. Keith joined Steve +Madden’s Legal Department in May 2017 and previously served as Vice President and Deputy General Counsel. Prior to joining the +Company, Mrs. Keith was a senior associate at Davis Wright Tremaine LLP, a law firm, where she represented clients in the fashion, technology +and luxury goods industries. Ms. Keith began her legal career at Gibson, Dunn & Crutcher LLP, where she practiced in the litigation +department. She earned her J.D. from New York University School of Law and her B.A., summa cum laude, from Brandeis University, where +she was Phi Beta Kappa. +Please +see the section of this Proxy Statement captioned “Proposal One: Election of Directors” for biographical summaries and other +information concerning our Chairman of the Board and Chief Executive Officer, Edward R. Rosenfeld, and our President, Amelia Newton Varela, +as well as our other director nominees. +Summary +Compensation Table for the 2023 Fiscal Year +The +following table sets forth the compensation information for our Chief Executive Officer, Chief Financial Officer and the three most highly +compensated executive officers other than the Chief Executive Officer and Chief Financial Officer relating to the fiscal years ended +December 31, 2023, 2022 and 2021, respectively. In this Proxy Statement, we refer to this group of people as our “Named Executive +Officers.” +In +accordance with applicable SEC rules, the Summary Compensation Table includes, for a particular fiscal year, only those stock awards +made during that fiscal year and not any awards made after year-end even if awarded for services rendered in that year. SEC rules require +that such awards be reflected in the year of grant and, as such, awards made after the end of the 2023 Fiscal Year will appear in the +Summary Compensation Table to be included in our proxy statement for our 2025 Annual Meeting of Stockholders. +38 +Name +and Principal Position +Fiscal +Year +Salary +($) +Bonus +($) +Stock +Awards +($)(1) +Option +Awards +($) +Non-Equity +Incentive +Plan +Compensation +($) +All +Other +Compensation +($) +Total +Compensation +($) +Edward +R. Rosenfeld +2023 +1,125,212 +— +2,999,991 +— +880,000 +27,900 (2) +5,033,103 +Chief +Executive Officer +2022 +1,081,935 +— +5,499,990 +— +1,000,000 +27,150 +7,609,075 +2021 +1,040,146 +— +5,499,985 +— +1,000,000 +26,700 +7,566,831 +Zine +Mazouzi +2023 +599,038 +— +450,023 +— +264,000 +24,900 (3) +1,337,961 +Chief +Financial Officer and +2022 +574,038 +— +250,002 +— +287,500 +24,150 +1,135,690 +Executive +Vice President of Operations +2021 +544,808 +— +1,200,021 +— +440,000 +23,700 +2,208,529 +Amelia +Newton Varela +2023 +774,037 +— +1,349,996 +— +303,708 +24,900 (4) +2,452,641 +President +2022 +749,038 +— +250,002 +— +414,086 +24,150 +1,437,276 +2021 +724,135 +— +999,983 +— +450,000 +23,700 +2,197,818 +Lisa +Keith +Executive +Vice President, General Counsel and Secretary +2023 +396,924 +100,000 +175,011 +— +— +5,920 (5) +677,855 +Karla +Frieders +2023 +590,000 +— +649,997 +— +— +6,600 (6) +1,246,597 +Chief +Merchandising Officer +2022 +590,000 +— +500,003 +— +100,000 +6,354 +1,196,357 +2021 +590,000 +— +400,009 +— +100,000 +8,700 +1,098,709 +(1) +The +amounts in this column reflect the total grant date fair value of awards granted during the applicable year for the fiscal years ended +December 31, 2023, December 31, 2022, and December 31, 2021, respectively, calculated in accordance with ASC Topic 718. Assumptions +used in the calculation of these amounts are included in Note H, Note H, and Note I, respectively, to our audited financial statements +for the fiscal years ended December 31, 2023, December 31, 2022, and December 2021 included in our Annual Report on Form 10-K filed +with the Securities and Exchange Commission on March 4, 2024, March 1, 2023, and March 1, 2022, respectively. +(2) +Consists +of an $18,000 automobile allowance and $9,900 in annual match contributions to Mr. Rosenfeld’s 401(k) plan account. +(3) +Consists +of a $15,000 automobile allowance and $9,900 in annual match contributions to Mr. Mazouzi’s 401(k) plan account. +(4) +Consists +of a $15,000 automobile allowance and $9,900 in annual matching contributions to Ms. Varela’s 401(k) plan account. +(5) +Consists +of $5,920 in annual matching contributions to Ms. Keith’s 401(k) plan account. Since Ms. Keith only became a named executive +officer in 2023, we are only required to provide her 2023 compensation. +(6) +Consists +of $6,600 in annual matching contributions to Ms. Frieders’ 401(k) plan account. +Employment +Arrangements +Edward +R. Rosenfeld. On December 31, 2021, we entered into an employment agreement (the “Rosenfeld 2021 Agreement”) with Mr. +Rosenfeld to replace his previous employment agreement, which expired on December 31, 2021. Pursuant to the Rosenfeld 2021 Agreement, +Mr. Rosenfeld continued to serve as our Chief Executive Officer and Executive Chairman of our Board of Directors through December 31, +2024, unless sooner terminated in accordance with the terms of the agreement. The Rosenfeld 2021 Agreement provided for an annual base +salary of $1,083,538, $1,126,879 and $1,171,954 for fiscal years 2022, 2023 and 2024, respectively, and a monthly automobile allowance +of $1,500. Pursuant to the Rosenfeld 2021 Agreement, on December 31, 2021, Mr. Rosenfeld was granted 75,317 shares of Common Stock, subject +to certain restrictions. Those restricted shares of Common Stock, which were issued under the Steven Madden, Ltd. 2019 Incentive Compensation +Plan, vest in five annual installments of 15,063, 15,063, 15,063, 15,064, and 15,064 shares respectively, commencing on December 1, 2022. +In addition, on February 1, 2022, Mr. Rosenfeld received an award of 60,532 shares of our Common Stock under the 2019 Plan, subject to +certain restrictions, which vest in five substantially equal annual installments of 12,106 shares commencing on February 1, 2023. Mr. +Rosenfeld was also granted 86,480 shares of Common Stock, subject to certain restrictions, which were issued under the Steven Madden, +Ltd. 2019 Incentive Compensation Plan, and vest in five annual installments of 17,296 shares commencing on March 1, 2024. The Rosenfeld +2021 Agreement provided that Mr. +39 +Rosenfeld will receive additional compensation and bonuses, if any, at the absolute discretion of the +Board of Directors. +On +February 27, 2024, based on the recommendation of the Compensation Committee, our Board of Directors approved, and on February 27, 2024 +we entered into, an employment agreement by and between us and Edward R. Rosenfeld, pursuant to which Mr. Rosenfeld will continue to +serve as our Chief Executive Officer and executive Chairman of our Board of Directors (the “Rosenfeld Employment Agreement”). +The Rosenfeld Employment Agreement supersedes and replaces the Rosenfeld 2021 Agreement. +The +term of the Rosenfeld Employment Agreement (the “Term”) commences on March 1, 2024 and will expire on February 28, 2029, +unless sooner terminated in accordance with its terms. +Pursuant +to the Rosenfeld Employment Agreement, Mr. Rosenfeld will receive an annual base salary of: $1,171,954 for the period from March 1, +2024 through February 28, 2025, and as of March 1, 2025 and as of each March 1 thereafter during the Term, the Board of Directors or +a committee thereof will review the annual base salary for potential increase (but not decrease). Mr. Rosenfeld will also receive a +monthly automobile allowance of $1,500. +In +addition, pursuant to the Rosenfeld Employment Agreement, on March 15, 2024, Mr. Rosenfeld will receive a grant under the Steven Madden, +Ltd. 2019 Incentive Compensation Plan (the “2019 Plan”) of restricted shares of the Company’s common stock with a value +of $3,400,000 (the “2024 Award”). The 2024 Award will vest in five equal annual installments commencing on February 28, 2025, +being fully vested on February 28, 2029. The Rosenfeld Employment Agreement further provides that, on March 15, 2025 and on each March +15 thereafter through the remainder of the Term, Mr. Rosenfeld will be eligible to receive an additional grant of time-vesting restricted +stock shares or restricted stock units in an amount to be determined by the Board of Directors or a committee of the Board of Directors, +and such grants will be made under the 2019 Plan (contingent on sufficient shares being available for issuance under the 2019 Plan at +such time), will have terms and conditions determined by the Board of Directors or a committee of the Board of Directors, and will be +subject to an award agreement under the 2019 Plan. +In +addition, under the terms of the Rosenfeld Employment Agreement, Mr. Rosenfeld will be eligible to receive an annual grant of performance +shares in a target amount equal to $3,600,000 (the “Target Shares”) that will be eligible to be earned over a three-year +performance period based on the Company’s average annual return on capital over such performance period compared to the average +annual return on capital of a predetermined peer group, with such peer group having been approved by the Board of Directors or a committee +of the Board of Directors. The performance period for each grant will begin on January 1 of the year in which the grant occurs and will +end on December 31 of the second full calendar year following the year in which such grant occurs. The number of performance shares earned +will be determined based on the following payout scale (with linear interpolation between performance levels): +Payout +Level +Company’s +Percentile Relative to Peer Group +% +of Target Shares Earned +Maximum +75 th +or higher +185 % +Target +50 th +100 % +Threshold +25 th +50 % +Below +Threshold +Below +25 th +0 % +Each +of the performance share grants will be subject to approval by the Board of Directors or a committee of the Board of Directors, will +be made under the 2019 Plan (contingent on sufficient shares being available in the 2019 Plan reserve) and will be subject to the terms +and conditions of a performance share award agreement. +The +Rosenfeld Employment Agreement permits the Company to terminate Mr. Rosenfeld’s employment at any time with or without Cause (as +defined under the Rosenfeld Employment Agreement), and Mr. Rosenfeld to resign from his employment at any time, with or without Good +Reason (also as defined under the Rosenfeld Employment Agreement). In the event that Mr. Rosenfeld’s employment should be terminated +by the Company for Cause or by Mr. Rosenfeld’s resignation without Good Reason, Mr. Rosenfeld would be entitled to receive only +his accrued and unpaid salary through the date of termination and, in the case of a resignation without Good Reason, the performance +shares earned during the prior performance period but not yet paid as of the date of termination. +40 +In +the event that Mr. Rosenfeld’s employment should be terminated by the Company without Cause or by Mr. Rosenfeld’s resignation +for Good Reason, Mr. Rosenfeld would be entitled to receive, subject to the execution and non-revocation of a general release of claims +by Mr. Rosenfeld, (i) payment of his annual base salary, payable at regular payroll intervals, from the date of termination of employment +through the earlier of (a) the date that is twelve months after the date of termination or (b) the remainder of the Term, (ii) if such +termination occurs prior to March 15, any accrued and unpaid bonus amounts relating to the prior period, and (iii) a pro rata portion +of performance shares earned based on the achievement of the performance goals during the performance period, as well as any performance +shares earned during the prior performance period and not yet paid. +If +Mr. Rosenfeld’s employment should be terminated by the Company without Cause or by Mr. Rosenfeld’s resignation for Good Reason +during the period commencing 90 days prior to a Change of Control (as defined in the Rosenfeld Employment Agreement) and ending 180 days +after a Change of Control, Mr. Rosenfeld would be entitled to receive a cash payment in an amount equal to 2.5 times the sum of (i) the +annual base salary to which Mr. Rosenfeld was entitled as of the date of such termination plus (ii) the average annual bonus received +by him during the preceding three-year period ending on the last previous December 31st. +The +Rosenfeld Employment Agreement also contains customary restrictive covenants and other customary provisions. +Zine +Mazouzi . The annual base salary of our Chief Financial Officer, Zine Mazouzi, under Mr. Mazouzi’s employment agreement dated +as of December 8, 2020, which remained in effect until December 31, 2023 (the “2020 Mazouzi Employment Agreement”), was $600,000 +for the year ending December 31, 2023. He also was entitled to an automobile allowance of $1,250 per month. On November 10, 2023, we +entered into a new employment agreement with Zine Mazouzi (the “2023 Mazouzi Employment Agreement”), which replaced the previous +agreement. The term of the 2023 Mazouzi Employment Agreement commenced on January 1, 2024, and will continue for three years through +December 31, 2026, unless sooner terminated in accordance with the terms thereof. The 2023 Mazouzi Employment Agreement provides for +an annual base salary of $675,000, $700,000, and $725,000, respectively, for fiscal years 2024, 2025, and 2026 and a monthly automobile +allowance of $1,250. In addition, pursuant to the 2023 Mazouzi Employment Agreement, on December 1, 2023, Mr. Mazouzi was granted 5,147 +restricted shares of Common Stock, which will vest 25% per year commencing on December 1, 2024 and on January 2, 2024, Mr. Mazouzi was +granted 23,641 restricted shares of Common Stock, which will vest 25% per year commencing on January 2, 2025. +In +addition, the terms of the 2020 Mazouzi Employment Agreement entitled Mr. Mazouzi to an annual performance-based cash bonus for each +of the fiscal years ended December 31, 2021, 2022 and 2023 based on the following schedule: +Diluted +EPS +Bonus +as +% +of Salary +Maximum +(130% of Plan) +80 % +Target +(100% of Plan) +50 % +Threshold +(90% of Plan) +20 % +The +terms of the 2023 Mazouzi Employment Agreement entitle Mr. Mazouzi to an annual performance-based cash bonus for each of the fiscal years +ended December 31, 2024, 2025 and 2026 based on the following schedule: +Diluted +EPS +Bonus +as +% +of Salary +Maximum +(130% of Plan) +90 % +Target +(100% of Plan) +60 % +Threshold +(90% of Plan) +40 % +For +actual diluted earnings per share (EPS) amounts between the Threshold and Target amounts or between the Target and Maximum amounts, the +bonus payable is to be calculated based on a straight-line interpolation between the respective amounts. +Pursuant +to the terms of the 2023 Mazouzi Employment Agreement, we may terminate Mr. Mazouzi’s employment for “cause” (as defined +in the 2023 Mazouzi Employment Agreement), in which event Mr. Mazouzi would be entitled to receive only his accrued and unpaid base salary +through the date of termination. If we terminate +41 +Mr. Mazouzi’s employment without cause or Mr. Mazouzi terminates the Mazouzi Employment +Agreement “for good reason” (as defined in the Mazouzi Employment Agreement), Mr. Mazouzi would be entitled to receive payment +of his annual base salary, payable at regular payroll intervals, from the date of termination of employment through the remainder of +the term plus any performance-based cash bonus that has accrued but not yet been paid. In addition, if we terminate Mr. Mazouzi’s +employment without cause or Mr. Mazouzi terminates the 2023 Mazouzi Employment Agreement for good reason during the period commencing +30 days prior to a “Change of Control” (as defined in the Mazouzi Employment Agreement) and ending 180 days following a Change +of Control, he will be entitled to receive an amount equal to the lesser of (A) two and one-half times the sum of (i) the annual base +salary to which he was entitled as of the date of termination plus (ii) the average cash bonus received by him for the preceding three-year +period ending on the last previous December 31 or (B) the maximum amount that is tax deductible to the Company under Section 280G of +the Internal Revenue Code of 1986, as amended. +Amelia +Newton Varela. On December 21, 2022, we entered into an employment agreement (the “Varela 2022 Agreement”) with Ms. Varela, +pursuant to which she will continue to serve as our President through December 31, 2025, unless sooner terminated in accordance with +the terms of the agreement. The Varela 2022 Agreement replaced her previous employment agreement, which expired on December 31, 2022. +The Varela 2022 Agreement provides for an annual base salary of $775,000, $800,000, and $825,000 for fiscal years 2023, 2024, and 2025 +and a monthly automobile allowance of $1,250 during each month of the term. In addition, on January 3, 2023, pursuant to the Varela 2022 +Agreement, Ms. Varela was granted 35,177 restricted shares of Common Stock, which will vest 25% per year commencing on January 3, 2024. +In +addition, the terms of the Varela 2022 Agreement entitle Ms. Varela to an annual performance-based cash bonus based on the Company’s +EBIT for each of the fiscal years ended December 31, 2023, 2024 and 2025 based on the following schedule: +EBIT +Bonus +as +% +of Salary +Maximum +(130% of Plan) +80 % +Target +(100% of Plan) +50 % +Threshold +(90% of Plan) +30 % +For +actual EBIT amounts between the Threshold and Target amounts or between the Target and Maximum amounts, the bonus payable is to be calculated +based on a straight-line interpolation between the respective amounts. +If +the Varela 2022 Agreement is terminated due to Ms. Varela’s “disability” (as defined in the agreement) or death, we +are obligated to pay Ms. Varela (or her estate) the amount of accrued and unpaid salary through the date of termination plus any performance-based +cash bonus that has accrued for the year prior to termination and is unpaid at the time Ms. Varela’s employment is terminated. +We may terminate the agreement for “cause” (as defined in the Varela 2022 Agreement), in which event she would be entitled +to receive only her accrued and unpaid salary through the date of termination. If we terminate Ms. Varela’s employment without +cause, she would be entitled to receive payment of her annual base salary, payable at regular payroll intervals, from the date of termination +of employment through the remainder of the term plus any performance-based cash bonus that has accrued but not yet been paid. In addition, +if we terminate Ms. Varela’s employment without cause during the period commencing 30 days prior to a “change of control” +(as defined in the Varela 2022 Agreement) transaction and ending 180 days after such change of control transaction, she would be entitled +to receive a cash payment in an amount equal to the lesser of (A) two and one-half times the sum of (i) the annual base salary to which +she was entitled as of the date of termination of employment plus (ii) the average cash bonus that she received for the preceding three +years ending on the last previous December 31 or (B) the maximum amount that is tax deductible to the Company under Section 280G of the +Code. +Lisa +Keith. On January 22, 2021, we entered into an employment agreement with Ms. Keith (the Keith 2021 Agreement”) pursuant to +which Ms. Keith served as our General Counsel. The Keith 2021 Agreement was effective from February 1, 2021 through January 31, 2023. +Pursuant +to the terms of the Keith 2021 Agreement, Ms. Keith was entitled to an annual base salary of $350,000 and $375,000 for the years ended +January 31, 2022 and 2023, respectively. In addition, the Keith 2021 Agreement entitled Ms. Keith to an annual performance-based bonus +for each of the fiscal years ending January 31, 2022 and 2023 in an amount to be determined by the Company in its absolute discretion, +which bonus, if any, was to be paid on or about March 15 of the year immediately following the year in which it was earned. In addition, +Ms. +42 +Keith was entitled to a grant of shares of restricted stock in an amount equal to $300,000 on February 1, 2021, with such grant vesting +20% per year for the five years commencing on the first anniversary of the grant date. +On +January 17, 2023, we entered into an employment agreement with Ms. Keith (the “Keith 2023 Agreement”) pursuant to which Ms. +Keith began serving as our Executive Vice President – General Counsel. The Keith 2023 Agreement was effective from February 1, +2023 through January 31, 2024. +Pursuant +to the terms of the Keith 2023 Agreement, Ms. Keith was entitled to an annual base salary of $400,000 for the year ended January 31, +2024. In addition, the Keith 2023 Agreement entitled Ms. Keith to an annual performance-based bonus for fiscal 2023 in an amount, if +any, to be determined by the Company in its absolute discretion, which bonus, if any, was to be paid on or about March 15 of the year +immediately following the year in which it was earned. In addition, Ms. Keith was entitled to a grant of shares of restricted stock in +an amount equal to $175,000 on February 1, 2023, with such grant vesting 20% per year for the five years commencing on the first anniversary +of the grant date. +If +we had terminated Ms. Keith’s employment due to her “disability” (as defined in the Keith 2023 Agreement) or her death, +we would have been obligated to pay her (or her estate) the amount of accrued and unpaid salary through the date of termination of employment. +We were entitled to terminate Ms. Keith’s employment for “cause” (as defined in the Keith 2023 Agreement), in which +event Ms. Keith would have been entitled to receive only her accrued and unpaid salary through the date of termination. The Keith 2023 +Agreement provided that if we terminated Ms. Keith’s employment without cause, Ms. Keith would have been entitled to receive payment +of her annual base salary, payable at regular payroll intervals, from the date of termination of employment through the date that the +Keith 2023 Agreement otherwise would have terminated. +On +January 24, 2024, we entered into an employment agreement with Ms. Keith (the “Keith 2024 Agreement”) pursuant to which Ms. +Keith continues to serve as our Executive Vice President – General Counsel. The Keith 2024 Agreement is effective as of February +1, 2024. +The +term of the Keith 2024 Agreement commenced on February 1, 2024 and will continue for a term of three years through January 31, 2027, +unless sooner terminated in accordance with the terms thereof. Pursuant to the terms of the Keith 2024 Agreement, Ms. Keith will receive +an annual base salary of $425,000, $450,000, and $475,000 for each of the years ended January 31, 2025, 2026, and 2027, respectively. +In addition, the Keith 2024 Agreement entitles Ms. Keith to an annual performance-based bonus for each of the fiscal years ending December +31, 2024, 2025, and 2026 in an amount to be determined by the Company in its absolute discretion, which bonus, if any, will be paid to +her on or about March 15 of the year immediately following the year in which it was earned. In addition, Ms. Keith is entitled to a grant +of shares of restricted stock in an amount equal to $250,000, $175,000, and $175,000 on February 1, 2024, 2025, and 2026, respectively, +with each such grant vesting 20% per year for five years commencing on the first anniversary of each respective grant date. +If +we terminate Ms. Keith’s employment due to her “disability” (as defined in the Keith 2024 Agreement) or her death, +we are obligated to pay her (or her estate) the amount of accrued and unpaid salary through the date of termination of employment. We +may terminate Ms. Keith’s employment for “cause” (as defined in the Keith 2024 Agreement), in which event Ms. Keith +would be entitled to receive only her accrued and unpaid salary through the date of termination. The Keith 2024 Agreement provides that +if we terminate Ms. Keith’s employment without cause, Ms. Keith would be entitled to receive payment of her annual base salary, +payable at regular payroll intervals, from the date of termination of employment through the earlier of the date that is six months after +the date of termination or the date that the Keith 2024 Agreement otherwise would have terminated. +Karla +Frieders. On May 15, 2023, we entered into an employment agreement with Ms. Frieders (the “Frieders 2023 Agreement”) +pursuant to which Ms. Frieders will continue to serve as our Chief Merchandising Officer. The Frieders 2023 Agreement is effective as +of May 1, 2023. +The +term of the Frieders 2023 Agreement commenced on May 1, 2023 and will continue for a term of three years through April 30, 2025, unless +sooner terminated in accordance with its terms. Pursuant to the terms of the Frieders 2023 Agreement, Ms. Frieders will receive an annual +base salary during the term of $590,000. In addition, the Frieders 2023 Agreement entitled Ms. Frieders to an annual performance-based +bonus for each of the fiscal years ending December 31, 2023 and 2024 in an amount to be determined by the Company in its absolute discretion, +which bonus, if any, will be paid to her on or about March 15 of the year immediately following the year in which it was earned. In addition, +on June 1, 2023, pursuant to the Frieders 2023 Agreement, Ms. Frieders was awarded 21,214 +43 +restricted shares of our Common Stock, which +will vest in five substantially equal annual installments commencing on June 1, 2024. +If +we terminate Ms. Frieders’ employment due to her “disability” (as defined in the Frieder’s Agreement) or her +death, we are obligated to pay her (or her estate) the amount of accrued and unpaid salary through the date of termination of employment. +We may terminate Ms. Frieders’ employment for “cause” (as defined in the Frieders 2023 Agreement), in which event Ms. +Frieders would be entitled to receive only her accrued and unpaid salary through the date of termination. The Frieders 2023 Agreement +provides that if we terminate Ms. Frieders’ employment without cause, Ms. Frieders would be entitled to receive payment of her +annual base salary, payable at regular payroll intervals, from the date of termination of employment through the earlier of (i) the date +that is one year after the date of termination, or (ii) the date that the Frieders 2023 Agreement would have otherwise terminated. +Grants +of Plan-Based Awards in the 2023 Fiscal Year +The +following table sets forth information concerning awards under our equity and non-equity incentive plans granted to each of the Named +Executive Officers in the 2023 Fiscal Year. +Estimated +Future Payouts Under +Non-Equity +Incentive Plan +All +Other Stock Awards: Number of Shares of Stock or +All +Other Option Awards: Number of Securities Underlying +Exercise +or Base Price of Option +Grant +Date Fair Value of Stock and Option +Name +Grant +Date +Threshold +($) +Awards (1) +Target +($) +Maximum +($) +Units +(#) +Options +(#) +Awards +($/Sh) +Awards +($) +Edward +R. Rosenfeld +N/A +— +1,000,000 +— +— +— +— +— +3/15/23 +— +— +— +86,480 +— +— +2,999,991 +Zine +Mazouzi +N/A +120,000 +300,000 +480,000 +— +— +— +— +3/15/23 +— +— +— +7,207 +— +— +250,011 +12/1/23 +— +— +— +5,147 +— +— +200,012 +Amelia +Newton Varela +N/A +— +465,000 +465,000 +— +— +— +— +1/3/23 +— +— +— +35,177 +— +— +1,099,985 +3/15/23 +— +— +— +7,207 +— +— +250,011 +Lisa +Keith +02/01/23 +— +100,000 +— +4,808 +— +— +175,011 +Karla +Frieders +N/A +— +100,000 +— +— +— +— +— +6/1/23 +— +— +— +21,214 +— +— +649,997 +(1) +Consistent +with SEC regulations, because there were no thresholds, targets or maximums for the 2023 annual bonus program for these Named Executive +Officers, the amounts shown in the target column (other than for Mr. Mazouzi) are representative amounts based on 2022 performance. +For Ms. Varela, the bonus was capped at $465,000 pursuant to her employment agreements. For Mr. Mazouzi, the amounts shown are based +on the annual bonus amounts set forth in his employment agreement. The bonus amounts actually earned for 2023 are shown in the Non-Equity +Incentive Plan Compensation column of the Summary Compensation Table above. +Plan-Based +Awards +On +February 25, 2019, upon recommendation of the Compensation Committee, the Board unanimously approved the adoption of the Steven Madden, +Ltd. 2019 Incentive Compensation Plan (the “2019 Plan”), and on May 24, 2019, our stockholders approved the adoption of the +2019 Plan. The purpose of the 2019 Plan is to enhance our profitability and value for the benefit of our stockholders by enabling the +Company to offer eligible employees, consultants and non-employee directors cash and stock-based incentives to attract, retain and reward +such individuals and provide additional incentive for such persons to exert maximum efforts for our success by encouraging stock ownership +in the Company. The 2019 Plan serves as a means to strengthen the mutuality of interests between such individuals and our stockholders. +All of the equity and non-equity incentive awards granted to our Named Executive Officers in Fiscal Year 2023 were granted under the +2019 Plan. +44 +Outstanding +Equity Awards at End of the 2023 Fiscal Year +The +following table sets forth information concerning restricted stock that has not vested and stock awards outstanding for each of the Named +Executive Officers as of the end of the 2023 Fiscal Year. +Option +Awards +Stock +Awards +Name +Number +of +Securities +Underlying +Unexercised +Options +(#) +Exercisable +Number +of +Securities +Underlying +Unexercised +Options +(#) +Unexercisable +Equity +Incentive +Plan +Awards: +Number +of +Securities +Underlying +Unexercised +Unearned +Options +(#) +Option +Exercise +Price +($) +Option +Expiration +Date +Number +of +Shares +or +Units +of +Stock +That +Have +Not +Vested +(#) +Market +Value +of +Shares +or +Units +of +Stock +That +Have +Not +Vested +($) +Equity +Incentive +Plan +Awards: +Number +of +Unearned Shares, +Units +or +Other +Rights +that +Have +Not +Vested +(#) +Equity +Incentive +Plan +Awards: +Market +or +Payout +Value +of +Unearned +Shares, +Units +or +Other +Rights +That +Have +Not +Vested +($) +Edward +R. Rosenfeld +— +— +— +— +— +351,331 (1) +14,755,902 +— +— +Zine +Mazouzi +— +— +— +— +— +42,606 (2) +1,789,452 +— +— +Amelia +Newton Varela +— +— +— +— +— +71,516 (3) +3,003,672 +— +— +Lisa +Keith +— +— +— +— +— +11,188 (4) +469,896 +— +— +Karla +Frieders +— +— +— +— +— +53,750 (5) +2,257,500 +— +— +(1) +On +February 1, 2019, Mr. Rosenfeld was awarded 87,500 shares of restricted Common stock, which vest in five equal annual installments +commencing on February 1, 2020. On March 15, 2019, Mr. Rosenfeld was awarded 91,547 shares of restricted Common Stock, which vest in +five equal annual installments commencing on March 1, 2020. On March 16, 2020, Mr. Rosenfeld was awarded 108,030 shares of restricted +Common Stock, which vest in five equal annual installments commencing on March 1, 2021. On December 31, 2021, Mr. Rosenfeld was awarded +75,317 shares of restricted Common Stock, which shares vest in five annual installments of 15,063, 15,063, 15,063, 15,064, and 15,064 +shares respectively, commencing on December 1, 2022. On March 15, 2022, Mr. Rosenfeld was awarded 77,340 shares of restricted Common +Stock, which shares will vest in five equal annual installments commencing on March 1, 2023. On March 15, 2023, Mr. Rosenfeld was awarded +86,480 shares of restricted Common Stock, which shares will vest in five equal annual installments commencing on March 1, 2024. +(2) +On +January 2, 2019, Mr. Mazouzi was awarded 8,202 restricted shares of Common Stock, which vest in five substantially equal installments +commencing on the first anniversary of the date awarded. On January 2, 2020, Mr. Mazouzi was awarded 2,320 restricted shares of Common +Stock, which vest in five substantially equal installments commencing on the first anniversary of the date awarded. On August 3, 2020, +Mr. Mazouzi was awarded 5,000 restricted shares of Common Stock, which vest in five substantially equal installments commencing on +the first anniversary of the date awarded. On January 4, 2021, Mr. Mazouzi was awarded 29,155 restricted shares of Common Stock, which +vest in five substantially equal installments commencing on the first anniversary of the date awarded. On March 15, 2021, Mr. Mazouzi +was awarded 5,057 restricted shares of Common Stock, which vest in five substantially equal installments commencing on March 1, 2022. +On March 15, 2022, Mr. Mazouzi was awarded 6,445 restricted shares of Common Stock, which will vest in five equal annual installments +commencing on March 1, 2023. On March 15, 2023, Mr. Mazouzi was awarded 7,207 restricted shares of Common Stock, which will vest in +five equal annual installments commencing on March 1, 2024. On December 1, 2023, Mr. Mazouzi was awarded 5,147 restricted shares of +Common Stock, which will vest in five equal annual installments commencing on December 1, 2024. +(3) +On +January 2, 2020, Ms. Varela was awarded 27,000 restricted shares of Common Stock, which will vest in five equal annual installments +on each anniversary of the date of grant, commencing on January 2, 2021. On March 1, 2021, Ms. Varela was awarded 26,350 restricted +shares of Common Stock, which will vest in four substantially equal annual installments on each anniversary of the date of grant, commencing +on March 1, 2022. On March 15, 2022, Ms. Varela was awarded 6,445 restricted shares of Common Stock, which will vest in five equal +annual installments commencing on March 1, 2023. On January 3, 2023, Ms. Varela was awarded 35,177 restricted shares of Common Stock, +which will vest in four equal annual installments commencing on January 3, 2024. On March 15, 2023, Ms. Varela was awarded 7,207 restricted +shares of Common Stock, which will vest in five equal annual installments commencing on March 1, 2024. +45 +(4) +On +February 1, 2021, Ms. Keith was awarded 8,912 restricted shares of Common Stock, which will vest in five equal annual installments +on each anniversary of the date of grant, commencing on February 1, 2022. On March 15, 2022, Ms. Keith was awarded 1,289 restricted +shares of Common Stock, which will vest in five equal annual installments on each anniversary of the date of grant, commencing on March +1, 2023. On February 1, 2023, Ms. Keith was awarded 4,808 restricted shares of Common Stock, which will vest in five equal annual installments +on each anniversary of the date of grant, commencing on February 1, 2024. +(5) +On +April 11, 2017, Ms. Frieders was awarded 30,000 shares of restricted Common Stock, which shares vest in five equal annual installments +commencing on April 1, 2018. On March 15, 2018, Ms. Frieders was awarded 16,666 shares of restricted Common Stock, which shares vest +in five substantially equal installments commencing on March 5, 2019. On May 11, 2020, Ms. Frieders was awarded 32,758 restricted shares +of our Common Stock, which will vest in five substantially equal annual installments commencing on May 1, 2021. On March 15, 2021, +Ms. Frieders was awarded 10,114 restricted shares of our Common Stock, which will vest in five substantially equal annual installments +commencing on March 1, 2022. On March 15, 2022, Ms. Frieders was awarded 12,890 restricted shares of Common Stock, which will vest +in five equal annual installments commencing on March 1, 2023. On June 1, 2023, Ms. Frieders was awarded 21,214 restricted shares of +Common Stock, which will vest in five equal annual installments commencing on June 1, 2024. +Option +Exercises and Stock Vested in the 2023 Fiscal Year +The +following table sets forth information concerning stock options exercised and restricted stock vested during the 2023 Fiscal Year for +each of the Named Executive Officers. The value realized from exercised options is deemed to be the market value of the Common Stock +on the date of exercise, less the exercise price of the option, multiplied by the number of shares of Common Stock underlying the option. +The value realized from the vesting of restricted stock is deemed to be the market value of the Common Stock on the date of vesting multiplied +by the number of shares vesting. +Option +Awards +Stock +Awards +Name +Number +of +Shares +Acquired +on +Exercise +(#) +Value +Realized +on +Exercise +($) +Number +of +Shares +Acquired +on +Vesting +(#) +Value +Realized +on +Vesting +($) +Edward +R. Rosenfeld +— +— +147,669 +5,457,310 +Zine +Mazouzi +— +— +11,237 +370,854 +Amelia +Newton Varela +— +— +13,276 +458,483 +Lisa +Keith +— +— +3,019 +107,385 +Karla +Frieders +— +— +17,540 +625,235 +Securities +Authorized for Issuance Under Equity Compensation Plans +The +following table sets forth information as of December 31, 2023 with respect to compensation plans (including individual compensation +arrangements) under which shares of Common Stock are authorized for issuance, aggregated as follows: +● All +compensation plans previously approved by security holders; and +● All +compensation plans not previously approved by security holders. +46 +Equity +Compensation Plan Information +Number of +securities +to be issued +upon exercise of +outstanding +options, warrants +and rights +(#) +Weighted average +exercise price of +outstanding +options, warrants +and rights +($) +Number of +securities +remaining +available +for future +issuance +under equity +compensation +plans +(excluding +securities +reflected in +column (a)) +(#) +Equity compensation plans approved by security holders +1,118,652 +35.62 +4,621,127 +Equity compensation plans not approved by security holders +— +— +— +Total +1,118,652 +35.62 +4,621,127 +Termination, +Change-in-Control and Non-Competition/Non-Solicitation +The +employment agreements for Ms. Varela and Messrs. Rosenfeld and Mazouzi as in effect in 2023 provided for a severance payment upon a termination +of employment in connection with a change-in-control of the Company. The employment agreements of Messrs. Rosenfeld and Mazouzi also +provided for a severance payment if the executive terminates his employment for good reason in connection with a change-in-control. The +change-in- control severance payments could have resulted in the application of the “golden parachute” provisions of Section +280G of the Code, and to the extent Section 280G applies, we would not have been able to deduct from our taxable income the severance +payments made to the Named Executive Officer. Moreover, Section 4999 of the Code would impose a 20% excise tax on the Named Executive +Officer receiving the severance payment. In the case of Ms. Varela, these severance payments in connection with a change-in-control, +however, are reduced if the severance payment, when added to any other benefits triggered by a change-of-control, is determined to constitute +an “excess parachute payment” under Sections 280G and 4999 of the Code, to the maximum amount that we can deduct under Section +280G of the Code. In the case of Messrs. Rosenfeld and Mazouzi, the executive’s change-in-control severance payment would only +be reduced to the maximum amount that we could deduct under Section 280G of the Code if the reduction provides the Named Executive Officer +with the best after-tax result; otherwise, the Named Executive Officer would receive the full amount of the severance payment and other +benefits triggered by the change-in-control and be liable for the 20% excise tax on the excess parachute payment in addition to all other +applicable taxes. In such case, our deduction of the portion of the severance payment constituting an excess parachute payment would +be disallowed. +Our +employment agreements with Ms. Varela and Messrs. Rosenfeld and Mazouzi as in effect during 2023 also provided for severance payments +to the executive if we terminated the executive’s employment without cause or if we gave any of these executives good reason to +terminate their respective employment. +Please +see the section of this Proxy Statement captioned “Employment Arrangements” for a summary description of the Named Executive +Officers’ employment agreements and such severance and change-in-control provisions. These benefits are described and quantified +in the section of this Proxy Statement captioned “Potential Payments Upon Termination or Change-In-Control” below. +We +believe that the severance payments and payments made upon change-in-control provisions in the employment agreements provide appropriate +protection to our executives, comparable to that available at peer companies and, with regard to the enhanced severance following a change-in-control, +protect the Company from losing key executives during a period when a change-in-control may be threatened or pending. These benefits +are described and quantified in the section below captioned “Potential Payments Upon Termination or Change-In-Control.” +Mses. +Frieders and Varela and Mr. Mazouzi had each agreed to a non-compete and non-solicitation restriction through the expiration date of +their employment agreements in effect during 2023, April 30, 2023, December 31, 2025, and December 31, 2026 respectively, in the event +of a voluntary termination or termination for cause. Mr. Rosenfeld had agreed to non-compete and non-solicitation restrictions during +the period of his employment and for a six-month period following the termination of his employment for cause or in the event of his +resignation without good reason. +47 +Potential +Payments Upon Termination or Change-In-Control +Our +employment agreements with the Named Executive Officers as in effect on December 31, 2023 provided for payments to such individuals upon +termination of employment or a change-in-control of the Company. Please see the section of this Proxy Statement captioned “Employment +Arrangements.” The table below assumes that the termination of employment occurred on December 31, 2023 and that the amounts would +be payable to the respective Named Executive Officer if such Named Executive Officer’s employment had been terminated under the +various scenarios set forth below. +Cash Payment +Continuation of Medical / Welfare Benefits +(Present +Value) +Acceleration and +Continuation of Equity Award +Total Termination +Benefits (1) +Name +($) +($) +($) +($) +Termination +Due To Death +Edward +R. Rosenfeld +1,171,954 (2) +23,812 (3) +— +1,195,766 +Zine +Mazouzi +— +— +— +— +Amelia +Newton Varela +— +— +— +— +Lisa +Keith +— +— +— +— +Karla +Frieders +— +— +— +— +Termination +Due To Total Disability +Edward +R. Rosenfeld +1,171,954 (2) +— +— +1,171,954 +Zine +Mazouzi +— +— +— +— +Amelia +Newton Varela +— +— +— +— +Lisa +Keith +— +— +— +— +Karla +Frieders +— +— +— +— +Termination +For Cause; Resignation +Without +Good Reason +Edward +R. Rosenfeld +— +— +— +— +Zine +Mazouzi +— +— +— +— +Amelia +Newton Varela +— +— +— +— +Lisa +Keith +— +— +— +— +Karla +Frieders +— +— +— +— +Termination +Other Than For Cause; +Resignation +For Good Reason +Edward +R. Rosenfeld +1,171,954 (4) +— +— +1,171,954 +Zine +Mazouzi +675,000 (5) +— +— +675,000 +Amelia +Newton Varela +1,625,000 (6) +— +— +1,625,000 +Lisa +Keith +33,333 (7) +— +— +33,333 +Karla +Frieders +590,000 (8) +— +— +590,000 +Termination +Upon A Change-In-Control +Edward +R. Rosenfeld +4,483,864 (9) +— +6,483,953 (10) +10,967,817 +Zine +Mazouzi +2,484,375 (11) +— +818,148 (10) +3,302,523 +Amelia +Newton Varela +2,657,572 (12) +— +1,227,482 (10) +3,885,054 +Lisa +Keith +33,333 (13) +— +247,882 (10) +281,215 +Karla +Frieders +590,000 (14) +— +956,276 (10) +1,546,276 +(1) +Ms. +Varela’s employment agreement provides that severance payments in connection with a change-in-control are reduced if the severance +payment, when added to any other benefits triggered by a change-of-control, is determined to constitute an “excess parachute payment” +under Sections 280G and 4999 of the Code, to the maximum amount that is deductible to the Company under Section 280G of the Code. The +employment agreements of Messrs. Rosenfeld and Mazouzi provide that the executive’s change-in-control severance payment +48 +will only be reduced to the maximum amount that is deductible to the Company under Section 280G of the Code if the reduction provides the Named Executive Officer with the best after-tax result; otherwise, the Named Executive Officer will receive the full amount of the severance payment and other benefits triggered by the change-in-control and be liable for the 20% excise tax on the excess parachute payment in addition to all other applicable taxes. In such case, our deduction of the portion of the severance payment constituting an excess parachute payment will be disallowed. Because our agreements with the Named Executive Officers do not under any circumstances provide for an increase in severance or other benefits due to the application of Sections 280G and 4999 of the Code, for purposes of the disclosure above, we have calculated the potential amounts payable without taking into account the application of Sections 280G and 4999 of the Code. Upon the occurrence of a change-of-control, the amounts may be reduced due to the application of Section 280G and 4999 of the Code. +(2) +Consists +of Mr. Rosenfeld’s 2024 base salary of $1,171,954, which would be paid at regular intervals. +(3) +Consists +of medical benefits. +(4) +Consists +of the base salary of $1,171,954 for 2024 that would have been paid to Mr. Rosenfeld during the remainder of the term of his employment +until the expiration of his employment agreement on December 31, 2024. Mr. Rosenfeld would receive these payments at regular intervals. +(5) +Consists +of the base salary of $675,000 for 2024, which would be paid at regular intervals. +(6) +Consists +of the base salary of $800,000, and $825,000 for 2024, and 2025, respectively, that would have been paid to Ms. Varela during the +remainder of the term of her employment until the expiration of her employment agreement on December 31, 2025. Ms. Varela would receive +these payments at regular intervals. +(7) +Consists +of the base salary of $400,000 that would have been paid to Ms. Keith during the remainder of the term of her employment until the +expiration of her employment agreement on January 31, 2024. Ms. Keith would receive these payments at regular intervals. +(8) +Consists +of the base salary of $590,000 for 2024, which would be paid at regular intervals. +(9) +Consists +of two and one-half times the sum of (i) Mr. Rosenfeld’s 2023 base salary of $1,126,879 plus (ii) the average cash bonus received +by Mr. Rosenfeld for the three-year period ending on December 31, 2022. Upon a change-in-control, payments (or portions thereof) +to Mr. Rosenfeld determined to constitute an “excess parachute payment” may be reduced to the maximum amount that would +be tax deductible by the Company pursuant to Sections 280G of the Code. See the “Implications of Tax and Accounting Matters” +section of “Compensation Discussion and Analysis” for a discussion of the applicability of Sections 280G and 4999 of +the Code to change-in-control payments generally. See also the summary of Mr. Rosenfeld’s employment agreement under “Employment +Arrangements.” +(10) +The +amount disclosed represents the total value of the restricted stock and stock options that would have received accelerated vesting +upon a hypothetical change-in-control on December 31, 2023. +(11) +Consists +of two and one-half times the sum of (i) Mr. Mazouzi’s 2023 base salary of $600,000 plus (ii) $393,750, Mr. Mazouzi’s +average bonus over the preceding three years. Upon a change-in-control, payments (or portions thereof) to Mr. Mazouzi determined +to constitute an “excess parachute payment” may be subject to reduction to the maximum amount that would be tax deductible +by the Company pursuant to Sections 280G of the Code. See the “Implications of Tax and Accounting Matters” section of +“Compensation Discussion and Analysis” for a discussion of the applicability of Sections 280G and 4999 of the Code to +change-in-control payments generally. See also the summary of Mr. Mazouzi’s employment agreement under “Employment Arrangements.” +(12) +Consists +of two and one-half times the sum of (i) Ms. Varela’s 2023 base salary of $775,000 plus (ii) the average cash bonus received +by Ms. Varela for the three-year period ending on December 31, 2021. Upon a change-in-control, payments (or portions thereof) to +Ms. Varela determined to constitute an “excess parachute payment” may be subject to reduction to the maximum amount that +would be tax deductible by the Company pursuant to Sections 280G of the Code. See the “Implications of Tax and Accounting Matters” +section of “Compensation Discussion and Analysis” for a discussion of the applicability of Sections 280G and 4999 of +the Code to change-in-control payments generally. See also the summary of Ms. Varela’s employment agreement under “Employment +Arrangements.” +(13) +Consists +of the base salary of $400,000 that would have been paid to Ms. Keith during the remainder of the term of her employment until the +expiration of her employment agreement on January 31, 2024. Ms. Keith would receive these payments at regular intervals. +(14) +Consists +of Ms. Frieder’s 2023 base salary of $590,000. +49 +Compensation +Committee Report +The +Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with management, and based on the review and +discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included +in this Proxy Statement. +Submitted +by the Compensation Committee of the Board of Directors: +Peter +Migliorini (Chairman) +Peter +A. Davis +Rose +Peabody Lynch +Robert +Smith +Pay +Versus Performance +As +required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(v) of Regulation S-K, we are +providing the following information about the relationship between executive compensation actually paid and certain financial performance +of the Company. For further information concerning the Company’s variable pay-for-performance philosophy and how the Company aligns +executive compensation with the Company’s performance, refer to “Executive Compensation – Compensation Discussion and +Analysis.” +Year +Compensation +Table Total for PEO 1 +Compensation +Actually Paid to PEO 2 +Compensation Table +Total for Non-PEO NEOs 3 +Compensation +Actually Paid to Non-PEO NEOs 4 +Total +Shareholder Return 5 +Peer +Group Total Shareholder Return 6 +Net +Income +(in +thousands) 7 +Adjusted +EBIT +(in +thousands) 8 +Summary +Average +Summary Compensation +Average +Compensation +Value +of Initial Fixed $100 Investment Based On: +Adjusted +Year +Compensation +Table Total for PEO 1 +Compensation +Actually Paid to PEO 2 +Table +Total for Non-PEO NEOs 3 +Actually +Paid to Non-PEO NEOs 4 +Total +Shareholder Return 5 +Peer +Group Total Shareholder Return 6 +Net +Income +(in +thousands) 7 +EBIT +(in +thousands) 8 +(a) +(b) +(c) +(d) +(e) +(f) +(g) +(h) +(i) +2023 +$ 5,033,103 +$ 9,359,656 +$ 1,428,763 +$ 1,933,048 +$ 151.14 +$ 252.60 +$ 171,554 +$ 224,445 +2022 +$ 7,609,075 +$ 1,935,729 +$ 1,148,601 +$ 686,226 +$ 110.96 +$ 192.41 +$ 216,061 +$ 281,025 +2021 +$ 7,566,831 +$ 11,498,936 +$ 1,711,424 +$ 2,175,266 +$ 157.42 +$ 210.40 +$ 190,678 +$ 259,450 +2020 +$ 2,872,859 +$ 562,398 +$ 1,074,114 +$ 1,210,677 +$ 117.95 +$ 150.13 +$ ( 18,397 ) +$ 63,627 +(1) +The +dollar amounts reported in column (b) are the amounts of total compensation reported for Mr. Rosenfeld (our Chief Executive Officer) +for each corresponding year in the “Total” column of the Summary Compensation Table. Refer to “Executive Compensation +– Summary Compensation Table for the 2023 Fiscal Year.” +(2) +The +dollar amounts reported in column (c) represent the amount of “compensation actually paid” to Mr. Rosenfeld, as computed +in accordance with Item 402(v) of Regulation S-K. The dollar amounts do not reflect the actual amount of compensation earned by or +paid to Mr. Rosenfeld during the applicable year. In accordance with the requirements of Item 402(v) of Regulation S-K, the following +adjustments were made to Mr. Rosenfeld’s total compensation for each year to determine the compensation actually paid: +(3) +The +dollar amounts reported in column (d) represent the average of the amounts reported for the Company’s named executive officers +(NEOs) as a group (excluding Mr. Rosenfeld, who has served as our CEO since 2008) in the “Total” column of the Summary +Compensation Table in each applicable year. The names of each of the NEOs (excluding Mr. Rosenfeld) included for purposes of calculating +the average amounts in each applicable year are as follows: (i) for 2023, Zine Mazouzi, Amelia Newton Varela, Lisa Keith, and Karla +Frieders; (ii) for 2022, Zine Mazouzi, Amelia Newton Varela, Karla Frieders, and Awadhesh Sinha; (iii) for 2021, Zine Mazouzi, Amelia +Newton Varela, Karla Frieders, and Awadhesh Sinha; and (iv) for 2020, Arvind Dharia, Amelia Newton Varela, Karla Frieders, and Awadhesh +Sinha. +(4) +The +dollar amounts reported in column (e) represent the average amount of “compensation actually paid” to the NEOs as a group +(excluding Mr. Rosenfeld), as computed in accordance with Item 402(v) of Regulation S-K. The dollar amounts do not reflect the actual +average amount of compensation earned by or paid to the NEOs as a group (excluding Mr. Rosenfeld) during the applicable year. In +accordance with the requirements of Item 402(v) of Regulation S-K, the following adjustments were made to average total compensation +for the NEOs as a group (excluding Mr. Rosenfeld) for each year to determine the compensation actually paid, using the same methodology +described above in Note 2: +(5) +Cumulative +TSR is calculated by dividing the sum of (i) the cumulative amount of dividends for the measurement period, assuming dividend reinvestment, +and (ii) the difference between the Company’s share price at the end and the beginning of the measurement period by the Company’s +share price at the beginning of the measurement period. +(6) +Represents +the weighted peer group TSR, weighted according to the respective companies’ stock market capitalization at the beginning of +each period for which a return is indicated. The peer group used for this purpose comes from the performance graph included in our +Annual Report on Form 10-K for the year ended December 31, 2023 and consists of seven companies: Caleres, Inc., Crocs, Inc., Deckers +Outdoor Corporation, Genesco Inc., Skechers U.S.A., Inc., Designer Brands Inc. and Wolverine World Wide, Inc. +(7) +The +dollar amounts reported represent the amount of net income reflected in the Company’s audited financial statements for the +applicable year. +(8) +The +Company has determined that Adjusted Earnings Before Interest and Taxes (EBIT) is the financial performance measure that represents +the most important performance measure used by the Company to link compensation actually paid to the Company’s NEOs in the +2023 Fiscal Year to Company performance. Adjusted EBIT is a non-GAAP measure that adjusts GAAP net income for certain items that +are outside of the Company’s core, on-going business activities. Adjusted EBIT excludes interest and other income/(expenses) +– net and the provision/(benefit) for income taxes. We also refer to Adjusted EBIT as Adjusted income from operations. A reconciliation of +GAAP income from operations to Adjusted income from operations is included in the press release filed as Exhibit 99.1 to our Current +Report on Form 8-K filed with the SEC on February 28, 2024. +Year +Reported +Summary +Compensation Table +Total for PEO +Reported +Value of +Equity +Awards (1) +Equity +Award +Adjustments (2) +Compensation +Actually Paid to +PEO +2023 +$ 5,033,103 +$ ( 2,999,991 ) +$ 7,326,543 +$ 9,359,656 +2022 +$ 7,609,075 +$ ( 5,499,990 ) +$ ( 173,356 ) +$ 1,935,729 +2021 +$ 7,566,831 +$ ( 5,499,985 ) +$ 9,432,090 +$ 11,498,936 +2020 +$ 2,872,859 +$ ( 2,360,456 ) +$ 49,995 +$ 562,398 +(1) +The +grant date fair value of equity awards represents the total of the amounts reported in the “Stock Awards” and “Option +Awards” columns in the Summary Compensation Table for the applicable year. +(2) +The +equity award adjustments for each applicable year include the addition (or subtraction, as +applicable) of the following: (i) the year-end fair value of any equity awards granted in +the applicable year that are outstanding and unvested as of the end of the year; (ii) the +amount of change as of the end of the applicable year (from the end of the prior fiscal year) +in fair value of any awards granted in prior years that are outstanding and unvested as of +the end of the applicable year; (iii) for awards that are granted and vest in same applicable +year, the fair value as of the vesting date; (iv) for awards granted in prior years that +vest in the applicable year, the amount equal to the change as of the vesting date (from +the end of the prior fiscal year) in fair value; (v) for awards granted in prior years that +are determined to fail to meet the applicable vesting conditions during the applicable year, +a deduction for the amount equal to the fair value at the end of the prior fiscal year; and +(vi) the dollar value of any dividends or other earnings paid on stock or option awards in +the applicable year prior to the vesting date that are not otherwise reflected in the fair +value of such award or included in any other component of total compensation for the applicable +year. The amounts deducted or added in calculating the equity award adjustments are as follows: +(2) +The +equity award adjustments for each applicable year include the addition (or subtraction, as applicable) of the following: (i) the year-end +fair value of any equity awards granted in the applicable year that are outstanding and unvested as of the end of the year; (ii) the +amount of change as of the end of the applicable year (from the end of the prior fiscal year) in fair value of any awards granted in +prior years that are outstanding and unvested as of the +50 +end of the applicable year; (iii) for awards that are granted +and vest in same applicable year, the fair value as of the vesting date; (iv) for awards granted in prior years that vest in the applicable +year, the amount equal to the change as of the vesting date (from the end of the prior fiscal year) in fair value; (v) for awards granted +in prior years that are determined to fail to meet the applicable vesting conditions during the applicable year, a deduction for the +amount equal to the fair value at the end of the prior fiscal year; and (vi) the dollar value of any dividends or other earnings paid +on stock or option awards in the applicable year prior to the vesting date that are not otherwise reflected in the fair value of such +award or included in any other component of total compensation for the applicable year. The amounts deducted or added in calculating +the equity award adjustments are as follows: +Year +Year +End +Fair Value +of Equity +Awards +Year +over +Year Change +in Fair Value +of Outstanding +and Unvested +Equity +Awards +Year +over Year Change +in Fair Value of +Equity Awards +Granted in Prior +Years that +Vested in the +Year +Value +of Dividends or other Earnings Paid on Stock or Option Awards not Otherwise Reflected in Fair Value or Total Compensation +Total +Equity +Award +Adjustments +2023 +$ 3,632,160 +$ 2,659,104 +$ 737,808 +$ 297,471 +$ 7,326,543 +2022 +$ 4,406,389 +$ ( 3,985,142 ) +$ ( 945,391 ) +$ 350,788 +$ ( 173,356 ) +2021 +$ 5,849,922 +$ 3,131,154 +$ 244,307 +$ 206,707 +$ 9,432,090 +2020 +$ 3,815,620 +$ ( 2,387,322 ) +$ ( 1,447,074 ) +$ 68,771 +$ 49,995 +(3) +The +dollar amounts reported in column (d) represent the average of the amounts reported for the Company’s named executive officers +(NEOs) as a group (excluding Mr. Rosenfeld, who has served as our CEO since 2008) in the “Total” column of the Summary +Compensation Table in each applicable year. The names of each of the NEOs (excluding Mr. Rosenfeld) included for purposes of calculating +the average amounts in each applicable year are as follows: (i) for 2023, Zine Mazouzi, Amelia Newton Varela, Lisa Keith, and Karla +Frieders; (ii) for 2022, Zine Mazouzi, Amelia Newton Varela, Karla Frieders, and Awadhesh Sinha; (iii) for 2021, Zine Mazouzi, Amelia +Newton Varela, Karla Frieders, and Awadhesh Sinha; and (iv) for 2020, Arvind Dharia, Amelia Newton Varela, Karla Frieders, and Awadhesh +Sinha. +(4) +The +dollar amounts reported in column (e) represent the average amount of “compensation actually paid” to the NEOs as a group +(excluding Mr. Rosenfeld), as computed in accordance with Item 402(v) of Regulation S-K. The dollar amounts do not reflect the actual +average amount of compensation earned by or paid to the NEOs as a group (excluding Mr. Rosenfeld) during the applicable year. In +accordance with the requirements of Item 402(v) of Regulation S-K, the following adjustments were made to average total compensation +for the NEOs as a group (excluding Mr. Rosenfeld) for each year to determine the compensation actually paid, using the same methodology +described above in Note 2: +Year +Average +Reported +Summary +Compensation Table +Total for Non-PEO +NEOs +Average +Reported +Value +of Equity +Awards +Average +Equity +Award +Adjustments (1) +Average +Compensation +Actually +Paid to Non-PEO +NEOs +2023 +$ +1,428,763 +$ +( 656,257 +) +$ +1,160,542 +$ +1,933,048 +2022 +$ +1,148,601 +$ +( 250,002 +) +$ +( 212,373 +) +$ +686,226 +2021 +$ +1,711,424 +$ +( 650,003 +) +$ +1,113,845 +$ +2,175,266 +2020 +$ +1,074,114 +$ +( 804,706 +) +$ +583,231 +$ +1,210,677 +(1) +The +amounts deducted or added in calculating the total average equity award adjustments are as follows: +51 +Year +Average +Year End Fair Value of Equity Awards +Year +over Year Average Change in Fair Value of Outstanding and Unvested Equity Awards +Year +over Year Average Change in Fair Value of Equity Awards Granted in Prior Years that Vested in the Year +Average +Value of Dividends or other Earnings Paid on Stock or Option Awards not Otherwise Reflected in Fair Value or Total Compensation +Total +Average Equity Award Adjustments +2023 +$ +847,980 +$ +246,733 +$ +30,364 +$ +35,465 +$ +1,160,542 +2022 +$ +205,982 +$ +( 392,470 +) +$ +( 53,429 +) +$ +27,544 +$ +( 212,373 +) +2021 +$ +821,078 +$ +235,259 +$ +32,832 +$ +24,676 +$ +1,113,845 +2020 +$ +840,098 +$ +( 108,114 +) +$ +( 153,423 +) +$ +4,670 +$ +583,231 +(5) +Cumulative +TSR is calculated by dividing the sum of (i) the cumulative amount of dividends for the measurement period, assuming dividend reinvestment, +and (ii) the difference between the Company’s share price at the end and the beginning of the measurement period by the Company’s +share price at the beginning of the measurement period. +(6) +Represents +the weighted peer group TSR, weighted according to the respective companies’ stock market capitalization at the beginning of +each period for which a return is indicated. The peer group used for this purpose comes from the performance graph included in our +Annual Report on Form 10-K for the year ended December 31, 2023 and consists of seven companies: Caleres, Inc., Crocs, Inc., Deckers +Outdoor Corporation, Genesco Inc., Skechers U.S.A., Inc., Designer Brands Inc. and Wolverine World Wide, Inc. +(7) +The +dollar amounts reported represent the amount of net income reflected in the Company’s audited financial statements for the +applicable year. +(8) +The +Company has determined that Adjusted Earnings Before Interest and Taxes (EBIT) is the financial performance measure that represents +the most important performance measure used by the Company to link compensation actually paid to the Company’s NEOs in the +2023 Fiscal Year to Company performance. Adjusted EBIT is a non-GAAP measure that adjusts GAAP net income for certain items that +are outside of the Company’s core, on-going business activities. Adjusted EBIT excludes interest and other income/(expenses) +– net and the provision/(benefit) for income taxes. We also refer to Adjusted EBIT as Adjusted income from operations. A reconciliation of +GAAP income from operations to Adjusted income from operations is included in the press release filed as Exhibit 99.1 to our Current +Report on Form 8-K filed with the SEC on February 28, 2024. +Financial +Performance Measures +As +described in greater detail in “Executive Compensation – Compensation Discussion and Analysis,” the Company’s +executive compensation program reflects a variable pay-for-performance philosophy. The metrics that the Company uses for both our long-term +and short-term incentive awards are selected based on an objective of incentivizing our NEOs to increase the value of our enterprise +for our stockholders. The most important financial performance measures used by the Company to link executive compensation actually paid +to the Company’s NEOs, for the most recently completed fiscal year, to the Company’s performance are as follows: +● Adjusted +EBIT +● Adjusted +EBITDA +● Adjusted +Diluted Earnings per Share +● Revenue +● Return +on Invested Capital +Analysis +of the Information Presented in the Pay versus Performance Table +As +described in more detail in the section “Executive Compensation – Compensation Discussion and Analysis,” the Company’s +executive compensation program reflects a variable pay-for-performance philosophy. While the Company utilizes several performance measures +to align executive compensation with Company +52 +performance, +all of those Company measures are not presented in the Pay Versus Performance table. Moreover, the Company generally seeks to incentivize +long-term performance, and therefore does not specifically align the Company’s performance measures with compensation that is actually +paid (as computed in accordance with Item 402(v) of Regulation S-K) for a particular year. In accordance with Item 402(v) of Regulation +S-K, the Company is providing the following graphs of the relationships between information presented in the Pay Versus Performance table. +The +following graph reflects the relationship between the amount of compensation actually paid to Mr. Rosenfeld, the average amount of compensation +actually paid to the Company’s NEOs as a group (excluding Mr. Rosenfeld) and the Company’s cumulative TSR over the four years +presented in the table. +The +following graph reflects the relationship between the amount of compensation actually paid to Mr. Rosenfeld, the average amount of compensation +actually paid to the Company’s NEOs as a group (excluding Mr. Rosenfeld) and the Company’s net income over the four years +presented in the table. +53 +The +following graph reflects the relationship between the amount of compensation actually paid to Mr. Rosenfeld, the average amount of compensation +actually paid to the Company’s NEOs as a group (excluding Mr. Rosenfeld) and the Company’s Adjusted EBIT over the four years +presented in the table. +54 +The +following graph reflects the relationship between the cumulative TSR of the Company and its peer group over the four-year period presented +in the table. For detail regarding the composition of the peer group, see footnote 6 to the table above. +55 +PROPOSAL +TWO: +RATIFICATION +OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS +FOR +THE FISCAL YEAR ENDING DECEMBER 31, 2024 +On +March 6, 2020, the Audit Committee initially appointed Ernst & Young LLP (“EY”) as our independent registered public +accounting firm to conduct the audit of our books and records for the fiscal year ending December 31, 2020, and the Committee has appointed +EY as our independent registered public accounting firm to conduct the audit of our books and records for the fiscal years ending December +31, 2021, December 31, 2022, December 31, 2023, and December 31, 2024. +In +evaluating the selection of an independent registered public accounting firm for 2024, the Audit Committee considered several factors +relating to potential candidates, including audit quality, the benefits of our existing auditor’s familiarity with the Company +versus a fresh perspective, the key members of the audit engagement team, the most recent internal quality control review or Public Company +Accounting Oversight Board inspection, auditor independence and its process for maintaining independence, the risks of a change of auditors, +and the firm’s international scope and presence. In addition, the Audit Committee evaluated the Company’s requirements in +light of the growth and complexity of its business and the increasing international aspects of its operations. As a result of this evaluation, +the Audit Committee selected EY as the Company’s independent registered public accounting firm for the fiscal year ending December +31, 2024. +Although +ratification by stockholders is not required by our organizational documents or any applicable law, the Audit Committee has determined +that requesting ratification by stockholders of its appointment of EY as our independent registered public accountants is a matter of +good corporate practice. If stockholders do not ratify the selection, the Audit Committee will reconsider whether or not to retain EY, +but may still retain that accounting firm. Even if the selection is ratified, the Audit Committee, in its discretion, may change the +appointment at any time during the year if it determines that such a change would be in our best interest and that of our stockholders. +Representatives +of EY are expected to be present at the Annual Meeting to respond to appropriate questions and to make a statement should they so desire. +Required +Vote +The +affirmative vote of a majority of the votes cast by the shares of Common Stock present or represented by proxy and entitled to vote at +the Annual Meeting is required to ratify the Audit Committee’s selection of EY. +Recommendation +of the Board of Directors +The +Board of Directors unanimously recommends a vote “FOR” the ratification of the appointment of EY as our independent registered +public accountants for the fiscal year ending December 31, 2024. Unless marked to the contrary, proxies received from stockholders will +be voted in favor of ratifying the appointment of EY as our independent registered public accountants for the fiscal year ending December +31, 2024. +Independent +Registered Public Accounting Firm’s Fees and Services +The +aggregate fees billed to the Company by EY for professional services rendered for each of 2023 and 2022, respectively, are set forth +below: +Year +Ended December 31, +2023 +2022 +Audit Fees (1) +$ 2,773,000 +$ 2,372,000 +Audit-Related Fees (2) +502,000 +— +Tax Fees (3) +415,000 +506,000 +All Other Fees +— +— +Total +$ 3,690,000 +$ 2,878,000 +56 +(1) Represents +the aggregate fees billed for (a) the audit of our annual financial statements, (b) the reviews +of the financial statements included in our Quarterly Reports on Form 10-Q, (c) other statutory +and regulatory filings or engagements and (d) the audit of our internal controls over financial +reporting. +(2) Represents +aggregate fees billed for due diligence procedures performed in connection with acquisitions. +(3) Represents +aggregate fees billed for tax advice, tax compliance and consulting. Includes, among others, +review and advice with respect to transfer pricing. +Audit +Committee’s Pre-Approval Policies and Procedures +Consistent +with SEC policies regarding auditor independence, the Audit Committee has responsibility for appointing, setting compensation and overseeing +the work of our independent registered public accountants. In recognition of this responsibility, the Audit Committee has established +a policy to review and pre-approve all audit and permissible non-audit services provided by the independent registered public accountants. +These services may include audit services, audit-related services, tax services and other services. +Prior +to engagement of the independent auditor for next year’s audit, the Audit Committee will pre-approve all auditing services and +all permitted non-audit services (including the fees and terms thereof), except those excluded from requiring pre-approval based upon +the de minimus exception set forth in Section 10A(i)(1)(B) of the Exchange Act and Rule 2-01(c)(7)(i)(C) of Regulation S-X. +The +Audit Committee’s pre-approval policies and procedures are as follows: (a) prior to each fiscal year, the Audit Committee pre-approves +a schedule of estimated fees for proposed non-prohibited audit and non-audit services; and (b) actual amounts paid are monitored by our +financial management and reported to the Audit Committee. +All +work performed by EY as described above under the captions Audit Fees, Audit-Related Fees, Tax Fees and All Other Fees has been approved +or pre-approved by the Audit Committee pursuant to the provisions of the Audit Committee’s charter. The Audit Committee did not +approve any of the Audit Fees, Audit-Related Fees, Tax Fees and All Other Fees described above pursuant to a de minimis exception +set forth in Rule 2-01(c)(7)(i)(C) of Regulation S- +X. +The Audit Committee has considered and concluded that the provision of non-audit services is compatible with maintaining the independence +of EY. +AUDIT +COMMITTEE REPORT +The +Audit Committee reviewed the Company’s audited financial statements for the 2023 Fiscal Year and met with both management and representatives +of EY, our independent registered public accountants for that year, to discuss such audited financial statements. Management and our +independent registered public accountants have represented to the Audit Committee that the financial statements were prepared in accordance +with accounting principles generally accepted in the United States of America. The Audit Committee has received from and discussed with +EY the written disclosures and the letter regarding EY’s communications with the Audit Committee concerning independence as required +by applicable requirements of the Public Company Accounting Oversight Board and discussed with EY the independence of EY. The Audit Committee +also discussed with EY any matters required to be discussed by applicable requirements of the Public Company Accounting Oversight Board +and the SEC. Based on these reviews and discussions, the Audit Committee recommended to the Board that the Company’s audited financial +statements be included in the Company’s Annual Report on Form 10-K for the 2023 Fiscal Year. +Submitted +by the Audit Committee of the Board of Directors: +Al +Ferrara (Chairman) +Mitchell +S. Klipper +Ravi +Sachdev +57 +PROPOSAL +THREE: +NON-BINDING +ADVISORY VOTE ON EXECUTIVE COMPENSATION +Section +14A of the Exchange Act, as created by Section 951 of the Dodd-Frank Act, and the rules and regulations promulgated thereunder require +a publicly traded company to include a resolution in its proxy statement at least once every three years seeking stockholder approval, +on an advisory or non-binding basis, of the compensation of the named executive officers as disclosed in such company’s proxy statement +pursuant to the compensation rules of the SEC. At our 2023 Annual Meeting of Stockholders, our stockholders approved, on an advisory +basis, the holding of an advisory vote to approve executive compensation (commonly known as a “say-on-pay” proposal) annually. +Based on these results, the Board of Directors determined to hold its advisory vote to approve executive compensation annually until +the next frequency vote, which is scheduled to occur at our 2026 Annual Meeting. Accordingly, we are providing stockholders with a non-binding +advisory vote on the compensation of our Named Executive Officers. +As +described in more detail in the Compensation Discussion and Analysis section, which begins on page 27 of this Proxy Statement, the overall +objective of our executive compensation program and plans is to support delivery of sustained operating and financial performance results +with the ultimate goal being to create and maximize value for our stockholders on a long-term basis. We believe that our executive compensation +program and plans serve the interests of our stockholders by enabling the Company to attract and retain an experienced and effective +management team whose combined knowledge of our business and the fashion footwear and accessories industries has proved extremely valuable +in delivering results for our stockholders. The Compensation Committee and the Board of Directors believe that our compensation program +and plans as articulated in the Compensation Discussion and Analysis section of this Proxy Statement effectively implement our philosophy +of aligning compensation to stockholder interests and that the compensation received by our Named Executive Officers in the 2023 Fiscal +Year reflects and supports such philosophy and goal and is commensurate with our performance and strategic position. We will continue +to review and modify our executive compensation program to address evolving best practices and changing regulatory requirements. +We +encourage stockholders to read the Compensation Discussion and Analysis section of this Proxy Statement, as well as the Summary Compensation +Table and other related compensation tables and narrative disclosure contained in this Proxy Statement, all of which describe and explain +in detail the compensation of our Named Executive Officers in the 2023 Fiscal Year. +The +following resolution is submitted for stockholder approval: +RESOLVED , +that the stockholders of Steven Madden, Ltd. (the “Company”) approve, on a non-binding advisory basis, the compensation paid +to the Named Executive Officers of the Company as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange +Commission, including the executive compensation as described in the section captioned “Compensation Discussion and Analysis,” +the Summary Compensation Table and related tabular disclosure and narrative discussion regarding compensation of Named Executive Officers +under the caption “Executive Compensation” contained in the Company’s Proxy Statement for the 2024 Annual Meeting of +Stockholders. +This +vote is not intended to address any specific item of compensation, but rather the overall compensation of our Named Executive Officers +and the compensation program and plans described in this Proxy Statement. While this advisory vote on executive compensation, commonly +referred to as a “say-on-pay” advisory vote, is required by Section 14A of the Exchange Act, it is not binding on our Board +of Directors and may not be construed as overruling any decision by the Board of Directors or the Compensation Committee. However, we +value the opinions of our stockholders. To the extent there is a significant vote against the compensation of the Named Executive Officers +as disclosed in this Proxy Statement, the Board of Directors and the Compensation Committee will consider the outcome of the vote when +considering future compensation arrangements and evaluate whether any actions are necessary to address the stockholders’ concerns. +58 +Required +Vote +Approval +of this resolution requires the affirmative vote of a majority of the votes cast by the shares of Common Stock present or represented +by proxy and entitled to vote at the Annual Meeting. +Recommendation +of the Board of Directors +The +Board of Directors unanimously recommends a vote “FOR” the resolution approving the overall compensation of the Named Executive +Officers for the 2023 Fiscal Year. +59 +PROPOSAL +FOUR: +ADOPTION +OF AN AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF THE COMPANY TO INCORPORATE NEW DELAWARE LAW PROVISIONS REGARDING OFFICER EXCULPATION +AND TO INTEGRATE PRIOR AMENDMENTS +Effective +August 1, 2022, the State of Delaware, which is the Company’s state of incorporation, enacted legislation that enables Delaware +corporations to limit the liability of certain officers in limited circumstances, as permitted by Section 102(b)(7) of the Delaware General +Corporation Law (“DGCL”). In light of this legislation, the Board of Directors recommends the stockholders approve an amendment +to the Ninth Article of the Company’s Certificate of Incorporation, as amended (the “Amendment”) to allow for the exculpation +of certain of the Company’s officers. Currently, the Ninth Article contains a provision eliminating the personal liability of the +Company’s directors for monetary damages or for breach of the fiduciary duty of care, to the fullest extent permitted by DGCL as +it now exists or may be amended or supplemented. +The +amendment is aligned with the narrow class and type of claim for which certain officers’ liability can be exculpated under Section +102(b)(7) of the DGCL. Accordingly, the proposed Amendment would only permit exculpation for direct claims (as opposed to derivate claims +made by stockholders on behalf of the Company) and would not apply to breach of duty of loyalty, acts or omissions not in good faith +or that involve intentional misconduct or a knowing violation of law, or any transaction in which the officer derived an improper personal +benefit. The officers who would be covered by the proposed Amendment include any officer who, in the course of conduct alleged to be +wrongful: (i) is or was the Company’s president, chief executive officer, chief operating officer, chief financial officer, chief +legal officer, controller, treasurer, or chief accounting officer; (ii) is or was identified in the Company’s public filings with +the SEC as a named executive officer; or (iii) has, by written agreement with the Company, consented to be identified for purposes of +service of process. +The +Board believes the Amendment allowing for the exculpation of certain of the Company’s officers is in the Company’s and its +stockholders’ best interests for the following reasons: +● In +recent years, officers have increasingly been named as defendants in stockholder litigation +for claims of breach of fiduciary duty, resulting in protracted litigation (and associated +costs) that would have been quickly dismissed if brought against directors. The Board believes +that the Amendment could help mitigate any potential future harm to the Company and stockholders +from this trend by preventing prolonged or frivolous litigation that distracts officers from +their primary responsibilities and reducing insurance costs associated with lawsuits. Additionally, +as public companies increasingly adopt officer exculpation clauses, insurance companies may +raise director and officer insurance premiums for corporations that do not adopt officer +exculpation provisions in their governing documents. +● The +Board also believes it is necessary to provide officers with protection from exposure to +personal liability to the fullest extent permitted by the DGCL in order to attract and retain +skilled officers, especially as more and more public companies adopt officer exculpation +provisions. The Company also expects its peers to adopt exculpation clauses that limit the +personal liability of officers in their certificates of incorporation, and failing to provide +for officer exculpation could result in impaired recruitment and retention of qualified officer +candidates. Qualified officer candidates might be deterred from serving a company who fails +to adopt similar protections due to exposure to personal liability and the risk that substantial +expense may be incurred in defending lawsuits, regardless of merit. +● Finally, +the Company’s officers frequently must make time-sensitive business decisions that +can create substantial risk of investigations or lawsuits seeking to impose personal liability +on the basis of hindsight and regardless of merit. The Board believes that the Amendment, +by limiting officers’ exposure to personal monetary liability, will empower officers +to exercise their business judgment in furtherance of stockholder interests without the potential +distraction of undue personal risk. Officer exculpation will also more generally align the +protections available to our directors with those available to our officers. +60 +For +these reasons, the Board of Directors determined that the approval of the Amendment to allow for the exculpation of certain of the Company’s +officers is advisable and in the best interests of the Company and the stockholders. +Non-Substantive +Revisions +The +Amendment also includes other minor, non-substantive revisions to the Company’s Certificate of Incorporation, principally the integration +of prior amendments into the Certificate of Incorporation and technical and conforming changes and modernizing updates. These revisions +will not have a substantive impact on the rights of stockholders of the Company. +Effect +of Approval +If +the stockholders approve the adoption of the Amendment, it will become effective upon the filing of the Amended and Restated Certificate +of Incorporation with the Delaware Secretary of State, which the Company anticipates doing immediately following stockholder approval. +Other than the replacement of the existing Ninth Article and the non-substantive revisions, the remainder of the Company’s Certificate +of Incorporation will remain unchanged after effectiveness of the Amendment. A copy of the proposed Amended and Restated Certificate +of Incorporation is attached as Annex B to this proxy statement. +Required +Vote +Approval +of this resolution requires the affirmative vote of a majority of the shares of Common Stock outstanding and entitled to vote at the +Annual Meeting. +Recommendation +of the Board of Directors +The +Board of Directors unanimously recommends a vote “FOR” the resolution adopting an Amended and Restated Certificate of Incorporation +of the Company to incorporate new Delaware law provisions regarding officer exculpation and to integrate prior amendments. +61 +PROPOSAL +FIVE: +APPROVAL +OF AMENDMENTS TO THE STEVEN MADDEN, LTD. 2019 INCENTIVE COMPENSATION PLAN +At +our 2019 Annual Meeting, the Company’s stockholders approved the adoption of the Steven Madden, Ltd. 2019 Incentive Compensation +Plan (the “2019 Plan”). The Board of Directors has approved an amendment to the 2019 Plan, subject to stockholder approval, +to (a) make available for issuance for future awards 8,000,000 additional shares and (b) extend the term of the 2019 Plan by five years, +to February 24, 2034 (collectively, the “2019 Plan Proposal”). +Because +of the limited number of remaining shares that may be granted under the 2019 Plan, the Board of Directors believes it is appropriate +and necessary at this time to authorize additional shares for future awards. Authorization of these additional shares will allow grants +to employees, consultants, and directors in the furtherance of the Company’s goal of continuing to achieve significant gains in +stockholder value and operating results. +As +of March 28, 2024, the 2019 Plan had an aggregate of approximately 2,753,558 shares of common stock available for future equity grants. +All awards that are outstanding as of the date that stockholders approve the 2019 Plan Proposal will remain outstanding and will continue +to be governed by the 2019 Plan. As of March 28, 2024, options to purchase 1,050,652 shares of the Company’s common stock were +outstanding. These options had a weighted average exercise price of $35.88 and a weighted average contractual life of 3.1 years. Further, +as of March 28, 2024, there were 1,370,135 shares of common stock subject to restricted stock or restricted stock unit awards and 160,603 +shares subject to performance share awards that had not vested or been earned under the 2019 Plan. As of March 28, 2024, there were 73,328,113 +shares of our common stock issued and outstanding and the closing price per share was +$42.28. +The +Company intends to continue awarding options in order to attract and retain the services or advice of such directors, employees, officers, +agents, consultants, and independent contractors and to provide additional incentive for such persons to exert maximum efforts for the +success of the Company and its affiliates. The following is a summary of the principal features of the 2019 Plan. The summary is qualified +in its entirety by reference to the complete text of the 2019 Plan, as proposed and amended. A copy of the 2019 Plan as it is proposed +to be amended is set forth as Annex C to this Proxy Statement. +Description +of the 2019 Plan +Eligibility +and Types of Awards. As of March 28, 2024, the Company had 4,200 employees, all of whom were eligible to participate under the 2019 +Plan. Our non-employee directors, currently eleven directors, as well as individuals providing consulting or advisory services to the +Company or its affiliates pursuant to a written agreement, are also eligible to receive awards under the 2019 Plan. The types of awards +available under the 2019 Plan consist of nonqualified stock options, stock appreciation rights, performance shares, restricted stock, +restricted stock units, other stock-based awards and performance-based cash awards. In addition, the Company’s employees and employees +of the Company’s affiliates that qualify as subsidiaries or parent corporations (as defined under Section 424 of the Code) are +eligible to be granted incentive stock options under the 2019 Plan. +Authorized +Shares and Limits on Awards. Currently, a total of 11,000,000 shares of Common Stock are authorized for issuance under the 2019 Plan. +If the 2019 Plan Proposal is approved, then the total number of shares authorized for issuance under the 2019 Plan will increase by 8,000,000 +shares to a total of 19,000,000 shares. The maximum number of shares of Common Stock with respect to which any stock option, stock appreciation +right or shares of restricted stock that are subject to the attainment of specified performance goals that may be granted under the Plan +during any fiscal year to any eligible employee or consultant will be 1,000,000 shares per type of award, subject to a total limit on +the number of shares of Common Stock with respect to all awards of 1,200,000 shares during any fiscal year. There is no annual limit +on the number of shares of Common Stock with respect to an award to eligible employees or consultants of restricted stock that is not +subject to the attainment of specified performance goals. The maximum number of shares of Common Stock with respect to any award of performance +shares to an eligible employee or consultant during any fiscal year is 1,000,000 shares. The maximum payment that may be made to an +62 +eligible +employee or consultant under any performance-based cash award during any fiscal year and subject to the attainment of specified performance +goals is $10,000,000. +The +maximum number of shares of Common Stock with respect to which any stock option (other than incentive stock options), stock appreciation +right, or other share appreciation awards that may be granted under the Plan during any fiscal year to any non-employee director will +be 120,000 shares per type of award, subject to a total limit on the number of shares of Common Stock with respect to all awards of 160,000 +shares during any fiscal year. Any award of Restricted Stock, Restricted Stock Units and any other awards other than stock options, stock +appreciation rights and other share appreciation awards which may be granted under the 2019 Plan during any fiscal year of the Company +to each non-employee director shall be 40,000 shares per type of award, provided that the maximum number of shares of Common Stock for +all such awards does not exceed 60,000 with respect to any fiscal year of the Company. In no event shall the aggregate grant of awards +to non-employee directors (when combined with certain other awards) exceed 5% of the total number of shares of Common Stock reserved +for awards under the 2019 Plan. +The +2019 Plan requires the Committee to appropriately adjust the individual maximum share limitations, the aggregate number of shares of +Common Stock available for the grant of awards, and the exercise price of an award to reflect any change in the Company’s capital +structure or business by reason of certain corporate transactions or events. +Under +the 2019 Plan, the number of shares of Common Stock available for awards is reduced by (i) the total number of options or stock appreciation +rights exercised, regardless of whether any of the shares of Common Stock underlying such awards are actually issued to the participant +as the result of a net settlement, (ii) any shares of Common Stock used to pay any exercise price or tax withholding obligation with +respect to any award and (iii) any shares of Common Stock repurchased by the Company on the open market with the proceeds of a stock +option exercise price. +Fungible +Share Limit. The 2019 Plan includes a “fungible share limit” to manage authorized shares. Under the 2019 Plan’s +fungible share design: +● shares +of Common Stock subject to awards that are not appreciation awards count against the 2019 +Plan’s share reserve as 3.0 shares for every share of Common Stock granted; +● each +share of Common Stock underlying an appreciation award granted that expires, terminates, +is cancelled or is forfeited for any reason, is added back to the 2019 Plan’s aggregate +maximum share limit and is again available for grant; and +● each +share of Common Stock underlying an award that is not an appreciation award that expires, +terminates, is cancelled or is forfeited for any reason, is added back to the 2019 Plan’s +share reserve as 3.0 shares of Common Stock and is again available for grant. +The +2019 Plan’s fungible share limit has the effect of reducing the maximum number of awards under the 2019 Plan because awards that +are not appreciation awards (such as awards of restricted stock) count against the 2019 Plan’s share reserve as 3.0 shares for +every share of Common Stock granted, rather than one share, as is the case for options and other appreciation awards. +Awards +Under the 2019 Plan. The following types of awards are available under the 2019 Plan: +Stock +Options. The Committee may grant nonqualified stock options and incentive stock options (only to eligible employees) to purchase +shares of Common Stock. The Committee will determine the number of shares of Common Stock subject to each option, the term of each option, +which may not exceed seven years (or five years in the case of an incentive stock option granted to a 10% stockholder), the exercise +price, the vesting schedule (if any), and the other material terms of each option. No incentive stock option or nonqualified stock option +may have an exercise price less than the fair market value of the Common Stock at the time of grant (or, in the case of an incentive +stock option granted to a 10% stockholder, 110% of fair market value). +Options +will be exercisable at such time and subject to such terms and conditions as determined by the Committee at grant and the exercisability +of such options may be accelerated by the Committee in its sole discretion, provided that no option is exercisable more than seven years +after the date the option is granted and, in the case of a ten percent stockholder, five years from the date an incentive stock option +is granted. Upon the exercise of an option, the participant must make payment of the full exercise price, either (i) in cash, check, +bank draft or money order; (ii) +63 +solely to the extent permitted by law, through the delivery of irrevocable instructions to a broker reasonably +acceptable to the Company to deliver promptly to the Company an amount equal to the purchase price; or (iii) on such other terms and +condition as may be acceptable to the Committee. +Stock +Appreciation Rights. The Committee may grant stock appreciation rights (“SARs”) either with a stock option which may +be exercised only at such times and to the extent the related option is exercisable (“Tandem SAR”) or independent of a stock +option (“Non-Tandem SARs”). A SAR is a right to receive a payment in Common Stock or cash (as determined by the Committee) +equal in value to the excess of the fair market value of one share of Common Stock on the date of exercise over the exercise price per +share established in connection with the grant of the SAR. The term of each SAR may not exceed seven years. The base price per share +covered by a SAR will be the exercise price per share of the related option in the case of a Tandem SAR and will be the fair market value +of the Common Stock on the date of grant in the case of a Non-Tandem SAR. The Committee may also grant “limited SARs,” either +as Tandem SARs or Non-Tandem SARs, which may become exercisable only upon the occurrence of a change in control (as defined in the 2019 +Plan) or such other event as the Committee may, in its sole discretion, designate at the time of grant or thereafter. +Restricted +Stock. The Committee may award shares of restricted stock. Except as otherwise provided by the Committee upon the award of restricted +stock, the recipient generally has the rights of a stockholder with respect to the shares, including the right to receive dividends, +the right to vote the shares of restricted stock and, conditioned upon full vesting of shares of restricted stock, the right to tender +such shares, subject to the conditions and restrictions generally applicable to restricted stock or specifically set forth in the recipient’s +restricted stock agreement. The Committee may determine at the time of award, that the payment of dividends, if any, will be deferred +until the expiration of the applicable restriction period. Recipients of restricted stock are required to enter into a restricted stock +agreement with the Company, which states the restrictions to which the shares are subject, which may include satisfaction of pre-established +performance goals, and the criteria or date or dates on which such restrictions will lapse. +If +the grant of restricted stock or the lapse of the relevant restrictions is based on the attainment of performance goals, the Committee +will establish for each recipient the applicable performance goals, formulae or standards and the applicable vesting percentages with +reference to the attainment of such goals or satisfaction of such formulas or standards. Such performance goals may incorporate provisions +for disregarding (or adjusting for) changes in accounting methods, corporate transactions (including, without limitation, dispositions +and acquisitions) and other similar events or circumstances. The performance goals for performance-based restricted stock are based on +one or more of the objective criteria set forth on Exhibit A to the 2019 Plan and discussed in general below. +Restricted +Stock Units. The Committee may award restricted stock units (“RSUs”). An RSU conveys a right to payment of Common Stock +or the cash value of Common Stock after the date on which the award is granted and subject to such conditions, including vesting and +performance conditions, as the Committee may determine. Except as otherwise provided upon the award of RSUs, the recipient does not have +the rights of a stockholder with respect to the underlying shares, including with respect to voting and dividends or the right to tender +shares, until the conditions on the award have been satisfied and the shares have been delivered to the recipient. If the grant of restricted +stock or the lapse of the relevant restrictions is based on the attainment of performance goals, the Committee will establish for each +recipient the applicable performance goals, formulae or standards and the applicable vesting percentages with reference to the attainment +of such goals or satisfaction of such formulae or standards. Such performance goals may incorporate provisions for disregarding (or adjusting +for) changes in accounting methods, corporate transactions (including, without limitation, dispositions and acquisitions) and other similar +events or circumstances. The performance goals for performance-based restricted stock are based on one or more of the objective criteria +set forth on Exhibit A to the 2019 Plan and discussed in general below. +Performance +Shares. The Committee may award performance shares. A performance share is counted as one share of Common Stock. The performance +goals for performance shares are based on one or more of the objective criteria set forth on Exhibit A to the 2019 Plan and discussed +in general below. A minimum level of acceptable achievement will also be established by the Committee. If, by the end of the performance +period, the recipient has achieved the specified performance goals, he or she will be deemed to have fully earned the performance shares. +To the extent earned, the performance shares will be paid to the recipient at the time and in the manner determined by the Committee +in cash, shares of Common Stock or any combination thereof. +Other +Stock-Based Awards. The Committee may, subject to limitations under applicable law, make a grant of such other stock-based awards +(including, without limitation, performance units, dividend equivalent units, stock equivalent units, restricted stock units and deferred +stock units) under the 2019 Plan that are payable in cash or +64 +denominated or payable in or valued by shares of Common Stock or factors +that influence the value of such shares. The Committee will determine the terms and conditions of any such other awards, which may include +the achievement of certain minimum performance goals and/or a minimum vesting period. The performance goals for performance- based other +stock-based awards are based on one or more of the objective criteria set forth on Exhibit A to the 2019 Plan and discussed in general +below. +Performance-Based +Cash Awards. The Committee may, subject to limitations under applicable law, make a grant of individual target awards either alone +or in tandem with stock options, SARs or restricted stock under the 2019 Plan that are contingent upon the satisfaction of certain pre-established +performance goals that are reached within a specified performance period, each of which, together with any other terms and conditions, +shall be determined by the Committee in its sole discretion at the time of grant. At the time the performance goals are established, +the Committee will prescribe a formula to determine the percentages (which may be greater than 100%) of the individual target award which +may be payable based upon the degree of attainment of the performance goals during the calendar year. The Committee may, in its sole +discretion, elect to pay a participant an amount that is less than the participant’s individual target award regardless of the +degree of attainment of the performance goals; provided that no such discretion to reduce a performance-based cash award earned based +on achievement of the applicable performance goals will be permitted for a calendar year in which a change in control occurs. The performance +goals for performance-based cash awards are based on one or more of the objective criteria set forth on Exhibit A to the 2019 Plan and +discussed in general below. +Limitation. +Notwithstanding any other provisions in the 2019 Plan or in any employment agreement, the restrictions or vesting conditions, as +applicable, on restricted stock awards, restricted stock units, other stock-based awards and performance-based awards can be no less +than (i) one year, if the lapsing of restrictions or vesting schedule, as applicable, is based (in whole or in part) on the attainment +of one or more performance goals, and (ii) three years, if the lapsing of restrictions or the vesting schedule, as applicable, is based +solely on the continued performance of services by the Plan participant (with restrictions as to no more than 1/3 rd of shares +of Common Stock subject thereto lapsing on each of the first three anniversaries of the date of grant); provided that, the Committee +is authorized to provide for earlier lapsing of the restrictions or acceleration of vesting, as applicable, in the event of a change +in control of the Company or a participant’s retirement, death or disability. The preceding limitation does not apply with respect +to up to 5% (when combined with the 5% limitation for non-employee director award grants) of the total number of shares of Common Stock +reserved for awards under the Plan. +Performance +Goals . The Committee may grant awards of restricted stock, restricted stock units, performance shares, performance-based cash awards +and other stock-based awards that may be granted, vest and be paid based on attainment of specified performance goals established by +the Committee. These performance goals are based on the attainment of a certain target level of, or a specified increase or decrease +in, one or more of the following criteria selected by the Committee: +● earnings +per share, earnings before interest and taxes or earnings before interest, taxes, depreciation +and amortization; +● gross +profit or gross profit return on investment; +● gross +margin or gross margin return on investment; +● operating +income, net income, cash flow or economic value added; +● return +on assets; return on capital; revenue growth; +● working +capital; +● specified +objectives with regard to limiting the level of increase in all or a portion of, the Company’s +bank debt or other long-term or short-term public or private debt or other similar financial +obligations of the Company, which may be calculated net of cash balances and/or other offsets +and adjustments as may be established by the Committee; +● return +on equity, assets or capital; +● total +shareholder return; +65 +● fair +market value of the shares of the Common Stock; +● market +share and/or market segment share; +● the +growth in the value of an investment in the Common Stock assuming the reinvestment of dividends; +● customer +satisfaction, customer loyalty, brand recognition and/or brand acceptance; +● style +indexes; +● employee +retention; +● number +of new patents, new product innovation and/or introduction; +● product +release schedules and/or ship targets; or +● reduction +in expenses and/or product cost reduction through advanced technology. +The +Committee may also exclude the impact of an event or occurrence such as restructurings, discontinued operations, extraordinary items +and other unusual or non-recurring charges, an event either not directly related to the operations of the Company or not within the reasonable +control of the Company’s management, or a change in accounting standards required by generally accepted accounting principles, +which the Committee determines should be appropriately excluded. Performance goals may also be based on individual participant performance +goals, as determined by the Committee in its sole discretion, or they may be based upon the attainment of specified levels of Company +(or subsidiary, division or other operational unit of the Company) performance under one or more of the measures described above relative +to the performance of other corporations. The Committee may designate additional business criteria on which the performance goals may +be based or adjust, modify or amend those criteria. +Change +in Control . In the event of a change in control (as defined in the 2019 Plan) of the Company, awards under the 2019 Plan may be assumed +and continued or substituted in accordance with applicable law. If and to the extent that a successor to the Company converts, assumes, +substitutes or replaces an award, the vesting restrictions and/or forfeiture provisions applicable to such award will not accelerate +or lapse by reason of the change in control. However, if the participant’s employment or other service is terminated, other than +for cause, within 12 months coincident with or immediately following the change in control, unvested awards will become fully vested +and exercisable. If the award is not continued as provided above, the awards generally shall become fully exercisable or payable immediately +prior to the change in control, and such awards shall terminate at the effective time of the change in control. +Term, +Amendment and Termination. The term of the 2019 Plan extends for a period of ten years from February 25, 2019 and, accordingly, will +remain in effect through February 24, 2029, unless sooner terminated. If the 2019 Plan Proposal is approved, then the term of the 2019 +Plan would be further extended until February 24, 2034. Notwithstanding any other provision of the 2019 Plan, the Board may at any time +amend any or all of the provisions of the 2019 Plan, or suspend or terminate it entirely, retroactively or otherwise; provided, however, +that, unless otherwise required by law or specifically provided in the 2019 Plan, the rights of a participant with respect to awards +granted prior to such amendment, suspension or termination may not be adversely affected without the consent of such participant and, +provided further that the approval of the Company’s stockholders will be obtained to the extent required by Delaware law, Section +422 of the Code, The Nasdaq Global Select Market or the rules of such other applicable stock exchange, as specified in the 2019 Plan. +Repricing +Options and Stock Appreciation Rights. The 2019 Plan includes an additional express prohibition against repricing stock options and +stock appreciation rights. The Company may not, without stockholder approval, either (i) reduce the exercise price of an outstanding +stock option or stock appreciation right or (ii) simultaneously cancel stock options or stock appreciation rights for which the exercise +price exceeds the then current fair market value of the underlying Common Stock and grant a new stock option or stock appreciation right +with an exercise price equal to the then current fair market value of the underlying Common Stock. +66 +Miscellaneous. +Awards granted under the 2019 Plan are generally nontransferable (other than by will or the laws of descent and distribution), except +that the Committee may provide for the transferability of nonqualified stock options at the time of grant or thereafter to certain family +members. +New +Plan Benefits +We +cannot currently determine the awards that may be granted under the 2019 Plan in the future to the executive officers, non-employee directors +or other persons. The Committee will make such determinations from time to time. +Certain +U.S. Federal Income Tax Consequences +The +rules concerning the federal income tax consequences with respect to options granted and to be granted pursuant to the 2019 Plan are +quite technical. Moreover, the applicable statutory provisions are subject to change, as are their interpretations and applications, +which may vary in individual circumstances. Therefore, the following is designed to provide a general understanding of the federal income +tax consequences. In addition, the following discussion does not set forth any gift, estate, Social Security or state or local tax consequences +that may be applicable and is limited to the U.S. federal income tax consequences to individuals who are citizens or residents of the +U.S., other than those individuals who are taxed on a residence basis in a foreign country. +Incentive +Stock Options. In general, an employee will not recognize taxable income upon either the grant or the exercise of an incentive stock +option and the Company will not be entitled to an income tax deduction at either such time. In general, however, for purposes of the +alternative minimum tax, the excess of the fair market value of the shares of Common Stock acquired upon exercise of an incentive stock +option (determined at the time of exercise) over the exercise price of the incentive stock option will be considered income. If the recipient +is continuously employed on the date of grant until the date three months prior to the date of exercise and such recipient does not sell +Common Stock received pursuant to the exercise of the incentive stock option within either (i) two years after the date of the grant +of the incentive stock option or (ii) one year after the date of exercise, a subsequent sale of Common Stock will result in long-term +capital gain or loss to the recipient and will not result in a tax deduction to the Company. +If +the recipient is not continuously employed on the date of grant until the date three months prior to the date of exercise or such recipient +disposes of Common Stock acquired upon exercise of the incentive stock option within either of the above-mentioned time periods, the +recipient will generally recognize as ordinary income an amount equal to the lesser of (i) the fair market value of Common Stock on the +date of exercise over the exercise price, or (ii) the amount realized upon disposition over the exercise price. In such event, subject +to the limitations of Section 280G of the Code (as described below), the Company generally will be allowed an income tax deduction equal +to the amount recognized as ordinary income. Any gain in excess of such amount recognized by the recipient as ordinary income would be +taxed at the rates applicable to short-term or long-term capital gains (depending on the holding period). +To +the extent that the aggregate fair market value (determined as of the time of grant) of the Common Stock with respect to which incentive +stock options are exercisable for the first time by a participant during any calendar year under the 2019 Plan and/or any other stock +option plan of the Company or affiliate exceeds $100,000, such options are treated as non-qualified stock options. +Nonqualified +Stock Options . A recipient will not recognize any taxable income upon the grant of a nonqualified stock option and the Company will +not be entitled to a deduction at the time of such grant unless such option has a readily ascertainable fair market value (as determined +under applicable tax law) at the time of grant. Upon exercise of a nonqualified stock option, the recipient generally will recognize +ordinary income in an amount equal to the excess of the fair market value of Common Stock on the date of exercise over the exercise price. +Upon a subsequent sale of Common Stock by the recipient, the recipient will recognize short-term or long-term capital gain or loss depending +upon his or her holding period for Common Stock. Subject to the limitations of Section 280G of the Code (as described below), the Company +will generally be allowed an income tax deduction equal to the amount recognized by the recipient as ordinary income. +All +Options. With regard to both incentive stock options and nonqualified stock options, the following also apply: (i) any of the Company’s +officers and directors subject to Section 16(b) of the Exchange Act may be subject to special tax rules regarding the income tax consequences +concerning their stock options, (ii) any entitlement to a tax deduction on the part of the Company is subject to the applicable tax rules, +and (iii) in the event that the exercisability or vesting of any award is accelerated because of a change in control, payments relating +to the awards (or a portion +67 +thereof), either alone or together with certain other payments, may constitute parachute payments under Section +280G of the Code, which excess amounts may be subject to excise taxes and may be nondeductible by the Company. +Section +409A of the Code provides that all amounts deferred under a nonqualified deferred compensation plan are includible in a participant’s +gross income to the extent such amounts are not subject to a substantial risk of forfeiture, unless certain requirements are satisfied. +If the requirements are not satisfied, in addition to current income inclusion, interest at the underpayment rate plus 1% will be imposed +on the participant’s underpayments that would have occurred had the deferred compensation been includible in gross income for the +taxable year in which first deferred or, if later, the first taxable year in which such deferred compensation is not subject to a substantial +risk of forfeiture. The amount required to be included in income is also subject to an additional 20% tax. While most awards under the +2019 Plan are anticipated to be exempt from the requirements of Section 409A of the Code, awards not exempt from Section 409A of the +Code will be subject to Section 409A of the Code. +Section +162(m) of the Code generally limits the deduction the Company can take for compensation we pay to any “covered employee” +to $1,000,000 per year per individual, and awards granted under the 2019 Plan may be subject to such limit. +The +2019 Plan is not subject to any of the requirements of the Employee Retirement Income Security Act of 1974, as amended. The 2019 Plan +is not, nor is it intended to be, a “tax-qualified” plan under Section 401(a) of the Code. +Required +Vote +Approval +of this resolution requires the affirmative vote of a majority of the votes cast by the shares of Common Stock present or represented +by proxy and entitled to vote at the Annual Meeting. +Recommendation +of the Board of Directors +The +Board of Directors unanimously recommends a vote “FOR” the approval of amendments to the Steven Madden, Ltd. 2019 Incentive +Compensation Plan. +OTHER +MATTERS +At +the date of this Proxy Statement, we have no knowledge of any business other than that described above that will be presented at the +Annual Meeting. If any other business should properly come before the Annual Meeting in connection therewith, it is intended that the +persons named in the accompanying proxy will have discretionary authority to vote the shares that they represent. +WHETHER +OR NOT YOU EXPECT TO BE PRESENT AT THE ANNUAL MEETING, PLEASE MARK, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY CARD PROMPTLY. ALTERNATIVELY, +YOU MAY VOTE YOUR SHARES BY TELEPHONE OR OVER THE INTERNET AS DESCRIBED ON THE ACCOMPANYING PROXY CARD. YOUR VOTE IS IMPORTANT. IF YOU +ARE A STOCKHOLDER OF RECORD AND ATTEND THE ANNUAL MEETING AND WISH TO VOTE IN PERSON, YOU MAY WITHDRAW YOUR PROXY AT ANY TIME PRIOR TO +THE VOTE. +68 +ANNEX +A - RECONCILIATION OF ADJUSTED RESULTS (NON-GAAP) +The +Proxy Statement provides our financial results both in accordance with generally accepted accounting principles in the United States +(“GAAP”) and using certain non-GAAP financial measures. In particular, the Proxy Statement provides our historic net income +and income per diluted share adjusted to exclude certain charges and recoveries, which are non-GAAP financial measures. We use non-GAAP +financial information to evaluate its operating performance and to represent the manner in which we conduct and view our business. Additionally, +we believe the information assists investors in comparing our performance across reporting periods on a consistent basis by excluding +items that are not indicative of its core business. The non-GAAP financial information is provided in addition to, and not as an alternative +to, our reported results prepared in accordance with GAAP. +Reconciliation +of Net Income and Diluted Income Per Share (GAAP Basis) to Adjusted Net Income and Adjusted Diluted Income Per Share (Non-GAAP Basis) +Year +Ended December 31, +2023 +2022 +GAAP net income attributable to +Steven Madden, Ltd. +$ 171,554 +$ 216,061 +After-tax impact of expense in connection with +impairment of certain trademarks +4,984 +- +After-tax impact of expense in connection with +certain severances, termination benefits and a corporate office relocation +2,878 +- +After-tax impact of expense in connection with +the write-off of an investment +2,273 +- +After-tax impact of expense in connection with +acquisition and formation of joint ventures +1,867 +- +After-tax impact of expense in connection with +the purchase accounting fair value adjustment of inventory acquired in connection with an acquisition +1,546 +- +After-tax impact of benefit in connection with +the dissolution of a joint venture +(1,630 ) +- +After-tax impact of benefit in connection with +a deferred tax adjustment +(291 ) +1,525 +After-tax impact of expense in connection with +the accelerated amortization of a trademark +- +5,393 +After-tax impact of benefit expense in connection +with the change in valuation of contingent consideration +- +(4,441 ) +After-tax impact of +benefit in connection with the exit of a lease +- +(245 ) +Adjustments attributable +to noncontrolling interest in connection with a trademark impairment +(498 ) +- +Adjusted net income +attributable to Steven Madden, Ltd. +$ 182,683 +$ 218,293 +GAAP diluted income per share +$ 2.30 +$ 2.77 +Adjusted diluted income per share +$ 2.45 +$ 2.80 +A- 1 +[This +page intentionally left blank] +ANNEX +B +AMENDED +AND RESTATED CERTIFICATE OF INCORPORATION OF +STEVEN +MADDEN, LTD. +Steven +Madden, Ltd., a corporation organized and existing under the laws of the State of Delaware, hereby certifies as follows: +1. The +name of the corporation is Steven Madden, Ltd., which was the name under which the corporation +was originally incorporated. The corporation was originally incorporated under the laws of +the State of New York on July 9, 1990, and reincorporated under the same name in Delaware +on November 10, 1998. +2. This +Amended and Restated Certificate of Incorporation, which restates, integrates, and further +amends the certificate of incorporation of the corporation, has been duly adopted by the +corporation in accordance with Sections 242 and 245 of the General Corporation Law of the +State of Delaware and has been adopted by the requisite vote of the stockholders of the corporation. +3. The +certificate of incorporation of the corporation is hereby amended and restated in its entirety +to read as follows: +FIRST: +The name of the corporation (hereinafter called the “corporation”) is Steven Madden, Ltd. +SECOND: +The address, including street, number, city, and county, of the registered office of the corporation in the State of Delaware is +850 New Burton Road, Suite 201, Dover, Delaware 19904; and the name of the registered agent of the corporation in the State of Delaware +at such address is Cogency Global Inc., in the County of Kent. +THIRD: +The purpose of the corporation is to engage in any lawful act or activity for which corporations may be organized under the General +Corporation Law of the State of Delaware. +FOURTH: +The total number of shares of all classes of stock which the corporation shall have authority to issue is two hundred fifty million +(250,000,000) shares, consisting of two hundred forty-five million (245,000,000) shares of common stock, $0.0001 par value per share, +and five million (5,000,000) shares of preferred stock, $0.0001 par value per share. +The +shares of Preferred Stock may be issued from time to time in one or more series, in any manner permitted by law, as determined from time +to time by the Board of Directors, and stated in the resolution or resolutions providing for the issuance of such shares adopted by the +Board of Directors pursuant to authority hereby vested in it. Without limiting the generality of the foregoing, shares in such series +shall have such voting powers, full or limited, or no voting powers, and shall have such designations, preferences and relative, participating, +optional, or other special rights, and qualifications, limitations, or restrictions thereof, permitted by law, as shall be stated in +the resolution or resolutions providing for the issuance of such shares adopted by the Board of Directors pursuant to authority hereby +vested in it. The number of shares of any such series so set forth in such resolution or resolutions may be increased (but not above +the total number of authorized shares of Preferred Stock) or decreased (but not below the number of shares thereof then outstanding) +by further resolution or resolutions adopted by the Board of Directors pursuant to authority hereby vested in it. +No +holder of any of the shares of the stock of the corporation, whether now or hereafter authorized and issued, shall be entitled as of +right to purchase or subscribe for any unissued stock of any class, or any additional shares of any class to be issued by reason of +any increase of the authorized capital stock of any class of the corporation, or bonds, certificates of indebtedness, debentures, or +other securities convertible into stock of any class of the corporation, or carrying any right to purchase stock of any class of the +corporation, but any such unissued stock or any such additional authorized issue of any stock or of other securities convertible +into stock, or carrying any right to purchase stock, may be issued and disposed of pursuant to resolution of the Board of Directors +to such persons, firms, corporations, or associations, and upon such terms, as may be deemed advisable by the Board of Directors in +the exercise of its discretion. +B- 1 +FIFTH: +The corporation is to have perpetual existence. +SIXTH: +Whenever a compromise or arrangement is proposed between this corporation and its creditors or any class of them and/or between this +corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application +in a summary way of this corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed +for this corporation under § 291 of Title 8 of the Delaware Code +or on the application of trustees in dissolution or of any receiver or receivers appointed for this corporation under § 279 of Title +8 of the Delaware Code order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of +this corporation, as the case may be, to be summoned in such manner as the said court directors. If a majority in number representing +three fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this corporation, +as the case may be, agree to any compromise or arrangement and to any reorganization of this corporation as consequence of such compromise +or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application +has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of this +corporation, as the case may be, and also on this corporation. +SEVENTH: +For the management of the business and for the conduct of the affairs of the corporation, and in further definition, limitation, +and regulation of the powers of the corporation and of its directors and of its stockholders or any class thereof, as the case may be, +it is further provided: +1. +The management of the business and the conduct of the affairs of the corporation shall be vested in its Board of Directors. The number +of directors which shall constitute the whole Board of Directors shall be fixed by, or in the manner provided in, the Bylaws. The phrase +“whole Board” and the phrase “total number of directors” shall be deemed to have the same meaning, to wit, the +total number of directors which the corporation would have if there were no vacancies. No election of directors need be by written ballot. +2. +After the original or other Bylaws of the corporation have been adopted, amended, or repealed, as the case may be, in accordance with +the provisions of § 109 of the General Corporation Law of the State of Delaware, and, after the corporation has received any payment +for any of its stock, the power to adopt, amend, or repeal the Bylaws of the corporation may be exercised by the Board of Directors of +the corporation; provided, however, that any provision for the classification of directors of the corporation for staggered terms pursuant +to the provisions of subsection (d) of § 141 of the General Corporation Law of the State of Delaware shall be set forth in an initial +Bylaw or in a Bylaw adopted by the stockholders entitled to vote of the corporation unless provisions for such classification shall be +set forth in this certificate of incorporation. +3. +Whenever the corporation shall be authorized to issue only one class of stock, each outstanding share shall entitle the holder thereof +to notice of, and the right to vote at, any meeting of stockholders. Whenever the corporation shall be authorized to issue more than +one class of stock, no outstanding share of any class of stock which is denied voting power under the provisions of the certificate of +incorporation shall entitle the holder thereof to the right to vote at any meeting of stockholders except as the provisions of paragraph +(2) of subsection (b) of § 242 of the General Corporation Law of the State of Delaware shall otherwise require; provided, that no +share of any such class which is otherwise denied voting power shall entitle the holder thereof to vote upon the increase or decrease +in the number of authorized shares of said class. +EIGHTH: +To the fullest extent permitted by the General Corporation Law of the State of Delaware, as the same presently exists or may hereafter +be amended, no director or officer shall be personally liable to the Corporation or to any stockholder for monetary damages for breach +of fiduciary duty as a director or officer, except for any matter in respect of which (a) such director shall be liable under Section +174 of the General Corporation Law of the State of Delaware or any amendment thereto or successor provision thereto, (b) such officer +shall be liable in any action by or in the right of the corporation, or (c) such director or officer shall be liable by reason that, +in addition to any and all other requirements for liability, that person (A) shall have breached their duty of loyalty to the Corporation +or its stockholders, (B) shall not have acted in good faith or, in failing to act, shall not have acted in good faith, (C) shall have +acted in a manner involving intentional misconduct or a knowing violation of law or, in failing to act, shall have acted in a manner +involving intentional misconduct or a knowing violation of law or (D) shall have derived an improper personal benefit. +Any +repeal or modification of this Article EIGHTH shall not adversely affect any right or protection of a director or officer with respect +to any act or omission occurring prior to such repeal or modification. If the General Corporation Law of the State of Delaware is amended +after the date of incorporation to authorize corporate action +B- 2 +further eliminating or limiting the personal liability of directors or +officers, then the liability of a director or officer of the Corporation shall be eliminated or limited to the fullest extent permitted +by the General Corporation Law of the State of Delaware, as so amended. +NINTH: +The corporation shall, to the fullest extent permitted by the provisions of § 145 of the General Corporation Law of the State +of Delaware, as the same may be amended and supplemented, indemnify any and all persons whom it shall have power to indemnify under said +section from and against any and all of the expenses, liabilities, or other matters referred to in or covered by said section, and the +indemnification provided for herein shall not be deemed exclusive of any other rights to which those indemnified may be entitled under +any Bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as +to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, +employee, or agent and shall inure to the benefit of the heirs, executors, and administrators of such a person. +TENTH: +From time to time any of the provisions of this certificate of incorporation may be amended, altered, or repealed, and other provisions +authorized by the laws of the State of Delaware at the time in force may be added or inserted in the manner and at the time prescribed +by said laws, and all rights at any time conferred upon the stockholders of the corporation by this certificate of incorporation are +granted subject to the provisions of this Article TENTH. +4. That +the foregoing amendment and restatement was approved by the holders of the requisite number +of shares of this corporation in accordance with the General Corporation Law of the State +of Delaware. +5. That +this Certificate of Incorporation, which restates and integrates and further amends the provisions +of this corporation’s Certificate of Incorporation, has been duly adopted in accordance +with Sections 242 and 245 of the General Corporation Law of the State of Delaware. +[ Signature +page follows ] +B- 3 +IN +WITNESS WHEREOF, this Amended and Restated Certificate of Incorporation has been executed by a duly authorized officer of this corporation +on this ___ day of ___________, 2024. +/s/ +By: +B- 4 +ANNEX +C +STEVEN +MADDEN, LTD. +2019 +INCENTIVE COMPENSATION PLAN +ARTICLE +I +ESTABLISHMENT +OF PLAN +1.1 +Establishment of the Plan . Steven Madden, Ltd (“the Company”) established this incentive compensation plan to +permit the granting of Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock +Units, Performance Shares, Performance Share Units, Other Stock-Based Awards and Performance-Based Cash Awards to the persons and for +the purposes described herein. +1.2 +Purposes of the Plan . The purposes of the Plan are to induce certain individuals to remain in the employ, or to continue to +serve as directors of, or consultants or advisors to, the Company and its present and future Subsidiaries, to attract new individuals +to enter into such employment or service and to encourage such individuals to secure or increase on reasonable terms their stock ownership +in the Company. The Board believes that the granting of Awards under the Plan will promote continuity of management and increased incentive +and personal interest in the welfare of the Company by those who are or may become primarily responsible for shaping and carrying out +the long range plans of the Company and securing its continued growth and financial success. +1.3 +Duration of the Plan . No Award may be granted under the Plan after February 24, 2034, or such earlier date as the Board shall +determine. The Plan will remain in effect with respect to outstanding Awards until no Awards remain outstanding. +ARTICLE +II +DEFINITIONS +For +purposes of this Plan, the following terms shall have the following meanings: +2.1 +“ Acquisition Event ” means a merger or consolidation in which the Company is not the surviving entity, any transaction +that results in the acquisition of all or substantially all of the Company’s outstanding Common Stock by a single person or entity +or by a group of persons and/or entities acting in concert, or the sale or transfer of all or substantially all of the Company’s +assets. +2.2 +“ Affiliate ” means each of the following: (a) any Subsidiary; (b) any Parent; (c) any corporation, trade or business +(including, without limitation, a partnership or limited liability company) which is directly or indirectly controlled 50% or more (whether +by ownership of stock, assets or an equivalent ownership interest or voting interest) by the Company; (d) any corporation, trade or business +(including, without limitation, a partnership or limited liability company) which directly or indirectly controls 50% or more (whether +by ownership of stock, assets or an equivalent ownership interest or voting interest) of the Company; and (e) any other entity in which +the Company or any of its Affiliates has a material equity interest and which is designated as an “Affiliate” by resolution +of the Committee; provided that the Common Stock subject to any Award constitutes “service recipient stock” for purposes +of Section 409A of the Code or otherwise does not subject the Award to Section 409A of the Code. +2.3 +“ Appreciation Award ” means any Award under this Plan of any Stock Option, Stock Appreciation Right or Other Stock-Based +Award, provided that such Other Stock-Based Award is based on the appreciation in value of a share of Common Stock in excess of an amount +equal to at least the Fair Market Value of the Common Stock on the date such Other Stock-Based Award is granted. +2.4 +“ Award ” means any award under this Plan of any Stock Option, Stock Appreciation Right, Restricted Stock, Performance +Share, Other Stock-Based Award or Performance-Based Cash Awards. All Awards shall be granted by, confirmed by, and subject to the terms +of, a written agreement executed by the Company and the Participant. +2.5 +“ Board ” means the Board of Directors of the Company. +2.6 +“ Cause ” means with respect to a Participant’s Termination of Employment or Termination of Consultancy from +and after the date hereof, the following: (a) in the case where there is no employment agreement, +C- 1 +consulting agreement, change in control +agreement or similar agreement in effect between the Company or an Affiliate and the Participant at the time of the grant of the Award +(or where there is such an agreement but it does not define “cause” (or words of like import)), termination due to: (i) a +Participant’s conviction of, or plea of guilty or nolo contendere to, a felony; (ii) perpetration by a Participant of an illegal +act, or fraud which could cause significant economic injury to the Company; (iii) continuing willful and deliberate failure by the Participant +to perform the Participant’s duties in any material respect, provided that the Participant is given notice and an opportunity to +effectuate a cure as determined by the Committee; or (iv) a Participant’s willful misconduct with regard to the Company that could +have a material adverse effect on the Company; or (b) in the case where there is an employment agreement, consulting agreement, change +in control agreement or similar agreement in effect between the Company or an Affiliate and the Participant at the time of the grant +of the Award that defines “cause” (or words of like import), “cause” as defined under such agreement; provided, +however, that with regard to any agreement under which the definition of “cause” only applies on occurrence of a change in +control, such definition of “cause” shall not apply until a change in control actually takes place and then only with regard +to a termination thereafter. With respect to a Participant’s Termination of Directorship, “cause” means an act or failure +to act that constitutes cause for removal of a director under applicable Delaware law. +2.7 +“ Change in Control ” has the meaning set forth in Section 14.3. +2.8 +“ Change in Control Price ” has the meaning set forth in Section 14.1. +2.9 +“ Code ” means the Internal Revenue Code of 1986, as amended. Any reference to any section of the Code shall also +be a reference to any successor provision and any Treasury Regulation promulgated thereunder. +2.10 +“ Committee ” means a committee or subcommittee of the Board appointed from time to time by the Board, which committee +or subcommittee shall consist of two or more non-employee directors, each of whom shall be (i) a “non-employee director” +as defined in Rule 16b-3; and (ii) an “independent director” as defined under Nasdaq Rule 5605(a)(2) or such other applicable +stock exchange rule. To the extent that no Committee exists that has the authority to administer this Plan, the functions of the Committee +shall be exercised by the Board. If for any reason the appointed Committee does not meet the requirements of Rule 16b-3, such noncompliance +shall not affect the validity of Awards, grants, interpretations or other actions of the Committee. +2.11 +“ Common Stock ” means the Common Stock, $0.0001 par value per share, of the Company. +2.12 +“ Company ” means Steven Madden, Ltd., a Delaware corporation, and its successors by operation of +law. +2.13 +“ Consultant ” means any natural person who provides bona fide consulting or advisory services to the Company or +its Affiliates pursuant to a written agreement, which are not in connection with the offer and sale of securities in a capital-raising +transaction. +2.14 +“ Disability ” means with respect to a Participant’s Termination, a permanent and total disability as defined +in Section 22(e)(3) of the Code. A Disability shall only be deemed to occur at the time of the determination by the Committee of the +Disability. Notwithstanding the foregoing, for Awards that are subject to Section 409A of the Code, Disability shall mean that a Participant +is disabled under Section 409A(a)(2)(C)(i) or (ii) of the Code. +2.15 +“ Effective Date ” means the effective date of this Plan as defined in Article XVIII. +2.16 +“ Eligible Employees ” means each employee of the Company or an Affiliate. +2.17 +“ Exchange Act ” means the Securities Exchange Act of 1934, as amended. Any references to any section of the Exchange +Act shall also be a reference to any successor provision. +2.18 +“ Fair Market Value ” means, unless otherwise required by any applicable provision of the Code or any regulations +issued thereunder, as of any date and except as provided below, the closing price reported for the Common Stock on the applicable date: +(a) as reported on the principal national securities exchange in the United States on which it is then traded, or (b) if not traded on +any such national securities exchange, the last sale price quoted in the principal over-the-counter market on which the Common Stock +is quoted, as determined by the Committee. If the Common Stock is not traded, listed or otherwise reported or quoted, then Fair Market +Value means the fair market value of the Common Stock as determined by the Committee in good faith in whatever manner it considers appropriate +taking into +C- 2 +account the requirements of Section 422 of the Code and/or Section 409A of the Code, as applicable. For purposes of the grant +of any Award, the applicable date shall be the trading day immediately prior to the date on which the Award is granted. For purposes +of the exercise of any Award, the applicable date shall be the date a notice of exercise is received by the Committee or, if not a day +on which the applicable market is open, the next day that it is open. +2.19 +“ Family Member ” means “family member” as defined in Section A.1.(5) of the general instructions of +Form S-8, as may be amended from time to time. +2.20 +“ GAAP ” has the meaning set forth in Section 12.2(c)(ii). +2.21 +“ Incentive Stock Option ” means any Stock Option awarded to an Eligible Employee of the Company, its Subsidiaries +and its Parent (if any) under this Plan intended to be and designated as an “Incentive Stock Option” within the meaning of +Section 422 of the Code. +2.22 +“ Limited Stock Appreciation Right ” means a Tandem Stock Appreciation Right or Non-Tandem Stock Appreciation Right +exercisable only upon the occurrence of a Change in Control or other event as determined by the Committee as provided in Section 7.5. +2.23 +“ Non-Employee Director ” means a director of the Company who is not an active employee of the Company or an Affiliate. +2.24 +“ Non-Qualified Stock Option ” means any Stock Option awarded under this Plan that is not an Incentive Stock Option. +2.25 +“ Non-Tandem Stock Appreciation Right ” means the right to receive cash or a number of shares of Common Stock +(as determined by the Committee, in its sole discretion, on the date of grant) equal to the difference between (i) the Fair Market Value +of a share of Common Stock on the date such right is exercised, and (ii) the aggregate exercise price of such right, otherwise than on +surrender of a Stock Option. +2.26 +“ Other Stock-Based Award ” means an Award under Article XI of this Plan that is valued in whole or in part by reference +to, or is payable in or otherwise based on, Common Stock, including, without limitation, a restricted stock unit or other Award valued +by reference to an Affiliate. +2.27 +“ Parent ” means any parent corporation of the Company within the meaning of Section 424(e) of the Code. +2.28 +“ Participant ” means an Eligible Employee, Non-Employee Director or Consultant to whom an Award has been granted +pursuant to this Plan. +2.29 +“ Performance Goals ” means the performance goals set forth on Exhibit A hereto. +2.30 +“ Performance-Based Cash Award ” means a cash Award under Article XII of this Plan that is payable or otherwise +based on the attainment of certain pre-established performance goals during a Performance Period. +2.31 +“ Performance Period ” means the duration of the period during which receipt of an Award is subject to the satisfaction +of performance criteria, such period as determined by the Committee in its sole discretion. +2.32 +“ Performance Share ” means an Award made pursuant to Article X of this Plan of the right to receive Common Stock +or cash of an equivalent value at the end of a specified Performance Period. +2.33 +“ Person ” means any individual, corporation, partnership, limited liability company, firm, joint venture, association, +joint-stock company, trust, incorporated organization, governmental or regulatory or other entity. +2.34 +“ Plan ” means this Steven Madden, Ltd. 2019 Incentive Compensation Plan, as it may be amended from time to time. +2.35 +“ Prior Plan ” means the Steven Madden, Ltd. 2006 Stock Incentive Plan, as in effect immediately prior to the Effective +Date. +C- 3 +2.36 +“ Reference Stock Option ” has the meaning set forth in Section 7.1. +2.37 +“ Restricted Stock ” means an Award of shares of Common Stock under this Plan that is subject to restrictions under +Article VIII. +2.38 +“ Restricted Stock Unit ” means an Award described in Article IX. +2.39 +“ Restriction Period ” has the meaning set forth in Subsection 8.3(a). +2.40 +“ Retirement ” means a voluntary Termination of Employment at or after age 65 or such earlier date after age 50 +as may be approved by the Committee, in its sole discretion at the time of grant or thereafter provided that the exercise of such discretion +does not make the applicable Award subject to Section 409A of the Code, except that Retirement shall not include any Termination by the +Company with or without Cause. With respect to a Participant’s Termination of Directorship, Retirement means the failure to stand +for reelection or the failure to be reelected on or after a Participant has attained age 65 or, with the consent of the Board, before +age 65 but after age 50, provided that the exercise of such discretion does not make the applicable Award subject to Section 409A of +the Code. +2.41 +“ Rule 16b-3 ” means Rule 16b-3 under Section 16(b) of the Exchange Act as then in effect or any successor provision. +2.42 +“ Section 409A of the Code ” means the nonqualified deferred compensation rules under Section 409A of the Code and +any applicable Treasury regulations thereunder. +2.43 +“ Securities Act ” means the Securities Act of 1933, as amended and all rules and regulations promulgated thereunder. +Any reference to any section of the Securities Act shall also be a reference to any successor provision. +2.44 +“ Stock Appreciation Right” means a Non-Tandem Stock Appreciation Right or a Tandem Stock Appreciation Right. +2.45 +“Stock Option ” or “ Option ” means any option to purchase shares of Common Stock granted +to Eligible Employees, Non-Employee Directors or Consultants granted pursuant to Article VI. +2.46 +“ Subsidiary ” means any subsidiary corporation of the Company within the meaning of Section 424(f) of the Code. +2.47 +“ Tandem Stock Appreciation Right ” means the right to surrender to the Company all (or a portion) of a Stock +Option in exchange for cash or a number of shares of Common Stock (as determined by the Committee, in its sole discretion, on the date +of grant) equal to the difference between (a) the Fair Market Value on the date such Stock Option (or such portion thereof) is surrendered, +of the Common Stock covered by such Stock Option (or such portion thereof), and (b) the aggregate exercise price of such Stock Option +(or such portion thereof). +2.48 +“ Ten Percent Stockholder ” means an Eligible Employee owning stock possessing more than 10% of the total combined +voting power of all classes of stock of the Company, its Subsidiaries or its Parent. +2.49 +“ Termination ” means a Termination of Consultancy, Termination of Directorship or Termination of Employment, as +applicable. +2.50 +“ Termination of Consultancy ” means: (a) that the Consultant is no longer acting as a consultant to the Company +or an Affiliate; or (b) when an entity which is retaining a Participant as a Consultant ceases to be an Affiliate unless the Participant +otherwise is, or thereupon becomes, a Consultant to the Company or another Affiliate at the time the entity ceases to be an Affiliate. +In the event that a Consultant becomes an Eligible Employee or a Non- Employee Director upon the termination of his or her consultancy, +unless otherwise determined by the Committee, in its sole discretion, no Termination of Consultancy shall be deemed to occur until such +time as such Consultant is no longer a Consultant, an Eligible Employee or a Non-Employee Director. Notwithstanding the foregoing, the +Committee may, in its sole discretion, otherwise define Termination of Consultancy in the Award agreement or, if no rights of a Participant +are reduced, may otherwise define Termination of Consultancy thereafter. +C- 4 +2.51 +“ Termination of Directorship ” means that the Non-Employee Director has ceased to be a director of the Company; +except that if a Non-Employee Director becomes an Eligible Employee or a Consultant upon the termination of his or her directorship, +his or her ceasing to be a director of the Company shall not be treated as a Termination of Directorship unless and until the Participant +has a Termination of Employment or Termination of Consultancy, as the case may be. +2.52 +“ Termination of Employment ” means: (a) a termination of employment (for reasons other than a military or personal +leave of absence granted by the Company) of a Participant from the Company and its Affiliates; or (b) when an entity which is employing +a Participant ceases to be an Affiliate, unless the Participant otherwise is, or thereupon becomes, employed by the Company or another +Affiliate at the time the entity ceases to be an Affiliate. In the event that an Eligible Employee becomes a Consultant or a Non-Employee +Director upon the termination of his or her employment, unless otherwise determined by the Committee, in its sole discretion, no Termination +of Employment shall be deemed to occur until such time as such Eligible Employee is no longer an Eligible Employee, a Consultant or a +Non-Employee Director. Notwithstanding the foregoing, the Committee may, in its sole discretion, otherwise define Termination of Employment +in the Award agreement or, if no rights of a Participant are reduced, may otherwise define Termination of Employment thereafter. +2.53 +“ Transfer ” means: (a) when used as a noun, any direct or indirect transfer, sale, assignment, pledge, hypothecation, +encumbrance or other disposition (including the issuance of equity in a Person), whether for value or no value and whether voluntary +or involuntary (including by operation of law), and (b) when used as a verb, to directly or indirectly transfer, sell, assign, pledge, +encumber, charge, hypothecate or otherwise dispose of (including the issuance of equity in a Person) whether for value or for no value +and whether voluntarily or involuntarily (including by operation of law). “Transferred” and “Transferrable” shall +have a correlative meaning. +ARTICLE +III +ADMINISTRATION +3.1 +The Committee . This Plan shall be administered and interpreted by the Committee. +3.2 +Grants of Awards . The Committee shall have full authority to grant, pursuant to the terms of this Plan, to Eligible Employees, +Consultants and Non-Employee Directors: (i) Stock Options, (ii) Stock Appreciation Rights, +(iii) +Restricted Stock, (iv) Restricted Stock Units, (v) Performance Shares; (vi) Other Stock-Based Awards, and (vii) Performance-Based Cash +Awards . In particular, the Committee shall have the authority: +(a) to +select the Eligible Employees, Consultants and Non-Employee Directors to whom Awards may +from time to time be granted hereunder; +(b) to +determine whether and to what extent Awards, or any combination thereof, are to be granted +hereunder to one or more Eligible Employees, Consultants or Non-Employee Directors; +(c) to +determine the number of shares of Common Stock to be covered by each Award granted hereunder; +(d) to +determine the terms and conditions, not inconsistent with the terms of this Plan, of any +Award granted hereunder (including, but not limited to, the exercise or purchase price (if +any), any restriction or limitation, any vesting schedule or acceleration thereof, or any +forfeiture restrictions or waiver thereof, regarding any Award and the shares of Common Stock +relating thereto, based on such factors, if any, as the Committee shall determine, in its +sole discretion); +(e) to +determine whether, to what extent and under what circumstances grants of Options and other +Awards under this Plan are to operate on a tandem basis and/or in conjunction with or apart +from other awards made by the Company outside of this Plan; +(f) to +determine whether and under what circumstances a Stock Option may be settled in cash, Common +Stock and/or Restricted Stock under Section 6.3(d); +(g) to +determine whether, to what extent and under what circumstances Common Stock and other amounts +payable with respect to an Award under this Plan shall be deferred either automatically or +at the election of the Participant in any case, in a manner intended to comply with, Section +409A of the Code; +(h) to +determine whether a Stock Option is an Incentive Stock Option or Non-Qualified Stock Option; +(i) to +determine whether to require a Participant, as a condition of the granting of any Award, +to not sell or otherwise dispose of shares acquired pursuant to the exercise of an Award +for a period of time as determined by the Committee, in its sole discretion, following the +date of the acquisition of such Award; and +C- 5 +(j) to +set the performance criteria and the Performance Period with respect to any Award for which +the grant, vesting or payment of such Award is conditioned upon the attainment of specified +performance criteria and to certify the attainment of any such performance criteria. +3.3 +Guidelines . Subject to Article XV hereof, the Committee shall, in its sole discretion, have the authority to adopt, alter +and repeal such administrative rules, guidelines and practices governing this Plan and perform all acts, including the delegation of +its responsibilities (to the extent permitted by applicable law and applicable stock exchange rules), as it shall, from time to time, +deem advisable; to construe and interpret the terms and provisions of this Plan and any Award issued under this Plan (and any agreements +relating thereto); and to otherwise supervise the administration of this Plan . The Committee may, in its sole discretion, correct +any defect, supply any omission or reconcile any inconsistency in this Plan or in any agreement relating thereto in the manner and to +the extent it shall deem necessary to effectuate the purpose and intent of this Plan . The Committee may, in its sole discretion, +adopt special guidelines and provisions for persons who are residing in or employed in, or subject to, the taxes of, any domestic or +foreign jurisdictions to comply with applicable tax and securities laws of such domestic or foreign jurisdictions . This Plan is +intended to comply with the applicable requirements of Rule 16b-3, and this Plan shall be limited, construed and interpreted in a manner +so as to comply therewith. +3.4 +Decisions Final . Any decision, interpretation or other action made or taken in good faith by or at the direction of the Company, +the Board or the Committee (or any of its members) arising out of or in connection with this Plan shall be within the absolute discretion +of all and each of them, as the case may be, and shall be final, binding and conclusive on the Company and all employees and Participants +and their respective heirs, executors, administrators, successors and assigns. +3.5 +Procedures . If the Committee is appointed, the Board shall designate one of the members of the Committee as chairman and the +Committee shall hold meetings, subject to the By-Laws of the Company, at such times and places as it shall deem advisable, including, +without limitation, by telephone conference or by written consent to the extent permitted by applicable law. A majority of the Committee +members shall constitute a quorum. All determinations of the Committee shall be made by a majority of its members. Any decision or determination +reduced to writing and signed by all the Committee members in accordance with the By-Laws of the Company shall be fully effective as +if it had been made by a vote at a meeting duly called and held. The Committee shall keep minutes of its meetings and shall make such +rules and regulations for the conduct of its business as it shall deem advisable. +3.6 +Delegation of Authority and Employment of Consultants . +(a) The +Committee may, in its sole discretion, designate employees of the Company and professional +advisors to assist the Committee in the administration of this Plan and (to the extent permitted +by applicable law and applicable exchange rules) may grant authority to officers to grant +Awards and/or execute agreements or other documents on behalf of the Committee. +(b) The +Committee may, in its sole discretion, employ such legal counsel, consultants and agents +as it may deem desirable for the administration of this Plan and may rely upon any opinion +received from any such counsel or consultant and any computation received from any such consultant +or agent. Expenses incurred by the Committee or the Board in the engagement of any such counsel, +consultant or agent shall be paid by the Company. The Committee, its members and any person +designated pursuant to sub-section (a) above shall not be liable for any action or determination +made in good faith with respect to this Plan. To the maximum extent permitted by applicable +law, no officer of the Company or member or former member of the Committee or of the Board +shall be liable for any action or determination made in good faith with respect to this Plan +or any Award granted under it. +3.7 +Indemnification . To the maximum extent permitted by applicable law and the Certificate of Incorporation and By-Laws of the +Company and to the extent not covered by insurance directly insuring such person, each officer or employee of the Company or any Affiliate +and member or former member of the Committee or the Board shall be indemnified and held harmless by the Company against any cost or expense +(including reasonable fees of counsel reasonably acceptable to the Committee) or liability (including any sum paid in settlement of a +claim with the approval of the Committee), and advanced amounts necessary to pay the foregoing at the earliest time and to the fullest +extent permitted, arising out of any act or omission to act in connection with the administration of this Plan, except to the extent +arising out of such officer’s, employee’s, member’s or former member’s fraud. Such indemnification shall be in +addition to any rights of indemnification the officers, employees, directors or members or former officers, directors or members may +have under applicable law or under the Certificate of Incorporation or By- +C- 6 +Laws of the Company or any Affiliate. Notwithstanding anything +else herein, this indemnification will not apply to the actions or determinations made by an individual with regard to Awards granted +to him or her under this Plan. +ARTICLE +IV +SHARE +LIMITATION +4.1 +Shares . +(a) General +Limitations . The aggregate number of shares of Common Stock that may be issued or used +for reference purposes or with respect to which Awards may be granted under this Plan shall +not exceed 19,000,000 shares (subject to any increase or decrease pursuant to Section 4.2), +which may be either authorized and unissued Common Stock or Common Stock held in or acquired +for the treasury of the Company or both. Any shares of Common Stock that are subject to Awards +that are not Appreciation Awards shall be counted against this limit as 3.0 shares for every +share granted. If any Appreciation Award granted under this Plan expires, terminates, is +cancelled or is forfeited for any reason, the number of shares of Common Stock underlying +any such Award shall again be available for the purpose of Awards under this Plan and added +back to the aggregate maximum limit. If any Awards that are not Appreciation Awards granted +under this Plan to a Participant expire, terminate, are cancelled or are forfeited for any +reason, 3.0 shares of Common Stock shall again be available for the purposes of Awards under +this Plan and added back to the aggregate maximum limit. If a Tandem Stock Appreciation Right +or a Limited Stock Appreciation Right is granted in tandem with an Option, such grant shall +only apply once against the maximum number of shares of Common Stock which may be issued +under this Plan. The number of shares of Common Stock available for the purpose of Awards +under this Plan shall be reduced by (i) the total number of Stock Options or Stock Appreciation +Rights exercised, regardless of whether any of the shares of Common Stock underlying such +Awards are not actually issued to the Participant as the result of a net settlement, (ii) +any shares of Common Stock used to pay any exercise price or tax withholding obligation with +respect to any Award and (iii) any shares of Common Stock repurchased by the Company on the +open market with the proceeds of an Stock Option exercise price. +(b) Individual +Participant Limitations . +(i) +The maximum number of shares of Common Stock subject to any Award of Stock Options, Stock Appreciation Rights, shares of Restricted Stock +or Awards parts of Restricted Stock Units for which the grant of such Award or the lapse of the relevant Restriction Period is subject +to the attainment of Performance Goals which may be granted under this Plan during any fiscal year of the Company to each Eligible Employee +or Consultant shall be 1,000,000 shares per type of Award (which shall be subject to any further increase or decrease pursuant to Section +4.2), provided that the maximum number of shares of Common Stock for all types of Awards does not exceed 1,200,000 (which shall be subject +to any further increase or decrease pursuant to Section 4.2) with respect to any fiscal year of the Company. If a Tandem Stock Appreciation +Right is granted or a Limited Stock Appreciation Right is granted in tandem with a Stock Option, it shall apply against the Eligible +Employee’s or Consultant’s individual share limitations for both Stock Appreciation Rights and Stock Options. +(ii) +The maximum number of shares of Common Stock subject to (A) any Award of Stock Options (other than Incentive Stock Options), Stock Appreciation +Rights and any other share appreciation awards which may be granted under this Plan during any fiscal year of the Company to each Non- +Employee Director shall be 120,000 shares per type of Award (which shall be subject to any further increase or decrease pursuant to Section +4.2), provided that the maximum number of shares of Common Stock for all such Awards does not exceed 160,000 (which shall be subject +to any further increase or decrease pursuant to Section 4.2) with respect to any fiscal year of the Company, and (B) +any Award of Restricted Stock, Restricted Stock Units and any other Awards other than Awards described in Section 4.1(b)(ii)(A) which +may be granted under this Plan during any fiscal year of the Company to each Non-Employee Director shall be 40,000 shares per type of +Award (which shall be subject to any further increase or decrease pursuant to Section 4.2), provided that the maximum number of shares +of Common Stock for all such Awards does not exceed 60,000 (which shall be subject to any further increase or decrease pursuant to Section +4.2) with respect to any fiscal year of the Company; provided further, that in no event shall the aggregate grant of Awards to Non- Employee +Directors exceed 5% (when combined with the 5% limitation set forth in Sections 6.3(c), +C- 7 +8.3(a)(iv), 9.3(c), 10.2(f) and 11.2(c) of this +Plan) of the total number of shares of Common Stock reserved for Awards under this Plan. If a Tandem Stock Appreciation Right is granted +or a Limited Stock Appreciation Right is granted in tandem with a Stock Option, it shall apply against the Non- Employee Director’s +individual share limitations for both Stock Appreciation Rights and Stock Options. +(iii) +There are no annual individual Eligible Employee or Consultant share limitations on Restricted Stock for which the grant of such Award +or the lapse of the relevant Restriction Period is not subject to attainment of Performance Goals in accordance with Section 8.3(a)(ii) +hereof. +(iv) +The maximum number of shares of Common Stock subject to any Award of Performance Shares which may be granted under this Plan during any +fiscal year of the Company to each Eligible Employee or Consultant shall be 1,000,000 (which shall be subject to any further increase +or decrease pursuant to Section 4.2) with respect to any fiscal year of the Company. Each Performance Share shall be referenced to one +share of Common Stock and shall be charged against the available shares under this Plan at the time the unit value measurement is converted +to a referenced number of shares of Common Stock in accordance with Section 10.1. +(v) +The maximum payment under any Performance-Based Cash Award payable with respect to any fiscal year of the Company and for which the grant +of such Award is subject to the attainment of Performance Goals in accordance with Section 12.2(c) herein which may be granted under +this Plan with respect to any fiscal year of the Company to each Eligible Employee or Consultant shall be $10,000,000. +(vi) +The individual Participant limitations set forth in this Section 4.1(b) shall be cumulative; that is, to the extent that shares of Common +Stock for which Awards are permitted to be granted to an Eligible Employee or a Consultant during a fiscal year are not covered by an +Award to such Eligible Employee or Consultant in a fiscal year, the number of shares of Common Stock available for Awards to such Eligible +Employee or Consultant shall automatically increase in the subsequent fiscal years during the term of the Plan until used. +4.2 +Changes . +(a) The +existence of this Plan and the Awards granted hereunder shall not affect in any way the right +or power of the Board or the stockholders of the Company to make or authorize (i) any adjustment, +recapitalization, reorganization or other change in the Company’s capital structure +or its business, (ii) any merger or consolidation of the Company or any Affiliate, (iii) +any issuance of bonds, debentures, preferred or prior preference stock ahead of or affecting +the Common Stock, (iv) the dissolution or liquidation of the Company or any Affiliate, (v) +any sale or transfer of all or part of the assets or business of the Company or any Affiliate +or (vi) any other corporate act or proceeding. +(b) +Subject +to the provisions of Section 4.2(d), if there shall occur any such change in the capital structure of the Company by reason of any stock +split, reverse stock split, stock dividend, subdivision, combination or reclassification of shares that may be issued under the Plan, +any recapitalization, any merger, any consolidation, any spin off, any reorganization or any partial or complete liquidation, or any +other corporate transaction or event having an effect similar to any of the foregoing (a “ Section 4.2 Event ”), then +(i) the aggregate number and/or kind of shares that thereafter may be issued under the Plan, (ii) the number and/or kind of shares or +other property (including cash) to be issued upon exercise of an outstanding Award or under other Awards granted under the Plan, (iii) +the purchase price thereof, and/or (iv) the individual Participant limitations set forth in Section 4.1(b) (other than those based on +cash limitations) shall be appropriately adjusted. In addition, subject to Section 4.2(d), if there shall occur any change in the capital +structure or the business of the Company that is not a Section 4.2 Event (an “ Other Extraordinary Event ”), including +by reason of any extraordinary dividend (whether cash or stock), any conversion, any adjustment, any issuance of any class of securities +convertible or exercisable into, or exercisable for, any class of stock, or any sale or transfer of all or substantially all the Company’s +assets or business, then the Committee, in its sole discretion, may adjust any Award and make such other adjustments to the Plan. Any +adjustment pursuant to this Section 4.2 shall be consistent with the applicable Section 4.2 Event or the applicable Other Extraordinary +Event, as the case may be, and in such manner as the +C- 8 +Committee may, in its sole discretion, deem appropriate and equitable to prevent substantial dilution or enlargement of the rights granted to, or available for, Participants under the Plan. Any such adjustment determined by the Committee shall be final, binding and conclusive on the Company and all Participants and their respective heirs, executors, administrators, successors and permitted assigns. Except as expressly provided in this Section 4.2 or in the applicable Award agreement, a Participant shall have no rights by reason of any Section 4.2 Event or any Other Extraordinary Event. +(c) Fractional +shares of Common Stock resulting from any adjustment in Awards pursuant to Section 4.2(a) +or (b) shall be aggregated until, and eliminated at, the time of exercise by rounding-down +for fractions less than one-half and rounding-up for fractions equal to or greater than one-half. +No cash settlements shall be made with respect to fractional shares eliminated by rounding. +Notice of any adjustment shall be given by the Committee to each Participant whose Award +has been adjusted and such adjustment (whether or not such notice is given) shall be effective +and binding for all purposes of this Plan. +(d) In +the event of an Acquisition Event, the Committee may, in its sole discretion, terminate all +outstanding and unexercised Stock Options or Stock Appreciation Rights or any Other Stock +Based Award that provides for a Participant-elected exercise effective as of the date of +the Acquisition Event, by delivering notice of termination to each Participant at least 20 +days prior to the date of consummation of the Acquisition Event, in which case during the +period from the date on which such notice of termination is delivered to the consummation +of the Acquisition Event, each such Participant shall have the right to exercise in full +all of his or her vested Stock Options or Stock Appreciation Rights that are then outstanding +(without regard to any limitations on exercisability otherwise contained in the Award agreements), +but any such exercise shall be contingent on the occurrence of the Acquisition Event, and, +provided that, if the Acquisition Event does not take place within a specified period after +giving such notice for any reason whatsoever, the notice and exercise pursuant thereto shall +be null and void. +If +an Acquisition Event occurs but the Committee does not terminate the outstanding Awards pursuant to this Section 4.2(d), the provisions +of Section 4.2(b) and Article XIV shall apply. +4.3 +Minimum Purchase Price . Notwithstanding any provision of this Plan to the contrary, if authorized but previously unissued +shares of Common Stock are issued under this Plan, such shares shall not be issued for a consideration that is less than as permitted +under applicable law. +ARTICLE +V +ELIGIBILITY +- GENERAL REQUIREMENTS FOR AWARDS +5.1 +General Eligibility . All Eligible Employees, Consultants, Non-Employee Directors and prospective employees and consultants +are eligible to be granted Awards, subject to the terms and conditions of this Plan. Eligibility for the grant of Awards and actual participation +in this Plan shall be determined by the Committee in its sole discretion. +5.2 +Incentive Stock Options . Notwithstanding anything herein to the contrary, only Eligible Employees of the Company, its Subsidiaries +and its Parent (if any) are eligible to be granted Incentive Stock Options under this Plan. Eligibility for the grant of an Incentive +Stock Option and actual participation in this Plan shall be determined by the Committee in its sole discretion. +5.3 +General Requirement . The vesting and exercise of Awards granted to a prospective employee or consultant are conditioned upon +such individual actually becoming an Eligible Employee or Consultant. +5.4 +Issuance of Shares . Shares shall not be issued pursuant to the exercise of an Award unless the exercise of such Award and +the issuance and delivery of such shares shall comply with all applicable laws, and shall be further subject to the approval of the Company +with respect to such compliance. As a condition of the exercise of an Award, the Company may require the person exercising such Award +to represent and warrant at the time of such exercise that the shares are being purchased only for investment and without any present +intention to sell or distribute such shares if, as determined by the Company, such a representation is required by any applicable law. +C- 9 +ARTICLE +VI +STOCK +OPTIONS +6.1 +Options . Stock Options may be granted alone or in addition to other Awards granted under this Plan. Each Stock Option granted +under this Plan shall be of one of two types: (a) an Incentive Stock Option or (b) a Non- Qualified Stock Option. +6.2 +Grants . The Committee shall, in its sole discretion, have the authority to grant to any Eligible Employee (subject to Section +5.2) Incentive Stock Options, Non-Qualified Stock Options, or both types of Stock Options, and shall designate the type or types of option +in the Award. The Committee shall, in its sole discretion, have the authority to grant Non-Qualified Stock Options to any Consultant +or Non-Employee Director. To the extent that any Stock Option does not qualify as an Incentive Stock Option (whether because of its provisions +or the time or manner of its exercise or otherwise), such Stock Option or the portion thereof which does not qualify shall constitute +a separate Non-Qualified Stock Option. If the Stock Option does not specify whether it is an Incentive Stock Option in whole or part, +the Stock Option shall be a Non-Qualified Stock Option. +6.3 +Terms of Options . Options granted under this Plan shall be subject to the following terms and conditions and shall be in such +form and contain such additional terms and conditions, not inconsistent with the terms of this Plan, as the Committee, in its sole discretion, +shall deem desirable: +(a) Exercise +Price . The exercise price per share of Common Stock subject to a Stock Option shall be +determined by the Committee at the time of grant, provided that the per share exercise price +of a Stock Option shall not be less than 100% (or, in the case of an Incentive Stock Option +granted to a Ten Percent Stockholder, 110%) of the Fair Market Value of the Common Stock +at the time of grant. +(b) Stock +Option Term . The term of each Stock Option shall be fixed by the Committee, provided +that no Stock Option shall be exercisable more than seven (7) years after the date the Option +is granted; and provided further that the term of an Incentive Stock Option granted to a +Ten Percent Stockholder shall not exceed five (5) years. +(c) Exercisability . +(i) Stock Options shall be exercisable at such time or times and subject to such terms +and conditions as shall be determined by the Committee at grant. +(ii) +Notwithstanding any other provision of this Plan to the contrary, the vesting period with respect to any Option Award shall be no +less than (A) one year, if the vesting is based (in whole or in part) on the attainment of one or more Performance Goals, and (B) three +years, if the vesting is based solely on the continued performance of services by the Participant (with vesting as to no more than one-third +of the shares of Common Stock subject thereto on each of the first three anniversaries of the date of grant). +(iii) +Subject to the limitations set forth in Section 4.1(b), the Committee shall be authorized (at the time of grant or thereafter) to +provide for earlier vesting in the event of a Participant’s Retirement, death or Disability. +Option +Awards may be granted without the foregoing limitations with respect to up to 5% (when combined with the 5% limitation set forth in Sections +4.1(b)(ii), 8.3(a)(iv), 9.3(c), 10.2(f) and 11.2(c) of this Plan) of the total number of shares of Common Stock reserved for Awards under +this Plan. +(d) +Method +of Exercise . Subject to whatever installment exercise and waiting period provisions apply under subsection (c) above, to the extent +vested, Stock Options may be exercised in whole or in part at any time during the Option term, by giving written notice of exercise to +the Company specifying the number of shares of Common Stock to be purchased. Such notice shall be in a form acceptable to the Company +and shall be accompanied by payment in full of the purchase price as follows: (i) in cash or by check, bank draft or money order payable +to the order of the Company; (ii) solely to the extent permitted by applicable law, if the Common Stock is traded on The Nasdaq Stock +Market or another national securities exchange or quoted in the over-the-counter market, and the Committee authorizes, through a procedure +whereby the Participant delivers irrevocable instructions to a broker reasonably acceptable to the Committee to deliver promptly to the +Company an amount equal to the +C- 10 +purchase price; (iii) by cashless exercise; or (iv) on such other terms and conditions as may be acceptable to the Committee (including, without limitation, payment in full or in part in the form of delivery of Common Stock owned by the Participant based on the Fair Market Value of the Common Stock on the payment date as determined by the Committee, in its sole discretion). No shares of Common Stock shall be issued until payment therefor, as provided herein, has been made or provided for. +(e) Non-Transferability +of Options . No Stock Option shall be Transferable by the Participant other than by will +or by the laws of descent and distribution, and all Stock Options shall be exercisable, during +the Participant’s lifetime, only by the Participant. Notwithstanding the foregoing, +the Committee may determine, in its sole discretion, at the time of grant or thereafter that +a Non-Qualified Stock Option that is otherwise not Transferable pursuant to this Section +is Transferable to a Family Member in whole or in part and in such circumstances, and under +such conditions, as determined by the Committee, in its sole discretion. A Non-Qualified +Stock Option that is Transferred to a Family Member pursuant to the preceding sentence (i) +may not be subsequently Transferred otherwise than by will or by the laws of descent and +distribution and (ii) remains subject to the terms of this Plan and the applicable Award +agreement. Any shares of Common Stock acquired upon the exercise of a Non-Qualified Stock +Option by a permissible transferee of a Non-Qualified Stock Option or a permissible transferee +pursuant to a Transfer after the exercise of the Non-Qualified Stock Option shall be subject +to the terms of this Plan and the applicable Award agreement. +(f) Incentive +Stock Option Limitations . To the extent that the aggregate Fair Market Value (determined +as of the time of grant) of the Common Stock with respect to which Incentive Stock Options +are exercisable for the first time by an Eligible Employee during any calendar year under +this Plan and/or any other stock option plan of the Company, any Subsidiary or any Parent +exceeds $100,000, such Options shall be treated as Non-Qualified Stock Options. Should any +provision of this Plan not be necessary in order for the Stock Options to qualify as Incentive +Stock Options, or should any additional provisions be required, the Committee may, in its +sole discretion, amend this Plan accordingly, without the necessity of obtaining the approval +of the stockholders of the Company. +(g) Form, +Modification, Extension and Renewal of Stock Options . Subject to the terms and conditions +and within the limitations of this Plan, Stock Options shall be evidenced by such form of +agreement or grant as is approved by the Committee, and the Committee may, in its sole discretion +(i) modify or extend outstanding Stock Options granted under this Plan (provided that the +rights of a Participant are not reduced without his or her consent and provided further that +such action does not subject the Stock Options to tax under Section 409A of the Code), and +(ii) accept the surrender of outstanding Stock Options (up to the extent not theretofore +exercised) and authorize the granting of new Stock Options in substitution therefor (to the +extent not theretofore exercised). Notwithstanding the foregoing, an outstanding Option may +not be modified to reduce the exercise price thereof nor may a new Option at a lower price +be substituted for a surrendered Option (other than adjustments or substitutions in accordance +with Section 4.2), unless such action is approved by the stockholders of the Company. +(h) Early +Exercise . The Committee may provide that a Stock Option include a provision whereby the +Participant may elect at any time before the Participant’s Termination to exercise +the Stock Option as to any part or all of the shares of Common Stock subject to the Stock +Option prior to the full vesting of the Stock Option, and such shares shall be subject to +the provisions of Article VIII and treated as Restricted Stock. Any unvested shares of Common +Stock so purchased may be subject to a repurchase option in favor of the Company or to any +other restriction the Committee determines to be appropriate. +(i) Other +Terms and Conditions . Stock Options may contain such other provisions, which shall not +be inconsistent with any of the terms of this Plan, as the Committee shall, in its sole discretion, +deem appropriate. +C- 11 +ARTICLE +VII +STOCK +APPRECIATION RIGHTS +7.1 +Tandem Stock Appreciation Rights . Stock Appreciation Rights may be granted in conjunction with all or part of any Stock Option +(a “Reference Stock Option”) granted under this Plan (“Tandem Stock Appreciation Rights”). In the case of a Non-Qualified +Stock Option, such rights may be granted either at or after the time of the grant of such Reference Stock Option. In the case of an Incentive +Stock Option, such rights may be granted only at the time of the grant of such Reference Stock Option. +7.2 +Terms and Conditions of Tandem Stock Appreciation Rights . Tandem Stock Appreciation Rights granted hereunder shall be subject +to such terms and conditions, not inconsistent with the provisions of this Plan, as shall be determined from time to time by the Committee +in its sole discretion, and the following: +(a) Base +Price . The exercise price per share of Common Stock subject to a Tandem Stock Appreciation +Right shall be determined by the Committee at the time of grant, provided that the per share +base price of a Tandem Stock Appreciation Right shall not be less than 100% of the Fair Market +Value of the Common Stock at the time of grant. +(b) Term . +A Tandem Stock Appreciation Right or applicable portion thereof granted with respect to a +Reference Stock Option shall terminate and no longer be exercisable upon the termination +or exercise of the Reference Stock Option, except that, unless otherwise determined by the +Committee, in its sole discretion, at the time of grant, a Tandem Stock Appreciation Right +granted with respect to less than the full number of shares covered by the Reference Stock +Option shall not be reduced until and then only to the extent the exercise or termination +of the Reference Stock Option causes the number of shares covered by the Tandem Stock Appreciation +Right to equal or exceed the number of shares remaining available and unexercised under the +Reference Stock Option. +(c) Exercisability . +Tandem Stock Appreciation Rights shall be exercisable only at such time or times and to the +extent that the Reference Stock Options to which they relate shall be exercisable in accordance +with the provisions of Article VI, and shall be subject to the provisions of Section 6.3(c). +(d) Method +of Exercise . A Tandem Stock Appreciation Right may be exercised by the Participant by +surrendering the applicable portion of the Reference Stock Option. Upon such exercise and +surrender, the Participant shall be entitled to receive an amount determined in the manner +prescribed in this Section 7.2. Stock Options which have been so surrendered, in whole or +in part, shall no longer be exercisable to the extent the related Tandem Stock Appreciation +Rights have been exercised. +(e) Payment . +Upon the exercise of a Tandem Stock Appreciation Right, a Participant shall be entitled to +receive up to, but no more than, an amount in cash or a number of shares of Common Stock +(as determined by the Committee, in its sole discretion, on the date of grant) equal in value +to the excess of the Fair Market Value of one share of Common Stock over the Option exercise +price per share specified in the Reference Stock Option agreement, multiplied by the number +of shares in respect of which the Tandem Stock Appreciation Right shall have been exercised. +(f) Deemed +Exercise of Reference Stock Option . Upon the exercise of a Tandem Stock Appreciation +Right, the Reference Stock Option or part thereof to which such Stock Appreciation Right +is related shall be deemed to have been exercised for the purpose of the limitation set forth +in Article IV of the Plan on the number of shares of Common Stock to be issued under the +Plan. +(g) Non-Transferability . +Tandem Stock Appreciation Rights shall be Transferable only when and to the extent that the +underlying Stock Option would be Transferable under Section 6.3(e) of the Plan. +7.3 +Non-Tandem Stock Appreciation Rights . Non-Tandem Stock Appreciation Rights may also be granted without reference to any Stock +Options granted under this Plan. +7.4 +Terms and Conditions of Non-Tandem Stock Appreciation Rights . Non-Tandem Stock Appreciation Rights granted hereunder shall +be subject to such terms and conditions, not +inconsistent +with the provisions of this Plan, as shall be determined from time to time by the Committee in its sole discretion, and the following: +(a) Exercise +Price . The base price per share of Common Stock subject to a Non-Tandem Stock Appreciation +Right shall be determined by the Committee at the time of grant, provided that the per share +base price of a Non-Tandem Stock Appreciation Right shall not be less than 100% of the Fair +Market Value of the Common Stock at the time of grant. +C- 12 +(b) Term . +The term of each Non-Tandem Stock Appreciation Right shall be fixed by the Committee, but +shall not be greater than 7 years after the date the right is granted. +(c) Exercisability . +Non-Tandem Stock Appreciation Rights shall be exercisable at such time or times and subject +to such terms and conditions as shall be determined by the Committee at grant. Notwithstanding +any other provision of this Plan to the contrary, the vesting period with respect to any +such right shall be no less than (A) one year, if the vesting is based (in whole or in part) +on the attainment of one or more Performance Goals, and (B) three years, if the vesting is +based solely on the continued performance of services by the Participant (with vesting as +to no more than one-third of the shares of Common Stock subject thereto on each of the first +three anniversaries of the date of grant). +(d) Method +of Exercise . Subject to whatever installment exercise and waiting period provisions apply +under subsection (c) above, Non-Tandem Stock Appreciation Rights may be exercised in whole +or in part at any time in accordance with the applicable Award agreement, by giving written +notice of exercise to the Company specifying the number of Non-Tandem Stock Appreciation +Rights to be exercised. +(e) Payment . +Upon the exercise of a Non-Tandem Stock Appreciation Right, a Participant shall be entitled +to receive, for each right exercised, up to, but no more than, an amount in cash or a number +of shares of Common Stock (as determined by the Committee, in its sole discretion, on the +date of grant) equal in value to the excess of the Fair Market Value of one share of Common +Stock on the date the right is exercised over the Fair Market Value of one share of Common +Stock on the date the right was awarded to the Participant. +(f) Non-Transferability . +No Non-Tandem Stock Appreciation Rights shall be Transferable by the Participant otherwise +than by will or by the laws of descent and distribution, and all such rights shall be exercisable, +during the Participant’s lifetime, only by the Participant. +7.5 +Limited Stock Appreciation Rights . The Committee may, in its sole discretion, grant Tandem and Non- Tandem Stock Appreciation +Rights either as a general Stock Appreciation Right or as a Limited Stock Appreciation Right. Limited Stock Appreciation Rights may be +exercised only upon the occurrence of a Change in Control or such other event as the Committee may, in its sole discretion, designate +at the time of grant or thereafter. Upon the exercise of Limited Stock Appreciation Rights, except as otherwise provided in an Award +agreement, the Participant shall receive in cash or Common Stock, as determined by the Committee, an amount equal to the amount (a) set +forth in Section 7.2(e) with respect to Tandem Stock Appreciation Rights, or (b) set forth in Section 7.4(e) with respect to Non-Tandem +Stock Appreciation Rights, as applicable. +ARTICLE +VIII +RESTRICTED +STOCK +8.1 +Awards of Restricted Stock . Shares of Restricted Stock may be issued either alone or in addition to other Awards granted under +the Plan. The Committee shall, in its sole discretion, determine the Eligible Employees, Consultants and Non-Employee Directors, to whom, +and the time or times at which, grants of Restricted Stock shall be made, the number of shares to be awarded, the price (if any) to be +paid by the Participant (subject to Section 8.2), the time or times within which such Awards may be subject to forfeiture, the vesting +schedule and rights to acceleration thereof, and all other terms and conditions of the Awards. The Committee may condition the grant +or vesting of Restricted Stock upon the attainment of specified performance targets (including, the Performance Goals specified in Exhibit +A attached hereto) or such other factors as the Committee may determine, in its sole discretion. +8.2 +Awards and Certificates . Eligible Employees, Consultants and Non-Employee Directors selected to receive Restricted Stock shall +not have any rights with respect to such Award, unless and until such Participant has delivered a fully executed copy of the agreement +evidencing the Award to the Company and has otherwise complied with the applicable terms and conditions of such Award. Further, such +Award shall be subject to the following conditions: +(a) Purchase +Price . The purchase price of Restricted Stock, if any, shall be fixed by the Committee. +Subject to Section 4.3, the purchase price for shares of Restricted Stock may be zero to +the extent permitted by applicable law, and, to the extent not so permitted, such purchase +price may not be less than par value. +(b) Acceptance . +Awards of Restricted Stock must be accepted within a period of 60 days (or such other period +as the Committee may specify) after the grant date, by execution of a Restricted Stock agreement +and by payment of the purchase price (if any) the Committee has designated thereunder. +C- 13 +(c) Legend . +Each Participant receiving Restricted Stock shall be issued a stock certificate in respect +of such shares of Restricted Stock, unless the Committee elects to use another system, such +as book entries by the transfer agent, as evidencing ownership of shares of Restricted Stock. +Such certificate shall be registered in the name of such Participant, and shall, in addition +to such legends required by applicable securities laws, bear an appropriate legend referring +to the terms, conditions, and restrictions applicable to such Award, substantially in the +following form: +“The +anticipation, alienation, attachment, sale, transfer, assignment, pledge, encumbrance or charge of the shares of stock represented hereby +are subject to the terms and conditions (including forfeiture) of the Steven Madden, Ltd. 2019 Stock Incentive Plan and an agreement +entered into between the registered owner and the Company dated __________. Copies of such Plan and agreement are on file at the principal +office of the Company.” +(d) Custody . +If stock certificates are issued in respect of shares of Restricted Stock, the Committee +may require that any stock certificates evidencing such shares be held in custody by the +Company until the restrictions thereon shall have lapsed, and that, as a condition of any +grant of Restricted Stock, the Participant shall have delivered a duly signed stock power, +endorsed in blank, relating to the Common Stock covered by such Award. +8.3 +Restrictions and Conditions . The shares of Restricted Stock awarded pursuant to this Plan shall be subject to the following +restrictions and conditions: +(a) Restriction +Period . (b) General. The Participant shall not be permitted to Transfer shares +of Restricted Stock awarded under this Plan during the period or periods set by the Committee +(the “Restriction Period”) commencing on the date of such Award, as set forth +in a Restricted Stock Award agreement, and such agreement shall set forth a vesting schedule +and any events which would accelerate vesting of the shares of Restricted Stock. Within those +limits, the Committee may condition the grant or provide for the lapse of such restrictions +in installments in whole or in part, or may accelerate the vesting of Restricted Stock. +(i) +Objective Performance Goals, Formulae or Standards . If the grant of shares of Restricted Stock or the lapse of restrictions is +based on the attainment of Performance Goals, the Committee shall establish the Performance Goals and the applicable vesting percentage +of the Restricted Stock Award applicable to each Participant or class of Participants in writing prior to the beginning of the applicable +Performance Period or at such later date as otherwise determined by the Committee. Such Performance Goals may incorporate provisions +for disregarding (or adjusting for) changes in accounting methods, corporate transactions (including, without limitation, dispositions +and acquisitions) and other similar type events or circumstances. The applicable Performance Goals shall be based on one or more of the +performance criteria set forth in Exhibit A hereto or such other criteria as the Committee may determine from time to time. +(ii) +Limitations . Notwithstanding any other provision of this Plan to the contrary, the Restriction Period with respect to any Restricted +Stock Award shall be no less than (A) one year, if the lapsing of restrictions is based (in whole or in part) on the attainment of one +or more Performance Goals, and (B) three years, if the lapsing of restrictions is based solely on the continued performance of services +by the Participant (with restrictions as to no more than one-third of the shares of Common Stock subject thereto lapsing on each of the +first three anniversaries of the date of grant). +(iii) +Acceleration. Subject to the terms of this Plan, the Committee shall be authorized (at the time of grant or thereafter) to provide +for the earlier lapsing of restrictions in the event of a Participant’s Retirement, death or Disability. +Subject +to the limitations set forth in Section 4.1(b), Restricted Stock Awards may be granted without the foregoing limitations with respect +to up to 5% (when combined with the 5% limitation set forth in Sections 4.1(b)(ii), 6.3(c), 9.3(c), 10.2(f) and 11.2(c) of this Plan) +of the total number of shares of Common Stock reserved for Awards under this Plan. +(c) +Rights +as a Stockholder . Except as provided in this subsection (b) and subsection (a) above and as otherwise determined by the Committee, +the Participant shall have, with respect to the shares of +C- 14 +Restricted Stock, all of the rights of a holder of shares of Common Stock of the Company including, without limitation, the right to receive any dividends, the right to vote such shares and, subject to and conditioned upon the full vesting of shares of Restricted Stock, the right to tender such shares. The Committee may, in its sole discretion, determine at the time of grant that dividends shall be accumulated and payment deferred until, and conditioned upon, the expiration of the applicable Restriction Period. +(d) Lapse +of Restrictions . If and when the Restriction Period expires without a prior forfeiture +of the Restricted Stock, the certificates for such shares shall be delivered to the Participant. +All legends shall be removed from said certificates at the time of delivery to the Participant, +except as otherwise required by applicable law or other limitations imposed by the Committee. +ARTICLE +IX +RESTRICTED +STOCK UNITS +9.1 +Award of Restricted Stock Units . Restricted Stock Units may be granted either alone or in addition to other Awards granted +under the Plan. The Committee shall, in its sole discretion, determine the Eligible Employees, Consultants and Non-Employee Directors, +to whom, and the time or times at which, Restricted Stock Units shall be awarded, the number of Restricted Stock Units to be awarded, +the time or times within which such Awards may be subject to forfeiture, the vesting schedule and rights to acceleration thereof, and +all other terms and conditions of the Awards. The Committee may condition the grant or vesting of Restricted Stock Units upon the attainment +of specified performance targets (including, the Performance Goals specified in Exhibit A attached hereto) or such other factors as the +Committee may determine, in its sole discretion. +9.2 +Nature of Award . An award of a Restricted Stock Unit conveys a right to payment of Common Stock or the cash value of Common +Stock after the date on which the Award is granted and subject to such conditions, including vesting and performance conditions, as the +Committee may determine. +9.3 +Vesting and Performance Conditions . +(a) General . +Restricted Stock Units shall be subject to such limits and conditions as are set forth in +an Award Agreement, which shall set forth a vesting schedule and any events which would accelerate +vesting of the Restricted Stock Units. Notwithstanding any other provision of this Plan to +the contrary, the vesting period with respect to any Restricted Stock Unit shall be no less +than (A) one year, if the vesting is based (in whole or in part) on the attainment of one +or more Performance Goals, and (B) three years, if the vesting is based solely on the continued +performance of services by the Participant (with vesting as to no more than one-third of +the shares of Common Stock subject thereto on each of the first three anniversaries of the +date of grant. +(b) Objective +Performance Goals, Formulae or Standards . If the grant or vesting of Restricted Stock +Units is based on the attainment of Performance Goals, the Committee shall establish the +Performance Goals and the applicable vesting percentage of the Restricted Stock Unit Award +applicable to each Participant or class of Participants in writing prior to the beginning +of the applicable Performance Period or at such later date as otherwise determined by the +Committee. Such Performance Goals may incorporate provisions for disregarding (or adjusting +for) changes in accounting methods, corporate transactions (including, without limitation, +dispositions and acquisitions) and other similar type events or circumstances. The applicable +Performance Goals shall be based on one or more of the performance criteria set forth in +Exhibit A hereto or such other criteria as the Committee may determine from time to time. +(c) Acceleration . +Subject to the terms of this Plan, the Committee shall be authorized (at the time of grant +or thereafter) to provide for the earlier lapsing of restrictions in the event of a Participant’s +Retirement, death or Disability. +Subject +to the limitations set forth in Section 4.1(b), Restricted Stock Unit Awards may be granted without the foregoing limitations with respect +to up to 5% (when combined with the 5% limitation set forth in Sections 4.1(b)(ii), 6.3(c), 8.3(a)(iv), 10.2(f) and 11.2(c) of this Plan) +of the total number of shares of Common Stock reserved for Awards under this Plan. +C- 15 +9.4 +Form and Timing of Payment . Except as otherwise provided under the terms of the Plan or a Participant’s Award agreement, +payment of Restricted Stock Units shall be made at a specified settlement date that shall not be earlier than the last day of the vesting +or restriction period. The Committee, in its sole discretion, may pay Restricted Stock Units by delivery of a number of shares of Common +Stock or by payment in cash in an amount equal to the Fair Market Value of such Common Stock, or a combination thereof. The Committee +may provide that settlement of Restricted Stock Units shall be deferred further, on a mandatory basis or at the election of the Participant. +9.5 +Rights as a Shareholder . A Participant shall not have the rights of a shareholder until and unless the Award of a Restricted +Stock Unit has been settled by the issuance of shares of Common Stock to the Participant. At the discretion of the Committee, Restricted +Stock Units granted pursuant to the Plan may provide Participants with the right to receive dividend equivalents, which may be paid currently +or credited to an account for the Participant, and which may be settled in Common Stock or cash, as determined by the Committee in its +sole discretion, subject in each case to such terms and conditions as the Committee may establish, which may differ from the terms and +conditions applicable to shares of Common Stock payable under the Restricted Stock Unit. The Committee shall not be under any obligation +to pay dividend equivalents. +ARTICLE +X +PERFORMANCE +SHARES +10.1 +Award of Performance Shares . Performance Shares may be awarded either alone or in addition to other Awards granted under this +Plan. The Committee shall, in its sole discretion, determine the Eligible Employees, Consultants and Non-Employee Directors, to whom, +and the time or times at which, Performance Shares shall be awarded, the number of Performance Shares to be awarded to any person, the +Performance Period during which, and the conditions under which, receipt of the Shares will be deferred, and the other terms and conditions +of the Award in addition to those set forth in Section 10.2. +Except +as otherwise provided herein, the Committee shall condition the right to payment of any Performance Share upon the attainment of specified +objective performance goals (including, the Performance Goals specified in Exhibit A attached hereto) established pursuant to Section +10.2(c) below and such other factors as the Committee may determine, in its sole discretion. +10.2 +Terms and Conditions . Performance Shares awarded pursuant to this Article X shall be subject to the following terms and conditions: +(a) Earning +of Performance Share Award . At the expiration of the applicable Performance Period, the +Committee shall determine the extent to which the Performance Goals established pursuant +to Section 10.2(c) are achieved and the percentage of each Performance Share Award that has +been earned. +(b) Non-Transferability . +Subject to the applicable provisions of the Award agreement and this Plan, Performance Shares +may not be Transferred during the Performance Period. +(c) Objective +Performance Goals, Formulae or Standards . The Committee shall establish the objective +Performance Goals for the earning of Performance Shares based on a Performance Period applicable +to each Participant or class of Participants in writing prior to the beginning of the applicable +Performance Period or at such later date as the Committee shall determine. Such Performance +Goals may incorporate provisions for disregarding (or adjusting for) changes in accounting +methods, corporate transactions (including, without limitation, dispositions and acquisitions) +and other similar type events or circumstances. The applicable Performance Goals shall be +based on one or more of the performance criteria set forth in Exhibit A hereto or such other +performance criteria as the Committee shall establish. +(d) Dividends . +Unless otherwise determined by the Committee at the time of grant, amounts equal to any dividends +declared during the Performance Period with respect to the number of shares of Common Stock +covered by a Performance Share will not be paid to the Participant. +(e) Payment . +Following the Committee’s determination in accordance with subsection (a) above, shares +of Common Stock or, as determined by the Committee in its sole discretion, the cash equivalent +of such shares shall be delivered to the Eligible Employee, Consultant or Non-Employee Director, +or his legal representative, in an amount equal to such individual’s earned Performance +Shares. Notwithstanding the foregoing, the Committee may, in its sole discretion, award an +amount less than the earned Performance Shares and/or subject the payment of all or part +of any Performance Shares to additional vesting, forfeiture and deferral conditions as it +deems appropriate. +C- 16 +(f) Vesting . +(i) +General. The Award agreement shall set forth a vesting schedule and any events which would accelerate vesting of the Performance +Share Award. The vesting schedule with respect to any Performance Share Award shall be no less than one year and shall be based in whole +or in part on the attainment of one or more Performance Goals. +(ii) +Acceleration. Subject to the terms of this Plan, the Committee shall be authorized (at the time of grant or thereafter) to provide +for the earlier lapsing of restrictions in the event of a Participant’s Retirement, death or Disability. +Subject +to the limitations set forth in Section 4.1(b), Performance Share Awards may be granted without the foregoing limitations with respect +to up to 5% (when combined with the 5% limitation set forth in Sections 4.1(b)(ii), 6.3(c), 8.3(a)(iv), 9.3(c), and 11.2(c) of this Plan) +of the total number of shares of Common Stock reserved for Awards under this Plan. +ARTICLE +XI +OTHER +STOCK-BASED AWARDS +11.1 +Other Awards . The Committee, in its sole discretion, is authorized to grant to Eligible Employees, Consultants and Non-Employee +Directors Other Stock-Based Awards that are payable in, valued in whole or in part by reference to, or otherwise based on or related +to shares of Common Stock, including, but not limited to, shares of Common Stock awarded purely as a bonus and not subject to any restrictions +or conditions, shares of Common Stock in payment of the amounts due under an incentive or performance plan sponsored or maintained by +the Company or an Affiliate, performance units, dividend equivalent units, stock equivalent units, restricted stock units and deferred +stock units . To the extent permitted by law, the Committee may, in its sole discretion, permit Eligible Employees and/or Non-Employee +Directors to defer all or a portion of their cash compensation in the form of Other Stock-Based Awards granted under this Plan, subject +to the terms and conditions of any deferred compensation arrangement established by the Company, which shall be intended to comply with +Section 409A of the Code . Other Stock-Based Awards may be granted either alone or in addition to or in tandem with other Awards +granted under the Plan. +Subject +to the provisions of this Plan, the Committee shall, in its sole discretion, have authority to determine the Eligible Employees, Consultants +and Non-Employee Directors, to whom, and the time or times at which, such Awards shall be made, the number of shares of Common Stock +to be awarded pursuant to such Awards, and all other conditions of the Awards . The Committee may also provide for the grant of +Common Stock under such Awards upon the completion of a specified Performance Period. +The +Committee may condition the grant or vesting of Other Stock-Based Awards upon the attainment of specified Performance Goals set forth +on Exhibit A as the Committee may determine, in its sole discretion. +11.2 +Terms and Conditions . Other Stock-Based Awards made pursuant to this Article XII shall be subject to the following terms and +conditions: +(a) Non-Transferability . +Subject to the applicable provisions of the Award agreement and this Plan, shares of Common +Stock subject to Awards made under this Article XI may not be Transferred prior to the date +on which the shares are issued, or, if later, the date on which any applicable restriction, +performance or deferral period lapses. +(b) Dividends . +Unless otherwise determined by the Committee at the time of Award, subject to the provisions +of the Award agreement and this Plan, the recipient of an Award under this Article XI shall +not be entitled to receive, currently or on a deferred basis, dividends or dividend equivalents +with respect to the number of shares of Common Stock covered by the Award. +(c) Vesting . +(i) +General. The vesting schedule with respect to any Award shall be no less than (A) one year, if the vesting period is based (in +whole or in part) on the attainment of one or more Performance Goals, and (B) three years, if the vesting period is based solely on the +continued performance of services by the Participant (with restrictions as to no more than one-third of the shares of Common Stock subject +thereto lapsing on each of the first three anniversaries of the date of grant). +C- 17 +(ii) +Acceleration. Subject to the terms of this Plan, the Committee shall be authorized (at the time of grant or thereafter) to provide +for the earlier lapsing of restrictions in the event of a Change in Control or a Participant’s Retirement, death or Disability. +Subject +to the limitations set forth in Section 4.1(b), Other Stock-Based Awards may be granted without the foregoing limitations with respect +to up to 5% (when combined with the 5% limitation set forth in Sections 4.1(b)(ii), 6.3(c), 8.3(a)(iv), 9.3(c), and 10.2(f) of this Plan) +of the total number of shares of Common Stock reserved for Awards under this Plan. +(d) Price . +Common Stock issued on a bonus basis under this Article XI may be issued for no cash consideration; +Common Stock purchased pursuant to a purchase right awarded under this Article XI shall be +priced, as determined by the Committee in its sole discretion. +(e) Payment . +The form of payment for the Other Stock-Based Award shall be specified in the Award agreement. +ARTICLE +XII +PERFORMANCE-BASED +CASH AWARDS +12.1 +Performance-Based Cash Awards . Performance-Based Cash Awards may be granted either alone or in addition to or in tandem with +Stock Options, Stock Appreciation Rights, or Restricted Stock. Subject to the provisions of this Plan, the Committee shall, in its sole +discretion, have authority to determine the Eligible Employees, Consultants and Non-Employee Directors to whom, and the time or times +at which, such Awards shall be made, the dollar amount to be awarded pursuant to such Awards, and all other conditions of the Awards. +The Committee may also provide for the payment of dollar amount under such Awards upon the completion of a specified Performance Period. +For +each Participant, the Committee may specify a targeted performance award. The individual target award may be expressed, at the Committee’s +discretion, as a fixed dollar amount, a percentage of base pay or total pay (excluding payments made under the Plan), or an amount determined +pursuant to an objective formula or standard. Establishment of an individual target award for a Participant for a calendar year shall +not imply or require that the same level individual target award (if any such award is established by the Committee for the relevant +Participant) be set for any subsequent calendar year. At the time the Performance Goals are established, the Committee shall prescribe +a formula to determine the percentages (which may be greater than 100%) of the individual target award which may be payable based upon +the degree of attainment of the Performance Goals during the calendar year. Notwithstanding anything else herein, the Committee may, +in its sole discretion, elect to pay a Participant an amount that is less than the Participant’s individual target award (or attained +percentage thereof) regardless of the degree of attainment of the Performance Goals; provided that no such discretion to reduce an Award +earned based on achievement of the applicable Performance Goals shall be permitted for the calendar year in which a Change in Control +of the Company occurs, or during such calendar year with regard to the prior calendar year if the Awards for the prior calendar year +have not been made by the time of the Change in Control of the Company, with regard to individuals who were Participants at the time +of the Change in Control of the Company. +12.2 +Terms and Conditions . Performance-Based Cash Awards made pursuant to this Article XII shall be subject to the following terms +and conditions: +(a) Vesting +of Performance-Based Cash Award . (i) General . The vesting schedule with respect +to any Performance Share Award shall be no less than one year, and shall be based in whole +or in part on the attainment of one or more Performance Goals. +(ii) +Waiver of Limitation . The Committee shall be authorized (at the time of grant or thereafter) to provide for earlier vesting in +the event of a Participant’s Retirement, death or Disability. +(b) Objective +Performance Goals, Formulae or Standards . +(i) +The Committee shall establish the objective Performance Goals and the individual target award (if any) applicable to each Participant +or class of Participants in writing prior to the beginning of the applicable Performance Period or at such later date as the Committee +may determine. Such Performance Goals may incorporate provisions for disregarding (or adjusting for) changes in accounting methods, corporate +transactions (including, without limitation, dispositions and acquisitions) and other similar type events or circumstances. The applicable +Performance Goals +C- 18 +shall be based on one or more of the performance criteria set forth in Exhibit A hereto or such other performance criteria +as the Committee shall establish. +(ii) +The measurements used in Performance Goals set under the Plan shall be determined in accordance with Accounting Principles Generally +Accepted in the United States of America (“GAAP”) except, to the extent that any objective Performance Goals are used, if +any measurements require deviation from GAAP, such deviation shall be at the discretion of the Committee at the time the Performance +Goals are set or at such later time to the extent determined by the Committee. +(c) Payment . +Following the Committee’s determination and certification in accordance with subsection +(a) +above, the Performance-Based Cash Award amount shall be delivered to the Eligible Employee, Consultant or Non-Employee Director, or his +legal representative, in accordance with the terms and conditions of the Award agreement. If the Award agreement does not provide when +such amount will be paid, except as provided in the next sentence, such amount shall be paid by no later than the later of: (i) March +15 of the year following the year in which the applicable Performance Period ends; or (ii) two and one-half (2½) months after +the expiration of the fiscal year of the Company in which the applicable Performance Period ends. Notwithstanding the foregoing, the +Committee may place such conditions on the payment of the payment of all or any portion of any Performance- Based Cash Award as the Committee +may determine and the Committee may (x) provide that the payment of all or any portion of any Performance-Based Cash Award shall be deferred +and (y) permit a Participant to elect to defer receipt of all or a portion of any Performance-Based Cash Award. To the extent applicable, +any deferral under this Section 12.2(d) shall be made in a manner intended to comply with the applicable requirements of Section 409A +of the Code. +ARTICLE +XIII +TERMINATION +13.1 +Termination . The following rules apply with regard to the Termination of the Participant’s service. +(a) Rules +Applicable to Stock Options and Stock Appreciation Rights . Unless otherwise determined +by the Committee at grant (or, if no rights of the Participant are reduced, thereafter): +(i) +Termination by Reason of Retirement, Death, or Disability. If a Participant’s Termination is by reason of the Participant’s +Retirement, death or Disability, all Stock Options or Stock Appreciation Rights that are held by such Participant that are vested and +exercisable at the time of the Participant’s Termination may be exercised by the Participant (or, in the case of death, by the +legal representative of the Participant’s estate) at any time within a one-year period from the date of such Termination, but in +no event beyond the expiration of the stated term of such Stock Options or Stock Appreciation Rights; provided, however, if the Participant +dies within such exercise period, all unexercised Stock Options or Stock Appreciation Rights held by such Participant shall thereafter +be exercisable, to the extent to which they were exercisable at the time of death, for a period of one year from the date of such death, +but in no event beyond the expiration of the stated term of such Stock Options or Stock Appreciation Rights. +(ii) +Involuntary Termination Without Cause. If a Participant’s Termination is by involuntary termination without Cause, all Stock +Options or Stock Appreciation Rights that are held by such Participant that are vested and exercisable at the time of the Participant’s +Termination may be exercised by the Participant at any time within a period of 90 days from the date of such Termination, but in no event +beyond the expiration of the stated term of such Stock Options or Stock Appreciation Rights. +(iii) +Voluntary Termination. If a Participant’s Termination is voluntary (other than a voluntary termination described in Section 13.2(a)(iv)(2) +below), all Stock Options or Stock Appreciation Rights that are held by such Participant that are vested and exercisable at the time +of the Participant’s Termination may be exercised by the Participant at any time within a period of 30 days from the date of such +Termination, but in no event beyond the expiration of the stated terms of such Stock Options or Stock Appreciation Rights. +C- 19 +(iv) +Termination for Cause. If a Participant’s Termination: (1) is for Cause or (2) is a voluntary Termination (as provided in sub-section +(iii) above) after the occurrence of an event that would be grounds for a Termination for Cause, all Stock Options or Stock Appreciation +Rights, whether vested or not vested, that are held by such Participant shall thereupon terminate and expire as of the date of such Termination. +(v) +Unvested Stock Options and Stock Appreciation Rights. Stock Options or Stock Appreciation Rights that are not vested as of the date of +a Participant’s Termination for any reason shall terminate and expire as of the date of such Termination. +(b) Rules +Applicable to Restricted Stock, Restricted Stock Units, Performance Shares, Other Stock- +Based Awards and Performance-Based Cash Awards . Unless otherwise determined by the Committee +at grant or thereafter, and except as otherwise provided in Article XIV, upon a Participant’s +Termination for any reason: (i) during the relevant Restriction Period, all Restricted Stock +still subject to restriction shall be forfeited; and (ii) any unvested Restricted Stock Units, +Performance Shares, Other Stock-Based Awards or Performance-Based Cash Awards shall be forfeited. +ARTICLE +XIV +CHANGE +IN CONTROL +14.1 +Treatment of Awards . Notwithstanding any other provision of the Plan to the contrary, in the event of a Change in Control: +(a) +If and to the extent that a successor to the Company converts, assumes, substitutes or replaces an Award, the vesting restrictions and/or +forfeiture provisions applicable to such Award shall not be accelerated or lapse, and all such vesting restrictions and/or forfeiture +provisions shall continue with respect to any shares of the successor or other consideration that may be received with respect to such +Award; provided, however, that if the Participant’s employment or other service is terminated, other than for Cause, within 12 +months coincident with or immediately following such Change in Control, any unvested Awards shall become fully vested and exercisable +upon such termination of employment or other service. +(b) +If and to the extent that such Awards are not converted, assumed, substituted for or replaced by a successor to the Company, Participants +will receive an amount equal to the consideration per share of Common Stock in such Change in Control (or, in the case of an Appreciation +Award, the consideration per share of Common Stock minus the exercise price or base price of such Award). +14.2 +Assumption . For the purposes of this Article XIV, an Award shall be considered converted, assumed, substituted for or replaced +by a successor if following the Change in Control the option or right confers the right to purchase or receive, for each share of Common +Stock subject to the Award immediately prior to the Change in Control, the consideration (whether stock, cash or other securities or +property) received in the Change in Control by holders of Common Stock for each share held on the effective date of the transaction (and +if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares); +provided, however, that if such consideration received in the Change in Control is not solely common stock of the successor, the Committee +may, with the consent of the successor, provide for the consideration to be received pursuant to the Award, for each share of Common +Stock subject thereto, to be solely common stock of the successor substantially equal in fair market value to the per share consideration +received by holders of Common Stock in the Change in Control. The determination of such substantial equality of value of consideration +shall be made by the Committee, and its determination shall be conclusive and binding. +14.3 +Change in Control . Unless otherwise determined by the Committee in the applicable Award agreement (or other written agreement +approved by the Committee including, without limitation, an employment agreement), a “Change in Control” shall be deemed +to occur following any transaction if: (a) any “person” as such term is used in Sections 13(d) and 14(d) of the Exchange +Act (other than the Company, any trustee or other fiduciary holding securities under any employee benefit plan of the Company, or any +company owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of +Common Stock of the Company), becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly +or indirectly, of 50% or more of the combined voting power of the then outstanding securities of the Company (or its successor corporation); +provided, however, that a merger or consolidation effected solely to implement a recapitalization of the +C- 20 +Company shall not constitute +a Change in Control of the Company; or (b) the stockholders of the Company approve a plan of complete liquidation of the Company; provided , +that this subsection (b) shall not constitute a Change in Control with respect to the amount of any payment pursuant to an Award under +this Plan, or any portion thereof, that is triggered upon a Change in Control and that is intended to constitute “non-qualified +deferred compensation” pursuant to Section 409A of the Code; or (c) the consummation of the sale or disposition by the Company +of all or substantially all of the Company’s assets other than (i) the sale or disposition of all or substantially all of the assets +of the Company to a person or persons who beneficially own, directly or indirectly, at least 50% or more of the combined voting power +of the outstanding voting securities of the Company at the time of the sale or (ii) pursuant to a spinoff- type transaction, directly +or indirectly, of such assets to the stockholders of the Company (as further addressed by Section 4.2(b)). +ARTICLE +XV +TERMINATION +OR AMENDMENT OF PLAN +15.1 +Termination or Amendment . Notwithstanding any other provision of this Plan, the Board or the Committee may at any time, and +from time to time, amend, in whole or in part, any or all of the provisions of this Plan, or suspend or terminate it entirely, retroactively +or otherwise; provided, however, that, unless otherwise required by law or specifically provided herein, the rights of a Participant +with respect to Awards granted prior to such amendment, suspension or termination, may not be impaired without the consent of such Participant +and, provided further, that without the approval of the stockholders of the Company in accordance with the laws of the State of Delaware, +to the extent required by the applicable provisions of Rule 16b-3, pursuant to the requirements of Nasdaq Rule 5635(c) or such other +applicable stock exchange rule, or, to the extent applicable to Incentive Stock Options under Section 422 of the Code, no amendment may +be made which would: +(a) increase +the aggregate number of shares of Common Stock that may be issued under this Plan pursuant +to Section 4.1 (except by operation of Section 4.2); +(b) increase +the maximum individual Participant limitations for a fiscal year under Section 4.1(b) (except +by operation of Section 4.2); +(c) change +the classification of Eligible Employees or Consultants eligible to receive Awards under +this Plan; +(d) decrease +the minimum option price of any Stock Option or Stock Appreciation Right; +(e) extend +the maximum option period under Section 6.3; +(f) other +than adjustments or substitutions in accordance with Section 4.2, amend the terms of outstanding +Awards to reduce the exercise price or base amount of outstanding Stock Options or Stock +Appreciation Rights or to cancel outstanding Stock Options or Stock Appreciation Rights in +exchange for cash, other Awards or Stock Options or Stock Appreciation Rights with an exercise +price or base amount that is less than the exercise price or base amount of the original +Stock Options or Stock Appreciation Rights; +(g) award +any Stock Option or Stock Appreciation Right in replacement of a canceled Stock Option or +Stock Appreciation Right with a higher exercise price, except in accordance with Section +6.3(g); or +(h) require +stockholder approval in order for this Plan to continue to comply with the applicable provisions +of Section 422 of the Code. +The +Committee may amend the terms of any Award theretofore granted, prospectively or retroactively, but, subject to Article IV above or as +otherwise specifically provided herein, no such amendment or other action by the Committee shall impair the rights of any holder without +the holder’s consent. +C- 21 +ARTICLE +XVI +UNFUNDED +PLAN +16.1 +Unfunded Status of Plan . This Plan is an “unfunded” plan for incentive and deferred compensation. With respect +to any payments as to which a Participant has a fixed and vested interest but which are not yet made to a Participant by the Company, +nothing contained herein shall give any such Participant any rights that are greater than those of a general unsecured creditor of the +Company. +ARTICLE +XVII +GENERAL +PROVISIONS +17.1 +Legend . The Committee may require each person receiving shares of Common Stock pursuant to a Stock Option or other Award under +the Plan to represent to and agree with the Company in writing that the Participant is acquiring the shares without a view to distribution +thereof. In addition to any legend required by this Plan, the certificates for such shares may include any legend that the Committee, +in its sole discretion, deems appropriate to reflect any restrictions on Transfer. +All +certificates for shares of Common Stock delivered under the Plan shall be subject to such stop transfer orders and other restrictions +as the Committee may, in its sole discretion, deem advisable under the rules, regulations and other requirements of the Securities and +Exchange Commission, The Nasdaq Stock Market or any other national securities exchange system upon whose system the Common Stock is then +quoted, any applicable federal or state securities law, and any applicable corporate law, and the Committee may cause a legend or legends +to be put on any such certificates to make appropriate reference to such restrictions. +17.2 +Other Plans . Nothing contained in this Plan shall prevent the Board from adopting other or additional compensation arrangements, +subject to stockholder approval if such approval is required; and such arrangements may be either generally applicable or applicable +only in specific cases. +17.3 +No Right to Employment/Directorship/Consultancy . Neither this Plan nor the grant of any Option or other Award hereunder shall +give any Participant or other employee, Consultant or Non-Employee Director any right with respect to continuance of employment, consultancy +or directorship by the Company or any Affiliate, nor shall they be a limitation in any way on the right of the Company or any Affiliate +by which an employee is employed or a Consultant or Non-Employee Director is retained to terminate his or her employment, consultancy +or directorship at any time. +17.4 +Tax Withholding . The Company shall have the right to deduct from any payment to be made pursuant to this Plan, or to otherwise +require, prior to the issuance or delivery of any shares of Common Stock or the payment of any cash hereunder, payment by the Participant +of, any federal, state or local taxes required by law to be withheld. Upon the vesting of Restricted Stock (or other Award that is taxable +upon vesting), or upon making an election under Section 83(b) of the Code, a Participant shall pay all required withholding to the Company. +Any statutorily required withholding obligation with regard to any Participant may be satisfied, subject to the advance consent of the +Committee, by reducing the number of shares of Common Stock otherwise deliverable or by delivering shares of Common Stock already owned. +Any fraction of a share of Common Stock required to satisfy such tax obligations shall be disregarded and the amount due shall be paid +instead in cash by the Participant. +17.5 +No Assignment of Benefits . No Award or other benefit payable under this Plan shall, except as otherwise specifically provided +by law or permitted by the Committee, be Transferable in any manner, and any attempt to Transfer any such benefit shall be void, and +any such benefit shall not in any manner be liable for or subject to the debts, contracts, liabilities, engagements or torts of any person +who shall be entitled to such benefit, nor shall it be subject to attachment or legal process for or against such person. +17.6 +Listing and Other Conditions . +(a) Unless +otherwise determined by the Committee, as long as the Common Stock is listed on a national +securities exchange or quoted in the over-the-counter market, the issuance of any shares +of Common Stock pursuant to an Award shall be conditioned upon such shares being listed on +such exchange or quoted in such market. The Company shall have no obligation to issue such +shares unless and until such shares are so listed or quoted, and the right to exercise any +Option or other Award with respect to such shares shall be suspended until such listing has +been effected. +C- 22 +(b) If +at any time counsel to the Company shall be of the opinion that any sale or delivery of shares +of Common Stock pursuant to an Option or other Award is or may in the circumstances be unlawful +or result in the imposition of excise taxes on the Company under the statutes, rules or regulations +of any applicable jurisdiction, the Company shall have no obligation to make such sale or +delivery, or to make any application or to effect or to maintain any qualification or registration +under the Securities Act or otherwise, with respect to shares of Common Stock or Awards, +and the right to exercise any Option or other Award shall be suspended until, in the opinion +of said counsel, such sale or delivery shall be lawful or will not result in the imposition +of excise taxes on the Company. +(c) Upon +termination of any period of suspension under this Section 17.6, any Award affected by such +suspension which shall not then have expired or terminated shall be reinstated as to all +shares available before such suspension and as to shares which would otherwise have become +available during the period of such suspension, but no such suspension shall extend the term +of any Award. +(d) A +Participant shall be required to supply the Company with any certificates, representations +and information that the Company requests and otherwise cooperate with the Company in obtaining +any listing, registration, qualification, exemption, consent or approval the Company deems +necessary or appropriate. +17.7 +Governing Law . This Plan and actions taken in connection herewith shall be governed and construed in accordance with the laws +of the State of Delaware (regardless of the law that might otherwise govern under applicable Delaware principles of conflict of laws). +17.8 +Construction . Wherever any words are used in this Plan in the masculine gender they shall be construed as though they were +also used in the feminine gender in all cases where they would so apply, and wherever any words are used herein in the singular form +they shall be construed as though they were also used in the plural form in all cases where they would so apply. +17.9 +Other Benefits . No Award granted or paid out under this Plan shall be deemed compensation for purposes of computing benefits +under any retirement plan of the Company or its Affiliates nor affect any benefits under any other benefit plan now or subsequently in +effect under which the availability or amount of benefits is related to the level of compensation. +17.10 +Costs . The Company shall bear all expenses associated with administering this Plan, including expenses of issuing Common Stock +pursuant to any Awards hereunder. +17.11 +No Right to Same Benefits . The provisions of Awards need not be the same with respect to each Participant, and such Awards +to individual Participants need not be the same in subsequent years. +17.12 +Death/Disability . The Committee may in its sole discretion require the transferee of a Participant to supply it with written +notice of the Participant’s death or Disability and to supply it with a copy of the will (in the case of the Participant’s +death) or such other evidence as the Committee deems necessary to establish the validity of the transfer of an Award. The Committee may, +in its discretion, also require the agreement of the transferee to be bound by all of the terms and conditions of the Plan. +17.13 +Section 16(b) of the Exchange Act . All elections and transactions under this Plan by persons subject to Section 16 of the +Exchange Act involving shares of Common Stock are intended to comply with any applicable exemptive condition under Rule 16b-3. The Committee +may, in its sole discretion, establish and adopt written administrative guidelines, designed to facilitate compliance with Section 16(b) +of the Exchange Act, as it may deem necessary or proper for the administration and operation of this Plan and the transaction of business +thereunder. +17.14 +Section 409A of the Code . The Company does not guarantee the particular tax treatment of an Award granted under this Plan. +Awards made under this Plan are intended to comply with, or be exempt from, the applicable requirements of Section 409A of the Code and +this Plan, and any Award agreement hereunder shall be limited, construed and interpreted in accordance with such intent. In no event +whatsoever shall the Company or any of its Affiliates be liable for any additional tax, interest or penalties that may be imposed on +a Participant by Section 409A of the Code or any damages for failing to comply with Section 409A of the Code. +C- 23 +17.15 +Successor and Assigns . The Plan shall be binding on all successors and permitted assigns of a Participant, including, without +limitation, the estate of such Participant and the executor, administrator or trustee of such estate. +17.16 +Severability of Provisions . If any provision of the Plan shall be held invalid or unenforceable, such invalidity or unenforceability +shall not affect any other provisions hereof, and the Plan shall be construed and enforced as if such provisions had not been included. +17.17 +Payments to Minors, Etc . Any benefit payable to or for the benefit of a minor, an incompetent person or other person incapable +of receipt thereof shall be deemed paid when paid to such person’s guardian or to the party providing or reasonably appearing to +provide for the care of such person, and such payment shall fully discharge the Committee, the Board, the Company, its Affiliates and +their employees, agents and representatives with respect thereto. +17.18 +Headings and Captions . The headings and captions herein are provided for reference and convenience only, shall not be considered +part of the Plan, and shall not be employed in the construction of the Plan. +17.19 +Effect of Prior Plan . All awards under the Prior Plan shall remain subject to the terms of the Prior Plan and any agreement +under which such Award was granted; provided, however, that no award under the Prior Plan that was limited by the application of Section +162(m) shall be subject to the application of negative discretion after December 31, 2018. +ARTICLE +XVIII +EFFECTIVE +DATE OF PLAN +The +Plan is was adopted by the Board on February 25, 2019 , and approved by the stockholders of the Company on May 24, 2019. The Effective +Date is the date on which the Board adopted the Plan, subject to stockholder approval within 12 months following the date on which the +Board approved the Plan. +ARTICLE +XIX +TERM +OF PLAN +No +Award shall be granted pursuant to this Plan on or after the tenth anniversary of initial Board approval, as further set forth in Article +XVIII, but Awards granted before that date may extend beyond that date. +ARTICLE +XX +NAME +OF PLAN +This +Plan shall be known as “The Steven Madden, Ltd. 2019 Incentive Compensation Plan.” +C- 24 +EXHIBIT +A +PERFORMANCE +GOALS +1. Performance +goals established for purposes of the grant or vesting of Awards shall be based on the attainment +of certain target levels of, or a specified increase or decrease (as applicable) in one or +more of the following performance goals (“Performance Goals”): +(a) earnings +per share; +(b) operating +income; +(c) net +income; +(d) cash +flow; +(e) gross +profit; +(f) gross +profit return on investment; +(g) gross +margin return on investment; +(h) gross +margin; +(i) working +capital; +(j) earnings +before interest and taxes; +(k) earnings +before interest, tax, depreciation and amortization; +(l) return +on equity; +(m) return +on assets; +(n) return +on capital; +(o) revenue +growth; +(p) total +shareholder return; +(q) economic +value added; +(r) specified +objectives with regard to limiting the level of increase in all or a portion of the Company’s +bank debt or other long-term or short-term public or private debt or other similar financial +obligations of the Company, which may be calculated net of cash balances and/or other offsets +and adjustments as may be established by the Committee in its sole discretion; +(s) the +Fair Market Value of the shares of the Company’s Common Stock; +(t) the +growth in the value of an investment in the Company’s Common Stock assuming the reinvestment +of dividends; +(u) reduction +in expenses; +(v) customer +satisfaction; +(w) customer +loyalty; +(x) style +indexes; +(y) number +of new patents; +(z) employee +retention; +(aa) +market share; +(bb) +market segment share; +(cc) +product release schedules; +(dd) +new product innovation; +(ee) +new product introduction; +(ff) +product cost reduction +through advanced technology; +(gg) +brand recognition and/or +acceptance; +(hh) +ship targets; or +(ii) +such other goals as the Committee may determine. +2. The +Committee may, in its sole discretion, also exclude, or adjust to reflect, the impact of +an event or occurrence which the Committee determines should be appropriately excluded or +adjusted, including: +(a) restructurings, +discontinued operations, extraordinary items or events, and other unusual or non-recurring +charges as described in Accounting Standards Codification (ASC) 225 and/or ASC 360 and/or +management’s discussion and analysis of financial condition and results of operations +appearing or incorporated by reference in the Company’s Form 10-K for the applicable +year; +(b) an +event either not directly related to the operations of the Company or not within the reasonable +control of the Company’s management; or +C- 25 +(c) a +change in tax law or accounting standards required by GAAP. +3. Performance +goals may also be based upon individual Participant performance goals, as determined by the +Committee, in its sole discretion. +4. In +addition, such Performance Goals may be based upon the attainment of specified levels of +Company (or subsidiary, division, other operational unit or administrative department of +the Company) performance under one or more of the measures described above relative to the +performance of other corporations. The Committee may: +(a) designate +additional business criteria on which the performance goals may be based; or +(b) adjust, +modify or amend the aforementioned business criteria. +C- 26 \ No newline at end of file diff --git a/raw/proxies/0000913241/0001493152-24-014177/proxy_rpt.txt b/raw/proxies/0000913241/0001493152-24-014177/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..e69de29bb2d1d6434b8b29ae775ad8c2e48c5391 diff --git a/raw/proxies/0000913241/0001493152-26-015299/proxy.txt b/raw/proxies/0000913241/0001493152-26-015299/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..1261bd11f7b2054be59474a8d99e2c769e5bdf9f --- /dev/null +++ b/raw/proxies/0000913241/0001493152-26-015299/proxy.txt @@ -0,0 +1,5108 @@ +false +0000913241 +DEF 14A +0000913241 +2025-01-01 +2025-12-31 +0000913241 +2024-01-01 +2024-12-31 +0000913241 +2023-01-01 +2023-12-31 +0000913241 +2022-01-01 +2022-12-31 +0000913241 +2021-01-01 +2021-12-31 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PURSUANT TO SECTION 14(A) OF THE +SECURITIES +EXCHANGE ACT OF 1934 (AMENDMENT NO. __) +Filed +by the Registrant ☒ +Filed +by a Party other than the Registrant ☐ +Check +the appropriate box: +☐ Preliminary +Proxy Statement +☐ Confidential, +for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +☒ Definitive +Proxy Statement +☐ Definitive +Additional Materials +☐ Soliciting +Material under §240.14a-12 +Steven +Madden, Ltd. +(Name +of Registrant as Specified in Its Charter) +(Name +of Person(s) Filing Proxy Statement, if other than the Registrant) +Payment +of Filing Fee (Check all boxes that apply): +☒ No +fee required. +☐ Fee +paid previously with preliminary materials. +☐ Fee +computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and +0-11. +STEVEN +MADDEN, LTD. +52-16 +Barnett Avenue +Long +Island City, New York 11104 +April +6, 2026 +DEAR +SHAREHOLDERS, +2025 +was a year that tested our business — and demonstrated its resilience. +The +operating environment shifted rapidly as new tariffs on goods imported into the United States created significant disruption across our +supply chain and wholesale channels. These dynamics pressured our financial performance and made for a challenging year. At the same +time, they reinforced the strengths that have defined Steve Madden for decades: our ability to move quickly, adapt to change, and maintain +an unwavering focus on the consumer and on delivering compelling product. +For +the full year, revenue increased 11% to $2.5 billion, reflecting the addition of Kurt Geiger, while earnings declined compared to 2024 +as we navigated higher costs and operational disruption. Despite these near-term pressures, we made meaningful progress strengthening +our brands and positioning the Company for long-term growth. +BUILDING +MOMENTUM IN THE STEVE MADDEN BRAND +In +our flagship brand Steve Madden, our design teams delivered compelling, trend-right assortments that drove a significant acceleration +in demand in the back half of the year, particularly in our core category of women’s footwear. +We +supported these assortments with enhanced marketing, including richer brand and product storytelling and a more integrated, full-funnel +approach. These efforts drove measurable gains in brand heat and consumer engagement as the year progressed — momentum that has +continued into early 2026. +ADDING +A POWERFUL NEW GROWTH ENGINE: KURT GEIGER +In +May 2025, we completed the acquisition of Kurt Geiger, adding a brand with a unique image, distinctive design aesthetic, and compelling +value proposition. +Kurt +Geiger London’s differentiated and elevated positioning — and its alignment with our strategic priorities of expanding in +international markets, accessories categories, and direct-to-consumer channels — make it a highly attractive and complementary +addition. +The +brand continues to have strong momentum, and we are excited about the opportunities ahead and confident that the acquisition meaningfully +enhances our long-term growth profile. +STRENGTHENING +OUR OTHER BRANDS +We +also made meaningful progress across our other owned brands. Dolce Vita continued to build on its strong growth trajectory, expanding +in adjacent categories such as handbags and gaining traction in international markets. +At +Betsey Johnson, we drove renewed cultural relevance through elevated talent partnerships, authentic community engagement, high-impact +activations, and differentiated product assortments. +NAVIGATING +A CHALLENGING OPERATING ENVIRONMENT +The +most significant headwind we faced in 2025 was the impact of new tariffs, which created meaningful disruption throughout the year. Our +team responded quickly and decisively — diversifying sourcing, adjusting pricing where appropriate, managing inventory carefully, +controlling costs, and maintaining strong relationships with our suppliers and customers. While these actions helped mitigate the impact, +tariffs placed significant pressure on both revenue and profitability. +Despite +these challenges, we believe the actions we took in 2025 have strengthened our operating model and increased our agility, positioning +us well for the future. +LOOKING +AHEAD +As +we enter 2026, we are encouraged by the momentum in our business. Our product assortments and marketing campaigns are resonating with +consumers, our brands are powerful and gaining relevance, and our strategy provides multiple levers for growth. +We +expect strong growth in our three lead brands — Steve Madden, Kurt Geiger London, and Dolce Vita — while acknowledging ongoing +pressure in our private label business, as well as continued uncertainty related to tariffs and the conflict in the Middle East. +Looking +further ahead, we believe the combination of our powerful brands, proven business model, and sound strategy positions us to drive sustainable +growth and long-term value creation. +Thank +you to our employees for their resilience and dedication during a challenging year, to our customers for their continued loyalty, and +to you — our shareholders — for your ongoing support. +Sincerely, +Edward +Rosenfeld +Chairman +and Chief Executive Officer +STEVEN +MADDEN, LTD. +52-16 +Barnett Avenue +Long +Island City, New York 11104 +NOTICE +OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 20, 2026 +TO +THE STOCKHOLDERS: +The +Annual Meeting of Stockholders (the “Annual Meeting”) of Steven Madden, Ltd. (the “Company”) will be held on +Wednesday, May 20, 2026, at 10:00 a.m. Eastern Time in a virtual-only format, for the purposes stated below: +1. to +elect ten (10) directors to the Board of Directors of the Company to serve until the next +annual meeting of our stockholders and until his, her, or their successor is elected and +qualified; +2. to +ratify the appointment of Ernst & Young LLP as the Company’s independent registered +public accounting firm for the fiscal year ending December 31, 2026; +3. to +approve, on a non-binding advisory basis, the compensation of the Company’s named executive +officers as disclosed in the accompanying proxy statement; and +4. to +transact such other business as may properly come before the Annual Meeting or any adjournments +or postponements thereof. +Only +stockholders of record at the close of business on March 27, 2026, the record date for the Annual Meeting, are entitled to notice of +and to vote at the Annual Meeting and any adjournments or postponements thereof. Stockholders who own shares of the Company’s common +stock beneficially through a broker, bank or other nominee will also be entitled to attend the Annual Meeting. To participate in the +Annual Meeting at www.virtualshareholdermeeting.com/ SHOO2026, you must enter the 16-digit control number found on your proxy card or +your Notice of Availability of Proxy Materials. Whether or not you plan to attend the Annual Meeting, we urge you to vote in advance +of the Annual Meeting by one of the methods described below. If you have voted over the Internet, by phone or by mail before the Annual +Meeting, you do not need to vote again. Guests may listen to the Annual Meeting, but are not entitled to participate. +IMPORTANT +NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 20, 2026: THE NOTICE OF +ANNUAL MEETING AND PROXY STATEMENT, ANNUAL REPORT, ELECTRONIC PROXY CARD AND ANY OTHER MATERIALS CONCERNING THE ANNUAL MEETING, TOGETHER +WITH ANY AMENDMENTS TO ANY OF THESE MATERIALS, ARE AVAILABLE ON THE INTERNET AT HTTP:// WWW.PROXYVOTE.COM. +April +6, 2026 BY +ORDER OF THE BOARD OF DIRECTORS +Long +Island City, New York +Lisa +Keith +Executive +Vice President, General Counsel and Secretary +WHETHER +OR NOT YOU EXPECT TO BE PRESENT AT THE ANNUAL MEETING, PLEASE MARK, DATE AND SIGN THE ACCOMPANYING FORM OF PROXY AND MAIL IT PROMPTLY +IN THE ENVELOPE PROVIDED TO: VOTE PROCESSING, C/O BROADRIDGE, 51 MERCEDES WAY, EDGEWOOD, NEW YORK 11717. ALTERNATIVELY, YOU MAY VOTE +YOUR SHARES BY TELEPHONE OR OVER THE INTERNET AS DESCRIBED ON THE ACCOMPANYING PROXY CARD. +TABLE +OF CONTENTS +GENERAL INFORMATION +1 +Notice of Internet Availability of Proxy Materials +1 +QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING +2 +PROPOSAL ONE: ELECTION OF DIRECTORS +6 +Stockholder Nominations for Board Membership +6 +Directors and Nominees for Election to the Board of Directors +6 +Additional Information About the Directors +7 +Required Vote +9 +Director Election (Majority Voting) Policy +9 +Recommendation of the Board of Directors +10 +CORPORATE GOVERNANCE +10 +The Board of Directors +10 +Director Independence +10 +Involvement in Certain Legal Proceedings +10 +Director Attendance at Meetings +10 +Director Election (Majority Voting) Policy +10 +Committees of the Board +11 +Board Leadership Structure, Risk Oversight, Executive Sessions of Non-Employee Directors, and Communications Between Stockholders and the Board +14 +Codes of Business Conduct and Ethics +15 +Corporate Governance Principles +16 +Stock Ownership Guidelines +16 +Insider Trading Policy +16 +Prohibition on Hedging and Pledging of Our Common Stock +16 +Corporate Social Responsibility Policy +16 +Clawback Policy +17 +Certain Relationships and Related Party Transactions +17 +Review, Approval or Ratification of Transactions with Related Persons +18 +COMPENSATION OF DIRECTORS IN THE 2025 FISCAL YEAR +18 +STOCK OWNERSHIP +19 +Security Ownership of Certain Beneficial Owners +19 +Security Ownership of Directors and Executive Officers +19 +Delinquent Section 16(a) Reports +21 +EXECUTIVE COMPENSATION +21 +Compensation Discussion and Analysis +21 +Executive Officers +30 +Summary Compensation Table for the Fiscal Year 2025 +31 +Employment Arrangements +32 +Grants of Plan-Based Awards in the 2025 Fiscal Year +36 +Plan-Based Awards +36 +Outstanding Equity Awards at End of the 2025 Fiscal Year +37 +Option Exercises and Stock Vested in the 2025 Fiscal Year +38 +Securities Authorized for Issuance Under Equity Compensation Plans +38 +Termination, Change-in-Control and Non-Competition/Non-Solicitation +38 +Potential Payments Upon Termination or Change-In-Control +39 +Compensation Committee Report +40 +Pay Versus Performance +40 +PROPOSAL TWO: RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2026 +45 +Required Vote +45 +Recommendation of the Board of Directors +45 +Independent Registered Public Accounting Firm’s Fees and Services +45 +Audit Committee’s Pre-Approval Policies and Procedures +46 +AUDIT COMMITTEE REPORT +46 +PROPOSAL THREE: NON-BINDING ADVISORY VOTE ON EXECUTIVE COMPENSATION +47 +Required Vote +47 +Recommendation of the Board of Directors +47 +ANNEX A – RECONCILIATION OF ADJUSTED RESULTS (NON-GAAP) +A-1 +SPECIAL +NOTE REGARDING FORWARD-LOOKING STATEMENTS +Certain +statements in this document regarding anticipated financial, business, legal or other outcomes, including business and market conditions, +outlook and other similar statements relating to the Company’s future events, developments, or financial or operational performance +or results, are “forward-looking statements” made pursuant to the safe harbor provisions of the Private Securities Litigation +Reform Act of 1995 and other federal securities laws. These forward-looking statements are identified by the use of words such as “may,” +“will,” “should,” “expect,” “estimate,” “believe,” “intend,” +“forecast,” “anticipate,” “project,” “predict,” “plan,” or “guidance,” +and other similar expressions, or the negative of these expressions. However, the absence of these or similar words or expressions does +not mean a statement is not forward-looking. Forward-looking statements are neither historical facts nor assurances of future performance. +Instead, they represent our current beliefs, expectations, and assumptions regarding anticipated events and trends affecting our business +and industry based on information available as of the time such statements are made. We caution investors that such forward-looking statements +are inherently subject to risks and uncertainties, many of which cannot be predicted with accuracy, and some of which may be outside +of our control. Our actual results and financial condition may differ materially from those indicated in these forward-looking statements. +As such, investors should not rely upon them. Forward-looking statements are only as of the date they are made, and the Company undertakes +no duty to update its forward-looking statements except as required by law. +Our +operations are subject to a number of risks and uncertainties including, but not limited to, those risk factors described in our SEC +filings. Refer to “Risk Factors” under Item 1A. of the Company’s Annual Report on Form 10-K for the year ended December +31, 2025 for a discussion of additional risk factors and a more complete discussion of some of the cautionary statements noted above. +If any of the events described in the risk factors actually occur, our business, financial condition or operating results, as well as +the market price of our securities, could be materially adversely affected. +STEVEN +MADDEN, LTD. +52-16 +Barnett Avenue +Long +Island City, New York 11104 PROXY STATEMENT +GENERAL +INFORMATION +The +Board of Directors of Steven Madden, Ltd. requests your proxy in connection with the Annual Meeting of Stockholders (the “Annual +Meeting”) of Steven Madden, Ltd. (the “Company,” “we,” or “our”). The Annual Meeting will be +held on Wednesday, May 20, 2026, at 10:00 a.m. Eastern Time in a virtual-only format. Proxies also may be voted at any adjournments or +postponements of the Annual Meeting. Shareholders who participate in the Annual Meeting virtually by way of the link and instructions +provided will be deemed to be “present in person,” as such term is used in this Proxy Statement, including for purposes of +determining a quorum and counting votes. +On +or about April 6, 2026, a notice containing instructions on how to access this Proxy Statement, the accompanying proxy card and related +materials online will be mailed to holders of record of our common stock, $0.0001 par value (the “Common Stock”), at the +close of business on March 27, 2026 (the “Record Date”). Our Annual Report for the fiscal year ended December 31, 2025 (the +“2025 Fiscal Year”), including audited financial statements, is included in the materials that are accessible online. This +Proxy Statement contains information about the Annual Meeting as well as information regarding the voting process, director elections, +our corporate governance programs, and executive and director compensation, among other things. We recommend that you read all of these +materials. +The +Annual Meeting has been called to consider and take action on the following proposals: +1. to +elect ten (10) directors to our Board of Directors to serve until the next annual meeting +of our stockholders and until his, her, or their successor is elected and qualified; +2. to +ratify the appointment of Ernst & Young LLP as our independent registered public accounting +firm for the fiscal year ending December 31, 2026; +3. to +approve, on a non-binding advisory basis, the compensation of the Company’s named executive +officers as disclosed in this Proxy Statement; and +4. to +transact such other business as may properly come before the Annual Meeting and any adjournments +or postponements thereof. +The +Board of Directors knows of no other matters to be presented for action at the Annual Meeting. However, if any other matters properly +come before the Annual Meeting, the persons named in the proxy will vote on such other matters or for other nominees for director in +accordance with their best judgment. Our Board of Directors recommends that the stockholders vote “FOR” each of the ten (10) +director nominees in Proposal One, and “FOR” Proposals Two and Three. Only holders of record of our Common Stock at the close +of business on the Record Date will be entitled to vote at the Annual Meeting. +We +are incorporated in the State of Delaware. Our principal executive offices are located at 52-16 Barnett Avenue, Long Island City, New +York 11104, and our telephone number is (718) 446-1800. +Notice +of Internet Availability of Proxy Materials +Your +vote is very important. We continue to take advantage of the Securities and Exchange Commission (the “SEC”) “e-proxy” +rules allowing the Company to furnish proxy materials through the Internet for the benefit and convenience of our stockholders. By using +the e-proxy rules, we can expedite the receipt by stockholders of proxy materials while lowering the costs and reducing the environmental +impact associated with our Annual Meeting. On or about April 6, 2026, we will furnish a Notice of Internet Availability of Proxy Materials +(the “Availability Notice”) to most of our stockholders containing instructions on how to access the proxy materials and +to vote online. In addition, instructions on how to request a printed copy of these materials will be found on the Availability Notice. +If you received an Availability Notice by mail, you will not receive a paper copy of the proxy materials unless you request such materials +by following the instructions contained in the Availability Notice. +Whether +or not you plan to attend our virtual Annual Meeting, please vote at your earliest convenience by following the instructions in the Availability +Notice, the proxy card or voting instruction form you received in the mail. +You +may revoke your proxy at any time before it is voted. For more information on voting your Common Stock, please refer to the following +“Questions and Answers” section. +1 +QUESTIONS +AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING +1. What +is included in the proxy materials? What is a proxy statement and what is a proxy? +The +proxy materials for our Annual Meeting include the Notice of Annual Meeting, this Proxy Statement and our Annual Report on Form 10-K +for the year ended December 31, 2025. If you received a paper copy of these materials, the proxy materials also include a proxy card +or voting instruction form. +A +proxy is the delegation of your right to vote the Common Stock you own to another person, who is called your proxy. When you designate +someone as your proxy in a written document, that document is called a proxy or a proxy card. SEC regulations require that we furnish +a proxy statement to you when we ask you to designate a proxy to vote your shares of Common Stock on your behalf. We have designated +our officers Edward R. Rosenfeld and Lisa Keith as proxies for the Annual Meeting. +2. Who +may vote at the Annual Meeting? +Only +holders of record of the 73,040,340 shares of our Common Stock outstanding as of the close of business on the Record Date can vote by +virtual presence online at or prior to the Annual Meeting. Each of these stockholders has one vote for each share of our Common Stock +held on that date. +3. What +is the difference between holding shares as a stockholder of record and as a beneficial owner? +If +your shares were registered as of the Record Date directly in your name with our registrar and transfer agent, Equiniti Trust Company, +LLC, then you are a “stockholder of record” with respect to those shares, and in such case, we have provided the Availability +Notice directly to you. Upon your request, we will send this Proxy Statement and the accompanying proxy materials directly to you. If +your shares were held as of the Record Date in a stock brokerage account or by a bank or nominee, then your shares are held in “street +name” and you are considered the “beneficial owner” of those shares. In that case, your broker, bank or other stockholder +of record has provided the Availability Notice to you and, upon your request, will provide this Proxy Statement and the accompanying +proxy materials to you. As the beneficial owner, you have the right to direct your broker, bank or other stockholder of record how to +vote your shares held in “street name.” +4. What +is considered a quorum to conduct the Annual Meeting? +The +presence, in person or by proxy, of the holders of a majority of the shares entitled to vote is necessary to constitute a quorum for +the purpose of transacting business at the Annual Meeting. Under Delaware law, abstentions and broker non-votes as described below are +counted as present for purposes of determining the presence or absence of a quorum for the transaction of business. If a quorum is not +present, the Annual Meeting may be adjourned until a quorum is obtained. +5. What +is a “broker non-vote”? +If +your shares are held in “street name” by a broker, bank or other nominee, your broker, bank or other nominee is the record +holder; however, the broker, bank or other nominee is required to vote the shares in accordance with your instructions. If you do not +give instructions to your broker, bank or other nominee, it may, if permitted by the organizations of which it is a member, exercise +discretionary voting power to vote your shares. A “broker non-vote” occurs when a broker, bank or other nominee of record +holding shares for a beneficial owner has not received voting instructions from the beneficial owner and either chooses not to vote the +shares on a particular proposal as to which the holder has discretionary voting power or does not vote on a particular proposal because +that holder does not have discretionary voting power for that particular item. Broker non-votes are considered present in determining +whether a quorum is present. +If +you hold your shares in “street name,” we strongly encourage you to provide instructions regarding the voting of your shares, +because your broker, bank or other nominee cannot vote your shares with respect to certain of the proposals being presented at the Annual +Meeting without voting instructions from you. +6. How +many votes do I have? What shares are included on the proxy card? +For +each share of Common Stock that you own on the Record Date, you are entitled to one vote on each matter presented at the Annual Meeting. +If +you are a record holder, you will receive an Availability Notice or proxy card for all of the shares of Common Stock you hold in certificate +form, in book-entry form and in any Company benefit plan. If you are a beneficial owner, you will receive information containing voting +instructions from the broker, bank or other nominee through which you own your shares of Common Stock. +2 +7. How +many votes are required to approve each proposal and what is the effect of abstentions and +broker non-votes? +Proposal +One (Election of Directors): Directors are elected by the affirmative vote of a plurality of the shares of Common Stock present in +person or represented by proxy at the Annual Meeting and entitled to vote on this proposal. This means that the director nominees who +receive the greatest number of affirmative votes cast are elected as directors, subject to our Director Election (Majority Voting) Policy +discussed in Proposal One below. +Proposal +Two (Ratification of Appointment of Ernst & Young LLP): The affirmative vote of a majority of the votes cast by the shares of +Common Stock present in person or represented by proxy at the Annual Meeting and entitled to vote on this proposal is required to approve +the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year +ending December 31, 2026. +Proposal +Three (Non-Binding Advisory Vote on Executive Compensation): The affirmative vote of a majority of the votes cast by the shares of +Common Stock present in person or represented by proxy at the Annual Meeting and entitled to vote on this proposal is required to approve, +on a non-binding advisory basis, the compensation of our Named Executive Officers as described in this Proxy Statement. +Other +Matters: If any other matters are presented at the Annual Meeting, they must receive the affirmative vote of a majority of the votes +cast by the shares of Common Stock present in person or represented by proxy at the Annual Meeting and entitled to vote on the matter +to be approved. +Abstentions +and broker non-votes will have no effect on the outcome of each proposal but will be treated as present and entitled to vote with respect +to each proposal and used for purposes of calculating whether a quorum is present at the Annual Meeting. +Proposal +One (Election of Directors) will be decided by a plurality of the votes of the shares represented in person or by proxy and entitled +to vote. The approval of each of Proposal Two (Ratification of Ernst & Young LLP) and Proposal Three (Non-Binding Advisory Vote on +Executive Compensation) requires a favorable vote of a majority of the votes cast by the shares present in person or by proxy and entitled +to vote on the applicable matter. As noted above, abstentions and broker-non votes will have no effect on the outcome of each proposal. +If +you do not provide your broker, bank or other nominee with instructions on how to vote your shares held in “street name,” +your broker, bank or other nominee will not be permitted to vote your shares on non-routine matters, and your shares will not affect +the outcome of proposals concerning non-routine matters. Proposal Two is considered a routine matter under applicable rules. Proposals +One and Three are considered “non-routine” matters, which means that your broker or other nominee does not have discretion +to vote your shares with respect to those proposals without voting instructions from you. If you hold your shares in “street name,” +we encourage you to provide instructions regarding the voting of your shares to your broker, bank or other nominee. +8. How +can I attend and participate in the Annual Meeting? +Our +virtual Annual Meeting will be conducted via live audio webcast. You will be able to participate online and submit your questions during +the Annual Meeting by visiting www.virtualshareholdermeeting.com/SHOO2026, beginning at 10:00 a.m. Eastern Time on May 20, 2026. Stockholders +will also be able to vote their shares electronically during the Annual Meeting. +To +participate in the Annual Meeting, you will need the 16-digit control number included on your proxy card or your Availability Notice. +The Annual Meeting will begin promptly at 10:00 a.m. Eastern Time. We encourage you to access the Annual Meeting prior to the start time. +Online access will begin at 9:45 a.m. Eastern Time. Guests may listen to a live audio webcast of the virtual Annual Meeting by visiting +www.virtualshareholdermeeting.com/SHOO2026, beginning at 9:45 a.m. Eastern Time, but are not entitled to participate. +The +virtual Annual Meeting platform is fully supported across various browsers (Internet Explorer, Chrome, Firefox, and Safari) and various +electronic devices (desktops, laptops, tablets, and cell phones) running the most updated version of applicable software and plugins. +Participants should ensure they have a strong Internet connection wherever they intend to participate in the Annual Meeting. Participants +should also allow plenty of time to log in and ensure that they can hear streaming audio prior to the start of the Annual Meeting. +9. Where +can I find a list of stockholders entitled to vote at the Annual Meeting? +For +the ten days prior to the Annual Meeting, and upon appointment, a list of stockholders entitled to vote at the Annual Meeting will be +available for examination by any stockholder of record for any purpose germane to the Annual Meeting at the Company’s principal +executive offices. Please contact the Company’s Secretary at Steven Madden, Ltd., 52-16 Barnett Avenue, Long Island City, New York +11104 to set up an appointment. +3 +10. How +can I vote my shares? +If +the records of our transfer agent show that you own shares in your name at the close of business on March 27, 2026, then you may vote +at the Annual Meeting. To attend the Annual Meeting and vote your shares electronically, you will need the 16-digit control number included +on your Availability Notice, on your proxy card, or on the instructions that accompanied your proxy materials. +Even +if you plan to attend the Annual Meeting, we encourage you to authorize your proxy in advance. You may vote your shares in advance of +the Annual Meeting by authorizing a proxy over the Internet or by telephone. In addition, if you received a paper copy of the proxy materials +by mail, you can submit a proxy by mail by following the instructions on the proxy card. Voting your shares by authorizing a proxy over +the Internet, by telephone or by written proxy card will ensure your representation at the Annual Meeting regardless of whether you attend +the Annual Meeting. +If +you are the record holder of your shares, please authorize your proxy electronically by going to the http:// www.proxyvote.com website +or by calling the toll-free number listed below and on the proxy card. Please have your Proxy Statement or proxy card in hand when going +online or calling. If you authorize your proxy via the Internet or by phone, you do not need to return your proxy card. If you choose +to authorize your proxy by mail, simply mark your proxy card and then date, sign and return it in the postage-paid envelope provided. +VOTE +OVER THE INTERNET +http://www.proxyvote.com +VOTE +BY PHONE 1-800-690-6903 +VOTE +BY MAIL Vote Processing c/o Broadridge 51 Mercedes Way Edgewood, New York 11717 +Use +the Internet to transmit your voting instructions and for electronic delivery of information. +Use +any touch-tone telephone to transmit your voting instructions. +If +you receive paper proxy materials, mark, sign and date your proxy card and return it in the postage-paid envelope we have provided +or return it to the address shown above. +If +you hold your shares beneficially in “street name” through a broker or nominee, you may be able to authorize your proxy by +telephone or the Internet as well as by mail, but you will need to obtain and follow instructions from your broker or nominee to vote +these shares. +11. May +I revoke my proxy for the Annual Meeting once I have given it? +You +may revoke your proxy at any time before it is voted at the Annual Meeting by: +● properly +executing and delivering a later-dated proxy (including a telephone or Internet proxy authorization); +● voting +your shares electronically at the Annual Meeting; or +● sending +a written notice of revocation to the Secretary of the Company at Steven Madden, Ltd., 52-16 +Barnett Avenue, Long Island City, New York 11104. This notice must be received before the +shares are voted. +12. How +does the Board of Directors recommend that I vote my shares? +Our +Board of Directors recommends that you vote: +● “FOR” +the election of each of the ten (10) director nominees to serve until the next annual meeting +of our stockholders and until his, her, or their successor is elected and qualified; +● “FOR” +the ratification of the appointment of Ernst & Young LLP as our independent registered +public accounting firm for the fiscal year ending December 31, 2026; and +● “FOR” +the approval, on a non-binding advisory basis, of the executive compensation of our Named +Executive Officers, as disclosed in this Proxy Statement. +ALL +PROXIES RECEIVED WILL BE VOTED IN ACCORDANCE WITH THE CHOICES SPECIFIED ON SUCH PROXIES. PROXIES WILL BE VOTED FOR EACH NOMINEE IN PROPOSAL +ONE AND IN FAVOR OF PROPOSALS TWO AND THREE IF NO CONTRARY SPECIFICATION IS MADE. ALL VALID PROXIES OBTAINED WILL BE VOTED AT THE DISCRETION +OF THE PERSONS NAMED IN THE PROXY WITH RESPECT TO ANY OTHER BUSINESS THAT MAY PROPERLY COME BEFORE THE ANNUAL MEETING OR ANY ADJOURNMENTS +OR POSTPONEMENTS THEREOF. AS NOTED ABOVE, IF YOU HOLD YOUR SHARES BENEFICIALLY THROUGH A BROKER, BANK OR OTHER NOMINEE AND FAIL TO PROVIDE +SPECIFIC VOTING INSTRUCTIONS TO THAT BROKER, BANK OR OTHER NOMINEE, YOUR SHARES WILL NOT BE VOTED IN THE ELECTION OF DIRECTORS OR THE +ADVISORY VOTE ON EXECUTIVE COMPENSATION UNLESS YOU ARE PRESENT AND VOTE AT THE MEETING. +4 +13. Who +will bear the expenses of this solicitation and how are proxies being solicited? +We +will pay the costs of soliciting proxies, including preparing, printing and mailing this Proxy Statement, any exhibits hereto and the +proxies solicited hereby. In addition to the use of the mailings, proxies may be solicited on our behalf by our officers, directors and +employees, without additional remuneration, by personal interviews, by telephone or by electronic transmission. We will also request +brokerage firms, nominees, custodians and fiduciaries to forward proxy materials to the beneficial owners of shares of Common Stock held +of record by them and will provide reimbursements for the cost of forwarding the material in accordance with customary charges. We do +not currently intend to retain a professional solicitor to assist in the solicitation of proxies; however, we may later elect to do so. +14. Will +I be able to ask questions at the Annual Meeting? +Edward +R. Rosenfeld, our Chairman and Chief Executive Officer, will be available to answer questions submitted by the stockholders during the +Annual Meeting related to the items of business at the Annual Meeting. Stockholders may submit questions for the Annual Meeting after +logging in, beginning at 10:00 a.m. Eastern Time on May 20, 2026. If you wish to submit a question, you may do so by logging into the +virtual meeting platform at www.virtualshareholdermeeting.com/SHOO2026, typing your question into the “Ask a Question” field, +and clicking “Submit.” Please submit any questions during the meeting. +Additional +information regarding the ability of stockholders to ask questions during the Annual Meeting, related rules of conduct and other materials +for the Annual Meeting will be available at www.virtualshareholdermeeting.com/ SHOO2026. +15. What +can I do if I have technical difficulties in accessing the 2026 Annual Meeting? +Technical +support, including related technical support phone numbers, will be available on the virtual meeting platform at www.virtualshareholdermeeting.com/SHOO2026 +beginning at 9:30 a.m. Eastern Time on May 20, 2026 through the conclusion of the Annual Meeting. +16. How +will the voting results be reported? +The +preliminary results of the voting on the proposals will be reported at the Annual Meeting. The final certified results will be reported +in a Current Report on Form 8-K that will be filed with the SEC within four business days following the Annual Meeting. +17. How +do I submit a proposal for action at the Company’s 2027 Annual Meeting of Stockholders? +Stockholder +proposals submitted in accordance with Rule 14a-8 under Securities Exchange Act of 1934, as amended (the “Exchange Act”), +must be received at our principal executive offices no later than December 7, 2026 to be considered for inclusion in the proxy materials +to be distributed by the Company in connection with the 2027 Annual Meeting of Stockholders (the “2027 Annual Meeting”). +Alternatively, +Article I, Section 7(f) of our Second Amended and Restated By-Laws (the “By-Laws”), requires that any stockholder proposal +that is not submitted for inclusion in the proxy materials for the 2027 Annual Meeting under Rule 14a-8 under the Exchange Act, but is +instead sought to be presented directly at the 2027 Annual Meeting, must be (i) specified in the notice of such meeting given by or at +the direction of the Board of Directors (or any duly authorized committee thereof), (ii) otherwise properly brought before such meeting +by or at the direction of the Board of Directors (or any duly authorized committee thereof) or (iii) specified in a notice in proper +written form given by a stockholder of record on the date of the giving of the notice and on the record date for such meeting, which +notice conforms to the requirements of Article I, Section 7(f) of the By-Laws and is delivered to, or mailed and received at, our principal +executive offices not less than 120 days nor more than 150 days prior to the first anniversary of the date of our 2026 Annual Meeting. +Accordingly, any written notice given by or on behalf of a stockholder pursuant to the foregoing clause (iii) in connection with the +2027 Annual Meeting must be received no later than January 20, 2027 and no earlier than December 21, 2026. +Under +Article II, Section 5 of the By-Laws, for a stockholder to nominate one or more persons for election to the Board of Directors at the +2027 Annual Meeting, complete and timely notice must be given in writing and in proper form to our Secretary no later than January 20, +2027 and no earlier than December 21, 2026. Any notice must contain the specific information required by the By-Laws, including, among +other things, information about any proposed nominee and any agreements, arrangements or understandings the stockholder may have with +any proposed nominee or other parties relating to the nomination or other proposal. Such information must be updated, if necessary, to +be true and correct as of the record date for the 2027 Annual Meeting and as of the date that is 10 business days prior to the date of +the 2027 Annual Meeting. This summary information regarding the By-Laws is qualified in its entirety by reference to the full text of +the By-Laws, a copy of which may be obtained by any stockholder, without charge, upon written request to our Secretary, Steven Madden, +Ltd., 52-16 Barnett Avenue, Long Island City, New York 11104. If a nomination is not timely and properly made in accordance with the +procedures set forth in the By-Laws, or does not contain the specific information required by the By-Laws, such nomination will be defective +and will not be brought before the 2027 Annual Meeting. In addition, to comply with the universal proxy rules, stockholders who intend +to solicit proxies in support of director nominees other than the nominees of our Board of Directors must comply with the additional +requirements of Rule 14a-19 under the Exchange Act, including providing a statement that such stockholder intends to solicit the holders +of shares representing at least 67% of the voting power of our shares entitled to vote on the election of directors in support of director +nominees other than our nominees, as required by Rule 14a-19(b). We intend to file a proxy statement and WHITE proxy card with the SEC +in connection with the solicitation of proxies for the 2027 Annual Meeting. +5 +18. I +share an address with another stockholder and we received only one Notice of Internet Availability +of Proxy Materials or one paper copy of the proxy materials, as applicable. How may I obtain +an additional copy? +If +two or more stockholders share an address, we may send a single copy of this Proxy Statement and other soliciting materials, as well +as our Annual Report for the 2025 Fiscal Year, to the shared address, unless we have received contrary instructions from one or more +of the stockholders sharing the address. If a single copy has been sent to multiple stockholders at a shared address, we will deliver +a separate proxy card for each stockholder entitled to vote. Additionally, we will send an additional copy of this Proxy Statement, other +soliciting materials and our Annual Report for the 2025 Fiscal Year, promptly upon oral or written request by any stockholder to the +Secretary at Steven Madden, Ltd., 52-16 Barnett Avenue, Long Island City, New York 11104; telephone number (718) 446-1800. If any stockholders +sharing an address receive multiple copies of this Proxy Statement, other soliciting materials and our Annual Report for the 2025 Fiscal +Year and would prefer in the future to receive only one copy, such stockholders may make such request to the Secretary at the same address +or telephone number. +PROPOSAL +ONE: ELECTION OF DIRECTORS +Our +By-Laws provide that the number of directors constituting our whole Board of Directors may be fixed from time to time by action of the +directors. The Board of Directors has fixed the number of directors comprising the Board of Directors at ten members. Directors are elected +to serve until the next annual meeting of stockholders, and the term of each of the current directors will expire at the Annual Meeting. +Stockholder +Nominations for Board Membership +The +Nominating/Corporate Governance Committee of the Board of Directors recommends to the Board director candidates for nomination and election +at each annual meeting of stockholders or for appointment to fill vacancies on the Board. +The +Nominating/Corporate Governance Committee will review and evaluate the qualifications of proposed director candidates recommended to +it from various sources, including candidates proposed by our stockholders in accordance with the procedures established for that purpose. +To enable the Nominating/Corporate Governance Committee to consider a stockholder recommendation in connection with the 2027 Annual Meeting, +we must receive the recommendation on or before December 7, 2026. +Directors +and Nominees for Election to the Board of Directors +Upon +recommendation of the Nominating/Corporate Governance Committee of the Board of Directors, the Board of Directors has nominated and is +recommending to the stockholders the election of each of the ten nominees named below to serve as a director of the Company until the +next annual meeting of our stockholders and until his, her, or their successor is duly elected and qualified or until his, her, or their +earlier death, resignation or removal from office. All of the nominees were elected directors at last year’s Annual Meeting of +Stockholders. All nominees have agreed to be named in this Proxy Statement and to serve on the Board of Directors if elected. +The +names and biographical summaries of the ten persons who have been recommended by the Nominating/ Corporate Governance Committee of the +Board of Directors and nominated by the Board of Directors to stand for election at the Annual Meeting are provided below for your information. +Our +Board of Directors is responsible for overseeing our business in a manner consistent with the Board’s fiduciary duty to our stockholders. +This significant responsibility requires that our directors consist of individuals who are well qualified for service on our Board and +its committees, who demonstrate a commitment to the success of the Company, and who serve in the best interests of our stockholders. +6 +The +following matrix identifies the relevant skills, experience and qualifications of our ten director nominees. The skills and experience +identified below are reviewed by the Nominating/Corporate Governance Committee, in addition to other qualifications, and nominees are +selected with a view to establishing a Board of Directors that consists of individuals who have extensive business leadership experience, +are independent, bring diverse perspectives to the Board, and possess high ethical standards, sound business judgment and acumen, and +a willingness to devote the time necessary for the Board to effectively fulfill its responsibilities. We believe that all of the director +nominees possess these qualifications and provide the Board with a full complement of knowledge, business skills and expertise for the +effective management of the Company. +Rosenfeld +Davis +Ferrara +Klipper +Kumar +Lynch +Migliorini +Reed +Sachdev +Varela +Knowledge, +Skills and Experience +Public +Company Board +● +● +● +● +Finance/Accounting +● +● +● +● +● +● +Executive +Leadership +● +● +● +● +● +● +● +● +● +● +Risk +Oversight/Management +● +● +● +● +● +Retail +Industry +● +● +● +● +● +● +● +● +Independence +● +● +● +● +● +● +● +● +Board +Tenure +Below +is a summary of general qualifications, skills and attributes for each director nominee as of April 6, 2026 that led to the Board’s +conclusion that the nominee is qualified to serve as a director. +Name +Principal +Occupation +Age +Year +Became a +Director +Edward +R. Rosenfeld +Chairman +of the Board and Chief Executive Officer, Steven Madden, Ltd. +50 +2008 +Peter +A. Davis +Retired +executive in the footwear and apparel industry and Founder and Managing Director of Pete Davis Basketball, LLC, a grassroots community +youth basketball organization +72 +2022 +Al +Ferrara +Retired +National Director of the Retail and Consumer Products Division of BDO USA, LLP, a major international accounting firm +75 +2019 +Mitchell +S. Klipper +Retired +Chief Executive Officer of Barnes & Noble, Inc.’s Retail Group, one of the largest retail booksellers in the United States +68 +2018 +Maria +Teresa Kumar +President +and CEO of Voto Latino, which she co-founded in 2004 and built into America’s largest Latinx voter registration and advocacy +organization +52 +2021 +Rose +Peabody Lynch +Retired +owner of Market Strategies, LLC, a New York-based consulting firm of which she was founder and President, which focused on strategic +marketing and operating issues for small to medium-sized companies +76 +2014 +Peter +Migliorini +Sales +Manager, Greschlers, Inc., a building supplies company +77 +1996 +Arian +Simone Reed +Co-Founder +and Chief Executive Officer of Fearless Fund, a venture capital fund that she co-founded in 2018 +45 +2022 +Ravi +Sachdev +Partner, +Clayton Dubilier & Rice, LLC, a global alternative investment firm +49 +2008 +Amelia +Newton Varela +President, +Steven Madden, Ltd. +54 +2016 +Additional +Information About the Directors Other Public Company Directorships +Three +of our directors also currently serve or recently served as directors of other public companies: +● Mr. +Rosenfeld served as a director and chairman of the Audit & Risk Management Committee +of PVH Corp. (NYSE: PVH), one of the world’s largest apparel companies, from March +24, 2013 until December 11, 2023. +● Ms. +Lynch is a director and member of the Compensation Committee, Pension Committee, and Nominating +Committee of General American Investors Company, Inc. (NYSE: GAM), a closed-end fund that +manages a global portfolio of investments consisting mainly of U.S. and foreign securities. +● Mr. +Sachdev serves as a director of Agilon Health, Inc. (NYSE: AGL), a technology-enabled services +platform for the physicians’ market. +Specific +Qualifications, Attributes, Skills and Experience of Directors +Edward +R. Rosenfeld has served as our Chairman of the Board and Chief Executive Officer since August 2008 and has been a director of +the Company since February 2008. Mr. Rosenfeld, who joined our executive management team in May 2005, has more than two decades of experience +focused on the retail, apparel and footwear industries and possesses particular knowledge and experience in the industry that strengthens +the Board’s collective qualifications, skills and experience. He has strong leadership skills and an in-depth understanding of +the Company and its goals from his positions as the Chairman of the Board and Chief Executive Officer. His background in finance and +his analytical skills gained through his years as a Vice President with Peter J. Solomon Company, an investment banking firm, where he +specialized in mergers and acquisitions in the retail, apparel and footwear industries, provide the Board with insight and guidance with +respect to, among other things, strategic business development matters. Mr. Rosenfeld served as a director and chairman of the Audit +& Risk Management Committee of PVH Corp. (NYSE: PVH), one of the world’s largest apparel companies, from March 2013 until December +2023. +7 +Peter +A. Davis has served as a director of the Company and as a member of the Compensation Committee since January 2022. Mr. Davis +has over 40 years of experience in the footwear and apparel industry, having held executive leadership positions in sales and marketing +with companies including Skechers, Fila, Reebok, Joy & Mario and Dynasty Footwear. He also founded The Infamous Black Sheep Brand, +an urban action sports lifestyle brand. A former player in the NBA, Mr. Davis founded Pete Davis Basketball, LLC, a grassroots community +youth basketball organization, in 2019 and today serves as its Managing Director. Prior to founding Pete Davis Basketball, LLC, Mr. Davis +was the Senior Vice President of Footwear for Joy & Mario Footwear from 2013 to 2018. Mr. Davis’ years of experience in our +industry provide relevant knowledge, expertise and leadership to the Board. +Al +Ferrara has served as a director of the Company and as a member of the Audit Committee since July 2019. In May 2020, Mr. Ferrara +became the Chairman of the Audit Committee and a member of the Nominating/Corporate Governance Committee. He is a retired certified public +accountant having retired from his position as a partner with BDO USA, LLP, a major international accounting firm, in August 2016 after +25 years with the firm, most recently serving as National Director of the Retail & Consumer Products Division. Mr. Ferrara also served +as a director on the firm’s Board of Directors from 2003 through 2010 and was also a director and BDO representative on the Board +of Directors of BDO Capital Advisors, LLC from 2000 to 2015. Mr. Ferrara served as a member of the Board of Directors of Barnes & +Noble, Inc., the nation’s largest retail bookseller, from 2016 until its sale in August 2019 and also served on its Audit Committee +and Compensation Committee. In September 2020, Mr. Ferrara was appointed to the Board of Directors of VIVAKOR, Inc. (NASDAQ: VIVK), a +socially responsible operator, acquirer and developer of clean energy technologies and environmental solutions, where he served as the +Chairman of its Audit Committee. Mr. Ferrara voluntarily resigned from VIVAKOR’s Board of Directors in November 2022. Mr. Ferrara’s +decades of relevant experience as a certified public accountant, the director of the retail practice at a major international accounting +firm, and as a member of the audit committee of a public company enhance the financial oversight capabilities of our Board and its Audit +Committee. +Mitchell +S. Klipper has served as a director of the Company since April 2018, as a member of the Audit Committee since June 2018 and as +a member of the Corporate Social Responsibility Committee since August 2019. Mr. Klipper served as the Chief Executive Officer of Barnes +& Noble, Inc.’s Retail Group, one of the nation’s largest retail booksellers, from March 2010 to May 2015. Mr. Klipper +began his career at Barnes & Noble as Chief Financial Officer of B&N College in June 1986. He subsequently held several executive +positions at Barnes & Noble, Inc., including Executive Vice President, President of Barnes & Noble Development and Chief Operating +Officer. Prior to joining Barnes & Noble, Inc., Mr. Klipper was an Audit Manager with KMG Main Hurdman, a certified public accounting +firm and predecessor to KPMG. He also served on the advisory board of Modell’s Sporting Goods, a sporting goods retailer, from +2006 through 2018. Mr. Klipper’s decades of relevant experience in retail management, general business and accounting enhance the +leadership and oversight capabilities of our Board. +Maria +Teresa Kumar has served as a director of the Company and as a member of the Corporate Social Responsibility Committee since January +2021. Ms. Kumar is the President and CEO of Voto Latino, America’s largest Latinx voter registration and advocacy organization, +which she co-founded in 2004. She is also a regular on-air contributor for MSNBC. Ms. Kumar serves on the boards of Emily’s List +and the World Economic Forum’s Global Shapers and is a World Economic Forum Young Global Leader and a Council on Foreign Relations +Life Member. Ms. Kumar graduated from U.C. Davis with a B.A. in International Affairs and earned a Master’s degree in Public Policy +from Harvard’s Kennedy School. Ms. Kumar’s extensive experience in management, leadership, social advocacy and working with +non-profits enhances Board leadership and management oversight with a unique perspective on corporate social responsibility. +Rose +Peabody Lynch has served as a director of the Company since April 2014, as a member of the Compensation Committee since June +2014, and as a member of the Audit Committee since July 2024. Ms. Lynch formerly served on the Corporate Social Responsibility Committee +from August 2019 to July 2024, when she became a member of the Audit Committee. Ms. Lynch previously operated her own New York-based +consulting business, Market Strategies, LLC, which focused on strategic marketing and operating issues for small to medium-sized companies. +She possesses over 30 years of business experience, including tenures as President and in other senior executive officer positions of +major companies in the beauty and fashion industries, and has extensive executive level financial and operating experience. Her experience +serving as a director and as a senior executive for a range of companies, including Victoria’s Secret; Trowbridge Gallery, a supplier +of fine art to the interior design trade; and Danskin, Inc., a leading manufacturer of women’s dance and active wear, enhances +the Board’s leadership and oversight capabilities. Ms. Lynch has served on several boards, including The Harmony Group-LeRoi Princeton +(a manufacturer of children’s apparel), Salant Corporation (Perry Ellis Menswear) and Frederick’s of Hollywood (a retailer +of women’s apparel and lingerie). Currently, Ms. Lynch serves on the board of General American Investors Company, Inc. (NYSE: GAM). +In her role on the GAM Board, she serves on the Compensation Committee, along with the Pension and Nominating Committees. She was a member +of the Audit Committee and Nominating and Governance Committees during her tenure at Salant and chaired the Compensation Committee during +her tenure on the board of Frederick’s of Hollywood. In addition, Ms. Lynch has held leadership positions with a variety of not-for-profit +organizations. She currently serves on the Board of Directors of the Princeton University Varsity Club. She also served two terms on +the Board of Trustees of Concord Academy in Concord, Massachusetts and rotated off the Board in July 2021. Ms. Lynch is a member of the +Women and Foreign Policy Advisory Council at the Council on Foreign Relations. Ms. Lynch graduated from Princeton with a B.A. in Art +History and earned a Master of Business Administration from Harvard Business School. +8 +Peter +Migliorini has served as a director of the Company since October 1996 and has served on the Nominating/ Corporate Governance +Committee, as its Chair, since July 2004 and the Compensation Committee, as its Chair, since July 2004. Mr. Migliorini formerly served +on the Audit Committee, from October 1996 until June 2018. Mr. Migliorini is the Presiding Director over all executive sessions of the +independent directors. Mr. Migliorini possesses extensive executive level financial, sales and operations experience. Mr. Migliorini +currently serves as sales manager for Greschlers, Inc., a building supplies company. Prior to joining Greschlers, Mr. Migliorini served +as Director of Operations for Mackroyce Group, a construction company, from 1987 to 1994. Earlier, Mr. Migliorini held various positions +of increasing responsibility from Assistant Buyer to Chief Planner/Coordinator for several shoe companies, including Meldisco Shoes, +Perry Shoes and Fasco Shoes. His numerous years of business experience at various levels and in various industries provide the Board +with a measure of practical orientation regarding our operations and growth endeavors. Mr. Migliorini’s early experience in the +shoe industry also provides relevant knowledge and expertise in our specific industry. +Arian +Simone Reed has served as a director of the Company and as a member of the Nominating/Corporate Governance Committee since January +2022, and as a member of the Corporate Social Responsibility Committee since July 2024. Ms. Reed is the Founding Partner and Chief Executive +Officer of the Fearless Fund, a venture capital fund that invests in women of color led businesses, which she co-founded in 2018. Prior +to Fearless Fund, Ms. Reed was the owner of AR PR Marketing, a publicity and marketing strategy firm from 2004 to 2017. Ms. Reed serves +as a member on the Board of Directors for the Birmingham Civil Rights Institute. In 2021, she was the recipient of the 15th Annual General +Motors African Ancestry Network Black History Month Celebration Entrepreneurial Spirit Award and the Detroit Branch NAACP Great Expectations +Award. Ms. Reed’s marketing expertise, leadership, social advocacy, and working with entrepreneurs enhances Board leadership and +strategic business development, and provides a unique perspective on corporate social responsibility. +Ravi +Sachdev has served as a director of the Company as a member of the Nominating/Corporate Governance Committee since August 2019 +and as a member of the Audit Committee from September 2008 until March 2025. As a Partner of the private equity firm Clayton Dubilier +& Rice, LLC since June 2015, Mr. Sachdev focuses on the healthcare sector. Earlier, Mr. Sachdev worked at several investment banks. +He was a Managing Director and Co-Head of Healthcare Services at J.P. Morgan from November 2010 until June 2015 and prior to that held +the positions of Managing Director at Deutsche Bank Securities, Inc. from January 2009 until November 2010 and Director at Deutsche Bank +from January 2007 until January 2009. Prior to joining Deutsche Bank in 2006 as a Vice President, Mr. Sachdev served as a Vice President +at Peter J. Solomon Company, an investment banking boutique, specializing in mergers and acquisitions in the healthcare sector, from +1998 to 2006. Mr. Sachdev possesses knowledge of finance and the financial analytics used to measure business performance. His 20 years +of professional experience in investment banking and private equity brings to the Board a thorough understanding of the financial issues +affecting public companies and greater insights in business valuation together with a practical orientation with respect to acquisitions +and integrations. Mr. Sachdev also serves on the Board of Directors of Agilon Health, Inc. (NYSE: AGL), a technology-enabled services +platform for the physicians’ market and served on the Board of Directors and the Strategy Committee and Compensation Committee +of Covetrus, Inc. (NASDAQ: CVET), a global animal-health technology and services company, from February 2019 until October 2022. +Amelia +Newton Varela has served as President of the Company since September 2015 and has been a director since 2016. Prior to this tenure, +Ms. Varela was Executive Vice President of Wholesale of the Company since April 2008 and Executive Vice President of Wholesale Footwear +of the Company from November 2004 to April 2008. Previously, she was Vice President of Sales for Steve Madden Women’s Wholesale +Division from January 2000. Ms. Varela began her career with the Company in 1998 in the role of Account Executive for Steve Madden Women’s +Wholesale Division. She graduated from The Fashion Institute of Technology in 1995. Ms. Varela’s over 25 years of experience at +the Company provides relevant industry knowledge and expertise, and leadership to the Board. +Required +Vote +Proxies +will be voted for the election of the ten nominees as directors of the Company unless otherwise specified in the proxy. A plurality of +the votes cast by the holders of shares of Common Stock present in person or represented by proxy and entitled to vote at the Annual +Meeting will be necessary to elect the nominees as directors. This means that the director nominees who receive the greatest number of +affirmative votes cast are elected as directors, subject to our Director Election (Majority Voting) Policy, which is described below. +If, for any reason, any nominee is unable or unwilling to serve, the proxies will be voted for a substitute nominee, who will be designated +by the Board of Directors at the Annual Meeting. Stockholders may withhold votes by marking the appropriate boxes on the accompanying +proxy. +Director +Election (Majority Voting) Policy +In +uncontested elections, it is our policy that any nominee for director who receives a greater number of “WITHHOLD” votes than +“FOR” votes for his, her, or their election must promptly submit a letter offering his, her, or their resignation to the +Nominating/Corporate Governance Committee following the certification of the stockholder vote. In such event, the Nominating/Corporate +Governance Committee would then consider the offer of resignation and make a recommendation to the independent member of the Board of +Directors as to whether or not the resignation should be accepted. For more information about this policy, see “Corporate Governance +– Director Election (Majority Voting) Policy” below. +9 +Recommendation +of the Board of Directors +The +Nominating/Corporate Governance Committee of the Board and the entire Board of Directors unanimously recommend a vote “FOR” +the election of Mr. Edward R. Rosenfeld, Mr. Peter A. Davis, Mr. Al Ferrara, Mr. Mitchell S. Klipper, Ms. Maria Teresa Kumar, Ms. Rose +Peabody Lynch, Mr. Peter Migliorini, Ms. Arian Simone Reed, Mr. Ravi Sachdev, and Ms. Amelia Newton Varela. +CORPORATE +GOVERNANCE +The +Board of Directors +Our +business is managed under the direction and oversight of the Board of Directors, whose members are elected by our stockholders. Directors +meet their responsibilities by participating in meetings of the Board of Directors and the various committees of the Board on which they +sit. They also communicate with our Chairman and Chief Executive Officer and other officers and employees of the Company and consult +with our independent registered public accounting firm and other third parties. The size of the Board is fixed at ten members. Eight +current directors are independent and two current directors are not independent. The Nominating/Corporate Governance Committee determined +to nominate all ten current directors for election to our Board. +Director +Independence +The +Board of Directors has determined that the following director nominees are “independent” for purposes of the criteria of +the SEC and The Nasdaq Global Select Market listing standards: Mr. Davis, Mr. Ferrara, Mr. Klipper, Ms. Kumar, Ms. Lynch, Mr. Migliorini, +Ms. Reed, and Mr. Sachdev. There is also no family relationship among any of the directors and executive officers of the Company. If +the ten nominees set forth above are elected, the Board will consist of a majority of independent directors. The Board of Directors has +held regularly scheduled executive sessions for the independent directors, with Mr. Migliorini serving as Presiding Director of such +executive sessions. +Involvement +in Certain Legal Proceedings +During +the past ten years, none of the persons currently serving as executive officers and/or directors of the Company has been the subject +matter of any legal proceedings that are required to be disclosed pursuant to Item 401(f) of Regulation S-K, nor are any such legal proceedings +believed to be contemplated by governmental authorities against any director or executive officer. Further, no executive officers, directors, +beneficial owners of more than five percent of the Company’s common stock, or any other actor mentioned in Item 103(c)(2) of Regulation +S-K is a party adverse to the Company in a material proceeding or has a material interest adverse to the Company. +Director +Attendance at Meetings +Attendance +at Annual Meetings of Stockholders +We +have no specific policy regarding director attendance at our annual meetings of stockholders. We encourage all our directors to attend +annual meetings of our stockholders, and nine directors attended our 2025 annual meeting of stockholders. +Attendance +at Meetings of the Board of Directors +The +Board of Directors held four regularly scheduled meetings and one special meeting during the 2025 Fiscal Year and acted by unanimous +written consent on three occasions during the 2025 Fiscal Year. In the 2025 Fiscal Year, each director attended 75% or more of the total +number of Board meetings and meetings held by all committees on which they then served. +Director +Election (Majority Voting) Policy +We +have adopted a Director Election (Majority Voting) Policy. Pursuant to this policy, in an uncontested election of directors (that is, +an election where the number of nominees is equal to the number of seats open) any nominee for director who receives a greater number +of “WITHHOLD” votes than “FOR” votes for his, her, or their election must promptly submit an offer of resignation +to the Nominating/Corporate Governance Committee following the certification of the stockholder vote for consideration in accordance +with the following procedures. In such event, upon receipt of the resignation, the Nominating/Corporate Governance Committee would promptly +consider the appropriateness of the director’s continued service on the Board of Directors and recommend to the Qualified Independent +Directors (as defined below) the action to be taken with respect to the resignation, which could include (1) accepting the resignation; +(2) rejecting the resignation; (3) retaining the director but addressing what the Qualified Independent Directors believe to be the underlying +cause of the “WITHHOLD” votes; or (4) determining that the director will not be renominated by the Board of Directors in +future elections. The Nominating/Corporate Governance Committee would consider factors such as (a) the reasons expressed by the stockholders +for withholding votes from such director; (b) any possibilities for curing the underlying cause of the “WITHHOLD” votes; +(c) the tenure and qualifications of the director and his, her, or their past and expected future contributions to the Company; (d) the +overall composition of the Board of Directors, including, without limitation, whether accepting the resignation would cause the Company +to fail to meet any applicable SEC or Nasdaq requirement; (e) the availability of other qualified candidates; and (f) our Board of Director +Candidate Guidelines. +10 +The +Qualified Independent Directors would then act on the Nominating/Corporate Governance Committee’s recommendation no later than +90 days following the date of the stockholders’ meeting at which the director election occurred. In considering the Nominating/Corporate +Governance Committee’s recommendation, the Qualified Independent Directors would review the factors considered by the Nominating/Corporate +Governance Committee and such additional information and factors that they believe to be relevant. Following the Qualified Independent +Directors’ decision, we would promptly disclose the decision in a Current Report on Form 8-K. The Form 8-K would include a full +explanation of the process by which the decision of the Qualified Independent Directors was reached and, if applicable, the reasons why +the offer of resignation was rejected. +If +an offer of resignation were to be accepted, the Nominating/Corporate Governance Committee would recommend to the Board of Directors +whether to fill the vacancy or reduce the size of the Board of Directors accordingly. Any director required to submit his, her, or their +resignation pursuant to this policy would not participate in the Nominating/Corporate Governance Committee’s recommendation or +the Qualified Independent Directors’ consideration of the resignation. Prior to voting on the director’s resignation offer, +the Qualified Independent Directors would provide to the director an opportunity to submit any information or statement that they believe +is relevant to the Qualified Independent Directors’ consideration of the resignation. +For +purposes of this policy, “Qualified Independent Directors” means all directors who (1) are “independent” for +purposes of The Nasdaq Global Select Market listing standards and (2) are not required to offer their resignation in accordance with +this policy. If there are fewer than three independent directors then serving on the Board of Directors who are not required to submit +their resignations in accordance with this policy, then the Qualified Independent Directors shall consist of all of the independent directors, +and each independent director who is required to offer their resignation in accordance with this policy, shall recuse himself or herself +from the deliberations and voting only with respect to their individual offer to resign. +Committees +of the Board +Among +other committees, the Board of Directors has a standing Audit Committee, Compensation Committee, Nominating/Corporate Governance Committee, +and Corporate Social Responsibility Committee. Each committee has a written charter. The table below provides current membership for +each Board committee and the number of meetings held by each Board committee in the 2025 Fiscal Year. +Committees +of the Board of Directors +Director +Audit +Compensation +Nominating/Corporate +Governance +Corporate +Social Responsibility +Edward +R. Rosenfeld +Peter +A. Davis +Member +Al +Ferrara +Chair +Member +Mitchell +S. Klipper +Member +Member +Maria +Teresa Kumar (1) +Chair +Rose +Peabody Lynch +Member +Member +Peter +Migliorini +Chair +Chair +Arian +Simone Reed +Member +Member +Ravi +Sachdev +Member +Amelia +Newton Varela +Number +of Meetings in 2025 Fiscal Year +4 +2 +1 +4 +Number +of Actions by Written Consents in 2025 Fiscal Year +1 +1 +3 +1 +(1) +Ms. Kumar became Chair of the Corporate Social Responsibility Committee on July 14, 2025. +11 +Audit +Committee +The +Audit Committee consists entirely of directors who are “independent” for purposes of The Nasdaq Global Select Market listing +standards and who meet the independence requirements contained in Exchange Act, Rule 10A-3(b)(1). The Board has determined that Ms. Lynch +and each of Messrs. Ferrara and Klipper meet the SEC criteria of an “audit committee financial expert” as defined in Item +407(d)(5) of Regulation S-K. No member of the Audit Committee may serve simultaneously on the audit committee of more than two other +public companies without prior approval of the Board. The Audit Committee is primarily responsible for reviewing the services performed +by our independent registered public accountants, evaluating our accounting policies, our system of internal controls over financial +reporting (ICFR), our risk management policies, and information security and technology, including cybersecurity, and reviewing significant +financial transactions. +The +Audit Committee is responsible for reviewing and striving to ensure the integrity of our financial statements and oversight of our compliance +with legal and regulatory requirements, our internal audit function and our information security and technology. Among other matters, +the Audit Committee, with management, independent registered public accountants and internal auditors, reviews the adequacy of our internal +controls that could significantly affect our financial statements. Additionally, the Audit Committee reviews any potential related party +transactions as well as any other potential conflicts of interest situations on an ongoing basis. The Audit Committee is also directly +and solely responsible for the appointment, retention, compensation, oversight and termination of our independent registered public accountants. +In addition, the Audit Committee functions as the Company’s Qualified Legal Compliance Committee (the “QLCC”). The +purpose of the QLCC is to receive, retain and investigate reports made directly, or otherwise made known, of evidence of material violations +of any United States federal or state law, including any material breach of fiduciary duty, by the Company or its officers, directors, +employees or agents and, if an investigation is necessary, to recommend an appropriate response to the Company. +Management +has primary responsibility for our financial statements and the overall reporting process, including our system of internal controls +over financial reporting. Our independent registered public accountants audit our annual financial statements prepared by management, +express an opinion as to whether those financial statements present fairly our financial position, results of operations and cash flows +in conformity with accounting principles generally accepted in the United States of America and discuss with the Audit Committee any +issues they believe should be raised. Our independent registered public accountants also issue an opinion on our internal controls over +financial reporting. +The +Audit Committee is also responsible for the oversight of our risk management process, which is discussed in the “Risk Oversight” +section below. +In +performing its functions, the Audit Committee meets with management on at least a quarterly basis to review and discuss the quarterly +financial statements, annual audited financial statements and related reports and to consider the adequacy of our internal controls and +the objectivity of our financial reporting. The Audit Committee then recommends to the Board whether the audited financial statements +should be included in our Annual Report on Form 10-K. From time to time, the Audit Committee, with management, identifies and reviews +other areas of risks related to our operations and at least quarterly receives reports on and reviews cybersecurity risks as well as +our approach to managing such risks. Our Chief Information Security Officer presents to the Audit Committee regarding cybersecurity on +at least a quarterly basis. The Audit Committee discusses these matters with our independent registered public accountants and with appropriate +Company personnel. Meetings are held with the independent registered public accountants, who have unrestricted access to the Audit Committee. +In addition, the Audit Committee reviews our financing plans and reports and makes recommendations to the full Board of Directors for +approval and to authorize action. The Board has adopted a written charter setting out the functions the Audit Committee is to perform. +A copy of the Audit Committee Charter is available on our website at https://investor.stevemadden.com/corporate-governance/highlights. +The Audit Committee held four regularly scheduled meetings during the 2025 Fiscal Year and undertook one action by written consent during +the 2025 Fiscal Year. +Nominating/Corporate +Governance Committee +The +Nominating/Corporate Governance Committee consists of directors who are “independent” for purposes of The Nasdaq Global Select +Market listing standards. +The +Nominating/Corporate Governance Committee provides oversight with respect to a wide range of issues relating to the operation of the +Board, including consideration of and recommendations regarding the size and composition of the Board of Directors and its committees +along with the identification of potential candidates to serve as directors. The Nominating/Corporate Governance Committee identifies +candidates to the Board of Directors by introductions from management, members of the Board of Directors, employees of the Company or +other sources, including stockholders that satisfy our policy regarding stockholder recommended candidates (as described below). To enable +the Nominating/Corporate Governance Committee to consider a stockholder recommendation in connection with the 2027 Annual Meeting, we +must receive the recommendation on or before December 7, 2026. The Nominating/ Corporate Governance Committee does not evaluate director +candidates recommended by stockholders that satisfy our policy differently than director candidates recommended by other sources. +12 +Stockholders +wishing to submit director nominations for the 2027 Annual Meeting should write to the Secretary, Steven Madden, Ltd., 52-16 Barnett +Avenue, Long Island City, New York 11104. In accordance with Article II, Section 5 of the By-Laws, director nominations for the 2027 +Annual Meeting can only be made by a stockholder of the Company who (i) is a stockholder of record on the date of the giving of the notice +of such director nominations and on the record date for the determination of stockholders entitled to vote at the 2027 Annual Meeting +and (ii) complies with the notice requirements and procedures set forth in Article II, Section 5 of the By-Laws. A stockholder’s +notice to the Secretary of the Company with respect to any such nominations must be timely and in proper written form pursuant to Article +II, Section 5 of the By-Laws, including containing certain information concerning the nominating or proposing stockholder and certain +information concerning the proposed nominee, such as any agreements, arrangements or understandings the stockholder may have with the +proposed nominee or other parties relating to the nomination or other proposal. Such information must be updated, if necessary, to be +true and correct as of the record date for the 2027 Annual Meeting and as of the date that is 10 business days prior to the date of the +2027 Annual Meeting. The notice must be delivered to, or mailed and received at, our principal executive offices not less than 120 days +nor more than 150 days prior to the first anniversary of the date of our 2026 Annual Meeting. Accordingly, any written notice given by +or on behalf of a stockholder pursuant to Article II, Section 5 of our By-Laws in connection with the 2027 Annual Meeting must be received +no later than January 20, 2027, and no earlier than December 21, 2026. This summary information regarding the By-Laws is qualified in +its entirety by reference to the full text of the By-Laws, a copy of which may be obtained by any stockholder, without charge, upon written +request to the Secretary of the Company at the address set forth above. If a nomination is not timely and properly made in accordance +with the procedures set forth in the By-Laws, or does not contain the specific information required by the By-Laws, such nomination will +be defective and will not be brought before the 2027 Annual Meeting. In addition, to comply with the universal proxy rules, stockholders +who intend to solicit proxies in support of director nominees other than the nominees of our Board of Directors must comply with the +additional requirements of Rule 14a-19 under the Exchange Act, including providing a statement that such stockholder intends to solicit +the holders of shares representing at least 67% of the voting power of our shares entitled to vote on the election of directors in support +of director nominees other than our nominees, as required by Rule 14a-19(b). We intend to file a proxy statement and WHITE proxy card +with the SEC in connection with the solicitation of proxies for the 2027 Annual Meeting. +In +considering candidates for the Board of Directors, the Nominating/Corporate Governance Committee considers our Board of Director Candidate +Guidelines and Director Election (Majority Voting) Policy, available on our website at https://investor.stevemadden.com/corporate-governance/highlights, +our policy regarding stockholder recommended director candidates, as set forth above, and all other factors that it deems appropriate, +including the individual’s character, education, experience, knowledge and skills. We are not including the information contained +on, or that can be accessed through, any website as part of, or incorporating it by reference into, this proxy statement. +To +assess the effectiveness of the mandate set forth in the Nominating/Corporate Governance Committee’s charter, the Nominating/Corporate +Governance Committee reviews annually with the Board the composition of the Board as a whole and recommends, if necessary, measures to +be taken so that the Board reflects the appropriate balance of knowledge, experience and diversity required for the Board as a whole. +Additionally, +the Nominating/Corporate Governance Committee takes a leadership role in shaping the corporate governance of the Company. The Nominating/Corporate +Governance Committee develops and recommends corporate governance principles for the Company, makes recommendations to the Board of Directors +in support of such principles, and monitors compliance with our Conduct Codes (as defined and discussed in the “Codes of Business +Conduct and Ethics” section below). The Nominating/Corporate Governance Committee also oversees the evaluation of the Board of +Directors, its committees, and the Company’s senior executives and periodically reviews the succession plan for our senior executives +with the Chairman of the Board and Chief Executive Officer. The Nominating/Corporate Governance Committee operates under a formal charter +that governs the Committee’s composition, powers and responsibilities. A copy of the Nominating/Corporate Governance Committee +Charter is available on our website at https:// investor.stevemadden.com/corporate-governance/highlights. The Nominating/Corporate Governance +Committee held one meeting and undertook three actions by written consent during the 2025 Fiscal Year. +Compensation +Committee +The +Compensation Committee consists of directors who are “independent” for purposes of The Nasdaq Global Select Market listing +standards and “non-employee directors” pursuant to Exchange Act Rule 16b-3. +The +Compensation Committee is responsible for establishing and overseeing our compensation and incentive plans and programs; determining +and approving compensation for our executive officers, including salaries, bonuses, perquisites and equity awards; reviewing and approving +compensation and awards for our executive officers under our compensation and incentive plans and program; considering the results of +say-on-pay proposals; assessing whether our compensation and incentive plans and programs encourage excessive risk-taking and evaluating +compensation policies that could mitigate such risk; administering our equity compensation plans; reviewing and approving a compensation +program for independent members of the Board; developing and monitoring compliance with policies for the clawback of erroneously paid +compensation; and assisting the Board in discharging the Board’s responsibilities relating to management organization, performance, +compensation and succession. The Compensation Committee also reviews executive education and development programs; evaluates the competitiveness +of the compensation of the Company’s executive officers; reviews and approves the corporate goals and objectives used to determine +executive compensation; and monitors the amount of Company equity used for compensation. The Compensation Committee has the authority +to seek the advice of compensation consultants in carrying out its duties and responsibilities; however, the Compensation Committee must +assess the independence of the consultant before retaining them or receiving any advice. Independence factors that the Compensation Committee +should consider are described in the “Role of the Compensation Committee – Independence of Outside Advisors” section +below. The Compensation Committee operates under a formal charter adopted by the Board of Directors that governs its composition, powers +and responsibilities. A copy of the Compensation Committee Charter is available on our website at https://investor.stevemadden.com/corporate-governance/highlights. +The Compensation Committee held two meetings and undertook one action by written consent during the 2025 Fiscal Year. +13 +Corporate +Social Responsibility Committee +The +Corporate Social Responsibility Committee consists of directors who are “independent” for purposes of The Nasdaq Global Select +Market listing standards. +The +Corporate Social Responsibility Committee is responsible for assisting the Board in its oversight of our initiatives, plans and practices +with respect to corporate social responsibility matters of significance to the Company and the communities in which we operate. Corporate +social responsibility matters include ethical and sustainable sourcing; human rights; the environment; supplier conduct; labor conditions; +climate change; diversity in employment; charitable giving; government relations; and political spending. The Committee’s responsibility +includes oversight of: +● management’s +evaluation of risks and opportunities with respect to corporate social responsibility matters; +● management’s +creation of key strategic initiatives, goals, strategies, policies, and procedures to address +corporate social responsibility risks and opportunities; +● our +governance of, and performance relative to, such key strategic initiatives, goals, strategies, +policies, and procedures; +● the +policies and procedures used to prepare corporate social responsibility related disclosures; +● engagement +with stockholders, other key stakeholders, and proxy advisory firms regarding corporate social +responsibility matters; +● our +response to corporate social responsibility related stockholder proposals; +● management’s +assessment of the identity and scope of matters comprising corporate social responsibility; +and +● our +government relations strategies and activities. +The +Corporate Social Responsibility Committee operates under a formal charter that governs the Committee’s composition, powers and +responsibilities. The Corporate Social Responsibility Committee Charter requires that a majority of the committee’s members not +be officers or employees of the Company or its affiliates. A copy of the Corporate Social Responsibility Committee Charter is available +on our website at https://investor.stevemadden.com/corporate-governance/ highlights. The Corporate Social Responsibility Committee held +four meetings and undertook one action by written consent during the 2025 Fiscal Year. +Board +Leadership Structure, Risk Oversight, Executive Sessions of Non-Employee Directors, and Communications Between Stockholders and the Board +Board +Leadership Structure +As +noted above, our Board currently comprises eight independent and two non-independent directors. +Mr. +Rosenfeld has served as Chairman of the Board and Chief Executive Officer since August 2008 and has been a member of the Board since +February 2008. Mr. Migliorini is currently serving as the Presiding Director. The Presiding Director is elected by the Board’s +independent directors and presides over executive sessions of the independent directors. We believe that the number of independent, experienced +directors who comprise our Board, along with the independent oversight of our Presiding Director, benefits the Company and our stockholders. +We +recognize that different board leadership structures may be appropriate for companies in different situations and believe that no one +structure is suitable for all companies. We believe our current Board leadership structure is optimal for the Company because it demonstrates +to our employees, suppliers, customers, and other stakeholders that we are under strong leadership, with a single person setting the +tone and having primary responsibility for managing our operations and leading our Board in setting long-term strategy. Having a single +leader for both the Company and our Board eliminates confusion and duplication of efforts and provides clear leadership for the Company. +We believe the Company, like many U.S. companies, has been well-served by this leadership structure. +Because +the positions of Chairman of the Board and Chief Executive Officer are held by the same person, the Board believes it is appropriate +for the independent directors to elect one independent director to serve as a Presiding Director. In addition to presiding at executive +sessions of the independent directors, the Presiding Director has responsibilities that include coordinating with the Chairman of the +Board and Chief Executive Officer in establishing agenda and discussion items for Board meetings; retaining independent advisors on behalf +of the Board as the Board may determine to be necessary or appropriate; and performing such other functions as the independent directors +may designate from time to time. +14 +Our +Board conducts an annual evaluation to determine whether it and its committees are functioning effectively. As part of its annual evaluation, +the Board evaluates whether the current leadership structure continues to be optimal for the Company and our stockholders. +Risk +Oversight +Our +Board is responsible for overseeing our risk management process. It focuses on our general risk management strategy and the most significant +risks facing the Company and ensures that management implements appropriate risk mitigation strategies. Management also apprises the +Board of particular risk management matters in connection with its general oversight and approval of corporate matters. +The +Board has delegated to the Audit Committee the oversight of our risk management process. Among its duties, the Audit Committee reviews +with management (a) our policies, guidelines, and processes with respect to risk assessment and management of risks that may be material +to the Company, (b) our system of disclosure controls and system of internal controls over financial reporting, (c) our compliance with +legal and regulatory requirements, and (d) our systems and processes related to information security and technology, including cybersecurity. +The Audit Committee is also responsible for reviewing major legislative and regulatory developments that could materially impact our +contingent liabilities and other financial risks. Our other Board committees also consider and address risks as they perform their respective +committee responsibilities. All committees report to the full Board as appropriate, including when a matter rises to the level of a material +or enterprise level risk. +Our +management is responsible for day-to-day risk management. Our risk management and internal audit areas serve as the primary monitoring +and testing function for company-wide policies and procedures and manage the day-to-day oversight of the risk management strategy for +our ongoing business. This oversight includes identifying, evaluating, and addressing potential risks that may exist at the enterprise, +strategic, financial, operational, and compliance and reporting levels. +We +believe the division of risk management responsibilities described above is an effective approach for addressing the risks facing the +Company and that our Board leadership structure supports this approach. +Executive +Sessions of Independent Directors +The +Board holds executive sessions of its independent directors generally at each regularly scheduled meeting. The Presiding Director serves +as the chairperson for these executive sessions. +Communications +Between Stockholders and the Board +We +have adopted a procedure by which stockholders may send communications to one or more members of the Board of Directors by writing to +such director(s) or to the entire Board of Directors in care of the Secretary at Steven Madden, Ltd., 52-16 Barnett Avenue, Long Island +City, New York 11104. The Board has instructed the Secretary of the Company to review all communications so received and to exercise +discretion not to forward to the Board correspondence that he or she decides is inappropriate, such as business solicitations, frivolous +communications and advertising, routine business matters (i.e., business inquiries, complaints, or suggestions) and personal grievances. +However, any director may at any time request that the Secretary forward to such director any and all communications received by the +Secretary, but not forwarded to the directors. +Codes +of Business Conduct and Ethics +We +have adopted a Code of Ethics for the Chief Executive Officer and Senior Financial Officers, which is applicable to our Chief Executive +Officer, Chief Financial Officer, controller, principal accounting officer, head of internal audit and such other employees of the Company +as the Audit Committee may from time to time designate as “senior financial officers.” In addition, the individuals who serve +on our Board of Directors are subject to a Code of Business Conduct and Ethics for the Board of Directors, and all of our employees are +held accountable for adherence to our Code of Conduct. The Code of Ethics for the Chief Executive Officer and Senior Financial Officers, +the Code of Business Conduct and Ethics for the Board of Directors and the Code of Conduct applicable to all of our employees (collectively, +the “Conduct Codes”) are available on our website at https://investor.stevemadden.com/corporate-governance/highlights and +may be obtained by any stockholder without charge upon request by writing to the Secretary at Steven Madden, Ltd., 52-16 Barnett Avenue, +Long Island City, New York 11104. The Conduct Codes are intended to establish standards necessary to deter wrongdoing and to promote +compliance with applicable governmental laws, rules and regulations and honest and ethical conduct. The Conduct Codes cover all areas +of professional conduct, including conflicts of interest, fair dealing, financial reporting and disclosure, protection of our assets +and confidentiality. Employees have an obligation to promptly report any known or suspected violation of the Conduct Codes without fear +of retaliation. Waiver of any provision of the Conduct Codes for executive officers and directors may only be granted by the Board of +Directors or the Nominating/Corporate Governance Committee, and we will disclose any such waiver or modification of the Conduct Codes +relating to such individuals. +15 +Corporate +Governance Principles +The +Board of Directors has adopted Corporate Governance Principles as a set of guiding fundamentals by which the Company is governed. The +Corporate Governance Principles address various matters of corporate governance such as board size and composition, director qualifications +and responsibilities, director compensation, limitations on service on other boards, board committees, director orientation and education, +director access to management, management development and succession planning, and annual performance evaluations for the Board. +The +Nominating/Corporate Governance Committee reviews the Corporate Governance Principles annually to determine whether to recommend changes +to the Corporate Governance Principles to reflect new laws, rules and regulations and governance best practices. The Corporate Governance +Principles are available on our website at https:// investor.stevemadden.com/corporate-governance/highlights and may be obtained by any +stockholder without charge upon request by writing to the Secretary at Steven Madden, Ltd., 52-16 Barnett Avenue, Long Island City, New +York 11104. +Stock +Ownership Guidelines +The +Board of Directors has adopted Stock Ownership Guidelines, which require a level of ownership of shares of our Common Stock by our directors +and executive officers to align their interests with the long-term interests of our stockholders. The Stock Ownership Guidelines require +our Chief Executive Officer to own shares of our Common Stock equal in value to six times his annual base salary. Other executive officers +are required to own shares of our Common Stock equal in value to two times their annual base salary. The Stock Ownership Guidelines further +require that each non-employee director must own shares of our Common Stock equal in value to two times the cash portion of the directors’ +annual retainer or the equivalent if a retainer is not received in certain circumstances. Individuals subject to the Stock Ownership +Guidelines must attain the required level of share ownership by the fifth anniversary of the later of (i) the effective date of the adoption +of the Stock Ownership Guidelines and (ii) the date that the individual became a named executive officer or director. The named executive +officer or director must retain an amount equal to 25% of the net shares of our Common Stock received as a result of the exercise, vesting +or payment of any equity award we make until the applicable share ownership requirement is satisfied. The Compensation Committee monitors +the compliance of our Chief Executive Officer, non-employee directors and other executive officers with the Stock Ownership Guidelines. +Insider +Trading Policy +The +Company has adopted an insider trading policy governing the purchase, sale and other dispositions of its securities by the directors +and employees of the Company and its subsidiaries, which is reasonably designed to promote compliance with all applicable insider +trading laws, rules and regulations and NASDAQ listing standards. In addition, it is the Company’s policy that the Company +will not purchase or sell its common stock when it is aware of material non-public information. A copy of our insider trading policy +and related Rule 10b5-1 trading plan policy was filed as Exhibit 19.01 to our Annual Report on Form 10-K for the fiscal year +ended December 31, 2024. +Prohibition +on Hedging and Pledging of Our Common Stock +Our +directors and executive officers and certain other persons designated from time to time by our Chief Financial Officer are prohibited +from entering into hedging transactions and from pledging our Common Stock pursuant to a formal policy concerning such activities adopted +by the Board of Directors. This policy does not apply to other employees of the Company. +Corporate +Social Responsibility Policy +We +are committed to operating our business in a socially responsible manner. We strive to incorporate this commitment into every aspect +of our business, including the design, quality, safety and sourcing of our products, the safety and fair treatment of our employees, +animal welfare and compliance with laws, including the Foreign Corrupt Practices Act and the SEC’s Conflict Minerals rule. These +guiding principles are set forth in our Corporate Social Responsibility Policy as well as our Conflict Minerals Policy, and we expect +all our employees to be familiar with and to adhere to them. We strive to do business with vendors and suppliers that share our views +and commitments to quality products and ethical business principles. We will only engage vendors and suppliers that demonstrate a commitment +to meeting our standards. Our Corporate Social Responsibility Committee assists the Board in its oversight of management’s social +responsibility obligations. +16 +Clawback +Policy +We +have adopted a Clawback Policy, which applies to our executive officers, including the named executive officers, and provides for the +repayment of certain incentive compensation received over a covered period if the Company is required to prepare an accounting restatement +due to the material noncompliance of the Company with any financial reporting requirement under the securities laws. See “Executive +Compensation – Compensation Discussion and Analysis – Clawback Policy” for further discussion of the Clawback Policy. +Certain +Relationships and Related Party Transactions +Steven +Madden Employment Agreement. We believe that Steven Madden, our founder and Creative and Design Chief, provides unique and significant +value in guiding the leadership of our creative process, both in his hands-on work for the Company and his collaboration with our designers, +product professionals, and marketing executives. In addition, the public’s association of Mr. Madden’s name and likeness +with our branded products is significant, meaningful, and integral to our success and has been, and continues to be, instrumental in +creating long-term stockholder value. Based upon that belief, we further believe that his continuing involvement with the Company is +essential, and to this end, we have for many years had an employment agreement with Mr. Madden as described below. +Mr. +Madden’s agreement in its current form dates back to July 1, 2005, as subsequently amended on various occasions, most recently +on November 10, 2023 (the “SM Agreement”). Under the SM Agreement, Mr. Madden has agreed to continue to serve as our Creative +and Design Chief for a term continuing through December 31, 2031, for a base salary of $7,026,042 per annum through December 31, 2026, +together with the potential for cash bonuses at the sole discretion of our Board of Directors and an annual life insurance premium reimbursement +of up to $200,000. Effective on May 1, 2025, Mr. Madden accepted a 10% reduction of his base salary under the SM Agreement due to the +Company’s heightened focus on managing expenses as a result of the increased uncertainty regarding the implementation of new tariffs +on U.S. imports and their impact on the Company. Effective on January 1, 2026, the Company resumed paying Mr. Madden his full base salary +under the SM Agreement. Effective January 1, 2027, Mr. Madden’s base salary will increase to $7,377,374 until December 31, 2028, +and effective January 1, 2029, through the remainder of the term, Mr. Madden’s base salary will be increased to $7,746,211. +Under +the SM Agreement, Mr. Madden is also eligible to receive annually, on or about the date of our annual meeting of stockholders (but not +later than June 30), an option (the “Annual Option”) to purchase shares of Common Stock equal to the greater of (a) 100% +of the largest aggregate number of shares of Common Stock available upon the exercise of an option or options granted to any other continuing +full-time employee of the Company during the preceding twelve-month period or (b) 225,000 shares of Common Stock; provided, however, +that a grant to Mr. Madden in excess of 150% of the number of shares of Common Stock subject to options granted to such other continuing +full-time employee would require stockholder approval. Any Annual Option so granted vests quarterly over a one-year period and is exercisable +for a period of five years at a price equal to the closing price of our Common Stock on the grant date. +Under +the SM Agreement, if Mr. Madden dies, his estate would receive a payment equal to his base salary for the 24-month period immediately +after the date of his death. Further, if Mr. Madden’s employment is terminated due to his total disability (as defined in the agreement), +“for cause” (as defined in the agreement) or due to Mr. Madden’s resignation, we are obligated to pay Mr. Madden the +amount of compensation that is accrued and unpaid through the date of termination. If Mr. Madden’s employment is terminated for +any reason (other than “for cause” or due to his death, total disability or resignation), we are obligated to pay Mr. Madden, +in installments, the balance of his base salary through the end of the term of the SM Agreement. If, during the period commencing 120 +days prior to a “change of control” transaction (as defined in the SM Agreement) and ending on the first anniversary of a +change of control transaction, Mr. Madden’s employment is terminated other than “for cause” (as defined in the SM Agreement), +all unvested options held by Mr. Madden will be accelerated and vest on the date of termination or resignation, or if the employment +termination occurred prior to the change of control, on the date of such change of control, and Mr. Madden will be entitled to receive +a lump sum cash payment equal to the amount of compensation that is accrued and unpaid through the date of termination plus $35 million. +The SM Agreement contains other customary provisions, including provisions regarding expense reimbursement, confidentiality, non-solicitation +and non-competition. +The +most recent amendment entered into on November 10, 2023, effected the extension of the term of the SM Agreement for five years through +December 31, 2031. In connection with the extension, we agreed to pay Mr. Madden a base salary of $7,026,042 for the annual periods ending +December 31, 2023, 2024, 2025, and 2026; $7,377,374 for the annual periods ending December 31, 2027 and 2028; and $7,746,211 for the +annual periods through the remainder of the term. Additionally, on the first business day of January 2024, and then annually on the first +business day of successive years through December 31, 2031, Mr. Madden will receive a restricted stock award under our 2019 Incentive +Compensation Plan for a number of shares of Common Stock valued at (i) ten million each year for the years ended December 31, 2024, 2025, +and 2026, and (ii) nine million each year for the years ended December 31, 2027, 2028, 2029, 2030, and 2031, and each award will vest +in accordance with the terms of the amendment. +For +the 2025 Fiscal Year, Mr. Madden earned $7,026,042 in base salary and received $200,000 for the payment of an annual life insurance premium. +Mr. Madden also received his Annual Option for the 2025 Fiscal Year to purchase 225,000 shares of Common Stock at a price per share of +$24.69 and 238,322 shares of restricted stock at a price of $41.96 which will vest in accordance with the terms of the amendment commencing +on January 2, 2026. +17 +Review, +Approval or Ratification of Transactions with Related Persons +Our +Conduct Codes and Employee Handbook prohibit all conflicts of interest. Under the Conduct Codes, conflicts of interest occur when personal +or professional interests interfere in any way, or even appear to interfere, with our interests. Our prohibition on conflicts of interest +under the Conduct Codes includes any related party transaction. +Related +person transactions must be approved by the Board, or by a committee of the Board consisting solely of independent directors, who will +approve the transaction only if they determine that it is in our best interests. In considering the transaction, the Board or committee +will consider all relevant factors, including, as applicable, (i) the business rationale for entering into the transaction; (ii) the +alternatives to entering into a related person transaction; (iii) whether the transaction is on terms comparable to those available to +third parties or, in the case of employment relationships, to employees generally; (iv) the potential for the transaction to lead to +an actual or apparent conflict of interest and any safeguards imposed to prevent such actual or apparent conflicts; and (v) the overall +fairness of the transaction to the Company. +We +have multiple processes for reporting conflicts of interest, including related party transactions. Under the Conduct Codes, all employees +are required to report any actual or apparent conflict of interest, or potential conflict of interest, to management. The Chief Financial +Officer distributes a questionnaire to our executive officers and management personnel quarterly and distributes a questionnaire to the +members of the Board of Directors annually requesting certain information regarding, among other things, their immediate family members, +employment and beneficial ownership interests, which information is then reviewed for any conflicts of interest under the Conduct Codes. +The +Board of Directors, the Audit Committee and the Disclosure Committee, which consists of management personnel, discuss the related party +transactions, specifically, and in connection with the regular review processes attendant to our periodic filings, including related +party transaction disclosures. +If +a director is a party to or in some manner involved in a transaction involving the Company, they will be recused from all discussions +and decisions about the transaction. The transaction must be approved in advance whenever practicable, and if not practicable, must be +ratified as promptly as practicable. +COMPENSATION +OF DIRECTORS IN THE 2025 FISCAL YEAR +The +Compensation Committee is responsible for establishing and overseeing all matters pertaining to compensation paid to directors for service +on the Board and its committees. +The +following table sets forth information concerning the 2025 Fiscal Year compensation of our non-employee directors who served in the 2025 +Fiscal Year. Following the table is a discussion of material factors related to the information disclosed in the table. Mr. Rosenfeld +and Ms. Varela do not receive any compensation for their service on the Board. Effective May 1, 2025, all non-employee directors accepted +a 10% reduction in compensation due to the Company’s heightened focus on managing expenses as a result of the increased uncertainty +regarding the implementation of new tariffs on U.S. imports and their impact on the Company. Effective on January 1, 2026, the Company +resumed paying all non-employee directors their full compensation. +Name +Fees +Paid in +Cash +Stock +Awards +(1) +All +Other +Compensation +Total +Peter +A. Davis (2) +$ 79,092 +$ 119,993 +$ — +$ 199,085 +Al +Ferrara (3) +$ 111,659 +$ 119,993 +$ — +$ 231,652 +Mitchell +S. Klipper (4) +$ 88,397 +$ 119,993 +$ — +$ 208,390 +Maria +Teresa Kumar (5) +$ 79,092 +$ 119,993 +$ — +$ 199,085 +Rose +Peabody Lynch (6) +$ 88,397 +$ 119,993 +$ — +$ 208,390 +Peter +Migliorini (7) +$ 93,049 +$ 119,993 +$ — +$ 213,042 +Arian +Simone Reed (8) +$ 90,897 +$ 119,993 +$ — +$ 210,890 +Ravi Sachdev (9) +$ 81,592 +$ 119,993 +$ — +$ 201,585 +Robert Smith (10) +$ 48,935 +$ 119,993 +$ — +$ 168,928 +(1) Reflects +the grant date fair value of stock awards calculated in accordance with the Financial Accounting +Standards Board (“FASB”) Accounting Standards Codification (“ASC”) +Topic 718. Assumptions used in the calculation of these amounts are included in Note 8 to +our audited financial statements for the fiscal year ended December 31, 2025 included in +our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March +2, 2026. +18 +(2) As +of December 31, 2025, the aggregate number of shares of restricted Common Stock held by Mr. +Davis was 4,860, all of which were issued in the 2025 Fiscal Year, and Mr. Davis had no options +outstanding. +(3) As +of December 31, 2025, the aggregate number of shares of restricted Common Stock held by Mr. +Ferrara was 4,860, all of which were issued in the 2025 Fiscal Year, and Mr. Ferrara had +no options outstanding. +(4) As +of December 31, 2025, the aggregate number of shares of restricted Common Stock held by Mr. +Klipper was 4,860, all of which were issued in the 2025 Fiscal Year, and Mr. Klipper had +no options outstanding. +(5) As +of December 31, 2025, the aggregate number of shares of restricted Common Stock held by Ms. +Kumar was 4,860, all of which were issued in the 2025 Fiscal Year, and Ms. Kumar had no options +outstanding. +(6) As +of December 31, 2025, the aggregate number of shares of restricted Common Stock held by Ms. +Lynch was 4,860, all of which were issued in the 2025 Fiscal Year, and Ms. Lynch had no options +outstanding. +(7) As +of December 31, 2025, the aggregate number of shares of restricted Common Stock held by Mr. +Migliorini was 4,860, all of which were issued in the 2025 Fiscal Year, and Mr. Migliorini +had no options outstanding. +(8) As +of December 31, 2025, the aggregate number of shares of restricted Common Stock held by Ms. +Reed was 4,860, all of which were issued in the 2025 Fiscal Year, and Ms. Reed had no options +outstanding. +(9) As +of December 31, 2025, the aggregate number of shares of restricted Common Stock held by Mr. +Sachdev was 4,860, all of which were issued in the 2025 Fiscal Year, and Mr. Sachdev had +no options outstanding. +(10) Mr. +Smith voluntarily resigned from the Board effective July 14, 2025. Amounts listed in the +table above are pro-rated and reflect the effective resignation date. As of December 31, +2025, Mr. Smith did not hold any shares of restricted Common Stock. All shares of restricted +Common Stock which were unvested were cancelled in accordance with the terms of the 2019 +Plan upon his resignation. +Directors +who are also our employees are not paid any fees or other remuneration for service on the Board of Directors or any of its committees. +In the 2025 Fiscal Year, each non-employee director received for service on the Board a grant of 4,860 shares of restricted Common Stock, +vesting on May 21, 2026, the first anniversary of the grant date, and was entitled to receive cash consideration of $75,000 for such +service. +In +the 2025 Fiscal Year, members of the Audit Committee, Nominating/Corporate Governance Committee, Compensation Committee and Corporate +Social Responsibility Committee were each entitled to receive an additional $10,000 for serving on such committees. Additionally, the +Chairman of the Audit Committee was entitled to receive $35,000 for serving in this role and the Chairman of the Compensation Committee +was entitled to receive an additional $15,000. We reimburse our directors for any out-of-pocket expenses incurred by them in connection +with services provided in such capacity, in accordance with our business expense reimbursement guidelines. +STOCK +OWNERSHIP +Security +Ownership of Certain Beneficial Owners +The +following table sets forth information as of March 27, 2026 (unless otherwise indicated) with respect to the beneficial ownership of +our Common Stock by each person known by the Company to be the beneficial owner of more than 5% of the outstanding shares of our Common +Stock. A person is deemed to be a beneficial owner of any securities that such person has the right to acquire within 60 days. +Name +and Address of Beneficial Owner +Amount +and Nature of +Beneficial +Ownership(1) +Percentage +of +Class +BlackRock +Inc. +50 Hudson Yards +New York, NY 10001 +10,792,222 +14.78 +% (2) +The +Vanguard Group +100 Vanguard Boulevard +Malvern, PA 19355 +8,241,420 +11.28 +% (3) +FMR +LLC +245 Summer Street +Boston, MA 02210 +8,025,845 +10.99 +% (4) +(1) Beneficial +ownership as reported in the table above has been determined in accordance with Item 403 +of Regulation S-K and Rule 13d-3 of the Exchange Act and based upon 73,040,340 shares of +Common Stock outstanding (excluding treasury shares) as of March 27, 2026. +(2) Based +solely on a Statement on Schedule 13G/A filed with the SEC on April 30, 2025 by BlackRock, +Inc. (“BlackRock”), BlackRock has, in its capacity as parent holding company, +as of March 31, 2025, sole voting power with respect to 10,707,547 of such shares and sole +dispositive power with respect to 10,792,222 of such shares. +(3) Based +solely on a Statement on Schedule 13G/A filed with the SEC on February 13, 2024 by The Vanguard +Group (“Vanguard”), Vanguard had, as of December 29, 2023, shared voting power +with respect to 138,409 of such shares, sole dispositive power with respect to 8,026,950 +of such shares and shared dispositive power with respect to 214,470 of such shares. Vanguard +subsequently reported on a Statement on Schedule 13G/A filed on March 27, 2026, that due +to an internal realignment it no longer has, or is deemed to have, any beneficial ownership +over our Common Stock beneficially owned by various Vanguard subsidiaries and/or business +divisions. Vanguard also reported that certain subsidiaries or business divisions that formerly +had, or were deemed to have, beneficial ownership with Vanguard, will report beneficial ownership +separately (on a disaggregated basis). +(4) Based +solely on a Statement on Schedule 13G/A filed with the SEC on February 5, 2026 by FMR LLC +and Abigail P. Johnson, as of December 31, 2025, FMR LLC and Abigail P. Johnson are the beneficial +owners of 8,025,845 shares of Common Stock. FMR LLC has sole voting power with respect to +8,004,680 of such shares and sole dispositive power with respect to 8,025,845 of such shares, +and Abigail P. Johnson has sole dispositive power with respect to 8,025,845 of such shares. +Security +Ownership of Directors and Executive Officers +The +following table sets forth information as of March 27, 2026 (unless otherwise indicated) with respect to the beneficial ownership of +Common Stock held by (a) each current director and nominee; (b) our Named Executive Officers; and (c) all current directors and executive +officers as a group. A person is deemed to be a beneficial owner of any securities that such person has the right to acquire within 60 +days. Each director and executive officer has sole voting power and sole dispositive power with respect to all shares beneficially owned +by him or her. +19 +Name +of Beneficial Owner (1) +Amount +and Nature +of +Beneficial Ownership (2) +Percentage +of +Class +Edward +R. Rosenfeld +1,057,330 +1.45 +% (3) +Peter +A. Davis +5,717 +* (4) +Al +Ferrara +27,151 +* (5) +Karla +Frieders +82,391 +* (6) +Lisa +Keith +25,730 +* (7) +Mitchell +S. Klipper +33,509 +* (8) +Maria +Teresa Kumar +9,260 +* (9) +Rose +Peabody Lynch +26,163 +* (10) +Zine +Mazouzi +65,922 +* (11) +Peter +Migliorini +17,866 +* (12) +Arian +Simone Reed +8,705 +* (13) +Ravi +Sachdev +84,089 +* (14) +Amelia +Newton Varela +219,632 +* (15) +All +Current Directors and Executive Officers as a Group (13 persons) +1,616,274 +2.21 +% (16) +*Indicates +beneficial ownership of less than 1%. +(1) The +address for each of the individuals named above is c/o Steven Madden, Ltd., 52-16 Barnett +Avenue, Long Island City, New York 11104. +(2) Beneficial +ownership as reported in the table above has been determined in accordance with Item 403 +of Regulation S-K and Rule 13d-3 of the Exchange Act and based upon 73,040,340 shares of +Common Stock outstanding (excluding treasury shares) as of March 27, 2026. +(3) Mr. +Rosenfeld’s beneficial ownership consists of (i) 342,126 shares of restricted Common +Stock; (ii) 481,204 shares of Common Stock held by Mr. Rosenfeld without restriction, and +(iii) 234,000 shares of Common Stock held by the Rosenfeld 2021 Family Trust (the “Trust”). +The Trust is for the benefit of Mr. Rosenfeld’s spouse and children and his spouse +is the sole trustee. Mr. Rosenfeld disclaims beneficial ownership of the Common Stock held +by the Trust. +(4) Mr. +Davis’ beneficial ownership consists of (i) 4,860 shares of restricted Common Stock +and (ii) 857 shares of Common Stock held by Mr. Davis without restriction. +(5) Mr. +Ferrara’s beneficial ownership consists of (i) 4,860 shares of restricted Common Stock +and (ii) 22,291 shares of Common Stock held by Mr. Ferrara without restriction. +(6) Ms. +Frieders voluntarily resigned from her position as an executive effective June 30, 2025. +At the time of her resignation, Ms. Frieders’ beneficial ownership consisted of (i) +25,781 shares of restricted Common Stock and (ii) 56,610 shares of Common Stock held by Ms. +Frieders without restriction. As of March 27, 2026, Ms. Frieders did not hold any shares +of restricted Common Stock. All shares of restricted Common Stock which were unvested were +cancelled in accordance with the terms of the 2019 Plan upon resignation. +(7) Ms. +Keith’s beneficial ownership consists of (i) 15,288 shares of restricted Common Stock +and (ii) 10,442 shares of Common Stock held by Ms. Keith without restriction. +(8) Mr. +Klipper’s beneficial ownership consists of (i) 4,860 shares of restricted Common Stock +and (ii) 28,649 shares of Common Stock held by Mr. Klipper without restriction. +(9) Ms. +Kumar’s beneficial ownership consists of (i) 4,860 shares of restricted Common Stock +and (ii) 4,400 shares of Common Stock held by Ms. Kumar without restriction. +(10) Ms. +Lynch’s beneficial ownership consists of (i) 4,860 shares of restricted Common Stock +and (ii) 21,303 shares of Common Stock held by Ms. Lynch without restriction. +(11) Mr. +Mazouzi’s beneficial ownership consists of (i) 40,918 shares of restricted Common Stock +and (ii) 25,004 shares of Common Stock held by Mr. Mazouzi without restriction. +(12) Mr. +Migliorini’s beneficial ownership consists of (i) 4,860 shares of restricted Common +Stock and (ii) 13,006 shares of Common Stock held by Mr. Migliorini without restriction. +(13) Ms. +Reed’s beneficial ownership consists of (i) 4,860 shares of restricted Common Stock +and (ii) 3,845 shares of Common Stock held by Ms. Reed without restriction. +(14) Mr. +Sachdev’s beneficial ownership consists of (i) 4,860 shares of restricted Common Stock +and (ii) 79,229 shares of Common Stock held by Mr. Sachdev without restriction. +20 +(15) Ms. +Varela’s beneficial ownership consists of (i) 57,424 shares of restricted Common Stock +and (ii) 162,208 shares of Common Stock held by Ms. Varela without restriction. +(16) Includes, +in the aggregate, (i) 529,836 shares of restricted Common Stock, (ii) 852,438 shares of Common +Stock held by such beneficial owners, and (iii) 234,000 shares of Common Stock held indirectly +by the Trust. +Delinquent +Section 16(a) Reports +Section +16(a) of the Securities Exchange Act of 1934 requires our Directors, executive officers and holders of more than 10% of our common stock +to file with the SEC reports regarding their ownership and changes in ownership of our securities. Based solely on our review of the +copies of Forms 3 and 4 (and any amendments) filed with the SEC and the written representations of our Directors and executive officers, +we believe that during fiscal year 2025 our Directors and executive officers complied with all Section 16(a) filing requirements. +EXECUTIVE +COMPENSATION +Compensation +Discussion and Analysis +Executive Summary +This +Compensation Discussion and Analysis describes the overall principles, objectives and specific features of our executive compensation +program, primarily focused on the executive compensation program’s application to our Chief Executive Officer and our other executive +officers included in the Summary Compensation Table for the Fiscal Year 2025, whom we refer to collectively in this Proxy Statement as +the “Named Executive Officers” or “NEOs.” +In +developing and evaluating our executive compensation program, the Compensation Committee reviews our total stockholder return and annual +financial results for prior years and the extent to which those indicia correlate with executive compensation. +As +part of our cash deployment strategy to drive stockholder value and enhance stockholder returns, our Board of Directors approved four +quarterly cash dividends on outstanding Common Stock during 2025. We paid a quarterly cash dividend of $0.21 per share on each of March +21, 2025, June 20, 2025, September 23, 2025, and December 26, 2025, returning a total of $61.0 million to stockholders during the period +in the form of dividends. We also repurchased 576,571 shares of our Common Stock for approximately $23.1 million during 2025, which consisted +of shares acquired in connection with the settlement of vested restricted stock to satisfy tax-withholding and/or option cost obligations +applicable to stock-based compensation awards. Since fiscal year 2015, the Company has returned approximately $1.5 billion to stockholders +in the form of share repurchases and dividends, demonstrating our commitment to creating stockholder value. +Total +revenue for the 2025 Fiscal Year increased by 11.0% to $2.5 billion from $2.3 billion in the year ended December 31, 2024. Net income +attributable to the Company was $44.7 million, or $0.63 per diluted share, for the 2025 Fiscal Year as compared to net income of $169.4 +million, or $2.35 per diluted share, for the year ended December 31, 2024. On an adjusted basis, net income attributable to the Company +was $120.9 million, or $1.70 per diluted share, for the 2025 Fiscal Year as compared to adjusted net income of $192.4 million, or $2.67 +per diluted share, for the year ended December 31, 2024. +The +preceding discussion includes financial measures that are adjusted from the corresponding GAAP financial measures. We include a reconciliation +of these adjusted financial measures to the corresponding GAAP financial measures in Annex A to this Proxy Statement. +Our +financial and stock performance in the 2025 Fiscal Year informed our decisions regarding the bonuses paid to our Named Executive Officers. +Because our general practice is to award bonuses and grant equity based on Named Executive Officer performance for the preceding year, +we believe that we are able to maintain relative alignment between pay and performance. +Compensation +Objectives and Strategy +Our +executive officer compensation program is designed to attract and retain the caliber of officers needed to ensure our continued growth +and profitability and to reward them for their performance, our performance, and the creation of long-term value for our stockholders. +The primary objectives of the program are to: +● align +rewards with performance that creates stockholder value; +● support +our strong team orientation; +● encourage +high-potential team players to build a career at the Company; and +● provide +rewards that are cost-efficient, competitive with other similarly positioned organizations +and fair to employees and stockholders. +21 +The +Compensation Committee of the Board of Directors approves and administers our executive compensation program. Working with management +and outside advisors, the Compensation Committee has developed a compensation and benefits strategy that rewards performance and reinforces +a culture that the Compensation Committee believes will drive long-term success and value creation. +The +compensation program rewards team accomplishments while promoting individual accountability. The executive officer compensation program +depends in significant measure on our results, but business unit results and individual accomplishments are also very important factors +in determining each executive’s compensation. We have a robust planning and goal-setting process that is fully integrated into +the compensation system, enhancing a strong relationship among individual efforts, Company results and financial rewards. +We +place a major portion of total compensation at risk through annual and long-term incentives. However, we may also pay discretionary bonuses +to the Named Executive Officers based on their performance during the preceding year. We designed the combination of incentives to balance +annual operating objectives and Company earnings performance with longer-term stockholder value creation. +To +implement our primary objectives, we seek to provide competitive compensation that is commensurate with performance. We target compensation +at the median of the market, as discussed below under “Pay Levels and Benchmarking,” and calibrate both annual and long-term +incentive opportunities to generate less-than-median awards when we do not fully achieve goals and greater-than-median awards when we +exceed goals. +We +believe that there is great value to the Company in having a team of long-tenured, seasoned managers and seek to promote a long-term +commitment from our senior executives. We have designed our team-focused culture and management processes to foster this commitment. +In addition, restricted Common Stock awards that we granted to Named Executive Officers in the 2025 Fiscal Year reinforce this long-term +orientation with annual vesting over four to five years. +Role +of the Compensation Committee +General. +The Compensation Committee provides overall guidance for our executive compensation policies and determines the amounts and elements +of compensation for our executive officers and outside directors. The Compensation Committee currently consists of three members of the +Board of Directors, Ms. Lynch and Messrs. Davis and Migliorini, each of whom is an independent director under Rule 5605 of The Nasdaq +Global Select Market listing standards and a “non-employee director” as defined under the SEC’s rules. +When +considering decisions concerning the compensation of executives, other than the Chief Executive Officer, the Compensation Committee asks +for the recommendations of the Chief Executive Officer, including his detailed evaluation of each executive’s performance. +In +accordance with the Compensation Committee Charter, the Compensation Committee may form and delegate authority to subcommittees when +appropriate. Additionally, the Compensation Committee may delegate its authority to the Company’s officers with respect to the +compensation of employees who are not officers of the Company for purposes of Section 16 of the Exchange Act when appropriate. +Use +of Outside Advisors. In making its determinations with respect to executive compensation, the Compensation Committee has historically +engaged the services of an independent compensation consulting firm. The Compensation Committee has retained the services of Arthur J. +Gallagher & Co.’s Human Resources & Compensation Consulting Practice (“Gallagher”) since 2005 to assist with +its review of the compensation packages and employment agreements of the Chief Executive Officer and other executive officers. In 2025, +Gallagher worked with the Compensation Committee to assess the reasonableness of grants of restricted Common Stock to our Named Executive +Officers as compared with comparable positions in the peer group that we list below. Gallagher also worked with the Compensation Committee +to establish a bonus pool and individual allocations from the pool for 2025. We based executive compensation for the Named Executive +Officers on employment agreements with pay structures and levels that we set with reference to competitive market studies that Gallagher +performed just prior to the consummation of the agreements. Gallagher completed position-specific competitive market studies when we +approved the grants of restricted Common Stock to Mr. Rosenfeld, Ms. Varela, Mr. Mazouzi, Ms. Keith and Ms. Frieders in the 2025 Fiscal +Year. Gallagher provides only executive compensation consulting services and works with management only at the behest of the Compensation +Committee. +The +Compensation Committee retains Gallagher directly, although in carrying out assignments for the Company, Gallagher also interacts with +our management, when necessary and appropriate, to obtain compensation and performance data for the Company and our executives. In addition, +Gallagher may, in its discretion, seek input and feedback from management regarding its consulting work product for the Compensation +Committee to confirm alignment with our business strategy and identify data questions or other similar issues, if any, prior to completion +of a project for the Compensation Committee. +Independence +of Outside Advisors. The Compensation Committee has the sole authority to retain, terminate, approve the fees and set the terms +of our relationship with any outside compensation advisors who assist the Committee in carrying out its responsibilities. It may select +or receive advice from any compensation consultant or other advisor only after taking into consideration all factors relevant to the +consultant’s independence from management, including the factors set forth in Nasdaq rules and in the Compensation Committee Charter. +Independence factors that the Compensation Committee should consider under its charter include: (a) any other services that the consultant +provides to the Company, (b) any business or personal relationships the consultant has with a committee member or an executive officer +of the Company, and (c) whether the consultant has any policies in place to prevent conflicts of interest. +22 +Accordingly, +the Compensation Committee reviews annually its relationship with Gallagher to ensure Gallagher’s independence on executive compensation +matters. Prior to selecting and receiving advice from Gallagher with respect to executive compensation in the 2025 Fiscal Year, the Compensation +Committee reviewed Gallagher’s independence and that of Gallagher’s individual representatives who served as the Committee’s +advisors. The Compensation Committee determined that no conflicts of interest exist between the Company and Gallagher or its representatives. +In reaching such determination, the Compensation Committee considered, among other things, the following factors: (i) that Gallagher +provides no services to the Company other than executive compensation consulting services; (ii) the fees we paid to Gallagher as a percentage +of Gallagher’s total revenue; (iii) the representations by Gallagher as to its policies and procedures that are designed to prevent +a conflict of interest; (iv) any business or personal relationships between the individual representatives of Gallagher who advised the +Compensation Committee and any member of the Compensation Committee; and (v) any business or personal relationships between our executive +officers and Gallagher or its individual representatives. +Consideration +of 2025 Stockholder Say-on-Pay Vote. At our 2025 Annual Meeting of Stockholders, our stockholders overwhelmingly approved, on +an advisory basis, the compensation of our Named Executive Officers (over 98% of votes cast). This continues the string of 93% or higher +approvals that began with the initial say-on-pay vote in 2011. The Compensation Committee believes this level of stockholder support +reflects a very strong endorsement of our compensation policies and decisions. The Compensation Committee has considered the results +of this advisory vote on executive compensation in determining our compensation policies and decisions for 2026 and has determined that +these policies and decisions are appropriate and in our best interests and those of our stockholders at this time. +Compensation +Structure +Pay +Elements - Overview +We +use four main components of compensation: +● base +salary; +● annual +performance-based cash bonuses; +● long-term +equity incentives (consisting of restricted stock, and, in certain cases, performance shares); +and +● other +benefits and perquisites. +Pay +Elements - Details +Base +Salary. We paid base salaries to each of the Named Executive Officers to provide them with fixed pay commensurate with the Named +Executive Officer’s role and responsibilities, experience, expertise, and individual performance. As we describe more fully in +the section of this Proxy Statement captioned “Employment Arrangements,” during 2025, we had employment agreements with each +of the Named Executive Officers that specified their base salary levels for 2025. The Compensation Committee, as constituted at the time +the parties entered into the employment agreements or any amendments to those agreements, reviewed and approved the salary that each +such agreement or amendment established. The Compensation Committee considered each employee’s salary history, value in our competitive +market, and performance (including at the Company and previous employment). +Mr. +Rosenfeld’s annual base salary for 2025 was set pursuant to his employment agreement at $1,171,954. Under Mr. Rosenfeld’s +employment agreement entered into in 2024, the Board of Directors or a committee thereof will review his annual base salary for potential +increase (but not decrease), but he is not guaranteed future increases. Ms. Varela’s annual base salary for 2025 was set pursuant +to her employment agreement at $825,000. Mr. Mazouzi’s annual base salary for 2025 was set pursuant to his employment agreement +at $700,000. Ms. Keith’s annual base salary for 2025 was set pursuant to her employment agreement at an annual rate of $425,000 +through January 31, 2025, and at an annual rate of $450,000 from February 1, 2025 through the remainder of the year. Ms. Frieders’ +annual base salary for 2025 was set pursuant to her employment agreement at $590,000. Effective May 1, 2025, Mr. Rosenfeld accepted a +10% reduction of his base salary, and Mr. Mazouzi, Ms. Varela and Ms. Frieders each accepted a 5% reduction of their base salaries, due +to the Company’s heightened focus on managing expenses as a result of the implementation of new tariffs on U.S. imports and their +impact on the Company. Effective January 1, 2026, the Company resumed paying Mr. Rosenfeld, Mr. Mazouzi and Ms. Varela their full base +salaries. +23 +Please +see the section of this Proxy Statement captioned “Summary Compensation Table for the Fiscal Year 2025” and “Employment +Arrangements” for a more detailed description of the employment agreements and compensation of the Named Executive Officers. The +2024 salaries and 2025 salary increases, if any, for our Named Executive Officers, as reflected in the following table, are generally +consistent with those of other management employees. +Named +Executive Officer +2025 +Salary +2024 +Salary +Edward +R. Rosenfeld +$ 1,171,954 +$ 1,171,954 +Amelia +Newton Varela +$ 825,000 +$ 800,000 +Zine +Mazouzi +$ 700,000 +$ 675,000 +Lisa +Keith +$ 450,000 (1) +$ 425,000 (1) +Karla +Frieders +$ 295,000 (2) +$ 590,000 +(1) Ms. +Keith’s salary changes were effective on February 1 pursuant to her employment agreement. +(2) Ms. +Frieders’ salary shown in the table is less than her annual rate of $590,000 due to +her voluntary resignation effective June 30, 2025. +Annual +Performance-based Cash Bonus. The respective employment agreements for our Named Executive Officers establish the structures for +their annual performance-based cash bonuses, if any. The Compensation Committee reviewed and approved the bonus provisions fixed in each +such employment agreement at the time the parties entered into such agreements and any amendments to those agreements. Such bonus provisions +generally provide for variable or discretionary bonuses that the Committee designed to reward attainment of business goals that create +stockholder value. +Mr. +Rosenfeld’s employment agreement, as in effect for 2025, makes him eligible to receive an annual performance-based cash bonus to +be determined by the Compensation Committee in its sole discretion. In making the determination of Mr. Rosenfeld’s performance-based +cash bonus, the Compensation Committee reviews various performance metrics with greatest emphasis on the Company’s earnings performance +in relation to the plan. +Ms. +Varela’s employment agreement, as in effect for 2025, entitled her to receive an annual performance-based cash bonus for Fiscal +Year 2025, determined based on the Company’s actual earnings before interest and taxes, also referred to as the Company’s +actual income from operations (“EBIT”) for each year in accordance with the following schedule: +EBIT +Bonus +as % of Salary +Maximum +(130% of Plan) +80 % +Target (100% of Plan) +50 % +Threshold (90% of +Plan) +30 % +Mr. +Mazouzi’s employment agreement entitles him to receive annual performance-based cash bonuses for Fiscal Years 2025 and 2026, determined +based on the Company’s actual diluted earnings per share, which we also refer to as diluted income per share (“EPS”), +for each year in accordance with the following schedule: +Diluted +EPS +Bonus +as % of Salary +Maximum +(130% of Plan) +90 % +Target (100% of Plan) +60 % +Threshold (90% of +Plan) +40 % +Ms. +Keith’s employment agreement entitles her to receive annual performance-based cash bonuses for Fiscal Years 2025 and 2026 in amounts +to be determined by the Company in its absolute discretion. In making the determination of Ms. Keith’s performance-based cash bonus, +50% is based on the Company’s earnings performance in relation to the plan and the remaining 50% is based on the Company’s +assessment of her leadership over the legal department. +Ms. +Frieders’ employment agreement in effect for 2025 entitled her to receive an annual performance-based cash bonus for Fiscal Year +2025 in an amount to be determined by the Company in its absolute discretion. +As +provided in the Steven Madden, Ltd. 2019 Incentive Compensation Plan, the maximum payment that we may make to an individual under any +performance-based cash award during any fiscal year and subject to the attainment of specified performance goals is $10,000,000. The +Compensation Committee may, in its sole discretion, elect to pay an individual an amount that is less than the individual’s target +award regardless of the degree of attainment of the performance goals. +24 +Taking +into account Gallagher’s recommendations based on comparisons with our peer group companies, including target annual incentive +compensation (which we discuss below under “Pay Levels and Benchmarking”) and the individual performance of our Named Executive +Officers, our adjusted EBIT and our adjusted diluted EPS (which were both below the threshold levels for bonuses for Ms. Varela and Mr. +Mazouzi), the Compensation Committee approved the following cash payments based on performance during Fiscal Year 2025: +Named +Executive Officer +2025 +Annual Performance- +Based +Cash Bonus +Edward +R. Rosenfeld +$ — +Amelia +Newton Varela +$ — +Zine +Mazouzi +$ — +Lisa +Keith +$ 56,250 +Karla +Frieders +$ — +Adjusted +EBIT and adjusted diluted EPS represent financial measures that are adjusted from the corresponding GAAP financial measures. We include +the results for those performance measures and a reconciliation of the adjusted financial measures to the corresponding GAAP financial +measures in Annex A to this Proxy Statement. +In +Fiscal Year 2025, we established a bonus pool equal to 6.0% of our net income out of which any bonuses earned by our Named Executive +Officers and other key executives would be paid. The bonus pool, based on net income of +$44.7 +million for Fiscal Year 2025, was approximately $2.7 million. +Long-term +Equity Incentives. Management and the Compensation Committee believe that equity-based awards are an important factor in aligning +the long-term financial interest of the executive officers and stockholders. The Compensation Committee continually evaluates the use +of equity-based awards and intends to continue to use such awards in the future as part of designing and administering our compensation +program. In Fiscal Year 2025, the Compensation Committee continued its practice in recent years of granting equity incentives in the +form of restricted stock, which the Compensation Committee believes provides both substantial incentive and retention characteristics. +The Committee also awarded Mr. Rosenfeld a grant of performance shares under the terms of his employment agreement. The Committee designed +these awards to emphasize preserving stockholder value generated in recent years while providing significant incentives for continuing +growth in stockholder value. +We +determined the amounts of the equity-based awards that we granted to our Named Executive Officers in the Fiscal Year 2025 based on the +Committee’s evaluation of our performance during Fiscal Year 2025, Gallagher’s recommendations based on comparisons with +our peer group companies, including target incentive compensation (which we discuss below under “Pay Levels and Benchmarking”), +the individual performance of the Named Executive Officers and the terms of their individual employment agreements. On March 15, 2025, +we made a grant of 134,387 shares of restricted Common Stock to Mr. Rosenfeld, a grant of 9,881 shares of restricted Common Stock to +Mr. Mazouzi, a grant of 9,881 shares of restricted Common Stock to Ms. Varela, a grant of 1,976 shares of restricted Common Stock to +Ms. Keith and a grant of 3,953 shares of restricted Common Stock to Ms. Frieders. Each of those grants vests 20% per year over five years +commencing on the first anniversary of the grant date; Ms. Frieders’ grant was forfeited upon her resignation. In addition, under +the terms of his employment agreement, in 2025, Mr. Rosenfeld received a grant of 142,292 performance shares with a grant date fair value +of approximately $3,600,000 that is eligible to be earned over the three-year performance period from 2025-2027. This performance grant +was based on the Company’s average annual return on capital over such performance period compared to the average annual return +on capital of a predetermined peer group. The peer group initially selected by the Committee for Mr. Rosenfeld’s performance shares +for 2025 was as follows: +Boot Barn Holdings, Inc. +(NYSE:BOOT) +G-III Apparel Group, Ltd. +(NasdaqGS:GIII) +Shoe +Carnival, Inc. +(NasdaqGS:SCVL) +Caleres, +Inc. +(NYSE:CAL) +Genesco +Inc. +(NYSE:GCO) +Skechers +U.S.A., Inc. +(NYSE:SKX) +Crocs, +Inc. +(NasdaqGS:CROX) +Guess?, +Inc. +(NYSE:GES) +The +Buckle, Inc. +(NYSE:BKE) +Deckers +Outdoor Corporation +(NYSE:DECK) +Lands’ +End, Inc. +(NasdaqCM:LE) +The +Children’s Place, Inc. +(NasdaqGS:PLCE) +Designer +Brands Inc. +(NYSE:DBI) +Movado +Group, Inc. +(NYSE:MOV) +Wolverine +World Wide, Inc. +(NYSE:WWW) +Columbia +Sportswear Co. +(NasdaqGS:COLM) +Oxford +Industries, Inc. +(NYSE:OXM) +Zumiez +Inc. +(NasdaqGS:ZUMZ) +Kontoor +Brands Inc. +(NYSE: KTB) +25 +See +“Employment Arrangements” below for a further discussion of the equity-based awards we made to our Named Executive Officers. +The +Committee intends to continue to review the types of equity awards we grant to achieve appropriate incentives for both performance and +retention. During Fiscal Year 2022, the Committee adopted an equity grant practice of using March 15 as the fixed, annual grant date +for future equity grants relating to performance in the prior fiscal year. +Other +Benefits and Perquisites. Our executive compensation program also includes other benefits and perquisites that may vary among individual +executive officers. These benefits and perquisites include annual matching contributions to executive officers’ 401(k) plan accounts +and automobile allowances. The Compensation Committee annually reviews these other benefits and perquisites and makes adjustments as +warranted based on competitive practices, our performance and the executive’s responsibilities and performance. The Compensation +Committee has approved these other benefits and perquisites as a reasonable component of our executive officer compensation program. +Please see the section of this Proxy Statement captioned “Summary Compensation Table for the Fiscal Year 2025” and, specifically, +the column entitled “All Other Compensation” and the corresponding footnotes. +Pay +Mix +We +use the particular elements of compensation that we described above because we believe that doing so provides a well-proportioned mix +of secure compensation, retention value and at-risk compensation, which produces short-term and long-term performance incentives and +rewards. By following this approach, we seek to motivate the executives to focus on business metrics and other variables within their +particular sector that will increase sales and margins while lowering costs, thereby producing a high level of short-term and long-term +performance for the Company and long-term wealth creation for the executives, as well as reducing the risk of recruitment of top executive +talent by competitors. The mix of metrics that we used for the annual performance bonuses and our long-term incentive program likewise +provides an appropriate balance between short-term financial performance and long-term stock performance. +For +the Named Executive Officers, we have weighted the mix of compensation heavily towards at-risk pay (annual incentives and long-term incentives). +Maintaining this pay mix results fundamentally in a pay-for-performance orientation for our executives, which is aligned with our stated +compensation philosophy of providing compensation commensurate with performance. +Pay +Levels and Benchmarking +We +determine pay levels for our executives based on several factors, including the individual’s roles and responsibilities within +the Company, the individual’s experience and expertise, the pay levels for peers within the Company, pay levels in our competitive +market for similar positions, and performance of the individual and the Company as a whole. The Compensation Committee is responsible +for approving pay levels for the Named Executive Officers. In determining the pay levels, the Compensation Committee considers all forms +of compensation and benefits. +The +Compensation Committee assesses the “competitive market” for compensation using several sources. The primary data source +that the Committee used in setting competitive market levels for the Named Executive Officers is the information publicly disclosed by +a peer group of the Company, which the Committee reviews annually and may change from year to year. For the 2025 Fiscal Year, the Compensation +Committee reviewed executive compensation and compensation design for the purpose of assessing bonus awards in early 2026 in the context +of overall compensation and in relation to the following peer companies: +Abercrombie +& Fitch Co. +(NYSE:ANF) +Deckers +Outdoor Corporation +(NYSE:DECK) +Movado +Group, Inc. +(NYSE:MOV) +American +Eagle Outfitters, Inc. +(NYSE:AEO) +Designer +Brands Inc. +(NYSE:DBI) +Oxford +Industries, Inc. +(NYSE:OXM) +Boot +Barn Holdings, Inc. +(NYSE:BOOT) +Fossil +Group, Inc. +(NASDAQGS:FOSL) +Shoe +Carnival, Inc. +(NASDAQGS:SCVL) +Caleres, +Inc. +(NYSE:CAL) +Genesco +Inc. +(NYSE:GCO) +The +Buckle, Inc. +(NYSE:BKE) +Carter’s, +Inc. +(NYSE:CRI) +G-III +Apparel Group, Ltd. +(NASDAQGS:GIII) +Under +Armour, Inc. +(NYSE:UAA) +Columbia +Sportswear Company +(NASDAQGS:COLM) +Kontoor +Brands, Inc. +(NYSE:KTB) +Wolverine +World Wide, Inc. +(NYSE:WWW) +Crocs, +Inc. +(NASDAQGS:CROX) +Lands’ +End, Inc. +(NASDAQCM:LE) +Zumiez +Inc. +(NASDAQGS:ZUMZ) +26 +The +market capitalization and trailing twelve months revenue of the Company and each peer company follows: +Company +Market +Cap (1) +TTM +Revenue (2) +Steven +Madden, Ltd. +$ 3.0 +$ 2.53 +Abercrombie +& Fitch Co. +$ 5.8 +$ 5.27 +American +Eagle Outfitters, Inc. +$ 4.5 +$ 5.50 +Boot +Barn Holdings, Inc. +$ 5.4 +$ 2.17 +Caleres, +Inc. +$ 0.4 +$ 2.70 +Carter’s, +Inc. +$ 1.2 +$ 2.90 +Columbia +Sportswear Company +$ 3.0 +$ 3.40 +Crocs, +Inc. +$ 4.4 +$ 4.04 +Deckers +Outdoor Corporation +$ 15.1 +$ 5.37 +Designer +Brands Inc. +$ 0.4 +$ 2.89 +Fossil +Group, Inc. +$ 0.2 +$ 1.07 +Genesco +Inc. +$ 0.3 +$ 2.44 +G-III +Apparel Group, Ltd. +$ 1.2 +$ 3.03 +Kontoor +Brands, Inc. +$ 3.4 +$ 3.15 +Lands’ +End, Inc. +$ 0.4 +$ 1.31 +Movado +Group, Inc. +$ 0.5 +$ 0.66 +Oxford +Industries, Inc. +$ 0.5 +$ 1.49 +Shoe +Carnival, Inc. +$ 0.5 +$ 1.14 +The +Buckle, Inc. +$ 2.7 +$ 1.28 +Under +Armour, Inc. +$ 2.1 +$ 4.98 +Wolverine +World Wide, Inc. +$ 1.5 +$ 1.87 +Zumiez +Inc. +$ 0.4 +$ 0.92 +(1) Market +capitalization is as of December 31, 2025 as reflected in a report prepared by Gallagher, +and is stated in billions. +(2) TTM +is the last four quarters of publicly reported revenue as of the Compensation Committee’s +review of executive compensation in early 2026 and is stated in billions. +After +consideration of data on external competitive levels of compensation and internal needs, the Compensation Committee makes decisions regarding +the Named Executive Officers’ target total compensation opportunities based on the need to attract, motivate and retain an experienced +and effective management team. Relative to the competitive market data, the Compensation Committee generally intends that the base salary +and target incentive compensation, including both cash bonuses and equity-based compensation, for each Named Executive Officer will be +at the median of the competitive market. +As +noted above, despite our overall pay positioning objectives, pay opportunities for specific individuals vary based on factors such as +scope of duties, tenure, institutional knowledge and difficulty in recruiting a new executive. Actual total compensation in a given year +will vary above or below the target compensation levels based primarily on the attainment of operating goals and the creation of stockholder +value. +Compensation +Committee Discretion +The +Compensation Committee has complete discretion whether to make cash performance bonuses or equity-based incentive awards, with the exception +of any such payouts that are to be made pursuant to contractual commitments. We describe factors to consider in making such awards under +“Annual Performance-Based Cash Bonuses” and “Long-term Equity Incentives” above. +Pay +Ratio +As +required by the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), the following disclosure +provides the relationship of the total annual compensation of our median-paid employee to the total annual compensation of our Chief +Executive Officer, Mr. Rosenfeld. +27 +The +table below sets forth the total annual compensation for Mr. Rosenfeld and our median-paid employee, who is a Part-Time Retail Sales +Associate, and the ratio between the two. +Median-paid +employee annual total compensation +$ 15,611 +Mr. +Rosenfeld annual total compensation +$ 8,164,373 +Ratio +of Chief Executive Officer to median-paid employee compensation +$ +523:1 +We +determined our median-paid employee as of December 31, 2025, which date was within the last three months of the 2025 Fiscal Year, as +permitted by the pay ratio rule under the Dodd-Frank Act. In determining our median-paid employee, we applied the “de minimis” +exemption under the rule, which allows for the exemption of 5% or less of our total global workforce in jurisdictions outside of the +U.S. +Our +total global workforce as of December 31, 2025 was 6,375 employees. In applying the exemption, we excluded all employees in Taiwan, +47 employees, Australia, 45 employees, Malaysia, 43 employees, Colombia, 35 employees, Ecuador, 30 employees, Kuwait, 21 employees, +Qatar, 19 employees, Serbia, 12 employees, Singapore, 12 employees, Bahrain, 8 employees, Oman, 8 employees, Panama, 6 +employees, Croatia, 5 employees, and Bosnia, 5 employees. The total amounted to 296 employees, which was less than 5% of our total +global workforce. We did not exclude any employees who joined the Company during the 2025 Fiscal Year as the result of a business +combination. To identify our median-paid employee, we used payroll data consisting of salary, hourly wage, overtime wage, bonus, +commissions, vesting of equity awards and any similar payroll items for all of our employees included in the calculation. +For +purposes of determining the ratio, we determined our median-paid employee’s annual total compensation for the 2025 Fiscal Year +using the same method required for calculating our Chief Executive Officer’s (and other Named Executive Officers’) total +annual compensation for purposes of the Summary Compensation Table for the Fiscal Year 2025. +We +believe that the ratio stated above is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K. It +is based on the methodologies, assumptions and estimates described above and is not necessarily comparable to the ratios reported by +other companies. +Risk +Assessment +Bonus +payments to executives are either based on the discretion of the Compensation Committee or are tied to growth in various indicators of +financial performance, such as EBIT or diluted earnings per share. We have established long-term incentives in the form of time-vested +restricted stock that generally vests over four or five years and, in certain cases, performance-based equity awards. We believe these +forms of compensation have proved effective in rewarding performance while not encouraging inappropriate risk-taking. +The +Compensation Committee undertook to review and evaluate our executive and company-wide compensation program and plans to assess whether +any aspect of the program and these plans would encourage inappropriate risk-taking by our executives and non-executive employees that +could have a material adverse effect on the Company and to confirm that we have adequate risk management controls in place to ensure +that executive and company-wide compensation is reasonable and achieves its intended incentive without creating unacceptable risk. Based +on such review and evaluation, the Compensation Committee believes there is no material risk to the Company that is related to our compensation +program for executives and non-executive employees. +This +review and evaluation of the risks associated with our compensation program and plans consisted of: +● identifying +those business risks that could be material to the Company and identifying our existing risk +management system; +● reviewing +and analyzing our compensation program and plans to identify program and plan features that +could potentially encourage or introduce excessive or imprudent risk-taking of a material +nature; +● identifying +the business risks that our compensation plan and program features could potentially encourage +or create; +● balancing +these business risks against our existing internal control systems designed to manage and +mitigate these business risks; and +● analyzing +whether the unmitigated risks, in part or as a whole, are reasonably likely to have a material +adverse effect on the Company. +The +Committee consulted various persons during the course of the assessment, including our executive officers and senior members of our human +resources department. The Compensation Committee engages Gallagher to review our executive and company-wide compensation program and +plans and provide advice regarding appropriate levels of incentive. +28 +The +Compensation Committee noted several features of our compensation structure that mitigate risk, including, for example: +● we +use a pay mix that is well-balanced between short-term financial performance and long-term +stock performance, consisting of secure compensation in the form of base salary, short-term +incentives in the form of potential for cash bonuses, and long-term incentives in the form +of time-vested restricted stock that generally vest over four or five years and, in certain +cases, performance-based equity awards; +● in +most instances, management or the Compensation Committee retains the discretion to decrease +all forms of incentive compensation based on significant individual or Company performance +shortfalls; +● we +periodically benchmark our compensation program and plans and target executive and non-executive +compensation within the normal limits of the competitive market; and +● the +Compensation Committee provides oversight of our compensation program and plans and compensation +philosophy, makes recommendations to the Board with respect to improvements to our compensation +program and plans, and is responsible for reviewing and approving executive compensation +and administering and awarding incentive, deferred and equity compensation to our senior +executives. +In +light of the assessment described above, the Compensation Committee concluded that the risks associated with our compensation program +and plans (executive and company-wide) are not reasonably likely to have a material adverse effect on the Company. +Implications +of Tax and Accounting Matters +As +a general matter, the Compensation Committee considers the various tax and accounting implications of compensation vehicles that we employ. +Although the Compensation Committee reviews and considers both the accounting and tax effects of various components of compensation, +those effects are not a significant factor in the Compensation Committee’s allocation of compensation among the different components. +Compensation +paid to certain covered employees, generally including our Named Executive Officers, generally is not deductible to the extent that the +compensation exceeds $1 million in any one year for any such covered employee under Code Section 162(m). The Compensation Committee believes +that our interests and those of our stockholders are best served by providing competitive levels of compensation, even if not fully deductible, +so some of the compensation that we have provided to our Named Executive Officers in the past, and that we provide to our executive officers +in the future, may not be deductible under Code Section 162(m). +As +more fully described below under the heading “Termination, Change-in-Control and Non-Competition/Non-Solicitation,” with +the exception of Ms. Frieders, all of our Named Executive Officers are entitled to receive certain compensation in the event of a termination +of employment in connection with a change-in-control event for the Company, which payments may trigger the application of the “golden +parachute” provisions of Sections 280G and 4999 of the Code. Section 280G of the Code disallows a tax deduction with respect to +excess parachute payments to certain executives of companies that undergo a change-in-control. In addition, Section 4999 of the Code +imposes a 20% excise tax on the individual receiving the excess parachute payment. Excess parachute payments are golden parachute payments +that exceed an amount determined under Section 280G based on the executive’s prior compensation. In approving the compensation +arrangements of our Named Executive Officers, our Compensation Committee considers all elements of the cost to the Company of providing +such compensation, including the potential impact of Sections 280G and 4999, which, under certain circumstances, may limit the deductibility +of executive compensation. However, our Compensation Committee may determine, in its judgment, to authorize compensation arrangements +that could give rise to loss of deductibility under Section 280G and the imposition of excise taxes under Section 4999 when it believes +that such arrangements are appropriate to attract and retain executive talent. +Compensation +Committee Interlocks and Insider Participation +During +the 2025 Fiscal Year, the following directors served on the Compensation Committee: Peter Migliorini (Chairman), Peter A. Davis and Rose +Peabody Lynch. Robert Smith was a member of the Compensation Committee during the 2025 Fiscal Year until his resignation from the Board, +effective July 14, 2025. During the 2025 Fiscal Year, no member of the Compensation Committee was an officer or employee of the Company, +none of our executive officers served as a member of the Board of Directors or Compensation Committee, or other committee serving an +equivalent function, of any entity that has one or more executive officers who served as members of our Board or our Compensation Committee, +and no member of the Compensation Committee had a relationship with the Company that required disclosure under Item 404 of Regulation +S-K. +Clawback +Policy +We +have adopted a Recovery Policy (the “Clawback Policy”) that is designed to comply with NASDAQ Listing Rule 5608 relating +to such policies (with such listing rule itself having been adopted as required by SEC rules adopted pursuant to the Dodd-Frank Act). +The Clawback Policy applies to our executive officers, including the Named Executive Officers, and provides for the repayment of certain +incentive compensation received over a covered period if the Company is required to prepare an accounting restatement due to the material +noncompliance of the Company with any financial reporting requirement under the securities laws. The covered period under the Clawback +Policy is the three full fiscal years prior to the date the Company is required to prepare an accounting restatement. Compensation subject +to recovery is the amount of incentive-based compensation received that exceeds the amount of incentive-based compensation that otherwise +would have been received had it been determined based on the restated amounts. +29 +Policies +and Practices for Granting Certain Equity Awards +We +generally grant annual equity-based awards during the first half of our fiscal year, although such timing may change from year to year. +Our Compensation Committee also may consider and approve interim or mid-year grants, or grants made on another basis, from time to time +based on business needs, changing compensation practices or other factors, in the discretion of our Compensation Committee. Our Compensation +Committee does not take into account material nonpublic information in determining the timing and terms of equity-based awards, and we +have not timed the disclosure of material nonpublic information for the purpose of affecting the value of executive compensation. +Conclusion +The +Compensation Committee considers the level and mix of compensation that it finally decides upon as to each executive within the context +of both the objective data from our competitive assessment of compensation and performance, as well as the subjective factors as outlined +above. The Compensation Committee believes that each of the compensation packages for the Named Executive Officers is within the competitive +range of practices when compared to the objective comparative data even where subjective factors may have influenced the compensation +decisions. +Executive +Officers +The +following table identifies the executive officers of the Company as of the date of this Proxy Statement, their ages, and positions: +Name +Age +Position +Edward +R. Rosenfeld +50 +Chairman +of the Board and Chief Executive Officer +Amelia +Newton Varela +54 +President +Zine +Mazouzi +54 +Chief +Financial Officer and Executive Vice President of Operations +Lisa +Keith +41 +Executive +Vice President, General Counsel and Secretary +Edward +R. Rosenfeld has served as our Chairman of the Board and Chief Executive Officer since August 2008 and has been a director of +the Company since February 2008. Mr. Rosenfeld, who joined our executive management team in May 2005, has more than two decades of experience +focused on the retail, apparel and footwear industries and possesses particular knowledge of and experience in the industry that strengthens +the Board’s collective qualifications, skills and experience. He has strong leadership skills and an in-depth understanding of +the Company and its goals from his positions as the Chairman of the Board and Chief Executive Officer. His background in finance and +his analytical skills gained through his years as a Vice President with Peter J. Solomon Company, an investment banking boutique, where +he specialized in mergers and acquisitions in the retail, apparel and footwear industries, provide the Board with insight and guidance +with respect to, among other things, strategic business development matters. Mr. Rosenfeld served as a director and chairman of the Audit +& Risk Management Committee of PVH Corp. (NYSE: PVH), one of the world’s largest apparel companies, from March 2013 until December +2023. +Amelia +Newton Varela has served as President of the Company since September 2015 and has been a director since 2016. Prior to this tenure, +Ms. Varela was Executive Vice President of Wholesale of the Company since April 2008 and Executive Vice President of Wholesale Footwear +of the Company from November 2004 to April 2008. Previously, she was Vice President of Sales for Steve Madden Women’s Wholesale +Division from January 2000. Ms. Varela began her career with the Company in 1998 in the role of Account Executive for Steve Madden Women’s +Wholesale Division. She graduated from The Fashion Institute of Technology in 1995. Ms. Varela’s over 25 years of experience at +the Company provides relevant industry knowledge and expertise, and leadership to the Board. +Zine +Mazouzi has been our Chief Financial Officer and Executive Vice President of Operations since January 1, 2024. He has served +as our Chief Financial Officer since January 1, 2021 and previously served as our Chief Accounting Officer and Senior Vice President +of Finance and Operations from January 2019 until his appointment as our Chief Financial Officer. Prior to joining the Company, he held +various senior positions at Sears Holdings, a holding company for department stores, as the Chief Financial Officer of Sears Footwear +Group from 2016 to 2017, Head of the Footwear Group from 2017 to 2018 and Head of the Footwear, Home and Jewelry Groups in 2018. Prior +to that, he worked at Nine West Group from 1998 to 2015, where he held a number of increasingly senior positions, including Chief Financial +Officer from 2014 to 2015. Mr. Mazouzi received a Bachelor’s Degree in Finance and a Master of Business Administration from Iona +University. +30 +Lisa +Keith has been our General Counsel since November 2019 and our Corporate Secretary since January 2021. Ms. Keith joined Steve +Madden’s Legal Department in May 2017 and previously served as Vice President and Deputy General Counsel. Prior to joining the +Company, Ms. Keith was a senior associate at Davis Wright Tremaine LLP, a law firm, where she represented clients in the fashion, technology +and luxury goods industries. Ms. Keith began her legal career at Gibson, Dunn & Crutcher LLP, where she practiced in the litigation +department. She earned her J.D. from New York University School of Law and her B.A., summa cum laude, from Brandeis University, where +she was Phi Beta Kappa. +Please +see the section of this Proxy Statement captioned “Proposal One: Election of Directors” for biographical summaries and other +information concerning our Chairman of the Board and Chief Executive Officer, Edward R. Rosenfeld, and our President, Amelia Newton Varela, +as well as our other director nominees. +Summary +Compensation Table for the Fiscal Year 2025 +The +following table sets forth the compensation information for our Chief Executive Officer, Chief Financial Officer, and the three most +highly compensated executive officers other than the Chief Executive Officer and Chief Financial Officer relating to the fiscal years +ended December 31, 2025, 2024 and 2023, respectively. In this Proxy Statement, we refer to this group of people as our “Named Executive +Officers” or “NEOs.” +In +accordance with applicable SEC rules, the Summary Compensation Table for the Fiscal Year 2025 includes, for a particular fiscal year, +only those stock awards made during that fiscal year and not any awards made after year-end even if awarded for services rendered in +that year. SEC rules require that such awards be reflected in the year of grant and, as such, awards made after the end of the 2025 Fiscal +Year will appear in the Summary Compensation Table for the Fiscal Year 2026 to be included in our proxy statement for our 2027 Annual +Meeting of Stockholders. +Fiscal +Salary +Bonus +Stock +Awards +Option +Awards +Non-Equity +Incentive Plan Compensation +All +Other Compensation +Total +Compensation +Name +and Principal Position +Year +($) +($) +($) (1) +($) +($) +($) +($) +Edward +R. Rosenfeld +2025 +1,135,894 (2) +— +6,999,979 +— +— +28,500 (3) +8,164,373 +Chief +Executive Officer +2024 +1,170,220 +— +7,000,001 +— +880,000 +28,350 +9,078,571 +2023 +1,125,212 +— +2,999,991 +— +880,000 +27,900 +5,033,103 +Zine +Mazouzi +2025 +701,538 (2) +— +249,989 +— +— +22,004 (4) +973,531 +Chief +Financial Officer and +2024 +672,115 +— +1,250,002 +— +420,045 +22,004 +2,364,167 +Executive +Vice President of Operations +2023 +599,038 +— +450,023 +— +264,000 +24,900 +1,337,961 +Amelia +Newton Varela +2025 +827,019 (2) +— +249,989 +— +— +25,500 (5) +1,102,508 +President +2024 +799,038 +— +249,988 +— +407,496 +25,350 +1,481,872 +2023 +774,037 +— +1,349,996 +— +303,708 +24,900 +2,452,641 +Lisa +Keith +2025 +463,942 +— +49,993 +— +56,250 +17,610 (6) +587,795 +Executive +Vice President, +2024 +421,827 +— +599,997 +— +106,250 +16,404 +1,144,478 +General +Counsel and Secretary +2023 +396,924 +100,000 +175,011 +— +— +5,920 +677,855 +Karla +Frieders +2025 +305,098 (2) +— +100,011 +— +— +6,102 (8) +411,211 +Former +Chief Merchandising +2024 +590,000 +— +99,995 +— +— +6,600 +696,595 +Officer(7) +2023 +590,000 +— +649,997 +— +— +6,600 +1,246,597 +(1) The +amounts in this column reflect the total grant date fair value of awards granted during the +applicable year for the fiscal years ended December 31, 2025, December 31, 2024, and December +31, 2023, respectively, calculated in accordance with ASC Topic 718. Assumptions used in +the calculation of these amounts are included in Note 8, Note H, and Note I, respectively, +to our audited financial statements for the fiscal years ended December 31, 2025, December +31, 2024, and December 2023 included in our Annual Report on Form 10-K filed with the Securities +and Exchange Commission on March 2, 2026, March 3, 2025, and March 4, 2024, respectively. +The amount shown for Mr. Rosenfeld for 2025 and 2024 includes grants of performance shares +with a fair value based on the probable outcome of the performance goals at the time of grant +of $3,599,988 and $3,599,996, respectively. The fair value of Mr. Rosenfeld’s performance +shares assuming the highest level of performance is achieved would be $6,659,977 and $6,659,993, +respectively. +(2) Salary +amounts reported reflect the actual amount paid to each NEO for the fiscal year, which may +be slightly higher or lower than the NEO’s annual salary rate in effect for such fiscal +year due to the timing of our payroll cycle. Salary amounts for 2025 also reflect the temporary +reductions described elsewhere in this proxy statement. +(3) Consists +of $18,000 automobile allowance and $10,500 in annual matching contributions to Mr. Rosenfeld’s +401(k) plan account. +(4) Consists +of $15,000 automobile allowance and $7,004 in annual matching contributions to Mr. Mazouzi’s +401(k) plan account. +(5) Consists +of $15,000 automobile allowance and $10,500 in annual matching contributions to Ms. Varela’s +401(k) plan account. +(6) Consists +of $12,000 automobile allowance and $5,610 in annual matching contributions to Ms. Keith’s +401(k) plan account. +(7) Ms. +Frieders voluntarily resigned from her position as an executive effective June 30, 2025. +Amounts listed in the table above are pro-rated. As of December 31, 2025, Ms. Frieders did +not hold any shares of restricted Common Stock. All shares of restricted Common Stock which +were unvested were cancelled in accordance with the terms of the 2019 Plan upon her resignation. +(8) Consists +of $6,102 in annual matching contributions to Ms. Frieders’ 401(k) plan account. +31 +Employment +Arrangements +Edward +R. Rosenfeld. On February 27, 2024, based on the recommendation of the Compensation Committee, our Board of Directors approved, +and on February 27, 2024 we entered into, an employment agreement by and between us and Edward R. Rosenfeld, pursuant to which Mr. Rosenfeld +continued to serve as our Chief Executive Officer and executive Chairman of our Board of Directors (the “Rosenfeld Employment Agreement”). +The Rosenfeld Employment Agreement replaces Mr. Rosenfeld’s prior employment agreement that we entered into on December 31, 2021. +The +term of the Rosenfeld Employment Agreement (the “Term”) commenced on March 1, 2024 and will expire on February 28, 2029, +unless sooner terminated in accordance with its terms. +Pursuant +to the Rosenfeld Employment Agreement, Mr. Rosenfeld received an annual base salary of $1,171,954 for the period from March 1, 2024 through +February 28, 2025, and as of March 1, 2025 and as of each March 1 thereafter during the Term, the Board of Directors or a committee thereof +will review the annual base salary for potential increase (but not decrease). Mr. Rosenfeld will also receive a monthly automobile allowance +of $1,500 during the Term. Effective on May 1, 2025, Mr. Rosenfeld accepted a 10% reduction of his base salary due to the Company’s +heightened focus on managing expenses as a result of the implementation of new tariffs on U.S. imports and their impact on the Company. +Effective on January 1, 2026, the Company resumed paying Mr. Rosenfeld his full base salary. +Pursuant +to the Rosenfeld Employment Agreement, on March 15, 2025, Mr. Rosenfeld received a grant under the Steven Madden, Ltd. 2019 Incentive +Compensation Plan (the “2019 Plan”) of restricted shares of the Company’s Common Stock with a value of $3,400,000 (the +“2025 Award”). The 2025 Award vests in five equal annual installments commencing on February 28, 2026. The 2025 Award was +approved by the Compensation Committee as part of our long-term equity compensation program and was not part of a multi-year guaranteed +equity payment. The Rosenfeld Employment Agreement provides that, on March 15, 2026 and on each March 15 thereafter through the remainder +of the Term, Mr. Rosenfeld will be eligible to receive an additional grant of time-vesting restricted stock shares or restricted stock +units in an amount to be determined by the Board of Directors or a committee of the Board of Directors, and such grants will be made +under the 2019 Plan (contingent on sufficient shares being available for issuance under the 2019 Plan at such time), will have terms +and conditions determined by the Board of Directors or a committee of the Board of Directors, and will be subject to an award agreement +under the 2019 Plan. +In +addition, under the terms of the Rosenfeld Employment Agreement, Mr. Rosenfeld is eligible to receive an annual grant of performance +shares in a target amount equal to $3,600,000 (the “Target Shares”) that will be eligible to be earned over a three-year +performance period based on the Company’s average annual return on capital over such performance period compared to the average +annual return on capital of a predetermined peer group, with such peer group having been approved by the Board of Directors or a committee +of the Board of Directors. The performance period for each grant will begin on January 1 of the year in which the grant occurs and will +end on December 31 of the second full calendar year following the year in which such grant occurs. The number of performance shares earned +will be determined based on the following payout scale (with linear interpolation between performance levels): +Payout +Level +Company’s +Percentile +Relative +to Peer Group +% +of Target +Shares +Earned +Maximum +75 th +or higher +185 % +Target +50 th +100 % +Threshold +25 th +50 % +Below +Threshold +Below +25 th +0 % +Each +of the performance share grants will be subject to approval by the Board of Directors or a committee of the Board of Directors, will +be made under the 2019 Plan (contingent on sufficient shares being available in the 2019 Plan reserve) and will be subject to the terms +and conditions of a performance share award agreement. +The +Rosenfeld Employment Agreement permits the Company to terminate Mr. Rosenfeld’s employment at any time with or without Cause (as +defined under the Rosenfeld Employment Agreement), and Mr. Rosenfeld to resign from his employment at any time, with or without Good +Reason (also as defined under the Rosenfeld Employment Agreement). In the event that Mr. Rosenfeld’s employment should be terminated +by the Company for Cause or by Mr. Rosenfeld’s resignation without Good Reason, Mr. Rosenfeld would be entitled to receive only +his accrued and unpaid salary through the date of termination and, in the case of a resignation without Good Reason, the performance +shares earned during the prior performance period but not yet paid as of the date of termination. +32 +In +the event that Mr. Rosenfeld’s employment should be terminated by the Company without Cause or by Mr. Rosenfeld’s resignation +for Good Reason, Mr. Rosenfeld would be entitled to receive, subject to the execution and non-revocation of a general release of claims +by Mr. Rosenfeld, (i) payment of his annual base salary, payable at regular payroll intervals, from the date of termination of employment +through the earlier of (a) the date that is twelve months after the date of termination or (b) the remainder of the Term, (ii) if such +termination occurs prior to March 15, any accrued and unpaid bonus amounts relating to the prior period, and (iii) a pro rata portion +of performance shares earned based on the achievement of the performance goals during the performance period, as well as any performance +shares earned during the prior performance period and not yet paid. +If +Mr. Rosenfeld’s employment should be terminated by the Company without Cause or by Mr. Rosenfeld’s resignation for Good Reason +during the period commencing 90 days prior to a Change of Control (as defined in the Rosenfeld Employment Agreement) and ending 180 days +after a Change of Control, Mr. Rosenfeld would be entitled to receive a cash payment in an amount equal to 2.5 times the sum of (i) the +annual base salary to which Mr. Rosenfeld was entitled as of the date of such termination plus (ii) the average annual bonus received +by him during the preceding three-year period ending on the last previous December 31st. +The +Rosenfeld Employment Agreement also contains customary restrictive covenants and other customary provisions. +Zine +Mazouzi. On November 10, 2023, we entered into a new employment agreement with Zine Mazouzi (the “2023 Mazouzi Employment +Agreement”), which replaced his previous agreement. The term of the 2023 Mazouzi Employment Agreement commenced on January 1, 2024, +and will continue for three years through December 31, 2026, unless sooner terminated in accordance with the terms thereof. The 2023 +Mazouzi Employment Agreement provides for an annual base salary of $675,000, $700,000, and $725,000 for Fiscal Years 2024, 2025, and +2026, respectively, and a monthly automobile allowance of $1,250 over the term of the agreement. In addition, pursuant to the 2023 Mazouzi +Employment Agreement, on December 1, 2023, Mr. Mazouzi was granted 5,147 restricted shares of the Company’s Common Stock, and on +January 2, 2024, Mr. Mazouzi was granted 23,641 restricted shares of Common Stock, which vest 20% per year over five years commencing +on January 2, 2025. Effective on May 1, 2025, Mr. Mazouzi accepted a 5% reduction of his base salary due to the Company’s heightened +focus on managing expenses as a result of the implementation of new tariffs on U.S. imports and their impact on the Company. Effective +on January 1, 2026, the Company resumed paying Mr. Mazouzi his full base salary. +The +terms of the 2023 Mazouzi Employment Agreement entitle Mr. Mazouzi to receive annual performance-based cash bonuses for Fiscal Years +2024, 2025, and 2026 based on the following schedule: +Diluted +EPS +Bonus +as % of Salary +Maximum +(130% of Plan) +90 % +Target (100% of Plan) +60 % +Threshold (90% of +Plan) +40 % +For +actual diluted earnings per share (EPS) amounts between the Threshold and Target amounts or between the Target and Maximum amounts, the +bonus payable is to be calculated based on a straight-line interpolation between the respective amounts. +Pursuant +to the terms of the 2023 Mazouzi Employment Agreement, we may terminate Mr. Mazouzi’s employment for “cause” (as defined +in the 2023 Mazouzi Employment Agreement), in which event Mr. Mazouzi would be entitled to receive only his accrued and unpaid base salary +through the date of termination. If we terminate Mr. Mazouzi’s employment without cause or Mr. Mazouzi terminates the 2023 Mazouzi +Employment Agreement “for good reason” (as defined in the Mazouzi Employment Agreement), Mr. Mazouzi would be entitled to +receive, subject to the execution and non-revocation of a general release of claims by Mr. Mazouzi, (i) payment of his annual base salary, +payable at regular payroll intervals, from the date of termination of employment through the earlier of (a) the date that is twelve months +after the date of termination or (b) the remainder of the term and (ii) if such termination occurs prior to March 15, any accrued and +unpaid bonus amounts relating to the prior period. In addition, if we terminate Mr. Mazouzi’s employment without cause or Mr. Mazouzi +terminates the 2023 Mazouzi Employment Agreement for good reason during the period commencing 30 days prior to a “Change of Control” +(as defined in the Mazouzi Employment Agreement) and ending 180 days following a Change of Control, he will be entitled to receive an +amount equal to the lesser of (A) two and one-half times the sum of (i) the annual base salary to which he was entitled as of the date +of termination plus (ii) the average cash bonus received by him for the preceding three-year period ending on the last previous December +31 or (B) the maximum amount that is tax deductible to the Company under Section 280G of the Internal Revenue Code of 1986, as amended. +Amelia +Newton Varela. On December 21, 2022, we entered into an employment agreement (the “Varela 2022 Agreement”) with Ms. +Varela, pursuant to which she continued to serve as our President through December 31, 2025. As previously disclosed, on January 6, 2026, +we entered into a new employment agreement with Ms. Varela (the “Varela 2026 Agreement”). The Varela 2022 Agreement provided +for an annual base salary of $775,000, $800,000, and $825,000 for Fiscal Years 2023, 2024, and 2025, respectively, and a monthly automobile +allowance of $1,250 during the term of the agreement. In addition, on January 3, 2023, pursuant to the Varela 2022 Agreement, Ms. Varela +was granted 35,177 restricted shares of the Company’s Common Stock, which vest 25% per year over four years, commencing on January +3, 2024. Effective on May 1, 2025, Ms. Varela accepted a 5% reduction of her base salary due to the Company’s heightened focus +on managing expenses as a result of the implementation of new tariffs on U.S. imports and their impact on the Company. Effective on January +1, 2026, the Company resumed paying Ms. Varela her full base salary. +33 +The +terms of the Varela 2022 Agreement also entitled Ms. Varela to receive annual performance-based cash bonuses for Fiscal Years 2023, 2024, +and 2025, determined based on the Company’s actual EBIT for each year in accordance with the following schedule: +EBIT +Bonus +as % of Salary +Maximum +(130% of Plan) +80 % +Target (100% of Plan) +50 % +Threshold (90% of +Plan) +20 % +For +actual EBIT amounts between the Threshold and Target amounts or between the Target and Maximum amounts, the bonus payable was to be calculated +based on a straight-line interpolation between the respective amounts. +If +the Varela 2022 Agreement were terminated due to Ms. Varela’s “disability” (as defined in the agreement) or death, +we would have been obligated to pay Ms. Varela (or her estate) the amount of accrued and unpaid salary through the date of termination +plus any performance-based cash bonus that has accrued for the year prior to termination and is unpaid at the time Ms. Varela’s +employment was terminated. We could have terminated the agreement for “cause” (as defined in the Varela 2022 Agreement), +in which event she would have been entitled to receive only her accrued and unpaid salary through the date of termination. If we had +terminated Ms. Varela’s employment without cause, she would have been entitled to receive payment of her annual base salary, payable +at regular payroll intervals, from the date of termination of employment through the remainder of the term plus any performance-based +cash bonus that had accrued but not yet been paid. In addition, if we had terminated Ms. Varela’s employment without cause during +the period commencing 30 days prior to a “change of control” (as defined in the Varela 2022 Agreement) transaction and ending +180 days after such change of control transaction, she would have been entitled to receive a cash payment in an amount equal to the lesser +of (A) two and one-half times the sum of (i) the annual base salary to which she was entitled as of the date of termination of employment +plus (ii) the average cash bonus that she received for the preceding three years ending on the last previous December 31 or (B) the maximum +amount that is tax deductible to the Company under Section 280G of the Code. +Under +the terms of the Varela 2026 Agreement, Ms. Varela will continue to serve as the President of the Company. The Varela 2026 Agreement +replaced the Varela 2022 Agreement. +The +term of the Varela 2026 Agreement commenced on January 1, 2026 and will continue for a term of three years through December 31, 2028, +unless sooner terminated in accordance with the terms thereof. Pursuant to the terms of the Varela 2026 Agreement, Ms. Varela will receive +an annual base salary during the term of $825,000 for the calendar year 2026, $850,000 for the calendar year 2027, and $875,000 for the +calendar year 2028 and a monthly automobile allowance of $1,250 during each month of the term. In addition, the Varela 2026 Agreement +provides that in January 2026, we will grant Ms. Varela the number of restricted shares of our Common Stock determined by dividing $1,100,000 +by the closing price of the Common Stock on the grant date. The shares of restricted Common Stock will vest 25% per year for four years +commencing on January 2, 2027. +In +addition, the terms of the Varela 2026 Agreement entitle Ms. Varela to an annual performance-based cash bonus based on the Company’s +total EBIT for each of the fiscal years ended December 31, 2026, 2027 and 2028 based on the following schedule: +EBIT +Bonus +as % of Salary +Maximum +(130% of Plan) +80 % +Target (100% of Plan) +50 % +Threshold (90% of +Plan) +30 % +For +EBIT amounts between the Threshold and Target amounts or between the Target and Maximum amounts, the bonus payable shall be calculated +based on a straight-line interpolation between the respective amounts. +Pursuant +to the terms of the Varela 2026 Agreement, we may terminate Ms. Varela’s employment for Cause (as defined in the Varela 2026 Agreement), +in which event Ms. Varela would be entitled to receive only her accrued and unpaid base salary through the date of termination. In the +event Ms. Varela’s employment is terminated by us without Cause, Ms. Varela would be entitled to receive payment of her annual +base salary, payable at regular payroll intervals, from the date of termination of employment through the earlier of the date that is +twelve months after the date of termination or the date the Varela 2026 Agreement would have otherwise terminated but for the involuntary +termination, plus, if terminated without Cause before March 15, any performance-based cash bonus that has accrued but has not yet been +paid for the calendar year before termination. Payment of such salary continuation and prior year bonus is contingent upon the execution +and non-revocation of a general release of claims in our standard form. +34 +In +addition, if Ms. Varela’s employment is terminated by us without Cause during the period commencing 30 days prior to a Change of +Control (as defined in the Varela 2026 Agreement) and ending 180 days after such Change of Control, Ms. Varela would be entitled to receive +a cash payment in an amount equal to the lesser of (A) two and one-half times (i) the annual base salary to which she was entitled as +of the date of termination of employment plus (ii) the average cash bonus that she received for the preceding three years ending on the +last previous December 31 or (B) the maximum amount that is deductible to us under Section 280G of the Internal Revenue Code. +Lisa +Keith. On January 24, 2024, we entered into an employment agreement with Ms. Keith, as amended on May 6, 2024 (the “Keith +2024 Agreement”) pursuant to which Ms. Keith continues to serve as our Executive Vice President – General Counsel. The Keith +2024 Agreement became effective as of February 1, 2024. +The +term of the Keith 2024 Agreement commenced on February 1, 2024 and will continue for a term of three years through January 31, 2027, +unless sooner terminated in accordance with the terms thereof. Pursuant to the terms of the Keith 2024 Agreement, Ms. Keith will receive +an annual base salary of $425,000, $450,000, and $475,000 for each of the 12-month periods ended January 31, 2025, 2026, and 2027, respectively. +In addition, the Keith 2024 Agreement entitles Ms. Keith to an annual performance-based cash bonus for each of the fiscal years ending +December 31, 2024, 2025, and 2026 in an amount to be determined by the Company in its absolute discretion, which bonus, if any, will +be paid to her on or about March 15 of the year immediately following the year in which it was earned. Ms. Keith also received a grant +of 5,833 shares of restricted Common Stock on February 1, 2024, which vest 20% per year over five years commencing on February 1, 2025. +The Keith 2024 Agreement also provides for a car allowance of $1,000 per month. +If +we terminate Ms. Keith’s employment due to her “disability” (as defined in the Keith 2024 Agreement) or her death, +we are obligated to pay her (or her estate) the amount of accrued and unpaid salary through the date of termination of employment. We +may terminate Ms. Keith’s employment for “cause” (as defined in the Keith 2024 Agreement), in which event Ms. Keith +would be entitled to receive only her accrued and unpaid salary through the date of termination. The Keith 2024 Agreement provides that +if we terminate Ms. Keith’s employment without cause, Ms. Keith would be entitled to receive, subject to the execution and non-revocation +of a general release of claims by Ms. Keith, (i) payment of her annual base salary, payable at regular payroll intervals, from the date +of termination of employment through the earlier of (a) the date that is six months after the date of termination or (b) the remainder +of the term and (ii) if such termination occurs prior to March 15, any accrued and unpaid bonus amounts relating to the prior period. +Karla +Frieders. As previously disclosed, Ms. Frieders voluntarily resigned from her position as an executive effective June 30, 2025. +Prior to her resignation, we were party to an employment agreement with Ms. Frieders (the “Frieders 2023 Agreement”) pursuant +to which Ms. Frieders served as our Chief Merchandising Officer. The Frieders 2023 Agreement became effective as of May 1, 2023. +The +term of the Frieders 2023 Agreement commenced on May 1, 2023 and continued for a term of three years through April 30, 2025. Pursuant +to the terms of the Frieders 2023 Agreement, Ms. Frieders received an annual base salary during the term of $590,000. In addition, the +Frieders 2023 Agreement entitled Ms. Frieders to receive annual performance-based cash bonuses for Fiscal Years 2023 and 2024 in amounts +determined by the Company in its absolute discretion. Any bonus earned was paid on or about March 15 of the year following the year in +which it was earned. In addition, on June 1, 2023, pursuant to the Frieders 2023 Agreement, Ms. Frieders was awarded 21,214 restricted +shares of the Company’s Common Stock, which vest in five equal annual installments commencing on June 1, 2024. Effective on May +1, 2025, Ms. Frieders accepted a 5% reduction of her base salary due to the Company’s heightened focus on managing expenses as +a result of the implementation of new tariffs on U.S. imports and their impact on the Company. +If +we had terminated Ms. Frieders’ employment due to her “disability” (as defined in the Frieders 2023 Agreement) or her +death, we would have been obligated to pay her (or her estate) the amount of accrued and unpaid salary through the date of termination +of employment. If we had terminated Ms. Frieders’ employment for “cause” (as defined in the Frieders 2023 Agreement), +Ms. Frieders would have been entitled to receive only her accrued and unpaid salary through the date of termination. The Frieders 2023 +Agreement provided that if we had terminated Ms. Frieders’ employment without cause, Ms. Frieders would have been entitled to receive +payment of her annual base salary, payable at regular payroll intervals, from the date of termination of employment through the earlier +of (i) the date one year after the date of termination, or (ii) the date that the Frieders 2023 Agreement would have otherwise terminated. +Ms. Frieders voluntarily resigned from her position as an executive effective June 30, 2025 and did not receive a severance payment. +35 +Grants +of Plan-Based Awards in the 2025 Fiscal Year +The +following table sets forth information concerning awards under our equity and non-equity incentive plans granted to each of the Named +Executive Officers in the 2025 Fiscal Year. +Estimated +Future Payouts Under +Non-Equity +Incentive Plan Awards (1) +Estimated +Future Payouts Under +Equity +Incentive Plan Awards (2) +All +Other +Stock +Awards: +Number +of +Shares +of +Stock or +All +Other +Option +Awards: +Number +of +Securities +Underlying +Exercise +or +Base +Price +of +Option +Grant +Date +Fair +Value +of +Stock +and +Option +Name +Grant +Date +Threshold +($) +Target +($) +Maximum +($) +Threshold +(#) +Target +(#) +Maximum +(#) +Units +(#) +Options +(#) +Awards +($/Sh) +Awards +($) +Edward +R. +NA +— +$ 1,000,000 +— +— +— +— +— +— +— +— +Rosenfeld +3/15/2025 +— +— +— +— +— +— +134,387 +— +— +$ 3,399,991 +3/15/2025 +— +— +— +71,146 +142,292 +263,240 +— +— +— +$ 3,599,988 +Zine +NA +$ 280,000 +$ 420,000 +$ 630,000 +— +— +— +— +— +— +$ — +Mazouzi +3/15/2025 +— +— +— +— +— +— +9,881 +— +— +$ 249,989 +Amelia +Newton +NA +$ 247,500 +$ 412,500 +$ 660,000 +— +— +— +— +— +— +$ — +Varela +3/15/2025 +— +— +— +— +— +— +9,881 +— +— +$ 249,989 +Lisa +Keith +3/15/2025 +— +— +— +— +— +— +1,976 +— +— +$ 49,993 +Karla Frieders (3) +3/15/2025 +— +— +— +— +— +— +3,953 +— +— +$ 100,011 +(1) Consistent +with SEC regulations, because there were no thresholds, targets or maximums for the 2025 +annual bonus program for these Named Executive Officers, the amounts shown in the target +column (other than for Mr. Mazouzi and Ms. Varela) are representative amounts based on 2025 +performance. For Mr. Mazouzi and Ms. Varela, the amounts shown are based on the annual bonus +amounts set forth in their respective employment agreements. The bonus amounts actually earned +for 2025 are shown in the Non-Equity Incentive Plan Compensation column of the Summary Compensation +Table for the Fiscal Year 2025 above. +(2) Amounts +represent performance shares granted to Mr. Rosenfeld that will be earned and vested based +on our average annual return on capital compared to the average annual return on capital +of a designated peer group of companies over the performance period January 1, 2025 through +December 31, 2027. +(3) Ms. +Frieders voluntarily resigned from her position as an executive effective June 30, 2025. +Amounts listed in the table above are pro-rated. As of December 31, 2025, Ms. Frieders did +not hold any shares of restricted Common Stock. All shares of restricted Common Stock which +were unvested were cancelled in accordance with the terms of the 2019 Plan upon her resignation. +Plan-Based +Awards +On +February 25, 2019, upon recommendation of the Compensation Committee, the Board unanimously approved the adoption of the Steven Madden, +Ltd. 2019 Incentive Compensation Plan (the “2019 Plan”), and on May 24, 2019, our stockholders approved the adoption of the +2019 Plan. The purpose of the 2019 Plan is to enhance our profitability and value for the benefit of our stockholders by enabling the +Company to offer eligible employees, consultants and non-employee directors cash and stock-based incentives to attract, retain and reward +such individuals and provide additional incentive for such persons to exert maximum efforts for our success by encouraging stock ownership +in the Company. The 2019 Plan serves as a means to strengthen the mutuality of interests between such individuals and our stockholders. +All of the equity and non-equity incentive awards granted to our Named Executive Officers in Fiscal Year 2025 were granted under the +2019 Plan. +36 +Outstanding +Equity Awards at End of the 2025 Fiscal Year +The +following table sets forth information concerning restricted stock that has not vested and stock awards outstanding for each of the Named +Executive Officers as of the end of the 2025 Fiscal Year. No stock options were outstanding for any of the Named Executive Officers as +of the end of the 2025 Fiscal Year. +Name +Number +of Shares +or +Units of Stock +That +Have Not +Vested +(#) +Market +Value of +Shares +or Units of +Stock +That Have +Not +Vested ($) +Equity +Incentive Plan Awards: +Number +of Unearned Shares, +Units +or Other Rights That +Have +Not Vested (#) +Plan +Awards: Market or +Payout +Value of +Unearned +Shares, Units +or +Other Rights That +Have +Not Vested ($) +Edward +R. Rosenfeld +331,939 (1) +$ 13,821,940 +361,324 (1) +$ 15,045,522 +Zine +Mazouzi +50,427 (2) +$ 2,099,780 +— +$ — +Amelia +Newton Varela +39,174 (3) +$ 1,631,205 +— +$ — +Lisa +Keith +18,260 (4) +$ 760,346 +— +$ — +Karla +Frieders +— (5) +$ — +— +$ — +(1) On +March 16, 2020, Mr. Rosenfeld was awarded 108,030 shares of restricted Common Stock, which +vest in five equal annual installments commencing on March 1, 2021. On March 15, 2021, Mr. +Rosenfeld was awarded 50,569 shares of restricted Common Stock, which vest in five equal +annual installments commencing on March 1, 2022. On December 31, 2021, Mr. Rosenfeld was +awarded 75,317 shares of restricted Common Stock, which shares vest in five annual installments +of 15,063, 15,063, 15,063, 15,064, and 15,064 shares respectively, commencing on December +1, 2022. On February 1, 2022, Mr. Rosenfeld was awarded 60,532 shares of restricted Common +Stock, which shares vest in five annual installments commencing on February 1, 2023. On March +15, 2022, Mr. Rosenfeld was awarded 77,340 shares of restricted Common Stock, which shares +will vest in five equal annual installments commencing on March 1, 2023. On March 15, 2023, +Mr. Rosenfeld was awarded 86,480 shares of restricted Common Stock, which shares will vest +in five equal annual installments commencing on March 1, 2024. On March 15, 2024, Mr. Rosenfeld +was awarded 81,672 shares of restricted Common Stock, which shares will vest in five equal +annual installments commencing on February 28, 2025. On March 15, 2024, Mr. Rosenfeld was +also awarded 86,476 performance shares that will be eligible to be earned over the three-year +performance period from 2024-2026 based on the Company’s average annual return on capital +over such performance period compared to the average annual return on capital of a predetermined +peer group. The number of performance shares earned may range from zero to 185% of the target +number of performance shares, depending on the level of performance achieved. On March 15, +2025, Mr. Rosenfeld was awarded 134,387 shares of restricted Common Stock, which shares will +vest in five equal annual installments commencing on February 28, 2026 and concluding on +February 28, 2030. On March 15, 2025, Mr. Rosenfeld was also awarded 142,292 performance +shares that will be eligible to be earned over the three-year performance period from 2025-2027 +based on the Company’s average annual return on capital over such performance period +compared to the average annual return on capital of a predetermined peer group. The number +of performance shares earned may range from zero to 185% of the target number of performance +shares, depending on the level of performance achieved. +(2) On +January 2, 2020, Mr. Mazouzi was awarded 2,320 restricted shares of Common Stock, which vest +in five substantially equal installments commencing on the first anniversary of the date +awarded. On August 3, 2020, Mr. Mazouzi was awarded 5,000 restricted shares of Common Stock, +which vest in five substantially equal installments commencing on the first anniversary of +the date awarded. On January 4, 2021, Mr. Mazouzi was awarded 29,155 restricted shares of +Common Stock, which vest in five substantially equal installments commencing on the first +anniversary of the date awarded. On March 15, 2021, Mr. Mazouzi was awarded 5,057 restricted +shares of Common Stock, which vest in five substantially equal installments commencing on +March 1, 2022. On March 15, 2022, Mr. Mazouzi was awarded 6,445 restricted shares of Common +Stock, which will vest in five equal annual installments commencing on March 1, 2023. On +March 15, 2023, Mr. Mazouzi was awarded 7,207 restricted shares of Common Stock, which will +vest in five equal annual installments commencing on March 1, 2024. On December 1, 2023, +Mr. Mazouzi was awarded 5,147 restricted shares of Common Stock, which will vest in five +equal annual installments commencing on December 1, 2024. On January 2, 2024, Mr. Mazouzi +was granted 23,641 restricted shares of Common Stock, which will vest 20% per year commencing +on January 2, 2025. On March 15, 2024, Mr. Mazouzi was granted 6,005 restricted shares of +Common Stock, which will vest in five equal annual installments commencing on March 1, 2025. +On March 15, 2025, Mr. Mazouzi was granted 9,881 restricted shares of Common Stock, which +will vest in five equal annual installments commencing on March 15, 2026 and concluding on +March 15, 2030. +(3) On +January 2, 2020, Ms. Varela was awarded 27,000 restricted shares of Common Stock, which will +vest in five equal annual installments on each anniversary of the date of grant, commencing +on January 2, 2021. On March 1, 2021, Ms. Varela was awarded 26,350 restricted shares of +Common Stock, which will vest in four substantially equal annual installments on each anniversary +of the date of grant, commencing on March 1, 2022. On March 15, 2022, Ms. Varela was awarded +6,445 restricted shares of Common Stock, which will vest in five equal annual installments +commencing on March 1, 2023. On January 3, 2023, Ms. Varela was awarded 35,177 restricted +shares of Common Stock, which will vest in four equal annual installments commencing on January +3, 2024. On March 15, 2023, Ms. Varela was awarded 7,207 restricted shares of Common Stock, +which will vest in five equal annual installments commencing on March 1, 2024. On March 15, +2024, Ms. Varela was awarded 6,005 restricted shares of Common Stock, which will vest in +five equal annual installments commencing on March 1, 2025. On March 15, 2025, Ms. Varela +was awarded 9,881 restricted shares of Common Stock, which will vest in five equal annual +installments commencing on March 15, 2026 and concluding on March 15, 2030. +(4) On +February 1, 2021, Ms. Keith was awarded 8,912 restricted shares of Common Stock, which will +vest in five equal annual installments on each anniversary of the date of grant, commencing +on February 1, 2022. On March 15, 2022, Ms. Keith was awarded 1,289 restricted shares of +Common Stock, which will vest in five equal annual installments on each anniversary of the +date of grant, commencing on March 1, 2023. On February 1, 2023, Ms. Keith was awarded 4,808 +restricted shares of Common Stock, which will vest in five equal annual installments on each +anniversary of the date of grant, commencing on February 1, 2024. On February 1, 2024, Ms. +Keith was awarded 5,833 restricted shares of Common Stock, which will vest in five equal +annual installments on each anniversary of the date of grant, commencing on February 1, 2025. +On August 1, 2024, Ms. Keith was awarded 8,044 restricted shares of Common Stock, which will +vest in five equal annual installments on each anniversary of the date of grant, commencing +on August 1, 2025. On March 15, 2025, Ms. Keith was awarded 1,976 restricted shares of Common +Stock, which will vest in five equal annual installments on each anniversary of the date +of grant, commencing on March 15, 2026 and concluding on March 15, 2030. +(5) On +May 11, 2020, Ms. Frieders was awarded 32,758 restricted shares of our Common Stock, which +will vest in five substantially equal annual installments commencing on May 1, 2021. On March +15, 2021, Ms. Frieders was awarded 10,114 restricted shares of our Common Stock, which will +vest in five substantially equal annual installments commencing on March 1, 2022. On March +15, 2022, Ms. Frieders was awarded 12,890 restricted shares of Common Stock, which will vest +in five equal annual installments commencing on March 1, 2023. On June 1, 2023, Ms. Frieders +was awarded 21,214 restricted shares of Common Stock, which will vest in five equal annual +installments commencing on June 1, 2024. On March 15, 2024, Ms. Frieders was awarded 2,402 +restricted shares of Common Stock, which will vest in five equal annual installments commencing +on March 1, 2025. On March 15, 2025, Ms. Frieders was awarded 3,953 restricted shares of +Common Stock, which will vest in five equal annual installments commencing on March 15, 2026 +and concluding on March 15, 2030. Ms. Frieders voluntarily resigned from her position as +an executive effective June 30, 2025. Amounts listed in the table above are pro-rated. As +of December 31, 2025, Ms. Frieders did not hold any shares of restricted Common Stock. All +shares of restricted Common Stock which were unvested were cancelled in accordance with the +terms of the 2019 Plan upon resignation. +37 +Option +Exercises and Stock Vested in the 2025 Fiscal Year +The +following table sets forth information concerning stock options exercised and restricted stock vested during the 2025 Fiscal Year for +each of the Named Executive Officers. The value realized from exercised options is deemed to be the market value of the Common Stock +on the date of exercise, less the exercise price of the option, multiplied by the number of shares of Common Stock underlying the option. +The value realized from the vesting of restricted stock is deemed to be the market value of the Common Stock on the date of vesting multiplied +by the number of shares vesting. +Option +Awards +Stock +Awards +Name +Number +of Shares Acquired on Exercise (#) +Value +Realized on Exercise ($) +Number +of Shares Acquired on Vesting (#) +Value +Realized on Vesting ($) +Edward +R. Rosenfeld +— +— +107,988 +$ 3,793,671 +Zine +Mazouzi +— +— +17,998 +$ 692,127 +Amelia +Newton Varela +— +— +24,714 +$ 940,091 +Lisa +Keith +— +— +5,779 +$ 206,891 +Karla +Frieders +— +— +15,877 +$ 408,100 +Securities +Authorized for Issuance Under Equity Compensation Plans +The +following table sets forth information as of December 31, 2025 with respect to compensation plans (including individual compensation +arrangements) under which shares of Common Stock are authorized for issuance, aggregated as follows: +● All +compensation plans previously approved by security holders; and +● All +compensation plans not previously approved by security holders. +Equity +compensation plan information +Number +of securities +to +be issued +upon +exercise of +outstanding +options, +warrants +and rights +(#) +Weighted +average +exercise +price of +outstanding +options, +warrants +and +rights +($) +Number +of securities +remaining +available for +future +issuance under +equity +compensation plans +(excluding +securities +reflected +in Column (a)) +(#) +Equity +compensation plans approved by security holders +1,159,402 +$ 36.67 +$ 7,893,358 +Equity +compensation plans not approved by security holders +— +— +— +Total +1,159,402 +$ 36.67 +$ 7,893,358 +Termination, +Change-in-Control and Non-Competition/Non-Solicitation +The +employment agreements for our Named Executive Officers during 2025 provided for severance benefits upon certain qualifying terminations +of employment. +Please +see the section of this Proxy Statement captioned “Employment Arrangements” for a summary description of the Named Executive +Officers’ employment agreements and such severance and change-in-control provisions. These benefits are described and quantified +in the section of this Proxy Statement captioned “Potential Payments Upon Termination or Change-In-Control” below. +We +believe that the severance payments and payments made upon change-in-control provisions in the employment agreements provide appropriate +protection to our executives, comparable to that available at peer companies and, with regard to the enhanced severance following a change-in-control, +protect the Company from losing key executives during a period when a change-in-control may be threatened or pending. These benefits +are described and quantified in the section below captioned “Potential Payments Upon Termination or Change-In-Control.” +Our +Named Executive Officers were each subject to customary restrictive covenants under the terms of their employment agreements. +38 +Potential +Payments Upon Termination or Change-In-Control +Our +employment agreements with the Named Executive Officers as in effect on December 31, 2025 (other than Ms. Frieders, who voluntarily resigned +during 2025 and therefore is excluded from the following disclosure) provided for payments to such individuals upon termination of employment +or a change-in-control of the Company. Please see the section of this Proxy Statement captioned “Employment Arrangements.” +The table below assumes that the termination of employment occurred on December 31, 2025 and that the amounts would be payable to the +respective Named Executive Officer if such Named Executive Officer’s employment had been terminated under the various scenarios +set forth below. +Name +Cash +Payment ($) +Continuation +of Medical / Welfare Benefits +(Present +Value) ($) +Acceleration +and Continuation of Equity Award ($) +Total +Termination Benefits ($) +Termination +Due To Death +Edward +R. Rosenfeld +— +— +$ 15,045,522 (2) +$ 15,045,522 +Zine +Mazouzi +— +— +— +— +Amelia +Newton Varela +— +— +— +— +Lisa +Keith +— +— +— +— +Termination +Due To Total Disability +Edward +R. Rosenfeld +— +— +$ 15,045,522 (2) +$ 15,045,522 +Zine +Mazouzi +— +— +— +— +Amelia +Newton Varela +— +— +— +— +Lisa +Keith +— +— +— +— +Termination +for Cause; Resignation Without Good Reason +Edward +R. Rosenfeld +— +— +— +— +Zine +Mazouzi +— +— +— +— +Amelia +Newton Varela +— +— +— +— +Lisa +Keith +— +— +— +— +Termination +Other Than for Cause; Resignation for Good Reason +Edward +R. Rosenfeld +$ 1,171,954 (3) +— +— +$ 1,171,954 +Zine +Mazouzi +$ 725,000 (3) +— +— +$ 725,000 +Amelia +Newton Varela +$ 825,000 (3) +— +— +$ 825,000 +Lisa +Keith +$ 235,417 (3) +— +— +$ 235,417 +Termination +Upon a Change-in-Control +Edward +R. Rosenfeld +$ 5,229,885 (4) +— +$ 28,867,462 (5) +$ 34,097,347 +Zine +Mazouzi +$ 2,622,121 (4) +— +$ 2,099,780 (5) +$ 4,721,901 +Amelia +Newton Varela +$ 3,000,242 (7) +— +$ 1,631,205 (5) +$ 4,631,447 +Lisa +Keith +$ 846,354 (8) +— +$ 760,346 (5) +$ 1,606,700 +(1) Mr. +Mazouzi’s, Ms. Varela’s and Ms. Keith’s employment agreements provide that +severance payments in connection with a change-in-control are limited if the severance payment, +when added to any other benefits triggered by a change-in-control, is determined to constitute +an “excess parachute payment” under Sections 280G and 4999 of the Code, to the +maximum amount that is deductible to the Company under Section 280G of the Code. The employment +agreement of Mr. Rosenfeld provides that the executive’s change-in-control severance +payment will only be reduced to the maximum amount that is deductible to the Company under +Section 280G of the Code if the reduction provides the executive with the best after-tax +result; otherwise, the executive will receive the full amount of the severance payment and +other benefits triggered by the change-in-control and be liable for the 20% excise tax on +the excess parachute payment in addition to all other applicable taxes. In such case, our +deduction of the portion of the severance payment constituting an excess parachute payment +will be disallowed. Because our agreements with the Named Executive Officers do not under +any circumstances provide for an increase in severance or other benefits due to the application +of Sections 280G and 4999 of the Code, for purposes of the disclosure above, we have calculated +the potential amounts payable without taking into account the application of Sections 280G +and 4999 of the Code. Upon the occurrence of a change-in-control, the amounts may be reduced +due to the application of Sections 280G and 4999 of the Code. +(2) Consists +of Mr. Rosenfeld’s performance shares, which would vest in full, calculated based on +performance trend through December 31, 2025. +(3) Consists +of base salary continuation as severance payable pursuant to the Named Executive Officer’s +employment agreement. Because the performance period for the prior year bonus was completed +as of December 31, 2025, no amount has been disclosed for such bonus. +(4) Consists +of two and one-half times the sum of (i) Mr. Rosenfeld’s 2025 base salary plus (ii) +the average cash bonus received by Mr. Rosenfeld for the three-year period ending on December +31, 2024. See the summary of Mr. Rosenfeld’s employment agreement under “Employment +Arrangements.” +39 +(5) The +amount disclosed represents the total value of the restricted stock and performance shares +that would have received accelerated vesting upon a hypothetical change-in-control and a +qualifying termination of employment on December 31, 2025. +(6) Consists +of two and one-half times the sum of (i) Mr. Mazouzi’s 2025 base salary plus (ii) the +average cash bonus received by Mr. Mazouzi for the three-year period ending on December 31, +2024. See the summary of Mr. Mazouzi’s employment agreement under “Employment +Arrangements.” +(7) Consists +of two and one-half times the sum of (i) Ms. Varela’s 2025 base salary plus (ii) the +average cash bonus received by Ms. Varela for the three-year period ending on December 31, +2024. See the summary of Ms. Varela’s employment agreement under “Employment +Arrangements.” +(8) Consists +of two and one-half times the sum of (i) Ms. Keith’s 2025 base salary plus (ii) the +average cash bonus received by Ms. Keith for the three-year period ending on December 31, +2024. See the summary of Ms. Keith’s employment agreement under “Employment Arrangements.” +Compensation +Committee Report +The +Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with management, and based on the review and +discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included +in this Proxy Statement. +Submitted +by the Compensation Committee of the Board of Directors: +Peter +Migliorini (Chairman) +Peter +A. Davis +Rose +Peabody Lynch +Pay +Versus Performance +As +required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(v) of Regulation S-K, we are +providing the following information about the relationship between executive compensation actually paid and certain financial performance +of the Company. For further information concerning the Company’s variable pay-for-performance philosophy and how the Company aligns +executive compensation with the Company’s performance, refer to “Executive Compensation – Compensation Discussion and +Analysis.” +Year +(a) +Summary +Compensation +Table +Total For +PEO +(b) 1 +Compensation +Actually +Paid To +PEO +(c) 2 +Average +Summary +Compensation +Table +Total For +Non-PEO +NEO (d) 3 +Average +Compensation +Actually +Paid +To +Non-PEO +NEO +(e) 4 +Total +Shareholder +Return +(f) 5 +Peer +Group +Total +Shareholder +Return +(g) 6 +Net +Income +(in +thousands) +(h) 7 +Adjusted +Diluted +Income +Per +Share +(i) 8 +Value +of Initial Fixed $100 Investment Based on: +Year +(a) +Summary +Compensation +Table +Total For +PEO +(b) 1 +Compensation +Actually +Paid To +PEO +(c) 2 +Average +Summary +Compensation +Table +Total For +Non-PEO +NEO (d) 3 +Average +Compensation +Actually +Paid +To +Non-PEO +NEO +(e) 4 +Total +Shareholder +Return +(f) 5 +Peer +Group +Total +Shareholder +Return +(g) 6 +Net +Income +(in +thousands) +(h) 7 +Adjusted Diluted Income Per Share +(i) 8 +2025 +$ 8,164,373 +$ 11,780,833 +$ 768,762 +$ 758,214 +$ 131.38 +$ 160.21 +$ 44,661 +$ 1.70 +2024 +$ 9,078,571 +$ 9,686,830 +$ 1,421,778 +$ 1,474,342 +$ 130.60 +$ 279.30 +$ 169,390 +$ 2.67 +2023 +$ 5,033,103 +$ 9,359,656 +$ 1,428,763 +$ 1,933,048 +$ 126.59 +$ 172.40 +$ 171,554 +$ 2.45 +2022 +$ 7,609,075 +$ 1,935,729 +$ 1,148,601 +$ 686,226 +$ 94.07 +$ 131.91 +$ 216,061 +$ 2.80 +2021 +$ 7,566,831 +$ 11,498,936 +$ 1,711,424 +$ 2,175,266 +$ 133.46 +$ 146.73 +$ 190,678 +$ 2.50 +(1) The +dollar amounts reported in column (b) are the amounts of total compensation reported for +Mr. Rosenfeld (our Chief Executive Officer) for each corresponding year in the “Total” +column of the Summary Compensation Table for the Fiscal Year 2025. Refer to “Executive +Compensation – Summary Compensation Table for the 2025 Fiscal Year.” +(2) The +dollar amounts reported in column (c) represent the amount of “compensation actually +paid” to Mr. Rosenfeld, as computed in accordance with Item 402(v) of Regulation S-K. +The dollar amounts do not reflect the actual amount of compensation earned by or paid to +Mr. Rosenfeld during the applicable year. In accordance with the requirements of Item 402(v) +of Regulation S-K, the following adjustments were made to Mr. Rosenfeld’s total compensation +for each year to determine the compensation actually paid: +(3) The +dollar amounts reported in column (d) represent the average of the amounts reported for the +Company’s named executive officers (NEOs) as a group (excluding Mr. Rosenfeld, who +has served as our CEO since 2008) in the “Total” column of the Summary Compensation +Table in each applicable year. The names of each of the NEOs (excluding Mr. Rosenfeld) included +for purposes of calculating the average amounts in each applicable year are as follows: (i) +for 2025, Zine Mazouzi, Amelia Newton Varela, Lisa Keith, and Karla Frieders; (ii) for 2024, +Zine Mazouzi, Amelia Newton Varela, Lisa Keith, and Karla Frieders; (iii) for 2023, Zine +Mazouzi, Amelia Newton Varela, Lisa Keith, and Karla Frieders; (iv) for 2022, Zine Mazouzi, +Amelia Newton Varela, Karla Frieders, and Awadhesh Sinha; and (v) for 2021, Zine Mazouzi, +Amelia Newton Varela, Karla Frieders, and Awadhesh Sinha. +(4) The +dollar amounts reported in column (e) represent the average amount of “compensation +actually paid” to the NEOs as a group (excluding Mr. Rosenfeld), as computed in accordance +with Item 402(v) of Regulation S-K. The dollar amounts do not reflect the actual average +amount of compensation earned by or paid to the NEOs as a group (excluding Mr. Rosenfeld) +during the applicable year. In accordance with the requirements of Item 402(v) of Regulation +S-K, the following adjustments were made to average total compensation for the NEOs as a +group (excluding Mr. Rosenfeld) for each year to determine the compensation actually paid, +using the same methodology described above in Note 2. +(5) Cumulative +TSR is calculated by dividing the sum of (i) the cumulative amount of dividends for the measurement +period, assuming dividend reinvestment, and (ii) the difference between the Company’s +share price at the end and the beginning of the measurement period by the Company’s +share price at the beginning of the measurement period. +(6) Represents +the weighted peer group TSR, weighted according to the respective companies’ stock +market capitalization at the beginning of each period for which a return is indicated. The +peer group used for this purpose comes from the performance graph included in our Annual +Report on Form 10-K for the year ended December 31, 2025 and consists of six companies: Caleres, +Inc., Crocs, Inc., Deckers Outdoor Corporation, Genesco Inc., Designer Brands Inc. and Wolverine +World Wide, Inc. Skechers, U.S.A., Inc. was removed from our peer group index for the year +ended December 31, 2025 as it is no longer a listed company. +(7) The +dollar amounts reported represent the amount of net income reflected in the Company’s +audited financial statements for the applicable year. +(8) The +Company has determined that adjusted diluted income per share is the financial performance +measure that represents the most important performance measure used by the Company to link +compensation actually paid to the Company’s NEOs in the 2025 Fiscal Year to Company +performance. Adjusted diluted income per share is a non-GAAP measure that adjusts GAAP diluted +income per share for certain items. A reconciliation of GAAP diluted income per share to +adjusted diluted earnings per share is included in Annex A. +(1) The +dollar amounts reported in column (b) are the amounts of total compensation reported for +Mr. Rosenfeld (our Chief Executive Officer) for each corresponding year in the “Total” +column of the Summary Compensation Table for the Fiscal Year 2025. Refer to “Executive +Compensation – Summary Compensation Table for the 2025 Fiscal Year.” +(2) The +dollar amounts reported in column (c) represent the amount of “compensation actually +paid” to Mr. Rosenfeld, as computed in accordance with Item 402(v) of Regulation S-K. +The dollar amounts do not reflect the actual amount of compensation earned by or paid to +Mr. Rosenfeld during the applicable year. In accordance with the requirements of Item 402(v) +of Regulation S-K, the following adjustments were made to Mr. Rosenfeld’s total compensation +for each year to determine the compensation actually paid: +Year +Reported +Summary Compensation Table Total for PEO +Reported +Value of +Equity +Awards (i) +Equity +Award +Adjustments (ii) +Compensation +Actually Paid To PEO +2025 +$ 8,164,373 +$ ( 6,999,979 ) +$ 10,616,439 +$ 11,780,833 +2024 +$ 9,078,571 +$ ( 7,000,001 ) +$ 7,608,260 +$ 9,686,830 +2023 +$ 5,033,103 +$ ( 2,999,991 ) +$ 7,326,543 +$ 9,359,656 +2022 +$ 7,609,075 +$ ( 5,499,990 ) +$ ( 173,356 ) +$ 1,935,729 +2021 +$ 7,566,831 +$ ( 5,499,985 ) +$ 9,432,090 +$ 11,498,936 +(i) The +reported value of equity awards represents the total of the amounts reported in the “Stock +Awards” and “Option Awards” columns in the Summary Compensation Table for +the applicable year. +40 +(ii) The +equity award adjustments for each applicable year include the addition (or subtraction, as +applicable) of the following: (i) the year-end fair value of any equity awards granted in +the applicable year that are outstanding and unvested as of the end of the year; (ii) the +amount of change as of the end of the applicable year (from the end of the prior fiscal year) +in fair value of any awards granted in prior years that are outstanding and unvested as of +the end of the applicable year; (iii) for awards that are granted and vest in the same applicable +year, the fair value as of the vesting date; (iv) for awards granted in prior years that +vest in the applicable year, the amount equal to the change as of the vesting date (from +the end of the prior fiscal year) in fair value; (v) for awards granted in prior years that +are determined to fail to meet the applicable vesting conditions during the applicable year, +a deduction for the amount equal to the fair value at the end of the prior fiscal year; and +(vi) the dollar value of any dividends or other earnings paid on stock or option awards in +the applicable year prior to the vesting date that are not otherwise reflected in the fair +value of such award or included in any other component of total compensation for the applicable +year. The amounts deducted or added in calculating the equity award adjustments are as follows: +Year +Year +End Fair Value of Equity Awards +Year +over Year Change in Fair Value of Outstanding and Unvested Equity Awards +Year +over Year Change in Fair Value of Equity Awards Granted in Prior Years that Vested in the Year +Value +of Dividends or Other Earnings Paid on Stock or Option Awards Not Otherwise Reflected in Fair Value or Total Compensation +Total +Equity Award Adjustments +2025 +$ 11,520,914 +$ ( 366,594 ) +$ ( 797,979 ) +$ 260,098 +$ 10,616,439 +2024 +$ 7,149,653 +$ 71,444 +$ 138,171 +$ 248,992 +$ 7,608,260 +2023 +$ 3,632,160 +$ 2,659,104 +$ 737,808 +$ 297,471 +$ 7,326,543 +2022 +$ 4,406,389 +$ ( 3,985,142 ) +$ ( 945,391 ) +$ 350,788 +$ ( 173,356 ) +2021 +$ 5,849,922 +$ 3,131,154 +$ 244,307 +$ 206,707 +$ 9,432,090 +(3) The +dollar amounts reported in column (d) represent the average of the amounts reported for the +Company’s named executive officers (NEOs) as a group (excluding Mr. Rosenfeld, who +has served as our CEO since 2008) in the “Total” column of the Summary Compensation +Table in each applicable year. The names of each of the NEOs (excluding Mr. Rosenfeld) included +for purposes of calculating the average amounts in each applicable year are as follows: (i) +for 2025, Zine Mazouzi, Amelia Newton Varela, Lisa Keith, and Karla Frieders; (ii) for 2024, +Zine Mazouzi, Amelia Newton Varela, Lisa Keith, and Karla Frieders; (iii) for 2023, Zine +Mazouzi, Amelia Newton Varela, Lisa Keith, and Karla Frieders; (iv) for 2022, Zine Mazouzi, +Amelia Newton Varela, Karla Frieders, and Awadhesh Sinha; and (v) for 2021, Zine Mazouzi, +Amelia Newton Varela, Karla Frieders, and Awadhesh Sinha. +(4) The +dollar amounts reported in column (e) represent the average amount of “compensation +actually paid” to the NEOs as a group (excluding Mr. Rosenfeld), as computed in accordance +with Item 402(v) of Regulation S-K. The dollar amounts do not reflect the actual average +amount of compensation earned by or paid to the NEOs as a group (excluding Mr. Rosenfeld) +during the applicable year. In accordance with the requirements of Item 402(v) of Regulation +S-K, the following adjustments were made to average total compensation for the NEOs as a +group (excluding Mr. Rosenfeld) for each year to determine the compensation actually paid, +using the same methodology described above in Note 2. +Year +Average +Reported Summary Compensation Table +Total +for Non-PEO NEOs +Average +Reported Value of Equity Awards (i) +Average +Equity Award Adjustments (ii) +Average +Compensation +Actually +Paid to Non-PEO NEOs +2025 +$ 768,762 +$ ( 162,496 ) +$ 151,948 +$ 758,214 +2024 +$ 1,421,778 +$ ( 549,996 ) +$ 602,560 +$ 1,474,342 +2023 +$ 1,428,763 +$ ( 656,257 ) +$ 1,160,542 +$ 1,933,048 +2022 +$ 1,148,601 +$ ( 250,002 ) +$ ( 212,373 ) +$ 686,226 +2021 +$ 1,711,424 +$ ( 650,003 ) +$ 1,113,845 +$ 2,175,266 +(i) The +average reported value of equity awards represents the average of the total amounts reported +in the “Stock Awards” and “Option Awards” columns in the Summary +Compensation Table for the applicable year. +(ii) The +amounts deducted or added in calculating the total average equity award adjustments are as +follows: +Year +Average +Year +End +Fair +Value +of +Equity +Awards +Year +over Year +Average +Change in Fair +Value +of Outstanding +and +Unvested Equity +Awards +Year +over Year Average +Change +in Fair Value of +Equity +Award Granted in +Prior +Years That Vested in +the +Year +Average +Value of Dividends +or +Other Earnings Paid on +Stock +or Option Awards Not +Otherwise +Reflected in Fair +Value +or Total Compensation +Total +Average +Equity +Award +Adjustments +2025 +$ 267,443 +$ ( 18,077 ) +$ ( 122,430 ) +$ 25,012 +$ 151,948 +2024 +$ 552,016 +$ 15,651 +$ ( 526 ) +$ 35,420 +$ 602,561 +2023 +$ 847,980 +$ 246,733 +$ 30,364 +$ 35,465 +$ 1,160,542 +2022 +$ 205,982 +$ ( 392,470 ) +$ ( 53,429 ) +$ 27,544 +$ ( 212,373 ) +2021 +$ 821,078 +$ 235,259 +$ 32,832 +$ 24,676 +$ 1,113,845 +(5) Cumulative +TSR is calculated by dividing the sum of (i) the cumulative amount of dividends for the measurement +period, assuming dividend reinvestment, and (ii) the difference between the Company’s +share price at the end and the beginning of the measurement period by the Company’s +share price at the beginning of the measurement period. +(6) Represents +the weighted peer group TSR, weighted according to the respective companies’ stock +market capitalization at the beginning of each period for which a return is indicated. The +peer group used for this purpose comes from the performance graph included in our Annual +Report on Form 10-K for the year ended December 31, 2025 and consists of six companies: Caleres, +Inc., Crocs, Inc., Deckers Outdoor Corporation, Genesco Inc., Designer Brands Inc. and Wolverine +World Wide, Inc. Skechers, U.S.A., Inc. was removed from our peer group index for the year +ended December 31, 2025 as it is no longer a listed company. +(7) The +dollar amounts reported represent the amount of net income reflected in the Company’s +audited financial statements for the applicable year. +(8) The +Company has determined that adjusted diluted income per share is the financial performance +measure that represents the most important performance measure used by the Company to link +compensation actually paid to the Company’s NEOs in the 2025 Fiscal Year to Company +performance. Adjusted diluted income per share is a non-GAAP measure that adjusts GAAP diluted +income per share for certain items. A reconciliation of GAAP diluted income per share to +adjusted diluted earnings per share is included in Annex A. +41 +Financial +Performance Measures +As +described in greater detail in “Executive Compensation – Compensation Discussion and Analysis,” the Company’s +executive compensation program reflects a variable pay-for-performance philosophy. The metrics that the Company uses for both our long-term +and short-term incentive awards are selected based on an objective of incentivizing our NEOs to increase the value of our enterprise +for our stockholders. The most important financial performance measures used by the Company to link executive compensation actually paid +to the Company’s NEOs, for the most recently completed fiscal year, to the Company’s performance are as follows: +● Adjusted +Diluted Income per Share +● Adjusted +EBIT +● Adjusted +EBITDA +● Revenue +● Return +On Capital +Analysis +of the Information Presented in the Pay Versus Performance Table +As +described in more detail in the section “Executive Compensation – Compensation Discussion and Analysis,” the Company’s +executive compensation program reflects a variable pay-for-performance philosophy. While the Company utilizes several performance measures +to align executive compensation with Company performance, all of those Company measures are not presented in the Pay Versus Performance +table. Moreover, the Company generally seeks to incentivize long-term performance, and therefore does not specifically align the Company’s +performance measures with compensation that is actually paid (as computed in accordance with Item 402(v) of Regulation S-K) for a particular +year. In accordance with Item 402(v) of Regulation S-K, the Company is providing the following graphs of the relationships between information +presented in the Pay Versus Performance table. +42 +The +following graph reflects the relationship between the amount of compensation actually paid to Mr. Rosenfeld, the average amount of compensation +actually paid to the Company’s NEOs as a group (excluding Mr. Rosenfeld) and the Company’s cumulative TSR over the five years +presented in the table. +The +following graph reflects the relationship between the amount of compensation actually paid to Mr. Rosenfeld, the average amount of compensation +actually paid to the Company’s NEOs as a group (excluding Mr. Rosenfeld) and the Company’s net income over the five years +presented in the table. +43 +The +following graph reflects the relationship between the amount of compensation actually paid to Mr. Rosenfeld, the average amount of compensation +actually paid to the Company’s NEOs as a group (excluding Mr. Rosenfeld) and the Company’s adjusted diluted earnings per +share over the five years presented in the table. +The +following graph reflects the relationship between the cumulative TSR of the Company and its peer group over the five-year period presented +in the table. For details regarding the composition of the peer group, see footnote 6 to the table above. +44 +PROPOSAL +TWO: +RATIFICATION +OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR +ENDING DECEMBER 31, 2026 +The +Audit Committee has appointed Ernst & Young LLP (“EY”) as our independent registered public accounting firm to conduct +the audit of our books and records for each fiscal year since March 6, 2020, beginning with the fiscal year ended December 31, 2020. +In +evaluating the selection of an independent registered public accounting firm for 2026, the Audit Committee considered several factors +relating to potential candidates, including audit quality, the benefits of our existing auditor’s familiarity with the Company +versus a fresh perspective, the key members of the audit engagement team, the most recent internal quality control review or Public Company +Accounting Oversight Board inspection, auditor independence and its process for maintaining independence, the risks of a change of auditors, +and the firm’s international scope and presence. In addition, the Audit Committee evaluated the Company’s requirements in +light of the growth and complexity of its business and the increasing international aspects of its operations. As a result of this evaluation, +the Audit Committee selected EY as the Company’s independent registered public accounting firm for the fiscal year ending December +31, 2026. +Although +ratification by stockholders is not required by our organizational documents or any applicable law, the Audit Committee has determined +that requesting ratification by stockholders of its appointment of EY as our independent registered public accounting firm is a matter +of good corporate practice. If stockholders do not ratify the selection, the Audit Committee will reconsider whether or not to retain +EY, but may still retain that accounting firm. Even if the selection is ratified, the Audit Committee, in its discretion, may change +the appointment at any time during the year if it determines that such a change would be in our best interest and that of our stockholders. +Representatives +of EY are expected to be present at the Annual Meeting to respond to appropriate questions and to make a statement should they so desire. +Required +Vote +The +affirmative vote of a majority of the votes cast by the shares of Common Stock present or represented by proxy and entitled to vote at +the Annual Meeting is required to ratify the Audit Committee’s selection of EY. +Recommendation +of the Board of Directors +The +Board of Directors unanimously recommends a vote “FOR” the ratification of the appointment of EY as our independent registered +public accounting firm for the fiscal year ending December 31, 2026. Unless marked to the contrary, proxies received from stockholders +will be voted in favor of ratifying the appointment of EY as our independent registered public accounting firm for the fiscal year ending +December 31, 2026. +Independent +Registered Public Accounting Firm’s Fees and Services +The +aggregate fees billed to the Company by EY for professional services rendered for each of 2025 and 2024, respectively, are set forth +below: +Year +Ended December 31, +2025 +2024 +Audit +Fees (1) +$ 4,195,000 +$ 3,177,900 +Audit-Related Fees (2) +1,048,000 +845,000 +Tax Fees (3) +869,000 +483,500 +All +Other Fees +22,000 +— +Total +$ 6,134,000 +$ 4,506,400 +(1) Represents +the aggregate fees billed for (a) the audit of our annual financial statements, (b) the reviews +of the financial statements included in our Quarterly Reports on Form 10-Q, (c) other statutory +and regulatory filings or engagements and (d) the audit of our internal controls over financial +reporting. +(2) Represents +aggregate fees billed for due diligence procedures performed in connection with acquisitions. +(3) Represents +aggregate fees billed for tax advice, tax compliance and consulting. Includes, among others, +review and advice with respect to transfer pricing. +45 +Audit +Committee’s Pre-Approval Policies and Procedures +Consistent +with SEC policies regarding auditor independence, the Audit Committee has responsibility for appointing, setting compensation and overseeing +the work of our independent registered public accountants. In recognition of this responsibility, the Audit Committee has established +a policy to review and pre-approve all audit and permissible non-audit services provided by the independent registered public accountants. +These services may include audit services, audit-related services, tax services and other services. +Prior +to engagement of the independent auditor for next year’s audit, the Audit Committee will pre-approve all auditing services and +all permitted non-audit services (including the fees and terms thereof), except those excluded from requiring pre-approval based upon +the de minimus exception set forth in Section 10A(i)(1)(B) of the Exchange Act and Rule 2-01(c)(7)(i)(C) of Regulation S-X. +The +Audit Committee’s pre-approval policies and procedures are as follows: (a) prior to each fiscal year, the Audit Committee pre-approves +a schedule of estimated fees for proposed non-prohibited audit and non-audit services; and +(b) +actual amounts paid are monitored by our financial management and reported to the Audit Committee. +All +work performed by EY as described above under the captions Audit Fees, Audit-Related Fees, Tax Fees and All Other Fees has been approved +or pre-approved by the Audit Committee pursuant to the provisions of the Audit Committee’s charter. The Audit Committee did not +approve any of the Audit Fees, Audit-Related Fees, Tax Fees or All Other Fees described above pursuant to a de minimis exception set +forth in Rule 2-01(c)(7)(i)(C) of Regulation S-X. The Audit Committee has considered and concluded that the provision of non-audit services +is compatible with maintaining the independence of EY. +AUDIT +COMMITTEE REPORT +The +Audit Committee reviewed the Company’s audited financial statements for the 2025 Fiscal Year and met with both management and representatives +of EY, our independent registered public accountants for that year, to discuss such audited financial statements. Management and our +independent registered public accountants have represented to the Audit Committee that the financial statements were prepared in accordance +with accounting principles generally accepted in the United States of America. The Audit Committee has received from and discussed with +EY the written disclosures and the letter regarding EY’s communications with the Audit Committee concerning independence as required +by applicable requirements of the Public Company Accounting Oversight Board and discussed with EY the independence of EY. The Audit Committee +also discussed with EY any matters required to be discussed by applicable requirements of the Public Company Accounting Oversight Board +and the SEC. Based on these reviews and discussions, the Audit Committee recommended to the Board that the Company’s audited financial +statements be included in the Company’s Annual Report on Form 10-K for the 2025 Fiscal Year. +Submitted +by the Audit Committee of the Board of Directors: +Al +Ferrara (Chairman) +Mitchell +S. Klipper +Rose +Peabody Lynch +46 +PROPOSAL +THREE: +NON-BINDING +ADVISORY VOTE ON EXECUTIVE COMPENSATION +Section +14A of the Exchange Act, as created by Section 951 of the Dodd-Frank Act, and the rules and regulations promulgated thereunder, require +a publicly traded company to include a resolution in its proxy statement at least once every three years seeking stockholder approval, +on an advisory or non-binding basis, of the compensation of the named executive officers as disclosed in such company’s proxy statement +pursuant to the compensation rules of the SEC. At our 2023 Annual Meeting of Stockholders, our stockholders approved, on an advisory +basis, the holding of an advisory vote to approve executive compensation (commonly known as a “say-on-pay” proposal) annually. +Based on these results, the Board of Directors determined to hold its advisory vote to approve executive compensation annually until +the next frequency vote, which is scheduled to occur at our 2029 Annual Meeting. Accordingly, we are providing stockholders with a non-binding +advisory vote on the compensation of our Named Executive Officers. +As +described in more detail in the Compensation Discussion and Analysis section, which begins on page 21 of this Proxy Statement, the overall +objective of our executive compensation program and plans is to support delivery of sustained operating and financial performance results +with the ultimate goal being to create and maximize value for our stockholders on a long-term basis. We believe that our executive compensation +program and plans serve the interests of our stockholders by enabling the Company to attract and retain an experienced and effective +management team whose combined knowledge of our business and the fashion footwear and accessories industries has proved extremely valuable +in delivering results for our stockholders. The Compensation Committee and the Board of Directors believe that our compensation program +and plans, as articulated in the Compensation Discussion and Analysis section of this Proxy Statement, effectively implement our philosophy +of aligning compensation to stockholder interests and that the compensation received by our Named Executive Officers in the 2025 Fiscal +Year reflects and supports such philosophy and goal and is commensurate with our performance and strategic position. We will continue +to review and modify our executive compensation program to address evolving best practices and changing regulatory requirements. +We +encourage stockholders to read the Compensation Discussion and Analysis section of this Proxy Statement, as well as the Summary Compensation +Table for the Fiscal Year 2025 and other related compensation tables and narrative disclosure contained in this Proxy Statement, all +of which describe and explain in detail the compensation of our Named Executive Officers in the 2025 Fiscal Year. +The +following resolution is submitted for stockholder approval: +RESOLVED , +that the stockholders of Steven Madden, Ltd. (the “Company”) approve, on a non-binding advisory basis, the compensation paid +to the Named Executive Officers of the Company as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange +Commission, including the executive compensation as described in the section captioned “Compensation Discussion and Analysis,” +the Summary Compensation Table for the Fiscal Year 2025 and related tabular disclosure and narrative discussion regarding compensation +of Named Executive Officers under the caption “Executive Compensation” contained in the Company’s Proxy Statement for +the 2026 Annual Meeting of Stockholders. +This +vote is not intended to address any specific item of compensation, but rather the overall compensation of our Named Executive Officers +and the compensation program and plans described in this Proxy Statement. While this advisory vote on executive compensation, commonly +referred to as a “say-on-pay” advisory vote, is required by Section 14A of the Exchange Act, it is not binding on our Board +of Directors and may not be construed as overruling any decision by the Board of Directors or the Compensation Committee. However, we +value the opinions of our stockholders. To the extent there is a significant vote against the compensation of the Named Executive Officers, +as disclosed in this Proxy Statement, the Board of Directors and the Compensation Committee will consider the outcome of the vote when +considering future compensation arrangements and evaluate whether any actions are necessary to address the stockholders’ concerns. +Required +Vote +Approval +of this resolution requires the affirmative vote of a majority of the votes cast by the shares of Common Stock present or represented +by proxy and entitled to vote at the Annual Meeting. +Recommendation +of the Board of Directors +The +Board of Directors unanimously recommends a vote “FOR” the resolution approving the overall compensation of the Named Executive +Officers for the 2025 Fiscal Year. +47 +ANNEX +A – RECONCILIATION OF ADJUSTED RESULTS (NON-GAAP) +The +Proxy Statement provides our financial results both in accordance with generally accepted accounting principles in the United States +(“GAAP”) and using certain non-GAAP financial measures. In particular, the Proxy Statement provides our historic net income +and income per diluted share adjusted to exclude certain charges and recoveries, which are non-GAAP financial measures. We use non-GAAP +financial information to evaluate our operating performance and to represent the manner in which we conduct and view our business. Additionally, +we believe the information assists investors in comparing our performance across reporting periods on a consistent basis by excluding +items that are not indicative of its core business. The non-GAAP financial information is provided in addition to, and not as an alternative +to, our reported results prepared in accordance with GAAP. +The +following table provides a reconciliation of Net Income and Diluted Income Per Share (GAAP Basis) to Adjusted Net Income and Adjusted +Diluted Income Per Share (Non-GAAP Basis): +Year +Ended December 31, +(in +thousands) +2025 +2024 +GAAP +net income attributable to Steven Madden, Ltd. +$ 44,661 +$ 169,390 +After +tax impact of expense in connection with acquisition-related compensation paid to management sellers and certain employees of Kurt +Geiger, as determined by the institutional shareholders as part of the sellers’ negotiated transaction waterfall +38,819 +— +After-tax +impact of expense in connection with the purchase accounting fair value adjustment of inventory acquired in connection with acquisitions +23,233 +332 +After-tax +impact of expense in connection with acquisitions, formation of joint ventures and reorganization of foreign entities +11,441 +5,180 +After-tax +impact of expense in connection with legal settlements and related fees +5,591 +2,575 +After-tax +impact of expense in connection with impairment of certain trademarks +4,785 +7,900 +After-tax +impact of expense in connection with certain severances, termination benefits and a corporate office relocation +3,062 +1,334 +After-tax +impact of expense in connection with the write-off of unamortized debt issuance costs associated with the replacement of the Company’s +previous revolving credit facility +641 +— +After-tax +impact of expense in connection with a divestiture of a business +— +3,749 +After-tax +impact of (benefit)/expense in connection with the change in valuation of contingent consideration liability +(4,232 ) +2,085 +After-tax +impact of benefit in connection with the settlement of a foreign exchange hedging contract entered into as part of the Company’s +acquisition of Kurt Geiger +(7,058 ) +— +Less: +Adjustments attributable to noncontrolling interest in connection with a +trademark impairment +— +(155 ) +Adjusted +net income attributable to Steven Madden, Ltd. +$ 120,943 +$ 192,390 +GAAP diluted income +per share +$ 0.63 +$ 2.35 +Adjusted diluted +income per share +$ 1.70 +$ 2.67 +A- 1 +The +following table provides a reconciliation of Earnings Before Interest and Taxes (GAAP Basis) to Adjusted Earnings Before Interest and +Taxes (Non-GAAP Basis): +Year +Ended December 31, +(in +thousands) +2025 +2024 +GAAP +earnings before interest and taxes +$ 80,771 +$ 224,939 +Pre-tax +impact of expense in connection with acquisition-related compensation paid to management sellers and certain employees of Kurt Geiger, +as determined by the institutional shareholders as part of the sellers’ negotiated transaction waterfall +38,819 +— +Pre-tax +impact of expense in connection with the purchase accounting fair value adjustment of inventory acquired in connection with acquisitions +30,891 +435 +Pre-tax +impact of expense in connection with acquisitions, formation of joint ventures and reorganization of foreign entities +13,317 +6,703 +Pre-tax +impact of expense in connection with legal settlements and related fees +7,344 +3,377 +Pre-tax +impact of expense in connection with impairment of certain trademarks +6,300 +10,335 +Pre-tax +impact of expense in connection with certain severances, termination benefits and a corporate office relocation +4,030 +1,758 +Pre-tax +impact of expense in connection with a divestiture of a business +— +3,199 +Pre-tax +impact of (benefit)/expense in connection with the change in valuation of contingent consideration liability +(5,580 ) +2,722 +Adjusted +earnings before interest and taxes +$ 175,892 +$ 253,468 +A- 2 \ No newline at end of file diff --git a/raw/proxies/0000913241/0001493152-26-015299/proxy_rpt.txt b/raw/proxies/0000913241/0001493152-26-015299/proxy_rpt.txt new file mode 100644 index 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+0000913241 +4 +2024-01-01 +2024-12-31 +0000913241 +5 +2024-01-01 +2024-12-31 +iso4217:USD +xbrli:shares +iso4217:USD +xbrli:shares +xbrli:pure +UNITED +STATES +SECURITIES +AND EXCHANGE COMMISSION +WASHINGTON, +D.C. 20549 +SCHEDULE +14A +(RULE +14A-101) +INFORMATION +REQUIRED IN PROXY STATEMENT +SCHEDULE +14A INFORMATION +PROXY +STATEMENT PURSUANT TO SECTION 14(A) OF THE +SECURITIES +EXCHANGE ACT OF 1934 (AMENDMENT NO. __) +Filed +by the Registrant ☒ +Filed +by a Party other than the Registrant ☐ +Check +the appropriate box: +☐ +Preliminary Proxy Statement +☐ +Confidential, for Use of the Commission Only (as permitted +by Rule 14a-6(e)(2)) +☒ +Definitive Proxy Statement +☐ +Definitive Additional Materials +☐ +Soliciting Material under §240.14a-12 +Steven +Madden, Ltd. +(Name +of Registrant as Specified in Its Charter) +(Name +of Person(s) Filing Proxy Statement, if other than the Registrant) +Payment +of Filing Fee (Check all boxes that apply): +☒ +No fee required. +☐ +Fee paid previously with preliminary materials. +☐ +Fee computed on table in exhibit required by Item 25(b) +per Exchange Act Rules 14a-6(i)(1) and 0-11. +STEVEN MADDEN, LTD. +52-16 Barnett Avenue +Long Island City, New York 11104 +April 7, 2025 +DEAR SHAREHOLDERS, +2024 was a strong year for Steve Madden. +Revenue grew 15% and adjusted diluted EPS increased 9% compared to 2023, demonstrating the power of our brands, the strength of our business +model and our team’s disciplined execution of our strategy. +DEEPENING OUR CONNECTION WITH CONSUMERS +At Steve Madden, our top priority is always +to win with product. In 2024, our teams leveraged our proven model – which combines talented design teams, a test-and-react strategy +and an industry-leading speed-to-market capability – to create trend-right assortments across our various brands and product categories +that resonated with consumers. +We supported these assortments with increased +investment in our full-funnel marketing strategy, highlighted by our Fall global campaign for the Steve Madden brand: “Never +Miss a Beat,” a love letter to our hometown of New York City featuring the iconic Deee-Lite song “Groove is in the Heart.” +Together, this powerful combination of compelling product and impactful marketing enabled us to deepen our connection with consumers and +drive results across our four key business drivers. +GROWING OUR INTERNATIONAL BUSINESS +Our first key driver is expanding in international +markets. In 2024, international revenue grew 12% year-over-year. EMEA was a standout, with 18% growth – including a solid gain in +Europe despite a challenging macroeconomic backdrop, strong expansion in the Middle East and exceptional growth in South Africa. In the +Americas (excluding the U.S.), revenue grew 9%, including mid-single-digit gains in Canada and Mexico, as well as a contribution from +our new joint venture in Latin America, which is off to a strong start. +We continued to transition from distributor to ownership models +in key markets, forming majority-owned joint ventures in: +● Latin America (Q2 2024) +● Southeastern Europe, including Serbia and Croatia (Q2 2024) +● Singapore (Q4 2024) +● Malaysia (January 2025) +● Australia (January 2025) +These transitions position us for greater long-term value creation +in high-potential international markets. +EXPANDING OUTSIDE OF FOOTWEAR +Our second key driver is growing our non-footwear product categories +of accessories and apparel. In 2024, accessories and apparel revenue increased 53% year-over-year, or 25% excluding Almost Famous, which +we acquired in October 2023. +Highlights included: +● Steve Madden handbags: Revenue surpassed $300 million for the first time, growing 31% vs. 2023. +● Steve Madden apparel: Revenue increased 23%. +● Almost Famous: Contributed $179 million in revenue in its first full year under our ownership. +DRIVING DIRECT-TO-CONSUMER, LED BY DIGITAL +Our third key driver is expanding our direct-to-consumer business, +led by digital. In 2024, direct-to-consumer revenue reached +$550 million, up 9% year-over-year (or 5% on a comparable basis). +● Steve Madden DTC: +6% +● Dolce Vita DTC: +36% +We remain focused on enhancing digital +capabilities and elevating the consumer experience across our owned channels. +STRENGTHENING OUR CORE U.S. WHOLESALE FOOTWEAR BUSINESS +Our fourth key driver is strengthening +our U.S. wholesale footwear business. While key retail partners remained cautious in their order patterns due to a continued focus on +inventory management, we were pleased to return to growth in 2024, with revenue up 2% year-over-year. +RETURNING CAPITAL TO SHAREHOLDERS +In addition to delivering strong top- and +bottom-line growth, we demonstrated our ongoing commitment to returning capital to shareholders with nearly $160 million in combined share +repurchases and dividends in 2024. Since 2013, we’ve returned approximately $1.7 billion to shareholders. +ADDING A POWERFUL NEW GROWTH ENGINE +On February 13, 2025, we announced a definitive +agreement to acquire Kurt Geiger. The Kurt Geiger London brand has delivered exceptional growth in recent years, as its unique +brand image, distinctive design aesthetic and compelling value proposition have driven success across multiple categories, led by handbags. +The brand’s +differentiated and elevated positioning – and its alignment with our strategic initiatives of expanding in international markets, +accessories categories and direct-to-consumer channels – make it a highly attractive and complementary addition to our portfolio. +We expect the transaction to close in Q2 2025. +LOOKING AHEAD +In summary, we delivered strong revenue +and earnings growth in 2024, along with meaningful progress on our strategic initiatives. While 2025 presents headwinds – most notably, +the impact of new tariffs on U.S. imports – we have a proven ability to navigate difficult market conditions and remain confident +that the combination of our strong brands and proven business model – supplemented by a significant new growth driver in Kurt Geiger +– will enable us to drive sustainable growth over the long term. +Thank you to our employees for their dedication, +to our customers for their loyalty, and to you – our shareholders – for your continued support. +Sincerely, +Edward Rosenfeld +Chairman and Chief Executive Officer +STEVEN MADDEN, LTD. +52-16 Barnett Avenue +Long Island City, New York 11104 +NOTICE OF ANNUAL MEETING OF STOCKHOLDERS +TO BE HELD ON MAY 21, 2025 +TO THE STOCKHOLDERS: +The Annual Meeting +of Stockholders (the “Annual Meeting”) of Steven Madden, Ltd. (the “Company”) will be held on Wednesday, May 21, +2025, at 10:00 a.m. Eastern Time in a virtual-only format, for the purposes stated below: +1. to elect eleven (11) directors to the Board of Directors of +the Company; +2. to ratify the appointment of Ernst & Young LLP as the Company’s +independent registered public accounting firm for the fiscal year ending December 31, 2025; +3. to approve, on a non-binding advisory basis, the compensation +of the Company’s named executive officers as disclosed in the accompanying proxy statement; and +4. to transact such other business as may properly come before +the Annual Meeting or any adjournments thereof. +Only stockholders of +record at the close of business on March 28, 2025, the record date for the Annual Meeting, are entitled to notice of and to vote at the +Annual Meeting and any adjournments thereof. Stockholders who own shares of the Company’s common stock beneficially through a bank, +broker or other nominee will also be entitled to attend the Annual Meeting. To participate in the Annual Meeting at www.virtualshareholdermeeting.com/SHOO2025 , +you must enter the 16-digit control number found on your proxy card or your Notice of Availability of Proxy Materials. Whether or not +you plan to attend the Annual Meeting, we urge you to vote in advance of the Annual Meeting by one of the methods described below. If +you have voted over the Internet, by phone or by mail before the Annual Meeting, you do not need to vote again. Guests may listen to +the Annual Meeting, but are not entitled to participate. +IMPORTANT NOTICE REGARDING +THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 21, 2025: THE NOTICE OF ANNUAL MEETING AND +PROXY STATEMENT, ANNUAL REPORT, ELECTRONIC PROXY CARD AND ANY OTHER MATERIALS CONCERNING THE ANNUAL MEETING, TOGETHER WITH ANY AMENDMENTS +TO ANY OF THESE MATERIALS, ARE AVAILABLE ON THE INTERNET AT HTTP://WWW.PROXYVOTE.COM . +April 7, 2025 +BY ORDER OF THE BOARD OF DIRECTORS +Long Island City, New York +Lisa Keith +Secretary +WHETHER OR NOT YOU EXPECT TO BE PRESENT +AT THE ANNUAL MEETING, PLEASE MARK, DATE AND SIGN THE ACCOMPANYING FORM OF PROXY AND MAIL IT PROMPTLY IN THE ENVELOPE PROVIDED TO: VOTE +PROCESSING, C/O BROADRIDGE, 51 MERCEDES WAY, EDGEWOOD, NEW YORK 11717. ALTERNATIVELY, YOU MAY VOTE YOUR SHARES BY TELEPHONE OR OVER THE +INTERNET AS DESCRIBED ON THE ACCOMPANYING PROXY CARD. +TABLE OF CONTENTS +GENERAL INFORMATION +1 +Notice of Internet Availability of Proxy Materials +1 +QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING +2 +PROPOSAL ONE: ELECTION OF DIRECTORS +7 +Stockholder Nominations for Board Membership +7 +Directors and Nominees for Election to the Board of Directors +7 +Additional Information About the Directors +9 +Required Vote +11 +Director Election (Majority Voting) Policy +11 +Recommendation of the Board of Directors +12 +CORPORATE GOVERNANCE +12 +The Board of Directors +12 +Director Independence +12 +Involvement in Certain Legal Proceedings +12 +Director Attendance at Meetings +12 +Director Election (Majority Voting) Policy +13 +Committees of the Board +13 +Board Leadership Structure, Risk Oversight, Executive Sessions of Non-Employee Directors, and Communications Between Stockholders and the Board +17 +Codes of Business Conduct and Ethics +18 +Corporate Governance Principles +19 +Stock Ownership Guidelines +19 +Insider Trading Policy +19 +Prohibition on Hedging and Pledging of Our Common Stock +19 +Corporate Social Responsibility Policy +19 +Clawback Policy +20 +Certain Relationships and Related Party Transactions +20 +Review, Approval or Ratification of Transactions with Related Persons +21 +COMPENSATION OF DIRECTORS IN THE 2024 FISCAL YEAR +21 +STOCK OWNERSHIP +22 +Security Ownership of Certain Beneficial Owners +22 +Security Ownership of Directors and Executive Officers +23 +Delinquent Section 16(a) Reports +24 +EXECUTIVE COMPENSATION +24 +Compensation Discussion and Analysis +24 +Executive Officers +33 +Summary Compensation Table for the Fiscal Year 2024 +34 +Employment Arrangements +35 +Grants of Plan-Based Awards in the 2024 Fiscal Year +39 +Plan-Based Awards +39 +Outstanding Equity Awards at End of the 2024 Fiscal Year +40 +Option Exercises and Stock Vested in the 2024 Fiscal Year +41 +Securities Authorized for Issuance Under Equity Compensation Plans +41 +Termination, Change-in-Control and Non-Competition/Non-Solicitation +41 +Potential Payments Upon Termination or Change-In-Control +42 +i +Compensation Committee Report +43 +Pay Versus Performance +43 +PROPOSAL TWO: RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR ENDING DECEMBER 31, 2025 +48 +Required Vote +48 +Recommendation of the Board of Directors +48 +Independent Registered Public Accounting Firm’s Fees and Services +48 +Audit Committee’s Pre-Approval Policies and Procedures +49 +AUDIT COMMITTEE REPORT +49 +PROPOSAL THREE: NON-BINDING ADVISORY VOTE ON EXECUTIVE COMPENSATION +50 +Required Vote +50 +Recommendation of the Board of Directors +50 +ANNEX A – RECONCILIATION OF ADJUSTED RESULTS (NON-GAAP) +A-1 +ii +SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS +Certain statements +in this document regarding anticipated financial, business, legal or other outcomes, including business and market conditions, outlook +and other similar statements relating to the Company’s future events, developments, or financial or operational performance or results, +are “forward-looking statements” made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act +of 1995 and other federal securities laws. These forward-looking statements are identified by the use of words such as “may,” +“will,” “should,” “expect,” “estimate,” “believe,” “intend,” “forecast,” +“anticipate,” “project,” “predict,” “plan,” “intend,” or “estimate,” +“guidance,” and other similar expressions, or the negative of these expressions. However, the absence of these or similar +words or expressions does not mean a statement is not forward-looking. Forward-looking statements are neither historical facts nor assurances +of future performance. Instead, they represent our current beliefs, expectations, and assumptions regarding anticipated events and trends +affecting our business, and industry based on information available as of the time such statements are made. We caution investors that +such forward-looking statements are inherently subject to risks and uncertainties, many of which cannot be predicted with accuracy, and +some of which may be outside of our control. Our actual results and financial condition may differ materially from those indicated in +these forward-looking statements. As such, investors should not rely upon them. Forward-looking statements are only as of the date they +are made, and the Company undertakes no duty to update its forward-looking statements except as required by law. +Our operations are +subject to a number of risks and uncertainties including, but not limited to, those risk factors described in our SEC filings. Refer to +“Risk Factors” under Item 1A. of the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 for a +discussion of additional risk factors and a more complete discussion of some of the cautionary statements noted above. If any of the events +described in the risk factors actually occur, our business, financial condition or operating results, as well as the market price of our +securities, could be materially adversely affected. +iii +STEVEN MADDEN, LTD. +52-16 Barnett Avenue +Long Island City, New York 11104 +PROXY STATEMENT +GENERAL INFORMATION +The Board of Directors +of Steven Madden, Ltd. requests your proxy in connection with the Annual Meeting of Stockholders (the “Annual Meeting”) of +Steven Madden, Ltd. (the “Company,” “we,” or “our”). The Annual Meeting will be held on Wednesday, +May 21, 2025, at 10:00 a.m. Eastern Time in a virtual-only format. Proxies also may be voted at any adjournments or postponements of the +Annual Meeting. You will not be able to attend the Annual Meeting physically in person. +On or about April 7, +2025, a notice containing instructions on how to access this Proxy Statement, the accompanying proxy card and related materials online +is being mailed to holders of record of our common stock, $0.0001 par value (the “Common Stock”), at the close of business +on March 28, 2025 (the “Record Date”). Our Annual Report for the fiscal year ended December 31, 2024 (the “2024 Fiscal +Year”), including audited financial statements, is included in the materials that are accessible online. This Proxy Statement contains +information about the Annual Meeting as well as information regarding the voting process, director elections, our corporate governance +programs, and executive and director compensation, among other things. We recommend that you read all of these materials. +The Annual Meeting has been called to consider and take action +on the following proposals: +1. to elect eleven (11) directors to our Board of Directors to +serve until the next annual meeting of our stockholders and until his, her, or their successor is elected and qualified; +2. to ratify the appointment of Ernst & Young LLP as our independent +registered public accounting firm for the fiscal year ending December 31, 2025; +3. to approve, on a non-binding advisory basis, the compensation +of the Company’s named executive officers as disclosed in this Proxy Statement; and +4. to transact such other business as may properly come before +the Annual Meeting and any adjournments thereof. +The Board of Directors +knows of no other matters to be presented for action at the Annual Meeting. However, if any other matters properly come before the Annual +Meeting, the persons named in the proxy will vote on such other matters or for other nominees for director in accordance with their best +judgment. Our Board of Directors recommends that the stockholders vote “FOR” each of the eleven (11) director nominees in +Proposal One, and “FOR” Proposals Two and Three. Only holders of record of our Common Stock at the close of business on the +Record Date will be entitled to vote at the Annual Meeting. +We are incorporated +in the State of Delaware. Our principal executive offices are located at 52-16 Barnett Avenue, Long Island City, New York 11104, and our +telephone number is (718) 446-1800. +Notice of Internet Availability of +Proxy Materials +Your vote is very +important. We continue to take advantage of the Securities and Exchange Commission (the “SEC”) “e-proxy” rules +allowing the Company to furnish proxy materials through the Internet for the benefit and convenience of our stockholders. By using the +e-proxy rules, we can expedite the receipt by stockholders of proxy materials while lowering the costs and reducing the environmental +impact associated with our Annual Meeting. On or about April 7, 2025, we will furnish a Notice of Internet Availability of Proxy Materials +(the “Availability Notice”) to most of our stockholders containing instructions on how to access the proxy materials and to +vote online. In addition, instructions on how to request a printed copy of these materials will be found on the Availability Notice. If +you received an Availability Notice by mail, you will not receive a paper copy of the proxy materials unless you request such materials +by following the instructions contained in the Availability Notice. +1 +Whether or not you +plan to attend the Annual Meeting virtually, please vote at your earliest convenience by following the instructions in the Availability +Notice, the proxy card or voting instruction form you received in the mail. You may revoke your proxy at any time before it is voted. +For more information on voting your Common Stock, please refer to the following “Questions and Answers” section. +QUESTIONS AND ANSWERS ABOUT THE ANNUAL +MEETING AND VOTING +1. What is included in the proxy materials? What is a proxy +statement and what is a proxy? +The proxy materials +for our Annual Meeting include the Notice of Annual Meeting, this Proxy Statement and our Annual Report on Form 10-K for the year ended +December 31, 2024. If you received a paper copy of these materials, the proxy materials also include a proxy card or voting instruction +form. +A proxy is the delegation +of your right to vote the Common Stock you own to another person, who is called your proxy. When you designate someone as your proxy in +a written document, that document is called a proxy or a proxy card. SEC regulations require that we furnish a proxy statement to you +when we ask you to designate a proxy to vote your shares of Common Stock on your behalf. We have designated our officers Edward R. Rosenfeld +and Lisa Keith as proxies for the Annual Meeting. +2. Who may vote at the Annual Meeting? +Only holders of +record of the 72,576,137 shares of our Common Stock outstanding as of the close of business on the Record Date can vote by virtual presence +online at or prior to the Annual Meeting. Each of these stockholders has one vote for each share of our Common Stock held on that date. +3. What is the difference between holding shares as a stockholder +of record and as a beneficial owner? +If your shares were +registered as of the Record Date directly in your name with our registrar and transfer agent, Equiniti Trust Company, LLC, then you are +a “stockholder of record” with respect to those shares, and in such case, we have provided the Availability Notice directly +to you. Upon your request, we will send this Proxy Statement and the accompanying proxy materials directly to you. If your shares were +held as of the Record Date in a stock brokerage account or by a bank or nominee, then your shares are held in “street name” +and you are considered the “beneficial owner” of those shares. In that case, your broker, bank or other stockholder of record +has provided the Availability Notice to you and, upon your request, will provide this Proxy Statement and the accompanying proxy materials +to you. As the beneficial owner, you have the right to direct your broker, bank or other stockholder of record how to vote your shares +held in “street name.” +4. What is considered a quorum to conduct the Annual Meeting? +The presence, in +person or by proxy, of the holders of a majority of the shares entitled to vote is necessary to constitute a quorum for the purpose of +transacting business at the Annual Meeting. Under Delaware law, abstentions and broker non-votes as described below are counted as present +for purposes of determining the presence or absence of a quorum for the transaction of business. If a quorum is not present, the Annual +Meeting may be adjourned until a quorum is obtained. +5. What is a “broker non-vote”? +If your shares are held +in “street name” by a broker, bank or other nominee, your broker, bank or other nominee is the record holder; however, the +broker, bank or other nominee is required to vote the shares in accordance with your instructions. If you do not give instructions to +your broker, bank or other nominee, it may, if permitted by the organizations of which it is a member, exercise discretionary voting power +to vote your shares. A “broker non- vote” occurs when a broker, bank or other nominee of record holding shares for a beneficial +owner has not received voting instructions from the beneficial owner and either chooses not to vote the shares on a particular proposal +as to which the holder has discretionary voting power or does not vote on a particular proposal because that holder does not have discretionary +voting power for that particular item. Broker non-votes are considered present in determining whether a quorum is present. +If you hold your +shares in “street name,” we strongly encourage you to provide instructions regarding the voting of your shares, because your +broker, bank or other nominee cannot vote your shares with respect to certain of the proposals being presented at the Annual Meeting without +voting instructions from you. +2 +6. How many votes do I have? What shares are included on the +proxy card? +For each share of +Common Stock that you own on the Record Date, you are entitled to one vote on each matter presented at the Annual Meeting. +If you are a record +holder, you will receive an Availability Notice or proxy card for all of the shares of Common Stock you hold in certificate form, in book-entry +form and in any Company benefit plan. If you are a beneficial owner, you will receive information containing voting instructions from +the broker, bank or other nominee through which you own your shares of Common Stock. +7. How many votes are required to approve each proposal and +what is the effect of abstentions and broker non-votes? +Proposal One (Election +of Directors): Directors are elected by the affirmative vote of a plurality of the shares of Common Stock present in person or represented +by proxy at the Annual Meeting and entitled to vote on this proposal. This means that the director nominees who receive the greatest number +of affirmative votes cast are elected as directors, subject to our Director Election (Majority Voting) Policy discussed in Proposal One +below. +Proposal Two (Ratification +of Appointment of Ernst & Young LLP): The affirmative vote of a majority of the votes cast by the shares of Common Stock present +in person or represented by proxy at the Annual Meeting and entitled to vote on this proposal is required to approve the ratification +of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, +2025. +Proposal Three +(Non-Binding Advisory Vote on Executive Compensation): The affirmative vote of a majority of the votes cast by the shares of Common +Stock present in person or represented by proxy at the Annual Meeting and entitled to vote on this proposal is required to approve, on +a non-binding advisory basis, the compensation of our Named Executive Officers as described in this Proxy Statement. +Other Matters: +If any other matters are presented at the Annual Meeting, they must receive the affirmative vote of a majority of the votes cast by +the shares of Common Stock present in person or represented by proxy at the Annual Meeting and entitled to vote on the matter to be approved. +Abstentions and broker +non-votes will have no effect on the outcome of each proposal but will be treated as present and entitled to vote with respect to each +proposal and used for purposes of calculating whether a quorum is present at the Annual Meeting. +Proposal One (Election +of Directors) will be decided by a plurality of the votes of the shares represented in person or by proxy and entitled to vote. The approval +of each of Proposal Two (Ratification of Ernst & Young LLP) and Proposal Three (Non-Binding Advisory Vote on Executive Compensation) +requires a favorable vote of a majority of the votes cast by the shares present in person or by proxy and entitled to vote on the applicable +matter. As noted above, abstentions and broker-non votes will have no effect on the outcome of each proposal. +If you do not provide +your broker, bank or other nominee with instructions on how to vote your shares held in “street name,” your broker, bank or +other nominee will not be permitted to vote your shares on non-routine matters, and your shares will not affect the outcome of proposals +concerning non-routine matters. Proposal Two is considered a routine matter under applicable rules. Proposals One and Three are considered +“non-routine” matters, which means that your broker or other nominee does not have discretion to vote your shares with respect +to those proposals without voting instructions from you. If you hold your shares in “street name,” we strongly encourage you +to provide instructions regarding the voting of your shares to your broker, bank or other nominee. +8. How can I attend and participate in the Annual Meeting? +Our virtual Annual +Meeting will be conducted on the Internet via live audio webcast. You will be able to participate online and submit your questions during +the Annual Meeting by visiting www.virtualshareholdermeeting.com/SHOO2025, beginning at 10:00 a.m. Eastern Time on May 21, 2025. +Stockholders will be able to vote their shares electronically during the Annual Meeting. +3 +To participate in the +Annual Meeting, you will need the 16-digit control number included on your proxy card or your Availability Notice. The Annual Meeting +will begin promptly at 10:00 a.m. Eastern Time. We encourage you to access the Annual Meeting prior to the start time. Online access +will begin at 9:45 a.m. Eastern Time. Guests may listen to a live audio webcast of the virtual Annual Meeting by visiting www.virtualshareholdermeeting.com/SHOO2025, +beginning at 9:45 a.m. Eastern Time, but are not entitled to participate. +The virtual Annual +Meeting platform is fully supported across browsers (Internet Explorer, Firefox, Chrome, and Safari) and devices (desktops, laptops, tablets, +and cell phones) running the most updated version of applicable software and plugins. Participants should ensure they have a strong Internet +connection wherever they intend to participate in the Annual Meeting. Participants should also allow plenty of time to log in and ensure +that they can hear streaming audio prior to the start of the Annual Meeting. +9. Where can I find a list of stockholders entitled to vote +at the Annual Meeting? +For the ten days +prior to the Annual Meeting, a list of stockholders entitled to vote at the Annual Meeting will be available for examination by any stockholder +of record for any purpose germane to the Annual Meeting at the Company’s principal executive offices upon appointment. Please contact +the Company’s Secretary at Steven Madden, Ltd., 52-16 Barnett Avenue, Long Island City, New York 11104 to set up an appointment. +10. How can I vote my shares? +If the records of +our transfer agent show that you own shares in your name at the close of business on March 28, 2025, then you may vote at the Annual Meeting. +To attend the Annual Meeting and vote your shares electronically, you will need the 16-digit control number included on your Availability +Notice, on your proxy card, or on the instructions that accompanied your proxy materials. +Even if you plan +to attend the Annual Meeting, we urge you to authorize your proxy in advance. You may vote your shares in advance of the Annual Meeting +by authorizing a proxy over the Internet or by telephone. In addition, if you received a paper copy of the proxy materials by mail, you +can submit a proxy by mail by following the instructions on the proxy card. Voting your shares by authorizing a proxy over the Internet, +by telephone or by written proxy card will ensure your representation at the Annual Meeting regardless of whether you attend the Annual +Meeting. +If you are the record +holder of your shares, please authorize your proxy electronically by going to the http://www.proxyvote.com website or by calling +the toll-free number listed below and on the proxy card. Please have your Proxy Statement or proxy card in hand when going online or +calling. If you authorize your proxy via the Internet or by phone, you do not need to return your proxy card. If you choose to authorize +your proxy by mail, simply mark your proxy card and then date, sign and return it in the postage-paid envelope provided. +VOTE OVER THE INTERNET http://www.proxyvote.com +VOTE BY PHONE 1-800-690-6903 +VOTE BY MAIL Vote Processing, c/o Broadridge 51 Mercedes Way Edgewood, New York 11717 +Use the Internet to transmit your voting instructions and for electronic delivery of information. +Use any touch-tone telephone to transmit your voting instructions. +If you receive paper proxy materials, mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to the address shown above. +If you hold your shares +beneficially in “street name” through a broker or nominee, you may be able to authorize your proxy by telephone or the Internet +as well as by mail, but you will need to obtain and follow instructions from your broker or nominee to vote these shares. +11. May I revoke my proxy for the Annual Meeting once I have +given it? +You may revoke your proxy at any time before it is voted at the +Annual Meeting by: +● properly executing and delivering a later-dated proxy (including +a telephone or Internet proxy authorization); +● voting your shares electronically at the Annual Meeting; or +● sending a written notice of revocation to the Secretary of the +Company at Steven Madden, Ltd., 52-16 Barnett Avenue, Long Island City, New York 11104. +4 +12. How does the Board of Directors recommend that I vote my +shares? +Our Board of Directors recommends that you vote: +● “FOR” the election of each of the eleven (11) director +nominees; +● “FOR” the ratification of the appointment of Ernst +& Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2025; and +● “FOR” the approval, on a non-binding advisory basis, +of the executive compensation of our Named Executive Officers, as disclosed in this Proxy Statement. +ALL PROXIES RECEIVED +WILL BE VOTED IN ACCORDANCE WITH THE CHOICES SPECIFIED ON SUCH PROXIES. PROXIES WILL BE VOTED FOR EACH NOMINEE IN PROPOSAL ONE AND IN +FAVOR OF PROPOSALS TWO AND THREE IF NO CONTRARY SPECIFICATION IS MADE. ALL VALID PROXIES OBTAINED WILL BE VOTED AT THE DISCRETION OF THE +PERSONS NAMED IN THE PROXY WITH RESPECT TO ANY OTHER BUSINESS THAT MAY PROPERLY COME BEFORE THE ANNUAL MEETING OR ANY ADJOURNMENTS OR +POSTPONEMENTS THEREOF. AS NOTED ABOVE, IF YOU HOLD YOUR SHARES BENEFICIALLY THROUGH A BROKER, BANK OR OTHER NOMINEE AND FAIL TO PROVIDE +SPECIFIC VOTING INSTRUCTIONS TO THAT BROKER, BANK OR OTHER NOMINEE, YOUR SHARES WILL NOT BE VOTED IN THE ELECTION OF DIRECTORS OR THE +ADVISORY VOTE ON EXECUTIVE COMPENSATION UNLESS YOU ARE PRESENT AND VOTE AT THE MEETING. +13. Who will bear the expenses of this solicitation and how are +proxies being solicited? +We will pay the costs +of soliciting proxies, including preparing, printing and mailing this Proxy Statement, any exhibits hereto and the proxies solicited hereby. +In addition to the use of the mails, proxies may be solicited on our behalf by our officers, directors and employees, without additional +remuneration, by personal interviews, by telephone or by electronic transmission. We will also request brokerage firms, nominees, custodians +and fiduciaries to forward proxy materials to the beneficial owners of shares of Common Stock held of record by them and will provide +reimbursements for the cost of forwarding the material in accordance with customary charges. We do not currently intend to retain a professional +solicitor to assist in the solicitation of proxies; however, we may later elect to do so. +14. Will I be able to ask questions at the Annual Meeting? +Edward R. Rosenfeld, +our Chairman and Chief Executive Officer, will be available to answer questions submitted by the stockholders during the Annual Meeting +related to the items of business at the Annual Meeting. Stockholders may submit questions for the Annual Meeting after logging in, beginning +at 10:00 a.m. Eastern Time on May 21, 2025. If you wish to submit a question, you may do so by logging into the virtual meeting platform +at www.virtualshareholdermeeting.com/SHOO2025, typing your question into the “Ask a Question” field, and clicking +“Submit.” Please submit any questions during the meeting. +Additional information +regarding the ability of stockholders to ask questions during the Annual Meeting, related rules of conduct and other materials for the +Annual Meeting will be available at www.virtualshareholdermeeting.com/SHOO2025 . +15. What can I do if I have technical difficulties in accessing +the 2025 Annual Meeting? +Technical support, including +related technical support phone numbers, will be available on the virtual meeting platform at www.virtualshareholdermeeting.com/SHOO2025 +beginning at 9:30 a.m. Eastern Time on May 21, 2025 through the conclusion of the Annual Meeting. +16. How will the voting results be reported? +The preliminary results +of the voting on the proposals will be reported at the Annual Meeting. The final certified results will be reported in a Current Report +on Form 8-K that will be filed with the SEC within four business days following the Annual Meeting. +5 +17. How do I submit a proposal for action at the Company’s +2026 Annual Meeting of Stockholders? +Stockholder proposals +submitted in accordance with Rule 14a-8 under Securities Exchange Act of 1934, as amended (the “Exchange Act”), must be received +at our principal executive offices no later than December 8, 2025 to be considered for inclusion in the proxy materials to be distributed +by the Company in connection with the 2026 Annual Meeting of Stockholders (the “2026 Annual Meeting”). +Alternatively, Article +I, Section 7(f) of our Second Amended and Restated By-Laws (the “By-Laws”), requires that any stockholder proposal that is +not submitted for inclusion in the proxy materials for the 2026 Annual Meeting under Rule 14a-8 under the Exchange Act, but is instead +sought to be presented directly at the 2026 Annual Meeting, must be (i) specified in the notice of such meeting given by or at the direction +of the Board of Directors (or any duly authorized committee thereof), (ii) otherwise properly brought before such meeting by or at the +direction of the Board of Directors (or any duly authorized committee thereof) or (iii) specified in a notice in proper written form given +by a stockholder of record on the date of the giving of the notice and on the record date for such meeting, which notice conforms to the +requirements of Article I, Section 7(f) of the By-Laws and is delivered to, or mailed and received at, our principal executive offices +not less than 120 days nor more than 150 days prior to the first anniversary of the date of our 2025 Annual Meeting. Accordingly, any +written notice given by or on behalf of a stockholder pursuant to the foregoing clause (iii) in connection with the 2026 Annual Meeting +must be received no later than January 21, 2026 and no earlier than December 22, 2025. +Under Article II, Section +5 of the By-Laws, for a stockholder to nominate one or more persons for election to the Board of Directors at the 2026 Annual Meeting, +complete and timely notice must be given in writing and in proper form to our Secretary no later than January 21, 2026 and no earlier +than December 22, 2025. Any notice must contain the specific information required by the By-Laws, including, among other things, information +about any proposed nominee and any agreements, arrangements or understandings the stockholder may have with any proposed nominee or other +parties relating to the nomination or other proposal. Such information must be updated, if necessary, to be true and correct as of the +record date for the 2026 Annual Meeting and as of the date that is 10 business days prior to the date of the 2026 Annual Meeting. This +summary information regarding the By-Laws is qualified in its entirety by reference to the full text of the By-Laws, a copy of which +may be obtained by any stockholder, without charge, upon written request to our Secretary, Steven Madden, Ltd., 52-16 Barnett Avenue, +Long Island City, New York 11104. If a nomination is not timely and properly made in accordance with the procedures set forth in the +By- Laws, or does not contain the specific information required by the By-Laws, such nomination will be defective and will not be brought +before the 2026 Annual Meeting. In addition, to comply with the universal proxy rules, stockholders who intend to solicit proxies in +support of director nominees other than the nominees of our Board of Directors must comply with the additional requirements of Rule 14a-19 +under the Exchange Act, including providing a statement that such stockholder intends to solicit the holders of shares representing at +least 67% of the voting power of our shares entitled to vote on the election of directors in support of director nominees other than +our nominees, as required by Rule 14a-19(b). We intend to file a proxy statement and WHITE proxy card with the SEC in connection with +the solicitation of proxies for the 2026 Annual Meeting. +18. I share an address with another stockholder and we received +only one Notice of Internet Availability of Proxy Materials or one paper copy of the proxy materials, as applicable. How may I obtain +an additional copy? +If two or more stockholders +share an address, we may send a single copy of this Proxy Statement and other soliciting materials, as well as our Annual Report for the +2024 Fiscal Year, to the shared address, unless we have received contrary instructions from one or more of the stockholders sharing the +address. If a single copy has been sent to multiple stockholders at a shared address, we will deliver a separate proxy card for each stockholder +entitled to vote. Additionally, we will send an additional copy of this Proxy Statement, other soliciting materials and our Annual Report +for the 2024 Fiscal Year, promptly upon oral or written request by any stockholder to the Secretary at Steven Madden, Ltd., 52-16 Barnett +Avenue, Long Island City, New York 11104; telephone number (718) 446-1800. If any stockholders sharing an address receive multiple copies +of this Proxy Statement, other soliciting materials and our Annual Report for the 2024 Fiscal Year and would prefer in the future to receive +only one copy, such stockholders may make such request to the Secretary at the same address or telephone number. +6 +PROPOSAL ONE: +ELECTION +OF DIRECTORS +Our By-Laws provide +that the number of directors constituting our whole Board of Directors may be fixed from time to time by action of the directors. The +Board of Directors has fixed the number of directors comprising the Board of Directors at eleven members. Directors are elected to serve +until the next annual meeting of stockholders, and the term of each of the current directors will expire at the Annual Meeting. +Stockholder Nominations for Board Membership +The Nominating/Corporate +Governance Committee of the Board of Directors recommends to the Board director candidates for nomination and election at each annual +meeting of stockholders or for appointment to fill vacancies on the Board. +The Nominating/Corporate +Governance Committee will review and evaluate the qualifications of proposed director candidates recommended to it from various sources, +including candidates proposed by our stockholders in accordance with the procedures established for that purpose. To enable the Nominating/Corporate +Governance Committee to consider a stockholder recommendation in connection with the 2026 Annual Meeting, we must receive the recommendation +on or before December 8, 2025. +Directors and Nominees for Election to the Board of Directors +Upon recommendation +of the Nominating/Corporate Governance Committee of the Board of Directors, the Board of Directors has nominated and is recommending to +the stockholders the election of each of the eleven nominees named below to serve as a director of the Company until the next annual meeting +of our stockholders and until his, her, or their successor is duly elected and qualified or until his, her, or their earlier death, resignation +or removal from office. All of the nominees were elected directors at last year’s Annual Meeting of Stockholders. All nominees have +agreed to be named in this Proxy Statement and to serve on the Board of Directors if elected. +The names and biographical +summaries of the eleven persons who have been recommended by the Nominating/Corporate Governance Committee of the Board of Directors and +nominated by the Board of Directors to stand for election at the Annual Meeting are provided below for your information. +Our Board of Directors +is responsible for overseeing our business in a manner consistent with the Board’s fiduciary duty to our stockholders. This significant +responsibility requires that our directors consist of individuals who are well-qualified for service on our Board and its committees and +demonstrate a commitment to the success of the Company and to serve in the best interests of our stockholders. +The following matrix +identifies the relevant skills, experience and qualifications of our eleven director nominees. The skills and experience identified below +are reviewed by the Nominating/Corporate Governance Committee, in addition to other qualifications, and nominees are selected with a view +to establishing a Board of Directors that consists of individuals who have extensive business leadership experience, are independent, +bring diverse perspectives to the Board, and possess high ethical standards, sound business judgment and acumen, and a willingness to +devote the time necessary for the Board to effectively fulfill its responsibilities. We believe that all of the director nominees possess +these qualifications and provide the Board with a full complement of knowledge, business skills and expertise for the effective management +of the Company. +Rosenfeld +Davis +Ferrara +Klipper +Kumar +Lynch +Migliorini +Reed +Sachdev +Smith +Varela +Knowledge, +Skills and Experience +Public +Company Board +● +● +● +● +Finance/Accounting +● +● +● +● +● +● +Executive +Leadership +● +● +● +● +● +● +● +● +● +● +● +Risk Oversight/ +Management +● +● +● +● +● +Retail +Industry +● +● +● +● +● +● +● +● +● +Independence +● +● +● +● +● +● +● +● +● +7 +Below is a summary of general qualifications, +skills and attributes for each director nominee as of April 7, 2025 that led to the Board’s conclusion that the nominee is qualified +to serve as a director. +Name +Principal +Occupation +Age +Year +Became a +Director +Edward R. Rosenfeld +Chairman of the Board and Chief Executive Officer, Steven Madden, Ltd. +49 +2008 +Peter A. Davis +Retired executive in the footwear and apparel industry and Founder and Managing Director of Pete Davis Basketball,LLC, a grassroots community youth basketball organization +71 +2022 +Al Ferrara +Retired National Director of the Retail and Consumer Products Division of BDO USA, LLP, a major international accounting firm +74 +2019 +Mitchell S. Klipper +Retired Chief Executive Officer of Barnes & +Noble, Inc.’s Retail Group, one of the largest retail booksellers in the United States +67 +2018 +Maria Teresa Kumar +President and CEO of Voto Latino, which she +co-founded in 2004 and built into America’s largest Latinx voter registration and advocacy organization +51 +2021 +Rose Peabody Lynch +Retired owner of Marketing Strategies, LLC, a New York based consulting firm of which she was founder and President, which focused on strategic marketing and operating issues for small to medium-sized companies +75 +2014 +Peter Migliorini +Sales Manager, Greschlers, Inc., a building +supplies company +76 +1996 +Arian Simone Reed +Co-Founder and Chief Executive Officer of Fearless Fund, a venture capital fund that she co-founded in 2018 +44 +2022 +Ravi Sachdev +Partner, Clayton Dubilier & Rice, LLC, a global +alternative investment firm +48 +2008 +Robert Smith +Founder and Chief Executive Officer of Phluid +Project, part retail concept and part experimental platform, with a website that offers products and programs worldwide +59 +2014 +Amelia Newton Varela +President, Steven Madden, Ltd. +53 +2016 +8 +Additional Information About the Directors +Other Public Company Directorships +Three of our directors also currently serve +or recently served as directors of other public companies: +● Mr. Rosenfeld served as a director and chairman of the Audit +& Risk Management Committee of PVH Corp. (NYSE: PVH), one of the world’s largest apparel companies, from March 24, 2013 until +December 11, 2023. +● Ms. Lynch is a director and member of the Compensation Committee, +Pension Committee, and Nominating Committee of General American Investors Company, Inc. (NYSE: GAM), a closed-end fund that manages a +global portfolio of investments consisting mainly of U.S. and foreign securities. +● Mr. Sachdev serves as a director of Agilon Health, Inc. (NYSE: +AGL), a technology-enabled services platform for the physicians’ market. +Specific Qualifications, Attributes, Skills and +Experience of Directors +Edward R. Rosenfeld +has served as our Chairman of the Board and Chief Executive Officer since August 2008 and has been a director of the Company since +February 2008. Mr. Rosenfeld, who joined our executive management team in May 2005, has more than two decades of experience focused on +the retail, apparel and footwear industries and possesses particular knowledge and experience in the industry that strengthens the Board’s +collective qualifications, skills and experience. He has strong leadership skills and an in-depth understanding of the Company and its +goals from his positions as the Chairman of the Board and Chief Executive Officer. His background in finance and his analytical skills +gained through his years as a Vice President with Peter J. Solomon Company, an investment banking firm, where he specialized in mergers +and acquisitions in the retail, apparel and footwear industries, provide the Board with insight and guidance with respect to, among other +things, strategic business development matters. Mr. Rosenfeld served as a director and chairman of the Audit & Risk Management Committee +of PVH Corp. (NYSE: PVH), one of the world’s largest apparel companies, from March 2013 until December 2023. +Peter A. Davis +has served as a director of the Company and as a member of the Compensation Committee since January 2022. Mr. Davis has over 40 +years of experience in the footwear and apparel industry, having held executive leadership positions in sales and marketing with companies +including Skechers, Fila, Reebok, Joy & Mario and Dynasty Footwear. He also founded The Infamous Black Sheep Brand, an urban action +sports lifestyle brand. A former player in the NBA, Mr. Davis founded Pete Davis Basketball, LLC, a grassroots community youth basketball +organization, in 2019 and today serves as its Managing Director. Prior to founding Pete Davis Basketball, LLC, Mr. Davis was the Senior +Vice President of Footwear for Joy & Mario Footwear from 2013 to 2018. Mr. Davis’ years of experience in our industry provide +relevant knowledge, expertise and leadership to the Board. +Al Ferrara has +served as a director of the Company and as a member of the Audit Committee since July 2019. In May 2020, Mr. Ferrara became the Chairman +of the Audit Committee and a member of the Nominating/Corporate Governance Committee. He is a retired certified public accountant having +retired from his position as a partner with BDO USA, LLP, a major international accounting firm, in August 2016 after 25 years with the +firm, most recently serving as National Director of the Retail & Consumer Products Division. Mr. Ferrara also served as a director +on the firm’s Board of Directors from 2003 through 2010 and was also a director and BDO representative on the Board of Directors +of BDO Capital Advisors, LLC from 2000 to 2015. Mr. Ferrara served as a member of the Board of Directors of Barnes & Noble, Inc., +the nation’s largest retail bookseller, from 2016 until its sale in August 2019 and also served on its Audit Committee and Compensation +Committee. In September 2020, Mr. Ferrara was appointed to the Board of Directors of VIVAKOR, Inc. (NASDAQ: VIVK), a socially responsible +operator, acquirer and developer of clean energy technologies and environmental solutions, where he served as the Chairman of its Audit +Committee. Mr. Ferrara resigned from VIVAKOR’s Board of Directors in November 2022. Mr. Ferrara’s decades of relevant experience +as a certified public accountant, the director of the retail practice at a major international accounting firm, and as a member of the +audit committee of a public company enhance the financial oversight capabilities of our Board and its Audit Committee. +Mitchell S. Klipper +has served as a director of the Company since April 2018, as a member of the Audit Committee since June 2018 and as a member of +the Corporate Social Responsibility Committee since August 2019. Mr. Klipper served as the Chief Executive Officer of Barnes & Noble, +Inc.’s Retail Group, one of the nation’s largest retail booksellers, from March 2010 to May 2015. Mr. Klipper began his career +at Barnes & Noble as Chief Financial Officer of B&N College in June 1986. He subsequently held several executive positions at +Barnes & Noble, Inc., including Executive Vice President, President of Barnes & Noble Development and Chief Operating Officer. +Prior to joining Barnes & Noble, Inc., Mr. Klipper was an Audit +9 +Manager with KMG Main Hurdman, +a certified public accounting firm and predecessor to KPMG. He also served on the advisory board of Modell’s Sporting Goods, a +sporting goods retailer, from 2006 through 2018. Mr. Klipper’s decades of relevant experience in retail management, general business +and accounting enhance the leadership and oversight capabilities of our Board. +Maria Teresa +Kumar has served as a director of the Company and as a member of the Corporate Social Responsibility Committee since January 2021. +Ms. Kumar is the President and CEO of Voto Latino, America’s largest Latinx voter registration and advocacy organization, which +she co-founded in 2004. She is also a regular on-air contributor for MSNBC. Ms. Kumar serves on the Boards of Emily’s List and the +World Economic Forum’s Global Shapers and is a World Economic Forum Young Global Leader and a Council on Foreign Relations Life +Member. Ms. Kumar graduated from U.C. Davis with +a B.A. in International Affairs and earned a Masters’ degree in Public Policy from Harvard’s Kennedy School. Ms. Kumar’s +extensive experience in management, leadership, social advocacy and working with non-profits enhance Board leadership and management oversight +with a unique perspective on corporate social responsibility. +Rose Peabody +Lynch has served as a director of the Company since April 2014, as a member of the Compensation Committee since June 2014, and +as a member of the Audit Committee since July 2024. Ms. Lynch formerly served on the Corporate Social Responsibility Committee from August +2019 to July 2024, when she became a member of the Audit Committee. Until recently, Ms. Lynch operated her own New York based consulting +business, Market Strategies, LLC, which focused on strategic marketing and operating issues for small to medium-sized companies. She possesses +over 30 years of business experience, including tenures as President and in other senior executive officer positions of major companies +in the beauty and fashion industries, and has extensive executive level financial and operating experience. Her experience serving as +a director and as a senior executive for a range of companies, including Victoria’s Secret; Trowbridge Gallery, a supplier of fine +art to the interior design trade; and Danskin, Inc., a leading manufacturer of women’s dance and active wear, enhances the Board’s +leadership and oversight capabilities. Ms. Lynch has served on several boards, including The Harmony Group-LeRoi Princeton (a manufacturer +of children’s apparel), Salant Corporation (Perry Ellis Menswear) and Frederick’s of Hollywood (a retailer of women’s +apparel and lingerie). Currently, Ms. Lynch serves on the board of General American Investors Company, Inc. (NYSE: GAM). In her role on +the GAM Board, she serves on the Compensation Committee, along with the Pension and Nominating Committees. She was a member of the Audit +Committee and Nominating and Governance Committees during her tenure at Salant and chaired the Compensation Committee during her tenure +on the board of Frederick’s of Hollywood. In addition, Ms. Lynch has held leadership positions with a variety of not-for-profit +organizations. She currently serves on the Board of Directors of the Princeton University Varsity Club. She also served two terms on the +Board of Trustees of Concord Academy in Concord, Massachusetts and rotated off the Board in July 2021. Ms. Lynch is a member of the Women +and Foreign Policy Advisory Council at the Council on Foreign Relations. Ms. Lynch graduated from Princeton with a B.A. in Art History +and earned a Master of Business Administration from Harvard Business School. +Peter Migliorini +has served as a director of the Company since October 1996 and has served on the Nominating/Corporate Governance Committee, as +its Chair, since July 2004 and the Compensation Committee, as its Chair, since July 2004. Mr. Migliorini formerly served on the Audit +Committee, from October 1996 until June 2018. Mr. Migliorini is the Presiding Director over all executive sessions of the independent +directors. Mr. Migliorini possesses extensive executive level financial, sales and operations experience. Mr. Migliorini currently serves +as sales manager for Greschlers, Inc., a building supplies company. Prior to joining Greschlers, Mr. Migliorini served as Director of +Operations for Mackroyce Group, a construction company, from 1987 to 1994. Earlier, Mr. Migliorini held various positions of increasing +responsibility from Assistant Buyer to Chief Planner/Coordinator for several shoe companies, including Meldisco Shoes, Perry Shoes and +Fasco Shoes. His numerous years of business experience at various levels and in various industries provide the Board with a measure of +practical orientation regarding our operations and growth endeavors. Mr. Migliorini’s early experience in the shoe industry also +provides relevant knowledge and expertise in our specific industry. +Arian Simone +Reed has served as a director of the Company and as a member of the Nominating/Corporate Governance Committee since January 2022, +and as a member of Corporate Social Responsibility since July 2024. Ms. Reed is the Founding Partner and Chief Executive Officer of the +Fearless Fund, a venture capital fund that invests in women of color led businesses, which she co-founded in 2018. Prior to Fearless Fund, +Ms. Reed was the owner of AR PR Marketing, a publicity and marketing strategy firm from 2004 to 2017. Ms. Reed serves as a member on the +Board of Directors for the Birmingham Civil Rights Institute. In 2021, she was the recipient of the 15th Annual General Motors African +Ancestry Network Black History Month Celebration Entrepreneurial Spirit Award and the Detroit Branch NAACP Great Expectations Award. Ms. +Reed’s marketing expertise, leadership, social advocacy, and working with entrepreneurs will enhance Board leadership, strategic +business development, and provide a unique perspective on corporate social responsibility. +10 +Ravi Sachdev +has served as a director of the Company as a member of the Nominating/Corporate Governance Committee since August 2019 and as a member +of the Audit Committee from September 2008 until March 2025. As a Partner of the private equity firm Clayton Dubilier & Rice, LLC +since June 2015, Mr. Sachdev focuses on the healthcare sector. Earlier, Mr. Sachdev worked at several investment banks. He was a Managing +Director and Co- Head of Healthcare Services at J.P. Morgan from November 2010 until June 2015 and prior to that held the positions of +Managing Director at Deutsche Bank Securities, Inc. from January 2009 until November 2010 and Director at Deutsche Bank from January 2007 +until January 2009. Prior to joining Deutsche Bank in 2006 as a Vice President, Mr. Sachdev served as a Vice President at Peter J. Solomon +Company, an investment banking boutique, specializing in mergers and acquisitions in the healthcare sector, from 1998 to 2006. Mr. Sachdev +possesses knowledge of finance and the financial analytics used to measure business performance. His 20 years of professional experience +in investment banking and private equity brings to the Board a thorough understanding of the financial issues affecting public companies +and greater insights in business valuation together with a practical orientation with respect to acquisitions and integrations. Mr. Sachdev +also serves on the Board of Directors of Agilon Health, Inc. (NYSE: AGL), a technology-enabled services platform for the physicians’ +market and served on the Board of Directors and the Strategy Committee and Compensation Committee of Covetrus, Inc. (NASDAQ: CVET), a +global animal-health technology and services company, from February 2019 until October 2022. +Robert Smith +has served as a director of the Company since April 2014 and has served on the Compensation Committee since June 2014 and on the Corporate +Social Responsibility Committee, as its Chair, since August 2019. Mr. Smith formerly served on the Nominating/Corporate Governance Committee +from June 2014 to July 2019, when he became a member of the Corporate Social Responsibility Committee. Mr. Smith is the Chief Executive +Officer of Phluid Project and GET Phluid, which he founded in 2018. Prior to Phluid Project, Mr. Smith was the Chief Merchandising Officer +for Haddad Brands from 2013 to 2017, a global children’s apparel and accessories licensing partner for iconic brands such as Levi’s, +Hurley, Nike, Jordan and Converse. Before his former position with Haddad Brands, Mr. Smith served as Executive Vice President, Merchandising +from 2010 to 2012 for Limited Brands, at Victoria’s Secret Direct, one of the largest direct-to-consumer women’s apparel retailer +in the United States. Prior thereto, Mr. Smith held various senior merchandising positions at Macy’s Inc. between 1998 and 2010, +beginning with Vice President, Merchandise Manager, Macy’s West and culminating with Executive Vice President, Merchandising for +Juniors, Kids, Intimate Apparel, Dresses, Suits, Coats and Swimwear. Earlier, Mr. Smith was a Merchandiser for XOXO Apparel Company and +held various positions with Burdine’s Department Stores. Mr. Smith possesses over 30 years of business experience in the fashion +industry and has extensive executive level expertise in merchandising. His experience in this area further enhances the Board’s +depth of understanding of the industry. +Amelia Newton +Varela has served as President of the Company since September 2015 and has been a director since 2016. Prior to this tenure, Ms. +Varela was Executive Vice President of Wholesale of the Company since April 2008 and Executive Vice President of Wholesale Footwear of +the Company from November 2004 to April 2008. Previously, she was Vice President of Sales for Steve Madden Women’s Wholesale Division +from January 2000. Ms. Varela began her career with the Company in 1998 in the role of Account Executive for Steve Madden Women’s +Wholesale Division. She graduated from The Fashion Institute of Technology in 1995. Ms. Varela’s over 25 years of experience at +the Company provides relevant industry knowledge and expertise, and leadership to the Board. +Required Vote +Proxies will be voted +for the election of the eleven nominees as directors of the Company unless otherwise specified in the proxy. A plurality of the votes +cast by the holders of shares of Common Stock present in person or represented by proxy and entitled to vote at the Annual Meeting will +be necessary to elect the nominees as directors. This means that the director nominees who receive the greatest number of affirmative +votes cast are elected as directors, subject to our Director Election (Majority Voting) Policy, which is described below. If, for any +reason, any nominee is unable or unwilling to serve, the proxies will be voted for a substitute nominee, who will be designated by the +Board of Directors at the Annual Meeting. Stockholders may abstain from voting by marking the appropriate boxes on the accompanying proxy. +Abstentions will be counted separately and used for purposes of calculating whether a quorum is present at the Annual Meeting, but will +have no effect on the outcome of the vote. +Director Election (Majority Voting) +Policy +In uncontested elections, +it is our policy that any nominee for director who receives a greater number of “WITHHOLD” votes than “FOR” votes +for his, her, or their election must promptly submit a letter offering his, her, or their resignation to the Nominating/Corporate Governance +Committee following the certification of the stockholder vote. In such event, the Nominating/Corporate Governance Committee would then +consider the offer of resignation and make a recommendation to the independent member of the Board of Directors as to whether or not the +resignation should be accepted. For more information about this policy, see “Corporate Governance – Director Election (Majority +Voting) Policy” below. +11 +Recommendation of the Board of Directors +The Nominating/Corporate +Governance Committee of the Board and the entire Board of Directors unanimously recommend a vote “FOR” the election of Mr. +Edward R. Rosenfeld, Mr. Peter A. Davis, Mr. Al Ferrara, Mr. Mitchell S. Klipper, Ms. Maria Teresa Kumar, Ms. Rose Peabody Lynch, Mr. +Peter Migliorini, Ms. Arian Simone Reed, Mr. Ravi Sachdev, Mr. Robert Smith, and Ms. Amelia Newton Varela. +CORPORATE GOVERNANCE +The Board of Directors +Our business is managed +under the direction and oversight of the Board of Directors, whose members are elected by our stockholders. Directors meet their responsibilities +by participating in meetings of the Board of Directors and the various committees of the Board on which they sit. They also communicate +with our Chairman and Chief Executive Officer and other officers and employees of the Company and consult with our independent registered +public accounting firm and other third parties. The size of the Board is fixed at eleven members. Nine current directors are independent +and two current directors are not independent. The Nominating/Corporate Governance Committee determined to nominate all eleven current +directors for election to our Board. +Director Independence +The Board of Directors +has determined that the following director nominees are “independent” for purposes of the criteria of the SEC and The Nasdaq +Global Select Market listing standards: Mr. Davis, Mr. Ferrara, Mr. Klipper, Ms. Kumar, Ms. Lynch, Mr. Migliorini, Ms. Reed, Mr. Sachdev, +and Mr. Smith. There is also no family relationship among any of the directors and executive officers of the Company. If the eleven nominees +set forth above are elected, the Board will consist of a majority of independent directors. The Board of Directors has held regularly +scheduled executive sessions for the independent directors, with Mr. Migliorini serving as Presiding Director of such executive sessions. +Involvement in Certain Legal Proceedings +During the past ten +years none of the persons currently serving as executive officers and/or directors of the Company has been the subject matter of any legal +proceedings that are required to be disclosed pursuant to Item 401(f) of Regulation S-K. Nor are any such legal proceedings believed to +be contemplated by governmental authorities against any director or executive officer. Further, no executive officers, directors, beneficial +owners of more than five percent of the Company’s common stock, or any other actor mentioned in Item 103(c)(2) of Regulation S-K +is a party adverse to the Company in a material proceeding or has a material interest adverse to the Company. +Director Attendance at Meetings +Attendance at Annual Meetings of Stockholders +We have no specific +policy regarding director attendance at our annual meetings of stockholders. We encourage all our directors to attend annual meetings +of our stockholders, and nine (9) directors attended our 2024 annual meeting of stockholders. +Attendance at Meetings of the Board of Directors +The Board of Directors +held four regularly scheduled meetings during the 2024 Fiscal Year and acted by unanimous written consent on one occasion during the 2024 +Fiscal Year. In the 2024 Fiscal Year, each director attended 75% or more of the total number of Board meetings and meetings held by all +committees on which they then served. +12 +Director Election (Majority Voting) Policy +We have adopted a Director Election (Majority +Voting) Policy. Pursuant to this policy, in an uncontested election of directors (that is, an election where the number of nominees is +equal to the number of seats open) any nominee for director who receives a greater number of “WITHHOLD” votes than “FOR” +votes for his, her, or their election must promptly submit an offer of resignation to the Nominating/Corporate Governance Committee following +the certification of the stockholder vote for consideration in accordance with the following procedures. In such event, upon receipt of +the resignation, the Nominating/Corporate Governance Committee would promptly consider the appropriateness of the director’s continued +service on the Board of Directors and recommend to the Qualified Independent Directors (as defined below) the action to be taken with +respect to the resignation, which could include (1) accepting the resignation; (2) rejecting the resignation; (3) retaining the director +but addressing what the Qualified Independent Directors believe to be the underlying cause of the “WITHHOLD” votes; or (4) +determining that the director will not be renominated by the Board of Directors in future elections. The Nominating/Corporate Governance +Committee would consider factors such as (a) the reasons expressed by the stockholders for withholding votes from such director; (b) any +possibilities for curing the underlying cause of the “WITHHOLD” votes; (c) the tenure and qualifications of the director and +his, her, or their past and expected future contributions to the Company; (d) the overall composition of the Board of Directors, including, +without limitation, whether accepting the resignation would cause the Company to fail to meet any applicable SEC or Nasdaq requirement; +(e) the availability of other qualified candidates; and (f) our Board of Director Candidate Guidelines. +The Qualified Independent +Directors would then act on the Nominating/Corporate Governance Committee’s recommendation no later than 90 days following the date +of the stockholders’ meeting at which the director election occurred. In considering the Nominating/Corporate Governance Committee’s +recommendation, the Qualified Independent Directors would review the factors considered by the Nominating/Corporate Governance Committee +and such additional information and factors that they believe to be relevant. Following the Qualified Independent Directors’ decision, +we would promptly disclose the decision in a Current Report on Form 8-K. The Form 8-K would include a full explanation of the process +by which the decision of the Qualified Independent Directors was reached and, if applicable, the reasons why the offer of resignation +was rejected. +If an offer of resignation +were to be accepted, the Nominating/Corporate Governance Committee would recommend to the Board of Directors whether to fill the vacancy +or reduce the size of the Board of Directors accordingly. Any director required to submit his, her, or their resignation pursuant to this +policy would not participate in the Nominating/Corporate Governance Committee’s recommendation or the Qualified Independent Directors’ +consideration of the resignation. Prior to voting on the director’s resignation offer, the Qualified Independent Directors would +provide to the director an opportunity to submit any information or statement that they believe is relevant to the Qualified Independent +Directors’ consideration of the resignation. +For purposes of this +policy, “Qualified Independent Directors” means all directors who (1) are “independent” for purposes of The Nasdaq +Global Select Market listing standards and (2) are not required to offer their resignation in accordance with this policy. If there are +fewer than three independent directors then serving on the Board of Directors who are not required to submit their resignations in accordance +with this policy, then the Qualified Independent Directors shall consist of all of the independent directors and each independent director +who is required to offer their resignation in accordance with this policy shall recuse himself or herself from the deliberations and voting +only with respect to their individual offer to resign. +Committees of the Board +Among other committees, +the Board of Directors has a standing Audit Committee, Compensation Committee, Nominating/Corporate Governance Committee, and Corporate +Social Responsibility Committee. Each committee has a written charter. The table below provides current membership for each Board committee +and the number of meetings held by each Board committee in the 2024 Fiscal Year. +13 +Committees of the Board of Directors +Director +Audit +Compensation +Nominating/ +Corporate +Governance +Corporate +Social +Responsibility +Edward R. Rosenfeld +Peter A. Davis +Member +Al Ferrara +Chair +Member +Mitchell S. Klipper +Member +Member +Maria Teresa Kumar +Member +Rose Peabody Lynch* +Member +Member +Peter Migliorini +Chair +Chair +Arian Simone Reed** +Member +Member +Ravi Sachdev*** +Member +Robert Smith +Member +Chair +Amelia Newton Varela +Number of Meetings in 2024 +Fiscal Year +5 +3 +1 +4 +Number of Actions by Written +Consents in 2024 Fiscal Year +1 +2 +1 +1 +* Ms. Lynch left the Corporate Social Responsibility Committee +and joined the Audit Committee on July 29, 2024. +**Ms. Reed joined the Corporate Social Responsibility Committee +on July 29, 2024. +***Mr. Sachdev left the Audit Committee on March 14, 2025. +Audit Committee +The Audit Committee +consists entirely of directors who are “independent” for purposes of The Nasdaq Global Select Market listing standards and +who meet the independence requirements contained in Exchange Act, Rule 10A- 3(b)(1). The Board has determined that Ms. Lynch and each +of Messrs. Ferrara, Klipper, and Sachdev meets the SEC criteria of an “audit committee financial expert” as defined in Item +407(d)(5) of Regulation S-K. No member of the Audit Committee may serve simultaneously on the audit committee of more than two other public +companies without prior approval of the Board. The Audit Committee is primarily responsible for reviewing the services performed by our +independent registered public accountants, evaluating our accounting policies, our system of internal controls over financial reporting +(ICFR), our risk management policies, and information security and technology, including cybersecurity, and reviewing significant financial +transactions. +The Audit Committee +is responsible for reviewing and striving to ensure the integrity of our financial statements and oversight of our compliance with legal +and regulatory requirement, our internal audit function and our information security and technology. Among other matters, the Audit Committee, +with management, independent registered public accountants and internal auditors, reviews the adequacy of our internal controls that could +significantly affect our financial statements. Additionally, the Audit Committee reviews any potential related party transactions as well +as any other potential conflicts of interest situations on an ongoing basis. The Audit Committee is also directly and solely responsible +for the appointment, retention, compensation, oversight and termination of our independent registered public accountants. In addition, +the Audit Committee functions as the Company’s Qualified Legal Compliance Committee (the “QLCC”). The purpose of the +QLCC is to receive, retain and investigate reports made directly, or otherwise made known, of evidence of material violations of any United +States federal or state law, including any material breach of fiduciary duty, by the Company or its officers, directors, employees or +agents and, if an investigation was necessary, to recommend an appropriate response to the Company. +Management has primary +responsibility for our financial statements and the overall reporting process, including our system of internal controls over financial +reporting. Our independent registered public accountants audit our annual financial statements prepared by management, express an opinion +as to whether those financial statements present fairly our financial position, results of operations and cash flows in conformity with +accounting principles generally accepted in the United States of America and discuss with the Audit Committee any issues they believe +should be raised. Our independent registered public accountants also issue an opinion on our internal controls over financial reporting. +The Audit Committee +is also responsible for the oversight of our risk management process, which is discussed in the “Risk Oversight” section below. +14 +In performing its +functions, the Audit Committee meets with management on at least a quarterly basis to review and discuss the quarterly financial statements, +annual audited financial statements and related reports and to consider the adequacy of our internal controls and the objectivity of our +financial reporting. The Audit Committee then recommends to the Board whether the audited financial statements should be included in our +Annual Report on Form 10-K. From time to time, the Audit Committee, with management, identifies and reviews other areas of risks related +to our operations and at least quarterly receives reports on and reviews cybersecurity risks as well as our approach to managing such +risks. Our Chief Information Security Officer presents to the Audit Committee regarding cybersecurity on at least a quarterly basis. The +Audit Committee discusses these matters with our independent registered public accountants and with appropriate Company personnel. Meetings +are held with the independent registered public accountants, who have unrestricted access to the Audit Committee. In addition, the Audit +Committee reviews our financing plans and reports and makes recommendations to the full Board of Directors for approval and to authorize +action. The Board has adopted a written charter setting out the functions the Audit Committee is to perform. A copy of the Audit Committee +Charter is available on our website at https://investor.stevemadden.com/corporate-governance/highlights . The Audit Committee held +four regularly scheduled meetings and one special meeting during the 2024 Fiscal Year and undertook one action by written consent during +the 2024 Fiscal Year. +Nominating/Corporate Governance Committee +The Nominating/Corporate +Governance Committee consists of directors who are “independent” for purposes of The Nasdaq Global Select Market listing standards. +The Nominating/Corporate +Governance Committee provides oversight with respect to a wide range of issues relating to the operation of the Board, including consideration +of and recommendations regarding the size and composition of the Board of Directors and its committees along with the identification of +potential candidates to serve as directors. The Nominating/Corporate Governance Committee identifies candidates to the Board of Directors +by introductions from management, members of the Board of Directors, employees of the Company or other sources, including stockholders +that satisfy our policy regarding stockholder recommended candidates (as described below). To enable the Nominating/Corporate Governance +Committee to consider a stockholder recommendation in connection with the 2026 Annual Meeting, we must receive the recommendation on or +before December 8, 2025. The Nominating/Corporate Governance Committee does not evaluate director candidates recommended by stockholders +that satisfy our policy differently than director candidates recommended by other sources. +Stockholders wishing +to submit director nominations for the 2026 Annual Meeting should write to the Secretary, Steven Madden, Ltd., 52-16 Barnett Avenue, Long +Island City, New York 11104. In accordance with Article II, Section 5 of the By-Laws, director nominations for the 2026 Annual Meeting +can only be made by a stockholder of the Company who (i) is a stockholder of record on the date of the giving of the notice of such director +nominations and on the record date for the determination of stockholders entitled to vote at the 2026 Annual Meeting and (ii) complies +with the notice requirements and procedures set forth in Article II, Section 5 of the By-Laws. A stockholder’s notice to the Secretary +of the Company with respect to any such nominations must be timely and in proper written form pursuant to Article II, Section 5 of the +By-Laws, including containing certain information concerning the nominating or proposing stockholder and certain information concerning +the proposed nominee, such as any agreements, arrangements or understandings the stockholder may have with the proposed nominee or other +parties relating to the nomination or other proposal. Such information must be updated, if necessary, to be true and correct as of the +record date for the 2026 Annual Meeting and as of the date that is 10 business days prior to the date of the 2026 Annual Meeting. The +notice must be delivered to, or mailed and received at, our principal executive offices not less than 120 days nor more than 150 days +prior to the first anniversary of the date of our 2025 Annual Meeting. Accordingly, any written notice given by or on behalf of a stockholder +pursuant to Article II, Section 5 of our By- Laws in connection with the 2026 Annual Meeting must be received no later than January 21, +2026, and no earlier than December 22, 2025. This summary information regarding the By-Laws is qualified in its entirety by reference +to the full text of the By-Laws, a copy of which may be obtained by any stockholder, without charge, upon written request to the Secretary +of the Company at the address set forth above. If a nomination is not timely and properly made in accordance with the procedures set forth +in the By-Laws, or does not contain the specific information required by the By-Laws, such nomination will be defective and will not be +brought before the 2026 Annual Meeting. In addition, to comply with the universal proxy rules, stockholders who intend to solicit proxies +in support of director nominees other than the nominees of our Board of Directors must comply with the additional requirements of Rule +14a-19 under the Exchange Act, including providing a statement that such stockholder intends to solicit the holders of shares representing +at least 67% of the voting power of our shares entitled to vote on the election of directors in support of director nominees other than +our nominees, as required by Rule 14a-19(b). We intend to file a proxy statement and WHITE proxy card with the SEC in connection with +the solicitation of proxies for the 2026 Annual Meeting. +15 +In considering candidates +for the Board of Directors, the Nominating/Corporate Governance Committee considers our Board of Director Candidate Guidelines and Director +Election (Majority Voting) Policy, available on our website at https://investor.stevemadden.com/corporate-governance/highlights , +our policy regarding stockholder recommended director candidates, as set forth above, and all other factors that it deems appropriate, +including the individual’s character, education, experience, knowledge and skills. To assess the effectiveness of the mandate set +forth in the Nominating/Corporate Governance Committee’s charter, the Nominating/Corporate Governance Committee reviews annually +with the Board the composition of the Board as a whole and recommends, if necessary, measures to be taken so that the Board reflects the +appropriate balance of knowledge, experience and diversity required for the Board as a whole. +Additionally, the Nominating/Corporate +Governance Committee takes a leadership role in shaping the corporate governance of the Company. The Nominating/Corporate Governance Committee +develops and recommends corporate governance principles for the Company, makes recommendations to the Board of Directors in support of +such principles, and monitors compliance with our Conduct Codes (as defined and discussed in the “Codes of Business Conduct and +Ethics” section below). The Nominating/Corporate Governance Committee also oversees the evaluation of the Board of Directors, its +committees, and the Company’s senior executives and periodically reviews the succession plan for our senior executives with the +Chairman of the Board and Chief Executive Officer. The Nominating/Corporate Governance Committee operates under a formal charter that +governs the Committee’s composition, powers and responsibilities. A copy of the Nominating/Corporate Governance Committee Charter +is available on our website at https://investor.stevemadden.com/corporate-governance/highlights . The Nominating/Corporate Governance +Committee held one meeting and undertook one action by written consent during the 2024 Fiscal Year. +Compensation Committee +The Compensation +Committee consists of directors who are “independent” for purposes of The Nasdaq Global Select Market listing standards and +“non-employee directors” pursuant to Exchange Act Rule 16b-3. +The Compensation Committee +is responsible for establishing and overseeing our compensation and incentive plans and programs; determining and approving compensation +for our executive officers, including salaries, bonuses, perquisites and equity awards; reviewing and approving compensation and awards +for our executive officers under our compensation and incentive plans and program; considering the results of say-on-pay proposals; assessing +whether our compensation and incentive plans and programs encourage excessive risk-taking and evaluating compensation policies that could +mitigate such risk; administering our equity compensation plans; reviewing and approving a compensation program for independent members +of the Board; developing and monitoring compliance with policies for the clawback of erroneously paid compensation; and assisting the +Board in discharging the Board’s responsibilities relating to management organization, performance, compensation and succession. +The Compensation Committee also reviews executive education and development programs; evaluates the competitiveness of the compensation +of the Company’s executive officers; reviews and approves of the corporate goals and objectives used to determine executive compensation; +and monitors the amount of Company equity used for compensation. The Compensation Committee has the authority to seek the advice of compensation +consultants in carrying out its duties and responsibilities; however, the Compensation Committee must assess the independence of the consultant +before retaining them or receiving any advice. Independence factors that the Compensation Committee should consider are described in the +“Role of the Compensation Committee – Independence of Outside Advisors” section below. The Compensation Committee operates +under a formal charter adopted by the Board of Directors that governs its composition, powers and responsibilities. A copy of the Compensation +Committee Charter is available on our website at https://investor.stevemadden.com/corporate-governance/highlights . The Compensation +Committee held three meetings and undertook two actions by written consent during the 2024 Fiscal Year. +Corporate Social Responsibility Committee +The Corporate Social +Responsibility Committee consists of directors who are “independent” for purposes of The Nasdaq Global Select Market listing +standards. +The Corporate Social +Responsibility Committee is responsible for assisting the Board in its oversight of our initiatives, plans and practices with respect +to corporate social responsibility matters of significance to the Company and the communities in which we operate. Corporate social responsibility +matters include ethical and sustainable sourcing; human rights; the environment; supplier conduct; labor conditions; climate change; diversity +in employment; charitable giving; government relations; and political spending. The Committee’s responsibility includes oversight +of: +● management’s evaluation of risks and opportunities with +respect to corporate social responsibility matters; +● management’s creation of key strategic initiatives, goals, +strategies, policies, and procedures to address corporate social responsibility risks and opportunities; +16 +● our governance of, and performance relative to, such key strategic +initiatives, goals, strategies, policies, and procedures; +● the policies and procedures used to prepare corporate social +responsibility related disclosures; +● engagement with stockholders, other key stakeholders, and proxy +advisory firms regarding corporate social responsibility matters; +● our response to corporate social responsibility related stockholder +proposals; +● management’s assessment of the identity and scope of matters +comprising corporate social responsibility; and +● our government relations strategies and activities. +The Corporate Social +Responsibility Committee operates under a formal charter that governs the Committee’s composition, powers and responsibilities. +The Corporate Social Responsibility Committee Charter requires that a majority of the committee’s members not be officers or employees +of the Company or its affiliates. A copy of the Corporate Social Responsibility Committee Charter is available on our website at https://investor.stevemadden.com/corporate-governance/highlights . +The Corporate Social Responsibility Committee held four meetings and undertook one action by written consent during the 2024 Fiscal Year. +Board Leadership Structure, Risk Oversight, +Executive Sessions of Non-Employee Directors, and Communications Between Stockholders and the Board +Board Leadership Structure +As noted above, our Board currently comprises nine independent +and two non-independent directors. +Mr. Rosenfeld has served +as Chairman of the Board and Chief Executive Officer since August 2008 and has been a member of the Board since February 2008. Mr. Migliorini +is currently serving as the Presiding Director. The Presiding Director is elected by the Board’s independent directors and presides +over executive sessions of the independent directors. We believe that the number of independent, experienced directors who comprise our +Board, along with the independent oversight of our Presiding Director, benefits the Company and our stockholders. +We recognize that +different board leadership structures may be appropriate for companies in different situations and believe that no one structure is suitable +for all companies. We believe our current Board leadership structure is optimal for the Company because it demonstrates to our employees, +suppliers, customers, and other stakeholders that we are under strong leadership, with a single person setting the tone and having primary +responsibility for managing our operations and leading our Board in setting long-term strategy. Having a single leader for both the Company +and our Board eliminates confusion and duplication of efforts and provides clear leadership for the Company. We believe the Company, like +many U.S. companies, has been well-served by this leadership structure. +Because the positions +of Chairman of the Board and Chief Executive Officer are held by the same person, the Board believes it is appropriate for the independent +directors to elect one independent director to serve as a Presiding Director. In addition to presiding at executive sessions of the independent +directors, the Presiding Director has responsibilities that include coordinating with the Chairman of the Board and Chief Executive Officer +in establishing agenda and discussion items for Board meetings; retaining independent advisors on behalf of the Board as the Board may +determine to be necessary or appropriate; and performing such other functions as the independent directors may designate from time to +time. +Our Board conducts +an annual evaluation to determine whether it and its committees are functioning effectively. As part of this annual self-evaluation, the +Board evaluates whether the current leadership structure continues to be optimal for the Company and our stockholders. +Risk Oversight +Our Board is responsible +for overseeing our risk management process. It focuses on our general risk management strategy and the most significant risks facing the +Company and ensures that management implements appropriate risk mitigation strategies. Management also apprises the Board of particular +risk management matters in connection with its general oversight and approval of corporate matters. +17 +The Board has +delegated to the Audit Committee the oversight of our risk management process. Among its duties, the Audit Committee reviews with +management (a) our policies, guidelines, and processes with respect to risk assessment and management of risks that may be material +to the Company, (b) our system of disclosure controls and system of internal controls over financial reporting, (c) our compliance +with legal and regulatory requirements, and (d) our systems and processes related to information security and technology, including +cybersecurity. The Audit Committee is also responsible for reviewing major legislative and regulatory developments that could +materially impact our contingent liabilities and other financial risks. Our other Board committees also consider and address risks +as they perform their respective committee responsibilities. All committees report to the full Board as appropriate, including when +a matter rises to the level of a material or enterprise level risk. +Our management is +responsible for day-to-day risk management. Our risk management and internal audit areas serve as the primary monitoring and testing function +for company-wide policies and procedures and manage the day-to-day oversight of the risk management strategy for our ongoing business. +This oversight includes identifying, evaluating, and addressing potential risks that may exist at the enterprise, strategic, financial, +operational, and compliance and reporting levels. +We believe the division +of risk management responsibilities described above is an effective approach for addressing the risks facing the Company and that our +Board leadership structure supports this approach. +Executive Sessions of Independent Directors +The Board holds executive +sessions of its independent directors generally at each regularly scheduled meeting. The Presiding Director serves as the chairperson +for these executive sessions. +Communications between Stockholders and the Board +We have adopted a +procedure by which stockholders may send communications to one or more members of the Board of Directors by writing to such director(s) +or to the entire Board of Directors in care of the Secretary at Steven Madden, Ltd., 52-16 Barnett Avenue, Long Island City, New York +11104. The Board has instructed the Secretary of the Company to review all communications so received and to exercise discretion not to +forward to the Board correspondence that he or she decides is inappropriate, such as business solicitations, frivolous communications +and advertising, routine business matters ( i.e. , business inquiries, complaints, or suggestions) and personal grievances. However, +any director may at any time request that the Secretary forward to such director any and all communications received by the Secretary, +but not forwarded to the directors. +Codes of Business Conduct and Ethics +We have adopted a +Code of Ethics for the Chief Executive Officer and Senior Financial Officers, which is applicable to our Chief Executive Officer, Chief +Financial Officer, controller, principal accounting officer, head of internal audit and such other employees of the Company as the Audit +Committee may from time to time designate as “senior financial officers.” In addition, the individuals who serve on our Board +of Directors are subject to a Code of Business Conduct and Ethics for the Board of Directors, and all of our employees are held accountable +for adherence to our Code of Conduct. Each of the Code of Ethics for the Chief Executive Officer and Senior Financial Officers and the +Code of Business Conduct and Ethics for the Board of Directors is included as an exhibit to our Annual Report on Form 10-K for the fiscal +year ended December 31, 2023. The Code of Conduct applicable to all of our employees is an exhibit to our Annual Report on Form 10-K for +the fiscal year ended December 31, 2024. The Code of Ethics for the Chief Executive Officer and Senior Financial Officers, the Code of +Business Conduct and Ethics for the Board of Directors and the Code of Conduct applicable to all of our employees (collectively, the “Conduct +Codes”) are available on our website at https://investor.stevemadden.com/corporate-governance/highlights and may be obtained +by any stockholder without charge upon request by writing to the Secretary at Steven Madden, Ltd., 52-16 Barnett Avenue, Long Island City, +New York 11104. The Conduct Codes are intended to establish standards necessary to deter wrongdoing and to promote compliance with applicable +governmental laws, rules and regulations and honest and ethical conduct. The Conduct Codes cover all areas of professional conduct, including +conflicts of interest, fair dealing, financial reporting and disclosure, protection of our assets and confidentiality. Employees have +an obligation to promptly report any known or suspected violation of the Conduct Codes without fear of retaliation. Waiver of any provision +of the Conduct Codes for executive officers and directors may only be granted by the Board of Directors or the Nominating/Corporate Governance +Committee, and we will disclose any such waiver or modification of the Conduct Codes relating to such individuals. +18 +Corporate Governance Principles +The Board of Directors +has adopted Corporate Governance Principles as a set of guiding guidelines by which the Company is governed. The Corporate Governance +Principles address various matters of corporate governance such as board size and composition, director qualifications and responsibilities, +director compensation, limitations on service on other boards, board committees, director orientation and education, director access to +management, management development and succession planning, and annual performance evaluations for the Board. +The Nominating/Corporate +Governance Committee reviews the Corporate Governance Principles annually to determine whether to recommend changes to the Corporate Governance +Guidelines to reflect new laws, rules and regulations and governance best practices. The Corporate Governance Principles are available +on our website at https://investor.stevemadden.com/corporate-governance/highlights and may be obtained by any stockholder without +charge upon request by writing to the Secretary at Steven Madden, Ltd., 52-16 Barnett Avenue, Long Island City, New York 11104. +Stock Ownership Guidelines +The Board of Directors +has adopted Stock Ownership Guidelines, which require a level of ownership of shares of our Common Stock by our directors and executive +officers to align their interests with the long-term interests of our stockholders. The Stock Ownership Guidelines require our Chief Executive +Officer to own shares of our Common Stock equal in value to five times his annual base salary. Other executive officers are required to +own shares of our Common Stock equal in value to two times their annual base salary. The Stock Ownership Guidelines further require that +each non-employee director must own shares of our Common Stock equal in value to two times the cash portion of the directors’ annual +retainer or the equivalent if a retainer is not received in certain circumstances. Individuals subject to the Stock Ownership Guidelines +must attain the required level of share ownership by the fifth anniversary of the later of (i) the effective date of the adoption of the +Stock Ownership Guidelines and (ii) the date that the individual became a named executive officer or director. The named executive officer +or director must retain an amount equal to 25% of the net shares of our Common Stock received as a result of the exercise, vesting or +payment of any equity award we make until the applicable share ownership requirement is satisfied. The Compensation Committee monitors +the compliance of our Chief Executive Officer, non-employee directors and other executive officers with the Stock Ownership Guidelines. +Insider Trading Policy +The Company has adopted +an insider trading policy governing the purchase, sale and other dispositions of its securities by the directors and employees of the +Company and its subsidiaries, which is reasonably designed to promote compliance with all applicable insider trading laws, rules and regulations +and NASDAQ listing standards. In addition, it is the Company’s policy that the Company will not purchase or sell its common stock +when it is aware of material non-public information. A copy of this policy is filed as an Exhibit to the Company’s Annual Report +on Form 10-K for the fiscal year ended December 31, 2024. +Prohibition on Hedging and Pledging +of Our Common Stock +Our directors and +executive officers and certain other persons designated from time to time by our Chief Financial Officer are prohibited from entering +into hedging transactions and from pledging our Common Stock pursuant to a formal policy concerning such activities adopted by the Board +of Directors. This policy does not apply to other employees of the Company. +Corporate Social Responsibility Policy +We are committed +to operating our business in a socially responsible manner. We strive to incorporate this commitment into every aspect of our business, +including the design, quality, safety and sourcing of our products, the safety and fair treatment of our employees, animal welfare and +compliance with laws, including the Foreign Corrupt Practices Act and the SEC’s Conflict Minerals rule. These guiding principles +are set forth in our Corporate Social Responsibility Policy as well as our Conflict Minerals Policy, and we expect all our employees to +be familiar with and to adhere to them. We strive to do business with vendors and suppliers that share our views and commitments to quality +products and ethical business principles. We will only engage vendors and suppliers that demonstrate a commitment to meeting our standards. +Our Corporate Social Responsibility Committee assists the Board in its oversight of management’s social responsibility obligations. +19 +Clawback Policy +We have adopted a Clawback +Policy, which applies to our executive officers, including the named executive officers, and provides for the repayment of certain incentive +compensation received over a covered period if the Company is required to prepare an accounting restatement due to the material noncompliance +of the Company with any financial reporting requirement under the securities laws. See “Executive Compensation – Compensation +Discussion and Analysis – Clawback Policy” for further discussion of the Clawback Policy. +Certain Relationships and Related Party Transactions +Steven Madden Employment +Agreement. We believe that Steven Madden, our founder and Creative and Design Chief, provides unique and significant value in guiding +the leadership of our creative process, both in his hands-on work for the Company and his collaboration with our designers, product professionals +and marketing executives. In addition, the public’s association of Mr. Madden’s name and likeness with our branded products +is significant, meaningful, and integral to our success and has been, and continues to be, instrumental in creating long- term stockholder +value. Based upon that belief, we further believe that his continuing involvement with the Company is essential, and to this end, we have +for many years had an employment agreement with Mr. Madden as described below. +Mr. Madden’s agreement +in its current form dates back to July 1, 2005, as subsequently amended on various occasions, most recently on November 10, 2023 (the +“SM Agreement”). Under the SM Agreement, Mr. Madden has agreed to continue to serve as our Creative and Design Chief for +a term continuing through December 31, 2031, for a base salary of $7,026,042 per annum through December 31, 2026, together with the potential +for cash bonuses at the sole discretion of our Board of Directors and an annual life insurance premium reimbursement of up to $200,000. +Effective January 1, 2027, Mr. Madden’s base salary will increase to $7,377,374 until December 31, 2028, and effective January +1, 2029, through the remainder of the term, Mr. Madden’s base salary will be increased to $7,746,211. +Under the SM Agreement, +Mr. Madden is also eligible to receive annually, on or about the date of our annual meeting of stockholders (but not later than June 30), +an option (the “Annual Option”) to purchase shares of Common Stock equal to the greater of (a) 100% of the largest aggregate +number of shares of Common Stock available upon the exercise of an option or options granted to any other continuing full-time employee +of the Company during the preceding twelve-month period or (b) 225,000 shares of Common Stock; provided, however, that a grant to Mr. +Madden in excess of 150% of the number of shares of Common Stock subject to options granted to such other continuing full-time employee +would require stockholder approval. Any Annual Option so granted vests quarterly over a one-year period and is exercisable for a period +of five years at a price equal to the closing price of our Common Stock on the grant date. +Under the SM Agreement, +if Mr. Madden dies, his estate would receive a payment equal to his base salary for the 24-month period immediately after the date of +his death. Further, if Mr. Madden’s employment is terminated due to his total disability (as defined in the agreement), “for +cause” (as defined in the agreement) or due to Mr. Madden’s resignation, we are obligated to pay Mr. Madden the amount of +compensation that is accrued and unpaid through the date of termination. If Mr. Madden’s employment is terminated for any reason +(other than “for cause” or due to his death, total disability or resignation), we are obligated to pay Mr. Madden, in installments, +the balance of his base salary through the end of the term of the SM Agreement. If, during the period commencing 120 days prior to a “change +of control” transaction (as defined in the SM Agreement) and ending on the first anniversary of a change of control transaction, +Mr. Madden’s employment is terminated other than “for cause” (as defined in the SM Agreement) all unvested options held +by Mr. Madden will be accelerated and vest on the date of termination or resignation, or if the employment termination occurred prior +to the change of control, on the date of such change of control, and Mr. Madden will be entitled to receive a lump sum cash payment equal +to the amount of compensation that is accrued and unpaid through the date of termination plus $35 million. The SM Agreement contains other +customary provisions, including provisions regarding expense reimbursement, confidentiality, non-solicitation and non-competition. +For the 2024 Fiscal +Year, Mr. Madden earned $7,026,042 in base salary and received $200,000 for the payment of an annual life insurance premium. Mr. Madden +also received his Annual Option for the 2024 Fiscal Year to purchase 225,000 shares of Common Stock at a price per share of $41.30. +The most recent +amendment entered into on November 10, 2023, effected the extension of the term of the SM Agreement for five years through December 31, +2031. In connection with the extension, we agreed to pay Mr. Madden a base salary of $7,026,042 for the annual periods ending December +31, 2023, 2024, 2025, and 2026; $7,377,374 for the annual periods ending December 31, 2027 and 2028; and $7,746,211 for the annual periods +through the remainder of the term. Additionally, on the first business day of January 2024, and then annually on the first business day +of successive years through +20 +December 31, 2031, Mr. Madden will receive a restricted stock award under our 2019 Incentive Compensation +Plan for a number of shares of Common Stock valued at (i) $10 million each year for the years ended December 31, 2024, 2025, and 2026, +and (ii) $9 million each year for the years ended December 31, 2027, 2028, 2029, 2030, and 2031, and each such award will vest in accordance +with the terms of the amendment. +Review, Approval or Ratification +of Transactions with Related Persons +Our Conduct Codes +and Employee Handbook prohibit all conflicts of interest. Under the Conduct Codes, conflicts of interest occur when personal or professional +interests interfere in any way, or even appear to interfere, with our interests. Our prohibition on conflicts of interest under the Conduct +Codes includes any related party transaction. +Related person transactions +must be approved by the Board, or by a committee of the Board consisting solely of independent directors, who will approve the transaction +only if they determine that it is in our best interests. In considering the transaction, the Board or committee will consider all relevant +factors, including, as applicable, (i) the business rationale for entering into the transaction; (ii) the alternatives to entering into +a related person transaction; (iii) whether the transaction is on terms comparable to those available to third parties or, in the case +of employment relationships, to employees generally; (iv) the potential for the transaction to lead to an actual or apparent conflict +of interest and any safeguards imposed to prevent such actual or apparent conflicts; and (v) the overall fairness of the transaction +to the Company. +We have multiple +processes for reporting conflicts of interest, including related party transactions. Under the Conduct Codes, all employees are required +to report any actual or apparent conflict of interest, or potential conflict of interest, to management. The Chief Financial Officer distributes +a questionnaire to our executive officers and management personnel quarterly and distributes a questionnaire to the members of the Board +of Directors annually requesting certain information regarding, among other things, their immediate family members, employment and beneficial +ownership interests, which information is then reviewed for any conflicts of interest under the Conduct Codes. +The Board of Directors, +the Audit Committee and the Disclosure Committee, which consists of management personnel, discuss the related party transactions, specifically, +and in connection with the regular review processes attendant to our periodic filings, including related party transaction disclosures. +If a director is +a party to or in some manner involved in a transaction involving the Company, they will be recused from all discussions and decisions +about the transaction. The transaction must be approved in advance whenever practicable, and if not practicable, must be ratified as promptly +as practicable. +COMPENSATION OF DIRECTORS IN THE 2024 FISCAL YEAR +The Compensation +Committee is responsible for establishing and overseeing all matters pertaining to compensation paid to directors for service on the Board +and its committees. +The following table sets +forth information concerning the 2024 Fiscal Year compensation of our non- employee directors who served in the 2024 Fiscal Year. Following +the table is a discussion of material factors related to the information disclosed in the table. Mr. Rosenfeld and Ms. Varela do not +receive any compensation for their service on the Board. +Name +Fees +Earned or +Paid +in Cash +($) +Stock +Awards +($)(1) +All Other Compensation +($) +Total +($) +Peter A. Davis (2) +85,000 +120,018 +— +205,018 +Al Ferrara (3) +120,000 +120,018 +— +240,018 +Mitchell S. Klipper (4) +95,000 +120,018 +— +215,018 +Maria Teresa Kumar (5) +85,000 +120,018 +— +205,018 +Rose Peabody Lynch (6) +95,000 +120,018 +— +215,018 +Peter Migliorini (7) +100,000 +120,018 +— +220,018 +Arian Simone Reed (8) +85,000 +120,018 +— +205,018 +Ravi Sachdev (9) +95,000 +120,018 +— +215,018 +Robert Smith (10) +95,000 +120,018 +— +215,018 +(1) Reflects the grant date fair value of stock awards calculated +in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) +Topic 718. Assumptions used in the calculation of these amounts are included in Note 8 to our audited financial statements for the fiscal +year ended December 31, 2024 included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 3, +2025. +21 +(2) At December 31, 2024, the aggregate number of shares of restricted +Common Stock held by Mr. Davis was 2,906, all of which were issued in the 2024 Fiscal Year, and Mr. Davis had no options outstanding. +(3) At December 31, 2024, the aggregate number of shares of restricted +Common Stock held by Mr. Ferrara was 2,906, all of which were issued in the 2024 Fiscal Year, and Mr. Ferrara had no options outstanding. +(4) At December 31, 2024, the aggregate number of shares of restricted +Common Stock held by Mr. Klipper was 2,906, all of which were issued in the 2024 Fiscal Year, and Mr. Klipper had no options outstanding. +(5) At December 31, 2024, the aggregate number of shares of restricted +Common Stock held by Ms. Kumar was 2,906, all of which were issued in the 2024 Fiscal Year, and Ms. Kumar had no options outstanding. +(6) At December 31, 2024, the aggregate number of shares of restricted +Common Stock held by Ms. Lynch was 2,906, all of which were issued in the 2024 Fiscal Year, and Ms. Lynch had no options outstanding. +(7) At December 31, 2024, the aggregate number of shares of restricted +Common Stock held by Mr. Migliorini was 2,906, all of which were issued in the 2024 Fiscal Year, and Mr. Migliorini had no options outstanding. +(8) At December 31, 2024, the aggregate number of shares of restricted +Common Stock held by Ms. Reed was 2,906, all of which were issued in the 2024 Fiscal Year, and Ms. Reed had no options outstanding. +(9) At December 31, 2024, the aggregate number of shares of restricted +Common Stock held by Mr. Sachdev was 2,906, all of which were issued in the 2024 Fiscal Year, and Mr. Sachdev had no options outstanding. +(10) At December 31, 2024, the aggregate number of shares of restricted +Common Stock held by Mr. Smith was 2,906, all of which were issued in the 2024 Fiscal Year, and Mr. Smith had no options outstanding. +Directors who are +also our employees are not paid any fees or other remuneration for service on the Board of Directors or any of its committees. In the +2024 Fiscal Year, each non-employee director received for service on the Board a grant of 2,906 shares of restricted Common Stock, vesting +on May 20, 2025, the first anniversary of the grant date, and was entitled to receive $75,000 for such service. +In the 2024 Fiscal Year, members of the +Audit Committee, Nominating/Corporate Governance Committee, Compensation Committee and Corporate Social Responsibility Committee were +each entitled to receive an additional $10,000 for serving on such committees. Additionally, the Chairman of the Audit Committee was entitled +to receive $35,000 for serving in this role and the Chairman of the Compensation Committee was entitled to receive an additional $15,000. +We reimburse our directors for any out-of-pocket expenses incurred by them in connection with services provided in such capacity, in accordance +with our business expense reimbursement guidelines. +STOCK OWNERSHIP +Security Ownership of Certain Beneficial Owners +The following table sets +forth information as of March 28, 2025 (unless otherwise indicated) with respect to the beneficial ownership of our Common Stock by each +person known by the Company to be the beneficial owner of more than 5% of the outstanding shares of our Common Stock. A person is deemed +to be a beneficial owner of any securities that that person has the right to acquire within 60 days. +Name and Address of Beneficial Owner +Amount +and Nature of Beneficial Ownership (1) +Percentage +of +Class +BlackRock Inc. 50 Hudson Yards +New York, NY 10001 +11,623,455 +16.02 % (2) +The Vanguard Group 100 Vanguard Boulevard +Malvern, PA 19355 +8,241,420 +11.36 % (3) +Macquarie Group Limited 50 Martin Place Sydney, +New South Wales Australia +5,174,755 +7.13 % (4) +Wellington Management Group LLP +c/o Wellington Management Company LLP 280 Congress Street Boston, MA 02210 +4,749,636 +6.54 % (5) +(1) Beneficial ownership as reported in the table below has been +determined in accordance with Item 403 of Regulation S-K and Rule 13d-3 of the Exchange Act and based upon 72,576,137 shares of Common +Stock outstanding (excluding treasury shares) as of March 28, 2025. +(2) Based solely on a Statement on Schedule 13G/A filed with the +SEC on February 5, 2025 by BlackRock, Inc. (“BlackRock”), BlackRock has sole voting power with respect to 11,505,553 of such +shares and sole dispositive power with respect to 11,623,455 of such shares. +(3) Based solely on a Statement on Schedule 13G/A filed with the +SEC on February 13, 2024 by The Vanguard Group (“Vanguard”), Vanguard has shared voting power with respect to 138,409 of +such shares, sole dispositive power with respect to 8,026,950 of such shares and shared dispositive power with respect to 214,470 of +such shares. +22 +(4) Based solely on a Statement on Schedule 13G/A filed with the +SEC on February 14, 2024 by Macquarie Group Limited (“Macquarie Group”), Macquarie Group is the beneficial owner of the following +shares of Common Stock by virtue of its direct or indirect ownership of the following companies: (i) Macquarie Investment Management +Business Trust (“Macquarie IM Business Trust”), which has sole voting power and sole dispositive power with respect to 5,174,755 +shares and (ii) Macquarie Management Holdings Inc. (“Macquarie Holdings”), which is deemed to be the beneficial owner of +5,174,755 , shares by virtue of its direct or indirect ownership interest in Macquarie IM Business Trust. The address of Macquarie Holdings +and Macquarie IM Business Trust is 610 Market Street, Philadelphia, PA 19106. +(5) Based solely on a Statement on Schedule 13G/A filed with the +SEC on November 8, 2024 by Wellington Management Group LLP (“Wellington”), Wellington has shared voting power with respect +to 4,126,970 of such shares and shared dispositive power with respect to 4,749,636 of such shares. +Security Ownership of Directors and Executive Officers +The following table +sets forth information as of March 28, 2025 (unless otherwise indicated) with respect to the beneficial ownership of Common Stock held +by (a) each current director and nominee; (b) our Chief Executive Officer, our Chief Financial Officer and our three most highly compensated +executive officers as of December 31, 2024 other than the Chief Executive Officer and the Chief Financial Officer (the “Named Executive +Officers”); and (c) all current directors and executive officers as a group. A person is deemed to be a beneficial owner of any +securities that that person has the right to acquire within 60 days. Each director and executive officer has sole voting power and sole +dispositive power with respect to all shares beneficially owned by him or her. +Name of Beneficial Owner (1) +Amount and +Nature of Beneficial Ownership(2) +Percentage of Class +Edward R. Rosenfeld +1,007,943 +1.39 % (3) +Peter A. Davis +6,824 +* (4) +Al Ferrara +18,291 +* (5) +Karla Frieders +87,903 +* (6) +Lisa Keith +29,043 +* (7) +Mitchell S. Klipper +24,649 +* (8) +Maria Teresa Kumar +4,400 +* (9) +Rose Peabody Lynch +21,303 +* (10) +Zine Mazouzi +77,994 +* (11) +Peter Migliorini +16,006 +* (12) +Arian Simone Reed +10,182 +* (13) +Ravi Sachdev +79,229 +* (14) +Robert Smith +15,324 +* (15) +Amelia Newton Varela +209,417 +* (16) +All Directors and Executive Officers as a Group (14 persons) +1,608,508 +2.22 % (17) +* Indicates beneficial ownership of less than 1%. +(1) The address for each of the individuals named above is c/o Steven +Madden, Ltd., 52-16 Barnett Avenue, Long Island City, New York 11104. +(2) Beneficial ownership as reported in the table above has been +determined in accordance with Item 403 of Regulation S-K and Rule 13d-3 of the Exchange Act and based upon 72,576,137 shares of Common +Stock outstanding (excluding treasury shares) as of March 28, 2025. +(3) Mr. Rosenfeld’s beneficial ownership includes: (i) 347,003 +shares of restricted Common Stock; (ii) 426,940 shares of Common Stock held by Mr. Rosenfeld without restriction, and (iii) 234,000 shares +of Common Stock held by the Rosenfeld 2021 Family Trust (the “Trust”). The Trust is for the benefit of Mr. Rosenfeld’s +spouse and children and his spouse is the sole trustee. Mr. Rosenfeld disclaims beneficial ownership of the Common Stock held by the +Trust. +(4) Mr. Davis’ beneficial ownership consists of (i) 2,906 +shares of restricted Common Stock and (ii) 3,918 shares of Common Stock held by Mr. Davis without restriction. +(5) Mr. Ferrara’s beneficial ownership consists of (i) 2,906 +shares of restricted Common Stock and (ii) 15,385 shares of Common Stock held by Mr. Ferrara without restriction. +(6) Ms. Frieders’ beneficial ownership consists of (i) 36,576 +shares of restricted Common Stock and (ii) 51,327 shares of Common Stock held by Ms. Frieders without restriction. +(7) Ms. Keith’s beneficial ownership consists of (i) 19,869 +shares of restricted Common Stock and (ii) 9,174 shares of Common Stock held by Ms. Keith without restriction. +(8) Mr. Klipper’s beneficial ownership consists of (i) 2,906 +shares of restricted Common Stock and (ii) 21,743 shares of Common Stock held by Mr. Klipper without restriction. +(9) Ms. Kumar’s beneficial ownership consists of (i) 2,906 +shares of restricted Common Stock and (ii) 1,494 shares of Common Stock held by Ms. Kumar without restriction. +(10) Ms. Lynch’s beneficial ownership consists of (i) 2,906 +shares of restricted Common Stock and (ii) 18,397 shares of Common Stock held by Ms. Lynch without restriction. +23 +(11) Mr. Mazouzi’s beneficial ownership includes: (i) 52,457 +shares of restricted Common Stock and (ii) 25,537 shares of Common Stock held by Mr. Mazouzi without restriction. +(12) Mr. Migliorini’s beneficial ownership includes: (i) 2,906 +shares of restricted Common Stock and (ii) 13,100 shares of Common Stock held by Mr. Migliorini without restriction. +(13) Ms. Reed’s beneficial ownership includes: (i) 2,906 shares +of restricted Common Stock and (ii) 7,276 shares of Common Stock held by Ms. Reed without restriction. +(14) Mr. Sachdev’s beneficial ownership includes: (i) 2,906 +shares of restricted Common Stock and (ii) 76,323 shares of Common Stock held by Mr. Sachdev without restriction. +(15) Mr. Smith’s beneficial ownership includes: (i) 2,906 shares +of restricted Common Stock and (ii) 12,418 shares of Common Stock held by Mr. Smith without restriction. +(16) Ms. Varela’s beneficial ownership includes: (i) 39,174 +shares of restricted Common Stock and (ii) 170,243 shares of Common Stock held by Ms. Varela without restriction. +(17) Includes, in the aggregate, (i) 521,233 shares of restricted +Common Stock; (ii) 853,275 shares of Common Stock held by such beneficial owners; and (iii) 234,000 shares of Common Stock held indirectly +by the Trust. +Delinquent Section 16(a) Reports +Section 16(a) of +the Securities Exchange Act of 1934 requires our Directors, executive officers and holders of more than 10% of our common stock to file +with the SEC reports regarding their ownership and changes in ownership of our securities. Based solely on our review of the copies of +Forms 3 and 4 (and any amendments) filed with the SEC and the written representations of our Directors and executive officers, we believe +that during fiscal year 2024 our Directors and executive officers complied with all Section 16(a) filing requirements . +EXECUTIVE COMPENSATION +Compensation Discussion and Analysis +Executive Summary +This Compensation +Discussion and Analysis describes the overall principles and objectives and specific features of our executive compensation program, primarily +focused on the executive compensation program’s application to our Chief Executive Officer and our other executive officers included +in the Summary Compensation Table for the Fiscal Year 2024, whom we refer to collectively in this Proxy Statement as the “Named +Executive Officers.” +In developing and evaluating +our executive compensation program, the Compensation Committee reviews our total stockholder return and annual financial results for prior +years and the extent to which those indicia correlate with executive compensation. +As part of our cash deployment +strategy to drive stockholder value and enhance stockholder returns, our Board of Directors approved four quarterly cash dividends on +outstanding Common Stock during 2024. We paid a quarterly cash dividend of $0.21 per share on each of March 22, 2024, June 21, 2024, September +23, 2024, and December 27, 2024, returning a total of $61.0 million to stockholders during the period in the form of dividends. We also +repurchased 2,300,900 shares of our Common Stock for approximately $98.4 million during 2024, which includes shares acquired through the +net settlement of employee stock awards. Since fiscal year 2013, the Company has returned approximately $1.7 billion to stockholders in +the form of share repurchases and dividends demonstrating our commitment to creating stockholder value. +Total revenue for +the 2024 Fiscal Year increased by 15.2% to $2.3 billion from $2.0 billion in the year ended December 31, 2023. Net income attributable +to the Company was $169.4 million, or $2.35 per diluted share, for the 2024 Fiscal Year as compared to net income of $171.6 million, or +$2.30 per diluted share, for the year ended December 31, 2023. On an adjusted basis, net income attributable to the Company was $192.4 +million, or $2.67 per diluted share, for the 2024 Fiscal Year as compared to adjusted net income of $182.7 million, or $2.45 per diluted +share, for the year ended December 31, 2023. +The preceding discussion +includes financial measures that are adjusted from the corresponding GAAP financial measures. We include a reconciliation of these adjusted +financial measures to the corresponding GAAP financial measures in Annex A to this Proxy Statement. +Our financial and +stock performance in the 2024 Fiscal Year informed our decisions regarding the bonuses paid to our Named Executive Officers. Because our +general practice is to award bonuses and grant equity based on Named Executive Officer performance for the preceding year, we believe +that we are able to maintain relative alignment between pay and performance. +24 +Compensation Objectives and Strategy +Our executive officer +compensation program is designed to attract and retain the caliber of officers needed to ensure our continued growth and profitability +and to reward them for their performance, for our performance and for creating long-term value for our stockholders. The primary objectives +of the program are to: +● align rewards with performance that creates stockholder value; +● support our strong team orientation; +● encourage high-potential team players to build a career at the +Company; and +● provide rewards that are cost-efficient, competitive with other +similarly positioned organizations and fair to employees and stockholders. +The Compensation +Committee of the Board of Directors approves and administers our executive compensation program. Working with management and outside advisors, +the Compensation Committee has developed a compensation and benefits strategy that rewards performance and reinforces a culture that the +Compensation Committee believes will drive long-term success and value creation. +The compensation +program rewards team accomplishments while promoting individual accountability. The executive officer compensation program depends in +significant measure on our results, but business unit results and individual accomplishments are also very important factors in determining +each executive’s compensation. We have a robust planning and goal-setting process that is fully integrated into the compensation +system, enhancing a strong relationship among individual efforts, Company results and financial rewards. +We place a major +portion of total compensation at risk through annual and long-term incentives. However, we may also pay discretionary bonuses to the Named +Executive Officers based on their performance during the preceding year. We designed the combination of incentives to balance annual operating +objectives and Company earnings performance with longer-term stockholder value creation. +To implement our +primary objectives, we seek to provide competitive compensation that is commensurate with performance. We target compensation at the median +of the market, as discussed below under “Pay Levels and Benchmarking,” and calibrate both annual and long-term incentive opportunities +to generate less-than-median awards when we do not fully achieve goals and greater-than-median awards when we exceed goals. +We believe that there +is great value to the Company in having a team of long-tenured, seasoned managers and seek to promote a long-term commitment from our +senior executives. We have designed our team-focused culture and management processes to foster this commitment. In addition, restricted +Common Stock awards that we granted to Named Executive Officers in the 2024 Fiscal Year reinforce this long-term orientation with annual +vesting over four to five years. +Role of the Compensation Committee +General. The +Compensation Committee provides overall guidance for our executive compensation policies and determines the amounts and elements of compensation +for our executive officers and outside directors. The Compensation Committee currently consists of four members of the Board of Directors, +Ms. Lynch and Messrs. Davis, Migliorini, and Smith, each of whom is an independent director under Rule 5605 of The Nasdaq Global Select +Market listing standards and a “non-employee director” as defined under the SEC’s rules. +When considering +decisions concerning the compensation of executives, other than the Chief Executive Officer, the Compensation Committee asks for the recommendations +of the Chief Executive Officer, including his detailed evaluation of each executive’s performance. +In accordance with +the Compensation Committee Charter, the Compensation Committee may form and delegate authority to subcommittees when appropriate. Additionally, +the Compensation Committee may delegate its authority to the Company’s officers with respect to the compensation of employees who +are not officers of the Company for purposes of Section 16 of the Exchange Act when appropriate. +25 +Use of Outside Advisors. +In making its determinations with respect to executive compensation, the Compensation Committee has historically engaged the services +of an independent compensation consulting firm. The Compensation Committee has retained the services of Arthur J. Gallagher & Co.’s +Human Resources & Compensation Consulting Practice (“Gallagher”) since 2005 to assist with its review of the compensation +packages and employment agreements of the Chief Executive Officer and other executive officers. In 2024, Gallagher worked with the Compensation +Committee to assess the reasonableness of grants of restricted Common Stock to our Named Executive Officers as compared with comparable +positions in the peer group that we list below. Gallagher also worked with the Compensation Committee to establish a bonus pool and individual +allocations from the pool for 2024. We based executive compensation for the Named Executive Officers on employment agreements with pay +structures and levels that we set with reference to competitive market studies that Gallagher performed just prior to the consummation +of the agreements. Gallagher completed position-specific competitive market studies when we approved the grants of restricted Common Stock +to Mr. Rosenfeld, Ms. Varela, Mr. Mazouzi, Ms. Keith and Ms. Frieders in the 2024 Fiscal Year. Gallagher provides only executive compensation +consulting services and works with management only at the behest of the Compensation Committee. +The Compensation Committee +retains Gallagher directly, although in carrying out assignments for the Company, Gallagher also interacts with our management, when necessary +and appropriate, to obtain compensation and performance data for the Company and our executives. In addition, Gallagher may, in its discretion, +seek input and feedback from management regarding its consulting work product for the Compensation Committee to confirm alignment with +our business strategy and identify data questions or other similar issues, if any, prior to completion of a project for the Compensation +Committee. +Independence of +Outside Advisors. The Compensation Committee has the sole authority to retain, terminate, approve the fees and set the terms of our +relationship with any outside compensation advisors who assist the Committee in carrying out its responsibilities. It may select or receive +advice from any compensation consultant or other advisor only after taking into consideration all factors relevant to the consultant’s +independence from management, including the factors set forth in Nasdaq rules and in the Compensation Committee Charter. Independence +factors that the Compensation Committee should consider under its charter include: (a) any other services that the consultant provides +to the Company, (b) any business or personal relationships the consultant has with a committee member or an executive officer of the Company, +and (c) whether the consultant has any policies in place to prevent conflicts of interest. +Accordingly, the +Compensation Committee reviews annually its relationship with Gallagher to ensure Gallagher’s independence on executive compensation +matters. Prior to selecting and receiving advice from Gallagher with respect to executive compensation in the 2024 Fiscal Year, the Compensation +Committee reviewed Gallagher’s independence and that of Gallagher’s individual representatives who served as the Committee’s +advisors. The Compensation Committee determined that no conflicts of interest exist between the Company and Gallagher or its representatives. +In reaching such determination, the Compensation Committee considered, among other things, the following factors: (i) that Gallagher provides +no services to the Company other than executive compensation consulting services; (ii) the fees we paid to Gallagher as a percentage of +Gallagher’s total revenue; (iii) the representations by Gallagher as to its policies and procedures that are designed to prevent +a conflict of interest; (iv) any business or personal relationships between the individual representatives of Gallagher who advised the +Compensation Committee and any member of the Compensation Committee; and (v) any business or personal relationships between our executive +officers and Gallagher or its individual representatives. +Consideration of +2024 Stockholder Say-on-Pay Vote. At our 2024 Annual Meeting of Stockholders, our stockholders overwhelmingly approved, on an advisory +basis, the compensation of our Named Executive Officers (over 93% of votes cast). This continues the string of 93% or higher approvals +that began with the initial say-on-pay vote in 2011. The Compensation Committee believes this level of stockholder support reflects a +very strong endorsement of our compensation policies and decisions. The Compensation Committee has considered the results of this advisory +vote on executive compensation in determining our compensation policies and decisions for 2025 and has determined that these policies +and decisions are appropriate and in our best interests and those of our stockholders at this time. +Compensation +Structure +Pay +Elements - Overview +We +use four main components of compensation: +● +base +salary; +● +annual +performance-based cash bonuses; +● +long-term +equity incentives (consisting of restricted stock, and, in certain cases, performance shares); and +● +benefits +and perquisites. +26 +Pay +Elements - Details +Base +Salary . We paid base salaries to each of the Named Executive Officers to provide them with fixed pay commensurate with the Named +Executive Officer’s role and responsibilities, experience, expertise, and individual performance. As we describe more fully in +the section of this Proxy Statement captioned “Employment Arrangements,” during 2024, we had employment agreements with each +of the Named Executive Officers that specified their base salary levels for 2024. The Compensation Committee, as constituted at the time +the parties entered into the employment agreements or any amendments to those agreements, reviewed and approved the salary that each +such agreement or amendment established. The Compensation Committee considered each employee’s salary history, value in our competitive +market and performance (including at the Company and previous employment). +Mr. +Rosenfeld’s annual base salary for 2024 was set pursuant to his employment agreement at $1,171,954. Under Mr. +Rosenfeld’s employment agreement entered into in 2024, the Board of Directors or a committee thereof will review his annual +base salary for potential increase (but not decrease), but he is not guaranteed future increases. Ms. Varela’s annual base +salary for 2024 was set pursuant to her employment agreement at $800,000. Mr. Mazouzi’s annual base salary for 2024 was set +pursuant to his employment agreement at $675,000. Ms. Keith’s annual base salary for 2024 was set pursuant to her employment +agreement at an annual rate of $400,000 through January 31, 2024 and at an annual rate of $425,000 from February 1, 2024 through the +remainder of the year. Ms. Frieders’ annual base salary for 2024 was set pursuant to her employment agreement at +$590,000. +Please +see the section of this Proxy Statement captioned “Summary Compensation Table for the Fiscal Year 2024” and “Employment +Arrangements” for a more detailed description of the employment agreements and compensation of the Named Executive Officers. The +2023 salaries and 2024 salary increases, if any, for our Named Executive Officers, as reflected in the following table, are generally +consistent with those of other management employees. +Named +Executive Officer +2023 +Salary +2024 +Salary +Edward +R. Rosenfeld +$ 1,126,879 +$ 1,171,954 +Amelia +Newton Varela +$ 775,000 +$ 800,000 +Zine +Mazouzi +$ 600,000 +$ 675,000 +Lisa +Keith +$ 400,000 * +$ 425,000 * +Karla +Frieders +$ 590,000 +$ 590,000 +*Ms. +Keith’s salary changes were effective on February 1 pursuant to her employment agreement. +Annual +Performance-based Cash Bonus . The respective employment agreements for our Named Executive Officers establish the structures for +their annual performance-based cash bonuses, if any. The Compensation Committee reviewed and approved the bonus provisions fixed in each +such employment agreement at the time the parties entered into such agreements and any amendments to those agreements. Such bonus provisions +generally provide for variable or discretionary bonuses that the Committee designed to reward attainment of business goals that create +stockholder value. +Mr. +Rosenfeld’s employment agreement, as in effect for 2024, makes him eligible to receive an annual performance-based +cash bonus to be determined by the Compensation Committee in its absolute sole discretion. +Ms. +Varela’s employment agreement entitles her to receive annual performance-based cash bonuses for Fiscal Years 2024 and 2025, determined +based on the Company’s actual earnings before interest and taxes, also referred to as the Company’s actual income from operations +(“EBIT”) for each year in accordance with the following schedule: +Bonus +as % of +EBIT +Salary +Maximum +(130% of Plan) +80 % +Target +(100% of Plan) +50 % +Threshold +(90% of Plan) +30 % +27 +Mr. +Mazouzi’s employment agreement entitles him to receive annual performance-based cash bonuses for Fiscal Years 2024, 2025, and 2026, +determined based on the Company’s actual diluted earnings per share, which we also refer to as diluted income per share (“EPS”), +for each year in accordance with the following schedule: +Diluted +EPS +Bonus +as % of Salary +Maximum +(130% of Plan) +90 % +Target (100% of Plan) +60 % +Threshold (90% of +Plan) +40 % +Ms. +Keith’s employment agreement entitles her to receive annual performance-based cash bonuses for Fiscal Years 2024, 2025, and 2026 +in amounts to be determined by the Company in its absolute discretion. +Ms. +Frieders’ employment agreement in effect for 2024 entitled her to receive an annual performance-based cash bonus for Fiscal Year +2024 in an amount to be determined by the Company in its absolute sole discretion. +As +provided in the Steven Madden, Ltd. 2019 Incentive Compensation Plan, the maximum payment that we may make to an individual under any +performance-based cash award during any fiscal year and subject to the attainment of specified performance goals is $10,000,000. The +Compensation Committee may, in its sole discretion, elect to pay an individual an amount that is less than the individual’s target +award regardless of the degree of attainment of the performance goals. +Taking +into account Gallagher’s recommendations based on comparisons with our peer group companies, including target annual incentive +compensation (which we discuss below under “Pay Levels and Benchmarking”), the individual performance of our Named Executive +Officers, our adjusted EBIT of $253.5 million for Fiscal Year 2024 resulted in a bonus payout representing 50.9% of the annual +salary in the case of Ms. Varela and our adjusted diluted EPS of $2.67 for Fiscal Year 2024 resulted in a bonus payout representing +62.2% of the annual salary in the case of Mr. Mazouzi, the Compensation Committee approved the following cash payments based on +performance during Fiscal Year 2024: +Named +Executive Officer +2024 +Annual Performance-Based +Cash +Bonus +Edward +R. Rosenfeld +$ 880,000 +Amelia +Newton Varela +$ 407,496 +Zine +Mazouzi +$ 420,045 +Lisa +Keith +$ 106,250 +Karla +Frieders +$ - +Adjusted +EBIT and adjusted diluted EPS represent financial measures that are adjusted from the corresponding GAAP financial measures. We include +a reconciliation of these adjusted financial measures to the corresponding GAAP financial measures in Annex A to this Proxy Statement. +In +Fiscal Year 2024, we established a bonus pool equal to 6.6% of our net income out of which any bonuses earned by our Named Executive +Officers and other key executives would be paid. The bonus pool, based on net income of $169.4 million for Fiscal Year 2024, was approximately +$11.2 million. +Long-term +Equity Incentives . Management and the Compensation Committee believe that equity-based awards are an important factor in aligning +the long-term financial interest of the executive officers and stockholders. The Compensation Committee continually evaluates the use +of equity-based awards and intends to continue to use such awards in the future as part of designing and administering our compensation +program. In Fiscal Year 2024, the Compensation Committee continued its practice in recent years of granting equity incentives in the +form of restricted stock, which the Compensation Committee believes provides both substantial incentive and retention characteristics. +The Committee also awarded Mr. Rosenfeld a grant of performance shares under the terms of his employment agreement. The Committee designed +these awards to provide emphasis on preserving stockholder value generated in recent years while providing significant incentives for +continuing growth in stockholder value. +We +determined the amounts of the equity-based awards that we granted to our Named Executive Officers in the Fiscal Year 2024 based on the +Committee’s evaluation of our performance during Fiscal Year 2023, Gallagher’s recommendations based on comparisons with +our peer group companies, including target incentive compensation (which we discuss below under “Pay Levels and Benchmarking”), +the individual performance of the Named Executive Officers and the terms of their individual employment agreements. On March 15, 2024, +we made a grant of 81,672 shares of restricted Common Stock to Mr. Rosenfeld, +28 +a grant of 6,005 shares of restricted Common Stock to Mr. +Mazouzi, a grant of 6,005 shares of restricted Common Stock to Ms. Varela and a grant of 2,402 shares of restricted Common Stock to Ms. +Frieders. Mr. Mazouzi also received a grant of 23,641 shares of restricted stock on January 2, 2024 pursuant to the terms of his employment +agreement. Ms. Keith also received grants of 5,833 and 8,044 shares of restricted Common Stock on February 1, 2024 and August 1, 2024, +respectively. Each of those grants vests 20% per year over five years commencing on the first anniversary of the grant date. In addition, +under the terms of his employment agreement, Mr. Rosenfeld received a grant of 86,476 performance shares with a grant date fair value +of approximately $3,600,000 that is eligible to be earned over the three-year performance period from 2024-2026 based on the Company’s +average annual return on capital over such performance period compared to the average annual return on capital of a predetermined peer +group. The peer group initially selected by the Committee for Mr. Rosenfeld’s performance shares was as follows: +Boot +Barn Holdings, Inc. (NYSE: BOOT) +G-III +Apparel Group, Ltd. (NasdaqGS: GIII) +Shoe +Carnival, Inc. (NasdaqGS: SCVL) +Caleres, +Inc. (NYSE: CAL) +Genesco +Inc. (NYSE: GCO) +Skechers +U.S.A., Inc. (NYSE: SKX) +Crocs, +Inc. (NasdaqGS: CROX) +Guess?, +Inc. (NYSE: GES) +The +Buckle, Inc. (NYSE: BKE) +Deckers +Outdoor Corporation (NYSE: DECK) +Lands’ +End, Inc. (NasdaqCM: LE) +The +Children’s Place, Inc. (NasdaqGS: PLCE) +Designer +Brands Inc. (NYSE: DBI) +Movado +Group, Inc. (NYSE: MOV) +Wolverine +World Wide, Inc. (NYSE: WWW) +Express, +Inc. (NYSE: EXPR) +Oxford +Industries, Inc. (NYSE: OXM) +Zumiez +Inc. (NasdaqGS: ZUMZ) +See +“Employment Arrangements” below for a further discussion of the equity-based awards we made to our Named Executive Officers. +The +Committee intends to continue to review the types of equity awards we grant to achieve appropriate incentives for both performance and +retention. During Fiscal Year 2022, the Committee adopted an equity grant practice of using March 15 as the fixed, annual grant date +for future equity grants relating to performance in the prior fiscal year. +Other +Benefits and Perquisites . Our executive compensation program also includes other benefits and perquisites that may vary among individual +executive officers. These benefits and perquisites include annual matching contributions to executive officers’ 401(k) plan accounts, +company-paid medical benefits and automobile allowances. The Compensation Committee annually reviews these other benefits and perquisites +and makes adjustments as warranted based on competitive practices, our performance and the executive’s responsibilities and performance. +The Compensation Committee has approved these other benefits and perquisites as a reasonable component of our executive officer compensation +program. Please see the section of this Proxy Statement captioned “Summary Compensation Table for the Fiscal Year 2024” and, +specifically, the column entitled “All Other Compensation” and the corresponding footnotes. +Pay +Mix +We +use the particular elements of compensation that we described above because we believe that doing so provides a well-proportioned mix +of secure compensation, retention value and at-risk compensation, which produces short-term and long-term performance incentives and +rewards. By following this approach, we seek to motivate the executives to focus on business metrics and other variables within their +particular sector that will increase sales and margins and at the same time lower costs so as to produce a high level of short-term and +long-term performance for the Company and long-term wealth creation for the executives, as well as reducing the risk of recruitment of +top executive talent by competitors. The mix of metrics that we used for the annual performance bonuses and our long- term incentive +program likewise provides an appropriate balance between short-term financial performance and long- term stock performance. +For +the Named Executive Officers, we have weighted the mix of compensation heavily towards at-risk pay (annual incentives and long-term incentives). +Maintaining this pay mix results fundamentally in a pay-for-performance orientation for our executives, which is aligned with our stated +compensation philosophy of providing compensation commensurate with performance. +Pay +Levels and Benchmarking +We +determine pay levels for our executives based on several factors, including the individual’s roles and responsibilities within +the Company, the individual’s experience and expertise, the pay levels for peers within the Company, pay levels in our competitive +market for similar positions, and performance of the individual and the Company as a whole. The Compensation Committee is responsible +for approving pay levels for the Named Executive Officers. In determining the pay levels, the Compensation Committee considers all forms +of compensation and benefits. +29 +The +Compensation Committee assesses the “competitive market” for compensation using several sources. The primary data source +that the Committee used in setting competitive market levels for the Named Executive Officers is the information publicly disclosed by +a peer group of the Company, which the Committee reviews annually and may change from year to year. For the 2024 Fiscal Year, the Compensation +Committee reviewed executive compensation and compensation design for the purpose of assessing bonus awards in early 2025 in the context +of overall compensation and in relation to the following peer companies: +Boot +Barn Holdings, Inc. +Designer +Brands Inc. +Movado +Group, Inc. +The +Buckle, Inc. +Columbia +Sportswear Company +Oxford +Industries, Inc. +Caleres, +Inc. +G-III +Apparel Group, Ltd. +Shoe +Carnival, Inc. +The +Children’s Place, Inc. +Genesco +Inc. +Skechers +U.S.A., Inc. +Crocs, +Inc. +Guess?, +Inc. +Wolverine +World Wide, Inc. +Deckers +Outdoor Corporation +Lands’ +End, Inc. +Zumiez +Inc. +Kontoor +Brands, Inc. +The +market capitalization and trailing twelve months revenue of the Company and each peer company follows: +Company +Market +Cap* +TTM +Revenue** +Steven +Madden, Ltd. +$ 3.1 +$ 2.28 +Boot +Barn Holdings, Inc. +$ 2.3 +$ 1.85 +The +Buckle, Inc. +$ 2.4 +$ 1.22 +Caleres, +Inc. +$ 1.1 +$ 2.78 +The +Children’s Place, Inc. +$ 0.3 +$ 1.43 +Crocs, +Inc. +$ 5.7 +$ 4.07 +Deckers +Outdoor Corporation +$ 17.2 +$ 4.92 +Designer +Brands Inc. +$ 0.5 +$ 3.05 +Columbia +Sportswear Company +$ 4.8 +$ 3.33 +G-III +Apparel Group, Ltd. +$ 1.6 +$ 3.11 +Genesco +Inc. +$ 0.4 +$ 2.32 +Guess?, +Inc. +$ 1.2 +$ 2.95 +Lands’ +End, Inc. +$ 0.3 +$ 1.44 +Movado +Group, Inc. +$ 0.7 +$ 0.66 +Oxford +Industries, Inc. +$ 1.6 +$ 1.53 +Shoe +Carnival, Inc. +$ 0.8 +$ 1.22 +Skechers +U.S.A., Inc. +$ 9.6 +$ 8.72 +Wolverine +World Wide, Inc. +$ 0.7 +$ 1.79 +Zumiez +Inc. +$ 0.4 +$ 0.89 +Kontoor +Brands, Inc. +$ 3.5 +$ 2.58 +* +Market +capitalization is as of December 31, 2024 as reflected in a report prepared by Gallagher, and is stated in billions +** +TTM +is the last four quarters of publicly reported revenue as of the Compensation Committee’s review of executive compensation +in early 2025 and is stated in billions. +Because +only four peer companies disclose compensation for a Chief Merchandising Officer, the Committee added seven additional companies with +respect to the consideration of Ms. Frieders’ compensation: Big Lots Inc., Burlington Stores Inc., Carter’s Inc., Citi Trends +Inc., Dollar General Inc., Express (former peer company) and Vince Holding Corp. +After +consideration of data on external competitive levels of compensation and internal needs, the Compensation Committee makes decisions regarding +the Named Executive Officers’ target total compensation opportunities based on the need to attract, motivate and retain an experienced +and effective management team. Relative to the competitive market data, the Compensation Committee generally intends that the base salary +and target incentive compensation, including both cash bonuses and equity-based compensation, for each Named Executive Officer will be +at the median of the competitive market. +As +noted above, despite our overall pay positioning objectives, pay opportunities for specific individuals vary based on factors such as +scope of duties, tenure, institutional knowledge and difficulty in recruiting a new executive. Actual total compensation in a given year +will vary above or below the target compensation levels based primarily on the attainment of operating goals and the creation of stockholder +value. +30 +Compensation +Committee Discretion +The +Compensation Committee has complete discretion whether to make cash performance bonuses or equity- based incentive awards, with the exception +of any such payouts that are to be made pursuant to contractual commitments. We describe factors to consider in making such awards under +“Annual Performance-Based Cash Bonuses” and “Long-term Equity Incentives” above. +Pay +Ratio +As +required by the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), the following disclosure +provides the relationship of the total annual compensation of our median-paid employee to the total annual compensation of our Chief +Executive Officer, Mr. Rosenfeld. +The +table below sets forth the total annual compensation for Mr. Rosenfeld and our median-paid employee, who is a store assistant manager, +and the ratio between the two. +Median +employee annual total compensation +$ 33,100 +Mr. +Rosenfeld annual total compensation +$ 9,078,571 +Ratio +of Chief Executive Officer to median employee compensation +$ 274:1 +We +determined our median-paid employee as of December 31, 2024, which date was within the last three months of the 2024 Fiscal Year, as +permitted by the pay ratio rule under the Dodd-Frank Act. In determining our median employee, we applied the “de minimis” +exemption under the rule, which allows the exemption of 5% or less of our total global workforce in jurisdictions outside of the U.S. +Our total global workforce as of December 31, 2024 was 4,400 employees. As such, we excluded all of our employees in each of Portugal, +25 employees; Taiwan, 45 employees; the Netherlands, 66 employees; Ecuador, 26 employees; Colombia, 24 employees; Panama, 5 employees; +Serbia, 14 employees and Croatia, 5 employees; which in total amounted to 210 employees, which was less than 5% of our total global workforce. +We did not exclude from consideration any employees who joined the Company during the 2024 Fiscal Year as the result of a business acquisition +or combination. Employees on leave of absence were excluded and wages and salaries were annualized for those employees who were not employed +for the entire 2024 Fiscal Year. To identify our median employee, we used payroll data consisting of salary, hourly wage, overtime wage, +bonus, commissions, vesting of equity awards and any similar payroll items for all of our employees included in the calculation. +For +purposes of determining the ratio, we determined our median-paid employee’s annual total compensation for the 2024 Fiscal Year +using the same method required for calculating our Chief Executive Officer’s (and other Named Executive Officers’) total +annual compensation for purposes of the Summary Compensation Table for the Fiscal Year 2024. +We +believe that the ratio stated above is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K. It +is based on the methodologies, assumptions and estimates described above and is not necessarily comparable to the ratios reported by +other companies. +Risk +Assessment +Bonus +payments to executives are either based on the discretion of the Compensation Committee or are tied to growth in various indicators of +financial performance, such as EBIT or diluted earnings per share. We have established long-term incentives in the form of time-vested +restricted stock that generally vests over four or five years and, in certain cases, performance-based equity awards. We believe these +forms of compensation have proved effective in rewarding performance while not encouraging inappropriate risk-taking. +The +Compensation Committee undertook to review and evaluate our executive and company-wide compensation program and plans to assess whether +any aspect of the program and these plans would encourage inappropriate risk-taking by our executives and non-executive employees that +could have a material adverse effect on the Company and to confirm that we have adequate risk management controls in place to ensure +that executive and company-wide compensation is reasonable and achieves its intended incentive without creating unacceptable risk. Based +on such review and evaluation, the Compensation Committee believes there is no material risk to the Company that is related to our compensation +program for executives and non-executive employees. +31 +This +review and evaluation of the risks associated with our compensation program and plans consisted of: +● +identifying +those business risks that could be material to the Company and identifying our existing risk management system; +● +reviewing +and analyzing our compensation program and plans to identify program and plan features that could potentially encourage or introduce +excessive or imprudent risk taking of a material nature; +● +identifying +the business risks that our compensation plan and program features could potentially encourage or create; +● +balancing +these business risks against our existing internal control systems designed to manage and mitigate these business risks; and +● +analyzing +whether the unmitigated risks, in part or as a whole, are reasonably likely to have a material adverse effect on the Company. +The +Committee consulted various persons during the course of the assessment, including our executive officers and senior members of our human +resources department. The Compensation Committee engages Gallagher to review our executive and company-wide compensation program and +plans and provide advice regarding appropriate levels of incentive. +The +Compensation Committee noted several features of our compensation structure that mitigate risk, including, for example: +● +we +use a pay mix that is well-balanced between short-term financial performance and long-term stock performance, consisting of secure +compensation in the form of base salary, short-term incentives in the form of potential for cash bonuses, and long-term incentives +in the form of time-vested restricted stock that generally vest over four or five years and, in certain cases, performance-based +equity awards; +● +in +most instances, management or the Compensation Committee retains the discretion to decrease all forms of incentive compensation based +on significant individual or Company performance shortfalls; +● +we +periodically benchmark our compensation program and plans and target executive and non-executive compensation within the normal limits +of the competitive market; and +● +the +Compensation Committee provides oversight of our compensation program and plans and compensation philosophy, makes recommendations +to the Board with respect to improvements to our compensation program and plans, and is responsible for reviewing and approving executive +compensation and administering and awarding incentive, deferred and equity compensation to our senior executives. +In +light of the assessment described above, the Compensation Committee concluded that the risks associated with our compensation program +and plans (executive and company-wide) are not reasonably likely to have a material adverse effect on the Company. +Implications +of Tax and Accounting Matters +As +a general matter, the Compensation Committee considers the various tax and accounting implications of compensation vehicles that we employ. +Although the Compensation Committee reviews and considers both the accounting and tax effects of various components of compensation, +those effects are not a significant factor in the Compensation Committee’s allocation of compensation among the different components. +Compensation +paid to certain covered employees, generally including our Named Executive Officers, generally is not deductible to the extent that the +compensation exceeds $1 million in any one year for any such covered employee under Code Section 162(m). The Compensation Committee believes +that our interests and those of our stockholders are best served by providing competitive levels of compensation, even if not fully deductible, +so some of the compensation that we have provided to our Named Executive Officers in the past, and that we provide to our executive officers +in the future, may not be deductible under Code Section 162(m). +As +more fully described below under the heading “Termination, Change-in-Control and Non- Competition/Non-Solicitation,” with +the exception of Ms. Frieders, all of our Named Executive Officers are entitled to receive certain compensation in the event of a termination +of employment in connection with a change-in-control event for the Company, which payments may trigger the application of the “golden +parachute” provisions of Sections 280G and 4999 of the Code. Section 280G of the Code disallows a tax deduction with respect to +excess parachute payments to certain executives of companies that undergo a change-in-control. In addition, Section 4999 of the Code +imposes a 20% excise tax on the individual +32 +receiving the excess parachute payment. Excess parachute payments are golden parachute payments +that exceed an amount determined under Section 280G based on the executive’s prior compensation. In approving the compensation +arrangements of our Named Executive Officers, our Compensation Committee considers all elements of the cost to the Company of providing +such compensation, including the potential impact of Sections 280G and 4999, which, under certain circumstances, may limit the deductibility +of executive compensation. However, our Compensation Committee may determine, in its judgment, to authorize compensation arrangements +that could give rise to loss of deductibility under Section 280G and the imposition of excise taxes under Section 4999 when it believes +that such arrangements are appropriate to attract and retain executive talent. +Clawback +Policy +We +have adopted a Recovery Policy (the “Clawback Policy”) that is designed to comply with NASDAQ Listing Rule 5608 relating +to such policies (with such listing rule itself having been adopted as required by SEC rules adopted pursuant to the Dodd-Frank Act). +The Clawback Policy applies to our executive officers, including the Named Executive Officers, and provides for the repayment of certain +incentive compensation received over a covered period if the Company is required to prepare an accounting restatement due to the material +noncompliance of the Company with any financial reporting requirement under the securities laws. The covered period under the Clawback +Policy is the three full fiscal years prior to the date the Company is required to prepare an accounting restatement. Compensation subject +to recovery is the amount of incentive-based compensation received that exceeds the amount of incentive- based compensation that otherwise +would have been received had it been determined based on the restated amounts. +Policies +and Practices for Granting Certain Equity Award +We +generally grant annual equity-based awards during the first half of our fiscal year, although such timing may change from year to year. +Our Compensation Committee also may consider and approve interim or mid-year grants, or grants made on another basis, from time to time +based on business needs, changing compensation practices or other factors, in the discretion of our Compensation Committee. Our Compensation +Committee does not take into account material nonpublic information in determining the timing and terms of equity-based awards, and we +have not timed the disclosure of material nonpublic information for the purpose of affecting the value of executive compensation. +Conclusion +The +Compensation Committee considers the level and mix of compensation that it finally decides upon as to each executive within the context +of both the objective data from our competitive assessment of compensation and performance, as well as the subjective factors as outlined +above. The Compensation Committee believes that each of the compensation packages for the Named Executive Officers is within the competitive +range of practices when compared to the objective comparative data even where subjective factors may have influenced the compensation +decisions. +Executive +Officers +The +following table identifies the executive officers of the Company as of the date of this Proxy Statement, and their ages and positions: +Name +Age +Position +Edward +R. Rosenfeld +49 +Chairman +of the Board and Chief Executive Officer +Amelia +Newton Varela +53 +President +Zine +Mazouzi +53 +Chief +Financial Officer and Executive Vice President of Operations +Karla +Frieders +48 +Chief +Merchandising Officer +Lisa +Keith +40 +Executive +Vice President, General Counsel and Secretary +Edward +R. Rosenfeld has served as our Chairman of the Board and Chief Executive Officer since August 2008 and has been a director of +the Company since February 2008. Mr. Rosenfeld, who joined our executive management team in May 2005, has more than two decades of experience +focused on the retail, apparel and footwear industries and possesses particular knowledge of and experience in the industry that strengthens +the Board’s collective qualifications, skills and experience. He has strong leadership skills and an in-depth understanding of +the Company and its goals from his positions as the Chairman of the Board and Chief Executive Officer. His background in finance and +his analytical skills gained through his years as a Vice President with Peter J. Solomon Company, an investment banking boutique, where +he specialized in mergers and acquisitions in the retail, apparel and footwear industries, provide the Board with insight and guidance +with respect to, among other things, strategic business development matters. Mr. Rosenfeld served as a director and chairman of the Audit +& Risk Management Committee of PVH Corp. (NYSE: PVH), one of the world’s largest apparel companies, from March 2013 until December +2023. +33 +Amelia +Newton Varela has served as President of the Company since September 2015 and has been a director since 2016. Prior to this tenure, +Ms. Varela was Executive Vice President of Wholesale of the Company since April 2008 and Executive Vice President of Wholesale Footwear +of the Company from November 2004 to April 2008. Previously, she was Vice President of Sales for Steve Madden Women’s Wholesale +Division from January 2000. Ms. Varela began her career with the Company in 1998 in the role of Account Executive for Steve Madden Women’s +Wholesale Division. She graduated from The Fashion Institute of Technology in 1995. Ms. Varela’s over 25 years of experience at +the Company provides relevant industry knowledge and expertise, and leadership to the Board. +Zine +Mazouzi has been our Chief Financial Officer since January 1, 2021 and previously served as our Chief Accounting Officer and +Senior Vice President of Finance and Operations from January 2019 until his appointment as our Chief Financial Officer. Prior to joining +the Company, he held various senior positions at Sears Holdings, a holding company for department stores, as the Chief Financial Officer +of Sears Footwear Group from 2016 to 2017, Head of the Footwear Group from 2017 to 2018 and Head of the Footwear, Home and Jewelry Groups +in 2018. Prior to that, he worked at Nine West Group from 1998 to 2015, where he held a number of increasingly senior positions, including +Chief Financial Officer from 2014 to 2015. Mr. Mazouzi received a Bachelor’s Degree in Finance and a Master of Business Administration +from Iona University. +Karla +Frieders has been our Chief Merchandising Officer since September 2015. Previously, Ms. Frieders served as President of Retail +from January 2013 until September 2015 and Vice President of Retail from October 2009 until January 2013. Prior to these roles, Ms. Frieders +held various buying positions at the Company since 1999. +Lisa +Keith has been our General Counsel since November 2019 and our Corporate Secretary since January 2021. Ms. Keith joined Steve +Madden’s Legal Department in May 2017 and previously served as Vice President and Deputy General Counsel. Prior to joining the +Company, Mrs. Keith was a senior associate at Davis Wright Tremaine LLP, a law firm, where she represented clients in the fashion, technology +and luxury goods industries. Ms. Keith began her legal career at Gibson, Dunn & Crutcher LLP, where she practiced in the litigation +department. She earned her J.D. from New York University School of Law and her B.A., summa cum laude, from Brandeis University, where +she was Phi Beta Kappa. +Please +see the section of this Proxy Statement captioned “Proposal One: Election of Directors” for biographical summaries and other +information concerning our Chairman of the Board and Chief Executive Officer, Edward R. Rosenfeld, and our President, Amelia Newton Varela, +as well as our other director nominees. +Summary +Compensation Table for the Fiscal Year 2024 +The +following table sets forth the compensation information for our Chief Executive Officer, Chief Financial Officer and the three most highly +compensated executive officers other than the Chief Executive Officer and Chief Financial Officer relating to the fiscal years ended +December 31, 2024, 2023 and 2022, respectively. In this Proxy Statement, we refer to this group of people as our “Named Executive +Officers.” +In +accordance with applicable SEC rules, the Summary Compensation Table for the Fiscal Year 2024 includes, for a particular fiscal year, +only those stock awards made during that fiscal year and not any awards made after year-end even if awarded for services rendered in +that year. SEC rules require that such awards be reflected in the year of grant and, as such, awards made after the end of the 2024 Fiscal +Year will appear in the Summary Compensation Table for the Fiscal Year 2024 to be included in our proxy statement for our 2026 Annual +Meeting of Stockholders. +34 +Stock +Option +Non-Equity +Incentive Plan +All +Other +Total +Name +and Principal +Fiscal +Salary +Bonus +Awards +Awards +Compensation +Compensation +Compensation +Position +Year +($) +($) +($) (1) +($) +($) +($) +($) +Edward +R. Rosenfeld +2024 +1,170,220 +— +7,000,001 +— +880,000 +28,350 (2) +9,078,571 +Chief +Executive Officer +2023 +1,125,212 +— +2,999,991 +— +880,000 +27,900 +5,033,103 +2022 +1,081,935 +— +5,499,990 +— +1,000,000 +27,150 +7,609,075 +Zine +Mazouzi +2024 +672,115 +— +1,250,002 +— +420,045 +22,004 (3) +2,364,167 +Chief +Financial Officer and +2023 +599,038 +— +450,023 +— +264,000 +24,900 +1,337,961 +Executive +Vice President of Operations +2022 +574,038 +— +250,002 +— +287,500 +24,150 +1,135,690 +Amelia +Newton Varela +2024 +799,038 +— +249,988 +— +407,496 +25,350 (4) +1,481,872 +President +2023 +774,037 +— +1,349,996 +— +303,708 +24,900 +2,452,641 +2022 +749,038 +— +250,002 +— +414,086 +24,150 +1,437,276 +Lisa +Keith +2024 +421,827 +— +599,997 +— +106,250 +16,404 (5) +1,144,478 +Executive +Vice President, +2023 +396,924 +100,000 +175,011 +— +— +5,920 +677,855 +General +Counsel and +Secretary +Karla +Frieders +2024 +590,000 +— +99,995 +— +— +6,600 (6) +696,595 +Chief +Merchandising +2023 +590,000 +— +649,997 +— +— +6,600 +1,246,597 +Officer +2022 +590,000 +— +500,003 +— +100,000 +6,354 +1,196,357 +(1) +The +amounts in this column reflect the total grant date fair value of awards granted during the applicable year for the fiscal years +ended December 31, 2024, December 31, 2023, and December 31, 2022, respectively, calculated in accordance with ASC Topic 718. Assumptions +used in the calculation of these amounts are included in Note 8, Note H, and Note I, respectively, to our audited financial statements +for the fiscal years ended December 31, 2024, December 31, 2023, and December 2022 included in our Annual Report on Form 10-K filed +with the Securities and Exchange Commission on March 3, 2025, March 4, 2024, and March 1, 2023, respectively. The amount shown for +Mr. Rosenfeld for 2024 includes a grant of performance shares with a fair value based on the probable outcome of the performance +goals at the time of grant of $3,599,996. The fair value of Mr. Rosenfeld’s performance shares assuming the highest level of +performance is achieved would be $6,659,993. +(2) +Consists +of an $18,000 automobile allowance and $10,350 in annual match contributions to Mr. Rosenfeld’s 401(k) plan account. +(3) +Consists +of a $15,000 automobile allowance and $7,004 in annual match contributions to Mr. Mazouzi’s 401(k) plan account. +(4) +Consists +of a $15,000 automobile allowance and $10,350 in annual matching contributions to Ms. Varela’s 401(k) plan account. +(5) +Consists +of a $10,615 automobile allowance and $5,789 in annual matching contributions to Ms. Keith’s 401(k) plan account. Since Ms. Keith +only became a named executive officer in 2023, we are only required to provide her 2024 and 2023 compensation. +(6) +Consists +of $6,600 in annual matching contributions to Ms. Frieders’ 401(k) plan account. +Employment +Arrangements +Edward +R. Rosenfeld. On February 27, 2024, based on the recommendation of the Compensation Committee, our Board of Directors approved, and +on February 27, 2024 we entered into, an employment agreement by and between us and Edward R. Rosenfeld, pursuant to which Mr. Rosenfeld +continued to serve as our Chief Executive Officer and executive Chairman of our Board of Directors (the “Rosenfeld Employment Agreement”). +The Rosenfeld Employment Agreement replaces Mr. Rosenfeld’s prior employment agreement that we entered into on December 31, 2021. +The +term of the Rosenfeld Employment Agreement (the “Term”) commenced on March 1, 2024 and will expire on February 28, 2029, +unless sooner terminated in accordance with its terms. +Pursuant +to the Rosenfeld Employment Agreement, Mr. Rosenfeld received an annual base salary of $1,171,954 for the period from March 1, 2024 +through February 28, 2025, and as of March 1, 2025 and as of each March 1 thereafter during the Term, the Board of Directors or a +committee thereof will review the annual base salary for potential increase (but not decrease). Mr. Rosenfeld will also receive a +monthly automobile allowance of $1,500 during the Term. +Pursuant +to the Rosenfeld Employment Agreement, on March 15, 2024, Mr. Rosenfeld received a grant under the Steven Madden, Ltd. 2019 Incentive +Compensation Plan (the “2019 Plan”) of restricted shares of the Company’s Common Stock with a value of $3,400,000 (the +“2024 Award”). The 2024 Award vests in five equal annual installments commencing on February 28, 2025. The 2024 Award was +approved by the Compensation Committee as part of our long-term equity compensation program and was not part of a multi-year guaranteed +equity payment. The Rosenfeld Employment Agreement provides that, on March 15, 2025 and on each March 15 thereafter through the remainder +of the Term, Mr. Rosenfeld will be +35 +eligible to receive an additional grant of time-vesting restricted stock shares or restricted stock +units in an amount to be determined by the Board of Directors or a committee of the Board of Directors, and such grants will be made +under the 2019 Plan (contingent on sufficient shares being available for issuance under the 2019 Plan at such time), will have terms +and conditions determined by the Board of Directors or a committee of the Board of Directors, and will be subject to an award agreement +under the 2019 Plan. +In +addition, under the terms of the Rosenfeld Employment Agreement, Mr. Rosenfeld is eligible to receive an annual grant of performance +shares in a target amount equal to $3,600,000 (the “Target Shares”) that will be eligible to be earned over a three-year +performance period based on the Company’s average annual return on capital over such performance period compared to the average +annual return on capital of a predetermined peer group, with such peer group having been approved by the Board of Directors or a committee +of the Board of Directors. The performance period for each grant will begin on January 1 of the year in which the grant occurs and will +end on December 31 of the second full calendar year following the year in which such grant occurs. The number of performance shares earned +will be determined based on the following payout scale (with linear interpolation between performance levels): +Payout +Level +Company’s +Percentile +Relative to Peer Group +% +of Target +Shares +Earned +Maximum +75 th +or higher +185 % +Target +50 th +100 % +Threshold +25 th +50 % +Below +Threshold +Below +25 th +0 % +Each +of the performance share grants will be subject to approval by the Board of Directors or a committee of the Board of Directors, will +be made under the 2019 Plan (contingent on sufficient shares being available in the 2019 Plan reserve) and will be subject to the terms +and conditions of a performance share award agreement. +The +Rosenfeld Employment Agreement permits the Company to terminate Mr. Rosenfeld’s employment at any time with or without Cause (as +defined under the Rosenfeld Employment Agreement), and Mr. Rosenfeld to resign from his employment at any time, with or without Good +Reason (also as defined under the Rosenfeld Employment Agreement). In the event that Mr. Rosenfeld’s employment should be terminated +by the Company for Cause or by Mr. Rosenfeld’s resignation without Good Reason, Mr. Rosenfeld would be entitled to receive only +his accrued and unpaid salary through the date of termination and, in the case of a resignation without Good Reason, the performance +shares earned during the prior performance period but not yet paid as of the date of termination. +In +the event that Mr. Rosenfeld’s employment should be terminated by the Company without Cause or by Mr. Rosenfeld’s resignation +for Good Reason, Mr. Rosenfeld would be entitled to receive, subject to the execution and non-revocation of a general release of claims +by Mr. Rosenfeld, (i) payment of his annual base salary, payable at regular payroll intervals, from the date of termination of employment +through the earlier of (a) the date that is twelve months after the date of termination or (b) the remainder of the Term, (ii) if such +termination occurs prior to March 15, any accrued and unpaid bonus amounts relating to the prior period, and (iii) a pro rata portion +of performance shares earned based on the achievement of the performance goals during the performance period, as well as any performance +shares earned during the prior performance period and not yet paid. +If +Mr. Rosenfeld’s employment should be terminated by the Company without Cause or by Mr. Rosenfeld’s resignation for Good Reason +during the period commencing 90 days prior to a Change of Control (as defined in the Rosenfeld Employment Agreement) and ending 180 days +after a Change of Control, Mr. Rosenfeld would be entitled to receive a cash payment in an amount equal to 2.5 times the sum of (i) the +annual base salary to which Mr. Rosenfeld was entitled as of the date of such termination plus (ii) the average annual bonus received +by him during the preceding three-year period ending on the last previous December 31st. +The +Rosenfeld Employment Agreement also contains customary restrictive covenants and other customary provisions. +36 +Zine +Mazouzi . On November 10, 2023, we entered into a new employment agreement with Zine Mazouzi (the “2023 Mazouzi Employment Agreement”), +which replaced his previous agreement. The term of the 2023 Mazouzi Employment Agreement commenced on January 1, 2024, and will continue +for three years through December 31, 2026, unless sooner terminated in accordance with the terms thereof. The 2023 Mazouzi Employment +Agreement provides for an annual base salary of $675,000, $700,000, and $725,000 for Fiscal Years 2024, 2025, and 2026, respectively, +and a monthly automobile allowance of $1,250 over the term of the agreement. In addition, pursuant to the 2023 Mazouzi Employment Agreement, +on December 1, 2023, Mr. Mazouzi was granted 5,147 restricted shares of the Company’s Common Stock and on January 2, 2024, Mr. +Mazouzi was granted 23,641 restricted shares of Common Stock, which vest 20% per year over five years commencing on January 2, 2025. +The +terms of the 2023 Mazouzi Employment Agreement entitle Mr. Mazouzi to receive annual performance-based cash bonuses for Fiscal Years +2024, 2025, and 2026 based on the following schedule: +Diluted +EPS +Bonus +as +% +of Salary +Maximum +(130% of Plan) +90 % +Target +(100% of Plan) +60 % +Threshold +(90% of Plan) +40 % +For +actual diluted earnings per share (EPS) amounts between the Threshold and Target amounts or between the Target and Maximum amounts, the +bonus payable is to be calculated based on a straight-line interpolation between the respective amounts. +Pursuant +to the terms of the 2023 Mazouzi Employment Agreement, we may terminate Mr. Mazouzi’s employment for “cause” (as defined +in the 2023 Mazouzi Employment Agreement), in which event Mr. Mazouzi would be entitled to receive only his accrued and unpaid base salary +through the date of termination. If we terminate Mr. Mazouzi’s employment without cause or Mr. Mazouzi terminates the Mazouzi Employment +Agreement “for good reason” (as defined in the Mazouzi Employment Agreement), Mr. Mazouzi would be entitled to receive, subject +to the execution and non-revocation of a general release of claims by Mr. Mazouzi, (i) payment of his annual base salary, payable at +regular payroll intervals, from the date of termination of employment through the earlier of (a) the date that is twelve months after +the date of termination or (b) the remainder of the term and (ii) if such termination occurs prior to March 15, any accrued and unpaid +bonus amounts relating to the prior period. In addition, if we terminate Mr. Mazouzi’s employment without cause or Mr. Mazouzi +terminates the 2023 Mazouzi Employment Agreement for good reason during the period commencing 30 days prior to a “Change of Control” +(as defined in the Mazouzi Employment Agreement) and ending 180 days following a Change of Control, he will be entitled to receive an +amount equal to the lesser of (A) two and one-half times the sum of (i) the annual base salary to which he was entitled as of the date +of termination plus (ii) the average cash bonus received by him for the preceding three-year period ending on the last previous December +31 or (B) the maximum amount that is tax deductible to the Company under Section 280G of the Internal Revenue Code of 1986, as amended. +Amelia +Newton Varela. On December 21, 2022, we entered into an employment agreement (the “Varela 2022 Agreement”) with Ms. Varela, +pursuant to which she will continue to serve as our President through December 31, 2025, unless sooner terminated in accordance with +the terms of the agreement. The Varela 2022 Agreement provides for an annual base salary of $775,000, $800,000, and $825,000 for Fiscal +Years 2023, 2024, and 2025, respectively, and a monthly automobile allowance of $1,250 during the term of the agreement. In addition, +on January 3, 2023, pursuant to the Varela 2022 Agreement, Ms. Varela was granted 35,177 restricted shares of the Company’s Common +Stock, which vest 25% per year over four years commencing on January 3, 2024. +The +terms of the Varela 2022 Agreement also entitle Ms. Varela to receive annual performance-based cash bonuses for Fiscal Years 2023, 2024, +and 2025, determined based on the Company’s actual EBIT for each year in accordance with the following schedule: +EBIT +Bonus +as +% +of Salary +Maximum +(130% of Plan) +80 % +Target +(100% of Plan) +50 % +Threshold +(90% of Plan) +20 % +For +actual EBIT amounts between the Threshold and Target amounts or between the Target and Maximum amounts, the bonus payable is to be calculated +based on a straight-line interpolation between the respective amounts. +37 +If +the Varela 2022 Agreement is terminated due to Ms. Varela’s “disability” (as defined in the agreement) or death, we +are obligated to pay Ms. Varela (or her estate) the amount of accrued and unpaid salary through the date of termination plus any performance-based +cash bonus that has accrued for the year prior to termination and is unpaid at the time Ms. Varela’s employment is terminated. +We may terminate the agreement for “cause” (as defined in the Varela 2022 Agreement), in which event she would be entitled +to receive only her accrued and unpaid salary through the date of termination. If we terminate Ms. Varela’s employment without +cause, she would be entitled to receive payment of her annual base salary, payable at regular payroll intervals, from the date of termination +of employment through the remainder of the term plus any performance-based cash bonus that has accrued but not yet been paid. In addition, +if we terminate Ms. Varela’s employment without cause during the period commencing 30 days prior to a “change of control” +(as defined in the Varela 2022 Agreement) transaction and ending 180 days after such change of control transaction, she would be entitled +to receive a cash payment in an amount equal to the lesser of (A) two and one-half times the sum of (i) the annual base salary to which +she was entitled as of the date of termination of employment plus (ii) the average cash bonus that she received for the preceding three +years ending on the last previous December 31 or (B) the maximum amount that is tax deductible to the Company under Section 280G of the +Code. +Lisa +Keith. On January 24, 2024, we entered into an employment agreement with Ms. Keith, as amended on May 6, 2024 (the “Keith 2024 +Agreement”) pursuant to which Ms. Keith continues to serve as our Executive Vice President – General Counsel. The Keith 2024 +Agreement became effective as of February 1, 2024. +The +term of the Keith 2024 Agreement commenced on February 1, 2024 and will continue for a term of three years through January 31, 2027, +unless sooner terminated in accordance with the terms thereof. Pursuant to the terms of the Keith 2024 Agreement, Ms. Keith will receive +an annual base salary of $425,000, $450,000, and $475,000 for each of the 12-month periods ended January 31, 2025, 2026, and 2027, respectively. +In addition, the Keith 2024 Agreement entitles Ms. Keith to an annual performance-based cash bonus for each of the fiscal years ending +December 31, 2024, 2025, and 2026 in an amount to be determined by the Company in its absolute discretion, which bonus, if any, will +be paid to her on or about March 15 of the year immediately following the year in which it was earned. Ms. Keith also received a grant +of 5,833 shares of restricted Common Stock on February 1, 2024, which vest 20% per year over five years commencing on February 1, 2025. The Keith 2024 Agreement also provides for a car allowance of $1,000 +per month. +If +we terminate Ms. Keith’s employment due to her “disability” (as defined in the Keith 2024 Agreement) or her death, +we are obligated to pay her (or her estate) the amount of accrued and unpaid salary through the date of termination of employment. We +may terminate Ms. Keith’s employment for “cause” (as defined in the Keith 2024 Agreement), in which event Ms. Keith +would be entitled to receive only her accrued and unpaid salary through the date of termination. The Keith 2024 Agreement provides that +if we terminate Ms. Keith’s employment without cause, Ms. Keith would be entitled to receive, subject to the execution and non-revocation +of a general release of claims by Ms. Keith, (i) payment of her annual base salary, payable at regular payroll intervals, from the date +of termination of employment through the earlier of (a) the date that is six months after the date of termination or (b) the remainder +of the term and (ii) if such termination occurs prior to March 15, any accrued and unpaid bonus amounts relating to the prior period. +Karla +Frieders. On May 15, 2023, we entered into an employment agreement with Ms. Frieders (the “Frieders 2023 Agreement”) +pursuant to which Ms. Frieders will continue to serve as our Chief Merchandising Officer. The Frieders 2023 Agreement became effective +as of May 1, 2023. +The +term of the Frieders 2023 Agreement commenced on May 1, 2023 and will continue for a term of three years through April 30, 2025, unless +sooner terminated in accordance with its terms. Pursuant to the terms of the Frieders 2023 Agreement, Ms. Frieders will receive an annual +base salary during the term of $590,000. In addition, the Frieders 2023 Agreement entitled Ms. Frieders to receive annual performance-based +cash bonuses for Fiscal Years 2023 and 2024 in amounts determined by the Company in its absolute discretion. Any bonus earned was paid +on or about March 15 of the year following the year in which it was earned. In addition, on June 1, 2023, pursuant to the Frieders 2023 +Agreement, Ms. Frieders was awarded 21,214 restricted shares of the Company’s Common Stock, which vest in five equal annual installments +commencing on June 1, 2024. +If +we terminate Ms. Frieders’ employment due to her “disability” (as defined in the Frieders’ Agreement) or her +death, we are obligated to pay her (or her estate) the amount of accrued and unpaid salary through the date of termination of employment. +We may terminate Ms. Frieders’ employment for “cause” (as defined in the Frieders 2023 Agreement), in which event Ms. +Frieders would be entitled to receive only her accrued and unpaid salary through the date of termination. The Frieders 2023 Agreement +provides that if we terminate Ms. Frieders’ employment without cause, Ms. Frieders would be entitled to receive payment of her +annual base salary, payable at regular payroll intervals, from the date of termination of employment through the earlier of (i) the date +that is one year after the date of termination, or (ii) the date that the Frieders 2023 Agreement would have otherwise terminated. +38 +Grants +of Plan-Based Awards in the 2024 Fiscal Year +The +following table sets forth information concerning awards under our equity and non-equity incentive plans granted to each of the Named +Executive Officers in the 2024 Fiscal Year. +Estimated +Future Payouts Under Non-Equity Incentive Plan Awards (1) +Estimated +Future Payouts Under Equity Incentive Plan Awards (2) +All +Other Stock Awards: Number of Shares of Stock or +All +Other Option Awards: Number of Securities Underlying +Exercise +or Base Price of Option +Grant +Date Fair Value of Stock and Option +Name +Grant +Date +Threshold +($) +Target +($) +Maximum +($) +Threshold +(#) +Target +(#) +Maximum +(#) +Units +(#) +Options +(#) +Awards +($/Sh) +Awards +($) +Edward +R. Rosenfeld +N/A +— +1,000,000 +— +— +— +— +— +— +— +— +3/15/2024 +— +— +— +— +— +— +81,672 +— +— +3,400,005 +3/15/2024 +— +— +— +43,238 +86,476 +159,981 +— +— +— +3,599,996 +Zine +Mazouzi +N/A +280,000 +420,000 +630,000 +— +— +— +— +— +— +— +1/2/2024 +— +— +— +— +— +— +23,641 +— +— +1,000,014 +3/15/2024 +— +— +— +— +— +— +6,005 +— +— +249,988 +Amelia +Newton Varela +N/A +247,500 +412,500 +660,000 +— +— +— +— +— +— +— +3/15/2024 +— +— +— +— +— +— +6,005 +— +— +249,988 +Lisa +Keith +N/A +— +112,500 +— +— +— +— +— +— +— +— +2/1/2024 +— +— +— +— +— +— +5,833 +— +— +250,002 +8/1/2024 +— +— +— +— +— +— +8,044 +— +— +349,995 +Karla +Frieders +3/15/2024 +— +— +— +— +— +— +2,402 +— +— +99,995 +(1) Consistent +with SEC regulations, because there were no thresholds, targets or maximums for the 2024 +annual bonus program for these Named Executive Officers, the amounts shown in the target +column (other than for Mr. Mazouzi and Ms. Varela) are representative amounts based on 2024 +performance. For Mr. Mazouzi and Ms. Varela, the amounts shown are based on the annual bonus +amounts set forth in their respective employment agreements. The bonus amounts actually earned +for 2024 are shown in the Non-Equity Incentive Plan Compensation column of the Summary Compensation +Table for the Fiscal Year 2024 above. +(2) Amounts +represent performance shares granted to Mr. Rosenfeld that will be earned and vested based +on our average annual return on capital compared to the average annual return on capital +of a designated peer group of companies over the performance period January 1, 2024 through +December 31, 2026. +Plan-Based +Awards +On +February 25, 2019, upon recommendation of the Compensation Committee, the Board unanimously approved the adoption of the Steven Madden, +Ltd. 2019 Incentive Compensation Plan (the “2019 Plan”), and on May 24, 2019, our stockholders approved the adoption of the +2019 Plan. The purpose of the 2019 Plan is to enhance our profitability and value for the benefit of our stockholders by enabling the +Company to offer eligible employees, consultants and non-employee directors cash and stock-based incentives to attract, retain and reward +such individuals and provide additional incentive for such persons to exert maximum efforts for our success by encouraging stock ownership +in the Company. The 2019 Plan serves as a means to strengthen the mutuality of interests between such individuals and our stockholders. +All of the equity and non-equity incentive awards granted to our Named Executive Officers in Fiscal Year 2024 were granted under the +2019 Plan. +39 +Outstanding +Equity Awards at End of the 2024 Fiscal Year +The +following table sets forth information concerning restricted stock that has not vested and stock awards outstanding for each of the Named +Executive Officers as of the end of the 2024 Fiscal Year. No stock options were outstanding for any of the Named Executive Officers as +of the end of the 2024 Fiscal Year. +Name +Number +of Shares or Units of Stock That Have Not Vested +(#) +Market +Value of Shares or Units of Stock That Have Not Vested +($) +Equity +Incentive Plan Awards: Number of Unearned +Shares, +Units or Other +Rights +That Have Not Vested +(#) +Plan +Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested +($) +Edward +R. Rosenfeld +305,540 (1) +12,991,561 +86,476 (1) +3,676,960 +Zine +Mazouzi +58,544 (2) +2,489,291 +— +— +Amelia +Newton Varela +54,007 (3) +2,296,378 +— +— +Lisa +Keith +22,063 (4) +938,119 +— +— +Karla +Frieders +37,705 (5) +1,603,217 +— +— +(1) On +March 16, 2020, Mr. Rosenfeld was awarded 108,030 shares of restricted Common Stock, which +vest in five equal annual installments commencing on March 1, 2021. On March 15, 2021, Mr. +Rosenfeld was awarded 50,569 shares of restricted Common Stock, which vest in five equal +annual installments commencing on March 1, 2022. On December 31, 2021, Mr. Rosenfeld was +awarded 75,317 shares of restricted Common Stock, which shares vest in five annual installments +of 15,063, 15,063, 15,063, 15,064, and 15,064 shares respectively, commencing on December +1, 2022. On February 1, 2022, Mr. Rosenfeld was awarded 60,532 shares of restricted Common +Stock, which shares vest in five annual installments commencing on February 1, 2023. On March +15, 2022, Mr. Rosenfeld was awarded 77,340 shares of restricted Common Stock, which shares +will vest in five equal annual installments commencing on March 1, 2023. On March 15, 2023, +Mr. Rosenfeld was awarded 86,480 shares of restricted Common Stock, which shares will vest +in five equal annual installments commencing on March 1, 2024. On March 15, 2024, Mr. Rosenfeld +was awarded 81,672 shares of restricted Common Stock, which shares will vest in five equal +annual installments commencing on February 28, 2025. On March 15, 2024, Mr. Rosenfeld was +also awarded 86,476 performance shares that will be eligible to be earned over the three-year +performance period from 2024-2026 based on the Company’s average annual return on capital +over such performance period compared to the average annual return on capital of a predetermined +peer group. The number of performance shares earned may range from zero to 185% of the target +number of performance shares, depending on the level of performance achieved. +(2) On +January 2, 2020, Mr. Mazouzi was awarded 2,320 restricted shares of Common Stock, which vest +in five substantially equal installments commencing on the first anniversary of the date +awarded. On August 3, 2020, Mr. Mazouzi was awarded 5,000 restricted shares of Common Stock, +which vest in five substantially equal installments commencing on the first anniversary of +the date awarded. On January 4, 2021, Mr. Mazouzi was awarded 29,155 restricted shares of +Common Stock, which vest in five substantially equal installments commencing on the first +anniversary of the date awarded. On March 15, 2021, Mr. Mazouzi was awarded 5,057 restricted +shares of Common Stock, which vest in five substantially equal installments commencing on +March 1, 2022. On March 15, 2022, Mr. Mazouzi was awarded 6,445 restricted shares of Common +Stock, which will vest in five equal annual installments commencing on March 1, 2023. On +March 15, 2023, Mr. Mazouzi was awarded 7,207 restricted shares of Common Stock, which will +vest in five equal annual installments commencing on March 1, 2024. On December 1, 2023, +Mr. Mazouzi was awarded 5,147 restricted shares of Common Stock, which will vest in five +equal annual installments commencing on December 1, 2024. On January 2, 2024, Mr. Mazouzi +was granted 23,641 restricted shares of Common Stock, which will vest 25% per year commencing +on January 2, 2025. On March 15, 2024, Mr. Mazouzi was granted 6,005 restricted shares of +Common Stock, which will vest in five equal annual installments commencing on March 1, 2025. +(3) On +January 2, 2020, Ms. Varela was awarded 27,000 restricted shares of Common Stock, which will +vest in five equal annual installments on each anniversary of the date of grant, commencing +on January 2, 2021. On March 1, 2021, Ms. Varela was awarded 26,350 restricted shares of +Common Stock, which will vest in four substantially equal annual installments on each anniversary +of the date of grant, commencing on March 1, 2022. On March 15, 2022, Ms. Varela was awarded +6,445 restricted shares of Common Stock, which will vest in five equal annual installments +commencing on March 1, 2023. On January 3, 2023, Ms. Varela was awarded 35,177 restricted +shares of Common Stock, which will vest in four equal annual installments commencing on January +3, 2024. On March 15, 2023, Ms. Varela was awarded 7,207 restricted shares of Common Stock, +which will vest in five equal annual installments commencing on March 1, 2024. On March 15, +2024, Ms. Varela was awarded 6,005 restricted shares of Common Stock, which will vest in +five equal annual installments commencing on March 1, 2025. +(4) On +February 1, 2021, Ms. Keith was awarded 8,912 restricted shares of Common Stock, which will +vest in five equal annual installments on each anniversary of the date of grant, commencing +on February 1, 2022. On March 15, 2022, Ms. Keith was awarded 1,289 restricted shares of +Common Stock, which will vest in five equal annual installments on each anniversary of the +date of grant, commencing on March 1, 2023. On February 1, 2023, Ms. Keith was awarded 4,808 +restricted shares of Common Stock, which will vest in five equal annual installments on each +anniversary of the date of grant, commencing on February 1, 2024. On February 1, 2024, Ms. +Keith was awarded 5,833 restricted shares of Common Stock, which will vest in five equal +annual installments on each anniversary of the date of grant, commencing on February 1, 2025. +On August 1, 2024, Ms. Keith was awarded 8,044 restricted shares of Common Stock, which will +vest in five equal annual installments on each anniversary of the date of grant, commencing +on August 1, 2025. +(5) On +May 11, 2020, Ms. Frieders was awarded 32,758 restricted shares of our Common Stock, which +will vest in five substantially equal annual installments commencing on May 1, 2021. On March +15, 2021, Ms. Frieders was awarded 10,114 restricted shares of our Common Stock, which will +vest in five substantially equal annual installments commencing on March 1, 2022. On March +15, 2022, Ms. Frieders was awarded 12,890 restricted shares of Common Stock, which will vest +in five equal annual installments commencing on March 1, 2023. On June 1, 2023, Ms. Frieders +was awarded 21,214 restricted shares of Common Stock, which will vest in five equal annual +installments commencing on June 1, 2024. On March 15, 2024, Ms. Frieders was awarded 2,402 +restricted shares of Common Stock, which will vest in five equal annual installments commencing +on March 1, 2025. +40 +Option +Exercises and Stock Vested in the 2024 Fiscal Year +The +following table sets forth information concerning stock options exercised and restricted stock vested during the 2024 Fiscal Year for +each of the Named Executive Officers. The value realized from exercised options is deemed to be the market value of the Common Stock +on the date of exercise, less the exercise price of the option, multiplied by the number of shares of Common Stock underlying the option. +The value realized from the vesting of restricted stock is deemed to be the market value of the Common Stock on the date of vesting multiplied +by the number of shares vesting. +Option Awards +Stock Awards +Name +Number of Shares Acquired on Exercise (#) +Value Realized on Exercise ($) +Number of Shares Acquired on Vesting (#) +Value Realized on Vesting ($) +Edward R. Rosenfeld +— +— +127,463 +5,491,617 +Zine Mazouzi +— +— +13,708 +573,692 +Amelia Newton Varela +— +— +23,514 +986,062 +Lisa Keith +— +— +3,002 +128,627 +Karla Frieders +— +— +18,447 +773,698 +Securities +Authorized for Issuance Under Equity Compensation Plans +The +following table sets forth information as of December 31, 2024 with respect to compensation plans (including individual compensation +arrangements) under which shares of Common Stock are authorized for issuance, aggregated as follows: +● All +compensation plans previously approved by security holders; and +● All +compensation plans not previously approved by security holders. +Equity +compensation plan information +Number +of securities to be issued +upon +exercise of outstanding options, warrants and rights +(#) +Weighted +average exercise price of outstanding +options, +warrants and rights +($) +Number +of securities remaining available for future issuance +under +equity compensation plans (excluding securities reflected in Column (a)) +(#) +Equity +compensation plans approved by security holders +1,268,000 +36.82 +10,411,378 +Equity +compensation plans not approved by security holders +— +— +— +Total +1,268,000 +36.82 +10,411,378 +Termination, +Change-in-Control and Non-Competition/Non-Solicitation +The +employment agreements for our Named Executive Officers during 2024 provided for severance benefits upon certain qualifying terminations +of employment. +Please +see the section of this Proxy Statement captioned “Employment Arrangements” for a summary description of the Named Executive +Officers’ employment agreements and such severance and change-in-control provisions. These benefits are described and quantified +in the section of this Proxy Statement captioned “Potential Payments Upon Termination or Change-In-Control” below. +We +believe that the severance payments and payments made upon change-in-control provisions in the employment agreements provide appropriate +protection to our executives, comparable to that available at peer companies and, with regard to the enhanced severance following a change-in-control, +protect the Company from losing key executives during a period when a change-in-control may be threatened or pending. These benefits +are described and quantified in the section below captioned “Potential Payments Upon Termination or Change-In-Control.” +Our +Named Executive Officers were each subject to customary restrictive covenants under the terms of their employment agreements. +41 +Potential +Payments Upon Termination or Change-In-Control +Our +employment agreements with the Named Executive Officers as in effect on December 31, 2024 provided for payments to such individuals upon +termination of employment or a change-in-control of the Company. Please see the section of this Proxy Statement captioned “Employment +Arrangements.” The table below assumes that the termination of employment occurred on December 31, 2024 and that the amounts would +be payable to the respective Named Executive Officer if such Named Executive Officer’s employment had been terminated under the +various scenarios set forth below. +Name +Cash +Payment +($) +Continuation +of +Medical +/ +Welfare +Benefits +(Present +Value) +($) +Acceleration +and +Continuation +of +Equity +Award +($) +Total +Termination +Benefits +($) +Termination +Due To Death +Edward +R. Rosenfeld +— +— +3,676,960 (2) +3,676,960 +Zine +Mazouzi +— +— +— +— +Amelia +Newton Varela +— +— +— +— +Lisa +Keith +— +— +— +— +Karla +Frieders +— +— +— +— +Termination +Due To Total Disability +Edward +R. Rosenfeld +— +— +3,676,960 (2) +3,676,960 +Zine +Mazouzi +— +— +— +— +Amelia +Newton Varela +— +— +— +— +Lisa +Keith +— +— +— +— +Karla +Frieders +— +— +— +— +Termination +for Cause; Resignation +Without +Good Reason +Edward +R. Rosenfeld +— +— +— +— +Zine +Mazouzi +— +— +— +— +Amelia +Newton Varela +— +— +— +— +Lisa +Keith +— +— +— +— +Karla +Frieders +— +— +— +— +Termination +Other Than for Cause; +Resignation +for Good Reason +Edward +R. Rosenfeld +1,171,954 (3) +— +— +1,171,954 +Zine +Mazouzi +700,000 (3) +— +— +700,000 +Amelia +Newton Varela +825,000 (3) +— +— +825,000 +Lisa +Keith +222,917 (3) +— +— +222,917 +Karla +Frieders +196,667 (3) +— +— +196,667 +Termination +Upon a Change-in-Control +Edward +R. Rosenfeld +5,329,885 (4) +— +16,668,520 (5) +21,998,405 +Zine +Mazouzi +2,576,250 (6) +— +2,489,291 (5) +5,065,541 +Amelia +Newton Varela +3,035,663 (7) +— +2,296,378 (5) +5,332,041 +Lisa +Keith +1,329,168 (8) +— +938,119 (5) +2,267,287 +Karla Frieders +196,667 (3) +— +1,603,217 (5) +1,799,884 +(1) +Mr. +Mazouzi’s, Ms. Varela’s and Ms. Keith’s employment agreements provide that severance payments in connection with +a change-in-control are limited if the severance payment, when added to any other benefits triggered by a change-of-control, is determined +to constitute an “excess parachute payment” under Sections 280G and 4999 of the Code, to the maximum amount that is deductible +to the Company under Section 280G of the Code. The employment agreement of Mr. Rosenfeld provides that the executive’s change-in-control +severance payment will only be reduced to the maximum amount that is deductible to the Company under Section 280G of the Code if +the reduction provides the executive with the best after-tax result; otherwise, the executive will receive the full amount of the +severance payment and other benefits triggered by the change-in-control and be liable for the 20% excise tax on the excess parachute +payment in addition to all other applicable taxes. In such case, our deduction of the portion of the severance payment constituting +an excess parachute payment will be disallowed. Because our agreements with the Named Executive Officers do not under any circumstances +provide for an increase in severance or other benefits due to the application of Sections 280G and 4999 of the Code, for purposes +of the disclosure above, we have calculated the potential amounts payable without taking into account the application of Sections +280G and 4999 of the Code. Upon the occurrence of a change-of-control, the amounts may be reduced due to the application of Section +280G and 4999 of the Code. +(2) +Consists +of Mr. Rosenfeld’s performance shares, which would vest in full. +(3) +Consists +of base salary continuation as severance payable pursuant to the Named Executive Officer’s employment agreement. Because the +performance period for the prior year bonus was completed as of December 31, 2024, no amount has been disclosed for such bonus. +42 +(4) +Consists +of two and one-half times the sum of (i) Mr. Rosenfeld’s 2025 base salary plus (ii) the average cash bonus received by Mr. +Rosenfeld for the three-year period ending on December 31, 2023. See the summary of Mr. Rosenfeld’s employment agreement under +“Employment Arrangements.” +(5) +The +amount disclosed represents the total value of the restricted stock and performance shares that would have received accelerated vesting +upon a hypothetical change-in-control and a qualifying termination of employment on December 31, 2024. +(6) +Consists +of two and one-half times the sum of (i) Mr. Mazouzi’s 2025 base salary plus (ii) the average cash bonus received by Mr. Mazouzi +for the three-year period ending on December 31, 2023. See the summary of Mr. Mazouzi’s employment agreement under “Employment +Arrangements.” +(7) +Consists +of two and one-half times the sum of (i) Ms. Varela’s 2025 base salary plus (ii) the average cash bonus received by Ms. Varela +for the three-year period ending on December 31, 2023. See the summary of Ms. Varela’s employment agreement under “Employment +Arrangements.” +(8) +Consists +of two and one-half times the sum of (i) Ms. Keith’s 2025 base salary plus (ii) the average cash bonus received by Ms. Keith +for the three-year period ending on December 31, 2023. See the summary of Ms. Keith’s employment agreement under “Employment +Arrangements.” +Compensation +Committee Report +The +Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with management, and based on the review and +discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included +in this Proxy Statement. +Submitted +by the Compensation Committee of the Board of Directors: +Peter +Migliorini (Chairman) +Peter +A. Davis +Rose +Peabody Lynch +Robert +Smith +Pay +Versus Performance +As +required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(v) of Regulation S-K, we are +providing the following information about the relationship between executive compensation actually paid and certain financial performance +of the Company. For further information concerning the Company’s variable pay-for-performance philosophy and how the Company aligns +executive compensation with the Company’s performance, refer to “Executive Compensation – Compensation Discussion and +Analysis.” +Year +(a) +Summary +Compensation Table Total For PEO +(b) 1 +Compensation +Actually Paid To PEO +(c) 2 +Average +Summary Compensation +Table +Total For Non-PEO NEO +(d) 3 +Average +Compensation +Actually +Paid To Non-PEO NEO +(e) 4 +Total +Shareholder Return +(f) 5 +Peer +Group Total Shareholder Return +(g) 6 +Net +Income (Loss) (in +thousands) +(h) 7 +Adjusted Diluted Income Per Share +(i) 8 +Value +of Initial Fixed +$100 +Investment Based on: +Year +(a) +Summary +Compensation Table Total For PEO +(b) 1 +Compensation +Actually Paid To PEO +(c) 2 +Average +Summary Compensation +Table +Total For Non-PEO NEO +(d) 3 +Average +Compensation +Actually +Paid To Non-PEO NEO +(e) 4 +Total +Shareholder Return +(f) 5 +Peer +Group Total Shareholder Return +(g) 6 +Net +Income (Loss) (in +thousands) +(h) 7 +Adjusted Diluted Income Per Share +(i) 8 +2024 +$ 9,078,571 +$ 9,686,830 +$ 1,421,778 +$ 1,474,342 +$ 107.97 +$ 284.77 +$ 169,390 +$ 2.67 +2023 +$ 5,033,103 +$ 9,359,656 +$ 1,428,763 +$ 1,933,048 +$ 151.14 +$ 252.60 +$ 171,554 +$ 2.45 +2022 +$ 7,609,075 +$ 1,935,729 +$ 1,148,601 +$ 686,226 +$ 110.96 +$ 192.41 +$ 216,061 +$ 2.80 +2021 +$ 7,566,831 +$ 11,498,936 +$ 1,711,424 +$ 2,175,266 +$ 157.42 +$ 210.40 +$ 190,678 +$ 2.50 +2020 +$ 2,872,859 +$ 562,398 +$ 1,074,114 +$ 1,210,677 +$ 117.95 +$ 150.13 +$ ( 18,397 ) +$ 0.64 +(1) +The +dollar amounts reported in column (b) are the amounts of total compensation reported for Mr. Rosenfeld (our Chief Executive Officer) +for each corresponding year in the “Total” column of the Summary Compensation Table for the Fiscal Year 2024. Refer to +“Executive Compensation – Summary Compensation Table for the 2024 Fiscal Year.” +(2) +The +dollar amounts reported in column (c) represent the amount of “compensation actually paid” to Mr. Rosenfeld, as computed +in accordance with Item 402(v) of Regulation S-K. The dollar amounts do not reflect the actual amount of compensation earned by or +paid to Mr. Rosenfeld during the applicable year. In accordance with the requirements of Item 402(v) of Regulation S-K, the following +adjustments were made to Mr. Rosenfeld’s total compensation for each year to determine the compensation actually paid: +(3) +The +dollar amounts reported in column (d) represent the average of the amounts reported for the Company’s named executive officers +(NEOs) as a group (excluding Mr. Rosenfeld, who has served as our CEO since 2008) in the “Total” column of the Summary +Compensation Table in each applicable year. The names of each of the NEOs (excluding Mr. Rosenfeld) included for purposes of calculating +the average amounts in each applicable year are as follows: (i) for 2024, Zine Mazouzi, Amelia Newton Varela, Lisa Keith, and Karla +Frieders; (ii) for 2023, Zine Mazouzi, Amelia Newton Varela, Lisa Keith, and Karla Frieders; (iii) for 2022, Zine Mazouzi, Amelia +Newton Varela, Karla Frieders, and Awadhesh Sinha; (iv) for 2021, Zine Mazouzi, Amelia Newton Varela, Karla Frieders, and Awadhesh +Sinha; and (v) for 2020, Arvind Dharia, Amelia Newton Varela, Karla Frieders, and Awadhesh Sinha. +(4) +The +dollar amounts reported in column (e) represent the average amount of “compensation actually paid” to the NEOs as a group +(excluding Mr. Rosenfeld), as computed in accordance with Item 402(v) of Regulation S-K. The dollar amounts do not reflect the actual +average amount of compensation earned by or paid to the NEOs as a group (excluding Mr. Rosenfeld) during the applicable year. In +accordance with the requirements of Item 402(v) of Regulation S-K, the following adjustments were made to average total compensation +for the NEOs as a group (excluding Mr. Rosenfeld) for each year to determine the compensation actually paid, using the same methodology +described above in Note 2: +(5) +Cumulative +TSR is calculated by dividing the sum of (i) the cumulative amount of dividends for the measurement period, assuming dividend reinvestment, +and (ii) the difference between the Company’s share price at the end and the beginning of the measurement period by the Company’s +share price at the beginning of the measurement period. +(6) +Represents +the weighted peer group TSR, weighted according to the respective companies’ stock market capitalization at the beginning of +each period for which a return is indicated. The peer group used for this purpose comes from the performance graph included in our +Annual Report on Form 10-K for the year ended December 31, 2024 and consists of seven companies: Caleres, Inc., Crocs, Inc., Deckers +Outdoor Corporation, Genesco Inc., Skechers U.S.A., Inc., Designer Brands Inc. and Wolverine World Wide, Inc. +(7) +The +dollar amounts reported represent the amount of net income reflected in the Company’s audited financial statements for the +applicable year. +(8) +The +Company has determined that adjusted diluted income per share is the financial performance measure that represents the most important +performance measure used by the Company to link compensation actually paid to the Company’s NEOs in the 2024 Fiscal Year to +Company performance. Adjusted diluted income per share is a non-GAAP measure that adjusts GAAP diluted income per share for certain +items. A reconciliation of GAAP diluted income per share to adjusted diluted earnings per share is included in the press release +filed as Exhibit 99.1 to our Current Report on Form 8-K filed with the SEC on February 26, 2025. +43 +Year +Reported +Summary Compensation Table Total for PEO +Reported +Value of Equity Awards (i) +Equity +Award Adjustments (ii) +Compensation +Actually Paid To PEO +2024 +$ 9,078,571 +$ ( 7,000,001 ) +$ 7,608,260 +$ 9,686,830 +2023 +$ 5,033,103 +$ ( 2,999,991 ) +$ 7,326,543 +$ 9,359,656 +2022 +$ 7,609,075 +$ ( 5,499,990 ) +$ ( 173,356 ) +$ 1,935,729 +2021 +$ 7,566,831 +$ ( 5,499,985 ) +$ 9,432,090 +$ 11,498,936 +2020 +$ 2,872,859 +$ ( 2,360,456 ) +$ 49,995 +$ 562,398 +(i) +The +reported value of equity awards represents the total of the amounts reported in the “Stock Awards” and “Option Awards” +columns in the Summary Compensation Table for the applicable year. +(ii) +The +equity award adjustments for each applicable year include the addition (or subtraction, as applicable) of the following: (i) the +year-end fair value of any equity awards granted in the applicable year that are outstanding and unvested as of the end of the year; +(ii) the amount of change as of the end of the applicable year (from the end of the prior fiscal year) in fair value of any awards +granted in prior years that are outstanding and unvested as of the end of the applicable year; (iii) for awards that are granted +and vest in same applicable year, the fair value as of the vesting date; (iv) for awards granted in prior years that vest in the +applicable year, the amount equal to the change as of the vesting date (from the end of the prior fiscal year) in fair value; (v) +for awards granted in prior years that are determined to fail to meet the applicable vesting conditions during the applicable year, +a deduction for the amount equal to the fair value at the end of the prior fiscal year; and (vi) the dollar value of any dividends +or other earnings paid on stock or option awards in the applicable year prior to the vesting date that are not otherwise reflected +in the fair value of such award or included in any other component of total compensation for the applicable year. The amounts deducted +or added in calculating the equity award adjustments are as follows: +Year +Year +End +Fair +Value +of +Equity Awards +Year +over +Year +Change +in +Fair Value +of +Outstanding +and +Unvested +Equity +Awards +Year +over Year +Change +in Fair Value +of +Equity Awards +Granted +in Prior +Years +that Vested in the Year +Value +of Dividends or +other +Earnings Paid on +Stock +or Option Awards +not +Otherwise Reflected +in +Fair Value or Total +Compensation +Total +Equity +Award +Adjustments +2024 +$ 7,149,653 +$ 71,444 +$ 138,171 +$ 248,992 +$ 7,608,260 +2023 +$ 3,632,160 +$ 2,659,104 +$ 737,808 +$ 297,471 +$ 7,326,543 +2022 +$ 4,406,389 +$ ( 3,985,142 ) +$ ( 945,391 ) +$ 350,788 +$ ( 173,356 ) +2021 +$ 5,849,922 +$ 3,131,154 +$ 244,307 +$ 206,707 +$ 9,432,090 +2020 +$ 3,815,620 +$ ( 2,387,322 ) +$ ( 1,447,074 ) +$ 68,771 +$ 49,995 +(3) +The +dollar amounts reported in column (d) represent the average of the amounts reported for the Company’s named executive officers +(NEOs) as a group (excluding Mr. Rosenfeld, who has served as our CEO since 2008) in the “Total” column of the Summary +Compensation Table in each applicable year. The names of each of the NEOs (excluding Mr. Rosenfeld) included for purposes of calculating +the average amounts in each applicable year are as follows: (i) for 2024, Zine Mazouzi, Amelia Newton Varela, Lisa Keith, and Karla +Frieders; (ii) for 2023, Zine Mazouzi, Amelia Newton Varela, Lisa Keith, and Karla Frieders; (iii) for 2022, Zine Mazouzi, Amelia +Newton Varela, Karla Frieders, and Awadhesh Sinha; (iv) for 2021, Zine Mazouzi, Amelia Newton Varela, Karla Frieders, and Awadhesh +Sinha; and (v) for 2020, Arvind Dharia, Amelia Newton Varela, Karla Frieders, and Awadhesh Sinha. +(4) +The +dollar amounts reported in column (e) represent the average amount of “compensation actually paid” to the NEOs as a group +(excluding Mr. Rosenfeld), as computed in accordance with Item 402(v) of Regulation S-K. The dollar amounts do not reflect the actual +average amount of compensation earned by or paid to the NEOs as a group (excluding Mr. Rosenfeld) during the applicable year. In +accordance with the requirements of Item 402(v) of Regulation S-K, the following adjustments were made to average total compensation +for the NEOs as a group (excluding Mr. Rosenfeld) for each year to determine the compensation actually paid, using the same methodology +described above in Note 2: +Year +Average +Reported +Summary +Compensation +Table +Total +for Non-PEO NEOs +Average +Reported +Value +of Equity Awards (i) +Average +Equity Award Adjustments (ii) +Average +Compensation +Actually +Paid to Non- PEO NEOs +2024 +$ 1,421,778 +$ ( 549,996 ) +$ 602,560 +$ 1,474,342 +2023 +$ 1,428,763 +$ ( 656,257 ) +$ 1,160,542 +$ 1,933,048 +2022 +$ 1,148,601 +$ ( 250,002 ) +$ ( 212,373 ) +$ 686,226 +2021 +$ 1,711,424 +$ ( 650,003 ) +$ 1,113,845 +$ 2,175,266 +2020 +$ 1,074,114 +$ ( 804,706 ) +$ 583,231 +$ 1,210,677 +(i) +The +average reported value of equity awards represents the average of the total amounts reported in the “Stock Awards” and +“Option Awards” columns in the Summary Compensation Table for the applicable year. +(ii) +The +amounts deducted or added in calculating the total average equity award adjustments are as follows: +44 +Year +Average +Year End Fair Value of Equity Awards +Year +over Year Average Change in Fair Value of Outstanding +and +Unvested Equity Awards +Year +over Year Average Change in Fair Value of Equity Award Granted in Prior Years That Vested +in +the +Year +Average +Value of Dividends or Other Earnings Paid on Stock or Option Awards Not Otherwise Reflected +in Fair Value +or +Total Compensation +Total +Average Equity Award +Adjustments +2024 +$ 552,016 +$ 15,651 +$ ( 526 ) +$ 35,420 +$ 602,561 +2023 +$ 847,980 +$ 246,733 +$ 30,364 +$ 35,465 +$ 1,160,542 +2022 +$ 205,982 +$ ( 392,470 ) +$ ( 53,429 ) +$ 27,544 +$ ( 212,373 ) +2021 +$ 821,078 +$ 235,259 +$ 32,832 +$ 24,676 +$ 1,113,845 +2020 +$ 840,098 +$ ( 108,114 ) +$ ( 153,423 ) +$ 4,670 +$ 583,231 +(5) +Cumulative +TSR is calculated by dividing the sum of (i) the cumulative amount of dividends for the measurement period, assuming dividend reinvestment, +and (ii) the difference between the Company’s share price at the end and the beginning of the measurement period by the Company’s +share price at the beginning of the measurement period. +(6) +Represents +the weighted peer group TSR, weighted according to the respective companies’ stock market capitalization at the beginning of +each period for which a return is indicated. The peer group used for this purpose comes from the performance graph included in our +Annual Report on Form 10-K for the year ended December 31, 2024 and consists of seven companies: Caleres, Inc., Crocs, Inc., Deckers +Outdoor Corporation, Genesco Inc., Skechers U.S.A., Inc., Designer Brands Inc. and Wolverine World Wide, Inc. +(7) +The +dollar amounts reported represent the amount of net income reflected in the Company’s audited financial statements for the +applicable year. +(8) +The +Company has determined that adjusted diluted income per share is the financial performance measure that represents the most important +performance measure used by the Company to link compensation actually paid to the Company’s NEOs in the 2024 Fiscal Year to +Company performance. Adjusted diluted income per share is a non-GAAP measure that adjusts GAAP diluted income per share for certain +items. A reconciliation of GAAP diluted income per share to adjusted diluted earnings per share is included in the press release +filed as Exhibit 99.1 to our Current Report on Form 8-K filed with the SEC on February 26, 2025. +Financial +Performance Measures +As +described in greater detail in “Executive Compensation – Compensation Discussion and Analysis,” the Company’s +executive compensation program reflects a variable pay-for-performance philosophy. The metrics that the Company uses for both our long-term +and short-term incentive awards are selected based on an objective of incentivizing our NEOs to increase the value of our enterprise +for our stockholders. The most important financial performance measures used by the Company to link executive compensation actually paid +to the Company’s NEOs, for the most recently completed fiscal year, to the Company’s performance are as follows: +● Adjusted +Diluted Income per Share +● Adjusted +EBIT +● Adjusted +EBITDA +● Revenue +● Return +on Invested Capital +Analysis +of the Information Presented in the Pay versus Performance Table +As +described in more detail in the section “Executive Compensation – Compensation Discussion and Analysis,” the Company’s +executive compensation program reflects a variable pay-for-performance philosophy. While the Company utilizes several performance measures +to align executive compensation with Company performance, all of those Company measures are not presented in the Pay Versus Performance +table. Moreover, the Company generally seeks to incentivize long-term performance, and therefore does not specifically align the Company’s +performance measures with compensation that is actually paid (as computed in accordance with Item 402(v) of Regulation S-K) for a particular +year. In accordance with Item 402(v) of Regulation S-K, the Company is providing the following graphs of the relationships between information +presented in the Pay Versus Performance table. +45 +The following graph reflects +the relationship between the amount of compensation actually paid to Mr. Rosenfeld, the average amount of compensation actually paid +to the Company’s NEOs as a group (excluding Mr. Rosenfeld) and the Company’s cumulative TSR over the five years presented +in the table. +The following graph reflects +the relationship between the amount of compensation actually paid to Mr. Rosenfeld, the average amount of compensation actually paid +to the Company’s NEOs as a group (excluding Mr. Rosenfeld) and the Company’s net income over the five years presented in +the table. +46 +The following graph reflects +the relationship between the amount of compensation actually paid to Mr. Rosenfeld, the average amount of compensation actually paid +to the Company’s NEOs as a group (excluding Mr. Rosenfeld) and the Company’s adjusted diluted earnings per share over the +five years presented in the table. +The following graph +reflects the relationship between the cumulative TSR of the Company and its peer group over the five-year period presented in the table. +For detail regarding the composition of the peer group, see footnote 6 to the table above. +47 +PROPOSAL TWO: +RATIFICATION OF +THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR ENDING DECEMBER +31, 2025 +On March 6, 2020, +the Audit Committee initially appointed Ernst & Young LLP (“EY”) as our independent registered public accounting firm +to conduct the audit of our books and records for the fiscal year ending December 31, 2020, and the Committee has appointed EY as our +independent registered public accounting firm to conduct the audit of our books and records for the fiscal years ending December 31, 2021, +December 31, 2022, December 31, 2023, +December 31, 2024, and December 31, 2025. +In evaluating the +selection of an independent registered public accounting firm for 2025, the Audit Committee considered several factors relating to potential +candidates, including audit quality, the benefits of our existing auditor’s familiarity with the Company versus a fresh perspective, +the key members of the audit engagement team, the most recent internal quality control review or Public Company Accounting Oversight Board +inspection, auditor independence and its process for maintaining independence, the risks of a change of auditors, and the firm’s +international scope and presence. In addition, the Audit Committee evaluated the Company’s requirements in light of the growth and +complexity of its business and the increasing international aspects of its operations. As a result of this evaluation, the Audit Committee +selected EY as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2025. +Although ratification +by stockholders is not required by our organizational documents or any applicable law, the Audit Committee has determined that requesting +ratification by stockholders of its appointment of EY as our independent registered public accountants is a matter of good corporate practice. +If stockholders do not ratify the selection, the Audit Committee will reconsider whether or not to retain EY, but may still retain that +accounting firm. Even if the selection is ratified, the Audit Committee, in its discretion, may change the appointment at any time during +the year if it determines that such a change would be in our best interest and that of our stockholders. +Representatives of +EY are expected to be present at the Annual Meeting to respond to appropriate questions and to make a statement should they so desire. +Required Vote +The affirmative +vote of a majority of the votes cast by the shares of Common Stock present or represented by proxy and entitled to vote at the Annual +Meeting is required to ratify the Audit Committee’s selection of EY. +Recommendation of the Board of Directors +The Board of Directors +unanimously recommends a vote “FOR” the ratification of the appointment of EY as our independent registered public accountants +for the fiscal year ending December 31, 2025. Unless marked to the contrary, proxies received from stockholders will be voted in favor +of ratifying the appointment of EY as our independent registered public accountants for the fiscal year ending December 31, 2025. +Independent Registered Public Accounting Firm’s Fees +and Services +The aggregate fees billed to the Company +by EY for professional services rendered for each of 2024 and 2023, respectively, are set forth below: +Year Ended December 31, +2024 +2023 +Audit Fees (1) +$ 3,177,900 +$ 2,773,000 +Audit-Related Fees (2) +845,000 +502,000 +Tax Fees (3) +483,500 +415,000 +All Other Fees +— +— +Total +$ 4,506,400 +$ 3,690,000 +(1) Represents the aggregate fees billed for (a) the audit of our +annual financial statements, (b) the reviews of the financial statements included in our Quarterly Reports on Form 10-Q, (c) other statutory +and regulatory filings or engagements and (d) the audit of our internal controls over financial reporting. +(2) Represents aggregate fees billed for due diligence procedures +performed in connection with acquisitions. +(3) Represents aggregate fees billed for tax advice, tax compliance +and consulting. Includes, among others, review and advice with respect to transfer pricing. +48 +Audit Committee’s Pre-Approval Policies and Procedures +Consistent with SEC policies +regarding auditor independence, the Audit Committee has responsibility for appointing, setting compensation and overseeing the work of +our independent registered public accountants. In recognition of this responsibility, the Audit Committee has established a policy to +review and pre-approve all audit and permissible non-audit services provided by the independent registered public accountants. These services +may include audit services, audit-related services, tax services and other services. +Prior to engagement of +the independent auditor for next year’s audit, the Audit Committee will pre-approve all auditing services and all permitted non-audit +services (including the fees and terms thereof), except those excluded from requiring pre-approval based upon the de minimus exception +set forth in Section 10A(i)(1)(B) of the Exchange Act and Rule 2-01(c)(7)(i)(C) of Regulation S-X. +The Audit Committee’s +pre-approval policies and procedures are as follows: (a) prior to each fiscal year, the Audit Committee pre-approves a schedule of estimated +fees for proposed non-prohibited audit and non-audit services; and (b) actual amounts paid are monitored by our financial management and +reported to the Audit Committee. +All work performed by EY as +described above under the captions Audit Fees, Audit-Related Fees, Tax Fees and All Other Fees has been approved or pre-approved by the +Audit Committee pursuant to the provisions of the Audit Committee’s charter. The Audit Committee did not approve any of the Audit +Fees, Audit-Related Fees, Tax Fees and All Other Fees described above pursuant to a de minimis exception set forth in Rule 2-01(c)(7)(i)(C) +of Regulation S-X. The Audit Committee has considered and concluded that the provision of non-audit services is compatible with maintaining +the independence of EY. +AUDIT COMMITTEE REPORT +The Audit Committee reviewed +the Company’s audited financial statements for the 2024 Fiscal Year and met with both management and representatives of EY, our +independent registered public accountants for that year, to discuss such audited financial statements. Management and our independent +registered public accountants have represented to the Audit Committee that the financial statements were prepared in accordance with accounting +principles generally accepted in the United States of America. The Audit Committee has received from and discussed with EY the written +disclosures and the letter regarding EY’s communications with the Audit Committee concerning independence as required by applicable +requirements of the Public Company Accounting Oversight Board and discussed with EY the independence of EY. The Audit Committee also discussed +with EY any matters required to be discussed by applicable requirements of the Public Company Accounting Oversight Board and the SEC. +Based on these reviews and discussions, the Audit Committee recommended to the Board that the Company’s audited financial statements +be included in the Company’s Annual Report on Form 10-K for the 2024 Fiscal Year. +Submitted by the Audit +Committee of the Board of Directors: +Al Ferrara (Chairman) +Mitchell S. Klipper +Rose Peabody Lynch +49 +PROPOSAL THREE: +NON-BINDING ADVISORY VOTE ON EXECUTIVE +COMPENSATION +Section 14A of the +Exchange Act, as created by Section 951 of the Dodd-Frank Act, and the rules and regulations promulgated thereunder require a publicly +traded company to include a resolution in its proxy statement at least once every three years seeking stockholder approval, on an advisory +or non-binding basis, of the compensation of the named executive officers as disclosed in such company’s proxy statement pursuant +to the compensation rules of the SEC. At our 2023 Annual Meeting of Stockholders, our stockholders approved, on an advisory basis, the +holding of an advisory vote to approve executive compensation (commonly known as a “say-on-pay” proposal) annually. Based +on these results, the Board of Directors determined to hold its advisory vote to approve executive compensation annually until the next +frequency vote, which is scheduled to occur at our 2026 Annual Meeting. Accordingly, we are providing stockholders with a non-binding +advisory vote on the compensation of our Named Executive Officers. +As described in more +detail in the Compensation Discussion and Analysis section, which begins on page 24 of this Proxy Statement, the overall objective of +our executive compensation program and plans is to support delivery of sustained operating and financial performance results with the +ultimate goal being to create and maximize value for our stockholders on a long-term basis. We believe that our executive compensation +program and plans serve the interests of our stockholders by enabling the Company to attract and retain an experienced and effective management +team whose combined knowledge of our business and the fashion footwear and accessories industries has proved extremely valuable in delivering +results for our stockholders. The Compensation Committee and the Board of Directors believe that our compensation program and plans as +articulated in the Compensation Discussion and Analysis section of this Proxy Statement effectively implement our philosophy of aligning +compensation to stockholder interests and that the compensation received by our Named Executive Officers in the 2024 Fiscal Year reflects +and supports such philosophy and goal and is commensurate with our performance and strategic position. We will continue to review and +modify our executive compensation program to address evolving best practices and changing regulatory requirements. +We encourage stockholders +to read the Compensation Discussion and Analysis section of this Proxy Statement, as well as the Summary Compensation Table for the Fiscal +Year 2024 and other related compensation tables and narrative disclosure contained in this Proxy Statement, all of which describe and +explain in detail the compensation of our Named Executive Officers in the 2024 Fiscal Year. +The following resolution is submitted for stockholder approval: +RESOLVED , that the stockholders of +Steven Madden, Ltd. (the “Company”) approve, on a non-binding advisory basis, the compensation paid to the Named Executive +Officers of the Company as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including +the executive compensation as described in the section captioned “Compensation Discussion and Analysis,” the Summary Compensation +Table for the Fiscal Year 2024 and related tabular disclosure and narrative discussion regarding compensation of Named Executive Officers +under the caption “Executive Compensation” contained in the Company’s Proxy Statement for the 2025 Annual Meeting of +Stockholders. +This vote is not intended +to address any specific item of compensation, but rather the overall compensation of our Named Executive Officers and the compensation +program and plans described in this Proxy Statement. While this advisory vote on executive compensation, commonly referred to as a “say-on-pay” +advisory vote, is required by Section 14A of the Exchange Act, it is not binding on our Board of Directors and may not be construed as +overruling any decision by the Board of Directors or the Compensation Committee. However, we value the opinions of our stockholders. To +the extent there is a significant vote against the compensation of the Named Executive Officers as disclosed in this Proxy Statement, +the Board of Directors and the Compensation Committee will consider the outcome of the vote when considering future compensation arrangements +and evaluate whether any actions are necessary to address the stockholders’ concerns. +Required Vote +Approval of this resolution requires the +affirmative vote of a majority of the votes cast by the shares of Common Stock present or represented by proxy and entitled to vote at +the Annual Meeting. +Recommendation of the Board of Directors +The Board of Directors unanimously recommends +a vote “FOR” the resolution approving the overall compensation of the Named Executive Officers for the 2024 Fiscal Year. +50 +ANNEX A – RECONCILIATION OF ADJUSTED RESULTS +(NON-GAAP) +The Proxy Statement +provides our financial results both in accordance with generally accepted accounting principles in the United States (“GAAP”) +and using certain non-GAAP financial measures. In particular, the Proxy Statement provides our historic net income and income per diluted +share adjusted to exclude certain charges and recoveries, which are non-GAAP financial measures. We use non-GAAP financial information +to evaluate its operating performance and to represent the manner in which we conduct and view our business. Additionally, we believe +the information assists investors in comparing our performance across reporting periods on a consistent basis by excluding items that +are not indicative of its core business. The non-GAAP financial information is provided in addition to, and not as an alternative to, +our reported results prepared in accordance with GAAP. +Reconciliation of +Net Income and Diluted Income Per Share (GAAP Basis) to Adjusted Net Income and Adjusted Diluted Income Per Share (Non-GAAP Basis) and +Reconciliation of Earnings Before Interest and Taxes (GAAP Basis) to Adjusted Earnings Before Interest and Taxes (Non-GAAP +Basis) (In 000’s): +Year Ended December 31, +2024 +2023 +GAAP net income attributable to Steven Madden, Ltd. +$ 169,390 +$ 171,554 +After-tax impact of expense in connection with impairment of certain trademarks +7,900 +4,984 +After-tax impact of expense in connection with acquisitions, formation of joint ventures and reorganization of foreign entities +5,180 +1,867 +After-tax impact of expense in connection with a divestiture of a business +3,749 +- +After-tax impact of expense in connection with legal settlements and related fees +2,575 +- +After-tax impact of expense in connection with the change in valuation of contingent consideration liability +2,085 +- +After-tax impact of expense in connection with certain severances, termination benefits and a corporate office relocation +1,334 +2,878 +After-tax impact of expense in connection with the purchase accounting fair value adjustment of inventory acquired in connection with acquisitions +332 +1,546 +After-tax impact of expense in connection with the write-off of an investment +- +2,273 +After-tax impact of benefit in connection with the dissolution of a joint venture +- +(1,630 ) +After-tax impact of benefit in connection with a deferred tax adjustment +- +(291 ) +Less: Adjustments attributable to noncontrolling interest in connection with a trademark impairment +(155 ) +(498 ) +Adjusted net income attributable to Steven Madden, Ltd. +$ 192,390 +$ 182,683 +GAAP diluted income per share +$ 2.35 +$ 2.30 +Adjusted diluted income per share +$ 2.67 +$ 2.45 +Year Ended December 31, +2024 +2023 +GAAP earnings before interest and taxes +$ 224,939 +$ 213,222 +Pre-tax impact of expense in connection with impairment of certain trademarks +10,335 +6,520 +Pre-tax impact of expense in connection with acquisitions, formation of joint ventures and reorganization of foreign entities +6,703 +2,443 +Pre-tax impact of expense in connection with a divestiture of a business +3,199 +- +Pre-tax impact of expense in connection with legal settlements and related fees +3,377 +- +Pre-tax impact of expense in connection with the change in valuation of contingent consideration liability +2,722 +- +Pre-tax impact of expense in connection with certain severances, termination benefits and a corporate office relocation +1,758 +3,803 +Pre-tax impact of expense in connection with the purchase accounting fair value adjustment of inventory acquired in connection with acquisitions +435 +2,023 +Pre-tax impact of expense in connection with the write-off of an investment +- +2,712 +Pre-tax impact of benefit in connection with the dissolution of a joint venture +- +(2,174 ) +Adjusted earnings before interest and taxes +$ 253,468 +$ 228,549 +A- 1 \ No newline at end of file diff --git a/raw/proxies/0000913241/0001641172-25-002947/proxy_rpt.txt b/raw/proxies/0000913241/0001641172-25-002947/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..8ab9c0a4f6a144f1675b7c995aa90e4e1b12dbe7 --- /dev/null +++ b/raw/proxies/0000913241/0001641172-25-002947/proxy_rpt.txt @@ -0,0 +1,77 @@ +Certain Relationships and Related Party Transactions +Steven Madden Employment +Agreement. We believe that Steven Madden, our founder and Creative and Design Chief, provides unique and significant value in guiding +the leadership of our creative process, both in his hands-on work for the Company and his collaboration with our designers, product professionals +and marketing executives. In addition, the public’s association of Mr. Madden’s name and likeness with our branded products +is significant, meaningful, and integral to our success and has been, and continues to be, instrumental in creating long- term stockholder +value. Based upon that belief, we further believe that his continuing involvement with the Company is essential, and to this end, we have +for many years had an employment agreement with Mr. Madden as described below. +Mr. Madden’s agreement +in its current form dates back to July 1, 2005, as subsequently amended on various occasions, most recently on November 10, 2023 (the +“SM Agreement”). Under the SM Agreement, Mr. Madden has agreed to continue to serve as our Creative and Design Chief for +a term continuing through December 31, 2031, for a base salary of $7,026,042 per annum through December 31, 2026, together with the potential +for cash bonuses at the sole discretion of our Board of Directors and an annual life insurance premium reimbursement of up to $200,000. +Effective January 1, 2027, Mr. Madden’s base salary will increase to $7,377,374 until December 31, 2028, and effective January +1, 2029, through the remainder of the term, Mr. Madden’s base salary will be increased to $7,746,211. +Under the SM Agreement, +Mr. Madden is also eligible to receive annually, on or about the date of our annual meeting of stockholders (but not later than June 30), +an option (the “Annual Option”) to purchase shares of Common Stock equal to the greater of (a) 100% of the largest aggregate +number of shares of Common Stock available upon the exercise of an option or options granted to any other continuing full-time employee +of the Company during the preceding twelve-month period or (b) 225,000 shares of Common Stock; provided, however, that a grant to Mr. +Madden in excess of 150% of the number of shares of Common Stock subject to options granted to such other continuing full-time employee +would require stockholder approval. Any Annual Option so granted vests quarterly over a one-year period and is exercisable for a period +of five years at a price equal to the closing price of our Common Stock on the grant date. +Under the SM Agreement, +if Mr. Madden dies, his estate would receive a payment equal to his base salary for the 24-month period immediately after the date of +his death. Further, if Mr. Madden’s employment is terminated due to his total disability (as defined in the agreement), “for +cause” (as defined in the agreement) or due to Mr. Madden’s resignation, we are obligated to pay Mr. Madden the amount of +compensation that is accrued and unpaid through the date of termination. If Mr. Madden’s employment is terminated for any reason +(other than “for cause” or due to his death, total disability or resignation), we are obligated to pay Mr. Madden, in installments, +the balance of his base salary through the end of the term of the SM Agreement. If, during the period commencing 120 days prior to a “change +of control” transaction (as defined in the SM Agreement) and ending on the first anniversary of a change of control transaction, +Mr. Madden’s employment is terminated other than “for cause” (as defined in the SM Agreement) all unvested options held +by Mr. Madden will be accelerated and vest on the date of termination or resignation, or if the employment termination occurred prior +to the change of control, on the date of such change of control, and Mr. Madden will be entitled to receive a lump sum cash payment equal +to the amount of compensation that is accrued and unpaid through the date of termination plus $35 million. The SM Agreement contains other +customary provisions, including provisions regarding expense reimbursement, confidentiality, non-solicitation and non-competition. +For the 2024 Fiscal +Year, Mr. Madden earned $7,026,042 in base salary and received $200,000 for the payment of an annual life insurance premium. Mr. Madden +also received his Annual Option for the 2024 Fiscal Year to purchase 225,000 shares of Common Stock at a price per share of $41.30. +The most recent +amendment entered into on November 10, 2023, effected the extension of the term of the SM Agreement for five years through December 31, +2031. In connection with the extension, we agreed to pay Mr. Madden a base salary of $7,026,042 for the annual periods ending December +31, 2023, 2024, 2025, and 2026; $7,377,374 for the annual periods ending December 31, 2027 and 2028; and $7,746,211 for the annual periods +through the remainder of the term. Additionally, on the first business day of January 2024, and then annually on the first business day +of successive years through +20 +December 31, 2031, Mr. Madden will receive a restricted stock award under our 2019 Incentive Compensation +Plan for a number of shares of Common Stock valued at (i) $10 million each year for the years ended December 31, 2024, 2025, and 2026, +and (ii) $9 million each year for the years ended December 31, 2027, 2028, 2029, 2030, and 2031, and each such award will vest in accordance +with the terms of the amendment. +Review, Approval or Ratification +of Transactions with Related Persons +Our Conduct Codes +and Employee Handbook prohibit all conflicts of interest. Under the Conduct Codes, conflicts of interest occur when personal or professional +interests interfere in any way, or even appear to interfere, with our interests. Our prohibition on conflicts of interest under the Conduct +Codes includes any related party transaction. +Related person transactions +must be approved by the Board, or by a committee of the Board consisting solely of independent directors, who will approve the transaction +only if they determine that it is in our best interests. In considering the transaction, the Board or committee will consider all relevant +factors, including, as applicable, (i) the business rationale for entering into the transaction; (ii) the alternatives to entering into +a related person transaction; (iii) whether the transaction is on terms comparable to those available to third parties or, in the case +of employment relationships, to employees generally; (iv) the potential for the transaction to lead to an actual or apparent conflict +of interest and any safeguards imposed to prevent such actual or apparent conflicts; and (v) the overall fairness of the transaction +to the Company. +We have multiple +processes for reporting conflicts of interest, including related party transactions. Under the Conduct Codes, all employees are required +to report any actual or apparent conflict of interest, or potential conflict of interest, to management. The Chief Financial Officer distributes +a questionnaire to our executive officers and management personnel quarterly and distributes a questionnaire to the members of the Board +of Directors annually requesting certain information regarding, among other things, their immediate family members, employment and beneficial +ownership interests, which information is then reviewed for any conflicts of interest under the Conduct Codes. +The Board of Directors, +the Audit Committee and the Disclosure Committee, which consists of management personnel, discuss the related party transactions, specifically, +and in connection with the regular review processes attendant to our periodic filings, including related party transaction disclosures. +If a director is +a party to or in some manner involved in a transaction involving the Company, they will be recused from all discussions and decisions +about the transaction. The transaction must be approved in advance whenever practicable, and if not practicable, must be ratified as promptly +as practicable. \ No newline at end of file diff --git a/raw/proxies/0001116463/0001193125-18-101914/proxy.txt b/raw/proxies/0001116463/0001193125-18-101914/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..be140191dfcd24652c5d3006af8b734baf506b3a --- /dev/null +++ b/raw/proxies/0001116463/0001193125-18-101914/proxy.txt @@ -0,0 +1,5046 @@ +DEF 14A +1 +d555241ddef14a.htm +DEF 14A +DEF 14A +Table of Contents +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +Washington, D.C. 20549 +SCHEDULE 14A +Proxy Statement Pursuant to Section 14(a) +of the Securities Exchange Act of 1934 +(Amendment No. +) +Filed by the Registrant ☒ Filed by a Party other than the Registrant ☐ +Check the appropriate box: +☐ +Preliminary Proxy Statement +☐ +Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +☒ +Definitive Proxy Statement +☐ +Definitive Additional Materials +☐ +Soliciting Material Pursuant to §240.14a-12 +OraSure Technologies, Inc. +(Name of Registrant as +Specified In Its Charter) +(Name of Person(s) Filing Proxy Statement, if other than the Registrant) +Payment of Filing Fee (Check the appropriate box): +☒ +No fee required. +☐ +Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. +(1) +Title of each class of securities to which transaction applies: +(2) +Aggregate number of securities to which transaction applies: +(3) +Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and +state how it was determined): +(4) +Proposed maximum aggregate value of transaction: +(5) +Total fee paid: +☐ +Fee paid previously with preliminary materials. +☐ +Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. +Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. +(1) +Amount Previously Paid: +(2) +Form, Schedule or Registration Statement No.: +(3) +Filing Party: +(4) +Date Filed: +Table of Contents +Proxy Statement +Notice of Annual Meeting of Shareholders +Tuesday, May 8, 2018 ● 10:00 a.m. (Eastern Time) +2018 Orasure Technologies, inc +Table of Contents +Douglas A. Michels +President and +Chief Executive Officer +Letter to the Stockholders +March 29, 2018 +Dear Fellow Stockholders: +You are cordially invited to attend the 2018 +Annual Meeting of Stockholders (the “Annual Meeting”) to be held on Tuesday, May 8, 2018 at 10:00 a.m. Eastern Time . Consistent with past practice, this year’s Annual Meeting will be a +completely virtual meeting of stockholders, conducted as a live webcast. You will be able to attend the Annual Meeting online, vote your shares electronically if you wish, and submit your questions during the meeting by visiting +www.virtualshareholdermeeting.com/OSUR2018 . +Pursuant to the Securities and Exchange Commission rule allowing companies to furnish proxy materials to their stockholders over the +internet, a Notice of Internet Availability of Proxy Materials (the “Notice”) was sent to stockholders on or about March 29, 2018. The Notice contains information on how to access copies of the proxy materials and vote your +shares. +At the Annual Meeting, you will be +asked to (i) elect two Class III Directors to serve on the Board of Directors until the Annual Meeting of Stockholders in 2021; (ii) ratify the appointment of KPMG LLP as our independent registered public accounting firm for the 2018 +fiscal year; (iii) approve, by an advisory (non-binding) vote, the compensation of the Company’s named executive officers as disclosed in the proxy materials and (iv) transact such other +business as may properly come before the meeting, and any adjournment(s) or postponement(s) thereof. +The Board of Directors has approved the nominees for Director and recommends that you vote FOR their election to the Board. In +addition, the Board of Directors recommends that you vote FOR the ratification of KPMG LLP’s appointment, and FOR the approval of the Company’s executive compensation. +Your vote is very important, regardless of the +number of shares you own . Whether or not you plan to attend the Annual Meeting online, we urge you to submit your vote as soon as possible . You will have the option to vote by telephone, via the internet, or by completing, signing, +dating and returning a paper Proxy Card. Additional details on these options can be found in the Notice sent to you and in the other proxy materials. You may, of course, attend the Annual Meeting online and vote your shares during the meeting +regardless of whether you have previously voted by phone, the internet or mail. +Before I close, I would like to offer a few additional comments with my retirement so close at hand. It has been a true pleasure to be +OraSure’s President and CEO for the past 14 years. I am very grateful for the opportunity to serve in that role and for all of the support I have received from the Board of Directors, my many colleagues at the Company and from you, our +stockholders. +We have enjoyed many successes, +especially in recent years, and the Company has never been in better shape. Our momentum is strong and our prospects are high. The Board has made a great decision to bring Steve Tang on as the new President and CEO. Steve is a person of high +integrity and has excellent experience and leadership skills. I have no doubt that he is the right person for the job. I look forward, as I am sure you do as well, to watching the Company’s exciting future unfold under Steve’s +leadership. +So with that, I thank you again +for your cooperation, and for your ongoing support of, and continued interest in, OraSure Technologies, Inc. +Sincerely yours, +Douglas A. Michels +President and Chief Executive Officer +Table of Contents +NOTICE OF 2018 ANNUAL MEETING OF STOCKHOLDERS +OF ORASURE TECHNOLOGIES, INC. +DATE AND TIME +Tuesday May 8, 2018 +10:00 a.m. (Eastern Time) +To be held virtually by visiting +www.virtualshareholdermeeting.com/OSUR2018 +ITEMS OF BUSINESS +The 2018 Annual Meeting of Stockholders will be held for the +following purposes: +•   To elect two (2) Class III Directors, each to serve for a term expiring at +the Company’s Annual Meeting of Stockholders in 2021; +•   To ratify the appointment of KPMG LLP as the Company’s independent registered +public accounting firm for the year ending December 31, 2018; +•   To approve, by an advisory (non-binding) +vote, the compensation of the Company’s named executive officers as disclosed in the Proxy Statement accompanying this Notice; and +•   To consider such other business as may properly come before the meeting, and any +adjournment(s) or postponement(s) thereof. +HOW TO VOTE +Via the +Internet . Go to www.proxyvote.com to vote your shares online prior to the Annual Meeting. Have the control number that is printed in your Notice of Internet +Availability of Proxy Materials or Proxy Card and follow the instructions. You may also vote online during the Annual Meeting by going to www.virtualshareholdermeeting.com/OSUR2018 and following the +instructions. +By +Phone . Call the toll-free number on your Notice of Internet Availability of Proxy Materials or Proxy Card and follow the prompts. +By +Mail . You can vote by mail by requesting a paper copy of the materials, which will include a Proxy Card. Please review your Notice of Internet Availability of Proxy Materials for instructions on how to request a +paper copy of the materials. Mark, sign and date your Proxy Card and return it as indicated on the Proxy Card. +Who Can Vote : Only holders of shares of the Company’s Common Stock of record at the close of business +on March 15, 2018 will be entitled to vote at the Annual Meeting of Stockholders and any adjournment(s) or postponement(s) thereof. Additional information is included in the Proxy Statement accompanying this Notice. +By Order of the Board of Directors, +Jack E. Jerrett +Secretary +March 29, 2018 +Table of Contents +Proxy Statement Table of Contents +Proxy Statement Summary +1 +2018 Annual Meeting Information +1 +2017 Business Highlights +1 +Corporate Governance Highlights +2 +Proposals for Stockholder Consideration +2 +Compensation Components +4 +Performance Highlights +4 +Key Features of our Executive Compensation Program +5 +Questions and Answers About the 2018 Annual Meeting and Voting +6 +Why Did I Receive These Proxy Materials? +6 +What Is a Proxy? +6 +What Is the Record Date and What Does It Mean? +6 +What Is the Difference Between a Stockholder of Record and a Stockholder Who Holds Stock in Street Name? +7 +How Can I Vote My Shares for the Annual Meeting? +7 +How Will My Shares Be Voted If I Send In a Proxy? +7 +Will My Shares Be Voted If I Do Not Provide My Proxy? +8 +How Many Shares Must Be Present To Hold the Annual Meeting? +8 +How Can I Revoke a Proxy? +8 +What Items Will Be Voted On At The Annual Meeting? +9 +Who Will Pay The Cost of This Proxy Solicitation? +9 +How Can I Participate in The Annual Meeting? +9 +Are Votes Confidential? +9 +Who Counts The Votes? +9 +May Stockholders Ask Questions at the Annual Meeting? +10 +Stock Ownership of Certain Beneficial Owners and Management +11 +Corporate Governance +13 +Board Responsibilities, Operation and Composition +13 +Governance Guidelines and Code of Conduct +13 +Independent Board Chairman +13 +Director Independence +14 +Oversight of Risk Management +14 +Annual Meeting Attendance and Stockholder Communications +14 +Committees of the Board +15 +Nomination of Directors +17 +Director Qualifications +18 +Insider +Trading +18 +Prohibition Against Short Sales, Hedging and Pledging +18 +Stock Ownership and Retention Guidelines +19 +Table of Contents +Audit Committee Matters +20 +Report of the Audit Committee for Year Ended December 31, 2017 +20 +Audit Fees; Audit-Related Fees; Tax Fees; All Other Fees +21 +Pre-Approval Procedures +21 +Compensation Committee Matters +21 +Compensation Process and Procedures +21 +Annual Performance Evaluations +21 +Role of the Compensation Committee +22 +Role of the +CEO +22 +Role of the Compensation Consultant +22 +Tally +Sheets +23 +Compensation Committee Interlocks and Insider Participation +23 +Compensation Committee Report +23 +Executive Officers +24 +Transactions with Related Persons +26 +Section 16(a) Beneficial Ownership Reporting Compliance +26 +Compensation Discussion Analysis – Table of Contents +27 +Compensation Discussion and Analysis +28 +Executive Summary +28 +Compensation Philosophy +37 +Benchmarking +37 +Pay +Mix +39 +2017 Executive Compensation Components +40 +Other Compensation +50 +CEO Pay +Ratio +51 +Compensation Tables +53 +Employment Agreements and Potential Payments Upon Termination or Change of Control +60 +Equity Compensation Plan Information +64 +Director Compensation +64 +Annual +Fees +64 +Initial Equity Awards +65 +Annual Equity Awards +65 +Equity Award Terms +65 +Deferred Compensation +66 +Director Compensation During 2017 +66 +Proposals Requiring Your Vote +67 +Proposal No. 1 – Election of Directors +67 +Background +67 +Vote Required; Board Recommendation +73 +Table of Contents +Proposal No. 2 – Ratification of Appointment of Independent Public Accounting +Firm +73 +Background +73 +Vote Required; Board Recommendation +73 +Proposal No. 3 – Advisory (Non-Binding) Vote To Approve +Executive Compensation +73 +Background +73 +Compensation Program Features +74 +Vote Required; Board Recommendation +74 +Annual Report +74 +Deadline for Stockholder Proposals +75 +Table of Contents +PROXY STATEMENT SUMMARY +We are providing these Proxy Materials to stockholders of OraSure Technologies, Inc., a +Delaware corporation (as used herein, “we,” “us,” “our” or the “Company”), in connection with the Company’s solicitation of proxies (each, a “Proxy”) for use at the Annual Meeting of +Stockholders to be held on May 8, 2018, at 10:00 a.m. Eastern Time, and at any adjournment(s) or postponement(s) thereof (the “Annual Meeting”). +As a stockholder, you are invited to attend the Annual Meeting and are requested to vote on the matters described in this Proxy +Statement. The Annual Meeting will be conducted in a completely virtual manner through +a live webcast that you can access online by going to www.virtualshareholdermeeting.com/OSUR2018 . The +webcast will not include a presentation by management. A question and answer session will be provided at the Annual Meeting only for questions that are germane to the matters being discussed and voted on at the meeting. +This summary highlights information contained elsewhere in this Proxy Statement. This summary does not contain all of the information +that you should consider. You should read the entire Proxy Statement carefully before voting . +2018 ANNUAL +MEETING INFORMATION +• +Date and Time: Tuesday, May 8, 2018 at 10:00 a.m. (ET) +• +Location: Online by visiting www.virtualshareholdermeeting.com/OSUR2018 +• +Record Date: March 15, 2018 +2017 BUSINESS +HIGHLIGHTS +Ö +Record consolidated net revenues of $167.1 million - 30% growth over 2016. +Ö +Consolidated net product revenues of $162 million - a 51% increase over 2016. +Ö +Consolidated net income of $30.9 million ($0.51 per share) - an $11.2 million ($0.16 per share) improvement over 2016. +Ö +Third consecutive year of record performance and profitable operations. +Ö +Total stockholder return of 114.8% for 2017. +Ö +$28.2 million in cash generated from operations - a $3.6 million improvement over 2016. +Ö +Over $176.6 million in cash and investments at year-end. +Ö +Record molecular collection systems revenues of $75.1 million - 133% growth over 2016. +Ö +International HCV product sales increased 156% over 2016. +Ö +International OraQuick ® HIV sales increased 115% over 2016. +We achieved record revenues and full-year profitability for the third consecutive year in 2017, with +strong contributions from our molecular collections systems business and OraQuick ® HIV Self-Test and HCV products. +1 +Table of Contents +CORPORATE +GOVERNANCE HIGHLIGHTS +Ö +By-Laws recently amended to adopt majority voting for uncontested election of Directors. +Ö +Comprehensive Code of Business Conduct and Ethics applies to Board of Directors (the “Board”) and Management. +Ö +Board Chairman and CEO positions held by different individuals and Board Chairman is independent of management. +Ö +More than a majority (67%) of Board members (“Directors”) are independent as defined by the Securities and Exchange Commission (“SEC”) and the NASDAQ Stock Market (“NASDAQ”). +Ö +Corporate Governance Principles in place to address Director independence, meetings and other important governance matters. +Ö +All committees of the Board consist solely of independent Directors. +Ö +Regular executive sessions of independent Directors. +Ö +Regular stockholder engagement through meetings, conferences and annual outreach. +Ö +Board and Committee members attended more than 75% of meetings during 2017. +Ö +All Directors attended 2017 Annual Meeting of Stockholders. +Ö +Strong stock ownership and retention guidelines for executive officers and non-employee Directors. +Ö +Policy prohibiting short sales, hedging and pledging of our Common Stock. +Ö +Compensation recoupment or “clawback” policy. +Ö +Policy to prevent improper insider trading of our stock by non-employee Directors and employees. +Ö +Oversight of risk management by Directors. +Ö +Strong “pay-for-performance” compensation philosophy. +PROPOSALS FOR +STOCKHOLDER CONSIDERATION +Proposals +Board +Recommendation +Page Reference +for More Detail +1.) +Election of two Class III Directors +FOR EACH NOMINEE +67 +2.) +Ratification of Appointment of Independent Registered Public +Accounting Firm for 2018 +FOR +73 +3.) +Advisory (Non-Binding) Vote to Approve Executive Compensation +FOR +73 +Proposal No. 1 – Election of Directors +The table below provides summary information about each of our nominees for Class III Directors, whose new terms would expire at the 2021 Annual +Meeting of Stockholders. The Board is recommending that stockholders vote for each Director nominee. +Name and Principal Occupation +Age +Director +Since +Independent +Committee +Memberships 1 +Other +Public +Boards +AC +CC +N& +GC +Michael Celano 2 +Chief Operating Officer of Recro Pharma, Inc. +59 +2006 +Yes +C +Ö +No +Charles W. Patrick +Principal, Patrick Consulting +63 +2006 +Yes +Ö +C +No +1 +AC = Audit Committee; CC = Compensation Committee; NCGC = Nominating & Corporate Governance Committee; C = +Chairman; Ö = Member. +2 +Mr. Celano has been appointed as Chairman of the Board effective April 1, 2018. Mr. Celano will replace +Stephen S. Tang, Ph.D., who will resign as Chairman of the Board and become the Company’s President and CEO on that date. +2 +Table of Contents +Proposal No. 2 – Ratification of Appointment of Independent Registered Public +Accounting Firm +Our Board and its Audit Committee have selected KPMG LLP (“KPMG”) to be our independent +registered public accounting firm for the 2018 fiscal year. The Board believes KPMG is well qualified to serve in this capacity and is recommending that the engagement of KPMG be ratified by our stockholders. +Proposal No. 3 – Advisory (Non-Binding) Vote to Approve Executive Compensation +Our business is diverse and we operate in extremely competitive markets around the world. +It takes commitment from all of the talented people throughout our Company, and especially our executive team, to manage the many facets +of our business. We have designed our compensation program to enable us to attract, retain and motivate our executives and reward them for achieving our objectives and delivering value to stockholders over the long-term. Therefore, we are asking our +stockholders to approve, by an advisory (non-binding) vote, the compensation of our named executive officers (“NEOs”) as described in this Proxy Statement. +Our compensation program is designed to focus and reward our executives for balancing both short and long-term priorities. To fulfill +this mission, we have adopted a pay-for-performance philosophy that forms the foundation for executive compensation decisions made by our Board and the Compensation +Committee of the Board (the “Compensation Committee”). In addition, our compensation decisions are designed to align the interests of our executives with the interests of our stockholders and incorporate strong corporate governance +principles. +The Compensation Discussion and Analysis portion of this Proxy Statement (the “CD&A”) contains a detailed +description of our executive compensation philosophy and program, the compensation decisions the Board and Compensation Committee have made under that program and the factors considered in making those decisions, focusing on the compensation of our +NEOs for the year ended December 31, 2017, who were: +Douglas A. Michels, President and Chief +Executive Officer +Ronald H. Spair, Chief Financial Officer and +Chief Operating Officer +Anthony Zezzo, II, Executive Vice President, +Business Unit Leader, Infectious Disease +Brian Smith, Executive Vice President, +Business Unit Leader, Molecular Solutions +Jack E. Jerrett, Senior Vice President, +General Counsel and Secretary +At our 2017 Annual Meeting, 96.6% of the votes cast approved the compensation paid to our NEO’s for +the 2016 fiscal year, as disclosed in our 2017 Proxy Statement. The Board and Compensation Committee take seriously the results of each “say-on-pay” +(“SOP”) vote and the views of our stockholders regarding executive compensation. Accordingly, as has been our practice following each SOP vote, we conducted an outreach effort to contact our stockholders in order to obtain their views on +the reasons for the vote and to solicit their input on our compensation practices. As part of that effort, after the 2017 Annual Meeting we contacted stockholders who, in the aggregate, beneficially owned in excess of 50% of our outstanding Common +Stock to discuss our compensation practices. The stockholders we contacted generally indicated that there was no need to meet with them at this time. We believe this reaction, coupled with the strong positive SOP vote at the 2017 Annual Meeting, +confirms that the structure of our compensation program, including changes made in recent years, such as the adoption of performance-vested restricted units for 50% of annual equity awards to our executives, are generally supported by our +stockholders. The CD&A provides further information on our outreach effort, which we intend to continue. The Board is recommending that stockholders vote in favor of our executive compensation. +3 +Table of Contents +COMPENSATION +COMPONENTS +We believe that all components of our executive compensation program are strongly tied to performance of +both the Company and our executives and are aligned with the best interests of our stockholders. These components consist of the following: +Base Salary +Salaries are based on position relative to market and individual performance and contribution. +Annual Cash Incentive Plan Bonuses +Annual incentive cash +bonuses reflect market-based targets and are contingent upon (i) achievement of corporate financial objectives, which are used to determine overall bonus pool funding, and (ii) the executive’s individual performance against pre-determined objectives, which are used to determine individual bonus payouts. +Equity Awards under the Long-Term Incentive Policy (“LTIP”) +Long-term incentive +equity compensation reflects market-based targets with the value of individual awards contingent upon the executive’s individual performance against pre-determined objectives during the fiscal year prior +to award. +PERFORMANCE +HIGHLIGHTS +We believe that compensation awarded to executives for 2017 was closely aligned with our +strong performance for the year. The Company’s financial results for 2017 represented a significant improvement over 2016. These results substantially exceeded our targets for the year. +Consolidated net revenues in 2017 were $167.1 million (30% growth over 2016), and consolidated net income was $30.9 million, +or $0.51 per share (compared to $19.7 million, or $0.35 per share in 2016). Both represent record financial performance and 2017 was the third consecutive year of profitability. Total stockholder return for 2017 was 114.8%. +Our molecular collection systems business continued its strong performance in 2017 with +revenues 133% higher than in 2016. Our international HIV revenues rose 115% in 2017 compared to the prior year, primarily as a result of the substantial growth in sales of our OraQuick ® HIV +Self-Test. We also reported strong growth in HCV sales, largely as a result of a 156% increase in international HCV sales compared to the prior year. +We generated $28.2 million in cash from operations in 2017 (a $3.6 million improvement over 2016) and we ended 2017 with +over $176 million in cash on our balance sheet, which we can use for our future growth. +4 +Table of Contents +KEY FEATURES OF +OUR EXECUTIVE COMPENSATION PROGRAM +Key features of our compensation program illustrate our commitment to pay-for-performance, the strong alignment of our executives’ interests with those of our stockholders and strong corporate governance. The more significant of these features are summarized below: +• +Compensation is market driven and performance-based. +• +Regular stockholder outreach on compensation/ governance +matters. +• +Total compensation targeted at 50 th percentile of peer +group. +• +Use of a third-party compensation consultant to provide +independent advice on compensation matters. +• +Balanced mix of cash/equity, fixed/variable, short-term/long-term compensation components. +• +Strong stock ownership/retention requirements for +executives. +• +Threshold financial performance objectives for annual bonus pool funding are set at levels that meet or exceed +actual financial performance for the prior fiscal year. +• +Use of peer company benchmarking and tally sheets. +• +The Board’s discretionary ability to adjust annual incentive bonus pool funding limited to +/- 10% of pool +amount. +• +Compensation recoupment policy. +• +Long-term equity incentive awards include 50% performance-vested restricted units that vest only if (i) a +three-year compound average growth rate for product revenues and/or a one-year earnings per share (“EPS”) target is met 1 and (ii) a +three-year service period is satisfied. +• +No hedging or pledging of our Common Stock. +• +No excise tax gross-up for all NEO employment agreements and +“double trigger” change–in-control severance in our CEO’s employment agreement. +The 2017 compensation for Mr. Michels, our President and Chief Executive Officer (“CEO”), +and Mr. Spair, our Chief Financial Officer and Chief Operating Officer (“CFO/COO”), increased consistent with our 2017 financial performance, reflecting our commitment to a pay-for-performance philosophy. +1 +Awards in 2018 used a one-year pre-tax +income target instead of EPS due to uncertainty about the impact of the recently enacted Federal tax reform legislation on our financial performance for 2018. +5 +Table of Contents +QUESTIONS AND ANSWERS ABOUT THE 2018 ANNUAL MEETING AND VOTING +1.    WHY DID I RECEIVE THESE PROXY MATERIALS? +Our Board is furnishing Proxy Materials, including this Proxy Statement, a Proxy Card +and the Company’s Annual Report to Stockholders for the year ended December 31, 2017 (“2017 Annual Report”), to our stockholders in order to solicit proxies to be voted at the Annual Meeting (each, a “Proxy”). Each +stockholder can access these documents on the internet in accordance with the rules and regulations of the SEC. On or about March 29, 2018, we mailed a Notice of Internet Availability of Proxy Materials (the “Notice”) to each +stockholder at the holder’s address of record, indicating that this Proxy Statement is now available to our stockholders of record entitled to vote at the Annual Meeting. +SEC rules permit us to deliver only one copy of the Notice or a single set of Proxy Materials to multiple stockholders sharing the +same address. Upon written or oral request, we will deliver separate Notices and/or copies of our 2017 Annual Report and/or this Proxy Statement to any stockholder at a shared address to +which a single copy of the Notice was delivered. Stockholders may notify the Company of their requests by calling or writing us at OraSure Technologies, Inc., 220 East First Street, Bethlehem, +Pennsylvania 18015, Attention: Corporate Secretary; (610) 882-1820. +All stockholders +and beneficial holders have the ability to access a copy of our Proxy Materials on the internet at the website referred to in the Notice. Stockholders will not receive printed copies of the Proxy Materials unless they request those copies . +The Notice also instructs stockholders as to how to submit a Proxy through the internet. If you would like to receive a paper or e-mail copy of your Proxy Materials, you should follow the instructions for +requesting such materials included in the Notice. We will pay the entire cost of preparing, assembling, printing, mailing and distributing these Proxy Materials and soliciting votes. If you choose to access the Proxy Materials and/or vote over the +internet, you are responsible for any internet access charges you may incur. +2.    WHAT IS A PROXY? +A Proxy is your legal designation of another person to vote the shares of Common Stock +you own. That other person is called a “proxy.” If you designate someone as your proxy in a written document, that document also is called a Proxy or a Proxy Card. +Jack E. Jerrett and Mark L. Kuna, each of whom are officers of the Company, have been designated as +proxies by the Board of Directors for the Annual Meeting. +3.    WHAT IS THE RECORD DATE AND WHAT DOES IT MEAN? +The record date for the Annual Meeting is March 15, 2018 (the “record +date”). The record date is established by the Board as required by Delaware law. Only stockholders of record at the close of business on the record date are entitled to: +(a) +receive notice of the Annual Meeting; and +(b) +vote at the meeting and any adjournment(s) or postponement(s) of the meeting. +Each stockholder of record on the record date is entitled to one vote for each share of Common Stock +held. On the record date, there were 61,494,102 shares of our Common Stock outstanding and entitled to vote at the Annual Meeting. +A list of stockholders will be open for examination by any stockholder for any purpose germane to the Annual Meeting for a period of +10 days prior to the meeting at our principal executive offices at 220 East First Street, Bethlehem, PA 18015, and electronically during the Annual Meeting at +www.virtualshareholdermeeting.com/OSUR2018 when you enter the control number provided in the Notice sent to you. +6 +Table of Contents +4. WHAT IS THE DIFFERENCE BETWEEN A +STOCKHOLDER OF RECORD AND A STOCKHOLDER WHO HOLDS STOCK IN STREET NAME? +If your shares of stock are registered in your name on the books and records of our +transfer agent, Computershare, Inc., you are a stockholder of record. +If your shares of stock are held for you in the name of +your broker, bank or other nominee, your shares are held in street name. The answer to Question 7 describes brokers’ discretionary voting authority and +when your broker, bank or other nominee is permitted to vote your shares of stock without instructions from you. +It is important that you vote your shares if you are a stockholder of record and, if you hold shares in street name, that you +provide appropriate voting instructions to your broker, bank or other nominee as discussed in the answer to Question 7. +5.    HOW CAN I VOTE MY SHARES FOR THE ANNUAL MEETING? +All stockholders have a choice of voting via the internet, over the telephone or by +completing and mailing a paper Proxy Card, as described below. +Voting via the Internet or by +Telephone . Stockholders of record desiring to vote online via the internet or by telephone prior to the Annual Meeting, should go to +www.proxyvote.com or call the toll free number indicated on the Proxy Card or Notice. You may vote via the internet or by telephone provided you do so by +11:59 p.m. Eastern Time (8:59 p.m. Pacific Time) on May 7, 2018. Stockholders who attend the Annual Meeting via the internet may vote their shares at that time up to and during the Annual Meeting by following the instructions at www.virtualshareholdermeeting.com/OSUR2018 . +Street name holders may vote via the internet or by telephone if their brokers, banks or other nominees make those methods available. +If that is the case, each broker, bank or nominee will include instructions with the Notice or Proxy Statement. +The telephone and +internet voting procedures, including the use of control numbers, are designed to authenticate your identity, to allow you to give your +voting instructions and to confirm that your instructions have been recorded properly. +If you vote via the internet, you should understand that you will be responsible for any costs associated with this method of voting, +such as usage charges from internet access providers and telephone companies. +Voting by +Mail . If you desire to vote prior to the Annual Meeting by using a paper Proxy Card instead of by telephone or via the internet, you will need to either print a copy of the Proxy Card from the website indicated +in your Notice or follow the instructions in your Notice to request that a paper copy be sent to you. You will then need to complete, sign, date and return the Proxy Card, as described on the Proxy Card. Street name holders should complete and +return the voting card provided by their broker, bank or nominee. +Voting at the Annual +Meeting . All stockholders of record may vote online during the Annual Meeting, as described above. Submitting a Proxy via the internet, over the telephone or by mail will not affect your right to +withdraw your Proxy and vote during the Annual Meeting. +6.    HOW WILL MY SHARES BE VOTED IF I SEND IN A PROXY? +If you are represented by a properly executed Proxy, whether delivered by phone, the +internet or mail, your shares will be voted in accordance with your instructions. +If you do not provide instructions with your Proxy, your shares will be voted according +to the recommendations of our Board as stated on the Proxy. +7 +Table of Contents +7.    WILL MY SHARES BE VOTED IF I DO NOT PROVIDE MY PROXY? +Stockholders of Record : If you are a stockholder of +record, your shares will not be voted if you do not provide your Proxy, unless you vote online during the Annual Meeting. It is, therefore, important that you vote your shares. +Street Name Holders : If your shares are held in street name and you do not provide your +signed and dated voting instruction form to your bank, broker or other nominee, your shares may be voted by your broker, bank or other nominee but only under certain circumstances. Specifically, under NASDAQ rules, shares held in the +name of your broker, bank or other nominee may be voted by your broker, bank or other nominee on certain “routine” matters if you do not provide voting instructions. +At the upcoming Annual Meeting, only the ratification of the selection of KPMG LLP as +the Company’s independent registered public accounting firm is considered a “routine” matter for which brokers, banks or other nominees may vote uninstructed shares. The other proposals to be voted on at our Annual Meeting +(specifically, the election of Director nominees and the advisory vote to approve the compensation of the Company’s NEO’s) are not considered “routine” under NASDAQ rules, so the broker, bank or other nominee cannot vote +your shares on any of these proposals unless you provide to the broker, bank or other nominee voting instructions for each of these matters. If you do not provide voting instructions on these matters, your shares will not be voted on the +matter, which is referred to as a “broker non-vote.” It is, therefore, important that you vote your shares. +8.    HOW MANY SHARES MUST BE PRESENT TO HOLD THE ANNUAL MEETING? +Your shares are counted as present at the meeting if you attend the meeting and vote +online or if you properly return a Proxy by internet, telephone or mail. In order for us to conduct our Annual Meeting, a majority of our outstanding shares of Common Stock as of the +March 15, 2018 record date, must be present online or by Proxy at the meeting. This is referred to as a quorum. Broker non-votes, votes withheld and +abstentions are included in determining whether there are a sufficient number of shares present to constitute a quorum. +9.    HOW CAN I REVOKE A PROXY? +You can revoke a Proxy before the completion of voting at the Annual Meeting by: +(a) +Giving written notice to the Corporate Secretary of the Company to revoke your Proxy; or +(b) +Delivering a later-dated Proxy that indicates the change in your vote; or +(c) +Logging on to www.proxyvote.com in the same manner you would to submit your Proxy +electronically or calling the telephone number indicated in your Notice, and in each case, following the instructions to revoke or change your vote; or +(d) +Attending the Annual Meeting online and voting, which will automatically cancel any Proxy previously given. Attendance +alone will not revoke any Proxy that you have given previously. +If you choose any of the first three methods, +you must take the described action no later than 11:59 p.m. Eastern Time (8:59 p.m. Pacific Time) on May 7, 2018. Once voting on a particular matter is completed at the Annual Meeting, you will not be able to revoke your Proxy or change your +vote. If your shares are held in street name by a broker or other nominee, you must contact that institution to change or revoke your vote. +8 +Table of Contents +10.    WHAT ITEMS WILL BE VOTED ON AT THE ANNUAL MEETING? +At the Annual Meeting, action will be taken on the matters set forth in the accompanying +Notice and described in this Proxy Statement. The Board knows of no other matters to be presented for action at the Annual Meeting. +If any other matters do properly come before the Annual Meeting, the persons named in +the Proxy Card will have discretionary authority to vote on those matters in accordance with their best judgment. +11.    WHO WILL PAY THE COST OF THIS PROXY SOLICITATION? +Solicitation of Proxies is made on behalf of the Board. The cost of soliciting Proxies +will be borne by the Company. In addition to solicitations by e-proxy and/or by mail, certain of our Directors, officers and regular employees may solicit Proxies personally or by telephone or other means +without additional compensation. +We have also engaged Morrow Sodali LLC, 470 West Ave., Stamford, CT 06902, to provide +proxy solicitation services at an estimated fee of $7,500 plus expenses. Arrangements will be made with brokerage firms and other custodians, nominees and fiduciaries to forward solicitation materials to the beneficial owners of stock held of record +by such persons, and we will, upon request, reimburse them for their reasonable expenses in so doing. +12.    HOW CAN I PARTICIPATE IN THE ANNUAL MEETING? +This year’s Annual Meeting will be a completely virtual meeting of stockholders, +and will be conducted via live webcast on the Internet. You are entitled to participate in the Annual Meeting only if you were a stockholder of the Company as of the close of business on March 15, 2018, the record date for the meeting, or if +you hold a valid Proxy for the Annual Meeting. +You will be able to participate in the Annual Meeting online and submit your questions +during the meeting by visiting www.virtualshareholdermeeting.com/OSUR2018. To participate in the Annual Meeting, you will need the control number that is +included on your Notice, on our proxy card or on the instructions that accompanied your proxy materials. The Annual Meeting will begin promptly at 10:00 a.m. Eastern Time, and you should allow ample time to complete the online check-in procedures. +13.    ARE VOTES CONFIDENTIAL? +We will continue our long-standing practice of holding the votes of each stockholder in +confidence from Directors, officers and employees, except: (a) as necessary to meet applicable legal requirements and to assert or defend claims for or against the Company; +(b) in the case of a contested proxy solicitation; (c) if a stockholder makes a written comment on the Proxy Card or otherwise communicates his or her vote to the Company; or +(d) as needed to allow the independent inspectors of election to certify the results of the vote. +14.    WHO COUNTS THE VOTES? +We will continue, as we have for many years, to retain an independent inspector of +election to receive +and tabulate the Proxies and certify the results. These activities will be handled electronically. +9 +Table of Contents +15.    MAY STOCKHOLDERS ASK QUESTIONS AT THE ANNUAL MEETING? +Yes. The Chairman of the Board will answer stockholders’ questions during the +question and answer period of the meeting. Stockholders must confine their questions to matters that relate directly to +the business of the meeting. The Chairman will determine which questions are appropriate to answer during the meeting. +10 +Table of Contents +STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT +The +following table sets forth information, as of March 15, 2018, regarding the beneficial ownership of the Company’s Common Stock by (a) each person who is known by us to be the beneficial owner of more than five percent of the Common +Stock outstanding; (b) each Director and nominee for election as Director; (c) each of our executive officers named in the Summary Compensation Table in this Proxy Statement; and (d) all of our Directors and executive officers as a +group. Unless otherwise indicated, the address of each person identified below is c/o OraSure Technologies, Inc., 220 East First Street, Bethlehem, Pennsylvania 18015. +Pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the “Exchange +Act”), shares of Common Stock which a person has a right to acquire pursuant to the exercise of stock options held by that person that are exercisable within 60 days of March 15, 2018 are deemed to be outstanding for the purpose of +computing the ownership percentage of that person, but are not deemed outstanding for computing the ownership percentage of any other person. +Name and Address of +Beneficial +Owner +Amount and Nature of +the Beneficial Ownership 1,2 +Percent +of Class +Black Rock, Inc. 3 +40 East 52 nd Street +New York, NY 10022 +7,729,515 +12.6 +% +The Vanguard Group 4 +100 Vanguard Blvd. +Malvern, PA 19355 +5,252,092 +8.5 +% +Renaissance Technologies, LLC 5 +800 Third Avenue +New York, NY 10022 +4,003,100 +6.5 +% +Wellington Management Group, LLP 6 +280 Congress Street +Boston, MA 02210 +3,286,266 +5.3 +% +Douglas A. Michels +825,303 +1.3 +% +Ronald H. Spair 7 +307,664 +* +Anthony Zezzo II +261,882 +* +Jack E. Jerrett +63,500 +* +Charles W. Patrick +58,182 +* +Eamonn P. Hobbs +54,711 +* +Stephen S. Tang, Ph.D. +43,083 +* +Michael Celano +41,128 +* +Brian Smith +24,640 +* +Mara Aspinall +21,666 +* +Ronny B. Lancaster +6,295 +* +Aradhana Sarin, M.D. +5,000 +* +All Directors and executive officers as a group +(14 people) +1,804,131 +2.9 +% +* +Less than 1% +1 +Subject to community property laws where applicable, beneficial +ownership consists of sole voting and investment power except as otherwise indicated. +2 +Includes shares subject to options exercisable within 60 days of +March 15, 2018, as follows: Mr. Michels, 108,364 shares; Mr. Spair, 31,372 shares; Mr. Zezzo, 113,499 shares; Mr. Jerrett, 13,232 shares; Mr. Hobbs, 40,000 shares; Dr. Tang, 6,667 shares; Mr. Smith, 6,565 +shares; +11 +Table of Contents +Ms. Aspinall, 16,666 shares; Dr. Sarin, 5,000 shares and all Directors and executive officers as a group, 351,308 shares. Also includes unvested restricted stock, as follows: +Mr. Michels, 128,241 shares; Mr. Spair, 64,183 shares; Mr. Zezzo, 35,159 shares; Mr. Jerrett, 26,720 shares; Mr. Patrick, 6,295 shares; Mr. Hobbs, 6,295 shares; Dr. Tang, 7,952 shares; Mr. Celano, 6,295 +shares; Mr. Smith, 12,782 shares; Mr. Lancaster, 6,295 shares; and all Directors and executive officers as a group, 346,653 shares. Does not include unvested performance-vested restricted units. +3 +Based on information contained in a Schedule 13G/A filed +January 19, 2018. The filing person has sole voting power with respect to 7,621,532 shares and sole dispositive power with respect to 7,729,515 shares. +4 +Based on information contained in a Schedule 13G/A filed +February 9, 2018. The filing person has sole voting power with respect to 109,507 shares, shared voting power with respect to 4,900 shares, sole dispositive power with respect to 5,142,385 shares and shared dispositive power with respect to +109,707 shares. +5 +Based on information contained in a Schedule 13G/A filed +February 14, 2018. The filing persons have sole voting power and sole dispositive power with respect to the indicated shares. +6 +Based on information contained in a Schedule 13G filed +February 8, 2018. The filing persons have shared voting power with respect to 2,976,004 shares and shared dispositive power with respect to 3,286,266 shares. +7 +Includes 166,402 restricted shares contributed to the OraSure +Technologies, Inc. Deferred Compensation Plan, by Mr. Spair. +12 +Table of Contents +CORPORATE GOVERNANCE +BOARD RESPONSIBILITIES, OPERATION +AND COMPOSITION +The primary responsibility of the Board of Directors is to promote the long-term success of the Company. +In fulfilling this role, each Director must exhibit good faith business judgment as to what is in the best interests of the Company. The Board is responsible for establishing broad corporate policies, setting strategic direction and overseeing +management. The Company’s management is responsible for the day-to-day operations of the Company. +The Board is divided into three classes with each class consisting of one-third of the total +number of Directors on the Board. At each Annual Meeting of Stockholders, the nominees for the class of Directors whose term is expiring at that annual meeting are elected for a three-year term. A Director holds office until the Annual Meeting of +Stockholders for the year in which his or her term expires or until his or her successor is elected and duly qualified, subject to prior death, resignation, retirement, disqualification or removal. Each nominee for election at the Annual Meeting +currently serves as a Director. +The Board typically holds regular meetings in February, May, August and November of each year, with special +meetings held as needed. The Board’s organizational meeting follows the Annual Meeting of Stockholders. The Board meets in executive session at all regularly scheduled meetings. The Board held 12 meetings and acted by written consent on two +(2) occasions during the fiscal year ended +Directors attended greater than 75% of all Board and Committee meetings during +2017. +December 31, 2017. Each member of the Board attended more than 75 percent of the combined total of +meetings of the Board and of the Committees of the Board on which such member served during the period in the year in which he or she served as a Director. +GOVERNANCE GUIDELINES AND CODE OF +CONDUCT +The Board has adopted Corporate Governance Principles which, along with the Charters for each of its +Committees and the Company’s Code of Business Conduct and Ethics, provide a framework for the governance of the Company. The Company’s Corporate Governance Principles address matters such as the responsibilities and composition of the +Board, Director independence and the conduct of Board and Committee meetings. The Company’s Code of Business Conduct and Ethics sets forth guiding principles of business ethics and certain legal requirements applicable to all Company employees +and non-employee Directors. Copies of the current Corporate Governance Principles and Code of Business Conduct and Ethics are available on the Company’s website, www.orasure.com . +We operate under a Code of Business Conduct and +Ethics and Corporate Governance Principles, which apply to all employees and non-employee Board Members. +INDEPENDENT BOARD +CHAIRMAN +The positions of Chairman of the Board and CEO of the Company are held by different individuals, with the Chairman being independent of +management. +Currently, the Company’s Chief Executive Officer does not hold the position of Chairman of the +Board as the Company believes it is appropriate for the Board to be led by an individual who is independent of management. Stephen S. Tang, Ph.D. was appointed as Chairman of the Board in November 2016 and has been a Director since 2011. As +previously announced, Dr. Tang will become the Company’s new President and CEO on April 1, 2018 following the retirement of Douglas A. Michels on March 31, 2018. Concurrently with his new appointment, Dr. Tang will resign as +Chairman of the Board and Michael Celano, who has been a Director since 2006 and is currently Chairman of the Audit Committee, will become our new Board Chairman. +13 +Table of Contents +The Board has carefully considered its leadership structure and believes at this time +that the Company and its stockholders are best served by having the positions of Chairman and Chief Executive Officer filled by different individuals. This allows the Chief Executive Officer to, among other things, focus on the Company’s day-to-day business, while allowing the Chairman to lead the Board in its fundamental role of providing advice and oversight of management. In the future, however, the Board +may reconsider whether its Chief Executive Officer should also serve as Board Chairman. +DIRECTOR +INDEPENDENCE +Our Corporate Governance Guidelines require, among other things, that a majority of the members of the Board meet +the independence requirements of the SEC and NASDAQ, on which our Common Stock is listed. Each year our Board, with assistance from the Nominating and Corporate Governance Committee, conducts a review of Director independence. The most +A majority of our Directors are independent as required under applicable SEC and NASDAQ rules. +recent annual review occurred in the first quarter of 2018, during which the Board considered transactions and +relationships, if any, between each Director or any member of such Director’s immediate family and the Company. As a result of this review, the Board determined that Mara Aspinall, Michael Celano, Eamonn P. Hobbs, Ronny B. Lancaster, Charles W. +Patrick and Aradhana Sarin, M.D. are “independent,” as that term is defined in the applicable rules of NASDAQ and the SEC. Stephen S. Tang, Ph.D. was also “independent” during 2017, but was determined by the Board not to be +independent after he signed an employment agreement and received certain onboarding compensation in January 2018 in connection with his appointment as the Company’s new President and CEO, which will be effective on April 1, 2018. In +addition, Douglas A. Michels and Ronald H. Spair were determined by the Board not to be independent because they are currently executive officers of the Company. Based on the foregoing, the Board of Directors is comprised of a majority of +independent Directors. +OVERSIGHT OF RISK +MANAGEMENT +As part of its oversight of the Company’s operations, the Board and Audit Committee monitor the management +of risks by the Company’s executives. The Audit Committee reviews the risks that the Company may face and receives reports from senior management on the nature of these risks and the procedures and processes in place to manage and mitigate such +risks. Substantive areas of risk reviewed by the Audit Committee include financial, legal, regulatory, operational, information technology, cybersecurity and employment matters. The Audit Committee provides a report to the full Board on the matters +covered during +The Board and Audit Committee monitor the major risks facing the Company and the procedures and processes implemented by management to +mitigate those risks. +each of its meetings, including its risk monitoring activities. In addition, senior management provides periodic reports +to the full Board on the major risks facing the Company and the processes and procedures in place to manage such risks. Management also conducts a risk assessment of the Company’s compensation policies and practices, including its executive +compensation program, as described in greater detail in the Section of this Proxy Statement entitled, “Compensation Committee Matters.” +ANNUAL MEETING ATTENDANCE AND STOCKHOLDER COMMUNICATIONS +The Board has approved a policy concerning Board members’ attendance at our Annual Meeting of +Stockholders and a process for security holders to send communications to members of the Board. A description of the Board’s policy on annual meeting attendance is provided on our website, at +www.orasure.com . As a general matter, each Board member is required to attend each Annual Meeting of Stockholders. Our 2017 Annual Meeting was attended by +all members of the Board. +14 +Table of Contents +Security holders may communicate with the Board by sending their communications to +OraSure Technologies, Inc., 220 East First Street, Bethlehem, Pennsylvania 18015, Attention: Corporate Secretary, fax: (610) 882-2275, email: +corporatesecretary@orasure.com . +All Board members are required to attend each Annual +Meeting of Stockholders. The entire Board was present at the 2017 Annual Meeting. +COMMITTEES OF THE BOARD +The Board currently has three standing committees–the Audit Committee, the Compensation Committee +and the Nominating and Corporate Governance Committee. Members of these committees are each “independent,” as defined in the Exchange Act and NASDAQ rules applicable to such Committees. In addition, the Board has determined that +Michael Celano is an “audit committee financial expert,” as that term is defined by applicable rules of the SEC. Each committee operates pursuant to a written charter, copies of which are available on our website, at www.orasure.com . Additional information on each standing committee is provided below: +AUDIT +COMMITTEE +Committee Members: +Responsibilities: +• Overseesaccounting and financial reporting process, internal controls and audits. +• Consultswith +management and the Company’s independent registered public accounting firm on, among other items, matters related to the annual audits, the published financial statements and the accounting principles applied. +• Appoints,evaluates and retains our independent registered public accounting firm. +• Responsiblefor +the compensation, termination and oversight of our independent registered public accounting firm. +• Evaluatesthe independent registered public accounting firm’s qualifications, +performance and independence. +• Approvesall services provided by the independent registered public accounting +firm. +• Monitorsthe Company’s major risk exposures and reviews risk assessment and +mitigation policies. +• Maintainsprocedures for the receipt, retention and treatment, on a confidential basis, +of complaints received by the Company regarding accounting, internal accounting controls or auditing matters, and the confidential, anonymous submissions by employees of concerns regarding questionable accounting or auditing matters. +Michael Celano +(C, +, I) +Mara G. Aspinall +(I) +Eamonn P. Hobbs +(I) +Charles W. Patrick +(I) +Aradhana Sarin, M.D. +(I) +Number of Meetings +during +fiscal 2017: 9 +C – Committee Chair +– Determined by the Board to be an audit committee financial expert as defined under applicable SEC Rules. +I – Determined by the Board to be independent under applicable SEC and NASDAQ rules. +15 +Table of Contents +COMPENSATION COMMITTEE +Committee Members: +Responsibilities: +• Overseescompensation for executives and +non-employee Directors. +• Reviewsand recommends to the Board for approval the performance criteria and goals and +objectives for CEO compensation. +• Inconsultation with other independent +non-employee Directors, evaluates the CEO’s and the CFO/COO’s annual performance in light of the Company’s performance. +• Evaluatesand recommends to the Board for approval the CEO’s compensation. +• Inconsultation +with the CEO, reviews and approves the compensation of other executive officers. +• Establishesperformance measures and goals and evaluates the attainment of such goals +under performance-based incentive compensation plans. +• Reviewscompensation and benefits issues. +• Reviewsand +recommends for Board approval, the terms of any employment or retirement agreements between the Company and each executive officer. +• Periodicallyreviews and administers the Company’s Compensation Recoupment Policy +for executive officers and non-employee Directors. +• Reviewscompliance with the Company’s Stock Ownership Guidelines. +Ronny B. Lancaster +(C, I) +Mara G. Aspinall +(I) +Michael Celano* +(I) +Eamonn P. Hobbs +(I) +Number of Meetings +during +fiscal 2017: 7 +NOMINATING AND CORPORATE GOVERNANCE COMMITTEE +Committee Members: +Responsibilities: +• Identifies,evaluates and recommends candidates for nomination or re-election to the Board. +• Reviewsand makes recommendations to the Board on the range of skills, qualifications +and expertise required for service as a Director. +• Reviewsand recommends for Board approval the appropriate structure of the Board. +• Reviewsand +recommends for Board approval the appropriate structure of Board committees, and recommends committee assignments and candidates for the position of Chairman of each committee. +• Developsand recommends for Board approval a set of Corporate Governance Guidelines and +a Code of Business Conduct and Ethics, and procedures for the implementation thereof. +• Periodicallyreviews and recommends for Board approval the Board’s leadership +structure, including whether the same person should serve as both CEO and Chairman of the Board. +• Assistsin the development of succession plans for the Company’s CEO and other +executives. +• Assiststhe Board in evaluating the independence of individual Directors for purposes +of Board and committee service. +• Developsand implements an annual self-evaluation process for the Board and its +committees +Charles W. Patrick +(C, I) +Ronny B. +Lancaster +(I) +Stephen S. Tang, Ph.D.* +Aradhana Sarin, M.D. +(I) +Number of Meetings +during +fiscal 2017: 4 +C – Committee Chair +– Determined by the Board to be an audit committee financial expert as defined under applicable SEC Rules. +I – Determined by the Board to be independent under applicable SEC and NASDAQ rules. +* – +Dr. Tang was “independent” during 2017, but was determined by the Board not to be independent +after he signed an employment agreement in January 2018 in connection with his appointment as the Company’s new President and CEO, effective April 1, 2018. As a result, Dr. Tang left the Compensation Committee in January 2018 and was +replaced on the Committee by Mr. Celano. +16 +Table of Contents +NOMINATION OF DIRECTORS +Our Bylaws provide that nominations for election to the Board may be made by the Board or by any stockholder +entitled to vote for the election of Directors at the Annual Meeting. A stockholder’s notice of nomination must be made in writing to the Company’s Corporate Secretary and must be delivered to or received at our principal executive offices +not less than ninety (90) days nor more than one hundred twenty (120) days prior to the meeting. However, in the event that less than one hundred (100) days’ notice or prior public disclosure of the date of the meeting is given +or made to stockholders, in order for notice by the stockholder to be timely, notice must be received no later than the close of business on the tenth (10 th ) day following the day on which +such notice of the date of the meeting was mailed or such public disclosure was made, whichever first occurs. The notice to the Corporate Secretary must set forth, with respect to the nominee, the name, age, business address, residence address, +principal occupation or employment of the person, the class and number of shares of capital stock of the Company which are beneficially owned by the person, and any other information relating to the person that is required to be disclosed +in +Stockholders can nominate individuals to serve on the Board by +following the procedures described in the Company’s Bylaws. Diversity is an important factor that is considered in evaluating new candidates for the Board. In determining whether incumbent Directors will be nominated for re-election, we +evaluate the individual’s background, experience and prior service as a Director. +solicitations for proxies for election of Directors pursuant to Regulation 14A under the Exchange Act. The notice must +also include, as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination is made: (i) the name and address of the stockholder and such beneficial owner; (ii) the class and number of shares of +capital stock of the Company which are held of record or beneficially owned by such stockholder and such beneficial owner and any other direct or indirect pecuniary or economic interest in any capital stock of the Company of such stockholder and +beneficial owner, including without limitation, any derivative instrument, swap, option, warrant, short interest, hedge, profit sharing arrangement or borrowed or loaned shares; (iii) a description of any arrangements or understandings between +such stockholder and beneficial owner and each proposed nominee and any other person (including their names) pursuant to which the nomination(s) are to be made by such stockholder and such beneficial owner or with respect to actions to be proposed +or taken by such nominee if elected as a Director; (iv) a representation that such stockholder intends to appear in person or by proxy at the meeting to nominate the persons named in its notice; and (v) any other information relating to +such stockholder and such beneficial owner that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of Directors, or may otherwise be required pursuant +to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder. We may also require any proposed nominee to furnish such other information as we may reasonably require to determine the eligibility of the proposed nominee +to serve as a Director of the Company. +The Nominating and Corporate Governance Committee may also consult with outside advisors or retain +search firms to assist in the search for qualified candidates. Candidates recommended by stockholders will be considered by the Nominating and Corporate Governance Committee in the same manner as candidates recommended by other sources, but only if +the stockholder makes a recommendation in accordance with the advance notification provisions set forth in the Company’s Bylaws. +During the past several years, our stockholders have indicated a desire for us to adopt a majority voting standard for the election of +Directors. Our Board regularly reviews governance matters and majority voting is a governance practice that the Board had been considering for some time. In February 2018, the Board approved an amendment to our Bylaws adopting a majority voting +standard for uncontested elections of Directors. Following this amendment, a plurality voting standard will remain in place for contested elections of Directors. The adoption of a majority voting standard is, in the Board’s view, an appropriate +corporate governance practice that is responsive to the express input we have received from our stockholders. +17 +Table of Contents +DIRECTOR QUALIFICATIONS +The Board considers diversity and other relevant +factors in evaluating and selecting Director candidates. +Although there is no formal policy governing Board diversity, the Nominating and Corporate Governance +Committee considers diversity and other factors in evaluating new candidates for the Board. The term diversity is used broadly to include not only race, gender and national origin, but also any other factors determined to be relevant by the +Nominating and Corporate Governance Committee based on the needs of the Board and Company, including independence, integrity, knowledge, judgment, character, leadership skills, education, industry experience, financial literacy, technical +background, specialized expertise, and standing in the community. In evaluating incumbent Directors for re-election, the Nominating and Corporate Governance Committee considers that Director’s background, +experience and overall service to the Company, including the number of meetings attended, level of participation, quality of performance and other factors deemed relevant by the Nominating and Corporate Governance Committee. +INSIDER TRADING +Our Insider Trading Policy prohibits trading by Directors, executive officers or employees who are in possession of material nonpublic +information about the Company. +We have a policy designed to prevent any trading in the Company’s Common Stock or other +securities by Directors, executive officers and all other employees of the Company and its affiliates while such person is in possession of material nonpublic information. The policy prohibits trading in the Company’s securities on the basis of +material nonpublic information, requires preapproval of transactions in Company securities for Directors, executive officers and all other employees and establishes regular trading windows after each calendar quarter following the Company’s +announcement of its quarterly financial results. +PROHIBITION AGAINST SHORT SALES, HEDGING AND PLEDGING +We believe it is inappropriate for any employee or member of the Board to engage in short-term or speculative +transactions involving Company securities. As a result, our insider trading policy prohibits Directors, executive officers and all other employees from entering into these types of transactions involving our Common Stock, including short sales, the +buying or selling of puts or calls, the purchase of securities on margin, prepaid variable forward contracts, equity swaps, collars, exchange funds and other similar financial instruments. Our policy also prohibits employees and Directors from +pledging shares of our Common Stock as collateral. +We have implemented several governance policies related to our Common Stock. Our policies prohibit short-term, speculative +transactions in our stock, such as hedging, pledging and short sales. +18 +Table of Contents +STOCK OWNERSHIP AND RETENTION GUIDELINES +We have implemented stock ownership and +retention guidelines for our CEO, other executives and members of the Board. +The Board has adopted stock ownership and retention guidelines applicable to the Company’s President and Chief +Executive Officer, its Chief Financial Officer and Chief Operating Officer, all other executive officers and all non-employee members of the Board. Under these guidelines, the covered individuals must meet the +following ownership requirements, expressed either as a multiple of base salary (in the case of Company officers) or annual cash fees (in the case of Board members): +Covered Individual +Multiple of Base Salary +or Director Fees +President and Chief Executive Officer +6x +Chief Financial +Officer and Chief Operating Officer +2x +Other Executive +Officers +1x +Non-Employee Directors +1x +Any individual who was covered by the guidelines at the time of adoption or who becomes subject to the +guidelines following adoption is required to meet the guidelines within five years. Any individual already subject to the guidelines who becomes subject to a higher ownership requirement, due to a promotion, a further amendment to the guidelines or +an increase in compensation, is required to meet the new ownership requirement within five years following the effective date of promotion, change in compensation or guideline amendment. In determining whether an individual meets the required +ownership requirement, shares owned directly or indirectly, restricted stock (including both time and performance vested) and shares deferred under our deferred compensation plan will be counted. Compliance will be determined as of December 31 +of each fiscal year. The guidelines also require each covered individual to retain at least 50% of the net shares acquired upon the exercise of stock options and the vesting of restricted stock until the individual’s holdings of Common Stock +equal or exceed the applicable ownership requirement. As of December 31, 2017, all covered officers and non-employee Directors were in compliance with the stock ownership guidelines. +19 +Table of Contents +AUDIT COMMITTEE MATTERS +REPORT OF THE AUDIT COMMITTEE FOR THE YEAR ENDED DECEMBER 31, 2017 +The information contained in this report shall not be deemed to be “soliciting material” or +“filed” for purposes of Section 18 of the Exchange Act or otherwise subject to liability under that Section. This report shall not be deemed “incorporated by reference” into any document filed under the Securities Act of +1933, as amended (the “Securities Act”), or the Exchange Act, whether such filing occurs before or after the date hereof, regardless of any general incorporation language in such filing. +The role of the Audit Committee is to assist the Board of Directors in fulfilling its responsibilities to oversee management’s +conduct of the Company’s financial reporting process, including monitoring (1) the participation of management and the outside independent registered public accounting firm in the financial reporting process, (2) the Company’s +systems of internal accounting and financial controls, (3) the annual independent audit of the Company’s financial statements and (4) the qualifications, independence and performance of the outside independent registered public +accounting firm. The Audit Committee selects the Company’s outside independent registered public accounting firm, and once selected, the outside independent registered public accounting firm reports directly to the Audit Committee. The Audit +Committee is responsible for approving both audit and non-audit services to be provided by the outside independent registered public accounting firm. The Audit Committee is composed of five (5) non-employee directors and operates pursuant to a Charter that was last amended and restated by the Board on February 20, 2018 (which can be found on the Company’s website at www.orasure.com ). +Management of the +Company is responsible for the preparation, presentation and integrity of the Company’s financial statements, the Company’s accounting and financial reporting principles and internal controls and procedures designed to assure compliance +with accounting standards and applicable laws and regulations. The independent registered public accounting firm is responsible for auditing the Company’s financial statements and expressing an opinion as to their conformity with U.S. generally +accepted accounting principles. The Audit Committee’s responsibility is to monitor and review these processes. It is not the Audit Committee’s duty or responsibility to conduct auditing or accounting reviews. +In the performance of its oversight function, the Audit Committee has considered and discussed the audited financial statements with +management, which included a discussion of not only the quality, but also the acceptability, of the accounting principles, the reasonableness of significant judgments and the clarity of disclosures in the financial statements. The Audit Committee +met with the independent registered public accounting firm, with and without management, to discuss the results of their audit and their judgments regarding the Company’s accounting policies. The Audit Committee has also discussed with the +independent registered public accounting firm the matters required to be discussed under applicable standards, including those in Public Company Accounting Oversight Board Auditing Standard No. 16, as currently in effect. Finally, the Audit +Committee has received the written disclosures and the letter from the independent registered public accounting firm required by applicable requirements of the Public Company Accounting Oversight Board as currently in effect, has considered whether +the provision of non-audit services by the independent registered public accounting firm to the Company is compatible with maintaining the firm’s independence and has discussed with the independent +registered public accounting firm the firm’s independence. +Based upon the reports and discussions described in this report, +and subject to the limitations on the role and responsibilities of the Audit Committee referred to above and in the Audit Committee’s Charter, the Audit Committee recommended to the Board that the audited financial statements be included in the +Company’s Annual Report on Form 10-K for the year ended December 31, 2017 for filing with the SEC and selected KPMG LLP as the independent registered public accounting firm for fiscal year 2018. The Board +is recommending that stockholders ratify that selection at the Annual Meeting. +Submitted by the Audit Committee of the Company’s Board of Directors: +Michael Celano, Chairman +Mara G. Aspinall +Eamonn P. Hobbs +Charles W. Patrick +Aradhana Sarin, M.D. +February 26, 2018 +20 +Table of Contents +AUDIT FEES; AUDIT RELATED FEES; TAX FEES; ALL OTHER FEES +The following table presents fees for professional audit services rendered by KPMG LLP (i) for the +audits of our annual consolidated financial statements and review of the financial statements in our Quarterly Reports on Form 10-Q for the fiscal years ended December 31, 2017 and 2016, and +(ii) for the audits of our internal control over financial reporting as of December 31, 2017 and 2016. The following table also includes fees billed for other services rendered by KPMG: +2017 +2016 +Audit fees 1 +$727,750 +$710,000 +Audit-related fees 2 +$22,250 +— +Tax fees 3 +$150,212 +$158,379 +All other fees 4 +$45,140 +— +Total fees +$945,352 +$868,379 +1 +Includes fees related to the audits of our consolidated annual +financial statements, interim reviews of our quarterly financial statements and audits of our internal control over financial reporting for each indicated year. +2 +Includes fees for preparation of a written consent for a +Registration Statement on Form S-8 and consulting on miscellaneous accounting matters. +3 +During the fiscal years ended December 31, 2017 and 2016, KPMG +was engaged to provide tax compliance, planning and consulting services. +4 +Includes fees related to consulting on proposed executive retirement packages. +PRE-APPROVAL PROCEDURES +The Audit Committee has adopted a general practice of +pre-approving all audit and non-audit services provided to the Company by our independent registered public accounting firm. The Chairman of the Audit Committee has been +delegated the authority to pre-approve audit and non-audit services having an aggregate value of up to $25,000 between meetings of the Audit Committee, provided that +such pre-approval is communicated to the Audit Committee at its next scheduled meeting. All services by KPMG in 2017 and 2016 were approved in accordance with these practices. +COMPENSATION COMMITTEE MATTERS +The Compensation Committee +assists the Board in developing and managing the compensation provided to executive officers of the Company and non-employee members of the Board. The Compensation Committee is responsible for developing and +overseeing the implementation of the Company’s compensation philosophy and for setting executive compensation at levels that are sufficiently competitive so that the Company can attract, retain, motivate and reward high quality executives who +can contribute to the Company’s success. +COMPENSATION PROCESS AND PROCEDURES +Compensation for executives is established by the Compensation Committee in accordance with the +compensation philosophy established under its charter as set forth later in the CD&A in this Proxy Statement. In setting executive compensation, the Compensation Committee considers the Company’s and each executive’s performance +against previously established objectives, internal pay equity, the compensation practices of the Company’s peer group (listed on page 38 of this Proxy Statement) (“Peer Group”), the Company’s industry position and general +industry data. The Compensation Committee periodically retains independent compensation consultants to review our executive compensation practices and to assist in establishing competitive compensation levels for our executives. +ANNUAL PERFORMANCE EVALUATIONS +On an annual basis, the Compensation Committee and other +non-employee Directors evaluate the performance of the CEO and CFO/COO based on the overall performance of the Company. The CEO also evaluates the performance of the other NEOs against their respective +predetermined performance objectives. Annual performance objectives for the NEOs are established at the beginning of the applicable year and generally include two parts: (1) the Company’s overall target financial objectives, and +(2) individual objectives in the functional +21 +Table of Contents +areas for which the executive is responsible. For each NEO, these objectives are then weighted to reflect their relative importance to the Company and the executive’s functional +responsibilities. +Depending on the Company’s overall performance and the extent to which an executive achieves his individual +objectives for a particular year, the executive will be rated as “Does Not Meet,” “Does Not Consistently Meet,” “Meets Expectations,” “Exceeds Expectations” or “Outstanding.” On occasion, a blended +rating such as “Meets/Exceeds” will be used to indicate performance in between the foregoing performance rating levels. The Compensation Committee uses the performance ratings to determine base salary adjustments, incentive cash bonuses +and long-term incentive equity awards, except for Messrs. Michels and Spair. The Compensation Committee believes that, because of their senior positions with the Company, it is more appropriate to determine the base salary, incentive cash bonuses +and long-term incentive equity awards for Messrs. Michels and Spair primarily based on the Company’s overall performance and, in doing so, does not apply individual performance rating labels to these executives. +ROLE OF THE COMPENSATION COMMITTEE +The Compensation Committee is comprised of non-employee +independent Directors who oversee our executive compensation program. Each year, the Compensation Committee determines the appropriate level of compensation for all NEOs. As an initial guideline, the Compensation Committee sets the total direct +compensation opportunity (base salary, annual incentive bonus target, and long-term incentive equity target) for each of our executive officers within a range around the 50th percentile of comparable medical diagnostics and healthcare companies. The +variation of actual pay relative to the market data is dependent on the executive officer’s performance, experience, knowledge, skills, level of responsibility, potential to impact our performance and future success, and the need to retain and +motivate strategic talent. +The Compensation Committee generally determines an executive officer’s compensation based upon the +objectives of our executive compensation program. The Compensation Committee makes compensation recommendations to the Board for the CEO and approves decisions for the other NEOs after careful review and analysis of appropriate performance +information and market compensation data. Compensation for the CEO is approved by the full Board of Directors. Compensation for the CFO/COO is approved by the Compensation Committee. +Beyond determining and recommending specific compensation for NEOs, the Compensation Committee works with executive management to review +and adjust compensation policies and practices to remain consistent with the Company’s values and philosophy, support the recruitment and retention of executive talent, and help the Company achieve its business objectives. +ROLE OF THE CEO +The CEO provides recommendations to the Compensation Committee on the total direct compensation for each +executive, other than himself. The CEO’s recommendations are based on his review of each executive’s performance, job responsibilities, importance to our overall business strategy, and our compensation philosophy. Although the CEO’s +recommendations are given significant weight, the Compensation Committee retains full discretion when determining compensation. +ROLE OF THE COMPENSATION CONSULTANT +To assist in the review of executive compensation and to obtain information regarding market trends, the +Compensation Committee engages independent executive compensation consultants to analyze our executive compensation structure and plan designs, and to assess whether the compensation program is competitive and supports our goal of aligning the +interests of our executive officers with those of our stockholders. Such consultants also provide the Compensation Committee with the peer group and other market data that is discussed in the CD&A, which the Compensation Committee evaluates when +determining compensation for executive officers. During 2017, the Compensation Committee engaged Pay Governance LLC (“Pay Governance”) to provide a market assessment of the target compensation for our executives, to assist in updating the +peer group of companies we use for compensation benchmarking purposes and to consult on the preparation of this Proxy Statement. In addition, Pay Governance assisted the Committee in determining market-based compensation terms for the employment +22 +Table of Contents +agreement entered into with Dr. Tang, who will become the Company’s new President and CEO effective April 1, 2018, and the retirement agreements with Messrs. Michels and Spair, who +will be retiring in 2018. +The Compensation Committee has the sole authority to approve any independent compensation +consultant’s fees and terms of engagement. The Compensation Committee annually reviews its relationship with each consultant to ensure executive compensation consulting independence. The process in 2017 included a review of the services Pay +Governance provides, the quality of those services, and fees associated with the services during the fiscal year as well as consideration of the factors impacting independence that NASDAQ rules require and a review of Pay Governance’s +independence policy. The Compensation Committee concluded that there were no conflicts of interest that prevented Pay Governance from serving as an independent consultant to the Compensation Committee on executive compensation matters. We paid Pay +Governance $72,209 for their services related to the executive compensation services described above. +TALLY SHEETS +In determining annual compensation, the Compensation Committee reviews tally sheets for each executive. +Tally sheets set forth the dollar amounts of all components of each NEO’s current compensation, including salary, incentive cash bonus, incentive equity awards, potential termination payments and other benefits deemed relevant by the +Compensation Committee. These tally sheets allow the Compensation Committee to review how a change in the amount of each compensation component affects each executive’s total compensation and to consider each executive’s compensation in +the aggregate. Included in each tally sheet is the estimated amount of severance and other benefits payable to the executive under various termination scenarios. Tally sheets are utilized by the Compensation Committee to establish aggregate +compensation for our executives which the Compensation Committee believes to be reasonable. +COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION +Mara G. Aspinall, Eamonn P. Hobbs, Ronny B. Lancaster and Stephen S. Tang, Ph.D. served as members of +the Compensation Committee during 2017. In early January 2018, Dr. Tang left the Compensation Committee and Michael Celano joined the Committee. None of these Directors has served or is currently serving as an officer or employee of the +Company, nor have they engaged in any transactions involving the Company which would require disclosure as a transaction with a related person. As previously noted, Dr. Tang will become our President and CEO on April 1, 2018. There are no +Compensation Committee interlocks between the Company and any other entity involving the Company’s or such entity’s executive officers or board members. +COMPENSATION COMMITTEE REPORT +The information contained in this report shall not be deemed to be “soliciting material” or +“filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that Section. This report shall not be deemed to be “ incorporated by reference” into any document filed +under the Securities Act or the Exchange Act, whether such filing occurs before or after the date hereof, regardless of any general incorporation language in such filing. +The Compensation Committee of OraSure Technologies, Inc. has reviewed and discussed with the Company’s management the Section +entitled, “Compensation Discussion and Analysis,” contained in this Proxy Statement. Based on that review and discussion, the Compensation Committee recommended to the Company’s Board of Directors that the foregoing Compensation +Discussion and Analysis be included in the Company’s 2017 Annual Report on Form 10-K Report and Proxy Statement for the 2018 Annual Meeting of Stockholders. +COMPENSATION COMMITTEE: +Ronny B. Lancaster, +Chairman +Mara G. Aspinall +Michael Celano +Eamonn P. Hobbs +March 27, 2018 +23 +Table of Contents +EXECUTIVE OFFICERS +The table below provides information about +the executive officers of the Company as of March 15, 2018. Officers of the Company hold office at the discretion of the Board. +Name +Age +Position +Douglas A. Michels +61 +President and Chief Executive Officer +Ronald H. Spair +62 +Chief Financial Officer and Chief Operating Officer +Anthony Zezzo II +64 +Executive Vice President, Business Unit Leader, Infectious Disease +Brian Smith +59 +Executive Vice President, Business Unit Leader, Molecular Solutions +Jack E. Jerrett +59 +Senior Vice President, General Counsel and Secretary +Michael Reed, Ph.D. +49 +Senior Vice President, Research and Development and Chief Science Officer +Mark L. Kuna +54 +Senior Vice President, Finance, Controller and Assistant Secretary +Douglas A. Michels, President and Chief Executive Officer +Mr. Michels has been the Company’s President and Chief Executive Officer since June 2004. Prior to that, Mr. Michels +served as Group Vice President, Global Marketing of Ortho-Clinical Diagnostics, President of Ortho-Clinical Diagnostics International, and President of Johnson & Johnson Healthcare Systems, Inc. Earlier in his career, Mr. Michels held +various sales and marketing positions of increasing responsibility within the Johnson & Johnson family of companies and with the Diagnostics Division of Abbott Laboratories. Mr. Michels received a B.S. degree in Public Health +Administration from the University of Illinois and an M.B.A. from Rutgers University. Mr. Michels recently served on the Presidential Advisory Council on HIV/AIDS (PACHA) and currently serves on the boards of directors of West Pharmaceutical +Services, Inc. and the Miller Keystone Blood Center. +Ronald H. Spair, Chief Financial Officer and Chief Operating Officer +Mr. Spair has been the Company’s Chief Financial Officer and Chief Operating Officer since September 2006 and served as +Executive Vice President and Chief Financial Officer since November 2001. Prior to that time, Mr. Spair served as Chief Financial Officer for various companies in the pharmaceutical industry, including Delsys Pharmaceutical Corporation, +SuperGen, Inc., Sparta Pharmaceuticals, Inc. and Envirogen, Inc. Mr. Spair received both his B.S. in Accounting and M.B.A. from Rider College. He is also a licensed Certified Public Accountant, a Chartered Global Management Accountant, a member +of the New Jersey Society of Certified Public Accountants and the American Institute of Certified Public Accountants, and serves on the boards of Fulton Financial Corporation and Life Sciences PA. +Anthony Zezzo II, Executive Vice President, Business Unit Leader, Infectious +Disease +Mr. Zezzo has been the Company’s Executive Vice President, Business Unit Leader, Infectious Disease since January 2017 and +prior to that he served as Executive Vice President, Marketing and Sales since January 2011. From 2004 to December 2010, Mr. Zezzo was Vice President, North American Sales and Marketing at the Ortho-Clinical Diagnostics Division of +Johnson & Johnson. Prior to that time, Mr. Zezzo held a series of sales and marketing positions of increasing responsibility within Johnson & Johnson. Mr. Zezzo received his B.A. in Political Science from Grove City +College. +24 +Table of Contents +Brian Smith, Executive Vice President, Business Unit Leader, Molecular Solutions, DNA Genotek, +Inc. +Brian Smith has been the Executive Vice President, Business Unit leader, Molecular Solutions with the Company’s subsidiary, DNA +Genotek, Inc., since August 2017, and prior to that served as DNA Genotek’s Vice President of Sales since January 2008. Prior to joining DNA Genotek, Mr. Smith was Director of Sales and Marketing for Telephonetics VIP plc, a UK speech +recognition company. Previous positions include Vice President of Marketing at Cloakware Corporation (Ottawa), President of Ponte Communications (California), and executive positions at Entrust Technologies in both North America and Europe. +Mr. Smith has a Bachelor of Commerce degree from McGill University with a major in Management Information Systems. +Jack E. Jerrett, Senior Vice President, General Counsel and Secretary +Mr. Jerrett has been the Company’s Senior Vice President and General Counsel since February 2003 and served as Vice +President and General Counsel since November 2000. He has also served as the Company’s Secretary since February 2001. Prior to joining the Company, Mr. Jerrett worked as an Associate at Morgan, Lewis & Bockius and held positions +of increasing legal responsibilities with companies in the transportation and energy industries. Mr. Jerrett received his B.S. in Accounting from Villanova University and his J.D. from the Villanova University School of Law. He is a member of +the Pennsylvania Bar and the American and Pennsylvania Bar Associations. +Michael Reed, Ph.D., Senior Vice President of Research and Development and Chief Science +Officer +Dr. Reed has been the Company’s Senior Vice President, Research and Development and Chief Science Officer since April 2016. +Prior to joining the Company, Dr. Reed spent eight years at Beckman Coulter, a global diagnostics and life sciences company within the Danaher Corporation, serving in a variety of leadership positions including Director of Global Assay and +Applications Development for the Beckman Coulter Life Science business and Director of Scientific Affairs for the Cellular Analysis Business Group. Prior to his work at Beckman Coulter, Dr. Reed served as Director of Product Development with +Osmetech Molecular Diagnostics (now called GenMark Diagnostics), a molecular diagnostics company. Dr. Reed received a Ph.D. degree in Biochemistry from the University of Adelaide (Australia) and a BSc. in Biochemistry from The Australian +National University (Canberra, Australia). He also conducted post-doctoral research at the Beckman Research Institute at the City of Hope in Duarte, California. +25 +Table of Contents +Mark L. Kuna, Senior Vice President, Finance, Controller and Assistant Secretary +Mark L. Kuna has been the Company’s Senior Vice President, Finance and Controller since September 2006, and served as Vice +President and Controller since February 2003 and as Controller since February 2001. Mr. Kuna has also served as the Company’s Assistant Secretary since May 2002 and provided accounting and financial analysis support since joining the +Company in October 2000. Prior to that time, Mr. Kuna served as an accountant with Deloitte and Touche and held senior accounting and management positions with companies in the petrochemical, manufacturing, and telecommunications industries. +Mr. Kuna received his B.S. in Accounting from the University of Scranton and is a licensed Certified Public Accountant, a Chartered Global Management Accountant, and a member of the Pennsylvania and American Institutes of Certified Public +Accountants. +TRANSACTIONS WITH RELATED PERSONS +Since January 1, 2017, +there have been no transactions with related persons that would require disclosure in this Proxy Statement. The Audit Committee is required to review and approve in advance all transactions with related persons involving the Company. The Audit +Committee may approve a related party transaction if the transaction is on terms comparable to those that could be obtained in arms’ length dealings with an unrelated third party. The Audit Committee also reviews any public disclosures of a +related party transaction contained in our SEC filings. These responsibilities are described in the Audit Committee’s charter, a copy of which is available on our website at +www.orasure.com . +Information +regarding employment and severance agreements between our executive officers and the Company is set forth in the Section entitled, “Employment Agreements and Potential Payments Upon Termination or Change of Control,” in this Proxy +Statement. +SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE +Section 16(a) of the +Exchange Act requires that our executive officers, Directors and persons who own more than ten percent of our Common Stock (collectively, “Reporting Persons”) file reports of ownership and changes in ownership with the SEC. Reporting +Persons are required by the SEC’s regulations to furnish us with copies of all Section 16(a) forms they file. +As a matter +of practice, our administrative staff assists each of the Reporting Persons who are employees and Directors of the Company in preparing initial reports of ownership and reports of changes in beneficial ownership and filing such reports with the SEC +and the NASDAQ. Based solely on a review of the copies of forms filed by or on behalf of the Reporting Persons and on written representations (if any) from each of the Reporting Persons, we believe that all Reporting Persons complied on a timely +basis with all applicable filing requirements with respect to the 2017 fiscal year, except for Brian Smith. A Form 3 for Mr. Smith, which was required when Mr. Smith became an executive officer of the Company in 2017, was inadvertently filed late +due to administrative delays by the SEC in issuing EDGAR filing codes for Mr. Smith. +26 +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS - TABLE OF +CONTENTS +EXECUTIVE SUMMARY +28 +Overview +28 +Our Performance in 2017 +28 +2017 Business Highlights in Detail +29 +2017 NEO Compensation At a Glance +30 +Pay for Performance +31 +Realizable Pay vs. TSR +33 +Realizable Pay vs. SCT Compensation +33 +Pay vs. Other Company Measures of Performance +34 +Say-on-Pay Results +in 2017 and the Company’s Response +35 +Compensation Governance Practices +35 +Compensation Risk Assessment +36 +COMPENSATION PHILOSOPHY +37 +BENCHMARKING +37 +PAY MIX +39 +2017 EXECUTIVE COMPENSATION COMPONENTS +Overview +40 +Compensation Components in Detail +41 +OTHER COMPENSATION +50 +Retirement Programs +50 +Perquisites and Other Compensation +50 +Potential Payments Upon Termination or Change of Control Pursuant to Employment Agreements +51 +Accounting and Tax Treatment of Compensation +51 +Compensation Recoupment Policy +51 +CEO PAY RATIO +51 +COMPENSATION TABLES – TABLE OF CONTENTS +Summary Compensation Table +53 +Grants of Plan-Based Awards +54 +Outstanding Equity Awards at December 31, 2017 +55 +Option Exercises and Stock Vested +57 +Retirement Benefits +57 +Nonqualified Deferred Compensation +58 +27 +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +EXECUTIVE SUMMARY +Overview +This Compensation Discussion and Analysis, or CD&A, describes the material elements of the compensation of our NEOs and describes +the objectives and principles underlying the Company’s executive compensation program, the compensation decisions we have recently made under this program and the factors we considered in making these decisions. +Our NEOs for 2017 who are covered in this CD&A include: +Name +Position during 2016 +Douglas A. Michels +President and Chief Executive Officer +Ronald H. Spair +Chief Financial Officer and Chief Operating Officer +Anthony Zezzo, II +Executive Vice President, Business Unit Leader, Infectious Disease +Brian Smith +Executive Vice President, Business Unit Leader, Molecular Solutions +Jack E. Jerrett +Senior Vice President, General Counsel and Secretary +Our Performance in 2017 +Our financial performance for 2017 represented another year of substantial improvement over the prior-year period, with record revenues +and a third consecutive year of profitability. The following charts describe our consolidated financial performance during the last three fiscal years, expressed in dollars (thousands) and percentage growth from the prior year period. +Net Revenues Net Income/Loss +28 +Table of Contents +2017 was another year of record financial performance for the Company and is the third consecutive year of +profitability. Our 2017 consolidated net revenues were $167.1 million, a 30% increase over 2016. Our consolidated net income in 2017 was $30.9 million, or $0.51 per share, an improvement of $11.2 million ($0.16 per share) over 2016. +2017 Business Highlights in Detail +Business highlights from 2017 and the principal factors driving our financial performance are summarized below: +• +Consolidated net revenues were $167.1 million (30% increase over 2016), a new record level for our Company. +• +Consolidated net product revenues increased 51% to $162 million in 2017. +• +We reported a third consecutive year of profitability with consolidated net income of $30.9 million for 2017, or $0.51 per share on a fully-diluted basis. This represents an $11.2 million ($0.16 per share) +improvement over 2016. +• +We generated $28.2 million in cash from operations during 2017, compared to $24.6 million in 2016. +• +Aggregate cash and cash equivalents totaled $176.6 million at year-end. +• +Net molecular collection system revenues reached a new high of $75.1 million in 2017, a 133% increase over 2016. +• +International sales of our OraQuick ® HIV products grew 115% in 2017, largely due to strong demand for our +OraQuick ® HIV Self-Test. +• +HCV product revenues increased 81% in 2016, reflecting a 156% rise in international sales of our OraQuick ® HCV test. +• +2017 total stockholder return (“TSR”) determined by reference to a change in the value of the Company’s Common Stock (based on the stock price) for the relevant measurements period was 114.8%. +Operating Income/Loss +29 +Table of Contents +2017 NEO Compensation At a Glance +NEO compensation in 2017 was tied to the performance of both the executives and the Company, resulting in the following: +• +Base Salary : The base salaries paid to our management (including the NEOs) during 2017 increased +from 2016 by 2.77% on average, with Mr. Michels receiving a 3.50% increase for the year over his 2016 base salary. Salary adjustments were based on the performance of each executive and the Company during 2016, the marketplace data provided to +the Compensation Committee by its compensation consultant at the time, and our Company-wide salary merit increase budget of 3.0%. Additional detail on these salary adjustments is provided in the “2017 Base Salaries” section, starting on +page 41. +NEO +2016 Performance Rating +2016 Salary +2017 Salary +Change (%) +Douglas A. Michels +Above Target +$612,580 +$634,020 +3.50% +Ronald H. Spair +Above Target +$480,244 +$497,053 +3.50% +Anthony Zezzo II +Meets +$391,690 +$400,503 +2.25% +Brian Smith 1 +Meets +$233,264 +$278,264 +N/A +Jack E. Jerrett +Meets +$353,010 +$360,953 +2.25% +1 Mr. Smith received a +2.25% base salary raise and, as a result, his initial salary for 2017 was increased to $238,512. In August 2017, Mr. Smith was promoted from Senior Vice President, General Manager, to his current position and his salary was increased to +$278,264. Mr. Smith’s Canadian-based salary has been translated into U.S. dollars using the Canadian to U.S. Dollar exchange rate at December 31, 2017. +• +Annual Incentive Bonuses : Incentive cash bonus awards for 2017 performance ranged from 170% to 300% +of target for the NEOs and for Mr. Michels was 300% of his target. The bonus amounts exceeded the applicable targets for each NEO primarily due to the financial performance of the Company during 2017, as described under the “2017 Business +Highlights in Detail” section, above. In approving these bonus awards, the Board also recognized the importance of broader Company performance such as TSR and considered the fact that our TSR for 2017 was 114.8%, a substantial improvement from +the 36% increase in TSR in 2016. Bonus payments above target were approved because of the Board’s belief that continuing annual financial improvement, and in particular the substantial improvement achieved in 2017, should be rewarded as a +critical factor for delivering value to our stockholders. Additional detail on these bonus payments is provided in the “2017 Annual Incentive Cash Bonuses” section, starting on page 43. +Actual 2017 Bonus Payments +NEO +2017 +Performance Rating +2017 Target +(% Salary) +($) +(% Salary) +(% Target) +Douglas A. Michels +Above Target +70% +$1,331,442 +210% +300% +Ronald H. Spair +Above Target +50% +$683,448 +137.5% +275% +Anthony Zezzo II +Meets +40% +$272,341 +68% +170% +Brian Smith 1 +Outstanding +40% +$317,639 +114% +285% +Jack E. Jerrett +Meets/Exceeds +35% +$290,567 +80.5% +230% +1 Mr. Smith’s 2017 actual bonus payment was calculated +using the Canadian to U.S. Dollar exchange rate effective on January 18, 2018. +30 +Table of Contents +• +Long-Term Incentive Awards : Incentive equity awards were granted to NEOs in February 2017 based on +performance during 2016. The value of the awards ranged from 75% to 225% of each executive’s base salary as shown below. The NEOs received equity awards consisting of 50% performance-vested restricted units and 50% time-vested restricted stock. +The total value of Mr. Michels’ award was 225% of his salary. Mr. Michels’ award was based on the Company’s strong financial performance during 2016, as described under the “2017 Base Salaries” section, starting on +page 41. +2017 Awards +NEO +2016 +Performance Rating +Target Range +(% Salary) +($) +(% Salary) +Douglas A. Michels +Above Target +150% – 250% +$ +1,378,310 +225% +Ronald H. Spair +Above Target +90% – 160% +$ +696,357 +145% +Anthony Zezzo II +Meets +75% - 125% +$ +391,691 +100% +Brian Smith 1 +Meets +75% - 125% +$ +225,386 +100% +Jack E. Jerrett +Meets +55% – 95% +$ +264,761 +75% +1 +The dollar value of Mr. Smith’s 2017 Award was calculated +using the Canadian to U.S. Dollar exchange rate effective on January 20, 2017. +Additional information +regarding NEO compensation for 2017 is provided below in this CD&A and in the accompanying tables, including the Summary Compensation Table (“SCT”) set forth on page 53. The information provided below explains the basis for of the +compensation paid to our executives considering our financial performance during 2016 and 2017. +Pay for Performance +We follow a pay-for-performance approach in +compensating executives. Our program pays executives for performance by rewarding the achievement of predetermined financial and other performance objectives. +A significant portion of each NEO’s compensation is paid out in variable and long-term compensation that is intended to align such +compensation with the long-term interests of our stockholders. Both our annual and long-term compensation are tied to the Company’s overall performance in a variety of ways, including our financial results and share price performance. A further +discussion of our pay mix for the NEOs is set forth in the “Pay Mix” section, starting on page 39. +An important feature +of our compensation program is the use of performance targets to incentivize management to achieve improved financial results on a year-to-year basis. We believe +continuous revenue growth and sustained and increasing profitability are key factors for increasing the price of our Common Stock and delivering long-term value for our stockholders. +31 +Table of Contents +The use of performance targets to drive growth is clearly illustrated by the annual +bonus plan established each year. As described further in this CD&A, annual financial objectives are established in order to determine the amount of pool funding available to pay individual bonus awards each year. When establishing these +objectives, the Board and Compensation Committee generally select targets that, if achieved, will result in improved financial performance on an annual basis, consistent with our business plans. Set forth below are the Target performance levels +(dollars in millions) that were used to determine pool funding in our bonus plans for the three-year period 2015-2017. These targets provided an important incentive for the significantly improved financial performance over that period, as shown on +pages 28-29. +Annual Bonus Plan Targets +2015 +2016 +2017 +Consolidated Net +Revenue +$121.7 +$126.3 +$137.7 +Operating +Income +$5.5 +$12.3 +$23.3 +Beginning in 2016, we adopted a new policy of granting annual equity awards to executives that consist +of 50% performance-vested restricted units and 50% time-vested restricted stock. The performance units will only vest if (i) the NEO remains employed by the Company for three years following the date of grant and (ii) the performance +criteria determined by the Committee and Board are met. The time-vested restricted stock portion of the award vests in equal annual installments over the three-year period following the grant date, subject to the NEO’s continued employment by +the Company. +For each award of performance-vested restricted units granted in 2017, +one-half of such units will be earned based on the achievement of a compound annual growth rate (“CAGR”) target for consolidated product revenues for the three-year period 2017-2019 and the remaining +half will be earned based on achievement of a one-year earnings per share (“EPS”) target for the fiscal year 2017. The three-year product revenue CAGR target reflects a blending of projected growth +taken from our internal long-range plan and growth rates contained in several published market research growth forecasts for the medical diagnostics and molecular testing markets. The one-year EPS target +represents the Company’s projected net income for 2017 as indicated in our 2017 budget or operating plan. Under the terms of the grant, award recipients may receive additional units, above the initial number awarded in 2017, if we exceed the +performance criteria. If we achieve less than 80% of a performance target, the units relating to such performance target will not vest. +We believe the performance targets and three-year service period of these performance-vested equity awards complement the short-term +incentives in our annual bonus plans. We also believe the combination of the structure of our annual bonus plan and the structure of our equity award policy will incentivize management to deliver substantially improved financial performance both on +an annual basis and over a longer term period and help drive long-term growth in stockholder value. +32 +Table of Contents +Pay for Performance Alignment Relative to Compensation Peer Group* Reflects FY2015 - FY2017 pay for OSUR OSUR 0% +25%50% 75% 100% 0% 25% 50% 75% 100% 3-Year Annualized TSR Percentile Rank 3-Year CEO Realizable Pay Percentile Rank* low pay for high performance pay-for performance alignment high pay for low performance +Realizable Pay vs. TSR +To ensure that we are adhering to a pay-for-performance +approach, we evaluated the degree of alignment between our CEO’s total realizable pay versus our TSR over the prior three fiscal years (2015 to 2017) relative to our Peer Group. We have adopted this approach to ensure our compensation program +is operating as intended and to respond to stockholder feedback we previously received on our executive compensation. The graph below shows the comparison of three-year TSR and “realizable pay” relative to our Peer Group. We provide +further detail regarding the companies in our Peer Group in the “Benchmarking” section of this CD&A. +Realizable pay includes base salary, incentive cash bonus and all other compensation reported in the +Summary Compensation Table. Realizable pay also includes the value of equity awards using each company’s closing stock price on December 29, 2017. Restricted stock and restricted unit awards are valued by multiplying the number of shares +granted (at the target level in the case of restricted units) by the closing stock price on December 29, 2017. Option awards are valued as the difference between the closing stock price on December 29, 2017 and the exercise price +multiplied by the number of option shares granted during the period. An option award with an exercise price greater than the closing stock price on December 29, 2017 is valued at $0. +As the graph indicates, there is a close relationship between our TSR performance and the realizable pay for our CEO, Mr. Michels, +relative to the relationship seen in our Peer Group. This analysis confirms the strong link between pay and performance embedded in our compensation program. +Realizable Pay vs. SCT Compensation +As described further below, we believe long-term equity awards are a key incentive for our executives to drive the Company’s +long-term growth and align the interests of our executives with those of our stockholders. The Summary Compensation Table includes the estimated value of long-term incentive equity awards at the time of grant based on the accounting valuation +determined under ASC 718. The actual value of these awards that may be realizable by our executives may vary from the estimates depending on the Company’s financial and stock performance and often differs significantly from what is reported in +the Summary Compensation Table. +A comparison of the realizable value of long-term equity incentive awards as of December 29, +2017 against the values reported in the Summary Compensation Table indicates how compensation outcomes may be impacted +33 +Table of Contents +by our performance. Such a comparison also shows the degree of alignment between our stock performance and the level of compensation provided to executives. +The table below compares the compensation values reported in the Summary Compensation Table and the value of realizable pay +(“RP”) for the compensation awarded during the three-year period 2015 to 2017 for our CEO, Mr. Michels. +Mr. Michels’ realizable pay for the three years 2015–2017 of $15.5 million is 84% higher than his SCT compensation opportunity +for the same period. This shows a strong link between pay and performance as our TSR over the three year period approximated the 75 th percentile of our peers. +Pay vs. Other Company Measures of Performance +While TSR is a common measure of performance that is often used to evaluate a company’s compensation practices, we consider other +performance measures to be, at times, more reflective of the success of our business. It is important to recognize that our TSR can be extremely volatile, as evidenced by the substantial movements in our stock price during the past several years. +Our TSR can be, and often is, influenced by a variety of macro-economic factors that are outside the control of our executives. Specifically, in 2013 our stock price declined 12%, but rose 61% in 2014. Our stock price declined again by 36.5% in 2015 +and rose 36% in 2016. More recently, our stock price rose 114.8% in 2017. These price changes are not solely tied to our underlying financial performance. For example, our stock price declined in 2015 even though we achieved record financial +performance with substantial growth and full year profitability that year. During this period, our stock price was also affected by market factors unrelated to our performance. +As a result, while our executive compensation opportunities do not follow a linear relationship with TSR, the pay realizable to our +executives (as noted above for our CEO) should and does demonstrate a clear relationship with both TSR and financial results. We have tried to align our executive compensation with performance results that are part of our overall business strategy +that we believe will drive stock price improvement and increased value for our stockholders over the longer term. For example, in past years we have had a number of +“first-of-their-kind” achievements in the diagnostics field. Specifically, we developed and commercialized the first and only rapid HCV test in the United +States along with the first ever rapid in-home HIV test. We successfully completed the acquisition of DNA Genotek in late 2011, providing us with an entrance into the high growth molecular diagnostics field. +This acquisition is now contributing strong growth to our business and accounted for 45% of our 2017 consolidated net revenues. During 2016 and 2017, we expanded the reach of our core HIV and HCV product lines with significant growth in +international markets. These achievements are the primary reasons for our profitability in 2015, 2016 and 2017 and our overall strong and continually improving financial performance for the past three fiscal years. +When establishing and evaluating our executive compensation program generally, and performance-based incentive plans in particular, we +believe that TSR alone will not always immediately account for the value of our accomplishments and, in many cases, it may take time for the impact of our strategic and other accomplishments to +FY2015 - FY2017 Pay Comparison $20,000,000 $15,503,935 $15,000,000 $4,648,636 $10,000,000 +$8,426,767 $4,849,264 $1,333,088 $1,890,774 $1,641,826 $5,000,000 $838,697 $4,364,208 $4,364,208 Total Cash + All Other Stock Options Restricted Stock PSUs +34 +Table of Contents +be fully reflected in the value of our stock. Thus, while obviously important, TSR is only one of several factors we consider in making compensation decisions for our executives. +Say-on-Pay Results in 2017 and the +Company’s Response +At our 2017 Annual Meeting, stockholders were asked to vote on an advisory (non-binding) basis on the compensation paid to our NEOs for 2016. We obtained strong stockholder support for our NEO compensation for 2016 with approximately 96.6% of stockholder votes cast in favor of our “say-on-pay” or SOP resolution. Even with this overwhelmingly positive response, we continued our outreach effort that had been initiated in response to prior SOP +votes to contact certain of our major stockholders in order to continue to understand their concerns regarding our compensation practices. We also contacted both ISS Proxy Advisory Services (“ISS”) and Glass Lewis & Co. +(“Glass Lewis”), two leading proxy advisory firms, in order to solicit their views on these issues. Overall, we contacted stockholders who, in the aggregate, beneficially held over 50% of our outstanding Common Stock. As a general matter, +our stockholders indicated that they saw no need to meet with us although many had done so in the past. We believe these stockholders declined our invitation because they are generally supportive of our executive compensation practices. As a result, +we made no further changes to our executive compensation program following the SOP vote at the 2017 Annual Meeting. +We believe our +stockholder engagement has been and continues to be beneficial for the Company and our stockholders. The feedback received, including the indicated lack of interest in meeting following our 2017 SOP vote results, reaffirms that the compensation +changes made in recent years were responsive to stockholder concerns and our executive compensation is strongly aligned with performance. The Board intends to continue ongoing dialogue with our stockholders to ensure our executive compensation +programs are well understood by all stakeholders and that we continue to be responsive to stockholder concerns. +Compensation Governance Practices +We are committed to maintaining good corporate governance and practices. As a result, and in response to input from stockholders, the +Compensation Committee and Board have adopted a number of changes over the past years to specifically respond to stockholder concerns and better align our compensation program with performance. The most significant of these changes was the adoption +of performance-vested restricted units for 50% of the value of annual long-term equity awards for our executives. These changes and other aspects of our compensation practices are summarized below: +Performance Mix – The vast majority of our NEOs’ compensation is performance-based. For example, approximately 81% +of Mr. Michels’ 2017 compensation consisted of an incentive cash bonus and long-term incentive equity awards, which are awarded based on Company performance. For the other NEOs, 67% of their aggregate 2017 compensation consisted of +performance-based compensation. +Diversified and Performance Based Portfolio – Our executive compensation consists of a mix of cash/equity, fixed/variable +and short-term/long-term compensation. Equity awards consist of 50% performance-vested restricted units and 50% time-vested restricted stock. +Performance Vested Equity – 50% of our NEOs’ annual equity awards consist of performance-vested restricted units +that will not vest until three years after the grant date and only if certain performance measures are met during the three-year period. +Long-Term Focus – Equity awards are subject to long-term vesting requirements, with restricted shares vesting over 3 +years. Performance vested restricted units also vest after 3 years. Structuring our equity awards in this manner helps align the interests of our executives with the long-term interests of our stockholders. +Threshold Bonus Objectives – Threshold financial performance objectives for annual bonus pool funding are set at levels +that meet or exceed the Company’s actual financial performance for the prior fiscal year. Target financial performance objectives generally increase or improve each year and thereby help drive improved financial performance on a year-over-year +basis. +35 +Table of Contents +Limited Bonus Pool Discretion – The aggregate bonus pool funding for annual cash bonuses is determined pursuant to a plan +funding formula tied to the Company’s achievement of specific financial objectives. The Board and Compensation Committee can make discretionary adjustments to the pool, but such an adjustment is limited to +/– 10% of the pool amount +determined under the plan’s self-funding formula. +Multiple Performance Metrics – Variable compensation is based on a combination of corporate and individual performance +measurements to help ensure balanced incentives for executives. +Employment Agreement Policy – Employment agreements with our NEO’s do not provide for a 280G income tax gross up and +our CEO’s employment agreement provides for “double trigger” change in control severance rather than a “single trigger” change in control severance used for other executive employment agreements. This policy was recently +followed in structuring the employment agreement with Stephen S. Tang, who will become the Company’s new President and CEO on April 1, 2018. +Strong Stock Ownership and Retention Conditions – We have implemented stock ownership requirements of six (6) times +salary for our President and CEO, two (2) times salary for our CFO/COO and one (1) times salary for other NEOs. +Prudent Benchmarking – The total compensation paid to executives is targeted at the 50 th percentile of a peer group of comparable companies based on achievement of performance objectives. We use a Peer Group consisting of companies in the medical diagnostic and healthcare industries +comparable in size to the Company based on total revenues and market value. +Tally Sheets – The Compensation Committee reviews tally sheets as part of making individual compensation decisions. +Independent Compensation Consultants – The Compensation Committee regularly utilizes independent compensation consultants +to provide compensation advice, including competitive assessments of our program compared to compensation paid to executives at the Peer Group of comparable medical diagnostic and healthcare companies. During 2017, the Compensation Committee engaged +Pay Governance as its independent consultant. +Recoupment Policy – The Company maintains a compensation recoupment or “clawback” policy, under which we will +seek to recover excess compensation paid to our executives if our financial statements are restated due to misconduct by that executive. +No Repricing – Our LTIP prohibits both the repricing and repurchase of under-water stock options or other equity awards +without stockholder approval. +No Perquisites – We do not provide executives with any perquisites that are not offered to all employees of the +Company. +Risk Review Process – We regularly assess the risks associated with our compensation programs. +No Hedging – Our policy prohibits Directors and NEOs from engaging in hedging activities with our stock. +No Pledging – Our Directors and NEOs are not permitted to pledge our stock. +Confidentiality/Non–Compete Agreements – Our NEOs are subject to confidentiality and non-compete agreements. +Compensation Risk Assessment +Management periodically conducts a risk assessment of the Company’s compensation policies and practices, including its executive +compensation program. In its review, management considers the attributes of the Company’s policies and practices and other factors, including: +• +The mix of fixed and variable compensation opportunities; +• +The balance between annual and long-term performance opportunities; +36 +Table of Contents +• +The corporate and individual performance objectives established for annual and long-term incentive compensation; +• +The internal controls and procedures in place to mitigate risks facing the Company, including the Company’s +“clawback” policy and stock ownership guidelines; and +• +The risk that unintended consequences could result from various aspects of the Company’s compensation policies and +practices. +Based on its review and assessment, management believes that the Company’s policies and practices +are designed with the appropriate balance of risk and reward in relation to the Company’s overall business strategy and do not incentivize employees to take unnecessary or excessive risks. The Company has also concluded that any risks arising +from the Company’s compensation policies and practices are not reasonably likely to have a material adverse effect on the Company. +COMPENSATION PHILOSOPHY +The primary objectives of our compensation program for executive officers are to: +Set compensation opportunities at levels sufficient to attract and retain high quality executives, to motivate them to contribute to our success and +to reward them for performance. +Ensure the compensation opportunities provided align the interests of executives with the interests of our stockholders. +Focus our executives on both short and longer-term individual and Company priorities established by the Board and appropriately reward them for +performance against these objectives. +The total direct compensation provided to each executive consists of an annual base salary, annual +incentive cash bonuses and long-term incentive equity awards. The amount of the incentive cash bonuses and the size of annual incentive equity awards are variable and depend on an executive’s and the Company’s achievement of predetermined +financial and other objectives. As a result, a substantial portion of each executive’s annual compensation is based on performance. +BENCHMARKING +We believe it is useful to regularly compare our compensation program against compensation paid to +executives at other comparable medical diagnostic and healthcare companies. With the assistance of Pay Governance, an independent compensation consultant engaged by the Compensation Committee, an updated Peer Group of companies was selected using +criteria based on industry, revenues and market capitalization and a competitive assessment of our executive compensation was prepared. +The Compensation Committee seeks to set total direct compensation opportunity levels for each executive near the fiftieth (50 th ) percentile of amounts paid by the Peer Group of companies for performance consistent with the Company’s target financial and other business plans for the applicable year. Use of the +fiftieth (50 th ) percentile is intended as a market-based reference and not as an absolute target. As a result, the total direct compensation opportunity and the value of specific compensation +components for individual executives may fall below or exceed the fiftieth (50 th ) percentile depending on the individual performance of the executive, the criticality of his or her role, the +executive’s contribution to our business, and other factors. +37 +Table of Contents +The following provides information about the Peer Group used by the Compensation +Committee for benchmarking purposes in setting executive compensation and how we compare to these companies (all dollars in millions): +In +Millions +Peer Company +FY 2017 Revenue 1 +12/31/17 Market +Capitalization +Business 2 +Abaxis, Inc. +$227 +$1,124 +Healthcare +Equipment +Anika Therapeutics, Inc. +$113 +$ 790 +Healthcare +Supplies +AtriCure, Inc. +$175 +$ 629 +Healthcare +Equipment +Atrion Corporation +$147 +$1,168 +Healthcare +Supplies +Cardiovascular Systems, Inc. +$205 +$ 808 +Healthcare +Equipment +Endologix, Inc. +$181 +$ 446 +Healthcare +Supplies +Enzo Biochem, Inc. +$108 +$ 382 +Life +Sciences Tools and Services +Fluidigm Corporation +$102 +$ 228 +Life +Sciences Tools and Services +Genomic Health +$341 +$1,190 +Biotechnology +Harvard Bioscience, Inc. +$102 +$ 115 +Life +Sciences Tools and Services +Lantheus Holdings, Inc. +$331 +$ 767 +Healthcare +Supplies +Luminex Corporation +$307 +$ 868 +Life +Sciences Tools and Services +Meridian Bioscience, Inc. +$201 +$ 592 +Healthcare +Supplies +NeoGenomics, Inc. +$259 +$ 712 +Life +Sciences Tools and Services +Quidel Corporation +$278 +$1,474 +Healthcare +Supplies +RTI Surgical, Inc. +$280 +$ 249 +Healthcare +Supplies +STAAR Surgical Company +$ 91 +$ 638 +Healthcare Supplies +FY 2017 Revenue 1 +12/31/17 Market +Capitalization +25 th Percentile +$113 +$ 446 +Median +$201 +$ 712 +75 th Percentile +$278 +$ 868 +OraSure Technologies, Inc. +$167 +$1,144 +Source: +Standard & Poors Capital I.Q. +1 +Reflects revenue reported for fiscal year 2017. +2 +Reflects Global Industry Classification Standard sub-industry designation. +In preparing its 2017 competitive assessment of executive compensation, Pay Governance compared the compensation +of our NEOs with a 50/50 blend of proxy data from the Peer Group and data for each NEO position from the 2017 Radford Global Life Sciences Survey. Since compensation market data can be volatile from year to year, the Compensation Committee believes +a blend of specific Peer Group proxy data and broader survey data better reflect market trends. Based on this analysis, Pay Governance reached the following conclusions: +• +With some variation by individual executives, the target total direct compensation (“TDC”) for our NEOs is +aligned with market median levels. +• +Despite aggregate TDC alignment, our LTIP equity targets for several executives is below median and may warrant +adjustment. +• +NEO average pay mix is generally higher with respect to base salary, but lower than the market median for LTIP equity +targets. +38 +Table of Contents +Douglas A. Michels’ Compensation base compensation performance-based compensation All Other NEO’s +Compensation base compensation performance-based compensation +Based on its review of the Pay Governance assessment, the Compensation Committee decided not to make any changes to our executive +compensation program. +PAY MIX +We follow a +pay-for-performance approach to executive compensation, with a significant portion of our executives’ compensation consisting of annual incentive cash bonuses and +long-term incentive equity awards that are based on the executives’ and the Company’s achievement of predetermined performance objectives. +The following illustrates the relative proportion of 2017 base salaries, and the performance-based compensation consisting of incentive +cash bonuses and long-term incentive equity awards, for Mr. Michels and the other NEOs, respectively: +Approximately 81% of Mr. Michels’ +aggregate compensation and 67% of the other NEOs’ aggregate compensation for 2017 consisted of variable or performance-based compensation. +39 +Table of Contents +2017 EXECUTIVE COMPENSATION COMPONENTS +Overview +Our compensation program consists of the following components: +Compensation +Form of +Compensation +Purpose +Base Salary +Cash +Base salaries provide fixed compensation necessary to attract and retain key executives. Salary levels are established for each position based on role responsibilities, +position criticality, experience and competitive market data, with annual adjustments tied to performance and market changes as appropriate. +Annual Incentive Bonus Awards +Cash +Annual incentive bonus awards provide performance-based incentives to our executives to achieve both Company-wide financial and strategic goals and the executives’ +individual performance objectives. Targets for individual bonuses are set at levels consistent with those offered in the marketplace. The Board’s authority to make discretionary adjustments to bonus pool funding is limited to +/- 10% of the +pool amount otherwise determined under the incentive plan formula. +Long-Term Incentive Awards +Performance-Vested +Restricted Units and +Time-Vested Restricted +Stock +The largest component of our executive compensation is paid in equity. Executive LTIP awards consist of 50% performance-vested restricted units and 50% time-vested +restricted stock in order to provide a strong link between pay and performance. The size of annual equity awards is determined by the Compensation Committee based on market data and prior year Company and individual performance. +Benefits +401(k) +Plan +Health and Welfare +Benefits +Retirement and health and welfare benefits provide a complete compensation package that is competitive with the market and addresses the needs of all employees and their +families, including our executives. +Employment Agreements +Cash severance and +accelerated equity vesting +Severance and accelerated equity vesting are provided to our executive officers in order to ensure they are not distracted by the possibility of termination in the event +of a change of control and to encourage continued focus on the strategic matters of the Company. +40 +Table of Contents +Compensation Components in Detail +2017 Base Salaries +The Compensation +Committee believes that competitive salaries must be paid in order to provide fixed compensation necessary to attract and retain key executives. Each year, the Compensation Committee evaluates and determines the annual base salaries for the NEOs. +The Compensation Committee considers the Company’s overall performance in establishing salaries for the CEO and CFO/COO and the annual performance evaluations prepared by the CEO for all other NEOs. The Compensation Committee also considers the +Company’s budget for expected salary adjustments, salary levels paid at the Peer Group companies and any recommendations that may be made by a compensation consultant engaged to assist the Compensation Committee. An executive’s annual +salary adjustment will tend to be at the higher end of the range budgeted by the Company if the executive receives a performance rating of “Meets Expectations” or better and such executive’s +pre-adjustment salary level is below the 50 th percentile for his or her position at the Peer Group companies. +Annual base salaries paid in 2017 to our NEOs were established by the Compensation Committee at the beginning of 2017 based on a review +of the Company’s performance during 2016, an evaluation of the individual contributions of each officer (other than Messrs. Michels and Spair as described below) compared to +pre-established performance objectives for 2016 and the most recent review of the competitive data and recommendations provided by the compensation consultant retained by the Compensation Committee. +Based on these factors, the Compensation Committee approved an annual base salary increase for our management (including the NEOs) +averaging approximately 2.77%. This compares with our Company-wide salary increase budget of 3.0%. In order to reflect the Company’s performance and each executive’s contributions, and to equitably move salaries towards the fiftieth (50 th ) percentile of amounts paid by the Peer Group companies or maintain them at approximately that level, the Compensation Committee used the following guidelines to assist in determining annual +base salary increases. +Performance +Rating +Merit Increase Range +Outstanding +5.0% - 7.0% +Exceeds +Requirements +3.0% - 4.0% +Meets +Requirements +2.0% - 2.5% +Does Not +Consistently Meet +1.0% – 1.5% +Does Not Meet +Requirements +0% +In establishing NEO base salaries for 2017, the Compensation Committee recognized our substantially +improved financial performance for 2016, including a record $128.2 million in consolidated net revenues (a 7% increase over 2015) and $19.7 million in consolidated net income (an $11.5 million improvement over 2015). In addition, the +Compensation Committee considered the following other factors: +Our 36% positive TSR for 2016. +The $24.6 million in cash generated from operations, compared to $15.8 million in 2015. +The record level of HCV product revenues of $14.1 million, a 24% increase over 2015. +The $32.2 million in molecular collection systems revenues, which represented an 8% improvement over 2015. +The progress made in developing a new OraQuick ® rapid Zika test, including +the securing of up to $16.6 million in federal funding for this product. +The substantial expansion of our international business, including an $18 million product supply agreement with a +foreign-government and increased sales of our OraQuick ® HIV Self-Test internationally. +The extensive review of multiple business development opportunities by management. +The maintenance of strong relationships with our investors. +41 +Table of Contents +Although the Compensation Committee generally uses the performance rating labels +mentioned above (i.e., Meets Expectations, Exceeds Expectations, etc.), it decided that those labels should not be used for Messrs. Michels and Spair. Given the senior positions of Messrs. Michels and Spair, the Compensation Committee believes it is +more appropriate to evaluate these executives based on the overall performance of the Company. As a result, the Compensation Committee approved the following 2017 salary adjustments for Mr. Michels and the other NEOs: +NEO +2016 Performance +2016 +Performance +Rating +2016 Salary +2017 +Salary +% +Increase +Douglas A. Michels +President and Chief Executive Officer +• Strong corporate performance, including record revenues and improved profitability, as described above. +Above Target 1 +$612,580 +$634,020 +3.50% +Ronald H. Spair +Chief Financial +Officer and Chief +Operating Officer +• Strong corporate performance, including record revenues and improved profitability, as described above. +Above Target 1 +$480,244 +$497,053 +3.50% +Anthony Zezzo II +Executive Vice +President, Business Unit +Leader, Infectious Disease +• Substantial achievement of overall sales goals. +• 24% growth in HCV product sales. +• Substantial expansion of international sales +of HCV product and HIV self-test. +• Oversight of sales and marketing functions. +• Contribution to development of updated +corporate strategy. +Meets +$391,690 +$400,503 +2.25% +Brian Smith +Executive Vice President, Business Unit Leader, Molecular Solutions +• Achievement of overall sales goals. +• 8% growth in molecular collection systems revenues. +• 6% increase in genomic sales to commercial and +academic customers. +• $1.1 million of +microbiome sales, which more than doubled from prior year. +Meets +$233,264 +$278,264 +N/A 2 +Jack E. Jerrett +Senior Vice President +and General +Counsel +• Leadership in directing the Ancestry litigation and resolution of other claims and disputes. +• Leadership in negotiating new credit +facility. +• Assistance in evaluating various +business development opportunities. +• Assistance on numerous important commercial matters. +• Ongoing advice and counsel to the Board and +senior management. +Meets +$353,010 +$360,953 +2.25% +42 +Table of Contents +1 +Assessment based on overall corporate performance during 2016. +2 +Mr. Smith received a 2.25% base salary raise and, as a result, +his initial salary for 2017 was increased to $238,512. In August 2017, Mr. Smith was promoted from Senior Vice President, General Manager, to his current position and his salary was increased to $278,264. Mr. Smith’s Canadian-based +salary amounts have been translated into U.S. Dollars using the Canadian to U.S. Dollar Exchange rate at December 31, 2017. +2017 +Annual Incentive Cash Bonuses +Annual cash bonuses are included as part of executive compensation because the Compensation +Committee believes that a significant portion of each executive’s compensation should be structured as a variable incentive focused on short-term priorities related to both the overall performance of the Company and the individual contributions +of the executive. On an annual basis, the Compensation Committee has adopted, with approval of the Board, an incentive plan (the “Incentive Plan”), which is intended to be the principal vehicle for incentive cash bonus awards. +If the Company meets all the Target levels, the pool is initially funded at 100% of the aggregate bonuses for all participants in the +Incentive Plan adjusted to reflect a normal range or mix of performance assessments (i.e. Outstanding, Exceeds, Meets, Does Not Meet), which increases or decreases the total amount of individual bonuses to be paid to participants. The pool is +initially funded at 50% of the aggregate projected bonuses if all of the Threshold levels are met and at 150% if all of the High levels are met. If the Company achieves a Maximum performance level, the pool can be initially funded up to 200% of the +aggregate projected bonuses. A linear interpolation of the amount of funding for each objective is made where a particular performance is in between the pre-established performance levels. To the extent a +performance level is below the Threshold objective, generally there is no funding for that particular item unless the Compensation Committee or Board determines, in its limited discretion, that some funding is warranted to recognize extraordinary +circumstances. +The amount of the cash bonus pool is determined by the Compensation Committee and recommended for Board approval. +The Compensation Committee and Board also retain discretion to increase or decrease the size of the pool in order to reflect differences in the mix of actual performance assessments of the participants or market conditions affecting the Company or +other factors. However, the Compensation Committee and Board have limited their ability to make discretionary bonus pool adjustments to +/- 10% of the pool size otherwise determined pursuant to the formula under the Incentive Plan. The cash bonus +pool is used to pay bonuses not only to the Company’s NEOs, but also to all other officers and certain higher-level employees of the Company and all employees of its subsidiary, DNA Genotek. +Individual payments from the bonus pool to executives are calculated using a formula that considers the size of the bonus pool, the +executive’s achievement of individual performance objectives (except in the case of Messrs. Michels and Spair, as described below), the number of individuals participating in the plan at the time bonuses are awarded and the executive’s +target bonus percentage. Bonuses are paid, based on an assessment of each executive’s performance for the applicable year, using targets expressed as a percentage of the executive officer’s annual base salary. +If an executive officer has met or exceeded his or her individual performance objectives and/or the Company’s expectations for the +applicable year, he or she may be eligible to receive up to 150% of his or her target bonus, depending on the size of the bonus pool. The Compensation Committee and Board retain the discretion to adjust an individual executive’s performance +evaluation and to increase or decrease the bonus paid to such individual to reflect the specific contributions of that executive, the Company’s overall performance, market conditions or other circumstances. +The Compensation Committee recommends for Board approval any bonus award for the CEO and the CFO/COO based on an assessment of the +Company’s overall performance. The CEO recommends individual awards for the other executive officers for approval by the Compensation Committee based on an assessment of each executive’s performance against his or her applicable individual +performance objectives. The Compensation Committee and Board have the right, in their sole discretion, to reject any or all of the recommended bonus awards, +43 +Table of Contents +even if the bonus pool has been funded and any or all applicable performance criteria have been satisfied, based on the business conditions of the Company or other factors deemed relevant by the +Compensation Committee or Board. +Under the 2017 Incentive Plan, the Compensation Committee established performance levels for two +equally weighted financial objectives to be used to fund the bonus pool. The Threshold financial objectives in the 2017 Incentive Plan reflected our actual performance for 2016. The Target levels reflected our annual budget or operating plan for +2017 and represented strong revenue growth and improved profitability compared to 2016. The High and Maximum levels reflected 105% and 110% of our Target consolidated net product sales for 2017, respectively, and 100% of Target for all other +revenues for 2017. +The following table summarizes the 2017 Incentive Plan performance objectives (dollar amounts in millions): +Financial Objective/Weight +Threshold +Target +High +Maximum +Consolidated +Net Revenues (50%) +$128.2 +$137.7 +$144.3 +$150.9 +Consolidated +Net Operating Income (50%) +$ 20.3 +$ 23.3 +$ 25.6 +$ 27.9 +Incentive +Plan Pool Funding (% of Target) +50% +100% +150% +200% +In establishing the 2017 Incentive Plan, the Compensation Committee decided on a 50%/50% weighting for +the revenue and operating income objectives. The Compensation Committee believed an equal weighting provided an appropriate balance of incentives for both top and bottom line financial performance. The following sets forth the weighting and +potential bonus pool funding for both objectives at each performance level (after application of the performance distribution factor mentioned above) established under the 2017 Incentive Plan, based on the participants covered by the Plan at year-end: +Objective +Weight +Threshold +Target +High +Maximum +Actual +Consolidated Net Revenues +50% +$ +661,000 +$ +1,322,000 +$ +1,980,000 +$ +2,643,000 +$ +2,643,000 +Consolidated Net Operating Income +50% +$ +661,000 +$ +1,322,000 +$ +1,980,000 +$ +2,643,000 +$ +2,643,000 +Potential Total Pool Funding +$ +1,322,000 +$ +2,643,000 +$ +3,960,000 +$ +5,286,000 +$ +5,286,000 +During 2017, we reported consolidated net revenues totaling $167.1 million, which exceeded the +Maximum performance level of $150.9 million for this objective, resulting in funding of $2.643 million. The Company’s 2017 consolidated net operating income was $40.2 million. This amount exceeded the Maximum performance target +of $27.9 million for this objective, resulting in funding of $2.643 million for that target. As a result, the aggregate pool funding under the 2017 Incentive Plan was calculated to be $5.286 million. +Although the pool funding was initially calculated at $5.286 million, the Committee decided to increase the pool amount by 10%, the +maximum allowed by the 2017 Incentive Plan, resulting in total pool funding of $5.815 million. The Committee believed this adjustment was appropriate in light of the Company’s outstanding financial performance for 2017, the fact that we +had substantially exceeded the Maximum performance levels for both consolidated net revenues and consolidated net operating income established under the 2017 Incentive Plan, and our strong TSR for 2017. +The final bonus pool amount was approved by the full Board and used to pay bonuses to the Company’s NEOs and other members of our +management team. The specific target payouts for NEO bonuses (expressed as a percentage of annual base salary) are shown below: +Title +Target Payouts +Chief Executive Officer +70% +Chief Financial Officer and Chief Operating +Officer +50% +Executive Vice President +40% +Senior Vice President +35% +44 +Table of Contents +In January 2018, the Compensation Committee authorized the payout of individual bonus +awards to executive officers from the bonus pool for 2017, based on the target bonus amounts described above and an assessment of each officer’s performance during 2017 against pre-established performance +objectives (except for Messrs. Michels and Spair where assessments were based on Company performance). The calculation of individual bonus awards was based on a formula that adjusted the foregoing target payments for both the executives’ +individual performance during 2017 and the degree to which the final approved bonus pool funding exceeded Target under the plan funding formula. +In evaluating Mr. Michels and the Company’s performance, the Compensation Committee recognized that our $167.1 million in +consolidated net revenues for 2017 represented a 30% increase over 2016 and that our consolidated net income of $30.9 million, or $0.51 per share, represented an $11.2 million or $0.16 per share improvement over 2016. The Compensation +Committee further recognized the substantial growth in our molecular collection systems business in 2017 and the strong performance of our infectious disease business as a result of substantial growth in HCV and HIV self-test revenues. A final +factor considered by the Compensation Committee was the 114.8% increase in our TSR for 2017. +In view of the foregoing factors, the +Compensation Committee determined that Messrs. Michels and Spair should receive above-target bonuses for 2017. The remaining NEO’s were evaluated based on their 2017 performance against individual objectives established for their respective +positions. Using these performance ratings, the Compensation Committee developed individual performance factors to adjust the target bonuses for Mr. Michels, the other NEO’s and the other participants in the 2017 Incentive Plan to reflect +their performance assessments for 2017. As a final step, the Compensation Committee adjusted the target bonuses further by a pool funding factor reflecting the amount by which pool funding exceeded Target under the plan formula. +Using the approach described above, a final 2017 incentive cash bonus of $1,331,442 was calculated for Mr. Michels, as follows: +2017 Base Salary +X +Target Bonus % +X +2017 Individual Performance +Factor +X +2017 Pool Funding +Factor += +2017 +Bonus +$634,020 +70% +150% +200% +$1,331,442 +This same formula was used to calculate the 2017 bonus awards for all NEOs, as follows: +2017 Bonus Payments +NEO +2017 +Salary +Bonus +Target +(% +salary) +2017 Performance +Assessment and Rating +Individual +2017 +Performance +Factor +2017 +Pool +Funding +Factor +2017 +Bonus +Douglas A. Michels President and Chief Executive Officer +$ +634,020 +70% +Above +Target 1 +•  Strong corporate performance, including record revenues and substantially improved profitability, +as +described above. +150% +200% +$ +1,331,442 +Ronald H. Spair Chief Financial Officer and Chief Operating Officer +$ +497,053 +50% +Above +Target 1 +•  Strong corporate performance, including record revenues and substantially improved profitability, +as +described above. +137.5% +200% +$ +683,448 +45 +Table of Contents +NEO +2017 +Salary +Bonus +Target +(% +salary) +2017 Performance +Assessment and Rating +Individual +2017 +Performance +Factor +2017 +Pool +Funding +Factor +2017 +Bonus +Anthony Zezzo II Executive Vice President, Business Unit Leader, Infectious Disease +$ +400,502 +40% +Meets +•  Mixed achievement of sales +goals. +•  81% growth in HCV product sales including a 156% increase in international sales. +•  115% increase in international sales of HIV self-test. +•  Oversight of sales and marketing functions. +85% +200% +$ +272,341 +Brian Smith 2 Executive Vice President, Business Unit Leader, Molecular +Solutions +$ +283,606 +40% +Outstanding +•  Substantially exceeded +sales goals. +•  133% increase in net molecular collection revenues, compared to 2016. +•  197% growth in genomics sales to commercial accounts, compared to 2016. +•  207% increase in microbiome revenues, compared to 2016. +•   +140% +200% +$ +317,639 +Jack E. Jerrett Senior Vice President and General Counsel +$ +360,953 +35% +Meets/Exceeds +•  Leadership in settling +Ancestry litigation and resolution of other claims and disputes. +•  Assistance in evaluating various +business development opportunities. +•  Assistance on numerous important commercial matters. +•  Ongoing advice and counsel to the Board and senior management. +115% +200% +$ +290,567 +46 +Table of Contents +1 +Assessment based on overall corporate performance during 2017. +2 +Mr. Smith’s 2017 incentive cash bonus was translated into U.S. Dollars using the Canadian to U.S. Dollar +exchange rate on January 18, 2018, the date on which his bonus award was calculated. +2017 Long-Term Incentive Awards +An additional way that we promote the long-term growth of the Company and align the interests of executives with those of our +stockholders is by compensating executives with equity in the Company that vests over a multi-year period. To accomplish this, the Compensation Committee administers the Company’s LTIP (Long-Term Incentive Policy), pursuant to which grants of +time-vested restricted shares and performance-vested restricted units are made to executive officers. +Incentive equity awards under +the LTIP are made on an annual basis, and are discretionary and subject to approval by the Compensation Committee and/or Board. Awards to individual participants under the LTIP are based on an evaluation of a number of factors, including: +• +Performance of the participant for the applicable year; +• +The participant’s level of responsibilities and relative contribution to the Company’s business; +• +A competitive assessment of awards at Peer Group companies; +• +History of equity awards to the participant; and +• +Other factors deemed relevant by the Compensation Committee and/or Board. +Each +participant’s individual performance for the applicable year is evaluated against his or her individual performance objectives for that year (except for Messrs. Michels and Spair who are evaluated based on total Company performance). A +“Meets Expectations” performance is typically the threshold requirement to receive an equity award under the LTIP. Awards below this performance level may be considered on an exception basis at the discretion of the Compensation Committee +and/or the Board. +The value of potential incentive equity awards that could be granted in 2017 under the LTIP (expressed as a +percentage of annual base salary) based on performance during 2016, are summarized below: +Performance +Position +Lower End +Target +Maximum +President/CEO +150% +200% +250% +CFO/COO +90% +125% +160% +EVP +75% +100% +125% +SVP +55% +75% +95% +The percentages set forth above were established at levels that the Compensation Committee believed +represented an appropriate long-term incentive compensation value for each executive, based on the results of a competitive assessment of long-term incentive awards at the Peer Group companies. Once the aggregate dollar value of an award has been +established by applying the Compensation Committee approved award percentage to a participant’s base salary, the value is converted into shares or units based on a valuation of the restricted stock and restricted unit portions of the award +using the average of the high and low stock price on the grant date as reported on the NASDAQ Stock Market. +In February 2017, the +ranges of percentages set forth above for annual incentive equity awards were increased by the Compensation Committee for the CFO/COO (i.e. from 90%/125%/160% to 105%/140%/175%), Executive Vice Presidents (i.e. from 75%/100%/125% to 95%/125%/155%), +and Senior Vice Presidents (i.e. from 55%/75%/95% to 70%/90%/115%), based on advice from the compensation consultant used at the time, in order to bring the ranges more closely in line with market levels. The new percentage ranges were effective +beginning with the incentive equity awards made in early 2018 for performance during 2017. +47 +Table of Contents +Under the LTIP, 50% of an executive’s total equity award consists of +performance-vested restricted units that will not vest until three years after the grant date and only if certain performance measures are met during that three-year period. The awards currently incorporate two performance metrics: (i) a CAGR +for consolidated product revenues during the three-year period beginning with the year in which the award is made and (ii) a one-year “EPS” target for the year of award followed by a further two-year time-vesting requirement. The remaining 50% of each executive’s incentive equity award consists of grants of time-vested restricted stock that vest in equal annual installments over a three-year +period. These vesting restrictions serve to promote the Company’s long-term growth by restricting executives’ ability to realize short-term gains from their awards. The Compensation Committee believes the terms of its incentive equity +awards to executives are competitive with the terms of equity awards offered at comparable medical diagnostics and healthcare companies. +The structure of the equity awards reflects market-based good governance practices as well as input from our stockholders, several of +whom advocated that a meaningful portion of the equity awards should have performance-based vesting. We believe 50% is a meaningful portion and is consistent with or exceeds the performance orientation of our Peer Group. In addition, although some +stockholders have mentioned TSR as a possible performance target, most of the stockholders we have contacted in recent years indicated that other measures such as financial or operational objectives would also be appropriate. The Board decided to +use consolidated net product revenue and EPS targets because they are important for our business, especially as we continue improving our profitability, and because of the Board’s belief that these measures will directly influence the +performance of our stock price over time. Under the terms of the awards, the impact of stock repurchase programs is excluded in determining whether an EPS target has been met. As discussed above, the Board does not believe that the use of TSR as a +performance metric in the long-term incentive plan is appropriate at this time, although the choice of performance metrics will be reviewed each year. +The adoption of performance-based vesting conditions with a three-year service requirement for 50% of an executive’s annual equity +award substantially strengthens the link between pay and performance and creates an appropriate long-term incentive for our executives. At the same time, the use of time-based vesting conditions for the remaining 50% of each award achieves the +equally important goal of share ownership/accumulation through a share-price sensitive vehicle that directly promotes alignment with stockholders and further supports executive retention. Overall, the Compensation Committee and Board believe that +this approach represents a balanced performance-based approach to our executive compensation program that is appropriate for our Company, directly responds to feedback from our stockholders, and is consistent with executive pay governance best +practices. +Equity awards are generally made by the Compensation Committee each year as part of the normal annual compensation +cycle. The awards for a particular year generally occur in late January or early February of the following year after the Company’s full year financial results are known and performance evaluations for the executive officers have been prepared. +Equity awards approved by the Compensation Committee for the CEO are then reviewed and approved by the Board. In addition to the annual equity awards, the Compensation Committee may approve equity awards for newly hired officers or in recognition of +an executive’s promotion or expansion of responsibilities. These latter grants may have vesting or other terms that differ from the terms generally approved for annual equity awards. Notwithstanding the terms of the LTIP, equity awards are made +at the discretion of the Compensation Committee or Board. +48 +Table of Contents +Effective February 1, 2017, the Compensation Committee approved equity awards for +the NEOs under the LTIP based on the performance evaluations of such officers for 2016, as summarized below. A description of the basis for each NEO’s 2016 performance evaluation is set forth above under the section entitled, “2017 Base +Salaries,” in this CD&A. +Executive Officer +2016 +Performance +Assessment +Time Vested +Restricted Stock +Performance-Vested +Restricted Units +Award Value +(% of Base Salary) +Douglas +A. Michels +President and Chief +Executive Officer +Above Target 1 +77,695 Shs +77,965 Shs +225% +Ronald H. +Spair +Chief Financial +Officer and Chief +Operating Officer +Above Target 1 +39,253 Shs +39,254 Shs +145% +Anthony +Zezzo II +Executive Vice +President, Business Unit +Leader, Infectious Disease +Meets +22,079 Shs +22,080 Shs +100% +Brian +Smith +Executive Vice President, +Business Unit Leader, +Molecular Solutions +Meets +12,705 Shs +12,705 Shs +100% +Jack E. +Jerrett +Senior Vice President +and General Counsel +Meets +14,924 Shs +14,925 Shs +75% +1 Assessment based on overall corporate performance during 2016. +Compensation Developments in 2018 +New CEO Employment Agreement . In January 2018, we entered into an employment agreement with Stephen S. Tang, Ph.D., in +connection with his appointment as the Company’s new President and CEO, effective April 1, 2018. This employment agreement contains terms substantially similar to the employment agreement of Mr. Michels. Dr. Tang will receive +(i) an annual base salary of $565,000, (ii) an annual cash bonus opportunity under the Company’s annual Incentive Plan with a bonus target of 85% of his base salary, which was determined based on a competitive market assessment provided by +Pay Governance) and (iii) annual equity awards under the Company’s LTIP ranging from 150%-250% of his base salary, with a target of 200%. Dr. Tang also received a +sign-on cash bonus of $230,000 and will receive an award of 37,116 shares of time-vested restricted stock (valued at $700,000 as of December 29, 2017). The award of restricted stock will be made on +Dr. Tang’s employment commencement date and will vest on the fifth anniversary of that date. +Retirement +Agreements . In early 2018, the Company also entered into retirement agreements with Messrs. Michels and Spair pursuant to which we agreed to the following: +(i) +The unvested portions of stock options and time-vested restricted stock (“Restricted Stock”) awards received +by these executives prior to the date of their retirement agreement will vest in full as of their respective retirement dates. +(ii) +The unvested portions of performance-vested restricted units (“PRUs”) received by these executives prior to +the date of their retirement agreements will vest in full three years after the grant date subject to the satisfaction of performance measures applicable to such PRUs, in accordance with the original terms of the relevant award agreements for such +PRUs, without the requirement the executive continue to be employed by us after his retirement date. +49 +Table of Contents +(iii) +Each executive will receive his normal annual equity award in 2018 for performance during 2017 pursuant to the +Company’s LTIP (“2018 LTIP Award”) with a grant date value at least equal to 200% (in the case of Mr. Michels) and 140% (in the case of Mr. Spair), of such executive’s respective base salary. Consistent with our practice, +the 2018 LTIP Award will consist of 50% Restricted Stock and 50% PRUs. The terms and conditions of the 2018 LTIP Award will be the same as the 2018 equity awards made to other senior executives, except that (a) the Restricted Stock portion of +the award will vest on the executive’s retirement date and (b) the PRUs will vest three years after the grant date, subject to the satisfaction of performance measures determined by the Board, but without the requirement that the executive +continue to be employed by us after his retirement date. +(iv) +Each executive will receive an incentive cash bonus payment under the Company’s 2018 Incentive Plan equal to his +target bonus prorated through the date of his retirement. For purposes of Mr. Michels’ bonus under the 2018 Incentive Plan, his target was increased from 70% to 85% of his base salary, based on the same competitive market assessment used +to establish the bonus target in Dr. Tang’s employment agreement. +2018 LTIP Awards . In +February, 2018, the Compensation Committee approved LTIP equity awards to its executives for performance during 2017. The structure of these LTIP Awards was the same as that used in recent years, except that the EPS performance measure used for the +PRUs was changed to a one-year pre-tax income performance measure because of uncertainty related to the impact of recently enacted Federal tax reform legislation on our +financial performance for 2018. This exception to the structure of PRUs set forth in the LTIP was only approved for 2018 awards made for performance during 2017. +OTHER COMPENSATION +We provide minimal additional benefits outside of our primary elements of compensation, as follows: +Retirement Programs +All of our U.S. employees, including executive officers, are eligible to participate in our 401(k) profit sharing plan (the “401(k) +Plan”). We make matching contributions for participants on a dollar-for-dollar basis up to $4,000 per year. Payments of employer-provided benefits accrued for a +401(k) Plan participant will be made upon retirement or upon termination of employment prior to retirement, provided certain vesting conditions have been met by the participant prior to termination. Our subsidiary DNA Genotek, which is located in +Canada, offers a registered retirement plan to its employees, which similarly allows employee contributions for retirement savings, with matching contributions by DNA Genotek of up to CAD $2,000 per year. +The Company also maintains the OraSure Technologies, Inc. Deferred Compensation Plan (the “Deferred Compensation Plan”) for +the benefit of the Company’s highly compensated employees, including all of the NEOs, and its non-employee Directors. The Deferred Compensation Plan allows participants to defer up to 100% of their annual +base salaries (or fees in the case of non-employee Directors) and up to 100% of annual incentive cash bonuses and, upon vesting, restricted shares of the Company’s Common Stock awarded to the participant. +The Company may also make discretionary contributions to the participants’ accounts that vest over one or more years as determined by the Company, as well as upon death, disability or a change of control. Since the Deferred Compensation Plan +was put in place, the Company has made no discretionary contributions. Participants may elect to receive distributions of deferred amounts on a specified date, separation from service, a change of control, disability and/or death. +Perquisites and Other Compensation +As a general matter, the Compensation Committee and Board do not believe that executive officers should be treated differently than +other employees by receiving special perquisites unrelated to our general compensation program. Therefore, our healthcare, disability, and other insurance programs and benefits are the same for all eligible employees, including executive officers. +Executive officers do not receive any additional perquisites. +50 +Table of Contents +Potential Payments Upon Termination or Change of Control Pursuant to +Employment Agreements +The Company has entered into employment agreements with each of the NEOs. In addition to the compensation +elements discussed above, these agreements provide for post-employment severance payments and benefits in the event of termination of employment by the Company without “cause” or by the executive for “good reason” and (except for +Mr. Smith) provide enhanced severance payments upon such terminations in connection with a “change of control” of the Company. The terms of these arrangements are discussed in more detail under the Section entitled, “Employment +Agreements and Potential Payments Upon Termination or Change of Control,” in this Proxy Statement. The Compensation Committee believes that these arrangements are generally consistent with industry practice at the Peer Group companies, provide +an incentive to the applicable executive to remain with the Company, and serve to align the interests of stockholders and the executives in the event of a change of control of the Company. +Accounting and Tax Treatment of Compensation. +In approving the amount and form of compensation for the NEOs, the Compensation Committee considers all elements of the cost to the +Company of providing such compensation, including accounting and tax implications. In particular, it considers the potential impact of Section 162(m) of the Internal Revenue Code. Section 162(m) which disallows a tax deduction for any +publicly-held corporation for individual compensation exceeding $1 million in any taxable year for the CEO and for the three most highly compensated officers (other than the Chief Financial Officer). Historically, there had been an exemption +that permitted qualified “performance-based compensation” to be exempt from this $1 million cap on deductibility. Under the Tax Cuts and Jobs Act enacted on December 22, 2017 (the “Tax Act”), this performance-based +compensation exemption was eliminated. Thus, bonuses paid under the LTIP will be subject to the cap on deductibility described above unless they qualify for transition relief for certain pre-existing +compensation arrangements. Notwithstanding the Tax Act, the Compensation Committee intends to maintain flexibility to pay compensation that is not entirely deductible when the best interests of the Company would make that advisable. +Compensation Recoupment Policy +The Board has adopted a compensation recoupment or “clawback” policy, applicable to all officers subject to Section 16 of +the Exchange Act. Under this policy, the Company will pursue recoupment of any excess compensation, including incentive cash bonuses, restricted awards, stock options or other compensation, which was awarded to a covered officer based on financial +statements of the Company where such statements are required to be restated as a result of the gross negligence, intentional misconduct or fraud of the covered officer. In addition to recoupment, the Company shall take such other remedial actions +deemed necessary against a covered employee, including recommending disciplinary actions up to and including termination and other available remedies. The recovery period for recoupment of any compensation is up to three fiscal years preceding the +date on which the Company is required to prepare and file the restated financial statements. This policy has been proactively adopted in advance of final guidance under Section 954 of the Dodd-Frank Act, and will be amended to conform with this +Section when final guidance is available. +CEO Pay Ratio +As required by applicable law and SEC regulations, we are providing the following information about the +relationship of the annual total compensation of our employees and the annual total compensation of Douglas A. Michels, our President and CEO. +For the 2017 fiscal year: (i) the median of the annual total compensation of all employees of our Company (other than +Mr. Michels) and its subsidiary, DNA Genotek, was $60,826; and (ii) the annual total compensation of Mr. Michels, as reported in the Summary Compensation Table included immediately after this CD&A, was $3,347,630. Based on this +information, for 2017 the ratio of the annual total compensation of Mr. Michels, our President and CEO, to the median of the annual total compensation for employees, was 55 to 1. +51 +Table of Contents +To identify the median of the annual total compensation of all our employees, as well +as to determine the annual total compensation of our median employee, we took the following steps: +• +We determined that, as of December 31, 2017, our world-wide employee population consisted of 363 people. +• +To identify the “median employee” from our employee population, we compared the amount of salary, wages, +overtime, commissions and bonuses of our employees as reflected in our payroll records. In making this determination, we did not annualize the compensation of employees who were hired in 2017 but did not work for us for the entire fiscal year. Since +we do not widely distribute annual equity awards to our employees, such awards were excluded from our compensation measure. +• +Once we identified our median employee, we combined all of the elements of such employee’s compensation for 2017 in +accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K, resulting in the annual total compensation as described above. +52 +Table of Contents +COMPENSATION TABLES +SUMMARY COMPENSATION +TABLE +The following table summarizes the compensation of our CEO and the other NEOs, for the fiscal years +ended December 31, 2017, 2016 and 2015: +Name & Principal +Position +Year +Salary +($) 1 +Bonus +($) +Stock +Awards 2 +($) +Option +Awards 3 +($) +Non- +Equity +Incentive +Plan +Compen- +sation 4 +($) +Change +in +Pension Value +and Nonqualified +Deferred +Compensation +Earnings +($) +All other +Compen- +sation 5 +($) +Total +($) +Douglas A. Michels +President and Chief +Executive Officer +2017 +2016 +2015 +$633,608 +$612,339 +$619,054 +$1,378,310 +$1,283,322 +$ 557,686 +— +$836,523 +$1,331,442 +$ 646,586 +$ 508,787 +— +$4,000 +$4,000 +$4,000 +$ +$ +$ +3,347,360 +2,546,247 +2,526,050 +Ronald H. Spair +Chief Financial Officer +and Chief Operating Officer +2017 +2016 +2015 +$496,730 +$480,069 +$486,243 +$ 696,357 +$ 632,930 +$ 264,653 +— +$396,971 +$ 683,448 +$ 362,074 +$ 285,452 +— +$4,000 +$4,000 +$4,000 +$ +$ +$ +1,880,535 +1,479,073 +1,437,319 +Anthony Zezzo II +Executive Vice President, +Business Unit Leader +Infectious Disease +2017 +2016 +2015 +$400,333 +$391,572 +$398,403 +$ 391,691 +$ 345,614 +$ 135,537 +— +$203,298 +$ 272,341 +$ 188,998 +$ 153,036 +— +— +$ +$ +$ +1,064,365 +962,184 +890,274 +Brian Smith +Executive Vice President, +Business Unit Leader +Molecular Solutions +2017 +$259,778 +$ 225,386 +$ 317,639 +$ +802,803 +Jack E. Jerrett +Senior Vice President +and General Counsel +2017 +2016 +2015 +$360,800 +$352,878 +$356,826 +$ 264,761 +$ 258,298 +$ 118,080 +— +$177,120 +$ 290,567 +$ 149,043 +$ 140,110 +— +$4,000 +$4,000 +$4,000 +$ +$ +$ +920,128 +764,219 +796,136 +1 +Salary in 2015 reflects twenty-seven bi-weekly payroll periods, as compared to twenty-six bi-weekly payroll periods in 2016 and 2017. This additional pay period caused the actual amounts received by the NEOs during 2015 to be somewhat higher than their +annual base salaries. Base salaries for 2015 were as follows: Mr. Michels, $596,895; Mr. Spair, $468,838; Mr. Zezzo, $384,010, and Mr. Jerrett, $344,400. Mr. Smith’s 2017 salary was initially set at $238,512 and was +increased to $278,264 in August 2017 when he was promoted to his current position. Mr. Smith’s 2017 Canadian-based salary has been translated into US dollars using the Canadian to U.S. Dollar exchange rate at December 31, 2017. +2 +The indicated amounts reflect the aggregate grant date fair value of restricted stock and performance-vested restricted +unit awards made to the NEOs during the applicable year, computed in accordance with Financial Accounting Standards Board (“FASB”) ASC Topic 718. Performance-vested restricted units were included in the annual equity awards for executives +beginning in 2016. The value of the performance-vested restricted units reflect the assumption that 100% of target is achieved for each of the performance measures reflected in the terms of the restricted unit awards. Certain assumptions used in the +calculation of the indicated amounts are set forth for the applicable year of award in footnote 9 to the Company’s audited consolidated financial statements for the year ended December 31, 2017, included in the Company’s Annual Report +on Form 10-K filed with the SEC on February 28, 2018 (the “2017 10-K Report”). The maximum grant-date fair value of the performance-vested restricted unit +awards made in 2017, assuming the highest level of performance measures will be achieved (150% of target), are as follows: Mr. Michels $1,033,732; Mr. Spair, $522,274; Mr. Zezzo, $293,774; Mr. Smith, $169,040; and +Mr. Jerrett, $198,577. +3 +The values set forth in this column reflect the aggregate grant date fair value of stock option awards made to the NEOs +during the applicable year, computed in accordance with FASB ASC Topic 718. Certain assumptions used in the calculation of those amounts are set forth for the applicable year of award in footnote 9 to the Company’s audited consolidated +financial statements for the year ended December 31, 2017, included in the Company’s 2017 10-K Report. +4 +The indicated amounts reflect incentive cash bonuses paid to the NEOs pursuant to an Incentive Plan, based on performance +during the applicable year. For a description of incentive cash bonus payments for performance during 2017, see the section entitled, “2017 Annual Incentive Cash Bonuses,” in the CD&A. +5 +The indicated amounts reflect cash contributed to a 401(k) profit sharing plan as an employer-matching contribution, +which was offered to domestic employees of the Company during each of the indicated years. Mr. Smith was eligible to participate in our Canadian subsidiary’s registered retirement savings plan in 2017; however he elected not to +participate. +53 +Table of Contents +GRANTS OF PLAN-BASED AWARDS +The following table summarizes information concerning possible incentive cash bonuses and possible and +actual restricted stock, performance-vested restricted unit and stock option awards for the NEOs during the fiscal year ended December 31, 2017 as well as possible payouts under the 2017 Incentive Plan: +Name +Grant +Date 1 +Estimated Possible Payouts +Under Non-Equity Incentive +Plan Awards 2 +Estimated Possible Payouts Under +Equity Incentive +Plan Awards 3 +All other +Stock +Awards: +Number +of Shares +of Stock +or Units 4 +(#Shs.) +All other +Option +Awards: +Number +of +Securities +Underlying +Options +(#Shs.) +Exercise +of Base +Price of +Option +awards +($/Sh) +Grant +Date +Fair +Value of +Stock +Awards 5 +($) +Threshold +($) +Target +($) +Maximum +($) +Threshold +(# Shs.) +Target +(# +Shs.) +Maximum +(# +Shs.) +Douglas A. +Michels +2/1/2017 +— +— +— +— +— +77,695 RS +— +— +$689,155 +President and +2/1/2017 +— +— +— +— +— +77,695 PRU +— +— +$689,155 +Chief Executive +N/A +$221,907 +$443,814 +$1,331,442 +51,797 RS +69,062 RS +86,328 RS +— +— +— +N/A +Officer +N/A +— +— +— +51,797 PRU +69,062 PRU +86,328 PRU +— +— +— +N/A +Ronald H. Spair +2/1/2017 +— +— +— +— +— +— +39,253 RS +— +— +$348,174 +Chief Financial +2/1/2017 +— +— +— +— +— +— +39,254 PRU +— +— +$341,183 +Officer and Chief +N/A +$124,263 +$248,527 +$745,580 +24,364 RS +33,839 RS +43.314 RS +— +— +— +N/A +Operating Officer +N/A +— +— +— +24,364 PRU +33,839 PRU +43,314 PRU +— +— +— +N/A +Anthony Zezo II +2/1/2017 +— +— +— +— +— +— +22,079 RS +— +— +$195,841 +Executive Vice +2/1/2017 +— +— +— +— +— +— +22,080 PRU +— +— +$195,850 +President, Business +N/A +$80,100 +$160,201 +$480,602 +16,560 RS +22,079 RS +27,599 RS +— +— +— +N/A +Unit Leader, +N/A +— +— +— +16,560 PRU +22,079 PRU +27,599 PRU +— +— +— +N/A +Infectious Disease +Brian Smith +2/1/2017 +— +— +— +— +— +— +12,705 RS +— +— +$112,693 +Executive Vice +2/1/2017 +— +— +— +— +— +— +12,705 PRU +— +— +$112,693 +President, Business +$55,653 +$111,306 +$333,917 +9,862 RS +13,149 RS +16,436 RS +— +— +— +N/A +Unit Leader, +— +— +— +9,862 PRU +13,149 PRU +16,436 PRU +— +— +— +N/A +Molecular Solutions +Jack E. Jerrett +2/1/2017 +— +— +— +— +— +— +14,924 RS +— +— +$132,376 +Senior Vice +2/1/2017 +— +— +— +— +— +— +14,925 PRU +— +— +$132,385 +President and +N/A +$63,167 +$126,334 +$379,001 +10,945 RS +14,924 RS +18,904 RS +— +— +— +N/A +General +Counsel +N/A +— +— +— +10,945 PRU +14,924 PRU +18,904 PRU +— +— +— +N/A +1 +Annual Incentive equity awards to NEOs consisted of a combination of time-vested restricted stock (“RS”) and +performance-vested restricted units (“PRU”) and were determined for 2017 pursuant to the LTIP based on performance during 2016. Annual equity awards made during 2017 were approved by the Compensation Committee effective on February 1, +2017. For a description of these equity awards and their terms, see the section entitled, “2017 Long-Term Incentive Awards,” in the CD&A. +2 +The indicated amounts represent potential incentive cash bonus payments to the NEOs under the 2017 Incentive Plan. On +January 29, 2018, bonus payments under the 2017 Incentive Plan were approved by the Compensation Committee for the NEOs, based on performance during 2017. The Threshold and Target amounts assume the executive receives 50% and 100% of his target +bonus and that the aggregate bonus pool is funded at 50% and 100% for each performance objective in the 2017 Incentive Plan, respectively. The Maximum amounts assume that the recipient receives 150% of his target bonus based on performance for 2017 +and that the bonus pool is funded at 200% or the Maximum level for each performance objective in the 2017 Incentive Plan. A further description of the payments approved under the 2017 Incentive Plan is set forth in the section entitled, “2017 +Annual Incentive Cash Bonuses,” in the CD&A. +3 +The indicated amounts represent the potential number of shares which +could have been granted to the NEOs in 2017 in the form of RS and PRUs pursuant to the LTIP, based on performance during 2016. The individual share numbers for each potential award were calculated by dividing 50% of the long-term incentive targets +for each NEO set forth in the LTIP by the mean between the high and low sales price of the Common Stock as reported by NASDAQ on the date of grant. The number of shares corresponding to the PRUs were calculated based on the assumption that 100% of +target is achieved for each of the performance measures set forth in the terms of such PRU awards. The actual number of shares received upon vesting of the PRUs could vary from 50% to 150% of target depending on the degree to which the performance +measures are achieved. +4 +The indicated amounts represent the actual number of shares of RS or PRUs granted to the NEOs in 2017 under the LTIP, +based on performance during 2016. Specific RS and PRU awards were approved by the Compensation Committee for the NEOs effective on February 1, 2017. A further description of these equity awards and their terms is set forth in the Section +entitled, “2017 Long-Term Incentive Awards,” in the CD&A. +5 +The indicated amounts represent the grant date fair value calculated in accordance with FASB ASC Topic 718. +54 +Table of Contents +OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2017 +The following table summarizes information regarding unexercised stock options and unvested restricted +stock and performance-based restricted units held by the NEOs as of December 31, 2017: +Option Awards 1 +Stock Awards 1 +Name +Number of +Securities +Underlying +Unexercised +Options +(#) +Exercisable +Number of +Securities +Underlying +Unexercised +Options 2 +(3) +Unexercisable +Equity +Incentive +Plan +Awards: +Number of +Securities +Underlying +Unexercised +Unearned +Options (#) +Option +Exercise +Price +($/Sh.) +Option +Expiration +Date +Number of +Shares or +Units of +Stock +That Have +Not +Vested 2 +(#) +Market +Value of +Shares or +Units of +Stock +That +Have Not +Vested +Equity +Incentive +Plan +Awards: +Number of +Unearned +Shares, +Units or +Other +Rights +that Have +Not +Vested (#) +Equity +Incentive +Plan +Awards: +Market +or Payout +Value of +Unearned +Shares, +Units or +other +Rights +That +Have Not +Vested +($) +Douglas A. Michels +President and Chief +Executive Officer +47,635 +10,586 +3(a) +-- +$ +5.72 +2/3/2024 +-- +-- +-- +-- +32,235 +50,143 +3(b) +-- +$ +9.31 +2/3/2025 +-- +-- +-- +-- +-- +-- +-- +-- +-- +19,978 +3(c) +$ +376,785 +-- +-- +-- +-- +-- +-- +-- +79,660 +3(d) +$ +1,502,388 +-- +-- +-- +-- +-- +-- +-- +119,490 +3(e) +$ +2,253,581 +-- +-- +-- +-- +-- +-- +-- +77,695 +3(f) +$ +1,465,328 +-- +-- +-- +-- +-- +-- +-- +77,695 +3(g) +$ +1,465,328 +-- +-- +Ronald H. +Spair +Chief Financial Officer +and Chief +Operating +Officer +10,716 +5,359 +4(a) +-- +$ +5.72 +2/3/2024 +-- +-- +-- +-- +6,798 +23,796 +4(b) +-- +$ +9.31 +2/3/2025 +-- +-- +-- +-- +-- +-- +-- +-- +-- +9,480 +4(c) +$ +178,793 +-- +-- +-- +-- +-- +-- +-- +39,288 +4(d) +$ +740,972 +-- +-- +-- +-- +-- +-- +-- +58,932 +4(e) +$ +1,111,458 +-- +-- +-- +-- +-- +-- +-- +39,253 +4(f) +$ +740,312 +-- +-- +-- +-- +-- +-- +-- +39,254 +4(g) +$ +740,330 +-- +-- +Anthony Zezzo +II +Executive Vice President, +Business Unit +Leader, +Infectious Disease +36,204 +-- +-- +$ +11.30 +2/1/2022 +-- +-- +-- +-- +32,921 +-- +-- +$ +7.05 +2/1/2023 +-- +-- +-- +-- +6,954 +3,473 +5(a) +-- +$ +5.72 +2/3/2024 +-- +-- +-- +-- +29,595 +12,186 +5(b) +-- +$ +9.31 +2/3/2025 +-- +-- +-- +-- +-- +-- +-- +-- +4,855 +5(c) +$ +91,565 +-- +-- +-- +-- +-- +-- +21,453 +5(d) +$ +404,604 +-- +-- +-- +-- +-- +-- +-- +32,180 +5(e) +$ +606,915 +-- +-- +-- +-- +-- +-- +-- +22,079 +5(f) +$ +416,410 +-- +-- +-- +-- +-- +-- +-- +22,080 +5(g) +$ +416,429 +-- +-- +Brian Smith +Executive Vice +President, Business Unit Leader, Molecular Solutions +1,343 +-- +-- +$ +11.30 +2/1/2022 +-- +-- +-- +-- +20,000 +-- +-- +$ +5.96 +12/20/2023 +-- +-- +-- +-- +3,397 +5,110 +6(a) +-- +$ +9.31 +2/3/2025 +-- +-- +-- +-- +-- +-- +-- +-- +-- +2,035 +6(b) +$ +38,380 +-- +-- +-- +-- +-- +-- +-- +8,625 +6(c) +$ +162,668 +-- +-- +-- +-- +-- +-- +-- +12,938 +6(d) +$ +244,011 +-- +-- +-- +-- +-- +-- +-- +12,705 +6(e) +$ +239,616 +-- +-- +-- +-- +-- +-- +-- +12,705 +6(f) +$ +239,616 +-- +-- +55 +Table of Contents +Option Awards 1 +Stock Awards 1 +Name +Number of +Securities +Underlying +Unexercised +Options +(#) +Exercisable +Number of +Securities +Underlying +Unexercised +Options 2 +(3) +Unexercisable +Equity +Incentive +Plan +Awards: +Number of +Securities +Underlying +Unexercised +Unearned +Options (#) +Option +Exercise +Price +($/Sh.) +Option +Expiration +Date +Number of +Shares or +Units of +Stock +That Have +Not +Vested 2 +(#) +Market +Value of +Shares or +Units of +Stock +That +Have Not +Vested +Equity +Incentive +Plan +Awards: +Number of +Unearned +Shares, +Units or +Other +Rights +that Have +Not +Vested (#) +Equity +Incentive +Plan +Awards: +Market +or +Payout +Value of +Unearned +Shares, +Units or +other +Rights +That +Have Not +Vested +($) +Jack E. +Jerrett +Senior Vice President +and General +Counsel +4,271 +2,136 +7(a) +-- +$ +5.72 +2/3/2024 +-- +-- +-- +-- +3,033 +10,617 +7(b) +-- +$ +9.31 +2/3/2025 +-- +-- +-- +-- +-- +-- +-- +-- +-- +4,230 +7(c) +$ +79,778 +-- +-- +-- +-- +-- +-- +-- +16,033 +7(d) +$ +302,382 +-- +-- +-- +-- +-- +-- +-- +24,050 +7(e) +$ +453,853 +-- +-- +-- +-- +-- +-- +-- +14,924 +7(f) +$ +281,467 +-- +-- +-- +-- +-- +-- +-- +14,925 +7(g) +$ +281,486 +-- +-- +1 +The table does not include restricted stock and restricted units awarded to the NEOs in February 2018 pursuant to the +LTIP in respect of performance during 2017. +2 +Stock options vest over four years, with the first 25% vesting on the first anniversary of the grant date and the +remaining 75% vesting on a monthly basis over the next three years following the first anniversary of the grant date. Grants of restricted stock vest over a three-year period, with one-third vesting on the +first anniversary of the grant date, a second third vesting on the second anniversary and the final third vesting on the third anniversary. Performance-vested restricted units will not vest until three years from the grant date and only if certain +performance measures are met during the three-year service period. +3 +The indicated stock options, restricted stock, and performance-based restricted units vest as follows: +(a) +5,293 options on January 3 and February 3, 2018; +(b) +3,582 options on the 3rd of each month from January 3, 2018 through February 3, 2019; +(c) +19,978 restricted shares on February 3, 2018; +(d) +39,830 restricted shares on February 3, 2018 and 2019; +(e) +119,490 performance-based restricted units cliff vesting on February 1, 2019, provided performance metrics have been +achieved; +(f) +25,898 restricted shares on February 1, 2018, 2019, and 2020; and +(g) +77,695 performance-based restricted units cliff vesting on February 1, 2020, provided performance +metrics have been achieved. +4 +The indicated stock options, restricted stock, and performance-based restricted units vest as follows: +(a) +2,679 options on January 3 and February 3, 2018; +(b) +1,700 options on the 3rd of each month from January 3, 2018 through February 3, 2019; +(c) +9,480 restricted shares on February 3, 2018; +(d) +19,644 restricted shares on February 3, 2018 and 2019; +(e) +58,932 performance-based restricted units cliff vesting on February 1, 2019, provided performance metrics have been +achieved; +(f) +13,084 restricted shares on February 1, 2018, 2019 and 2020; and +(g) +39,254 performance-based restricted units cliff vesting on February 1, 2020, provided performance metrics have been +achieved. +5 +The indicated stock options, restricted stock, and performance-based restricted units vest as follows: +(a) +1,736 options on January 1, and February 1, 2018; +(b) +870 options on the 3rd of each month, from January 3, 2018 through February 3, +2019; +(c) +4,855 restricted shares on February 3, 2018; +(d) +10,727 restricted shares on February 1, 2018 and 2019; +(e) +32,180 performance-based restricted units cliff vesting on February 1, 2019, provided performance metrics have been +achieved; +(f) +7,360 restricted shares on February 1, 2018, 2019 and 2020; and +(g) +22,080 performance-based restricted units cliff vesting on February 1, 2020, provided performance metrics have been +achieved. +56 +Table of Contents +6 +The indicated stock options, restricted stock, and performance-based restricted units vest as follows: +(a) +365 options on the 3rd of each month, from January 3, 2018 through February 3, +2019; +(b) +2,035 restricted shares on February 3, 2018; +(c) +4,312 restricted shares on February 3, 2018 and 2019; +(d) +12.938 performance-based restricted units cliff vesting on February 1, 2019, provided performance metrics have been +achieved; +(e) +4.235 restricted shares on February 1, 2018, 2019 and 2020; and +(f) +12,705 performance-based restricted units cliff vesting on February 1, 2020, provided performance metrics have been +achieved. +7 +The indicated stock options, restricted stock, and performance-based restricted units vest as follows: +(a) +1,068 options on January 3 and February 3, 2018; +(b) +758 options on the 3rd of each month from January 3, 2018 through February 3, +2019; +(c) +4,230 restricted shares on February 3, 2018; +(d) +8.017 restricted shares on February 3, 2018 and 2019; +(e) +24,050 performance-based restricted units cliff vesting on February 1, 2019, provided performance metrics have been +achieved; +(f) +4.975 restricted shares on February 1, 2018, 2019, and 2020; and +(g) +14,925 performance-based restricted units cliff vesting on February 1, 2020, provided performance metrics have been +achieved. +8 +The indicated values were determined by multiplying the number of unvested shares of restricted stock and unvested +performance-vested restricted units shown in this table by $18.86 per share, the closing price of the Company’s Common Stock as reported by NASDAQ on December 29, 2017. +OPTION EXERCISES AND STOCK +VESTED +The following table summarizes information with respect to the exercise of stock options and vesting of +restricted stock for each of the NEOs during the fiscal year ended December 31, 2017: +Option Awards +Stock Awards +Name +Number +of Shares +Acquired +on +Exercise +(#) +Value +Realized +on +Exercise +($) 1 +Number +Of Shares +Acquired +on +Vesting +(#) +Value +Realized +on +Vesting 2 +($) +Douglas A. +Michels +1,054,866 +$ +7,866,682 +70,403 +$ +377,072 +President and Chief Executive Officer +Ronald H. +Spair +696,396 +$ +7,753,348 +35,860 +$ +192,079 +Chief Financial Officer and Chief Operating +Officer +Anthony Zezzo +II +187,916 +$ +2,141,928 +18,337 +$ +98,178 +Executive Vice President, Business Unit Leader, Infectious +Disease +Brian Smith +95,303 +$ +462,685 +2,756 +$ +14,759 +Executive Vice President, Business Unit Leader, Molecular +Solutions +Jack E. +Jerrett +171,128 +$ +1,177,354 +15,222 +$ +81,538 +Senior Vice President and General +Counsel +1 +The indicated amounts represent the number of shares acquired upon exercise of the options multiplied by the difference +between the market value of the Company’s Common Stock on the applicable exercise date and the option exercise price. +2 +The indicated amounts were calculated by multiplying the number of +restricted shares acquired upon vesting by the market value of the Company’s Common Stock on the applicable vesting date. The market value was determined by calculating the mean between the high and low sales prices of the Common Stock as +reported by NASDAQ on the vesting date. +RETIREMENT +BENEFITS +The NEOs are eligible to participate in our 401(k) Plan or, in the case of Mr. Smith, a registered +retirement plan offered by DNA Genotek, on the same terms and conditions applicable to other employees. For a further description of the terms of the 401(k) Plan, see the Section entitled, “Retirement Programs,” in the CD&A. +57 +Table of Contents +NONQUALIFIED DEFERRED +COMPENSATION +The OraSure Technologies, Inc. Deferred Compensation Plan (the “Plan”) is a non-qualified deferred compensation plan designed to provide deferred compensation benefits to a select group of the Company’s highly compensated employees, including all of the NEOs, and to non-employee members of the Board. +The Plan allows for deferrals by participants of up to 100% of +their annual base salaries (or in the case of non-employee Directors, 100% of fees payable under the Company’s Non-Employee Director Compensation Policy), up to +100% of annual incentive cash bonuses and, upon vesting, restricted shares of the Company’s Common Stock and shares received in respect of performance-vested restricted units awarded under the LTIP. The Company may also make discretionary +contributions to the accounts of employees participating in the Plan. Cash balances in participants’ accounts may be invested in a list of investment options that are similar to the fund choices offered in the Company’s 401(k) plan. +Participants will be permitted to sell vested shares in their accounts, subject to compliance with the Company’s Insider Trading Policy and applicable securities laws, and invest the proceeds of any such sale in the investment options available +under the Plan. Participants will be 100% vested in their accounts and the restricted shares they defer, except that Company contributions will vest over one or more years as determined by the Company. In the event of death, disability or change of +control, a participant will become 100% vested in any then unvested Company contributions. +Participants may elect to receive a +distribution from his or her account upon a specified date, separation from service, change of control, disability and/or death. Distributions will be made in a lump sum or installments, as allowed under the Plan. +Amounts contributed to a participant’s account through elective deferrals or through the Company’s discretionary contributions +are generally not subject to income tax, and the Company does not receive a deduction until they are distributed pursuant to the Plan. +However, cash deferrals are subject to the Federal Insurance Contributions Act Tax imposed at the time of deferral (the “FICA +tax”). Deferrals of restricted shares and shares received in respect of performance-vested restricted units are subject to the FICA tax at the time the shares vest, but are not subject to income tax, and the Company does not receive the +deduction until the shares are distributed pursuant to the Plan. The Company may amend or terminate the Plan at any time in accordance with applicable law. +58 +Table of Contents +The following table summarizes information for each NEO with respect to the Plan for +the fiscal year ended December 31, 2017: +Name +Executive +Contributions 1 +($) +Registrant +Contributions +($) +Aggregate +Earnings/ +Loss 2 +($) +Aggregate +Withdrawals/ +Distributions +($) +Aggregate +Balance +at 12/31/17 1,2 +($) +Douglas A. Michels +President and Chief +Executive +Officer +— +— +— +— +— +Ronald H. Spair +Chief Financial Officer +and Chief Operating +Officer +$390,531 +— +$1,004,618 +30,567 +$2,778,019 +Anthony Zezzo II +Executive Vice President, +Business Unit +Leader +Infectious Disease +— +— +— +— +— +Brian Smith +Executive Vice President, +Business Unit Leader, +Molecular Solutions +— +— +— +— +— +Jack E. Jerrett +Senior Vice President and +General +Counsel +— +— +— +— +— +1 +The indicated amounts of NEO contributions have been reported as +compensation in the Summary Compensation Table. +2 +There were no earnings or deferred compensation at above market or preferential rates and, therefore, no earnings have +been reported as compensation in the Summary Compensation Table for 2017. Aggregate earnings include dividends and interest earned during the period, as well as the net unrealized appreciation of the underlying investments in the participant’s +account. +59 +Table of Contents +EMPLOYMENT AGREEMENTS AND POTENTIAL PAYMENTS UPON TERMINATION +OR CHANGE OF CONTROL +We have entered into employment agreements with all of our NEOs. We believe such agreements are necessary to attract and retain critical +talent, and are in-line with market practices. The following summary describes the material terms of the employment arrangements with Mr. Michels and the other NEOs, as amended. +Mr. Michels’ employment agreement with the Company provides for the various components of compensation described in the +CD&A. In addition, upon a termination of employment, Mr. Michels’ contract provides for certain post-employment severance and other benefits, as described below. +Mr. Michels’ employment agreement will terminate upon his death or disability. In addition, Mr. Michels may terminate his +employment at any time and for any reason upon 90 days’ written notice to the Company or for “good reason” (as defined below). Mr. Michels’ employment agreement can also be terminated by the Company for “Cause” (as +defined below) or without “Cause.” +As used in Mr. Michels’ agreement, the term “good reason” means +(i) a material breach of the agreement by the Company that is not cured within 30 days of written notice, (ii) a material diminution in Mr. Michels’ base compensation or authority, duties or responsibilities (following a change +of control, such a diminution shall occur if Mr. Michels no longer functions as the sole chief executive officer of the successor organization), (iii) a material diminution in the authority, duties or responsibilities of the person to whom +Mr. Michels reports, including a change in Mr. Michels’ reporting obligation from the Board to another employee of the Company, if applicable (following a change of control, such a diminution shall occur if Mr. Michels no longer +reports to the board of directors of a public company), (iv) a material diminution of the budget over which Mr. Michels exercises control, or (v) a material change in Mr. Michels’ job location. +A “change of control” generally is defined to take place when disclosure of such a change would be required by the proxy rules +promulgated by the SEC or when: +• +any person, or more than one person acting as a group within the meaning of Section 409A of the Internal Revenue Code (the “Code”) and the regulations issued thereunder, acquires ownership of stock of the +Company that, together with stock held by such person or group, constitutes more than 50 percent of the total fair market value or total voting power of the stock of the Company; +• +any person, or more than one person acting as a group within the meaning of Code Section 409A and the regulations issued thereunder, acquires (or has acquired during the +12-month period ending on the date of the most recent acquisition) ownership of stock of the Company possessing 30 percent or more of the total voting power of the Company’s stock; +• +a majority of the members of the Board is replaced during any 12-month period by Directors whose appointment or election is not endorsed by a majority of the members of the Board +before the date of the appointment or election; or +• +a person, or more than one person acting as a group within the meaning of Code Section 409A and the regulations issued thereunder, acquires (or has acquired during the +12-month period ending on the date of the most recent acquisition) assets from the Company that have a total gross fair market value equal to or more than 40 percent of the total gross fair market value +of all the assets of the Company immediately before such acquisition or acquisitions. +A “change of control +period” is the period which begins on the occurrence of a change of control and ends 18 months thereafter. +“Cause” +is defined as (i) willful and continued failure by Mr. Michels to substantially perform his duties as provided in the agreement after a written demand for substantial performance is delivered to Mr. Michels by the Board, which demand +identifies with reasonable specificity the manner in which Mr. Michels has not substantially +60 +Table of Contents +performed his duties, and Mr. Michels’ failure to comply with such demand within a reasonable time; (ii) the engaging by Mr. Michels in gross misconduct or gross negligence +materially injurious to the Company; (iii) the commission of any act in direct competition with or materially detrimental to the best interests of the Company; or (iv) Mr. Michels’ conviction of having committed a felony. +Upon the termination of Mr. Michels’ employment upon his death or disability, by Mr. Michels for any reason other than +good reason or by the Company for Cause, Mr. Michels will be entitled to receive his salary through the date of termination and any bonus approved by the Board or the Compensation Committee prior to the date of termination but not yet paid and, +in the case of a termination upon his death or disability, a cash bonus for the calendar year in which termination occurs that Mr. Michels would have received but for his death or disability, prorated through the date of death or commencement +of disability. Upon termination of the agreement by Mr. Michels with good reason or by the Company without Cause (which includes the Company’s failure to renew the agreement), Mr. Michels would be entitled to receive his salary +through the date of termination and any bonus that has been approved by the Board or the Compensation Committee prior to the date of termination but not yet paid, a cash bonus for the calendar year in which termination occurs equal to +Mr. Michels’ target bonus for such year, and for a period of one year after the date of termination, benefits for Mr. Michels and/or his family at levels substantially equal to those that would have been provided to them by the +Company if Mr. Michels’ employment had not been terminated. If termination is for good reason or without Cause (which includes the Company’s failure to renew the agreement) and does not occur during a change of control period, +Mr. Michels would also receive a lump sum amount equivalent to 12 months of his annual salary. If, however, termination is for good reason or without Cause (which includes the Company’s failure to renew the agreement) and occurs during a +change of control period, Mr. Michels will receive a lump sum amount equivalent to 36 months of his annual salary. If Mr. Michels is a “specified employee” within the meaning of Code Section 409A at the time of the +termination of his employment and any of the foregoing payments would subject him to any tax, interest or penalty under Code Section 409A or regulation thereunder, then the payment shall not be made until the first day which is at least six +months after the date of termination of his employment. +Upon termination of Mr. Michels’ employment as a result of +disability, for good reason, or by the Company without Cause, Mr. Michels can elect to receive medical and dental insurance coverage for himself and his family under any plans offered by the Company to the extent the Company is self-insured or +coverage for former employees is available on reasonable terms (as determined by the Company) from the Company’s providers of medical and dental coverage. +All stock awards granted to Mr. Michels are required to immediately vest (i) in the event of a change of control or +(ii) if Mr. Michels’ employment is terminated for good reason by Mr. Michels or by the Company without Cause during a change of control period, and 50% of such stock awards shall vest in the event Mr. Michels’ +employment is terminated for good reason or by the Company without Cause during any period other than a change of control period. +The termination and severance provisions in the employment agreements for the other NEOs (except for Mr. Smith) are substantially +similar to Mr. Michels’ employment agreement, with the following exceptions. Mr. Spair is entitled to receive severance equal to 36 months of his annual salary and Mr. Jerrett is entitled to receive severance equivalent to 24 +months of their annual salary, rather than 36 months, in the event of a termination of their agreements for good reason or without Cause during a change of control period or after a change of control. Mr. Zezzo will be entitled to receive +severance equal to 24 months of his annual salary only if he is terminated for good reason or without Cause during a change of control period. In the employment agreements with Messrs. Spair, Zezzo and Jerrett, the term “good reason” means +(i) a material breach of the agreement by the Company that is not cured within 30 days of written notice, (ii) a material diminution in base compensation or authority, duties or responsibilities, (iii) a material diminution in the +authority, duties or responsibilities of the person to whom the executive reports, including a change in the executive’s reporting obligation from the Board to another employee of the Company, if applicable, (iv) a material diminution of +the budget over which the executive exercises control, or (v) a material change in the executive’s job location. +61 +Table of Contents +Mr. Smith’s employment agreement is somewhat different than the other NEOs. +Mr. Smith will receive a base salary and is eligible to receive annual cash bonuses under our annual Incentive Plans and annual equity awards under the LTIP. If Mr. Smith’s employment is terminated by the Company without +“Cause” or for “good reason”, Mr. Smith will receive severance equal to twelve months of his base salary. As used in Mr. Smith’s employment agreement, “good reason” will occur if Mr. Smith terminates +his employment within 30 days of the occurrence of any of the following: (i) any material reduction in his salary and bonus; (ii) a material amendment to his duties, including any transfer to any position other than his current position +unless such transfer is clearly consistent with a promotion; or (iii) any required relocation beyond a 50 kilometer radius from the company’s head office. A termination of Mr. Smith’s employment for “Cause” will occur +if the following events occur: (i) the act or omission involving (A) material dishonesty or (B) fraud with respect to the company, its subsidiaries or any of their customers or suppliers; (ii) a substantial and repeated failure +to perform his duties; (iii) gross negligence or willful misconduct; or (iv) conduct tending to bring the company or any of its subsidiaries into substantial disgrace or disrepute. +As we previously announced, effective March 31, 2018, Mr. Michels will retire as our President and CEO and as a member of our +Board. In connection with his retirement, we entered into a retirement agreement with Mr. Michels, pursuant to which Mr. Michels will be entitled to the following: (i) the unvested portions of stock options and time-vested RS awards +granted to Mr. Michels prior to the date of his retirement agreement will vest in full as of his retirement date; (ii) the unvested portions of PRUs granted to Mr. Michels prior to the date of his retirement agreement will vest in +full three years after the grant date, subject to the satisfaction of performance measures applicable to such PRUs, in accordance with the original terms of the relevant award agreement, but without the requirement that Mr. Michels continue to +be employed by the Company after his retirement date; (iii) Mr. Michels will receive a pro-rated bonus payment under the Company’s 2018 Incentive Plan equal to 85% of his base salary, subject to +adjustment to reflect the actual bonus pool funding approved by the Board; (iv) Mr. Michels will receive his normal annual equity award in 2018 for his performance during 2017 pursuant to the LTIP, with a grant date value at least equal to +200% of Mr. Michels’ base salary, with the RS portion of the award vesting on Mr. Michels’ retirement date and the PRU portion vesting three years after the grant date, subject to the satisfaction of performance measures +determined by the Board, but without the requirement that Mr. Michels continue to be employed by the Company after his retirement date; and (v) if after retirement Mr. Michels elects to receive continuation coverage under the +Company’s group health plan pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985 and maintains such coverage for the full period permitted by law, he will have the right to elect to continue such coverage at his own cost and +expense under the terms of the Company’s group health plan. +As we previously announced, Mr. Spair will retire as our +CFO/COO and as a member of our Board, with a specific retirement date to be determined based on the timing of our appointment of a new CFO. In connection with his retirement, we entered into a retirement agreement with Mr. Spair that contains +the same terms as Mr. Michels’ retirement agreement, except that Mr. Spair’s 2018 equity award (for his performance during 2017) will have a grant date value at least equal to 140% of his base salary, and his pro-rated bonus payment under the Company’s 2018 Incentive Plan will be equal to 50% of his base salary, subject to adjustment to reflect the actual bonus pool funding approved by the Board. +62 +Table of Contents +The following table provides estimates of the potential severance and other +post-termination benefits the NEOs would receive assuming their employment was terminated as of December 31, 2017: +Name +Benefit +Voluntary +Termination +or +Termination +for Cause +Termination +for Death +or +Disability 1 +Termination +for Good +Reason or +Without +Cause Not +Within +Change of +Control +Period 1 +Termination +after Change of +Control (except +Mr. Michels), or for +Good Reason or +Without Cause +Within Change of +Control Period 1 +Douglas A. +Michels +President and +Chief Executive +Officer +Salary Continuation +— +— +$ +634,020 +$ +1,902,060 +Bonus +— +$ +1,331,442 +$ +443,814 +$ +443,814 +Accelerated Option Vesting +— +— +$ +309,135 +$ +618,269 +Accelerated Restricted Stock/Unit Vesting +— +$ +7,063,409 +$ +3,531,705 +$ +7,063,409 +Health Care Benefits +— +— +$ +26,780 +$ +26,780 +Total +— +$ +8,394,851 +$ +4,945,454 +$ +10,054,332 +Ronald H. Spair +Chief Financial +Officer and +Chief Operating +Officer +Salary Continuation +— +— +$ +497,053 +$ +1,491,159 +Bonus +— +$ +683,448 +$ +248,527 +$ +248,527 +Accelerated Option Vesting +— +— +$ +148,907 +$ +297,815 +Accelerated Restricted Stock/Unit Vesting +— +$ +3,511,864 +$ +1,755,931 +$ +3,511,864 +Health Care Benefits +— +— +$ +26,747 +$ +26,747 +Total +— +$ +4,195,312 +$ +2,677,165 +$ +5,576,112 +Anthony Zezzo II +Executive Vice +President, +Business Unit +Leader, Infectious +Disease +Salary Continuation +— +— +$ +400,502 +$ +801,004 +Bonus +— +$ +272,341 +$ +160,201 +$ +160,201 +Accelerated Option Vesting +— +— +$ +81,045 +$ +162,090 +Accelerated Restricted Stock/Unit Vesting +— +$ +1,935,922 +$ +967,962 +$ +1,935,922 +Health Care Benefits +— +— +$ +4,193 +$ +4,193 +Total +— +$ +2,208,263 +$ +1,613,903 +$ +3,063,410 +Brian Smith 2 +Executive Vice +President, +Business Unit +Leader, Molecular +Solutions +Salary Continuation +— +$ +— +$ +278,264 +$ +278,264 +Bonus +— +$ +317,639 +$ +— +$ +— +Accelerated Option Vesting +— +$ +— +$ +24,413 +$ +48,826 +Accelerated Restricted Stock/Unit Vesting +— +$ +924,291 +$ +462,145 +$ +924,291 +Health Care Benefits +— +$ +— +$ +— +Total +— +$ +1,241,930 +$ +764,822 +$ +1,251,381 +Jack E. Jerrett +Senior Vice +President and +General +Counsel +Salary Continuation +— +— +$ +360,953 +$ +721,906 +Bonus +— +$ +290,567 +$ +126,334 +$ +126,334 +Accelerated Option Vesting +— +— +$ +64,762 +$ +129,523 +Accelerated Restricted Stock/Unit Vesting +— +$ +1,398,695 +$ +699,348 +$ +1,398,695 +Health Care Benefits +— +— +$ +26,452 +$ +26,452 +Total +— +$ +1,689,262 +$ +1,277,849 +$ +2,402,910 +63 +Table of Contents +1 +The indicated values for the accelerated vesting of stock options +reflect (i) the number of option shares which would vest on an accelerated basis, multiplied by (ii) the excess, if any, of the $18.86 per share closing price for the Company’s Common Stock, as reported by NASDAQ on December 29, +2017, over the applicable exercise price for each option. The indicated values for the accelerated vesting of restricted stock and performance-vested restricted units reflect the $18.86 per share closing price on December 29, 2017 multiplied by +the number of shares which would vest on an accelerated basis (assuming, in the case of restricted units, that the applicable performance measures for the restricted units are met at 100% of target). +2 +Mr. Smith’s salary continuation benefit and bonus were calculated using the Canadian to U.S. Dollar +exchange rate as of December 31, 2017. +EQUITY COMPENSATION PLAN INFORMATION +The +following table provides information as of December 31, 2017 about the shares of Common Stock that may be issued upon the exercise of options under the OraSure Technologies, Inc. Stock Award Plan (“Award Plan”). The Award Plan, was +adopted by the Company in connection with the merger of Epitope and STC to form the Company in September 2000. Additional grants of equity compensation may only be made under the Award Plan. +Plan Category +Number of Securities to be +Issued Upon Exercise of +Outstanding Options +(a) +Weighted- +Average Exercise +Price of Outstanding +Options +(b) +Number of Securities +Remaining Available for +Future Issuance +Under +Equity Compensation Plans +(Excluding Securities +Reflected in Column (a)) +(c) +Equity compensation +plans approved by security holders +1,201,028 +$ +8.04 +4,354,607 +1 +Equity compensation +plans not approved by security holders +— +— +— +Total +1,201,028 +4,354,607 +1 +Represents shares remaining available for future issuance as of +December 31, 2017 under the Award Plan. +DIRECTOR COMPENSATION +ANNUAL FEES +Under our Non-Employee Director Compensation Policy +(“Director Policy”), non-employee members of the Board receive fixed annual fees for service on the Board and Committees of the Board during 2017, as set forth below. The fees were paid quarterly in +arrears. +Position +Annual Fee +Board Chairman +$ +60,000 +Non-Chairman Board Member +$ +40,000 +Audit +Chairman +$ +20,000 +Compensation +Chairman +$ +15,000 +N&CG +Chairman +$ +10,000 +Non-Chairman Audit Member +$ +8,000 +Non-Chairman Compensation Member +$ +6,000 +Non-Chairman N&CG Member +$ +4,000 +64 +Table of Contents +INITIAL EQUITY AWARDS +Non-employee Directors receive an initial grant of 40,000 stock +options for the Company’s Common Stock upon joining the Board (the “Initial Grant”). An additional grant of 40,000 stock options is also made to any non-employee Director who becomes Chairman of +the Board (the “Chairman Grant”). The options granted to non-employee Directors are nonqualified stock options and have an exercise price equal to the mean between the high and low sales prices of +the Company’s Common Stock as quoted on the NASDAQ Stock Market on the grant date. Each Initial Grant and Chairman Grant generally vest on a monthly basis over the 24 months immediately following the grant date. Payment of the exercise price +may be made in cash or by delivery of previously acquired shares of Common Stock having a fair market value equal to the aggregate exercise price. +ANNUAL EQUITY AWARDS +Under the Director Policy, each non-employee Director receives +an annual grant of restricted shares (the “Annual Grant”) of the Company’s Common Stock on the date of each annual meeting of stockholders. Annual grants are made using a value transfer award method similar to that used for our +executives under the LTIP. The dollar values of the Annual Awards were determined by the Compensation Committee and Board based on advice from PM&P and an assessment of director equity awards made at comparable medical diagnostics and healthcare +companies. +Under the Director Policy, Annual Grants of restricted stock were made in 2017 pursuant to the values set forth in the +following table: +Board Position +Award Grant Value +Chairman +$ +120,000 +Non-Chairman Director +$ +95,000 +The dollar value of each Annual Grant is converted into restricted stock by dividing the above values by +the average of the high and low sales prices of the Company’s Common Stock, as reported on the NASDAQ Stock Market, on the grant date. Annual Grants of restricted stock will vest on the date that is twelve months from the date of grant. Non-employee Directors are permitted to direct the Company to withhold restricted stock in order to pay tax withholding obligations arising upon the vesting of such shares. +EQUITY AWARD TERMS +Any unvested stock options and restricted stock granted to +non-employee Directors will vest in their entirety immediately upon the occurrence of a “change of control” of the Company. A “change of control” means a change of control that would be +required to be reported under the Securities Exchange Act of 1934, as amended, and would be deemed to have occurred at such time as (i) any person, or more than one person acting as a group within the meaning of Section 409A of the Code, +acquires ownership of stock of the Company that, together with stock held by such person or group, constitutes more than 50 percent of the total fair market value or total voting power of the stock of the Company; (ii) any person, or more +than one person acting as a group within the meaning of Section 409A of the Code, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition) ownership of stock +of the Company possessing 30 percent or more of the total voting power of the Company’s stock; (iii) a majority of the members of the Board is replaced during any 12-month period by Directors +whose appointment or election is not endorsed by a majority of the members of the Board before the date of the appointment or election; or (iv) a person, or more than one person acting as a group within the meaning of Section 409A of the +Code, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition) assets from the Company that have a total gross fair market value equal to or more than +40 percent of the total gross fair market value of all the assets of the Company immediately before such acquisition or acquisitions. In addition, if a non-employee Director leaves the Board for any +reason other than a change of +65 +Table of Contents +control, prior to the end of the vesting period for the Annual Grant of restricted stock, such award shall immediately vest on a pro-rata basis based on +the actual duration of such Director’s service to the Board during such vesting period. +DEFERRED COMPENSATION +Non-employee Directors are permitted to defer all or a portion +of the fees and grants of restricted stock under the Company’s Non-Qualified Deferred Compensation Plan, on terms similar to those applicable to our officers. +DIRECTOR COMPENSATION DURING +2017 +The following table summarizes information related to compensation of +non-employee Directors during the fiscal year ended December 31, 2017: +Name 1, 2 +Fees +Earned +or Paid +in Cash +($) +Stock +Awards 3 +($) +Option +Awards 4 +($) +Non-Equity +Incentive Plan +Compensation +($) +Change in +Pension +Value and +Nonqualified +Deferred +Compensation +Earnings +All Other +Compensation +($) +Total ($) +Mara G. Aspinall +$ +28,484 +— +$281,896 +— +— +— +$ +310,380 +Michael +Celano +$ +64,000 +$94,992 +— +— +— +— +$ +158,992 +Eamonn P. +Hobbs +$ +54,000 +$94,992 +— +— +— +— +$ +148,992 +Ronny B. +Lancaster +$ +59,000 +$94,992 +— +— +— +— +$ +153,992 +Charles W. +Patrick +$ +58,000 +$94,992 +— +— +— +— +$ +152,992 +Aradhana Sarin, +M.D. +— +— +— +— +— +— +— +Stephen S. Tang, +Ph.D. +$ +70,000 +$119,996 +— +— +— +— +$ +189,996 +1 +Because Messrs. Michels and Spair are officers of the Company, they +are not entitled to any separate compensation for service on the Board or any Committee thereof and have not been included in this table. Ms. Aspinall became a Director in June 2017 and Dr. Sarin became a Director in February 2018. +2 +Non-employee Directors held +the following number of unvested restricted shares (“RSs”) and stock options (“SOs”) at December 31, 2017: Ms. Aspinall: 30,000 SOs; Mr. Celano: 6,295 RSs; Mr. Hobbs: 6,295 RSs; 5,000 SOs; Mr. Lancaster: +6,295 RSs; Mr. Patrick: 6,295 RSs; and Dr. Tang: 7,952 RSs; 18,334 SOs. The aggregate number of stock options and restricted shares held by Messrs. Michels and Spair are set forth in the table in the section entitled, “Outstanding +Equity Awards,” in this Proxy Statement. +3 +The indicated amounts reflect the aggregate grant date fair value of +restricted stock awards made to non-employee Directors during 2017, computed in accordance with FAS ASC Topic 718. +4 +The indicated amount reflects the aggregate grant date fair value of the stock option award made to Ms. Aspinall +upon being elected as a Director, computed in accordance with FAS ASC Topic 718. Dr. Sarin received an initial stock option award for 40,000 shares upon joining the Board in February 2018. Certain assumptions used in the calculation of the +indicated amounts are set forth in footnote 9 to the Company’s audited consolidated financial statements for the fiscal year ended December 31, 2017, included in the Company’s 2017 Annual Report on Form +10-K. +66 +Table of Contents +PROPOSALS REQUIRING YOUR VOTE +PROPOSAL NO. +1. ELECTION OF DIRECTORS +Background +At the Annual Meeting, you will be asked to vote on the election of two Directors. A majority of the independent members of the Board +have nominated Michael Celano and Charles W. Patrick for election as Class III Directors, for terms expiring at the Annual Meeting of Stockholders in 2021. Douglas A. Michels, who also currently serves as a Class III Director, has not been +nominated for re-election by the Board because he will be retiring from the Company on March 31, 2018. +Each of the nominees for election as Directors is presently a member of our Board and has consented to continue to serve if re-elected to the Board. Mr. Celano joined the Board in 2006 and serves as Chairman of the Audit Committee and as a member of the Compensation Committee. He also previously served on the Nominating and +Corporate Governance Committee. Mr. Patrick joined the Board in 2006 and serves as the Chairman of the Nominating and Corporate Governance Committee and a member of the Audit Committee. +We do not know of anything that would preclude any nominee from serving. However, should any nominee for any reason become unable or +unwilling to serve as a Director, the persons named in the enclosed Proxy Card will vote the shares represented by each Proxy for such substitute nominee as the Board may approve. +Any vacancy that occurs on the Board that results from an increase in the number of Directors may be filled by the affirmative vote of a +majority of the Directors then in office, and any other vacancy on the Board may be filled by the affirmative vote of a majority of the Directors then in office, even though less than a quorum of the Board, or by a sole remaining Director. +Certain information with respect to each person nominated for election as a Director and each person whose term of office as a Director +will continue after the Annual Meeting, including the particular experience, qualifications, attributes and skills they possess that led to the conclusion that they should serve as a Director, is set forth below. +Name +Principal Occupation +Age +Director +Since +Class I (Directors +Whose Terms Expire in 2019): +Eamonn P. Hobbs +President of Hobbs Medical Ventures, LLC +59 +2016 +Stephen S. Tang, Ph.D. +President and Chief Executive Officer of The University City +Science Center +57 +2011 +Class II (Directors +Whose Terms Expire in 2020): +Mara G. Aspinall +President & Chief Executive Officer of Health Catalysts +55 +2017 +Ronny B. Lancaster +Senior Vice President for Federal Government Relations of Assurant, Inc. +66 +2003 +Ronald H. Spair +Chief Financial Officer and Chief Operating Officer of the Company +62 +2006 +Aradhana Sarin, M.D. +Senior Vice President, Head of Corporate Business Development and +Strategy of Alexion Pharmaceuticals +43 +2018 +Class III +(Nominees for Terms Expiring in 2021): +Michael Celano +Chief Operating Officer of Recro Pharma, Inc. +59 +2006 +Charles W. Patrick +Principal, Patrick Consulting +63 +2006 +67 +Table of Contents +Eamonn P. Hobbs +Independent +Director +Director since: +2016 +Class I +Director +Term Expires: +2019 +Age : 59 +Other Current +Public Company +Directorships : None +Mr. Hobbs currently serves as President of Hobbs Medical Ventures, LLC, a consulting company in the healthcare field, which he +founded. From December 2016 to June 2017, Mr. Hobbs served as President and CEO of Digital Cognition Technologies, Inc., an early stage medical device company. From July 2014 to January 2016, Mr. Hobbs served as the President and Chief +Executive Officer of Antares Pharma, Inc., a specialty pharmaceutical company focused on self-injection pharmaceutical products and technologies. He also served on the Antares board of directors from 2009 to 2016. From 2009 to 2013, Mr. Hobbs +served as President and Chief Executive Officer, and from 2008 to 2013 was a member of the board of directors, of Delcath Systems, Inc., a specialty pharmaceutical and medical device public company specializing in cancer treatment. Prior to Delcath +Systems, Inc., Mr. Hobbs served as President and Chief Executive Officer of AngioDynamics, Inc., a company he co-founded in 1988 as a division of E-Z-EM, Inc. which grew into a leading medical technology public company with a highly diverse product line. From 1988 to 2004, Mr. Hobbs also served as Executive Vice President of Business Development +of E-Z-EM, Inc., a NASDAQ-traded company. Before joining AngioDynamics, Mr. Hobbs was Director of Marketing and Product Development at NAMIC; founder, President and +Chief Executive Officer of Hobbs Medical, Inc.; and a Product Development Engineer at Cook Incorporated. Mr. Hobbs received a B.S. in Plastics Engineering with a Biomaterials emphasis at the University of Massachusetts (Lowell). Mr. Hobbs +has served on the Board of Directors of the Medical Device Manufacturers Association since 2009. +Skills and Qualifications leading to conclusion that he should serve on the Board: +•   Executive-level +management experience as CEO of several public companies. +•   Extensive experience in the medical device, pharmaceutical and combination products industries. +•   Extensive experience managing +operations in a cost-effective, efficient manner. +•   Experience with governance and policy development for the medical device +industry. +68 +Table of Contents +Stephen S. Tang, Ph.D. +Independent +Director +(During 2017) +Director since: 2011 +Class I Director +Term Expires: +2019 +Age : 57 +Other Current +Public Company +Directorships : None +Stephen S. Tang, Ph.D. became a member of the Board in April 2011 and has served as the Company’s Chairman of the Board since +November 2016. Since January 2008, Dr. Tang has served as President and Chief Executive Officer of The University City Science Center, an urban research park and business incubator owned by over thirty leading universities, medical schools +and health networks in the greater Philadelphia, Pennsylvania area. Dr. Tang will become the Company’s President and CEO on April 1, 2018. Prior to his tenure at the University City Science Center, Dr. Tang held +senior management and business development positions with several firms in the life sciences industry, including Olympus America, Inc., as well as Millennium Cell Inc. and A.T. Kearney Inc. Dr. Tang holds a B.S. degree in Chemistry from The +College of William and Mary, an M.S. and Ph.D. in Chemical Engineering from Lehigh University and an MBA from The Wharton School of Business at the University of Pennsylvania. +Skills and Qualifications leading to +conclusion that he should serve on the Board: +•   Extensive business experience, particularly in the life sciences industry. +•   Experience with strategic and business development matters. +•   Executive-level management +experience. +Mara G. Aspinall +Independent +Director +Director since: 2017 +Class II Nominee +Term Expires: 2020 +Age : 55 +Other +Current +Public Company +Directorships : 2 +Mara G. Aspinall joined the Board in June 2017. Since 2014, she has served as the President and Chief Executive Officer of Health +Catalysts, an investment and advisory firm that focuses on growth of early stage life science and technology companies. She also currently serves as the Executive Chairman of GenePeeks, a computational genomics company offering proprietary +technology to help identify the pre-conception risk of passing on monogenic disease to progeny. Prior to these positions, Ms. Aspinall served as President and CEO, Global Head of Roche Tissue +Diagnostics/Ventana Medical Systems, a division of The Roche Group that provides tissue-based cancer diagnostic instruments, products and services. Prior to that, she founded and served as CEO and Director of +On-Q-ity, Inc., a diagnostic research company focused on improving cancer treatment through the capture of circulating tumor cells in a patient’s blood. Ms. Aspinall also spent 12 years with Genzyme +Corporation, serving as President of the Genzyme Genetics division, a leading provider of esoteric and genetic tests for the reproductive, oncology and personalized medicine markets, and as President of the Genzyme Pharmaceuticals division, a custom +pharmaceutical intermediates provider. Ms. Aspinall began her career as a management consultant with Bain & Company. Ms. Aspinall holds an M.B.A from Harvard Business School and a B.A. in International Relations from Tufts +University. In addition to serving on the Board at GenePeeks, she previously served on the Board at Safeguard Scientific and currently serves on the Boards of Abcam Plc and Allscripts. +Skills and Qualifications leading to +conclusion that she should serve on the Board: +•   Executive level experience as a CEO. +•   Executive experience in the life sciences industry. +•   Extensive experience in molecular +diagnostics. +69 +Table of Contents +Ronny B. Lancaster +Independent +Director +Director since: +2003 +Class II +Nominee +Term Expires: +2020 +Age : 66 +Other Current +Public Company +Directorships : None +Ronny B. Lancaster became a member of the Board in May 2003. Since September 2005, Mr. Lancaster has served as Senior Vice +President, Federal Government Relations of Assurant, Inc., a provider of specialty insurance and insurance-related products and services. Prior to that, Mr. Lancaster served as Chief Operating Officer of the Morehouse School of Medicine, +Executive Assistant to the Secretary and Principal Deputy Assistant Secretary for Planning and Evaluation at the U.S. Department of Health and Human Services, General Counsel of Hamilton Enterprises, Inc., Senior Washington Representative for Blue +Cross/Blue Shield Association, and Chief of the Division of Fee-For-Service Plans at the U.S. Office of Personnel Management. Mr. Lancaster received a B.A. in +Economics from the Catholic University of America, an M.B.A. from the Wharton School of the University of Pennsylvania, and a J.D. from The Georgetown University Law Center. He is admitted to the Bars of Pennsylvania and the District of Columbia. +Mr. Lancaster previously served on the board of directors of Immucor, Inc. +Skills and Qualifications leading to conclusion that he should serve on the Board: +•   Expertise in +government affairs and political matters. +•   Extensive medical and healthcare experience. +•   Legal training. +Ronald H. Spair +Chief +Financial Officer +& Chief Operating +Officer +Director since: 2006 +Class II Nominee +Term Expires: 2020 +Age : 62 +Other Current +Public Company +Directorships : 1 +For biographical information on Mr. Spair, see the Section entitled, “Executive Officers,” in this Proxy Statement. +Skills and Qualifications leading to +conclusion that he should serve on the Board: +•   Service as Chief Financial Officer and Chief Operating Officer of the Company. +•   Financial and accounting expertise. +•   Extensive business and investor relations experience. +70 +Table of Contents +Michael Celano +Independent +Director +Director since: 2006 +Class III Director +Term Expires: 2021 +Age : +59 +Other Current Public +Company Directorships : None +Michael Celano became a member of the Board in October 2006. Since January 2018, Mr. Celano has served as the Chief Operating +Officer of Recro Pharma, Inc. and between July 2016 and January 2018, Mr. Celano served as its Chief Financial Officer. Between 2015 and June 2016 Mr. Celano was self-employed providing consulting services to healthcare companies. Prior to +that, Mr. Celano served as the Chief Financial Officer of Kensey Nash Corporation, a biomaterials company from 2009 to 2012. From 2007 to 2008, Mr. Celano also served as Chief Financial Officer for BioRexis Pharmaceutical Corporation, a +biopharmaceutical company. Before joining BioRexis, Mr. Celano served as a partner with KPMG LLP, where he was co-leader of its National Life Science Practice. Mr. Celano also was co-leader of the Life Science Practice for Arthur Andersen before he joined KPMG. Mr. Celano holds a B.S. in Accounting from St. Joseph’s University. +Skills and +Qualifications leading to conclusion that he should serve on the Board: +•   Long career in public accounting focused in the life sciences area. +•   Accounting and financial expertise. +•   Extensive business +experience. +Douglas A. Michels +President & Chief +Executive Officer +Director since: +2004 +Class III +Director +Term Expires: +2021 +Age : 61 +Other Current Public Company Directorships : +1 +For biographical information on Mr. Michels, see the Section entitled, “Executive Officers,” in this Proxy +Statement. +Skills and Qualifications +leading to conclusion that he should serve on the Board: +•   Service as President and Chief Executive Officer of the Company. +•   Extensive business and executive-level management experience in the medical device +and diagnostics field. +•   Public, private and non-profit board +experience. +71 +Table of Contents +Charles W. Patrick +Independent +Director +Director since: +2006 +Class III +Director +Term Expires: +2021 +Age : 63 +Other Current Public Company Directorships : +None +Charles W. Patrick became a member of the Board in January 2006. Since 2000, Mr. Patrick has served as Principal of Patrick +Consulting, a management consulting firm that helps diagnostic, medical device and technology companies develop sales, marketing and distribution strategies. From 2001 through 2011, Mr. Patrick also served as the President and Co-owner of ADS Golf, Inc., a golf equipment supplier. Prior to that time, he served as the President and Chief Executive Officer of CallNexus, Inc., a provider of virtual call center services, and Vice President of +Sales and Marketing for Biosite, Inc., a medical diagnostics company, where he had primary responsibility for developing and achieving Biosite’s strategic sales, marketing and distribution objectives. Prior to his time at Biosite, +Mr. Patrick served as World Wide Group Marketing Manager and held several other sales and marketing positions for the Diagnostics Division of Abbott Laboratories. Mr. Patrick also previously served on the board of directors for DiaDexus, +Inc., Accumentrics, Inc. and Seamless Medical Systems, Inc. Mr. Patrick received his undergraduate degree from the University of Central Florida. +Skills and Qualifications leading to conclusion that he should serve on the Board: +•   Extensive sales +and marketing background. +•   More than 40 years of experience in the medical diagnostics industry. +•   Entrepreneurial skills. +Aradhana Sarin, M.D. +Independent +Director +Director since: 2018 +Class II Nominee +Term Expires: 2020 +Age : 43 +Other +Current +Public Company +Directorships : None +Aradhana Sarin became a member of the Board in January 2018. Since November 2017, she has served as the Senior Vice President, Head of +Corporate Business Development & Strategy for Alexion Pharmaceuticals, a global biopharmaceutical company. Dr. Sarin also serves as Co-Chair of the Executive Management Committee overseeing +Science and Innovation at Alexion. Prior to that, Dr. Sarin served as the Managing Director of Healthcare Corporate & Investment Banking at Citi Global Banking, focusing on clients in the diagnostics, life sciences and +biopharmaceutical sectors. Prior to her tenure at Citi, Dr. Sarin held various positions in the investment banking industry, including with UBS and JP Morgan. Prior to her career in investment banking, Dr. Sarin spent two years as a +medical resident practicing in both India and Africa. Dr. Sarin received her MBA from Stanford Business School and obtained her medical training from the University of Delhi in India. +Skills and Qualifications leading to +conclusion that she should serve on the Board: +•   Extensive experience in the healthcare and life sciences sectors. +•   Scientific and medical background and experience. +•   Extensive experience at global financial institutions, involving M&A and equity +and debt financing transactions +•   Extensive knowledge of global healthcare +systems. +72 +Table of Contents +Vote Required; Board Recommendation +If a quorum is present, each nominee will be elected if he or she receives a majority of the votes cast by shares present in person or +by Proxy and entitled to vote at the Annual Meeting. Shares voted in person or represented by proxy which are not voted for a nominee (by voting no or abstaining) will have the effect of voting against the nominee. Broker non-votes will have no effect on the required vote. In the absence of instructions to the contrary, shares of Common Stock represented by properly executed Proxies will be voted for the nominees, each of whom has +consented to be named and to serve if elected. +Your Board recommends that you vote FOR the election of the Director nominees. +PROPOSAL NO. 2. RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED +PUBLIC ACCOUNTING FIRM +Background +The Audit Committee of the Board of Directors has approved the reappointment of KPMG LLP (“KPMG”) as our independent +registered public accounting firm for the 2018 fiscal year. The Audit Committee has also recommended that the Board submit the appointment of KPMG for ratification by stockholders at the Annual Meeting. Although action by the stockholders on this +matter is not legally required, the Audit Committee and the Board believe it is appropriate to seek stockholder ratification of this appointment in light of the important role played by the independent registered public accounting firm in reporting +on the Company’s consolidated financial statements. If this appointment is not ratified by stockholders, the Audit Committee may reconsider its appointment of KPMG for the 2018 fiscal year or in the future. +One or more representatives of KPMG are expected to attend the Annual Meeting electronically. They will have an opportunity to make a +statement and will be available to respond to appropriate questions. +Vote Required; Board Recommendation +Ratification of the appointment of KPMG requires the affirmative vote of a majority of shares present in person or by Proxy and entitled +to vote at the Annual Meeting. Shares voted in person or represented by Proxy which are not voted for this ratification (by voting no or abstaining) will have the effect of voting against this proposal. In the absence of instructions to the +contrary, shares of Common Stock represented by properly executed Proxies will be voted for ratification of the appointment of KPMG as our independent registered public accounting firm for the 2018 fiscal year. +Your Board recommends that the stockholders vote FOR ratification of the appointment of KPMG. +PROPOSAL NO. 3. ADVISORY +(NON-BINDING) VOTE TO APPROVE EXECUTIVE COMPENSATION +Background +Section 14A of the Exchange Act, enacted pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 +(“Dodd-Frank Act”), requires that stockholders be given the opportunity to vote to approve, on an advisory (non-binding) basis, no less frequently than once every three years, the compensation of our +NEOs. Based on feedback received at our 2017 Annual Meeting, the Board determined that such a vote will continue to be held on an annual basis until the next advisory vote on frequency. +The vote on the resolution recommended below is not intended to address any specific element of compensation, but rather relates to the +overall compensation of our NEOs. As described more fully under the CD&A Section of this Proxy Statement and the related tables and narrative, our compensation program is performance-based and is designed to pay executives for performance by +offering rewards for the achievement of pre-determined +73 +Table of Contents +objectives. In addition, our program is designed to align the interests of executives with the interests of our stockholders, provide long-term incentives and set compensation at levels +sufficiently competitive to attract, retain and motivate high quality executives, and meet strong corporate governance principles. You are urged to carefully review the CD&A Section of this Proxy Statement which contains a detailed discussion of +our executive compensation program, including the 2017 compensation of our NEOs. +Compensation Program Features +As described more fully in the CD&A, there are many important features to our compensation program that illustrate our commitment to +pay-for-performance and good corporate governance. A summary of some of the more significant of these features is set forth below: +• +Compensation is market driven and performance-based. +• +Total compensation targeted at 50 th percentile of peer +group. +• +Balanced mix of cash/equity, fixed/variable, short-term/long-term compensation components. +• +Use of peer company benchmarking and tally sheets. +• +Threshold financial performance objectives for annual bonus pool funding meet or exceed fiscal performance for the prior fiscal year. +• +Compensation recoupment policy. +• +Equity awards provide long-term incentive with three year vesting. +• +No hedging or pledge of our Common Stock. +• +50% of annual equity is performance-vested. +• +Robust stockholder outreach on compensation/governance matters. +Vote Required; Board Recommendation +If a quorum is present, the affirmative vote of a majority of shares present, in person or by Proxy and entitled to vote at the Annual +Meeting, is required to approve, on an advisory (non-binding) basis, the compensation paid to NEOs. Shares voted in person or represented by Proxy which are not voted for approval of our executive compensation +(by voting no or abstaining) will have the effect of voting against this proposal. Broker non-votes will not count toward the determination of whether this proposal is approved and will have no impact on the +vote. In the absence of instructions to the contrary, shares of Common Stock represented by properly executed Proxies will be voted for approval of our executive compensation, as disclosed in this Proxy Statement. Because this stockholder vote is +advisory, it will not be binding on the Company or the Board of Directors. However, the Compensation Committee and Board will take into account the outcome of the vote when considering future executive compensation programs and arrangements. +Based on the foregoing, the Board is requesting that stockholders vote on the following resolution: +RESOLVED , that the compensation paid to the Company’s named executive officers, as disclosed in the Compensation Discussion +and Analysis, compensation tables and narrative discussion, is hereby APPROVED. +Your Board recommends that the stockholders vote FOR the approval +of our executive compensation as described in the preceding resolution. +ANNUAL REPORT +Our +Annual Report to Stockholders for the year ended December 31, 2017 accompanies this Proxy Statement. Following receipt of a written request, we will provide, without charge, a copy of our Annual Report on Form +10-K for the year ended December 31, 2017, as filed with the SEC (including a list briefly describing the exhibits thereto), to any record holder or beneficial owner of our Common Stock on +74 +Table of Contents +March 15, 2018, the record date for the Annual Meeting, or to any person who subsequently becomes such a record holder or beneficial owner. Requests should be directed to the attention of +the Corporate Secretary of the Company at our address set forth in the Notice of Annual Meeting of Stockholders immediately preceding this Proxy Statement. +DEADLINE FOR STOCKHOLDER PROPOSALS +You may submit proposals for inclusion in the proxy materials for the Company’s 2019 Annual Meeting of Stockholders. Any such +proposals must meet the stockholder eligibility and other requirements imposed by rules issued by the SEC and must be received by the Company at 220 East First Street, Bethlehem, Pennsylvania 18015, Attention: Corporate Secretary, in accordance with +Rule 14a-8 promulgated under the Exchange Act, not later than December 6, 2018. +In +addition, our Bylaws provide that a stockholder proposal must meet certain predetermined requirements in order to be considered at the Annual Meeting. These requirements are separate from, and in addition to, the requirements discussed above to have +the stockholder proposal included in the proxy materials pursuant to the SEC’s rules and regulations. In order to be considered, a stockholder’s proposal must be made in writing to the Company’s Secretary and must be delivered to or +received at our principal executive offices not less than ninety (90) days nor more than one hundred twenty (120) days prior to the meeting. However, if less than one hundred (100) days’ notice or prior public disclosure of the +date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be so received no later than the close of business on the tenth (10 th ) day following the day +on which such notice of the date of the meeting was mailed or such public disclosure was made, whichever first occurs. The notice to the Secretary must set forth, with respect to each matter the stockholder proposes to bring before the meeting, a +brief description of the matter and the reasons for considering that matter at the Annual Meeting. The notice must also include, as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf notice of the proposed +business is made: (i) the name and address of the stockholder and such beneficial owner; (ii) any material interest of such stockholder and such beneficial holder in such business; (iii) the class and number of shares of capital stock +of the Company which are held of record or beneficially owned by the stockholder and such beneficial owner and any other direct or indirect pecuniary or economic interest in any capital stock of the Company of such stockholder and such beneficial +owner, including without limitation, any derivative instrument, swap, option, warrant, short interest, hedge, profit sharing arrangement or borrowed or loaned shares; (iv) a representation that such stockholder intends to appear in person or by +proxy at the meeting to propose the business described in its notice; and (v) any other information relating to such business matter that would be required to be disclosed in a proxy statement or other filings required to be made in connection +with solicitations of proxies pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder. To the extent the Board of Directors or the SEC, or a court of competent jurisdiction, deems these Bylaw provisions +to be inconsistent with the right of stockholders to request inclusion of a proposal in the Company’s proxy materials pursuant to Rule 14a-8 promulgated under the Exchange Act, such rule shall prevail. +The SEC has promulgated rules relating to the exercise of discretionary voting authority under proxies solicited by the Board. If a +stockholder intends to present a proposal at our 2019 Annual Meeting without inclusion of that proposal in the Company’s proxy materials and written notice of the proposal is not received by the Secretary of the Company by February 12, +2019 (the date that is 45 days before the one-year anniversary of the date on which the Company first sent its proxy materials for the Annual Meeting), or if the Company meets other requirements of the +applicable SEC rules and regulations, the proxies solicited by the Board for use at the 2019 Annual Meeting will confer discretionary authority to vote on the proposal should it then be raised at the 2019 Annual Meeting. +BY ORDER OF THE BOARD OF DIRECTORS +Jack E. Jerrett +Secretary +March 29, 2018 +75 +Table of Contents +220 EAST FIRST STREET +BETHLEHEM, PA 18015 +VOTE BY INTERNET +Before The Meeting - Go to www.proxyvote.com or scan the QR Barcode above +Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the meeting date. Have your proxy card in hand when you access the web site and follow +the instructions to obtain your records and to create an electronic voting instruction form. +During The Meeting - Go to +www.virtualshareholdermeeting.com/OSUR2018 +You may attend the Meeting via the Internet and vote during the +Meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions. +VOTE BY PHONE - 1-800-690-6903 +Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the meeting date. Have your proxy card in hand when you call and then follow the instructions. +VOTE BY MAIL +Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. +TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: +E38313-P03935 KEEP THIS PORTION FOR YOUR +RECORDS +THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. +DETACH AND RETURN THIS PORTION ONLY +ORASURE TECHNOLOGIES, INC. +The Board of Directors recommends you vote FOR each of the following +nominees: +1. +ELECTION OF DIRECTORS +Class III (Expiring 2021) +Nominees: +For +Against +Abstain +1a. Michael Celano +☐ +☐ +☐ +1b. Charles W. Patrick +☐ +☐ +☐ +The Board of Directors recommends you vote FOR items 2 and +3. +For +Against +Abstain +2. +Ratification of Appointment of KPMG LLP as the Independent +Registered Public Accounting Firm for Fiscal Year 2018. +☐ +☐ +☐ +3. +Advisory (Non-Binding) Vote to Approve Executive +Compensation. +☐ +☐ +☐ +Mark Here for Address Changes or Comments SEE REVERSE +☐ +NOTE: Please sign as name appears hereon. Joint owners should each sign. +When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. +Signature [PLEASE SIGN WITHIN BOX] +Date +Signature (Joint Owners) +Date +Table of Contents +OraSure Technologies, Inc. +2018 Annual Meeting of Stockholders +Tuesday, May 8, 2018 +Important notice regarding the Internet availability of proxy materials for the +Annual Meeting of Stockholders. +The Notice and Proxy Statement and 2017 Annual Report to Stockholders +are available at www.proxyvote.com. +E38314-P03935 +PROXY +2018 Annual Meeting of Stockholders +PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS +The undersigned hereby appoints Jack +E. Jerrett and Mark L. Kuna, and each of them, proxies with full power of substitution, to vote all of the shares which the undersigned is entitled to vote at the 2018 Annual Meeting of Stockholders of OraSure Technologies, Inc. (the +“Company”), on Tuesday, May 8, 2018, at 10:00 a.m. (Eastern Time), and at any adjournment or adjournments thereof, with all the powers the undersigned would possess if personally present, with respect to the matters listed on the reverse +side. +The shares represented by this Proxy, if properly +executed, will be voted (i) FOR the election of the nominees listed on the reverse side as directors, (ii) FOR the ratification of the appointment of KPMG LLP as the Company’s independent registered public accounting firm for 2018, and (iii) +FOR approval of the compensation of the Company’s named executive officers. If any other business properly comes before the meeting, the proxies named above will have discretionary authority to vote thereon in accordance with their best +judgment. +PLEASE MARK, DATE, SIGN AND RETURN THE PROXY CARD +PROMPTLY. +Address Changes/Comments: +(If you noted any Address Changes/Comments above, please mark corresponding box on the reverse side.) +(Continued and to be marked, dated and signed, on the +other side) \ No newline at end of file diff --git a/raw/proxies/0001116463/0001193125-18-101914/proxy_rpt.txt b/raw/proxies/0001116463/0001193125-18-101914/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..4a9a76407a49671428f2768146089a7c59d722be --- /dev/null +++ b/raw/proxies/0001116463/0001193125-18-101914/proxy_rpt.txt @@ -0,0 +1,9 @@ +TRANSACTIONS WITH RELATED PERSONS +Since January 1, 2017, +there have been no transactions with related persons that would require disclosure in this Proxy Statement. The Audit Committee is required to review and approve in advance all transactions with related persons involving the Company. The Audit +Committee may approve a related party transaction if the transaction is on terms comparable to those that could be obtained in arms’ length dealings with an unrelated third party. The Audit Committee also reviews any public disclosures of a +related party transaction contained in our SEC filings. These responsibilities are described in the Audit Committee’s charter, a copy of which is available on our website at +www.orasure.com . +Information +regarding employment and severance agreements between our executive officers and the Company is set forth in the Section entitled, “Employment Agreements and Potential Payments Upon Termination or Change of Control,” in this Proxy +Statement. \ No newline at end of file diff --git a/raw/proxies/0001116463/0001564590-19-011253/proxy.txt b/raw/proxies/0001116463/0001564590-19-011253/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..37544e4cd62ed95a241ed3593066ff321fb81005 --- /dev/null +++ b/raw/proxies/0001116463/0001564590-19-011253/proxy.txt @@ -0,0 +1,4520 @@ +DEF 14A +1 +osur-def14a_20190521.htm +DEF 14A +osur-def14a_20190521.htm +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +Washington, D.C. 20549 +SCHEDULE 14A +Proxy Statement Pursuant to Section 14(a) +of the Securities Exchange Act of 1934 +(Amendment No. ) +Filed by the Registrant ☒ Filed by a Party other than the Registrant ☐ +Check the appropriate box: +☐ +Preliminary Proxy Statement +☐ +Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +☒ +Definitive Proxy Statement +☐ +Definitive Additional Materials +☐ +Soliciting Material Pursuant to §240.14a-12 +OraSure Technologies, Inc. +(Name of Registrant as Specified In Its Charter) +(Name of Person(s) Filing Proxy Statement, if other than the Registrant) +Payment of Filing Fee (Check the appropriate box): +☒ +No fee required. +☐ +Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. +(1) +Title of each class of securities to which transaction applies: +(2) +Aggregate number of securities to which transaction applies: +(3) +Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): +(4) +Proposed maximum aggregate value of transaction: +(5) +Total fee paid: +☐ +Fee paid previously with preliminary materials. +☐ +Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. +(1) +Amount Previously Paid: +(2) +Form, Schedule or Registration Statement No.: +(3) +Filing Party: +(4) +Date Filed: +2019 +Proxy Statement +Notice of Annual Meeting of Stockholders +Tuesday, May 21, 2019 ● 10:00 a.m. (Eastern Time) +Letter to the Stockholders +Stephen S. Tang, Ph.D. +President and +Chief Executive Officer +April 10, 2019 +Dear Fellow Stockholders: +You are cordially invited to attend the 2019 Annual Meeting of Stockholders (the “Annual Meeting”) to be held on Tuesday, May 21, 2019 at 10:00 a.m. Eastern Time . Consistent with past practice, this year’s Annual Meeting will be a completely virtual meeting, conducted as a live webcast. You will be able to attend the Annual Meeting online, vote your shares electronically if you wish, and submit your questions during the meeting by visiting www.virtualshareholdermeeting.com/OSUR2019 . +Pursuant to the Securities and Exchange Commission (“SEC”) rule allowing companies to furnish proxy materials to their stockholders over the internet, a Notice of Internet Availability of Proxy Materials (the “Notice”) was sent to stockholders on or about April 10, 2019. The Notice contains information on how to access copies of the proxy materials and vote your shares. +At the Annual Meeting, you will be asked to (i) elect two Class I Directors to serve on the Board of Directors until the Annual Meeting of Stockholders in 2022; (ii) ratify the appointment of KPMG LLP as our independent registered public accounting firm for the 2019 fiscal year; (iii) approve, by an advisory (non-binding) vote, the compensation of the Company’s named executive officers as disclosed in the proxy materials and (iv) transact such other business as may properly come before the meeting, and any adjournment(s) or postponement(s) thereof. +The Board of Directors has approved the nominees for Director and recommends that you vote FOR their election to the Board. In addition, the Board of Directors recommends that you vote FOR the ratification of KPMG LLP’s appointment, and FOR the approval of the Company’s executive compensation. +Your vote is very important, regardless of the number of shares you own . Whether or not you plan to attend the Annual Meeting online, we urge you to submit your vote as soon as possible . You will have the option to vote by telephone, via the internet, or by completing, signing, dating and returning a paper Proxy Card. Additional details on these options can be found in the Notice sent to you and in the other proxy materials. You may, of course, attend the Annual Meeting online and vote your shares during the meeting regardless of whether you have previously voted by phone, the internet or mail. +Thank you for your cooperation, your ongoing support of, and continued interest in, OraSure Technologies, Inc. +Sincerely yours, +Stephen S. Tang, Ph.D. +President and Chief Executive Officer +NOTICE OF 2019 ANNUAL MEETING OF STOCKHOLDERS +OF ORASURE TECHNOLOGIES, INC. +DATE AND TIME +Tuesday May 21, 2019 +10:00 a.m. (Eastern Time) +To be held virtually by visiting +www.virtualshareholdermeeting.com/OSUR2019 +ITEMS OF BUSINESS +The 2019 Annual Meeting of Stockholders will be held for the following purposes: +• To elect two (2) Class I Directors, each to serve for a term expiring at the Company’s Annual Meeting of Stockholders in 2022; +• To ratify the appointment of KPMG LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2019; +• To approve, by an advisory (non-binding) vote, the compensation of the Company’s named executive officers as disclosed in the Proxy Statement accompanying this Notice; and +• To consider such other business as may properly come before the meeting, and any adjournment(s) or postponement(s) thereof. +HOW TO VOTE +Via the Internet . Go to www.proxyvote.com to vote your shares online prior to the Annual Meeting. Have the control number that is printed in your Notice of Internet Availability of Proxy Materials or Proxy Card available and follow the instructions. You may also vote online during the Annual Meeting by going to www.virtualshareholdermeeting.com/OSUR2019 and following the instructions. +By Phone . Call the toll-free number on your Notice of Internet Availability of Proxy Materials or Proxy Card and follow the prompts. +By Mail . You can vote by mail by requesting a paper copy of the materials, which will include a Proxy Card. Please review your Notice of Internet Availability of Proxy Materials for instructions on how to request a paper copy of the materials. Mark, sign and date your Proxy Card and return it as indicated on the Proxy Card. +Who Can Vote : Only holders of shares of the Company’s Common Stock of record at the close of business on March 28, 2019 will be entitled to vote at the Annual Meeting of Stockholders and any adjournment(s) or postponement(s) thereof. Additional information is included in the Proxy Statement accompanying this Notice. +By Order of the Board of Directors, +Jack E. Jerrett +Secretary +April 10, 2019 +Proxy Statement Table of Contents +Proxy Statement Summary +1 +2019 Annual Meeting Information +1 +Proposals for Stockholder Consideration +1 +Compensation Components +3 +Key Features of our Executive Compensation Program +3 +Performance Highlights +4 +Questions and Answers About the 2019 Annual Meeting and Voting +5 +Why Did I Receive These Proxy Materials? +5 +What Is a Proxy? +5 +What Is the Record Date and What Does It Mean? +5 +What Is the Difference Between a Stockholder of Record and a Stockholder Who Holds Stock in Street Name? +6 +How Can I Vote My Shares for the Annual Meeting? +6 +How Will My Shares Be Voted If I Send In a Proxy? +6 +Will My Shares Be Voted If I Do Not Provide My Proxy? +7 +How Many Shares Must Be Present To Hold the Annual Meeting? +7 +How Can I Revoke a Proxy? +7 +What Items Will Be Voted On At The Annual Meeting? +7 +Who Will Pay The Cost of This Proxy Solicitation? +7 +How Can I Participate in The Annual Meeting? +8 +What if I Have Technical Difficulties or Trouble Accessing the Virtual Meeting? +8 +Are Votes Confidential? +8 +Who Counts The Votes? +8 +May Stockholders Ask Questions at the Annual Meeting? +8 +Stock Ownership of Certain Beneficial Owners and Management +9 +Corporate Governance +10 +Board Responsibilities, Operation and Composition +10 +Governance Guidelines and Code of Conduct +10 +Independent Board Chairman +10 +Director Independence +11 +Oversight of Risk Management +11 +Annual Meeting Attendance and Stockholder Communications +11 +Committees of the Board +12 +Nomination of Directors +14 +Director Qualifications +15 +Insider Trading +15 +Prohibition Against Short Sales, Hedging and Pledging +15 +Stock Ownership and Retention Guidelines +15 +Audit Committee Matters +17 +Report of the Audit Committee for Year Ended December 31, 2018 +17 +Audit Fees; Audit-Related Fees; Tax Fees; All Other Fees +18 +Pre-Approval Procedures +18 +Compensation Committee Matters +18 +Compensation Process and Procedures +18 +Annual Performance Evaluations +18 +Role of the Compensation Committee +19 +Role of the CEO +19 +Role of the Compensation Consultant +19 +Tally Sheets +20 +Compensation Committee Interlocks and Insider Participation +20 +Compensation Committee Report +20 +Executive Officers +21 +Transactions with Related Persons +23 +Section 16(a) Beneficial Ownership Reporting Compliance +23 +Compensation Discussion Analysis – Table of Contents +24 +Compensation Discussion and Analysis +25 +Executive Summary +25 +Compensation Philosophy +33 +Benchmarking +33 +2018 Executive Compensation Components +35 +Other Compensation +46 +CEO Pay Ratio +47 +Compensation Tables +49 +Employment Agreements and Potential Payments Upon Termination or Change of Control +56 +Equity Compensation Plan Information +60 +Director Compensation +60 +Annual Fees +60 +Initial Equity Awards +60 +Annual Equity Awards +60 +Equity Award Terms +61 +Deferred Compensation +61 +Director Compensation During 2018 +62 +Proposals Requiring Your Vote +63 +Proposal No. 1 – Election of Directors +63 +Background +63 +Vote Required; Board Recommendation +68 +Proposal No. 2 – Ratification of Appointment of Independent Registered Public Accounting Firm +68 +Background +68 +Vote Required; Board Recommendation +68 +Proposal No. 3 – Advisory (Non-Binding) Vote To Approve Executive Compensation +68 +Background +68 +Compensation Program Features +69 +Vote Required; Board Recommendation +69 +Annual Report +69 +Deadline for Stockholder Proposals +70 +PROXY STAT EMENT SUMMARY +We are providing these Proxy Materials to stockholders of OraSure Technologies, Inc., a Delaware corporation (as used herein, “we,” “us,” “our” or the “Company”), in connection with the Company’s solicitation of proxies (each, a “Proxy”) for use at the Annual Meeting of Stockholders to be held on May 21, 2019, at 10:00 a.m. Eastern Time, and at any adjournment(s) or postponement(s) thereof (the “Annual Meeting”). +As a stockholder, you are invited to attend the Annual Meeting and are requested to vote on the matters described in this Proxy Statement. The Annual Meeting will be conducted in a completely virtual manner through a live +webcast that you can access online by going to www.virtualshareholdermeeting.com/OSUR2019 . The webcast will not include a presentation by management. A question and answer session will be provided at the Annual Meeting only for questions that are germane to the matters being discussed and voted on at the meeting. +This summary highlights information contained elsewhere in this Proxy Statement, but does not contain all of the information that you should consider. You should read the entire Proxy Statement carefully before voting your shares . +2019 ANNUAL MEETING INFORMATION +• +Date and Time: Tuesday, May 21, 2019 at 10:00 a.m. (ET) +• +Location: Online by visiting www.virtualshareholdermeeting.com/OSUR2019 +• +Record Date: March 28, 2019 +PROPOSALS FOR STOCKHOLDER CONSIDERATION +Proposals +Board +Recommendation +Page Reference +for More Detail +1.) +Election of two Class I Directors +FOR EACH NOMINEE +63 +2.) +Ratification of Appointment of Independent +Registered Public Accounting Firm for 2019 +FOR +68 +3.) +Advisory (Non-Binding) Vote to Approve +Executive Compensation +FOR +68 +Proposal No. 1 – Election of Directors +The table below provides summary information about each of our nominees for Class I Directors, whose new terms will expire at the 2022 Annual Meeting of Stockholders. The Board is recommending that stockholders vote for each Director nominee. +Committee +Memberships 1 +Other +Name and Principal Occupation +Age +Director +Since +Independent +AC +CC +N& +GC +Public +Boards +Eamonn P. Hobbs +President of Hobbs Medical Ventures, LLC +60 +2016 +Yes +√ +C +No +Stephen S. Tang, Ph.D. 2 +President and Chief Executive Officer (“CEO”) +of the Company +58 +2011 +No +No +1 +AC = Audit Committee; CC = Compensation Committee; NCGC = Nominating & Corporate Governance Committee; C = Chairman; Ö = Member. +2 +Dr. Tang was appointed as the Company’s President and CEO effective as of April 1, 2018. Prior to that date, Dr. Tang was a member of the Company’s Board of Directors and served as Chairman of the Board since November 2016. +1 +Proposal No. 2 – Ratification of Appointment of Independent Registered Public Accounting Firm +Our Audit Committee has selected KPMG LLP (“KPMG”) to be our independent registered public accounting firm for the 2019 fiscal year. The Board +believes KPMG is well qualified to serve in this capacity and is recommending that the engagement of KPMG be ratified by our stockholders. +Proposal No. 3 – Advisory (Non-Binding) Vote to Approve Executive Compensation +Our business is diverse and we operate in extremely competitive markets around the world. It takes commitment from all of the talented people throughout our Company, and especially our executive team, to manage the many facets of our business. +We have designed our compensation program to enable us to attract, retain and motivate our executives and reward them for achieving our objectives and delivering value to stockholders over the long-term. Therefore, we are asking our stockholders to approve, by an advisory (non-binding) vote, the compensation of our named executive officers (“NEOs”) as described in this Proxy Statement. +Our compensation program is designed to focus and reward our executives for balancing both short and long-term priorities. To fulfill this mission, we have adopted a +pay-for-performance philosophy that forms the foundation for executive compensation decisions made by our Board and the Compensation Committee of the Board (the “Compensation Committee”). In addition, our compensation decisions are designed to align the interests of our executives with the interests of our stockholders and incorporate strong corporate governance principles. +The Compensation Discussion and Analysis portion of this Proxy Statement (the “CD&A”) contains a detailed description of our executive compensation philosophy and program, the compensation decisions the Board and Compensation Committee have made under that program and the factors considered in making those decisions, focusing on the compensation of our NEOs for the year ended December 31, 2018, who were: +Stephen S. Tang, Ph.D., President and CEO 1 +Roberto Cuca, Chief Financial Officer (“CFO”) 2 +Anthony Zezzo, II, Executive Vice President, Business Unit Leader, Infectious Disease +Brian Smith, Vice Chairman and Executive Vice President, Innovation 3 +Jack E. Jerrett, Senior Vice President, General Counsel and Secretary +Douglas A. Michels, Former President and CEO 1 +Ronald H. Spair, Former CFO and Chief Operating Officer 2 +___________________________ +1 Dr. Tang was appointed as the Company’s President and CEO effective as of April 1, 2018. Dr. Tang replaced Douglas A. Michels who retired effective March 31, 2018. +2 Mr. Cuca was appointed as the Company’s CFO effective as of June 8, 2018, replacing Ronald H. Spair who retired effective as of the same date. +3 Ms. Kathleen G. Weber replaced Mr. Smith as Executive Vice President, Business Unit Leader, Molecular Solutions, at the Company’s subsidiary, DNA Genotek, Inc. (“DNAG”), effective as of January 1, 2019. Mr. Smith now serves as Vice Chairman and Executive Vice President, Innovation at DNAG. +At our 2018 Annual Meeting, 96% of the votes cast approved the compensation paid to our NEO’s for the 2017 fiscal year, as disclosed in our 2018 Proxy Statement. The Board and Compensation Committee take seriously the results of each “say-on-pay” (“SOP”) vote and the views of our stockholders regarding executive compensation. Accordingly, as has been our practice following each SOP vote, we conducted an outreach effort to contact our stockholders in order to obtain their views on the reasons for the vote and to solicit their input on our compensation practices. As part of that effort, we attempted to contact stockholders who, in the aggregate, beneficially owned +approximately 33% of our outstanding Common Stock to discuss our compensation practices. The stockholders we contacted generally either did not respond or indicated that there was no need to meet with them at this time. We believe this reaction, coupled with the strong positive SOP vote at the 2018 Annual Meeting, confirms that the structure of our compensation program is generally supported by our stockholders. The CD&A provides further information on our outreach effort, which we intend to continue. The Board is recommending that stockholders vote in favor of our executive compensation. +2 +COMPENSATION COMPONENTS +We believe that all components of our executive compensation program are strongly tied to performance of both the Company and our executives and are aligned with the best interests of our stockholders. These components consist of the following: +Base Salary +Salaries are based on position relative to market and individual performance and contribution. +Annual Cash Incentive Plan Bonuses +Annual incentive cash bonuses reflect market-based targets and are contingent upon (i) achievement of corporate financial objectives, which are used to determine overall bonus pool funding, and (ii) the executive’s individual performance against pre-determined objectives, which are used to determine individual bonus payouts. +Equity Awards under the Long-Term Incentive Policy (“LTIP”) +Long-term incentive equity compensation reflects market-based targets with the value of individual awards contingent upon the executive’s individual performance against pre-determined objectives during the fiscal year prior to award. Fifty percent (50%) of each NEO’s annual LTIP award consists of performance-vested restricted units (“PRUs”) which require achievement of certain financial performance measures selected by the Board and Compensation Committee and satisfaction of a 3-year service period for vesting of the award. The other fifty percent (50%) consists of time-vested restricted stock (“RS”). +KEY FEATURES OF OUR EXECUTIVE COMPENSATION PROGRAM +Key features of our compensation program illustrate our commitment to pay-for-performance, the strong alignment of our executives’ interests with those of our stockholders and strong corporate governance. Several of the more significant of these features are summarized below: +• +Compensation is market driven with total compensation targeted at the 50 th percentile of our peer group. +• +Regular stockholder outreach on compensation/ governance matters. +● +Compensation is predominantly variable or performance-based. +• +Use of a third-party compensation consultant to provide independent advice on compensation matters. +● +Balanced mix of cash/equity, fixed/variable, short-term/long-term compensation components. +• +Strong stock ownership/retention requirements for executives. +• +In order to incentivize growth, performance objectives for annual bonus pool funding target key financial measures and/or important strategic goals. +● +No economic perquisites for NEOs. +• +The Board’s discretionary ability to adjust annual incentive bonus pool funding is limited to +/- 10% of pool amount in order to avoid excessive discretionary bonus pool adjustments. +• +Use of peer company benchmarking and tally sheets. +• +Long-term equity incentive awards include 50% PRUs that vest only if (i) a three-year compound average growth rate for product revenues and/or a one-year earnings per share (“EPS”) or income before income taxes (“IBIT”) target is met and (ii) a three-year service period is satisfied. +• +Compensation recoupment policy. +• +No excise tax gross-up in any of our NEO employment agreements and no “single trigger” change–in-control severance in any of our new executive employment agreements, including our CEO’s and CFO’s agreements. +• +No hedging or pledging of our Common Stock. +3 +PERFORMANCE HIGHLIGHTS +We believe that compensation awarded to executives for 2018 was closely aligned with our strong performance for the year. We successfully completed a major transition in leadership, with the appointment of Dr. Tang as our new President and CEO and Mr. Cuca as our new CFO. We also updated the long-term strategy for our business, which is focused on innovation and growth. Finally, we completed due diligence and negotiated the terms of two strategic acquisitions (i.e. of CoreBiome, Inc. and Novosanis, N.V.), which closed during the first week of January 2019. +At the same time, the Company generated strong financial results for 2018. Consolidated net revenues in 2018 were $181.7 million (9% growth over 2017), and consolidated net income was $20.4 million, or $0.33 per +share. These revenues set a new record for our Company, and this was the fourth consecutive year of strong profitable operations. +Our molecular collection systems business continued its strong performance in 2018 with revenues (including royalty income) 28% higher than in 2017. Our international HIV revenues rose 93% in 2018 compared to the prior year, primarily as a result of the substantial growth in sales of our OraQuick ® HIV Self-Test. +We generated $39.1 million in cash from operations in 2018 (a $10.1 million improvement over 2017) and we ended 2018 with over $200 million in cash on our balance sheet, which we can use for our future growth. +4 +QUESTIONS AND ANSWERS ABOUT THE 2019 ANNUAL MEETING AND VOTING +1. WHY DID I RECEIVE THESE PROXY MATERIALS? +Our Board is furnishing Proxy Materials, including this Proxy Statement, a Proxy Card and the Company’s Annual Report to Stockholders for the year ended December 31, 2018 (the “2018 Annual Report”), to our stockholders in order to solicit proxies to be voted at the Annual Meeting (each, a “Proxy”). Each stockholder can access these documents on the internet in accordance with the rules and regulations of the SEC. On or about April 10, 2019, we mailed a Notice of Internet Availability of Proxy Materials (the “Notice”) to each stockholder at the holder’s address of record, indicating that this Proxy Statement is now available to our stockholders of record entitled to vote at the Annual Meeting. +SEC rules permit us to deliver only one copy of the Notice or a single set of Proxy Materials to multiple stockholders sharing the same address. Upon written or oral request, we will deliver separate Notices and/or copies of our 2018 Annual Report and/or this Proxy Statement to any stockholder at a shared address to which a single copy of the Notice was delivered. Stockholders may notify the +Company of their requests by calling or writing us at OraSure Technologies, Inc., 220 East First Street, Bethlehem, Pennsylvania 18015, Attention: Corporate Secretary; (610) 882-1820. +All stockholders and beneficial holders have the ability to access a copy of our Proxy Materials on the internet at the website referred to in the Notice. Stockholders will not receive printed copies of the Proxy Materials unless they request those copies . The Notice also instructs stockholders as to how to submit a Proxy through the internet. If you would like to receive a paper or e-mail copy of your Proxy Materials, you should follow the instructions for requesting such materials included in the Notice. We will pay the entire cost of preparing, assembling, printing, mailing and distributing these Proxy Materials and soliciting votes. If you choose to access the Proxy Materials and/or vote over the internet, you are responsible for any internet access charges you may incur. +2. WHAT IS A PROXY? +A Proxy is your legal designation of another person to vote the shares of Common Stock you own. That other person is called a “proxy.” If you designate someone as your proxy in a written document, that document also is called a Proxy or a Proxy Card. +Jack E. Jerrett and Michele Miller, each of whom are officers of the Company, have been designated as proxies by the Board of Directors for the Annual Meeting. +3. WHAT IS THE RECORD DATE AND WHAT DOES IT MEAN? +The record date for the Annual Meeting is March 28, 2019 (the “record date”). The record date is established by the Board as required by Delaware law. Only stockholders of record at the close of business on the record date are entitled to: +(a) +receive notice of the Annual Meeting; and +(b) +vote at the meeting and any adjournment(s) or postponement(s) of the meeting. +Each stockholder of record on the record date is entitled to one vote for each share of Common Stock held. On the record date, there were 62,050,806 shares of our Common +Stock outstanding and entitled to vote at the Annual Meeting. +A list of stockholders will be open for examination by any stockholder for any purpose germane to the Annual Meeting for a period of 10 days prior to the meeting at our principal executive offices at 220 East First Street, Bethlehem, PA 18015, and electronically during the Annual Meeting at www.virtualshareholdermeeting.com/OSUR2019 when you enter the control number provided in the Notice sent to you. +5 +4. WHAT IS THE DIFFERENCE BETWEEN A STOCKHOLDER OF RECORD AND A STOCKHOLDER WHO HOLDS STOCK IN STREET NAME? +If your shares of stock are registered in your name on the books and records of our transfer agent, Computershare, Inc., you are a stockholder of record. +If your shares of stock are held for you in the name of your broker, bank or other nominee, your shares are held in street name. The answer to Question 7 describes brokers’ discretionary voting authority and when your broker, bank or +other nominee is permitted to vote your shares of stock without instructions from you. +It is important that you vote your shares if you are a stockholder of record and, if you hold shares in street name, that you provide appropriate voting instructions to your broker, bank or other nominee as discussed in the answer to Question 7. +5. HOW CAN I VOTE MY SHARES FOR THE ANNUAL MEETING? +All stockholders have a choice of voting via the internet, over the telephone or by completing and mailing a paper Proxy Card, as described below. +Voting via the Internet or by Telephone . Stockholders of record desiring to vote online via the internet or by telephone prior to the Annual Meeting, should go to www.proxyvote.com or call the toll free number indicated on the Proxy Card or Notice. You may vote via the internet or by telephone provided you do so by 11:59 p.m. Eastern Time (8:59 p.m. Pacific Time) on May 20, 2019. Stockholders who attend the Annual Meeting via the internet may vote their shares at that time up to and during the Annual Meeting by following the instructions at www.virtualshareholdermeeting.com/OSUR2019 . +Street name holders may vote via the internet or by telephone if their brokers, banks or other nominees make those methods available. If that is the case, each broker, bank or nominee will include instructions with the Notice or Proxy Statement. +The telephone and internet voting procedures, including the use of control numbers, are designed to authenticate your identity, to allow you to give your voting instructions and +to confirm that your instructions have been recorded properly. +If you vote via the internet, you should understand that you will be responsible for any costs associated with this method of voting, such as usage charges from internet access providers and telephone companies. +Voting by Mail . If you desire to vote prior to the Annual Meeting by using a paper Proxy Card instead of by telephone or via the internet, you will need to either print a copy of the Proxy Card from the website indicated in your Notice or follow the instructions in your Notice to request that a paper copy be sent to you. You will then need to complete, sign, date and return the Proxy Card, as described on the Proxy Card. Street name holders should complete and return the voting card provided by their broker, bank or nominee. +Voting at the Annual Meeting . All stockholders of record may vote online during the Annual Meeting, as described above. Submitting a Proxy via the internet, over the telephone or by mail will not affect your right to withdraw your Proxy and vote during the Annual Meeting. +6. HOW WILL MY SHARES BE VOTED IF I SEND IN A PROXY? +If you are represented by a properly executed Proxy, whether delivered by phone, the internet or mail, your shares will be voted in accordance with your instructions. +If you do not provide instructions with your Proxy, your shares will be voted according to the recommendations of our Board as stated on the Proxy. +6 +7. WILL MY SHARES BE VOTED IF I DO NOT PROVIDE MY PROXY? +Stockholders of Record : If you are a stockholder of record, your shares will not be voted if you do not provide your Proxy, unless you vote online during the Annual Meeting. It is, therefore, important that you vote your shares. +Street Name Holders : If your shares are held in street name and you do not provide your signed and dated voting instruction form to your bank, broker or other nominee, your shares may be voted by your broker, bank or other nominee but only under certain circumstances. Specifically, under rules of the NASDAQ Stock Exchange (“NASDAQ”), shares held in the name of your broker, bank or other nominee may be voted by your broker, bank or other nominee on certain “routine” matters if you do not provide voting instructions. +At the upcoming Annual Meeting, only the ratification of the selection of KPMG LLP as the Company’s independent registered public accounting firm is considered a “routine” matter for which brokers, banks or other nominees may vote uninstructed shares. The other proposals to be voted on at our Annual Meeting (specifically, the election of Director nominees and the advisory vote to approve the compensation of the Company’s NEO’s) are not considered “routine” under NASDAQ rules, so the broker, bank or other nominee cannot vote your shares on any of these proposals unless you provide to the broker, bank or other nominee voting instructions for each of these matters. If you do not provide voting instructions on these matters, your shares will not be voted on the matter, which is referred to as a “broker non-vote.” It is, therefore, important that you vote your shares. +8. HOW MANY SHARES MUST BE PRESENT TO HOLD THE ANNUAL MEETING? +Your shares are counted as present at the meeting if you attend the meeting and vote online or if you properly return a Proxy by internet, telephone or mail. In order for us to conduct our Annual Meeting, a majority of our outstanding shares of Common Stock as of the March 28, 2019 record +date, must be present online or by Proxy at the meeting. This is referred to as a quorum. Broker non-votes, votes withheld and abstentions are included in determining whether there are a sufficient number of shares present to constitute a quorum. +9. HOW CAN I REVOKE A PROXY? +You can revoke a Proxy before the completion of voting at the Annual Meeting by: +(a) +Giving written notice to the Corporate Secretary of the Company to revoke your Proxy; or +(b) +Delivering a later-dated Proxy that indicates the change in your vote; or +(c) +Logging on to www.proxyvote.com in the same manner you would to submit your Proxy electronically or calling the telephone number indicated in your Notice, and in each case, following the instructions to revoke or change your vote; or +(d) +Attending the Annual Meeting online and voting, which will automatically cancel any Proxy previously given. Attendance alone will not revoke any Proxy that you have given previously. +If you choose any of the first three methods, you must take the described action no later than 11:59 p.m. Eastern Time (8:59 p.m. Pacific Time) on May 20, 2019. Once voting on a particular matter is completed at the Annual Meeting, you will not be able to revoke your Proxy or change your vote. If your shares are held in street name by a broker or other nominee, you must contact that institution to change or revoke your vote. +10. WHAT ITEMS WILL BE VOTED ON AT THE ANNUAL MEETING? +At the Annual Meeting, action will be taken on the matters set forth in the accompanying Notice and described in this Proxy Statement. The Board knows of no other matters to be presented for action at the Annual Meeting. +If any other matters do properly come before the Annual Meeting, the persons named in the Proxy Card will have discretionary authority to vote on those matters in accordance with their best judgment. +11. WHO WILL PAY THE COST OF THIS PROXY SOLICITATION? +Solicitation of Proxies is made on behalf of the Board. The cost of soliciting Proxies will be borne by the Company. In addition to solicitations by e-proxy and/or by mail, certain of our Directors, officers and regular employees may solicit +Proxies personally or by telephone or other means without additional compensation. +7 +We have also engaged Morrow Sodali LLC, 470 West Ave., Stamford, CT 06902, to provide proxy solicitation services at an estimated fee of $7,500 plus expenses. Arrangements will be made with brokerage firms and other +custodians, nominees and fiduciaries to forward solicitation materials to the beneficial owners of stock held of record by such persons, and we will, upon request, reimburse them for their reasonable expenses in so doing. +12. HOW CAN I PARTICIPATE IN THE ANNUAL MEETING? +This year’s Annual Meeting will be a completely virtual meeting of stockholders, and will be conducted via live webcast on the Internet. You are entitled to participate in the Annual Meeting only if you were a stockholder of the Company as of the close of business on March 28, 2019, the record date for the meeting, or if you hold a valid Proxy for the Annual Meeting. +You will be able to participate in the Annual Meeting online and submit your questions during the meeting by visiting www.virtualshareholdermeeting.com/OSUR2019. +To participate in the Annual Meeting, you will need the control number that is included on your Notice, on our proxy card or on the instructions that accompanied your proxy materials. The Annual Meeting will begin promptly at 10:00 a.m. Eastern Time, and you should allow ample time to complete the online check-in procedures. +13 . WHAT IF I HAVE TECHNICAL DIFFICULTIES OR TROUBLE VIEWING THE VIRTUAL MEETING +We have technicians ready to assist you with any technical difficulties during the virtual Annual Meeting. If you encounter any difficulties accessing the virtual meeting +or during the meeting, please call one of the following numbers: +Domestic: (800) 586-1548 +International: (303) 562-9288 +14. ARE VOTES CONFIDENTIAL? +We will continue our long-standing practice of holding the votes of each stockholder in confidence from Directors, officers and employees, except: (a) as necessary to meet applicable legal requirements and to assert or defend claims for or against the Company; (b) in the case of a contested +proxy solicitation; (c) if a stockholder makes a written comment on the Proxy Card or otherwise communicates his or her vote to the Company; or (d) as needed to allow the independent inspectors of election to certify the results of the vote. +15. WHO COUNTS THE VOTES? +We will continue, as we have for many years, to retain an independent inspector of election to receive and tabulate +the Proxies and certify the results. These activities will be handled electronically. +16. MAY STOCKHOLDERS ASK QUESTIONS AT THE ANNUAL MEETING? +Yes. The Chairman of the Board will answer stockholders’ written questions submitted during the question and answer period of the meeting. Stockholders should confine their questions to matters that relate to the business of the meeting. The Chairman will determine which questions are appropriate to answer during the meeting. +We reserve the right to edit or reject any questions we deem profane or otherwise inappropriate. Detailed +guidelines for submitting written questions during the meeting are available at www.virtualshareholdermeeting.com/OSUR2019 . +8 +STOCK OWNERSHIP OF CERTAIN BEN EFICIAL OWNERS AND MANAGEMENT +The following table sets forth information, as of March 28, 2019, regarding the beneficial ownership of the Company’s Common Stock by (a) each person who is known by us to be the beneficial owner of more than five percent of the Common Stock outstanding; (b) each Director and nominee for election as Director; (c) each of our executive officers named in the Summary Compensation Table in this Proxy Statement (except for Messrs. Michels and Spair who have retired from the Company); and (d) all of our Directors and executive officers as a group. Unless otherwise indicated, the address of each person identified below is c/o OraSure Technologies, Inc., 220 East First Street, Bethlehem, Pennsylvania 18015. +Pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), shares of Common Stock which a person has a right to acquire pursuant to the exercise of stock options held by that person that are exercisable within 60 days of March 28, 2019 are deemed to be outstanding for the purpose of computing the ownership percentage of that person, but are not deemed outstanding for computing the ownership percentage of any other person. +Name and Address of +Beneficial Owner +Amount and Nature of +the Beneficial Ownership 1,2 +Percent +of Class +Black Rock, Inc. 3 +40 East 52 nd Street +New York, NY 10022 +8,902,252 +14.4% +Renaissance Technologies, LLC 4 +800 Third Avenue +New York, NY 10022 +4,149,803 +6.7% +The Vanguard Group 5 +100 Vanguard Blvd. +Malvern, PA 19355 +3,836,377 +6.2% +Alger Associates, Inc. 6 +360 Park Avenue South +New York, NY 10010 +3,407,426 +5.5% +Anthony Zezzo II +304,943 +* +Stephen S. Tang, Ph.D. +135,627 +* +Jack E. Jerrett +101,942 +* +Michael Celano +68,978 +* +Eamonn P. Hobbs +59,471 +* +Charles W. Patrick +54,298 +* +Mara Aspinall +49,477 +* +Roberto Cuca +38,934 +* +Brian Smith +34,940 +* +Aradhana Sarin, M.D. +31,144 +* +Ronny B. Lancaster +10,520 +* +All Directors and executive officers as a group +(14 people) +1,041,903 +1.7% +* +Less than 1% +1 +Subject to community property laws where applicable, beneficial ownership consists of sole voting and investment power except as otherwise indicated. +2 +Includes shares subject to options exercisable within 60 days of March 28, 2019, as follows: Mr. Zezzo, 121,333 shares; Dr. Tang, 16,667 shares; Mr. Jerrett, 20,057 shares; Mr. Celano, 21,666 shares; Mr. Hobbs, 40,000 shares; Ms. Aspinall, 38,333 shares; Mr. Smith, 9,850 shares; and Dr. Sarin, 25,000 shares; and all Directors and executive officers as a group, 321,194 shares. Also includes unvested RS, as follows: Mr. Zezzo, 33,502 shares; Dr. Tang, 84,988 shares; Mr. Jerrett, 29,344 shares; Mr. Celano, 7,762 shares; Mr. Hobbs, 6,144 shares; Mr. Patrick, 6,144 shares; Ms. Aspinall, 6,144 shares; Mr. Cuca, 38,934 shares; Mr. Smith, 33,078 shares; Dr. Sarin, 6,144 shares; and Mr. Lancaster, 6,144 shares; and all Directors and executive officers as a group, 305,951 shares. Does not include unvested PRUs. +3 +Based on information contained in a Schedule 13G/A filed January 31, 2019. The filing person has sole voting power with respect to 8,771,335 shares and sole dispositive power with respect to 8,902,252 shares. +4 +Based on information contained in a Schedule 13G/A filed February 13, 2019. The filing persons have sole voting power with respect to 3,980,887 shares, sole dispositive power with respect to 3,985,171 shares and shared dispositive power with respect to 164,632 shares. +5 Based on information contained in a schedule 13G/A filed February 11, 2019. The filing person has sole voting power with respect to 120,352 shares, shared voting power with respect to 4,900 shares, sole dispositive power with respect to 3,715,825 shares and shared dispositive power with respect to 120,552 shares. +6 +Based on information contained in a Schedule 13G filed February 14, 2019. The filing persons have sole voting and dispositive power with respect to the indicated shares. +9 +CORPORATE GOVERNANCE +BOARD RESPONSIBILITIES, OPERATION AND COMPOSITION +The primary responsibility of the Board of Directors is to promote the long-term success of the Company. In fulfilling this role, each Director must exhibit good faith business judgment as to what is in the best interests of the Company. The Board is responsible for establishing broad corporate policies, setting strategic direction and overseeing management. The Company’s management is responsible for the day-to-day operations of the Company. +The Board is divided into three classes with each class consisting of one-third of the total number of Directors on the Board. At each Annual Meeting of Stockholders, the nominees for the class of Directors whose term is expiring at that annual meeting are elected for a three-year term. A Director holds office until the Annual Meeting of Stockholders for the year in which his or her term expires or until his or her successor is elected and duly qualified, subject to prior death, resignation, retirement, disqualification or removal. Each nominee for election at the Annual Meeting currently serves as a Director. +The Board typically holds regular meetings in February, May, August and November of each year, with special meetings held as needed. The Board’s organizational meeting follows the Annual Meeting of Stockholders. The Board meets in executive session at all regularly scheduled meetings. The Board held 12 meetings and acted by written consent on five (5) occasions during the fiscal year ended December 31, 2018. Each member of the board attended more than 75 percent of the combined total of meetings of the Board and of the Committees of the Board on which such member served during the period in the year in which he or she served as a Director. +The Board holds four regularly scheduled meetings each year and special meetings as needed. Directors attended greater than 75% of all Board and Committee meetings during 2018. +GOVERNANCE GUIDELINES AND CODE OF CONDUCT +The Board has adopted Corporate Governance Principles which, along with the Charters for each of its Committees and the Company’s Code of Business Conduct and Ethics, provide a framework for the governance of the Company. The Company’s Corporate Governance Principles address matters such as the responsibilities and composition of the Board, Director independence and the conduct of Board and Committee meetings. The Company’s Code of Business Conduct and Ethics sets forth guiding principles of business ethics and certain legal requirements applicable to all Company employees and non-employee Directors. Copies of the current Corporate Governance Principles and Code of Business Conduct and Ethics are available on the Company’s website, www.orasure.com . +We operate under a Code of Business Conduct and Ethics and Corporate Governance Principles, which apply to all employees and non-employee Board members. +INDEPENDENT BOARD CHAIRMAN +The positions of Chairman of the Board and CEO of the Company are held by different individuals, with the Chairman being independent of management. +Currently, the Company’s Chief Executive Officer does not hold the position of Chairman of the Board as the Company believes it is appropriate for the Board to be led by an individual who is independent of management. Stephen S. Tang, Ph.D., became the Company’s new President and CEO on April 1, 2018 following the retirement of Douglas A. Michels on March 31, 2018. Prior to that time, Dr. Tang served as Chairman of the Board. Concurrently with his new appointment, Dr. Tang resigned as Chairman of the Board and Michael Celano, who has been a Director since 2006, became our new Board Chairman. +10 +The Board has carefully considered its leadership structure and believes at this time that the Company and its stockholders are best served by having the positions of Chairman and Chief Executive Officer filled by different individuals. This allows the Chief Executive Officer to, among other things, focus on the Company’s day-to-day business, while allowing the Chairman to lead the Board in its fundamental role of providing strategic advice and oversight of management. In the future, however, the Board may reconsider whether its Chief Executive Officer should also serve as Board Chairman or may elect to rotate the position of Board Chairman to other independent Directors. +DIRECTOR INDEPENDENCE +Our Corporate Governance Guidelines require, among other things, that a majority of the members of the Board meet the independence requirements of the SEC and NASDAQ, on which our Common Stock is listed. Each year our Board, with assistance from the Nominating and Corporate Governance Committee, conducts a review of Director independence. The most recent annual review occurred in the first quarter of 2019, during which the Board considered transactions and relationships, if any, between each Director and any member of such Director’s immediate family +A majority of our Directors are independent as required under applicable SEC and NASDAQ rules. All standing Board Committees consist of independent Directors. +and the Company. As a result of this review, the Board determined that Mara Aspinall, Michael Celano, Eamonn P. Hobbs, Ronny B. Lancaster, Charles W. Patrick and Aradhana Sarin, M.D., are “independent,” as that term is defined in the applicable rules of NASDAQ and the SEC. Stephen S. Tang, Ph.D., was determined by the Board not to be independent because he is currently an executive officer employed by the Company. Based on the foregoing, the Board of Directors is comprised of a majority of independent Directors. All standing Committees of the Board are also comprised solely of independent Directors. +OVERSIGHT OF RISK MANAGEMENT +As part of its oversight of the Company’s operations, the Board and Audit Committee monitor the management of risks by the Company’s executives. The Audit Committee reviews the risks that the Company may face and receives reports from senior management on the nature of these risks and the procedures and processes in place to manage and mitigate such risks. Substantive areas of risk reviewed by the Audit Committee include financial, legal, regulatory, operational, information technology, cybersecurity and employment matters. The Audit Committee provides a report to the full Board on the matters covered during each of its meetings, including +The Board and Audit Committee monitor the major risks facing the Company and the procedures and processes implemented by management to mitigate those risks. +its risk monitoring activities. In addition, senior management provides periodic reports to the full Board on the major risks facing the Company and the processes and procedures in place to manage such risks. Management also conducts a risk assessment of the Company’s compensation policies and practices, including its executive compensation program, as described in greater detail in the Section of this Proxy Statement entitled, “Compensation Committee Matters.” +ANNUAL MEETING ATTENDANCE AND STOCKHOLDER COMMUNICATIONS +The Board has approved a policy concerning Board members’ attendance at our Annual Meeting of Stockholders and a process for security holders to send communications to members of the Board. A description of the Board’s policy on annual meeting attendance is provided on our website, at www.orasure.com . As a general matter, each Board member is required to attend each Annual Meeting of Stockholders. Our 2018 Annual Meeting was attended by all members of the Board. +Security holders may communicate with the Board by sending their communications to OraSure Technologies, Inc., 220 East First Street, Bethlehem, Pennsylvania 18015, Attention: Corporate Secretary, fax: (610) 882-2275, email: corporatesecretary@orasure.com . +All Board members are required to attend each Annual Meeting of Stockholders. The entire Board attended the 2018 Annual Meeting. +11 +COMMITTEES OF THE BOARD +The Board currently has three standing committees - the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee. Members of these committees are each “independent,” as defined in the Exchange Act and NASDAQ rules applicable to such Committees. In addition, the Board has determined that Michael Celano is an “audit committee financial expert,” as that term is defined by applicable rules of the SEC. Each committee operates pursuant to a written charter, copies of which are available on our website, at www.orasure.com . Additional information on each standing committee is provided below: +AUDIT COMMITTEE +Committee Members:* +Responsibilities: +• Oversees accounting and financial reporting process, internal controls and audits. +• Consults with management and the Company’s independent registered public accounting firm on, among other items, matters related to the annual audits, the published financial statements and the accounting principles applied. +• Appoints, evaluates and retains our independent registered public accounting firm. +• Responsible for the compensation, termination and oversight of our independent registered public accounting firm. +• Evaluates the independent registered public accounting firm’s qualifications, performance and independence. +• Approves all services provided by the independent registered public accounting firm. +• Monitors the Company’s major risk exposures and reviews risk assessment and mitigation policies. +• Maintains procedures for the receipt, retention and treatment, on a confidential basis, of complaints received by the Company regarding accounting, internal accounting controls or auditing matters, and the confidential, anonymous submissions by employees of concerns regarding questionable accounting or auditing matters. +Aradhana Sarin, M.D. +(C, I) +Mara G. Aspinall +(I) +Michael Celano +( , I) +Charles W. Patrick. +(I) +Number of Meetings during +fiscal 2018: 9 +C – Committee Chair +– Determined by the Board to be an audit committee financial expert as defined under applicable SEC Rules. +I – Determined by the Board to be independent under applicable SEC and NASDAQ rules. +*- Eamonn P. Hobbs served on the Audit Committee during 2018. In February 2019, Mr. Hobbs left the Audit Committee and joined the Nominating and Corporate Governance Committee, where he currently serves as Chairman. +12 +COMPENSATION COMMITTEE +Committee Members: +Responsibilities: +• Oversees compensation for executives and non-employee Directors. +• Reviews and recommends to the Board for approval the performance criteria and goals and objectives for CEO compensation. +• In consultation with other independent non-employee Directors, evaluates the CEO’s annual performance. +• Evaluates and recommends to the Board for approval the CEO’s compensation. +• In consultation with the CEO, reviews and approves the compensation of other executive officers. +• Establishes performance measures and goals and evaluates the attainment of such goals under performance-based incentive compensation plans. +• Reviews compensation and benefits issues. +• Reviews and recommends for Board approval, the terms of any employment or retirement agreements between the Company and each executive officer. +• Periodically reviews and administers the Company’s Compensation Recoupment Policy for executive officers and non-employee Directors. +• Reviews compliance with the Company’s Stock Ownership Guidelines. +Ronny B. Lancaster +(C, I) +Mara G. Aspinall +(I) +Michael Celano +(I) +Eamonn P. Hobbs +(I) +Number of Meetings during +fiscal 2018: 7 +NOMINATING AND CORPORATE GOVERNANCE COMMITTEE +Committee Members: +Responsibilities: +• Identifies, evaluates and recommends candidates for nomination or re-election to the Board. +• Reviewsand makes recommendations to the Board on the range of skills, qualifications and expertise required for service as a Director. +• Reviewsand recommends for Board approval the appropriate structure of the Board. +• Reviews and recommends for Board approval the appropriate structure of Board committees, and recommends committee assignments and candidates for the position of Chairman of each committee. +• Develops and recommends for Board approval a set of Corporate Governance Guidelines and a Code of Business Conduct and Ethics, and procedures for the implementation thereof. +• Periodically reviews and recommends for Board approval the Board’s leadership structure, including whether the same person should serve as both CEO and Chairman of the Board. +• Assists in the development of succession plans for the Company’s CEO and other executives. +• Assists the Board in evaluating the independence of individual Directors for purposes of Board and committee service. +• Develops and implements an annual self-evaluation process for the Board and its committees +Eamonn P. Hobbs* +(C, I) +Ronny B. Lancaster +(I) +Charles W. Patrick +(I) +Aradhana Sarin, M.D. +(I) +Number of Meetings during +fiscal 2018: 4 +C – Committee Chair +– Determined by the Board to be an audit committee financial expert as defined under applicable SEC Rules. +I – Determined by the Board to be independent under applicable SEC and NASDAQ rules. +* – Mr. Hobbs joined the Nominating and Corporate Governance Committee and was appointed as Chairman of the Committee in February 2019. +13 +NOMINATION OF DIRECTORS +Our Bylaws provide that nominations for election to the Board may be made by the Board or by any stockholder entitled to vote for the election of Directors at the Annual Meeting. A stockholder’s notice of nomination must be made in writing to the Company’s Corporate Secretary and must be delivered to or received at our principal executive offices not less than ninety (90) days nor more than one hundred twenty (120) days prior to the meeting. However, in the event that less than one hundred +Stockholders can nominate individuals to serve on the Board by following the procedures described in the Company’s Bylaws. +(100) days’ notice or prior public disclosure of the date of the meeting is given or made to stockholders, in order for notice by the stockholder to be timely, notice must be received no later than the close of business on the tenth (10 th ) day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made, whichever first occurs. The notice to the Corporate Secretary must set forth, with respect to the nominee, the name, age, business address, residence address, principal occupation or employment of the person, the class and number of shares of capital stock of the Company which are beneficially owned by the person, and any other information relating to the person that is required to be disclosed in solicitations for proxies for election of Directors pursuant to Regulation 14A under the Exchange Act. The notice must also include, as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination is made: (i) the name and address of the stockholder and such beneficial owner; (ii) the class and number of shares of capital stock of the Company which are held of record or beneficially owned by such stockholder and such beneficial owner and any other direct or indirect pecuniary or economic interest in any capital stock of the Company of such stockholder and beneficial owner, including without limitation, any derivative instrument, swap, option, warrant, short interest, hedge, profit sharing arrangement or borrowed or loaned shares; (iii) a description of any arrangements or understandings between such stockholder and beneficial owner and each proposed nominee and any other person (including their names) pursuant to which the nomination(s) are to be made by such stockholder and such beneficial owner or with respect to actions to be proposed or taken by such nominee if elected as a Director; (iv) a representation that such stockholder intends to appear in person or by proxy at the meeting to nominate the persons named in its notice; and (v) any other information relating to such stockholder and such beneficial owner that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of Directors, or may otherwise be required pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder. We may also require any proposed nominee to furnish such other information as we may reasonably require to determine the eligibility of the proposed nominee to serve as a Director of the Company. +The Nominating and Corporate Governance Committee may also consult with outside advisors or retain search firms to assist in the search for qualified candidates. Candidates recommended by stockholders will be considered by the Nominating and Corporate Governance Committee in the same manner as candidates recommended by other sources, but only if the stockholder makes a recommendation in accordance with the advance notification provisions set forth in the Company’s Bylaws. +In response to feedback from our stockholders, in February 2018 the Board approved a majority voting standard for uncontested elections of Directors. +During the past several years, our stockholders have indicated a desire for us to adopt a majority voting standard for the election of Directors. Our Board regularly reviews governance matters and majority voting is a governance practice that the Board had been considering for some time. In February 2018, the Board approved an amendment to our Bylaws adopting a majority voting standard for uncontested elections of Directors. Following this amendment, a plurality voting standard will remain in place for contested elections of Directors. The adoption of a majority voting standard is, in the Board’s view, an appropriate corporate governance practice that is responsive to the express input we have received from our stockholders. +14 +DIRECTOR QUALIFICATIONS +The Board considers diversity, including personal factor such as race and gender, and other relevant factors in evaluating Director candidates. In determining whether incumbent Directors will be nominated for re-election, we evaluate the individual’s background, experience and prior service as a Director. +Although there is no formal policy governing Board diversity, the Nominating and Corporate Governance Committee considers diversity as one of many factors in identifying new candidates for the Board. Such diversity includes personal characteristics such as race and gender as well as diversity in background and skills and experience that relate to our Board’s performance of its responsibilities. The Nominating and Corporate Governance Committee does not assign specific weight to any particular criteria when reviewing candidates and may not apply the same criteria to all prospective nominees. +INSIDER TRADING +Our Insider Trading Policy prohibits trading by Directors, executive officers or employees who are in possession of material nonpublic information about the Company. +We have a policy designed to prevent any trading in the Company’s Common Stock or other securities by Directors, executive officers and all other employees of the Company and its affiliates while such person is in possession of material nonpublic information. The policy prohibits trading in the Company’s securities on the basis of material nonpublic information, requires preapproval of transactions in Company securities for Directors, executive officers and all other employees and establishes regular trading windows after each calendar quarter following the Company’s announcement of its quarterly financial results. +PROHIBITION AGAINST SHORT SALES, HEDGING AND PLEDGING +We believe it is inappropriate for any employee of the Company or its affiliates or any member of the Board to engage in short-term or speculative transactions involving Company securities, including entering into financial instruments or engaging in other transactions that hedge or offset, or that are designed to hedge or offset, any decrease in the market value of our Common Stock. As a result, our insider trading policy prohibits Directors, executive officers and all other employees from entering into transactions involving our Common Stock, such as short sales, the buying or selling of puts or calls, the purchase of securities on margin, prepaid variable forward contracts, equity swaps, collars, exchange funds and other similar financial instruments. Our policy also prohibits employees and Directors from pledging shares of our Common Stock as collateral. +We have implemented several governance policies related to our Common Stock. Our policies prohibit short-term, speculative transactions in our stock, such as hedging, pledging and short sales. +STOCK OWNERSHIP AND RETENTION GUIDELINES +We have implemented stock ownership and retention guidelines for our CEO, other executives and members of the Board. +The Board has adopted stock ownership and retention guidelines applicable to the Company’s President and CEO, our CFO and all other executive officers and all non-employee members of the Board. Under these guidelines, the covered individuals must meet the following ownership requirements, expressed either as a multiple of base salary (in the case of Company officers) or annual cash fees (in the case of Board members): +Covered Individual +Multiple of Base Salary +or Director Fees +President and Chief Executive Officer +6x +Chief Financial Officer +2x +Other Executive Officers +1x +Non-Employee Directors +1x +15 +Any individual who was covered by the guidelines at the time of adoption or who becomes subject to the guidelines following adoption is required to meet the guidelines within five years. Any individual already subject to the guidelines who becomes subject to a higher ownership requirement, due to a promotion, a further amendment to the guidelines or an increase in compensation, is required to meet the new ownership requirement within five years following the effective date of promotion, change in compensation or guideline amendment. In determining whether an individual meets the required ownership requirement, shares owned directly or indirectly, restricted stock (including both time and performance vested) and shares deferred under our deferred compensation plan will be counted. Compliance will be determined as of December 31 of each fiscal year. The guidelines also require each covered individual to retain at least 50% of the net shares acquired upon the exercise of stock options and the vesting of restricted stock until the individual’s holdings of Common Stock equal or exceed the applicable ownership requirement. As of December 31, 2018, all covered officers and non-employee Directors were in compliance with the stock ownership guidelines. +16 +AUDIT COMMITTEE MATTERS +REPORT OF THE AUDIT COMMITTEE FOR THE YEAR ENDED DECEMBER 31, 2018 +The information contained in this report shall not be deemed to be “soliciting material” or “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to liability under that Section. This report shall not be deemed “incorporated by reference” into any document filed under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, whether such filing occurs before or after the date hereof, regardless of any general incorporation language in such filing. +The role of the Audit Committee is to assist the Board of Directors in fulfilling its responsibilities to oversee management’s conduct of the Company’s financial reporting process, including monitoring (1) the participation of management and the outside independent registered public accounting firm in the financial reporting process, (2) the Company’s systems of internal accounting and financial controls, (3) the annual independent audit of the Company’s financial statements and (4) the qualifications, independence and performance of the outside independent registered public accounting firm. The Audit Committee selects the Company’s outside independent registered public accounting firm, and once selected, the outside independent registered public accounting firm reports directly to the Audit Committee. The Audit Committee is responsible for approving both audit and non-audit services to be provided by the outside independent registered public accounting firm. The Audit Committee is composed of five (5) non-employee directors and operates pursuant to a Charter that was last amended and restated by the Board on February 20, 2018 (which can be found on the Company’s website at www.orasure.com ). +Management of the Company is responsible for the preparation, presentation and integrity of the Company’s financial statements, the Company’s accounting and financial reporting principles and internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. The independent registered public accounting firm is responsible for auditing the Company’s financial statements and expressing an opinion as to their conformity with U.S. generally accepted accounting principles. The Audit Committee’s responsibility is to monitor and review these processes. It is not the Audit Committee’s duty or responsibility to conduct auditing or accounting reviews. +In the performance of its oversight function, the Audit Committee has considered and discussed the audited financial statements with management, which included a discussion of not only the quality, but also the acceptability, of the accounting principles, the reasonableness of significant judgments and the clarity of disclosures in the financial statements. The Audit Committee met with the independent registered public accounting firm, with and without management, to discuss the results of their audit and their judgments regarding the Company’s accounting policies. The Audit Committee has also discussed with the independent registered public accounting firm the matters required to be discussed under applicable standards, including those in Public Company Accounting Oversight Board Auditing Standard No. 16, as currently in effect. Finally, the Audit Committee has received the written disclosures and the letter from the independent registered public accounting firm required by applicable requirements of the Public Company Accounting Oversight Board as currently in effect, has considered whether the provision of non-audit services by the independent registered public accounting firm to the Company is compatible with maintaining the firm’s independence and has discussed with the independent registered public accounting firm the firm’s independence. +Based upon the reports and discussions described in this report, and subject to the limitations on the role and responsibilities of the Audit Committee referred to above and in the Audit Committee’s Charter, the Audit Committee recommended to the Board that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 for filing with the SEC and selected KPMG LLP as the independent registered public accounting firm for fiscal year 2019. The Board is recommending that stockholders ratify that selection at the Annual Meeting. +Submitted by the Audit Committee of the Company’s Board of Directors: +Aradhana Sarin, M.D., Chairman +Mara G. Aspinall +Michael Celano +Charles W. Patrick +February 25, 2019 +17 +AUDIT FEES; AUDIT RELATED FEES; TAX FEES; ALL OTHER FEES +The following table presents fees for professional audit services rendered by KPMG LLP (i) for the audits of our annual consolidated financial statements and review of the financial statements in our Quarterly Reports on Form 10-Q for the fiscal years ended December 31, 2018 and 2017, and (ii) for the audits of our internal control over financial reporting as of December 31, 2018 and 2017. The following table also includes fees billed for other services rendered by KPMG: +2018 +2017 +Audit fees 1 +$749,000 +$727,750 +Audit-related fees 2 +$217,335 +$22,250 +Tax fees 3 +$272,224 +$150,212 +All other fees 4 +- +$45,140 +Total fees +$1,238,559 +$945,352 +1 +Includes fees related to the audits of our consolidated annual financial statements, interim reviews of our quarterly financial statements and audits of our internal control over financial reporting for each indicated year. +2 +Includes fees for (i) preparation of a written consent for a Universal Shelf Registration Statement on Form S-3 and consulting on two acquisitions in 2018 and (ii) preparation of a written consent for a Registration Statement on Form S-8 and consulting on miscellaneous accounting matters in 2017. +3 +During the fiscal years ended December 31, 2018 and 2017, KPMG was engaged to provide tax compliance, planning and consulting services. +4 +Includes fees related to consulting on proposed executive retirement packages during 2017. +PRE-APPROVAL PROCEDURES +The Audit Committee has adopted a general practice of pre-approving all audit and non-audit services provided to the Company by our independent registered public accounting firm. The Chairman of the Audit Committee has been delegated the authority to pre-approve audit and non-audit services having an aggregate value of up to $25,000 between meetings of the Audit Committee, provided that such pre-approval is communicated to the Audit Committee at its next scheduled meeting. All services by KPMG in 2018 and 2017 were approved in accordance with these practices. +COMPENSATION COMMITTEE MATTERS +The Compensation Committee assists the Board in developing and managing the compensation provided to executive officers of the Company and non-employee members of the Board. The Compensation Committee is responsible for developing and overseeing the implementation of the Company’s compensation philosophy and for setting executive compensation at levels that are sufficiently competitive so that the Company can attract, retain, motivate and reward high quality executives who can contribute to the Company’s success. +COMPENSATION PROCESS AND PROCEDURES +Compensation for executives is established by the Compensation Committee in accordance with the compensation philosophy established under its charter as set forth in the CD&A Section of this Proxy Statement. In setting executive compensation, the Compensation Committee considers the Company’s and each executive’s performance against previously established objectives, internal pay equity, the compensation practices of the Company’s peer group (set forth in the CD&A) (“Peer Group”), the Company’s industry position and general industry compensation data. The Compensation Committee periodically retains independent compensation consultants to review our executive compensation practices and to assist in establishing competitive compensation levels for our executives. +ANNUAL PERFORMANCE EVALUATIONS +On an annual basis, the Compensation Committee and other non-employee Directors evaluate the performance of the CEO and, while Mr. Spair was with the Company, the CFO/Chief Operating Officer (“COO”) (prior to Mr. Spair’s retirement), based on the overall performance of the Company. The CEO also evaluates the performance of the other NEOs (including the CFO following Mr. Spair’s retirement) against their respective predetermined performance objectives. Annual performance objectives for the NEOs are established at the beginning of the applicable year and generally include two parts: (1) the Company’s overall target financial objectives, and (2) individual objectives in the functional areas for which the executive is responsible. For each NEO, these objectives are then weighted to reflect their relative importance to the Company and the executive’s functional responsibilities. +18 +Depending on the Company’s overall performance and the extent to which an executive achieves his or her individual objectives for a particular year, the executive will be rated as “Does Not Meet,” “Does Not Consistently Meet,” “Meets Expectations,” “Exceeds Expectations” or “Outstanding.” On occasion, a blended rating such as “Meets/Exceeds” or “High Meets” will be used to indicate performance in between the foregoing performance rating levels. The Compensation Committee uses the performance ratings and other factors to determine base salary adjustments, incentive cash bonuses and long-term incentive equity awards. +The Board and Compensation Committee did not apply specific performance rating levels to Mr. Michels or Mr. Spair when they were employed by the Company, because their performance was based on the overall performance of the Company. In evaluating Dr. Tang’s and Mr. Cuca’s performance for 2018, the Board and Compensation Committee have returned to the practice of using performance ratings in setting compensation for our CEO and CFO, even though Dr. Tang’s performance continues to be based primarily on the Company’s overall performance. +ROLE OF THE COMPENSATION COMMITTEE +The Compensation Committee is comprised of independent non-employee Directors who oversee our executive compensation program. Each year, the Compensation Committee determines or recommends the appropriate level of compensation for all NEOs. As an initial guideline, the Compensation Committee sets the total direct compensation opportunity (base salary, annual incentive bonus target, and long-term incentive equity target) for each of our executive officers within a range around the 50th percentile of comparable medical diagnostics and healthcare companies. The variation of actual pay relative to the market data is dependent on the executive officer’s performance, experience, knowledge, skills, level of responsibility, potential to impact our performance and future success, and the need to retain and motivate strategic talent. +The Compensation Committee generally determines an executive officer’s compensation based upon the objectives of our executive compensation program. The Compensation Committee makes compensation recommendations to the Board for the CEO and approves decisions for the other NEOs after careful review and analysis of appropriate performance information and market compensation data. Compensation for the CEO is approved by the independent members of the Board of Directors. +Beyond determining and recommending specific compensation for the NEOs, the Compensation Committee works with executive management to review and adjust compensation policies and practices to remain consistent with the Company’s values and philosophy, support the recruitment and retention of executive talent, and help the Company achieve its business objectives. The Compensation Committee also determines a market-based level of compensation for non-employee Directors. +ROLE OF THE CEO +The CEO provides performance assessments and recommendations to the Compensation Committee on the total direct compensation for each executive. The CEO’s recommendations are based on his review of each executive’s performance, job responsibilities, importance to our overall business strategy, and our compensation philosophy. Although the CEO’s recommendations are given significant weight, the Compensation Committee retains full discretion when determining compensation. +ROLE OF THE COMPENSATION CONSULTANT +To assist in the review of executive compensation and to obtain information regarding market trends and governance best practices, the Compensation Committee engages independent executive compensation consultants to analyze our executive compensation structure and plan designs, and to assess whether the compensation program is competitive and supports our goal of aligning the interests of our executive officers with those of our stockholders. Such consultants also provide the Compensation Committee with the Peer Group and other market data that is discussed in the CD&A, which the Compensation Committee evaluates when determining compensation for executive officers. In connection with its 2018 year-end compensation decisions, the Compensation Committee engaged Pay Governance LLC (“Pay Governance”) to provide market assessments of the target compensation for our executives, to assist in updating the Peer Group of companies we use for compensation benchmarking purposes and to consult on the preparation of this Proxy Statement. During 2018, Pay Governance also assisted the Compensation Committee in determining market-based compensation terms for the employment agreements entered into with Dr. Tang and Mr. Cuca and the retirement agreements entered into with Mr. Michels and Mr. Spair and has been engaged to provide a market-based assessment of non-employee Director compensation. +19 +The Compensation Committee has the sole authority to approve any independent compensation consultant’s fees and terms of engagement. The Compensation Committee annually reviews its relationship with each consultant to ensure executive compensation consulting independence. The process in 2018 included a review of the services Pay Governance provides, the quality of those services, and the fees associated with the services during the fiscal year as well as consideration of the factors impacting independence that NASDAQ rules require and a review of Pay Governance’s independence policy. The Compensation Committee concluded that there were no conflicts of interest that prevented Pay Governance from serving as an independent consultant to the Compensation Committee on executive compensation matters. +TALLY SHEETS +In determining annual compensation, the Compensation Committee reviews tally sheets for each executive. Tally sheets set forth the dollar amounts of all components of each NEO’s current compensation, including salary, incentive cash bonus, incentive equity awards, potential termination payments and other benefits deemed relevant by the Compensation Committee. These tally sheets allow the Compensation Committee to review how a change in the amount of each compensation component affects each executive’s total compensation and to consider each executive’s compensation in the aggregate. Included in each tally sheet is the estimated amount of severance and other benefits payable to the executive under various termination scenarios. Tally sheets are utilized by the Compensation Committee to establish aggregate compensation for our executives which the Compensation Committee believes to be reasonable. +COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION +Mara G. Aspinall, Michael Celano, Eamonn P. Hobbs and Ronny B. Lancaster each served as members of the Compensation Committee during 2018, with Mr. Lancaster serving as Chairman. None of these Directors has served or is currently serving as an officer or employee of the Company, nor have they engaged in any transactions involving the Company which would require disclosure as a transaction with a related person. There are no Compensation Committee interlocks between the Company and any other entity involving the Company’s or such entity’s executive officers or board members. +COMPENSATION COMMITTEE REPORT +The information contained in this report shall not be deemed to be “soliciting material” or “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that Section. This report shall not be deemed to be “ incorporated by reference” into any document filed under the Securities Act or the Exchange Act, whether such filing occurs before or after the date hereof, regardless of any general incorporation language in such filing. +The Compensation Committee of OraSure Technologies, Inc. has reviewed and discussed with the Company’s management the Section entitled, “Compensation Discussion and Analysis,” contained in this Proxy Statement. Based on that review and discussion, the Compensation Committee recommended to the Company’s Board of Directors that the foregoing Compensation Discussion and Analysis be included in the Company’s 2018 Annual Report on Form 10-K Report and Proxy Statement for the 2019 Annual Meeting of Stockholders. +COMPENSATION COMMITTEE: +Ronny B. Lancaster, Chairman +Mara G. Aspinall +Michael Celano +Eamonn P. Hobbs +April 4, 2019 +20 +EXECUTIVE OFFICERS +The table below provides information about the executive officers of the Company as of March 28, 2019. Officers of the Company hold office at the discretion of the Board. +Name +Age +Position +Stephen S. Tang +58 +President and Chief Executive Officer +Roberto Cuca +51 +Chief Financial Officer +Anthony Zezzo II +65 +Executive Vice President, Business Unit Leader, Infectious Disease +Brian Smith 1 +60 +Vice Chairman and Executive Vice President, Innovation +Kathleen G. Weber 1 +52 +Executive Vice President, Business Unit Leader, Molecular Solutions +Jack E. Jerrett +60 +Senior Vice President, General Counsel and Secretary +Michael Reed, Ph.D. +50 +Senior Vice President, Research and Development and Chief Science Officer +Michele Miller +45 +Vice President, Finance, Controller and Assistant Secretary +_________________ +1 Mr. Smith served as Executive Vice President, Business Unit Leader, Molecular Solutions until January 1, 2019, when he was replaced by Ms. Weber. +Stephen S. Tang, Ph.D., President and Chief Executive Officer +Stephen S. Tang, Ph.D., became a member of the Board in April 2011 and served as the Company’s Chairman until he became the Company’s President and CEO on April 1, 2018. From January 2008 to March 2018, Dr. Tang served as President and Chief Executive Officer of the University City Science Center, an urban research park and business incubator owned by over thirty leading universities, medical schools and health networks in the greater Philadelphia, Pennsylvania area. Prior to his tenure at the University City Science Center, Dr. Tang held senior management and business development positions with several firms in the life sciences industry, including Olympus America, Inc., Millennium Cell Inc. and A.T. Kearney Inc. Dr. Tang holds a B.S. degree in Chemistry from The College of William and Mary, an M.S. and Ph.D. in Chemical Engineering from Lehigh University and an M.B.A. from The Wharton School of Business at the University of Pennsylvania. +Roberto Cuca, Chief Financial Officer +Roberto Cuca joined the Company in May 2018, initially serving as Senior Advisor until his appointment as the Company’s Chief Financial Officer in June 2018. Prior to joining the Company, Mr. Cuca served as Senior Vice President and Chief Financial Officer of Trevena, Inc., a clinical stage biopharmaceutical company, where he led the finance and investor relations functions and worked with senior management to establish and execute overall corporate strategy. Prior to his tenure with Trevana, Mr. Cuca held various leadership positions in the finance organization of Endo Health Solutions Inc., a pharmaceutical company, including Treasurer and Senior Vice President, Finance, where he was responsible for capital raises and cash management, mergers, acquisitions and licensing transactions, tax planning and compliance, and risk management. Before he joined Endo, Mr. Cuca served as the Director, Corporate and Business Development at moksha8 Pharmaceuticals, Inc., an emerging markets-focused pharmaceutical company, and as an equity analyst covering U.S. pharmaceutical companies at J.P. Morgan Chase & Co. Mr. Cuca received an M.B.A. from The Wharton School of the University of Pennsylvania, a Juris Doctor from Cornell Law School, and an A.B. from Princeton University. Mr. Cuca is also a CFA Charterholder. +21 +Anthony Zezzo II, Executive Vice President, Business Unit Leader, Infectious Disease +Mr. Zezzo has been the Company’s Executive Vice President, Business Unit Leader, Infectious Disease since January 2017 and prior to that he served as Executive Vice President, Marketing and Sales since January 2011. From 2004 to December 2010, Mr. Zezzo was Vice President, North American Sales and Marketing at the Ortho-Clinical Diagnostics Division of Johnson & Johnson. Prior to that time, Mr. Zezzo held a series of sales and marketing positions of increasing responsibility within Johnson & Johnson. Mr. Zezzo received his B.A. in Political Science from Grove City College. +Brian Smith, Vice Chairman and Executive Vice President, Innovation +DNA Genotek, Inc. +Brian Smith has been Vice Chairman and Executive Vice President, Innovation since January 1, 2019 with the Company’s subsidiary, DNA Genotek, Inc. (“DNAG”). Prior to that, he served as the Executive Vice President, Business Unit leader, Molecular Solutions at DNAG since August 2017, and served as DNAG’s Vice President of Sales since January 2008. Prior to joining DNAG, Mr. Smith was Director of Sales and Marketing for Telephonetics VIP plc, a UK speech recognition company. Previous positions include Vice President of Marketing at Cloakware Corporation (Ottawa), President of Ponte Communications (California), and executive positions at Entrust Technologies in both North America and Europe. Mr. Smith has a Bachelor of Commerce degree from McGill University with a major in Management Information Systems. +Kathleen G. Weber, Executive Vice President, Business Unit Leader, Molecular Solutions +DNA Genotek, Inc. +Kathleen G. Weber has served as the Executive Vice President, Business Unit Leader, Molecular Solutions at DNAG since January 1, 2019. Prior to that, she served as the Senior Vice President and General Manager, Consumer Products at the Company since November 2012. Prior to her time at OraSure, Ms. Weber has served in executive leadership roles at Pfizer, Johnson and Johnson, and Wyeth. Ms. Weber began her career in the finance industry at Chase Manhattan Bank (now known as JP Morgan Chase). Ms. Weber received a B.S. in business administration from Georgetown University and an M.B.A. from New York University’s Stern School of Business. +Jack E. Jerrett, Senior Vice President, General Counsel and Secretary +Mr. Jerrett has been the Company’s Senior Vice President and General Counsel since February 2003 and served as Vice President and General Counsel since November 2000. He has also served as the Company’s Secretary since February 2001. Prior to joining the Company, Mr. Jerrett worked as an Associate at Morgan, Lewis & Bockius and held positions of increasing legal responsibilities with companies in the transportation and energy industries. Mr. Jerrett received his B.S. in Accounting from Villanova University and his J.D. from the Villanova University School of Law. He is a member of the Pennsylvania Bar and the American and Pennsylvania Bar Associations. +22 +Michael Reed, Ph.D., Senior Vice President of Research and Development and Chief Science Officer +Michael Reed, Ph.D., has been the Company’s Senior Vice President, Research and Development and Chief Science Officer since April 2016. Prior to joining the Company, Dr. Reed spent eight years at Beckman Coulter, a global diagnostics and life sciences company within the Danaher Corporation, serving in a variety of leadership positions including Director of Global Assay and Applications Development for the Beckman Coulter Life Science business and Director of Scientific Affairs for the Cellular Analysis Business Group. Prior to his work at Beckman Coulter, Dr. Reed served as Director of Product Development with Osmetech Molecular Diagnostics (now called GenMark Diagnostics), a molecular diagnostics company. Dr. Reed received a Ph.D. in Biochemistry from the University of Adelaide (Australia) and a BSc. in Biochemistry from The Australian National University (Canberra, Australia). He also conducted post-doctoral research at the Beckman Research Institute at the City of Hope in Duarte, California. +Michele Miller, Vice President, Finance and Controller +Michele Miller has been the Company’s Vice President, Finance and Controller since October 2018 and served as the Company’s Director, Financial Reporting since December 2011 and as Manager, Financial Reporting since August 2007. Prior to joining the Company, Ms. Miller served as Manager, Financial Reporting at Knoll, Inc. and as an accountant with Beard Miller Company and Ernst & Young. Ms. Miller received her B.S. in Accounting from Bloomsburg University and is a licensed Certified Public Accountant, a Chartered Global Management Accountant, and a member of the Pennsylvania and American Institutes of Certified Public Accountants. +TRANSACTIONS WITH RELATED PERSONS +Since January 1, 2018, there have been no transactions with related persons that would require disclosure in this Proxy Statement. The Audit Committee is required to review and approve in advance all transactions with related persons involving the Company. The Audit Committee may approve a related party transaction if the transaction is on terms comparable to those that could be obtained in arms’ length dealings with an unrelated third party. The Audit Committee also reviews any public disclosures of a related party transaction contained in our SEC filings. These responsibilities are described in the Audit Committee’s charter, a copy of which is available on our website at www.orasure.com . +Information regarding employment, severance and retirement agreements between our executive officers and the Company is set forth in the Section entitled, “Employment Agreements and Potential Payments Upon Termination or Change of Control,” in this Proxy Statement. +SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE +Section 16(a) of the Exchange Act requires that our executive officers, Directors and persons who own more than ten percent of our Common Stock (collectively, “Reporting Persons”) file reports of ownership and changes in ownership with the SEC. Reporting Persons are required by the SEC’s regulations to furnish us with copies of all Section 16(a) forms they file. +As a matter of practice, our administrative staff assists each of the Reporting Persons who are employees and Directors of the Company in preparing initial reports of ownership and reports of changes in beneficial ownership and filing such reports with the SEC and the NASDAQ. Based solely on a review of the copies of forms filed by or on behalf of the Reporting Persons and on written representations (if any) from each of the Reporting Persons, we believe that all Reporting Persons complied on a timely basis with all applicable filing requirements with respect to the 2018 fiscal year. +23 +Compensation Discussion and Analysis - Table of Contents +EXECUTIVE SUMMARY +25 +Overview +25 +Our Performance in 2018 +25 +2018 Business Highlights in Detail +26 +2018 NEO Compensation At a Glance +27 +Pay for Performance +28 +Compensation Governance Practices +29 +Realizable Pay vs. TSR +30 +Realizable Pay vs. SCT Compensation +31 +Pay vs. Other Company Measures of Performance +32 +Say-on-Pay Results in 2018 and the Company’s Response +32 +Compensation Risk Assessment +33 +COMPENSATION PHILOSOPHY +33 +BENCHMARKING +33 +2018 EXECUTIVE COMPENSATION COMPONENTS +35 +Overview +35 +Pay Mix +35 +Compensation Components in Detail +36 +OTHER COMPENSATION +46 +Retirement Programs +46 +Perquisites and Other Compensation +47 +Potential Payments Upon Termination or Change of Control Pursuant to Employment Agreements +47 +Accounting and Tax Treatment of Compensation +47 +Compensation Recoupment Policy +47 +CEO PAY RATIO +47 +Compensation Tables – Table of Contents +Summary Compensation Table +49 +Grants of Plan-Based Awards +50 +Outstanding Equity Awards at December 31, 2018 +51 +Option Exercises and Stock Vested +53 +Retirement Benefits +54 +Nonqualified Deferred Compensation +54 +24 +COMPENSATION DISCUSSION AND ANALYSIS +EXECUTIVE SUMMARY +Overview +This Compensation Discussion and Analysis, or CD&A, describes the material elements of the compensation of our NEOs and describes the objectives and principles underlying the Company’s executive compensation program, the compensation decisions we have recently made under this program and the factors we considered in making these decisions. +Our NEOs for 2018 who are covered in this CD&A include: +Name +Position during 2018 +Stephen S. Tang, Ph.D. +President and Chief Executive Officer +Roberto Cuca +Chief Financial Officer +Anthony Zezzo, II +Executive Vice President, Business Unit Leader, Infectious Disease +Brian Smith 1 +Vice Chairman and Executive Vice President, Innovation +Jack E. Jerrett +Senior Vice President, General Counsel and Secretary +Douglas A. Michels +Former President and Chief Executive Officer +Ronald H. Spair +Former Chief Financial Officer and Chief Operating Officer +_________________ +1 Mr. Smith served as Executive Vice President, Business Unit Leader, Molecular Solutions during 2018 and assumed his current position on January 1, 2019. +Our Performance in 2018 +We reported another strong year of financial performance in 2018, with record revenues and a fourth consecutive year of profitability. The following charts describe our consolidated financial performance during the last three fiscal years, expressed in dollars (thousands). +25 +__________ +1 2017 operating income includes a $12.5 million gain related to +a litigation settlement. 2018 operating income includes $9.6 million +in executive transition costs and $1.2 million in transaction costs +associated with two recent acquisitions. +2018 was another year of record revenues for the Company and was the fourth consecutive year of profitability. Our 2018 consolidated net revenues were $181.7 million, a 9% increase over 2017, reflecting strong contributions from our molecular collections systems and OraQuick ® HIV Self-Test businesses. Our consolidated net income in 2018 was $20.4 million, or $0.33 per share. +2018 Business Highlights in Detail +Business highlights from 2018 and the principal factors driving our financial performance are summarized below: +• We successfully completed a transition in senior leadership in 2018, as Stephen S. Tang, Ph.D. became our new President and CEO and Roberto Cuca became our new CFO. +• We updated the long-term strategy for our business focusing on innovation and growth. +● We completed due diligence and negotiated the terms for two strategic acquisitions - CoreBiome, Inc. and Novosanis NV - with the transactions closing in early January 2019. +• Consolidated net revenues for 2018 were $181.7 million (a 9% increase over 2017), a new record level for our Company. +• Consolidated net product revenues increased 2% to $165.4 million in 2018. +• We reported a fourth consecutive year of profitability with consolidated net income of $20.4 million for 2018, or $0.33 per share on a fully-diluted basis. This bottom line performance was achieved despite costs of $9.6 million ($0.15 per share) incurred in connection with the Company’s transition to a new CEO and CFO and $1.2 million ($0.02 per share) in transaction costs associated with the two strategic acquisitions. +• We generated $39.1 million in cash from operations during 2018, compared to $28.2 million in 2017. +• Aggregate cash and cash equivalents exceeded $200 million at year-end. +• Net molecular collection systems revenues (including royalty income) were $96.1 million in 2018, a 28% increase over 2017. +• International sales of our OraQuick ® HIV products grew 93% in 2018, largely due to strong demand for our OraQuick ® HIV Self-Test. +26 +2018 N EO Compensation At a Glance +NEO compensation for 2018 was as follows: +• +Base Salary : The base salaries paid to our management (including the NEOs) during 2018 increased from 2017 by 3.0% on average. Salary adjustments were based on the performance of each executive and the Company during 2017 (other than for Messrs. Michels and Spair, who were evaluated based on the Company’s overall performance), the marketplace compensation data provided to the Compensation Committee by its compensation consultant at the time, and our Company-wide salary merit increase budget of 3.0%. Generally, an executive’s annual salary adjustment will tend to be at the higher end of the range budgeted by the Company if the executive receives a performance rating of “Meets Expectations” or better and such executive’s pre-adjustment salary level is below the 50 th percentile for his or her position as reflected in marketplace and Peer Group compensation data. +Dr. Tang and Mr. Cuca joined the Company during 2018 and their initial base salaries were determined based on marketplace compensation data provided to the Compensation Committee by its compensation consultant and an assessment of Dr. Tang’s and Mr. Cuca’s respective experience levels and ability to contribute to the Company’s future performance and success. Additional detail on these salaries is provided in the “2018 Base Salaries” Section, below. +NEO +2017 Performance Rating +2017 Salary +2018 Salary +Change (%) +Stephen S. Tang, Ph.D. 1 +N/A +N/A +$ +412,855 +N/A +Roberto Cuca 1 +N/A +N/A +$ +263,365 +N/A +Anthony Zezzo II +Meets +$ +400,503 +$ +408,512 +2.00% +Brian Smith 2 +Outstanding +$ +278,264 +$ +334,000 +N/A +Jack E. Jerrett +Meets/Exceeds +$ +360,953 +$ +369,977 +2.50% +Douglas A. Michels +N/A 3 +$ +634,020 +$ +659,381 +4.00% +Ronald H. Spair +N/A 3 +$ +497,053 +$ +516,935 +4.00% +-------------------------------- ---- +1 Dr. Tang became the Company’s President and CEO on April 1, 2018, replacing Mr. Michels who retired on March 31, 2018. Mr. Cuca joined the Company in May 2018 and became CFO on June 8, 2018, replacing Mr. Spair who retired on the same date. The indicated amounts represent the amount of salary paid to Dr. Tang and Mr. Cuca for their service in 2018. The full-year 2018 annualized salaries for Dr. Tang and Mr. Cuca were $565,000 and $415,000, respectively. +2 Mr. Smith’s 2017 Canadian-based salary has been converted into U.S. dollars using the Canadian to U.S Dollar exchange rate at December 31, 2017. Mr. Smith received a 6% base salary increase in 2018 and, as a result, his initial salary for 2018 was $300,622. In August 2018, Mr. Smith’s salary was increased to $334,000 to bring his compensation in line with market levels. Mr. Smith’s Canadian-based salary amounts for 2018 have been converted into U.S. dollars using the Canadian to U.S. dollar exchange rate at the time of the increases. +3 The Board and Compensation Committee evaluated the performance of Mr. Michels and Mr. Spair in 2017 based on the Company’s overall performance and, as a result, did not apply performance ratings for these executives. +• +Annual Incentive Bonuses : Incentive cash bonus awards for 2018 performance ranged from 142% to 184% of target for the NEOs, except for Messrs. Michels and Spair who received bonuses at their target amounts pro-rated to reflect the portions of the year that they worked for the Company prior to their respective retirement dates. The bonus amounts exceeded the applicable targets for the other NEOs primarily due to the financial performance of the Company, as described under the “2018 Business Highlights in Detail” Section, above, and the individual performance of the executives. Bonus payments above target were approved because of the Board’s belief that continuing annual financial improvement, the successful leadership transition, the strategy update and the strategic acquisitions negotiated in 2018, should be rewarded as critical factors for delivering value to our stockholders. Additional detail on these bonus payments is provided in the “2018 Annual Incentive Cash Bonuses” Section, below. +27 +Actual 2018 Bonus Payments +NEO +2018 +Performance +Rating +2018 Target +(% Salary) +($) +(% Salary) +(% Target) +Stephen S. Tang, Ph.D. +High Meets +85% +$ +818,346 +198% +170% +Roberto Cuca +High Meets +50% +$ +353,580 +134% +170% +Anthony Zezzo II +Meets +40% +$ +232,035 +57% +142% +Brian Smith 1 +Exceeds +40% +$ +246,626 +74% +184% +Jack E. Jerrett +High Meets +35% +$ +220,654 +60% +170% +Douglas A. Michels 2 +N/A 3 +85% +$ +198,968 +N/A +N/A +Ronald H. Spair 2 +N/A 3 +50% +$ +161,490 +N/A +N/A +1 Mr. Smith’s 2018 actual bonus payment was calculated using the Canadian to U.S. Dollar exchange rate in effect near the time of his bonus award. +2 Mr. Michels’ and Mr. Spair’s bonuses were prorated for the period during which they provided services prior to their retirement dates of March 31, 2018 and June 8, 2018, respectively. +3 The Board and Compensation Committee evaluated the performance of Mr. Michels and Mr. Spair in 2018 based on the Company’s overall performance and, as a result, did not apply performance ratings for these executives. +• +Long-Term Incentive Awards : Equity awards received by Dr. Tang and Mr. Cuca during 2018 represent onboarding compensation pursuant to the terms of their employment agreements. Incentive equity awards granted to the other NEOs in February 2018 were based on the Company’s financial performance, as described under the “2018 Base Salaries” Section, below, and/or each executive’s performance during 2018. The value of the awards ranged from 105% to 250% of each executive’s base salary as shown below. The NEOs (except for Dr. Tang) received equity awards consisting of 50% time-vested RS and 50% PRUs. +2018 Equity Awards +NEO +2017 +Performance Rating +Target Range +(% Salary) +($) +(% Salary) +Stephen S. Tang, Ph.D. 1 +N/A +N/A +$ +623,363 +N/A +Roberto Cuca 2 +N/A +N/A +$ +435,758 +N/A +Anthony Zezzo II +Meets +95% - 155% +$ +420,527 +105% +Brian Smith 3 +Outstanding +95% - 155% +$ +411,229 +145% +Jack E. Jerrett +Meets/Exceeds +70% – 115% +$ +379,001 +105% +Douglas A. Michels +N/A 4 +150% – 250% +$ +1,585,050 +250% +Ronald H. Spair +N/A 4 +105% – 175% +$ +795,285 +160% +1 Pursuant to his employment agreement, Dr. Tang received an onboarding equity award consisting of 37,116 shares of time-vested RS that will cliff vest on the fifth anniversary of the April 1, 2018 award date. The indicated amount reflects the aggregate grant date fair value of the award on April 1, 2018. +2 Pursuant to his employment agreement, Mr. Cuca received an onboarding equity award consisting of (i) 50% time-vested RS (14,320 shares) and (ii) 50% PRUs (14,320 units). The indicated amount reflects the aggregate grant date fair value of the award on Mr. Cuca’s May 7, 2108 start date. Mr. Cuca’s award contains terms substantially similar to the annual equity awards provided to the other NEO’s in February 2018. +3 +The dollar value of Mr. Smith’s 2017 Award was calculated using the Canadian to U.S. Dollar exchange rate in effect near the time of his award. +4 The Board and Compensation Committee evaluated the performance of Mr. Michels and Mr. Spair in 2017 based on the Company’s overall performance and, as a result, did not apply performance ratings for these executives. +Additional information regarding NEO compensation for 2018 is provided below in this CD&A and in the accompanying tables, including the Summary Compensation Table (“SCT”) set forth below. +Pay for Performance +We follow a pay-for-performance approach in compensating executives. Our program pays executives for performance by rewarding the achievement of predetermined financial and/or strategic objectives. +A significant portion of each NEO’s compensation is paid out in variable and long-term compensation that is intended to align such compensation with the long-term interests of our stockholders. Both our annual and long-term compensation are tied to the Company’s overall performance in a variety of ways, including our financial results and share price performance. A further discussion of our pay mix for the NEOs is set forth in the “Pay Mix” Section, below. +28 +One aspect of our compensation program is the use of performance targets to incentivize management to achieve improved financial results on a year-to-year basis. For the past several years, annual financial objectives have been used to determine the amount of pool funding available to pay individual awards under our annual bonus plan. These objectives are generally set at levels intended to incentivize annual financial growth. A combination of financial and strategic objectives may also be considered, and in the past have been used, where the Compensation Committee and the Board desire to incentivize management to meet certain near-term strategic objectives which could help drive improved financial performance in a year with increased financial uncertainty. Each year the Compensation Committee and the Board evaluate whether financial objectives, strategic objectives, or some combination thereof, would provide the most appropriate near-term incentive for our NEOs to achieve improved financial performance. +In addition, for the past several years we have followed a policy of granting annual equity awards to executives that consist of 50% PRUs and 50% time-vested RS. The PRUs will only vest if (i) the NEO remains employed by the Company for three years following the date of grant and (ii) the performance criteria determined by the Committee and the Board are met. For the PRUs granted in 2018, a compound annual growth rate (“CAGR”) target for consolidated product revenues for the three-year period 2018-2020 and a one-year income before income taxes (“IBIT”) target for the fiscal year 2018 were established as the performance criteria. The time-vested RS portion of the award vests in equal annual installments over the three-year period following the grant date, subject to the NEO’s continued employment by the Company. +We believe the performance targets and three-year service period applicable to PRUs complement the short-term incentives in our annual bonus plan. We also believe the combination of the structure of our annual bonus plan and the structure of our equity award policy will incentivize management to deliver substantially improved financial performance both on an annual basis and over a longer term period and help drive long-term growth in stockholder value. +Compensation Governance Practices +We are committed to maintaining good corporate governance and practices. As a result, and in response to input from stockholders, the Compensation Committee and Board have adopted a number of changes over the past years to specifically respond to stockholder concerns and better align our compensation program with performance. The most significant of these changes was the adoption of PRUs for 50% of the value of annual long-term equity awards for our executives. These changes and other aspects of our compensation practices are summarized below: +Performance Mix – The vast majority of our NEOs’ compensation is performance-based. For example, approximately 78% of Dr. Tang’s annual compensation consists of an incentive cash bonus and equity award, both of which are performance-based. For the other NEOs (except for Messrs. Michels and Spair), 64% of their aggregate annual compensation consists of performance-based compensation. +Diversified and Performance Based Portfolio – Our executive compensation consists of a mix of cash/equity, fixed/variable and short-term/long-term compensation. +Performance Vested Equity – 50% of our NEOs’ annual equity awards consist of PRUs that will not vest until three years after the grant date and only if certain performance measures are met during the three-year period. +Long-Term Focus – Equity awards are subject to long-term vesting requirements, with time-vested RS vesting over 3 years. PRUs also vest only after 3 years. Structuring our equity awards in this manner helps align the interests of our executives with the long-term interests of our stockholders. +Target Bonus Objectives – Our annual bonus pool is funded based on the achievement of annual financial objectives, strategic objectives or a combination thereof, in order to incentivize management to achieve improved financial performance on a year-over-year basis. +Limited Bonus Pool Discretion – The aggregate bonus pool funding for annual cash bonuses is determined pursuant to a plan funding formula tied to the Company’s achievement of specific financial objectives. The Board and Compensation Committee can make discretionary adjustments to the pool, but such an adjustment is limited to +/– 10% of the pool amount determined under the plan’s self-funding formula. +Multiple Performance Metrics – Variable compensation is based on a combination of corporate and individual performance measurements to help ensure balanced incentives for executives. +29 +Change-in-Control Severance and Tax Gross Ups – Our policy is that employment agreements with our executives provide for “double trigger” change-in-control severance rather than “single trigger” change-in-control severance and do not provide for a 280G income tax gross up. This policy was recently followed in structuring the employment agreements with Dr. Tang, who became the Company’s new President and CEO on April 1, 2018, and Mr. Cuca, who became our CFO on June 8, 2018. +Strong Stock Ownership and Retention Conditions – We have implemented stock ownership requirements of six (6) times salary for our President and CEO, two (2) times salary for our CFO and one (1) times salary for other NEOs. +Prudent Benchmarking – The total compensation paid to our executives is targeted at the 50 th percentile of a Peer Group of comparable companies based on achievement of performance objectives. We use a Peer Group consisting of companies in the medical diagnostic and healthcare industries comparable in size to the Company based on total revenues and market value. +Tally Sheets – The Compensation Committee reviews tally sheets as part of making individual compensation decisions. +Independent Compensation Consultants – The Compensation Committee regularly utilizes independent compensation consultants to provide compensation advice, including competitive assessments of our program compared to compensation paid to executives at the Peer Group of comparable medical diagnostic and healthcare companies. During 2018, the Compensation Committee engaged Pay Governance as its independent consultant. +Recoupment Policy – The Company maintains a compensation recoupment or “clawback” policy, under which we will seek to recover excess compensation paid to an executive if our financial statements are restated due to misconduct by that executive. +No Repricing – Our LTIP prohibits both the repricing and repurchase of under-water stock options or other equity awards without stockholder approval. +No Perquisites – We do not provide executives with any perquisites that are not offered to all employees of the Company. +Risk Review Process – We periodically assess the risks associated with our compensation programs. +No Hedging – Our policy prohibits Directors and NEOs from engaging in hedging activities with our stock. +No Pledging – Our Directors and NEOs are not permitted to pledge our stock. +Confidentiality/Non–Compete Agreements – Our NEOs are subject to confidentiality and non-compete agreements . +Realizable Pay vs. TSR +To ensure that our executive compensation program and compensation levels are consistent with our pay-for-performance philosophy, we evaluated the degree of alignment between our CEO’s total realizable pay versus our TSR over the prior three fiscal years (2016 to 2018) relative to our Peer Group. The graph below shows the comparison of three-year TSR and “realizable pay” relative to our Peer Group. +30 +Realizable pay for our CEO consists of Dr. Tang’s compensation for 2018 and Mr. Michels’ compensation for 2017 and 2016. Realizable pay includes base salary, incentive cash bonus and all other compensation reported in the SCT, and in the case of Dr. Tang includes his onboarding compensation. Equity awards are valued using each company’s closing stock price on December 31, 2018. Restricted stock and restricted unit awards are valued by multiplying the number of shares or units by the closing stock price on December 31, 2018. The number of restricted units included in the calculations for Mr. Michels reflect a payout based on the Company’s currently expected performance against the applicable performance measures for those awards. Option awards are valued as the difference between the closing stock price on December 31, 2018 and the exercise price multiplied by the number of option shares granted during the period. An option award with an exercise price greater than the closing stock price on December 31, 2018 is valued at $0. +As the graph indicates, there is a close relationship between our TSR performance and the realizable pay for our CEO relative to the relationship seen in our Peer Group. This analysis confirms the strong link between pay and performance embedded in our compensation program. +Realizable Pay vs. SCT Compensation +As described further below, we believe long-term equity awards are a key incentive for our executives to drive the Company’s long-term growth and align the interests of our executives with those of our stockholders. The SCT includes the estimated value of long-term incentive equity awards at the time of grant based on the accounting valuation determined under ASC 718. The actual value of these awards that may be realizable by our executives may vary from the estimates depending on the Company’s financial and stock performance and often differs significantly from what is reported in the SCT. +A comparison of the realizable value of long-term equity incentive awards as of December 31, 2018 against the values reported in the SCT indicates how compensation outcomes may be impacted by our performance. Such a comparison also shows the degree of alignment between our stock performance and the level of compensation provided to executives. +The table below compares the compensation values reported in the SCT and the value of realizable pay (“RP”) for the compensation awarded during the three-year period 2016 to 2018 for our CEO, which reflects a blend of Dr. Tang’s compensation for 2018 and Mr. Michels’ compensation for 2017 and 2016 as described above. +31 +Our CEO’s RP for the three years 2016–2018 of $10.9 million is 88% higher than the CEO’s SCT compensation for the same period. This shows a strong link between pay and performance as our 81% TSR for the three years increased the value of our CEO’s RP for that period. +Pay vs. Other Company Measures of Performance +While TSR is a common measure of performance that is often used to evaluate a company’s compensation practices, we consider other performance measures to be, at times, more reflective of the success of our business. It is important to recognize that our TSR can be extremely volatile, as evidenced by the substantial movements in our stock price during the past several years. Our TSR can be, and often is, influenced by a variety of macro-economic factors that are outside the control of our executives. Specifically, in 2013 our stock price declined 12%, but rose 61% in 2014. Our stock price declined again by 37% in 2015 and rose 36% in 2016. More recently, our stock price rose 115% in 2017 and then declined 38% in 2018. These price changes are not solely tied to our underlying financial performance. For example, our stock price declined in 2015 and 2018 even though we achieved record financial performance with substantial growth and strong profitability in those years. +As a result, while our executive compensation opportunities do not follow a linear relationship with TSR, the pay realizable to our executives (as noted above for our CEO) should and does demonstrate a clear relationship with both TSR and financial results. We have tried to align our executive compensation with performance results that are part of our overall business strategy that we believe will drive stock price improvement and increased value for our stockholders over the longer term. +When establishing and evaluating our executive compensation program generally, and performance-based incentive plans in particular, we believe that TSR alone will not always immediately account for the value of our accomplishments and, in many cases, it may take time for the impact of our strategic and other accomplishments to be fully reflected in the value of our stock. Thus, while obviously important, TSR is only one of several factors we consider in making compensation decisions for our executives. +Pay Comparison $20,000,000 $15,503,935 $15,000,000 $4,648,636 $10,000,000 $8,426,767 $4,849,264 $1,333,088 $1,890,774 $1,641,826 $5,000,000 $838,697 $4,364,208 $4,364,208 Total Cash + All Other Stock Options Restricted Stock PSUs +Say-on-Pay Results in 2018 and the Company’s Response +At our 2018 Annual Meeting, stockholders were asked to vote on an advisory (non-binding) basis on the compensation paid to our NEOs for 2017. We obtained strong stockholder support for our NEO compensation for 2017 with approximately 96% of stockholder votes cast in favor of our “say-on-pay” or SOP resolution. Even with this overwhelmingly positive response, we continued our outreach effort that had been initiated in response to prior SOP votes to contact certain of our major stockholders in order to continue to understand their concerns regarding our compensation practices. Overall, we attempted to contact stockholders who, in the aggregate, beneficially held approximately 33% of our outstanding Common Stock. As a general matter, our stockholders either did not respond or indicated that they saw no need to meet with us although they had done so in the past. We believe these stockholders responded in this manner because they are generally supportive of our executive compensation practices. As a result, we made no further changes to our executive compensation program following the SOP vote at the 2018 Annual Meeting. +We believe our stockholder engagement has been and continues to be beneficial for the Company and our stockholders. The feedback we received reaffirms that the compensation changes made in recent years were responsive to stockholder concerns and our executive compensation is strongly aligned with performance. The Board intends to continue ongoing dialogue with our stockholders to ensure our executive compensation programs are well understood by all stakeholders and that we continue to be responsive to stockholder concerns. +32 +Compensation Ri sk Assessment +Management periodically conducts a risk assessment of the Company’s compensation policies and practices, including its executive compensation program. In its review, management considers the attributes of the Company’s policies and practices and other factors, including: +• +The mix of fixed and variable compensation opportunities; +• +The balance between annual and long-term performance opportunities; +• +The corporate and individual performance objectives established for annual and long-term incentive compensation; +• +The internal controls and procedures in place to mitigate risks facing the Company, including the Company’s “clawback” policy and stock ownership guidelines; and +• +The risk that unintended consequences could result from various aspects of the Company’s compensation policies and practices. +Based on its consideration of the foregoing, management believes that the Company’s policies and practices are designed with the appropriate balance of risk and reward in relation to the Company’s overall business strategy and do not incentivize employees to take unnecessary or excessive risks. The Company has also concluded that any risks arising from the Company’s compensation policies and practices are not reasonably likely to have a material adverse effect on the Company. +COMPENSATION PHILOSOPHY +The primary objectives of our compensation program for executive officers are to: +Set compensation opportunities at levels sufficient to attract and retain high quality executives, to motivate them to contribute to our success and to reward them for performance. +Ensure the compensation opportunities provided align the interests of executives with the interests of our stockholders. +Focus our executives on both short and longer-term individual and Company priorities established by the Board and appropriately reward them for performance against these objectives. +The total direct compensation provided to each executive consists of an annual base salary, an annual incentive cash bonus and long-term incentive equity awards. The amount of the incentive cash bonus and the size of annual incentive equity awards are variable and depend on an executive’s and the Company’s achievement of predetermined financial and other objectives. As a result, a substantial portion of each executive’s annual compensation is based on performance. +BENCHMARKING +We believe it is useful to regularly compare our compensation program against compensation paid to executives at other comparable medical diagnostic and healthcare companies. With the assistance of Pay Governance, an independent compensation consultant engaged by the Compensation Committee, an updated Peer Group of companies was selected using criteria based on industry, revenues and market capitalization and a competitive assessment of our executive compensation was prepared. +The Compensation Committee seeks to set total direct compensation opportunity levels for each executive near the fiftieth (50 th ) percentile of amounts paid by the Peer Group of companies for performance consistent with the Company’s target financial and other business plans for the applicable year. Use of the fiftieth (50 th ) percentile is intended as a market-based reference and not as an absolute target. As a result, the total direct compensation opportunity and the value of specific compensation components for individual executives may fall below or exceed the fiftieth (50 th ) percentile depending on the experience and individual performance of the executive, the criticality of his or her role, the executive’s contribution to our business, and other factors. +33 +Based on advice from Pay Governance, the Compensation Committee updated the Peer Group in January 2019. The following provides information about the Peer Group used by the Compensation Committee for benchmarking purposes in setting executive compensation and how we compare to these companies (all dollars in millions): +Peer Company 1 +FY 2018 Revenue 2 +12/31/18 Market +Capitalization +Business 3 +Anika Therapeutics, Inc. +$ +106 +$ +478 +Biotechnology +AtriCure, Inc. +$ +202 +$ +1,179 +Healthcare Equipment +Atrion Corporation +$ +152 +$ +1,373 +Healthcare Supplies +Cardiovascular Systems, Inc. +$ +217 +$ +989 +Healthcare Equipment +Endologix, Inc. +$ +156 +$ +74 +Healthcare Supplies +Enzo Biochem, Inc. +$ +105 +$ +131 +Life Sciences Tools and Services +Fluidigm Corporation +$ +113 +$ +420 +Life Sciences Tools and Services +Genomic Health, Inc. +$ +394 +$ +2,327 +Biotechnology +Harvard Bioscience, Inc. +$ +121 +$ +119 +Life Sciences Tools and Services +Lantheus Holdings, Inc. +$ +343 +$ +602 +Healthcare Supplies +Luminex Corporation +$ +316 +$ +1,030 +Life Sciences Tools and Services +Meridian Bioscience, Inc. +$ +214 +$ +737 +Healthcare Supplies +NeoGenomics, Inc. +$ +277 +$ +1,191 +Life Sciences Tools and Services +Quidel Corporation +$ +522 +$ +1,920 +Healthcare Supplies +RTI Surgical, Inc. +$ +281 +$ +235 +Healthcare Supplies +STAAR Surgical Company +$ +124 +$ +1,408 +Healthcare Supplies +FY 2018 Revenue 1 +12/31/18 Market +Capitalization +25 th Percentile +$123 +$ 374 +Median +$208 +$ 863 +75 th Percentile +$290 +$1,237 +OraSure Technologies, Inc. +$182 +$ 716 +Source: Standard & Poors Capital I.Q. +1 This Peer Group represents the same group of companies used by the Compensation Committee in benchmarking our 2017 executive compensation, except that Abaxis, Inc. was eliminated in the current Peer Group because of its acquisition by another company. +2 +Reflects revenue reported for fiscal year 2018. +3 +Reflects Global Industry Classification Standard sub-industry designation. +In preparing its 2018 competitive assessment of executive compensation, Pay Governance compared the compensation of our NEOs with a 50/50 blend of proxy data from the Peer Group and data for each NEO position from the 2018 Radford Global Life Sciences Survey. Since compensation market data can be volatile from year to year, the Compensation Committee believes a blend of specific Peer Group proxy data and broader survey data better reflect market trends. +Based on its review of the Pay Governance assessment, the Compensation Committee decided not to make any changes to our executive compensation program, except as provided below. +34 +2018 EXECUTIVE COMPENSATION COMPONENTS +Overview +Our compensation program consists of the following components: +Compensation +Form of +Compensation +Purpose +Base Salary +Cash +Base salaries provide fixed compensation necessary to attract and retain key executives. +Annual Incentive Bonus Awards +Cash +Annual incentive bonus awards provide performance-based incentives to our executives to achieve both Company-wide financial and strategic goals and the executives’ individual performance objectives. +Long-Term Incentive Awards +Performance-Vested +Restricted Units and +Time-Vested Restricted +Stock +The largest component of our executive compensation is paid in equity. Annual LTIP awards for the NEOs consist of 50% PRUs and 50% time-vested RS in order to provide a strong link between pay and performance. +Benefits +401(k) Plan +Health and Welfare +Benefits +Retirement and health and welfare benefits provide a complete compensation package that is competitive with the market and addresses the needs of all employees and their families, including our executives. +Employment Agreements +Cash severance and +accelerated equity vesting +Severance and accelerated equity vesting are provided to our executive officers in order to ensure continued focus on the strategic matters of the Company during potentially uncertain times. +Pay Mix +We follow a pay-for-performance approach to executive compensation, with a significant portion of our executives’ compensation consisting of annual incentive cash bonuses and long-term equity awards that are based on the executives’ and the Company’s achievement of predetermined performance objectives. +The following charts illustrate the relative proportion of 2018 base salaries compared to the performance-based elements of our executive compensation for Dr. Tang and the other NEOs (except for Messrs. Michels and Spair), respectively. In preparing the charts, the base salaries for Dr. Tang and Mr. Cuca were annualized since they joined the Company during 2018. In addition, in order to better represent Dr. Tang’s normal annual mix of compensation, the onboarding RS award he received was excluded and his compensation was calculated as if he received an annual long-term equity incentive award at his target amount (i.e. 200% of base salary). The onboarding equity award provided to Mr. Cuca was included in his compensation since it is representative of his normal annual incentive equity award. +35 +Approximately 78% of Dr. Tang’s aggregate compensation (modified to reflect his normal compensation mix, as provided above) and 64% of the other NEOs’ aggregate compensation for 2018 consisted of performance-based compensation. +Compensation Components in Detail +2018 Base Salaries +Annual base salaries paid in 2018 to our NEOs (except for Dr. Tang and Mr. Cuca, whose base salaries were determined as described below) were established by the Compensation Committee at the beginning of 2018 based on a review of the Company’s performance and the individual contributions of each officer (other than Messrs. Michels and Spair, who were evaluated based on the Company’s overall performance) compared to pre-established performance objectives for 2017. The Compensation Committee also considered the Company’s budget for expected salary adjustments, salary levels paid at the Peer Group companies and recommendations provided by the compensation consultant engaged to assist the Compensation Committee. The initial salaries paid to Dr. Tang and Mr. Cuca were established based on market data provided by the Compensation Committee’s compensation consultant at the time these executives were hired during 2018. +Based on these factors, the Compensation Committee approved an annual base salary increase for our senior management (including the NEOs other than Dr. Tang and Mr. Cuca) averaging approximately 3.0%. This was in line with our Company-wide budgeted average salary increase of 3.0%. Individual salary increases for 2018 were determined by using the following guidelines: +Performance Rating +Merit Increase Range +Outstanding +5.0% - 7.0% +Exceeds Requirements +3.0% - 4.0% +Meets Requirements +2.0% - 2.5% +Does Not Consistently Meet +1.0% – 1.5% +Does Not Meet Requirements +0% +36 +In evaluating the Company’s overall performance, the Compensation Committee recognized that our $167.1 million in consolidated net revenues for 2017 represented a 30% increase over 2016 and that our consolidated net income of $30.9 million, or $0.51 per share, represented an $11.2 million or $0.16 per share improvement over 2016. The Compensation Committee further recognized the substantial growth of our molecular collection systems business in 2017 and the strong performance of our infectious disease business as a result of substantial growth in HCV and HIV Self-Test revenues. A final factor considered by the Compensation Committee was the 115% increase in our TSR for 2017. +In view of the foregoing, the Compensation Committee determined that Messrs. Michels and Spair should receive above-target salary increases for 2018 as a result of the Company’s overall performance during 2017, with the remaining NEOs receiving increases based on their 2017 performance against their individual objectives. As noted above, the 2018 salaries for Dr. Tang and Mr. Cuca were based on market data, an assessment of their qualifications and likely contributions to our business, and what we negotiated in order to attract and retain these executives at the time they were hired. As a result, the Compensation Committee approved the following 2018 salary levels for the NEOs: +NEO +2017 Performance +2017 +Performance +Rating +2017 Salary +2018 +Salary +% +Increase +Stephen S. Tang, Ph.D. +President and Chief +Executive Officer +N/A +N/A +N/A +$565,000 1 +N/A +Roberto Cuca +Chief Financial Officer +N/A +N/A +N/A +$415,000 1 +N/A +Anthony Zezzo II +Executive Vice +President, Business +Unit Leader, +Infectious Disease +• Mixed achievement of sales goals. +• 81% growth in HCV product sales including a 156% increase in international sales. +• 115% increase in international sales of HIV Self-Test. +• Oversight of sales and marketing functions. +Meets +$400,503 +$408,512 +2.00% +Brian Smith 2 +Vice Chairman and +Executive Vice President, Innovation +• Substantially exceeded sales goals. +• 133% increase in net molecular collection revenues compared to 2016. +• 197% growth in genomics sales to commercial accounts, compared to 2016. +● 207% increase in microbiome revenues, compared to 2016. +Outstanding +$278,264 +$334,000 +N/A +37 +NEO +2017 Performance +2017 +Performance +Rating +2017 Salary +2018 +Salary +% +Increase +Jack E. Jerrett +Senior Vice President +and General Counsel +• Leadership in settling Ancestry litigation and resolution of other claims and disputes. +• Assistance in evaluating various business development opportunities. +• Assistance on numerous important commercial matters. +● Ongoing advice and counsel to the Board and senior management. +Meets/Exceeds +$360,953 +$369,977 +2.50% +Douglas A. Michels +Former President and +Chief Executive Officer +• Strong corporate performance, including record revenues and improved profitability, as described above. +N/A 3 +$634,020 +$659,381 +4.00% +Ronald H. Spair +Former Chief Financial +Officer and Chief +Operating Officer +• Strong corporate performance, including record revenues and improved profitability, as described above. +N/A 3 +$497,053 +$516,935 +4.00% +1 Represents annualized salary amounts for Dr. Tang and Mr. Cuca because they were employed for only a portion of 2018. +2 +Mr. Smith received a 6% base salary raise and, as a result, his initial salary for 2018 was increased to $300,622. In August 2018, Mr. Smith’s salary was further increased to $334,000 to bring his compensation in line with market levels. Mr. Smith’s Canadian-based salary amounts have been converted into U.S. Dollars using the Canadian to U.S. Dollar Exchange rate at the time of the increases. +3 Assessment based on overall Company performance during 2017. +2018 Annual Incentive Cash Bonuses +Annual cash bonuses are included as part of executive compensation because the Compensation Committee believes that a significant portion of each executive’s compensation should be structured as a variable incentive focused on short-term priorities related to both the overall performance of the Company and the individual contributions of the executive. On an annual basis, the Compensation Committee has adopted, with approval of the Board, an incentive plan (the “Incentive Plan”), which is intended to be the principal vehicle for incentive cash bonus awards. +When establishing the terms of each Incentive Plan, the Compensation Committee and the Board evaluate which funding objectives will provide the most appropriate incentive for our NEOs to improve our annual financial performance. In recent years, bonus pool funding has been based solely on the achievement of annual financial objectives. Strategic objectives may also be (and in the past have been) used in combination with annual financial objectives where there is greater financial uncertainty facing the Company and the Compensation Committee and the Board desire to incentivize our NEOs to take near- term strategic steps required to drive annual financial growth and stability. In general, the Compensation Committee and the Board will choose those funding objectives, whether they be financial, strategic, or a combination thereof, which in their judgement provide the most appropriate incentive for management to drive improved financial performance on a year-over-year basis. +Where funding is solely based on achievement of financial objectives (as has been the case in recent years), if the Company meets the Target levels for all funding objectives, the pool is initially funded at 100% of the aggregate projected bonuses for all participants in the Incentive Plan adjusted to reflect a normal range or mix of performance assessments (i.e., Outstanding, Exceeds, Meets, Does Not Meet), which increases or decreases the total amount of individual bonuses to be paid to participants. Unless circumstances require otherwise, the pool generally is initially funded at 50% of the aggregate projected bonuses if all of the Threshold levels are met and at 150% of the aggregate projected bonuses if all of the High levels are met. If the Company achieves a Maximum performance level for all objectives, the pool can be initially funded up to 200% of the aggregate projected bonuses. A linear interpolation of the amount of funding for each target objective is +38 +made where a particular performance is in between the pre-established performance levels. To the extent the performance level for a funding objective is below the Threshold level, generally there is no funding for that particular objective. The Compensation Committee and the Board have some limited discretion to increase funding to recognize unique market conditions and extraordinary circumstances. +The amount of the cash bonus pool is determined by the Compensation Committee and recommended for Board approval. The Compensation Committee and Board also retain discretion to increase or decrease the size of the pool in order to reflect differences in the mix of actual performance assessments of the participants or market conditions affecting the Company or other factors. However, the Compensation Committee and Board have limited their ability to make discretionary bonus pool adjustments to +/- 10% of the pool size otherwise determined pursuant to the funding formula under the Incentive Plan. The cash bonus pool is used to pay bonuses not only to the Company’s NEOs, but also to all other officers and certain higher-level employees of the Company and all employees of its subsidiary, DNA Genotek. +Individual payments from the bonus pool to executives are generally calculated using a formula that considers the size of the bonus pool, the executive’s achievement of individual performance objectives, the number of individuals participating in the plan at the time bonuses are awarded and the executive’s target bonus percentage. Bonuses are paid, based on an assessment of each executive’s performance for the applicable year, using targets expressed as a percentage of the executive officer’s annual base salary. +If an executive officer has met or exceeded his or her individual performance objectives and/or the Company’s expectations for the applicable year, he or she may be eligible to receive up to 150% of his or her target bonus, depending on the size of the bonus pool. The Compensation Committee and Board retain the discretion to adjust an individual executive’s performance evaluation and to increase or decrease the bonus paid to such individual to reflect the specific contributions of that executive, the Company’s overall performance, market conditions or other circumstances. +The Compensation Committee recommends for Board approval any bonus award for the CEO based on an assessment of the Company’s overall performance. The CEO recommends individual awards for the other executive officers for approval by the Compensation Committee based on an assessment of each executive’s performance against his or her applicable individual performance objectives. The Compensation Committee and Board have the right, in their sole discretion, to reject any or all of the recommended bonus awards, even if the bonus pool has been funded and any or all applicable performance criteria have been satisfied, based on the business conditions of the Company or other factors deemed relevant by the Compensation Committee or the Board. +Under the 2018 Incentive Plan, the Compensation Committee established performance levels for two equally weighted financial objectives for revenues and operating income to be used to fund the bonus pool. The Threshold financial objectives reflected our actual performance for 2017. The Target levels reflected our annual budget or operating plan for 2018 and represented strong revenue growth and improved profitability compared to 2017 after eliminating certain one-time items from our 2017 results. The High and Maximum levels reflected 105% and 110% of our Target consolidated net product sales for 2018, respectively, and 100% of our Target for all other revenues for 2018. The funding objectives did not include any estimates for transition costs associated with the changes in our CEO and CFO, transaction costs associated with acquisitions or differences between actual foreign exchange rates and those assumed in our 2018 operating plan. +The following table summarizes the 2018 Incentive Plan performance objectives (dollar amounts in millions): +Financial Objective/Weight +Threshold +Target +High +Maximum +Consolidated Net Revenues (50%) +$167.1 +$184.7 +$193.5 +$202.3 +Consolidated Net Operating Income (50%) +$ 27.7 +32.1 +$ 37.0 +$ 41.8 +Incentive Plan Pool Funding (% of Target) +50% +100% +150% +200% +The following sets forth the potential and actual bonus pool funding for both objectives at each performance level (after application of the performance distribution factor mentioned above) established under the 2018 Incentive Plan, based on the participants covered by the Plan at year-end: +Objective +Weight +Threshold +Target +High +Maximum +Actual +Consolidated Net Revenues +50% +$ +760,000 +$ +1,521,000 +$ +2,281,000 +$ +3,042,000 +$ +1,394,000 +Consolidated Net Operating Income +50% +$ +760,000 +$ +1,521,000 +$ +2,281,000 +$ +3,042,000 +$ +2,912,000 +Potential Total Pool Funding +$ +1,520,000 +$ +3,042,000 +$ +4,562,000 +$ +6,084,000 +$ +4,306,000 +During 2018, we reported consolidated net revenues totaling $181.8 million, which exceeded the Threshold performance level but was less than the Target level, resulting in funding of $1.394 million for that objective. The Company’s +39 +2018 consolidated net operating income was $41.0 million after eliminating (i) costs associated with our transition to a new CEO and CFO, (ii) transaction costs associated with two recent acquisitions and (iii) differences in foreign exchange rates from those that we had assumed in our 2018 operating plan. This amount exceeded the High performance target but was less than the Maximum target for this objective, resulting in funding of $2.912 million for that objective. As a result, the aggregate pool funding under the 2018 Incentive Plan was calculated to be $4.306 million. +The final bonus pool amount was approved by the full Board and used to pay bonuses to the Company’s NEOs and other members of our management team. In connection with Dr. Tang’s appointment as our new CEO, the Compensation Committee obtained market data from Pay Governance in order to ensure Dr. Tang’s compensation was set at market levels. Based on this data, the Compensation Committee and the Board decided to increase the bonus target for the CEO position from 70% to 85% of salary at the time Dr. Tang was hired in order to better reflect market levels. The Compensation Committee and Board also decided to apply this revised bonus target to Mr. Michels. Pursuant to their retirement agreements, Messrs. Michels and Spair received incentive cash bonuses for 2018 pro-rated to reflect the period of time they were employed prior to their respective retirement dates. +The specific target payouts for NEO bonuses for 2018 (expressed as a percentage of annual base salary) are shown below: +Title +Target Payouts +Chief Executive Officer +85% +Chief Financial Officer (and Chief Operating +Officer) +50% +Executive Vice President +40% +Senior Vice President +35% +In January 2019, the Compensation Committee authorized the payout of individual bonus awards to executive officers from the bonus pool for 2018 based on the target bonus amounts described above and an assessment of each officer’s performance during 2018 against pre-established performance objectives (except for (i) Dr. Tang where the assessment was based on the Company’s overall performance and (ii) Messrs. Michels and Spair where their target bonus amounts were pro-rated pursuant to the terms of their retirement agreements). The calculation of individual bonus awards was based on a formula that adjusted the foregoing target payments for both the executives’ individual performance during 2018 and the degree to which the final approved bonus pool funding exceeded the Target under the plan funding formula. +In evaluating Dr. Tang’s and the Company’s performance, the Compensation Committee recognized the successful leadership transition to a new CEO and CFO and the completion of an updated long-term strategy focused on innovation and growth. The Compensation Committee also noted the record 2018 net consolidated revenues of $181.7 million, our continued strong profitability, the generation of $39.1 million in cash for the year and our strong cash position at year end. Finally, the Compensation Committee recognized the completion of two strategic acquisitions of CoreBiome, Inc. and Novosanis, N.V., which both closed during the first week of January 2019, as evidence of initial progress in executing against our new growth strategy. +In view of the foregoing, the Compensation Committee determined that Dr. Tang should receive a High Meets performance rating for 2018 with the remaining NEOs being evaluated based on individual objectives established for their positions. Using these performance ratings, the Compensation Committee next considered individual performance factors to adjust the bonuses for Dr. Tang, the other NEOs and the other participants in the 2018 Incentive Plan to reflect their performance assessments for 2018. As a final step, the Compensation Committee adjusted the bonuses further by a pool funding factor reflecting the amount by which pool funding exceeded Target under the plan formula. +Using the approach described above, a final 2018 incentive cash bonus of $818,346 was calculated for Dr. Tang, as follows: +2018 Base +Target +2018 Individual Performance +2018 Pool Funding +2018 +Salary +X +Bonus % +X +Factor +X +Factor += +Bonus +$565,000 +85% +120% +142% +$818,346 +40 +This same formula was used to calculate the 2018 bonus awards for all other NEOs, as follows: +2018 Bonus Payments +NEO +2018 Salary +Bonus Target +(% Salary) +2018 Performance Assessment and Rating +Individual 2018 Performance Factor +2018 Pool Funding Factor +2018 Bonus +Stephen S. Tang, Ph.D. +President and Chief Executive Officer +$565,000 +85% +High Meets 1 +• Strong corporate performance, including record revenues and continued profitability +120% +142% +$818,346 +Roberto Cuca +Chief Financial Officer +$415,000 +50% +High Meets +• Successful transition into CFO role. +• Strong management of financial planning, reporting and accounting. +• Maintenance of strong investor base. +• Assistance in business development activities. +• Support for updated long-term business strategy. +120% +142% +$353,580 +Anthony Zezzo II +Executive Vice President, Business Unit Leader, Infectious Disease +$408,513 +40% +Meets +• Mixed achievement of sales goals. +• Oversight of infectious disease sales and marketing functions. +• Support for updated long-term business strategy. +• 93% increase in international OraQuick ® HIV revenues for 2018. +100% +142% +$232,035 +41 +NEO +2018 Salary +Bonus Target +(% Salary) +2018 Performance Assessment and Rating +Individual 2018 Performance Factor +2018 Pool Funding Factor +2018 Bonus +Brian Smith 2 +Vice Chairman and Executive Vice President, Innovation +$334,000 +40% +Exceeds +• Substantially met all sales goals. +• 28% growth in molecular collection revenues. +• Strong oversight of molecular collection sales and +marketing functions. +• Support for updated long-term business strategy. +• Support for molecular collections leadership transition. +130% +142% +$246,626 +Jack E. Jerrett +Senior Vice President and General Counsel +$369,977 +35% +High Meets +• Oversight of global legal function. +• Assistance in evaluating various business development opportunities. +• Assistance on numerous important commercial matters. +• Ongoing advice and counsel to the Board and senior management. +120% +142% +$220,654 +Douglas A. Michels +Former President and Chief Executive Officer +$659,381 +85% +N/A +N/A +142% +$198,968 3 +Ronald H. Spair +Former Chief Financial Officer and Chief Operating Officer +$516,935 +50% +N/A +N/A +142% +$161,490 4 +1 +Assessment based on overall Company performance during 2018. +2 +Mr. Smith’s 2018 incentive cash bonus was converted into U.S. Dollars using the Canadian to U.S. Dollar exchange rate in effect near the date on which his bonus award occurred. +3 Mr. Michels’ bonus was pro-rated to reflect his service prior to his March 31, 2018 retirement date. +4 Mr. Spair’s bonus was pro-rated to reflect his service prior to his June 8, 2018 retirement date. +42 +2018 Long-Term Incentive Equity Awards +An additional way that we promote the long-term growth of the Company and align the interests of executives with those of our stockholders is by compensating executives with equity in the Company that vests over a multi-year period. To accomplish this, the Compensation Committee administers the Company’s LTIP (Long-Term Incentive Policy), pursuant to which grants of time-vested restricted shares and performance-vested restricted units are made to executive officers. +Incentive equity awards under the LTIP are made on an annual basis, and are discretionary and subject to approval by the Compensation Committee and/or the Board. Awards to individual participants under the LTIP are based on an evaluation of a number of factors, including: +• +Performance of the participant for the applicable year; +• +The participant’s level of responsibilities and relative contribution to the Company’s business; +• +A competitive assessment of awards at Peer Group companies; +• +History of equity awards to the participant; and +• +Other factors deemed relevant by the Compensation Committee and/or the Board. +Each participant’s individual performance for the applicable year is evaluated against his or her individual performance objectives for that year, except for Dr. Tang who is evaluated based on total Company performance. As previously discussed, the performance of Messrs. Michels and Spair was also based on an assessment of total Company performance. A “Meets Expectations” performance is typically the threshold requirement to receive an equity award under the LTIP. Awards below this performance level may be considered on an exception basis at the discretion of the Compensation Committee and/or the Board. +The value of potential incentive equity awards that could have been granted in 2018 under the LTIP (expressed as a percentage of annual base salary) based on performance during 2017, are summarized below: +2018 LTIP Award Ranges +Performance +Position +Lower End +Target +Maximum +President/CEO +150% +200% +250% +CFO/COO +105% +140% +175% +EVP +95% +125% +155% +SVP and General Counsel +70% +100% +130% +Other SVPs +70% +90% +115% +The percentages set forth above were established at levels that the Compensation Committee believed represented an appropriate long-term incentive compensation value for each executive, based on the results of a competitive assessment of long-term incentive awards at the Peer Group companies. Once the aggregate dollar value of an award has been established by applying the Compensation Committee approved award percentage to a participant’s base salary, the value is converted into shares or units based on a valuation of the restricted stock and restricted unit portions of the award using the average of the high and low stock price on the grant date as reported on the NASDAQ Stock Market. +In August 2018, the range of percentages set forth above for annual incentive equity awards was increased by the Compensation Committee for Mr. Jerrett, the Company’s Senior Vice President and General Counsel (i.e. from 70%/90%/115% to 70%/100%/130%), based on advice to the Compensation Committee from Pay Governance, in order to bring the range more closely in line with market levels. The new percentage range was effective beginning with the incentive equity awards made in 2018 for performance during 2017. +Under the LTIP, 50% of an executive’s total equity award consists of PRUs that will not vest until three years after the grant date and only if certain performance measures are met during that three-year period. In the past, the awards +43 +incorporated two performance metrics: (i) a CAGR for consolidated product revenues during the three-year period beginning with the year in which the award was made and (ii) a one-year “EPS” target for the year of award followed by a further two-year time-vesting requirement. However , in February 2018 when the Compensation Committee approved LTIP equity awards to executives for performance during 2017, the EPS performance measure used for past awards was changed to a one-year “IBIT”, or income before income tax, performance measure because of uncertainty related to the impact of recently enacted Federal tax legislation on our financial performance for 2018. The remaining 50% of each executive’s incentive equity award consists of grants of time-vested RS that vest in equal annual installments over a three-year period. These vesting restrictions serve to promote the Company’s long-term growth by restricting executives’ ability to realize short-term gains from their awards. The Compensation Committee believes the terms of its incentive equity awards to executives are competitive with the terms of equity awards offered at comparable medical diagnostics and healthcare companies. +The structure of the equity awards reflects market-based good governance practices as well as input from our stockholders, several of whom advocated that a meaningful portion of the equity awards should have performance-based vesting. We believe 50% is a meaningful portion and is consistent with or exceeds the performance orientation of our Peer Group. In addition, although some stockholders have mentioned TSR as a possible performance target, most of the stockholders we have contacted in recent years indicated that other measures such as financial or operational objectives would also be appropriate. The Board decided to use consolidated net product revenue and IBIT targets because they are important for our business, especially as we continue improving our profitability, and because of the Board’s belief that these measures will directly influence the performance of our stock price over time. Under the terms of the awards, the impact of stock repurchase programs is excluded in determining whether an IBIT target is met. As discussed above, the Board does not believe that the use of TSR as a performance metric in the long-term incentive plan is appropriate at this time, although the choice of performance metrics will be reviewed each year. +The adoption of performance-based vesting conditions with a three-year service requirement for 50% of an executive’s annual equity award substantially strengthens the link between pay and performance and creates an appropriate long-term incentive for our executives. At the same time, the use of time-based vesting conditions for the remaining 50% of each award achieves the equally important goal of share ownership/accumulation through a share-price sensitive vehicle that directly promotes alignment with stockholders and further supports executive retention. Overall, the Compensation Committee and Board believe that this approach represents a balanced performance-based approach to our executive compensation program that is appropriate for our Company, directly responds to feedback from our stockholders, and is consistent with executive pay governance best practices. +Equity awards are generally made by the Compensation Committee each year as part of the normal annual compensation cycle. The awards for a particular year generally occur in late January or early February of the following year after the Company’s full year financial results are known and performance evaluations for the executive officers have been prepared. Equity awards approved by the Compensation Committee for the CEO are then reviewed and approved by the Board. In addition to the annual equity awards, the Compensation Committee may approve equity awards for newly hired officers or in recognition of an executive’s promotion or expansion of responsibilities. These latter grants may have vesting or other terms that differ from the terms generally approved for annual equity awards. Notwithstanding the terms of the LTIP, equity awards are made at the discretion of the Compensation Committee or Board. +Effective February 1, 2018, the Compensation Committee approved equity awards for the NEOs under the LTIP based on the performance evaluations of such officers for 2017, as summarized below. A description of the basis for each NEO’s 2017 performance evaluation is set forth above under the Section entitled, “2018 Base Salaries,” in this CD&A. Since Dr. Tang and Mr. Cuca joined the Company later in the year, they did not participate in the annual equity awards provided to the other NEOs in 2018. Instead, they both received onboarding equity awards pursuant to the terms of their respective employment agreements. Dr. Tang received an award of 37,116 shares of time-vesting RS, having a value of $623,363, which will become fully vested on the fifth anniversary of the grant date. Mr. Cuca received an equity award having an aggregate value of $435,758, consisting of 14,320 time-vested RS and 14,320 PRUs. The terms of Mr. Cuca’s award are substantially the same as the terms of the annual incentive awards made to the Company’s other NEOs in February 2018 for performance during 2017. +44 +The following summarizes the equity awards provided to the NEOs during 2018: +Executive Officer +2017 +Performance +Assessment +Time Vested +Restricted Stock +Performance-Vested +Restricted Units +Award Value +(% of Base Salary) +Stephen S. Tang, Ph.D. +President and Chief +Executive Officer +N/A +37,116 Shs 1 +N/A +N/A +Roberto Cuca +Chief Financial +Officer +N/A +14,320 Shs 1 +14,320 Shs 1 +N/A +Anthony Zezzo II +Executive Vice +President, Business Unit +Leader, Infectious Disease +Meets +9,714 Shs +9,714 Shs +105% +Brian Smith +Executive Vice President, +Business Unit Leader, +Molecular Solutions +Outstanding +9,499 Shs +9,499 Shs +145% +Jack E. Jerrett +Senior Vice President +and General Counsel +Meets/Exceeds +8,755 Shs +8,755 Shs +105% +Douglas A. Michels +Former President and Chief +Executive Officer +N/A 2 +36,615 Shs +36,615 Shs +250% +Ronald H. Spair +Former Chief Financial +Officer and Chief +Operating Officer +N/A 2 +18,371 Shs +18,371 Shs +160% +1 Onboarding equity awards pursuant to Dr. Tang’s and Mr. Cuca’s respective employment agreements. +2 Assessment based on overall Company performance during 2017. +Compensation Developments in 2019 +LTIP Amendments . In February 2019, the Compensation Committee recommended, and the Board approved, increased ranges for incentive equity awards under the LTIP for Dr. Tang, the Company’s President and CEO, and Mr. Jerrett, the Company’s Senior Vice President and General Counsel. These changes were approved in order to bring the ranges more in line with market levels, based on market data and advice provided to the Compensation Committee by its compensation consultant, Pay Governance. As a result, the ranges were changed as follows and will be effective for equity awards expected to be made in early 2020 for performance during 2019: +2019 LTIP Award Ranges +President and CEO +(% of Salary) +Lower End +Target +Maximum +Old Range +150% +200% +250% +New Range +200% +250% +300% +Senior Vice President and General Counsel +(% of Salary) +Lower End +Target +Maximum +Old Range +70% +100% +130% +New Range +95% +125% +155% +Pay Out Under 2016 PRUs . We initially adopted the current structure for annual incentive equity awards in early 2016 for awards based on performance during 2015. As noted above, these awards consisted of 50% time-vested RS and 50% PRUs. The PRU portion of the award would not vest until three years after the grant date and only if a three-year +45 +product revenue CAGR target and/or a one-year EPS target were met. The three-year service period for these PRUs expired on February 1, 2019. Under the terms of the PRUs, the number of shares that are paid in settlement will depend on the degree to which the performance revenue CAGR and EPS measures were met. The following table summarizes the potential range of shares that will be delivered based upon the degree of achievement of the applicable performance measures: +Achievement Level of +Applicable Performance Target +Percentage of Restricted Units +To Become Vested +80% +50% +90% +75% +100% +100% +110% +125% +120% +150% +For the 2016 PRUs, the Company exceeded both of the applicable performance measures by more than 120%, thereby resulting in the maximum payout of 150% under the foregoing table. The following summarizes the three-year revenue CAGR and one-year EPS targets for the 2016 PRUs, our performance against these targets and the resulting number of shares delivered upon settlement of the PRUs: +Performance Target +Actual Performance +% of Target +% Vested +CAGR +5.6% +16.6% +296% +150% +EPS +$0.20 +$0.26 +130% +150% +2016 PRU’s Target and Actual Payout +CAGR Target +(# of shs) +CAGR Actual +(# of shs) +EPS Target +(# of shs) +EPS Actual +(# of shs) +Stephen S. Tang, Ph.D. +N/A +N/A +N/A +N/A +Roberto Cuca +N/A +N/A +N/A +N/A +Anthony Zezzo II +16,090 +24,135 +16,090 +24,135 +Brian Smith +6,469 +9,704 +6,469 +9,704 +Jack E. Jerrett +12,025 +18,038 +12,025 +18,038 +Douglas A. Michels +59,745 +89,618 +59,745 +89,618 +Ronald H. Spair +29,466 +44,199 +29,466 +44,199 +OTHER C OMPENSATION +We provide minimal additional benefits outside of our primary elements of compensation, as follows: +Retirement Programs +All of our U.S. employees, including executive officers, are eligible to participate in our 401(k) profit sharing plan (the “401(k) Plan”). We make matching contributions for participants on a dollar-for-dollar basis up to $4,000 per year. Payments of employer-provided benefits accrued for a 401(k) Plan participant will be made upon retirement or upon termination of employment prior to retirement, provided certain vesting conditions have been met by the participant prior to termination. Our subsidiary DNA Genotek, which is located in Canada, offers a registered retirement plan to its employees, which similarly allows employee contributions for retirement savings, with matching contributions by DNA Genotek of up to CAD $2,000 per year. +The Company also maintains the OraSure Technologies, Inc. Deferred Compensation Plan (the “Deferred Compensation Plan”) for the benefit of the Company’s highly compensated employees, including all of the NEOs, and its non-employee Directors. The Deferred Compensation Plan allows participants to defer up to 100% of their annual base salaries (or fees in the case of non-employee Directors) and up to 100% of annual incentive cash bonuses and, upon vesting, restricted shares of the Company’s Common Stock awarded to the participant. The Company may also make discretionary contributions to the participants’ accounts that vest over one or more years as determined by the Company, as well as upon death, disability or a change of control. Since the Deferred Compensation Plan was put in place, the Company has made no discretionary contributions. Participants may elect to receive distributions of deferred amounts on a specified date, separation from service, a change of control, disability and/or death. +46 +Perquisites and Ot her Compensation +As a general matter, the Compensation Committee and Board do not believe that executive officers should be treated differently than other employees by receiving special perquisites unrelated to our general compensation program. Therefore, our healthcare, disability, and other insurance programs and benefits are the same for all eligible employees, including executive officers. Executive officers do not receive any additional perquisites. +Potential Payments Upon Termination or Change of Control Pursuant to Employment Agreements +The Company has entered into employment agreements with each of the NEOs. In addition to the compensation elements discussed above, these agreements provide for post-employment severance payments and benefits in the event of termination of employment by the Company without “cause” or by the executive for “good reason” and (except for Mr. Smith) provide enhanced severance payments upon such terminations in connection with a “change of control” of the Company. The terms of these arrangements are discussed in more detail under the Section entitled, “Employment Agreements and Potential Payments Upon Termination or Change of Control,” in this Proxy Statement. The Compensation Committee believes that these arrangements are generally consistent with industry practice at the Peer Group companies, provide an incentive to the applicable executive to remain with the Company, and serve to align the interests of stockholders and the executives in the event of a change of control of the Company. +Accounting and Tax Treatment of Compensation. +In approving the amount and form of compensation for the NEOs, the Compensation Committee considers all elements of the cost to the Company of providing such compensation, including accounting and tax implications. In particular, it considers the potential impact of Section 162(m) of the Internal Revenue Code, which disallows a tax deduction for any publicly-held corporation for individual compensation exceeding $1 million in any taxable year for certain covered employees. Historically, there had been an exemption that permitted qualified “performance-based compensation” to be exempt from this $1 million cap on deductibility. Under the Tax Cuts and Jobs Act enacted on December 22, 2017 (the “Tax Act”), this performance-based compensation exemption was eliminated. Thus, bonuses paid under the LTIP will be subject to the cap on deductibility described above unless they qualify for transition relief for certain pre-existing compensation arrangements. Notwithstanding the Tax Act, the Compensation Committee intends to maintain flexibility to pay compensation that is not entirely deductible when the best interests of the Company would make that advisable. +Compensation Recoupment Policy +The Board has adopted a compensation recoupment or “clawback” policy, applicable to all officers subject to Section 16 of the Exchange Act. Under this policy, the Company will pursue recoupment of any excess compensation, including incentive cash bonuses, restricted awards, stock options or other compensation, which was awarded to a covered officer based on financial statements of the Company where such statements are required to be restated as a result of the gross negligence, intentional misconduct or fraud of the covered officer. In addition to recoupment, the Company shall take such other remedial actions deemed necessary against a covered employee, including recommending disciplinary actions up to and including termination and other available remedies. The recovery period for recoupment of any compensation is up to three fiscal years preceding the date on which the Company is required to prepare and file the restated financial statements. This policy has been proactively adopted in advance of final guidance under Section 954 of the Dodd-Frank Act and will be amended to conform with this Section when final guidance is available. +CEO Pay Ratio +As required by applicable law and SEC regulations, we are providing the following information about the relationship of the median of the annual total compensation of our employees and the annual total compensation of Stephen S. Tang, Ph.D., our President and CEO. +For the 2018 fiscal year, the median of the annual total compensation of all employees of the Company (other than Dr. Tang) and our subsidiary, DNA Genotek, was $60,826. To identify the median of the annual total compensation of all our employees, as well as to determine the annual total compensation of our median employee, we took the following steps: +• +We used the same median employee that we used in our pay ratio disclosure in our 2018 Proxy Statement for fiscal year 2017 because during 2018 there was no change in our employee population or employee compensation arrangements that we reasonably believe would result in a significant change to our pay ratio disclosure. +● +We determined that, as of December 31, 2017, our world-wide employee population consisted of 363 people. +47 +• +To identify the “median employee” from our employee population, we compared the amount of salary, wages, overtime, commissions and bonuses of our employees as reflected in our payroll records. In making this determination, we did not annualize the compensation of employees who were hired in 2017 but did not work for us for the entire fiscal year. Since we do not widely distribute annual equity awards to our employees, such awards were excluded from our compensation measure. +• +Using the same median employee we used in our 2018 Proxy Statement, we combined all of the elements of this employee’s compensation for 2018 in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K, resulting in the annual total compensation as described above. +In calculating Dr. Tang’s 2018 annual total compensation of $2,251,709 for purposes of this pay ratio disclosure, we annualized his base salary since he did not become our CEO until April 1, 2018 and included his other compensation reported in the SCT below. +Based on this information, for 2018 the ratio of the annual total compensation of Dr. Tang, our President and CEO, to the median of the annual total compensation for employees, was 37 to 1. +48 +COMPENSATION TABLES +SUMMAR Y COMPENSATION TABLE +The following table summarizes the compensation of our CEO and the other NEOs, for the fiscal years ended December 31, 2018, 2017 and 2016: +Name & Principal +Position +Year +Salary 1 +($) +Bonus 2 +($) +Stock +Awards 3,4 +($) +Option +Awards +($) +Non- +Equity +Incentive +Plan +Compen- +sation 5 +($) +Change in +Pension Value +and Nonqualified +Deferred +Compensation +Earnings +($) +All other +Compen- +sation 6 +($) +Total +($) +Stephen S. Tang, Ph.D. +2018 +$ +412,885 +230,000 +$ +623,363 +— +$ +818,346 +— +15,000 +$ +2,099,594 +President and Chief +Executive Officer +Roberto Cuca +2018 +$ +263,365 +— +$ +435,758 +— +$ +353,580 +— +— +$ +1,052,703 +Chief Financial Officer +Anthony Zezzo II +2018 +$ +408,359 +— +$ +420,519 +— +$ +232,035 +— +— +$ +1,060,913 +Executive Vice President, +2017 +$ +400,333 +— +$ +391,691 +— +$ +272,341 +— +— +$ +1,064,365 +Business Unit Leader +2016 +$ +391,572 +— +$ +345,614 +— +$ +188,998 +— +— +$ +926,184 +Infectious Disease +Brian Smith +2018 +$ +320,813 +— +$ +411,212 +— +$ +246,626 +— +— +$ +978,651 +Vice Chairman and +2017 +$ +259,778 +— +$ +225,386 +— +$ +317,639 +— +— +$ +802,803 +Executive Vice President, +Innovation +Jack E. Jerrett +2018 +$ +369,804 +— +$ +379,004 +— +$ +220,654 +— +$ +4,000 +$ +973,462 +Senior Vice President +2017 +$ +360,800 +— +$ +264,761 +— +$ +290,567 +— +$ +4,000 +$ +920,128 +and General Counsel +2016 +$ +352,878 +— +$ +258,298 +— +$ +149,043 +— +$ +4,000 +$ +764,219 +Douglas A. Michels +2018 +$ +220,986 +— +$ +3,738,872 +— +$ +198,968 +— +$ +4,000 +$ +4,162,826 +Former President and +2017 +$ +633,608 +— +$ +1,378,310 +— +$ +1,331,442 +— +$ +4,000 +$ +3,347,360 +Former Chief Executive +2016 +$ +612,339 +— +$ +1,283,322 +— +$ +646,586 +— +$ +4,000 +$ +2,546,247 +Officer +Ronald H. Spair +2018 +$ +294,053 +— +$ +2,047,373 +— +$ +161,490 +— +$ +4,000 +$ +2,506,916 +Former Chief Financial +2017 +$ +496,730 +— +$ +696,357 +— +$ +683,448 +— +$ +4,000 +$ +1,880,535 +Officer and Former Chief +2016 +$ +480,069 +— +$ +632,930 +— +$ +362,074 +— +$ +4,000 +$ +1,479,073 +Operating Officer +____________________________________ +1 +The salaries shown for Dr. Tang and Mr. Cuca represent the amounts paid to these executives after they joined the Company on April 1, 2018 and May 7, 2018, respectively. Mr. Smith’s 2018 salary was initially set at $300,622 and was increased to $334,000 in August 2018 to bring his compensation in line with market levels. Mr. Smith’s 2017 Canadian-based salary has been converted into U.S. dollars using the Canadian to U.S. Dollar exchange rate at December 31, 2017 and his 2018 Canadian-based salary has been converted into U.S. dollars using the Canadian to U.S. Dollar exchange rate at December 31, 2018. +2 The indicated amount represents an onboarding cash bonus paid to Dr. Tang pursuant to the terms of his employment agreement. +3 +The indicated amounts reflect the aggregate grant date fair value of RS and PRU awards made to the NEOs during the applicable year, computed in accordance with Financial Accounting Standards Board (“FASB”) ASC Topic 718. The value of the PRUs reflect the assumption that 100% of target will be achieved for each of the performance measures reflected in the terms of the restricted unit awards. Certain assumptions used in the calculation of the indicated amounts are set forth for the applicable year of award in footnote 9 to the Company’s audited consolidated financial statements for the year ended December 31, 2018, included in the Company’s Annual Report on Form 10-K filed with the SEC on February 28, 2019 (the “2018 10-K Report”). The maximum grant-date fair value of the PRU awards made in 2018, assuming the highest level of performance measures will be achieved (120% of target resulting in a 150% payout), are as follows: Mr. Cuca, $326,818; Mr. Zezzo, $315,389; Mr. Smith, $308,409; Mr. Jerrett, $284,253; Mr. Michels, $1,188,798; and Mr. Spair, $596,460. +4 +The amounts indicated for Mr. Michels and Mr. Spair for 2018 also include compensation resulting from the acceleration of unvested RS upon their retirement in the amount of $2,153,808 and $1,252,092, respectively. +5 +The indicated amounts reflect incentive cash bonuses paid to the NEOs pursuant to an Incentive Plan, based on performance during the applicable year. For a description of incentive cash bonus payments for performance during 2018, see the Section entitled, “2018 Annual Incentive Cash Bonuses,” in the CD&A. +6 +The indicated amounts reflect $4,000 in cash contributed to a 401(k) profit sharing plan as an employer-matching contribution, which was offered to U.S. employees of the Company during each of the indicated years. Mr. Smith was eligible to participate in our Canadian subsidiary’s registered retirement savings plan in 2018; however he elected not to participate. The amount indicated for Dr. Tang represents the reimbursement of legal fees he incurred in connection with the review and negotiation of his employment agreement with the Company. +49 +GRANTS OF PLAN-BASED AWARDS +The following table summarizes information concerning possible incentive cash bonuses and possible and actual RS and PRU awards for the NEOs during the fiscal year ended December 31, 2018: +Estimated Possible Payouts +Under Non-Equity Incentive +Plan Awards 4 +Estimated Possible Payouts Under +Equity Incentive Plan Awards 5 +Name +Grant +Date +Threshold +($) +Target +($) +Maximum +($) +Threshold +(# Shs.) +Target +(# Shs.) +Maximum +(# Shs.) +All other +Stock +Awards: +Number +of Shares +of Stock +or Units 6 +(#Shs.) +All other +Option +Awards: +Number +of +Securities +Underlying +Options +(#Shs.) +Exercise +of Base +Price of +Option +awards +($/Sh) +Grant +Date +Fair +Value of +Stock +Awards 7 +($) +Stephen S. Tang, Ph.D. +4/1/2018 1 +— +— +— +— +— +— +37,116 +RS +— +— +$ +623,363 +President and +N/A +$ +240,125 +$ +480,250 +$ +1,440,750 +— +— +— +— +— +— +N/A +Chief Executive Officer +Roberto Cuca +5/7/2018 2 +— +— +— +— +— +— +14,320 +RS +— +— +$ +217,879 +Chief Financial Officer +5/7/2018 2 +— +— +— +— +— +— +14,320 +PRU +— +— +$ +217,879 +N/A +$ +103,750 +$ +207,500 +$ +622,500 +— +— +— +— +— +— +N/A +Anthony Zezzo II +2/1/2018 3 +— +— +— +— +— +— +9,714 +RS +— +— +$ +210,260 +Executive Vice President +2/1/2018 3 +— +— +— +— +— +— +9,714 +PRU +— +— +$ +210,260 +Business Unit Leader, +N/A +$ +81,703 +$ +163,405 +$ +490,216 +8,789 +RS +11,565 +RS +14,340 +RS +— +— +— +N/A +Infectious Disease +N/A +— +— +— +8,789 +PRU +11,565 +PRU +14,340 +PRU +— +— +— +N/A +Brian Smith +2/1/2018 3 +— +— +— +— +— +— +9,499 +RS +— +— +$ +205,606 +Vice Chairman and +2/1/2018 3 +— +— +— +— +— +— +9,499 +PRU +— +— +$ +205,606 +Executive Vice President, +N/A +$ +66,800 +$ +133,600 +$ +400,800 +6,224 +RS +8,189 +RS +10,155 +RS +— +— +— +N/A +Innovation +N/A +— +— +— +6,224 +PRU +8,189 +PRU +10,155 +PRU +— +— +— +N/A +Jack E. Jerrett +2/1/2018 3 +— +— +— +— +— +— +8,755 +RS +— +— +$ +189,502 +Senior Vice President +2/1/2018 3 +— +— +— +— +— +— +8,755 +PRU +— +— +$ +189,502 +and General Counsel +N/A +$ +64,746 +$ +129,492 +$ +388,476 +5,837 +RS +8,338 +RS +10,839 +RS +— +— +— +N/A +N/A +— +— +— +5,837 +PRU +8,338 +PRU +10,839 +PRU +— +— +— +N/A +Douglas A. Michels +2/1/2018 3 +— +— +— +— +— +— +36,615 +RS +— +— +$ +792,532 +Former President and +2/1/2018 3 +— +— +— +— +— +— +36,615 +PRU +— +— +$ +792,532 +Former Chief Executive +N/A +$ +280,237 +$ +560,474 +$ +1,681,422 +21,969 +RS +29,292 +RS +36,615 +RS +— +— +— +N/A +Officer +N/A +— +— +— +21,969 +PRU +29,292 +PRU +36,615 +PRU +— +— +— +N/A +Ronald H. Spair +2/1/2018 3 +— +— +— +— +— +— +18,371 +RS +— +— +$ +397,640 +Former Chief Financial +2/1/2018 3 +— +— +— +— +— +— +18,371 +PRU +— +— +$ +397,640 +Officer and Former +N/A +$ +129,234 +$ +258,468 +$ +775,403 +12,056 +RS +16,075 +RS +20,093 +RS +— +— +— +N/A +Chief Operating +N/A +— +— +— +12,056 +PRU +16,075 +PRU +20,093 +PRU +— +— +— +N/A +Officer +_________________________________ +1 Onboarding award consisting of time-vested RS granted to Dr. Tang on his date of hire. +2 Onboarding award consisting of time-vested RS and PRUs granted to Mr. Cuca on his date of hire. +3 +Annual Incentive equity awards to NEOs consisted of a combination of time-vested RS and PRUs that were determined for 2018 pursuant to the LTIP based on performance during 2017. Annual equity awards made during 2018 were approved by the Compensation Committee effective on February 1, 2018. For a description of these equity awards and their terms, see the Section entitled, “2018 Long-Term Incentive Awards,” in the CD&A. +4 +The indicated amounts represent potential incentive cash bonus payments to the NEOs under the 2018 Incentive Plan. On January 25, 2019, bonus payments under the 2018 Incentive Plan were approved by the Compensation Committee for the NEOs, based on performance during 2018. The Threshold and Target amounts assume the executive receives 50% and 100% of his target bonus and that the aggregate bonus pool is funded at 50% and 100% for each performance objective in the 2018 Incentive Plan, respectively. The Maximum amounts assume that the recipient receives 150% of his target bonus based on performance for 2018 and that the bonus pool is funded at 200% or the Maximum level for each performance objective in the 2018 Incentive Plan. Because Messrs. Michaels and Spair retired from the Company during 2018, they ultimately received bonuses equal to their target amounts (after adjustment for bonus pool funding) pro-rated to their respective dates of retirement. A further description of the payments approved under the 2018 Incentive Plan is set forth in the Section entitled, “2018 Annual Incentive Cash Bonuses,” in the CD&A. +50 +5 +The indicated amounts represent the potential number of shares which could have been granted to the NEOs in 2018 in the form of RS and PRUs pursuant to the LTIP, based on performance during 2017. The individual share numbers for each potential award were calculated by dividing 50% of the long-term incentive targets for each NEO set forth in the LTIP by the mean between the high and low sales price of the Common Stock as reported by NASDAQ on the date of grant. The number of shares corresponding to the PRUs were calculated based on the assumption that 100% of target is achieved for each of the performance measures set forth in the terms of such PRU awards. The actual number of shares received upon vesting of the PRUs could vary from 50% to 150% of target depending on the degree to which the performance measures are achieved. +6 +The indicated amounts represent the actual number of shares of RS or PRUs granted to the NEOs in 2018 under the LTIP, based on performance during 2017 or, in the case of Dr. Tang and Mr. Cuca, granted to those executives as onboarding compensation pursuant to their respective employment agreements. A further description of these equity awards and their terms is set forth in the Section entitled, “2018 Long-Term Incentive Awards,” in the CD&A. +7 +The indicated amounts represent the grant date fair value calculated in accordance with FASB ASC Topic 718. +OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2018 +The following table summarizes information regarding unexercised stock options and unvested RS and PRUs held by the NEOs as of December 31, 2018: +Option Awards 1 +Stock Awards 1 +Name +Number of +Securities +Underlying +Unexercised +Options +(#) +Exercisable +Number of +Securities +Underlying +Unexercised +Options 2 +(#) +Unexercisable +Equity +Incentive +Plan +Awards: +Number of +Securities +Underlying +Unexercised +Unearned +Options (#) +Option +Exercise +Price +($/Sh.) +Option +Expiration +Date +Number of +Shares or +Units of +Stock +That +Have +Not +Vested 2 (#) +Market +Value of +Shares or +Units of +Stock +That +Have Not +Vested 10 ($) +Equity +Incentive +Plan +Awards: +Number of +Unearned +Shares, +Units or +Other +Rights +that +Have Not +Vested 2 (#) +Equity +Incentive +Plan +Awards: +Market +or Payout +Value of +Unearned +Shares, +Units or +other +Rights +That +Have Not +Vested 10 ($) +Stephen S. Tang, Ph.D. +16,667 +— +— +$ +8.33 +11/14/2026 +— +— +— +— +President and Chief +— +— +— +— +— +37,116 +3(a) +$ +433,515 +— +— +Executive Officer +Roberto Cuca +— +— +— +— +— +14,320 +4(a) +$ +167,258 +— +— +Chief Financial Officer +— +— +— +— +— +— +— +7,160 +4(b) +$ +83,629 +— +— +— +— +— +— +— +10,740 +4(c) +$ +125,443 +Anthony Zezzo II +36,204 +— +— +$ +11.30 +2/1/2022 +— +— +— +— +Executive Vice President, +32,921 +— +— +$ +7.05 +2/1/2023 +— +— +— +— +Business Unit Leader, +10,427 +— +— +$ +5.72 +2/3/2024 +— +— +— +— +Infectious Disease +40,040 +1,741 +5(a) +— +$ +9.31 +2/3/2025 +— +— +— +— +— +— +— +— +— +10,726 +5(b) +$ +125,280 +— +— +— +— +— +— +— +14,719 +5(c) +$ +171,918 +— +— +— +— +— +— +— +9,714 +5(d) +$ +113,460 +— +— +— +— +— +— +— +— +— +24,135 +5(e) +$ +281,897 +— +— +— +— +— +— +— +24,135 +5(e) +$ +281,897 +— +— +— +— +— +— +— +16,560 +5(f) +$ +193,421 +— +— +— +— +— +— +— +11,040 +5(g) +$ +128,947 +— +— +— +— +— +— +— +7,286 +5(h) +$ +85,100 +— +— +— +— +— +— +— +4,857 +5(i) +$ +56,730 +Brian Smith +1,343 +— +— +$ +11.30 +2/1/2022 +— +— +— +— +Vice Chairman +7,777 +730 +6(a) +— +$ +9.31 +2/3/2025 +— +— +— +— +Executive Vice +— +— +— +— +— +4,312 +6(b) +$ +50,364 +— +— +President, Innovation +— +— +— +— +— +8,470 +6(c) +$ +98,930 +— +— +— +— +— +— +— +9,499 +6(d) +$ +110,948 +— +— +— +— +— +— +— +— +— +9,704 +6(e) +$ +113,343 +— +— +— +— +— +— +— +9,704 +6(e) +$ +113,343 +— +— +— +— +— +— +— +9,530 +6(f) +$ +111,310 +— +— +— +— +— +— +— +6,352 +6(g) +$ +74,191 +— +— +— +— +— +— +— +7,125 +6(h) +$ +83,220 +— +— +— +— +— +— +— +4,749 +6(i) +$ +55,468 +51 +Option Awards 1 +Stock Awards 1 +Name +Number of +Securities +Underlying +Unexercised +Options +(#) +Exercisable +Number of +Securities +Underlying +Unexercised +Options 2 +(#) +Unexercisable +Equity +Incentive +Plan +Awards: +Number of +Securities +Underlying +Unexercised +Unearned +Options (#) +Option +Exercise +Price +($/Sh.) +Option +Expiration +Date +Number of +Shares or +Units of +Stock +That +Have +Not +Vested 2 (#) +Market +Value of +Shares or +Units of +Stock +That +Have Not +Vested 10 ($) +Equity +Incentive +Plan +Awards: +Number of +Unearned +Shares, +Units or +Other +Rights +that +Have Not +Vested 2 (#) +Equity +Incentive +Plan +Awards: +Market +or Payout +Value of +Unearned +Shares, +Units or +other +Rights +That +Have Not +Vested 10 ($) +Jack E. Jerrett +6,407 +— +— +$ +5.72 +2/3/2024 +— +— +— +— +Senior Vice President and +12,133 +1,517 +7(a) +— +$ +9.31 +2/3/2025 +— +— +— +— +General Counsel +— +— +— +— +— +8,016 +7(b) +$ +93,627 +— +— +— +— +— +— +— +9,949 +7(c) +$ +116,204 +— +— +— +— +— +— +— +8,755 +7(d) +$ +102,258 +— +— +— +— +— +— +— +— +— +18,038 +7(e) +$ +210,684 +— +— +— +— +— +— +— +18,038 +7(e) +$ +210,684 +— +— +— +— +— +— +— +11,195 +7(f) +$ +130,758 +— +— +— +— +— +— +— +7,462 +7(g) +$ +87,156 +— +— +— +— +— +— +— +6,567 +7(h) +$ +76,703 +— +— +— +— +— +— +— +4,377 +7(i) +$ +51,123 +Douglas A. Michels +58,221 +— +— +$ +5.72 +2/3/2024 +— +— +— +— +Former President and +82,378 +— +— +$ +9.31 +2/3/2025 +— +— +— +— +Former Chief Executive +— +— +— +— +— +— +— +89,618 +8(a) +$ +1,046,738 +Officer +— +— +— +— +— +— +— +89,618 +8(a) +$ +1,046,738 +— +— +— +— +— +— +— +58,272 +8(b) +$ +680,617 +— +— +— +— +— +— +— +38,847 +8(c) +$ +453,733 +— +— +— +— +— +— +— +27,642 +8(d) +$ +322,859 +— +— +— +— +— +— +— +18,307 +8(e) +$ +213,826 +Ronald H. Spair +— +— +— +— +— +— +— +44,199 +9(a) +$ +516,244 +Former Chief Financial +— +— +— +— +— +— +— +44,199 +9(a) +$ +516,244 +Officer and Former Chief +— +— +— +— +— +— +— +29,441 +9(b) +$ +343,871 +Operating Officer +— +— +— +— +— +— +— +19,627 +9(c) +$ +229,243 +— +— +— +— +— +— +— +13,779 +9(d) +$ +160,939 +— +— +— +— +— +— +— +9,185 +9(e) +$ +107,281 +1 +The table does not include RS and PRUs awarded to the NEOs in February 2019 pursuant to the LTIP in respect of performance during 2018. +2 +Stock options vest over four years, with the first 25% vesting on the first anniversary of the grant date and the remaining 75% vesting on a monthly basis over the next three years following the first anniversary of the grant date. Grants of RS vest over a three-year period, with one-third vesting on the first anniversary of the grant date, a second third vesting on the second anniversary and the final third vesting on the third anniversary. PRUs will not vest until three years from the grant date and only if certain performance measures are met during the three-year service period. +3 +The indicated stock options, RS, and PRUs vest as follows: +(a) +37,116 restricted shares cliff vesting on April 1, 2023 +4 +The indicated stock options, RS, and PRUs vest as follows: +(a) +4,774 restricted shares on May 7, 2019 and 4,773 restricted shares on May 7, 2020 and 2021; +(b) +7,160 PRUs cliff vesting on May 7, 2021, provided performance metrics have been achieved; and +(c) +10,740 PRUs cliff vesting on May 7, 2021, provided performance metrics have been achieved. +5 +The indicated stock options, RS, and PRUs vest as follows: +(a) +870 options on January 3, 2019 and 871 options on February 3, 2019; +(b) +10,726 restricted shares on February 1, 2019; +(c) +7,360 restricted shares on February 1, 2019 and 7,359 restricted shares on February 1, 2020; +(d) +3,238 restricted shares on February 1, 2019, 2020 and 2021; +(e) +24,135 PRUs cliff vesting on February 1, 2019, provided performance metrics have been achieved; +(f) +16,560 PRUs cliff vesting on February 1, 2020, provided performance metrics have been achieved; +(g) +11,040 PRUs cliff vesting on February 1, 2020, provided performance metrics have been achieved; +(h) +7,286 PRUs cliff vesting on February 1, 2021, provided performance metrics have been achieved; and +(i) +4,857 PRUs cliff vesting on February 1, 2021, provided performance metrics have been achieved. +52 +6 +The indicated stock options, RS, and PRUs vest as follows: +(a) +365 options on January 3 and February 3, 2019; +(b) +4,312 restricted shares on February 1, 2019; +(c) +4,235 restricted shares on February 1, 2019 and 2020; +(d) +3,167 restricted shares on February 1, 2019, 3,166 restricted shares on February 1, 2020 and 3,166 restricted shares on February 5, 2020; +(e) +9,704 PRUs cliff vesting on February 1, 2019, provided performance metrics have been achieved; +(f) +9,530 PRUs cliff vesting on February 1, 2020, provided performance metrics have been achieved; +(g) +6,352 PRUs cliff vesting on February 1, 2020, provided performance metrics have been achieved; +(h) +7,125 PRUs cliff vesting on February 1, 2021, provided performance metrics have been achieved; and +(i) +4,749 PRUs cliff vesting on February 1, 2021, provided performance metrics have been achieved; +7 +The indicated stock options, RS, and PRUs vest as follows: +(a) +758 options on January 3, 2019 and 759 options February 3, 2019; +(b) +8,016 restricted shares on February 1, 2019; +(c) +4,975 restricted shares on February 1, 2019 and 4,974 restricted shares on February 1, 2020; +(d) +2,919 restricted shares on February 1, 2019 and 2,918 restricted shares on February 1, 2020 and 2021; +(e) +18,038 PRUs cliff vesting on February 1, 2019, provided performance metrics have been achieved; +(f) +11,195 PRUs cliff vesting on February 1, 2020, provided performance metrics have been achieved; +(g) +7,462 PRUs cliff vesting on February 1, 2020, provided performance metrics have been achieved; +(h) +6,567 PRUs cliff vesting on February 1, 2021, provided performance metrics have been achieved; and +(i) +4,377 PRUs cliff vesting on February 1, 2021, provided performance metrics have been achieved. +8 +The indicated stock options, RS, and PRUs vest as follows: +(a) +89,618 PRUs cliff vesting on February 1, 2019, provided performance metrics have been achieved; +(b) +58,272 PRUs cliff vesting on February 1, 2020, provided performance metrics have been achieved; +(c) +38,847 PRUs cliff vesting on February 1, 2020, provided performance metrics have been achieved; +(d) +27,642 PRUs cliff vesting on February 1, 2021, provided performance metrics have been achieved; and +(e) +18,307 PRUs cliff vesting on February 1, 2021, provided performance metrics have been achieved. +9 +The indicated stock options, RS, and PRUs vest as follows: +(a) +44,199 PRUs cliff vesting on February 1, 2019, provided performance metrics have been achieved; +(b) +29,441 PRUs cliff vesting on February 1, 2020, provided performance metrics have been achieved; +(c) +19,627 PRUs cliff vesting on February 1, 2020, provided performance metrics have been achieved; +(d) +13,779 PRUs cliff vesting on February 1, 2021, provided performance metrics have been achieved; and +(e) +9,185 PRUs cliff vesting on February 1, 2021, provided performance metrics have been achieved. +10 +The indicated values were determined by multiplying the number of unvested shares of RS and unvested PRUs shown in this table by $11.68 per share, the closing price of the Company’s Common Stock as reported by NASDAQ on December 31, 2018. +OPTION EXERCISES AND STOCK VESTED +The following table summarizes information with respect to the exercise of stock options and vesting of RS for each of the NEOs during the fiscal year ended December 31, 2018: +Option Awards +Stock Awards 1 +Name +Number +of Shares +Acquired +on +Exercise +(#) +Value +Realized +on +Exercise 2 +($) +Number +Of Shares +Acquired +on +Vesting +(#) +Value +Realized +on +Vesting 3 +($) +Stephen S. Tang, Ph.D. +23,333 +$ +225,047 +7,952 +$ +127,073 +President and Chief Executive Officer +Roberto Cuca +— +— +— +— +Chief Financial Officer +Anthony Zezzo II +— +— +22,942 +$ +493,539 +Executive Vice President, Business Unit +Leader, Infectious Disease +Brian Smith +20,000 +$ +240,070 +10,583 +$ +227,799 +Vice Chairman and +Executive Vice President, Innovation +53 +Option Awards +Stock Awards 1 +Name +Number +of Shares +Acquired +on +Exercise +(#) +Value +Realized +on +Exercise 2 +($) +Number +Of Shares +Acquired +on +Vesting +(#) +Value +Realized +on +Vesting 3 +($) +Jack E. Jerrett +— +— +17,222 +$ +370,107 +Senior Vice President and General Counsel +Douglas A. Michels +— +— +213,948 +$ +3,996,562 +Former President and Chief Executive Officer +Ronald H. Spair +46,669 +$ +402,844 +106,392 +$ +2,027,695 +Former Chief Financial Officer and Chief Operating +Officer +1 There were no PRUs that vested during 2018. +2 The indicated amounts represent the number of shares acquired upon exercise of the options multiplied by the difference between the market value of the Company’s Common Stock on the applicable exercise date and the option exercise price. +3 +The indicated amounts were calculated by multiplying the number of restricted shares acquired upon vesting by the market value of the Company’s Common Stock on the applicable vesting date. The market value was determined by calculating the mean between the high and low sales prices of the Common Stock as reported by NASDAQ on the vesting date. +RETIREMENT BENEFITS +The NEOs are eligible to participate in our 401(k) Plan or, in the case of Mr. Smith, a registered retirement plan offered by DNA Genotek, on the same terms and conditions applicable to other employees. For a further description of the terms of the 401(k) Plan, see the Section entitled, “Retirement Programs,” in the CD&A. +NONQUALIFIED DEFERRED COMPENSATION +The OraSure Technologies, Inc. Deferred Compensation Plan (the “Plan”) is a non-qualified deferred compensation plan designed to provide deferred compensation benefits to a select group of the Company’s highly compensated employees, including all of the NEOs, and to non-employee members of the Board. +The Plan allows for deferrals by participants of up to 100% of their annual base salaries (or in the case of non-employee Directors, 100% of fees payable under the Company’s Non-Employee Director Compensation Policy), up to 100% of annual incentive cash bonuses and, upon vesting, restricted shares of the Company’s Common Stock and shares received in respect of performance-vested restricted units awarded under the LTIP. The Company may also make discretionary contributions to the accounts of employees participating in the Plan. Cash balances in participants’ accounts may be invested in a list of investment options that are similar to the fund choices offered in the Company’s 401(k) plan. Participants will be permitted to sell vested shares in their accounts, subject to compliance with the Company’s Insider Trading Policy and applicable securities laws, and invest the proceeds of any such sale in the investment options available under the Plan. Participants will be 100% vested in their accounts and the restricted shares they defer, except that Company contributions will vest over one or more years as determined by the Company. In the event of death, disability or change of control, a participant will become 100% vested in any then unvested Company contributions. +Participants may elect to receive a distribution from his or her account upon a specified date, separation from service, change of control, disability and/or death. Distributions will be made in a lump sum or installments, as allowed under the Plan. +Amounts contributed to a participant’s account through elective deferrals or through the Company’s discretionary contributions are generally not subject to income tax, and the Company does not receive a deduction until they are distributed pursuant to the Plan. +54 +However, cash deferrals are subject to the Federal Insurance Contributions Act Tax imposed at the time of deferral (the “FICA tax”). Deferrals of restricted shares and shares received in respect of performance-vested restricted units are subject to the FICA tax at the time the shares vest, but are not subject to income tax, and the Company does not receive the deduction until the shares are distributed pursuant to the Plan. The Company may amend or terminate the Plan at any time in accordance with applicable law. +The following table summarizes information for each NEO with respect to the Plan for the fiscal year ended December 31, 2018: +Name +Executive +Contributions 1 +($) +Registrant +Contributions +($) +Aggregate +Earnings/ +Loss 2 +($) +Aggregate +Withdrawals/ +Distributions +($) +Aggregate +Balance +at 12/31/18 1,2 +($) +Stephen S. Tang, Ph.D. +President and Chief +Executive Officer +— +— +— +— +— +Roberto Cuca +Chief Financial Officer +— +— +— +— +— +Anthony Zezzo II +Executive Vice President, +Business Unit Leader +Infectious Disease +— +— +— +— +— +Brian Smith +Vice Chairman and +Executive Vice President, +Innovation +— +— +— +— +— +Jack E. Jerrett +Senior Vice President and +General Counsel +— +— +— +— +— +Douglas A. Michels +Former President and Former +Chief Executive Officer +— +— +— +— +— +Ronald H. Spair +Former Chief Financial Officer +and Former Chief Operating Officer +$ +1,971,087 +— +$ +748,726 +$ +791,107 +$ +3,209,273 +1 +The indicated amounts of NEO contributions have been reported as compensation in the Summary Compensation Table. +2 +There were no earnings or deferred compensation at above market or preferential rates and, therefore, no earnings have been reported as compensation in the Summary Compensation Table for 2018. Aggregate earnings include dividends and interest earned during the period, as well as the net unrealized appreciation of the underlying investments in the participant’s account. +55 +EMPLOYMENT AGREEME NTS AND POTENTIAL PAYME NTS UPON TERMINATION OR CHANGE OF CONTROL +Employment Agreements +We have entered into employment agreements with all of our NEOs. We believe such agreements are necessary to attract and retain critical talent, and are in-line with market practices. The following summary describes the material terms of the employment arrangements with Dr. Tang and the other NEOs. +In January 2018, we entered into an employment agreement with Dr. Tang in connection with his appointment as the Company’s new President and CEO, effective April 1, 2018. Under the agreement, Dr. Tang will receive (i) an annual base salary of at least $565,000, (ii) an annual cash bonus opportunity under the Company’s annual Incentive Plan with a bonus target of at least 85% of his base salary and (iii) annual equity awards under the Company’s LTIP ranging from at least 150%-250% of his base salary, with a target of 200%. Dr. Tang also received a sign-on cash bonus of $230,000 and an award of 37,116 shares of time-vested RS. The award of RS will vest on the fifth anniversary of Dr. Tang’s date of employment. Upon a termination of employment, Dr. Tang’s agreement provides for certain post-employment severance and other benefits, as described below. +Dr. Tang’s employment agreement will terminate upon his death or disability. In addition, Dr. Tang may unilaterally terminate his employment at any time and for any reason upon 90 days written notice to the Company or for “good reason” (as defined below). Dr. Tang’s employment agreement can also be terminated by the Company for “Cause” (as defined below) or without “Cause.” +As used in Dr. Tang’s agreement, the term “good reason” means (i) a material breach of the agreement by the Company, (ii) a material diminution in Dr. Tang’s base compensation or authority, duties or responsibilities (following a change of control, such a diminution shall occur if Dr. Tang no longer functions as the sole chief executive officer of the successor organization), (iii) a material change in Dr. Tang’s reporting relationship from the Board to another employee of the Company (following a change of control, such a diminution shall occur if Dr. Tang no longer reports to the board of directors of a public company), or (iv) a material change in Dr. Tang’s job location. +A “change of control” generally is defined to take place when disclosure of such a change would be required by the proxy rules promulgated by the SEC or when: +• +any person, or more than one person acting as a group within the meaning of Section 409A of the Internal Revenue Code (the “Code”) and the regulations issued thereunder, acquires ownership of stock of the Company that, together with stock held by such person or group, constitutes more than 50 percent of the total fair market value or total voting power of the stock of the Company; +• +any person, or more than one person acting as a group within the meaning of Code Section 409A and the regulations issued thereunder, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition) ownership of stock of the Company possessing 30 percent or more of the total voting power of the Company’s stock; +• +a majority of the members of the Board is replaced during any 12-month period by Directors whose appointment or election is not endorsed by a majority of the members of the Board before the date of the appointment or election; or +• +a person, or more than one person acting as a group within the meaning of Code Section 409A and the regulations issued thereunder, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition) assets from the Company that have a total gross fair market value equal to or more than 40 percent of the total gross fair market value of all the assets of the Company immediately before such acquisition or acquisitions. +A “change of control period” is the period which begins 60 days prior to the occurrence of a change of control and ends 18 months thereafter. +“Cause” is defined as (i) the willful and continued failure by Dr. Tang to substantially perform his duties as provided in the agreement after a written demand for substantial performance is delivered to Dr. Tang by the Board, and Dr. Tang’s failure to comply with such demand within a reasonable time; (ii) the engaging by Dr. Tang in gross misconduct or gross negligence materially injurious to the Company; (iii) the commission of any act in direct competition with or materially detrimental to the best interests of the Company; or (iv) Dr. Tang’ conviction of having committed a felony. +56 +Upon the termination of Dr. Tang’s employment for any reason, Dr. Tang will be entitled to receive his salary through the date of termination and any bonus approved by the Board or the Compensation Committee prior to the date of termination but not yet paid. In the case of a termination upon his death or disability or by the Company without Cause, or in the case of a unilateral termination by Dr. Tang or a termination by Dr. Tang for good reason where in either case the termination occurs after June 30 of any year, Dr. Tang will also receive a cash bonus for the year of termination prorated through the date of termination. In addition, if termination is for good reason or without Cause (which includes the Company’s failure to renew the agreement) and does not occur during a change of control period, Dr. Tang would receive additional severance in the form of a lump sum amount equivalent to 18 months of his annual salary plus reimbursement of the costs of continuation coverage under the Company’s health plans (if Dr. Tang elects coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985) for a period of 18 months after the date of termination. If, however, termination is for good reason or without Cause (which includes the Company’s failure to renew the agreement) and occurs during a change of control period, Dr. Tang will receive a lump sum amount equivalent to 36 months of his annual salary and reimbursement of continuation coverage under the Company’s health plan for 36 months. If Dr. Tang is a “specified employee” within the meaning of Code Section 409A at the time of the termination of his employment and any of the foregoing payments would subject him to any tax, interest or penalty under Code Section 409A or regulation thereunder, then the payment shall not be made until the first day which is at least six months after the date of termination of his employment. +All stock awards granted to Dr. Tang are required to immediately vest (i) in the event of a change of control or (ii) if Dr. Tang’s employment is terminated for good reason by Dr. Tang or by the Company without Cause during a change of control period, and 50% of such stock awards shall vest in the event Dr. Tang’s employment is terminated for good reason by Dr. Tang or by the Company without Cause during any period other than a change of control period. +In May 2018, we entered into an employment agreement with Mr. Cuca, pursuant to which Mr. Cuca will receive (i) an annual base salary of at least $415,000, (ii) a target bonus opportunity under the Company’s annual incentive plan of 50% of his base salary, and (iii) annual equity awards under the Company’s long-term incentive policy ranging from 105% to 175% of his base salary (with a target of 140%). Mr. Cuca also received an onboarding equity award having an aggregate value of $435,750. This award consisted of 50% time-vested RS and 50% PRUs. The terms of Mr. Cuca’s award are substantially the same as the terms of awards made to the Company’s other executives in February 2018. +The termination and severance provisions in the employment agreements for Mr. Cuca and the other NEOs (except for Mr. Smith) are substantially similar to Dr. Tang’s employment agreement, with the following exceptions: Mr. Jerrett is entitled to receive severance equivalent to 12 months of his annual salary, rather than 18 months, in the event of a termination for good reason or without Cause where such termination does not occur during a change of control period and he will be entitled to receive severance equivalent to 24 months of his annual salary, rather than the 36 months, if Mr. Jerrett terminates his agreement after a change of control or a termination for good reason or without Cause occurs during a change of control period. Mr. Zezzo will also be entitled to receive severance equal to 12 months of his annual salary if he is terminated for good reason or without Cause, but he will receive 24 months of his annual salary if such termination occurs during a change of control period. In the employment agreements with Messrs. Zezzo and Jerrett, the term “good reason” also includes a material diminution of the budget over which the executive exercises control and a change of control period begins upon the occurrence of a change of control. Finally, neither Mr. Zezzo nor Mr. Jerrett shall be entitled to a prorated bonus in the event of a unilateral termination by either executive after June 30 of the applicable year. +If Mr. Smith’s employment is terminated by the Company without “Cause” or for “good reason”, Mr. Smith will receive severance equal to 12 months of his base salary. As used in Mr. Smith’s employment agreement, “good reason” will occur if Mr. Smith terminates his employment within 30 days of the occurrence of any of the following: (i) any material reduction in his salary and bonus; (ii) a material amendment to his duties, including any transfer to any position other than his current position unless such transfer is clearly consistent with a promotion; or (iii) any required relocation beyond a 50 kilometer radius from the company’s head office. A termination of Mr. Smith’s employment for “Cause” will occur if the following events occur: (i) the act or omission involving (A) material dishonesty or (B) fraud with respect to the company, its subsidiaries or any of their customers or suppliers; (ii) a substantial and repeated failure to perform his duties; (iii) gross negligence or willful misconduct; or (iv) conduct tending to bring the company or any of its subsidiaries into substantial disgrace or disrepute. +57 +Retirement Agreements +As we previously announced, during 2018 we entered into a retirement agreement with Mr. Michels, our former President and CEO, which provided that: (i) the unvested portions of stock options and time-vested RS awards granted to Mr. Michels prior to the date of his retirement agreement would vest in full as of March 31, 2018, his retirement date; (ii) the unvested portions of PRUs granted to Mr. Michels prior to the date of his retirement agreement would vest in full three years after the grant date, subject to the satisfaction of performance measures applicable to such PRUs, in accordance with the original terms of the relevant award agreement, but without the requirement that Mr. Michels continue to be employed by the Company after his retirement date; (iii) Mr. Michels would receive a pro-rated bonus payment under the Company’s 2018 Incentive Plan equal to 85% of his base salary, subject to adjustment to reflect the actual bonus pool funding approved by the Board; (iv) Mr. Michels would receive his normal annual equity award in 2018 for his performance during 2017 pursuant to the LTIP, with a grant date value at least equal to 200% of Mr. Michels’ base salary, with the RS portion of the award vesting on Mr. Michels’ retirement date and the PRU portion vesting three years after the grant date, subject to the satisfaction of performance measures determined by the Board, but without the requirement that Mr. Michels continue to be employed by the Company after his retirement date; and (v) if after retirement Mr. Michels elects to receive continuation coverage under the Company’s group health plan pursuant to the COBRA and maintains such coverage for the full period permitted by law, he would have the right to elect to continue such coverage at his own cost and expense under the terms of the Company’s group health plan. +As we also previously announced, we also entered into a retirement agreement with Mr. Spair in 2018 that contains the same terms as Mr. Michels’ retirement agreement, except that Mr. Spair’s retirement agreement provided that his 2018 equity award (for his performance during 2017) would have a grant date value at least equal to 140% of his base salary, and his bonus payment under the Company’s 2018 Incentive Plan would be based on his target of 50% of his base salary, subject to adjustment to reflect the actual bonus pool funding approved by the Board, and would be pro-rated to his date of retirement. +Finally, as previously announced, we entered into a retirement agreement with Brian Smith, pursuant to which Mr. Smith left his position as Executive Vice President, Business Unit Leader, Molecular Solutions of DNAG and became Vice Chairman and Executive Vice President, Innovation at DNAG, beginning January 1, 2019. Pursuant to his retirement agreement, Mr. Smith will lead the Company’s global innovation function, consult on strategy and business matters and transition his duties to Ms. Kathleen G. Weber, his successor who now serves as Executive Vice President, Business Unit Leader, Molecular Solutions at DNAG. Mr. Smith will be eligible to receive an incentive cash bonus under our 2019 Incentive Plan based on a 40% base salary target, consistent with past practice. The unvested portions of time-vested RS awards received by Mr. Smith prior to January 1, 2019 will vest in full on his February 5, 2020 planned retirement date. In addition, the unvested portions of PRUs received by Mr. Smith prior to January 1, 2019 will vest in full three years after the grant date, subject to satisfaction of performance measures applicable to such awards, in accordance with the original terms of the original award agreement, but without the requirement that Mr. Smith continue to be employed after his retirement date. Mr. Smith received his normal annual equity award in 2019 for his performance during 2018 and will receive his normal annual equity award in 2020 for his performance during 2019, consistent with past practice, with such awards consisting of 50% time-vested RS and 50% PRUs. Finally, Mr. Smith will receive additional supplemental equity awards in both 2019 and 2020 at the same time the annual LTIP awards are granted to other senior executives, with such awards ranging from 25,000 to 37,500 PRUs for achievement of 100% to 120% of the applicable net revenue budget for DNAG for 2019 and 2020, as applicable. These supplemental awards will vest one year after the grant date to the extent the net revenue target is met with respect to the applicable year. +58 +The following table provides estimates of the potential severance and other post-termination benefits the NEOs (except for Messrs. Michels and Spair, because they are no longer with the Company) would receive assuming their employment was terminated as of December 31, 2018: +Name +Benefit +Voluntary +Termination +or +Termination +for Cause 1 +Termination +for Death +or Disability 2 +Termination +for Good +Reason or +Without +Cause Not +Within +Change of +Control +Period 2 +Voluntary +Termination +after Change of +Control (only for +Mr. Jerrett), or +Termination for +Good Reason or +Without Cause +Within Change of +Control Period 2 +Stephen S. Tang, Ph.D. +Salary Continuation +— +— +$ +847,500 +$ +1,695,000 +President +Bonus +$ +480,250 +$ +818,346 +$ +480,250 +$ +480,250 +and Chief Executive Officer +Accelerated Option Vesting +— +— +— +— +Accelerated Restricted Stock/Unit Vesting +— +$ +433,515 +$ +216,757 +$ +433,515 +Health Care Benefits +— +— +$ +39,088 +$ +39,088 +Total +$ +480,250 +$ +1,251,861 +$ +1,583,595 +$ +2,647,853 +Roberto Cuca +Salary Continuation +— +— +$ +622,500 +$ +1,245,000 +Chief Financial Officer +Bonus +$ +207,500 +$ +353,580 +$ +207,500 +$ +207,500 +Accelerated Option Vesting +— +— +— +— +Accelerated Restricted Stock/Unit Vesting +— +$ +334,515 +$ +167,258 +$ +334,515 +Health Care Benefits +— +— +$ +3,456 +$ +3,456 +Total +$ +207,500 +$ +688,095 +$ +1,000,714 +$ +1,790,471 +Anthony Zezzo II +Salary Continuation +— +— +$ +408,513 +$ +817,026 +Executive Vice President, +Bonus +— +$ +232,035 +$ +163,405 +$ +163,405 +Business Unit Leader, +Accelerated Option Vesting +— +4,135 +$ +2,067 +$ +4,135 +Infectious Disease +Accelerated Restricted Stock/Unit Vesting +— +$ +1,157,873 +$ +578,937 +$ +1,157,873 +Health Care Benefits +— +— +$ +4,687 +$ +4,687 +Total +$ +— +$ +1,394,043 +$ +1,157,609 +$ +2,147,126 +Brian Smith +Salary Continuation +— +— +$ +334,000 +$ +334,000 +Executive Vice President, +Bonus +— +$ +246,626 +— +— +Business Unit Leader +Accelerated Option Vesting +— +1,734 +$ +867 +$ +1,734 +Molecular Solutions +Accelerated Restricted Stock/Unit Vesting +— +$ +670,701 +$ +335,350 +$ +670,701 +Health Care Benefits +— +— +— +— +Total +— +$ +919,061 +$ +670,217 +$ +1,006,435 +Jack E. Jerrett +Salary Continuation +— +— +$ +369,977 +$ +739,954 +Senior Vice President +Bonus +— +$ +220,654 +$ +129,492 +$ +129,492 +and General Counsel +Accelerated Option Vesting +— +3,603 +$ +1,801 +$ +3,603 +Accelerated Restricted Stock/Unit Vesting +— +$ +869,576 +$ +434,788 +$ +869,576 +Health Care Benefits +— +— +$ +29,716 +$ +29,716 +Total +— +$ +1,093,833 +$ +965,774 +$ +1,772,341 +1 In the event of a unilateral termination by Dr. Tang or Mr. Cuca after June 30, they would receive a prorated bonus for the year in which termination occurs. +2 +The indicated values for the accelerated vesting of stock options reflect (i) the number of option shares which would vest on an accelerated basis, multiplied by (ii) the excess, if any, of the $11.68 per share closing price for the Company’s Common Stock, as reported by NASDAQ on December 31, 2018, over the applicable exercise price for each option. The indicated values for the accelerated vesting of RS and PRUs reflect the $11.68 per share closing price on December 31, 2018 multiplied by the number of shares which would vest on an accelerated basis (assuming, in the case of restricted units, that the applicable performance measures for the PRUs are met at 100% of target). +59 +EQUITY COMPENSATION PLAN INFORMATION +The following table provides information as of December 31, 2018 about the shares of Common Stock that may be issued upon the exercise of options under the OraSure Technologies, Inc. Stock Award Plan (“Award Plan”). The Award Plan, was adopted by the Company in connection with the merger of Epitope and STC to form the Company in September 2000. Additional grants of equity compensation may only be made under the Award Plan. +Plan Category +Number of Securities to be +Issued Upon Exercise of +Outstanding Options +(a) +Weighted- +Average Exercise +Price of Outstanding +Options +(b) +Number of Securities +Remaining Available for +Future Issuance Under +Equity Compensation Plans +(Excluding Securities +Reflected in Column (a)) +(c) +Equity compensation plans approved by +security holders +1,083,102 +$ +10.19 +3,704,243 +1 +Equity compensation plans not approved by +security holders +— +— +— +Total +1,083,102 +3,704,243 +1 +Represents shares remaining available for future issuance as of December 31, 2018 under the Award Plan. +DIRECTOR COMPENSATION +ANNUAL FEES +Under our Non-Employee Director Compensation Policy (“Director Policy”), non-employee members of the Board receive fixed annual fees for service on the Board and Committees of the Board during 2018, as set forth below. The fees were paid quarterly in arrears. +Position +Annual Fee +Board Chairman +$ +80,000 +Non-Chairman Board Member +$ +55,000 +Audit Chairman +$ +20,000 +Compensation Chairman +$ +20,000 +N&CG Chairman +$ +20,000 +Non-Chairman Audit Member +$ +5,000 +Non-Chairman Compensation Member +$ +5,000 +Non-Chairman N&CG Member +$ +5,000 +INITIAL EQUITY AWARDS +Non-employee Directors receive an initial grant of 40,000 stock options for the Company’s Common Stock upon joining the Board (the “Initial Grant”). An additional grant of 40,000 stock options is also made to any non-employee Director who becomes Chairman of the Board (the “Chairman Grant”). The options granted to non-employee Directors are nonqualified stock options and have an exercise price equal to the mean between the high and low sales prices of the Company’s Common Stock as quoted on the NASDAQ Stock Market on the grant date. Each Initial Grant and Chairman Grant generally vest on a monthly basis over the 24 months immediately following the grant date. Payment of the exercise price may be made in cash or by delivery of previously acquired shares of Common Stock having a fair market value equal to the aggregate exercise price. +ANNUAL EQUITY AWARDS +Under the Director Policy, each non-employee Director receives an annual grant of restricted shares (the “Annual Grant”) of the Company’s Common Stock on the date of each annual meeting of stockholders. Annual grants are made using a value transfer award method similar to that used for our executives under the LTIP. The dollar values of the Annual Awards were determined by the Compensation Committee and Board based on advice from an independent Compensation Consultant previously engaged by the Committee and an assessment of director equity awards made at comparable medical diagnostics and healthcare companies. +60 +Under the Director Policy, Annual Grants of restricted stock were made in 2018 pursuant to the values set forth in the following table: +Board Position +Award Grant Value +Chairman +$ +120,000 +Non-Chairman Director +$ +95,000 +The dollar value of each Annual Grant is converted into restricted stock by dividing the above values by the average of the high and low sales prices of the Company’s Common Stock, as reported on the NASDAQ Stock Market, on the grant date. Annual Grants of restricted stock will vest on the date that is twelve months from the date of grant. Non-employee Directors are permitted to direct the Company to withhold restricted stock in order to pay tax withholding obligations arising upon the vesting of such shares. +EQUITY AWARD TERMS +Any unvested stock options and restricted stock granted to non-employee Directors will vest in their entirety immediately upon the occurrence of a “change of control” of the Company. A “change of control” means a change of control that would be required to be reported under the Securities Exchange Act of 1934, as amended, and would be deemed to have occurred at such time as (i) any person, or more than one person acting as a group within the meaning of Section 409A of the Code, acquires ownership of stock of the Company that, together with stock held by such person or group, constitutes more than 50 percent of the total fair market value or total voting power of the stock of the Company; (ii) any person, or more than one person acting as a group within the meaning of Section 409A of the Code, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition) ownership of stock of the Company possessing 30 percent or more of the total voting power of the Company’s stock; (iii) a majority of the members of the Board is replaced during any 12-month period by Directors whose appointment or election is not endorsed by a majority of the members of the Board before the date of the appointment or election; or (iv) a person, or more than one person acting as a group within the meaning of Section 409A of the Code, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition) assets from the Company that have a total gross fair market value equal to or more than 40 percent of the total gross fair market value of all the assets of the Company immediately before such acquisition or acquisitions. In addition, if a non-employee Director leaves the Board for any reason other than a change of control, prior to the end of the vesting period for the Annual Grant of restricted stock, such award shall immediately vest on a pro-rata basis based on the actual duration of such Director’s service to the Board during such vesting period. +DEFERRED COMPENSATION +Non-employee Directors are permitted to defer all or a portion of the fees and grants of restricted stock under the Company’s Non-Qualified Deferred Compensation Plan, on terms similar to those applicable to our officers. +61 +DIRECTOR COMPENSATION DURING 2018 +The following table summarizes information related to compensation of non-employee Directors during the fiscal year ended December 31, 2018: +Name 1, 2 +Fees +Earned +or Paid +in Cash +($) +Stock +Awards 3 +($) +Option +Awards 4 +($) +Non-Equity +Incentive Plan +Compensation +($) +Change in +Pension +Value and +Nonqualified +Deferred +Compensation +Earnings +All Other +Compensation +($) +Total ($) +Mara G. Aspinall +$ +62,250 +$ +94,986 +— +— +— +— +$ +157,236 +Michael Celano +$ +83,000 +$ +120,000 +$ +303,360 +— +— +— +$ +506,360 +Eamonn P. Hobbs +$ +62,250 +$ +94,986 +— +— +— +— +$ +157,236 +Ronny B. Lancaster +$ +74,750 +$ +94,986 +— +— +— +— +$ +169,736 +Charles W. Patrick +$ +74,000 +$ +94,986 +— +— +— +— +$ +168,986 +Aradhana Sarin, M.D. +$ +68,378 +$ +94,986 +$ +398,948 +— +— +— +$ +562,312 +1 +Because Dr. Tang is an officer of the Company, he is not entitled to any separate compensation for service on the Board or any Committee thereof and has not been included in this table. Dr. Sarin became a Director in February 2018. +2 +Non-employee Directors held the following number of unvested shares of restricted stock (“RS”) and stock options (“SOs”) at December 31, 2018: Ms. Aspinall: 6,144 RS; 10,000 SOs; Mr. Celano: 7,762 RS; 26,668 SOs; Mr. Hobbs: 6,144 RS; Mr. Lancaster: 6,144 RS; Mr. Patrick: 6,144 RS; and Dr. Sarin: 6,144 RS; 21,667 SOs. The aggregate number of stock options and restricted shares held by Dr. Tang are set forth in the table in the Section entitled, “Outstanding Equity Awards,” in this Proxy Statement. +3 +The indicated amounts reflect the aggregate grant date fair value of restricted stock awards made to non-employee Directors during 2018, computed in accordance with FAS ASC Topic 718. +4 +The indicated amount reflects the aggregate grant date fair value of the stock option award made to Dr. Sarin upon being elected as a Director, computed in accordance with FAS ASC Topic 718. Dr. Sarin received a stock option award for 40,000 shares upon joining the Board in February 2018 and Mr. Celano received a stock option award for 40,000 shares upon being elected Chairman of the Board in 2018. Certain assumptions used in the calculation of the indicated amounts are set forth in footnote 9 to the Company’s audited consolidated financial statements for the fiscal year ended December 31, 2018, included in the Company’s 2018 Annual Report on Form 10-K. +62 +PROPOSALS REQUI RING YOUR VOTE +PROPOSAL NO. 1. ELECTION OF DIRECTORS +Background +At the Annual Meeting, you will be asked to vote on the election of two Directors. A majority of the independent members of the Board have nominated Eamonn P. Hobbs and Stephen S. Tang, Ph.D. for election as Class I Directors, for terms expiring at the Annual Meeting of Stockholders in 2022. +Each of the nominees for election as Directors is presently a member of our Board and has consented to continue to serve if re-elected to the Board. Mr. Hobbs joined the Board in 2016 and serves as a member of the Compensation Committee and Chairman of the Nominating and Corporate Governance Committee. Dr. Tang joined the Board in 2011 and now serves as the Company’s President and CEO. +We do not know of anything that would preclude any nominee from serving. However, should any nominee for any reason become unable or unwilling to serve as a Director, the persons named in the enclosed Proxy Card will vote the shares represented by each Proxy for such substitute nominee as the Board may approve. +Any vacancy that occurs on the Board that results from an increase in the number of Directors may be filled by the affirmative vote of a majority of the Directors then in office, and any other vacancy on the Board may be filled by the affirmative vote of a majority of the Directors then in office, even though less than a quorum of the Board, or by a sole remaining Director. +Certain information with respect to each person nominated for election as a Director and each person whose term of office as a Director will continue after the Annual Meeting, including the particular experience, qualifications, attributes and skills they possess that led to the conclusion that they should serve as a Director, is set forth below. +Name +Principal Occupation +Age +Director +Since +Class I (Nominees with Terms Expiring in 2019): +Eamonn P. Hobbs +President of Hobbs Medical Ventures, LLC +60 +2016 +Stephen S. Tang, Ph.D. +President and Chief Executive Officer of +OraSure Technologies, Inc. +58 +2011 +Class II (Directors Whose Terms Expire in 2020): +Mara G. Aspinall +President & Chief Executive Officer of +Health Catalysts Group +56 +2017 +Ronny B. Lancaster +Former Senior Vice President for Federal +Government Relations of Assurant, Inc. +67 +2003 +Aradhana Sarin, M.D. +Executive Vice President, Chief Strategy and +Business Officer of +Alexion Pharmaceuticals +44 +2018 +Class III (Directors Whose Terms Expire in 2021): +Michael Celano +Chief Operating Officer of Recro Pharma, Inc. +60 +2006 +Charles W. Patrick +Principal, Patrick Consulting +64 +2006 +63 +Eamonn P. Hobbs +Independent Director +Director since: 2016 +Class I Nominee +Term Expires: 2019 +Age : 60 +Other Current +Public Company +Directorships : None +Mr. Hobbs serves as President of Hobbs Medical Ventures, LLC, a consulting company he founded in the healthcare field. In March 2018, he co-founded and serves as Chairman of the Board and CEO of ImmunSYS, Inc. a company that is developing a new immunotherapy for late stage metastatic prostate cancer. From December 2016 to June 2017, Mr. Hobbs served as President and CEO of Digital Cognition Technologies, Inc., an early stage medical device company. From July 2014 to January 2016, Mr. Hobbs served as the President and Chief Executive Officer of Antares Pharma, Inc., a specialty pharmaceutical company focused on self-injection pharmaceutical products and technologies. He also served on the Antares board of directors from 2009 to 2016. From 2009 to 2013, Mr. Hobbs served as President and Chief Executive Officer, and from 2008 to 2013 was a member of the board of directors, of Delcath Systems, Inc., a specialty pharmaceutical and medical device public company specializing in cancer treatment. Prior to Delcath Systems, Inc., Mr. Hobbs served as President and Chief Executive Officer of AngioDynamics, Inc., a company he co-founded in 1988 as a division of E-Z-EM, Inc. which grew into a leading medical technology public company with a highly diverse product line. From 1988 to 2004, Mr. Hobbs also served as Executive Vice President of Business Development of E-Z-EM, Inc., a NASDAQ-traded company. Before joining AngioDynamics, Mr. Hobbs was Director of Marketing and Product Development at NAMIC; founder, President and Chief Executive Officer of Hobbs Medical, Inc.; and a Product Development Engineer at Cook Incorporated. Mr. Hobbs received a B.S. in Plastics Engineering with a Biomaterials emphasis at the University of Massachusetts (Lowell). Mr. Hobbs has served on the Board of Directors of the Medical Device Manufacturers Association since 2009. +Skills and Qualifications leading to conclusion that he should serve on the Board: +• Executive-level management experience as CEO of several public companies. +• Extensive experience in the medical device, pharmaceutical and combination products industries. +• Extensive experience managing operations in a cost-effective, efficient manner. +• Experience with governance and policy development for the medical device industry. +64 +Stephen S. Tang, Ph.D. +Director +Director since: 2011 +Class I Nominee +Term Expires: 2019 +Age : 58 +Other Current +Public Company +Directorships : None +For biographical information on Dr. Tang, see the Section entitled, “Executive Officers,” in this Proxy Statement. +Skills and Qualifications leading to conclusion that he should serve on the Board: +• Extensive business experience, particularly in the life sciences industry. +• Experience with strategic and business development matters. +• Executive-level management experience. +Mara G. Aspinall +Independent Director +Director since: 2017 +Class II Director +Term Expires: 2020 +Age : 56 +Other Current +Public Company +Directorships : 2 +Mara G. Aspinall joined the Board in June 2017. Since 2014, she has served as the President and Chief Executive Officer of Health Catalysts Group, a consulting firm that focuses on growth of early stage life science and technology companies. Ms. Aspinall is also Managing Director of BlueStone Venture Partners, a venture capital firm dedicated to investing in life sciences and healthcare related companies. Prior to these positions, Ms. Aspinall served as President and CEO, Global Head of Roche Tissue Diagnostics/Ventana Medical Systems, a division of The Roche Group that provides tissue-based cancer diagnostic instruments, products and services. Prior to that, she founded and served as CEO and Director of On-Q-ity, Inc., a diagnostic research company focused on improving cancer treatment through the capture of circulating tumor cells in a patient’s blood. Ms. Aspinall also spent 12 years with Genzyme Corporation, serving as President of the Genzyme Genetics division, a leading provider of esoteric and genetic tests for the reproductive, oncology and personalized medicine markets, and as President of the Genzyme Pharmaceuticals division, a custom pharmaceutical intermediates provider. Ms. Aspinall began her career as a management consultant with Bain & Company. Ms. Aspinall holds an M.B.A from Harvard Business School and a B.A. in International Relations from Tufts University. Ms. Aspinall previously served on the Board at Safeguard Scientific and currently serves on the Boards of Abcam Plc and Allscripts. +Skills and Qualifications leading to conclusion that she should serve on the Board: +• Executive level experience as a CEO. +• Executive experience in the life sciences industry. +• Extensive experience in molecular diagnostics. +65 +Ronny B. Lancaster +Independent Director +Director since: 2003 +Class II Director +Term Expires: 2020 +Age : 67 +Other Current +Public Company +Directorships : None +Ronny B. Lancaster became a member of the Board in May 2003. From September 2005 to December 2018, Mr. Lancaster served as Senior Vice President, Federal Government Relations of Assurant, Inc., a provider of specialty insurance and insurance-related products and services. Prior to that, Mr. Lancaster served as Chief Operating Officer of the Morehouse School of Medicine, Executive Assistant to the Secretary and Principal Deputy Assistant Secretary for Planning and Evaluation at the U.S. Department of Health and Human Services, General Counsel of Hamilton Enterprises, Inc., Senior Washington Representative for Blue Cross/Blue Shield Association, and Chief of the Division of Fee-For-Service Plans at the U.S. Office of Personnel Management. Mr. Lancaster received a B.A. in Economics from the Catholic University of America, an M.B.A. from the Wharton School of the University of Pennsylvania, and a J.D. from The Georgetown University Law Center. He is admitted to the Bars of Pennsylvania and the District of Columbia. Mr. Lancaster previously served on the board of directors of Immucor, Inc. +Skills and Qualifications leading to conclusion that he should serve on the Board: +• Expertise in government affairs and political matters. +• Extensive medical and healthcare experience. +• Legal training. +Aradhana M. Sarin, M.D. +Independent Director +Director since: 2018 +Class II Director +Term Expires: 2020 +Age : 44 +Other Current +Public Company +Directorships : None +Aradhana Sarin, M.D. became a member of the Board in January 2018. Since February 2019, Dr. Sarin has served as the Executive Vice President, Chief Strategy and Business Officer for Alexion Pharmaceuticals, a global biopharmaceutical company. Prior to that, Dr. Sarin served as Senior Vice President, Head of Corporate Business Development and Strategy at Alexion, since November 2017. She also serves as Co-Chair of the Executive Management Committee overseeing Science and Innovation at Alexion. Prior to her tenure at Alexion, Dr. Sarin served as the Managing Director of Healthcare Corporate & Investment Banking at Citi Global Banking, focusing on clients in the diagnostics, life sciences and biopharmaceutical sectors. Earlier in her career, Dr. Sarin also held various other positions in the investment banking industry, including with UBS and JP Morgan. Prior to her career in investment banking, Dr. Sarin spent two years as a medical resident practicing in both India and Africa. Dr. Sarin received her M.B.A. from Stanford Business School and obtained her medical training from the University of Delhi in India. +Skills and Qualifications leading to conclusion that she should serve on the Board: +• Extensive experience in the healthcare and life sciences sectors. +• Scientific and medical background and experience. +• Extensive experience at global financial institutions, involving M&A and equity and debt financing transactions +• Extensive knowledge of global healthcare systems. +66 +Michael Celano +Independent Director +Director since: 2006 +Class III Director +Term Expires: 2021 +Age : 60 +Other Current Public Company Directorships : None +Michael Celano became a member of the Board in October 2006 and has served as the Company’s Chairman of the Board since April 2018. Since January 2018, Mr. Celano has served as the Chief Operating Officer of Recro Pharma, Inc. and between July 2016 and January 2018, Mr. Celano served as Chief Financial Officer at Recro Pharma. Between 2015 and June 2016 Mr. Celano was self-employed providing consulting services to healthcare companies. From 2013 to 2015, Mr. Celano served as Chief Financial Officer of DrugScan, Inc. a clinical laboratory services company. Prior to that, Mr. Celano served as the Chief Financial Officer of Kensey Nash Corporation, a biomaterials company from 2009 to 2012. From 2007 to 2008, Mr. Celano also served as Chief Financial Officer for BioRexis Pharmaceutical Corporation, a biopharmaceutical company. Before joining BioRexis, Mr. Celano served as a partner with KPMG LLP, where he was co-leader of its National Life Science Practice. Mr. Celano also was co-leader of the Life Science Practice for Arthur Andersen before he joined KPMG. Mr. Celano also served on the Board of Directors of Performance Health, a consumer health care product manufacturing company from 2015 to 2016. Mr. Celano holds a B.S. in Accounting from St. Joseph’s University. +Skills and Qualifications leading to conclusion that he should serve on the Board: +• Long career in public accounting focused in the life sciences area. +● Life sciences industry operating company experience +• Accounting and financial expertise. +• Extensive business experience. +Charles W. Patrick +Independent Director +Director since: 2006 +Class III Director +Term Expires: 2021 +Age : 64 +Other Current Public Company Directorships : None +Charles W. Patrick became a member of the Board in January 2006. Since 2000, Mr. Patrick has served as Principal of Patrick Consulting, a management consulting firm that helps diagnostic, medical device and technology companies develop sales, marketing and distribution strategies. From 2001 through 2011, Mr. Patrick also served as the President and Co-owner of ADS Golf, Inc. Prior to that time, he served as the President and Chief Executive Officer of CallNexus, Inc., a provider of virtual call center services, and Vice President of Sales and Marketing for Biosite, Inc., a medical diagnostics company, where he had primary responsibility for developing and achieving Biosite’s strategic sales, marketing and distribution objectives. Prior to his time at Biosite, Mr. Patrick served as World Wide Group Marketing Manager and held several other sales and marketing positions for the Diagnostics Division of Abbott Laboratories. Mr. Patrick also previously served on the board of directors for DiaDexus, Inc., Accumentrics, Inc. and Seamless Medical Systems, Inc. Mr. Patrick received his undergraduate degree from the University of Central Florida. +Skills and Qualifications leading to conclusion that he should serve on the Board: +• Extensive sales and marketing background. +• More than 40 years of experience in the medical diagnostics industry. +• Entrepreneurial skills. +67 +Vote Required; Boa rd Recommendation +If a quorum is present, each nominee will be elected if he or she receives a majority of the votes cast by shares present in person or by Proxy and entitled to vote at the Annual Meeting. Shares voted in person or represented by proxy which are not voted for a nominee (by voting no or abstaining) will have the effect of voting against the nominee. Broker non-votes will have no effect on the required vote. In the absence of instructions to the contrary, shares of Common Stock represented by properly executed Proxies will be voted for the nominees, each of whom has consented to be named and to serve if elected. +Your Board recommends that you vote FOR the election of the Director nominees. +PROPOSAL NO. 2. RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC +ACCOUNTING FIRM +Background +The Audit Committee of the Board of Directors has approved the reappointment of KPMG LLP (“KPMG”) as our independent registered public accounting firm for the 2019 fiscal year. The Audit Committee has also recommended that the Board submit the appointment of KPMG for ratification by stockholders at the Annual Meeting. Although action by the stockholders on this matter is not legally required, the Audit Committee and the Board believe it is appropriate to seek stockholder ratification of this appointment in light of the important role played by the independent registered public accounting firm in reporting on the Company’s consolidated financial statements. If this appointment is not ratified by stockholders, the Audit Committee may reconsider its appointment of KPMG for the 2019 fiscal year or in the future. +One or more representatives of KPMG are expected to attend the Annual Meeting electronically. They will have an opportunity to make a statement and will be available to respond to appropriate questions. +Vote Required; Board Recommendation +Ratification of the appointment of KPMG requires the affirmative vote of a majority of shares present in person or by Proxy and entitled to vote at the Annual Meeting. Shares voted in person or represented by Proxy which are not voted for this ratification (by voting no or abstaining) will have the effect of voting against this proposal. In the absence of instructions to the contrary, shares of Common Stock represented by properly executed Proxies will be voted for ratification of the appointment of KPMG as our independent registered public accounting firm for the 2018 fiscal year. +Your Board recommends that the stockholders vote FOR ratification of the appointment of KPMG. +PROPOSAL NO. 3. ADVISORY (NON-BINDING) VOTE TO APPROVE EXECUTIVE COMPENSATION +Background +Section 14A of the Exchange Act, enacted pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank Act”), requires that stockholders be given the opportunity to vote to approve, on an advisory (non-binding) basis, no less frequently than once every three years, the compensation of our NEOs. Based on feedback received at our 2017 Annual Meeting, the Board determined that such a vote will continue to be held on an annual basis until the next advisory vote on frequency. +The vote on the resolution recommended below is not intended to address any specific element of compensation, but rather relates to the overall compensation of our NEOs. As described more fully under the CD&A Section of this Proxy Statement and the related tables and narrative, our compensation program is performance-based and is designed to pay executives for performance by offering rewards for the achievement of pre-determined objectives. In addition, our program is designed to align the interests of executives with the interests of our stockholders, provide long-term incentives and set compensation at levels sufficiently competitive to attract, retain and motivate high quality executives, and meet strong corporate governance principles. You are urged to carefully review the CD&A Section of this Proxy Statement which contains a detailed discussion of our executive compensation program, including the 2018 compensation of our NEOs. +68 +Compensation Pr ogram Features +As described more fully in the CD&A, there are many important features to our compensation program that illustrate our commitment to pay-for-performance and good corporate governance. A summary of some of the more significant of these features is set forth below: +• +Compensation is market driven and performance-based. +• +Total compensation targeted at 50 th percentile of Peer Group. +• +Balanced mix of cash/equity, fixed/variable, short-term/long-term compensation components. +• +Use of peer company benchmarking and tally sheets. +• +Threshold financial performance objectives for annual bonus pool funding meet or exceed fiscal performance for the prior fiscal year. +• +Compensation recoupment policy. +• +Equity awards provide long-term incentive with three year vesting. +• +No hedging or pledge of our Common Stock. +• +50% of annual equity is performance-vested. +• +Robust stockholder outreach on compensation/governance matters. +Vote Required; Board Recommendation +If a quorum is present, the affirmative vote of a majority of shares present, in person or by Proxy and entitled to vote at the Annual Meeting, is required to approve, on an advisory (non-binding) basis, the compensation paid to NEOs. Shares voted in person or represented by Proxy which are not voted for approval of our executive compensation (by voting no or abstaining) will have the effect of voting against this proposal. Broker non-votes will not count toward the determination of whether this proposal is approved and will have no impact on the vote. In the absence of instructions to the contrary, shares of Common Stock represented by properly executed Proxies will be voted for approval of our executive compensation, as disclosed in this Proxy Statement. Because this stockholder vote is advisory, it will not be binding on the Company or the Board of Directors. However, the Compensation Committee and Board will take into account the outcome of the vote when considering future executive compensation programs and arrangements. +Based on the foregoing, the Board is requesting that stockholders vote on the following resolution: +RESOLVED , that the compensation paid to the Company’s named executive officers, as disclosed in the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby APPROVED. +Your Board recommends that the stockholders vote FOR the approval of our executive compensation as described in the preceding resolution. +ANNUAL REPORT +Our Annual Report to Stockholders for the year ended December 31, 2018 accompanies this Proxy Statement. Following receipt of a written request, we will provide, without charge, a copy of our Annual Report on Form 10-K for the year ended December 31, 2018, as filed with the SEC (including a list briefly describing the exhibits thereto), to any record holder or beneficial owner of our Common Stock on March 28, 2019, the record date for the Annual Meeting, or to any person who subsequently becomes such a record holder or beneficial owner. Requests should be directed to the attention of the Corporate Secretary of the Company at our address set forth in the Notice of Annual Meeting of Stockholders immediately preceding this Proxy Statement. +69 +DEADLINE FOR STOCK HOLDER PROPOSALS +You may submit proposals for inclusion in the proxy materials for the Company’s 2020 Annual Meeting of Stockholders. Any such proposals must meet the stockholder eligibility and other requirements imposed by rules issued by the SEC and must be received by the Company at 220 East First Street, Bethlehem, Pennsylvania 18015, Attention: Corporate Secretary, in accordance with Rule 14a-8 promulgated under the Exchange Act, not later than December 20, 2019. +In addition, our Bylaws provide that a stockholder proposal must meet certain predetermined requirements in order to be considered at the Annual Meeting. These requirements are separate from, and in addition to, the requirements discussed above to have the stockholder proposal included in the proxy materials pursuant to the SEC’s rules and regulations. In order to be considered, a stockholder’s proposal must be made in writing to the Company’s Secretary and must be delivered to or received at our principal executive offices not less than ninety (90) days nor more than one hundred twenty (120) days prior to the meeting. However, if less than one hundred (100) days’ notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be so received no later than the close of business on the tenth (10 th ) day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made, whichever first occurs. The notice to the Secretary must set forth, with respect to each matter the stockholder proposes to bring before the meeting, a brief description of the matter and the reasons for considering that matter at the Annual Meeting. The notice must also include, as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf notice of the proposed business is made: (i) the name and address of the stockholder and such beneficial owner; (ii) any material interest of such stockholder and such beneficial holder in such business; (iii) the class and number of shares of capital stock of the Company which are held of record or beneficially owned by the stockholder and such beneficial owner and any other direct or indirect pecuniary or economic interest in any capital stock of the Company of such stockholder and such beneficial owner, including without limitation, any derivative instrument, swap, option, warrant, short interest, hedge, profit sharing arrangement or borrowed or loaned shares; (iv) a representation that such stockholder intends to appear in person or by proxy at the meeting to propose the business described in its notice; and (v) any other information relating to such business matter that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder. To the extent the Board of Directors or the SEC, or a court of competent jurisdiction, deems these Bylaw provisions to be inconsistent with the right of stockholders to request inclusion of a proposal in the Company’s proxy materials pursuant to Rule 14a-8 promulgated under the Exchange Act, such rule shall prevail. +The SEC has promulgated rules relating to the exercise of discretionary voting authority under proxies solicited by the Board. If a stockholder intends to present a proposal at our 2020 Annual Meeting without inclusion of that proposal in the Company’s proxy materials and written notice of the proposal is not received by the Secretary of the Company by February 13, 2020 (the date that is 45 days before the one-year anniversary of the date on which the Company first sent its proxy materials for the Annual Meeting), or if the Company meets other requirements of the applicable SEC rules and regulations, the proxies solicited by the Board for use at the 2020 Annual Meeting will confer discretionary authority to vote on the proposal should it then be raised at the 2020 Annual Meeting. +BY ORDER OF THE BOARD OF DIRECTORS +Jack E. Jerrett +Secretary +April 10, 2019 +70 +220 EAST FIRST STREET +BETHLEHEM, PA 18015 +VOTE BY INTERNET +Before The Meeting - Go to www.proxyvote.com or scan the QR Barcode above +Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. +During The Meeting - Go to www.virtualshareholdermeeting.com/OSUR2019 +You may attend the Meeting via the Internet and vote during the Meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions. +VOTE BY PHONE - 1-800-690-6903 +Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the meeting date. Have your proxy card in hand when you call and then follow the instructions. +VOTE BY MAIL +Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. +TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: +E38313-P03935 KEEP THIS PORTION FOR YOUR RECORDS +THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. +DETACH AND RETURN THIS PORTION ONLY +ORASURE TECHNOLOGIES, INC. +The Board of Directors recommends you vote FOR each of the following nominees: +1. +ELECTION OF DIRECTORS +Class I (Expiring 2022) +Nominees: +For +Against +Abstain +1a. Eamonn P. Hobbs +☐ +☐ +☐ +1b. Stephen S. Tang, Ph.D. +☐ +☐ +☐ +The Board of Directors recommends you vote FOR items 2 and 3. +For +Against +Abstain +2. +Ratification of Appointment of KPMG LLP as the Independent Registered Public Accounting Firm for Fiscal Year 2019. +☐ +☐ +☐ +3. +Advisory (Non-Binding) Vote to Approve Executive Compensation. +☐ +☐ +☐ +Mark Here for Address Changes or Comments SEE REVERSE +☐ +NOTE: Please sign as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. +Signature [PLEASE SIGN WITHIN BOX] +Date +Signature (Joint Owners) +Date +OraSure Technologies, Inc. +2019 Annual Meeting of Stockholders +Tuesday, May 21, 2019 +Important notice regarding the Internet availability of proxy materials for the +Annual Meeting of Stockholders. +The Notice and Proxy Statement and 2018 Annual Report to Stockholders +are available at www.proxyvote.com. +E38314-P03935 +PROXY +2019 Annual Meeting of Stockholders +PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS +The undersigned hereby appoints Jack E. Jerrett and Michele Miller, and each of them, proxies with full power of substitution, to vote all of the shares which the undersigned is entitled to vote at the 2019 Annual Meeting of Stockholders of OraSure Technologies, Inc. (the “Company”), on Tuesday, May 21, 2019, at 10:00 a.m. (Eastern Time), and at any adjournment or adjournments thereof, with all the powers the undersigned would possess if personally present, with respect to the matters listed on the reverse side. +The shares represented by this Proxy, if properly executed, will be voted (i) FOR the election of the nominees listed on the reverse side as directors, (ii) FOR the ratification of the appointment of KPMG LLP as the Company’s independent registered public accounting firm for 2019, and (iii) FOR approval of the compensation of the Company’s named executive officers. If any other business properly comes before the meeting, the proxies named above will have discretionary authority to vote thereon in accordance with their best judgment. +PLEASE MARK, DATE, SIGN AND RETURN THE PROXY CARD PROMPTLY. +Address Changes/Comments: +(If you noted any Address Changes/Comments above, please mark corresponding box on the reverse side.) +(Continued and to be marked, dated and signed, on the other side) \ No newline at end of file diff --git a/raw/proxies/0001116463/0001564590-19-011253/proxy_rpt.txt b/raw/proxies/0001116463/0001564590-19-011253/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..5a8377d548e9bff3d0003e3c047ef6d5c41f1792 --- /dev/null +++ b/raw/proxies/0001116463/0001564590-19-011253/proxy_rpt.txt @@ -0,0 +1,3 @@ +TRANSACTIONS WITH RELATED PERSONS +Since January 1, 2018, there have been no transactions with related persons that would require disclosure in this Proxy Statement. The Audit Committee is required to review and approve in advance all transactions with related persons involving the Company. The Audit Committee may approve a related party transaction if the transaction is on terms comparable to those that could be obtained in arms’ length dealings with an unrelated third party. The Audit Committee also reviews any public disclosures of a related party transaction contained in our SEC filings. These responsibilities are described in the Audit Committee’s charter, a copy of which is available on our website at www.orasure.com . +Information regarding employment, severance and retirement agreements between our executive officers and the Company is set forth in the Section entitled, “Employment Agreements and Potential Payments Upon Termination or Change of Control,” in this Proxy Statement. \ No newline at end of file diff --git a/raw/proxies/0001168054/0001047469-18-002393/proxy.txt b/raw/proxies/0001168054/0001047469-18-002393/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..9c7fd134a3a05a18bcab90b6a8b32d2060250a99 --- /dev/null +++ b/raw/proxies/0001168054/0001047469-18-002393/proxy.txt @@ -0,0 +1,4026 @@ +DEF 14A +1 +a2234973zdef14a.htm +DEF 14A +Use these links to rapidly review the document +TABLE OF CONTENTS +COMPENSATION DISCUSSION AND ANALYSIS – TABLE OF CONTENTS +Table of Contents +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +Washington, D.C. 20549 +SCHEDULE 14A +Proxy +Statement Pursuant to Section 14(a) of +the Securities Exchange Act of 1934 (Amendment No. ) +Filed by the Registrant ý +Filed by a Party other than the Registrant o +Check the appropriate box: +o +Preliminary Proxy Statement +o +Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +ý +Definitive Proxy Statement +o +Definitive Additional Materials +o +Soliciting Material under §240.14a-12 +Cimarex Energy Co. +(Name of Registrant as Specified In Its Charter) +(Name of Person(s) Filing Proxy Statement, if other than the Registrant) +Payment of Filing Fee (Check the appropriate box): +ý +No fee required. +o +Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. +(1) +Title of each class of securities to which transaction applies: +(2) +Aggregate number of securities to which transaction applies: +(3) +Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): +(4) +Proposed maximum aggregate value of transaction: +(5) +Total fee paid: +o +Fee paid previously with preliminary materials. +o +Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration +statement number, or the Form or Schedule and the date of its filing. +(1) +Amount Previously Paid: +(2) +Form, Schedule or Registration Statement No.: +(3) +Filing Party: +(4) +Date Filed: +Table of Contents +1700 Lincoln Street, Suite 3700 +Denver, CO 80203-4537 +NOTICE OF 2018 ANNUAL MEETING OF SHAREHOLDERS +TIME AND DATE +9:00 a.m. Central Daylight Time on Thursday, May 10, 2018 +PLACE +Hyatt Regency Tulsa +100 East 2 nd Street +Tulsa, Oklahoma 74103 +ITEMS OF BUSINESS +Item 1. Election of Directors +Item 2. Advisory Vote to Approve Executive Compensation +Item 3. Ratification of Independent Auditors +Transact any other business that properly comes before the Meeting and any adjournment or postponement of the Meeting +RECORD DATE +March 14, 2018 +MAILING DATE TO SHAREHOLDERS +March 30, 2018 +MATERIALS TO REVIEW +This booklet contains our Notice of 2018 Annual Meeting and Proxy Statement. Our 2017 Annual Report is available on our website at www.cimarex.com . +PROXY VOTING +It is important that your shares be represented and voted at the Meeting. You can vote your shares by following the internet or telephone instructions on page 9 of this proxy statement or you may attend and vote +in person at the Annual Meeting. If you received a paper copy of the proxy card, you also may vote by completing and mailing the proxy card in the postage-paid envelope provided for your convenience. You may revoke your proxy at any time before the +vote is taken by following the instructions on page 11 of this proxy statement. +Francis B. Barron +March 30, 2018 +Corporate Secretary +Table of Contents +TABLE OF CONTENTS +Page No. +Voting Information +2 +Proxy Statement Summary +3 +Proxy Statement +8 +Questions and Answers +9 +Election of Directors (Item 1) +13 +Election Process +13 +Director Nominations +14 +Director Qualifications +14 +2018 Nominees for Class I Directors +14 +Continuing Directors +16 +Director Compensation +20 +Corporate Governance +21 +Board and Committee Information +23 +Our Board +23 +Board Leadership Structure +23 +Board Committees +24 +Director Independence and Related Person Transactions +26 +Risk Oversight +27 +Executive Sessions +27 +Shareholder Engagement +27 +Stock Ownership—Directors, Management and Certain Beneficial Owners +29 +Compensation Discussion and Analysis +34 +Compensation and Governance Committee Report +51 +Compensation Tables +52 +Summary Compensation Table +52 +2017 Grants of Plan-Based Awards +54 +Outstanding Equity Awards at December 31, 2017 +55 +2017 Option Exercises and Restricted Stock Vested +56 +2017 Nonqualified Deferred Compensation +56 +CEO Pay Ratio +58 +Potential Payments Upon Change in Control or Termination +58 +Director and Officer Indemnification Agreements +61 +Advisory Vote to Approve Executive Compensation (Item 2) +61 +Report of Audit Committee +62 +Ratification of Independent Auditors (Item 3) +63 +Audit and Non-Audit Fees +63 +Approval of Audit, Audit-Related and Tax Services +63 +Other Matters +63 +Section 16(a) Beneficial Ownership Reporting Compliance +63 +Complaint and Reporting Procedures +64 +Table of Contents +VOTING INFORMATION +WE WANT TO HEAR FROM YOU – VOTE TODAY +It is important that you vote. Please carefully review the proxy materials for the 2018 Annual Meeting of Shareholders and follow the +instructions below to cast your vote on all of the voting matters. +Voting Matters and Board Recommendations +Our Board's Recommendation +Election of Directors (page 13) +FOR each Director Nominee +Advisory Vote to Approve Executive Compensation (page 61) +FOR +Ratification of Independent Auditors (page 63) +FOR +Advance Voting Methods +Even if you plan to attend the 2018 Annual Meeting of Shareholders in person, please vote right away using one of the following advance voting +methods (see page 9 for additional details). Make sure to have your proxy card or voting instruction form in hand and follow the instructions. +You can vote in advance in one of three ways: +Visit the website listed on your proxy card/voting instruction form to vote VIA THE INTERNET +Call the telephone number on your proxy card/voting instruction form to vote BY TELEPHONE +Sign, date and return your proxy card/voting instruction form in the enclosed envelope to vote BY MAIL +Voting at our 2018 Annual Meeting of Shareholders +All shareholders of record may vote in person at the 2018 Annual Meeting of Shareholders, which will be held on Thursday, May 10, 2018 +at 9:00 a.m., Central Daylight Time, at the Hyatt Regency Tulsa, 100 East 2 nd Street, Tulsa, Oklahoma 74103. Beneficial owners may vote in person at the Meeting if they +have a legal proxy, as described in the response to question 14 on page 12 of "Questions and Answers about the Meeting and Voting." +2 +Table of Contents +Proxy Statement Summary +Director Nominees (page 13) +You are being asked to vote on the following three Director Nominees. Directors are elected by a majority of votes cast. Detailed information +about each Director's background, skill sets and areas of expertise can be found beginning on page 13. +NAME +AGE +DIRECTOR SINCE +POSITION +INDEPENDENT +AC* +C/G* +NOM* +OTHER +PUBLIC +BOARDS +Joseph R. Albi +59 +2011 +Executive Vice President—Operations, Chief Operating Officer, Cimarex Energy Co. +No +0 +Lisa A. Stewart +60 +2015 +Chairman, President, Chief Executive Officer and Chief Investment Officer, Sheridan Production Partners +Yes +X +X +0 +Michael J. Sullivan +78 +2002 +Retired Senior Attorney,Lewis Roca Rothgerber LLP +Yes +X +X +0 +* AC = +Audit Committee, C/G = Compensation and Governance Committee and NOM = Nominating Committee. All independent directors serve on the +Nominating Committee. +Continuing Directors (page 16) +The following are Cimarex's continuing Directors. Detailed information about each Director's background, skill sets and areas of expertise can +be found beginning on page 16. +NAME +AGE +DIRECTOR SINCE +TERM EXPIRES +POSITION +INDEPENDENT +AC* +C/G* +NOM* +OTHER +PUBLIC +BOARDS +Hans Helmerich +59 +2002 +2019 +Chairman and former CEO, Helmerich & Payne, Inc. +Yes +X +X +2 +David A. Hentschel +84 +2002 +2020 +Retired, former Chairman and CEO, Occidental Oil and Gas Corporation +Yes +X +X +0 +Thomas E. Jorden +60 +2011 +2020 +Chairman, CEO and President, Cimarex Energy Co. +No +0 +Harold R. Logan, Jr. +73 +2009 +2019 +Independent Lead Director and Chair of Nominating Committee of Cimarex; Chairman, Suburban Propane Partners L.P. +Yes +X +X +2 +Floyd R. Price +69 +2012 +2020 +Chair of Compensation and Governance Committee of Cimarex; Retired, former executive officer, Apache Corporation +Yes +X +X +1 +Monroe W. Robertson +68 +2005 +2019 +Chair of Audit Committee of Cimarex; Retired, former President and Chief Operating Officer, Key Production Co. +Yes +X +X +0 +Frances M. Vallejo +52 +2017 +2020 +Retired, former Vice President, ConocoPhillips +Yes +X +X +0 +* AC = +Audit Committee, C/G = Compensation and Governance Committee and NOM = Nominating Committee. All independent directors serve on the +Nominating Committee. +3 +Table of Contents +Governance Highlights (page 21) +Cimarex +is committed to good corporate governance, which promotes the long-term interests of shareholders, strengthens the Board of Directors, fosters management accountability, and helps build public +trust in Cimarex. Highlights include: +• 8 of 10 independent directors • Independent lead director • Majority +voting director resignation policy • Active shareholder engagement • Proxy access +• Clawback policy • Non-hedging and non-pledging policies • +Director and management stock ownership guidelines, including restrictions on sales of shares until requirements are met • No tax gross-ups +4 +Table of Contents +2017 Executive Compensation (page 32) +Below is the 2017 compensation for each Named Executive Officer ("NEO") as determined under the Securities and Exchange Commission ("SEC") +rules. See the notes accompanying the 2017 Summary Compensation Table on page 52 for more information. +Name and +Principal Position +Salary +Bonus +Stock +Awards +Option +Awards +Non-Equity +Incentive +Plan +Comp. +All Other +Comp. +Total +Thomas E. Jorden +$ +960,000 +$ +— +$ +8,000,000 +$ +— +$ +2,000,000 +$ +94,129 +$ +11,054,129 +Chairman, Chief Executive Officer and President +(Principal Executive Officer) +G. Mark Burford +$ +460,000 +$ +— +$ +2,900,000 +$ +— +$ +760,000 +$ +73,307 +$ +4,193,307 +Vice President and Chief Financial Officer +(Principal Financial Officer) +Joseph R. Albi +$ +602,151 +$ +— +$ +3,400,000 +$ +— +$ +1,000,000 +$ +68,872 +$ +5,071,023 +Executive Vice President—Operations, +Chief Operating Officer +Stephen P. Bell +$ +498,459 +$ +— +$ +3,150,000 +$ +— +$ +850,000 +$ +68,186 +$ +4,566,645 +Executive Vice President— +Business Development +John A. Lambuth +$ +495,791 +$ +— +$ +3,400,000 +$ +— +$ +900,000 +$ +61,081 +$ +4,856,872 +Senior Vice President—Exploration +A Significant Portion of our CEO's 2017 Compensation is At Risk +The accompanying graph illustrates our CEO's 2017 at-risk compensation. A significant portion of reported compensation is an incentive for +future performance and realized only if Cimarex meets certain performance measures. +5 +Table of Contents +How CEO Pay is Tied to Cimarex's Performance (page 46) +Our compensation programs are designed to align performance incentives with the long-term interests of our shareholders. The programs also +provide competitive total direct compensation opportunities that retain, and attract when needed, executive talent and link compensation earned to achievement of short- and long-term financial and +operational objectives. Our Compensation and Governance Committee considers performance in two primary ways: +• Cimarex's operating performance; and +• Return to shareholders over time, on both an absolute basis and a relative basis compared to other companies in the S&P Oil & Gas +Exploration & Production index and our Compensation Peer Group (see page 36). +2017 Financial and Operating Highlights +• Exploration and development expenditures increased 74% to $1,281.1 million compared to $734.8 million in 2016, while +year-over-year average daily production increased 19% to 1,142.1 MMcfe per day. +• While total production expense increased by approximately $30.2 million, or 13%, from $232.0 million in 2016 to +$262.2 million in 2017, our Operations group excelled at optimizing our production. As a result, our production expense per Mcfe declined almost 5% from $0.66 per Mcfe in 2016 to $0.63 per Mcfe +in 2017, and declined 42% in 2017 compared to 2014. +• We incurred no additional debt and had cash on hand of $400.5 million at year-end 2017. +• Year-over-year production revenues increased 53% to $1.9 billion as revenues were positively affected by increased realized commodity +prices as well as increased production, which resulted in net income of $494.3 million in 2017 after losses in each of 2016 and 2015. +• Cash flow provided by operating activities of $1.1 billion was 75% higher than that of the prior year. +• During 2017, our overall estimated proved reserves increased 16% after additions, positive and negative revisions, and production. We added +940.7 Bcfe of proved reserves through extensions and discoveries in the Mid-Continent and Permian Basin, where we added 282.9 Bcfe and 657.8 Bcfe, respectively. In addition, we had net negative +revisions of previous estimates of 59.7 Bcfe. Revisions were comprised of an increase of 45.8 Bcfe for net positive performance revisions, a decrease of 43.9 Bcfe related to higher operating +expenses, an increase of 187.2 Bcfe for positive revisions due to higher commodity prices, and a decrease of 248.8 Bcfe for the removal of proved undeveloped reserves, the development of which likely +will be delayed beyond five years from our initial disclosure. +• As a result of our strong financial and operation performance in 2017, we continued to outperform our peers in a difficult macro-economic energy +environment. Our relative three-year stock price performance as compared to our peer group performed at the 78th percentile. +6 +Table of Contents +Return to Shareholders +Cimarex has consistently returned value to its shareholders. The following chart shows how a December 31, 2012 investment of $100 in +Cimarex common stock would have grown to $216.52 on December 31, 2017, which includes dividends reinvested quarterly for those who wish to consider Total Shareholder Return when evaluating +executive compensation. The chart also compares the Total Shareholder Return on Cimarex common stock to the same investment in the S&P 500 index, the Dow Jones US Exploration & +Production index, and the S&P Oil & Gas Exploration & Production index over the same time period. +COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN +12/31/2012 +12/31/2013 +12/31/2014 +12/31/2015 +12/31/2016 +12/31/2017 +Cimarex Energy Co . +$ +100.00 +$ +182.98 +$ +185.83 +$ +157.57 +$ +240.50 +$ +216.52 +S&P 500 +$ +100.00 +$ +132.39 +$ +150.51 +$ +152.59 +$ +170.84 +$ +208.14 +Dow Jones US Exploration & Production +$ +100.00 +$ +131.84 +$ +117.64 +$ +89.72 +$ +111.69 +$ +113.14 +S&P Oil & Gas Exploration & Production +$ +100.00 +$ +127.49 +$ +113.99 +$ +75.06 +$ +99.72 +$ +93.43 +The stock price performance included in this graph is not necessarily indicative of future stock price performance. +7 +Table of Contents +PROXY STATEMENT +We +are furnishing you this proxy statement to solicit proxies to be voted at the 2018 Annual Meeting ("Meeting") of Shareholders of Cimarex Energy Co. ("Cimarex" or the "Company"). The Meeting +will take place on May 10, 2018 at 9:00 a.m. Central Daylight Time at the Hyatt Regency Tulsa, 100 East 2 nd Street, Tulsa, Oklahoma 74103. The proxies also may be +voted at any adjournments or postponements of the Meeting. +The +mailing address of our principal office is 1700 Lincoln Street, Suite 3700, Denver, Colorado 80203. We are first furnishing the proxy materials to shareholders on March 30, 2018. +All +properly executed written proxies and proxies submitted by telephone or internet delivered pursuant to this solicitation will be voted at the Meeting in accordance with the directions given in the +proxy, unless the proxy is revoked prior to completion of voting at the Meeting. +Only +owners of record of shares of Cimarex common stock ("Common Stock") as of the close of business on March 14, 2018, the record date, are entitled to notice of and to vote at the Meeting or +at any adjournments or postponements of the Meeting. Each owner of Common Stock on the record date is entitled to one vote for each share of Common Stock held. On March 14, 2018, there were +95,436,321 shares of Common Stock issued and outstanding. +IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 10, 2018. +The +Notice of Annual Meeting, Proxy Statement and Annual Report on Form 10-K for the year ended December 31, 2017 are available at http://www.allianceproxy.com/cimarex/2018 . +8 +Table of Contents +QUESTIONS AND ANSWERS +PROXY MATERIALS AND VOTING INFORMATION +1. Why did I receive these proxy materials? +We +are providing these materials in connection with the solicitation by the Board of Directors of Cimarex Energy Co., a Delaware corporation, of proxies to be voted at our +2018 Annual Meeting of Shareholders and at any adjournment or postponement of the Meeting. The Meeting will take place on May 10, 2018, beginning at 9:00 a.m. Central Daylight Time, at +the Hyatt Regency Tulsa, 100 East 2 nd Street, Tulsa, Oklahoma 74103. +2. What is the difference between holding shares as a shareholder of record and as a beneficial owner? +If +your shares are registered directly in your name with Cimarex's registrar and transfer agent, Continental Stock Transfer & Trust Company, you are considered a shareholder +of record with respect to these shares. If your shares are held in a brokerage account or bank, broker or other nominee, you are considered the beneficial owner of these shares. +3. What shares are included on the proxy card? +If +you are a shareholder of record, you should receive only one proxy card for all the shares you hold of record in certificate form and in book-entry form. If you receive more than +one proxy card, please vote all proxy cards received. +If +you are a Cimarex employee, you will receive a proxy or voting instruction card for all the shares you hold in the Cimarex 401(k) Plan. Your proxy card will serve as a voting instruction card for +the Plan trustee. If you do not specify your voting instructions on the proxy card, the Plan trustee will vote your shares in the same proportion as it votes shares for which it did receive timely +instructions. To allow sufficient time for voting by the trustee, your voting instructions must be received no later than 11:59 p.m. Eastern Daylight Time on +May 7, 2018. +4. What different methods can I use to vote? +By Written Proxy. All shareholders of record can vote by written proxy card. If you are a shareholder of record and receive a +notice regarding the availability of proxy materials, you may request a written proxy card by following the instructions included in the notice. If you are a beneficial owner, you may request a +written proxy card or a voting instruction form from your bank, broker or other nominee. +By Telephone or Internet. All shareholders of record can vote by calling the toll-free telephone number on the proxy card. +Please have your proxy card when you call. Voice prompts will direct you on how to vote your shares and will confirm your voting instructions have been recorded properly. +Shareholders +also may vote on the internet by accessing the website noted on the proxy card. Please have your proxy card when you go to the website. As with telephone voting, you can confirm your +voting instructions have been recorded properly. +Beneficial +owners may vote by telephone or internet if their bank, broker or other nominee makes those methods available, in which case the bank, broker or other nominee will include the instructions +with the proxy materials. +9 +Table of Contents +5. What are my voting choices for each of the proposals to be voted on at the 2018 Annual Meeting of Shareholders and what are the voting standards? +Proposal +Voting Choices and Board Recommendation +Voting Standard +Item 1. Election of Three Class I Directors +• +vote in favor of all nominees; +• +vote in favor of specific nominees; +• +vote against all nominees; +• +vote against specific nominees; +• +abstain from voting with respect to all nominees; or +• +abstain from voting with respect +to specific nominees. +The Board recommends a vote FOR each of the nominees. +Majority of votes cast +Item 2. Advisory Vote to Approve Executive Compensation +• +vote in favor of the advisory proposal; +• +vote against the advisory +proposal; or +• +abstain from voting on the advisory proposal. +The Board recommends a vote FOR the advisory proposal to approve executive compensation. +Majority of shares present and entitled to vote +Item 3. Ratification of the Appointment of KPMG LLP as Independent Auditors +• +vote in favor of the ratification; +• +vote against the ratification; or +• +abstain from voting on the ratification. +The Board recommends a vote FOR the ratification. +Majority of shares present and entitled to vote +6. What if I am a beneficial owner and do not give voting instructions to my broker? +As +a beneficial owner, in order to ensure your shares are voted in the way you would like, you must provide voting instructions to your bank, broker or other nominee by the deadline +provided in the materials you receive from your bank, broker or other nominee. If you do not provide voting instructions to your bank, broker or other nominee, whether your shares can be voted by such +person depends on the type of item being considered to vote. +Non-Discretionary Items. The election of Directors and the advisory vote to approve executive compensation are non-discretionary +items and may not be voted on by brokers, banks or other nominees who have not received specific voting instructions from beneficial owners. +Discretionary Items. The ratification of the appointment of KPMG LLP as Independent Auditors is a discretionary item. +Generally, banks, brokers and other nominees that do not receive voting instructions from beneficial owners may vote on the proposal in their discretion. +10 +Table of Contents +7. How are abstentions and broker non-votes counted? +Item 1. Election of Three Class I Directors. If you abstain from voting in the election of Directors, you will be +treated as not having cast a vote and the abstention will not be counted in determining the outcome of the election. Broker non-votes are not considered a vote cast under our Bylaws and will have no +effect on the outcome of the election of Directors. +Item 2. Advisory Vote to Approve Executive Compensation. If you abstain from voting on the advisory vote to approve +executive compensation, you are considered present and entitled to vote, and your shares are considered in the calculation of whether Item 2 received the affirmative vote of a majority of +shares present and entitled to vote. The effect of an abstention is a vote against Item 2. Broker non-votes are not considered in the calculation of a majority of shares present and entitled to +vote. +Item 3. Ratification of Appointment of KPMG as Independent Auditors. If you abstain from voting on the ratification of +KPMG LLP as Cimarex's Independent Auditors, you are considered present and entitled to vote, and your shares are considered in the calculation of whether Item 3 received the affirmative +vote of a majority of shares present and entitled to vote. The effect of an abstention is a vote against Item 3. Because Item 3 is a routine matter on which a broker has discretionary +authority, no or few broker non-votes likely will result from this Item. +8. What can I do if I change my mind after I vote my shares? +You +may revoke your proxy prior to the completion of voting by: +• Giving written notice to Cimarex's Corporate Secretary; • Delivering a valid, later-dated proxy, or a later-dated vote by telephone or +on the internet in a timely manner; or • +Voting by ballot at the Annual Meeting. +9. Can I access the proxy materials on the internet? How can I sign up for the electronic proxy delivery service? +We +are distributing our proxy materials to certain shareholders via the internet under the "notice and access" approach permitted by the SEC. On or about March 30, 2018, we +will mail to certain of our shareholders a notice of internet availability of proxy materials with instructions explaining how to access our proxy statement and annual report and how to vote online. +If you receive a notice of internet availability by mail, you will not receive a printed copy of the proxy materials in the mail unless you request them by following the instructions for requesting +such materials included in the notice of internet availability. +Even +if you do not participate in "notice and access," the Notice of Annual Meeting and proxy statement are available on the internet at http://www.allianceproxy.com/cimarex/2018 . +10. Who counts the votes? +Alliance +Advisors LLC, our proxy solicitor, will tabulate the votes and, Francis B. Barron, Cimarex's Corporate Secretary, will act as inspector of election. +11. When will Cimarex announce the voting results? +We +will announce the preliminary voting results at the Annual Meeting of Shareholders. Cimarex will report the final results in a Current Report on Form 8-K filed with the SEC +after the Meeting. +11 +Table of Contents +12. How are proxies solicited, and what is the cost? +We +bear all expenses incurred in connection with the solicitation of proxies. We hired Alliance Advisors LLC to assist with the solicitation of proxies for an estimated fee of +$10,000 plus expenses. We will reimburse brokers, fiduciaries and custodians for their costs in forwarding proxy materials to beneficial owners of Common Stock. +Our +Directors, officers and employees also may solicit proxies by mail, telephone and personal contact. They will not receive any additional compensation for these activities. +13. What is householding? +As +permitted by the Securities Exchange Act of 1934, as amended (the "1934 Act"), only one copy of this proxy statement is being delivered to shareholders residing at the same +address, unless the shareholders have notified Cimarex of their desire to receive multiple copies of the proxy statement. This is known as "householding." +Upon +oral or written request, we promptly will deliver a separate copy of the proxy statement to any shareholder residing at an address to which only one copy was mailed. Direct requests for +additional copies for the current year or future years to our Corporate Secretary, Cimarex Energy Co., 1700 Lincoln Street, Suite 3700, Denver, Colorado 80203-4537, telephone +(303) 295-3995 and facsimile (720) 403-9383. +Shareholders +of record residing at the same address and currently receiving multiple copies of the proxy statement may contact our registrar and transfer agent, Continental Stock Transfer & +Trust Company, by phone at (888) 509-5580 or by mail at 1 State Street, 30th Floor, New York, NY 10004-1561, to request a single copy be mailed in the future. +Beneficial +owners should contact their broker or bank. +14. How can I vote at the Meeting if I am a beneficial owner? +If +you are a beneficial owner and want to vote your shares at the Meeting, you will need to ask your bank, broker or other nominee to furnish you with a legal proxy, bring the legal +proxy with you to the Meeting and hand it in with a signed ballot that will be provided to you at the Meeting. You will not be able to vote your shares at the Meeting without a legal proxy. If you do +not have a legal proxy, you can still attend the Meeting. We encourage you to vote your shares in advance, even if you intend to attend the Meeting. Please note that if you request a legal proxy, any +previously executed proxy will be revoked, and your vote will not be counted unless you appear at the Meeting and vote in person or legally appoint another proxy to vote on your behalf. +COMPANY DOCUMENTS, COMMUNICATIONS AND SHAREHOLDER PROPOSALS +15. How can I view copies of Cimarex's corporate documents and SEC filings? +Our +Corporate Governance Guidelines, Board Committee Charters, Code of Business Conduct and Ethics and SEC filings are posted on our website at www.cimarex.com . Upon request, we will +promptly deliver (free of charge) a copy of our +Annual Report on Form 10-K to any shareholder. Direct such requests to our Corporate Secretary, Cimarex Energy Co., 1700 Lincoln Street, Suite 3700, Denver, Colorado 80203-4537, +telephone (303) 295-3995 and facsimile (720) 403-9383. +12 +Table of Contents +16. How can I communicate with Cimarex's Directors? +Communications +from shareholders can be addressed to our Directors by mail in care of our Corporate Secretary, Cimarex Energy Co., 1700 Lincoln Street, +Suite 3700, Denver, Colorado 80203-4537 or facsimile (720) 403-9383. All shareholder communications will be forwarded to our Lead Director. The Lead Director may take any action +deemed appropriate or necessary, including, without limitation, forwarding the information to the Board for consideration or, with the concurrence of the Board, retaining independent or outside +counsel, accountants or other advisors to review the concern. +17. How do I submit a proposal for action at the 2019 Annual Meeting of Shareholders? +A +proposal to be acted upon at the 2019 Annual Meeting of Shareholders will be acted upon only: +• If the proposal is to be included in the proxy statement, pursuant to Rule 14a-8 under the 1934 Act, the proposal is received by our +Corporate Secretary on or before November 30, 2018, and the proposal meets the requirements of the applicable rules of the SEC and the requirements of our bylaws. +• If the proposal is not to be included in the proxy statement, pursuant to our bylaws, the proposal is submitted in writing to our Corporate +Secretary no earlier than January 10, 2019 and no later than February 11, 2019, and such proposal is, under Delaware General Corporation Law, an appropriate subject for shareholder +action. +• If the proposal concerns the nomination of Directors, see the procedures in "Election of Directors (Item 1)—Director +Nominations" in the following section. +ELECTION OF DIRECTORS (ITEM 1) +Election Process +Our current Board consists of ten Directors, which is the maximum number of Directors permitted by our Certificate of Incorporation. The Board +is divided into three classes: Class I, Class II and Class III Directors. At each Annual Meeting, a Class of Directors is elected for a term expiring at the Annual Meeting in the +third year following the year of election. Each Director holds office until his or her successor is elected and qualifies. +The +terms of the three Class I Directors, Joseph R. Albi, Lisa A. Stewart and Michael J. Sullivan, will expire at the 2018 Annual Meeting. The Nominating Committee, at its +February 2018 meeting, nominated Messrs. Albi and Sullivan and Ms. Stewart for election as Class I Directors, to serve until the Annual Meeting of Shareholders to be held in 2021. +If +prior to the Annual Meeting a nominee becomes unavailable to serve as a Director, any shares represented by a proxy directing a vote will be voted for the remaining nominees and for any substitute +nominee(s) designated by our Board or its Nominating Committee. As of the mailing of these proxy materials, the Board knows of no reason why any Director nominee would not be available to serve as a +Director. +A +nominee is elected if the votes cast for his or her election exceed the votes cast against his or her election. Pursuant to our majority voting policy, each nominated Director has tendered an +irrevocable resignation that is effective upon his or her failure to receive the required vote and the Board's acceptance of such resignation. If a nominee fails to receive more favorable votes than +votes cast against him or her, the Nominating Committee will act on an expedited basis following the Annual Meeting to determine whether to recommend that the Board accept the Director's resignation. +The Nominating Committee and the Board may consider any factors they deem relevant in deciding whether to accept the Director's resignation. The Director whose resignation is under consideration must +abstain from participating in any +13 +Table of Contents +decision +regarding his or her resignation. The Board will publicly disclose its decision regarding acceptance of his or her resignation within 90 days after the results of the election are +certified. If the resignation is not accepted, the Director will continue to serve as a Director until his or her successor is elected and qualified. If the Board accepts the resignation, then the +Board will either fill the vacancy in accordance with the Bylaws or decrease the size of the Board in compliance with the Certificate of Incorporation. +Director Nominations +The Nominating Committee is responsible for identifying and evaluating potential nominees for Director and for recommending to the Board a +slate of nominees for election at each Annual Meeting. Potential nominees may be suggested by Directors, members of management, shareholders or a third-party firm. +While +the Nominating Committee will consider nominees recommended by shareholders, it did not receive any shareholder nominations for the 2018 Annual Meeting prior to the deadline for such +nominations. Shareholders who wish to nominate persons for election as Directors at the 2019 Annual Meeting must submit a timely written notice complying with Cimarex's Bylaws to the Corporate +Secretary at Cimarex Energy Co., 1700 Lincoln Street, Suite 3700, Denver, Colorado 80203-4537 or by facsimile (720) 403-9383. In addition, up to +20 shareholders collectively beneficially owning more than 3% of the Company's outstanding shares for at least three consecutive years may nominate up to two candidates for inclusion in the +Company's proxy materials by following the procedures set forth in the proxy access provisions in Article III, Section 2A of our Bylaws (the "Proxy Access Policy"). To be timely, the +shareholder's written notice for nominees to be considered by the Nominating Committee or proxy access candidate to be included in the proxy statement for the 2019 Annual Meeting must be received +between January 10, 2019 and February 11, 2019. In addition, shareholder nominations must comply with the other requirements of Article III, Section 2 or Section 2A, +as applicable, of our Bylaws. +Director Qualifications +In its assessment of each potential candidate, the Nominating Committee considers the nominee's judgment, integrity, experience, independence, +understanding of Cimarex's business or related industries and such other factors that the Nominating Committee determines are pertinent in light of the needs of the Board. The Nominating Committee +also considers the ability of a nominee to devote the time and effort necessary to fulfill his or her +responsibilities to Cimarex. Our Nominating Committee Charter specifically includes diversity of gender and ethnic background in the list of desirable attributes sought in our Board composition. +Although +all the current Directors have extensive oil and gas experience, either as company executives or attorneys, their experience is with companies with widely different operating strategies. This +diversity and depth of experience benefits our Board in executing its duty of oversight and guidance. +2018 Nominees for Class I Directors +Upon the recommendation of the Nominating Committee, the Board has nominated Joseph R. Albi, Lisa A. Stewart and +Michael J. Sullivan for election as Class I Directors to serve until the Annual Meeting of Shareholders to be held in 2021. The Board has determined that each of Ms. Stewart and +Mr. Sullivan is independent under the New York Stock Exchange ("NYSE") corporate governance rules. Each of the Director nominees currently serves on the Board. We have no reason to believe that +any of the nominees will be unable or unwilling to serve if elected. +The +Board believes that the combination of the various qualifications, skills and experiences of the 2018 Director nominees will contribute to an effective and well-functioning Board. The Board also +believes that, individually and as a whole, the Director nominees possess the necessary qualifications to provide effective oversight of the business and quality advice and counsel to Cimarex. +Included +in each Director nominee's biography is an assessment of the specific qualifications, attributes, skills and experience of such nominee based on the qualifications described above. +14 +Table of Contents +The Board of Directors recommends a vote FOR the election of each of the Director +nominees. +JOSEPH R. ALBI, 59 +Position, Principal Occupation and Business Experience +Mr. Albi was named Chief Operating Officer in September 2011. He has served Cimarex in various capacities since September 2002, including Executive Vice +President-Operations from 2005 to 2011, Senior Vice President-Corporate Engineering from 2003 to 2005 and Vice President-Engineering from 2002 to 2003. +Key Attributes, Experience and Skills +Mr. Albi has over 35 years of experience in the oil and gas industry. His extensive understanding of the management of oil and gas production and +drilling operations, business development, environmental and safety management and oil and gas marketing provide the Board with considerable insight about the operations of Cimarex. +LISA A. STEWART, 60 +Position, Principal Occupation and Business Experience +Ms. Stewart is Chairman, President, Chief Executive Officer, and Chief Investment Officer of Sheridan Production Partners ("Sheridan"), a +privately-owned oil and gas operating company she founded in 2007. From 2009 until its acquisition in May 2015, Ms. Stewart served as a Director on the board of Talisman Energy, Inc., a +Canadian oil and gas exploration and production company traded publicly on the NYSE and the Toronto Stock Exchange. Prior to 2007, Ms. Stewart served as Executive Vice President of El Paso +Corporation and President of El Paso E&P from 2004 to 2006. From 1984 to 2004, Ms. Stewart served in various capacities, including as Executive Vice President, of Apache Corporation with +responsibility in various departments of Apache, which included reservoir engineering, business development, land, environmental, health and safety ("EH&S"), and corporate purchasing. +Key Attributes, Experience and Skills +Ms. Stewart's over 35 years of experience in the oil and gas industry, including in reservoir engineering, business development, land and EH&S, +and extensive leadership roles are key attributes that make her well qualified to serve as a Cimarex Director. +MICHAEL J. SULLIVAN, 78 +Position, Principal Occupation and Business Experience +Mr. Sullivan retired in September 2015 from the Arizona-based law firm Lewis Roca Rothgerber LLP after serving as senior attorney, partner or +special counsel beginning in 2001, and the managing attorney of the firm's Casper, Wyoming office. Mr. Sullivan practiced law as a partner with Brown, Drew, Apostolos, Massey & Sullivan +from 1964 to 1986 and from 1995 until 1998. He served as the Governor of Wyoming from 1987 to 1995 and as the U.S. Ambassador to Ireland from 1998 to 2001. +Mr. Sullivan +retired as a Director and member of the compensation and governance committees of First Interstate BancSystem, located in Billings, Montana, in December 2016, and had been a +Director and member of the compensation and governance and audit committees of Sletten Construction, Inc., located in Great Falls, Montana (a non-public company) until retiring from the board +in June 2015. From 2001 to 2009, he served as a Director and was a member of the audit, corporate social responsibility, and governance committees of Allied Irish Bank Group, located in +15 +Table of Contents +Dublin, +Ireland. From 2003 to 2011, he served as a Director of the Kerry Group Plc, a global food and food ingredients producer headquartered in Tralee, the county town of County Kerry, +Ireland. +Key Attributes, Experience and Skills +Mr. Sullivan brings a wealth of experience and a diverse background to our Board. In addition to his Juris Doctor degree, he has an undergraduate degree +in petroleum engineering, years of government service as the Governor of Wyoming and as the U.S. Ambassador to Ireland, and 40 years' experience practicing law in the areas of natural +resources, mediation and business. As Governor, he was involved in the process of reviewing and administering Wyoming's budget. This experience is directly relevant to his service on the Cimarex Board +and oversight of the Company's capital expenditure budget. Mr. Sullivan's education, legal experience, particularly in mediation and litigation, and his domestic and international service all +provide a background that is beneficial in addressing the issues coming before the Cimarex Board. +Continuing Directors – Class II – Term Expires 2019 +HANS HELMERICH, 59 +Position, Principal Occupation and Business Experience +Mr. Helmerich has served as Chairman of Helmerich & Payne, Inc. ("H&P") since March 2012 and a Director since 1987. H&P is a publicly held +company primarily engaged in contract drilling services for oil and gas exploration and production companies. H&P uses drilling rigs it designs and builds and is one of the major land and offshore +platform drilling companies in the world. After joining H&P in 1981, Mr. Helmerich served as CEO from 1989 to March 2014 and as President from 1989 to March 2012. H&P's exploration and +production business was merged into Cimarex in 2002. +Mr. Helmerich +serves as a Trustee of The Northwestern Mutual Life Insurance Company of Milwaukee, Wisconsin. He was a Director of Atwood Oceanics, Inc., an international offshore +drilling company traded on the NYSE, located in Houston, Texas, from 1989 to 2017 prior to its merger with Ensco plc. +Key Attributes, Experience and Skills +Mr. Helmerich's background with the drilling sector of the oil and gas business provides the Board with insight into an aspect of Cimarex's business +that represents a significant expenditure in Cimarex's capital budget. His over 25 years of executive experience provide a strong background for his service on Cimarex's Board and on the +Compensation and Governance Committee. In addition, his service as a Director and Chairman of H&P and as a Trustee of The Northwestern Mutual Life Insurance Company and his former service as a +Director of Atwood Oceanics provides him with additional experience and knowledge to serve as a Director. +HAROLD R. LOGAN, JR., 73 +Position, Principal Occupation and Business Experience +Mr. Logan currently serves as Chairman of the Board of Supervisors of Suburban Propane Partners, L.P. and has served as a Director of that +company since 1996. Since February 2018, he has served as Chairman of InfraREIT, Inc. and previously served as Lead Director of that company from 2015 until February 2018. InfraREIT is a +publicly held real estate investment trust that owns utility assets (electric transmission lines) in Texas. Mr. Logan also is a Director of one private company—Hart Energy +Publishing (publisher of Oil and Gas Investor and other +energy publications). From 2003 to 2017, Mr. Logan served as a Director of Graphic Packaging Holding Co., a publicly held company located in Atlanta, Georgia, and predecessor companies. +From 2008 to 2018, he served as Director of Basic Materials and Services LLC, a privately held company that invested in companies providing specialized services for the pipeline construction +and sand/silica industries before it sold its last investment and closed. +16 +Table of Contents +Mr. Logan +was a co-founder of TransMontaigne in Denver, Colorado in 1995 and Chief Financial Officer, Executive Vice President, and Treasurer, through 2002. He served as a Director of +TransMontaigne from 1995 to 2006 and chairman of its Finance Committee from 2002 to 2006. From 1987 to 1994, he was Senior Vice President/Finance, Chief Financial Officer, and a Director of Associated +Natural Gas Corporation. Prior to that, Mr. Logan was an investment banker with Dillon Read & Co. Inc. and Rothschild, Inc. +Since +1998, Mr. Logan has been a Director of ten public companies and has served on audit, compensation, and governance committees. +Key Attributes, Experience and Skills +Mr. Logan has over 40 years of business experience. His education and his investment banking/venture capital and financial management experience +provide him with a comprehensive understanding of business and finance. Mr. Logan's expertise and experience have been relevant to his responsibilities of providing oversight and advice to the +management of public companies, and are of particular benefit in his role as Cimarex's Lead Director and as a member of Cimarex's Audit Committee. +MONROE W. ROBERTSON, 68 +Position, Principal Occupation and Business Experience +Mr. Robertson retired from Key Production Company, Inc. (one of two companies whose merger created Cimarex in 2002) after co-founding and serving +for 10 years with Key. While with Key, he held the positions of President, Chief Operating Officer, Senior Vice President and Principal Financial Officer. Mr. Robertson has served in +executive capacities with three other public energy companies, Apache Corporation, Gulf Oil Corporation and Terra Resources, Inc. +Mr. Robertson +was a Director of Earthstone Energy, Inc. (formerly named Basic Earth Science System) from 2007 to 2014. During his service as a Director of Earthstone, he was chair of the +Audit Committee and a member of the Compensation and Nominating Committee. +Key Attributes, Experience and Skills +Mr. Robertson has comprehensive knowledge of the financial and operational sides of the exploration and production business and experience as the +Principal Financial Officer of Key, which is of considerable value in his service as Chairman of the Audit Committee. +Continuing Directors – Class III – Term +Expires 2020 +DAVID A. HENTSCHEL, age 84 +Position, Principal Occupation and Business Experience +Mr. Hentschel was Chairman and Chief Executive Officer of Occidental Oil and Gas Corporation, a subsidiary of Occidental Petroleum, from 1986 to 1993 +and from 1997 until he retired in 1999. He also served as President and Chief Executive Officer of Canadian Occidental Petroleum, Ltd., now known as Nexen, from 1995 to 1997. He was in charge +of the worldwide exploration and production operations for Cities Service and Occidental Oil and Gas Corporation for the last 20 years of his 40-year career. +Mr. Hentschel +was a Director of Occidental Petroleum from 1987 to 1993 and of Canadian Occidental or Nexen from 1985 to 2009. During his service as a Director of Nexen, he was chair of the +audit committee and a member of the compensation committee and various other committees. He was also a Director of the Bank of Oklahoma from 1984 to 1995. +17 +Table of Contents +Key Attributes, Experience and Skills +Mr. Hentschel brings considerable executive experience in the domestic and international oil and gas industry to the Board. Mr. Hentschel's +extensive leadership background and his service on Nexen's audit and compensation committees provide strong skills and experience for his service on our Compensation and Governance Committee. +THOMAS E. JORDEN, 60 +Position, Principal Occupation and Business Experience +Mr. Jorden is the Chairman of the Board, Chief Executive Officer and President of Cimarex. He has served Cimarex in various capacities since September +2002. He was elected CEO in September 2011 after serving as Executive Vice President-Exploration from 2003 to 2011 and as Vice President-Exploration from 2002 to 2003. Mr. Jorden also serves on +the Board of Trustees of the Colorado School of Mines and other private boards. +Key Attributes, Experience and Skills +Mr. Jorden brings to the Board over 35 years of experience in the oil and gas exploration and production industry and, as our Chief Executive +Officer, a deep understanding of our business, operations and long-term strategic issues and goals. Mr. Jorden holds undergraduate and graduate degrees in geophysics. His service on the Board +creates an important link between management and the Board. +FLOYD R. PRICE, 69 +Position, Principal Occupation and Business Experience +Mr. Price, a former executive officer of Apache Corporation, held various positions with Apache Corporation from 1991 through 2009, including Executive +Vice President and Corporate Exploration Officer; President, Apache Canada; President, Apache International; and Exploration Manager. Apache Corporation, with headquarters in Houston, Texas, is an oil +and gas exploration and production company with domestic and international operations. Mr. Price has served as Chairman of the Board and as a member of the audit, reserves and +compensation/governance committees of Tamarack Valley Energy Ltd., Calgary, Alberta, Canada, a publicly held company traded on the Toronto Stock Exchange, since June 2010. Tamarack is involved +in the identification, evaluation and operation of resource plays in the Western Canadian sedimentary basin. From June 2010 to January 2013, Mr. Price served as a Director and Chairman of the +Board of Gastar Exploration, Inc., a publicly held company located in Houston, Texas. Mr. Price also served on the compensation and governance, audit and reserves committees of the board +at Gastar. Gastar is engaged in the exploration, development and production of natural gas, natural gas liquids, oil and condensate in the United States and is traded on the NYSE. +Key Attributes, Experience and Skills +Mr. Price has over 40 years of domestic and international experience in the exploration and production business. Mr. Price has held +leadership positions with a large public oil and gas company. His experience during the past seven years serving as a Director of public and private companies also provides him with invaluable board +skills and experience. Mr. Price brings extensive oil and gas exploration, operations, management and financial experience to Cimarex's Board and the Compensation and Governance Committee. +18 +Table of Contents +Frances M. Vallejo, 52 +Position, Principal Occupation and Business Experience +Ms. Vallejo, a former executive officer of ConocoPhillips, the world's largest independent exploration company, held various positions beginning in 1987 +with ConocoPhillips and Phillips Petroleum Company, which merged with Conoco Inc. to form ConocoPhillips in August 2002. She served as Vice President Corporate Planning and Development from +April 2015 until December 2016 and as Vice President and Treasurer from October 2008 until March 2015. Prior to October 2008, she served as General Manager—Corporate Planning and Budgets, +Vice President Upstream Planning & Portfolio Management, Assistant Treasurer, Manager Strategic Transactions, and in other geophysical, commercial, and finance roles. Ms. Vallejo served +as a member of the Board of Trustees of Colorado School of Mines from 2010 until 2016 and on boards of other charitable associations. +Key Attributes, Experience and Skills +Ms. Vallejo's 30 years of experience in the oil and gas industry and extensive leadership roles in corporate planning, budgeting, and treasury +are key attributes that make her well qualified to serve as a Cimarex Director and a member of the Audit Committee. +19 +Table of Contents +DIRECTOR COMPENSATION +Our Compensation and Governance Committee administers our Director compensation program. Total Director compensation is designed to be near the +50 th percentile of that paid by comparable public oil and gas companies with similar market capitalization and revenue. We use the same group of companies in reviewing Director +compensation as we use in reviewing executive base salary and total direct compensation. See "CD&A—Section 1—Competitive Positioning" for a list of, and the methodology +followed in selecting, these companies. The Compensation and Governance Committee uses its independent compensation consultant, Longnecker & Associates ("Longnecker"), to review and make +recommendations concerning Director compensation. The Compensation and Governance Committee, after reviewing the consultant's recommendations with the CEO and Vice President of Human Resources, +recommends Director compensation for Board consideration and approval at the Board meeting held following each year's Annual Meeting of Shareholders. Payment of the annual +component of Director compensation occurs on June 1 of each year. Preceding June 1, 2017, meeting fees were paid as earned. Effective June 1, 2017, meeting fees were paid +quarterly. +Through +May 11, 2017, compensation for non-employee Directors consisted of the following: +• Annual cash retainer of $75,000; • Annual equity retainer of $180,000, comprised of restricted stock that vests in one-third +increments on May 1 of each of the three years +following the date of grant; • Committee Chairman fee of $20,000; • Lead Director (who also acts as Nominating Committee +Chairman) fee of $40,000; • +Board meeting attendance fee of $1,800 per meeting; and • Committee meeting attendance fee of $1,500 per meeting. +At +the May 11, 2017 meeting, the Committee's independent consultant advised that the equity component of Director compensation was below the 50 th percentile compared to the +Company's Compensation Peer Group and the total compensation for directors was at the 40 th percentile of the Company's Compensation Peer Group. (See below +"CD&A—Section 1—2017 Compensation Peer Group", for a list of these companies). The cash components and value of the equity component of Director compensation had not +changed since May 2014. The Board, on the recommendation of the Compensation and Governance Committee and the Compensation and Governance Committee's independent compensation consultant, and based on +a study of peers and market trends, made the following change to the compensation program for non-employee Directors: +• Increased the annual equity retainer to $200,000, comprised of restricted stock that vests on the earlier of (i) the termination of the +service as a Director other than because of removal or (ii) May 1, 2018. +The +other components of non-employee Director compensation did not change. Following this change, the total Director compensation was between the 50 th and +75 th percentiles of the Company's Compensation Peer Group. +Independent Director 2017 Compensation +NAME +FEES PAID IN CASH (1) +STOCK AWARDS (2) +ALL OTHER +COMPENSATION (3) +TOTAL +Hans Helmerich +$ +101,100 +$ +200,000 +$ +3,782 +$ +304,882 +David A. Hentschel +$ +101,100 +$ +200,000 +$ +954 +$ +302,054 +Harold R. Logan, Jr. +$ +139,300 +$ +200,000 +$ +954 +$ +340,254 +Floyd R. Price +$ +114,433 +$ +200,000 +$ +954 +$ +315,387 +Monroe W. Robertson +$ +122,600 +$ +200,000 +$ +954 +$ +323,554 +Lisa A. Stewart +$ +102,600 +$ +200,000 +$ +837 +$ +303,437 +Michael J. Sullivan +$ +102,600 +$ +200,000 +$ +954 +$ +303,554 +L. Paul Teague (4) +$ +99,733 +$ +— +$ +656 +$ +100,389 +Frances M. Vallejo +$ +66,500 +$ +200,000 +$ +298 +$ +266,798 +(1) Represents +fees earned for services as a Director during 2017, including the annual cash retainer fee, Board and Committee meeting attendance fees, +Committee Chairman fee and Lead Director fee. +20 +Table of Contents +(2) Represents +the aggregate grant date fair market value of the 1,864 shares of restricted stock as of the June 1, 2017 grant date. +(3) Consists +of dividends paid during 2017 on unvested restricted stock awards and dividend equivalents paid during 2017 on deferred compensation units +that settle in shares of common stock. +(4) Mr. Teague +served as a director until May 11, 2017, at which time he began serving as Director Emeritus. As Director Emeritus, +Mr. Teague was paid an annual retainer for 2017 of $85,000, which is included under "Fees Paid in Cash." +The +following table discloses as of December 31, 2017 the aggregate number of outstanding unvested stock awards and the market value of those awards. Market value is based on the closing +trading price of $122.01 on December 29, 2017, which was the last trading day of 2017. The Directors have the right to vote and receive dividends on unvested stock awards. There were no +outstanding vested but unexercised option awards as of that date. +Independent Director +Unvested Stock Awards +Market Value +Hans Helmerich +3,422 +$ +417,518 +David A. Hentschel +3,422 +$ +417,518 +Harold R. Logan, Jr. +3,422 +$ +417,518 +Floyd R. Price +3,422 +$ +417,518 +Monroe W. Robertson +3,422 +$ +417,518 +Lisa A. Stewart +3,197 +$ +390,066 +Michael J. Sullivan +3,422 +$ +417,518 +L. Paul Teague* +1,558 +$ +190,092 +Frances M. Vallejo +1,864 +$ +227,427 +* Mr. Teague +served as a director until May 11, 2017, at which time he began serving as Director Emeritus. Cimarex agreed to allow the continued vesting of +unvested stock awards held by Mr. Teague while he serves as Director Emeritus. Mr. Teague will not receive any additional stock awards as Director Emeritus. +Our +Corporate Governance Guidelines require that each independent Director own Cimarex stock in an amount equal to three times his or her annual cash retainer. A newly elected Director has three years +from the date of his or her initial election to comply with the Corporate Governance Guidelines. Restricted stock, restricted stock units and deferred compensation units are counted in calculating +ownership; shares subject to options are not counted. Each of the independent Directors complies with these guidelines. +In +connection with his retirement from the Board effective immediately following the annual meeting on May 11, 2017, the Board appointed Mr. Teague as Director Emeritus for up to a +two-year term. As compensation for serving as Director Emeritus, all outstanding restricted stock awards held by Mr. Teague at the time of the expiration of his term as Director continue to +vest according to their terms during the period he serves as Director Emeritus. Mr. Teague will not receive any additional stock awards as Director Emeritus. Mr. Teague will be entitled +to a cash retainer of $85,000 per year. The Company entered into an indemnification agreement with Mr. Teague with substantially the same terms as his indemnification agreement as a Director. +CORPORATE GOVERNANCE +Cimarex's website +( www.cimarex.com ) includes materials that are helpful in understanding our corporate +governance practices: +• +Corporate Governance +Guidelines +• +Corporate +Bylaws +• +Code of Business Conduct +and Ethics +• +Stock Ownership +Guidelines +• +Complaint and Reporting +Procedures +• +Background and Experience +of our Board of Directors +• +Committee +Charters +• +Background and Experience +of Executive Management +21 +Table of Contents +We +believe good corporate governance promotes the long-term interests of shareholders, strengthens Board and management accountability, and helps build public trust. Copies of corporate governance +materials may be requested from our Corporate Secretary, Cimarex Energy Co., 1700 Lincoln Street, Suite 3700, Denver, Colorado 80203. +A +summary of key governance matters are noted in the table below: +Size of Board +10 +Code of Business Conduct and Ethics +Yes +Number of independent Directors +8 +Corporate Governance Guidelines +Yes +Majority voting for Directors resignation policy +Yes +Disclosure Committee for financial reporting +Yes +Classified Board +Yes +Board and Audit Committee risk oversight +Yes +Separate Chairman and CEO +No +Compensation risk assessment +Yes +Independent Lead Director +Yes +Review of related party transactions +Yes +Diverse Board skills and experience +Yes +Non-hedging and non-pledging policies +Yes +Annual Board and Committee self-evaluations +Yes +Clawback policy +Yes +Periodic consultant review of Board skills +Yes +Management and Director stock ownership guidelines +Yes +Annual equity grants to Directors +Yes +Tax gross-ups +No +Annual Board education +Yes +Proxy access +Yes +Shareholders +may communicate with our Board by mail directed to our Corporate Secretary or by facsimile (720) 403-9383. All communications will be forwarded to the Lead Director for the Lead +Director's review. The Lead Director may take any action the Lead Director deems appropriate or necessary, including, without limitation, forwarding the information to the Board for consideration or, +with the concurrence of the Board, retaining independent or outside counsel, accountants or other advisors to address the concern. +22 +Table of Contents +BOARD AND COMMITTEE INFORMATION +Our Board +During 2017, the Board of Directors met seven times. The Board has three Committees: the Audit Committee, the Compensation and Governance +Committee, and the Nominating Committee. During 2017, each Director attended greater than 75% of the meetings of the Board and the Board Committees on which he or she served. All Board members are +expected to attend the Annual Meeting. All Directors attended our 2017 Annual Meeting. +NAME +AGE +DIRECTOR +SINCE +POSITION +INDEPENDENT +OTHER +PUBLIC +BOARDS +Joseph R. Albi +59 +2011 +Executive Vice President—Operations, Chief Operating Officer, Cimarex Energy Co. +No +0 +Hans Helmerich +59 +2002 +Chairman and former CEO, Helmerich & Payne, Inc. +Yes +2 +David A. Hentschel +84 +2002 +Retired, former Chairman, CEO Occidental Oil & Gas Corporation +Yes +0 +Thomas E. Jorden +60 +2011 +Chairman, CEO and President, Cimarex Energy Co. +No +0 +Harold R. Logan, Jr. +73 +2009 +Chairman, Suburban Propane Partners, L.P. +Yes +2 +Floyd R. Price +69 +2012 +Retired, former Executive Vice President, Apache Corporation +Yes +1 +Monroe W. Robertson +68 +2005 +Retired, former President and Chief Operating Officer, Key Production Co. +Yes +0 +Lisa A. Stewart +60 +2015 +Chairman, President, Chief Executive Officer and Chief Investment Officer, Sheridan Production Partners +Yes +0 +Michael J. Sullivan +78 +2002 +Retired Senior Attorney, Lewis Roca Rothgerber LLP +Yes +0 +Frances M. Vallejo +52 +2017 +Retired, former Vice President, ConocoPhillips +Yes +0 +Board Leadership Structure +Cimarex has a combined Chairman of the Board and CEO. Cimarex also has a Lead Director who is chosen annually from our independent Directors. +Following is a summary of the functions of the Chairman of the Board/CEO and the Lead Director, as provided in our Lead Director Charter: +Duties and Responsibilities of Chairman of the Board +Duties and Responsibilities of Lead Director +Preside over Board meetings. +Preside at all Board meetings at which the Chairman of the Board is not present. +Call special meetings of the Board. +Solicit agenda items from non-management Directors, review Board meeting agenda and materials, and provide input to the Chairman of the Board. +Approve agenda for Board meetings. +Authority to call meetings of non-management Directors and, as appropriate, set the agenda. +Preside over shareholder meetings. +Preside at all meetings of non-management Directors and at all executive sessions of non-management Directors. +Facilitate and participate in formal and informal communications with and among Directors. +Act as Chairman of the Nominating Committee. +Liaison between the Chairman and Directors and facilitate communication among full Board. +Review shareholder communications directed to Board and take appropriate action. +Retain outside advisors and consultants who report directly to the Board on Board-wide issues. +23 +Table of Contents +The +Board believes that the roles of a combined Chairman/CEO and an independent Lead Director having the duties described above serve the interests of our shareholders because this structure provides +an appropriate balance between strategy development and independent oversight of management. +Thomas +Jorden was elected Chief Executive Officer on September 30, 2011 and Chairman of the Board on August 14, 2012. He has served as an executive officer of Cimarex since its formation +in 2002. He has considerable knowledge and experience gained through his executive positions with Cimarex and prior industry experience. This knowledge and experience allow him to focus the activities +of the Board on matters most relevant to the success of Cimarex. +Our +Board structure is designed to avoid any undue influence by the Chairman of the Board/CEO on the Board. The Compensation and Governance Committee is comprised entirely of independent Directors. +When the Board acts on the Compensation and Governance Committee's recommendation for compensation of the Chairman/CEO, it acts without him being present. +The +substantial experience and background of our independent Directors ensure their active and knowledgeable involvement in Board matters. This involvement, and the presence and involvement of our +Lead Director, provide the Board with a strong and independent point of view. +Board Committees +The table below provides 2017 membership and meeting information for each of the Board Committees: +NAME +AUDIT +COMP/GOV +NOMINATING +Hans Helmerich +X +X +David A. Hentschel +X +X +Harold R. Logan, Jr. +X +X +Floyd R. Price +X +X +Monroe W. Robertson +X +X +Lisa A. Stewart +X +X +Michael J. Sullivan* +X +X +Frances M. Vallejo +X +X +2017 Meetings Held +10 +7 +5 +* Mr. Sullivan +served on the Audit Committee from 2002 until May 2017 when he joined the Compensation and Corporate Governance Committee. +Audit Committee +The Audit Committee is comprised entirely of independent Directors and is governed by a Board-approved Charter stating the Audit Committee's responsibilities. +A copy of the Audit Committee Charter is available on our website at www.cimarex.com . +Under its Charter, the Audit Committee performs the following functions: +• Appoints independent auditors; • Approves the nature and scope of services of independent auditors and reviews range of fees for such +services; • Assists the Board in monitoring the performance of the internal audit function; • Reviews qualifications and +independence of auditors; • Reviews and discusses with independent auditors (i) the auditors' responsibilities and management's responsibilities in the audit +process, (ii) overall audit strategy, (iii) scope and timing of annual audit, and (iv) any significant risks identified during auditors' risk assessment procedures; • +Assists the Board in monitoring the integrity of financial statements; • Monitors compliance with legal and regulatory requirements; • Reviews and reports to Board on corporate and financial risk processes; • Monitors the process related to ongoing litigation matters; and +24 +Table of Contents +• With the Company's management and (if applicable) an independent petroleum engineering consulting firm, reviews the Company's annual process of +estimating and reporting quantities of oil and gas reserves. +The +Board of Directors has determined that each of the members of the Audit Committee is financially literate and independent as defined by the rules of the SEC and the NYSE. The Board also has +determined that each of Mr. Logan, Mr. Robertson, Ms. Stewart and Ms. Vallejo is an "audit committee financial expert" as defined by the SEC's rules. +Compensation and Governance Committee +The Compensation and Governance Committee is comprised entirely of independent Directors and is governed by a Board-approved Charter stating the Committee's +responsibilities. A copy of the Compensation and Governance Committee Charter is available on our website at www.cimarex.com . Under its Charter, the Compensation and Governance +Committee performs +the following functions: +Compensation Functions +• Recommends CEO and executive officer cash compensation for approval by the Board; • Recommends Director compensation for approval by +the Board; • Reviews and recommends to the Board that the Compensation Discussion and Analysis be included in our proxy statement; +• Determines amount and terms of equity awards; • Reviews and approves long-term incentive plans; • Reviews relationship of compensation to risk; and • Approves the nature and scope of services of independent compensation consultants. +As +part of its compensation functions, the Compensation and Governance Committee has increased its oversight of compensation of all employees, including its review of the Company's practices to ensure +compensation equity. +Governance Functions +• Develops and implements policies and processes regarding corporate governance matters; • Develops plans for managerial succession; and +• Oversees annual Board and Committee evaluations. +As +part of its governance functions, the Compensation and Governance Committee has increased its oversight of environmental, social and governance ("ESG") issues, including corporate sustainability +and workplace fairness. +Compensation and Governance Committee Interlocks and Insider Participation. Hans Helmerich, a member of the Committee, was an executive officer of Cimarex from +February 14, 2002 until September 30, 2002. Cimarex was formed on February 14, 2002 as a wholly owned subsidiary of H&P for the purpose of facilitating a spinoff by H&P of its oil +and gas exploration and production business. Cimarex became a publicly traded company on September 30, 2002, at which time Mr. Helmerich resigned as an executive officer. +Nominating Committee +The Nominating Committee is comprised of all of the independent Directors and is governed by a Board-approved Charter stating its +responsibilities. A copy of the Nominating Committee Charter is available on our website at www.cimarex.com . Under its Charter, the Nominating Committee's responsibilities include +the following: +• Determines desired Board skills and attributes; • Recommends candidates to serve on the Board and to stand for election at annual +meeting of shareholders or to fill a vacancy occurring between +meetings; • Considers shareholder nominees for election to the Board; and • Recommends Committee appointments. +25 +Table of Contents +Director Independence and Related Person Transactions +Our Corporate Governance Guidelines require that a majority of our Board of Directors be independent as defined by applicable laws, rules, +regulations and listing standards. We comply with the criteria for independence established by the NYSE listing requirements and other governing laws and regulations. +Each +year the Compensation and Governance Committee reviews the independence of our Directors and any related person transactions. On the basis of this review, the Committee delivers a report to the +Board of Directors, and the Board makes independence determinations based on the Committee's report. +As +a result of this review, the Board has determined that Hans Helmerich, David A. Hentschel, Harold R. Logan, Jr., Floyd R. Price, Monroe W. Robertson, Lisa A. Stewart, Michael J. Sullivan and +Frances M. Vallejo, representing eight of our ten current Directors, are independent of Cimarex and its management. Thomas Jorden and Joseph Albi are not independent because of their employment as CEO +and COO of Cimarex, respectively. +In +making these determinations, the Board considered that, in the ordinary course of business, relationships and transactions may occur between Cimarex and entities with which some of our Directors +are or have been affiliated. As a result of the Committee's review, certain relationships and transactions are not considered to be material transactions that would impair a Director's independence, +including the following: +• The Director is an employee of another company that does business with Cimarex, and our annual sales to or purchases from the other company +amount to less than 2% of the annual revenues of the other company and that such sales to or purchases from the other company are part of our ordinary course of business and conducted in the same +manner as we obtain services from other companies that provide similar services; or +• The Director is a director (but not an employee) of another company that does business with Cimarex. +Hans +Helmerich is the non-executive Chairman of the Board, and until March 5, 2014 was the CEO, of Helmerich & Payne, Inc. ("H&P"), a company with which Cimarex engages in +ordinary course of business transactions. As non-executive Chairman, Mr. Helmerich currently is not an employee of H&P. During H&P's fiscal year ended September 30, 2017, Cimarex paid +H&P $39.6 million for drilling services in arms' length transactions and as part of our ordinary course of business and in the same manner as we obtain services from other companies that +provide similar services. The aggregate amount of the payment represented 2.20% of H&P's revenue during that period. The Compensation and Governance Committee reviewed these transactions and +concluded: (i) the transactions are proper and not material when compared to both Cimarex's total drilling costs and H&P's total revenues; (ii) the transactions occur in the ordinary +course of business and at arms' length; (iii) the Board does not review or approve drilling service contracts or arrangements; and (iv) Mr. Helmerich's relationship with H&P does +not interfere with his independent judgment as a Director of Cimarex. +Ms. Stewart +is Chairman, President, Chief Executive Officer and Chief Investment Officer of Sheridan Production Partners, a privately—owned oil and gas operating company she founded +in 2007. During 2017 Cimarex paid certain affiliated companies of Sheridan oil and gas revenues of $208 thousand and received $89 thousand from certain affiliates of Sheridan for joint +interest billings. The payments to the affiliates of Sheridan represented 0.03% of Sheridan's consolidated revenues for 2017. In addition, Cimarex paid the Sheridan affiliates joint interest billings +of $1 thousand, and received $378 of oil and gas revenues. The Compensation and Governance Committee reviewed these transactions and concluded: (i) the transactions are proper and not +material when compared to both Cimarex's total costs and Sheridan's revenues; (ii) the transactions occur in the ordinary course of business and at arms' length; (iii) the Board does not +review or approve oil and gas revenue payments or joint interest billings; and (iv) Ms. Stewart's relationship with Sheridan does not interfere with her independent judgment as a +Director of Cimarex. +26 +Table of Contents +Risk Oversight +The Board has overall responsibility for risk oversight. In carrying out its responsibility, the Board has requested that the Audit Committee +discuss with management and report to the Board with respect to: +• Processes Cimarex follows to mitigate corporate risks; • Guidelines and processes pertaining to financial risk assessment; +• Steps management takes to measure, monitor and control financial risk exposures; and • Management's conclusion as to the +effectiveness of the guidelines and processes utilized to mitigate such corporate and financial risks and +exposures. +In +addition, at each of the Board's four regularly scheduled meetings held during the year, management provides the Board with an overview of Cimarex's operations, financial results, risks and risk +mitigation efforts, and other aspects of its business. Significant strategic considerations, such as material acquisitions or mergers are brought to the Board for deliberation and, as appropriate, +decisions. +The +Audit Committee, at its December 7, 2017 meeting, reviewed, discussed and, at the Board meeting that day, reported to the Board about corporate, operational and financial risks and +Cimarex's processes for mitigation of these risks. +Compensation Risk Oversight +In February 2018, the Compensation and Governance Committee performed a thorough review of the possible connection between compensation and +excessive risk taking. The Compensation and Governance Committee's review covered Cimarex's compensation policies and practices covering executive and non-executive employees to determine whether the +policies and practices encourage excessive risk taking by employees. The Committee's analysis included a review and discussion of the following: +• The metrics for determining incentive awards; • Participants in the Company's compensation programs; • How the compensation pools and individual awards are determined; • The maximum individual award potential (maximum individual incentive to take +risk); +• The maximum possible cost if awards were paid at maximum levels (maximum cost exposure); • The decision-making and +approval process; and • The systemic limitations on the ability to take excessive risks in order to influence compensation. +The +Compensation and Governance Committee determined that the risks from Cimarex's compensation policies and practices for Cimarex employees are not reasonably likely to have a material adverse effect +on Cimarex. +Executive Sessions +The independent Directors meet in executive session at each regularly scheduled Board meeting. The Lead Director presides over executive +sessions. During 2017, four executive sessions were held and all of the independent Directors attended each session with the exception of Mr. Logan, who missed one meeting. These sessions allow +independent Directors to review the CEO's performance and compensation, to discuss issues of importance to Cimarex, including the business and affairs of Cimarex, as well as matters concerning +management, without any member of management present. +Shareholder Engagement +Cimarex's relationships with its shareholders are an important part of our corporate governance profile, and we recognize the value of taking +their views into account. Engagement with shareholders helps us understand the larger context and impact of our operations, learn about expectations for our performance, assess emerging issues that +may affect our business or other aspects of our operations, and shape corporate and governance policies. +27 +Table of Contents +Consistent +with our commitment to seek and respond to shareholder input on corporate governance topics, we have considered and discussed with investors a wide variety of matters, +including: +• Our executive compensation program and disclosures, as a result of which we previously made changes in these areas; • The "proxy +access" shareholder proposal acted upon in 2015; • A shareholder proposal concerning fugitive methane reporting that was made in December 2015 and subsequently withdrawn, as a result of +which we +added disclosure concerning methane emissions to our website; and • Environmental, social and governance issues, including greenhouse gas emissions, employee and board diversity, and +shareholder protection +measures. +As +a result of additional engagement with shareholders during 2017, in January 2018 we enhanced our website disclosure concerning air quality, hydraulic fracturing, seismicity, spill prevention, water +resource management, safety and health, community impact, and community support. +28 +Table of Contents +STOCK OWNERSHIP +DIRECTORS, MANAGEMENT AND CERTAIN BENEFICIAL OWNERS +Beneficial Ownership by Executive Officers and Directors +The following table shows, as of March 14, 2018, the number of shares of common stock "beneficially owned," as determined in accordance +with Rule 13d-3 under the Securities Exchange Act of 1934, by the NEOs, the Directors, and all executive officers and Directors, as a group: +Name of Beneficial Owner +Shares +Beneficially +Owned (1) +Percent of +Class +Named Executive Officers : +Thomas E. Jorden, CEO (also Director) +389,383 +<1 +% +G. Mark Burford, CFO +96,416 +<1 +% +Joseph R. Albi, COO (also Director) +141,044 +<1 +% +Stephen P. Bell, EVP +115,772 +<1 +% +John A. Lambuth, SVP +113,068 +<1 +% +Directors : +Hans Helmerich +450,467 +(2) +<1 +% +David A. Hentschel +32,427 +<1 +% +Harold R. Logan, Jr. +6,554 +<1 +% +Floyd R. Price +11,242 +<1 +% +Monroe W. Robertson +15,146 +<1 +% +Lisa A. Stewart +4,554 +<1 +% +Michael J. Sullivan +17,608 +<1 +% +Frances M. Vallejo +1,864 +<1 +% +All executive officers and Directors as a group (17 persons) +1,667,936 +(2)(3) +1.7 +% +(1) Includes +restricted stock (as well as shares that are subject to performance-based vesting and time-based vesting more than 60 days after +March 14, 2018), direct and indirect ownership of common stock and equivalent shares of common stock held by the trustee for the benefit of the named individual in the Cimarex Energy Co. +401(k) Plan. Does not include deferred compensation units held by one Director. +(2) Includes +11,450 shares owned by Mr. Helmerich's wife. Mr. Helmerich disclaims beneficial ownership of the shares held by his wife. Also +includes 50,999 shares owned by 1993 Hans Helmerich Trust, of which Mr. Helmerich is the trustee, 1,062 shares owned by Helmerich Grandchildren LLC, of which Mr. Helmerich is the +co-manager, 7,865 shares owned by Family Trust, of which Mr. Helmerich is the trustee, 36,430 shares owned by The Helmerich Trust, of which Mr. Helmerich is the co-trustee, and 325,000 +shares held by the Peggy Helmerich QTIP Trust, of which Mr. Helmerich is the trustee. +29 +Table of Contents +Beneficial Ownership of More than Five Percent +Each of the following shareholders beneficially owns five percent or more of our outstanding shares of common stock. The following table +provides information regarding their stock ownership and is based on their filings with the SEC. +Total Amount +of Beneficial +Ownership +Voting Authority +Dispositive Authority +Percent of +Class +Name and Address +Sole +Shared +Sole +Shared +BlackRock Inc. +55 East 52 nd Street +New York, NY 10055 +6,319,205 +0 +7,075,794 +0 +7,075,793 +(1) +7.4 +% +FMR LLC +245 Summer Street +Boston, MA 02210 +253,985 +0 +4,422,741 +0 +4,422,741 +(2) +4.64 +% +State Street Corporation +State Street Financial Center +One Lincoln Street +Boston, MA 02111 +0 +5,291,589 +0 +5,291,589 +5,291,589 +(3) +5.55 +% +The Vanguard Group +100 Vanguard Boulevard +Malvern, PA 19355 +137,639 +17,968 +9,990,104 +151,707 +10,141,811 +(4) +10.64 +% +(1) Based +solely on information as of December 31, 2017 included in a Schedule 13G/A filed with the SEC on January 29, 2018. +(2) Based +solely on information as of December 31, 2017 included in a Schedule 13G/A filed with the SEC on February 13, 2018. +(3) Based +solely on information as of December 31, 2017 included in a Schedule 13G filed with the SEC on February 14, 2018. +(4) Based +solely on information as of December 30, 2017 included in a Schedule 13G/A filed with the SEC on February 8, 2018. +30 +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS – TABLE OF CONTENTS +Page No. +Executive Summary of Compensation Discussion & Analysis +("CD&A") +32 +Compensation Discussion and Analysis +34 +Section 1 +34 +Our Compensation Framework +34 +Objectives +34 +Design +35 +Principal Elements of Executive Compensation +35 +Competitive Positioning +36 +Section 2 +37 +Summary of 2017 and Early 2018 Compensation Decisions +37 +Response to 2017 Say-on-Pay Vote and Shareholder Engagement +38 +Key 2017 Compensation Actions +39 +CEO Compensation +39 +Other NEO Compensation +39 +Base Salary Determination +40 +Annual Cash Incentive Awards +41 +Long-Term Equity Incentive Award Program +43 +2017 Vesting of NEO Equity Awards +45 +Elimination of Tax Gross Up Payments +45 +Alignment of CEO Direct Compensation to Total Shareholder Return ("TSR") +46 +Early 2018 Compensation Decisions +47 +2018 Annual Cash Incentive Award Goals +47 +Section 3 +48 +Role of Compensation Consultant and Management in Compensation +Decisions +48 +Other Compensation Arrangements +49 +Post-Employment and Employment Arrangements +49 +Retirement Benefits +49 +Perquisites +49 +Other Compensation Policies +50 +Total Pay Considerations +50 +Stock Ownership and Holding Requirements +50 +Clawback Policy +50 +Non-Hedging and Non-Pledging Policies +50 +Tax Law Considerations +50 +Compensation and Governance Committee Report +51 +31 +Table of Contents +Executive Summary of Compensation Discussion & Analysis ("CD&A") +2017 BUSINESS AND FINANCIAL PERFORMANCE OVERVIEW +The great volatility in the oil and gas exploration and production industry in 2016 transitioned to more stability in commodity prices in 2017. +The Compensation and Governance Committee continued to focus on strategic and tactical goals that preserve Cimarex's strong balance sheet, core properties and organization while improving health, +safety and environment metrics. These goals and our performance are summarized below under "Section 2—Annual Cash Incentive Awards". As the year progressed, oil and natural gas +liquids ("NGL") prices stabilized at higher levels than 2016. It is through this macroeconomic lens that the Committee considered the following 2017 business and financial performance +overview when making compensation decisions: +• Exploration and development expenditures increased 74% to $1,281.1 million compared to $734.8 million in 2016, while +year-over-year average daily production increased 19% to 1,142.1 MMcfe per day. • While total production expense increased by approximately $30.2 million, or 13%, from +$232.0 million in 2016 to +$262.2 million in 2017, our Operations group excelled at optimizing our production. As a result, our production expense per Mcfe declined almost 5% from $0.66 per Mcfe in 2016 to $0.63 per Mcfe +in 2017, and declined 42% in 2017 compared to 2014. • We incurred no additional debt and had cash on hand of $400.5 million at year-end 2017. • Year-over-year production revenues increased 53% to $1.9 billion as revenues were positively affected by increased realized commodity +prices as well as increased production, which resulted in net income of $494.3 million in 2017 after losses in each of 2016 and 2015. • Cash flow provided by operating activities of +$1.1 billion was 75% higher than 2016. • During 2017, our overall estimated proved reserves increased 16% after additions, positive and negative revisions, and production. We added +940.7 Bcfe of proved reserves through extensions and discoveries, in the Mid-Continent and Permian Basin, where we added 282.9 Bcfe and 657.8 Bcfe, respectively. In addition, we had net negative +revisions of previous estimates of 59.7 Bcfe. Revisions were comprised of an increase of 45.8 Bcfe for net positive performance revisions, a decrease of 43.9 Bcfe related to higher +operating expenses, an increase of 187.2 Bcfe for positive revisions due to higher commodity prices, and a decrease of 248.8 Bcfe for the removal of proved undeveloped reserves, the +development of which likely will be delayed beyond five years from our initial disclosure. • As a result of our strong financial and operation performance in 2017, we continued to +outperform our peers in a difficult macro-economic energy +environment. Our relative three-year stock price performance as compared to our peer group performed at the 78 th percentile. +2017 EXECUTIVE COMPENSATION +2017 Salary (1) +Year End +2017 Base Salary +2017 Annual Cash +Incentive Award (1) +2017 Long-Term +Incentive Grant +Date Fair Value (1) +Total +Compensation (1)(2) +% of Total +Compensation at +Risk (3) +Thomas E. Jorden, CEO +$ +960,000 +$ +960,000 +$ +2,000,000 +$ +8,000,000 +$ +11,054,129 +90 +% +G. Mark Burford, CFO +$ +460,000 +$ +460,000 +$ +760,000 +$ +2,900,000 +$ +4,193,307 +87 +% +Joseph R. Albi, COO +$ +602,151 +$ +610,000 +$ +1,000,000 +$ +3,400,000 +$ +5,071,023 +87 +% +Stephen P. Bell, EVP +$ +498,459 +$ +505,000 +$ +850,000 +$ +3,150,000 +$ +4,566,645 +88 +% +John A. Lambuth, SVP +$ +495,791 +$ +508,000 +$ +900,000 +$ +3,400,000 +$ +4,856,872 +89 +% +(1) From +Summary Compensation Table. +(2) Includes +All Other Compensation from Summary Compensation Table. +(3) Compensation +at risk is based on the sum of 2017 Annual Cash Incentive Award and 2017 Long-Term Incentive Grant Date Fair Value compared to the Total +Compensation from the Summary Compensation Table. +32 +Table of Contents +ELEMENTS AND MIX OF EXECUTIVE COMPENSATION +Principal Elements of Executive Compensation +We principally use three elements of executive compensation to carry out the design of our executive compensation program, collectively +referred to as "Total Direct Compensation": +Element +Purpose +➢ +Base salary +Retain current executive team and, when appropriate, attract new executives. +➢ +Annual cash incentive award +Reward executives for short-term financial and operational results. +➢ +Annual long-term equity award +Focus executive efforts on activities and short-term results that lead to long-term shareholder value. Half of our restricted stock awards +vest based on continued employment and the passage of time, which promotes retention. The remainder of the awards vest based on performance measures tied to relative stock price performance, which promotes the long-term interests of our shareholders +and aligns executives' interests with shareholders' interests. +Mix of Executive Compensation +Cimarex's executive compensation program directly links a substantial portion of executive compensation to Cimarex's performance through annual +and long-term incentives. The diagrams below show the mix of the pay elements for the CEO and other NEOs for fiscal 2017. These diagrams are based on the Summary Compensation Table and highlight the +substantial portion of the at-risk compensation that only is realized if certain performance criteria are met. Of the CEO's total disclosed 2017 compensation, 90% is at risk and is linked to Cimarex's +future performance. This consists of 18% annual cash incentive compensation based on 2017 performance and 72% long-term equity incentive compensation that is both service- and performance-based. The +2017 average compensation mix for the other NEOs was 88% at risk compensation consisting of 19% annual cash incentive compensation based on 2017 performance and 69% long-term equity incentive +compensation that is both service- and performance-based. +33 +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +This CD&A describes Cimarex's executive compensation program for 2017. We use this program to retain, motivate and attract (when appropriate) +the executives who lead our business. This CD&A explains how the Compensation and Governance Committee (the "Committee") of the Board of Directors made 2017 compensation decisions for our executives, +including the following NEOs: +• Thomas E. Jorden, Chairman of the Board, CEO and President (Principal Executive Officer) • G. Mark Burford, Vice President and CFO +(Principal Financial Officer) • Joseph R. Albi, Executive Vice President—Operations, COO • Stephen P. Bell, Executive +Vice President—Business Development +• John A. Lambuth, Senior Vice President—Exploration +This CD&A is divided into three sections: +Section 1 discusses our compensation framework, principal elements of executive compensation, and competitive positioning. +Section 2 discusses 2017 and early 2018 actions related to 2017 executive compensation. +Section 3 discusses the role of the Committee's independent compensation consultant and management in compensation decisions, post-employment +compensation, retirement benefits, perquisites and other compensation related issues. +SECTION 1 +Our Compensation Framework +Objectives +Our principal business objective is to profitably grow our proved oil and gas reserves and production for the long-term benefit of shareholders while seeking +to minimize our impact on the communities in which we operate for the long-term. The primary strategy we use to achieve this objective is to reinvest our cash flow from operations at a competitive +rate of return. Our executive compensation program is designed to retain, motivate and attract, when appropriate, the experienced professionals necessary to carry out this strategy. +Throughout +the Company, we focus on attracting high quality personnel who have strong technical competence, are not afraid to contribute new ideas, and work well in a team environment. The Company +recently undertook a study of compensation across all areas and disciplines within Cimarex. The data confirmed no compensation bias at Cimarex, and every employee is paid equitably for their position +regardless of gender, ethnicity or age. This study will be reviewed periodically to ensure these results remain consistent. +The +Committee also engaged our independent compensation consultant, Longnecker & Associates ("Longnecker"), to analyze the actual delivery of compensation versus the performance of the Company +as compared to the Compensation Peer Group (see below, "—2017 Compensation Peer Group," for a list of these companies). Longnecker concluded that Cimarex had the highest correlation of +realized pay to performance out of all the Compensation Peer Group companies. +34 +Table of Contents +Design +We design our executive compensation program to: +• Align performance incentives with the long-term interests of our +shareholders. +We +align the long-term interests of our executives with the long-term interests of our shareholders by paying a substantial portion of each executive's total direct compensation in the form of +performance-based equity awards. The vesting of up to half of the NEOs' equity awards is dependent upon relative stock price performance, meaning the more our shareholders benefit through shareholder +returns compared to a defined stock performance peer group, the more our executives benefit through increased vesting of performance-based equity awards. Also, our Executive Stock Ownership Guidelines +encourage executives to have a meaningful ownership stake in Cimarex, further aligning the interests of our shareholders and our executives. +• Provide competitive total direct compensation opportunities that retain, motivate and attract, when needed, executive +talent. +We +compensate our executives at levels that are competitive with equivalent positions at companies with which we may compete for talent as represented by our Compensation Peer Group (See "2017 +Compensation Peer Group" below). In general, when we review base salaries, annual incentive awards, long-term equity awards and total direct compensation, we reference the 50th and +75th percentiles of the Compensation Peer Group. Actual compensation earned by an executive may be outside this range based on the Company's performance, the individual's achievements, and +industry competition for talented executives. Half of our restricted stock awards vest based on continued employment and the passage of time, which promotes retention of executives. +• Link compensation earned to achievement of short-term and long-term financial and operational +objectives. +We +provide the opportunity for an annual incentive cash award that is designed to reward executive efforts for achieving Company financial and operational objectives. The portion of our long-term +equity incentive awards that vest based on performance measures tied to relative stock price performance are designed to encourage above average stock price performance, which aligns executives' +interests with shareholders' interests. +Principal Elements of Executive Compensation +We principally use three elements of executive compensation to carry out the design of our executive compensation program, collectively +referred to as "Total Direct Compensation": +Element +Purpose +➢ +Base salary +Retain executive team and, when appropriate, attract executives. +➢ +Annual cash incentive award +Reward executives for short-term financial and operational results. +➢ +Annual long-term equity award +Focus executive efforts on activities and short-term results that lead to long-term shareholder value. Half of our restricted stock awards +vest based on continued employment and the passage of time, which promotes retention. The remainder of the awards vest based on performance measures tied to relative stock price performance, which promotes the long-term interests of our shareholders +and aligns executives' interests with shareholders' interests. +35 +Table of Contents +Competitive Positioning +In support of our compensation objectives and in order to determine an appropriate total value and mix of pay for executives, we reference the +50th and 75th percentiles of the Compensation Peer Group. The 50th and 75th percentiles are reference points only; we do not automatically compensate each executive at +these levels. Several variables, including individual and division performance, time employed in the position, annual Company performance and one- and three-year relative stock price performance +influence the actual executive compensation decisions. We look at our individual NEO and total NEO Total Direct Compensation compared to individual NEO and total NEO Total Direct Compensation of +companies in our Compensation Peer Group. Because not all of our NEO positions are directly comparable to NEO positions of companies in our Compensation Peer Group, we believe that reviewing the +aggregate Total Direct Compensation of all NEOs provides an appropriate reference for comparative purposes and allows us to compare our total cost of management for all NEOs to our peers' total cost +of management. +2017 Compensation Peer Group +The Compensation Peer Group is comprised of companies in the oil and gas industry with market capitalizations and revenues similar to ours and with whom we +compete for executive and other employee talent. The Committee annually reviews companies in the Compensation Peer Group and modifies the group as appropriate. +In +May 2017, the Committee approved the 2017 Compensation Peer Group. The companies included in the Compensation Peer Group were, at the time of selection, comparable to Cimarex in size and scope of +operations, market capitalization and revenue. These are companies with whom we believe we compete for employees. The April 28, 2017 market capitalization of these companies ranged from +$3.7 billion to $20.9 billion and the trailing 12 months' revenue, as of the previous quarterly report on Form 10-Q filed by these companies, ranged from +$527 million to $5.4 billion. For the comparable date and period, Cimarex's market capitalization was $11.1 billion and its revenue was $1.3 billion. The Committee's +independent compensation consultant recommended removing one company that was in the 2016 Compensation Peer Group due to its smaller size compared to other members of the peer group. This company was +QEP Resources, Inc., which had a market capitalization of $2.7 billion and trailing 12 month revenues of $1.4 billion. The consultant also recommended adding two new +companies, Diamondback Energy, Inc. ("Diamondback") and Apache Corporation ("Apache"). The consultant recommended Diamondback because its financial metrics closely aligned with those of +Cimarex, and its operations are concentrated in the Permian Basin, where Cimarex has substantial operations. The consultant recommended Apache because of its market capitalization and increasing +operational focus in the Permian Basin. Diamondback had a market capitalization of $9.8 billion and trailing 12 month revenues of $527 million. Apache had a market capitalization +of $18.5 billion and trailing 12 month revenues of $5.4 billion. The Committee approved these recommendations, resulting in the inclusion of the following companies in the 2017 +Compensation Peer Group: +Peer Company +Peer Company +Antero Resources Corporation +Newfield Exploration Company +Apache Corporation +Noble Energy, Inc. +Cabot Oil & Gas Corporation +Pioneer Natural Resources Company +Concho Resources Inc. +Range Resources Corporation +Continental Resources, Inc. +Southwestern Energy Company +Diamondback Energy, Inc. +WPX Energy, Inc. +Energen Corporation +2017 Stock Performance Peer Group +Under our long-term equity incentive award program, we grant performance-based awards of restricted stock to our NEOs. For grants made in December 2017, the +performance measure used to determine the number of shares to be delivered upon vesting is Cimarex's relative stock price performance at the end of the three-year period preceding the +December 1, 2020 vesting date when compared to companies in the S&P 500 Oil and Gas Exploration & Production index (the "Stock Performance Peer Group"). The Stock Performance Peer +Group members are companies with which we compete for investors and investment capital. The Committee believes that using an index of companies selected by an independent group such as Standard and +Poor's provides less ability for management to attempt to manipulate +36 +Table of Contents +relative +performance. The following are the companies that comprised the Stock Performance Peer Group on December 7, 2017: +Peer Company +Peer Company +Anadarko Petroleum Corporation +EQT Corporation +Apache Corporation +Hess Corporation +Cabot Oil & Gas Corporation +Marathon Oil Corporation +Chesapeake Energy Corporation +Newfield Exploration Company +Cimarex Energy Co. +Noble Energy, Inc. +Concho Resources Inc. +Occidental Petroleum Corporation +ConocoPhillips +Pioneer Natural Resources Company +Devon Energy Corporation +Range Resources Corporation +EOG Resources, Inc. +SECTION 2 +Summary of 2017 and Early 2018 Compensation Decisions +TOPIC +ACTION +RATIONALE +Base Salary Review +Recommended no increase to CEO base salary. +As described below in "Base Salary Determination," the Committee determined not to adjust the salary for Mr. Jorden. At the time of the meeting in May 2017, the CEO's base salary was between the 50th and +75th percentiles of the Compensation Peer Group. +Recommended no increase to CFO base salary. +At the time of the meeting in May 2017, the CFO's base salary was between the 50 th and 75 th percentiles. As +described below, the Committee determined not to adjust the salary for Mr. Burford. +Increased remaining NEOs' base salaries by 3.0-5.8% +These increases were based on maintaining alignment of the NEOs between the 50 th and 75 th percentiles of the +Compensation Peer Group, and Company performance. +Annual Short-Term Incentive Plan +Authorized annual cash short-term awards to the CEO of 208% of year-end base salary and between 164% to 177% of year-end base salary to the other NEOs (with a target of 125% of year-end base salary for the CEO and 100% +for all other NEOs). +Annual cash awards were based on the achievement of financial and strategic objectives described below in "Annual Cash Incentive Awards" and on recommendations from the Committee's independent compensation consultant. See +"Key 2017 Compensation Actions—Annual Cash Incentive Awards" below. +37 +Table of Contents +TOPIC +ACTION +RATIONALE +Long-Term Equity Incentives +Authorized long-term equity awards to NEOs (including the CEO) with an aggregate grant date fair value of $20,850,000. The number of shares that may be earned pursuant to these awards is determined by Cimarex's relative +stock price performance. The awards vest on December 1, 2020 and are subject to a continuous service requirement. A minimum of 50% of the shares granted and a maximum of 100% of the shares granted may be earned at the end of the three-year +performance period, with 100% being earned if Cimarex's relative stock price is in the top five of the 17 companies in the Stock Performance Peer Group. +Given Cimarex's reduced emphasis on cash and other forms of compensation that are not "at-risk," the range for 2017 long-term equity awards recommended by the compensation consultant represented a total value between the +75 th and 90 th percentiles when compared to 2017 awards made by peer companies based on the consultant's review of public filings and knowledge of other companies for which the consultant provides services to +compensation committees and market survey data. The Committee considered Cimarex's total shareholder return ("TSR") for the past one and three years, the historical performance of Cimarex compared to its peers since inception and ability to weather +industry downturns, NEO total direct compensation compared to peer companies, the compensation consultant's recommended individual and total pool of grant date fair value and the CEO's recommendations for NEOs other than the CEO based on their +individual contribution, and determined to make aggregate awards above those recommended by its consultant. Its consultant concurred with the Committee's final determination. The approved awards positioned the NEOs at approximately the +87 th percentile of the Compensation Peer Group. The actual value of the shares upon vesting on December 1, 2020 will be based on Cimarex's performance as reflected in the relative stock price compared to the other companies in +the Stock Performance Peer Group and Cimarex's stock price at that time. +See "Key 2017 Compensation Actions" below for more detail. +Response to 2017 Say-on-Pay Vote and Shareholder Engagement +At the 2017 Annual Meeting of Shareholders, 97% of the votes cast were in favor of the advisory vote to approve executive compensation. Also, +84% of shares voted in favor of holding the say-on-pay vote on an annual basis, which the Board approved during the August 31, 2017 Board meeting. In addition to the advisory vote, as part of +our regular shareholder engagement, we consider and discuss with shareholders a number of matters throughout the year, +38 +Table of Contents +including +executive compensation and environmental, social and governance ("ESG") issues. The Committee carefully considers any feedback and routinely reviews executive compensation practices and ESG +issues. +The +Committee considered the results of the advisory vote and the discussions with shareholders to convey our shareholders' support of the Committee's compensation decisions in 2016 and early 2017 and +shareholders' overall satisfaction with Cimarex's executive compensation programs. Consistent with this support, the Committee retained the core design of our executive compensation programs for the +remainder of 2017. +Key 2017 Compensation Actions +The following discusses the Committee's key 2017 compensation decisions, which are reflected in the 2017 Summary Compensation Table below. +These decisions were made with the advice and concurrence of the Committee's independent consultant, Longnecker & Associates. (See +"CD&A— S ection 3" for additional discussion regarding the role of the consultant.) +CEO Compensation +• Mr. Jorden's annual salary for 2017 remained $960,000 for the reasons described below. +• Mr. Jorden's 2017 annual cash incentive award was $2,000,000, or 208% of his year-end base salary. His target annual cash incentive award +is 125% of his year-end base salary and his maximum award is 250%. +• Mr. Jorden's annual long-term incentive equity award value at the date of grant (December 7, 2017) was $8,000,000. +These +decisions were reviewed in detail by the Committee and its independent consultant. The Committee considered several factors, including input from its independent consultant, compensation data +from peer companies and Cimarex's performance. In 2017, approximately 90% of Mr. Jorden's compensation as disclosed in the Summary Compensation Table was at risk. +Other NEO Compensation +The Committee also made compensation decisions for the other NEOs comprised of base salary adjustments made in May 2017, annual cash incentive +awards for 2017 made in February 2018, and long-term equity awards made in December 2017. These adjustments were based upon the recommendations of the CEO, evaluation by the Committee, the advice and +recommendations of the Committee's independent consultant, salary data from peer and broader market surveys, internal pay relationships based on relative duties and responsibilities, the executive's +impact on Cimarex's results, and for retention purposes. Based upon these considerations, the Committee made the following 2017 NEO compensation decisions: +2017 Salary (1) +Year End +2017 Base Salary +2017 Annual Cash +Incentive Award (1) +2017 Long-Term +Incentive Equity +Grant Date Fair +Value (1) +Total +Compensation (1)(2) +% of Total +Compensation +that is +At Risk (3) +G. Mark Burford, CFO +$ +460,000 +$ +460,000 +$ +760,000 +$ +2,900,000 +$ +4,193,307 +87 +% +Joseph R. Albi, COO +$ +602,151 +$ +610,000 +$ +1,000,000 +$ +3,400,000 +$ +5,071,023 +87 +% +Stephen P. Bell, EVP +$ +498,459 +$ +505,000 +$ +850,000 +$ +3,150,000 +$ +4,566,645 +88 +% +John A. Lambuth, SVP +$ +495,791 +$ +508,000 +$ +900,000 +$ +3,400,000 +$ +4,856,872 +89 +% +(1) From +Summary Compensation Table. +(2) Includes +All Other Compensation from Summary Compensation Table. +(3) Compensation +at risk is based on the sum of 2017 Annual Cash Incentive Award and 2017 Long-Term Incentive Grant Date Fair Value compared to the Total +Compensation from the Summary Compensation Table. +39 +Table of Contents +Base Salary Determination +We provide competitive base salaries to retain and attract, when appropriate, talented executives and to provide a fixed base of cash +compensation. We compare each Cimarex NEO's base salary with the base salary paid for a similar executive position by companies in our Compensation Peer Group. See "Competitive Positioning" above in +this CD&A for a list of the companies in the Compensation Peer Group. The Committee then may adjust base salaries based on a number of factors, including job responsibilities, management experience, +individual contributions, number of years in position and current salary. +In +May 2017, the Committee's independent compensation consultant reviewed the NEOs' base salaries compared to Compensation Peer Group data and broader market data and initially recommended a 3% +increase in executive salaries for each NEO. The compensation consultant noted that each NEO's salary was between the 50 th and 75 th percentiles of the +Compensation Peer Group. Mr. Jorden, our CEO, provided the Committee with recommendations for NEOs other than himself. While Mr. Jorden, our CEO, typically does not make recommendations +concerning his own salary, in May 2017 he recommended that he and Mr. Burford, the CFO, not receive salary increases for 2017. This recommendation was due to corrections made to Cimarex's +financial statements resulting from errors in the quarterly ceiling test calculations used to test for possible impairments of Cimarex's oil and gas properties. For a complete description of these +corrections, see the "Explanatory Note" to Cimarex's amended Annual Report on Form 10-K/A for the year ended December 31, 2016 filed with the SEC on May 10, 2017. With respect to +the other NEOs, Mr. Jorden's recommendations +were based on maintaining alignment of the NEOs between the 50 th and 75 th percentile of the Compensation Peer Group and Company relative TSR performance being +in the 63 rd percentile of the Compensation Peer Group companies for the previous one-year period and the 79 th percentile among those companies for the +previous three-year period. The Committee considered the recommendations of both the Committee's consultant and Mr. Jorden for NEOs other than Mr. Jorden. With respect to +Mr. Jorden's salary, in discussions in executive session with the compensation consultant and without Mr. Jorden present, the Committee considered Mr. Jorden's leadership of +Cimarex through a reduced commodity price environment, including Cimarex's relative TSR performance in the 63 rd percentile compared to the Compensation Peer Group for the past one +year and in the 79 th percentile for the past three years, and his salary being between the 50 th and 75 th percentiles of the Compensation +Peer Group's CEO salaries. However, due to the financial statement corrections described above, the Committee determined not to adjust the salaries of Mr. Jorden and Mr. Burford. The +Committee also reviewed the total salaries and recommended salaries of all the NEOs compared to the total salaries of the NEOs of the Compensation Peer Group. Before the recommended salary increases, +aggregate NEO salaries were at the 61 st percentile of the Compensation Peer Group. The recommended increases put the NEOs at the 66 th percentile. The +compensation consultant indicated its concurrence with the Committee's recommendations based on these reasons and the compensation consultant's experience with, and knowledge of, compensation +decisions of other oil and gas exploration and production companies. The Committee recommended, and the Board approved, the following base salaries effective June 1, 2017: +Name +Title +5/31/2017 +Base Salary +6/1/2017 +Base Salary +Percent Increase +Thomas E. Jorden +Chairman of the Board, CEO +and President +$ +960,000 +$ +960,000 +0 +% +G. Mark Burford +Vice President and CFO +$ +460,000 +$ +460,000 +0 +% +Joseph R. Albi +Executive Vice President— +Operations, COO +$ +592,000 +$ +610,000 +3.0 +% +Stephen P. Bell +Executive Vice President— +Business Development +$ +490,000 +$ +505,000 +3.1 +% +John A. Lambuth +Senior Vice President— +Exploration +$ +480,000 +$ +508,000 +5.8 +% +40 +Table of Contents +Annual Cash Incentive Awards +In February 2018, the Committee met to deliberate and determine NEO (including the CEO) annual cash incentive awards for 2017 performance. The +individual target for the CEO is 125% of his base salary and for each other NEO is 100% of his base salary. There is no minimum award, and an individual's maximum award is 250% of base salary for the +CEO and 200% of each other NEO's base salary. +In +February 2017, the Compensation and Governance Committee adopted 2017 strategic and tactical goals and objectives to be measured in 2018. At the time the Committee approved these goals, commodity +prices had recently increased but were still very volatile, with oil near $50 per barrel, and the Committee continued its focus from 2016 on goals that preserve Cimarex's strong balance sheet, core +properties and organization during a difficult period for the oil +and gas industry. The table below explains the level of achievement of the 2017 strategic and tactical goals and objectives. +2017 Strategic and Tactical Goals and Objectives +Achievement +Achieve good return on invested capital. +Excellent. We were above our threshold for after tax return on invested capital based on internal measurements that consider only discounted future cash flows from proved developed +reserves and are fully burdened with land, seismic, personnel costs, and all other non-drilling costs attributed to our exploration program. The returns are excellent by historical standards and reflected our ability to continue to control costs and +innovate our operations throughout the year. +Manage the balance sheet. +Excellent. We continued to preserve the strength of our balance sheet and increased production on a debt adjusted* per share basis by 15% and reserves on a debt adjusted* per share +basis by 13%. We incurred no additional debt and had cash on hand of $400.5 million at year-end 2017. +Continue focus on staffing and succession planning at all levels. +Very Good. Cimarex continued our focus on succession planning in 2017. We identified potential future managers and leaders in our organization and provided them with additional +training and opportunities in different areas within the Company. We reported these actions and the individuals' progress to the Board of Directors. +Continue focus on and improve health, safety and the environment metrics. +Fair. We are proud of the organization's cultural commitment to health, safety and the environment ("HS&E"). We have developed an operational practice of transparency around +HS&E. We encourage reporting of all incidents involving our employees and contractors (including near misses) and the use of Stop Work Authority, and we have used examples of incidents reported as a vehicle to educate our employees and +contractors and to improve our HS&E practices. +41 +Table of Contents +2017 Strategic and Tactical Goals and Objectives +Achievement +Tactical Goals: +• +Meet or exceed quarterly +and annual production guidance targets. +Excellent. We met or exceeded our production guidance during each of the quarters during 2017. We +achieved a 19% growth in total daily production and our daily oil volumes grew 27%. +• +Identify and understand +the risks around induced seismicity. +Excellent. We continued the active monitoring of proprietary ground motion arrays in 2017. We also +continued a collaborative dialogue with regulators and industry groups and peer companies. As Cimarex has continued to study the issue of induced seismicity, we have brought our experience to the table in advocacy with our peers and regulatory +agencies to adopt a proactive, productive approach to the issue that includes widespread ground motion monitoring, rigid standards, and transparency. +• +Develop long-term water +sourcing and disposal solutions for Cimarex development projects. +Excellent. In 2017, amidst budget discipline, Cimarex continued planning and implementing field-wide +salt-water disposal designs that consider the risks of downtime. Our operations group responded to the challenge of designing and building redundancy into our salt-water disposal systems during 2017. We currently have excess capacity and contingency +plans in the event that one or more of our salt-water disposal wells go offline. We will continue to focus on this area as we increase our exploration and development efforts. +• +Continue to develop and +advance field automation. +Very Good. In 2017, Cimarex continued the work on automating our Permian facilities. All new facilities +are being designed and built with automated meters, gauges, and tank level indicators. We plan to automate older facilities and to establish a central "command and control" center that will provide continuous monitoring and intervention as +needed. +• +Increase corporate +environmental disclosure. +Excellent. In early 2017, Cimarex committed to provide a more robust environmental disclosure on our +website. This new environmental disclosure achieves our goals of being transparent and having metrics against which we can both test ourselves and improve. This new disclosure was added to our website in February 2018. +* The +Company uses debt adjusted production growth and reserve numbers to demonstrate the Company's ability to increase production and reserves without a commensurate +increase in debt. The use of debt adjusted measures mitigates the risk that management could increase reserves and production by increasing drilling and exploration budgets using debt imprudently. +These measures are not prescribed by Generally Accepted Accounting Principles ("GAAP"). We calculate debt-adjusted shares by adding to the actual shares of common stock outstanding the theoretical +number of shares that would be required to retire our year-end debt, net of cash on hand. The theoretical number of shares is calculated by dividing our net debt at year-end by the trailing 12-month +average stock price at year-end. +42 +Table of Contents +The +Committee's independent compensation consultant recommended a pool for cash incentive awards for all NEOs of $5.8 million or 192% of the NEOs' year-end 2017 salaries, based on the +consultant's review of the Company's achievement of the 2017 strategic and tactical goals, the consultant's analysis of the projected annual incentive awards of the Compensation Peer Group to be +generally at target levels or slightly above target level for 2017 performance, the consultant's evaluation of the Company's performance of its 2017 strategic and tactical goals compared to the +Compensation Peer Group's percentile rankings, and the consultant's review of actions by other oil and gas exploration and production companies related to annual incentive awards due to commodity +price and stock price trends. Based principally on the achievement of the 2017 strategic and tactical goals and objectives and the improvement in and stabilizing of commodity prices and expected +improvement in the Company's cash flow, the CEO recommended cash incentive awards for the other NEOs of between 164% and 177% of their year-end 2017 salaries, which were slightly lower than the +recommendations of the Committee's independent compensation consultant. The Committee's independent consultant concurred that the CEO's recommendations were reasonable. The Committee, after +considering the achievement of the 2017 strategic and tactical goals and objectives, the improvement in and stabilizing of oil and gas prices and the impact on cash flow, and in consultation with its +independent consultant, accepted the CEO's recommendations, and the Board approved the Committee's recommendations. +The +Committee, with its independent consultant, and without management present, deliberated concerning the CEO's annual cash incentive award. Based on its analysis of the Company's 2017 performance +described above and the CEO's leadership of the Company and management of senior executives and other employees to achieve this performance, the Committee recommended and the Board approved a cash +incentive award to the CEO of 208% of his base salary, which was approximately 6% below the recommendation of the Committee's independent compensation consultant. The Committee's independent +consultant concurred with this recommendation, and the total cash incentive awards to +all NEOs of $5.51 million was $0.3 million below the recommendation of the compensation consultant of a reasonable pool of $5.8 million. Following are the CEO and other NEO 2017 +annual cash incentive awards: +Name +Cash Incentive Award +% of Year-End +Base Salary +Thomas E. Jorden, CEO +$ +2,000,000 +208 +% +G. Mark Burford, CFO +$ +760,000 +165 +% +Joseph R. Albi, COO +$ +1,000,000 +164 +% +Stephen P. Bell, EVP +$ +850,000 +168 +% +John A. Lambuth, SVP +$ +900,000 +177 +% +Long-Term Equity Incentive Award Program +Our long-term equity incentive award program balances the short-term annual cash incentive program by focusing executive efforts on the +activities that lead to long-term shareholder value. Typically, the Committee grants equity awards of restricted stock to NEOs each year. +For +grants made in December 2017, the number of shares that NEOs may earn is determined by the relative stock price performance of Cimarex when compared to the Stock Performance Peer Group. See +"CD&A—Competitive Positioning" for a list of the companies in the 2017 Stock Performance Peer Group. The awards vest on December 1, 2020, based on the Company's relative stock price +performance compared to the Stock Performance Peer Group for the three years ending December 1, 2020, and are subject to a continuous service requirement. A minimum of 50% of the shares granted +and a maximum of 100% of the shares granted may be earned at the end of the three-year performance period. Half of our restricted stock awards vest based on continuous employment and the passage of +time, which promotes retention of executives, and the other half of the awards vest based on performance measures tied to relative stock price performance, which promotes the long-term interests of +our shareholders and aligns executives' interests with shareholders' interests. While the 2014 Equity Incentive Plan does not set a minimum vesting period, the Committee has set a three-year vesting +period for restricted stock awards to NEOs since the Committee began making restricted stock awards in 2006. +Dividends +equivalent to those paid on Cimarex common stock are paid on the shares awarded that are subject to time-based vesting, and dividends applicable to the remainder of the shares awarded are +accrued and only paid on the +43 +Table of Contents +shares +earned following calculation of Cimarex's relative stock price performance compared to companies in the Stock Performance Peer Group at the end of the performance period. All of the shares +subject to the award have the same voting rights as outstanding shares of Cimarex common stock. +For +restricted stock awards made in December 2017, the total number of shares earned is determined by calculating the percentage difference between the average per share closing price for shares of +Cimarex and each company in the Stock Performance Peer Group for the 30 trading days preceding December 1, 2017 and the 30 trading days preceding December 1, 2020. The Committee ranks +Cimarex and calculates its relative performance percentile. Companies that are not in the Stock Performance Peer Group at both the beginning and the end of the performance period are not included in +the calculation. Companies that declare bankruptcy or are delisted and cease to be traded on a national securities exchange are ranked last at the end of the performance period. The following table +illustrates shares that would be earned at various relative stock price performance percentiles (assuming 17 companies in the Peer Group). +Cimarex's Rank Among +Peer Companies +Percent of +Award Vesting +Relative Stock Price +Performance Percentile +1 through 5 +100 +% +71-100% +6 +94 +% +65% +7 +88 +% +59% +8 +81 +% +53% +9 +75 +% +47% +10 +69 +% +41% +11 +63 +% +35% +12 +56 +% +29% +13 through 17 +50 +% +0-24% +On +December 7, 2017, the Committee granted long-term equity awards to the NEOs with a total grant date fair value of $20,850,000 based on competitive market data for companies in Cimarex's +Compensation Peer Group. Comparative data was obtained by the Committee's independent consultant from public filings disclosing 2017 NEO compensation of companies in the Compensation Peer Group and +the consultant's knowledge of other companies for which the consultant provides services. See "CD&A—Competitive Positioning" for a list of the companies in the Compensation Peer Group. +The +Committee's compensation consultant recommended awards with a value between the 75 th percentile and 90 th percentile when compared to companies in the +Compensation Peer Group. The factors considered by the consultant in making its recommendations included the following: +• Cimarex was the third-highest performing company in the Compensation Peer Group when comparing current stock price to the respective historical +all-time high price. This is indicative of Cimarex's historical performance through industry cycles including the prolonged oil price decline beginning in late 2014. • Cimarex was the +third-highest performer in the Compensation Peer Group based on three-year relative TSR performance. +• Due to Cimarex's better relative stock price performance during the industry downturn compared to peers, the Company faces a potential +disadvantage in the NEOs' ability to earn payouts based on relative stock price performance going forward. • The tenure of executives in their respective roles has increased and they +achieved good overall performance. +The +Committee approved awards within the recommended total pool range based on Cimarex's TSR compared to its Compensation Peer Group for the periods indicated, the total direct compensation of our +NEOs compared to that of our peer companies, Cimarex's 2017 financial and operational performance, and the compensation consultant's recommendations. The Committee's consultant concurred with the +Committee's final determination. The actual value of +the awards upon vesting in December 2020 will be based on Cimarex's relative three-year stock price performance compared to the other companies in the Stock Performance Peer Group as described above +and Cimarex's stock price at that time. +44 +Table of Contents +The +Committee granted a total of 233,065 restricted shares to the NEOs (including the CEO). The number of shares granted to each NEO was based on their relative individual roles and responsibilities. +Of the total number of shares granted to the NEOs (including the CEO), the Committee awarded 38% of the shares to Mr. Jorden, 16% of the total shares to Mr. Albi, 16% to +Mr. Lambuth, 15% to Mr. Bell and 14% to Mr. Burford. The following table reflects the awards made by the Committee: +Name +No. of Shares Subject +to Award +Grant Date Value of +Long-Term Equity +Incentive Award (1) +Thomas E. Jorden, CEO +89,425 +$ +8,000,000 +G. Mark Burford, CFO +32,417 +$ +2,900,000 +Joseph R. Albi, COO +38,006 +$ +3,400,000 +Stephen P. Bell, EVP +35,211 +$ +3,150,000 +John A. Lambuth, SVP +38,006 +$ +3,400,000 +(1) Represents +an estimate of the fair value of the shares as of the grant date utilizing a Monte Carlo valuation technique as permitted by the guidance +provided by FASB ASC Topic 718. The estimated fair value is the aggregate compensation cost to be recognized over the service period. +2017 Vesting of NEO Equity Awards +On December 10, 2017, the performance period applicable to the December 10, 2014 NEO equity awards ended. Cimarex's relative +stock price performance was in the 94 th percentile of the Stock Performance Peer Group at the end of the performance period, resulting in the vesting of 100% of the shares subject +to the December 10, 2014 award. +The +following table reflects the shares originally granted to each NEO in 2014 and the number of shares that vested at the end of the three-year performance period: +Name +No. of Shares Granted +No. of Shares Vested +Thomas E. Jorden, CEO +85,839 +85,839 +Joseph R. Albi, COO +41,738 +41,738 +Stephen P. Bell, EVP +35,477 +35,477 +John A. Lambuth, SVP (1) +39,651 +39,651 +G. Mark Burford, CFO (1)(2) +0 +0 +(1) During +2017, restricted share awards granted to Mr. Lambuth and Mr. Burford in 2012, prior to their becoming NEOs, vested. The restricted +shares that vested in 2017 are included below in "Compensation Tables—2017 Option Exercises and Restricted Stock Vested." +(2) Mr. Burford +did not receive a performance share award in 2014 because he was not CFO at that time. +The +vesting of these awards and the value at vesting is also reported in "2017 Option Exercises and Restricted Stock Vested" table in this proxy statement. For a comparison of the grant date fair +value of the performance shares granted in December 2014 to the value realized upon vesting in December 2017, see footnote 1 to that table. +Elimination of Tax Gross Up Payments +In March 2013, the Board amended Cimarex's Change in Control Severance Plan to eliminate any participant's right (including the right of any +NEO) to a tax gross-up payment. +Cimarex's +Change in Control Severance Plan is the only plan that provided for a tax gross-up payment to a participant following a change in control if any payments received by the participant as a +result of the change in control become subject to the excise tax imposed by Section 4999 of the Internal Revenue Code. See "Potential Payments Upon Change in Control or Termination" for a more +detailed description of this Plan. +45 +Table of Contents +Alignment of CEO Direct Compensation to Total Shareholder Return ("TSR") +CEO's Total Direct Compensation Compared to Cimarex TSR +The following graph illustrates our CEO's direct compensation compared to our TSR for the years 2013 through 2017. Indexed TSR represents the cumulative total +return of Cimarex stock for a five-year period based on a $100 investment at the start of the first year and reinvestment of all dividends. The table shows the value of the investment at the end of +each year. +Relative CEO Total Compensation Compared to Relative TSR +The following graph depicts alignment of relative CEO compensation compared to relative TSR for the years ended December 31, 2014 through +December 31, 2016. The information only is provided through 2016 because 2017 CEO peer company compensation information is not publicly available at this time. The companies used for the +relative +46 +Table of Contents +comparison +are the companies in our Compensation Peer Group. We also included, as a point of reference, Cimarex's CEO compensation for the years ended December 31, 2015 through +December 31, 2017. +Early 2018 Compensation Decisions +2018 Annual Cash Incentive Award Goals +In +February 2018, the Committee approved the following strategic goals and objectives that will apply to 2018 annual cash incentive awards that will be measured and paid in 2019: +2018 +strategic goals: +o Achieve good return on invested capital. o Manage the balance sheet as is prudently possible. +§ Increase debt adjusted production per share. § Increase debt adjusted reserves per share. +o Continue focus on staffing and succession planning at all levels. o Continue emphasis on health, +safety and the environment. +2018 +tactical goals: +o Meet or exceed quarterly and annual production guidance targets. o Prepare a comprehensive and +data-driven analysis of optimal E&P capital +investment pace and return of capital. o Continue to optimize midstream operations and expenditures. o Continue to develop and advance field automation and water sourcing, disposal, +and recycling solutions for development projects. o Be opportunistic in business development arena. o Continue to pursue technological advancement. +For +the 2018 strategic goals concerning return on capital investment and debt adjusted production and reserves per share, the Committee has adopted numerical levels that correspond to poor, fair, +good, very good and excellent +47 +Table of Contents +achievement. +The specific numerical levels will be discussed in the Compensation Discussion and Analysis concerning 2018 compensation decisions contained in the proxy statement for the 2019 Annual +Meeting of Shareholders. +The +strategic and tactical measures and objectives have been clearly communicated to the NEOs. At year end, the CEO will deliver a report of results to the Committee with respect to each goal and +provide the CEO's recommendation and the basis for the CEO's recommendations for individual awards. The Committee and its independent compensation consultant will review the CEO's recommendations and +accept or modify those recommendations. The non-management members of the Board will consider the recommendations of the Committee. Each NEO, other than the CEO, has a threshold award of 0% of +year-end base salary (no minimum award), a target award equal to 100% of year-end base salary, and a maximum award of 200% of year-end base salary. The CEO has a threshold award of 0% of year-end base +salary, a target award equal to 125% of year-end base salary, and a maximum award of 250% of year-end base salary. +SECTION 3 +Role of Compensation Consultant and Management in Compensation Decisions +Compensation Consultant +The Committee has engaged the firm of Longnecker & Associates ("Longnecker") as its independent compensation consultant to fulfill the following +responsibilities: +• Advise the Committee on management proposals, as requested; • Undertake special projects at the request of the Committee; +• Participate in Committee meetings; • Make recommendations concerning the Compensation Peer Group; +• Review the selected Peer Group and survey data for competitive comparisons; • Provide market data and recommendations on +NEO compensation; and • Provide market data and recommendations on non-employee Director compensation. +The +Committee has considered the independence factors adopted by the NYSE and has determined that its consultant, Longnecker, is independent within the meaning of the NYSE listing standards. +As +part of its ongoing services to the Committee, one or more representatives of Longnecker attended six of the Committee meetings held in 2017. Longnecker provided the following services in +2017: +• Reviewed and provided input on the CD&A in the 2017 proxy statement; • Attended the February 23, 2017 Compensation and +Governance Committee meeting and consulted with the Committee on annual cash incentive +awards; • Attended the May 11, 2017 Compensation and Governance Committee meeting and consulted with the Committee on executive base salary levels; • Made recommendations concerning the Compensation Peer Group; • Conducted a market analysis of Board compensation and consulted with the +Committee concerning Board compensation; and • Provided an executive compensation analysis and a recommended range for long-term equity grants and participated in the December 7, +2017 +Compensation and Governance Committee meeting and consulted with the Committee on performance share awards. +Management +Our CEO and President is the principal management resource for compensation recommendations to the Committee with respect to the other NEOs. The CEO +(i) provides an annual assessment of Cimarex's overall financial and operational performance and (ii) subjectively evaluates individual NEO performance and recommends individual base +salary adjustments, annual cash incentive awards, and long-term equity awards. His subjective evaluations generally include factors such as scope of responsibility, contribution to Company +performance, technical competence, managerial +48 +Table of Contents +skills +and advancement potential. The Committee considers the CEO's recommendations in making decisions regarding executive compensation. The Committee exercises its discretion to accept, reject or +modify these compensation recommendations. +Our +Vice President—Human Resources, Government Relations, and External Affairs acts as an informational resource to Longnecker and the Committee and compiles survey and other compensation +data for their review. The Committee, in consultation with Longnecker, reviews this information when making executive compensation and program design decisions. +Other Compensation Arrangements +Post-Employment and Employment Arrangements +All employees, including the NEOs, are covered by the Cimarex Change in Control Severance Plan. The Plan provides for a "double trigger" so that payments are +made only if (a) there is a change in control (as defined in the Plan) and (b) an employee is terminated for any reason other than "cause" (as defined in the Plan) within two years +following a change in control. In the event that both of the above contingencies are satisfied, the employee is entitled to (i) cash severance payments of two times annual salary and average +cash incentive award, (ii) a pro-rata portion of annual cash incentive bonus for the current year, and (iii) continued medical, dental, disability and life insurance benefits for two +years. See "Potential Payments Upon Change in Control or Termination" for a more detailed description of these benefits. In addition, the 2014 Equity Incentive Plan and the terms of employee equity +award agreements provide for acceleration of vesting of outstanding equity awards upon the occurrence of a change in control. +Cimarex +assumed the change in control provisions from the now-expired employment agreements between each of Messrs. Albi, Bell, and Jorden and a predecessor company. The assumed portion of each +agreement provides that if the executive is terminated without cause within two years following a change in control event (as defined in the agreement), the executive is entitled to a lump-sum payment +equal to two times the executive's base salary at the time of the change in control. Benefits payable under these agreements are forfeited if the executive receives benefits under any other change in +control plan, including Cimarex's Change in Control Severance Plan. As a practical matter, the change in control benefits assumed under the employment agreements only benefit these executives if the +Change in Control Severance Plan described above has been terminated. The Change in Control Severance Plan provides for greater benefits payable upon the occurrence of a change in control event than +those payable under the assumed agreements. +Retirement Benefits +Employees, including the NEOs, are eligible to participate in the Cimarex 401(k) defined contribution retirement plan ("401(k) Plan"). Cimarex matches +dollar-for-dollar employee contributions to the 401(k) Plan up to 7% of the employee's cash compensation, subject to limits imposed by the Internal Revenue Code. The Board is authorized to make +profit-sharing contributions under the 401(k) Plan. In February 2018, the Board determined that a profit-sharing contribution of 4% would be made due to the Company's $494.3 million of net +income in 2017. +In +addition, eligible participants, including the NEOs, may participate in the Supplemental Savings Plan, which is a non-qualified deferred compensation plan that permits participants to make +contributions (and to receive matching contributions) in excess of the Internal Revenue Code limitations for 401(k) plans. See "Compensation Tables—2017 Nonqualified Deferred Compensation" +for information about contributions to the Supplemental Savings Plan. The Committee administers this plan and designates who may participate. Benefits are paid upon the later to occur of termination +of employment or the time elected by the participant. In the event of a change in control, each participant receives a lump sum cash payment of the amount allocated to his or her account. +Perquisites +We offer a limited number of perquisites (personal benefits) to our NEOs that are not offered to other employees, including financial and estate planning and +annual medical examinations. Our corporate aircraft is generally not available +49 +Table of Contents +for +personal use by any employee. With the authorization of our CEO, however, the corporate aircraft may be used by an employee or a member of his/her family for medical purposes. The incremental cost +for non-business use of our corporate aircraft, if any, is disclosed in the "Summary Compensation Table." We use the Standard Industry Fare Level tables published by the Internal Revenue Service to +determine the amount of compensation income that is imputed to the employee for tax purposes for personal use of corporate aircraft. Our corporate aircraft was used for one trip by an employee and his +spouse for his spouse's medical care in 2017 with the authorization of our CEO. There was no other personal use of corporate aircraft during the year. +Other Compensation Policies +Total Pay Considerations +The Committee considers Total Direct Compensation at the time it makes a decision on any element of executive compensation. The Committee also reviews the +relationship of the CEO's total compensation to the total compensation of each of the other NEOs. +Stock Ownership and Holding Requirements +Our Corporate Governance Guidelines require that each independent Director own Cimarex stock in an amount equal to three times his or her annual cash retainer. +In addition, pursuant to a revision made in December 2016, the CEO is expected to own Cimarex shares in an amount equal to six times his annual base salary, and each executive officer who reports to +the CEO is expected to own stock in an amount equal to three times his or her annual base salary. A newly elected Director or a newly appointed executive officer has three years from the date of his +or her initial election or appointment to comply with the Guidelines. Until the stock ownership guidelines are met, an executive officer or Director may not sell any Cimarex stock acquired through +equity grants except to pay income taxes upon the vesting of awards or to pay the exercise price and related income taxes upon the exercise of stock options. Restricted stock, restricted stock units, +deferred compensation units and performance awards are counted in calculating ownership. Shares subject to options are not counted. As of March 30, 2018, all officers and independent Directors +were in compliance with the stock ownership guidelines other than Frances M. Vallejo, who joined the Board on May 11, 2017. Ms. Vallejo has until May 11, 2020 to comply with the +guidelines. +Clawback Policy +We have adopted a clawback policy providing that, in the event of an accounting restatement due to material noncompliance with financial reporting requirements +under the U.S. federal securities laws, the Committee has the right to use reasonable efforts to recover from any of our current or former executive officers incentive-based compensation related to +the restatement and received during the three-year period preceding any such accounting restatement. This policy applies to incentive-based compensation granted on or after June 1, 2012. This +clawback policy will be interpreted in the best judgment of the Committee in a manner consistent with any applicable rules or regulations adopted by the SEC or the NYSE as contemplated by the +Dodd-Frank Act. +Non-Hedging and Non-Pledging Policies +Our insider trading policy prohibits Directors, officers and designated employees from engaging in hedging or monetization transactions, and other employees +are strongly discouraged from engaging in such transactions. Any other employee wishing to enter into such an arrangement must first submit the proposed transaction for approval by the compliance +officer designated in the policy. The policy also prohibits Directors, officers and employees from holding Cimarex stock in a margin account or pledging Cimarex stock as collateral for a loan. +Tax Law Considerations +The Committee considers the impact of applicable tax laws with respect to executive compensation. Section 162(m) of the Internal Revenue Code of 1986, +as amended, ("Section 162(m)") limits the amount of compensation that Cimarex may deduct on its federal income tax return for compensation paid to certain executive officers to no more than +50 +Table of Contents +$1 million +per year. Through 2017, there were exceptions to the $1 million limitation for performance-based compensation meeting certain requirements. The performance-based portion of +our restricted stock awards made prior to November 2, 2017 are the only element of executive compensation designed to qualify for the performance-based exception to the $1 million +deduction limit, provided additional requirements are met. These exceptions were eliminated by the Tax Cuts and Jobs Act enacted in December 2017. The Committee attempted to preserve the deductibility +of compensation paid to executive officers by utilizing performance-based stock awards until this tax law change, but did not limit executive compensation to amounts deductible under +Section 162(m) and does not plan to limit executive compensation to deductible amounts going forward. +COMPENSATION AND GOVERNANCE COMMITTEE REPORT +The Compensation and Governance Committee has reviewed and discussed with management the preceding Compensation Discussion and Analysis section +of Cimarex's 2018 proxy statement. Based on our review and discussions, we have recommended to the Board of Directors that the Compensation Discussion and Analysis be included in Cimarex's 2018 proxy +statement. +THE COMPENSATION AND GOVERNANCE COMMITTEE +Floyd R. Price, Chairman +Hans Helmerich +David A. Hentschel +Michael J. Sullivan +51 +Table of Contents +COMPENSATION TABLES +SUMMARY COMPENSATION TABLE +The following table describes 2015-2017 compensation of our CEO, CFO and the three other most highly compensated executive officers. +Name and +Principal Position +Year +Salary +Bonus +Stock +Awards (1) +Option +Awards +Non-Equity +Incentive Plan +Comp. (2) +All Other +Comp. (3) +Total +Thomas E. Jorden +2017 +$ +960,000 +$ +— +$ +8,000,000 +$ +— +$ +2,000,000 +$ +94,129 +$ +11,054,129 +Chief Executive +2016 +$ +921,468 +$ +— +$ +10,500,000 +$ +— +$ +1,700,000 +$ +59,451 +$ +13,180,919 +Officer, President, +2015 +$ +870,750 +$ +— +$ +6,424,530 +$ +— +$ +435,375 +$ +59,481 +$ +7,790,136 +and Chairman of +the Board (CEO) +(Principal Executive +Officer) +G. Mark Burford +2017 +$ +460,000 +$ +— +$ +2,900,000 +$ +— +$ +760,000 +$ +73,307 +$ +4,193,307 +Vice President and +2016 +$ +429,779 +$ +— +$ +3,200,000 +$ +— +$ +690,000 +$ +47,679 +$ +4,367,458 +Chief Financial Officer +2015 +$ +342,279 +$ +— +$ +2,250,000 +$ +— +$ +156,000 +$ +47,340 +$ +2,795,619 +(CFO) (Principal +Financial Officer) +Joseph R. Albi +2017 +$ +602,151 +$ +— +$ +3,400,000 +$ +— +$ +1,000,000 +$ +68,872 +$ +5,071,023 +Executive Vice +2016 +$ +578,876 +$ +— +$ +4,000,000 +$ +— +$ +888,000 +$ +58,072 +$ +5,524,948 +President— +2015 +$ +561,600 +$ +— +$ +3,200,000 +$ +— +$ +225,000 +$ +58,053 +$ +4,044,653 +Operations, +Chief Operating +Officer +Stephen P. Bell +2017 +$ +498,459 +$ +— +$ +3,150,000 +$ +— +$ +850,000 +$ +68,186 +$ +4,566,645 +Executive Vice +2016 +$ +480,340 +$ +— +$ +3,400,000 +$ +— +$ +735,000 +$ +74,135 +$ +4,689,475 +President—Business +2015 +$ +467,625 +$ +— +$ +2,850,000 +$ +— +$ +163,000 +$ +75,195 +$ +3,555,820 +Development +John A. Lambuth +2017 +$ +495,791 +$ +— +$ +3,400,000 +$ +— +$ +900,000 +$ +61,081 +$ +4,856,872 +Senior Vice +2016 +$ +471,365 +$ +— +$ +3,750,000 +$ +— +$ +735,000 +$ +52,753 +$ +5,009,118 +President— +2015 +$ +427,168 +$ +— +$ +3,050,000 +$ +— +$ +156,000 +$ +51,803 +$ +3,684,971 +Exploration +(1) Represents +the grant date fair value of the awards, which is the aggregate compensation cost to be recognized over the service period under FASB ASC +Topic 718. The grant-date fair value is determined using the Monte Carlo simulation method. Actual payouts with respect to the awards can range from 50 percent to 100 percent of the +award based on the relative ranking of the Company's relative stock price performance in comparison to the peer group at the end of the three-year performance period. If the Company's performance +results in 100% of the award being paid, the grant date fair value of the maximum number of shares for each of the NEOs pursuant to the awards granted in 2017 based on the closing price of the +Company's common stock on the December 7, 2017 date of grant would have been as follows: Mr. Jorden $9,915,493; Mr. Burford $3,594,366; Mr. Albi $4,214,085; Mr. Bell +$3,904,225; and Mr. Lambuth $4,214,085. +52 +Table of Contents +(2) Amount +reported for the year earned. +(3) The +following describes the components of other items of compensation, including any perquisite in excess of $10,000: +Executive Officer +Unused +Vacation +Company +Contributions +to Retirement +Plans +Insurance +Premiums +Financial +Consulting +Service and +Estate Planning +Benefits +Total +Other +Compensation +Thomas E. Jorden, CEO +2017 +$ +— +$ +46,800 +$ +27,512 +$ +19,817 +$ +94,129 +2016 +$ +— +$ +36,000 +$ +23,451 +$ +— +$ +59,451 +2015 +$ +— +$ +36,000 +$ +23,481 +$ +— +$ +59,481 +G. Mark Burford, CFO +2017 +$ +— +$ +46,800 +$ +14,571 +$ +11,936 +$ +73,307 +2016 +$ +3,437 +$ +36,000 +$ +8,242 +$ +— +$ +47,679 +2015 +$ +2,411 +$ +36,000 +$ +8,929 +$ +— +$ +47,340 +Joseph R. Albi, COO +2017 +$ +— +$ +46,800 +$ +22,072 +$ +— +$ +68,872 +2016 +$ +— +$ +36,000 +$ +22,072 +$ +— +$ +58,072 +2015 +$ +— +$ +36,000 +$ +22,053 +$ +— +$ +58,053 +Stephen P. Bell, EVP +2017 +$ +— +$ +46,800 +$ +21,386 +$ +— +$ +68,186 +2016 +$ +16,749 +$ +36,000 +$ +21,386 +$ +— +$ +74,135 +2015 +$ +17,986 +$ +36,000 +$ +21,209 +$ +— +$ +75,195 +John A. Lambuth, SVP +2017 +$ +— +$ +46,800 +$ +14,281 +$ +— +$ +61,081 +2016 +$ +— +$ +36,000 +$ +16,753 +$ +— +$ +52,753 +2015 +$ +— +$ +36,000 +$ +15,803 +$ +— +$ +51,803 +53 +Table of Contents +2017 GRANTS OF PLAN-BASED AWARDS +2017 Non-Equity Incentive Plan +The following table describes the target and maximum amounts of annual cash incentive awards for the CEO and other NEOs and the actual award +paid in March 2018 for 2017 services. The non-equity incentive plan provides for no minimum (threshold) award. The amounts listed in the Target column +represent 125% of the year-end base salary for CEO and 100% of the year-end base salary for other NEOs. The amounts listed in the Maximum column represent +250% of year-end base salary for CEO and 200% of the year-end base salary for other NEOs. See the description of our annual cash incentive award plan in "CD&A—Section 2." +Estimated Future Payouts Under Non-Equity Incentive Plan +Name +Threshold +Target +Maximum +Actual +Award +Paid in +March 2018 +Thomas E. Jorden, CEO +$ +0 +$ +1,200,000 +$ +2,400,000 +$ +2,000,000 +G. Mark Burford, CFO +$ +0 +$ +460,000 +$ +920,000 +$ +760,000 +Joseph R. Albi, COO +$ +0 +$ +610,000 +$ +1,220,000 +$ +1,000,000 +Stephen P. Bell, EVP +$ +0 +$ +505,000 +$ +1,010,000 +$ +850,000 +John A. Lambuth, SVP +$ +0 +$ +508,000 +$ +1,016,000 +$ +900,000 +2017 Equity Incentive Plan Awards +The following table provides information regarding the awards of restricted stock made to the NEOs in 2017. No option awards were made in 2017. +See "CD&A—Section 2—Long Term Equity Incentive Award Program," for more information about these awards. +Estimated Future Payouts Under Equity +Incentive Plan Awards (in shares) +Grant Date +Fair Value of +Stock & +Option +Awards (4) +Award +Grant +Date +Comp. +Comm. +Approval +Date +Name +Type of +Award (1) +Threshold (2) +Target (3) +Maximum +Thomas E. Jorden, CEO +PSA +12/7/17 +12/7/17 +44,712 +None +89,425 +$ +8,000,000 +G. Mark Burford, CFO +PSA +12/7/17 +12/7/17 +16,208 +None +32,417 +$ +2,900,000 +Joseph R. Albi, COO +PSA +12/7/17 +12/7/17 +19,002 +None +38,006 +$ +3,400,000 +Stephen P. Bell, EVP +PSA +12/7/17 +12/7/17 +17,605 +None +35,211 +$ +3,150,000 +John A. Lambuth, SVP +PSA +12/7/17 +12/7/17 +19,002 +None +38,006 +$ +3,400,000 +(1) PSA = +Performance stock awards +(2) One-half +of the total potential award will vest on completion of continuous service on December 1, 2020. +54 +Table of Contents +(3) Terms +of the awards do not specify a targeted number of shares. The number of shares that are earned depends on Cimarex's stock price performance +relative to peers for the three year performance period ending December 1, 2020. See "Long-Term Equity Incentive Award Program" for the method of computing the number of shares that vest. Cash +dividends will be paid on the threshold number of shares during the vesting period and accrued during the vesting period on the remaining number of shares that are subject to measurement of relative +stock price performance upon satisfaction of the continuous service requirement. +(4) Represents +the estimated fair value of the shares as of the grant date utilizing a Monte Carlo valuation technique as permitted by the guidance +provided by FASB ASC Topic 718. The estimated fair value is the aggregate compensation cost to be recognized over the service period. +OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2017 +STOCK AWARDS +Equity Incentive Plan Awards That Have +Not Vested +Name +No. of Shares +Market Value of +Unearned Shares (1) +Thomas E. Jorden, CEO +252,415 +(2) +$ +30,797,154 +G. Mark Burford, CFO +93,442 +(3) +$ +11,400,858 +Joseph R. Albi, COO +108,734 +(4) +$ +13,266,635 +Stephen P. Bell, EVP +96,821 +(5) +$ +11,813,130 +John A. Lambuth, SVP +104,887 +(6) +$ +12,797,263 +(1) The +amount in this column reflects the closing market price of the stock of $122.01 on December 29, 2017 (the last trading day of 2017) +multiplied by the number of shares reported in the previous column. +(2) Between +a minimum of 36,863 and a maximum of 73,727 shares could vest on December 9, 2018, between a minimum of 44,631 and a maximum of 89,263 +shares could vest on December 1, 2019, and between a minimum of 44,712 and a maximum of 89,425 shares could vest on December 1, 2020. +(3) 4,500 +shares will vest on July 15, 2018, 3,500 shares will vest on July 31, 2019, and between a minimum of 12,910 and a maximum of 25,821 +shares could vest on December 9, 2018, between a minimum of 13,602 and a maximum of 27,204 shares could vest on December 1, 2019, and between a minimum of 16,208 and a maximum of 32,417 +shares could vest on December 1, 2020. +(4) Between +a minimum of 18,361 and a maximum of 36,723 shares could vest on December 9, 2018, between a minimum of 17,002 and a maximum of 34,005 +shares could vest on December 1, 2019, and between a minimum of 19,002 and a maximum of 38,006 shares could vest on December 1, 2020. +(5) Between +a minimum of 16,353 and a maximum of 32,706 shares could vest on December 9, 2018, between a minimum of 14,452 and a maximum of 28,904 +shares could vest on December 1, 2019, and between a minimum of 17,605 and a maximum of 35,211 shares could vest on December 1, 2020. +(6) Between +a minimum of 17,500 and a maximum of 35,001 shares could vest on December 9, 2018, between a minimum of 15,940 and a maximum of 31,880 +shares could vest on December 1, 2019, and between a minimum of 19,002 and a maximum of 38,006 shares could vest on December 1, 2020. +55 +Table of Contents +2017 OPTION EXERCISES AND RESTRICTED STOCK VESTED +2017 OPTION EXERCISES +2017 STOCK VESTING (1) +Name +Number of Shares +Acquired on Exercise +(#) +Value Realized on +Exercise +($) +Number of Shares +Acquired on Vesting +(#) +Value Realized on +Vesting +($) +Thomas E. Jorden, CEO +— +$ +— +85,839 +$ +9,605,384 +G. Mark Burford, CFO +— +$ +— +4,000 +$ +369,920 +Joseph R. Albi, COO +— +$ +— +41,738 +$ +4,670,482 +Stephen P. Bell, EVP +— +$ +— +35,477 +$ +3,969,876 +John A. Lambuth, SVP +— +$ +— +43,651 +$ +4,806,866 +(1) The +restricted shares that vested in December 2017 as shown in the table consisted of performance shares granted to the NEOs in December 2014 (other +than Mr. Burford, who was not a NEO in December 2014 and did not receive a performance share award), plus time-based restricted shares that were granted to Mr. Burford and +Mr. Lambuth in prior years when they were not NEOs. The following is a comparison of the grant date fair value of the performance shares granted in December 2014 to the value realized upon +vesting of those performance shares in December 2017 (excluding the time-based restricted shares that vested in 2017 for Mr. Burford and Mr. Lambuth). The Value Realized Upon Vesting +exceeded the Grant Date Fair Value ("GDFV") because the Company ranked second in relative stock price performance compared to its Stock Performance Peer Group over the vesting period, resulting in +100% vesting, and the Company's stock price was higher on the vesting date compared to the date of grant. +NEO +Performance +Shares Granted +in December +2014 +GDFV of +Performance +Shares Granted +in December +2014 +Performance +Shares Vested +in December +2017 +Value Realized +Upon Vesting +in December +2017 +Thomas E. Jorden, CEO +85,839 +$ +7,143,522 +85,839 +$ +9,605,384 +G. Mark Burford, CFO +— +— +— +— +Joseph R. Albi, COO +41,738 +$ +3,473,436 +41,738 +$ +4,670,482 +Stephen P. Bell, EVP +35,477 +$ +2,952,396 +35,477 +$ +3,969,876 +John A. Lambuth, SVP +39,651 +$ +3,299,756 +39,651 +$ +4,436,947 +2017 NONQUALIFIED DEFERRED COMPENSATION +The following table provides information on the Supplemental Savings Plan (the "SSP") contributions and earnings for our NEOs in each of the +last three fiscal years. Under the terms of the SSP, a participant may make an elective contribution to the SSP of an amount that exceeds the maximum amount permitted to be contributed to his account +in the Cimarex 401(k) Plan (an "excess contribution") provided that the excess contribution does not exceed the dollar limitation on elective deferrals under the Internal Revenue Code +section 402(g) in effect on January 1 of the calendar year of deferral (2017 limitation was $18,000). Cimarex will match 100% of the excess contributions up to 7% of a participant's +eligible compensation. A participant also may elect to have up to 50% of his or her compensation and up +56 +Table of Contents +to +100% of his or her bonus withheld from his or her compensation and allocated to his or her SSP account. Cimarex does not match these contributions. +Name +Executive +Contributions (1) +Registrant +Contributions (2) +Aggregate +Earnings +Aggregate +Withdrawals/ +Distributions +Aggregate +Balance at FYE +Thomas E. Jorden, CEO +2017 +$ +18,000 +$ +18,000 +$ +15,169 +$ +— +$ +743,658 +(3) +2016 +$ +18,000 +$ +18,000 +$ +6,017 +$ +— +$ +692,912 +2015 +$ +18,000 +$ +18,000 +$ +699 +$ +— +$ +651,318 +G. Mark Burford, CFO +2017 +$ +18,000 +$ +18,000 +$ +44,899 +$ +— +$ +319,734 +(3) +2016 +$ +18,000 +$ +18,000 +$ +20,802 +$ +— +$ +239,258 +2015 +$ +18,000 +$ +18,000 +$ +<2,684 +> +$ +— +$ +182,879 +Joseph R. Albi, COO +2017 +$ +18,000 +$ +18,000 +$ +94,735 +$ +— +$ +743,726 +(3) +2016 +$ +18,000 +$ +18,000 +$ +60,995 +$ +— +$ +613,414 +2015 +$ +18,000 +$ +18,000 +$ +<10,588 +> +$ +— +$ +516,842 +Stephen P. Bell, EVP +2017 +$ +18,000 +$ +18,000 +$ +5,761 +$ +— +$ +727,499 +(3) +2016 +$ +18,000 +$ +18,000 +$ +2,882 +$ +— +$ +686,161 +2015 +$ +18,000 +$ +18,000 +$ +<691 +> +$ +— +$ +647,702 +John A. Lambuth, SVP +2017 +$ +18,000 +$ +18,000 +$ +74,608 +$ +— +$ +642,400 +(3) +2016 +$ +50,996 +$ +18,000 +$ +23,193 +$ +— +$ +532,216 +2015 +$ +18,000 +$ +18,000 +$ +55 +$ +— +$ +440,450 +(1) The +amounts included in this column also are included in the Salary column in the "Summary Compensation +Table." +(2) The +amounts reported in this column also are included in the All Other Compensation column and footnote 3 +thereto in the "Summary Compensation Table." +(3) The +following table sets forth amounts included in the aggregate balance at December 31, 2017 that were reported as compensation to the NEO in +the Summary Compensation Table for previous years. +NEO +Amount of Previously +Reported Compensation +Thomas E. Jorden, CEO +$ +619,618 +G. Mark Burford, CFO +$ +190,189 +Joseph R. Albi, COO +$ +429,148 +Stephen P. Bell, EVP +$ +508,502 +John A. Lambuth, SVP +$ +414,007 +57 +Table of Contents +CEO PAY RATIO +Beginning with this proxy statement, prepared for the 2018 Annual Meeting of Shareholders, the SEC requires the disclosure of the ratio of the +pay of the CEO and the identified median employee. The 2017 annual total compensation of our CEO, as shown in the "Summary Compensation Table" above, was $11,054,129. The annual total compensation of +Cimarex's identified median employee was $119,127 in 2017. This results in a ratio of 93 to 1. +As +noted above, Cimarex's executive compensation program links a significant portion of executive compensation to the Company's performance through variable pay programs, including annual and long +term incentives. Consequently, 90% of the compensation of the Chief Executive Officer is considered "At Risk" pay and is only realized if Cimarex meets certain performance measures. By way of +comparison, none of the median employee's compensation was at risk. +The +median employee was identified from the total employee population as of December 31, 2017. Not including the CEO, this represents 891 full-time and 18 part-time or seasonal employees. We +calculated the median total compensation by a simple array of lowest to highest of the wages reflected as Medicare Taxable Earnings as reported on Internal Revenue Service Form W-2 +(Box 5) for 2017. We made no assumptions, adjustments, or estimates with regard to total compensation, and we did not annualize the compensation for any employees that were not employed by us +the entire year. +POTENTIAL PAYMENTS UPON CHANGE IN CONTROL OR TERMINATION +We do not consider post-termination benefits as a material element of executive compensation because NEO post-termination benefits are the same +benefits available to all full-time employees. Post-termination benefits are not included in the Compensation and Governance Committee's analysis of total compensation. +We +are obligated to make certain payments to employees, including our NEOs, or to accelerate the vesting of their equity awards pursuant to the following plans and +agreements: +• Change in Control Severance Plan that covers all full-time employees, including the NEOs; +• 2002 Stock Incentive Plan, 2011 Equity Incentive Plan and 2014 Equity Incentive Plan that govern all equity awards made to Directors and +employees, including the NEOs; +• Change in control provisions for the benefit of Messrs. Albi, Bell, and Jorden, as assumed by Cimarex; and +• Supplemental Savings Plan. +Our +change in control arrangements keep our senior executives focused on pursuing all corporate transaction activity that is in the best interests of shareholders regardless of whether those +transactions may result in their own job losses. Uncertainty created by a corporate transaction can create retention risk for a company. In addition, change in control protection is often needed to +retain and attract, when appropriate, the best talent because many of the companies with whom we compete for talent provide change in control protection. +We +do not have a formal program to pay severance benefits nor do our equity award agreements provide for acceleration of equity awards upon the retirement of the NEOs. +Change in Control +We are obligated under certain agreements to pay benefits upon a "change in control" event. Cimarex's definition of "change in control" as used +in its 2002 Stock Incentive Plan, its 2011 Equity Incentive Plan and its 2014 Equity Incentive Plan, its Change in Control Severance Plan and the change in control provisions that survived certain +expired +58 +Table of Contents +employment +agreements with each NEO are the same. In summary, a change in control event means any of the following: +• Acquisition of 30% or more of the shares of our outstanding common stock or the combined voting power of voting securities of Cimarex by an +individual or group; +• Members of our Board of Directors, or Directors nominated by those Directors, cease to constitute a majority of the Directors during any period +of twelve months; +• A reorganization, share exchange or merger unless (i) the shareholders prior to the reorganization or merger continue to own more than +40% of the outstanding common stock and combined voting power of the resulting corporation following the reorganization or merger; and (ii) at least a majority of the members of the Board of +the corporation resulting from the merger or reorganization were members of the Board at the time of executing the agreement to reorganize or merge; or +• The complete liquidation or dissolution of Cimarex or the sale of all or substantially all of its assets. +The +following is a summary of those agreements that provide for payment to the NEOs in the event of a change in control event coupled with termination of employment without cause: +Change in Control – Termination Without Cause +Our Change in Control Plan provides for the payment of severance benefits to all active employees in the event of termination following a change in control. In +the event of a change in control, if an employee is +terminated for any reason other than "cause" (as defined in the Plan) within two years following a change in control, that employee would be entitled to: +• Cash severance payments of up to two years' salary and cash incentive award; +• A pro rata portion of the annual cash incentive bonus award otherwise payable for the year of termination; and +• Continued medical, dental, disability and life insurance benefits for two years. +We +assumed from a predecessor company the change in control provisions from the now-expired employment agreements of each of Messrs. Albi, Bell, and Jorden with such company. Each agreement +provides that if the executive is terminated without cause within two years following a change in control event (as defined in the agreement), the executive is entitled to a lump-sum payment equal to +two times the executive's base salary at the time of the change in control. Benefits payable under these agreements are forfeited if the executive receives benefits under any other change in control +plan, including the Cimarex Change in Control Severance Plan. As a practical matter, the change in control benefits assumed under the employment agreements only benefit these executives if the Change +in Control Severance Plan described above has been terminated. The Change in Control Severance Plan provides for greater benefits payable upon the occurrence of a change in control event than those +payable under the assumed agreements. +Change in Control – No Termination +Our 2002 Stock Incentive Plan, our 2011 Equity Incentive Plan, and our 2014 Equity Incentive Plan provide for acceleration of vesting of equity awards in the +event of a change in control. +59 +Table of Contents +Termination of Employment +Death or Disability +The award agreements for grants of equity under the 2002 Stock Incentive Plan, and the provisions of the 2011 Equity Incentive Plan and 2014 Equity Incentive +Plan, provide for acceleration of vesting of awards in the event of death or disability. Benefits under the Supplemental Savings Plan also are paid upon death or disability. +Termination Without Cause +Benefits under the Supplemental Savings Plan are payable to each NEO upon termination of employment. +Estimated Benefits upon Various Termination Scenarios +Payments upon a change in control or termination of employment include various elements of compensation. The elements of compensation that may +be included in a change in control or severance payment are: +(A) +(B) +(C) +(D) +(E) +ANNUAL AVERAGE +CASH +COMPENSATION (1) +CASH +INCENTIVE (2) +LONG TERM +AWARD PAYOUT (3) +SUPPLEMENTAL +SAVINGS (4) +OTHER BENEFITS (5) +Thomas E. Jorden, CEO +$ +5,581,468 +$ +2,000,000 +$ +30,797,154 +$ +743,658 +$ +118,474 +G. Mark Burford, CFO +$ +2,339,779 +$ +760,000 +$ +11,400,858 +$ +319,734 +$ +98,794 +Joseph R. Albi, COO +$ +3,069,027 +$ +1,000,000 +$ +13,266,635 +$ +743,726 +$ +94,541 +Stephen P. Bell, EVP +$ +2,563,799 +$ +850,000 +$ +11,813,130 +$ +727,499 +$ +69,179 +John A. Lambuth, SVP +$ +2,602,156 +$ +900,000 +$ +12,797,263 +$ +642,400 +$ +92,013 +(1) Amount +represents two times the annual average compensation (salary and cash incentive bonus) paid to the executive for 2016 and 2017, as provided in +the Change in Control Severance Plan. The salary amounts include deferred compensation amounts reported in the Salary column of the "Summary Compensation +Table" (see footnote (3) to the "2017 Nonqualified Deferred Compensation" table above). +(2) Amount +represents the average incentive bonus as provided in the Change in Control Severance Plan. This is the actual approved bonus for 2017. +(3) Amount +represents the value of accelerated vesting of restricted stock based upon the closing price of Cimarex's common stock as of December 29, +2017, the last trading day of 2017, of $122.01 per share. Includes amounts previously reported in the Stock Awards column of the "Summary Compensation +Table." +(4) Amount +represents estimated payments under the Supplemental Savings Plan. Includes deferred compensation amounts reported in the Salary column of the "Summary Compensation Table" (see footnote (3) to the +2017 Nonqualified Deferred Compensation table above). +(5) Amount +represents the estimated value of continued medical, dental, disability and life insurance benefits for two years as provided in the Change in +Control Severance Plan. +The +following table provides the estimated compensation and present value of benefits potentially payable to each NEO in the event of a change in control or termination under various circumstances. +The amounts shown assume that the termination or change in control occurred on December 31, 2017. The actual amounts to be paid only can be determined at the time of the executive's actual +separation from Cimarex or the occurrence of a change in control. +60 +Table of Contents +Actual +payments may be more or less than the amounts described below. In addition, the Company may enter into new arrangements or modify these arrangements, from time to time. +NAME +TERMINATION +WITHOUT CAUSE +(D) (1) +TERMINATION AS A +RESULT OF +DEATH OR +DISABILITY +(C+D) (1) +CHANGE IN +CONTROL +(No Termination) +(C) (1) +TERMINATION +ON CHANGE +IN CONTROL +(A+B+C+D+E) (1) +Thomas E. Jorden, CEO +$ +743,658 +$ +31,540,812 +$ +30,797,154 +$ +39,240,754 +G. Mark Burford, CFO +$ +319,734 +$ +11,720,592 +$ +11,400,858 +$ +14,919,165 +Joseph R. Albi, COO +$ +743,726 +$ +14,010,361 +$ +13,266,635 +$ +18,173,929 +Stephen P. Bell, EVP +$ +727,499 +$ +12,540,629 +$ +11,813,130 +$ +16,023,607 +John A. Lambuth, SVP +$ +642,400 +$ +13,439,663 +$ +12,797,263 +$ +17,033,832 +(1) The +alphabetical code refers to the elements of compensation that may be included upon various termination scenarios as described in the table at the +beginning of this section, "Estimated Benefits upon Various Termination Scenarios." +DIRECTOR AND OFFICER INDEMNIFICATION AGREEMENTS +We have entered into an indemnification agreement with our Directors and certain officers. These agreements require us, among other things, to +indemnify such persons against certain liabilities that may arise by reason of their status or service as Directors or officers, to advance their expenses incurred as a result of a proceeding for +which they may be indemnified, and to cover them under any Directors' and officers' liability insurance policy that we choose, in our discretion, to maintain. These indemnification agreements are +intended to provide indemnification rights to the fullest extent permitted under applicable Delaware law and will be in addition to any other rights that the indemnitee may have under our Restated +Certificate of Incorporation, Bylaws, and applicable law. +ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION (ITEM 2) +At the 2017 Annual Meeting of Shareholders, 97% of the votes cast were in favor of the advisory vote to approve executive compensation. In +addition to the advisory vote, as part of our regular shareholder engagement, we consider and discuss with shareholders a number of matters throughout the year, including executive compensation and +governance. The Compensation and Governance Committee carefully considers any feedback and routinely reviews executive compensation practices and governance. +The +Compensation and Governance Committee considered the results of the advisory vote and the discussions with shareholders to convey our shareholders' support of the Committee's compensation +decisions in 2016 and early 2017 and shareholders' overall satisfaction with Cimarex's executive compensation programs. Consistent with this support, the Compensation and Governance Committee retained +the core design of our executive compensation programs for the remainder of 2017, as it believes the programs continue to retain, attract, when appropriate, and appropriately incent senior management. +At +the 2018 Annual Meeting of Shareholders, we again will hold an annual advisory vote to approve executive compensation. The Compensation and Governance Committee will continue to consider the +results from this year's and future advisory votes on executive compensation, as well as feedback from shareholders through the course of such year. +61 +Table of Contents +Because +your vote is advisory, it will not be binding upon the Board. However, the Board values shareholders' opinions, and the Compensation and Governance Committee will take into account the outcome +of the vote when considering future executive compensation decisions. The Board recommends that shareholders vote FOR the following resolution: +RESOLVED, +that the shareholders approve, on an advisory basis, the compensation of Cimarex's Named Executive Officers, as disclosed in this proxy statement, including the Compensation Discussion and +Analysis, the executive compensation tables and the related narrative. +The Board of Directors unanimously recommends a vote FOR the advisory vote to approve executive compensation. +REPORT OF AUDIT COMMITTEE +The Audit Committee on behalf of the Board of Directors monitors (i) the integrity of the Company's financial statements; +(ii) the independent auditors' qualifications and independence; (iii) the performance of the Company's internal audit function and independent auditors; (iv) the appropriateness +of the Company's accounting policies; (v) the adequacy of the Company's internal controls; (vi) the Company's compliance with legal and regulatory requirements related to audit matters; +(vii) the process related to ongoing litigation matters; (viii) the annual process of estimating and reporting quantities of oil and gas reserves; and (ix) risk oversight. In so +doing, it is the responsibility of the Committee to maintain free and open communication between the Directors, the independent auditor and the management of the Company. All members of the Audit +Committee meet the independence, experience and financial literacy requirements of the New York Stock Exchange, the Sarbanes Oxley Act and any rules or regulations promulgated by the Securities and +Exchange Commission. The Board of Directors has adopted a written charter for the Audit Committee, a copy of which is available on our website at www.cimarex.com . +Management +is responsible for the Company's financial statements, the financial reporting process, and the process of estimating and reporting quantities of oil and gas reserves, including the related +systems of internal controls and disclosure controls and procedures. The Company's independent registered public accounting firm is responsible for performing an independent audit of the Company's +financial statements in accordance with generally accepted auditing standards, as well as an audit of the Company's internal control over financial reporting in accordance with the standards of the +Public Company Accounting Oversight Board (PCAOB) and issuing reports thereon. The Audit Committee's responsibility is to monitor and oversee these processes and the Audit Committee uses the Company's +internal audit department and (if applicable) independent petroleum engineers to assist with these responsibilities. +The +Audit Committee reviewed Cimarex's audited financial statements and supplemental oil and gas reserve information as of and for the year ended December 31, 2017 and met with management, +DeGolyer and MacNaughton (an independent petroleum engineering consulting firm) and KPMG, Cimarex's independent registered public accounting firm, to discuss the related information, and the +effectiveness of Cimarex's internal control over financial reporting. In addition, the Audit Committee has received from KPMG the communication required by PCAOB Rule 3526, Communication with +Audit Committees Concerning Independence, and discussed with KPMG their independence from Cimarex and its management. The Audit Committee also discussed with KPMG any matters required by PCAOB +Auditing Standard No. 1301, Communications with Audit Committees. +Based +on these reviews and discussions, the Audit Committee recommended to the Board of Directors that Cimarex's audited financial statements be included in Cimarex's Annual Report on Form 10-K +for the fiscal year ended December 31, 2017. +THE AUDIT COMMITTEE +Monroe W. Robertson, Chairman +Harold R. Logan, Jr. +Lisa A. Stewart +Frances M. Vallejo +62 +Table of Contents +The +Audit Committee Report does not constitute soliciting material and shall not be deemed to be filed or incorporated by reference into any other Cimarex filing under the Securities Act of 1933, as +amended, or the Securities Exchange Act of 1934, as amended, except to the extent that Cimarex specifically incorporates the Audit Committee Report by reference. +RATIFICATION OF INDEPENDENT AUDITORS (ITEM 3) +The Audit Committee of the Board has appointed KPMG LLP to audit our financial statements for 2018. Since October 1, 2002, +KPMG LLP has served as our independent auditors. +We +are asking that shareholders ratify the appointment of KPMG LLP as our independent auditors. If shareholders fail to ratify the appointment, the Audit Committee may reconsider this +appointment. A KPMG LLP representative will be at the Annual Meeting to answer appropriate questions and to make a statement if he or she desires. +The Board of Directors recommends a vote FOR the ratification of KPMG LLP as Cimarex's Independent Auditors for 2018. +Audit and Non-Audit Fees +The following table shows the fees for professional services rendered by KPMG LLP for the audit of Cimarex's annual financial statements for the years +ended December 31, 2017 and December 31, 2016, and fees billed for other services rendered by KPMG LLP during those periods: +Years Ended +December 31, +2017 +2016 +Audit Fees (1) +$ +1,162,045 +$ +1,083,169 +Audit-Related Fees (2) +$ +101,850 +$ +0 +Tax Fees (3) +$ +210, 286 +$ +200,000 +All Other Fees +$ +0 +$ +0 +(1) Audit +fees were principally for audit work performed on the consolidated financial statements and internal controls over financial reporting. +(2) Audit-related +fees were principally for services associated with SEC registration statements, periodic reports and other documents filed with the SEC +or issued in connection with securities offerings, e.g., comfort letters and consents and assistance in responding to SEC comment letters. +(3) Tax +fees were principally for services related to tax compliance and reporting and analysis services. +Approval of Audit, Audit-Related and Tax Services +The Audit Committee annually reviews and pre-approves certain categories of audit, audit-related and tax services to be performed by our independent auditors, +subject to a specified range of fees. The Audit Committee also may pre-approve specific services. Certain non-audit services as specified by the SEC may not be performed by our independent auditors. +The Audit Committee may delegate pre-approval authority to one or more of its members. In the event of any such delegation, any pre-approved decisions will be reported to the Audit Committee at its +next scheduled meeting. The services described in the above table were pre-approved by the Audit Committee in 2016 and 2017. +OTHER MATTERS +Section 16(a) Beneficial Ownership Reporting Compliance +Section 16(a) of the Securities Exchange Act of 1934 requires our Directors and executive officers, and persons who own more than 10% of our common +stock, to file reports of ownership of, and transactions in, our common stock with the SEC. Based on a review of such reports, and on written representations from our reporting persons, we believe +that +63 +Table of Contents +all +reports were timely filed in 2017. Subsequent to December 31, 2017, Harold R. Logan, Jr. reported on a Form 5 a late Form 4 transaction that originally occurred on +February 22, 2012 due to a recently discovered administrative oversight. +Complaint and Reporting Procedures +We have established complaint and reporting procedures that are posted on our website at www.cimarex.com . Any person, whether or not an employee, who has a concern about +the conduct of Cimarex or any of our employees, +including accounting, internal accounting controls or auditing issues, may, in an anonymous manner, communicate that concern by calling our hotline, 1-866-519-1898. The hotline is available +24 hours a day, seven days a week. Comments will be typed verbatim and will be delivered to a representative with authority to investigate the concern. +64 +PROXY +THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS +CIMAREX ENERGY CO. +The undersigned appoints Thomas E. Jorden and Francis B. Barron as proxies, with power to act without the other and with power of substitution, and authorizes them to represent and vote, as designated on the other side, all the shares of common stock of Cimarex Energy Co. held of record by the undersigned with all powers that the undersigned would possess if present at the Annual Meeting of Shareholders to be held at the Hyatt Regency Tulsa, 100 East 2nd Street, Tulsa, Oklahoma 74103, on May 10, 2018, at 9:00 a.m., Central Daylight Time, or any adjournment thereof. +For participants in the Cimarex 401(k) Plan, this proxy, when properly executed, will be voted in the manner directed by the undersigned. If no direction is given, if the card is not signed, or if the card is not received prior to 11:59 p.m., Eastern Daylight Time, on May 7, 2018, the Plan’s Trustee will vote your shares held in the Plan in the same proportion as shares were voted by other Plan participants. +(Continued, and to be marked, dated and signed, on the other side) +PLEASE DETACH ALONG PERFORATED LINE AND MAIL IN THE ENVELOPE PROVIDED. +Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to be held May 10, 2018. +The Proxy Statement and our 2017 Annual Report to Shareholders are available at: http://www.allianceproxy.com/cimarex/2018 +THIS PROXY WILL BE VOTED AS DIRECTED, OR, IF NO DIRECTION IS INDICATED, WILL BE VOTED “FOR” ALL THE NOMINEES LISTED UNDER ITEM 1, AND “FOR” ITEMS 2 AND 3. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. +Please mark your votes like this +x +The Board of Directors recommends a vote “FOR” all the nominees listed under Item 1 and “FOR” Items 2 and 3. +1. Election of three Class I directors: +FOR +AGAINST +ABSTAIN +(01) Joseph R. Albi +o +o +o +(02) Lisa A. Stewart +o +o +o +(03) Michael J. Sullivan +o +o +o +FOR +AGAINST +ABSTAIN +2. Advisory vote to approve executive compensation +o +o +o +3. Ratify the appointment of KPMG LLP as our independent auditors for 2018 +o +o +o +DO NOT PRINT IN THIS AREA +(Shareholder Name & Address Data) +I plan on attending the meeting o +NOTE: Please sign as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee or guardian, please give full title as such. +Signature +Signature (if held jointly) +Date: , 2018 +CONTROL NUMBER +PLEASE DETACH ALONG PERFORATED LINE AND MAIL IN THE ENVELOPE PROVIDED. +CIMAREX ENERGY CO. +As a shareholder of Cimarex Energy Co., you have the option of voting your shares electronically through the Internet or on the telephone, eliminating the need to return the proxy card. Your electronic vote authorizes the named proxies to vote your shares in the same manner as if you marked, signed, dated and returned the proxy card. Votes submitted electronically over the Internet or by telephone must be received by 11:59 p.m., Eastern Time, on May 9, 2018. +CONTROL NUMBER +PROXY VOTING INSTRUCTIONS +Please have your 11 digit control number ready when voting by Internet or Telephone +INTERNET +TELEPHONE +MAIL +Vote Your Proxy on the Internet: +Go to www.AALvote.com/XEC +Have your proxy card available when you access the above-website. Follow the prompts to vote your shares. +Vote Your Proxy by Phone: +Call 1 (866) 804-9616 +Use any touch-tone telephone to vote your proxy. Have your proxy card available when you call. Follow the voting instructions to vote your shares. +Vote Your Proxy by Mail: +Mark, sign, and date your proxy card, then detach it, and return it in the postage-paid envelope provided. \ No newline at end of file diff --git a/raw/proxies/0001168054/0001047469-18-002393/proxy_rpt.txt b/raw/proxies/0001168054/0001047469-18-002393/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..9e3df24f1f43af090d439e60aa9864a962243058 --- /dev/null +++ b/raw/proxies/0001168054/0001047469-18-002393/proxy_rpt.txt @@ -0,0 +1,28 @@ +Review of related party transactions +Yes +Diverse Board skills and experience +Yes +Non-hedging and non-pledging policies +Yes +Annual Board and Committee self-evaluations +Yes +Clawback policy +Yes +Periodic consultant review of Board skills +Yes +Management and Director stock ownership guidelines +Yes +Annual equity grants to Directors +Yes +Tax gross-ups +No +Annual Board education +Yes +Proxy access +Yes +Shareholders +may communicate with our Board by mail directed to our Corporate Secretary or by facsimile (720) 403-9383. All communications will be forwarded to the Lead Director for the Lead +Director's review. The Lead Director may take any action the Lead Director deems appropriate or necessary, including, without limitation, forwarding the information to the Board for consideration or, +with the concurrence of the Board, retaining independent or outside counsel, accountants or other advisors to address the concern. +22 +Table of Contents \ No newline at end of file diff --git a/raw/proxies/0001168054/0001047469-19-001570/proxy.txt b/raw/proxies/0001168054/0001047469-19-001570/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..b361595f7699dec4457f80c3f75aa3f39a5899b0 --- /dev/null +++ b/raw/proxies/0001168054/0001047469-19-001570/proxy.txt @@ -0,0 +1,5895 @@ +DEF 14A +1 +a2238111zdef14a.htm +DEF 14A +Use these links to rapidly review the document +TABLE OF CONTENTS +Table of Contents +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +Washington, D.C. 20549 +SCHEDULE 14A +Proxy Statement Pursuant to Section 14(a) of +the Securities Exchange Act of 1934 (Amendment No. ) +Filed by the Registrant þ +Filed by a Party other than the Registrant o +Check the appropriate box: +o +Preliminary Proxy Statement +o +Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +þ +Definitive Proxy Statement +o +Definitive Additional Materials +o +Soliciting Material Pursuant to §240.14a-12 +Cimarex Energy Co. +(Name of Registrant as Specified in Its Charter) +(Name of Person(s) Filing Proxy Statement, if other than the Registrant) +Payment of Filing Fee (Check the appropriate box): +þ +No fee required. +o +Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. +(1) +Title of each class of securities to which transaction applies: +(2) +Aggregate number of securities to which transaction applies: +(3) +Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): +(4) +Proposed maximum aggregate value of transaction: +(5) +Total fee paid: +o +Fee paid previously with preliminary materials. +o +Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration +statement number, or the Form or Schedule and the date of its filing. +(1) +Amount Previously Paid: +(2) +Form, Schedule or Registration Statement No.: +(3) +Filing Party: +(4) +Date Filed: +Table of Contents +1700 Lincoln Street, Suite 3700 +Denver, CO 80203 +2019 ANNUAL MEETING +§ NOTICE OF ANNUAL MEETING OF +SHAREHOLDERS +TIME AND DATE +9:00 a.m. Mountain Daylight Time on Wednesday, May 8, 2019 +PLACE +Wells Fargo Center—Denver +Assemble Room (Lower Level 2) +1700 Lincoln Street +Denver, Colorado 80203 +ITEMS OF BUSINESS +Item 1. Election of Directors +Item 2. Advisory Vote to Approve Executive Compensation +Item 3. Approve the 2019 Equity Incentive Plan +Item 4. Ratification of Independent Auditors +Transact any other business that properly comes before the Meeting and any adjournment or postponement of the Meeting +RECORD DATE +March 12, 2019 +MAILING DATE TO SHAREHOLDERS +March 25, 2019 +MATERIALS TO REVIEW +This booklet contains our Notice of 2019 Annual Meeting and Proxy Statement. Our 2018 Annual Report is available on our website at www.cimarex.com. +PROXY VOTING +It is important that your shares be represented and voted at the Meeting. You can vote your shares by following the internet or telephone instructions on page 86 of this proxy statement or you may attend and vote in +person at the Annual Meeting. If you received a paper copy of the proxy card, you also may vote by completing and mailing the proxy card in the postage-paid envelope provided for your convenience. You may revoke your proxy at any time before the vote +is taken by following the instructions on page 88 of this proxy statement. +March 25, 2019 +Francis B. Barron, Corporate Secretary +Table of Contents +TABLE OF CONTENTS +PROXY STATEMENT SUMMARY +1 +ITEM 1: ELECTION OF DIRECTORS +6 +Election Process +6 +Director Nominations +6 +2019 Nominees for Class II Directors +7 +Continuing Directors +11 +Summary of Director Core Competencies and Composition Highlights +18 +CORPORATE GOVERNANCE +19 +Corporate Governance Highlights +19 +Shareholder Engagement +19 +Director Qualifications and Recruitment +20 +Board of Directors and its Committees +20 +Other Governance Matters +25 +COMPENSATION DISCUSSION AND ANALYSIS +28 +Executive Summary of Compensation Discussion and Analysis ("CD&A") +28 +Section 1 +32 +Our Compensation Framework +32 +Competitive Positioning +33 +2018 Compensation Peer Group +34 +2018 Stock Performance Peer Group +35 +Section 2 +36 +Summary of 2018 and Early 2019 Compensation Decisions +36 +Response to 2018 Say-on-Pay Vote and Shareholder Engagement +37 +Key 2018 Compensation Actions +38 +Alignment of CEO Direct Compensation to Total Shareholder Return ("TSR") +47 +Early 2019 Compensation Decisions +49 +Section 3 +50 +Role of Compensation Consultant and Management in Compensation Decisions +50 +Other Compensation Arrangements +51 +Other Compensation Policies +52 +Compensation and Governance Committee Report +53 +EXECUTIVE COMPENSATION TABLES +54 +Summary Compensation Table +54 +2018 Grants of Plan-Based Awards +56 +Outstanding Equity Awards at December 31, 2018 +57 +2018 Option Exercises and Restricted Stock Vested +58 +2018 Nonqualified Deferred Compensation +59 +CEO Pay Ratio +60 +Potential Payments Upon Change in Control or Termination +61 +Director and Officer Indemnification Agreements +64 +NON-EMPLOYEE DIRECTOR COMPENSATION +65 +SECURITY OWNERSHIP +68 +Management, Directors and Certain Beneficial Owners +68 +Section 16(a) Beneficial Ownership Reporting Compliance +69 +ITEM 2: ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION +70 +ITEM 3: APPROVAL OF THE 2019 EQUITY INCENTIVE PLAN +71 +ITEM 4: RATIFICATION OF INDEPENEDENT AUDITORS +81 +Audit and Non-Audit Fees +81 +Approval of Audit, Audit-Related and Tax Services +81 +Report of Audit Committee +82 +GENERAL INFORMATION +84 +Information Available Online +84 +Communications with Cimarex's Directors +84 +Director Nominations for the 2020 Annual Meeting of Shareholders +84 +Shareholder Proposals for the 2020 Annual Meeting Of Shareholders +84 +Complaint and Reporting Procedures +85 +QUESTIONS AND ANSWERS +86 +Proxy Materials and Voting Information +86 +ANNEX A: 2019 EQUITY INCENTIVE PLAN +91 +Table of Contents +Proxy Statement Summary +This section highlights certain important information presented in this Proxy Statement and is intended to assist you +in evaluating the matters to be voted on at the meeting. We encourage you to read the Proxy Statement in its entirety before you cast your vote. For more information regarding Cimarex's 2018 +performance, please review Cimarex's Annual Report on Form 10-K for the year ended December 31, 2018. +Voting Matters and Board Recommendations +Voting Recommendation +Page +Reference +Item 1: +Election of Directors +FOR each Director Nominee +6 +Item 2: +Advisory Vote to Approve Executive Compensation +FOR +70 +Item 3: +Approve the 2019 Equity Incentive Plan +FOR +71 +Item 4: +Ratification of Independent Auditors +FOR +81 +Advance Voting Methods +Even if you plan to attend the 2019 Annual Meeting of Shareholders in person, please vote right away using one of the following advance voting +methods (see page 86 for additional details). Make sure to have your proxy card or voting instruction form in hand and follow the instructions. +You can vote in advance in one of three ways: +Visit the website listed on your proxy card/voting instruction form to vote VIA THE INTERNET +Call the telephone number on your proxy card/voting instruction form to vote BY TELEPHONE +Sign, date and return your proxy card/voting instruction form in the enclosed envelope to vote BY MAIL +Voting at our 2019 Annual Meeting of Shareholders +All shareholders of record may vote in person at the 2019 Annual Meeting of Shareholders, which will be held on Wednesday, May 8, 2019 +at 9:00 a.m., Mountain Daylight Time, at the Wells Fargo Center – Denver, Assemble Room (Lower Level 2), 1700 Lincoln Street, Denver, Colorado 80203. Beneficial owners may +vote in person at the Meeting if they have a legal proxy, as described in the response to question 14 on page 86 of "Questions and Answers about the Meeting and Voting." +Governance Highlights (page 19) +Cimarex is committed to good corporate governance, which promotes the long-term interests of shareholders, strengthens the Board of Directors, +fosters management accountability, and helps build public trust in Cimarex. Highlights include: +þ +8 of 10 independent Directors +þ +Clawback policy +þ +Independent Lead Director +þ +Non-hedging and non-pledging policies +þ +Majority voting Directors resignation policy +þ +Director and management stock ownership guidelines, including restrictions on sales of shares until requirements are met +þ +Active shareholder engagement +þ +No tax gross-ups +þ +Proxy access +þ +Annual Board and committee self-evaluations +Cimarex +Energy +Co. +1 +Table of Contents +Director Nominees and Current Committee Memberships +Committee Memberships +(Independent Directors Only) +DIRECTOR NOMINEES +AGE +DIRECTOR +SINCE +TERM +EXPIRES +Audit +Compensation +and +Governance +Nominating +Hans Helmerich (Independent Director) +Chairman and former Chief Executive Officer, Helmerich & Payne, Inc. +60 +2002 +2019 +· +· +Harold R. Logan, Jr. (Independent Director) +Independent Lead Director and Chair of Nominating Committee of Cimarex; Chairman, Suburban Propane Partners, L.P. +74 +2009 +2019 +· +· +Monroe W. Robertson (Independent Director) +Chair of Audit Committee of Cimarex; Retired, former President and Chief Operating Officer, Key Production Co. +69 +2005 +2019 +Chair +· +Continuing Directors +Joseph R. Albi +Executive Vice President—Operations, Chief Operating Officer, Cimarex Energy Co. +60 +2011 +2021 +David A. Hentschel (Independent Director) +Retired, former Chairman and Chief Executive Officer, Occidental Oil and Gas Corporation +85 +2002 +2020 +· +· +Thomas E. Jorden +Chairman, Chief Executive Officer and President, Cimarex Energy Co. +61 +2011 +2020 +Floyd R. Price (Independent Director) +Chair of Compensation and Governance Committee of Cimarex; Retired, former executive officer, Apache Corporation +70 +2012 +2020 +Chair +· +Lisa A. Stewart (Independent Director) +Chairman, President, Chief Executive Officer and Chief Investment Officer, Sheridan Production Partners +61 +2015 +2021 +· +· +Michael J. Sullivan (Independent Director) +Retired Senior Attorney, Lewis Roca Rothgerber LLP +79 +2002 +2021 +· +· +Frances M. Vallejo (Independent Director) +Retired, former Vice President, ConocoPhillips +53 +2017 +2020 +· +· +2 +2019 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +2018 Executive Compensation (page 28) +Below is the 2018 compensation for each Named Executive Officer ("NEO") as determined under the Securities and Exchange Commission ("SEC") +rules. See the notes accompanying the 2018 Summary Compensation Table on page 54 for more information. +Name and +Principal Position +Salary +Bonus +Stock +Awards +Option +Awards +Non-Equity +Incentive +Plan Comp. +All Other +Comp. +Total +Thomas E. Jorden +Chairman, Chief Executive +Officer and President (Principal Executive Officer) +$ +976,789 +$ +— +$ +6,900,000 +$ +— +$ +1,740,000 +$ +110,691 +$ +9,727,480 +G. Mark Burford +Vice President and +Chief Financial Officer (Principal Financial Officer) +$ +468,394 +$ +— +$ +2,750,000 +$ +— +$ +700,000 +$ +89,183 +$ +4,007,577 +Joseph R. Albi +Executive Vice President—Operations, Chief Operating Officer +$ +620,241 +$ +— +$ +3,000,000 +$ +— +$ +875,000 +$ +83,635 +$ +4,578,876 +Stephen P. Bell +Executive Vice President—Business Development +$ +513,478 +$ +— +$ +2,900,000 +$ +— +$ +725,000 +$ +81,990 +$ +4,220,468 +John A. Lambuth +Senior Vice President—Exploration +$ +517,514 +$ +— +$ +3,000,000 +$ +— +$ +775,000 +$ +71,786 +$ +4,364,300 +A Significant Portion of our CEO's 2018 Compensation is At Risk +The accompanying graph illustrates our CEO's 2018 at risk compensation. A significant portion of reported compensation is an incentive for +future performance and realized only if Cimarex meets certain performance measures. +Cimarex +Energy +Co. +3 +Table of Contents +How CEO Pay is Tied to Cimarex's Performance (page 47) +Our compensation programs are designed to align performance incentives with the long-term interests of our shareholders. The programs also +provide competitive total direct compensation opportunities that retain, and attract when needed, executive talent and link compensation earned to achievement of short- and long-term financial and +operational objectives. Our Compensation and Governance Committee considers performance in two primary ways: +§ Cimarex's operating performance; and § Return to shareholders over +time, on both an absolute basis and a relative basis +compared to other companies in the S&P Oil & Gas Exploration & Production Index and in our Compensation Peer Group (see page 34). +2018 Financial and Operating Highlights +§ Exploration and development expenditures increased 23% to $1,570.3 million +compared to $1,281.1 million in 2017, while year-over-year average daily production increased 17% to 221.9 MBOE per day. § Year-over-year production +revenues increased 22% to $2.297 billion as revenues +were positively affected by increased realized commodity prices as well as increased production, which resulted in net income of $791.9 million in 2018 compared to net income of +$494.3 million in 2017. § Cash flow provided by operating activities of $1.55 billion was 42% higher than +2017. § Our Operations group excelled at optimizing our production and maximizing well +profitability. As a result, our production expense per BOE declined 4% from $3.77 per BOE in 2017 to $3.62 per BOE in 2018, and declined 44% in 2018 compared to 2014. § We sold non-core assets in Ward County, Texas for $544.5 in a transaction that closed +on August 31, 2018. § We entered into a merger agreement in November 2018 to acquire Resolute Energy +Corporation, which has approximately 21,100 net leasehold acres adjacent to and near our Reeves County, Texas properties in the Permian Basin. The merger was completed on March 1, 2019. § We incurred no additional debt in 2018 and had cash on hand of $800.1 million +at year-end 2018. § During 2018, our overall estimated proved reserves increased 6% after additions, +positive and negative revisions, and production. We added 159 MMBOE of proved reserves through extensions and discoveries, including 120 MMBOE in the Permian Basin and 38 MMBOE in the Mid-Continent. +In addition, we had net negative revisions of previous estimates of 23 MMBOE. Revisions were comprised of an increase of 21 MMBOE for net positive performance revisions, a decrease of 8 MMBOE related +to higher operating expenses, an increase of 2.7 MMBOE for positive revisions due to higher commodity prices, and a decrease of 39 MMBOE for the removal of proved undeveloped reserves, the development +of which likely will be delayed beyond five years from our initial disclosure. § Despite our production growth and strong net income in 2018, our stock +price decreased +49% from $122.01 at year-end 2017 to $61.65 at year-end 2018. The decrease in our stock price led to a lower value for NEOs vested long-term equity awards in 2018 compared to the grant date fair value +of those awards in 2015 and lower grant date fair values for long-term equity awards made in 2018, demonstrating the alignment of interests of our NEOs and shareholders. +4 +2019 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +Return to Shareholders +The following chart shows how a December 31, 2013 investment of $100 in Cimarex common stock would have a value of $60.17 on +December 31, 2018, which includes dividends reinvested quarterly for those who wish to consider Total Shareholder Return when evaluating executive compensation. The chart also compares the +Total Shareholder Return on Cimarex common stock to the same investment in the S&P 500 Index, the Dow Jones U.S. Exploration & Production Index, and the S&P Oil & Gas +Exploration & Production Index over the same time period. +COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN* +12/31/2013 +12/31/2014 +12/31/2015 +12/31/2016 +12/31/2017 +12/31/2018 +Cimarex Energy Co . +$ +100.00 +$ +101.56 +$ +86.11 +$ +131.44 +$ +118.33 +$ +60.17 +S&P 500 +$ +100.00 +$ +113.69 +$ +115.26 +$ +129.05 +$ +157.22 +$ +150.33 +Dow Jones U.S. Exploration & Production +$ +100.00 +$ +89.23 +$ +68.05 +$ +84.71 +$ +85.81 +$ +70.57 +S&P Oil & Gas Exploration & Production +$ +100.00 +$ +89.41 +$ +58.87 +$ +78.22 +$ +73.29 +$ +58.99 +The +stock price performance included in this graph is not necessarily indicative of future stock price performance. +Cimarex +Energy +Co. +5 +Table of Contents +ITEM 1: ELECTION OF DIRECTORS +ITEM 1: ELECTION OF DIRECTORS +Election Process +Our +current Board consists of ten Directors, which is the maximum number of Directors permitted by our Certificate of Incorporation. The Board is divided into three classes: Class I, +Class II and Class III Directors. At each Annual Meeting, a Class of Directors is elected for a term expiring at the Annual Meeting in the third year following the year of election. Each +Director holds office until his or her successor is elected and qualifies. +The +terms of the three Class II Directors, Hans Helmerich, Harold R. Logan, Jr. and Monroe W. Robertson, will expire at the 2019 Annual Meeting. The Nominating Committee, at its February 2019 +meeting, nominated Messrs. Helmerich, Logan and Robertson for election as Class II Directors, to serve until the Annual Meeting of Shareholders to be held in 2022. +If +prior to the Annual Meeting a nominee becomes unavailable to serve as a Director, any shares represented by a proxy directing a vote will be voted for the remaining nominees and for any substitute +nominee(s) designated by our Board or its Nominating Committee. As of the mailing of these proxy materials, the Board knows of no reason why any Director nominee would not be available to serve as a +Director. +A +nominee is elected if the votes cast for his or her election exceed the votes cast against his or her election. Pursuant to our majority voting policy, each nominated Director has tendered an +irrevocable resignation that is effective upon his or her failure to receive the required vote and the Board's acceptance of such resignation. If a nominee fails to receive more favorable votes than +votes cast against him or her, the Nominating Committee will act on an expedited basis following the Annual Meeting to determine whether to recommend that the Board accept the Director's resignation. +The Nominating Committee and the Board may consider any factors they deem relevant in deciding whether to accept the Director's resignation. The Director whose resignation is under consideration must +abstain from participating in any decision regarding his or her resignation. The Board will publicly disclose its decision regarding acceptance of his or her resignation within 90 days after +the results of the election are certified. If the resignation is not accepted, the Director will continue to serve as a Director until his or her successor is elected and qualified. If the Board +accepts the resignation, then the Board will either fill the vacancy in accordance with the Bylaws or decrease the size of the Board in compliance with the Certificate of Incorporation. +Director Nominations +The +Nominating Committee is responsible for identifying and evaluating potential nominees for Director and for recommending to the Board a slate of nominees for election at each Annual Meeting. +Potential nominees may be suggested by Directors, members of management, shareholders or a third-party firm. +While +the Nominating Committee will consider nominees suggested by shareholders, it did not receive any shareholder nominations for the 2019 Annual Meeting prior to the deadline for such nominations. +6 +2019 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +ITEM 1: ELECTION OF DIRECTORS +2019 Nominees for Class II Directors +Upon +the recommendation of the Nominating Committee, the Board has nominated Hans Helmerich, Harold R. Logan, Jr. and Monroe W. Robertson for election as Class II Directors to serve until the +Annual Meeting of Shareholders to be held in 2022. The Board has determined that each of Messrs. Helmerich, Logan and Robertson is independent under the New York Stock Exchange ("NYSE") +corporate governance rules. Each of the Director nominees currently serves on the Board. We have no reason to believe that any of the nominees will be unable or unwilling to serve if elected. +The +Board believes that the combination of the various qualifications, skills and experiences of the 2019 Director nominees will contribute to an effective and well-functioning Board. The Board also +believes that, individually and as a whole, the Director nominees possess the necessary qualifications to provide effective oversight of the business and quality advice and counsel to Cimarex. +Included +in each Director nominee's biography is an assessment of the specific qualifications, attributes, skills and experience of such nominee based on the qualifications described above. +The Board of Directors recommends a vote FOR the election of each of the Director nominees. +Cimarex +Energy +Co. +7 +Table of Contents +ITEM 1: ELECTION OF DIRECTORS +About the Director Nominees +HANS HELMERICH +Director Since 2002 | Age 60 +| Independent +Committees of the Board: +§ +Compensation +§ +Nominating +Current Public Company Directorships: +§ +Chairman of Helmerich & Payne, Inc. +Former Public Company Directorships +(within the last five years): +§ +Atwood Oceanics, Inc. +Core Competencies: +§ +Oilfield Services +§ +Exploration and Development +§ +Corporate Governance +§ +Public Company Executive Experience +§ +Executive Compensation +Mr. Helmerich +has served as Chairman of Helmerich & Payne, Inc. ("H&P") since March 2012 and as a Director since 1987. H&P is a publicly held company primarily engaged in contract +drilling services for oil and gas exploration and production companies. H&P uses drilling rigs it designs and builds and is one of the major land and offshore platform drilling companies in the world. +After joining H&P in 1981, Mr. Helmerich served as CEO from 1989 to March 2014 and as President from 1989 to March 2012. H&P's exploration and production business was merged into Cimarex in +2002. +Mr. Helmerich +serves as a Trustee of The Northwestern Mutual Life Insurance Company of Milwaukee, Wisconsin. He was a Director of Atwood Oceanics, Inc., an international offshore +drilling company traded on the NYSE, located in Houston, Texas, from 1989 to 2017 prior to its merger with Ensco plc. +Key Attributes, Experience and Skills +Mr. Helmerich's +background with the drilling sector of the oil and gas business provides the Board with insight into an aspect of Cimarex's business that represents a significant expenditure in +Cimarex's capital budget. His over 25 years of executive experience provide a strong background for his service on Cimarex's Board and on the Compensation and Governance Committee. In addition, +his service as a Director and Chairman of H&P, as a Trustee of The Northwestern Mutual Life Insurance Company and his former service as a Director of Atwood Oceanics, Inc. provides him with +additional experience and knowledge to serve as a Director. +8 +2019 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +ITEM 1: ELECTION OF DIRECTORS +HAROLD R. LOGAN, JR. (Lead Director) +Director Since 2009 | Age 74 | Independent +Committees of the Board: +§ +Audit +§ +Nominating (Chair) +Current Public Company Directorships: +§ +Chairman of the Board of Supervisors of Suburban Propane Partners, L.P. +§ +Chairman of InfraREIT, Inc. +Former Public Company +Directorships +(within the last five years): +§ +Graphic Packaging Holding Co. +Core Competencies: +§ +Corporate Governance +§ +Financial Reporting Experience +§ +Executive Compensation +§ +Finance/Investment Banking +§ +Public Company Executive Experience +§ +Midstream +Mr. Logan +currently serves as Chairman of the Board of Supervisors of Suburban Propane Partners, L.P. and has served as a Director of that company since 1996. Since February 2018, he has +served as Chairman of InfraREIT, Inc. and previously served as Lead Director of that company from 2015 until February 2018. InfraREIT, Inc. is a publicly held real estate investment +trust that owns utility assets (electric transmission lines) in Texas. Mr. Logan also is a Director of one private company – Hart Energy Publishing (publisher of Oil and Gas Investor and +other energy publications). From 2003 to 2017, Mr. Logan served as a Director of Graphic Packaging Holding Co., a +publicly held company located in Atlanta, Georgia, and predecessor companies. From 2008 until it sold its last investment and closed in 2018, he served as Director of Basic Materials and +Services LLC, a privately held company that invested in companies providing specialized services for the pipeline construction and sand/silica industries. +Mr. Logan +was a co-founder of TransMontaigne in Denver, Colorado in 1995 and was its Chief Financial Officer, Executive Vice President, and Treasurer, through 2002. He served as a Director of +TransMontaigne from 1995 to 2006 and Chairman of its Finance Committee from 2002 to 2006. From 1987 to 1994, he was Senior Vice President/Finance, Chief Financial Officer, and a Director of Associated +Natural Gas Corporation. Prior to that, Mr. Logan was an investment banker with Dillon Read & Co. Inc. and Rothschild, Inc. +Since +1998, Mr. Logan has been a Director of ten public companies and has served on numerous audit, compensation, and governance committees. +Key Attributes, Experience and Skills +Mr. Logan's education and his over 40 years of investment banking/venture capital and financial management experience provide him with a +comprehensive understanding of business and finance. Mr. Logan's expertise and experience have been relevant to his responsibilities of providing oversight and advice to the management of +public companies, and are of particular benefit to his roles as Cimarex's Lead Director and as a member of Cimarex's Audit Committee. +Cimarex +Energy +Co. +9 +Table of Contents +ITEM 1: ELECTION OF DIRECTORS +MONROE W. ROBERTSON +Director Since 2005 | Age 69 +| Independent +Committees of the Board: +§ +Audit (Chair) +§ +Nominating +Former Public Company Directorships: +(within the last five years): +§ +Earthstone Energy, Inc. +(formerly named Basic Earth +Science System) +Core Competencies: +§ +Corporate Governance +§ +Financial Reporting Experience +§ +Executive Compensation +§ +Finance/Investment Banking +§ +Public Company Executive Experience +§ +Exploration and Development +Mr. Robertson +retired from Key Production Company, Inc. ("Key") (one of two companies whose merger created Cimarex in 2002) after co-founding and serving for 10 years with Key. +While with Key, he held the positions of President, Chief Operating Officer, Senior Vice President and Principal Financial Officer. Mr. Robertson has served in executive capacities with three +other public energy companies: Apache Corporation, Gulf Oil Corporation and Terra Resources, Inc. +Mr. Robertson +was a Director of Earthstone Energy, Inc. (formerly named Basic Earth Science System) from 2007 to 2014. During his service as a Director of Earthstone Energy, Inc., +he was Chair of the Audit Committee and a member of the Compensation and Nominating Committee. +Key Attributes, Experience and Skills +Mr. Robertson has comprehensive knowledge of the financial and operational sides of the exploration and production business and experience as the Principal Financial Officer of Key, which is of +considerable value in his service as Chairman of the Audit Committee. +10 +2019 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +ITEM 1: ELECTION OF DIRECTORS +Continuing Directors—Class III—Term Expires 2020 +DAVID A. HENTSCHEL +Director Since 2002 | Age +85 | Independent +Committees of the Board: +§ +Compensation +§ +Nominating +Core Competencies: +§ +Corporate Governance +§ +Financial Reporting Experience +§ +Executive Compensation +§ +Finance/Investment Banking +§ +Public Company Executive Experience +§ +Exploration and Development +Mr. Hentschel +was Chairman and Chief Executive Officer of Occidental Oil and Gas Corporation, a subsidiary of Occidental Petroleum, from 1986 to 1993 and from 1997 until he retired in 1999. He +also served as President and Chief Executive Officer of Canadian Occidental Petroleum, Ltd., now known as Nexen, from 1995 to 1997. He was in charge of the worldwide exploration and production +operations for Cities Service and Occidental Oil and Gas Corporation for the last 20 years of his 40-year career. +Mr. Hentschel +was a Director of Occidental Petroleum from 1987 to 1993 and of Occidental or Nexen from 1985 to 2009. During his service as a Director of Nexen, he was chair of the Audit +Committee and a member of the Compensation Committee and various other committees. He was also a Director of the Bank of Oklahoma from 1984 to 1995. +Key Attributes, Experience and Skills +Mr. Hentschel brings considerable executive experience in the domestic and international oil and gas industry to the Board. Mr. Hentschel's +extensive leadership background and his service on Nexen's audit and compensation committees provide strong skills and experience for his service on our Compensation and Governance Committee. +Cimarex +Energy +Co. +11 +Table of Contents +ITEM 1: ELECTION OF DIRECTORS +THOMAS E. JORDEN +Director since 2011 | Age +61 +Chairman, Chief Executive Officer and President, Cimarex Energy Co. +Core Competencies: +§ +Exploration and Development +§ +Environmental, Health and Safety +§ +Government and Regulatory +§ +Industry Background +§ +Investor Relations +§ +Public Company Executive Experience +§ +Risk Management +Mr. Jorden +is the Chairman of the Board, Chief Executive Officer and President of Cimarex. He has served Cimarex in various capacities since September 2002. He was elected Chief Executive +Officer in September 2011 after serving as Executive Vice President-Exploration from 2003 to 2011 and as Vice President-Exploration from 2002 to 2003. Mr. Jorden also serves on the Board of +Trustees of the Colorado School of Mines and other private boards. +Key Attributes, Experience and Skills +Mr. Jorden brings to the Board over 35 years of experience in the oil and gas exploration and production industry and, as our Chief Executive +Officer, a deep understanding of our business, operations and long-term strategic issues and goals. Mr. Jorden holds undergraduate and graduate degrees in geophysics. His service on the Board +creates an important link between management and the Board. +12 +2019 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +ITEM 1: ELECTION OF DIRECTORS +FLOYD R. PRICE +Director Since 2012 | Age +70 | Independent +Committees of the Board: +§ +Compensation (Chair) +§ +Nominating +Current Public Company Directorships: +§ +Tamarack Valley Energy Ltd. +Core Competencies: +§ +Exploration and Development +§ +Financial Reporting Experience +§ +Executive Compensation +§ +Finance/Investment Banking +§ +Public Company Executive Experience +§ +Corporate Governance +Mr. Price +held various positions with Apache Corporation from 1991 through 2009, including Executive Vice President and Corporate Exploration Officer; President, Apache Canada; President, +Apache International; and Exploration Manager. Apache Corporation, with headquarters in Houston, Texas, is an oil and gas exploration and production company with domestic and international operations. +Mr. Price has served as Chairman of the Board and as a member of the audit, reserves and compensation/governance committees of Tamarack Valley Energy Ltd. ("Tamarack"), Calgary, Alberta, +Canada, a publicly held company traded on the Toronto Stock Exchange, since June 2010. Tamarack is involved in the identification, evaluation and operation of resource plays in the Western Canadian +sedimentary basin. From June 2010 to January 2013, Mr. Price served as a Director and Chairman of the Board of Gastar Exploration, Inc. ("Gastar"), a publicly held company located in +Houston, Texas. Mr. Price also served on the compensation and governance, audit and reserves committees of the Board at Gastar. Gastar is engaged in the exploration, development and production +of natural gas, natural gas liquids, oil and condensate in the United States and is traded on the NYSE. +Key Attributes, Experience and Skills +Mr. Price has over 40 years of domestic and international experience in the exploration and production business. Mr. Price has held +leadership positions with a large public oil and gas company. His experience during the past eight years serving as a Director of public and private companies also provides him with invaluable board +skills and experience. Mr. Price brings extensive oil and gas exploration, operations, management and financial experience to Cimarex's Board and the Compensation and Governance +Committee. +Cimarex +Energy +Co. +13 +Table of Contents +ITEM 1: ELECTION OF DIRECTORS +FRANCES M. VALLEJO +Director Since 2017 | Age +53 | Independent +Committees of the Board: +§ +Audit +§ +Nominating +Core Competencies: +§ +Exploration and Development +§ +Financial Reporting Experience +§ +Corporate Finance +§ +Mergers and Acquisitions +§ +Risk Management +§ +Corporate Governance +§ +Corporate Planning and Budgets +§ +Public Company Executive +Ms. Vallejo +is a former executive officer of ConocoPhillips, the world's largest independent exploration and production company. Beginning in 1987, she held various positions with both +ConocoPhillips and Phillips Petroleum Company, which merged with Conoco Inc. to form ConocoPhillips in August 2002. She served as Vice President Corporate Planning and Development from April +2015 until December 2016 and as Vice President and Treasurer from October 2008 until March 2015. Prior to October 2008, she served as General Manager – Corporate Planning and +Budgets, Vice President Upstream Planning & Portfolio Management, Assistant Treasurer, Manager Strategic Transactions, and in other geophysical, commercial, and finance roles. From 2010 until +2016, Ms. Vallejo served as a member of the Board of Trustees of Colorado School of Mines and she currently serves or has served on boards of other charitable associations. +Key Attributes, Experience and Skills +Ms. Vallejo's 30 years of experience in the oil and gas industry and extensive leadership roles in corporate planning, budgeting, and treasury +are key attributes that make her well qualified to serve as a Cimarex Director and a member of the Audit Committee. +14 +2019 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +ITEM 1: ELECTION OF DIRECTORS +Continuing Directors – Class I – Term Expires 2021 +JOSEPH R. ALBI +Director since 2011 | Age +60 +Executive Vice President – Operations, Chief Operating Officer, Cimarex Energy Co. +Core Competencies: +§ +Exploration and Development +§ +Environmental, Health and Safety +§ +Government and Regulatory +§ +Industry Background +§ +Public Company Executive Experience +§ +Risk Management +Mr. Albi +was named Chief Operating Officer in September 2011. He has served Cimarex in various capacities since September 2002, including Executive Vice President – +Operations from 2005 to 2011, Senior Vice President – Corporate Engineering from 2003 to 2005 and Vice President – Engineering from 2002 to 2003. +Key Attributes, Experience and Skills +Mr. Albi has over 35 years of experience in the oil and gas industry. His extensive understanding of the management of oil and gas production +and drilling operations, business development, environmental and safety management and oil and gas marketing provide the Board with considerable insight about Cimarex's operations. +Cimarex +Energy +Co. +15 +Table of Contents +ITEM 1: ELECTION OF DIRECTORS +LISA A. STEWART +Director Since 2015 | Age +61 | Independent +Committees of the Board: +§ +Audit +§ +Nominating +Former Public Company Directorships: +(within the last five years): +§ +Talisman Energy, Inc. +Core Competencies: +§ +Exploration and Development +§ +Environmental, Health and Safety +§ +Financial Reporting Experience +§ +Executive Compensation +§ +Finance/Investment Banking +§ +Public Company Executive Experience +§ +Investor Relations +Ms. Stewart +is Chairman, President, Chief Executive Officer, and Chief Investment Officer of Sheridan Production Partners, a privately-owned oil and gas operating company she founded in 2007. +From 2009 until its acquisition in May 2015, Ms. Stewart served as a Director on the Board of Talisman Energy, Inc., a Canadian oil and gas exploration and production company traded +publicly on the NYSE and the Toronto Stock Exchange. Prior to 2007, Ms. Stewart served as Executive Vice President of El Paso Corporation and President of El Paso E&P from 2004 to 2006. From +1984 to 2004, Ms. Stewart served Apache Corporation in various capacities, including most recently as Executive Vice President, with responsibility in the departments of its reservoir +engineering, business development, land, environmental, health and safety ("EH&S"), and corporate purchasing. +Key Attributes, Experience and Skills +Ms. Stewart's over 35 years of experience in the oil and gas industry, including in reservoir engineering, business development, land and EH&S, +and extensive leadership roles are key attributes that make her well qualified to serve as a Cimarex Director. +16 +2019 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +ITEM 1: ELECTION OF DIRECTORS +MICHAEL J. SULLIVAN +Director Since 2002 | Age +79 | Independent +Committees of the Board: +§ +Compensation +§ +Nominating +Core Competencies: +§ +Corporate Governance +§ +Governmental, Political or Diplomatic Expertise +§ +Legal Expertise +§ +Finance/Budgeting +In +September 2015, Mr. Sullivan retired from the Arizona-based law firm Lewis Roca Rothgerber LLP where beginning in 2001 he served as senior attorney, partner or special counsel, and +was the managing attorney of the firm's Casper, Wyoming office. Mr. Sullivan practiced law as a partner with Brown, Drew, Apostolos, +Massey & Sullivan from 1964 to 1986 and from 1995 until 1998. He served as the Governor of Wyoming from 1987 to 1995 and as the U.S. Ambassador to Ireland from 1998 to 2001. +Mr. Sullivan +retired as a Director and member of the compensation and governance committees of First Interstate BancSystem, located in Billings, Montana, in December 2016, and had been a +Director and member of the compensation and governance and audit committees of Sletten Construction, Inc., located in Great Falls, Montana (a non-public company) until retiring from the Board +in June 2015. From 2001 to 2009, he served as a Director and was a member of the audit, corporate social responsibility, and governance committees of Allied Irish Bank Group, located in Dublin, +Ireland. From 2003 to 2011, he served as a Director of the Kerry Group Plc, a global food and food ingredients producer headquartered in Tralee, the county town of County Kerry, Ireland. +Key Attributes, Experience and Skills +Mr. Sullivan brings a wealth of experience and a diverse background to our Board. In addition to his Juris Doctor degree, he has an undergraduate +degree in petroleum engineering, years of public service as the Governor of Wyoming and as the U.S. Ambassador to Ireland, and 40 years' experience practicing law in the areas of natural +resources, mediation and business. As Governor, he was involved in the process of reviewing and administering Wyoming's budget. This experience is directly relevant to his service on the Cimarex Board +and to his oversight of Cimarex's capital expenditure budget. Mr. Sullivan's education, legal experience, particularly in mediation and litigation, and his domestic and international service +all provide a background that is beneficial in addressing the issues coming before the Cimarex Board. +Cimarex +Energy +Co. +17 +Table of Contents +ITEM 1: ELECTION OF DIRECTORS +Summary of Director Core Competencies and Composition Highlights +The following chart summarizes the competencies that the Board considers valuable to effective oversight of the Company and illustrates how +the current Board members individually and collectively represent these key competencies. The lack of an indicator for a particular item does not mean that the Director does not possess that +qualification, skill or experience. While each Director is knowledgeable in these areas, the indicator represents a core competency that the Director brings to our Board. +18 +2019 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +CORPORATE GOVERNANCE +CORPORATE GOVERNANCE +We believe good corporate governance promotes the long-term interests of shareholders, strengthens Board and management accountability, and +helps build public trust. Cimarex's website (www.cimarex.com) includes materials that are helpful in understanding our corporate governance practices: +Corporate Governance Guidelines +Corporate Bylaws +Code of Business Conduct and Ethics +Stock Ownership Guidelines +Complaint and Reporting Procedures +Background and Experience of our Board of Directors +Committee Charters +Background and Experience of Executive Management +Proxy access +Corporate Governance Highlights +8 of 10 independent Directors +Disclosure Committee for financial reporting +Majority voting for Directors resignation policy +Board and Audit Committee risk oversight +Classified Board +Compensation risk assessment +Combined Chairman and CEO +Review of related party transactions +Independent Lead Director +Non-hedging and non-pledging policies +Diverse Board skills and experience +Clawback policy +Annual Board and committee self-evaluations +Management and Director stock ownership guidelines +Periodic consultant review of Board skills +No tax gross-ups +Annual equity grants to Directors +Proxy access +Annual Board education +Active shareholder engagement +Shareholder Engagement +Cimarex's relationships with its shareholders are an important part of our corporate governance profile, and we recognize the value of taking +their views into account. Engagement with shareholders helps us understand the larger context and the impact of our operations, learn about expectations for our performance, assess emerging issues +that may affect our business or other aspects of our operations, and shape corporate and governance policies. +Consistent +with our commitment to seek and respond to shareholder input on corporate governance topics, we have considered and discussed with investors a wide variety of matters, +including: +§ Our executive compensation program and disclosures, as a result of which we previously +made changes in these areas; +§ The "proxy access" shareholder proposal acted upon in 2015; +§ A shareholder proposal concerning fugitive methane reporting that was made in December +2015 and subsequently withdrawn, as a result of which we added disclosures concerning methane emissions to our website; and +Cimarex +Energy +Co. +19 +Table of Contents +CORPORATE GOVERNANCE +§ Environmental, social and governance issues, including greenhouse gas emissions, +employee and Board diversity, and shareholder protection measures. +In +January 2018, as a result of additional engagement with shareholders during 2017, we enhanced our website disclosure concerning air quality, hydraulic fracturing, seismicity, spill prevention, +water resource management, safety and health, community impact, and community support. In 2018, we added specific numeric threshold targets to assist the Compensation and Governance Committee in +evaluating certain performance objectives for 2018 annual short term incentive awards. See "CD&A—Key 2018 Compensation Actions—Annual Cash Incentive Awards" below. We increased +our shareholder engagement efforts in 2018 because of the lower number of votes cast in favor of the advisory vote on executive compensation from 97% at the 2017 annual meeting of shareholders to 93% +at the 2018 annual meeting. +Director Qualifications and Recruitment +The Board is committed to recruiting and nominating directors for election who will collectively provide the Board with the necessary +diversity of skills, backgrounds and experiences to meet Cimarex's ongoing needs and support oversight of our business strategy and priorities. In its assessment of each potential candidate, the +Nominating Committee considers the nominee's judgment, integrity, experience, independence, understanding of Cimarex's business or related industries and such other factors that the Nominating +Committee determines are pertinent in light of the needs of the Board. The Nominating Committee also considers the ability of a nominee to devote the time and effort necessary to fulfill his or her +responsibilities to Cimarex. Our Nominating Committee Charter specifically includes diversity of gender and ethnic background in the list of desirable attributes sought in our Board composition. +Although +all current Directors have extensive oil and gas experience, either as company executives or attorneys, their experience is with companies with widely different operating strategies than +those of Cimarex. This diversity and depth of experience benefits our Board in executing its duty of oversight and guidance. +§ Shareholder Nominations of Director Candidates +Cimarex's Bylaws permit a group of up to 20 shareholders collectively beneficially owning more than 3% of Cimarex's outstanding shares for at least three consecutive years to +nominate up to two candidates for inclusion in Cimarex's proxy materials by following the procedures set forth in the proxy access provisions in +Article III, Section 2A of our Bylaws (the "Proxy Access Policy"). For more information on proxy access and other procedures to recommend candidates to Cimarex's Board of Directors, see +"General Information—Director Nominations for the 2020 Annual Meeting of Shareholders." +Board of Directors and its Committees +Cimarex is governed by its Board of Directors, which is led by our Chairman of the Board and CEO, and its three committees. Cimarex also has a +Lead Director, who is chosen annually by the Board from our independent Directors. The structure of the Board and the responsibilities of its committees are described in detail below. +20 +2019 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +CORPORATE GOVERNANCE +§ Our Board +Committee Memberships +(Independent Directors Only) +DIRECTOR NOMINEES +AGE +DIRECTOR +SINCE +TERM +EXPIRES +Audit +Compensation +and +Governance +Nominating +Hans Helmerich (Independent Director) +Chairman and former Chief Executive Officer, Helmerich & Payne, Inc. +60 +2002 +2019 +· +· +Harold R. Logan, Jr. (Independent Director) +Independent Lead Director and Chair of Nominating Committee of Cimarex; Chairman, Suburban Propane Partners, L.P. +74 +2009 +2019 +· +Chair +Monroe W. Robertson (Independent Director) +Chair of Audit Committee of Cimarex; Retired, former President and Chief Operating Officer, Key Production Co. +69 +2005 +2019 +Chair +· +Continuing Directors +Joseph R. Albi +Executive Vice President—Operations, Chief Operating Officer, Cimarex Energy Co. +60 +2011 +2021 +David A. Hentschel (Independent Director) +Retired, former Chairman and Chief Executive Officer, Occidental Oil and Gas Corporation +85 +2002 +2020 +· +· +Thomas E. Jorden +Chairman, Chief Executive Officer and President, Cimarex Energy Co. +61 +2011 +2020 +Floyd R. Price (Independent Director) +Chair of Compensation and Governance Committee of Cimarex; Retired, former executive officer, Apache Corporation +70 +2012 +2020 +Chair +· +Lisa A. Stewart (Independent Director) +Chairman, President, Chief Executive Officer and Chief Investment Officer, Sheridan Production Partners +61 +2015 +2021 +· +· +Michael J. Sullivan (Independent Director) +Retired Senior Attorney, Lewis Roca Rothgerber LLP +79 +2002 +2021 +· +· +Frances M. Vallejo (Independent Director) +Retired, former Vice President, ConocoPhillips +53 +2017 +2020 +· +· +Cimarex +Energy +Co. +21 +Table of Contents +CORPORATE GOVERNANCE +§ Board Leadership Structure +Chairman of the Board: Duties and Responsibilities +§ +Preside over Board meetings. +§ +Call special meetings of the Board. +§ +Approve agenda for Board meetings. +§ +Preside over shareholder meetings. +§ +Facilitate and participate in formal and informal communications with and among Directors. +Lead Director: Duties and Responsibilities +§ +Preside over all Board meetings at which the Chairman of the Board is not present. +§ +Act as Chairman of the Nominating Committee. +§ +Solicit agenda items from non-management Directors, review Board meeting agenda and materials, and provide input to the Chairman of the Board. +§ +Act as liaison between the Chairman and the Directors and facilitate communication among the full Board. +§ +Call meetings of non-management Directors and, as appropriate, set the agenda. +§ +Review shareholder communications directed to the Board and take appropriate action. +§ +Preside over all meetings of non-management Directors and over all executive sessions of non-management Directors. +§ +Retain outside advisors and consultants, who report directly to the Board on Board-wide issues. +The +Board believes having a combined Chairman/CEO and an independent Lead Director, who have the duties described above, best serve the interests of our shareholders because this structure provides an +appropriate balance between strategy development and independent oversight of management. +Thomas +Jorden was elected Chief Executive Officer on September 30, 2011 and Chairman of the Board on August 14, 2012. He has served as an executive officer of Cimarex since its formation +in 2002. He has considerable knowledge and experience gained through his executive positions with Cimarex and prior industry experience. This knowledge and experience allow him to focus the activities +of the Board on matters most relevant to the success of Cimarex. +The +Compensation and Governance Committee is comprised entirely of independent Directors. When the Board acts on the Compensation and Governance Committee's recommendation for compensation of the +Chairman/CEO, it acts without the Chairman/CEO being present. +The +substantial experience and background of our independent Directors ensure their active and knowledgeable involvement in Board matters. This involvement, and the presence and involvement of our +Lead Director, provide the Board with a strong and independent point of view. +§ Board Committees +The committees of the Board are comprised entirely of independent Directors. The primary responsibilities of the committees are described below. The committees are governed by +Board-approved charters stating +22 +2019 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +CORPORATE GOVERNANCE +the +committees' responsibilities. A copy of the committees' charters are available on our website at www.cimarex.com. +Audit Committee +Primary Responsibilities: +Meetings in 2018: 8 +§ +Appoints independent auditors; +Members: +Monroe W. Robertson +(Chair) +§ +Approves the nature and scope of services of independent auditors and reviews the range of fees for such services; +Harold R. Logan, Jr. +Lisa A. Stewart +§ +Assists the Board in oversight and monitoring the performance of the internal audit function; +Frances M. Vallejo +§ +Reviews qualifications and independence of the auditors; +§ +Reviews and discusses with independent auditors (i) the auditors' responsibilities and management's responsibilities in the audit process, (ii) the overall +audit strategy, (iii) the scope and timing of annual audit, and (iv) any significant risks identified during the independent auditors' risk assessment procedures; +§ +Assists the Board in monitoring the integrity of financial statements; +§ +Monitors compliance with legal and regulatory requirements; +§ +Reviews and reports to Board on corporate and financial risk processes; +§ +Monitors the process related to ongoing litigation matters; and +§ +With the Company's management and (if applicable) an independent petroleum engineering consulting firm, reviews the Company's annual process of estimating and +reporting quantities of oil and gas reserves. +The Board of Directors has determined that each of the members of the Audit Committee is financially literate and independent as defined by the rules of the SEC and the NYSE. The Board also has determined that each of +Mr. Logan, Mr. Robertson, Ms. Stewart and Ms. Vallejo is an "audit committee financial expert" as defined by the SEC's rules. +Cimarex +Energy +Co. +23 +Table of Contents +CORPORATE GOVERNANCE +Compensation and +Primary Responsibilities (Compensation Functions): +Meetings in 2018: 8 +Governance +§ +Recommends CEO and executive officer cash compensation for approval by the Board; +Committee +§ +Recommends Director compensation for approval by the Board; +Members: +Floyd R. Price +(Chair) +Hans Helmerich +§ +Reviews and recommends to the Board that the Compensation Discussion and Analysis be included in our proxy statement; +David A. Hentschel +§ +Determines amount and terms of equity awards; +Michael J. Sullivan +§ +Reviews and approves long-term incentive plans; +§ +Reviews relationship of compensation to risk; and +§ +Approves the nature and scope of services of independent compensation consultants. +As part of its compensation functions, the Compensation and Governance Committee has increased its oversight of compensation of all employees, including its review of the Company's practices to ensure compensation is +equitable. +Primary Responsibilities (Governance Functions) : +§ +Develops and implements policies and processes regarding corporate governance matters; +§ +Develops plans for managerial succession; and +§ +Oversees annual Board and Committee evaluations. +As part of its governance functions, the Compensation and Governance Committee has increased its oversight of environmental, social and governance ("ESG") issues, including corporate sustainability and workplace +fairness. +Compensation and Governance Committee Interlocks and Insider Participation. Hans Helmerich, a member of the Compensation and Governance Committee, was +an executive officer of Cimarex from February 14, 2002 until September 30, 2002. Cimarex was formed on February 14, 2002 as a wholly owned subsidiary of Helmerich & +Payne, Inc. ("H&P") for the purpose of facilitating a spinoff by H&P of its oil and gas +24 +2019 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +CORPORATE GOVERNANCE +exploration +and production business. Cimarex became a publicly traded company on September 30, 2002, at which time Mr. Helmerich resigned as an executive officer. +Nominating Committee +Primary Responsibilities (Compensation Functions): +Meetings in 2018: 4 +§ +Determines desired Board skills and attributes; +Members: +Harold R. Logan, Jr. +(Chair) +Hans Helmerich +§ +Recommends candidates to serve on the Board and to stand for election at annual meeting of shareholders or to fill a vacancy occurring between meetings; +David A. Hentschel +Floyd R. Price +§ +Considers shareholder nominees for election to the Board; and +Monroe W. Robertson +Lisa A. Stewart +Michael J. Sullivan +Frances M. Vallejo +§ +Recommends Board committee appointments. +Other Governance Matters +§ Director Attendance +During 2018, the Board of Directors met eight times. The Board has three Committees: the Audit Committee, the Compensation and Governance Committee, and the Nominating +Committee. During 2018, each Director attended greater than 75% of the meetings of the Board and the Board Committees on which he or she served. All Board members are expected to attend the Annual +Meeting. All Directors attended our 2018 Annual Meeting. +§ Executive Sessions +The independent Directors meet in executive session at each regularly scheduled Board meeting. The Lead Director presides over executive sessions. During 2018, four executive +sessions were held, without the CEO or any member of management present, and all of the independent Directors attended each session. These sessions allow independent Directors to review the CEO's +performance and compensation and to discuss issues of importance to Cimarex, including the business and affairs of Cimarex, as well as matters concerning management. +§ Risk Oversight +The Board has overall responsibility for risk oversight. In carrying out its responsibility, the Board has requested that the Audit Committee discuss with management and report +to the Board with respect to: +§ Processes Cimarex follows to mitigate corporate risks; § Guidelines +and processes pertaining to financial risk assessment; § Steps management takes to measure, monitor and control financial risk exposures; and +§ Management's conclusion as to the effectiveness of the guidelines and processes +utilized to mitigate such corporate and financial risks and exposures. +Cimarex +Energy +Co. +25 +Table of Contents +CORPORATE GOVERNANCE +In +addition, at each of the Board's four regularly scheduled meetings held during the year, management provides the Board with an overview of Cimarex's operations, financial results, risks and risk +mitigation efforts, and other aspects of its business. Significant strategic considerations, such as material acquisitions or mergers are brought to the Board for deliberation and, as appropriate, +decisions. +The +Audit Committee, at its December 6, 2018 meeting, reviewed, discussed and, at the Board meeting that day, reported to the Board about corporate, operational and financial risks and +Cimarex's processes for mitigation of these risks. +§ Compensation Risk Oversight +In February 2019, the Compensation and Governance Committee performed a thorough review of the possible connection between compensation and excessive risk taking. The +Compensation and Governance Committee's review covered Cimarex's compensation policies and practices covering executive and non-executive employees to determine whether the policies and practices +encourage excessive risk taking by employees. The Committee's analysis included a review and discussion of the following: +§ The metrics for determining incentive awards; § Participants in the +Company's compensation programs; § +How the Company determines compensation pools and individual awards; § The maximum individual award potential (maximum individual +incentive to take risk); § The maximum possible cost if awards were paid at maximum levels (maximum cost +exposure); § The decision-making and approval process; and § The systemic limitations on the ability of employees to take excessive risks in order +to influence compensation. +The +Compensation and Governance Committee determined that the risks from Cimarex's compensation policies and practices for Cimarex employees are not reasonably likely to have a material adverse effect +on Cimarex. +§ Director Independence and Related Person Transactions +Our Corporate Governance Guidelines require that a majority of our Directors be independent as defined by applicable laws, rules, regulations and listing standards. We comply +with the criteria for independence established by the NYSE listing requirements and other governing laws and regulations. +Each +year the Compensation and Governance Committee reviews the independence of our Directors and any related party transactions. On the basis of this review, the Committee delivers a report to the +Board, and the Board makes independence determinations based on the Committee's report. +As +a result of this review, the Board has determined that Hans Helmerich, David A. Hentschel, Harold R. Logan, Jr., Floyd R. Price, Monroe W. Robertson, Lisa A. Stewart, Michael J. Sullivan and +Frances M. Vallejo, representing eight of our ten current Directors, are independent of Cimarex and its management. Thomas Jorden and Joseph Albi are not independent because of their employment as CEO +and COO of Cimarex, respectively. +26 +2019 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +CORPORATE GOVERNANCE +In +making these determinations, the Board considered that, in the ordinary course of business, relationships and transactions may occur between Cimarex and entities with which some of our Directors +are or have been affiliated. As a result of the Committee's review, certain relationships and transactions are not considered to be material transactions that would impair a Director's independence, +including the following: +§ The Director is an employee of another company that does business with Cimarex, and +our annual sales to or purchases from the other company amount to less than 2% of the annual revenues of the other company and that such sales to or purchases from the other company are part of our +ordinary course of business and conducted in the same manner as we obtain services from other companies that provide similar services; or § The Director +is a director (but not an employee) of another company that does business +with Cimarex. +Hans +Helmerich is the non-executive Chairman of the Board, and until March 5, 2014 was the CEO, of Helmerich & Payne, Inc. ("H&P"), a company with which Cimarex engages in +ordinary course of business transactions. As non-executive Chairman, Mr. Helmerich currently is not an employee of H&P. During H&P's fiscal year ended September 30, 2017, Cimarex paid +H&P $39.6 million for drilling services in arms' length transactions and as part of our ordinary course of business and in the same manner as we obtain services from other companies that +provide similar services. The aggregate amount of the payment represented 2.20% of H&P's revenue during that period. The Compensation and Governance Committee reviewed these transactions and +concluded: (i) the transactions are proper and not material when compared to both Cimarex's total drilling costs and H&P's total revenues; (ii) the transactions occurred in the ordinary +course of business and at arms' length; (iii) the Board does not review or approve drilling service contracts or arrangements; (iv) Mr. Helmerich ceased being an employee of H&P +in 2014; and (iv) Mr. Helmerich's relationship with H&P does not interfere with his independent judgment as a Director of Cimarex. +Ms. Stewart +is Chairman, President, Chief Executive Officer and Chief Investment Officer of Sheridan Production Partners, a privately–owned oil and gas operating company she founded +in 2007. During 2017 Cimarex paid certain affiliated companies of Sheridan oil and gas revenues of $208 thousand and received $89 thousand from certain affiliates of Sheridan for joint +interest billings. Cimarex's payments to the affiliates of Sheridan represented 0.03% of Sheridan's consolidated revenues for 2017. In addition, Cimarex paid the Sheridan affiliates joint interest +billings of $1 thousand, and Cimarex received $378 of oil and gas revenues. The Compensation and Governance Committee reviewed these transactions and concluded: (i) the transactions are +proper and not material when compared to both Cimarex's total costs and Sheridan's revenues; (ii) the transactions occurred in the ordinary course of business and at arms' length; +(iii) the Board does not review or approve oil and gas revenue payments or joint interest billings; and (iv) Ms. Stewart's relationship with Sheridan does not interfere with her +independent judgment as a Director of Cimarex. +§ Communications with Directors +Shareholders may communicate with our Board by mail directed to our Corporate Secretary or by facsimile (720) 403-9383. All communications will be forwarded to +the Lead Director for the Lead Director's review. The Lead Director may take any action the Lead Director deems appropriate or necessary, including, without limitation, forwarding the information to +the Board for consideration or, with the concurrence of the Board, retaining independent or outside counsel, accountants or other advisors to address the concern. +Cimarex +Energy +Co. +27 +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +EXECUTIVE SUMMARY OF COMPENSATION DISCUSSION AND ANALYSIS ("CD&A") +OVERVIEW +§ 2018 BUSINESS AND FINANCIAL PERFORMANCE +The relative stability in commodity prices in 2017 continued through most of 2018 until a steep decline in oil prices in the fourth quarter of 2018. The Compensation and +Governance Committee continued to focus on strategic and tactical goals that preserve Cimarex's strong balance sheet, core properties and organization while improving health, safety and ebnvironment +metrics. These goals and our performance are summarized below under "Section 2—Annual Cash Incentive Awards." It is through this macroeconomic lens that the Committee considered the +following 2018 business and financial performance overview when making compensation decisions: +§ Exploration and development expenditures increased 23% to $1,570.3 million +compared to $1,281.1 million in 2017, while year-over-year average daily production increased 17% to 221.9 MBOE per day. § Year-over-year production +revenues increased 22% to $2.297 billion as revenues +were positively affected by increased realized commodity prices as well as increased production, which resulted in net income of $791.9 million in 2018 compared to net income of +$494.3 million in 2017. § Cash flow provided by operating activities of $1.55 billion was 42% higher than +2017. § Our Operations group excelled at optimizing our production and maximizing well +profitability. As a result, our production expense per BOE declined 4% from $3.77 per BOE in 2017 to $3.62 per BOE in 2018, and declined 44% in 2018 compared to 2014. § We sold non-core assets in Ward County, Texas for $544.5 in a transaction that closed +on August 31, 2018. § We entered into a merger agreement in November 2018 to acquire Resolute Energy +Corporation, which has approximately 21,100 net leasehold acres adjacent to and near our Reeves County, Texas properties in the Permian Basin. The merger was completed on March 1, 2019. § We incurred no additional debt in 2018 and had cash on hand of $800.1 million +at year-end 2018. § During 2018, our overall estimated proved reserves increased 6% after additions, +positive and negative revisions, and production. We added 159 MMBOE of proved reserves through extensions and discoveries, including 120 MMBOE in the Permian Basin and 38 MMBOE in the Mid-Continent. +In addition, we had net negative revisions of previous estimates of 23 MMBOE. Revisions were comprised of an increase of 21 MMBOE for net positive performance revisions, a decrease of 8 MMBOE related +to higher operating expenses, an increase of 2.7 MMBOE for positive revisions due to higher commodity prices, and a decrease of 39 MMBOE for the removal of proved undeveloped reserves, the development +of which likely will be delayed beyond five years from our initial disclosure. § Despite our production growth and strong net income in 2018, our stock +price decreased +49% from $122.01 at year-end 2017 to $61.65 at year-end 2018. The decrease in our stock price led to a lower value for NEOs vested long-term equity awards in 2018 compared to the grant date fair value +of those awards in 2015 and lower grant date fair values for long-term equity awards made in 2018, demonstrating the alignment of interests of our NEOs and shareholders. +28 +2019 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +§ HIGHLIGHTS OF EXECUTIVE COMPENSATION PROGRAM POLICIES AND +PRACTICES +What We do +What We Don't Do +Link majority of compensation to performance +No hedging or pledging of Company securities by officers or Directors +Pay long term incentive awards solely in shares of common stock +No tax gross-up payments upon change in control +Double-trigger change in control severance benefits +No excessive perquisites +Maintain stock ownership guidelines +Retain an independent compensation consultant +Hold annual say-on-pay advisory vote for stockholders +Maintain a clawback policy +§ 2018 EXECUTIVE COMPENSATION +Name +2018 Salary (1) +Year End +2018 Base Salary +2018 Annual Cash +Incentive Award (1) +2018 Long-Term +Incentive Grant +Date Fair Value (1) +Total +Compensation (1)(2) +% of Total +Compensation +at Risk (3) +Thomas E. Jorden, CEO +$ 976,789 +$ 990,000 +$ 1,740,000 +$ 6,900,000 +$ 9,727,480 +90% +G. Mark Burford, CFO +$ 468,394 +$ 475,000 +$ 700,000 +$ 2,750,000 +$ 4,007,577 +86% +Joseph R. Albi, COO +$ 620,241 +$ 628,300 +$ 875,000 +$ 3,000,000 +$ 4,578,876 +85% +Stephen P. Bell, EVP +$ 513,478 +$ 520,150 +$ 725,000 +$ 2,900,000 +$ 4,220,468 +86% +John A. Lambuth, SVP +$ 517,514 +$ 525,000 +$ 775,000 +$ 3,000,000 +$ 4,364,300 +87% +(1) From Summary Compensation Table. +(2) Includes All Other Compensation from Summary Compensation Table. +(3) Compensation at risk is based on the sum of 2018 Annual Cash Incentive Award and 2018 Long-Term +Incentive Grant Date Fair Value compared to the Total Compensation from the Summary Compensation Table. +ELEMENTS AND MIX OF EXECUTIVE COMPENSATION +§ Principal Elements of Executive Compensation +Cimarex +Energy +Co. +29 +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +We principally use three elements to carry out the design of our executive compensation program, collectively referred to as "Total Direct Compensation": +Element +Purpose +Base salary +➜ +Retain current executive team and, when appropriate, attract new executives. +Annual cash incentive award +➜ +Reward executives for short-term financial and operational results. +Annual long-term equity award +➜ +Focus executive efforts on activities and short-term results that lead to long-term shareholder value. Half of the grant date fair value of 2018 long-term equity awards was made in the form of shares of restricted stock that vest based on continued +employment and the passage of time, which promotes retention. The other half of the grant date fair value of the 2018 long-term equity awards was made in the form of performance shares that vest based on performance measures tied to relative stock +price performance, which promotes the long-term interests of our shareholders and aligns executives' interests with shareholders' interests. +§ Mix of Executive Compensation +Cimarex's executive compensation program directly links a substantial portion of executive compensation to Cimarex's performance through annual and long-term incentives. The +diagrams below show the mix of the pay elements for the CEO and other NEOs for fiscal 2018. These diagrams are based on the Summary Compensation Table and highlight the substantial portion of the at +risk compensation that only is realized if certain performance criteria are met. Of the CEO's total disclosed 2018 compensation, 90% is at risk and is linked to Cimarex's future performance. The +at-risk compensation consists of 18% annual cash incentive compensation based on 2018 performance and 72% long-term equity incentive compensation that is both service- and performance-based. The 2018 +average compensation mix for the other NEOs was 87% at-risk compensation consisting of 18% annual cash incentive compensation based on 2018 performance and 70% long-term equity incentive compensation +that is both service- and performance-based. +30 +2019 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +2018 TOTAL COMPENSATION MIX +Chief Executive Officer +Other Named Executive Officers +Cimarex +Energy +Co. +31 +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +COMPENSATION DISCUSSION AND ANALYSIS +This CD&A describes Cimarex's executive compensation program for 2018. We use this program to retain, motivate and attract (when appropriate) +the executives who lead our business. This CD&A explains how the Compensation and Governance Committee (the "Committee") of the Board of Directors made 2018 compensation decisions for our executives, +including the following NEOs: +Named Executive Officer +Position +Thomas E. Jorden +Chairman of the Board, CEO and President (Principal Executive Officer) +G. Mark Burford +Senior Vice President and CFO (Principal Financial Officer) +Joseph R. Albi +Executive Vice President—Operations, COO +Stephen P. Bell +Executive Vice President—Business Development +John A. Lambuth +Senior Vice President—Exploration +This CD&A is divided into three sections: +➢ +Section 1 +discusses our compensation framework, principal elements of executive compensation, and competitive positioning; +➢ +Section 2 +discusses 2018 and early 2019 actions related to 2018 executive compensation; and +➢ +Section 3 +discusses the role of the Committee's independent compensation consultant and management in compensation decisions, post-employment compensation, retirement benefits, perquisites and other compensation related +issues. +SECTION 1 +§ Our Compensation +Framework +Objectives +Our principal business objective is to profitably grow our proved oil and gas reserves and production for the long-term benefit of +shareholders while seeking to minimize our impact on the communities in which we operate for the long-term. The primary strategy we use to achieve this objective is to reinvest our cash flow from +operations at a competitive rate of return while implementing best practices concerning safety and the environment. Our executive compensation program is designed to retain, motivate and attract, when +appropriate, the experienced professionals necessary to carry out this strategy. +Throughout +the Company, we focus on attracting high quality personnel who have strong technical competence, are not afraid to contribute new ideas, and work well in a team environment. The Company +periodically undertakes a study of compensation across all areas and disciplines within Cimarex. The data confirmed no compensation bias at Cimarex, and every employee is paid equitably for their +position regardless of gender, ethnicity or age. This study will be reviewed periodically to ensure these results remain consistent. +32 +2019 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +The +Committee also engaged our independent compensation consultant, Longnecker & Associates ("Longnecker"), to analyze the actual delivery of compensation versus the performance of the Company +as compared to the Compensation Peer Group (see below, "—2018 Compensation Peer Group," for a list of these companies). Longnecker concluded that Cimarex had one of the highest +correlations of realized pay to performance out of all the Compensation Peer Group companies. +Design +We design our executive compensation program to: +§ Align performance incentives with the long-term interests of our shareholders. +We +align the long-term interests of our executives with the long-term interests of our shareholders by paying a substantial portion of each executive's total direct compensation in the form of +performance-based equity awards. Half the grant date fair value of 2018 long-term equity awards to NEOs was in the form of performance shares with vesting dependent upon relative stock price +performance, meaning the more our shareholders benefit through shareholder returns compared to a defined stock performance peer group, the more our executives benefit through increased vesting of +performance-based equity awards. Also, our Executive Stock Ownership Guidelines encourage executives to have a meaningful ownership stake in Cimarex, further aligning the interests of our shareholders +and our executives. +§ Provide competitive total direct compensation opportunities that retain, motivate and +attract, when needed, executive talent. +We +compensate our executives at levels that are competitive with equivalent positions at companies with which we may compete for talent as represented by our Compensation Peer Group (See "2018 +Compensation Peer Group" below). In general, when we review base salaries, annual incentive awards, long-term equity awards and total direct compensation, we reference the 50th and +75th percentiles of the Compensation Peer Group. Actual compensation earned by an executive may be outside this range based +on the Company's performance, the individual's achievements, and industry competition for talented executives. Half the grant date fair value of 2018 long-term equity awards was in the form of shares +of restricted stock that vest based on continued employment and the passage of time, which promotes retention of executives. +§ Link compensation earned to achievement of short-term and long-term financial and +operational objectives. +We +provide the opportunity for an annual incentive cash award that is designed to reward executive efforts for achieving Company financial and operational objectives. The portion of our long-term +equity incentive awards that vest based on performance measures tied to relative stock price performance are designed to encourage above average stock price performance, which aligns executives' +interests with shareholders' interests. +§ Competitive Positioning +In support of our compensation objectives and in order to determine an appropriate total value and mix of pay for executives, we reference the 50th and +75th percentiles of the Compensation Peer Group. The +Cimarex +Energy +Co. +33 +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +50th and +75th percentiles are reference points only; we do not automatically compensate each executive at these levels. Several variables, including individual and division performance, +time employed in the position, annual Company performance and one- and three-year relative stock price performance influence the actual executive compensation decisions. We look at our individual NEO +and total NEO Total Direct Compensation compared to individual NEO and total NEO Total Direct Compensation of companies in our Compensation Peer Group. Because not all of our NEO positions are +directly comparable to NEO positions of companies in our Compensation Peer Group, we believe that reviewing the aggregate Total Direct Compensation of all NEOs provides an appropriate reference for +comparative purposes and allows us to compare our total cost of management for all NEOs to our peers' total cost of management. +§ 2018 Compensation Peer Group +The Compensation Peer Group is comprised of companies in the oil and gas industry with market capitalizations, revenues and operating areas similar to ours and with whom we +compete for executive and other employee talent. The Committee annually reviews companies in the Compensation Peer Group and modifies the group as appropriate. +In +May 2018, the Committee approved the 2018 Compensation Peer Group, which at the time of selection included companies that were comparable to Cimarex. The May 1, 2018 market capitalization of +these companies ranged from $3.4 billion to $24.5 billion, and the trailing 12 months' revenue, based on the latest periodic report filed by these companies with the SEC, ranged +from $430 million to $6.4 billion. For the comparable date and period, Cimarex's market capitalization was $9.5 billion and its revenue was $1.9 billion. Longnecker +recommended removing two companies that were in the 2017 Compensation Peer Group due to their market capitalizations and revenues compared to the other companies. Those companies were Pioneer Natural +Resources Company, which had a market capitalization of $34.5 billion and trailing 12 month revenues of $5.5 billion, and Southwestern Energy Company, which had a market +capitalization of $2.1 billion and trailing 12 month revenues of $3.2 billion. Longnecker also recommended adding two new companies, Centennial Resource Development, Inc. +("Centennial") and Parsley Energy, Inc. ("Parsley") based primarily on their market capitalizations and focus of operations in the Permian Basin. Centennial had a market capitalization of +$4.9 billion and Parsley had a market capitalization of $8.0 billion at May 1, 2018. Longnecker also noted the location of Centennial's headquarters in Denver and competition for +talent with Cimarex also was a factor in Longnecker's recommendation. The Committee approved these recommendations, resulting in the following 2018 Compensation Peer Group: +Compensation Peer Company +Stock +Ticker +Compensation Peer Company +Stock +Ticker +Antero Resources Corporation +AR +Energen Corporation +EGN +Apache Corporation +APA +Newfield Exploration Company +NFX +Cabot Oil & Gas Corporation +COG +Noble Energy, Inc. +NBL +Centennial Resource Development, Inc. +CDEV +Parsley Energy, Inc. +PE +Concho Resources Inc. +CXO +Range Resources Corporation +RRC +Continental Resources, Inc. +CLR +WPX Energy, Inc. +WPX +Diamondback Energy, Inc. +FANG +34 +2019 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +§ 2018 Stock Performance Peer Group +Under our long-term equity incentive award program, we grant performance-based awards of restricted stock to our NEOs. For grants made in December 2018, the performance measure +used to determine the number of shares to be delivered upon vesting is Cimarex's relative stock price performance at the end of the three-year period preceding the December 1, 2021 vesting date +when compared to companies in the S&P 500 Exploration and Production Index (the "Stock Performance Peer Group"). The Stock Performance Peer Group members are companies with which we compete for +investors and investment capital. The Committee believes that using an index of companies selected by an independent group such as Standard and Poor's provides less ability for management to attempt +to manipulate relative performance. The following are the companies that comprised the Stock Performance Peer Group on December 6, 2018: +Stock Performance Peer Company +Stock +Ticker +Stock Performance Peer Company +Stock +Ticker +Anadarko Petroleum Corporation +APC +EQT Corporation +EQT +Apache Corporation +APA +Hess Corporation +HES +Cabot Oil & Gas Corporation +COG +Marathon Oil Corporation +MRO +Cimarex Energy Co. +XEC +Newfield Exploration Company +NFX +Concho Resources Inc. +CXO +Noble Energy Inc. +NBL +ConocoPhillips +COP +Occidental Petroleum Corporation +OXY +Devon Energy Corporation +DVN +Pioneer Natural Resources Company +PXD +EOG Resources Inc. +EOG +Cimarex +Energy +Co. +35 +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +SECTION 2 +§ Summary of 2018 +and Early 2019 Compensation Decisions +COMPENSATION ELEMENT +ACTION +RATIONALE +§ +BASE SALARY +Increased CEO's base salary from $960,000 to $990,000. +Mr. Jorden's leadership in maintaining the Company's strong financial position through a reduced commodity price environment and his base salary compared to other Compensation Peer Group CEOs. +Increased CFO base salary from $460,000 to $475,000. +Ensuring internal equity with base salaries of other NEOs (other than the CEO) and external competitiveness compared to the Compensation Peer Group. +Increased remaining NEOs' base salaries by 3.0-3.35% +These increases were based on maintaining alignment of the other NEOs with the Compensation Peer Group, and Company performance. +§ +ANNUAL SHORT-TERM INCENTIVE PLAN +Authorized annual cash short-term awards to the CEO of 141% of his target award, or 176% of year-end base salary and between 139% to 148% of year-end base salary, to the other NEOs. The CEO has an award target of 125% of year-end base salary and all +other NEOs have an award target of 100% of year-end salary. +Annual cash awards were based on the achievement of financial and strategic objectives described below in "Annual Cash Incentive Awards" and on recommendations from the Committee's independent compensation consultant. See "Key 2018 Compensation +Actions—Annual Cash Incentive Awards" below. +36 +2019 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +COMPENSATION ELEMENT +ACTION +RATIONALE +§ +LONG-TERM EQUITY INCENTIVES +Authorized long-term equity awards to NEOs (including the CEO) with an aggregate grant date fair value of $18,550,000. Half of the grant date fair value of the 2018 long-term equity awards was made in the form of shares of restricted stock that vest +based on continued employment through December 1, 2021. The other half of the grant date fair value of the 2018 long-term equity award was made in the form of performance shares that may vest on December 1, 2021 in an amount between zero +and 200% of the initial performance shares awarded, with 200% being earned if Cimarex's relative stock price is in the top two of the 15 companies in the Stock Performance Peer Group during the three-year performance period ending on December 1, +2021. The vesting percentages are reduced if Cimarex's relative stock performance is not in the top three companies and if Cimarex's stock price is lower on December 1, 2021 than on December 1, 2018. +Given Cimarex's reduced emphasis on cash and other forms of compensation that are not "at risk" and the factors discussed below in this paragraph, the range for 2018 long-term equity awards recommended by the compensation consultant represented a +total value between the 50th and 60th percentiles when compared to 2018 awards made by peer companies based on the consultant's review of public filings and knowledge of other companies for which the consultant provides services to +compensation committees and market survey data. The Committee considered Cimarex's total shareholder return ("TSR") for the past one and three years, the competitive market pressures and Cimarex's relative share price performance versus peers, and +the limited upside in the performance award design used in prior years, the compensation consultant's recommended individual and total pool of grant date fair value and the CEO's recommendations for NEOs other than the CEO based on their individual +contribution, and determined to make aggregate awards within the range recommended by its consultant. Its consultant concurred with the Committee's final determination. +See "Key 2018 Compensation Actions" below for more detail. +§ Response to 2018 +Say-on-Pay Vote and Shareholder Engagement +At the 2018 Annual Meeting of Shareholders, 93% of the votes cast were in favor of the advisory vote to approve executive compensation. In addition to the +advisory vote, as part of our regular shareholder engagement, we consider and discuss with shareholders a number of matters throughout the year, including executive compensation and ESG issues. The +Committee considers any feedback and routinely reviews executive compensation practices and ESG issues. +Cimarex +Energy +Co. +37 +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +The +Committee considered the results of the advisory vote and the discussions with shareholders. Based on these results and discussions, the Committee believes our shareholders' generally support the +Committee's compensation decisions in 2017 and early 2018 and shareholders' are satisfied with Cimarex's executive compensation programs. Consistent with this support, the Committee retained the core +design of our executive compensation programs for the remainder of 2018 while adding specific numeric threshold targets to assist in evaluating certain performance objectives for 2018 annual short +term incentive awards. See "Key 2018 Compensation Actions—Annual Cash Incentive Awards" below. +§ Key 2018 +Compensation Actions +The following discusses the Committee's key 2018 compensation decisions, which are reflected in the 2018 Summary Compensation Table below. These decisions were +made with the advice and concurrence of Longnecker. (See "CD&A—Section 3" for additional discussion regarding the role of the consultant.) +CEO Compensation +§ +Mr. Jorden's base salary was increased by 3.13% for the reasons described below. +§ +Mr. Jorden's 2018 annual cash incentive award was $1,740,000, or 141% of his target award or 176% of his year-end base salary. His target annual cash incentive +award is 125% of his year-end base salary and his maximum award is 250%. +§ +Mr. Jorden's annual long-term incentive equity award value at the date of grant (December 6, 2018) was $6,900,000. +These +decisions were reviewed in detail by the Committee and its independent consultant. The Committee considered several factors, including input from its independent consultant, compensation data +from peer companies and Cimarex's performance. In 2018, approximately 90% of Mr. Jorden's compensation as disclosed in the Summary Compensation Table was at risk. The value of +Mr. Jorden's long-term equity incentive awards that vested was $3.8 million, compared to the grant date fair value of those awards when granted in 2015 of $6.4 million, +demonstrating the alignment of Mr. Jorden's interests with shareholders' interests. +Other NEO Compensation +The Committee also made compensation decisions for the other NEOs comprised of base salary adjustments made in May 2018, annual cash incentive +awards for 2018 made in February 2019, and long-term equity awards made in December 2018. These adjustments were based upon the recommendations of the CEO, evaluation by the Committee, the advice and +recommendations of Longnecker, salary data from peer and broader market surveys, internal pay relationships based on relative +38 +2019 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +duties +and responsibilities, the executive's impact on Cimarex's results, and for retention purposes. Based upon these considerations, the Committee made the following 2018 NEO compensation decisions: +Name +2018 Salary (1) +Year End +2018 Base Salary +2018 Annual Cash +Incentive Award (1) +2018 Long-Term +Incentive Grant +Date Fair Value (1) +Total +Compensation (1)(2) +% of Total +Compensation +at Risk (3) +G. Mark Burford, CFO +$ 468,394 +$ 475,000 +$ 700,000 +$ 2,750,000 +$ 4,007,577 +86% +Joseph R. Albi, COO +$ 620,241 +$ 628,300 +$ 875,000 +$ 3,000,000 +$ 4,578,876 +85% +Stephen P. Bell, EVP +$ 513,478 +$ 520,150 +$ 725,000 +$ 2,900,000 +$ 4,220,468 +86% +John A. Lambuth, SVP +$ 517,514 +$ 525,000 +$ 775,000 +$ 3,000,000 +$ 4,364,300 +87% +(1) From Summary Compensation Table. +(2) Includes All Other Compensation from Summary Compensation Table. +(3) Compensation at risk is based on the sum of 2018 Annual Cash Incentive Award and 2018 Long-Term Incentive Grant +Date Fair Value compared to the Total Compensation from the Summary Compensation Table. +Base Salary Determination +We provide competitive base salaries to retain and attract, when appropriate, talented executives and to provide a fixed base of cash +compensation. We compare each Cimarex NEO's base salary with the base salary paid for a similar executive position by companies in our Compensation Peer Group. See "Competitive Positioning" above in +this CD&A for a list of the companies in the Compensation Peer Group. The Committee then may adjust base salaries based on a number of factors, including job responsibilities, management experience, +individual contributions, number of years in position and current salary. +In +May 2018, the Committee's independent compensation consultant reviewed the NEOs' base salaries compared to Compensation Peer Group data and broader market data and initially recommended a 3% +increase in executive salaries for each NEO to remain competitive with the Compensation Peer Group. The compensation consultant noted that each NEO's salary was at or slightly above the +50th percentile of the Compensation Peer Group except for the Chief Financial Officer, who was below the 50th percentile. The compensation consultant noted that competitive market salary +adjustments were projected to be in the range of 3% to 4% increases. With respect to the Chief Financial Officer, the consultant recommended that the Committee review the overall market alignment of +the executive group to ensure internal equity and external competitiveness are appropriate. Because the CFO has previously aligned below the median and +was approaching three years of tenure in his position, the consultant recommended an increase greater than 3%. +Mr. Jorden, +our CEO, provided the Committee with recommendations for NEOs other than himself. +Mr. Jorden's +recommendations were based on maintaining competitive alignment of the NEOs with the Compensation Peer Group and Company relative TSR performance being in the +21 st percentile of the Compensation Peer Group companies for the previous one-year period and the 49 th percentile among those companies for the previous +three-year period. The Committee considered the recommendations of both the Committee's consultant and Mr. Jorden for NEOs other than Mr. Jorden. With respect to Mr. Jorden's +salary, in discussions in executive session with the compensation consultant and without Mr. Jorden present, the Committee considered Mr. Jorden's leadership of Cimarex through a reduced +commodity price environment, including Cimarex's relative TSR performance compared to the Compensation Peer Group for the past one year and the past three years, and his salary being compared to the +Compensation Peer Group's CEO salaries. The Committee also reviewed the total salaries and recommended salaries of all the NEOs compared to the total salaries of the NEOs of the Compensation Peer +Group. The compensation consultant +Cimarex +Energy +Co. +39 +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +indicated +its concurrence with the Committee's recommendations based on these reasons and the compensation consultant's experience with, and knowledge of, compensation decisions of other oil and gas +exploration and production companies. The Committee recommended, and the Board approved, the following base salaries effective June 1, 2018: +Name +Title +5/31/2018 +Base Salary +6/1/2018 +Base Salary +Percent +Increase +Thomas E. Jorden +Chairman of the Board, CEO and President +$ 960,000 +$ 990,000 +3.13% +G. Mark Burford +Senior Vice President and CFO +$ 460,000 +$ 475,000 +3.26% +Joseph R. Albi +Executive Vice President—Operations, COO +$ 610,000 +$ 628,300 +3.00% +Stephen P. Bell +Executive Vice President—Business Development +$ 505,000 +$ 520,150 +3.00% +John A. Lambuth +Senior Vice President—Exploration +$ 508,000 +$ 525,000 +3.35% +Annual Cash Incentive Awards +In February 2019, the Committee met to determine NEO (including the CEO) annual cash incentive awards for 2018 performance. The individual +target for the CEO is 125% of the CEO's base salary and for each other NEO is 100% of that NEO's base salary. There is no minimum award, and an individual's maximum award is 250% of base salary for +the CEO and 200% of each other NEO's base salary. +In +February 2018, the Compensation and Governance Committee adopted 2018 strategic and tactical goals and objectives to be measured in 2019. In March 2018, the Committee discussed and approved +adopting numeric threshold targets to assist in evaluating certain of these performance objectives. At the time the Committee approved these goals, commodity prices had recently increased but were +still very volatile, with oil in the range of $60 to $65 per barrel, and the Committee continued its focus from 2017 on goals that preserve Cimarex's strong balance sheet, core properties and +organization during a difficult period for the oil and gas industry. During third quarter of 2018, oil prices dropped precipitously from approximately $75 per barrel to approximately $45 per barrel. +The table below explains the level of achievement of the 2018 strategic and tactical goals and objectives. +40 +2019 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +2018 STRATEGIC GOALS AND OBJECTIVES +§ +Overall Conclusion. +➜ +Exceeded Expectations. The Cimarex executive team exceeded the goals as defined by the Compensation and Governance Committee for 2018. Highlights include a return on invested capital that exceeded +target, balance sheet management and per share growth that exceeded target, quarterly and full year production results that exceeded target, ongoing success in water sourcing and recycling, and success in the acquisitions and divestitures ("A&D") +arena that significantly exceeded our goal. The A&D success included the successful disposition of non-core Ward County, Texas assets and the acquisition of Resolute Energy. Our application of technology and innovations exceeded expectations and +helped us to achieve excellent results. +§ +Achieve good return on invested capital. +➜ +Exceeded Expectations. For 2018, we exceeded the Committee's threshold for fully burdened after tax return on invested capital based on internal measurements that +consider only discounted future cash flows from proved developed reserves and are fully burdened with land, seismic, personnel costs, and all other non-drilling costs attributed to our exploration program. The fully burdened after tax return on +invested capital was substantially higher in our Permian Basin region. Our returns reflected our ability to continue to control costs and innovate our operations throughout the year. Because we calculate fully burdened returns differently than other +companies, we do not publish the actual returns. +§ +Manage the balance sheet. +➜ +Exceeded Expectations. In March 2018, the Committee approved threshold targets of 6% increases for each of production growth per debt adjusted share and reserve growth per debt adjusted share. In +2018, we continued to preserve the strength of our balance sheet and significantly exceeded the production growth target by increasing production on a debt adjusted* per share basis by 19% and exceeded the reserves growth target by increasing +reserves on a debt adjusted* per share basis by 8%. We incurred no additional debt and had cash on hand of $800 million at year-end 2018. +§ +Continue focus on staffing and succession planning at all levels. +➜ +Achieved Expectations. Cimarex successfully continued our focus on succession planning in 2018. We continued to identify potential future managers and leaders in +our organization and provided them with additional training and career development opportunities in different areas within the Company. We reported these actions and the individuals' progress to the Board of Directors. During 2018, we also initiated +a formalized process for our supervisors to work with all of their subordinates in order to discuss career goals, job flexibility, training needs, and elements of success and frustration in their current roles. Our intent is for these conversations +to provide current snapshots on our ability to provide career progression and development. +§ +Continue focus on and improve health, safety and the environment metrics. +➜ +Achieved Expectations. We successfully continued our organization's cultural commitment to health, safety and the environment ("HS&E"). We have developed an operational practice of transparency +around HS&E. We encourage reporting of all incidents involving our employees and contractors (including near misses) and the use of Stop Work Authority, and we have used examples of incidents reported as a vehicle to educate our employees and +contractors and to improve our HS&E practices. In 2018, our HS&E group had a great year in Safety Training, Contractor Management, Air Quality Inspections, and Air Permitting. They continued to nurture a safety culture that encourages best +practices, stop work authority, and transparency. Furthermore, the HS&E group continued to establish credible, professional relationships with state and federal regulatory agencies. +Cimarex +Energy +Co. +41 +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +2018 TACTICAL GOALS AND OBJECTIVES: +§ +Meet or exceed quarterly and annual production guidance targets. +➜ +Exceeded Expectations. We met or exceeded our production guidance during all four of the quarters during 2018. We achieved a 17% growth in total daily production and our daily oil volumes grew 18%. +This was the result of considerable effort in planning, tracking and coordination. +§ +Develop a comprehensive and data-driven model to examine the impact on the present value of the Company's properties based on different drilling and completion spending +scenarios, including spending within cash flow and outspending cash flow. +➜ +Achieved Expectations. We have historically used an annual lookback analysis to compare our expected drilling economics upon which drilling decisions were based to +our actual results. We believe our annual lookback sets Cimarex apart from our peers in our understanding of the elements that affect value creation over time by allowing us to understand the items that contribute to value creation and value +destruction, including commodity prices, reserve and production forecasts, operating costs, and unplanned capital expenditures. It was our intent to use the lookback as a way to objectively consider changing investor sentiments, which in 2018 +generally sought for E&P companies to reduce capital expenditures, generate free cash flow, and return excess cash to shareholders in the form of share buybacks or dividends. We believe our response, which has been to reduce capital expenditures +and operate within cash flow, is the right response to current and anticipated future market conditions. +§ +Develop long-term approach to accounting and managing midstream expenditures to include evaluating and exploring midstream partner relationships. +➜ +Exceeded Expectations. In 2018, we began including all drilling related midstream expenditures, which comprise the overwhelming majority, into our internal rate of return calculations. This is a +conservative approach because it accounts for midstream expenditures in the year they occur instead of amortizing them over decades of use. The result has been a healthy internal debate regarding the necessity and timing of midstream expenditures. It +has introduced a tension into our system that has resulted in a moderation of midstream expenditures. It also allows for better capital allocation between projects that utilize Cimarex midstream and those that utilize third party midstream providers. +Without fully accounting for midstream expenditures in our internal analyses, the true project rate of return on a project may be exaggerated and skewed decision making. +§ +Continue to develop and advance field automation and water solutions for (water sourcing and produced water recycling and disposal). +➜ +Exceeded Expectations. In 2018, Cimarex continued our initiative to automate field operations, including the automation of our saltwater disposal systems. We made +significant progress in the use of recycled water. In particular, our "on demand" produced water system in Culberson County, Texas is now heavily used a source for water in completion operations. The system is highly engineered, environmentally +friendly, and has led to significant savings in our water sourcing costs. +§ +Be opportunistic in acquisition and development arena. +➜ +Significantly Exceeded Expectations. In 2018, we formed our Asset Evaluation Team to rapidly evaluate properties and companies for acquisition and our own properties for possible sale. The team +completed several significant asset evaluations. Most notably, the team's speedy and detailed evaluation of Resolute Energy allowed Cimarex to negotiate a favorable deal to acquire this company with properties adjacent to and nearby our Reeves County, +Texas acreage in the Permian Basin. We also entered into a successful sale of non-core assets in Ward County, Texas in the Permian Basin, which provided a portion of the cash consideration available for the Resolute acquisition. +§ +Continue to push Cimarex on the technology front. Be curious. Be leading edge. +➜ +Achieved Expectations. In 2018, we created and filled the position of Vice President—Technology and Innovation to oversee and expand our use of technology to +support our business. This move was designed to be disruptive and we continue with our efforts to leverage technology to enhance our exploration and development expertise. We made great advances in 2018 in understanding the economics of optimum well +spacing. This involved a blend of our technical curiosity and investment discipline. We developed a set of advanced analytic tools using multi-phase flow analysis that we have incorporated company-wide. Our Exploitation Team made advances in +life-of-well lift analysis, downhole pressure prediction, and analysis of large data volumes that we receive from our automated facilities. +* The Company uses debt adjusted production growth and reserve numbers to demonstrate the Company's ability to increase production and reserves without a commensurate increase in +debt. The use of debt adjusted measures mitigates the risk that management could increase reserves and production by increasing drilling and exploration budgets using debt imprudently. These measures +are not prescribed by Generally Accepted Accounting Principles ("GAAP"). We calculate debt-adjusted shares by adding to the actual shares of common stock outstanding the theoretical number of shares +that would be required to retire our year-end debt, net of cash on hand. The theoretical number of shares is calculated by dividing our net debt at year-end by the trailing 12-month average stock +price at year-end. +42 +2019 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +The +Committee's independent compensation consultant recommended a pool for cash incentive awards for all NEOs totaling between $4.4 million and $4.7 million, or between 130% and 140% of +the NEOs' year-end 2018 salaries, based on the consultant's review of the Company's achievement of the 2018 strategic and tactical goals, the consultant's analysis of the projected annual incentive +awards of the Compensation Peer Group to be generally at target levels or slightly above target level for 2018 performance, the consultant's evaluation of the Company's performance of its 2018 +strategic and tactical goals compared to the Compensation Peer Group's percentile rankings, and the consultant's review of actions by other oil and gas exploration and production companies related to +annual incentive awards due to commodity price and stock price trends. Based principally on the achievement of the 2018 strategic and tactical goals and objectives, the improvement in and stabilizing +of commodity prices, and expected improvement in the Company's cash flow, the CEO recommended cash incentive awards for the other NEOs of between 139% and 152% of their year-end 2018 salaries, which +were slightly lower than the recommendations of the Committee's independent compensation consultant. The Committee's independent consultant concurred that the CEO's recommendations were reasonable. +After considering all of these factors and consulting with Longnecker, the Committee accepted the CEO's recommendations, and the Board approved the Committee's recommendations. +The +Committee, with its independent consultant and without management present, deliberated concerning the CEO's annual cash incentive award. Based on its analysis of the Company's 2018 performance +described above and the CEO's leadership of the Company and management of senior executives and other employees to achieve this performance, the Committee recommended and the Board approved a cash +incentive award to the CEO of 140% of his target award, which resulted in an award equal to 176% of the CEO's base salary. This award was in the range of 130% to 140% of target recommended by the +Committee's independent compensation consultant. The Committee's independent consultant concurred with this recommendation, and the total cash incentive awards to all NEOs of $4.8 million was +slightly where the recommendation of the compensation consultant of a reasonable pool of up to $4.7 million. Following are the CEO and other NEO 2018 annual cash incentive awards: +Name +Cash Incentive Award +% of Target +% of Year-End +Base Salary +Thomas E. Jorden, CEO +$ 1,740,000 +141% +176% +G. Mark Burford, CFO +$ 700,000 +147% +147% +Joseph R. Albi, COO +$ 875,000 +139% +139% +Stephen P. Bell, EVP +$ 725,000 +139% +139% +John A. Lambuth, SVP +$ 775,000 +148% +148% +Long-Term Equity Incentive Award Program +Our long-term equity incentive award program balances the short-term annual cash incentive program by focusing executive efforts on the +activities that lead to long-term shareholder value. Typically, the Committee grants equity awards of restricted stock to NEOs each year. +For +grants made in December 2018, half of the grant date fair value of the long-term equity awards was made in the form of shares of restricted stock that vest based on continued employment through +December 1, 2021. The other half of the grant date fair value of the long-term equity awards was made in the form of performance shares that may vest on December 1, 2021 in an amount +between zero and 200% +Cimarex +Energy +Co. +43 +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +of +the initial performance shares awarded, with 200% being earned if Cimarex's relative stock price is in the top two of the 15 companies in the Stock Performance Peer Group during the three-year +performance period ending on December 1, 2021. The vesting percentages are reduced if Cimarex's relative stock performance is not in the top three companies and if Cimarex's stock price is +lower on December 1, 2021 than on December 1, 2018. See "CD&A—Competitive Positioning" for a list of the companies in the 2018 Stock Performance Peer Group. Our restricted +stock awards that vest based on continuous employment and the passage of time promote retention of executives, and the performance share awards that vest based on performance measures tied to relative +stock price performance promote the long-term interests of our shareholders and align our executives' interests with our shareholders' interests. While the 2014 Equity Incentive Plan does not set a +minimum vesting period, the Committee has set a three-year vesting period for restricted stock awards to NEOs since the Committee began making restricted stock awards in 2006. +Dividends +equivalent to those paid on Cimarex common stock are paid on the restricted shares awarded that are subject to time-based vesting, and dividends applicable to the performance shares awarded +are accrued and only paid on the shares actually earned when those shares vest. All of the shares subject to the award have the same voting rights as outstanding shares of Cimarex common stock. +For +performance awards made in December 2018, the total number of shares earned is determined by calculating the percentage difference between the average per share closing price for shares of Cimarex +and each company in the Stock Performance Peer Group for the 30 trading days preceding December 1, 2018 and the 30 trading days preceding December 1, 2021. The Committee ranks Cimarex's +average share price for these two periods among the average share price for all the companies in the Stock Performance Peer Group for these two periods. Companies that are not in the Stock Performance +Peer Group at both the beginning and the end of the performance period are not included in the calculation. Companies that declare bankruptcy or are delisted and cease to be traded on a national +securities exchange are ranked last at the end of the performance period. In addition, vesting percentages are reduced if Cimarex's stock price is lower on December 1, 2021 than in +December 1, 2018. The following table illustrates shares that would be earned at various relative stock price performance ranks (assuming 15 companies in the Peer Group). +Relative Performance Rank +XEC Price on 12/1/2021 is Less Than +XEC Beginning Price – +Percent of Award Vesting +XEC Price on 12/1/2021 is Equal to or +Greater Than XEC Beginning Price - +Percent of Award Vesting +1-2 +200% +200% +3 +175% +175% +4-5 +135% +150% +6 +100% +125% +7-8 +50% +100% +9 +0% +75% +10 +0% +50% +11-15 +0% +0% +On +December 6, 2018, the Committee granted long-term equity awards to the NEOs with a total grant date fair value of $18,550,000 based on competitive market data for companies in Cimarex's +Compensation Peer Group. Comparative data was obtained by the Committee's independent consultant from public filings disclosing 2018 NEO compensation of companies in the Compensation Peer Group and +the consultant's knowledge of other companies for which the consultant provides services. See "CD&A—Competitive Positioning" for a list of the companies in the Compensation Peer Group. +44 +2019 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +The +Committee's compensation consultant recommended awards with a value between the 50th percentile and 60th percentile when compared to companies in the Compensation Peer Group and a +change to the potential vesting of the performance based equity awards. The factors considered by the consultant in making its recommendations included the +following: +§ Cimarex's stock price had declined approximately 26% since the date of grant of the +2017 equity awards; § Competitive market pressures and Cimarex's relative share price performance versus +peers; and § The limited upside potential in the performance award design used in prior years. +The +Committee approved awards within the recommended total pool range based on: the factors noted by Longnecker, Cimarex's TSR compared to its Compensation Peer Group for the previous one- and +three-year periods, the total direct compensation of our NEOs compared to that of our peer companies, Cimarex's 2018 financial and operational performance, and the compensation consultant's +recommendations. The Committee's consultant concurred with the Committee's final determination. The actual value of the awards upon vesting in December 2021 will be based on Cimarex's relative +three-year stock price performance compared to the other companies in the Stock Performance Peer Group as described above and Cimarex's stock price at that time. +The +Committee granted a total of 225,771 restricted shares to the NEOs (including the CEO). The number of shares granted to each NEO was based on their relative individual roles and responsibilities. +Of the total number of shares granted to the NEOs (including the CEO), the Committee awarded 37% of the shares to Mr. Jorden, 16% of the total shares to Mr. Albi, 16% to Mr. Bell, +16% to Mr. Lambuth and 15% to Mr. Burford. The following table reflects the awards made by the Committee: +Name +No. of Shares +Subject to Award +Grant Date Value +of Long-Term Equity Incentive Award (1) +Thomas E. Jorden, CEO +83,979 +$ 6,900,000 +G. Mark Burford, CFO +33,470 +$ 2,750,000 +Joseph R. Albi, COO +36,513 +$ 3,000,000 +Stephen P. Bell, EVP +35,295 +$ 2,900,000 +John A. Lambuth, SVP +36,513 +$ 3,000,000 +(1) Represents an estimate of the fair value of the shares as of the grant date utilizing a Monte +Carlo valuation technique as permitted by the guidance provided by FASB ASC Topic 718. The estimated fair value is the aggregate compensation cost to be recognized over the service +period. +2018 Vesting of NEO Equity Awards +On December 9, 2018, the performance period applicable to the December 9, 2015 NEO equity awards ended. Cimarex's relative stock +price performance was in the 41st percentile of the Stock Performance Peer Group at the end of the performance period, resulting in the vesting of 69% of the shares subject to the +December 9, 2015 award. In addition, 10,000 of Mr. Burford's total 2015 equity awards of 25,821 restricted shares were granted on September 1, 2015 when he became Chief Financial +Officer. The performance period for these shares began on September 1, 2015 and ended on December 9, 2018. During this period, Cimarex's relative stock performance was in the 47% +percentile, resulting in 75% or 7,500 of 10,000 shares vesting. +Cimarex +Energy +Co. +45 +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +The +following table reflects the shares originally granted to each NEO in 2015 and the number of shares that vested at the end of the three-year performance period: +Name +No. of Shares Granted +No. of Shares Vested +Thomas E. Jorden, CEO +73,727 +50,871 +G. Mark Burford, CFO (1) (2) +25,821 +18,416 +Joseph R. Albi, COO +36,723 +25,338 +Stephen P. Bell, EVP +32,706 +22,567 +John A. Lambuth, SVP +35,001 +24,150 +(1) During 2018, restricted share awards granted to Mr. Burford in 2013, prior to becoming an +NEO, vested. The restricted shares that vested in 2018 are included below in "Compensation Tables—2018 Option Exercises and Restricted Stock Vested." +(2) Includes 10,000 performance shares issued to Mr. Burford in September 2015 and 15,821 +issued to Mr. Burford in December 2015. +The +vesting of these awards and the value at vesting are also reported in "2018 Option Exercises and Restricted Stock Vested" table in this proxy statement. For a comparison of the grant date fair +value of the performance shares granted in December 2015 to the value realized upon vesting in December 2018, see footnote 1 to that table. +46 +2019 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +§ Alignment of CEO Compensation to Total Shareholder Return ("TSR") +CEO Total Direct and Realized Compensation Compared to Cimarex TSR +The following graph illustrates our CEO's direct compensation and realized compensation compared to our TSR for the years 2014 through 2018. +Indexed TSR represents the cumulative total return of Cimarex stock for a five-year period based on a $100 investment at the start of the first year and reinvestment of all dividends. The table shows +the value of the investment at the end of each year. +* CEO Total Compensation is the Total Compensation disclosed in the Summary Compensation +table. ** CEO Realized Compensation is compensation actually received by the CEO during the year, +including salary, current non-equity incentive plan compensation (i.e. annual bonus), market value at vesting of previously granted stock-based awards, and All Other Compensation amounts +realized during the year. It excludes unvested grants and other amounts that will not actually be received until a future date. +Relative CEO Total Compensation Compared to Relative TSR +The following graph depicts alignment of relative CEO compensation compared to relative TSR for the years ended December 31, 2015 +through December 31, 2017. The comparative information only is provided through 2017 because 2018 CEO peer company compensation information is not publicly available at this time. The companies +used for the relative comparison are the companies in our Compensation Peer Group, which are depicted by dots in the graph. We also included, as a point of reference and without comparable data for +our Compensation Peer Group, Cimarex's CEO compensation for the years ended December 31, 2016 through December 31, 2018. +Cimarex +Energy +Co. +47 +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +48 +2019 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +§ Early 2019 Compensation Decisions +2019 Annual Cash Incentive Award Goals +In February 2019, the Committee approved the following strategic and tactical goals and objectives that will apply to 2019 annual cash +incentive awards that will be measured and paid in 2020: +2019 STRATEGIC GOALS : ➜ +§ +Achieve good return on invested capital. +§ +Demonstrate progress on health, safety and the environment. +§ +Manage the balance sheet prudently. +o +Increase debt adjusted production per share. +o +Increase debt adjusted reserves per share. +o +Live within cash flow. +§ +Demonstrate progress on staffing and succession planning at all levels. +§ +Grow our assets. +2019 TACTICAL GOALS: ➜ +§ +Meet or exceed quarterly and annual production guidance targets. +§ +Continue to optimize midstream operations and expenditures. +§ +Continue to develop and advance field automation and produced water disposal. +§ +Develop, and begin implementation of, comprehensive strategy around greenhouse gas emissions. +§ +Achieve significant reductions in capital expenditures per unit. +§ +Be creative in moving Cimarex to the forefront of technology implementation and significantly enhance data science capabilities. +For +the 2019 strategic goals concerning return on capital investment and debt adjusted production and reserves per share, the Committee has adopted numerical target thresholds to assist in evaluating +those performance objectives. The specific numerical levels will be discussed in the Compensation Discussion and Analysis concerning 2019 compensation decisions contained in the proxy statement for +the 2020 Annual Meeting of Shareholders. +The +strategic and tactical measures and objectives have been clearly communicated to the NEOs. At year end, the CEO will deliver a report of results to the Committee with respect to each goal and +provide the CEO's recommendations and the basis for the CEO's recommendations for individual awards. The Committee and its independent compensation consultant will review the CEO's recommendations and +accept or modify +Cimarex +Energy +Co. +49 +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +those +recommendations. The non-management members of the Board will consider the recommendations of the Committee. Each NEO, other than the CEO, has a threshold award of 0% of year-end base salary (no +minimum award), a target award equal to 100% of year-end base salary, and a maximum award of 200% of year-end base salary. The CEO has a threshold award of 0% of year-end base salary, a target award +equal to 125% of year-end base salary, and a maximum award of 250% of year-end base salary. +SECTION 3 +§ Role of Compensation Consultant and Management in Compensation Decisions +Compensation Consultant +The Committee has engaged the firm of Longnecker & Associates as its independent compensation consultant to fulfill the following +responsibilities: +§ +Advise the Committee on management proposals, as requested; +§ +Undertake special projects at the request of the Committee; +§ +Participate in Committee meetings; +§ +Make recommendations concerning the Compensation Peer +Group; +§ +Review the selected Peer Group and survey data for competitive comparisons; +§ +Provide market data and recommendations on NEO compensation; and +§ +Provide market data and recommendations on non-employee Director compensation. +The +Committee has considered the independence factors adopted by the NYSE and has determined that its consultant, Longnecker, is independent within the meaning of the NYSE listing standards. +As +part of its ongoing services to the Committee, one or more representatives of Longnecker attended seven of the Committee meetings held in 2018. Longnecker provided the following services in 2018: +§ +Reviewed and provided input on the CD&A in the 2018 proxy statement; +§ +Made recommendations concerning the Compensation Peer Group; +§ +Attended the February 22, 2018 Compensation and Governance Committee meeting and consulted with the Committee on annual cash incentive awards; +§ +Conducted a market analysis of Board compensation and consulted with the Committee concerning Board compensation; and +§ +Attended the May 10, 2018 Compensation and Governance Committee meeting and consulted with the Committee on executive base salary levels; +§ +Provided an executive compensation analysis and a recommended range for long-term equity grants, participated in the December 6, 2018 Compensation and +Governance Committee meeting and consulted with the Committee on performance share awards. +Management +Our CEO and President is the principal management resource for compensation recommendations to the Committee with respect to the other NEOs. +The CEO (i) provides an annual assessment of Cimarex's overall financial and operational performance and (ii) subjectively evaluates individual NEO performance and recommends individual +base salary adjustments, annual cash incentive awards, and long-term equity +50 +2019 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +awards. +His subjective evaluations generally include factors such as scope of responsibility, contribution to Company performance, technical competence, managerial skills and advancement potential. +The Committee considers the CEO's recommendations in making decisions regarding executive compensation. The Committee exercises its discretion to accept, reject or modify these compensation +recommendations. +Our +Senior Vice President—General Counsel acts as an informational resource to Longnecker and the Committee and compiles survey and other compensation data for their review. The Committee, +in consultation with Longnecker, reviews this information when making executive compensation and program design decisions. +§ Other Compensation Arrangements +Post-Employment and Employment Arrangements +All employees, including the NEOs, are covered by the Cimarex Change in Control Severance Plan. The Plan provides for a "double trigger" so +that payments are made only if (a) there is a change in control (as defined in the Plan) and (b) an employee is terminated for any reason other than "cause" (as defined in the Plan) +within two years following a change in control. In the event that both of the above contingencies are satisfied, the employee is entitled to (i) cash severance payments of two times annual +salary and average cash incentive award, (ii) a pro-rata portion of annual cash incentive bonus for the current year, and (iii) continued medical, dental, disability and life insurance +benefits for two years. See "Potential Payments Upon Change in Control or Termination" for a more detailed description of these benefits. In addition, the 2014 Equity Incentive Plan and the terms of +employee equity award agreements provide for acceleration of vesting of outstanding equity awards upon the occurrence of a change in control. +Cimarex +assumed the change in control provisions from the now-expired employment agreements between each of Messrs. Albi, Bell, and Jorden and a predecessor company. The assumed portion of each +agreement provides that if the executive is terminated without cause within two years following a change in control event (as defined in the agreement), the executive is entitled to a lump-sum payment +equal to two times the executive's base salary at the time of the change in control. Benefits payable under these agreements are forfeited if the executive receives benefits under any other change in +control plan, including Cimarex's Change in Control Severance Plan. As a practical matter, the change in control benefits assumed under the employment agreements only benefit these executives if the +Change in Control Severance Plan described above has been terminated. The Change in Control Severance Plan provides for greater benefits payable upon the occurrence of a change in control event than +those payable under the assumed agreements. +Retirement Benefits +Employees, including the NEOs, are eligible to participate in the Cimarex 401(k) defined contribution retirement plan ("401(k) Plan"). Cimarex +matches dollar-for-dollar employee contributions to the 401(k) Plan up to 7% of the employee's cash compensation, subject to limits imposed by the Internal Revenue Code. The Board is authorized to +make profit-sharing contributions under the 401(k) Plan. In February 2019, the Board determined that a profit-sharing contribution of 4.0% would be made due to the Company's $791.9 million of +net income in 2018. +Cimarex +Energy +Co. +51 +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +In +addition, eligible participants, including the NEOs, may participate in the Supplemental Savings Plan, which is a non-qualified deferred compensation plan that permits participants to make +contributions (and to receive matching contributions) in excess of the Internal Revenue Code limitations for 401(k) plans. See "Compensation Tables—2018 Nonqualified Deferred Compensation" +for information about contributions to the Supplemental Savings Plan. The Committee administers this plan and designates who may participate. Benefits are paid upon the later to occur of termination +of employment or the time elected by the participant. In the event of a change in control, each participant receives a lump sum cash payment of the amount allocated to his or her account. +Perquisites +We offer a limited number of perquisites (personal benefits) to our NEOs that are not offered to other employees, including financial and +estate planning and annual medical examinations. Our corporate aircraft is generally not available for personal use by any employee. With the authorization of our CEO, however, the corporate aircraft +may be used by an employee or a member of his/her family for medical purposes. The incremental cost for non-business use of our corporate aircraft, if any, is disclosed in the "Summary Compensation +Table." We use the Standard Industry Fare Level tables published by the Internal Revenue Service to determine the amount of compensation income that is imputed to the employee for tax purposes for +personal use of corporate aircraft. +§ Other Compensation Policies +Total Pay Considerations +The Committee considers Total Direct Compensation at the time it makes a decision on any element of executive compensation. The Committee also +reviews the relationship of the CEO's total compensation to the total compensation of each of the other NEOs. +Stock Ownership and Holding Requirements +Cimarex's Executive Stock Ownership Guidelines are intended to more closely align the interests of our executive officers with those of our +shareholders. Pursuant to a revision made in December 2016, the CEO is expected to own Cimarex shares in an amount equal to six times his annual base salary, and each executive officer who reports to +the CEO is expected to own stock in an amount equal to three times his or her annual base salary. A newly appointed executive officer has three years from the date of his or her initial election or +appointment to comply with the guidelines. Until the stock ownership guidelines are met, an executive officer may not sell any Cimarex stock acquired through equity grants except to pay income taxes +upon the vesting of awards or to pay the exercise price and related income taxes upon the exercise of stock options. Restricted stock, restricted stock units, deferred compensation units and +performance awards are counted in calculating ownership. Shares subject to options are not counted. As of March 12, 2019, all officers were in compliance with the stock ownership guidelines. +Clawback Policy +We have adopted a clawback policy providing that, in the event of an accounting restatement due to material noncompliance with financial +reporting requirements under the U.S. federal securities laws, the +52 +2019 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +Committee +has the right to use reasonable efforts to recover from any of our current or former executive officers incentive-based compensation related to the restatement and received during the +three-year period preceding any such accounting restatement. This policy applies to incentive-based compensation granted on or after June 1, 2012. This clawback policy will be interpreted in +the best judgment of the Committee in a manner consistent with any applicable rules or regulations adopted by the SEC or the NYSE as contemplated by the Dodd-Frank Act. +Non-Hedging and Non-Pledging Policies +Our insider trading policy prohibits Directors, officers and designated employees from engaging in hedging or monetization transactions, and +other employees are strongly discouraged from engaging in such transactions. Any other employee wishing to enter into such an arrangement must first submit the proposed transaction for approval by the +compliance officer designated in the policy. The policy also prohibits Directors, officers and employees from holding Cimarex stock in a margin account or pledging Cimarex stock as collateral for a +loan. +Tax Law Considerations +The Committee considers the impact of applicable tax laws with respect to executive compensation. Section 162(m) of the Internal +Revenue Code of 1986, as amended, ("Section 162(m)") limits the amount of compensation that Cimarex may deduct on its federal income tax return for compensation paid to certain executive +officers to no more than $1 million per year. Through 2017, there were exceptions to the $1 million limitation for performance-based compensation meeting certain requirements. The +performance-based portion of our restricted stock awards made prior to November 2, 2017 is the only element of executive compensation designed to qualify for the performance-based exception to +the $1 million deduction limit, provided additional requirements are met. These exceptions were eliminated by the Tax Cuts and Jobs Act enacted in December 2017. The Committee attempted to +preserve the deductibility of compensation paid to executive officers by utilizing performance-based stock awards until this tax law change, but did not limit executive compensation to amounts +deductible under Section 162(m) and does not plan to limit executive compensation to deductible amounts going forward. +COMPENSATION AND GOVERNANCE COMMITTEE REPORT +The Compensation and Governance Committee has reviewed and discussed with management the preceding Compensation Discussion and Analysis +section of Cimarex's 2019 proxy statement. Based on our review and discussions, we have recommended to the Board of Directors that the Compensation Discussion and Analysis be included in Cimarex's +2019 proxy statement. +THE COMPENSATION AND GOVERNANCE COMMITTEE +Floyd +R. Price (Chair) +Hans Helmerich +David A. Hentschel +Michael J. Sullivan +Cimarex +Energy +Co. +53 +Table of Contents +EXECUTIVE COMPENSATION TABLES +EXECUTIVE COMPENSATION TABLES +SUMMARY COMPENSATION TABLE +The following table describes 2016-2018 compensation of our CEO, CFO and the three other most highly compensated executive officers. +Name and +Principal Position +Year +Salary +Bonus +Stock +Awards (1) +Option +Awards +Non-Equity +Incentive Plan +Comp. (2) +All Other +Comp. (3) +Total +Thomas E. Jorden +2018 +$ 976,789 +$ +— +$ +6,900,000 +$ +— +$ +1,740,000 +$ +110,691 +$ +9,727,480 +Chief Executive Officer, +2017 +$ 960,000 +$ +— +$ +8,000,000 +$ +— +$ +2,000,000 +$ +94,129 +$ +11,054,129 +President, and Chairman of +the Board (CEO) (Principal Executive Officer) +2016 +$ 921,468 +$ +— +$ +10,500,000 +$ +— +$ +1,700,000 +$ +59,451 +$ +13,180,919 +G. Mark Burford +2018 +$ 468,394 +$ +— +$ +2,750,000 +$ +— +$ +700,000 +$ +89,183 +$ +4,007,577 +Senior Vice President and +2017 +$ 460,000 +$ +— +$ +2,900,000 +$ +— +$ +760,000 +$ +73,307 +$ +4,193,307 +Chief Financial Officer (CFO) +(Principal Financial Officer) +2016 +$ 429,779 +$ +— +$ +3,200,000 +$ +— +$ +690,000 +$ +47,679 +$ +4,367,458 +Joseph R. Albi +2018 +$ 620,241 +$ +— +$ +3,000,000 +$ +— +$ +875,000 +$ +83,635 +$ +4,578,876 +Executive Vice President— +2017 +$ 602,151 +$ +— +$ +3,400,000 +$ +— +$ +1,000,000 +$ +68,872 +$ +5,071,023 +Operations, Chief Operating Officer +2016 +$ 578,876 +$ +— +$ +4,000,000 +$ +— +$ +888,000 +$ +58,072 +$ +5,524,948 +Stephen P. Bell +2018 +$ 513,478 +$ +— +$ +2,900,000 +$ +— +$ +725,000 +$ +81,990 +$ +4,220,468 +Executive Vice President— +2017 +$ 498,459 +$ +— +$ +3,150,000 +$ +— +$ +850,000 +$ +68,186 +$ +4,566,645 +Business Development +2016 +$ 480,340 +$ +— +$ +3,400,000 +$ +— +$ +735,000 +$ +74,135 +$ +4,689,475 +John A. Lambuth +2018 +$ 517,514 +$ +— +$ +3,000,000 +$ +— +$ +775,000 +$ +71,786 +$ +4,364,300 +Senior Vice President— +2017 +$ 495,791 +$ +— +$ +3,400,000 +$ +— +$ +900,000 +$ +61,081 +$ +4,856,872 +Exploration +2016 +$ 471,365 +$ +— +$ +3,750,000 +$ +— +$ +735,000 +$ +52,753 +$ +5,009,118 +(1) Represents the grant date fair value of the awards, which +is the aggregate compensation cost to be recognized over the service period under FASB ASC Topic 718. The grant date fair value for the restricted stock awards that vest based on continuous employment +and the passage of time is the closing price of the Company's common stock on the December 6, 2018 date of grant. The grant date fair value for the performance stock awards is determined using +the Monte Carlo simulation method. Actual payouts with respect to the performance stock awards can range from zero percent to 200 percent of the initial shares awarded based on the ranking of +the Company's relative stock price performance in comparison to the peer group at the end of the three-year performance period. +(2) Amount reported for the year earned. +54 +2019 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +EXECUTIVE COMPENSATION TABLES +(3) The following describes the components of other items of +compensation, including any perquisite in excess of $10,000: +Executive Officer +Unused +Vacation +Company +Contributions +to Retirement +Plans +Insurance +Premiums +Financial +Consulting +Service and +Estate Planning +Benefits +Total +Other +Compensation +Thomas E. Jorden, CEO +2018 +$ +— +$ +48,000 +$ +45,722 +$ +16,969 +$ +110,691 +2017 +$ +— +$ +46,800 +$ +27,512 +$ +19,817 +$ +94,129 +2016 +$ +— +$ +36,000 +$ +23,451 +$ +— +$ +59,451 +G. Mark Burford, CFO +2018 +$ +— +$ +48,000 +$ +19,658 +$ +21,525 +$ +89,183 +2017 +$ +— +$ +46,800 +$ +14,571 +$ +11,936 +$ +73,307 +2016 +$ +3,437 +$ +36,000 +$ +8,242 +$ +— +$ +47,679 +Joseph R. Albi, COO +2018 +$ +— +$ +48,000 +$ +24,295 +$ +11,340 +$ +83,635 +2017 +$ +— +$ +46,800 +$ +22,072 +$ +— +$ +68,872 +2016 +$ +— +$ +36,000 +$ +22,072 +$ +— +$ +58,072 +Stephen P. Bell, EVP +2018 +$ +— +$ +48,000 +$ +23,595 +$ +10,395 +$ +81,990 +2017 +$ +— +$ +46,800 +$ +21,386 +$ +— +$ +68,186 +2016 +$ +16,749 +$ +36,000 +$ +21,386 +$ +— +$ +74,135 +John A. Lambuth, SVP +2018 +$ +— +$ +48,000 +$ +23,786 +$ +— +$ +71,786 +2017 +$ +— +$ +46,800 +$ +14,281 +$ +— +$ +61,081 +2016 +$ +— +$ +36,000 +$ +16,753 +$ +— +$ +52,753 +Cimarex +Energy +Co. +55 +Table of Contents +EXECUTIVE COMPENSATION TABLES +2018 GRANTS OF PLAN-BASED AWARDS +§ 2018 +Non-Equity Incentive Plan +The following table describes the target and maximum amounts of annual cash incentive awards for the CEO and other NEOs and the actual award paid in March 2019 +for 2018 services. The non-equity incentive plan provides for no minimum (threshold) award. The amounts listed in the "Target" column represent 125% of the year-end base salary for CEO and 100% of the +year-end base salary for other NEOs. The amounts listed in the "Maximum" column represent 250% of year-end base salary for CEO and 200% of the year-end base salary for other NEOs. See the description +of our annual cash incentive award plan in "CD&A—Section 2." +Estimated Future Payouts Under +Non-Equity Incentive Plan +Actual Award Paid +in March 2019 +Name +Threshold +Target +Maximum +Thomas E. Jorden, CEO +$ +0 +$ +1,237,500 +$ +2,475,000 +$ +1,740,000 +G. Mark Burford, CFO +$ +0 +$ +475,000 +$ +950,000 +$ +700,000 +Joseph R. Albi, COO +$ +0 +$ +628,300 +$ +1,256,600 +$ +875,000 +Stephen P. Bell, EVP +$ +0 +$ +520,150 +$ +1,040,300 +$ +725,000 +John A. Lambuth, SVP +$ +0 +$ +525,000 +$ +1,050,000 +$ +775,000 +§ 2018 +Equity Incentive Plan Awards +The following table provides information regarding the awards of restricted stock made to the NEOs in 2018. No option awards were made in 2018. See +"CD&A—Section 2—Long Term Equity Incentive Award Program," for more information about these awards. +Estimated Future Payouts Under +Equity Incentive Plan Awards +(in shares) (2) +Grant Date +Fair Value of +Stock & +Option +Awards (4) +Award +Grant +Date +Comp. +Comm. +Approval +Date +All Other Stock +Awards: +Number of +Shares (3) +Type of +Award (1) +Name +Threshold +Target +Maximum +Thomas E. Jorden, CEO +PSA +12/6/2018 +12/6/2018 +19,111 +38,223 +76,446 +— +$ +3,450,000 +RSA +12/6/2018 +12/6/2018 +— +— +— +45,756 +$ +3,450,000 +G. Mark Burford, CFO +PSA +12/6/2018 +12/6/2018 +7,617 +15,234 +30,468 +— +$ +1,375,000 +RSA +12/6/2018 +12/6/2018 +— +— +— +18,236 +$ +1,375,000 +Joseph R. Albi, COO +PSA +12/6/2018 +12/6/2018 +8,309 +16,619 +33,237 +— +$ +1,500,000 +RSA +12/6/2018 +12/6/2018 +— +— +— +19,894 +$ +1,500,000 +Stephen P. Bell, EVP +PSA +12/6/2018 +12/6/2018 +8,032 +16,065 +32,129 +— +$ +1,450,000 +RSA +12/6/2018 +12/6/2018 +— +— +— +19,231 +$ +1,450,000 +John A. Lambuth, SVP +PSA +12/6/2018 +12/6/2018 +8,309 +16,619 +33,237 +— +$ +1,500,000 +RSA +12/6/2018 +12/6/2018 +— +— +— +19,894 +$ +1,500,000 +(1) PSA = Performance stock awards. RSA = +Restricted stock awards +(2) The amounts in these columns represent the threshold, +target and maximum payouts for the performance stock awards granted to each named executive officer during the 2018 fiscal year. The number of shares shown in the "Threshold" column reflects the +lowest possible payout (other than zero) of the number of performance shares granted. If performance is below the threshold, no shares are paid. The number of shares shown in the "Target" column +reflects a payout of 100% of the number of performance shares granted. The number of shares shown in the "Maximum" column reflects the highest possible payout of 200% of the number of performance +shares granted. The actual payout of shares may be anywhere between 0% and 200% of the number of +56 +2019 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +EXECUTIVE COMPENSATION TABLES +performance +shares granted depending on the Company's performance at the end of the three-year performance period. See "CD&A—Section 2—Key 2018 Compensation Actions" +above for more discussion of the performance stock awards. +(3) The amounts in these columns represent the time-based +restricted stock granted to the named executive officers on the noted date. These restricted shares will vest on December 1, 2021 based on continuous service through that +date. +(4) Represents the estimated fair value of the shares as of +the grant date utilizing a Monte Carlo valuation technique as permitted by the guidance provided by FASB ASC Topic 718. The estimated fair value is the aggregate compensation cost to be recognized +over the service period. +OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2018 +STOCK AWARDS +Equity Incentive Plan Awards That Have Not Vested +Name +No. of Shares +Market Value of +Unearned Shares (1) +Thomas E. Jorden, CEO +262,667 (2) +$ +16,193,421 +G. Mark Burford, CFO +96,591 (3) +$ +5,954,835 +Joseph R. Albi, COO +108,524 (4) +$ +6,690,505 +Stephen P. Bell, EVP +99,411 (5) +$ +6,128,688 +John A. Lambuth, SVP +106,399 (6) +$ +6,559,498 +(1) The amount in this column reflects the closing market price of the stock of $61.65 on +December 31, 2018 (the last trading day of 2018) multiplied by the number of shares reported in the previous column. +(2) Between a minimum of 44,631 and a maximum of 89,263 shares could vest on December 1, 2019, +between a minimum of 44,712 and a maximum of 89,425 shares could vest on December 1, 2020, 45,756 shares will vest on December 1, 2021, and between a minimum of 19,111 and a maximum of +76,446 shares could vest on December 1, 2021. +(3) 3,500 shares will vest on July 31, 2019, and between a minimum of 13,602 and a maximum of +27,204 shares could vest on December 1, 2019, between a minimum of 16,208 and a maximum of 32,417 shares could vest on December 1, 2020, 18,236 shares will vest on December 1, +2021, and between a minimum of 7,617 and a maximum of 30,468 shares could vest on December 1, 2021. +(4) Between a minimum of 17,002 and a maximum of 34,005 shares could vest on December 1, 2019, +between a minimum of 19,002 and a maximum of 38,006 shares could vest on December 1, 2020, 19,894 shares will vest on December 1, 2021, and between a minimum of 8,309 and a maximum of +33,237 shares could vest on December 1, 2021. +(5) Between a minimum of 14,452 and a maximum of 28,904 shares could vest on December 1, 2019, +between a minimum of 17,605 and a maximum of 35,211 shares could vest on December 1, 2020, 19,231 shares will vest on December 1, 2021, and between a minimum of 8,032 and a maximum of +32,129 shares could vest on December 1, 2021. +(6) Between a minimum of 15,940 and a maximum of 31,880 shares could vest on December 1, 2019, +between a minimum of 19,002 and a maximum of 38,006 shares could vest on December 1, 2020, 19,894 shares will vest on December 1, 2021, and between a minimum of 8,309 and a maximum of +33,237 shares could vest on December 1, 2021. +Cimarex +Energy +Co. +57 +Table of Contents +EXECUTIVE COMPENSATION TABLES +2018 OPTION EXERCISES AND RESTRICTED STOCK VESTED +2018 OPTION EXERCISES +2018 STOCK VESTING (1) +Name +Number of Shares +Acquired on Exercise +(#) +Value Realized on +Exercise +($) +Number of Shares +Acquired on Vesting +(#) +Value Realized on +Vesting +($) +Thomas E. Jorden, CEO +-- +$ +-- +50,871 +$ +3,826,516 +G. Mark Burford, CFO +-- +$ +-- +22,916 +$ +1,834,374 +Joseph R. Albi, COO +-- +$ +-- +25,338 +$ +1,905,924 +Stephen P. Bell, EVP +-- +$ +-- +22,567 +$ +1,697,489 +John A. Lambuth, SVP +-- +$ +-- +24,150 +$ +1,816,563 +(1) The restricted shares that vested in December 2018 as shown in the table consisted of performance shares granted to +the NEOs in December 2015, plus performance shares granted to Mr. Burford in September 2015 and time-based restricted shares that were granted to Mr. Burford in prior years when he was +not an NEO. See above "CD&A—2018 Vesting of NEO Equity Awards" for additional information. The following is a comparison of the grant date fair value of the performance shares granted in +December 2015 and September 2015 to the value realized upon vesting of those performance shares in December 2018 (excluding the time-based restricted shares that vested in 2018 for +Mr. Burford). The Value Realized Upon Vesting was less than the Grant Date Fair Value ("GDFV") because the Company's ranking in relative stock price performance compared to its Stock +Performance Peer Group over the vesting period resulted in less than 100% vesting, and the Company's stock price was lower on the vesting date compared to the date of grant. +NEO +Performance +Shares Granted in +December 2015 +GDFV of Performance +Shares Granted in +December 2015 +Performance Shares +Vested in +December 2018 +Value Realized Upon +Vesting in +December 2018 +Thomas E. Jorden, CEO +73,727 +$ +6,424,571 +50,871 +$ +3,826,516 +G. Mark Burford, CFO +25,821 +$ +2,250,042 +18,416 +$ +1,385,251 +Joseph R. Albi, COO +36,723 +$ +3,200,042 +25,338 +$ +1,905,924 +Stephen P. Bell, EVP +32,706 +$ +2,850,001 +22,567 +$ +1,697,489 +John A. Lambuth, SVP +35,001 +$ +3,049,987 +24,150 +$ +1,816,563 +58 +2019 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +EXECUTIVE COMPENSATION TABLES +2018 NONQUALIFIED DEFERRED COMPENSATION +The following table provides information on the Supplemental Savings Plan (the "SSP") contributions and earnings for our +NEOs in each of the last three fiscal years. Under the terms of the SSP, a participant may make an elective contribution to the SSP of an amount that +exceeds the maximum amount permitted to be contributed to his account in the Cimarex 401(k) Plan (an "excess contribution") provided that the excess contribution does not exceed the dollar limitation +on elective deferrals under the Internal Revenue Code section 402(g) in effect on January 1 of the calendar year of deferral (2018 limitation was $18,500). Cimarex will match 100% of the +excess contributions up to 7% of a participant's eligible compensation. A participant also may elect to have up to 50% of his or her compensation and up to 100% of his or her +Cimarex +Energy +Co. +59 +Table of Contents +EXECUTIVE COMPENSATION TABLES +bonus +withheld from his or her compensation and allocated to his or her SSP account. Cimarex does not match these contributions. +Name +Executive +Contributions (1) +Registrant +Contributions (2) +Aggregate +Earnings +Aggregate +Withdrawals/ +Distributions +Aggregate Balance +at FYE +Thomas E. Jorden, CEO +2018 +$ +18,500 +$ +18,500 +$ +6,235 +$ +-- +$ +786,458 +(3) +2017 +$ +18,000 +$ +18,000 +$ +15,169 +$ +-- +$ +743,658 +2016 +$ +18,000 +$ +18,000 +$ +6,017 +$ +-- +$ +692,912 +G. Mark Burford, CFO +2018 +$ +18,500 +$ +18,500 +$ +<23,201> +$ +-- +$ +333,099 +(3) +2017 +$ +18,000 +$ +18,000 +$ +44,899 +$ +-- +$ +319,734 +2016 +$ +18,000 +$ +18,000 +$ +20,802 +$ +-- +$ +239,258 +Joseph R. Albi, COO +2018 +$ +18,500 +$ +18,500 +$ +<53,681> +$ +-- +$ +726,610 +(3) +2017 +$ +18,000 +$ +18,000 +$ +94,735 +$ +-- +$ +743,726 +2016 +$ +18,000 +$ +18,000 +$ +60,995 +$ +-- +$ +613,414 +Stephen P. Bell, EVP +2018 +$ +18,500 +$ +18,500 +$ +13,377 +$ +-- +$ +777,442 +(3) +2017 +$ +18,000 +$ +18,000 +$ +5,761 +$ +-- +$ +727,499 +2016 +$ +18,000 +$ +18,000 +$ +2,882 +$ +-- +$ +686,161 +John A. Lambuth, SVP +2018 +$ +54,726 +$ +18,500 +$ +<30,733> +$ +-- +$ +684,459 +(3) +2017 +$ +18,000 +$ +18,000 +$ +74,608 +$ +-- +$ +642,400 +2016 +$ +50,996 +$ +18,000 +$ +23,193 +$ +-- +$ +532,216 +(1) The amounts included in this column also are included in the "Salary" column in the "Summary Compensation Table." +(2) The amounts reported in this column also are included in the "All Other Compensation" column and footnote 3 thereto +in the "Summary Compensation Table." +(3) The following table sets forth amounts included in the aggregate balance at December 31, 2018 that were +reported as compensation to the NEO in the Summary Compensation Table for previous years. +NEO +Amount of Previously +Reported Compensation +Thomas E. Jorden, CEO +$ +655,195 +G. Mark Burford, CFO +$ +225,766 +Joseph R. Albi, COO +$ +464,725 +Stephen P. Bell, EVP +$ +544,079 +John A. Lambuth, SVP +$ +449,584 +CEO PAY RATIO +The 2018 annual total compensation of our CEO, as shown in the "Summary Compensation Table" above, was $9,727,480. The annual total +compensation of Cimarex's identified median employee was $118,035 in 2018. This results in a ratio of 82 to 1. The pay ratio decreased from the 2017 pay ratio of 93 to 1 due to an increase in the +compensation of the median employee and a decrease in the compensation of our CEO as described above in "CD&A." +60 +2019 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +EXECUTIVE COMPENSATION TABLES +As +noted above, Cimarex's executive compensation program links a significant portion of executive compensation to the Company's performance through variable pay programs, including annual and +long-term incentives. Consequently, 90% of the compensation of the Chief Executive Officer is considered "At-Risk" pay and is only realized if Cimarex meets certain performance measures. By way of +comparison, none of the median employee's compensation was at risk. +The +median employee was identified from our total employee population as of December 31, 2018. Not including the CEO, this represents 943 full-time and 12part-time or seasonal employees. We +calculated the median total compensation by an array of wages from lowest to highest reflected as Medicare Taxable Earnings as reported on Internal Revenue Service Form W-2 (Box 5) for +2018. We made no assumptions, adjustments, or estimates with regard to total compensation, and we did not annualize the compensation for any employees that we did not employ the entire year. +POTENTIAL PAYMENTS UPON CHANGE IN CONTROL OR TERMINATION +We do not consider post-termination benefits as a material element of executive compensation because NEO post-termination benefits are the +same benefits available to all full-time employees. Post-termination benefits are not included in the Compensation and Governance Committee's analysis of total compensation. +We +are obligated to make certain payments to employees, including our NEOs, or to accelerate the vesting of their equity awards pursuant to the following plans and +agreements: +§ Change in Control Severance Plan that covers all full-time +employees, including the NEOs; § 2002 Stock Incentive Plan, 2011 Equity Incentive Plan and 2014 +Equity Incentive Plan that govern all equity awards made to Directors and employees, including the NEOs; § Change in control provisions for the benefit of +Messrs. Albi, Bell, and Jorden, as assumed by Cimarex; and § Supplemental Savings Plan. +Our +change in control arrangements keep our senior executives focused on pursuing all corporate transaction activity that is in the best interests of shareholders regardless of whether those +transactions +may result in their own job losses. Uncertainty created by a corporate transaction can create retention risk for a company. In addition, change in control protection is often needed to retain and +attract, when appropriate, the best talent because many of the companies with whom we compete for talent provide change in control protection. +We +do not have a formal program to pay severance benefits nor do our equity award agreements provide for acceleration of equity awards upon the retirement of the NEOs. +§ Change in Control +We are obligated under certain agreements to pay benefits upon a "change in control" event. Cimarex's definition of "change in control" as used in its 2002 Stock Incentive +Plan, its 2011 Equity Incentive Plan and its 2014 Equity Incentive Plan, its Change in Control Severance Plan and the change in control provisions +Cimarex +Energy +Co. +61 +Table of Contents +EXECUTIVE COMPENSATION TABLES +that +survived certain expired employment agreements with each NEO are the same. In summary, a change in control event means any of the following: +§ Acquisition of 30% or more of the shares of our outstanding common +stock or the combined voting power of voting securities of Cimarex by an individual or group; § Members of our Board of Directors, or Directors nominated +by those +Directors, cease to constitute a majority of the Directors during any twelve month period; § A reorganization, share exchange or merger unless +(i) the +shareholders prior to the reorganization or merger continue to own more than 40% of the outstanding common stock and combined voting power of the resulting corporation following the reorganization or +merger, and (ii) at least a majority of the members of the Board of the corporation resulting from the merger or reorganization were members of the Board at the time of executing the agreement +to reorganize or merge; or § The complete liquidation or dissolution of Cimarex or the sale of +all or substantially all of its assets. +The +following is a summary of those agreements that provide for payment to the NEOs in the event of a change in control event coupled with termination of employment without "cause:" +Change in Control – Termination Without Cause +Our +Change in Control Plan provides for the payment of severance benefits to all active employees in the event of termination following a change in control. In the event of a change in control, if an +employee is terminated for any reason other than "cause" (as defined in the Plan) within two years following a change in control, that employee would be entitled +to: +§ Cash severance payments of up to two years' salary and average cash +incentive award; § A pro rata portion of the annual cash incentive bonus award +otherwise payable for the year of termination; and § Continued medical, dental, disability and life insurance benefits +for two years. +We +assumed from a predecessor company the change in control provisions from the now-expired employment agreements of each of Messrs. Albi, Bell, and Jorden with such company. Each agreement +provides that if the executive is terminated without cause within two years following a change in control event (as defined in the agreement), the executive is entitled to a lump-sum payment equal to +two times the executive's base salary at the time of the change in control. Benefits payable under these agreements are forfeited if the executive receives benefits under any other change in control +plan, including the Cimarex Change in Control Severance Plan. As a practical matter, the change in control benefits assumed under the employment agreements only benefit these executives if the Change +in Control Severance Plan described above has been terminated. The Change in Control Severance Plan provides for greater benefits payable upon the occurrence of a change in control event than those +payable under the assumed agreements. +Change in Control – No Termination +Our +2002 Stock Incentive Plan, our 2011 Equity Incentive Plan, and our 2014 Equity Incentive Plan provide for acceleration of vesting of equity awards in the event of a change in control. +62 +2019 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +EXECUTIVE COMPENSATION TABLES +§ Termination of Employment +Death or Disability +The +award agreements for grants of equity under the 2002 Stock Incentive Plan, and the provisions of the 2011 Equity Incentive Plan and 2014 Equity Incentive Plan, provide for acceleration of vesting +of awards in the event of death or disability. Benefits under the Supplemental Savings Plan also are paid upon death or disability. +Termination Without Cause +Benefits +under the Supplemental Savings Plan are payable to each NEO upon termination of employment. +§ Estimated Benefits upon Various Termination +Scenarios +Payments upon a change in control or termination of employment include various elements of compensation. The elements of compensation that may be included in a change in +control or severance payment are: +(A) +(B) +(C) +(D) +(E) +Name +Annual +Average Cash +Compensation (1) +Cash +Incentive (2) +Long Term +Award Payout (3) +Supplemental +Savings (4) +Other +Benefits (5) +Thomas E. Jorden, CEO +$ +5,676,789 +$ +1,740,000 +$ +16,193,421 +$ +786,458 +$ +154,895 +G. Mark Burford, CFO +$ +2,388,394 +$ +700,000 +$ +5,954,835 +$ +333,099 +$ +108,968 +Joseph R. Albi, COO +$ +3,097,392 +$ +875,000 +$ +6,690,505 +$ +726,610 +$ +93,369 +Stephen P. Bell, EVP +$ +2,586,937 +$ +725,000 +$ +6,128,688 +$ +777,442 +$ +73,597 +John A. Lambuth, SVP +$ +2,688,305 +$ +775,000 +$ +6,559,498 +$ +684,459 +$ +111,022 +(1) Amount represents two times the annual average compensation (salary and cash incentive bonus) paid to the executive for 2017 and +2018, as provided in the Change in Control Severance Plan. The salary amounts include deferred compensation amounts reported in the "Salary" column of the "Summary Compensation Table" (see footnote +(3) to the "2018 Nonqualified Deferred Compensation" table above). +(2) Amount represents the average incentive bonus as provided in the Change in Control Severance Plan. This is the actual approved bonus +for 2018. +(3) Amount represents the value of accelerated vesting of restricted stock based upon the closing price of Cimarex's common stock as of +December 31, 2018, the last trading day of 2018, of $61.65 per share. Includes amounts previously reported in the "Stock Awards" column of the "Summary Compensation Table." +(4) Amount represents estimated payments under the Supplemental Savings Plan. Includes deferred compensation amounts reported in the +"Salary" column of the "Summary Compensation Table" (see footnote (3) to the 2018 Nonqualified Deferred Compensation table above). +(5) Amount represents the estimated value of continued medical, dental, disability and life insurance benefits for two years as provided +in the Change in Control Severance Plan. +The +following table provides the estimated compensation and present value of benefits potentially payable to each NEO in the event of a change in control or termination under various circumstances. +The amounts shown assume that the termination or change in control occurred on December 31, 2018. The actual amounts to be paid only can be determined at the time of the executive's actual +separation from Cimarex or the occurrence of a change in control. Actual payments may be more or less than the amounts +Cimarex +Energy +Co. +63 +Table of Contents +EXECUTIVE COMPENSATION TABLES +described +below. In addition, the Company may enter into new arrangements or modify these arrangements, from time to time. +Name +Termination +Without Cause +(D) (1) +Termination as a +Result of Death +or Disability +(C+D) (1) +Change In Control +(No Termination) +(C) (1) +Termination on +Change In Control +(A+B+C+D+E) (1) +Thomas E. Jorden, CEO +$ +786,458 +$ +16,979,879 +$ +16,193,421 +$ +24,551,563 +G. Mark Burford, CFO +$ +333,099 +$ +6,287,934 +$ +5,954,835 +$ +9,485,296 +Joseph R. Albi, COO +$ +726,610 +$ +7,417,115 +$ +6,690,505 +$ +11,482,876 +Stephen P. Bell, EVP +$ +777,442 +$ +6,906,130 +$ +6,128,688 +$ +10,291,664 +John A. Lambuth, SVP +$ +684,459 +$ +7,243,957 +$ +6,559,498 +$ +10,818,284 +(1) The alphabetical code refers to the elements of compensation that may be included upon various termination scenarios as described in +the table at the beginning of this section, "Estimated Benefits upon Various Termination Scenarios." +DIRECTOR AND OFFICER INDEMNIFICATION AGREEMENTS +We have entered into indemnification agreements with our Directors and certain officers. These agreements require us, among other things, to +indemnify such persons against certain liabilities that may arise by reason of their status or service as Directors or officers, to advance their expenses incurred as a result of a proceeding for +which they may be indemnified, and to cover them under any Directors' and officers' liability insurance policy that we choose, in our discretion, to maintain. These indemnification agreements are +intended to provide indemnification rights to the fullest extent permitted under applicable Delaware law and will be in addition to any other rights that the indemnitee may have under our Restated +Certificate of Incorporation, Bylaws, and applicable law. +64 +2019 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +NON-EMPLOYEE DIRECTOR COMPENSATION +NON-EMPLOYEE DIRECTOR COMPENSATION +Our Compensation and Governance Committee administers our Director compensation program. Total Director compensation is designed to be near +the 50th percentile of that paid by comparable public oil and gas companies with similar market capitalization and revenue. We use the same group of companies in reviewing Director compensation +as we use in reviewing executive base salary and total direct compensation. See "CD&A—Section 1—Competitive Positioning" for a list of, and the methodology followed in +selecting, these companies. The Compensation and Governance Committee uses its independent compensation consultant, Longnecker & Associates, to review and make recommendations concerning +Director compensation. The Compensation and Governance Committee, after reviewing the consultant's recommendations with the CEO, recommends Director compensation for Board consideration and approval +at the Board meeting held following each year's Annual Meeting of Shareholders. Payment of the annual component of Director compensation occurs on June 1 of each year. +Through +May 10, 2018, compensation for non-employee Directors consisted of the following: +Compensation +Amount +Annual Cash Retainer +$75,000 +Annual Equity Retainer +(comprised of restricted stock that vests on the earlier of (i) the termination of the service as a Director other than because of removal or (ii) May 1, 2018) +$200,000 +Committee Chair Fee +(for Audit Committee and Compensation and Governance Committee) +$20,000 +Lead Director Fee +(who also acts as Nominating Committee Chair) +$40,000 +Board Meeting Attendance Fee +$1,800 per meeting +Committee Meeting Attendance Fee +$1,500 per meeting +At +the May 10, 2018 meeting, the Committee's independent consultant recommended no changes to the overall Director compensation, but recommended eliminating meeting fees and increasing the +annual cash retainer to an amount approximating the meeting fees previously paid for regularly scheduled meetings. As a result of this recommendation, Directors would not receive additional +compensation for special meetings of the Board or Committees in addition to the regularly scheduled meetings. The Board, on the recommendation of the Compensation and Governance Committee and the +Compensation and Governance Committee's independent compensation consultant, and based on a study of peers and market trends, +Cimarex +Energy +Co. +65 +Table of Contents +NON-EMPLOYEE DIRECTOR COMPENSATION +made +the following change to the compensation program for non-employee Directors effective June 1, 2018: +Compensation +Amount +Annual Cash Retainer +(payable on June 1 of each year) +$105,000 +Annual Equity Retainer +(comprised of restricted stock that vests on the earlier of (i) the termination of the service as a Director other than because of removal or (ii) May 1 of the following year) +$200,000 +Committee Chair Fee +(for Audit Committee and Compensation and Governance Committee) +$20,000 +Lead Director Fee +(who also acts as Nominating Committee Chair) +$40,000 +Board Meeting Attendance Fee +None +Committee Meeting Attendance Fee +None +The +other components of non-employee Director compensation did not change. +§ Independent Director 2018 Compensation +Name +Fees Paid in Cash (1) +Stock Awards (2) +All Other +Compensation (3) +Total +Hans Helmerich +$ +104,600 +$ +200,000 +$ +6,431 +$ +311,031 +David A. Hentschel +$ +104,600 +$ +200,000 +$ +1,305 +$ +305,905 +Harold R. Logan, Jr. +$ +144,600 +$ +200,000 +$ +1,305 +$ +345,905 +Floyd R. Price +$ +123,100 +$ +200,000 +$ +1,305 +$ +324,405 +Monroe W. Robertson +$ +124,600 +$ +200,000 +$ +1,305 +$ +325,905 +Lisa A. Stewart +$ +104,600 +$ +200,000 +$ +1,382 +$ +305,982 +Michael J. Sullivan +$ +104,600 +$ +200,000 +$ +1,305 +$ +305,905 +L. Paul Teague (4) +$ +85,000 +$ +— +$ +384 +$ +85,384 +Frances M. Vallejo +$ +104,600 +$ +200,000 +$ +921 +$ +305,521 +(1) Represents fees earned for services as a Director during 2018, including the annual cash retainer fee, Board and +Committee meeting attendance fees, Committee Chairman fee and Lead Director fee. As noted above, after June 1, 2018, Directors will no longer receive meeting attendance fees. +(2) Represents the aggregate grant date fair market value of the 2,270 shares of restricted stock as +of the June 1, 2018 grant date. +(3) Consists of dividends paid during 2018 on unvested restricted stock awards and dividend +equivalents paid during 2018 on deferred compensation units that settle in shares of common stock. +(4) Mr. Teague served as Director Emeritus and was paid an annual retainer for 2018 of +$85,000. +The +following table discloses as of December 31, 2018 the aggregate number of outstanding unvested stock awards and the market value of those awards. Market value is based on the closing +trading price of $61.65 on December 31, 2018 (the last trading day of 2018). The Directors have the right to vote and receive +66 +2019 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +NON-EMPLOYEE DIRECTOR COMPENSATION +dividends +on unvested stock awards. There were no outstanding vested but unexercised option awards as of that date. +Independent Director +Unvested Stock Awards +Market Value +Hans Helmerich +2,788 +$ +171,880 +David A. Hentschel +2,788 +$ +171,880 +Harold R. Logan, Jr. +2,788 +$ +171,880 +Floyd R. Price +2,788 +$ +171,880 +Monroe W. Robertson +2,788 +$ +171,880 +Lisa A. Stewart +2,788 +$ +171,880 +Michael J. Sullivan +2,788 +$ +171,880 +L. Paul Teague * +518 +$ +31,935 +Frances M. Vallejo +2,270 +$ +139,946 +*Mr. Teague served as a director until May 11, 2017, at which time he began serving as Director Emeritus. Cimarex agreed to allow the continued vesting of unvested stock awards +held by Mr. Teague while he serves as Director Emeritus. Mr. Teague will not receive any additional stock awards as Director Emeritus. +Our +Corporate Governance Guidelines require that each independent Director own Cimarex stock in an amount equal to three times his or her annual cash retainer. A newly elected Director has three years +from the date of his or her initial election to comply with the Corporate Governance Guidelines. Restricted stock, restricted stock units and deferred compensation units are counted in calculating +ownership; shares subject to options are not counted. Each of the independent Directors complies with these guidelines. +In +connection with his retirement from the Board effective immediately following the annual meeting on May 11, 2017, the Board appointed Mr. Teague as Director Emeritus for up to a +two-year term. As compensation for serving as Director Emeritus, all outstanding restricted stock awards held by Mr. Teague at the time of the expiration of his term as Director continue to +vest according to their terms during the period he serves as Director Emeritus. Mr. Teague will not receive any additional stock awards as Director Emeritus. Mr. Teague will be entitled +to a cash retainer of $85,000 per year. The Company entered into an indemnification agreement with Mr. Teague with substantially the same terms as his indemnification agreement as a Director. +Stock Ownership and Holding Requirements +Our Corporate Governance Guidelines require that each independent Director own +Cimarex stock in an amount equal to three times his or her annual cash retainer. A newly elected Director has three years from the date of his or her initial election or appointment to comply with the +Guidelines. Until the stock ownership guidelines are met, a Director may not sell any Cimarex stock acquired through equity grants except to pay income taxes upon the vesting of awards or to pay the +exercise price and related income taxes upon the exercise of stock options. Restricted stock, restricted stock units, and deferred compensation units are counted in calculating ownership. Shares +subject to options are not counted. As of March 12, 2019, all independent Directors were in compliance with the stock ownership guidelines. +Cimarex +Energy +Co. +67 +Table of Contents +SECURITY OWNERSHIP +SECURITY OWNERSHIP +MANAGEMENT, DIRECTORS AND CERTAIN BENEFICIAL OWNERS +The following table shows, as of March 12, 2019, the number of shares of common stock "beneficially owned," as determined in accordance +with Rule 13d-3 under the Securities Exchange Act of 1934, by the NEOs, the Directors, and all executive officers and Directors, as a group: +Name of Beneficial Owner +Shares +Beneficially Owned (1) +Percent of Class +Named Executive Officers : +Thomas E. Jorden, CEO (also Director) +426,138 +<1% +G. Mark Burford, CFO +112,471 +<1% +Joseph R. Albi, COO (also Director) +153,352 +<1% +Stephen P. Bell, EVP +131,004 +<1% +John A. Lambuth, SVP +128,108 +<1% +Directors : +Hans Helmerich +449,315 +(2) +<1% +David A. Hentschel +33,293 +<1% +Harold R. Logan, Jr. +8,249 +<1% +Floyd R. Price +13,512 +<1% +Monroe W. Robertson +17,416 +<1% +Lisa A. Stewart +7,996 +<1% +Michael J. Sullivan +18,386 +<1% +Frances M. Vallejo +4,134 +<1% +All executive officers and Directors as a group (16 persons) +1,737,193 +(2) +1.7% +(1) Includes restricted stock (as well as shares that are subject to +performance-based vesting and time-based vesting more than 60 days after March 12, 2019), direct and indirect ownership of common stock and equivalent shares of common stock held by the +trustee for the benefit of the named individual in the Cimarex Energy Co. 401(k) Plan. Does not include deferred compensation units held by one Director. +(2) Includes 11,450 shares owned by Mr. Helmerich's wife. +Mr. Helmerich disclaims beneficial ownership of the shares held by his wife. Also includes 43,903 shares owned by 1993 Hans Helmerich Trust, of which Mr. Helmerich is the trustee, 1,062 +shares owned by Helmerich Grandchildren LLC, of which Mr. Helmerich is the co-manager, 7,865 shares owned by Family Trust, of which Mr. Helmerich is the trustee, 36,430 shares +owned by The Helmerich Trust, of which Mr. Helmerich is the co-trustee, 325,000 shares held by the Peggy Helmerich QTIP Trust, of which Mr. Helmerich is the trustee, and 10,000 shares +held by Saddleridge, LLC, of which Mr. Helmerich owns 99% and his wife owns 1%. +68 +2019 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +SECURITY OWNERSHIP +Each +of the following shareholders beneficially owns five percent or more of our outstanding shares of common stock. The following table provides information regarding their stock ownership and is +based on their filings with the SEC. +Voting Authority +Dispositive Authority +Total Amount of +Beneficial +Ownership +Percent +of Class +Name and Address +Sole +Shared +Sole +Shared +BlackRock, Inc. +55 East 52 nd Street +New York, NY 10055 +5,699,682 +0 +6,484,622 +0 +6,484,622 +(1) +6.8% +Boston Partners +One Beacon Street, 30 th Floor +Boston, MA 02108 +4,783,941 +5,558 +5,874,052 +0 +5,874,052 +(2) +6.14% +Diamond Hill Capital +Management, Inc. +325 John H. McConnell Blvd., +Suite 200 +Columbus, OH 43215 +5,763,413 +0 +6,200,961 +0 +6,200,961 +(3) +6.5% +State Street Corporation +State Street Financial Center +One Lincoln Street +Boston, MA 02111 +0 +4,813,962 +0 +5,368,933 +5,370,280 +(4) +5.6% +The Vanguard Group +100 Vanguard Boulevard +Malvern, PA 19355 +111,752 +20,663 +10,141,453 +130,559 +10,272,012 +(5) +10.74% +(1) Based solely on information as of December 31, 2018 +included in a Schedule 13G/A filed with the SEC on February 4, 2019. +(2) Based solely on information as of December 31, 2018 included in a +Schedule 13G filed with the SEC on February 14, 2019. +(3) Based solely on information as of December 31, 2018 included in a +Schedule 13G filed with the SEC on February 12, 2019. +(4) Based solely on information as of December 31, 2018 included in a +Schedule 13G filed with the SEC on February 14, 2019. +(5) Based solely on information as of December 30, 2018 included in a +Schedule 13G/A filed with the SEC on February 11, 2019. +SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE +Section 16(a) of the Securities Exchange Act of 1934 requires our Directors and executive officers, and persons who own more than 10% +of our common stock, to file reports of ownership of, and transactions in, our common stock with the SEC. Based on a review of such reports, and on written representations from our reporting persons, +we believe that all reports were timely filed in 2018. +Cimarex +Energy +Co. +69 +Table of Contents +ITEM 2: ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION +ITEM 2: ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION +At the 2018 Annual Meeting of Shareholders, 93% of the votes cast were in favor of the advisory vote to approve executive compensation. In +addition to the advisory vote, as part of our regular shareholder engagement, we consider and discuss with shareholders a number of matters throughout the year, including executive compensation and +governance. The Compensation and Governance Committee considers any feedback and routinely reviews executive compensation practices and governance. +The +Compensation and Governance Committee considered the results of the advisory vote and the discussions with shareholders to convey our shareholders' support of the Committee's compensation +decisions in 2017 and early 2018 and our shareholders' overall satisfaction with Cimarex's executive compensation programs. Consistent with this support, the Compensation and Governance Committee +retained the core design of our executive compensation programs for the remainder of 2018, as it believes the programs continue to retain, attract, when appropriate, and appropriately incent senior +management. +At +the 2019 Annual Meeting of Shareholders, we again will hold an annual advisory vote to approve executive compensation. The Compensation and Governance Committee will continue to consider the +results from this year's and future years' advisory votes on executive compensation, as well as feedback from shareholders through the course of such year. +Because +your vote is advisory, it will not be binding upon the Board. However, the Board values shareholders' opinions, and the Compensation and Governance Committee will take into account the outcome +of the vote when considering future executive compensation decisions. The Board recommends that shareholders vote FOR the following resolution: +RESOLVED , that the shareholders approve, on an advisory basis, the compensation of Cimarex's Named Executive Officers, as disclosed in this proxy +statement, including the Compensation Discussion and Analysis, the executive compensation tables and the related narrative. +The Board of Directors unanimously recommends a vote FOR the advisory vote to approve executive compensation. +70 +2019 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +ITEM 3: APPROVAL OF THE 2019 EQUITY INCENTIVE PLAN +ITEM 3: APPROVAL OF THE 2019 EQUITY INCENTIVE PLAN +We +are asking you to approve the Cimarex Energy Co. 2019 Equity Incentive Plan (the "2019 Plan"), a new omnibus equity incentive plan that will replace our existing 2014 Equity Incentive Plan +(the "2014 Plan"). The 2019 Plan was approved by the Board on February 20, 2019, to be effective upon shareholder approval at the Annual Meeting. +The Board recommends that the Company's shareholders vote FOR approval of the 2019 Plan at the Annual Meeting. +The +key features of the 2019 Plan include the following: +§ A reserve of 5,800,000 new shares of our common stock that may be issued pursuant to +awards under the 2019 Plan. In addition, shares available for issuance under the 2014 Plan will be transferred over to and made available for issuance under the 2019 Plan, as will shares that become +available as a result of forfeitures of awards made under the 2014 Plan; +§ fungible share design pursuant to which awards other than options and stock +appreciation rights are counted against the share reserve at a rate of 2.38 shares per every share delivered under a full value award, and shares delivered pursuant to options and stock appreciation +rights are counted against the share reserve on a 1:1 basis; +§ A term that expires on February 19, 2029; +§ Permitted awards include, but are not limited to, options, stock appreciation rights +(sometimes referred to as "SARs"), restricted stock, restricted stock units (sometimes referred to as "RSUs"), performance stock units (sometimes referred to as "PSUs"), and other cash and stock-based +awards; +§ No direct or indirect repricing of options or stock appreciation rights without +shareholder approval; +§ Stringent share recycling provisions that prohibit recycling of shares used as +consideration for tax withholding or as consideration for option exercises, along with full counting of all shares subject to stock-settled stock appreciation rights; +§ A minimum one-year vesting schedule on all awards types under the 2019 Plan +(applicable to at least 95% of the shares authorized for issuance so that up to 5% of the authorized shares may be issued pursuant to exceptions to the minimum one-year vesting); +§ Dividends and dividend equivalents on performance-based awards are accrued and paid +only if related awards become vested; and +§ No excise-tax gross-ups on equity awards. +Cimarex +Energy +Co. +71 +Table of Contents +ITEM 3: APPROVAL OF THE 2019 EQUITY INCENTIVE PLAN +Reasons for Adopting the 2019 Plan +The Compensation and Governance Committee and the Board believe that we must continue to offer a competitive equity incentive program in order +to successfully attract, retain and +motivate the best employees, directors, and consultants, without whom we cannot execute on our business goals or deliver value to our shareholder. We currently maintain the 2014 Equity Incentive Plan. +The share reserve of the 2014 Plan is nearly depleted. As of March 12, 2019, there were only 596,449 shares available for grant under the 2014 Plan. Accordingly, and based on historic grant +patterns, we believe the remaining shares available for issuance under the 2014 Plan are insufficient, and that we must increase the number of shares available for issuance under our equity incentive +plans to address our future equity compensation needs for a meaningful period of time. We believe strongly that adoption of the 2019 Plan will accomplish this objective. If the shareholders approve +the 2019 Plan, the number of shares of common stock reserved for issuance under the Company's equity incentive plans will be increased by 5,800,000 shares. In the event the shareholders fail to +approve the 2019 Plan, the 2014 Plan will remain in effect, but will have only the limited share reserve described above. +Outstanding Awards under 2014 Plan +Upon approval of the 2019 Plan, the 2014 Plan will terminate, and no further awards will be granted under the 2014 Plan. As of +March 12, 2019, there were 413,945 stock options/SARs outstanding under the Company's equity compensation plans with a weighted average exercise price of $99.27 and weighted average remaining +term of 4.1 years. In addition, as of March 12, 2019, there were 1,793,228 full-value awards outstanding under the 2014 Plan and previous plans. Other than the foregoing, no other awards +under the 2014 Plan and previous plans were outstanding, and only 596,449 shares available for future grants. As of March 12, 2019, the total number of outstanding shares of the Company's +common stock was 101,420,358. +Description of the 2019 Plan +The following summary of material terms of the 2019 Plan does not purport to be complete and is subject to and qualified in its entirety by +the actual terms of the 2019 Plan. A copy of the 2019 Plan is provided as Appendix A to this proxy statement. +§ Purpose of the 2019 Plan +The purpose of the 2019 Plan is to promote the success of the Company and the interests of its shareholders by providing an additional means for the Company to attract, +motivate, retain and reward directors, officers, employees and other eligible persons (including certain consultants and advisors). +The +Board or one or more committees consisting of directors appointed by the Board will administer the 2019 Plan. The Board intends to delegate general administrative authority for the 2019 Plan to +the Compensation and Governance Committee, which is comprised of directors who qualify as independent under the rules promulgated by the SEC and NYSE. Except where prohibited by applicable law, a +committee may delegate some or all of its authority with respect to the 2019 Plan to another committee of directors or to one or more officers of the Company. For purposes of Rule 16b-3 of the +Exchange Act, the rules of the NYSE and for grants to non-employee directors, the 2019 Plan must be administered by a committee +72 +2019 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +ITEM 3: APPROVAL OF THE 2019 EQUITY INCENTIVE PLAN +consisting +solely of two or more independent directors. The appropriate acting body, be it the Board, a committee within its delegated authority, or an officer within his or her delegated authority, +is referred to in this section as the Administrator. +The +Administrator has broad authority under the 2019 Plan with respect to award grants including, without limitation, the authority: +§ To select participants and determine the type(s) of award(s) that they are to receive; +§ To determine the number of shares that are to be subject to awards and the terms and +conditions of awards, including the price (if any) to be paid for the shares or the award; +§ To cancel, modify, or waive the Company's rights with respect to, or modify, +discontinue, suspend, or terminate any or all outstanding awards, subject to any required consents, and subject to the repricing prohibition described below; +§ To accelerate or extend the vesting or exercisability or extend the term of any or all +outstanding awards subject to any required consents; +§ Subject to the other provisions of the 2019 Plan, to make certain adjustments to +outstanding awards and authorize the conversion, succession or substitution of awards; and +§ To allow the purchase price of awards or shares of the Company's common stock to be +paid in the form of cash, check, or electronic funds transfer, by the delivery of already-owned shares of the Company's common stock or by a reduction of the number of shares deliverable pursuant to +the awards, by services rendered by the recipient of the awards, by notice of third party payment or by cashless exercise, on such terms as the Administrator may authorize, or any other form permitted +by law. +Eligibility +Persons eligible to receive awards under the 2019 Plan include officers and employees of the Company or any of its subsidiaries, non-employee +directors of the Company, and certain individual consultants who render bona fide services to the Company or any of its subsidiaries (other than services in connection with the offering or sale of +securities or as a market maker or promoter of securities of the Company). As of March 12, 2019, there were approximately 1,009 employees, including officers, of the Company and its +subsidiaries and eight non-employee Directors of the Company and its subsidiaries who would potentially be eligible to receive awards under the 2019 Plan. +Authorized Shares +The number shares of Company common stock authorized for issuance pursuant to awards under the 2019 Plan is equal to the sum of +(i) 5,800,000 shares of Company common stock, plus (ii) the shares of Company common stock available for issuance under the 2014 Plan upon approval of the 2019 Plan, plus +(iii) any shares that would have otherwise become available for issuance under the 2014 Plan as a result of forfeitures of outstanding awards made under the 2014 Plan. The 2019 Plan generally +provides that shares +Cimarex +Energy +Co. +73 +Table of Contents +ITEM 3: APPROVAL OF THE 2019 EQUITY INCENTIVE PLAN +issued +in connection with awards that are granted by or become obligations of the Company through the assumption of awards (or in substitution for awards) in connection with an acquisition of another +company will not count against the shares available for issuance under the 2019 Plan, except as may be required by the Administrator or applicable law or stock exchange rules. +The +2019 Plan uses a fungible share design, pursuant to which shares delivered pursuant to options and stock appreciation rights count against the share reserve on a 1:1 basis, and shares delivered +pursuant to all other awards count against the share reserve at a rate of 2.38 shares per share delivered under the +award. Shares that are subject to or underlie awards that expire or for any reason are canceled or terminated, are forfeited, fail to vest, or for any other reason are not paid or delivered under the +2019 Plan are available for reissuance under the 2019 Plan at the same rate as they would have been taken into account under the fungible share counting system described above. However, the 2019 Plan +prohibits liberal share recycling. Accordingly, shares tendered or withheld to satisfy the exercise price of options or tax withholding obligations, and shares covering the portion of exercised +stock-settled SARs (regardless of the number of shares actually delivered), count against the share limit in accordance with the fungible share counting system described above. +Awards Under the 2019 Plan +Because awards under the 2019 Plan are granted in the discretion of the Board or a committee of the Board, the type, number, recipients and +other terms of future awards cannot be determined at this time. +No Repricing +In no event will any adjustment be made to a stock option or stock appreciation right award under the 2019 Plan (by amendment, cancellation +and regrant, exchange for other awards or cash or other means) that would constitute a repricing of the per share exercise or base price of the award, unless such adjustment is approved by the +shareholders of the Company. Adjustment made in accordance with the 2019 Plan to reflect a stock split or similar event are not deemed to be a repricing. +Minimum Vesting Schedule +The 2019 Plan requires a minimum one-year cliff vesting schedule for all equity award types under the 2019 Plan. This minimum vesting schedule +will apply to at least 95% of the shares authorized for grant under the 2019 Plan. +Dividends and Dividend Equivalents +Accrued dividends or dividend equivalent amounts shall not be paid on performance-based awards unless and until the awards to which they +relate become vested. +Types of Awards +The 2019 Plan authorizes stock options, SARs, restricted stock, RSUs, PSUs and other forms of awards that may be granted or denominated in or +otherwise determined by reference to the Company's common stock, +74 +2019 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +ITEM 3: APPROVAL OF THE 2019 EQUITY INCENTIVE PLAN +as +well as cash awards. The 2019 Plan provides flexibility to offer competitive incentives and to tailor benefits to specific needs and circumstances. Awards may, in certain cases, be paid or settled +in cash. +§ Stock Options +A stock option is a right to purchase shares of the Company's common stock at a future date at a specified price per share (the "exercise price"). The per share exercise price +of an option generally may not be less than the fair market value of a share of the Company's common stock on the date of grant. On March 12, 2019, the last sale price of the Company's common +stock as reported on NYSE was $70.03 per share. The maximum term of an option is seven years from the date of grant. An option may be either an incentive stock option or a nonqualified stock option. +Incentive stock options are taxed differently than nonqualified stock options and are subject to more restrictive terms under the Internal Revenue Code of 1986, as amended (the "Code") and the 2019 +Plan. Incentive stock options may be granted only to employees of the Company or a subsidiary. +§ Stock Appreciation Rights +A stock appreciation right is the right to receive payment of an amount equal to the excess of the fair market value of shares of the Company's common stock on the date of +exercise of the stock appreciation right over the base price of the stock appreciation right. The base price is established by the Administrator at the time of grant of the stock appreciation right +and cannot be less than the fair market value of a share of the Company's common stock on the date of grant. Stock appreciation rights may be granted in connection with other awards or independently. +The maximum term of a stock appreciation right is ten years from the date of grant. +§ Restricted Stock +Shares of restricted stock are shares of the Company's common stock that are subject to forfeiture and to certain restrictions on sale, pledge, or other transfer by the +recipient during a particular period of employment or service or until certain performance vesting conditions are satisfied (the "restricted period"). Subject to the restrictions provided in the +applicable award agreement and the 2019 Plan, a participant receiving restricted stock may have all of the rights of a shareholder as to such shares, including the right to vote and the right to +receive dividends; provided, however, that dividends on shares subject to performance-based vesting shall be accrued and shall be paid only if the restricted stock to which they relate become vested. +§ Restricted Stock Units +A restricted stock unit represents the right to receive one share of the Company's common stock on a specific future vesting or payment date. Subject to the restrictions +provided in the applicable award agreement and the 2019 Plan, a participant receiving RSUs has no rights as a shareholder with respect to the RSUs until the shares of common stock are issued to the +participant. RSUs may be granted with dividend equivalent rights. RSUs may be settled in cash if so provided in the applicable award agreement. +Cimarex +Energy +Co. +75 +Table of Contents +ITEM 3: APPROVAL OF THE 2019 EQUITY INCENTIVE PLAN +§ Performance Stock Units +A performance stock unit ("PSU") is a performance-based award that entitles the recipient to receive shares of the Company's common stock based on attainment of one or more +performance goals. Each PSU +shall designate a target number of shares payable under the award, with the actual number of shares earned (if any) based on a formula set forth in the award agreement related to the attainment of one +or more performance goals. Subject to the restrictions provided in the applicable award agreement and the 2019 Plan, a participant receiving PSUs has no rights as a shareholder until the shares of +common stock are issued to the participant. PSUs may be granted with dividend equivalent rights that are payable only if the underlying PSUs are earned. PSUs may be settled in cash if so provided in +the applicable award agreement. +§ Cash Awards +The Administrator, in its sole discretion, may grant cash awards, including without limitation discretionary awards, awards based on objective or subjective performance +criteria, and awards subject to other vesting criteria. +§ Other Awards +The other types of awards that may be granted under the 2019 Plan include, without limitation, stock bonuses, and similar rights to purchase or acquire shares of the Company's +common stock, and similar securities with a value derived from the value of or related to the Company's common stock or returns thereon. +Change of Control +In the event of a change of control (as defined in the 2019 Plan), time-based awards shall become fully vested, and performance-based awards +shall vest based on performance through the date of the change of control (with the Administrator making any adjustments necessary to accommodate the truncated performance period of such awards). In +addition, the Administrator shall have full discretion to take whatever additional actions (not inconsistent with the accelerated vesting described above) it deems necessary or appropriate, including +but not limited to the following actions: (1) provide for the assumption of such awards (or portions thereof) or the substitution of such awards (or portions thereof) +with similar awards of the surviving or acquiring Company; (2) provide for the termination of outstanding awards; (3) provide for the cash-out and cancellation of any award (or portion +thereof); and (4) take any other actions as the Administrator deems necessary or advisable in connection with such change of control transaction. The Administrator may take different actions +with respect to different participants under the 2019 Plan, different awards under the 2019 Plan, and different portions of awards granted under the 2019 Plan. +Transferability of Awards +Awards under the 2019 Plan generally are not transferable by the recipient other than by will or the laws of descent and distribution, or +pursuant to domestic relations orders, and with respect to awards with exercise features, are generally exercisable during the recipient's lifetime only by the recipient. Any amounts payable or shares +issuable pursuant to an award generally will be paid only to the recipient or the +76 +2019 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +ITEM 3: APPROVAL OF THE 2019 EQUITY INCENTIVE PLAN +recipient's +beneficiary or representative. The Administrator has discretion, however, to establish written conditions and procedures for the transfer of awards to other persons or entities, as long as +such transfers comply with applicable federal and state securities laws and provided that any such transfers are not for consideration. +Adjustments +As is customary in plans of this nature, the share limits and the number and kind of shares available under the 2019 Plan and any outstanding +awards, as well as the exercise or purchase prices of awards, are subject to adjustment in the event of certain reorganizations, mergers, combinations, recapitalizations, stock splits, stock +dividends, or other similar events that change the number or kind of shares outstanding, and extraordinary dividends or distributions of property to the shareholders. +No Limit on Other Authority +The 2019 Plan does not limit the authority of the Board or any committee to grant awards or authorize any other compensation, with or without +reference to the Company's common stock, under any other plan or authority. +Non-Competition and Clawback Policy +By accepting awards and as a condition to the exercise of awards and the enjoyment of any benefits of the 2019 Plan, participants agree to be +bound by any clawback policy adopted by the Company from time to time. Participants may also be subject to restrictive covenants if so required by the Administrator in any award agreement. +Awards to Directors +The 2019 Plan is the exclusive vehicle for awards of cash and equity compensation to be paid or provided to the Company's non-employee +directors. Cash awards to non-employee directors may take any form determined by the Administrator in its sole and absolute discretion, including, but not limited to, retainers, committee fees, +chairperson fees, per meeting fees, and special fees for committee service. Cash awards paid to any non-employee director may not exceed $400,000 in any fiscal year. Equity awards to non-employee +directors may take any form determined by the Administrator in its sole and absolute discretion (other than incentive stock options). Equity awards granted to any non-employee director may not have a +grant date fair value in excess of $400,000 in any fiscal year. +Termination of, or Changes to, the 2019 Plan +The Administrator may amend or terminate the 2019 Plan at any time and in any manner. Shareholder approval for an amendment will be required +only to the extent then required by applicable law or any applicable stock exchange rules or as required to preserve the intended tax consequences of the 2019 Plan. For example, shareholder approval +is required for any proposed amendment to increase the maximum number of shares that may be delivered with respect to awards granted under the 2019 Plan. Adjustments as a result of stock splits or +similar events will not, however, be considered amendments requiring +Cimarex +Energy +Co. +77 +Table of Contents +ITEM 3: APPROVAL OF THE 2019 EQUITY INCENTIVE PLAN +shareholder +approval. Unless terminated earlier by the Board, the authority to grant new awards under the 2019 Plan will terminate ten years after the date on which the 2019 Plan was approved by the +Board. Outstanding awards generally will continue following the expiration or termination of the 2019 Plan. Generally speaking, outstanding awards may be amended by the Administrator (except for a +repricing), but the consent of the award holder is required if the amendment (or any plan amendment) materially and adversely affects the holder. +Certain Federal Tax Consequences +The following summary of the federal income tax consequences of awards under the 2019 Plan is based upon federal income tax laws in effect on +the date of this proxy statement. This summary does not purport to be complete, and does not discuss state, local or non-U.S. tax consequences. The tax consequences of individual awards may vary +depending upon the particular circumstances applicable to any individual participant. +§ Nonqualified Stock Options +The grant of a nonqualified stock option under the 2019 Plan will not result in any federal income tax consequences to the participant or to the Company. Upon exercise of a +nonqualified stock option, the participant will recognize ordinary compensation income equal to the excess of the fair market value of the shares of common stock at the time of exercise over the +option exercise price. If the participant is an employee, this income is subject to withholding for federal income and employment tax purposes. The Company is entitled to an income tax deduction in +the amount of the income recognized by the participant, subject to possible limitations imposed by the Code, including Section 162(m) thereof. Any gain or loss on the participant's subsequent +disposition of the shares will be treated as long-term or short-term capital gain or loss, depending on the sales proceeds received and whether the shares are held for more than one year following +exercise. The Company does not receive a tax deduction for any subsequent capital gain. +§ Incentive Stock Options +The grant of an incentive stock option (or "ISO") under the 2019 Plan will not result in any federal income tax consequences to the participant or to the Company. A participant +recognizes no federal taxable income upon exercising an ISO (subject to the alternative minimum tax rules discussed below), and the Company receives no deduction at the time of exercise. In the event +of a disposition of stock acquired upon exercise of an ISO, the tax consequences depend upon how long the participant has held the shares. If the participant does not dispose of the shares within two +years after the ISO was granted, nor within one year +after the ISO was exercised, the participant will recognize a long-term capital gain (or loss) equal to the difference between the sale price of the shares and the exercise price. The Company is not +entitled to any deduction under these circumstances. +If +the participant fails to satisfy either of the foregoing holding periods (referred to as a "disqualifying disposition"), he or she will recognize ordinary compensation income in the year of the +disposition. The amount of ordinary compensation income generally is the lesser of (i) the difference between the amount realized on the disposition and the exercise price or (ii) the +difference between the fair market value of the stock at the time of exercise and the exercise price. Such amount is not subject to withholding for federal income and employment tax purposes, even if +the participant is an employee of the Company. Any gain in +78 +2019 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +ITEM 3: APPROVAL OF THE 2019 EQUITY INCENTIVE PLAN +excess +of the amount taxed as ordinary income will generally be treated as a short-term capital gain. The Company, in the year of the disqualifying disposition, is entitled to a deduction equal to the +amount of ordinary compensation income recognized by the participant, subject to possible limitations imposed by the Code, including Section 162(m) thereof. +The +"spread" under an ISO (i.e., the difference between the fair market value of the shares at exercise and the exercise price) is classified as an item of adjustment in the year of exercise +for purposes of the alternative minimum tax. If a participant's alternative minimum tax liability exceeds such participant's regular income tax liability, the participant will owe the alternative +minimum tax liability. +§ Restricted Stock +Restricted stock is generally taxable to the participant as ordinary compensation income on the date that the restrictions lapse (i.e. the date that the stock vests), in +an amount equal to the excess of the fair market +value of the shares on such date over the amount paid for such stock (if any). If the participant is an employee, this income is subject to withholding for federal income and employment tax purposes. +The Company is entitled to an income tax deduction in the amount of the ordinary income recognized by the participant, subject to possible limitations imposed by the Code, including +Section 162(m) thereof. Any gain or loss on the participant's subsequent disposition of the shares will be treated as long-term or short-term capital gain or loss depending on the sales price +and how long the stock has been held since the restrictions lapsed. The Company does not receive a tax deduction for any subsequent gain. +Participants +receiving restricted stock awards may make an election under Section 83(b) of the Code (a "Section 83(b) Election") to recognize as ordinary compensation income in the year +that such restricted stock is granted in an amount equal to the excess of the fair market value on the date of the issuance of the stock over the amount paid for such stock. If the participant is an +employee, this income is subject to withholding for federal income and employment tax purposes. If such an election is made, the recipient recognizes no further amounts of compensation income upon the +lapse of any restrictions and any gain or loss on subsequent disposition will be long-term or short-term capital gain or loss to the recipient. However, if the stock is later forfeited, the +participant will not be able to recover the tax previously paid pursuant to the Section 83(b) Election. The Section 83(b) Election must be made within 30 days from the time the +restricted stock is issued. The Company is entitled to a deduction equal to the amount of income taken into account as a result of the Section 83(b) Election, subject to possible limitations +imposed by the Code, including Section 162(m) thereof. +To +the extent dividends are paid while the restrictions on the stock are in effect, any such dividends will be taxable to the participant as ordinary income (and will be treated as additional wages +for federal income and employment tax withholding purposes, if the recipient is an employee) and will be deductible by the Company (subject to possible limitations imposed by the Code, including +Section 162(m) thereof), unless the participant has made a Section 83(b) Election, in which case the dividends will generally be taxed at dividend rates and will not be deductible by the +Company. +§ Other Awards +Other awards (such as RSUs and PSUs) are generally treated as ordinary compensation income as and when common stock or cash are paid to the participant upon vesting or +settlement of such awards. If the participant is an employee, this income is subject to withholding for income and employment tax purposes. +Cimarex +Energy +Co. +79 +Table of Contents +ITEM 3: APPROVAL OF THE 2019 EQUITY INCENTIVE PLAN +The +Company is generally entitled to an income tax deduction equal to the amount of ordinary income recognized by the recipient, subject to possible limitations imposed by the Code, including +Section 162(m) thereof. +Section 162(m) of the Internal Revenue Code +Under Code Section 162(m), no deduction is generally allowed in any taxable year of the Company for compensation in excess of +$1 million paid to the Company's "covered employees." A "covered employee" is any individual who has served at any time after December 31, 2016 as the Company's chief executive officer, +chief financial officer, or other executive officer whose compensation has been reported in a Company proxy statement, regardless of whether any such individual is still employed by the Company. +Certain compensation issued prior to the effective date of the 2019 Plan may be deductible based on specialized transition rules set forth in Code Section 162(m) and related guidance. +Section 409A of the Internal Revenue Code +Section 409A of the Code provides certain requirements for the deferral and payment of deferred compensation arrangements. In the event +that any award under the 2019 Plan is deemed to be a deferred compensation arrangement, and if such arrangement does not comply with Section 409A of the Code, the recipient of such award will +recognize ordinary income once such award is vested, as opposed to at the time or times set forth above. In addition, the amount taxable will be subject to an additional 20% federal income tax along +with other potential taxes and penalties. It is intended, although not guaranteed, that all awards issued under the 2019 Plan will either be exempt from or compliant with the requirements of +Section 409A of the Code. +Interested Parties +Because approval of the 2019 Plan will increase the number of shares available for issuance to the directors and executive officers of the +Company, each of those persons has an interest in and may benefit from the approval of the 2019 Plan. +Vote Required for Approval +Approval of the 2019 Plan will require the affirmative vote of a majority of the shares present or represented at the Annual Meeting. +Abstentions will be counted as votes against this matter, and broker non-votes will have no effect on the vote on this matter. +The Board of Directors unanimously recommends a vote FOR the approval of the Company's 2019 Equity Incentive Plan. +80 +2019 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +ITEM 4: RATIFICATION OF INDEPENDENT AUDITORS +ITEM 4: RATIFICATION OF INDEPENDENT AUDITORS +The Audit Committee of the Board has appointed KPMG LLP to audit our financial statements for 2019. Since October 1, 2002, +KPMG LLP has served as our independent auditors. +We +are asking that shareholders ratify the appointment of KPMG LLP as our independent auditors. If shareholders fail to ratify the appointment, the Audit Committee may reconsider this +appointment. A KPMG LLP representative will be at the Annual Meeting to answer appropriate questions and to make a statement if he or she desires. +The Board of Directors recommends a vote FOR the ratification of KPMG LLP as Cimarex's Independent Auditors for 2019. +Audit and Non-Audit Fees +The following table shows the fees for professional services rendered by KPMG LLP for the audit of Cimarex's annual financial +statements for the years ended December 31, 2018 and December 31, 2017, and fees billed for other services rendered by KPMG LLP during those periods: +Years Ended December 31, +2018 +2017 +Audit Fees (1) +$ +1,148,580 +$ +1,162,045 +Audit-Related Fees (2) +$ +30,500 +$ +101,850 +Tax Fees (3) +$ +215,000 +$ +210,286 +All Other Fees +$ +0 +$ +0 +(1) Audit fees were principally for audit work performed on the consolidated financial statements and +internal controls over financial reporting. +(2) Audit-related fees were principally for services associated with SEC registration statements, +periodic reports and other documents filed with the SEC or issued in connection with securities offerings, e.g., comfort letters and consents and assistance in responding to SEC comment +letters. +(3) Tax fees were principally for services related to tax compliance and reporting and analysis +services. +Approval of Audit, Audit-Related and Tax Services +The Audit Committee annually reviews and pre-approves certain categories of audit, audit-related and tax services to be performed by our +independent auditors, subject to a specified range of fees. The Audit Committee also may pre-approve specific services. Certain non-audit services as specified by the SEC may not be performed by our +independent auditors. The Audit Committee may delegate pre-approval authority to one or more of its members. In the event of any such delegation, any pre-approved decisions will be reported to the +Audit Committee at its next scheduled meeting. The services described in the above table were pre-approved by the Audit Committee in 2017 and 2018. +Cimarex +Energy +Co. +81 +Table of Contents +ITEM 4: RATIFICATION OF INDEPENDENT AUDITORS +REPORT OF AUDIT COMMITTEE +The Audit Committee on behalf of the Board of Directors monitors: (i) the integrity of the Company's financial statements; +(ii) the independent auditors' qualifications and independence; (iii) the +performance of the Company's internal audit function and independent auditors; (iv) the appropriateness of the Company's accounting policies; (v) the adequacy of the Company's internal +controls; (vi) the Company's compliance with legal and regulatory requirements related to audit matters; (vii) the process related to ongoing litigation matters; (viii) the annual +process of estimating and reporting quantities of oil and gas reserves; and (ix) risk oversight. In so doing, it is the responsibility of the Audit Committee to maintain free and open +communication between the Directors, the independent auditor and the management of the Company. All members of the Audit Committee meet the independence, experience and financial literacy requirements +of the New York Stock Exchange, the Sarbanes Oxley Act and any rules or regulations promulgated by the Securities and Exchange Commission. The Board of Directors has adopted a written charter for the +Audit Committee, a copy of which is available on our website at www.cimarex.com. +Management +is responsible for the Company's financial statements, the financial reporting process, and the process of estimating and reporting quantities of oil and gas reserves, including the related +systems of internal controls and disclosure controls and procedures. The Company's independent registered public accounting firm is responsible for performing an independent audit of the Company's +financial statements in accordance with generally accepted auditing standards, as well as an audit of the Company's internal control over financial reporting in accordance with the standards of the +Public Company Accounting Oversight Board (PCAOB) and issuing reports thereon. The Audit Committee's responsibility is to monitor and oversee these processes and the Audit Committee uses the Company's +internal audit department and (if applicable) independent petroleum engineers to assist with these responsibilities. +The +Audit Committee reviewed Cimarex's audited financial statements and supplemental oil and gas reserve information as of and for the year ended December 31, 2018 and met with management, +DeGolyer and MacNaughton (an independent petroleum engineering consulting firm) and KPMG LLP, Cimarex's independent registered public accounting firm, to discuss the related information, and +the effectiveness of Cimarex's internal control over financial reporting. In addition, the Audit Committee has received from KPMG LLP the communication required by PCAOB Rule 3526, +Communication with Audit Committees Concerning Independence, and discussed with KPMG LLP their independence from Cimarex and its management. The Audit Committee also discussed with +KPMG LLP any matters required by PCAOB Auditing Standard No. 1301, Communications with Audit Committees. +Based +on these reviews and discussions, the Audit Committee recommended to the Board of Directors that Cimarex's audited financial statements be included in Cimarex's Annual Report on Form 10-K +for the fiscal year ended December 31, 2018. +THE AUDIT COMMITTEE +Monroe +W. Robertson (Chair) +Harold R. Logan, Jr. +Lisa A. Stewart +Frances M. Vallejo +82 +2019 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +ITEM 4: RATIFICATION OF INDEPENDENT AUDITORS +The +Audit Committee Report does not constitute soliciting material and shall not be deemed to be filed or incorporated by reference into any other Cimarex filing under the Securities Act of 1933, as +amended, or the Securities Exchange Act of 1934, as amended, except to the extent that Cimarex specifically incorporates the Audit Committee Report by reference. +Cimarex +Energy +Co. +83 +Table of Contents +EXECUTIVE COMPENSATION TABLES +GENERAL INFORMATION +Information Available Online +Our Corporate Governance Guidelines, Board Committee Charters, Code of Business Conduct and Ethics and SEC filings are posted on our website +at www.cimarex.com . Upon request, we will promptly deliver (free of charge) a copy of our Annual Report on Form 10-K to any +shareholder. Direct such requests to our Corporate Secretary, Cimarex Energy Co., 1700 Lincoln Street, Suite 3700, Denver, Colorado 80203, telephone (303) 295-3995 and facsimile +(720) 403-9383. +Communications with Cimarex's Directors +Communications from shareholders can be addressed to our Directors by mail in care of our Corporate Secretary, Cimarex Energy Co., 1700 +Lincoln Street, Suite 3700, Denver, Colorado 80203 or facsimile (720) 403-9383. All shareholder communications will be forwarded to our Lead Director. In response, the Lead Director may +take any action deemed appropriate or necessary, including, without limitation, forwarding the information to the Board for consideration or, with the concurrence of the Board, retaining independent +or outside counsel, accountants or other advisors. +Director Nominations for the 2020 Annual Meeting of Shareholders +Shareholders who wish to nominate persons for election as Directors at the 2020 Annual Meeting must submit a timely written notice complying +with Cimarex's Bylaws to the Corporate Secretary at Cimarex Energy Co., 1700 Lincoln Street, Suite 3700, Denver, Colorado 80203 or by facsimile (720) 403-9383. In addition, up to +20 shareholders collectively beneficially owning more than 3% of the Company's outstanding shares for at least three consecutive years may nominate up to two candidates for +inclusion in the Company's proxy materials by following the procedures set forth in the proxy access provisions in Article III, Section 2A of our Bylaws (the "Proxy Access Policy"). To +be timely, the shareholder's written notice for nominees to be considered by the Nominating Committee or proxy access candidate to be included in the proxy statement for the 2020 Annual Meeting must +be received between January 9, 2020 and February 10, 2020. In addition, shareholder nominations must comply with the other requirements of Article III, Section 2 or +Section 2A, as applicable, of our Bylaws. +Shareholder Proposals for the 2020 Annual Meeting of Shareholders +A proposal to be acted upon at the 2020 Annual Meeting of Shareholders will be acted upon only: +§ If the proposal is to be included in the proxy statement, pursuant to +Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the "1934 Act"), the proposal is received by our Corporate Secretary on or before November 29, 2019, and the proposal +meets the requirements of the applicable rules of the SEC and the requirements of our bylaws. § If the proposal is not to be included in the proxy +statement, pursuant to our bylaws, +the proposal is submitted in writing to our Corporate Secretary no earlier than January 9, 2020 and no later than +84 +2019 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +GENERAL INFORMATION +February 10, +2020, and such proposal is, under Delaware General Corporation Law, an appropriate subject for shareholder action. +§ If the proposal concerns the nomination of Directors, see "Director Nominations for +the 2020 Annual Meeting of Shareholders" above. +Complaint and Reporting Procedures +We have established complaint and reporting procedures that are posted on our website at www.cimarex.com. Any person, whether or not an +employee, who has a concern about the conduct of Cimarex or any of our employees, including accounting, internal accounting controls or auditing issues, may, in an anonymous manner, communicate that +concern by calling our hotline, 1 866-519-1898. The hotline is available 24 hours a day, seven days a week. The communication will be typed verbatim and delivered to a +representative with authority to investigate the concern. +Cimarex +Energy +Co. +85 +Table of Contents +QUESTIONS AND ANSWERS +QUESTIONS AND ANSWERS +§ PROXY MATERIALS AND VOTING +INFORMATION +1. Why did I receive these proxy materials? +We are providing these materials in connection with the solicitation by the Board of Directors of Cimarex Energy Co., a Delaware corporation, of proxies +to be voted at our 2019 Annual Meeting of Shareholders and at any adjournment or postponement of the Meeting. The Meeting will take place on May 8, 2019, beginning at 9:00 a.m. Mountain +Daylight Time, at the Wells Fargo Center – Denver, Assemble Room (Lower Level 2), 1700 Lincoln Street, Denver, Colorado 80203. +2. What is the difference between holding shares as a shareholder of record and as a beneficial owner? +If your shares are registered directly in your name with Cimarex's registrar and transfer agent, Continental Stock Transfer & Trust Company, you are +considered a shareholder of record with respect to these shares. If your shares are held in a brokerage account or bank, broker or other nominee, you are considered the beneficial owner of these +shares. +3. What shares are included on the proxy card? +If you are a shareholder of record, you should receive only one proxy card for all the shares you hold of record in certificate form and in book-entry form. If +you receive more than one proxy card, please vote all proxy cards received. +If +you are a Cimarex employee, you will receive a proxy or voting instruction card for all the shares you hold in the Cimarex 401(k) Plan. Your proxy card will serve as a voting instruction card for +the Plan trustee. If you do not specify your voting instructions on the proxy card, the Plan trustee will vote your shares in the same proportion as it votes shares for which it did receive timely +instructions. To allow sufficient time for voting by the trustee, your voting instructions must be received no later than 11:59 p.m. Eastern Daylight Time on +May 5, 2019 . +4. What different methods can I use to vote? +By Written Proxy. All shareholders of record can vote by written proxy card. If you are a shareholder of record and receive a notice regarding the availability of proxy +materials, you may request a written proxy card by following the instructions included in the notice. If you are a beneficial owner, you may request a written proxy card or a voting instruction form +from your bank, broker or other nominee. +By Telephone or Internet. All shareholders of record can vote by calling the toll-free telephone number on the proxy card. Please have your proxy card when you call. +Voice prompts will direct you on how to vote your shares and will confirm your voting instructions have been recorded properly. +86 +2019 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +QUESTIONS AND ANSWERS +Shareholders +also may vote on the internet by accessing the website noted on the proxy card. Please have your proxy card when you go to the website. As with telephone voting, you can confirm your +voting instructions have been recorded properly. +Beneficial +owners may vote by telephone or internet if their bank, broker or other nominee makes those methods available, in which case the bank, broker or other nominee will include the instructions +with the proxy materials. +5. What are my voting choices for each of the proposals to be voted on at the 2019 Annual Meeting of Shareholders and what are +the voting standards? +Proposal +Voting Choices and Board Recommendation +Voting Standard +Item 1. Election of Three Class II +§ +vote in favor of all nominees; +Majority of votes cast +Directors +§ +vote in favor of specific nominees; +§ +vote against all nominees; +§ +vote against specific nominees; +§ +abstain from voting with respect to all nominees; or +§ +abstain from voting with respect to specific nominees. +The Board recommends a vote FOR each of the nominees. +Item 2. Advisory Vote to Approve +§ +vote in favor of the advisory proposal; +Majority of shares +Executive Compensation +§ +vote against the advisory proposal; or +present and entitled to +§ +abstain from voting on the advisory proposal +vote +The Board recommends a vote FOR the advisory proposal to approve executive compensation. +Item 3. Approve the First +§ +vote in favor of the Plan; +Majority of shares +Amendment to the 2014 Equity +§ +vote against the Plan; or +present and entitled to +Incentive Plan +§ +abstain from voting on the Plan. +vote +The Board recommends a vote FOR the approval of the 2019 Equity Incentive Plan. +Item 4. Ratification of the +§ +vote in favor of the ratification; +Majority of shares +Appointment of KPMG LLP as +§ +vote against the ratification; or +present and entitled to +Independent Auditors +§ +abstain from voting on the ratification. +vote +The Board recommends a vote FOR the ratification. +6. What if I am a beneficial owner and do not give voting instructions to my broker? +As a beneficial owner, in order to ensure your shares are voted in the way you would like, you must provide voting instructions to your bank, broker or other +nominee by the deadline provided in the materials you receive from your bank, broker or other nominee. If you do not provide voting instructions to your bank, broker or other nominee, whether your +shares can be voted by such person depends on the type of item being considered to vote. +Non-Discretionary Items. The election of Directors and the advisory vote to approve executive compensation are non-discretionary items and may not be voted on by +brokers, banks or other nominees who have not received specific voting instructions from beneficial owners. +Cimarex +Energy +Co. +87 +Table of Contents +QUESTIONS AND ANSWERS +Discretionary Items. The ratification of the appointment of KPMG LLP as Independent Auditors is a discretionary item. Generally, banks, brokers and other nominees +that do not receive voting instructions from beneficial owners may vote on the proposal in their discretion. +7. How are abstentions and broker non-votes counted? +Item 1. Election of Three Class II Directors. If you abstain from voting in the election +of Directors, you will be treated as not having cast a vote and the abstention will not be counted in determining the outcome of the election. Broker non-votes are not considered a vote cast under our +Bylaws and will have no effect on the outcome of the election of Directors. +Item 2. Advisory Vote to Approve Executive Compensation. If you abstain from voting on the +advisory vote to approve executive compensation, you are considered present and entitled to vote, and your shares are considered in the calculation of whether Item 2 received the affirmative +vote of a majority of shares present and entitled to vote. The effect of an abstention is a vote against Item 2. Broker non-votes are not considered in the calculation of a majority of shares +present and entitled to vote. +Item 3. Approve the 2019 Equity Incentive Plan. If you abstain from voting on the proposed 2019 +Equity Incentive Plan, you are considered present and entitled to vote, and your shares are considered in the calculation of whether Item 3 received the affirmative vote of a majority of shares +present and entitled to vote. The effect of an abstention is a vote against Item 3. Broker non-votes will have no effect on the outcome of Item 3 because broker non-votes are not +entitled to vote and are not considered in the calculation of a majority of shares present and entitled to vote. +Item 4. Ratification of Appointment of KPMG LLP as Independent Auditors. If you abstain +from voting on the ratification of KPMG LLP as Cimarex's Independent Auditors, you are considered present and entitled to vote, and your shares are considered in the calculation of whether +Item 4 received the affirmative vote of a majority of shares present and entitled to vote. The effect of an abstention is a vote against Item 4. Because Item 4 is a routine matter +on which a broker has discretionary authority, no or few broker non-votes likely will result from this Item. +8. What can I do if I change my mind after I vote my shares? +You may revoke your proxy prior to the completion of voting by: +§ Giving written notice to Cimarex's Corporate Secretary; § Delivering +a valid, later-dated proxy, or a later-dated vote by telephone or on the +internet in a timely manner; or § Voting by ballot at the Annual Meeting. +9. Can I access the proxy materials on the internet? How can I sign up for the electronic proxy delivery +service? +We are distributing our proxy materials to certain shareholders via the internet under the "notice and access" approach permitted by the SEC. On or about +March 25, 2019, we will mail to certain of our shareholders a notice of internet availability of proxy materials with instructions explaining how to access our proxy statement and annual report +and how to vote online. If you receive a notice of internet +88 +2019 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +QUESTIONS AND ANSWERS +availability +by mail, you will not receive a printed copy of the proxy materials in the mail unless you request them by following the instructions for requesting such materials included in the notice +of internet availability. +Even +if you do not participate in "notice and access," the Notice of Annual Meeting and proxy statement are available on the internet at http://www.allianceproxy.com/cimarex/2019. +10. Who counts the votes? +Alliance Advisors LLC, our proxy solicitor, will tabulate the votes and, Francis B. Barron, Cimarex's Corporate Secretary, will act as inspector of +election. +11. When will Cimarex announce the voting results? +We will announce the preliminary voting results at the Annual Meeting of Shareholders. Cimarex will report the final results in a Current Report on +Form 8 K filed with the SEC after the Meeting. +12. How are proxies solicited, and what is the cost? +We bear all expenses incurred in connection with the solicitation of proxies. We hired Alliance Advisors LLC to assist with the solicitation of proxies +for an estimated fee of $10,000 plus expenses. We will reimburse brokers, fiduciaries and custodians for their costs in forwarding proxy materials to beneficial owners of Common Stock. +Our +Directors, officers and employees also may solicit proxies by mail, telephone and personal contact. They will not receive any additional compensation for these activities. +13. What is householding? +As permitted by the 1934 Act, only one copy of this proxy statement is being delivered to shareholders residing at the same address, unless the shareholders +have notified Cimarex of their desire to receive multiple copies of the proxy statement. This is known as "householding." +Upon +oral or written request, we promptly will deliver a separate copy of the proxy statement to any shareholder residing at an address to which only one copy was mailed. Direct requests for +additional copies for the current year or future years to our Corporate Secretary, Cimarex Energy Co., 1700 Lincoln Street, Suite 3700, Denver, Colorado 80203, telephone +(303) 295-3995 and facsimile (720) 403-9383. +Shareholders +of record residing at the same address and currently receiving multiple copies of the proxy statement may contact our registrar and transfer agent, Continental Stock Transfer & +Trust Company, by phone at (888) 509-5580 or by mail at 1 State Street, 30th Floor, New York, NY 10004-1561, to request a single copy be mailed in the future. +Beneficial +owners should contact their broker or bank. +Cimarex +Energy +Co. +89 +Table of Contents +QUESTIONS AND ANSWERS +14. How can I vote at the Meeting if I am a beneficial owner? +If you are a beneficial owner and want to vote your shares at the Meeting, you will need to ask your bank, broker or other nominee to furnish you with a legal +proxy, bring the legal proxy with you to the Meeting and hand it in with a signed ballot that will be provided to you at the Meeting. You will not be able to vote your shares at the Meeting without a +legal proxy. If you do not have a legal proxy, you can still attend +the Meeting. We encourage you to vote your shares in advance, even if you intend to attend the Meeting. Please note that if you request a legal proxy, any previously executed proxy will be revoked, +and your vote will not be counted unless you appear at the Meeting and vote in person or legally appoint another proxy to vote on your behalf. +90 +2019 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +ANNEX A: 2019 EQUITY INCENTIVE PLAN +CIMAREX ENERGY CO. +2019 EQUITY INCENTIVE PLAN +Adopted by the Board on February 20, 2019 +Approved by the Company's stockholders on [May 8], 2019 +1. ESTABLISHMENT AND PURPOSE OF PLAN +Cimarex Energy Co., a Delaware corporation (the " Company "), hereby establishes the Cimarex +Energy Co. 2019 Equity Incentive Plan (the " Plan ") as set forth in this document. The purpose of the Plan is to promote the success of the +Company and to increase stockholder value by providing an additional means to attract, motivate, retain and reward selected employees, non-employee directors, and other eligible persons through the +grant of equity and cash Awards that align the interests of Plan participants with the interests of the Company's stockholders. +2. DEFINITIONS +2.1 Defined Terms. Whenever used in the Plan, the +following capitalized terms shall have the meanings set forth below: +(a) " Administrator " shall mean the Board or one or more committees appointed by the Board (or appointed by another +committee within that committee's delegated authority) to administer all or certain aspects of this Plan, as set forth in Section 3 hereof. +(b) " Affiliate " shall have the meaning ascribed to such term in Rule 12b-2 of the General Rules and Regulations of +the Exchange Act. +(c) " Award " shall mean a grant under the Plan of an Option, Stock Appreciation Right, Restricted Stock, Restricted Stock +Unit, Performance Stock Unit, cash Award, or Other Stock-Based Award. +(d) " Award Agreement " shall mean a written or electronic Award agreement or document evidencing the grant of an Award under +the Plan and containing the terms and conditions of such Award, as determined by the Administrator. +(e) " Board " shall mean the board of directors of the Company. +(f) " Cause " shall mean, with respect to any Participant, as determined by the Administrator and unless otherwise provided +in an applicable agreement between the Participant and the Company or an Affiliate, (i) gross negligence or willful misconduct in connection with performance of duties; (ii) conviction +of a criminal offense (other than minor traffic offenses); or (iii) material breach of any term of any employment, consulting or other services, confidentiality, intellectual property or +non-competition agreement, if any, between the Participant and the Company or an Affiliate. Any +Cimarex +Energy +Co. +91 +Table of Contents +ANNEX A: 2019 EQUITY INCENTIVE PLAN +determination +by the Administrator whether an event constituting Cause has occurred will be final, binding and conclusive. +(g) " Change in Control " shall mean and shall be deemed to have occurred upon the occurrence of any one of the following: +1. the +acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a +" Person ") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 30% or more of either (i) the +then outstanding shares of Common Stock (the " Outstanding Company Common Stock ") or (ii) the combined voting power of the then outstanding voting +securities of the Company entitled to vote generally in the election of directors (the " Outstanding Company Voting Securities "); provided , however , that for purposes of this subsection (a), the following acquisitions shall not +constitute a Change in Control: (A) any acquisition directly from the Company, (B) any acquisition by the Company, (C) any acquisition by any employee benefit plan (or related +trust) sponsored or maintained by the Company or any corporation controlled by the Company or (D) any acquisition by any corporation pursuant to a transaction that described in +clauses (i) and (ii) of subsection 3. below; or +2. during +any period of twelve months beginning after the Effective Date, individuals who, as of the Effective Date, constitute the Board (the +" Incumbent Board ") cease for any reason to constitute at least a majority of the Board; provided , however , +that any individual becoming a director at the beginning of such twelve-month period, whose election, appointment or nomination for election by +the Company's stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the +Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or +removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or +3. the +closing of a reorganization, share exchange or merger (a " Business Combination "), in each case, unless, following +such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding +Voting Securities immediately prior to such Business Combination will beneficially own, directly or indirectly, more than 40% of, respectively, the then outstanding shares of common stock and the +combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination +(including, without +limitation, a corporation which as a result of such transaction will own the Company through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to +such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be and (ii) at least a majority of the members of the board of +directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, +providing for such Business Combination or were elected, appointed or nominated by the Board; or +92 +2019 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +ANNEX A: 2019 EQUITY INCENTIVE PLAN +4. the +closing of (i) a complete liquidation or dissolution of the Company or, (ii) the sale or other disposition of all or substantially all of the assets +of the Company, other than to a corporation, with respect to which following such sale or other disposition, (A) more than 40% of, respectively, the then outstanding shares of common stock of +such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, +directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting +Securities immediately prior to such sale or other disposition in substantially the same proportion as their ownership, immediately prior to such sale or other disposition, of the Outstanding Company +Common Stock and Outstanding Company Voting Securities, as the case may be, and (B) at least a majority of the members of the board of directors of such corporation were members of the +Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such sale or other disposition of assets of the Company or were elected, appointed +or nominated by the Board. +If +required for compliance with Section 409A of the Code, in no event will a Change in Control be deemed to have occurred if the transaction is not also a "change in ownership or +effective control of" the Company or a "change in the ownership of a substantial portion of the assets of" the Company as determined under Treasury Regulation Section 1.409A-3(i)(5). +(h) " Code " shall mean the Internal Revenue Code of 1986, as amended. +(i) " Common Stock " shall mean the common stock of the Company, par value $0.01 per share, and such other securities or +property as may become the subject of Awards under this Plan pursuant to an adjustment made under Section 8.1. +(j) " Company " shall mean Cimarex Energy Co., a Delaware corporation. +(k) " Disability " shall mean, unless otherwise provided in an employment, consulting or other services agreement, if any, or +Award Agreement between the Participant and the Company or an Affiliate, the Participant (i) is unable to engage in any substantial gainful activity by reason of any medically determinable +physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or (ii) is, by reason of any +medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income +replacement benefits for a period of not less than 3 months under an accident and health plan covering employees of the Company. +(l) " Effective Date " shall mean the date on which this Plan is approved by the stockholders of the Company. +(m) " Eligible Person " shall have the meaning set forth in Section 5 hereof. +(n) " Exchange Act " shall mean the Securities Exchange Act of 1934, as amended. +Cimarex +Energy +Co. +93 +Table of Contents +ANNEX A: 2019 EQUITY INCENTIVE PLAN +(o) " Fair Market Value " shall mean, unless otherwise determined by the Committee, the fair market value of a share of +Common Stock as of a particular date, determined as follows: (i) the closing sale price reported for such share of Common Stock on the national securities exchange or national market system on +which such stock is principally traded, or if no sale of shares of Common Stock is reported for such trading day, on the next preceding day on which a sale was reported, or (ii) if the shares +of Common Stock are not then listed on a national securities exchange or national market system, or the value of such shares is not otherwise determinable, such value as determined by the Committee in +good faith in its sole discretion consistent with the requirements under Section 409A of the Code. +(p) " Incentive Stock Option " or " ISO " shall mean an incentive stock option +within the meaning of Section 422 of the Code. +(q) " Non-Qualified Stock Option " or " NSO " shall mean an Option other than +an Incentive Stock Option. +(r) " Option " shall mean a compensatory stock option granted pursuant to Section 6.1.1. +(s) " Other-Stock Based Award " shall mean a stock-based Award issued pursuant to Section 6.1.7. +(t) " Participant " shall mean any Eligible Person that has been issued an Award under the Plan. +(u) " Performance Stock Unit " or " PSU " shall mean a performance stock unit +Award issued pursuant to Section 6.1.5. +(v) " Plan " shall have the meaning set forth in Section 1 hereof. +(w) " Prior Plan " shall mean the Cimarex Energy Co. 2014 Equity Incentive Plan, as amended. +(x) " Restricted Stock " shall mean shares of forfeitable Common Stock issued pursuant to Section 6.1.3. +(y) " Restricted Stock Unit " or " RSU " shall mean a restricted stock unit +issued pursuant to Section 6.1.4. +(z) " Section 409A " shall mean section 409A of the Code and related Treasury regulations and pronouncements +thereunder. +(aa) " Securities Act " shall mean the Securities Act of 1933, as amended. +(bb) " Share Limit " shall have the meaning set forth in Section 4.1. +(cc) " Stock Appreciation Right " or " SAR " shall mean a stock appreciation +right granted pursuant to Section 6.1.2. +94 +2019 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +ANNEX A: 2019 EQUITY INCENTIVE PLAN +(dd) " Subsidiary " shall mean any corporation or other entity controlled by the Company directly or indirectly though one or +more intermediaries. +2.2 Construction . Except where otherwise +indicated by the context, any masculine term used herein also shall include the feminine, the plural shall include the singular, and the singular shall include the plural. +3. PLAN ADMINISTRATION +3.1 Plan Administrator . This Plan shall be +administered by, and all Awards under this Plan shall be authorized by, the Administrator. Any committee appointed by the Board to act as the Administrator shall be comprised solely of one or more +directors or such other number of directors as may be required under applicable law. A committee may delegate some or all of its authority to another committee so constituted. The Board or a committee +comprised solely of directors may also delegate, to the extent permitted by applicable law, to one or more officers of the Company, its powers under this Plan (a) to determine the Eligible +Persons who will receive grants of Awards under this Plan, and (b) to determine the number of shares subject to, and the other terms and conditions of, such Awards. The Board may delegate +different levels of authority to different committees with administrative and grant authority under this Plan. Unless otherwise provided in the bylaws of the Company or the applicable charter of any +Administrator: (a) a majority of the members of the acting Administrator shall constitute a quorum, and (b) the affirmative vote of a majority of the members present assuming the +presence of a quorum or the unanimous written consent of the members of the Administrator shall constitute due authorization of an action by the acting Administrator. +Award +grants, and transactions in or involving Awards, intended to be exempt under Rule 16b-3 under the Exchange Act, must be duly and timely authorized by the Board or a +committee consisting solely of two or more non-employee directors (as this requirement is applied under Rule 16b-3 promulgated under the Exchange Act). To the extent required by any applicable +stock exchange, this Plan shall be administered by a committee composed entirely of independent directors (as defined by the rules of the applicable stock exchange). Awards granted to non-employee +directors shall not be subject to the discretion of any officer or employee of the Company and shall be administered exclusively by the Board or a committee consisting solely of independent directors. +3.2 Powers of the Administrator . Subject to the +express provisions of this Plan, the Administrator is authorized and empowered to do all things necessary or desirable in connection with the authorization of Awards and the administration of this +Plan (in the case of a committee or delegation to one or more officers, within the authority delegated to that committee or person(s)), including, without limitation, the authority to: +(a) determine +eligibility and, from among those persons determined to be eligible, the particular Eligible Persons who will receive Awards under this Plan; +(b) grant +Awards to Eligible Persons, determine the price at which securities will be offered or Awarded and the number of securities to be offered or Awarded to any of +such persons, determine the other specific terms and conditions of such Awards consistent with the express limits of this Plan, establish the installments (if any) in which such Awards shall become +exercisable or shall vest (which may include, without limitation, performance and/or time-based schedules), or determine that no delayed exercisability or vesting is required, establish any applicable +performance targets, and establish the events of termination or reversion of such Awards; +Cimarex +Energy +Co. +95 +Table of Contents +ANNEX A: 2019 EQUITY INCENTIVE PLAN +(c) approve +the forms of Award agreements (which need not be identical either as to type of Award or among Participants); +(d) construe +and interpret this Plan and any Award Agreements defining the rights and obligations of the Company, its Subsidiaries, and Participants under this Plan, +further define the terms used in this Plan, and prescribe, amend and rescind rules and regulations relating to the administration of this Plan or the Awards granted under this Plan; +(e) cancel, +modify, or waive the Company's rights with respect to, or modify, discontinue, suspend, or terminate any or all outstanding Awards, subject to any required +consent under Section 10.5.5; +(f) accelerate +or extend the vesting or exercisability or extend the term of any or all such outstanding Awards (in the case of Options or Stock Appreciation Rights, +within the maximum seven-year term of such Awards) in such circumstances as the Administrator may deem appropriate (including, without limitation, in connection with a termination of employment or +services or other events of a personal nature) subject to any required consent under Section 10.5.5; +(g) adjust +the number of shares of Common Stock subject to any Award, adjust the price of any or all outstanding Awards or otherwise change previously imposed terms and +conditions, in such circumstances as the Administrator may deem appropriate, in each case subject to compliance with applicable stock exchange requirements, Sections 4 and 10.5.5, and provided +that in no case (except due to an adjustment contemplated by Section 8) shall the terms of any outstanding Awards be amended (by amendment, cancellation and regrant, or other means) to reduce +the per share exercise or base price of any outstanding Option or Stock Appreciation Right or other Award granted under this Plan, or be exchanged for cash, other Awards or Option or Stock +Appreciation Rights with an exercise price that is less than the per share exercise price of the original Option or Stock Appreciation Rights, without stockholder approval, and further provided that +any adjustment or change in terms made pursuant to this Section 3.2(g) shall be made in a manner that, in the good faith determination of the Administrator will not likely result in the +imposition of additional taxes or interest under Section 409A of the Code; +(h) determine +the date of grant of an Award, which may be a designated date after but not before the date of the Administrator's action (unless otherwise designated by the +Administrator, the date of grant of an Award shall be the date upon which the Administrator took the action granting an Award); +(i) determine +whether, and the extent to which, adjustments are required pursuant to Section 8 hereof and authorize the termination, conversion, substitution, +acceleration or succession of Awards upon the occurrence of an event of the type described in Section 8; +(j) acquire +or settle rights under Awards in cash, stock of equivalent value, or other consideration, subject to the provision of the Plan; and +(k) determine +the Fair Market Value of the Common Stock or Awards under this Plan from time to time and/or the manner in which such value will be determined. +96 +2019 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +ANNEX A: 2019 EQUITY INCENTIVE PLAN +3.3 Binding Determinations. Any action taken by, +or inaction of, the Company, any Subsidiary, or the Administrator relating or pursuant to this Plan and within its authority hereunder or under applicable law shall be within the absolute discretion +of that entity or body and shall be conclusive and binding upon all persons. Neither the Board, the Administrator, nor any Board committee, nor any member thereof or person acting at the direction +thereof, shall be liable for any act, omission, interpretation, construction or determination made in good faith in connection with this Plan (or any Award made under this Plan), and all such persons +shall be entitled to indemnification and reimbursement by the Company in respect of any claim, loss, damage or expense (including, without limitation, legal fees) arising or resulting therefrom to the +fullest extent permitted by law. The foregoing right of indemnification shall be in addition to any right of indemnification set forth in the Company's certificate of incorporation and bylaws, as the +same may be amended from time to time, or under any directors and officers liability insurance coverage or written indemnification agreement with the Company that may be in effect from time to time. +3.4 Reliance on Experts. In making any +determination or in taking or not taking any action under this Plan, the Administrator may obtain and may rely upon the advice of experts, including professional advisors to the Company. The +Administrator shall not be liable for any such action or determination taken or made or omitted in good faith based upon such advice. +3.5 Delegation of Non-Discretionary Functions. In +addition to the ability to delegate certain grant authority to officers of the Company as set forth in Section 3.1, the Administrator may also delegate ministerial, non-discretionary functions +to individuals who are officers or employees of the Company or any of its Subsidiaries or to third parties. +4. SHARES OF COMMON STOCK SUBJECT TO THE PLAN; SHARE LIMIT +4.1 Shares of Common Stock Subject to the Plan; Share +Limit. Subject to the adjustment as provided in Sections 8.1 and 10.9, the maximum number of shares of Common Stock available for issuance under the +Plan (the " Share Limit ") will be equal to the sum of (a) 5,800,000 shares of Common Stock plus (b) the number of shares of Common Stock +available for future Awards under the Prior Plan as of the Effective Date of this Plan plus (c) such additional shares of Common Stock that become available under the Prior Plan pursuant to +Section 4.3 thereof. Subject to adjustment as provided in Section 8.1, 5,800,000 shares of Common Stock shall be available under the Plan for issuance as Incentive Stock Options. Common +Stock issue under the Plan shall be either authorized but unissued shares or, to the extent permitted by applicable, shares of Common Stock that have been reacquired by the Company or any Subsidiary. +4.2 Counting of Shares. The Administrator may +adopt reasonable counting procedures to ensure appropriate counting and to avoid double counting (as, for example, in the case of tandem or substitute Awards) as it may deem necessary or desirable in +its sole discretion. For each Share delivered pursuant to an Option or a Stock Appreciation Right, the number of shares available for issuance under the Plan shall be reduced by one share. For each +share delivered pursuant to an Award other than an Option or Stock Appreciation Right, the number of shares available for issuance under the Plan shall be reduced by 2.38 shares. Shares shall be +counted against those reserved to the extent shares have been delivered pursuant to an Award and are no longer subject to a substantial risk of forfeiture. Accordingly, to the extent that an Award +under the Plan, in whole or in part, is canceled, expired, forfeited, settled in cash, or otherwise terminated without delivery of shares to the Participant, the shares retained by or returned to the +Company will not be deemed to have been delivered under the Plan, as applicable, and will be deemed to remain available under this Plan in the same amount as they otherwise would have counted against +the limit Section forth in Section 4.1. Notwithstanding the foregoing, +Cimarex +Energy +Co. +97 +Table of Contents +ANNEX A: 2019 EQUITY INCENTIVE PLAN +shares +that are withheld from such an Award or separately surrendered by the Participant in payment of the exercise price or taxes relating to such an Award, and the total number of shares subject to +the exercised portion of a stock-settled SAR (regardless of the actual lesser of number shares delivered to the Participant), shall be deemed to have been issued hereunder and shall reduce the number +of shares remaining available for issuance under the Plan. +4.3 Reservation of Shares; No Fractional +Shares. The Company shall at all times reserve a number of shares of Common Stock sufficient to cover the Company's obligations and contingent obligations to +deliver shares with respect to Awards then outstanding under this Plan (exclusive of any dividend equivalent obligations to the extent the Company has the right to settle such rights in cash). No +fractional shares shall be delivered under this Plan. The Administrator may pay cash in lieu of any fractional shares in settlements of Awards under this Plan. +5. ELIGIBILITY +5.1 Eligible Persons . The Administrator may grant +Awards under this Plan only to those persons that the Administrator determines to be Eligible Persons. An " Eligible Person " is any person who is either: +(a) an officer (whether or not a director) or employee of the Company or one of its Subsidiaries; (b) a non-employee director of the Company or one of its Subsidiaries; or (c) an +individual consultant who renders bona fide services (other than services in connection with the offering or sale of securities of the Company or one of its Subsidiaries in a capital-raising +transaction or as a market maker or promoter of securities of the Company or one of its Subsidiaries) to the Company or one of its Subsidiaries and who is selected to participate in this Plan by the +Administrator; provided, however, that a person who is otherwise an Eligible Person under clause (c) above may participate in this Plan only if +such participation would not adversely affect either the Company's eligibility to use Form S-8 to register under the Securities Act, the offering and sale of shares issuable under this Plan by +the Company, or the Company's compliance with any other applicable laws. +5.2 Participation . The Administrator shall, in +its sole and absolute discretion, select from among the Eligible Employees those individuals who shall receive Awards and become Participants under the Plan. There is no right of any Eligible Person +to receive an Award under the Plan, and the Administrator has absolute discretion to treat Eligible Employees differently from one another under the Plan. Receipt of an Award by a Participant shall +not create the right to receive future Awards under the Plan, but a Participant who has been granted an Award may, if otherwise eligible, be granted additional Awards if the Administrator shall so +determine. +6. AWARDS +6.1 Type and Form of Awards. The Administrator +shall determine the type or types of Award(s) to be made to each selected Eligible Person. Awards may be granted singly, in combination or in tandem. Awards also may be made in combination or in +tandem with, in replacement of, as alternatives to, or as the payment form for grants or rights under any other employee or compensation plan of the Company or one of its Subsidiaries. The types of +Awards that may be granted under this Plan are: +6.1.1 Stock Options. An Option is the grant of a +right to purchase a specified number of shares of Common Stock during a specified period at a fixed exercise price as determined by the Administrator. +98 +2019 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +ANNEX A: 2019 EQUITY INCENTIVE PLAN +(a) General Option Provisions. Options may only be granted to +Eligible Persons for whom the Company would be deemed to be an "eligible issuer of service recipient stock," as defined in Treasury Regulation 1.409A-1(b)(5)(iii)(E). An Option may be intended +to be an Incentive Stock Option or a Nonqualified Stock Option. The Award agreement for an Option will indicate if the Option is intended as an ISO; otherwise it will be deemed to be a Nonqualified +Stock Option. The maximum term of each Option (ISO or NSO) shall be seven (7) years. The per share exercise price for each Option shall be not less than 100% of the Fair Market Value of a share +of Common Stock on the date of grant of the Option. Each Option shall become exercisable at such times and under such conditions and shall be subject to such other terms as may be determined by the +Administrator in its discretion. When an Option is exercised, the exercise price for the shares to be purchased shall be paid in full in cash or such other method permitted by the Administrator +consistent with Section 6.4. +(b) Additional Rules Applicable to ISOs. Notwithstanding the +general option rules set forth in subsection (a), above, the following rules shall apply to options intended to qualify as ISOs. ISOs may only be granted to employees of the Company or one of +its subsidiaries (for this purpose, the term "subsidiary" is used as defined in Section 424(f) of the Code, which generally requires an unbroken chain of ownership of at least 50% of the total +combined voting power of all classes of stock of each subsidiary in the chain beginning with the Company and ending with the subsidiary in question). To the extent that the aggregate Fair Market Value +(determined at the time of grant of the applicable option) of stock with respect to which ISOs first become exercisable by a Participant in any calendar year exceeds $100,000, taking into account both +Common Stock subject to ISOs under this Plan and stock subject to ISOs under all other plans of the Company or one of its Subsidiaries (or any parent or predecessor corporation to the extent required +by and within the meaning of Section 422 of the Code and the regulations promulgated thereunder), such options shall be treated as Nonqualified Stock Options. In reducing the number of options +treated as ISOs to meet the $100,000 limit, the most recently granted options shall be reduced first. To the extent a reduction of simultaneously granted options is necessary to meet the $100,000 +limit, the Administrator may, in the manner and to the extent permitted by law, designate which shares of Common Stock are to be treated as shares acquired pursuant to the exercise of an ISO. There +shall be imposed in any Award agreement relating to ISOs such other terms and conditions as from time to time are required in order that the option be an "incentive stock option" as that term is +defined in Section 422 of the Code. No ISO may be granted to any person who, at the time the option is granted, owns (or is deemed to own under Section 424(d) of the Code) shares of +outstanding Common Stock possessing more than 10% of the total combined voting power of all classes of stock of the Company, unless the exercise price of such option is at least 110% of the Fair +Market Value of the stock subject to the option and such option by its terms is not exercisable after the expiration of five years from the date such option is granted. +6.1.2 Stock Appreciation Rights. A Stock +Appreciation Right or "SAR" is an Award that entitles the Participant to receive, upon exercise of the SAR, a payment in cash and/or Common Stock or a combination of the two, equal to (or having a +Fair Market Value equal to) the product of (x) number of SARs being exercised multiplied by (y) the excess of (i) the Fair Market Value of a share of Common Stock on the date the +SAR is exercised, over (ii) the "base price" applicable to the SAR. SARs may only be granted to Eligible Persons for whom the Company would be deemed to be an "eligible issuer of service +recipient stock," as defined in Treasury Regulation 1.409A-1(b)(5)(iii)(E). The base price of the SAR shall +Cimarex +Energy +Co. +99 +Table of Contents +ANNEX A: 2019 EQUITY INCENTIVE PLAN +be +determined by the Administrator but shall be not less than the Fair Market Value of the Company's Common Stock on the date of grant. The maximum term of a SAR shall be seven (7) years. SARs +shall become exercisable at such times and under such conditions and shall be subject to such other terms as may be determined by the Administrator in its discretion consistent with the terms and +conditions of the Plan. +6.1.3 Restricted Stock. +(a) General Restricted Stock Provisions. Restricted Stock is +Common Stock subject to such restrictions on transferability, risk of forfeiture and other restrictions, if any, as the Administrator may impose, which restrictions may lapse separately or in +combination at such times, under such circumstances (including based on achievement of performance goals and/or future service requirements), in such installments or otherwise, as the Administrator +may determine at the date of grant or thereafter. Except to the extent restricted under the terms of this Plan and the applicable Award Agreement relating to the Restricted Stock, a Participant +granted Restricted Stock shall have all of the rights of a stockholder of the Company, including the right to vote the Restricted Stock and the right to receive dividends thereon (subject to the +provisions of Section 6.1.3(c), below). +(b) Certificates for Shares. Shares of Restricted Stock granted +under this Plan may be evidenced in such manner as the Administrator shall determine. If certificates representing Restricted Stock are registered in the name of the Participant, the Administrator may +require that such certificates bear an appropriate legend referring to the terms, conditions and restrictions applicable to such Restricted Stock, that the Company retain physical possession of the +certificates, and that the Participant deliver a stock power to the Company, endorsed in blank, relating to the Restricted Stock. The Administrator may require that shares of Restricted Stock are held +in escrow until all restrictions lapse. +(c) Dividends and Splits. As a +condition to the grant of an +Award of Restricted Stock, any stock distributed in connection with a stock split or stock dividend, and any other property distributed as a dividend, shall be subject to restrictions and a risk of +forfeiture to the same extent as the Restricted Stock with respect to which such dividend or distribution was made. In addition, any cash dividends paid on shares of Restricted Stock may be paid out +on a current basis or may be subject to restrictions and a risk of forfeiture to the same extent as the Restricted Stock with respect to which such cash dividend relates, and, subject to applicable +law, the Administrator may require or permit a Participant to elect that any cash dividends paid +on Restricted Stock be automatically reinvested in additional shares of Restricted Stock or applied to the purchase of additional Awards under this Plan. +6.1.4 Restricted Stock Units. +(a) Grant of Restricted Stock Units. A restricted stock unit, +or "RSU", represents the right to receive from the Company on the respective scheduled vesting or payment date for such RSU, one share of Common Stock or, if specified in the applicable Award +agreement, the Fair Market Value of one share of Common Stock paid in cash. The vesting or payment of an Award of RSUs may be subject to the attainment of specified performance goals or targets, +100 +2019 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +ANNEX A: 2019 EQUITY INCENTIVE PLAN +forfeitability +provisions and such other terms and conditions as the Administrator may determine, subject to the provisions of this Plan. +(b) Dividend Equivalent Accounts. If (and only if) required by +the applicable Award Agreement, prior to the expiration of the applicable vesting period of an RSU, the Administrator shall pay dividend equivalent rights with respect to RSUs, in which case the +Company shall establish an account for the Participant and reflect in that account any securities, cash or other property comprising any dividend or property distribution with respect to the shares of +Common Stock underlying each RSU. Each amount or other property credited to any such account may be immediately vested or may be subject to the same vesting conditions as the RSU to which it relates, +as determined by the Administrator. In addition, subject to applicable law, the Administrator may require or permit a Participant to elect that any such dividend equivalent amounts credited to the +Participant's account be automatically deemed reinvested in additional RSUs or applied to the purchase of additional Awards under the Plan. The Participant shall be paid the amounts or other property +credited to such dividend equivalent account at the time set forth in the Award Agreement. +(c) Rights as a Stockholder. Subject to the restrictions +imposed under the terms and conditions of this Plan and the applicable Award Agreement, each Participant receiving RSUs shall have no rights as a stockholder of the Company with respect to such RSUs +until such time as shares of Common Stock are issued to the +Participant. In the event an RSU is settled in cash, the Participant receiving RSUs shall never receive stockholder rights with respect to such Award. No shares of Common Stock shall be issued at the +time a RSU is granted, and the Company will not be required to set aside a fund for the payment of any such Award. +6.1.5 Performance Stock Units. +(a) Grant of Performance Stock Units. A Performance Stock Unit, +or "PSU," is a performance-based Award that entitles the Participant to receive shares of Common Stock or, if specified in the Award Agreement, the Fair Market Value of such shares of Common Stock +paid in cash, based on the attainment of one or more performance goals. Each Award of PSUs shall designate a target number of PSUs covered by the Award, with the actual number of shares of Common +Stock earned (if any) to be based on a formula set forth in the Award Agreement related to the attainment of one or more performance goals set forth in the Award Agreement. +(b) Dividend Equivalent Accounts. If (and only if) required by +the applicable Award Agreement, the Administrator shall pay dividend equivalent rights with respect to PSUs, in which case the Participant shall be entitled to a cash payment with respect to each PSU +earned and payable in an amount based on the ordinary cash dividends that would have been payable to Participant had Participant been the owner of a number of actual shares of Common Stock equal to +the number of PSUs earned, from the date of grant of the PSU Award through the date the PSU is paid. If so determined by the Administrator and set forth in the applicable Award Agreement, such cash +amount may be credited with earnings or losses as if deemed reinvested in Company Common Stock or as if used to purchase additional Awards under the Plan. The amount payable shall be made in a single +lump sum on the date on which payment is made in respect of the related PSUs. +Cimarex +Energy +Co. +101 +Table of Contents +ANNEX A: 2019 EQUITY INCENTIVE PLAN +(c) Rights as a Stockholder. Subject to the restrictions +imposed under the terms and conditions of this Plan and the applicable Award Agreement, each Participant receiving PSUs shall have no rights as a stockholder of the Company with respect to such PSUs +until such time as shares of Common Stock are issued to the Participant. In the event a PSU is settled in cash, the Participant receiving PSUs shall never receive stockholder rights with respect to +such Award. No shares of Common Stock shall be issued at the time a PSU is granted, and the Company will not be required to set aside a fund for the payment of any such Award. +6.1.6 Cash Awards. The Administrator may, +from time to time, +subject to the provisions of the Plan and such other terms and conditions as it may determine, grant cash bonuses (including without limitation, discretionary Awards, Awards based on objective or +subjective performance criteria, Awards subject to other vesting criteria or Awards granted consistent with Section 6.1.7 below). Cash Awards shall be Awarded in such amount and at such times +during the term of the Plan as the Administrator shall determine. +6.1.7 Other Awards. The other types of +Awards that may be +granted under this Plan include: (a) stock bonuses or similar rights to purchase or acquire shares, whether at a fixed or variable price or ratio related to the Common Stock (subject to +compliance with applicable laws), upon the passage of time, the occurrence of one or more events, or the satisfaction of performance criteria or other conditions, or any combination thereof; or +(b) any similar securities or rights with a value derived from the value of or related to the Common Stock and/or returns thereon. +6.2 Award Agreements. Each Award (other than cash +Awards described in Section 6.1.6) shall be evidenced by a written or electronic Award Agreement in the form approved by the Administrator and, if required by the Administrator, executed or +accepted by the recipient of the Award. The Administrator may authorize any officer of the Company (other than the particular Award recipient) to execute any or all Award Agreements on behalf of the +Company (electronically or otherwise). The Award agreement shall set forth the material terms and conditions of the Award as established by the Administrator consistent with the express limitations of +this Plan. +6.3 Deferrals and Settlements. Except as +otherwise set forth herein, payment of Awards may be in the form of cash, Common Stock, other Awards or combinations thereof as the Administrator shall determine, and with such restrictions as it may +impose. The Administrator may also require or permit Participants to elect to defer the issuance of shares of Common Stock or the settlement of Awards in cash under such rules and procedures as it may +establish under this Plan. The Administrator may also provide that deferred settlements include the payment or crediting of interest or other earnings on the deferral amounts, or the payment or +crediting of dividend equivalents where the deferred amounts are denominated in shares. All mandatory or elective deferrals of the issuance of shares of Common Stock or the settlement of cash Awards +shall be structured in a manner that is intended to comply with the requirements of Section 409A of the Code. +6.4 Consideration for Common Stock or Awards. The +purchase price for any Award granted under this Plan or the Common Stock to be delivered pursuant to an Award, as applicable, may be paid by means of any lawful consideration as determined by the +Administrator and subject to compliance with applicable laws, including, without limitation, one or a combination of the following methods: +(a) services +rendered by the recipient of such Award; +102 +2019 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +ANNEX A: 2019 EQUITY INCENTIVE PLAN +(b) cash, +check payable to the order of the Company, or electronic funds transfer; +(c) notice +and third-party payment in such manner as may be authorized by the Administrator; +(d) the +delivery of previously owned shares of Common Stock that are fully vested and unencumbered; +(e) by +a reduction in the number of shares otherwise deliverable pursuant to the Award; or +(f) subject +to such procedures as the Administrator may adopt, pursuant to a "cashless exercise" with a third party who provides financing for the purposes of (or who +otherwise facilitates) the purchase or exercise of Awards. +In +the event that the Administrator allows a Participant to exercise an Award by delivering shares of Common Stock previously owned by such Participant and unless otherwise expressly +provided by the Administrator, any shares delivered which were initially acquired by the Participant from the Company (upon exercise of an Option or otherwise) must have been owned by the Participant +at least six months as of the date of delivery (or such other period as may be required by the Administrator in order to avoid adverse accounting treatment). Shares of Common Stock used to satisfy the +exercise price of an Option shall be valued at their Fair Market Value on the date of exercise. The Company will not be obligated to deliver any shares unless and until it receives full payment of the +exercise or purchase price therefor and any related withholding obligations under Section 9.1, and any other conditions to exercise or purchase, as established from time to time by the +Administrator have been satisfied. Unless otherwise expressly provided in the applicable Award Agreement, the Administrator may at any time eliminate or limit a Participant's ability to pay the +purchase or exercise price of any Award by any method other than cash payment to the Company. +6.5 Minimum Vesting Schedule. Except as provided +below, all Awards granted under the Plan shall have a minimum one year cliff vesting schedule meaning that no portion of any Award may be scheduled to vest prior to one year after the date of grant of +such Award. Notwithstanding the foregoing, up to five percent (5%) of the total number of shares of Common Stock authorized by the Board and the stockholders for issuance under the Plan may be granted +pursuant to Awards not subject to the minimum vesting schedule described above. The Administrator may adopt reasonable counting procedures to determine whether the five percent (5%) limit in the +preceding sentence has been attained. The Administrator may also apply reasonable rules and rounding conventions to determine whether an Award complies with the above-referenced minimum vesting +schedule. +6.6 Transfer Restrictions. +6.6.1 Limitations on Exercise and Transfer. Unless otherwise +expressly provided in (or pursuant to) this Section 6.6, by applicable law and by the Award agreement, as the same may be amended, (a) all Awards are non-transferable and shall not be +subject in any manner to sale, transfer, anticipation, alienation, assignment, pledge, encumbrance or charge; (b) Awards shall be exercised only by the Participant; and (c) amounts +payable or shares issuable pursuant to any Award shall be delivered only to (or for the account of) the Participant. +Cimarex +Energy +Co. +103 +Table of Contents +ANNEX A: 2019 EQUITY INCENTIVE PLAN +6.6.2 Exceptions. The Administrator may +permit Awards to be +exercised by and paid to, or otherwise transferred to, other persons or entities pursuant to such conditions and procedures, including limitations on subsequent transfers, as the Administrator may, in +its sole discretion, establish in writing (provided that any such transfers of ISOs shall be limited to the extent permitted under the federal tax laws governing ISOs). Any permitted transfer shall be +subject to compliance with applicable federal and state securities laws. +6.6.3 Further Exceptions to Limits on +Transfer. The exercise and transfer restrictions in Section 6.6.1 shall not apply to: +(a) transfers +to the Company, +(b) the +designation of a beneficiary to receive benefits in the event of the Participant's death or, if the Participant has died, transfers to or exercise by the +Participant's beneficiary, or, in the absence of a validly designated beneficiary, transfers by will or the laws of descent and distribution, +(c) subject +to any applicable limitations on ISOs, transfers to a family member (or former family member) pursuant to a domestic relations order if approved or ratified by +the Administrator, +(d) subject +to any applicable limitations on ISOs, if the Participant has suffered a Disability, permitted transfers or exercises on behalf of the Participant by his or her +legal representative, or +(e) the +authorization by the Administrator of "cashless exercise" procedures with third parties who provide financing for the purpose of (or who otherwise facilitate) the +exercise of Awards consistent with applicable laws and the express authorization of the Administrator. +6.7 International Awards. One or more Awards may +be granted to Eligible Persons who provide services to the Company or one of its Subsidiaries outside of the United States. Any Awards granted to such persons may, if deemed necessary or advisable by +the Administrator, be granted pursuant to the terms and conditions of any applicable sub-plans, if any, appended to this Plan and approved by the Administrator. +6.8 Dividend and Dividend +Equivalents. Notwithstanding anything to the contrary herein, in no event may accrued dividends or dividend equivalents with respect to any Award issued under the +Plan that is subject to performance-based vesting be paid prior to the vesting of such Award. +7. EFFECT OF TERMINATION OF SERVICE ON AWARDS +7.1 Termination of Employment. +7.1.1 Administrator Determination. The +Administrator shall +establish the effect of a termination of employment or service on the rights and benefits under each Award under this Plan and +104 +2019 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +ANNEX A: 2019 EQUITY INCENTIVE PLAN +in +so doing may make distinctions based upon, inter alia, the cause of termination and type of Award. If the Participant is not an employee of the Company or one of its Subsidiaries and provides other +services to the Company or one of its Subsidiaries, the Administrator shall be the sole judge for purposes of this Plan (unless a contract or the Award agreement otherwise provides) of whether the +Participant continues to render services to the Company or one of its Subsidiaries and the date, if any, upon which such services shall be deemed to have terminated. +7.1.2 Stock Options and SARs. For Awards of +Options or SARs, +unless the Award Agreement provides otherwise, the exercise period of such Options or SARs shall expire: (1) three months after the last day that the Participant is employed by or provides +services to the Company or a Subsidiary ( provided however , that in the event of the Participant's death during this period, those persons entitled to +exercise the Option or SAR pursuant to the laws of descent and distribution shall have one year following the date of death within which to exercise such Option or SAR); (2) in the case of a +Participant whose termination of employment is due to death or Disability (as defined in the applicable Award agreement), 12 months after the last day that the Participant is employed by or +provides services to the Company or a Subsidiary; and (3) immediately upon a Participant's termination for Cause. The Administrator will, in its absolute discretion, determine the effect of all +matters and questions relating to a termination of employment, including, but not by way of limitation, the question of whether a leave of absence constitutes a termination of employment and whether a +Participant's termination is for Cause. +7.1.3 Other Awards. For all other Awards +issued under the Plan, +unless the Award agreement provides otherwise, the portion of such Awards that are unvested at the time that a Participant's employment or service is terminated shall be forfeited and reacquired by +the Company; provided however, the Administrator may provide, by rule or regulation or in any Award agreement, or may determine in any individual case, +that such forfeiture requirement shall be waived in whole or in part. +7.2 Events Not Deemed Terminations of +Service. Unless the express policy of the Company or one of its Subsidiaries, or the Administrator, otherwise provides, the employment relationship shall not be +considered terminated in the case of (a) sick leave, (b) military leave, or (c) any other paid or unpaid leave of absence authorized by the Company or one of its Subsidiaries, or +the Administrator; provided that unless reemployment upon the expiration of such leave is guaranteed by contract or law, such leave is for a period of +not more than 3 months. In the case of any employee of the Company or one of its Subsidiaries on an approved leave of absence, continued vesting of the Award while on leave from the employ of +the Company or one of its Subsidiaries may be suspended until the employee returns to service, unless the +Administrator otherwise provides or applicable law otherwise requires. In no event shall an Award be exercised after the expiration of the term set forth in the Award agreement. +7.3 Effect of Change of Subsidiary Status. For +purposes of this Plan and any Award, if an entity ceases to be a Subsidiary of the Company, a termination of employment or service shall be deemed to have occurred with respect to each Eligible Person +in respect of such Subsidiary who does not continue as an Eligible Person in respect of the Company or another Subsidiary that continues as such after giving effect to the transaction or other event +giving rise to the change in status. +Cimarex +Energy +Co. +105 +Table of Contents +ANNEX A: 2019 EQUITY INCENTIVE PLAN +8. ADJUSTMENTS; ACCELERATION +8.1 Adjustments. Upon or in contemplation of +(a) any reclassification, recapitalization, stock split (including a stock split in the form of a stock dividend) or reverse stock split, (b) any merger, arrangement, combination, +consolidation, or other reorganization, (c) any spin-off, split-up, or similar extraordinary dividend distribution +in respect of the Common Stock (whether in the form of securities or property), (d) any exchange of Common Stock or other securities of the Company, or (e) any similar unusual or +extraordinary corporate event or transaction affecting the Common Stock, the Administrator shall in such manner, to such extent and at such time as it deems appropriate and equitable in the +circumstances (but subject to compliance with applicable laws and stock exchange requirements) proportionately adjust any or all of (1) the number and type of shares of Common Stock (or other +securities) that thereafter may be made the subject of Awards (including the Share Limit and the limit on the number of Incentive Stock Options issuable under the Plan), (2) the number, amount +and type of shares of Common Stock (or other securities or property) subject to any or all outstanding Awards, (3) the grant, purchase, or exercise price (which term includes the base price of +any SAR or similar right) of any or all outstanding Awards, and (4) the securities, cash or other property deliverable upon exercise or payment of any outstanding Awards. Any adjustment made +pursuant to this Section 8.1 shall be made in a manner that, in the good faith determination of the Administrator, will not likely result in the imposition of additional taxes or interest under +Section 409A of the Code. With respect to any Award of an ISO, the Administrator may make an adjustment that causes the option to cease to qualify as an ISO without the consent of the affected +Participant. +8.2 Change in Control. In the event of a Change +in Control: (i) with respect to Awards that are subject to a time-based vesting schedule, any unvested portion of such Awards shall become vested in full immediately prior to the Change in +Control, and (ii) with respect to Awards that are subject to performance-based vesting, the performance period for all such Awards shall be deemed to be completed as of the Change in Control, +and the Administrator shall determine the extent to which the Awards have vested based on the results achieved through the date of the Change in Control, including any adjustments necessary to take +into account the truncation of the performance period as a result of the Change in Control. In addition, the Administrator shall have full discretion to take whatever additional actions (not +inconsistent with the previous sentence) that it deems necessary or appropriate with respect to outstanding Awards, including, but not limited to: (i) to provide for the assumption of such +Awards (or portions thereof) or the substitution of such Awards (or portions thereof) with similar awards of the surviving or acquiring company, in a manner designed to comply with Section 409A +of the Code, (ii) to provide for the termination of any Award upon the occurrence of the Change in Control, (iii) to provide for the cash out and cancellation of any Award (or portion +thereof) immediately prior to such Change in Control, which cash out may (in a manner designed to comply with Code Section 409A) be subject to any escrow, earn-out or other contingent or +deferred payment arrangement that is contemplated by such Change in Control, and (iv) to take any other actions as the Administrator deems necessary or advisable in connection with such Change +in Control transaction. The Administrator may take different actions with respect to different Participants under the Plan, different Awards under the Plan, and different portions of Awards granted +under the Plan. +9. TAX PROVISIONS +9.1 Tax Withholding. Upon any exercise, vesting, +or payment of any Award, the Company or one of its Subsidiaries shall have the right at its option to: +(a) require +the Participant (or the Participant's personal representative or beneficiary, as the case may be) to pay or provide for payment of at least the minimum amount +of any taxes which the +106 +2019 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +ANNEX A: 2019 EQUITY INCENTIVE PLAN +Company +or one of its Subsidiaries may be required to withhold with respect to such Award event or payment; or +(b) deduct +from any amount otherwise payable in cash to the Participant (or the Participant's personal representative or beneficiary, as the case may be) the minimum amount +of any taxes which the Company or one of its Subsidiaries may be required to withhold with respect to such cash payment. +In +any case where a tax is required to be withheld in connection with the delivery of shares of Common Stock under this Plan, the Administrator may in its sole discretion (subject to +Section 10.1) grant (either at the time of the Award or thereafter) to the Participant the right to elect, pursuant to such rules and subject to such conditions as the Administrator may +establish, to have the Company reduce the number of shares to be delivered by (or otherwise reacquire) the appropriate number of shares, valued in a consistent manner at their Fair Market Value or at +the sales price in accordance with authorized procedures for cashless exercises, necessary to satisfy the applicable withholding obligation on exercise, vesting or payment, not in excess of the +maximum statutory rates in the Participant's applicable jurisdictions. +9.2 Requirement of Notification of Code Section 83(b) +Election . If any Participant shall make an election under Code Section 83(b) (to include in gross income in the year of transfer the amounts specified in +Code +Section 83(b)) or under a similar provisions of the laws of a jurisdiction outside the United States, such Participant shall notify the Company of such election within ten (10) days +after filing notice of the election with the Internal Revenue Service or other government authority, in addition to any filing and notification required pursuant to regulations issued under Code +Section 83(b) or other applicable provision. +9.3 Requirement of Notification of Disqualifying +Disposition . If any Participant shall make any disposition of shares of stock delivered pursuant to the exercise of an ISO under the +circumstances described in Code Section 421(b) (relating to certain disqualifying dispositions), such Participant shall notify the Company of such disposition within ten (10) days +thereof. +10. OTHER PROVISIONS +10.1 Compliance with Laws. This Plan, the +granting and vesting of Awards under this Plan, the offer, issuance and delivery of shares of Common Stock, the payment of money under this Plan or under Awards are subject to compliance with all +applicable federal and state laws, rules and regulations and to such approvals by any applicable stock exchange listing, regulatory or governmental authority as may, in the opinion of counsel for the +Company, be necessary or advisable in connection therewith. The person acquiring any securities under this Plan will, if requested by the Company or one of its Subsidiaries, provide such assurances +and representations to the Company or one of its Subsidiaries as the Administrator may deem necessary or desirable to assure compliance with all applicable legal and accounting requirements. +10.2 Future Awards/Other Rights. No person shall +have any claim or rights to be granted an Award (or additional Awards, as the case may be) under this Plan, subject to any express contractual rights (set forth in a document other than this Plan) to +the contrary. +10.3 No Employment/Service Contract. Nothing +contained in this Plan (or in any other documents under this Plan or in any Award) shall confer upon any Eligible Person or other Participant any right to continue in the employ or other service of +the Company or one of its Subsidiaries, constitute any contract or agreement of employment or other service or affect an employee's status as an employee at will, nor shall interfere in any way +Cimarex +Energy +Co. +107 +Table of Contents +ANNEX A: 2019 EQUITY INCENTIVE PLAN +with +the right of the Company or one of its Subsidiaries to change a person's compensation or other benefits, or to terminate his or her employment or other service, with or without cause. Nothing in +this Section 10.3, however, is intended to adversely affect any express independent right of such person under a separate employment or service contract other than an Award agreement. +10.4 Plan Not Funded. Awards payable under this +Plan shall be payable in shares of Common Stock or from the general assets of the Company, and no special or separate reserve, fund or deposit shall be made to assure payment of such Awards. No +Participant, beneficiary or other person shall have any right, title or interest in any fund or in any specific asset (including shares of Common Stock, except as expressly otherwise provided) of the +Company or one of its Subsidiaries by reason of any Award hereunder. Neither the provisions of this Plan (or of any related documents), nor the creation or adoption of this Plan, nor any action taken +pursuant to the provisions of this Plan shall create, or be construed to create, a trust of any kind or a fiduciary relationship between the Company or one of its Subsidiaries and any Participant, +beneficiary or other person. To the extent that a Participant, beneficiary or other person acquires a right to receive payment pursuant to any Award hereunder, such right shall be no greater than the +right of any unsecured general creditor of the Company. +10.5 Effective Date, Termination and Suspension, +Amendments. +10.5.1 Effective Date and Termination. This +Plan was approved +by the Board and shall become effective upon approval by the stockholders of the Company (the " Effective Date "). Unless earlier terminated by the Board, +this Plan shall terminate at the close of business ten years after the date on which it was approved by the Board. After the termination of this Plan either upon such stated expiration date or its +earlier termination by the Board, no additional Awards may be granted under this Plan, but previously granted Awards (and the authority of the Administrator with respect thereto, including the +authority to amend such Awards) shall remain outstanding in accordance with their applicable terms and conditions and the terms and conditions of this Plan. +10.5.2 Board Authorization. The Board may, +at any time, +terminate or, from time to time, amend, modify or suspend this Plan, in whole or in part. No Awards may be granted during any period that the Board suspends this Plan. +10.5.3 Stockholder Approval. To the extent +then required by +applicable law or any applicable stock exchange rule or required to preserve the intended tax consequences of this Plan, or deemed necessary or advisable +by the Board, this Plan and any amendment to this Plan shall be subject to approval by the stockholders of the Company. +10.5.4 Amendments to Awards. Without +limiting any other express +authority of the Administrator under (but subject to) the express limits of this Plan, the Administrator by agreement or resolution may waive conditions of or limitations on Awards to Participants +that the Administrator in the prior exercise of its discretion has imposed, without the consent of a Participant, and (subject to the requirements of Sections 3.2 and 10.5.5) may make other +changes to the terms and conditions of Awards. Any amendment or other action that would constitute a repricing of an Award is subject to the limitations and stockholder approval requirements set forth +in Section 3.2(g). +10.5.5 Limitations on Amendments to Plan and Awards. No +amendment, suspension or termination of this Plan or change of or affecting any outstanding Award shall, without written consent of the Participant, affect in any manner materially adverse to the +Participant any rights or benefits of the +108 +2019 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +ANNEX A: 2019 EQUITY INCENTIVE PLAN +Participant +or obligations of the Company under any Award granted under this Plan. Changes, settlements and other actions contemplated by Section 8 shall not be deemed to constitute changes or +amendments for purposes of this Section 10.5.5. +10.6 Privileges of Stock Ownership. Except as +otherwise expressly authorized by the Administrator or this Plan, a Participant shall not be entitled to any privilege of stock ownership as to any shares of Common Stock not actually delivered to and +held of record by the Participant. Except as expressly provided herein, no adjustment will be made for dividends or other rights as a stockholder of the Company for which a record date is prior to +such date of delivery. +10.7 Governing Law; Construction; Severability. +10.7.1 Choice of Law. This Plan, the Awards, +all documents +evidencing Awards and all other related documents shall be governed by, and construed in accordance with the laws of the State of Delaware. +10.7.2 Severability. If a court of +competent jurisdiction holds +any provision of this Plan invalid and unenforceable, the remaining provisions of this Plan shall continue in effect and the Plan shall be construed and enforced without regard to the illegal or +invalid provision. +10.7.3 Plan Construction. +(a) Rule 16b-3. It is the +intent of the Company that the Awards and transactions permitted by Awards be interpreted in a manner that, in the case of Participants who are or may be subject to Section 16 of the Exchange +Act, qualify, to the maximum extent compatible with the express terms of the Award, for exemption from matching liability under Rule 16b-3 promulgated under the Exchange Act. Notwithstanding +the foregoing, the Company shall have no liability to any Participant for Section 16 consequences of Awards or events under Awards if an Award or event does not so qualify. +(b) Compliance with Section 409A of +the +Code. The Board intends that, except as may be otherwise determined by the Administrator, any Awards under the Plan will be either exempt from or satisfy the +requirements of Section 409A to avoid the imposition of any taxes, including additional income or penalty taxes, thereunder. If the Administrator determines that an Award, Award Agreement, +acceleration, adjustment to the terms of an Award, payment, distribution, deferral election, transaction or any other action or arrangement contemplated by the provisions of the Plan would, if +undertaken, cause a Participant's Award to violate Section 409A, unless the Administrator expressly determines otherwise, such Award, Award Agreement, payment, acceleration, adjustment, +distribution, deferral election, transaction or other action or arrangement shall not be undertaken and the related provisions of the Plan and/or Award Agreement will be deemed modified or, if +necessary, rescinded in order to comply with the requirements of Section 409A to the extent determined by the Administrator without the consent of or notice to the Participant. Notwithstanding +the foregoing, neither the Company nor the Administrator shall have any obligation to take any action to prevent the assessment of any excise tax or penalty on any Participant under +Section 409A. +(c) No Guarantee of Favorable Tax +Treatment. Although the Company intends that Awards under the Plan will be exempt from, or will comply with, the requirements of Section 409A of the Code, +the Company does not warrant that any Award under the Plan will qualify for favorable tax +Cimarex +Energy +Co. +109 +Table of Contents +ANNEX A: 2019 EQUITY INCENTIVE PLAN +treatment +under Section 409A of the Code or any other provision of federal, state, local or foreign law. The Company shall not be liable to any Participant for any tax, interest or penalties +the Participant might owe as a result of the grant, holding, vesting, exercise or payment of any Award under the Plan. +10.8 Captions. Captions and headings are given to +the sections and subsections of this Plan solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of +this Plan or any provision thereof. +10.9 Stock-Based Awards in Substitution for Stock Options or Awards +Granted by Other +Corporation. Awards may be granted to Eligible Persons in substitution for or in connection with an assumption of employee stock options, stock appreciation +right, restricted stock or other stock-based awards granted by other entities to persons who are or who will become Eligible Persons in respect of the Company or one of its Subsidiaries, in connection +with a distribution, arrangement, business combination, merger or other reorganization by or with the granting entity or an affiliated entity, or the acquisition by the Company or one of its +Subsidiaries, directly or indirectly, of all or a substantial part of the stock or assets of the employing entity. The Awards so granted need not comply with other specific terms of this Plan, +provided the Awards reflect only adjustments giving effect to the assumption or substitution consistent with the conversion applicable to the Common Stock in the transaction and any change in the +issuer of the security. Any shares that are delivered and any Awards that are granted by, or become obligations of, the Company, as a result of the assumption by the Company of, or in substitution +for, outstanding Awards previously granted by an acquired company (or previously granted by a predecessor employer (or direct or indirect parent thereof) in the case of persons that become employed by +the Company or one of its Subsidiaries in connection with a business or asset acquisition or similar transaction) shall not be counted against the Share Limit or other limits on the number of shares +available for issuance under this Plan, except as may otherwise be provided by the Administrator at the time of such assumption or substitution or as may be required to comply with the requirements of +any applicable stock exchange. +10.10 Non-Exclusivity of Plan. Nothing in +this Plan shall limit +or be deemed to limit the authority of the Board or the Administrator to grant Awards or authorize any other compensation, with or without reference to the Common Stock, under any other plan or +authority. +10.11 No Corporate Action Restriction. The +existence of this +Plan, the Award agreements and the Awards granted hereunder shall not limit, affect or restrict in any way the right or power of the Board or the stockholders of the Company to make or authorize: +(a) any adjustment, recapitalization, reorganization or other change in the capital structure or business of the Company or any Subsidiary, (b) any merger, arrangement, business +combination, amalgamation, consolidation or change in the ownership of the Company or any Subsidiary, (c) any issue of bonds, debentures, capital, preferred or prior preference stock ahead of +or affecting the capital stock (or the rights thereof) of the Company or any Subsidiary, (d) any dissolution or liquidation of the Company or any Subsidiary, (e) any sale or transfer of +all or any part of the assets or business of the Company or any Subsidiary, or (f) any other corporate act or proceeding by the Company or any Subsidiary. No Participant, beneficiary or any +other person shall have any claim under any Award or Award Agreement against any member of the Board or the Administrator, or the Company or any employees, officers or agents of the Company or any +Subsidiary, as a result of any such action. +10.12 Other Company Benefit and Compensation Programs. Payments +and other benefits received by a Participant under an Award made pursuant to this Plan shall not be deemed a part of a Participant's +compensation for purposes of the determination of benefits under any other employee welfare or benefit plans +110 +2019 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +ANNEX A: 2019 EQUITY INCENTIVE PLAN +or +arrangements, if any, provided by the Company or any Subsidiary, except where the Administrator expressly otherwise provides or authorizes in writing or except as otherwise specifically set forth +in the terms and conditions of such other employee welfare or benefit plan or arrangement. Awards under this Plan may be made in addition to, in combination with, as alternatives to or in payment of +grants, Awards or commitments under any other plans or arrangements of the Company or its Subsidiaries. +10.13 Restrictive Covenants, Cause Forfeiture and Clawback +Policy. +10.13.1 Restrictive Covenants . The Company +may retain the right +in an Award Agreement to cause a forfeiture of the gain realized by a Participant on account of actions taken by the Participant in violation or breach of or in conflict with any non-competition +agreement, any agreement prohibiting solicitation of employees of the Company or any Affiliate thereof or any confidentiality obligation of post-employment cooperation agreement with respect to the +Company or any Affiliate, to the extent specified in such Award Agreement applicable to the Participant. +10.13.2 Annulment upon Termination for Cause . The Administrator +may annul an Award if the Participant is an employee of the Company or an Affiliate thereof and is terminated for Cause as defined in the applicable Award Agreement or in the Plan. +10.13.3 Awards Subject to Clawback . Notwithstanding any other +provision of this Plan to the contrary, any Award granted or amount payable or paid under this Plan shall be subject to the terms of any compensation recoupment policy then applicable, if any, of the +Company, to the extent the policy applies to such award or amount. By accepting an Award or the payment of any amount under the Plan, each +Participant agrees and consents to the Company's application, implementation and enforcement of (a) any such policy and (b) any provision of applicable law relating to cancellation, +rescission, payback or recoupment of compensation and expressly agrees that the Company may take such actions as are permitted under the policy or applicable law without further consent or action +being required by such Participant. To the extent that the terms of this Plan and the policy or applicable law conflict, then the terms of the policy or applicable law shall prevail. +11. DIRECTOR COMPENSATION PROVISIONS +11.1 Plan Exclusive Vehicle for Non-Employee Director Cash and Equity +Compensation. All cash and equity compensation paid or provided to the Company's non-employee directors shall be awarded under the terms and conditions of this +Plan. +11.2 Non-Employee Director +Compensation. Non-employee directors may be Awarded any of the types of Awards described in Section 6 above for which they are eligible under the terms and +conditions of Section 6, above. +11.2.1 Cash Awards . Cash Awards (as +described in +Section 6.1.6) may take any form determined by the Administrator in its sole and absolute discretion, including, but not limited to, retainers, committee fees, chairperson fees, per meeting +fees, and special fees for committee service. In no event shall cash Awards paid to any non-employee director exceed $400,000 in any fiscal year. +11.2.2 Equity Awards. Equity Awards +(described in +Sections 6.1.1, 6.1.2, 6.1.3, 6.1.4 and 6.1.5) may take any form determined by the Administrator in its sole and absolute discretion, provided, +Cimarex +Energy +Co. +111 +Table of Contents +ANNEX A: 2019 EQUITY INCENTIVE PLAN +however, +that in no event shall Awards granted to an non-employee director in any fiscal year have a grant date fair value in excess of $400,000. +As +adopted by the Board of Directors of Cimarex Energy Co. on February 20, 2019. +112 +2019 +Notice +of +Annual +Meeting +and +Proxy +Statement +PROXY THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS CIMAREX ENERGY CO. The undersigned appoints Thomas E. Jorden and Francis B. Barron as proxies, with power to act without the other and with power of substitution, and authorizes them to represent and vote, as designated on the other side, all the shares of common stock of Cimarex Energy Co. held of record by the undersigned with all powers that the undersigned would possess if present at the Annual Meeting of Shareholders to be held at the Wells Fargo Center - Denver, Assemble Room (Lower Level 2), 1700 Lincoln Street, Denver, Colorado 80203, on May 8, 2019, at 9:00 a.m., Mountain Daylight Time, or any adjournment thereof. For participants in the Cimarex 401(k) Plan, this proxy, when properly executed, will be voted in the manner directed by the undersigned. If no direction is given, if the card is not signed, or if the card is not received prior to 11:59 p.m., Eastern Daylight Time, on May 5, 2019, the Plan’s Trustee will vote your shares held in the Plan in the same proportion as shares were voted by other Plan participants. (Continued, and to be marked, dated and signed, on the other side) PLEASE DETACH ALONG PERFORATED LINE AND MAIL IN THE ENVELOPE PROVIDED. Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to be held May 8, 2019. The Proxy Statement and our 2018 Annual Report to Shareholders are available at: http://www.allianceproxy.com/cimarex/2019 +THIS PROXY WILL BE VOTED AS DIRECTED, OR, IF NO DIRECTION IS INDICATED, WILL BE VOTED “FOR” ALL THE NOMINEES LISTED UNDER ITEM 1, AND “FOR” ITEMS 2, 3, AND 4. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. Please mark your votes like this The Board of Directors recommends a vote “FOR” all the nominees listed under Item 1 and “FOR” Items 2, 3, and 4. FOR AGAINST ABSTAIN 1. Election of three Class II directors: 2. Advisory vote to approve executive compensation 3. Approve 2019 Equity Incentive Plan FOR AGAINST ABSTAIN (01) Hans Helmerich (02) Harold R. Logan, Jr. (03) Monroe W. Robertson 4. Ratify the appointment of KPMG LLP as our independent auditors for 2019 I plan on attending the meeting NOTE: Please sign as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee or guardian, please give full title as such. Signature Signature (if held jointly) Date: , 2019 CONTROL NUMBER PLEASE DETACH ALONG PERFORATED LINE AND MAIL IN THE ENVELOPE PROVIDED. CIMAREX ENERGY CO. As a shareholder of Cimarex Energy Co., you have the option of voting your shares electronically through the Internet or on the telephone, eliminating the need to return the proxy card. Your electronic vote authorizes the named proxies to vote your shares in the same manner as if you marked, signed, dated and returned the proxy card. Votes submitted electronically over the Internet or by telephone must be received by 11:59 p.m., Eastern Time, on May 7, 2019. CONTROL NUMBER PROXY VOTING INSTRUCTIONS Please have your 11 digit control number ready when voting by Internet or Telephone MAIL Vote Your Proxy by Mail: Mark, sign, and date your proxy card, then detach it, and return it in the postage-paid envelope provided. TELEPHONE Vote Your Proxy by Phone: Call 1 (866) 804-9616 Use any touch-tone telephone to vote your proxy. Have your proxy card available when you call. Follow the voting instructions to vote your shares. INTERNET Vote Your Proxy on the Internet: Go to www.AALvote.com/XEC Have your proxy card available when you access the above website. Follow the prompts to vote your shares. DO NOT PRINT IN THIS AREA (Shareholder Name & Address Data) \ No newline at end of file diff --git a/raw/proxies/0001168054/0001047469-19-001570/proxy_rpt.txt b/raw/proxies/0001168054/0001047469-19-001570/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..5ea78c9df842f6e258f5b4a53b983eb6b6d11506 --- /dev/null +++ b/raw/proxies/0001168054/0001047469-19-001570/proxy_rpt.txt @@ -0,0 +1,30 @@ +Review of related party transactions +Independent Lead Director +Non-hedging and non-pledging policies +Diverse Board skills and experience +Clawback policy +Annual Board and committee self-evaluations +Management and Director stock ownership guidelines +Periodic consultant review of Board skills +No tax gross-ups +Annual equity grants to Directors +Proxy access +Annual Board education +Active shareholder engagement +Shareholder Engagement +Cimarex's relationships with its shareholders are an important part of our corporate governance profile, and we recognize the value of taking +their views into account. Engagement with shareholders helps us understand the larger context and the impact of our operations, learn about expectations for our performance, assess emerging issues +that may affect our business or other aspects of our operations, and shape corporate and governance policies. +Consistent +with our commitment to seek and respond to shareholder input on corporate governance topics, we have considered and discussed with investors a wide variety of matters, +including: +§ Our executive compensation program and disclosures, as a result of which we previously +made changes in these areas; +§ The "proxy access" shareholder proposal acted upon in 2015; +§ A shareholder proposal concerning fugitive methane reporting that was made in December +2015 and subsequently withdrawn, as a result of which we added disclosures concerning methane emissions to our website; and +Cimarex +Energy +Co. +19 +Table of Contents \ No newline at end of file diff --git a/raw/proxies/0001168054/0001047469-20-001680/proxy.txt b/raw/proxies/0001168054/0001047469-20-001680/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..463de56dc443d9537f16122e7a1a0c8e88390488 --- /dev/null +++ b/raw/proxies/0001168054/0001047469-20-001680/proxy.txt @@ -0,0 +1,5117 @@ +DEF 14A +1 +a2241019zdef14a.htm +DEF 14A +Use these links to rapidly review the document +TABLE OF CONTENTS +Table of Contents +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +Washington, D.C. 20549 +SCHEDULE 14A +Proxy Statement Pursuant to Section 14(a) of +the Securities Exchange Act of 1934 (Amendment No. ) +Filed by the Registrant þ +Filed by a Party other than the Registrant o +Check the appropriate box: +o +Preliminary Proxy Statement +o +Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +þ +Definitive Proxy Statement +o +Definitive Additional Materials +o +Soliciting Material Pursuant to §240.14a-12 +Cimarex Energy Co. +(Name of Registrant as Specified in Its Charter) +(Name of Person(s) Filing Proxy Statement, if other than the Registrant) +Payment of Filing Fee (Check the appropriate box): +þ +No fee required. +o +Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. +(1) +Title of each class of securities to which transaction applies: +(2) +Aggregate number of securities to which transaction applies: +(3) +Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): +(4) +Proposed maximum aggregate value of transaction: +(5) +Total fee paid: +o +Fee paid previously with preliminary materials. +o +Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration +statement number, or the Form or Schedule and the date of its filing. +(1) +Amount Previously Paid: +(2) +Form, Schedule or Registration Statement No.: +(3) +Filing Party: +(4) +Date Filed: +(This page has been left blank intentionally.) +Table of Contents +1700 Lincoln Street, Suite 3700 +Denver, CO 80203 +2020 ANNUAL MEETING +§ NOTICE OF ANNUAL MEETING OF +SHAREHOLDERS +TIME AND DATE +9:00 a.m. Central Daylight Time on Wednesday, May 6, 2020 +PLACE +Hyatt Regency Tulsa +100 East 2nd Street +Tulsa, Oklahoma 74103 +We are actively monitoring the health and safety concerns and government recommendations and restrictions relating to the COVID-19 pandemic. In the event it is not possible or advisable to hold our annual meeting at a +physical location, we will host a virtual-only annual meeting. We anticipate making a final decision on our meeting location on or before April 14, 2020, and will announce our decision by press release and posting on our website at +www.cimarex.com, as well as through an SEC filing. If you are planning to attend the annual meeting, please be sure to check our website for any updates in the days before our annual meeting. As always, we encourage you to vote your shares prior to +the annual meeting. +ITEMS OF BUSINESS +Item 1. Election of Directors +Item 2. Advisory Vote to Approve Executive Compensation +Item 3. Ratification of Independent Auditors +Transact any other business that properly comes before the Meeting and any adjournment or postponement of the Meeting +RECORD DATE +March 10, 2020 +MAILING DATE TO SHAREHOLDERS +March 23, 2020 +MATERIALS TO REVIEW +This booklet contains our Notice of 2020 Annual Meeting and Proxy Statement. Our 2019 Annual Report is available on our website at www.cimarex.com. +PROXY VOTING +It is important that your shares be represented and voted at the Meeting. You can vote your shares by following the internet or telephone instructions on page 83 of this proxy statement or you may attend and vote in +person at the Annual Meeting. If you received a paper copy of the proxy card, you also may vote by completing and mailing the proxy card in the postage-paid envelope provided for your convenience. You may revoke your proxy at any time before the vote +is taken by following the instructions on page 85 of this proxy statement. +March 23, 2020 +Francis B. Barron, Corporate Secretary +Table of Contents +TABLE OF CONTENTS +PROXY STATEMENT SUMMARY +1 +ITEM 1: ELECTION OF DIRECTORS +8 +Election Process +8 +Director Nominations +8 +2020 Nominees for Class I Director and Class III Directors +9 +Continuing Directors +15 +Summary of Director Core Competencies and Composition Highlights +20 +CORPORATE GOVERNANCE +21 +Corporate Governance Highlights +21 +Shareholder Engagement +21 +Director Qualifications and Recruitment +22 +Board of Directors and its Committees +23 +Other Governance Matters +28 +COMPENSATION DISCUSSION AND ANALYSIS +31 +Executive Summary of Compensation Discussion and Analysis ("CD&A") +31 +Section 1 +35 +Our Compensation Framework +35 +Competitive Positioning +37 +2019 Compensation Peer Group +37 +2019 Stock Performance Peer Group +38 +Section 2 +39 +Summary of 2019 and Early 2020 Compensation Decisions +39 +Response to 2019 Say-on-Pay Vote and Shareholder Engagement +40 +Key 2019 Compensation Actions +41 +Alignment of CEO Compensation to Total Shareholder Return ("TSR") +53 +Early 2020 Compensation Decisions +56 +Section 3 +57 +Role of Compensation Consultant and Management in Compensation Decisions +57 +Other Compensation Arrangements +58 +Other Compensation Policies +59 +Compensation Committee Report +60 +EXECUTIVE COMPENSATION TABLES +61 +Summary Compensation Table +61 +2019 Grants of Plan-Based Awards +63 +Outstanding Equity Awards at December 31, 2019 +64 +2019 Option Exercises and Restricted Stock Vested +65 +2019 Nonqualified Deferred Compensation +66 +CEO Pay Ratio +67 +Potential Payments Upon Change in Control or Termination +68 +Director and Officer Indemnification Agreements +72 +NON-EMPLOYEE DIRECTOR COMPENSATION +73 +SECURITY OWNERSHIP +76 +Management, Directors and Certain Beneficial Owners +76 +Section 16(a) Beneficial Ownership Reporting Compliance +77 +ITEM 2: ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION +78 +ITEM 3: RATIFICATION OF INDEPENDENT AUDITORS +79 +Audit and Non-Audit Fees +79 +Approval of Audit, Audit-Related and Tax Services +79 +Report of Audit Committee +80 +GENERAL INFORMATION +81 +Information Available Online +81 +Communications with Cimarex's Directors +81 +Director Nominations for the 2021 Annual Meeting of Shareholders +81 +Shareholder Proposals for the 2021 Annual Meeting of Shareholders +81 +Complaint and Reporting Procedures +82 +QUESTIONS AND ANSWERS +83 +Proxy Materials and Voting Information +83 +Table of Contents +Proxy Statement Summary +This section highlights certain important information presented in this Proxy Statement and is intended to assist you +in evaluating the matters to be voted on at the meeting. We encourage you to read the Proxy Statement in its entirety before you cast your vote. For more information regarding Cimarex's 2019 +performance, please review Cimarex's Annual Report on Form 10-K for the year ended December 31, 2019. +Voting Matters and Board Recommendations +Voting Recommendation +Page +Reference +Item 1: +Election of Directors +FOR each Director Nominee +8 +Item 2: +Advisory Vote to Approve Executive Compensation +FOR +78 +Item 3: +Ratification of Independent Auditors +FOR +79 +Advance Voting Methods +Even if you plan to attend the 2020 Annual Meeting of Shareholders in person, please vote right away using one of the following advance voting +methods (see page 83 for additional details). Make sure to have your proxy card or voting instruction form in hand and follow the instructions. +You can vote in advance in one of three ways: +Visit the website listed on your proxy card/voting instruction form to vote VIA THE INTERNET +Call the telephone number on your proxy card/voting instruction form to vote BY TELEPHONE +Sign, date and return your proxy card/voting instruction form in the enclosed envelope to vote BY MAIL +Voting at our 2020 Annual Meeting of Shareholders +All shareholders of record may vote in person at the 2020 Annual Meeting of Shareholders, which will be held on Wednesday, May 6, 2020 +at 9:00 a.m., Central Daylight Time, at the Hyatt Regency Tulsa, 100 East 2nd Street, Tulsa, Oklahoma 74103. Beneficial owners may vote in person at the Meeting if they have a legal +proxy, as described in the response to question 14 on page 86 of "Questions and Answers about the Meeting and Voting." +Cimarex +Energy +Co. +1 +Table of Contents +Governance Highlights (page 21) +Cimarex is committed to good corporate governance, which promotes the long-term interests of shareholders, strengthens the Board of Directors, +fosters management accountability, and helps build public trust in Cimarex. Highlights include: +þ +8 of 10 independent Directors +þ +Disclosure Committee for financial reporting +þ +Majority voting for Directors resignation policy +þ +Board and Audit Committee risk oversight +þ +Classified Board +þ +Compensation risk assessment +þ +Combined Chairman and CEO +þ +Review of related party transactions +þ +Independent Lead Director +þ +Non-hedging and non-pledging policies +þ +Diverse Board skills and experience +þ +Clawback policy +þ +Annual Board and committee self-evaluations +þ +Management and Director stock ownership guidelines +þ +Periodic consultant review of Board skills +þ +No tax gross-ups +þ +Annual equity grants to Directors +þ +Proxy access +þ +Annual Board education +þ +Active shareholder engagement +2 +2020 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +Director Nominees and Current Committee Memberships +Committee Memberships +(Independent Directors Only) +DIRECTOR NOMINEES +AGE +DIRECTOR +SINCE +TERM +EXPIRES +Audit +Compensation +Nominating +and +Corporate +Governance +Paul N. Eckley (Independent Director) +Senior Vice President—Investments, State Farm +65 +2019 +2020 +· +· +Kathleen A. Hogenson (Independent Director) +President and Chief Executive Officer, Zone Oil & Gas LLC +59 +2019 +2020 +· +· +Thomas E. Jorden +Chairman, Chief Executive Officer and President, Cimarex Energy Co. +62 +2011 +2020 +Floyd R. Price (Independent Director) +Chair of Compensation Committee of Cimarex; Retired, former executive officer, Apache Corporation +71 +2012 +2020 +Chair +· +Frances M. Vallejo (Independent Director) +Retired, former Vice President, ConocoPhillips +54 +2017 +2020 +· +· +Continuing Directors +Joseph R. Albi +Executive Vice President—Operations, Chief Operating Officer, Cimarex Energy Co. +61 +2011 +2021* +Hans Helmerich (Independent Director) +Chairman and former Chief Executive Officer, Helmerich & Payne, Inc. +61 +2002 +2022 +· +· +Harold R. Logan, Jr. (Independent Director) +Independent Lead Director and Chair of Nominating and Corporate Governance Committee of Cimarex; Chairman, Suburban Propane Partners, L.P. +75 +2009 +2022 +· +Chair +Monroe W. Robertson (Independent Director) +Chair of Audit Committee of Cimarex; Retired, former President and Chief Operating Officer, Key Production Co. +70 +2005 +2022 +Chair +· +Lisa A. Stewart (Independent Director) +Chairman, President, Chief Executive Officer and Chief Investment Officer, Sheridan Production Partners +62 +2015 +2021 +· +· +* In January 2020, Mr. Albi informed Cimarex that he intends to retire as an officer, Director and employee +of Cimarex effective July 1, 2020. +Cimarex +Energy +Co. +3 +Table of Contents +2019 Executive Compensation (page 31) +Below is the 2019 compensation for each Named Executive Officer ("NEO") as determined under the Securities and Exchange Commission ("SEC") +rules. See the notes accompanying the 2019 Summary Compensation Table on page 61 for more information. +Stock Awards ($) +Name and +Principal Position +Salary +Bonus +Performance- +based +Time +Vested +Non-Equity +Incentive +Plan Comp. +All Other +Comp. +Total +Thomas E. Jorden +Chairman, Chief Executive +Officer (CEO) and President (Principal Executive Officer) +$ +1,009,324 +$ +— +$ +3,362,500 +$ +3,362,500 +$ +1,153,000 +$ +115,231 +$ +9,002,555 +G. Mark Burford +Senior Vice President and +Chief Financial Officer (CFO) (Principal Financial Officer) +$ +505,846 +$ +— +$ +1,250,000 +$ +1,250,000 +$ +440,000 +$ +80,073 +$ +3,525,919 +Joseph R. Albi +Executive Vice President— +Operations, Chief Operating Officer (COO) +$ +640,569 +$ +— +$ +1,450,000 +$ +1,450,000 +$ +600,000 +$ +93,892 +$ +4,234,461 +John A. Lambuth +Executive Vice President— +Exploration +$ +535,262 +$ +— +$ +1,450,000 +$ +1,450,000 +$ +480,000 +$ +66,453 +$ +3,981,715 +Christopher H. Clason +Senior Vice President and +Chief Human Resources +Officer (CHRO) +$ +295,212 +$ +100,000 +$ +1,875,000 +$ +1,781,000 +$ +360,000 +$ +699,844 +$ +5,111,056 +Response to Say-on-Pay Vote and Shareholder Engagement +In response to the advisory vote to approve executive compensation, or "say-on-pay," at our May 2019 annual meeting of shareholders and our +shareholder engagement, we made the following changes to our 2019 and 2020 compensation programs: +§ Reduced potential vesting of 2019 performance equity awards by 50% if the Company's +share price declines over the performance period; and § Added objective, formula-based metrics to short-term incentives for 2019 and 2020. +4 +2020 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +A Significant Portion of our CEO's 2019 Compensation is At Risk +The accompanying graph illustrates our CEO's 2019 at risk compensation. With 89% of total compensation at risk, the majority of our CEO's +compensation is an incentive for future performance and realized only if Cimarex meets certain performance measures and delivers value to shareholders. +How CEO Pay is Tied to Cimarex's Performance (page 53) +Our compensation programs are designed to align performance incentives with the long-term interests of our shareholders. The programs also +provide competitive total direct compensation opportunities that retain, and attract when needed, executive talent and link compensation earned to achievement of short- and long-term financial and +operational objectives. Our Compensation Committee considers performance in two primary ways: +§ Cimarex's operating performance; and § Return to shareholders over +time, on both an absolute basis and a relative basis +compared to other companies in our Stock Performance Peer Group and in our Compensation Peer Group (see page 38). +2019 Financial and Operational Highlights +§ Exploration and development expenditures decreased 21% to $1.242 billion in +2019 compared to $1.570 billion in 2018, while year-over-year average daily production increased 25% to 278.5 thousand barrels of oil equivalent ("MBOE") per day in 2019 compared to +221.9 MBOE per day in 2018. The increase in the daily production volumes resulted from our acquisition of Resolute Energy Corporation ("Resolute") as well as drilling and completion activity in 2019. § Year-over-year production revenues increased 1% to $2.322 billion and were +positively affected by increased production and negatively affected by declining commodity prices. § We incurred a net loss of $124.6 million in 2019 +compared to net income of +$791.9 million in 2018. § We recognized a $618.7 million non-cash ceiling test impairment of our oil and +gas properties primarily due to decreases in the 12-month average trailing commodity prices used in calculating the ceiling test. § Cash flow provided by +operating activities of $1.344 billion was 13% lower than +cash flow provided by operating activities in 2018. +Cimarex +Energy +Co. +5 +Table of Contents +§ Our Operations group excelled at optimizing our production and maximizing well +profitability. As a result, our production expense declined 9% from $3.66 per barrels of oil equivalent ("BOE") in 2018 to $3.34 per BOE in 2019. § We +completed our acquisition of Resolute and its 21,100 net leasehold acres adjacent +to our acreage in the Permian Basin in Reeves County, Texas, for $325.7 million in cash, common and preferred stock valued at $494.6 million, and the assumption of $870.0 million +of debt. § We issued $500.0 million of senior notes and paid off Resolute's +$870.0 million of long-term debt. § We had cash on hand of $94.7 million at year-end 2019. § At year-end 2019, our estimated proved reserves were 5% higher than at year-end 2018 +after additions, positive and negative revisions, and production. § Our stock price decreased 15% from $61.65 at year-end 2018 to $52.49 at year-end 2019. +The decrease in our stock price led to the following, which demonstrate the alignment of interests of our NEOs and shareholders: +§ a lower value for NEOs' long-term equity awards that vested in 2019 compared to the +grant date fair value ("GDFV") of those awards in 2016, with the vested shares having a value equal to 22% of the GDFV, and § lower GDFV for long-term +equity awards made in 2019, with the GDFV of the four NEOs +who also were NEOs in 2018 declining 4%. +6 +2020 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +Return to Shareholders +The following chart shows how a December 31, 2014 investment of $100 in Cimarex common stock would have a value of $51.21 on +December 31, 2019, which includes dividends reinvested quarterly, for those who wish to consider Total Shareholder Return when evaluating executive compensation. The chart also compares the +Total Shareholder Return on Cimarex common stock to the same investment in the S&P 500 Index, the Dow Jones U.S. Exploration & Production Index, and the S&P Oil & Gas +Exploration & Production Index over the same time period. +COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN +12/31/2014 +12/31/2015 +12/31/2016 +12/31/2017 +12/31/2018 +12/31/2019 +Cimarex Energy Co . +$ +100.00 +$ +84.79 +$ +129.42 +$ +116.52 +$ +59.25 +$ +51.21 +S&P 500 +$ +100.00 +$ +101.38 +$ +113.51 +$ +138.29 +$ +132.23 +$ +173.86 +Dow Jones U.S. Exploration & Production +$ +100.00 +$ +76.27 +$ +94.94 +$ +96.18 +$ +79.09 +$ +88.10 +S&P Oil & Gas Exploration & Production +$ +100.00 +$ +65.85 +$ +87.48 +$ +81.96 +$ +65.98 +$ +73.91 +The +stock price performance included in this graph is not necessarily indicative of future stock price performance. +Cimarex +Energy +Co. +7 +Table of Contents +ITEM 1: ELECTION OF DIRECTORS +ITEM 1: ELECTION OF DIRECTORS +Election Process +Our +current Board consists of ten Directors, which is the maximum number of Directors permitted by our Certificate of Incorporation. The Board is divided into three classes: Class I, +Class II and Class III Directors. At each Annual Meeting, a Class of Directors is elected for a term expiring at the Annual Meeting in the third year following the year of election. Each +Director holds office until his or her successor is elected and qualifies. +The +terms of one Class I Director, Kathleen A. Hogenson, and the four Class III Directors, Paul N. Eckley, Thomas E. Jorden, Floyd R. Price, and Frances M. Vallejo, will expire at the +2020 Annual Meeting. The Nominating and Corporate Governance Committee, at its February 2020 meeting, nominated Ms. Hogenson for election as a Class I Director, to serve until the 2021 +Annual Meeting, and Messrs. Eckley, Jorden, and Price and Ms. Vallejo for election as Class III Directors, to serve until the Annual Meeting of Shareholders to be held in 2023. +If +prior to the Annual Meeting a nominee becomes unavailable to serve as a Director, any shares represented by a proxy directing a vote will be voted for the remaining nominees and for any substitute +nominee(s) designated by our Board or its Nominating and Corporate Governance Committee. As of the mailing of these proxy materials, the Board has no reason to believe any Director nominee would not +be available to serve. +A +nominee is elected if the votes cast for his or her election exceed the votes cast against his or her election. Pursuant to our majority voting policy, each nominated Director has tendered an +irrevocable resignation that is effective upon his or her failure to receive the required vote and the Board's acceptance of such resignation. If a nominee fails to receive more favorable votes than +votes cast against him or her, the Nominating and Corporate Governance Committee will act on an expedited basis following the Annual Meeting to determine whether to recommend that the Board accept the +Director's resignation. The Nominating and Corporate Governance Committee and the Board may consider any factors they deem relevant in deciding whether to accept the Director's resignation. The +Director whose resignation is under consideration must abstain from participating in any decision regarding his or her resignation. The Board will publicly disclose its decision regarding acceptance +of his or her resignation within 90 days after the results of the election are certified. If the Board does not accept the resignation, the Director will continue to serve as a Director until +his or her successor is elected and qualified. If the Board accepts the resignation, then the Board will either fill the vacancy in accordance with the Bylaws or decrease the size of the Board in +compliance with the Certificate of Incorporation. +Director Nominations +The +Nominating and Corporate Governance Committee is responsible for identifying and evaluating potential Director nominees and for recommending to the Board a slate of nominees for election at each +Annual Meeting. Potential nominees may be suggested by Directors, members of management, shareholders or a third-party firm. +8 +2020 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +ITEM 1: ELECTION OF DIRECTORS +While +the Nominating and Corporate Governance Committee will consider Director nominees suggested by shareholders, it did not receive any shareholder nominations for the 2020 Annual Meeting prior to +the deadline for such nominations. +2020 Nominees for Class I Director and Class III Directors +Upon +the recommendation of the Nominating and Corporate Governance Committee, the Board has nominated Kathleen A. Hogenson for election as a Class I Director, to serve until the 2021 Annual +Meeting, and Paul N. Eckley, Thomas E. Jorden, Floyd R. Price, and Frances M. Vallejo for election as Class III Directors to serve until the Annual Meeting of Shareholders to be held in 2023. +The Board has determined that each of Messrs. Eckley and Price and Ms. Hogenson and Ms. Vallejo are independent under the New York Stock Exchange ("NYSE") corporate governance +rules. Each of the Director nominees currently serves on the Board. We have no reason to believe that any of the nominees will be unable or unwilling to serve if elected. +The +Board believes the combination of the various qualifications, skills and experiences of the 2020 Director nominees will contribute to an effective and well-functioning Board. The Board also +believes that, individually and as a whole, the Director nominees possess the necessary qualifications to provide effective oversight of the business, quality advice and counsel to Cimarex. +Included +in each Director nominee's biography is an assessment of the specific qualifications, attributes, skills and experience of such nominee based on the qualifications described above. +The Board of Directors recommends a vote FOR the election of each of the Director nominees. +Cimarex +Energy +Co. +9 +Table of Contents +ITEM 1: ELECTION OF DIRECTORS +About the Director Nominees +PAUL N. ECKLEY +Director Since 2019 | Age +65 | Independent +Committees of the Board: +§ +Compensation +§ +Nominating and Corporate Governance +Core Competencies: +§ +Corporate Governance +§ +Financial Reporting Experience +§ +Executive Compensation +§ +Finance/Investment Banking +§ +Public Company Executive Experience +§ +Risk Management +Mr. Eckley +is Senior Vice President – Investments at State Farm® Corporate Headquarters in Bloomington, Illinois. Mr. Eckley joined State Farm in 1977 as an +investment analyst. He was promoted to Investment Officer in 1990 and then Vice President – Common Stocks in 1995. He assumed his current position in 1998. +Mr. Eckley +was a Director of the Emerging Markets Growth Fund owned by the Capital Group from 2005 until November 2016, including serving as Chairman of the Board of that Fund from January 2014 +through November 2016. +Key Attributes, Experience and Skills +Mr. Eckley's 42 years of experience in investments in public and private companies, including companies in the oil and gas industry, and +extensive leadership roles are key attributes that make him well qualified to serve as a Director of the Company. +10 +2020 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +ITEM 1: ELECTION OF DIRECTORS +KATHLEEN A. HOGENSON +Director Since 2019 | Age +59 | Independent +Committees of the Board: +§ +Audit +§ +Nominating and Corporate Governance +Current Public Company Directorships: +§ +First Quantum Minerals Ltd. +§ +Verisk Analytics Inc. +Former Public Company Directorships: +(within the last five years): +§ +Petrofac Ltd. +Core Competencies: +§ +Exploration and Development +§ +Environmental, Health and Safety +§ +Financial Reporting Experience +§ +Executive Compensation +§ +Finance/Investment Banking +§ +Public Company Executive Experience +§ +Corporate Governance +Ms. Hogenson +has served since February 2009 as President and Chief Executive Officer at Zone Oil & Gas LLC, an independent oil and gas advisory firm focused on acquisition, +exploration, development, production optimization and the operation of oil and gas properties. She co-founded Zone in 2007. +Since +2017, Ms. Hogenson has served as a Director for First Quantum Minerals Ltd., a public Canadian-based mining and metals company traded on the Toronto Stock Exchange. Since 2016, she +also has served as a Director for Verisk Analytics Inc. a publicly traded company on the Nasdaq. From 2013 to 2016, Ms. Hogenson served as a Director of Petrofac Ltd., an +international oilfield services company listed on the London Stock Exchange. From 2001 to 2007, Ms. Hogenson served as President and Chief Executive Officer of Santos USA Corp. From 1998 to +2001, Ms. Hogenson held various positions at Unocal Corp., including Vice President of Technology, Global Chief Engineer Reservoir, and Manager, Global Reservoir Technology. +Key Attributes, Experience and Skills +Ms. Hogenson's over 35 years of experience in the oil and gas industry and extensive leadership roles are key attributes that make her well +qualified to serve as a Director of the Company. +Cimarex +Energy +Co. +11 +Table of Contents +ITEM 1: ELECTION OF DIRECTORS +THOMAS E. JORDEN +Director since 2011 | Age +62 +Chairman, Chief Executive Officer and President, Cimarex Energy Co. +Core Competencies: +§ +Exploration and Development +§ +Environmental, Health and Safety +§ +Government and Regulatory +§ +Industry Background +§ +Investor Relations +§ +Public Company Executive Experience +§ +Risk Management +Mr. Jorden +is the Chairman of the Board, Chief Executive Officer and President of Cimarex. He has served Cimarex in various capacities since September 2002. He was elected Chief Executive +Officer in September 2011 after serving as Executive Vice President-Exploration from 2003 to 2011 and as Vice President-Exploration from 2002 to 2003. Mr. Jorden also serves on the Board of +Trustees of the Colorado School of Mines and other private boards. +Key Attributes, Experience and Skills +Mr. Jorden brings to the Board over 35 years of experience in the oil and gas exploration and production industry and, as our Chief Executive +Officer, a deep understanding of our business, operations and long-term strategic issues and goals. Mr. Jorden holds undergraduate and graduate degrees in geophysics. His service on the Board +creates an important link between management and the Board. +12 +2020 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +ITEM 1: ELECTION OF DIRECTORS +FLOYD R. PRICE +Director Since 2012 | Age +71 | Independent +Committees of the Board: +§ +Compensation (Chair) +§ +Nominating and Corporate Governance +Current Public Company Directorships: +§ +Tamarack Valley Energy Ltd. +Core Competencies: +§ +Exploration and Development +§ +Financial Reporting Experience +§ +Executive Compensation +§ +Finance/Investment Banking +§ +Public Company Executive Experience +§ +Corporate Governance +Mr. Price +held various positions with Apache Corporation from 1991 through 2009, including Executive Vice President and Corporate Exploration Officer; President, Apache Canada; President, +Apache International; and Exploration Manager. Apache Corporation, with headquarters in Houston, Texas, is an oil and gas exploration and production company with domestic and international operations. +Since 2010, Mr. Price has served as Chairman of the Board and as a member of the audit, reserves and compensation/governance committees of Tamarack Valley Energy Ltd. ("Tamarack"), +Calgary, Alberta, Canada, a publicly held company traded on the Toronto Stock Exchange. Tamarack is involved in the identification, evaluation and operation of resource plays in the Western Canadian +sedimentary basin. From June 2010 to January 2013, Mr. Price served as a Director and Chairman of the Board of Gastar Exploration, Inc. ("Gastar"), a publicly held company located in +Houston, Texas. Mr. Price also served on the compensation and governance, audit and reserves committees of the Board at Gastar. Gastar is engaged in the exploration, development and production +of natural gas, natural gas liquids, oil and condensate in the United States and is traded on the NYSE. +Key Attributes, Experience and Skills +Mr. Price has over 40 years of domestic and international experience in the exploration and production business. Mr. Price has held +leadership positions with a large public oil and gas company. His experience during the past eight years serving as a Director of public and private companies also provides him with invaluable board +skills and experience. Mr. Price brings extensive oil and gas exploration, operations, management and financial experience to Cimarex's Board and the Compensation Committee. +Cimarex +Energy +Co. +13 +Table of Contents +ITEM 1: ELECTION OF DIRECTORS +FRANCES M. VALLEJO +Director Since 2017 | Age +54 | Independent +Committees of the Board: +§ +Audit +§ +Nominating and Corporate Governance +Core Competencies: +§ +Exploration and Development +§ +Financial Reporting Experience +§ +Corporate Finance +§ +Mergers and Acquisitions +§ +Risk Management +§ +Corporate Governance +§ +Corporate Planning and Budgets +§ +Public Company Executive +§ +NACD Governance Fellow +Ms. Vallejo +is a former executive officer of ConocoPhillips, an independent exploration and production company. Beginning in 1987, she held various positions with both ConocoPhillips and +Phillips Petroleum Company, which merged with Conoco Inc. to form ConocoPhillips in August 2002. She served as Vice President Corporate Planning and Development from April 2015 until December +2016 and as Vice President and Treasurer from October 2008 until March 2015. Prior to October 2008, she served as General Manager – Corporate Planning and Budgets, Vice President +Upstream Planning & Portfolio Management, Assistant Treasurer, Manager Strategic Transactions, and in other geophysical, commercial, and finance roles. From 2010 until 2016, Ms. Vallejo +served as a member of the Board of Trustees of Colorado School of Mines and she currently serves or has served on boards of other charitable associations. +Key Attributes, Experience and Skills +Ms. Vallejo's over 30 years of experience in the oil and gas industry and extensive leadership roles in corporate planning, budgeting, and +treasury are key attributes that make her well qualified to serve as a Cimarex Director and a member of the Audit Committee. +14 +2020 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +ITEM 1: ELECTION OF DIRECTORS +Continuing Directors – Class I – +Term Expires 2021 +JOSEPH R. ALBI +Director since 2011 | Age +61 +Executive Vice President – Operations, Chief Operating Officer, Cimarex Energy Co. +Core Competencies: +§ +Exploration and Development +§ +Environmental, Health and Safety +§ +Government and Regulatory +§ +Industry Background +§ +Public Company Executive Experience +§ +Risk Management +Mr. Albi +was named Chief Operating Officer in September 2011. He has served Cimarex in various capacities since September 2002, including Executive Vice President – +Operations from 2005 to 2011, Senior Vice President – Corporate Engineering from 2003 to 2005 and Vice President – Engineering from 2002 to 2003. In January 2020, +Mr. Albi informed Cimarex that he intends to retire as an officer, Director and employee of Cimarex effective July 1, 2020. +Key Attributes, Experience and Skills +Mr. Albi has over 40 years of experience in the oil and gas industry. His extensive understanding of the management of oil and gas production +and drilling operations, business development, environmental and safety management and oil and gas marketing provide the Board with considerable insight about Cimarex's operations. +Cimarex +Energy +Co. +15 +Table of Contents +ITEM 1: ELECTION OF DIRECTORS +LISA A. STEWART +Director Since 2015 | Age +62 | Independent +Committees of the Board: +§ +Compensation +§ +Nominating and Corporate Governance +Current Public Company Directorships: +§ +Jadestone Energy +Former Public Company Directorships: +(within the last five years): +§ +Talisman Energy, Inc. +Core Competencies: +§ +Exploration and Development +§ +Environmental, Health and Safety +§ +Financial Reporting Experience +§ +Executive Compensation +§ +Finance/Investment Banking +§ +Public Company Executive Experience +§ +Investor Relations +Ms. Stewart +is Chairman, President, Chief Executive Officer, and Chief Investment Officer of Sheridan Production Partners, a privately-owned oil and gas operating company she founded in 2007. +Since December 2, 2019, Ms. Stewart has served as a Director of Jadestone Energy, an upstream oil and gas company in the Asia Pacific region, which focuses on production and near-term +development assets. Jadestone Energy is headquartered in Singapore and is publicly traded on the Toronto Stock Exchange and Alternative Investment Market, a sub-market of the London Stock Exchange. +From 2009 until its acquisition in May 2015, Ms. Stewart served as a Director on the Board of Talisman Energy, Inc., a Canadian oil and gas exploration and production company traded +publicly on the NYSE and the Toronto Stock Exchange. From 2004 to 2006, Ms. Stewart served as Executive Vice President of El Paso Corporation and President of El Paso E&P. From +1984 to 2004, Ms. Stewart served Apache Corporation in various capacities, including most recently as Executive Vice President, with responsibilities in Apache Corporation's reservoir +engineering, business development, land, environmental, health and safety, and corporate purchasing departments. +In +September 2019, Sheridan Holding Company II LLC and eight related debtors filed a Chapter 11 bankruptcy case in the Southern District of Texas. These entities are related to Sheridan +Production Partners and Ms. Stewart is Executive Chairman, President, Chief Executive Officer and Chief Investment Officer of the debtor entities. +Key Attributes, Experience and Skills +Ms. Stewart's over 35 years of experience in the oil and gas industry, including in reservoir engineering, business development, land and EH&S, +and extensive leadership roles are key attributes that make her well qualified to serve as a Cimarex Director. +16 +2020 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +ITEM 1: ELECTION OF DIRECTORS +Continuing Directors – Class II – Term Expires 2022 +HANS HELMERICH +Director Since 2002 | Age +61 | Independent +Committees of the Board: +§ +Compensation +§ +Nominating and Corporate Governance +Current Public Company Directorships: +§ +Chairman of Helmerich & Payne, Inc. +Former Public Company Directorships +(within the last five years): +§ +Atwood Oceanics, Inc. +Core Competencies: +§ +Oilfield Services +§ +Exploration and Development +§ +Corporate Governance +§ +Public Company Executive Experience +§ +Executive Compensation +Mr. Helmerich +has served as Chairman of Helmerich & Payne, Inc. ("H&P") since March 2012 and as a Director since 1987. H&P is a publicly held company primarily engaged in contract +drilling services for oil and gas exploration and production companies. H&P uses drilling rigs it designs and builds and is one of the major land and offshore platform drilling companies in the world. +After joining H&P in 1981, Mr. Helmerich served as CEO from 1989 to March 2014 and as President from 1989 to March 2012. H&P's exploration and production business was merged into Cimarex +in 2002. +Mr. Helmerich +serves as a Trustee of The Northwestern Mutual Life Insurance Company of Milwaukee, Wisconsin. He was a Director of Atwood Oceanics, Inc., an international offshore +drilling company traded on the NYSE, located in Houston, Texas, from 1989 to 2017 prior to its merger with Ensco plc. +Key Attributes, Experience and Skills +Mr. Helmerich's background with the drilling sector of the oil and gas business provides the Board with insight into an aspect of Cimarex's business +that represents a significant expenditure in Cimarex's capital budget. His over 25 years of executive experience provide a strong background for his service on Cimarex's Board and on the +Compensation Committee. In addition, his service as a Director and Chairman of H&P, as a Trustee of The Northwestern Mutual Life Insurance Company and his former service as a Director of Atwood +Oceanics, Inc. provides him with additional experience and knowledge to serve as a Director. +Cimarex +Energy +Co. +17 +Table of Contents +ITEM 1: ELECTION OF DIRECTORS +HAROLD R. LOGAN, JR. (Lead Director) +Director Since 2009 | Age 75 | Independent +Committees of the +Board: +§ +Audit +§ +Nominating and Corporate Governance (Chair) +Current Public Company Directorships: +§ +Chairman of the Board of Supervisors of Suburban Propane Partners, +L.P. +Former Public Company Directorships +(within the last five years): +§ +Graphic Packaging Holding Co. +§ +Chairman of InfraREIT, Inc. +Core Competencies: +§ +Corporate Governance +§ +Financial Reporting Experience +§ +Executive Compensation +§ +Finance/Investment Banking +§ +Public Company Executive Experience +§ +Midstream +Mr. Logan +currently serves as Chairman of the Board of Supervisors of Suburban Propane Partners, L.P. and has served as a Director of that company since 1996. Mr. Logan also is a +Director of one private company – Hart Energy Publishing (publisher of Oil and Gas Investor and other energy publications). From 2003 +to 2017, Mr. Logan served as a Director of Graphic Packaging Holding Co., a publicly held company located in Atlanta, Georgia, and predecessor companies. From 2008 until it sold its last +investment and closed in 2018, he served as Director of Basic Materials and Services LLC, a privately held company that invested in companies providing specialized services for the pipeline +construction and sand/silica industries. From February 2018 until its sale in June 2019, Mr. Logan served as Chairman of InfraREIT, Inc., a publicly held real estate investment trust +that owned utility assets (electric transmission lines) in Texas. From 2015 to February 2018 he had served as Lead Director for InfraREIT, Inc. +Mr. Logan +was a co-founder of TransMontaigne in Denver, Colorado in 1995 and was its Chief Financial Officer, Executive Vice President, and Treasurer, through 2002. He served as a Director of +TransMontaigne from 1995 to 2006 and Chairman of its Finance Committee from 2002 to 2006. From 1987 to 1994, he was Senior Vice President/Finance, Chief Financial Officer, and a Director of Associated +Natural Gas Corporation. Prior to that, Mr. Logan was an investment banker with Dillon Read & Co. Inc. and Rothschild, Inc. +Since +1998, Mr. Logan has been a Director of ten public companies and has served on numerous audit, compensation, and governance committees. +Key Attributes, Experience and Skills +Mr. Logan's education and his over 40 years of investment banking/venture capital and financial management experience provide him with a +comprehensive understanding of business and finance. Mr. Logan's expertise and experience have been relevant to his responsibilities of providing oversight and advice to the management of +public companies, and are of particular benefit to his roles as Cimarex's Lead Director and as a member of Cimarex's Audit Committee. +18 +2020 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +ITEM 1: ELECTION OF DIRECTORS +MONROE W. ROBERTSON +Director Since 2005 | Age +70 | Independent +Committees of the Board: +§ +Audit (Chair) +§ +Nominating and Corporate Governance +Former Public Company Directorships: +(within the last five +years): +§ +Earthstone Energy, Inc. (formerly named Basic Earth Science System) +Core Competencies: +§ +Corporate Governance +§ +Financial Reporting Experience +§ +Executive Compensation +§ +Finance/Investment Banking +§ +Public Company Executive Experience +§ +Exploration and Development +Mr. Robertson +retired from Key Production Company, Inc. ("Key") (one of two companies whose merger created Cimarex in 2002) after co-founding and serving for 10 years with Key. +While with Key, he held the positions of President, Chief Operating Officer, Senior Vice President and Principal Financial Officer. Mr. Robertson has served in executive capacities with three +other public energy companies: Apache Corporation, Gulf Oil Corporation and Terra Resources, Inc. +Mr. Robertson +was a Director of Earthstone Energy, Inc. (formerly named Basic Earth Science System) from 2007 to 2014. During his service as a Director of Earthstone Energy, Inc., +he was Chair of the Audit Committee and a member of the Compensation and Nominating Committee. +Key Attributes, Experience and Skills +Mr. Robertson has comprehensive knowledge of the financial and operational sides of the exploration and production business and experience as the +Principal Financial Officer of Key, which is of considerable value in his service as Chairman of the Audit Committee. +Cimarex +Energy +Co. +19 +Table of Contents +ITEM 1: ELECTION OF DIRECTORS +Summary of Director Core Competencies and Composition Highlights +The following chart summarizes the competencies that the Board considers valuable to effective oversight of the Company and illustrates how +the current Board members individually and collectively represent these key competencies. The lack of an indicator for a particular item does not mean that the Director does not possess that +qualification, skill or experience. While each Director is knowledgeable in these areas, the indicator represents a core competency that the Director brings to our Board. +20 +2020 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +CORPORATE GOVERNANCE +CORPORATE GOVERNANCE +We believe good corporate governance promotes the long-term interests of shareholders, strengthens Board and management accountability, and +helps build public trust. Cimarex's website (www.cimarex.com) includes materials that are helpful in understanding our corporate governance practices: +§ +Corporate Governance Guidelines +§ +Corporate Bylaws +§ +Code of Business Conduct and Ethics +§ +Stock Ownership Guidelines +§ +Complaint and Reporting Procedures +§ +Background and Experience of our Board of Directors +§ +Committee Charters +§ +Background and Experience of Executive Management +§ +Proxy access +Corporate Governance Highlights +8 of 10 independent Directors +Disclosure Committee for financial reporting +Majority voting for Directors resignation policy +Board and Audit Committee risk oversight +Classified Board +Compensation risk assessment +Combined Chairman and CEO +Review of related party transactions +Independent Lead Director +Non-hedging and non-pledging policies +Diverse Board skills and experience +Clawback policy +Annual Board and committee self-evaluations +Management and Director stock ownership guidelines +Periodic consultant review of Board skills +No tax gross-ups +Annual equity grants to Directors +Proxy access +Annual Board education +Active shareholder engagement +Shareholder Engagement +Cimarex's relationships with its shareholders are an important part of our corporate governance profile, and we recognize the value of taking +their views into account. Engagement with shareholders helps us understand the larger context and the impact of our operations, learn about expectations for our performance, assess emerging issues +that may affect our business or other aspects of our operations, and shape corporate and governance policies. +In +April and May 2019, we reached out to 29 of our top shareholders who collectively held approximately 66% of our shares to hold calls to discuss our compensation programs and disclosure and ESG +issues. Six shareholders, who collectively held 23% of our shares, accepted our invitations. In these calls, our Senior Vice President—General Counsel and Secretary and our Vice +President—Investor +Relations asked the shareholders their views on pay for performance alignment, the structure of our compensation programs and other concerns. The results of these calls were shared with our +Compensation Committee and the full Board of Directors. While these shareholders generally believed we had alignment with our pay for performance, they had suggestions concerning our short-term and +long-term compensation programs and ESG matters. The Company took action on a number of items in response to these engagement efforts and +Cimarex +Energy +Co. +21 +Table of Contents +CORPORATE GOVERNANCE +other +feedback received, including the results of the shareholder advisory vote on executive compensation (61% in 2019 compared to 93% in 2018), as follows: +What We Heard in 2019 +What We Did in 2019 and 2020 +Some of our shareholders raised concerns with the discretionary nature of our annual cash incentive program. +We added objective, formula-based metrics to the short-term incentives for 2020. We also clarified our disclosure concerning compensation programs in this proxy statement concerning the use of metrics for 2019 annual cash incentive decisions and a +more formulaic metric-based approach for 2020. +Some of our shareholders raised concerns that the NEOs' performance-based awards could vest at the maximum level even if the stock price declined over the performance period. +We changed the vesting schedule opportunity for performance share awards in December 2019 so that vesting is reduced by 50% if the Company's share price declines from the date of grant through the end of the performance +period. +See "CD&A—Key 2019 Compensation Actions—Annual Cash Incentive Awards" below. +Based +on shareholder engagement in previous years, we did the following: +§ Revised our executive compensation program and disclosures; § +Enacted the "proxy access" shareholder proposal acted upon in 2015; § Added disclosures concerning methane emissions to our website in response to a +shareholder proposal concerning fugitive methane reporting that was made in December 2015 and subsequently withdrawn; and § Updated our disclosures +concerning environmental, social and governance ("ESG") +issues, including air quality, hydraulic fracturing, seismicity, spill prevention, water resource management, safety and health, community impact, community support, employee and Board diversity, and +shareholder protection measures. +Director Qualifications and Recruitment +The Board is committed to recruiting and nominating directors for election who will collectively provide the Board with the necessary +diversity of skills, backgrounds and experiences to meet Cimarex's ongoing needs and support oversight of our business strategy and priorities. In its assessment of each potential candidate, the +Nominating and Corporate Governance Committee considers the nominee's judgment, integrity, experience, independence, understanding of Cimarex's business or related industries and such other factors +that the Nominating and Corporate Governance Committee determines are pertinent in light of the needs of the Board. The Nominating and Corporate Governance Committee also considers the ability of a +nominee to devote the time and effort necessary to fulfill his or her responsibilities to Cimarex. Our Nominating and Corporate Governance Committee Charter specifically includes diversity of gender +and ethnic background in the list of desirable attributes sought in our Board composition. +Although +all current Directors have extensive oil and gas experience, either as company executives or investors, their experience is with companies with widely different operating strategies than +those of +22 +2020 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +CORPORATE GOVERNANCE +Cimarex. +This diversity and depth of experience benefits our Board in executing its duty of oversight and guidance. +§ Shareholder Nominations of Director Candidates +Cimarex's Bylaws permit a group of up to 20 shareholders collectively beneficially owning more than 3% of Cimarex's outstanding shares for at least three consecutive years to +nominate up to two candidates for inclusion in Cimarex's proxy materials by following the procedures set forth in the proxy access provisions in Article III, Section 2A of our Bylaws +(the "Proxy Access Policy"). For more information on proxy access and other procedures to recommend candidates to Cimarex's Board of Directors, see "General Information—Director +Nominations for the 2021 Annual Meeting of Shareholders." +Board of Directors and its Committees +Cimarex is governed by its Board of Directors, which is led by our Chairman of the Board and CEO, and its three committees. Cimarex also has a +Lead Director, who is chosen annually by the Board from our independent Directors. The structure of the Board and the responsibilities of its committees are described in detail below. +Cimarex +Energy +Co. +23 +Table of Contents +CORPORATE GOVERNANCE +§ Our Board +Committee Memberships +(Independent Directors Only) +DIRECTOR NOMINEES +AGE +DIRECTOR +SINCE +TERM +EXPIRES +Audit +Compensation +Nominating +and +Corporate +Governance +Paul N. Eckley (Independent Director) +Senior Vice President—Investments, State Farm +65 +2019 +2020 +· +· +Kathleen A. Hogenson (Independent Director) +President and Chief Executive Officer, Zone Oil & Gas LLC +59 +2019 +2020 +· +· +Thomas E. Jorden +Chairman, Chief Executive Officer and President, Cimarex Energy Co. +62 +2011 +2020 +Floyd R. Price (Independent Director) +Chair of Compensation Committee of Cimarex; Retired, former executive officer, Apache Corporation +71 +2012 +2020 +Chair +· +Frances M. Vallejo (Independent Director) +Retired, former Vice President, ConocoPhillips +54 +2017 +2020 +· +· +Continuing Directors +Joseph R. Albi +Executive Vice President—Operations, Chief Operating Officer, Cimarex Energy Co. +61 +2011 +2021* +Hans Helmerich (Independent Director) +Chairman and former Chief Executive Officer, Helmerich & Payne, Inc. +61 +2002 +2022 +· +· +Harold R. Logan, Jr. (Independent Director) +Independent Lead Director and Chair of Nominating and Corporate Governance Committee of Cimarex; Chairman, Suburban Propane Partners, L.P. +75 +2009 +2022 +· +Chair +Monroe W. Robertson (Independent Director) +Chair of Audit Committee of Cimarex; Retired, former President and Chief Operating Officer, Key Production Co. +70 +2005 +2022 +Chair +· +Lisa A. Stewart (Independent Director) +Chairman, President, Chief Executive Officer and Chief Investment Officer, Sheridan Production Partners +62 +2015 +2021 +· +· +* In January 2020, Mr. Albi informed Cimarex that he intends to retire as an officer, Director and employee +of Cimarex effective July 1, 2020. +24 +2020 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +CORPORATE GOVERNANCE +§ Board Leadership Structure +Chairman of the Board: Duties and Responsibilities +§ +Preside over Board meetings. +§ +Call special meetings of the Board. +§ +Approve agenda for Board meetings. +§ +Preside over shareholder meetings. +§ +Facilitate and participate in formal and informal communications with and among Directors. +Lead Director: Duties and Responsibilities +§ +Preside over all Board meetings at which the Chairman of the Board is not present. +§ +Act as Chairman of the Nominating and Corporate Governance Committee. +§ +Solicit agenda items from non-management Directors, review Board meeting agenda and materials, and provide input to the Chairman of the Board. +§ +Act as liaison between the Chairman and the Directors and facilitate communication among the full Board. +§ +Call meetings of non-management Directors and, as appropriate, set the agenda. +§ +Review shareholder communications directed to the Board and take appropriate action. +§ +Preside over all meetings of non-management Directors and over all executive sessions of non-management Directors. +§ +Retain outside advisors and consultants, who report directly to the Board on Board-wide issues. +The +Board believes having a combined Chairman/CEO and an independent Lead Director, who have the duties described above, best serve the interests of our shareholders because this structure provides an +appropriate balance between strategy development and independent oversight of management. +Thomas +Jorden was elected Chief Executive Officer on September 30, 2011 and Chairman of the Board on August 14, 2012. He has served as an executive officer of Cimarex since its formation +in 2002. He has considerable knowledge and experience gained through his executive positions with Cimarex and prior industry experience. This knowledge and experience allow him to focus the activities +of the Board on matters most relevant to the success of Cimarex. +The +Compensation Committee is comprised entirely of independent Directors. When the Board acts on the Compensation Committee's recommendation for compensation of the Chairman/CEO, it acts without the +Chairman/CEO being present. +The +substantial experience and background of our independent Directors ensure their active and knowledgeable involvement in Board matters. This involvement, and the presence and involvement of our +Lead Director, provide the Board with a strong and independent point of view. +§ Board Committees +The committees of the Board are comprised entirely of independent Directors. The primary responsibilities of the committees are described below. The committees are governed by +Board-approved charters stating the committees' responsibilities. In February 2020, due to the increasing time commitment necessary for +Cimarex +Energy +Co. +25 +Table of Contents +CORPORATE GOVERNANCE +both +the compensation and corporate governance functions previously overseen by the Compensation and Governance Committee, the Board moved the governance functions to the Nominating Committee. As a +result, the names of the committees were changed to reflect these new duties. A copy of the committees' charters are available on our website at www.cimarex.com. +Audit Committee +Primary Responsibilities: +Meetings in 2019: 8 +§ +Appoints independent auditors; +Members: +Monroe W. Robertson +(Chair) +§ +Approves the nature and scope of services of independent auditors and reviews the range of fees for such services; +Kathleen A. Hogenson +Harold R. Logan, Jr. +§ +Assists the Board in oversight and monitoring the performance of the internal audit function; +Frances M. Vallejo +§ +Reviews qualifications and independence of the auditors; +§ +Reviews and discusses with independent auditors (i) the auditors' responsibilities and management's responsibilities in the audit process, (ii) the overall +audit strategy, (iii) the scope and timing of annual audit, and (iv) any significant risks identified during the independent auditors' risk assessment procedures; +§ +Assists the Board in monitoring the integrity of financial statements; +§ +Monitors compliance with legal and regulatory requirements; +§ +Reviews and reports to Board on corporate and financial risk processes; +§ +Monitors the process related to ongoing litigation matters; and +§ +With the Company's management and (if applicable) an independent petroleum engineering consulting firm, reviews the Company's annual process of estimating and +reporting quantities of oil and gas reserves. +The Board of Directors has determined that each of the members of the Audit Committee is financially literate and independent as defined by the rules of the SEC and the NYSE. The Board also has determined that each of +Ms. Hogenson, Mr. Logan, Mr. Robertson and Ms. Vallejo is an "audit committee financial expert" as defined by the SEC's rules. +26 +2020 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +CORPORATE GOVERNANCE +Compensation +Primary Responsibilities: +Meetings in 2019: 5 +Committee +§ +Recommends CEO and executive officer cash compensation for approval by the Board; +Members: +Floyd R. Price +(Chair) +Paul N. Eckley +Hans Helmerich +Lisa A. Stewart +§ +Recommends Director compensation for approval by the Board; +§ +Reviews and recommends to the Board that the Compensation Discussion and Analysis be included in our proxy statement; +§ +Determines amount and terms of equity awards; +§ +Reviews and approves long-term incentive plans; +§ +Reviews relationship of compensation to risk; +§ +Approves the nature and scope of services of independent compensation consultants; and +§ +Develops plans for managerial succession. +As part of its compensation functions, the Compensation Committee has increased its oversight of compensation of all employees, including its review of the Company's practices to ensure compensation is +equitable. +Compensation Committee Interlocks and Insider Participation. Hans Helmerich, a member of the Compensation Committee, was an executive officer of Cimarex +from February 14, 2002 until September 30, 2002. Cimarex was formed on February 14, 2002 as a wholly owned subsidiary of Helmerich & Payne, Inc. ("H&P") for the +purpose of facilitating a spinoff by H&P of its oil and gas exploration and production business. Cimarex became a publicly traded company on September 30, 2002, at which time +Mr. Helmerich resigned as an executive officer. +Nominating and +Primary Responsibilities (Nominating Functions): +Meetings in 2019: 5 +Corporate Governance Committee +§ +Determines desired Board skills and attributes; +§ +Recommends candidates to serve on the Board and to stand for election at annual meeting of shareholders or to fill a vacancy occurring between meetings; +§ +Considers shareholder nominees for election to the Board; and +Members: +Harold R. Logan, Jr. +(Chair) +Paul N. Eckley +§ +Recommends Board committee appointments. +Hans Helmerich +Kathleen A. Hogenson +Floyd R. Price +Monroe W. Robertson +Lisa A. Stewart +Frances M. Vallejo +Primary Responsibilities (Governance Functions) : +§ +Develops and implements policies and processes regarding corporate governance matters; and +§ +Oversees annual Board and Committee evaluations. +As part of its governance functions, the Nominating and Corporate Governance Committee has increased its oversight of environmental, social and governance ("ESG") issues, including corporate sustainability and +workplace fairness. +Cimarex +Energy +Co. +27 +Table of Contents +CORPORATE GOVERNANCE +Other Governance Matters +§ Director Education +Directors are encouraged to attend continuing education programs designed to enhance the performance and competencies of individual Directors and the Board of Directors. In +2019, Directors participated in various corporate director and compliance programs held by governance organizations, including the NYSE and the National Association of Corporate Directors ("NACD"). +Ms. Vallejo, a member of our Board, Audit Committee and Nominating and Corporate Governance Committee, became a NACD Governance Fellow in 2019. NACD Fellowship is a comprehensive and continuous +program of study that empowers directors with the latest insights, intelligence, and leading boardroom practices. +§ Director Attendance +During 2019, the Board of Directors met five times. The Board has three Committees: the Audit Committee, the Compensation Committee, and the Nominating and Corporate Governance +Committee. During 2019, each Director attended greater than 75% of the meetings of the Board and the Board Committees on which he or she served. All Board members are expected to attend the Annual +Meeting. All Directors attended our 2019 Annual Meeting. +§ Executive Sessions +The independent Directors meet in executive session at each regularly scheduled Board meeting. The Lead Director presides over executive sessions. During 2019, four executive +sessions were held, without the CEO or any member of management present, and all of the independent Directors attended each session that occurred while he or she was a Director, with the exception of +one former Director who could not attend one executive session. These sessions allow independent Directors to review the CEO's performance and compensation and to discuss issues of importance to +Cimarex, including the business and affairs of Cimarex, as well as matters concerning management. +§ Risk Oversight +The Board has overall responsibility for risk oversight. In carrying out its responsibility, the Board has requested that the Audit Committee discuss with management and report +to the Board with respect to: +§ Processes Cimarex follows to mitigate corporate risks; § Guidelines +and processes pertaining to financial risk assessment; § Steps management takes to measure, monitor and control financial risk exposures; and +§ Management's conclusion as to the effectiveness of the guidelines and processes +utilized to mitigate such corporate and financial risks and exposures. +In +addition, at each of the Board's four regularly scheduled meetings held during the year, management provides the Board with an overview of Cimarex's operations, financial results, risks and risk +mitigation efforts, and other aspects of its business. Significant strategic considerations, such as material acquisitions or mergers, are brought to the Board for deliberation and, as appropriate, +decisions. +28 +2020 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +CORPORATE GOVERNANCE +The +Audit Committee, at its December 5, 2019 meeting, reviewed, discussed and, at the Board meeting that day, reported to the Board about corporate, operational and financial risks and +Cimarex's processes for mitigation of these risks. +§ Compensation Risk Oversight +In February 2020, the Compensation Committee performed a thorough review of the possible connection between compensation and excessive risk taking. The Compensation Committee's +review covered Cimarex's compensation policies and practices covering executive and non-executive employees to determine whether the policies and practices encourage excessive risk taking by +employees. The Committee's analysis included a review and discussion of the following: +§ The metrics for determining incentive awards; § Participants in the +Company's compensation programs; § How the Company determines compensation pools and individual awards; § The maximum individual award potential (maximum individual incentive to take risk); +§ The maximum possible cost if awards were paid at maximum levels (maximum cost +exposure); § The decision-making and approval process; and § The systemic limitations through Company business processes on the ability of +employees to take excessive risks in order to influence compensation. +The +Compensation Committee determined that the risks from Cimarex's compensation policies and practices for Cimarex employees are not reasonably likely to have a material adverse effect on Cimarex. +§ Director Independence and Related Person Transactions +Our Corporate Governance Guidelines require that a majority of our Directors be independent as defined by applicable laws, rules, regulations and listing standards. We comply +with the criteria for independence established by the NYSE listing requirements and other governing laws and regulations. +Each +year until February 19, 2020, the Compensation Committee reviewed the independence of our Directors and any related party transactions. On the basis of this review, the Committee delivers +a report to the Board, and the Board makes independence determinations based on the Committee's report. Going forward this review and reporting will be undertaken by the Nominating and Corporate +Governance Committee. +As +a result of this review, the Board has determined that Paul N. Eckley, Hans Helmerich, Kathleen A. Hogenson Harold R. Logan, Jr., Floyd R. Price, Monroe W. Robertson, Lisa A. Stewart and Frances M. +Vallejo, representing eight of our ten current Directors, are independent of Cimarex and its management. Thomas Jorden and Joseph Albi are not independent because of their employment as CEO and COO of +Cimarex, respectively. +In +making these determinations, the Board considered that, in the ordinary course of business, relationships and transactions may occur between Cimarex and entities with which some of our Directors +are or have +Cimarex +Energy +Co. +29 +Table of Contents +CORPORATE GOVERNANCE +been +affiliated. As a result of the Committee's review, certain relationships and transactions are not considered to be material transactions that would impair a Director's independence, including the +following: +§ The Director is an employee of another company that does business with Cimarex, and +our annual sales to or purchases from the other company amount to less than 2% of the annual revenues of the other company and that such sales to or purchases from the other company are part of our +ordinary course of business and conducted in the same manner as we obtain services from other companies that provide similar services; or § The Director +is a director (but not an employee) of another company that does business +with Cimarex. +Hans +Helmerich is the non-executive Chairman of the Board, and until March 5, 2014 was the CEO, of Helmerich & Payne, Inc. ("H&P"), a company with which Cimarex engages in the +ordinary course of business transactions. As non-executive Chairman, Mr. Helmerich currently is not an employee of H&P. During H&P's fiscal year ended September 30, 2019, Cimarex paid +H&P $83 million for drilling services in arms' length transactions and as part of our ordinary course of business and in the same manner as we obtain services from other companies that provide +similar services. The aggregate amount of the payments represented 2.9% of H&P's revenue during that period. The Compensation Committee reviewed these transactions and concluded: (i) the +transactions are proper and not material when compared to both Cimarex's total drilling and completions costs and H&P's total revenues; (ii) the transactions occurred in the ordinary course of +business and at arms' length; (iii) the Board does not review or approve drilling service contracts or arrangements; (iv) Mr. Helmerich ceased being an employee of H&P in 2014; +and (v) Mr. Helmerich's relationship with H&P does not interfere with his independent judgment as a Director of Cimarex. +Ms. Stewart +is Chairman, President, Chief Executive Officer and Chief Investment Officer of Sheridan Production Partners, a privately – owned oil and gas operating company she +founded in 2007. During 2019 Cimarex paid certain affiliated companies of Sheridan oil and gas revenues of $133,350 and received $114,182 from certain affiliates of Sheridan for joint interest +billings. Cimarex's payments to the affiliates of Sheridan represented 0.4% of Sheridan's consolidated gross revenues for 2019. In addition, Cimarex paid the Sheridan affiliates joint interest +billings of $1,611, and Cimarex received $3,522 of oil and gas revenues. The Compensation Committee reviewed these transactions and concluded: (i) the transactions are proper and not material +when compared to both Cimarex's total costs and Sheridan's revenues; (ii) the transactions occurred in the ordinary course of business and at arms' length; (iii) the Board does not +review or approve oil and gas revenue payments or joint interest billings; and (iv) Ms. Stewart's relationship with Sheridan does not interfere with her independent judgment as a +Director of Cimarex. +§ Communications with Directors +Shareholders may communicate with our Board by mail directed to our Corporate Secretary or by facsimile (720) 403-9383. All communications will be forwarded to +the Lead Director for the Lead Director's review. The Lead Director may take any action the Lead Director deems appropriate or necessary, including, without limitation, forwarding the information to +the Board for consideration or, with the concurrence of the Board, retaining independent or outside counsel, accountants or other advisors to address the concern. +30 +2020 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +EXECUTIVE SUMMARY OF COMPENSATION DISCUSSION AND ANALYSIS ("CD&A") +OVERVIEW +§ 2019 BUSINESS AND FINANCIAL PERFORMANCE +Oil prices increased throughout 2019 from $45.41 per barrel on January 1, 2019 to $61.66 per barrel on December 31, 2019 before declining in the first few months +of 2020 to below $30.00 per barrel on March 9, 2020 after Saudi Arabia announced price cuts and production increases. Natural gas prices quoted at Henry Hub declined during 2019 from $2.94 per +Mcf on January 1, 2019 to $2.18 per Mcf on December 31, 2019 and continued to decline in the first few months of 2020. Given declining commodity prices and volatility, the Compensation +Committee continued to focus on strategic and tactical goals that preserve Cimarex's strong balance sheet, core properties and organization while also stressing improving health, safety and +environment metrics. For 2019, specific goal targets and weightings have been added to improve transparency of Compensation Committee decision-making. These goals and our performance are summarized +below under "Section 2—Annual Cash Incentive Awards." It is through this hybrid microeconomic and macroeconomic lens that the Committee considered the following 2019 business and +financial performance overview when making compensation decisions: +§ Exploration and development expenditures decreased 21% to $1.242 billion in +2019 compared to $1.570 billion in 2018, while year-over-year average daily production increased 25% to 278.5 MBOE per day in 2019 compared to 221.9 MBOE per day in 2018. The increase in the +daily production volumes resulted from our acquisition of Resolute Energy Corporation ("Resolute") as well as drilling and completion activity in 2019. § +Year-over-year production revenues increased 1% to $2.322 billion and were +positively affected by increased production and negatively affected by declining commodity prices. § We incurred a net loss of $124.6 million in 2019 +compared to net income of +$791.9 million in 2018. § We recognized a $618.7 million non-cash ceiling test impairment of our oil and +gas properties primarily due to decreases in the 12-month average trailing commodity prices used in calculating the ceiling test. § Cash flow provided by +operating activities of $1.344 billion was 13% lower than +cash flow provided by operating activities in 2018. § Our Operations group excelled at optimizing our production and maximizing well +profitability. As a result, our production expense declined 9% from $3.66 per BOE in 2018 to $3.34 per BOE in 2019. § We completed our acquisition of +Resolute Energy Corporation ("Resolute") and its +21,100 net acres adjacent to our acreage in the Permian Basin in Reeves County, Texas, for $325.7 million in cash, common and preferred stock valued at $494.6 million, and the assumption +of $870.0 million of debt. § We issued $500.0 million of senior notes and paid off Resolute's +$870.0 million of long-term debt. § We had cash on hand of $94.7 million at year-end 2019. § At year-end 2019, our estimated proved reserves were 5% higher than at year-end 2018 +after additions, positive and negative revisions, and production. +Cimarex +Energy +Co. +31 +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +§ Our stock price decreased 15% from $61.65 at year-end 2018 to $52.49 at year-end 2019. +The decrease in our stock price led to the following, which demonstrate the alignment of interests of our NEOs and shareholders: +§ a lower value for NEOs' long-term equity awards that vested in 2019 compared to the +grant date fair value ("GDFV") of those awards in 2016, with the vested shares having a value equal to 22% of the GDFV, and § lower GDFV for long-term +equity awards made in 2019, with the GDFV of the four NEOs +who also were NEOs in 2018 declining 4%. +§ HIGHLIGHTS OF EXECUTIVE COMPENSATION PROGRAM POLICIES AND +PRACTICES +What We Do +What We Don't Do +Link majority of compensation to performance +No hedging or pledging of Company securities by officers or Directors +Pay long-term incentive awards solely in shares of common stock +No tax gross-up payments upon change in control +Double-trigger change in control severance benefits +No excessive perquisites +Maintain stock ownership guidelines +Retain an independent compensation consultant +Hold annual say-on-pay advisory vote for stockholders +Maintain a clawback policy for cash and equity incentive awards +Incorporate specific goals and metrics in annual cash incentive awards +Undertake pay equity analyses +§ 2019 EXECUTIVE COMPENSATION +Stock Awards ($) (1) +% of Total +Name +2019 Salary (1) +Year End +2019 Base Salary +2019 Annual Cash +Incentive Award (1) +Performance- +based +Time Vested +Total +Compensation (1)(2) +Compensation +at Risk (3) +Thomas E. Jorden, CEO +$ 1,009,324 +$ 1,024,650 +$ 1,153,000 +$ 3,362,500 +$ 3,362,500 +$ 9,002,555 +89% +G. Mark Burford, CFO +$ 505,846 +$ 515,000 +$ 440,000 +$ 1,250,000 +$ 1,250,000 +$ 3,525,919 +85% +Joseph R. Albi, COO +$ 640,569 +$ 650,300 +$ 600,000 +$ 1,450,000 +$ 1,450,000 +$ 4,234,461 +85% +John A. Lambuth, EVP +$ 535,262 +$ 543,400 +$ 480,000 +$ 1,450,000 +$ 1,450,000 +$ 3,981,715 +86% +Christopher H. Clason, SVP, CHRO +$ 295,212 +$ 420,000 +$ 360,000 +$ 1,875,000 +$ 1,781,000 +$ 5,111,056 +93% +(1) From Summary Compensation Table. +(2) Includes All Other Compensation from Summary Compensation Table. Mr. Clason joined Cimarex +in April 2019. For a description of the compensation he received in connection with joining Cimarex, which, together with the annual grant of equity awards to officers in December 2019, resulted in +his being an NEO, see footnote 4 to the Summary Compensation Table. +(3) Compensation at risk is based on the sum of 2019 Annual Cash Incentive Award and 2019 Long-Term +Incentive Grant Date Fair Value compared to the sum of the 2019 Salary, 2019 Annual Cash Incentive Award, and 2019 Stock Awards grant date for value for performance-based and time vested awards as +disclosed in the Total Compensation from the Summary Compensation Table. +32 +2020 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +ELEMENTS AND MIX OF EXECUTIVE COMPENSATION +§ Principal Elements of Executive Compensation +We principally use three elements to carry out the design of our executive compensation program, collectively referred to as "Total Direct Compensation": +Element +Purpose +Base salary +➜ +Ensure best talent through market competitive cash compensation and, when needed, attract new executives. +Annual cash incentive award +➜ +Reward executives for short-term financial and operational results. +Annual long-term equity award +➜ +Retain current executive team and ensure that activities and results are focused on building long-term shareholder value. Half of the grant date fair value of 2019 long-term equity awards was made in the form of shares of restricted stock that vest +based on continued employment and the passage of time, which promotes retention. The other half of the grant date fair value of the 2019 long-term equity awards was made in the form of performance shares that vest based on performance measures tied +to absolute and relative stock price performance, which promotes the long-term interests of our shareholders and aligns executives' interests with shareholders' interests. +§ Mix of Executive Compensation +Cimarex's executive compensation program directly links the majority of executive compensation to Cimarex's performance through annual and long-term incentives. The diagrams +below show the mix of the pay elements for the CEO and other NEOs for fiscal 2019. These diagrams are based on the base salary, annual cash incentive award and annual long-term equity award +(performance-based and time-vested stock awards) in the Summary Compensation Table and highlight the substantial portion of the at risk compensation that is only realized if certain performance +criteria are met. On this basis, 89% of the CEO's 2019 compensation is at risk and is linked to measured performance criteria. The at-risk compensation consists of 13% annual cash incentive +compensation based on 2019 performance and 76% long-term equity incentive compensation that is both time- and performance-based. The 2019 average compensation mix for +the other NEOs was 87% at-risk compensation consisting of 12% annual cash incentive compensation based on 2019 performance and 76% long-term equity incentive compensation that is both time- and +performance-based. +Cimarex +Energy +Co. +33 +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +2019 TOTAL COMPENSATION MIX +Chief Executive Officer +Other Named Executive Officers +34 +2020 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +COMPENSATION DISCUSSION AND ANALYSIS +This CD&A describes Cimarex's executive compensation program for 2019. We use this program to retain, motivate and attract, when needed, the +executives who lead our business. The annual cash incentive award and long-term incentive award components ensure a direct link to Company performance and shareholder value. This CD&A explains how the +Compensation Committee (the "Committee") of the Board of Directors made 2019 compensation decisions for our executives, including the following NEOs: +Named Executive Officer +Position +Thomas E. Jorden +Chairman of the Board, CEO and President (Principal Executive Officer) +G. Mark Burford +Senior Vice President and CFO (Principal Financial Officer) +Joseph R. Albi +Executive Vice President—Operations, COO +John A. Lambuth +Executive Vice President—Exploration +Christopher H. Clason +Senior Vice President and Chief Human Resources Officer +This CD&A is divided into three sections: +➢ +Section 1 +discusses our compensation framework, principal elements of executive compensation, and competitive positioning; +➢ +Section 2 +discusses 2019 and early 2020 actions related to 2019 executive compensation; and +➢ +Section 3 +discusses the role of the Committee's independent compensation consultant and management in compensation decisions, post-employment compensation, retirement benefits, perquisites and other compensation related +issues. +SECTION 1 +§ Our Compensation Framework +Objectives +Our principal business objective is to profitably grow our proved oil and gas reserves and production for the long-term benefit of +shareholders while seeking to minimize our impact on the communities in which we operate. The primary strategy we use to achieve this objective is to reinvest our cash flow from operations at a +competitive rate of return while implementing best practices concerning safety and the environment. Our executive compensation program is designed to retain, motivate and attract, when needed, the +experienced leaders necessary to carry out this strategy. +Throughout +the Company, we focus on attracting high quality personnel who have strong technical competence, are not afraid to contribute new ideas, and work well in a team environment. The Company +periodically undertakes studies and analyses of compensation practices across all areas and disciplines within Cimarex. The data confirmed no compensation bias at Cimarex, and every employee is paid +equitably for their position regardless of gender, ethnicity or age. +Cimarex +Energy +Co. +35 +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +The +Committee also engaged our independent compensation consultant, Longnecker & Associates ("Longnecker"), to analyze the actual delivery of compensation versus the performance of the Company +as compared to the Compensation Peer Group (see below, "2019 Compensation Peer Group," for a list of these companies). Longnecker concluded that Cimarex had one of the highest correlations of realized +pay to performance out of all the Compensation Peer Group companies. +Design +We design our executive compensation program to: +§ Align performance incentives with the long-term interests of our shareholders. +We +align the long-term interests of our executives with the long-term interests of our shareholders by paying a substantial portion of each executive's total direct compensation in the form of +performance-based equity awards. Half the grant date fair value of 2019 long-term equity awards to NEOs was in the form of performance shares with vesting dependent upon absolute and relative stock +price performance, meaning the more our shareholders benefit through shareholder returns compared to a defined stock performance peer group, the more our executives benefit through increased vesting +of performance-based equity awards. As noted above, based on feedback received during shareholder engagement in 2019 and the results of the 2019 shareholder advisory vote on executive compensation, +the Compensation Committee reduced the vesting potential of performance awards if the Company's share price declines over the performance period. For performance awards made in December 2019, if the +share price declines during the performance period, the potential vesting is reduced by 50% and is capped at 100% of the target number of shares granted regardless of the relative rank of our stock +performance among stock performance peer group companies at the conclusion of the performance period. This compares to awards made in 2018 where maximum vesting of 200% could still be attained based +on relative stock performance even if the overall share price declines. Also, our Executive Stock Ownership Guidelines require executives to have a meaningful ownership stake in Cimarex, further +aligning the interests of our shareholders and our executives. +§ Provide competitive total direct compensation opportunities that retain, motivate and +attract, when needed, executive talent. +We +compensate our executives at levels that are competitive with equivalent positions at companies with which we may compete for talent as represented by our Compensation Peer Group (see "2019 +Compensation Peer Group" below). In general, when we review base salaries, annual incentive award opportunities, long-term equity awards and total direct compensation, we reference the 50th and +75th percentiles of the Compensation Peer Group to understand the competitive landscape. Actual compensation earned by an executive may be outside this range based on the Company's performance, +the individual's achievements and expertise, and industry competition for talented executives. Half the grant date fair value of 2019 long-term equity awards was in the form of shares of restricted +stock that vest based on continued employment and the passage of time, which promotes retention of executives. +36 +2020 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +§ Link compensation earned to achievement of short-term and long-term financial and +operational objectives. +We +provide the opportunity for an annual incentive cash award that is designed to reward executive efforts for achieving Company financial, operational and strategic objectives. The portion of our +long-term equity incentive awards that vest based on performance measures tied to relative stock price performance, with limitations on vesting in the event of an absolute price decline, are designed +to encourage above average stock price performance, which aligns executives' interests with shareholders' interests. +§ Competitive Positioning +In support of our compensation objectives and in order to determine an appropriate total value and mix of pay for executives, we reference the 50th and +75th percentiles of the Compensation Peer Group to understand the competitive landscape. The 50th and 75th percentiles are reference points only; we do not automatically +compensate each executive at these levels. Several variables, including individual and division performance, time employed in the position, annual Company performance and one- and three-year relative +stock price performance influence the actual executive compensation decisions. We review our individual NEO and total NEO Total Direct Compensation compared to individual NEO and total NEO Total +Direct Compensation of companies in our Compensation Peer Group. Because not all of our NEO positions are directly comparable to NEO positions of companies in our Compensation Peer Group, we believe +that reviewing the aggregate Total Direct Compensation of all NEOs provides an appropriate reference for comparative purposes and allows us to compare our total cost of management for all NEOs to our +peers' total cost of management. +§ 2019 Compensation Peer Group +The Compensation Peer Group is comprised of companies in the oil and gas industry with market capitalizations, revenues and operating areas similar to ours and with whom we +compete for executive and other employee talent. The Committee annually reviews companies in the Compensation Peer Group and modifies the group as appropriate. +In +May 2019, the Committee approved the 2019 Compensation Peer Group, which at the time of selection included companies that were comparable to Cimarex. The April 30, 2019 market capitalization +of these companies ranged from $2.2 billion to $17.5 billion, and the trailing 12 months' revenue, based on the latest periodic report filed by these companies with the SEC, +ranged from $891 million to $10.7 billion. For the comparable date and period, Cimarex's market capitalization was $6.8 billion and its revenue was $2.3 billion. Longnecker +recommended removing one company, Concho Resources, Inc., that was in the 2018 Compensation Peer Group due to its market capitalization ($23 billion), enterprise value +($27.7 billion) and asset levels ($26.3 billion) compared to the other companies being above the range of reasonableness for appropriate peer companies. Longnecker also recommended +adding one new company, Devon Energy Corporation ("Devon"), based primarily on its market capitalization ($10.7 billion) and enterprise value ($18.1 billion) being within the range of +reasonableness, its operational overlap with Cimarex in the Delaware Basin and Mid-Continent region, and its being a consistent constituent in proxy advisory peer +Cimarex +Energy +Co. +37 +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +groups. +The Committee approved these recommendations, resulting in the following 2019 Compensation Peer Group: +Compensation Peer Company +Stock +Ticker +Compensation Peer Company +Stock +Ticker +Antero Resources Corporation +AR +Diamondback Energy, Inc. +FANG +Apache Corporation +APA +Noble Energy, Inc. +NBL +Cabot Oil & Gas Corporation +COG +Parsley Energy, Inc. +PE +Centennial Resource Development, Inc. +CDEV +Range Resources Corporation +RRC +Continental Resources, Inc. +CLR +WPX Energy, Inc. +WPX +Devon Energy Corporation +DVN +§ 2019 Stock Performance Peer Group +Under our long-term equity incentive award program, we grant performance-based awards of restricted stock to our NEOs. For grants made in December 2019, the performance measure +used to determine the number of shares to be delivered upon vesting is Cimarex's relative stock price performance at the end of the three-year period preceding the December 1, 2022 vesting date +when compared to companies in a Compensation Committee-selected group of companies in the exploration and production industry with whom the Company competes for investors and investment capital (the +"Stock Performance Peer Group"). The Company previously used the S&P 500 Oil & Gas Exploration & Production Index companies as the Stock Performance Peer Group. However, due to +the small number of companies in that index in December 2019, the Committee selected a larger group to ensure appropriate comparisons. The revised Stock Performance Peer Group included 10 of the 12 +companies in the S&P 500 Oil & Gas Exploration & Production Index. The Committee's independent compensation consultant agreed with the selected companies. The following are the +companies that comprised the Stock Performance Peer Group on December 5, 2019: +Stock Performance Peer Company +Stock +Ticker +Stock Performance Peer Company +Stock +Ticker +Apache Corporation +APA +Ovintiv Inc. (formerly known as Encana Corporation) +OVV +Cabot Oil & Gas Corporation +COG +EQT Corporation +EQT +Centennial Resource Development, Inc. +CDEV +Marathon Oil Corporation +MRO +Cimarex Energy Co. +XEC +Matador Resources Company +MTDR +Concho Resources Inc. +CXO +Noble Energy, Inc. +NBL +Devon Energy Corporation +DVN +Parsley Energy, Inc. +PE +Diamondback Energy, Inc. +FANG +Pioneer Natural Resources Company +PXD +EOG Resources, Inc. +EOG +WPX Energy, Inc. +WPX +38 +2020 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +SECTION 2 +§ Summary of 2019 and Early 2020 Compensation +Decisions +COMPENSATION ELEMENT +ACTION +RATIONALE +§ +BASE SALARY +Increased CEO's base salary from $990,000 to $1,024,650. +Mr. Jorden's leadership in maintaining the Company's strong financial position and operational performance through a reduced commodity price environment, as well as his base salary compared to other Compensation Peer Group CEOs. +Increased CFO base salary from $475,000 to $515,000. +Ensuring internal equity with base salaries of other NEOs (other than the CEO), external competitiveness compared to the Compensation Peer Group, tenure as CFO, and promotion to Senior Vice President. +Increased remaining NEOs' base salaries by 3.5%. +These increases were based on maintaining alignment of the other NEOs with the Compensation Peer Group, and both Company and individual performance. +§ +ANNUAL CASH INCENTIVE PLAN +Authorized annual cash incentive award to the CEO of 90% of his target award (or 113% of year-end base salary) and awards to the other NEOs between 85% to 92% of year-end base salary. The CEO has an award target of 125% of year-end base salary and +all other NEOs have an award target of 100% of year-end salary. +Annual cash incentive awards were based on the achievement of financial, operational and strategic objectives described below in "Annual Cash Incentive Awards" and on recommendations from the Committee's independent compensation consultant. See "Key +2019 Compensation Actions—Annual Cash Incentive Awards" below. +Cimarex +Energy +Co. +39 +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +COMPENSATION ELEMENT +ACTION +RATIONALE +§ +LONG-TERM EQUITY INCENTIVES +Authorized long-term equity awards to NEOs (including the CEO) with an aggregate grant date fair value of $17,825,000. Half of the grant date fair value of the 2019 long-term equity awards was made in the form of shares of restricted stock that vest +based on continued employment through December 1, 2022. The other half of the grant date fair value of the 2019 long-term equity award was made in the form of performance shares that may vest on December 1, 2022 in an amount between zero +and 200% of the target number of performance shares awarded, with 200% being earned if Cimarex's stock price has increased, and if relative stock price is in the top two of the 16 companies in the Stock Performance Peer Group during the three-year +performance period ending on December 1, 2022. Based on feedback during shareholder engagement, the vesting percentages are reduced by 50%, and capped at 100% of the target number of shares granted, if Cimarex's stock price is lower on +December 1, 2022 than on December 1, 2019. +Given Cimarex's reduced emphasis on cash and other forms of compensation that are not "at risk" and the factors discussed below in this paragraph, the range for 2019 long-term equity awards recommended by the compensation consultant represented a +total value just below the 50th percentile when compared to 2019 awards made by peer companies based on the consultant's review of public filings and knowledge of practices of other companies in the Company's competitive market and market survey +data. The Committee considered Cimarex's total shareholder return for the past one and three years, the competitive market pressures and Cimarex's relative share price performance versus peers. The Committee considered the compensation consultant's +recommended individual and total pool of grant date fair value and the CEO's recommendations for NEOs other than the CEO based on their individual contribution, and determined to make aggregate awards slightly below the level recommended by its +consultant. Its consultant concurred with the Committee's final determination. +See "Key 2019 Compensation Actions" below for more detail. +§ Response to 2019 Say-on-Pay Vote and +Shareholder Engagement +In April and May 2019, we reached out to 29 of our top shareholders who collectively held approximately 66% of our shares to hold calls to discuss our +compensation programs and disclosure and ESG issues. Six shareholders, who collectively held 23% of our shares, accepted our invitations. In these calls, our Senior Vice President—General +Counsel and Secretary and our Vice President—Investor Relations asked the shareholders their views on pay for performance alignment, the structure of our compensation programs and other +concerns. The results of these calls were shared with our Compensation Committee and the full Board of Directors. While these shareholders generally believed we had alignment with our pay for +40 +2020 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +performance, +they had suggestions concerning our short-term and long-term compensation programs and ESG matters. The Company took action on a number of items in response to these engagement efforts +and other feedback received, including the results of the shareholder advisory vote on executive compensation (61% in 2019 compared to 93% in 2018), as follows: +What We Heard in 2019 +What We Did in 2019 and 2020 +Some of our shareholders raised concerns with the discretionary nature of our annual cash incentive program. +We added objective, formula-based metrics to the short-term incentives for 2020. We also clarified our disclosure concerning compensation programs in this proxy statement concerning the use of metrics for 2019 annual cash incentive decisions and a +more formulaic metric-based approach for 2020. +Some of our shareholders raised concerns that the NEOs' performance-based awards could vest at the maximum level even if the stock price declined over the performance period. +We changed the vesting schedule opportunity for performance share awards in December 2019 so that vesting is reduced by 50% if the Company's share price declines from the date of grant through the end of the performance +period. +§ Key 2019 Compensation Actions +The following discusses the Committee's key 2019 compensation decisions, which are reflected in the 2019 Summary Compensation Table below. These decisions were +made with the advice and concurrence of Longnecker. (See "CD&A—Section 3" for additional discussion regarding the role of the consultant.) +CEO Compensation +§ +Mr. Jorden's base salary was increased by 3.5% for the reasons described below. +§ +Mr. Jorden's 2019 annual cash incentive award was $1,153,000, or 90% of his target award or 113% of his year-end base salary. This equates to a decrease of 34% +relative to Mr. Jorden's annual cash incentive award for 2018. His target annual cash incentive award is 125% of his year-end base salary and his maximum award is 250%. +§ +Mr. Jorden's annual long-term incentive equity award value at the date of grant (December 5, 2019) was $6,725,000. This equates to a decrease of 2.5% +relative to Mr. Jorden's long-term incentive equity award value granted in 2018. +These +decisions were reviewed in detail by the Committee and its independent consultant. The Committee considered several factors, including input from its independent consultant, compensation data +from peer companies and Cimarex's performance. In 2019, approximately 89% of Mr. Jorden's compensation as disclosed in the Summary Compensation Table was at risk. The value of +Mr. Jorden's long-term equity incentive awards that vested in 2019 was $2.3 million, compared to the grant date fair value of those awards when granted in 2016 of $10.5 million, +demonstrating the alignment of Mr. Jorden's interests with shareholders' interests. +Cimarex +Energy +Co. +41 +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +Other NEO Compensation +The Committee also made compensation decisions for the other NEOs comprised of base salary adjustments made in May 2019, annual cash incentive +awards for 2019 made in February 2020, +and long-term equity awards made in December 2019. These adjustments were based upon the recommendations of the CEO, evaluation by the Committee, the advice and recommendations of Longnecker, salary +data from peer and broader market surveys, internal pay relationships based on relative duties and responsibilities, the executive's impact on Cimarex's results, and for retention purposes. Based upon +these considerations, the Committee made the following 2019 NEO compensation decisions: +2019 Long-Term Incentive +Grant Date Fair Value (1) +% of Total +Name +2019 Salary (1) +Year End +2019 Base Salary +2019 Annual Cash +Incentive Award (1) +Performance +based +Time Vested +Total +Compensation (1)(2) +Compensation +at Risk (3) +G. Mark Burford, CFO +$ 505,846 +$ 515,000 +$ 440,000 +$ 1,250,000 +$ 1,250,000 +$ 3,525,919 +85% +Joseph R. Albi, COO +$ 640,569 +$ 650,300 +$ 600,000 +$ 1,450,000 +$ 1,450,000 +$ 4,234,461 +85% +John A. Lambuth, EVP +$ 535,262 +$ 543,400 +$ 480,000 +$ 1,450,000 +$ 1,450,000 +$ 3,981,715 +86% +Christopher H. Clason, SVP, CHRO (4) +$ 295,212 +$ 420,000 +$ 360,000 +$ 1,875,000 +$ 1,781,000 +$ 5,111,056 +93% +(1) From Summary Compensation Table. +(2) Includes All Other Compensation from Summary Compensation Table. +(3) Compensation at risk is based on the sum of 2019 Annual Cash Incentive Award and 2019 Long-Term Incentive Grant Date Fair Value +compared to the Total Compensation from the Summary Compensation Table. +(4) Includes All Other Compensation from Summary Compensation Table. Mr. Clason joined Cimarex in April 2019. +For a description of the compensation he received in connection with joining Cimarex, which, together with the annual grant of equity awards to officers in December 2019, resulted in his being an NEO, +see footnote 4 to the Summary Compensation Table. +Base Salary Determination +We provide competitive base salaries to ensure market competitive total cash compensation as well as to retain and attract, when needed, +talented executives. We compare each Cimarex NEO's base salary with the base salary paid for a similar executive position by companies in our Compensation Peer Group. See "Competitive Positioning" +above in this CD&A for a list of the companies in the Compensation Peer Group. The Committee then may adjust base salaries based on a number of factors, +including job responsibilities, management experience, individual contributions, retention, number of years in position, and current salary. +In +February 2019, the Committee's independent compensation consultant reviewed the NEOs' base salaries compared to the Compensation Peer Group in connection with the review of Total Direct +Compensation. In March 2019, the Committee considered raising Mr. Burford's salary in connection with his promotion from Vice President and CFO to Senior Vice President and CFO. The February +2019 Compensation Peer Group data showed that Mr. Burford's salary was below the 50 th percentile. Based on Mr. Burford's promotion and his tenure as CFO, the +Committee approved raising Mr. Burford's salary from $475,000 to $515,000 per year effective March 15, 2019, and not to further adjust his salary when other NEO salaries were considered +in May 2019. As a result, Mr. Burford's revised salary was at approximately the 52 nd percentile of the Compensation Peer Group. +In +May 2019, the Committee's independent compensation consultant reviewed the NEOs' base salaries compared to Compensation Peer Group data and broader market data and recommended a 3.5% increase in +executive salaries for each NEO, excluding Mr. Burford due to the prior actions noted above, to remain competitive with the Compensation Peer Group. Mr. Clason was hired on +April 10, 2019, and was not considered for a salary adjustment during the May 2019 NEO base salary review process. Longnecker noted +42 +2020 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +that +each NEO's salary, other than Mr. Clason, was at or slightly above the 50th percentile of the Compensation Peer Group except for the CEO, who was below the 50th percentile. +The compensation consultant noted that competitive market salary adjustments were projected to be in the range of 3% to 4%. +Mr. Jorden, +our CEO, provided the Committee with recommendations for NEOs other than himself. +Mr. Jorden's +recommendations were based on maintaining competitive alignment of the NEOs with the Compensation Peer Group and internal pay equity. The Committee considered the recommendations +of both the Committee's consultant and Mr. Jorden for NEOs other than Mr. Jorden. With respect to Mr. Jorden's salary, in discussions in executive session with the compensation +consultant and without Mr. Jorden present, the Committee considered Mr. Jorden's leadership of Cimarex through a reduced commodity price environment, including Cimarex's relative TSR +performance compared to the Compensation Peer Group for the past one year and the past three years, and his salary compared to the Compensation Peer Group's CEO salaries. The Committee also reviewed +the total salaries and recommended salaries of all the NEOs compared to the total salaries of the NEOs of the Compensation Peer Group. The compensation consultant indicated its concurrence with the +Committee's recommendations based on these reasons and the compensation consultant's experience with, and knowledge of, compensation decisions of other oil and gas exploration and production +companies. The Committee recommended, and the Board approved, the following base salaries effective June 1, 2019: +Name +Title +5/31/2019 +Base Salary +6/1/2019 +Base Salary +Percent +Increase +Thomas E. Jorden +Chairman of the Board, CEO and President +$ +990,000 +$ +1,024,650 +3.5% +G. Mark Burford +Senior Vice President and CFO +$ +475,000 +* +$ +515,000 +* +8.4% +Joseph R. Albi +Executive Vice President—Operations, COO +$ +628,300 +$ +650,300 +3.5% +John A. Lambuth +Executive Vice President—Exploration +$ +525,000 +$ +543,400 +3.5% +Christopher H. Clason** +Senior Vice President and CHRO +$ +420,000 +$ +420,000 +0.0% +* As noted above, Mr. Burford's base salary was increased effective March 15, 2019 in connection with his promotion. The noted salary and +percent increase are as of that date. Mr. Burford did not receive an adjustment as of June 1, 2019. +** Mr. Clason was hired as Vice President and Chief Human Resources Officer on April 10, 2019. Mr. Clason did not receive an +adjustment as of June 1, 2019. +Annual Cash Incentive Awards +In February 2020, the Committee met to determine NEO (including the CEO) annual cash incentive awards for 2019 performance. The individual +target for the CEO is 125% of the CEO's base salary and for each other NEO is 100% of that NEO's base salary. There is no minimum award, and an individual's maximum award is 250% of base salary for +the CEO and 200% of each other NEO's base salary. +In +February 2019, the Compensation Committee adopted 2019 strategic and tactical goals and objectives to be used to assess NEO performance and to determine annual cash incentive awards for 2019. The +below table summarizes the 2019 goal results and assessment, which were reviewed and approved in February 2020. While these discussions occurred after setting the original goals and objectives in +February 2019, the Committee decided to apply more specific metrics and weightings to 2019 goals to be responsive to +Cimarex +Energy +Co. +43 +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +shareholder +outreach and because the 2019 metrics and weightings are consistent with the metrics and weightings then being discussed for 2020 goals and objectives. At the time the Committee approved +the 2019 goals in February 2019, commodity prices had recently declined sharply, with oil in the range of $45.41 to $56.92 per barrel from January 1, 2019 through the meeting of the Committee +on February 20, 2019. The Committee also continued its focus from 2018 on goals that preserve Cimarex's strong balance sheet, core properties and organization capabilities during a difficult +period for the oil and gas industry. +44 +2020 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +The +table below explains the level of achievement of the 2019 strategic and tactical goals and objectives and the weighting applied to those goals and objectives. Summary comments for each goal area +can be found below the 2019 Performance Objectives table. +Cimarex 2019 Performance Objectives +Goal +Weight +Metrics +Result +Assessment +Strategic Goals for 2019 +80% +Achieve a good return on invested capital—rate of return (ROR) using "fully burdened" associated costs. +30% +Goal —15% ROR +Stretch —20% ROR +15.4% +Achieved Expectations +Manage the balance sheet: +— +Increase debt adjusted production per share and reserves per share, and +5% +Goal —6% +Stretch —9% +Negative +Significantly Missed Expectations +— +Live within cash flow, including dividends, with no incremental debt. +10% +Goal —cash flow neutral +Stretch —free cash flow +Free cash flow +Exceeded Expectations +Continue focus on staffing and succession planning at all levels. +10% +Exceeded Expectations +Continue focus on and improve Health, Safety and the Environment. +10% +Partially Achieved Expectations +Grow our Assets. +15% +New play or acquisition +Partially Achieved Expectations +Specific Goals for 2019 +20% +Hit or exceed quarterly and annual production guidance targets. +Goal —meet every quarter +Stretch —beat every quarter +Exceeded Expectations +Continue push on field automation and saltwater disposal ("SWD") solutions. +Achieved Expectations +Develop and implement a comprehensive strategy on methane emissions. +Exceeded Expectations +Achieve significant capex per unit cost reductions. +Goal — 7.5% +Stretch —10% +24% +Exceeded Expectations +Further move Cimarex to the forefront of technology implementation. Enhance data science capabilities. +Exceeded Expectations +Cimarex +Energy +Co. +45 +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +After +careful review of achievement against the 2019 goals and objectives, and application of the weightings and metrics designated, the Compensation Committee's assessment of executive leadership +performance is that, overall, the Company Achieved Expectations for its goals and objectives. Assessment commentary for each 2019 performance objective +follows: +Achieve a good return on invested capital—Achieved Expectations. +Cimarex utilizes a "fully-burdened" economic assessment of all investment decisions and to measure overall return on capital performance at +the corporate level. While capital return metrics are increasingly prevalent in the oil and gas industry, a recurring theme we have heard in our external engagement efforts is the perception that there is a lack of communication of fully-burdened +return results. A "fully-burdened" assessment includes costs for drilling, completion, facilities, infrastructure, land and overhead costs. It also includes midstream and SWD infrastructure fully accounted for in the year the costs are incurred in +order to truly measure the impact of an investment decision to Cimarex's bottom-line. For instance, when reviewing a drilling decision, an honest assessment of a well's production performance (forecast) coupled with ALL associated costs to drill, +complete and produce is foundational to learning from the past and improving our go-forward drilling decisions. For 2019, the overall return on capital was 15.4% "fully burdened," and above the Company's cost of capital. +Manage the balance sheet +• +Increase debt-adjusted +production and reserves per share—Significantly Missed Expectations +We realized year on year decline of oil and BOE debt-adjusted production per share of –4% and –2% respectively. This compared to the Company's goal of 6% growth on a debt-adjusted +basis. +We also realized year on year decline of oil and BOE debt-adjusted reserves per share of –11% and –19% respectively. This compared to the Company's goal of 6% growth on a debt-adjusted basis. The +lower 2019 average share price and lower commodity prices used in our reserve calculations were the key drivers causing our debt-adjusted production and reserves per share to come in below targeted expectations. This was known by management, but we +maintained the target performance levels with the overriding objective of living within cash and generating free cash flow, without incurring additional debt. +• +Live within cash +flow—Exceeded Expectations +Cimarex established the 2019 goal to cover all oil and gas capital expenditures, as well as other capital expenditures within cash flow generated through Company operations, without incurring additional +debt. Despite lower commodity prices in 2019, we executed our capital plan while generating $141 million of free cash flow ($61 million, after dividends). Our free cash flow generation was driven by higher annual production volumes and +lower capital investment as a result of operational efficiencies. +46 +2020 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +Continue focus on staffing and succession planning at all levels—Exceeded Expectations +Cimarex implemented a Business Unit organization structure for our Permian region, which aligned exploration, production operations and support staff into a streamlined structure under a single business unit +leadership team. This has improved decision making processes and allowed for new development opportunities for potential leaders. The Company made a number of additional key assignments in order to facilitate the growth and development of key leaders +throughout the organization. As part of our succession planning, the Company introduced detailed executive assessments, development assignments and professional coaching. +Continue focus on and improve health, safety and the environment—Partially Achieved +Expectations +We continued to focus on organizational culture and our commitment to health, safety and the environment ("HS&E"). We made progress in 2019 in several focus areas, such as reduced vehicular accidents, +increased training and promoted stop work authority. Last, our total and recordable incident rate increased over prior years, which was largely driven by an increase in minor incidents. +Grow our Assets—Partially Achieved Expectations +Cimarex completed the Resolute Energy Corporation acquisition with a successful integration process, which significantly increased our assets. We also successfully identified and tested new Permian landing +zones, which significantly added to our future inventory. However, we underperformed our objective of taking action on new exploratory plays. This is a major strategic focus for 2020 and beyond. +Hit or exceed quarterly and annual production guidance targets—Exceeded Expectations +We generated 27% and 25% annual oil and BOE year-over-year growth, respectively, and exceeded our oil and BOE production guidance for all four quarters and full-year 2019. The organization achieved this +through focusing on operational efficiencies, improving execution, and driving an aligned and thorough planning process improvement. +Continue push on field automation and SWD solutions—Achieved Expectations +Cimarex continued our strategic initiative to automate field operations with specific focus on SWD system solutions. We worked to ensure that every new well in the Permian region is connected to the SWD +pipeline, when economically feasible. To improve the economics of this strategy, we continue to drive down the cost structure of our operated SWD systems. Throughout 2019 we expanded the use of automation in the field to increase safety and +reliability across our operations. We approved and nearly completed our Midland based automation control center in 2019, which will be a key element for managing safety and preventing system interruptions. +Develop and implement a comprehensive strategy on methane emissions—Exceeded +Expectations +In 2019, we reduced our methane intensity by 20% through continued instrument air installation on all new facilities and our ongoing emphasis on reducing pneumatic devices wherever possible. We enhanced +remote monitoring of our emission control systems through the installation of pressure monitoring devices. We held emission summit meetings in the office and in the field with an objective of operating leak-free facilities and reducing our overall +emissions footprint. We continue to evaluate and test new emission early detection technologies using fixed-based lasers and aerial monitoring. +Cimarex +Energy +Co. +47 +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +Achieve significant capex per unit cost reductions—Exceeded Expectations +In 2019, we reduced the capital cost of our wells by 24% in total as compared to 2018 (when normalized per lateral foot). While this result significantly exceeded management expectations, the value +engineering contribution to the total reductions was (conservatively) 8% - 10%, with the balance of the 24% reduction being achieved through negotiated pricing and other market factors. This compared to the Company's goal of 7.5% capital +cost reduction through value engineering. We focused on all aspects of capital cost efficiency throughout the year, with strong results in lower stimulation costs as well as other capital efficiencies which were deployed in new multi-well development +projects. +Further move Cimarex to the forefront of technology implementation—Exceeded +Expectations +We significantly enhanced our Data Science capabilities through the formation of our dedicated Data Science Team. Working with an outside contractor, we achieved significant breakthroughs on the Data Science +front. We currently have plans to field test these learnings and techniques in 2020. +The +Committee's independent compensation consultant recommended a pool for cash incentive awards for all NEOs totaling between $3.1 million and $3.5 million, or between 92% and 103% of +the NEOs' target payout, based on (i) the consultant's review of the Company's achievement of the 2019 strategic and tactical goals, (ii) the consultant's evaluation of the Company's +performance of its 2019 strategic and tactical goals compared to the Compensation Peer Group's percentile rankings, and (iii) the consultant's review of actions by other oil and gas exploration +and production companies related to annual incentive awards given performance expectations, commodity pricing and stock price trends. Based principally on the achievement of the 2019 strategic and +tactical goals and objectives, the CEO recommended cash incentive awards for the other NEOs of between 85% and 92% of their year-end 2019 salaries (all NEOs other than the CEO have annual target +incentive awards of 100% of base salary). This resulted in an average annual incentive award for the other NEOs of 89%, which is below the low end of the range provided by the Committee's independent +compensation consultant. The Committee's independent consultant concurred that the CEO's recommendations were reasonable and likely to be conservative relative to actions from peer companies. After +considering all of these factors and with concurrence of the Committee's independent consultant, the Committee accepted the CEO's recommendations, and the Board approved the Committee's +recommendations. +The +Committee, with its independent consultant and without management present, deliberated concerning the CEO's annual cash incentive award. Based on its analysis of the Company's 2019 performance +described above and the CEO's leadership of the Company and management of senior executives and other employees to achieve this performance in an extremely challenging environment, the Committee +recommended and the Board approved a cash incentive award to the CEO of 90% of his target award, which resulted in an award equal to 113% of the CEO's base salary (the CEO has an annual target +incentive of 125% of base salary). This award is also below the range of 92% to 103% of target recommended by the +Committee's independent compensation consultant. The Committee's independent consultant concurred with this recommendation, and the total cash incentive awards to all NEOs of $3.0 million was +significantly +48 +2020 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +below +the recommendation of the compensation consultant of a reasonable pool of up to $3.5 million. Following are the CEO and other NEO 2019 annual cash incentive awards: +Name +Cash Incentive Award +% of Target +% of Year-End +Base Salary +Thomas E. Jorden, CEO +$ 1,153,000 +90% +113% +G. Mark Burford, CFO +$ 440,000 +85% +85% +Joseph R. Albi, COO +$ 600,000 +92% +92% +John A. Lambuth, EVP +$ 480,000 +88% +88% +Christopher H. Clason, SVP, CHRO +$ 360,000 +86% +86% +Long-Term Equity Incentive Award Program +Our long-term equity incentive award program balances the short-term annual cash incentive program by focusing executive efforts on the +activities that lead to long-term and sustainable shareholder value. Typically, the Committee grants equity awards of restricted stock to NEOs each year. +For +grants made in December 2019, half of the grant date fair value of the long-term equity awards was made in the form of shares of restricted stock that vest based on continued employment through +December 1, 2022. The other half of the grant date fair value of the long-term equity awards was made in the form of performance shares that may vest on December 1, 2022 in an amount +between zero and 200% of the target number of performance shares awarded, with 200% being earned if Cimarex's relative stock price is in the top two of the 16 companies in the Stock Performance Peer +Group during the three-year performance period ending on December 1, 2022 and if Cimarex's stock price is higher on December 1, 2022 than on December 1, 2019. The vesting +opportunity is reduced by 50% if Cimarex's stock price is lower on December 1, 2022 than on December 1, 2019 with a maximum vesting opportunity of 100% of the target number of shares +awarded. See "CD&A—Competitive Positioning" for a list of the companies in the 2019 Stock Performance Peer Group. Our restricted stock awards that vest based on continuous employment and +the passage of time promote retention of executives, and the performance share awards that vest based on performance measures tied to absolute and relative stock price performance promote the +long-term interests of our shareholders and align our executives' interests with our shareholders' interests. Our 2019 Equity Incentive Plan sets a minimum one-year vesting period except as approved +by the Committee not to exceed a total of 5% of the shares subject to the Plan. The Committee has set a three-year vesting period for restricted stock awards to NEOs since the Committee began making +restricted stock awards in 2006. +Dividends +equivalent to those paid on Cimarex common stock are paid on the restricted shares awarded that are subject to time-based vesting, and dividends applicable to the performance shares awarded +are accrued and only paid on the shares actually earned when those shares vest. All of the shares subject to the award have the same voting rights as outstanding shares of Cimarex common stock. +For +performance awards made in December 2019, the total number of shares earned is determined by calculating the percentage difference between the average per share closing price for shares of Cimarex +and each company in the Stock Performance Peer Group for the 30 trading days preceding December 1, 2019 and the 30 trading days preceding December 1, 2022. The Committee ranks Cimarex's +average share price for these two periods among the average share price for all the companies in the Stock Performance Peer +Cimarex +Energy +Co. +49 +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +Group +for these two periods. Companies that are not in the Stock Performance Peer Group at both the beginning and the end of the performance period are not included in the calculation. Companies that +declare bankruptcy or are delisted and cease to be traded on a national securities exchange are ranked last at the end of the performance period. In addition, vesting percentages are reduced if +Cimarex's stock price is lower on December 1, 2022 than on December 1, 2019. The following table illustrates shares that would be earned at various relative stock price performance ranks +(assuming 16 companies in the Peer Group). +Relative Performance Rank +XEC Ending Price on 12/1/2022 is Less +Than XEC Beginning Price – +Percent of Award Vesting +XEC Ending Price on 12/1/2022 is Equal to or +Greater Than XEC Beginning Price - +Percent of Award Vesting +1-2 +100% +200% +3 +87.5% +175% +4-5 +75% +150% +6 +62.5% +125% +7-8 +50% +100% +9 +37.5% +75% +10 +25% +50% +11-16 +0% +0% +On +December 5, 2019, the Committee granted long-term equity awards to the NEOs with a total grant date fair value of $17,825,000 (which was approximately 4.1% lower than the total grant date +fair value of December 2018 awards) based on competitive market data for companies in Cimarex's Compensation Peer Group. Comparative data was obtained by the Committee's independent consultant from +public filings disclosing 2019 NEO compensation of companies in the Compensation Peer Group and the consultant's knowledge of other companies' actions. See "CD&A—Competitive Positioning" +for a list of the companies in the Compensation Peer Group. +The +Committee's compensation consultant recommended awards with a value just below the 50th percentile when compared to companies in the Compensation Peer Group and a change to the potential +vesting of the performance based equity awards. The factors considered by the consultant in making its recommendations included the following: +§ Cimarex's stock price performance was in the 3 rd quartile of peer +companies over the prior year; § Competitive market pressures; § Investment community seeking greater alignment of investor and management team +interests through greater +beneficial ownership levels; and § Proxy advisor perspectives and say-on-pay vote recommendations. +The +Committee approved awards slightly below the recommended total pool range based on: the factors noted by Longnecker, the total direct compensation of our NEOs compared to that of our peer +companies, and Cimarex's 2019 financial and operational performance. The Committee's consultant concurred with the Committee's final determination. The actual value of the awards upon vesting in +December 2022 will be based on Cimarex's relative three-year stock price performance compared to the other companies in the Stock Performance Peer Group as described above and Cimarex's stock price at +that time. +The +Committee granted a total of 366,650 restricted shares to the NEOs (including the CEO). The number of shares granted to each NEO was based on their relative individual roles and responsibilities. +Of the total number of shares granted to the NEOs (including the CEO), the Committee awarded 40% of the shares to +50 +2020 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +Mr. Jorden, +17% of the total shares to Mr. Albi, 17% to Mr. Lambuth, 15% to Mr. Burford, and 11% to Mr. Clason. The following table reflects the awards made by the +Committee: +No. of Shares Subject to Award +Grant Date Fair Value +Name +Performance- +based +Time Vested +of Long-Term Equity Incentive +Awards (1) +Thomas E. Jorden, CEO +73,273 +72,844 +$ 6,725,000 +G. Mark Burford, SVP, CFO +27,239 +27,080 +$ 2,500,000 +Joseph R. Albi, EVP, COO +31,597 +31,412 +$ 2,900,000 +John A. Lambuth, EVP +31,597 +31,412 +$ 2,900,000 +Christopher H. Clason, SVP, CHRO +20,157 +20,039 +$ 1,850,000 +(1) Represents an estimate of the fair value of the shares as of the grant date utilizing a Monte +Carlo valuation technique as permitted by the guidance provided by FASB ASC Topic 718. The estimated fair value is the aggregate compensation cost to be recognized over the service +period. +2019 Vesting of NEO Equity Awards +On December 1, 2019, the performance period applicable to the December 8, 2016 NEO equity awards ended. Cimarex's relative stock +price performance was in the 25 th percentile of the Stock +Performance Peer Group at the end of the performance period, resulting in the vesting of 56% of the shares subject to the December 8, 2016 award. +The +following table reflects the number of shares, and the grant date fair value ("GDFV") of those shares, originally granted in 2016 to each NEO who was an NEO in both 2016 and 2019, the number of +shares that vested in 2019 at the end of the three-year performance period, and the value of the shares that vested based on the stock price on December 1, 2019: +Cimarex +Energy +Co. +51 +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +Name +Performance +Shares +Granted in +December +2016 +GDFV of +Performance +Shares +Granted in +December +2016 +Performance +Shares +Vested in +December +2019 +Value +Realized +Upon +Vesting in +December +2019 +GDFV +compared +to +Realized +Value +Value +Realized +as +Percentage +of GDFV +Thomas E. Jorden, CEO +89,263 +$ 10,500,000 +49,987 +$ 2,297,902 +$ (8,202,098) +22% +G. Mark Burford, CFO (1) +27,204 +$ 3,200,000 +15,234 +$ 700,306 +$ (2,499,694) +22% +Joseph R. Albi, COO +34,005 +$ 4,000,000 +19,042 +$ 875,360 +$ (3,124,640) +22% +John A. Lambuth, EVP +31,880 +$ 3,750,000 +17,852 +$ 820,656 +$ (2,929,344) +22% +Christopher H. Clason, SVP, CHRO (2) +— +— +— +— +— +— +(1) During 2019, restricted share awards granted to Mr. Burford in 2014, prior to becoming an +NEO, vested. The restricted shares that vested in 2019 are included below in "Compensation Tables—2019 Option Exercises and Restricted Stock Vested." +(2) Mr. Clason joined the Company in April 2019 and was an NEO in 2019. He did not have any +awards in 2016. +52 +2020 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +§ Alignment of CEO +Compensation to Total Shareholder Return ("TSR") +CEO Total Direct and Realized Compensation Compared to Cimarex TSR +The following graph illustrates our CEO's direct compensation and realized compensation compared to our TSR for the years 2014 through 2019. +Indexed TSR represents the cumulative total return of Cimarex stock for a five-year period based on a $100 investment at the start of the first year and reinvestment of all dividends. The table shows +the value of the investment at the end of each year. +* CEO Total Compensation is the Total Compensation disclosed in the Summary Compensation +Table. ** CEO Realized Compensation is compensation actually received by the CEO during the year, +including salary, current non-equity incentive plan compensation (i.e., annual bonus), market value at vesting of previously granted stock-based awards, and All Other Compensation amounts +realized during the year. It excludes unvested grants and other amounts that will not actually be received until a future date. +Cimarex +Energy +Co. +53 +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +CEO Long Term Incentive (LTI) Grant Date Fair Value and Realized LTI Compared to Cimarex TSR +The following graph illustrates our CEO's LTI grant date fair value and realized LTI compared to our TSR for the years 2014 through 2019. +Indexed TSR represents the cumulative total return of Cimarex stock for that period based on a $100 investment at the start of 2014 and reinvestment of all dividends. The table shows the value of the +investment at the end of each year. +* CEO LTI GDFV is the Stock Awards grant date fair value disclosed in the Summary Compensation +Table. ** CEO Realized LTI is the market value at vesting of previously granted stock-based awards +actually received by the CEO during the year indicated. It excludes unvested grants and other amounts that will not actually be received until a future date. +54 +2020 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +Relative CEO and NEO Total Compensation Compared to Relative TSR +The following graphs depict alignment of relative CEO and NEO compensation compared to relative TSR for the years ended December 31, +2016 through December 31, 2018. The comparative information is provided through 2018 because 2019 peer company compensation information was not publicly available at the time of writing. The +companies used for the relative comparison are the companies in our Compensation Peer Group, which are depicted by dots in the graph. We also included, as a point of reference, Cimarex's CEO and NEO +compensation and relative TSR for the years ended December 31, 2017 through December 31, 2019 compared to the Compensation Peer Group data for the years ended December 31, 2016 +through December 31, 2018. +Cimarex +Energy +Co. +55 +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +§ Early 2020 Compensation Decisions +2020 Annual Cash Incentive Award Goals +In March 2020, the Committee approved the following Cimarex 2020 Performance Objectives, goal weightings and target levels that will apply to +2020 annual cash incentive awards: +Cimarex 2020 Performance Objectives +Goal +Weight +Target +Stretch +Achieve a good return on invested capital, rate of return (ROR) using "fully burdened" costs for drilling, completion, facilities, +infrastructure, land and overhead costs. +30% +15% ROR +20% ROR +Manage the balance sheet, as is prudently possible: +➢ +Live within cash flow, including the dividend, with no incremental debt. +20% +Cash Flow Neutral +Free Cash Flow +Achieve target methane intensity +(Volume CH4/Gross Gas Production). +10% +0.254% +0.240% +Achieve Permian target flare volume levels +(percent Permian gross gas production). +10% +1.44% +0.96% +Achieve target Permian total well cost +(capital cost normalized per lateral foot, including drilling, completion and facilities). +20% +$1,050 +$1,000 +Grow our Assets. +10% +New play or acquisition +Total +100% +56 +2020 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +To +provide greater clarity to shareholders when communicating results, in February 2020 the Compensation Committee approved the above targets pursuant to which each Performance Objective will be +assessed using the following grade scale: +Grade +% Target Award +Significantly Exceeded (SE) +200% +Exceeded (E) +150% +Achieved (A) +100% +Did Not Achieve/Partially Achieved (DNA/PA) +50% +Significantly Missed (SM) +0% +The +2020 Performance Objectives have been communicated to the NEOs. At year end, the CEO will deliver to the Committee a report that will include (i) the results with respect to each goal and +(ii) the CEO's recommendations, including his basis for such recommendations, for individual awards other than his own. The Committee and its independent compensation consultant will review the +CEO's report and +recommendations and will accept or modify those recommendations. The non-management members of the Board will consider the recommendations of the Committee. Each NEO, other than the CEO, has a +threshold award of 0% of year-end base salary (no minimum award), a target award equal to 100% of year-end base salary, and a maximum award of 200% of year-end base salary. The CEO has a threshold +award of 0% of year-end base salary (no minimum award), a target award equal to 125% of year-end base salary, and a maximum award of 250% of year-end base salary. +SECTION 3 +§ Role of Compensation Consultant and Management in Compensation Decisions +Compensation Consultant +As stated above, the Committee has engaged Longnecker & Associates as its independent compensation consultant to fulfill the following +responsibilities: +§ +Advise the Committee on management proposals, as requested; +§ +Provide market data and recommendations on NEO compensation; +§ +Provide market data and recommendations on non-employee Director compensation; +§ +Make recommendations concerning the Compensation Peer Group; +§ +Review the selected Peer Group and survey data for competitive comparisons; +§ +Provide market data and recommendations on NEO severance benefits in the events of termination without cause and changes in control; +§ +Undertake special projects at the request of the Committee; and +§ +Participate in Committee meetings. +The +Committee has considered the independence factors adopted by the NYSE and has determined that its consultant, Longnecker, is independent within the meaning of the NYSE listing standards. +Cimarex +Energy +Co. +57 +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +As +part of its ongoing services to the Committee, one or more representatives of Longnecker attended five of the Committee meetings held in 2019. Longnecker provided the following services in 2019: +§ +Reviewed and provided input on the CD&A in the 2019 proxy statement; +§ +Attended the February 20, 2019 Compensation Committee meeting and consulted with the Committee on annual cash incentive awards; +§ +Attended the May 8, 2019 Compensation Committee meeting and consulted with the Committee on executive base +salary levels; +§ +Made recommendations concerning the Compensation Peer Group; +§ +Conducted a market analysis of Board compensation and consulted with the Committee concerning Board compensation; and +§ +Provided an executive compensation analysis and a recommended range for long-term equity grants, participated in +the December 5, 2019 Compensation Committee meeting and consulted with the Committee on performance share awards and provided the Committee with recommendations for executive severance agreements. +Management +Our CEO and President is the principal management resource for compensation recommendations to the Committee with respect to the other NEOs. +The CEO (i) provides an annual assessment of Cimarex's overall financial and operational performance and (ii) evaluates individual NEO performance and recommends individual base salary +adjustments, annual cash incentive awards, and long-term equity awards. His evaluations generally include factors such as scope of responsibility, contribution to Company performance, technical +competence, managerial skills and advancement potential. The Committee considers the CEO's recommendations in making decisions regarding executive compensation. The Committee exercises its discretion +to accept, reject or modify these compensation recommendations. +Our +Senior Vice President—Chief Human Resources Officer and Senior Vice President—General Counsel act as informational resources to Longnecker and the Committee and compile +survey and other compensation data for their review. The Committee, in consultation with Longnecker, reviews this information when making executive compensation and program design decisions. +§ Other Compensation Arrangements +Post-Employment and Employment Arrangements +Severance Compensation Agreements +On March 9, 2020, we entered into Severance Compensation Agreements (the "Agreements") with each of the NEOs. The Agreements are +described below under "Potential Payments Upon Termination or Change-in-Control—Severance Compensation Agreements." The Company believes that the Agreements are a fair and appropriate step +to ensure the NEOs' continued employment, attention and dedication, and to ensure the NEOs' continued service, notwithstanding the possibility or threat of a change in control or involuntary +termination of employment without cause. +58 +2020 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +Retirement Benefits +Employees, including the NEOs, are eligible to participate in the Cimarex 401(k) defined contribution retirement plan ("401(k) Plan"). Cimarex +matches dollar-for-dollar employee contributions to the 401(k) Plan up to 7% of the employee's cash compensation, subject to limits imposed by the Internal Revenue Code. The Board is authorized to +make profit-sharing contributions under the 401(k) Plan. In February 2020, the Board determined that no profit-sharing contribution would be made due to the Company's $124.6 million net loss in +2019. +In +addition, eligible participants, including the NEOs, may participate in the Supplemental Savings Plan, which is a non-qualified deferred compensation plan that permits participants to make +contributions (and to receive matching contributions) in excess of the Internal Revenue Code limitations for 401(k) plans. See "Compensation Tables—2019 Nonqualified Deferred Compensation" +for information about contributions to the Supplemental Savings Plan. The Committee administers this plan and designates who may participate. Benefits are paid upon the later to occur of termination +of employment or the time elected by the participant. In the event of a change in control, each participant receives a lump sum cash payment of the amount allocated to his or her account. +Perquisites +We offer a limited number of perquisites (personal benefits) to our NEOs that are not offered to other employees, including financial and +estate planning and annual medical examinations. Our corporate aircraft is not available for personal use by any employee. With the authorization of our CEO, however, the corporate aircraft may be +used by an employee or a member of his/her family for medical purposes. The incremental cost for non-business use of our corporate aircraft, if any, is disclosed in the "Summary Compensation Table." +We use the Standard Industry Fare Level tables published by the Internal Revenue Service to determine the amount of compensation income that is imputed to the employee for tax purposes for personal +use of corporate aircraft. There was no personal use of our aircraft in 2019. +§ Other Compensation Policies +Total Pay Considerations +The Committee considers Total Direct Compensation at the time it makes a decision on any element of executive compensation. The Committee also +reviews the relationship of the CEO's total compensation to the total compensation of each of the other NEOs. +Stock Ownership and Holding Requirements +Cimarex's Executive Stock Ownership Guidelines are intended to more closely align the interests of our executive officers with those of our +shareholders. Pursuant to a revision made in December 2016, the CEO is expected to own Cimarex shares in an amount equal to six times his annual base salary, and each executive officer who reports to +the CEO is expected to own stock in an amount equal to three times his or her annual base salary. A newly appointed executive officer has three years from the date of his or her initial election or +appointment to comply with the guidelines. Until the stock ownership guidelines are met, an executive officer may not sell any Cimarex stock acquired through equity grants except to pay income +Cimarex +Energy +Co. +59 +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +taxes +upon the vesting of awards or to pay the exercise price and related income taxes upon the exercise of stock options. Restricted stock, restricted stock units, deferred compensation units and +performance awards are counted in calculating ownership. Shares subject to options are not counted. As of March 10, 2020, all officers were in compliance with the stock ownership guidelines. +Clawback Policy +We have adopted a clawback policy providing that, in the event of an accounting restatement due to material noncompliance with financial +reporting requirements under the U.S. federal securities laws, the Committee has the right to use reasonable efforts to recover from any of our current or former executive officers incentive-based +compensation related to the restatement and received during the three-year period preceding any such accounting restatement. This policy applies to incentive-based compensation granted on or after +June 1, 2012. This clawback policy will be interpreted in the best judgment of the Committee in a manner consistent with any applicable rules or regulations adopted by the SEC or the NYSE as +contemplated by the Dodd-Frank Act. +Non-Hedging and Non-Pledging Policies +Our insider trading policy prohibits Directors, officers and designated employees from engaging in hedging or monetization transactions, and +other employees are strongly discouraged from engaging in such transactions. Any other employee wishing to enter into such an arrangement must first submit the proposed transaction for approval by the +compliance officer designated in the policy. The policy also prohibits Directors, officers and employees from holding Cimarex stock in a margin account or pledging Cimarex stock as collateral for a +loan. +Tax Law Considerations +The Committee considers the impact of applicable tax laws with respect to executive compensation. Section 162(m) of the Internal +Revenue Code of 1986, as amended ("Section 162(m)"), limits the amount of compensation that Cimarex may deduct on its federal income tax return for compensation paid to certain executive +officers to no more than $1 million per year. Through 2017, there were exceptions to the $1 million limitation for performance-based compensation meeting certain requirements. The +performance-based portion of our restricted stock awards made prior to November 2, 2017 is the only element of executive compensation designed to qualify for the performance-based exception to +the +$1 million deduction limit, provided additional requirements are met. These exceptions were eliminated by the Tax Cuts and Jobs Act enacted in December 2017. The Committee attempted to preserve +the deductibility of compensation paid to executive officers by utilizing performance-based stock awards until this tax law change, but did not limit executive compensation to amounts deductible under +Section 162(m) and does not plan to limit executive compensation to deductible amounts going forward. +COMPENSATION COMMITTEE REPORT +The Compensation Committee has reviewed and discussed with management the preceding Compensation Discussion and Analysis section of Cimarex's +2020 proxy statement. Based on our review and discussions, we have recommended to the Board of Directors that the Compensation Discussion and Analysis be included in Cimarex's 2020 proxy statement. +THE COMPENSATION COMMITTEE +Floyd +R. Price (Chair) +Paul N. Eckley +Hans Helmerich +Lisa A. Stewart +60 +2020 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +EXECUTIVE COMPENSATION TABLES +EXECUTIVE COMPENSATION TABLES +SUMMARY COMPENSATION TABLE +The following table describes 2017-2019 compensation of our CEO, CFO and the three other most highly compensated executive officers. +Stock Awards ($) (1) +Non-Equity +Name and +Principal Position +Year +Salary +Bonus +Performance- +based +Time Vested +Incentive Plan +Comp. (2) +All Other +Comp. (3) +Total +Thomas E. Jorden +2019 +$ 1,009,324 +— +$ +3,362,500 +$ +3,362,500 +$ +1,153,000 +$ +115,231 +$ +9,002,555 +Chief Executive Officer, +2018 +$ 976,789 +— +$ +3,450,000 +$ +3,450,000 +$ +1,740,000 +$ +110,691 +$ +9,727,480 +President, and Chairman +of the Board (CEO) +(Principal Executive Officer) +2017 +$ 960,000 +— +$ +8,000,000 +$ +— +$ +2,000,000 +$ +94,129 +$ +11,054,129 +G. Mark Burford +2019 +$ 505,846 +— +$ +1,250,000 +$ +1,250,000 +$ +440,000 +$ +80,073 +$ +3,525,919 +Senior Vice President +2018 +$ 468,394 +— +$ +1,375,000 +$ +1,375,000 +$ +700,000 +$ +89,183 +$ +4,007,577 +and Chief Financial +Officer (CFO) +(Principal Financial Officer) +2017 +$ 460,000 +— +$ +2,900,000 +$ +— +$ +760,000 +$ +73,307 +$ +4,193,307 +Joseph R. Albi +2019 +$ 640,569 +— +$ +1,450,000 +$ +1,450,000 +$ +600,000 +$ +93,892 +$ +4,234,461 +Executive Vice +2018 +$ 620,241 +— +$ +1,500,000 +$ +1,500,000 +$ +875,000 +$ +83,635 +$ +4,578,876 +President—Operations, +Chief Operating Officer (COO) +2017 +$ 602,151 +— +$ +3,400,000 +$ +— +$ +1,000,000 +$ +68,872 +$ +5,071,023 +John A. Lambuth +2019 +$ 535,262 +— +$ +1,450,000 +$ +1,450,000 +$ +480,000 +$ +66,453 +$ +3,981,715 +Executive Vice +2018 +$ 517,514 +— +$ +1,500,000 +$ +1,500,000 +$ +775,000 +$ +71,786 +$ +4,364,300 +President—Exploration +2017 +$ 495,791 +— +$ +3,400,000 +$ +— +$ +900,000 +$ +61,081 +$ +4,856,872 +Christopher H. Clason (4) +2019 +$ 295,212 +$ +100,000 +$ +1,875,000 +$ +1,781,000 +$ +360,000 +$ +699,844 +$ +5,111,056 +Senior Vice President and Chief Human Resources Officer (CHRO) +(1) Represents the grant date fair value ("GDFV") of the +awards, which is the aggregate compensation cost to be recognized over the service period under FASB ASC Topic 718. The grant date fair value for the restricted stock awards that vest based on +continuous employment and the passage of time is the closing price of the Company's common stock on the December 5, 2019 date of grant. The grant date fair value for the performance stock +awards is determined using the Monte Carlo simulation method. Actual payouts with respect to the performance stock awards can range from zero percent to 200 percent of the initial shares +awarded based on the ranking of the Company's relative stock price performance in comparison to the peer group at the end of the three-year performance period. +(2) Amount reported for the year earned. +Cimarex +Energy +Co. +61 +Table of Contents +EXECUTIVE COMPENSATION TABLES +(3) All Other Compensation includes the value of perquisites +or personal benefits received by the Named Executive Officer, including for reserved parking, financial consulting services, and estate planning. The following describes each perquisite in excess of +$25,000 other than amounts described in footnote (4) below in connection with the hiring and relocation of Mr. Clason. +Executive Officer +Company +Contributions +to Retirement +Plans +Insurance Premiums +Thomas E. Jorden, CEO +2019 +$ +38,000 +$ +67,223 +2018 +$ +48,000 +$ +45,722 +2017 +$ +46,800 +$ +27,512 +G. Mark Burford, CFO +2019 +$ +38,000 +$ +25,346 +2018 +$ +48,000 +$ +19,658 +2017 +$ +46,800 +$ +14,571 +Joseph R. Albi, COO +2019 +$ +38,000 +$ +31,956 +2018 +$ +48,000 +$ +24,295 +2017 +$ +46,800 +$ +22,072 +John A. Lambuth, EVP +2019 +$ +38,000 +$ +28,453 +2018 +$ +48,000 +$ +23,786 +2017 +$ +46,800 +$ +14,281 +Christopher H. Clason, SVP, CHRO +2019 +$ +16,638 +$ +7,789 +(4) This is the first year Mr. Clason is included as an NEO in the Summary Compensation Table. +Therefore, information is reported only for the 2019 fiscal year. In connection with the hiring and relocation of Mr. Clason, he received the following: +(a) A one-time stock award effective upon his date of hire of April 10, 2019 consisting of a +performance based award with a GDFV of $950,000 and a time-based award with a GDFV of $856,000. These amounts are included in the Stock Awards column of the Summary Compensation Table. These awards +vest on December 1, 2021 based on the same terms as awards made to the other NEOs in December 2018. +(b) A one-time reporting bonus of $100,000 paid on April 10, 2019 that is included in the +Bonus column of the Summary Compensation Table. +(c) Tax reimbursement for standard non-deductible relocation expenses of $288,022; payment of +expenses for home improvements and repairs to prepare his prior home for sale and reimbursement of a loss on the sale of his home in the aggregate amount of $304,624; and the cost of moving his +household goods in the amount of $34,123, all of which are included in the All Other Compensation column of the Summary Compensation +Table. +62 +2020 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +EXECUTIVE COMPENSATION TABLES +2019 GRANTS OF PLAN-BASED AWARDS +§ 2019 +Non-Equity Incentive Plan +The following table describes the target and maximum amounts of annual cash incentive awards for the CEO and other NEOs and the actual award paid in March 2020 +for 2019 services. The non-equity incentive plan provides for no minimum (threshold) award. The amounts listed in the "Target" column represent 125% of the year-end base salary for CEO and 100% of the +year-end base salary for other NEOs. The amounts listed in the "Maximum" column represent 250% of year-end base salary for CEO and 200% of the year-end base salary for other NEOs. See the description +of our annual cash incentive award plan in "CD&A—Section 2." +Estimated Future Payouts Under Non-Equity Incentive Plan +Actual Award Paid +in March 2020 +Name +Threshold +Target +Maximum +Thomas E. Jorden, CEO +$ +0 +$ +1,280,813 +$ +2,561,625 +$ +1,153,000 +G. Mark Burford, CFO +$ +0 +$ +515,000 +$ +1,030,000 +$ +440,000 +Joseph R. Albi, COO +$ +0 +$ +650,300 +$ +1,300,600 +$ +600,000 +John A. Lambuth, EVP +$ +0 +$ +543,400 +$ +1,086,800 +$ +480,000 +Christopher H. Clason, SVP, CHRO +$ +0 +$ +420,000 +$ +840,000 +$ +360,000 +§ 2019 +Equity Incentive Plan Awards +The following table provides information regarding the awards of restricted stock made to the NEOs in 2019. No option awards were made in 2019. See +"CD&A—Section 2—Long-Term Equity Incentive Award Program," for more information about these awards. +Estimated Future Payouts Under +Equity Incentive Plan Awards +(in shares) (2) +Grant Date +Fair Value of +Stock & +Option +Awards (4) +Award +Grant +Date +Comp. +Comm. +Approval +Date +All Other Stock +Awards: +Number of +Shares (3) +Type of Award (1) +Name +Threshold +Target +Maximum +Thomas E. Jorden, CEO +PSA +12/5/2019 +12/5/2019 +18,318 +73,273 +146,546 +— +$ +3,362,500 +RSA +12/5/2019 +12/5/2019 +— +— +— +72,844 +$ +3,362,500 +G. Mark Burford, CFO +PSA +12/5/2019 +12/5/2019 +6,810 +27,239 +54,478 +— +$ +1,250,000 +RSA +12/5/2019 +12/5/2019 +— +— +— +27,080 +$ +1,250,000 +Joseph R. Albi, COO +PSA +12/5/2019 +12/5/2019 +7,899 +31,597 +63,194 +— +$ +1,450,000 +RSA +12/5/2019 +12/5/2019 +— +— +— +31,412 +$ +1,450,000 +John A. Lambuth, EVP +PSA +12/5/2019 +12/5/2019 +7,899 +31,597 +63,194 +— +$ +1,450,000 +RSA +12/5/2019 +12/5/2019 +— +— +— +31,412 +$ +1,450,000 +Christopher H. Clason, SVP, CHRO +PSA +12/5/2019 +12/5/2019 +5,039 +20,157 +40,314 +— +$ +925,000 +RSA +12/5/2019 +12/5/2019 +— +— +— +20,039 +$ +925,000 +PSA +4/10/2019 +2/20/2019 +5,263 +10,525 +21,050 +$ +950,000 +RSA +4/10/2019 +2/20/2019 +— +— +— +12,599 +$ +856,000 +(1) PSA = Performance stock awards. RSA = +Restricted stock awards +(2) The amounts in these columns represent the threshold, +target and maximum payouts for the performance stock awards granted to each named executive officer during the 2019 fiscal year. The number of shares shown in the "Threshold" column reflects the +lowest possible payout (other than zero) of the number of performance shares granted. If performance is below the threshold, no shares are paid. The number of shares shown in the "Target" column +reflects a payout of 100% of the number of performance shares granted. The number of shares shown in the "Maximum" column reflects the highest possible payout of 200% of the +Cimarex +Energy +Co. +63 +Table of Contents +EXECUTIVE COMPENSATION TABLES +number +of performance shares granted. The actual payout of shares may be anywhere between 0% and 200% of the number of performance shares granted depending on the Company's performance at the end of +the three-year performance period. See "CD&A—Section 2—Key 2019 Compensation Actions" above for more discussion of the performance stock +awards. +(3) The amounts in this column represent the time-based +restricted stock granted to the named executive officers on the noted date. These restricted shares will vest on December 1, 2022 based on continuous service through that date except for the +April 10, 2019 restricted stock award for Mr. Clason, which vests December 1, 2021. +(4) For performance shares, represents the estimated fair +value of the shares as of the grant date utilizing a Monte Carlo valuation technique as permitted by the guidance provided by FASB ASC Topic 718. The estimated fair value is the aggregate compensation +cost to be recognized over the service period. +OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2019 +STOCK AWARDS +Equity Incentive Plan Awards That Have Not Vested +Name +No. of Shares +Market Value of +Unearned Shares (1) +Thomas E. Jorden, CEO +319,521 (2) +$ +16,771,657 +G. Mark Burford, CFO +120,206 (3) +$ +6,309,613 +Joseph R. Albi, COO +137,528 (4) +$ +7,218,845 +John A. Lambuth, EVP +137,528 (5) +$ +7,218,845 +Christopher H. Clason, SVP, CHRO +63,320 (6) +$ +3,323,667 +(1) The amount in this column reflects the closing market price of the stock of $52.49 on +December 31, 2019 (the last trading day of 2019) multiplied by the number of shares reported in the previous column. +(2) Between a minimum of 44,712 and a maximum of 89,425 shares could vest on December 1, 2020, +45,756 shares will vest on December 1, 2021, and between a minimum of 19,111 and a maximum of 76,446 shares could vest on December 1, 2021, and 72,844 shares will vest on +December 1, 2022, and between a minimum of 18,318 and a maximum of 146,546 shares could vest on December 1, 2022. +(3) Between a minimum of 16,208 and a maximum of 32,417 shares could vest on December 1, 2020, +18,236 shares will vest on December 1, 2021, and between a minimum of 7,617 and a maximum of 30,468 shares could vest on December 1, 2021, and 27,080 shares will vest on +December 1, 2022, and between a minimum of 6,810 and a maximum of 54,478 shares could vest on December 1, 2022. +(4) Between a minimum of 19,002 and a maximum of 38,006 shares could vest on December 1, 2020, +19,894 shares will vest on December 1, 2021, and between a minimum of 8,309 and a maximum of 33,237 shares could vest on December 1, 2021, and 31,412 shares will vest on +December 1, 2022, and between a minimum of 7,899 and a maximum of 63,194 shares could vest on December 1, 2022. +(5) Between a minimum of 19,002 and a maximum of 38,006 shares could vest on December 1, 2020, +19,894 shares will vest on December 1, 2021, and between a minimum of 8,309 and a maximum of 33,237 shares could vest on December 1, 2021, and 31,412 shares will vest on +December 1, 2022, and between a minimum of 7,899 and a maximum of 63,194 shares could vest on December 1, 2022. +(6) 12,599 shares will vest on December 1, 2021, and between a minimum of 5,263 and a maximum +of 21,050 shares could vest on December 1, 2021, and 20,039 shares will vest on December 1, 2022, and between a minimum of 5,039 and a maximum of 40,314 shares could vest on +December 1, 2022. +64 +2020 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +EXECUTIVE COMPENSATION TABLES +2019 OPTION EXERCISES AND RESTRICTED STOCK VESTED +2019 OPTION EXERCISES +2019 STOCK VESTING (1) +Name +Number of Shares +Acquired on Exercise +(#) +Value Realized on +Exercise +($) +Number of Shares +Acquired on Vesting +(#) +Value Realized on +Vesting +($) +Thomas E. Jorden, CEO +-- +$ +-- +49,987 +$ +2,297,902 +G. Mark Burford, CFO +-- +$ +-- +18,734 +$ +877,651 +Joseph R. Albi, COO +-- +$ +-- +19,042 +$ +875,360 +John A. Lambuth, EVP +-- +$ +-- +17,852 +$ +820,656 +Christopher H. Clason, SVP, CHRO +-- +$ +-- +-- +$ +-- +(1) The restricted shares that vested in December 2019 as shown in the table consisted of performance shares granted to +the NEOs in December 2016, plus time-based restricted shares that were granted to Mr. Burford in 2014 when he was not an NEO. See above "CD&A—2019 Vesting of NEO Equity Awards" for +additional information. The following is a comparison of the grant date fair value of the performance shares granted in December 2016 to the value realized upon vesting of those performance shares in +December 2019 (excluding the time-based restricted shares that vested in 2019 for Mr. Burford). The Value Realized Upon Vesting was less than the Grant Date Fair Value ("GDFV") because the +Company's ranking in relative stock price performance compared to its Stock Performance Peer Group over the vesting period resulted in less than 100% vesting, and the Company's stock price was lower +on the vesting date compared to the date of grant. +Name +Performance +Shares +Granted in +December +2016 +GDFV of +Performance +Shares +Granted +in +December +2016 +Performance +Shares +Vested +in +December +2019 +Value +Realized +Upon +Vesting +in +December +2019 +GDFV +compared +to +Realized +Value +Value +Realized +as +Percentage +of GDFV +Thomas E. Jorden, CEO +89,263 +$ +10,500,000 +49,987 +$ +2,297,902 +$ +(8,202,098 +) +22% +G. Mark Burford, CFO +27,204 +$ +3,200,000 +15,234 +$ +700,306 +$ +(2,499,694 +) +22% +Joseph R. Albi, COO +34,005 +$ +4,000,000 +19,042 +$ +875,360 +$ +(3,124,640 +) +22% +John A. Lambuth, EVP +31,880 +$ +3,750,000 +17,852 +$ +820,656 +$ +(2,929,344 +) +22% +Christopher H. Clason, SVP, CHRO +-- +-- +-- +-- +-- +-- +Cimarex +Energy +Co. +65 +Table of Contents +EXECUTIVE COMPENSATION TABLES +2019 NONQUALIFIED DEFERRED COMPENSATION +The following table provides information on the Supplemental Savings Plan (the "SSP") contributions and earnings for our +NEOs in each of the last three fiscal years. Under the terms of the SSP, a participant may make an elective contribution to the SSP of an amount that exceeds the maximum amount permitted to be +contributed to his account in the Cimarex 401(k) Plan (an "excess contribution") provided that the excess contribution does not exceed the dollar limitation on elective deferrals under the Internal +Revenue Code section 402(g) in effect on January 1 of the calendar year of deferral (2019 limitation was $19,000). Cimarex will match 100% of the excess contributions up to 7% of a +participant's eligible compensation. A participant also may elect to have up to 50% of his or her compensation and up to 100% of his or her +66 +2020 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +EXECUTIVE COMPENSATION TABLES +bonus +withheld from his or her compensation and allocated to his or her SSP account. Cimarex does not match these contributions. +Name +Executive +Contributions (1) +Registrant +Contributions (2) +Aggregate +Earnings +Aggregate +Withdrawals/ +Distributions +Aggregate Balance +at FYE +Thomas E. Jorden, CEO +2019 +$ +19,000 +$ +19,000 +$ +48,652 +$ +-- +$ +973,596 +(3) +2018 +$ +18,500 +$ +18,500 +$ +6,235 +$ +-- +$ +786,458 +2017 +$ +18,000 +$ +18,000 +$ +15,169 +$ +-- +$ +743,658 +G. Mark Burford, CFO +2019 +$ +19,000 +$ +19,000 +$ +84,437 +$ +-- +$ +455,089 +(3) +2018 +$ +18,500 +$ +18,500 +$ +<23,201> +$ +-- +$ +333,099 +2017 +$ +18,000 +$ +18,000 +$ +44,899 +$ +-- +$ +319,734 +Joseph R. Albi, COO +2019 +$ +19,000 +$ +19,000 +$ +165,255 +$ +-- +$ +929,419 +(3) +2018 +$ +18,500 +$ +18,500 +$ +<53,681> +$ +-- +$ +726,610 +2017 +$ +18,000 +$ +18,000 +$ +94,735 +$ +-- +$ +743,726 +John A. Lambuth, EVP +2019 +$ +19,000 +$ +19,000 +$ +126,055 +$ +-- +$ +885,535 +(3) +2018 +$ +54,726 +$ +18,500 +$ +<30,733> +$ +-- +$ +684,459 +2017 +$ +18,000 +$ +18,000 +$ +74,608 +$ +-- +$ +642,400 +Christopher H. Clason, SVP, CHRO +2019 +$ +-- +$ +-- +$ +-- +$ +-- +$ +-- +(3) +(1) The amounts included in this column also are included in the "Salary" column in the "Summary Compensation Table." +(2) The amounts reported in this column also are included in the "All Other Compensation" column and footnote 3 thereto +in the "Summary Compensation Table." +(3) The following table sets forth amounts included in the aggregate balance at December 31, 2019 that were +reported as compensation to the NEO in the Summary Compensation Table for previous years. +NEO +Amount of Previously +Reported Compensation +Thomas E. Jorden, CEO +$ +691,760 +G. Mark Burford, CFO +$ +262,329 +Joseph R. Albi, COO +$ +501,289 +John A. Lambuth, EVP +$ +522,377 +Christopher H. Clason, SVP, CHRO +$ +-- +CEO PAY RATIO +The 2019 annual total compensation of our CEO, as shown in the "Summary Compensation Table" above, was $9,002,555. The annual total +compensation of Cimarex's identified median employee was $124,105 in 2019. This results in a ratio of 73 to 1. The pay ratio decreased from the 2018 pay ratio of 82 to 1 due to an increase in the +compensation of the median employee and a decrease in the compensation of our CEO as described above in the "CD&A." +The +median employee was identified from our total employee population as of December 31, 2019. Not including the CEO, this represents 971 full-time and 15 part-time or seasonal employees. We +calculated the +Cimarex +Energy +Co. +67 +Table of Contents +EXECUTIVE COMPENSATION TABLES +median +total compensation by an array of wages from lowest to highest reflected as Medicare Taxable Earnings as reported on Internal Revenue Service Form W-2 (Box 5) for 2019. We made no +assumptions, adjustments, or estimates with regard to total compensation, and we did not annualize the compensation for any employees that we did not employ the entire year. +POTENTIAL PAYMENTS UPON CHANGE IN CONTROL OR TERMINATION +Post-termination benefits are not included in the Compensation Committee's analysis of total compensation. +We +are obligated to make certain payments to employees, including our NEOs, or to accelerate the vesting of their equity awards pursuant to the following plans and +agreements: +§ Severance Compensation Agreements with NEOs; § 2002 Stock Incentive +Plan, 2011 Equity Incentive Plan, 2014 Equity +Incentive Plan, and 2019 Equity Incentive Plan that govern all equity awards made to Directors and employees, including the NEOs; and § Supplemental +Savings Plan. +Our +change in control arrangements keep our senior executives focused on pursuing all corporate transaction activity that is in the best interests of shareholders regardless of whether those +transactions may result in their own job losses. Uncertainty created by a corporate transaction can create retention risk for a company. In addition, change in control protection is often needed to +retain and attract, when necessary, the best talent because many of the companies with whom we compete for talent provide change in control protection. +We +do not have a formal program to pay severance benefits nor do our equity award agreements provide for acceleration of equity awards upon the retirement of the NEOs. +§ Change in Control +We are obligated under the Severance Compensation Agreements with NEOs to pay benefits upon a "change in control" event. Cimarex's definition of "change in control" as used in +its 2002 Stock Incentive Plan, its 2011 Equity Incentive Plan, its 2014 Equity Incentive Plan and its 2019 Equity Incentive Plan, and its Severance Compensation Agreements with NEOs are the same. In +summary, a change in control event means any of the following: +§ Acquisition of 30% or more of the shares of our outstanding common +stock or the combined voting power of voting securities of Cimarex by an individual or group; § Members of our Board of Directors, or Directors nominated +by those +Directors, cease to constitute a majority of the Directors during any twelve month period; § A reorganization, share exchange or merger unless +(i) the +shareholders prior to the reorganization or merger continue to own more than 40% of the outstanding common stock and combined voting power of the resulting corporation following the reorganization or +merger, and (ii) at least a majority of the members of the Board of the corporation resulting from the merger or reorganization were members of the Board at the time of executing the agreement +to reorganize or merge; or § The complete liquidation or dissolution of Cimarex or the sale of +all or substantially all of its assets. +68 +2020 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +EXECUTIVE COMPENSATION TABLES +§ Severance Compensation Agreements +On March 9, 2020, we entered into Severance Compensation Agreements (the "Agreements") with each of the NEOs. The Company believes that the Agreements are a fair and +appropriate step to ensure the NEOs' continued employment, attention and dedication, and to ensure the NEOs' continued service, notwithstanding the possibility or threat of a change in control or +involuntary termination of employment without cause. The Agreements supersede any prior agreements with or plans covering the NEOs. +Under +the Agreements, each NEO is entitled to separation benefits in the event that the NEO's employment is terminated by the Company without cause or by the NEO for "good reason" in certain +circumstances, including a reduction in the NEO's base salary, a material reduction in the NEO's annual incentive compensation opportunity (with certain exceptions), or a material geographic +relocation other than in connection with the change of the Company's headquarters to Tulsa, Midland or Houston, in each case which the Company has failed to cure. +Separation Benefits +The +following table summarizes the separation benefits to be received by an NEO upon termination under the circumstances described above, prior to a change in control (as defined below) of the +Company: +In the Event of a Termination Without Cause or +For Good Reason +CEO +All Other NEOs +Multiple of Base Salary +2.0x +1.5x +Multiple of Average Bonus +2.0x +1.5x +Current Year Bonus +Pro rated +Pro rated +Years of Medical Benefit Continuation +2 years +1.5 years +Excise Tax Gross Up +None +None +The +following table summarizes the separation benefits to be received by an NEO if such a termination occurs within 24 months after a change in control, which is commonly referred to as a +"double trigger": +In the Event of a Change-in-Control +CEO +All Other Executive +Officers +Multiple of Base Salary +3.0x +2.0x +Multiple of Average Bonus +3.0x +2.0x +Current Year Bonus +Pro rated +Pro rated +Years of Medical Benefit Continuation +3 years +2 years +Excise Tax Gross Up +None +None +The +severance payment based on base salary and average bonus is payable in monthly installments of 36 months for the CEO and 24 months for the other NEOs. The severance payment based on +the pro rated bonus for the current year is payable in a lump sum. The NEOs will not receive any tax gross up for taxes related to the severance payments. +Cimarex +Energy +Co. +69 +Table of Contents +EXECUTIVE COMPENSATION TABLES +Treatment of Equity Awards +In +the event of a qualifying termination prior to the occurrence of a change in control, the NEO's outstanding equity awards will be treated as follows: (i) all outstanding time-vested equity +awards will vest on a pro rata basis on the date of the qualified termination, based on the period of continuous service elapsed in the vesting period as of the date of the qualifying termination as +compared to the total duration of the vesting period, and (ii) all outstanding performance-vested equity awards shall first be reduced on a pro rata basis as of the date of the qualifying +termination (such remaining portion of the awards being the "Remaining Portion"), and the Remaining Portion shall then vest, if at all, based on the performance measures set forth in the award +agreements at the end of the relevant vesting period(s), provided that the NEO executes additional one-year non-solicitation agreements each year following the expiration of the one-year +non-solicitation period set forth in the Agreement, such that the NEO remains subject to a non-solicitation covenant continuously from the date of the qualifying termination through the end of the +relevant vesting period(s). If the NEO fails to execute any such additional non-solicitation agreement, the Remaining Portion(s) of all then-outstanding performance-vested equity awards shall +immediately be forfeited upon expiration of the then-current non-solicitation period. +In +the event an NEO remains employed through the date of a Change in Control, the NEO's outstanding equity awards shall be treated as set forth in the applicable equity incentive plan(s) and award +agreements. +Confidentiality, Non-Compete and Non-Solicitation Obligations +As +consideration for the separation benefits under the Agreements, the NEOs agreed to certain confidentiality obligations with respect to proprietary information of the Company gained as a result of +their employment. In addition, the NEOs are subject to non-compete provisions under the Agreements, which prohibit them from engaging in any competitive business, as defined in the Agreements, during +the term of the Agreements or for a period of one year following termination within certain geographical boundaries based on the locations where the Company does business. The NEOs also are prohibited +during the term of the Agreement and for one year following termination from soliciting the services of any employee of the Company or the business of any person who was a client or customer of the +Company. To receive the severance benefits after a qualifying termination or change in control, the NEO is required to sign a general release of claims within 60 days after termination. +§ Termination of Employment Related to Death or Disability +The award agreements for grants of equity under our 2002 Stock Incentive Plan, and the provisions of our 2011 Equity Incentive Plan, our 2014 Equity Incentive Plan and our 2019 +Equity Incentive Plan, provide for acceleration of vesting of awards in the event of death or disability. No benefits are payable under the Severance Compensation Agreements upon death or disability. +§ Supplemental Savings Plan +After termination of employment for any reason, NEOs who are participants in our Supplemental Savings Plan (the "SSP") will receive deferred compensation payments at the times +they elected under the SSP. For a description of the SSP, a summary of the contributions and earnings for our NEOs under the SSP in each of the last three fiscal years, and the current balances of +each NEO's account at December 31, 2019 that +70 +2020 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +EXECUTIVE COMPENSATION TABLES +would +be distributable following termination of employment, please see "2019 Nonqualified Deferred Compensation" above. +§ Estimated Benefits upon Various Termination Scenarios +The following table summarizes potential payments to each of our NEOs in connection with certain termination events, including an involuntary termination without cause or +resignation for good reason without a change in control, an involuntary termination within a change in control period, a change in control without termination of employment, as these events are +described above in "—Severance Compensation Agreements," and termination due to death or disability, which is not covered by the Severance Compensation Agreements but is addressed in our +equity plans. +Name +Involuntary +Termination Without +Cause or Resignation +for Good Reason +Outside of a Change +of Control Period (1) +Involuntary +Termination Within +a Change of Control +Period (2) +Change of Control; +No Termination (3) +Termination Due +to Death or +Disability (4) +Thomas E. Jorden, CEO +Average Annual Cash Compensation +$ +4,879,113 +$ +7,318,670 +$ +— +$ +— +Current Year Pro Rated Bonus +$ +1,446,500 +$ +1,446,500 +$ +— +$ +— +Long Term Award Payout (5) +$ +5,005,346 +$ +16,771,657 +$ +16,771,657 +$ +16,771,657 +Continued Benefits +$ +189,242 +$ +$283,863 +$ +— +$ +— +TOTAL (6) +$ +11,520,201 +$ +25,820,690 +$ +16,771,657 +$ +16,771,657 +G. Mark Burford, CFO +Average Annual Cash Compensation +$ +1,585,680 +$ +2,114,240 +$ +— +$ +— +Current Year Pro Rated Bonus +$ +570,000 +$ +570,000 +$ +— +$ +— +Long Term Award Payout (5) +$ +1,872,952 +$ +6,309,613 +$ +6,309,613 +$ +6,309,613 +Continued Benefits +$ +85,036 +$ +113,381 +$ +— +$ +— +TOTAL (6) +$ +4,113,668 +$ +9,107,234 +$ +6,309,613 +$ +6,309,613 +Joseph R. Albi, COO +Average Annual Cash Compensation +$ +2,051,858 +$ +2,735,810 +$ +— +$ +— +Current Year Pro Rated Bonus +$ +737,500 +$ +737,500 +$ +— +$ +— +Long Term Award Payout (5) +$ +2,143,845 +$ +7,218,845 +$ +7,218,845 +$ +7,218,845 +Continued Benefits +$ +78,005 +$ +104,006 +$ +— +$ +— +TOTAL (6) +$ +5,011,207 +$ +10,796,161 +$ +7,218,845 +$ +7,218,845 +John A. Lambuth, EVP +Average Annual Cash Compensation +$ +1,730,832 +$ +2,307,776 +$ +— +$ +— +Current Year Pro Rated Bonus +$ +627,500 +$ +627,500 +$ +— +$ +— +Long Term Award Payout (5) +$ +2,143,845 +$ +7,218,845 +$ +7,218,845 +$ +7,218,845 +Continued Benefits +$ +83,776 +$ +111,701 +$ +— +$ +— +TOTAL (6) +$ +4,585,952 +$ +10,265,822 +$ +7,218,845 +$ +7,218,845 +Christopher H. Clason, SVP, CHRO (7) +Average Annual Cash Compensation +$ +1,530,000 +$ +2,040,000 +$ +— +$ +— +Current Year Pro Rated Bonus +$ +360,000 +$ +360,000 +$ +— +$ +— +Long Term Award Payout (5) +$ +383,208 +$ +3,323,667 +$ +3,323,667 +$ +3,323,667 +Continued Benefits +$ +52,780 +$ +70,373 +$ +— +$ +— +TOTAL (6) +$ +2,325,988 +$ +5,794,040 +$ +3,323,667 +$ +3,323,667 +(1) This column represents the amounts that would have been payable to the NEO in the event that the NEO's employment +was terminated by the Company on December 31, 2019 without cause or by the NEO for "good reason" not involving a change in control. In this event, the CEO receives 2 times and the other NEOs +receive 1.5 times their average annual cash compensation (salary plus annual cash incentive award) for the last two years, their pro rated cash incentive award for the current year, and pro +Cimarex +Energy +Co. +71 +Table of Contents +EXECUTIVE COMPENSATION TABLES +rated +vesting of equity awards. See "—Separation Compensation Agreements" above. This column assumes performance-based awards remaining after pro ration achieved 100% vesting based on +satisfying performance objectives at the end of the respective performance periods. +(2) This column represents the amounts that would have been payable to the NEO in the event that the NEO's employment +is terminated by the Company on December 31, 2019 without cause or by the NEO for "good reason" within two years after a change in control. In this event, the CEO receives 3 times and the other +NEOs receive 2 times their average annual cash compensation (salary plus annual cash incentive award) for the last two years, their pro rated cash incentive award for the current year, and full +vesting of time based equity awards and vesting of performance based equity awards assuming the performance period ended on the date of the change in control. See "—Separation Compensation +Agreements" above. This column assumes all performance-based awards achieved 100% vesting. +(3) This column represents the amounts that would have been payable in the event a change in control occurs on +December 31, 2019 and the NEOs remain employed by the Company. In this event, no severance benefits are payable under the Severance Compensation Agreements and the NEOs' outstanding equity +awards are treated as set forth in the applicable equity incentive plan(s) and award agreements. Our equity incentive plans provide for acceleration of vesting of time-based equity awards in the event +of a change in control. Vesting of performance awards upon a change in control is based on the actual performance through date of the change in control rather than the full performance period. This +column assumes all performance-based awards achieved 100% vesting. +(4) This column represents the amounts that would have been payable in the event an NEO died or became disabled on +December 31, 2019. The award agreements for grants of equity under our equity plans and the provisions of those equity plans provide for acceleration of vesting of awards in the event of death +or disability. No benefits are payable under the Severance Compensation Agreements upon death or disability. +(5) For purposes of this table, the "Long Term Award Payout" is based on the closing price for the Company's common +stock on December 31, 2019 of $52.49. +(6) The total represents the maximum value of the payments and benefits that the executive would have received upon the +occurrence of a change of control or the referenced termination of employment. However, if the total amount of payments and benefits to be provided to the NEO would cause the NEO to incur "golden +parachute" excise tax liability, then any payments and benefits provided under the executive's employment agreement may be reduced to the extent necessary to eliminate the application of the excise +tax if that will leave the executive in a better after-tax position than if no such reduction had occurred. Accordingly, the total value of the payments and benefits that the executive would receive +under such circumstances may be less than the total reflected in the table. There are no "gross up" payments for excise taxes that may be imposed. +(7) Mr. Clason joined Cimarex in April 2019. The calculation of severance benefits under the Severance +Compensation Agreement are based on annualized salary in accordance with the agreement. +DIRECTOR AND OFFICER INDEMNIFICATION AGREEMENTS +We have entered into indemnification agreements with our Directors and certain officers. These agreements require us, among other things, to +indemnify such persons against certain liabilities that may arise by reason of their status or service as Directors or officers, to advance their expenses incurred as a result of a proceeding for +which they may be indemnified, and to cover them under any Directors' and officers' liability insurance policy that we choose, in our discretion, to maintain. These indemnification agreements are +intended to provide indemnification rights to the fullest extent permitted under applicable Delaware law and will be in addition to any other rights that the indemnitee may have under our Restated +Certificate of Incorporation, Bylaws, and applicable law. +72 +2020 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +NON-EMPLOYEE DIRECTOR COMPENSATION +NON-EMPLOYEE DIRECTOR COMPENSATION +Our Compensation Committee administers our Director compensation program. Total Director compensation is designed to be near the +50th percentile of that paid by comparable public oil and gas companies with similar market capitalization and revenue. We use the same group of companies in reviewing Director compensation as +we use in reviewing executive base salary and total direct compensation. See "CD&A—Section 1—Competitive Positioning" for a list of, and the methodology followed in +selecting, these companies. The Compensation Committee uses its independent compensation consultant, Longnecker & Associates, to review and make recommendations concerning Director +compensation. The Compensation Committee, after reviewing the consultant's recommendations with the CEO, recommends Director compensation for Board consideration and approval at the Board meeting held +following each year's Annual Meeting of Shareholders. Payment of the annual component of Director compensation occurs on June 1 of each year. +For +2019, compensation for non-employee Directors consisted of the following: +Compensation +Amount +Annual Cash Retainer +(payable on June 1 of each year) +$105,000 +Annual Equity Retainer +(comprised of restricted stock that vests on the earlier of (i) the termination of the service as a Director other than because of removal or (ii) May 1 of the following year) +$200,000 +Committee Chair Fee +(for Audit Committee and Compensation Committee; also for Nominating and Corporate Governance Committee Chair if the Nominating and Corporate Governance Committee Chair is not the Lead Director) +$20,000 +Lead Director Fee +(who also acts as Nominating and Corporate Governance Committee Chair) +$40,000 +Board Meeting Attendance Fee +None +Committee Meeting Attendance Fee +None +At +the May 8, 2019 meeting, the Board, on the recommendation of the Compensation Committee and the Compensation Committee's independent compensation consultant, and based on a study of peers +and market trends, recommended no changes to Director compensation. +Cimarex +Energy +Co. +73 +Table of Contents +NON-EMPLOYEE DIRECTOR COMPENSATION +§ Independent Director 2019 Compensation +The following table discloses compensation earned by or paid to independent Directors in 2019. +Name +Fees Paid in Cash (1) +Stock Awards (2) +All Other +Compensation (3) +Total +Paul N. Eckley +$ +105,000 +$ +200,000 +$ +1,399 +$ +306,399 +Hans Helmerich +$ +105,000 +$ +200,000 +$ +8,794 +$ +313,794 +David A. Hentschel (4) +$ +85,000 +$ +— +$ +502 +$ +85,502 +Kathleen A. Hogenson (5) +$ +70,000 +$ +133,333 +$ +556 +$ +203,889 +Harold R. Logan, Jr. +$ +145,000 +$ +200,000 +$ +1,901 +$ +346,901 +Floyd R. Price +$ +125,000 +$ +200,000 +$ +1,901 +$ +326,901 +Monroe W. Robertson +$ +125,000 +$ +200,000 +$ +1,901 +$ +326,901 +Lisa A. Stewart +$ +105,000 +$ +200,000 +$ +1,901 +$ +306,901 +Michael J. Sullivan (6) +$ +105,000 +$ +200,000 +$ +1,201 +$ +306,201 +L. Paul Teague (7) +$ +0 +$ +— +$ +93 +$ +93 +Frances M. Vallejo +$ +105,000 +$ +200,000 +$ +1,807 +$ +306,807 +(1) Represents fees earned or paid for services as a Director during 2019, including the annual cash retainer fee, +Committee Chair fee and Lead Director fee. +(2) Represents the aggregate grant date fair market value of the 3,497 shares of restricted stock as +of the June 1, 2019 grant date. +(3) Consists of dividends paid during 2019 on unvested restricted stock awards and dividend +equivalents paid during 2019 on deferred compensation units that settle in shares of common stock. +(4) Mr. Hentschel served as a Director until May 31, 2019, at which time he began +serving as Director Emeritus. As Director Emeritus, Mr. Hentschel was paid an annual retainer for 2019 of $85,000, which is included under "Fees Paid in Cash." +(5) Ms. Hogenson was appointed as a Director on September 30, 2019 and received a pro +rata share of the annual cash and equity retainer fees for the year June 1, 2019 to May 31, 2020. +(6) Mr. Sullivan served as a Director until September 30, 2019, at which time he began +serving as Director Emeritus. +(7) Mr. Teague served as Director Emeritus until the conclusion of the 2019 Annual Meeting of +Shareholders. +The +following table discloses as of December 31, 2019 the aggregate number of outstanding unvested stock awards and the market value of those awards. Market value is based on the closing +trading price of $52.49 on December 31, 2019 (the last trading day of 2019). The Directors have the right to vote and receive dividends on unvested stock awards. There were no outstanding +vested but unexercised option awards as of that date. +Independent Director +Unvested Stock Awards +Market Value +Paul N. Eckley +3,497 +$ +183,558 +Hans Helmerich +3,497 +$ +183,558 +Kathleen A. Hogenson +2,781 +$ +145,975 +Harold R. Logan, Jr. +3,497 +$ +183,558 +Floyd R. Price +3,497 +$ +183,558 +Monroe W. Robertson +3,497 +$ +183,558 +Lisa A. Stewart +3,497 +$ +183,558 +Frances M. Vallejo +3,497 +$ +183,558 +In +connection with Mr. Hentschel's retirement from the Board effective May 31, 2019, and Mr. Sullivan's retirement from the Board effective September 30, 2019, the Board +appointed each of them as Director Emeritus for up to a two-year term. As compensation for serving as Director Emeritus, Messrs. Hentschel and Sullivan will each be entitled to a cash retainer +of $85,000 per year; they will not receive any +74 +2020 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +NON-EMPLOYEE DIRECTOR COMPENSATION +additional +stock awards as Directors Emeritus. The Company and Messrs. Hentschel and Sullivan also entered into indemnification agreements with substantially the same terms as their Director +indemnification agreements. +Stock Ownership and Holding Requirements +Our Corporate Governance Guidelines require that each independent Director own Cimarex stock in an amount equal to five times his or her +annual cash retainer. A newly elected Director has five years from the date of his or her initial election or appointment to comply with the Guidelines. Until the stock ownership guidelines are met, a +Director may not sell any Cimarex stock acquired through equity grants except to pay income taxes upon the vesting of awards or to pay the exercise price and related income taxes upon the exercise of +stock options. Restricted stock, restricted stock units, and deferred compensation units are counted in calculating ownership. Shares subject to options are not counted. Based on his or her holdings, +or being in the five-year period to meet the guidelines, as of March 10, 2020, all independent Directors were in compliance with the stock ownership guidelines. +Cimarex +Energy +Co. +75 +Table of Contents +SECURITY OWNERSHIP +SECURITY OWNERSHIP +MANAGEMENT, DIRECTORS AND CERTAIN BENEFICIAL OWNERS +The +following table shows, as of March 10, 2020, the number of shares of common stock "beneficially owned," as determined in accordance with Rule 13d-3 under the Securities Exchange Act +of 1934, by the NEOs, the Directors, and all executive officers and Directors, as a group: +Name of Beneficial Owner +Shares +Beneficially Owned (1) +Percent of Class +Named Executive Officers : +Thomas E. Jorden, CEO (also Director) +521,678 +<1% +G. Mark Burford, CFO +146,597 +<1% +Joseph R. Albi, COO (also Director) +190,644 +<1% +John A. Lambuth, EVP +169,237 +<1% +Christopher H. Clason, SVP, CHRO +63,320 +<1% +Directors : +Paul N. Eckley +3,497 +<1% +Hans Helmerich +452,812 +(2) +<1% +Kathleen A. Hogenson +2,781 +<1% +Harold R. Logan, Jr. +14,756 +<1% +Floyd R. Price +17,009 +<1% +Monroe W. Robertson +20,913 +<1% +Lisa A. Stewart +11,493 +<1% +Frances M. Vallejo +7,631 +<1% +All executive officers and Directors as a group (17 persons) +2,072,779 +2% +(1) Includes restricted stock (as well as shares that are subject to +performance-based vesting and time-based vesting more than 60 days after March 10, 2020), direct and indirect ownership of common stock and equivalent shares of common stock held by the +trustee for the benefit of the named individual in the Cimarex Energy Co. 401(k) Plan. Does not include deferred compensation units held by one Director. +(2) Includes 11,450 shares owned by Mr. Helmerich's wife. +Mr. Helmerich disclaims beneficial ownership of the shares held by his wife. Also includes 46,691 shares owned by 1993 Hans Helmerich Trust, of which Mr. Helmerich is the trustee, 1,062 +shares owned by Helmerich Grandchildren LLC, of which Mr. Helmerich is the co-manager, 7,865 shares owned by Family Trust, of which Mr. Helmerich is the trustee, 36,430 shares +owned by The Helmerich Trust, of which Mr. Helmerich is the co-trustee, 325,000 shares held by the Peggy Helmerich QTIP Trust, of which Mr. Helmerich is the trustee, and 10,000 shares +held by Saddleridge, LLC, of which Mr. Helmerich owns 99% and his wife owns 1%. +76 +2020 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +SECURITY OWNERSHIP +Each +of the following shareholders beneficially owns five percent or more of our outstanding shares of common stock. The following table provides information regarding their stock ownership and is +based on their filings with the SEC. +Voting Authority +Dispositive Authority +Total Amount of +Beneficial +Ownership +Percent +of Class +Name and Address +Sole +Shared +Sole +Shared +BlackRock, Inc. +55 East 52 nd Street +New York, NY 10055 +5,520,718 +0 +6,157,730 +0 +6,157,730 +(1) +6.0% +Boston Partners +One Beacon Street, 30 th Floor +Boston, MA 02108 +6,686,737 +11,268 +7,686,537 +0 +7,686,537 +(2) +7.55% +Diamond Hill Capital +Management, Inc. +325 John H. McConnell Blvd., +Suite 200 +Columbus, OH 43215 +4,793,549 +0 +5,198,099 +0 +5,198,099 +(3) +5.1% +State Street Corporation +State Street Financial Center +One Lincoln Street +Boston, MA 02111 +0 +4,781,190 +0 +5,536,236 +5,537,536 +(4) +5.44% +The Vanguard Group +100 Vanguard Boulevard +Malvern, PA 19355 +126,764 +22,209 +10,907,500 +137,226 +11,044,726 +(5) +10.84% +(1) Based solely on information as of December 31, 2019 +included in a Schedule 13G/A filed with the SEC on February 5, 2020. +(2) Based solely on information as of December 31, 2019 included in a +Schedule 13G/A filed with the SEC on February 10, 2020. +(3) Based solely on information as of December 31, 2019 included in a +Schedule 13G/A filed with the SEC on February 12, 2020. +(4) Based solely on information as of December 31, 2019 included in a +Schedule 13G filed with the SEC on February 14, 2020. +(5) Based solely on information as of December 31, 2019 included in a +Schedule 13G/A filed with the SEC on February 12, 2020. +SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE +Section 16(a) of the Securities Exchange Act of 1934 requires our Directors and executive officers, and persons who own more than 10% +of our common stock, to file reports of ownership of, and transactions in, our common stock with the SEC. Based on a review of such reports, and on written representations from our reporting persons, +we believe that all reports were timely filed in 2019. +Cimarex +Energy +Co. +77 +Table of Contents +ITEM 2: ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION +ITEM 2: ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION +At the 2019 Annual Meeting of Shareholders, 61% of the votes cast were in favor of the advisory vote to approve executive compensation. In +addition to the advisory vote, as part of our regular shareholder engagement, we consider and discuss with shareholders a number of matters throughout the year, including executive compensation and +governance. Due to the decrease in the number of shares in favor of the advisory vote on executive compensation, the Company increased its shareholder engagement. The Compensation Committee considers +any feedback and routinely reviews executive compensation practices and governance. +Based +on feedback received during shareholder engagement in 2019 and the results of the 2019 shareholder advisory vote on executive compensation, the Compensation Committee further reduced potential +vesting of performance equity awards if the Company's share price declines over the performance period. For performance awards made in December 2019, if the share price declines during the +performance period, the potential vesting is reduced by 50%. This compares to awards made in 2018 where maximum vesting could still be attained if the overall share price declines. In addition, the +Committee added objective, formula-based metrics to the short-term incentives paid in 2019 and for 2020 performance objectives. +The +Compensation Committee believes these changes enhanced the core design of our executive compensation programs for the remainder of 2019, as it believes the programs continue to retain, attract, +when needed, and appropriately incent senior management. +At +the 2020 Annual Meeting of Shareholders, we again will hold an annual advisory vote to approve executive compensation. The Compensation Committee will continue to consider the results from this +year's and future years' advisory votes on executive compensation, as well as feedback from shareholders through the course of such year. +Because +your vote is advisory, it will not be binding upon the Board. However, the Board values shareholders' opinions, and the Compensation Committee will take into account the outcome of the vote +when considering future executive compensation decisions. The Board recommends that shareholders vote FOR the following resolution: +RESOLVED , that the shareholders approve, on an advisory basis, the compensation of Cimarex's Named Executive Officers, as disclosed in this proxy +statement, including the Compensation Discussion and Analysis, the executive compensation tables and the related narrative. +The Board of Directors unanimously recommends a vote FOR the advisory vote to approve executive compensation. +78 +2020 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +ITEM 3: RATIFICATION OF INDEPENDENT AUDITORS +ITEM 3: RATIFICATION OF INDEPENDENT AUDITORS +The Audit Committee of the Board has appointed KPMG LLP to audit our financial statements for 2020. Notwithstanding its selection, the +Audit Committee, in its discretion, may appoint new independent registered public accountants at any time during the year if the Audit Committee believes that such a change would be in the best +interests of our shareholders and the Company. KPMG LLP has served as our independent auditors since October 1, 2002. +We +are asking that shareholders ratify the appointment of KPMG LLP as our independent auditors. If shareholders fail to ratify the appointment, the Audit Committee may reconsider this +appointment. A KPMG LLP representative will be at the Annual Meeting to answer appropriate questions and to make a statement if he or she desires. +The Board of Directors recommends a vote FOR the ratification of KPMG LLP as Cimarex's Independent Auditors for 2020. +Audit and Non-Audit Fees +The following table shows the fees for professional services rendered by KPMG LLP for the audit of Cimarex's annual financial +statements for the years ended December 31, 2019 and December 31, 2018, and fees billed for other services rendered by KPMG LLP during those periods: +Years Ended December 31, +2019 +2018 +Audit Fees (1) +$ +1,258,916 +$ +1,148,580 +Audit-Related Fees (2) +$ +80,895 +$ +30,500 +Tax Fees (3) +$ +225,000 +$ +215,000 +All Other Fees +$ +0 +$ +0 +(1) Audit fees were principally for audit work performed on the consolidated financial statements and +internal controls over financial reporting. +(2) Audit-related fees were principally for services associated with SEC registration statements, +periodic reports and other documents filed with the SEC or issued in connection with securities offerings, e.g., comfort letters and consents and assistance in responding to SEC comment +letters. +(3) Tax fees were principally for services related to tax compliance and reporting and analysis +services. +Approval of Audit, Audit-Related and Tax Services +The Audit Committee annually reviews and pre-approves certain categories of audit, audit-related and tax services to be performed by our +independent auditors, subject to a specified range of fees. The Audit Committee also may pre-approve specific services. Certain non-audit services as specified by the SEC may not be performed by our +independent auditors. The Audit Committee may delegate pre-approval authority to one or more of its members. In the event of any such delegation, any pre-approved decisions will be reported to the +Audit Committee at its next scheduled meeting. The services described in the above table were pre-approved by the Audit Committee in 2018 and 2019. +Cimarex +Energy +Co. +79 +Table of Contents +ITEM 3: RATIFICATION OF INDEPENDENT AUDITORS +REPORT OF AUDIT COMMITTEE +The Audit Committee on behalf of the Board of Directors monitors: (i) the integrity of the Company's financial statements; +(ii) the independent auditors' qualifications and independence; (iii) the +performance of the Company's internal audit function and independent auditors; (iv) the appropriateness of the Company's accounting policies; (v) the adequacy of the Company's internal +controls; (vi) the Company's compliance with legal and regulatory requirements related to audit matters; (vii) the process related to ongoing litigation matters; (viii) the annual +process of estimating and reporting quantities of oil and gas reserves; and (ix) risk oversight. In so doing, it is the responsibility of the Audit Committee to maintain free and open +communication between the Directors, the independent auditor and the management of the Company. All members of the Audit Committee meet the independence, experience and financial literacy requirements +of the New York Stock Exchange, the Sarbanes Oxley Act and any rules or regulations promulgated by the Securities and Exchange Commission. The Board of Directors has adopted a written charter for the +Audit Committee, a copy of which is available on our website at www.cimarex.com. +Management +is responsible for the Company's financial statements, the financial reporting process, and the process of estimating and reporting quantities of oil and gas reserves, including the related +systems of internal controls and disclosure controls and procedures. The Company's independent registered public accounting firm is responsible for performing an independent audit of the Company's +financial statements in accordance with generally accepted auditing standards, as well as an audit of the Company's internal control over financial reporting in accordance with the standards of the +Public Company Accounting Oversight Board (PCAOB) and issuing reports thereon. The Audit Committee's responsibility is to monitor and oversee these processes and the Audit Committee uses the Company's +internal audit department and (if applicable) independent petroleum engineers to assist with these responsibilities. +The +Audit Committee reviewed Cimarex's audited financial statements and supplemental oil and gas reserve information as of and for the year ended December 31, 2019 and met with management, +DeGolyer and MacNaughton (an independent petroleum engineering consulting firm) and KPMG LLP, Cimarex's independent registered public accounting firm, to discuss the related information, and +the effectiveness of Cimarex's internal control over financial reporting. In addition, the Audit Committee has received from KPMG LLP the communication required by PCAOB Rule 3526, +Communication with Audit Committees Concerning Independence, and discussed with KPMG LLP their independence from Cimarex and its management. The Audit Committee also discussed with +KPMG LLP any matters required by PCAOB Auditing Standard No. 1301, Communications with Audit Committees. +Based +on these reviews and discussions, the Audit Committee recommended to the Board of Directors that Cimarex's audited financial statements be included in Cimarex's Annual Report on Form 10-K +for the fiscal year ended December 31, 2019. +THE AUDIT COMMITTEE +Monroe +W. Robertson (Chair) +Kathleen A. Hogenson +Harold R. Logan, Jr. +Frances M. Vallejo +The +Audit Committee Report does not constitute soliciting material and shall not be deemed to be filed or incorporated by reference into any other Cimarex filing under the Securities Act of 1933, as +amended, or the Securities Exchange Act of 1934, as amended, except to the extent that Cimarex specifically incorporates the Audit Committee Report by reference. +80 +2020 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +GENERAL INFORMATION +GENERAL INFORMATION +Information Available Online +Our Corporate Governance Guidelines, Board Committee Charters, Code of Business Conduct and Ethics and SEC filings are posted on our website +at www.cimarex.com . Upon request, we will promptly deliver (free of charge) a copy of our Annual Report on Form 10-K to any +shareholder. Direct such requests to our +Corporate Secretary, Cimarex Energy Co., 1700 Lincoln Street, Suite 3700, Denver, Colorado 80203, telephone (303) 295-3995 and facsimile (720) 403-9383. +Communications with Cimarex's Directors +Communications from shareholders can be addressed to our Directors by mail in care of our Corporate Secretary, Cimarex Energy Co., 1700 +Lincoln Street, Suite 3700, Denver, Colorado 80203 or facsimile (720) 403-9383. All shareholder communications will be forwarded to our Lead Director. In response, the Lead Director may +take any action deemed appropriate or necessary, including, without limitation, forwarding the information to the Board for consideration or, with the concurrence of the Board, retaining independent +or outside counsel, accountants or other advisors. +Director Nominations for the 2021 Annual Meeting of Shareholders +Shareholders who wish to nominate persons for election as Directors at the 2021 Annual Meeting must submit a timely written notice complying +with Cimarex's Bylaws to the Corporate Secretary at Cimarex Energy Co., 1700 Lincoln Street, Suite 3700, Denver, Colorado 80203 or by facsimile (720) 403-9383. In addition, up to +20 shareholders collectively beneficially owning more than 3% of the Company's outstanding shares for at least three consecutive years may nominate up to two candidates for inclusion in the Company's +proxy materials by following the procedures set forth in the proxy access provisions in Article III, Section 2A of our Bylaws (the "Proxy Access Policy"). To be timely, the shareholder's +written notice for nominees to be considered by the Nominating and Corporate Governance Committee or proxy access candidate to be included in the proxy statement for the 2021 Annual Meeting must be +received between January 6, 2021 and February 5, 2021. In addition, shareholder nominations must comply with the other requirements of Article III, Section 2 or +Section 2A, as applicable, of our Bylaws. +Shareholder Proposals for the 2021 Annual Meeting of Shareholders +A proposal to be acted upon at the 2021 Annual Meeting of Shareholders will be acted upon only: +§ If the proposal is to be included in the proxy statement, pursuant to +Rule 14a-8 under the Securities Exchange Act of 1934, as amended, the proposal is received by our Corporate Secretary on or before November 24, 2020, and the proposal meets the +requirements of the applicable rules of the SEC and the requirements of our bylaws. § If the proposal is not to be included in the proxy statement, +pursuant to our bylaws, +the proposal is submitted in writing to our Corporate Secretary no earlier than January 6, 2021 and no later than +Cimarex +Energy +Co. +81 +Table of Contents +GENERAL INFORMATION +February 5, +2021, and such proposal is, under Delaware General Corporation Law, an appropriate subject for shareholder action. +§ If the proposal concerns the nomination of Directors, see "Director Nominations for +the 2021 Annual Meeting of Shareholders" above. +Complaint and Reporting Procedures +We have established complaint and reporting procedures that are posted on our website at www.cimarex.com . Any person, whether or not an employee, who has a concern about +the conduct of Cimarex or any of our employees, +including accounting, internal accounting controls or auditing issues, may, in an anonymous manner, communicate that concern by calling our hotline, 1-866-519-1898. The hotline is available +24 hours a day, seven days a week. Your telephone communication will be transcribed verbatim and such transcription will be e-mailed to a Company representative with authority to investigate +the concern. +82 +2020 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +QUESTIONS AND ANSWERS +QUESTIONS AND ANSWERS +§ PROXY MATERIALS AND VOTING +INFORMATION +1. Why did I receive these proxy materials? +We are providing these materials in connection with the solicitation by the Board of Directors of Cimarex Energy Co., a Delaware corporation, of proxies +to be voted at our 2020 Annual Meeting of Shareholders and at any adjournment or postponement of the Meeting. The Meeting will take place on May 6, 2020, beginning at 9:00 a.m. Central +Daylight Time, at the Hyatt Regency Tulsa, 100 East 2nd Street, Tulsa, Oklahoma 74103. +2. What is the difference between holding shares as a shareholder of record and as a beneficial owner? +If your shares are registered directly in your name with Cimarex's registrar and transfer agent, Continental Stock Transfer & Trust Company, you are +considered a shareholder of record with respect to these shares. If your shares are held in a brokerage account or bank, broker or other nominee, you are considered the beneficial owner of these +shares. +3. What shares are included on the proxy card? +If you are a shareholder of record, you should receive only one proxy card for all the shares you hold of record in certificate form and in book-entry form. If +you receive more than one proxy card, please vote all proxy cards received. +If +you are a Cimarex employee, you will receive a proxy or voting instruction card for all the shares you hold in the Cimarex 401(k) Plan. Your proxy card will serve as a voting instruction card for +the Plan trustee. If you do not specify your voting instructions on the proxy card, the Plan trustee will vote your shares in the same proportion as it votes shares for which it did receive timely +instructions. To allow sufficient time for voting by the trustee, your voting instructions must be received no later than 11:59 p.m. Eastern Daylight Time on +May 3, 2020 . +4. What different methods can I use to vote? +By Written Proxy. All shareholders of record can vote by written proxy card. If you are a shareholder of record and receive a notice regarding the availability of proxy +materials, you may request a +written proxy card by following the instructions included in the notice. If you are a beneficial owner, you may request a written proxy card or a voting instruction form from your bank, broker or +other nominee. +By Telephone or Internet. All shareholders of record can vote by calling the toll-free telephone number on the proxy card. Please have your proxy card when you call. +Voice prompts will direct you on how to vote your shares and will confirm your voting instructions have been recorded properly. +Cimarex +Energy +Co. +83 +Table of Contents +QUESTIONS AND ANSWERS +Shareholders +also may vote on the internet by accessing the website noted on the proxy card. Please have your proxy card when you go to the website. As with telephone voting, you can confirm your +voting instructions have been recorded properly. +Beneficial +owners may vote by telephone or internet if their bank, broker or other nominee makes those methods available, in which case the bank, broker or other nominee will include the instructions +with the proxy materials. +5. What are my voting choices for each of the proposals to be voted on at the 2020 Annual Meeting of Shareholders and what are +the voting standards? +Proposal +Voting Choices and Board Recommendation +Voting Standard +Item 1. Election of One Class I +§ +vote in favor of all nominees; +Majority of votes cast +Director and Four Class III +§ +vote in favor of specific nominees; +Directors +§ +vote against all nominees; +§ +vote against specific nominees; +§ +abstain from voting with respect to all nominees; or +§ +abstain from voting with respect to specific nominees. +The Board recommends a vote FOR each of the nominees. +Item 2. Advisory Vote to Approve +§ +vote in favor of the advisory proposal; +Majority of shares +Executive Compensation +§ +vote against the advisory proposal; or +present and entitled to +§ +abstain from voting on the advisory proposal +vote +The Board recommends a vote FOR the advisory proposal to approve executive compensation. +Item 3. Ratification of the +§ +vote in favor of the ratification; +Majority of shares +Appointment of KPMG LLP as +§ +vote against the ratification; or +present and entitled to +Independent Auditors +§ +abstain from voting on the ratification. +vote +The Board recommends a vote FOR the ratification. +6. What if I am a beneficial owner and do not give voting instructions to my broker? +As a beneficial owner, in order to ensure your shares are voted in the way you would like, you must provide voting instructions to your bank, broker or other +nominee by the deadline provided in the materials you receive from your bank, broker or other nominee. If you do not provide voting instructions to +your bank, broker or other nominee, whether your shares can be voted by such person depends on the type of item being considered to vote. +Non-Discretionary Items. The election of Directors and the advisory vote to approve executive compensation are non-discretionary items and may not be voted on by +brokers, banks or other nominees who have not received specific voting instructions from beneficial owners. +Discretionary Items. The ratification of the appointment of KPMG LLP as Independent Auditors is a discretionary item. Generally, banks, brokers and other nominees +that do not receive voting instructions from beneficial owners may vote on the proposal in their discretion. +84 +2020 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +QUESTIONS AND ANSWERS +7. How are abstentions and broker non-votes counted? +Item 1. Election of One Class I Director and Four Class III Directors. If you +abstain from voting in the election of Directors, you will be treated as not having cast a vote and the abstention will not be counted in determining the outcome of the election. Broker non-votes are +not considered a vote cast under our Bylaws and will have no effect on the outcome of the election of Directors. +Item 2. Advisory Vote to Approve Executive Compensation. If you abstain from voting on the +advisory vote to approve executive compensation, you are considered present and entitled to vote, and your shares are considered in the calculation of whether Item 2 received the affirmative +vote of a majority of shares present and entitled to vote. The effect of an abstention is a vote +against Item 2. Broker non-votes are not considered in the calculation of a majority of shares present and entitled to vote. +Item 3. Ratification of Appointment of KPMG LLP as Independent Auditors. If you abstain +from voting on the ratification of KPMG LLP as Cimarex's Independent Auditors, you are considered present and entitled to vote, and your shares are considered in the calculation of whether +Item 3 received the affirmative vote of a majority of shares present and entitled to vote. The effect of an abstention is a vote against Item 3. Because Item 3 is a routine matter +on which a broker has discretionary authority, no or few broker non-votes likely will result from this Item. +8. What can I do if I change my mind after I vote my shares? +You may revoke your proxy prior to the completion of voting by: +§ Giving written notice to Cimarex's Corporate Secretary; § Delivering +a valid, later-dated proxy, or a later-dated vote by telephone or on the +internet in a timely manner; or § Voting by ballot at the Annual Meeting. +9. Can I access the proxy materials on the internet? How can I sign up for the electronic proxy delivery +service? +We are distributing our proxy materials to certain shareholders via the internet under the "notice and access" approach permitted by the SEC. On or about +March 23, 2020, we will mail to certain of our +shareholders a notice of internet availability of proxy materials with instructions explaining how to access our proxy statement and annual report and how to vote online. If you receive a notice of +internet availability by mail, you will not receive a printed copy of the proxy materials in the mail unless you request them by following the instructions for requesting such materials included in +the notice of internet availability. +Even +if you do not participate in "notice and access," the Notice of Annual Meeting and proxy statement are available on the internet at http://www.allianceproxy.com/cimarex/2020. +10. Who counts the votes? +Alliance Advisors LLC, our proxy solicitor, will tabulate the votes and, Francis B. Barron, Cimarex's Corporate Secretary, will act as inspector of +election. +Cimarex +Energy +Co. +85 +Table of Contents +QUESTIONS AND ANSWERS +11. When will Cimarex announce the voting results? +We will announce the preliminary voting results at the Annual Meeting of Shareholders. Cimarex will report the final results in a Current Report on +Form 8-K filed with the SEC after the Meeting. +12. How are proxies solicited, and what is the cost? +We bear all expenses incurred in connection with the solicitation of proxies. We hired Alliance Advisors LLC to assist with the solicitation of proxies +for an estimated fee of $10,000 plus expenses. We will reimburse brokers, fiduciaries and custodians for their costs in forwarding proxy materials to beneficial owners of Common Stock. +Our +Directors, officers and employees also may solicit proxies by mail, telephone and personal contact. They will not receive any additional compensation for these activities. +13. What is householding? +As permitted by the Securities Exchange Act of 1934, only one copy of this proxy statement is being delivered to shareholders residing at the same address, +unless the shareholders have notified Cimarex of their desire to receive multiple copies of the proxy statement. This is known as "householding." +Upon +oral or written request, we promptly will deliver a separate copy of the proxy statement to any shareholder residing at an address to which only one copy was mailed. Direct requests for +additional copies for the current year or future years to our Corporate Secretary, Cimarex Energy Co., 1700 Lincoln Street, Suite 3700, Denver, Colorado 80203, telephone +(303) 295-3995 and facsimile (720) 403-9383. +Shareholders +of record residing at the same address and currently receiving multiple copies of the proxy statement may contact our registrar and transfer agent, Continental Stock Transfer & +Trust Company, by phone at (888) 509-5580 or by mail at 1 State Street, 30th Floor, New York, NY 10004-1561, to request a single copy be mailed in the future. +Beneficial +owners should contact their broker or bank. +14. How can I vote at the Meeting if I am a beneficial owner? +If you are a beneficial owner and want to vote your shares at the Meeting, you will need to ask your bank, broker or other nominee to furnish you with a legal +proxy, bring the legal proxy with you to the Meeting and hand it in with a signed ballot that will be provided to you at the Meeting. You will not be able to vote your shares at the Meeting without a +legal proxy. If you do not have a legal proxy, you can still attend the Meeting. We encourage you to vote your shares in advance, even if you intend to attend the Meeting. Please note that if you +request a legal proxy, any previously executed proxy will be revoked, and your vote will not be counted unless you appear at the Meeting and vote in person or legally appoint another proxy to vote on +your behalf. +86 +2020 +Notice +of +Annual +Meeting +and +Proxy +Statement +PROXY THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS CIMAREX ENERGY CO. The undersigned appoints Thomas E. Jorden and Francis B. Barron as proxies, with power to act without the other and with power of substitution, and authorizes them to represent and vote, as designated on the other side, all the shares of common stock of Cimarex Energy Co. held of record by the undersigned with all powers that the undersigned would possess if present at the Annual Meeting of Shareholders to be held at the Hyatt Regency Tulsa, 100 East 2nd Street, Tulsa, Oklahoma 74103, on May 6, 2020, at 9:00 a.m., Central Daylight Time, or any adjournment thereof. For participants in the Cimarex 401(k) Plan, this proxy, when properly executed, will be voted in the manner directed by the undersigned. If no direction is given, if the card is not signed, or if the card is not received prior to 11:59 p.m., Eastern Daylight Time, on May 3, 2020, the Plan’s Trustee will vote your shares held in the Plan in the same proportion as shares were voted by other Plan participants. (Continued, and to be marked, dated and signed, on the other side) PLEASE DETACH ALONG PERFORATED LINE AND MAIL IN THE ENVELOPE PROVIDED. Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to be held May 6, 2020. The Proxy Statement and our 2019 Annual Report to Shareholders are available at: http://www.allianceproxy.com/cimarex/2020 +Please mark your votes like this THIS PROXY WILL BE VOTED AS DIRECTED, OR, IF NO DIRECTION IS INDICATED, WILL BE VOTED “FOR” ALL THE NOMINEES LISTED UNDER ITEM 1, AND “FOR” ITEMS 2 AND 3. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. The Board of Directors recommends a vote “FOR” all the nominees listed under Item 1 and “FOR” Items 2 and 3. FOR AGAINST ABSTAIN 2. Advisory vote to approve executive compensation 1. Election of one Class I director: FOR AGAINST ABSTAIN (01) Kathleen A. Hogenson Election of four Class III directors: (02) Paul N. Eckley (03) Thomas E. Jorden (04) Floyd R. Price (05) Frances M. Vallejo 3. Ratify the appointment of KPMG LLP as our independent auditors for 2020 I plan on attending the meeting NOTE: Please sign as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee or guardian, please give full title as such. Signature Signature (if held jointly) Date: , 2020 CONTROL NUMBER PLEASE DETACH ALONG PERFORATED LINE AND MAIL IN THE ENVELOPE PROVIDED. CIMAREX ENERGY CO. As a shareholder of Cimarex Energy Co., you have the option of voting your shares electronically through the Internet or on the telephone, eliminating the need to return the proxy card. Your electronic vote authorizes the named proxies to vote your shares in the same manner as if you marked, signed, dated and returned the proxy card. Votes submitted electronically over the Internet or by telephone must be received by 11:59 p.m., Eastern Time, on May 5, 2020. CONTROL NUMBER PROXY VOTING INSTRUCTIONS Please have your 11 digit control number ready when voting by Internet or Telephone INTERNET Vote Your Proxy on the Internet: Go to www.AALvote.com/XEC Have your proxy card available when you access the above •website. Follow the prompts to vote your shares. MAIL Vote Your Proxy by Mail: Mark, sign, and date your proxy card, then detach it, and return it in the postage-paid envelope provided. TELEPHONE Vote Your Proxy by Phone: Call 1 (866) 804-9616 Use any touch-tone telephone to vote your proxy. Have your proxy card available when you call. Follow the voting instructions to vote your shares. \ No newline at end of file diff --git a/raw/proxies/0001168054/0001047469-20-001680/proxy_rpt.txt b/raw/proxies/0001168054/0001047469-20-001680/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..1656e42f4975c6698f31b0deded1825aca11705e --- /dev/null +++ b/raw/proxies/0001168054/0001047469-20-001680/proxy_rpt.txt @@ -0,0 +1,29 @@ +Review of related party transactions +Independent Lead Director +Non-hedging and non-pledging policies +Diverse Board skills and experience +Clawback policy +Annual Board and committee self-evaluations +Management and Director stock ownership guidelines +Periodic consultant review of Board skills +No tax gross-ups +Annual equity grants to Directors +Proxy access +Annual Board education +Active shareholder engagement +Shareholder Engagement +Cimarex's relationships with its shareholders are an important part of our corporate governance profile, and we recognize the value of taking +their views into account. Engagement with shareholders helps us understand the larger context and the impact of our operations, learn about expectations for our performance, assess emerging issues +that may affect our business or other aspects of our operations, and shape corporate and governance policies. +In +April and May 2019, we reached out to 29 of our top shareholders who collectively held approximately 66% of our shares to hold calls to discuss our compensation programs and disclosure and ESG +issues. Six shareholders, who collectively held 23% of our shares, accepted our invitations. In these calls, our Senior Vice President—General Counsel and Secretary and our Vice +President—Investor +Relations asked the shareholders their views on pay for performance alignment, the structure of our compensation programs and other concerns. The results of these calls were shared with our +Compensation Committee and the full Board of Directors. While these shareholders generally believed we had alignment with our pay for performance, they had suggestions concerning our short-term and +long-term compensation programs and ESG matters. The Company took action on a number of items in response to these engagement efforts and +Cimarex +Energy +Co. +21 +Table of Contents \ No newline at end of file diff --git a/raw/proxies/0001168054/0001047469-21-000740/proxy.txt b/raw/proxies/0001168054/0001047469-21-000740/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..444b08da0e62f2a1a0958bf6cc5c4f31fe969a9e --- /dev/null +++ b/raw/proxies/0001168054/0001047469-21-000740/proxy.txt @@ -0,0 +1,7851 @@ +DEF 14A +1 +a2243081zdef14a.htm +DEF 14A +Table of Contents +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +Washington, D.C. 20549 +SCHEDULE 14A +Proxy Statement Pursuant to Section 14(a) of +the Securities Exchange Act of 1934 (Amendment No. ) +Filed by the Registrant þ +Filed by a Party other than the Registrant o +Check the appropriate box: +o +Preliminary Proxy Statement +o +Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +þ +Definitive Proxy Statement +o +Definitive Additional Materials +o +Soliciting Material Pursuant to §240.14a-12 +Cimarex Energy Co. +(Name of Registrant as Specified in Its Charter) +(Name of Person(s) Filing Proxy Statement, if other than the Registrant) +Payment of Filing Fee (Check the appropriate box): +þ +No fee required. +o +Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. +(1) +Title of each class of securities to which transaction applies: +(2) +Aggregate number of securities to which transaction applies: +(3) +Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): +(4) +Proposed maximum aggregate value of transaction: +(5) +Total fee paid: +o +Fee paid previously with preliminary materials. +o +Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration +statement number, or the Form or Schedule and the date of its filing. +(1) +Amount Previously Paid: +(2) +Form, Schedule or Registration Statement No.: +(3) +Filing Party: +(4) +Date Filed: +Table of Contents +1700 Lincoln Street, Suite 3700 +Denver, CO 80203 +2021 ANNUAL MEETING +§ NOTICE OF ANNUAL MEETING OF +SHAREHOLDERS +TIME AND DATE +9:00 a.m. Mountain Daylight Time on Wednesday, May 12, 2021 +PLACE +The Annual Meeting of Cimarex Energy Co. ("Cimarex" or the "Company") will be held virtually at www.viewproxy.com/cimarex/2021. +Because of continuing health and safety concerns and government recommendations and restrictions relating to the COVID-19 pandemic, we are not holding an in-person Annual Meeting. We anticipate allowing for in-person annual meetings in the future +when health and regulatory issues allow. While you will be able to vote your shares and ask questions at the virtual meeting, we encourage you to vote your shares prior to the annual meeting. For more information, see "Questions and Answers—2. +How do I attend and vote shares at the virtual Annual Meeting?" +ITEMS OF BUSINESS +Item 1. Election of Directors +Item 2. Advisory Vote to Approve Executive Compensation +Item 3. Approve Amended and Restated 2019 Equity Incentive Plan to Increase the Number of Shares of Common Stock Authorized for Issuance Under the Plan by +6,900,000 +Item 4. To Consider a Proposal to Amend and Restate Our Certificate of Incorporation to Provide for the Annual Election of All Directors +Item 5. Ratification of Independent Auditors +Transact any other business that properly comes before the Meeting and any adjournment or postponement of the Meeting +RECORD DATE +March 16, 2021 +MAILING DATE TO SHAREHOLDERS +March 26, 2021 +MATERIALS TO REVIEW +This booklet contains our Notice of 2021 Annual Meeting and Proxy Statement. Our 2020 Annual Report is available on our website at www.cimarex.com. +PROXY VOTING +It is important that your shares be represented and voted at the Meeting. You can vote your shares by following the internet or telephone instructions on page 97 of this proxy statement or you may attend virtually and +vote your shares electronically at the Annual Meeting. If you received a paper copy of the proxy card, you also may vote by completing and mailing the proxy card in the postage-paid envelope provided for your convenience. You may revoke your proxy at +any time before the vote is taken by following the instructions on page 99 of this proxy statement. +March 26, 2021 +Francis B. Barron, Corporate Secretary +Table of Contents +TABLE OF CONTENTS +PROXY STATEMENT SUMMARY +1 +ITEM 1: ELECTION OF DIRECTORS +8 +Election Process +8 +Director Nominations +8 +2021 Nominees for Class I Directors +9 +Continuing Directors +12 +Summary of Director Core Competencies and Composition Highlights +19 +CORPORATE GOVERNANCE +20 +Corporate Governance Highlights +20 +Shareholder Engagement +20 +Director Qualifications and Recruitment +21 +Board of Directors and its Committees +22 +Other Governance Matters +27 +COMPENSATION DISCUSSION AND ANALYSIS +31 +Executive Summary of Compensation Discussion and Analysis ("CD&A") +31 +Section 1 +35 +Our Compensation Framework +35 +Competitive Positioning +37 +2020 Compensation Peer Group +37 +2020 Stock Performance Peer Group +38 +Section 2 +39 +Summary of 2020 and Early 2021 Compensation Decisions +39 +Response to 2020 Say-on-Pay Vote +40 +Key 2020 Compensation Actions +41 +Alignment of CEO Compensation to Total Shareholder Return ("TSR") +51 +Early 2021 Compensation Decisions +55 +Section 3 +56 +Role of Compensation Consultant and Management in Compensation Decisions +56 +Other Compensation Arrangements +57 +Other Compensation Policies +58 +Compensation Committee Report +59 +EXECUTIVE COMPENSATION TABLES +60 +Summary Compensation Table +60 +2020 Grants of Plan-Based Awards +61 +Outstanding Equity Awards at December 31, 2020 +63 +2020 Option Exercises and Restricted Stock Vested +64 +2020 Nonqualified Deferred Compensation +65 +CEO Pay Ratio +66 +Potential Payments Upon Change in Control or Termination +66 +Director and Officer Indemnification Agreements +72 +NON-EMPLOYEE DIRECTOR COMPENSATION +73 +SECURITY OWNERSHIP +76 +Management, Directors and Certain Beneficial Owners +76 +Section 16(a) Beneficial Ownership Reporting Compliance +77 +ITEM 2: ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION +78 +ITEM 3: APPROVAL OF THE AMENDED AND RESTATED 2019 EQUITY INCENTIVE PLAN +79 +ITEM 4: AMENDMENT AND RESTATEMENT OF THE RESTATED CERTIFICATE OF INCORPORATION TO PROVIDE FOR THE ANNUAL ELECTION OF ALL +DIRECTORS +90 +ITEM 5: RATIFICATION OF INDEPENDENT AUDITORS +92 +Audit and Non-Audit Fees +92 +Approval of Audit, Audit-Related and Tax Services +92 +Report of Audit Committee +93 +GENERAL INFORMATION +94 +Information Available Online +94 +Communications with Cimarex's Directors +94 +Director Nominations for the 2022 Annual Meeting of Shareholders +94 +Shareholder Proposals for the 2022 Annual Meeting of Shareholders +94 +Complaint and Reporting Procedures +95 +QUESTIONS AND ANSWERS +96 +Proxy Materials and Voting Information +96 +APPENDIX A: AMENDED AND RESTATED 2019 EQUITY INCENTIVE PLAN +A-1 +APPENDIX B: AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF CIMAREX ENERGY CO. +B-1 +APPENDIX C: AMENDED AND RESTATED BYLAWS OF CIMAREX ENERGY CO. +C-1 +Table of Contents +Proxy Statement Summary +This section highlights certain important information presented in this Proxy Statement and is intended to assist you +in evaluating the matters to be voted on at the meeting. We encourage you to read the Proxy Statement in its entirety before you cast your vote. For more information regarding Cimarex's 2020 +performance, please review Cimarex's Annual Report on Form 10-K for the year ended December 31, 2020. +Voting Matters and Board Recommendations +Voting Recommendation +Page +Reference +Item 1: +Election of Directors +FOR each Director Nominee +8 +Item 2: +Advisory Vote to Approve Executive Compensation +FOR +78 +Item 3: +Approve Amended and Restated 2019 Equity Incentive Plan +FOR +79 +Item 4: +To Consider a Proposal to Amend and Restate Our Certificate of Incorporation to Provide for the Annual Election of All Directors +FOR +90 +Item 5: +Ratification of Independent Auditors +FOR +92 +Advance Voting Methods +Even if you plan to virtually attend the 2021 Annual Meeting of Shareholders, please vote right away using one of the following advance voting +methods (see page 97 for additional details). Make sure to have your proxy card or voting instruction form in hand and follow the instructions. +You can vote in advance in one of three ways: +Visit the website listed on your proxy card/voting instruction form to vote VIA THE INTERNET +Call the telephone number on your proxy card/voting instruction form to vote BY TELEPHONE +Sign, date and return your proxy card/voting instruction form in the enclosed envelope to vote BY MAIL +Voting at our 2021 Annual Meeting of Shareholders +All shareholders of record may vote electronically at the 2021 Annual Meeting of Shareholders, which will be held virtually on Wednesday, +May 12, 2021 at 9:00 a.m., Mountain Daylight Time, at www.viewproxy.com/cimarex/2021. Beneficial owners may vote electronically at the virtual Meeting if they have a legal proxy, as +described in the response to question 2 on page 96 of "Questions and Answers about the Meeting and Voting." +Cimarex +Energy +Co. +1 +Table of Contents +Governance Highlights (page 20) +Cimarex is committed to good corporate governance, which promotes the long-term interests of shareholders, strengthens the Board of Directors, +fosters management accountability, and helps build public trust in Cimarex. +þ +8 of 9 continuing Directors are independent +þ +Disclosure Committee for financial reporting +þ +Majority voting for Directors resignation policy +þ +Board and Audit Committee risk oversight +þ +Proposing Declassification of Board +þ +Compensation risk assessment +þ +Combined Chairman and CEO +þ +Review of related party transactions +þ +Independent Lead Director +þ +Non-hedging and non-pledging policies +þ +Diverse Board skills and experience +þ +Clawback policy +þ +Annual Board and committee self-evaluations +þ +Management and Director stock ownership guidelines +þ +Periodic consultant review of Board skills +þ +No tax gross-ups +þ +Annual equity grants to Directors +þ +Proxy access +þ +Annual Board education +þ +Active shareholder engagement +þ +Board refreshment efforts with five new directors since 2012 +þ +Increased gender and ethnic diversity of Board +As +highlighted above, the Company is proposing declassifying the Board and provide that all directors be elected annually beginning with our 2024 annual meeting. This proposal is an outcome of our +shareholder engagement efforts, and demonstrates our commitment to enhancing our corporate governance policies. +In +addition, to support the Company's elevated focus on environmental and safety performance, our Board of Directors established a new Environmental, Health and Safety Committee. The committee has +oversight of the Company's approach to health, safety and environmental (HSE) policies and programs and key HSE risks, as well as overseeing our corporate disclosures. +2 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +Director Nominees and Current Committee Memberships +Committee Memberships +(Independent Directors Only) +DIRECTOR NOMINEES +AGE +DIRECTOR +SINCE +TERM +EXPIRES +Audit +Compensation +Nominating +and +Corporate +Governance +Kathleen A. Hogenson (Independent Director) +President and Chief Executive Officer, Zone Oil & Gas LLC +60 +2019 +2021 +· +· +Lisa A. Stewart (Independent Director) +Executive Chairman and former President, Chief Executive Officer and Chief Investment Officer, Sheridan Production Partners +63 +2015 +2021 +· +· +Continuing Directors +Paul N. Eckley (Independent Director) +Retired, former Senior Vice President—Investments, State Farm +66 +2019 +2023 +· +· +Hans Helmerich (Independent Director) +Chairman and former Chief Executive Officer, Helmerich & Payne, Inc . +62 +2002 +2022 +· +· +Thomas E. Jorden +Chairman, Chief Executive Officer and President, Cimarex +63 +2011 +2023 +Harold R. Logan, Jr. (Independent Director) +Independent Lead Director and Chair of Nominating and Corporate Governance Committee of Cimarex +76 +2009 +2022 +· +Chair +Floyd R. Price (Independent Director) +Chair of Compensation Committee of Cimarex; Retired, former executive officer, Apache Corporation +72 +2012 +2023 +Chair +· +Monroe W. Robertson (Independent Director) +Chair of Audit Committee of Cimarex; Retired, former President and Chief Operating Officer, Key Production Co . +71 +2005 +2022 +Chair +· +Frances M. Vallejo (Independent Director) +Retired, former Vice President, ConocoPhillips +55 +2017 +2023 +· +· +Cimarex +Energy +Co. +3 +Table of Contents +2020 Executive Compensation (page 31) +Below is the 2020 compensation for each Named Executive Officer ("NEO") as determined under the Securities and Exchange Commission ("SEC") +rules. See the notes accompanying the 2020 Summary Compensation Table on page 60 for more information. +Stock Awards ($) +Name and +Principal Position +Salary +Bonus +Performance- +based +Time +Vested +2020 Annual +Cash Incentive +Award +All Other +Comp. +Total +Thomas E. Jorden +Chairman, Chief Executive +Officer (CEO) and President (Principal Executive Officer) +$ +934,870 +$ +— +$ +4,250,000 +$ +4,250,000 +$ +1,240,000 +$ +106,223 +$ +10,781,093 +G. Mark Burford +Senior Vice President and +Chief Financial Officer (CFO) (Principal Financial Officer) +$ +495,849 +$ +— +$ +1,150,000 +$ +1,150,000 +$ +490,000 +$ +81,181 +$ +3,367,030 +John A. Lambuth +Executive Vice President—Exploration +$ +566,803 +$ +— +$ +1,550,000 +$ +1,550,000 +$ +570,000 +$ +67,453 +$ +4,304,256 +Stephen P. Bell +Executive Vice President—Business Development +$ +518,379 +$ +— +$ +1,500,000 +$ +1,500,000 +$ +520,000 +$ +66,031 +$ +4,104,410 +Francis B. Barron +Senior Vice President—General Counsel, Corporate Secretary +$ +444,434 +$ +— +$ +1,000,000 +$ +1,000,000 +$ +440,000 +$ +78,121 +$ +2,962,555 +Joseph R. Albi +Former Executive Vice President—Operations, Chief Operating Officer (COO) +$ +346,097 +$ +— +$ +— +$ +— +$ +310,000 +$ +65,935 +$ +722,032 +Response to Say-on-Pay Vote +In response to the advisory vote to approve executive compensation, or "say-on-pay," at our May 2019 and May 2020 annual meetings of +shareholders and our shareholder engagement, we made the following changes to our compensation programs: +§ Reduced potential vesting of 2019 performance equity awards by 50% if the Company's +share price declines over the performance period; § Added objective, formula-based metrics to short-term incentives for 2020; and § Added objective emissions and flaring reduction metrics to short-term incentives for +2020 and 2021. +A Significant Portion of our CEO's 2020 Compensation is at Risk +The accompanying graph illustrates our CEO's 2020 at risk compensation. With 91% of total compensation at risk, the majority of our CEO's +compensation is an incentive for future performance and realized only if +4 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +Cimarex +meets certain performance measures and delivers value to shareholders. (Percentages in the following table do not add to 100% due to rounding.) +How CEO Pay is Tied to Cimarex's Performance (page 51) +Our compensation programs are designed to align performance incentives with the long-term interests of our shareholders. The programs also +provide competitive total direct compensation opportunities that retain, and attract when needed, executive talent and link compensation earned to achievement of short- and long-term financial and +operational objectives. Our Compensation Committee considers performance in two primary ways: +§ Cimarex's operating performance, with an increased focus on emissions performance in +2020 and 2021; and § Return to shareholders over time, on both an absolute basis and a relative basis +compared to other companies in our Stock Performance Peer Group and in our Compensation Peer Group (see page 38). +2020 Financial and Operational Highlights +§ Responded to the highly transmissible and pathogenic coronavirus known as severe acute +respiratory syndrome coronavirus 2 (SARS-CoV-2) that causes the disease known as COVID-19 and the oil and gas demand destruction caused by the COVID-19 pandemic as well as the March 2020 oil price war +between Saudi Arabia and Russia by, among other things: +§ Implementing safety protocols to protect employees and contractors from COVID-19 § Announcing a reduction in our 2020 capital investment budget of 55-60% from our +original guidance of $1.25-$1.35 billion and implementing cost-cutting measures to align business operations with lower commodity price environment § +Reducing base salary of our CEO by 25% and base salaries of the other executive +officers by 15% and the cash compensation of directors by 20% from June 1, 2020 until December 1, 2020 § Maintaining our common stock dividend +at $0.22 per share per quarter ($0.88 per year) +§ Reduced Permian Basin flaring volume levels as a percentage of our Permian Basin gross +operated gas production from 1.97% in 2019 to 0.90% in 2020, a 54% decrease. +Cimarex +Energy +Co. +5 +Table of Contents +§ Reduced methane intensity company-wide (the gross volume of our natural gas emissions +divided by the gross operated volume of our natural gas production) from 0.258% in 2019 to 0.187% in 2020, a 28% decrease. § Decreased exploration and +development expenditures by 56% to $544.9 million in +2020 compared to $1.24 billion in 2019, while year-over-year average daily production decreased 9% to 252.5 thousand barrels of oil equivalent ("MBOE") per day in 2020 compared to 278.5 +MBOE per day in 2019. The decreases in expenditures and production were primarily the result of reducing development activities and shutting in wells due to demand destruction from the COVID-19 +pandemic. § Year-over-year production revenues decreased 35% to $1.51 billion, which were +negatively affected by decreased production and declining commodity prices. § Incurred a net loss of $1.967 billion in 2020 compared to a net loss of +$124.6 million in 2019, primarily from the non-cash ceiling test impairment described below and a goodwill impairment. § Recognized a +$1.638 billion non-cash ceiling test impairment of our oil and gas +properties primarily due to decreases in the 12-month average trailing commodity prices used in calculating the ceiling test. § Generated cash flow from +operating activities of $904.2 million, which was 33% +lower than in 2019. § Our Operations group continued optimizing our production and maximizing well +profitability. As a result, our production expense declined 7% from $3.34 per barrels of oil equivalent ("BOE") in 2019 to $3.09 per BOE in 2020. § +Increased cash on hand to $273.1 million at year-end 2020, up from +$94.7 million at year-end 2019. § Estimated proved reserves at year-end 2020 were 14% lower than at year-end 2019 after +additions, positive and negative revisions, and production. § Our stock price decreased 29% from $52.49 at year-end 2019 to $37.51 at year-end 2020. +The decrease in our stock price led to a lower value for NEOs' long-term equity awards that vested in 2020 compared to the grant date fair value ("GDFV") of those awards in 2017, with the vested +shares for NEOs (other than a retired NEO) having a value equal to 20% of the GDFV, which demonstrates the alignment of interests of our NEOs. +6 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +Return to Shareholders +The following chart shows how a December 31, 2015 investment of $100 in Cimarex common stock would have a value of $44.43 on +December 31, 2020, which includes dividends reinvested quarterly, for those who wish to consider Total Shareholder Return when evaluating executive compensation. The chart also compares the +Total Shareholder Return on Cimarex common stock to the same investment in the S&P 500 Index, the Dow Jones U.S. Exploration & Production Index, and the S&P Oil & Gas +Exploration & Production Index over the same time period. +COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN* +12/31/2015 +12/31/2016 +12/31/2017 +12/31/2018 +12/31/2019 +12/31/2020 +Cimarex Energy Co . +$ +100.00 +$ +152.64 +$ +137.42 +$ +69.88 +$ +60.39 +$ +44.43 +S&P 500 +$ +100.00 +$ +111.96 +$ +136.40 +$ +130.42 +$ +171.49 +$ +203.04 +Dow Jones U.S. Exploration & Production +$ +100.00 +$ +124.48 +$ +126.10 +$ +103.69 +$ +115.51 +$ +76.64 +S&P Oil & Gas Exploration & Production +$ +100.00 +$ +132.86 +$ +124.48 +$ +100.20 +$ +112.25 +$ +72.49 +The +stock price performance included in this graph is not necessarily indicative of future stock price performance. +Cimarex +Energy +Co. +7 +Table of Contents +ITEM 1: ELECTION OF DIRECTORS +ITEM 1: ELECTION OF DIRECTORS +Election Process +Our +current Board consists of ten Directors, which is the maximum number of Directors permitted by our Certificate of Incorporation. The Board is divided into three classes: Class I, +Class II and Class III Directors. At each Annual Meeting, a Class of Directors is elected for a term expiring at the Annual Meeting in the third year following the year of election. Each +Director holds office until his or her successor is elected and qualifies. +The +term of three Class I Directors, Joseph R. Albi, Kathleen A. Hogenson and Lisa A. Stewart, will expire at the 2021 Annual Meeting. The Nominating and Corporate Governance Committee, at its +February 2021 meeting, nominated Ms. Hogenson and Ms. Stewart for election as Class I Directors, to serve until the 2024 Annual Meeting. Mr. Albi is retiring as a Director +following the 2021 Annual Meeting and will serve as Director Emeritus for up to two years. +If +prior to the Annual Meeting a nominee becomes unavailable to serve as a Director, any shares represented by a proxy directing a vote will be voted for the remaining nominees and for any substitute +nominee(s) designated by our Board or its Nominating and Corporate Governance Committee. As of the mailing of these proxy materials, the Board has no reason to believe any Director nominee would not +be available to serve. +A +nominee is elected if the votes cast for his or her election exceed the votes cast against his or her election. Pursuant to our majority voting policy, each nominated Director has tendered an +irrevocable resignation that is effective upon his or her failure to receive the required vote and the Board's acceptance of such resignation. If a nominee fails to receive more favorable votes than +votes cast against him or her, the Nominating and Corporate Governance Committee will act on an expedited basis following the Annual Meeting to determine whether to recommend that the Board accept the +Director's resignation. The Nominating and Corporate Governance Committee and the Board may consider any factors they deem relevant in deciding whether to accept the Director's resignation. The +Director whose resignation is under consideration must abstain from participating in any decision regarding his or her resignation. The Board will publicly disclose its decision regarding acceptance +of his or her resignation within 90 days after the results of the election are certified. If the Board does not accept the resignation, the Director will continue to serve as a Director until +his or her successor is elected and qualified. If the Board accepts the resignation, then the Board will either fill the vacancy in accordance with the Bylaws or decrease the size of the Board in +compliance with the Certificate of Incorporation. +Director Nominations +The +Nominating and Corporate Governance Committee is responsible for identifying and evaluating potential Director nominees and for recommending to the Board a slate of nominees for election at each +Annual Meeting. Directors, members of management, shareholders or a third-party search firm may suggest potential nominees. +8 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +ITEM 1: ELECTION OF DIRECTORS +While +the Nominating and Corporate Governance Committee will consider Director nominees suggested by shareholders, it did not receive any shareholder nominations for the 2021 Annual Meeting prior to +the deadline for such nominations. +2021 Nominees for Class I Directors +Upon +the recommendation of the Nominating and Corporate Governance Committee, the Board has nominated Kathleen A. Hogenson and Lisa A. Stewart for election as Class I Directors, to serve until +the 2024 Annual Meeting. The Board has determined that each of Ms. Hogenson and Ms. Stewart is independent under the New York Stock Exchange ("NYSE") corporate governance rules. Each of +the Director nominees currently serves on the Board. We have no reason to believe that any of the nominees will be unable or unwilling to serve if elected. +The +Board believes the combination of the various qualifications, skills and experiences of the 2021 Director nominees will contribute to an effective and well-functioning Board. The Board also +believes that, individually and as a whole, the Director nominees possess the necessary qualifications to provide effective oversight of the business, quality advice and counsel to Cimarex. +Included +in each Director nominee's biography is an assessment of the specific qualifications, attributes, skills and experience of such nominee based on the qualifications described above. +The Board of Directors recommends a vote FOR the election of each of the Director nominees. +Cimarex +Energy +Co. +9 +Table of Contents +ITEM 1: ELECTION OF DIRECTORS +About the Director Nominees +KATHLEEN A. HOGENSON +Director Since 2019 | Age +60 | Independent +Committees of the Board: +§ +Audit +§ +Nominating and Corporate Governance +Current Public Company Directorships: +§ +First Quantum Minerals Ltd. +§ +Verisk Analytics Inc. +Former Public Company Directorships +(within the last five years): +§ +Petrofac Ltd. +Core Competencies: +§ +Exploration and Development +§ +Information Technology +§ +Environmental, Health and Safety +§ +Financial Reporting Experience +§ +Executive Compensation +§ +Finance/Investment Banking +§ +Public Company Executive Experience +§ +Corporate Governance +Ms. Hogenson +has served since February 2007 as President and Chief Executive Officer at Zone Oil & Gas LLC, an independent oil and gas advisory firm focused on acquisition, +exploration, development, production optimization and the operation of oil and gas properties. In 2007, she co-founded Zone Energy LLC, an upstream oil and gas operations company that was sold +in 2015. +Since +2017, Ms. Hogenson has served as a Director for First Quantum Minerals Ltd., a public Canadian-based mining and metals company traded on the Toronto Stock Exchange. Since 2016, she +also has served as a Director for Verisk Analytics Inc. a publicly traded company on the Nasdaq. From 2013 to 2016, Ms. Hogenson served as a Director of Petrofac Ltd., an +international oilfield services company listed on the London Stock Exchange. From 2001 to 2007, Ms. Hogenson served as President and Chief Executive Officer of Santos USA Corp, the U.S. +subsidiary of a publicly traded Australian natural gas producer. From 1998 to 2001, Ms. Hogenson held various positions at Unocal Corp., including Vice President of Technology, Global Chief +Engineer Reservoir, and Manager, Global Reservoir Technology. +Key Attributes, Experience and Skills +Ms. Hogenson's over 35 years of experience in the oil and gas industry and extensive leadership roles are key attributes that make her well +qualified to serve as a Director of the Company. +10 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +ITEM 1: ELECTION OF DIRECTORS +LISA A. STEWART +Director Since 2015 | Age +63 | Independent +Committees of the Board: +§ +Compensation +§ +Nominating and Corporate Governance +Current Public Company Directorships: +§ +Jadestone Energy +§ +Western Midstream Partners, LP +Former Public Company Directorships +(within the last five years): +§ +Talisman Energy, Inc. +Core Competencies: +§ +Exploration and Development +§ +Environmental, Health and Safety +§ +Financial Reporting Experience +§ +Executive Compensation +§ +Finance/Investment Banking +§ +Public Company Executive Experience +§ +Investor Relations +Ms. Stewart +is Executive Chairman of Sheridan Production Partners, a privately-owned oil and gas operating company she founded in 2006. From its founding in 2006 to April 2020, +Ms. Stewart served as Chairman and Chief Investment Officer, and also served as President and Chief Executive Officer from December 2016 to April 2020. Since September 2020, Ms. Stewart +has served as a Director of the general partner of Western Midstream Partners, LP, a publicly traded master limited partnership formed to acquire, own, develop and operate midstream energy +assets. Since December 2019, Ms. Stewart has served as a Director of Jadestone Energy, an upstream oil and gas company in the Asia Pacific region, which focuses on production and near-term +development assets. Jadestone Energy is headquartered in Singapore and is publicly traded on the Alternative Investment Market, a sub-market of the London Stock Exchange. From 2009 until its +acquisition in May 2015, Ms. Stewart served as a Director on the Board of Talisman Energy, Inc., a Canadian oil and gas exploration and production company traded publicly on the NYSE and +the Toronto Stock Exchange. From 2004 to 2006, Ms. Stewart served as Executive Vice President of El Paso Corporation and President of El Paso E&P. From 1984 to 2004, Ms. Stewart served +Apache Corporation in various capacities, including most recently as Executive Vice President, with responsibilities in Apache Corporation's reservoir engineering, business development, land, +environmental, health and safety, and corporate purchasing departments. +In +September 2019, Sheridan Holding Company II LLC and eight related debtors filed a Chapter 11 bankruptcy case in the Southern District of Texas. In March 2020, Sheridan Holding Company +I LLC and eight related debtors filed a Chapter 11 bankruptcy case in the South District of Texas. Both cases were concluded in the first quarter of 2020. These entities are related to +Sheridan Production Partners and Ms. Stewart was Executive Chairman, and was President, Chief Executive Officer and Chief Investment Officer of the debtor entities at the time of the bankruptcy +filing. +Key Attributes, Experience and Skills +Ms. Stewart's nearly 40 years of experience in the oil and gas industry, including in reservoir engineering, business development, land and +EH&S, and extensive leadership roles are key attributes that make her well qualified to serve as a Cimarex Director. +Cimarex +Energy +Co. +11 +Table of Contents +ITEM 1: ELECTION OF DIRECTORS +Continuing Directors – Class II – Term Expires 2022 +HANS HELMERICH +Director Since 2002 | Age +62 | Independent +Committees of the Board: +§ +Compensation +§ +Nominating and Corporate Governance +Current Public Company Directorships: +§ +Chairman of Helmerich & Payne, Inc. +Former Public Company Directorships +(within the last five years): +§ +Atwood Oceanics, Inc. +Core Competencies: +§ +Oilfield Services +§ +Exploration and Development +§ +Corporate Governance +§ +Public Company Executive Experience +§ +Executive Compensation +Mr. Helmerich +has served as Chairman of Helmerich & Payne, Inc. ("H&P") since March 2012 and as a Director since 1987. H&P is a publicly held company primarily engaged in contract +drilling services for oil and gas exploration and production companies. H&P uses drilling rigs it designs and builds and is one of the major land and offshore platform drilling companies in the world. +After joining H&P in 1981, Mr. Helmerich served as CEO from 1989 to March 2014 and as President from 1989 to March 2012. H&P's exploration and production business was merged into Cimarex in +2002. +Mr. Helmerich +served as Director of Atwood Oceanics, Inc., an international offshore drilling company traded on the NYSE, located in Houston, Texas, from 1989 to 2017 prior to its merger +with Ensco plc. From 2006 to 2020, Mr. Helmerich served as a Trustee of The Northwestern Mutual Life Insurance Company of Milwaukee, Wisconsin. +Key Attributes, Experience and Skills +Mr. Helmerich's background with the drilling sector of the oil and gas business provides the Board with insight into an aspect of Cimarex's business +that represents a significant expenditure in Cimarex's capital budget. His over 25 years of executive experience provide a strong background for his service on Cimarex's Board and on the +Compensation Committee. In addition, his service as a Director and Chairman of H&P, as a Trustee of The Northwestern Mutual Life Insurance Company and his former service as a Director of Atwood +Oceanics, Inc. provides him with additional experience and knowledge to serve as a Director. +12 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +ITEM 1: ELECTION OF DIRECTORS +HAROLD R. LOGAN, JR. (Lead Director) +Director Since 2009 | Age 76 | Independent +Committees of the +Board: +§ +Audit +§ +Nominating and Corporate Governance (Chair) +Current Public Company Directorships: +§ +Board of Supervisors of Suburban Propane Partners, L.P. +Former Public Company Directorships +(within the last five years): +§ +Graphic Packaging Holding Co. +§ +Chairman of InfraREIT, Inc. +Core Competencies: +§ +Corporate Governance +§ +Financial Reporting Experience +§ +Executive Compensation +§ +Finance/Investment Banking +§ +Public Company Executive Experience +§ +Midstream +Mr. Logan +currently serves as a Director of the Board of Supervisors of Suburban Propane Partners, L.P. and has served as a Director of that company since 1996. From January 2007 to +January 2021 he served as Chairman of the Board of Supervisors of Suburban Propane Partners, L.P. Mr. Logan also is a Director of one private company – Hart +Energy Publishing (publisher of Oil and Gas Investor and other energy publications). From 2003 to 2017, Mr. Logan served as a Director of Graphic +Packaging Holding Co., a publicly held company located in Atlanta, Georgia, and predecessor companies. From 2008 until it sold its last investment and closed in 2018, he served as Director of +Basic Materials and Services LLC, a privately held company that invested in companies providing specialized services for the pipeline construction and sand/silica industries. From February 2018 +until its sale in June 2019, Mr. Logan served as Chairman of InfraREIT, Inc., a publicly held real estate investment trust that owned utility assets (electric transmission lines) in +Texas. From 2015 to February 2018 he had served as Lead Director for InfraREIT, Inc. +Mr. Logan +was a co-founder of TransMontaigne in Denver, Colorado in 1995 and was its Chief Financial Officer, Executive Vice President, and Treasurer, through 2002. He served as a Director of +TransMontaigne from 1995 to 2006 and Chairman of its Finance Committee from 2002 to 2006. From 1987 to 1994, he was Senior Vice President/Finance, Chief Financial Officer, and a Director of Associated +Natural Gas Corporation. Prior to that, Mr. Logan was an investment banker with Dillon Read & Co. Inc. and Rothschild, Inc. +Since +1998, Mr. Logan has been a Director of ten public companies and has served on numerous audit, compensation, and governance committees. +Key Attributes, Experience and Skills +Mr. Logan's education and his over 40 years of investment banking/venture capital and financial management experience provide him with a +comprehensive understanding of business and finance. Mr. Logan's expertise and experience have been relevant to his responsibilities of providing oversight and advice to the management of +public companies, and are of particular benefit to his roles as Cimarex's Lead Director and as a member of Cimarex's Audit Committee. +Cimarex +Energy +Co. +13 +Table of Contents +ITEM 1: ELECTION OF DIRECTORS +MONROE W. ROBERTSON +Director Since 2005 | Age +71 | Independent +Committees of the Board: +§ +Audit (Chair) +§ +Nominating and Corporate Governance +Former Public Company Directorships: +(within the last five +years): +§ +Earthstone Energy, Inc. (formerly named Basic Earth Science System) +Core Competencies: +§ +Corporate Governance +§ +Financial Reporting Experience +§ +Executive Compensation +§ +Finance/Investment Banking +§ +Public Company Executive Experience +§ +Exploration and Development +Mr. Robertson +retired from Key Production Company, Inc. ("Key") (one of two companies whose merger created Cimarex in 2002) after co-founding and serving for 10 years with Key. +While with Key, he held the positions of President, Chief Operating Officer, Senior Vice President and Principal Financial Officer. Mr. Robertson has served in executive capacities with three +other public energy companies: Apache Corporation, Gulf Oil Corporation and Terra Resources, Inc. +Mr. Robertson +was a Director of Earthstone Energy, Inc. (formerly named Basic Earth Science System) from 2007 to 2014. During his service as a Director of Earthstone Energy, Inc., +he was Chair of the Audit Committee and a member of the Compensation and Nominating Committee. +Key Attributes, Experience and Skills +Mr. Robertson has comprehensive knowledge of the financial and operational sides of the exploration and production business and experience as the +Principal Financial Officer of Key, which is of considerable value in his service as Chairman of the Audit Committee. +14 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +ITEM 1: ELECTION OF DIRECTORS +Continuing Directors – Class III – Term Expires 2023 +PAUL N. ECKLEY +Director Since 2019 | Age +66 | Independent +Committees of the Board: +§ +Compensation +§ +Nominating and Corporate Governance +Core Competencies: +§ +Corporate Governance +§ +Financial Reporting Experience +§ +Executive Compensation +§ +Finance/Investments +§ +Public Company Executive Experience +§ +Risk Management +Mr. Eckley +was Senior Vice President – Investments at State Farm® Corporate Headquarters in Bloomington, Illinois from 1998 until his retirement in September 2020. +Mr. Eckley joined State Farm in 1977 as an investment analyst. He was promoted to Investment Officer in 1990 and then Vice President – Common Stocks in 1995. +Mr. Eckley +was a Director of the Emerging Markets Growth Fund owned by the Capital Group from 2005 until November 2016, including serving as Chairman of the Board of that Fund from January 2014 +through November 2016. +Key Attributes, Experience and Skills +Mr. Eckley's 43 years of experience in investments in public and private companies, including companies in the oil and gas industry, and +extensive leadership roles are key attributes that make him well qualified to serve as a Director of the Company. +Cimarex +Energy +Co. +15 +Table of Contents +ITEM 1: ELECTION OF DIRECTORS +THOMAS E. JORDEN +Director since 2011 | Age +63 +Chairman, Chief Executive Officer and President, Cimarex Energy Co. +Core Competencies: +§ +Exploration and Development +§ +Environmental, Health and Safety +§ +Government and Regulatory +§ +Industry Background +§ +Investor Relations +§ +Public Company Executive Experience +§ +Risk Management +Mr. Jorden +is the Chairman of the Board, Chief Executive Officer and President of Cimarex. He has served Cimarex in various capacities since September 2002. He was elected Chief Executive +Officer in September 2011 after serving as Executive Vice President-Exploration from 2003 to 2011 and as Vice President-Exploration from 2002 to 2003. Mr. Jorden also serves on the Board of +Trustees of the Colorado School of Mines and other private boards. +Key Attributes, Experience and Skills +Mr. Jorden brings to the Board over 35 years of experience in the oil and gas exploration and production industry and, as our Chief Executive +Officer, a deep understanding of our business, operations and long-term strategic issues and goals. Mr. Jorden holds undergraduate and graduate degrees in geophysics. His service on the Board +creates an important link between management and the Board. +16 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +ITEM 1: ELECTION OF DIRECTORS +FLOYD R. PRICE +Director Since 2012 | Age +72 | Independent +Committees of the Board: +§ +Compensation (Chair) +§ +Nominating and Corporate Governance +Current Public Company Directorships: +§ +Tamarack Valley Energy Ltd. +Core Competencies: +§ +Exploration and Development +§ +Financial Reporting Experience +§ +Executive Compensation +§ +Finance/Investment Banking +§ +Public Company Executive Experience +§ +Corporate Governance +Mr. Price +held various positions with Apache Corporation from 1991 through 2009, including Executive Vice President and Corporate Exploration Officer; President, Apache Canada; President, +Apache International; and Exploration Manager. Apache Corporation, with headquarters in Houston, Texas, is an oil and gas exploration and production company with domestic and international operations. +Since 2010, Mr. Price has served as Chairman of the Board and as a member of the audit, reserves and compensation/governance committees of Tamarack Valley Energy Ltd. ("Tamarack"), +Calgary, Alberta, Canada, a publicly held company traded on the Toronto Stock Exchange. Tamarack is involved in the identification, evaluation and operation of resource plays in the Western Canadian +sedimentary basin. From June 2010 to January 2013, Mr. Price served as a Director and Chairman of the Board of Gastar Exploration, Inc. ("Gastar"), then a publicly held company located +in Houston, Texas. Mr. Price also served on the compensation and governance, audit and reserves committees of the Board at Gastar. +Key Attributes, Experience and Skills +Mr. Price has over 40 years of domestic and international experience in the exploration and production business. Mr. Price has held +leadership positions with a large public oil and gas company. His experience during the past ten years serving as a Director of public and private companies also provides him with invaluable board +skills and experience. Mr. Price brings extensive oil and gas exploration, operations, management and financial experience to Cimarex's Board and the Compensation Committee. +Cimarex +Energy +Co. +17 +Table of Contents +ITEM 1: ELECTION OF DIRECTORS +FRANCES M. VALLEJO +Director Since 2017 | Age +55 | Independent +Committees of the Board: +§ +Audit +§ +Nominating and Corporate Governance +Current Public Company Directorships: +§ +Crestwood Equity Partners LP +Core Competencies: +§ +Exploration and Development +§ +Financial Reporting Experience +§ +Corporate Finance +§ +Mergers and Acquisitions +§ +Risk Management +§ +Corporate Governance +§ +Corporate Planning and Budgets +§ +Public Company Executive +§ +NACD Governance Fellow +Ms. Vallejo +is a former executive officer of ConocoPhillips, an independent exploration and production company. Beginning in 1987, she held various positions with both ConocoPhillips and +Phillips Petroleum Company, which merged with Conoco Inc. to form ConocoPhillips in August 2002. She served as Vice President Corporate Planning and Development from April 2015 until December +2016 and as Vice President and Treasurer from October 2008 until March 2015. Prior to October 2008, she served as General Manager – Corporate Planning and Budgets, Vice +President Upstream Planning & Portfolio Management, Assistant Treasurer, Manager Strategic Transactions, and in other geophysical, commercial, and finance roles. Since February 2021, +Ms. Vallejo has served as a director of the general partner of Crestwood Equity Partners LP, a publicly traded master limited partnership that owns and operates oil and gas midstream +assets located primarily in the Bakken Shale, Delaware Basin, Powder River Basin, Marcellus Shale and Barnett Shale. From 2010 until 2016, Ms. Vallejo served as a member of the Board of +Trustees of Colorado School of Mines and she currently serves or has served on boards of other charitable associations. Ms. Vallejo also serves on the Executive Committee (fiduciary body) of +the Colorado School of Mines Foundation. +Key Attributes, Experience and Skills +Ms. Vallejo's over 30 years of experience in the oil and gas industry and extensive leadership roles in corporate planning, budgeting, and +treasury are key attributes that make her well qualified to serve as a Cimarex Director and a member of the Audit Committee. +18 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +ITEM 1: ELECTION OF DIRECTORS +Summary of Director Core Competencies and Composition Highlights +The following chart summarizes the competencies that the Board considers valuable to effective oversight of the Company and illustrates how +the current Board members individually and collectively represent these key competencies. The lack of an indicator for a particular item does not mean that the Director does not possess that +qualification, skill or experience. While each Director is knowledgeable in these areas, the indicator represents a core competency that the Director brings to our Board. +Cimarex +Energy +Co. +19 +Table of Contents +CORPORATE GOVERNANCE +CORPORATE GOVERNANCE +We believe good corporate governance promotes the long-term interests of shareholders, strengthens Board and management accountability, and +helps build public trust. Cimarex's website (www.cimarex.com) includes materials that are helpful in understanding our corporate governance practices: +§ +Corporate Governance Guidelines +§ +Corporate Bylaws +§ +Code of Business Conduct and Ethics +§ +Stock Ownership Guidelines +§ +Complaint and Reporting Procedures +§ +Background and Experience of our Board of Directors +§ +Committee Charters +§ +Background and Experience of Executive Management +§ +Proxy Access +Corporate Governance Highlights +8 of 9 continuing Directors are independent +Disclosure Committee for financial reporting +Majority voting for Directors resignation policy +Board and Audit Committee risk oversight +Proposing Declassification of Board +Compensation risk assessment +Combined Chairman and CEO +Review of related party transactions +Independent Lead Director +Non-hedging and non-pledging policies +Diverse Board skills and experience +Clawback policy +Annual Board and committee self-evaluations +Management and Director stock ownership guidelines +Periodic consultant review of Board skills +No tax gross-ups +Annual equity grants to Directors +Proxy access +Annual Board education +Active shareholder engagement +Board refreshment efforts with five new directors since 2012 +Increased gender and ethnic diversity of Board +As +highlighted above, the Company is proposing declassifying the Board and provide that all directors be elected annually beginning with our 2024 annual meeting. This proposal is an outcome of our +shareholder engagement efforts, and demonstrates our commitment to enhancing our corporate governance policies. +In +addition, to support the Company's elevated focus on environmental and safety performance, our Board of Directors established a new Environmental, Health and Safety Committee. The committee has +oversight of the Company's approach to health, safety and environmental (HSE) policies and programs and key HSE risks, as well as overseeing our corporate disclosures. +Shareholder Engagement +Cimarex's relationships with its shareholders are an important part of our corporate governance profile, and we recognize the value of taking +their views into account. Engagement with shareholders helps us understand the larger context and the impact of our operations, learn about expectations for our performance, assess emerging issues +that may affect our business or other aspects of our operations, and shape corporate and governance policies. +At +the 2020 Annual Meeting of Shareholders, 96% of the votes cast were in favor of the advisory vote to approve executive compensation. In addition to the advisory vote, as part of our regular +shareholder +20 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +CORPORATE GOVERNANCE +engagement, +we consider and discuss with shareholders a number of matters throughout the year, including executive compensation and environmental, social and governance ("ESG") issues. In the first +quarter of 2021, we reached out to 11 shareholders owning approximately 36% of our outstanding common stock to discuss ESG issues. Six of those shareholders holding 18% of our common stock accepted +our invitation and participated in calls. The feedback from these meetings was provided to the Board of Directors and the Compensation Committee considered the feedback when reviewing executive +compensation practices and ESG issues. +The +Compensation Committee considered the results of the advisory votes on executive compensation in 2019 and 2020 and the discussions with shareholders. Based on these results and discussions, the +Committee believes our shareholders generally support the Committee's compensation decisions in 2019 and early 2020, which addressed concerns raised in connection with the 2019 shareholder advisory +vote on executive compensation, and shareholders are satisfied with Cimarex's executive compensation programs. See "CD&A—Key 2020 Compensation Actions" below. +Based +on shareholder engagement in previous years, we did the following: +§ Enhanced our executive compensation program and disclosures; § +Enacted the "proxy access" shareholder proposal acted upon in 2015; § Added disclosures concerning methane emissions to our website in response to a +shareholder proposal concerning fugitive methane reporting that was made in December 2015 and subsequently withdrawn; § Updated our disclosures concerning +environmental, social and governance ("ESG") +issues, including air quality, hydraulic fracturing, seismicity, spill prevention, water resource management, safety and health, community impact, community support, employee and Board diversity, and +shareholder protection measures; § Added short term incentive compensation metrics based on reducing emissions beginning +in 2019; § Proposed at 2021 annual meeting of shareholders to amend and restate our certificate +of incorporation to provide for the annual election of all directors; § Established Environmental, Health and Safety Committee; and § Proposed declassifying the Board of Directors. +Director Qualifications and Recruitment +The Board is committed to recruiting and nominating directors for election who will collectively provide the Board with the necessary +diversity of skills, backgrounds and experiences to meet Cimarex's ongoing needs and support oversight of our business strategy and priorities. In its assessment of each potential candidate, the +Nominating and Corporate Governance Committee considers the nominee's judgment, integrity, experience, independence, understanding of Cimarex's business or related industries and such other factors +that the Nominating and Corporate Governance Committee determines are pertinent in light of the needs of the Board. The Nominating and Corporate Governance Committee also considers the ability of a +nominee to devote the time and effort necessary to fulfill his or her responsibilities to Cimarex. Our Nominating and Corporate Governance Committee Charter specifically includes diversity of gender +and ethnic background in the list of desirable attributes sought in our Board composition. The Nominating and Corporate Governance Committee has focused on Board refreshment with five new Directors +being recruited since 2012, with increased gender and ethnic diversity. +Cimarex +Energy +Co. +21 +Table of Contents +CORPORATE GOVERNANCE +Although +all current Directors have extensive oil and gas experience, either as company executives or investors, their experience is with companies with widely different operating strategies than +those of Cimarex. This diversity and depth of experience benefits our Board in executing its duty of oversight and guidance. +§ Shareholder Nominations of Director Candidates +Cimarex's Bylaws permit a group of up to 20 shareholders collectively beneficially owning more than 3% of Cimarex's outstanding shares for at least three consecutive years to +nominate up to two candidates for inclusion in Cimarex's proxy materials by following the procedures set forth in the proxy access provisions in Article III, Section 2A of our Bylaws +(the "Proxy Access Policy"). For more information on proxy access and other procedures to recommend candidates to Cimarex's Board of Directors, see "General Information—Director +Nominations for the 2022 Annual Meeting of Shareholders." +Board of Directors and its Committees +Cimarex is governed by its Board of Directors, which is led by our Chairman of the Board and CEO, and its three committees. Cimarex also has a +Lead Director, who is chosen annually by the Board from our independent Directors. The structure of the Board and the responsibilities of its committees are described in detail below. +22 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +CORPORATE GOVERNANCE +§ Our Board +Committee Memberships +(Independent Directors Only) +DIRECTOR NOMINEES +AGE +DIRECTOR +SINCE +TERM +EXPIRES +Audit +Compensation +Nominating +and +Corporate +Governance +Kathleen A. Hogenson (Independent Director) +President and Chief Executive Officer, Zone Oil & Gas LLC +60 +2019 +2021 +· +· +Lisa A. Stewart (Independent Director) +Executive Chairman and former President, Chief Executive Officer and Chief Investment Officer, Sheridan Production Partners +63 +2015 +2021 +· +· +Continuing Directors +Paul N. Eckley (Independent Director) +Retired, former Senior Vice President—Investments, State Farm +66 +2019 +2023 +· +· +Hans Helmerich (Independent Director) +Chairman and former Chief Executive Officer, Helmerich & Payne, Inc. +62 +2002 +2022 +· +· +Thomas E. Jorden +Chairman, Chief Executive Officer and President, Cimarex Energy Co. +63 +2011 +2023 +Harold R. Logan, Jr. (Independent Director) +Independent Lead Director and Chair of Nominating and Corporate Governance Committee of Cimarex; Chairman, Suburban Propane Partners, L.P. +76 +2009 +2022 +· +Chair +Floyd R. Price (Independent Director) +Chair of Compensation Committee of Cimarex; Retired, former executive officer, Apache Corporation +72 +2012 +2023 +Chair +· +Monroe W. Robertson (Independent Director) +Chair of Audit Committee of Cimarex; Retired, former President and Chief Operating Officer, Key Production Co. +71 +2005 +2022 +Chair +· +Frances M. Vallejo (Independent Director) +Retired, former Vice President, ConocoPhillips +55 +2017 +2023 +· +· +Cimarex +Energy +Co. +23 +Table of Contents +CORPORATE GOVERNANCE +§ Board Leadership Structure +Chairman of the Board: Duties and Responsibilities +§ +Preside over Board meetings. +§ +Call special meetings of the Board. +§ +Approve agenda for Board meetings with input from the Lead Director. +§ +Preside over shareholder meetings. +§ +Facilitate and participate in formal and informal communications with and among Directors. +Lead Director: Duties and Responsibilities +§ +Preside over all Board meetings at which the Chairman of the Board is not present. +§ +Act as Chairman of the Nominating and Corporate Governance Committee. +§ +Solicit agenda items from non-management Directors, review Board meeting agenda and materials, and provide input to the Chairman of the Board. +§ +Act as liaison between the Chairman and the Directors and facilitate communication among the full Board. +§ +Call meetings of non-management Directors and, as appropriate, set the agenda. +§ +Review shareholder communications directed to the Board and take appropriate action. +§ +Preside over all meetings of non-management Directors and over all executive sessions of non-management Directors. +§ +Retain outside advisors and consultants, who report directly to the Board on Board-wide issues. +The +Board believes having a combined Chairman/CEO and an independent Lead Director, who have the duties described above, best serve the interests of our shareholders because this structure provides an +appropriate balance between strategy development and independent oversight of management. +Thomas +Jorden was elected Chief Executive Officer on September 30, 2011 and Chairman of the Board on August 14, 2012. He has served as an executive officer of Cimarex since its formation +in 2002. He has considerable knowledge and experience gained through his executive positions with Cimarex and prior industry experience. This knowledge and experience allow him to focus the activities +of the Board on matters most relevant to the success of Cimarex. +The +Compensation Committee is comprised entirely of independent Directors. When the Board acts on the Compensation Committee's recommendation for compensation of the Chairman/CEO, it acts without the +Chairman/CEO being present. +The +substantial experience and background of our independent Directors ensure their active and knowledgeable involvement in Board matters. This involvement, and the presence and involvement of our +Lead Director, provide the Board with a strong and independent point of view. +§ Board Committees +The committees of the Board are comprised entirely of independent Directors. The primary responsibilities of the committees are described below. The committees are governed by +Board-approved charters stating +24 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +CORPORATE GOVERNANCE +the +committees' responsibilities. Copies of the committees' charters are available on our website at www.cimarex.com. +Audit Committee +Primary Responsibilities: +Meetings in 2020: 8 +§ +Appoints independent auditors; +Members: +Monroe W. Robertson +(Chair) +§ +Approves the nature and scope of services of independent auditors and reviews the range of fees for such services; +Kathleen A. Hogenson +Harold R. Logan, Jr. +§ +Assists the Board in oversight and monitoring the performance of the internal audit function; +Frances M. Vallejo +§ +Reviews qualifications and independence of the auditors; +§ +Reviews and discusses with independent auditors (i) the auditors' responsibilities and management's responsibilities in the audit process, (ii) the overall +audit strategy, (iii) the scope and timing of annual audit, and (iv) any significant risks identified during the independent auditors' risk assessment procedures; +§ +Assists the Board in monitoring the integrity of financial statements; +§ +Monitors compliance with legal and regulatory requirements; +§ +Reviews and reports to Board on corporate and financial risk processes; +§ +Monitors the process related to ongoing litigation matters; and +§ +With the Company's management and (if applicable) an independent petroleum engineering consulting firm, reviews the Company's annual process of estimating and +reporting quantities of oil and gas reserves. +The Board of Directors has determined that each of the members of the Audit Committee is financially literate and independent as defined by the rules of the SEC and the NYSE. The Board also has determined that each of +Ms. Hogenson, Mr. Logan, Mr. Robertson and Ms. Vallejo is an "audit committee financial expert" as defined by the SEC's rules. +Cimarex +Energy +Co. +25 +Table of Contents +CORPORATE GOVERNANCE +Compensation +Primary Responsibilities: +Meetings in 2020: 10 +Committee +§ +Recommends CEO and executive officer cash compensation for approval by the Board; +Members: +Floyd R. Price +(Chair) +Paul N. Eckley +Hans Helmerich +Lisa A. Stewart +§ +Recommends Director compensation for approval by the Board; +§ +Reviews and recommends to the Board that the Compensation Discussion and Analysis be included in our proxy statement; +§ +Determines amount and terms of equity awards; +§ +Reviews and approves long-term incentive plans; +§ +Reviews relationship of compensation to risk; +§ +Approves the nature and scope of services of independent compensation consultants; and +§ +Develops plans for managerial succession. +As part of its compensation functions, the Compensation Committee has increased its oversight of compensation of all employees, including its review of the Company's practices to ensure compensation is +equitable. +Compensation Committee Interlocks and Insider Participation. Hans Helmerich, a member of the Compensation Committee, was an executive officer of Cimarex +from February 14, 2002 until September 30, 2002. Cimarex was formed on February 14, 2002 as a wholly-owned subsidiary of Helmerich & Payne, Inc. ("H&P") for the +purpose of facilitating a spinoff by H&P of its oil and gas exploration and production business. Cimarex became a publicly traded company on September 30, 2002, at which time +Mr. Helmerich resigned as an executive officer. +Nominating and +Primary Responsibilities (Nominating Functions): +Meetings in 2020: 4 +Corporate +Governance +Committee +Members: +Harold R. Logan, Jr. +(Chair) +Paul N. Eckley +Hans Helmerich +Kathleen A. Hogenson +Floyd R. Price +Monroe W. Robertson +Lisa A. Stewart +Frances M. Vallejo +§ +Determines desired Board skills and attributes; +§ +Recommends candidates to serve on the Board and to stand for election at annual meeting of shareholders or to fill a vacancy occurring between meetings; +§ +Considers shareholder nominees for election to the Board; and +§ +Recommends Board committee appointments. +Primary Responsibilities (Governance Functions) : +§ +Develops and implements policies and processes regarding corporate governance matters; and +§ +Oversees annual Board and Committee evaluations. +26 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +CORPORATE GOVERNANCE +Environmental, +Primary Responsibilities: +Meetings in 2020: NA +Health and Safety Committee +Members: +Paul N. Eckley +Hans Helmerich +Kathleen A. Hogenson +Harold R. Logan, Jr. +Floyd R. Price +Monroe W. Robertson +Lisa A. Stewart +Frances M. Vallejo +§ +Provide assistance to the Board of Directors' oversight of the Company's policies, programs and initiatives on the environment, health and safety; +§ +Overseeing and providing recommendations to the Board of Directors regarding environmental, health and safety policies and programs, including technological innovations and +related risks; +§ +Monitoring and reviewing environmental matters and trends in such +matters that affect the Company's activities and performance; +§ +Reviewing and providing input to +management and the Board of Directors regarding the Company's compliance with laws, regulations, policies, programs and practices with regard to environmental, health and safety matters; +§ +Consulting with the Board of Directors and internal and external advisers of the Company, as appropriate, regarding the management of the Company's health, safety +and environmental programs, trends in environmental compliance and the economic effect and risks of such trends on the Company's business; and +§ +Reviewing with management reports regarding the Company's efforts to gather data and communicate externally regarding its environmental, health and safety programs, initiatives +and outcomes. +Other Governance Matters +§ Environmental, Social and Governance ("ESG") +While some ESG matters are reviewed by Board Committees, the Board has overall responsibility for the oversight of ESG matters. The Board discusses environmental and safety +matters at its regular meetings, receives reports on social matters from management and provides input to management on social issues, and receives reports on governance matters from the Nominating +and Corporate Governance Committee, which is comprised of all non-management directors. The Lead Director, who serves as Chair of the Nominating and Corporate Governance Committee, solicits governance +topics for presentations to that Committee and the full Board. To assist the Board in its ESG oversight, in February 2021, the Board formed the Environmental, Health and Safety Committee ("EHS +Committee"). The EHS Committee is comprised of all independent Directors and plans to meet periodically between quarterly Board meetings to perform the duties described above. A copy of the EHS +Committee's charter is available on our website. +Cimarex +Energy +Co. +27 +Table of Contents +CORPORATE GOVERNANCE +§ Director Education +Directors are encouraged to attend continuing education programs designed to enhance the performance and competencies of individual Directors and the Board of Directors. +Directors have participated in various +corporate director and compliance programs held by governance organizations, including the NYSE and the National Association of Corporate Directors ("NACD"). Ms. Vallejo, a member of our Board, +Audit Committee and Nominating and Corporate Governance Committee, became a NACD Governance Fellow in 2019. NACD Fellowship is a comprehensive and continuous program of study that empowers directors +with the latest insights, intelligence, and leading boardroom practices. +§ Director Attendance +During 2020, the Board of Directors met 16 times. The increased number of meetings compared to prior years was due to the Board's increased oversight of matters related to the +COVID-19 pandemic and the oil and gas demand destruction resulting from the pandemic as well as the March 2020 oil price war between Saudi Arabia and Russia. During 2020, the Board had three +Committees: the Audit Committee, the Compensation Committee, and the Nominating and Corporate Governance Committee. During 2020, each Director attended greater than 75% of the meetings of the Board +and the Board Committees on which he or she served. All Board members are expected to attend the Annual Meeting and all directors attended the May 2020 Annual Meeting. Also, both +Director Emeriti attended greater than 75% of the Board meetings. +§ Executive Sessions +The independent Directors meet in executive session at each regularly scheduled Board meeting. The Lead Director presides over executive sessions. During 2020, 10 executive +sessions were held, without the CEO or any member of management present, and all of the independent Directors attended each session that occurred. These sessions allow independent Directors to review +the CEO's performance and compensation and to discuss issues of importance to Cimarex, including the business and affairs of Cimarex, as well as matters concerning management. +§ Risk Oversight +The Board has overall responsibility for risk oversight. In carrying out its responsibility, the Board has requested that the Audit Committee discuss with management and report +to the Board with respect to: +§ Processes Cimarex follows to mitigate corporate risks, including operational risks, +such as environmental, health and safety (EHS), pipeline takeaway, technology and cyber security, legal, and capital investment risk; § Guidelines and +processes pertaining to financial risk assessment, including market +risk from commodity price volatility, climate change, counterparty exposure and liquidity, and accounting risks such as accurate reserve exposure, financial reporting and internal controls; § Steps management takes to measure, monitor and control financial risk exposures; and § Management's conclusion +as to the effectiveness of the guidelines and processes +utilized to mitigate such corporate and financial risks and exposures. +28 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +CORPORATE GOVERNANCE +In +addition, at each of the Board's four regularly scheduled meetings held during the year, management provides the Board with an overview of Cimarex's operations, financial results, risks and risk +mitigation efforts, and other aspects of its business. Significant strategic considerations, such as material acquisitions or mergers, are brought to the Board for deliberation and, as appropriate, +decisions. In 2020, the Board enhanced its risk oversight role in response to the impacts of the COVID-19 pandemic and oil and gas demand destruction as well as the March 2020 oil price war between +Saudi Arabia and Russia on the world economy and the Company's business. The Board held 8 special meetings at which it reviewed risks to the Company and its employees +including: +§ Protecting employee and contractor health in the face of COVID-19; § +Protecting the Company's financial position in the face of falling commodity prices; § Ensuring continuity of oil and gas production; +§ Protecting information technology infrastructure from increased risks of remote +working; and § Ensuring compliance with applicable laws and contracts. +The +Audit Committee, at its December 3, 2020 meeting, reviewed, discussed and, at the Board meeting that day, reported to the Board about corporate, operational and financial risks and +Cimarex's processes for mitigation of these risks. +§ Compensation Risk Oversight +In February 2021, the Compensation Committee performed a thorough review of the possible connection between compensation and excessive risk taking. The Compensation Committee's +review covered Cimarex's compensation policies and practices covering executive and non-executive employees to determine whether the policies and practices encourage excessive risk taking by +employees. The Committee's analysis included a review and discussion of the following: +§ The metrics for determining incentive awards; § Participants in the +Company's compensation programs; § How the Company determines compensation pools and individual awards; § The maximum individual award potential (maximum individual incentive to take risk); +§ The maximum possible cost if awards were paid at maximum levels (maximum cost +exposure); § The decision-making and approval process; and § The systemic limitations through Company business processes on the ability of +employees to take excessive risks in order to influence compensation. +The +Compensation Committee determined that the risks from Cimarex's compensation policies and practices for Cimarex employees are not reasonably likely to have a material adverse effect on Cimarex. +§ Director Independence and Related Person Transactions +Our Corporate Governance Guidelines require that a majority of our Directors be independent as defined by applicable laws, rules, regulations and listing standards. We comply +with the criteria for independence established by the NYSE listing requirements and other governing laws and regulations. +Cimarex +Energy +Co. +29 +Table of Contents +CORPORATE GOVERNANCE +The +Nominating and Corporate Governance Committee is responsible annually to review the independence of our Directors and any related party transactions. On the basis of this review, the Committee +delivers a report to the Board, and the Board makes independence determinations based on the Committee's report. +As +a result of this review, the Board has determined that Paul N. Eckley, Hans Helmerich, Kathleen A. Hogenson Harold R. Logan, Jr., Floyd R. Price, Monroe W. Robertson, Lisa A. Stewart and Frances M. +Vallejo, representing eight of our nine continuing Directors, are independent of Cimarex and its management. Thomas E. Jorden is not independent because of his employment as CEO of Cimarex. +In +making these determinations, the Board considered that, in the ordinary course of business, relationships and transactions may occur between Cimarex and entities with which some of our Directors +are or have been affiliated. As a result of the Committee's review, certain relationships and transactions are not considered to be material transactions that would impair a Director's independence, +including the following: +§ The Director is an employee of another company that does business with Cimarex, and +our annual sales to or purchases from the other company amount to less than 2% of the annual revenues of the other company and that such sales to or purchases from the other company are part of our +ordinary course of business and conducted in the same manner as we obtain services from other companies that provide similar services; or § The Director +is a director (but not an employee) of another company that does business +with Cimarex. +Hans +Helmerich is the non-executive Chairman of the Board, and until March 5, 2014 was the CEO, of Helmerich & Payne, Inc. ("H&P"), a company with which Cimarex engages in the +ordinary course of business transactions. As non-executive Chairman, Mr. Helmerich currently is not an employee of H&P. During H&P's fiscal year ended September 30, 2020, Cimarex paid +H&P $36 million for drilling rigs services in arms' length transactions and as part of our ordinary course of business and in the same manner as we obtain services from other companies that +provide similar services. The aggregate amount of the payments represented 2.0% of H&P's revenue during that period. The Nominating and Corporate Governance Committee reviewed these transactions and +concluded: (i) the transactions are proper and not material when compared to Cimarex's total drilling and completions costs and H&P's total revenues; (ii) the transactions occurred in +the ordinary course of business and at arms' length; (iii) the Board does not review or approve drilling service contracts or arrangements; (iv) Mr. Helmerich ceased being an +employee of H&P in 2014; and (v) Mr. Helmerich's relationship with H&P does not interfere with his independent judgment as a Director of Cimarex. +§ Communications with Directors +Shareholders and other interested parties may communicate with our Board by mail directed to our Corporate Secretary or by facsimile (720) 403-9383. All communications +will be forwarded to the Lead Director for the Lead Director's review. The Lead Director may take any action the Lead Director deems +appropriate or necessary, including, without limitation, forwarding the information to the Board for consideration or, with the concurrence of the Board, retaining independent or outside counsel, +accountants or other advisors to address the concern. +30 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +EXECUTIVE SUMMARY OF COMPENSATION DISCUSSION AND ANALYSIS ("CD&A") +OVERVIEW +§ 2020 BUSINESS AND FINANCIAL PERFORMANCE +Oil prices fluctuated dramatically throughout 2020 beginning at $61.06 per barrel on January 1, 2020, dropping dramatically as a result of COVID-19 demand destruction +and the oil price war between Saudi Arabia and Russia, trading at negative prices in April 2020, and recovering to $48.52 per barrel at December 31, 2020. Natural gas prices quoted at Henry Hub +were also volatile during 2020, beginning the year at $2.19 per Mcf, bottoming below $1.60 per Mcf before increasing to $2.53 per Mcf on December 31, 2020 and continuing to increase in the +first few months of 2021. Given declining commodity prices and volatility, the Compensation Committee continued to focus on performance objectives that preserve Cimarex's strong balance sheet, core +properties and organization while also stressing improving health, safety and environment metrics. For 2020, specific goal targets and weightings have been added to improve transparency of +Compensation Committee decision-making. These goals and our performance are summarized below under "Section 2—Annual Cash Incentive Awards." It is through this hybrid microeconomic +and macroeconomic lens that the Committee considered the following 2020 business and financial performance overview when making compensation decisions: +§ Responded to the highly transmissible and pathogenic coronavirus known as severe acute +respiratory syndrome coronavirus 2 (SARS-CoV-2) that causes the disease known as COVID-19 and the oil and gas demand destruction caused by the COVID-19 pandemic as well as the March 2020 oil price war +between Saudi Arabia and Russia by, among other things: +§ Implementing safety protocols to protect employees and contractors from COVID-19 § Announcing a reduction in our 2020 capital investment budget of 55-60% from our +original guidance of $1.25-$1.35 billion and implementing cost-cutting measures to align business operations with lower commodity price environment § +Reducing base salary of our CEO by 25% and base salaries of the other executive +officers by 15% and the cash compensation of directors by 20% from May 1, 2020 until December 1, 2020 § Maintaining our common stock dividend at +$0.22 per share per quarter ($0.88 per year) +§ Reduced Permian Basin flaring volume levels as a percentage of our Permian Basin gross +operated gas production from 1.97% in 2019 to 0.90% in 2020, a 54% decrease. § Reduced methane intensity company-wide (the gross volume of our natural gas +emissions +divided by the gross operated volume of our natural gas production) from 0.258% in 2019 to 0.187% in 2020, a 28% decrease. § Decreased exploration and +development expenditures by 56% to $544.9 million in +2020 compared to $1.242 billion in 2019, while year-over-year average daily production decreased 9% to 252.5 thousand barrels of oil equivalent ("MBOE") per day in 2020 compared to 278.5 +MBOE per day in 2019. The decreases in expenditures and production were primarily the result of reducing development activities and shutting in wells due to demand destruction from the COVID-19 +pandemic. § Year-over-year production revenues decreased 35% to $1.51 billion, which were +negatively affected by decreased production and declining commodity prices. +Cimarex +Energy +Co. +31 +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +§ Incurred a net loss of $1.967 billion in 2020 compared to a net loss of +$124.6 million in 2019, primarily from the non-cash ceiling test impairment described below and a goodwill impairment. § Recognized a +$1.638 billion non-cash ceiling test impairment of our oil and gas +properties primarily due to decreases in the 12-month average trailing commodity prices used in calculating the ceiling test. § Generated cash flow from +operating activities of $904.2 million, which was 33% +lower than in 2019. § Our Operations group continued optimizing our production and maximizing well +profitability. As a result, our production expense declined 7% from $3.34 per barrels of oil equivalent ("BOE") in 2019 to $3.09 per BOE in 2020. § +Increased cash on hand to $273.1 million at year-end 2020, up from +$94.7 million at year-end 2019. § At year-end 2020, our estimated proved reserves were 14% lower than at year-end 2019 +after additions, positive and negative revisions, and production. § Our stock price decreased 29% from $52.49 at year-end 2019 to $37.51 at year-end 2020. +The decrease in our stock price led to a lower value for NEOs' long-term equity awards that vested in 2020 compared to the grant date fair value ("GDFV") of those awards in 2017, with the vested +shares for NEOs (other than a retired NEO) having a value equal to 20% of the GDFV, which demonstrates the alignment of interests of our NEOs. +§ HIGHLIGHTS OF EXECUTIVE COMPENSATION PROGRAM POLICIES AND +PRACTICES +What We Do +What We Don't Do +Link majority of compensation to performance +No hedging or pledging of Company securities by officers or Directors +Double-trigger change in control severance benefits +No tax gross-up payments upon change in control +Maintain stock ownership guidelines +No excessive perquisites +Retain an independent compensation consultant +No performance metrics that encourage excessive risk taking +Hold annual say-on-pay advisory vote for stockholders +Maintain a clawback policy for cash and equity incentive awards +Incorporate objective goals and specific metrics, including environmental performance metrics, in annual cash incentive awards +Undertake pay equity analyses +32 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +§ 2020 EXECUTIVE COMPENSATION +Stock Awards ($) (1) +% of Total +Name +2020 Salary (1)(2) +Year End +2020 Base Salary +2020 Annual Cash +Incentive Award (1) +Performance- +based +Time Vested +Total +Compensation (1)(2)(3) +Compensation +at Risk (2)(4) +Thomas E. Jorden, CEO +$ 934,870 +$ 1,024,650 +$ 1,240,000 +$ 4,250,000 +$ 4,250,000 +$ 10,781,093 +91% +G. Mark Burford, CFO +$ 495,849 +$ 515,000 +$ 490,000 +$ 1,150,000 +$ 1,150,000 +$ 3,367,030 +85% +John A. Lambuth, EVP +$ 566,803 +$ 600,000 +$ 570,000 +$ 1,550,000 +$ 1,550,000 +$ 4,304,256 +87% +Stephen P. Bell, EVP +$ 518,379 +$ 538,400 +$ 520,000 +$ 1,500,000 +$ 1,500,000 +$ 4,104,410 +87% +Francis B. Barron, SVP +$ 444,434 +$ 461,600 +$ 440,000 +$ 1,000,000 +$ 1,000,000 +$ 2,962,555 +85% +Joseph R. Albi, Former COO (5) +$ 346,097 +$ — +$ 310,000 +$ — +$ — +$ 722,032 +N/A +(1) From Summary Compensation Table. +(2) Reflects temporary reductions of salary of 25% for CEO and 15% for other NEOs for the period +June 1, 2020 through December 1, 2020 due to impacts of the COVID-19 pandemic and oil and gas demand destruction. +(3) Includes All Other Compensation from Summary Compensation +Table. +(4) Compensation at risk is based on the sum of 2020 Annual Cash Incentive Award and 2020 Long-Term +Incentive Grant Date Fair Value compared to the sum of the 2020 Salary, 2020 Annual Cash Incentive Award, and 2020 Stock Awards grant date fair value for performance-based and time vested awards as +disclosed in the Summary Compensation Table. +(5) Mr. Albi retired as an employee effective July 1, 2020 and received a pro rata +share of his 2020 Annual Cash Incentive Award. He did not receive a stock award in December 2020 although he received a prorated equity award as a non-employee Director effective July 1, 2020. +See "Potential Payments Upon Change in Control or Termination-Severance Arrangements for Former COO" and "Non-Employee Director Compensation" +below. +ELEMENTS AND MIX OF EXECUTIVE COMPENSATION +§ Principal Elements of Executive Compensation +We principally use three elements to carry out the design of our executive compensation program, collectively referred to as "Total Direct Compensation": +Element +Purpose +Base salary +➜ +Ensure best talent through market competitive cash compensation and, when needed, attract new executives. +Annual cash incentive award +➜ +Reward executives for short-term financial, operational, and environmental results. +Annual long-term equity award +➜ +Retain current executive team and ensure that activities and results are focused on building long-term shareholder value. Half of the grant date fair value of the 2020 long-term equity awards was made in the form of shares of restricted stock that +vest based on continued employment and the passage of time, which promotes retention. The other half of the grant date fair value of the 2020 long-term equity awards was made in the form of performance shares that vest based on performance measures +tied to absolute and relative stock price performance, which promotes the long-term interests of our shareholders and aligns executives' interests with shareholders' interests. +Cimarex +Energy +Co. +33 +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +§ Mix of Executive Compensation +Cimarex's executive compensation program directly links the majority of executive compensation to Cimarex's performance through annual and long-term incentives. The diagrams +below show the mix of the pay elements for the CEO and other NEOs for fiscal 2020. These diagrams are based on the base salary, annual cash incentive award and annual long-term equity award +(performance-based and time-vested stock awards) in the Summary Compensation Table and highlight the substantial portion of the at risk compensation that is only realized if certain performance +criteria are met. On this basis, 91% of the CEO's 2020 compensation is at risk and is linked to measured performance criteria. The at-risk compensation consists of 12% annual cash incentive +compensation based on 2020 performance and 80% long-term equity incentive compensation that is both time- and performance-based. Note that, due to rounding, these percentages do not add to 100%. The +2020 average compensation mix for the other NEOs was 86% at-risk compensation consisting of 14% annual cash incentive compensation based on 2020 performance and 72% long-term equity incentive +compensation that is both time- and performance-based. +2020 TOTAL COMPENSATION MIX +Chief Executive Officer* +Other Named Executive Officers +* Percentages +do not add to 100% due to rounding. +COMPENSATION DISCUSSION AND ANALYSIS +This CD&A describes Cimarex's executive compensation program for 2020. We use this program to retain, motivate and attract, when needed, the +executives who lead our business. The annual cash incentive award and long-term incentive award components ensure a direct link to Company performance and shareholder +34 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +value. +This CD&A explains how the Compensation Committee (the "Committee") of the Board of Directors made compensation decisions for our executives, including the following NEOs: +Named Executive Officer +Position +Thomas E. Jorden +Chairman of the Board, CEO and President (Principal Executive Officer) +G. Mark Burford +Senior Vice President and CFO (Principal Financial Officer) +John A. Lambuth +Executive Vice President—Exploration +Stephen P. Bell +Executive Vice President—Business Development +Francis B. Barron +Senior Vice President—General Counsel, Corporate Secretary +Joseph R. Albi +Former Executive Vice President—Operations, COO +This CD&A is divided into three sections: +➢ +Section 1 +discusses our compensation framework, principal elements of executive compensation, and competitive positioning; +➢ +Section 2 +discusses 2020 and early 2021 actions related to 2020 executive compensation; and +➢ +Section 3 +discusses the role of the Committee's independent compensation consultant and management in compensation decisions, post-employment compensation, retirement benefits, perquisites and other compensation related +issues. +SECTION 1 +§ Our Compensation +Framework +Objectives +Our principal business objective is to profitably grow our proved oil and gas reserves and production for the long-term benefit of +shareholders while seeking to minimize our impact on the environment and the communities in which we operate. The primary strategy we use to achieve this objective is to reinvest our cash flow from +operations at a competitive rate of return while implementing +best practices concerning safety and the environment. Our executive compensation program is designed to retain, motivate and attract, when needed, the experienced leaders necessary to carry out this +strategy. +Throughout +the Company, we focus on attracting high quality personnel who have strong technical competence, are not afraid to contribute new ideas, and work well in a team environment. The Company +periodically undertakes studies and analyses of compensation practices across all areas and disciplines within Cimarex. The data confirmed no compensation bias at Cimarex, and every employee is paid +equitably for their position regardless of gender, ethnicity, or age. +The +Committee also engaged our independent compensation consultant, Longnecker & Associates ("Longnecker"), to analyze the actual delivery of compensation versus the performance of the Company +as compared to the Compensation Peer Group (see below, "2020 Compensation Peer Group," for a list of +Cimarex +Energy +Co. +35 +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +these +companies). Longnecker concluded that Cimarex had one of the highest correlations of reported compensation to performance out of all the Compensation Peer Group companies. +Design +We design our executive compensation program to: +§ Align performance incentives with the long-term interests of our shareholders. +We +align the long-term interests of our executives with the long-term interests of our shareholders by paying a substantial portion of each executive's total direct compensation in the form of +performance-based equity awards. Half the grant date fair value of 2020 long-term equity awards to NEOs was in the form of performance shares with vesting dependent upon absolute and relative stock +price performance, meaning the more our shareholders benefit through shareholder returns compared to a defined stock performance peer group, the more our executives benefit through increased vesting +of performance-based equity awards. As noted above, based on feedback received during shareholder engagement in 2019 and the results of the 2019 shareholder advisory vote on executive compensation, +the Compensation Committee reduced the vesting potential of performance awards granted beginning in December 2019 if the Company's share price declines over the performance period. For performance +awards made in December 2020, if the share price declines during the performance period, the potential vesting is reduced by 50% and is capped at 100% of the target number of shares granted regardless +of the relative rank of our stock performance among stock performance peer group companies at the conclusion of the performance period. This compares to awards made in 2018 where maximum vesting of +200% could still be attained based on relative stock performance even if the overall share price declines. Also, our Executive Stock Ownership Guidelines require executives to have a meaningful +ownership stake in Cimarex, further aligning the interests of our shareholders and our executives. +§ Provide competitive total direct compensation opportunities that retain, motivate and +attract, when needed, executive talent. +We +compensate our executives at levels that are competitive with equivalent positions at companies with which we may compete for talent as represented by our Compensation Peer Group (see "2020 +Compensation Peer Group" below). In general, when we review base salaries, annual incentive award opportunities, long-term equity awards and total direct compensation, we reference the 50th and +75th percentiles of the Compensation Peer Group to understand the competitive landscape. Actual compensation earned by an executive may be outside this range based on the Company's performance, +the individual's achievements and expertise, and industry competition for talented executives. Half the grant date fair value of 2020 long-term equity awards was in the form of shares of restricted +stock that vest based on continued employment and the passage of time, which promotes retention of executives. +§ Link compensation earned to achievement of short-term and long-term financial and +operational objectives. +We +provide the opportunity for an annual incentive cash award that is designed to reward executive efforts for achieving Company financial, operational and strategic objectives. The portion of our +long-term equity incentive awards that vest based on performance measures tied to relative stock price performance, with +36 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +limitations +on vesting in the event of an absolute price decline, are designed to encourage above average stock price performance, which aligns executives' interests with shareholders' interests. +§ Competitive Positioning +In support of our compensation objectives and in order to determine an appropriate total value and mix of pay for executives, we reference the 50th and +75th percentiles of the Compensation Peer Group to understand the competitive landscape. The 50th and 75th percentiles are reference points only; we do not automatically +compensate each executive at these levels. Several variables, including individual and division performance, time employed in the position, aggregate professional experience and expertise, annual +Company performance and one- and three-year relative stock price performance influence the actual executive compensation decisions. We review our individual NEO and total NEO Total Direct Compensation +compared to individual NEO and total NEO Total Direct Compensation of companies in our Compensation Peer Group. Because not all of our NEO positions are directly comparable to NEO positions of +companies in our Compensation Peer Group, we believe that reviewing the aggregate Total Direct Compensation of all NEOs provides an appropriate reference for comparative purposes and allows us to +compare our total cost of management for all NEOs to our peers' total cost of management. +§ 2020 Compensation Peer Group +The Compensation Peer Group is comprised of companies in the oil and gas industry with market capitalizations and revenues within a range of reasonableness and operating areas +similar to ours and with whom we compete for executive and other employee talent. The Committee annually reviews companies in the Compensation Peer Group and modifies the group as appropriate. +In +April 2020, the Committee approved the 2020 Compensation Peer Group, which at the time of selection included companies that were within a range of reasonableness comparable to Cimarex. The +April 22, 2020 market capitalization of these companies ranged from $119 million to $8.3 billion, and the trailing 12 months' revenue, based on the latest periodic reports +filed by these companies with the SEC, ranged from +$944 million to $6.4 billion. For the comparable date and period, Cimarex's market capitalization was $2.0 billion and its revenue was $2.4 billion. Longnecker recommended +removing two companies, Centennial Resource Development, Inc. ("CDEV") and Antero Resources Corporation ("AR"), that were in the 2019 Compensation Peer Group. The removal of CDEV was due to its +management turnover and revenue ($944 million), market capitalization ($119 million), and enterprise value ($1.2 billion) compared to the other companies being outside the range +of reasonableness for appropriate peer companies. The recommended removal of AR was due to its market capitalization and the receipt of compensation and dividends by AR's NEOs from AR's midstream +master limited partnership. Longnecker also recommended adding two new companies, Ovintiv Inc. ("OVV") and PDC Energy, Inc. ("PDC"), based primarily on both having (1) operational +overlap with Cimarex's areas of operations, (2) headquarters in Denver, (3) similar production profiles, and (4) substantial number of common peer companies in their compensation +peer +Cimarex +Energy +Co. +37 +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +company +groups. The Committee approved these recommendations, resulting in the following 2020 Compensation Peer Group: +Compensation Peer Company +Stock +Ticker +Compensation Peer Company +Stock +Ticker +Apache Corporation +APA +Ovintiv Inc. +OVV +Cabot Oil & Gas Corporation +COG +Parsley Energy, Inc. +PE +Continental Resources, Inc. +CLR +PDC Energy, Inc. +PDCE +Devon Energy Corporation +DVN +Range Resources Corporation +RRC +Diamondback Energy, Inc. +FANG +WPX Energy, Inc. +WPX +Noble Energy, Inc. +NBL +§ 2020 Stock Performance Peer +Group +Under our long-term equity incentive award program, we grant performance-based awards of restricted stock to our NEOs. For grants made in December 2020, the performance measure +used to determine the number of shares to be delivered upon vesting is Cimarex's relative stock price performance at the end of the three-year period preceding the December 1, 2023 vesting date +when compared to companies in a Compensation Committee-selected group of companies in the exploration and production industry with whom the Company competes for investors and investment capital (the +"Stock Performance Peer Group"). In selecting the 2020 Stock Performance Peer Group, the Committee considered the need to replace companies from the 2019 Stock Performance Peer Group that had been +acquired or entered into agreements to be acquired so that the peer group was broad enough for a meaningful comparison of relative performance, including companies that compete for capital with +Cimarex and operate in the areas where Cimarex operates, and the recommendations of the Committee's compensation consultant. As a result of these considerations, Concho Resources, Inc., Noble +Energy, Inc. and WPX Energy, Inc. were removed because they were acquired or were in the process of being acquired, and Centennial Resource Development, Inc. ("CDEV") and Matador +Resources Company ("MTDR") were removed due to their sizes and stock price reactions in the market at that time. CNX Resources Corporation ("CNX"), ConocoPhillips ("COP"), Continental +Resources, Inc. ("CLR"), Occidental Petroleum Corporation ("OXY"), PDC Energy, Inc. ("PDCE"), and Range Resources Corporation ("RRC") were added to the Stock Performance Peer Group. The +Committee's independent compensation consultant agreed with the selected companies. As a result of the companies removed and added, the following are the companies that comprised the Stock Performance +Peer Group on December 10, 2020: +Stock Performance Peer Company +Stock +Ticker +Stock Performance Peer Company +Stock Ticker +Apache Corporation +APA +EOG Resources, Inc. +EOG +Cabot Oil & Gas Corporation +COG +EQT Corporation +EQT +Cimarex Energy Co. +XEC +Marathon Oil Corporation +MRO +ConocoPhillips +COP +Ovintiv Inc. +OVV +CNX Resources Corporation +CNX +Occidental Petroleum Corporation +OXY +Continental Resources, Inc. +CLR +PDC Energy, Inc. +PDCE +Devon Energy Corporation +DVN +Pioneer Natural Resources Company +PXD +Diamondback Energy, Inc. +FANG +Range Resources Corporation +RRC +38 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +SECTION 2 +§ Summary of 2020 +and Early 2021 Compensation Decisions +COMPENSATION ELEMENT +ACTION +RATIONALE +§ +BASE SALARY +No change to CEO's base salary of $1,024,650, with temporary reduction by 25% from June 1, 2020 through December 1, 2020. +Due to the reduced commodity price environment, the impacts of the COVID-19 pandemic and oil and gas demand destruction and despite Mr. Jorden's leadership in maintaining the Company's strong financial position and operational performance +through a reduced commodity price environment, as well as his base salary compared to other Compensation Peer Group CEOs, the Compensation Committee (a) did not increase Mr. Jorden's salary in 2020, and (b) temporarily reduced +Mr. Jorden's salary by 25% for the period from June 1, 2020 through December 1, 2020. +No change to remaining NEOs' base salaries, with temporary reduction by 15% from June 1, 2020 through December 1, 2020. +No changes were made to base salaries due to the reduced commodity price environment and impacts of the COVID-19 pandemic and oil and gas demand destruction. In addition, due to the impacts of the COVID-19 pandemic and oil and gas demand destruction, +NEOs other than Mr. Jorden had their salaries reduced by 15% for the period from June 1, 2020 through December 1, 2020. Due to his impending retirement, Mr. Albi's salary was not reduced. +§ +ANNUAL CASH INCENTIVE PLAN +Authorized annual cash incentive award to the CEO of 97% of his target award and awards to the other NEOs of between 95% and 97% of their target awards. In setting the final annual cash incentive awards, the Compensation Committee exercised negative +discretion to lower the awards below the calculated 120% of target in light of overall economic and industry conditions. The CEO has an award target of 125% of year-end base salary and all other NEOs have an award target of 100% of year-end +salary. +Annual cash incentive awards were based on the level of achievement of the 2020 Performance Objectives as described below in "Annual Cash Incentive Awards" and on recommendations from the Committee's independent compensation consultant. See "Key +2020 Compensation Actions—Annual Cash Incentive Awards" below. +Cimarex +Energy +Co. +39 +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +COMPENSATION ELEMENT +ACTION +RATIONALE +§ +LONG-TERM EQUITY INCENTIVES +Authorized long-term equity awards to NEOs (including the CEO) with an aggregate grant date fair value of $18,900,000. Half of the grant date fair value of the 2020 long-term equity awards was made in the form of shares of restricted stock that vest +based on continued employment through December 1, 2023. The other half of the grant date fair value of the 2020 long-term equity award was made in the form of performance shares that may vest on December 1, 2023 in an amount between zero +and 200% of the target number of performance shares awarded, with 200% being earned if Cimarex's stock price has increased, and if relative stock price is in the top two of the 16 companies in the Stock Performance Peer Group during the three-year +performance period ending on December 1, 2023. Based on feedback during shareholder engagement, the vesting percentages are reduced by 50%, and capped at 100% of the target number of shares granted, if Cimarex's stock price is lower on +December 1, 2023 than on December 1, 2020. To preserve shares available under Cimarex's equity plan, performance award vesting in excess of 100% will be paid in cash rather than shares. +Given Cimarex's reduced emphasis on cash and other forms of compensation that are not "at risk" and the factors discussed below in this paragraph, the mid-point of the range for 2020 long-term equity awards for all NEOs recommended by the +compensation consultant represented a total value at approximately the 55th percentile when compared to 2020 awards made by peer companies based on the consultant's review of public filings and knowledge of practices of other companies in the +Company's competitive market and market survey data. The Committee considered Cimarex's total shareholder return for the past one and three years, the competitive market pressures and Cimarex's relative share price performance versus peers. The +Committee considered the compensation consultant's recommended individual and total pool of grant date fair value and the CEO's recommendations for NEOs other than the CEO based on their individual contribution, and determined to make aggregate +awards slightly below the level recommended by its consultant. Its consultant concurred with the Committee's final determination. +See "Key 2020 Compensation Actions" below for more detail. +§ Response to 2020 +Say-on-Pay Vote +At the 2020 Annual Meeting of Shareholders, 96% of the votes cast were in favor of the advisory vote to approve executive compensation. In addition to the +advisory vote, as part of our regular shareholder engagement, we consider and discuss with shareholders a number of matters throughout the year, including executive compensation. The Committee +considers any feedback and routinely reviews executive compensation practices. For additional information on our shareholder engagement efforts, see "Corporate Governance—Shareholder +Engagement" above. +The +Committee considered the results of the advisory vote and the discussions with shareholders. Based on these results and discussions, the Committee believes our shareholders' generally support the +Committee's +40 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +compensation +decisions in 2019 and 2020, which addressed concerns raised in connection with the 2019 shareholder advisory vote on executive compensation, and shareholders' are satisfied with Cimarex's +executive compensation programs. See "Key 2020 Compensation Actions" below. +§ Key 2020 +Compensation Actions +The following discusses the Committee's key 2020 compensation decisions, which are reflected in the 2020 Summary Compensation Table below. These decisions were +made with the advice and concurrence of Longnecker. (See "CD&A—Section 3" for additional discussion regarding the role of the consultant.) +CEO Compensation +§ +Mr. Jorden's base salary was not changed and was temporarily reduced for the reasons described below. +§ +Mr. Jorden's 2020 annual cash incentive award was $1,240,000, or 97% of his target award. His target annual cash incentive award is 125% of his year-end base +salary and his maximum award is 250%. +§ +Mr. Jorden's annual long-term incentive equity award value at the date of grant (December 10, 2020) was $8,500,000. +These +decisions were reviewed in detail by the Committee and its independent consultant. The Committee considered several factors, including input from its independent consultant, compensation data +from peer companies, Cimarex's performance and, with respect to the temporary salary reductions, the impacts of the COVID-19 pandemic and oil and gas demand destruction. In 2020, approximately 91% of +Mr. Jorden's compensation as disclosed in the Summary Compensation Table was at risk. The value of Mr. Jorden's long-term equity incentive awards that vested in 2020 was +$1.6 million, compared to the grant date fair value of those awards when granted in 2017 of $8.0 million, demonstrating the alignment of Mr. Jorden's interests with shareholders' +interests. +Severance Arrangements for Former COO +Effective July 1, 2020, the Company entered into an agreement ("Succession Agreement") with Joseph R. Albi, Cimarex's former COO. The +Succession Agreement established terms related to his retirement and severance arrangements. Additional information regarding the Succession Agreement is provided following the "Potential Payments +Upon Change in Control or Termination—Severance Arrangements for Former COO." +Other NEO Compensation +The Committee also made compensation decisions for the other NEOs comprised of base salary decisions, including not changing base salaries and +temporarily reducing salaries, made in May 2020, annual cash incentive awards for 2020 made in February 2021, and long-term equity awards made in December 2020. These decisions were based upon the +recommendations of the CEO, evaluation by the Committee, the advice and recommendations of Longnecker, salary data from peer and broader market +surveys, internal pay relationships based on relative duties and responsibilities, the executive's impact on Cimarex's results, for retention purposes and, with respect to the temporary salary +reductions, the impacts of the COVID-19 +Cimarex +Energy +Co. +41 +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +pandemic +and oil and gas demand destruction. Based upon these considerations, the Committee made the following 2020 NEO compensation decisions: +Stock Awards (1) +% of Total +Name +2020 Salary (1) +Year End +2020 Base Salary +2020 Annual Cash +Incentive Award (1) +Performance +based +Time Vested +Total +Compensation (1)(2) +Compensation at +Risk (3) +G. Mark Burford, CFO +$ 495,849 +$ 515,000 +$ 490,000 +$ 1,150,000 +$ 1,150,000 +$ 3,367,030 +85% +John A. Lambuth, EVP +$ 566,803 +$ 600,000 +$ 570,000 +$ 1,550,000 +$ 1,550,000 +$ 4,304,256 +87% +Stephen P. Bell, EVP +$ 518,379 +$ 538,400 +$ 520,000 +$ 1,500,000 +$ 1,500,000 +$ 4,104,410 +87% +Francis B. Barron, SVP +$ 444,434 +$ 461,600 +$ 440,000 +$ 1,000,000 +$ 1,000,000 +$ 2,962,555 +85% +Joseph R. Albi, Former COO (4) +$ 346,097 +$ — +$ 310,000 +$ — +$ — +$ 722,032 +N/A +(1) From Summary Compensation Table. +(2) Includes All Other Compensation from Summary Compensation Table. +(3) Compensation at risk is based on the sum of 2020 Annual Cash Incentive Award and 2020 Long-Term Incentive Grant Date Fair Value +compared to the sum of the 2020 Salary, 2020 Annual Cash Incentive Award, and 2020 Stock Awards grant date fair value for performance-based and time vested awards as disclosed in the Summary +Compensation Table. +(4) Mr. Albi retired as an employee effective July 1, 2020 and received a pro rata share of his 2020 Annual Cash Incentive +Award. He did not receive a stock award in December 2020 although he received a prorated equity award as a non-employee Director effective July 1, 2020. See "Potential Payments Upon Change in +Control or Termination-Severance Arrangements for Former COO" and "Non-Employee Director Compensation" below. His annual base salary was $650,300. +Base Salary Determination +We provide competitive base salaries to ensure market competitive total cash compensation as well as to retain and attract, when needed, +talented executives. We compare each Cimarex NEO's base salary with the base salary paid for a similar executive position by companies in our Compensation Peer Group. See "Competitive Positioning" +above in this CD&A for a list of the companies in the Compensation Peer Group. The Committee then may adjust base salaries based on a number of factors, including job responsibilities, management +experience, individual contributions, retention, number of years in position, and current salary. +In +February 2020, the Committee's independent compensation consultant reviewed the NEOs' base salaries compared to the Compensation Peer Group in connection with the review of Total Direct +Compensation. +In +April 2020, the Committee's independent compensation consultant reviewed the NEOs' base salaries compared to Compensation Peer Group data and broader market data. Based on the economic situation at +that time due to the COVID-19 pandemic, Longnecker recommended no increase in executive salaries for all NEOs. +Mr. Jorden, +our CEO, provided the Committee with recommendations for base salaries for NEOs other than himself. He recommended no increase in base salaries for the other NEOs and a temporary +reduction for his salary of 25% and for other NEOs of 15% due to the impacts of the COVID-19 pandemic and oil and gas demand destruction. +42 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +Mr. Jorden's +recommendations were based on maintaining competitive alignment of the NEOs with the Compensation Peer Group and internal pay equity. The Committee considered the recommendations +of both the Committee's consultant and Mr. Jorden for NEOs other than Mr. Jorden. With respect to Mr. Jorden's salary, in discussions in executive session with the compensation +consultant and without Mr. Jorden present, the Committee considered Mr. Jorden's leadership of Cimarex through a reduced commodity price environment, including Cimarex's relative TSR +performance compared to the Compensation Peer Group for the past one year and the past three years, and his salary compared to the Compensation Peer Group's CEO salaries. The Committee also reviewed +the total salaries and recommended salaries of all the NEOs compared to the total salaries of the NEOs of the Compensation Peer Group. The compensation consultant indicated its concurrence with the +Committee's recommendations based on these reasons and the compensation consultant's experience with, and knowledge of, compensation decisions of other oil and gas exploration and production +companies. The Committee recommended, and the Board approved, the base salaries set forth in the table below effective June 1, 2020, which were unchanged from the prior salaries. The Committee +also recommended, and the Board approved, the temporary reduction in the CEO's salary by 25% and other NEOs' salaries by 15% beginning June 1, 2020. In August 2020, after considering +improvements in oil and gas prices and the Company's outlook, the Committee recommended, and the Board approved, restoring the NEOs' base salaries effective December 1, 2020. +Name +Title +5/31/2020 +Base Salary +6/1/2020 +Base Salary(1) +Percent +Increase +Thomas E. Jorden +Chairman of the Board, CEO and President +$ +1,024,650 +$ +1,024,650 +0% +G. Mark Burford +Senior Vice President and CFO +$ +515,000 +$ +515,000 +0% +John A. Lambuth +Executive Vice President—Exploration +$ +543,400 +$ +543,400 +0% +Stephen P. Bell +Executive Vice President—Business Development +$ +538,400 +$ +538,400 +0% +Francis B. Barron +Senior Vice President—General Counsel, Corporate Secretary +$ +461,600 +$ +461,600 +0% +Joseph R. Albi +Former Executive Vice President—Operations, COO +$ +650,300 +$ +650,300 +0% +(1) Before temporary reduction in salary of 25% for CEO and 15% for other NEOs from May 1, 2020 until December 1, 2020. Because of his +impending retirement, Mr. Albi's salary was not reduced. +Annual Cash Incentive Awards +In +February 2021, the Committee met to determine NEO (including the CEO) annual cash incentive awards for 2020 performance. The individual target for the CEO is 125% of the CEO's base salary and for +each other NEO is 100% of that NEO's base salary. There is no minimum award, and an individual's maximum award is 250% of base salary for the CEO and 200% of each other NEO's base salary. +In +March 2020, the Compensation Committee adopted 2020 Performance Objectives to be used to assess NEO performance and to determine annual cash incentive awards for 2020. The below table summarizes +the 2020 goal results and assessment, which were reviewed and approved in February 2021. The Committee has continued its focus from prior years on goals that drive strong returns on invested capital, +that preserve Cimarex's strong balance sheet, and that drive significant reduction of emissions. +Cimarex +Energy +Co. +43 +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +The +table below explains the level of achievement of the 2020 Performance Objectives and the weighting applied to those goals. Summary comments for each goal area can be found following the 2020 +Performance Objectives table. +Cimarex 2020 Performance Objectives +Goal +Weight +Metrics +Result +Assessment +Multiple +STI Score +Achieve a good return on invested capital, rate of return (ROR) using "fully burdened" costs for drilling, completion, facilities, infrastructure, land and overhead costs. +30% +Target —15% ROR +Stretch —20% ROR +13% +Partially Achieved +50% +15% +Manage the balance sheet, as is prudently possible: +— +Live within cash flow, including dividends, with no incremental debt. +20% +Target —cash flow neutral +Stretch —free cash flow +$274 million +Achieved +100% +20% +Achieve target methane intensity (Volume CH4/Gross Operated Gas Production). +10% +Original: +Target —0.254% +Stretch —0.240% +Revised: +Target —0.245% +Stretch —0.232% +0.187% +Significantly Exceeded +200% +20% +Achieve Permian target flare volume levels (percent Permian gross operated gas production). +10% +Target —1.44% +Stretch —0.96% +0.90% +Significantly Exceeded +200% +20% +Achieve target Permian total well cost (capital cost normalized per lateral foot, including drilling, completion and facilities). +20% +Target —$1,050/ft. +Stretch —$1,000/ft. +$855/ft. +Significantly Exceeded +200% +40% +Grow our Assets. +10% +Target—New play or acquisition +See assessment +commentary below. +Partially Achieved +50% +5% +Total +100% +120% +Grade +% Target Award +Significantly Exceeded (SE) +200% +Exceeded (E) +150% +Achieved (A) +100% +Did Not Achieve/Partially Achieved (DNA/PA) +50% +Significantly Missed (SM) +0% +44 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +After +careful review of achievement against the 2020 Performance Objectives, and application of the weightings and metrics designated, the Compensation Committee's assessment of executive leadership +performance is that, overall, the Company Exceeded Expectations for its goals and objectives. Assessment commentary for each 2020 performance objective +follows: +Achieve a good return on invested capital—Partially Achieved. +Cimarex utilizes a "fully-burdened" economic assessment of all investment decisions and to measure overall return on capital performance at +the corporate level. While capital return metrics are increasingly prevalent in the oil and gas industry, a recurring theme we have heard in our external engagement efforts is the perception that there is a lack of communication of fully-burdened +return results. A "fully-burdened" assessment includes costs for drilling, completion, facilities, infrastructure, land and overhead costs. It also includes midstream and SWD infrastructure fully accounted for in the year the costs are incurred in +order to truly measure the impact of an investment decision to Cimarex's bottom-line. For instance, when reviewing a drilling decision, an objective assessment of a well's production performance (forecast) coupled with ALL associated costs to drill, +complete and produce is foundational to learning from the past and improving our go-forward drilling decisions. For 2020, the overall return on capital was 13% "fully burdened," and above the Company's cost of capital. +Manage the balance sheet—Achieved +Cimarex established the 2020 goal to generate cash flow above all capital expenditures and dividend payments (free cash flow). Cimarex +managed through commodity headwinds to generate $274 million of free cash flow after the dividend during 2020 ($372 million before the dividend). This result was generated primarily due to a reduction in capital expenditures, which was +driven by a lower activity level as well as cost reductions resulting from increased operating efficiencies and oil field services market deflation. Cimarex incurred no incremental debt in 2020. +Achieve target methane intensity—Significantly Exceeded +Cimarex's stretch goal for methane intensity was originally published before the company reported its formal Annual Greenhouse Gas +Emissions Inventory to the EPA in March 2020. Cimarex established a target and stretch goal of 5% and 10% year over year reduction, respectively. Upon publishing the 2019 Greenhouse Gas Emissions Inventory, Cimarex realized its forward estimate of +methane emissions was high, yet still wanted to maintain the target and stretch 5% and 10% year over year reduction goal, which marked the new, more stringent, internal goals as 0.245% (target) and 0.232% (stretch). Cimarex exceeded this stretch goal +with three focused strategies: instrument air compressor installations, pneumatic valve conversions to instrument air, and better true runtime tracking. +Cimarex +Energy +Co. +45 +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +Achieve Permian target flare volume levels—Significantly Exceeded +Cimarex's 2020 Permian flare intensity target and stretch goals represented a 25% and 50% year over year reduction from 2019. Cimarex +exceeded its stretch goal with a final Permian 2020 flare intensity of 0.90%. This was accomplished by implementing new technology to reduce flaring during upset conditions and enhanced reporting and surveillance to identify problem areas and respond +with corrective actions more quickly. These system and process changes were highly successful at reducing Cimarex's flaring exposure across its Permian operations. +Achieve target Permian total well cost—Significantly Exceeded +In 2020, Cimarex reduced its Permian total well cost by 23% to $855 per foot compared to 2019 costs, which were $1,114 per foot. This +significant reduction was achieved through value engineering, negotiated pricing, and other market factors. The Permian team focused on all aspects of capital cost efficiency throughout the year, with strong results in reducing nonproductive time. +The team also increased drilling footage per day from 1,100 feet per day to 1,400 feet per day through process improvements. Also, completion efficiency was increased from 1,000 feet per day to 1,350 feet per day through significant cycle time +reduction. +Grow our Assets—Partially Achieved +Cimarex made significant progress in identifying and developing new opportunities in the Anadarko Basin that will compete for future +capital. In Permian Basin, the Cimarex team successfully tested two new landing zones that significantly add to its top tier inventory. +The +Committee's independent compensation consultant recommended a pool for cash incentive awards for all NEOs totaling between $4.5 million and $4.9 million, or between 120% and 131% of +the NEOs' target payout, based on (i) the consultant's review of the Company's achievement of the 2020 performance objectives, (ii) the consultant's evaluation of the Company's +performance of its 2020 performance objectives compared to the Compensation Peer Group's percentile rankings, and (iii) the consultant's review of actions by other oil and gas exploration and +production companies related to annual incentive awards given performance expectations, commodity pricing and stock price trends. Based principally on the results against targets and subsequent +assessment of the 2020 performance objectives, and in light of overall economic and industry conditions, the CEO recommended cash incentive awards for the other NEOs of between 95% and 97% of their +target awards (all NEOs other than the CEO have annual target incentive awards of 100% of base salary). This resulted in an average annual incentive award for the other NEOs of 95%, which was +significantly below (a) the 120% of target awards calculated using the performance and weighting of metrics in the Cimarex 2020 Performance Objectives table above and (b) the low end of +the range provided by the Committee's independent consultant. The Committee's consultant concurred that the CEO's recommendations were reasonable and likely to be conservative relative to actions from +peer companies. After considering all of these factors and with the concurrence of the Committees independent consultant, the Committee exercised negative discretion to lower the cash incentive awards +below the calculated 120% of target and accepted the CEO's recommendations, and the Board approved the Committee's recommendations. +Mr. Albi, +former EVP and Chief Operating Officer, was included in the above described recommendation and approval process for a prorated Annual Incentive of 95% of his base salary for his +contributions to Cimarex 2020 results until his retirement date of July 1, 2020. +46 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +The +Committee, without management present, deliberated concerning the CEO's annual cash incentive award. Based on its analysis of the Company's 2020 performance described above and the CEO's +leadership of the Company and management of senior executives and other employees to achieve this performance in an extremely challenging environment, the Committee recommended and the Board approved +a cash incentive award to the CEO of 97% of his target award (the CEO has an annual target incentive of 125% of base salary). This award is also well below the range of 120% to 131% of target +recommended by the Committee's independent consultant. The total cash incentive awards to all NEOs of $3.6 million was significantly below the recommendation of the compensation consultant of a +reasonable pool of up to $4.9 million. Following are the CEO and other NEO 2020 annual cash incentive awards: +Name +Cash Incentive Award +% of Target +Thomas E. Jorden, CEO +$ 1,240,000 +97% +G. Mark Burford, CFO +$ 490,000 +95% +John A. Lambuth, EVP +$ 570,000 +95% +Stephen P. Bell, EVP +$ 520,000 +97% +Francis B. Barron, SVP +$ 440,000 +95% +Joseph R. Albi, Former COO +$ 310,000 +95% +Long-Term Equity Incentive Award Program +Our long-term equity incentive award program balances the short-term annual cash incentive program by focusing executive efforts on the +activities and results that lead to long-term and sustainable shareholder value. Typically, the Committee grants equity awards of restricted stock to NEOs each year. +For +grants made in December 2020, half of the grant date fair value of the long-term equity awards was made in the form of shares of restricted stock that vest based on continued employment through +December 1, 2023. The other half of the grant date fair value of the long-term equity awards was made in the form of performance shares that may vest on December 1, 2023 in an amount +between zero and 200% of the target number of performance shares awarded, with 200% being earned if Cimarex's relative stock price is in the top two of the 16 companies in the Stock Performance Peer +Group during the three-year performance period ending on December 1, 2023 and if Cimarex's stock price on December 1, 2023 is equal to or greater than on December 1, 2020. To +preserve shares available under Cimarex's equity plan, performance award vesting in excess of 100% will be paid in cash rather than shares. The vesting opportunity is reduced by 50% if Cimarex's stock +price is lower on December 1, 2023 than on December 1, 2020 with a maximum vesting opportunity of 100% of the target number of shares awarded. See "CD&A—Competitive +Positioning" for a list of the companies in the 2020 Stock Performance Peer Group. Our restricted stock awards that vest based on continuous employment and the passage of time promote retention of +executives, and the performance share awards that vest based on performance measures tied to absolute and relative stock price performance promote the long-term interests of our shareholders and align +our executives' interests with our shareholders' interests. Our 2019 Equity Incentive Plan sets a minimum one-year vesting period except as approved by the Committee not to exceed a total of 5% of the +shares subject to the Plan. The Committee has set a three-year vesting period for restricted stock awards to NEOs since the Committee began making restricted stock awards in 2006. +Dividends +equivalent to those paid on Cimarex common stock are paid on the restricted shares awarded that are subject to time-based vesting, and dividends applicable to the performance shares awarded +are +Cimarex +Energy +Co. +47 +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +accrued +and only paid on the shares actually earned when those shares vest. All of the shares subject to the award have the same voting rights as outstanding shares of Cimarex common stock. +For +performance awards made in December 2020, the total number of shares earned is determined by calculating the percentage difference between the average per share closing price for shares of Cimarex +and each company in the Stock Performance Peer Group for the 30 trading days preceding December 1, 2020 and the 30 trading days preceding December 1, 2023. The Committee ranks Cimarex's +average share price for these two periods among the average share price for all the companies in the Stock Performance Peer Group for these two periods. Companies that are not in the Stock Performance +Peer Group at both the beginning and the end of the performance period are not included in the calculation. Companies that declare bankruptcy or are delisted and cease to be traded on a national +securities exchange are ranked last at the end of the performance period. In addition, vesting percentages are reduced if Cimarex's stock price is lower on December 1, 2023 than on +December 1, 2020. The following table illustrates shares that would be earned at various relative stock price performance ranks (assuming 16 companies in the Peer Group). +XEC Ending Price Less Than +XEC Beginning Price +XEC Ending Price Equal to or Greater Than +XEC Beginning Price +Relative Performance Rank +Percent of Restricted +Stock Vesting +Value Consideration +Percent of Restricted +Stock Vesting +Value Consideration +1-2 +100% +Stock +200% +100% Stock/ +100% cash +3 +87.5% +Stock +175% +100% Stock/ +75% cash +4-5 +75% +Stock +150% +100% Stock/ +50% cash +6 +62.5% +Stock +125% +100% Stock/ +25% cash +7-8 +50% +Stock +100% +Stock +9 +37.5% +Stock +75% +Stock +10 +25% +Stock +50% +Stock +11-16 +0% +N/A +0% +N/A +On +December 10, 2020, the Committee granted long-term equity awards to the NEOs with a total grant date fair value of $18,900,000 based on competitive market data for companies in Cimarex's +Compensation Peer Group. Comparative data was obtained by the Committee's independent consultant from public filings disclosing NEO compensation of companies in the Compensation Peer Group and the +consultant's knowledge of other companies' actions. See "CD&A—Competitive Positioning" for a list of the companies in the Compensation Peer Group. +The +Committee's compensation consultant recommended a range of awards for all NEOs with a mid-point of representing a total value at approximately the 55 th percentile when +compared to 2020 awards made by peer companies based on the consultant's review of public filings and knowledge of practices of other companies in the Company's competitive market and market survey +data. The consultant also recommended a change to the potential vesting of the performance based equity awards. The factors considered by the consultant in making its recommendations included the +following: +§ Cimarex's stock price performance was in the 26 th percentile of +peer companies over the prior three years; § Competitive market pressures; and +48 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +§ Market trends. +The +Committee approved awards slightly below the recommended total pool range based on: the factors noted by Longnecker, the total direct compensation of our NEOs compared to that of our peer +companies, and Cimarex's 2020 financial and operational performance. The Committee's consultant concurred with the Committee's final determination. The actual value of the awards upon vesting in +December 2023 will be based on Cimarex's relative three-year stock price performance compared to the other companies in the Stock Performance Peer Group as described above and Cimarex's stock price at +that time. +The +Committee granted a total of 468,189 restricted shares to the NEOs (including the CEO). The number of shares granted to each NEO was based on their relative individual roles and responsibilities. +Of the total number of shares granted to the NEOs (including the CEO), the Committee awarded 45% of the shares to Mr. Jorden, 16% to Mr. Lambuth, 16% to Mr. Bell, 12% to +Mr. Burford, and 11% to Mr. Barron. The following table reflects the awards made by the Committee: +No. of Shares Subject to +Award +Grant Date Fair Value +Name +Performance- +based +Time Vested +of Long-Term Equity Incentive +Awards (1) +Thomas E. Jorden, CEO +102,583 +107,978 +$ 8,500,000 +G. Mark Burford, SVP, CFO +27,758 +29,217 +$ 2,300,000 +John A. Lambuth, EVP +37,413 +39,380 +$ 3,100,000 +Stephen P. Bell, EVP +36,206 +38,110 +$ 3,000,000 +Francis B. Barron, SVP +24,137 +25,407 +$ 2,000,000 +(1) The grant date fair value for the restricted stock awards that vest based on continuous +employment and the passage of time is the closing price of the Company's common stock on the date of grant. The grant date fair value for the performance stock awards is determined using a multiple +probability simulation model. +2020 Vesting of NEO Equity Awards +On December 1, 2020, the performance period applicable to the December 7, 2017 NEO equity awards ended. Cimarex's relative stock +price performance was in the bottom quartile of the Stock Performance Peer Group at the end of the performance period, resulting in the vesting of 50% of the shares subject to the December 7, +2017 award. +The +following table reflects the number of shares, and the grant date fair value ("GDFV") of those shares, originally granted in 2017 to each NEO who was an NEO in both 2017 and 2020, the number of +shares that +Cimarex +Energy +Co. +49 +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +vested +in 2020 at the end of the three-year performance period, and the value of the shares that vested based on the stock price on December 1, 2020: +Name +Performance +Shares +Granted in +December +2017 +GDFV of +Performance +Shares +Granted in +December +2017 +Performance +Shares +Vested in +December +2020 +Value +Realized +Upon +Vesting in +December +2020 +GDFV +compared +to +Realized +Value +Value +Realized +as +Percentage +of GDFV +Thomas E. Jorden, CEO +89,425 +$ 8,000,000 +44,713 +$ 1,616,822 +$ (6,383,178) +20% +G. Mark Burford, CFO +32,417 +$ 2,900,000 +16,209 +$ 586,117 +$ (2,313,883) +20% +John A. Lambuth, EVP +38,006 +$ 3,400,000 +19,003 +$ 687,148 +$ (2,712,852) +20% +Stephen P. Bell, EVP +35,211 +$ 3,150,000 +17,606 +$ 636,633 +$ (2,513,367) +20% +Francis B. Barron, SVP +23,474 +$ 2,100,000 +11,737 +$ 424,410 +$ (1,675,590) +20% +Joseph R. Albi, Former COO (1) +38,006 +$ 3,400,000 +38,006 +$ 935,707 +$ (2,464,293) +28% +(1) This above chart and table reflect Mr. Albi's accelerated vesting of 2017 +performance-based equity awards at target level upon his retirement as an employee on July 1, 2020. See Potential Payments Upon Change in Control or Termination—Severance +Arrangements for Former COO. +50 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +§ Alignment of CEO +Compensation to Total Shareholder Return ("TSR") +CEO Total Direct and Realized Compensation Compared to Cimarex TSR +The following graph illustrates our CEO's direct compensation and realized compensation compared to our TSR for the years 2016 through 2020. +Indexed TSR represents the cumulative total return of Cimarex stock for a five-year period based on a $100 investment at the start of the first year and reinvestment of all dividends. The table shows +the value of the investment at the end of each year. +* CEO Total Compensation is the Total Compensation disclosed in the Summary Compensation +Table. ** CEO Realized Compensation is compensation actually received by the CEO during the year, +including salary, current non-equity incentive plan compensation (i.e., annual bonus), market value at vesting of previously granted stock-based awards, and All Other Compensation amounts +realized during the year. It excludes unvested grants and other amounts that will not actually be received until a future date. +Cimarex +Energy +Co. +51 +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +CEO Long Term Incentive (LTI) Grant Date Fair Value and Realized LTI Value Compared to Cimarex TSR +The following graph illustrates our CEO's LTI grant date fair value and realized LTI compared to our TSR for the years 2016 through 2020. +Indexed TSR represents the cumulative total return of Cimarex stock for that period based on a $100 investment at the start of 2016 and reinvestment of all dividends. The table shows the value of the +investment at the end of each year. +* CEO LTI GDFV is the Stock Awards grant date fair value disclosed in the Summary Compensation +Table. ** CEO Realized LTI is the market value at vesting of previously granted stock-based awards +actually received by the CEO during the year indicated. It excludes unvested grants and other amounts that will not actually be received until a future date. +52 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +Relative CEO and NEO Total Compensation Compared to Relative TSR +The following graphs depict alignment of relative CEO and NEO compensation compared to relative TSR for the years ended December 31, +2017 through December 31, 2019. The comparative information is provided through 2019 because 2020 peer company compensation information was not publicly available at the time of writing. The +companies used for the relative comparison are the companies in our Compensation Peer Group, which are depicted by dots in the graph. We also included, as a point of reference, Cimarex's CEO and NEO +compensation and relative TSR for the years ended December 31, 2018 through December 31, 2020 compared to the Compensation Peer Group data for the years ended December 31, 2017 +through December 31, 2019. +Cimarex +Energy +Co. +53 +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +54 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +§ Early 2021 +Compensation Decisions +2021 Annual Cash Incentive Award Performance Objectives +In March 2021, the Committee approved the following Cimarex 2021 Performance Objectives, goal weightings and target levels that will apply to +2021 annual cash incentive awards: +Cimarex 2021 Performance Objectives +Goal +Weight +Target +Stretch +Achieve a good return on invested capital, rate of return (ROR) using "fully burdened" costs for drilling, completion, facilities, +infrastructure, land and overhead costs. +30% +15% ROR +20% ROR +Generate free cash flow. +30% +10% of 12/31/2020 Enterprise Value* +12% of 12/31/2020 Enterprise Value* +Achieve Permian Basin target high pressure flare intensity levels (% Permian Basin Gross Operated Gas Production). +15% +15% year over year reduction +30% year over year reduction +Reduce greenhouse gas intensity (Metric Tons CO2e / MBOE). +15% +8% Reduction +12% Reduction +Achieve target Permian Basin total well cost +($/lateral foot including drilling, completion and facilities). +10% +$815 +$780 +Total +100% +* Enterprise Value calculated using a 30-day trailing average share price +through December 31, 2020 to determine market capitalization, plus debt, plus preferred stock, less cash on hand. Free cash flow is a non-GAAP measure that we define as adjusted cash flow (a +non-GAAP measure) less total capital investment incurred during the period. We define adjusted cash flow (a non-GAAP measure) as net cash provided by operating activities excluding changes in +operating assets and liabilities. +To +provide greater clarity to shareholders when communicating results, in March 2021 the Compensation Committee approved the above targets pursuant to which each Performance Objective will be assessed +using the following grade scale: +Grade +% Target Award +Significantly Exceeded (SE) +200% +Exceeded (E) +150% +Achieved (A) +100% +Did Not Achieve/Partially Achieved (DNA/PA) +50% +Significantly Missed (SM) +0% +The +2021 Performance Objectives have been communicated to the NEOs. At year end, the CEO will deliver to the Committee a report that will include (i) the results with respect to each goal and +(ii) the CEO's recommendations, including his basis for such recommendations, for individual awards other than his own. The Committee and its independent compensation consultant will review the +CEO's report and +Cimarex +Energy +Co. +55 +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +recommendations +and will accept or modify those recommendations. The non-management members of the Board will consider the recommendations of the Committee. Each NEO, other than the CEO, has a +threshold award of 0% of year-end base salary (no minimum award), a target award equal to 100% of year-end base salary, and a maximum award of 200% of year-end base salary. The CEO has a threshold +award of 0% of year-end base salary (no minimum award), a target award equal to 125% of year-end base salary, and a maximum award of 250% of year-end base salary. +SECTION 3 +§ Role of Compensation +Consultant and Management in Compensation Decisions +Compensation Consultant +As stated above, the Committee has engaged Longnecker & Associates as its independent compensation consultant to fulfill the following +responsibilities: +§ +Advise the Committee on management proposals, as requested; +§ +Provide market data and recommendations on NEO compensation; +§ +Provide market data and recommendations on non-employee Director compensation; +§ +Make recommendations concerning the Compensation Peer Group and Stock Performance Peer Group; +§ +Review the selected Peer Group and survey data for competitive comparisons; +§ +Provide market data and recommendations on NEO severance benefits in the events of termination without cause and changes in control; +§ +Undertake special projects at the request of the Committee; and +§ +Participate in Committee meetings. +The +Committee has considered the independence factors adopted by the NYSE and has determined that its consultant, Longnecker, is independent within the meaning of the NYSE listing standards. +As +part of its ongoing services to the Committee, one or more representatives of Longnecker attended nine of the Committee meetings held in 2020. Longnecker provided the following services in 2020: +§ +Reviewed and provided input on the CD&A in the 2020 proxy statement; +§ +Attended the February 19, 2020 Compensation Committee meeting and consulted with the Committee on annual cash incentive awards; +§ +Attended the April 30, 2020 Compensation Committee meeting and consulted with the Committee on executive base +salary levels; +§ +Made recommendations concerning the Compensation Peer Group; +§ +Conducted a market analysis of Board compensation and consulted with the Committee concerning Board compensation; and +§ +Provided an executive compensation analysis and a recommended range for long-term equity grants, participated in +the December 3, 2020 Compensation Committee meeting and consulted with the Committee on performance share awards and provided the Committee with recommendations for executive severance agreements. +56 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +Management +Our CEO and President is the principal management resource for compensation recommendations to the Committee with respect to the other NEOs. +The CEO (i) provides an annual assessment of Cimarex's overall financial and operational performance and (ii) evaluates individual NEO performance and recommends individual base salary +adjustments, annual cash incentive awards, and long-term equity awards. His evaluations generally include factors such as scope of responsibility, contribution to Company performance, technical +competence, managerial skills and advancement potential. The Committee considers the CEO's recommendations in making decisions regarding executive compensation. The Committee exercises its discretion +to accept, reject or modify these compensation recommendations. +Our +Senior Vice President—Chief Human Resources Officer and Senior Vice President—General Counsel act as informational resources to Longnecker and the Committee and compile +survey and other compensation data for their review. The Committee, in consultation with Longnecker, reviews this information when making executive compensation and program design decisions. +§ Other Compensation +Arrangements +Post-Employment and Employment Arrangements +Severance Compensation Agreements +On March 9, 2020, we entered into Severance Compensation Agreements (the "Agreements") with each of the NEOs. The Agreements are +described below under "Potential Payments Upon Change-in-Control or Termination—Severance Compensation Agreements." The Company believes that the Agreements are a fair and appropriate step +to ensure the NEOs' continued employment, attention and dedication, and to ensure the NEOs' continued service, notwithstanding the possibility or threat of a change in control or involuntary +termination of employment without cause. +Retirement Benefits +Employees, including the NEOs, are eligible to participate in the Cimarex 401(k) defined contribution retirement plan ("401(k) Plan"). Cimarex +matches dollar-for-dollar employee contributions to the 401(k) Plan up to 7% of the employee's cash compensation, subject to limits imposed by the Internal Revenue Code. The Board is authorized to +make profit-sharing contributions under the 401(k) Plan. In February 2021, the Board determined that no profit-sharing contribution would be made due to the Company's loss in 2020. +In +addition, eligible participants, including the NEOs, may participate in the Supplemental Savings Plan, which is a non-qualified deferred compensation plan that permits participants to make +contributions (and to receive matching contributions) in excess of the Internal Revenue Code limitations for 401(k) plans. See "Executive Compensation Tables—2020 Nonqualified Deferred +Compensation" for information about contributions to the Supplemental Savings Plan. The Committee administers this plan and designates who may participate. Benefits are paid upon the later to occur of +termination of employment or the time elected by the participant. In the event of a change in control, each participant receives a lump sum cash payment of the amount allocated to his or her account. +Cimarex +Energy +Co. +57 +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +Effective +July 1, 2020, the Company entered into an agreement ("Succession Agreement") with Mr. Albi, Cimarex's former COO, in connection with his retirement. See below, "Potential +Payments Upon Change in Control or Termination." +Perquisites +We offer a limited number of perquisites (personal benefits) to our NEOs that are not offered to other employees, including financial and +estate planning and annual medical examinations. Our corporate aircraft is not available for personal use by any employee. With the authorization of our CEO, however, the corporate aircraft may be +used by an employee or a member of his/her family for medical purposes. The incremental cost for non-business use of our corporate aircraft, if any, is disclosed in the "Summary Compensation Table." +We use the Standard Industry Fare Level tables published by the Internal Revenue Service to determine the amount of compensation income that is imputed to the employee for tax purposes for personal +use of corporate aircraft. There was no personal use of our aircraft in 2020. +§ Other Compensation +Policies +Total Pay Considerations +The Committee considers Total Direct Compensation at the time it makes a decision on any element of executive compensation. The Committee also +reviews the relationship of the CEO's total compensation to the total compensation of each of the other NEOs, as well as reviews a comparison of our NEOs Total Direct Compensation to that of all +members of our Compensation Peer Group. +Stock Ownership and Holding Requirements +Cimarex's Executive Stock Ownership Guidelines are intended to more closely align the interests of our executive officers with those of our +shareholders. Pursuant to a revision made in December 2016, the CEO is expected to own Cimarex shares in an amount equal to six times his annual base salary, and each executive officer who reports to +the CEO is expected to own stock in an amount equal to three times his or her annual base salary. A newly appointed executive officer has three years from the date of his or her initial election or +appointment to comply with the guidelines. Until the stock ownership guidelines are met, an executive officer may not sell any Cimarex stock acquired through equity grants except to pay income taxes +upon the vesting of awards or to pay the exercise price and related income taxes upon the exercise of stock options. Restricted stock, restricted stock units, deferred compensation units and +performance awards are counted in calculating ownership. Shares subject to options are not counted. As of March 16, 2021, all officers were in compliance with the stock ownership guidelines. +Clawback Policy +We have adopted a clawback policy providing that, in the event of an accounting restatement due to material noncompliance with financial +reporting requirements under the U.S. federal securities laws, the Committee has the right to use reasonable efforts to recover from any of our current or former executive officers incentive-based +compensation related to the restatement and received during the three-year period preceding any such accounting restatement. This policy applies to incentive-based compensation granted on or after +June 1, 2012. This clawback policy will be interpreted in the best judgment of the Committee in a +58 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS +manner +consistent with any applicable rules or regulations adopted by the SEC or the NYSE as contemplated by the Dodd-Frank Act. +Non-Hedging and Non-Pledging Policies +Our insider trading policy prohibits Directors, officers and designated employees from engaging in hedging or monetization transactions, and +other employees are strongly discouraged from engaging in such transactions. Any other employee wishing to enter into such an arrangement must first submit the proposed transaction for approval by the +compliance officer designated in the policy. The policy also prohibits Directors, officers and employees from holding Cimarex stock in a margin account or pledging Cimarex stock as collateral for a +loan. +Tax Law Considerations +The Committee considers the impact of applicable tax laws with respect to executive compensation. Section 162(m) of the Internal +Revenue Code of 1986, as amended ("Section 162(m)"), limits the amount of compensation that Cimarex may deduct on its federal income tax return for compensation paid to certain executive +officers to no more than $1 million per year. Through 2017, there were exceptions to the $1 million limitation for performance-based compensation meeting certain requirements. The +performance-based portion of our restricted stock awards made prior to November 2, 2017 is the only element of executive compensation designed to qualify for the performance-based exception to +the $1 million deduction limit, provided additional requirements are met. These exceptions were eliminated by +the Tax Cuts and Jobs Act enacted in December 2017. The Committee attempted to preserve the deductibility of compensation paid to executive officers by utilizing performance-based stock awards until +this tax law change, but did not limit executive compensation to amounts deductible under Section 162(m) and does not plan to limit executive compensation to deductible amounts going forward. +COMPENSATION COMMITTEE REPORT +The Compensation Committee has reviewed and discussed with management the preceding Compensation Discussion and Analysis section of Cimarex's +2021 proxy statement. Based on our review and discussions, we have recommended to the Board of Directors that the Compensation Discussion and Analysis be included in Cimarex's 2021 proxy statement. +THE COMPENSATION COMMITTEE +Floyd +R. Price (Chair) +Paul N. Eckley +Hans Helmerich +Lisa A. Stewart +Cimarex +Energy +Co. +59 +Table of Contents +EXECUTIVE COMPENSATION TABLES +EXECUTIVE COMPENSATION TABLES +SUMMARY COMPENSATION TABLE +The +following table describes 2018-2020 compensation of our CEO, CFO and the three other most highly compensated executive officers. In compliance with SEC interpretations, the table also discloses +2018-2020 compensation of Joseph R. Albi, our former COO, who retired as an employee effective July 1, 2020. +Stock Awards ($) (1) +Non-Equity +Name and +Principal Position +Year +Salary +Bonus +Performance-based +Time Vested +Incentive Plan Comp. (2) +All Other Comp. (3) +Total +Thomas E. Jorden +2020 +$ 934,870 +— +$ +4,250,000 +$ +4,250,000 +$ +1,240,000 +$ +106,223 +$ +10,781,093 +Chief Executive Officer, +2019 +$ 1,009,324 +— +$ +3,362,500 +$ +3,362,500 +$ +1,153,000 +$ +115,231 +$ +9,002,555 +President, and Chairman +of the Board +(CEO) (Principal Executive Officer) +2018 +$ 976,789 +— +$ +3,450,000 +$ +3,450,000 +$ +1,740,000 +$ +110,691 +$ +9,727,480 +G. Mark Burford +2020 +$ 495,849 +— +$ +1,150,000 +$ +1,150,000 +$ +490,000 +$ +81,181 +$ +3,367,030 +Senior Vice President +2019 +$ 505,846 +— +$ +1,250,000 +$ +1,250,000 +$ +440,000 +$ +80,073 +$ +3,525,919 +and Chief Financial +Officer (CFO) +(Principal Financial Officer) +2018 +$ 468,394 +— +$ +1,375,000 +$ +1,375,000 +$ +700,000 +$ +89,183 +$ +4,007,577 +John A. Lambuth +2020 +$ 566,803 +— +$ +1,550,000 +$ +1,550,000 +$ +570,000 +$ +67,453 +$ +4,304,256 +Executive Vice +2019 +$ 535,262 +— +$ +1,450,000 +$ +1,450,000 +$ +480,000 +$ +66,453 +$ +3,981,715 +President—Exploration +2018 +$ 517,514 +— +$ +1,500,000 +$ +1,500,000 +$ +775,000 +$ +71,786 +$ +4,364,300 +Stephen P. Bell +2020 +$ 518,379 +— +$ +1,500,000 +$ +1,500,000 +$ +520,000 +$ +66,031 +$ +4,104,410 +Executive Vice +2019 +$ 530,328 +— +$ +1,400,000 +$ +1,400,000 +$ +470,000 +$ +67,743 +$ +3,868,071 +President—Business Development +2018 +$ 513,478 +— +$ +1,450,000 +$ +1,450,000 +$ +725,000 +$ +81,990 +$ +4,220,468 +Francis B. Barron (4) +2020 +$ 444,434 +— +$ +1,000,000 +$ +1,000,000 +$ +440,000 +$ +78,121 +$ +2,962,555 +Senior Vice President—General Counsel, Corporate Secretary +Joseph R. Albi +2020 +$ 346,097 +— +$ +— +$ +— +$ +310,000 +(5) +$ +65,935 +$ +722,032 +Former Executive Vice +2019 +$ 640,569 +— +$ +1,450,000 +$ +1,450,000 +$ +600,000 +$ +93,892 +$ +4,234,461 +President—Operations, +Chief Operating Officer (COO) +2018 +$ 620,241 +— +$ +1,500,000 +$ +1,500,000 +$ +875,000 +$ +83,635 +$ +4,578,876 +(1) Represents the grant date fair value ("GDFV") of the +awards. The grant date fair value for the restricted stock awards that vest based on continuous employment and the passage of time is the closing price of the Company's common stock on the date of +grant. The grant date fair value for the performance stock awards is determined using a multiple probability simulation model. Actual payouts with respect to the performance stock awards can range +from zero percent to 200 percent of the initial shares awarded based on the ranking of the Company's relative stock price performance in comparison to the peer group at the end of +60 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +EXECUTIVE COMPENSATION TABLES +the +three-year performance period. Performance stock award granted in 2020 that vest in excess of 100% will be paid in cash rather than shares. +(2) Amount reported for the year +earned. +(3) All Other Compensation includes the value of perquisites +or personal benefits received by the Named Executive Officer, including for reserved parking, financial consulting services, and estate planning. The following describes each perquisite in excess of +$25,000. +Executive Officer +Company +Contributions +to Retirement +Plans +Insurance Premiums +Thomas E. Jorden, CEO +2020 +$ +39,000 +$ +67,223 +2019 +$ +38,000 +$ +67,223 +2018 +$ +48,000 +$ +45,722 +G. Mark Burford, CFO +2020 +$ +39,000 +$ +25,346 +2019 +$ +38,000 +$ +25,346 +2018 +$ +48,000 +$ +19,658 +John A. Lambuth, EVP +2020 +$ +39,000 +$ +28,453 +2019 +$ +38,000 +$ +28,453 +2018 +$ +48,000 +$ +23,786 +Stephen P. Bell, EVP +2020 +$ +39,000 +$ +27,031 +2019 +$ +38,000 +$ +29,743 +2018 +$ +48,000 +$ +23,595 +Francis B. Barron, SVP +2020 +$ +39,000 +$ +21,940 +Joseph R. Albi, Former COO +2020 +$ +39,000 +$ +2,485 +2019 +$ +38,000 +$ +31,956 +2018 +$ +48,000 +$ +24,295 +(4) This is the first year Mr. Barron is included as an NEO in the Summary Compensation Table. +Therefore, information is reported only for the 2020 fiscal year. +(5) Represents the payment of the pro-rata portion of Mr. Albi's 2020 annual cash incentive +award through his retirement as an employee on July 1, 2020 based on the Company's 2020 performance. See "Potential Payments Upon Change in Control or Termination—Severance +Arrangements for Former COO." +2020 GRANTS OF PLAN-BASED AWARDS +§ 2020 +Non-Equity Incentive Plan +The following table describes the target and maximum amounts of annual cash incentive awards for the CEO and other NEOs and the actual award paid in March 2021 +for 2020 services. The non-equity incentive plan provides for no minimum (threshold) award. The amounts listed in the "Target" column represent 125% of the year-end base salary for CEO and 100% of the +year-end base salary for other NEOs. The amounts listed in the "Maximum" column represent 250% of year-end base salary for CEO and 200% of +Cimarex +Energy +Co. +61 +Table of Contents +EXECUTIVE COMPENSATION TABLES +the +year-end base salary for other NEOs. See the description of our annual cash incentive award plan in "CD&A—Section 2." +Estimated Future Payouts Under Non-Equity Incentive Plan +Actual Award Paid +Name +Threshold +Target +Maximum +in March 2021 +Thomas E. Jorden, CEO +$ +0 +$ +1,280,813 +$ +2,561,625 +$ +1,240,000 +G. Mark Burford, CFO +$ +0 +$ +515,000 +$ +1,030,000 +$ +490,000 +John A. Lambuth, EVP +$ +0 +$ +600,000 +$ +1,200,000 +$ +570,000 +Stephen P. Bell, EVP +$ +0 +$ +538,400 +$ +1,076,800 +$ +520,000 +Francis B. Barron, SVP +$ +0 +$ +461,600 +$ +923,200 +$ +440,000 +Joseph R. Albi, Former COO +$ +0 +$ +650,300 +$ +1,300,600 +$ +310,000 (1[nc_te,h]) +(1) Mr. Albi retired as an employee effective +July 1, 2020 and received a pro rata share of his annual cash incentive based on the Company's 2020 performance pursuant to a Succession Agreement entered into in connection with his +retirement. See "Potential Payments Upon Change in Control or Termination—Severance Arrangements for Former +COO." +§ 2020 +Equity Incentive Plan Awards +The following table provides information regarding the awards of restricted stock made to the NEOs in 2020. No option awards were made in 2020. See +"CD&A—Section 2—Long-Term Equity Incentive Award Program," for more information about these awards. +Type of +Award +Grant +Comp. +Comm. +Approval +Estimated Future Payouts Under Equity Incentive Plan Awards +(in shares) (2) +All Other Stock +Awards: +Number of +Grant Date +Fair Value of +Stock & +Option +Name +Award (1) +Date +Date +Threshold +Target +Maximum +Shares (3) +Awards (4) +Thomas E. Jorden, CEO +PSA +12/10/2020 +12/10/2020 +25,646 +102,583 +205,166 +— +$ +4,250,000 +RSA +12/10/2020 +12/10/2020 +— +— +— +107,978 +$ +4,250,000 +G. Mark Burford, CFO +PSA +12/10/2020 +12/10/2020 +6,940 +27,758 +55,516 +— +$ +1,150,000 +RSA +12/10/2020 +12/10/2020 +— +— +— +29,217 +$ +1,150,000 +John A. Lambuth, EVP +PSA +12/10/2020 +12/10/2020 +9,353 +37,413 +74,826 +— +$ +1,550,000 +RSA +12/10/2020 +12/10/2020 +— +— +— +39,380 +$ +1,550,000 +Stephen P. Bell, EVP +PSA +12/10/2020 +12/10/2020 +9,052 +36,206 +72,412 +— +$ +1,500,000 +RSA +12/10/2020 +12/10/2020 +— +— +— +38,110 +$ +1,500,000 +Francis B. Barron, SVP +PSA +12/10/2020 +12/10/2020 +6,034 +24,137 +48,274 +— +$ +1,000,000 +RSA +12/10/2020 +12/10/2020 +— +— +— +25,407 +$ +1,000,000 +(1) "PSA" = Performance stock awards. "RSA" = +Restricted stock awards +(2) The amounts in these columns represent the threshold, +target and maximum payouts for the performance stock awards granted to each NEO during the 2020 fiscal year. The number of shares shown in the "Threshold" column reflects the lowest possible payout +(other than zero) of the number of performance shares granted. If performance is below the threshold, no shares are paid. The number of shares shown in the "Target" column reflects a payout of 100% of +the number of performance shares granted. The number of shares shown in the "Maximum" column reflects the highest possible payout of 200% of the number of performance shares granted. The actual payout +of shares may be anywhere between 0% and 200% of the number of performance shares granted depending on the Company's performance at the end of the three-year performance period. Performance stock +award vesting in excess of 100% will be paid in cash rather than shares. See "CD&A—Section 2—Key 2020 Compensation Actions" above for more discussion of the performance +stock awards. +(3) The amounts in this column represent the time-based +restricted stock granted to the NEOs on the noted date. These restricted shares will vest on December 1, 2023 based on continuous service through that +date. +(4) For performance shares, represents the estimated fair +value of the shares as of the grant date using a multiple probability simulation model. The estimated fair value is the aggregate compensation cost to be recognized over the service +period. +62 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +EXECUTIVE COMPENSATION TABLES +OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2020 +STOCK AWARDS +Equity Incentive Plan Awards That Have Not Vested +Name +No. of Shares +Market Value of +Unearned Shares (1) +Thomas E. Jorden, CEO +440,657 (2) +$ +16,529,044 +G. Mark Burford, CFO +144,764 (3) +$ +5,430,098 +John A. Lambuth, EVP +176,315 (4) +$ +6,613,576 +Stephen P. Bell, EVP +170,449 (5) +$ +6,393,542 +Francis B. Barron, SVP +112,864 (6) +$ +4,233,529 +(1) The amount in this column reflects the closing market price of the stock of $37.51 on +December 31, 2020 (the last trading day of 2020) multiplied by the number of shares reported in the previous column. +(2) 45,756 shares will vest on December 1, 2021, and between a minimum of 19,111 and a maximum +of 76,446 shares could vest on December 1, 2021, 72,844 shares will vest on December 1, 2022, and between a minimum of 18,318 and a maximum of 146,546 shares could vest on +December 1, 2022, and 107,978 shares will vest on December 1, 2023, and between a minimum of 25,646 and a maximum of 102,583 shares could vest on December 1, +2023. +(3) 18,236 shares will vest on December 1, 2021, and between a minimum of 7,617 and a maximum +of 30,468 shares could vest on December 1, 2021, 27,080 shares will vest on December 1, 2022, and between a minimum of 6,810 and a maximum of 54,478 shares could vest on +December 1, 2022, and 29,217 shares will vest on December 1, 2023, and between a minimum of 6,940 and a maximum of 27,758 shares could vest on December 1, +2023. +(4) 19,894 shares will vest on December 1, 2021, and between a minimum of 8,309 and a maximum +of 33,237 shares could vest on December 1, 2021, 31,412 shares will vest on December 1, 2022, and between a minimum of 7,899 and a maximum of 63,194 shares could vest on +December 1, 2022, and 39,380 shares will vest on December 1, 2023, and between a minimum of 9,353 and a maximum of 37,413 shares could vest on December 1, +2023. +(5) 19,231 shares will vest on December 1, 2021, and between a minimum of 8,032 and a maximum +of 32,129 shares could vest on December 1, 2021, 30,329 shares will vest on December 1, 2022, and between a minimum of 7,627 and a maximum of 61,016 shares could vest on +December 1, 2022, and 38,110 shares will vest on December 1, 2023, and between a minimum of 9,052 and a maximum of 36,206 shares could vest on December 1, +2023. +(6) 12,599 shares will vest on December 1, 2021, and between a minimum of 5,263 and a maximum +of 21,050 shares could vest on December 1, 2021, 20,039 shares will vest on December 1, 2022, and between a minimum of 5,039 and a maximum of 40,314 shares could vest on +December 1, 2022, and 25,407 shares will vest on December 1, 2023, and between a minimum of 6,034 and a maximum of 24,137 shares could vest on December 1, +2023. +Cimarex +Energy +Co. +63 +Table of Contents +EXECUTIVE COMPENSATION TABLES +2020 OPTION EXERCISES AND RESTRICTED STOCK VESTED +2020 OPTION EXERCISES +2020 STOCK VESTING (1) +Name +Number of Shares +Acquired on Exercise +(#) +Value Realized on +Exercise +($) +Number of Shares +Acquired on Vesting +(#) +Value Realized on +Vesting +($) +Thomas E. Jorden, CEO +-- +$ +-- +44,713 +$ +1,616,822 +G. Mark Burford, CFO +-- +$ +-- +16,209 +$ +586,117 +John A. Lambuth, EVP +-- +$ +-- +19,003 +$ +687,148 +Stephen P. Bell, EVP +-- +$ +-- +17,606 +$ +636,633 +Francis B. Barron, SVP +-- +$ +-- +11,737 +$ +424,410 +Joseph R. Albi, Former COO (2) +-- +$ +-- +137,528 +$ +3,385,939 +(1) The restricted shares that vested in December 2020 as shown in the table consisted of performance +shares granted to the NEOs in December 2017. The following is a comparison of the Grant Date Fair Value ("GDFV") of the performance shares granted in December 2017 to the value realized upon vesting +of those performance shares in December 2020. The Value Realized Upon Vesting was less than the GDFV because the Company's ranking in relative stock price performance compared to its Stock Performance +Peer Group over the vesting period resulted in 50% vesting. +(2) Includes accelerated vesting of restricted stock awards held by Mr. Abi upon his +retirement as an employee on July 1, 2020. See Potential Payments Upon Change in Control or Termination—Severance Arrangements for Former COO. +Name +Performance +Shares +Granted in +December +2017 +GDFV of +Performance +Shares +Granted +in +December +2017 +Performance +Shares +Vested +in +December +2020 +Value +Realized +Upon +Vesting +in +December +2020 +GDFV +Compared +to +Realized +Value +Value +Realized +as +Percentage +of GDFV +Thomas E. Jorden, CEO +89,425 +$ +8,000,000 +44,713 +$ +1,616,822 +$ +(6,383,178 +) +20% +G. Mark Burford, CFO +32,417 +$ +2,900,000 +16,209 +$ +586,117 +$ +(2,313,883 +) +20% +John A. Lambuth, EVP +38,006 +$ +3,400,000 +19,003 +$ +687,148 +$ +(2,712,852 +) +20% +Stephen P. Bell, EVP +35,211 +$ +3,150,000 +17,606 +$ +636,633 +$ +(2,513,367 +) +20% +Francis B. Barron, SVP +23,474 +$ +2,100,000 +11,737 +$ +424,410 +$ +(1,675,590 +) +20% +Joseph R. Albi, Former COO (3) +38,006 +$ +3,400,000 +38,006 +$ +935,707 +$ +(2,464,293 +) +28% +(3) The above chart and table reflect Mr. Albi's accelerated vesting of 2017 performance-based +equity awards at target level upon his retirement as an employee on July 1, 2020. See Potential Payments Upon Change in Control or Termination—Severance Arrangements for Former COO. +64 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +EXECUTIVE COMPENSATION TABLES +2020 NONQUALIFIED DEFERRED COMPENSATION +The following table provides information on the Supplemental Savings Plan (the "SSP") contributions and earnings for our +NEOs in each of the last three fiscal years. Under the terms of the SSP, a participant may make an elective contribution to the SSP of an amount that exceeds the maximum amount permitted to be +contributed to his account in the Cimarex 401(k) Plan (an "excess contribution") provided that the excess contribution does not exceed the dollar limitation on elective deferrals under the Internal +Revenue Code section 402(g) in effect on January 1 of the calendar year of deferral (2020 limitation was $19,500). Cimarex will match 100% of the excess contributions up to 7% of a +participant's eligible compensation. A participant also may elect to have up to 50% of his or her base salary and up to 100% of his or her bonus withheld from his or her compensation and allocated to +his or her SSP account. Cimarex does not match these contributions. +Name +Executive +Contributions (1) +Registrant +Contributions (2) +Aggregate +Earnings +Aggregate +Withdrawals/ +Distributions +Aggregate Balance +at FYE +Thomas E. Jorden, CEO +2020 +$ +19,500 +$ +19,500 +$ +73,791 +$ +-- +$ +1,179,416 +(3) +2019 +$ +19,000 +$ +19,000 +$ +48,652 +$ +-- +$ +973,596 +2018 +$ +18,500 +$ +18,500 +$ +6,235 +$ +-- +$ +786,458 +G. Mark Burford, CFO +2020 +$ +19,500 +$ +19,500 +$ +75,231 +$ +-- +$ +568,862 +(3) +2019 +$ +19,000 +$ +19,000 +$ +84,437 +$ +-- +$ +455,089 +2018 +$ +18,500 +$ +18,500 +$ +<23,201> +$ +-- +$ +333,099 +John A. Lambuth, EVP +2020 +$ +19,500 +$ +19,500 +$ +135,291 +$ +-- +$ +1,099,044 +(3) +2019 +$ +19,000 +$ +19,000 +$ +126,055 +$ +— +$ +885,535 +2018 +$ +54,726 +$ +18,500 +$ +<30,733> +$ +-- +$ +684,459 +Stephen P. Bell, EVP +2020 +$ +19,500 +$ +19,500 +$ +42,336 +$ +-- +$ +988,282 +(3) +2019 +$ +19,000 +$ +19,000 +$ +19,000 +$ +-- +$ +871,118 +2018 +$ +18,500 +$ +18,500 +$ +13,377 +$ +-- +$ +777,442 +Francis B. Barron, SVP (4) +2020 +$ +19,500 +$ +19,500 +$ +203,915 +$ +-- +$ +1,651,241 +(3) +Joseph R. Albi, Former COO +2020 +$ +19,500 +$ +19,500 +$ +<3,507> +$ +-- +$ +964,454 +(3) +2019 +$ +19,000 +$ +19,000 +$ +165,255 +$ +-- +$ +929,419 +2018 +$ +18,500 +$ +18,500 +$ +<53,681> +$ +-- +$ +726,610 +(1) The amounts included in this column also are included in the "Salary" column in the "Summary Compensation Table." +(2) The amounts reported in this column also are included in the "All Other Compensation" column and footnote 3 thereto +in the "Summary Compensation Table." +(3) The following table sets forth amounts included in the aggregate balance at December 31, 2020 that were +reported as compensation to the NEO in the Summary Compensation Table for previous years. +Cimarex +Energy +Co. +65 +Table of Contents +EXECUTIVE COMPENSATION TABLES +(4) This is the first year Mr. Barron is included as an NEO in the executive compensation tables. Therefore, +information is reported only for the 2020 fiscal year. +NEO +Amount of Previously +Reported Compensation +Thomas E. Jorden, CEO +$ +830,246 +G. Mark Burford, CFO +$ +299,883 +John A. Lambuth, EVP +$ +597,399 +Stephen P. Bell, EVP +$ +655,320 +Francis B. Barron, SVP +$ +-- +Joseph R. Albi, Former COO +$ +538,843 +CEO PAY RATIO +The 2020 annual total compensation of our CEO, as shown in the "Summary Compensation Table" above, was $10,781,093. The annual total +compensation of Cimarex's identified median employee was $143,424 in 2020. This results in a ratio of 75 to 1. +The +median employee was identified from our total employee population as of December 31, 2020. Not including the CEO, this represents 739 full-time and seven part-time or seasonal employees. We +calculated the median total compensation by an array of wages from lowest to highest reflected as Medicare Taxable Earnings as reported on Internal Revenue Service Form W-2 (Box 5) for +2020. We made no assumptions, adjustments, or estimates with regard to total compensation, and we did not annualize the compensation for any employees that we did not employ the entire year. +POTENTIAL PAYMENTS UPON CHANGE IN CONTROL OR TERMINATION +Post-termination benefits are not included in the Compensation Committee's analysis of total compensation. +We +are obligated to make certain payments to employees, including our NEOs, or to accelerate the vesting of their equity awards pursuant to the following plans and +agreements: +§ Severance Compensation Agreements with NEOs; § 2002 Stock Incentive +Plan, 2011 Equity Incentive Plan, 2014 Equity +Incentive Plan, and 2019 Equity Incentive Plan that govern all equity awards made to Directors and employees, including the NEOs; and § Supplemental +Savings Plan. +Our +change in control arrangements keep our senior executives focused on pursuing all corporate transaction activity that is in the best interests of shareholders regardless of whether those +transactions +may result in their own job losses. Uncertainty created by a corporate transaction can create retention risk for a company. In addition, change in control protection is often needed to retain and +attract, when necessary, the best talent because many of the companies with whom we compete for talent provide change in control protection. +66 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +EXECUTIVE COMPENSATION TABLES +We +do not have a formal program to pay severance benefits nor do our equity award agreements provide for acceleration of equity awards upon the retirement of the NEOs. In connection with the +retirement of Joseph R. Albi as an employee on July 1, 2020, we entered into a Succession Agreement with Mr. Albi pursuant to which he was paid certain amounts and had certain equity +awards accelerated. See "Severance Arrangements for Former COO" below. +§ Change in Control +We are obligated under the Severance Compensation Agreements with NEOs to pay benefits upon a "change in control" event. Cimarex's definition of "change in control" as used in +its 2002 Stock Incentive Plan, its 2011 Equity Incentive Plan, its 2014 Equity Incentive Plan and its 2019 Equity Incentive Plan, and its Severance Compensation Agreements with NEOs are the same. In +summary, a change in control event means any of the following: +§ Acquisition of 30% or more of the shares of our outstanding common +stock or the combined voting power of voting securities of Cimarex by an individual or group; § Members of our Board of Directors, or Directors nominated +by those +Directors, cease to constitute a majority of the Directors during any twelve-month period; § A reorganization, share exchange or merger unless +(i) the +shareholders prior to the reorganization or merger continue to own more than 40% of the outstanding common stock and combined voting power of the resulting corporation following the reorganization or +merger, and (ii) at least a majority of the members of the Board of the corporation resulting from the merger or reorganization were members of the Board at the time of executing the agreement +to reorganize or merge; or § The complete liquidation or dissolution of Cimarex or the sale of +all or substantially all of its assets. +§ Severance Compensation Agreements +On March 9, 2020, we entered into Severance Compensation Agreements (the "Agreements") with each of the NEOs. The Company believes that the Agreements are a fair and +appropriate step to ensure the NEOs' continued employment, attention and dedication, and to ensure the NEOs' continued service, notwithstanding the possibility or threat of a change in control or +involuntary termination of employment without cause. The Committee received input from Longnecker and outside counsel before the Agreements were finalized. The Agreements supersede any prior +agreements with or plans covering the NEOs. +Under +the Agreements, each NEO is entitled to separation benefits in the event that the NEO's employment is terminated by the Company without cause or by the NEO for "good reason" in certain +circumstances, including a reduction in the NEO's base salary, a material reduction in the NEO's annual incentive compensation opportunity (with certain exceptions), or a material geographic +relocation other than in +connection with the change of the Company's headquarters to Tulsa, Midland or Houston, in each case which the Company has failed to cure. +Cimarex +Energy +Co. +67 +Table of Contents +EXECUTIVE COMPENSATION TABLES +Separation Benefits +The +following table summarizes the separation benefits to be received by an NEO upon termination under the circumstances described above, prior to a change in control (as defined below) of the +Company: +In the Event of a Termination Without Cause or +For Good Reason +CEO +All Other NEOs +Multiple of Base Salary +2.0x +1.5x +Multiple of Average Bonus +2.0x +1.5x +Current Year Bonus +Pro rated +Pro rated +Years of Medical Benefit Continuation +2 years +1.5 years +Excise Tax Gross Up +None +None +The +following table summarizes the separation benefits to be received by an NEO if such a termination occurs within 24 months after a change in control, which is commonly referred to as a +"double trigger": +In the Event of a Change-in-Control +CEO +All Other Executive +Officers +Multiple of Base Salary +3.0x +2.0x +Multiple of Average Bonus +3.0x +2.0x +Current Year Bonus +Pro rated +Pro rated +Years of Medical Benefit Continuation +3 years +2 years +Excise Tax Gross Up +None +None +The +severance payment based on base salary and average bonus is payable in monthly installments of 36 months for the CEO and 24 months for the other NEOs. The severance payment based on +the pro rated bonus for the current year is payable in a lump sum. The NEOs will not receive any tax gross up for taxes related to the severance payments. +Treatment of Equity Awards +In +the event of a qualifying termination prior to the occurrence of a change in control, the NEO's outstanding equity awards will be treated as follows: (i) all outstanding time-vested equity +awards will vest on a pro rata basis on the date of the qualified termination, based on the period of continuous service elapsed in the vesting period as of the date of the qualifying termination as +compared to the total duration of the vesting period, and (ii) all outstanding performance-vested equity awards shall first be reduced on a pro rata basis as of the date of the qualifying +termination (such remaining portion of the awards being the "Remaining Portion"), and the Remaining Portion shall then vest, if at all, based on the performance measures set forth in the award +agreements at the end of the relevant vesting period(s), provided that the NEO executes additional one-year non-solicitation agreements each year following the expiration of the one-year +non-solicitation period set forth in the Agreement, such that the NEO remains subject to a non-solicitation covenant continuously from the date of the qualifying termination through the end of the +relevant vesting period(s). If the NEO fails to execute any such additional non-solicitation agreement, the Remaining Portion(s) of all then-outstanding performance-vested equity awards shall +immediately be forfeited upon expiration of the then-current non-solicitation period. +68 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +EXECUTIVE COMPENSATION TABLES +In +the event an NEO remains employed through the date of a Change in Control, the NEO's outstanding equity awards shall be treated as set forth in the applicable equity incentive plan(s) and award +agreements. +Confidentiality, Non-Compete and Non-Solicitation Obligations +As +consideration for the separation benefits under the Agreements, the NEOs agreed to certain confidentiality obligations with respect to proprietary information of the Company gained as a result of +their employment. In addition, the NEOs are subject to non-compete provisions under the Agreements, which prohibit them from engaging in any competitive business, as defined in the Agreements, during +the term of the Agreements or for a period of one year following termination within certain geographical boundaries based on the locations where the Company does business. The NEOs also are prohibited +during the term of the Agreement and for one year following termination from soliciting the services of any employee of the Company or the business of any person who was a client or customer of the +Company. To receive the severance benefits after a qualifying termination or change in control, the NEO is required to sign a general release of claims within 60 days after termination. +§ Termination of Employment Related to Death or Disability +The award agreements for grants of equity under our 2002 Stock Incentive Plan, and the provisions of our 2011 Equity Incentive Plan, our 2014 Equity Incentive Plan and our 2019 +Equity Incentive Plan, provide for acceleration of vesting of awards in the event of death or disability. No benefits are payable under the Severance Compensation Agreements upon death or disability. +§ Supplemental Savings Plan +After termination of employment for any reason, NEOs who are participants in our Supplemental Savings Plan (the "SSP") will receive deferred compensation payments at the times +they elected under the SSP. For a description of the SSP, a summary of the contributions and earnings for our NEOs under the SSP in each of the last three fiscal years, and the current balances of +each NEO's account at December 31, 2020 that would be distributable following termination of employment, please see "2020 Nonqualified Deferred Compensation" above. +§ Estimated Benefits upon Various Termination Scenarios +The following table summarizes potential payments to each of our NEOs in connection with certain termination events, including an involuntary termination without cause or +resignation for good reason without a change in control, an involuntary termination within a change in control period, a change in control without termination of employment, as these events are +described above in "—Severance +Cimarex +Energy +Co. +69 +Table of Contents +EXECUTIVE COMPENSATION TABLES +Compensation +Agreements," and termination due to death or disability, which is not covered by the Severance Compensation Agreements but is addressed in our equity plans. +Name +Involuntary +Termination Without +Cause or Resignation +for Good Reason +Outside of a Change +of Control Period (1) +Involuntary +Termination Within +a Change of +Control +Period (2) +Change of Control; +No Termination (3) +Termination Due +to Death or +Disability (4) +Thomas E. Jorden, CEO +Average Annual Cash Compensation +$ +4,337,194 +$ +6,505,791 +$ +— +$ +— +Current Year Pro Rated Bonus +$ +1,196,500 +$ +1,196,500 +$ +— +$ +— +Long Term Award Payout (5) +$ +4,303,015 +$ +16,529,044 +$ +16,529,044 +$ +16,529,044 +Continued Benefits +$ +179,709 +$ +$269,564 +$ +— +$ +— +TOTAL (6) +$ +10,016,418 +$ +24,500,899 +$ +16,529,044 +$ +16,529,044 +G. Mark Burford, CFO +Average Annual Cash Compensation +$ +1,448,771 +$ +1,931,695 +$ +— +$ +— +Current Year Pro Rated Bonus +$ +465,000 +$ +465,000 +$ +— +$ +— +Long Term Award Payout (5) +$ +1,642,699 +$ +5,430,098 +$ +5,430,098 +$ +5,430,098 +Continued Benefits +$ +71,966 +$ +95,954 +$ +— +$ +— +TOTAL (6) +$ +3,628,436 +$ +7,922,747 +$ +5,430,098 +$ +5,430,098 +John A. Lambuth, EVP +Average Annual Cash Compensation +$ +1,614,049 +$ +2,152,065 +$ +— +$ +— +Current Year Pro Rated Bonus +$ +525,000 +$ +525,000 +$ +— +$ +— +Long Term Award Payout (5) +$ +1,853,180 +$ +6,613,576 +$ +6,613,576 +$ +6,613,576 +Continued Benefits +$ +76,625 +$ +102,167 +$ +— +$ +— +TOTAL (6) +$ +4,068,854 +$ +9,392,808 +$ +6,613,576 +$ +6,613,576 +Stephen P. Bell, EVP +Average Annual Cash Compensation +$ +1,529,030 +$ +2,038,707 +$ +— +$ +— +Current Year Pro Rated Bonus +$ +495,000 +$ +495,000 +$ +— +$ +— +Long Term Award Payout (5) +$ +1,790,505 +$ +6,393,542 +$ +6,393,542 +$ +6,393,542 +Continued Benefits +$ +54,793 +$ +73,057 +$ +— +$ +— +TOTAL (6) +$ +3,869,328 +$ +9,000,306 +$ +6,393,542 +$ +6,393,542 +Francis B. Barron, SVP +Average Annual Cash Compensation +$ +1,300,601 +$ +1,734,134 +$ +— +$ +— +Current Year Pro Rated Bonus +$ +417,500 +$ +417,500 +$ +— +$ +— +Long Term Award Payout (5) +$ +1,178,225 +$ +4,233,529 +$ +4,233,529 +$ +4,233,529 +Continued Benefits +$ +66,857 +$ +89,142 +$ +— +$ +— +TOTAL (6) +$ +2,963,182 +$ +6,474,305 +$ +4,233,529 +$ +4,233,529 +(1) This column represents the amounts that would have been payable to the NEO in the event that the NEO's employment +was terminated by the Company on December 31, 2020 without cause or by the NEO for "good reason" not involving a change in control. In this event, the CEO receives 2 times and the other NEOs +receive 1.5 times their average annual cash compensation (salary plus annual cash incentive award) for the last two years, their pro rated cash incentive award for the current year, and pro rated +vesting of equity awards. See "—Separation Compensation Agreements" above. This column assumes performance-based awards remaining after pro ration achieved 100% vesting based on satisfying +performance objectives at the end of the respective performance periods. +(2) This column represents the amounts that would have been payable to the NEO in the event that the NEO's employment +is terminated by the Company on December 31, 2020 without cause or by the NEO for "good reason" within two years after a change in control. In this event, the CEO receives 3 times and the other +NEOs receive 2 times their average annual cash compensation (salary plus annual cash incentive award) for the last two years, their pro rated cash incentive award for the current year, and full +vesting of time based equity awards and vesting of performance based equity awards assuming the performance period ended on the date of the change in control. See "—Separation Compensation +Agreements" above. This column assumes all performance-based awards achieved 100% vesting. +70 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +EXECUTIVE COMPENSATION TABLES +(3) This column represents the amounts that would have been payable in the event a change in control occurs on +December 31, 2020 and the NEOs remain employed by the Company. In this event, no severance benefits are payable under the Severance Compensation Agreements and the NEOs' outstanding equity +awards are treated as set forth in the applicable equity incentive plan(s) and award agreements. Our equity incentive plans provide for acceleration of vesting of time-based equity awards in the event +of a change in control. Vesting of performance awards upon a change in control is based on the actual performance through date of the change in control rather than the full performance period. This +column assumes all performance-based awards achieved 100% vesting. +(4) This column represents the amounts that would have been payable in the event an NEO died or became disabled on +December 31, 2020. The award agreements for grants of equity under our equity plans and the provisions of those equity plans provide for acceleration of vesting of awards in the event of death +or disability. No benefits are payable under the Severance Compensation Agreements upon death or disability. +(5) For purposes of this table, the "Long Term Award Payout" is based on the closing price for the Company's common +stock on December 31, 2020 of $37.51. +(6) The total represents the maximum value of the payments and benefits that the executive would have received upon the +occurrence of a change of control or the referenced termination of employment. However, if the total amount of payments and benefits to be provided to the NEO would cause the NEO to incur "golden +parachute" excise tax liability, then any payments and benefits provided under the executive's employment agreement may be reduced to the extent necessary to eliminate the application of the excise +tax if that will leave the executive in a better after-tax position than if no such reduction had occurred. Accordingly, the total value of the payments and benefits that the executive would receive +under such circumstances may be less than the total reflected in the table. There are no "gross up" payments for excise taxes that may be imposed. +§ Severance Arrangements for Former COO +Effective July 1, 2020, the Company entered into a Succession Agreement with Joseph R. Albi, Cimarex's former COO. Effective July 1, 2020, the Company and +Mr. Albi agreed to certain compensatory arrangements. Mr. Albi was a founder of the Company and, to continue to provide Mr. Albi's expertise and guidance to the Company during the +business environment resulting from the COVID-19 pandemic, oil and gas demand destruction, and industry volatility, Mr. Albi agreed, after his retirement as an employee on July 1, 2020, +to remain a director of the Company until immediately following the annual meeting of shareholders of the Company to be held in May 2021, at which time his term as a director will expire (the +"Director Term Expiration Date"). In consideration of Mr. Albi's service as a founder and his role in the development and success of the Company, and his agreeing to continue to serve on the +Board providing his expertise and guidance to the Company during an uncertain business environment, the Board agreed to enter into a Succession Agreement with Mr. Albi with terms including the +following: +§ Vesting of all time-based equity awards held by +Mr. Albi; § Vesting of performance-based equity awards held by Mr. Albi +at target level; § Mr. Albi was entitled to a portion of his short term +incentive annual cash incentive award ("STI Award") for 2020 based on the pro rata period from January 1, 2020 through his retirement date payable at the same time that other executive officers +are paid their STI Awards based on the actual performance for the STI Awards as determined by the Compensation Committee; § Mr. Albi agreed to +certain non-disclosure, non-competition, +non-solicitation, and non-disparagement restrictions; and § Mr. Albi executed a general release of potential claims +against the Company. +The +vested equity awards are included in the "2020 Option Exercises and Restricted Stock Vested" table above. Mr. Albi's pro rata STI Award is included under the "Non-Equity Incentive Plan +Comp" column in the "Summary Compensation Table" above. +Cimarex +Energy +Co. +71 +Table of Contents +EXECUTIVE COMPENSATION TABLES +As +a non-management director for the period from July 1, 2020 until the Director Term Expiration Date, Mr. Albi received a pro rata portion of non-management director compensation, +consisting of an annual cash retainer of $105,000, which was temporarily reduced by 20% from June 1, 2020 until December 1, 2020 due to the business environment resulting from the +COVID-19 pandemic, oil and gas demand destruction, and industry volatility, and restricted stock with a value of $200,000. As a result of the pro ration and temporary reduction in fees, +Mr. Albi received $87,500 for the retainer and restricted shares with a value of $183,333. The restricted shares vest on May 1, 2021 or the earlier termination of service as a director +other than because of removal. +DIRECTOR AND OFFICER INDEMNIFICATION AGREEMENTS +We have entered into indemnification agreements with our Directors and certain officers. These agreements require us, among other things, to +indemnify such persons against certain liabilities that may arise by reason of their status or service as Directors or officers, to advance their expenses incurred as a result of a proceeding for +which they may be indemnified, and to cover them under any Directors' and officers' liability insurance policy that we choose, in our discretion, to maintain. These indemnification agreements are +intended to provide indemnification rights to the fullest extent permitted under applicable Delaware law and will be in addition to any other rights that the indemnitee may have under our Restated +Certificate of Incorporation, Bylaws, and applicable law. +72 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +NON-EMPLOYEE DIRECTOR COMPENSATION +NON-EMPLOYEE DIRECTOR COMPENSATION +Our Compensation Committee administers our Director compensation program. Total Director compensation is designed to be near the +50th percentile of that paid by comparable public oil and gas companies with similar market capitalization and revenue. We use the same group of companies in reviewing Director compensation as +we use in reviewing executive base salary and total direct compensation. See "CD&A—Section 1—Competitive Positioning" for a list of, and the methodology followed in +selecting, these companies. The Compensation Committee uses its independent compensation consultant, Longnecker & Associates, to review and make recommendations concerning Director +compensation. The Compensation Committee, after reviewing the consultant's recommendations with the CEO, recommends Director compensation for Board consideration and approval at the Board meeting held +following each year's Annual Meeting of Shareholders. Payment of the annual component of Director compensation occurs on June 1 of each year. +For +2020, compensation for non-employee Directors consisted of the following: +Compensation +Amount +Annual Cash Retainer +(payable on June 1 of each year) +$105,000 +Annual Equity Retainer +(comprised of restricted stock that vests on the earlier of (i) the termination of the service as a Director other than because of removal or (ii) May 1 of the following year) +$200,000 +Committee Chair Fee +(for Audit Committee and Compensation Committee; also for Nominating and Corporate Governance Committee Chair if the Nominating and Corporate Governance Committee Chair is not the Lead Director) +$20,000 +Lead Director Fee +(who also acts as Nominating and Corporate Governance Committee Chair) +$40,000 +Board Meeting Attendance Fee +None +Committee Meeting Attendance Fee +None +At +the April 30, 2020 meeting, the Board, on the recommendation of the Compensation Committee and the Compensation Committee's independent compensation consultant, and based on a study of peers +and market trends, recommended no changes to Director compensation. Also at that meeting, due to the impacts of the COVID-19 pandemic and oil and gas demand destruction, the cash fees payable to +directors were reduced by 20% beginning on June 1, 2020. The cash fees returned to the levels set forth in the table above effective December 1, 2020. +Cimarex +Energy +Co. +73 +Table of Contents +NON-EMPLOYEE DIRECTOR COMPENSATION +§ Non-Employee Director 2020 Compensation +The following table discloses compensation earned by or paid to non-employee Directors in 2020. +Name +Fees Paid in Cash (1) +Stock Awards (2) +All Other +Compensation (3) +Total +Joseph R. Albi (4) +$ +87,500 +$ +183,333 +$ +3,062 +$ +273,895 +Paul N. Eckley +$ +94,500 +$ +200,000 +$ +3,907 +$ +298,407 +Hans Helmerich +$ +94,500 +$ +200,000 +$ +11,508 +$ +306,008 +Kathleen A. Hogenson +$ +94,500 +$ +200,000 +$ +3,764 +$ +298,264 +Harold R. Logan, Jr. +$ +130,500 +$ +200,000 +$ +3,907 +$ +334,407 +Floyd R. Price +$ +112,500 +$ +200,000 +$ +3,907 +$ +316,407 +Monroe W. Robertson +$ +112,500 +$ +200,000 +$ +3,907 +$ +316,407 +Lisa A. Stewart +$ +94,500 +$ +200,000 +$ +3,907 +$ +298,407 +Frances M. Vallejo +$ +94,500 +$ +200,000 +$ +3,907 +$ +298,407 +(1) Represents fees earned or paid for services as a Director during 2020, including the annual cash retainer fee, +Committee Chair fee and Lead Director fee. Due to the impacts of the COVID-19 pandemic and oil and gas demand destruction, the cash fees payable to Directors were reduced by 20% for the period from +June 1, 2020 through December 1, 2020. +(2) Represents the aggregate grant date fair value of the 7,291 shares of restricted stock as of the +June 1, 2020 grant date. +(3) Consists of dividends paid during 2020 on unvested restricted stock awards and dividend +equivalents paid during 2020 on deferred compensation units that settle in shares of common stock. +(4) As a non-management Director for the period from July 1, 2020 until the Director Term +Expiration Date, Mr. Albi received a pro rata portion of non-management director compensation, consisting of an annual cash retainer of $105,000, which was temporarily reduced by 20% from +June 1, 2020 until December 1, 2020 due to the business environment resulting from the COVID-19 pandemic, oil and gas demand destruction, and industry volatility, and restricted stock +with a value of $200,000. As a result of the pro ration and temporary reduction in fees, Mr. Albi received $87,500 for the retainer and 6,960 restricted shares with a value of $183,333. +The +following table discloses as of December 31, 2020 the aggregate number of outstanding unvested stock awards and the market value of those awards. Market value is based on the closing +trading price of $37.51 on December 31, 2020 (the last trading day of 2020). The Directors have the right to vote and receive dividends on unvested stock awards. There were no outstanding +vested but unexercised option awards as of that date. +Non-Employee Director +Unvested Stock Awards +Market Value +Joseph R. Albi +6,960 +$ +261,070 +Paul N. Eckley +7,291 +$ +273,485 +Hans Helmerich +7,291 +$ +273,485 +Kathleen A. Hogenson +7,291 +$ +273,485 +Harold R. Logan, Jr. +7,291 +$ +273,485 +Floyd R. Price +7,291 +$ +273,485 +Monroe W. Robertson +7,291 +$ +273,485 +Lisa A. Stewart +7,291 +$ +273,485 +Frances M. Vallejo +7,291 +$ +273,485 +In +connection with Mr. Hentschel's retirement from the Board effective May 31, 2019, and Mr. Sullivan's retirement from the Board effective September 30, 2019, the Board +appointed each of them as Director Emeritus for up to a two-year term. As compensation for serving as Director Emeritus, Messrs. Hentschel and Sullivan will each be entitled to a cash retainer +of $85,000 per year; they will not receive any +74 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +NON-EMPLOYEE DIRECTOR COMPENSATION +additional +stock awards as Directors Emeritus. The Company and Messrs. Hentschel and Sullivan also entered into indemnification agreements with substantially the same terms as their Director +indemnification agreements. +Stock Ownership and Holding Requirements +Our Corporate Governance Guidelines require that each non-management Director own Cimarex stock in an amount equal to five times his or her +annual cash retainer. A newly elected Director has five years from the date of his or her initial election or appointment to comply with the Guidelines. Until the stock ownership guidelines are met, a +Director may not sell any Cimarex stock acquired through equity grants except to pay income taxes upon the vesting of awards or to pay the exercise price and related income taxes upon the exercise of +stock options. Restricted stock, restricted stock units, and deferred compensation units are counted in calculating ownership. Shares subject to options are not counted. Based on his or her holdings, +or being in the five-year period to meet the guidelines, as of March 16, 2021, all independent Directors were in compliance with the stock ownership guidelines. +Cimarex +Energy +Co. +75 +Table of Contents +SECURITY OWNERSHIP +SECURITY OWNERSHIP +MANAGEMENT, DIRECTORS AND CERTAIN BENEFICIAL OWNERS +The +following table shows, as of March 16, 2021, the number of shares of common stock "beneficially owned," as determined in accordance with Rule 13d-3 under the Securities Exchange Act +of 1934, by the NEOs, the Directors, and all executive officers and Directors, as a group: +Name of Beneficial Owner +Shares +Beneficially Owned (1) +Percent of Class +Named Executive Officers : +Thomas E. Jorden, CEO (also Director) +679,504 +<1% +G. Mark Burford, CFO +175,253 +<1% +John A. Lambuth, EVP +208,669 +<1% +Stephen P. Bell, EVP +192,953 +<1% +Francis B. Barron, SVP +149,824 +<1% +Directors : +Joseph R. Albi, Former COO +96,628 +<1% +Paul N. Eckley +10,788 +<1% +Hans Helmerich +470,103 +(2) +<1% +Kathleen A. Hogenson +10,072 +<1% +Harold R. Logan, Jr. +18,492 +<1% +Floyd R. Price +24,300 +<1% +Monroe W. Robertson +26,204 +<1% +Lisa A. Stewart +18,784 +<1% +Frances M. Vallejo +14,922 +<1% +All executive officers and Directors as a group (19 persons) +2,525,398 +2% +(1) Includes restricted stock (as well as shares that are subject to +performance-based vesting and time-based vesting more than 60 days after March 16, 2021), direct and indirect ownership of common stock and equivalent shares of common stock held by the +trustee for the benefit of the named individual in the Cimarex Energy Co. 401(k) Plan. Does not include deferred compensation units held by one Director. +(2) Includes 11,450 shares owned by Mr. Helmerich's wife. +Mr. Helmerich disclaims beneficial ownership of the shares held by his wife. Also includes 50,188 shares owned by 1993 Hans Helmerich Trust, of which Mr. Helmerich is the trustee, 11,062 +shares owned by Helmerich Grandchildren LLC, of which Mr. Helmerich is the co-manager, 7,865 shares owned by Family Trust, of which Mr. Helmerich is the trustee, 36,430 shares +owned by The Helmerich Trust, of which Mr. Helmerich is the co-trustee, 325,000 shares held by the Peggy Helmerich QTIP Trust, of which Mr. Helmerich is the trustee, and 10,000 shares +held by Saddleridge, LLC, of which Mr. Helmerich owns 99% and his wife owns 1%. +76 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +SECURITY OWNERSHIP +Each +of the following shareholders beneficially owns five percent or more of our outstanding shares of common stock. The following table provides information regarding their stock ownership and is +based on their filings with the SEC. +Voting Authority +Dispositive Authority +Total Amount of +Beneficial +Ownership +Percent +of Class +Name and Address +Sole +Shared +Sole +Shared +BlackRock, Inc. +55 East 52 nd Street +New York, NY 10055 +8,312,608 +0 +8,672,585 +0 +8,672,585 +(1) +8.5% +Capital World Investors +333 South Hope Street, 55th Floor +Los Angeles, CA 90071 +5,388,122 +0 +5,388,122 +0 +5,388,122 +(2) +5.3% +The Vanguard Group +100 Vanguard Boulevard +Malvern, PA 19355 +0 +72,566 +9,708,434 +159,152 +9,867,586 +(3) +9.68% +(1) Based solely on information as of December 31, 2020 +included in a Schedule 13G/A filed with the SEC on January 29, 2021. +(2) Based solely on information as of December 31, 2020 included in a +Schedule 13G filed with the SEC on February 16, 2021. +(3) Based solely on information as of December 31, 2020 included in a +Schedule 13G/A filed with the SEC on February 10, 2021. +SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE +Section 16(a) of the Securities Exchange Act of 1934 requires our Directors and executive officers, and persons who own more than 10% +of our common stock, to file reports of ownership of, and transactions in, our common stock with the SEC. Based on a review of such reports, and on written representations from our reporting persons, +we believe that all reports were timely filed in 2020. +Cimarex +Energy +Co. +77 +Table of Contents +ITEM 2: ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION +ITEM 2: ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION +At the 2020 Annual Meeting of Shareholders, 96% of the votes cast were in favor of the advisory vote to approve executive compensation. In +addition to the advisory vote, as part of our regular shareholder engagement, we consider and discuss with shareholders a number of matters throughout the year, including executive compensation and +governance. The Compensation Committee considers any feedback and routinely reviews executive compensation practices and governance. +Based +on feedback received during shareholder engagement in 2019 and the results of the 2019 shareholder advisory vote on executive compensation, the Compensation Committee further reduced potential +vesting of performance equity awards if the Company's share price declines over the performance period. For performance awards made in December 2020, if the share price declines during the performance +period, the potential vesting is reduced by 50%. This compares to awards made in 2018 where +maximum vesting could still be attained if the overall share price declines. In addition, the Committee added objective, formula-based metrics to the short-term incentives paid in 2020. +The +Compensation Committee believes these changes enhanced the core design of our executive compensation programs, as it believes the programs continue to retain, attract, when needed, and +appropriately incent senior management as well as further align the Company's compensation practices to the interests of shareholders. +At +the 2021 Annual Meeting of Shareholders, we again will hold an annual advisory vote to approve executive compensation. The Compensation Committee will continue to consider the results from this +year's and future years' advisory votes on executive compensation, as well as feedback from shareholders through the course of such year. +Because +your vote is advisory, it will not be binding upon the Board. However, the Board values shareholders' opinions, and the Compensation Committee will take into account the outcome of the vote +when considering future executive compensation decisions. The Board recommends that shareholders vote FOR the following resolution: +RESOLVED , that the shareholders approve, on an advisory basis, the compensation of Cimarex's Named Executive Officers, as disclosed in this proxy +statement, including the Compensation Discussion and Analysis, the executive compensation tables and the related narrative. +The Board of Directors unanimously recommends a vote FOR the advisory vote to approve executive compensation. +78 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +ITEM 3: APPROVAL OF THE AMENDED AND RESTATED 2019 EQUITY INCENTIVE PLAN +ITEM 3: APPROVAL OF THE AMENDED AND RESTATED 2019 EQUITY +INCENTIVE PLAN +We are asking you to approve the Amended and Restated Cimarex Energy Co. 2019 Equity Incentive Plan (the "Amended 2019 Plan"), an +amended and restated omnibus equity incentive plan that will replace our existing 2019 Equity Incentive Plan (the "Existing Plan"). The Amended 2019 Plan was approved by the Board on +February 17, 2021, to be effective upon shareholder approval at the Annual Meeting. A copy of the Amended 2019 Plan, which has been marked to show changes from the Existing Plan, is attached to +this proxy statement as Appendix A. +The Board recommends that the Company's shareholders vote FOR approval of the Amended 2019 Plan at the Annual Meeting. +The +key features of the Amended 2019 Plan include the following: +§ A reserve of 6,900,000 new shares of our common stock that may be issued pursuant to +awards under the Amended 2019 Plan. In addition, shares remaining available for issuance under the Existing Plan will be transferred over to and made available for issuance under the Amended 2019 +Plan, as will shares that become available as a result of forfeitures of awards made under the Existing Plan; +§ Fungible share design pursuant to which awards other than options and stock +appreciation rights are counted against the share reserve at a rate of 2.38 shares per every share delivered under a full value award, and shares delivered pursuant to options and stock appreciation +rights are counted against the share reserve on a 1:1 basis; +§ A term that expires on February 17, 2030; +§ Permitted awards include, but are not limited to, options, stock appreciation rights +(sometimes referred to as "SARs"), restricted stock, restricted stock units (sometimes referred to as "RSUs"), performance stock units (sometimes referred to as "PSUs"), and other cash and stock-based +awards; +§ No direct or indirect repricing of options or stock appreciation rights without +shareholder approval; +§ Stringent share recycling provisions that prohibit recycling of shares used as +consideration for tax withholding or as consideration for option exercises, along with full counting of all shares subject to stock-settled stock appreciation rights; +§ A minimum one-year vesting schedule on all awards types under the Existing Plan +(applicable to at least 95% of the shares authorized for issuance so that up to 5% of the authorized shares may be issued pursuant to exceptions to the minimum one-year vesting); +§ Dividends and dividend equivalents on performance-based awards are accrued and paid +only if related awards become vested; and +Cimarex +Energy +Co. +79 +Table of Contents +ITEM 3: APPROVAL OF THE AMENDED AND RESTATED 2019 EQUITY INCENTIVE PLAN +§ No excise-tax gross-ups on equity awards. +Reasons for Adopting the Amended 2019 Plan +The Compensation Committee and the Board believe that we must continue to offer a competitive equity incentive program in order to +successfully attract, retain and motivate the best employees, directors, and consultants, without whom we cannot execute on our business goals or deliver value to our shareholder. We currently +maintain the Existing Plan. As of March 16, 2021, there were only 1,795,493 shares available for grant under the Existing Plan. Accordingly, and based on historic grant patterns, we believe the +remaining shares available for issuance under the Existing Plan are insufficient, and that we must increase the number of shares available for issuance under our equity incentive plans to address our +future equity compensation needs for a meaningful period of time. We believe strongly that adoption of the Amended 2019 Plan will accomplish this objective. If the shareholders approve the Amended +2019 Plan, the number of shares of common stock reserved for issuance under the Company's equity incentive plans will be increased by 6,900,000 shares. In the event the shareholders fail to approve +the Amended 2019 Plan, the Existing Plan will remain in effect, but will have only the limited share reserve described above. +Outstanding Awards under Existing Plan +As of March 16, 2021, there were 533,177 stock options/SARs outstanding under the Company's equity compensation plans with a weighted +average exercise price of $69.55 and weighted average remaining term of 4.4 years. In addition, as of March 16, 2021, there were 2,696,355 full-value awards outstanding under the Existing Plan +and previous plans. Other than the foregoing, no other awards under the Existing Plan and previous plans were outstanding, and only 1,795,493 shares available for future grants. As of March 16, +2021, the total number of outstanding shares of the Company's common stock was 102,826,956. +Description of the Amended 2019 Plan +The following summary of material terms of the Amended 2019 Plan does not purport to be complete and is subject to and qualified in its +entirety by the actual terms of the Amended 2019 Plan. A copy of the Amended 2019 Plan is provided as Appendix A to this proxy statement. The only changes to the Amended 2019 Plan are the +increased number of shares available and the termination date. The differences between the Existing Plan and the Amended 2019 Plan are marked in Appendix A. +§ Purpose of the Amended 2019 Plan +The purpose of the Amended 2019 Plan is to promote the success of the Company and the interests of its shareholders by providing an additional means for the Company to attract, +motivate, retain and reward directors, officers, employees and other eligible persons (including certain consultants and advisors). +The +Board or one or more committees consisting of directors appointed by the Board will administer the Amended 2019 Plan. The Board intends to delegate general administrative authority for the Amended +2019 Plan to the Compensation Committee, which is comprised of directors who qualify as independent under the rules promulgated by the SEC and NYSE. Except where prohibited by applicable law, a +committee may delegate some or all of its authority with respect to the Amended 2019 Plan to another committee of directors or to one or more officers of the Company. For purposes of Rule 16b-3 +of the Exchange Act, the +80 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +ITEM 3: APPROVAL OF THE AMENDED AND RESTATED 2019 EQUITY INCENTIVE PLAN +rules +of the NYSE and, for grants to non-employee directors, the Amended 2019 Plan must be administered by a committee consisting solely of two or more independent directors. The appropriate acting +body, be it the Board, a committee within its delegated authority, or an officer within his or her delegated authority, is referred to in this section as the Administrator. +The +Administrator has broad authority under the Amended 2019 Plan with respect to award grants including, without limitation, the authority: +§ To select participants and determine the type(s) of award(s) that they are to receive; +§ To determine the number of shares that are to be subject to awards and the terms and +conditions of awards, including the price (if any) to be paid for the shares or the award; +§ To cancel, modify, or waive the Company's rights with respect to, or modify, +discontinue, suspend, or terminate any or all outstanding awards, subject to any required consents, and subject to the repricing prohibition described below; +§ To accelerate or extend the vesting or exercisability or extend the term of any or all +outstanding awards subject to any required consents; +§ Subject to the other provisions of the Amended 2019 Plan, to make certain adjustments +to outstanding awards and authorize the conversion, succession or substitution of awards; and +§ To allow the purchase price of awards or shares of the Company's common stock to be +paid in the form of cash, check, or electronic funds transfer, by the delivery of already-owned shares of the Company's common stock or by a reduction of the number of shares deliverable pursuant to +the awards, by services rendered by the recipient of the awards, by notice of third party payment or by cashless exercise, on such terms as the Administrator may authorize, or any other form permitted +by law. +Eligibility +Persons eligible to receive awards under the Amended 2019 Plan include officers and employees of the Company or any of its subsidiaries, +non-employee directors of the Company, and certain individual consultants who render bona fide services to the Company or any of its subsidiaries (other than services in connection with the offering +or sale of securities or as a market maker or promoter of securities of the Company). As of March 16, 2021, there were approximately 742 employees, including officers, of the Company and its +subsidiaries and nine non-employee Directors of the Company and its subsidiaries who would potentially be eligible to receive awards under the Amended 2019 Plan. +Authorized Shares +The number shares of Company common stock authorized for issuance pursuant to awards under the Amended 2019 Plan is equal to the sum of +(i) 6,900,000 shares of Company common stock, plus (ii) the shares of Company common stock available for issuance under the Existing Plan upon approval of the Amended 2019 Plan, plus +(iii) any shares that would have otherwise become available for issuance under +Cimarex +Energy +Co. +81 +Table of Contents +ITEM 3: APPROVAL OF THE AMENDED AND RESTATED 2019 EQUITY INCENTIVE PLAN +the +Existing Plan as a result of forfeitures of outstanding awards made under the Existing Plan. The Amended 2019 Plan generally provides that shares issued in connection with awards that are granted +by or become obligations of the Company through the assumption of awards (or in substitution for awards) in connection with an acquisition of another company will not count against the shares +available for issuance under the Existing Plan, except as may be required by the Administrator or applicable law or stock exchange rules. +The +Amended 2019 Plan uses a fungible share design, pursuant to which shares delivered pursuant to options and stock appreciation rights count against the share reserve on a 1:1 basis, and shares +delivered pursuant to all other awards count against the share reserve at a rate of 2.38 shares per share delivered +under the award. Shares that are subject to or underlie awards that expire or for any reason are canceled or terminated, are forfeited, fail to vest, or for any other reason are not paid or delivered +under the Amended 2019 Plan are available for reissuance under the Amended 2019 Plan at the same rate as they would have been taken into account under the fungible share counting system described +above. However, the Amended 2019 Plan prohibits liberal share recycling. Accordingly, shares tendered or withheld to satisfy the exercise price of options or tax withholding obligations, and shares +covering the portion of exercised stock-settled SARs (regardless of the number of shares actually delivered), count against the share limit in accordance with the fungible share counting system +described above. +Awards Under the Amended 2019 Plan +Because awards under the Amended 2019 Plan are granted in the discretion of the Board or a committee of the Board, the type, number, +recipients and other terms of future awards cannot be determined at this time. +No Repricing +In no event will any adjustment be made to a stock option or stock appreciation right award under the Amended 2019 Plan (by amendment, +cancellation and regrant, exchange for other awards or cash or other means) that would constitute a repricing of the per share exercise or base price of the award, unless such adjustment is approved +by the shareholders of the Company. Adjustments made in accordance with the Amended 2019 Plan to reflect a stock split or similar event are not deemed to be a repricing. +Minimum Vesting Schedule +The Amended 2019 Plan requires a minimum one-year cliff vesting schedule for all equity award types under the Amended 2019 Plan. This minimum +vesting schedule will apply to at least 95% of the shares authorized for grant under the Amended 2019 Plan. +Dividends and Dividend Equivalents +Accrued dividends or dividend equivalent amounts shall not be paid on performance-based awards unless and until the awards to which they +relate become vested. +82 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +ITEM 3: APPROVAL OF THE AMENDED AND RESTATED 2019 EQUITY INCENTIVE PLAN +Types of Awards +The Amended 2019 Plan authorizes stock options, SARs, restricted stock, RSUs, PSUs and other forms of awards that may be granted or +denominated in or otherwise determined by reference to the Company's common stock, as well as cash awards. The Amended 2019 Plan provides flexibility to offer competitive incentives and to tailor +benefits to specific needs and circumstances. Awards may, in certain cases, be paid or settled in cash. +§ Stock Options +A stock option is a right to purchase shares of the Company's common stock at a future date at a specified price per share (the "exercise price"). The per share exercise price +of an option generally may not be less than the fair market value of a share of the Company's common stock on the date of grant. On March 16, 2021, the last sale price of the Company's common +stock as reported on NYSE was $63.43 per share. The maximum term of an option is seven years from the date of grant. An option may be either an incentive stock option or a nonqualified stock option. +Incentive stock options are taxed differently than nonqualified stock options and are subject to more restrictive terms under the Internal Revenue Code of 1986, as amended (the "Code"), and the +Amended 2019 Plan. Incentive stock options may be granted only to employees of the Company or a subsidiary. +§ Stock Appreciation Rights +A stock appreciation right is the right to receive payment in cash and/or common stock of an amount equal to the excess of the fair market value of shares of the Company's +common stock on the date of exercise of the stock appreciation right over the base price of the stock appreciation right. The base price is established by the Administrator at the time of grant of the +stock appreciation right and cannot be less +than the fair market value of a share of the Company's common stock on the date of grant. Stock appreciation rights may be granted in connection with other awards or independently. The maximum term of +a stock appreciation right is seven years from the date of grant. +§ Restricted Stock +Shares of restricted stock are shares of the Company's common stock that are subject to forfeiture and to certain restrictions on sale, pledge, or other transfer by the +recipient during a particular period of employment or service or until certain performance vesting conditions are satisfied (the "restricted period"). Subject to the restrictions provided in the +applicable award agreement and the Amended 2019 Plan, a participant receiving restricted stock, and/or the fair market value of all or a portion of the restricted stock in cash, may have all of the +rights of a shareholder as to such shares, including the right to vote and the right to receive dividends; provided, however, that dividends on shares subject to performance-based vesting shall be +accrued and shall be paid only if the restricted stock to which they relate become vested. +§ Restricted Stock Units +A restricted stock unit represents the right to receive one share of the Company's common stock, or the fair market value of one share of common stock in cash, on a specific +future vesting or payment date. Subject to the restrictions provided in the applicable award agreement and the Amended 2019 Plan, a +Cimarex +Energy +Co. +83 +Table of Contents +ITEM 3: APPROVAL OF THE AMENDED AND RESTATED 2019 EQUITY INCENTIVE PLAN +participant +receiving RSUs has no rights as a shareholder with respect to the RSUs until the shares of common stock are issued to the participant. RSUs may be granted with dividend equivalent rights. +RSUs may be settled in cash if so provided in the applicable award agreement. +§ Performance Stock Units +A performance stock unit ("PSU") is a performance-based award that entitles the recipient to receive shares of the Company's common stock, or the fair market value of some or +all those shares in cash, based on attainment of one or more performance goals. Each PSU shall designate a target number of shares payable under the award, with the actual number of shares earned (if +any) based on a formula set forth in the award agreement related to the attainment of one or more performance goals. Subject to the restrictions provided in the applicable award agreement and the +Amended 2019 Plan, a participant receiving PSUs has no rights as a shareholder until the shares of common stock are issued to the participant. PSUs may be granted with dividend equivalent rights that +are payable only if the underlying PSUs are earned. PSUs may be settled in cash if so provided in the applicable award agreement. +§ Cash Awards +The Administrator, in its sole discretion, may grant cash awards, including without limitation discretionary awards, awards based on objective or subjective performance +criteria, and awards subject to other vesting criteria. +§ Other Awards +The other types of awards that may be granted under the Amended 2019 Plan include, without limitation, stock bonuses, and similar rights to purchase or acquire shares of the +Company's common stock, and similar securities with a value derived from the value of or related to the Company's common stock or returns thereon. +Change of Control +In the event of a change of control (as defined in the Amended 2019 Plan), time-based awards shall become fully vested, and performance-based +awards shall vest based on performance through the date of the change of control (with the Administrator making any adjustments necessary to accommodate the truncated performance period of such +awards). In addition, the Administrator shall have full discretion to take whatever additional actions (not inconsistent with the accelerated vesting described above) it deems necessary or +appropriate, including but not limited to the following actions: (1) provide for the assumption of such awards (or portions thereof) or the substitution of such awards (or portions thereof) +with similar awards of the surviving or acquiring Company; (2) provide for the termination of outstanding awards; (3) provide for the cash-out and cancellation of any award (or portion +thereof); and (4) take any other actions as the Administrator deems necessary or advisable in connection with such change of control transaction. The Administrator may take different actions +with respect to different participants under the Amended 2019 Plan, different awards under the Amended 2019 Plan, and different portions of awards granted under the Amended 2019 Plan. +84 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +ITEM 3: APPROVAL OF THE AMENDED AND RESTATED 2019 EQUITY INCENTIVE PLAN +Transferability of Awards +Awards under the Amended 2019 Plan generally are not transferable by the recipient other than by will or the laws of descent and distribution, +or pursuant to domestic relations orders, and with respect to awards with exercise features, are generally exercisable during the recipient's lifetime only by the recipient. Any amounts payable or +shares issuable pursuant to an award generally will be paid only to the recipient or the recipient's beneficiary or representative. The Administrator has discretion, however, to establish written +conditions and procedures for the transfer of awards to other persons or entities, as long as such transfers comply with applicable federal and state securities laws and provided that any such +transfers are not for consideration. +Adjustments +As is customary in plans of this nature, the share limits and the number and kind of shares available under the Amended 2019 Plan and any +outstanding awards, as well as the exercise or purchase prices of awards, are subject to adjustment in the event of certain reorganizations, mergers, combinations, recapitalizations, stock splits, +stock dividends, or other similar events that change the number or kind of shares outstanding, and extraordinary dividends or distributions of property to the shareholders. +No Limit on Other Authority +The Amended 2019 Plan does not limit the authority of the Board or any committee to grant awards or authorize any other compensation, with or +without reference to the Company's common stock, under any other plan or authority. +Non-Competition and Clawback Policy +By accepting awards and as a condition to the exercise of awards and the enjoyment of any benefits of the Amended 2019 Plan, participants +agree to be bound by any clawback policy adopted by the Company from time to time. Participants may also be subject to restrictive covenants if so required by the Administrator in any award agreement. +Awards to Directors +The Amended 2019 Plan is the exclusive vehicle for awards of cash and equity compensation to be paid or provided to the Company's non-employee +directors. Cash awards to non-employee directors may take any form determined by the Administrator in its sole and absolute discretion, including, but not limited to, retainers, committee fees, +chairperson fees, per meeting fees, and special fees for committee service. Cash awards paid to any non-employee director may not exceed $400,000 in any fiscal year. Equity awards to non-employee +directors may take any form determined by the Administrator in its sole and absolute discretion (other than incentive stock options). Equity awards granted to any non-employee director may not have a +grant date fair value in excess of $400,000 in any fiscal year. +Cimarex +Energy +Co. +85 +Table of Contents +ITEM 3: APPROVAL OF THE AMENDED AND RESTATED 2019 EQUITY INCENTIVE PLAN +Termination of, or Changes to, the Amended 2019 Plan +The Administrator may amend or terminate the Amended 2019 Plan at any time and in any manner. Shareholder approval for an amendment will be +required only to the extent then required by applicable law or any applicable stock exchange rules or as required to preserve the intended tax consequences of the Amended 2019 Plan. For example, +shareholder approval is required for any proposed amendment to increase the maximum number of shares that may be delivered with respect to awards granted under the Amended 2019 Plan. Adjustments as a +result of stock splits or similar events will not, however, be considered amendments requiring shareholder approval. Unless terminated earlier by the Board, the authority to grant new awards under the +Amended 2019 Plan will terminate ten years after the date on which the Amended 2019 Plan was approved by the Board. Outstanding awards generally will continue following the expiration or termination +of the Amended 2019 Plan. Generally speaking, outstanding awards may be amended by the Administrator (except for a repricing), but the consent of the award holder is required if the amendment (or any +plan amendment) materially and adversely affects the holder. +Certain Federal Tax Consequences +The following summary of the federal income tax consequences of awards under the Amended 2019 Plan is based upon federal income tax laws in +effect on the date of this proxy statement. This summary does not purport to be complete, and does not discuss state, local or non-U.S. tax consequences. The tax consequences of individual awards may +vary depending upon the particular circumstances applicable to any individual participant. +§ Nonqualified Stock Options +The grant of a nonqualified stock option under the Amended 2019 Plan will not result in any federal income tax consequences to the participant or to the Company. Upon exercise +of a nonqualified stock +option, the participant will recognize ordinary compensation income equal to the excess of the fair market value of the shares of common stock at the time of exercise over the option exercise price. +If the participant is an employee, this income is subject to withholding for federal income and employment tax purposes. The Company is entitled to an income tax deduction in the amount of the income +recognized by the participant, subject to possible limitations imposed by the Code, including Section 162(m) thereof. Any gain or loss on the participant's subsequent disposition of the shares +will be treated as long-term or short-term capital gain or loss, depending on the sales proceeds received and whether the shares are held for more than one year following exercise. The Company does +not receive a tax deduction for any subsequent capital gain. +§ Incentive Stock Options +The grant of an incentive stock option (or "ISO") under the Amended 2019 Plan will not result in any federal income tax consequences to the participant or to the Company. A +participant recognizes no federal taxable income upon exercising an ISO (subject to the alternative minimum tax rules discussed below), and the Company receives no deduction at the time of exercise. +In the event of a disposition of stock acquired upon exercise of an ISO, the tax consequences depend upon how long the participant has held the shares. If the participant does not dispose of the +shares within two years after the ISO was granted, nor within one year after the ISO was exercised, the participant will recognize a long-term capital gain (or loss) equal +86 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +ITEM 3: APPROVAL OF THE AMENDED AND RESTATED 2019 EQUITY INCENTIVE PLAN +to +the difference between the sale price of the shares and the exercise price. The Company is not entitled to any deduction under these circumstances. +If +the participant fails to satisfy either of the foregoing holding periods (referred to as a "disqualifying disposition"), he or she will recognize ordinary compensation income in the year of the +disposition. The amount of ordinary compensation income generally is the lesser of (i) the difference between the amount realized on the disposition and the exercise price or (ii) the +difference between the fair market value of the stock at the time of exercise and the exercise price. Such amount is not subject to withholding for federal income and employment tax purposes, even if +the participant is an employee of the Company. Any gain in excess of the amount taxed as ordinary income will generally be treated as a short-term capital gain. The Company, in the year of the +disqualifying disposition, is entitled to a deduction equal to the amount of ordinary compensation income recognized by the participant, subject to possible limitations imposed by the Code, including +Section 162(m) thereof. +The +"spread" under an ISO (i.e., the difference between the fair market value of the shares at exercise and the exercise price) is classified as an item of adjustment in the year of exercise +for purposes of the alternative minimum tax. If a participant's alternative minimum tax liability exceeds such participant's regular income tax liability, the participant will owe the alternative +minimum tax liability. +§ Restricted Stock +Restricted stock is generally taxable to the participant as ordinary compensation income on the date that the restrictions lapse (i.e. the date that the stock vests), in +an amount equal to the excess of the fair market value of the shares on such date over the amount paid for such stock (if any). If the participant is an employee, this income is subject to withholding +for federal income and employment tax purposes. The Company is entitled to an income tax deduction in the amount of the ordinary income recognized by the participant, subject to possible limitations +imposed by the Code, including Section 162(m) thereof. Any gain or loss on the participant's subsequent disposition of the shares will be treated as long-term or short-term capital gain or loss +depending on the sales price and how long the stock has been held since the restrictions lapsed. The Company does not receive a tax deduction for any subsequent gain. +Participants +receiving restricted stock awards may make an election under Section 83(b) of the Code (a "Section 83(b) Election") to recognize as ordinary compensation income in the year +that such restricted stock is granted in an amount equal to the excess of the fair market value on the date of the issuance of the stock over the amount paid for such stock. If the participant is an +employee, this income is subject to withholding for federal income and employment tax purposes. If such an election is made, the recipient recognizes no further amounts of compensation income upon the +lapse of any restrictions and any gain or +loss on subsequent disposition will be long-term or short-term capital gain or loss to the recipient. However, if the stock is later forfeited, the participant will not be able to recover the tax +previously paid pursuant to the Section 83(b) Election. The Section 83(b) Election must be made within 30 days from the time the restricted stock is issued. The Company is +entitled to a deduction equal to the amount of income taken into account as a result of the Section 83(b) Election, subject to possible limitations imposed by the Code, including +Section 162(m) thereof. +To +the extent dividends are paid while the restrictions on the stock are in effect, any such dividends will be taxable to the participant as ordinary income (and will be treated as additional wages +for federal income and employment tax withholding purposes, if the recipient is an employee) and will be deductible by the +Cimarex +Energy +Co. +87 +Table of Contents +ITEM 3: APPROVAL OF THE AMENDED AND RESTATED 2019 EQUITY INCENTIVE PLAN +Company +(subject to possible limitations imposed by the Code, including Section 162(m) thereof), unless the participant has made a Section 83(b) Election, in which case the dividends +will generally be taxed at dividend rates and will not be deductible by the Company. +§ Other Awards +Other awards (such as RSUs and PSUs) are generally treated as ordinary compensation income as and when common stock or cash are paid to the participant upon vesting or +settlement of such awards. If the participant is an employee, this income is subject to withholding for income and employment tax purposes. The Company is generally entitled to an income tax deduction +equal to the amount of ordinary income recognized by the recipient, subject to possible limitations imposed by the Code, including Section 162(m) thereof. +Section 162(m) of the Internal Revenue Code +Under Code Section 162(m), no deduction is generally allowed in any taxable year of the Company for compensation in excess of +$1 million paid to the Company's "covered employees." A "covered employee" is any individual who has served at any time after December 31, 2016 as the Company's chief executive officer, +chief financial officer, or other executive officer whose compensation has been reported in a Company proxy statement, regardless of whether any such individual is still employed by the Company. +Certain compensation issued prior to the effective date of the Amended 2019 Plan may be deductible based on specialized transition rules set forth in Code Section 162(m) and related guidance. +Section 409A of the Internal Revenue Code +Section 409A of the Code provides certain requirements for the deferral and payment of deferred compensation arrangements. In the event +that any award under the Amended 2019 Plan is deemed to be a deferred compensation arrangement, and if such arrangement does not comply with Section 409A of the Code, the recipient of such +award will recognize ordinary income once such award is vested, as opposed to at the time or times set forth above. In addition, the amount taxable will be subject to an additional 20% federal income +tax along with other potential taxes and penalties. It is intended, although not guaranteed, that all awards issued under the Amended 2019 Plan will either be exempt from or compliant with the +requirements of Section 409A of the Code. +Interested Parties +Because approval of the Amended 2019 Plan will increase the number of shares available for issuance to the directors and executive officers of +the Company, each of those persons has an interest in and may benefit from the approval of the Amended 2019 Plan. +88 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +ITEM 3: APPROVAL OF THE AMENDED AND RESTATED 2019 EQUITY INCENTIVE PLAN +Vote Required for Approval +Approval of the Amended 2019 Plan will require the affirmative vote of a majority of the shares present or represented at the Annual Meeting. +Abstentions will be counted as votes against this matter, and broker non-votes will have no effect on the vote on this matter. +The Board of Directors unanimously recommends a vote FOR the approval of the Company's Amended and Restated 2019 Equity Incentive Plan. +Cimarex +Energy +Co. +89 +Table of Contents +ITEM 4: AMENDMENT AND RESTATEMENT OF THE RESTATED CERTIFICATE OF INCORPORATION TO PROVIDE FOR THE ANNUAL ELECTION OF ALL DIRECTORS +ITEM 4: AMENDMENT AND RESTATEMENT OF THE RESTATED CERTIFICATE OF INCORPORATION TO PROVIDE FOR THE ANNUAL ELECTION OF ALL DIRECTORS +On February 17, 2021, our Board of Directors approved, upon the recommendation of the Nominating and Corporate Governance Committee, an +amended and restated version of our Restated Certificate of Incorporation that would declassify our Board of Directors and provide for the annual election of all directors, subject to obtaining the +requisite approval from our stockholders at the 2021 annual meeting of stockholders. +Our +Restated Certificate of Incorporation currently provides that our Board of Directors be divided into three classes, each of which serves for staggered three-year terms. Our Board of Directors +previously viewed the classified structure of the Board as benefiting our stockholders by promoting continuity and +stability in the management of our business and affairs, encouraging directors to take a long-term perspective, and reducing the Company's vulnerability to coercive takeover tactics. While our Board +of Directors still believes these are important benefits, the Board recognizes the benefit of providing stockholders an annual opportunity to express in a meaningful way their satisfaction or +dissatisfaction with the actions of the Board. The Board has also considered comments received in our shareholder engagement and commentary from institutional investors. +After +careful deliberation, our Board of Directors has determined, upon the recommendation of the Nominating and Corporate Governance Committee, to propose that our stockholders approve to amend and +restate our Restated Certificate of Incorporation to declassify our Board of Directors and provide that all directors be elected annually. If this proposal is approved by our stockholders, each +director who has been elected to a three-year term prior to the filing of the Amended and Restated Certificate of Incorporation, including each director elected at the 2021 annual meeting, will +complete her or his three-year term. Thereafter, such director, or her or his successor, will be elected to one-year terms. Beginning with the 2024 annual meeting, all directors will stand for +election annually. +In +connection with this proposal, our Board of Directors also approved certain other conforming amendments to our Restated Certificate of Incorporation, subject to stockholder approval. These +conforming amendments include an amendment to permit the removal of directors, with or without cause. This provision is required under Delaware law for corporations that do not have classified boards +or cumulative voting for directors. In light of these conforming amendments, we are proposing to amend and restate the Restated Certificate of Incorporation in its entirety, and the substantive +changes are reflected in the proposed form of Amended and Restated Certificate of Incorporation attached to this proxy statement as Appendix B. For your convenience, the attached form of +Amended and Restated Certificate of Incorporation is marked to indicate the proposed amendments. The amendments to the Bylaws will not take effect unless and until the Amended and Restated Certificate +of Incorporation becomes effective. A marked version of the Bylaws reflecting the amendments is attached to this Proxy Statement as Appendix C. +In +addition, the Board of Directors has approved conforming amendments to our Bylaws, subject to stockholder approval of the Amended and Restated Certificate of Incorporation. The amendments to our +Bylaws do not require stockholder approval. +90 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +ITEM 4: AMENDMENT AND RESTATEMENT OF THE RESTATED CERTIFICATE OF INCORPORATION TO PROVIDE FOR THE ANNUAL ELECTION OF ALL DIRECTORS +The +affirmative vote of the holders of at least 80% of the voting power of all of our outstanding shares of common stock is required for approval of this proposal to amend and restate our Restated +Certificate of Incorporation to declassify the Board and provide for the annual election of all directors. +The Board of Directors recommends a vote FOR the Amendment and Restatement of the Restated Certificate of Incorporation to Provide for the Annual Election of All Directors. +Cimarex +Energy +Co. +91 +Table of Contents +ITEM 5: RATIFICATION OF INDEPENDENT AUDITORS +ITEM 5: RATIFICATION OF INDEPENDENT AUDITORS +The Audit Committee of the Board has appointed KPMG LLP to audit our financial statements for 2021. Notwithstanding its selection, the +Audit Committee, in its discretion, may appoint new independent registered public accountants at any time during the year if the Audit Committee believes that such a change would be in the best +interests of our shareholders and the Company. KPMG LLP has served as our independent auditors since October 1, 2002. +We +are asking that shareholders ratify the appointment of KPMG LLP as our independent auditors. If shareholders fail to ratify the appointment, the Audit Committee may reconsider this +appointment. A KPMG LLP representative will be at the Annual Meeting to answer appropriate questions and to make a statement if he or she desires. +The Board of Directors recommends a vote FOR the ratification of KPMG LLP as Cimarex's Independent Auditors for 2021. +Audit and Non-Audit Fees +The following table shows the fees for professional services rendered by KPMG LLP for the audit of Cimarex's annual financial +statements for the years ended December 31, 2020 and December 31, 2019, and fees billed for other services rendered by KPMG LLP during those periods: +Years Ended December 31, +2020 +2019 +Audit Fees (1) +$ +950,000 +$ +1,258,916 +Audit-Related Fees (2) +$ +0 +$ +80,895 +Tax Fees (3) +$ +225,000 +$ +225,000 +All Other Fees +$ +0 +$ +0 +(1) Audit fees were principally for audit work performed on the consolidated financial statements and +internal controls over financial reporting. +(2) Audit-related fees were principally for services associated with SEC registration statements, +periodic reports and other documents filed with the SEC or issued in connection with securities offerings, e.g., comfort letters and consents and assistance in responding to SEC comment +letters. +(3) Tax fees were principally for services related to tax compliance and reporting and analysis +services. +Approval of Audit, Audit-Related and Tax Services +The Audit Committee annually reviews and pre-approves certain categories of audit, audit-related and tax services to be performed by our +independent auditors, subject to a specified range of fees. The Audit Committee also may pre-approve specific services. Certain non-audit services as specified by the SEC may not be performed by our +independent auditors. The Audit Committee may delegate pre-approval authority to one or more of its members. In the event of any such delegation, any pre-approved decisions will be reported to the +Audit Committee at its next scheduled meeting. The services described in the above table were pre-approved by the Audit Committee in 2019 and 2020. +92 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +ITEM 5: RATIFICATION OF INDEPENDENT AUDITORS +REPORT OF AUDIT COMMITTEE +The Audit Committee on behalf of the Board of Directors monitors: (i) the integrity of the Company's financial statements; +(ii) the independent auditors' qualifications and independence; (iii) the performance of the Company's internal audit function and independent auditors; (iv) the appropriateness +of the Company's accounting policies; (v) the adequacy of the Company's internal controls; (vi) the Company's compliance with legal and regulatory requirements related to audit matters; +(vii) the process related to ongoing litigation matters; (viii) the annual process of estimating and reporting quantities of oil and gas reserves; and (ix) risk oversight. In so +doing, it is the responsibility of the Audit Committee to maintain free and open communication between the Directors, the independent auditor and the management of the Company. All members of the +Audit Committee meet the independence, experience and financial literacy requirements of the New York Stock Exchange, the Sarbanes Oxley Act and any rules or regulations promulgated by the Securities +and Exchange Commission. The Board of Directors has adopted a written charter for the Audit Committee, a copy of which is available on our website at www.cimarex.com. +Management +is responsible for the Company's financial statements, the financial reporting process, and the process of estimating and reporting quantities of oil and gas reserves, including the related +systems of internal controls and disclosure controls and procedures. The Company's independent registered public accounting firm is responsible for performing an independent audit of the Company's +financial statements in accordance with generally accepted auditing standards, as well as an audit of the Company's internal control over financial reporting in accordance with the standards of the +Public Company Accounting Oversight Board ("PCAOB") and issuing reports thereon. The Audit Committee's responsibility is to monitor and oversee these processes and the Audit Committee uses the +Company's internal audit department and (if applicable) independent petroleum engineers to assist with these responsibilities. +The +Audit Committee reviewed Cimarex's audited financial statements and supplemental oil and gas reserve information as of and for the year ended December 31, 2020 and met with management, +DeGolyer and MacNaughton (an independent petroleum engineering consulting firm) and KPMG LLP, Cimarex's independent registered public accounting firm, to discuss the related information, and +the effectiveness of Cimarex's internal control over financial reporting. In addition, the Audit Committee has received from KPMG LLP the communication required by PCAOB Rule 3526, +Communication with Audit Committees Concerning Independence, and discussed with KPMG LLP their independence from Cimarex and its management. The Audit Committee also discussed with +KPMG LLP any matters required by PCAOB Auditing Standard No. 1301, Communications with Audit Committees. +Based +on these reviews and discussions, the Audit Committee recommended to the Board of Directors that Cimarex's audited financial statements be included in Cimarex's Annual Report on Form 10-K +for the fiscal year ended December 31, 2020. +THE AUDIT COMMITTEE +Monroe +W. Robertson (Chair) +Kathleen A. Hogenson +Harold R. Logan, Jr. +Frances M. Vallejo +The +Audit Committee Report does not constitute soliciting material and shall not be deemed to be filed or incorporated by reference into any other Cimarex filing under the Securities Act of 1933, as +amended, or the Securities Exchange Act of 1934, as amended, except to the extent that Cimarex specifically incorporates the Audit Committee Report by reference. +Cimarex +Energy +Co. +93 +Table of Contents +GENERAL INFORMATION +GENERAL INFORMATION +Information Available Online +Our Corporate Governance Guidelines, Board Committee Charters, Code of Business Conduct and Ethics and SEC filings are posted on our website +at www.cimarex.com . Upon request, we will promptly deliver (free of charge) a copy of our Annual Report on Form 10-K to any +shareholder. Direct such requests to our Corporate Secretary, Cimarex Energy Co., 1700 Lincoln Street, Suite 3700, Denver, Colorado 80203, telephone (303) 295-3995 and facsimile +(720) 403-9383. +Communications with Cimarex's Directors +Communications from shareholders and other interested parties can be addressed to our Directors by mail in care of our Corporate Secretary, +Cimarex Energy Co., 1700 Lincoln Street, Suite 3700, Denver, Colorado 80203 or facsimile (720) 403-9383. All shareholder and other interested party communications will be +forwarded to our Lead Director. In response, the Lead Director may take any action deemed appropriate or necessary, including, without limitation, forwarding the information to the Board for +consideration or, with the concurrence of the Board, retaining independent or outside counsel, accountants or other advisors. +Director Nominations for the 2022 Annual Meeting of Shareholders +Shareholders who wish to nominate persons for election as Directors at the 2022 Annual Meeting must submit a timely written notice complying +with Cimarex's Bylaws to the Corporate Secretary at Cimarex Energy Co., 1700 Lincoln Street, Suite 3700, Denver, Colorado 80203 or by facsimile (720) 403-9383. In addition, up to +20 shareholders collectively beneficially owning more than 3% of the +Company's outstanding shares for at least three consecutive years may nominate up to two candidates for inclusion in the Company's proxy materials by following the procedures set forth in the proxy +access provisions in Article III, Section 2A of our Bylaws (the "Proxy Access Policy"). To be timely, the shareholder's written notice for nominees to be considered by the Nominating and +Corporate Governance Committee or proxy access candidate to be included in the proxy statement for the 2022 Annual Meeting must be received between January 12, 2022 and February 11, +2022. In addition, shareholder nominations must comply with the other requirements of Article III, Section 2 or Section 2A, as applicable, of our Bylaws. +Shareholder Proposals for the 2022 Annual Meeting of Shareholders +A proposal to be acted upon at the 2022 Annual Meeting of Shareholders will be acted upon only: +§ If the proposal is to be included in the proxy statement, pursuant to +Rule 14a-8 under the Securities Exchange Act of 1934, as amended, the proposal is received by our Corporate Secretary on or before November 29, 2021, and the proposal meets the +requirements of the applicable rules of the SEC and the requirements of our bylaws. § If the proposal is not to be included in the proxy statement, +pursuant to our bylaws, +the proposal is submitted in writing to our Corporate Secretary no earlier than January 12, 2022 and no later than +94 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +GENERAL INFORMATION +February 11, +2022, and such proposal is, under Delaware General Corporation Law, an appropriate subject for shareholder action. +§ If the proposal concerns the nomination of Directors, see "Director Nominations for +the 2022 Annual Meeting of Shareholders" above. +Complaint and Reporting Procedures +We have established complaint and reporting procedures that are posted on our website at www.cimarex.com . Any person, whether or not an employee, who has a concern about +the conduct of Cimarex or any of our employees, +including accounting, internal accounting controls or auditing issues, may, in an anonymous manner, communicate that concern by calling our hotline, 1-866-519-1898. The hotline is available +24 hours a day, seven days a week. Your telephone communication will be transcribed verbatim and such transcription will be e-mailed to a Company representative with authority to investigate +the concern. +Cimarex +Energy +Co. +95 +Table of Contents +QUESTIONS AND ANSWERS +QUESTIONS AND ANSWERS +§ PROXY MATERIALS +AND VOTING INFORMATION +1. Why did I receive these proxy materials? +We are providing these materials in connection with the solicitation by the Board of Directors of Cimarex Energy Co., a Delaware corporation, of proxies +to be voted at our 2021 Annual Meeting of Shareholders and at any adjournment or postponement of the Meeting. The Meeting will take place virtually on May 12, 2021, beginning at +9:00 a.m. Mountain Daylight Time, at www.viewproxy.com/cimarex/2021. +2. How do I attend and vote shares at the virtual Annual Meeting? +The Annual Meeting will convene at 9:00 a.m. Mountain Daylight Time on May 12, 2021. In order to participate in the 2021 Annual Meeting live via +the Internet, you must register at www.allianceproxy.com/cimarex/2021 by 11:59 p.m. Eastern Time on May 11, 2021. If you are a registered holder, you must register using the virtual +control number included on your Notice of Internet Availability of Proxy Materials or your proxy card (if you received a printed copy of the proxy materials). If you hold your shares beneficially +through a bank or broker, you must provide a legal proxy from your bank or broker during registration and you will be assigned a virtual control number in order to vote your shares during the 2021 +Annual Meeting. If you are unable to obtain a legal proxy to vote your shares, you will still be able to attend the 2021 Annual Meeting (but will not be able to vote your shares) so long as you +demonstrate proof of stock ownership. Instructions on how to connect and participate via the Internet, including how to demonstrate proof of stock ownership, are posted at +www.allianceproxy.com/cimarex/2021. +On +the day of the Annual Meeting, if you have properly registered, you may enter the Annual Meeting by logging in using the password you received via email in your registration confirmation at +www.viewproxy.com/cimarex/2021. +If +you encounter any difficulties accessing the Annual Meeting live audio webcast during the meeting time, please email VirtualMeeting@viewproxy.com or call 1-866-612-8937. +Even +if you plan to attend the live webcast of the Annual Meeting, we encourage you to vote in advance by Internet, telephone or mail so that your vote will be counted even if you later decide not to +attend the virtual Annual Meeting. Please note that no members of management or the Board will be in attendance at the physical location. +3. What is the difference between holding shares as a shareholder of record and as a beneficial owner? +If your shares are registered directly in your name with Cimarex's registrar and transfer agent, Continental Stock Transfer & Trust Company, you are +considered a shareholder of record with respect to these shares. If your shares are held in a brokerage account or bank, broker or other nominee, you are considered the beneficial owner of these +shares. +96 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +QUESTIONS AND ANSWERS +4. What shares are included on the proxy card? +If you are a shareholder of record, you should receive only one proxy card for all the shares you hold of record in certificate form and in book-entry form. If +you receive more than one proxy card, please vote all proxy cards received. +If +you are a Cimarex employee, you will receive a proxy or voting instruction card for all the shares you hold in the Cimarex 401(k) Plan. Your proxy card will serve as a voting instruction card for +the Plan trustee. If you do not specify your voting instructions on the proxy card, the Plan trustee will vote your shares in the same proportion as it votes shares for which it did receive timely +instructions. To allow sufficient time for voting by the trustee, your voting instructions must be received no later than 11:59 p.m. Eastern Daylight Time on +May 7, 2021 . +5. What different methods can I use to vote? +By Written Proxy. All shareholders of record can vote by written proxy card. If you are a shareholder of record and receive a notice regarding the availability of proxy +materials, you may request a written proxy card by following the instructions included in the notice. If you are a beneficial owner, you may request a written proxy card or a voting instruction form +from your bank, broker or other nominee. +By Telephone or Internet. All shareholders of record can vote by calling the toll-free telephone number on the proxy card. Please have your proxy card when you call. +Voice prompts will direct you on how to vote your shares and will confirm your voting instructions have been recorded properly. +Shareholders +also may vote on the internet by accessing the website noted on the proxy card. Please have your proxy card when you go to the website. As with telephone voting, you can confirm your +voting instructions have been recorded properly. +Beneficial +owners may vote by telephone or internet if their bank, broker or other nominee makes those methods available, in which case the bank, broker or other nominee will include the instructions +with the proxy materials. +Cimarex +Energy +Co. +97 +Table of Contents +QUESTIONS AND ANSWERS +6. What are my voting choices for each of the proposals to be voted on at the 2021 Annual Meeting of Shareholders and what are +the voting standards? +Proposal +Voting Choices and Board Recommendation +Voting Standard +Item 1. Election of Two Class I +§ +vote in favor of all nominees; +Majority of votes cast +Directors +§ +vote in favor of specific nominees; +§ +vote against all nominees; +§ +vote against specific nominees; +§ +abstain from voting with respect to all nominees; or +§ +abstain from voting with respect to specific nominees. +The Board recommends a vote FOR each of the nominees. +Item 2. Advisory Vote to +§ +vote in favor of the advisory proposal; +Majority of shares +Approve Executive Compensation +§ +vote against the advisory proposal; or +present and entitled to +§ +abstain from voting on the advisory proposal. +vote +The Board recommends a vote FOR the advisory proposal to approve executive compensation. +Item 3. Approve the Amended +§ +vote in favor of the Plan; +Majority of shares +and Restated 2019 Equity +§ +vote against the Plan; or +present and entitled to +Incentive Plan +§ +abstain from voting on the Plan. +vote +The Board recommends a vote FOR the approval of the Amended and Restated 2019 Equity Incentive Plan. +Item 4. To Consider a Proposal +§ +vote in favor of the proposed amendment; +80% of the voting +to Amend and Restate Our +§ +vote against the proposed amendment; or +power of all +Restated Certificate of +§ +abstain from voting on the proposed amendment. +of our outstanding +Incorporation To Provide for the Annual Election of All Directors +shares of common stock +The Board recommends a vote FOR the amendment and restatement of the Restated Certificate of Incorporation to provide for the annual election of all directors. +Item 5. Ratification of the +§ +vote in favor of the ratification; +Majority of shares +Appointment of KPMG LLP as +§ +vote against the ratification; or +present and entitled to +Independent Auditors +§ +abstain from voting on the ratification. +vote +The Board recommends a vote FOR the ratification. +7. What if I am a beneficial owner and do not give voting instructions to my broker? +As a beneficial owner, in order to ensure your shares are voted in the way you would like, you must provide voting instructions to your bank, broker or other +nominee by the deadline provided in the materials you receive from your bank, broker or other nominee. If you do not provide voting instructions to your bank, broker or other nominee, whether your +shares can be voted by such person depends on the type of item being considered to vote. +Non-Discretionary Items. The election of Directors and the advisory vote to approve executive compensation are non-discretionary items and may not be voted on by +brokers, banks or other nominees who have not received specific voting instructions from beneficial owners. +98 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +QUESTIONS AND ANSWERS +Discretionary Items. The ratification of the appointment of KPMG LLP as Independent Auditors is a discretionary item. Generally, banks, brokers and other nominees +that do not receive voting instructions from beneficial owners may vote on the proposal in their discretion. +8. How are abstentions and broker non-votes counted? +Item 1. Election of Two Class I Directors. If you abstain from voting in the election of +Directors, you will be treated as not having cast a vote and the abstention will not be counted in determining the outcome of the election. Broker non-votes are not considered a vote cast under our +Bylaws and will have no effect on the outcome of the election of Directors. +Item 2. Advisory Vote to Approve Executive Compensation. If you abstain from voting on the +advisory vote to approve executive compensation, you are considered present and entitled to vote, and your shares are considered in the calculation of whether Item 2 received the affirmative +vote of a majority of shares present and entitled to vote. The effect of an abstention is a vote against Item 2. Broker non-votes are not considered in the calculation of a majority of shares +present and entitled to vote. +Item 3. Approve the Amended and Restated 2019 Equity Incentive Plan. If you abstain from voting +on the proposed Amended and Restated 2019 Equity Incentive Plan, you are considered present and entitled to vote, and your shares are considered in the calculation of whether Item 3 received +the affirmative vote of a majority of shares present and entitled to vote. The effect of an abstention is a vote against Item 3. Broker non-votes will have no effect on the outcome of +Item 3 because broker non-votes are not entitled to vote and are not considered in the calculation of a majority of shares present and entitled to vote. +Item 4. Consider a Proposal to Amend and Restate Our Restated Certificate of Incorporation to Provide for the Annual Election of All +Directors. If you abstain from voting on the proposal to amend and restate our Restated Certificate of Incorporation, you are considered present and entitled to +vote, and your shares are considered in the calculation of whether Item 4 received the affirmative vote of 80% of the voting power of all of our outstanding shares of common stock. The effect +of an abstention is a vote against Item 4. Broker non-votes will have no effect on the outcome of Item 4 because broker non-votes are not entitled to vote and are not considered in the +calculation of 80% of shares present and entitled to vote. +Item 5. Ratification of Appointment of KPMG LLP as Independent Auditors. If you abstain +from voting on the ratification of KPMG LLP as Cimarex's Independent Auditors, you are considered present and entitled to vote, and your shares are considered in the calculation of whether +Item 5 received the affirmative vote of a majority of shares present and entitled to vote. The effect of an abstention is a vote against Item 5. Because Item 5 is a routine matter +on which a broker has discretionary authority, no or few broker non-votes likely will result from this Item. +9. What can I do if I change my mind after I vote my shares? +You may revoke your proxy prior to the completion of voting by: +§ Giving written notice to Cimarex's Corporate Secretary; § Delivering +a valid, later-dated proxy, or a later-dated vote by telephone or on the +internet in a timely manner; or § Voting your shares at the virtual Annual Meeting. +Cimarex +Energy +Co. +99 +Table of Contents +QUESTIONS AND ANSWERS +10. Can I access the proxy materials on the internet? How can I sign up for the electronic proxy delivery +service? +We are distributing our proxy materials to certain shareholders via the internet under the "notice and access" approach permitted by the SEC. On or about +March 26, 2021, we will mail to certain of our shareholders a notice of internet availability of proxy materials with instructions explaining how to access our proxy statement and annual report +and how to vote online. If you receive a notice of internet +availability by mail, you will not receive a printed copy of the proxy materials in the mail unless you request them by following the instructions for requesting such materials included in the notice +of internet availability. +Even +if you do not participate in "notice and access," the Notice of Annual Meeting and proxy statement are available on the internet at http://www.allianceproxy.com/cimarex/2021. +11. Who counts the votes? +Alliance Advisors LLC, our proxy solicitor, will tabulate the votes and, Francis B. Barron, Cimarex's Corporate Secretary, will act as inspector of +election. +12. When will Cimarex announce the voting results? +We will announce the preliminary voting results at the Annual Meeting of Shareholders. Cimarex will report the final results in a Current Report on +Form 8-K filed with the SEC after the Meeting. +13. How are proxies solicited, and what is the cost? +We bear all expenses incurred in connection with the solicitation of proxies. We hired Alliance Advisors LLC to assist with the solicitation of proxies +for an estimated fee of $10,000 plus expenses. We will reimburse brokers, fiduciaries and custodians for their costs in forwarding proxy materials to beneficial owners of Common Stock. +Our +Directors, officers and employees also may solicit proxies by mail, telephone and personal contact. They will not receive any additional compensation for these activities. +14. What is householding? +As permitted by the Securities Exchange Act of 1934, only one copy of this proxy statement is being delivered to shareholders residing at the same address, +unless the shareholders have notified Cimarex of their desire to receive multiple copies of the proxy statement. This is known as "householding." +Upon +oral or written request, we promptly will deliver a separate copy of the proxy statement to any shareholder residing at an address to which only one copy was mailed. Direct requests for +additional copies for the current year or future years to our Corporate Secretary, Cimarex Energy Co., 1700 Lincoln Street, Suite 3700, Denver, Colorado 80203, telephone +(303) 295-3995 and facsimile (720) 403-9383. +100 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents +QUESTIONS AND ANSWERS +Shareholders +of record residing at the same address and currently receiving multiple copies of the proxy statement may contact our registrar and transfer agent, Continental Stock Transfer & +Trust Company, by phone at (888) 509-5580 or by mail at 1 State Street, 30th Floor, New York, NY 10004-1561, to request a single copy be mailed in the future. +Beneficial +owners should contact their broker or bank. +Cimarex +Energy +Co. +101 +Appendix A +CIMAREX ENERGY CO. +Amended and Restated 2019 EQUITY INCENTIVE PLAN +Adopted by the Board on February 20, 2019 17, 2021 +Approved by the Company's stockholders on +[ May 12, 2021] 8, 2019 +[ 6,317,476 [ ] shares total, consisting of 5,800,000 [6,900,000] plus +517,476 [ ] available +On May [12], 2021 8, 2019 under 2014 2019 Equity Incentive Plan] +1. ESTABLISHMENT AND PURPOSE OF PLAN +Cimarex Energy Co., a Delaware corporation (the " Company "), hereby establishes the Cimarex +Energy Co. Amended and Restated 2019 Equity Incentive Plan (the " Amended 2019 Plan ") as +set forth in this document. The purpose of the Plan Amended 2019 Plan is to promote the success of the Company and to increase +stockholder value by providing an additional means to attract, motivate, retain and reward selected employees, non-employee directors, and other eligible persons through the grant of equity and cash +Awards that align the interests of Plan Amended 2019 Plan participants with the interests of the Company's stockholders. +2. DEFINITIONS +2.1 Defined Terms . Whenever used in the +Plan Amended 2019 Plan , the following capitalized terms shall have the meanings set forth below: +(a) " Administrator " shall mean the Board or one or more committees appointed by the Board (or appointed by another +committee within that committee's delegated authority) to administer all or certain aspects of this Plan Amended 2019 Plan , as set +forth in Section 3 hereof. +(b) " Affiliate " shall have the meaning ascribed to such term in Rule 12b-2 of the General Rules and Regulations of +the Exchange Act. +(c) " Amended 2019 Plan " shall have the meaning set +forth in Section 1 hereof. +(d) " Award " shall mean a grant under the +Plan Amended 2019 Plan of an Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, Performance Stock Unit, cash +Award, or Other Stock-Based Award. +( d e ) " Award Agreement " shall mean a written or +electronic Award agreement or document evidencing the grant of an Award under the Plan Amended 2019 Plan and containing the terms and +conditions of such Award, as determined by the Administrator. +( e f ) " Board " shall mean the board of directors of the +Company. +( f g ) " Cause " shall mean, with respect to any +Participant, as determined by the Administrator and unless otherwise provided in an applicable agreement between the Participant and the Company or an Affiliate, (i) gross negligence or willful +misconduct in connection with performance of duties; (ii) conviction of a criminal offense (other than minor traffic offenses); or +Cimarex +Energy +Co. +A-1 +Appendix A +(iii) material +breach of any term of any employment, consulting or other services, confidentiality, intellectual property or non-competition agreement, if any, between the Participant and the +Company or an Affiliate. Any determination by the Administrator whether an event constituting Cause has occurred will be final, binding and conclusive. +( g h ) " Change in Control " shall mean and shall be deemed +to have occurred upon the occurrence of any one of the following: +1. the +acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a +" Person ") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 30% or more of either (i) the +then outstanding shares of Common Stock (the " Outstanding Company Common Stock ") or (ii) the combined voting power of the then outstanding voting +securities of the Company entitled to vote generally in the election of directors (the " Outstanding Company Voting Securities "); provided , however , that for purposes of this subsection (a), the following acquisitions shall not +constitute a Change in Control: (A) any acquisition directly from the Company, (B) any acquisition by the Company, (C) any acquisition by any employee benefit plan (or related +trust) sponsored or maintained by the Company or any corporation controlled by the Company or (D) any acquisition by any corporation pursuant to a transaction that described in +clauses (i) and (ii) of subsection 3. below; or +2. during +any period of twelve months beginning after the Effective Date, individuals who, as of the Effective Date, constitute the Board (the +" Incumbent Board ") cease for any reason to constitute at least a majority of the Board; provided , however , +that any individual becoming a director at the beginning of such twelve-month period, whose election, appointment or nomination for election by +the Company's stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the +Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or +removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or +3. the +closing of a reorganization, share exchange or merger (a " Business Combination "), in each case, unless, following +such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding +Voting Securities immediately prior to such Business Combination will beneficially own, directly or indirectly, more than 40% of, respectively, the then outstanding shares of common stock and the +combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination +(including, without limitation, a corporation which as a result of such transaction will own the Company through one or more subsidiaries) in substantially the same proportions as their ownership, +immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be and (ii) at least a majority of the members +of the +A-2 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Appendix A +board +of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, +providing for such Business Combination or were elected, appointed or nominated by the Board; or +4. the +closing of (i) a complete liquidation or dissolution of the Company or, (ii) the sale or other disposition of all or substantially all of the assets +of the Company, other than to a corporation, with respect to which following such sale or other disposition, (A) more than 40% of, respectively, the then outstanding shares of common stock of +such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, +directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting +Securities immediately prior to such sale or other disposition in substantially the same proportion as their ownership, immediately prior to such sale or other disposition, of the Outstanding Company +Common Stock and Outstanding Company Voting Securities, as the case may be, and (B) at least a majority of the members of the board of directors of such corporation were members of the +Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such sale or other disposition of assets of the Company or were elected, appointed +or nominated by the Board. +If +required for compliance with Section 409A of the Code, in no event will a Change in Control be deemed to have occurred if the transaction is not also a "change in ownership or +effective control of" the Company or a "change in the ownership of a substantial portion of the assets of" the Company as determined under Treasury Regulation Section 1.409A-3(i)(5). +( h i ) " Code " shall mean the Internal Revenue Code of +1986, as amended. +( i j ) " Common Stock " shall mean the common stock of the +Company, par value $0.01 per share, and such other securities or property as may become the subject of Awards under this Plan Amended 2019 +Plan pursuant to an adjustment made under Section 8.1. +( j k ) " Company " shall mean Cimarex Energy Co., a +Delaware corporation. +( k l ) " Disability " shall mean, unless otherwise provided +in an employment, consulting or other services agreement, if any, or Award Agreement between the Participant and the Company or an Affiliate, the Participant (i) is unable to engage in any +substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not +less than 12 months, or (ii) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a +continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than 3 months under an accident and health plan covering employees of the +Company. +( l m ) " Effective Date " shall mean the date on which this +Plan Amended 2019 Plan is approved by the stockholders of the Company. +Cimarex +Energy +Co. +A-3 +Appendix A +( m n ) " Eligible Person " shall have the meaning set forth +in Section 5 hereof. +( n o ) " Exchange Act " shall mean the Securities Exchange +Act of 1934, as amended. +( o p ) " Fair Market Value " shall mean, unless otherwise +determined by the Committee, the fair market value of a share of Common Stock as of a particular date, determined as follows: (i) the closing sale price reported for such share of Common Stock +on the national securities exchange or national market system on +which such stock is principally traded, or if no sale of shares of Common Stock is reported for such trading day, on the next preceding day on which a sale was reported, or (ii) if the shares +of Common Stock are not then listed on a national securities exchange or national market system, or the value of such shares is not otherwise determinable, such value as determined by the Committee in +good faith in its sole discretion consistent with the requirements under Section 409A of the Code. +( p q ) " Incentive Stock Option " or +" ISO " shall mean an incentive stock option within the meaning of Section 422 of the Code. +( q r ) " Non-Qualified Stock Option " or +" NSO " shall mean an Option other than an Incentive Stock Option. +( r s ) " Option " shall mean a compensatory stock option +granted pursuant to Section 6.1.1. +( s t ) " Other-Stock Based Award " shall mean a stock-based +Award issued pursuant to Section 6.1.7. +( t u ) " Participant " shall mean any Eligible Person that +has been issued an Award under the Plan Amended 2019 Plan . +( u v ) " Performance Stock Unit " or +" PSU " shall mean a performance stock unit Award issued pursuant to Section 6.1.5. +(v) " Plan " +shall have the meaning set forth in Section 1 hereof. +(w) " Prior Plan " shall mean the Cimarex Energy Co. 2014 Equity Incentive Plan, as amended. +(x) " Restricted Stock " shall mean shares of forfeitable Common Stock issued pursuant to Section 6.1.3. +(y) " Restricted Stock Unit " or " RSU " shall mean a restricted stock unit +issued pursuant to Section 6.1.4. +(z) " Section 409A " shall mean section 409A of the Code and related Treasury regulations and pronouncements +thereunder. +(aa) " Securities Act " shall mean the Securities Act of 1933, as amended. +A-4 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Appendix A +(bb) " Share Limit " shall have the meaning set forth in Section 4.1. +(cc) " Stock Appreciation Right " or " SAR " shall mean a stock appreciation +right granted pursuant to Section 6.1.2. +(dd) " Subsidiary " shall mean any corporation or other entity controlled by the Company directly or indirectly though one or +more intermediaries. +2.2 Construction . Except where otherwise +indicated by the +context, any masculine term used herein also shall include the feminine, the plural shall include the singular, and the singular shall include the plural. +3. PLAN AMENDED 2019 PLAN ADMINISTRATION +3.1 Plan Amended 2019 Plan +Administrator . This Plan Amended 2019 Plan shall be administered by, and all Awards under this +Plan Amended 2019 Plan shall be authorized by, the Administrator. Any committee appointed by the Board to act as the Administrator +shall be comprised solely of one or more directors or such other number of directors as may be required under applicable law. A committee may delegate some or all of its authority to another committee +so constituted. The Board or a committee comprised solely of directors may also delegate, to the extent permitted by applicable law, to one or more officers of the Company, its powers under this +Plan Amended 2019 Plan (a) to determine the Eligible Persons who will receive grants of Awards under this +Plan Amended 2019 Plan , and (b) to determine the number of shares subject to, and the other terms and conditions of, such +Awards. The Board may delegate different levels of +authority to different committees with administrative and grant authority under this Plan Amended 2019 Plan . Unless otherwise +provided in the bylaws of the Company or the applicable charter of any Administrator: (a) a majority of the members of the acting Administrator shall constitute a quorum, and (b) the +affirmative vote of a majority of the members present assuming the presence of a quorum or the unanimous written consent of the members of the Administrator shall constitute due authorization of an +action by the acting Administrator. +Award +grants, and transactions in or involving Awards, intended to be exempt under Rule 16b-3 under the Exchange Act, must be duly and timely authorized by the Board or a +committee consisting solely of two or more non-employee directors (as this requirement is applied under Rule 16b-3 promulgated under the Exchange Act). To the extent required by any applicable +stock exchange, this Plan Amended 2019 Plan shall be administered by a committee composed entirely of independent directors (as +defined by the rules of the applicable stock exchange). Awards granted to non-employee directors shall not be subject to the discretion of any officer or employee of the Company and shall be +administered exclusively by the Board or a committee consisting solely of independent directors. +3.2 Powers of the Administrator . Subject to +the express +provisions of this Plan Amended 2019 Plan , the Administrator is authorized and empowered to do all things necessary or desirable in +connection with the authorization of Awards and the administration of this Plan Amended 2019 Plan (in the case of a committee or +delegation to one or more officers, within the authority delegated to that committee or person(s)), including, without limitation, the authority to: +(a) determine +eligibility and, from among those persons determined to be eligible, the particular Eligible Persons who will receive Awards under this +Plan Amended 2019 Plan ; +Cimarex +Energy +Co. +A-5 +Appendix A +(b) grant +Awards to Eligible Persons, determine the price at which securities will be offered or Awarded and the number of securities to be offered or Awarded to any of +such persons, determine the other specific terms and conditions of such Awards consistent with the express limits of this Plan Amended 2019 +Plan , establish the installments (if any) in which such Awards shall become exercisable or shall vest (which may include, without limitation, performance and/or time-based schedules), +or determine that no delayed exercisability or vesting is required, establish any applicable performance targets, and establish the events of termination or reversion of such Awards; +(c) approve +the forms of Award agreements (which need not be identical either as to type of Award or among Participants); +(d) construe +and interpret this Plan Amended 2019 Plan and any Award Agreements defining the rights and +obligations of the Company, its Subsidiaries, and Participants under this Plan Amended 2019 Plan , further define the terms used in +this Plan Amended 2019 Plan , and prescribe, amend and rescind rules and regulations relating to the administration of this +Plan Amended 2019 Plan or the Awards granted under this Plan Amended 2019 +Plan ; +(e) cancel, +modify, or waive the Company's rights with respect to, or modify, discontinue, suspend, or terminate any or all outstanding Awards, subject to any required +consent under Section 10.5.5; +(f) accelerate +or extend the vesting or exercisability or extend the term of any or all such outstanding Awards (in the case of Options or Stock Appreciation Rights, +within the maximum seven-year term of such Awards) in such circumstances as the Administrator may deem appropriate (including, without limitation, in connection with a termination of employment or +services or other events of a personal nature) subject to any required consent under Section 10.5.5; +(g) adjust +the number of shares of Common Stock subject to any Award, adjust the price of any or all outstanding Awards or otherwise change previously imposed terms and +conditions, in such circumstances as the Administrator may deem appropriate, in each case subject to compliance with applicable stock exchange requirements, Sections 4 and 10.5.5, and provided +that in no case (except due to an adjustment contemplated by Section 8) shall the terms of any outstanding Awards be amended (by amendment, cancellation and regrant, or other means) to reduce +the per share exercise or base price of any outstanding Option or Stock Appreciation Right or other Award granted under this Plan Amended 2019 +Plan , or be exchanged for cash, other Awards or Option or Stock Appreciation Rights with an exercise price that is less than the per share exercise price of the original Option or Stock +Appreciation Rights, without stockholder approval, and further provided that any adjustment or change in terms made pursuant to this Section 3.2(g) shall be made in a manner that, in the good +faith determination of the Administrator will not likely result in the imposition of additional taxes or interest under Section 409A of the Code; +(h) determine +the date of grant of an Award, which may be a designated date after but not before the date of the Administrator's action (unless otherwise designated by the +Administrator, the date of grant of an Award shall be the date upon which the Administrator took the action granting an Award); +A-6 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Appendix A +(i) determine +whether, and the extent to which, adjustments are required pursuant to Section 8 hereof and authorize the termination, conversion, substitution, +acceleration or succession of Awards upon the occurrence of an event of the type described in Section 8; +(j) acquire +or settle rights under Awards in cash, stock of equivalent value, or other consideration, subject to the provision of the +Plan Amended 2019 Plan ; and +(k) determine +the Fair Market Value of the Common Stock or Awards under this Plan Amended 2019 Plan from +time to time and/or the manner in which such value will be determined. +3.3 Binding Determinations. Any action +taken by, or inaction +of, the Company, any Subsidiary, or the Administrator relating or pursuant to this Plan Amended 2019 Plan and within its authority +hereunder or under applicable law shall be within the absolute discretion of that entity or body and shall be conclusive and binding upon all persons. Neither the Board, the Administrator, nor any +Board committee, nor any member thereof or person acting at the direction thereof, shall be liable for any act, omission, interpretation, construction or determination made in good faith in connection +with this Plan Amended 2019 Plan (or any Award made under this Plan Amended 2019 +Plan ), and all such persons shall be entitled to indemnification and reimbursement by the Company in respect of any claim, loss, damage or expense (including, without limitation, legal +fees) arising or resulting therefrom to the fullest extent permitted by law. The foregoing right of indemnification shall be in addition to any right of indemnification set forth in the Company's +certificate of incorporation and bylaws, as the same may be amended from time to time, or under any directors and officers liability insurance coverage or written indemnification agreement with the +Company that may be in effect from time to time. +3.4 Reliance on Experts. In making any +determination or in +taking or not taking any action under this Plan Amended 2019 Plan , the Administrator may obtain and may rely upon the advice of +experts, including professional advisors to the Company. The Administrator shall not be liable for any such action or determination taken or made or omitted in good faith based upon such advice. +3.5 Delegation of Non-Discretionary Functions. In addition to +the ability to delegate certain grant authority to officers of the Company as set forth in Section 3.1, the Administrator may also delegate ministerial, non-discretionary functions to +individuals who are officers or employees of the Company or any of its Subsidiaries or to third parties. +Cimarex +Energy +Co. +A-7 +Appendix A +4. SHARES OF COMMON STOCK SUBJECT TO THE PLAN AMENDED 2019 PLAN ; SHARE LIMIT +4.1 Shares of Common Stock Subject to the +Plan Amended 2019 Plan ; Share Limit. Subject to the adjustment as provided in +Sections 8.1 and 10.9, the maximum number of shares of Common Stock available for issuance under the Plan Amended 2019 Plan +(the " Share Limit ") will be equal to the sum of (a) 5,800,000 6,900,000 +shares of Common Stock plus (b) the number of shares of Common Stock available for future Awards under the Prior Plan as of the Effective Date of this +Plan Amended 2019 Plan plus (c) such additional shares of Common Stock that become available under the Prior Plan pursuant to +Section 4.3 thereof. Subject to adjustment as provided in Section 8.1, 5,800,000 6,900,000 shares of Common Stock +shall be available under the Plan Amended 2019 Plan for issuance as Incentive Stock Options. Common Stock issue under the +Plan Amended 2019 Plan shall be either authorized but unissued shares or, to the extent permitted by applicable, shares of Common +Stock that have been reacquired by the Company or any Subsidiary. +4.2 Counting of Shares. The Administrator +may adopt reasonable +counting procedures to ensure appropriate counting and to avoid double counting (as, for example, in the case of tandem or substitute Awards) as it may deem necessary or desirable in its sole +discretion. For each Share delivered pursuant to an Option or a Stock Appreciation Right, the number of shares available for issuance under the +Plan Amended 2019 Plan shall be reduced by one share. For each share delivered pursuant to an Award other than an Option or Stock +Appreciation Right, the number of shares available for issuance under the Plan Amended 2019 Plan shall be reduced by 2.38 shares. +Shares shall be counted against those reserved to the extent shares have been delivered pursuant to an Award and are no longer subject to a substantial risk of forfeiture. Accordingly, to the extent +that an Award under the Plan Amended 2019 Plan , in whole or in part, is canceled, expired, forfeited, settled in cash, or otherwise +terminated without delivery of shares to the Participant, the shares retained by or returned to the Company will not be deemed to have been delivered under the +Plan Amended 2019 Plan , as applicable, and will be deemed to remain available under this +Plan Amended 2019 Plan in the same amount as they otherwise would have counted against the limit Section forth in Section 4.1. +Notwithstanding the foregoing, shares that are withheld from such an Award or separately surrendered by the Participant in payment of the exercise price or taxes relating to such an Award, and the +total number of shares subject to the exercised portion of a stock-settled SAR (regardless of the actual lesser of number shares delivered to the Participant), shall be deemed to have been issued +hereunder and shall reduce the number of shares remaining available for issuance under the Plan Amended 2019 Plan . +4.3 Reservation of Shares; No Fractional Shares. The Company +shall at all times reserve a number of shares of Common Stock sufficient to cover the Company's obligations and contingent obligations to deliver shares with respect to Awards then outstanding under +this Plan Amended 2019 Plan (exclusive of any dividend equivalent obligations to the extent the Company has the right to settle such +rights in cash). No fractional shares shall be delivered under this Plan Amended 2019 Plan . The Administrator may pay cash in lieu of +any fractional shares in settlements of Awards under this Plan Amended 2019 Plan . +5. ELIGIBILITY +5.1 Eligible Persons . The Administrator may grant Awards under +this Plan Amended 2019 Plan only to those persons that the Administrator determines to be Eligible Persons. An +" Eligible Person " is any person who is either: (a) an officer (whether or not a director) or employee of the Company or one of its +A-8 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Appendix A +Subsidiaries; +(b) a non-employee director of the Company or one of its Subsidiaries; or (c) an individual consultant who renders bona fide services (other than services in connection +with the offering or sale of securities of the Company or one of its Subsidiaries in a capital-raising transaction or as a market maker or promoter of securities of the Company or one of its +Subsidiaries) to the Company or one of its Subsidiaries and who is selected to participate in this Plan Amended 2019 Plan by the +Administrator; provided, however, that a person who is otherwise an Eligible Person under clause (c) above may participate in this +Plan Amended 2019 Plan only if such participation would not adversely affect either the Company's eligibility to use Form S-8 +to register under the Securities Act, the offering and sale of shares issuable under this Plan Amended 2019 Plan by the Company, or +the Company's compliance with any other applicable laws. +5.2 Participation . The Administrator shall, in its sole and +absolute discretion, select from among the Eligible Employees those individuals who shall receive Awards and become Participants under the +Plan Amended 2019 Plan . There is no right of any Eligible Person to receive an Award under the +Plan Amended 2019 Plan , and the Administrator has absolute discretion to treat Eligible Employees differently from one another under +the Plan Amended 2019 Plan . Receipt of an Award by a Participant shall not create the right to receive future Awards under the +Plan Amended 2019 Plan , but a Participant who has been granted an Award may, if otherwise eligible, be granted additional Awards if +the Administrator shall so determine. +6. AWARDS +6.1 Type and Form of Awards . The Administrator shall determine +the type or types of Award(s) to be made to each selected Eligible Person. Awards may be granted singly, in combination or in tandem. Awards also may be made in combination or in tandem with, in +replacement of, as alternatives to, or as the payment form for grants or rights under any other employee or compensation plan of the Company or one of its Subsidiaries. The types of Awards that may be +granted under this Plan Amended 2019 Plan are: +6.1.1 Stock Options . An Option is the grant of a right to +purchase a specified number of shares of Common Stock during a specified period at a fixed exercise price as determined by the Administrator. +(a) General +Option Provisions. Options may only be granted to Eligible Persons for whom the Company would be deemed to be an "eligible issuer of service +recipient stock," as defined in Treasury Regulation 1.409A-1(b)(5)(iii)(E). An Option may be intended to be an Incentive Stock Option or a Nonqualified Stock Option. The Award agreement for an +Option will indicate if the Option is intended as an ISO; otherwise it will be deemed to be a Nonqualified Stock Option. The maximum term of each Option (ISO or NSO) shall be seven (7) years. +The per share exercise price for each Option shall be not less than 100% of the Fair Market Value of a share of Common Stock on the date of grant of the Option. Each Option shall become exercisable at +such times and under such conditions and shall be subject to such other terms as may be determined by the Administrator in its discretion. When an Option is exercised, the exercise price for the +shares to be purchased shall be paid in full in cash or such other method permitted by the Administrator consistent with Section 6.4. +Cimarex +Energy +Co. +A-9 +Appendix A +(b) Additional +Rules Applicable to ISOs. Notwithstanding the general option rules set forth in subsection (a), above, the following rules shall apply +to options intended to qualify as ISOs. ISOs may only be granted to employees of the Company or one of its subsidiaries (for this purpose, the term "subsidiary" is used as defined in +Section 424(f) of the Code, which generally requires an unbroken chain of ownership of at least 50% of the total combined voting power of all classes of stock of each subsidiary in the chain +beginning with the Company and ending with the subsidiary in question). To the extent that the aggregate Fair Market Value (determined at the time of grant of the applicable option) of stock with +respect to which ISOs first become exercisable by a Participant in any calendar year exceeds $100,000, taking into account both Common Stock subject to ISOs under this +Plan Amended 2019 Plan and stock subject to ISOs under all other plans of the Company or one of its Subsidiaries (or any parent or +predecessor corporation to the extent required by and within the meaning of Section 422 of the Code and the regulations promulgated +thereunder), such options shall be treated as Nonqualified Stock Options. In reducing the number of options treated as ISOs to meet the $100,000 limit, the most recently granted options shall be +reduced first. To the extent a reduction of simultaneously granted options is necessary to meet the $100,000 limit, the Administrator may, in the manner and to the extent permitted by law, designate +which shares of Common Stock are to be treated as shares acquired pursuant to the exercise of an ISO. There shall be imposed in any Award agreement relating to ISOs such other terms and conditions as +from time to time are required in order that the option be an "incentive stock option" as that term is defined in Section 422 of the Code. No ISO may be granted to any person who, at the time +the option is granted, owns (or is deemed to own under Section 424(d) of the Code) shares of outstanding Common Stock possessing more than 10% of the total combined voting power of all classes +of stock of the Company, unless the exercise price of such option is at least 110% of the Fair Market Value of the stock subject to the option and such option by its terms is not exercisable after the +expiration of five years from the date such option is granted. +6.1.2 Stock Appreciation Rights. A Stock Appreciation Right or +"SAR" is an Award that entitles the Participant to receive, upon exercise of the SAR, a payment in cash and/or Common Stock or a combination of the two, equal to (or having a Fair Market Value equal +to) the product of (x) number of SARs being exercised multiplied by (y) the excess of (i) the Fair Market Value of a share of Common Stock on the date the SAR is exercised, over +(ii) the "base price" applicable to the SAR. SARs may only be granted to Eligible Persons for whom the Company would be deemed to be an "eligible issuer of service recipient stock," as defined +in Treasury Regulation 1.409A-1(b)(5)(iii)(E). The base price of the SAR shall be determined by the Administrator but shall be not less than the Fair Market Value of the Company's Common Stock +on the date of grant. The maximum term of a SAR shall be seven (7) years. SARs shall become exercisable at such times and under such conditions and shall be subject to such other terms as may +be determined by the Administrator in its discretion consistent with the terms and conditions of the Plan Amended 2019 Plan . +6.1.3 Restricted Stock . +(a) General Restricted Stock Provisions. Restricted Stock is Common Stock subject to such restrictions on +transferability, risk of forfeiture and other restrictions, if any, as the Administrator may impose, which restrictions may lapse separately or in +A-10 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Appendix A +combination +at such times, under such circumstances (including based on achievement of performance goals and/or future service requirements), in such installments or otherwise, as the Administrator +may determine at the date of grant or thereafter. Except to the extent restricted under the terms of this Plan Amended 2019 Plan and +the applicable Award Agreement relating to the Restricted Stock, a Participant granted Restricted Stock shall have all of the rights of a stockholder of the Company, including the right to vote the +Restricted Stock and the right to receive dividends thereon (subject to the provisions of Section 6.1.3(c), below). +(b) Certificates for Shares. Shares of Restricted Stock granted under this +Plan Amended 2019 Plan may be evidenced in such manner as the Administrator shall determine. If certificates representing Restricted +Stock are registered in the name of the Participant, the Administrator may require that such certificates bear an appropriate legend referring to the terms, conditions and restrictions applicable to +such Restricted Stock, that the Company retain physical possession of the certificates, and that the Participant deliver a stock power to the Company, endorsed in blank, relating to the Restricted +Stock. The Administrator may require that shares of Restricted Stock are held in escrow until all restrictions lapse. +(c) Dividends and Splits. As a condition to the grant of an Award of Restricted Stock, any stock distributed +in connection with a stock split or stock dividend, and any other property distributed as a dividend, shall be subject to restrictions and a risk of forfeiture to the same extent as the Restricted +Stock with respect to which such dividend or distribution was made. In addition, any cash dividends paid on shares of Restricted Stock may be paid out on a current basis or may be subject to +restrictions and a risk of forfeiture to the same extent as the Restricted Stock with respect to which such cash dividend relates, and, subject to applicable law, the Administrator may require or +permit a Participant to elect that any cash dividends paid on Restricted Stock be automatically reinvested in additional shares of Restricted Stock or applied to the purchase of additional Awards +under this Plan Amended 2019 Plan . +6.1.4 Restricted Stock Units . +(a) Grant +of Restricted Stock Units. A restricted stock unit, or "RSU", represents the right to receive from the Company on the respective scheduled vesting +or payment date for such RSU, one share of Common Stock or, if specified in the applicable Award agreement, the Fair Market Value of one share of Common Stock paid in cash. The vesting or payment of +an Award of RSUs may be subject to the attainment of specified performance goals or targets, forfeitability provisions and such other terms and conditions as the Administrator may determine, subject +to the provisions of this Plan Amended 2019 Plan . +(b) Dividend +Equivalent Accounts. If (and only if) required by the applicable Award Agreement, prior to the expiration of the applicable vesting period of an +RSU, the Administrator shall pay dividend equivalent rights with respect to RSUs, in which case the Company shall establish an account for the Participant and reflect in that account any securities, +cash or other property comprising any dividend or property distribution with +Cimarex +Energy +Co. +A-11 +Appendix A +respect +to the shares of Common Stock underlying each RSU. Each amount or other property credited to any such account may be immediately vested or may be subject to the same vesting conditions as the +RSU to which it relates, as determined by the Administrator. In addition, subject to applicable law, the Administrator may require or permit a Participant to elect that any such dividend equivalent +amounts credited to the Participant's account be automatically deemed reinvested in additional RSUs or applied to the purchase of additional Awards under the +Plan Amended 2019 Plan . The Participant shall be paid the amounts or other property credited to such dividend equivalent account at +the time set forth in the Award Agreement. +(c) Rights +as a Stockholder. Subject to the restrictions imposed under the terms and conditions of this +Plan Amended 2019 Plan and the applicable Award Agreement, each Participant receiving RSUs shall have no rights as a stockholder of +the Company with respect to such RSUs until such time as shares of Common Stock are issued to the Participant. In the event an RSU is settled in cash, the Participant receiving RSUs shall never +receive stockholder rights with respect to such Award. No shares of Common Stock shall be issued at the time a RSU is granted, and the Company will not be required to set aside a fund for the payment +of any such Award. +6.1.5 Performance Stock Units. +(a) Grant +of Performance Stock Units. A Performance Stock Unit, or "PSU," is a performance-based Award that entitles the Participant to receive shares of +Common Stock or, if specified in the Award Agreement, the Fair Market Value of such shares of Common Stock paid in cash, based on the attainment of one or more performance goals. Each Award of PSUs +shall designate a target number of PSUs covered by the Award, with the actual number of shares of Common Stock earned (if any) to be based on a formula set forth in the Award Agreement related to the +attainment of one or more performance goals set forth in the Award Agreement. +(b) Dividend +Equivalent Accounts. If (and only if) required by the applicable Award Agreement, the Administrator shall pay dividend equivalent rights with +respect to PSUs, in which case the Participant shall be entitled to a cash payment with respect to each PSU earned and payable in an amount based on the ordinary cash dividends that would have been +payable to Participant had Participant been the owner of a number of actual shares of Common Stock equal to the number of PSUs earned, from the date of grant of the PSU Award through the date the PSU +is paid. If so determined by the Administrator and set forth in the applicable Award Agreement, such cash amount may be credited with earnings or losses as if deemed reinvested in Company Common Stock +or as if used to purchase additional Awards under the Plan Amended 2019 Plan . The amount payable shall be made in a single lump sum +on the date on which payment is made in respect of the related PSUs. +(c) Rights +as a Stockholder. Subject to the restrictions imposed under the terms and conditions of this +Plan Amended 2019 Plan and the applicable Award Agreement, each Participant receiving PSUs shall have +no rights as a stockholder of the Company with respect to such PSUs until such time as shares of Common Stock are issued +A-12 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Appendix A +to +the Participant. In the event a PSU is settled in cash, the Participant receiving PSUs shall never receive stockholder rights with respect to such Award. No shares of Common Stock shall be issued +at the time a PSU is granted, and the Company will not be required to set aside a fund for the payment of any such Award. +6.1.6 Cash Awards . The Administrator +may, from time to time, subject to the provisions of the Plan Amended 2019 Plan and such other terms and conditions as it may +determine, grant cash bonuses (including without limitation, discretionary Awards, Awards based on objective or subjective performance criteria, Awards subject to other vesting criteria or Awards +granted consistent with Section 6.1.7 below). Cash Awards shall be Awarded in such amount and at such times during the term of the +Plan Amended 2019 Plan as the Administrator shall determine. +6.1.7 Other Awards. The other types of Awards that may be +granted under this Plan Amended 2019 Plan include: (a) stock bonuses or similar rights to purchase or acquire shares, whether +at a fixed or variable price or ratio related to the Common Stock (subject to compliance with applicable laws), upon the passage of time, the occurrence of one or more events, or the satisfaction of +performance criteria or other conditions, or any combination thereof; or (b) any similar securities or rights with a value derived from the value of or related to the Common Stock and/or +returns thereon. +6.2 Award Agreements . Each Award (other than cash Awards +described in Section 6.1.6) shall be evidenced by a written or electronic Award Agreement in the form approved by the Administrator and, if required by the Administrator, executed or accepted +by the recipient of the Award. The Administrator may authorize any officer of the Company (other than the particular Award recipient) to execute any or all Award Agreements on behalf of the Company +(electronically or otherwise). The Award agreement shall set forth the material terms and conditions of the Award as established by the Administrator consistent with the express limitations of this +Plan Amended 2019 Plan . +6.3 Deferrals and Settlements . Except as otherwise set forth +herein, payment of Awards may be in the form of cash, Common Stock, other Awards or combinations thereof as the Administrator shall determine, and with such restrictions as it may impose. The +Administrator may also require or permit Participants to elect to defer the issuance of shares of Common Stock or the settlement of Awards in cash under such rules and procedures as it may establish +under this Plan Amended 2019 Plan . The Administrator may also provide that deferred settlements include the payment or crediting of +interest or other earnings on the deferral amounts, or the payment or crediting of dividend equivalents where the deferred amounts are denominated in shares. All mandatory or elective deferrals of the +issuance of shares of Common Stock or the settlement of cash Awards shall be structured in a manner that is intended to comply with the requirements of Section 409A of the Code. +6.4 Consideration for Common Stock or Awards . The purchase +price for any Award granted under this Plan Amended 2019 Plan or the Common Stock to be delivered pursuant to an Award, as +applicable, may be paid by means of any lawful consideration as determined by the Administrator and subject to compliance with applicable laws, including, without limitation, one or a combination of +the following methods: +(a) services +rendered by the recipient of such Award; +Cimarex +Energy +Co. +A-13 +Appendix A +(b) cash, +check payable to the order of the Company, or electronic funds transfer; +(c) notice +and third-party payment in such manner as may be authorized by the Administrator; +(d) the +delivery of previously owned shares of Common Stock that are fully vested and unencumbered; +(e) by +a reduction in the number of shares otherwise deliverable pursuant to the Award; or +(f) subject +to such procedures as the Administrator may adopt, pursuant to a "cashless exercise" with a third party who provides financing for the purposes of (or who +otherwise facilitates) the purchase or exercise of Awards. +In +the event that the Administrator allows a Participant to exercise an Award by delivering shares of Common Stock previously owned by such Participant and unless otherwise expressly +provided by the Administrator, any shares delivered which were initially acquired by the Participant from the Company (upon exercise of an Option or otherwise) must have been owned by the Participant +at least six months as of the date of delivery (or such other period as may be required by the Administrator in order to avoid adverse accounting treatment). Shares of Common Stock used to satisfy the +exercise price of an Option shall be valued at their Fair Market Value on the date of exercise. The Company will not be obligated to deliver any shares unless and until it receives full payment of the +exercise or purchase price therefor and any related withholding obligations under Section 9.1, and any other conditions to exercise or purchase, as established from time to time by the +Administrator have been satisfied. Unless otherwise expressly provided in the applicable Award Agreement, the Administrator may at any time eliminate or limit a Participant's ability to pay the +purchase or exercise price of any Award by any method other than cash payment to the Company. +6.5 Minimum Vesting Schedule. Except as provided below, all +Awards granted under the Plan Amended 2019 Plan shall have a minimum one year cliff vesting schedule meaning that no portion of any +Award may be scheduled to vest prior to one year after the date of grant of such Award. Notwithstanding the foregoing, up to five percent (5%) of the total number of shares of Common Stock authorized +by the Board and the stockholders for issuance under the Plan Amended 2019 Plan may be granted pursuant to Awards not subject to the +minimum vesting schedule described above. The Administrator may adopt reasonable counting procedures to determine whether the five percent (5%) limit in the preceding sentence has been attained. The +Administrator may also apply reasonable rules and rounding conventions to determine whether an Award complies with the above-referenced minimum vesting schedule. +6.6 Transfer Restrictions. +6.6.1 Limitations on Exercise and Transfer . Unless otherwise +expressly provided in (or pursuant to) this Section 6.6, by applicable law and by the Award agreement, as the same may be amended, (a) all Awards are non-transferable and shall not be +subject in any manner to sale, transfer, anticipation, alienation, assignment, pledge, encumbrance or charge; (b) Awards shall be exercised only +A-14 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Appendix A +by +the Participant; and (c) amounts payable or shares issuable pursuant to any Award shall be delivered only to (or for the account of) the Participant. +6.6.2 Exceptions . The Administrator may permit Awards to be +exercised by and paid to, or otherwise transferred to, other persons or entities pursuant to such conditions and procedures, including limitations on subsequent transfers, as the Administrator may, in +its sole discretion, establish in writing (provided that any such transfer of Awards are not for consideration and provided further that any such transfers of ISOs shall +be limited to the extent permitted under the federal tax laws governing ISOs). Any permitted transfer shall be subject to compliance with applicable federal and state securities laws. +6.6.3 Further Exceptions to Limits on Transfer . The exercise +and transfer restrictions in Section 6.6.1 shall not apply to: +(a) transfers +to the Company, +(b) the +designation of a beneficiary to receive benefits in the event of the Participant's death or, if the Participant has died, transfers to or exercise by the +Participant's beneficiary, or, in the absence of a validly designated beneficiary, transfers by will or the laws of descent and distribution, +(c) subject +to any applicable limitations on ISOs, transfers to a family member (or former family member) pursuant to a domestic relations order if approved or ratified by +the Administrator, +(d) subject +to any applicable limitations on ISOs, if the Participant has suffered a Disability, permitted transfers or exercises on behalf of the Participant by his or +her legal representative, or +(e) the +authorization by the Administrator of "cashless exercise" procedures with third parties who provide financing for the purpose of (or who otherwise facilitate) the +exercise of Awards consistent with applicable laws and the express authorization of the Administrator. +6.7 International Awards . One or more Awards may be granted to +Eligible Persons who provide services to the Company or one of its Subsidiaries outside of the United States. Any Awards granted to such persons may, if deemed necessary or advisable by the +Administrator, be granted pursuant to the terms and conditions of any applicable sub-plans, if any, appended to this Plan Amended 2019 +Plan and approved by the Administrator. +6.8 Dividend and Dividend Equivalents . Notwithstanding anything +to the contrary herein, in no event may accrued dividends or dividend equivalents with respect to any Award issued under the Plan Amended 2019 +Plan that is subject to performance-based vesting be paid prior to the vesting of such Award. +Cimarex +Energy +Co. +A-15 +Appendix A +7. EFFECT OF TERMINATION OF SERVICE ON AWARDS +7.1 Termination of Employment. +7.1.1 Administrator Determination. The Administrator shall +establish the effect of a termination of employment or service on the rights and benefits under each Award under this Plan Amended 2019 +Plan and in so doing may make distinctions based upon, inter alia, the cause of termination and type of Award. If the Participant is not an employee of the Company or one of its +Subsidiaries and provides other services to the Company or one of its Subsidiaries, the Administrator shall be the sole judge for purposes of this +Plan Amended 2019 Plan (unless a contract or the Award agreement otherwise provides) of whether the Participant continues to render +services to the Company or one of its Subsidiaries and the date, if any, upon which such services shall be deemed to have terminated. +7.1.2 Stock Options and SARs. For Awards of Options or SARs, +unless the Award Agreement provides otherwise, the exercise period of such Options or SARs shall expire: (1) three months after the last day that the Participant is employed by or provides +services to the Company or a Subsidiary ( provided however , that in the event of the Participant's death during this period, those persons entitled to +exercise the Option or SAR pursuant to the laws of descent and distribution shall have one year following the date of death within which to exercise such Option or SAR); (2) in the case of a +Participant whose termination of employment is due to death or Disability (as defined in the applicable Award agreement), 12 months after the last day that the Participant is employed by or +provides services to the Company or a Subsidiary; and (3) immediately upon a Participant's termination for Cause. The Administrator will, in its absolute discretion, determine the effect of all +matters and questions relating to a termination of employment, including, but not by way of limitation, the question of whether a leave of absence constitutes a termination of employment and whether a +Participant's termination is for Cause. +7.1.3 Other Awards. For all other Awards issued under the +Plan Amended 2019 Plan , unless the Award agreement provides otherwise, the portion of such Awards that are unvested at the time that +a Participant's employment or service is terminated shall be forfeited and reacquired by the Company; provided however, the Administrator may provide, +by rule or regulation or in any Award agreement, or may determine in any individual case, that such forfeiture requirement shall be waived in whole or in part. +7.2 Events Not Deemed Terminations of Service. Unless the +express policy of the Company or one of its Subsidiaries, or the Administrator, otherwise provides, the employment relationship shall not be considered terminated in the case of (a) sick leave, +(b) military leave, or (c) any other paid or unpaid leave of absence authorized by the Company or one of its Subsidiaries, or the Administrator; provided that unless reemployment upon the +expiration of such leave is guaranteed by contract or law, such leave is for a period of not more than +3 months. In the case of any employee of the Company or one of its Subsidiaries on an approved leave of absence, continued vesting of the Award while on leave from the employ of the Company or +one of its Subsidiaries may be suspended until the employee returns to service, unless the Administrator otherwise provides or applicable law otherwise requires. In no event shall an Award be +exercised after the expiration of the term set forth in the Award agreement. +A-16 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Appendix A +7.3 Effect of Change of Subsidiary Status. For purposes of this +Plan Amended 2019 Plan and any Award, if an entity ceases to be a Subsidiary of the Company, a termination of employment or service +shall be deemed to have occurred with respect to each Eligible Person in respect of such Subsidiary who does not continue as an Eligible Person in respect of the Company or another Subsidiary that +continues as such after giving effect to the transaction or other event giving rise to the change in status. +8. ADJUSTMENTS; ACCELERATION +8.1 Adjustments. Upon or in contemplation of (a) any +reclassification, recapitalization, stock split (including a stock split in the form of a stock dividend) or reverse stock split, (b) any merger, arrangement, combination, consolidation, or +other reorganization, (c) any spin-off, split-up, or similar extraordinary dividend distribution in respect of the Common Stock (whether in the form of securities or property), (d) any +exchange of Common Stock or other securities of the Company, or (e) any similar unusual or extraordinary corporate event or transaction affecting the Common Stock, the Administrator shall in +such manner, to such extent and at such time as it deems appropriate and equitable in the circumstances (but subject to compliance with applicable laws and stock exchange requirements) proportionately +adjust any or all of (1) the number and type of shares of Common Stock (or other securities) that thereafter may be made the subject of Awards (including the Share Limit and the limit on the +number of Incentive Stock Options issuable under the Plan Amended 2019 Plan ), (2) the number, amount and type of shares of +Common Stock (or other securities or property) subject to any or all outstanding Awards, (3) the grant, purchase, or exercise price (which term includes the base price of any SAR or similar +right) of any or all outstanding Awards, and (4) the securities, cash or other property deliverable upon exercise or payment of any outstanding Awards. Any adjustment made pursuant to this +Section 8.1 shall be made in a manner that, in the good faith determination of the Administrator, will not likely result in the imposition of additional taxes or interest under +Section 409A of the Code. With respect to any Award of an ISO, the Administrator may make an adjustment that causes the option to cease to qualify as an ISO without the consent of the affected +Participant. +8.2 Change in Control. In the event of a Change in Control: +(i) with respect to Awards that are subject to a time-based vesting schedule, any unvested portion of such Awards shall become vested in full immediately prior to the Change in Control, and +(ii) with respect to Awards that are subject to performance-based vesting, the performance period for all such Awards shall be deemed to be completed as of the Change in Control, and the +Administrator shall determine the extent to which the Awards have vested based on the results achieved through the date of the Change in Control, including any adjustments necessary to take into +account the truncation of the performance period as a result of the Change in Control. In addition, the Administrator shall have full discretion to take whatever additional actions (not inconsistent +with the previous sentence) that it deems necessary or appropriate with respect to outstanding Awards, including, +but not limited to: (i) to provide for the assumption of such Awards (or portions thereof) or the substitution of such Awards (or portions thereof) with similar awards of the surviving or +acquiring company, in a manner designed to comply with Section 409A of the Code, (ii) to provide for the termination of any Award upon the occurrence of the Change in Control, +(iii) to provide for the cash out and cancellation of any Award (or portion thereof) immediately prior to such Change in Control, which cash out may (in a manner designed to comply with Code +Section 409A) be subject to any escrow, earn-out or other contingent or deferred payment arrangement that is contemplated by such Change in Control, and (iv) to take any other actions as +the Administrator deems necessary or advisable in connection with such Change in Control transaction. The Administrator may take different actions with respect to different +Cimarex +Energy +Co. +A-17 +Appendix A +Participants +under the Plan Amended 2019 Plan , different Awards under the +Plan Amended 2019 Plan , and different portions of Awards granted under the +Plan Amended 2019 Plan . +9. TAX PROVISIONS +9.1 Tax Withholding. Upon any exercise, vesting, or payment of +any Award, the Company or one of its Subsidiaries shall have the right at its option to: +(a) require +the Participant (or the Participant's personal representative or beneficiary, as the case may be) to pay or provide for payment of at least the minimum amount +of any taxes which the Company or one of its Subsidiaries may be required to withhold with respect to such Award event or payment; or +(b) deduct +from any amount otherwise payable in cash to the Participant (or the Participant's personal representative or beneficiary, as the case may be) the minimum +amount of any taxes which the Company or one of its Subsidiaries may be required to withhold with respect to such cash payment. +In +any case where a tax is required to be withheld in connection with the delivery of shares of Common Stock under this Plan Amended +2019 Plan , the Administrator may in its sole discretion (subject to Section 10.1) grant (either at the time of the Award or thereafter) to the Participant the right to elect, +pursuant to such rules and subject to such conditions as the Administrator may establish, to have the Company reduce the number of shares to be delivered by (or otherwise reacquire) the appropriate +number of shares, valued in a consistent manner at their Fair Market Value or at the sales price in accordance with authorized procedures for cashless exercises, necessary to satisfy the applicable +withholding obligation on exercise, vesting or payment, not in excess of the maximum statutory rates in the Participant's applicable jurisdictions. +9.2 Requirement of Notification of Code Section 83(b) +Election . If any Participant shall make an election under Code Section 83(b) (to include in gross income in the year of transfer the amounts specified in +Code Section 83(b)) or under a similar provisions of the laws of a jurisdiction outside the United States, such Participant shall notify the Company of such election within ten (10) days +after filing notice of the election with the Internal Revenue Service or other government authority, in addition to any filing and notification required pursuant to regulations issued under Code +Section 83(b) or other applicable provision. +9.3 Requirement of Notification of Disqualifying +Disposition . If any Participant shall make any disposition of shares of stock delivered pursuant to the exercise of an ISO under the circumstances described in +Code Section 421(b) (relating to certain disqualifying dispositions), such Participant shall notify the Company of such disposition within ten (10) days thereof. +10. OTHER PROVISIONS +10.1 Compliance with Laws. This +Plan Amended 2019 Plan , the granting and vesting of Awards under this +Plan Amended 2019 Plan , the offer, issuance and delivery of shares of Common Stock, the payment of money under this +Plan Amended 2019 Plan or under Awards are subject to compliance with all applicable federal and state laws, rules and regulations +and to such approvals by any applicable stock exchange listing, regulatory or governmental authority as may, in the opinion of counsel for the Company, +A-18 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Appendix A +be +necessary or advisable in connection therewith. The person acquiring any securities under this Plan Amended 2019 Plan will, if +requested by the Company or one of its Subsidiaries, provide such assurances and representations to the Company or one of its Subsidiaries as the Administrator may deem necessary or desirable to +assure compliance with all applicable legal and accounting requirements. +10.2 Future Awards/Other Rights. No person shall have any claim +or rights to be granted an Award (or additional Awards, as the case may be) under this Plan Amended 2019 Plan , subject to any express +contractual rights (set forth in a document other than this Plan Amended 2019 Plan ) to the contrary. +10.3 No Employment/Service Contract. Nothing contained in this +Plan Amended 2019 Plan (or in any other documents under this Plan Amended 2019 +Plan or in any Award) shall confer upon any Eligible Person or other Participant any right to continue in the employ or other service of the Company or one of its Subsidiaries, +constitute any contract or agreement of employment or other service or affect an employee's status as an employee at will, nor shall interfere in any way with the right of the Company or one of its +Subsidiaries to change a person's compensation or other benefits, or to terminate his or her employment or other service, with or without cause. Nothing in this Section 10.3, however, is +intended to adversely affect any express independent right of such person under a separate employment or service contract other than an Award agreement. +10.4 Plan Amended 2019 Plan Not +Funded. Awards payable under this Plan Amended 2019 Plan shall be payable in shares of Common +Stock or from the general assets of the Company, and no special or separate reserve, fund or deposit shall be made to assure payment of such Awards. No Participant, beneficiary or other person shall +have any right, title or interest in any fund or in any specific asset (including shares of Common Stock, except as expressly otherwise provided) of the Company or one of its Subsidiaries by reason of +any Award hereunder. Neither the provisions of this Plan Amended 2019 Plan (or of any related documents), nor the creation or +adoption of this Plan Amended 2019 Plan , nor any action taken pursuant to the provisions of this +Plan Amended 2019 Plan shall create, or be construed to create, a trust of any kind or a fiduciary relationship between the Company +or one of its Subsidiaries and any Participant, beneficiary or other person. To the extent that a Participant, beneficiary or other person acquires a right to receive payment pursuant to any Award +hereunder, such right shall be no greater than the right of any unsecured general creditor of the Company. +10.5 Effective Date, Termination and Suspension, +Amendments. +10.5.1 Effective Date and Termination. This +Plan Amended 2019 Plan was approved by the Board and shall become effective upon approval by the stockholders of the Company (the +" Effective Date "). Unless earlier terminated by the Board, this Plan Amended 2019 +Plan shall terminate at the close of business ten years after the date on which it was approved by the Board. After the termination of this +Plan Amended 2019 Plan either upon such stated expiration date or its earlier termination by the Board, no additional Awards may be +granted under this Plan Amended 2019 Plan , but previously granted Awards (and the authority of the Administrator with respect +thereto, including the authority to amend such Awards) shall remain outstanding in accordance with their applicable terms and conditions and the terms and conditions of this +Plan Amended 2019 Plan . +Cimarex +Energy +Co. +A-19 +Appendix A +10.5.2 Board Authorization. The Board may, at any time, +terminate or, from time to time, amend, modify or suspend this Plan Amended 2019 Plan , in whole or in part. No Awards may be granted +during any period that the Board suspends this Plan Amended 2019 Plan . +10.5.3 Stockholder Approval. To the extent then required by +applicable law or any applicable stock exchange rule or required to preserve the intended tax consequences of this Plan Amended 2019 +Plan , or deemed necessary or advisable by the Board, this Plan Amended 2019 Plan and any amendment to this +Plan Amended 2019 Plan shall be subject to approval by the stockholders of the Company. +10.5.4 Amendments to Awards. Without limiting any other express +authority of the Administrator under (but subject to) the express limits of this Plan Amended 2019 Plan , the Administrator by +agreement or resolution may waive conditions of or limitations on Awards to Participants that the Administrator in the prior exercise of its discretion has imposed, without the consent of a +Participant, and (subject to the requirements of Sections 3.2 and 10.5.5) may make other changes to the terms and conditions of Awards. Any amendment or other action that would constitute a +repricing of an Award is subject to the limitations and stockholder approval requirements set forth in Section 3.2(g). +10.5.5 Limitations on Amendments to Plan Amended +2019 Plan and Awards. No amendment, suspension or termination of this Plan Amended 2019 +Plan or change of or affecting any outstanding Award shall, without written consent of the Participant, affect in any manner materially adverse to the Participant any rights or benefits +of the Participant or obligations of the Company under any Award granted under this Plan Amended 2019 Plan . Changes, settlements and +other actions contemplated by Section 8 shall not be deemed to constitute changes or amendments for purposes of this Section 10.5.5. +10.6 Privileges of Stock Ownership. Except as otherwise +expressly authorized by the Administrator or this Plan Amended 2019 Plan , a Participant shall not be entitled to any privilege of +stock ownership as to any shares of Common Stock not actually delivered to and held of record by the Participant. Except as expressly provided herein, no adjustment will be made for dividends or other +rights as a stockholder of the Company for which a record date is prior to such date of delivery. +10.7 Governing Law; Construction; Severability. +10.7.1 Choice of Law. This +Plan Amended 2019 Plan , the Awards, all documents evidencing Awards and all other related documents shall be governed by, and +construed in accordance with the laws of the State of Delaware. +10.7.2 Severability. If a court of competent jurisdiction holds +any provision of this Plan Amended 2019 Plan invalid and unenforceable, the remaining provisions of this +Plan Amended 2019 Plan shall continue in effect +and the Plan Amended 2019 Plan shall be construed and enforced without regard to the illegal or invalid provision. +A-20 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Appendix A +10.7.3 Plan Amended 2019 Plan +Construction. +(a) Rule 16b-3. It is the intent of the Company that the Awards and transactions permitted by Awards be +interpreted in a manner that, in the case of Participants who are or may be subject to Section 16 of the Exchange Act, qualify, to the maximum extent compatible with the express terms of the +Award, for exemption from matching liability under Rule 16b-3 promulgated under the Exchange Act. Notwithstanding the foregoing, the Company shall have no liability to any Participant for +Section 16 consequences of Awards or events under Awards if an Award or event does not so qualify. +(b) Compliance with Section 409A of the Code. The Board intends that, except as may be otherwise +determined by the Administrator, any Awards under the Plan Amended 2019 Plan will be either exempt from or satisfy the requirements +of Section 409A to avoid the imposition of any taxes, including additional income or penalty taxes, thereunder. If the Administrator determines that an Award, Award Agreement, acceleration, +adjustment to the terms of an Award, payment, distribution, deferral election, transaction or any other action or arrangement contemplated by the provisions of the +Plan Amended 2019 Plan would, if undertaken, cause a Participant's Award to violate Section 409A, unless the Administrator +expressly determines otherwise, such Award, Award Agreement, payment, acceleration, adjustment, distribution, deferral election, transaction or other action or arrangement shall not be undertaken and +the related provisions of the Plan Amended 2019 Plan and/or Award Agreement will be deemed modified or, if necessary, rescinded in +order to comply with the requirements of Section 409A to the extent determined by the Administrator without the consent of or notice to the Participant. Notwithstanding the foregoing, neither +the Company nor the Administrator shall have any obligation to take any action to prevent the assessment of any excise tax or penalty on any Participant under Section 409A. +(c) No Guarantee of Favorable Tax Treatment. Although the Company intends that Awards under the +Plan Amended 2019 Plan will be exempt from, or will comply with, the requirements of Section 409A of the Code, the Company +does not warrant that any Award under the Plan Amended 2019 Plan will qualify for favorable tax treatment under Section 409A +of the Code or any other provision of federal, state, local or foreign law. The Company shall not be liable to any Participant for any tax, interest or penalties the +Participant might owe as a result of the grant, holding, vesting, exercise or payment of any Award under the Plan Amended 2019 Plan . +10.8 Captions. Captions and headings are given to +the sections and subsections of this +Plan Amended 2019 Plan solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or +relevant to the construction or interpretation of this Plan Amended 2019 Plan or any provision thereof. +10.9 Stock-Based Awards in Substitution for Stock Options or Awards Granted by Other +Corporation. Awards may be granted to Eligible Persons in substitution for or in connection with an assumption of employee stock options, stock appreciation right, +restricted stock or other stock-based awards granted by other entities to persons who are or who will become Eligible Persons in respect of the Company or one of its Subsidiaries, in connection with a +distribution, arrangement, business combination, merger or other reorganization by or with the granting entity or an affiliated entity, or the acquisition by the Company or one of its Subsidiaries, +directly or indirectly, of all or a substantial part of the stock or +Cimarex +Energy +Co. +A-21 +Appendix A +assets +of the employing entity. The Awards so granted need not comply with other specific terms of this Plan Amended 2019 Plan , +provided the Awards reflect only adjustments giving effect to the assumption or substitution consistent with the conversion applicable to the Common Stock in the transaction and any change in the +issuer of the security. Any shares that are delivered and any Awards that are granted by, or become obligations of, the Company, as a result of the assumption by the Company of, or in substitution +for, outstanding Awards previously granted by an acquired company (or previously granted by a predecessor employer (or direct or indirect parent thereof) in the case of persons that become employed by +the Company or one of its Subsidiaries in connection with a business or asset acquisition or similar transaction) shall not be counted against the Share Limit or other limits on the number of shares +available for issuance under this Plan Amended 2019 Plan , except as may otherwise be provided by the Administrator at the time of +such assumption or substitution or as may be required to comply with the requirements of any applicable stock exchange. +10.10 Non-Exclusivity of Plan Amended 2019 +Plan . Nothing in this Plan Amended 2019 Plan shall limit or be deemed to limit +the authority of the Board or the Administrator to grant Awards or authorize any other compensation, with or without reference to the Common Stock, under any other plan or authority. +10.11 No Corporate Action Restriction. The +existence of this +Plan Amended 2019 Plan , the Award agreements and the Awards granted hereunder shall not limit, affect or restrict in any way the +right or power of the Board or the stockholders of the Company to make or authorize: (a) any adjustment, recapitalization, reorganization or other change in the capital structure or business of +the Company or any Subsidiary, (b) any merger, arrangement, business combination, amalgamation, consolidation or change in the ownership of the Company or any Subsidiary, (c) any issue +of bonds, debentures, capital, preferred or prior preference stock ahead of or affecting the capital stock (or the rights thereof) of the Company or any Subsidiary, (d) any dissolution or +liquidation of the Company or any Subsidiary, (e) any sale or transfer of all or any part of the assets or business of the Company or any Subsidiary, or (f) any other corporate act or +proceeding by the Company or any Subsidiary. No Participant, beneficiary or any other person shall have any claim under any Award or Award Agreement against any member of the Board or the +Administrator, or the Company or any employees, officers or agents of the Company or any Subsidiary, as a result of any such action. +10.12 Other Company Benefit and Compensation Programs. Payments and other benefits +received by a Participant under an Award made pursuant to this Plan Amended 2019 Plan shall not be deemed a part of a Participant's +compensation for purposes of the determination of benefits under any other employee welfare or benefit plans or arrangements, if any, provided by the Company or any Subsidiary, except where the +Administrator expressly otherwise provides or authorizes in writing or except as otherwise specifically set forth in the terms and conditions of such other employee welfare or benefit plan or +arrangement. Awards under this Plan Amended 2019 Plan may be made in addition to, in combination with, as alternatives to or in +payment of grants, Awards or commitments under any other plans or arrangements of the Company or its Subsidiaries. +10.13 Restrictive Covenants, Cause Forfeiture and Clawback Policy. +10.13.1 Restrictive Covenants . The Company may retain the right in an Award Agreement to cause a forfeiture of +the gain realized by a Participant on account of actions taken by the Participant in violation or breach of or in conflict with any non-competition agreement, any agreement prohibiting +A-22 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Appendix A +solicitation +of employees of the Company or any Affiliate thereof or any confidentiality obligation of post-employment cooperation agreement with respect to the Company or any Affiliate, to the extent +specified in such Award Agreement applicable to the Participant. +10.13.2 Annulment upon Termination for Cause . The Administrator may annul an Award if the Participant is an +employee of the Company or an Affiliate thereof and is terminated for Cause as defined in the applicable Award Agreement or in the Plan Amended 2019 +Plan . +10.13.3 Awards Subject to Clawback . Notwithstanding any other provision of this +Plan Amended 2019 Plan to the contrary, any Award granted or amount payable or paid under this +Plan Amended 2019 Plan shall be subject to the terms of any compensation recoupment policy then applicable, if any, of the Company, +to the extent the policy applies to such award or amount. By accepting an Award or the payment of any amount under the Plan Amended 2019 +Plan , each Participant agrees and consents to the Company's application, implementation and enforcement of (a) any such policy and (b) any provision of applicable law +relating to cancellation, rescission, payback or recoupment of compensation and expressly agrees that the Company may take such actions as are permitted under the policy or applicable law without +further consent or action being required by such Participant. To the extent that the terms of this Plan Amended 2019 Plan and the +policy or applicable law conflict, then the terms of the policy or applicable law shall prevail. +11. DIRECTOR COMPENSATION PROVISIONS +11.1 Plan Amended 2019 Plan +Exclusive Vehicle for Non-Employee Director Cash and Equity Compensation. All cash and equity compensation paid or provided to the Company's non-employee directors +shall be awarded under the terms and conditions of this Plan Amended 2019 Plan . +11.2 Non-Employee Director Compensation. Non-employee directors may be Awarded any of +the types of Awards described in Section 6 above for which they are eligible under the terms and conditions of Section 6, above. +11.2.1 Cash Awards . Cash Awards (as described in Section 6.1.6) may take any form determined by the +Administrator in its sole and absolute discretion, including, but not limited to, retainers, committee fees, +chairperson fees, per meeting fees, and special fees for committee service. In no event shall cash Awards paid to any non-employee director exceed $400,000 in any fiscal year. +11.2.2 Equity Awards. Equity Awards (described in Sections 6.1.1, 6.1.2, 6.1.3, 6.1.4 and 6.1.5) may +take any form determined by the Administrator in its sole and absolute discretion, provided, however, that in no event shall Awards granted to an non-employee director in any fiscal year have a grant +date fair value in excess of $400,000. +As +adopted by the Board of Directors of Cimarex Energy Co. on February 17, 2021 20, 2019 . +Cimarex +Energy +Co. +A-23 +Appendix B +AMENDED AND RESTATED +CERTIFICATE OF INCORPORATION +OF CIMAREX ENERGY CO. +1. The +name of the Corporation is Cimarex Energy Co. +2. The +name under which the Corporation was originally incorporated was Helmerich & Payne Exploration and Production Co. and the original Certificate of +Incorporation of the Corporation was filed with the Secretary of State of the State of Delaware on February 14, 2002. +3. An +Amended and Restated Certificate of Incorporation was filed with the Secretary of State of the State of Delaware on September 30, 2002. +4. An +additional Amended and Restated Certificate of Incorporation was filed with the Secretary of State of the State of +Delaware on June 7, 2005. +4. 5. This +Amended and Restated Certificate of Incorporation was duly adopted in accordance with the +provisions of Sections 242 and 245 of the General Corporation Law of the State of Delaware. +5 6 . The +text of the Restated Certificate of Incorporation of the Corporation as amended hereby is +restated to read in its entirety, as follows: +FIRST : +The name of the Corporation is Cimarex Energy Co. (hereinafter the "Corporation"). +SECOND : +The address of the registered agent is 2711 Centerville Road, Suite 400 261 Little Falls +Drive , in the City of Wilmington, County of New Castle, State of Delaware. The name of its registered agent at that address is the Corporation +Service Services Company. +THIRD : +The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law +of the State of Delaware as set forth in Title 8 of the Delaware Code (the "GCL"). +FOURTH : +The total number of shares of stock which the Corporation shall have authority to issue is Two Hundred Fifteen Million (215,000,000) shares of +capital stock, consisting of (i) Two Hundred Million (200,000,000) shares of common stock, par value $.01 per share (the "Common Stock"), and (ii) Fifteen Million (15,000,000) shares of +preferred stock, par value $.01 per share (the "Preferred Stock"). +1. Common Stock. The +powers, preferences and rights, and +the qualifications, limitations and restrictions, of the Common Stock are as follows: +a. Voting . Except +as otherwise expressly required by law or provided in this Certificate of Incorporation, and subject to any +voting rights provided to holders of Preferred Stock at any time outstanding, at each annual or special meeting of stockholders, each holder of record of shares of Common Stock on the relevant record +date shall be entitled to cast one vote in person or by proxy for each share of the Common Stock standing in such holder's name on the stock transfer records of the Corporation. Holders of shares of +Common Stock shall not have cumulative voting rights. +Cimarex +Energy +Co. +B-1 +Appendix B +b. Dividends . Subject +to the rights of the holders of Preferred Stock, and subject to any other provisions of this Certificate of +Incorporation, as it may be amended from time to time, holders of shares of Common Stock shall be entitled to receive such dividends and other distributions in cash, stock or property of the +Corporation when, as and if declared thereon by the Board of Directors from time to time out of assets or funds of the Corporation legally available therefor. +c. Liquidation, +Dissolution, etc . In the event of any liquidation, dissolution or winding up (either voluntary or involuntary) of +the Corporation, the holders of shares of Common Stock shall be entitled to receive the assets and funds of the Corporation available for distribution after payments to creditors and to the holders of +any Preferred Stock of the Corporation that may at the time be outstanding, in proportion to the number of shares held by them. +d. No +Preemptive or Subscription Rights . No holder of shares of Common Stock shall be entitled to preemptive or subscription +rights. +2. Preferred Stock . The Board of Directors +is hereby +expressly authorized to provide for the issuance of all or any shares of the Preferred Stock in one or more classes or series, and to fix for each such class or series such voting powers, full or +limited, or no voting powers, and such designations, preferences and relative, participating, optional or other special rights and such qualifications, limitations or restrictions thereof, as shall be +stated and expressed in the resolution or resolutions adopted by the Board of Directors providing for the issuance of such class or series, including, without limitation, the authority to provide that +any such class or series may be (i) subject to redemption at such time or times and at such price or prices; (ii) entitled to receive dividends (which may be cumulative or +non-cumulative) at such rates, on such conditions, and at such times, and payable in preference to, or in such relation to, the dividends payable on any other class or classes or any other series; +(iii) entitled to such rights upon the dissolution of, or upon any distribution of the assets of, the Corporation; or (iv) convertible into, or exchangeable for, shares of any other +class or classes of stock, or of any other series of the same or any other class or classes of stock, of the Corporation at such price or prices or at such rates of exchange and with such adjustments, +all as may be stated in such resolution or resolutions. Pursuant to the authority conferred by this Article FOURTH, the following series of Preferred Stock have been designated, each +such series consisting of such number of shares, with such voting powers and with such designations, preferences and relative, participating, optional or other special rights, and qualifications, +limitations or restrictions thereon as are stated and expressed in Exhibit A attached hereto and incorporated herein by reference: +Exhibit +A: 8 1 / 8 % Series A Cumulative Perpetual Convertible Preferred Stock +3. Power to Sell and Purchase Shares . Subject to the +requirements of applicable law, the Corporation shall have the power to issue and sell all or any part of any shares of any class of stock herein or hereafter authorized to such persons, and for such +consideration, as the Board of Directors shall from time to time, in its discretion, determine, whether or not greater consideration could be received upon the issue or sale of the same number of +shares of another class, and as otherwise permitted by law. Subject to the requirements of applicable law, the Corporation shall have the power to purchase any shares of any class of stock herein or +hereafter authorized from such persons, and for such consideration, as the Board of Directors shall from time to time, in its discretion, determine whether or not less consideration could be paid upon +the purchase of the same number of shares of another class, and as otherwise permitted by law. +B-2 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Appendix B +FIFTH : +The following provisions are inserted for the management of the business and the conduct of the affairs of the Corporation, and for further +definition, limitation and regulation of the powers of the Corporation and of its directors and stockholders. +1. The +business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors. +2. The +directors shall have concurrent power with the stockholders to make, alter, amend, change, add to or repeal the By-Laws of the Corporation. +3. a. The Subject +to the rights of the holders of any series of Preferred Stock to elect additional +directors, the number of directors of the Corporation shall be at least six and not more than ten, with the exact number to be from time to time fixed by resolution adopted by a +majority of the entire Board of Directors. Election of directors need not be by written ballot unless the By-Laws so provide. The directors shall be divided into three classes, +designated Class I, Class II and Class III. Each class shall consist, as nearly as may be possible, of one-third of the total number of directors constituting the entire Board of +Directors. The initial division of the Board of Directors into classes shall be made by the decision of the affirmative vote of a majority of the entire Board of Directors. The term of the initial +Class I directors shall terminate on the date of the 2003 annual meeting; the term of the initial Class II directors shall terminate on the date of the 2004 annual meeting; and the term +of the initial Class III directors shall terminate on the date of the 2005 annual meeting. At each annual meeting of stockholders beginning in 2003, successors to the class of directors whose +term expires at that annual meeting shall be elected for a three-year term. If the number of directors is changed, any increase or decrease shall be apportioned among the classes so as to maintain the +number of directors in each class as nearly equal as possible, and any additional director of any class elected to fill a vacancy resulting from an increase in such class shall hold office for a term +that shall coincide with the remaining term of that class, but in no case will a decrease in the number of directors shorten the term of any incumbent director. At +each annual meeting of stockholders commencing with the 2022 annual meeting of stockholders, the directors whose terms shall then expire, other than those who may be elected by the holders of any +series of Preferred Stock, shall be elected for a one-year term expiring at the next succeeding annual meeting of stockholders. Notwithstanding any other provision of this Certificate +of Incorporation (and in addition to any other vote that may be required by Law), the affirmative vote of the holders of at least eighty percent (80%) of the voting power of the shares entitled to +vote at an election of directors shall be required to amend, alter, change or repeal, or to adopt any provision as part of this Certificate of Incorporation inconsistent with the purpose and intent of +this Article FIFTH. +b. A +director shall hold office until the annual meeting for the year in which his or her term expires and until his or her successor shall be elected and shall qualify +subject, however, to prior death, resignation, retirement, disqualification or removal from office. +c. Subject +to the terms of any one or more classes or series of Preferred Stock, any vacancy on the Board of Directors that results from an increase in the number of +directors may be filled by a majority of the Board of Directors then in office, provided that a quorum is present, and any other vacancy occurring on the Board of Directors may be filled by a majority +of the Board of Directors then in office, even if less than a quorum, or by a sole remaining director. Any director of any class elected to fill a vacancy resulting from an increase +in the number of directors of such class shall hold office for a term that shall coincide with the remaining term of that class. Any +Cimarex +Energy +Co. +B-3 +Appendix B +director +elected to fill a vacancy not resulting from an increase in the number of directors shall have the same remaining term as that +of his predecessor. Subject to the rights, if any, of the holders of shares of Preferred Stock then outstanding, any or all of the directors of the Corporation may be removed from +office at any time, but only for cause and with or without cause, only by the affirmative vote of the holders of at least a majority of the voting +power of the Corporation's then outstanding capital stock entitled to vote at an election of directors; provided, however, that the Board of Directors shall be considered classified for purposes of +Section 141(k) of the GCL so long as any director is continuing to serve the remaining portion of a multi-year term and no such director may be removed during such multi-year term except for +cause and then only by the affirmative vote of the holders of at least a majority of the voting power of the Corporation's then outstanding capital stock entitled to vote at an election +of directors. Notwithstanding the foregoing, whenever the holders of any one or more classes or series of Preferred +Stock issued by the Corporation shall have the right, voting separately by class or series, to elect directors at an annual or special meeting of stockholders, the election, term of office, filling of +vacancies and other features of such directorships shall be governed by the terms of this Certificate of Incorporation applicable thereto , and such directors so elected shall not be +divided into classes pursuant to this Article FIFTH unless expressly provided by such terms . +d. In +addition to the powers and authority hereinbefore or by statute expressly conferred upon them, the directors are hereby empowered to exercise all such powers and do +all such acts and things as may be exercised or done by the Corporation, subject, nevertheless, to the provisions of the GCL, this Certificate of Incorporation, and any By-Laws adopted by the +stockholders; provided , however , that no By-Laws hereafter adopted by the stockholders shall invalidate +any prior act of the directors which would have been valid if such By-Laws had not been adopted. +4. No +director shall be personally liable to the Corporation or any of its stockholders for monetary damages for breach of fiduciary duty as a director, except to the +extent such exemption from liability or limitation thereof is not permitted under the GCL, as the same exists or may hereafter be amended. If the GCL is amended hereafter to authorize further +elimination or limitation of liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent authorized by the GCL, as so amended. Any +repeal or modification of this Article FIFTH by the stockholders of the Corporation shall not adversely affect any rights or protection of a director of the Corporation existing at the time of such +repeal or modification with respect to acts or omissions occurring prior to such repeal or modification. +5. In +addition to the powers and authority hereinbefore or by statute expressly conferred upon them, the directors are hereby empowered to exercise all such powers and do +all such acts and things as may be exercised or done by the Corporation, subject, nevertheless, to the provisions of the GCL, this Certificate of Incorporation, and any By-Laws adopted by the +stockholders; provided, however, that no By-Laws hereafter adopted by the stockholders shall invalidate any prior act of the directors which would have been valid if such By-Laws had not been adopted. +SIXTH : +Meetings of stockholders may be held within or without the State of Delaware, as the By-Laws may provide. The books of the Corporation may be kept +(subject to any provision contained in the GCL) outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the By-Laws of the +Corporation. +B-4 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Appendix B +SEVENTH : +The Corporation shall indemnify its directors and officers to the fullest extent authorized or permitted by law, as now or hereafter in effect, and +such right to indemnification shall continue as to a person who has ceased to be a director or officer of the Corporation and shall inure to the benefit of his or her heirs, executors and personal and +legal representatives; provided , however , that, except for proceedings to enforce rights to +indemnification, the Corporation shall not be obligated to indemnify any director or officer (or his or her heirs, executors or personal or legal representatives) in connection with a proceeding (or +part thereof) initiated by such person unless such proceeding (or part thereof) was authorized or consented to by the Board of Directors. The right to indemnification conferred by this Article SEVENTH +shall include the right to be paid by the Corporation the expenses incurred in defending or otherwise participating in any proceeding in advance of its final disposition. +The +Corporation may, to the extent authorized from time to time by the Board of Directors, provide rights to indemnification and to the advancement of the expenses to employees and +agents of the Corporation similar to those conferred in this Article SEVENTH to directors and officers of the Corporation. +The +rights to indemnification and to the advance of expenses conferred in this Article SEVENTH shall not be exclusive of any other right which any person may have or hereafter acquire +under this Certificate of Incorporation, the By-Laws of the Corporation, any statute, agreement, vote of stockholders or disinterested directors or otherwise. +Any +repeal or modification of this Article SEVENTH by the stockholders of the Corporation shall not adversely affect any rights to indemnification and to the advancement of expenses of +a director or officer of the Corporation existing at the time of such repeal or modification with respect to any acts or omissions occurring prior to such repeal or modification. +EIGHTH : +No action by shareholders shall be valid unless taken at a duly constituted meeting pursuant to the terms of the By-Laws of the Corporation and no +action may be taken by stockholders by written consent without a meeting. Notwithstanding any other provision of this Certificate of Incorporation (and in addition to any other vote that may be +required by law), the affirmative vote of the holders of at least eighty percent (80%) of the voting power of the shares entitled to vote at an election of directors shall be required to amend, alter, +change or repeal, or to adopt any provision as part of this Certificate of Incorporation inconsistent with the purpose and intent of this article EIGHTH. +NINTH : +The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now +or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation. In furtherance and not in limitation of the powers conferred upon it by +the laws of the State of Delaware, the Board of Directors shall have the power to adopt, amend, alter or repeal the Corporation's By-Laws. The affirmative vote of at least a majority of the entire +Board of Directors shall be required to adopt, amend, alter or repeal the Corporation's By-Laws. The Corporation's By-Laws also may be adopted, amended, altered or repealed by the affirmative vote of +at least eighty percent (80%) of the voting power of the shares entitled to vote at an election of directors. Notwithstanding any other provision of this Certificate of Incorporation (and in addition +to any other vote that may be required by law), the affirmative vote of the holders of at least eighty percent (80%) of the +voting power of the shares entitled to vote at an election of directors shall be required to amend, alter, change or repeal, or to adopt any provision as part of this Certificate of Incorporation +inconsistent with the purpose and intent of this Article NINTH. +Cimarex +Energy +Co. +B-5 +Appendix B +IN +WITNESS WHEREOF, Cimarex Energy Co. has caused this Certificate to be duly executed in its corporate name as of this +7 th day of June, 2005 May 2021 . +CIMAREX ENERGY CO. +By: +/s/ PAUL KORUS Francis B. Barron +Paul Korus Francis B. Barron +Senior Vice President , Chief Financial -General Counsel, and Corporate Secretary Officer and Treasurer +B-6 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Appendix C +AMENDED AND RESTATED BYLAWS +OF +CIMAREX ENERGY CO. +(hereinafter called the "Corporation") +(amended and restated +November 11, 2015) [May 12, 2021]) +ARTICLE I +OFFICES +Section 1. Registered Office. The registered +office of the Corporation shall be +in the City of Wilmington, County of New Castle, State of Delaware. +Section 2. Other Offices. The Corporation may +also have offices at such other +places, both within and without the State of Delaware, as the Board of Directors may from time to time determine. +ARTICLE II +MEETINGS OF STOCKHOLDERS +Section 1. Place of Meetings. Meetings of the +stockholders for the election of +directors or for any other purpose shall be held at such time and place, if any, either within or without the State of Delaware, as shall be designated from time to time by the Board of Directors and +stated in the notice of the meeting or in a duly executed waiver of notice thereof. The Board of Directors may, in its sole discretion, determine that a meeting of stockholders shall not be held at +any place, but may instead be held solely by means of remote communications authorized by and in accordance with Section 211(a)(2) of the General Corporation Law of the State of Delaware (the +"GCL"). In the absence of any such designation, stockholders' meetings shall be held at the principal executive office of the Corporation. +Section 2. Annual Meetings. The annual +meetings of stockholders shall be held on +such date and at such time as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting, at which meetings, the stockholders shall elect directors, and +transact such other business as may properly be brought before the meeting. Written notice of the annual meeting stating the place, if any, date and hour of the meeting, and the means of remote +communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, shall be given to each +stockholder entitled to vote at such meeting not less than ten nor more than sixty days before the date of the meeting. The Corporation may postpone, reschedule or cancel any annual meeting of +stockholders previously scheduled by the Board of Directors. +Section 3. Special Meetings. Unless otherwise +prescribed by law or by the +certificate of incorporation of the Corporation, as amended and/or restated from time to time (the "Certificate of Incorporation"), special meetings of stockholders, for any purpose or purposes, may +be called by either (i) the Chairman of the Board of Directors, (ii) the President, or (iii) the Board of Directors. At a special meeting of the stockholders, only such business +shall be conducted as shall be specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors. Written notice of a special meeting stating the +place, if any, date and hour of the meeting, the means of remote +Cimarex +Energy +Co. +C-1 +Appendix C +communications, +if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, and the purpose or purposes for which the meeting is called shall be +given not less than ten nor more than sixty days before the date of the meeting to each stockholder entitled to vote at such meeting. The Corporation may postpone, reschedule or cancel any special +meeting of stockholders previously scheduled by the Board of Directors. +Section 4. Quorum. Except as otherwise +required by law or by the Certificate of +Incorporation, the holders of a majority of the capital stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings +of the stockholders for the transaction of business. A quorum, once established, shall not be broken by the withdrawal of enough votes to leave less than a quorum. If, however, such quorum shall not +be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall +have power to adjourn the meeting from time to time, without notice other than announcement at the meeting of the time and place, if any, thereof, and the means of remote communications, if any, by +which stockholders may be deemed to be present in person and vote at such adjourned meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be +present or represented, any business may be transacted which might have been transacted at the meeting as originally noticed. If the adjournment is for more than thirty days, or if after the +adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder entitled to vote at the meeting not less than ten nor more than +sixty days before the date of the meeting. +Section 5. Adjournments. Any annual or +special meeting of stockholders may +adjourn from time to time to reconvene at the same or some other place, if any, and notice need not be given of any such adjourned meeting if the time and place, if any, thereof, and the means of +remote communications, if any, by which stockholders may be deemed to be present in person and vote at such adjourned meeting are announced at the meeting at which the adjournment is taken. At the +adjourned meeting the Corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty days, or if after the adjournment a new +record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder entitled to vote at the meeting not less than ten nor more than sixty days before +the date of the meeting. +Section 6. Proxies. Any stockholder entitled +to vote at a meeting may do so in +person or by his or her proxy appointed by an instrument in writing subscribed by such stockholder or by his or her attorney thereunto authorized, delivered to the Secretary of the meeting; provided , +however , that no proxy shall be voted or acted upon after three years from its date, unless +said proxy provides for a longer period. Without limiting the manner in which a stockholder may authorize another person or persons to act for him or her as proxy, either of the following shall +constitute a valid means by which a stockholder may grant such authority: +(i) A +stockholder may execute a writing authorizing another person or persons to act for him or her as proxy. Execution may be accomplished by the stockholder or his or +her authorized officer, director, employee or agent signing such writing or causing his or her signature to be affixed to such writing by any reasonable means, including, but not limited to, by +facsimile signature. +(ii) A +stockholder may authorize another person or persons to act for him or her as proxy by transmitting or authorizing the transmission of a telegram or other means of +electronic +C-2 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Appendix C +transmission +to the person who will be the holder of the proxy or to a proxy solicitation firm, proxy support service organization or like agent duly authorized by the person who will be the holder of +the proxy to receive such transmission, provided that any such telegram or other means of electronic transmission must either set forth or be submitted with information from which it can be determined +that the telegram or other electronic transmission was authorized by the stockholder. +Any +copy, facsimile telecommunication or other reliable reproduction of the writing or transmission authorizing another person or persons to act as proxy for a stockholder may be submitted or used in +lieu of the original writing or transmission for any and all purposes for which the original writing or transmission could be used; provided that such +copy, facsimile telecommunication or other reproduction shall be a complete reproduction of the entire original writing or transmission. +Section 7. Voting. At all meetings of the +stockholders at which a quorum is +present, except as otherwise required by law, the Certificate of Incorporation or these Bylaws, any question brought before any meeting of stockholders, other than in an election of directors as +provided for below, shall be decided by the affirmative vote of the holders of a majority of the total number of votes of the capital stock present in person or represented by proxy and entitled to +vote on such question, voting as a single class. The Board of Directors, in its discretion, or the Chairman of the meeting of stockholders, in his or her discretion, may require that any votes cast at +such meeting shall be cast by written ballot. +Section 8. Election of Directors. A nominee +for director shall be elected to the +Board of Directors if the votes cast for such nominee's election exceed the votes cast against such nominee's election; provided , however , that the +directors shall be elected by a plurality of the votes cast at any meeting of stockholders for which (i) the Corporate +Secretary receives a notice that a stockholder has nominated a person for election to the Board of Directors in compliance with the advance notice requirements for stockholder nominees for director +set forth in Article III, Sections 2 or 2A of these Bylaws, and (ii) such nomination has not been withdrawn by such stockholder on or before the tenth (10th) day before the +Corporation first mails its notice of meeting for such meeting to the stockholders. If directors are to be elected by a plurality of the votes cast, stockholders shall not be permitted to vote against +a nominee. +As +used in this Section 8, "votes cast" shall not include abstentions. Ballots will not include an option to "withhold" votes from the election of directors but will include the +choices to vote "for" or "against" each director or to "abstain," unless directors are to be elected by plurality as provided in the previous paragraph. +Section 9. Nature of Business at Meetings of Stockholders. No business may be +transacted at an annual meeting of stockholders, other than business that is (a) specified in the notice of meeting (or any +supplement thereto) given by or at the direction of the Board of Directors (or any duly authorized committee thereof), (b) otherwise properly brought before the annual meeting by or at the +direction of the Board of Directors (or any duly authorized committee thereof) or (c) otherwise properly brought before the annual meeting by any stockholder of the Corporation (i) who +is a stockholder of record on the date of the giving of the notice provided for in this Section 9 and on the record date for the determination of stockholders entitled to vote at such annual +meeting and (ii) who complies with the notice and other procedures set forth in this Section 9. +Cimarex +Energy +Co. +C-3 +Appendix C +In +addition to any other applicable requirements, for business to be properly brought before an annual meeting by a stockholder, such stockholder must have given timely notice thereof +in proper written form to the Secretary of the Corporation. +To +be timely, a stockholder's notice to the Secretary must be delivered to or mailed and received at the principal executive offices of the Corporation not less than ninety +(90) days nor more than one hundred twenty (120) days prior to the anniversary date of the immediately preceding annual meeting of stockholders; provided, however, that in the event that +the annual meeting is called for a date that is not within thirty (30) days before or after such anniversary date, notice by the stockholder in order to be timely must be so received not later +than the close of business on the tenth (10th) day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure of the date of the annual meeting was +made, whichever first occurs. +To +be in proper written form, a stockholder's notice to the Secretary must set forth as to each matter such stockholder proposes to bring before the annual meeting (i) a brief +description of the business desired to be brought before the annual meeting, the text of the proposal or business (including the text of any resolutions proposed for consideration and in the event +that such business includes a proposal to amend these Bylaws, the language of the proposed amendment) and the reasons for conducting such business at the annual meeting, (ii) the name and +record address of such stockholder (or beneficial owner, if any, on whose behalf the proposal is made), (iii) the class or series and number of shares of capital stock of the Corporation which +are owned beneficially or of record by such stockholder (or by the beneficial owner, if any, on whose behalf the proposal is made), (iv) a description of all agreements, arrangements or +understandings between such stockholder (or beneficial owner, if any, on whose behalf the proposal is made), any of their respective affiliates or associates, and any others acting in concert with any +of the foregoing, and any other person or persons (including their names) in connection with the proposal of such business by such stockholder and any material interest of such stockholder in such +business, (v) a description of any agreement, arrangement or understanding (including any derivative or short positions, profit interests, options, warrants, convertible securities, stock +appreciation or similar rights, hedging transactions, and borrowed or loaned shares) that has been entered into as of the date of the stockholder's notice by, or on behalf of, such stockholder (and +beneficial owner, if any, on whose behalf the proposal is made), whether or not such instrument or right shall be subject to settlement in underlying shares of capital stock of the Corporation, the +effect or intent of which is to mitigate loss to, manage risk or benefit of share price changes for, or increase or decrease the voting power of, such stockholder (or such beneficial owner, if any) +with respect to securities of the Corporation, (vi) a representation that such stockholder is a holder of record of stock of the Corporation entitled to vote at such meeting and intends to +appear in person or by proxy at the annual meeting to bring such business before the meeting, (vii) a representation whether the stockholder (or the beneficial owner, if any, on whose behalf +the proposal is made) intends or is part of a group which intends (A) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Corporation's outstanding +capital stock required to approve or adopt the proposal and/or (B) otherwise to solicit proxies or votes from stockholders in support of such proposal, and (viii) any other information +relating to such stockholder (and beneficial owner, if any, on whose behalf the proposal is made) required to be disclosed in a proxy statement or other filings required +to be made in connection with solicitations of proxies for the proposal pursuant to and in accordance with Section 14(a) of the Exchange Act and the rules and regulations promulgated +thereunder. +No +business shall be conducted at the annual meeting of stockholders except business brought before the annual meeting in accordance with the procedures set forth in this +Section 9, provided , however , +C-4 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Appendix C +that, +once business has been properly brought before the annual meeting in accordance with such procedures, nothing in this Section 9 shall be deemed to preclude discussion by any stockholder +of any such business. If the Chairman of an annual meeting determines that business was not properly brought before the annual meeting in accordance with the foregoing procedures, the Chairman shall +declare to the meeting that the business was not properly brought before the meeting and such business shall not be transacted. +Section 10. List of Stockholders Entitled to Vote. The officer of the +Corporation who has charge of the stock ledger of the Corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote +at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the +examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where +the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept +at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder of the Corporation who is present. If the meeting is to be held solely by means of remote +communications, then the list shall also be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required +to access such list shall be provided with the notice of the meeting. +Section 11. Stock Ledger. Except as otherwise +provided by law, the stock ledger +of the Corporation shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list required by Section 10 of this Article II or the books of the +Corporation, or to vote in person or by proxy at any meeting of stockholders. +Section 12. Record Date. In order that the +Corporation may determine the +stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any +rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix a record date, which +record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors and which record date: (1) in the case of determination of +stockholders entitled to vote at any meeting of stockholders or adjournment thereof, shall not be more than sixty nor less than ten days before the date of such meeting; and (2) in the case of +any other action, shall not be more than sixty days prior to such other action. If no record date is fixed: (1) the record date for determining stockholders entitled to notice of or to vote at +a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the +day on which the meeting is held; and (2) the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts +the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, +however, that the Board of Directors may fix a new record date for the adjourned meeting. +Cimarex +Energy +Co. +C-5 +Appendix C +Section 13. Inspectors of Election. In +advance of any meeting of stockholders, the Board by resolution +or the Chairman or President shall appoint one or more inspectors of election to act at the meeting and make a written report thereof. One or more other persons may be designated as alternate +inspectors to replace any inspector who fails to act. If no inspector or alternate is present, ready and willing to act at a meeting of stockholders, the Chairman of the meeting shall appoint one or +more inspectors to act at the meeting. Unless otherwise required by law, inspectors may be officers, employees or agents of the Corporation. Each inspector, before entering upon the discharge of his +or her duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his or her ability. The inspector shall have the duties +prescribed by law and, when the vote is completed, shall make a certificate of the result of the vote taken and of such other facts as may be required by law. +Section 14. Conduct of Meetings. The date and +time of the opening and the +closing of the polls for each matter upon which the stockholders will vote at a meeting shall be announced at the meeting by the Chairman of the meeting. The Board of Directors may adopt by resolution +such rules and regulations for the conduct of the meeting of stockholders as it shall deem appropriate. Except to the extent inconsistent with such rules and regulations as adopted by the Board of +Directors, the Chairman of any meeting of stockholders shall have the right and authority to convene and (for any or no reason) to recess and/or adjourn the meeting, to prescribe such rules, +regulations and procedures and to do all such acts as, in the judgment of such Chairman, are appropriate for the proper conduct of the meeting. Such rules, regulations or procedures, whether adopted +by the Board of Directors or prescribed by the Chairman of the meeting, may include, without limitation, the following: (i) the establishment of an agenda or order of business for the meeting; +(ii) rules and procedures for maintaining order at the meeting and the safety of those present; (iii) limitations on attendance at or participation in the meeting to stockholders +entitled to vote at the meeting, their duly authorized and constituted proxies or such other persons as the Chairman of the meeting shall determine; (iv) restrictions on entry to the meeting +after the time fixed for the commencement thereof; and (v) limitations on the time allotted to questions or comments by participants. Unless and to the extent determined by the Board of +Directors or the Chairman of the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure. +ARTICLE III +DIRECTORS +Section 1. Number and Election of Directors. The Board of Directors shall +consist of not less than six nor more than ten members, the exact number of which shall be determined from time to time by resolution adopted by the Board of Directors. Except as provided in +Section 3 of this Article III, directors shall be elected by the stockholders at the annual meetings of stockholders, and each director so elected shall hold office until such director's +successor is duly elected and qualified, or until such director's death, or until such director's earlier resignation or removal. Directors need not be stockholders. +Section 2. Nomination of Directors. Only persons who are nominated in accordance +with the following procedures shall be eligible for election as directors of the Corporation, except as may be otherwise provided in the Certificate of Incorporation with respect to the right of +holders of preferred stock of the Corporation to nominate and elect a specified number of directors in certain circumstances. Nominations of persons for election to the Board of Directors may be made +at any annual meeting of stockholders, or at any special meeting of stockholders called for the purpose of electing directors, (a) by or +C-6 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Appendix C +at +the direction of the Board of Directors (or any duly authorized committee thereof), (b) by any stockholder of the Corporation (i) who is a stockholder of record on the date of the +giving of the notice provided for in this Section 2 and on the record date for the determination of stockholders entitled to vote at such meeting and (ii) who complies with the notice +and other procedures set forth in this Section 2 or (c) solely with respect to compliant nominations at an annual meeting pursuant to a Proxy Access Notice of a qualifying Stockholder +Nominee, by an Eligible Stockholder pursuant to, and in compliance with, Section 2A of this Article III. +In +addition to any other applicable requirements, for a nomination to be made by a stockholder, such stockholder must have given timely notice thereof in proper written form to the +Secretary of the Corporation. +To +be timely, a stockholder's notice to the Secretary must be delivered to or mailed and received at the principal executive offices of the Corporation (a) in the case of an +annual meeting, not less than ninety (90) days nor more than one hundred twenty (120) days prior to the anniversary date of the immediately preceding annual meeting of stockholders; provided , +however , that in the event that the annual meeting is called for a date that is not within +thirty (30) days before or after such anniversary date, notice by the stockholder in order to be timely must be so received not later than the close of business on the tenth (10th) day +following the day on which such notice of the date of the annual meeting was mailed or such public disclosure of the date of the annual meeting was made, whichever first occurs; and (b) in the +case of a special meeting of stockholders called for the purpose of electing directors, not later than the close of business on the tenth (10th) day following the day on which notice of the date of +the special meeting was mailed or public disclosure of the date of the special meeting was made, whichever first occurs. +To +be in proper written form, a stockholder's notice to the Secretary must set forth (a) as to each person whom the stockholder proposes to nominate for election as a director +(i) the name, age, business address and residence address of the person, (ii) the principal occupation or employment of the person, (iii) the class or series and number of shares +of capital stock of the Corporation which are owned beneficially or of record by the person and (iv) any other information relating to the person that would be required to be disclosed in a +proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Securities Exchange Act of 1934, as +amended (the "Exchange Act"), and the rules and regulations promulgated thereunder; and (b) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the +nomination is made (i) the name and record address of such stockholder and of such beneficial owner, (ii) the class or series and number of shares of capital stock of the Corporation +which are owned beneficially or of record by such stockholder and such beneficial owner, (iii) a description of all agreements, arrangements or understandings between such stockholder and/or +such beneficial owner, any of their respective affiliates or associates, and any others acting in concert with any of the foregoing, and each proposed nominee and any other person or persons +(including their names) pursuant to which the nomination(s) are to be made by such stockholder, (iv) a description of any agreement, arrangement or understanding (including any derivative or +short positions, profit interests, options, warrants, convertible securities, stock appreciation or similar rights, hedging transactions, and borrowed or loaned shares) that has been entered into as +of the date of the stockholder's notice by, or on behalf of, such stockholder and beneficial owner, if any, whether or not such instrument or right shall be subject to settlement in underlying shares +of capital stock of the Corporation, the effect or intent of which is to mitigate loss to, manage risk or benefit of share price changes for, or increase or decrease the voting power of, such +stockholder or such beneficial owner, if any, +Cimarex +Energy +Co. +C-7 +Appendix C +with +respect to securities of the Corporation, (v) a representation whether the stockholder or the beneficial owner, if any, intends or is part of a group which intends (a) to deliver a +proxy statement and/or form of proxy to holders of at least the percentage of the Corporation's outstanding capital stock required to elect the nominee and/or (b) otherwise to solicit proxies +or votes from stockholders in support of such nomination, (vi) a representation that such stockholder is a holder of record of stock of the Corporation entitled to vote at such meeting and +intends to appear in person or by proxy at the meeting to nominate the persons named in its notice, and (vii) any other information relating to such stockholder and such beneficial owner, if +any, that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to +Section 14 of the Exchange Act and the rules and regulations promulgated thereunder. Such notice must be accompanied by a written consent of each proposed nominee to being named as a nominee +and to serve as a director if elected. +No +person shall be eligible for election as a director of the Corporation unless nominated in accordance with the procedures set forth in this Section 2 or Section 2A. If +the Chairman of the meeting determines that a nomination was not made in accordance with the foregoing procedures, the Chairman shall declare to the meeting that the nomination was defective and such +defective nomination shall be disregarded. +Without +limiting the foregoing or any other provision of these Bylaws, in order to be eligible to be a nominee of a stockholder for election or reelection as a director of the +Corporation pursuant to this Section 2 or Section 2A of this Article III, a person must deliver (in accordance with the time periods prescribed for delivery of notice under this +Section 2 or Section 2A, as applicable) to the Secretary at the principal executive offices of the Corporation (1) a written questionnaire with respect to the background and +qualification of such individual and the background of any other person or entity on whose behalf, directly or indirectly, the nomination is being made (which questionnaire shall be provided by the +Secretary upon written request) and (2) a written representation and agreement (in the form provided by the Secretary upon request) that such person (i) is not and will not become a +party to (A) any agreement, arrangement or understanding with, and has not given any commitment or assurance to, any person or entity as to how such person, if elected as a director of the +Corporation, will act or vote on any issue or question (a "Voting Commitment") that has not been disclosed to the Corporation, and (B) any Voting Commitment that could limit or interfere with +such individual's ability to comply, if elected as a director of the Corporation, with such individual's fiduciary duties under applicable law; (ii) is not and will not become a party to any +agreement, arrangement or understanding with any person or entity other than the Corporation with respect to any direct or indirect compensation, reimbursement or indemnification in connection with +service or action as a director that has not been disclosed to the Corporation; and (iii) in such individual's personal capacity and on behalf of any person or entity on whose behalf, directly +or indirectly, the nomination is being made, would be in compliance, if elected as a director of the Corporation, and will comply, with all corporate governance, code of conduct, conflict of interest, +confidentiality, stock ownership and trading policies and guidelines of the Corporation generally applicable to directors publicly disclosed from time to time. +Section 2A. Inclusion of Stockholder Director Nominations in the +Corporation's Proxy +Materials. +Subject +to the terms and conditions set forth in these Bylaws, the Corporation shall include in its proxy materials for an annual meeting of stockholders the name, together with the +Required Information (as defined below), of any person nominated for election (the "Stockholder Nominee") to the Board of +C-8 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Appendix C +Directors +by a stockholder or group of stockholders that satisfy the requirements of this Section 2A of this Article III, including qualifying as an Eligible Stockholder (as defined in +paragraph (D) below) and that expressly elects at the time of providing the written notice required by this Section 2A of this Article III (a "Proxy Access Notice") to have its +nominee included in the Corporation's proxy materials pursuant to this Section 2A of this Article III. For the purposes of this Section 2A of this Article III: +(1) "Voting +Stock" shall mean outstanding shares of capital stock of the Corporation entitled to vote generally for the election of Directors; +(2) "Constituent +Holder" shall mean any stockholder, collective investment fund included within a Qualifying Fund (as defined in paragraph (D) below) or beneficial +holder whose stock ownership is counted for the purposes of qualifying as holding the Proxy Access Request Required Shares (as defined in paragraph (D) below) or qualifying as an Eligible +Stockholder (as defined in paragraph (D) below); +(3) "affiliate" +and "associate" shall have the meanings ascribed thereto in Rule 405 under the Exchange Act; provided , +however , that the term "partner" as used in the definition of "associate" shall not include any limited partner that is not involved in the management of the relevant +partnership; and +(4) a +stockholder (including any Constituent Holder) shall be deemed to "own" only those outstanding shares of Voting Stock as to which the stockholder itself (or such +Constituent Holder itself) possesses both (a) the full voting and investment rights pertaining to the shares and (b) the full economic interest in (including the opportunity for profit +and risk of loss on) such shares. The number of shares calculated in accordance with the foregoing clauses (a) and (b) shall be deemed not to include (and to the extent any of the +following arrangements have been entered into by affiliates of the stockholder (or of any Constituent Holder), shall be reduced by) any shares (x) sold by such stockholder or Constituent Holder +(or any of either's affiliates) in any transaction that has not been settled or closed, including any short sale, (y) borrowed by such stockholder or Constituent Holder (or any of either's +affiliates) for any purposes or purchased by such stockholder or Constituent Holder (or any of either's affiliates) pursuant to an agreement to resell, or (z) subject to any option, warrant, +forward contract, swap, contract of sale, other derivative or similar agreement entered into by such stockholder or Constituent Holder (or any of either's affiliates), whether any such instrument or +agreement is to be settled with shares or with cash based on the notional amount or value of Voting Stock, in any such case which instrument or agreement has, or is intended to have, or if exercised +by either party thereto would have, the purpose or effect of (i) reducing in any manner, to any extent or at any time in the future, such stockholder's or Constituent Holder's (or either's +affiliate's) full right to vote or direct the voting of any such shares, and/or (ii) hedging, offsetting or altering to any degree gain or loss arising from the full economic ownership of such +shares by such stockholder or Constituent Holder (or either's affiliate), other than any such arrangements solely involving an exchange listed multi-industry market index fund in which Voting Stock +represents at the time of entry into such arrangement less than 10% of the proportionate value of such index. A stockholder (including any Constituent Holder) shall "own" shares held in the name of a +nominee or other intermediary so long as the stockholder itself (or such Constituent Holder itself) retains the right to instruct how the shares are voted with respect to the election of Directors and +the right to direct the disposition thereof and possesses the full economic interest in the shares. A stockholder's (including any Constituent Holder's) ownership of shares shall be deemed to continue +during any period in which the stockholder has loaned such shares so long as such stockholder retains the power to recall such shares on no greater than five (5) business days' notice or has +delegated any voting power over such shares by means of a proxy, power of attorney or other instrument or arrangement so long as such delegation is revocable at any time by the stockholder; +Cimarex +Energy +Co. +C-9 +Appendix C +provided, +that in the case of loaned shares, such shares are recalled no later than the final date when a Proxy Access Notice pursuant to this Section 2A of this Article III may be +timely delivered to the Secretary of the Corporation and such shares remain recalled (and otherwise "owned" as defined herein) through the annual meeting. The terms "owned," "owning" and other +variations of the word "own" shall have correlative meanings. +(A) For +purposes of this Section 2A of this Article III, the "Required Information" that the Corporation will include in its proxy statement is +(1) the information concerning the Stockholder Nominee and the Eligible Stockholder that the Corporation determines is required to be disclosed in the Corporation's proxy statement by the +regulations promulgated under the Exchange Act; and (2) if the Eligible Stockholder so elects, a Statement (as defined in paragraph (F) below). The Corporation shall also include the +name of the Stockholder Nominee in its proxy card. For the avoidance of doubt, and any other provision of these Bylaws +notwithstanding, the Corporation may in its sole discretion solicit against, and include in the proxy statement its own statements or other information relating to, any Eligible Stockholder and/or +Stockholder Nominee, including any information provided to the Corporation with respect to the foregoing. +(B) To +be timely, a stockholder's Proxy Access Notice must be submitted to the Secretary and delivered to or mailed and received at the principal executive offices of the +Corporation within the time periods applicable to stockholder notices of nominations pursuant to Section 2 of this Article III. In no event shall any adjournment or postponement of an +annual meeting, the date of which has been announced by the Corporation, commence a new time period for the giving of a Proxy Access Notice. +(C) The +maximum number of Stockholder Nominees (including Stockholder Nominees that were submitted by an Eligible Stockholder for inclusion in the Corporation's proxy +materials pursuant to this Section 2A of this Article III but either are subsequently withdrawn or that the Board of Directors decides to nominate as Board of Directors' nominees) +appearing in the Corporation's proxy materials pursuant to this Section 2A with respect to an annual meeting of stockholders shall not exceed the largest whole number that does not exceed +twenty-five percent (25%) of the number of directors in office as of the last day on which a Proxy Access Notice may be delivered in accordance with the procedures set forth in this Section 2A +of this Article III (such greater number, the "Permitted Number"); provided , however , that the +Permitted Number shall be reduced by: +(1) the +number of such director candidates for which the Corporation shall have received one or more stockholder notices nominating director candidates pursuant to +Section 2 of these Bylaws plus the number of directors in office that were elected to the Board after being nominated at any of the two preceding annual meetings pursuant to such +Section 2; +(2) the +number of directors in office or director candidates that in either case were elected or appointed to the Board or will be included in the Corporation's proxy +materials with respect to such annual meeting as an unopposed (by the Corporation) nominee, pursuant to an agreement, arrangement or other understanding with a stockholder or group of stockholders +(other than any such agreement, arrangement or understanding entered into in connection with an acquisition of Voting Stock, by such +C-10 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Appendix C +stockholder +or group of stockholders, from the Corporation), other than any such director referred to in this clause (2) who at the time of such annual meeting will have served as a director +continuously, as a nominee of the Board of Directors, for at least one full three-year term, but only to the extent the Permitted Number after such reduction with respect to this clause (2) +equals or exceeds one; and +(3) the +number of directors in office for whom access to the Corporation's proxy materials was previously provided (or requested) pursuant to this Section 2A, other +than (a) any such director referred to in this clause (3) whose term of office will expire at such annual meeting and who is not seeking (or agreeing) to be nominated at such meeting for +another term of office and (b) any such director who at the time of such annual meeting will have served as a director continuously, as a nominee of the Board of Directors, for at least one +full three-year term; +provided, +further , that in no circumstance shall the Permitted Number exceed the number of directors to be elected at the applicable annual meeting as noticed by the +Corporation; and, provided further, that in the event the Board of Directors resolves to reduce the size of the Board of Directors effective on or prior to the date of the annual meeting, the +Permitted Number shall be calculated based on the number of directors in office as so reduced. In the event that the number of Stockholder Nominees submitted by Eligible Stockholders pursuant to this +Section 2A of this Article III exceeds the Permitted Number, each Eligible Stockholder will select one Stockholder Nominee for inclusion in the Corporation's proxy materials until the +Permitted Number is reached, going in order of the amount (largest to smallest) of shares of Voting Stock each Eligible Stockholder disclosed as owned in its Proxy Access Notice submitted to the +Corporation. If the Permitted Number is not reached after each Eligible Stockholder has selected one (1) Stockholder Nominee, this selection process will continue as many times as necessary, +following the same order each time, until the Permitted Number is reached. +(D) An +"Eligible Stockholder" is one or more stockholders of record who own and have owned, or are acting on behalf of one or more beneficial owners who own and have owned +(in each case as defined above), in each case continuously for at least three (3) years as of both the date that the Proxy Access Notice is received by the Corporation pursuant to this +Section 2A of this Article III, and as of the record date for determining stockholders eligible to vote at the annual meeting, at least three percent (3%) of the aggregate voting power +of the Voting Stock (the "Proxy Access Request Required Shares"), and who continue to own the Proxy Access Request Required Shares at all times between the date such Proxy Access Notice is received by +the Corporation and the date of the applicable annual meeting, provided that the aggregate number of stockholders, and, if and to the extent that a stockholder is acting on behalf of one or more +beneficial owners, of such beneficial owners, whose stock ownership is counted for the purpose of satisfying the foregoing ownership requirement shall not exceed twenty (20). Two or more collective +investment funds that are part of the same family of funds or sponsored by the same employer (a "Qualifying Fund") shall be treated as one stockholder for the purpose of determining the aggregate +number of stockholders in this paragraph (D), provided that each fund included within a Qualifying Fund otherwise meets the requirements set forth in this Section 2A of this +Article III. No shares may be attributed to more than one group constituting an Eligible Stockholder under this Section 2A of this Article III (and, for the avoidance of doubt, no +stockholder may be a member of more than one group constituting an Eligible Stockholder). A record holder acting on behalf of one or more +Cimarex +Energy +Co. +C-11 +Appendix C +beneficial +owners will not be counted separately as a stockholder with respect to the shares owned by beneficial owners on whose behalf such record holder has been directed in writing to act, but each +such beneficial owner will be counted separately, subject to the other provisions of this paragraph (D), for purposes of determining the number of stockholders whose holdings may be considered +as part of an Eligible Stockholder's holdings. For the avoidance of doubt, Proxy Access Request Required Shares will qualify as such if and only if the beneficial owner of such shares as of the date +of the Proxy Access Notice has itself individually beneficially owned such shares continuously for the three-year (3 year) period ending on that date and through the other applicable dates +referred to above (in addition to the other applicable requirements being met). +(E) No +later than the final date when a Proxy Access Notice pursuant to this Section 2A of this Article III may be timely delivered to the Secretary of the +Corporation, an Eligible Stockholder (including each Constituent Holder) must provide the information required by Section 2 of this Article III to the Secretary of the Corporation and +also provide the following information in writing to the Secretary: +(1) with +respect to each Constituent Holder, the name and address of, and number of shares of Voting Stock owned by, such person; +(2) one +or more written statements from the record holder of the shares (and from each intermediary through which the shares are or have been held during the requisite +three-year (3 year) holding period) verifying that, as of a date within seven (7) calendar days prior to the date the Proxy Access Notice is delivered to the Corporation, such person +owns, and has owned continuously for the preceding three (3) years, the Proxy Access Request Required Shares, and such person's agreement to provide: +(a) within +ten (10) days after the record date for the annual meeting, written statements from the record holder and intermediaries verifying such person's +continuous ownership of the Proxy Access Request Required Shares through the record date, together with any additional information reasonably requested to verify such person's ownership of the Proxy +Access Request Required Shares; and +(b) immediate +notice if the Eligible Stockholder ceases to own any of the Proxy Access Request Required Shares prior to the date of the applicable annual meeting of +stockholders; +(3) a +representation that such person: +(a) acquired +the Proxy Access Request Required Shares in the ordinary course of business and not with the intent to change or influence control of the Corporation, and +does not presently have such intent; +(b) has +not nominated and will not nominate for election to the Board of Directors at the annual meeting any person other than the Stockholder Nominee(s) being nominated +pursuant to this Section 2A of this Article III; +C-12 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Appendix C +(c) has +not engaged and will not engage in, and has not and will not be a "participant" in another person's, "solicitation" within the meaning of Rule 14a-1(l) +under the Exchange Act with respect to the Corporation in support of the election of any individual as a director at the annual meeting other than its Stockholder Nominee(s) or a nominee of the Board +of Directors; +(d) will +not distribute to any stockholder of the Corporation any form of proxy for the annual meeting other than the form distributed by the Corporation; and +(e) will +provide facts, statements and other information in all communications with the Corporation and its stockholders that are and will be true and correct in all +material respects and do not and will not omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading, and +will otherwise comply with all applicable laws, rules and regulations in connection with any actions taken pursuant to this Section 2A of this Article III; +(4) in +the case of a nomination by a group of stockholders that together is such an Eligible Stockholder, the designation by all group members of one group member that is +authorized to act on behalf of all members of the nominating stockholder group with respect to the nomination and matters related thereto, including withdrawal of the nomination; and +(5) an +undertaking that such person agrees to: +(a) assume +all liability stemming from, and indemnify and hold harmless the Corporation and each of its directors, officers, and employees individually against any +liability, loss or damages in connection with any threatened or pending action, suit or proceeding, whether legal, administrative or investigative, against the +Corporation or any of its directors, officers or employees arising out of any legal or regulatory violation arising out of the Eligible Stockholder's communications with the stockholders of the +Corporation or out of the information that the Eligible Stockholder (including such person) provided to the Corporation; and +(b) file +with the Securities and Exchange Commission any solicitation by the Eligible Stockholder of stockholders of the Corporation relating to the annual meeting at +which the Stockholder Nominee will be nominated. +In +addition, no later than the final date when a Proxy Access Notice pursuant to this Section 2A of this Article III may be timely delivered to the Secretary of the Corporation, a +Qualifying Fund whose stock ownership is counted for purposes of qualifying as an Eligible Stockholder must provide to the Secretary of the Corporation documentation reasonably satisfactory to the +Board of Directors that demonstrates that the funds included within the Qualifying Fund are either part of the same family of funds or sponsored by the same employer. In order to be considered timely, +any information required by this Section 2A of this Article III to be provided to the Corporation +Cimarex +Energy +Co. +C-13 +Appendix C +must +be supplemented (by delivery to the Secretary of the Corporation) (1) no later than ten (10) days following the record date for the applicable annual meeting, to disclose the +foregoing information as of such record date, and (2) no later than the fifth day before the annual meeting, to disclose the foregoing information as of the date that is no earlier than ten +(10) days prior to such annual meeting. For the avoidance of doubt, the requirement to update and supplement such information shall not permit any Eligible Stockholder or other person to change +or add any proposed Stockholder Nominee or be deemed to cure any defects or limit the remedies (including without limitation under these Bylaws) available to the Corporation relating to any defect. +(F) The +Eligible Stockholder may provide to the Secretary of the Corporation, at the time the information required by this Section 2A of this Article III is +originally provided, a single written statement for inclusion in the Corporation's proxy statement for the annual meeting, not to exceed five hundred (500) words, in support of the candidacy of +such Eligible Stockholder's Stockholder Nominee(s) (the "Statement"). Notwithstanding anything to the contrary contained in this Section 2A of this Article III, the Corporation may omit +from its proxy materials any information or Statement that it, in good faith, believes is materially false or misleading, omits to state any material fact, directly or indirectly without factual +foundation impugns the character, integrity or personal reputation of or makes charges concerning improper, illegal or immoral conduct or associations with respect to any person or would violate any +applicable law or regulation. +(G) No +later than the final date when a Proxy Access Notice pursuant to this Section 2A of this Article III may be timely delivered to the Secretary of the +Corporation, each Stockholder Nominee must provide to the Secretary the information required by Section 2 of this Article III, a completed and executed questionnaire, representation and +agreement as required by the last paragraph of Section 2 of this Article III and also: +(1) provide +an executed agreement, in a form deemed satisfactory by the Board of Directors or its designee (which form shall be provided by the Corporation reasonably +promptly upon written request of a stockholder), that such Stockholder Nominee consents to being named in the Corporation's proxy statement and form of proxy card (and will not agree to be named in +any other person's proxy statement or form of proxy card with respect to the Corporation) as a nominee and to serving as a director of the Corporation if elected; and +(2) provide +such additional information as necessary to permit the Board of Directors to determine if any of the matters referred to in paragraph (I) below apply +and to determine if such Stockholder Nominee has any direct or indirect relationship with the Corporation other than those relationships that have been deemed categorically immaterial pursuant to the +Corporation's Corporate Governance Guidelines or is or has been subject to any event specified in Item 401(f) of Regulation S-K (or successor rule) of the Securities and Exchange +Commission. +In +the event that any information or communications provided by the Eligible Stockholder (or any Constituent Holder) or the Stockholder Nominee to the Corporation or its stockholders ceases to be true +and correct in all material respects or omits a material fact necessary to make the statements made, in light of the circumstances under which they were made, not misleading, +C-14 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Appendix C +each +Eligible Stockholder or Stockholder Nominee, as the case may be, shall promptly notify the Secretary of the Corporation of any defect in such previously provided information and of the +information that is required to correct any such defect; it being understood for the avoidance of doubt that providing any such notification shall not be deemed to cure any such defect or limit the +remedies (including without limitation under these Bylaws) available to the Corporation relating to any such defect. +(H) Any +Stockholder Nominee who is included in the Corporation's proxy materials for a particular meeting of stockholders but (i) withdraws from or becomes +ineligible or unavailable for election at the meeting (other than by reason of such Stockholder Nominee's disability) or (ii) does not receive votes cast in favor of the Stockholder Nominee's +election equal to at least 20% of the shares present in person or represented by proxy at such meeting, shall be ineligible to be a Stockholder Nominee pursuant to this Section 2A of this +Article III for the next two annual meetings of stockholders following the meeting for which the Stockholder Nominee has been nominated for election. For the avoidance of doubt, any Stockholder +Nominee who is included in the Corporation's proxy statement for a particular annual meeting of stockholders, but subsequently is determined not to satisfy the eligibility requirements of this +Section 2A of this Article III or any other provision of these Bylaws, the Corporation's Certificate of Incorporation or other applicable regulation any time before the annual meeting of +stockholders, will not be eligible for election at the relevant annual meeting of stockholders. +(I) The +Corporation shall not be required to include, pursuant to this Section 2A of this Article III, a Stockholder Nominee in its proxy materials for any +annual meeting of stockholders, or, if the proxy statement already has been filed, to allow the nomination of a Stockholder Nominee, notwithstanding that proxies in respect of such vote may have been +received by the Corporation: +(1) (a) +who is not independent under the listing standards of the principal U.S. exchange upon which the common stock of the Corporation is listed, any applicable rules of +the Securities and Exchange Commission and any publicly disclosed standards used by the Board of Directors in determining and disclosing independence of the Corporation's directors, in each case as +determined by the Board of Directors or (b) who is or has been, within the past three years, an employee, officer or director of a competitor, as defined in Section 8 of the Clayton +Antitrust Act of 1914, as amended (or successors thereto); +(2) whose +service as a member of the Board of Directors would violate or cause the Corporation to be in violation of these Bylaws, the Corporation's Certificate of +Incorporation, the rules and listing standards of the principal U.S. exchange upon which the common stock of the Corporation is traded, or any applicable law, rule or regulation; +(3) if +the Eligible Stockholder (or any Constituent Holder) or applicable Stockholder Nominee otherwise breaches or fails to comply in any material respect with its +obligations pursuant to this Section 2A of this Article III or any agreement, representation or undertaking required by this Section; or +Cimarex +Energy +Co. +C-15 +Appendix C +(4) if +the Eligible Stockholder ceases to be an Eligible Stockholder for any reason, including but not limited to not owning the Proxy Access Request Required Shares +through the date of the applicable annual meeting. +For +the purposes of this paragraph (I), clauses (1) and (2) and, to the extent related to a breach or failure by the Stockholder Nominee, clause (3) will +result in the exclusion from the proxy materials pursuant to this Section 2A of this Article III of the specific Stockholder Nominee to whom the ineligibility applies, or, if the proxy +statement already has been filed, the ineligibility of such Stockholder Nominee to be nominated; provided , however, that clause (4) and, to the +extent related to a breach or failure by an Eligible Stockholder (or any Constituent Holder), clause (3) will result in the Voting Stock owned by such Eligible Stockholder (or Constituent +Holder) being excluded from the Proxy Access Request Required Shares (and, if as a result the Proxy Access Notice shall no longer have been filed by an Eligible Stockholder, the exclusion from the +proxy materials pursuant to this Section 2A of this Article III of all of the applicable stockholder's Stockholder Nominees from the applicable annual meeting of stockholders or, if the +proxy statement has already been filed, the ineligibility of all of such stockholder's Stockholder Nominees to be nominated). +Section 3. Vacancies. Subject to the terms of any one or more classes or series +of preferred stock, any newly created directorship on the Board of Directors that results from an increase in the number of directors and any vacancy occurring on the Board of Directors that does not +result from an increase in the number of directors may be filled only by a majority of the Board of Directors then in office, even if less than a quorum, or by a sole remaining director. Any director +elected to fill a newly created directorship resulting from an increase in the number of directors of such class shall hold office for a term that shall coincide with the remaining term of that class. +Any director elected to fill a vacancy not resulting from an increase in the number of directors shall have the same remaining term as that of his predecessor. Notwithstanding the foregoing, whenever +the holders of any one or more classes or series of preferred stock issued by the Corporation shall have the right, voting separately by class or series, to elect directors at an annual or special +meeting of stockholders, the election, term of office, filling of vacancies and other features of such directorships shall be governed by the terms of the Corporation's Certificate of Incorporation +applicable thereto, and such directors so elected shall not be divided into classes pursuant to the Corporation's Certificate of Incorporation unless expressly provided by such terms. +Section 4. Duties and Powers. The business of the Corporation shall be managed +by or under the direction of the Board of Directors which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the Certificate of +Incorporation or by these Bylaws required to be exercised or done by the stockholders. +Section 5. Organization. At each meeting of the Board of Directors, the Chairman +of the Board of Directors, or, in his or her absence, a director chosen by a majority of the directors present, shall act as Chairman. The Secretary of the Corporation shall act as Secretary at each +meeting of the Board of Directors. In case +the Secretary shall be absent from any meeting of the Board of Directors, an Assistant Secretary shall perform the duties of Secretary at such meeting; and in the absence from any such meeting of the +Secretary and all the Assistant Secretaries, the Chairman of the meeting may appoint any person to act as Secretary of the meeting. +C-16 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Appendix C +Section 6. Resignations and Removals of Directors. Any director of the Corporation may resign at any +time, by giving written notice to the Chairman of the Board of Directors, the President or the Secretary of the Corporation. Such resignation shall take effect at the time therein specified or, if no +time is specified, immediately; and, unless otherwise specified in such notice, the acceptance of such resignation shall not be necessary to make it effective. Except as otherwise +required by law and subject Subject to the rights, if any, of the holders of shares of preferred stock then outstanding, any director +or all of the entire Board directors of +Directors the Corporation may be removed from office at any time, but only for +with or without cause, and only by the affirmative vote of the holders of at least a majority of +the voting power of the Corporation's then outstanding capital stock entitled to vote at an election of directors; provided, however, that the Board of Directors shall be considered classified for +purposes of Section 141(k) of the GCL so long as any director is continuing to serve the remaining portion of a multi-year term and no such director may be removed during such multi-year term +except for cause and then only by the affirmative vote of the holders of at least a majority of the votes cast on the issue voting +power of the Corporation's then outstanding capital stock entitled to vote at an election of directors. Notwithstanding the foregoing, whenever the holders of any one or more classes or series of +preferred stock issued by the Corporation shall have the right, voting separately by class or series, to elect directors at an annual or special meeting of stockholders, the election, term of office, +filling of vacancies and other features of such directorships shall be governed by the terms of the Corporation's Certificate of Incorporation applicable thereto . +Section 7. Meetings. The Board of Directors +of the Corporation may hold +meetings, both regular and special, either within or without the State of Delaware. Regular meetings of the Board of Directors may be held at such time and at such place as may from time to time be +determined by the Board of Directors and, unless required by resolution of the Board of Directors, without notice. Special meetings of the Board of Directors may be called by the Chairman of the Board +of Directors, the Vice Chairman, if there be one, or a majority of the directors then in office. The Lead Director, if there be one, shall have the authority to call meetings +of the non-employee directors. Notice of meetings of the Board of Directors or non-employee directors stating the place, date and hour of the meeting shall be given to each director either by mail not +less than forty-eight (48) hours before the meeting, or by telephone, facsimile or other electronic submission on twenty-four (24) hours' notice, or on such shorter notice as the person +or persons calling such meeting may deem necessary or appropriate in the circumstances. The Chairman of the Board or Chief Executive Officer of the Corporation shall preside over meetings of the Board +of Directors as provided in these Bylaws. The Lead Director, if there be one, shall preside over meetings of the non-employee directors and of meetings of the Board of Directors if the Chairman of the +Board and Chief Executive Officer are not present. +Section 8. Quorum. Except as may be otherwise +required by law, the Certificate +of Incorporation or these Bylaws, at all meetings of the Board of Directors, a majority of the entire Board of Directors shall constitute a quorum for the transaction of business and the act of a +majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors. If a quorum shall not be present at any meeting of the Board of Directors, the +directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting of the time and place of the adjourned meeting, until a quorum shall be +present. +Section 9. Actions of Board. Unless otherwise +provided by the Certificate of +Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all the members of +the Board of Directors or +Cimarex +Energy +Co. +C-17 +Appendix C +committee, +as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board of Directors or committee. +Section 10. Meetings by Means of Conference Telephone. Unless otherwise provided +by the Certificate of Incorporation or these Bylaws, members of the Board of Directors of the Corporation or any committee designated by the Board of Directors, may participate in a meeting of the +Board of Directors or such committee by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and +participation in a meeting pursuant to this Section 10 shall constitute presence in person at such meeting. +Section 11. Committees. The Board of +Directors may, by resolution passed by a +majority of the entire Board of Directors, designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board of Directors may designate one or +more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of any such committee. In the absence or disqualification of a member of a +committee, and in the absence of a designation by the Board of Directors of an alternate member to replace the absent or disqualified member, the member or members thereof present at any meeting and +not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any absent or +disqualified member. Any committee, to the extent permitted by law and provided in the resolution establishing such committee, shall have and may exercise all the powers and authority of the Board of +Directors in the management of the business and affairs of the Corporation. Each committee shall keep regular minutes and periodically report to the Board of Directors. +Section 12. Compensation. The directors may +be paid their expenses, if any, of +attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary, or such other emoluments as the Board of +Directors shall from time to time determine. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Members of special or +standing committees may be allowed like compensation for attending committee meetings. +Section 13. Interested Directors. No contract +or transaction between the +Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association, or other organization in which one or more of its directors or +officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the +meeting of the Board of Directors or committee thereof which authorizes the contract or transaction, or solely because such person's or their votes are counted for such purpose if (i) the +material facts as to such person's or their relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board of +Directors or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than +a quorum; or (ii) the material facts as to such person's or their relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote +thereof, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (iii) the contract or transaction is fair as to the Corporation as of the time it +is authorized, approved or ratified, by the Board of Directors, a committee thereof or the stockholders. Common or interested directors may be counted in +C-18 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Appendix C +determining +the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction. +ARTICLE IV +OFFICERS +Section 1. General. The officers of the +Corporation shall be chosen by the Board +of Directors and shall be a President and a Secretary. The Board of Directors, in its discretion, may also choose a Chairman of the Board of Directors, Chief Executive Officer (who must be a +director), one or more Vice Presidents, a Treasurer, one or more Assistant Secretaries, one or more Assistant Treasurers, and other officers. Any number of offices may be held by the same person, +unless otherwise prohibited by law, the Certificate of Incorporation or these Bylaws. The officers of the Corporation need not be stockholders of the Corporation nor, except in the case of the +Chairman of the Board of Directors and the Chief Executive Officer, need such officers be directors of the Corporation. +Section 2. Election. The Board of Directors +at its first meeting held after each +annual meeting of stockholders shall elect the officers of the Corporation who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined +from time to time by the Board of Directors; and all officers of the Corporation shall hold office until their successors are chosen and qualified, or until their earlier death, resignation or +removal. Any officer elected by the Board of Directors may be removed at any time by the affirmative vote of a majority of the Board of Directors. Any vacancy occurring in any office of the +Corporation shall be filled by the Board of Directors. The salaries of all officers of the Corporation shall be fixed by the Board of Directors. +Section 3. Voting Securities Owned by the Corporation. Powers of attorney, +proxies, waivers of notice of meeting, consents and other instruments, relating to securities owned by the Corporation may be executed in the name of and on behalf of the Corporation by the Chief +Executive Officer, the President or any Vice President and any such officer may, in the name of and on behalf of the Corporation, take all such action as any such officer may deem advisable to vote in +person or by proxy at any meeting of security holders of any corporation in which the Corporation may own securities and at any such meeting shall possess and may exercise any and all rights and power +incident to the ownership of such securities and which, as the owner thereof, the Corporation might have exercised and possessed if present. The Board of Directors may, by resolution, from time to +time confer like powers upon any other person or persons. +Section 4. Chairman of the Board of Directors. The Chairman of the Board of +Directors, if there is one, shall preside at all meetings of the Board of Directors and shall also perform such other duties and may exercise such other powers as may be assigned to him by these +Bylaws or the Board of Directors. +Section 5. Chief Executive Officer. The Chief +Executive Officer shall be the +chief executive officer of the Corporation and shall have, subject to the direction of the Board of Directors, general control and management of the Corporation's business and affairs and shall also +see that all the policies and resolutions of the Board of Directors are carried into effect, subject, however, to the right of the Board of Directors to delegate any specific powers, except such as +may be by statute exclusively conferred on the President or on any other officer or officers of the Corporation. The Chief Executive Officer shall preside at all meetings of the Board of Directors at +which he may be present and the Chairman of the Board of Directors may be absent. +Cimarex +Energy +Co. +C-19 +Appendix C +Section 6. President. The President shall +perform those duties that shall be +specifically assigned to him from time to time by the Board of Directors. To the extent the President is not also the Chief Executive Officer, in the absence of the Chief Executive Officer or in the +event of his death, inability or refusal to act, the President shall perform the duties of the Chief Executive Officer, and when so acting shall have the powers of and be subject to all the +restrictions upon the Chief Executive Officer. +Section 7. Vice Presidents. At the request of +the President or in his or her +absence or in the event of his or her inability or refusal to act, the Vice President or the Vice Presidents if there is more than one (in the order designated by the Board of Directors) shall perform +the duties of the President, and when so acting, +shall have all the powers and be subject to all the restrictions upon the President. Each Vice President shall perform such other duties and have such other powers as the Board of Directors from time +to time may prescribe. If there be no Vice President, the Board of Directors shall designate the officer of the Corporation who, in the absence of the President or in the event of the inability or +refusal of the President to act, shall perform the duties of the President, and when so acting, shall have all the powers of and be subject to all the restrictions upon the President. +Section 8. Secretary. The Secretary shall +attend all meetings of the Board of +Directors and all meetings of stockholders and record all the proceedings thereat in a book or books to be kept for that purpose; the Secretary shall also perform like duties for the standing +committees when requested by the Board or committee. The Secretary shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the Board of Directors, and +shall perform such other duties as may be prescribed by the Board of Directors or Chief Executive Officer, under whose supervision the Secretary shall be. If the Secretary shall be unable or shall +refuse to cause to be given notice of all meetings of the stockholders and special meetings of the Board of Directors, and if there be no Assistant Secretary, then either the Board of Directors or the +Chief Executive Officer may choose another officer to cause such notice to be given. The Secretary shall have custody of the seal of the Corporation and the Secretary or any Assistant Secretary, if +there be one, shall have authority to affix the same to any instrument requiring it and when so affixed, it may be attested by the signature of the Secretary or by the signature of any such Assistant +Secretary. The Board of Directors may give general authority to any other officer to affix the seal of the Corporation and to attest the affixing by his or her signature. The Secretary shall see that +all books, reports, statements, certificates and other documents and records required by law to be kept or filed are properly kept or filed, as the case may be. +Section 9. Treasurer. The Treasurer shall +have the custody of the corporate +funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name +and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. The Treasurer shall disburse the funds of the Corporation as may be ordered by the Board of +Directors, taking proper vouchers for such disbursements, and shall render to the Chief Executive Officer and the Board of Directors, at its regular meetings, or when the Board of Directors so +requests, an account of all transactions as Treasurer and of the financial condition of the Corporation. If required by the Board of Directors, the Treasurer shall give the Corporation a bond in such +sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of the office of Treasurer and for the restoration to the +Corporation, in case of the Treasurer's death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in the Treasurer's possession +or under control of the Treasurer belonging to the Corporation. +C-20 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Appendix C +Section 10. Assistant Secretaries. Except as +otherwise provided in these Bylaws, +Assistant Secretaries, if there be any, shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors, the Chief Executive Officer, the +President, any Vice President, if there be one, or the Secretary, and in the absence of the Secretary or in the event of his or her disability or refusal to act, shall perform the duties of the +Secretary, and when so acting, shall have all the powers of and be subject to all the restrictions upon the Secretary. +Section 11. Assistant Treasurers. Assistant +Treasurers, if there be any, shall +perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors, the Chief Executive Officer, the President, any Vice President, if there be one, or the +Treasurer, and in the absence of the Treasurer or in the event of the Treasurer's disability or refusal to act, shall perform the duties of the Treasurer, and when so acting, shall have all the powers +of and be subject to all the restrictions upon the Treasurer. If required by the Board of Directors, an Assistant Treasurer shall give the Corporation a bond in such sum and with such surety or +sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of the office of Assistant Treasurer and for the restoration to the Corporation, in case of the +Assistant Treasurer's death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in the Assistant Treasurer's possession or under +control of the Assistant Treasurer belonging to the Corporation. +ARTICLE V +STOCK +Section 1. Form of Certificates. Unless +provided by resolution of the Board of +Directors that some or all of any or all classes or series of the Corporation's stock shall be uncertificated, every holder of stock in the Corporation shall be entitled to have a certificate signed, +in the name of the Corporation, (i) by the Chairman of the Board of Directors, the President or a Vice President and (ii) by the Treasurer or an Assistant Treasurer, or the Secretary or +an Assistant Secretary of the Corporation, certifying the number of shares owned by such holder of stock in the Corporation. +Section 2. Signatures. Any or all of the +signatures on a certificate may be a +facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or +registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue. +Section 3. Lost, Destroyed or Stolen Certificates. The Board of Directors may +direct a new certificate to be issued in place of any certificate theretofore issued by the Corporation alleged to have been lost, stolen or +destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate, the Board of +Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate, or such person's legal representative, to +advertise the same in such manner as the Board of Directors shall require and/or to give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the +Corporation with respect to the certificate alleged to have been lost, stolen or destroyed. +Cimarex +Energy +Co. +C-21 +Appendix C +Section 4. Transfers. Stock of the +Corporation shall be transferable in the +manner prescribed by law and in these Bylaws. Transfers of stock shall be made on the books of the Corporation only by the person named in the certificate or by such person's attorney lawfully +constituted in writing and upon the surrender of the certificate therefore, properly endorsed for transfer and payment of all necessary transfer taxes; provided , however , that such surrender and endorsement or payment of taxes shall not be required in any +case in which the officers of the Corporation shall determine to waive such requirement. Every certificate exchanged, returned or surrendered to the Corporation shall be marked "Cancelled," with the +date of cancellation, by the Secretary or Assistant Secretary of the Corporation or the transfer agent thereof. No transfer of stock shall be valid as against the Corporation for any purpose until it +shall have been entered in the stock records of the Corporation by an entry showing from and to whom transferred. +Section 5. Transfer and Registry Agents. The +Corporation may from time to time +maintain one or more transfer offices or agencies and registry offices or agencies at such place or places as may be determined from time to time by the Board of Directors. +Section 6. Beneficial Owners. The Corporation +shall be entitled to recognize the +exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its +books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have +express or other notice thereof, except as otherwise provided by law. +ARTICLE VI +NOTICES +Section 1. Notices. Whenever written notice +is required by law, the Certificate +of Incorporation or these Bylaws, to be given to any director, member of a committee or stockholder, such notice may be given by mail, addressed to such director, member of a committee or stockholder, +at such person's address as it appears on the records of the Corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the +United States mail. Written notice may also be given personally or by electronic submission. +Section 2. Waivers of Notice. +(a) Whenever +any notice is required by law, the Certificate of Incorporation or these Bylaws, to be given to any director, member of a committee or stockholder, a waiver +thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting, +present by person or represented by proxy, shall constitute a waiver of notice of such meetings, except where the person attends the meeting for the express purpose of objecting at the beginning of +the meeting to the transaction of any business because the meeting is not lawfully called or convened. +(b) Neither +the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders, directors or members of a committee of directors need +be specified in any written waiver of notice unless so required by law, the Certificate of Incorporation or these Bylaws. +C-22 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Appendix C +ARTICLE VII +GENERAL PROVISIONS +Section 1. Dividends. Subject to the +requirements of the GCL and the provisions +of the Certificate of Incorporation, dividends upon the capital stock of the Corporation may be declared by the Board of Directors at any regular or special meeting of the Board of Directors, and may +be paid in cash, in property, or in shares of the Corporation's capital stock. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such +sum or sums as the Board of Directors from time to time, in its absolute discretion, deems proper as a reserve or reserves to meet contingencies, or for purchasing any of the shares of capital stock, +warrants, rights, options, bonds, debentures, notes, scrip or other securities or evidences of indebtedness of the Corporation, or for equalizing dividends, or for repairing or maintaining any +property of the Corporation, or for any other proper purpose, and the Board of Directors may modify or abolish any such reserve. +Section 2. Disbursements. All checks or +demands for money and notes of the +Corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate. +Section 3. Fiscal Year. The fiscal year of +the Corporation shall be fixed by +resolution of the Board of Directors. +Section 4. Corporate Seal. The corporate seal +shall have inscribed thereon the +name of the Corporation, the year of its organization and the words "Corporate Seal, Delaware." The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or +otherwise. +Section 5. Exclusive Forum. Unless the +Corporation consents in writing to the +selection of an alternative forum, to the fullest extent permitted by law, the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Corporation, +(ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of the Corporation to the Corporation or the Corporation's stockholders, +(iii) any action asserting a claim arising pursuant to any provision of the GCL or the Corporation's Certificate of Incorporation or Bylaws (as either may be amended from time to time), or +(iv) any action asserting a claim governed by the internal affairs doctrine shall be the Court of Chancery of the State of Delaware (or, if the Court of Chancery of the State of Delaware does +not have jurisdiction, the United States District Court for the District of Delaware). +ARTICLE VIII +INDEMNIFICATION +Section 1. Power to Indemnify in Actions, Suits or Proceedings Other than Those by or in the +Right of the +Corporation. Subject to Section 3 of this Article VIII, the Corporation shall indemnify any person who was or is a party or is threatened to be made +a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by +reason of the fact that such person is or was a director or officer of the Corporation, or is or was a director or officer of the Corporation serving at the request of the Corporation as a director or +officer, employee or agent of another corporation, partnership, joint venture, +Cimarex +Energy +Co. +C-23 +Appendix C +trust, +employee benefit plan or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in +connection with such action, suit or proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation, +and, with respect to any criminal action or proceeding, such person had no reasonable cause to believe his or her conduct was unlawful. The termination of any action, suit or proceeding by judgment, +order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that such person did not act in good faith and in a manner which such +person reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his or her +conduct was unlawful. +Section 2. Power to Indemnify in Actions, Suits or Proceedings by or in the Right of the +Corporation. Subject to Section 3 of this Article VIII, the Corporation shall indemnify any person who was or is a party or is threatened to be made +a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that such person is or was a director or +officer of the Corporation, or is or was a director or officer of the Corporation serving at the request of the Corporation as a director, officer, employee or agent of another corporation, +partnership, joint venture, trust, employee benefit plan or other enterprise, against expenses (including attorneys' fees) actually and reasonably incurred by such person in connection with the +defense or settlement of such action or suit if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation; except +that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the +Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, +such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper. +Section 3. Authorization of Indemnification. Any indemnification under this +Article VIII (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the director or officer is proper +in the circumstances because such person has met the applicable standard of conduct set forth in Section 1 or Section 2 of this Article VIII, as the case may be. Such +determination shall be made (i) by a majority vote of the directors who are not parties to such action, suit or proceeding, even though less than a quorum, or (ii) by a committee of such +directors designated by a majority vote of such directors, even though less than a quorum, or (iii) if there are no such directors, or if such directors so direct, by independent legal counsel +in a written opinion, or (iv) by the stockholders. To the extent, however, that a director or officer of the Corporation has been successful on the merits or otherwise in defense of any action, +suit or proceeding described above, or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred +by such person in connection therewith, without the necessity of authorization in the specific case. +Section 4. Good Faith Defined. For purposes +of any determination under +Section 3 of this Article VIII, a person shall be deemed to have acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the +Corporation, or, with respect to any criminal action or proceeding, to have had no reasonable cause to believe his or her conduct was unlawful, if such person's action is based on the records or books +of account of the Corporation or another enterprise, or on +C-24 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Appendix C +information +supplied to such person by the officers of the Corporation or another enterprise in the course of their duties, or on the advice of legal counsel for the Corporation or another enterprise +or on information or records given or reports made to the Corporation or another enterprise by an independent certified public accountant or by an appraiser or other expert selected with reasonable +care by the Corporation or another enterprise. The term "another enterprise" as used in this Section 4 shall mean any other corporation or any partnership, joint venture, trust, employee +benefit plan or other enterprise of which such person is or was serving at the request of the Corporation as a director, officer, employee or agent. The provisions of this Section 4 shall not +be deemed to be exclusive or to limit in any way the circumstances in which a person may be deemed to have met the applicable standard of conduct set forth in Section 1 or 2 of this +Article VIII, as the case may be. +Section 5. Indemnification by a Court. Notwithstanding any contrary +determination in the specific case under Section 3 of this article VIII, and notwithstanding the absence of any determination thereunder, any director or officer may commence an action +in to the Court of Chancery of the State of Delaware for indemnification to the extent otherwise permissible under Sections 1 and 2 of this Article VIII. The basis of such +indemnification by the Court of Chancery of the State of Delaware shall be a determination by such court that indemnification of the director or officer is proper in the circumstances because such +person has met the applicable standards of conduct set forth in Section 1 or 2 of this Article VIII, as the case may be. Neither a contrary determination in the specific case under +Section 3 of this Article VIII nor the absence of any determination thereunder shall be a defense to such action or create a presumption that the director or officer seeking +indemnification has not met any applicable standard of conduct. Notice of any action for indemnification pursuant to this Section 5 shall be given to the Corporation promptly upon the filing of +such action. If successful, in whole or in part, the director or officer seeking indemnification shall also be entitled to be paid the expense of prosecuting such action. +Section 6. Expenses Payable in Advance. Expenses incurred by a director or +officer in defending or investigating a threatened or pending action, suit or proceeding shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon +receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the Corporation as +authorized in this Article VIII. +Section 7. Nonexclusivity of Indemnification and Advancement of Expenses. The +indemnification and advancement of expenses provided by or granted pursuant to this Article VIII shall not be deemed exclusive of any other rights to which those seeking indemnification or +advancement of expenses may be entitled under the Certificate of Incorporation or any Bylaw, agreement, contract, vote of stockholders or disinterested directors or pursuant to the direction +(howsoever embodied) of any court of competent jurisdiction or otherwise, both as to action in such person's official capacity and as to action in another capacity while holding such office, it being +the policy of the Corporation that indemnification of the persons specified in Sections 1 and 2 of this Article VIII shall be made to the fullest extent permitted by law. The provisions +of this Article VIII shall not be deemed to preclude the indemnification of any person who is not specified in Section 1 or 2 of this Article VIII but whom the Corporation has the +power or obligation to indemnify under the provisions of the GCL, or otherwise. +Section 8. Insurance. The Corporation may +purchase and maintain insurance on +behalf of any person who is or was a director or officer of the Corporation, or is or was a director or officer of the Corporation serving +at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise against any liability +Cimarex +Energy +Co. +C-25 +Appendix C +asserted +against such person and incurred by such person in any such capacity, or arising out of such person's status as such, whether or not the Corporation would have the power or the obligation to +indemnify such person against such liability under the provisions of this Article VIII. +Section 9. Certain Definitions. For purposes +of this Article VIII, +references to "the Corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent or a constituent) absorbed in a consolidation or merger +which, if its separate existence had continued, would have had power and authority to indemnify its directors or officers, so that any person who is or was a director or officer of such constituent +corporation, or is or was a director or officer of such constituent corporation serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, +partnership, joint venture, trust, employee benefit plan or other enterprise, shall stand in the same position under the provisions of this Article VIII with respect to the resulting or +surviving corporation as such person would have with respect to such constituent corporation if its separate existence had continued. For purposes of this Article VIII, references to "fines" +shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to "serving at the request of the Corporation" shall include any service as a director, +officer, employee or agent of the Corporation which imposes duties on, or involves services by, such director or officer with respect to an employee benefit plan, its participants or beneficiaries; +and a person who acted in good faith and in a manner such person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have +acted in a manner "not opposed to the best interests of the Corporation" as referred to in this Article VIII. +Section 10. Survival of Indemnification and Advancement of Expenses. The +indemnification and advancement of expenses provided by, or granted pursuant to, this Article VIII shall, unless otherwise provided when authorized or ratified, continue as to a person who has +ceased to be a director or officer and shall inure to the benefit of the heirs, executors and administrators of such a person. +Section 11. Limitation on Indemnification. Notwithstanding anything contained in +this Article VIII to the contrary, except for proceedings to enforce rights to indemnification (which shall be governed by Section 5 hereof), the Corporation shall not be obligated to +indemnify any director or officer (or his or her heirs, executors or personal or legal representatives) or advance expenses in connection with a proceeding (or part thereof) initiated by such person +unless such proceeding (or part thereof) was authorized or consented to by the Board of Directors of the Corporation. +Section 12. Indemnification of Employees and Agents. The Corporation may, to the +extent authorized from time to time by the Board of Directors, provide rights to indemnification and to the advancement of expenses to employees and agents of the Corporation similar to those +conferred in this Article VIII to directors and officers of the Corporation. +ARTICLE IX +AMENDMENTS +Section 1. Amendments. These Bylaws may be +altered, amended or repealed, in +whole or in part, or new bylaws may be adopted by the Board of Directors or by the stockholders as provided in the Certificate of Incorporation. +Section 2. Entire Board of Directors. As used +in this Article IX and in +these Bylaws generally, the term "entire Board of Directors" means the total number of directors which the Corporation would have if there were no vacancies. +C-26 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +PROXY THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS CIMAREX ENERGY CO. The undersigned appoints Thomas E. Jorden and Francis B. Barron as proxies, with power to act without the other and with power of substitution, and authorizes them to represent and vote, as designated on the other side, all the shares of common stock of Cimarex Energy Co. held of record by the undersigned with all powers that the undersigned would possess if present at the Annual Meeting of Shareholders to be held virtually at www.viewproxy.com/cimarex/2021, on May 12, 2021, at 9:00 a.m., Mountain Daylight Time, or any adjournment thereof. Please register in advance to attend virtually using the following link: www.allianceproxy. com/cimarex/2021. For participants in the Cimarex 401(k) Plan, this proxy, when properly executed, will be voted in the manner directed by the undersigned. If no direction is given, if the card is not signed, or if the card is not received prior to 11:59 p.m., Eastern Daylight Time, on May 7, 2021, the Plan’s Trustee will vote your shares held in the Plan in the same proportion as shares were voted by other Plan participants. (Continued, and to be marked, dated and signed, on the other side) PLEASE DETACH ALONG PERFORATED LINE AND MAIL IN THE ENVELOPE PROVIDED. Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to be held May 12, 2021. The Proxy Statement and our 2020 Annual Report to Shareholders are available at: http://www.allianceproxy.com/cimarex/2021 +Please mark your votes like this THIS PROXY WILL BE VOTED AS DIRECTED, OR, IF NO DIRECTION IS INDICATED, WILL BE VOTED “FOR” ALL THE NOMINEES LISTED UNDER ITEM 1, AND “FOR” ITEMS 2, 3, 4, AND 5. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. The Board of Directors recommends a vote “FOR” all the nominees listed under Item 1, and “FOR” Items 2, 3, 4, and 5. FOR ABSTAIN AGAINST 1. Election of two Class I directors: 3. Approve Amended and Restated 2019 Equity Incentive Plan FOR AGAINST ABSTAIN (01) Kathleen A. Hogenson (02) LIsa A. Stewart 4. Proposal to Amend and restate our Certificate of Incorporation to provide for the annual election of all directors 2. Advisory vote to approve executive compensation 5. Ratify the appointment of KPMG LLP as our independent auditors for 2021 I plan on attending the meeting NOTE: Please sign as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee or guardian, please give full title as such. Signature Signature (if held jointly) Date: , 2021 CONTROL NUMBER PLEASE DETACH ALONG PERFORATED LINE AND MAIL IN THE ENVELOPE PROVIDED. CIMAREX ENERGY CO. As a shareholder of Cimarex Energy Co., you have the option of voting your shares electronically through the Internet or on the telephone, eliminating the need to return the proxy card. Your electronic vote authorizes the named proxies to vote your shares in the same manner as if you marked, signed, dated and returned the proxy card. Votes submitted electronically over the Internet or by telephone must be received by 11:59 p.m., Eastern Time, on May 11, 2021. CONTROL NUMBER PROXY VOTING INSTRUCTIONS Please have your 11 digit control number ready when voting by Internet or Telephone MAIL Vote Your Proxy by Mail: Mark, sign, and date your proxy card, then detach it, and return it in the postage-paid envelope provided. TELEPHONE Vote Your Proxy by Phone: Call 1 (866) 804-9616 Use any touch-tone telephone to vote your proxy. Have your proxy card available when you call. Follow the voting instructions to vote your shares. INTERNET Vote Your Proxy on the Internet: Go to www.AALvote.com/XEC Have your proxy card available when you access the above website. Follow the prompts to vote your shares. \ No newline at end of file diff --git a/raw/proxies/0001168054/0001047469-21-000740/proxy_rpt.txt b/raw/proxies/0001168054/0001047469-21-000740/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..946df11dabbe53b03bef29222b90bd5bd3fc9110 --- /dev/null +++ b/raw/proxies/0001168054/0001047469-21-000740/proxy_rpt.txt @@ -0,0 +1,38 @@ +Review of related party transactions +Independent Lead Director +Non-hedging and non-pledging policies +Diverse Board skills and experience +Clawback policy +Annual Board and committee self-evaluations +Management and Director stock ownership guidelines +Periodic consultant review of Board skills +No tax gross-ups +Annual equity grants to Directors +Proxy access +Annual Board education +Active shareholder engagement +Board refreshment efforts with five new directors since 2012 +Increased gender and ethnic diversity of Board +As +highlighted above, the Company is proposing declassifying the Board and provide that all directors be elected annually beginning with our 2024 annual meeting. This proposal is an outcome of our +shareholder engagement efforts, and demonstrates our commitment to enhancing our corporate governance policies. +In +addition, to support the Company's elevated focus on environmental and safety performance, our Board of Directors established a new Environmental, Health and Safety Committee. The committee has +oversight of the Company's approach to health, safety and environmental (HSE) policies and programs and key HSE risks, as well as overseeing our corporate disclosures. +Shareholder Engagement +Cimarex's relationships with its shareholders are an important part of our corporate governance profile, and we recognize the value of taking +their views into account. Engagement with shareholders helps us understand the larger context and the impact of our operations, learn about expectations for our performance, assess emerging issues +that may affect our business or other aspects of our operations, and shape corporate and governance policies. +At +the 2020 Annual Meeting of Shareholders, 96% of the votes cast were in favor of the advisory vote to approve executive compensation. In addition to the advisory vote, as part of our regular +shareholder +20 +2021 +Notice +of +Annual +Meeting +and +Proxy +Statement +Table of Contents \ No newline at end of file diff --git a/raw/proxies/0001168054/0001104659-15-025318/proxy.txt b/raw/proxies/0001168054/0001104659-15-025318/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..19aa40a531a9f7b1cdaac063912475e9502148b0 --- /dev/null +++ b/raw/proxies/0001168054/0001104659-15-025318/proxy.txt @@ -0,0 +1,3096 @@ +DEF 14A +1 +a15-1556_1def14a.htm +DEF 14A +Table of Contents +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +Washington, D.C. 20549 +SCHEDULE 14A +Proxy Statement Pursuant to Section 14(a) of +the Securities Exchange Act of 1934 (Amendment No. ) +Filed by the Registrant x +Filed by a Party other than the Registrant o +Check the appropriate box: +o +Preliminary Proxy Statement +o +Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(3)(2)) +x +Definitive Proxy Statement +o +Definitive Additional Materials +o +Soliciting Material Pursuant to §240.14a-12 +Cimarex Energy Co. +(Name of Person(s) Filing Proxy Statement, if other than the Registrant) +Payment of Filing Fee (Check the appropriate box): +x +No fee required. +o +Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. +(1) +Title of each class of securities to which transaction applies: +(2) +Aggregate number of securities to which transaction applies: +(3) +Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): +(4) +Proposed maximum aggregate value of transaction: +(5) +Total fee paid: +o +Fee paid previously with preliminary materials. +o +Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. +(1) +Amount Previously Paid: +(2) +Form, Schedule or Registration Statement No.: +(3) +Filing Party: +(4) +Date Filed: +Table of Contents +1700 Lincoln Street, Suite 3700 +Denver, CO 80203-4537 +NOTICE OF 2015 ANNUAL MEETING OF SHAREHOLDERS +TIME AND DATE +9:00 a.m. Mountain Daylight Time on Thursday, May 14, 2015 +PLACE +Hershner Room +1700 Lincoln Street +Denver, Colorado 80203 +ITEMS OF BUSINESS +Item 1. Election of Directors +Item 2. Advisory Vote to Approve Executive Compensation +Item 3. Ratification of Independent Auditors +Item 4. Shareholder Proposal on “Proxy Access” +Transact any other business that properly comes before the Meeting and any adjournment or postponement of the Meeting +RECORD DATE +March 18, 2015 +MAILING DATE TO SHAREHOLDERS +April 2, 2015 +MATERIALS TO REVIEW +This booklet contains our Notice of 2015 Annual Meeting and Proxy Statement. Our 2014 Annual Report is available on our website at www.cimarex.com . +PROXY VOTING +It is important that your shares be represented and voted at the Meeting. You can vote your shares by following the internet or telephone instructions on page 9 of this proxy statement or you may attend and vote in person at the Annual Meeting. If you received a paper copy of the proxy card, you also may vote by completing and mailing the proxy card in the postage-paid envelope provided for your convenience. You may revoke your proxy at any time before the vote is taken by following the instructions on page 11 of this proxy statement. +Francis B. Barron +April 2, 2015 +Corporate Secretary +Table of Contents +TABL E OF CONTENTS +Page No. +Voting Information +2 +Proxy Statement Summary +3 +Proxy Statement +8 +Questions and Answers +9 +Election of Directors (Item 1) +13 +Election Process +13 +Director Nominations +14 +Director Qualifications +14 +2015 Nominees for Class I Directors +14 +Continuing Directors +15 +Retiring Director +18 +Director Compensation +18 +Corporate Governance +20 +Board and Committee Information +21 +Our Board +21 +Board Leadership Structure +21 +Board Committees +22 +Director Independence and Related Person Transactions +23 +Risk Oversight +24 +Executive Sessions +25 +Shareholder Engagement +25 +Stock Ownership Directors, Management and Certain Beneficial Owners +26 +Compensation Discussion and Analysis +28 +Compensation and Governance Committee Report +43 +Compensation Tables +44 +Summary Compensation Table +44 +2014 Grants of Plan-Based Awards +46 +Outstanding Equity Awards at December 31, 2014 +47 +2014 Option Exercises and Restricted Stock Vested +48 +2014 Nonqualified Deferred Compensation +48 +Potential Payments upon Change in Control or Termination +49 +Director and Officer Indemnification Agreements +52 +Advisory Vote to Approve Executive Compensation (Item 2) +52 +Report of Audit Committee +53 +Ratification of Independent Auditors (Item 3) +53 +Audit and Non-Audit Fees +54 +Policy for Approval of Audit, Audit-Related and Tax Services +54 +Shareholder Proposal on “Proxy Access” (Item 4) +54 +Other Matters +57 +Section 16(a) Beneficial Ownership Reporting Compliance +57 +Complaint and Reporting Procedures +57 +Table of Contents +VOTING INFORMATION +WE WANT TO HEAR FROM YOU – VOTE TODAY +It is important that you vote. Please carefully review the proxy materials for the 2015 Annual Meeting of Shareholders and follow the instructions below to cast your vote on all of the voting matters. +Voting Matters and Board Recommendations +Our Board’s Recommendation +Election of Directors (page 13) +FOR each Director Nominee +Advisory Vote to Approve Executive Compensation (page 52) +FOR +Ratification of Independent Auditors (page 53) +FOR +Shareholder Proposal on “Proxy Access” (page 54) +AGAINST +Advance Voting Methods +Even if you plan to attend the 2015 Annual Meeting of Shareholders in person, please vote right away using one of the following advance voting methods (see page 9 for additional details). Make sure to have your proxy card or voting instruction form in hand and follow the instructions. +You can vote in advance in one of three ways: +Visit the website listed on your proxy card/voting instruction form to vote VIA THE INTERNET +Call the telephone number on your proxy card/voting instruction form to vote BY TELEPHONE +Sign, date and return your proxy card/voting instruction form in the enclosed envelope to vote BY MAIL +Voting at our 2015 Annual Meeting of Shareholders +All shareholders of record may vote in person at the 2015 Annual Meeting of Shareholders, which will be held on Thursday, May 14, 2015 at 9:00 a.m., Mountain Daylight Time, at the Hershner Room, 1700 Lincoln Street, Denver, Colorado 80203. Beneficial owners may vote in person at the Meeting if they have a legal proxy, as described in the response to question 14 on page 12 of “Questions and Answers about the Meeting and Voting.” +2 +Table of Contents +Proxy Statement Summary +Director Nominees (page 13) +You are being asked to vote on the following two Director Nominees. Directors are elected by a majority of votes cast. Detailed information about each Director’s background, skill sets and areas of expertise can be found beginning on page 13. +NAME +AGE +DIRECTOR +SINCE +POSITION +INDEPENDENT +AC +C/G +NOM +OTHER +PUBLIC +BOARDS +Joseph R. Albi +56 +2011 +Executive Vice President—Operations, Chief Operating Officer, Cimarex Energy Co. +No +0 +Michael J. Sullivan +75 +2002 +Senior Attorney, +Lewis Roca Rothgerber LLP +Yes +X +X +1 +Continuing Directors (page 15) +The following are Cimarex’s continuing Directors. Detailed information about each Director’s background, skill sets and areas of expertise can be found beginning on page 15. +NAME +AGE +DIRECTOR +SINCE +TERM +EXPIRES +POSITION +INDEPENDENT +AC +C/G +NOM +OTHER +PUBLIC +BOARDS +Hans Helmerich +56 +2002 +2016 +Chairman and former CEO, Helmerich & Payne +Yes +X +X +3 +David A. Hentschel +81 +2002 +2017 +Retired, former Chairman and CEO, Occidental Oil and Gas Corporation +Yes +X +X +0 +Thomas E. Jorden +57 +2011 +2017 +Chairman, CEO and President, Cimarex Energy Co. +No +0 +Harold R. Logan, Jr. +70 +2009 +2016 +Chairman, Suburban Propane Partners L.P. +Yes +X +X +3 +Floyd R. Price +66 +2012 +2017 +Retired, former executive officer, Apache Corp. +Yes +X +X +1 +Monroe W. Robertson +65 +2005 +2016 +Retired, Former President and Chief Operating Officer of Key Production Co. +Yes +X +X +0 +L. Paul Teague +80 +2002 +2017 +Retired, former Vice President, Texaco USA +Yes +X +X +0 +Retiring Director (page 18) +The following Director’s term expires at the 2015 Annual Meeting of Shareholders. He has informed the Company that he will not stand for re-election. +NAME +AGE +DIRECTOR +SINCE +TERM +EXPIRES +POSITION +INDEPENDENT +AC +C/G +NOM +OTHER +PUBLIC +BOARDS +Jerry Box +76 +2005 +2015 +Retired, former Chairman, Newpark Resources, Inc. +Yes +X +X +0 +AC +Audit Committee +C/G +Compensation and Governance Committee +NOM +Nominating Committee +3 +Table of Contents +Governance Highlights (page 20) +Cimarex is committed to good corporate governance, which promotes the long-term interests of shareholders, strengthens the Board of Directors, fosters management accountability, and helps build public trust in Cimarex. Highlights include: +· 8 of 10 Independent Directors +· Independent Lead Director +· Majority Voting Director resignation policy +· Active Shareholder engagement +· Clawback Policy +· Non-Hedging and Non-Pledging Policies +· Director and Management Stock Ownership Guidelines +· No tax gross-ups +4 +Table of Contents +2014 Executive Compensation (page 29) +Below is the 2014 compensation for each Named Executive Officer (“NEO”) as determined under the Securities and Exchange Commission (“SEC”) rules. See the notes accompanying the 2014 Summary Compensation Table on page 44 for more information. +Name and +Principal Position +Salary +Bonus +Stock +Awards +Option +Awards +Non-Equity +Incentive +Plan Comp. +All Other +Comp. +Total +Thomas E. Jorden +Chairman, Chief Executive Officer and President +$ +845,048 +$ +— +$ +7,143,522 +$ +— +$ +740,138 +$ +56,776 +$ +8,785,484 +Paul Korus +Senior Vice President, Chief Financial Officer +$ +480,169 +$ +— +$ +2,952,396 +$ +— +$ +413,236 +$ +43,695 +$ +3,889,496 +Joseph R. Albi +$ +552,462 +$ +— +$ +3,473,436 +$ +— +$ +477,360 +$ +54,187 +$ +4,557,445 +Executive Vice President—Operations, Chief Operating Officer +Stephen P. Bell +Executive Vice President—Business Development +$ +453,822 +$ +— +$ +2,952,396 +$ +— +$ +397,481 +$ +45,358 +$ +3,849,057 +John A. Lambuth +$ +398,149 +$ +— +$ +3,299,756 +$ +— +$ +352,856 +$ +643,695 +$ +4,694,456 +Vice President—Exploration +A Significant Portion of our CEO’s 2014 Compensation is At Risk +The accompanying graph illustrates our CEO’s 2014 at-risk compensation. A significant portion of reported compensation is an incentive for future performance and realized only if Cimarex meets certain performance measures. +5 +Table of Contents +How CEO Pay is Tied to Cimarex’s Performance (page 37) +Our compensation programs are designed to align performance incentives with the long-term interests of our shareholders. The programs also provide competitive total compensation opportunities that retain, and attract when needed, executive talent and link compensation earned to achievement of short and long-term financial and strategic objectives. Our Compensation and Governance Committee considers performance in two primary ways: +· Cimarex’s operating performance; and +· Return to shareholders over time, both on an absolute basis and relative to other companies in the S&P Oil & Gas Exploration & Production Index and our compensation peer group (see page 40). +2014 Financial and Operating Highlights +· Generated a record of $2.4 billion of revenue. +· Realized net income of $507.2 million, or $5.78 per diluted share. +· Generated $1.6 billion of cash flow from operating activities. +· Invested $1.9 billion in exploration and development. +· Grew production 25 percent to a record 869 MMcfe/d. +· Increased proved reserves 25 percent to 3.1 Tcfe, 23 percent of which are oil. +· Added 814 Bcfe of proved reserves from extensions and discoveries replacing 257 percent of production. +· Continued to delineate and expand our Mid-Continent acreage position. +· Ended 2014 with debt-to-total capitalization of 25 percent. +· Strengthened financial position through sale of $446 million of non-core properties and issuance of $750 million of 4.375% senior notes. +6 +Table of Contents +Return to Shareholders +Cimarex has consistently returned value to its shareholders. The following chart shows how a December 31, 2009 investment of $100 in Cimarex common stock would have grown to $205.90 on December 31, 2014, which includes dividends reinvested quarterly for those who wish to considering Total Shareholder Return when evaluating executive compensation. The chart also compares the Total Shareholder Return on Cimarex common stock to the same investment in the S&P 500 Index, the Dow Jones US Exploration & Production Index, and the S&P Oil & Gas Exploration & Production index over the same time period. +12/2009 +12/2010 +12/2011 +12/2012 +12/2013 +12/2014 +Cimarex Energy Co. +$ +100.00 +$ +167.87 +$ +117.94 +$ +110.80 +$ +202.75 +$ +205.90 +S&P 500 +$ +100.00 +$ +115.06 +$ +117.49 +$ +136.30 +$ +180.44 +$ +205.14 +Dow Jones US Exploration & Production +$ +100.00 +$ +116.74 +$ +111.85 +$ +118.36 +$ +156.05 +$ +139.24 +S&P Oil & Gas Exploration & Production +$ +100.00 +$ +109.28 +$ +102.25 +$ +105.98 +$ +135.11 +$ +120.81 +The stock price performance included in this graph is not necessarily indicative of future stock price performance. +7 +Table of Contents +PROXY STATEMENT +We are furnishing you this proxy statement to solicit proxies to be voted at the 2015 Annual Meeting of Shareholders of Cimarex Energy Co. (“Cimarex” or the “Company”). The Meeting will take place on May 14, 2015 at 9:00 a.m. Mountain Daylight Time at the Hershner Room, 1700 Lincoln Street, Denver, Colorado 80203. The proxies also may be voted at any adjournments or postponements of the Meeting. +The mailing address of our principal office is 1700 Lincoln Street, Suite 3700, Denver, Colorado 80203. We are first furnishing the proxy materials to shareholders on April 2, 2015. +All properly executed written proxies and proxies submitted by telephone or internet delivered pursuant to this solicitation will be voted at the Meeting in accordance with the directions given in the proxy, unless the proxy is revoked prior to completion of voting at the Meeting. +Only owners of record of shares of Cimarex common stock (“Common Stock”) as of the close of business on March 18, 2015, the record date, are entitled to notice of and to vote at the Meeting or at any adjournments or postponements of the Meeting. Each owner of Common Stock on the record date is entitled to one vote for each share of Common Stock held. On March 18, 2015, there were 87,665,460 shares of Common Stock issued and outstanding. +IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 14, 2015. +The Notice of Annual Meeting, Proxy Statement and Annual Report on Form 10-K for the year ended December 31, 2014 are available at www.allianceproxy.com/cimarex2015 . +8 +Table of Contents +QUESTIONS AND ANSWERS +P ROXY M ATERIALS AND V OTING I NFORMATION +1. Why did I receive these proxy materials? +We are providing these materials in connection with the solicitation by the Board of Directors of Cimarex Energy Co., a Delaware corporation, of proxies to be voted at our 2015 Annual Meeting of Shareholders and at any adjournment or postponement of the Meeting. The Meeting will take place on May 14, 2015, beginning at 9:00 a.m. Mountain Daylight Time, at the Hershner Room, 1700 Lincoln Street, Denver, Colorado 80203. +2. What is the difference between holding shares as a shareholder of record and as a beneficial owner? +If your shares are registered directly in your name with Cimarex’s registrar and transfer agent, Continental Stock Transfer & Trust Company, you are considered a shareholder of record with respect to these shares. If your shares are held in a brokerage account or bank, broker or other nominee, you are considered the beneficial owner of these shares. +3. What shares are included on the proxy card? +If you are a shareholder of record, you will receive only one proxy card for all the shares you hold of record in certificate form and in book-entry form. +If you are a Cimarex employee, you will receive a proxy or voting instruction card for all the shares you hold in the Cimarex 401(k) Plan. Your proxy card will serve as a voting instruction card for the Plan trustee. If you do not specify your voting instructions on the proxy card, the Plan trustee will vote your shares in the same proportion as it votes shares for which it did receive timely instructions. To allow sufficient time for voting by the trustee, your voting instructions must be received no later than 11:59 p.m. Eastern Daylight Time on May 11, 2015. +4. What different methods can I use to vote? +By Written Proxy. All shareholders of record can vote by written proxy card. If you are a shareholder of record and receive a notice regarding the availability of proxy materials, you may request a written proxy card by following the instructions included in the notice. If you are a beneficial owner, you may request a written proxy card or a voting instruction form from your bank, broker or other nominee. +By Telephone or Internet. All shareholders of record can vote by calling the toll-free telephone number on the proxy card. Please have your proxy card when you call. Voice prompts will direct you on how to vote your shares and will confirm your voting instructions have been recorded properly. +Shareholders also may vote on the internet by accessing the website noted on the proxy card. Please have your proxy card when you go to the website. As with telephone voting, you can confirm your voting instructions have been recorded properly. +Beneficial owners may vote by telephone or internet if their bank, broker or other nominee makes those methods available, in which case the bank, broker or other nominee will include the instructions with the proxy materials. +9 +Table of Contents +5. What are my voting choices for each of the proposals to be voted on at the 2015 Annual Meeting of Shareholders and what are the voting standards? +Proposal +Voting Choices and Board Recommendation +Voting Standard +Item 1. Election of Two Class I Directors +· vote in favor of all nominees; +· vote in favor of specific nominees; +· vote against all nominees; +· vote against specific nominees; +· abstain from voting with respect to all nominees; or +· abstain from voting with respect to specific nominees. +The Board recommends a vote FOR each of the nominees. +Majority of votes cast +Item 2. Advisory Vote to Approve Executive Compensation +· vote in favor of the advisory proposal; +· vote against the advisory proposal; or +· abstain from voting on the advisory proposal. +The Board recommends a vote FOR the advisory proposal to approve executive compensation. +Majority of shares present and entitled to vote +Item 3. Ratification of the Appointment of KPMG LLP as Independent Auditors +· vote in favor of the ratification; +· vote against the ratification; or +· abstain from voting on the ratification. +The Board recommends a vote FOR the ratification. +Majority of shares present and entitled to vote +Item 4. Shareholder Proposal on “Proxy Access” +· vote in favor of the proposal; +· vote against the proposal; or +· abstain from voting on the proposal. +The Board recommends a vote AGAINST the proposal. +Majority of shares present and entitled to vote +6. What if I am a beneficial owner and do not give voting instructions to my broker? +As a beneficial owner, in order to ensure your shares are voted in the way you would like, you must provide voting instructions to your bank, broker or other nominee by the deadline provided in the materials you receive from your bank, broker or other nominee. If you do not provide voting instructions to your bank, broker or other nominee, whether your shares can be voted by such person depends on the type of item being considered to vote. +Non-Discretionary Items. The election of Directors, the advisory vote to approve executive compensation, and the shareholder proposal on “proxy access” are non-discretionary items and may not be voted on by brokers, banks or other nominees who have not received specific voting instructions from beneficial owners. +Discretionary Items. The ratification of the appointment of KPMG LLP as Independent Auditors is a discretionary item. Generally banks, brokers and other nominees that do not receive voting instructions from beneficial owners may vote on the proposal in their discretion. +10 +Table of Contents +7. How are abstentions and broker non-votes counted? +Item 1. Election of Two Class I Directors. If you abstain from voting in the election of Directors, you have not cast a vote and the abstention will not be counted in determining the outcome of the election. Broker non-votes are not considered a vote cast under our Bylaws and will have no effect on the outcome of the election of Directors. +Item 2. Advisory Vote to Approve Executive Compensation. If you abstain from voting on the advisory vote to approve executive compensation, you are considered present and entitled to vote, and your shares are considered in the calculation of whether Item 2 received the affirmative vote of a majority of shares present and entitled to vote. The effect of an abstention is a vote against Item 2. Broker non-votes are not considered in the calculation of a majority of shares present and entitled to vote. +Item 3. Ratification of Appointment of KPMG as Independent Auditors. If you abstain from voting on the ratification of KPMG LLP as Cimarex’s Independent Auditors, you are considered present and entitled to vote, and your shares are considered in the calculation of whether Item 3 received the affirmative vote of a majority of shares present and entitled to vote. The effect of an abstention is a vote against Item 3. Because Item 3 is a routine matter on which a broker has discretionary authority, no broker non-votes likely will result from this Item. +Item 4. Shareholder Proposal on “Proxy Access.” If you abstain from voting on the shareholder proposal on “proxy access,” you are considered present and entitled to vote, and your shares are considered in the majority of shares present and entitled to vote. The effect of an abstention is a vote against Item 4. Broker non-votes are not considered in the calculation of a majority of shares present and entitled to vote. +8. What can I do if I change my mind after I vote my shares? +You may revoke your proxy prior to the completion of voting by: +· Giving written notice to Cimarex’s Corporate Secretary; +· Delivering a valid, later-dated proxy, or a later-dated vote by telephone or on the internet in a timely manner; or +· Voting by ballot at the Annual Meeting. +9. Can I access the proxy materials on the internet? How can I sign up for the electronic proxy delivery service? +We are distributing our proxy materials to certain shareholders via the internet under the “notice and access” approach permitted by the SEC. On or about April 2, 2015, we will mail to certain of our shareholders a notice of internet availability of proxy materials with instructions explaining how to access our proxy statement and annual report and how to vote online. If you receive a notice of internet availability by mail, you will not receive a printed copy of the proxy materials in the mail unless you request them by following the instructions for requesting such materials included in the notice of internet availability. +Even if you do not participate in “notice and access,” the Notice of Annual Meeting and proxy statement are available on the internet at http://www.allianceproxy.com/cimarex/2015 . +10. Who counts the votes? +Alliance Advisors LLC, our proxy solicitor, will tabulate the votes and act as inspector of election. +11 +Table of Contents +11. When will Cimarex announce the voting results? +We will announce the preliminary voting results at the Annual Meeting of Shareholders. Cimarex will report the final results in a Current Report on Form 8-K filed with the SEC. +12. How are proxies solicited, and what is the cost? +We bear all expenses incurred in connection with the solicitation of proxies. We hired Alliance Advisors LLC to assist with the solicitation of proxies for an estimated fee of $9,500 plus expenses. We will reimburse brokers, fiduciaries and custodians for their costs in forwarding proxy materials to beneficial owners of Common Stock. +Our Directors, officers and employees also may solicit proxies by mail, telephone and personal contact. They will not receive any additional compensation for these activities. +13. What is householding? +As permitted by the Securities Exchange Act of 1934 (the “1934 Act”), as amended, only one copy of this proxy statement is being delivered to shareholders residing at the same address, unless the shareholders have notified Cimarex of their desire to receive multiple copies of the proxy statement. This is known as “householding.” +Upon oral or written request, we will promptly deliver a separate copy of the proxy statement to any shareholder residing at an address to which only one copy was mailed. Direct requests for additional copies for the current year or future years to our Corporate Secretary, Cimarex Energy Co., 1700 Lincoln Street, Suite 3700, Denver, Colorado 80203-4537, telephone (303) 295-3995 and facsimile (720) 403-9383. +Shareholders of record residing at the same address and currently receiving multiple copies of the proxy statement may contact our registrar and transfer agent, Continental Stock Transfer & Trust Company, by phone at (888) 509-5580 or by mail at 17 Battery Place South, 8 th Floor, New York, NY 10004, to request a single copy be mailed in the future. +Beneficial owners should contact their broker or bank. +14. How can I vote at the Meeting if I am a beneficial owner? +If you are a beneficial owner and want to vote your shares at the Annual Meeting, you will need to ask your bank, broker or other nominee to furnish you with a legal proxy, bring the legal proxy with you to the Meeting and hand it in with a signed ballot that will be provided to you at the Meeting. You will not be able to vote your shares at the Meeting without a legal proxy. If you do not have a legal proxy, you can still attend the Meeting. We encourage you to vote your shares in advance, even if you intend to attend the Meeting. Please note that if you request a legal proxy, any previously executed proxy will be revoked, and your vote will not be counted unless you appear at the Meeting and vote in person or legally appoint another proxy to vote on your behalf. +C OMPANY D OCUMENTS, C OMMUNICATIONS AND S HAREHOLDER P ROPOSALS +15. How can I view copies of Cimarex’s corporate documents and SEC filings? +Our Corporate Governance Guidelines, Board Committee Charters, Code of Business Conduct and Code of Ethics and SEC filings are posted on our website at www.cimarex.com . Upon request, we will promptly deliver (free of charge) a copy of the Form 10- K to any shareholder. Direct such requests to our Corporate Secretary, Cimarex Energy Co., 1700 Lincoln Street, Suite 3700, Denver, Colorado 80203-4537, telephone (303) 295-3995 and facsimile (720) 403-9383. +12 +Table of Contents +16. How can I communicate with Cimarex’s Directors? +Communications can be addressed to our Directors by mail in care of our Corporate Secretary, Cimarex Energy Co., 1700 Lincoln Street, Suite 3700, Denver, Colorado 80203-4537, telephone (303) 295-3995 or facsimile (720) 403-9383. All communications will be forwarded to our Lead Director. The Lead Director may take any action deemed appropriate or necessary, including, without limitation, forwarding the information to the Board for consideration or, with the concurrence of the Board, retaining independent or outside counsel, accountants or other advisors to address the concern. +17. How do I submit a proposal for action at the 2016 Annual Meeting of Shareholders? +A proposal to be acted upon at the 2016 Annual Meeting of Shareholders will be acted upon only: +· If the proposal is to be included in the proxy statement, pursuant to Rule 14a-8 under the 1934 Act, the proposal is received by our Corporate Secretary on or before December 4, 2015, and the proposal meets the requirements of the applicable rules of the SEC and the requirements of our bylaws. +· If the proposal is not to be included in the proxy statement, pursuant to our bylaws, the proposal is submitted in writing to our Corporate Secretary no earlier than January 15, 2016 and no later than February 15, 2016, and such proposal is, under Delaware General Corporation Law, an appropriate subject for shareholder action. +ELECTION OF DIRECTORS (ITEM 1) +Election Process +Our current Board consists of ten Directors, which is the maximum number of Directors permitted by our Certificate of Incorporation. The Board is divided into three classes, Class I, Class II and Class III Directors. At each Annual Meeting a Class of Directors is elected for a term expiring at the Annual Meeting in the third year following the year of election. Each Director holds office until his successor is elected and qualifies. +The terms of the three Class I Directors, Joseph R. Albi, Jerry Box and Michael J. Sullivan, will expire at the 2015 Annual Meeting. The Nominating Committee, at its February 2015 meeting, nominated Messrs. Albi and Sullivan for re-election as Class I Directors, with a term expiring at the 2018 Annual Meeting. Mr. Box informed the Nominating Committee that he will not stand for re-election. Upon the completion of Mr. Box’s term following the May 14, 2015 Annual Meeting of Shareholders, the size of the Board will be reduced to nine Directors. The Nominating Committee has engaged a search firm with expertise with oil and gas exploration and development companies, Preng & Associates, to assist in identifying Director candidates. +If prior to the Annual Meeting a nominee becomes unavailable to serve as a Director, any shares represented by a proxy directing a vote will be voted for the remaining nominees and for any substitute nominee(s) designated by our Board or its Nominating Committee. As of the mailing of these proxy materials, the Board knows of no reason why any Director nominee would not be available to serve as a Director. +A nominee is elected if the votes cast for his election exceed the votes cast against his election. Pursuant to our majority voting policy, each nominated Director has tendered an irrevocable resignation that is effective upon his failure to receive the required vote and the Board’s acceptance of such resignation. If a nominee fails to receive more favorable votes than votes cast against him, the Nominating Committee will act on an expedited basis following the Annual Meeting to determine whether to recommend that the Board accept the Director’s resignation. The Nominating Committee and the Board may consider any factors they deem relevant in deciding whether to accept the Director’s resignation. The Director whose resignation is under consideration must abstain from participating in any decision regarding his or her resignation. The Board will publicly disclose its decision regarding acceptance of his or her resignation within 90 days after the results of the election are certified. If the resignation is not accepted, the Director will continue to serve as a Director until his or her successor is elected and qualified. If the Board accepts the resignation, then the Board may fill the vacancy in accordance with the Bylaws or may decrease the size of the Board in compliance with the Certificate of Incorporation. +13 +Table of Contents +Director Nominations +The Nominating Committee is responsible for identifying and evaluating nominees for Director and for recommending to the Board a slate of nominees for election at each Annual Meeting. Nominees may be suggested by Directors, members of management, shareholders or, in some cases, by a third-party firm. The Nominating Committee has engaged Preng & Associates, a search firm with expertise with oil and gas exploration and production companies, to assist in identifying director candidates. In 2014, Preng & Associates also conducted an evaluation of the Board’s and individual Director’s skill sets. +The Committee will consider nominees recommended by shareholders. The Committee did not receive nominations for the 2015 Annual Meeting from any shareholder prior to the deadline for shareholder nominations. Shareholders who wish to nominate persons for election as Directors at the 2016 Annual Meeting must submit a timely written notice complying with Cimarex’s Bylaws to the Corporate Secretary, Cimarex Energy Co., 1700 Lincoln Street, Suite 3700, Denver, Colorado 80203-4537, facsimile (720) 403-9383. To be timely, the shareholder’s written notice must be received between January 15, 2016 and February 15, 2016. +Director Qualifications +In its assessment of each potential candidate, the Nominating Committee considers the nominee’s judgment, integrity, experience, independence, understanding of Cimarex’s business or related industries and such other factors that the Committee determines are pertinent in light of the needs of the Board. The Committee also considers the ability of a nominee to devote the time and effort necessary to fulfill his or her responsibilities to Cimarex. Our Nominating Committee Charter specifically includes diversity of gender and ethnic background in the list of desirable attributes sought in our Board composition. +Although all the current Directors have extensive oil and gas experience, either as company executives or attorneys, their experience is with companies with widely different operating strategies. This diversity and depth of experience benefits our Board in executing its duty of oversight and guidance. +2015 Nominees for Class I Directors +Upon the recommendation of the Nominating Committee, the Board has nominated Joseph R. Albi and Michael J. Sullivan for election as Class I Directors to serve until the Annual Meeting of Shareholders to be held in 2018. The Board has determined that nominee Mr. Sullivan is independent under the New York Stock Exchange (“NYSE”) corporate governance rules. Mr. Albi is not independent because he is an officer of Cimarex. Each of the Director nominees currently serves on the Board. We have no reason to believe that either of the nominees will be unable or unwilling to serve if elected. +The Board believes that the combination of the various qualifications, skills and experiences of the 2015 Director nominees will contribute to an effective and well-functioning Board. The Board also believes that, individually and as a whole, the Director nominees possess the necessary qualifications to provide effective oversight of the business and quality advice and counsel to Cimarex. +Included in each Director nominee’s biography is an assessment of the specific qualifications, attributes, skills and experience of such nominee based on the qualifications described above. +The Board of Directors recommends a vote FOR the election of each of the Director nominees. +JOSEPH R. ALBI, 56 +Position, Principal Occupation and Business Experience +Mr. Albi was named Chief Operating Officer in September 2011. He has served Cimarex in various capacities since September 2002, including Executive Vice President-Operations from 2005 to 2011, Senior Vice President-Corporate Engineering from 2003 to 2005 and Vice President-Engineering from 2002 to 2003. +14 +Table of Contents +Key Attributes, Experience and Skills +Mr. Albi has over 35 years of experience in the oil and gas industry. His extensive understanding of the management of oil and gas production and drilling operations, business development, environmental and safety management and oil and gas marketing provide the Board with considerable insight about the operations of Cimarex. +MICHAEL J. SULLIVAN, 75 +Position, Principal Occupation and Business Experience +Mr. Sullivan has been a senior attorney, partner or special counsel for the Arizona-based law firm, Lewis Roca Rothgerber LLP, since 2001, and the managing attorney of the Casper office of that firm. Mr. Sullivan practiced law as a partner with Brown, Drew, Apostolos, Massey & Sullivan from 1964 to 1986 and from 1995 until 1998. +Mr. Sullivan is a director and member of the compensation and governance committees of First Interstate BancSystem, located in Billings, Montana and a director and member of the compensation and governance and audit committees of Sletten Construction, Inc., located in Great Falls, Montana (a non-public company). From 2001 to May 2009 he served as a director and during his tenure as a member of the audit, corporate social responsibility committee and governance committee of Allied Irish Bank Group, located in Dublin, Ireland. From 2003 to 2011, he served as a director of the Kerry Group Plc, a global food and food ingredients producer headquartered in Tralee, the county town of County Kerry, Ireland. +Key Attributes, Experience and Skills +Mr. Sullivan brings a wealth of experience and a diverse background to our Board. In addition to his Juris Doctor degree, he has an undergraduate degree in petroleum engineering, years of governmental service as the Governor of Wyoming (1987-1995) and Ambassador to Ireland (1998-2001), and 39 years’ experience practicing law in the areas of natural resources, mediation and business. As Governor, he was involved in the process of reviewing and administering Wyoming’s budget. This experience is particularly relevant to his service on the Audit Committee. Mr. Sullivan’s education, legal experience, particularly in mediation and litigation, and his domestic and international service all provide a background that is beneficial in addressing the issues coming before the Cimarex Board. +Continuing Directors – Class II – Term Expires 2016 +HANS HELMERICH, 56 +Position, Principal Occupation and Business Experience +Mr. Helmerich has served as Chairman of Helmerich & Payne, Inc. (“H&P”) since March 2012 and a director since 1987. H&P is a publicly held company primarily engaged in contract drilling services for oil and gas exploration and production companies. H&P uses drilling rigs it designs and builds and is one of the major land and offshore platform drilling companies in the world. After joining H&P in 1981, Mr. Helmerich served as CEO from 1989 to March 2014 and as President from 1989 to March 2012. H&P’s exploration and production business was merged into Cimarex in 2002. +Mr. Helmerich serves as a director of Atwood Oceanics, Inc., located in Houston, Texas, an international offshore drilling company traded on the NYSE, and as a Trustee of The Northwestern Mutual Life Insurance Company of Milwaukee, Wisconsin. +Key Attributes, Experience and Skills +Mr. Helmerich’s background with the drilling sector of the oil and gas business provides the Board with insight into an aspect of Cimarex’s business that represents a significant expenditure in Cimarex’s capital budget. His over 25 years of executive experience provide a strong background for his service on Cimarex’s Board and on the Compensation and Governance Committee. In addition, his service as a director of Atwood Oceanics and as a Trustee of The Northwestern Mutual Life Insurance Company provide him with additional experience and knowledge to serve as a Director. +15 +Table of Contents +HAROLD R. LOGAN, JR., 70 +Position, Principal Occupation and Business Experience +Mr. Logan currently serves as Chairman of the Board of Supervisors of Suburban Propane Partners, L.P. and has served as a director of that company since 1996. In February 2015, he began serving as Lead Director of InfraREIT, Inc., a publicly held real estate investment trust that owns utility assets (electric transmission lines) in Texas. In addition, he has been a director of Graphic Packaging Holding Co. and predecessor companies since 2003. Mr. Logan also is a director of two private companies – Hart Energy Publishing (publisher of Oil and Gas Investor and other energy publications) and Basic Materials and Services LLC (privately held company that invests in companies providing specialized services for the pipeline construction and sand/silica industries.) +Mr. Logan was a co-founder of TransMontaigne in Denver, Colorado in 1995 and Chief Financial Officer, Executive Vice President, Treasurer, and a director through 2002. He served as a director of TransMontaigne and chairman of its Finance Committee from 2002 to 2006. From 1987 to 1994, he was Senior Vice President/Finance, Chief Financial Officer, and a director of Associated Natural Gas Corporation. Prior to that, Mr. Logan was an investment banker with Dillon Read & Co. Inc. and Rothschild, Inc. +Since 1998, Mr. Logan has been a director of ten public companies and has served on audit, compensation, and governance committees. +Key Attributes, Experience and Skills +Mr. Logan has over 40 years of business experience. His education, and his investment banking/venture capital and financial management experience provide him with a comprehensive understanding of business and finance. Mr. Logan’s expertise and experience have been relevant to his responsibilities of providing oversight and advice to the management of public companies, and is of particular benefit in his role as Lead Director and as a member of Cimarex’s Audit Committee. +MONROE W. ROBERTSON, 65 +Position, Principal Occupation and Business Experience +Mr. Robertson is currently a private investor. Mr. Robertson retired from Key Production Company, Inc. (a company acquired by Cimarex in 2002) after serving ten years with the company. While with Key, he held the positions of President, Chief Operating Officer, Senior Vice President and Principal Financial Officer. Mr. Robertson has served in executive capacities with three other public energy companies, Apache Corp., Gulf Oil Corporation and Terra Resources. +Mr. Robertson was a director of Earthstone Energy, Inc. (formerly named Basic Earth Science System) from 2007 to 2014. During his service as a director of Earthstone, he was chair of the Audit Committee and a member of the Compensation and Nominating Committee. +Key Attributes, Experience and Skills +Mr. Robertson has comprehensive knowledge of the financial and operational sides of the exploration and production business, which is of considerable value in his service as Chairman of the Audit Committee. +Continuing Directors – Class III – Term Expires 2017 +DAVID A. HENTSCHEL, age 81 +Position, Principal Occupation and Business Experience +Mr. Hentschel was Chairman and Chief Executive Officer of Occidental Oil and Gas Corporation, a subsidiary of Occidental Petroleum, from 1986 to 1993 and from 1997 to 1999, when he retired. He also served as President and Chief Executive Officer of Canadian Occidental Petroleum, Ltd., now known as Nexen, from 1995 to 1997. He was in charge of the worldwide +16 +Table of Contents +exploration and production operations for Cities Service and Occidental Oil and Gas Corporation for the last 20 years of his 40-year career. +Mr. Hentschel was a director of Occidental Petroleum from 1987 to 1993 and of Canadian Occidental or Nexen from 1985 to 2009. During his service as a director of Nexen, he was chair of the audit committee and a member of the compensation committee and various other committees. He was also a director of the Bank of Oklahoma from 1984 to 1995. +Key Attributes, Experience and Skills +Mr. Hentschel brings considerable executive experience in the domestic and international oil and gas industry to the Board. Mr. Hentschel’s extensive leadership background and his service on Nexen’s audit and compensation committees provide strong skills and experience for his service on our Compensation and Governance Committee. +THOMAS E. JORDEN, 57 +Position, Principal Occupation and Business Experience +Mr. Jorden is the Chairman of the Board, Chief Executive Officer and President of Cimarex. He has served Cimarex in various capacities since September 2002. He was elected CEO in September 2011, from 2003 to 2011 served as Executive Vice President-Exploration and from 2002 to 2003 as Vice President-Exploration. Mr. Jorden also serves on the Board of Trustees of the Colorado School of Mines and other private boards. +Key Attributes, Experience and Skills +Mr. Jorden brings to the Board over 30 years of experience in the oil and gas exploration and production industry, and as our Chief Executive Officer, a deep understanding of our business, operations and long-term strategic issues and goals. Mr. Jorden holds undergraduate and graduate degrees in geophysics and has headed the company’s exploration program since the company’s inception. His service on the Board creates an important link between management and the Board. +FLOYD R. PRICE, 66 +Position, Principal Occupation and Business Experience +Mr. Price, a former executive officer of Apache Corp., held various positions with Apache Corp. from 1991 through 2009, including Executive Vice President and Corporate Exploration Officer; President, Apache Canada; President, Apache International; and Exploration Manager. Apache Corp., with headquarters in Houston, Texas, is an oil and gas exploration and production company with domestic and international operations. Mr. Price serves as Chairman of the Board and as a member of the audit and compensation/governance committees of Tamarack Valley Energy Ltd., Calgary, Alberta, Canada, a publicly held company traded on the TSX Venture Exchange. Tamarack is involved in the identification, evaluation and operation of resource plays in the Western Canadian sedimentary basin. From June 2010 to January 2013, Mr. Price served as a director, Chairman of the Board and member of the compensation and governance committee of Gastar Exploration, Inc., a publicly held company located in Houston, Texas. Gastar is engaged in the exploration, development and production of natural gas, natural gas liquids, oil and condensate in the United States and is traded on the NYSE. +Key Attributes, Experience and Skills +Mr. Price has over 40 years of experience in the exploration and production business. Mr. Price has considerable domestic and international experience in the oil and gas industry, and has held leadership positions with a large public oil and gas company. His experience during the past three years serving as a director of public and private companies also provides him with invaluable Board skills and experience. Mr. Price brings extensive oil and gas exploration, operations, management and financial experience to Cimarex’s Audit Committee. +17 +Table of Contents +L. PAUL TEAGUE, 80 +Position, Principal Occupation and Business Experience +Mr. Teague served 35 years with Texaco Inc. He retired in 1994 as Vice President, Western Exploration & Producing Region of Texaco USA in Denver, Colorado. Mr. Teague held various positions with Texaco USA, including Vice President-Producing in Houston; Vice President of the New Orleans Producing Division; Division Manager, New Orleans; and General Superintendent of the Offshore Division in New Orleans. +Key Attributes, Experience and Skills +Mr. Teague holds a degree in Petroleum Engineering from Louisiana Tech University and is a graduate of the University of Southern California Executive Program. He has several industry affiliations, including the former Chairman of the API Executive Committee on Drilling and Production Practices, former President of the Colorado Petroleum Association, a 50-year Legion of Honor Member of the Society of Petroleum Engineers and a member of the Rocky Mountain Oil & Gas Hall of Fame. He brings his executive experience with a major oil and gas company to bear on corporate governance and executive compensation issues in his role as Chairman of our Compensation and Governance Committee. +Retiring Director – Class I – Term Expires 2015 +JERRY BOX, 76 +Position, Principal Occupation and Business Experience +Mr. Box was Chairman of Magnum Hunter Resources, Inc. from October 2004 to June 2005, and a director of Magnum Hunter from March 1999 to June 2005. He retired in June 2005 at the time of Cimarex’s acquisition of Magnum Hunter. Mr. Box served as President, COO and a director of Oryx Energy Company from February 1998 to March 1999. He previously held a number of managerial and executive positions with Oryx Energy and its predecessor company, Sun Oil Company. Mr. Box served as a non-management director and Chairman of the Board of Newpark Resources, Inc. of The Woodlands, Texas, an oilfield services company traded on the NYSE from 2003 to May 2014. Mr. Box will not be standing for reelection, and his term as a Director of Cimarex will expire at the completion of the May 2015 Annual Meeting of Shareholders. +Key Attributes, Experience and Skills +Mr. Box holds undergraduate and graduate degrees in geology. He has served for several years in an executive capacity with public and private oil and gas companies. Mr. Box has served on numerous oil and gas committees and task forces and as a President and Treasurer of the Dallas Petroleum Club. His extensive experience as an executive for companies in the energy business makes his service on the Compensation and Governance Committee particularly valuable. +DIRECTOR COMPENSATION +Our Compensation and Governance Committee administers our Director compensation program. Director compensation is designed to be near the 50 th percentile of that paid by comparable public oil and gas companies with similar market capitalization and revenue. We use the same group of companies in reviewing Director compensation as we use in reviewing executive base salary and total direct compensation. See Competitive Positioning, Section 2, Compensation Discussion and Analysis for a list of, and the methodology followed in selecting, these companies. The Committee uses its independent compensation consultant, Longnecker & Associates, to review Director compensation. The Committee, after reviewing the consultant’s recommendations with the CEO and Vice President of Human Resources, recommends Director compensation for Board consideration and approval at the Board meeting held following each year’s Annual Meeting of Shareholders. Payment of Director compensation occurs on June 1 of each year. +18 +Table of Contents +Through May 14, 2014, compensation for non-employee Directors consisted of the following: +· Annual cash retainer of $65,000; +· Annual equity retainer of $180,000, comprised of restricted stock that vests in one-third increments on each anniversary of the date of grant; +· Committee Chairman fee of $20,000; +· Lead Director (who also acts as Nominating Committee Chairman) fee of $20,000; +· Board meeting attendance fee of $1,800 per meeting; and +· Committee meeting attendance fee of $1,500 per meeting. +At the May 15, 2014 meeting, the Committee’s independent consultant advised that Director compensation was below the 50th percentile of director compensation paid by comparable public oil and gas companies. On May 15, 2014, the Board, on the recommendation of the Compensation and Governance Committee and in consultation with the Committee’s independent compensation consultant, based on a study of peers and market trends, made the following changes to the compensation program for non-employee Directors: +· Increased the annual cash retainer to $75,000; and +· Increased the annual Lead Director fee to $40,000 (the Lead Director also serves as Nominating Committee Chairman). +The other non-employee Director compensation did not change. +Independent Director 2014 Compensation +NAME +FEES PAID IN CASH 1 +STOCK AWARDS 2 +TOTAL +Jerry Box +$ +89,966 +$ +180,000 +$ +269,966 +Hans Helmerich +$ +89,966 +$ +180,000 +$ +269,966 +David Hentschel +$ +89,966 +$ +180,000 +$ +269,966 +Harold Logan +$ +126,300 +$ +180,000 +$ +306,300 +Floyd Price +$ +94,466 +$ +180,000 +$ +274,466 +Monroe Robertson +$ +114,466 +$ +180,000 +$ +294,466 +Michael Sullivan +$ +92,666 +$ +180,000 +$ +272,666 +L. Paul Teague +$ +109,966 +$ +180,000 +$ +289,966 +(1) Represents fees earned for services as a Director during 2014, including the annual cash retainer fee, Board and Committee meeting attendance fees, Committee Chairman fee and Lead Director fee. +(2) Represents the aggregate grant date fair value computed as the market value (average of the high and low trading prices) of the 1,394 shares of restricted stock as of the June 1, 2014 grant date. +The following table discloses as of December 31, 2014 the aggregate number of outstanding unvested stock awards and the market value of those awards. (Market value uses a $105.685 share price, which is based on the average of the high and low trading prices on December 31, 2014.) The Directors have the right to vote and receive dividends on unvested stock awards. There were no outstanding vested but unexercised option awards as of that date. +Independent Director +Unvested Stock Awards +Market Value +Jerry Box +4,111 +$ +434,471 +Hans Helmerich +4,111 +$ +434,471 +David Hentschel +4,111 +$ +434,471 +Harold Logan +4,111 +$ +434,471 +Floyd Price +3,540 +$ +374,125 +Monroe Robertson +4,111 +$ +434,471 +Michael Sullivan +4,111 +$ +434,471 +L. Paul Teague +4,111 +$ +434,471 +19 +Table of Contents +Our Corporate Governance Guidelines require that each independent Director own Cimarex stock in an amount equal to three times his annual cash retainer. A newly elected Director has three years from the date of his or her initial election to comply with the Guidelines. Restricted stock, restricted stock units and deferred compensation units are counted in calculating ownership; shares subject to options are not counted. Each of the independent Directors complies with these guidelines. +CORPORATE GOVERNANCE +Cimarex’s website ( www.cimarex.com ) includes materials that are helpful in understanding our corporate governance practices: +· +Corporate Governance Guidelines +· +Code of Business Conduct and Ethics +· +Code of Ethics for CEO, CFO and Chief Accounting Officer +· +Stock Ownership Guidelines +· +Complaint and Reporting Procedures +· +Background and Experience of our Board of Directors +· +Committee Charters +· +Background and Experience of Executive Management +We believe good corporate governance promotes the long-term interests of shareholders, strengthens Board and management accountability, and helps build public trust. Copies of corporate governance materials may be requested from our Corporate Secretary, Cimarex Energy Co., 1700 Lincoln Street, Suite 3700, Denver, Colorado 80203. +A summary of key governance matters are noted in the table below: +Size of Board +10 +Code of Business Conduct and Ethics +Yes +Number of independent Directors +8 +Corporate Governance Guidelines +Yes +Majority voting for Directors resignation policy +Yes +Disclosure Committee for financial reporting +Yes +Classified Board +Yes +Board and Audit Committee risk oversight +Yes +Separate Chairman and CEO +No +Compensation risk assessment +Yes +Independent Lead Director +Yes +Review of related party transactions +Yes +Diverse Board skills and experience +Yes +Non-Hedging and non-pledging policies +Yes +Annual Board and Committee self-evaluations +Yes +Clawback policy +Yes +Consultant review of Board skills +Yes +Management and Director stock ownership guidelines +Yes +Annual equity grants to Directors +Yes +Tax gross-ups +No +Annual Board education +Yes +Interested parties may communicate with our Board by mail directed to our Corporate Secretary or by facsimile (720) 403-9383. All communications will be forwarded to the Lead Director for the Lead Director’s review. The Lead Director may take any action the Lead Director deems appropriate or necessary, including, without limitation, forwarding the information to the Board for consideration or, with the concurrence of the Board, retaining independent or outside counsel, accountants or other advisors to address the concern. +20 +Table of Contents +B OARD AND C OMMITTEE I NFORMATION +Our Board +During 2014, the Board of Directors met six times. The Board has three Committees: the Audit Committee, the Compensation and Governance Committee, and the Nominating Committee. During 2014, each Director attended greater than 75% of the meetings of the Board and the Board Committees on which he served. All Board members are expected to attend the Annual Meeting. All of our Directors attended our 2014 Annual Meeting. +NAME +AGE +DIRECTOR +SINCE +POSITION +INDEPENDENT +OTHER +PUBLIC +BOARDS +Joseph R. Albi +56 +2011 +Executive Vice President—Operations, Chief Operating Officer, Cimarex +No +0 +Jerry Box +76 +2005 +Retired, Chairman, Newpark Resources +Yes +0 +Hans Helmerich +56 +2002 +Chairman and former CEO, H&P +Yes +3 +David A. Hentschel +81 +2002 +Retired, Former Chairman, CEO Occidental Oil & Gas Corporation +Yes +0 +Thomas E. Jorden +57 +2011 +Chairman, CEO and President, Cimarex +No +0 +Harold R. Logan, Jr. +70 +2009 +Chairman, Suburban Propane Partners, L.P. +Yes +3 +Floyd R. Price +66 +2012 +Retired, Former Executive Vice President, Apache Corp. +Yes +1 +Monroe W. Robertson +65 +2005 +Retired, Former President and Chief Operating Officer of Key Production Co. +Yes +0 +Michael J. Sullivan +75 +2002 +Senior Attorney, Lucas Roca Rothgerber LLC +Yes +1 +L. Paul Teague +80 +2002 +Retired, Former Regional Vice President, Texaco USA +Yes +0 +Board Leadership Structure +Cimarex has a combined Chairman of the Board and CEO. Cimarex also has a Lead Director who is chosen annually from our independent Directors. Following is a summary of the functions of the Chairman of the Board/CEO and the Lead Director, as provided in our Lead Director Charter: +Duties and Responsibilities of Chairman of the Board +Duties and Responsibilities of Lead Director +Preside over Board meetings. +Preside at all Board meetings at which the Chairman of the Board is not present. +Call special meetings of the Board. +Solicit agenda items from non-management Directors, review Board meeting agenda and materials, and provide input to the Chairman of the Board. +Approve agenda for Board meetings. +Authority to call meetings of non-management Directors and, as appropriate, set the agenda. +Preside over shareholder meetings. +Preside at all meetings of non-management Directors and at all executive sessions of non-management Directors. +Facilitate and participate in formal and informal communications with and among Directors. +Act as Chairman of the Nominating Committee. +Liaison between the Chairman and Directors and facilitate communication among full Board. +Review interested party communications directed to Board and take +21 +Table of Contents +appropriate action. +Retain outside advisors and consultants who report directly to the Board on Board-wide issues. +The Board believes that the roles of a combined Chairman/CEO and an independent Lead Director having the duties described above serve the interests of our shareholders because this structure provides an appropriate balance between strategy development and independent oversight of management. +Thomas Jorden was elected Chief Executive Officer on September 30, 2011 and Chairman of the Board on August 14, 2012. He has served as an executive officer of Cimarex since its formation in 2002. He has considerable knowledge and experience gained through his executive positions with Cimarex and prior industry experience. This knowledge and experience allow him to focus the activities of the Board on matters most relevant to the success of Cimarex. +Our Board structure is designed to avoid any undue influence by the Chairman of the Board/CEO on the Board. The Compensation and Governance Committee is comprised entirely of independent Directors. When the Board acts on the Compensation and Governance Committee’s recommendation for compensation of the Chairman/CEO, it acts without him being present. +The substantial experience and background of our independent Directors ensure their active and knowledgeable involvement in Board matters. This involvement, and the presence and involvement of our Lead Director, provide the Board with a strong and independent point of view. +Board Committees +The table below provides 2014 membership and meeting information for each of the Board Committees: +NAME +AUDIT +COMP/GOV +NOMINATING +Jerry Box +X +X +Hans Helmerich +X +X +David Hentschel +X +X +Harold Logan +X +X +Floyd Price +X +X +Monroe Robertson +X +X +Michael Sullivan +X +X +L. Paul Teague +X +X +2014 Meetings Held +8 +4 +3 +Audit Committee +The Audit Committee is comprised entirely of independent Directors and is governed by a Board-approved Charter stating the Audit Committee’s responsibilities. A copy of the Audit Committee Charter is available on our website at www.cimarex.com . Under its Charter, the Audit Committee performs the following functions: +· Appoints independent auditors; +· Approves the nature and scope of services of independent auditors and reviews range of fees for such services; +· Assists the Board in monitoring the performance of the internal audit function; +· Reviews qualifications and independence of auditors; +· Reviews and discusses with independent auditors (i) the auditors’ responsibilities and management’s responsibilities in the audit process, (ii) overall audit strategy, (iii) scope and timing of annual audit, and (iv) any significant risks identified during auditors’ risk assessment procedures; +· Assists the Board in monitoring the integrity of financial statements; +· Monitors compliance with legal and regulatory requirements; and +· Reviews and reports to Board on corporate and financial risk processes. +22 +Table of Contents +The Board of Directors has determined that each of the members of the Audit Committee is financially literate and independent as defined by the rules of the SEC and the NYSE. The Board also has determined that each of Messrs. Logan, Price and Robertson is an “audit committee financial expert” as defined by the SEC’s rules. +Compensation and Governance Committee +The Compensation and Governance Committee is comprised entirely of independent Directors and is governed by a Board-approved Charter stating the Committee’s responsibilities. A copy of the Compensation and Governance Committee Charter is available on our website at www.cimarex.com . Under its Charter, the Compensation and Governance Committee performs the following functions: +Compensation Functions +· Recommends CEO and executive officer cash compensation for approval by the Board; +· Recommends Director compensation for approval by the Board; +· Reviews and recommends to the Board that the Compensation Discussion and Analysis be included in our proxy statement; +· Determines amount and terms of equity awards; +· Reviews and approves long-term incentive plans; +· Reviews relationship of compensation to risk; and +· Approves the nature and scope of services of independent compensation consultants. +Governance Functions +· Oversees corporate governance; +· Develops plans for managerial succession; and +· Oversees annual Board and Committee evaluations. +Compensation and Governance Committee Interlocks and Insider Participation. Hans Helmerich, a member of the Committee, was an executive officer of Cimarex from February 14, 2002 until September 30, 2002. Cimarex was formed on February 14, 2002 as a wholly owned subsidiary of H&P for the purpose of facilitating a spinoff by H&P of its oil and gas exploration and production business. Cimarex became a publicly traded company on September 30, 2002, at which time Mr. Helmerich resigned as an executive officer. +Nominating Committee +The Nominating Committee is comprised of all of the independent Directors and is governed by a Board-approved Charter stating its responsibilities. A copy of the Nominating Committee Charter is available on our website at www.cimarex.com . Under its Charter, the Nominating Committee’s responsibilities include the following: +· Determine desired Board skills and attributes; +· Recommend candidates to serve on the Board and to stand for election at annual meeting of shareholders or to fill a vacancy occurring between meetings; +· Consider shareholder nominees for election to the Board; and +· Recommend Committee appointments. +Director Independence and Related Person Transactions +Our Corporate Governance Guidelines require that a majority of our Board of Directors be independent as defined by applicable laws, rules, regulations and listing standards. We comply with the criteria for independence established by the NYSE listing requirements and other governing laws and regulations. +Each year the Compensation and Governance Committee reviews the independence of our Directors and any related person transactions. On the basis of this review, the Committee delivers a report to the Board of Directors, and the Board makes independence determinations based on the Committee’s report. +As a result of this review, the Board has determined that Jerry Box, Hans Helmerich, David Hentschel, Harold Logan, Floyd Price, Monroe Robertson, Michael Sullivan and L. Paul Teague, representing eight of our ten Directors, are independent of Cimarex +23 +Table of Contents +and its management. Thomas Jorden and Joseph Albi are not independent because of their employment as CEO and COO of Cimarex, respectively. +In making these determinations, the Board considered that in the ordinary course of business, relationships and transactions may occur between Cimarex and entities with which some of our Directors are or have been affiliated. As a result of the Committee’s review, certain relationships and transactions are not considered to be material transactions that would impair a Director’s independence, including the following: +· The Director is an employee of another company that does business with Cimarex, and our annual sales to or purchases from the other company amount to less than 2% of the annual revenues of the other company and that such sales to or purchases from the other company are part of our ordinary course of business and conducted in the same manner as we obtain services from other companies that provide similar services; or +· The Director is a director (but not an employee) of another company that does business with Cimarex. +Hans Helmerich is the Chairman of the Board, and until March 5, 2014 was the CEO, of H&P, a company with which Cimarex engages in ordinary course of business transactions. During H&P’s fiscal year ended September 30, 2014, Cimarex paid H&P $17.1 million for drilling services in arms’ length transactions and as part of our ordinary course of business and in the same manner as we obtain services from other companies that provide similar services. The aggregate amount of the payment represented 0.46% of H&P’s revenue during that period. The Committee reviewed these transactions and concluded that (i) the transactions are proper and not material when compared to both Cimarex’s total drilling costs and H&P’s total revenues; (ii) the transactions occur in the ordinary course of business and at arms’ length; (iii) the Board does not review or approve drilling service contracts or arrangements; and (iv) Mr. Helmerich’s relationship with H&P does not interfere with his independent judgment as a Director of Cimarex . +Risk Oversight +The Board has overall responsibility for risk oversight. In carrying out its responsibility, the Board has requested that the Audit Committee discuss with management and report to the Board with respect to: +· Processes Cimarex follows to mitigate corporate risks; +· Guidelines and processes pertaining to financial risk assessment; +· Steps management takes to measure, monitor and control such financial risk exposures; and +· Management’s conclusion as to the effectiveness of the guidelines and processes utilized to mitigate such corporate and financial risks and exposures. +In addition, at each of its four meetings held during the year, management provides the Board with an overview of Cimarex’s operations, financial results and other aspects of its business. Significant strategic considerations, such as material acquisitions or mergers are brought to the Board for deliberation and, as appropriate, decisions. +The Audit Committee, at its December 10, 2014 meeting, reviewed, discussed and, at the Board meeting that day, reported to the Board about corporate, operational and financial risks and Cimarex’s processes for mitigation of these risks. +Compensation Risk Oversight +In February 2015, the Compensation and Governance Committee performed a thorough review of the possible connection between incentives and excessive risk taking. The Committee’s review covered Cimarex’s compensation policies and practices covering executive and non-executive employees to determine whether the policies and practices encourage excessive risk taking by employees. The Committee’s analysis included a review and discussion of the following: +· The metrics for determining awards; +· Plan participants; +· How the pools and individual awards are determined; +· The maximum individual award potential (maximum individual incentive to take risk); +· The maximum possible cost if awards were paid at maximum levels (maximum cost exposure); +· The decision-making and approval process; and +· The systemic limitations on the ability to take excessive risks in order to influence compensation. +24 +Table of Contents +The Committee determined that the risks from Cimarex’s compensation policies and practices for Cimarex employees are not reasonably likely to have a material adverse effect on Cimarex. +Executive Sessions +The independent Directors meet in executive session at each regularly scheduled Board meeting. The Lead Director presides over executive sessions. During 2014, four executive sessions were held, and all of the independent Directors attended each session. These sessions allow independent Directors to review the CEO’s performance and compensation, to discuss issues of importance to Cimarex, including the business and affairs of Cimarex, as well as matters concerning management, without any member of management present. +Shareholder Engagement +Cimarex’s relationships with its shareholders are an important part of our corporate governance profile, and we recognize the value of taking their views into account. Engagement with shareholders helps us understand the larger context and impact of our operations, learn about expectations for our performance, assess emerging issues that may affect our business or other aspects of our operations, and shape corporate and governance policies. +Consistent with our commitment to seek and respond to shareholder input on corporate governance topics, we have considered and discussed with investors a wide variety of matters, including our executive compensation program and disclosures and have previously made changes in these areas. +25 +Table of Contents +S TOCK O WNERSHIP +D IRECTORS, M ANAGEMENT AND C ERTAIN B ENEFICIAL O WNERS +Beneficial Ownership by Executive Officers and Directors +The following table shows, as of March 18, 2015, the number of shares of common stock “beneficially owned,” as determined in accordance with Rule 13d-3 under the Securities Exchange Act of 1934, by the NEOs, the Directors, and all executive officers and Directors, as a group: +Name of Beneficial Owner +Shares +Beneficially +Owned (1) +Percent of +Class +Named Executive Officers +Thomas E. Jorden, CEO (also Director) +315,995 +<1 +% +Paul Korus, CFO +149,305 +<1 +% +Joseph R. Albi, COO (also Director) +167,829 +<1 +% +Stephen P. Bell, EVP +127,785 +<1 +% +John A. Lambuth, VP +110,651 +<1 +% +Directors +Jerry Box +6,960 +<1 +% +Hans Helmerich +479,135 +(2) +<1 +% +David A. Hentschel +31,149 +<1 +% +Harold R. Logan, Jr. +9,870 +<1 +% +Floyd R. Price +6,262 +<1 +% +Monroe W. Robertson +14,166 +<1 +% +Michael J. Sullivan +17,128 +<1 +% +L. Paul Teague +54,614 +(3) +<1 +% +All executive officers and Directors as a group (17 persons) +1,777,748 +(2)(3) +2 +% +(1) Includes restricted stock (including shares that are subject to performance-based vesting and time-based vesting more than 60 days after March 18, 2015), direct and indirect ownership of common stock and equivalent shares of common stock held by the trustee for the benefit of the named individual in the Cimarex Energy Co. 401(k) Plan. Does not include deferred compensation units held by one Director. For all executive officers and directors as a group, includes 999 shares of common stock that could be purchased upon the exercise of stock options that have vested or will vest within the 60-day period following March 18, 2015. +(2) Includes 11,450 shares owned by Mr. Helmerich’s wife. Mr. Helmerich disclaims beneficial ownership of the shares held by his wife. Also includes 45,330 shares owned by 1993 Hans Helmerich Trust, of which Mr. Helmerich is the trustee, 1,062 shares owned by Family Trust, of which Mr. Helmerich is the co-trustee, 7,865 shares owned by Family Trust, of which Mr. Helmerich is the trustee, 48,500 shares owned by The Helmerich Trust, of which Mr. Helmerich is the co-trustee, and 350,000 shares held by the Peggy Helmerich QTIP Trust, of which Mr. Helmerich is the trustee. +(3) Includes 9,065 shares owned by Mr. Teague’s wife. Mr. Teague disclaims beneficial ownership of the shares held by his wife. +26 +Table of Contents +Beneficial Ownership of More than Five Percent +Each of the following shareholders beneficially owns five percent or more of our outstanding shares of common stock. The following table provides information regarding their stock ownership and is based on their filings with the SEC. +Voting Authority +Dispositive Authority +Total Amount +of Beneficial +Percent of +Name and Address +Sole +Shared +Sole +Shared +Ownership +Class +BlackRock Inc. +55 East 52 nd Street +New York, NY 10022 +5,461,341 +0 +6,121,571 +0 +6,121,571 +7.0 +% +FMR LLC +245 Summer Street +Boston, MA 02210 +91,056 +0 +6,275,324 +0 +6,275,324 +7.19 +% +The Vanguard Group +100 Vanguard Boulevard +Malvern, PA 19355 +148,553 +0 +6,750,430 +141,654 +6,892,084 +7.89 +% +27 +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS - TABLE OF CONTENTS +Page No. +Executive Summary of Compensation Discussion and Analysis (“CD&A”) +29 +Compensation Discussion and Analysis +30 +Section 1 +30 +Summary of 2014 and Early 2015 Compensation Decisions +30 +Response to 2015 Say-on-Pay Vote and Shareholder Engagement +31 +Key 2014 Compensation Actions +31 +CEO Compensation +32 +Other NEO Compensation +32 +Base Salary Determination +32 +Annual Cash Incentive Awards +33 +Long-Term Equity Incentive Award Program +34 +Elimination of Tax Gross Up Payments +36 +Alignment of CEO Compensation to Total Shareholder Return +37 +Early 2015 Compensation Decisions +38 +2015 Annual Cash Incentive Award Goals +38 +Section 2 +39 +Our Compensation Framework +39 +Objectives +39 +Design +39 +Principal Elements of Executive Compensation +39 +Competitive Positioning +40 +Role of Compensation Consultant and Management in Compensation Decisions +41 +Other Compensation Arrangements +41 +Post-Employment and Employment Arrangements +41 +Retirement Benefits +42 +Perquisites +42 +Other Compensation Policies +42 +Total Pay Considerations +42 +Stock Ownership and Holding Requirements +42 +Clawback Policy +43 +Non-Hedging and Non-Pledging Policies +43 +Tax Law Considerations +43 +Compensation and Governance Committee Report +43 +28 +Table of Contents +Executive Summary of Compensation Discussion & Analysis (“CD&A”) +2014 BUSINESS AND FINANCIAL PERFORMANCE OVERVIEW +· Generated a record of $2.4 billion of revenue. +· Realized net income of $507.2 million, or $5.78 per diluted share. +· Generated $1.6 billion of cash flow from operating activities. +· Invested $1.9 billion in exploration and development. +· Grew production 25 percent to a record 869 MMcfe/d. +· Increased proved reserves 25 percent to 3.1 Tcfe, 23 percent of which are oil. +· Added 814 Bcfe of proved reserves from extensions and discoveries replacing 257 percent of production. +· Continued to delineate and expand our Mid-Continent acreage position. +· Ended 2014 with debt-to-total capitalization of 25 percent. +· Strengthened financial position through sale of $446 million of non-core properties and issuance of $750 million of 4.375% senior notes. +2014 EXECUTIVE COMPENSATION +2014 Salary +2014 Annual Cash +Incentive Award +2014 Long- Term +Incentive Grant +Value +Total +% of Total +Compensation at +Risk +Thomas E. Jorden, CEO +$ +870,750 +$ +740,138 +$ +7,143,522 +$ +8,754,410 +90 +% +Paul Korus, CFO +$ +486,160 +$ +413,236 +$ +2,952,396 +$ +3,851,792 +87 +% +Joseph R. Albi, COO +$ +561,600 +$ +477,360 +$ +3,473,436 +$ +4,512,396 +88 +% +Stephen P. Bell, EVP +$ +467,625 +$ +397,481 +$ +2,952,396 +$ +3,817,502 +88 +% +John A. Lambuth, VP +$ +415,125 +$ +352,856 +$ +3,299,756 +$ +4,067,737 +90 +% +ELEMENTS AND MIX OF EXECUTIVE COMPENSATION +Cimarex’s executive compensation program directly links a substantial portion of executive compensation to Cimarex’s performance through annual and long-term incentives. The mix of the pay elements for the CEO and other NEOs for fiscal 2014 is shown below. This information is based on the Summary Compensation Table data and highlights the substantial portion of compensation that is at risk and will be realized only if performance criteria are met. Of the CEO’s total disclosed 2014 compensation, 90% is at risk and is linked to Cimarex’s future performance and 82% of his 2014 disclosed compensation is service-based and performance-based long-term equity incentive compensation. The average compensation mix for the other NEOs is 88% at risk compensation and 78% service-based and performance-based long-term equity incentive compensation. +Pay Elements +Pay Element Rationale +Base Salary +Retain and attract, when needed, talented executives +Annual Cash Incentive +Encourage short term operational/financial performance +Long-Term Equity Incentive +Encourage retention and above average stock price performance +29 +Table of Contents +C OMPENSATION D ISCUSSION AND A NALYSIS +This CD&A describes Cimarex’s executive compensation program for 2014. We use this program to retain and attract (when appropriate) the executives who lead our business. This CD&A explains how the Compensation and Governance Committee (the Committee) of the Board of Directors made 2014 compensation decisions for our executives, including the following NEOs. +· Thomas E. Jorden, Chairman of the Board, CEO and President +· Paul Korus, Senior Vice President, CFO +· Joseph R. Albi, Executive Vice President—Operations, COO +· Stephen P. Bell, Executive Vice President—Business Development +· John A. Lambuth, Vice President—Exploration +This CD&A is divided into two sections: +Section 1 discusses 2014 and early 2015 actions related to 2014 executive compensation. +Section 2 discusses our compensation framework, post-employment compensation, retirement benefits, perquisites and other compensation policies. +SECTION 1 +Summary of 2014 and Early 2015 Compensation Decisions +TOPIC +ACTION +RATIONALE +Base Salary Review +Increased CEO’s base salary from $810,000 to $870,750. +CEO’s base salary was below the 50th percentile of Cimarex’s peers. +Increased EVP—Business Development’s base salary by 7.5% +A larger than 4% market increase was recommended due to his extensive service and the value delivered to Cimarex in developing business. +Increased VP—Exploration’s base salary by 10.7% +A larger than 4% market increase was recommended due to his combined exploration and operational level of responsibilities are greater than the responsibilities of individuals at peer companies with similar titles. +Increased remaining NEOs’ base salaries by 3-4% +Maintain alignment of the NEOs with the market. +Annual Short-Term Incentive Plan +Authorized annual cash short-term awards to the CEO and other NEOs of 85% of year-end base salary (target of 100% of base salary for all NEOs). +Annual cash awards were based on the achievement of financial and strategic objectives. See Key Compensation Actions for 2014 in Section 1, Compensation Discussion and Analysis. +30 +Table of Contents +TOPIC +ACTION +RATIONALE +Long-Term Equity Incentives +Authorized long-term equity awards to NEOs (including the CEO) with an aggregate grant date fair value of $19,821,506. The number of shares that may be earned pursuant to these awards is determined by Cimarex’s relative stock price performance. The awards vest three years from the date of grant and are subject to a continuous service requirement. A minimum of 50% of the shares granted and a maximum of 100% of the shares granted may be earned at the end of the three-year period, with 100% being earned if Cimarex’s relative stock price is in the top five of the 18 companies in the stock performance peer group. +Given Cimarex’s reduced emphasis on cash and other forms of compensation that is not “at-risk,” the range for 2014 long-term equity awards recommended by the compensation consultant represented a total value between the 75 th and 90 th percentiles when compared to 2013 awards made by peer companies (which was the latest public information available). The Committee approved awards at approximately the 90 th percentile when compared to peer company 2013 awards. The Committee considered Cimarex’s total shareholder return for the past one and three years, NEO total direct compensation compared to peer companies, Cimarex’s strong 2014 financial and operational performance, and the compensation consultant’s recommended range of grant date fair value. The actual value of the shares upon vesting in December 2017 will be based on Cimarex’s performance as reflected in the relative stock price compared to the other companies in the stock performance peer group and Cimarex’s stock price at that time. +Director Compensation +Increased annual cash retainer from $65,000 to $75,000 and the annual Lead Director fee from $20,000 to $40,000. +Based on a market review of director compensation at peer group companies, the compensation consultant advised that Cimarex Director compensation was below the 50 th percentile. The Lead Director’s annual fee was increased to better align the fee with the position’s increased and significant level of responsibilities. +See Key 2014 Compensation Actions below for more detail. +Response to 2015 Say-on-Pay Vote and Shareholder Engagement +At the 2014 Annual Meeting of Shareholders, 96% of the votes cast were in favor of the advisory vote to approve executive compensation. In addition to the advisory vote, as part of our regular shareholder engagement, we consider and discuss with shareholders a number of matters throughout the year, including executive compensation and governance. The Committee carefully considers any feedback and routinely reviews executive compensation practices and governance. +The Committee considered the results of the advisory vote and the discussions with shareholders to convey our shareholders’ support of the Committee’s compensation decisions in 2013 and early 2014 and shareholders’ overall satisfaction with Cimarex’s executive compensation programs. Consistent with this support, the Committee retained the core design of our executive compensation programs for the remainder of 2014, as it believes the programs continue to retain, attract, when appropriate, and appropriately incent senior management. +Key 2014 Compensation Actions +The following discusses the Committee’s key 2014 compensation decisions, which are reflected in the 2014 Summary Compensation Table below. These decisions were made with the advice of the Committee’s independent consultant, Longnecker & Associates. (See Section 2 of Compensation Discussion and Analysis for additional discussion regarding the role of the Committee’s compensation consultant.) +31 +Table of Contents +CEO Compensation +· Effective June 1, 2014, Mr. Jorden’s base salary was increased from $810,000 to $870,750. Prior to the increase, Mr. Jorden’s base salary was below the 50 th percentile of CEOs of our peer companies, and the Committee, with the concurrence of its independent consultant, increased his base salary to near the 50 th percentile. +· Mr. Jorden’s 2014 annual cash incentive award was $740,138, or 85% of his year-end base salary. +· His annual long-term incentive equity award value at the date of grant (December 10, 2014) was $7,143,522. +These adjustments were reviewed in detail by the Committee and its independent consultant. The Committee considered several factors, including input from its independent consultant and salary data from peer companies. In 2014, approximately 90% of Mr. Jorden’s compensation as disclosed in the Summary Compensation Table was at risk. +Other NEO Compensation +The Committee also made compensation decisions for the other NEOs comprised of base salary adjustments, 2014 annual cash incentive awards made in February 2015, and long-term equity awards made in December 2014. These adjustments were based upon the recommendations of the CEO, evaluation by the Committee, the advice of the Committee’s independent consultant, salary data from peer and comparator groups, internal pay relationships based on relative duties and responsibilities, the executive’s impact on Cimarex’s results, and for retention purposes. Based upon these considerations, the Committee made the following 2014 NEO compensation decisions: +2014 Salary +2014 Annual Cash +Incentive Award +2014 Long- Term +Incentive Equity +Grant Date Fair +Value +Total +% of +Total +Compensation +that is +At Risk +Paul Korus, CFO +$ +486,160 +$ +413,236 +$ +2,952,396 +$ +3,851,792 +87 +% +Joseph R. Albi, COO +$ +561,600 +$ +477,360 +$ +3,473,436 +$ +4,512,396 +88 +% +Stephen P. Bell, EVP +$ +467,625 +$ +397,481 +$ +2,952,396 +$ +3,817,502 +88 +% +John A. Lambuth, VP +$ +415,125 +$ +352,856 +$ +3,299,756 +$ +4,067,737 +90 +% +Base Salary Determination +We provide competitive base salaries to retain and attract, when appropriate, talented executives and to provide a fixed base of cash compensation. We compare each NEO’s base salary with the base salary paid for a similar executive position by companies in our Compensation Peer Group. See Competitive Positioning later in this CD&A for a list of the companies in the Compensation Peer Group. The Committee then may adjust base salaries based on a number of factors, including job responsibilities, management experience, individual contributions, number of years in position and current salary. +In May 2014, the Committee’s independent compensation consultant reviewed the NEOs’ base salaries compared to market and recommended an annual increase of 3.5% to 4% to maintain market alignment. The consultant also advised that the CEO’s base salary was below market and recommended an increase in the CEO’s base salary to at least the 50 th percentile of the Compensation Peer Group. Based on a recommendation by Mr. Jorden, the Committee also recognized the Executive Vice President—Business Development for the extensive service he has provided Cimarex and the value he delivers to Cimarex in developing business, and the Vice President—Exploration because his combined exploration and operational responsibilities are greater than the responsibilities of individuals at peer companies with similar titles. The Committee considered the recommendations of the consultant and took into consideration the recommendation by Mr. Jorden. The Committee recommended, and the Board approved, the following base salary increases effective June 1, 2014: +32 +Table of Contents +Name +Title +5/31/2014 +Base Salary +After 6/1/2014 +Base Salary +Percent Increase +Thomas E. Jorden +Chairman of the Board, CEO and President +$ +810,000 +$ +870,750 +7.5 +% +Joseph R. Albi +Executive Vice President—Operations, COO +$ +540,000 +$ +561,600 +4 +% +Stephen P. Bell +Executive Vice President—Business Development +$ +435,000 +$ +467,625 +7.5 +% +Paul Korus +Senior Vice President, CFO +$ +472,000 +$ +486,160 +3 +% +John A. Lambuth +Vice President—Exploration +$ +375,000 +$ +415,125 +10.7 +% +Annual Cash Incentive Awards +In February 2015, the Committee met to deliberate and determine NEO (including the CEO) annual cash incentive awards for 2014 services. The individual target for the CEO and each other NEO is 100% of his base salary. There is no minimum award and an individual’s maximum award is 200% of his base salary. +In December 2013, the Committee adopted 2014 strategic and tactical goals and objectives to be measured in 2015. The following represents the level of achievement of the 2014 strategic and tactical goals and objectives: +2014 Strategic and Tactical Goals and Objectives +Achievement +Achieve threshold or greater economic return on invested capital +Good. Exceeded threshold for after tax return on invested capital based on internal measurements which consider only discounted future cash flows from proved developed reserves. +Increase production compared to previous year (absolute and on a debt-adjusted basis) +Excellent. Increased absolute production by 25% and debt adjusted production by 18%. +Increase reserves compared to previous year (absolute and on a debt-adjusted basis) +Excellent. Increased absolute proved reserves by 25% and debt adjusted reserves by 18%. +Deliver at least one new project that contains significant future investment potential +Good. In 2014, Cimarex continued to test an exploration concept begun in 2013, tested an exploration prospect in the Meramec formation in the Mid-Continent region, and implemented new completion techniques that enhanced recoveries in the existing Cana Woodford play in the Mid-Continent region. +Improve management of base property production +Excellent. Production growth in 2014 exceeded targets in each of Cimarex’s production regions. Cimarex’s Permian Basin operations benefited from improved compression runtimes, lift optimization and continued field-level focus. In the Mid-Continent region, the discovery and application of new well treatment techniques significantly improved well performance. +Continue improvement of drilling and completion performance and decrease in related costs +Fair. Through most of 2014, Cimarex encountered service cost increases as well as increased absolute costs driven, in part, by Cimarex’s increased well stimulation efforts. These efforts did result in increasing well performance, return on investment and total well cost. +Continue to focus on staffing and succession planning at all levels +Fair. Continued to make progress in the face of shortage of skilled manpower. Cimarex’s human resources department is working to identify core competencies that define Cimarex leadership, seek those competencies in new hires, and to identify and develop those competencies within Cimarex staff. +Emphasize and improve health, safety and environmental practices +Good. In 2014, Cimarex continued to emphasize safety and environmental responsibility at every level of the organization. +Develop five-year plan/capital model +Very Good. In 2014, Cimarex identified the resources necessary to execute its multi-year capital plan, including +33 +Table of Contents +manpower, drilling rigs, stimulation crews, gathering systems, compression, electrification, water sourcing and disposal, and road infrastructure. +Prepare Delaware Basin Wolfcamp assets for development decision +· Conduct field experiments necessary to understand spacing +· Define needed infrastructure and put plans in place +· Develop a finance plan for development +Good. In 2014, Cimarex continued to make progress in its Wolfcamp development plans, including drilling several infill spacing pilot tests, building required infrastructure and incorporating required financing into our five-year plan. +The Committee’s independent compensation consultant recommended a pool for cash incentive awards for all NEOs of approximately $3.45 million, or 123% of the NEOs year-end 2014 salaries, based on the consultant’s review of the company’s achievement of the 2014 strategic and tactical goals, the consultant’s analysis of the prior year’s annual payouts of the Compensation Peer Group at the market 50 th and market 70 th percentiles (or between $3.45 million and $4.1 million), and the consultant’s review of reductions by other exploration and production companies in annual incentive awards due to commodity price and stock price drops. Based principally on the achievement of the 2014 strategic and tactical goals and objectives while recognizing the sharp drop in oil and gas prices in the second half of 2014 and the uncertainty concerning when prices, and therefore the Company’s cash flow, might increase, the CEO recommended cash incentive awards for the other NEOs of 85% of their year-end 2014 salaries. The Committee’s independent consultant concurred that the CEO’s recommendations were reasonable. The Committee, after considering the achievement of the 2014 financial and operational objectives, the reduction in oil and gas prices and the impact on cash flow, and in consultation with its independent consultant, accepted the CEO’s recommendations, and the Board approved the Committee’s recommendations. +The Committee, with its independent consultant, and without management present, deliberated concerning the CEO’s annual cash incentive award. Based on its analysis of the Company’s 2014 performance described above and the CEO’s leadership of the company and management of senior executives and other employees to achieve this performance, the Committee recommended and the Board approved a cash incentive award to the CEO of 85% of his base salary. The Committee’s independent consultant concurred with this recommendation, and the total cash incentive awards to all NEOs of $2.38 million was below the recommendation of the compensation consultant of a reasonable pool of $3.45 million. Following are the CEO and other NEO 2014 annual cash incentive awards: +Name +Cash Incentive Award +% of Year-End +Base Salary +Thomas E. Jorden, CEO +$ +740,138 +85 +% +Paul Korus, CFO +$ +413,236 +85 +% +Joseph R. Albi, COO +$ +477,360 +85 +% +Stephen P. Bell, EVP +$ +397,481 +85 +% +John A. Lambuth, VP +$ +352,856 +85 +% +Long-Term Equity Incentive Award Program +Our long-term equity incentive award program balances the short-term annual cash incentive program by focusing executive efforts on the activities and short-term results that lead to long-term shareholder value. Each year the Committee grants equity awards of restricted stock to NEOs. +For grants made in December 2014, the number of shares that may be earned is determined by the relative stock price performance of Cimarex when compared to the stock price performance of companies in the S&P 500 Oil and Gas Exploration & Production Index (Stock Performance Peer Group). See Competitive Positioning in this CD&A for a list of the companies in the 2014 Stock Performance Peer Group. The 2014 Stock Performance Peer Group differed from the 2013 Stock Performance Peer Group by eliminating companies from the S&P 400 Oil and Gas Exploration & Production Index. The Committee felt that because Cimarex was added to the S&P 500 Stock Index it was appropriate to limit the Stock Performance Peer Group to other S&P 500 oil and gas exploration and production companies. The awards vest three years from the date of grant and are subject to a continuous service requirement. A minimum of 50% of the shares granted and a maximum of 100% of the shares granted may be earned at the end of the three-year vesting period. While the 2014 Equity Incentive Plan does not set a minimum vesting period, the Committee has set a three year vesting period for restricted stock awards to NEOs since the Committee began making restricted stock awards in 2006. +34 +Table of Contents +Dividends equivalent to those paid on Cimarex common stock are paid on 50% of the shares awarded, and dividends applicable to the remainder of the shares awarded are accrued and only paid on the shares earned following calculation of Cimarex’s relative stock price performance compared to companies in the Stock Performance Peer Group at the end of the performance period. All of the shares subject to the award have the same voting rights as outstanding shares of Cimarex common stock. +For restricted stock awards made in December 2014, the total number of shares earned is determined by calculating the percentage difference between the average per share closing price for shares of Cimarex and each company in the Stock Performance Peer Group for the 30 trading days preceding the date of grant and the 30 trading days preceding the third anniversary of the grant. The Committee ranks Cimarex and calculates its relative performance percentile. Companies that are not in the Stock Performance Peer Group at both the beginning and the end of the performance period are not included in the calculation. The following table illustrates shares that would be earned at various relative stock performance price percentiles (assuming 18 companies in the Peer Group). +Cimarex’s Rank Among +Peer Companies +Percent of +Award Vesting +Relative Stock Price +Performance Percentile +1 through 5 +100% +76-100% +6 +94% +71% +7 +89% +65% +8 +83% +59% +9 +78% +53% +10 +72% +47% +11 +67% +41% +12 +61% +35% +13 +56% +29% +14 through 18 +50% +0-24% +Given Cimarex’s reduced emphasis on cash and other forms of compensation that is not “at-risk,” on December 10, 2014, the Committee granted long-term equity awards to the NEOs with a total grant date fair value of $19,821,506 based on competitive market data for companies in Cimarex’s Compensation Peer Group. (Comparative data is obtained from public filings disclosing 2013 NEO compensation of companies in the Compensation Peer Group.) See Competitive Positioning in this CD&A for a list of the companies in the Compensation Peer Group. The Committee’s compensation consultant recommended awards with a value between the 75 th and 90 th percentiles when compared to companies in the Compensation Peer Group and supported grants in excess of this range if the Committee so determined because Cimarex outperformed its Compensation Peer Group based on total stockholder return for the periods from January 1, 2014 through November 28, 2014 and November 28, 2011 through November 28, 2014. Cimarex was ranked at the highest percentile of the peer group for both periods. The Committee approved awards at approximately the 90 th percentile based on Cimarex’s total shareholder return compared to its Compensation Peer Group for these periods, the total direct compensation of our NEOs compared to our peer companies, Cimarex’s 2014 financial and operational performance, and the compensation consultant’s recommended range. The actual value of the shares upon vesting in December 2017 will be based on Cimarex’s relative stock performance compared to the other companies in the Stock Performance Peer Group as described above and Cimarex’s stock price at that time. +35 +Table of Contents +The Committee granted a total of 238,182 restricted shares to the NEOs (including the CEO). The number of shares granted to each NEO was based on the relative individual roles and responsibilities. Of the total number of shares granted to the NEOs (including the CEO), the Committee awarded 36.0% of the shares to Mr. Jorden, 17.5% of the total shares to Mr. Albi, 16.6% to Mr. Lambuth and 14.9% to each of Mr. Korus and Mr. Bell. The following table reflects the awards made by the Committee: +Name +No. of Shares Subject +to Award +Grant Date Value of +Long-Term Equity +Incentive Award (1) +Thomas E. Jorden, CEO +85,839 +$ +7,143,522 +Paul Korus, CFO +35,477 +$ +2,952,396 +Joseph R. Albi, COO +41,738 +$ +3,473,436 +Stephen P. Bell, EVP +35,477 +$ +2,952,396 +John Lambuth, VP +39,651 +$ +3,299,756 +(1) Represents an estimate of the fair value of the shares as of the grant date utilizing a Monte Carlo valuation technique as permitted by the guidance provided by FASB ASC Topic 718. The estimated fair value is the aggregate compensation cost to be recognized over the service period based on the results of the Monte Carlo analysis. +2014 Vesting of NEO Equity Awards +On January 3, 2014, the performance period applicable to the January 3, 2011 NEO equity awards ended. Cimarex’s relative stock price performance percentile was 48% at the end of the performance period, resulting in the vesting of 73% of the shares subject to the January 3, 2011 award. The following table reflects the shares originally granted to each NEO and the number of shares that vested at the end of the three-year performance period: +Name +No. of Shares Granted +January 3, 2011 +No. of Shares Vested +January 3, 2014 +Thomas E. Jorden, CEO +47,863 +34,940 +Paul Korus, CFO +47,863 +34,940 +Joseph R. Albi, COO +47,863 +34,940 +Stephen P. Bell, EVP +47,863 +34,940 +The vesting of these awards and the value at vesting is also reported in 2014 Option Exercises and Restricted Stock Vesting table in this proxy statement. Mr. Jorden was not the CEO and Mr. Lambuth was not a NEO at the time of the January 3, 2011 awards. Mr. Lambuth’s service-based award that vested in 2014 is included in the 2014 Option Exercises and Restricted Stock Vesting table. +Elimination of Tax Gross Up Payments +In March 2013, the Board amended the Cimarex’s Change in Control Severance Plan to eliminate any participant’s right (including the right of any NEO) to a tax gross-up payment. +Cimarex’s Change in Control Severance Plan is the only plan that provided for a tax gross-up payment to a participant following a change in control if any payments received by the participant as a result of the change in control become subject to the excise tax imposed by Section 4999 of the Internal Revenue Code. See Potential Payments upon Change in Control or Termination for a more detailed description of this Plan. +36 +Table of Contents +Alignment of CEO Compensation to Total Shareholder Return (“TSR”) +Cimarex CEO Total Compensation Compared to Cimarex TSR +The following graph illustrates our CEO compensation compared to our TSR for the years 2010 through 2014. Indexed TSR represents the cumulative total return of Cimarex stock for a five-year period based on a $100 investment at the start of the first year and reinvestment of all dividends. The data for 2010 represents reported compensation for only F. H. Merelli, our former CEO. The data for 2011 includes weighted compensation, including compensation for F. H. Merelli, who served as CEO for nine months in 2011, and compensation for Thomas Jorden, who served as CEO for three months in 2011. Compensation for 2012, 2013 and 2014 represents only compensation for Thomas Jorden, Cimarex’s current CEO. The table shows the value of the investment at the end of each year. +Relative CEO Total Compensation Compared to Relative TSR +The following graph depicts alignment of relative CEO compensation compared to relative TSR for the years ended December 31, 2011 through December 31, 2013. The information is only provided through 2013 because 2014 CEO peer company compensation information is not publicly available at this time. The companies used for the relative comparison are the companies in our Compensation Peer Group. We have also included, as a point of reference, Cimarex’s CEO compensation for the years ended December 31, 2012 through December 31, 2014. +37 +Table of Contents +Multiple of Median CEO Compensation +The graph below reflects that Cimarex’s 2013 CEO total direct compensation represents 75% of the median CEO total direct compensation of companies in our Compensation Peer Group. The information provided is for 2013 peer group CEO total direct compensation because 2014 CEO peer company compensation information is not publicly available at this time. We have also included, as a point of reference, Cimarex’s 2014 CEO total direct compensation. +Early 2015 Compensation Decisions +2015 Annual Cash Incentive Award Goals +In December 2014, the Committee approved the following strategic goals and objectives that will apply to 2015 annual cash incentive awards that will be measured and paid in 2016: +2015 strategic goals : +o Achieve good return on invested capital. +o Manage the balance sheet. As is prudently possible in reduced commodity price environment: +¡ Increase debt adjusted production per share. +¡ Increase debt adjusted reserves per share. +o Continue focus on staffing and succession planning at all levels. +o Keep five year plan continuously updated. +o Continue emphasis on health, safety and the environment. +2015 tactical goals: +o Further develop organizational capability for low cost, efficient resource play development. +o Be opportunistic for asset or corporate acquisition opportunities. +o Optimize drilling and completion costs. +o Bring new exploration project to a point where commerciality can be reasonably assessed. +o Be innovative in the down cycle. +38 +Table of Contents +The strategic and tactical measures and objectives have been clearly communicated to the NEOs. At year end, the CEO will deliver a report of results to the Committee with respect to each goal and provide the CEO’s recommendation and the basis for the CEO’s recommendations for individual awards. The Committee and its independent compensation consultant will review the CEO’s recommendations and accept or modify those recommendations. The non-management members of the Board will consider the recommendations of the Committee. Each NEO, including the CEO, has a target award equal to 100% of base salary and a maximum award of 200% of base salary; there is no minimum award. +SECTION 2 +Our Compensation Framework +Objectives +Our principal business objective is to profitably grow our proved oil and gas reserves and production for the long-term benefit of shareholders. The primary strategy we use to achieve this objective is to reinvest our cash flow from operations at a competitive rate of return. Our executive compensation program is designed to retain and attract, when appropriate, the experienced professionals necessary to carry out this strategy. +Design +We design our executive compensation program to: +· Align performance incentives with the long-term interests of our shareholders. +We align the long-term interests of our executives with the long-term interests of our shareholders by paying a substantial portion of each executive’s total direct compensation in the form of performance-based equity awards. The actual awards delivered are dependent upon relative TSR so that the more our shareholders benefit through shareholder returns compared to our Stock Performance Peer Group, the more our executives benefit through increased vesting of performance-based equity and the relative increase in stock price compared to our Stock Performance Peer Group. Also, stock ownership guidelines encourage executives to have a meaningful ownership stake in Cimarex, further aligning the interests of our shareholders and our executives. +· Provide competitive total direct compensation opportunities that retain and attract, when needed, executive talent. +We provide compensation opportunities to our executives at levels that are competitive with equivalent positions at companies with which we may compete for talent. In general, when we review base salary, long-term equity awards and total direct compensation, we reference the 50 th and 75 th percentiles of the relevant peer group. Actual compensation earned by an executive may be outside this range based on company and individual performance and industry competition for talented executives. +· Link compensation earned to achievement of short-term and long-term financial and operational objectives. +We provide an annual incentive cash award opportunity that is designed to reward executive efforts for achievement of company financial and operational objectives. Our long-term equity incentive awards are designed to encourage above average stock price performance and are structured to encourage retention of executives. +Principal Elements of Executive Compensation +We principally use three elements of executive compensation to carry out the design of our executive compensation program, collectively referred to as “Total Direct Compensation”: +Ø +Base salary +Retain executive team and, when appropriate, attract other executives. +Ø +Annual cash incentive award +Reward executives for short-term financial and operational results. +39 +Table of Contents +Ø +Annual long-term equity award +Focus executive efforts on activities and short-term results that lead to long-term shareholder value. We use time-vested restricted stock for retention and performance measures based on relative TSR to align executives’ interests with the interests of shareholders. +Competitive Positioning +In support of our compensation objectives, we reference the 50 th and 75 th percentiles of a peer group of companies to determine an appropriate total value and mix of pay for executives. We look at individual NEO and total NEO Total Direct Compensation compared to individual NEO and total NEO Total Direct Compensation of companies in our Compensation Peer Group. Because not all of our NEO positions are directly comparable to NEO positions of companies in our Compensation Peer Group, we believe that reviewing aggregate Total Direct Compensation of all NEOs provides an appropriate reference for comparative purposes. The Compensation Peer Group is comprised of companies in the oil and gas industry with similar market capitalization and revenue. The Committee annually reviews companies in this peer group. The 50 th and 75 th percentiles are reference points only; we do not automatically compensate each executive at these levels. Several variables, including individual and division performance, time in position, annual company performance and one- and three-year relative stock price performance influence the actual executive compensation decisions. +In May 2014, the Committee approved Cimarex’s Compensation Peer Group to be used for 2014 compensation decisions. The companies included in the Compensation Peer Group at the time of selection are companies in our industry of similar size and scope of operations and similar market capitalization and revenue. At the time of selection, the April 21, 2014 market capitalization of these companies ranged from $4.3 billion to $28.6 billion, and the trailing 12 months revenue as of April 21, 2014 ranged from $933 million to $4.8 billion. For the comparable periods, Cimarex’s market capitalization was $10.5 billion and revenue was $2.0 billion. +2014 Compensation Peer Group +Peer Company +Peer Company +Cabot Oil & Gas Corporation +QEP Resources, Inc. +Concho Resources Inc. +Range Resources Corporation +Denbury Resources Inc. +SM Energy Company +Energen Corporation +Southwestern Energy Company +Newfield Exploration Company +Ultra Petroleum Corp. +Noble Energy, Inc. +Whiting Petroleum Corporation +Pioneer Natural Resources Company +WPX Energy, Inc. +Under our long-term equity incentive award program, we grant performance-based awards of restricted stock. For grants made in December 2014, the performance measure used to determine the number of shares to be delivered upon vesting is Cimarex’s relative TSR when compared to companies in the S&P 500 Oil and Gas Exploration & Production Index (the “Stock Performance Peer Group”). Grants made in December 2013 included the S&P 400 Oil and Gas Exploration & Production Index in the peer group. Because Cimarex was added to the S&P 500 Stock Index in 2014, the Compensation and Governance Committee determined that it was appropriate to limit the Stock Performance Peer Group to the S&P 500 Oil and Gas Exploration & Production Index. +2014 Stock Performance Peer Group +S&P 500 Oil and Gas Exploration & Production Index +Anadarko Petroleum Corporation +EQT Corporation +Apache Corporation +Marathon Oil Corporation +Cabot Oil & Gas Corporation +Murphy Oil Corporation +Chesapeake Energy Corporation +Newfield Exploration Company +Cimarex Energy Co. +Noble Energy, Inc. +ConocoPhillips +Pioneer Natural Resources Company +Denbury Resources Inc. +QEP Resources, Inc. +Devon Energy Corporation +Range Resources Corporation +EOG Resources, Inc. +Southwestern Energy Company +40 +Table of Contents +Role of Compensation Consultant and Management in Compensation Decisions +Compensation Consultant +The Committee has engaged the firm of Longnecker & Associates (“Longnecker”) as its independent compensation consultant to fulfill the following responsibilities: +· Advise the Committee on management proposals, as requested. +· Undertake special projects at the request of the Committee. +· Participate in Committee meetings. +· Make recommendations concerning the Compensation Peer Group. +· Review the selected peer group and survey data for competitive comparisons. +· Provide market data and recommendations on NEO compensation. +The Committee has considered the independence factors adopted by the NYSE and has determined that its consultant, Longnecker, is independent within the meaning of the NYSE listing standards. +In 2014, as part of its ongoing services to the Committee, one or more representatives of Longnecker attended or participated by teleconference at four of the meetings of the Committee. Longnecker provided the following services in 2014: +· Reviewed and provided input on the CD&A in the 2014 proxy statement. +· Attended February 25, 2014 Committee meeting and consulted with the Committee on annual cash incentive awards. +· Reviewed and made executive base salary recommendations. +· Made recommendations concerning the Compensation Peer Group. +· Conducted a market analysis of Board compensation. +· Provided an executive compensation analysis and recommended range for long-term equity grants. +The total amount of fees paid to Longnecker for 2014 services to the Committee was $117,250. In addition, the Committee reimburses Longnecker for reasonable travel and business expenses. +Management +Our CEO and President is the principal management resource for compensation recommendations to the Committee with respect to the other NEOs. The CEO (i) provides an annual assessment of Cimarex’s overall financial and operational performance, and (ii) subjectively evaluates individual NEO performance and recommends individual base salary adjustments, annual cash incentive awards, and long-term equity awards. His subjective evaluations generally include factors such as scope of responsibility, contribution to company performance, technical competence, managerial skills and advancement potential. The Committee considers the CEO’s recommendations in making Committee decisions regarding executive compensation. The Committee exercises its discretion to accept, reject or modify these compensation recommendations. +Our Vice President of Human Resources acts as an informational resource to Longnecker and the Committee and compiles survey and other compensation data for their review. The Committee, in consultation with Longnecker, reviews this information when making executive compensation and program design decisions. +Other Compensation Arrangements +Post-Employment and Employment Arrangements +All employees, including the NEOs, are covered by the Cimarex Change in Control Severance Plan. The Plan provides for a “double trigger” so that payments are made only if (a) there is a change in control (as defined in the Plan) and (b) an employee is terminated for any reason other than “cause” (as defined in the Plan) within two years following a change in control. In that event, the employee is entitled to (i) cash severance payments of two times annual salary and average cash incentive award, (ii) a pro-rata portion of annual cash incentive bonus for the current year, and (iii) continued medical, dental, disability and life insurance benefits for two years. See Potential Payments upon Change in Control or Termination for a more detailed description of these benefits. In addition, the 2014 Equity Incentive Plan, and the terms of employee equity award agreements provide for acceleration of vesting of outstanding equity awards upon the occurrence of a change in control. +41 +Table of Contents +Cimarex assumed the change in control provisions from the now-expired employment agreements between each of Messrs. Albi, Bell, Jorden and Korus and a predecessor company. The assumed portion of each agreement provides that if the executive is terminated without cause within two years following a change in control event (as defined in the agreement), the executive is entitled to a lump-sum payment equal to two times the executive’s base salary at the time of the change in control. Benefits payable under these agreements are forfeited if the executive receives benefits under any other change in control plan, including Cimarex’s Change in Control Severance Plan. As a practical matter, the change in control benefits assumed under the employment agreements only benefit these executives if the Change in Control Severance Plan described above has been terminated. The Change in Control Severance Plan provides for greater benefits payable upon the occurrence of a change in control event than those payable under the assumed agreements. +In 2010, prior to becoming an NEO, John Lambuth, Vice President-Exploration, entered into a retention agreement with Cimarex. The agreement required Cimarex to make a payment of $600,000, less required withholdings, to Mr. Lambuth if he remained employed through June 1, 2014 or upon an earlier change in control (as defined in the Change in Control Severance Plan) or termination of Mr. Lambuth by Cimarex other than for cause. This amount is included in the Summary Compensation table below under “All Other Compensation.” No retention agreements currently are in place with Mr. Lambuth or any other NEO. +Retirement Benefits +Employees, including the NEOs, are eligible to participate in the Cimarex 401(k) defined contribution retirement plan. Cimarex matches dollar-for-dollar employee contributions to the plan up to 7% of the employee’s cash compensation, subject to limits imposed by the Internal Revenue Code. The Board is authorized to make profit-sharing contributions under the Plan and, in February 2015, the Board authorized a profit-sharing contribution of 2% of the gross 2014 cash compensation, subject to the IRS compensation limit, of eligible participants under the Plan. +In addition, eligible participants, including the NEOs, may participate in the Supplemental Savings Plan, which is a non-qualified deferred compensation plan that permits participants to make contributions (and to receive matching contributions) in excess of the Internal Revenue Code limitations for 401(k) plans. See Compensation Tables, 2014 Nonqualified Deferred Compensation for information about contributions to the Supplemental Savings Plan. The Committee administers this plan and designates who may participate. Benefits are paid upon the later to occur of termination of employment or the time elected by the participant. In the event of a change in control, each participant receives a lump sum cash payment of the amount allocated to his or her account. +Perquisites +We provide a limited number of perquisites (personal benefits) to our NEOs, including financial and estate planning and a medical reimbursement program. The medical reimbursement program ended on December 31, 2014. Our corporate aircraft is generally not available for personal use by any employee. With the authorization of our CEO, however, the corporate aircraft may be used by an employee or a member of his/her family for medical purposes. The incremental cost for non-business use of our corporate aircraft, if any, is disclosed in the Summary Compensation Table . We use the Standard Industry Fare Level tables published by the Internal Revenue Service to determine the amount of compensation income that is imputed to the employee for tax purposes for personal use of corporate aircraft. There was no non-business use of our corporate aircraft during 2014. +Other Compensation Policies +Total Pay Considerations +The Committee considers Total Direct Compensation at the time it makes a decision on any element of executive compensation. The Committee also reviews the relationship of the CEO’s total compensation to the total compensation of each of the other NEOs. +Stock Ownership and Holding Requirements +Our Corporate Governance Guidelines require that each independent Director own Cimarex stock in an amount equal to three times his annual cash retainer. In addition, the CEO is expected to own Cimarex shares in an amount equal to five times his annual base salary, and each executive officer who reports to the CEO is expected to own stock in an amount equal to three times his annual base salary. A newly elected Director or a newly appointed executive officer has three years from the date of +42 +Table of Contents +his or her initial election or appointment to comply with the Guidelines. Restricted stock, restricted stock units, deferred compensation units and performance awards are counted in calculating ownership. Shares subject to options are not counted. Each of the independent Directors, the CEO and the other NEOs comply with these guidelines. +Clawback Policy +We have adopted a clawback policy providing that, in the event of an accounting restatement due to material noncompliance with financial reporting requirements under the U.S. federal securities laws, the Committee has the right to use reasonable efforts to recover from any of our current or former executive officers who received incentive-based compensation related to the restatement and received during the three-year period preceding any such accounting restatement. This policy applies to incentive-based compensation granted on or after June 1, 2012. This clawback policy will be interpreted in the best judgment of the Committee in a manner consistent with any applicable rules or regulations adopted by the SEC or the NYSE as contemplated by the Dodd-Frank Act. +Non-Hedging and Non-Pledging Policies +Our insider trading policy prohibits Directors, officers and designated employees from engaging in hedging or monetization transactions and other employees are strongly discouraged from engaging in such transactions. Any other employee wishing to enter into such an arrangement must first submit the proposed transaction for approval by the compliance officer designated in the policy. The policy also prohibits Directors, officers and employees from holding Cimarex stock in a margin account or pledging Cimarex stock as collateral for a loan. +Tax Law Considerations +The Committee considers the impact of applicable tax laws with respect to executive compensation. Section 162(m) of the Internal Revenue Code of 1986, as amended, (“Section 162(m)”) limits the amount of compensation that Cimarex may deduct on its federal income tax return for compensation paid to certain executive officers to no more than $1 million per year. There are exceptions to the $1 million limitation for performance-based compensation meeting certain requirements. The performance-based portion of our restricted stock awards are the only element of executive compensation designed to qualify for the performance-based exception to the $1 million deduction limit, provided additional requirements are met. The Committee attempts to preserve the deductibility of compensation paid to executive officers but does not limit executive compensation to amounts deductible under Section 162(m). +COMPENSATION AND GOVERNANCE COMMITTEE REPORT +The Compensation and Governance Committee has reviewed and discussed with management the preceding Compensation Discussion and Analysis section of Cimarex’s 2015 proxy statement. Based on our review and discussions, we have recommended to the Board of Directors that the Compensation Discussion and Analysis be included in Cimarex’s 2015 proxy statement. +THE COMPENSATION AND GOVERNANCE COMMITTEE +L. Paul Teague, Chairman +Jerry Box +Hans Helmerich +David A. Hentschel +43 +Table of Contents +COMPENSATION TABLES +S UMMARY C OMPENSATION T ABLE +The following table describes 2012-2014 compensation of our CEO, CFO and the three other most highly compensated executive officers. +Name and +Principal Position +Year +Salary +Bonus +Stock +Awards (1) +Option +Awards +Non-Equity +Incentive Plan +Comp. (2) +All Other +Comp. (3) +Total +Thomas E. Jorden +2014 +$ +845,048 +$ +— +$ +7,143,522 +$ +— +$ +740,138 +$ +56,776 +$ +8,785,484 +Chief Executive +2013 +$ +751,616 +$ +— +$ +4,785,000 +$ +— +$ +1,620,000 +$ +58,975 +$ +7,215,591 +Officer, President, and +2012 +$ +672,000 +$ +— +$ +2,549,445 +$ +— +$ +800,000 +$ +44,740 +$ +4,066,185 +Chairman of the Board +(CEO) +Paul Korus +2014 +$ +480,169 +$ +— +$ +2,952,396 +$ +— +$ +413,236 +$ +43,695 +$ +3,889,496 +Senior Vice President, +2013 +$ +463,539 +$ +— +$ +2,791,250 +$ +— +$ +750,000 +$ +48,440 +$ +4,053,229 +Chief Financial Officer +2012 +$ +452,000 +$ +— +$ +1,593,425 +$ +— +$ +474,600 +$ +48,232 +$ +2,568,257 +(CFO) +Joseph R. Albi +2014 +$ +552,462 +$ +— +$ +3,473,436 +$ +— +$ +477,360 +$ +54,187 +$ +4,557,445 +Executive Vice +2013 +$ +523,077 +$ +— +$ +3,190,000 +$ +— +$ +930,000 +$ +48,440 +$ +4,691,517 +President—Operations, +2012 +$ +500,000 +$ +— +$ +1,912,127 +$ +— +$ +550,000 +$ +83,692 +$ +3,045,819 +Chief Operating Officer +Stephen P. Bell +2014 +$ +453,822 +$ +— +$ +2,952,396 +$ +— +$ +397,481 +$ +45,358 +$ +3,849,057 +Executive Vice +2013 +$ +428,654 +$ +— +$ +2,791,250 +$ +— +$ +750,000 +$ +56,436 +$ +4,026,340 +President—Business +2012 +$ +395,231 +$ +— +$ +1,593,425 +$ +— +$ +462,000 +$ +59,786 +$ +2,510,442 +Development +John A. Lambuth +Vice President— +2014 +$ +398,149 +$ +— +$ +3,299,756 +$ +— +$ +352,856 +$ +643,695 +(4) +$ +4,694,456 +Exploration +2013 +$ +368,654 +$ +— +$ +2,791,250 +$ +— +$ +645,000 +$ +48,440 +$ +3,853,344 +2012 +$ +324,615 +$ +— +$ +1,367,000 +$ +— +$ +325,000 +$ +42,637 +$ +2,059,252 +44 +Table of Contents +(1) Represents the grant date fair value of the awards, which is an estimate of aggregate compensation cost to be recognized over the service period based on the probable outcome of the performance conditions and is an estimate of aggregate compensation cost to be recognized over the service period determined as of the grant date under FASB ASC Topic 718. The awards are valued as market-based awards using the Monte Carlo simulation method assuming a target number of shares that would be issued because this is deemed to be the “probable” payout percentage at the time of grant consistent with the estimate of aggregate compensation cost to be recognized over the service period. Actual payouts with respect to the awards can range from 50 percent to 100 percent of the award based on the relative ranking of the company’s TSR in comparison to the peer group over the three-year performance period. If the company’s performance results in 100% of the award being paid, the grant date fair value of the maximum number of shares for each of the NEOs pursuant to the awards granted in 2014 based on the closing price of the company’s common stock on the December 10, 2014 date of grant would have been as follows: Mr. Jorden $8,576,174; Mr. Korus $3,544,507; Mr. Albi $4,170,044; Mr. Bell $3,544,507; and Mr. Lambuth $3,961,536. +(2) Amount reported for the year earned. +(3) The following describes the components of other items of compensation, including any perquisite in excess of $10,000: +Executive Officer +Unused +Vacation +Company +Contributions +to Retirement +Plans +Life +Insurance +Premiums +Total +Other +Compensation +Thomas E. Jorden, CEO +2014 +$ +— +$ +40,200 +$ +3,495 +$ +56,776 +(a) +2013 +$ +— +$ +45,200 +$ +3,240 +$ +58,975 +2012 +$ +— +$ +41,500 +$ +3,240 +$ +44,740 +Paul Korus, CFO +2014 +$ +— +$ +40,200 +$ +3,495 +$ +43,695 +2013 +$ +— +$ +45,200 +$ +3,240 +$ +48,440 +2012 +$ +3,803 +$ +41,500 +$ +2,929 +$ +48,232 +Joseph R. Albi, COO +2014 +$ +— +$ +40,200 +$ +3,495 +$ +54,187 +(b) +2013 +$ +— +$ +45,200 +$ +3,240 +$ +48,440 +2012 +$ +3,036 +$ +41,500 +$ +3,240 +$ +83,692 +Stephen P. Bell, EVP +2014 +$ +1,663 +$ +40,200 +$ +3,495 +$ +45,358 +2013 +$ +7,996 +$ +45,200 +$ +3,240 +$ +56,436 +2012 +$ +14,808 +$ +41,500 +$ +3,478 +$ +59,786 +John A. Lambuth, VP +2014 +$ +— +$ +40,200 +$ +3,495 +$ +643,695 +2013 +$ +— +$ +45,200 +$ +3,240 +$ +48,440 +2012 +$ +— +$ +39,743 +$ +2,894 +$ +42,637 +(a) Mr. Jorden’s total other compensation includes $12,466 for medical reimbursements and $615 for reserved parking. +(b) Mr. Albi’s total other compensation includes $9,731 for medical reimbursements, $615 for reserved parking and $146 for estate planning. +(4) Includes a payment of $600,000 to Mr. Lambuth on June 1, 2014 pursuant to a retention agreement entered into with Mr. Lambuth in 2010, prior to his becoming a NEO, which was payable if Mr. Lambuth remained employed through June 1, 2014. +45 +Table of Contents +2014 G RANTS OF P LAN -B ASED A WARDS +2014 Non-Equity Incentive Plan +The following table describes the target and maximum amounts of annual cash incentive awards for the NEOs and the actual award paid in March 2015 for 2014 services. The non-equity incentive plan provides for no minimum (threshold) award. The amounts listed in the Target column represent 100% of the year-end monthly base salary annualized. The amounts listed in the Maximum column represent 200% of the year-end monthly base salary annualized. See the description of our annual cash incentive award plan in Section 1, Compensation Discussion and Analysis . +Estimated Future Payouts Under +Non-Equity Incentive Plan +Actual +Award +Paid in +Name +Threshold +Target +Maximum +March 2015 +Thomas E. Jorden, CEO +$ +0 +$ +870,750 +$ +1,741,500 +$ +740,138 +Paul Korus, CFO +$ +0 +$ +486,160 +$ +972,320 +$ +413,236 +Joseph R. Albi, COO +$ +0 +$ +561,600 +$ +1,123,200 +$ +477,360 +Stephen P. Bell, EVP +$ +0 +$ +467,625 +$ +935,250 +$ +397,481 +John A. Lambuth, VP +$ +0 +$ +415,125 +$ +830,250 +$ +352,856 +2014 Equity Incentive Plan Awards +The following table provides information regarding the awards of restricted stock and options made to the CEO, CFO and other NEOs in 2014. No option awards were made in 2014. See Section 1, Compensation Discussion and Analysis , Long Term Equity Incentive Award Program , for more information about these awards. +Award +Comp. +Comm. +Estimated Future Payouts Under Equity +Incentive Plan Awards +Grant Date +Fair Value of +Stock & +Type of +Grant +Approval +Option +Name +Award (1) +Date +Date +Threshold (2) +Target (3) +Maximum +Awards (4) +Thomas E. Jorden, CEO +RSA +12/10/14 +12/10/14 +42,919 +85,839 +$ +7,143,522 +Paul Korus, CFO +RSA +12/10/14 +12/10/14 +17,738 +35,477 +$ +2,952,396 +Joseph Albi, COO +RSA +12/10/14 +12/10/14 +20,869 +41,738 +$ +3,473,436 +Stephen Bell, EVP +RSA +12/10/14 +12/10/14 +17,738 +35,477 +$ +2,952,396 +John Lambuth, VP +RSA +12/10/14 +12/10/14 +19,825 +39,651 +$ +3,299,756 +(1) RSA = Restricted stock (service-based and performance-based shares) +46 +Table of Contents +(2) One-half of the total potential award will vest on completion of continuous service on the third anniversary of the grant date of the award. +(3) Terms of the awards do not specify a targeted number of shares. The number of shares that are earned depends on Cimarex’s stock price performance relative to peers and is not computed until the third anniversary of the grant date of the award. See Long-Term Equity Incentive Award Program for the method of computing the number of shares that vest. Cash dividends will be paid on the threshold number of shares during the vesting period and accrued during the vesting period on the remaining number of shares that are subject to measurement of relative TSR upon satisfaction of the continuous service requirement. +(4) Represents an estimate of the fair value of the shares as of the grant date utilizing a Monte Carlo valuation technique as permitted by the guidance provided by FASB ASC Topic 718. The estimated fair value is the aggregate compensation cost to be recognized over the service period based on the results of the Monte Carlo analysis. The awards are valued as market-based awards assuming a target number of shares would be issued because this is deemed to be the “probable” payout percentage at the time of grant consistent with the estimate of aggregate compensation cost to be recognized over the service period. +O UTSTANDING E QUITY A WARDS AT D ECEMBER 31, 2014 +O PTION A WARDS +S TOCK A WARDS +Number of Securities +Underlying +Equity Incentive Plan Awards That Have +Not Vested +Unexercised Options +Option +Name +Exercisable +Unexercisable +Option +Exercise Price +Expiration +Date +No. of Shares +Market Value of +Unearned Shares (1) +Thomas E. Jorden, CEO +25,000 +0 +$ +55.96 +9/30/2018 +205,531 (2) +$ +21,786,286 +Paul Korus, CFO +15,000 +0 +$ +55.96 +9/30/2018 +107,785 (3) +$ +11,425,210 +Joseph R. Albi, COO +25,000 +0 +$ +55.96 +9/30/2018 +126,508 (4) +$ +13,409,848 +Stephen P. Bell, EVP +25,000 +0 +$ +55.96 +9/30/2018 +107,785 (5) +$ +11,425,210 +John A. Lambuth, VP +0 +0 +— +— +110,651 (6) +$ +11,729,006 +(1) The amount in this column reflects the closing market price of the stock as of December 31, 2014 ($106.00) multiplied by the number of shares reported in the previous column. +(2) A minimum of 29,846 and a maximum of 59,692 shares could vest on May 18, 2015, between a minimum of 30,000 and a maximum of 60,000 shares could vest on December 12, 2016, and between a minimum of 42,919 and a maximum of 85,839 shares could vest on December 10, 2017. +(3) A minimum of 18,654 and a maximum of 37,308 shares could vest on May 18, 2015, between a minimum of 17,500 and a maximum of 35,000 shares could vest on December 12, 2016, and between a minimum of 17,738 and a maximum of 35,477 shares could vest on December 10, 2017. +(4) A minimum of 22,385 and a maximum of 44,770 shares could vest on May 18, 2015, between a minimum of 20,000 and a maximum of 40,000 shares could vest on December 12, 2016, and between a minimum of 20,869 and a maximum of 41,738 shares could vest on December 10, 2017. +(5) A minimum of 18,654 and a maximum of 37,308 shares could vest on May 18, 2015, between a minimum of 17,500 and a maximum of 35,000 shares could vest on December 12, 2016, and between a minimum of 17,738 and a maximum of 35,477 shares could vest on December 10, 2017. +47 +Table of Contents +(6) 4,000 shares will vest on July 1, 2015, 4,000 shares will vest on July 13, 2016, 4,000 shares will vest on July 13, 2017, a minimum of 12,000 and a maximum of 24,000 shares could vest on September 13, 2015, a minimum of 17,500 and a maximum of 35,000 shares could vest on December 12, 2016, and between a minimum of 19,825 and a maximum of 39,651 shares could vest on December 10, 2017. +2014 O PTION E XERCISES AND R ESTRICTED S TOCK V ESTED +2014 OPTION EXERCISES +2014 STOCK VESTING +Name +Number of Shares +Acquired on Exercise +(#) +Value Realized on +Exercise +($) +Number of Shares +Acquired on Vesting +(#) +Value Realized on +Vesting +($) +Thomas E. Jorden, CEO +— +$ +— +34,940 +$ +3,511,470 +Paul Korus, CFO +— +$ +— +34,940 +$ +3,511,470 +Joseph R. Albi, COO +— +$ +— +34,940 +$ +3,511,470 +Stephen P. Bell, EVP +— +$ +— +34,940 +$ +3,511,470 +John A. Lambuth, VP +— +$ +— +2,500 +$ +356,525 +2014 N ONQUALIFIED D EFERRED C OMPENSATION +The following table provides information on the Supplemental Savings Plan (the “SSP”) contributions and earnings for our NEOs in each of the last three fiscal years. Under the terms of the SSP, a participant may make an elective contribution to the SSP of an amount that exceeds the maximum amount permitted to be contributed to his account in the Cimarex 401(k) Plan (an “excess contribution”) provided that the excess contribution does not exceed the dollar limitation on elective deferrals under the Internal Revenue Code section 402(g) in effect on January 1 of the calendar year of deferral (2014 limitation was $17,500). Cimarex will match 100% of the excess contributions up to 7% of a participant’s eligible compensation. A participant may also elect to have up to 50% of his compensation and up to 100% of his bonus withheld from his compensation and allocated to his SSP account. Cimarex does not match these contributions. +Executive +Contributions +in Last FY (1) +Registrant +Contributions in +Last FY (2) +Aggregate +Earnings in Last +FY +Aggregate +Withdrawals/ +Distributions +Aggregate +Balance at Last +FYE +Name +($) +($) +($) +($) +($) +Thomas E. Jorden, CEO +2014 +$ +17,500 +$ +17,500 +$ +327 +$ +— +$ +615,042 +(3) +2013 +$ +17,500 +$ +17,500 +$ +173 +$ +— +$ +580,126 +2012 +$ +17,000 +$ +17,000 +$ +207 +$ +— +$ +545,364 +Paul Korus, CFO +2014 +$ +140,517 +$ +17,500 +$ +83,908 +$ +— +$ +850,037 +(3) +2013 +$ +63,854 +$ +17,500 +$ +142,102 +$ +— +$ +608,523 +2012 +$ +17,000 +$ +17,000 +$ +51,798 +$ +— +$ +385,478 +Joseph R. Albi, COO +2014 +$ +17,500 +$ +17,500 +$ +30,552 +$ +— +$ +491,853 +(3) +2013 +$ +17,500 +$ +17,500 +$ +73,828 +$ +— +$ +426,712 +2012 +$ +17,000 +$ +17,000 +$ +35,895 +$ +— +$ +318,296 +48 +Table of Contents +Stephen P. Bell, EVP +2014 +$ +17,500 +$ +17,500 +$ +321 +$ +— +$ +611,434 +(3) +2013 +$ +17,500 +$ +17,500 +$ +38,093 +$ +— +$ +576,524 +2012 +$ +17,000 +$ +17,000 +$ +65,201 +$ +— +$ +503,842 +John A. Lambuth, VP +2014 +$ +17,500 +$ +17,500 +$ +18,916 +$ +— +$ +404,818 +(3) +2013 +$ +17,500 +$ +17,500 +$ +33,445 +$ +— +$ +351,313 +2012 +$ +17,000 +$ +17,000 +$ +24,466 +$ +— +$ +283,280 +(1) The amounts included in this column are also included in the Salary column in the Summary Compensation Table . +(2) The amounts reported in this column are included in the All Other Compensation column and footnote 3 thereto in the Summary Compensation Table . +(3) The following table sets forth amounts included in the aggregate balance at December 31, 2014 that were reported as compensation to the NEO in the Summary Compensation Table for previous years. +Named Executive Officer +Amount of Previously +Reported Compensation +Thomas E. Jorden, CEO +$ +513,875 +Paul Korus, CFO +$ +469,589 +Joseph R. Albi, COO +$ +323,405 +Stephen P. Bell, EVP +$ +402,759 +John A. Lambuth, VP +$ +275,269 +P OTENTIAL P AYMENTS U PON C HANGE IN C ONTROL OR T ERMINATION +We do not consider post-termination benefits as a material element of executive compensation because NEO post-termination benefits are the same benefits available to all full-time employees. Post-termination benefits are not included in the Committee’s analysis of total compensation. +We are obligated to make certain payments to employees, including our NEOs, or to accelerate the vesting of their equity awards pursuant to the following plans and agreements: +· Change in Control Severance Plan that covers all full-time employees, including the NEOs; +· 2002 Stock Incentive Plan, 2011 Equity Incentive Plan and 2014 Equity Incentive Plan that govern all equity awards made to Directors and employees, including the NEOs; +· Change in control provisions for the benefit of Messrs. Albi, Bell, Jorden and Korus, as assumed by Cimarex; and +· Supplemental Savings Plan. +Our change-in control arrangements keep our senior executives focused on pursuing all corporate transaction activity that is in the best interests of shareholders regardless of whether those transactions may result in their own job losses. Uncertainty created by a corporate transaction can create retention risk for a company. In addition, change-in-control protection is often needed to retain and attract, when appropriate, the best talent because many of the companies with whom we compete for talent provide change-in-control protection. +We currently do not pay severance benefits nor do our equity award agreements provide for acceleration of equity awards upon the retirement of the NEOs. Individual performance assessments, compensation arising from our annual compensation +49 +Table of Contents +program (except to the extent provided in the contractual arrangements described above) and overall wealth accumulation are not factors that affect post-termination benefits. +Change in Control +We are obligated under certain agreements to pay benefits upon a “change in control” event. Cimarex’s definition of “ change in control ” as used in its 2002 Stock Incentive Plan, its 2011 Equity Incentive Plan and its 2014 Equity Incentive Plan, its Change in Control Severance Plan and the change in control provisions that survived certain expired employment agreements with each NEO are the same. In summary, a change in control event means any of the following: +· Acquisition of 30% or more of the shares of our outstanding common stock or the combined voting power of voting securities of Cimarex by an individual or group. +· Members of our Board of Directors, or Directors nominated by those Directors, cease to constitute a majority of the directors during any period of twelve months. +· A reorganization, share exchange or merger unless (i) the shareholders prior to the reorganization or merger continue to own more than 40% of the outstanding common stock and combined voting power of the resulting corporation following the reorganization or merger; and (ii) at least a majority of the members of the Board of the corporation resulting from the merger or reorganization were members of the Board at the time of executing the agreement to reorganize or merge. +· The complete liquidation or dissolution of Cimarex or the sale of all or substantially all of its assets. +The following is a summary of those agreements that provide for payment to the NEOs in the event of a change in control event coupled with termination of employment without cause: +Change in Control – Termination Without Cause +Our Change in Control Plan provides for the payment of severance benefits to all active employees in the event of termination following a change in control. In the event of a change in control, if an employee is terminated for any reason other than “cause” (as defined in the Plan) within two years following a change in control, that employee would be entitled to: +· Cash severance payments of up to two years’ salary and cash incentive award; +· A pro rata portion of the annual cash incentive bonus award otherwise payable for the year of termination; and +· Continued medical, dental, disability and life insurance benefits for two years. +We assumed from a predecessor company the change in control provisions from the now-expired employment agreements of each of Messrs. Albi, Bell, Jorden and Korus with such company. Each agreement provides that if the executive is terminated without cause within two years following a change in control event (as defined in the agreement), the executive is entitled to a lump-sum payment equal to two times the executive’s base salary at the time of the change in control. Benefits payable under these agreements are forfeited if the executive receives benefits under any other change in control plan, including the Cimarex Change in Control Severance Plan. As a practical matter, the change in control benefits assumed under the employment agreements only benefit these executives if the Change in Control Severance Plan described above has been terminated. The Change in Control Severance Plan provides for greater benefits payable upon the occurrence of a change in control event than those payable under the assumed agreements. +Change in Control – No Termination +Our 2002 Stock Incentive Plan, our 2011 Equity Incentive Plan, and our 2014 Equity Incentive Plan provide for acceleration of vesting of equity awards in the event of a change in control. +50 +Table of Contents +Termination of Employment +Death or Disability +The award agreements for grants of equity under the 2002 Stock Incentive Plan, and the provisions of the 2011 Equity Incentive Plan and 2014 Equity Incentive Plan, provide for acceleration of vesting of awards in the event of death or disability. Benefits under the Supplemental Savings Plan also are paid upon death or disability. +Termination Without Cause +Benefits under the Supplemental Savings Plan are payable to each NEO upon termination of employment. +Estimated Benefits upon Various Termination Scenarios +Payments upon a change in control or termination of employment include various elements of compensation. The elements of compensation that may be included in a change in control or severance payment are: +(A) +(B) +(C) +(D) +(E) +ANNUAL AVERAGE +CASH +COMPENSATION (1) +CASH INCENTIVE (2) +LONG TERM +AWARD PAYOUT (3) +SUPPLEMENTAL +SAVINGS (4) +OTHER BENEFITS (5) +Thomas E. Jorden, CEO +$ +3,956,802 +$ +740,138 +$ +17,640,026 +$ +615,042 +$ +72,233 +Paul Korus, CFO +$ +2,106,944 +$ +413,236 +$ +9,704,493 +$ +850,037 +$ +70,630 +Joseph R. Albi, COO +$ +2,482,899 +$ +477,360 +$ +11,385,550 +$ +491,853 +$ +56,160 +Stephen P. Bell, EVP +$ +2,029,957 +$ +397,481 +$ +9,704,493 +$ +611,434 +$ +36,613 +John A. Lambuth, VP +$ +1,764,659 +$ +352,856 +$ +9,808,883 +$ +404,818 +$ +66,343 +(1) Amount represents two times the annual average compensation (salary and cash incentive bonus) paid to the executive for 2013 and 2014, as provided in the Change in Control Severance Plan. +(2) Amount represents the average incentive bonus as provided in the Change in Control Severance Plan. +(3) Amount represents the value of accelerated vesting of restricted stock and options based upon the closing price of Cimarex’s common stock as of December 31, 2014 of $106.00 per share. +(4) Amount represents estimated payments under the Supplemental Savings Plan. +(5) Amount represents the estimated value of continued medical, dental, disability and life insurance benefits for two years as provided in the Change in Control Severance Plan. +The following table provides the estimated compensation and present value of benefits potentially payable to each NEO in the event of a change in control or termination under various circumstances. The amounts shown assume that the termination or change in control occurred on December 31, 2014. The actual amounts to be paid can only be determined at the time of the executive’s actual separation from Cimarex or the occurrence of a change in control. Actual payments may be more or less than the amounts described below. In addition, the company may enter into new arrangements or modify these arrangements, from time to time. +51 +Table of Contents +The following describes potential payments to the NEOs in the event of a change in control or termination under various scenarios. [Note that the alphabetical references in the headings refer to the element of compensation described above]: +NAME +TERMINATION +WITHOUT CAUSE +(D) (1) +TERMINATION AS A +RESULT OF +DEATH OR +DISABILITY +(C)(D) (1) +CHANGE IN +CONTROL +(No Termination) +(C) (1) +TERMINATION +ON CHANGE +IN CONTROL +(A+B+C+D+E) (1) +Thomas E. Jorden, CEO +$ +615,042 +$ +18,255,067 +$ +17,640,026 +$ +23,024,240 +Paul Korus, CFO +$ +850,037 +$ +10,554,530 +$ +9,704,493 +$ +13,145,340 +Joseph R. Albi, COO +$ +491,853 +$ +11,877,403 +$ +11,385,550 +$ +14,893,823 +Stephen P. Bell, EVP +$ +611,434 +$ +10,315,927 +$ +9,704,493 +$ +12,779,978 +John A. Lambuth, VP +$ +404,818 +$ +10,213,701 +$ +9,808,883 +$ +12,397,559 +(1) The alphabetical code refers to the elements of compensation that may be included in a change in control or severance payment as described at the beginning of this section, Estimated Benefits upon Various Termination Scenarios . +DIRECTOR AND OFFICER INDEMNIFICATION AGREEMENTS +We have entered into an indemnification agreement with our Directors and certain officers. These agreements require us, among other things, to indemnify such persons against certain liabilities that may arise by reason of their status or service as Directors or officers, to advance their expenses incurred as a result of a proceeding for which they may be indemnified, and to cover them under any Directors’ and officers’ liability insurance policy that we choose, in our discretion, to maintain. These indemnification agreements are intended to provide indemnification rights to the fullest extent permitted under applicable Delaware law and will be in addition to any other rights that the indemnitee may have under our Restated Certificate of Incorporation, Bylaws, and applicable law. +ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION (ITEM 2) +At the 2014 Annual Meeting of Shareholders, 96% of the votes cast were in favor of the advisory vote to approve executive compensation. In addition to the advisory vote, as part of our regular shareholder engagement, we consider and discuss with shareholders a number of matters throughout the year, including executive compensation and governance. The Compensation Committee carefully considers any feedback and routinely reviews executive compensation practices and governance. +The Compensation Committee considered the results of the advisory vote and the discussions with shareholders to convey our shareholders’ support of the Committee’s compensation decisions in 2013 and early 2014 and shareholders’ overall satisfaction with Cimarex’s executive compensation programs. Consistent with this support, the Committee retained the core design of our executive compensation programs for the remainder of 2014, as it believes the programs continue to retain, attract, when appropriate, and appropriately incent senior management. +At the 2015 Annual Meeting of Shareholders, we will again hold an annual advisory vote to approve executive compensation. The Committee will continue to consider the results from this year’s and future advisory votes on executive compensation, as well as feedback from shareholders through the course of such year. A shareholder advisory vote will be held at the 2017 annual meeting to vote again on the frequency of the advisory vote to approve executive compensation, i.e., if the advisory vote should be held every one, two or three years. +Because your vote is advisory, it will not be binding upon the Board. However, the Board values shareholders’ opinions, and the Committee will take into account the outcome of the vote when considering future executive compensation decisions. The Board recommends that shareholders vote FOR the following resolution: +RESOLVED, that the shareholders approve, on an advisory basis, the compensation of Cimarex’s Named Executive Officers, as disclosed in this proxy statement, including the Compensation Discussion and Analysis, the executive compensation tables and the related narrative. +52 +Table of Contents +The Board of Directors unanimously recommends a vote FOR the advisory vote to approve executive compensation. +REPORT OF AUDIT COMMITTEE +The Audit Committee on behalf of the Board of Directors monitors (i) the integrity of the Company’s financial statements; (ii) the independent auditors’ qualifications and independence; (iii) the performance of the Company’s internal audit function and independent auditors; (iv) the appropriateness of the Company’s accounting policies; (v) the adequacy of the Company’s internal controls; (vi) the Company’s compliance with legal and regulatory requirements related to audit matters; and (vii) risk oversight. In so doing, it is the responsibility of the Committee to maintain free and open communication between the directors, the independent auditor and the management of the Company. All members of the Audit Committee meet the independence, experience and financial literacy requirements of the New York Stock Exchange, the Sarbanes Oxley Act and any rules or regulations promulgated by the Securities and Exchange Commission. The Board of Directors has adopted a written charter for the Audit Committee, a copy of which is available on our website at www.cimarex.com . +Management is responsible for the Company’s financial statements and the financial reporting process, including the systems of internal controls and disclosure controls and procedures. The Company’s independent registered public accounting firm is responsible for performing an independent audit of the Company’s financial statements in accordance with generally accepted auditing standards and issuing a report thereon. The Audit Committee’s responsibility is to monitor and oversee these processes and the Audit Committee uses the Company’s internal audit department to assist with these responsibilities. +The Audit Committee reviewed Cimarex’s audited financial statements as of and for the year ended December 31, 2014 and met with both management and KPMG, Cimarex’s independent registered public accounting firm, to discuss those financial statements and the effectiveness of Cimarex’s internal control over financial reporting. In addition, we have received from KPMG the communication required by Public Company Accounting Oversight Board (PCAOB) Rule 3526, Communication with Audit Committees Concerning Independence, and discussed with KPMG their independence from Cimarex and its management. The Audit Committee also discussed with KPMG any matters required by the PCAOB Auditing Standards No. 16, Communication with Audit Committees. +Based on these reviews and discussions, the Audit Committee recommended to the Board of Directors that Cimarex’s audited financial statements be included in Cimarex’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014. +THE AUDIT COMMITTEE +Monroe W. Robertson, Chairman +Harold R. Logan, Jr. +Floyd R. Price +Michael J. Sullivan +The Audit Committee Report does not constitute soliciting material and shall not be deemed to be filed or incorporated by reference into any other Cimarex filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that Cimarex specifically incorporates the Audit Committee Report by reference. +RATIFICATION OF INDEPENDENT AUDITORS (ITEM 3) +The Audit Committee of the Board has appointed KPMG LLP to audit our financial statements for 2015. Since October 1, 2002, KPMG LLP has served as our independent auditors. +We are asking that shareholders ratify the appointment of KPMG LLP as independent auditor. If shareholders fail to ratify the appointment, the Audit Committee may reconsider this appointment. A KPMG LLP representative will be at the Annual Meeting to answer appropriate questions and to make a statement if he or she desires. +The Board of Directors recommends a vote FOR the ratification of KPMG LLP as Cimarex’s Independent Auditors for 2015. +53 +Table of Contents +Audit and Non-Audit Fees +The following table shows the fees for professional services rendered by KPMG LLP for the audit of Cimarex’s annual financial statements for the years ended December 31, 2014 and December 31, 2013, and fees billed for other services rendered by KPMG LLP during those periods: +Years Ended +December 31, +2014 +2013 +Audit Fees (1) +$ +1,142,844 +$ +1,076,127 +Audit-Related Fees (2) +$ +80,000 +$ +0 +Tax Fees (3) +$ +174,420 +$ +175,056 +All Other Fees +$ +0 +$ +0 +(1) Audit fees were principally for audit work performed on the consolidated financial statements and internal controls over financial reporting. +(2) Audit-related fees were principally for services associated with SEC registration statements, periodic reports and other documents filed with the SEC or issued in connection with securities offerings, e.g., comfort letters and consents and assistance in responding to SEC comment letters. +(3) Tax fees were principally for services related to tax compliance and reporting and analysis services. +Policy for Approval of Audit, Audit-Related and Tax Services +The Audit Committee annually reviews and pre-approves certain categories of audit, audit-related and tax services to be performed by our independent auditors, subject to a specified range of fees. The Audit Committee also may pre-approve specific services. Certain non-audit services as specified by the SEC may not be performed by our independent auditors. The Audit Committee may delegate pre-approval authority to one or more of its members. In the event of any such delegation, any pre-approved decisions will be reported to the Audit Committee at its next scheduled meeting. The services described in the above table were pre-approved by the Audit Committee in 2013 and 2014. +SHAREHOLDER PROPOSAL ON “PROXY ACCESS” (ITEM 4) +The following shareholder proposal (the “Comptroller Proposal”) has been submitted to the Company for action by the Comptroller of the City of New York as custodian and trustee of the New York City Employees’ Retirement System, New York City Fire Department Pension Fund, the New York City Teachers’ Retirement System, and the New York City Police Pension Fund, and custodian of the New York City Board of Education Retirement System (collectively, the “NYC Funds”), the beneficial owners of more than $2,000 in market value of the Company’s stock, Municipal Building, One Centre Street, Room 629, New York, New York 10007. The affirmative vote of a majority of the shares voted at the meeting is required for the approval of the Comptroller Proposal. Our Board recommends that you vote Against this Proposal. The text of the Comptroller Proposal follows: +RESOLVED: Shareholders of Cimarex Energy Co. (the “Company”) ask the board of directors (the “Board”) to adopt, and present for shareholder approval, a “proxy access” bylaw. Such a bylaw shall require the Company to include in proxy materials prepared for a shareholder meeting at which directors are to be elected the name, Disclosure and Statement (as defined herein) of any person nominated for election to the board by a shareholder or group (the “Nominator”) that meets the criteria established below. The Company shall allow shareholders to vote on such nominee on the Company’s proxy card. +The number of shareholder-nominated candidates appearing in proxy materials shall not exceed one quarter of the directors then serving. This bylaw, which shall supplement existing rights under Company bylaws, should provide that a Nominator must: +a) have beneficially owned 3% or more of the Company’s outstanding common stock continuously for at least three years before submitting the nomination; +54 +Table of Contents +b) give the Company, within the time period identified in its bylaws, written notice of the information required by the bylaws and any Securities and Exchange Commission rules about (i) the nominee, including consent to being named in the proxy materials and to serving as director if elected; and (ii) the Nominator, including proof it owns the required shares (the “Disclosure”); and +c) certify that (i) it will assume liability stemming from any legal or regulatory violation arising out of the Nominator’s communications with the Company shareholders, including the Disclosure and Statement; (ii) it will comply with all applicable laws and regulations if it uses soliciting material other than the Company’s proxy materials; and (c [sic]) to the best of its knowledge, the required shares were acquired in the ordinary course of business and not to change or influence control at the Company. +The Nominator may submit with the Disclosure a statement not exceeding 500 words in support of the nominee (the “Statement”). The Board shall adopt procedures for promptly resolving disputes over whether notice of a nomination was timely, whether the Disclosure and Statement satisfy the bylaw and applicable federal regulations, and the priority to be given to multiple nominations exceeding the one-quarter limit. +SUPPORTING STATEMENT +We believe proxy access is a fundamental shareholder right that will make directors more accountable and contribute to increased shareholder value. The CFA Institute’s 2014 assessment of pertinent academic studies and the use of proxy access in other markets similarly concluded that proxy access: +· Would “benefit both the markets and corporate boardrooms, with little cost or disruption.” +· Has the potential to raise overall US market capitalization by up to $140.3 billion if adopted market-wide. ( http://www.cfapubs.org/doi/pdf/10.2469/ccb.v.2014.n9.1 ) +The proposed bylaw terms enjoy strong investor support – votes for similar shareholder proposals averaged 55% from 2012 through September 2014 – and similar bylaws have been adopted by companies of various sizes across industries, including Chesapeake Energy, Hewlett-Packard, Western Union and Verizon. +We urge shareholders to vote FOR this proposal. +Your Board Recommends You Vote Against This Proposal For The Following Reasons: +Cimarex is committed to good corporate governance, which promotes the long-term interests of shareholders, strengthens the Board of Directors, fosters management accountability, and helps build public trust in Cimarex. The Board has carefully considered this shareholder proposal and believes that its adoption is not in the best interests of Cimarex and its shareholders at this time. The Board believes that any proxy access framework implemented by the Company as a permanent feature of its corporate governance should be developed in a deliberate, methodical fashion following extensive engagement with shareholders, review of marketplace developments and consideration of unintended consequences. An appropriate framework for proxy access would carefully enhance the rights of significant, long-term shareholders without unduly risking the costs and distractions associated with encouraging unnecessary contests in director elections. The Comptroller Proposal fails to strike such a balance. Specifically, because this proposal (i) seeks an inappropriately low proxy access ownership threshold (3%); (ii) fails to expressly provide for reasonable limits on permitted aggregation or “grouping” of shares to meet the low ownership threshold, and (iii) contemplates an inordinately high fraction of the Board (25%) being available for proxy access candidates, it risks introducing a disruptive and potentially destabilizing dynamic into the Board election process - a particularly unjustified outcome given the significant extent to which our existing corporate governance structure promotes responsiveness and accountability to shareholders. +As described below, the Board intends to implement proxy access even if this proposal fails to pass - but on terms that we develop through further consultation with our shareholders and are more appropriate for the Company and much less likely to put shareholder value at risk. Accordingly, shareholders should understand that the Comptroller Proposal is neither the only nor, in our view, the preferable path to achieving proxy access at Cimarex. +55 +Table of Contents +The Comptroller Proposal’s suggested proxy access framework could have significant adverse consequences. +Certain major shareholders have advised us that a 3% threshold is too low given the potential costs and disruption that could result from such a proxy access regime. The Board concurs with this view. Candidates placed directly into our proxy materials by holders or unlimited groups of holders of as little as 3% of our outstanding shares, who would only need to win a plurality of votes to be elected in a contested election, may serve the special interests and particular agendas of those holders and fail to represent the best interests of the Company and its shareholders as a whole. Unlike the exclusively independent members of the Nominating Committee, who owe fiduciary duties to all of our shareholders when recommending director candidates, a shareholder making a nomination through the proposed proxy access process, or soliciting an unlimited number of shareholders to reach an already low 3% threshold (in essence conducting a proxy contest to conduct a proxy contest) has no fiduciary obligations to other shareholders and may cause the Company to undertake considerable expense and look to serve only the proposing shareholder’s own interests. The Board believes the low proxy access ownership threshold, absence of a specified cap on aggregation and high permissible percentage of proxy access candidates contemplated by this proposal do not adequately protect the Company and its shareholders from this significant risk. +The proposal reflects a “one size fits all” approach to proxy access, failing to recognize that Cimarex’s current governance practices and structure already ensure the Board is accountable to shareholders. +The Board notes that the NYC Funds submitted a substantially identical version of this proposal to dozens of companies, thereby failing to draw any distinction between the specific circumstances and governance profiles of each individual company. The Comptroller Proposal therefore takes no account of the fact that our shareholders already have several avenues to voice their opinions to, and influence, the Board and that our corporate governance structure provides for accountability and responsiveness to shareholders. For example, our current governance includes the following highlights: +· Active shareholder engagement program +· Majority-independent board of directors (8 of 10) with fully independent standing board committees +· Independent lead director +· Majority voting director resignation policy +· Directors with diverse skill sets and experiences +· Annual board and committee self-evaluations and annual board education +· Outside consultant review of Board skills +· Board and committee-level risk oversight programs +· Clawback policy +· Non-hedging and non-pledging policies +· Director and management stock ownership guidelines +· No tax gross ups +In addition to accountability, our governance policies and practices provide shareholders with the ability to effectively voice their opinions to the Board. Our shareholders are able to: +· propose director nominees to the Nominating Committee; +· communicate directly with the Board or with the directors serving on the Board; +· nominate directors pursuant to the Company’s bylaws and solicit proxies for director nominees under federal proxy rules; +56 +Table of Contents +· submit proposals for consideration at an annual meeting and for inclusion in the Company’s proxy statement, subject to certain conditions and Securities and Exchange Commission rules; and +· express their views on our executive compensation program through our annual “Say on Pay” vote. +Moreover, the Company has an active program of engagement with shareholders. We seek out the views of shareholders regularly with respect to important matters involving governance and operations, including proxy access. We believe that the minimal eligibility requirements and significant proportion of the Board availability for proxy access candidates contemplated by the Comptroller Proposal are disproportionate and inappropriate for a Company with existing policies and procedures as robust as ours to ensure Board accountability to shareholders. +The Board currently intends to implement an appropriate, reasonable form of proxy access following further review of marketplace developments and consultation with our shareholders, and such form may differ from the proxy access construct advanced by the NYC Funds. +Even if, as the Board recommends, the Company’s shareholders choose not to approve the Comptroller Proposal, the Board would still continue to engage with shareholders regarding proxy access. Subject to shareholder feedback and garnering support of a broad range of shareholders, the Board intends to develop bylaw amendments implementing a reasonable proxy access framework that the Board believes is in the best interests of the Company and the shareholders. The Board believes that a proxy access provision needs to be tailored to the company and its circumstances and that such a provision must not be susceptible to abuse or misuse that would put shareholder value at risk. Based on feedback already received from major shareholders and the Board’s analysis of the benefits and risks of proxy access, the Board currently believes that a proxy access framework with a 4% required ownership threshold (such threshold to be met either by an individual shareholder or a group of up to 15 shareholders), a three-year required holding period and up to 20% of the Board available for proxy access candidates could be appropriate for the Company. Subject to further consultation with shareholders and review of corporate governance developments and on-going evolution of best practices, the Board’s intention would be to develop and implement a proxy access provision in the ensuing year. Implementing a carefully considered proxy access framework - one that would be specifically tailored to the Company’s own needs and shareholder base as opposed to those of a one-size-fits-all agenda - will enhance our shareholders’ rights while seeking to mitigate the disproportionate risks of disruption of the Board’s functioning that we believe are posed by the Comptroller Proposal. +For the foregoing reasons, we believe that the Comptroller Proposal is unnecessary, involves the risk of considerable harm to our Company and is not in the best interests of our shareholders. Therefore, the Board recommends you vote AGAINST this proposal. +O THER M ATTERS +Section 16(a) Beneficial Ownership Reporting Compliance +Section 16(a) of the Securities Exchange Act of 1934 requires our Directors and executive officers, and persons who own more than 10% of our common stock, to file reports of ownership of, and transactions in, our common stock with the SEC. Based on a review of such reports, and on written representations from our reporting persons, we believe that all reports were timely filed in 2014. +Complaint and Reporting Procedures +We have established complaint and reporting procedures that are posted on our website at www.cimarex.com . Any person, whether or not an employee, who has a concern about the conduct of Cimarex or any of our employees, including accounting, internal accounting controls or auditing issues, may, in an anonymous manner, communicate that concern by calling our hotline, 1-866-519-1898. The hotline is available 24 hours a day, seven days a week. Comments will be typed verbatim and will be delivered to a representative with authority to investigate the concern. +57 +PLEASE DETACH +ALONG PERFORATED LINE AND MAIL IN THE ENVELOPE PROVIDED. t t PROXY THIS PROXY +IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS CIMAREX ENERGY CO. The +undersigned appoints Thomas E. Jorden and Francis B. Barron as proxies, with +power to act without the other and with power of substitution, and authorizes +them to represent and vote, as designated on the other side, all the shares +of common stock of Cimarex Energy Co. held of record by the undersigned with +all powers that the undersigned would possess if present at the Annual +Meeting of Shareholders to be held at the Hershner Room, 1700 Lincoln Street, +Denver, Colorado 80203, on May 14, 2015, at 9:00 a.m., Mountain Daylight +Time, or any adjournment thereof. For participants in the Cimarex 401(k) +Plan, this proxy, when properly executed, will be voted in the manner +directed by the undersigned. If no direction is given, if the card is not +signed, or if the card is not received prior to 11:59 p.m., Eastern Daylight +Time, on May 11, 2015, the Plan's Trustee will vote your shares held in the +Plan in the same proportion as shares were voted by other Plan participants. +(Continued, and to be marked, dated and signed, on the other side) Important +Notice Regarding the Availability of Proxy Materials for the Annual Meeting +of Shareholders to be held May 14, 2015. The Proxy Statement and our 2014 +Annual Report to Shareholders are available at: +http://www.allianceproxy.com/cimarex/2015 +PLEASE DETACH +ALONG PERFORATED LINE AND MAIL IN THE ENVELOPE PROVIDED. t t PROXY VOTING +INSTRUCTIONS Please have your 11 digit control number ready when voting by +Internet or Telephone INTERNET Vote Your Proxy on the Internet: Go to +www.cesvote.com Have your proxy card available when you access the above +website. Follow the prompts to vote your shares. TELEPHONE Vote Your Proxy by +Phone: Call 1 (888) 693-8683 Use any touch-tone telephone to vote your proxy. +Have your proxy card available when you call. Follow the voting instructions +to vote your shares. MAIL Vote Your Proxy by Mail: Mark, sign, and date your +proxy card, then detach it, and return it in the postage-paid envelope +provided. CONTROL NUMBER NOTE: Please sign as name appears hereon. Joint +owners should each sign. When signing as attorney, executor, administrator, +corporate officer, trustee or guardian, please give full title as such. Signature +Signature (if held jointly) Date: +, 2015 Please mark your votes like this x THIS PROXY WILL BE VOTED AS +DIRECTED, OR, IF NO DIRECTION IS INDICATED, WILL BE VOTED “FOR” ALL THE +NOMINEES LISTED UNDER ITEM 1 AND “FOR” ITEMS 2 AND 3, AND “AGAINST” ITEM 4. +THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. The Board of +Directors recommends a vote FOR all the nominees listed below: 1. Election of +two Class I directors: FOR AGAINST ABSTAIN (01) Joseph R. Albi o o o (02) +Michael J. Sullivan o o o The Board of Directors recommends you vote FOR the +following Items: FOR AGAINST ABSTAIN 2. Advisory vote to approve executive +compensation o o o 3. Ratify the appointment of KPMG LLP as our independent +auditors for 2015 o o o The Board of Directors recommends you vote AGAINST +the following Item: 4. Shareholder proposal on “proxy access” o o o CIMAREX +ENERGY CO. As a shareholder of Cimarex Energy Co., you have the option of +voting your shares electronically through the Internet or on the telephone, +eliminating the need to return the proxy card. Your electronic vote +authorizes the named proxies to vote your shares in the same manner as if you +marked, signed, dated and returned the proxy card. Votes submitted +electronically over the Internet or by telephone must be received by 7:00 +p.m., Eastern Time, on May 13, 2015. The Board of Directors recommends a vote +“FOR” all the nominees listed under Item 1 and “FOR” Items 2 and 3, and +“AGAINST” Item 4. I plan on attending the meeting o CONTROL NUMBER \ No newline at end of file diff --git a/raw/proxies/0001168054/0001104659-15-025318/proxy_rpt.txt b/raw/proxies/0001168054/0001104659-15-025318/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..0f19f619a1b9c14c0169cbdc00aec62a170a6636 --- /dev/null +++ b/raw/proxies/0001168054/0001104659-15-025318/proxy_rpt.txt @@ -0,0 +1,23 @@ +Review of related party transactions +Yes +Diverse Board skills and experience +Yes +Non-Hedging and non-pledging policies +Yes +Annual Board and Committee self-evaluations +Yes +Clawback policy +Yes +Consultant review of Board skills +Yes +Management and Director stock ownership guidelines +Yes +Annual equity grants to Directors +Yes +Tax gross-ups +No +Annual Board education +Yes +Interested parties may communicate with our Board by mail directed to our Corporate Secretary or by facsimile (720) 403-9383. All communications will be forwarded to the Lead Director for the Lead Director’s review. The Lead Director may take any action the Lead Director deems appropriate or necessary, including, without limitation, forwarding the information to the Board for consideration or, with the concurrence of the Board, retaining independent or outside counsel, accountants or other advisors to address the concern. +20 +Table of Contents \ No newline at end of file diff --git a/raw/proxies/0001168054/0001104659-16-108949/proxy.txt b/raw/proxies/0001168054/0001104659-16-108949/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..b92697f55afb6b5e9dde29cbe054aeed72a83943 --- /dev/null +++ b/raw/proxies/0001168054/0001104659-16-108949/proxy.txt @@ -0,0 +1,3110 @@ +DEF 14A +1 +a16-2317_1def14a.htm +DEF 14A +Table of Contents +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +Washington, D.C. 20549 +SCHEDULE 14A +Proxy Statement Pursuant to Section 14(a) of +the Securities Exchange Act of 1934 (Amendment No. ) +Filed by the Registrant x +Filed by a Party other than the Registrant o +Check the appropriate box: +o +Preliminary Proxy Statement +o +Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(3)(2)) +x +Definitive Proxy Statement +o +Definitive Additional Materials +o +Soliciting Material Pursuant to §240.14a-12 +Cimarex Energy Co. +(Name of Registrant as Specified in Its Charter) +(Name of Person(s) Filing Proxy Statement, if other than the Registrant) +Payment of Filing Fee (Check the appropriate box): +x +No fee required. +o +Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. +(1) +Title of each class of securities to which transaction applies: +(2) +Aggregate number of securities to which transaction applies: +(3) +Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): +(4) +Proposed maximum aggregate value of transaction: +(5) +Total fee paid: +o +Fee paid previously with preliminary materials. +o +Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. +(1) +Amount Previously Paid: +(2) +Form, Schedule or Registration Statement No.: +(3) +Filing Party: +(4) +Date Filed: +Table of Contents +1700 Lincoln Street, Suite 3700 +Denver, CO 80203-4537 +NOTICE OF 2016 ANNUAL MEETING OF SHAREHOLDERS +TIME AND DATE +9:00 a.m. Central Daylight Time on Thursday, May 12, 2016 +PLACE +Hyatt Regency Tulsa +100 East Second Street +Tulsa, Oklahoma 74103 +ITEMS OF BUSINESS +Item 1. Election of Directors +Item 2. Advisory Vote to Approve Executive Compensation +Item 3. Ratification of Independent Auditors +Transact any other business that properly comes before the Meeting and any adjournment or postponement of the Meeting +RECORD DATE +March 16, 2016 +MAILING DATE TO SHAREHOLDERS +March 31, 2016 +MATERIALS TO REVIEW +This booklet contains our Notice of 2016 Annual Meeting and Proxy Statement. Our 2015 Annual Report is available on our website at www.cimarex.com . +PROXY VOTING +It is important that your shares be represented and voted at the Meeting. You can vote your shares by following the internet or telephone instructions on page 9 of this proxy statement or you may attend and vote in person at the Annual Meeting. If you received a paper copy of the proxy card, you also may vote by completing and mailing the proxy card in the postage-paid envelope provided for your convenience. You may revoke your proxy at any time before the vote is taken by following the instructions on page 11 of this proxy statement. +Francis B. Barron +March 31, 2016 +Corporate Secretary +Table of Contents +TABL E OF CONTENTS +Page No. +Voting Information +2 +Proxy Statement Summary +3 +Proxy Statement +8 +Questions and Answers +9 +Election of Directors (Item 1) +13 +Election Process +13 +Director Nominations +14 +Director Qualifications +14 +2016 Nominees for Class I Director and Class II Directors +14 +Continuing Directors +16 +Director Compensation +18 +Corporate Governance +20 +Board and Committee Information +21 +Our Board +21 +Board Leadership Structure +21 +Board Committees +22 +Director Independence and Related Person Transactions +23 +Risk Oversight +24 +Executive Sessions +25 +Shareholder Engagement +25 +Stock Ownership Directors, Management and Certain Beneficial Owners +26 +Compensation Discussion and Analysis +28 +Compensation and Governance Committee Report +46 +Compensation Tables +47 +Summary Compensation Table +47 +2015 Grants of Plan-Based Awards +49 +Outstanding Equity Awards at December 31, 2015 +50 +2015 Option Exercises and Restricted Stock Vested +51 +2015 Nonqualified Deferred Compensation +51 +Potential Payments Upon Change in Control or Termination +52 +Severance Arrangements for Former CFO +56 +Director and Officer Indemnification Agreements +56 +Advisory Vote to Approve Executive Compensation (Item 2) +56 +Report of Audit Committee +57 +Ratification of Independent Auditors (Item 3) +58 +Audit and Non-Audit Fees +58 +Policy for Approval of Audit, Audit-Related and Tax Services +58 +Other Matters +59 +Section 16(a) Beneficial Ownership Reporting Compliance +59 +Complaint and Reporting Procedures +59 +Table of Contents +VOTING INFORMATION +WE WANT TO HEAR FROM YOU – VOTE TODAY +It is important that you vote. Please carefully review the proxy materials for the 2016 Annual Meeting of Shareholders and follow the instructions below to cast your vote on all of the voting matters. +Voting Matters and Board Recommendations +Our Board’s Recommendation +Election of Directors (page 13) +FOR each Director Nominee +Advisory Vote to Approve Executive Compensation (page56) +FOR +Ratification of Independent Auditors (page 58) +FOR +Advance Voting Methods +Even if you plan to attend the 2016 Annual Meeting of Shareholders in person, please vote right away using one of the following advance voting methods (see page 9 for additional details). Make sure to have your proxy card or voting instruction form in hand and follow the instructions. +You can vote in advance in one of three ways: +Visit the website listed on your proxy card/voting instruction form to vote VIA THE INTERNET +Call the telephone number on your proxy card/voting instruction form to vote BY TELEPHONE +Sign, date and return your proxy card/voting instruction form in the enclosed envelope to vote BY MAIL +Voting at our 2016 Annual Meeting of Shareholders +All shareholders of record may vote in person at the 2016 Annual Meeting of Shareholders, which will be held on Thursday, May 12, 2016 at 9:00 a.m., Central Daylight Time, at Hyatt Regency Tulsa, 100 East Second Street, Tulsa, Oklahoma 74103. Beneficial owners may vote in person at the Meeting if they have a legal proxy, as described in the response to question 14 on page 12 of “Questions and Answers about the Meeting and Voting.” +2 +Table of Contents +Proxy Statement Summary +Director Nominees (page 13) +You are being asked to vote on the following four Director Nominees. Directors are elected by a majority of votes cast. Detailed information about each Director’s background, skill sets and areas of expertise can be found beginning on page 13. +NAME +AGE +DIRECTOR +SINCE +POSITION +INDEPENDENT +AC +C/G +NOM +OTHER +PUBLIC +BOARDS +Hans Helmerich +57 +2002 +Chairman and former CEO, Helmerich & Payne +Yes +X +X +3 +Harold R. Logan, Jr. +71 +2009 +Chairman, Suburban Propane Partners L.P. +Yes +X +X +3 +Monroe W. Robertson +66 +2005 +Retired, Former President and Chief Operating Officer of Key Production Co. +Yes +X +X +0 +Lisa A. Stewart +58 +2015 +Chairman and Chief Investment Officer of Sheridan Production Partners +Yes +X +X +0 +Continuing Directors (page 16) +The following are Cimarex’s continuing Directors. Detailed information about each Director’s background, skill sets and areas of expertise can be found beginning on page 16. +NAME +AGE +DIRECTOR +SINCE +TERM +EXPIRES +POSITION +INDEPENDENT +AC +C/G +NOM +OTHER +PUBLIC +BOARDS +Joseph R. Albi +57 +2011 +2018 +Executive Vice President—Operations, Chief Operating Officer, Cimarex Energy Co. +No +0 +David A. Hentschel +82 +2002 +2017 +Retired, former Chairman and CEO, Occidental Oil and Gas Corporation +Yes +X +X +0 +Thomas E. Jorden +58 +2011 +2017 +Chairman, CEO and President, Cimarex Energy Co. +No +0 +Floyd R. Price +67 +2012 +2017 +Retired, former executive officer, Apache Corp. +Yes +X +X +1 +Michael J. Sullivan +76 +2002 +2018 +Retired Senior Attorney, +Lewis Roca Rothgerber LLP +Yes +X +X +1 +L. Paul Teague +81 +2002 +2017 +Retired, former Vice President, Texaco USA +Yes +X +X +0 +3 +Table of Contents +Governance Highlights (page 20) +Cimarex is committed to good corporate governance, which promotes the long-term interests of shareholders, strengthens the Board of Directors, fosters management accountability, and helps build public trust in Cimarex. Highlights include: +· 8 of 10 Independent Directors +· Independent Lead Director +· Majority Voting Director resignation policy +· Active Shareholder engagement +· Proxy Access +· Clawback Policy +· Non-Hedging and Non-Pledging Policies +· Director and Management Stock Ownership Guidelines +· No Tax Gross-Ups +4 +Table of Contents +2015 Executive Compensation (page 29) +Below is the 2015 compensation for each Named Executive Officer (“NEO”) as determined under the Securities and Exchange Commission (“SEC”) rules. See the notes accompanying the 2015 Summary Compensation Table on page 47 for more information. +Name and +Principal Position +Salary +Bonus +Stock +Awards +Option +Awards +Non-Equity +Incentive +Plan Comp. +All Other +Comp. +Total +Thomas E. Jorden +Chairman, Chief Executive Officer and President (Principal Executive Officer) +$ +870,750 +$ +— +$ +6,424,530 +$ +— +$ +435,375 +$ +59,481 +$ +7,790,136 +G. Mark Burford +Vice President and Chief Financial Officer (Principal Financial Officer) +$ +342,279 +$ +— +$ +2,250,000 +$ +— +$ +156,000 +$ +47,340 +$ +2,795,619 +Joseph R. Albi +$ +561,600 +$ +— +$ +3,200,000 +$ +— +$ +225,000 +$ +58,053 +$ +4,044,653 +Executive Vice President—Operations, Chief Operating Officer +Stephen P. Bell +Executive Vice President—Business Development +$ +467,625 +$ +— +$ +2,850,000 +$ +— +$ +163,000 +$ +75,195 +$ +3,555,820 +John A. Lambuth +$ +427,168 +$ +— +$ +3,050,000 +$ +— +$ +156,000 +$ +51,803 +$ +3,684,971 +Senior Vice President—Exploration +Paul Korus +Former Senior Vice President — Chief Financial Officer (Former Principal Financial Officer) +$ +331,430 +$ +— +$ +— +$ +— +$ +324,107 +$ +69,703 +$ +725,240 +A Significant Portion of our CEO’s 2015 Compensation is At Risk +The accompanying graph illustrates our CEO’s 2015 at-risk compensation. A significant portion of reported compensation is an incentive for future performance and realized only if Cimarex meets certain performance measures. +5 +Table of Contents +How CEO Pay is Tied to Cimarex’s Performance (page 39) +Our compensation programs are designed to align performance incentives with the long-term interests of our shareholders. The programs also provide competitive total compensation opportunities that retain, and attract when needed, executive talent and link compensation earned to achievement of short- and long-term financial and strategic objectives. Our Compensation and Governance Committee considers performance in two primary ways: +· Cimarex’s operating performance; and +· Return to shareholders over time, on both an absolute basis and a relative basis compared to other companies in the S&P Oil & Gas Exploration & Production Index and our compensation peer group (see page 42). +2015 Financial and Operating Highlights +· Average daily production increased 13% to 984.5 MMcfe per day. +· Oil production grew 19% to 51,132 barrels per day, gas volumes increased by 9% to 463.0 MMcf per day and NGL volumes rose 15% to 35,789 barrels per day. +· We added 571 Bcfe of proved reserves from extensions and discoveries and net positive performance revisions, replacing 159% of production. +· In the second quarter of 2015 we completed a common stock offering and received net proceeds of $730.0 million. +· Cash on hand at year end was $779.4 million. +· Production revenues declined 40% to $1.4 billion. +· Cash flow provided by operating activities of $691.5 million was 57% lower than that of the prior year. +· We incurred non-cash impairments of our oil and gas properties totaling $3.7 billion. +· We had a net loss for the year of $2.4 billion, or $25.92 per share. +· Proved reserves decreased 7.1% to 2,909.4 Bcfe primarily due to negative price-related revisions of 398.8 Bcfe. +6 +Table of Contents +Return to Shareholders +Cimarex has consistently returned value to its shareholders. The following chart shows how a December 31, 2010 investment of $100 in Cimarex common stock would have grown to $104.00 on December 31, 2015, which includes dividends reinvested quarterly for those who wish to considering Total Shareholder Return when evaluating executive compensation. The chart also compares the Total Shareholder Return on Cimarex common stock to the same investment in the S&P 500 Index, the Dow Jones US Exploration & Production Index, and the S&P Oil & Gas Exploration & Production index over the same time period. +12/31/2010 +12/31/2011 +12/31/2012 +12/31/2013 +12/31/2014 +12/31/2015 +Cimarex Energy Co. +100.00 +70.26 +66.01 +120.78 +122.66 +104.00 +S&P 500 +100.00 +102.11 +118.45 +156.82 +178.29 +180.75 +Dow Jones US Exploration & Production +100.00 +95.81 +101.39 +133.68 +119.27 +90.97 +S&P Oil & Gas Exploration & Production +100.00 +93.57 +96.98 +123.65 +110.55 +72.80 +The stock price performance included in this graph is not necessarily indicative of future stock price performance. +7 +Table of Contents +PROXY STATEMENT +We are furnishing you this proxy statement to solicit proxies to be voted at the 2016 Annual Meeting (“Meeting”) of Shareholders of Cimarex Energy Co. (“Cimarex” or the “Company”). The Meeting will take place on May 12, 2016 at 9:00 a.m. Central Daylight Time at the Hyatt Regency Tulsa, 100 East Second Street, Tulsa, Oklahoma 74103. The proxies also may be voted at any adjournments or postponements of the Meeting. +The mailing address of our principal office is 1700 Lincoln Street, Suite 3700, Denver, Colorado 80203. We are first furnishing the proxy materials to shareholders on March 31, 2016. +All properly executed written proxies and proxies submitted by telephone or internet delivered pursuant to this solicitation will be voted at the Meeting in accordance with the directions given in the proxy, unless the proxy is revoked prior to completion of voting at the Meeting. +Only owners of record of shares of Cimarex common stock (“Common Stock”) as of the close of business on March 16, 2016, the record date, are entitled to notice of and to vote at the Meeting or at any adjournments or postponements of the Meeting. Each owner of Common Stock on the record date is entitled to one vote for each share of Common Stock held. On March 16, 2016, there were 94,816,993 shares of Common Stock issued and outstanding. +IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 12, 2016. +The Notice of Annual Meeting, Proxy Statement and Annual Report on Form 10-K for the year ended December 31, 2015 are available at http://www.allianceproxy.com/cimarex/2016 . +8 +Table of Contents +QUESTIONS AND ANSWERS +P ROXY M ATERIALS AND V OTING I NFORMATION +1. Why did I receive these proxy materials? +We are providing these materials in connection with the solicitation by the Board of Directors of Cimarex Energy Co., a Delaware corporation, of proxies to be voted at our 2016 Annual Meeting of Shareholders and at any adjournment or postponement of the Meeting. The Meeting will take place on May 12, 2016, beginning at 9:00 a.m. Central Daylight Time, at the Hyatt Regency Tulsa, 100 East Second Street, Tulsa, Oklahoma 74103. +2. What is the difference between holding shares as a shareholder of record and as a beneficial owner? +If your shares are registered directly in your name with Cimarex’s registrar and transfer agent, Continental Stock Transfer & Trust Company, you are considered a shareholder of record with respect to these shares. If your shares are held in a brokerage account or bank, broker or other nominee, you are considered the beneficial owner of these shares. +3. What shares are included on the proxy card? +If you are a shareholder of record, you will receive only one proxy card for all the shares you hold of record in certificate form and in book-entry form. +If you are a Cimarex employee, you will receive a proxy or voting instruction card for all the shares you hold in the Cimarex 401(k) Plan. Your proxy card will serve as a voting instruction card for the Plan trustee. If you do not specify your voting instructions on the proxy card, the Plan trustee will vote your shares in the same proportion as it votes shares for which it did receive timely instructions. To allow sufficient time for voting by the trustee, your voting instructions must be received no later than 11:59 p.m. Eastern Daylight Time on May 9, 2016. +4. What different methods can I use to vote? +By Written Proxy. All shareholders of record can vote by written proxy card. If you are a shareholder of record and receive a notice regarding the availability of proxy materials, you may request a written proxy card by following the instructions included in the notice. If you are a beneficial owner, you may request a written proxy card or a voting instruction form from your bank, broker or other nominee. +By Telephone or Internet. All shareholders of record can vote by calling the toll-free telephone number on the proxy card. Please have your proxy card when you call. Voice prompts will direct you on how to vote your shares and will confirm your voting instructions have been recorded properly. +Shareholders also may vote on the internet by accessing the website noted on the proxy card. Please have your proxy card when you go to the website. As with telephone voting, you can confirm your voting instructions have been recorded properly. +Beneficial owners may vote by telephone or internet if their bank, broker or other nominee makes those methods available, in which case the bank, broker or other nominee will include the instructions with the proxy materials. +9 +Table of Contents +5. What are my voting choices for each of the proposals to be voted on at the 2016 Annual Meeting of Shareholders and what are the voting standards? +Proposal +Voting Choices and Board Recommendation +Voting Standard +Item 1. Election of One Class I Director and Three Class II Directors +· vote in favor of all nominees; +· vote in favor of specific nominees; +· vote against all nominees; +· vote against specific nominees; +· abstain from voting with respect to all nominees; or +· abstain from voting with respect to specific nominees. +The Board recommends a vote FOR each of the nominees. +Majority of votes cast +Item 2. Advisory Vote to Approve Executive Compensation +· vote in favor of the advisory proposal; +· vote against the advisory proposal; or +· abstain from voting on the advisory proposal. +The Board recommends a vote FOR the advisory proposal to approve executive compensation. +Majority of shares present and entitled to vote +Item 3. Ratification of the Appointment of KPMG LLP as Independent Auditors +· vote in favor of the ratification; +· vote against the ratification; or +· abstain from voting on the ratification. +The Board recommends a vote FOR the ratification. +Majority of shares present and entitled to vote +6. What if I am a beneficial owner and do not give voting instructions to my broker? +As a beneficial owner, in order to ensure your shares are voted in the way you would like, you must provide voting instructions to your bank, broker or other nominee by the deadline provided in the materials you receive from your bank, broker or other nominee. If you do not provide voting instructions to your bank, broker or other nominee, whether your shares can be voted by such person depends on the type of item being considered to vote. +Non-Discretionary Items. The election of Directors and the advisory vote to approve executive compensation are non-discretionary items and may not be voted on by brokers, banks or other nominees who have not received specific voting instructions from beneficial owners. +Discretionary Items. The ratification of the appointment of KPMG LLP as Independent Auditors is a discretionary item. Generally banks, brokers and other nominees that do not receive voting instructions from beneficial owners may vote on the proposal in their discretion. +10 +Table of Contents +7. How are abstentions and broker non-votes counted? +Item 1. Election of One Class I Director and Three Class II Directors. If you abstain from voting in the election of Directors, you will be treated as not having cast a vote and the abstention will not be counted in determining the outcome of the election. Broker non-votes are not considered a vote cast under our Bylaws and will have no effect on the outcome of the election of Directors. +Item 2. Advisory Vote to Approve Executive Compensation. If you abstain from voting on the advisory vote to approve executive compensation, you are considered present and entitled to vote, and your shares are considered in the calculation of whether Item 2 received the affirmative vote of a majority of shares present and entitled to vote. The effect of an abstention is a vote against Item 2. Broker non-votes are not considered in the calculation of a majority of shares present and entitled to vote. +Item 3. Ratification of Appointment of KPMG as Independent Auditors. If you abstain from voting on the ratification of KPMG LLP as Cimarex’s Independent Auditors, you are considered present and entitled to vote, and your shares are considered in the calculation of whether Item 3 received the affirmative vote of a majority of shares present and entitled to vote. The effect of an abstention is a vote against Item 3. Because Item 3 is a routine matter on which a broker has discretionary authority, no or few broker non-votes likely will result from this Item. +8. What can I do if I change my mind after I vote my shares? +You may revoke your proxy prior to the completion of voting by: +· Giving written notice to Cimarex’s Corporate Secretary; +· Delivering a valid, later-dated proxy, or a later-dated vote by telephone or on the internet in a timely manner; or +· Voting by ballot at the Annual Meeting. +9. Can I access the proxy materials on the internet? How can I sign up for the electronic proxy delivery service? +We are distributing our proxy materials to certain shareholders via the internet under the “notice and access” approach permitted by the SEC. On or about March 31, 2016, we will mail to certain of our shareholders a notice of internet availability of proxy materials with instructions explaining how to access our proxy statement and annual report and how to vote online. If you receive a notice of internet availability by mail, you will not receive a printed copy of the proxy materials in the mail unless you request them by following the instructions for requesting such materials included in the notice of internet availability. +Even if you do not participate in “notice and access,” the Notice of Annual Meeting and proxy statement are available on the internet at http://www.allianceproxy.com/cimarex/2016 . +10. Who counts the votes? +Alliance Advisors LLC, our proxy solicitor, will tabulate the votes and act as inspector of election. +11 +Table of Contents +11. When will Cimarex announce the voting results? +We will announce the preliminary voting results at the Annual Meeting of Shareholders. Cimarex will report the final results in a Current Report on Form 8-K filed with the SEC after the Meeting. +12. How are proxies solicited, and what is the cost? +We bear all expenses incurred in connection with the solicitation of proxies. We hired Alliance Advisors LLC to assist with the solicitation of proxies for an estimated fee of $9,500 plus expenses. We will reimburse brokers, fiduciaries and custodians for their costs in forwarding proxy materials to beneficial owners of Common Stock. +Our Directors, officers and employees also may solicit proxies by mail, telephone and personal contact. They will not receive any additional compensation for these activities. +13. What is householding? +As permitted by the Securities Exchange Act of 1934, as amended (the “1934 Act”), only one copy of this proxy statement is being delivered to shareholders residing at the same address, unless the shareholders have notified Cimarex of their desire to receive multiple copies of the proxy statement. This is known as “householding.” +Upon oral or written request, we promptly will deliver a separate copy of the proxy statement to any shareholder residing at an address to which only one copy was mailed. Direct requests for additional copies for the current year or future years to our Corporate Secretary, Cimarex Energy Co., 1700 Lincoln Street, Suite 3700, Denver, Colorado 80203-4537, telephone (303) 295-3995 and facsimile (720) 403-9383. +Shareholders of record residing at the same address and currently receiving multiple copies of the proxy statement may contact our registrar and transfer agent, Continental Stock Transfer & Trust Company, by phone at (888) 509-5580 or by mail at 17 Battery Place South, 8 th Floor, New York, NY 10004, to request a single copy be mailed in the future. +Beneficial owners should contact their broker or bank. +14. How can I vote at the Meeting if I am a beneficial owner? +If you are a beneficial owner and want to vote your shares at the Annual Meeting (“Meeting”), you will need to ask your bank, broker or other nominee to furnish you with a legal proxy, bring the legal proxy with you to the Meeting and hand it in with a signed ballot that will be provided to you at the Meeting. You will not be able to vote your shares at the Meeting without a legal proxy. If you do not have a legal proxy, you can still attend the Meeting. We encourage you to vote your shares in advance, even if you intend to attend the Meeting. Please note that if you request a legal proxy, any previously executed proxy will be revoked, and your vote will not be counted unless you appear at the Meeting and vote in person or legally appoint another proxy to vote on your behalf. +C OMPANY D OCUMENTS, C OMMUNICATIONS AND S HAREHOLDER P ROPOSALS +15. How can I view copies of Cimarex’s corporate documents and SEC filings? +Our Corporate Governance Guidelines, Board Committee Charters, Code of Business Conduct and Code of Ethics and SEC filings are posted on our website at www.cimarex.com . Upon request, we will promptly deliver (free of charge) a copy of our Annual Report on Form 10- K to any shareholder. Direct such requests to our Corporate Secretary, Cimarex Energy Co., 1700 Lincoln Street, Suite 3700, Denver, Colorado 80203-4537, telephone (303) 295-3995 and facsimile (720) 403-9383. +12 +Table of Contents +16. How can I communicate with Cimarex’s Directors? +Communications can be addressed to our Directors by mail in care of our Corporate Secretary, Cimarex Energy Co., 1700 Lincoln Street, Suite 3700, Denver, Colorado 80203-4537, telephone (303) 295-3995 or facsimile (720) 403-9383. All communications will be forwarded to our Lead Director. The Lead Director may take any action deemed appropriate or necessary, including, without limitation, forwarding the information to the Board for consideration or, with the concurrence of the Board, retaining independent or outside counsel, accountants or other advisors to address the concern. +17. How do I submit a proposal for action at the 2017 Annual Meeting of Shareholders? +A proposal to be acted upon at the 2017 Annual Meeting of Shareholders will be acted upon only: +· If the proposal is to be included in the proxy statement, pursuant to Rule 14a-8 under the 1934 Act, the proposal is received by our Corporate Secretary on or before December 2, 2016, and the proposal meets the requirements of the applicable rules of the SEC and the requirements of our bylaws. +· If the proposal is not to be included in the proxy statement, pursuant to our bylaws, the proposal is submitted in writing to our Corporate Secretary no earlier than January 12, 2017 and no later than February 13, 2017, and such proposal is, under Delaware General Corporation Law, an appropriate subject for shareholder action. +ELECTION OF DIRECTORS (ITEM 1) +Election Process +Our current Board consists of ten Directors, which is the maximum number of Directors permitted by our Certificate of Incorporation. The Board is divided into three classes: Class I, Class II and Class III Directors. At each Annual Meeting a Class of Directors is elected for a term expiring at the Annual Meeting in the third year following the year of election. Each Director holds office until his or her successor is elected and qualifies. +The terms of the one Class I Director, Lisa A. Stewart, and the three Class II Directors, Hans Helmerich, Harold R. Logan, Jr. and Monroe W. Robertson, will expire at the 2016 Annual Meeting. The Nominating Committee, at its February 2016 meeting, nominated Ms. Stewart for election as a Class I Director, to serve until the 2018 Annual Meeting, and Messrs. Helmerich, Logan and Robertson for election as Class II Directors, to serve until the Annual Meeting of Shareholders to be held in 2019. +If prior to the Annual Meeting a nominee becomes unavailable to serve as a Director, any shares represented by a proxy directing a vote will be voted for the remaining nominees and for any substitute nominee(s) designated by our Board or its Nominating Committee. As of the mailing of these proxy materials, the Board knows of no reason why any Director nominee would not be available to serve as a Director. +A nominee is elected if the votes cast for his or her election exceed the votes cast against his or her election. Pursuant to our majority voting policy, each nominated Director has tendered an irrevocable resignation that is effective upon his or her failure to receive the required vote and the Board’s acceptance of such resignation. If a nominee fails to receive more favorable votes than votes cast against him or her, the Nominating Committee will act on an expedited basis following the Annual Meeting to determine whether to recommend that the Board accept the Director’s resignation. The Nominating Committee and the Board may consider any factors they deem relevant in deciding whether to accept the Director’s resignation. The Director whose resignation is under consideration must abstain from participating in any decision regarding his or her resignation. The Board publicly will disclose its decision regarding acceptance of his or her resignation within 90 days after the results of the election are certified. If the resignation is not accepted, the Director will continue to serve as a Director until his or her successor is elected and qualified. If the Board accepts the resignation, then the Board will either fill the vacancy in accordance with the Bylaws or decrease the size of the Board in compliance with the Certificate of Incorporation. +13 +Table of Contents +Director Nominations +The Nominating Committee is responsible for identifying and evaluating nominees for Director and for recommending to the Board a slate of nominees for election at each Annual Meeting. Nominees may be suggested by Directors, members of management, shareholders or a third-party firm. During 2015, the Nominating Committee engaged Preng & Associates, a search firm with expertise with oil and gas exploration and production companies, to assist in identifying director candidates. Preng & Associates identified several director candidates, including Lisa A. Stewart, who was appointed as a Director in October 2015. In 2014, Preng & Associates also conducted an evaluation of the Board’s and individual Director’s skill sets. +While the Nominating Committee will consider nominees recommended by shareholders, it did not receive any shareholder nominations for the 2016 Annual Meeting prior to the deadline for such nominations. Shareholders who wish to nominate persons for election as Directors at the 2017 Annual Meeting must submit a timely written notice complying with Cimarex’s Bylaws to the Corporate Secretary, Cimarex Energy Co., 1700 Lincoln Street, Suite 3700, Denver, Colorado 80203-4537, facsimile (720) 403-9383. To be timely, the shareholder’s written notice must be received between January 12, 2017 and February 13, 2017. In addition, shareholder nominations must comply with the other requirements of Article III, Section 2 or Section 2A, as applicable, of our Bylaws. +Director Qualifications +In its assessment of each potential candidate, the Nominating Committee considers the nominee’s judgment, integrity, experience, independence, understanding of Cimarex’s business or related industries and such other factors that the Nominating Committee determines are pertinent in light of the needs of the Board. The Nominating Committee also considers the ability of a nominee to devote the time and effort necessary to fulfill his or her responsibilities to Cimarex. Our Nominating Committee Charter specifically includes diversity of gender and ethnic background in the list of desirable attributes sought in our Board composition. +Although all the current Directors have extensive oil and gas experience, either as company executives or attorneys, their experience is with companies with widely different operating strategies. This diversity and depth of experience benefits our Board in executing its duty of oversight and guidance. +2016 Nominees for Class I Director and Class II Directors +Upon the recommendation of the Nominating Committee, the Board has nominated Lisa A. Stewart for election as a Class I Director to serve until the 2018 Annual Meeting, and Hans Helmerich, Harold R. Logan, Jr. and Monroe W. Robertson for election as Class II Directors to serve until the Annual Meeting of Shareholders to be held in 2019. The Board has determined that the nominees are independent under the New York Stock Exchange (“NYSE”) corporate governance rules. Each of the Director nominees currently serves on the Board. We have no reason to believe that any of the nominees will be unable or unwilling to serve if elected. +The Board believes that the combination of the various qualifications, skills and experiences of the 2016 Director nominees will contribute to an effective and well-functioning Board. The Board also believes that, individually and as a whole, the Director nominees possess the necessary qualifications to provide effective oversight of the business and quality advice and counsel to Cimarex. +Included in each Director nominee’s biography is an assessment of the specific qualifications, attributes, skills and experience of such nominee based on the qualifications described above. +The Board of Directors recommends a vote FOR the election of each of the Director nominees. +HANS HELMERICH, 57 +Position, Principal Occupation and Business Experience +Mr. Helmerich has served as Chairman of Helmerich & Payne, Inc. (“H&P”) since March 2012 and a director since 1987. H&P is a publicly held company primarily engaged in contract drilling services for oil and gas exploration and production companies. H&P uses drilling rigs it designs and builds and is one of the major land and offshore platform drilling companies in the world. +14 +Table of Contents +After joining H&P in 1981, Mr. Helmerich served as CEO from 1989 to March 2014 and as President from 1989 to March 2012. H&P’s exploration and production business was merged into Cimarex in 2002. +Mr. Helmerich serves as a director of Atwood Oceanics, Inc., located in Houston, Texas, an international offshore drilling company traded on the NYSE, and as a Trustee of The Northwestern Mutual Life Insurance Company of Milwaukee, Wisconsin. +Key Attributes, Experience and Skills +Mr. Helmerich’s background with the drilling sector of the oil and gas business provides the Board with insight into an aspect of Cimarex’s business that represents a significant expenditure in Cimarex’s capital budget. His over 25 years of executive experience provide a strong background for his service on Cimarex’s Board and on the Compensation and Governance Committee. In addition, his service as a director of Atwood Oceanics and as a Trustee of The Northwestern Mutual Life Insurance Company provides him with additional experience and knowledge to serve as a Director. +HAROLD R. LOGAN, JR., 71 +Position, Principal Occupation and Business Experience +Mr. Logan currently serves as Chairman of the Board of Supervisors of Suburban Propane Partners, L.P. and has served as a director of that company since 1996. In February 2015, he began serving as Lead Director of InfraREIT, Inc., a publicly held real estate investment trust that owns utility assets (electric transmission lines) in Texas. In addition, he has been a director of Graphic Packaging Holding Co. and predecessor companies since 2003. Mr. Logan also is a director of two private companies – Hart Energy Publishing (publisher of Oil and Gas Investor and other energy publications) and Basic Materials and Services LLC (a privately held company that invests in companies providing specialized services for the pipeline construction and sand/silica industries.) +Mr. Logan was a co-founder of TransMontaigne in Denver, Colorado in 1995 and Chief Financial Officer, Executive Vice President, and Treasurer, through 2002. He served as a director of TransMontaigne from 1995 to 2006 and chairman of its Finance Committee from 2002 to 2006. From 1987 to 1994, he was Senior Vice President/Finance, Chief Financial Officer, and a director of Associated Natural Gas Corporation. Prior to that, Mr. Logan was an investment banker with Dillon Read & Co. Inc. and Rothschild, Inc. +Since 1998, Mr. Logan has been a director of ten public companies and has served on audit, compensation, and governance committees. +Key Attributes, Experience and Skills +Mr. Logan has over 40 years of business experience. His education and his investment banking/venture capital and financial management experience provide him with a comprehensive understanding of business and finance. Mr. Logan’s expertise and experience have been relevant to his responsibilities of providing oversight and advice to the management of public companies, and are of particular benefit in his role as Cimarex’s Lead Director and as a member of Cimarex’s Audit Committee. +MONROE W. ROBERTSON, 66 +Position, Principal Occupation and Business Experience +Mr. Robertson is currently a private investor. Mr. Robertson retired from Key Production Company, Inc. (a company acquired by Cimarex in 2002) after serving 10 years with the company. While with Key, he held the positions of President, Chief Operating Officer, Senior Vice President and Principal Financial Officer. Mr. Robertson has served in executive capacities with three other public energy companies, Apache Corp., Gulf Oil Corporation and Terra Resources, Inc. +Mr. Robertson was a director of Earthstone Energy, Inc. (formerly named Basic Earth Science System) from 2007 to 2014. During his service as a director of Earthstone, he was chair of the Audit Committee and a member of the Compensation and Nominating Committee. +15 +Table of Contents +Key Attributes, Experience and Skills +Mr. Robertson has comprehensive knowledge of the financial and operational sides of the exploration and production business, which is of considerable value in his service as Chairman of the Audit Committee. +LISA A. STEWART, 58 +Position, Principal Occupation and Business Experience +Ms. Stewart is Chairman and Chief Investment Officer of Sheridan Production Partners (“Sheridan”), a privately-owned oil and gas operating company she founded in 2007. From 2009 until its acquisition in May 2015, Ms. Stewart served as a director on the board of Talisman Energy, Inc., a Canadian oil and gas exploration and production company traded publicly on the NYSE and the Toronto Stock Exchange. Prior to 2007, Ms. Stewart served as Executive Vice President of El Paso Corporation and President of El Paso E&P from 2004 to 2006. From 1984 to 2004, Ms. Stewart served as Executive Vice President of Apache Corporation with responsibility in various departments of Apache, which included reservoir engineering, business development, land, environmental, health and safety and corporate purchasing. +Key Attributes, Experience and Skills +Ms. Stewart’s over 30 years of experience in the oil and gas industry and extensive leadership roles are key attributes that make her well qualified to serve as a Cimarex Director. +Continuing Directors – Class I – Term Expires 2018 +JOSEPH R. ALBI, 57 +Position, Principal Occupation and Business Experience +Mr. Albi was named Chief Operating Officer in September 2011. He has served Cimarex in various capacities since September 2002, including Executive Vice President-Operations from 2005 to 2011, Senior Vice President-Corporate Engineering from 2003 to 2005 and Vice President-Engineering from 2002 to 2003. +Key Attributes, Experience and Skills +Mr. Albi has over 35 years of experience in the oil and gas industry. His extensive understanding of the management of oil and gas production and drilling operations, business development, environmental and safety management and oil and gas marketing provide the Board with considerable insight about the operations of Cimarex. +MICHAEL J. SULLIVAN, 76 +Position, Principal Occupation and Business Experience +Mr. Sullivan retired in September 2015 from the Arizona-based law firm Lewis Roca Rothgerber LLP after serving as senior attorney, partner or special counsel since 2001, and the managing attorney of the firm’s Casper office. Mr. Sullivan practiced law as a partner with Brown, Drew, Apostolos, Massey & Sullivan from 1964 to 1986 and from 1995 until 1998. +Mr. Sullivan is a director and member of the compensation and governance committees of First Interstate BancSystem, located in Billings, Montana, and had been a director and member of the compensation and governance and audit committees of Sletten Construction, Inc., located in Great Falls, Montana (a non-public company) until retiring from the board in June of 2015. From 2001 to 2009, he served as a director and was a member of the audit, corporate social responsibility, and governance committees of Allied Irish Bank Group, located in Dublin, Ireland. From 2003 to 2011, he served as a director of the Kerry Group Plc, a global food and food ingredients producer headquartered in Tralee, the county town of County Kerry, Ireland. +16 +Table of Contents +Key Attributes, Experience and Skills +Mr. Sullivan brings a wealth of experience and a diverse background to our Board. In addition to his Juris Doctor degree, he has an undergraduate degree in petroleum engineering, years of governmental service as the Governor of Wyoming (1987-1995) and as the Ambassador to Ireland (1998-2001), and 40 years’ experience practicing law in the areas of natural resources, mediation and business. As Governor, he was involved in the process of reviewing and administering Wyoming’s budget. This experience is directly relevant to his service on the Audit Committee. Mr. Sullivan’s education, legal experience, particularly in mediation and litigation, and his domestic and international service all provide a background that is beneficial in addressing the issues coming before the Cimarex Board. +Continuing Directors – Class III – Term Expires 2017 +DAVID A. HENTSCHEL, age 82 +Position, Principal Occupation and Business Experience +Mr. Hentschel was Chairman and Chief Executive Officer of Occidental Oil and Gas Corporation, a subsidiary of Occidental Petroleum, from 1986 to 1993 and from 1997 until he retired in 1999. He also served as President and Chief Executive Officer of Canadian Occidental Petroleum, Ltd., now known as Nexen, from 1995 to 1997. He was in charge of the worldwide exploration and production operations for Cities Service and Occidental Oil and Gas Corporation for the last 20 years of his 40-year career. +Mr. Hentschel was a director of Occidental Petroleum from 1987 to 1993 and of Canadian Occidental or Nexen from 1985 to 2009. During his service as a director of Nexen, he was chair of the audit committee and a member of the compensation committee and various other committees. He was also a director of the Bank of Oklahoma from 1984 to 1995. +Key Attributes, Experience and Skills +Mr. Hentschel brings considerable executive experience in the domestic and international oil and gas industry to the Board. Mr. Hentschel’s extensive leadership background and his service on Nexen’s audit and compensation committees provide strong skills and experience for his service on our Compensation and Governance Committee. +THOMAS E. JORDEN, 58 +Position, Principal Occupation and Business Experience +Mr. Jorden is the Chairman of the Board, Chief Executive Officer and President of Cimarex. He has served Cimarex in various capacities since September 2002. He was elected CEO in September 2011after serving as Executive Vice President-Exploration from 2003 to 2011 and as Vice President-Exploration from 2002 to 2003. Mr. Jorden also serves on the Board of Trustees of the Colorado School of Mines and other private boards. +Key Attributes, Experience and Skills +Mr. Jorden brings to the Board over 30 years of experience in the oil and gas exploration and production industry and, as our Chief Executive Officer, a deep understanding of our business, operations and long-term strategic issues and goals. Mr. Jorden holds undergraduate and graduate degrees in geophysics. His service on the Board creates an important link between management and the Board. +FLOYD R. PRICE, 67 +Position, Principal Occupation and Business Experience +Mr. Price, a former executive officer of Apache Corp., held various positions with Apache Corp. from 1991 through 2009, including Executive Vice President and Corporate Exploration Officer; President, Apache Canada; President, Apache International; and Exploration Manager. Apache Corp., with headquarters in Houston, Texas, is an oil and gas exploration and +17 +Table of Contents +production company with domestic and international operations. Mr. Price serves as Chairman of the Board and as a member of the audit, reserves and compensation/governance committees of Tamarack Valley Energy Ltd., Calgary, Alberta, Canada, a publicly held company traded on the Toronto Stock Exchange. Tamarack is involved in the identification, evaluation and operation of resource plays in the Western Canadian sedimentary basin. From June 2010 to January 2013, Mr. Price served as a director and Chairman of the Board of Gastar Exploration, Inc., a publicly held company located in Houston, Texas. Mr. Price also served on the compensation and governance, audit and reserves committees of the board at Gastar. Gastar is engaged in the exploration, development and production of natural gas, natural gas liquids, oil and condensate in the United States and is traded on the NYSE. +Key Attributes, Experience and Skills +Mr. Price has over 40 years of experience in the exploration and production business. Mr. Price has considerable domestic and international experience in the oil and gas industry, and has held leadership positions with a large public oil and gas company. His experience during the past three years serving as a director of public and private companies also provides him with invaluable Board skills and experience. Mr. Price brings extensive oil and gas exploration, operations, management and financial experience to Cimarex’s Compensation and Governance Committee. +L. PAUL TEAGUE, 81 +Position, Principal Occupation and Business Experience +Mr. Teague served 35 years with Texaco Inc. He retired in 1994 as Vice President, Western Exploration & Producing Region of Texaco USA in Denver, Colorado. Mr. Teague held various positions with Texaco USA, including Vice President-Producing in Houston; Vice President of the New Orleans Producing Division; Division Manager, New Orleans; and General Superintendent of the Offshore Division in New Orleans. +Key Attributes, Experience and Skills +Mr. Teague holds a degree in Petroleum Engineering from Louisiana Tech University and is a graduate of the University of Southern California Executive Program. He has several industry affiliations, including the former Chairman of the API Executive Committee on Drilling and Production Practices, former President of the Colorado Petroleum Association, a 50-year Legion of Honor Member of the Society of Petroleum Engineers and a member of the Rocky Mountain Oil & Gas Hall of Fame. He brings his executive experience with a major oil and gas company to bear on corporate governance and executive compensation issues in his role as Chairman of our Compensation and Governance Committee. +DIRECTOR COMPENSATION +Our Compensation and Governance Committee administers our Director compensation program. Director compensation is designed to be near the 50 th percentile of that paid by comparable public oil and gas companies with similar market capitalization and revenue. We use the same group of companies in reviewing Director compensation as we use in reviewing executive base salary and total direct compensation. See Competitive Positioning, Section 2, Compensation Discussion and Analysis for a list of, and the methodology followed in selecting, these companies. The Compensation and Governance Committee uses its independent compensation consultant, Longnecker & Associates (“Longnecker”), to review Director compensation. The Compensation and Governance Committee, after reviewing the consultant’s recommendations with the CEO and Vice President of Human Resources, recommends Director compensation for Board consideration and approval at the Board meeting held following each year’s Annual Meeting of Shareholders. Payment of the annual component of Director compensation occurs on June 1 of each year. Meeting fees are paid as earned. +Through May 14, 2015, compensation for non-employee Directors consisted of the following: +· Annual cash retainer of $75,000; +· Annual equity retainer of $180,000, comprised of restricted stock that vests in one-third increments on May 1 of each of the three years following the date of grant ; +· Committee Chairman fee of $20,000; +· Lead Director (who also acts as Nominating Committee Chairman) fee of $40,000; +· Board meeting attendance fee of $1,800 per meeting; and +18 +Table of Contents +· Committee meeting attendance fee of $1,500 per meeting. +At the May 14, 2015 meeting, the vesting date for the Directors’ equity grant on and after June 1, 2015 was changed from June 1 to May 1 to occur before the usual date for Annual Meetings of Shareholders so that Directors who did not continue past the Annual Meeting would receive partial vesting for the period prior to leaving the Board. Other than the change in the vesting date for the restricted stock award, non-employee Director compensation did not change. +Independent Director 2015 Compensation +NAME +FEES PAID IN CASH (1) +STOCK AWARDS (2) +ALL OTHER +COMPENSATION (3) +TOTAL +Jerry Box (4) +$ +30,100 +$ +0 +$ +657.76 +$ +30,758 +Hans Helmerich +$ +91,500 +$ +180,000 +$ +8,043.52 +$ +279,544 +David A. Hentschel +$ +93,000 +$ +180,000 +$ +2,387.20 +$ +275,387 +Harold R. Logan, Jr. +$ +137,800 +$ +180,000 +$ +2,387.20 +$ +320,187 +Floyd R. Price +$ +97,500 +$ +180,000 +$ +2,343.36 +$ +279,843 +Monroe W. Robertson +$ +117,500 +$ +180,000 +$ +2,387.20 +$ +299,887 +Lisa A. Stewart (5) +$ +23,550 +$ +105,000 +$ +142.24 +$ +128,692 +Michael J. Sullivan +$ +97,500 +$ +180,000 +$ +2,387.20 +$ +279,887 +L. Paul Teague +$ +113,000 +$ +180,000 +$ +2,387.20 +$ +295,387 +(1) Represents fees earned for services as a Director during 2015, including the annual cash retainer fee, Board and Committee meeting attendance fees, Committee Chairman fee and Lead Director fee. +(2) Represents the aggregate grant date fair market value of the 1,563 shares of restricted stock as of the June 1, 2015 grant date. +(3) Consists of dividends paid during 2015 on unvested restricted stock awards and dividend equivalents paid during 2015 on deferred compensation units that settle in shares of common stock. +(4) Mr. Box retired and his term as a Director of Cimarex expired after the May 2015 Annual Meeting of Shareholders. +(5) Ms. Stewart was appointed as a Director on October 30, 2015 and received a pro rata share of the annual cash and equity retainer fees for the year June 1, 2015 to May 31, 2016. +The following table discloses as of December 31, 2015 the aggregate number of outstanding unvested stock awards and the market value of those awards. (Market value uses an $89.65 share price, which is based on the average of the high and low trading prices on December 31, 2015.) The Directors have the right to vote and receive dividends on unvested stock awards. There were no outstanding vested but unexercised option awards as of that date. +Independent Director +Unvested Stock Awards +Market Value +Hans Helmerich +3,349 +$ +300,238 +David A. Hentschel +3,349 +$ +300,238 +Harold R. Logan, Jr. +3,349 +$ +300,238 +Floyd R. Price +3,349 +$ +300,238 +Monroe W. Robertson +3,349 +$ +300,238 +Lisa A. Stewart +889 +$ +79,699 +Michael J. Sullivan +3,349 +$ +300,238 +L. Paul Teague +3,349 +$ +300,238 +Our Corporate Governance Guidelines require that each independent Director own Cimarex stock in an amount equal to three times his or her annual cash retainer. A newly elected Director has three years from the date of his or her initial election to comply with the Corporate Governance Guidelines. Restricted stock, restricted stock units and deferred compensation units are counted in calculating ownership; shares subject to options are not counted. Each of the independent Directors complies with these guidelines. +19 +Table of Contents +CORPORATE GOVERNANCE +Cimarex’s website ( www.cimarex.com ) includes materials that are helpful in understanding our corporate governance practices: +· +Corporate Governance Guidelines +· +Code of Business Conduct and Ethics +· +Code of Ethics for CEO, CFO and Chief Accounting Officer +· +Stock Ownership Guidelines +· +Complaint and Reporting Procedures +· +Background and Experience of our Board of Directors +· +Committee Charters +· +Background and Experience of Executive Management +We believe good corporate governance promotes the long-term interests of shareholders, strengthens Board and management accountability, and helps build public trust. Copies of corporate governance materials may be requested from our Corporate Secretary, Cimarex Energy Co., 1700 Lincoln Street, Suite 3700, Denver, Colorado 80203. +A summary of key governance matters are noted in the table below: +Size of Board +10 +Code of Business Conduct and Ethics +Yes +Number of independent Directors +8 +Corporate Governance Guidelines +Yes +Majority voting for Directors resignation policy +Yes +Disclosure Committee for financial reporting +Yes +Classified Board +Yes +Board and Audit Committee risk oversight +Yes +Separate Chairman and CEO +No +Compensation risk assessment +Yes +Independent Lead Director +Yes +Review of related party transactions +Yes +Diverse Board skills and experience +Yes +Non-Hedging and non-pledging policies +Yes +Annual Board and Committee self-evaluations +Yes +Clawback policy +Yes +Consultant review of Board skills +Yes +Management and Director stock ownership guidelines +Yes +Annual equity grants to Directors +Yes +Tax gross-ups +No +Annual Board education +Yes +Proxy Access +Yes +Interested parties may communicate with our Board by mail directed to our Corporate Secretary or by facsimile (720) 403-9383. All communications will be forwarded to the Lead Director for the Lead Director’s review. The Lead Director may take any action the Lead Director deems appropriate or necessary, including, without limitation, forwarding the information to the Board for consideration or, with the concurrence of the Board, retaining independent or outside counsel, accountants or other advisors to address the concern. +20 +Table of Contents +B OARD AND C OMMITTEE I NFORMATION +Our Board +During 2015, the Board of Directors met five times. The Board has three Committees: the Audit Committee, the Compensation and Governance Committee, and the Nominating Committee. During 2015, each Director attended greater than 75% of the meetings of the Board and the Board Committees on which he or she served. All Board members are expected to attend the Annual Meeting. All except one of our Directors attended our 2015 Annual Meeting. +NAME +AGE +DIRECTOR +SINCE +POSITION +INDEPENDENT +OTHER +PUBLIC +BOARDS +Joseph R. Albi +57 +2011 +Executive Vice President—Operations, Chief Operating Officer, Cimarex +No +0 +Hans Helmerich +57 +2002 +Chairman and former CEO, Helmerich & Payne, Inc. +Yes +3 +David A. Hentschel +82 +2002 +Retired, Former Chairman, CEO Occidental Oil & Gas Corporation +Yes +0 +Thomas E. Jorden +58 +2011 +Chairman, CEO and President, Cimarex +No +0 +Harold R. Logan, Jr. +71 +2009 +Chairman, Suburban Propane Partners, L.P. +Yes +3 +Floyd R. Price +67 +2012 +Retired, Former Executive Vice President, Apache Corp. +Yes +1 +Monroe W. Robertson +66 +2005 +Retired, Former President and Chief Operating Officer of Key Production Co. +Yes +0 +Lisa A. Stewart +58 +2015 +Chairman and Chief Investment Officer of Sheridan Production Partners +Yes +0 +Michael J. Sullivan +76 +2002 +Retired Senior Attorney, Lewis Roca Rothgerber LLP +Yes +1 +L. Paul Teague +81 +2002 +Retired, Former Regional Vice President, Texaco USA +Yes +0 +Board Leadership Structure +Cimarex has a combined Chairman of the Board and CEO. Cimarex also has a Lead Director who is chosen annually from our independent Directors. Following is a summary of the functions of the Chairman of the Board/CEO and the Lead Director, as provided in our Lead Director Charter: +Duties and Responsibilities of Chairman of the Board +Duties and Responsibilities of Lead Director +Preside over Board meetings. +Preside at all Board meetings at which the Chairman of the Board is not present. +Call special meetings of the Board. +Solicit agenda items from non-management Directors, review Board meeting agenda and materials, and provide input to the Chairman of the Board. +Approve agenda for Board meetings. +Authority to call meetings of non-management Directors and, as appropriate, set the agenda. +Preside over shareholder meetings. +Preside at all meetings of non-management Directors and at all executive sessions of non-management Directors. +Facilitate and participate in formal and informal communications with and among Directors. +Act as Chairman of the Nominating Committee. +Liaison between the Chairman and Directors and facilitate communication among full Board. +21 +Table of Contents +Review interested party communications directed to Board and take appropriate action. +Retain outside advisors and consultants who report directly to the Board on Board-wide issues. +The Board believes that the roles of a combined Chairman/CEO and an independent Lead Director having the duties described above serve the interests of our shareholders because this structure provides an appropriate balance between strategy development and independent oversight of management. +Thomas Jorden was elected Chief Executive Officer on September 30, 2011 and Chairman of the Board on August 14, 2012. He has served as an executive officer of Cimarex since its formation in 2002. He has considerable knowledge and experience gained through his executive positions with Cimarex and prior industry experience. This knowledge and experience allow him to focus the activities of the Board on matters most relevant to the success of Cimarex. +Our Board structure is designed to avoid any undue influence by the Chairman of the Board/CEO on the Board. The Compensation and Governance Committee is comprised entirely of independent Directors. When the Board acts on the Compensation and Governance Committee’s recommendation for compensation of the Chairman/CEO, it acts without him being present. +The substantial experience and background of our independent Directors ensure their active and knowledgeable involvement in Board matters. This involvement, and the presence and involvement of our Lead Director, provide the Board with a strong and independent point of view. +Board Committees +The table below provides 2015 membership and meeting information for each of the Board Committees: +NAME +AUDIT +COMP/GOV +NOMINATING +Hans Helmerich +X +X +David A. Hentschel +X +X +Harold R. Logan, Jr. +X +X +Floyd R. Price* +X +X +Monroe W. Robertson +X +X +Michael J. Sullivan +X +X +Lisa A. Stewart +X +X +L. Paul Teague +X +X +2015 Meetings Held +8 +6 +4 +* Mr. Price served on the Audit Committee from 2012 until October 2015 when he joined the Compensation and Corporate Governance Committee. +Audit Committee +The Audit Committee is comprised entirely of independent Directors and is governed by a Board-approved Charter stating the Audit Committee’s responsibilities. A copy of the Audit Committee Charter is available on our website at www.cimarex.com . Under its Charter, the Audit Committee performs the following functions: +· Appoints independent auditors; +· Approves the nature and scope of services of independent auditors and reviews range of fees for such services; +· Assists the Board in monitoring the performance of the internal audit function; +· Reviews qualifications and independence of auditors; +· Reviews and discusses with independent auditors (i) the auditors’ responsibilities and management’s responsibilities in the audit process, (ii) overall audit strategy, (iii) scope and timing of annual audit, and (iv) any significant risks identified during auditors’ risk assessment procedures; +22 +Table of Contents +· Assists the Board in monitoring the integrity of financial statements; +· Monitors compliance with legal and regulatory requirements; +· Reviews and reports to Board on corporate and financial risk processes; +· Monitors the process related to ongoing litigation matters; and +· With the Company’s management and (if applicable) an independent petroleum engineering consulting firm, reviews the Company’s annual process of estimating and reporting quantities of oil and gas reserves. +The Board of Directors has determined that each of the members of the Audit Committee is financially literate and independent as defined by the rules of the SEC and the NYSE. The Board also has determined that each of Messrs. Logan and Robertson is an “audit committee financial expert” as defined by the SEC’s rules. +Compensation and Governance Committee +The Compensation and Governance Committee is comprised entirely of independent Directors and is governed by a Board-approved Charter stating the Committee’s responsibilities. A copy of the Compensation and Governance Committee Charter is available on our website at www.cimarex.com . Under its Charter, the Compensation and Governance Committee performs the following functions: +Compensation Functions +· Recommends CEO and executive officer cash compensation for approval by the Board; +· Recommends Director compensation for approval by the Board; +· Reviews and recommends to the Board that the Compensation Discussion and Analysis be included in our proxy statement; +· Determines amount and terms of equity awards; +· Reviews and approves long-term incentive plans; +· Reviews relationship of compensation to risk; and +· Approves the nature and scope of services of independent compensation consultants. +Governance Functions +· Oversees corporate governance; +· Develops plans for managerial succession; and +· Oversees annual Board and Committee evaluations. +Compensation and Governance Committee Interlocks and Insider Participation. Hans Helmerich, a member of the Committee, was an executive officer of Cimarex from February 14, 2002 until September 30, 2002. Cimarex was formed on February 14, 2002 as a wholly owned subsidiary of H&P for the purpose of facilitating a spinoff by H&P of its oil and gas exploration and production business. Cimarex became a publicly traded company on September 30, 2002, at which time Mr. Helmerich resigned as an executive officer. +Nominating Committee +The Nominating Committee is comprised of all of the independent Directors and is governed by a Board-approved Charter stating its responsibilities. A copy of the Nominating Committee Charter is available on our website at www.cimarex.com . Under its Charter, the Nominating Committee’s responsibilities include the following: +· Determine desired Board skills and attributes; +· Recommend candidates to serve on the Board and to stand for election at annual meeting of shareholders or to fill a vacancy occurring between meetings; +· Consider shareholder nominees for election to the Board; and +· Recommend Committee appointments. +Director Independence and Related Person Transactions +Our Corporate Governance Guidelines require that a majority of our Board of Directors be independent as defined by applicable laws, rules, regulations and listing standards. We comply with the criteria for independence established by the NYSE listing requirements and other governing laws and regulations. +23 +Table of Contents +Each year the Compensation and Governance Committee reviews the independence of our Directors and any related person transactions. On the basis of this review, the Committee delivers a report to the Board of Directors, and the Board makes independence determinations based on the Committee’s report. +As a result of this review, the Board has determined that Hans Helmerich, David Hentschel, Harold Logan, Floyd Price, Monroe Robertson, Lisa Stewart, Michael Sullivan and L. Paul Teague, representing eight of our ten Directors, are independent of Cimarex and its management. Thomas Jorden and Joseph Albi are not independent because of their employment as CEO and COO of Cimarex, respectively. +In making these determinations, the Board considered that, in the ordinary course of business, relationships and transactions may occur between Cimarex and entities with which some of our Directors are or have been affiliated. As a result of the Committee’s review, certain relationships and transactions are not considered to be material transactions that would impair a Director’s independence, including the following: +· The Director is an employee of another company that does business with Cimarex, and our annual sales to or purchases from the other company amount to less than 2% of the annual revenues of the other company and that such sales to or purchases from the other company are part of our ordinary course of business and conducted in the same manner as we obtain services from other companies that provide similar services; or +· The Director is a director (but not an employee) of another company that does business with Cimarex. +Hans Helmerich is the Chairman of the Board, and until March 5, 2014 was the CEO, of H&P, a company with which Cimarex engages in ordinary course of business transactions. During H&P’s fiscal year ended September 30, 2015, Cimarex paid H&P $12.4 million for drilling services in arms’ length transactions and as part of our ordinary course of business and in the same manner as we obtain services from other companies that provide similar services. The aggregate amount of the payment represented 0.39% of H&P’s revenue during that period. The Compensation and Governance Committee reviewed these transactions and concluded: (i) the transactions are proper and not material when compared to both Cimarex’s total drilling costs and H&P’s total revenues; (ii) the transactions occur in the ordinary course of business and at arms’ length; (iii) the Board does not review or approve drilling service contracts or arrangements; and (iv) Mr. Helmerich’s relationship with H&P does not interfere with his independent judgment as a Director of Cimarex . +Lisa Stewart joined our Board of Directors effective October 30, 2015. Ms. Stewart is Chairman and Chief Investment Officer of Sheridan Production Partners, a privately—owned oil and gas operating company she founded in 2007. During 2015 Cimarex paid certain affiliates of Sheridan oil and gas revenues of $224 thousand and received $81 thousand from certain affiliates of Sheridan for joint interest billings. The payments to the affiliates of Sheridan represented 0.03% of Sheridan’s consolidated revenues for 2015.In addition, Cimarex paid the Sheridan affiliates joint interest billings of $6 thousand, and received $4 thousand of oil and gas revenues. The Compensation and Governance Committee reviewed these transactions and concluded: (i) the transactions are proper and not material when compared to both Cimarex’s total costs and Sheridan’s revenues; (ii) the transactions occur in the ordinary course of business and at arms’ length; (iii) the Board does not review or approve oil and gas revenue payments or joint interest billings; and (iv) Ms. Stewart’s relationship with Sheridan does not interfere with her independent judgment as a Director of Cimarex. +Risk Oversight +The Board has overall responsibility for risk oversight. In carrying out its responsibility, the Board has requested that the Audit Committee discuss with management and report to the Board with respect to: +· Processes Cimarex follows to mitigate corporate risks; +· Guidelines and processes pertaining to financial risk assessment; +· Steps management takes to measure, monitor and control financial risk exposures; and +· Management’s conclusion as to the effectiveness of the guidelines and processes utilized to mitigate such corporate and financial risks and exposures. +In addition, at each of its four regularly scheduled meetings held during the year, management provides the Board with an overview of Cimarex’s operations, financial results and other aspects of its business. Significant strategic considerations, such as material acquisitions or mergers are brought to the Board for deliberation and, as appropriate, decisions. +24 +Table of Contents +The Audit Committee, at its December 9, 2015 meeting, reviewed, discussed and, at the Board meeting that day, reported to the Board about corporate, operational and financial risks and Cimarex’s processes for mitigation of these risks. +Compensation Risk Oversight +In February 2016, the Compensation and Governance Committee performed a thorough review of the possible connection between incentives and excessive risk taking. The Compensation and Governance Committee’s review covered Cimarex’s compensation policies and practices covering executive and non-executive employees to determine whether the policies and practices encourage excessive risk taking by employees. The Committee’s analysis included a review and discussion of the following: +· The metrics for determining awards; +· Plan participants; +· How the pools and individual awards are determined; +· The maximum individual award potential (maximum individual incentive to take risk); +· The maximum possible cost if awards were paid at maximum levels (maximum cost exposure); +· The decision-making and approval process; and +· The systemic limitations on the ability to take excessive risks in order to influence compensation. +The Compensation and Governance Committee determined that the risks from Cimarex’s compensation policies and practices for Cimarex employees are not reasonably likely to have a material adverse effect on Cimarex. +Executive Sessions +The independent Directors meet in executive session at each regularly scheduled Board meeting. The Lead Director presides over executive sessions. During 2015, four executive sessions were held and, with the exception of one session at which one independent Director was absent, all of the independent Directors attended each session. These sessions allow independent Directors to review the CEO’s performance and compensation, to discuss issues of importance to Cimarex, including the business and affairs of Cimarex, as well as matters concerning management, without any member of management present. +Shareholder Engagement +Cimarex’s relationships with its shareholders are an important part of our corporate governance profile, and we recognize the value of taking their views into account. Engagement with shareholders helps us understand the larger context and impact of our operations, learn about expectations for our performance, assess emerging issues that may affect our business or other aspects of our operations, and shape corporate and governance policies. +Consistent with our commitment to seek and respond to shareholder input on corporate governance topics, we have considered and discussed with investors a wide variety of matters, including our executive compensation program and disclosures and have previously made changes in these areas, the “proxy access” shareholder proposal acted upon in 2015, and a shareholder proposal concerning fugitive methane reporting that was made in December 2015 and subsequently withdrawn. +25 +Table of Contents +S TOCK O WNERSHIP +D IRECTORS, M ANAGEMENT AND C ERTAIN B ENEFICIAL O WNERS +Beneficial Ownership by Executive Officers and Directors +The following table shows, as of March 16, 2016, the number of shares of common stock “beneficially owned,” as determined in accordance with Rule 13d-3 under the Securities Exchange Act of 1934, by the NEOs, the Directors, and all executive officers and Directors, as a group: +Name of Beneficial Owner +Shares +Beneficially Owned (1) +Percent of +Class +Named Executive Officers : +Thomas E. Jorden, CEO (also Director) +331,738 +<1% +G. Mark Burford, CFO +45,217 +<1 % +Joseph R. Albi, COO (also Director) +139,636 +<1% +Stephen P. Bell, EVP +103,183 +<1% +John A. Lambuth, SVP +117,652 +<1% +Paul Korus, Former CFO +54,825 +<1% +Directors : +Hans Helmerich +455,698 (2) +<1% +David A. Hentschel +31,010 +<1% +Harold R. Logan, Jr. +9,433 +<1% +Floyd R. Price +7,825 +<1% +Monroe W. Robertson +13,729 +<1% +Lisa A. Stewart +889 +<1% +Michael J. Sullivan +16,191 +<1% +L. Paul Teague +54,403 (3) +<1% +All executive officers and Directors as a group (18 persons) +1,657,768 (2)(3) +2% +(1) Includes restricted stock (as well as shares that are subject to performance-based vesting and time-based vesting more than 60 days after March 16, 2016), direct and indirect ownership of common stock and equivalent shares of common stock held by the trustee for the benefit of the named individual in the Cimarex Energy Co. 401(k) Plan. Does not include deferred compensation units held by one Director. For all executive officers and Directors as a group, includes 1,999 shares of common stock that could be purchased upon the exercise of stock options that have vested or will vest within the 60-day period following March 16, 2016. +(2) Includes 11,450 shares owned by Mr. Helmerich’s wife. Mr. Helmerich disclaims beneficial ownership of the shares held by his wife. Also includes 47,655 shares owned by 1993 Hans Helmerich Trust, of which Mr. Helmerich is the trustee, 1,062 shares owned by Family Trust, of which Mr. Helmerich is the co-trustee, 7,865 shares owned by Family Trust, of which Mr. Helmerich is the trustee, 48,500 shares owned by The Helmerich Trust, of which Mr. Helmerich is the co-trustee, and 325,000 shares held by the Peggy Helmerich QTIP Trust, of which Mr. Helmerich is the trustee. +(3) Includes 9,065 shares owned by Mr. Teague’s wife. Mr. Teague disclaims beneficial ownership of the shares held by his wife. +26 +Table of Contents +Beneficial Ownership of More than Five Percent +Each of the following shareholders beneficially owns five percent or more of our outstanding shares of common stock. The following table provides information regarding their stock ownership and is based on their filings with the SEC. +Voting Authority +Dispositive Authority +Total Amount +of Beneficial +Percent of +Name and Address +Sole +Shared +Sole +Shared +Ownership +Class +BlackRock Inc. +55 East 52 nd Street +New York, NY 10055 +5,739,109 +0 +6,533,894 +0 +6,533,894 +6.9% +FMR LLC +245 Summer Street +Boston, MA 02210 +318,053 +0 +5,552,215 +0 +5,552,215 +5.87% +The Vanguard Group +100 Vanguard Boulevard +Malvern, PA 19355 +172,322 +9,100 +8,227,548 +184,423 +8,411,971 +8.89% +27 +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS - TABLE OF CONTENTS +Page No. +Executive Summary of Compensation Discussion and Analysis (“CD&A”) +29 +Compensation Discussion and Analysis +30 +Section 1 +30 +Summary of 2015 and Early 2016 Compensation Decisions +30 +Response to 2016 Say-on-Pay Vote and Shareholder Engagement +32 +Key 2015 Compensation Actions +32 +CEO Compensation +32 +Severance Arrangements for Former CFO +32 +Other NEO Compensation +32 +Base Salary Determination +33 +Annual Cash Incentive Awards +33 +Long-Term Equity Incentive Award Program +36 +Elimination of Tax Gross Up Payments +38 +Alignment of CEO Direct Compensation to Total Shareholder Return +39 +Early 2016 Compensation Decisions +40 +2016 Annual Cash Incentive Award Goals +40 +Section 2 +41 +Our Compensation Framework +41 +Objectives +41 +Design +41 +Principal Elements of Executive Compensation +41 +Competitive Positioning +42 +Role of Compensation Consultant and Management in Compensation Decisions +43 +Other Compensation Arrangements +44 +Post-Employment and Employment Arrangements +44 +Retirement Benefits +44 +Perquisites +44 +Other Compensation Policies +45 +Total Pay Considerations +45 +Stock Ownership and Holding Requirements +45 +Clawback Policy +45 +Non-Hedging and Non-Pledging Policies +45 +Tax Law Considerations +45 +Compensation and Governance Committee Report +46 +28 +Table of Contents +Executive Summary of Compensation Discussion & Analysis (“CD&A”) +2015 BUSINESS AND FINANCIAL PERFORMANCE OVERVIEW +· Average daily production increased 13% to 984.5 MMcfe per day. +· Oil production grew 19% to 51,132 barrels per day, gas volumes increased by 9% to 463.0 MMcf per day and NGL volumes rose 15% to 35,789 barrels per day. +· We added 571 Bcfe of proved reserves from extensions and discoveries and net positive performance revisions, replacing 159% of production. +· In the second quarter of 2015 we completed a common stock offering and received net proceeds of $730.0 million. +· Cash on hand at year end was $779.4 million. +· Production revenues declined 40% to $1.4 billion. +· Cash flow provided by operating activities of $691.5 million was 57% lower than that of the prior year. +· We incurred non-cash impairments of our oil and gas properties totaling $3.7 billion. +· We had a net loss for the year of $2.4 billion, or $25.92 per share. +· Proved reserves decreased 7.1% to 2,909.4 Bcfe primarily due to negative price-related revisions of 398.8 Bcfe. +2015 EXECUTIVE COMPENSATION +2015 Salary +2015 Annual Cash +Incentive Award +2015 Long- Term +Incentive Grant +Value +Total +% of Total +Compensation at +Risk +Thomas E. Jorden, CEO +$ +870,750 +$ +435,375 +$ +6,424,530 +$ +7,730,655 +89 % +G. Mark Burford, CFO +$ +342,279 +$ +156,000 +$ +2,250,000 +$ +2,748,279 +88 % +Joseph R. Albi, COO +$ +561,600 +$ +225,000 +$ +3,200,000 +$ +3,986,600 +86 % +Stephen P. Bell, EVP +$ +467,625 +$ +163,000 +$ +2,850,000 +$ +3,480,625 +87 % +John A. Lambuth, SVP +$ +427,168 +$ +156,000 +$ +3,050,000 +$ +3,633,168 +88 % +Paul Korus, Former CFO +$ +331,430 +$ +324,107 +$ +— +$ +655,537 +49 % +ELEMENTS AND MIX OF EXECUTIVE COMPENSATION +Cimarex’s executive compensation program directly links a substantial portion of executive compensation to Cimarex’s performance through annual and long-term incentives. The mix of the pay elements for the CEO and other NEOs for fiscal 2015 is shown below. This information is based on the Summary Compensation Table data and highlights the substantial portion of compensation that is at risk and will be realized only if performance criteria are met. Of the CEO’s total disclosed 2015 compensation, 89% is at risk and is linked to Cimarex’s future performance and 83% of his 2015 disclosed compensation is service-based and performance-based long-term equity incentive compensation. The average compensation mix for the other NEOs is 88% at risk compensation and 83% service-based and performance-based long-term equity incentive compensation. +Pay Elements +Pay Element Rationale +Base Salary +Retain and attract, when needed, talented executives +Annual Cash Incentive +Encourage short term operational/financial performance +Long-Term Equity Incentive +Encourage retention and above average stock price performance +29 +Table of Contents +C OMPENSATION D ISCUSSION AND A NALYSIS +This CD&A describes Cimarex’s executive compensation program for 2015. We use this program to retain and attract (when appropriate) the executives who lead our business. This CD&A explains how the Compensation and Governance Committee of the Board of Directors made 2015 compensation decisions for our executives, including the following NEOs: +· Thomas E. Jorden, Chairman of the Board, CEO and President (Principal Executive Officer) +· G. Mark Burford, Vice President and CFO (Principal Financial Officer) +· Joseph R. Albi, Executive Vice President—Operations, COO +· Stephen P. Bell, Executive Vice President—Business Development +· John A. Lambuth, Senior Vice President—Exploration +· Paul Korus, Former Senior Vice President—CFO (Former Principal Financial Officer) +This CD&A is divided into two sections: +Section 1 discusses 2015 and early 2016 actions related to 2015 executive compensation. +Section 2 discusses our compensation framework, post-employment compensation, retirement benefits, perquisites and other compensation policies. +SECTION 1 +Summary of 2015 and Early 2016 Compensation Decisions +TOPIC +ACTION +RATIONALE +Base Salary Review +No change to CEO, former CFO, COO, and EVP—Business Development base salaries. +Due to the downturn in commodity prices and therefore the Company’s cash flow, the Committee determined that CEO, former CFO, COO , EVP—Business Development were being paid at or near the targeted percentile and recommended no increases in base salaries. +Set base salary for new CFO upon retirement of former CFO in September 2015. +When Mr. Burford was named as CFO effective upon the retirement of the former CFO on September 1, 2015, his base salary was set at $390,000 based on the base salary levels of compensation peer companies. The salary was set below his predecessor’s base salary and in the lower range of CFOs in our Compensation Peer Group due to Mr. Burford being new to the position. +Initially Increased VP—Exploration’s base salary in May 2015 by 5% and in December 2015 increased base salary due to promotion. +The Committee recommended a 5% increase in base salary for the VP—Exploration. In December 2015, the VP—Exploration was promoted to SVP—Exploration and salary increased by 5.5%. These increases were due to his combined exploration and operational level of responsibilities being greater than the responsibilities of individuals at peer companies with similar titles and his promotion to Senior Vice President in recognition of his duties and internal comparability with other NEOs and executive officers based on his experience level and +30 +Table of Contents +TOPIC +ACTION +RATIONALE +tenure with Cimarex. +Annual Short-Term Incentive Plan +Authorized annual cash short-term awards to the CEO of 50% of year-end base salary and other NEOs of between 35% to 40% of year-end base salary (target of 100% of base salary for all NEOs). +Annual cash awards were based on the achievement of financial and strategic objectives and recommendations from the Compensation and Governance Committee’s independent compensation consultant. Due to commodity price decreases and the impact on cash flows, the Compensation and Governance Committee exercised negative discretion to reduce the awards from the 105% to 125% range recommended by the Committee’s compensation consultant. See Key Compensation Actions for 2015 in Section 1, Compensation Discussion and Analysis. +Long-Term Equity Incentives +Authorized long-term equity awards to NEOs (including the CEO) with an aggregate grant date fair value of $17,774,530. The number of shares that may be earned pursuant to these awards is determined by Cimarex’s relative stock price performance. The awards vest three years from the date of grant and are subject to a continuous service requirement. A minimum of 50% of the shares granted and a maximum of 100% of the shares granted may be earned at the end of the three-year period, with 100% being earned if Cimarex’s relative stock price is in the top five of the 17 companies in the stock performance peer group. +Given Cimarex’s reduced emphasis on cash and other forms of compensation that is not “at-risk,” the range for 2015 long-term equity awards recommended by the compensation consultant represented a total value at the 75 th percentile when compared to 2015 awards made by peer companies based on the consultant’s review of public filings and knowledge of other companies for which the consultant provides services to compensation committees. The Committee approved its consultant’s recommendations, which were 10% lower than the grant date fair value of awards to the NEOs in 2014. The Committee considered Cimarex’s total shareholder return for the past one and three years, NEO total direct compensation compared to peer companies, and the compensation consultant’s recommended pool of grant date fair value. The actual value of the shares upon vesting in December 2018 will be based on Cimarex’s performance as reflected in the relative stock price compared to the other companies in the stock performance peer group and Cimarex’s stock price at that time. +Organizational Changes +Elected G. Mark Burford as VP and Chief Financial Officer (Principal Financial Officer) +Cimarex’s former CFO, Paul Korus retired on September 1, 2015. Mr. Burford was elected to fill the vacancy. +Promoted John Lambuth to SVP—Exploration +Mr. Lambuth was promoted to reflect additional responsibilities and for internal comparability with other NEOs and executive officers based on his experience level and tenure with Cimarex. +See Key 2015 Compensation Actions below for more detail. +31 +Table of Contents +Response to 2016 Say-on-Pay Vote and Shareholder Engagement +At the 2015 Annual Meeting of Shareholders, 98% of the votes cast were in favor of the advisory vote to approve executive compensation, up from 96% at the 2014 annual meeting. In addition to the advisory vote, as part of our regular shareholder engagement, we consider and discuss with shareholders a number of matters throughout the year, including executive compensation and governance. The Compensation and Governance Committee carefully considers any feedback and routinely reviews executive compensation practices and governance. +The Compensation and Governance Committee considered the results of the advisory vote and the discussions with shareholders to convey our shareholders’ support of the Committee’s compensation decisions in 2014 and early 2015 and shareholders’ overall satisfaction with Cimarex’s executive compensation programs. Consistent with this support, the Compensation and Governance Committee retained the core design of our executive compensation programs for the remainder of 2015, as it believes the programs continue to retain, attract, when appropriate, and appropriately incent senior management. +Key 2015 Compensation Actions +The following discusses the Compensation and Governance Committee’s key 2015 compensation decisions, which are reflected in the 2015 Summary Compensation Table below. These decisions were made with the advice of the Compensation and Governance Committee’s independent consultant, Longnecker & Associates. (See Section 2 of Compensation Discussion and Analysis for additional discussion regarding the role of the consultant.) +CEO Compensation +· Mr. Jorden’s base salary was not increased in 2015 due to the downturn in commodity prices and Cimarex’s cash flow. +· Mr. Jorden’s 2015 annual cash incentive award was $435,375, or 50% of his year-end base salary. +· His annual long-term incentive equity award value at the date of grant (December 9, 2015) was $6,424,530. +These decisions were reviewed in detail by the Compensation and Governance Committee and its independent consultant. The Compensation and Governance Committee considered several factors, including input from its independent consultant, salary data from peer companies and Cimarex’s performance. In 2015, approximately 89% of Mr. Jorden’s compensation as disclosed in the Summary Compensation Table was at risk. +Severance Arrangements for Former CFO +On August 17, 2015, the Company entered into an agreement (“Succession Agreement”) with Mr. Korus, Cimarex’s former CFO. The Succession Agreement established terms related to his retirement and severance arrangements. Additional information regarding the Succession Agreement is provided following the “Potential Payments Upon Change in Control or Termination—Severance Arrangements for Former CFO.” +Other NEO Compensation +The Compensation and Governance Committee also made compensation decisions for the other NEOs comprised of base salary adjustments, 2015 annual cash incentive awards made in February 2016, and long-term equity awards made in December 2015. These adjustments were based upon the recommendations of the CEO, evaluation by the Committee, the advice and recommendations of the Committee’s independent consultant, salary data from peer and comparator groups, internal pay relationships based on relative duties and responsibilities, the executive’s impact on Cimarex’s results, and for retention purposes. Based upon these considerations, the Committee made the following 2015 NEO compensation decisions: +32 +Table of Contents +2015 Salary +2015 Annual +Cash +Incentive +Award +2015 Long- Term +Incentive Equity +Grant Date Fair +Value +Total +% of +Total +Compensation +that is +At Risk +G. Mark Burford, CFO +$ +390,000 (1) +$ +156,000 +$ +2,250,000 +$ +2,796,000 +86% +Joseph R. Albi, COO +$ +561,600 +$ +225,000 +$ +3,200,000 +$ +3,986,600 +86% +Stephen P. Bell, EVP +$ +467,625 +$ +163,000 +$ +2,850,000 +$ +3,480,625 +87% +John A. Lambuth, SVP +$ +436,000 (2) +$ +156,000 +$ +3,050,000 +$ +3,642,000 +88% +Paul Korus, Former CFO +$ +486,160 +$ +324,107 (3) +$ +— +$ +810,267 +40% +(1) Mr. Burford’s salary effective September 1, 2015 upon his election as Vice President and Chief Financial Officer. +(2) Mr. Lambuth’s salary increase effective June 1, 2015. +(3) Mr. Korus retired effective September 1, 2015 and received a pro rata share of his target bonus. See Potential Payments Upon Change in Control or Termination below. +Base Salary Determination +We provide competitive base salaries to retain and attract, when appropriate, talented executives and to provide a fixed base of cash compensation. We compare each NEO’s base salary with the base salary paid for a similar executive position by companies in our Compensation Peer Group. See Competitive Positioning later in this CD&A for a list of the companies in the Compensation Peer Group. The Compensation and Governance Committee then may adjust base salaries based on a number of factors, including job responsibilities, management experience, individual contributions, number of years in position and current salary. +In May 2015, the Committee’s independent compensation consultant reviewed the NEOs’ base salaries compared to market and recommended a pool equal to 1% of executive salaries to be allocated in the Compensation and Governance Committee’s discretion for individual salary increases in the range of 1% to 3% to maintain market alignment. Based on a recommendation by Mr. Jorden, the Committee also recognized the Vice President—Exploration because his combined exploration and operational responsibilities are greater than the responsibilities of individuals at peer companies with similar titles. Mr. Jorden recommended that there be no increase in salaries for other NEOs due to the downturn in commodity prices and the Company’s cash flow. The Compensation and Governance Committee considered the recommendation of the consultant and took into consideration the recommendations by Mr. Jorden. The Compensation and Governance Committee recommended, and the Board approved, the following base salaries effective June 1, 2015: +Name +Title +5/31/2015 +Base Salary +After 6/1/2015 +Base Salary +Percent +Increase +Thomas E. Jorden +Chairman of the Board, CEO and President +$ +870,750 +$ +870,750 +0% +G. Mark Burford (1) +Vice President and CFO +$ +— +$ +— +—% +Joseph R. Albi +Executive Vice President—Operations, COO +$ +561,600 +$ +561,600 +0% +Stephen P. Bell +Executive Vice President—Business Development +$ +467,625 +$ +467,625 +0% +John A. Lambuth +Senior Vice President—Exploration +$ +415,125 +$ +436,000 (2) +5% +Paul Korus +Former Senior Vice President—CFO +$ +486,160 +$ +486,160 +0% +(1) When Mr. Burford was named as CFO effective upon the retirement of the former CFO on September 1, 2015, his base salary was set at $390,000 based on the base salary levels of compensation peer companies. The salary was set below his predecessor’s base salary and in the lower range of CFOs in our Compensation Peer Group due to Mr. Burford being new to the position. +(2) Mr. Lambuth was promoted to Senior Vice President—Exploration on December 9, 2015 and his base salary increased to $460,000 effective January 1, 2016. +Annual Cash Incentive Awards +In February 2016, the Committee met to deliberate and determine NEO (including the CEO) annual cash incentive awards for 2015 services. The individual target for the CEO and each other NEO is 100% of his or her base salary. There is no minimum award and an individual’s maximum award is 200% of his or her base salary. +33 +Table of Contents +In February 2015, the Compensation and Governance Committee adopted 2015 strategic and tactical goals and objectives to be measured in 2016. The following represents the level of achievement of the 2015 strategic and tactical goals and objectives: +2015 Strategic and Tactical Goals and Objectives +Achievement +Achieve good return on invested capital. +Poor. We were below our threshold for after tax return on invested capital based on internal measurements which consider only discounted future cash flows from proved developed reserves. Although our drilling program achieved very good results on a rate, reserve and cost perspective, these results were not enough to overcome the effect of commodity prices that continued to decline throughout 2015. +Manage the balance sheet as is prudently possible in a reduced commodity price environment: +Good. Cimarex addressed this objective with the primary goal to preserve the strength of our balance sheet. As discussed below, we achieved increased production in spite of significant reductions in capital implemented through the year. Reserves declined due to the impact of reduced commodity prices. +· Increase debt adjusted production per share. +Good. Increased absolute production by 13% and debt adjusted production by 4%. +· Increase debt adjusted reserves per share. +Good. Proved reserves declined by 7% and debt adjusted reserves declined by 15% compared to declines in the prices used to calculate reserves of 40.5% for natural gas, 47.1% for oil and 53.3% for natural gas liquids. +Continue focus on staffing and succession planning at all levels. +Excellent. Cimarex implemented a talent succession plan in 2015 to develop the next generation of talent to replace retiring managers and executives. Under this plan, we began an ongoing process of identifying high potential employees and developing career plans for those employees to prepare them for future managerial and executive positions. +Keep five year plan continuously updated. +Excellent. In 2015, Cimarex progressed in its ability to generate long terms corporate forecasts, including the capability to quickly integrate the effect of commodity price changes and capital program changes on projected overall results. This allows Cimarex to quickly analyze alternatives in its active inventory of future drilling opportunities based on changes in variables such as commodity prices, rig counts and cost structure. +Continue emphasis on health, safety and the environment. +Good. In 2015, Cimarex continued to emphasize safety and environmental responsibility at every level of the organization. While we have developed a safety and environmental culture that is responsible and responsive, our 2015 incident rate increased. The Environmental, Health & Safety group also performed admirably while working with our Operations group to prevent environmental damage following the breach of an Army Corps of Engineers levy. +Further develop organizational capability for low cost, efficient resource play development. +Good. In 2015, Cimarex formed interdisciplinary task forces in its two main areas of operation, the Delaware and Anadarko Basins, in order to more effectively plan and execute resource play development. This allows our teams to work together in project planning and execution and to apply lessons learned in one area of operations to other areas. +34 +Table of Contents +Be opportunistic for asset or corporate acquisition opportunities. +Good. In 2015, Cimarex evaluated and declined a number potential acquisition opportunities after determining that they would not have created sufficient value for our shareholders. We remain vigilant and prepared to pursue the right opportunity. +Optimize drilling and completion costs. +Excellent. In 2015, we continued to obtain lower drilling and completion costs, driven by decreases in unit costs from our vendors and gains in drilling and completion efficiencies. +Bring new exploration project to a point where commerciality can be reasonably assessed. +Fair. In 2015, decreased cash flow led to delaying drilling plans in new exploration areas. While drilling plans have been delayed, we continue to analyze data and have entered into data sharing arrangements with other operators in new exploration areas. +Be innovative in the down cycle. +Good. In 2015, our organization rose to the challenge of declining commodity prices. Our focus has been on the need to continuously improve efficiencies and costs and work on innovative approaches to our business. +The Compensation and Governance Committee’s independent compensation consultant recommended a pool for cash incentive awards for all NEOs of between $2.93 million and $3.5 million, or between 105% and 125% of the NEOs year-end 2015 salaries, based on the consultant’s review of the company’s achievement of the 2015 strategic and tactical goals, the consultant’s analysis of the prior year’s annual payouts of the Compensation Peer Group at the market 50 th percentile (or $3.5 million) based on the consultant’s evaluation of the Company’s performance of its 2015 strategic and factual goals compared to the Compensation Peer Group’s percentile rankings, and the consultant’s review of reductions by other exploration and production companies in annual incentive awards due to commodity price and stock price drops. Based principally on the achievement of the 2015 strategic and tactical goals and objectives while recognizing the sharp drop in oil and gas prices in 2015 and the uncertainty concerning when prices, and therefore the Company’s cash flow, might increase, the CEO recommended cash incentive awards for the other NEOs of between 35% and 40% of their year-end 2015 salaries. The Compensation and Governance Committee’s independent consultant concurred that the CEO’s recommendations were reasonable. The Compensation and Governance Committee, after considering the achievement of the 2015 financial and operational objectives, the reduction in oil and gas prices and the impact on cash flow, and in consultation with its independent consultant, accepted the CEO’s recommendations, and the Board approved the Compensation and Governance Committee’s recommendations. +The Compensation and Governance Committee, with its independent consultant, and without management present, deliberated concerning the CEO’s annual cash incentive award. Based on its analysis of the Company’s 2015 performance described above and the CEO’s leadership of the company and management of senior executives and other employees to achieve this performance, the Compensation and Governance Committee recommended and the Board approved a cash incentive award to the CEO of 50% of his base salary. The Compensation and Governance Committee’s independent consultant concurred with this recommendation, and the total cash incentive awards to all NEOs of $1.1 million was below the recommendation of the compensation consultant of a reasonable pool in the range of $2.93 million to $3.5 million. Following are the CEO and other NEO 2015 annual cash incentive awards: +Name +Cash Incentive Award +% of Year-End +Base Salary +Thomas E. Jorden, CEO +$ +435,375 +50 % +G. Mark Burford, CFO +$ +156,000 +40 % +Joseph R. Albi, COO +$ +225,000 +40 % +Stephen P. Bell, EVP +$ +163,000 +35 % +John A. Lambuth, SVP +$ +156,000 +36 % +Paul Korus, Former CFO * +$ +324,107 +67% +* Pursuant to the Succession Agreement entered into with Mr. Korus in connection with his retirement on September 1, 2015, Cimarex agreed to pay Mr. Korus a prorated portion of his target bonus due to his service to Cimarex and the success of the Company’s May 2015 equity offering with net proceeds of $729 million. See Potential Payments Upon Change in Control or Termination below. +35 +Table of Contents +Long-Term Equity Incentive Award Program +Our long-term equity incentive award program balances the short-term annual cash incentive program by focusing executive efforts on the activities and short-term results that lead to long-term shareholder value. Each year the Compensation and Governance Committee grants equity awards of restricted stock to NEOs. +For grants made in December 2015, the number of shares that may be earned is determined by the relative stock price performance of Cimarex when compared to the stock price performance of companies in the S&P 500 Oil and Gas Exploration & Production Index (Stock Performance Peer Group). See Competitive Positioning in this CD&A for a list of the companies in the 2015 Stock Performance Peer Group. The awards vest three years from the date of grant and are subject to a continuous service requirement. A minimum of 50% of the shares granted and a maximum of 100% of the shares granted may be earned at the end of the three-year vesting period. While the 2015 Equity Incentive Plan does not set a minimum vesting period, the Compensation and Governance Committee has set a three year vesting period for restricted stock awards to NEOs since the Compensation and Governance Committee began making restricted stock awards in 2006. +Dividends equivalent to those paid on Cimarex common stock are paid on 50% of the shares awarded, and dividends applicable to the remainder of the shares awarded are accrued and only paid on the shares earned following calculation of Cimarex’s relative stock price performance compared to companies in the Stock Performance Peer Group at the end of the performance period. All of the shares subject to the award have the same voting rights as outstanding shares of Cimarex common stock. +For restricted stock awards made in December 2015, the total number of shares earned is determined by calculating the percentage difference between the average per share closing price for shares of Cimarex and each company in the Stock Performance Peer Group for the 30 trading days preceding the date of grant and the 30 trading days preceding the third anniversary of the grant. The Compensation and Governance Committee ranks Cimarex and calculates its relative performance percentile. Companies that are not in the Stock Performance Peer Group at both the beginning and the end of the performance period are not included in the calculation. The following table illustrates shares that would be earned at various relative stock performance price percentiles (assuming 17 companies in the Peer Group). +Cimarex’s Rank Among +Peer Companies +Percent of +Award Vesting +Relative Stock Price +Performance Percentile +1 through 5 +100% +75-100% +6 +94% +69% +7 +88% +63% +8 +81% +56% +9 +75% +50% +10 +69% +44% +11 +63% +38% +12 +56% +31% +13 through 17 +50% +25% +Given Cimarex’s reduced emphasis on cash and other forms of compensation that is not “at-risk,” on December 9, 2015, the Compensation and Governance Committee granted long-term equity awards to the NEOs with a total grant date fair value of $17,774,530 based on competitive market data for companies in Cimarex’s Compensation Peer Group. Comparative data was obtained by the Compensation and Governance Committee’s independent consultant from public filings disclosing 2015 NEO compensation of companies in the Compensation Peer Group and the consultant’s knowledge of other companies for which the consultant provides services. See Competitive Positioning in this CD&A for a list of the companies in the Compensation Peer Group. The Compensation and Governance Committee’s compensation consultant recommended awards with a value at the 75 th percentile when compared to companies in the Compensation Peer Group because of Cimarex’s outstanding performance compared to its Compensation Peer Group based on total shareholder return for the periods from December 3, 2014 through December 3, 2015 and December 3, 2012 through December 3, 2015. The consultant noted that, as of December 3, 2015, Cimarex was at the 86 th percentile in terms of one-year total shareholder return, the 100 th percentile in terms of three-year total shareholder return, and the 80 th percentile in terms of five-year total return. The recommended total grant date value for all NEOs is approximately 10% lower than the total for 2014 long term equity grants. The independent compensation consultant noted that this recommendation would be in alignment with its estimated market 75 th percentile and the reduction from the prior year’s grant will keep the Company closely aligned with market practices for top performers and provide consideration for the Company’s good performance in a depressed environment. The Compensation and Governance +36 +Table of Contents +Committee approved awards equal to the recommended total pool based on Cimarex’s total shareholder return compared to its Compensation Peer Group for the periods indicated, the total direct compensation of our NEOs compared to our peer companies, Cimarex’s 2015 financial and operational performance, and the compensation consultant’s recommendation. The actual value of the shares upon vesting in December 2018 will be based on Cimarex’s relative three-year stock performance compared to the other companies in the Stock Performance Peer Group as described above and Cimarex’s stock price at that time. +The Compensation and Governance Committee granted a total of 263,939 restricted shares to the NEOs (including the CEO). The number of shares granted to each NEO was based on their relative individual roles and responsibilities. Of the total number of shares granted to the NEOs (including the CEO), the Committee awarded 36.0% of the shares to Mr. Jorden, 18% of the total shares to Mr. Albi, 17% to Mr. Lambuth, 16% to Mr. Bell and 13% to Mr. Burford. The following table reflects the awards made by the Committee: +Name +No. of Shares +Subject to Award +Grant Date Value of +Long-Term Equity +Incentive Award (1) +Thomas E. Jorden, CEO +73,727 +$ +6,424,530 +G. Mark Burford, CFO +25,821 (2) +$ +2,250,000 (2) +Joseph R. Albi, COO +36,723 +$ +3,200,000 +Stephen P. Bell, EVP +32,706 +$ +2,850,000 +John A. Lambuth, SVP +35,001 +$ +3,050,000 +(1) Represents an estimate of the fair value of the shares as of the grant date utilizing a Monte Carlo valuation technique as permitted by the guidance provided by FASB ASC Topic 718. The estimated fair value is the aggregate compensation cost to be recognized over the service period based on the results of the Monte Carlo analysis. +(2) Includes 10,000 shares granted to Mr. Burford upon his appointment as CFO effective September 1, 2015 with the same vesting terms as the December 9, 2015 awards to all NEOs. +2015 Vesting of NEO Equity Awards +On May 15, 2015, the performance period applicable to the May 18, 2012 NEO equity awards ended. Cimarex’s relative stock price performance was 88 th percentile of the Compensation Peer Group at the end of the performance period, resulting in the vesting of 100% of the shares subject to the May 18, 2012 award. +Mr. Lambuth was not an NEO at the time of the May 18, 2012 awards. He received a performance share award on September 13, 2012 in connection with his appointment as Vice President—Exploration. On September 13, 2015, the performance period applicable to Mr. Lambuth’s September 13, 2012 equity award ended. Cimarex’s relative stock price performance was 96 th percentile of the Stock Performance Peer Group at the end of the performance period, resulting in the vesting of 100% of the shares subject to Mr. Lambuth’s September 13, 2012 award. +The following table reflects the shares originally granted to each NEO and the number of shares that vested at the end of the three-year performance period: +Name +No. of Shares Granted +No. of Shares Vested +Thomas E. Jorden, CEO +59,692 +59,692 +Joseph R. Albi, COO +44,770 +44,770 +Stephen P. Bell, EVP +37,308 +37,308 +John A. Lambuth, SVP +24,000 +24,000 +Paul Korus, Former CFO +37,308 +37,308 +The vesting of these awards and the value at vesting is also reported in 2015 Option Exercises and Restricted Stock Vesting table in this proxy statement. +37 +Table of Contents +Elimination of Tax Gross Up Payments +In March 2013, the Board amended the Cimarex’s Change in Control Severance Plan to eliminate any participant’s right (including the right of any NEO) to a tax gross-up payment. +Cimarex’s Change in Control Severance Plan is the only plan that provided for a tax gross-up payment to a participant following a change in control if any payments received by the participant as a result of the change in control become subject to the excise tax imposed by Section 4999 of the Internal Revenue Code. See Potential Payments Upon Change in Control or Termination for a more detailed description of this Plan. +38 +Table of Contents +Alignment of CEO Direct Compensation to Total Shareholder Return (“TSR”) +Cimarex CEO Total Direct Compensation Compared to Cimarex TSR +The following graph illustrates our CEO direct compensation compared to our TSR for the years 2011 through 2015. Indexed TSR represents the cumulative total return of Cimarex stock for a five-year period based on a $100 investment at the start of the first year and reinvestment of all dividends. The data for 2011 includes weighted compensation, including compensation for F. H. Merelli, who served as CEO for nine months in 2011, and compensation for Thomas E. Jorden, who served as CEO for three months in 2011. Compensation for 2012, 2013, 2014 and 2015 represents only compensation for Mr. Jorden, Cimarex’s current CEO. The table shows the value of the investment at the end of each year. +Relative CEO Total Compensation Compared to Relative TSR +The following graph depicts alignment of relative CEO compensation compared to relative TSR for the years ended December 31, 2011 through December 31, 2014. The information is only provided through 2014 because 2015 CEO peer company compensation information is not publicly available at this time. The companies used for the relative comparison are the companies in our Compensation Peer Group. We have also included, as a point of reference, Cimarex’s CEO compensation for the years ended December 31, 2013 through December 31, 2015. +39 +Table of Contents +Multiple of Median CEO Compensation +The graph below reflects that Cimarex’s 2014 CEO total direct compensation represents 96% of the median CEO total direct compensation of companies in our Compensation Peer Group. The information provided is for 2014 peer group CEO total direct compensation because 2015 CEO peer group compensation information is not publicly available at this time. We have also included, as a point of reference, Cimarex’s 2015 CEO total direct compensation. +Early 2016 Compensation Decisions +2016 Annual Cash Incentive Award Goals +In February 2016, the Compensation and Governance Committee approved the following strategic goals and objectives that will apply to 2016 annual cash incentive awards that will be measured and paid in 2017: +2016 strategic goals : +o Achieve good return on invested capital. +o Manage the balance sheet. +o Redefine and implement appropriate cost structure for road ahead. +o Be innovative in doing more with less. Maximize effectiveness. +o Be creative in developing new plays / new concepts / innovations. +2016 tactical goals: +o Continue to improve base production management. +o Continue to optimize our midstream operations. +o Continue focus on staffing and succession planning at all levels. +o Emphasize and improve health, safety and environment; safety first. +o Implement fugitive methane emission reporting process. +o Continue to keep corporate model/five year plan evergreen. +o Determine commerciality and disposition of exploration prospect. +o Be opportunistic for asset or corporate acquisition opportunities. +40 +Table of Contents +The strategic and tactical measures and objectives have been clearly communicated to the NEOs. At year end, the CEO will deliver a report of results to the Compensation and Governance Committee with respect to each goal and provide the CEO’s recommendation and the basis for the CEO’s recommendations for individual awards. The Compensation and Governance Committee and its independent compensation consultant will review the CEO’s recommendations and accept or modify those recommendations. The non-management members of the Board will consider the recommendations of the Compensation and Governance Committee. Each NEO, including the CEO, has a threshold award of 0% of base salary (no minimum award), a target award equal to 100% of base salary and a maximum award of 200% of base salary. +SECTION 2 +Our Compensation Framework +Objectives +Our principal business objective is to profitably grow our proved oil and gas reserves and production for the long-term benefit of shareholders. The primary strategy we use to achieve this objective is to reinvest our cash flow from operations at a competitive rate of return. Our executive compensation program is designed to retain and attract, when appropriate, the experienced professionals necessary to carry out this strategy. +Design +We design our executive compensation program to: +· Align performance incentives with the long-term interests of our shareholders. +We align the long-term interests of our executives with the long-term interests of our shareholders by paying a substantial portion of each executive’s total direct compensation in the form of performance-based equity awards. The actual awards delivered are dependent upon relative TSR so that the more our shareholders benefit through shareholder returns compared to our Stock Performance Peer Group, the more our executives benefit through increased vesting of performance-based equity and the relative increase in stock price. Also, stock ownership guidelines encourage executives to have a meaningful ownership stake in Cimarex, further aligning the interests of our shareholders and our executives. +· Provide competitive total direct compensation opportunities that retain and attract, when needed, executive talent. +We provide compensation opportunities to our executives at levels that are competitive with equivalent positions at companies with which we may compete for talent. In general, when we review base salary, long-term equity awards and total direct compensation, we reference the 50 th and 75 th percentiles of the relevant peer group. Actual compensation earned by an executive may be outside this range based on company and individual performance and industry competition for talented executives. +· Link compensation earned to achievement of short-term and long-term financial and operational objectives. +We provide an annual incentive cash award opportunity that is designed to reward executive efforts for achievement of company financial and operational objectives. Our long-term equity incentive awards are designed to encourage above average stock price performance and are structured to encourage retention of executives. +Principal Elements of Executive Compensation +We principally use three elements of executive compensation to carry out the design of our executive compensation program, collectively referred to as “Total Direct Compensation”: +Ø +Base salary +Retain executive team and, when appropriate, attract other executives. +Ø +Annual cash incentive award +Reward executives for short-term financial and operational +41 +Table of Contents +results. +Ø +Annual long-term equity award +Focus executive efforts on activities and short-term results that lead to long-term shareholder value. We use time-vested restricted stock for retention and performance measures based on relative TSR to align executives’ interests with the interests of shareholders. +Competitive Positioning +In support of our compensation objectives, we reference the 50 th and 75 th percentiles of a peer group of companies to determine an appropriate total value and mix of pay for executives. We look at individual NEO and total NEO Total Direct Compensation compared to individual NEO and total NEO Total Direct Compensation of companies in our Compensation Peer Group. Because not all of our NEO positions are directly comparable to NEO positions of companies in our Compensation Peer Group, we believe that reviewing aggregate Total Direct Compensation of all NEOs provides an appropriate reference for comparative purposes. The Compensation Peer Group is comprised of companies in the oil and gas industry with similar market capitalization and revenue. The Compensation and Governance Committee annually reviews companies in this Peer Group and modifies the group as appropriate. The 50 th and 75 th percentiles are reference points only; we do not automatically compensate each executive at these levels. Several variables, including individual and division performance, time in position, annual company performance and one- and three-year relative stock price performance influence the actual executive compensation decisions. +In May 2015, the Compensation and Governance Committee approved Cimarex’s Compensation Peer Group to be used for 2015 compensation decisions. The companies included in the Compensation Peer Group at the time of selection are companies in our industry of similar size and scope of operations and similar market capitalization and revenue. At the time of selection, the April 30, 2015 market capitalization of these companies ranged from $2.8 billion to $25.8 billion, the trailing 12 months revenue as of April 30, 2015 ranged from $1.3 million to $4.9 billion. For the comparable periods, Cimarex’s market capitalization was $10.9 billion and its revenue was $2.4 billion. The Compensation and Governance Committee’s independent compensation consultant recommended removing one company from the 2014 Compensation Peer Group. The consultant recommended removing Ultra Petroleum Corp. as being too small from an overall financial stand point with a market capitalization of $2.6 billion and trailing 12 month revenues of $1.1 billion. The consultant also recommended adding Continental Resources, Inc. (“Continental”) because its financial metrics aligned with those of Cimarex. Continental had a market capitalization of $19.6 billion at April 30, 2015. The Compensation and Governance Committee approved the recommendations and the following are the companies in the 2015 Compensation Peer Group: +2015 Compensation Peer Group +Peer Company +Peer Company +Cabot Oil & Gas Corporation +Pioneer Natural Resources Company +Concho Resources Inc. +QEP Resources, Inc. +Continental Resources, Inc. +Range Resources Corporation +Denbury Resources Inc. +SM Energy Company +Energen Corporation +Southwestern Energy Company +Newfield Exploration Company +Whiting Petroleum Corporation +Noble Energy, Inc. +WPX Energy, Inc. +Under our long-term equity incentive award program, we grant performance-based awards of restricted stock. For grants made in December 2015, the performance measure used to determine the number of shares to be delivered upon vesting is Cimarex’s relative TSR over preceding 1- and 3- year periods when compared to companies in the S&P 500 Oil and Gas Exploration & Production Index (the “Stock Performance Peer Group”). +2015 Stock Performance Peer Group +Peer Company +Peer Company +Anadarko Petroleum Corporation +Hess Corporation +Apache Corporation +Marathon Oil Corporation +Cabot Oil & Gas Corporation +Murphy Oil Corporation +Chesapeake Energy Corporation +Newfield Exploration Company +Cimarex Energy Co. +Noble Energy, Inc. +42 +Table of Contents +ConocoPhillips +Pioneer Natural Resources Company +Devon Energy Corporation +Range Resources Corporation +EOG Resources, Inc. +Southwestern Energy Company +EQT Corporation +Role of Compensation Consultant and Management in Compensation Decisions +Compensation Consultant +The Compensation and Governance Committee has engaged the firm of Longnecker & Associates (“Longnecker”) as its independent compensation consultant to fulfill the following responsibilities: +· Advise the Compensation and Governance Committee on management proposals, as requested; +· Undertake special projects at the request of the Compensation and Governance Committee; +· Participate in Compensation and Governance Committee meetings; +· Make recommendations concerning the Compensation Peer Group; +· Review the selected Peer Group and survey data for competitive comparisons; and +· Provide market data and recommendations on NEO compensation. +The Compensation and Governance Committee has considered the independence factors adopted by the NYSE and has determined that its consultant, Longnecker, is independent within the meaning of the NYSE listing standards. +In 2015, as part of its ongoing services to the Compensation and Governance Committee, one or more representatives of Longnecker attended or participated by teleconference at four of the meetings. Longnecker provided the following services in 2015: +· Reviewed and provided input on the CD&A in the 2015 proxy statement; +· Attended February 24, 2015 Compensation and Governance Committee meeting and consulted with the Committee on annual cash incentive awards. +· Reviewed and made executive base salary recommendations; +· Made recommendations concerning the Compensation Peer Group; +· Conducted a market analysis of Board compensation; and +· Provided an executive compensation analysis and recommended range for long-term equity grants. +The total amount of fees paid to Longnecker for 2015 services to the Committee was $128,600. In addition, the Compensation and Governance Committee reimburses Longnecker for reasonable travel and business expenses. +Management +Our CEO and President is the principal management resource for compensation recommendations to the Compensation and Governance Committee with respect to the other NEOs. The CEO (i) provides an annual assessment of Cimarex’s overall financial and operational performance, and (ii) subjectively evaluates individual NEO performance and recommends individual base salary adjustments, annual cash incentive awards, and long-term equity awards. His subjective evaluations generally include factors such as scope of responsibility, contribution to company performance, technical competence, managerial skills and advancement potential. The Compensation and Governance Committee considers the CEO’s recommendations in making decisions regarding executive compensation. The Compensation and Governance Committee exercises its discretion to accept, reject or modify these compensation recommendations. +Our Vice President—Human Resources acts as an informational resource to Longnecker and the Compensation and Governance Committee and compiles survey and other compensation data for their review. The Compensation and Governance Committee, in consultation with Longnecker, reviews this information when making executive compensation and program design decisions. +43 +Table of Contents +Other Compensation Arrangements +Post-Employment and Employment Arrangements +All employees, including the NEOs, are covered by the Cimarex Change in Control Severance Plan. The Plan provides for a “double trigger” so that payments are made only if (a) there is a change in control (as defined in the Plan) and (b) an employee is terminated for any reason other than “cause” (as defined in the Plan) within two years following a change in control. In the event that both of the above contingencies are satisfied, the employee is entitled to (i) cash severance payments of two times annual salary and average cash incentive award, (ii) a pro-rata portion of annual cash incentive bonus for the current year, and (iii) continued medical, dental, disability and life insurance benefits for two years. See Potential Payments Upon Change in Control or Termination for a more detailed description of these benefits. In addition, the 2014 Equity Incentive Plan and the terms of employee equity award agreements provide for acceleration of vesting of outstanding equity awards upon the occurrence of a change in control. +Cimarex assumed the change in control provisions from the now-expired employment agreements between each of Messrs. Albi, Bell, and Jorden and a predecessor company. The assumed portion of each agreement provides that if the executive is terminated without cause within two years following a change in control event (as defined in the agreement), the executive is entitled to a lump-sum payment equal to two times the executive’s base salary at the time of the change in control. Benefits payable under these agreements are forfeited if the executive receives benefits under any other change in control plan, including Cimarex’s Change in Control Severance Plan. As a practical matter, the change in control benefits assumed under the employment agreements only benefit these executives if the Change in Control Severance Plan described above has been terminated. The Change in Control Severance Plan provides for greater benefits payable upon the occurrence of a change in control event than those payable under the assum ed agreements. +Retirement Benefits +Employees, including the NEOs, are eligible to participate in the Cimarex 401(k) defined contribution retirement plan (“401(k) Plan”). Cimarex matches dollar-for-dollar employee contributions to the 401(k) Plan up to 7% of the employee’s cash compensation, subject to limits imposed by the Internal Revenue Code. The Board is authorized to make profit-sharing contributions under the 401(k) Plan. In February 2016, the Board determined that no profit-sharing contribution would be made due to the Company’s loss in 2015. +In addition, eligible participants, including the NEOs, may participate in the Supplemental Savings Plan, which is a non-qualified deferred compensation plan that permits participants to make contributions (and to receive matching contributions) in excess of the Internal Revenue Code limitations for 401(k) plans. See Compensation Tables, 2015 Nonqualified Deferred Compensation for information about contributions to the Supplemental Savings Plan. The Compensation and Governance Committee administers this plan and designates who may participate. Benefits are paid upon the later to occur of termination of employment or the time elected by the participant. In the event of a change in control, each participant receives a lump sum cash payment of the amount allocated to his or her account. +On August 17, 2015, the Company entered into an agreement (“Succession Agreement”) with Mr. Korus, Cimarex’s former CFO, in connection with his retirement effective September 1, 2015. See below Potential Payments Upon Change in Control or Termination . +Perquisites +We provide a limited number of perquisites (personal benefits) to our NEOs, including financial and estate planning. Our corporate aircraft is generally not available for personal use by any employee. With the authorization of our CEO, however, the corporate aircraft may be used by an employee or a member of his/her family for medical purposes. The incremental cost for non-business use of our corporate aircraft, if any, is disclosed in the Summary Compensation Table . We use the Standard Industry Fare Level tables published by the Internal Revenue Service to determine the amount of compensation income that is imputed to the employee for tax purposes for personal use of corporate aircraft. There was no non-business use of our corporate aircraft during 2015. +44 +Table of Contents +Other Compensation Policies +Total Pay Considerations +The Compensation and Governance Committee considers Total Direct Compensation at the time it makes a decision on any element of executive compensation. The Compensation and Governance Committee also reviews the relationship of the CEO’s total compensation to the total compensation of each of the other NEOs. +Stock Ownership and Holding Requirements +Our Corporate Governance Guidelines require that each independent Director own Cimarex stock in an amount equal to three times his or her annual cash retainer. In addition, the CEO is expected to own Cimarex shares in an amount equal to five times his annual base salary, and each executive officer who reports to the CEO is expected to own stock in an amount equal to three times his or her annual base salary. A newly elected Director or a newly appointed executive officer has three years from the date of his or her initial election or appointment to comply with the Guidelines. Restricted stock, restricted stock units, deferred compensation units and performance awards are counted in calculating ownership. Shares subject to options are not counted. Each of the independent Directors, the CEO and the other NEOs comply with these guidelines. +Clawback Policy +We have adopted a clawback policy providing that, in the event of an accounting restatement due to material noncompliance with financial reporting requirements under the U.S. federal securities laws, the Compensation and Governance Committee has the right to use reasonable efforts to recover from any of our current or former executive officers who received incentive-based compensation related to the restatement and received during the three-year period preceding any such accounting restatement. This policy applies to incentive-based compensation granted on or after June 1, 2012. This clawback policy will be interpreted in the best judgment of the Compensation and Governance Committee in a manner consistent with any applicable rules or regulations adopted by the SEC or the NYSE as contemplated by the Dodd-Frank Act. +Non-Hedging and Non-Pledging Policies +Our insider trading policy prohibits Directors, officers and designated employees from engaging in hedging or monetization transactions, and other employees are strongly discouraged from engaging in such transactions. Any other employee wishing to enter into such an arrangement must first submit the proposed transaction for approval by the compliance officer designated in the policy. The policy also prohibits Directors, officers and employees from holding Cimarex stock in a margin account or pledging Cimarex stock as collateral for a loan. +Tax Law Considerations +The Compensation and Governance Committee considers the impact of applicable tax laws with respect to executive compensation. Section 162(m) of the Internal Revenue Code of 1986, as amended, (“Section 162(m)”) limits the amount of compensation that Cimarex may deduct on its federal income tax return for compensation paid to certain executive officers to no more than $1 million per year. There are exceptions to the $1 million limitation for performance-based compensation meeting certain requirements. The performance-based portion of our restricted stock awards are the only element of executive compensation designed to qualify for the performance-based exception to the $1 million deduction limit, provided additional requirements are met. The Compensation and Governance Committee attempts to preserve the deductibility of compensation paid to executive officers, but does not limit executive compensation to amounts deductible under Section 162(m). +45 +Table of Contents +COMPENSATION AND GOVERNANCE COMMITTEE REPORT +The Compensation and Governance Committee has reviewed and discussed with management the preceding Compensation Discussion and Analysis section of Cimarex’s 2016 proxy statement. Based on our review and discussions, we have recommended to the Board of Directors that the Compensation Discussion and Analysis be included in Cimarex’s 2016 proxy statement. +THE COMPENSATION AND GOVERNANCE COMMITTEE +L. Paul Teague, Chairman +Hans Helmerich +David A. Hentschel +Floyd R. Price +46 +Table of Contents +COMPENSATION TABLES +S UMMARY C OMPENSATION T ABLE +The following table describes 2013-2015 compensation of our CEO, CFO and the three other most highly compensated executive officers. In compliance with SEC interpretations, the table also discloses 2013-2015 compensation of Paul Korus, our former CFO, who retired in September 2015. +Non-Equity +Name and +Stock +Option +Incentive Plan +All Other +Principal Position +Year +Salary +Bonus +Awards (1) +Awards +Comp. (2) +Comp. (3) +Total +Thomas E. Jorden +2015 +$ +870,750 +$ +— +$ +6,424,530 +$ +— +$ +435,375 +$ +59,481 +$ +7,790,136 +Chief Executive Officer, President, and Chairman of the Board (CEO) (Principal Executive Officer) +2014 +$ +845,048 +$ +— +$ +7,143,522 +$ +— +$ +740,138 +$ +56,776 +$ +8,785,484 +2013 +$ +751,616 +$ +— +$ +4,785,000 +$ +— +$ +1,620,000 +$ +58,975 +$ +7,215,591 +G. Mark Burford (4) +2015 +$ +342,279 +$ +— +$ +2,250,000 +$ +— +$ +156,000 +$ +47,340 +$ +2,795,619 +Vice President and Chief Financial Officer (CFO) (Principal Financial Officer) +Joseph R. Albi +2015 +$ +561,600 +$ +— +$ +3,200,000 +$ +— +$ +225,000 +$ +58,053 +$ +4,044,653 +Executive Vice President—Operations, Chief Operating Officer +2014 +$ +552,462 +$ +— +$ +3,473,436 +$ +— +$ +477,360 +$ +54,187 +$ +4,557,445 +2013 +$ +523,077 +$ +— +$ +3,190,000 +$ +— +$ +930,000 +$ +48,440 +$ +4,691,517 +Stephen P. Bell +2015 +$ +467,625 +$ +— +$ +2,850,000 +$ +— +$ +163,000 +$ +75,195 +$ +3,555,820 +Executive Vice President—Business Development +2014 +$ +453,822 +$ +— +$ +2,952,396 +$ +— +$ +397,481 +$ +45,358 +$ +3,849,057 +2013 +$ +428,654 +$ +— +$ +2,791,250 +$ +— +$ +750,000 +$ +56,436 +$ +4,026,340 +John A. Lambuth +Senior Vice President—Exploration +2015 +$ +427,168 +$ +— +$ +3,050,000 +$ +— +$ +156,000 +$ +51,803 +$ +3,684,971 +2014 +$ +398,149 +$ +— +$ +3,299,756 +$ +— +$ +352,856 +$ +643,695 +(5) +$ +4,694,456 +2013 +$ +368,654 +$ +— +$ +2,791,250 +$ +— +$ +645,000 +$ +48,440 +$ +3,853,344 +Paul Korus +2015 +$ +331,430 +$ +— +$ +— +$ +— +$ +324,107 +(6) +$ +69,703 +$ +725,240 +Former Senior Vice President—Chief Financial Officer (Former CFO) (Former Principal Financial Officer) +2014 +$ +480,169 +$ +— +$ +2,952,396 +$ +— +$ +413,236 +$ +43,695 +$ +3,889,496 +2013 +$ +463,539 +$ +— +$ +2,791,250 +$ +— +$ +750,000 +$ +48,440 +$ +4,053,229 +47 +Table of Contents +(1) Represents the grant date fair value of the awards, which is an estimate of aggregate compensation cost to be recognized over the service period based on the probable outcome of the performance conditions and is an estimate of aggregate compensation cost to be recognized over the service period determined as of the grant date under FASB ASC Topic 718. The awards are valued as market-based awards using the Monte Carlo simulation method assuming a target number of shares that would be issued because this is deemed to be the “probable” payout percentage at the time of grant consistent with the estimate of aggregate compensation cost to be recognized over the service period. Actual payouts with respect to the awards can range from 50 percent to 100 percent of the award based on the relative ranking of the company’s TSR in comparison to the peer group over the three-year performance period. If the company’s performance results in 100% of the award being paid, the grant date fair value of the maximum number of shares for each of the NEOs pursuant to the awards granted in 2015 based on the closing price of the company’s common stock on the December 9, 2015 date of grant would have been as follows: Mr. Jorden $7,680,879; Mr. Burford $2,690,032; Mr. Albi $3,825,802; Mr. Bell $3,407,311; and Mr. Lambuth $3,646,404. +(2) Amount reported for the year earned. +(3) The following describes the components of other items of compensation, including any perquisite in excess of $10,000: +Executive Officer +Unused +Vacation +Company +Contributions +to Retirement +Plans +Insurance +Premiums +Total +Other +Compensation +Thomas E. Jorden, CEO +2015 +$ +— +$ +36,000 +$ +23,481 +$ +59,481 +2014 +$ +— +$ +40,200 +$ +3,495 +$ +56,776 +2013 +$ +— +$ +45,200 +$ +3,240 +$ +58,975 +G. Mark Burford, CFO +2015 +$ +2,411 +$ +36,000 +$ +8,929 +$ +47,340 +Joseph R. Albi, COO +2015 +$ +— +$ +36,000 +$ +22,053 +$ +58,053 +2014 +$ +— +$ +40,200 +$ +3,495 +$ +54,187 +2013 +$ +— +$ +45,200 +$ +3,240 +$ +48,440 +Stephen P. Bell, EVP +2015 +$ +17,986 +$ +36,000 +$ +21,209 +$ +75,195 +2014 +$ +1,663 +$ +40,200 +$ +3,495 +$ +45,358 +2013 +$ +7,996 +$ +45,200 +$ +3,240 +$ +56,436 +John A. Lambuth, SVP +2015 +$ +— +$ +36,000 +$ +15,803 +$ +51,803 +2014 +$ +— +$ +40,200 +$ +3,495 +$ +643,695 +2013 +$ +— +$ +45,200 +$ +3,240 +$ +48,440 +Paul Korus, Former CFO +2015 +$ +17,226 +$ +36,000 +$ +16,477 +$ +69,703 +2014 +$ +— +$ +40,200 +$ +3,495 +$ +43,695 +2013 +$ +— +$ +45,200 +$ +3,240 +$ +48,440 +(4) This is the first year Mr. Burford is included as CFO in the Summary Compensation Table. Therefore, information is reported only for the 2015 fiscal year. +(5) Includes a payment of $600,000 to Mr. Lambuth on June 1, 2014 pursuant to a retention agreement entered into with Mr. Lambuth in 2010, prior to his becoming a NEO, which was payable if Mr. Lambuth remained employed through June 1, 2014. +(6) Represents the payment of the pro-rata portion of Mr. Korus’ target bonus upon his retirement on September 1, 2015. See Potential Payments Upon Change in Control or Termination—Severance Arrangements for Former CFO . +48 +Table of Contents +2015 G RANTS OF P LAN -B ASED A WARDS +2015 Non-Equity Incentive Plan +The following table describes the target and maximum amounts of annual cash incentive awards for the NEOs and the actual award paid in March 2016 for 2015 services. The non-equity incentive plan provides for no minimum (threshold) award. The amounts listed in the Target column represent 100% of the year-end monthly base salary annualized. The amounts listed in the Maximum column represent 200% of the year-end monthly base salary annualized. See the description of our annual cash incentive award plan in Section 1, Compensation Discussion and Analysis . +Estimated Future Payouts Under +Non-Equity Incentive Plan +Actual +Award +Paid in +Name +Threshold +Target +Maximum +March 2016 +Thomas E. Jorden, CEO +$ +0 +$ +870,750 +$ +1,741,500 +$ +435,375 +G. Mark Burford, CFO +$ +0 +$ +390,000 +$ +780,000 +$ +156,000 +Joseph R. Albi, COO +$ +0 +$ +561,600 +$ +1,123,200 +$ +225,000 +Stephen P. Bell, EVP +$ +0 +$ +467,625 +$ +935,250 +$ +163,000 +John A. Lambuth, SVP +$ +0 +$ +436,000 +$ +872,000 +$ +156,000 +Paul Korus, Former CFO +$ +0 +$ +486,160 +$ +972,320 +$ +324,107 (1) +(1) Mr. Korus retired effective September 1, 2015 and received a pro rata share of his target bonus pursuant to a Succession Agreement entered into in connection with his retirement. See Potential Payments Upon Change in Control or Termination—Severance Arrangements for Former CFO . +2015 Equity Incentive Plan Awards +The following table provides information regarding the awards of restricted stock and options made to the NEOs in 2015. No option awards were made in 2015. See Section 1, Compensation Discussion and Analysis , Long Term Equity Incentive Award Program , for more information about these awards. +Award +Comp. +Comm. +Estimated Future Payouts Under Equity +Incentive Plan Awards +Grant Date +Fair Value of +Stock & +Type of +Grant +Approval +Option +Name +Award (1) +Date +Date +Threshold (2) +Target (3) +Maximum +Awards (4) +Thomas E. Jorden, CEO +RSA +12/9/15 +12/9/15 +36,863 +None +73,727 +$ 6,424,530 +G. Mark Burford, CFO +RSA +12/9/15 +12/9/15 +12,910 +None +25,821 +$ 2,250,000 +Joseph R. Albi, COO +RSA +12/9/15 +12/9/15 +18,361 +None +36,723 +$ 3,200,000 +Stephen P. Bell, EVP +RSA +12/9/15 +12/9/15 +16,353 +None +32,706 +$ 2,850,000 +49 +Table of Contents +John A. Lambuth, SVP +RSA +12/9/15 +12/9/15 +17,500 +35,001 +$ 3,050,000 +Paul Korus, Former CFO +— +— +— +— +— +(1) RSA = Restricted stock (service-based and performance-based shares). +(2) One-half of the total potential award will vest on completion of continuous service on the third anniversary of the grant date of the award. +(3) Terms of the awards do not specify a targeted number of shares. The number of shares that are earned depends on Cimarex’s stock price performance relative to peers and is not computed until the third anniversary of the grant date of the award. See Long-Term Equity Incentive Award Program for the method of computing the number of shares that vest. Cash dividends will be paid on the threshold number of shares during the vesting period and accrued during the vesting period on the remaining number of shares that are subject to measurement of relative TSR upon satisfaction of the continuous service requirement. +(4) Represents an estimate of the fair value of the shares as of the grant date utilizing a Monte Carlo valuation technique as permitted by the guidance provided by FASB ASC Topic 718. The estimated fair value is the aggregate compensation cost to be recognized over the service period based on the results of the Monte Carlo analysis. The awards are valued as market-based awards assuming a target number of shares would be issued because this is deemed to be the “probable” payout percentage at the time of grant consistent with the estimate of aggregate compensation cost to be recognized over the service period. +O UTSTANDING E QUITY A WARDS AT D ECEMBER 31, 2015 +S TOCK A WARDS +Equity Incentive Plan Awards That Have +Not Vested +Name +No. of Shares +Market Value of +Unearned Shares (1) +Thomas E. Jorden, CEO +219,566 (2) +$ +19,624,809 +G. Mark Burford, CFO +41,321 (3) +$ +3,693,271 +Joseph R. Albi, COO +118,461 (4) +$ +10,588,044 +Stephen P. Bell, EVP +103,183 (5) +$ +9,222,497 +John A. Lambuth, SVP +117,652 (6) +$ +10,515,736 +Paul Korus, Former CFO +21,905 (7) +$ +1,957,869 +(1) The amount in this column reflects the closing market price of the stock as of December 31, 2015 ($89.38) multiplied by the number of shares reported in the previous column. +(2) A minimum of 30,000 and a maximum of 60,000 shares could vest on December 12, 2016, between a minimum of 42,919 and a maximum of 85,839 shares could vest on December 10, 2017, and between a minimum of 36,863 and a maximum of 73,727 shares could vest on December 9, 2018. +(3) 3,500 shares will vest on July 13, 2016, 4,000 shares will vest on July 13, 2017, 4,500 shares will vest on July 15, 2018, 3,500 shares will vest on July 31, 2019, and a minimum of 12,910 and a maximum of 25,821 shares could vest on December 9, 2018. +(4) A minimum of 20,000 and a maximum of 40,000 shares could vest on December 12, 2016, between a minimum of 20,869 and a maximum of 41,738 shares could vest on December 10, 2017, and between a minimum of 18,361 and a maximum of 36,723 shares could vest on December 9, 2018. +50 +Table of Contents +(5) +A minimum of 17,500 and a maximum of 35,000 shares could vest on December 12, 2016, between a minimum of 17,738 and a maximum of 35,477 shares could vest on December 10, 2017, and between a minimum of 16,353 and a maximum of 32,706 shares could vest on December 9, 2018. +(6) +4,000 shares will vest on July 13, 2016, 4,000 shares will vest on July 13, 2017, a minimum of 17,500 and a maximum of 35,000 shares could vest on December 12, 2016, between a minimum of 19,825 and a maximum of 39,651 shares could vest on December 10, 2017, and between a minimum of 17,500 and a maximum of 35,001 shares could vest on December 9, 2018. +(7) +Up to 12,738 shares will vest on December 12, 2016 and up to 9,167 shares will vest on December 10, 2017. +2015 O PTION E XERCISES A ND R ESTRICTED S TOCK V ESTED +2015 OPTION EXERCISES +2015 STOCK VESTING +Name +Number of Shares +Acquired on Exercise +(#) +Value Realized on +Exercise +($) +Number of Shares +Acquired on Vesting +(#) +Value Realized on +Vesting +($) +Thomas E. Jorden, CEO +25,000 +$ +2,741,987 +59,692 +$ +6,826,974 +G. Mark Burford, CFO +— +$ +— +14,000 +$ +1,565,680 +Joseph R. Albi, COO +25,000 +$ +2,890,000 +44,770 +$ +5,120,345 +Stephen P. Bell, EVP +25,000 +$ +2,890,151 +37,308 +$ +4,266,916 +John A. Lambuth, SVP +— +$ +— +28,000 +$ +2,956,960 +Paul Korus, Former CFO +— +$ +— +59,213 +* +$ +6,616,227* +* Includes accelerated vesting of a portion of restricted stock awards held by Mr. Korus upon his retirement on September 1, 2015. See Potential Payments Upon Change in Control or Termination—Severance Arrangements for Former CFO . +2015 N ONQUALIFIED D EFERRED C OMPENSATION +The following table provides information on the Supplemental Savings Plan (the “SSP”) contributions and earnings for our NEOs in each of the last three fiscal years. Under the terms of the SSP, a participant may make an elective contribution to the SSP of an amount that exceeds the maximum amount permitted to be contributed to his account in the Cimarex 401(k) Plan (an “excess contribution”) provided that the excess contribution does not exceed the dollar limitation on elective deferrals under the Internal Revenue Code section 402(g) in effect on January 1 st of the calendar year of deferral (2015 limitation was $18,000). Cimarex will match 100% of the excess contributions up to 7% of a participant’s eligible compensation. A participant also may elect to have up to 50% of his or her compensation and up to 100% of his or her bonus withheld from his or her compensation and allocated to his SSP account. Cimarex does not match these contributions. +Executive +Contributions +in Last FY (1) +Registrant +Contributions +in Last FY (2) +Aggregate +Earnings +in Last FY +Aggregate +Withdrawals/ +Distributions +Aggregate +Balance +at Last FYE +Name +($) +($) +($) +($) +($) +Thomas E. Jorden, CEO +2015 +$ +18,000 +$ +18,000 +$ +699 +$ +— +$ +651,318 +(3) +2014 +$ +17,500 +$ +17,500 +$ +327 +$ +— +$ +615,042 +2013 +$ +17,500 +$ +17,500 +$ +173 +$ +— +$ +580,126 +G. Mark Burford, CFO +2015 +$ +18,000 +$ +18,000 +$ +<2,684 +> +$ +— +$ +182,879 +51 +Table of Contents +Joseph R. Albi, COO +2015 +$ +18,000 +$ +18,000 +$ +<10,588 +> +$ +— +$ +516,842 +(3) +2014 +$ +17,500 +$ +17,500 +$ +30,552 +$ +— +$ +491,853 +2013 +$ +17,500 +$ +17,500 +$ +73,828 +$ +— +$ +426,712 +Stephen P. Bell, EVP +2015 +$ +18,000 +$ +18,000 +$ +<691 +> +$ +— +$ +647,702 +(3) +2014 +$ +17,500 +$ +17,500 +$ +321 +$ +— +$ +611,434 +2013 +$ +17,500 +$ +17,500 +$ +38,093 +$ +— +$ +576,524 +John A. Lambuth, SVP +2015 +$ +18,000 +$ +18,000 +$ +55 +$ +— +$ +440,450 +(3) +2014 +$ +17,500 +$ +17,500 +$ +18,916 +$ +— +$ +404,818 +2013 +$ +17,500 +$ +17,500 +$ +33,445 +$ +— +$ +351,313 +Paul Korus, Former CFO +2015 +$ +94,189 +$ +18,000 +$ +<2,492 +> +$ +— +$ +959,311 +(3) +2014 +$ +140,517 +$ +17,500 +$ +83,908 +$ +— +$ +850,037 +2013 +$ +63,854 +$ +17,500 +$ +142,102 +$ +— +$ +608,523 +(1) The amounts included in this column also are included in the Salary column in the Summary Compensation Table . +(2) The amounts reported in this column also are included in the All Other Compensation column and footnote 3 thereto in the Summary Compensation Table . +(3) The following table sets forth amounts included in the aggregate balance at December 31, 2015 that were reported as compensation to the NEO in the Summary Compensation Table for previous years. +Named Executive Officer +Amount of Previously +Reported Compensation +Thomas E. Jorden, CEO +$ +548,464 +G. Mark Burford, CFO +$ +NA +Joseph R. Albi, COO +$ +357,994 +Stephen P. Bell, EVP +$ +437,348 +John A. Lambuth, SVP +$ +309,858 +Paul Korus, Former CFO +$ +627,195 +P OTENTIAL P AYMENTS U PON C HANGE IN C ONTROL OR T ERMINATION +We do not consider post-termination benefits as a material element of executive compensation because NEO post-termination benefits are the same benefits available to all full-time employees. Post-termination benefits are not included in the Compensation and Governance Committee’s analysis of total compensation. +We are obligated to make certain payments to employees, including our NEOs, or to accelerate the vesting of their equity awards pursuant to the following plans and agreements: +· Change in Control Severance Plan that covers all full-time employees, including the NEOs; +· 2002 Stock Incentive Plan, 2011 Equity Incentive Plan and 2014 Equity Incentive Plan that govern all equity awards made to Directors and employees, including the NEOs; +52 +Table of Contents +· Change in control provisions for the benefit of Messrs. Albi, Bell, and Jorden, as assumed by Cimarex; and +· Supplemental Savings Plan. +Our change in control arrangements keep our senior executives focused on pursuing all corporate transaction activity that is in the best interests of shareholders regardless of whether those transactions may result in their own job losses. Uncertainty created by a corporate transaction can create retention risk for a company. In addition, change in control protection is often needed to retain and attract, when appropriate, the best talent because many of the companies with whom we compete for talent provide change in control protection. +We do not have a formal program to pay severance benefits nor do our equity award agreements provide for acceleration of equity awards upon the retirement of the NEOs. In connection with the retirement of Paul Korus as CFO effective September 1, 2015, we entered into a Succession Agreement with Mr. Korus pursuant to which he was paid certain amounts and had certain equity awards accelerated. See Severance Arrangements with Former CFO below. +Change in Control +We are obligated under certain agreements to pay benefits upon a “change in control” event. Cimarex’s definition of “ change in control ” as used in its 2002 Stock Incentive Plan, its 2011 Equity Incentive Plan and its 2014 Equity Incentive Plan, its Change in Control Severance Plan and the change in control provisions that survived certain expired employment agreements with each NEO are the same. In summary, a change in control event means any of the following: +· Acquisition of 30% or more of the shares of our outstanding common stock or the combined voting power of voting securities of Cimarex by an individual or group; +· Members of our Board of Directors, or Directors nominated by those Directors, cease to constitute a majority of the Directors during any period of twelve months; +· A reorganization, share exchange or merger unless (i) the shareholders prior to the reorganization or merger continue to own more than 40% of the outstanding common stock and combined voting power of the resulting corporation following the reorganization or merger; and (ii) at least a majority of the members of the Board of the corporation resulting from the merger or reorganization were members of the Board at the time of executing the agreement to reorganize or merge; or +· The complete liquidation or dissolution of Cimarex or the sale of all or substantially all of its assets. +The following is a summary of those agreements that provide for payment to the NEOs in the event of a change in control event coupled with termination of employment without cause: +Change in Control — Termination Without Cause +Our Change in Control Plan provides for the payment of severance benefits to all active employees in the event of termination following a change in control. In the event of a change in control, if an employee is terminated for any reason other than “cause” (as defined in the Plan) within two years following a change in control, that employee would be entitled to: +· Cash severance payments of up to two years’ salary and cash incentive award; +· A pro rata portion of the annual cash incentive bonus award otherwise payable for the year of termination; and +· Continued medical, dental, disability and life insurance benefits for two years. +We assumed from a predecessor company the change in control provisions from the now-expired employment agreements of each of Messrs. Albi, Bell, and Jorden with such company. Each agreement provides that if the executive is terminated without cause within two years following a change in control event (as defined in the agreement), the executive is entitled to a lump-sum payment equal to two times the executive’s base salary at the time of the change in control. Benefits payable under these agreements are forfeited if the executive receives benefits under any other change in control plan, including the Cimarex Change in Control Severance Plan. As a practical matter, the change in control benefits assumed under the employment +53 +Table of Contents +agreements only benefit these executives if the Change in Control Severance Plan described above has been terminated. The Change in Control Severance Plan provides for greater benefits payable upon the occurrence of a change in control event than those payable under the assumed agreements. +Change in Control — No Termination +Our 2002 Stock Incentive Plan, our 2011 Equity Incentive Plan, and our 2014 Equity Incentive Plan provide for acceleration of vesting of equity awards in the event of a change in control. +54 +Table of Contents +Termination of Employment +Death or Disability +The award agreements for grants of equity under the 2002 Stock Incentive Plan, and the provisions of the 2011 Equity Incentive Plan and 2014 Equity Incentive Plan, provide for acceleration of vesting of awards in the event of death or disability. Benefits under the Supplemental Savings Plan also are paid upon death or disability. +Termination Without Cause +Benefits under the Supplemental Savings Plan are payable to each NEO upon termination of employment. +Estimated Benefits upon Various Termination Scenarios +Payments upon a change in control or termination of employment include various elements of compensation. The elements of compensation that may be included in a change in control or severance payment are: +(A) +(B) +(C) +(D) +(E) +ANNUAL AVERAGE +CASH +COMPENSATION (1) +CASH INCENTIVE (2) +LONG TERM AWARD +PAYOUT (3) +SUPPLEMENTAL +SAVINGS (4) +OTHER +BENEFITS (5) +Thomas E. Jorden, CEO +$ +3,191,311 +$ +435,375 +$ +18,031,686 +$ +651,318 +$ +102,430 +G. Mark Burford, CFO +$ +1,023,279 +$ +156,000 +$ +2,453,339 +$ +182,879 +$ +73,324 +Joseph R. Albi, COO +$ +1,816,422 +$ +225,000 +$ +9,796,974 +$ +516,842 +$ +83,211 +Stephen P. Bell, EVP +$ +1,481,928 +$ +163,000 +$ +8,517,333 +$ +647,702 +$ +61,015 +John A. Lambuth, SVP +$ +1,334,173 +$ +156,000 +$ +9,763,042 +$ +440,450 +$ +87,073 +(1) Amount represents two times the annual average compensation (salary and cash incentive bonus) paid to the executive for 2014 and 2015, as provided in the Change in Control Severance Plan. +(2) Amount represents the average incentive bonus as provided in the Change in Control Severance Plan. This is the actual approved bonus for 2015. +(3) Amount represents the value of accelerated vesting of restricted stock and options based upon the closing price of Cimarex’s common stock as of December 31, 2015 of $89.38 per share. +(4) Amount represents estimated payments under the Supplemental Savings Plan. +(5) Amount represents the estimated value of continued medical, dental, disability and life insurance benefits for two years as provided in the Change in Control Severance Plan. +The following table provides the estimated compensation and present value of benefits potentially payable to each NEO in the event of a change in control or termination under various circumstances. The amounts shown assume that the termination or change in control occurred on December 31, 2015. The actual amounts to be paid only can be determined at the time of the executive’s actual separation from Cimarex or the occurrence of a change in control. Actual payments may be more or less than the amounts described below. In addition, the company may enter into new arrangements or modify these arrangements, from time to time. +55 +Table of Contents +The following describes potential payments to the NEOs in the event of a change in control or termination under various scenarios. +NAME +TERMINATION +WITHOUT CAUSE +(D) (1) +TERMINATION AS A +RESULT OF +DEATH OR +DISABILITY +(C)(D) (1) +CHANGE IN +CONTROL +(No Termination) +(C) (1) +TERMINATION +ON CHANGE +IN CONTROL +(A+B+C+D+E) (1) +Thomas E. Jorden, CEO +$ +651,318 +$ +18,683,003 +$ +18,031,686 +$ +22,412,119 +G. Mark Burford, CFO +$ +182,879 +$ +2,636,219 +$ +2,453,339 +$ +3,888,822 +Joseph R. Albi, COO +$ +516,842 +$ +10,313,816 +$ +9,796,974 +$ +12,438,450 +Stephen P. Bell, EVP +$ +647,702 +$ +9,165,035 +$ +8,517,333 +$ +10,870,978 +John A. Lambuth, SVP +$ +440,450 +$ +10,203,492 +$ +9,763,042 +$ +11,780,738 +(1) The alphabetical code refers to the elements of compensation that may be included in a change in control or severance payment as described at the beginning of this section, Estimated Benefits upon Various Termination Scenarios . +SEVERANCE ARRANGEMENTS FOR FORMER CFO +On August 17, 2015, the Company entered into a Succession Agreement with Mr. Korus, Cimarex’s former CFO. The Succession Agreement established terms related to his retirement and severance arrangements, including a pro-rata payment of Mr. Korus target bonus for 2015 and the acceleration of a portion of the outstanding unvested equity awards. +In approving the terms of the agreement, the Compensation and Governance Committee considered Mr. Korus’ role as a founder of the Company, his length of service, his contributions to the Company, his succession planning and preparation of his successor to serve as Chief Financial Officer, and the recommendation of the CEO. The Committee also consulted its compensation consultant, which agreed with the recommendation of the CEO. After considering these matters, the Compensation and Governance Committee approved amending Mr. Korus’ outstanding performance share awards covering an aggregate of up to 70,477 shares to allow 21,905 of the shares that vest based on continued employment to vest upon his retirement, to allow up to another 21,905 shares that vest based on performance to continue to vest on their original terms and vesting schedule after Mr. Korus’ retirement, and to forfeit 26,667 shares upon retirement. The up to 21,905 shares that are performance based are at risk and may not vest if the Company’s relative shareholder return does not meet the minimum vesting levels in the relevant performance periods. As a condition to these amendments to his awards, Mr. Korus agreed to a non-compete/non-solicitation agreement that would be in force during the remaining performance based vesting periods as well as agreements to keep Company information confidential, not to disparage the Company and to be available to assist the Company in connection with any audit, investigation or judicial, administrative, or arbitral proceeding involving matters within the scope of his duties with Cimarex. In addition, based on Mr. Korus’ performance in 2015 and the Company’s year-to-date performance with respect to its annual incentive goals at the time of approval of the Succession Agreement, the Compensation and Governance Committee approved the payment of 8/12ths of Mr. Korus’ target bonus upon his retirement on September 1, 2015, an amount equal to $324,107. +DIRECTOR AND OFFICER INDEMNIFICATION AGREEMENTS +We have entered into an indemnification agreement with our Directors and certain officers. These agreements require us, among other things, to indemnify such persons against certain liabilities that may arise by reason of their status or service as Directors or officers, to advance their expenses incurred as a result of a proceeding for which they may be indemnified, and to cover them under any Directors’ and officers’ liability insurance policy that we choose, in our discretion, to maintain. These indemnification agreements are intended to provide indemnification rights to the fullest extent permitted under applicable Delaware law and will be in addition to any other rights that the indemnitee may have under our Restated Certificate of Incorporation, Bylaws, and applicable law. +ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION (ITEM 2) +At the 2015 Annual Meeting of Shareholders, 98% of the votes cast were in favor of the advisory vote to approve executive compensation. In addition to the advisory vote, as part of our regular shareholder engagement, we consider and discuss with shareholders a number of matters throughout the year, including executive compensation and governance. The Compensation +56 +Table of Contents +and Governance Committee carefully considers any feedback and routinely reviews executive compensation practices and governance. +The Compensation and Governance Committee considered the results of the advisory vote and the discussions with shareholders to convey our shareholders’ support of the Committee’s compensation decisions in 2014 and early 2015 and shareholders’ overall satisfaction with Cimarex’s executive compensation programs. Consistent with this support, the Compensation and Governance Committee retained the core design of our executive compensation programs for the remainder of 2015, as it believes the programs continue to retain, attract, when appropriate, and appropriately incent senior management. +At the 2016 Annual Meeting of Shareholders, we again will hold an annual advisory vote to approve executive compensation. The Compensation and Governance Committee will continue to consider the results from this year’s and future advisory votes on executive compensation, as well as feedback from shareholders through the course of such year. A shareholder advisory vote will be held at the 2017 annual meeting to vote again on the frequency of the advisory vote to approve executive compensation, i.e., if the advisory vote should be held every one, two or three years. +Because your vote is advisory, it will not be binding upon the Board. However, the Board values shareholders’ opinions, and the Compensation and Governance Committee will take into account the outcome of the vote when considering future executive compensation decisions. The Board recommends that shareholders vote FOR the following resolution: +RESOLVED, that the shareholders approve, on an advisory basis, the compensation of Cimarex’s Named Executive Officers, as disclosed in this proxy statement, including the Compensation Discussion and Analysis, the executive compensation tables and the related narrative. +The Board of Directors unanimously recommends a vote FOR the advisory vote to approve executive compensation. +REPORT OF AUDIT COMMITTEE +The Audit Committee on behalf of the Board of Directors monitors (i) the integrity of the Company’s financial statements; (ii) the independent auditors’ qualifications and independence; (iii) the performance of the Company’s internal audit function and independent auditors; (iv) the appropriateness of the Company’s accounting policies; (v) the adequacy of the Company’s internal controls; (vi) the Company’s compliance with legal and regulatory requirements related to audit matters; (vii) the process related to ongoing litigation matters, (viii) the annual process of estimating and reporting quantities of oil and gas reserves, and (ix) risk and oversight. In so doing, it is the responsibility of the Committee to maintain free and open communication between the directors, the independent auditor and the management of the Company. All members of the Audit Committee meet the independence, experience and financial literacy requirements of the New York Stock Exchange, the Sarbanes Oxley Act and any rules or regulations promulgated by the Securities and Exchange Commission. The Board of Directors has adopted a written charter for the Audit Committee, a copy of which is available on our website at www.cimarex.com . +Management is responsible for the Company’s financial statements, the financial reporting process, and the process of estimating and reporting quantities of oil and gas reserves, including the related systems of internal controls and disclosure controls and procedures. The Company’s independent registered public accounting firm is responsible for performing an independent audit of the Company’s financial statements in accordance with generally accepted auditing standards and issuing a report thereon. The Audit Committee’s responsibility is to monitor and oversee these processes and the Audit Committee uses the Company’s internal audit department and (if applicable) independent petroleum engineers to assist with these responsibilities. +The Audit Committee reviewed Cimarex’s audited financial statements and supplemental oil and gas reserve information as of and for the year ended December 31, 2015 and met with management, DeGolyer and MacNaughton (an independent petroleum engineering consulting firm) and KPMG, Cimarex’s independent registered public accounting firm, to discuss the related information, and the effectiveness of Cimarex’s internal control over financial reporting. In addition, we have received from KPMG the communication required by Public Company Accounting Oversight Board (PCAOB) Rule 3526, Communication with Audit Committees Concerning Independence, and discussed with KPMG their independence from Cimarex and its management. The Audit Committee also discussed with KPMG any matters required by the PCAOB Auditing Standards No. 16, Communication with Audit Committees. +57 +Table of Contents +Based on these reviews and discussions, the Audit Committee recommended to the Board of Directors that Cimarex’s audited financial statements be included in Cimarex’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015. +THE AUDIT COMMITTEE +Monroe W. Robertson, Chairman +Harold R. Logan, Jr. +Lisa A. Stewart +Michael J. Sullivan +The Audit Committee Report does not constitute soliciting material and shall not be deemed to be filed or incorporated by reference into any other Cimarex filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that Cimarex specifically incorporates the Audit Committee Report by reference. +RATIFICATION OF INDEPENDENT AUDITORS (ITEM 3) +The Audit Committee of the Board has appointed KPMG LLP to audit our financial statements for 2016. Since October 1, 2002, KPMG LLP has served as our independent auditors. +We are asking that shareholders ratify the appointment of KPMG LLP as our independent auditors. If shareholders fail to ratify the appointment, the Audit Committee may reconsider this appointment. A KPMG LLP representative will be at the Annual Meeting to answer appropriate questions and to make a statement if he or she desires. +The Board of Directors recommends a vote FOR the ratification of KPMG LLP as Cimarex’s Independent Auditors for 2016. +Audit and Non-Audit Fees +The following table shows the fees for professional services rendered by KPMG LLP for the audit of Cimarex’s annual financial statements for the years ended December 31, 2015 and December 31, 2014, and fees billed for other services rendered by KPMG LLP during those periods: +Years Ended +December 31, +2015 +2014 +Audit Fees (1) +$ +1,100,131 +$ +1,142,844 +Audit-Related Fees (2) +$ +99,940 +$ +80,000 +Tax Fees (3) +$ +211,504 +$ +174,420 +All Other Fees +$ +0 +$ +0 +(1) Audit fees were principally for audit work performed on the consolidated financial statements and internal controls over financial reporting. +(2) Audit-related fees were principally for services associated with SEC registration statements, periodic reports and other documents filed with the SEC or issued in connection with securities offerings, e.g., comfort letters and consents and assistance in responding to SEC comment letters. +(3) Tax fees were principally for services related to tax compliance and reporting and analysis services. +Policy for Approval of Audit, Audit-Related and Tax Services +The Audit Committee annually reviews and pre-approves certain categories of audit, audit-related and tax services to be performed by our independent auditors, subject to a specified range of fees. The Audit Committee also may pre-approve specific services. Certain non-audit services as specified by the SEC may not be performed by our independent auditors. The Audit Committee may delegate pre-approval authority to one or more of its members. In the event of any such delegation, any pre-approved decisions will be reported to the Audit Committee at its next scheduled meeting. The services described in the above table were pre-approved by the Audit Committee in 2014 and 2015. +58 +Table of Contents +O THER M ATTERS +Section 16(a) Beneficial Ownership Reporting Compliance +Section 16(a) of the Securities Exchange Act of 1934 requires our Directors and executive officers, and persons who own more than 10% of our common stock, to file reports of ownership of, and transactions in, our common stock with the SEC. Based on a review of such reports, and on written representations from our reporting persons, we believe that all reports were timely filed in 2015. +Complaint and Reporting Procedures +We have established complaint and reporting procedures that are posted on our website at www.cimarex.com . Any person, whether or not an employee, who has a concern about the conduct of Cimarex or any of our employees, including accounting, internal accounting controls or auditing issues, may, in an anonymous manner, communicate that concern by calling our hotline, 1-866-519-1898. The hotline is available 24 hours a day, seven days a week. Comments will be typed verbatim and will be delivered to a representative with authority to investigate the concern. +59 +PROXY +THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS +CIMAREX ENERGY CO. +The undersigned appoints Thomas E. Jorden and Francis B. Barron as proxies, with power to act without the other and with power of substitution, and authorizes them to represent and vote, as designated on the other side, all the shares of common stock of Cimarex Energy Co. held of record by the undersigned with all powers that the undersigned would possess if present at the Annual Meeting of Shareholders to be held at the Hyatt Regency Tulsa, 100 East Second Street, Tulsa, Oklahoma 74103, on May 12, 2016, at 9:00 a.m., Central Daylight Time, or any adjournment thereof. +For participants in the Cimarex 401(k) Plan, this proxy, when properly executed, will be voted in the manner directed by the undersigned. If no direction is given, if the card is not signed, or if the card is not received prior to 11:59 p.m., Eastern Daylight Time, on May 9, 2016, the Plan’s Trustee will vote your shares held in the Plan in the same proportion as shares were voted by other Plan participants. +(Continued, and to be marked, dated and signed, on the other side) +p PLEASE DETACH ALONG PERFORATED LINE AND MAIL IN THE ENVELOPE PROVIDED. p +Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to be held May 12, 2016. +The Proxy Statement and our 2015 Annual Report to Shareholders are available at: http://www.allianceproxy.com/cimarex/2016 +THIS PROXY WILL BE VOTED AS DIRECTED, OR, IF NO DIRECTION IS INDICATED, WILL BE VOTED “FOR” ALL THE NOMINEES LISTED UNDER ITEM 1 AND “FOR” ITEMS 2 AND 3. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. +Please mark your votes like this +x +The Board of Directors recommends a vote “FOR” all the nominees listed under Item 1 and “FOR” Items 2 and 3. +The Board of Directors recommends a vote FOR all the nominees listed below: +The Board of Directors recommends you vote FOR the following Items: +1. Election of one Class I director: +FOR +AGAINST +ABSTAIN +FOR +AGAINST +ABSTAIN +2. Advisory vote to approve executive compensation +o +o +o +(01) Lisa A. Stewart +o +o +o +3. Ratify the appointment of KPMG LLP as our +o +o +o +Election of three Class II directors: +independent auditors for 2016 +(02) Hans Helmerich +o +o +o +(03) Harold R. Logan, Jr. +o +o +o +(04) Monroe W. Robertson +o +o +o +I plan on attending the meeting o +NOTE: Please sign as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee or guardian, please give full title as such. +Signature +CONTROL NUMBER +Signature (if held jointly) +Date: +, 2016 +p PLEASE DETACH ALONG PERFORATED LINE AND MAIL IN THE ENVELOPE PROVIDED. p +CIMAREX ENERGY CO. +As a shareholder of Cimarex Energy Co., you have the option of voting your shares electronically through the Internet or on the telephone, eliminating the need to return the proxy card. Your electronic vote authorizes the named proxies to vote your shares in the same manner as if you marked, signed, dated and returned the proxy card. Votes submitted electronically over the Internet or by telephone must be received by 7:00 p.m., Eastern Time, on May 11, 2016. +CONTROL NUMBER +PROXY VOTING INSTRUCTIONS +Please have your 11 digit control number ready when voting by Internet or Telephone +INTERNET +Vote Your Proxy on the Internet: Go to www.cesvote.com +Have your proxy card available when you access the above website. Follow the prompts to vote your shares. +TELEPHONE +Vote Your Proxy by Phone: +Call 1 (888) 693-8683 +Use any touch-tone telephone to vote your proxy. Have your proxy card available when you call. Follow the voting instructions to vote your shares. +MAIL +Vote Your Proxy by Mail: +Mark, sign, and date your proxy card, then detach it, and return it in the postage-paid envelope provided. \ No newline at end of file diff --git a/raw/proxies/0001168054/0001104659-16-108949/proxy_rpt.txt b/raw/proxies/0001168054/0001104659-16-108949/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..8bc4ef5a6438e6c871c081ede6b36a1500242579 --- /dev/null +++ b/raw/proxies/0001168054/0001104659-16-108949/proxy_rpt.txt @@ -0,0 +1,25 @@ +Review of related party transactions +Yes +Diverse Board skills and experience +Yes +Non-Hedging and non-pledging policies +Yes +Annual Board and Committee self-evaluations +Yes +Clawback policy +Yes +Consultant review of Board skills +Yes +Management and Director stock ownership guidelines +Yes +Annual equity grants to Directors +Yes +Tax gross-ups +No +Annual Board education +Yes +Proxy Access +Yes +Interested parties may communicate with our Board by mail directed to our Corporate Secretary or by facsimile (720) 403-9383. All communications will be forwarded to the Lead Director for the Lead Director’s review. The Lead Director may take any action the Lead Director deems appropriate or necessary, including, without limitation, forwarding the information to the Board for consideration or, with the concurrence of the Board, retaining independent or outside counsel, accountants or other advisors to address the concern. +20 +Table of Contents \ No newline at end of file diff --git a/raw/proxies/0001168054/0001104659-17-020553/proxy.txt b/raw/proxies/0001168054/0001104659-17-020553/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..ab5000bf8777b58b66a9b6629951835e5d097d48 --- /dev/null +++ b/raw/proxies/0001168054/0001104659-17-020553/proxy.txt @@ -0,0 +1,3034 @@ +DEF 14A +1 +a17-2278_1def14a.htm +DEF 14A +Table of Contents +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +Washington, D.C. 20549 +SCHEDULE 14A +Proxy Statement Pursuant to Section 14(a) of +the Securities Exchange Act of 1934 (Amendment No. ) +Filed by the Registrant x +Filed by a Party other than the Registrant o +Check the appropriate box: +o +Preliminary Proxy Statement +o +Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(3)(2)) +x +Definitive Proxy Statement +o +Definitive Additional Materials +o +Soliciting Material Pursuant to §240.14a-12 +Cimarex Energy Co. +(Name of Registrant as Specified in Its Charter) +(Name of Person(s) Filing Proxy Statement, if other than the Registrant) +Payment of Filing Fee (Check the appropriate box): +x +No fee required. +o +Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. +(1) +Title of each class of securities to which transaction applies: +(2) +Aggregate number of securities to which transaction applies: +(3) +Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): +(4) +Proposed maximum aggregate value of transaction: +(5) +Total fee paid: +o +Fee paid previously with preliminary materials. +o +Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. +(1) +Amount Previously Paid: +(2) +Form, Schedule or Registration Statement No.: +(3) +Filing Party: +(4) +Date Filed: +Table of Contents +1700 Lincoln Street, Suite 3700 +Denver, CO 80203-4537 +NOTICE OF 2017 ANNUAL MEETING OF SHAREHOLDERS +TIME AND DATE +9:00 a.m. Mountain Daylight Time on Thursday, May 11, 2017 +PLACE +Wells Fargo Center – Denver +Assemble Room (Lower Level 2) +1700 Lincoln Street +Denver, Colorado 80203 +ITEMS OF BUSINESS +Item 1. Election of Directors +Item 2. Advisory Vote to Approve Executive Compensation +Item 3. Advisory Vote on the Frequency of Advisory Vote on Executive Compensation +Item 4. Ratification of Independent Auditors +Transact any other business that properly comes before the Meeting and any adjournment or postponement of the Meeting +RECORD DATE +March 15, 2017 +MAILING DATE TO SHAREHOLDERS +March 31, 2017 +MATERIALS TO REVIEW +This booklet contains our Notice of 2017 Annual Meeting and Proxy Statement. Our 2016 Annual Report is available on our website at www.cimarex.com . +PROXY VOTING +It is important that your shares be represented and voted at the Meeting. You can vote your shares by following the internet or telephone instructions on page 9 of this proxy statement or you may attend and vote in person at the Annual Meeting. If you received a paper copy of the proxy card, you also may vote by completing and mailing the proxy card in the postage-paid envelope provided for your convenience. You may revoke your proxy at any time before the vote is taken by following the instructions on page 11 of this proxy statement. +Francis B. Barron +March 31, 2017 +Corporate Secretary +Table of Contents +TABLE OF CONTENTS +Page No. +Voting Information +2 +Proxy Statement Summary +3 +Proxy Statement +8 +Questions and Answers +9 +Election of Directors (Item 1) +13 +Election Process +13 +Director Nominations +14 +Director Qualifications +14 +2017 Nominees for Class III Directors +14 +Continuing Directors +16 +Retiring Director +18 +Director Compensation +19 +Corporate Governance +20 +Board and Committee Information +22 +Our Board +22 +Board Leadership Structure +22 +Board Committees +23 +Director Independence and Related Person Transactions +25 +Risk Oversight +25 +Executive Sessions +26 +Shareholder Engagement +26 +Stock Ownership—Directors, Management and Certain Beneficial Owners +27 +Compensation Discussion and Analysis +32 +Compensation and Governance Committee Report +49 +Compensation Tables +50 +Summary Compensation Table +50 +2016 Grants of Plan-Based Awards +52 +Outstanding Equity Awards at December 31, 2016 +53 +2016 Option Exercises and Restricted Stock Vested +54 +2016 Nonqualified Deferred Compensation +54 +Potential Payments Upon Change in Control or Termination +55 +Director and Officer Indemnification Agreements +58 +Advisory Vote to Approve Executive Compensation (Item 2) +58 +Advisory Vote on Frequency of Advisory Vote on Executive Compensation (Item 3) +59 +Report of Audit Committee +59 +Ratification of Independent Auditors (Item 4) +60 +Audit and Non-Audit Fees +60 +Approval of Audit, Audit-Related and Tax Services +60 +Other Matters +61 +Section 16(a) Beneficial Ownership Reporting Compliance +61 +Complaint and Reporting Procedures +61 +Table of Contents +VOTING INFORMATION +WE WANT TO HEAR FROM YOU – VOTE TODAY +It is important that you vote. Please carefully review the proxy materials for the 2017 Annual Meeting of Shareholders and follow the instructions below to cast your vote on all of the voting matters. +Voting Matters and Board Recommendations +Our Board’s Recommendation +Election of Directors (page 13) +FOR each Director Nominee +Advisory Vote to Approve Executive Compensation (page 58) +FOR +Advisory Vote to Approve the Frequency of Advisory Vote on Executive Compensation (page 59) +FOR “1 YEAR” +Ratification of Independent Auditors (page 60) +FOR +Advance Voting Methods +Even if you plan to attend the 2017 Annual Meeting of Shareholders in person, please vote right away using one of the following advance voting methods (see page 9 for additional details). Make sure to have your proxy card or voting instruction form in hand and follow the instructions. +You can vote in advance in one of three ways: +Visit the website listed on your proxy card/voting instruction form to vote VIA THE INTERNET +Call the telephone number on your proxy card/voting instruction form to vote BY TELEPHONE +Sign, date and return your proxy card/voting instruction form in the enclosed envelope to vote BY MAIL +Voting at our 2017 Annual Meeting of Shareholders +All shareholders of record may vote in person at the 2017 Annual Meeting of Shareholders, which will be held on Thursday, May 11, 2017 at 9:00 a.m., Mountain Daylight Time, at Wells Fargo Center – Denver, Assemble Room (Lower Level 2), 1700 Lincoln Street, Denver, Colorado 80203. Beneficial owners may vote in person at the Meeting if they have a legal proxy, as described in the response to question 14 on page 12 of “Questions and Answers about the Meeting and Voting.” +2 +Table of Contents +Proxy Statement Summary +Director Nominees (page 13) +You are being asked to vote on the following four Director Nominees. Directors are elected by a majority of votes cast. Detailed information about each Director’s background, skill sets and areas of expertise can be found beginning on page 13. +NAME +AGE +DIRECTOR +SINCE +POSITION +INDEPENDENT +AC +C/G +NOM +OTHER +PUBLIC +BOARDS +David A. Hentschel +83 +2002 +Retired, former Chairman and CEO, Occidental Oil and Gas Corporation +Yes +X +X +0 +Thomas E. Jorden +59 +2011 +Chairman, CEO and President, Cimarex Energy Co. +No +0 +Floyd R. Price +68 +2012 +Retired, former executive officer, Apache Corporation +Yes +X +X +1 +Frances M. Vallejo +51 +NA +Retired, former Vice President, ConocoPhillips +Yes +* +* +0 +* The Board will consider Committee assignments at the May 11, 2017 meeting of the Board. It is anticipated that, due to her experience in finance and budgeting, Ms. Vallejo will serve on the Audit Committee. In addition, all independent directors serve on the Nominating Committee. +Continuing Directors (page 16) +The following are Cimarex’s continuing Directors. Detailed information about each Director’s background, skill sets and areas of expertise can be found beginning on page 16. +NAME +AGE +DIRECTOR +SINCE +TERM +EXPIRES +POSITION +INDEPENDENT +AC +C/G +NOM +OTHER +PUBLIC +BOARDS +Joseph R. Albi +58 +2011 +2018 +Executive Vice President—Operations, Chief Operating Officer, Cimarex Energy Co. +No +0 +Hans Helmerich +58 +2002 +2019 +Chairman and former CEO, Helmerich & Payne +Yes +X +X +3 +Harold R. Logan, Jr. +72 +2009 +2019 +Chairman, Suburban Propane Partners L.P. +Yes +X +X +3 +Monroe W. Robertson +67 +2005 +2019 +Retired, Former President and Chief Operating Officer of Key Production Co. +Yes +X +X +0 +Lisa A. Stewart +59 +2015 +2018 +Chairman, President, Chief Executive Officer and Chief Investment Officer of Sheridan Production Partners +Yes +X +X +0 +Michael J. Sullivan +77 +2002 +2018 +Retired Senior Attorney, Lewis Roca Rothgerber LLP +Yes +X +X +1 +3 +Table of Contents +Retiring Director +L. Paul Teague, who has served as a Director since 2002, will not seek an additional term as Director and will retire following the May 11, 2017 annual meeting of shareholders. In order to provide continued access to Mr. Teague’s specialized knowledge and expertise concerning Cimarex, Mr. Teague will serve as Director Emeritus for up to two years after the expiration of his term as Director. Cimarex would like to thank Mr. Teague for his dedicated service to, and guidance of, the company since he joined the Board. +Governance Highlights (page 20) +Cimarex is committed to good corporate governance, which promotes the long-term interests of shareholders, strengthens the Board of Directors, fosters management accountability, and helps build public trust in Cimarex. Highlights include: +· 8 of 10 Independent Directors +· Independent Lead Director +· Majority Voting Director resignation policy +· Active Shareholder Engagement +· Proxy Access +· Clawback Policy +· Non-Hedging and Non-Pledging Policies +· Director and Management Stock Ownership Guidelines, including restrictions on sales of shares until requirements are met +· No Tax Gross-Ups +4 +Table of Contents +2016 Executive Compensation (page 30) +Below is the 2016 compensation for each Named Executive Officer (“NEO”) as determined under the Securities and Exchange Commission (“SEC”) rules. See the notes accompanying the 2016 Summary Compensation Table on page 50 for more information. +Name and +Principal Position +Salary +Bonus +Stock +Awards +Option +Awards +Non-Equity +Incentive +Plan Comp. +All Other +Comp. +Total +Thomas E. Jorden +Chairman, Chief Executive Officer and President (Principal Executive Officer) +$ +921,468 +$ +— +$ +10,500,000 +$ +— +$ +1,700,000 +$ +59,451 +$ +13,180,919 +G. Mark Burford +Vice President and Chief Financial Officer (Principal Financial Officer) +$ +429,779 +$ +— +$ +3,200,000 +$ +— +$ +690,000 +$ +47,679 +$ +4,367,458 +Joseph R. Albi +$ +578,876 +$ +— +$ +4,000,000 +$ +— +$ +888,000 +$ +58,072 +$ +5,524,948 +Executive Vice President—Operations, Chief Operating Officer +Stephen P. Bell +Executive Vice President—Business Development +$ +480,340 +$ +— +$ +3,400,000 +$ +— +$ +735,000 +$ +74,135 +$ +4,689,475 +John A. Lambuth +$ +471,365 +$ +— +$ +3,750,000 +$ +— +$ +735,000 +$ +52,753 +$ +5,009,118 +Senior Vice President—Exploration +A Significant Portion of our CEO’s 2016 Compensation is At Risk +The accompanying graph illustrates our CEO’s 2016 at-risk compensation. A significant portion of reported compensation is an incentive for future performance and realized only if Cimarex meets certain performance measures. +5 +Table of Contents +How CEO Pay is Tied to Cimarex’s Performance (page 44) +Our compensation programs are designed to align performance incentives with the long-term interests of our shareholders. The programs also provide competitive total direct compensation opportunities that retain, and attract when needed, executive talent and link compensation earned to achievement of short- and long-term financial and operational objectives. Our Compensation and Governance Committee considers performance in two primary ways: +· Cimarex’s operating performance; and +· Return to shareholders over time, on both an absolute basis and a relative basis compared to other companies in the S&P Oil & Gas Exploration & Production Index and our compensation peer group (see page 34). +2016 Financial and Operating Highlights +· In spite of a reduction of exploration and development expenditures of 16% to $734.8 million compared to $877.0 million in 2015, year-over-year average daily production only declined 2% to 963.4 MMcfe per day. +· Our Operations group did an excellent job of optimizing our production and reducing production expense by approximately $67.4 million, or 23%, from $299.4 million in 2015 to $232.0 million in 2016. Our production expense per Mcfe of total production declined 20% from $.83 per Mcfe in 2015 to $.66 per Mcfe in 2016, and declined 39% in 2016 compared to 2014. +· We incurred no additional debt and had cash on hand of $652.9 million at year-end 2016. +· Year-over-year production revenues declined 14% to $1.2 billion as revenues were adversely affected by low realized commodity prices, which also brought about impairments of our oil and gas properties and net losses for each of 2015 and 2016. +· Cash flow provided by operating activities of $599.2 million was 13% lower than that of the prior year. +· During 2016, our overall estimated reserves were flat after additions, positive and negative revisions, and production. We added 324.0 Bcfe of proved reserves through extensions and discoveries, primarily in the Mid-Continent and Permian Basin, where we added 121.6 Bcfe and 198.7 Bcfe, respectively. In addition, we had net positive revisions of previous estimates of 19.8 Bcfe. Revisions were comprised of an increase of 126.2 Bcfe for net positive performance revisions, an increase of 138.5 Bcfe related to lower operating expenses and a decrease of 244.9 Bcfe for negative revisions due to lower commodity prices. +· Stock price increased from $89.38 at year-end 2015 to $135.90 at year-end 2016, an increase of 52%. For the same period, average stock price performance for the Compensation Peer Group was 51%. +6 +Table of Contents +Return to Shareholders +Cimarex has consistently returned value to its shareholders. The following chart shows how a December 31, 2011 investment of $100 in Cimarex common stock would have grown to $225.95 on December 31, 2016, which includes dividends reinvested quarterly for those who wish to consider Total Shareholder Return when evaluating executive compensation. The chart also compares the Total Shareholder Return on Cimarex common stock to the same investment in the S&P 500 index, the Dow Jones US Exploration & Production index, and the S&P Oil & Gas Exploration & Production index over the same time period. +12/31/2011 +12/31/2012 +12/31/2013 +12/31/2014 +12/31/2015 +12/31/2016 +Cimarex Energy Co. +100.00 +93.95 +171.90 +174.58 +148.03 +225.95 +S&P 500 +100.00 +116.00 +153.58 +174.60 +177.01 +198.18 +Dow Jones US Exploration & Production +100.00 +105.82 +139.52 +124.48 +94.94 +118.19 +S&P Oil & Gas Exploration & Production +100.00 +103.65 +132.14 +118.15 +77.80 +103.36 +The stock price performance included in this graph is not necessarily indicative of future stock price performance. +7 +Table of Contents +PROXY STATEMENT +We are furnishing you this proxy statement to solicit proxies to be voted at the 2017 Annual Meeting (“Meeting”) of Shareholders of Cimarex Energy Co. (“Cimarex” or the “Company”). The Meeting will take place on May 11, 2017 at 9:00 a.m. Mountain Daylight Time at Wells Fargo Center – Denver, Assemble Room (Lower Level 2), 1700 Lincoln Street, Denver, Colorado 80203. The proxies also may be voted at any adjournments or postponements of the Meeting. +The mailing address of our principal office is 1700 Lincoln Street, Suite 3700, Denver, Colorado 80203. We are first furnishing the proxy materials to shareholders on March 31, 2017. +All properly executed written proxies and proxies submitted by telephone or internet delivered pursuant to this solicitation will be voted at the Meeting in accordance with the directions given in the proxy, unless the proxy is revoked prior to completion of voting at the Meeting. +Only owners of record of shares of Cimarex common stock (“Common Stock”) as of the close of business on March 15, 2017, the record date, are entitled to notice of and to vote at the Meeting or at any adjournments or postponements of the Meeting. Each owner of Common Stock on the record date is entitled to one vote for each share of Common Stock held. On March 15, 2017, there were 95,113,764 shares of Common Stock issued and outstanding. +IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 11, 2017. +The Notice of Annual Meeting, Proxy Statement and Annual Report on Form 10-K for the year ended December 31, 2016 are available at http://www.allianceproxy.com/cimarex/2017 . +8 +Table of Contents +QUESTIONS AND ANSWERS +P ROXY M ATERIALS AND V OTING I NFORMATION +1. Why did I receive these proxy materials? +We are providing these materials in connection with the solicitation by the Board of Directors of Cimarex Energy Co., a Delaware corporation, of proxies to be voted at our 2017 Annual Meeting of Shareholders and at any adjournment or postponement of the Meeting. The Meeting will take place on May 11, 2017, beginning at 9:00 a.m. Mountain Daylight Time, at the Wells Fargo Center – Denver, Assemble Room (Lower Level 2), 1700 Lincoln Street, Denver, Colorado 80203. +2. What is the difference between holding shares as a shareholder of record and as a beneficial owner? +If your shares are registered directly in your name with Cimarex’s registrar and transfer agent, Continental Stock Transfer & Trust Company, you are considered a shareholder of record with respect to these shares. If your shares are held in a brokerage account or bank, broker or other nominee, you are considered the beneficial owner of these shares. +3. What shares are included on the proxy card? +If you are a shareholder of record, you will receive only one proxy card for all the shares you hold of record in certificate form and in book-entry form. +If you are a Cimarex employee, you will receive a proxy or voting instruction card for all the shares you hold in the Cimarex 401(k) Plan. Your proxy card will serve as a voting instruction card for the Plan trustee. If you do not specify your voting instructions on the proxy card, the Plan trustee will vote your shares in the same proportion as it votes shares for which it did receive timely instructions. To allow sufficient time for voting by the trustee, your voting instructions must be received no later than 11:59 p.m. Eastern Daylight Time on May 8, 2017. +4. What different methods can I use to vote? +By Written Proxy. All shareholders of record can vote by written proxy card. If you are a shareholder of record and receive a notice regarding the availability of proxy materials, you may request a written proxy card by following the instructions included in the notice. If you are a beneficial owner, you may request a written proxy card or a voting instruction form from your bank, broker or other nominee. +By Telephone or Internet. All shareholders of record can vote by calling the toll-free telephone number on the proxy card. Please have your proxy card when you call. Voice prompts will direct you on how to vote your shares and will confirm your voting instructions have been recorded properly. +Shareholders also may vote on the internet by accessing the website noted on the proxy card. Please have your proxy card when you go to the website. As with telephone voting, you can confirm your voting instructions have been recorded properly. +Beneficial owners may vote by telephone or internet if their bank, broker or other nominee makes those methods available, in which case the bank, broker or other nominee will include the instructions with the proxy materials. +9 +Table of Contents +5. What are my voting choices for each of the proposals to be voted on at the 2017 Annual Meeting of Shareholders and what are the voting standards? +Proposal +Voting Choices and Board Recommendation +Voting Standard +Item 1. Election of Four Class III Directors +— vote in favor of all nominees; +— vote in favor of specific nominees; +— vote against all nominees; +— vote against specific nominees; +— abstain from voting with respect to all nominees; or +— abstain from voting with respect to specific nominees. +The Board recommends a vote FOR each of the nominees. +Majority of votes cast +Item 2. Advisory Vote to Approve Executive Compensation +— vote in favor of the advisory proposal; +— vote against the advisory proposal; or +— abstain from voting on the advisory proposal. +The Board recommends a vote FOR the advisory proposal to approve executive compensation. +Majority of shares present and entitled to vote +Item 3. Advisory Vote on the Frequency of Advisory Vote on Executive Compensation +— vote in favor of every one year; +— vote in favor of every two years; +— vote in favor of every three years; or +— abstain from voting with respect to frequency. +The Board recommends a vote FOR every one year. +Majority of votes cast +Item 4. Ratification of the Appointment of KPMG LLP as Independent Auditors +— vote in favor of the ratification; +— vote against the ratification; or +— abstain from voting on the ratification. +The Board recommends a vote FOR the ratification. +Majority of shares present and entitled to vote +6. What if I am a beneficial owner and do not give voting instructions to my broker? +As a beneficial owner, in order to ensure your shares are voted in the way you would like, you must provide voting instructions to your bank, broker or other nominee by the deadline provided in the materials you receive from your bank, broker or other nominee. If you do not provide voting instructions to your bank, broker or other nominee, whether your shares can be voted by such person depends on the type of item being considered to vote. +Non-Discretionary Items. The election of Directors, the advisory vote to approve executive compensation, and the advisory vote on frequency of the advisory vote on executive compensation are non-discretionary items and may not be voted on by brokers, banks or other nominees who have not received specific voting instructions from beneficial owners. +Discretionary Items. The ratification of the appointment of KPMG LLP as Independent Auditors is a discretionary item. Generally, banks, brokers and other nominees that do not receive voting instructions from beneficial owners may vote on the proposal in their discretion. +10 +Table of Contents +7. How are abstentions and broker non-votes counted? +Item 1. Election of Four Class III Directors. If you abstain from voting in the election of Directors, you will be treated as not having cast a vote and the abstention will not be counted in determining the outcome of the election. Broker non-votes are not considered a vote cast under our Bylaws and will have no effect on the outcome of the election of Directors. +Item 2. Advisory Vote to Approve Executive Compensation. If you abstain from voting on the advisory vote to approve executive compensation, you are considered present and entitled to vote, and your shares are considered in the calculation of whether Item 2 received the affirmative vote of a majority of shares present and entitled to vote. The effect of an abstention is a vote against Item 2. Broker non-votes are not considered in the calculation of a majority of shares present and entitled to vote. +Item 3. Advisory Vote to Approve the Frequency of the Advisory Vote on Executive Compensation. If you abstain from voting on the advisory vote to approve the frequency of the advisory vote on executive compensation, you will be treated as not having cast a vote and the abstention will not be counted in determining whether Item 3 received the affirmative vote of a majority of shares present and entitled to vote. Broker non-votes are not considered in the calculation of a majority of shares present and entitled to vote. +Item 4. Ratification of Appointment of KPMG as Independent Auditors. If you abstain from voting on the ratification of KPMG LLP as Cimarex’s Independent Auditors, you are considered present and entitled to vote, and your shares are considered in the calculation of whether Item 4 received the affirmative vote of a majority of shares present and entitled to vote. The effect of an abstention is a vote against Item 4. Because Item 4 is a routine matter on which a broker has discretionary authority, no or few broker non-votes likely will result from this Item. +8. What can I do if I change my mind after I vote my shares? +You may revoke your proxy prior to the completion of voting by: +· Giving written notice to Cimarex’s Corporate Secretary; +· Delivering a valid, later-dated proxy, or a later-dated vote by telephone or on the internet in a timely manner; or +· Voting by ballot at the Annual Meeting. +9. Can I access the proxy materials on the internet? How can I sign up for the electronic proxy delivery service? +We are distributing our proxy materials to certain shareholders via the internet under the “notice and access” approach permitted by the SEC. On or about March 31, 2017, we will mail to certain of our shareholders a notice of internet availability of proxy materials with instructions explaining how to access our proxy statement and annual report and how to vote online. If you receive a notice of internet availability by mail, you will not receive a printed copy of the proxy materials in the mail unless you request them by following the instructions for requesting such materials included in the notice of internet availability. +Even if you do not participate in “notice and access,” the Notice of Annual Meeting and proxy statement are available on the internet at http://www.allianceproxy.com/cimarex/2017 . +10. Who counts the votes? +Alliance Advisors LLC, our proxy solicitor, will tabulate the votes and act as inspector of election. +11 +Table of Contents +11. When will Cimarex announce the voting results? +We will announce the preliminary voting results at the Annual Meeting of Shareholders. Cimarex will report the final results in a Current Report on Form 8-K filed with the SEC after the Meeting. +12. How are proxies solicited, and what is the cost? +We bear all expenses incurred in connection with the solicitation of proxies. We hired Alliance Advisors LLC to assist with the solicitation of proxies for an estimated fee of $9,500 plus expenses. We will reimburse brokers, fiduciaries and custodians for their costs in forwarding proxy materials to beneficial owners of Common Stock. +Our Directors, officers and employees also may solicit proxies by mail, telephone and personal contact. They will not receive any additional compensation for these activities. +13. What is householding? +As permitted by the Securities Exchange Act of 1934, as amended (the “1934 Act”), only one copy of this proxy statement is being delivered to shareholders residing at the same address, unless the shareholders have notified Cimarex of their desire to receive multiple copies of the proxy statement. This is known as “householding.” +Upon oral or written request, we promptly will deliver a separate copy of the proxy statement to any shareholder residing at an address to which only one copy was mailed. Direct requests for additional copies for the current year or future years to our Corporate Secretary, Cimarex Energy Co., 1700 Lincoln Street, Suite 3700, Denver, Colorado 80203-4537, telephone (303) 295-3995 and facsimile (720) 403-9383. +Shareholders of record residing at the same address and currently receiving multiple copies of the proxy statement may contact our registrar and transfer agent, Continental Stock Transfer & Trust Company, by phone at (888) 509-5580 or by mail at 17 Battery Place South, 8 th Floor, New York, NY 10004, to request a single copy be mailed in the future. +Beneficial owners should contact their broker or bank. +14. How can I vote at the Meeting if I am a beneficial owner? +If you are a beneficial owner and want to vote your shares at the Meeting, you will need to ask your bank, broker or other nominee to furnish you with a legal proxy, bring the legal proxy with you to the Meeting and hand it in with a signed ballot that will be provided to you at the Meeting. You will not be able to vote your shares at the Meeting without a legal proxy. If you do not have a legal proxy, you can still attend the Meeting. We encourage you to vote your shares in advance, even if you intend to attend the Meeting. Please note that if you request a legal proxy, any previously executed proxy will be revoked, and your vote will not be counted unless you appear at the Meeting and vote in person or legally appoint another proxy to vote on your behalf. +C OMPANY D OCUMENTS , C OMMUNICATIONS AND S HAREHOLDER P ROPOSALS +15. How can I view copies of Cimarex’s corporate documents and SEC filings? +Our Corporate Governance Guidelines, Board Committee Charters, Code of Business Conduct and Ethics and SEC filings are posted on our website at www.cimarex.com . Upon request, we will promptly deliver (free of charge) a copy of our Annual Report on Form 10-K to any shareholder. Direct such requests to our Corporate Secretary, Cimarex Energy Co., 1700 Lincoln Street, Suite 3700, Denver, Colorado 80203-4537, telephone (303) 295-3995 and facsimile (720) 403-9383. +12 +Table of Contents +16. How can I communicate with Cimarex’s Directors? +Communications from shareholders can be addressed to our Directors by mail in care of our Corporate Secretary, Cimarex Energy Co., 1700 Lincoln Street, Suite 3700, Denver, Colorado 80203-4537, telephone (303) 295-3995 or facsimile (720) 403-9383. All shareholder communications will be forwarded to our Lead Director. The Lead Director may take any action deemed appropriate or necessary, including, without limitation, forwarding the information to the Board for consideration or, with the concurrence of the Board, retaining independent or outside counsel, accountants or other advisors to address the concern. +17. How do I submit a proposal for action at the 2018 Annual Meeting of Shareholders? +A proposal to be acted upon at the 2018 Annual Meeting of Shareholders will be acted upon only: +· If the proposal is to be included in the proxy statement, pursuant to Rule 14a-8 under the 1934 Act, the proposal is received by our Corporate Secretary on or before December 1, 2017, and the proposal meets the requirements of the applicable rules of the SEC and the requirements of our bylaws. +· If the proposal is not to be included in the proxy statement, pursuant to our bylaws, the proposal is submitted in writing to our Corporate Secretary no earlier than January 11, 2018 and no later than February 12, 2018, and such proposal is, under Delaware General Corporation Law, an appropriate subject for shareholder action. +· If the proposal concerns the nomination of directors, see the procedures in “Election of Directors (Item 1) — Director Nominations” in the following section. +ELECTION OF DIRECTORS (ITEM 1) +Election Process +Our current Board consists of ten Directors, which is the maximum number of Directors permitted by our Certificate of Incorporation. The Board is divided into three classes: Class I, Class II and Class III Directors. At each Annual Meeting, a Class of Directors is elected for a term expiring at the Annual Meeting in the third year following the year of election. Each Director holds office until his or her successor is elected and qualifies. +The terms of the four Class III Directors, David A. Hentschel, Thomas E. Jorden, Floyd R. Price and L. Paul Teague, will expire at the 2017 Annual Meeting. The Nominating Committee, at its March 2017 meeting, nominated Messrs. Hentschel, Jorden, and Price and Ms. Vallejo for election as Class III Directors, to serve until the Annual Meeting of Shareholders to be held in 2020. +If prior to the Annual Meeting a nominee becomes unavailable to serve as a Director, any shares represented by a proxy directing a vote will be voted for the remaining nominees and for any substitute nominee(s) designated by our Board or its Nominating Committee. As of the mailing of these proxy materials, the Board knows of no reason why any Director nominee would not be available to serve as a Director. +A nominee is elected if the votes cast for his or her election exceed the votes cast against his or her election. Pursuant to our majority voting policy, each nominated Director has tendered an irrevocable resignation that is effective upon his or her failure to receive the required vote and the Board’s acceptance of such resignation. If a nominee fails to receive more favorable votes than votes cast against him or her, the Nominating Committee will act on an expedited basis following the Annual Meeting to determine whether to recommend that the Board accept the Director’s resignation. The Nominating Committee and the Board may consider any factors they deem relevant in deciding whether to accept the Director’s resignation. The Director whose resignation is under consideration must abstain from participating in any decision regarding his or her resignation. The Board will publicly disclose its decision regarding acceptance of his or her resignation within 90 days after the results of the election are certified. If the resignation is not accepted, the Director will continue to serve as a Director until his or her successor is elected and qualified. If the Board accepts the resignation, then the Board will either fill the vacancy in accordance with the Bylaws or decrease the size of the Board in compliance with the Certificate of Incorporation. +13 +Table of Contents +Director Nominations +The Nominating Committee is responsible for identifying and evaluating nominees for Director and for recommending to the Board a slate of nominees for election at each Annual Meeting. Nominees may be suggested by Directors, members of management, shareholders or a third-party firm. +While the Nominating Committee will consider nominees recommended by shareholders, it did not receive any shareholder nominations for the 2017 Annual Meeting prior to the deadline for such nominations. Shareholders who wish to nominate persons for election as Directors at the 2018 Annual Meeting must submit a timely written notice complying with Cimarex’s Bylaws to the Corporate Secretary, Cimarex Energy Co., 1700 Lincoln Street, Suite 3700, Denver, Colorado 80203-4537, facsimile (720) 403-9383. In addition, up to 20 shareholders collectively beneficially owning more than 3% of the Company’s outstanding shares for at least three consecutive years may nominate up to two candidates for inclusion in the Company’s proxy materials by following the procedures set forth in the proxy access provisions in Article III, Section 2A of our Bylaws (the “Proxy Access Policy”). To be timely, the shareholder’s written notice for nominees to be considered by the Nominating Committee or proxy access candidate to be included in the proxy statement for the 2018 Annual Meeting must be received between January 11, 2018 and February 12, 2018. In addition, shareholder nominations must comply with the other requirements of Article III, Section 2 or Section 2A, as applicable, of our Bylaws. +Director Qualifications +In its assessment of each potential candidate, the Nominating Committee considers the nominee’s judgment, integrity, experience, independence, understanding of Cimarex’s business or related industries and such other factors that the Nominating Committee determines are pertinent in light of the needs of the Board. The Nominating Committee also considers the ability of a nominee to devote the time and effort necessary to fulfill his or her responsibilities to Cimarex. Our Nominating Committee Charter specifically includes diversity of gender and ethnic background in the list of desirable attributes sought in our Board composition. +Although all the current Directors have extensive oil and gas experience, either as company executives or attorneys, their experience is with companies with widely different operating strategies. This diversity and depth of experience benefits our Board in executing its duty of oversight and guidance. +2017 Nominees for Class III Directors +Upon the recommendation of the Nominating Committee, the Board has nominated David A. Hentschel, Thomas E. Jorden, Floyd R. Price and Frances M. Vallejo for election as Class III Directors to serve until the Annual Meeting of Shareholders to be held in 2020. The Board has determined that each of Mr. Hentschel, Mr. Price and Ms. Vallejo is independent under the New York Stock Exchange (“NYSE”) corporate governance rules. Each of the Director nominees other than Ms. Vallejo currently serves on the Board. We have no reason to believe that any of the nominees will be unable or unwilling to serve if elected. +The Board believes that the combination of the various qualifications, skills and experiences of the 2017 Director nominees will contribute to an effective and well-functioning Board. The Board also believes that, individually and as a whole, the Director nominees possess the necessary qualifications to provide effective oversight of the business and quality advice and counsel to Cimarex. +Included in each Director nominee’s biography is an assessment of the specific qualifications, attributes, skills and experience of such nominee based on the qualifications described above. +The Board of Directors recommends a vote FOR the election of each of the Director nominees. +DAVID A. HENTSCHEL, age 83 +Position, Principal Occupation and Business Experience +Mr. Hentschel was Chairman and Chief Executive Officer of Occidental Oil and Gas Corporation, a subsidiary of Occidental Petroleum, from 1986 to 1993 and from 1997 until he retired in 1999. He also served as President and Chief Executive Officer +14 +Table of Contents +of Canadian Occidental Petroleum, Ltd., now known as Nexen, from 1995 to 1997. He was in charge of the worldwide exploration and production operations for Cities Service and Occidental Oil and Gas Corporation for the last 20 years of his 40-year career. +Mr. Hentschel was a director of Occidental Petroleum from 1987 to 1993 and of Canadian Occidental or Nexen from 1985 to 2009. During his service as a director of Nexen, he was chair of the audit committee and a member of the compensation committee and various other committees. He was also a director of the Bank of Oklahoma from 1984 to 1995. +Key Attributes, Experience and Skills +Mr. Hentschel brings considerable executive experience in the domestic and international oil and gas industry to the Board. Mr. Hentschel’s extensive leadership background and his service on Nexen’s audit and compensation committees provide strong skills and experience for his service on our Compensation and Governance Committee. +THOMAS E. JORDEN, 59 +Position, Principal Occupation and Business Experience +Mr. Jorden is the Chairman of the Board, Chief Executive Officer and President of Cimarex. He has served Cimarex in various capacities since September 2002. He was elected CEO in September 2011 after serving as Executive Vice President-Exploration from 2003 to 2011 and as Vice President-Exploration from 2002 to 2003. Mr. Jorden also serves on the Board of Trustees of the Colorado School of Mines and other private boards. +Key Attributes, Experience and Skills +Mr. Jorden brings to the Board over 30 years of experience in the oil and gas exploration and production industry and, as our Chief Executive Officer, a deep understanding of our business, operations and long-term strategic issues and goals. Mr. Jorden holds undergraduate and graduate degrees in geophysics. His service on the Board creates an important link between management and the Board. +FLOYD R. PRICE, 68 +Position, Principal Occupation and Business Experience +Mr. Price, a former executive officer of Apache Corporation, held various positions with Apache Corporation from 1991 through 2009, including Executive Vice President and Corporate Exploration Officer; President, Apache Canada; President, Apache International; and Exploration Manager. Apache Corporation, with headquarters in Houston, Texas, is an oil and gas exploration and production company with domestic and international operations. Mr. Price has served as Chairman of the Board and as a member of the audit, reserves and compensation/governance committees of Tamarack Valley Energy Ltd., Calgary, Alberta, Canada, a publicly held company traded on the Toronto Stock Exchange, since June 2010. Tamarack is involved in the identification, evaluation and operation of resource plays in the Western Canadian sedimentary basin. From June 2010 to January 2013, Mr. Price served as a director and Chairman of the Board of Gastar Exploration, Inc., a publicly held company located in Houston, Texas. Mr. Price also served on the compensation and governance, audit and reserves committees of the board at Gastar. Gastar is engaged in the exploration, development and production of natural gas, natural gas liquids, oil and condensate in the United States and is traded on the NYSE. +Key Attributes, Experience and Skills +Mr. Price has over 40 years of domestic and international experience in the exploration and production business. Mr. Price has held leadership positions with a large public oil and gas company. His experience during the past six years serving as a director of public and private companies also provides him with invaluable board skills and experience. Mr. Price brings extensive oil and gas exploration, operations, management and financial experience to Cimarex’s Compensation and Governance Committee. +15 +Table of Contents +Frances M. Vallejo, 51 +Position, Principal Occupation and Business Experience +Ms. Vallejo, a former executive officer of ConocoPhillips, the world’s largest independent exploration company, held various positions beginning in 1987 with ConocoPhillips and Phillips Petroleum Company, which merged with Conoco Inc. to form ConocoPhillips in August 2002. She served as Vice President Corporate Planning and Development from April 2015 until December 2016 and as Vice President and Treasurer from October 2008 until March 2015. Prior to October 2008, she served as General Manager—Corporate Planning and Budgets, Vice President Upstream Planning & Portfolio Management, Assistant Treasurer, Manager Strategic Transactions, and in other geophysical, commercial, and finance roles. Ms. Vallejo served as a member of the Board of Trustees of Colorado School of Mines from 2010 until 2016 and on other charitable associations. +Key Attributes, Experience and Skills +Ms. Vallejo’s 30 years of experience in the oil and gas industry and extensive leadership roles in corporate planning, budgeting, and treasury are key attributes that make her well qualified to serve as a Cimarex Director. +Continuing Directors – Class I – Term Expires 2018 +JOSEPH R. ALBI, 58 +Position, Principal Occupation and Business Experience +Mr. Albi was named Chief Operating Officer in September 2011. He has served Cimarex in various capacities since September 2002, including Executive Vice President-Operations from 2005 to 2011, Senior Vice President-Corporate Engineering from 2003 to 2005 and Vice President-Engineering from 2002 to 2003. +Key Attributes, Experience and Skills +Mr. Albi has over 35 years of experience in the oil and gas industry. His extensive understanding of the management of oil and gas production and drilling operations, business development, environmental and safety management and oil and gas marketing provide the Board with considerable insight about the operations of Cimarex. +LISA A. STEWART, 59 +Position, Principal Occupation and Business Experience +Ms. Stewart is Chairman, President, Chief Executive Officer and Chief Investment Officer of Sheridan Production Partners (“Sheridan”), a privately-owned oil and gas operating company she founded in 2007. From 2009 until its acquisition in May 2015, Ms. Stewart served as a director on the board of Talisman Energy, Inc., a Canadian oil and gas exploration and production company traded publicly on the NYSE and the Toronto Stock Exchange. Prior to 2007, Ms. Stewart served as Executive Vice President of El Paso Corporation and President of El Paso E&P from 2004 to 2006. From 1984 to 2004, Ms. Stewart served in various capacities, including as Executive Vice President, of Apache Corporation with responsibility in various departments of Apache, which included reservoir engineering, business development, land, environmental, health and safety and corporate purchasing. +Key Attributes, Experience and Skills +Ms. Stewart’s over 30 years of experience in the oil and gas industry and extensive leadership roles are key attributes that make her well qualified to serve as a Cimarex Director. +16 +Table of Contents +MICHAEL J. SULLIVAN, 77 +Position, Principal Occupation and Business Experience +Mr. Sullivan retired in September 2015 from the Arizona-based law firm Lewis Roca Rothgerber LLP after serving as senior attorney, partner or special counsel since 2001, and the managing attorney of the firm’s Casper, Wyoming office. Mr. Sullivan practiced law as a partner with Brown, Drew, Apostolos, Massey & Sullivan from 1964 to 1986 and from 1995 until 1998. +Mr. Sullivan retired as a director and member of the compensation and governance committees of First Interstate BancSystem, located in Billings, Montana, in December 2016, and had been a director and member of the compensation and governance and audit committees of Sletten Construction, Inc., located in Great Falls, Montana (a non-public company) until retiring from the board in June of 2015. From 2001 to 2009, he served as a director and was a member of the audit, corporate social responsibility, and governance committees of Allied Irish Bank Group, located in Dublin, Ireland. From 2003 to 2011, he served as a director of the Kerry Group Plc, a global food and food ingredients producer headquartered in Tralee, the county town of County Kerry, Ireland. +Key Attributes, Experience and Skills +Mr. Sullivan brings a wealth of experience and a diverse background to our Board. In addition to his Juris Doctor degree, he has an undergraduate degree in petroleum engineering, years of governmental service as the Governor of Wyoming (1987-1995) and as the Ambassador to Ireland (1998-2001), and 40 years’ experience practicing law in the areas of natural resources, mediation and business. As Governor, he was involved in the process of reviewing and administering Wyoming’s budget. This experience is directly relevant to his service on the Audit Committee. Mr. Sullivan’s education, legal experience, particularly in mediation and litigation, and his domestic and international service all provide a background that is beneficial in addressing the issues coming before the Cimarex Board. +Continuing Directors – Class II – Term Expires 2019 +HANS HELMERICH, 58 +Position, Principal Occupation and Business Experience +Mr. Helmerich has served as Chairman of Helmerich & Payne, Inc. (“H&P”) since March 2012 and a director since 1987. H&P is a publicly held company primarily engaged in contract drilling services for oil and gas exploration and production companies. H&P uses drilling rigs it designs and builds and is one of the major land and offshore platform drilling companies in the world. After joining H&P in 1981, Mr. Helmerich served as CEO from 1989 to March 2014 and as President from 1989 to March 2012. H&P’s exploration and production business was merged into Cimarex in 2002. +Mr. Helmerich serves as a director of Atwood Oceanics, Inc., located in Houston, Texas, an international offshore drilling company traded on the NYSE, and as a Trustee of The Northwestern Mutual Life Insurance Company of Milwaukee, Wisconsin. +Key Attributes, Experience and Skills +Mr. Helmerich’s background with the drilling sector of the oil and gas business provides the Board with insight into an aspect of Cimarex’s business that represents a significant expenditure in Cimarex’s capital budget. His over 25 years of executive experience provide a strong background for his service on Cimarex’s Board and on the Compensation and Governance Committee. In addition, his service as a director of Atwood Oceanics and as a Trustee of The Northwestern Mutual Life Insurance Company provides him with additional experience and knowledge to serve as a Director. +HAROLD R. LOGAN, JR., 72 +Position, Principal Occupation and Business Experience +Mr. Logan currently serves as Chairman of the Board of Supervisors of Suburban Propane Partners, L.P. and has served as a director of that company since 1996. In February 2015, he began serving as Lead Director of InfraREIT, Inc., a publicly held real +17 +Table of Contents +estate investment trust that owns utility assets (electric transmission lines) in Texas. In addition, he has been a director of Graphic Packaging Holding Co. and predecessor companies since 2003. Mr. Logan also is a director of two private companies – Hart Energy Publishing (publisher of Oil and Gas Investor and other energy publications) and Basic Materials and Services LLC (a privately held company that invests in companies providing specialized services for the pipeline construction and sand/silica industries). +Mr. Logan was a co-founder of TransMontaigne in Denver, Colorado in 1995 and Chief Financial Officer, Executive Vice President, and Treasurer, through 2002. He served as a director of TransMontaigne from 1995 to 2006 and chairman of its Finance Committee from 2002 to 2006. From 1987 to 1994, he was Senior Vice President/Finance, Chief Financial Officer, and a director of Associated Natural Gas Corporation. Prior to that, Mr. Logan was an investment banker with Dillon Read & Co. Inc. and Rothschild, Inc. +Since 1998, Mr. Logan has been a director of ten public companies and has served on audit, compensation, and governance committees. +Key Attributes, Experience and Skills +Mr. Logan has over 40 years of business experience. His education and his investment banking/venture capital and financial management experience provide him with a comprehensive understanding of business and finance. Mr. Logan’s expertise and experience have been relevant to his responsibilities of providing oversight and advice to the management of public companies, and are of particular benefit in his role as Cimarex’s Lead Director and as a member of Cimarex’s Audit Committee. +MONROE W. ROBERTSON, 67 +Position, Principal Occupation and Business Experience +Mr. Robertson retired from Key Production Company, Inc. (one of two companies whose merger created Cimarex in 2002) after co-founding and serving for 10 years with Key. While with Key, he held the positions of President, Chief Operating Officer, Senior Vice President and Principal Financial Officer. Mr. Robertson has served in executive capacities with three other public energy companies, Apache Corporation, Gulf Oil Corporation and Terra Resources, Inc. +Mr. Robertson was a director of Earthstone Energy, Inc. (formerly named Basic Earth Science System) from 2007 to 2014. During his service as a director of Earthstone, he was chair of the Audit Committee and a member of the Compensation and Nominating Committee. +Key Attributes, Experience and Skills +Mr. Robertson has comprehensive knowledge of the financial and operational sides of the exploration and production business, which is of considerable value in his service as Chairman of the Audit Committee. +Retiring Director – Class III – Term Expires 2017 +L. PAUL TEAGUE, 82 +Mr. Teague, who has served as a Director since 2002, will not seek an additional term as Director and will retire following the May 11, 2017 annual meeting of shareholders. In order to provide continued access to Mr. Teague’s specialized knowledge and expertise concerning Cimarex, Mr. Teague will serve as Director Emeritus for up to two years after the expiration of his term as Director. Cimarex would like to thank Mr. Teague for his dedicated service to, and guidance of, the company since he joined the Board. +18 +Table of Contents +DIRECTOR COMPENSATION +Our Compensation and Governance Committee administers our Director compensation program. Total Director compensation is designed to be near the 50 th percentile of that paid by comparable public oil and gas companies with similar market capitalization and revenue. We use the same group of companies in reviewing Director compensation as we use in reviewing executive base salary and total direct compensation. See Competitive Positioning, Section 1, Compensation Discussion and Analysis for a list of, and the methodology followed in selecting, these companies. The Compensation and Governance Committee uses its independent compensation consultant, Longnecker & Associates (“Longnecker”), to review and make recommendations concerning Director compensation. The Compensation and Governance Committee, after reviewing the consultant’s recommendations with the CEO and Vice President of Human Resources, recommends Director compensation for Board consideration and approval at the Board meeting held following each year’s Annual Meeting of Shareholders. Payment of the annual component of Director compensation occurs on June 1 of each year. Meeting fees are paid as earned. +Through May 12, 2016, compensation for non-employee Directors consisted of the following: +· Annual cash retainer of $75,000; +· Annual equity retainer of $180,000, comprised of restricted stock that vests in one-third increments on May 1 of each of the three years following the date of grant; +· Committee Chairman fee of $20,000; +· Lead Director (who also acts as Nominating Committee Chairman) fee of $40,000; +· Board meeting attendance fee of $1,800 per meeting; and +· Committee meeting attendance fee of $1,500 per meeting. +At the May 12, 2016 meeting, the non-employee Director compensation did not change. The cash components and value of the equity component of Director compensation has not changed since May 2014. +Independent Director 2016 Compensation +NAME +FEES PAID IN CASH (1) +STOCK AWARDS (2) +ALL OTHER +COMPENSATION (3) +TOTAL +Hans Helmerich +$ +91,500 +$ +180,000 +$ +4,787.12 +$ +276,287 +David A. Hentschel +$ +94,800 +$ +180,000 +$ +1,251.92 +$ +276,052 +Harold R. Logan, Jr. +$ +137,800 +$ +180,000 +$ +1,251.92 +$ +319,052 +Floyd R. Price +$ +94,800 +$ +180,000 +$ +1,251.92 +$ +276,052 +Monroe W. Robertson +$ +117,800 +$ +180,000 +$ +1,251.92 +$ +299,052 +Lisa A. Stewart +$ +97,800 +$ +180,000 +$ +580.40 +$ +278,380 +Michael J. Sullivan +$ +97,800 +$ +180,000 +$ +1,251.92 +$ +279,052 +L. Paul Teague +$ +114,800 +$ +180,000 +$ +1,251.92 +$ +296,052 +(1) Represents fees earned for services as a Director during 2016, including the annual cash retainer fee, Board and Committee meeting attendance fees, Committee Chairman fee and Lead Director fee. +(2) Represents the aggregate grant date fair market value of the 1,553 shares of restricted stock as of the June 1, 2016 grant date. +(3) Consists of dividends paid during 2016 on unvested restricted stock awards and dividend equivalents paid during 2016 on deferred compensation units that settle in shares of common stock. +19 +Table of Contents +The following table discloses as of December 31, 2016 the aggregate number of outstanding unvested stock awards and the market value of those awards. Market value is based on the closing trading price of $135.90 on December 30, 2016, which was the last trading day of 2016. The Directors have the right to vote and receive dividends on unvested stock awards. There were no outstanding vested but unexercised option awards as of that date. +Independent Director +Unvested Stock Awards +Market Value +Hans Helmerich +3,061 +$ +415,990 +David A. Hentschel +3,061 +$ +415,990 +Harold R. Logan, Jr. +3,061 +$ +415,990 +Floyd R. Price +3,061 +$ +415,990 +Monroe W. Robertson +3,061 +$ +415,990 +Lisa A. Stewart +2,146 +$ +291,641 +Michael J. Sullivan +3,061 +$ +415,990 +L. Paul Teague +3,061 +$ +415,990 +Our Corporate Governance Guidelines require that each independent Director own Cimarex stock in an amount equal to three times his or her annual cash retainer. A newly elected Director has three years from the date of his or her initial election to comply with the Corporate Governance Guidelines. Restricted stock, restricted stock units and deferred compensation units are counted in calculating ownership; shares subject to options are not counted. Each of the independent Directors complies with these guidelines. +In connection with his retirement from the Board effective immediately following the Meeting on May 11, 2017, the Board appointed Mr. Teague effective that date as Director Emeritus for up to a two-year term. As compensation for serving as Director Emeritus, all outstanding restricted stock awards held by Mr. Teague at the time of the expiration of his term as Director will continue to vest according to their terms during the period he serves as Director Emeritus. Mr. Teague also will be entitled to such other cash compensation as determined by the Chairman of the Board in consideration of the expected time commitment to be made by Mr. Teague and such other facts and circumstances as the Chairman of the Board deems appropriate. The Company also will enter into an indemnification agreement with Mr. Teague with substantially the same terms as his current indemnification agreement as a Director. +CORPORATE GOVERNANCE +Cimarex’s website ( www.cimarex.com ) includes materials that are helpful in understanding our corporate governance practices: +· +Corporate Governance Guidelines +· +Corporate Bylaws +· +Code of Business Conduct and Ethics +· +Stock Ownership Guidelines +· +Complaint and Reporting Procedures +· +Background and Experience of our Board of Directors +· +Committee Charters +· +Background and Experience of Executive Management +We believe good corporate governance promotes the long-term interests of shareholders, strengthens Board and management accountability, and helps build public trust. Copies of corporate governance materials may be requested from our Corporate Secretary, Cimarex Energy Co., 1700 Lincoln Street, Suite 3700, Denver, Colorado 80203. +A summary of key governance matters are noted in the table below: +Size of Board +10 +Code of Business Conduct and Ethics +Yes +Number of independent Directors +8 +Corporate Governance Guidelines +Yes +Majority voting for Directors resignation policy +Yes +Disclosure Committee for financial reporting +Yes +Classified Board +Yes +Board and Audit Committee risk oversight +Yes +Separate Chairman and CEO +No +Compensation risk assessment +Yes +Independent Lead Director +Yes +Review of related party transactions +Yes +20 +Table of Contents +Diverse Board skills and experience +Yes +Non-Hedging and non-pledging policies +Yes +Annual Board and Committee self-evaluations +Yes +Clawback policy +Yes +Periodic consultant review of Board skills +Yes +Management and Director stock ownership guidelines +Yes +Annual equity grants to Directors +Yes +Tax gross-ups +No +Annual Board education +Yes +Proxy Access +Yes +Shareholders may communicate with our Board by mail directed to our Corporate Secretary or by facsimile (720) 403-9383. All communications will be forwarded to the Lead Director for the Lead Director’s review. The Lead Director may take any action the Lead Director deems appropriate or necessary, including, without limitation, forwarding the information to the Board for consideration or, with the concurrence of the Board, retaining independent or outside counsel, accountants or other advisors to address the concern. +21 +Table of Contents +B OARD AND C OMMITTEE I NFORMATION +Our Board +During 2016, the Board of Directors met six times. The Board has three Committees: the Audit Committee, the Compensation and Governance Committee, and the Nominating Committee. During 2016, each Director attended greater than 75% of the meetings of the Board and the Board Committees on which he or she served. All Board members are expected to attend the Annual Meeting. All Directors attended our 2016 Annual Meeting. +NAME +AGE +DIRECTOR +SINCE +POSITION +INDEPENDENT +OTHER +PUBLIC +BOARDS +Joseph R. Albi +58 +2011 +Executive Vice President—Operations, Chief Operating Officer, Cimarex +No +0 +Hans Helmerich +58 +2002 +Chairman and former CEO, Helmerich & Payne, Inc. +Yes +3 +David A. Hentschel +83 +2002 +Retired, Former Chairman, CEO Occidental Oil & Gas Corporation +Yes +0 +Thomas E. Jorden +59 +2011 +Chairman, CEO and President, Cimarex +No +0 +Harold R. Logan, Jr. +72 +2009 +Chairman, Suburban Propane Partners, L.P. +Yes +3 +Floyd R. Price +68 +2012 +Retired, Former Executive Vice President, Apache Corporation +Yes +1 +Monroe W. Robertson +67 +2005 +Retired, Former President and Chief Operating Officer of Key Production Co. +Yes +0 +Lisa A. Stewart +59 +2015 +Chairman, President, Chief Executive Officer and Chief Investment Officer of Sheridan Production Partners +Yes +0 +Michael J. Sullivan +77 +2002 +Retired Senior Attorney, Lewis Roca Rothgerber LLP +Yes +1 +L. Paul Teague* +82 +2002 +Retired, Former Regional Vice President, Texaco USA +Yes +0 +________ +* Mr. Teague will not stand for reelection at the Meeting. Frances M. Vallejo has been nominated to serve as a Class III Director in the vacancy resulting from Mr. Teague’s retirement. +Board Leadership Structure +Cimarex has a combined Chairman of the Board and CEO. Cimarex also has a Lead Director who is chosen annually from our independent Directors. Following is a summary of the functions of the Chairman of the Board/CEO and the Lead Director, as provided in our Lead Director Charter: +Duties and Responsibilities of Chairman of the Board +Duties and Responsibilities of Lead Director +Preside over Board meetings. +Preside at all Board meetings at which the Chairman of the Board is not present. +Call special meetings of the Board. +Solicit agenda items from non-management Directors, review Board meeting agenda and materials, and provide input to the Chairman of the Board. +Approve agenda for Board meetings. +Authority to call meetings of non-management Directors and, as appropriate, set the agenda. +Preside over shareholder meetings. +Preside at all meetings of non-management Directors and at all executive sessions of non-management Directors. +22 +Table of Contents +Duties and Responsibilities of Chairman of the Board +Duties and Responsibilities of Lead Director +Facilitate and participate in formal and informal communications with and among Directors. +Act as Chairman of the Nominating Committee. +Liaison between the Chairman and Directors and facilitate communication among full Board. +Review shareholder communications directed to Board and take appropriate action. +Retain outside advisors and consultants who report directly to the Board on Board-wide issues. +The Board believes that the roles of a combined Chairman/CEO and an independent Lead Director having the duties described above serve the interests of our shareholders because this structure provides an appropriate balance between strategy development and independent oversight of management. +Thomas Jorden was elected Chief Executive Officer on September 30, 2011 and Chairman of the Board on August 14, 2012. He has served as an executive officer of Cimarex since its formation in 2002. He has considerable knowledge and experience gained through his executive positions with Cimarex and prior industry experience. This knowledge and experience allow him to focus the activities of the Board on matters most relevant to the success of Cimarex. +Our Board structure is designed to avoid any undue influence by the Chairman of the Board/CEO on the Board. The Compensation and Governance Committee is comprised entirely of independent Directors. When the Board acts on the Compensation and Governance Committee’s recommendation for compensation of the Chairman/CEO, it acts without him being present. +The substantial experience and background of our independent Directors ensure their active and knowledgeable involvement in Board matters. This involvement, and the presence and involvement of our Lead Director, provide the Board with a strong and independent point of view. +Board Committees +The table below provides 2016 membership and meeting information for each of the Board Committees: +NAME +AUDIT +COMP/GOV +NOMINATING +Hans Helmerich +X +X +David A. Hentschel +X +X +Harold R. Logan, Jr. +X +X +Floyd R. Price +X +X +Monroe W. Robertson +X +X +Michael J. Sullivan +X +X +Lisa A. Stewart +X +X +L. Paul Teague +X +X +2016 Meetings Held +8 +6 +3 +Audit Committee +The Audit Committee is comprised entirely of independent Directors and is governed by a Board-approved Charter stating the Audit Committee’s responsibilities. A copy of the Audit Committee Charter is available on our website at www.cimarex.com . Under its Charter, the Audit Committee performs the following functions: +· Appoints independent auditors; +· Approves the nature and scope of services of independent auditors and reviews range of fees for such services; +· Assists the Board in monitoring the performance of the internal audit function; +· Reviews qualifications and independence of auditors; +23 +Table of Contents +· Reviews and discusses with independent auditors (i) the auditors’ responsibilities and management’s responsibilities in the audit process, (ii) overall audit strategy, (iii) scope and timing of annual audit, and (iv) any significant risks identified during auditors’ risk assessment procedures; +· Assists the Board in monitoring the integrity of financial statements; +· Monitors compliance with legal and regulatory requirements; +· Reviews and reports to Board on corporate and financial risk processes; +· Monitors the process related to ongoing litigation matters; and +· With the Company’s management and (if applicable) an independent petroleum engineering consulting firm, reviews the Company’s annual process of estimating and reporting quantities of oil and gas reserves. +The Board of Directors has determined that each of the members of the Audit Committee is financially literate and independent as defined by the rules of the SEC and the NYSE. The Board also has determined that each of Mr. Logan, Mr. Robertson and Ms. Stewart is an “audit committee financial expert” as defined by the SEC’s rules. +Compensation and Governance Committee +The Compensation and Governance Committee is comprised entirely of independent Directors and is governed by a Board-approved Charter stating the Committee’s responsibilities. A copy of the Compensation and Governance Committee Charter is available on our website at www.cimarex.com . Under its Charter, the Compensation and Governance Committee performs the following functions: +Compensation Functions +· Recommends CEO and executive officer cash compensation for approval by the Board; +· Recommends Director compensation for approval by the Board; +· Reviews and recommends to the Board that the Compensation Discussion and Analysis be included in our proxy statement; +· Determines amount and terms of equity awards; +· Reviews and approves long-term incentive plans; +· Reviews relationship of compensation to risk; and +· Approves the nature and scope of services of independent compensation consultants. +Governance Functions +· Oversees corporate governance; +· Develops plans for managerial succession; and +· Oversees annual Board and Committee evaluations. +Compensation and Governance Committee Interlocks and Insider Participation. Hans Helmerich, a member of the Committee, was an executive officer of Cimarex from February 14, 2002 until September 30, 2002. Cimarex was formed on February 14, 2002 as a wholly owned subsidiary of H&P for the purpose of facilitating a spinoff by H&P of its oil and gas exploration and production business. Cimarex became a publicly traded company on September 30, 2002, at which time Mr. Helmerich resigned as an executive officer. +Nominating Committee +The Nominating Committee is comprised of all of the independent Directors and is governed by a Board-approved Charter stating its responsibilities. A copy of the Nominating Committee Charter is available on our website at www.cimarex.com . Under its Charter, the Nominating Committee’s responsibilities include the following: +· Determine desired Board skills and attributes; +· Recommend candidates to serve on the Board and to stand for election at annual meeting of shareholders or to fill a vacancy occurring between meetings; +· Consider shareholder nominees for election to the Board; and +· Recommend Committee appointments. +24 +Table of Contents +Director Independence and Related Person Transactions +Our Corporate Governance Guidelines require that a majority of our Board of Directors be independent as defined by applicable laws, rules, regulations and listing standards. We comply with the criteria for independence established by the NYSE listing requirements and other governing laws and regulations. +Each year the Compensation and Governance Committee reviews the independence of our Directors and any related person transactions. On the basis of this review, the Committee delivers a report to the Board of Directors, and the Board makes independence determinations based on the Committee’s report. +As a result of this review, the Board has determined that Hans Helmerich, David Hentschel, Harold Logan, Floyd Price, Monroe Robertson, Lisa Stewart, Michael Sullivan and L. Paul Teague, representing eight of our ten current Directors, are independent of Cimarex and its management. The Board also determined that Frances M. Vallejo, who is nominated to serve as a Class III Director, is independent of Cimarex and its management. Thomas Jorden and Joseph Albi are not independent because of their employment as CEO and COO of Cimarex, respectively. +In making these determinations, the Board considered that, in the ordinary course of business, relationships and transactions may occur between Cimarex and entities with which some of our Directors or nominee for Director are or have been affiliated. As a result of the Committee’s review, certain relationships and transactions are not considered to be material transactions that would impair a Director’s independence, including the following: +· The Director is an employee of another company that does business with Cimarex, and our annual sales to or purchases from the other company amount to less than 2% of the annual revenues of the other company and that such sales to or purchases from the other company are part of our ordinary course of business and conducted in the same manner as we obtain services from other companies that provide similar services; or +· The Director is a director (but not an employee) of another company that does business with Cimarex. +Hans Helmerich is the Chairman of the Board, and until March 5, 2014 was the CEO, of H&P, a company with which Cimarex engages in ordinary course of business transactions. During H&P’s fiscal year ended September 30, 2016, Cimarex paid H&P $17.5 million for drilling services in arms’ length transactions and as part of our ordinary course of business and in the same manner as we obtain services from other companies that provide similar services. The aggregate amount of the payment represented 1.08% of H&P’s revenue during that period. The Compensation and Governance Committee reviewed these transactions and concluded: (i) the transactions are proper and not material when compared to both Cimarex’s total drilling costs and H&P’s total revenues; (ii) the transactions occur in the ordinary course of business and at arms’ length; (iii) the Board does not review or approve drilling service contracts or arrangements; and (iv) Mr. Helmerich’s relationship with H&P does not interfere with his independent judgment as a Director of Cimarex. +Ms. Stewart is Chairman, President, Chief Executive Officer and Chief Investment Officer of Sheridan Production Partners, a privately–owned oil and gas operating company she founded in 2007. During 2016 Cimarex paid certain affiliates of Sheridan oil and gas revenues of $178 thousand and received $73 thousand from certain affiliates of Sheridan for joint interest billings. The payments to the affiliates of Sheridan represented 0.02% of Sheridan’s consolidated revenues for 2016. In addition, Cimarex paid the Sheridan affiliates joint interest billings of $5 thousand, and received $399 of oil and gas revenues. The Compensation and Governance Committee reviewed these transactions and concluded: (i) the transactions are proper and not material when compared to both Cimarex’s total costs and Sheridan’s revenues; (ii) the transactions occur in the ordinary course of business and at arms’ length; (iii) the Board does not review or approve oil and gas revenue payments or joint interest billings; and (iv) Ms. Stewart’s relationship with Sheridan does not interfere with her independent judgment as a Director of Cimarex. +Risk Oversight +The Board has overall responsibility for risk oversight. In carrying out its responsibility, the Board has requested that the Audit Committee discuss with management and report to the Board with respect to: +· Processes Cimarex follows to mitigate corporate risks; +· Guidelines and processes pertaining to financial risk assessment; +· Steps management takes to measure, monitor and control financial risk exposures; and +25 +Table of Contents +· Management’s conclusion as to the effectiveness of the guidelines and processes utilized to mitigate such corporate and financial risks and exposures. +In addition, at each of the Board’s four regularly scheduled meetings held during the year, management provides the Board with an overview of Cimarex’s operations, financial results and other aspects of its business. Significant strategic considerations, such as material acquisitions or mergers are brought to the Board for deliberation and, as appropriate, decisions. +The Audit Committee, at its December 8, 2016 meeting, reviewed, discussed and, at the Board meeting that day, reported to the Board about corporate, operational and financial risks and Cimarex’s processes for mitigation of these risks. +Compensation Risk Oversight +In February 2017, the Compensation and Governance Committee performed a thorough review of the possible connection between incentives and excessive risk taking. The Compensation and Governance Committee’s review covered Cimarex’s compensation policies and practices covering executive and non-executive employees to determine whether the policies and practices encourage excessive risk taking by employees. The Committee’s analysis included a review and discussion of the following: +· The metrics for determining awards; +· Participants in the Company’s compensation programs; +· How the compensation pools and individual awards are determined; +· The maximum individual award potential (maximum individual incentive to take risk); +· The maximum possible cost if awards were paid at maximum levels (maximum cost exposure); +· The decision-making and approval process; and +· The systemic limitations on the ability to take excessive risks in order to influence compensation. +The Compensation and Governance Committee determined that the risks from Cimarex’s compensation policies and practices for Cimarex employees are not reasonably likely to have a material adverse effect on Cimarex. +Executive Sessions +The independent Directors meet in executive session at each regularly scheduled Board meeting. The Lead Director presides over executive sessions. During 2016, four executive sessions were held and all of the independent Directors attended each session. These sessions allow independent Directors to review the CEO’s performance and compensation, to discuss issues of importance to Cimarex, including the business and affairs of Cimarex, as well as matters concerning management, without any member of management present. +Shareholder Engagement +Cimarex’s relationships with its shareholders are an important part of our corporate governance profile, and we recognize the value of taking their views into account. Engagement with shareholders helps us understand the larger context and impact of our operations, learn about expectations for our performance, assess emerging issues that may affect our business or other aspects of our operations, and shape corporate and governance policies. +Consistent with our commitment to seek and respond to shareholder input on corporate governance topics, we have considered and discussed with investors a wide variety of matters, including: +· our executive compensation program and disclosures, as a result of which we previously made changes in these areas, +· the “proxy access” shareholder proposal acted upon in 2015, +· a shareholder proposal concerning fugitive methane reporting that was made in December 2015 and subsequently withdrawn, as a result of which we added disclosure concerning methane emissions to our website, and +· environmental, social and governance issues, including greenhouse gas emissions, employee and board diversity, and shareholder protection measures. +26 +Table of Contents +S TOCK O WNERSHIP +D IRECTORS, M ANAGEMENT AND C ERTAIN B ENEFICIAL O WNERS +Beneficial Ownership by Executive Officers and Directors +The following table shows, as of March 15, 2017, the number of shares of common stock “beneficially owned,” as determined in accordance with Rule 13d-3 under the Securities Exchange Act of 1934, by the NEOs, the Directors, and all executive officers and Directors, as a group: +Name of Beneficial Owner +Shares +Beneficially Owned (1) +Percent of +Class +Named Executive Officers : +Thomas E. Jorden, CEO (also Director) +369,218 +<1% +G. Mark Burford, CFO +65,823 +<1 % +Joseph R. Albi, COO (also Director) +133,943 +<1% +Stephen P. Bell, EVP +110,783 +<1% +John A. Lambuth, SVP +110,532 +<1% +Directors : +Hans Helmerich +449,706 (2) +<1% +David A. Hentschel +30,563 +<1% +Harold R. Logan, Jr. +8,848 +<1% +Floyd R. Price +9,378 +<1% +Monroe W. Robertson +13,282 +<1% +Lisa A. Stewart +2,442 +<1% +Michael J. Sullivan +15,744 +<1% +L. Paul Teague +54,497 (3) +<1% +Nominee for Director: +Frances M. Vallejo +0 +<1% +All executive officers, Directors and Nominee as a group (18 persons) +1,614,069 (2)(3) +1.7% +(1) Includes restricted stock (as well as shares that are subject to performance-based vesting and time-based vesting more than 60 days after March 15, 2017), direct and indirect ownership of common stock and equivalent shares of common stock held by the trustee for the benefit of the named individual in the Cimarex Energy Co. 401(k) Plan. Does not include deferred compensation units held by one Director. +(2) Includes 11,450 shares owned by Mr. Helmerich’s wife. Mr. Helmerich disclaims beneficial ownership of the shares held by his wife. Also includes 49,496 shares owned by 1993 Hans Helmerich Trust, of which Mr. Helmerich is the trustee, 1,062 shares owned by Helmerich Grandchildren LLC, of which Mr. Helmerich is the co-manager, 7,865 shares owned by Family Trust, of which Mr. Helmerich is the trustee, 40,955 shares owned by The Helmerich Trust, of which Mr. Helmerich is the co-trustee, and 325,000 shares held by the Peggy Helmerich QTIP Trust, of which Mr. Helmerich is the trustee. +(3) Includes 9,065 shares owned by Mr. Teague’s wife. Mr. Teague disclaims beneficial ownership of the shares held by his wife. +27 +Table of Contents +Beneficial Ownership of More than Five Percent +Each of the following shareholders beneficially owns five percent or more of our outstanding shares of common stock. The following table provides information regarding their stock ownership and is based on their filings with the SEC. +Voting Authority +Dispositive Authority +Total Amount +of Beneficial +Percent of +Name and Address +Sole +Shared +Sole +Shared +Ownership +Class +BlackRock Inc. +55 East 52 nd Street +New York, NY 10055 +6,136,148 +0 +6,924,521 +0 +6,924,521 (1) +7.3% +FMR LLC +245 Summer Street +Boston, MA 02210 +223,311 +0 +4,962,937 +0 +4,962,937 (2) +5.226% +State Street Corporation +State Street Financial Center +One Lincoln Street +Boston, MA 02111 +0 +5,011,717 +0 +5,011,717 +5,011,717 (3) +5.28% +The Vanguard Group +100 Vanguard Boulevard +Malvern, PA 19355 +148,347 +21,663 +9,395,880 +169,811 +9,565,691 (4) +10.07% +(1) Based solely on information as of December 31, 2016 included in a Schedule 13G/A filed with the SEC on January 23, 2017. +(2) Based solely on information as of December 31, 2016 included in a Schedule 13G/A filed with the SEC on February 14, 2017. +(3) Based solely on information as of December 31, 2016 included in a Schedule 13G filed with the SEC on February 9, 2017. +(4) Based solely on information as of December 30, 2016 included in a Schedule 13G/A filed with the SEC on January 10, 2017. +28 +Table of Contents +COMPENSATION DISCUSSION AND ANALYSIS - TABLE OF CONTENTS +Page No. +Executive Summary of Compensation Discussion and Analysis (“CD&A”) +30 +Compensation Discussion and Analysis +32 +Section 1 +32 +Our Compensation Framework +32 +Objectives +32 +Design +32 +Principal Elements of Executive Compensation +33 +Competitive Positioning +33 +Section 2 +34 +Summary of 2016 and Early 2017 Compensation Decisions +34 +Response to 2016 Say-on-Pay Vote and Shareholder Engagement +36 +Key 2016 Compensation Actions +36 +CEO Compensation +36 +Other NEO Compensation +36 +Base Salary Determination +37 +Annual Cash Incentive Awards +38 +Long-Term Equity Incentive Award Program +41 +2016 Vesting of NEO Equity Awards +42 +Elimination of Tax Gross Up Payments +43 +Alignment of CEO Direct Compensation to Total Shareholder Return (“TSR”) +44 +Early 2017 Compensation Decisions +45 +2017 Annual Cash Incentive Award Goals +45 +Section 3 +46 +Role of Compensation Consultant and Management in Compensation Decisions +46 +Other Compensation Arrangements +47 +Post-Employment and Employment Arrangements +47 +Retirement Benefits +47 +Perquisites +47 +Other Compensation Policies +48 +Total Pay Considerations +48 +Stock Ownership and Holding Requirements +48 +Clawback Policy +48 +Non-Hedging and Non-Pledging Policies +48 +Tax Law Considerations +48 +Compensation and Governance Committee Report +49 +29 +Table of Contents +Executive Summary of Compensation Discussion & Analysis (“CD&A”) +2016 BUSINESS AND FINANCIAL PERFORMANCE OVERVIEW +2016 was a year of great volatility in the oil and gas exploration and production industry. The year began with a continuation of low commodity prices that commenced in November 2014 when the Organization of Petroleum Exporting Countries (“OPEC”) declined to impose production limits and allowed oil prices to plunge as U.S. and worldwide production far exceeded demand. Oil prices were below $30 per barrel in February 2016 when the Compensation and Governance Committee adopted 2016 strategic and tactical goals and objectives to be measured in 2017. As a result, the Committee focused on goals that would preserve Cimarex’s strong balance sheet, core properties and organization during a difficult period for the oil and gas industry. These goals and our performance are summarized below under “Annual Incentive Awards”. As the year progressed, commodity prices increased and stabilized. It is through this macroeconomic lense that the Committee considered the following 2016 business and financial performance overview when making compensation decisions: +· In spite of a reduction of exploration and development expenditures of 16% to $734.8 million compared to $877.0 million in 2015, year-over-year average daily production only declined 2% to 963.4 MMcfe per day. +· Our Operations group did an excellent job of optimizing our production and reducing production expense by approximately $67.4 million, or 23%, from $299.4 million in 2015 to $232.0 million in 2016. Our production expense per Mcfe of total production declined 20% from $.83 per Mcfe in 2015 to $.66 per Mcfe in 2016, and declined 39% in 2016 compared to 2014. +· We incurred no additional debt and had cash on hand of $652.9 million at year-end 2016. +· Year-over-year production revenues declined 14% to $1.2 billion as revenues were adversely affected by low realized commodity prices, which also brought about impairments of our oil and gas properties and net losses for each of 2015 and 2016. +· Cash flow provided by operating activities of $599.2 million was 13% lower than that of the prior year. +· During 2016, our overall estimated reserves were flat after additions, positive and negative revisions, and production. We added 324.0 Bcfe of proved reserves through extensions and discoveries, primarily in the Mid-Continent and Permian Basin, where we added 121.6 Bcfe and 198.7 Bcfe, respectively. In addition, we had net positive revisions of previous estimates of 19.8 Bcfe. Revisions were comprised of an increase of 126.2 Bcfe for net positive performance revisions, an increase of 138.5 Bcfe related to lower operating expenses and a decrease of 244.9 Bcfe for negative revisions due to lower commodity prices. +· Stock price increased from $89.38 at year-end 2015 to $135.90 at year-end 2016, an increase of 52%. For the same period, average stock price performance for the Compensation Peer Group was 51%. +2016 EXECUTIVE COMPENSATION +2016 Salary (1) +Year End +2016 Base Salary +2016 Annual Cash +Incentive Award (1) +2016 Long-Term +Incentive Grant +Value (1) +Total +Compensation +(1)(2) +% of Total +Compensation +at Risk (3) +Thomas E. Jorden, CEO +$ +921,468 +$ +960,000 +$ +1,700,000 +$ +10,500,000 +$ +13,180,919 +93% +G. Mark Burford, CFO +$ +429,779 +$ +460,000 +$ +690,000 +$ +3,200,000 +$ +4,367,458 +89% +Joseph R. Albi, COO +$ +578,876 +$ +592,000 +$ +888,000 +$ +4,000,000 +$ +5,524,948 +88% +Stephen P. Bell, EVP +$ +480,340 +$ +490,000 +$ +735,000 +$ +3,400,000 +$ +4,689,475 +88% +John A. Lambuth, SVP +$ +471,365 +$ +480,000 +$ +735,000 +$ +3,750,000 +$ +5,009,118 +90% +(1) From Summary Compensation Table. +(2) Includes All Other Compensation from Summary Compensation Table. +(3) Compensation at risk is based on the sum of 2016 Annual Cash Incentive Award and 2016 Long-Term Incentive Grant Value compared to the Total Compensation from the Summary Compensation Table. +30 +Table of Contents +ELEMENTS AND MIX OF EXECUTIVE COMPENSATION +Principal Elements of Executive Compensation +We principally use three elements of executive compensation to carry out the design of our executive compensation program, collectively referred to as “Total Direct Compensation”: +Elements +Purpose +Ø Base salary +Retain current executive team and, when appropriate, attract new executives. +Ø Annual cash incentive award +Reward executives for short-term financial and operational results. +Ø Annual long-term equity award +Focus executive efforts on activities and short-term results that lead to long-term shareholder value. Half of our restricted stock awards vest based on continued employment and the passage of time, which promotes retention. The remainder of the awards vest based on performance measures tied to relative total shareholder return (“TSR”), which promotes the long-term interests of our shareholders and aligns executives’ interests with shareholders’ interests. +Mix of Executive Compensation +Cimarex’s executive compensation program directly links a substantial portion of executive compensation to Cimarex’s performance through annual and long-term incentives. The diagrams below show the mix of the pay elements for the CEO and other NEOs for fiscal 2016. These diagrams are based on the Summary Compensation Table and highlight the substantial portion of the at-risk compensation that only is realized if certain performance criteria are met. Of the CEO’s total disclosed 2016 compensation, 93% is at risk and is linked to Cimarex’s future performance. This consists of 13% annual cash incentive compensation based on 2016 performance and 80% long-term equity incentive compensation that is both service- and performance-based. The 2016 average compensation mix for the other NEOs was 89% at risk compensation consisting of 16% annual cash incentive compensation based on 2016 performance and 73% long-term equity incentive compensation that is both service- and performance-based. +31 +Table of Contents +C OMPENSATION D ISCUSSION AND A NALYSIS +This CD&A describes Cimarex’s executive compensation program for 2016. We use this program to retain, motivate and attract (when appropriate) the executives who lead our business. This CD&A explains how the Compensation and Governance Committee (the “Committee”) of the Board of Directors made 2016 compensation decisions for our executives, including the following NEOs: +· Thomas E. Jorden, Chairman of the Board, CEO and President (Principal Executive Officer) +· G. Mark Burford, Vice President and CFO (Principal Financial Officer) +· Joseph R. Albi, Executive Vice President—Operations, COO +· Stephen P. Bell, Executive Vice President—Business Development +· John A. Lambuth, Senior Vice President—Exploration +This CD&A is divided into three sections: +Section 1 discusses our compensation framework, principal elements of executive compensation, and competitive positioning. +Section 2 discusses 2016 and early 2017 actions related to 2016 executive compensation. +Section 3 discusses the role of the Committee’s independent compensation consultant and management in compensation decisions, post-employment compensation, retirement benefits, perquisites and other compensation related issues. +SECTION 1 +Our Compensation Framework +Objectives +Our principal business objective is to profitably grow our proved oil and gas reserves and production for the long-term benefit of shareholders. The primary strategy we use to achieve this objective is to reinvest our cash flow from operations at a competitive rate of return. Our executive compensation program is designed to retain, motivate and attract, when appropriate, the experienced professionals necessary to carry out this strategy. +Design +We design our executive compensation program to: +· Align performance incentives with the long-term interests of our shareholders. +We align the long-term interests of our executives with the long-term interests of our shareholders by paying a substantial portion of each executive’s total direct compensation in the form of performance-based equity awards. The vesting of up to half of the NEOs’ equity awards is dependent upon relative TSR performance, meaning the more our shareholders benefit through shareholder returns compared to our Stock Performance Peer Group, the more our executives benefit through increased vesting of performance-based equity awards. Also, our Executive Stock Ownership Guidelines encourage executives to have a meaningful ownership stake in Cimarex, further aligning the interests of our shareholders and our executives. +· Provide competitive total direct compensation opportunities that retain, motivate and attract, when needed, executive talent. +We compensate our executives at levels that are competitive with equivalent positions at companies with which we may compete for talent as represented by our Compensation Peer Group. In general, when we review base salary, annual incentive awards, long-term equity awards and total direct compensation, we reference the 50th and 75th percentiles of the Compensation Peer Group. Actual compensation earned by an executive may be outside this range based on the company’s performance, the individual’s achievements, and industry competition for talented +32 +Table of Contents +executives. Half of our restricted stock awards vest based on continued employment and the passage of time, which promotes retention of executives. +· Link compensation earned to achievement of short-term and long-term financial and operational objectives. +We provide the opportunity for an annual incentive cash award that is designed to reward executive efforts for achieving company financial and operational objectives. The portion of our long-term equity incentive awards that vest based on performance measures tied to relative TSR are designed to encourage above average stock price performance, which aligns executives’ interests with shareholders’ interests. +Principal Elements of Executive Compensation +We principally use three elements of executive compensation to carry out the design of our executive compensation program, collectively referred to as “Total Direct Compensation”: +Element +Purpose +Ø Base salary +Retain executive team and, when appropriate, attract other executives. +Ø Annual cash incentive award +Reward executives for short-term financial and operational results. +Ø Annual long-term equity award +Focus executive efforts on activities and short-term results that lead to long-term shareholder value. Half of our restricted stock awards vest based on continued employment and the passage of time, which promotes retention. The remainder of the awards vest based on performance measures tied to relative TSR, which promotes the long-term interests of our shareholders and aligns executives’ interests with shareholders’ interests. +Competitive Positioning +In support of our compensation objectives and in order to determine an appropriate total value and mix of pay for executives, we reference the 50th and 75th percentiles of a peer group of companies (“Compensation Peer Group”). We look at our individual NEO and total NEO Total Direct Compensation compared to individual NEO and total NEO Total Direct Compensation of companies in our Compensation Peer Group. Because not all of our NEO positions are directly comparable to NEO positions of companies in our Compensation Peer Group, we believe that reviewing the aggregate Total Direct Compensation of all NEOs provides an appropriate reference for comparative purposes and allows us to compare our total cost of management for all NEOs to our peers’ total cost of management. +2016 Compensation Peer Group +The Compensation Peer Group is comprised of companies in the oil and gas industry with market capitalizations and revenues similar to ours and with whom we compete for executive and other employee talent. The Committee annually reviews companies in the Compensation Peer Group and modifies the group as appropriate. The 50th and 75th percentiles are reference points only; we do not automatically compensate each executive at these levels. Several variables, including individual and division performance, time employed in the position, annual company performance and one- and three-year relative stock price performance influence the actual executive compensation decisions. +In May 2016, the Committee approved the 2016 Compensation Peer Group. The companies included in the Compensation Peer Group were, at the time of selection, comparable to Cimarex in size and scope of operations, market capitalization and revenue. These are companies with whom we believe we compete for employees. At the time of selection, the March 1, 2016, market capitalization of these companies ranged from $1.2 billion to $20.9 billion and the trailing 12 months’ revenue as of March 1, 2016 ranged from $900 million to $4.8 billion. For the comparable date and period, Cimarex’s market capitalization was $8.1 billion and its revenue was $1.5 billion. The Committee’s independent compensation consultant recommended removing three companies from the 2015 Compensation Peer Group due to financial and/or operational considerations, including market capitalization, revenue and debt levels and operational profile and footprint. These companies were Denbury Resources Inc., with a market capitalization of $400 million and trailing 12 month revenues of $1.2 billion; SM Energy Company with a market capitalization of $600 million and trailing 12 month revenues of $1.6 billion; and Whiting Petroleum Corporation +33 +Table of Contents +with a market capitalization of $900 million and trailing 12 month revenues of $2.0 billion. The consultant also recommended adding Antero Resources Corporation (“Antero”) because its financial metrics more closely aligned with those of Cimarex. Antero had a market capitalization of $6.2 billion and trailing 12 month revenues of $4.0 billion at March 1, 2016. The Committee approved these recommendations, resulting in the following companies being included in the 2016 Compensation Peer Group: +Peer Company +Peer Company +Antero Resources Corporation +Noble Energy, Inc. +Cabot Oil & Gas Corporation +Pioneer Natural Resources Company +Concho Resources Inc. +QEP Resources, Inc. +Continental Resources, Inc. +Range Resources Corporation +Energen Corporation +Southwestern Energy Company +Newfield Exploration Company +WPX Energy, Inc. +2016 Stock Performance Peer Group +Under our long-term equity incentive award program, we grant performance-based awards of restricted stock to our NEOs. For grants made in December 2016, the performance measure used to determine the number of shares to be delivered upon vesting is Cimarex’s relative TSR over the three-year period preceding the December 1, 2019 vesting date when compared to companies in the S&P 500 Oil and Gas Exploration & Production Index (the “Stock Performance Peer Group”). The Stock Performance Peer Group members are companies with which we compete for investors and investment capital. The Committee believes that using an index of companies selected by an independent group such as Standard and Poor’s provides less ability for management to attempt to manipulate relative performance. The following are the companies that comprised the Stock Performance Peer Group on December 8, 2016: +Peer Company +Peer Company +Anadarko Petroleum Corporation +EQT Corporation +Apache Corporation +Hess Corporation +Cabot Oil & Gas Corporation +Marathon Oil Corporation +Chesapeake Energy Corporation +Murphy Oil Corporation +Cimarex Energy Co. +Newfield Exploration Company +Concho Resources Inc. +Noble Energy, Inc. +ConocoPhillips +Pioneer Natural Resources Company +Devon Energy Corporation +Range Resources Corporation +EOG Resources, Inc. +Southwestern Energy Company +SECTION 2 +Summary of 2016 and Early 2017 Compensation Decisions +TOPIC +ACTION +RATIONALE +Base Salary Review +Increased CEO’s base salary from $870,750 to $960,000. +CEO’s base salary was below the 50th percentile of the Compensation Peer Group. Following the increase, Mr. Jorden’s salary was at the 66 th percentile of the peers. +Increased base salary for CFO from $390,000 to $460,000. +When Mr. Burford was named as CFO effective upon the retirement of the former CFO on September 1, 2015, Mr. Burford’s base salary was set at $390,000. The salary was set below his predecessor’s base salary and in the lower range of CFOs in our Compensation Peer Group due to Mr. Burford being new to the position. When the Committee reviewed salaries in May 2016, Mr. Burford’s salary continued to be below the 50 th percentile of Cimarex’s Compensation Peer Group, and the Committee +34 +Table of Contents +TOPIC +ACTION +RATIONALE +recognized that Mr. Burford had demonstrated exceptional skill and performance in his transition to the CFO position, justifying the increase. Following the increase, Mr. Burford’s salary remained below the 50th percentile of the peers. +Increased remaining NEOs’ base salaries by 4.35-5.41% +These increases were based on maintaining alignment of the NEOs between the 50 th and 75 th percentiles of the Compensation Peer Group, lack of increases for some NEOs in 2015, and Company performance. In addition, John Lambuth’s salary previously was increased by 5.5% to $460,000 effective January 1, 2016 upon his promotion to Senior Vice President—Exploration. +Annual Short-Term Incentive Plan +Authorized annual cash short-term awards to the CEO of 177% of year-end base salary and other NEOs of between 150% to 153% of year-end base salary (target of 100% of base salary for all NEOs). +Annual cash awards were based on the achievement of financial and strategic objectives described below in “Annual Cash Incentive Awards” and on recommendations from the Committee’s independent compensation consultant. See Key 2016 Compensation Actions — Annual Cash Incentive Awards below . +Long-Term Equity Incentives +Authorized long-term equity awards to NEOs (including the CEO) with an aggregate grant date fair value of $24,850,000. The number of shares that may be earned pursuant to these awards is determined by Cimarex’s relative stock price performance. The awards vest on December 1, 2019, and are subject to a continuous service requirement. A minimum of 50% of the shares granted and a maximum of 100% of the shares granted may be earned at the end of the three-year performance period, with 100% being earned if Cimarex’s relative stock price is in the top five of the 18 companies in the Stock Performance Peer Group. +Given Cimarex’s reduced emphasis on cash and other forms of compensation that is not “at-risk,” the range for 2016 long-term equity awards recommended by the compensation consultant represented a total value between the 75th and 90th percentiles when compared to 2016 awards made by peer companies based on the consultant’s review of public filings and knowledge of other companies for which the consultant provides services to compensation committees and market survey data. The Committee considered Cimarex’s TSR for the past one and three years, the historical performance of Cimarex compared to its peers since inception and ability to weather industry downturns, NEO total direct compensation compared to peer companies, and the compensation consultant’s recommended individual and total pool of grant date fair value and determined to make aggregate awards above those recommended by its consultant. Its consultant concurred with the Committee’s final determination. The actual value of the shares upon vesting on December 1, 2019 will be based on Cimarex’s performance as reflected in the relative stock price compared to the other companies in the stock performance peer group and Cimarex’s stock price at that time. +See Key 2016 Compensation Actions below for more detail. +35 +Table of Contents +Response to 2016 Say-on-Pay Vote and Shareholder Engagement +At the 2016 Annual Meeting of Shareholders, 98% of the votes cast were in favor of the advisory vote to approve executive compensation, the same as the 98% approval at the 2015 annual meeting. In addition to the advisory vote, as part of our regular shareholder engagement, we consider and discuss with shareholders a number of matters throughout the year, including executive compensation and governance. The Committee carefully considers any feedback and routinely reviews executive compensation practices and governance. +The Committee considered the results of the advisory vote and the discussions with shareholders to convey our shareholders’ support of the Committee’s compensation decisions in 2015 and early 2016 and shareholders’ overall satisfaction with Cimarex’s executive compensation programs. Consistent with this support, the Committee retained the core design of our executive compensation programs for the remainder of 2016. +Key 2016 Compensation Actions +The following discusses the Committee’s key 2016 compensation decisions, which are reflected in the 2016 Summary Compensation Table below. These decisions were made with the advice and concurrence of the Committee’s independent consultant, Longnecker & Associates. (See Section 2 of Compensation Discussion and Analysis for additional discussion regarding the role of the consultant.) +CEO Compensation +· Mr. Jorden’s base salary was increased by 10.3% due to his leadership of Cimarex through a reduced commodity price environment, including Cimarex’s relative TSR performance at the 80 th percentile compared to the Compensation Peer Group for the one year and 89 th percentile of the group for the three year periods ending April 30, 2016, his not receiving an increase in salary in 2015, and his being below the 50 th percentile of the Compensation Peer Group’s salaries. +· Mr. Jorden’s 2016 annual cash incentive award was $1,700,000, or 177% of his year-end base salary. +· His annual long-term incentive equity award value at the date of grant (December 8, 2016) was $10,500,000. +These decisions were reviewed in detail by the Committee and its independent consultant. The Committee considered several factors, including input from its independent consultant, salary data from peer companies and Cimarex’s performance. In 2016, approximately 93% of Mr. Jorden’s compensation as disclosed in the Summary Compensation Table was at risk. +Other NEO Compensation +The Committee also made compensation decisions for the other NEOs comprised of base salary adjustments made in May 2016, 2016 annual cash incentive awards made in February 2017, and long-term equity awards made in December 2016. These adjustments were based upon the recommendations of the CEO, evaluation by the Committee, the advice and recommendations of the Committee’s independent consultant, salary data from peer and broader market surveys, internal pay relationships based on relative duties and responsibilities, the executive’s impact on Cimarex’s results, and for retention purposes. Based upon these considerations, the Committee made the following 2016 NEO compensation decisions: +2016 Salary (1) +Year End 2016 +Base Salary +2016 Annual +Cash Incentive +Award (1) +2016 Long-Term +Incentive Equity +Grant Date Fair +Value (1) +Total +Compensation +(1)(2) +% of +Total +Compensation +that is +At Risk (3) +G. Mark Burford, CFO +$ +429,779 +$ +460,000 +$ +690,000 +$ +3,200,000 +$ +4,367,458 +89% +Joseph R. Albi, COO +$ +578,876 +$ +592,000 +$ +888,000 +$ +4,000,000 +$ +5,524,948 +88% +Stephen P. Bell, EVP +$ +480,340 +$ +490,000 +$ +735,000 +$ +3,400,000 +$ +4,689,475 +88% +John A. Lambuth, SVP +$ +471,365 (4) +$ +480,000 +$ +735,000 +$ +3,750,000 +$ +5,009,118 +90% +(1) From Summary Compensation Table. +(2) Includes All Other Compensation from Summary Compensation Table. +36 +Table of Contents +(3) Compensation at risk is based on the sum of 2016 Annual Cash Incentive Award and 2016 Long-Term Incentive Grant Value compared to the Total Compensation from the Summary Compensation Table. +(4) Mr. Lambuth’s salary increased from $436,000 to $460,000 effective January 1, 2016 upon his promotion to Senior Vice President—Exploration. +Base Salary Determination +We provide competitive base salaries to retain and attract, when appropriate, talented executives and to provide a fixed base of cash compensation. We compare each Cimarex NEO’s base salary with the base salary paid for a similar executive position by companies in our Compensation Peer Group. See Competitive Positioning above in this CD&A for a list of the companies in the Compensation Peer Group. The Committee then may adjust base salaries based on a number of factors, including job responsibilities, management experience, individual contributions, number of years in position and current salary. +In May 2016, the Committee’s independent compensation consultant reviewed the NEOs’ base salaries compared to Compensation Peer Group data and broader market data and initially recommended a 3% increase in executive salaries other than the CEO and CFO. The compensation consultant recommended the Committee consider increases of 5.7% and 7.7% for the CEO and CFO, respectively, because their salaries were below the 50% percentile of the Compensation Peer Group. Mr. Jorden, our CEO, provided the Committee with recommendations for NEOs other than himself. With respect to Mr. Burford, the CFO, Mr. Jorden’s recommendation was based on Mr. Burford’s initial salary (when he was named as CFO effective upon the retirement of the former CFO on September 1, 2015) being set below his predecessor’s base salary and in the lower range of CFOs in our Compensation Peer Group due to Mr. Burford being new to the position. When the Committee reviewed salaries in May 2016, Mr. Burford’s salary continued to be below the 50 th percentile of Cimarex’s Compensation Peer Group. Mr. Jorden noted that Mr. Burford had demonstrated exceptional skill and performance in his transition to the CFO position, justifying a 17.9% increase. Following the increase, Mr. Burford’s salary was still below the 50 th percentile of the Compensation Peer Group. With respect to the other NEOs, Mr. Jorden’s recommendations were based on maintaining alignment of the NEOs between the 50 th and 75 th percentile of the Compensation Peer Group, lack of increases for some NEOs in 2015, and Company relative TSR performance being in the 80 th percentile of the Compensation Peer Group companies for the previous one-year period and the 89 th percentile among those companies for the previous three-year period. The Committee considered the recommendations of both the Committee’s consultant and Mr. Jorden for NEOs other than Mr. Jorden. With respect to Mr. Jorden’s salary, in discussions in executive session with the compensation consultant and without Mr. Jorden present, the Committee considered Mr. Jorden’s leadership of Cimarex through a reduced commodity price environment, including Cimarex’s relative TSR performance in the 80 th percentile compared to the Compensation Peer Group for the past one year and in the 89 th percentile for the past three years, his not receiving an increase in salary in 2015, and his being below the 50 th percentile of the Compensation Peer Group’s CEO salaries. The Committee also reviewed the total salaries and recommended salaries of all the NEOs compared to the total salaries of the NEOs of the Compensation Peer Group. Before the recommended salary increases, aggregate NEO salaries were at the 50 th percentile of the Compensation Peer Group. The recommended increases put the NEOs at the 60 th percentile. The compensation consultant indicated its concurrence with the Committee’s recommendations based on these reasons and the compensation consultant’s experience with, and knowledge of, compensation decisions of other oil and gas exploration and production companies. The Committee recommended, and the Board approved, the following base salaries effective June 1, 2016: +Name +Title +5/31/2016 +Base Salary +After 6/1/2016 +Base Salary +Percent +Increase +Thomas E. Jorden +Chairman of the Board, CEO and President +$ +870,750 +$ +960,000 +10.2% +G. Mark Burford +Vice President and CFO +$ +390,000 +$ +460,000 +17.9% +Joseph R. Albi +Executive Vice President—Operations, COO +$ +561,600 +$ +592,000 +5.4% +Stephen P. Bell +Executive Vice President—Business Development +$ +467,625 +$ +490,000 +4.8% +John A. Lambuth +Senior Vice President—Exploration +$ +460,000 (1) +$ +480,000 +4.3% +(1) Mr. Lambuth’s salary increased from $436,000 to $460,000 effective January 1, 2016 upon his promotion to Senior Vice President—Exploration. +37 +Table of Contents +Annual Cash Incentive Awards +In February 2017, the Committee met to deliberate and determine NEO (including the CEO) annual cash incentive awards for 2016 performance. The individual target for the CEO and each other NEO is 100% of his base salary. There is no minimum award, and an individual’s maximum award is 200% of the NEO’s base salary. +In February 2016, the Compensation and Governance Committee adopted 2016 strategic and tactical goals and objectives to be measured in 2017. At the time the Committee approved these goals, commodity prices were still depressed, with oil below $30 per barrel, and the Committee focused on goals that would preserve Cimarex’s strong balance sheet, core properties and organization during a difficult period for the oil and gas industry. The following represents the level of achievement of the 2016 strategic and tactical goals and objectives: +2016 Strategic and Tactical Goals and Objectives +Achievement +Achieve good return on invested capital. +Good. We were above our threshold for after tax return on invested capital based on internal measurements which consider only discounted future cash flows from proved developed reserves and are fully burdened with land, seismic, personnel costs, and all other non-drilling costs attributed to our exploration program. The returns were very good by historical standards and reflected our ability to reduce costs and innovate our operations throughout the year. Returns were also aided by commodity price increases through 2016. +Manage the balance sheet. +Excellent. We preserved the strength of our balance sheet while adapting to a lower cash flow environment in 2016 by reducing exploration and drilling capital by 16% compared to 2015. We incurred no additional debt and had cash on hand of $653 million at year-end 2016. +Continue focus on redefining and implementing cost structure and innovative techniques that maximize effectiveness using less. +Good. In 2016, the Cimarex executive team performed a detailed analysis of the company’s cost structure and staffing levels, both in absolute terms and in comparison to our peers. While we confirmed our historical lean overhead, we instituted a voluntary retirement program for certain eligible employees, resulting in a meaningful overhead cost savings. +In 2016, we established a Water Resource Group to engineer cost effective water sourcing and disposal options. This group got fully up to speed in 2016 and the resultant water cost savings for our well stimulation program were significant. Our Operations group focused on reducing overall company lease operating expense (“LOE”) and achieved a reduction in LOE of 24% compared to 2015. +Continue creative and innovative development of new plays and concepts. +Excellent. The organization did a remarkable job in well completion optimization and innovation throughout the year. We experimented with many aspects of well completion techniques and deployed emerging technologies in order to gain a better understanding of completion effectiveness. This work is ongoing and continues to deliver improved well results. +Tactical Goals: +· Continue to improve base production management. +Excellent. Our Operations group did an excellent job of optimizing our production. They focused on facilities engineering, automation, field route optimization, and lease +38 +Table of Contents +2016 Strategic and Tactical Goals and Objectives +Achievement +operating expense reduction. These efforts were successful, with Cimarex achieving a total production expense reduction of $67.4 million, or 23%, in 2016 compared to 2015 and a $110.3 million, or 32%, reduction compared to 2014. +· Continue to define and manage role and operation of midstream assets. +Good. In 2016, we continued our focus on upgrading the expertise of our midstream group, including engineering and design capabilities, and measuring all midstream investments against full project rate of return. +· Continue focus on staffing and succession planning at all levels. +Very Good. Succession planning is a constant focus for the executive team. In 2016, the executive team made a number of employee transfers into different roles and supervisory positions to aid in career development. We continue to focus on succession planning to be ready for upcoming retirements as our employees along with other oil and gas companies’ employees age while facing the gap of experienced oil and gas industry employees caused by employees leaving the industry and potential employees avoiding the industry during previous downturns. +· Continue emphasis on health, safety and the environment. +Very Good. In 2016, Cimarex continued to emphasize safety and environmental responsibility at every level of the organization. Safety and environmental responsibility have become a central focus of our operations. The Cimarex organization has embraced the philosophy that safe and clean operations are the heart of overall operational excellence. The executive team reinforces these principles and lives by them. This is particularly true with our emphasis on spill reporting and reporting of safety “near misses”. We have encouraged the organization to be forthcoming and transparent in reporting safety “near misses” and to use these incidents as learning tools to avoid occurrences that are more serious. In 2016, this resulted in an improved safety incident rate and a reduction in spill volumes with most being within lined containment. Cimarex has made great strides in inculcating a culture that is based upon responsibility and commitment to one another, to our vendors, to our communities, and to the environment. When it comes to safety and the environment, good is never good enough. +· Implement fugitive methane emission reporting process. +Excellent. Last year, Cimarex committed to report full cycle fugitive methane emissions on our website by year-end 2016. This commitment to fugitive emission disclosure went beyond the reporting currently required under the U.S. Environmental Protection Agency (“EPA”) greenhouse gas emission reporting requirements to include all fugitive emissions from source categories within our operated portion of the value chain. These source categories included processing plants, compression facilities, and gathering systems, many of which are not covered by the EPA greenhouse gas reporting requirements. To ensure accurate reporting, we performed a full and thorough inventory of all equipment at each operated Cimarex facility. This intense effort involved coordination between field, office, and contract employees. As a part of our fugitive methane disclosure and monitoring, we committed to the establishment of a leak detection and repair +39 +Table of Contents +2016 Strategic and Tactical Goals and Objectives +Achievement +(“LDAR”) program using infrared camera technology. By year-end, we had completed our analysis of the Cimarex fugitive methane emissions and posted a full disclosure on our website. We will update our reporting annually and are committed to an ongoing program of monitoring and remediation. +· Keep five year plan continuously updated. +Excellent. In 2016, Cimarex continually updated its long term corporate forecasts, including quickly integrating the effect of commodity price changes and capital program changes on projected overall results. This allows Cimarex to quickly analyze alternatives in its active inventory of future drilling opportunities based on changes in variables such as commodity prices, rig counts and cost structure, as well as to evaluate acquisition opportunities. +· Determine commerciality and disposition of new exploration project. +Very Good. In 2016, we drilled our second well in a new exploration area after decreased cash flow in 2015 led to delaying drilling plans in new exploration areas. We continue to analyze data from these wells. We also have entered into a data sharing arrangement and a joint exploration agreement with another operator in this area. +· Be opportunistic. +Fair. In 2016, we evaluated several assets offered for sale in our core Anadarko and Delaware Basins operating areas. Our discipline of demanding a full cycle return on investment that competes with our current portfolio resulted in our not being successful in these auctions of quality assets. +The Committee’s independent compensation consultant recommended a pool for cash incentive awards for all NEOs of between $3.7 million and $4.5 million, or between 123% and 150% of the NEOs’ year-end 2016 salaries, based on the consultant’s review of the Company’s achievement of the 2016 strategic and tactical goals, the consultant’s analysis of the projected annual incentive awards of the Compensation Peer Group to be generally at target levels or slightly above target level for 2016 performance, the consultant’s evaluation of the Company’s performance of its 2016 strategic and tactical goals compared to the Compensation Peer Group’s percentile rankings, and the consultant’s review of actions by other oil and gas exploration and production companies related to annual incentive awards due to commodity price and stock price trends. Based principally on the achievement of the 2016 strategic and tactical goals and objectives and the improvement in and stabilizing of commodity prices and expected improvement in the Company’s cash flow, the CEO recommended cash incentive awards for the other NEOs of between 150% and 153% of their year-end 2016 salaries. The Committee’s independent consultant concurred that the CEO’s recommendations were reasonable. The Committee, after considering the achievement of the 2016 financial and operational objectives, the improvement in and stabilizing of oil and gas prices and the impact on cash flow, and in consultation with its independent consultant, accepted the CEO’s recommendations, and the Board approved the Committee’s recommendations. +The Committee, with its independent consultant, and without management present, deliberated concerning the CEO’s annual cash incentive award. Based on its analysis of the Company’s 2016 performance described above and the CEO’s leadership of the Company and management of senior executives and other employees to achieve this performance, the Committee recommended and the Board approved a cash incentive award to the CEO of 177% of his base salary. The Committee’s independent consultant concurred with this recommendation, and the total cash incentive awards to all NEOs of $4.7 million was slightly above the recommendation of the compensation consultant of a reasonable pool in the range of $3.7 million to $4.5 million. Following are the CEO and other NEO 2016 annual cash incentive awards: +40 +Table of Contents +Name +Cash Incentive Award +% of Year-End +Base Salary +Thomas E. Jorden, CEO +$ +1,700,000 +177% +G. Mark Burford, CFO +$ +690,000 +150% +Joseph R. Albi, COO +$ +888,000 +150% +Stephen P. Bell, EVP +$ +735,000 +150% +John A. Lambuth, SVP +$ +735,000 +153% +Long-Term Equity Incentive Award Program +Our long-term equity incentive award program balances the short-term annual cash incentive program by focusing executive efforts on the activities and short-term results that lead to long-term shareholder value. Typically, the Committee grants equity awards of restricted stock to NEOs each year. +For grants made in December 2016, the number of shares that may be earned is determined by the relative stock price performance of Cimarex when compared to the stock price performance of companies in the S&P 500 Oil and Gas Exploration & Production Index (Stock Performance Peer Group). See Competitive Positioning in this CD&A for a list of the companies in the 2016 Stock Performance Peer Group. The awards vest on December 1, 2019, based on the Company’s relative TSR compared to the Stock Performance Peer Group for the three years ending December 1, 2019, and are subject to a continuous service requirement. A minimum of 50% of the shares granted and a maximum of 100% of the shares granted may be earned at the end of the three-year performance period. Half of our restricted stock awards vest based on continuous employment and the passage of time, which promotes retention of executives, and the other half of the awards vest based on performance measures tied to relative TSR, which promotes the long-term interests of our shareholders and aligns executives’ interests with shareholders’ interests. While the 2014 Equity Incentive Plan does not set a minimum vesting period, the Committee has set a three-year vesting period for restricted stock awards to NEOs since the Committee began making restricted stock awards in 2006. +Dividends equivalent to those paid on Cimarex common stock are paid on 50% of the shares awarded that are subject to time-based vesting, and dividends applicable to the remainder of the shares awarded are accrued and only paid on the shares earned following calculation of Cimarex’s relative stock price performance compared to companies in the Stock Performance Peer Group at the end of the performance period. All of the shares subject to the award have the same voting rights as outstanding shares of Cimarex common stock. +For restricted stock awards made in December 2016, the total number of shares earned is determined by calculating the percentage difference between the average per share closing price for shares of Cimarex and each company in the Stock Performance Peer Group for the 30 trading days preceding December 1, 2016 and the 30 trading days preceding December 1, 2019. The Committee ranks Cimarex and calculates its relative performance percentile. Companies that are not in the Stock Performance Peer Group at both the beginning and the end of the performance period are not included in the calculation. The following table illustrates shares that would be earned at various relative stock price performance percentiles (assuming 18 companies in the Peer Group). +Cimarex’s Rank Among +Peer Companies +Percent of +Award Vesting +Relative Stock Price +Performance Percentile +1 through 5 +100% +76-100% +6 +94% +71% +7 +89% +65% +8 +83% +59% +9 +78% +53% +10 +72% +47% +11 +67% +41% +12 +61% +35% +13 +56% +29% +14 through 18 +50% +0-24% +On December 8, 2016, the Committee granted long-term equity awards to the NEOs with a total grant date fair value of $24,850,000 based on competitive market data for companies in Cimarex’s Compensation Peer Group. Comparative data was obtained by the Committee’s independent consultant from public filings disclosing 2016 NEO compensation of companies in +41 +Table of Contents +the Compensation Peer Group and the consultant’s knowledge of other companies for which the consultant provides services. See Competitive Positioning in this CD&A for a list of the companies in the Compensation Peer Group. +The Committee’s compensation consultant recommended awards with a value between the 75 th percentile and 90 th percentile when compared to companies in the Compensation Peer Group. The factors considered by the consultant in making its recommendations included the following: +· Cimarex was the second-highest performing company in the Compensation Peer Group when comparing current stock price to the respective historical all time high price and was the top performer when compared to the Stock Performance Peer Group. This is indicative of Cimarex’s historical performance through industry cycles including the prolonged oil price decline beginning in late 2014. +· Cimarex was the second-highest performer in the Compensation Peer Group based on three-year relative TSR performance. +· Due to competitive TSR performance during the industry downturn compared to peers, the Company faces a potential disadvantage in the NEOs’ ability to earn payouts based on relative TSR. +· Increasing tenure of executives in new roles and good performance. +The Committee approved awards above the high-end of the recommended total pool based on Cimarex’s TSR compared to its Compensation Peer Group for the periods indicated, the total direct compensation of our NEOs compared to that of our peer companies, Cimarex’s 2016 financial and operational performance, and the compensation consultant’s recommendation. The Committee’s consultant concurred with the Committee’s final determination. The actual value of the shares upon vesting in December 2019 will be based on Cimarex’s relative three-year stock performance compared to the other companies in the Stock Performance Peer Group as described above and Cimarex’s stock price at that time. +The Committee granted a total of 211,256 restricted shares to the NEOs (including the CEO). The number of shares granted to each NEO was based on their relative individual roles and responsibilities. Of the total number of shares granted to the NEOs (including the CEO), the Committee awarded 42% of the shares to Mr. Jorden, 16% of the total shares to Mr. Albi, 15% to Mr. Lambuth, 14% to Mr. Bell and 13% to Mr. Burford. The following table reflects the awards made by the Committee: +Name +No. of Shares +Subject to Award +Grant Date Value of +Long-Term Equity +Incentive Award (1) +Thomas E. Jorden, CEO +89,263 +$ +10,500,000 +G. Mark Burford, CFO +27,204 +$ +3,200,000 +Joseph R. Albi, COO +34,005 +$ +4,000,000 +Stephen P. Bell, EVP +28,904 +$ +3,400,000 +John A. Lambuth, SVP +31,880 +$ +3,750,000 +(1) Represents an estimate of the fair value of the shares as of the grant date utilizing a Monte Carlo valuation technique as permitted by the guidance provided by FASB ASC Topic 718. The estimated fair value is the aggregate compensation cost to be recognized over the service period based on the results of the Monte Carlo analysis. +2016 Vesting of NEO Equity Awards +On December 12, 2016, the performance period applicable to the December 12, 2013 NEO equity awards ended. Cimarex’s relative stock price performance was in the 92 nd percentile of the Compensation Peer Group at the end of the performance period, resulting in the vesting of 100% of the shares subject to the December 12, 2013 award. +42 +Table of Contents +The following table reflects the shares originally granted to each NEO in 2013 and the number of shares that vested at the end of the three-year performance period: +Name +No. of Shares Granted +No. of Shares Vested +Thomas E. Jorden, CEO +60,000 +60,000 +Joseph R. Albi, COO +40,000 +40,000 +Stephen P. Bell, EVP +35,000 +35,000 +John A. Lambuth, SVP (1) +35,000 +35,000 +G. Mark Burford, CFO (1) (2) +0 +0 +(1) During 2016, restricted share awards granted to Mr. Lambuth and Mr. Burford in 2011, prior to their becoming NEOs, vested. The restricted shares that vested in 2016 are included below in “Compensation Tables—2016 Option Exercises and Restricted Stock Vested.” +(2) Mr. Burford did not receive a performance share award in 2013 because he was not CFO at that time. +The vesting of these awards and the value at vesting is also reported in 2016 Option Exercises and Restricted Stock Vesting table in this proxy statement. +Elimination of Tax Gross Up Payments +In March 2013, the Board amended Cimarex’s Change in Control Severance Plan to eliminate any participant’s right (including the right of any NEO) to a tax gross-up payment. +Cimarex’s Change in Control Severance Plan is the only plan that provided for a tax gross-up payment to a participant following a change in control if any payments received by the participant as a result of the change in control become subject to the excise tax imposed by Section 4999 of the Internal Revenue Code. See Potential Payments Upon Change in Control or Termination for a more detailed description of this Plan. +43 +Table of Contents +Alignment of CEO Direct Compensation to Total Shareholder Return (“TSR”) +CEO’s Total Direct Compensation Compared to Cimarex TSR +The following graph illustrates our CEO’s direct compensation compared to our TSR for the years 2012 through 2016. Indexed TSR represents the cumulative total return of Cimarex stock for a five-year period based on a $100 investment at the start of the first year and reinvestment of all dividends. The table shows the value of the investment at the end of each year. +Relative CEO Total Compensation Compared to Relative TSR +The following graph depicts alignment of relative CEO compensation compared to relative TSR for the years ended December 31, 2012 through December 31, 2015. The information only is provided through 2015 because 2016 CEO peer company compensation information is not publicly available at this time. The companies used for the relative comparison are the companies in our Compensation Peer Group. We also included, as a point of reference, Cimarex’s CEO compensation for the years ended December 31, 2014 through December 31, 2016. +44 +Table of Contents +Multiple of Median CEO Compensation +The graph below reflects that Cimarex’s 2015 CEO total direct compensation represents 106% of the median CEO total direct compensation of companies in our Compensation Peer Group. The information provided is only for 2015 peer group CEO total direct compensation because 2016 CEO peer group compensation information is not publicly available at this time. We also included, as a point of reference, Cimarex’s 2016 CEO total direct compensation compared to the median CEO total direct compensation of the Compensation Peer Group for 2015. +Early 2017 Compensation Decisions +2017 Annual Cash Incentive Award Goals +In February 2017, the Committee approved the following strategic goals and objectives that will apply to 2017 annual cash incentive awards that will be measured and paid in 2018: +2017 strategic goals : +o Achieve good return on invested capital. +o Manage the balance sheet as is prudently possible given commodity price environment. +¡ Increase debt adjusted production per share. +¡ Increase debt adjusted reserves per share. +o Continue focus on staffing and succession planning at all levels. +o Continue emphasis on health, safety and the environment and reduction of incidents. +2017 tactical goals: +o Meet or exceed quarterly and annual production guidance targets. +o Continue understanding and mitigation of risk. +o Develop long-term water sourcing and disposal solutions for development projects. +o Continue to develop and advance field automation. +o Improve corporate environmental disclosure. +45 +Table of Contents +The strategic and tactical measures and objectives have been clearly communicated to the NEOs. At year end, the CEO will deliver a report of results to the Committee with respect to each goal and provide the CEO’s recommendation and the basis for the CEO’s recommendations for individual awards. The Committee and its independent compensation consultant will review the CEO’s recommendations and accept or modify those recommendations. The non-management members of the Board will consider the recommendations of the Committee. Each NEO, other than the CEO, has a threshold award of 0% of year-end base salary (no minimum award), a target award equal to 100% of year-end base salary, and a maximum award of 200% of year-end base salary. The CEO has a threshold award of 0% of year-end base salary, a target award equal to 125% of year-end base salary, and a maximum award of 250% of year-end base salary. +SECTION 3 +Role of Compensation Consultant and Management in Compensation Decisions +Compensation Consultant +The Committee has engaged the firm of Longnecker & Associates (“Longnecker”) as its independent compensation consultant to fulfill the following responsibilities: +· Advise the Committee on management proposals, as requested; +· Undertake special projects at the request of the Committee; +· Participate in Committee meetings; +· Make recommendations concerning the Compensation Peer Group; +· Review the selected Peer Group and survey data for competitive comparisons; and +· Provide market data and recommendations on NEO compensation. +The Committee has considered the independence factors adopted by the NYSE and has determined that its consultant, Longnecker, is independent within the meaning of the NYSE listing standards. +In 2016, as part of its ongoing services to the Committee, one or more representatives of Longnecker attended or participated by teleconference at six of the meetings. Longnecker provided the following services in 2016: +· Reviewed and provided input on the CD&A in the 2016 proxy statement; +· Attended the February 22, 2016 Compensation and Governance Committee meeting and consulted with the Committee on annual cash incentive awards; +· Attended the May 12, 2016 Compensation and Governance Committee meeting and consulted with the Committee on executive base salary levels; +· Made recommendations concerning the Compensation Peer Group; +· Conducted a market analysis of Board compensation; and +· Provided an executive compensation analysis and a recommended range for long-term equity grants and participated in the December 8, 2016 Compensation and Governance Committee meeting and consulted with the Committee on performance share awards. +The total amount of fees paid to Longnecker for 2016 services to the Committee was $127,500. In addition, the Committee reimburses Longnecker for reasonable travel and business expenses. +Management +Our CEO and President is the principal management resource for compensation recommendations to the Committee with respect to the other NEOs. The CEO (i) provides an annual assessment of Cimarex’s overall financial and operational performance, and (ii) subjectively evaluates individual NEO performance and recommends individual base salary adjustments, annual cash incentive awards, and long-term equity awards. His subjective evaluations generally include factors such as scope of responsibility, contribution to Company performance, technical competence, managerial skills and advancement potential. The Committee considers the CEO’s recommendations in making decisions regarding executive compensation. The Committee exercises its discretion to accept, reject or modify these compensation recommendations. +46 +Table of Contents +Our Vice President—Human Resources, Government Relations, and External Affairs acts as an informational resource to Longnecker and the Committee and compiles survey and other compensation data for their review. The Committee, in consultation with Longnecker, reviews this information when making executive compensation and program design decisions. +Other Compensation Arrangements +Post-Employment and Employment Arrangements +All employees, including the NEOs, are covered by the Cimarex Change in Control Severance Plan. The Plan provides for a “double trigger” so that payments are made only if (a) there is a change in control (as defined in the Plan) and (b) an employee is terminated for any reason other than “cause” (as defined in the Plan) within two years following a change in control. In the event that both of the above contingencies are satisfied, the employee is entitled to (i) cash severance payments of two times annual salary and average cash incentive award, (ii) a pro-rata portion of annual cash incentive bonus for the current year, and (iii) continued medical, dental, disability and life insurance benefits for two years. See Potential Payments Upon Change in Control or Termination for a more detailed description of these benefits. In addition, the 2014 Equity Incentive Plan and the terms of employee equity award agreements provide for acceleration of vesting of outstanding equity awards upon the occurrence of a change in control. +Cimarex assumed the change in control provisions from the now-expired employment agreements between each of Messrs. Albi, Bell, and Jorden and a predecessor company. The assumed portion of each agreement provides that if the executive is terminated without cause within two years following a change in control event (as defined in the agreement), the executive is entitled to a lump-sum payment equal to two times the executive’s base salary at the time of the change in control. Benefits payable under these agreements are forfeited if the executive receives benefits under any other change in control plan, including Cimarex’s Change in Control Severance Plan. As a practical matter, the change in control benefits assumed under the employment agreements only benefit these executives if the Change in Control Severance Plan described above has been terminated. The Change in Control Severance Plan provides for greater benefits payable upon the occurrence of a change in control event than those payable under the assumed agreements. +Retirement Benefits +Employees, including the NEOs, are eligible to participate in the Cimarex 401(k) defined contribution retirement plan (“401(k) Plan”). Cimarex matches dollar-for-dollar employee contributions to the 401(k) Plan up to 7% of the employee’s cash compensation, subject to limits imposed by the Internal Revenue Code. The Board is authorized to make profit-sharing contributions under the 401(k) Plan. In February 2017, the Board determined that no profit-sharing contribution would be made due to the Company’s loss in 2016. +In addition, eligible participants, including the NEOs, may participate in the Supplemental Savings Plan, which is a non-qualified deferred compensation plan that permits participants to make contributions (and to receive matching contributions) in excess of the Internal Revenue Code limitations for 401(k) plans. See Compensation Tables, 2016 Nonqualified Deferred Compensation for information about contributions to the Supplemental Savings Plan. The Committee administers this plan and designates who may participate. Benefits are paid upon the later to occur of termination of employment or the time elected by the participant. In the event of a change in control, each participant receives a lump sum cash payment of the amount allocated to his or her account. +Perquisites +We offer a limited number of perquisites (personal benefits) to our NEOs that are not offered to other employees, including financial and estate planning and annual medical examinations. Our corporate aircraft is generally not available for personal use by any employee. With the authorization of our CEO, however, the corporate aircraft may be used by an employee or a member of his/her family for medical purposes. The incremental cost for non-business use of our corporate aircraft, if any, is disclosed in the Summary Compensation Table . We use the Standard Industry Fare Level tables published by the Internal Revenue Service to determine the amount of compensation income that is imputed to the employee for tax purposes for personal use of corporate aircraft. There was no non-business use of our corporate aircraft during 2016. +47 +Table of Contents +Other Compensation Policies +Total Pay Considerations +The Committee considers Total Direct Compensation at the time it makes a decision on any element of executive compensation. The Committee also reviews the relationship of the CEO’s total compensation to the total compensation of each of the other NEOs. +Stock Ownership and Holding Requirements +Our Corporate Governance Guidelines require that each independent Director own Cimarex stock in an amount equal to three times his or her annual cash retainer. In addition, pursuant to a revision made in December 2016, the CEO is expected to own Cimarex shares in an amount equal to six times his annual base salary, and each executive officer who reports to the CEO is expected to own stock in an amount equal to three times his or her annual base salary. A newly elected Director or a newly appointed executive officer has three years from the date of his or her initial election or appointment to comply with the Guidelines. Until the stock ownership guidelines are met, an executive officer or director may not sell any Cimarex stock acquired through equity grants except to pay income taxes upon the vesting of awards or to pay the exercise price and related income taxes upon the exercise of stock options. Restricted stock, restricted stock units, deferred compensation units and performance awards are counted in calculating ownership. Shares subject to options are not counted. Each of the independent Directors, the CEO and the other NEOs comply with these guidelines. +Clawback Policy +We have adopted a clawback policy providing that, in the event of an accounting restatement due to material noncompliance with financial reporting requirements under the U.S. federal securities laws, the Committee has the right to use reasonable efforts to recover from any of our current or former executive officers incentive-based compensation related to the restatement and received during the three-year period preceding any such accounting restatement. This policy applies to incentive-based compensation granted on or after June 1, 2012. This clawback policy will be interpreted in the best judgment of the Committee in a manner consistent with any applicable rules or regulations adopted by the SEC or the NYSE as contemplated by the Dodd-Frank Act. +Non-Hedging and Non-Pledging Policies +Our insider trading policy prohibits Directors, officers and designated employees from engaging in hedging or monetization transactions, and other employees are strongly discouraged from engaging in such transactions. Any other employee wishing to enter into such an arrangement must first submit the proposed transaction for approval by the compliance officer designated in the policy. The policy also prohibits Directors, officers and employees from holding Cimarex stock in a margin account or pledging Cimarex stock as collateral for a loan. +Tax Law Considerations +The Committee considers the impact of applicable tax laws with respect to executive compensation. Section 162(m) of the Internal Revenue Code of 1986, as amended, (“Section 162(m)”) limits the amount of compensation that Cimarex may deduct on its federal income tax return for compensation paid to certain executive officers to no more than $1 million per year. There are exceptions to the $1 million limitation for performance-based compensation meeting certain requirements. The performance-based portion of our restricted stock awards are the only element of executive compensation designed to qualify for the performance-based exception to the $1 million deduction limit, provided additional requirements are met. The Committee attempts to preserve the deductibility of compensation paid to executive officers, but does not limit executive compensation to amounts deductible under Section 162(m). +48 +Table of Contents +COMPENSATION AND GOVERNANCE COMMITTEE REPORT +The Compensation and Governance Committee has reviewed and discussed with management the preceding Compensation Discussion and Analysis section of Cimarex’s 2017 proxy statement. Based on our review and discussions, we have recommended to the Board of Directors that the Compensation Discussion and Analysis be included in Cimarex’s 2017 proxy statement. +THE COMPENSATION AND GOVERNANCE COMMITTEE +L. Paul Teague, Chairman +Hans Helmerich +David A. Hentschel +Floyd R. Price +49 +Table of Contents +COMPENSATION TABLES +S UMMARY C OMPENSATION T ABLE +The following table describes 2014-2016 compensation of our CEO, CFO and the three other most highly compensated executive officers. +Non-Equity +Name and +Stock +Option +Incentive Plan +All Other +Principal Position +Year +Salary +Bonus +Awards (1) +Awards +Comp. (2) +Comp. (3) +Total +Thomas E. Jorden +2016 +$ +921,468 +$ +— +$ +10,500,000 +$ +— +$ +1,700,000 +$ +59,451 +$ +13,180,919 +Chief Executive Officer, President, and Chairman of the Board (CEO) (Principal Executive Officer) +2015 +$ +870,750 +$ +— +$ +6,424,530 +$ +— +$ +435,375 +$ +59,481 +$ +7,790,136 +2014 +$ +845,048 +$ +— +$ +7,143,522 +$ +— +$ +740,138 +$ +56,776 +$ +8,785,484 +G. Mark Burford (4) +2016 +$ +429,779 +$ +— +$ +3,200,000 +$ +— +$ +690,000 +$ +47,679 +$ +4,367,458 +Vice President and Chief Financial Officer (CFO) (Principal Financial Officer) +2015 +$ +342,279 +$ +— +$ +2,250,000 +$ +— +$ +156,000 +$ +47,340 +$ +2,795,619 +Joseph R. Albi +2016 +$ +578,876 +$ +— +$ +4,000,000 +$ +— +$ +888,000 +$ +58,072 +$ +5,524,948 +Executive Vice President—Operations, Chief Operating Officer +2015 +$ +561,600 +$ +— +$ +3,200,000 +$ +— +$ +225,000 +$ +58,053 +$ +4,044,653 +2014 +$ +552,462 +$ +— +$ +3,473,436 +$ +— +$ +477,360 +$ +54,187 +$ +4,557,445 +Stephen P. Bell +2016 +$ +480,340 +$ +— +$ +3,400,000 +$ +— +$ +735,000 +$ +74,135 +$ +4,689,475 +Executive Vice President—Business Development +2015 +$ +467,625 +$ +— +$ +2,850,000 +$ +— +$ +163,000 +$ +75,195 +$ +3,555,820 +2014 +$ +453,822 +$ +— +$ +2,952,396 +$ +— +$ +397,481 +$ +45,358 +$ +3,849,057 +John A. Lambuth +2016 +$ +471,365 +$ +— +$ +3,750,000 +$ +— +$ +735,000 +$ +52,753 +$ +5,009,118 +Senior Vice President—Exploration +2015 +$ +427,168 +$ +— +$ +3,050,000 +$ +— +$ +156,000 +$ +51,803 +$ +3,684,971 +2014 +$ +398,149 +$ +— +$ +3,299,756 +$ +— +$ +352,856 +$ +643,695 +(5) +$ +4,694,456 +50 +Table of Contents +(1) Represents the grant date fair value of the awards, which is an estimate of aggregate compensation cost to be recognized over the service period based on the probable outcome of the performance conditions and is an estimate of aggregate compensation cost to be recognized over the service period determined as of the grant date under FASB ASC Topic 718. The awards are valued as market-based awards using the Monte Carlo simulation method assuming a target number of shares that would be issued because this is deemed to be the “probable” payout percentage at the time of grant consistent with the estimate of aggregate compensation cost to be recognized over the service period. Actual payouts with respect to the awards can range from 50 percent to 100 percent of the award based on the relative ranking of the company’s TSR in comparison to the peer group over the three-year performance period. If the company’s performance results in 100% of the award being paid, the grant date fair value of the maximum number of shares for each of the NEOs pursuant to the awards granted in 2016 based on the closing price of the company’s common stock on the December 8, 2016 date of grant would have been as follows: Mr. Jorden $12,734,251; Mr. Burford $3,880,915; Mr. Albi $4,851,143; Mr. Bell $4,123,472; and Mr. Lambuth $4,547,947. +(2) Amount reported for the year earned. +(3) The following describes the components of other items of compensation, including any perquisite in excess of $10,000: +Executive Officer +Unused +Vacation +Company +Contributions +to Retirement +Plans +Insurance +Premiums +Total +Other +Compensation +Thomas E. Jorden, CEO +2016 +$ +— +$ +36,000 +$ +23,451 +$ +59,451 +2015 +$ +— +$ +36,000 +$ +23,481 +$ +59,481 +2014 +$ +— +$ +40,200 +$ +3,495 +$ +56,776 +G. Mark Burford, CFO (4) +2016 +$ +3,437 +$ +36,000 +$ +8,242 +$ +47,679 +2015 +$ +2,411 +$ +36,000 +$ +8,929 +$ +47,340 +Joseph R. Albi, COO +2016 +$ +— +$ +36,000 +$ +22,072 +$ +58,072 +2015 +$ +— +$ +36,000 +$ +22,053 +$ +58,053 +2014 +$ +— +$ +40,200 +$ +3,495 +$ +54,187 +Stephen P. Bell, EVP +2016 +$ +16,749 +$ +36,000 +$ +21,386 +$ +74,135 +2015 +$ +17,986 +$ +36,000 +$ +21,209 +$ +75,195 +2014 +$ +1,663 +$ +40,200 +$ +3,495 +$ +45,358 +John A. Lambuth, SVP +2016 +$ +— +$ +36,000 +$ +16,753 +$ +52,753 +2015 +$ +— +$ +36,000 +$ +15,803 +$ +51,803 +2014 +$ +— +$ +40,200 +$ +3,495 +$ +643,695 +(5) +(4) This is the second year Mr. Burford is included as CFO in the Summary Compensation Table. Therefore, information is reported only for the 2015 and 2016 fiscal years. +(5) Includes a payment of $600,000 to Mr. Lambuth on June 1, 2014 pursuant to a retention agreement entered into with Mr. Lambuth in 2010, prior to his becoming a NEO, which was payable if Mr. Lambuth remained employed through June 1, 2014. +51 +Table of Contents +2016 G RANTS OF P LAN -B ASED A WARDS +2016 Non-Equity Incentive Plan +The following table describes the target and maximum amounts of annual cash incentive awards for the NEOs and the actual award paid in March 2017 for 2016 services. The non-equity incentive plan provides for no minimum (threshold) award. The amounts listed in the Target column represent 100% of the year-end base salary. The amounts listed in the Maximum column represent 200% of the year-end base salary. See the description of our annual cash incentive award plan in Section 1, Compensation Discussion and Analysis . +Estimated Future Payouts Under +Non-Equity Incentive Plan +Actual +Award +Paid in +Name +Threshold +Target +Maximum +March 2017 +Thomas E. Jorden, CEO +$ +0 +$ +960,000 +$ +1,920,000 +$ +1,700,000 +G. Mark Burford, CFO +$ +0 +$ +460,000 +$ +920,000 +$ +690,000 +Joseph R. Albi, COO +$ +0 +$ +592,000 +$ +1,184,000 +$ +888,000 +Stephen P. Bell, EVP +$ +0 +$ +490,000 +$ +980,000 +$ +735,000 +John A. Lambuth, SVP +$ +0 +$ +480,000 +$ +960,000 +$ +735,000 +2016 Equity Incentive Plan Awards +The following table provides information regarding the awards of restricted stock made to the NEOs in 2016. No option awards were made in 2016. See Section 1, Compensation Discussion and Analysis , Long Term Equity Incentive Award Program , for more information about these awards. +Award +Comp. +Comm. +Estimated Future Payouts Under Equity +Incentive Plan Awards +Grant Date +Fair Value of +Stock & +Type of +Grant +Approval +Option +Name +Award (1) +Date +Date +Threshold (2) +Target (3) +Maximum +Awards (4) +Thomas E. Jorden, CEO +RSA +12/8/16 +12/8/16 +44,631 +None +89,263 +$ 10,500,000 +G. Mark Burford, CFO +RSA +12/8/16 +12/8/16 +13,602 +None +27,204 +$ 3,200,000 +Joseph R. Albi, COO +RSA +12/8/16 +12/8/16 +17,002 +None +34,005 +$ 4,000,000 +Stephen P. Bell, EVP +RSA +12/8/16 +12/8/16 +14,452 +None +28,904 +$ 3,400,000 +John A. Lambuth, SVP +RSA +12/8/16 +12/8/16 +15,940 +None +31,880 +$ 3,750,000 +(1) RSA = Restricted stock (service-based and performance-based shares). +52 +Table of Contents +(2) One-half of the total potential award will vest on completion of continuous service on the third anniversary of the grant date of the award. +(3) Terms of the awards do not specify a targeted number of shares. The number of shares that are earned depends on Cimarex’s stock price performance relative to peers and is not computed until the third anniversary of the grant date of the award. See Long-Term Equity Incentive Award Program for the method of computing the number of shares that vest. Cash dividends will be paid on the threshold number of shares during the vesting period and accrued during the vesting period on the remaining number of shares that are subject to measurement of relative TSR upon satisfaction of the continuous service requirement. +(4) Represents an estimate of the fair value of the shares as of the grant date utilizing a Monte Carlo valuation technique as permitted by the guidance provided by FASB ASC Topic 718. The estimated fair value is the aggregate compensation cost to be recognized over the service period based on the results of the Monte Carlo analysis. The awards are valued as market-based awards assuming a target number of shares would be issued because this is deemed to be the “probable” payout percentage at the time of grant consistent with the estimate of aggregate compensation cost to be recognized over the service period. +O UTSTANDING E QUITY A WARDS AT D ECEMBER 31, 2016 +S TOCK A WARDS +Equity Incentive Plan Awards That Have Not Vested +Name +No. of Shares +Market Value of +Unearned Shares (1) +Thomas E. Jorden, CEO +248,829 (2) +$ +33,815,861 +G. Mark Burford, CFO +65,025 (3) +$ +8,836,898 +Joseph R. Albi, COO +112,466 (4) +$ +15,284,129 +Stephen P. Bell, EVP +97,087 (5) +$ +13,194,123 +John A. Lambuth, SVP +110,532 (6) +$ +15,021,299 +(1) The amount in this column reflects the closing market price of the stock of $135.90 on December 30, 2016 (the last trading day of 2016) multiplied by the number of shares reported in the previous column. +(2) A minimum of 42,919 and a maximum of 85,839 shares could vest on December 10, 2017, between a minimum of 36,863 and a maximum of 73,727 shares could vest on December 9, 2018, and between a minimum of 44,631 and a maximum of 89,263 shares could vest on December 1, 2019. +(3) 4,000 shares will vest on July 13, 2017, 4,500 shares will vest on July 15, 2018, 3,500 shares will vest on July 31, 2019, and between a minimum of 12,910 and a maximum of 25,821 shares could vest on December 9, 2018, and between a minimum of 13,602 and a maximum of 27,204 shares could vest on December 1, 2019. +(4) Between a minimum of 20,869 and a maximum of 41,738 shares could vest on December 10, 2017, between a minimum of 18,361 and a maximum of 36,723 shares could vest on December 9, 2018, and between a minimum of 17,002 and a maximum of 34,005 shares could vest on December 1, 2019. +(5) Between a minimum of 17,738 and a maximum of 35,477 shares could vest on December 10, 2017, between a minimum of 16,353 and a maximum of 32,706 shares could vest on December 9, 2018, and between a minimum of 14,452 and a maximum of 28,904 shares could vest on December 1, 2019. +(6) 4,000 shares will vest on July 13, 2017, between a minimum of 19,825 and a maximum of 39,651 shares could vest on December 10, 2017, between a minimum of 17,500 and a maximum of 35,001 shares could vest on December 9, 2018, and between a minimum of 15,940 and a maximum of 31,880 shares could vest on December 1, 2019. +53 +Table of Contents +2016 O PTION E XERCISES A ND R ESTRICTED S TOCK V ESTED +2016 OPTION EXERCISES +2016 STOCK VESTING +Name +Number of Shares +Acquired on Exercise +(#) +Value Realized on +Exercise +($) +Number of Shares +Acquired on Vesting +(#) +Value Realized on +Vesting +($) +Thomas E. Jorden, CEO +— +$ +— +60,000 +$ +8,618,100 +G. Mark Burford, CFO +— +$ +— +3,500 +$ +416,159 +Joseph R. Albi, COO +— +$ +— +40,000 +$ +5,745,400 +Stephen P. Bell, EVP +— +$ +— +35,000 +$ +5,027,225 +John A. Lambuth, SVP +— +$ +— +39,000 +$ +5,502,835 +2016 N ONQUALIFIED D EFERRED C OMPENSATION +The following table provides information on the Supplemental Savings Plan (the “SSP”) contributions and earnings for our NEOs in each of the last three fiscal years. Under the terms of the SSP, a participant may make an elective contribution to the SSP of an amount that exceeds the maximum amount permitted to be contributed to his account in the Cimarex 401(k) Plan (an “excess contribution”) provided that the excess contribution does not exceed the dollar limitation on elective deferrals under the Internal Revenue Code section 402(g) in effect on January 1 st of the calendar year of deferral (2016 limitation was $18,000). Cimarex will match 100% of the excess contributions up to 7% of a participant’s eligible compensation. A participant also may elect to have up to 50% of his or her compensation and up to 100% of his or her bonus withheld from his or her compensation and allocated to his SSP account. Cimarex does not match these contributions. +Executive +Contributions +in Last FY (1) +Registrant +Contributions +in Last FY (2) +Aggregate +Earnings +in Last FY +Aggregate +Withdrawals/ +Distributions +Aggregate +Balance +at Last FYE +Name +($) +($) +($) +($) +($) +Thomas E. Jorden, CEO +2016 +$ +18,000 +$ +18,000 +$ +6,017 +$ +— +$ +692,912 +(3) +2015 +$ +18,000 +$ +18,000 +$ +699 +$ +— +$ +651,318 +2014 +$ +17,500 +$ +17,500 +$ +327 +$ +— +$ +615,042 +G. Mark Burford, CFO +2016 +$ +18,000 +$ +18,000 +$ +20,802 +$ +— +$ +239,258 +(3) +2015 +$ +18,000 +$ +18,000 +$ +<2,684 +> +$ +— +$ +182,879 +Joseph R. Albi, COO +2016 +$ +18,000 +$ +18,000 +$ +60,995 +$ +— +$ +613,414 +(3) +2015 +$ +18,000 +$ +18,000 +$ +<10,588 +> +$ +— +$ +516,842 +2014 +$ +17,500 +$ +17,500 +$ +30,552 +$ +— +$ +491,853 +Stephen P. Bell, EVP +2016 +$ +18,000 +$ +18,000 +$ +2,882 +$ +— +$ +686,161 +(3) +2015 +$ +18,000 +$ +18,000 +$ +<691 +> +$ +— +$ +647,702 +2014 +$ +17,500 +$ +17,500 +$ +321 +$ +— +$ +611,434 +54 +Table of Contents +John A. Lambuth, SVP +2016 +$ +50,996 +$ +18,000 +$ +23,193 +$ +— +$ +532,216 +(3) +2015 +$ +18,000 +$ +18,000 +$ +55 +$ +— +$ +440,450 +2014 +$ +17,500 +$ +17,500 +$ +18,916 +$ +— +$ +404,818 +(1) The amounts included in this column also are included in the Salary column in the Summary Compensation Table . +(2) The amounts reported in this column also are included in the All Other Compensation column and footnote 3 thereto in the Summary Compensation Table . +(3) The following table sets forth amounts included in the aggregate balance at December 31, 2016 that were reported as compensation to the NEO in the Summary Compensation Table for previous years. +Named Executive Officer +Amount of Previously +Reported Compensation +Thomas E. Jorden, CEO +$ +584,041 +G. Mark Burford, CFO +$ +154,612 +Joseph R. Albi, COO +$ +393,571 +Stephen P. Bell, EVP +$ +472,925 +John A. Lambuth, SVP +$ +345,435 +POTENTIAL PAYMENTS UPON CHANGE IN CONTROL OR TERMINATION +We do not consider post-termination benefits as a material element of executive compensation because NEO post-termination benefits are the same benefits available to all full-time employees. Post-termination benefits are not included in the Compensation and Governance Committee’s analysis of total compensation. +We are obligated to make certain payments to employees, including our NEOs, or to accelerate the vesting of their equity awards pursuant to the following plans and agreements: +· Change in Control Severance Plan that covers all full-time employees, including the NEOs; +· 2002 Stock Incentive Plan, 2011 Equity Incentive Plan and 2014 Equity Incentive Plan that govern all equity awards made to Directors and employees, including the NEOs; +· Change in control provisions for the benefit of Messrs. Albi, Bell, and Jorden, as assumed by Cimarex; and +· Supplemental Savings Plan. +Our change in control arrangements keep our senior executives focused on pursuing all corporate transaction activity that is in the best interests of shareholders regardless of whether those transactions may result in their own job losses. Uncertainty created by a corporate transaction can create retention risk for a company. In addition, change in control protection is often needed to retain and attract, when appropriate, the best talent because many of the companies with whom we compete for talent provide change in control protection. +We do not have a formal program to pay severance benefits nor do our equity award agreements provide for acceleration of equity awards upon the retirement of the NEOs. +Change in Control +We are obligated under certain agreements to pay benefits upon a “change in control” event. Cimarex’s definition of “ change in control ” as used in its 2002 Stock Incentive Plan, its 2011 Equity Incentive Plan and its 2014 Equity Incentive Plan, its Change in Control Severance Plan and the change in control provisions that survived certain expired employment agreements with each NEO are the same. In summary, a change in control event means any of the following: +55 +Table of Contents +· Acquisition of 30% or more of the shares of our outstanding common stock or the combined voting power of voting securities of Cimarex by an individual or group; +· Members of our Board of Directors, or Directors nominated by those Directors, cease to constitute a majority of the Directors during any period of twelve months; +· A reorganization, share exchange or merger unless (i) the shareholders prior to the reorganization or merger continue to own more than 40% of the outstanding common stock and combined voting power of the resulting corporation following the reorganization or merger; and (ii) at least a majority of the members of the Board of the corporation resulting from the merger or reorganization were members of the Board at the time of executing the agreement to reorganize or merge; or +· The complete liquidation or dissolution of Cimarex or the sale of all or substantially all of its assets. +The following is a summary of those agreements that provide for payment to the NEOs in the event of a change in control event coupled with termination of employment without cause: +Change in Control – Termination Without Cause +Our Change in Control Plan provides for the payment of severance benefits to all active employees in the event of termination following a change in control. In the event of a change in control, if an employee is terminated for any reason other than “cause” (as defined in the Plan) within two years following a change in control, that employee would be entitled to: +· Cash severance payments of up to two years’ salary and cash incentive award; +· A pro rata portion of the annual cash incentive bonus award otherwise payable for the year of termination; and +· Continued medical, dental, disability and life insurance benefits for two years. +We assumed from a predecessor company the change in control provisions from the now-expired employment agreements of each of Messrs. Albi, Bell, and Jorden with such company. Each agreement provides that if the executive is terminated without cause within two years following a change in control event (as defined in the agreement), the executive is entitled to a lump-sum payment equal to two times the executive’s base salary at the time of the change in control. Benefits payable under these agreements are forfeited if the executive receives benefits under any other change in control plan, including the Cimarex Change in Control Severance Plan. As a practical matter, the change in control benefits assumed under the employment agreements only benefit these executives if the Change in Control Severance Plan described above has been terminated. The Change in Control Severance Plan provides for greater benefits payable upon the occurrence of a change in control event than those payable under the assumed agreements. +Change in Control – No Termination +Our 2002 Stock Incentive Plan, our 2011 Equity Incentive Plan, and our 2014 Equity Incentive Plan provide for acceleration of vesting of equity awards in the event of a change in control. +56 +Table of Contents +Termination of Employment +Death or Disability +The award agreements for grants of equity under the 2002 Stock Incentive Plan, and the provisions of the 2011 Equity Incentive Plan and 2014 Equity Incentive Plan, provide for acceleration of vesting of awards in the event of death or disability. Benefits under the Supplemental Savings Plan also are paid upon death or disability. +Termination Without Cause +Benefits under the Supplemental Savings Plan are payable to each NEO upon termination of employment. +Estimated Benefits upon Various Termination Scenarios +Payments upon a change in control or termination of employment include various elements of compensation. The elements of compensation that may be included in a change in control or severance payment are: +(A) +(B) +(C) +(D) +(E) +ANNUAL AVERAGE +CASH +COMPENSATION (1) +CASH INCENTIVE (2) +LONG TERM AWARD +PAYOUT (3) +SUPPLEMENTAL +SAVINGS (4) +OTHER +BENEFITS (5) +Thomas E. Jorden, CEO +$ +3,927,593 +$ +1,700,000 +$ +33,815,861 +$ +702,207 +$ +104,365 +G. Mark Burford, CFO +$ +1,618,058 +$ +690,000 +$ +8,836,898 +$ +251,794 +$ +76,721 +Joseph R. Albi, COO +$ +2,253,476 +$ +888,000 +$ +15,284,129 +$ +635,227 +$ +84,613 +Stephen P. Bell, EVP +$ +1,845,965 +$ +735,000 +$ +13,194,123 +$ +689,297 +$ +61,991 +John A. Lambuth, SVP +$ +1,789,533 +$ +735,000 +$ +15,021,299 +$ +551,518 +$ +92,660 +(1) Amount represents two times the annual average compensation (salary and cash incentive bonus) paid to the executive for 2015 and 2016, as provided in the Change in Control Severance Plan. The salary amounts include deferred compensation amounts reported in the Salary column of the Summary Compensation Table (see footnote (3) to the 2016 Nonqualified Deferred Compensation table above). +(2) Amount represents the average incentive bonus as provided in the Change in Control Severance Plan. This is the actual approved bonus for 2016. +(3) Amount represents the value of accelerated vesting of restricted stock based upon the closing price of Cimarex’s common stock as of December 30, 2016, the last trading day of 2016, of $135.90 per share. Includes amounts previously reported in the Stock Awards column of the Summary Compensation Table. +(4) Amount represents estimated payments under the Supplemental Savings Plan. Includes deferred compensation amounts reported in the Salary column of the Summary Compensation Table (see footnote (3) to the 2016 Nonqualified Deferred Compensation table above). +(5) Amount represents the estimated value of continued medical, dental, disability and life insurance benefits for two years as provided in the Change in Control Severance Plan. +The following table provides the estimated compensation and present value of benefits potentially payable to each NEO in the event of a change in control or termination under various circumstances. The amounts shown assume that the termination or change in control occurred on December 31, 2016. The actual amounts to be paid only can be determined at the time of the executive’s actual separation from Cimarex or the occurrence of a change in control. Actual payments may be more or less than the amounts described below. In addition, the company may enter into new arrangements or modify these arrangements, from time to time. +57 +Table of Contents +The following describes potential payments to the NEOs in the event of a change in control or termination under various scenarios. +NAME +TERMINATION +WITHOUT CAUSE +(D) (1) +TERMINATION AS A +RESULT OF +DEATH OR +DISABILITY +(C+D) (1) +CHANGE IN +CONTROL +(No Termination) +(C) (1) +TERMINATION +ON CHANGE +IN CONTROL +(A+B+C+D+E) (1) +Thomas E. Jorden, CEO +$ +702,207 +$ +34,518,068 +$ +33,815,861 +$ +40,250,026 +G. Mark Burford, CFO +$ +251,794 +$ +9,088,692 +$ +8,836,898 +$ +11,473,471 +Joseph R. Albi, COO +$ +635,227 +$ +15,919,356 +$ +15,284,129 +$ +19,145,445 +Stephen P. Bell, EVP +$ +689,297 +$ +13,883,420 +$ +13,194,123 +$ +16,526,376 +John A. Lambuth, SVP +$ +551,518 +$ +15,572,817 +$ +15,021,299 +$ +18,190,010 +(1) The alphabetical code refers to the elements of compensation that may be included in a change in control or severance payment as described at the beginning of this section, Estimated Benefits upon Various Termination Scenarios . +DIRECTOR AND OFFICER INDEMNIFICATION AGREEMENTS +We have entered into an indemnification agreement with our Directors and certain officers. These agreements require us, among other things, to indemnify such persons against certain liabilities that may arise by reason of their status or service as Directors or officers, to advance their expenses incurred as a result of a proceeding for which they may be indemnified, and to cover them under any Directors’ and officers’ liability insurance policy that we choose, in our discretion, to maintain. These indemnification agreements are intended to provide indemnification rights to the fullest extent permitted under applicable Delaware law and will be in addition to any other rights that the indemnitee may have under our Restated Certificate of Incorporation, Bylaws, and applicable law. +ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION (ITEM 2) +At the 2016 Annual Meeting of Shareholders, 98% of the votes cast were in favor of the advisory vote to approve executive compensation. In addition to the advisory vote, as part of our regular shareholder engagement, we consider and discuss with shareholders a number of matters throughout the year, including executive compensation and governance. The Compensation and Governance Committee carefully considers any feedback and routinely reviews executive compensation practices and governance. +The Compensation and Governance Committee considered the results of the advisory vote and the discussions with shareholders to convey our shareholders’ support of the Committee’s compensation decisions in 2015 and early 2016 and shareholders’ overall satisfaction with Cimarex’s executive compensation programs. Consistent with this support, the Compensation and Governance Committee retained the core design of our executive compensation programs for the remainder of 2016, as it believes the programs continue to retain, attract, when appropriate, and appropriately incent senior management. +At the 2017 Annual Meeting of Shareholders, we again will hold an annual advisory vote to approve executive compensation. The Compensation and Governance Committee will continue to consider the results from this year’s and future advisory votes on executive compensation, as well as feedback from shareholders through the course of such year. +Because your vote is advisory, it will not be binding upon the Board. However, the Board values shareholders’ opinions, and the Compensation and Governance Committee will take into account the outcome of the vote when considering future executive compensation decisions. The Board recommends that shareholders vote FOR the following resolution: +RESOLVED, that the shareholders approve, on an advisory basis, the compensation of Cimarex’s Named Executive Officers, as disclosed in this proxy statement, including the Compensation Discussion and Analysis, the executive compensation tables and the related narrative. +The Board of Directors unanimously recommends a vote FOR the advisory vote to approve executive compensation. +58 +Table of Contents +ADVISORY VOTE ON FREQUENCY OF ADVISORY VOTE ON EXECUTIVE COMPENSATION (ITEM 3) +As described in Proposal 2 above, shareholders are being provided the opportunity to cast an advisory vote on Cimarex’s executive compensation program. +This Proposal 3 affords shareholders the opportunity to cast an advisory vote on how often Cimarex should include a say-on-pay vote (described in Proposal 2 above) in its proxy materials for future annual meetings of shareholders (or a special shareholder meeting for which Cimarex must include executive compensation information in the proxy statement for that meeting). Under this Proposal 3, shareholders may vote to have the say-on-pay vote every year, every two years, or every three years, or may abstain from voting. +Because your vote is advisory, it will not be binding upon the Board. However, the Board values shareholders’ opinions, and the Compensation and Governance Committee will take into account the outcome of the vote when considering frequency of advisory votes on executive compensation. +The Board of Directors has determined that an annual advisory vote on executive compensation will permit our shareholders to provide direct input on Cimarex’s executive compensation philosophy, policies and practices as disclosed in the proxy statement each year, which is consistent with our efforts to engage in an ongoing dialogue with our shareholders on executive compensation and corporate governance matters. +The Board of Directors unanimously recommends a vote FOR every year. +REPORT OF AUDIT COMMITTEE +The Audit Committee on behalf of the Board of Directors monitors (i) the integrity of the Company’s financial statements; (ii) the independent auditors’ qualifications and independence; (iii) the performance of the Company’s internal audit function and independent auditors; (iv) the appropriateness of the Company’s accounting policies; (v) the adequacy of the Company’s internal controls; (vi) the Company’s compliance with legal and regulatory requirements related to audit matters; (vii) the process related to ongoing litigation matters, (viii) the annual process of estimating and reporting quantities of oil and gas reserves, and (ix) risk oversight. In so doing, it is the responsibility of the Committee to maintain free and open communication between the directors, the independent auditor and the management of the Company. All members of the Audit Committee meet the independence, experience and financial literacy requirements of the New York Stock Exchange, the Sarbanes Oxley Act and any rules or regulations promulgated by the Securities and Exchange Commission. The Board of Directors has adopted a written charter for the Audit Committee, a copy of which is available on our website at www.cimarex.com . +Management is responsible for the Company’s financial statements, the financial reporting process, and the process of estimating and reporting quantities of oil and gas reserves, including the related systems of internal controls and disclosure controls and procedures. The Company’s independent registered public accounting firm is responsible for performing an independent audit of the Company’s financial statements in accordance with generally accepted auditing standards, as well as an audit of the Company’s internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (PCAOB) and issuing reports thereon. The Audit Committee’s responsibility is to monitor and oversee these processes and the Audit Committee uses the Company’s internal audit department and (if applicable) independent petroleum engineers to assist with these responsibilities. +The Audit Committee reviewed Cimarex’s audited financial statements and supplemental oil and gas reserve information as of and for the year ended December 31, 2016 and met with management, DeGolyer and MacNaughton (an independent petroleum engineering consulting firm) and KPMG, Cimarex’s independent registered public accounting firm, to discuss the related information, and the effectiveness of Cimarex’s internal control over financial reporting. In addition, the Audit Committee has received from KPMG the communication required by PCAOB Rule 3526, Communication with Audit Committees Concerning Independence, and discussed with KPMG their independence from Cimarex and its management. The Audit Committee also discussed with KPMG any matters required by the PCAOB Auditing Standards No. 1301, Communications with Audit Committees. +59 +Table of Contents +Based on these reviews and discussions, the Audit Committee recommended to the Board of Directors that Cimarex’s audited financial statements be included in Cimarex’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016. +THE AUDIT COMMITTEE +Monroe W. Robertson, Chairman +Harold R. Logan, Jr. +Lisa A. Stewart +Michael J. Sullivan +The Audit Committee Report does not constitute soliciting material and shall not be deemed to be filed or incorporated by reference into any other Cimarex filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that Cimarex specifically incorporates the Audit Committee Report by reference. +RATIFICATION OF INDEPENDENT AUDITORS (ITEM 4) +The Audit Committee of the Board has appointed KPMG LLP to audit our financial statements for 2017. Since October 1, 2002, KPMG LLP has served as our independent auditors. +We are asking that shareholders ratify the appointment of KPMG LLP as our independent auditors. If shareholders fail to ratify the appointment, the Audit Committee may reconsider this appointment. A KPMG LLP representative will be at the Annual Meeting to answer appropriate questions and to make a statement if he or she desires. +The Board of Directors recommends a vote FOR the ratification of KPMG LLP as Cimarex’s Independent Auditors for 2017. +Audit and Non-Audit Fees +The following table shows the fees for professional services rendered by KPMG LLP for the audit of Cimarex’s annual financial statements for the years ended December 31, 2016 and December 31, 2015, and fees billed for other services rendered by KPMG LLP during those periods: +Years Ended +December 31, +2016 +2015 +Audit Fees (1) +$ +1,083,169 +$ +1,100,131 +Audit-Related Fees (2) +$ +0 +$ +99,940 +Tax Fees (3) +$ +200,000 +$ +211,504 +All Other Fees +$ +0 +$ +0 +(1) Audit fees were principally for audit work performed on the consolidated financial statements and internal controls over financial reporting. +(2) Audit-related fees were principally for services associated with SEC registration statements, periodic reports and other documents filed with the SEC or issued in connection with securities offerings, e.g., comfort letters and consents and assistance in responding to SEC comment letters. +(3) Tax fees were principally for services related to tax compliance and reporting and analysis services. +Approval of Audit, Audit-Related and Tax Services +The Audit Committee annually reviews and pre-approves certain categories of audit, audit-related and tax services to be performed by our independent auditors, subject to a specified range of fees. The Audit Committee also may pre-approve specific services. Certain non-audit services as specified by the SEC may not be performed by our independent auditors. The Audit Committee may delegate pre-approval authority to one or more of its members. In the event of any such delegation, any pre-approved decisions will be reported to the Audit Committee at its next scheduled meeting. The services described in the above table were pre-approved by the Audit Committee in 2015 and 2016. +60 +Table of Contents +O THER M ATTERS +Section 16(a) Beneficial Ownership Reporting Compliance +Section 16(a) of the Securities Exchange Act of 1934 requires our Directors and executive officers, and persons who own more than 10% of our common stock, to file reports of ownership of, and transactions in, our common stock with the SEC. Based on a review of such reports, and on written representations from our reporting persons, we believe that all reports were timely filed in 2016. +Complaint and Reporting Procedures +We have established complaint and reporting procedures that are posted on our website at www.cimarex.com . Any person, whether or not an employee, who has a concern about the conduct of Cimarex or any of our employees, including accounting, internal accounting controls or auditing issues, may, in an anonymous manner, communicate that concern by calling our hotline, 1-866-519-1898. The hotline is available 24 hours a day, seven days a week. Comments will be typed verbatim and will be delivered to a representative with authority to investigate the concern. +61 +Table of Contents +PROXY +THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS +CIMAREX ENERGY CO. +The undersigned appoints Thomas E. Jorden and Francis B. Barron as proxies, with power to act without the other and with power of substitution, and authorizes them to represent and vote, as designated on the other side, all the shares of common stock of Cimarex Energy Co. held of record by the undersigned with all powers that the undersigned would possess if present at the Annual Meeting of Shareholders to be held at the Wells Fargo Center – Denver, Assemble Room (Lower Level 2), 1700 Lincoln Street, Denver, Colorado 80203, on May 11, 2017, at 9:00 a.m., Mountain Daylight Time, or any adjournment thereof. +For participants in the Cimarex 401(k) Plan, this proxy, when properly executed, will be voted in the manner directed by the undersigned. If no direction is given, if the card is not signed, or if the card is not received prior to 11:59 p.m., Eastern Daylight Time, on May 8, 2017, the Plan’s Trustee will vote your shares held in the Plan in the same proportion as shares were voted by other Plan participants. +(Continued, and to be marked, dated and signed, on the other side) +p PLEASE DETACH ALONG PERFORATED LINE AND MAIL IN THE ENVELOPE PROVIDED. p +Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to be held May 11, 2017. +The Proxy Statement and our 2016 Annual Report to Shareholders are available at: http://www.allianceproxy.com/cimarex/2017 +Table of Contents +THIS PROXY WILL BE VOTED AS DIRECTED, OR, IF NO DIRECTION IS INDICATED, WILL BE VOTED “FOR” ALL THE NOMINEES LISTED UNDER ITEM 1, “FOR” ITEMS 2 AND 4, AND FOR “1 YEAR” UNDER ITEM 3. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. +Please mark your votes like this +x +The Board of Directors recommends a vote “FOR” all the nominees listed under Item 1, “FOR” Items 2 and 4, and FOR “1 YEAR” under Item 3. +FOR +AGAINST +ABSTAIN +1. Election of four Class III directors: +FOR +AGAINST +ABSTAIN +2. Advisory vote to approve executive compensation +o +o +o +1 YEAR +2 YEARS +3 YEARS +ABSTAIN +(01) David A. Hentschel +o +o +o +3. Advisory vote on frequency of advisory vote on executive compensation +o +o +o +(02) Thomas E. Jorden +o +o +o +(03) Floyd R. Price +o +o +o +FOR +AGAINST +ABSTAIN +(04) Frances M. Vallejo +o +o +o +4. Ratify the appointment of KPMG LLP as our independent auditors for 2017 +o +o +o +I plan on attending the meeting o +NOTE: Please sign as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee or guardian, please give full title as such. +Signature +CONTROL NUMBER +Signature (if held jointly) +Date: +, 2017 +p PLEASE DETACH ALONG PERFORATED LINE AND MAIL IN THE ENVELOPE PROVIDED. p +CIMAREX ENERGY CO. +As a shareholder of Cimarex Energy Co., you have the option of voting your shares electronically through the Internet or on the telephone, eliminating the need to return the proxy card. Your electronic vote authorizes the named proxies to vote your shares in the same manner as if you marked, signed, dated and returned the proxy card. Votes submitted electronically over the Internet or by telephone must be received by 7:00 p.m., Eastern Time, on May 10, 2017. +CONTROL NUMBER +PROXY VOTING INSTRUCTIONS +Please have your 11 digit control number ready when voting by Internet or Telephone +( +INTERNET +Vote Your Proxy on the Internet: +Go to www.AALvote.com/XEC +Have your proxy card available when you access the above website. Follow the prompts to vote your shares. +TELEPHONE +Vote Your Proxy by Phone: +Call 1 (866) 804-9616 +Use any touch-tone telephone to vote your proxy. Have your proxy card available when you call. Follow the voting instructions to vote your shares. +MAIL +Vote Your Proxy by Mail: +Mark, sign, and date your proxy card, then detach it, and return it in the postage-paid envelope provided. \ No newline at end of file diff --git a/raw/proxies/0001168054/0001104659-17-020553/proxy_rpt.txt b/raw/proxies/0001168054/0001104659-17-020553/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..285bc92c506c88f176aee93d8ef56b8ce0d4ec41 --- /dev/null +++ b/raw/proxies/0001168054/0001104659-17-020553/proxy_rpt.txt @@ -0,0 +1,27 @@ +Review of related party transactions +Yes +20 +Table of Contents +Diverse Board skills and experience +Yes +Non-Hedging and non-pledging policies +Yes +Annual Board and Committee self-evaluations +Yes +Clawback policy +Yes +Periodic consultant review of Board skills +Yes +Management and Director stock ownership guidelines +Yes +Annual equity grants to Directors +Yes +Tax gross-ups +No +Annual Board education +Yes +Proxy Access +Yes +Shareholders may communicate with our Board by mail directed to our Corporate Secretary or by facsimile (720) 403-9383. All communications will be forwarded to the Lead Director for the Lead Director’s review. The Lead Director may take any action the Lead Director deems appropriate or necessary, including, without limitation, forwarding the information to the Board for consideration or, with the concurrence of the Board, retaining independent or outside counsel, accountants or other advisors to address the concern. +21 +Table of Contents \ No newline at end of file diff --git a/raw/proxies/0001439725/0001193125-21-140545/proxy.txt b/raw/proxies/0001439725/0001193125-21-140545/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..aae8adf6a52c191448e3828cd5482a6dd71ac716 --- /dev/null +++ b/raw/proxies/0001439725/0001193125-21-140545/proxy.txt @@ -0,0 +1,1722 @@ +DEF 14A +1 +d142163ddef14a.htm +DEF 14A +DEF 14A +Table of Contents +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +Washington, DC 20549 +SCHEDULE 14A +(Rule 14a-101) +SCHEDULE 14A INFORMATION +Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 +(Amendment No. ) +☒ +Filed by the Registrant +☐ +Filed by a Party other than the Registrant +Check the appropriate box: +☐ +Preliminary Proxy Statement +☐ +Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +☒ +Definitive Proxy Statement +☐ +Definitive Additional Materials +☐ +Soliciting Material under § 240.14a-12 +Biodesix, Inc. +(Name of Registrant as Specified in its +Charter) +(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant) +Payment of Filing Fee (Check the appropriate box): +☒ +No fee required. +☐ +Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. +(1) +Title of each class of securities to which transaction applies: +(2) +Aggregate number of securities to which transaction applies: +(3) +Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined): +(4) +Proposed maximum aggregate value of transaction: +(5) +Total fee paid: +☐ +Fee paid previously with preliminary materials. +☐ +Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration +statement number, or the Form or Schedule and the date of its filing. +(1) +Amount Previously Paid: +(2) +Form, Schedule or Registration Statement No.: +(3) +Filing Party: +(4) +Date Filed: +Table of Contents +Biodesix, Inc. +2970 Wilderness Place, Suite 100 +Boulder, CO 80301 +Notice of 2021 Annual Meeting of Stockholders +Dear Biodesix Stockholders: +You are invited to attend Biodesix, Inc.’s 2021 Annual Meeting of Stockholders (the “Annual Meeting”). +Date: +May 26, 2021 (Wednesday) +Time: +1:00 p.m., Mountain Time +Virtual Location: +You can attend the Annual Meeting online, including to vote and/or submit questions, at www.proxydocs.com/BDSX . See page 1 of the accompanying proxy statement for additional information +regarding participation in the virtual meeting. +Items of Business: +At the Annual Meeting, stockholders will be asked to vote: +1.  to elect the two Class I directors named in this proxy statement to hold office until the 2024 +annual meeting of stockholders; +2.  to ratify the appointment of KPMG LLP as our independent +registered public accounting firm for the year ending December 31, 2021; and +3.  to conduct any +other business properly brought before the meeting, or any adjournment or postponement thereof. +Record Date: +You can participate in the Annual Meeting and vote if you were a stockholder of record as of the close of business on April 26, 2021. +Voting: +Your vote is very important to us. Whether or not you plan to attend the virtual Annual Meeting, please ensure your shares are represented by voting promptly. For instructions on how to vote your shares, please refer to +the instructions included with this proxy statement, your proxy card, and our Annual Report on Form 10-K for the year ended December 31, 2020. +By order of the Board of Directors, +Robin Harper Cowie +Chief Financial Officer, Secretary and Treasurer +April 29, 2021 +This Notice of 2021 Annual Meeting of Stockholders, the accompanying proxy statement and our 2020 Annual Report on Form 10-K are available on our website at https://investors.biodesix.com/investor-relations in the SEC Filings section, as well as at +www.proxydocs.com/BDSX. +Table of Contents +Table of Contents +ANNUAL MEETING +INFORMATION +1 +BOARD AND CORPORATE GOVERNANCE +MATTERS +7 +Proposal One: Election of Directors +7 +Overview of Our Nominees and Continuing Directors +8 +Board Composition +11 +Director Independence +11 +Board Leadership Structure +11 +Role of our Board of Directors in Risk Oversight +12 +Meetings of our Board of Directors +12 +Committees of our Board of Directors +12 +Committee Composition and Meetings +13 +Audit Committee +13 +Compensation Committee +14 +Compensation Committee Interlocks and Insider Participation +14 +Nominating and Corporate Governance Committee +14 +Director Nomination Process +15 +Code of Ethics and Business Conduct +16 +Corporate Governance Guidelines +16 +Anti-Hedging and Anti-Pledging Policy +16 +Stockholder Communications with our Board of Directors +17 +Certain Relationships and Related Party Transactions +17 +DIRECTOR COMPENSATION +19 +Non-Employee Director Compensation Policy +19 +2020 Director Compensation Table +19 +EXECUTIVE COMPENSATION +20 +Overview +20 +Compensation of Named Executive Officers +21 +2020 Summary Compensation Table +24 +Outstanding Equity Awards at 2020 Fiscal Year-End +25 +Additional Matters +26 +STOCK OWNERSHIP +28 +Security Ownership of Certain Beneficial Owners and +Management +28 +Delinquent Section 16(a) Reports +30 +AUDIT MATTERS +31 +Proposal Two: Ratification of Appointment of Independent Registered Public Accounting +Firm +31 +Report of the Audit Committee +32 +Table of Contents +ADDITIONAL INFORMATION +33 +Other Matters +33 +Stockholder Proposals and Nominations for Next Year’s Annual Meeting of +Stockholders +33 +Availability of Annual Report on Form 10-K +33 +Table of Contents +Proxy Statement +2021 Annual Meeting of Stockholders +May 26, 2021 +ANNUAL MEETING INFORMATION +Our board of directors is soliciting your proxy for +the 2021 Annual Meeting of Stockholders (the “Annual Meeting”) of Biodesix, Inc. (“Biodesix,” the “Company,” “we,” “us” or “our) and at any adjournment, continuation or postponement of the +meeting for the purposes described in this proxy statement and the accompanying Notice of 2021 Annual Meeting of Stockholders. The Annual Meeting will take place on May 26, 2021 at 1:00 p.m. Mountain Time. Due to ongoing public health +concerns regarding the COVID-19 pandemic and for the health and well-being of our stockholders and employees, this year’s Annual Meeting will be held via live audio webcast at www.proxydocs.com/BDSX . If you held shares of our common stock as of the close of business on April 26, 2021, you will +be able to vote on the proposals described in this proxy statement and submit questions online through the virtual meeting platform during the Annual Meeting. On or about April 30, 2021, we will be mailing a copy of our Annual Report on Form 10-K for the year ended December 31, 2020 (the “2020 Form 10-K Report”), this Proxy Statement and the proxy card (together, the “Proxy Materials”). +The documents will be available at www.proxydocs.com/BDSX . The proxy card will also include information on how +to vote online or by telephone or by returning your proxy card by mail. +Who can vote? +If you were a stockholder of record as of the close of business on April 26, 2021 (the “record date”), you are entitled to vote +your shares at the Annual Meeting. As of the record date, 26,858,322 shares of our common stock were issued and outstanding. Each share of our common stock is entitled to one vote on each matter properly brought before to the meeting. +What am I voting on? +You are being asked to vote on two proposals: +● +Proposal One: To elect the two Class I directors named in this proxy statement to hold office until +the 2024 annual meeting of stockholders; and +● +Proposal Two: To ratify the appointment of KPMG LLP as our independent registered public accounting firm +for 2021. +How does the board of directors recommend that I vote on each proposal? +The board of directors recommends that our stockholders vote: +● +“For” the election of the two Class I directors named in this proxy statement to hold +office until the 2024 annual meeting of stockholders; and +● +“For” the ratification of the appointment of KPMG LLP as our independent registered public +accounting firm for 2021. +2021 Proxy Statement +1 +Table of Contents +What if another matter is properly brought before the meeting? +The board of directors is not aware of any other matters that will be presented for consideration at the Annual Meeting. However, if any other +matters are properly brought before the Annual Meeting, the persons named in the accompanying proxy intend to vote on those matters in accordance with their best judgment. +How do I vote? +The procedures for voting depend on whether your shares are registered in your name or are held by a bank, broker or other nominee. You may +also vote your shares electronically during a designated portion of the virtual Annual Meeting after your successful registration at www.proxydocs.com/BDSX. Whether or not you plan to attend the Annual Meeting, we encourage you to vote and submit +your proxy in advance of the meeting by one of the methods described below. +● +Stockholders of Record: Shares Registered in Your Name +Vote by Proxy in Advance of the Annual Meeting : If, on the record date, your shares were registered directly in your name with +Biodesix’s transfer agent, Computershare Trust Company, N.A., then you are a “stockholder of record.” As a stockholder of record, you may vote by proxy in advance of the Annual Meeting in three ways: +Vote by Internet +Go to +http://www.proxypush.com/ +BDSX to complete an +electronic +proxy card. You will be asked to +provide the company number +and control number from your +proxy card. Your vote must be +received prior to the meeting +start time to be counted. +Vote by +telephone +Dial toll-free 1-866-291-6774 +using a touch-tone phone and +follow the recorded instructions. +You will be asked to provide the +company number and control +number from +your proxy card. +Your vote must be received +prior to the meeting start time to +be counted. +Vote +by mail +Complete, date sign and date the +proxy card you +received as part +of the Proxy Materials, and +return it promptly in the +envelope provided. If your +signed proxy card is received +prior to the meeting date, we +will vote your shares as you +direct. +● +Beneficial Owner: Shares Registered in the Name of Broker, Bank or Other Nominee +If, on the record date, your shares were held not in your name, but in an account with a broker, bank or other nominee as custodian on your +behalf, then you are considered the “beneficial owner” of shares held in “street name.” The Proxy Materials are being forwarded to you by that broker, bank or other nominee who is considered the stockholder of record of those +shares for purposes of voting at the Annual Meeting. As the beneficial owner, you have the right to direct your broker, bank or other nominee on how to vote your shares by following the instructions for voting set forth on that organization’s +voting instruction card. +2021 Proxy Statement +2 +Table of Contents +What is the effect of giving a proxy? What if I return a proxy card or otherwise +vote but do not make specific choices? +Proxies are solicited by and on behalf of the board of directors. Robin Harper Cowie +(our Chief Financial Officer, Secretary and Treasurer) and Ryan H. Siurek (our Chief Accounting Officer) have been designated as proxy holders by the board of directors. If you properly grant your proxy, your shares will be voted as you instruct. +If you return a signed proxy card or otherwise vote without marking specific voting selections, your shares will be voted as the board of +directors recommends: “For” the election of two Class I directors (Proposal One); “For” the ratification of the appointment of KPMG LLP as our independent registered public accounting firm for 2021 (Proposal Two); and in +accordance with the best judgment of your proxy holder for any other matters properly brought before the meeting, if any. +Can I +change my vote or revoke my proxy? +Yes. If you are a stockholder of record, you can change your vote or revoke your proxy +before the Annual Meeting in any of these ways: +● Vote again over the Internet or by +telephone as instructed above before 11:59 Eastern Time on May 25, 2021. Only your latest Internet or telephone vote is counted. +● Submit a properly signed proxy card +with a later date that is received no later than 11:59 Eastern Time on May 25, 2021. Only your latest dated proxy card will be counted. +● Send a timely written notice that +you are revoking your proxy to Biodesix’s Corporate Secretary at 2970 Wilderness Place, Suite 100, Boulder, CO 80301. +● Attend the virtual Annual Meeting +and vote electronically during the meeting. Simply attending the meeting will not, by itself, revoke your proxy. +If you are the +beneficial owner of shares held in street name, you should follow the instructions provided by your broker, bank or other nominee to revoke previously submitted voting instructions. +What are broker non-votes? +Brokers, banks or other nominees holding shares on behalf of a beneficial owner may vote those shares in their discretion on certain +“routine” matters even if they do not receive timely voting instructions from the beneficial owner. With respect to “non-routine” matters, the broker, bank or other nominee is not permitted +to vote shares for a beneficial owner without timely received voting instructions. The only routine matter to be presented at the Annual Meeting is the proposal to ratify the appointment of KPMG LLP as our independent registered public +accounting firm for 2021 (Proposal Two). The election of two Class I directors (Proposal One) is a non-routine matter. +A broker non-vote occurs when a broker, bank or other nominee does not vote on a non-routine matter because the beneficial owner of such shares has not provided voting instructions with regard to such matter. If a broker, bank or other nominee exercises discretionary voting authority on Proposal +Two, such shares will be considered present at the Annual meeting for quorum purposes and broker non-votes will occur as to Proposal One, or any other non-routine +matters that are properly presented at the Annual Meeting. Broker non-votes will have no impact on the voting results. +2021 Proxy Statement +3 +Table of Contents +How many shares must be present to hold the Annual Meeting? +A quorum must be present at the Annual Meeting for any business to be conducted. A quorum will be present if the holders of at least a +majority of the outstanding shares of our common stock entitled to vote are present at the Annual Meeting online or represented by proxy. On the record date, there were 26,858,322 shares of our common stock outstanding and entitled to vote. +Therefore, the holders of 13,429,162 shares must be present online or represented by proxy at the Annual Meeting to have a quorum. For purposes of determining the presence of a quorum, abstentions, withheld votes and broker non-votes are counted. If there is no quorum, the holders of a majority of shares present or represented by proxy at the Annual Meeting may adjourn the meeting to a later date. +What vote is required for the approval of each proposal? What effect do “withhold” votes, abstentions and broker non-votes have on the proposals? +The following chart summarizes the proposals to be +considered at the Annual Meeting, the vote required for approval of each proposal, and the manner in which votes will be counted: +Proposal +Voting Options +Vote Required to Adopt the +Proposal +Effect of “Withheld” +Votes or Abstentions +Effect of “Broker +Non-Votes” +Proposal One: Election of the two Class I directors named in this proxy +statement +For or +Withhold on +each nominee +Plurality of the votes cast. +This means that the two +nominees receiving the +highest number of “For” +votes (from the holders +of +votes of shares present or +represented by proxy and +entitled to vote on the +election of directors) will +be elected as Class I +directors. +“Withheld” votes +have no effect; +only “For” votes +affect the outcome +of the election. +Brokers do not +have discretion +to vote. Broker +non-votes will +have no effect; +only “For” +votes affect +the +outcome of the +election. +Proposal Two: Ratification of appointment of KPMG LLP as our independent registered +public accounting firm for the year ended December 31, 2021 +For, Against or +Abstain +Affirmative vote of a +majority of the shares +present or represented by +proxy and entitled to vote +on the proposal. +Abstentions are +considered shares +present and entitled +to vote, and +therefore have the +same impact as +votes “Against” +the +proposal. +Brokers have +discretion to +vote. Therefore, +we do not +expect any +broker +non-votes. +Important Information About Our Virtual Annual Meeting: +• +Why is the Annual Meeting being held in a virtual format this year? In light +of health and safety concerns as well as travel restrictions related to the ongoing coronavirus (“COVID-19”) pandemic, the Annual Meeting will be held in a virtual meeting format via live audio +webcast. The virtual format will enable us to support the health and well-being of our stockholders, employees and directors, while providing access to the Annual Meeting for our stockholders regardless of geographic location. We have designed our +virtual format to help ensure that our stockholders who attend the Annual Meeting virtually will be afforded similar rights and opportunities to participate as they would at an in-person meeting. +• +How can I attend Annual Meeting online? To join the Annual Meeting +online, visit www.proxydocs.com/BDSX and register using your control number on your proxy card or on the instructions that accompanied your Proxy Materials, and following the instructions received via email, +including a unique link that will allow you access to the Annual Meeting, to vote, and submit questions during the meeting. +2021 Proxy Statement +4 +Table of Contents +• +When can I join the virtual Annual Meeting? The meeting will begin promptly +at 1:00 p.m. Mountain Time on Thursday, May 26, 2021. You may access the meeting platform 15 minutes earlier, and we encourage you to join in advance of the meeting start time to allow sufficient time to log in and confirm your connection and +audio are working properly. +• +Can I ask questions during the virtual Annual Meeting? Yes. If you are logged +in as a “stockholder” at the virtual Annual Meeting, you will have an opportunity to submit questions live via the Internet during a designated portion of the virtual Annual Meeting. Once you are logged in, type your question into the +question box and click “submit. ” Subject to time constraints, we intend to answer questions pertinent to the Company and meeting matters submitted by stockholders during the Annual Meeting that comply with our rules of conduct +for the Annual Meeting, which will be posted on the meeting website during the meeting. +• +How do I vote during the virtual Annual Meeting? You will have an opportunity +to vote your shares electronically during a designated portion of the virtual Annual Meeting after logging in. Whether or not you plan to join the Annual Meeting, we encourage you to vote and submit your proxy in advance of the meeting by one of the +methods described in these Proxy Materials. +• +What if I have technical difficulties? On the day of the Annual Meeting, if +you have trouble accessing the virtual meeting platform or encounter other technical difficulties with the platform before or during the meeting, please call the technical support number provided in your email instructions. +• +Will a list of stockholders be available for inspection prior to and during the +meeting? Yes. A complete list of stockholders of record will be available for inspection, by appointment only, by any stockholder for at least ten (10) days prior to the Annual Meeting during ordinary business hours at our +headquarters located at 2970 Wilderness Place, Suite 100, Boulder, CO 80301. +• +Will a recording of the meeting be available? Yes, following the Annual +Meeting, a recording of the meeting will be available on www.proxydocs.com/BDSX for one year following the meeting date. +Who will count the votes? +Representatives of Mediant Communications Inc. (“Mediant”) will tabulate the votes, and a representative of Mediant will act as +inspector of election. +Who is paying for this proxy solicitation? +We will pay the cost of soliciting proxies. Proxies may be solicited on our behalf by our directors, officers or employees (for no additional +compensation) in person, by telephone or by other means of communication. Arrangements may be made with brokerage houses, custodians, nominees and fiduciaries to send Proxy Materials to their principals and we may reimburse them for the cost of +forwarding Proxy Materials to beneficial owners. +What does it mean if I receive more than +one set of Proxy Materials? +If you receive more than one set of Proxy Materials, your shares may be registered in more than +one name or in different accounts. Please follow the voting instructions included in each set of Proxy Materials to ensure that all of your shares are voted. +How can I find out the results of the voting at the Annual Meeting? +Preliminary voting results will be announced at the Annual Meeting. In addition, final voting results will be published in a current report on +Form 8-K that we expect to file with the SEC within four business days after the Annual Meeting. +2021 Proxy Statement +5 +Table of Contents +Why were my Proxy Materials included in the +same envelope as other people at my address? How may I obtain an additional copy of the Proxy Materials? +We have adopted a +procedure approved by the SEC called “householding.” Under this procedure, we deliver a single copy our Proxy Materials to stockholders of record who shares the same address, unless we have received contrary instructions from any +stockholder at that address. This practice is designed to eliminate duplicate mailings, conserve natural resources and reduce our printing and mailing costs. Stockholders who participate in householding will continue to be able to access and receive +separate proxy cards. If you share an address with another stockholder and receive only a single copy of our Proxy Materials, but would like to request a separate copy of these materials, please contact our mailing agent, Mediant, by calling 1-866-8133 or e-mailing +paper@investorelections.com and an additional copy of the materials will be promptly delivered to you. Similarly, if +you receive multiple copies of the Proxy Materials but would prefer to receive a single copy in the future, you may also contact Mediant at the above telephone number or address. Beneficial owners should contact their broker, bank or other nominee +to request information about householding procedures. +2021 Proxy Statement +6 +Table of Contents +BOARD AND CORPORATE GOVERNANCE MATTERS +Proposal One: Election of Directors +General +The primary responsibilities of +our board of directors are to provide oversight, strategic guidance, counseling and direction to our management. Our board of directors currently consists of seven directors and is divided into three classes of directors that serve staggered +three-year terms, currently Class I, with a term expiring in 2021, Class II, with a term expiring in 2022 and Class III, with a term expiring in 2023. At the Annual Meeting, our stockholders will vote on the election of two +Class I directors whose terms will expire at our 2024 annual meeting of stockholders. Each of our other current directors will continue to serve as a director until the election and qualification of his or her successor. +The two directors currently serving on our board of directors in Class I, the class whose term of office expires in 2021, have each been +nominated by our board of directors, upon the recommendation of our nominating and corporate governance committee, to stand for election at the Annual Meeting: Scott Hutton and John Patience. Mr. Patience has served on our board of directors +since June 2008, and as the chairman of the board of directors since September 2020. Each of these two nominees has consented to being named as a nominee in this proxy statement and has agreed to serve, if elected, until our 2024 annual meeting of +stockholders and until the election and qualification of his successor. +For more information about each of the director nominees and +continuing directors, including information regarding the experience, qualifications, attributes and skills that led to the conclusion that each director should serve as a member of the board of directors, please refer to the section below entitled +“Overview of Our Nominees and Continuing Directors.” +Vote Required: +Directors are elected by a plurality of the votes cast by our stockholders at the Annual Meeting. This means that the two nominees receiving the highest number of affirmative votes (from the holders of votes of shares +present or represented by proxy and entitled to vote on the election of directors) will be elected. Broker non-votes and “Withheld” votes will have no effect. +Board +Recommendation: +OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE ELECTION OF EACH OF THE TWO CLASS I DIRECTOR NOMINEES NAMED ABOVE. +2021 Proxy Statement +7 +Table of Contents +Overview of Our Nominees and Continuing Directors +The following table and the brief biographies that follow provide information, as of the date of this proxy statement, about each +director nominee and each continuing director: +Age +Position(s) +Director +Since +Class +Current +Term +Expires +Expiration +of Term for +which +Nominated +Independent +Committee +Membership* +AC +CC +NCG +DIRECTOR NOMINEES +Scott Hutton +49 +President, Chief Executive +Officer and Director +2020 +I +2021 +2024 +No +John Patience +73 +Chairman of the Board +2008 +I +2021 +2024 +Yes +X +CONTINUING DIRECTORS +Matthew Strobeck, Ph.D. +48 +Director +2012 +II +2022 +— +Yes +X +Chair +Charles Watts, M.D. +78 +Director +2019 +II +2022 +Yes +X +Jean Franchi +54 +Director +2020 +III +2023 +— +Yes +Chair +X +Hany Massarany +59 +Director +2020 +III +2023 +— +Yes +X +Chair +Jack Schuler +80 +Director +2008 +III +2023 +— +Yes +X +* AC - Audit Committee; CC - Compensation Committee; NCG - Nominating and Corporate +Governance Committee +Director Nominees +Class I Directors – Nominees for Election at the Annual Meeting +Scott Hutton has served as our President, Chief Executive Officer and Director since January 2020, and previously held the role +of Chief Operating Officer from March 2018 to December 2019. Additionally, Mr. Hutton has served on the board of directors of Eximis Surgical, Inc. since February 2018 and was on the Board of the Colorado BioScience Association from April 2011 +to April 2013. Mr. Hutton was an Observer on the board of directors of Aqueduct Critical Care from September 2014 to January 2017, and an Observer on the Board of Visualase, Inc. from October 2012 to July 2014. Mr. Hutton joined Biodesix +from Spectranetics Corp (NASDAQ: SPNC), a U.S.-based global leader in vascular intervention and lead management solutions (now part of Royal Philips (NYSE: PHG)), where he served as Senior Vice President and General Manager of the Vascular +Intervention division from January 2017 to December 2017. Prior to joining Spectranetics, Mr. Hutton held several positions of increasing responsibility, including Vice President and General Manager, at Medtronic plc (NYSE: MDT), a global +healthcare products company and manufacturer of medical devices and supplies, over a period of 16 years. From April 2012 to January 2017, Mr. Hutton was Vice President and General Manager of Neurosurgery, where he oversaw the operations of the +approximately $1 Billion Neurosurgery Business Unit. From 2008 to 2012, he grew from Senior Director of Global Marketing to Vice President and Business Leader of the Surgical Navigation and Intra-Operative Imaging Business. Mr. Hutton holds a +Bachelor of Arts degree from the College of Health and Human Sciences, Department of Health and Kinesiology at Purdue University. In March 2021, Mr. Hutton was named a Significant Sig by Sigma Chi International Fraternity. In February 2021, +Mr. Hutton was named a Top 25 Biotech CEO of 2021 by the Healthcare Technology Report. In January 2021, Mr. Hutton was named 2020 CEO of the Year-USA by CEO Monthly Magazine. In July 2011, +Mr. Hutton received the Medtronic Wallin Leadership Award for his focus on talent development, business performance, and his personal and intentional demonstration of leadership. +2021 Proxy Statement +8 +Table of Contents +We believe that Mr. Hutton is qualified to serve on our board of directors because of +his experience in leadership and management roles at our Company, as well as his experience as a board member in the healthcare and medical device industries. +John Patience has served as a Director of the Company since June 2008 and as Chairman of the Board since September 2020. +Mr. Patience currently serves as both a Director and Chairman of the board of Accelerate Diagnostics, Inc. (“Accelerate Diagnostics”) (NASDAQ: AXDX) and has served in that capacity since joining the Accelerate Diagnostics’ board +in 2012. Mr. Patience served as a director of Ventana Medical Systems, Inc. (“Ventana”), from 1989 and as Vice Chairman from 1999 until Ventana’s acquisition by Roche in 2008. Mr. Patience also served as a director of +Stericycle, Inc. (NASDAQ: SRCL) since its founding in 1989 to June 2018. Mr. Patience is a founding partner of Crabtree Partners, a private equity investment partnership in Lake Forest, Illinois. He was also previously a partner of a venture +capital investment firm that provided both Ventana and Stericycle, Inc. with early-stage funding. Mr. Patience was also previously a partner at the consulting firm McKinsey & Co., Inc., specializing in health care. Mr. Patience +holds a B.A. in Liberal Arts and an L.L.B. from the University of Sydney, Australia, and an M.B.A. from the University of Pennsylvania’s Wharton School of Business. +We believe that Mr. Patience is qualified to serve on our board of directors because of his experience in leadership and management roles +in the field of medicine, as well as his experience as a board member and investor in companies in the healthcare industry. +Continuing Directors +Class II Directors – Term Expiring at the 2022 Annual Meeting +Matthew Strobeck, Ph.D . has served as a Director of the Company since January 2012. Dr. Strobeck is currently the Managing +Partner of Birchview Capital LP, an investment management company. In addition, Dr. Strobeck is currently a Director of Quidel Corporation (NASDAQ: QDEL), Accelerate Diagnostics (NASDAQ: AXDX), Tepha Inc., and Monteris Medical. +Dr. Strobeck received a B.S. from St. Lawrence University, a Ph.D. from the University of Cincinnati, a S.M. from the Harvard University/MIT Health Sciences Technology Program, and a S.M. from the MIT Sloan School of Management. +We believe that Mr. Strobeck is qualified to serve on our board of directors because of his experience in leadership and management roles +at medical technology companies, as well as his experience as a board member and investor in the medical technology industry. +Charles Watts, M.D . has served as a Director of the Company since July 2019. Until his retirement, Dr. Watts served as +Chief Medical Officer at Northwestern Memorial Hospital and Associate Dean for Clinical Affairs at the Feinberg School of Medicine, Northwestern University from 2001 to 2011. Prior to his tenure at Northwestern, Dr. Watts served as Chief of +Clinical Affairs and Associate Dean at the University of Michigan Medical Center. He also previously served as Executive in Residence for the Health Management Academy, as an active faculty member of a nationally based Physician Leadership Program. +Dr. Watts served as a Director of Providence Health and Services (Seattle, Washington) from 2012 to 2016 where he chaired the Quality and Patient Safety Improvement Committee, and served as a Trustee of Swedish Health Services until May 2017, +when he accepted an appointment as interim Chief Medical Officer, serving in that capacity until June 2019. He currently serves as a Trustee on the Institute for Systems Biology Board and as a director of Accelerate Diagnostics. Dr. Watts +received his medical degree from the University of Michigan. +2021 Proxy Statement +9 +Table of Contents +We believe that Mr. Watts is qualified to serve on our board of directors because of +his experience in leadership and management roles in the field of medicine, as well as his experience as a board member in the healthcare industry. +Class III Directors – Term Expiring at the 2023 Annual Meeting +Jean M. Franchi has served as a Director of the Company since April 2020. Ms. Franchi is currently Chief Financial +Officer at the Replimune Group, a biotechnology company developing oncolytic immuno-gene therapies. Prior to the Replimune Group, Ms. Franchi was Chief Financial Officer at Merrimack Pharmaceuticals, Inc., a biopharmaceutical company, from 2017 +to 2019, Dimension Therapeutics, Inc., a gene therapy company, from 2015 to 2017, and Good Start Genetics, Inc., a molecular genetic information company, from 2012 to 2015. From 1995 to 2011, Ms. Franchi held various positions at Genzyme +Corporation, including Senior Vice President of Corporation Finance, Senior Vice President of Business Unit Finance, and Vice President of Finance and Controller, Product Line and International Group. Ms. Franchi currently serves on the boards +of directors of Biophytis S.A., Visioneering Technologies, Inc. and Dynacure. Ms. Franchi received her B.A. in Accounting from Hofstra University. +We believe that Ms. Franchi is qualified to serve on our board of directors because of her experience in leadership and management roles +in the healthcare industry as well as her experience holding finance-related roles of increasing responsibility. +Hany +Massarany has served as a Director of the Company since July 2020. Mr. Massarany was President and Chief Executive Officer of GenMark Diagnostics, Inc. (NASDAQ: GNMK), a provider of multiplex molecular diagnostic solutions, from April +2011 to March 2020. From February 2009 to April 2011, Mr. Massarany served as President at Ventana and Head of Roche Tissue Diagnostics, a division of F. Hoffman-La Roche Ltd. focused on manufacturing +instruments and reagents that automate tissue processing and slide staining diagnostics for cancer. From 1999 to 2009, Mr. Massarany held various global leadership positions with Ventana, including Chief Operating Officer, Executive Vice +President, Worldwide Operations, Senior Vice President, Corporate Strategy and Development, and Vice President, North American Commercial Operations. Mr. Massarany also held executive management positions with Bayer Diagnostics and Chiron +Diagnostics, working in both the Asia Pacific region and the United States. Mr. Massarany served on the board of directors of GenMark Diagnostics, Inc. from May 2011 to February 2020. Mr. Massarany earned a B.S. in Microbiology and +Immunology from Monash University in Australia and an M.B.A. from Melbourne University. +We believe that Mr. Massarany is qualified +to serve on our board of directors because of his experience in leadership and management roles, and experience as a board member, in the healthcare industry. +Jack Schuler has served as a Director of the Company since June 2008. Mr. Schuler served as a director of Ventana from 1991 +and as Chairman of the board from 1995 until Ventana’s acquisition by Roche in 2008. Prior to joining Ventana, Mr. Schuler was President and Chief Operating Officer of Abbott Laboratories, a diversified health care company, which he joined +in 1972 and where he held a number of management and marketing positions, also serving as a director from April 1985 to August 1989. Additionally, Mr. Schuler has served as a director of Abbott Laboratories (NYSE:ABT), Medtronic plc (Lead +Director) (NYSE: MDT), Stericyle (Chairman) (NASDAQ: SRCL), Chiron Corporation, and Quidel Corporation (NASDAQ: QDEL), and currently serves on the board of directors of Accelerate Diagnostics (NASDAQ: AXDX). Mr. Schuler holds a B.S. in +Mechanical Engineering from Tufts University and an M.B.A. from Stanford University Graduate School of Business Administration. +We +believe that Mr. Schuler is qualified to serve on our board of directors because of his experience in leadership and management roles in the healthcare industry, as well as his experience as a board member in the healthcare and medical device +industries. +2021 Proxy Statement +10 +Table of Contents +Board +Composition +In accordance with our amended and restated certificate of +incorporation, our board of directors is divided into three classes with staggered, three-year terms. At each annual meeting of stockholders, the successors to directors whose terms then expire will be elected to serve from the time of election and +qualification until the third annual meeting following election. Our directors are divided among the three classes as follows: +• +the Class I directors are John Patience and Scott Hutton, and their terms expire at the Annual Meeting; +• +the Class II directors are Matthew Strobeck and Charles Watts, and their terms will expire at the 2022 +annual meeting of stockholders; and +• +the Class III directors will be Jean Franchi, Hany Massarany and Jack Schuler, and their terms will expire +at the 2023 annual meeting of stockholders. +Our amended and restated certificate of incorporation and amended and +restated bylaws provide that the authorized number of directors may be changed only by resolution of the board of directors. Any additional directorships resulting from an increase in the number of directors will be distributed among the three +classes so that, as nearly as possible, each class will consist of one third of the directors. Each director’s term continues until the election and qualification of his or her successor, or, if sooner, his or her death, resignation or removal. +Director Independence +Under the listing requirements and rules of Nasdaq Stock Market (“Nasdaq”), +independent directors must comprise a majority of our board of directors as a listed company within one year of the closing of our initial public offering. +Our board of directors has undertaken a review of its composition, the composition of its committees and the independence of each director. +Based upon information requested from and provided by each director concerning his or her background, employment and affiliations, including family relationships, our board of directors has determined that Ms. Franchi and Messrs. Massarany, +Strobeck, Watts, Schuler and Patience do not have any relationships that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors is “independent” as that +term is defined under the applicable listing requirements and rules of Nasdaq. In making this determination, our board of directors considered the current and prior relationships that each non-employee +director has with our company and all other facts and circumstances our board of directors deemed relevant in determining their independence, including the beneficial ownership of our capital stock by each +non-employee director. +Board Leadership Structure +Our corporate governance guidelines provide our board of directors with flexibility to combine or separate the positions of Chairman of the +board of directors and the Chief Executive Officer and/or the implementation of a lead director in accordance with its determination that utilizing one or the other structure would be in the best interests of the company. Mr. Patience currently +serves as the independent Chairman of our board of directors. Our board of directors believes that separating these positions reinforces the independence of our board of directors from management, creates an environment that encourages objective +oversight of management’s performance and enhances the effectiveness of our board of directors as a whole. +2021 Proxy Statement +11 +Table of Contents +Role of +our Board of Directors in Risk Oversight +Our board of directors is responsible +for overseeing the overall risk management process at Biodesix. The day-to-day responsibility for managing risks and exposures resides with our executive management team +while our board of director committees and our board of directors as a whole participate in the oversight process. The risk oversight process includes receiving regular reports from committees and management to enable our board of directors to +understand management’s risk assessment and mitigation processes, which includes areas of potential material risk, including long-term strategic and operational planning, strategic biopharmaceutical partnerships, executive development and +evaluation, regulatory and legal compliance, information technology (including cybersecurity), financial reporting and internal controls and reputational risk. Our board of directors focuses on the overall risks affecting us, and each of its +standing committees has been delegated responsibility for oversight of specific risks that fall within its areas of responsibility. For example: +• +Our audit committee is responsible for overseeing our major financial, legal and regulatory risk exposures, which +spans a variety of areas including litigation, regulatory compliance, financial reporting, insurance and cybersecurity. Our audit committee also oversees the steps management has taken to monitor and control such exposures, including guidelines and +policies for assessing and managing risk and related compliance efforts. +• +Our nominating and corporate governance committee oversees the management of risks associated with our overall +compliance and corporate governance practices and the independence and composition of our board of directors, including monitoring the effectiveness of our corporate governance guidelines and other policies such as our code of conduct and overseeing +our environmental and sustainability efforts and progress. +• +Our compensation committee regularly assesses risks arising from our compensation plans, policies and programs, +including whether any such plans encourage excessive or inappropriate risk-taking. +While each committee is responsible +for evaluating certain risks and overseeing the management of such risks, the full board of directors is regularly informed through committee reports about such risks. +Meetings of our Board of Directors +Our board of directors held fifteen (15) meetings during 2020. Each incumbent director attended at least 75% of the aggregate total +number of meetings of the board of directors and the committees on which he or she served, held during the portion of 2020 for which he or she was a director or committee member. We encourage our directors to attend our annual meetings of +stockholders. +Committees of our Board of Directors +Our board of directors has established an audit committee, a compensation committee and a nominating and corporate governance committee. Our +board of directors may establish other committees to facilitate the management of our business. The composition and functions of each committee are described below. Members serve on these committees until their resignation or until otherwise +determined by our board of directors. The charter of each committee is available on our corporate website at www.biodesix.com in the Investors section under “Governance Highlights.” Reference to our website does not constitute +incorporation by reference of the information contained at or accessible through our website into this proxy statement. +2021 Proxy Statement +12 +Table of Contents +Committee Composition and Meetings +The following table provides current membership and 2020 meeting information for each committee of our board of directors: +Name: +Audit Committee +Compensation +Committee (1) +Nominating and Corporate +Governance Committee (1) +Jean Franchi +Chair +X +Hany Massarany +X +Chair +John Patience +X +Jack Schuler +X +Matthew Strobeck, Ph.D. +X +Chair +Charles Watts, M.D. +X +Total meetings held in 2020 +3 +- +- +(1) +During 2020, our compensation committee and nominating and corporate governance committee did not meet; +governance matters (including in connection with our initial public offering) were considered by our full board of directors. +Audit Committee +Our audit committee consists of Ms. Franchi and Messrs. +Massarany and Strobeck, each of whom our board of directors has determined satisfies the independence requirements under Nasdaq listing rules and Rule 10A-3(b)(1) of the Exchange Act. The chair of our audit +committee is Ms. Franchi, whom our board of directors has determined is an “audit committee financial expert” within the meaning of the SEC regulations. Each member of our audit committee can read and understand fundamental financial +statements in accordance with applicable listing standards. In arriving at these determinations, our board of directors has examined each audit committee member’s scope of experience and the nature of her or his employment in the corporate +finance sector. The functions of this committee include: +• +helping our board of directors oversee our corporate accounting and financial reporting processes; +• +reviewing and discussing with our management the adequacy and effectiveness of our disclosure controls and +procedures; +• +assisting with design and implementation of our risk assessment functions; +• +evaluating the qualifications, performance and independence of our independent registered public accounting firm +and deciding whether to retain its services; +• +monitoring the rotation of partners of our independent registered public accounting firm on our engagement team +as required by law; +• +discussing the scope and results of the audit with the independent registered public accounting firm, and +reviewing, with management and the independent accountants, our interim and year-end results; +• +developing procedures for employees to submit concerns anonymously about questionable accounting or audit +matters; +• +reviewing related-party transactions; +• +approving, or as permitted, pre-approving, audit and permissible non-audit services to be performed by our independent registered public accounting firm; and +2021 Proxy Statement +13 +Table of Contents +• +reviewing and assessing, at least annually, the performance of the audit committee and adequacy of its charter. +Compensation Committee +Our compensation committee consists of Messrs. Massarany, Patience and Watts, and the chair of our compensation committee is +Mr. Massarany. Our board of directors has determined that each of Messrs. Massarany, Patience and Watts is independent under the Nasdaq listing rules and is a “non-employee director” as defined +in Rule 16b-3 promulgated under the Exchange Act. The functions of this committee include: +• +reviewing, modifying and overseeing overall compensation strategy and policies; +• +reviewing and approving the compensation and other terms of employment of our chief executive officer, other +executive officers and senior management, as appropriate; +• +reviewing and approving the compensation arrangements with our executive officers and other senior management, as +appropriate; +• +reviewing and recommending to the full board of directors the compensation of our directors; +• +appointing and overseeing the work of compensation consultants, legal counsel or any other advisors and +consultants engaged for the purpose of advising the compensation committee; +• +reviewing, recommending to the full board of directors, as appropriate, and administering equity award plans, +compensation plans and similar programs, as well as modification or termination of plans and programs; +• +establishing policies with respect to equity compensation arrangements; +• +reviewing and evaluating with the chief executive officer and the full board of directors the succession plans +for our executive officers; and +• +reviewing and assessing, at least annually, the performance of the compensation committee and the adequacy of its +charter. +Compensation Committee Interlocks and Insider Participation +None of the members of the compensation committee is currently, or has been at any time during 2020, one of our officers or +employees. None of our executive officers currently serve, or has served during 2020, as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving as a member of our board of directors +or compensation committee. +Nominating and Corporate Governance Committee +Our nominating and corporate governance committee consists of Ms. Franchi and Messrs. Strobeck and Schuler, and the chair of our +nominating and corporate governance committee is Mr. Strobeck. Our board of directors has determined that Ms. Franchi and Messrs. Strobeck and Schuler are independent under the applicable listing standards. The functions of this committee +include: +• +reviewing periodically and evaluating director performance of our board of directors and its applicable +committees, and recommending to our board of directors and management areas for improvement; +2021 Proxy Statement +14 +Table of Contents +• +identifying, evaluating, nominating and recommending individuals for membership on our board of directors; +• +reviewing with our chief executive officer the plans for succession to the offices of our executive officers and +make recommendations to our board of directors with respect to the selection of appropriate individuals to succeed to these positions; +• +reviewing and recommending to our board of directors any amendments to our corporate governance policies; and +• +reviewing and assessing, at least annually, the performance of the nominating and corporate governance committee +and the adequacy of its charter. +Director Nomination Process +Selection and Nomination Process +Our board of directors is responsible for nominating members for election to our board of directors by our stockholders at our annual meetings +of stockholders. Whenever a vacancy occurs on our board of directors, whether due to a newly created director position or the death, resignation, removal or retirement of an existing director, our board of directors is authorized to select a person +to fill the vacancy to serve as a director until the annual meeting of stockholders at which the director’s term expires and until the election and qualification of his or her successor or, if sooner, his or her death, resignation or removal. +Any increase or decrease in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors. +Criteria for Board Membership +The board of directors and the nominating and corporate governance committee will determine the appropriate characteristics, skills and +experience for the board of directors as a whole and for its individual members. The board of directors and the nominating and corporate governance committee will consider the minimum general criteria set forth below, and may add any specific +additional criteria with respect to specific searches, in selecting candidates and existing directors for service on the board of directors. An acceptable candidate may not fully satisfy all of the criteria, but is expected to satisfy nearly all of +them. While the nominating and corporate governance committee does not have a formal policy in this regard, the diversity of the board of the directors is a consideration in evaluating candidates for director positions, among others. +The board of directors and the nominating and corporate governance committee believe that candidates for director should have certain minimum +qualifications, including being able to read and understand basic financial statements, being over 21 years of age and having the highest personal integrity and ethics. In considering candidates, the board of directors and the nominating and +corporate governance committee intend to consider such factors as possessing relevant expertise upon which to be able to offer advice and guidance to management, having sufficient time to devote to the affairs of the Company, demonstrated excellence +in his or her field, having the ability to exercise sound business judgment and having the commitment to rigorously represent the long-term interests of our stockholders. +The board of directors and the nominating and corporate governance committee review candidates for director nomination in the context of the +current composition of the board of directors, the operating requirements of the Company and the long-term interests of our stockholders. In conducting this assessment, the board of directors and the nominating and corporate governance committee +consider diversity, age, skills, and such other factors as it deems appropriate given the current needs of the board of directors and the Company to +2021 Proxy Statement +15 +Table of Contents +maintain a balance of knowledge, experience and capability. In the case of incumbent directors whose terms of office are set to expire, the board of directors and the nominating and corporate +governance committee review such directors’ overall service to the Company during their term, including the number of meetings attended, level of participation, quality of performance, and any other relationships and transactions that might +impair such directors’ independence. In the case of new director candidates, the board of directors and the nominating and corporate governance committee also determine whether the nominee must be independent for purposes of any stock exchange +on which any of the Company’s capital stock is listed. +Stockholder Recommendations and Nominations +Stockholders who wish to recommend candidates may contact the nominating and corporate governance committee in the manner described below +under “Board and Corporate Governance Matters—Stockholder Communications with our Board of Directors.” Stockholder nominations must be made according to the procedures required under our bylaws and described in this proxy statement +under the heading “Additional Information—Stockholder Proposals and Nominations for Next Year’s Annual Meeting of Stockholders.” Stockholder-recommended candidates and stockholder nominees whose nominations comply with these +procedures will be evaluated by our nominating and corporate governance committee in the same manner as other nominees. +Code of Business Conduct and Ethics +We have adopted a Code of Business Conduct and Ethics (the “Code of Conduct”) +that applies to all of our employees, officers (including our principal executive officer, principal financial officer and principal accounting officer or controller, or persons performing similar functions), and directors. The full text of our Code +of Conduct is posted on our website at www.biodesix.com. We intend to disclose future amendments to certain provisions of our Code of Conduct, or waivers of such provisions, applicable to any principal executive officer, principal financial officer, +principal accounting officer or controller, or persons performing similar functions, and our directors, on our website identified above. Reference to our website does not constitute incorporation by reference of the information contained at or +accessible through our website into this proxy statement. +Corporate Governance Guidelines +We have adopted written corporate governance guidelines which provide the framework for our corporate governance, along with our amended and +restated certificate of incorporation, amended and restated bylaws, committee charters and other key governance practices and policies. Our corporate governance guidelines cover a range of topics including, but not limited to, board composition, +independence and selection of directors, board membership criteria, conduct of board meetings, board committee composition and functions, board assessment, director compensation and succession planning. Our corporate governance guidelines will be +reviewed at least annually by our nominating and corporate governance committee and any proposed changes will be recommended to our full board of directors for approval. A copy of our corporate governance guidelines is available on our corporate +website at www.biodesix.com in the Investor section under “Governance Highlights.” Reference to our website does not constitute incorporation by reference of the information contained at or accessible through our website into this proxy +statement. +Anti-Hedging and Anti-Pledging Policy +Our insider trading policy prohibits our directors, executive officers and other employees from engaging in hedging transactions or other +inherently speculative transactions with respect to Company securities, such as short sales or transactions in put or call options. Our directors, executive officers and other employees are also prohibited from holding Company securities in a margin +account or pledging company securities as collateral for a loan. +2021 Proxy Statement +16 +Table of Contents +Stockholder Communications with our Board of Directors +Any stockholder or other interested party who wishes to communicate with our board of directors or any individual director may +send written communications to our board of directors or such director c/o Corporate Secretary, Biodesix, Inc., 2970 Wilderness Place, Suite 100, Boulder, CO 80301. The communication must include the stockholder’s name, address and an +indication that the person is our stockholder. The Corporate Secretary will review any communications received from stockholders and will forward such communications to the appropriate director or directors, or committee of our board of directors, +based on the subject matter. Communications that are deemed inappropriate (such as communications that are commercial or frivolous in nature) will not be forwarded. In addition, communications that appear to be unduly hostile, intimidating, +threatening, illegal or similarly inappropriate will not be forwarded. +Certain Relationships and +Related-Party Transactions +The following is a summary of the transactions since January 1, 2019 to which we have been a +participant in which the amount involved in the transaction exceeds or will exceed $120,000 and in which any of our directors, director nominees, executive officers, or holders of more than 5% of our capital stock, or any immediate family member of, +or person sharing the household with, any of these individuals, had or will have a direct or indirect material interest, with certain exceptions, other than compensation arrangements, which are under the section of this proxy statement captioned +“Executive Compensation.” +Preferred Stock Financings +We previously issued convertible preferred stock from time to time to fund our operations and to make acquisitions. In February and March +2019, we issued 8,695,621 shares of Series H Preferred Stock at $1.15 per share for total cash proceeds of $10.0 million. +Immediately +prior to our initial public offering, we had issued 118,766,273 convertible preferred shares. On October 27, 2020, upon closing of our initial public offering, each outstanding share of Series A-1 +Preferred Stock, Series A-2 Preferred Stock, Series A-3 Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred +Stock, Series F Preferred Stock, Series G Preferred Stock and Series H Preferred Stock automatically converted into 0.1684664 share of common stock; and each share of Series B-1 Preferred Stock automatically +converted into 0.196 shares of common stock. In the aggregate, all series of preferred stock were converted into 20,090,745 shares of common stock. As a result, as of December 31, 2020 there are no longer any series of convertible preferred +stock outstanding. +Convertible Debt Financings +In March 2020, we issued $10.0 million in convertible debt (the “March 2020 Notes”) that was scheduled to mature in August +2020. In August 2020, the maturity date of this debt was extended to June 30, 2021. The March 2020 Notes were issued in two tranches of $5 million, with the first tranche being funded in March 2020 and the second tranche in June 2020. The +holders of the March 2020 Notes included a number of our directors and their affiliates. +In December 2019, we issued $6.0 million in +convertible debt (the “December 2019 Notes”), that were scheduled to mature in August 2020. In August 2020, the maturity date of this debt was extended to June 30, 2021. The December 2019 Notes were issued in two tranches of +$3.0 million, with the first tranche funded in December 2019. The second tranche was funded in February 2020. The holders of the December 2019 Notes included a number of our directors and their affiliates. +In August and September 2019 we issued $10.0 million in convertible debt (the “August 2019 Notes”) that was scheduled to mature +in August 2020. In August 2020, the maturity date of this debt was extended to June 30, 2021. The holders of the August 2019 Notes included a number of our directors and their affiliates. +Our convertible debt, along with the related accrued interest, was automatically converted to 1,848,280 shares of our common stock upon the +completion of our initial public offering in October 2020. +2021 Proxy Statement +17 +Table of Contents +Investor Rights Agreement +In October 2018, we entered into an amended and restated investor rights agreement (“IRA”) with certain holders of our preferred +stock and common stock, including certain holders of 5% of our capital stock, and including certain members of, and affiliates of, our directors and certain of our executive officers. The IRA provides the holders of our preferred stock with certain +registration rights. After the closing of our initial public offering, the holders of 20,090,745 shares of common stock issuable from conversion of outstanding preferred stock, became entitled to rights with respect to the registration of their +shares of common stock under the Securities Act under this agreement. +Contingent Value Rights Agreement +In February 2016, we entered into a contingent value rights agreement (“CVR Agreement”) with certain holders of our preferred and +common stock, including several members of our board of directors. Pursuant to the CVR Agreement, the holders would be eligible to receive in the aggregate up to 15% of any future income and proceeds that we would receive, subject to a number of +conditions and offsets, with respect to ficlatuzumab rights under our co-development and collaboration agreement with AVEO Pharmaceuticals, Inc. +Stock Options +As of December 31, 2020, options to purchase an aggregate of 229,978 shares of common stock were outstanding under our 2006 Incentive +Plan. As of December 31, 2020, options to purchase an aggregate of 2,091,590 shares of common stock were outstanding under our 2016 Incentive Plan. For additional information regarding the terms of these plans, see the section titled +“Executive Compensation—Equity Plan Information.” +Participation in Initial Public Offering +Messrs. Patience, Schuler and Strobeck, members of our board of directors, purchased 391,110 shares of common stock from the underwriters in +our initial public offering at the initial public offering price per share of $18.00. +Participation in Initial Public Offering +Directed Share Program +Messrs. Hutton, Massarany and Watts, members of our board of directors, purchased 15,000 shares of +common stock through our Directed Share Program in our initial public offering at the initial public offering price per share of $18.00. +Indemnification of Directors and Executive Officers +We have entered into indemnification agreements with +each of our directors and executive officers in connection with our initial public offering. The indemnification agreements and our bylaws will require us to indemnify our directors against certain liabilities, costs and expenses to the fullest +extent not prohibited by DGCL, and have purchased directors’ and officers’ liability insurance. Subject to very limited exceptions, our bylaws will also require us to advance expenses incurred by our directors and officers. +Policies and Procedures for Related-Party Transactions +Our audit committee has the primary responsibility for the review, approval and oversight of any “related-party transaction,” which +is any transaction, arrangement or relationship (or series of similar transactions, arrangements or relationships) in which we are, were or will be a participant and the amount involved exceeds $120,000, and in which the related person has, had or +will have a direct or indirect material interest. We adopted a written related-party transaction policy effective October 2020. Under our related-party transaction policy, our management is required to submit any related-party transaction not +previously approved or ratified by our audit committee to our audit committee. In approving or rejecting the proposed transactions, our audit committee takes into account all of the relevant facts and circumstances available. All of the transactions +described in this section, except for certain equity award grants, occurred prior to the adoption of this policy. +2021 Proxy Statement +18 +Table of Contents +DIRECTOR COMPENSATION +Non-Employee Director Compensation Policy +During the year ended December 31, 2020, none of our non-employee directors received retainers or +other cash payments with respect to service on our board of directors or any of its committees. We plan to adopt a formal non-employee director compensation program. For 2021, we have not granted any stock +awards, option awards or other equity awards to our non-employee directors at the time of this filing. +2020 Director Compensation Table +The following table sets forth information for +the fiscal year ended December 31, 2020 regarding the compensation awarded to, earned by or paid to our non-employee directors. The only compensation received by our +non-employee directors was in the form of restricted stock units (“RSUs”) and option awards. Mr. Hutton, our Chief Executive Officer, does not receive any separate compensation for his service +on our board of directors. +In respect of 2020 service, Messrs. Patience, Schuler, Strobeck and Watts each received stock options +representing the right to purchase 35,157 shares of our common stock. Ms. Franchi joined the board of directors in April 2020 and Mr. Massarany joined the board of directors in July 2020. The board of directors granted each of +Ms. Franchi and Mr. Massarany a new member equity award of 26,368 RSUs and an option award for their terms beginning April 1, 2020 and July 1, 2020, respectively, upon availability from the stock option pool. +Stock +Awards +Option +Awards +Total +Name +($) (1) +($) (2) +($) +Jean Franchi +20,348 +5,244 +25,592 +Hany Massarany +20,348 +6,468 +26,816 +John Patience +— +6,468 +6,468 +Jack Schuler +— +6,468 +6,468 +Matthew Strobeck, Ph.D +— +6,468 +6,468 +Charles M. Watts, M.D +— +6,468 +6,468 +(1) +The amounts reported represent the aggregate grant date fair market value of the RSUs, calculated in accordance +with FASB ASC Topic 718 based on the assumption that the value of each RSU was equal to $0.77. +(2) +The amounts reported represent the aggregate grant date fair market value of the stock options calculated in +accordance with FASB ASC Topic 718. The assumptions used in calculating the grant date fair value of the award disclosed in this column are set forth in Note 14 of our audited financial statements included in the 2020 Form 10-K Report under “Item 8. Financial Statements and Supplementary Data” for the year ended December 31, 2020. These amounts do not correspond to the actual value that may be recognized by the non-employee directors upon exercise of the applicable awards. +2021 Proxy Statement +19 +Table of Contents +EXECUTIVE COMPENSATION +The following is a discussion of compensation arrangements of our named executive officers. This discussion contains forward-looking +statements that are based on our current plans, considerations, expectations, and determinations regarding future compensation programs. Actual compensation programs that we adopt may differ materially from currently planned programs as summarized +in this discussion. As an “emerging growth company” as defined in the JOBS Act, we are not required to include a Compensation Discussion and Analysis section and have elected to comply with the scaled back disclosure requirements +applicable to emerging growth companies. In addition, as an emerging growth company, we are not required to conduct votes seeking approval, on an advisory basis, of either the compensation of our named executive officers or the frequency with which +such votes must be conducted. +Overview +This section provides a discussion of the compensation paid or awarded to our Chief Executive Officer and our two other most highly compensated +executive officers as of December 31, 2020. We refer to these individuals as our “named executive officers.” For 2020, our named executive officers were: +• +Scott Hutton, President and Chief Executive Officer; +• +Robin Harper Cowie, Chief Financial Officer, Secretary and Treasurer; and +• +Kieran O’Kane, Chief Commercial Officer. +Our executive compensation program is intended to align executive compensation with our performance objectives and business strategy and to +enable us to attract, motivate, retain and reward executive officers who operate in a highly competitive and technologically challenging environment and whose contributions are critical to our long-term success. The compensation paid or awarded to +our executive officers is generally based on the assessment of each individual’s performance compared against the business objectives established for the fiscal year as well as our historical compensation practices. The compensation paid to +newly hired executive officers is primarily determined based on the negotiations of the parties as well as our historical compensation practices, and we seek fairness in total compensation paid to our executive officers. As a result, we benchmark +executive compensation against external and internal comparisons and look at the relationship between team member roles in the organization to determine appropriate compensation. For the year ended December 31, 2020, the material elements of our +executive compensation program were base salary, annual cash bonus and equity awards in the form of stock options. +Performance-based, at +risk and variable compensation in the form of annual cash bonuses and equity-based compensation is a significant portion of the overall compensation paid to each named executive officer. Our annual cash bonuses and performance-based stock options +are earned or vest only upon the achievement of certain performance metrics. In addition, the value received from stock options (if any) depends on our stock price. +We expect that our executive compensation program will continue to evolve to reflect our recent status as a publicly-traded company, while +still supporting our overall business and compensation objectives. The compensation committee of our board of directors oversees our executive compensation program. In addition, during the year ended December 31, 2020, the compensation +committee retained an independent executive compensation consultant to advise us on the elements of our executive compensation program. +2021 Proxy Statement +20 +Table of Contents +Compensation of Named Executive Officers +Base Salary +Base salaries are intended to provide a level of compensation sufficient to attract and retain an effective management team, when considered in +combination with the other components of our executive compensation program. The relative levels of base salary for our named executive officers are designed to reflect each executive officer’s scope of responsibility and accountability to us. +Please see the “Salary” column in the Summary Compensation Table for the base salary amounts received by each named executive officer during the years ended December 31, 2019 and December 31, 2020. +The 2020 annual base salaries in effect for Mr. Hutton and Ms. Harper Cowie through October 31, 2020 were $350,000 and +$265,000, respectively, and as set forth in their offer letter agreements which are further described below, increased to $425,000 and $290,000, respectively, on November 1, 2020 following our initial public offering. +The 2020 annual base salary in effect for Mr. O’Kane was $232,000 through February 28, 2020 and $240,000 effective March 1, +2020 for the remainder of the fiscal year. +Effective March 1, 2021, our board of directors approved increases in +Mr. Hutton’s, Ms. Harper Cowie’s and Mr. O’Kane’s annual base salaries to $515,000, $330,000 and $275,000, respectively. The March 2021 increases were set based on advice from the independent compensation +consultant and were intended to ensure competitiveness when compared with public company base salaries for companies of commensurate size and complexity. +Annual Cash Bonuses +We provide our senior leadership team with short-term incentive compensation through an annual cash bonus program. Annual bonus compensation +holds executives accountable, rewards the executives based on actual business results and helps create a “pay for performance” culture. Our annual cash bonus program provides cash incentive award opportunities based on the achievement of +performance goals approved by our compensation committee at the beginning of each fiscal year. +Generally, our compensation committee +establishes a Company-based performance metric as a threshold vesting criterion for any payouts for a particular annual bonus period. In determining bonus payouts, if any, the performance of our named executive officers with respect to individual +performance goals established at the beginning of the applicable year is only considered if that metric is met or exceeded. For 2020, the compensation committee determined that the Company’s revenue would be the applicable Company-based metric, +and at year end, measured actual revenue against targeted revenue, determined in accordance with U.S. GAAP. +Mr. Hutton’s 2020 +bonus target as a percentage of his annual base salary was 50% through October 31, 2020 and 100% from November 1, 2020 through the fiscal year end. Ms. Harper Cowie’s 2020 bonus target as a percentage of her annual base salary +was 50% for the entire fiscal year. Mr. O’Kane’s 2020 bonus target as a percentage of his annual base salary was 20% through February 28, 2020 and 40% from March 1, 2020 through the fiscal year end. Based on our 2020 +performance, our compensation committee determined, and our board of directors approved, payouts under our annual cash bonus program equal to approximately 150% of the target bonus opportunity. +The Company’s bonus-to options program permits eligible executives, including each of our named +executive officers, to elect to receive a portion of the annual bonus earned during a particular year in the form of an option award (“bonus-to-options +awards”), subject to certain limitations on the total number of bonus-to-options awards that may be granted for a year. The bonus-to-option awards, if any, are fully vested at grant and have an exercise price equal to the fair market value of our common stock on grant date. The bonus-to-options program reflects our commitment to a “pay for performance” philosophy and further aligns our executive compensation program with the long-term interests of our stockholders because +an executive who participates foregoes a portion of his or her annual cash bonus in exchange for an option award that will be valuable only if the stock price increases. +2021 Proxy Statement +21 +Table of Contents +Pursuant to each named executive officers’ elections made in 2019, Mr. Hutton, +Ms. Harper Cowie and Mr. O’Kane each received portions of their respective annual bonuses in the form of a bonus-to-options award instead of in cash. The +number of shares of the Company’s common stock subject to each bonus-to-options award was determined by multiplying the cash value of the bonus election to be +received in the form of an option award by four, and then dividing the product of that calculation by $8.38 (the Company’s average share price during 2020, calculated based on (i) for January 1, 2020 through October 27, 2020, the +then current value per share of preferred stock, as adjusted to take into account the reverse stock split that occurred in 2020, and (ii) for October 28, 2020 through December 31, 2020, the closing price of our publicly traded common +stock). This methodology represents an equitable adjustment by the board of directors of the formula under the bonus-to-options program to take into account the impact +of our initial public offering on our securities and prevent the dilution or enlargement of rights under the program. Accordingly, each of Mr. Hutton, Ms. Harper Cowie and Mr. O’Kane received a payout under the 2020 annual cash +bonus program in cash and a bonus-to-options award, as illustrated below: +Name +Incentive +Cash Payout +Shares Subject to Bonus- +to-Option Award +Scott Hutton +$167,636 +75,195 +Robin Harper Cowie +$104,077 +46,685 +Kieran O’Kane +$68,142 +30,566 +Equity Awards +To further align the interests of our executive officers with the interests of our stockholders and to further focus our executive officers on +our long-term performance, we have historically granted equity compensation in the form of stock options. +In the year ended December 31, +2020, the board of directors awarded Mr. Hutton, Ms. Harper Cowie and Mr. O’Kane stock options (“time-vested options”) representing the right to purchase 151,617, 30,323, and 26,953 shares of our common stock, +respectively, on a five-year vesting schedule. The 2020 time-vested options vest in a series of 60 successive, equal monthly installments measured from the vesting commencement date, subject to continued service through the applicable vesting date. +In the year ended December 31, 2019, the board of directors awarded Mr. Hutton and Ms. Harper Cowie time-vested options +representing the right to purchase 42,116 and 35,377 shares of our common stock, respectively, also on a five- year vesting schedule. Mr. O’Kane was not a named executive officer for fiscal 2019. Under the original terms of the 2019 +time-vested options granted to Mr. Hutton and Ms. Harper Cowie, two fifths of the time-vested options would have vested on the second anniversary of the vesting commencement date, with the remaining balance vesting in a series of 36 +successive equal monthly installments measured from the second anniversary of the vesting commencement date, subject to the award recipient’s continued service through the applicable vesting date. In September 2020, the board of directors +amended the 2019 time-vested options such that 21/60 of the time-vested options vested on the date that was 21 months after the vesting commencement date, with the remaining balance vesting in a series of 39 successive equal monthly installments +measured from such date, subject to the award recipient’s continued service through the applicable vesting date. +In the year ended +December 31, 2019, the board of directors also awarded Mr. Hutton and Ms. Harper Cowie performance-based stock options (“performance-vested options”) representing the right to purchase 25,269, and 17,688 shares of our common +stock, respectively, on a three-year vesting schedule subject to the achievement of applicable performance criteria. One third of these performance-vested options vest after each of the first (2019 tranche), second (2020 tranche) and third (2021 +tranche) anniversaries of the vesting commencement date, subject to the Company’s achievement of recognized revenue of at least $31 million, $67 million and $134 million for the years ended December 31, 2019, 2020 and 2021, +respectively. +Mr. O’Kane did not become eligible for a grant of performance-vested options until April 2020, at which time he +was granted stock options representing the right to purchase 8,423 shares of our common stock. One half of the performance-vested options granted to Mr. O’Kane vest after each of the first (2020 tranche) and second +2021 Proxy Statement +22 +Table of Contents +(2021 tranche) anniversaries of the vesting commencement date, subject to the achievement of the same performance criteria described above for the 2020 and 2021 tranches of Mr. Hutton’s +and Ms. Harper Cowie’s performance-vested options. +The board of directors has sole discretion to determine if the performance +hurdles are met and to determine the vesting date, and shall make such determinations within 90 days after the end of the applicable fiscal year. In September 2020, and in light of the impact of the COVID-19 +pandemic on the Company’s operations and other considerations, the board of directors amended the performance-vested options to adjust the performance hurdles for the 2020 tranche and the 2021 tranche to $28.6 million and +$51.5 million, respectively. At the time of such amendment, the Board believed that the achievement of the amended performance hurdles remained uncertain, and struck the appropriate balance of ambitious and attainable. +The board of directors retains ultimate discretion to determine whether such performance hurdles have been met. For the 2019 tranche, the board +of directors determined that the performance hurdles were not met and, consistent with our pay for performance philosophy, one third of each of Mr. Hutton’s and Ms. Harper Cowie’s performance-vested option award was therefore +cancelled. For the 2020 tranche, the board of directors determined that the performance hurdles were met and one third of each of Mr. Hutton’s and Ms. Harper Cowie’s and one half of Mr. O’Kane’s performance-vested +option award became fully vested and exercisable. +In addition, the compensation committee awarded Mr. Hutton, Ms. Harper Cowie +and Mr. O’Kane bonus-to-options awards representing the right to purchase 75,195, 46,685 and 30,566 shares of our common stock, respectively. Such awards +relate to achievement of performance metrics under the 2020 annual cash bonus program as determined in February of 2021, at which time the bonus-to-options awards were +approved. See the section titled “Annual Cash Bonuses,” above. +Please see “Outstanding Equity Awards at Fiscal 2020 Year-End” below for a summary of the outstanding equity awards held by each of the named executive officers as of 2020 year-end. +Discretionary Bonus +Mr. O’Kane was awarded a discretionary Excellence Award during 2020, which is a recognition award presented annually to selected team +members for excellence in contributions to the Company. As an award recipient, Mr. O’Kane received a cash bonus of $2,000. +2021 Proxy Statement +23 +Table of Contents +2020 Summary Compensation Table +The following table shows information regarding the compensation of our named executive officers for services performed during the years ended +December 31, 2020 and 2019. +Name and Principal Position +Fiscal +Year +Salary +($) (1) +Bonus +($) +Option +Awards +($) (2) +Non-Equity +Incentive Plan +Compensation +($) (3)(4) +All Other +Compensation +($)(5) +Total ($) +Scott Hutton +President and Chief Executive Officer +2020 +364,175 +— +1,051,652 +167,636 +(6) +71 +1,583,534 +2019 +298,475 +— +38,285 +— +336,760 +Robin Harper Cowie +Chief Financial Officer, Secretary and Treasurer +2020 +271,017 +— +621,247 +104,077 +(7) +143 +996,484 +2019 +263,525 +— +30,150 +— +293,675 +Kieran O’Kane +Chief Commercial Officer (8) +2020 +239,000 +2,000 +(9) +414,453 +68,142 +(10) +917 +724,512 +(1) +The amounts disclosed represent the dollar value of base salary earned by the named executive officer as of +December 31 of each applicable fiscal year. +(2) +The amounts disclosed represent the aggregate grant date fair value of the award or an estimate of the grant +date fair value of bonus-to-options awards as calculated in accordance with FASB ASC Topic 718. The assumptions used in calculating the grant date fair value of the +award disclosed in this column are set forth in Note 14 of our audited financial statements included in the 2020 Form 10-K Report “Item 8. Financial Statements and Supplementary Data” for the year +ended December 31, 2020. For the bonus-to-options awards, the estimated grant date fair value was used to correspond to the treatment of such expense under U.S. GAAP in +the 2020 Form 10-K Report, as the service inception period precedes the grant date. These amounts do not correspond to the actual value that may be realized by the named executive officers upon vesting or +exercise of the applicable awards. +(3) +Based on our 2020 performance measured against the Company’s amended net revenue objectives, our +compensation committee determined that the Company had overachieved and the board of directors therefore approved payouts under the 2020 annual cash bonus program at a 150% achievement level. The Non-Equity +Incentive Plan Compensation listed for each named executive officer represents the annual cash bonus award for the 2020 fiscal year after taking into consideration the election of each individual to participate in the +bonus-to-options program. +(4) +Based on our 2019 performance measured against Company objectives, our compensation committee determined not to +award payouts under the 2019 annual cash bonus program. +(5) +The amounts disclosed represent the tax gross-up received by each named +executive officer as of December 31 of each applicable fiscal year. +(6) +At a 150% achievement level, Mr. Hutton was entitled to a payout under the 2020 annual cash bonus program +of $325,171. However, Mr. Hutton elected to receive a portion of his 2020 annual cash bonus in the form of an option award under the bonus-to-options program. In +accordance with Mr. Hutton’s election and the terms of the bonus-to-options program, Mr. Hutton received a cash payment of $167,636 in respect of his 2020 +annual cash bonus, as reflected in this column, and in place of the remaining amount, received an option award representing the right to purchase 75,195 shares of our common stock, the value of which is reflected in the “Option Awards” +column. +2021 Proxy Statement +24 +Table of Contents +(7) +At a 150% achievement level, Ms. Harper Cowie was entitled to a payout under the 2020 annual cash bonus +program of $201,884. However, Ms. Harper Cowie elected to receive a portion of her 2020 annual cash bonus in the form of an option award under the bonus-to-options +program. In accordance with Ms. Harper Cowie’s election and the terms of the bonus-to-options program, Ms. Harper Cowie received a cash payment of +$104,077 in respect of her 2020 annual cash bonus, as reflected in this column, and in place of the remaining amount, received an option award representing the right to purchase 46,685 shares of our common stock, the value of which is reflected in +the “Option Awards” column. +(8) +Mr. O’Kane was not a named executive officer for fiscal 2019. +(9) +Mr. O’Kane was awarded a discretionary Excellence Award during 2020 equal to $2,000. +(10) +At a 150% achievement level, Mr. O’Kane was entitled to a payout under the 2020 annual cash bonus +program of $132,178. However, Mr. O’Kane elected to receive a portion of his 2020 annual cash bonus in the form of an option award under the bonus-to-options +program. In accordance with Mr. O’Kane’s election and the terms of the bonus-to-options program, Mr. O’Kane received a cash payment of $68,142 +in respect of his 2020 annual cash bonus, as reflected in this column, and in place of the remaining amount, received an option award representing the right to purchase 30,566 shares of our common stock, the value of which is reflected in the +“Option Awards” column. +Outstanding Equity Awards at Fiscal 2020 Year-End +The following table presents information regarding the outstanding equity awards held +by each of the named executive officers as of December 31, 2020. As of the year ended December 31, 2020, none of the named executive officers held any outstanding RSUs or stock awards other than options. +Name +Grant +Date +Number of +Securities +Underlying +Unexercised +Options +(#) Exercisable +Number of +Securities +Underlying +Unexercised +Options +(#) Unexercisable +Equity +Incentive +Plan +Awards: +Number of +Securities +Underlying +Unexercised +Unearned +Options (#) +Option +Exercise +Price +($) +Option +Expiration +Date +Scott Hutton +4/4/2018 +46,326 +37,905 (3) +– +0.42 +4/3/2028 +3/22/2019 +16,143 +25,972 (2) +16,846 (4) +0.77 +12/31/2028 +4/15/2020 +27,797 +123,820 (1) +– +0.77 +4/14/2030 +Robin Harper Cowie +4/22/2011 +2,526 +– +– +2.62 +4/21/2021 +2/4/2014 +10,107 +– +– +4.40 +2/3/2024 +4/8/2015 +6,738 +– +– +4.40 +4/7/2025 +4/7/2016 +42,960 +589 (1) +– +0.84 +4/6/2026 +5/16/2017 +13,206 +3,640 (1) +– +0.42 +5/15/2027 +4/4/2018 +12,285 +8,772 (1) +– +0.42 +4/3/2028 +3/22/2019 +13,557 +21,820 (2) +11,792 (4) +0.77 +12/31/2028 +4/15/2020 +5,566 +24,757 (1) +– +0.77 +4/14/2030 +Kieran O’Kane +4/4/2018 +7,157 +5,477 (3) +– +0.42 +4/3/2028 +3/22/2019 +4,853 +7,781 (1) +– +0.77 +12/31/2028 +4/15/2020 +4,924 +22,029 (1) +8,423 (4) +0.77 +4/14/2030 +(1) +These stock options vest in a series of 60 successive, equal monthly installments measured from the vesting +commencement date. +(2) +Two fifths of these time-vested options vest on the second anniversary of the vesting commencement date, with +the remaining balance vesting in a series of 36 successive equal monthly installments measured from the second anniversary of the vesting commencement date, subject to the award recipient’s continued employment through the applicable vesting +date. In September 2020, the board of directors amended these time-vested options such that 21/60 of the time-vested options vest on the date that is 21 months after the +2021 Proxy Statement +25 +Table of Contents +vesting commencement date, with the remaining balance vesting in a series of 39 successive equal monthly installments measured from such date, subject to the award recipient’s continued +employment through the applicable vesting date. +(3) +Two fifths of these time-vested options vest on the second anniversary of the vesting commencement date, with +the remaining balance vesting in a series of 36 successive equal monthly installments measured from the second anniversary of the vesting commencement date, subject to the award recipient’s continued employment through the applicable vesting +date. +(4) +In the year ended December 31, 2019, the board of directors awarded Mr. Hutton and Ms. Harper Cowie +performance-vested options representing the right to purchase 25,269 and 17,688 shares of our common stock, respectively. One third of these performance-vested options vest (or could have vested) after each of the first, second and third +anniversaries of the vesting commencement date, subject to the Company’s achievement of recognized revenue of at least $31 million, $67 million and $134 million for the years ended December 31, 2019, 2020 and 2021, respectively. +Mr. O’Kane did not become eligible to receive an award of performance-vested options until April 2020, at which time he was granted stock options representing the right to purchase 8,423 shares of our common stock. One half of the +performance-vested options granted to Mr. O’Kane vest after each of the first and second anniversaries of the vesting commencement date, subject to the achievement of the same performance criteria described above for the 2020 and 2021 +tranches of Mr. Hutton’s and Ms. Harper Cowie’s performance-vested options. The board of directors has sole discretion to determine if the performance hurdles are met and to determine the vesting date, and shall make such +determinations within 90 days after the end of the applicable fiscal year. For the 2019 tranche, the board of directors determined that the performance hurdle was not met. As a result, one third of each of Mr. Hutton’s and Ms. Harper +Cowie’s awards were cancelled, and two thirds of each of Mr. Hutton’s and Ms. Harper Cowie’s awards remained outstanding. In addition, in September 2020 and in light of the impact of the +COVID-19 pandemic on the Company’s operations and other considerations, the board of directors amended the performance-vested options to adjust the performance hurdles for the 2020 tranche and the 2021 +tranche to $28.6 million and $51.5 million, respectively. For the 2020 tranche, the board of directors determined that the 2020 performance hurdles were met and one third of each of Mr. Hutton’s and Ms. Harper Cowie’s +and one half of Mr. O’Kane’s performance-vested option award became fully vested and exercisable. +Additional Matters +Hutton Offer Letters +Mr. Hutton and the Company entered into an offer letter agreement, dated as of February 23, 2020 (the “2020 Hutton Offer +Letter”). Under the terms of the 2020 Hutton Offer Letter, effective January 1, 2020, Mr. Hutton’s base salary was raised to $350,000 annually. Effective November 2020, Mr. Hutton’s base salary was further adjusted to +$425,000 annually, and he became eligible to receive a bonus of up to 100% of his base salary. +In addition, Mr. Hutton is entitled +to certain severance benefits in the event that his employment with the Company is terminated without Cause, as defined in Mr. Hutton’s offer letter agreement with the Company dated as of February 8, 2018 (the “2018 Hutton Offer +Letter”), including but not limited to a termination following a change in control or, following a change in control, a successor’s failure to assume the terms and conditions of the 2018 Hutton Offer Letter as it relates to +Mr. Hutton’s salary, duties and responsibilities or severance provisions. The severance benefits consist of (i) base salary continuation for a period of 12 months following the effective date of a general release of claims, less +standard deductions and withholdings, and (ii) if Mr. Hutton timely elects healthcare continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), Company-paid COBRA premiums +(including in respect of coverage for eligible dependents) for a period starting on Mr. Hutton’s termination date and ending 12 months thereafter, subject to earlier termination if Mr. Hutton becomes eligible for health coverage from +a subsequent employer, or if Mr. Hutton ceases to be eligible for COBRA continuation for any reason including plan termination. In order to receive the severance benefits, Mr. Hutton is required to execute and allow to become effective a +release of all claims in favor of the Company, which becomes irrevocable and to be in continued compliance with any cooperation, non-disparagement or confidentiality provisions contained therein and with +obligations under the Company’s Confidentiality and Inventions Assignment Agreement, including non-solicit provisions thereof. +2021 Proxy Statement +26 +Table of Contents +Pursuant to the 2018 Hutton Offer Letter, in the event Mr. Hutton resigned, or if his +employment was terminated by the Company for Cause or due to death or disability, Mr. Hutton would be entitled to any salary earned but unpaid prior to such termination, any reimbursable business expenses that were incurred but not reimbursed +as of Mr. Hutton’s last day of employment, and, if applicable, all accrued but unused vacation. Any unvested stock options or other equity awards would cease to vest and be forfeited on Mr. Hutton’s last day of employment. In the +event that Mr. Hutton’s employment is terminated by the Company without Cause, as defined in the 2020 Hutton Offer Letter, he would be entitled to the same severance benefits as provided for under the 2018 Hutton Offer Letter, plus an +additional payout of target bonus previously established by the compensation committee. Furthermore, any change in control which results in a change of position will trigger the accelerated vesting of 100% of all unvested and then outstanding +options held by Mr. Hutton. +Effective March 1, 2021, our board of directors approved an increase in Mr. Hutton’s base +salary to $515,000 to reward him at a level that is commensurate with public company peers and to provide incentives that properly reflect his current duties and responsibilities. +Harper Cowie Offer Letters +Ms. Harper Cowie and the Company entered into an offer letter agreement, dated as of February 23, 2020 (the “2020 Harper Cowie +Offer Letter”). Under the terms of the 2020 Harper Cowie Offer Letter, Ms. Harper Cowie is entitled to a base salary of $290,000 annually effective November 2020, and she is eligible to receive a bonus of up to 50% of her base salary after +approval from the compensation committee and board of directors that relevant objectives have been achieved. In addition, Ms. Harper Cowie is entitled to certain severance benefits in the event that her employment with the Company is terminated +without Cause, as defined in the 2020 Harper Cowie Offer Letter, including but not limited to a termination following a change in control. The severance benefits consist of (i) base salary continuation for a period of six months following the +effective date of a general release of claims, less standard deductions and withholdings, and (ii) if Ms. Harper Cowie timely elects healthcare continuation coverage under COBRA, Company-paid COBRA premiums (including in respect of +coverage for eligible dependents) for a period starting on Ms. Harper Cowie’s termination date and ending 12 months thereafter, subject to earlier termination if Ms. Harper Cowie becomes eligible for health coverage from a subsequent +employer, or if Ms. Harper Cowie ceases to be eligible for COBRA continuation for any reason including plan termination. Any change in control which results in a change of position for Ms. Harper Cowie also results in accelerated vesting +of 100% of all unvested and then outstanding options held by Ms. Harper Cowie. In order to receive the severance benefits, Ms. Harper Cowie is required to execute a release of all claims in favor of the Company which becomes irrevocable, +and to be in continued compliance with cooperation, non-disparagement or confidentiality provisions contained therein and with obligations under the Company’s Confidentiality and Inventions Assignment +Agreement, including non-solicit provisions thereof. +Pursuant to the 2020 Harper Cowie Offer +Letter, in the event Ms. Harper Cowie resigns, or if her employment is terminated by the Company for Cause or due to death or disability, Ms. Harper Cowie would be entitled to any salary earned but unpaid prior to such termination, any +reimbursable business expenses that were incurred but not reimbursed as of Ms. Harper Cowie’s last day of employment, and, if applicable, all accrued but unused vacation. Any unvested stock options or other equity awards shall cease to +vest and be forfeited on Ms. Harper Cowie’s last day of employment. +Effective March 1, 2021, our board of directors +approved an increase in Ms. Harper Cowie’s base salary to $330,000 to reward her at a level that is commensurate with public company peers and to provide incentives that properly reflect her current duties and responsibilities. +401(k) Plan +The +Company participates in a multiple employer tax-qualified 401(k) savings plan which allows participants to defer eligible compensation up to the maximum amount allowed under Internal Revenue Service +guidelines. The Company does not currently make any discretionary or employer matching contributions under the plan. +2021 Proxy Statement +27 +Table of Contents +STOCK OWNERSHIP +Security Ownership of Certain Beneficial Owners and Management +The following table sets forth certain information with respect to the beneficial ownership of our common stock as of April 1, 2021: +• +each of our named executive officers; +• +each of our directors; +• +all of our directors and executive officers as a group; and +• +each person, or group of affiliated persons, known by us to beneficially own more than 5% of our common stock. +We have determined beneficial ownership in accordance with the rules of the SEC, and therefore it represents sole or +shared voting or investment power with respect to our securities. Unless otherwise indicated below, to our knowledge, the persons and entities named in the table have sole voting and sole investment power with respect to all shares that they +beneficially owned, subject to community property laws where applicable. We have deemed shares of common stock subject to options that are currently exercisable or exercisable within 60 days of April 1, 2021, to be outstanding and to be +beneficially owned by the person holding the option for the purpose of computing the percentage ownership of that person but have not treated them as outstanding for the purpose of computing the percentage ownership of any other person. +We have based percentage ownership of common stock before this offering on 26,785,426 shares of common stock outstanding as of April 1, +2021. Unless otherwise indicated, the address for each beneficial owner listed in the table below is c/o Biodesix, Inc., 2970 Wilderness Place, Suite 100, Boulder, Colorado 80301. +Shares Beneficially +Owned +Name and Address of Beneficial Owner +Shares +% +Principal Stockholders: +Jack Schuler and entities affiliated with Jack Schuler (1) +7,959,564 +29.7 +% +John Patience and entities affiliated with John Patience (2) +4,822,537 +18.0 +% +Life Sciences Alternative Financing LLC and entities affiliated with Life Sciences Alternative +Financing LLC (3) +2,190,427 +8.2 +% +Robert Cawthorn and entities affiliated with Robert Cawthorn (4) +1,999,193 +7.4 +% +Entities affiliated with Lawrence T. Kennedy, +Jr. (5) +1,411,767 +5.3 +% +Directors and Executive Officers: +Scott Hutton (6) +255,341 +* +Robin Harper Cowie (7) +158,948 +* +Kieran O’Kane (8) +57,836 +* +Jack Schuler (9) +7,959,564 +29.7 +% +John Patience (10) +4,822,537 +18.0 +% +Matthew Strobeck, Ph.D. (11) +1,120,039 +4.2 +% +Charles Watts, M.D. (12) +63,525 +* +Jean Franchi (13) +29,363 +* +Hany Massarany (14) +36,799 +* +All directors and named executive officers as a group (11 persons) +14,688,875 +53.4 +% +* +Represents beneficial ownership of less than 1%. +2021 Proxy Statement +28 +Table of Contents +(1) +Consists of (a) 11,717 shares of common stock issuable upon the exercise of options held by Jack Schuler that +are vested and exercisable within 60 days of April 1, 2021. The number of shares listed as beneficially owned includes (a) 5,724,513 shares of common stock held by Jack W. Schuler Living Trust, (b) 396,769 shares of common stock held by +Tanya Eva Schuler, Trust, (c) 396,769 shares of common stock held by Therese Heidi Schuler, Trust, (d) 396,769 shares of common stock held by Tino Hans Schuler, Trust, (e) 382,467 shares of common stock held by Schuler Grandchildren +LLC, (f) 190,300 shares of common stock held by JS Grandchildren Trust, (g) 182,483 shares of common stock held by Schuler Descendants Trust and (h) 277,777 shares of common stock held by Schuler Family Foundation. Mr. Schuler +disclaims beneficial ownership of all shares other than those held by Mr. Schuler personally or by the Jack W. Schuler Living Trust. +(2) +Consists of (a) 11,717 shares of common stock issuable upon the exercise of options held by John Patience +that are vested and exercisable within 60 days of April 1, 2021. The number of shares listed as beneficially owned includes (a) 1,910,870 shares of common stock held by Patience Enterprises LP, (b) 2,869,950 shares of common stock +held by John Patience Trust, dated July 23, 1993 and (c) 30,000 shares of common stock held by Diane Patience. +(3) +Consists of (a) 1,896,374 shares of common stock held by IND Funding LLC and (b) 294,053 shares of +common stock held by Life Sciences Alternative Financing LLC. +(4) +Consists of (a) 70,314 shares of common stock issuable upon the exercise of options held by Robert +Cawthorn that are vested and exercisable within 60 days of April 1, 2021 and (b) 1,928,879 shares of common stock held by Manlia Limited. +(5) +Consists of (a) 774,044 shares of common stock held by Lawrence T. Kennedy, Jr. Revocable Trust UAD +6/19/01 and as amended from time to time, (b) 471,057 shares of common stock held by Lawrence T. Kennedy, Jr. Perpetuity Trust UAD 6/30/16 and (c) 166,666 shares of common stock held by KFDI-B LLC. +(6) +Consists of 249,841 shares of common stock issuable upon the exercise of options held by Scott Hutton that are +vested and exercisable within 60 days of April 1, 2021. The number of shares listed as beneficially owned includes 5,500 shares of common stock held by Scott Hutton. +(7) +Consists of 157,948 shares of common stock issuable upon the exercise of options held by Robin Harper Cowie +that are vested and exercisable within 60 days of April 1, 2021. The number of shares listed as beneficially owned includes 1,000 shares of common stock held by Robin Harper Cowie. +(8) +Consists of 57,836 shares of common stock issuable upon the exercise of options held by Kieran O’Kane that +are vested and exercisable within 60 days of April 1, 2021. +(9) +Consists of 7,681,787 shares beneficially owned by Jack Schuler and entities affiliated with Jack Schuler, as +set forth in footnote (1). Mr. Schuler disclaims beneficial ownership of all shares other than those held by Mr. Schuler personally or by the Jack W. Schuler Living Trust. +(10) +Consists of 4,840,033 shares beneficially owned by John Patience and entities affiliated with John Patience, as +set forth in footnote (2). +(11) +Consists of (a) 15,086 shares of common stock issuable upon the exercise of options held by +Dr. Matthew Strobeck that are vested and exercisable within 60 days of April 1, 2021. The number of shares listed as beneficially owned includes (a) 966,883 shares of common stock held by Matthew Strobeck, (b) 40,665 shares of +common stock held by Clajer Capital LLC, (c) 14,072 shares of common stock held by the minor children of Matthew Strobeck, (d) 10,833 shares of common stock held by Birchview Capital Partners and (e) 72,500 shares of common stock held +by Birchview Fund. +(12) +Consists of 61,525 shares of common stock issuable upon the exercise of options held by Dr. Charles Watts +that are vested and exercisable within 60 days of April 1, 2021. The number of shares listed as beneficially owned includes 2,000 shares of common stock held by Dr. Charles Watts. +(13) +Consists of 29,363 shares of common stock issuable upon the exercise of options held by Jean Franchi that are +vested and exercisable within 60 days of April 1, 2021. +(14) +Consists of 29,299 shares of common stock issuable upon the exercise of options held by Hany Massarany that are +vested and exercisable within 60 days of April 1, 2021. The number of shares listed as beneficially owned includes 7,500 shares of common stock held by Hany Massarany. +2021 Proxy Statement +29 +Table of Contents +Delinquent Section 16(a) Reports +To our knowledge, based solely on the reports filed by us, copies of such reports furnished to us and written representations made by our +executive officers and directors regarding their filing obligations, all Section 16(a) filing requirements applicable to our executive officers and directors were satisfied with respect to the year ended December 31, 2020. +2021 Proxy Statement +30 +Table of Contents +AUDIT MATTERS +Proposal Two: Ratification of Appointment of Independent Registered Public Accounting Firm +Our audit committee has appointed KPMG LLP as our independent registered public accounting firm for the year ending December 31, 2021. +Although stockholder ratification of the appointment of KPMG LLP is not required by our bylaws, other governing documents or the law, our board of directors considers the appointment of our independent registered public accounting firm to be an +important matter of stockholder concern and is submitting the appointment of KPMG LLP for ratification by our stockholders as a matter of good corporate practice. If our stockholders fail to ratify the appointment, our audit committee will review +its future selection of KPMG LLP as its independent registered public accounting firm. Even if the appointment is ratified, our audit committee, in its discretion, may direct the appointment of a different independent registered public accounting +firm at any time during the year if they determine that such a change would be in the best interests of the Company and our stockholders. +Our board of directors considers the appointment of KPMG LLP as our independent registered public accounting firm for 2021 to be in the best +interests of the Company and our stockholders. We expect representatives of KPMG LLP to attend the Annual Meeting. They will have an opportunity to make a statement if they wish and will be available to respond to appropriate questions from +stockholders. +KPMG LLP has served as our independent registered public accounting firm since 2016. +Principal Accountant Fees and Services +The following is a summary of the fees and services provide by KPMG LLP to us for the years ended December 31, 2020 and 2019. +Year Ended December 31, +2020 +2019 +Audit Fees (1) +$ +545,899 +$ +167,906 +Audit-Related Fees +$ +- +$ +- +Tax Fees +$ +- +$ +- +All Other Fees +$ +- +$ +- +Total +$ +545,899 +$ +167,906 +(1) +Audit Fees consist of professional services rendered by KPMG LLP for the audits of our annual financial +statements and reviews of quarterly financial statements. The audit fees incurred in 2020 also include fees totaling $319,810 in connection with our initial public offering, which was completed in October 2020, and review of related documents filed +with the SEC. +Pre-Approval Policies and Procedures +Our audit committee is responsible for appointing, setting compensation for, and overseeing the work of our independent registered public +accounting firm. Our audit committee’s charter establishes a policy that all audit and permitted non-audit and tax services to be provided by our independent registered public accounting firm must be pre-approved by our audit committee. Our audit committee has pre-approved all such audit and permissible non-audit and tax services in +accordance with this policy for the years ended December 31, 2020 and 2019. As part of this review, our audit committee considers whether the provision of any such non-audit or tax services by KPMG LLP is +compatible with maintaining the independence of our independent registered public accounting firm. +2021 Proxy Statement +31 +Table of Contents +Our audit committee may delegate authority to +pre-approve services to one or more of its members, provided any decisions made by such member to grant pre-approvals must be presented to the full audit committee at +its next scheduled meeting. +Vote Required: +Ratification of the appointment of KPMG LLP as our independent registered public accounting firm for 2021 requires the affirmative vote of a majority of the shares present or represented by proxy and entitled to vote +at the Annual Meeting. Abstentions have the same impact as votes “Against” the proposal. Brokers have discretion to vote on this proposal. +Board Recommendation: +OUR BOARD OF DIRECTORS AND THE AUDIT COMMITTEE OF OUR BOARD OF DIRECTORS EACH UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS OUR +INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2021. +Report of the Audit Committee +The audit committee oversees our independent registered public accounting firm and assists our board of directors in fulfilling its oversight +responsibilities on matters relating to the integrity of our financial statements, our compliance with legal and regulatory requirements and the independent registered public accounting firm’s qualifications and independence by meeting +regularly with the independent registered public accounting firm and financial management personnel. Management is responsible for the preparation, presentation and integrity of our financial statements. +In fulfilling its oversight responsibilities, the audit committee: +• +reviewed and discussed our financial statements as of and for the year ended December 31, 2020 with +management and KPMG LLP; +• +discussed with KPMG LLP the matters required to be discussed by the applicable requirements of the Public Company +Accounting Oversight Board and the SEC; +• +received the written disclosures and the letter from KPMG LLP required by the applicable requirements of the +Public Company Accounting Oversight Board; and +• +discussed the independence of KPMG LLP with that firm. +Based on the audit committee’s review and discussions noted above, the audit committee recommended to our board of directors, and our +board of directors approved, that the audited financial statements be included in the 2020 Form 10-K Report for filing with the SEC. The audit committee also appointed KPMG LLP as our independent registered +public accounting firm for the fiscal year ending December 31, 2021. +Submitted by the audit committee of our board +of directors: +Jean Franchi, Chair +Hany Massarany +Matthew Strobeck +2021 Proxy Statement +32 +Table of Contents +ADDITIONAL INFORMATION +Other Matters +Our board of directors is not aware of any other matters that will be presented for consideration at the Annual Meeting. However, if any other +matters are properly brought before the Annual Meeting, the persons named in the accompanying proxy intend to vote on those matters in accordance with their best judgment. +Stockholder Proposals and Nominations for Next Year’s Annual Meeting of Stockholders +In order to be considered for inclusion in the Proxy Materials for our 2022 annual meeting of stockholders, proposals submitted by stockholders +pursuant to Rule 14a-8 under the Exchange Act must be received by our Corporate Secretary at Biodesix, Inc., 2970 Wilderness Place, Suite 100, Boulder, CO 80301 on or before December 30, 2021, and also +must otherwise comply with the procedures and requirements set forth in Rule 14a-8. +Alternatively, +stockholders intending to present a proposal (outside of the process established in Rule 14a-8) or nominate a director for election at our 2022 annual meeting of stockholders without having the proposal or +nomination included in the Proxy Materials for the meeting must comply with the requirements set forth in our bylaws. Our bylaws require, among other things, that our Corporate Secretary receive the proposal or nomination no earlier than the close +of business on the 120 th day, and no later than the close of business on the 90 th day, prior to the first anniversary of the preceding +year’s annual meeting of stockholders. Accordingly, for our 2022 annual meeting of stockholders, our Corporate Secretary must receive the proposal or nomination no earlier than January 26, 2022 and no later than the close of business on +February 25, 2022. The proposal or nomination must contain the information required by our bylaws and otherwise comply with the requirements set forth in our bylaws. +Availability of Annual Report on Form 10-K +A copy the 2020 Form 10-K Report as filed with the SEC is available free of charge on our website at +www.biodesix.com or on the SEC’s website at www.sec.gov. Stockholders may also obtain a copy of our 2020 annual report, including financial statements but excluding exhibits, without charge by sending a written request to: Biodesix, Inc., +Attention: Corporate Secretary, 2970 Wilderness Place, Suite 100, Boulder, CO 80301. +2021 Proxy Statement +33 +Table of Contents +P.O. BOX 8016, CARY, NC 27512-9903 +YOUR VOTE IS IMPORTANT! PLEASE VOTE BY: +INTERNET +Go To: www.proxypush.com/BDSX +• • Cast your vote online +• Have your Proxy Card ready +Follow the simple instructions to record your vote +PHONE Call 1-866-291-6774 +• • Use any touch-tone +telephone +• Have your Proxy Card ready +Follow the simple recorded +instructions +MAIL +• • Mark, sign and date your Proxy Card +Fold and return your Proxy Card in the postage-paid envelope provided +You +must register to attend the meeting online and/or participate at www.proxydocs.com/BDSX +Biodesix, Inc. +Annual Meeting of Stockholders +For Stockholders of record as of April 26, 2021 +TIME: Wednesday, May 26, 2021 1:00 PM, Mountain Time PLACE: Annual Meeting to be held live via the Internet—please visit www.proxydocs.com/BDSX for more +details. +This proxy is being solicited on behalf of the Board of Directors +The undersigned stockholder of Biodesix, Inc. hereby appoints Robin Harper Cowie and Ryan Siurek, and each or either of them, as the true and lawful attorneys of +the undersigned, with full power of substitution and revocation, and authorizes them, and each of them, to vote all the shares of capital stock of Biodesix, Inc. which the undersigned is entitled to vote at said meeting and any adjournment thereof +upon the matters specified and upon such other matters as may be properly brought before the meeting or any adjournment thereof, conferring authority upon such true and lawful attorneys to vote in their discretion on such other matters as may +properly come before the meeting and revoking any proxy heretofore given. +THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS +GIVEN, SHARES WILL BE VOTED IDENTICAL TO THE BOARD OF DIRECTORS RECOMMENDATION. This proxy, when properly executed, will be voted in the manner directed herein. In their discretion, the named proxies are authorized to vote upon such other matters +that may properly come before the meeting or any adjournment or postponement thereof. +You are encouraged to specify your choice by marking the appropriate box (SEE +REVERSE SIDE) but you need not mark any box if you wish to vote in accordance with the Board of Directors’ recommendation. The named proxies cannot vote your shares unless you sign (on the reverse side) and return this card. +PLEASE BE SURE TO SIGN AND DATE THIS PROXY CARD AND MARK ON THE REVERSE SIDE +Table of Contents +Biodesix, Inc. +Annual Meeting of Stockholders +Please make your marks like this: X Use dark black pencil or pen only THE BOARD OF DIRECTORS RECOMMENDS A VOTE: FOR ON PROPOSALS 1 AND 2 +BOARD OF DIRECTORS +PROPOSAL YOUR VOTE RECOMMENDS +1. to elect the two Class I directors named in this proxy statement to hold office until the 2024 annual meeting of stockholders; +FOR WITHHOLD +1.01 Scott Hutton FOR +#P2# #P2# +1.02 John Patience FOR +#P3# #P3# +FOR AGAINST ABSTAIN +2. to ratify the appointment of KPMG LLP as our independent registered public accounting firm for FOR the year ending December 31, 2021; and #P4# #P4# #P4# 3. to conduct any +other business properly brought before the meeting, or any adjournment or postponement thereof. +You must register to attend the meeting online and/or participate +at www.proxydocs.com/BDSX +Authorized Signatures—Must be completed for your instructions to be executed. +Please sign exactly as your name(s) appears on your account. If held in joint tenancy, all persons should sign. Trustees, administrators, etc., should include title and authority. +Corporations should provide full name of corporation and title of authorized officer signing the Proxy/Vote Form. +Signature (and Title if applicable) Date +Signature (if held jointly) Date \ No newline at end of file diff --git a/raw/proxies/0001439725/0001193125-21-140545/proxy_rpt.txt b/raw/proxies/0001439725/0001193125-21-140545/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..84ef61a4a76aa776e5a47def2633853b1e193547 --- /dev/null +++ b/raw/proxies/0001439725/0001193125-21-140545/proxy_rpt.txt @@ -0,0 +1,61 @@ +Related-Party Transactions +The following is a summary of the transactions since January 1, 2019 to which we have been a +participant in which the amount involved in the transaction exceeds or will exceed $120,000 and in which any of our directors, director nominees, executive officers, or holders of more than 5% of our capital stock, or any immediate family member of, +or person sharing the household with, any of these individuals, had or will have a direct or indirect material interest, with certain exceptions, other than compensation arrangements, which are under the section of this proxy statement captioned +“Executive Compensation.” +Preferred Stock Financings +We previously issued convertible preferred stock from time to time to fund our operations and to make acquisitions. In February and March +2019, we issued 8,695,621 shares of Series H Preferred Stock at $1.15 per share for total cash proceeds of $10.0 million. +Immediately +prior to our initial public offering, we had issued 118,766,273 convertible preferred shares. On October 27, 2020, upon closing of our initial public offering, each outstanding share of Series A-1 +Preferred Stock, Series A-2 Preferred Stock, Series A-3 Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred +Stock, Series F Preferred Stock, Series G Preferred Stock and Series H Preferred Stock automatically converted into 0.1684664 share of common stock; and each share of Series B-1 Preferred Stock automatically +converted into 0.196 shares of common stock. In the aggregate, all series of preferred stock were converted into 20,090,745 shares of common stock. As a result, as of December 31, 2020 there are no longer any series of convertible preferred +stock outstanding. +Convertible Debt Financings +In March 2020, we issued $10.0 million in convertible debt (the “March 2020 Notes”) that was scheduled to mature in August +2020. In August 2020, the maturity date of this debt was extended to June 30, 2021. The March 2020 Notes were issued in two tranches of $5 million, with the first tranche being funded in March 2020 and the second tranche in June 2020. The +holders of the March 2020 Notes included a number of our directors and their affiliates. +In December 2019, we issued $6.0 million in +convertible debt (the “December 2019 Notes”), that were scheduled to mature in August 2020. In August 2020, the maturity date of this debt was extended to June 30, 2021. The December 2019 Notes were issued in two tranches of +$3.0 million, with the first tranche funded in December 2019. The second tranche was funded in February 2020. The holders of the December 2019 Notes included a number of our directors and their affiliates. +In August and September 2019 we issued $10.0 million in convertible debt (the “August 2019 Notes”) that was scheduled to mature +in August 2020. In August 2020, the maturity date of this debt was extended to June 30, 2021. The holders of the August 2019 Notes included a number of our directors and their affiliates. +Our convertible debt, along with the related accrued interest, was automatically converted to 1,848,280 shares of our common stock upon the +completion of our initial public offering in October 2020. +2021 Proxy Statement +17 +Table of Contents +Investor Rights Agreement +In October 2018, we entered into an amended and restated investor rights agreement (“IRA”) with certain holders of our preferred +stock and common stock, including certain holders of 5% of our capital stock, and including certain members of, and affiliates of, our directors and certain of our executive officers. The IRA provides the holders of our preferred stock with certain +registration rights. After the closing of our initial public offering, the holders of 20,090,745 shares of common stock issuable from conversion of outstanding preferred stock, became entitled to rights with respect to the registration of their +shares of common stock under the Securities Act under this agreement. +Contingent Value Rights Agreement +In February 2016, we entered into a contingent value rights agreement (“CVR Agreement”) with certain holders of our preferred and +common stock, including several members of our board of directors. Pursuant to the CVR Agreement, the holders would be eligible to receive in the aggregate up to 15% of any future income and proceeds that we would receive, subject to a number of +conditions and offsets, with respect to ficlatuzumab rights under our co-development and collaboration agreement with AVEO Pharmaceuticals, Inc. +Stock Options +As of December 31, 2020, options to purchase an aggregate of 229,978 shares of common stock were outstanding under our 2006 Incentive +Plan. As of December 31, 2020, options to purchase an aggregate of 2,091,590 shares of common stock were outstanding under our 2016 Incentive Plan. For additional information regarding the terms of these plans, see the section titled +“Executive Compensation—Equity Plan Information.” +Participation in Initial Public Offering +Messrs. Patience, Schuler and Strobeck, members of our board of directors, purchased 391,110 shares of common stock from the underwriters in +our initial public offering at the initial public offering price per share of $18.00. +Participation in Initial Public Offering +Directed Share Program +Messrs. Hutton, Massarany and Watts, members of our board of directors, purchased 15,000 shares of +common stock through our Directed Share Program in our initial public offering at the initial public offering price per share of $18.00. +Indemnification of Directors and Executive Officers +We have entered into indemnification agreements with +each of our directors and executive officers in connection with our initial public offering. The indemnification agreements and our bylaws will require us to indemnify our directors against certain liabilities, costs and expenses to the fullest +extent not prohibited by DGCL, and have purchased directors’ and officers’ liability insurance. Subject to very limited exceptions, our bylaws will also require us to advance expenses incurred by our directors and officers. +Policies and Procedures for Related-Party Transactions +Our audit committee has the primary responsibility for the review, approval and oversight of any “related-party transaction,” which +is any transaction, arrangement or relationship (or series of similar transactions, arrangements or relationships) in which we are, were or will be a participant and the amount involved exceeds $120,000, and in which the related person has, had or +will have a direct or indirect material interest. We adopted a written related-party transaction policy effective October 2020. Under our related-party transaction policy, our management is required to submit any related-party transaction not +previously approved or ratified by our audit committee to our audit committee. In approving or rejecting the proposed transactions, our audit committee takes into account all of the relevant facts and circumstances available. All of the transactions +described in this section, except for certain equity award grants, occurred prior to the adoption of this policy. +2021 Proxy Statement +18 +Table of Contents \ No newline at end of file diff --git a/raw/proxies/0001439725/0001193125-22-091782/proxy.txt b/raw/proxies/0001439725/0001193125-22-091782/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..7c0d5b8f9b74f3d6b99fc8a664493a549d0c5671 --- /dev/null +++ b/raw/proxies/0001439725/0001193125-22-091782/proxy.txt @@ -0,0 +1,1934 @@ +DEF 14A +1 +d266748ddef14a.htm +DEF 14A +DEF 14A +Table of Contents +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +Washington, DC 20549 +SCHEDULE 14A +(Rule 14a-101) +SCHEDULE 14A INFORMATION +Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 +(Amendment No. ) +☒ +Filed by the Registrant +☐ +Filed by a Party other than the Registrant +Check the appropriate box: +☐ +Preliminary Proxy Statement +☐ +Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +☒ +Definitive Proxy Statement +☐ +Definitive Additional Materials +☐ +Soliciting Material under § 240.14a-12 +Biodesix, Inc. +(Name of Registrant as Specified in its +Charter) +(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant) +Payment of Filing Fee (Check the appropriate box): +☒ +No fee required. +☐ +Fee paid previously with preliminary materials. +☐ +Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11. +Table of Contents +Biodesix, Inc. +2970 Wilderness Place, Suite 100 +Boulder, CO 80301 +Notice of 2022 Annual Meeting of Stockholders +Dear Biodesix Stockholders: +You are invited to attend Biodesix, Inc.’s 2022 Annual Meeting of Stockholders (the “Annual Meeting”). +Date: +May 24, 2022 (Tuesday) +Time: +1:00 p.m., Mountain Time +Virtual Location: +You can attend the Annual Meeting online, including to vote and/or submit questions, at www.proxydocs.com/BDSX . See page 1 of the accompanying proxy statement for additional information +regarding participation in the virtual meeting. +Items of Business: +At the Annual Meeting, stockholders will be asked to vote: +1.  to elect the two Class II directors named in this proxy statement to hold office until the 2025 +annual meeting of stockholders; +2.  to ratify the appointment of KPMG LLP as our independent +registered public accounting firm for the year ending December 31, 2022; and +3.  to conduct any +other business properly brought before the meeting, or any adjournment or postponement thereof. +Record Date: +You can participate in the Annual Meeting and vote if you were a stockholder of record as of the close of business on March 25, 2022. +Voting: +Your vote is very important to us. Whether or not you plan to attend the virtual Annual Meeting, please ensure your shares are represented by voting promptly. For instructions on how to vote your shares, please refer to +the instructions on the Internet Notice, the section entitled “Annual Meeting Information” beginning on page 1 of the accompanying proxy statement or, if you requested to receive printed copies of these materials, your enclosed proxy +card. +By order of the Board of Directors, +Robin Harper Cowie +Chief Financial Officer, Secretary and Treasurer +March 31, 2022 +Important Notice Regarding the Internet Availability of Proxy Materials for the Annual Meeting to be Held on May 24, 2022 +at 1:00 p.m. Mountain Time via live audio webcast at www.proxydocs.com/BDSX : +This Notice of 2022 Annual Meeting of +Stockholders, the accompanying proxy statement and our 2021 Annual Report on Form 10-K are available on our website at https://investors.biodesix.com/investor-relations in the SEC Filings section, as well as +at www.proxydocs.com/BDSX. +Table of Contents +Table of +Contents +ANNUAL MEETING +INFORMATION +1 +BOARD AND CORPORATE GOVERNANCE +MATTERS +7 +Proposal One: Election of Directors +7 +Overview of Our Nominees and Continuing Directors +8 +Board Composition +11 +Director Independence +11 +Board Leadership Structure +12 +Role of our Board of Directors in Risk Oversight +12 +Meetings of our Board of Directors +12 +Committees of our Board of Directors +13 +Committee Composition and Meetings +13 +Audit Committee +13 +Compensation Committee +14 +Compensation Committee Interlocks and Insider Participation +15 +Nominating and Corporate Governance Committee +15 +Director Nomination Process +15 +Board Diversity Matrix +17 +Executive Officers +17 +Code of Business Conduct and Ethics +18 +Corporate Governance Guidelines +18 +Anti-Hedging and Anti-Pledging Policy +18 +Stockholder Communications with our Board of Directors +18 +Certain Relationships and Related Party Transactions +19 +DIRECTOR COMPENSATION +22 +Non-Employee Director Compensation Policy +22 +Director Deferred Compensation Plan +22 +2021 Director Compensation Table +23 +EXECUTIVE COMPENSATION +25 +Overview +25 +Compensation of Named Executive Officers +26 +2021 Summary Compensation Table +29 +Outstanding Equity Awards at 2021 Fiscal Year-End +31 +Additional Matters +32 +STOCK OWNERSHIP +34 +Security Ownership of Certain Beneficial Owners and +Management +34 +Delinquent Section 16(a) Reports +36 +Table of Contents +AUDIT MATTERS +37 +Proposal Two: Ratification of Appointment of Independent Registered Public Accounting +Firm +37 +Report of the Audit Committee +38 +ADDITIONAL INFORMATION +39 +Other Matters +39 +Stockholder Proposals and Nominations for Next Year’s Annual Meeting of +Stockholders +39 +Availability of Annual Report on Form 10-K +39 +Table of Contents +Proxy Statement +2022 Annual Meeting of Stockholders +May 24, 2022 +ANNUAL MEETING INFORMATION +Our board of directors is soliciting your proxy for +the 2022 Annual Meeting of Stockholders (the “Annual Meeting”) of Biodesix, Inc. (“Biodesix,” the “Company,” “we,” “us” or “our) and at any adjournment, continuation or postponement of the +meeting for the purposes described in this proxy statement and the accompanying Notice of 2022 Annual Meeting of Stockholders. The Annual Meeting will take place on May 24, 2022 at 1:00 p.m. Mountain Time. Due to ongoing public health concerns +regarding the COVID-19 pandemic and for the health and well-being of our stockholders and employees, this year’s Annual Meeting will be held via live audio webcast at www.proxydocs.com/BDSX . If you held shares of our common stock as of the close of business on March 25, 2022, you will +be able to vote on the proposals described in this proxy statement and submit questions online through the virtual meeting platform during the Annual Meeting. On or about March 31, 2022, we will be mailing a Notice of Internet Availability of +Proxy Materials (the “Internet Notice”) to our stockholders. The Notice will include instructions on how to access the proxy materials over the Internet, including our proxy statement, Notice of 2022 Annual Meeting of Stockholders, proxy +card and our Annual Report on Form 10-K for the year ended December 31, 2021 (the “2021 Annual Report”). The Internet Notice will also describe how to vote online or by telephone and, if +desired, how to receive a printed set of proxy materials. +Why did I receive a Notice of Internet Availability of Proxy +Materials in the mail instead of a full set of proxy materials? +Pursuant to the “notice and access” rules adopted by +the Securities and Exchange Commission (the “SEC”), we have elected to provide access to our proxy materials over the Internet. Accordingly, we are sending the Internet Notice to our stockholders as of the record date, beginning on or +about March 25, 2022. The Internet Notice will instruct you as to how you may access and review the proxy materials on the Internet and, if desired, how to request a printed set of proxy materials. In addition, by following the instructions in +the Internet Notice, you may request to receive proxy materials in printed form by mail or electronically by email on an ongoing basis. We believe that these rules allow us to conserve natural resources and reduce our costs of printing and +delivering proxy materials, while providing a convenient method for stockholders to access the materials and vote. +We provided our +stockholders with a printed set of proxy materials instead of the Internet Notice in connection with the 2021 Annual Meeting of Stockholders. If you received a printed set of proxy materials, we encourage you to consider helping us reduce the +environmental impact of delivering printed materials by signing up to receive all of your future proxy materials electronically. +Who can vote? +If you were a stockholder of record as of the close of business on March 25, 2022 (the “record date”), you are entitled to vote +your shares at the Annual Meeting. As of the record date, 31,839,317 shares of our common stock were issued and outstanding. Each share of our common stock is entitled to one vote on each matter properly brought before to the meeting. +2022 Proxy Statement +1 +Table of Contents +What am I voting on? +You are being asked to vote on two proposals: +● +Proposal One: To elect the two Class II directors named in this proxy statement to hold office +until the 2025 annual meeting of stockholders; and +● +Proposal Two: To ratify the appointment of KPMG LLP as our independent registered public accounting firm +for 2022. +How does the board of directors recommend that I vote on each proposal? +The board of directors recommends that our stockholders vote: +● +“For” the election of the two Class II directors named in this proxy statement to hold +office until the 2025 annual meeting of stockholders; and +● +“For” the ratification of the appointment of KPMG LLP as our independent registered public +accounting firm for 2022. +What if another matter is properly brought before the meeting? +The board of directors is not aware of any other matters that will be presented for consideration at the Annual Meeting. However, if any other +matters are properly brought before the Annual Meeting, the persons named in the accompanying proxy intend to vote on those matters in accordance with their best judgment. +How do I vote? +The procedures for voting depend on whether your shares are registered in your name or are held by a bank, broker or other nominee. You may +also vote your shares electronically during a designated portion of the virtual Annual Meeting after your successful registration at www.proxydocs.com/BDSX. Whether or not you plan to attend the Annual Meeting, we encourage you to vote and submit +your proxy in advance of the meeting by one of the methods described below. +● +Stockholders of Record: Shares Registered in Your Name +Vote by Proxy in Advance of the Annual Meeting : If, on the record date, your shares were registered directly in your name with +Biodesix’s transfer agent, Computershare Trust Company, N.A., then you are a “stockholder of record.” As a stockholder of record, you may vote by proxy in advance of the Annual Meeting in three ways: +Vote by Internet +Go to +http://www.proxypush.com/ +BDSX to complete an +electronic +proxy card. You will be asked to +provide the company number +and control number from your +proxy card. Your vote must be +received prior to the meeting +start time to be counted. +Vote by +telephone +Dial toll-free 1-866-291-6774 +using a touch-tone phone and +follow the recorded instructions. +You will be asked to provide the +company number and control +number from your proxy card. +Your vote must be +received +prior to the meeting start time to +be counted. +Vote +by mail +If you received printed copies of +the proxy materials, +complete, +date and sign the enclosed proxy +card and return it promptly in +the envelope provided. If your +signed proxy card is received +prior to the meeting date, we +will vote your shares as you +direct. +2022 Proxy Statement +2 +Table of Contents +● +Beneficial Owner: Shares Registered in the Name of Broker, Bank or Other Nominee +If, on the record date, your shares were held not in your name, but in an account with a broker, bank or other nominee as custodian on your +behalf, then you are considered the “beneficial owner” of shares held in “street name.” The Internet Notice or the proxy materials, as applicable, are being forwarded to you by that broker, bank or other nominee who is considered +the stockholder of record of those shares for purposes of voting at the Annual Meeting. As the beneficial owner, you have the right to direct your broker, bank or other nominee on how to vote your shares by following the instructions for voting set +forth on that organization’s voting instruction card. +What is the effect of giving a proxy? What if I return a proxy card +or otherwise vote but do not make specific choices? +Proxies are solicited by and on behalf of the board of directors. Robin +Harper Cowie (our Chief Financial Officer, Secretary and Treasurer) and Ryan H. Siurek (our Chief Accounting Officer) have been designated as proxy holders by the board of directors. If you properly grant your proxy, your shares will be voted as you +instruct. +If you return a signed proxy card or otherwise vote without marking specific voting selections, your shares will be voted as +the board of directors recommends: “For” the election of two Class II directors (Proposal One); “For” the ratification of the appointment of KPMG LLP as our independent registered public accounting firm for 2022 (Proposal +Two); and in accordance with the best judgment of your proxy holder for any other matters properly brought before the meeting, if any. +Can I change my vote or revoke my proxy? +Yes. If you are a stockholder of record, you can change your vote +or revoke your proxy before the Annual Meeting in any of these ways: +● Vote again over the Internet or by telephone as instructed above before 11:59 a.m., Eastern Time on May 23, 2022. Only your latest Internet or telephone vote is +counted. +● Submit a properly +signed proxy card with a later date that is received no later than 11:59 a.m., Eastern Time on May 23, 2022. Only your latest dated proxy card will be counted. +● Send a timely written notice that +you are revoking your proxy to Biodesix’s Corporate Secretary at 2970 Wilderness Place, Suite 100, Boulder, CO 80301. +● Attend the virtual Annual Meeting +and vote electronically during the meeting. Simply attending the meeting will not, by itself, revoke your proxy. +If you are the +beneficial owner of shares held in street name, you should follow the instructions provided by your broker, bank or other nominee to revoke previously submitted voting instructions. +What are broker non-votes? +Brokers, banks or other nominees holding shares on behalf of a beneficial owner may vote those shares in their discretion on certain +“routine” matters even if they do not receive timely voting instructions from the beneficial owner. With respect to “non-routine” matters, the broker, bank or other nominee is not permitted +to vote shares for a beneficial owner without timely received voting instructions. The only routine matter to be presented at the Annual Meeting is the proposal to ratify the appointment of KPMG LLP as our independent registered public +accounting firm for 2022 (Proposal Two). The election of two Class II directors (Proposal One) is a non-routine matter. +2022 Proxy Statement +3 +Table of Contents +A broker non-vote occurs when a broker, bank or +other nominee does not vote on a non-routine matter because the beneficial owner of such shares has not provided voting instructions with regard to such matter. If a broker, bank or other nominee exercises +discretionary voting authority on Proposal Two, such shares will be considered present at the Annual meeting for quorum purposes and broker non-votes will occur as to Proposal One, or any other non-routine matters that are properly presented at the Annual Meeting. Broker non-votes will have no impact on the voting results. +How many shares must be present to hold the Annual Meeting? +A quorum must be present at the Annual Meeting for any business to be conducted. A quorum will be present if the holders of at least a +majority of the outstanding shares of our common stock entitled to vote are present at the Annual Meeting online or represented by proxy. On the record date, there were 31,839,317 shares of our common stock outstanding and entitled to vote. +Therefore, the holders of 15,919,660 shares must be present online or represented by proxy at the Annual Meeting to have a quorum. For purposes of determining the presence of a quorum, abstentions, withheld votes and broker non-votes are counted. If there is no quorum, the holders of a majority of shares present or represented by proxy at the Annual Meeting may adjourn the meeting to a later date. +What vote is required for the approval of each proposal? What effect do “withhold” votes, abstentions and broker non-votes have on the proposals? +The following chart summarizes the proposals to be +considered at the Annual Meeting, the vote required for approval of each proposal, and the manner in which votes will be counted: +Proposal +Voting Options +Vote Required to Adopt the +Proposal +Effect of “Withheld” +Votes or Abstentions +Effect of “Broker +Non-Votes” +Proposal One: Election of the two Class II directors named in this proxy +statement +For or +Withhold on +each nominee +Plurality of the votes cast. +This means that the two +nominees receiving the +highest number of “For” +votes (from the holders +of +votes of shares present or +represented by proxy and +entitled to vote on the +election of directors) will +be elected as Class II +directors. +“Withheld” votes +have no effect; only +“For” votes affect +the outcome of the +election. +Brokers do not +have discretion +to vote. Broker +non-votes will +have no effect; +only “For” +votes affect +the +outcome of the +election. +Proposal Two: Ratification of appointment of KPMG LLP as our independent registered +public accounting firm for the year ended December 31, 2022 +For, Against or +Abstain +Affirmative vote of a +majority of the shares +present or represented by +proxy and entitled to vote +on the proposal. +Abstentions are +considered shares +present and entitled +to vote, and +therefore have the +same impact as +votes “Against” +the +proposal. +Brokers have +discretion to +vote. Therefore, +we do not +expect any +broker +non-votes. +Important Information About Our Virtual Annual Meeting: +• +Why is the Annual Meeting being held in a virtual format this year? In light +of health and safety concerns as well as travel restrictions related to the ongoing coronavirus (“COVID-19”) pandemic, the Annual Meeting will be held in a virtual meeting format via live audio +webcast. The virtual format will enable us to support the health and well-being of our stockholders, employees and directors, while providing access to the Annual Meeting for our stockholders regardless of geographic location. We have designed our +virtual format to help ensure that our stockholders who attend the Annual Meeting virtually will be afforded similar rights and opportunities to participate as they would at an in-person meeting. +2022 Proxy Statement +4 +Table of Contents +• +How can I attend Annual Meeting online? To join the Annual Meeting online, +visit www.proxydocs.com/BDSX and register using your control number on your proxy card or on the instructions that accompanied your proxy materials, and following the instructions received via email, including a +unique link that will allow you access to the Annual Meeting, to vote, and submit questions during the meeting. +• +When can I join the virtual Annual Meeting? The meeting will begin promptly +at 1:00 p.m. Mountain Time on Tuesday, May 24, 2022. You may access the meeting platform 15 minutes earlier, and we encourage you to join in advance of the meeting start time to allow sufficient time to log in and confirm your connection and +audio are working properly. +• +Can I ask questions during the virtual Annual Meeting? Yes. If you are logged +in as a “stockholder” at the virtual Annual Meeting, you will have an opportunity to submit questions live via the Internet during a designated portion of the virtual Annual Meeting. Once you are logged in, type your question into the +question box and click “submit. ” Subject to time constraints, we intend to answer questions pertinent to the Company and meeting matters submitted by stockholders during the Annual Meeting that comply with our rules of conduct +for the Annual Meeting, which will be posted on the meeting website during the meeting. +• +How do I vote during the virtual Annual Meeting? You will have an opportunity +to vote your shares electronically during a designated portion of the virtual Annual Meeting after logging in. Whether or not you plan to join the Annual Meeting, we encourage you to vote and submit your proxy in advance of the meeting by one of the +methods described in these proxy materials. +• +What if I have technical difficulties? On the day of the Annual Meeting, if +you have trouble accessing the virtual meeting platform or encounter other technical difficulties with the platform before or during the meeting, please call the technical support number provided in your email instructions. +• +Will a list of stockholders be available for inspection prior to and during the +meeting? Yes. A complete list of stockholders of record will be available for inspection, by appointment only, by any stockholder for at least ten (10) days prior to the Annual Meeting during ordinary business hours at our +headquarters located at 2970 Wilderness Place, Suite 100, Boulder, CO 80301. +• +Will a recording of the meeting be available? Yes, following the Annual +Meeting, a recording of the meeting will be available on www.proxydocs.com/BDSX for one year following the meeting date. +Who will count the votes? +Representatives of Mediant Communications Inc. (“Mediant”) will tabulate the votes, and a representative of Mediant will act as +inspector of election. +Who is paying for this proxy solicitation? +We will pay the cost of soliciting proxies. Proxies may be solicited on our behalf by our directors, officers or employees (for no additional +compensation) in person, by telephone or by other means of communication. Arrangements may be made with brokerage houses, custodians, nominees and fiduciaries to send proxy materials to their principals and we may reimburse them for the cost of +forwarding proxy materials to beneficial owners. +What does it mean if I receive more than one Internet Notice? +If you receive more than one Internet Notice, your shares may be registered in more than one name or in different accounts. Please follow the +voting instructions in each Internet Notice to ensure that all of your shares are voted. +2022 Proxy Statement +5 +Table of Contents +How can I find out the results of the voting at the Annual Meeting? +Preliminary voting results will be announced at the Annual Meeting. In addition, final voting results will be published in a current report on +Form 8-K that we expect to file with the SEC within four business days after the Annual Meeting. +Why were my proxy materials included in the same envelope as other people at my address? How may I obtain an additional copy of the proxy materials? +We have adopted a procedure approved by the SEC called “householding.” Under this procedure, we deliver a single copy of the +Internet Notice, and, if applicable, the proxy materials to stockholders of record who shares the same address, unless we have received contrary instructions from any stockholder at that address. This practice is designed to eliminate duplicate +mailings, conserve natural resources and reduce our printing and mailing costs. Stockholders who participate in householding will continue to be able to access and receive separate proxy cards. If you share an address with another stockholder and +receive only a single copy the Internet Notice, and, if applicable, the proxy materials, but would like to request a separate copy of these materials, please contact our mailing agent, Mediant, by calling 1-866-8133 or e-mailing paper@investorelections.com +and an additional copy of the materials will be promptly delivered to you. Similarly, if you receive multiple copies of the Internet Notice, and, if applicable, the proxy materials, but would prefer to receive a single copy in the future, you may +also contact Mediant at the above telephone number or address. Beneficial owners should contact their broker, bank or other nominee to request information about householding procedures. +2022 Proxy Statement +6 +Table of Contents +BOARD AND CORPORATE GOVERNANCE MATTERS +Proposal One: Election of Directors +General +The primary responsibilities of +our board of directors are to provide oversight, strategic guidance, counseling and direction to our management. Our board of directors currently consists of eight directors and is divided into three classes of directors that serve staggered +three-year terms, currently Class I, with a term expiring in 2024, Class II, with a term expiring in 2022 and Class III, with a term expiring in 2023. At the Annual Meeting, our stockholders will vote on the election of two +Class II directors whose terms will expire at our 2025 annual meeting of stockholders. Each of our other current directors will continue to serve as a director until the election and qualification of his or her successor. +The two directors currently serving on our board of directors in Class II, the class whose term of office expires in 2022, have each been +nominated by our board of directors, upon the recommendation of our nominating and corporate governance committee, to stand for election at the Annual Meeting: Matthew Strobeck, Ph.D. and Charles Watts, M.D. Dr. Strobeck has served on our board +of directors since 2012 and Dr. Watts has served on our board of directors since 2019. Each of these two nominees has consented to being named as a nominee in this proxy statement and has agreed to serve, if elected, until our 2025 annual +meeting of stockholders and until the election and qualification of his successor. +For more information about each of the director +nominees and continuing directors, including information regarding the experience, qualifications, attributes and skills that led to the conclusion that each director should serve as a member of the board of directors, please refer to the section +below entitled “Overview of Our Nominees and Continuing Directors.” +Vote Required: +Directors are elected by a plurality of the votes cast by our stockholders at the Annual Meeting. This means that the two nominees receiving the highest number of affirmative votes (from the holders of votes of shares +present or represented by proxy and entitled to vote on the election of directors) will be elected. Broker non-votes and “Withheld” votes will have no effect. +Board +Recommendation: +OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE ELECTION OF EACH OF THE TWO CLASS II DIRECTOR NOMINEES NAMED ABOVE. +2022 Proxy Statement +7 +Table of Contents +Overview of Our Nominees and Continuing Directors +The following table and the brief biographies that follow provide information, as of the date of this proxy statement, about each +director nominee and each continuing director: +Age +Position(s) +Director +Since +Class +Current +Term +Expires +Expiration +of Term for +which +Nominated +Independent +Committee +Membership* +AC +CC +NCG +DIRECTOR NOMINEES +Matthew Strobeck, Ph.D. +49 +Director +2012 +II +2022 +2025 +Yes +X +Chair +Charles Watts, M.D. +79 +Director +2019 +II +2022 +2025 +Yes +X +CONTINUING DIRECTORS +Jon Faiz Kayyem, Ph.D. +58 +Director +2021 +I +2024 +— +Yes +X +Scott Hutton +50 +President, Chief Executive +Officer and Director +2020 +I +2024 +— +No +John Patience +74 +Chairman of the Board +2008 +I +2024 +— +Yes +X +Jean Franchi +55 +Director +2020 +III +2023 +— +Yes +Chair +X +Hany Massarany +60 +Director +2020 +III +2023 +— +Yes +X +Chair +Jack Schuler +81 +Director +2008 +III +2023 +— +Yes +X +* AC - Audit Committee; CC - Compensation Committee; NCG - Nominating and Corporate +Governance Committee +Director Nominees +Class II Directors – Nominees for Election at the Annual Meeting +Matthew Strobeck, Ph.D . has served as a Director of the Company since January 2012. Dr. Strobeck is currently the Managing +Partner of Birchview Capital LP, an investment management company. In addition, Dr. Strobeck is currently a Director of Quidel Corporation (“Quidel”), Accelerate Diagnostics Inc. (“Accelerate Diagnostics”), and Monteris +Medical. Dr. Strobeck was a Director of Tepha Inc. until June 2021. Dr. Strobeck received a B.S. from St. Lawrence University, a Ph.D. from the University of Cincinnati, a S.M. from the Harvard University/MIT Health Sciences Technology +Program, and a S.M. from the MIT Sloan School of Management. +We believe that Dr. Strobeck is qualified to serve on our board of +directors because of his experience in leadership and management roles at medical technology companies, as well as his experience as a board member and investor in the medical technology industry. +Charles Watts, M.D . has served as a Director of the Company since July 2019. Until his retirement, Dr. Watts served as +Chief Medical Officer at Northwestern Memorial Hospital and Associate Dean for Clinical Affairs at the Feinberg School of Medicine, Northwestern University from 2001 to 2011. Prior to his tenure at Northwestern, Dr. Watts served as Chief of +Clinical Affairs and Associate Dean at the University of Michigan Medical Center. He also previously served as Executive in Residence for the Health Management Academy, as an active faculty member of a nationally based Physician Leadership Program. +Dr. Watts served as a Director of Providence Health and Services (Seattle, Washington) from 2012 to 2016 where he chaired the Quality and Patient Safety Improvement Committee, and served as a Trustee of Swedish Health Services until May 2017, +when he accepted an appointment as interim Chief Medical Officer, serving in that capacity until June 2019. He currently serves as a Trustee on the Institute for Systems Biology Board and as a director of Accelerate Diagnostics. Dr. Watts +received his medical degree from the University of Michigan. +2022 Proxy Statement +8 +Table of Contents +We believe that Dr. Watts is qualified to serve on our board of directors because of +his experience in leadership and management roles in the field of medicine, as well as his experience as a board member in the healthcare industry. +Continuing Directors +Class I Directors – Term Expiring at the 2024 Annual Meeting +Jon Faiz Kayyem, +Ph.D. has served as a Director of the Company since December 2021. Dr. Kayyem has over 20 years of experience inventing, patenting, licensing, developing, and commercializing novel solutions for molecular diagnostics and DNA detection +opportunities. Dr. Kayyem has served in various leadership positions throughout his career. He held numerous roles at GenMark Diagnostics, including Founder, CEO and President, Chief Scientific Officer, Senior Vice President of Research and +Development. Prior to his work at GenMark Diagnostics, Dr. Kayyem served as Director and Founder of Calimmune and was Vice President of Life Sciences at Motorola. In October 2004, he co-founded the +biotechnology fund management company, Efficacy Capital Limited and served as a managing partner. Additionally, Dr. Kayyem founded Clinical Micro Sensors Inc., the predecessor company of GenMark Diagnostics, to commercialize multiple technical +innovations that he developed while serving as a Senior Research Fellow at the California Institute of Technology (Caltech). Dr. Kayyem holds a B.S. and M.S. in Biochemistry from Yale University and a Ph.D. in Molecular Biology from Caltech. +Currently, Dr. Kayyem is on the Board of Directors of Inhibrx. +We believe that Dr. Kayyem is qualified to serve on our board of +directors because of his experience in leadership and management roles in the field of medicine, as well as his experience as a board member and investor in companies in the healthcare industry. +Scott Hutton has served as our President, Chief Executive Officer and Director since January 2020, and previously held the role +of Chief Operating Officer from March 2018 to December 2019. Additionally, Mr. Hutton has served on the board of directors of Eximis Surgical, Inc. since February 2018 and was on the Board of the Colorado BioScience Association from April 2011 +to April 2013. Mr. Hutton was an Observer on the board of directors of Aqueduct Critical Care from September 2014 to January 2017, and an Observer on the Board of Visualase, Inc. from October 2012 to July 2014. Mr. Hutton joined Biodesix +from Spectranetics Corp, a U.S.-based global leader in vascular intervention and lead management solutions (now part of Royal Philips), where he served as Senior Vice President and General Manager of the Vascular Intervention division from January +2017 to December 2017. Prior to joining Spectranetics, Mr. Hutton held several positions of increasing responsibility, including Vice President and General Manager, at Medtronic plc, a global healthcare products company and manufacturer of +medical devices and supplies, over a period of 16 years. From April 2012 to January 2017, Mr. Hutton was Vice President and General Manager of Neurosurgery, where he oversaw the operations of the approximately $1 Billion Neurosurgery Business +Unit. From 2008 to 2012, he grew from Senior Director of Global Marketing to Vice President and Business Leader of the Surgical Navigation and Intra-Operative Imaging Business. Mr. Hutton holds a Bachelor of Arts degree from the College of +Health and Human Sciences, Department of Health and Kinesiology at Purdue University. In March 2021, Mr. Hutton was named a Significant Sig by Sigma Chi International Fraternity. Mr. Hutton was named a Top 25 Biotech CEO of 2021 and 2022 +by the Healthcare Technology Report in February 2021 and February 2022, respectively. In January 2021, Mr. Hutton was named 2020 CEO of the Year-USA by CEO Monthly Magazine. In July 2011, Mr. Hutton +received the Medtronic Wallin Leadership Award for his focus on talent development, business performance, and his personal and intentional demonstration of leadership. +We believe that Mr. Hutton is qualified to serve on our board of directors because of his experience in leadership and management roles +at our Company, as well as his experience as a board member in the healthcare and medical device industries. +2022 Proxy Statement +9 +Table of Contents +John Patience has served as a Director of the Company since June 2008 and as +Chairman of the Board since September 2020. Mr. Patience currently serves as both a Director and Chairman of the board of Accelerate Diagnostics and has served in that capacity since joining the Accelerate Diagnostics’ board in +2012. Mr. Patience served as a director of Ventana Medical Systems, Inc. (“Ventana”), from 1989 and as Vice Chairman from 1999 until Ventana’s acquisition by Roche in 2008. Mr. Patience also served as a director of +Stericycle, Inc. since its founding in 1989 to June 2018. Mr. Patience is a founding partner of Crabtree Partners, a private equity investment partnership in Lake Forest, Illinois. He was also previously a partner of a venture capital +investment firm that provided both Ventana and Stericycle, Inc. with early-stage funding. Mr. Patience was also previously a partner at the consulting firm McKinsey & Co., Inc., specializing in health care. Mr. Patience holds a +B.A. in Liberal Arts and an L.L.B. from the University of Sydney, Australia, and an M.B.A. from the University of Pennsylvania’s Wharton School of Business. +We believe that Mr. Patience is qualified to serve on our board of directors because of his experience in leadership and management roles +in the field of medicine, as well as his experience as a board member and investor in companies in the healthcare industry. +Class III Directors – Term Expiring at the 2023 Annual Meeting +Jean M. Franchi has served as a Director of the Company since April 2020. Ms. Franchi is currently Chief Financial +Officer at the Replimune Group, a biotechnology company developing oncolytic immuno-gene therapies. Prior to the Replimune Group, Ms. Franchi was Chief Financial Officer at Merrimack Pharmaceuticals, Inc., a biopharmaceutical company, from 2017 +to 2019, Dimension Therapeutics, Inc., a gene therapy company, from 2015 to 2017, and Good Start Genetics, Inc., a molecular genetic information company, from 2012 to 2015. From 1995 to 2011, Ms. Franchi held various positions at Genzyme +Corporation, including Senior Vice President of Corporation Finance, Senior Vice President of Business Unit Finance, and Vice President of Finance and Controller, Product Line and International Group. Ms. Franchi currently serves on the boards +of directors of Visioneering Technologies, Inc. and Dynacure. Ms. Franchi also served on the board of directors of Biophytis S.A. through July 2021. Ms. Franchi received her B.A. in Accounting from Hofstra University. +We believe that Ms. Franchi is qualified to serve on our board of directors because of her experience in leadership and management roles +in the healthcare industry as well as her experience holding finance-related roles of increasing responsibility. +Hany +Massarany has served as a Director of the Company since July 2020. Mr. Massarany was President and Chief Executive Officer of GenMark Diagnostics, Inc., a provider of multiplex molecular diagnostic solutions, from April 2011 to March +2020. From February 2009 to April 2011, Mr. Massarany served as President at Ventana and Head of Roche Tissue Diagnostics, a division of F. Hoffman-La Roche Ltd. focused on manufacturing instruments and +reagents that automate tissue processing and slide staining diagnostics for cancer. From 1999 to 2009, Mr. Massarany held various global leadership positions with Ventana, including Chief Operating Officer, Executive Vice President, Worldwide +Operations, Senior Vice President, Corporate Strategy and Development, and Vice President, North American Commercial Operations. Mr. Massarany also held executive management positions with Bayer Diagnostics and Chiron Diagnostics, working in +both the Asia Pacific region and the United States. Mr. Massarany served on the board of directors of GenMark Diagnostics, Inc. from May 2011 to February 2020. Mr. Massarany earned a B.S. in Microbiology and Immunology from Monash +University in Australia and an M.B.A. from Melbourne University. +We believe that Mr. Massarany is qualified to serve on our board of +directors because of his experience in leadership and management roles, and experience as a board member, in the healthcare industry. +Jack Schuler has served as a Director of the Company since June 2008. Mr. Schuler served as a director of Ventana from 1991 +and as Chairman of the board from 1995 until Ventana’s acquisition by Roche in 2008. Prior to joining Ventana, Mr. Schuler was President and Chief Operating Officer of Abbott Laboratories, a diversified +2022 Proxy Statement +10 +Table of Contents +health care company, which he joined in 1972 and where he held a number of management and marketing positions, also serving as a director from April 1985 to August 1989. Additionally, +Mr. Schuler has served as a director of Abbott Laboratories, Medtronic plc (Lead Director), Stericyle (Chairman), Chiron Corporation, and Quidel, and currently serves on the board of directors of Accelerate Diagnostics. Mr. Schuler holds a +B.S. in Mechanical Engineering from Tufts University and an M.B.A. from Stanford University Graduate School of Business Administration. +We believe that Mr. Schuler is qualified to serve on our board of directors because of his experience in leadership and management roles +in the healthcare industry, as well as his experience as a board member in the healthcare and medical device industries. +Board Composition +In accordance with our amended and restated certificate of incorporation, our board of directors is divided +into three classes with staggered, three-year terms. At each annual meeting of stockholders, the successors to directors whose terms then expire will be elected to serve from the time of election and qualification until the third annual meeting +following election. Our directors are divided among the three classes as follows: +• +the Class I directors are Jon Faiz Kayyem, Ph.D., John Patience and Scott Hutton, and their terms will +expire at the 2024 annual meeting of stockholders; +• +the Class II directors are Matthew Strobeck, Ph.D., and Charles Watts, M.D., and their terms expire at the +Annual Meeting; and +• +the Class III directors are Jean Franchi, Hany Massarany and Jack Schuler, and their terms will expire at +the 2023 annual meeting of stockholders. +Our amended and restated certificate of incorporation and amended and restated +bylaws provide that the authorized number of directors may be changed only by resolution of the board of directors. Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so +that, as nearly as possible, each class will consist of one third of the directors. Each director’s term continues until the election and qualification of his or her successor, or, if sooner, his or her death, resignation or removal. +Director Independence +Under the listing requirements and rules of Nasdaq Stock Market (“Nasdaq”), independent directors must comprise a majority of our +board of directors as a listed company within one year of the closing of our initial public offering. +Our board of directors has +undertaken a review of its composition, the composition of its committees and the independence of each director. Based upon information requested from and provided by each director concerning his or her background, employment and affiliations, +including family relationships, our board of directors has determined that Ms. Franchi, Messrs. Massarany, Schuler and Patience and Drs. Kayyem, Strobeck and Watts do not have any relationships that would interfere with the exercise of +independent judgment in carrying out the responsibilities of a director and that each of these directors is “independent” as that term is defined under the applicable listing requirements and rules of Nasdaq. In making this determination, +our board of directors considered the current and prior relationships that each non-employee director has with our company and all other facts and circumstances our board of directors deemed relevant in +determining their independence, including the beneficial ownership of our capital stock by each non-employee director. +2022 Proxy Statement +11 +Table of Contents +Board Leadership Structure +Our corporate governance guidelines provide our board of directors with flexibility to combine or separate the positions of Chairman of the +board of directors and the Chief Executive Officer and/or the implementation of a lead director in accordance with its determination that utilizing one or the other structure would be in the best interests of the company. Mr. Patience currently +serves as the independent Chairman of our board of directors. Our board of directors believes that separating these positions reinforces the independence of our board of directors from management, creates an environment that encourages objective +oversight of management’s performance and enhances the effectiveness of our board of directors as a whole. +Role of our Board of Directors in Risk Oversight +Our board of directors is responsible for overseeing the overall risk +management process at Biodesix. The day-to-day responsibility for managing risks and exposures resides with our executive management team while our board of director +committees and our board of directors as a whole participate in the oversight process. The risk oversight process includes receiving regular reports from committees and management to enable our board of directors to understand management’s risk +assessment and mitigation processes, which includes areas of potential material risk, including long-term strategic and operational planning, strategic biopharmaceutical partnerships, executive development and evaluation, regulatory and legal +compliance, information technology (including cybersecurity), financial reporting and internal controls and reputational risk. Our board of directors focuses on the overall risks affecting us, and each of its standing committees has been delegated +responsibility for oversight of specific risks that fall within its areas of responsibility. For example: +• +Our audit committee is responsible for overseeing our major financial, legal and regulatory risk exposures, which +spans a variety of areas including litigation, regulatory compliance, financial reporting, insurance and cybersecurity. Our audit committee also oversees the steps management has taken to monitor and control such exposures, including guidelines and +policies for assessing and managing risk and related compliance efforts. +• +Our nominating and corporate governance committee oversees the management of risks associated with our overall +compliance and corporate governance practices and the independence and composition of our board of directors, including monitoring the effectiveness of our corporate governance guidelines and other policies such as our code of conduct and overseeing +our environmental and sustainability efforts and progress. +• +Our compensation committee regularly assesses risks arising from our compensation plans, policies and programs, +including whether any such plans encourage excessive or inappropriate risk-taking. +While each committee is responsible +for evaluating certain risks and overseeing the management of such risks, the full board of directors is regularly informed through committee reports about such risks. +Meetings of our Board of Directors +Our board of directors held six (6) meetings during 2021. Each incumbent director attended at least 75% of the aggregate total number of +meetings of the board of directors and the committees on which he or she served, held during the portion of 2021 for which he or she was a director or committee member. We encourage our directors to attend our annual meetings of stockholders. Seven +(7) directors, including our Chief Executive Officer, Mr. Hutton, attended our 2021 annual meeting of stockholders. +2022 Proxy Statement +12 +Table of Contents +Committees of our Board of Directors +Our board of directors has established an audit committee, a compensation committee and a nominating and corporate governance committee. Our +board of directors may establish other committees to facilitate the management of our business. The composition and functions of each committee are described below. Members serve on these committees until their resignation or until otherwise +determined by our board of directors. The charter of each committee is available on our corporate website at www.biodesix.com in the Investors section under “Governance Highlights.” Reference to our website does not constitute +incorporation by reference of the information contained at or accessible through our website into this proxy statement. +Committee Composition and Meetings +The following table provides current membership and 2021 meeting information for each +committee of our board of directors: +Name: +Audit Committee +Compensation +Committee +Nominating and Corporate +Governance Committee (1) +Jean Franchi +Chair +X +Jon Faiz Kayyem, Ph.D. +X +Hany Massarany +X +Chair +John Patience +X +Jack Schuler +X +Matthew Strobeck, Ph.D. +X +Chair +Charles Watts, M.D. +X +Total meetings held in 2021 +4 +4 +0 +(1) +During 2021, our nominating and corporate governance committee did not meet; certain governance matters were +considered by our full board of directors. +Audit Committee +Our audit committee consists of Ms. Franchi, Mr. Massarany and Dr. Strobeck, each of whom our board of directors has determined +satisfies the independence requirements under Nasdaq listing rules and Rule 10A-3(b)(1) of the Exchange Act. The chair of our audit committee is Ms. Franchi, whom our board of directors has determined is +an “audit committee financial expert” within the meaning of the SEC regulations. Each member of our audit committee can read and understand fundamental financial statements in accordance with applicable listing standards. In arriving at +these determinations, our board of directors has examined each audit committee member’s scope of experience and the nature of her or his employment in the corporate finance sector. The functions of this committee include: +• +helping our board of directors oversee our corporate accounting and financial reporting processes; +• +reviewing and discussing with our management the adequacy and effectiveness of our disclosure controls and +procedures; +• +assisting with design and implementation of our risk assessment functions; +• +evaluating the qualifications, performance and independence of our independent registered public accounting firm +and deciding whether to retain its services; +2022 Proxy Statement +13 +Table of Contents +• +monitoring the rotation of partners of our independent registered public accounting firm on our engagement team +as required by law; +• +discussing the scope and results of the audit with the independent registered public accounting firm, and +reviewing, with management and the independent accountants, our interim and year-end results; +• +developing procedures for employees to submit concerns anonymously about questionable accounting or audit +matters; +• +reviewing related-party transactions; +• +approving, or as permitted, pre-approving, audit and permissible non-audit services to be performed by our independent registered public accounting firm; and +• +reviewing and assessing, at least annually, the performance of the audit committee and adequacy of its charter. +Compensation Committee +Our compensation committee consists of Messrs. Massarany and Patience and Drs. Kayyem and Watts, and the chair of our compensation committee +is Mr. Massarany. Our board of directors has determined that each of Messrs. Massarany and Patience and Drs. Kayyem and Watts is independent under the Nasdaq listing rules and is a “non-employee +director” as defined in Rule 16b-3 promulgated under the Exchange Act. The functions of this committee include: +• +reviewing, modifying and overseeing overall compensation strategy and policies; +• +reviewing and approving the compensation and other terms of employment of our chief executive officer, other +executive officers and senior management, as appropriate; +• +reviewing and approving the compensation arrangements with our executive officers and other senior management, as +appropriate; +• +reviewing and recommending to the full board of directors the compensation of our directors; +• +appointing and overseeing the work of compensation consultants, legal counsel or any other advisors and +consultants engaged for the purpose of advising the compensation committee; +• +reviewing, recommending to the full board of directors, as appropriate, and administering equity award plans, +compensation plans and similar programs, as well as modification or termination of plans and programs; +• +establishing policies with respect to equity compensation arrangements; +• +reviewing and evaluating with the chief executive officer and the full board of directors the succession plans +for our executive officers; and +• +reviewing and assessing, at least annually, the performance of the compensation committee and the adequacy of its +charter. +2022 Proxy Statement +14 +Table of Contents +Compensation Committee Interlocks and Insider +Participation +None of the members of the compensation committee is currently, or has been at any time during 2021, one of our +officers or employees. None of our executive officers currently serve, or has served during 2021, as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving as a member of our board +of directors or compensation committee. +Nominating and Corporate Governance Committee +Our nominating and corporate governance committee consists of Ms. Franchi, Dr. Strobeck and Mr. Schuler, and the chair of our +nominating and corporate governance committee is Dr. Strobeck. Our board of directors has determined that Ms. Franchi, Dr. Strobeck and Mr. Schuler are independent under the applicable listing standards. The functions of this +committee include: +• +reviewing periodically and evaluating director performance of our board of directors and its applicable +committees, and recommending to our board of directors and management areas for improvement; +• +identifying, evaluating, nominating and recommending individuals for membership on our board of directors; +• +reviewing with our chief executive officer the plans for succession to the offices of our executive officers and +make recommendations to our board of directors with respect to the selection of appropriate individuals to succeed to these positions; +• +reviewing and recommending to our board of directors any amendments to our corporate governance policies; and +• +reviewing and assessing, at least annually, the performance of the nominating and corporate governance committee +and the adequacy of its charter. +Director Nomination Process +Selection and Nomination Process +Our board of directors is responsible for nominating members for election to our board of directors by our stockholders at our annual meetings +of stockholders. Whenever a vacancy occurs on our board of directors, whether due to a newly created director position or the death, resignation, removal or retirement of an existing director, our board of directors is authorized to select a person +to fill the vacancy to serve as a director until the annual meeting of stockholders at which the director’s term expires and until the election and qualification of his or her successor or, if sooner, his or her death, resignation or removal. +Any increase or decrease in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors. +Criteria for Board Membership +The board of directors and the nominating and corporate governance committee will determine the appropriate characteristics, skills and +experience for the board of directors as a whole and for its individual members. The board of directors and the nominating and corporate governance committee will consider the minimum general criteria set forth below, and may add any specific +additional criteria with respect to specific searches, in selecting candidates and existing directors for service on the board of directors. An acceptable +2022 Proxy Statement +15 +Table of Contents +candidate may not fully satisfy all of the criteria, but is expected to satisfy nearly all of them. While the nominating and corporate governance committee does not have a formal policy in this +regard, the diversity of the board of the directors is a consideration in evaluating candidates for director positions, among others. +The +board of directors and the nominating and corporate governance committee believe that candidates for director should have certain minimum qualifications, including being able to read and understand basic financial statements, being over 21 years of +age and having the highest personal integrity and ethics. In considering candidates, the board of directors and the nominating and corporate governance committee intend to consider such factors as possessing relevant expertise upon which to be able +to offer advice and guidance to management, having sufficient time to devote to the affairs of the Company, demonstrated excellence in his or her field, having the ability to exercise sound business judgment and having the commitment to rigorously +represent the long-term interests of our stockholders. +The board of directors and the nominating and corporate governance committee +review candidates for director nomination in the context of the current composition of the board of directors, the operating requirements of the Company and the long-term interests of our stockholders. In conducting this assessment, the board of +directors and the nominating and corporate governance committee consider diversity, age, skills, and such other factors as it deems appropriate given the current needs of the board of directors and the Company to maintain a balance of knowledge, +experience and capability. In the case of incumbent directors whose terms of office are set to expire, the board of directors and the nominating and corporate governance committee review such directors’ overall service to the Company during +their term, including the number of meetings attended, level of participation, quality of performance, and any other relationships and transactions that might impair such directors’ independence. In the case of new director candidates, the +board of directors and the nominating and corporate governance committee also determine whether the nominee must be independent for purposes of any stock exchange on which any of the Company’s capital stock is listed. +Stockholder Recommendations and Nominations +Stockholders who wish to recommend candidates may contact the nominating and corporate governance committee in the manner described below +under “Board and Corporate Governance Matters—Stockholder Communications with our Board of Directors.” Stockholder nominations must be made according to the procedures required under our bylaws and described in this proxy statement +under the heading “Additional Information—Stockholder Proposals and Nominations for Next Year’s Annual Meeting of Stockholders.” Stockholder-recommended candidates and stockholder nominees whose nominations comply with these +procedures will be evaluated by our nominating and corporate governance committee in the same manner as other nominees. +2022 Proxy Statement +16 +Table of Contents +Board Diversity Matrix +The table below provides certain highlights of the composition of our board of directors members and nominees as of March 31, 2022. Each +of the categories listed in the below table has the meaning as it is used in Nasdaq Listing Rule 5605(f). +Board Diversity Matrix as of March 31, 2022 +Total Number of Directors +8 +Female +Male +Non-Binary +Did Not Disclose Gender +Part I: Gender Identity +1 +7 +- +- +Directors +Part II: Demographic Background +African American or Black +- +- +- +- +Alaskan Native or Native American +- +- +- +- +Asian +- +- +- +- +Hispanic or Latinx +- +- +- +- +Native Hawaiian or Pacific Islander +- +- +- +- +White +1 +7 +- +- +Two or More Races or Ethnicities +- +- +- +- +LGBTQ+ +- +Did Not Disclose Demographic Background +- +Directors who Identify as Middle Eastern: 1 +Executive Officers +Set forth below is biographical information with respect to each current executive officer of the Company, except Mr. Hutton, our +President and Chief Executive Officer. Mr. Hutton also serves as a director of the Company, and his biographical information is available above in the section titled “Overview of Our Nominees and Continuing Directors—Continuing +Directors.” +Robin Harper Cowie , age 42. Ms. Harper Cowie has served as our Chief Financial Officer since April +2017. She has been with the Company in multiple financial and reimbursement positions since March 2011, serving as Vice President of Finance from February 2016 to April 2017, Vice President of Reimbursement & Health Economics from February +2015 to February 2016, Senior Director of Reimbursement from January 2014 to February 2015, and Director of Reimbursement from March 2011 to January 2014. Prior to joining Biodesix, Ms. Harper Cowie held a leadership role in payer and +government relations at Precision Therapeutics, Inc. Ms. Harper Cowie’s background includes corporate finance, managed care and payer relations, reimbursement and regulatory policy, and revenue cycle operations. Additionally, she spent +several years as a researcher at the University of Pittsburgh Medical Center. Ms. Harper Cowie holds a B.S. in Molecular Biology from the University of Pittsburgh, and an M.B.A. in Finance from the Joseph M. Katz Graduate School of Business +from the University of Pittsburgh. +Ryan Siurek , age 50. Mr. Siurek has been the Chief Accounting Officer of Biodesix +since December 2020. Mr. Siurek has held various finance and accounting executive roles of increasing responsibility. Prior to Biodesix, Mr. Siurek served as the Vice President, Chief Accounting Officer and Controller of Vail Resorts Inc. +from April 2016 to October 2020. Prior to Vail Resorts, Inc., Mr. Siurek served as Chief Financial Officer for Sprint Corporation’s prepaid and wholesale division from December 2013 to April 2016 and as VP, Chief +2022 Proxy Statement +17 +Table of Contents +Accounting Officer and Controller from July 2013 to December 2013. He served as Vice President and Assistant Controller of Sprint Corporation from January 2009 to November 2009. Prior to Sprint +Corporation, Mr. Siurek worked for LyondellBasell Industries from January 2004 to January 2009, where he held various positions, including Director of Risk Management and Global Shared Services from September 2008 to January 2009, European +Controller from July 2007 to August 2008, and Senior Manager of Technical Accounting from January 2004 to June 2007 and served as its Controller for European Operations. Mr. Siurek serves as a member of the Small Business Advisory Committee of +the Financial Accounting Standards Board (“FASB”) as well as a member of the Financial Reporting Executive Committee of the American Institute of Certified Public Accountants. Mr. Siurek holds a Bachelor’s Degree in Accounting +and a Master’s Degree in Accounting from Texas A&M University and is a Certified Public Accountant. +Code of Business Conduct and Ethics +We have adopted a Code of Business Conduct and Ethics (the “Code of Conduct”) +that applies to all of our employees, officers (including our principal executive officer, principal financial officer and principal accounting officer or controller, or persons performing similar functions), and directors. The full text of our Code +of Conduct is posted on our website at www.biodesix.com. We intend to disclose future amendments to certain provisions of our Code of Conduct, or waivers of such provisions, applicable to any principal executive officer, principal financial officer, +principal accounting officer or controller, or persons performing similar functions, and our directors, on our website identified above. Reference to our website does not constitute incorporation by reference of the information contained at or +accessible through our website into this proxy statement. +Corporate Governance Guidelines +We have adopted written corporate governance guidelines which provide the framework for our corporate governance, along with our amended and +restated certificate of incorporation, amended and restated bylaws, committee charters and other key governance practices and policies. Our corporate governance guidelines cover a range of topics including, but not limited to, board composition, +independence and selection of directors, board membership criteria, conduct of board meetings, board committee composition and functions, board assessment, director compensation and succession planning. Our corporate governance guidelines will be +reviewed at least annually by our nominating and corporate governance committee and any proposed changes will be recommended to our full board of directors for approval. A copy of our corporate governance guidelines is available on our corporate +website at www.biodesix.com in the Investor section under “Governance Highlights.” Reference to our website does not constitute incorporation by reference of the information contained at or accessible through our website into this proxy +statement. +Anti-Hedging and Anti-Pledging Policy +Our insider trading policy prohibits our directors, executive officers and other employees from engaging in hedging transactions or other +inherently speculative transactions with respect to Company securities, such as short sales or transactions in put or call options. Our directors, executive officers and other employees are also prohibited from holding Company securities in a margin +account or pledging company securities as collateral for a loan. +Stockholder Communications with our +Board of Directors +Any stockholder or other interested party who wishes to communicate with our board of directors or any +individual director may send written communications to our board of directors or such director c/o Corporate Secretary, Biodesix, Inc., 2970 Wilderness Place, Suite 100, Boulder, CO 80301. The communication must include the stockholder’s name, +address and an indication that the person is our stockholder. The Corporate Secretary will review any communications received from stockholders and will forward such communications to +2022 Proxy Statement +18 +Table of Contents +the appropriate director or directors, or committee of our board of directors, based on the subject matter. Communications that are deemed inappropriate (such as communications that are +commercial or frivolous in nature) will not be forwarded. In addition, communications that appear to be unduly hostile, intimidating, threatening, illegal or similarly inappropriate will not be forwarded. +Certain Relationships and Related-Party Transactions +The following is a summary of the transactions since January 1, 2020 to which we have been a participant in which the amount involved in +the transaction exceeds or will exceed $120,000 and in which any of our directors, director nominees, executive officers, or holders of more than 5% of our capital stock, or any immediate family member of, or person sharing the household with, any +of these individuals, had or will have a direct or indirect material interest, with certain exceptions, other than compensation arrangements, which are under the section of this proxy statement captioned “Executive Compensation.” +At-the-Market Equity Offering +On November 29, 2021, we established an at-the-market +equity offering program (the “ATM Program”) to sell shares of our common stock from time to time through Cowen and Company, LLC as sales agent. On December 30, 2021, we sold 3,756,994 shares under the ATM Program at a public offering +price of $4.35 per share, generating gross proceeds of $16.3 million, before $0.6 million of underwriting discounts and commissions and offering expenses payable by the Company. The net proceeds from the ATM Program were used, among other +things, to fund a $20 million partial repayment of the $30 million term loan with Silicon Valley Bank. +Preferred Stock +Financings +We previously issued convertible preferred stock from time to time to fund our operations and to make acquisitions. +In February and March 2019, we issued 8,695,621 shares of Series H Preferred Stock at $1.15 per share for total cash proceeds of $10.0 million. Immediately prior to our initial public offering, we had issued 118,766,273 convertible preferred +shares. On October 27, 2020, upon closing of our initial public offering, each outstanding share of Series A-1 Preferred Stock, Series A-2 Preferred Stock, Series A-3 Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock, Series F Preferred Stock, Series G Preferred Stock and Series H Preferred Stock +automatically converted into 0.1684664 share of common stock; and each share of Series B-1 Preferred Stock automatically converted into 0.196 shares of common stock. In the aggregate, all series of preferred +stock were converted into 20,090,745 shares of common stock. As a result, as of December 31, 2020 and through the date of this filing there are no longer any series of convertible preferred stock outstanding. +Convertible Debt Financings +In March 2020, we issued $10.0 million in convertible debt (the “March 2020 Notes”) that was scheduled to mature in August +2020. In August 2020, the maturity date of this debt was extended to June 30, 2021. The March 2020 Notes were issued in two tranches of $5 million, with the first tranche being funded in March 2020 and the second tranche in June 2020. The +holders of the March 2020 Notes included a number of our directors and their affiliates. +In December 2019, we issued $6.0 million in +convertible debt (the “December 2019 Notes”), that were scheduled to mature in August 2020. In August 2020, the maturity date of this debt was extended to June 30, 2021. The December 2019 Notes were issued in two tranches of +$3.0 million, with the first tranche funded in December 2019. The second tranche was funded in February 2020. The holders of the December 2019 Notes included a number of our directors and their affiliates. +In August and September 2019 we issued $10.0 million in convertible debt (the “August 2019 Notes”) that was scheduled to mature +in August 2020. In August 2020, the maturity date of this debt was extended to June 30, 2021. The holders of the August 2019 Notes included a number of our directors and their affiliates. +2022 Proxy Statement +19 +Table of Contents +Our convertible debt, along with the related accrued interest, was automatically converted +to 1,848,280 shares of our common stock upon the completion of our initial public offering in October 2020. +Investor Rights +Agreement +In October 2018, we entered into an amended and restated investor rights agreement (“IRA”) with certain +holders of our preferred stock and common stock, including certain holders of 5% of our capital stock, and including certain members of, and affiliates of, our directors and certain of our executive officers. The IRA provides the holders of our +preferred stock with certain registration rights. After the closing of our initial public offering, the holders of 20,090,745 shares of common stock issuable from conversion of outstanding preferred stock, became entitled to rights with respect to +the registration of their shares of common stock under the Securities Act under this agreement. +Contingent Value Rights +Agreement +In February 2016, we entered into a contingent value rights agreement (“CVR Agreement”) with certain +holders of our preferred and common stock, including several members of our board of directors. Pursuant to the CVR Agreement, the holders would be eligible to receive in the aggregate up to 15% of any future income and proceeds that we would +receive, subject to a number of conditions and offsets, with respect to ficlatuzumab rights under our co-development and collaboration agreement with AVEO Pharmaceuticals, Inc. +Stock Options +The Biodesix, Inc. 2006 Employee, Director and Consultant Stock Plan, as amended and restated in 2008, 2011 and 2013 (the “2006 Incentive +Plan”) was replaced in 2016 by the 2016 Equity Incentive Plan (the “2016 Incentive Plan”). The 2006 Incentive Plan governed outstanding awards granted prior to the adoption of the 2016 Incentive Plan. In connection with our initial +public offering in October 2020, our board of directors and our stockholders approved the 2020 equity incentive plan (the “2020 Incentive Plan”). The 2020 Incentive Plan replaced the 2016 Incentive Plan. As of December 31, 2021, options to +purchase an aggregate of 1,350,157 shares of common stock were outstanding under our 2020 Incentive Plan. As of December 31, 2021, options to purchase an aggregate of 1,900,451 shares of common stock were outstanding, in the aggregate, under our +2006 Incentive Plan and our 2016 Incentive Plan. +Participation in Initial Public Offering +Messrs. Patience and Schuler and Dr. Strobeck, members of our board of directors, purchased 391,110 shares of common stock from the +underwriters in our initial public offering at the initial public offering price per share of $18.00. +Participation in Initial +Public Offering Directed Share Program +Messrs. Hutton and Massarany and Dr. Watts, members of our board of directors, +purchased 15,000 shares of common stock through our Directed Share Program in our initial public offering at the initial public offering price per share of $18.00. +Indemnification of Directors and Executive Officers +We have entered into indemnification agreements with each of our directors and executive officers in connection with our initial public +offering. The indemnification agreements and our bylaws will require us to indemnify our directors against certain liabilities, costs and expenses to the fullest extent not prohibited by DGCL, and have purchased directors’ and officers’ +liability insurance. Subject to very limited exceptions, our bylaws will also require us to advance expenses incurred by our directors and officers. +2022 Proxy Statement +20 +Table of Contents +Policies and Procedures for Related-Party Transactions +Our audit committee has the primary responsibility for the review, approval and oversight of any “related-party transaction,” which +is any transaction, arrangement or relationship (or series of similar transactions, arrangements or relationships) in which we are, were or will be a participant and the amount involved exceeds $120,000, and in which the related person has, had or +will have a direct or indirect material interest. We adopted a written related-party transaction policy effective October 2020. Under our related-party transaction policy, our management is required to submit any related-party transaction not +previously approved or ratified by our audit committee to our audit committee. In approving or rejecting the proposed transactions, our audit committee takes into account all of the relevant facts and circumstances available. All of the transactions +described in this section, except for certain equity award grants, occurred prior to the adoption of this policy. +2022 Proxy Statement +21 +Table of Contents +DIRECTOR COMPENSATION +Non-Employee Director Compensation Policy +Our board of directors adopted a non-employee director compensation policy, as summarized below, which +became effective with respect to our third quarter, and was amended in the fourth quarter of 2021. The non-employee director compensation policy was determined after consultation with Board Advisory LLC, our +independent compensation consultant. +● Annual Retainers : During the +year ended December 31, 2021, none of our non-employee directors received annual retainers with respect to service on our board of directors or any of its committees. Our +non-employee director compensation policy will continue this practice in 2022, such that no annual cash retainers will be paid. +● Equity Compensation : +– +Upon appointment to our board of directors, each non-employee director +is entitled to receive an initial stock option grant valued at $187,500 as of the grant date, with 40% vesting on the two-year anniversary of the grant date and the remainder vesting ratably on each subsequent +monthly anniversary of the grant date for 36 months, subject to such director’s continuous service through each applicable vesting date. +– +Upon appointment to our board of directors, each non-employee director +is also entitled to receive an initial restricted stock unit (“RSU”) grant valued at $187,500 as of the grant date, which will vest on the one-year anniversary of the grant date subject to such +director’s continuous service through such date. +– +Generally, each non-employee director continuing his or her service on +our board of directors following the annual meeting of stockholders is entitled to receive an annual equity grant valued at $275,000 as of the grant date. Each non-employee director may elect to receive this +annual equity grant in the form of stock options or RSUs, or in a mixture of 50% stock options and 50% RSUs, which in each case will vest immediately prior to the subsequent annual meeting of stockholders. If a +non-employee director becomes a director after an annual meeting of stockholders, he or she will be granted a pro-rata annual equity grant based on the period of the non-employee director’s service on our board of directors during the year. For grants to be made in respect of 2022, however, the compensation committee has determined that non-employee directors will receive +an annual equity grant valued at $192,500 in the form of RSUs. +– +Notwithstanding the vesting schedules described above, each +non-employee director who remains in continuous service until a change of control (as defined in our 2020 Incentive Plan) will become fully vested in all then-outstanding equity awards. In addition, annual +equity grants will vest on a prorated basis in the event a director resigns or otherwise experiences a termination of service other than for cause. +● Expense Reimbursement : Our non-employee directors are also reimbursed for their reasonable out-of-pocket travel expenses to cover in person attendance at and +participation in board and committee meetings. +Director Deferred Compensation Plan +On December 21, 2021, our compensation committee adopted the 2021 Non-Employee Director Deferred +Compensation Plan (the “Director Deferred Compensation Plan”), an unfunded, non-qualified deferred compensation plan that allows our non-employee directors to +defer RSU awards that they receive. +Any RSU deferred will be credited as deferred units to the +non-employee director’s account as of the date on which it vests. Each deferred unit is credited with dividend equivalents equal to the dividends paid on our +2022 Proxy Statement +22 +Table of Contents +common stock, which are deemed reinvested in additional deferred units on the dividend payment date. Deferred units will be appropriately adjusted in the event of any change in our common stock +through merger, consolidation, or otherwise; a stock dividend; or a stock split, combination or other change in our common stock. +Payments +will be made in shares of our common stock equal to the number of deferred units credited to the director’s account, with a cash payment for any fractional deferred unit. A director may elect to receive deferred amounts in a lump sum within 90 +days after either his or her separation from service or, alternatively the later of his or her separation from service or January 1 of a calendar year elected by the director which may not be more than 15 years after the calendar year in which +the director’s initial deferral election under the Director Deferred Compensation Plan was made. Within 90 days following a non-employee director’s death, a lump sum equal to the then-remaining +balance in his or her account will be made to his or her beneficiary. Within 10 business days after a change in control (as defined in our 2020 Incentive Plan) and to the extent permitted by Federal tax law, each +non-employee director (or former non-employee director) will receive a cash lump sum payment equal to the number of deferred units credited to his or her account on the +date of the change in control, multiplied by the fair market value of one share of our common stock on such date. If payment within 10 business days following a change in control is not permitted by Federal tax laws, then payment will be made at the +time and in the form that payment would have been made if a change in control had not occurred. +2021 +Director Compensation Table +The following table sets forth information for the fiscal year ended December 31, 2021 regarding +the compensation awarded to, earned by or paid to our non-employee directors. The only compensation received by our non-employee directors was in the form of RSUs and +option awards. Mr. Hutton, our Chief Executive Officer, does not receive any separate compensation for his service on our board of directors. +In respect of annual equity grants for 2021 service, Ms. Franchi and Dr. Strobeck each received 20,044 RSUs, Messrs. Patience and +Schuler and Dr. Watts each received stock options representing the right to purchase 34,385 shares of our common stock and Mr. Massarany received a prorated grant of stock options representing the right to purchase 25,789 shares of our +common stock. Dr. Kayyem joined the board of directors in December 2021 and received an initial grant of 31,619 RSUs and an initial grant of stock options representing the right to purchase 50,368 shares of our common stock. In addition, +Dr. Kayyem received a prorated annual equity grant in the form of stock options representing the right to purchase 27,038 shares. +Stock +Awards +Option +Awards +Total +Name +($) (1) +($) (2) +($) +Jean Franchi (3) +275,000 +— +275,000 +Jon Faiz Kayyem, Ph.D (3) +187,500 +275,000 +462,500 +Hany Massarany (3) +— +206,250 +206,250 +John Patience (3) +— +275,000 +275,000 +Jack Schuler (3) +— +275,000 +275,000 +Matthew Strobeck, Ph.D (3) +275,000 +— +275,000 +Charles M. Watts, M.D (3) +— +275,000 +275,000 +(1) +The amounts reported represent the aggregate grant date fair market value of the RSUs, calculated in accordance +with FASB ASC Topic 718 based on the assumption that the value of each RSU granted to each of Ms. Franchi and Dr. Strobeck on June 29, 2021 was equal to $13.72 and the value of each RSU granted to Dr. Kayyem on December 6, +2021 was equal to $5.93, both amounts being the closing prices of our common stock on these respective dates. +(2) +The amounts reported represent the aggregate grant date fair market value of the stock options calculated in +accordance with FASB ASC Topic 718. The assumptions used in calculating the grant date fair value of the award disclosed in this column are set forth in Note 12 of our audited financial statements included in the 2021 Form 10-K Report under “Item 8. Financial Statements and Supplementary Data” for the year ended December 31, 2021. These amounts do not correspond to the actual value that may be recognized by the non-employee directors upon exercise of the applicable awards. +2022 Proxy Statement +23 +Table of Contents +(3) +As of December 31, 2021, Ms. Franchi held options to purchase 29,363 shares of our common stock and RSUs in +respect of 46,412 shares of our common stock; Dr. Kayyem held options to purchase 77,406 shares of our common stock and RSUs in respect of 31,619 shares of our common stock; Mr. Massarany held options to purchase 60,946 shares of our common stock +and RSUs in respect of 26,368 shares of our common stock; Mr. Patience held options to purchase 46,102 shares of our common stock; Mr. Schuler held options to purchase 46,102 shares of our common stock; Dr. Strobeck held options to purchase 15,086 +shares of our common stock and RSUs in respect of 20,044 shares of our common stock; and Dr. Watts held options to purchase 95,910 shares of our common stock and RSUs in respect of 26,368 shares of our common stock. +2022 Proxy Statement +24 +Table of Contents +EXECUTIVE COMPENSATION +The following is a discussion of compensation arrangements of our named executive officers. This discussion contains forward-looking +statements that are based on our current plans, considerations, expectations, and determinations regarding future compensation programs. Actual compensation programs that we adopt may differ materially from currently planned programs as summarized +in this discussion. As an “emerging growth company” as defined in the JOBS Act, we are not required to include a Compensation Discussion and Analysis section and have elected to comply with the scaled back disclosure requirements +applicable to emerging growth companies. In addition, as an emerging growth company, we are not required to conduct votes seeking approval, on an advisory basis, of either the compensation of our named executive officers or the frequency with which +such votes must be conducted. +Overview +This section provides a discussion of the compensation paid or awarded to our Chief Executive Officer and our two other most highly compensated +executive officers as of December 31, 2021. We refer to these individuals as our “named executive officers.” For 2021, our named executive officers were: +• +Scott Hutton, President and Chief Executive Officer; +• +Robin Harper Cowie, Chief Financial Officer, Secretary and Treasurer; and +• +Ryan Siurek, Chief Accounting Officer +Our executive compensation program is intended to align executive compensation with our performance objectives and business strategy and to +enable us to attract, motivate, retain and reward executive officers who operate in a highly competitive and technologically challenging environment and whose contributions are critical to our long-term success. The compensation paid or awarded to +our executive officers is generally based on the assessment of each individual’s performance compared against the business objectives established for the fiscal year as well as our historical compensation practices. The compensation paid to +newly hired executive officers is primarily determined based on the negotiations of the parties as well as our historical compensation practices, and we seek fairness in total compensation paid to our executive officers. As a result, we benchmark +executive compensation against external and internal comparisons and look at the relationship between team member roles in the organization to determine appropriate compensation. For the year ended December 31, 2021, the material elements of +our executive compensation program were base salary, annual cash bonus and equity awards in the form of stock options. +Performance-based, +at risk and variable compensation in the form of annual cash bonuses and equity-based compensation is a significant portion of the overall compensation paid to each named executive officer. Our annual cash bonuses and performance-based stock options +are earned or vest only upon the achievement of certain performance metrics. In addition, the value received from stock options (if any) depends on our stock price. +We expect that our executive compensation program will continue to evolve over the coming years, while still supporting our overall business +and compensation objectives. The compensation committee of our board of directors oversees our executive compensation program. In addition, during the year ended December 31, 2021, the compensation committee utilized our independent executive +compensation consultant to advise us on the elements of our executive compensation program. +2022 Proxy Statement +25 +Table of Contents +Compensation of Named Executive Officers +Base Salary +Base salaries are intended to provide a level of compensation sufficient to attract and retain an effective management team, when considered in +combination with the other components of our executive compensation program. The relative levels of base salary for our named executive officers are designed to reflect each executive officer’s scope of responsibility and accountability to us. +Please see the “Salary” column in the Summary Compensation Table for the base salary amounts received by each named executive officer during the years ended December 31, 2020 and December 31, 2021. +As of January 1, 2021, Mr. Siurek’s annual base salary was $300,000. +Effective March 1, 2021, our board of directors approved increases in Mr. Hutton’s and Ms. Harper Cowie’s annual base +salaries to $515,000 (from $425,000) and $330,000 (from $290,000), respectively. The March 2021 increases were set based on advice from the independent compensation consultant and were intended to ensure competitiveness when compared with public +company base salaries for companies of commensurate size and complexity. +Effective March 1, 2022, our compensation committee approved +increases in Ms. Harper Cowie’s annual base salary to $355,000 (from $330,000). The March 2022 increase was again set based on advice from the independent compensation consultant and intended to ensure competitiveness at the 25th +percentile when compared with public company base salaries for companies of commensurate size and complexity. +Annual Cash +Bonuses +We provide our senior leadership team with short-term incentive compensation through an annual cash bonus program. +Annual bonus compensation holds executives accountable, rewards the executives based on actual business results and helps create a “pay for performance” culture. Our annual cash bonus program provides cash incentive award opportunities +based on the achievement of performance goals approved by our compensation committee at the beginning of each fiscal year. +Generally, our +compensation committee establishes a Company-based performance metric as a threshold vesting criterion for any payouts for a particular annual bonus period. In determining bonus payouts, if any, the performance of our named executive officers with +respect to individual performance goals established at the beginning of the applicable year is only considered if that metric is met or exceeded. +For 2020, the compensation committee determined that the Company’s revenue would be the applicable Company-based metric, and at year end, +measured actual revenue against targeted revenue, determined in accordance with U.S. GAAP. Mr. Hutton’s 2020 bonus target as a percentage of his annual base salary was 50% through October 31, 2020 and 100% from November 1, 2020 +through the fiscal year end. Ms. Harper Cowie’s 2020 bonus target as a percentage of her annual base salary was 50% for the entire fiscal year. Based on our 2020 performance, our compensation committee determined, and our board of +directors approved, payouts under our annual cash bonus program in 2021 equal to approximately 150% of the target bonus opportunity. +For +2021, the compensation committee determined that the Company’s short-term incentive compensation would be based on the achievement of two financial objectives, the Company’s revenue determined in accordance with U.S. GAAP and non-COVID-19 gross margin percentage, as well as one innovation objective intended to incentivize the advancement of the Company’s product pipeline. Actual results were +measured at year end against targeted outcomes. +Mr. Hutton’s 2021 bonus target as a percentage of his annual base salary was +100%. Ms. Harper Cowie’s 2021 bonus target as a percentage of her annual base salary was 50%. Mr. Siurek’s 2021 bonus target as a percentage of his annual base salary was 45%. Based on our 2021 performance, our compensation +committee determined, and our board of directors approved, payouts under our annual cash bonus program equal to approximately 76.7% of the target bonus opportunity. +2022 Proxy Statement +26 +Table of Contents +For 2020, the Company’s +bonus-to-options program permitted eligible executives, including each of our named officers, to elect to receive a portion of the annual bonus earned during a +particular year in the form of an option award (“bonus-to-options awards”), subject to certain limitations on the total number of bonus-to-options awards that may be granted for a year. On December 31, 2020, our compensation committee adopted the Company’s 2021 Senior Management Bonus to Equity +Plan, which permits eligible executives, including each of our named executive officers, to elect to receive 25%, 50%, 75% or 100% of the annual bonus earned during a particular year in the form of a bonus-to-options award, subject to an individual cap equal to the executive’s target annual bonus or any maximum dollar amount approved by the Company or the executive for such year. The bonus-to-options awards, if any, are fully vested at grant and have an exercise price equal to the fair market value of our common stock on the grant date. The program +reflects our commitment to a “pay for performance” philosophy and further aligns our executive compensation program with the long-term interests of our stockholders because an executive who participates foregoes a portion of his or her +annual cash bonus in exchange for an option award that will be valuable only if the stock price increases. +Pursuant to each named +executive officers’ elections made in 2019, Mr. Hutton and Ms. Harper Cowie each received portions of their respective annual bonuses earned in 2020 in the form of a +bonus-to-options award instead of in cash. Pursuant to elections made in 2020, each named executive officer also received a portion of their respective annual bonuses +earned in 2021 in the form of a bonus-to-options award instead of in cash. For annual bonuses earned in 2020, the number of shares of the Company’s common stock +subject to each bonus-to-options award granted in 2021 was determined by multiplying the cash value of the bonus election to be received in the form of an option award +by four, and then dividing the product of that calculation by $8.38 (the Company’s average share price during 2020, calculated based on (i) for January 1, 2020 through October 27, 2020, the then current value per share of +preferred stock, as adjusted to take into account the reverse stock split that occurred in 2020, and (ii) for October 28, 2020 through December 31, 2020, the closing price of our publicly traded common stock. This methodology +represents an equitable adjustment by the board of directors of the formula under the bonus to options program to take into account the impact of our initial public offering on our securities and prevent the dilution or enlargement of rights under +the program. For bonuses earned in 2021, the number of shares of the Company’s common stock subject to each bonus-to-options award granted in 2022 was determined by +multiplying the cash value of the bonus that was elected to be received in the form of an option award by four, and then dividing the product of that calculation by $13.40 (the Company’s average share price during 2021, calculated based on the +daily closing price of our publicly traded common stock). Accordingly, each of Mr. Hutton, Ms. Harper Cowie and Mr. Siurek received a payout under the 2020 and 2021 annual cash bonus program in cash and/or a bonus-to-options award, as illustrated below: +2020 +Name +Incentive +Cash Payout +Shares Subject to Bonus- +to-Option Award +Scott +Hutton +$167,636 +75,195 +Robin Harper Cowie +$104,077 +46,685 +2021 +Name +Incentive +Cash Payout +Shares Subject to Bonus- +to-Option Award +Scott +Hutton +$95,911 +85,875 +Robin Harper +Cowie +$31,002 +27,758 +Ryan Siurek +— +30,887 +Equity Awards +To further align the interests of our executive officers with the interests of our stockholders and to further focus our executive officers on +our long-term performance, we have historically granted equity compensation in the form of stock options and this practice continued in 2021. +In the year ended December 31, 2021, the compensation committee awarded Mr. Hutton and Ms. Harper Cowie stock options +(“time-vested options”) representing the right to purchase 255,688 and 61,439, shares of our +2022 Proxy Statement +27 +Table of Contents +common stock, respectively on a five-year vesting schedule. The 2021 time-vested options vest in a series of 60 successive, equal monthly installments, measured from the vesting commencement +date, subject to continued service through the applicable vesting date. +In addition, in connection with his appointment as Chief +Accounting Officer on December 31, 2020, Mr. Siurek received stock options representing the right to purchase 45,000 shares of our common stock, with 40% of such shares vesting on the second anniversary of the date of +Mr. Siurek’s appointment, and the remaining shares vesting in equal monthly installments over the next three years, subject to continued service the applicable vesting date. +In the year ended December 31, 2020, the board of directors awarded Mr. Hutton and Ms. Harper Cowie stock options representing +the right to purchase 151,617 and 30,323 shares of our common stock, respectively, on a five-year vesting schedule. The 2020 time-vested options vest in a series of 60 successive, equal monthly installments measured from the vesting commencement +date, subject to continued service through the applicable vesting date. +Each of Mr. Hutton and Ms. Cowie were previously granted +performance-based stock options (“performance-vested options”) that became partially vested in 2020 and 2021 based on the achievement of specified performance hurdles. The performance-vested options represented the right to purchase +25,269, and 17,688 shares of our common stock, respectively, on a three-year vesting schedule subject to the achievement of applicable performance criteria. One third of these performance-vested options could have vested after each of the first +(2019 tranche), second (2020 tranche) and third (2021 tranche) anniversaries of the vesting commencement date, subject to the Company’s achievement of recognized revenue of at least $31 million, $67 million and $134 million for +the years ended December 31, 2019, 2020 and 2021, respectively. +The board of directors has sole discretion to determine if the +performance hurdles are met and to determine the vesting date, and shall make such determinations within 90 days after the end of the applicable fiscal year. In September 2020, and in light of the impact of the +COVID-19 pandemic on the Company’s operations and other considerations, the board of directors amended the performance-vested options to adjust the performance hurdles for the 2020 tranche and the 2021 +tranche to $28.6 million and $51.5 million, respectively. At the time of such amendment, the Board believed that the achievement of the amended performance hurdles remained uncertain, and struck the appropriate balance of ambitious and +attainable. +The board of directors retains ultimate discretion to determine whether such performance hurdles have been met. For the 2019 +tranche, the board of directors determined that the performance hurdles were not met and, consistent with our pay for performance philosophy, one third of each of Mr. Hutton’s and Ms. Harper Cowie’s performance-vested option +award was therefore cancelled. For each of the 2020 tranche and 2021 tranche, the board of directors determined that the performance hurdles were met and the remaining amounts of each of Mr. Hutton’s and Ms. Harper Cowie’s +performance-vested option award became fully vested and exercisable. +Please see “Outstanding Equity Awards at Fiscal 2021 Year-End” below for a summary of the outstanding equity awards held by each of the named executive officers as of 2021 year-end. +One-Time Recognition Awards +During 2021, each of Mr. Hutton and Ms. Harper Cowie were granted one-time recognition awards +in the form of a fully vested stock option representing the right to purchase 40,008 and 24,839 shares of our common stock, respectively. These awards were in recognition of significant contributions relating to the strategic priorities of the +Company in the discretion of the Compensation Committee. +2022 Proxy Statement +28 +Table of Contents +2021 Summary Compensation Table +The following table shows information regarding the compensation of our named executive officers for services performed during the years ended +December 31, 2021 and 2020. +Name and Principal Position +Fiscal +Year +Salary +($) (1) +Bonus +($) +Option +Awards +($) (2) +Non-Equity +Incentive +Plan +Compensation +($) (3)(4) +All Other +Compensation +($) (5) +Total ($) +Scott Hutton +President and Chief Executive Officer +2021 +490,285 +— +4,068,265 +95,911 +(6) +102 +4,654,563 +2020 +364,175 +— +1,051,652 +167,636 +(7) +71 +1,583,534 +Robin Harper Cowie +Chief Financial Officer, Secretary and Treasurer +2021 +317,887 +— +1,178,634 +31,002 +(8) +163 +1,527,687 +2020 +271,017 +— +621,247 +104,077 +(9) +143 +996,484 +Ryan Siurek +Chief Accounting Officer (10) +2021 +294,872 +— +643,394 +— +(11) +— +938,266 +(1) +The amounts disclosed represent the dollar value of base salary earned by the named executive officer as of +December 31 of each applicable fiscal year. +(2) +The amounts disclosed represent the aggregate grant date fair value of awards including an estimate of the +grant date fair value of bonus-to-options awards as calculated in accordance with FASB ASC Topic 718. The assumptions used in calculating the grant date fair value of +the award disclosed in this column are set forth in Note 12 of our audited financial statements included in the 2021 Form 10-K Report “Item 8. Financial Statements and Supplementary Data” for the +year ended December 31, 2021. For the bonus-to-options awards, the estimated grant date fair value was used to correspond to the treatment of such expense under +U.S. GAAP in the 2021 Form 10-K Report, as the service inception period precedes the grant date. These amounts do not correspond to the actual value that may be realized by the named executive officers upon +vesting or exercise of the applicable awards. +(3) +Based on our 2021 performance measured against the Company’s achievement of two financial objectives, +revenue and non-COVID-19 gross margin percentage as well as one innovation objective, our compensation committee determined, and our board of directors approved, payouts +under the 2021 annual cash bonus program at a 76.7% achievement level. The Non-Equity Incentive Plan Compensation listed for each named executive officer represents the annual cash bonus award for the 2021 fiscal year after taking into +consideration the election of each individual to participate in the bonus-to-options program. +(4) +Based on our 2020 performance measured against the Company’s amended net revenue objectives, our +compensation committee determined that the Company had overachieved and the board of directors therefore approved payouts under the 2020 annual cash bonus program at a 150% achievement level. The Non-Equity +Incentive Plan Compensation listed for each named executive officer represents the annual cash bonus award for the 2020 fiscal year after taking into consideration the election of each individual to participate in the +bonus-to-options program. +(5) +The amounts disclosed represent the tax gross-up on awards through the +Company’s Wishlist Rewards Program, a peer-to-peer recognition program, received by each named executive officer as of December 31 of each applicable fiscal +year for specific contributions and demonstrating the Company’s core values. +2022 Proxy Statement +29 +Table of Contents +(6) +At a 76.7% achievement level, Mr. Hutton was entitled to a payout under the 2021 annual cash bonus program +of $383,643. However, Mr. Hutton elected to receive a portion of his 2021 annual cash bonus in the form of an option award under the bonus-to-options program. In +accordance with Mr. Hutton’s election and the terms of the bonus-to-options program, Mr. Hutton received a cash payment of $95,911 in respect of his 2021 +annual cash bonus, as reflected in this column, and in place of the remaining amount, received an option award representing the right to purchase 85,875 shares of our common stock, the value of which is reflected in the “Option Awards” +column. +(7) +At a 150% achievement level, Mr. Hutton was entitled to a payout under the 2020 annual cash bonus program +of $325,171. However, Mr. Hutton elected to receive a portion of his 2020 annual cash bonus in the form of an option award under the bonus-to-options program. In +accordance with Mr. Hutton’s election and the terms of the bonus-to-options program, Mr. Hutton received a cash payment of $167,636 in respect of his 2020 +annual cash bonus, as reflected in this column, and in place of the remaining amount, received an option award representing the right to purchase 75,195 shares of our common stock, the value of which is reflected in the “Option Awards” +column. +(8) +At a 76.7% achievement level, Ms. Harper Cowie was entitled to a payout under the 2021 annual cash bonus +program of $124,010. However, Ms. Harper Cowie elected to receive a portion of her 2021 annual cash bonus in the form of an option award under the bonus-to-options +program. In accordance with Ms. Harper Cowie’s election and the terms of the bonus-to-options program, Ms. Harper Cowie received a cash payment of $31,002 +in respect of her 2021 annual cash bonus, as reflected in this column, and in place of the remaining amount, received an option award representing the right to purchase 27,758 shares of our common stock, the value of which is reflected in the +“Option Awards” column. +(9) +At a 150% achievement level, Ms. Harper Cowie was entitled to a payout under the 2020 annual cash bonus +program of $201,884. However, Ms. Harper Cowie elected to receive a portion of her 2020 annual cash bonus in the form of an option award under the bonus-to-options +program. In accordance with Ms. Harper Cowie’s election and the terms of the bonus-to-options program, Ms. Harper Cowie received a cash payment of +$104,077 in respect of her 2020 annual cash bonus, as reflected in this column, and in place of the remaining amount, received an option award representing the right to purchase 46,685 shares of our common stock, the value of which is reflected in +the “Option Awards” column. +(10) +Mr. Siurek was not a named executive officer for fiscal 2020. +(11) +At a 76.7% achievement level, Mr. Siurek was entitled to a payout under the 2021 annual cash bonus program +of $103,490. However, Mr. Siurek elected to receive 100% of his 2021 annual cash bonus in the form of an option award under the bonus-to-options program. In +accordance with Mr. Siurek’s election and the terms of the bonus-to-options program, Mr. Siurek did not receive any cash payment in respect of his 2021 +annual cash bonus, as reflected in this column, and in place of the total amount, received an option award representing the right to purchase 30,887 shares of our common stock, the value of which is reflected in the “Option Awards” column. +2022 Proxy Statement +30 +Table of Contents +Outstanding Equity Awards at Fiscal 2021 Year-End +The following table presents information regarding the outstanding equity awards held +by each of the named executive officers as of December 31, 2021. As of the year ended December 31, 2021, none of the named executive officers held any outstanding RSUs or stock awards other than options. +Name +Grant +Date +Number of +Securities +Underlying +Unexercised +Options +(#) Exercisable +Number of +Securities +Underlying +Unexercised +Options +(#) Unexercisable +Equity +Incentive +Plan +Awards: +Number of +Securities +Underlying +Unexercised +Unearned +Options (#) +Option +Exercise +Price +($) +Option +Expiration +Date +Scott Hutton +4/4/2018 +63,174 +21,057 (3) +– +0.42 +4/3/2028 +3/22/2019 +24,597 +17,548 (2) +0.77 +12/31/2028 +3/22/2019 +8,423 +– +8,423 (4) +0.77 +12/31/2028 +4/15/2020 +58,121 +93,496 (1) +– +0.77 +4/14/2030 +2/23/2021 +40,008 +– (5) +– +20.67 +2/22/2031 +2/23/2021 +42,615 +213,073 (1) +– +20.67 +2/22/2031 +2/23/2021 +75,195 +– (5) +– +20.67 +2/22/2031 +Robin Harper Cowie +– +– +2/4/2014 +10,107 +– +– +4.40 +2/3/2024 +4/8/2015 +6,738 +– +– +4.40 +4/7/2025 +4/7/2016 +35,377 +– +0.84 +4/6/2026 +5/16/2017 +2,240 +280 (1) +– +0.42 +5/15/2027 +4/4/2018 +2,808 +4,560 (1) +– +0.42 +4/3/2028 +3/22/2019 +20,637 +14,740 (2) +0.77 +12/31/2028 +3/22/2019 +5,896 +5,896 (4) +0.77 +12/31/2028 +4/15/2020 +11,638 +18,685 (1) +– +0.77 +4/14/2030 +2/23/2021 +24,839 +– (5) +– +20.67 +2/22/2031 +2/23/2021 +10,240 +51,199 (1) +– +20.67 +2/22/2031 +2/23/2021 +46,685 +– (5) +– +20.67 +2/22/2031 +Ryan Siurek +1/7/2021 +– +45,000 (2) +– +19.16 +1/6/2031 +(1) +These stock options vest in a series of 60 successive, equal monthly installments measured from the vesting +commencement date. +(2) +Two fifths of these time-vested options vest on the second anniversary of the vesting commencement date, with +the remaining balance vesting in a series of 36 successive equal monthly installments measured from the second anniversary of the vesting commencement date, subject to the award recipient’s continued employment through the applicable vesting +date. In September 2020, the board of directors amended these time-vested options such that 21/60 of the time-vested options vest on the date that is 21 months after the vesting commencement date, with the remaining balance vesting in a series of 39 +successive equal monthly installments measured from such date, subject to the award recipient’s continued employment through the applicable vesting date. +(3) +Two fifths of these time-vested options vest on the second anniversary of the vesting commencement date, with +the remaining balance vesting in a series of 36 successive equal monthly installments measured from the second anniversary of the vesting commencement date, subject to the award recipient’s continued employment through the applicable vesting +date. +2022 Proxy Statement +31 +Table of Contents +(4) +In the year ended December 31, 2019, the board of directors awarded Mr. Hutton and Ms. Harper +Cowie performance-vested options representing the right to purchase 25,269 and 17,688 shares of our common stock, respectively. One third of these performance-vested options were eligible to vest after each of the first, second and third +anniversaries of the vesting commencement date, subject to the Company’s achievement of recognized revenue of at least $31 million, $67 million and $134 million for the years ended December 31, 2019, 2020 and 2021, +respectively. The board of directors has sole discretion to determine if the performance hurdles are met and to determine the vesting date, and shall make such determinations within 90 days after the end of the applicable fiscal year. For the 2019 +tranche, the board of directors determined that the performance hurdle was not met. As a result, one third of each of Mr. Hutton’s and Ms. Harper Cowie’s awards were cancelled, and two thirds of each of Mr. Hutton’s and +Ms. Harper Cowie’s awards remained outstanding. In addition, in September 2020 and in light of the impact of the COVID-19 pandemic on the Company’s operations and other considerations, the board +of directors amended the performance-vested options to adjust the performance hurdles for the 2020 tranche and the 2021 tranche to $28.6 million and $51.5 million, respectively. For each of the 2020 tranche and the 2021 tranche, the board +of directors determined that the applicable performance hurdles were met and one third of each of Mr. Hutton’s and Ms. Harper Cowie’s performance-vested option award became fully vested and exercisable on January 1, 2021 and +January 1, 2022, respectively. +(5) +100% vested at Date of Grant. +Additional Matters +Hutton Offer Letters +Mr. Hutton and the Company entered into an offer letter agreement, dated as of February 23, 2020 (the “2020 Hutton Offer +Letter”). Under the terms of the 2020 Hutton Offer Letter, effective January 1, 2020, Mr. Hutton’s base salary was raised to $350,000 annually. Effective November 2020, Mr. Hutton’s base salary was further adjusted to +$425,000 annually, and he became eligible to receive a bonus of up to 100% of his base salary. +In addition, Mr. Hutton is entitled +to certain severance benefits in the event that his employment with the Company is terminated without Cause, as defined in Mr. Hutton’s offer letter agreement with the Company dated as of February 8, 2018 (the “2018 Hutton Offer +Letter”), including but not limited to a termination following a change in control or, following a change in control, a successor’s failure to assume the terms and conditions of the 2018 Hutton Offer Letter as it relates to +Mr. Hutton’s salary, duties and responsibilities or severance provisions. The severance benefits consist of (i) base salary continuation for a period of 12 months following the effective date of a general release of claims, less +standard deductions and withholdings, and (ii) if Mr. Hutton timely elects healthcare continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), Company-paid COBRA premiums +(including in respect of coverage for eligible dependents) for a period starting on Mr. Hutton’s termination date and ending 12 months thereafter, subject to earlier termination if Mr. Hutton becomes eligible for health coverage from +a subsequent employer, or if Mr. Hutton ceases to be eligible for COBRA continuation for any reason including plan termination. In order to receive the severance benefits, Mr. Hutton is required to execute and allow to become effective a +release of all claims in favor of the Company, which becomes irrevocable and to be in continued compliance with any cooperation, non-disparagement or confidentiality provisions contained therein and with +obligations under the Company’s Confidentiality and Inventions Assignment Agreement, including non-solicit provisions thereof. +Pursuant to the 2018 Hutton Offer Letter, in the event Mr. Hutton resigned, or if his employment was terminated by the Company for Cause +or due to death or disability, Mr. Hutton would be entitled to any salary earned but unpaid prior to such termination, any reimbursable business expenses that were incurred but not reimbursed as of Mr. Hutton’s last day of employment, +and, if applicable, all accrued but unused vacation. Any unvested stock options or other equity awards would cease to vest and be forfeited on Mr. Hutton’s last day of employment. In the event that Mr. Hutton’s employment is +terminated by the Company without Cause, as +defined in the 2020 Hutton Offer Letter, he would be entitled to the same severance benefits as provided for +under the 2018 Hutton Offer Letter, plus an additional payout of target bonus previously established by the +2022 Proxy Statement +32 +Table of Contents +compensation committee. Furthermore, any change in control which results in a change of position will trigger the accelerated vesting of 100% of all unvested and then outstanding options held by +Mr. Hutton. +Effective March 1, 2021, our board of directors approved an increase in Mr. Hutton’s base salary to +$515,000 to reward him at a level that is commensurate with public company peers and to provide incentives that properly reflect his current duties and responsibilities. +Harper Cowie Offer Letters +Ms. Harper Cowie and the Company entered into an offer letter agreement, dated as of February 23, 2020 (the “2020 Harper Cowie +Offer Letter”). Under the terms of the 2020 Harper Cowie Offer Letter, Ms. Harper Cowie is entitled to a base salary of $290,000 annually effective November 2020, and she is eligible to receive a bonus of up to 50% of her base salary after +approval from the compensation committee and board of directors that relevant objectives have been achieved. In addition, Ms. Harper Cowie is entitled to certain severance benefits in the event that her employment with the Company is terminated +without Cause, as defined in the 2020 Harper Cowie Offer Letter, including but not limited to a termination following a change in control. The severance benefits consist of (i) base salary continuation for a period of six months following the +effective date of a general release of claims, less standard deductions and withholdings, and (ii) if Ms. Harper Cowie timely elects healthcare continuation coverage under COBRA, Company-paid COBRA premiums (including in respect of +coverage for eligible dependents) for a period starting on Ms. Harper Cowie’s termination date and ending 12 months thereafter, subject to earlier termination if Ms. Harper Cowie becomes eligible for health coverage from a subsequent +employer, or if Ms. Harper Cowie ceases to be eligible for COBRA continuation for any reason including plan termination. Any change in control which results in a change of position for Ms. Harper Cowie also results in accelerated vesting +of 100% of all unvested and then outstanding options held by Ms. Harper Cowie. In order to receive the severance benefits, Ms. Harper Cowie is required to execute a release of all claims in favor of the Company which becomes irrevocable, +and to be in continued compliance with cooperation, non-disparagement or confidentiality provisions contained therein and with obligations under the Company’s Confidentiality and Inventions Assignment +Agreement, including non-solicit provisions thereof. +Pursuant to the 2020 Harper Cowie Offer +Letter, in the event Ms. Harper Cowie resigns, or if her employment is terminated by the Company for Cause or due to death or disability, Ms. Harper Cowie would be entitled to any salary earned but unpaid prior to such termination, any +reimbursable business expenses that were incurred but not reimbursed as of Ms. Harper Cowie’s last day of employment, and, if applicable, all accrued but unused vacation. Any unvested stock options or other equity awards shall cease to +vest and be forfeited on Ms. Harper Cowie’s last day of employment. +Effective March 1, 2021 and 2022, our board of +directors approved increases in Ms. Harper Cowie’s base salary to $330,000 and $355,000, respectively, to reward her at a level that is commensurate with public company peers and to provide incentives that properly reflect her current +duties and responsibilities. +401(k) Plan +The Company participates in a multiple employer tax-qualified 401(k) savings plan which allows +participants to defer eligible compensation up to the maximum amount allowed under Internal Revenue Service guidelines. The Company does not currently make any discretionary or employer matching contributions under the plan. +2022 Proxy Statement +33 +Table of Contents +STOCK OWNERSHIP +Security Ownership of Certain Beneficial Owners and Management +The following table sets forth certain information with respect to the beneficial ownership of our common stock as of March 1, 2022: +• +each of our named executive officers; +• +each of our directors; +• +all of our directors and executive officers as a group; and +• +each person, or group of affiliated persons, known by us to beneficially own more than 5% of our common stock. +We have determined beneficial ownership in accordance with the rules of the SEC, and therefore it represents sole or +shared voting or investment power with respect to our securities. Unless otherwise indicated below, to our knowledge, the persons and entities named in the table have sole voting and sole investment power with respect to all shares that they +beneficially owned, subject to community property laws where applicable. We have deemed shares of common stock subject to options that are currently exercisable or exercisable within 60 days of March 1, 2022 and restricted stock units +representing the right to receive shares of common stock that are currently vested or vest within 60 days of March 1, 2022, to be outstanding and to be beneficially owned by the person holding the option or restricted stock unit for the purpose of +computing the percentage ownership of that person but have not treated them as outstanding for the purpose of computing the percentage ownership of any other person. +We have based percentage ownership of common stock on 31,123,578 shares of common stock outstanding as of March 1, 2022. Unless otherwise +indicated, the address for each beneficial owner listed in the table below is c/o Biodesix, Inc., 2970 Wilderness Place, Suite 100, Boulder, Colorado 80301. +Shares Beneficially +Owned +Name and Address of Beneficial Owner +Shares +% +Principal Stockholders: +Jack Schuler and entities affiliated with Jack Schuler (1) +8,509,266 +27.3 +% +John Patience and entities affiliated with John Patience (2) +5,047,338 +16.2 +% +Life Sciences Alternative Financing LLC and entities affiliated with Life Sciences Alternative +Financing LLC (3) +2,190,427 +7.0 +% +Robert Cawthorn and entities affiliated with Robert Cawthorn (4) +1,999,193 +6.4 +% +Entities affiliated with Lawrence T. Kennedy, +Jr. (5) +2,561,192 +8.2 +% +Directors and Executive Officers: +Scott Hutton (6) +454,345 +1.4 +% +Robin Harper Cowie (7) +265,598 +* +Ryan Siurek (8) +34,753 +* +Jack Schuler (9) +8,509,266 +27.3 +% +John Patience (10) +5,047,338 +16.2 +% +Matthew Strobeck, Ph.D. (11) +1,284,514 +4.1 +% +Charles Watts, M.D. (12) +118,265 +* +Jean Franchi (13) +59,950 +* +Hany Massarany (14) +68,446 +* +Jon Faiz Kayyem, Ph.D. (15) +27,038 +* +All directors and named executive officers as a group (13 persons) +16,200,765 +49.8 +% +* +Represents beneficial ownership of less than 1%. +2022 Proxy Statement +34 +Table of Contents +(1) +Consists of (a) 46,102 shares of common stock issuable upon the exercise of options held by Jack Schuler that +are vested and exercisable within 60 days of March 1, 2022. The number of shares listed as beneficially owned includes (a) 8,463,164 shares of common stock held by Jack W. Schuler Living Trust. +(2) +Consists of (a) 46,102 shares of common stock issuable upon the exercise of options held by John Patience that +are vested and exercisable within 60 days of March 1, 2022. The number of shares listed as beneficially owned includes (a) 2,078,298 shares of common stock held by Patience Enterprises LP, (b) 2,869,950 shares of common stock held by John +Patience Trust, dated July 23, 1993 and (c) 52,988 shares of common stock held by Diane Patience. +(3) +Consists of (a) 1,896,374 shares of common stock held by IND Funding LLC and (b) 294,053 shares of common stock +held by Life Sciences Alternative Financing LLC. +(4) +Consists of (a) 70,314 shares of common stock issuable upon the exercise of options held by Robert Cawthorn +that are vested and exercisable within 60 days of March 1, 2022 and (b) 1,928,879 shares of common stock held by Manlia Limited. +(5) +Consists of (a) 1,624,961 shares of common stock held by Lawrence T. Kennedy, Jr. Revocable Trust UAD 6/19/01 +and as amended from time to time, (b) 769,565 shares of common stock held by Lawrence T. Kennedy, Jr. Perpetuity Trust UAD 6/30/16 and (c) 166,666 shares of common stock held by KFDI-B LLC. +(6) +Consists of 441,979 shares of common stock issuable upon the exercise of options held by Scott Hutton that are +vested and exercisable within 60 days of March 1, 2022. The number of shares listed as beneficially owned includes 12,366 shares of common stock held by Scott Hutton. +(7) +Consists of 215,340 shares of common stock issuable upon the exercise of options held by Robin Harper Cowie +that are vested and exercisable within 60 days of March 1, 2022. The number of shares listed as beneficially owned includes 50,258 shares of common stock held by Robin Harper Cowie. +(8) +Consists of 30,887 shares of common stock issuable upon the exercise of options held by Ryan Siurek that are +vested and exercisable within 60 days of March 1, 2022. The number of shares listed as beneficially owned includes 3,866 shares of common stock held by Ryan Siurek. +(9) +Consists of 8,509,266 shares beneficially owned by Jack Schuler and entities affiliated with Jack Schuler, as +set forth in footnote (1). +(10) +Consists of 5,047,338 shares beneficially owned by John Patience and entities affiliated with John Patience, as +set forth in footnote (2). +(11) +Consists of (a) 11,717 shares of common stock issuable upon the exercise of options held by Dr. Matthew +Strobeck that are vested and exercisable within 60 days of March 1, 2022 and (b) restricted stock units held by Dr. Matthew Strobeck representing the right to receive 20,044 shares of common stock that are currently vested or vest within 60 +days of March 1, 2022. The number of shares listed as beneficially owned includes (a) 966,883 shares of common stock held by Matthew Strobeck, (b) 40,665 shares of common stock held by Clajer Capital LLC, (c) 14,072 shares of common stock held by +the minor children of Matthew Strobeck, (d) 19,933 shares of common stock held by Birchview Capital Partners and (e) 211,200 shares of common stock held by Birchview Fund. +(12) +Consists of (a) 95,910 shares of common stock issuable upon the exercise of options held by Dr. Charles +Watts that are vested and exercisable within 60 days of March 1, 2022 and (b) restricted stock units held by Dr. Charles Watts representing the right to receive 14,500 shares of common stock that are currently vested or vest within 60 days of +March 1, 2022. The number of shares listed as beneficially owned includes 7,855 shares of common stock held by Dr. Charles Watts. +(13) +Consists of (a) options held by Jean Franchi to acquire 29,363 shares of common stock that are currently +vested and exercisable 60 days of March 1, 2022 and (b) restricted stock units held by Jean Franchi representing the right to receive 30,587 shares of common stock that are currently vested or vest within 60 days of March 1, 2022. +(14) +Consists of 60,946 shares of common stock issuable upon the exercise of options held by Hany Massarany that are +vested and exercisable within 60 days of March 1, 2022. The number of shares listed as beneficially owned includes 7,500 shares of common stock held by Hany Massarany. +(15) +Consists of 27,038 shares of common stock issuable upon the exercise of options held by Dr. Jon Faiz +Kayyem that are vested and exercisable within 60 days of March 1, 2022. +2022 Proxy Statement +35 +Table of Contents +Delinquent Section 16(a) Reports +Based solely on a review of the Section 16(a) reports filed electronically with the SEC, and written +representations from our directors and executive officers that no other reports were required, all reports filed by or on behalf of our directors and executive officers and any persons holding more than ten percent of our common stock +were filed on a timely basis under Section 16(a), other than an inadvertent late reporting of one late transaction on Form 4 for each of Scott Hutton, our Chief Executive Officer, Robin Harper Cowie, our Chief Financial Officer, Kieran +O’Kane, our Chief Commercial Officer, Robert Georgantas, our Chief Scientific Officer and Gary Pestano, our Chief Development Officer . +2022 Proxy Statement +36 +Table of Contents +AUDIT MATTERS +Proposal Two: Ratification of Appointment of Independent Registered Public Accounting Firm +Our audit committee has appointed KPMG LLP as our independent registered public accounting firm for the year ending December 31, 2022. +Although stockholder ratification of the appointment of KPMG LLP is not required by our bylaws, other governing documents or the law, our board of directors considers the appointment of our independent registered public accounting firm to be an +important matter of stockholder concern and is submitting the appointment of KPMG LLP for ratification by our stockholders as a matter of good corporate practice. If our stockholders fail to ratify the appointment, our audit committee will review +its future selection of KPMG LLP as its independent registered public accounting firm. Even if the appointment is ratified, our audit committee, in its discretion, may direct the appointment of a different independent registered public accounting +firm at any time during the year if they determine that such a change would be in the best interests of the Company and our stockholders. +Our board of directors considers the appointment of KPMG LLP as our independent registered public accounting firm for 2022 to be in the best +interests of the Company and our stockholders. We expect representatives of KPMG LLP to attend the Annual Meeting. They will have an opportunity to make a statement if they wish and will be available to respond to appropriate questions from +stockholders. +KPMG LLP has served as our independent registered public accounting firm since 2016. +Principal Accountant Fees and Services +The following is a summary of the fees and services provide by KPMG LLP to us for the years ended December 31, 2021 and 2020. +Year Ended December 31, +2021 +2020 +Audit Fees (1) +$ +408,618 +$ +545,899 +Audit-Related Fees +$ +- +$ +- +Tax Fees +$ +- +$ +- +All Other Fees +$ +- +$ +- +Total +$ +408,618 +$ +545,899 +(1) +Audit Fees consist of professional services rendered by KPMG LLP for the audits of our annual financial +statements and reviews of quarterly financial statements. The audit fees incurred in 2021 include fees totaling $107,710 in connection with registration statements filed in 2021. The audit fees incurred in 2020 also include fees totaling $319,810 in +connection with our initial public offering, which was completed in October 2020, and review of related documents filed with the SEC. +Pre-Approval Policies and Procedures +Our audit committee is +responsible for appointing, setting compensation for, and overseeing the work of our independent registered public accounting firm. Our audit committee’s charter establishes a policy that all audit and permitted +non-audit and tax services to be provided by our independent registered public accounting firm must be pre-approved by our audit committee. Our audit committee has pre-approved all such audit and permissible non-audit and tax services in accordance with this policy for the years ended December 31, 2021 and 2020. As part of this +review, our audit committee considers whether the provision of any such non-audit or tax services by KPMG LLP is compatible with maintaining the independence of our independent registered public accounting +firm. +2022 Proxy Statement +37 +Table of Contents +Our audit committee may delegate authority to +pre-approve services to one or more of its members, provided any decisions made by such member to grant pre-approvals must be presented to the full audit committee at +its next scheduled meeting. +Vote Required: +Ratification of the appointment of KPMG LLP as our independent registered public accounting firm for 2022 requires the affirmative vote of a majority of the shares present or represented by proxy and entitled to vote +at the Annual Meeting. Abstentions have the same impact as votes “Against” the proposal. Brokers have discretion to vote on this proposal. +Board Recommendation: +OUR BOARD OF DIRECTORS AND THE AUDIT COMMITTEE OF OUR BOARD OF DIRECTORS EACH UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS OUR +INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2022. +Report of the Audit Committee +The audit committee oversees our independent registered public accounting firm and assists our board of directors in fulfilling its oversight +responsibilities on matters relating to the integrity of our financial statements, our compliance with legal and regulatory requirements and the independent registered public accounting firm’s qualifications and independence by meeting +regularly with the independent registered public accounting firm and financial management personnel. Management is responsible for the preparation, presentation and integrity of our financial statements. +In fulfilling its oversight responsibilities, the audit committee: +• +reviewed and discussed our financial statements as of and for the year ended December 31, 2021 with +management and KPMG LLP; +• +discussed with KPMG LLP the matters required to be discussed by the applicable requirements of the Public Company +Accounting Oversight Board and the SEC; +• +received the written disclosures and the letter from KPMG LLP required by the applicable requirements of the +Public Company Accounting Oversight Board; and +• +discussed the independence of KPMG LLP with that firm. +Based on the audit committee’s review and discussions noted above, the audit committee recommended to our board of directors, and our +board of directors approved, that the audited financial statements be included in the 2021 Form 10-K Report for filing with the SEC. The audit committee also appointed KPMG LLP as our independent registered +public accounting firm for the fiscal year ending December 31, 2022. +Submitted by the audit committee of our board +of directors: +Jean Franchi, Chair +Hany Massarany +Matthew Strobeck, Ph.D. +2022 Proxy Statement +38 +Table of Contents +ADDITIONAL INFORMATION +Other Matters +Our board of directors is not aware of any other matters that will be presented for consideration at the Annual Meeting. However, if any other +matters are properly brought before the Annual Meeting, the persons named in the accompanying proxy intend to vote on those matters in accordance with their best judgment. +Stockholder Proposals and Nominations for Next Year’s Annual Meeting of Stockholders +In order to be considered for inclusion in the proxy materials for our 2023 annual meeting of stockholders, proposals submitted by stockholders +pursuant to Rule 14a-8 under the Exchange Act must be received by our Corporate Secretary at Biodesix, Inc., 2970 Wilderness Place, Suite 100, Boulder, CO 80301 on or before December 30, 2022, and also +must otherwise comply with the procedures and requirements set forth in Rule 14a-8. +Alternatively, +stockholders intending to present a proposal (outside of the process established in Rule 14a-8) or nominate a director for election at our 2023 annual meeting of stockholders without having the proposal or +nomination included in the proxy materials for the meeting must comply with the requirements set forth in our bylaws. Our bylaws require, among other things, that our Corporate Secretary receive the proposal or nomination no earlier than the close +of business on the 120 th day, and no later than the close of business on the 90 th day, prior to the first anniversary of the preceding +year’s annual meeting of stockholders. Accordingly, for our 2023 annual meeting of stockholders, our Corporate Secretary must receive the proposal or nomination no earlier than January 24, 2023 and no later than the close of business on +February 23, 2023. The proposal or nomination must contain the information required by our bylaws and otherwise comply with the requirements set forth in our bylaws. +In addition to satisfying the foregoing requirements under our amended and restated bylaws, to comply with the universal proxy rules (once +effective), stockholders who intend to solicit proxies in support of director nominees other than management’s nominees must provide notice that sets forth the information required by Rule 14a-19 under +the Exchange Act no later than March 25, 2023. +Availability of Annual Report on Form 10-K +A copy the 2021 Form 10-K Report as filed with the +SEC is available free of charge on our website at www.biodesix.com or on the SEC’s website at www.sec.gov. Stockholders may also obtain a copy of our 2021 Annual Report, including financial statements but excluding exhibits, without charge by +sending a written request to: Biodesix, Inc., Attention: Corporate Secretary, 2970 Wilderness Place, Suite 100, Boulder, CO 80301. +2022 Proxy Statement +39 +Table of Contents +biodesix® P.O. BOX 8016, CARY, NC 27512-9903 YOUR VOTE IS IMPORTANT! PLEASE VOTE BY: INTERNET Go To: www.proxypush.com/BDSX Cast +your vote online Have your Proxy Card ready Follow the simple instructions to record your vote PHONE Call 1-866-291-6774 Use any +touch-tone telephone Have your Proxy Card ready Follow the simple recorded instructions MAIL Mark, sign and date your Proxy Card Fold and return your Proxy Card in the postage-paid envelope provided You must register to attend the meeting online +and/or participate at www.proxydocs.com/BDSX Biodesix, Inc. Annual Meeting of Stockholders For Stockholders of record as of March 25, 2022 TIME: Tuesday, May 24, 2022 1:00 PM, Mountain Time PLACE: Annual Meeting to be held live via the +Internet - please visit www.proxydocs.com/BDSX for more details. This proxy is being solicited on behalf of the Board of Directors The undersigned stockholder of Biodesix, Inc. hereby appoints Robin Harper Cowie and Ryan Siurek, and each or either +of them, as the true and lawful attorneys of the undersigned, with full power of substitution and revocation, and authorizes them, and each of them, to vote all the shares of capital stock of Biodesix, Inc. which the undersigned is entitled to vote +at said meeting and any adjournment thereof upon the matters specified and upon such other matters as may be properly brought before the meeting or any adjournment thereof, conferring authority upon such true and lawful attorneys to vote in their +discretion on such other matters as may properly come before the meeting and revoking any proxy heretofore given. THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN, SHARES WILL BE VOTED IDENTICAL TO THE +BOARD OF DIRECTORS RECOMMENDATION. This proxy, when properly executed, will be voted in the manner directed herein. In their discretion, the named proxies are authorized to vote upon such other matters that may properly come before the meeting or +any adjournment or postponement thereof. You are encouraged to specify your choice by marking the appropriate box (SEE REVERSE SIDE) but you need not mark any box if you wish to vote in accordance with the Board of Directors’ recommendation. +The named proxies cannot vote your shares unless you sign (on the reverse side) and return this card. PLEASE BE SURE TO SIGN AND DATE THIS PROXY CARD AND MARK ON THE REVERSE SIDE +Table of Contents +Biodesix, Inc. Annual Meeting of Stockholders Please make your marks like this: [X] THE BOARD OF DIRECTORS RECOMMENDS A VOTE: FOR ON +PROPOSALS 1 AND 2 PROPOSAL 1. To elect the two Class II directors named in this proxy statement to hold office until the 2025 annual meeting of stockholders; YOUR VOTE BOARD OF DIRECTORS RECOMMENDS 1.01 Matthew Strobeck, Ph.D. FOR +[ ] WITHHOLD [ ] FOR 1.02 Charles Watts, M.D. [ ] [ ] FOR 2. To ratify the appointment of KPMG LLP as our independent registered public accounting firm for +the year ending December 31, 2022. FOR [ ] AGAINST [ ] ABSTAIN [ ] FOR 3. To conduct any other business properly brought before the meeting, or any adjournment or postponement +thereof. You must register to attend the meeting online and/or participate at www.proxydocs.com/BDSX Authorized Signatures - Must be completed for your instructions to be executed. Please sign exactly as your name(s) appears on your account. If held +in joint tenancy, all persons should sign. Trustees, administrators, etc., should include title and authority. Corporations should provide full name of corporation and title of authorized officer signing the Proxy/Vote Form. Signature (and Title if +applicable) Date Signature (if held jointly) Date \ No newline at end of file diff --git a/raw/proxies/0001439725/0001193125-22-091782/proxy_rpt.txt b/raw/proxies/0001439725/0001193125-22-091782/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..92edc681cc3cde52da53aeb2e4e9b94ecd92f364 --- /dev/null +++ b/raw/proxies/0001439725/0001193125-22-091782/proxy_rpt.txt @@ -0,0 +1,70 @@ +Certain Relationships and Related-Party Transactions +The following is a summary of the transactions since January 1, 2020 to which we have been a participant in which the amount involved in +the transaction exceeds or will exceed $120,000 and in which any of our directors, director nominees, executive officers, or holders of more than 5% of our capital stock, or any immediate family member of, or person sharing the household with, any +of these individuals, had or will have a direct or indirect material interest, with certain exceptions, other than compensation arrangements, which are under the section of this proxy statement captioned “Executive Compensation.” +At-the-Market Equity Offering +On November 29, 2021, we established an at-the-market +equity offering program (the “ATM Program”) to sell shares of our common stock from time to time through Cowen and Company, LLC as sales agent. On December 30, 2021, we sold 3,756,994 shares under the ATM Program at a public offering +price of $4.35 per share, generating gross proceeds of $16.3 million, before $0.6 million of underwriting discounts and commissions and offering expenses payable by the Company. The net proceeds from the ATM Program were used, among other +things, to fund a $20 million partial repayment of the $30 million term loan with Silicon Valley Bank. +Preferred Stock +Financings +We previously issued convertible preferred stock from time to time to fund our operations and to make acquisitions. +In February and March 2019, we issued 8,695,621 shares of Series H Preferred Stock at $1.15 per share for total cash proceeds of $10.0 million. Immediately prior to our initial public offering, we had issued 118,766,273 convertible preferred +shares. On October 27, 2020, upon closing of our initial public offering, each outstanding share of Series A-1 Preferred Stock, Series A-2 Preferred Stock, Series A-3 Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock, Series F Preferred Stock, Series G Preferred Stock and Series H Preferred Stock +automatically converted into 0.1684664 share of common stock; and each share of Series B-1 Preferred Stock automatically converted into 0.196 shares of common stock. In the aggregate, all series of preferred +stock were converted into 20,090,745 shares of common stock. As a result, as of December 31, 2020 and through the date of this filing there are no longer any series of convertible preferred stock outstanding. +Convertible Debt Financings +In March 2020, we issued $10.0 million in convertible debt (the “March 2020 Notes”) that was scheduled to mature in August +2020. In August 2020, the maturity date of this debt was extended to June 30, 2021. The March 2020 Notes were issued in two tranches of $5 million, with the first tranche being funded in March 2020 and the second tranche in June 2020. The +holders of the March 2020 Notes included a number of our directors and their affiliates. +In December 2019, we issued $6.0 million in +convertible debt (the “December 2019 Notes”), that were scheduled to mature in August 2020. In August 2020, the maturity date of this debt was extended to June 30, 2021. The December 2019 Notes were issued in two tranches of +$3.0 million, with the first tranche funded in December 2019. The second tranche was funded in February 2020. The holders of the December 2019 Notes included a number of our directors and their affiliates. +In August and September 2019 we issued $10.0 million in convertible debt (the “August 2019 Notes”) that was scheduled to mature +in August 2020. In August 2020, the maturity date of this debt was extended to June 30, 2021. The holders of the August 2019 Notes included a number of our directors and their affiliates. +2022 Proxy Statement +19 +Table of Contents +Our convertible debt, along with the related accrued interest, was automatically converted +to 1,848,280 shares of our common stock upon the completion of our initial public offering in October 2020. +Investor Rights +Agreement +In October 2018, we entered into an amended and restated investor rights agreement (“IRA”) with certain +holders of our preferred stock and common stock, including certain holders of 5% of our capital stock, and including certain members of, and affiliates of, our directors and certain of our executive officers. The IRA provides the holders of our +preferred stock with certain registration rights. After the closing of our initial public offering, the holders of 20,090,745 shares of common stock issuable from conversion of outstanding preferred stock, became entitled to rights with respect to +the registration of their shares of common stock under the Securities Act under this agreement. +Contingent Value Rights +Agreement +In February 2016, we entered into a contingent value rights agreement (“CVR Agreement”) with certain +holders of our preferred and common stock, including several members of our board of directors. Pursuant to the CVR Agreement, the holders would be eligible to receive in the aggregate up to 15% of any future income and proceeds that we would +receive, subject to a number of conditions and offsets, with respect to ficlatuzumab rights under our co-development and collaboration agreement with AVEO Pharmaceuticals, Inc. +Stock Options +The Biodesix, Inc. 2006 Employee, Director and Consultant Stock Plan, as amended and restated in 2008, 2011 and 2013 (the “2006 Incentive +Plan”) was replaced in 2016 by the 2016 Equity Incentive Plan (the “2016 Incentive Plan”). The 2006 Incentive Plan governed outstanding awards granted prior to the adoption of the 2016 Incentive Plan. In connection with our initial +public offering in October 2020, our board of directors and our stockholders approved the 2020 equity incentive plan (the “2020 Incentive Plan”). The 2020 Incentive Plan replaced the 2016 Incentive Plan. As of December 31, 2021, options to +purchase an aggregate of 1,350,157 shares of common stock were outstanding under our 2020 Incentive Plan. As of December 31, 2021, options to purchase an aggregate of 1,900,451 shares of common stock were outstanding, in the aggregate, under our +2006 Incentive Plan and our 2016 Incentive Plan. +Participation in Initial Public Offering +Messrs. Patience and Schuler and Dr. Strobeck, members of our board of directors, purchased 391,110 shares of common stock from the +underwriters in our initial public offering at the initial public offering price per share of $18.00. +Participation in Initial +Public Offering Directed Share Program +Messrs. Hutton and Massarany and Dr. Watts, members of our board of directors, +purchased 15,000 shares of common stock through our Directed Share Program in our initial public offering at the initial public offering price per share of $18.00. +Indemnification of Directors and Executive Officers +We have entered into indemnification agreements with each of our directors and executive officers in connection with our initial public +offering. The indemnification agreements and our bylaws will require us to indemnify our directors against certain liabilities, costs and expenses to the fullest extent not prohibited by DGCL, and have purchased directors’ and officers’ +liability insurance. Subject to very limited exceptions, our bylaws will also require us to advance expenses incurred by our directors and officers. +2022 Proxy Statement +20 +Table of Contents +Policies and Procedures for Related-Party Transactions +Our audit committee has the primary responsibility for the review, approval and oversight of any “related-party transaction,” which +is any transaction, arrangement or relationship (or series of similar transactions, arrangements or relationships) in which we are, were or will be a participant and the amount involved exceeds $120,000, and in which the related person has, had or +will have a direct or indirect material interest. We adopted a written related-party transaction policy effective October 2020. Under our related-party transaction policy, our management is required to submit any related-party transaction not +previously approved or ratified by our audit committee to our audit committee. In approving or rejecting the proposed transactions, our audit committee takes into account all of the relevant facts and circumstances available. All of the transactions +described in this section, except for certain equity award grants, occurred prior to the adoption of this policy. +2022 Proxy Statement +21 +Table of Contents \ No newline at end of file diff --git a/raw/proxies/0001439725/0001193125-23-099181/proxy.txt b/raw/proxies/0001439725/0001193125-23-099181/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..6d827bb1e7a632ab39a948f275868228bc6c736f --- /dev/null +++ b/raw/proxies/0001439725/0001193125-23-099181/proxy.txt @@ -0,0 +1,2596 @@ +DEF 14A +1 +d425141ddef14a.htm +DEF 14A +DEF 14A +Table of Contents +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +Washington, DC 20549 +SCHEDULE 14A +(Rule 14a-101) +SCHEDULE 14A INFORMATION +Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 +(Amendment No. ) +☒ +Filed by the Registrant +☐ +Filed by a Party other than the Registrant +Check the appropriate box: +☐ +Preliminary Proxy Statement +☐ +Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +☒ +Definitive Proxy Statement +☐ +Definitive Additional Materials +☐ +Soliciting Material under § 240.14a-12 +Biodesix, Inc. +(Name of Registrant as Specified in its +Charter) +(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant) +Payment of Filing Fee (Check the appropriate box): +☒ +No fee required. +☐ +Fee paid previously with preliminary materials. +☐ +Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11. +Table of Contents +Biodesix, Inc. +2970 Wilderness Place, Suite 100 +Boulder, CO 80301 +Notice of 2023 Annual Meeting of Stockholders +Dear Biodesix Stockholders: +You are invited to attend Biodesix, Inc.’s 2023 Annual Meeting of Stockholders (the “Annual Meeting”). +Date: +May 23, 2023 (Tuesday) +Time: +1:00 p.m., Mountain Time +Virtual Location: +You can attend the Annual Meeting online, including to vote and/or submit questions, at www.proxydocs.com/BDSX . See page 1 of the accompanying proxy statement for additional information +regarding participation in the virtual meeting. +Items of Business: +At the Annual Meeting, stockholders will be asked to vote: +1.  to elect the three Class III directors named in this proxy statement to hold office until the +2026 annual meeting of stockholders; +2.  to ratify the appointment of KPMG LLP as our independent +registered public accounting firm for the year ending December 31, 2023; +3.  to approve the +option exchange program, as described in the accompanying proxy statement; and +4.  to conduct any +other business properly brought before the meeting, or any adjournment or postponement thereof. +Record Date: +You can participate in the Annual Meeting and vote if you were a stockholder of record as of the close of business on March 24, 2023. +Voting: +Your vote is very important to us. Whether or not you plan to attend the virtual Annual Meeting, please ensure your shares are represented by voting promptly. For instructions on how to vote your shares, please refer to +the instructions on the Internet Notice, the section entitled “Annual Meeting Information” beginning on page 1 of the accompanying proxy statement or, if you requested to receive printed copies of these materials, your enclosed proxy +card. +By order of the Board of Directors, +Robin Harper Cowie +Chief Financial Officer, Secretary and Treasurer +April 12, 2023 +Important Notice Regarding the Internet Availability of Proxy Materials for the Annual Meeting to be Held on May 23, 2023 +at 1:00 p.m. Mountain Time via live audio webcast at www.proxydocs.com/BDSX : +This Notice of 2023 Annual Meeting of +Stockholders, the accompanying proxy statement and our 2022 Annual Report on Form 10-K are available on our website at https://investors.biodesix.com/investor-relations in the SEC Filings section, as well as +at www.proxydocs.com/BDSX . +Table of Contents +Table of Contents +ANNUAL MEETING +INFORMATION +1 +BOARD AND CORPORATE GOVERNANCE +MATTERS +7 +Proposal One: Election of Directors +7 +Overview of Our Nominees and Continuing Directors +8 +Board Composition +11 +Director Independence +12 +Board Leadership Structure +12 +Role of our Board of Directors in Risk Oversight +12 +Meetings of our Board of Directors +13 +Committees of our Board of Directors +13 +Committee Composition and Meetings +13 +Audit Committee +14 +Compensation Committee +14 +Compensation Committee Interlocks and Insider Participation +15 +Nominating and Corporate Governance Committee +15 +Director Nomination Process +15 +Board Diversity Matrix +17 +Executive Officers +17 +Code of Business Conduct and Ethics +18 +Corporate Governance Guidelines +18 +Anti-Hedging and Anti-Pledging Policy +18 +Stockholder Communications with our Board of Directors +19 +Policies and Procedures for Related Party Transactions +19 +EQUITY COMPENSATION PLAN INFORMATION +21 +DIRECTOR COMPENSATION +22 +Non-Employee Director Compensation Policy +22 +Director Deferred Compensation Plan +23 +2022 Director Compensation Table +23 +EXECUTIVE COMPENSATION +25 +Overview +25 +Compensation of Named Executive Officers +26 +2022 Summary Compensation Table +29 +Outstanding Equity Awards at 2022 Fiscal Year-End +32 +Additional Matters +33 +STOCK OWNERSHIP +35 +Security Ownership of Certain Beneficial Owners and +Management +35 +Delinquent Section 16(a) Reports +37 +Table of Contents +AUDIT MATTERS +38 +Proposal Two: Ratification of Appointment of Independent Registered Public Accounting +Firm +38 +Report of the Audit Committee +39 +COMPENSATORY MATTERS +40 +Proposal Three: Approval of the Stock Option Exchange Program +40 +ADDITIONAL INFORMATION +48 +Other Matters +48 +Stockholder Proposals and Nominations for Next Year’s Annual Meeting of +Stockholders +48 +Availability of Annual Report on Form 10-K +48 +Table of Contents +Proxy Statement +2023 Annual Meeting of Stockholders +May 23, 2023 +ANNUAL MEETING INFORMATION +Our board of directors is soliciting your proxy for +the 2023 Annual Meeting of Stockholders (the “Annual Meeting”) of Biodesix, Inc. (“Biodesix,” the “Company,” “we,” “us” or “our”) and at any adjournment, continuation or postponement of the +meeting for the purposes described in this proxy statement and the accompanying Notice of 2023 Annual Meeting of Stockholders. The Annual Meeting will take place virtually on May 23, 2023 at 1:00 p.m. Mountain Time. You must register to attend +the meeting online and/or participate at www.proxydocs.com/BDSX using the control number on your proxy card or notice. +You will receive an email one hour prior to the meeting containing a link which will connect you to the meeting portal. If you held shares of our common stock as of the close of business on March 24, 2023, you will be able to vote on the +proposals described in this proxy statement and submit questions online through the virtual meeting platform during the Annual Meeting. On or about April 12, 2023, we will be mailing a Notice of Internet Availability of Proxy Materials (the +“Internet Notice”) to our stockholders. The Notice will include instructions on how to access the proxy materials over the Internet, including our proxy statement, Notice of 2023 Annual Meeting of Stockholders, proxy card and our Annual +Report on Form 10-K for the year ended December 31, 2022 (the “2022 Annual Report”). The Internet Notice will also describe how to vote online or by telephone and, if desired, how to receive a +printed set of proxy materials. +Why did I receive a Notice of Internet Availability of Proxy Materials in the mail +instead of a full set of proxy materials? +Pursuant to the “notice and access” rules adopted by the Securities and +Exchange Commission (the “SEC”), we have elected to provide access to our proxy materials over the Internet. Accordingly, we are sending the Internet Notice to our stockholders as of the record date, beginning on or about March 24, +2023. The Internet Notice will instruct you as to how you may access and review the proxy materials on the Internet and, if desired, how to request a printed set of proxy materials. In addition, by following the instructions in the Internet Notice, +you may request to receive proxy materials in printed form by mail or electronically by email on an ongoing basis. We believe that these rules allow us to conserve natural resources and reduce our costs of printing and delivering proxy materials, +while providing a convenient method for stockholders to access the materials and vote. +Who can vote? +If you were a stockholder of record as of the close of business on March 24, 2023 (the “record date”), you are entitled to vote +your shares at the Annual Meeting. As of the record date, 77,979,011 shares of our common stock were issued and outstanding. Each share of our common stock is entitled to one vote on each matter properly brought before to the meeting. +What am I voting on? +You are being asked to vote on three proposals: +● +Proposal One: To elect the three Class III directors named in this proxy statement to hold office +until the 2026 annual meeting of stockholders; +2023 Proxy Statement +1 +Table of Contents +● +Proposal Two: To ratify the appointment of KPMG LLP as our independent registered public accounting firm +for 2023; and +● +Proposal Three: To approve the Stock Option Exchange Program; +How does the board of directors recommend that I vote on each proposal? +The board of directors recommends that our stockholders vote: +● +“For” the election of the three Class III directors named in this proxy statement to hold +office until the 2026 annual meeting of stockholders; +● +“For” the ratification of the appointment of KPMG LLP as our independent registered public +accounting firm for 2023; and +● +“For” the approval of the Stock Option Exchange Program; +What if another matter is properly brought before the meeting? +The board of directors is not aware of any other matters that will be presented for consideration at the Annual Meeting. However, if any other +matters are properly brought before the Annual Meeting, the persons named in the accompanying proxy intend to vote on those matters in accordance with their best judgment. +How do I vote? +The procedures for voting depend on whether your shares are registered in your name or are held by a bank, broker or other nominee. You may +also vote your shares electronically during a designated portion of the virtual Annual Meeting after your successful registration at www.proxydocs.com/BDSX. Whether or not you plan to attend the Annual Meeting, we encourage you to vote and submit +your proxy in advance of the meeting by one of the methods described below. +● +Stockholders of Record: Shares Registered in Your Name +Vote by Proxy in Advance of the Annual Meeting : If, on the record date, your shares were registered directly in your name with +Biodesix’s transfer agent, Computershare Trust Company, N.A., then you are a “stockholder of record.” As a stockholder of record, you may vote by proxy in advance of the Annual Meeting in three ways: +Vote by Internet +Go to +http://www.proxypush.com/ +BDSX to complete an +electronic +proxy card. You will be asked to +provide the company number +and control number from your +proxy card. Your vote must be +received prior to the meeting +start time to be counted. +Vote by +telephone +Dial toll-free 1-866-291-6774 +using a touch-tone phone and +follow the recorded instructions. +You will be asked to provide the +company number and control +number from +your proxy card. +Your vote must be received +prior to the meeting start time to +be counted. +Vote +by mail +If you received printed copies of +the proxy materials, +complete, +date and sign the enclosed proxy +card and return it promptly in +the envelope provided. If your +signed proxy card is received +prior to the meeting date, we +will vote your shares as you +direct. +2023 Proxy Statement +2 +Table of Contents +● +Beneficial Owner: Shares Registered in the Name of Broker, Bank or Other Nominee +If, on the record date, your shares were held not in your name, but in an account with a broker, bank or other nominee as custodian on your +behalf, then you are considered the “beneficial owner” of shares held in “street name.” The Internet Notice or the proxy materials, as applicable, are being forwarded to you by that broker, bank or other nominee who is considered +the stockholder of record of those shares for purposes of voting at the Annual Meeting. As the beneficial owner, you have the right to direct your broker, bank or other nominee on how to vote your shares by following the instructions for voting set +forth on that organization’s voting instruction card. +What is the effect of giving a proxy? What if I return a proxy card +or otherwise vote but do not make specific choices? +Proxies are solicited by and on behalf of the board of directors. Robin +Harper Cowie (our Chief Financial Officer, Secretary and Treasurer) and Ryan H. Siurek (our Chief Accounting Officer) have been designated as proxy holders by the board of directors. If you properly grant your proxy, your shares will be voted as you +instruct. +If you return a signed proxy card or otherwise vote without marking specific voting selections, your shares will be voted as +the board of directors recommends: “For” the election of three Class III directors (Proposal One); “For” the ratification of the appointment of KPMG LLP as our independent registered public accounting firm for 2023 (Proposal +Two); “For” the approval of the Stock Option Exchange Program (Proposal Three); and in accordance with the best judgment of your proxy holder for any other matters properly brought before the meeting, if any. +Can I change my vote or revoke my proxy? +Yes. If you are a stockholder of record, you can change your vote or revoke your proxy before the Annual Meeting in any of these ways: +● Vote again over the Internet or by +telephone as instructed above before 11:59 p.m., Eastern Time on May 22, 2023. Only your latest Internet or telephone vote is counted. +● Submit a properly signed proxy card +with a later date that is received no later than 11:59 p.m., Eastern Time on May 22, 2023. Only your latest dated proxy card will be counted. +● Send a timely written notice that +you are revoking your proxy to Biodesix’s Corporate Secretary at 2970 Wilderness Place, Suite 100, Boulder, CO 80301. +● Attend the virtual Annual Meeting +and vote electronically during the meeting. Simply attending the meeting will not, by itself, revoke your proxy. +If you are the +beneficial owner of shares held in street name, you should follow the instructions provided by your broker, bank or other nominee to revoke previously submitted voting instructions. +What are broker non-votes? +Brokers, banks or other nominees holding shares on behalf of a beneficial owner may vote those shares in their discretion on certain +“routine” matters even if they do not receive timely voting instructions from the beneficial owner. With respect to “non-routine” matters, the broker, bank or other nominee is not permitted +to vote shares for a beneficial owner without timely received voting instructions. The only routine matter to be presented at the Annual Meeting is the proposal to ratify the appointment of KPMG LLP as our independent registered public +accounting firm for 2023 (Proposal Two). The election of three Class III directors (Proposal One), and approval of the Stock Option Exchange Program (Proposal Three) are non-routine matters. +2023 Proxy Statement +3 +Table of Contents +A broker non-vote occurs when a broker, bank or +other nominee does not vote on a non-routine matter because the beneficial owner of such shares has not provided voting instructions with regard to such matter. If a broker, bank or other nominee exercises +discretionary voting authority on Proposal Two, such shares will be considered present at the Annual meeting for quorum purposes and broker non-votes will occur as to Proposal One and Proposal Three, or any +other non-routine matters that are properly presented at the Annual Meeting. Broker non-votes will have no impact on the voting results. +How many shares must be present to hold the Annual Meeting? +A quorum must be present at the Annual Meeting for any business to be conducted. A quorum will be present if the holders of at least a +majority of the outstanding shares of our common stock entitled to vote are present at the Annual Meeting online or represented by proxy. On the record date, there were 77,979,011 shares of our common stock outstanding and entitled to vote. +Therefore, the holders of 38,989,507 shares must be present online or represented by proxy at the Annual Meeting to have a quorum. For purposes of determining the presence of a quorum, abstentions, withheld votes and broker non-votes are counted. If there is no quorum, the holders of a majority of shares present or represented by proxy at the Annual Meeting may adjourn the meeting to a later date. +What vote is required for the approval of each proposal? What effect do “withhold” votes, abstentions and broker non-votes have on the proposals? +The following chart summarizes the proposals to be +considered at the Annual Meeting, the vote required for approval of each proposal, and the manner in which votes will be counted: +Proposal +Voting Options +Vote Required to Adopt the +Proposal +Effect of “Withheld” +Votes or Abstentions +Effect of “Broker +Non-Votes” +Proposal One : Election +of the three Class III +directors named in +this +proxy statement +For or +Withhold on +each nominee +Plurality of the votes cast. +This means that the three +nominees receiving the +highest number of “For” +votes (from the +holders of +votes of shares present or +represented by proxy and +entitled to vote on the +election of directors) will +be elected as Class III +directors. +“Withheld” votes +have no effect; only +“For” votes affect +the outcome of the +election. +Brokers do not +have discretion +to vote. Broker +non-votes will +have no effect; +only “For” +votes affect the +outcome of the +election. +Proposal Two : +Ratification of +appointment of KPMG +LLP as our independent +registered public +accounting firm for the +year ended December 31, +2023 +For, Against or +Abstain +Affirmative vote of a +majority of the shares +present or represented by +proxy and entitled to vote +on the proposal. +Abstentions are +considered shares +present and entitled +to vote, and +therefore have the +same impact as +votes “Against” +the +proposal. +Brokers have +discretion to +vote. Therefore, +we do not +expect any +broker +non-votes. +Proposal Three : Approval of the Stock Option Exchange Program +For, Against or +Abstain +Affirmative vote of a +majority of the shares +present or represented by +proxy and entitled to vote +on the proposal. +Abstentions are +considered shares +present and entitled +to vote, and +therefore have the +same impact as +votes “Against” +the +proposal. +Brokers have +discretion to +vote. Therefore, +we do not +expect any +broker +non-votes. +2023 Proxy Statement +4 +Table of Contents +Important Information About Our Virtual Annual Meeting: +• +Why is the Annual Meeting being held in a virtual format this year? The +Annual Meeting will be held in a virtual meeting format via live audio webcast, and will provide access to the Annual Meeting for our stockholders regardless of geographic location. We have designed our virtual format to help ensure that our +stockholders who attend the Annual Meeting virtually will be afforded similar rights and opportunities to participate as they would at an in-person meeting. +• +How can I attend Annual Meeting online? To join the Annual Meeting online, +visit www.proxydocs.com/BDSX and register using your control number on your proxy card or on the instructions that accompanied your proxy materials, and following the instructions received via email, including a +unique link that will allow you access to the Annual Meeting, to vote, and submit questions during the meeting. +• +When can I join the virtual Annual Meeting? The meeting will begin promptly +at 1:00 p.m. Mountain Time on Tuesday, May 23, 2023. You may access the meeting platform 15 minutes earlier, and we encourage you to join in advance of the meeting start time to allow sufficient time to log in and confirm your connection and +audio are working properly. +• +Can I ask questions during the virtual Annual Meeting? Yes. If you are logged +in as a “stockholder” at the virtual Annual Meeting, you will have an opportunity to submit questions live via the Internet during a designated portion of the virtual Annual Meeting. Once you are logged in, type your question into the +question box and click “submit.” Subject to time constraints, we intend to answer questions pertinent to the Company and meeting matters submitted by stockholders during the Annual Meeting that comply with our rules of conduct for the +Annual Meeting, which will be posted on the meeting website during the meeting. +• +How do I vote during the virtual Annual Meeting? You will have an opportunity +to vote your shares electronically during a designated portion of the virtual Annual Meeting after logging in. Whether or not you plan to join the Annual Meeting, we encourage you to vote and submit your proxy in advance of the meeting by one of the +methods described in these proxy materials. +• +What if I have technical difficulties? On the day of the Annual Meeting, if +you have trouble accessing the virtual meeting platform or encounter other technical difficulties with the platform before or during the meeting, please call the technical support number provided in your email instructions. +• +Will a list of stockholders be available for inspection prior to and during the +meeting? Yes. A complete list of stockholders of record will be available for inspection, by appointment only, by any stockholder for at least ten (10) days prior to the Annual Meeting during ordinary business hours at our +headquarters located at 2970 Wilderness Place, Suite 100, Boulder, CO 80301. +• +Will a recording of the meeting be available? Yes, following the Annual +Meeting, a recording of the meeting will be available on www.proxydocs.com/BDSX for one year following the meeting date. +Who will count the votes? +Representatives of Mediant Communications Inc. (“Mediant”) will tabulate the votes, and a representative of Mediant will act as +inspector of election. +Who is paying for this proxy solicitation? +We will pay the cost of soliciting proxies. Proxies may be solicited on our behalf by our directors, officers or employees (for no additional +compensation) in person, by telephone or by other means of communication. Arrangements may be made with brokerage houses, custodians, nominees and fiduciaries to send proxy materials to their principals and we may reimburse them for the cost of +forwarding proxy materials to beneficial owners. +2023 Proxy Statement +5 +Table of Contents +What does it mean if I receive more than one Internet Notice? +If you receive more than one Internet Notice, your shares may be registered in more than one name or in different accounts. Please follow the +voting instructions in each Internet Notice to ensure that all of your shares are voted. +How can I find out the results of the +voting at the Annual Meeting? +Preliminary voting results will be announced at the Annual Meeting. In addition, final voting +results will be published in a current report on Form 8-K that we expect to file with the SEC within four business days after the Annual Meeting. +Why were my proxy materials included in the same envelope as other people at my address? How may I obtain an additional copy of the +proxy materials? +We have adopted a procedure approved by the SEC called “householding.” Under this procedure, we +deliver a single copy of the Internet Notice, and, if applicable, the proxy materials to stockholders of record who shares the same address, unless we have received contrary instructions from any stockholder at that address. This practice is +designed to eliminate duplicate mailings, conserve natural resources and reduce our printing and mailing costs. Stockholders who participate in householding will continue to be able to access and receive separate proxy cards. If you share an address +with another stockholder and receive only a single copy the Internet Notice, and, if applicable, the proxy materials, but would like to request a separate copy of these materials, please contact our mailing agent, Mediant, by calling 1-866-648-8133 or e-mailing +paper@investorelections.com and an additional copy of the materials will be promptly delivered to you. Similarly, if you receive +multiple copies of the Internet Notice, and, if applicable, the proxy materials, but would prefer to receive a single copy in the future, you may also contact Mediant at the above telephone number or address. Beneficial owners should contact their +broker, bank or other nominee to request information about householding procedures. +2023 Proxy Statement +6 +Table of Contents +BOARD AND CORPORATE GOVERNANCE MATTERS +Proposal One: Election of Directors +General +The primary responsibilities of +our board of directors are to provide oversight, strategic guidance, counseling and direction to our management. Our board of directors currently consists of nine directors and is divided into three classes of directors that serve staggered +three-year terms, currently Class I, with a term expiring in 2024, Class II, with a term expiring in 2025 and Class III, with a term expiring in 2023. At the Annual Meeting, our stockholders will vote on the election of three +Class III directors whose terms will expire at our 2026 annual meeting of stockholders. Each of our other current directors will continue to serve as a director until the election and qualification of his or her successor. +The three directors currently serving on our board of directors in Class III, the class whose term of office expires in 2023, have each +been nominated by our board of directors, upon the recommendation of our nominating and corporate governance committee, to stand for election at the Annual Meeting. Jack Schuler has served on our board of directors since 2008. Jean Franchi and Hany +Massarany have served on our board of directors since 2020. Each of these three nominees has consented to being named as a nominee in this proxy statement and has agreed to serve, if elected, until our 2026 annual meeting of stockholders and until +the election and qualification of his or her successor. +For more information about each of the director nominees and continuing +directors, including information regarding the experience, qualifications, attributes and skills that led to the conclusion that each director should serve as a member of the board of directors, please refer to the section below entitled +“Overview of Our Nominees and Continuing Directors.” +Vote Required: +Directors are elected by a plurality of the votes cast by our stockholders at the Annual Meeting. This means that the three nominees receiving the highest number of affirmative votes (from the holders of votes of +shares present or represented by proxy and entitled to vote on the election of directors) will be elected. Broker non-votes and “Withheld” votes will have no effect. +Board +Recommendation: +OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE ELECTION OF EACH OF THE THREE CLASS III DIRECTOR NOMINEES NAMED ABOVE. +2023 Proxy Statement +7 +Table of Contents +Overview of Our Nominees and Continuing Directors +The following table and the brief biographies that follow provide information, as of the date of this proxy statement, about each +director nominee and each continuing director: +Age +Position(s) +Director +Since +Class +Current +Term +Expires +Expiration +of Term for +which +Nominated +Independent +Committee +Membership* +AC +CC +NCG +DIRECTOR NOMINEES +Jean Franchi +56 +Director +2020 +III +2023 +2026 +Yes +Chair +X +Hany Massarany +61 +Director +2020 +III +2023 +2026 +Yes +X +Chair +Jack Schuler +82 +Director +2008 +III +2023 +2026 +Yes +X +CONTINUING DIRECTORS +Jon Faiz Kayyem, Ph.D. +59 +Director +2021 +I +2024 +— +Yes +X +Scott Hutton +51 +President, Chief Executive +Officer and Director +2020 +I +2024 +— +No +John Patience +75 +Chairman of the Board +2008 +I +2024 +— +Yes +X +Lawrence T. Kennedy, Jr. +51 +Director +2023 +II +2025 +— +Yes +X +Matthew Strobeck, Ph.D. +50 +Director +2012 +II +2025 +— +Yes +X +Chair +Charles Watts, M.D. +80 +Director +2019 +II +2025 +— +Yes +X +* AC - Audit Committee; CC - Compensation Committee; NCG - Nominating and Corporate +Governance Committee +Director Nominees +Class III Directors – Nominees for Election at the Annual Meeting +Jean M. Franchi has served as a Director of the Company since April 2020. Ms. Franchi is currently Chief Financial Officer +at the Replimune Group, a biotechnology company developing oncolytic immuno-gene therapies. Prior to the Replimune Group, Ms. Franchi was Chief Financial Officer at Merrimack Pharmaceuticals, Inc., a biopharmaceutical company, from 2017 to +2019, Dimension Therapeutics, Inc., a gene therapy company, from 2015 to 2017, and Good Start Genetics, Inc., a molecular genetic information company, from 2012 to 2015. From 1995 to 2011, Ms. Franchi held various positions at Genzyme +Corporation, including Senior Vice President of Corporate Finance, Senior Vice President of Business Unit Finance, and Vice President of Finance and Controller, Product Line and International Group. Ms. Franchi currently serves on the boards of +directors of Flamingo Therapeutics and VectorY Therapeutics. Ms. Franchi also served on the board of directors of Biophytis S.A. through July 2021 and Visioneering Technologies, Inc. through December 2022. Ms. Franchi received her B.A. in +Accounting from Hofstra University. +We believe that Ms. Franchi is qualified to serve on our board of directors because of her +experience in leadership and management roles in the healthcare industry as well as her experience holding finance-related roles of increasing responsibility. +Hany Massarany has served as a Director of the Company since July 2020. Mr. Massarany currently serves as both a Director (since +2020) and Chairman (since February 2023), of Accelerate Diagnostics, an in vitro diagnostics company. Mr. Massarany was President and Chief Executive Officer of GenMark Diagnostics, Inc., a provider of multiplex molecular diagnostic +solutions, from April 2011 to March 2020. From February 2009 to +2023 Proxy Statement +8 +Table of Contents +April 2011, Mr. Massarany served as President at Ventana and Head of Roche Tissue Diagnostics, a division of F. Hoffman-La Roche Ltd. focused on +manufacturing instruments and reagents that automate tissue processing and slide staining diagnostics for cancer. From 1999 to 2009, Mr. Massarany held various global leadership positions with Ventana, including Chief Operating Officer, +Executive Vice President, Worldwide Operations, Senior Vice President, Corporate Strategy and Development, and Vice President, North American Commercial Operations. Mr. Massarany also held executive management positions with Bayer Diagnostics +and Chiron Diagnostics, working in both the Asia Pacific region and the United States. Mr. Massarany served on the board of directors of GenMark Diagnostics, Inc. from May 2011 to February 2020. Mr. Massarany earned a B.S. in Microbiology +and Immunology from Monash University in Australia and an M.B.A. from Melbourne University. +We believe that Mr. Massarany is +qualified to serve on our board of directors because of his experience in leadership and management roles, and experience as a board member, in the healthcare industry. +Jack Schuler has served as a Director of the Company since June 2008. Mr. Schuler served as a director of Ventana from 1991 +and as Chairman of the board from 1995 until Ventana’s acquisition by Roche in 2008. Prior to joining Ventana, Mr. Schuler was President and Chief Operating Officer of Abbott Laboratories, a diversified health care company, which he joined +in 1972 and where he held a number of management and marketing positions, also serving as a director from April 1985 to August 1989. Additionally, Mr. Schuler has served as a director of Abbott Laboratories, Medtronic plc (Lead Director), +Stericyle (Chairman), Chiron Corporation, and Quidel, and currently serves as a Director (since 2012) of Accelerate Diagnostics, an in vitro diagnostics company. Mr. Schuler holds a B.S. in Mechanical Engineering from Tufts University +and an M.B.A. from Stanford University Graduate School of Business Administration. +We believe that Mr. Schuler is qualified to serve +on our board of directors because of his experience in leadership and management roles in the healthcare industry, as well as his experience as a board member in the healthcare and medical device industries. +Continuing Directors +Class I Directors – Term Expiring at the 2024 Annual Meeting +Jon Faiz Kayyem, +Ph.D. has served as a Director of the Company since December 2021. Dr. Kayyem has over 20 years of experience inventing, patenting, licensing, developing, and commercializing novel solutions for molecular diagnostics and DNA detection +opportunities. Dr. Kayyem has served in various leadership positions throughout his career. He held numerous roles at GenMark Diagnostics, including Founder, CEO and President, Chief Scientific Officer, Senior Vice President of Research and +Development. Prior to his work at GenMark Diagnostics, Dr. Kayyem served as Director and Founder of Calimmune and was Vice President of Life Sciences at Motorola. In October 2004, he co-founded the +biotechnology fund management company, Efficacy Capital Limited and served as a managing partner. Additionally, Dr. Kayyem founded Clinical Micro Sensors Inc., the predecessor company of GenMark Diagnostics, to commercialize multiple technical +innovations that he developed while serving as a Senior Research Fellow at the California Institute of Technology (Caltech). Dr. Kayyem holds a B.S. and M.S. in Biochemistry from Yale University and a Ph.D. in Molecular Biology from Caltech. +Currently, Dr. Kayyem is on the Board of Directors of Inhibrx. +We believe that Dr. Kayyem is qualified to serve on our board of +directors because of his experience in leadership and management roles in the field of medicine, as well as his experience as a board member and investor in companies in the healthcare industry. +Scott Hutton has served as our President, Chief Executive Officer and Director since January 2020, and previously held the role +of Chief Operating Officer from March 2018 to December 2019. Additionally, +2023 Proxy Statement +9 +Table of Contents +Mr. Hutton has served on the board of directors of Eximis Surgical, Inc. since February 2018 and was on the Board of the Colorado BioScience Association from April 2011 to April 2013. +Mr. Hutton was an Observer on the board of directors of Aqueduct Critical Care from September 2014 to January 2017, and an Observer on the Board of Visualase, Inc. from October 2012 to July 2014. Mr. Hutton joined Biodesix from +Spectranetics Corp, a U.S.-based global leader in vascular intervention and lead management solutions (now part of Royal Philips), where he served as Senior Vice President and General Manager of the Vascular Intervention division from January 2017 +to December 2017. Prior to joining Spectranetics, Mr. Hutton held several positions of increasing responsibility, including Vice President and General Manager, at Medtronic plc, a global healthcare products company and manufacturer of medical +devices and supplies, over a period of 16 years. From April 2012 to January 2017, Mr. Hutton was Vice President and General Manager of Neurosurgery, where he oversaw the operations of the approximately $1 Billion Neurosurgery Business Unit. +From 2008 to 2012, he grew from Senior Director of Global Marketing to Vice President and Business Leader of the Surgical Navigation and Intra-Operative Imaging Business. Mr. Hutton holds a Bachelor of Arts degree from the College of Health and +Human Sciences, Department of Health and Kinesiology at Purdue University. In March 2021, Mr. Hutton was named a Significant Sig by Sigma Chi International Fraternity. Mr. Hutton was named a Top 25 Biotech CEO of 2021 and 2022 by the +Healthcare Technology Report in February 2021 and February 2022, respectively. In January 2021, Mr. Hutton was named 2020 CEO of the Year-USA by CEO Monthly Magazine. In July 2011, Mr. Hutton +received the Medtronic Wallin Leadership Award for his focus on talent development, business performance, and his personal and intentional demonstration of leadership. +We believe that Mr. Hutton is qualified to serve on our board of directors because of his experience in leadership and management roles +at our Company, as well as his experience as a board member in the healthcare and medical device industries. +John Patience +has served as a Director of the Company since June 2008 and as Chairman of the Board since September 2020. Mr. Patience currently serves as a Director (since 2012) of Accelerate Diagnostics, an in vitro diagnostics +company. Mr. Patience served as a director of Ventana Medical Systems, Inc. (“Ventana”), from 1989 and as Vice Chairman from 1999 until Ventana’s acquisition by Roche in 2008. Mr. Patience also served as a director of +Stericycle, Inc. since its founding in 1989 to June 2018. Mr. Patience is a founding partner of Crabtree Partners, a private equity investment partnership in Lake Forest, Illinois. He was also previously a partner of a venture capital +investment firm that provided both Ventana and Stericycle, Inc. with early-stage funding. Mr. Patience was also previously a partner at the consulting firm McKinsey & Co., Inc., specializing in health care. Mr. Patience holds a +B.A. in Liberal Arts and an L.L.B. from the University of Sydney, Australia, and an M.B.A. from the University of Pennsylvania’s Wharton School of Business. +We believe that Mr. Patience is qualified to serve on our board of directors because of his experience in leadership and management roles +in the field of medicine, as well as his experience as a board member and investor in companies in the healthcare industry. +Class II Directors – Term Expiring at the 2025 Annual Meeting +Lawrence T. Kennedy, Jr. has served as a Director of the Company since January 2023. Mr. Kennedy brings to Biodesix more +than 20 years of broad operating, corporate finance, company creation and investment experience with a specific focus in the healthcare industry. Mr. Kennedy currently serves as the Managing Partner and Chief Executive Officer of Westwood +Management, a private investment and wealth management firm directing a diverse investment portfolio across a range of alternative and traditional asset classes. Prior to his role at Westwood Management, Mr. Kennedy was the co-founder of Health Carousel, a talent management company with a leading portfolio of healthcare staffing and workforce solution businesses. Mr. Kennedy currently serves on the boards of directors of +Healthcare for Kids, HC Locum, Revolution 4.0, and Health Carousel. Mr. Kennedy has received a Master of Business Administration from Duke University’s Fuqua School of Business and a Bachelor of Arts from Colgate University. +2023 Proxy Statement +10 +Table of Contents +We believe that Mr. Kennedy is qualified to serve on our board of directors because of +his experience in leadership and management roles in the field of healthcare, as well as his experience as a board member and investor in companies in the healthcare industry. +Matthew Strobeck, Ph.D . has served as a Director of the Company since January 2012. Dr. Strobeck is currently the Managing +Partner of Birchview Capital LP, an investment management company. In addition, Dr. Strobeck is currently a Director of Quidel Corporation (“Quidel”), Accelerate Diagnostics Inc. (“Accelerate Diagnostics”), and Monteris +Medical. Dr. Strobeck was a Director of Tepha Inc. until June 2021. Dr. Strobeck received a B.S. from St. Lawrence University, a Ph.D. from the University of Cincinnati, a S.M. from the Harvard University/MIT Health Sciences +Technology Program, and a S.M. from the MIT Sloan School of Management. +We believe that Dr. Strobeck is qualified to serve on our +board of directors because of his experience in leadership and management roles at medical technology companies, as well as his experience as a board member and investor in the medical technology industry. +Charles Watts, M.D . has served as a Director of the Company since July 2019. Until his retirement, Dr. Watts served as +Chief Medical Officer at Northwestern Memorial Hospital and Associate Dean for Clinical Affairs at the Feinberg School of Medicine, Northwestern University from 2001 to 2011. Prior to his tenure at Northwestern, Dr. Watts served as Chief of +Clinical Affairs and Associate Dean at the University of Michigan Medical Center. He also previously served as Executive in Residence for the Health Management Academy, as an active faculty member of a nationally based Physician Leadership Program. +Dr. Watts served as a Director of Providence Health and Services (Seattle, Washington) from 2012 to 2016 where he chaired the Quality and Patient Safety Improvement Committee, and served as a Trustee of Swedish Health Services until May 2017, +when he accepted an appointment as interim Chief Medical Officer, serving in that capacity until June 2019. He currently serves as a Trustee on the Institute for Systems Biology Board and as a director of Accelerate Diagnostics. Dr. Watts +received his medical degree from the University of Michigan. +We believe that Dr. Watts is qualified to serve on our board of +directors because of his experience in leadership and management roles in the field of medicine, as well as his experience as a board member in the healthcare industry. +Board Composition +In accordance with our amended and restated certificate of incorporation, our board of directors is divided into three classes with staggered, +three-year terms. At each annual meeting of stockholders, the successors to directors whose terms then expire will be elected to serve from the time of election and qualification until the third annual meeting following election. Our directors are +divided among the three classes as follows: +• +the Class I directors are Jon Faiz Kayyem, Ph.D., John Patience and Scott Hutton, and their terms will +expire at the 2024 annual meeting of stockholders; +• +the Class II directors are Matthew Strobeck, Ph.D., Charles Watts, M.D., and Lawrence T. Kennedy, Jr. and +their terms expire at the 2025 annual meeting of stockholders; and +• +the Class III directors are Jean Franchi, Hany Massarany and Jack Schuler, and their terms will expire at +the Annual Meeting. +Our amended and restated certificate of incorporation and amended and restated bylaws provide that +the authorized number of directors may be changed only by resolution of the board of directors. Any additional +2023 Proxy Statement +11 +Table of Contents +directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one third of the +directors. Each director’s term continues until the election and qualification of his or her successor, or, if sooner, his or her death, resignation or removal. +Director Independence +Under the listing requirements and rules of Nasdaq Stock Market (“Nasdaq”), independent directors must comprise a majority of our +board of directors as a listed company within one year of the closing of our initial public offering. +Our board of directors has +undertaken a review of its composition, the composition of its committees and the independence of each director. Based upon information requested from and provided by each director concerning his or her background, employment and affiliations, +including family relationships, our board of directors has determined that Ms. Franchi, Messrs. Massarany, Schuler, Patience and Kennedy and Drs. Kayyem, Strobeck and Watts do not have any relationships that would interfere with the exercise of +independent judgment in carrying out the responsibilities of a director and that each of these directors is “independent” as that term is defined under the applicable listing requirements and rules of Nasdaq. In making this determination, +our board of directors considered the current and prior relationships that each non-employee director has with our company and all other facts and circumstances our board of directors deemed relevant in +determining their independence, including the beneficial ownership of our capital stock by each non-employee director. +Board Leadership Structure +Our corporate governance guidelines provide our board of directors with flexibility to combine or separate the positions of Chairman of the +board of directors and the Chief Executive Officer and/or the implementation of a lead director in accordance with its determination that utilizing one or the other structure would be in the best interests of the company. Mr. Patience currently +serves as the independent Chairman of our board of directors. Our board of directors believes that separating these positions reinforces the independence of our board of directors from management, creates an environment that encourages objective +oversight of management’s performance and enhances the effectiveness of our board of directors as a whole. +Role of our Board of Directors in Risk Oversight +Our board of directors is responsible for overseeing the overall risk +management process at Biodesix. The day-to-day responsibility for managing risks and exposures resides with our executive management team while our board of director +committees and our board of directors as a whole participate in the oversight process. The risk oversight process includes receiving regular reports from committees and management to enable our board of directors to understand management’s risk +assessment and mitigation processes, which includes areas of potential material risk, including long-term strategic and operational planning, strategic biopharmaceutical partnerships, executive development and evaluation, regulatory and legal +compliance, information technology (including cybersecurity), financial reporting and internal controls and reputational risk. Our board of directors focuses on the overall risks affecting us, and each of its standing committees has been delegated +responsibility for oversight of specific risks that fall within its areas of responsibility. For example: +• +Our audit committee is responsible for overseeing our major financial, legal and regulatory risk exposures, which +spans a variety of areas including litigation, regulatory compliance, financial reporting, insurance and cybersecurity. Our audit committee also oversees the steps management has taken to monitor and control such exposures, including guidelines and +policies for assessing and managing risk and related compliance efforts. +• +Our nominating and corporate governance committee oversees the management of risks associated with our overall +compliance and corporate governance practices and the independence and +2023 Proxy Statement +12 +Table of Contents +composition of our board of directors, including monitoring the effectiveness of our corporate governance guidelines and other policies such as our code of conduct and overseeing our +environmental and sustainability efforts and progress. +• +Our compensation committee regularly assesses risks arising from our compensation plans, policies and programs, +including whether any such plans encourage excessive or inappropriate risk-taking. +While each committee is responsible +for evaluating certain risks and overseeing the management of such risks, the full board of directors is regularly informed through committee reports about such risks. +Meetings of our Board of Directors +Our board of directors held seven meetings during 2022. Each incumbent director attended at least 75% of the aggregate total number of +meetings of the board of directors and the committees on which he or she served, held during the portion of 2022 for which he or she was a director or committee member. We encourage our directors to attend our annual meetings of stockholders. +Seven directors, including our Chief Executive Officer, Mr. +Hutton, attended our 2022 annual meeting of stockholders. +Committees of our Board of Directors +Our board of directors has established an audit committee, a compensation committee and a nominating and corporate governance +committee. Our board of directors may establish other committees to facilitate the management of our business. The composition and functions of each committee are described below. Members serve on these committees until their resignation or until +otherwise determined by our board of directors. The charter of each committee is available on our corporate website at www.biodesix.com in the Investors section under “Governance Highlights.” Reference to our website does not constitute +incorporation by reference of the information contained at or accessible through our website into this proxy statement. +Committee Composition and Meetings +The following table provides current membership and 2022 meeting information for each +committee of our board of directors: +Name: +Audit Committee +Compensation +Committee +Nominating and Corporate +Governance Committee +Jean Franchi +Chair +X +Jon Faiz Kayyem, Ph.D. +X +Lawrence T. Kennedy, Jr. (1) +X +Hany Massarany +X +Chair +John Patience +X +Jack Schuler +X +Matthew Strobeck, Ph.D. +X +Chair +Charles Watts, M.D. +X +Total meetings held in 2022 +4 +5 +4 +(1) +Lawrence T. Kennedy, Jr. joined the audit committee on January 3, 2023, in connection with his appointment +to the board of directors. +2023 Proxy Statement +13 +Table of Contents +Audit Committee +Our audit committee consists of Ms. Franchi, Messrs. Kennedy and Massarany and Dr. Strobeck, each of whom our board of +directors has determined satisfies the independence requirements under Nasdaq listing rules and Rule 10A-3(b)(1) of the Exchange Act. The chair of our audit committee is Ms. Franchi, whom our board of +directors has determined is an “audit committee financial expert” within the meaning of the SEC regulations. Each member of our audit committee can read and understand fundamental financial statements in accordance with applicable listing +standards. In arriving at these determinations, our board of directors has examined each audit committee member’s scope of experience and the nature of her or his employment in the corporate finance sector. The functions of this committee +include: +• +helping our board of directors oversee our corporate accounting and financial reporting processes; +• +reviewing and discussing with our management the adequacy and effectiveness of our disclosure controls and +procedures; +• +assisting with design and implementation of our risk assessment functions; +• +evaluating the qualifications, performance and independence of our independent registered public accounting firm +and deciding whether to retain its services; +• +monitoring the rotation of partners of our independent registered public accounting firm on our engagement team +as required by law; +• +discussing the scope and results of the audit with the independent registered public accounting firm, and +reviewing, with management and the independent accountants, our interim and year-end results; +• +developing procedures for employees to submit concerns anonymously about questionable accounting or audit +matters; +• +reviewing related-party transactions; +• +approving, or as permitted, pre-approving, audit and permissible non-audit services to be performed by our independent registered public accounting firm; and +• +reviewing and assessing, at least annually, the performance of the audit committee and adequacy of its charter. +Compensation Committee +Our compensation committee consists of Messrs. Massarany and Patience and Drs. Kayyem and Watts, and the chair of our compensation committee +is Mr. Massarany. Our board of directors has determined that each of Messrs. Massarany and Patience and Drs. Kayyem and Watts is independent under the Nasdaq listing rules and is a “non-employee +director” as defined in Rule 16b-3 promulgated under the Exchange Act. The functions of this committee include: +• +reviewing, modifying and overseeing overall compensation strategy and policies; +• +reviewing and approving the compensation arrangements and other terms of employment of our chief executive +officer, other executive officers and senior management, as appropriate; +• +reviewing and recommending to the full board of directors the compensation of our directors; +2023 Proxy Statement +14 +Table of Contents +• +appointing and overseeing the work of compensation consultants, legal counsel or any other advisors and +consultants engaged for the purpose of advising the compensation committee; +• +reviewing, recommending to the full board of directors, as appropriate, and administering equity award plans, +compensation plans and similar programs, as well as modification or termination of plans and programs; +• +establishing policies with respect to equity compensation arrangements; +• +reviewing and evaluating with the chief executive officer and the full board of directors the succession plans +for our executive officers; and +• +reviewing and assessing, at least annually, the performance of the compensation committee and the adequacy of its +charter. +Compensation Committee Interlocks and Insider Participation +None of the members of the compensation committee is currently, or has been at any time during 2022, one of our officers or +employees. None of our executive officers currently serve, or has served during 2022, as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving as a member of our board of directors +or compensation committee. +Nominating and Corporate Governance Committee +Our nominating and corporate governance committee consists of Ms. Franchi, Dr. Strobeck and Mr. Schuler, and the chair of our +nominating and corporate governance committee is Dr. Strobeck. Our board of directors has determined that Ms. Franchi, Dr. Strobeck and Mr. Schuler are independent under the applicable listing standards. The functions of this +committee include: +• +reviewing periodically and evaluating director performance of our board of directors and its applicable +committees, and recommending to our board of directors and management areas for improvement; +• +identifying, evaluating, nominating and recommending individuals for membership on our board of directors; +• +reviewing with our chief executive officer the plans for succession to the offices of our executive officers and +make recommendations to our board of directors with respect to the selection of appropriate individuals to succeed to these positions; +• +reviewing and recommending to our board of directors any amendments to our corporate governance policies; and +• +reviewing and assessing, at least annually, the performance of the nominating and corporate governance committee +and the adequacy of its charter. +Director Nomination Process +Selection and Nomination Process +Our board of directors is responsible for nominating members for election to our board of directors by our stockholders at our annual meetings +of stockholders. Whenever a vacancy occurs on our board of directors, +2023 Proxy Statement +15 +Table of Contents +whether due to a newly created director position or the death, resignation, removal or retirement of an existing director, our board of directors is authorized to select a person to fill the +vacancy to serve as a director until the annual meeting of stockholders at which the director’s term expires and until the election and qualification of his or her successor or, if sooner, his or her death, resignation or removal. Any increase +or decrease in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors. +Criteria for Board Membership +The board of directors and the nominating and corporate governance committee will determine the appropriate characteristics, skills and +experience for the board of directors as a whole and for its individual members. The board of directors and the nominating and corporate governance committee will consider the minimum general criteria set forth below, and may add any specific +additional criteria with respect to specific searches, in selecting candidates and existing directors for service on the board of directors. An acceptable candidate may not fully satisfy all of the criteria, but is expected to satisfy nearly all of +them. While the nominating and corporate governance committee does not have a formal policy in this regard, the diversity of the board of the directors is a consideration in evaluating candidates for director positions, among others. +The board of directors and the nominating and corporate governance committee believe that candidates for director should have certain minimum +qualifications, including being able to read and understand basic financial statements, being over 21 years of age and having the highest personal integrity and ethics. In considering candidates, the board of directors and the nominating and +corporate governance committee intend to consider such factors as possessing relevant expertise upon which to be able to offer advice and guidance to management, having sufficient time to devote to the affairs of the Company, demonstrated excellence +in his or her field, having the ability to exercise sound business judgment and having the commitment to rigorously represent the long-term interests of our stockholders. +The board of directors and the nominating and corporate governance committee review candidates for director nomination in the context of the +current composition of the board of directors, the operating requirements of the Company and the long-term interests of our stockholders. In conducting this assessment, the board of directors and the nominating and corporate governance committee +consider diversity, age, skills, and such other factors as it deems appropriate given the current needs of the board of directors and the Company to maintain a balance of knowledge, experience and capability. In the case of incumbent directors whose +terms of office are set to expire, the board of directors and the nominating and corporate governance committee review such directors’ overall service to the Company during their term, including the number of meetings attended, level of +participation, quality of performance, and any other relationships and transactions that might impair such directors’ independence. In the case of new director candidates, the board of directors and the nominating and corporate governance +committee also determine whether the nominee must be independent for purposes of any stock exchange on which any of the Company’s capital stock is listed. +Stockholder Recommendations and Nominations +Stockholders who wish to recommend candidates may contact the nominating and corporate governance committee in the manner described below +under “Board and Corporate Governance Matters—Stockholder Communications with our Board of Directors.” Stockholder nominations must be made according to the procedures required under our bylaws and described in this proxy statement +under the heading “Additional Information—Stockholder Proposals and Nominations for Next Year’s Annual Meeting of Stockholders.” Stockholder-recommended candidates and stockholder nominees whose nominations comply with these +procedures will be evaluated by our nominating and corporate governance committee in the same manner as other nominees. +2023 Proxy Statement +16 +Table of Contents +Board Diversity Matrix +The table below provides certain highlights of the composition of our board of directors members and nominees as of March 24, 2023. +Nasdaq listing requirements require each listed company to have, or explain why it does not have, two diverse directors on the board, including at least one diverse director who self-identifies as female and at least one diverse director who +self-identifies as an underrepresented minority or LGBTQ+, or for smaller reporting companies, two female directors. Companies listed on the Nasdaq Global Market must have at least one diverse director by December 31, 2023 and two diverse +directors by December 31, 2025. As of March 24, 2023, our board of directors has one diverse director, and we intend to be fully compliant with Nasdaq’s diversity requirement by December 31, 2025. Each of the categories listed in +the below table has the meaning as it is used in Nasdaq Listing Rule 5605(f). +Board Diversity Matrix as of March 24, 2023 +Total Number of Directors +9 +Female +Male +Non-Binary +Did Not Disclose Gender +Part I: Gender Identity +1 +8 +- +- +Directors +Part II: Demographic Background +African American or Black +- +- +- +- +Alaskan Native or Native American +- +- +- +- +Asian +- +- +- +- +Hispanic or Latinx +- +- +- +- +Native Hawaiian or Pacific Islander +- +- +- +- +White +1 +8 +- +- +Two or More Races or Ethnicities +- +- +- +- +LGBTQ+ +- +Did Not Disclose Demographic Background +- +Directors who Identify as Middle Eastern: 1 +Executive Officers +Set forth below is biographical information with respect to each current executive officer of the Company, except Mr. Hutton, our +President and Chief Executive Officer. Mr. Hutton also serves as a director of the Company, and his biographical information is available above in the section titled “Overview of Our Nominees and Continuing Directors—Continuing +Directors.” +Robin Harper Cowie , age 43. Ms. Harper Cowie has served as our Chief Financial Officer since April +2017. She has been with the Company in multiple financial and reimbursement positions since March 2011, serving as Vice President of Finance from February 2016 to April 2017, Vice President of Reimbursement & Health Economics from February +2015 to February 2016, Senior Director of Reimbursement from January 2014 to February 2015, and Director of Reimbursement from March 2011 to January 2014. Prior to joining Biodesix, Ms. Harper Cowie held a leadership role in payer and +government relations at Precision Therapeutics, Inc. Ms. Harper Cowie’s background includes corporate finance, managed care and payer relations, reimbursement and regulatory policy, and revenue cycle operations. Additionally, she spent +several years as a researcher at the University of Pittsburgh Medical Center. Ms. Harper Cowie holds a B.S. in Molecular Biology from the University of Pittsburgh, and an M.B.A. in Finance from the Joseph M. Katz Graduate School of Business +from the University of Pittsburgh. +2023 Proxy Statement +17 +Table of Contents +Ryan Siurek , age 51. Mr. Siurek has been the Chief Accounting Officer of +Biodesix since December 2020. Mr. Siurek has held various finance and accounting executive roles of increasing responsibility. Prior to Biodesix, Mr. Siurek served as the Vice President, Chief Accounting Officer and Controller of Vail +Resorts Inc. from April 2016 to October 2020. Prior to Vail Resorts, Inc., Mr. Siurek served as Chief Financial Officer for Sprint Corporation’s prepaid and wholesale division from December 2013 to April 2016 and as Vice President, +Chief Accounting Officer and Controller from July 2013 to December 2013. He served as Vice President and Assistant Controller of Sprint Corporation from January 2009 to November 2009. Prior to Sprint Corporation, Mr. Siurek worked for +LyondellBasell Industries from January 2004 to January 2009, where he held various positions, including Director of Risk Management and Global Shared Services from September 2008 to January 2009, European Controller from July 2007 to August 2008, +and Senior Manager of Technical Accounting from January 2004 to June 2007 and served as its Controller for European Operations. Mr. Siurek serves as a member of the Small Business Advisory Committee of the Financial Accounting Standards Board +(“FASB”) as well as a member of the Financial Reporting Executive Committee of the American Institute of Certified Public Accountants. Mr. Siurek holds a Bachelor’s Degree in Accounting and a Master’s Degree in Accounting +from Texas A&M University and is a Certified Public Accountant. +Code of Business Conduct and Ethics +We have adopted a Code of Business Conduct and Ethics (the “Code of Conduct”) that applies to all of our employees, +officers (including our principal executive officer, principal financial officer and principal accounting officer or controller, or persons performing similar functions), and directors. The full text of our Code of Conduct is posted on our website +at www.biodesix.com. We intend to disclose future amendments to certain provisions of our Code of Conduct, or waivers of such provisions, applicable to any principal executive officer, principal financial officer, principal accounting officer or +controller, or persons performing similar functions, and our directors, on our website identified above. Reference to our website does not constitute incorporation by reference of the information contained at or accessible through our website into +this proxy statement. +Corporate Governance Guidelines +We have adopted written corporate governance guidelines which provide the framework for our corporate governance, along with our amended and +restated certificate of incorporation, amended and restated bylaws, committee charters and other key governance practices and policies. Our corporate governance guidelines cover a range of topics including, but not limited to, board composition, +independence and selection of directors, board membership criteria, conduct of board meetings, board committee composition and functions, board assessment, director compensation and succession planning. Our corporate governance guidelines will be +reviewed at least annually by our nominating and corporate governance committee and any proposed changes will be recommended to our full board of directors for approval. A copy of our corporate governance guidelines is available on our corporate +website at www.biodesix.com in the Investor section under “Governance Highlights.” Reference to our website does not constitute incorporation by reference of the information contained at or accessible through our website into this proxy +statement. +Anti-Hedging and Anti-Pledging Policy +Our insider trading policy prohibits our directors, executive officers and other employees from engaging in hedging transactions or other +inherently speculative transactions with respect to Company securities, such as short sales or transactions in put or call options. Our directors, executive officers and other employees are also prohibited from holding Company securities in a margin +account or pledging company securities as collateral for a loan. +2023 Proxy Statement +18 +Table of Contents +Stockholder Communications with our Board of Directors +Any stockholder or other interested party who wishes to communicate with our board of directors or any individual director may +send written communications to our board of directors or such director c/o Corporate Secretary, Biodesix, Inc., 2970 Wilderness Place, Suite 100, Boulder, CO 80301. The communication must include the stockholder’s name, address and an +indication that the person is our stockholder. The Corporate Secretary will review any communications received from stockholders and will forward such communications to the appropriate director or directors, or committee of our board of directors, +based on the subject matter. Communications that are deemed inappropriate (such as communications that are commercial or frivolous in nature) will not be forwarded. In addition, communications that appear to be unduly hostile, intimidating, +threatening, illegal or similarly inappropriate will not be forwarded. +Certain Relationships and +Related-Party Transactions +The following is a summary of the transactions since January 1, 2022 to which we have been a +participant in which the amount involved in the transaction exceeds or will exceed $120,000 and in which any of our directors, director nominees, executive officers, or holders of more than 5% of our capital stock, or any immediate family member of, +or person sharing the household with, any of these individuals, had or will have a direct or indirect material interest, with certain exceptions, other than compensation arrangements, which are under the section of this proxy statement captioned +“Executive Compensation.” +Subscription Agreements +On April 7, 2022, we entered into subscription agreements with a consortium of investors, including three members of our board of +directors and other existing stockholders of the Company, for the issuance and sale by the Company of an aggregate of 6,508,376 shares at a purchase price of $1.79 per share in a private placement offering, for an aggregate purchase price of +$11.7 million. The net proceeds were used, among other things, to fund a $3.0 million partial repayment of the $30 million term loan with Silicon Valley Bank. +On November 21, 2022, we entered into subscription agreements with certain members of the Company’s management team, including our +Chief Executive Officer and Chief Financial Officer, for the issuance and sale by the Company of an aggregate of 235,056 shares at a purchase price of $1.15, for an aggregate purchase price of approximately $270,000. +Investor Rights Agreement +In October 2018, we entered into an amended and restated investor rights agreement (“IRA”) with certain holders of our preferred +stock and common stock, including certain holders of 5% of our capital stock, and including certain members of, and affiliates of, our directors and certain of our executive officers. The IRA provides the holders of our preferred stock with certain +registration rights. After the closing of our initial public offering, the holders of 20,090,745 shares of common stock issuable from conversion of outstanding preferred stock, became entitled to rights with respect to the registration of their +shares of common stock under the Securities Act under this agreement. +Indemnification of Directors and Executive Officers +We have entered into indemnification agreements with each of our directors and executive officers in connection with our +initial public offering or the start of their service on our board. The indemnification agreements and our bylaws will require us to indemnify our directors against certain liabilities, costs and expenses to the fullest extent not prohibited by +DGCL, and have purchased directors’ and officers’ liability insurance. Subject to very limited exceptions, our bylaws will also require us to advance expenses incurred by our directors and officers. +2023 Proxy Statement +19 +Table of Contents +Policies and Procedures for Related-Party Transactions +Our audit committee has the primary responsibility for the review, approval and oversight of any “related-party transaction,” which +is any transaction, arrangement or relationship (or series of similar transactions, arrangements or relationships) in which we are, were or will be a participant and the amount involved exceeds $120,000, and in which the related person has, had or +will have a direct or indirect material interest. We adopted a written related-party transaction policy effective October 2020. Under our related-party transaction policy, our management is required to submit any related-party transaction not +previously approved or ratified by our audit committee to our audit committee. In approving or rejecting the proposed transactions, our audit committee takes into account all of the relevant facts and circumstances available. All of the transactions +described in this section, except for certain equity award grants, occurred prior to the adoption of this policy. +2023 Proxy Statement +20 +Table of Contents +EQUITY COMPENSATION PLAN INFORMATION +The following table summarizes the number of outstanding stock options and restricted stock unit (RSU) awards granted to our +employees, consultants, and directors, as well as the number of shares of common stock remaining available for future issuance, under our equity compensation plans in effect as of December 31, 2022. +Plan Category: +Number of +securities to be +issued upon exercise of +outstanding options +(a) +Weighted-average +exercise price of +outstanding options +(b)($) +Number of securities +remaining available for +issuance under equity +compensation plans +(excluding +securities +reflected in column +(a)) +Equity compensation plans approved by security holders (1) +4,277,415 +(2) +$ +8.77 +(3) +641,735 +(4) +Equity compensation plans not approved by security +holders +— +— +— +Total +4,277,415 +$ +8.77 +641,735 +(1) +Includes the 2006 Employee, Director and Consultant Stock Plan (“2006 Incentive Plan”), the 2016 +Equity Incentive Plan (“2016 Incentive Plan”), the 2020 Equity Incentive Plan (“2020 Incentive Plan), the 2020 Employee Stock Purchase Plan (“ESPP”), the 2011 Second Amended and Restated Bonus-to-Options Program and the 2015 +Third Amended and Restated Bonus-to-Options Program. +(2) +Includes 79,104 RSUs that were outstanding on December 31, 2022 under the 2016 Incentive Plan and 1,131,820 +RSUs that were outstanding on December 31, 2022 under the 2020 Incentive Plan. RSU awards may be settled only for shares of common stock on a one-for-one basis. +(3) +Only option awards were used in computing the weighted-average exercise price. +(4) +This amount represents 233,694 shares of common stock available for issuance under the 2020 Incentive Plan and +408,041 shares of common stock available for issuance under the ESPP, all of which were subject to purchase under the offering period in effect as of December 31, 2022, which offering period ended on February 28, 2023. Awards available for +grant under the Company’s 2020 Incentive Plan include stock options, stock appreciation rights, restricted stock, restricted stock units, other stock awards, performance awards, and any combination of the foregoing awards. The number of shares +of our common stock reserved for issuance under our 2020 Incentive Plan will automatically increase on the first day of each fiscal year by 4% of the number of shares of common stock outstanding on the immediately preceding December 31 or such +lesser amount as is determined by our board of directors. The ESPP provides the opportunity for eligible coworkers to acquire shares of our common stock at a discount. The number of shares of our common stock reserved for issuance under our ESPP +will automatically increase on the first day of each fiscal year by the lesser of 1% of the number of shares of common stock outstanding on the immediately preceding December 31, 338,106 shares of our common stock or such lesser amount as is +determined by our board of directors. +2023 Proxy Statement +21 +Table of Contents +DIRECTOR COMPENSATION +Non-Employee Director Compensation Policy +The following summarizes our 2022 non-employee director compensation policy, as amended in the first +quarter of 2022. +● Annual +Retainers : During the year ended December 31, 2022, none of our non-employee directors received annual retainers with respect to service on our board of directors or any of its committees. +● Equity Compensation : +– +Upon appointment to our board of directors, each non-employee director +is entitled to receive an initial stock option grant valued at $187,500 as of the grant date, with 40% vesting on the two-year anniversary of the grant date and the remainder vesting ratably on each subsequent +monthly anniversary of the grant date for 36 months, subject to such director’s continuous service through each applicable vesting date. +– +Upon appointment to our board of directors, each non-employee director +is also entitled to receive an initial RSU grant valued at $187,500 as of the grant date, which will vest on the one-year anniversary of the grant date subject to such director’s continuous service +through such date. +– +Generally, each non-employee director continuing his or her service on +our board of directors following the annual meeting of stockholders is entitled to receive an annual equity grant valued at $275,000 as of the grant date. Each non-employee director may elect to receive this +annual equity grant in the form of stock options or RSUs, or in a mixture of 50% stock options and 50% RSUs, which in each case will vest immediately prior to the subsequent annual meeting of stockholders. If a +non-employee director becomes a director after an annual meeting of stockholders, he or she will be granted a pro-rata annual equity grant based on the period of the non-employee director’s service on our board of directors during the year. For 2022 grants, however, the compensation committee determined that non-employee directors +would be entitled to receive an annual equity grant valued at $192,500 as of the date of the 2022 annual meeting of stockholders, in the form of RSUs. The closing price of our common stock on May 24, 2022 was $1.32. Based on this price, it was +determined that each non-employee director was entitled to a grant of 143,833 RSUs, but there were not sufficient shares available under the 2020 Incentive Plan as of such date to make such grants. The board +of directors therefore granted 83,333 RSUs to each non-employee director on May 24, 2022, with a grant date value of $110,000, and granted the remaining 62,500 RSUs to each +non-employee director on January 1, 2023, with a grant date value of $143,750, after the number of shares of our common stock reserved for issuance under the 2020 Incentive Plan automatically increased in +accordance with such plan’s terms. +– +Notwithstanding the vesting schedules described above, each +non-employee director who remains in continuous service until a change of control (as defined in our 2020 Incentive Plan) will become fully vested in all then-outstanding equity awards. In addition, annual +equity grants will vest on a prorated basis in the event a director resigns or otherwise experiences a termination of service other than for cause. +● Expense Reimbursement : Our non-employee directors are also reimbursed for their reasonable out-of-pocket travel expenses to cover in person attendance at and +participation in board and committee meetings. +2023 Proxy Statement +22 +Table of Contents +Director Deferred Compensation Plan +On December 21, 2021, our compensation committee adopted the 2021 Non-Employee Director Deferred +Compensation Plan (the “Director Deferred Compensation Plan”), an unfunded, non-qualified deferred compensation plan that allows our non-employee directors to +defer RSU awards that they receive. +Any RSU deferred will be credited as deferred units to the +non-employee director’s account as of the date on which it vests. Each deferred unit is credited with dividend equivalents equal to the dividends paid, if any, on our common stock, which are deemed +reinvested in additional deferred units on the dividend payment date. Deferred units will be appropriately adjusted in the event of any change in our common stock through merger, consolidation, or otherwise; a stock dividend; or a stock split, +combination or other change in our common stock. +Payments will be made in shares of our common stock equal to the number of deferred units +credited to the director’s account, with a cash payment for any fractional deferred unit. A director may elect to receive deferred amounts in a lump sum within 90 days after either his or her separation from service or, alternatively the later +of his or her separation from service or January 1 of a calendar year elected by the director which may not be more than 15 years after the calendar year in which the director’s initial deferral election under the Director Deferred +Compensation Plan was made. Within 90 days following a non-employee director’s death, a lump sum equal to the then-remaining balance in his or her account will be made to his or her beneficiary. Within 10 +business days after a change in control (as defined in our 2020 Incentive Plan) and to the extent permitted by Federal tax law, each non-employee director (or former +non-employee director) will receive a cash lump sum payment equal to the number of deferred units credited to his or her account on the date of the change in control, multiplied by the fair market value of one +share of our common stock on such date. If payment within 10 business days following a change in control is not permitted by Federal tax laws, then payment will be made at the time and in the form that payment would have been made if a change in +control had not occurred. +2022 Director Compensation Table +The following table sets forth information for the fiscal year ended December 31, 2022 regarding the compensation awarded to, earned by or +paid to our non-employee directors. The only compensation received by our non-employee directors was in the form of RSU awards in respect of annual equity grants for +2022 service. Each of Ms. Franchi, Drs. Kayyem, Strobeck and Watts, and Messrs. Massarany, Patience and Schuler received a grant of 83,333 RSUs. Mr. Hutton, our Chief Executive Officer, does not receive any separate compensation for his +service on our board of directors. +Stock +Awards +Total +Name +($) (1) +($) +Jean Franchi (2) +$ +110,000 +$ +110,000 +Jon Faiz Kayyem, Ph.D (2) +$ +110,000 +$ +110,000 +Hany Massarany (2) +$ +110,000 +$ +110,000 +John Patience (2) +$ +110,000 +$ +110,000 +Jack Schuler (2) +$ +110,000 +$ +110,000 +Matthew Strobeck, Ph.D (2) +$ +110,000 +$ +110,000 +Charles M. Watts, M.D (2) +$ +110,000 +$ +110,000 +(1) +The amounts reported represent the aggregate grant date fair market value of the RSUs, calculated in accordance +with FASB ASC Topic 718 based on the assumption that the value of each RSU granted on May 24, 2022 was equal to $1.32, with such amount being the closing price of our common stock on that date. The assumptions used in calculating the grant date +fair value of the award disclosed in this column are set forth in Note 12 of our audited financial statements included in the 2022 Form 10-K Report “Item 8. Financial Statements and Supplementary +Data” for the year ended December 31, 2022. Pursuant to the Director Deferred Compensation Plan, non-employee directors may choose to defer receipt of the shares to be issued in connection with +settlement of the annual RSU award. Ms. Franchi, Messrs. Patience and Schuler and Dr. Strobeck each chose to defer receipt of 83,333 shares upon their vesting. +2023 Proxy Statement +23 +Table of Contents +(2) +As of December 31, 2022, Ms. Franchi held options to purchase 29,363 shares of our common stock and +RSUs in respect of 109,701 shares of our common stock; Dr. Kayyem held options to purchase 77,406 shares of our common stock and RSUs in respect of 83,333 shares of our common stock; Mr. Massarany held options to purchase 60,946 shares of +our common stock and RSUs in respect of 109,701 shares of our common stock; Mr. Patience held options to purchase 46,102 shares of our common stock and RSUs in respect of 83,333 shares of our common stock; Mr. Schuler held options to +purchase 46,102 shares of our common stock and RSUs in respect of 83,333 shares of our common stock; Dr. Strobeck held options to purchase 11,717 shares of our common stock and RSUs in respect of 83,333 shares of our common stock; and +Dr. Watts held options to purchase 95,910 shares of our common stock and RSUs in respect of 109,701 shares of our common stock. +2023 Proxy Statement +24 +Table of Contents +EXECUTIVE COMPENSATION +The following is a discussion of compensation arrangements of our named executive officers. This discussion contains forward-looking +statements that are based on our current plans, considerations, expectations, and determinations regarding future compensation programs. Actual compensation programs that we adopt may differ materially from currently planned programs as summarized +in this discussion. As an “emerging growth company” as defined in the JOBS Act, we are not required to include a Compensation Discussion and Analysis section and have elected to comply with the scaled back disclosure requirements +applicable to emerging growth companies. In addition, as an emerging growth company, we are not required to conduct votes seeking approval, on an advisory basis, of either the compensation of our named executive officers or the frequency with which +such votes must be conducted. +Overview +This section provides a discussion of the compensation paid or awarded to our Chief Executive Officer and our two other most highly compensated +executive officers as of December 31, 2022. We refer to these individuals as our “named executive officers.” For 2022, our named executive officers were: +• +Scott Hutton, President and Chief Executive Officer; +• +Robin Harper Cowie, Chief Financial Officer, Secretary and Treasurer; and +• +Ryan Siurek, Chief Accounting Officer +Our executive compensation program is intended to align executive compensation with our performance objectives and business strategy and to +enable us to attract, motivate, retain and reward executive officers who operate in a highly competitive and technologically challenging environment and whose contributions are critical to our long-term success. The compensation paid or awarded to +our executive officers is generally based on the assessment of each individual’s performance compared against the business objectives established for the fiscal year as well as our historical compensation practices. The compensation paid to +newly hired executive officers is primarily determined based on the negotiations of the parties as well as our historical compensation practices, and we seek fairness in total compensation paid to our executive officers. As a result, we benchmark +executive compensation against external and internal comparisons and look at the relationship between team member roles in the organization to determine appropriate compensation. For the year ended December 31, 2022, the material elements of +our executive compensation program were base salary, annual cash bonus and equity awards in the form of RSUs and stock options. +Performance-based, at risk and variable compensation in the form of annual cash bonuses and equity-based compensation is a significant portion +of the overall compensation paid to each named executive officer. Our annual cash bonuses are earned or vest only upon the achievement of certain performance metrics. In addition, the value received from RSUs and stock options (if any) depends on +our stock price. +We expect that our executive compensation program will continue to evolve over the coming years, while still supporting +our overall business and compensation objectives. The compensation committee of our board of directors oversees our executive compensation program. In addition, during the year ended December 31, 2022, the compensation committee utilized our +independent executive compensation consultant to advise us on the elements of our executive compensation program. +2023 Proxy Statement +25 +Table of Contents +Compensation of Named Executive Officers +Base Salary +Base salaries are intended to provide a level of compensation sufficient to attract and retain an effective management team, when considered in +combination with the other components of our executive compensation program. The relative levels of base salary for our named executive officers are designed to reflect each executive officer’s scope of responsibility and accountability to us. +Please see the “Salary” column in the Summary Compensation Table for the base salary amounts received by each named executive officer during the years ended December 31, 2021 and December 31, 2022. +As of January 1, 2022, Mr. Hutton’s annual base salary was $515,000, Ms. Harper Cowie’s annual base salary was +$330,000, and Mr. Siurek’s annual base salary was $300,000. Effective March 1, 2022, our compensation committee approved an increase in Ms. Harper Cowie’s annual base salary to $355,000 (from $330,000). The March 2022 +increase was set based on advice from the independent compensation consultant to ensure that salary levels remain appropriate and competitive when compared with public company base salaries for companies of commensurate size and complexity. +Annual Cash Bonuses +We provide our senior leadership team with short-term incentive compensation through an annual cash bonus program. Annual bonus compensation +holds executives accountable, rewards the executives based on actual business results and helps create a “pay for performance” culture. Our annual cash bonus program provides cash incentive award opportunities based on the achievement of +performance goals approved by our compensation committee at the beginning of each fiscal year. +Generally, our compensation committee +establishes a Company-based performance metric as a threshold vesting criterion for any payouts for a particular annual bonus period. In determining bonus payouts, if any, the performance of our named executive officers with respect to individual +performance goals established at the beginning of the applicable year is only considered if that metric is met or exceeded. +For 2021, the +compensation committee determined that the Company’s short-term incentive compensation would be based on the achievement of two financial objectives, the Company’s revenue determined in accordance with U.S. GAAP and non-COVID-19 gross margin percentage, as well as one innovation objective intended to incentivize the advancement of the Company’s product pipeline. Actual results were +measured at year end against targeted outcomes. +For 2022, the compensation committee determined that the Company’s short-term +incentive compensation would be based on the achievement of three financial objectives, (i) total revenue determined in accordance with U.S. GAAP, (ii) gross margin percentage and (iii) total operating expense (excluding certain non-cash expenses), as well as one commercial catalyst objective intended to incentivize the advancement of certain major projects and commercial objectives of the Company. Actual results were measured at year end +against targeted outcomes. +Mr. Hutton’s, Ms. Harper Cowie’s and Mr. Siurek’s 2021 and 2022 bonus targets as +a percentage of annual base salary were 100%, 50% and 45% respectively. Based on our 2021 and 2022 performance, our compensation committee determined, and our board of directors approved, payouts under our annual cash bonus program equal to +approximately 76.7% and 65.5%, respectively, of the target bonus opportunity. +On December 31, 2020, our compensation committee +adopted the Company’s 2021 Senior Management Bonus to Equity Plan, which permitted eligible executives, including each of our named executive officers, to elect to receive 25%, 50%, 75% or 100% of the annual bonus earned during 2021 or 2022 in +the form of a bonus-to-options award, subject to an individual cap equal to the executive’s target annual bonus or any maximum dollar amount approved by the Company +or the executive for such year. Effective as of December 14, 2022, the plan was amended to further provide that the amount of the annual bonus an eligible executive may elect to receive in the form of a bonus-to-options award may also be subject to a maximum percentage approved +2023 Proxy Statement +26 +Table of Contents +by the Company for such year. The bonus-to-options awards, if any, are fully vested on the grant date and have an +exercise price equal to the fair market value of our common stock on the grant date. The program reflects our commitment to a “pay for performance” philosophy and further aligns our executive compensation program with the long-term +interests of our stockholders because an executive who participates foregoes a portion of his or her annual cash bonus in exchange for an option award that will be valuable only if the stock price increases. +Pursuant to elections made in 2020 and 2021, each named executive officer also received a portion of their respective annual bonuses earned in +2021 and 2022 in the form of a bonus-to-options award instead of in cash. For annual bonuses earned in 2021 and 2022, the number of shares of the Company’s common +stock subject to each bonus-to-options award granted in 2022 and 2023, respectively, was determined by multiplying the cash value of the bonus that was elected to be +received in the form of an option award by four, and then dividing the product of that calculation by $13.40 (the Company’s average stock price during 2021, calculated based on the daily closing price of our publicly traded common stock) or +$2.04 (the Company’s average stock price during 2022, calculated based on the daily closing price of our publicly traded common stock), respectively. Because the 2021 Senior Management Bonus to Equity Plan is a +sub-plan of the 2020 Incentive Plan, any grants under the plan are subject to the overall availability of shares for grant under the 2020 Incentive Plan. As a result, the number of shares of the Company’s +common stock subject to each bonus-to-options award granted in 2023 was reduced by 12.1% with such portion paid in cash. Accordingly, each of Mr. Hutton, +Ms. Harper Cowie and Mr. Siurek received a payout under the 2021 and 2022 annual cash bonus program in cash and/or a bonus-to-options award, as illustrated +below: +2021 +Name +Incentive +Cash Payout +Shares Subject to Bonus- +to-Option Award +Scott +Hutton +$ +95,911 +85,875 +Robin Harper +Cowie +$ +31,002 +27,758 +Ryan Siurek +— +30,887 +2022 +Name +Incentive +Cash Payout +Shares Subject to Bonus- +to-Option Award +Scott +Hutton +$ +114,869 +435,668 +Robin Harper +Cowie +$39,140 +148,448 +Ryan Siurek +$30,111 +114,204 +Equity Awards +To further align the interests of our executive officers with the interests of our stockholders and to further focus our executive officers on +our long-term performance, we have historically granted equity compensation in the form of stock options and this practice continued in 2021. Named executive officers were granted RSUs in 2022, which the compensation committee believes will continue +to align the interests of the executive officers with our stockholders. +In the year ended December 31, 2022, the compensation +committee awarded Mr. Hutton, Ms. Harper Cowie and Mr. Siurek 195,392 RSUs, 50,508 RSUs and 21,341 RSUs, respectively, which vest ratably on a quarterly basis for four years from the vesting commencement date, subject to continued +service through the applicable vesting date. In addition, the compensation committee awarded Mr. Hutton, Ms. Harper Cowie and Mr. Siurek 195,393 RSUs, 50,508 RSUs, and 21,341 RSUs, respectively, which vest ratably on a quarterly basis +for six calendar quarters from the vesting commencement date, subject to continued service through the applicable vesting date. +In the +year ended December 31, 2021, the compensation committee awarded Mr. Hutton and Ms. Harper Cowie stock options (“time-vested options”) representing the right to purchase 255,688 and 61,439, shares of our common stock, +respectively on a five-year vesting schedule. The 2021 time-vested options vest in a series of 60 successive, equal monthly installments, measured from the vesting commencement date, subject to continued service through the applicable vesting date. +2023 Proxy Statement +27 +Table of Contents +In addition, in connection with his appointment as Chief Accounting Officer on +December 31, 2020, Mr. Siurek received stock options on January 7, 2021, representing the right to purchase 45,000 shares of our common stock, with 40% of such shares vesting on the second anniversary of the date of +Mr. Siurek’s appointment, and the remaining shares vesting in equal monthly installments over the next three years, subject to continued service through the applicable vesting date. +Each of Mr. Hutton and Ms. Cowie were previously granted performance-based stock options (“performance-vested options”) +that became partially vested in 2021 based on the achievement of specified performance hurdles. The performance-vested options represented the right to purchase 25,269, and 17,688 shares of our common stock, respectively, on a three-year vesting +schedule subject to the achievement of applicable performance criteria. One third of these performance-vested options could have vested after each of the first (2019 tranche), second (2020 tranche) and third (2021 tranche) anniversaries of the +vesting commencement date, subject to the Company’s achievement of recognized revenue of at least $31 million, $67 million and $134 million for the years ended December 31, 2019, 2020 and 2021, respectively. +The board of directors has sole discretion to determine if the performance hurdles are met and to determine the vesting date, and shall make +such determinations within 90 days after the end of the applicable fiscal year. In September 2020, and in light of the impact of the COVID-19 pandemic on the Company’s operations and other considerations, +the board of directors amended the performance-vested options to adjust the performance hurdles for the 2020 tranche and the 2021 tranche to $28.6 million and $51.5 million, respectively. At the time of such amendment, the Board believed +that the achievement of the amended performance hurdles remained uncertain, and struck the appropriate balance of ambitious and attainable. +The board of directors retains ultimate discretion to determine whether such performance hurdles have been met. For the 2019 tranche, the board +of directors determined that the performance hurdles were not met and, consistent with our pay for performance philosophy, one third of each of Mr. Hutton’s and Ms. Harper Cowie’s performance-vested option award was therefore +cancelled. For each of the 2020 tranche and 2021 tranche, the board of directors determined that the performance hurdles were met and the remaining amounts of each of Mr. Hutton’s and Ms. Harper Cowie’s performance-vested option +award became fully vested and exercisable. +Please see “Outstanding Equity Awards at Fiscal 2022 +Year-End” below for a summary of the outstanding equity awards held by each of the named executive officers as of 2022 year-end. +One-Time Recognition Awards +During 2021, each of Mr. Hutton and Ms. Harper Cowie were granted one-time recognition awards +in the form of a fully vested stock option representing the right to purchase 40,008 and 24,839 shares of our common stock, respectively. These awards were in recognition of significant contributions relating to the strategic priorities of the +Company in the discretion of the Compensation Committee. +During 2022, Mr. Siurek was granted a +one-time recognition award in the form of a time-vested grant of 9,485 RSUs, which vest ratably on a quarterly basis for four years from the vesting commencement date, subject to continued service through the +applicable vesting date. This award was in recognition of significant contributions relating to the strategic priorities of the Company in the discretion of the Compensation Committee. +2023 Proxy Statement +28 +Table of Contents +2022 Summary Compensation Table +The following table shows information regarding the compensation of our named executive officers for services performed during the years ended +December 31, 2022 and 2021. +Name and Principal Position +Fiscal +Year +Salary +($) (1) +Stock +Awards +($) (2) +Options +Awards +($) (3) +Non-Equity +Incentive +Plan +Compensation +($) (4)(5) +All Other +Compensation +($) (6) +Total ($) +Scott Hutton +President and Chief Executive Officer +2022 +515,000 +1,441,997 +680,532 +114,869 (7) +2,134 +2,754,532 +2021 +490,285 +— +4,068,265 +95,911 (8) +102 +4,654,563 +Robin Harper Cowie +Chief Financial Officer, Secretary and Treasurer +2022 +350,096 +372,749 +231,882 +39,140 (9) +1,633 +995,500 +2021 +317,887 +— +1,178,635 +31,002 (10) +163 +1,527,687 +Ryan Siurek +Chief Accounting Officer +2022 +300,000 +192,496 +178,391 +30,111 (11) +2,170 +703,168 +2021 +294,872 +— +643,394 +— (12) +— +938,266 +(1) +The amounts disclosed represent the dollar value of base salary earned by the named executive officer as of +December 31 of each applicable fiscal year. +(2) +The amounts disclosed represent the aggregate grant date fair value of RSU awards as calculated in accordance +with FASB ASC Topic 718. The assumptions used in calculating the grant date fair value of the award disclosed in this column are set forth in Note 12 of our audited financial statements included in the 2022 Form +10-K Report “Item 8. Financial Statements and Supplementary Data” for the year ended December 31, 2022. These amounts do not correspond to the actual value that may be realized by the named +executive officers upon vesting or exercise of the applicable awards. +(3) +The amounts disclosed represent the aggregate grant date fair value of awards including an estimate of the +grant date fair value of bonus-to-options awards as calculated in accordance with FASB ASC Topic 718. The assumptions used in calculating the grant date fair value of +the award disclosed in this column are set forth in Note 12 of our audited financial statements included in the 2022 Form 10-K Report “Item 8. Financial Statements and Supplementary Data” for the +year ended December 31, 2022. For the bonus-to-options awards, the estimated grant date fair value was used to correspond to the treatment of such expense under +U.S. GAAP in the 2022 Form 10-K Report, as the service inception period precedes the grant date. These amounts do not correspond to the actual value that may be realized by the named executive officers upon +vesting or exercise of the applicable awards. +(4) +Based on our 2022 performance measured against the Company’s achievement of three financial objectives, +(i) total revenue determined in accordance with U.S. GAAP, (ii) gross margin percentage and (iii) total operating expense (excluding certain non-cash expenses), as well as one commercial +catalyst objective intended to incentivize the advancement of certain major projects and commercial objectives of the Company, our compensation committee determined, and our board of directors approved, payouts under the 2022 annual cash bonus +program at a 65.5% achievement level. The Non-Equity Incentive Plan Compensation listed for each named executive officer represents the annual cash bonus award for the 2022 fiscal year after taking into +consideration the election of each individual to participate in the bonus-to-options program. +2023 Proxy Statement +29 +Table of Contents +(5) +Based on our 2021 performance measured against the Company’s achievement of two financial objectives, +revenue and non-COVID-19 gross margin percentage as well as one innovation objective, our compensation committee determined, and our board of directors approved, payouts +under the 2021 annual cash bonus program at a 76.7% achievement level. The Non-Equity Incentive Plan Compensation listed for each named executive officer represents the annual cash bonus award for the 2021 +fiscal year after taking into consideration the election of each individual to participate in the bonus-to-options program. +(6) +The amounts disclosed primarily represent an electronics allowance stipend and the tax gross-up on awards through the Company’s Wishlist Rewards Program, a peer-to-peer recognition program, received by each named +executive officer as of December 31 of each applicable fiscal year for specific contributions and demonstrating the Company’s core values. +(7) +At a 65.5% achievement level, Mr. Hutton was entitled to a payout under the 2022 annual cash bonus program +of $337,202. However, Mr. Hutton elected to receive a portion of his 2022 annual cash bonus in the form of an option award under the bonus-to-options program. +Because the 2021 Senior Management Bonus to Equity Plan is a sub-plan of the 2020 Incentive Plan, any grants under the plan are subject to the overall availability of shares for grant under the 2020 Incentive +Plan. As a result, the number of shares of the Company’s common stock subject to each bonus-to-options award granted in 2023 was reduced by 12.1% with such portion +paid in cash. In accordance with Mr. Hutton’s election and the terms of the bonus-to-options program, Mr. Hutton received a cash payment of $114,869 in +respect of his 2022 annual cash bonus, as reflected in this column, and in place of the remaining amount, received an option award representing the right to purchase 435,668 shares of our common stock, the value of which is reflected in the +“Option Awards” column. +(8) +At a 76.7% achievement level, Mr. Hutton was entitled to a payout under the 2021 annual cash bonus program +of $383,643. However, Mr. Hutton elected to receive a portion of his 2021 annual cash bonus in the form of an option award under the bonus-to-options program. In +accordance with Mr. Hutton’s election and the terms of the bonus-to-options program, Mr. Hutton received a cash payment of $95,911 in respect of his 2021 +annual cash bonus, as reflected in this column, and in place of the remaining amount, received an option award representing the right to purchase 85,875 shares of our common stock, the value of which is reflected in the “Option Awards” +column. +(9) +At a 65.5% achievement level, Ms. Harper Cowie was entitled to a payout under the 2022 annual cash bonus +program of $114,897. However, Ms. Harper Cowie elected to receive a portion of her 2022 annual cash bonus in the form of an option award under the bonus-to-options +program. Because the 2021 Senior Management Bonus to Equity Plan is a sub-plan of the 2020 Incentive Plan, any grants under the plan are subject to the overall availability of shares for grant under the 2020 +Incentive Plan. As a result, the number of shares of the Company’s common stock subject to each bonus-to-options award granted in 2023 was reduced by 12.1% with +such portion paid in cash. In accordance with Ms. Harper Cowie’s election and the terms of the bonus-to-options program, Ms. Harper Cowie received a cash +payment of $39,140 in respect of her 2022 annual cash bonus, as reflected in this column, and in place of the remaining amount, received an option award representing the right to purchase 148,448 shares of our common stock, the value of which is +reflected in the “Option Awards” column. +(10) +At a 76.7% achievement level, Ms. Harper Cowie was entitled to a payout under the 2021 annual cash bonus +program of $124,010. However, Ms. Harper Cowie elected to receive a portion of her 2021 annual cash bonus in the form of an option award under the bonus-to-options +program. In accordance with Ms. Harper Cowie’s election and the terms of the bonus-to-options program, Ms. Harper Cowie received a cash payment of $31,002 +in respect of her 2021 annual cash bonus, as reflected in this column, and in place of the remaining amount, received an option award representing the right to purchase 27,758 shares of our common stock, the value of which is reflected in the +“Option Awards” column. +(11) +At a 65.5% achievement level, Mr. Siurek was entitled to a payout under the 2022 annual cash bonus program +of $88,393. However, Mr. Siurek elected to receive a portion of his 2022 annual cash bonus in the form of an option award under the bonus-to-options program. +Because the 2021 Senior Management Bonus to Equity Plan is a sub-plan of the 2020 Incentive Plan, any grants under the plan are subject to the overall availability of shares for grant under the 2020 Incentive +Plan. As a result, the number of shares of the Company’s common stock subject to each bonus-to-options award granted in 2023 was reduced by +2023 Proxy Statement +30 +Table of Contents +12.1% with such portion paid in cash. In accordance with Mr. Siurek’s election and the terms of the +bonus-to-options program, Mr. Siurek received a cash payment of $30,111 in respect of his 2022 annual cash bonus, as reflected in this column, and in place of the +remaining amount, received an option award representing the right to purchase 114,204 shares of our common stock, the value of which is reflected in the “Option Awards” column. +(12) +At a 76.7% achievement level, Mr. Siurek was entitled to a payout under the 2021 annual cash bonus program +of $103,490. However, Mr. Siurek elected to receive 100% of his 2021 annual cash bonus in the form of an option award under the bonus-to-options program. In +accordance with Mr. Siurek’s election and the terms of the bonus-to-options program, Mr. Siurek did not receive any cash payment in respect of his 2021 +annual cash bonus, as reflected in this column, and in place of the total amount, received an option award representing the right to purchase 30,887 shares of our common stock, the value of which is reflected in the “Option Awards” column. +2023 Proxy Statement +31 +Table of Contents +Outstanding Equity Awards at Fiscal 2022 Year-End +The following table presents information regarding the outstanding equity awards held +by each of the named executive officers as of December 31, 2022. As of the year ended December 31, 2022, none of the named executive officers held any outstanding stock awards other than options and RSUs. +Option Awards +Stock Awards +Name +Grant +Date +Number of +Securities +Underlying +Unexercised +Options +(#) Exercisable +Number of +Securities +Underlying +Unexercised +Options +(#) Unexercisable +Equity +Incentive +Plan +Awards: +Number of +Securities +Underlying +Unexercised +Unearned +Options (#) +Option +Exercise +Price +($) +Option +Expiration +Date +Number of +Shares or Units +of Stock That +Have Not Vested +(#) +Market Value +of Shares or +Units of Stock +That Have +Not Vested +($) (8) +Scott Hutton +4/4/2018 +80,022 +4,209 (3) +– +0.42 +4/3/2028 +– +– +3/22/2019 +32,991 +9,124 (2) +– +0.77 +12/31/2028 +– +– +3/22/2019 +16,846 (4) +– +– +0.77 +12/31/2028 +– +– +4/15/2020 +88,445 +63,172 (1) +– +0.77 +4/14/2030 +– +– +2/23/2021 +40,008 (5) +– +– +20.67 +2/22/2031 +– +– +2/23/2021 +93,752 +161,936 (1) +– +20.67 +2/22/2031 +– +– +2/23/2021 +75,195 (5) +– +– +20.67 +2/22/2031 +– +– +2/8/2022 +– +– +– +– +– +158,756 (6) +365,139 +2/8/2022 +– +– +– +– +– +97,696 (7) +224,701 +3/10/2022 +85,875 (5) +– +– +2.29 +3/9/2032 +– +– +Robin Harper Cowie +2/4/2014 +10,107 +– +– +4.40 +2/3/2024 +– +– +4/8/2015 +6,738 +– +– +4.40 +4/7/2025 +– +– +4/7/2016 +35,377 +– +– +0.84 +4/6/2026 +– +– +4/4/2018 +3,859 +350 (1) +– +0.42 +4/3/2028 +– +– +3/22/2019 +27,717 +7,660 (2) +– +0.77 +12/31/2028 +– +– +3/22/2019 +11,792 (4) +– +– +0.77 +12/31/2028 +– +– +4/15/2020 +17,698 +12,625 (1) +– +0.77 +4/14/2030 +– +– +2/23/2021 +24,839 (5) +– +– +20.67 +2/22/2031 +– +– +2/23/2021 +22,528 +38,911 (1) +– +20.67 +2/22/2031 +– +– +2/23/2021 +46,685 (5) +– +– +20.67 +2/22/2031 +– +– +2/8/2022 +– +– +– +– +– +41,038 (6) +94,387 +2/8/2022 +– +– +– +– +– +25,254 (7) +58,084 +3/10/2022 +27,758 (5) +– +– +2.29 +3/9/2032 +– +– +Ryan Siurek +1/7/2021 +18,000 +27,000 (3) +– +19.16 +1/6/2031 +– +– +2/8/2022 +– +– +– +– +– +17,340 (6) +39,882 +2/8/2022 +– +– +– +– +– +10,670 (7) +24,541 +2/8/2022 +– +– +– +– +– +7,707 (6) +17,726 +3/10/2022 +30,887 (5) +– +– +2.29 +3/9/2032 +– +– +(1) +These stock options vest in a series of 60 successive, equal monthly installments measured from the vesting +commencement date. +(2) +Two fifths of these time-vested options vest on the second anniversary of the vesting commencement date, with +the remaining balance vesting in a series of 36 successive equal monthly installments measured from the second anniversary of the vesting commencement date, subject to the award recipient’s continued employment through the applicable vesting +date. In September 2020, the board of directors amended these time-vested options such that 21/60 of the time-vested options vest on the date that is 21 months after the vesting commencement date, with the remaining balance vesting in a series of 39 +successive equal monthly installments measured from such date, subject to the award recipient’s continued employment through the applicable vesting date. +(3) +Two fifths of these time-vested options vest on the second anniversary of the vesting commencement date, with +the remaining balance vesting in a series of 36 successive equal monthly installments measured from the second anniversary of the vesting commencement date, subject to the award recipient’s continued employment through the applicable vesting +date. +2023 Proxy Statement +32 +Table of Contents +(4) +In the year ended December 31, 2019, the board of directors awarded Mr. Hutton and Ms. Harper +Cowie performance-vested options representing the right to purchase 25,269 and 17,688 shares of our common stock, respectively. One third of these performance-vested options were eligible to vest after each of the first, second and third +anniversaries of the vesting commencement date, subject to the Company’s achievement of recognized revenue of at least $31 million, $67 million and $134 million for the years ended December 31, 2019, 2020 and 2021, +respectively. The board of directors has sole discretion to determine if the performance hurdles are met and to determine the vesting date, and shall make such determinations within 90 days after the end of the applicable fiscal year. For the 2019 +tranche, the board of directors determined that the performance hurdle was not met. As a result, one third of each of Mr. Hutton’s and Ms. Harper Cowie’s awards were cancelled, and two thirds of each of Mr. Hutton’s and +Ms. Harper Cowie’s awards remained outstanding. In addition, in September 2020 and in light of the impact of the COVID-19 pandemic on the Company’s operations and other considerations, the board +of directors amended the performance-vested options to adjust the performance hurdles for the 2020 tranche and the 2021 tranche to $28.6 million and $51.5 million, respectively. For each of the 2020 tranche and the 2021 tranche, the board +of directors determined that the applicable performance hurdles were met and one third of each of Mr. Hutton’s and Ms. Harper Cowie’s performance-vested option award became fully vested and exercisable on January 1, 2021 and +January 1, 2022, respectively. +(5) +100% vested at Date of Grant. +(6) +These time-vested RSUs vest in a series of 16 successive equal quarterly installments measured from the vesting +commencement date, subject to the award recipient’s continued employment through the applicable vesting date. +(7) +These time-vested RSUs vest in a series of six successive equal quarterly installments measured from the +vesting commencement date, subject to the award recipient’s continued employment through the applicable vesting date. +(8) +The dollar amount is calculated based on $2.30 per share, the closing price of our common stock on December 30, +2022. +Additional Matters +Hutton Offer Letter +Mr. Hutton and the Company entered into an offer letter agreement, dated as of February 23, 2020 (the “2020 Hutton Offer +Letter”). Under the terms of the 2020 Hutton Offer Letter, effective January 1, 2020, Mr. Hutton’s base salary was raised to $350,000 annually. Effective November 2020, Mr. Hutton’s base salary was further adjusted to +$425,000 annually, and he became eligible to receive a bonus of up to 100% of his base salary. +In addition, Mr. Hutton is entitled +to certain severance benefits in the event that his employment with the Company is terminated by the Company without Cause, as defined in the 2020 Hutton Offer Letter, including but not limited to a termination by the Company following a change in +control. The severance benefits consist of (i) base salary continuation for a period of 12 months following the effective date of a general release of claims, less standard deductions and withholdings, (ii) payout of target bonus previously +established by the compensation committee and (iii) if Mr. Hutton timely elects healthcare continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), Company-paid COBRA premiums +(including in respect of coverage for eligible dependents) for a period starting on Mr. Hutton’s termination date and ending 12 months thereafter, subject to earlier termination if Mr. Hutton becomes eligible for health coverage from +a subsequent employer, or if Mr. Hutton ceases to be eligible for COBRA continuation for any reason including plan termination. Any change in control which results in a change of position for Mr. Hutton also results in accelerated vesting of +100% of all unvested and then outstanding options held by Mr. Hutton. In order to receive the severance benefits, Mr. Hutton is required to execute and allow to become effective a release of all claims in favor of the Company, which becomes +irrevocable, and to be in continued compliance with any cooperation, non-disparagement or confidentiality provisions contained therein and with obligations under the Company’s Confidentiality and +Inventions Assignment Agreement, including non-solicit provisions thereof. +2023 Proxy Statement +33 +Table of Contents +Pursuant to the 2020 Hutton Offer Letter, in the event Mr. Hutton resigned, or if his +employment was terminated by the Company for Cause or due to death or disability, Mr. Hutton would be entitled to any salary earned but unpaid prior to such termination, any reimbursable business expenses that were incurred but not reimbursed +as of Mr. Hutton’s last day of employment, and, if applicable, all accrued but unused vacation. Any unvested stock options or other equity awards would cease to vest on Mr. Hutton’s last day of employment. +Effective March 1, 2021, our board of directors approved an increase in Mr. Hutton’s base salary to $515,000 to reward him at a +level that is commensurate with public company peers and to provide incentives that properly reflect his current duties and responsibilities. +Harper Cowie Offer Letter +Ms. Harper Cowie and the Company entered into an offer letter agreement, dated as of February 23, 2020 (the “2020 Harper Cowie +Offer Letter”). Under the terms of the 2020 Harper Cowie Offer Letter, Ms. Harper Cowie is entitled to a base salary of $290,000 annually effective November 2020, and she is eligible to receive a bonus of up to 50% of her base salary after +approval from the compensation committee and board of directors that relevant objectives have been achieved. In addition, Ms. Harper Cowie is entitled to certain severance benefits in the event that her employment with the Company is terminated +without Cause by the Company, as defined in the 2020 Harper Cowie Offer Letter, including but not limited to a termination by the Company following a change in control. The severance benefits consist of (i) base salary continuation for a period +of six months following the effective date of a general release of claims, less standard deductions and withholdings, and (ii) if Ms. Harper Cowie timely elects healthcare continuation coverage under COBRA, Company-paid COBRA premiums +(including in respect of coverage for eligible dependents) for a period starting on Ms. Harper Cowie’s termination date and ending 12 months thereafter, subject to earlier termination if Ms. Harper Cowie becomes eligible for health +coverage from a subsequent employer, or if Ms. Harper Cowie ceases to be eligible for COBRA continuation for any reason including plan termination. Any change in control which results in a change of position for Ms. Harper Cowie also +results in accelerated vesting of 100% of all unvested and then outstanding options held by Ms. Harper Cowie. In order to receive the severance benefits, Ms. Harper Cowie is required to execute a release of all claims in favor of the +Company which becomes irrevocable, and to be in continued compliance with cooperation, non-disparagement or confidentiality provisions contained therein and with obligations under the Company’s +Confidentiality and Inventions Assignment Agreement, including non-solicit provisions thereof. +Pursuant to the 2020 Harper Cowie Offer Letter, in the event Ms. Harper Cowie resigns, or if her employment is terminated by the Company +for Cause or due to death or disability, Ms. Harper Cowie would be entitled to any salary earned but unpaid prior to such termination, any reimbursable business expenses that were incurred but not reimbursed as of Ms. Harper Cowie’s +last day of employment, and, if applicable, all accrued but unused vacation. Any unvested stock options or other equity awards shall cease to vest and be forfeited on Ms. Harper Cowie’s last day of employment. +Effective March 1, 2021 and 2022, our board of directors approved increases in Ms. Harper Cowie’s base salary to $330,000 and +$355,000, respectively, to reward her at a level that is commensurate with public company peers and to provide incentives that properly reflect her current duties and responsibilities. +401(k) Plan +The +Company participates in a multiple employer tax-qualified 401(k) savings plan which allows participants to defer eligible compensation up to the maximum amount allowed under Internal Revenue Service +guidelines. The Company does not currently make any discretionary or employer matching contributions under the plan. +2023 Proxy Statement +34 +Table of Contents +STOCK OWNERSHIP +Security Ownership of Certain Beneficial Owners and Management +The following table sets forth certain information with respect to the beneficial ownership of our common stock as of March 3, 2023: +• +each of our named executive officers; +• +each of our directors; +• +all of our directors and executive officers as a group; and +• +each person, or group of affiliated persons, known by us to beneficially own more than 5% of our common stock. +We have determined beneficial ownership in accordance with the rules of the SEC, and therefore it represents sole or +shared voting or investment power with respect to our securities. Unless otherwise indicated below, to our knowledge, the persons and entities named in the table have sole voting and sole investment power with respect to all shares that they +beneficially owned, subject to community property laws where applicable. We have deemed shares of common stock subject to options that are currently exercisable or exercisable within 60 days of March 3, 2023 and RSUs representing the right to +receive shares of common stock that were deferred under the Director Deferred Compensation Plan or that vest within 60 days of March 3, 2023, to be outstanding and to be beneficially owned by the person holding the option or restricted stock +unit for the purpose of computing the percentage ownership of that person but have not treated them as outstanding for the purpose of computing the percentage ownership of any other person. +We have based percentage ownership of common stock on 77,974,979 shares of common stock outstanding as of March 3, 2023. Unless otherwise +indicated, the address for each beneficial owner listed in the table below is c/o Biodesix, Inc., 2970 Wilderness Place, Suite 100, Boulder, Colorado 80301. +Shares Beneficially +Owned +Name and Address of Beneficial Owner +Shares +% +Principal Stockholders: +Jack Schuler and entities affiliated with Jack Schuler (1) +20,586,002 +26.3 +% +Lawrence T. Kennedy, Jr. and entities affiliated with Lawrence T. Kennedy, Jr. (2) +14,854,812 +19.0 +% +John Patience and entities affiliated with John Patience (3) +7,216,508 +9.2 +% +AIGH Capital Management LLC (4) +5,568,901 +7.1 +% +Matthew Strobeck and entities affiliated with Matthew Strobeck (5) +5,223,324 +6.7 +% +Directors and Executive Officers: +Jack Schuler (6) +20,586,002 +26.3 +% +Lawrence T. Kennedy, Jr. (7) +14,854,812 +19.0 +% +John Patience (8) +7,216,508 +9.2 +% +Matthew Strobeck, Ph.D. (9) +5,223,324 +6.7 +% +Scott Hutton (10) +1,195,928 +1.5 +% +Robin Harper Cowie (11) +502,740 +* +Jon Faiz Kayyem, Ph.D. (12) +383,281 +* +Hany Massarany (13) +366,360 +* +Charles Watts, M.D. (14) +317,731 +* +Jean Franchi (15) +218,816 +* +Ryan Siurek (16) +202,895 +* +All directors and named executive officers as a group (13 persons) +51,459,362 +63.8 +% +* +Represents beneficial ownership of less than 1%. +2023 Proxy Statement +35 +Table of Contents +(1) +Consists of (a) 46,102 shares of common stock issuable upon the exercise of options held by Jack Schuler that +are vested and exercisable within 60 days of March 3, 2023, (b) RSUs held by Mr. Schuler representing the right to receive 150,711 shares of common stock that will vest within 60 days of March 3, 2023 and be deferred under the +Director Deferred Compensation Plan until separation from service to the Company, and (c) 20,389,189 shares of common stock held by Jack W. Schuler Living Trust +(2) +Consists of (a) 9,148,889 shares of common stock held by Lawrence T. Kennedy, Jr. Revocable Trust UAD 6/19/01 +and as amended from time to time, (b) 4,355,914 shares of common stock held by Lawrence T. Kennedy, Jr. Perpetuity Trust UAD 6/30/16, (c) 166,666 shares of common stock held by KFDI-B LLC, (d) 1,155,935 shares +of common stock held by Lair BDSX GRAT 2022-03-02, and (e) RSUs held by Mr. Kennedy representing the right to receive 27,408 shares of common stock that will +vest within 60 days of March 3, 2023 and be deferred under the Director Deferred Compensation Plan. +(3) +Consists of (a) 337,926 shares of common stock held directly by John Patience, (b) 46,102 shares of common +stock issuable upon the exercise of options held by Mr. Patience that are vested and exercisable within 60 days of March 3, 2023, (c) RSUs held by Mr. Patience representing the right to receive 150,711 shares of common stock that will +vest within 60 days of March 3, 2023 and be deferred under the Director Deferred Compensation Plan until separation from service to the Company, (d) 2,078,298 shares of common stock held by Patience Enterprises LP, (e) 4,550,483 shares of +common stock held by John Patience Living Trust, dated July 23, 1993, and (f) 52,988 shares of common stock held by Diane Patience. +(4) +Based on information reported in a Schedule 13G filed with the SEC on March 21, 2023, jointly by Orin +Hirschman, AIGH Capital Management, LLC (“AIGH CM”) and AIGH Investment Partners, L.L.C. (“AIGH LLC”), reporting sole voting power and sole dispositive power over 5,568,901 shares of common stock as of November 21, 2022. +This amount consists of shares of common stock indirectly beneficially owned by AIGH CM, as an Advisor or Sub-Advisor to AIGH Investment Partners, L.P., WVP Emerging Manger Onshore Fund, LLC – AIGH Series +and WVP Emerging Manger Onshore Fund, LLC – Optimized Equity Series, and directly held by AIGH LLC. Mr. Hirschman serves as Managing Member to AIGH CM and president of AIGH LLC and, in such capacities, may be deemed to indirectly +beneficially own the shares of common stock held indirectly through AIGH CM, directly by AIGH LLC and directly by Mr. Hirschman and his family. The address of each of AIGH CM, AIGH LLC and Mr. Orin Hirschman is 6006 Berkley Avenue, +Baltimore, MD 21209. +(5) +Consists of (a) 11,717 shares of common stock issuable upon the exercise of options held by Dr. Matthew +Strobeck that are vested and exercisable within 60 days of March 3, 2023, (b) RSUs held by Dr. Strobeck representing the right to receive 151,930 shares of common stock that will vest within 60 days of March 3, 2023 and be deferred +under the Director Deferred Compensation Plan until separation from service to the Company, (c) 2,415,151 shares of common stock held by Dr. Strobeck, (d) 2,135,076 shares of common stock held by Birchview Fund LLC, (e) 19,933 shares of common +stock held by Birchview Capital Separately Managed Account, (f) 40,665 shares of common stock held by Clajer Capital LLC and (g) 112,213 shares of common stock held in each of four UTMA accounts (for an aggregate amount of 448,852 shares). +(6) +Consists of 20,586,002 shares beneficially owned by Jack Schuler and entities affiliated with Mr. Schuler, +as set forth in footnote (1). +(7) +Consists of 14,854,812 shares beneficially owned by Lawrence T. Kennedy, Jr. and entities affiliated with +Mr. Kennedy, as set forth in footnote (2). +(8) +Consists of 7,216,508 shares beneficially owned by John Patience and entities affiliated with +Mr. Patience, as set forth in footnote (3). +(9) +Consists of 5,223,324 shares beneficially owned by Dr. Matthew Strobeck and entities affiliated with +Dr. Strobeck, as set forth in footnote (4). +(10) +Consists of (a) 986,202 shares of common stock issuable upon the exercise of options held by Scott Hutton that +are vested and exercisable within 60 days of March 3, 2023, and (b) 209,726 shares of common stock held by Mr. Hutton. +(11) +Consists of (a) 393,465 shares of common stock issuable upon the exercise of options held by Robin Harper Cowie +that are vested and exercisable within 60 days of March 3, 2023, and (b) 109,275 shares of common stock held by Ms. Harper Cowie. +2023 Proxy Statement +36 +Table of Contents +(12) +Consists of (a) 27,038 shares of common stock issuable upon the exercise of options held by Dr. Jon Faiz +Kayyem that are vested and exercisable within 60 days of March 3, 2023, (b) RSUs held by Dr. Kayyem representing the right to receive 150,711 shares of common stock that will vest within 60 days of March 3, 2023, of which 4,878 shares +of common stock will be deferred under the Director Deferred Compensation Plan until separation from service to the Company, (c) 173,913 shares of common stock held by The Jon Faiz Kayyem Revocable Trust, for which Dr. Kayyem and his spouse +serve as co-trustees, and (d) 31,619 shares of common stock held by Dr. Kayyem. Dr. Kayyem disclaims beneficial ownership of the shares held by The Jon Faiz Kayyem Revocable Trust. +(13) +Consists of (a) 60,946 shares of common stock issuable upon the exercise of options held by Hany Massarany that +are vested and exercisable within 60 days of March 3, 2023, (b) RSUs held by Mr. Massarany representing the right to receive 152,540 shares of common stock that will vest within 60 days of March 3, 2023, of which 6,707 shares of +common stock will be deferred under the Director Deferred Compensation Plan until separation from service to the Company, (c) RSUs held by Mr. Massarany representing the right to receive 14,940 shares of common stock which are vested and will +generally settle in shares of common stock on the earlier of July 1, 2025 and separation from service to the Company, and (d) 137,934 shares of common stock held by Mr. Massarany. +(14) +Consists of (a) 95,910 shares of common stock issuable upon the exercise of options held by Dr. Charles Watts +that are vested and exercisable within 60 days of March 3, 2023, (b) RSUs held by Dr. Watts representing the right to receive 150,711 shares of common stock that will vest within 60 days of March 3, 2023, (c) RSUs held by Dr. Watts +representing the right to receive 19,777 shares of common stock which are vested and will generally settle in shares of common stock on the earlier of July 16, 2024 and separation from service to the Company, and (d) 51,333 shares of common stock +held by Dr. Watts. +(15) +Consists of (a) 29,363 shares of common stock issuable upon the exercise of options held by Jean Franchi that +are vested and exercisable within 60 days of March 3, 2023, (b) RSUs held by Ms. Franchi representing the right to receive 153,150 shares of common stock that will vest within 60 days of March 3, 2023 and be deferred under the +Director Deferred Compensation Plan until separation from service to the Company, (c) RSUs held by Ms. Franchi representing the right to receive 16,259 shares of common stock which are vested and will generally settle in shares of common stock on +the earlier of April 1, 2025 and separation from service to the Company, and (d) 20,044 shares of common stock held by Ms. Franchi. +(16) +Consists of (a) 166,091 shares of common stock issuable upon the exercise of options held by Ryan Siurek that +are vested and exercisable within 60 days of March 3, 2023, and (b) 36,804 shares of common stock held by Mr. Siurek. +Delinquent Section 16(a) Reports +Based solely on a review of the +Section 16(a) reports filed electronically with the SEC, and written representations from our directors and executive officers that no other reports were required, all reports filed by or on behalf of our directors +and executive officers and any persons holding more than ten percent of our common stock were filed on a timely basis under Section 16(a), other than an inadvertent late reporting of two transactions on one Form 4 for Lawrence T. Kennedy, Jr., +one of our directors. +2023 Proxy Statement +37 +Table of Contents +AUDIT MATTERS +Proposal Two: Ratification of Appointment of Independent Registered Public Accounting Firm +Our audit committee has appointed KPMG LLP as our independent registered public accounting firm for the year ending December 31, 2023. +Although stockholder ratification of the appointment of KPMG LLP is not required by our bylaws, other governing documents or the law, our board of directors considers the appointment of our independent registered public accounting firm to be an +important matter of stockholder concern and is submitting the appointment of KPMG LLP for ratification by our stockholders as a matter of good corporate practice. If our stockholders fail to ratify the appointment, our audit committee will review +its future selection of KPMG LLP as its independent registered public accounting firm. Even if the appointment is ratified, our audit committee, in its discretion, may direct the appointment of a different independent registered public accounting +firm at any time during the year if they determine that such a change would be in the best interests of the Company and our stockholders. +Our board of directors considers the appointment of KPMG LLP as our independent registered public accounting firm for 2023 to be in the best +interests of the Company and our stockholders. We expect representatives of KPMG LLP to attend the Annual Meeting. They will have an opportunity to make a statement if they wish and will be available to respond to appropriate questions from +stockholders. +KPMG LLP has served as our independent registered public accounting firm since 2016. +Principal Accountant Fees and Services +The following is a summary of the fees and services provided by KPMG LLP to us for the years ended December 31, 2022 and 2021. +Year Ended December 31, +2022 +2021 +Audit Fees (1) +$ +408,415 +$ +408,618 +Audit-Related Fees +$ +- +$ +- +Tax Fees +$ +- +$ +- +All Other Fees +$ +- +$ +- +Total +$ +408,415 +$ +408,618 +(1) +Audit Fees consist of professional services rendered by KPMG LLP for the audits of our annual financial +statements and reviews of quarterly financial statements. +Pre-Approval +Policies and Procedures +Our audit committee is responsible for appointing, setting compensation for, and overseeing the work of +our independent registered public accounting firm. Our audit committee’s charter establishes a policy that all audit and permitted non-audit and tax services to be provided by our independent registered +public accounting firm must be pre-approved by our audit committee. Our audit committee has pre-approved all such audit and permissible +non-audit and tax services in accordance with this policy for the years ended December 31, 2022 and 2021. As part of this review, our audit committee considers whether the provision of any such non-audit or tax services by KPMG LLP is compatible with maintaining the independence of our independent registered public accounting firm. +2023 Proxy Statement +38 +Table of Contents +Our audit committee may delegate authority to +pre-approve services to one or more of its members, provided any decisions made by such member to grant pre-approvals must be presented to the full audit committee at +its next scheduled meeting. +Vote Required: +Ratification of the appointment of KPMG LLP as our independent registered public accounting firm for 2023 requires the affirmative vote of a majority of the shares present or represented by proxy and entitled to vote +at the Annual Meeting. Abstentions have the same impact as votes “Against” the proposal. Brokers have discretion to vote on this proposal. +Board Recommendation: +OUR BOARD OF DIRECTORS AND THE AUDIT COMMITTEE OF OUR BOARD OF DIRECTORS EACH UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS OUR INDEPENDENT REGISTERED +PUBLIC ACCOUNTING FIRM FOR 2023. +Report of the Audit Committee +The audit committee oversees our independent registered public accounting firm and assists our board of directors in fulfilling its oversight +responsibilities on matters relating to the integrity of our financial statements, our compliance with legal and regulatory requirements and the independent registered public accounting firm’s qualifications and independence by meeting +regularly with the independent registered public accounting firm and financial management personnel. Management is responsible for the preparation, presentation and integrity of our financial statements. +In fulfilling its oversight responsibilities, the audit committee: +• +reviewed and discussed our financial statements as of and for the year ended December 31, 2022 with +management and KPMG LLP; +• +discussed with KPMG LLP the matters required to be discussed by the applicable requirements of the Public Company +Accounting Oversight Board and the SEC; +• +received the written disclosures and the letter from KPMG LLP required by the applicable requirements of the +Public Company Accounting Oversight Board; and +• +discussed the independence of KPMG LLP with that firm. +Based on the audit committee’s review and discussions noted above, the audit committee recommended to our board of directors, and our +board of directors approved, that the audited financial statements be included in the 2022 Form 10-K Report for filing with the SEC. The audit committee also appointed KPMG LLP as our independent registered +public accounting firm for the fiscal year ending December 31, 2023. +Submitted by the audit committee of our board +of directors: +Jean Franchi, Chair +Lawrence T. Kennedy, Jr. +Hany Massarany +Matthew Strobeck, Ph.D. +2023 Proxy Statement +39 +Table of Contents +COMPENSATORY MATTERS +Proposal Three: Approval of the Stock Option Exchange Program +General +We have decided to seek +stockholder approval of a proposed one-time option exchange for current employees of the Company that would allow these employees to exchange certain stock options that are substantially “out-of-the-money” (meaning the outstanding stock options that have an exercise price that is substantially greater than the +current market price of our stock) (also known as “underwater” stock options) for new stock options (Option Exchange) that will be exercisable for fewer shares of our common stock and will have an exercise price equal to the fair market +value of our common stock on the new grant date, as well as new vesting requirements and a new expiration date. +On March 1, 2023, +our board of directors authorized the Option Exchange for eligible stock options, which generally includes any stock option held by an eligible employee that has an exercise price greater than $10.00 per share pursuant to our 2020 Incentive Plan. +Non-employee members of our board of directors are not eligible to participate in the Option Exchange. +As of March 1, 2023, +we had outstanding stock options held by eligible employees to purchase 3,376,227 shares of our common stock with a weighted average exercise price of $6.56 per share. Of these stock options, there were 856,713 shares with an exercise +price greater than $10.00 per share, with a weighted average exercise price of $20.37 per share, that would be considered eligible for purposes of the Option Exchange. +The Option Exchange, if approved by stockholders, is anticipated to commence as soon as practical after June 23, 2023. The Company’s +stock price on June 23, 2022 was $1.39 per share and the 52-week high through March 24, 2023 was $2.89 per share, which is approximately 86% and 71%, respectively, below the $10.00 per share threshold exercise price of the eligible stock +options. In addition, the $10.00 per share threshold exercise price of the eligible stock options is approximately 400% above the closing price of $2.00 per share of our common stock on The Nasdaq Global Select Market on March 1, 2023, the date +on which our board of directors authorized the Option Exchange. Stock options eligible for surrender will have been granted at least one year prior to the commencement of the Option Exchange. Further, 100% of the stock options eligible for surrender +were granted prior to December 31, 2021. +Stockholder-Friendly Design +In discussing strategies to address our +out-of-the-money stock options, we focused on creating a strategy that is compatible with the interests of our stockholders and +the Company. The board of directors believes that an Option Exchange was preferrable to other alternatives considered as it would address the “overhang” of eligible stock options as well as provide a value-neutral exchange that strikes an +appropriate balance of employee and stockholder interests. The board of directors believes that the benefits of the proposed Option Exchange is a more cost-effective and stockholder-friendly retention and incentive tool than simply paying additional +cash compensation in order to effectively retain and motivate our employees. In particular, the proposed Option Exchange will: +• +Provide a better incentive and motivation to employees than their existing underwater options; +• +Reduce the overhang (meaning potential shares committed but unissued) by 615,109 awards to the 2020 Incentive +Plan pool by granting fewer new options at a lower exercise price; +• +Provide a “value for value” exchange, meaning that the accounting fair value of the replacement options +granted will be approximately equal to the fair value of the options that are surrendered, such that the exchange does not result in a windfall to the participants; +• +Add retention value by extending the vesting requirements of newly issued awards; +• +Maintain existing non-cash compensation expense given that the fair value of awards surrendered will approximate +the value of new awards issued; and +2023 Proxy Statement +40 +Table of Contents +• +Enable the Company to devote more of our cash resources toward the growth of core lung diagnostic and biopharma +services business as compared to additional cash compensation. +We believe that these design features, among others, +mean that the proposed Option Exchange is aligned with the interests of our stockholders and Company. +Background and Rationale for Option Exchange +Since our initial public offering (IPO) in October 2020, our stock closed as high as $31.21 (January 20, 2021) and subsequent +declines in our stock price steadily eroded the retentive and incentive value of stock options granted. We have been thoughtfully considering the idea of an Option Exchange since 2022. In early 2022, we began internal discussions to consider various +ways to better incentivize and retain employees to continue our growth-oriented goals and objectives. We evaluated several alternatives to the Option Exchange for remaining competitive within our industry and with our employees, including granting +additional stock options or RSUs, exchanging underwater options for full value shares or exchanging underwater options for a cash payment. Granting additional stock options or RSUs would cause dilution to our current stockholders and increasing cash +compensation would reduce the cash resources we can devote towards our ongoing operating needs and strategic plans for organic growth. We also carefully considered who would be eligible to participate in the Option Exchange. Non-employee members of +our board of directors are not eligible to participate in the Option Exchange. In order to reduce the overhang and provide retention and motivation to all employees, though, we have decided that executive officers should be eligible to participate +in the Option Exchange, as they currently hold approximately 70% of outstanding equity awards. As such, if we were to exclude them from participating, we may not fully achieve the objectives of the program with respect to retention and dilution. The +Company has engaged a compensation consulting firm, Pearl Meyer, to review and evaluate the equity compensation alternatives available to Biodesix. In addition, because our stock price has been under pressure, our remaining share pool availability +has been substantially reduced from prior years, which reduces our ability to remain competitive in the recruitment and retention of key talent using the equity component of our compensation programs. Accordingly, we determined that the Option +Exchange was the most attractive alternative for stockholders for the reasons set forth below. +Performance Incentives +We face significant competition for experience and talented personnel in our industry, and stock options are an important part of the +incentive compensation offered to our employees. The price of our common stock has decreased significantly since March 1, 2021. While we have made significant progress in our core lung diagnostic business, including continued sales growth +and payor reimbursement for clinical diagnostics testing, the price of our common stock remains relatively low. On March 1, 2023, the closing price of our common stock on The Nasdaq Global Select Market was $2.00 per share, resulting in +approximately 39% of our outstanding stock options held by eligible employees being underwater, which means that the stock option exercise price or exceeded the market price of our common stock on such date. Our compensatory stock options cannot be +sold. They can either be voluntarily exercised or they will expire unexercised. Underwater stock options are viewed by us as less effective performance incentives because they provide less or no perceived value to employee option holders. Because +many of our options are significantly underwater, we believe the likelihood that there will be a positive spread between their exercise prices and the near-term price of our common stock is too low to provide meaningful incentive to employee option +holders. +Employee Retention +The Option Exchange would restore equity value, increase retention and motivation, provide non-cash +compensation incentives and better align our employee and stockholder interests for long-term growth. Underwater stock option awards are of limited benefit in motivating and retaining our employees. Through the Option Exchange, we believe that we +will be able to enhance long-term stockholder value by increasing our ability to retain experienced and talented employees and by better aligning the interests of these employees with the interests of our stockholders. As of March 1, 2023, +approximately 39% of our outstanding stock options held +2023 Proxy Statement +41 +Table of Contents +by eligible employees were underwater, and for a large number of our employees, significantly so. As a result, we may face a considerable challenge in retaining our employees, and there is a +possibility that our competitors may be able to offer equity incentives that are more attractive and that, in some cases, could make the terms of employment at a new employer more attractive than what we are able to offer to our existing employees. +The Option Exchange is designed to address these concerns as well as improve morale among our employees. +As discussed in more detail +below, none of the new stock options issued under the Option Exchange will be vested on the date of grant. Stock options issued in the Option Exchange that were vested prior to the Option Exchange will vest on the first day of the first month +following the first anniversary of the month in which the Option Exchange is completed, subject to the applicable employee’s continued services through the vesting date. Eligible stock options that were unvested prior to the Option Exchange may +be exchanged for new stock options with an extended vesting schedule. Under the extended vesting schedule , vesting will commence on the first day of the first month following the first anniversary of the month in which the Option Exchange is +completed, and will occur in a series of equal monthly installments over the number of months that were remaining in the surrendered option’s vesting schedule immediately prior to the Option Exchange, subject to the applicable employee’s +continued services through each vesting date. Our board of directors believes that implementing a new, extended vesting schedule is appropriate because it further encourages the retention of employees over the vesting period. +Impact on Compensation Expense +The value of the stock options eligible for exchange was based on the then fair market value of our common stock on the applicable grant date. +Under the applicable accounting rules, a total of approximately $11.3 million in non-cash compensation expense will be recognized related to eligible underwater stock options ($7.3 million has been +recognized as expense through March 1, 2023), $4.0 million of which we will continue to be obligated to recognize over the vesting period of the new stock options as non-cash compensation expense, even if these stock options are never exercised +because they remain underwater, except to the extent any such options are cancelled due to termination of service of any eligible employee prior to vesting. Replacing current stock options that have little or no retention or incentive value with new +stock options that will provide both retention and incentive value while not creating significant additional compensation expense will make efficient use of our resources. +Reduce Stock Option Overhang +Under the Option Exchange, eligible participants will receive new stock options covering a reduced number of shares that are covered by the +surrendered stock options. Therefore, if we implement and eligible employees participate in the Option Exchange, we would expect a meaningful reduction in the number of outstanding stock options. The number of shares covered by the new stock options +will be based on exchange ratios developed using a Black-Scholes calculation that values the old grant relative to the projected value of the new grant, such that the new stock options will have a fair value, on an aggregate basis, approximately +equivalent to the fair value of the eligible stock options they replace on the grant date of the new stock options. Our board of directors, in consultation with Pearl Meyer, established an approach to determining the exchange ratios, which will vary +based on the original exercise price of the eligible stock option, as further described in the section titled “Exchange Ratios” below. Any options tendered in the Option Exchange and which are not reissued as part of the Option Exchange +will be available for future grant under our 2020 Incentive Plan pursuant to the share recycling provisions of the 2020 Incentive Plan. +As of March 1, 2023, we had outstanding stock options held by eligible employees to purchase 3,376,227 shares of our common stock, with a +range in exercise prices from $0.42 to $20.67 per share, of which 856,713 shares (approximately 25%) of common stock subject to such outstanding stock options had an exercise price in excess of $10.00 per share. As a result, a significant +portion of our stock option “overhang” consists of outstanding but unexercised stock options that are not serving their intended purpose of motivating and retaining employees. Not only do the underwater stock options have diminished +employee retentive value, but they also cannot be removed from our equity plan overhang until they are exercised, expire or are otherwise cancelled (for example, upon termination of an employee’s service with the Company). By replacing eligible +stock options +2023 Proxy Statement +42 +Table of Contents +through the Option Exchange, we estimate that we can reduce our outstanding stock options by 615,109 shares or 18% of common stock subject to outstanding stock options held by eligible employees. +Alternatives Considered +Our board +of directors considered alternatives to the Option Exchange to provide meaningful performance and retention incentives to our employees, including granting additional stock options or RSUs, exchanging underwater options for full value shares or +exchanging underwater options for a cash payment. After careful consideration, our board of directors determined that, compared to other alternatives, the Option Exchange provides better performance and retention incentives, and reduces overhang of +outstanding options, all at a lower cost to the Company. +Structure of Option Exchange +The board of directors authorized the Option Exchange on March 1, 2023, subject to stockholder approval. We currently plan to commence +the Option Exchange on a date as soon as practicable following June 23, 2023, or the Commencement Date. At the start of the Option Exchange, employees holding eligible stock options will receive a written exchange offer that will set forth the +terms of the Option Exchange. The written offer will be governed by the tender offer rules of the SEC. At or before the Commencement Date, we will file the offer to exchange and other related documents with the SEC as part of a tender offer +statement on Schedule TO. We will give eligible option holders at least 20 business days to elect to participate in the Option Exchange. Eligible option holders may choose which eligible option grants they wish to exchange and may choose to not +exchange portions of eligible option grants. Set forth below is a description of the key features of the Option Exchange. +Eligible Participants +The Option Exchange will be available to employees who on the Commencement Date are employed by us and hold outstanding eligible +stock options. Non-employee members of our board of directors are not eligible to participate in the Option Exchange. As of March 1, 2023, eligible stock options were held by 119 employees, representing approximately 48% of our employees. +Participants in the Option Exchange must continue to be employed by us on the date the surrendered options are cancelled and replacement stock options are granted. Any employee holding eligible stock options who elects to participate in the Option +Exchange, but whose service with us terminates for any reason before the date the new stock options are granted, including due to voluntary resignation, retirement, involuntary termination, layoff, death or disability, would retain his or her +eligible stock options subject to their existing terms and would not be eligible to receive new stock options in the Option Exchange. +Eligible +Stock Options +An eligible stock option generally includes any stock option held by an eligible employee that has an exercise +price greater than $10.00 per share pursuant to our 2020 Incentive Plan. +As of March 1, 2023, we had eligible outstanding stock +options to purchase 856,713 shares of common stock under our 2020 Incentive Plan at a weighted-average exercise price of $20.37 per share and with a weighted-average remaining life of approximately eight years. These eligible stock options +represent approximately 25% of the issued and outstanding shares of our common stock subject to outstanding stock options held by eligible employees as of March 1, 2023. If all of these eligible stock options are exchanged and replaced by new +stock options in accordance with the exchange ratios described below under the section heading “Exchange Ratios,” the number of outstanding stock options under our 2020 Incentive Plan would be reduced by 615,109 shares, representing +approximately 18% of the 3,376,227 shares of common stock subject to outstanding stock options held by eligible employees as of March 1, 2023. Pursuant to the share recycling provisions including in the 2020 Incentive Plan, all +615,109 shares subject to such exchanged options would be recycled back into the 2020 Incentive Plan and would be available for future grants in accordance with the terms of the 2020 Incentive Plan. +2023 Proxy Statement +43 +Table of Contents +The Option Exchange, if approved by stockholders, is anticipated to commence as soon as +practical after June 23, 2023. The Company’s stock price on June 23, 2022 was $1.39 per share, which is approximately 86% below the $10.00 per share threshold exercise price of the eligible stock options. In addition, the $10.00 per +share threshold exercise price of the eligible stock options is approximately 400% above the closing price of $2.00 per share of our common stock on The Nasdaq Global Select Market on March 1, 2023, the date on which our board of directors +authorized the Option Exchange. Stock options eligible for surrender will have been granted at least one year prior to the commencement of the Option Exchange. Further, 100% of the eligible stock options for surrender were granted prior to +December 31, 2021. +Exchange Ratios; Exercise Price of New Options +The Option Exchange is not a one-for-one exchange. We designed +an approach to exchange ratios for the Option Exchange to result in a fair value of the new stock options that will be approximately equivalent, on an aggregate basis, to the fair value of the eligible stock options that employees would surrender. +Although the exchange ratios cannot be determined prospectively because the fair market value of our common stock is likely to change before the Commencement Date, we established example exchange ratios to illustrate the approach that will be taken +by grouping together eligible stock options with similar exercise prices. At the time our board of directors approved the general design of the Option Exchange, the fair market value of our common stock was $2.00 per share (the closing price of our +common stock on The Nasdaq Global Select Market on March 1, 2023). The exchange ratios below are illustrative (calculated using a Black-Scholes option pricing model) and based on the fair value of the eligible stock options within the relevant +grouping as of March 1, 2023. Calculation of fair value takes into account variables such as the volatility of our stock, the expected term of a stock option and interest rates. As illustrated in the table below, the applicable exchange ratios will +vary based on the exercise price of the eligible stock option. +Exercise Price Range +per +Share +Number of Outstanding +Eligible Options +Weighted Average +Remaining Life (In Years) +Exchange Ratio +(Surrendered Stock Options +to New Stock Options) +$10.00 to $14.00 +14,150 +8.3 +2.6 to 1 +$14.01 to $18.00 +13,250 +8.2 +2.7 to 1 +$18.01 to $20.00 +54,475 +7.9 +3.4 to 1 +$20.01 and above +774,838 +8.0 +3.6 to 1 +The total number of shares of common stock issuable upon exercise of new stock options will be determined by +dividing the number of shares underlying the surrendered stock option by the applicable exchange ratio and rounding up to the nearest whole share. For purposes of illustration, if an employee holds a stock option to purchase 10,000 shares of common +stock with an exercise price of $10.00 to $14.00 per share and the exchange ratios above were applied, the employee would be entitled to exchange that option for a replacement stock option to purchase 3,847 shares of common stock after applying the +applicable 2.6 to 1 exchange ratio. For further illustration, an eligible employee who holds an option to purchase 10,000 shares of common stock with an exercise price of $20.01 and above per share could exchange that option for a replacement stock +option to purchase 2,778 shares of common stock after applying the applicable 3.6 to 1 exchange ratio using the illustrative exchange ratios. All replacement stock options granted based on the final exchange ratios will have an exercise price equal +to the fair market value of our common stock at the time we grant replacement options at the end of the exchange period. +Vesting Schedule for New +Options +New stock option awards will not be vested on the date of grant. Eligible stock options that were vested prior to the +Option Exchange may be exchanged for new stock options that fully vest on the first day of the month following the first anniversary of the month in which the Option Exchange is completed, subject to the applicable employee’s continued services +through the vesting date. Eligible stock options that were unvested prior to the Option Exchange may be exchanged for new stock options with an extended vesting schedule. Under +2023 Proxy Statement +44 +Table of Contents +the extended vesting schedule, vesting will commence on the first day of the month following the first anniversary of the month in which the Option Exchange is completed, and will occur in a +series of equal monthly installments over the number of months that were remaining in the surrendered option’s vesting schedule immediately prior to the Option Exchange, subject to the applicable employee’s continued services through each +vesting date. For illustration, if a stock option that has 6 months of vesting remaining is exchanged in July of 2023 for a replacement stock option, the vesting schedule of the replacement stock option will provide for vesting in equal +installments on a monthly basis for 6 months beginning on August 1, 2024. This new vesting schedule supports the nature of the stock options as an incentive vehicle, recognizes the prior services and contributions of eligible employees and +provides us with valuable additional years of employee retention. +Term for New Options +The new stock options will expire ten years following the date of grant. The weighted-average remaining life of the eligible stock options is +approximately eight years. +Intended Implementation of the Option Exchange As Soon As Practicable Following June 23, 2023 +We currently plan to commence the Option Exchange as soon as practicable after June 23, 2023. Our board of directors reserves the right +in its discretion to amend, postpone or, under certain circumstances, cancel the Option Exchange once it has commenced, but the Option Exchange will not be materially amended in a manner that is more beneficial to eligible participants without first +seeking additional stockholder approval. +Impact of Option Exchange on Surrendered Options +Assuming all eligible employees participate in the Option Exchange with respect to 100% of their eligible stock options, we estimate that +there will be 615,109 shares of common stock underlying stock options that are surrendered under the Option Exchange but are not replaced by new stock options. Pursuant to the terms of the 2020 Incentive Plan, these shares will be returned to +the share reserve of the 2020 Incentive Plan and will be available for future grant of equity awards under the 2020 Incentive Plan. +Option Exchange +Process +Additional information regarding how we expect to conduct the Option Exchange, provided it is approved by stockholders, +is set forth below. While the terms of the Option Exchange are expected to conform to the material terms described in this Proposal Three, we may find it necessary or appropriate to change the terms of the Option Exchange to take into account our +administrative needs, accounting rules, or Company policy decisions or to comply with any comments we receive from the SEC. We may decide not to implement the Option Exchange even if we obtain stockholder approval, or we may delay, amend or +terminate the Option Exchange once it is in progress. The final terms of the Option Exchange will be described in the exchange offer documents that will be filed with the SEC and available at www.sec.gov. +Overview of the Option Exchange Process +Upon commencement of the Option Exchange, those individuals holding eligible stock options will receive a written offer setting forth the +terms of the Option Exchange and may voluntarily elect to participate. All employees who are employed by us on the Commencement Date, are still employed by us on the grant date of the new stock options, and hold eligible stock option awards may +participate in the Option Exchange. We will give eligible participants at least 20 business days to elect to surrender eligible stock options in exchange for a reduced number of new stock options. Upon completion of the Option Exchange, surrendered +stock options will be cancelled and new stock options will be granted. The shares of our common stock underlying the cancelled options will then be available for future grant under the 2020 Incentive Plan. +2023 Proxy Statement +45 +Table of Contents +The 2020 Incentive Plan will govern all terms and conditions of new stock options not +specifically addressed by the Option Exchange described in this proxy statement. Additionally, it is anticipated that new options will be non-qualified stock options. +Election to Participate +Eligible +employees will receive a tender offer document and will be able to voluntarily elect to participate in the Option Exchange. If you are both a stockholder and an eligible employee holding stock options that may be subject to the Option Exchange, +please note that voting to approve the Option Exchange pursuant to this Proposal Three does not constitute an election to participate in the Option Exchange. The written exchange offer documents described above will be provided if and when the +Option Exchange is commenced, and you can only elect to participate after that time and in accordance with the terms of the written exchange offer documents. +Impact of Options Exchanged on Number of Options Issued +Our board of directors has determined to establish exchange ratios that will result in the issuance of a lesser number of stock options +through the Option Exchange than the number of stock options originally granted to eligible employees. The exchange ratios will be grouped together based on similar exercise prices. The following table illustrates the impact of the Option Exchange +on the number of stock options outstanding as of March 1, 2023, assuming that 100% of employees eligible to participate as of March 1, 2023 exchange 100% of their eligible stock options in the Option Exchange, and that the illustrative +exchange ratios described above were applied. +Outstanding Eligible Stock Options +Exchange +Exercise Price Range per Share +Number of Existing +Options (shares) +Weighted Average +Exercise Price per Share +Exchange +Ratio +Total New +Options +Granted +(shares) +Potential +Net Shares +Recaptured +$10.00 to $14.00 +14,150 +$ +13.72 +2.6 to 1 +5,442 +8,708 +$14.01 to $18.00 +13,250 +$ +14.89 +2.7 to 1 +4,907 +8,343 +$18.01 to $20.00 +54,475 +$ +19.16 +3.4 to 1 +16,022 +38,453 +$20.01 and above +774,838 +$ +20.67 +3.6 to 1 +215,233 +559,605 +Totals +856,713 +$20.37 +241,604 +615,109 +* As noted above, the shares of our common stock underlying the cancelled options will then be available for +future grant under the 2020 Plan. +As described above under the section titled “Exchange Ratios,” the total number of shares of +common stock issuable upon exercise of new stock options that a participating employee will receive with respect to a surrendered stock option will be determined by dividing the number of shares surrendered by the applicable exchange ratio and +rounding up to the nearest whole share. +Effect on Stockholders +Under the terms of the Option Exchange, the new stock options are meant to have a fair value that will be approximately equivalent, on an +aggregate basis, to the fair value of the cancelled stock options they would replace as of the grant date of the new stock options. While we cannot predict how many employees will elect to participate in the Option Exchange, assuming that 100% of +employees eligible as of March 1, 2023 participate in the Option Exchange and exchange 100% of their eligible stock options, and based on the illustrative exchange ratios described above, eligible stock options to purchase approximately +856,713 shares of common stock may be surrendered and cancelled in the Option Exchange, which would result in the Company issuing new stock options for 241,604 shares of common stock and would result in a net reduction in our stock option +overhang of 615,109 shares of common stock. +2023 Proxy Statement +46 +Table of Contents +Accounting Impact +The incremental compensation expense associated with the Option Exchange will be measured as the excess, if any, of the fair value of each +award of new stock option granted to participants in the Option Exchange, measured as of the date the new stock options are granted, over the fair value of the stock options surrendered in exchange for the new stock options, measured immediately +prior to the cancellation. We do not expect the incremental compensation expense, if any, to be material. We will recognize any such incremental compensation expense ratably over the vesting period of the new stock options. +Material U.S. Federal Income Tax Consequences of the Option Exchange +The following is a brief summary of certain United States federal income tax consequences generally arising with respect to the Option +Exchange. This discussion does not address all aspects of the U.S. federal income tax consequences of participating in the Option Exchange that may be relevant to participants in light of their personal investment or tax circumstances and does not +discuss any state, local or non-United States tax consequences of participating in the Option Exchange. Each participant is advised to consult his or her personal tax advisor concerning the application of the +U.S. federal income tax laws to such participant’s particular situation, as well as the applicability and effect of any state, local or non-United States tax laws before taking any actions with respect to +his or her stock options eligible for the Option Exchange. +The exchange of stock options pursuant to the Option Exchange is expected to be treated as a non-taxable exchange because the new stock options will have an exercise price equal to or greater than the fair market value of our common stock on the grant date. Neither the Company nor the participants in the +Option Exchange should recognize any income for U.S. federal income tax purposes upon the grant of the new stock options. New stock options granted under the Option Exchange will be non-qualified stock options +for U.S. federal income tax purposes. Tax effects may vary in other countries. A more detailed summary of tax considerations will be provided to all participants in the Option Exchange documents. +Financial Statements +Our financial +statements and other information required by Item 13(a) of Schedule 14A under the Exchange Act are incorporated by reference from our Annual Report on Form 10-K for the fiscal year ended December 31, +2022, filed with the SEC on March 6, 2023. +If you are both a stockholder and an eligible employee holding eligible +stock options, please note that voting to approve the Option Exchange does not constitute an election to participate in the Option Exchange. +Vote Required: +Approval of the Option Exchange requires the affirmative vote of the majority of the shares of our common stock present in person or represented by proxy and entitled to vote at the annual meeting. An abstention will +have the same effect as a vote against Proposal Three. A broker non-vote on Proposal Three will not have any effect on the vote. +Board +Recommendation: +OUR BOARD OF DIRECTORS [AND THE COMPENSATION COMMITTEE OF OUR BOARD OF DIRECTORS EACH] UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE STOCK OPTION EXCHANGE PROGRAM. +2023 Proxy Statement +47 +Table of Contents +ADDITIONAL INFORMATION +Other Matters +Our board of directors is not aware of any other matters that will be presented for consideration at the Annual Meeting. However, if any other +matters are properly brought before the Annual Meeting, the persons named in the accompanying proxy intend to vote on those matters in accordance with their best judgment. +Stockholder Proposals and Nominations for Next Year’s Annual Meeting of Stockholders +In order to be considered for inclusion in the proxy materials for our 2024 annual meeting of stockholders, proposals submitted by stockholders +pursuant to Rule 14a-8 under the Exchange Act must be received by our Corporate Secretary at Biodesix, Inc., 2970 Wilderness Place, Suite 100, Boulder, CO 80301 on or before December 30, 2023, and also +must otherwise comply with the procedures and requirements set forth in Rule 14a-8. +Alternatively, stockholders intending to present a proposal (outside of the process established in Rule +14a-8) or nominate a director for election at our 2024 annual meeting of stockholders without having the proposal or nomination included in the proxy materials for the meeting must comply with the requirements +set forth in our bylaws. Our bylaws require, among other things, that our Corporate Secretary receive the proposal or nomination no earlier than the close of business on the 120 th day, and no +later than the close of business on the 90 th day, prior to the first anniversary of the preceding year’s annual meeting of stockholders. Accordingly, for our 2024 annual meeting of +stockholders, our Corporate Secretary must receive the proposal or nomination no earlier than January 24, 2024 and no later than the close of business on February 23, 2024. The proposal or nomination must contain the information required +by our bylaws and otherwise comply with the requirements set forth in our bylaws. +In addition to satisfying the foregoing requirements +under our amended and restated bylaws, to comply with the universal proxy rules, stockholders who intend to solicit proxies in support of director nominees other than management’s nominees must provide notice that sets forth the information +required by Rule 14a-19 under the Exchange Act no later than March +24, 2024. +Availability of Annual Report on Form 10-K +A copy the 2022 Form 10-K Report as filed with the SEC is available free of charge on our website at +www.biodesix.com or on the SEC’s website at www.sec.gov. Stockholders may also obtain a copy of our 2022 Annual Report, including financial statements but excluding exhibits, without charge by sending a written request to: Biodesix, Inc., +Attention: Corporate Secretary, 2970 Wilderness Place, Suite 100, Boulder, CO 80301. +2023 Proxy Statement +48 +Table of Contents +P.O. BOX 8016, CARY, NC 27512-9903 +YOUR VOTE IS IMPORTANT! PLEASE VOTE BY: +INTERNET +Go To: www.proxypush.com/BDSX +•  Cast your vote +online +•   Have your Proxy +Card ready +•  Follow the simple +instructions to record your vote +PHONE Call +1-866-291-6774 +•  Use any touch-tone +telephone +•   Have your Proxy +Card ready +•  Follow the simple +recorded instructions +MAIL +•  Mark, sign and +date your Proxy Card +•  Fold and return your +Proxy Card in the postage-paid envelope provided +You must register to attend the meeting online and/or participate at www.proxydocs.com/BDSX +Biodesix, Inc. +Annual Meeting of Stockholders +For Stockholders of record as of March 24, 2023 +TIME: +Tuesday, May 23, 2023 1:00 PM, Mountain Time +PLACE: +Annual Meeting to be held live via the Internet - please visit +www.proxydocs.com/BDSX for more details. +This proxy is being solicited on behalf of the Board of Directors +The undersigned stockholder of Biodesix, Inc. hereby appoints Robin Harper Cowie and Ryan H. Siurek, and each or either of them, as the true and lawful +attorneys of the undersigned, with full power of substitution and revocation, and authorizes them, and each of them, to vote all the shares of capital stock of Biodesix, Inc. which the undersigned is entitled to vote at said meeting and any +adjournment thereof upon the matters specified and upon such other matters as may be properly brought before the meeting or any adjournment thereof, conferring authority upon such true and lawful attorneys to vote in their discretion on such other +matters as may properly come before the meeting and revoking any proxy heretofore given. +THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED +OR, IF NO DIRECTION IS GIVEN, SHARES WILL BE VOTED IDENTICAL TO THE BOARD OF DIRECTORS RECOMMENDATION. This proxy, when properly executed, will be voted in the manner directed herein. In their discretion, the named proxies are authorized to vote +upon such other matters that may properly come before the meeting or any adjournment or postponement thereof. +You are encouraged to specify your choice +by marking the appropriate box (SEE REVERSE SIDE) but you need not mark any box if you wish to vote in accordance with the Board of Directors’ recommendation. The named proxies cannot vote your shares unless you sign (on the reverse side) and +return this card. +PLEASE BE SURE TO SIGN AND DATE THIS PROXY CARD AND MARK ON THE REVERSE SIDE +Table of Contents +Biodesix, Inc. +Annual Meeting of Stockholders +Please +make your marks like this: ☒ +THE BOARD OF DIRECTORS RECOMMENDS A VOTE: +FOR ON PROPOSALS 1, 2 AND 3 +BOARD OF +DIRECTORS +RECOMMENDS +PROPOSAL +YOUR VOTE +1. +To elect the three Class III directors to hold office until the 2026 annual meeting of stockholders; +FOR +WITHHOLD +1.01 Jean M. Franchi +☐ +☐ +FOR +1.02 Hany Massarany +☐ +☐ +FOR +1.03 Jack Schuler +☐ +☐ +FOR +FOR +AGAINST +ABSTAIN +2. +To ratify the appointment of KPMG LLP as our independent registered public accounting firm for the year ending December 31, 2023; +☐ +☐ +☐ +FOR +3. +To approve the option exchange program; and +☐ +☐ +☐ +FOR +4. +To conduct any other business properly brought before the meeting, or any adjournment or postponement thereof. +You must register to attend the +meeting online and/or participate at www.proxydocs.com/BDSX +Authorized Signatures - Must be completed for your instructions to be +executed. +Please sign exactly as your name(s) appears on your account. If held in joint tenancy, all persons should sign. Trustees, +administrators, etc., +should include title and authority. Corporations should provide full name of corporation and title of authorized +officer signing the Proxy/Vote Form. +Signature (and Title if applicable) +Date +Signature (if held jointly) +Date \ No newline at end of file diff --git a/raw/proxies/0001439725/0001193125-23-099181/proxy_rpt.txt b/raw/proxies/0001439725/0001193125-23-099181/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..855cb7cbf5abd7e4207afbf0c3015725cbcae094 --- /dev/null +++ b/raw/proxies/0001439725/0001193125-23-099181/proxy_rpt.txt @@ -0,0 +1,147 @@ +reviewing related-party transactions; +• +approving, or as permitted, pre-approving, audit and permissible non-audit services to be performed by our independent registered public accounting firm; and +• +reviewing and assessing, at least annually, the performance of the audit committee and adequacy of its charter. +Compensation Committee +Our compensation committee consists of Messrs. Massarany and Patience and Drs. Kayyem and Watts, and the chair of our compensation committee +is Mr. Massarany. Our board of directors has determined that each of Messrs. Massarany and Patience and Drs. Kayyem and Watts is independent under the Nasdaq listing rules and is a “non-employee +director” as defined in Rule 16b-3 promulgated under the Exchange Act. The functions of this committee include: +• +reviewing, modifying and overseeing overall compensation strategy and policies; +• +reviewing and approving the compensation arrangements and other terms of employment of our chief executive +officer, other executive officers and senior management, as appropriate; +• +reviewing and recommending to the full board of directors the compensation of our directors; +2023 Proxy Statement +14 +Table of Contents +• +appointing and overseeing the work of compensation consultants, legal counsel or any other advisors and +consultants engaged for the purpose of advising the compensation committee; +• +reviewing, recommending to the full board of directors, as appropriate, and administering equity award plans, +compensation plans and similar programs, as well as modification or termination of plans and programs; +• +establishing policies with respect to equity compensation arrangements; +• +reviewing and evaluating with the chief executive officer and the full board of directors the succession plans +for our executive officers; and +• +reviewing and assessing, at least annually, the performance of the compensation committee and the adequacy of its +charter. +Compensation Committee Interlocks and Insider Participation +None of the members of the compensation committee is currently, or has been at any time during 2022, one of our officers or +employees. None of our executive officers currently serve, or has served during 2022, as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving as a member of our board of directors +or compensation committee. +Nominating and Corporate Governance Committee +Our nominating and corporate governance committee consists of Ms. Franchi, Dr. Strobeck and Mr. Schuler, and the chair of our +nominating and corporate governance committee is Dr. Strobeck. Our board of directors has determined that Ms. Franchi, Dr. Strobeck and Mr. Schuler are independent under the applicable listing standards. The functions of this +committee include: +• +reviewing periodically and evaluating director performance of our board of directors and its applicable +committees, and recommending to our board of directors and management areas for improvement; +• +identifying, evaluating, nominating and recommending individuals for membership on our board of directors; +• +reviewing with our chief executive officer the plans for succession to the offices of our executive officers and +make recommendations to our board of directors with respect to the selection of appropriate individuals to succeed to these positions; +• +reviewing and recommending to our board of directors any amendments to our corporate governance policies; and +• +reviewing and assessing, at least annually, the performance of the nominating and corporate governance committee +and the adequacy of its charter. +Director Nomination Process +Selection and Nomination Process +Our board of directors is responsible for nominating members for election to our board of directors by our stockholders at our annual meetings +of stockholders. Whenever a vacancy occurs on our board of directors, +2023 Proxy Statement +15 +Table of Contents +whether due to a newly created director position or the death, resignation, removal or retirement of an existing director, our board of directors is authorized to select a person to fill the +vacancy to serve as a director until the annual meeting of stockholders at which the director’s term expires and until the election and qualification of his or her successor or, if sooner, his or her death, resignation or removal. Any increase +or decrease in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors. +Criteria for Board Membership +The board of directors and the nominating and corporate governance committee will determine the appropriate characteristics, skills and +experience for the board of directors as a whole and for its individual members. The board of directors and the nominating and corporate governance committee will consider the minimum general criteria set forth below, and may add any specific +additional criteria with respect to specific searches, in selecting candidates and existing directors for service on the board of directors. An acceptable candidate may not fully satisfy all of the criteria, but is expected to satisfy nearly all of +them. While the nominating and corporate governance committee does not have a formal policy in this regard, the diversity of the board of the directors is a consideration in evaluating candidates for director positions, among others. +The board of directors and the nominating and corporate governance committee believe that candidates for director should have certain minimum +qualifications, including being able to read and understand basic financial statements, being over 21 years of age and having the highest personal integrity and ethics. In considering candidates, the board of directors and the nominating and +corporate governance committee intend to consider such factors as possessing relevant expertise upon which to be able to offer advice and guidance to management, having sufficient time to devote to the affairs of the Company, demonstrated excellence +in his or her field, having the ability to exercise sound business judgment and having the commitment to rigorously represent the long-term interests of our stockholders. +The board of directors and the nominating and corporate governance committee review candidates for director nomination in the context of the +current composition of the board of directors, the operating requirements of the Company and the long-term interests of our stockholders. In conducting this assessment, the board of directors and the nominating and corporate governance committee +consider diversity, age, skills, and such other factors as it deems appropriate given the current needs of the board of directors and the Company to maintain a balance of knowledge, experience and capability. In the case of incumbent directors whose +terms of office are set to expire, the board of directors and the nominating and corporate governance committee review such directors’ overall service to the Company during their term, including the number of meetings attended, level of +participation, quality of performance, and any other relationships and transactions that might impair such directors’ independence. In the case of new director candidates, the board of directors and the nominating and corporate governance +committee also determine whether the nominee must be independent for purposes of any stock exchange on which any of the Company’s capital stock is listed. +Stockholder Recommendations and Nominations +Stockholders who wish to recommend candidates may contact the nominating and corporate governance committee in the manner described below +under “Board and Corporate Governance Matters—Stockholder Communications with our Board of Directors.” Stockholder nominations must be made according to the procedures required under our bylaws and described in this proxy statement +under the heading “Additional Information—Stockholder Proposals and Nominations for Next Year’s Annual Meeting of Stockholders.” Stockholder-recommended candidates and stockholder nominees whose nominations comply with these +procedures will be evaluated by our nominating and corporate governance committee in the same manner as other nominees. +2023 Proxy Statement +16 +Table of Contents +Board Diversity Matrix +The table below provides certain highlights of the composition of our board of directors members and nominees as of March 24, 2023. +Nasdaq listing requirements require each listed company to have, or explain why it does not have, two diverse directors on the board, including at least one diverse director who self-identifies as female and at least one diverse director who +self-identifies as an underrepresented minority or LGBTQ+, or for smaller reporting companies, two female directors. Companies listed on the Nasdaq Global Market must have at least one diverse director by December 31, 2023 and two diverse +directors by December 31, 2025. As of March 24, 2023, our board of directors has one diverse director, and we intend to be fully compliant with Nasdaq’s diversity requirement by December 31, 2025. Each of the categories listed in +the below table has the meaning as it is used in Nasdaq Listing Rule 5605(f). +Board Diversity Matrix as of March 24, 2023 +Total Number of Directors +9 +Female +Male +Non-Binary +Did Not Disclose Gender +Part I: Gender Identity +1 +8 +- +- +Directors +Part II: Demographic Background +African American or Black +- +- +- +- +Alaskan Native or Native American +- +- +- +- +Asian +- +- +- +- +Hispanic or Latinx +- +- +- +- +Native Hawaiian or Pacific Islander +- +- +- +- +White +1 +8 +- +- +Two or More Races or Ethnicities +- +- +- +- +LGBTQ+ +- +Did Not Disclose Demographic Background +- +Directors who Identify as Middle Eastern: 1 \ No newline at end of file diff --git a/raw/proxies/0001439725/0001193125-24-118069/proxy.txt b/raw/proxies/0001439725/0001193125-24-118069/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..0af2029944046a2a57420b4a06adc19f1d6f12d8 --- /dev/null +++ b/raw/proxies/0001439725/0001193125-24-118069/proxy.txt @@ -0,0 +1,2386 @@ +DEF 14A +1 +d674951ddef14a.htm +DEF 14A +DEF 14A +Table of Contents +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +Washington, DC 20549 +SCHEDULE 14A +(Rule 14a-101) +SCHEDULE 14A INFORMATION +Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 +(Amendment No.    ) +☒ +Filed by the Registrant +☐ +Filed by a Party other than the Registrant +Check the appropriate box: +☐ +Preliminary Proxy Statement +☐ +Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +☒ +Definitive Proxy Statement +☐ +Definitive Additional Materials +☐ +Soliciting Material under § 240.14a-12 +Biodesix, Inc. +(Name of Registrant as Specified in its +Charter) +(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant) +Payment of Filing Fee (Check the appropriate box): +☒ +No fee required. +☐ +Fee paid previously with preliminary materials. +☐ +Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11. +Table of Contents +Biodesix, Inc. +919 West Dillon Rd., +Louisville, +CO 80027 +Notice of 2024 Annual Meeting of Stockholders +Dear Biodesix Stockholders: +You are invited to attend +Biodesix, Inc.’s 2024 Annual Meeting of Stockholders (the Annual Meeting). +Date: +May 21, 2024 (Tuesday) +Time: +1:00 p.m., Mountain Time +Virtual Location: +You can attend the Annual Meeting online, including to vote and/or submit questions, at www.proxydocs.com/BDSX . See page 1 of the accompanying proxy statement for additional information +regarding participation in the virtual meeting. +Items of Business: +At the Annual Meeting, stockholders will be asked to vote: +1.  to elect the three Class I directors named in this proxy statement to hold office until the 2027 +annual meeting of stockholders; +2.  to ratify the appointment of KPMG LLP as our independent +registered public accounting firm for the year ending December 31, 2024; +3.  To approve, for +purposes of complying with Nasdaq Listing Rule 5635(d), the conversion of the Company’s Series A Non-Voting Convertible Preferred Stock, par value $0.001 per share (“Series A Preferred Stock”) +into shares of the Company’s common stock, par value $0.001 per share (“Common Stock”); +4.  To approve, for purposes of complying with Nasdaq Listing Rule 5635(c), the issuance of the +Company’s Series A Preferred Stock to certain of the Company’s directors and officers and any shares of the Company’s Common Stock issuable upon the conversion thereof; and +5.  to conduct any other business properly brought before the meeting, or any adjournment or postponement +thereof. +Record Date: +You can participate in the Annual Meeting and vote if you were a stockholder of record as of the close of business on March 25, 2024. +Voting: +Your vote is very important to us. Whether or not you plan to attend the virtual Annual Meeting, please ensure your shares are represented by voting promptly. For instructions on how to vote your shares, please refer to +the instructions included with this proxy statement and your proxy card. +By order of the Board of Directors, +Robin Harper Cowie +Chief Financial Officer, Secretary and Treasurer +April 26, 2024 +This Notice of 2024 Annual Meeting of Stockholders, the accompanying proxy statement and our 2023 Annual Report on Form 10-K are available on our website at https://investors.biodesix.com/investor-relations in the SEC Filings section, as well as at +www.proxydocs.com/BDSX . +Table of Contents +Table of Contents +ANNUAL MEETING +INFORMATION +1 +BOARD AND CORPORATE GOVERNANCE +MATTERS +8 +Proposal One: Election of Directors +8 +Overview of Our Nominees and Continuing Directors +9 +Board Composition +12 +Director Independence +13 +Board Leadership Structure +13 +Role of our Board of Directors in Risk Oversight +13 +Meetings of our Board of Directors +14 +Committees of our Board of Directors +14 +Committee Composition and Meetings +15 +Audit Committee +15 +Compensation Committee +16 +Compensation Committee Interlocks and Insider Participation +16 +Nominating and Corporate Governance Committee +16 +Director Nomination Process +17 +Board Diversity Matrix +18 +Executive Officers +19 +Code of Business Conduct and Ethics +19 +Corporate Governance Guidelines +19 +Anti-Hedging and Anti-Pledging Policy +20 +Stockholder Communications with our Board of Directors +20 +Certain Relationships and Related Party Transactions +20 +EQUITY COMPENSATION PLAN INFORMATION +22 +DIRECTOR COMPENSATION +23 +Non-Employee Director Compensation Policy +23 +Director Deferred Compensation Plan +25 +2023 Director Compensation Table +25 +EXECUTIVE COMPENSATION +27 +Overview +27 +Compensation of Named Executive Officers +28 +2023 Summary Compensation Table +30 +Outstanding Equity Awards at 2023 Fiscal Year-End +32 +Additional Matters +33 +STOCK OWNERSHIP +36 +Security Ownership of Certain Beneficial Owners and +Management +36 +Delinquent Section 16(a) Reports +38 +Table of Contents +AUDIT MATTERS +39 +Proposal Two: Ratification of Appointment of Independent Registered Public Accounting +Firm +39 +Report of the Audit Committee +40 +PREFERRED STOCK CONVERSION AND ISSUANCE +41 +Proposal Three: Approval of Series A Preferred Stock Conversion into Common Stock +41 +Proposal Four: Approval of Issuance of Series A Preferred Stock to Certain Directors +and Officers and Conversion into Common Stock Thereof +43 +ADDITIONAL INFORMATION +44 +Other Matters +44 +Stockholder Proposals and Nominations for Next Year’s Annual Meeting of +Stockholders +44 +Availability of Annual Report on Form 10-K +44 +Table of Contents +Proxy Statement +2024 Annual Meeting of Stockholders +May 21, 2024 +ANNUAL MEETING INFORMATION +Our board of directors is soliciting your proxy +for the 2024 Annual Meeting of Stockholders (the Annual Meeting) of Biodesix, Inc. (“Biodesix,” the “Company,” “we,” “us” or “our”) and at any adjournment, continuation or postponement of the meeting +for the purposes described in this proxy statement and the accompanying Notice of 2024 Annual Meeting of Stockholders. The Annual Meeting will take place virtually on May 21, 2024 at 1:00 p.m. Mountain Time. You must register to attend the +meeting online and/or participate at www.proxydocs.com/BDSX using the control number on your proxy card or notice. You +will receive an email one hour prior to the meeting containing a link which will connect you to the meeting portal. If you held shares of our common stock as of the close of business on March 25, 2024, you will be able to vote on the proposals +described in this proxy statement and submit questions online through the virtual meeting platform during the Annual Meeting. On or about April 26, 2024, we will be mailing a copy of our Annual Report on Form +10-K for the year ended December 31, 2023 (the 2023 Annual Report), this Proxy Statement and the proxy card (together, the Proxy Materials). The documents will be available at www.proxydocs.com/BDSX . The proxy card will also include information on how to vote online or by telephone or by returning +your proxy card by mail. +Who can vote? +If you were a stockholder of record as of the close of business on March 25, 2024 (the record date), you are entitled to vote your shares +at the Annual Meeting. As of the record date, 97,159,448 shares of our common stock were issued and outstanding. Each share of our common stock is entitled to one vote on each matter properly brought before to the meeting. +What am I voting on? +You are being asked to vote on four proposals: +● +Proposal One: To elect the three Class I directors named in this proxy statement to hold office until the +2027 annual meeting of stockholders; +● +Proposal Two: To ratify the appointment of KPMG LLP as our independent registered public accounting firm for +2024; +● +Proposal Three: To approve of the conversion of the Series A Preferred Stock into shares of Common Stock; and +● +Proposal Four: To approve of the issuance of shares of Series A Preferred Stock to certain of the +Company’s directors and officers and any shares of the Company’s Common Stock issuable upon the conversion thereof. +2024 Proxy Statement +1 +Table of Contents +How does the board of directors recommend that I vote on each proposal? +The board of directors recommends that our stockholders vote: +● +“For” the election of the three Class I directors named in this proxy statement to hold +office until the 2027 annual meeting of stockholders; +● +“For” the ratification of the appointment of KPMG LLP as our independent registered public +accounting firm for 2024; +● +“For” the approval of the conversion of the Series A Preferred Stock into shares of Common +Stock; and +● +“For” the approval of the issuance of shares of Series A Preferred Stock to certain of the +Company’s directors and officers and any shares of the Company’s Common Stock issuable upon the conversion thereof. +What if another matter is properly brought before the meeting? +The board of directors is not aware of any +other matters that will be presented for consideration at the Annual Meeting. However, if any other matters are properly brought before the Annual Meeting, the persons named in the accompanying proxy intend to vote on those matters in accordance +with their best judgment. +How do I vote? +The procedures for voting depend on whether your shares are registered in your name or are held by a bank, broker or other nominee. You may +also vote your shares electronically during a designated portion of the virtual Annual Meeting after your successful registration at www.proxydocs.com/BDSX. Whether or not you plan to attend the Annual Meeting, we encourage you to vote and submit +your proxy in advance of the meeting by one of the methods described below. +● +Stockholders of Record: Shares Registered in Your Name +Vote by Proxy in Advance of the Annual Meeting : If, on the record date, your shares were registered directly in your name with +Biodesix’s transfer agent, Computershare Trust Company, N.A., then you are a “stockholder of record.” As a stockholder of record, you may vote by proxy in advance of the Annual Meeting in three ways: +Vote by Internet +Go to +http://www.proxypush.com/ +BDSX to complete an +electronic +proxy card. You will be asked to +provide the Company number +and control number from your +proxy card. Your vote must be +received prior to the meeting +start time to be counted. +Vote by +telephone +Dial toll-free 1-866-291-6774 +using a touch-tone phone and +follow the recorded instructions. +You will be asked to provide the +Company number and control +number from +your proxy card. +Your vote must be received +prior to the meeting start time to +be counted. +Vote +by mail +Complete, sign and date the +proxy card you received as +part +of the Proxy Materials, and +return it promptly in the +envelope provided. If your +signed proxy card is received +prior to the meeting date, we +will vote your shares as you +direct. +2024 Proxy Statement +2 +Table of Contents +● +Beneficial Owner: Shares Registered in the Name of Broker, Bank or Other Nominee +If, on the record date, your shares were held not in your name, but in an account with a broker, bank or other nominee as custodian on your +behalf, then you are considered the “beneficial owner” of shares held in “street name.” The Proxy Materials are being forwarded to you by that broker, bank or other nominee who is considered the stockholder of record of those +shares for purposes of voting at the Annual Meeting. As the beneficial owner, you have the right to direct your broker, bank or other nominee on how to vote your shares by following the instructions for voting set forth on that organization’s +voting instruction card. +What is the effect of giving a proxy? What if I return a proxy card or otherwise vote but do not make +specific choices? +Proxies are solicited by and on behalf of the board of directors. Robin Harper Cowie (our Chief Financial +Officer, Secretary and Treasurer) and Christopher C. Vazquez (our Chief Accounting Officer) have been designated as proxy holders by the board of directors. If you properly grant your proxy, your shares will be voted as you instruct. +If you return a signed proxy card or otherwise vote without marking specific voting selections, your shares will be voted as the board of +directors recommends: “For” the election of three Class I directors (Proposal One); “For” the ratification of the appointment of KPMG LLP as our independent registered public accounting firm for 2024 (Proposal Two); +“For” the approval of the conversion of the Series A Preferred Stock into shares of Common Stock (Proposal Three); “For” the approval of the issuance of shares of Series A Preferred Stock to certain of the Company’s +directors and officers and any shares of the Company’s Common Stock issuable upon the conversion thereof (Proposal Four); and in accordance with the best judgment of your proxy holder for any other matters properly brought before the meeting, +if any. +Can I change my vote or revoke my proxy? +Yes. If you are a stockholder of record, you can change your vote or revoke your proxy and voting instructions at any time prior to the vote +at the annual meeting. To do so: +● Submit a new proxy card or voting +instructions to the independent tabulator, Mediant Communications Inc. (Mediant), by mail, telephone or through the Internet by the closing of the polls at the annual meeting. +● Attend the virtual Annual Meeting +and vote electronically during the meeting. Simply attending the meeting will not, by itself, revoke your proxy. +If you are the +beneficial owner of shares held in street name, you should follow the instructions provided by your broker, bank or other nominee to revoke previously submitted voting instructions. +What are broker non-votes? +Brokers, banks or other nominees holding shares on behalf of a beneficial owner may vote those shares in their discretion on certain +“routine” matters even if they do not receive timely voting instructions from the beneficial owner. With respect to “non-routine” matters, the broker, bank or other nominee is not permitted +to vote shares for a beneficial owner without timely received voting instructions. The only routine matter to be presented at the Annual Meeting is the proposal to ratify the appointment of KPMG LLP as our independent registered public +accounting firm for 2024 (Proposal Two). The election of three Class I directors (Proposal One), approval of the conversion of the Series A Preferred Stock into shares of Common Stock (Proposal Three) and the approval of the issuance of shares +of Series A Preferred Stock to certain of the Company’s directors and officers and any shares of the Company’s Common Stock issuable upon the conversion thereof (Proposal Four) are non-routine +matters. +2024 Proxy Statement +3 +Table of Contents +A broker non-vote occurs when a broker, bank or +other nominee does not vote on a non-routine matter because the beneficial owner of such shares has not provided voting instructions with regard to such matter. If a broker, bank or other nominee exercises +discretionary voting authority on Proposal Two, such shares will be considered present at the Annual Meeting for quorum purposes and broker non-votes will occur as to Proposal One, Proposal Three and Proposal +Four and any other non-routine matters that are properly presented at the Annual Meeting. Broker non-votes will have no impact on the voting results. +How many shares must be present to hold the Annual Meeting? +A quorum must be present at the Annual Meeting for any business to be conducted. A quorum will be present if the holders of at least a +majority of the outstanding shares of our common stock entitled to vote are present at the Annual Meeting online or represented by proxy. On the record date, there were 97,159,448 shares of our common stock outstanding and entitled to vote. +Therefore, the holders of 48,579,725 shares must be present online or represented by proxy at the Annual Meeting to have a quorum. For purposes of determining the presence of a quorum, abstentions, withheld votes and broker non-votes are counted. If there is no quorum, the holders of a majority of shares present or represented by proxy at the Annual Meeting may adjourn the meeting to a later date. +2024 Proxy Statement +4 +Table of Contents +What vote is required for the approval of each proposal? What effect do +“withhold” votes, abstentions and broker non-votes have on the proposals? +The +following chart summarizes the proposals to be considered at the Annual Meeting, the vote required for approval of each proposal, and the manner in which votes will be counted: +Proposal +Voting Options +Vote Required to Adopt the +Proposal +Effect of “Withheld” +Votes or Abstentions +Effect of “Broker +Non-Votes” +Proposal One: Election +of the three Class I +directors named in this +proxy statement +For or +Withhold on +each nominee +Plurality of the votes cast. +This means that the three +nominees receiving the +highest number +of “For” +votes (from the holders of +votes of shares present or +represented by proxy and +entitled to vote on the +election of directors) will +be elected as Class I +directors. +“Withheld” votes +have no effect; +only “For” votes +affect the +outcome +of the election. +Brokers do not +have discretion +to vote. Broker +non-votes will +have no effect; +only +“For” +votes affect the +outcome of the +election. +Proposal Two: +Ratification of +appointment of KPMG +LLP as our independent +registered public +accounting firm for the +year ended December 31, 2024 +For, Against or +Abstain +Affirmative vote of a +majority of the shares +present or represented by +proxy and entitled to +vote +on the proposal. +Abstentions are +considered shares +present and entitled +to vote, and +therefore have +the +same impact as +votes “Against” the +proposal. +Brokers have +discretion to +vote. Therefore, +we do not +expect +any +broker +non-votes. +Proposal Three: +Approval of the conversion of the Series A Preferred Stock into shares of Common Stock +For, Against or +Abstain +Affirmative vote of a +majority of the shares +present or represented by +proxy and entitled to +vote +on the proposal. +Abstentions are +considered shares +present and entitled +to vote, and +therefore have +the +same impact as +votes “Against” the +proposal. +Brokers have +discretion to +vote. Therefore, +we do not +expect +any +broker +non-votes. +Proposal Four: +Approval of issuance of shares of Series A Preferred Stock to certain of the Company’s directors and officers and any shares of the Company’s Common Stock issuable upon the conversion +thereof +For, Against or +Abstain +Affirmative vote of a +majority of the shares +present or represented by +proxy and entitled to +vote +on the proposal. +Abstentions are +considered shares +present and entitled +to vote, and +therefore have +the +same impact as +votes “Against” the +proposal. +Brokers have +discretion to +vote. Therefore, +we do not +expect +any +broker +non-votes. +2024 Proxy Statement +5 +Table of Contents +Important Information About Our Virtual Annual Meeting: +• +Why is the Annual Meeting being held in a virtual format this year? The +Annual Meeting will be held in a virtual meeting format via live audio webcast, and will provide access to the Annual Meeting for our stockholders regardless of geographic location. We have designed our virtual format to help ensure that our +stockholders who attend the Annual Meeting virtually will be afforded similar rights and opportunities to participate as they would at an in-person meeting. +• +How can I attend Annual Meeting online? To join the Annual Meeting online, +visit www.proxydocs.com/BDSX and register using your control number on your proxy card or on the instructions that accompanied your Proxy Materials, and following the instructions received via email, including a +unique link that will allow you access to the Annual Meeting, to vote, and submit questions during the meeting. +• +When can I join the virtual Annual Meeting? The meeting will begin promptly +at 1:00 p.m. Mountain Time on Tuesday, May 21, 2024. You may access the meeting platform 15 minutes earlier, and we encourage you to join in advance of the meeting start time to allow sufficient time to log in and confirm your connection and +audio are working properly. +• +Can I ask questions during the virtual Annual Meeting? Yes. If you are logged +in as a “stockholder” at the virtual Annual Meeting, you will have an opportunity to submit questions live via the Internet during a designated portion of the virtual Annual Meeting. Once you are logged in, type your question into the +question box and click “submit.” Subject to time constraints, we intend to answer questions pertinent to the Company and meeting matters submitted by stockholders during the Annual Meeting that comply with our rules of conduct for the +Annual Meeting, which will be posted on the meeting website during the meeting. +• +How do I vote during the virtual Annual Meeting? You will have an opportunity +to vote your shares electronically during a designated portion of the virtual Annual Meeting after logging in. Whether or not you plan to join the Annual Meeting, we encourage you to vote and submit your proxy in advance of the meeting by one of the +methods described in these Proxy Materials. +• +What if I have technical difficulties? On the day of the Annual Meeting, if +you have trouble accessing the virtual meeting platform or encounter other technical difficulties with the platform before or during the meeting, please call the technical support number provided in your email instructions. +• +Will a list of stockholders be available for inspection prior to and during the +meeting? Yes. A complete list of stockholders of record will be available for inspection, by appointment only, by any stockholder for at least ten (10) days prior to the Annual Meeting during ordinary business hours at our +headquarters located at 919 West Dillon Rd., Louisville, CO 80027. +• +Will a recording of the meeting be available? Yes, following the Annual +Meeting, a recording of the meeting will be available on www.proxydocs.com/BDSX for one year following the meeting date. +Who will count the votes? +Representatives of Mediant will tabulate the votes, and a representative of Mediant will act as inspector of election. +Who is paying for this proxy solicitation? +We will pay the cost of soliciting proxies. Proxies may be solicited on our behalf by our directors, officers or employees (for no additional +compensation) in person, by telephone or by other means of communication. Arrangements may be made with brokerage houses, custodians, nominees and fiduciaries to send proxy materials to their principals and we may reimburse them for the cost of +forwarding proxy materials to beneficial owners. +2024 Proxy Statement +6 +Table of Contents +What does it mean if I receive more than one set of Proxy Materials? +If you receive more than one set of Proxy Materials, your shares may be registered in more than one name or in different +accounts. Please follow the voting instructions included in each set of Proxy Materials to ensure that all of your shares are voted. +How can I find out the results of the voting at the Annual Meeting? +Preliminary voting results will be announced at the Annual Meeting. In addition, final voting results will be published in a current report on +Form 8-K that we expect to file with the SEC within four business days after the Annual Meeting. +Why were my Proxy Materials included in the same envelope as other people at my address? How may I obtain an additional copy of the Proxy Materials? +We have adopted a procedure approved by the SEC called “householding.” Under this procedure, we deliver a single copy of our Proxy +Materials to stockholders of record who shares the same address, unless we have received contrary instructions from any stockholder at that address. This practice is designed to eliminate duplicate mailings, conserve natural resources and reduce our +printing and mailing costs. Stockholders who participate in householding will continue to be able to access and receive separate proxy cards. If you share an address with another stockholder and receive only a single copy of our Proxy Materials, but +would like to request a separate copy of these materials, please contact our mailing agent, Mediant, by calling 1-866-648-8133 or +e-mailing paper@investorelections.com and an additional copy of the materials will be promptly delivered to you. Similarly, if you receive multiple copies of the Proxy Materials, but would prefer to receive a +single copy in the future, you may also contact Mediant at the above telephone number or address. Beneficial owners should contact their broker, bank or other nominee to request information about householding procedures. +2024 Proxy Statement +7 +Table of Contents +BOARD AND CORPORATE GOVERNANCE MATTERS +Proposal One: Election of Directors +General +The primary responsibilities of +our board of directors are to provide oversight, strategic guidance, counseling and direction to our management. Our board of directors currently consists of nine directors and is divided into three classes of directors that serve staggered +three-year terms, currently Class II, with a term expiring in 2025, Class III, with a term expiring in 2026 and Class I, with a term expiring in 2024. At the Annual Meeting, our stockholders will vote on the election of three +Class I directors whose terms will expire at our 2027 annual meeting of stockholders. Each of our other current directors will continue to serve as a director until the election and qualification of his or her successor. +The three directors currently serving on our board of directors in Class I, the class whose term of office expires in 2024, have each +been nominated by our board of directors, upon the recommendation of our nominating and corporate governance committee, to stand for election at the Annual Meeting. Jon Faiz Kayyem, Ph.D. has served on our board of directors since 2021. Scott Hutton +has served on our board of directors since 2020. John Patience has served on our board of directors since 2008. Each of these three nominees has consented to being named as a nominee in this proxy statement and has agreed to serve, if elected, until +our 2027 annual meeting of stockholders and until the election and qualification of his or her successor. +For more information about each +of the director nominees and continuing directors, including information regarding the experience, qualifications, attributes and skills that led to the conclusion that each director should serve as a member of the board of directors, please refer +to the section below entitled “Overview of Our Nominees and Continuing Directors.” +Vote Required: +Directors are elected by a plurality of the votes cast by our stockholders at the Annual Meeting. This means that the three nominees receiving the highest number of affirmative votes (from the holders of votes of +shares present or represented by proxy and entitled to vote on the election of directors) will be elected. Broker non-votes and “Withheld” votes will have no effect. +Board +Recommendation: +OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE ELECTION OF EACH OF THE THREE CLASS I DIRECTOR NOMINEES NAMED ABOVE. +2024 Proxy Statement +8 +Table of Contents +Overview of Our Nominees and Continuing Directors +The following table and the brief biographies that follow provide information, as of the date of this proxy statement, about each +director nominee and each continuing director: +Age +Position(s) +Director +Since +Class +Current +Term +Expires +Expiration +of Term for +which +Nominated +Independent +Committee +Membership* +AC +CC +NCG +DIRECTOR NOMINEES +Jon Faiz Kayyem, Ph.D. +60 +Director +2021 +I +2024 +2027 +Yes +X +Scott Hutton +52 +President, +Chief Executive +Officer and Director  +2020 +I +2024 +2027 +No +John Patience +76 +Chairman of the +Board +2008 +I +2024 +2027 +Yes +X +CONTINUING DIRECTORS +Lawrence T. Kennedy, Jr. +52 +Director +2023 +II +2025 +— +Yes +X +Matthew Strobeck, Ph.D. +51 +Director +2012 +II +2025 +— +Yes +X +Chair +Charles Watts, M.D. +81 +Director +2019 +II +2025 +— +Yes +X +Jean Franchi +57 +Director +2020 +III +2026 +— +Yes +Chair +X +Hany Massarany +62 +Director +2020 +III +2026 +— +Yes +X +Chair +Jack Schuler +83 +Director +2008 +III +2026 +— +Yes +X +* AC - Audit Committee; CC - Compensation Committee; NCG - Nominating and Corporate +Governance Committee +Director Nominees +Class I Directors – Nominees for Election at the Annual Meeting +Jon Faiz Kayyem, Ph.D. has served as a Director of the Company since December 2021. Dr. Kayyem has over 20 years of +experience inventing, patenting, licensing, developing, and commercializing novel solutions for molecular diagnostics and DNA detection opportunities. Dr. Kayyem has served in various leadership positions throughout his career. He held numerous +roles at GenMark Diagnostics, Inc., including Founder, CEO and President, Chief Scientific Officer, Senior Vice President of Research and Development. Prior to his work at GenMark Diagnostics, Dr. Kayyem served as director and founder of +Calimmune, Inc. and was Vice President of Life Sciences at Motorola Solutions, Inc. In October 2004, he co-founded the biotechnology fund management company, Efficacy Capital Limited and served as a managing +partner. Additionally, Dr. Kayyem founded Clinical Micro Sensors Inc., the predecessor company of GenMark Diagnostics, to commercialize multiple technical innovations that he developed while serving as a Senior Research Fellow at the California +Institute of Technology (Caltech). Dr. Kayyem holds a B.S. and M.S. in Biochemistry from Yale University and a Ph.D. in Molecular Biology from Caltech. Currently, Dr. Kayyem is on the board of directors of Inhibrx, Inc. +We believe that Dr. Kayyem is qualified to serve on our board of directors because of his experience in leadership and management roles +in the field of medicine, as well as his experience as a board member and investor in companies in the healthcare industry. +Scott +Hutton has served as our President, Chief Executive Officer and Director since January 2020, and previously held the role of Chief Operating Officer from March 2018 to December 2019. Mr. Hutton also serves +2024 Proxy Statement +9 +Table of Contents +as a director and board secretary for the Coalition for 21st Century Medicine, a non-profit organization that advocates for high-quality diagnostic testing +availability. Additionally, Mr. Hutton has served on the board of directors of Eximis Surgical, Inc. since February 2018 and was on the board of the Colorado Bioscience Association from April 2011 to April 2013. Mr. Hutton was an observer +on the board of directors of Aqueduct Critical Care, Inc. from September 2014 to January 2017, and an observer on the Board of Visualase, Inc. from October 2012 to July 2014. Mr. Hutton joined Biodesix from Spectranetics Corp. (Spectranetics), +a U.S.-based global leader in vascular intervention and lead management solutions (now part of Royal Philips), where he served as Senior Vice President and General Manager of the Vascular Intervention division from January 2017 to December 2017. +Prior to joining Spectranetics, Mr. Hutton held several positions of increasing responsibility, including Vice President and General Manager, at Medtronic plc, a global healthcare products company and manufacturer of medical devices and +supplies, over a period of 16 years. From April 2012 to January 2017, Mr. Hutton was Vice President and General Manager of Neurosurgery, where he oversaw the operations of the approximately $1 billion Neurosurgery business unit. From 2008 +to 2012, he grew from Senior Director of Global Marketing to Vice President and Business Leader of the Surgical Navigation and Intra-Operative Imaging business. Mr. Hutton holds a B.A. from the College of Health and Human Sciences, Department +of Health and Kinesiology at Purdue University. In March 2021, Mr. Hutton was named a Significant Sig by Sigma Chi International Fraternity. Mr. Hutton was named a Top 25 Biotech CEO of 2021 and 2022 by the Healthcare Technology Report in +February 2021 and February 2022, respectively. In January 2021, Mr. Hutton was named 2020 CEO of the Year-USA by CEO Monthly Magazine. In July 2011, Mr. Hutton received the Medtronic plc Wallin +Leadership Award for his focus on talent development, business performance, and his personal and intentional demonstration of leadership. +We believe that Mr. Hutton is qualified to serve on our board of directors because of his experience in leadership and management roles +at our Company, as well as his experience as a board member in the healthcare and medical device industries. +John Patience +has served as a Director of the Company since June 2008 and as Chairman of the Board since September 2020. Mr. Patience currently serves as a director (since 2012) of Accelerate Diagnostics, Inc., an in vitro diagnostics company +(Accelerate Diagnostics). Mr. Patience served as a director of Ventana Medical Systems, Inc. (Ventana), from 1989 and as Vice Chairman from 1999 until Ventana’s acquisition by Roche in 2008. Mr. Patience also served as a director +of Stericycle, Inc. since its founding in 1989 to June 2018. Mr. Patience is a founding partner of Crabtree Partners, a private equity investment partnership in Lake Forest, Illinois, and an angel investor. He was also previously a partner of a +venture capital investment firm that provided both Ventana and Stericycle, Inc. with early-stage funding. Mr. Patience was also previously a partner at the consulting firm McKinsey & Company, Inc., specializing in healthcare. +Mr. Patience holds a B.A. in Liberal Arts and an L.L.B. from the University of Sydney, Australia, and an M.B.A. from the University of Pennsylvania’s Wharton School of Business. +We believe that Mr. Patience is qualified to serve on our board of directors because of his experience in leadership and management roles +in the field of medicine, as well as his experience as a board member and investor in companies in the healthcare industry. +Continuing Directors +Class II Directors – Term Expiring at the 2025 Annual Meeting +Lawrence T. Kennedy, Jr. +has served as a Director of the Company since January 2023. Mr. Kennedy brings to Biodesix more than 25 years of broad operating, corporate finance, company creation and investment experience with a specific focus in the healthcare +industry. Mr. Kennedy currently serves as the Managing +2024 Proxy Statement +10 +Table of Contents +Partner and Chief Executive Officer of Westwood Management, a private investment and wealth management firm directing a diverse investment portfolio across a range of alternative and traditional +asset classes. Prior to his role at Westwood Management, Mr. Kennedy was the co-founder, Chief Financial Officer and chairman of Health Carousel, a talent management company with a leading portfolio of +healthcare staffing and workforce solution businesses. Mr. Kennedy currently serves on the boards of directors of Healthcare for Kids, Caliber Healthcare Solutions, Revolution 4.0 and Health Carousel. Mr. Kennedy has received an M.B.A. +from Duke University’s Fuqua School of Business and a B.A. from Colgate University. +We believe that Mr. Kennedy is qualified to +serve on our board of directors because of his experience in leadership and management roles in the field of healthcare, as well as his experience as a board member and investor in companies in the healthcare industry. +Matthew Strobeck, Ph.D . has served as a Director of the Company since January 2012. Dr. Strobeck is currently the Managing +Partner of Birchview Capital LP, an investment management company. In addition, Dr. Strobeck is currently a director of QuidelOrtho Corporation (Quidel), Accelerate Diagnostics, Monteris Medical Corporation and the Schuler Education Foundation. +Dr. Strobeck was a director of Yield 10 Biosciences from 2012 to 2017. Dr. Strobeck received a B.S. from St. Lawrence University, a Ph.D. from the University of Cincinnati, an M.S. from the Harvard +University-MIT Health Sciences and Technology Program, and an M.S. from the MIT Sloan School of Management. +We believe that Dr. Strobeck is qualified to serve on our board of directors because of his experience in leadership and management roles +at medical technology companies, as well as his experience as a board member and investor in the medical technology industry. +Charles Watts, M.D . has served as a Director of the Company since July 2019. Until his retirement, Dr. Watts served as +Chief Medical Officer at Northwestern Memorial Hospital and Associate Dean for Clinical Affairs at the Feinberg School of Medicine, Northwestern University (Northwestern) from 2001 to 2011. Prior to his tenure at Northwestern, Dr. Watts served +as Chief of Clinical Affairs and Associate Dean at the University of Michigan Medical Center. He also previously served as Executive in Residence for the Health Management Academy and as an active faculty member of a national physician leadership +program. Dr. Watts served as a director of Providence Health and Services (Seattle, Washington) from 2012 to 2016 where he chaired the Quality and Patient Safety Improvement Committee, and served as a Trustee of Swedish Health Services until +May 2017, when he accepted an appointment as interim Chief Medical Officer, serving in that capacity until June 2019. He currently serves as chairman of the Institute for Systems Biology board and served as a director of Accelerate Diagnostics until +2023. Dr. Watts received his medical degree from the University of Michigan. +We believe that Dr. Watts is qualified to serve on +our board of directors because of his experience in leadership and management roles in the field of medicine, as well as his experience as a board member in the healthcare industry. +Class III Directors – Term Expiring at the 2026 Annual Meeting +Jean M. Franchi has served as a Director of the Company since April 2020. Ms. Franchi is currently Chief Financial Officer +of Disc Medicine, Inc., a clinical stage company focused on hematologic diseases, prior to which she served as Chief Financial Officer of Replimune Group, Inc. (Replimune) from 2019 to 2023, a biotechnology company developing oncolytic immuno-gene +therapies. Prior to Replimune, Ms. Franchi was Chief Financial Officer at Merrimack Pharmaceuticals, Inc., a biopharmaceutical company, from 2017 to 2019, Dimension Therapeutics, Inc., a gene therapy company, from 2015 to 2017, and Good Start +Genetics, Inc., a molecular genetic information company, from 2012 to 2015. From 1995 to 2011, Ms. Franchi held various positions at Genzyme Corporation, including Senior Vice President of Corporate Finance, Senior Vice President of Business +Unit Finance, and Vice President of Finance and Controller, Product Line and International Group. +2024 Proxy Statement +11 +Table of Contents +Ms. Franchi currently serves on the board of directors of VectorY Therapeutics. Ms. Franchi also served on the board of directors of Biophytis S.A. through July 2021, Visioneering +Technologies, Inc. through December 2022 and Flamingo Therapeutics through March 2024. Ms. Franchi received her B.A. in Accounting from Hofstra University. +We believe that Ms. Franchi is qualified to serve on our board of directors because of her experience in leadership and management roles +in the healthcare industry as well as her experience holding finance-related roles of increasing responsibility. +Hany +Massarany has served as a Director of the Company since July 2020. Mr. Massarany currently serves as both a director (since 2020) and chairman (since February 2023) of Accelerate Diagnostics. Mr. Massarany was President and Chief +Executive Officer of GenMark Diagnostics, Inc., a provider of multiplex molecular diagnostic solutions, from April 2011 to March 2020. From February 2009 to April 2011, Mr. Massarany served as President at Ventana and Head of Roche Tissue +Diagnostics, a division of F. Hoffman-La Roche Ltd. focused on manufacturing instruments and reagents that automate tissue processing and slide staining diagnostics for cancer. From 1999 to 2009, +Mr. Massarany held various global leadership positions with Ventana, including Chief Operating Officer, Executive Vice President, Worldwide Operations, Senior Vice President, Corporate Strategy and Development, and Vice President, North +American Commercial Operations. Mr. Massarany also held executive management positions with Bayer Diagnostics and Chiron Diagnostics, working in both the Asia Pacific region and the United States. Mr. Massarany served on the board of +directors of GenMark Diagnostics, Inc. from May 2011 to February 2020. Mr. Massarany earned a B.S. in Microbiology and Immunology from Monash University in Australia and an M.B.A. from Melbourne University. +We believe that Mr. Massarany is qualified to serve on our board of directors because of his experience in leadership and management +roles, and experience as a board member, in the healthcare industry. +Jack Schuler has served as a Director of the Company +since June 2008. Mr. Schuler served as a director of Ventana from 1991 and as chairman of the board from 1995 until Ventana’s acquisition by Roche in 2008. Prior to joining Ventana, Mr. Schuler was President and Chief Operating +Officer of Abbott Laboratories, a diversified healthcare company, which he joined in 1972 and where he held a number of management and marketing positions, also serving as a director from April 1985 to August 1989. Mr. Schuler is the co-founder of Crabtree Partners, a private investment partnership based in Lake Forest, Illinois, and the president and co-founder of the Schuler Scholar Program. +Additionally, Mr. Schuler has served as a director of Medtronic plc (lead director), Stericycle, Inc. (chairman), Hansen Medical, Inc. and Quidel, and currently serves as a director (since 2012) of Accelerate Diagnostics. Mr. Schuler holds +a B.S. in Mechanical Engineering from Tufts University and an M.B.A. from Stanford University Graduate School of Business. +We believe +that Mr. Schuler is qualified to serve on our board of directors because of his experience in leadership and management roles in the healthcare industry, as well as his experience as a board member in the healthcare and medical device +industries. +Board Composition +In accordance with our amended and restated certificate of incorporation, our board of directors is divided into three classes with staggered, +three-year terms. At each annual meeting of stockholders, the successors to directors whose terms then expire will be elected to serve from the time of election and qualification until the third annual meeting following election. Our directors are +divided among the three classes as follows: +• +the Class I directors are Jon Faiz Kayyem, Ph.D., John Patience and Scott Hutton, and their terms will +expire at the Annual Meeting; +2024 Proxy Statement +12 +Table of Contents +• +the Class II directors are Matthew Strobeck, Ph.D., Charles Watts, M.D., and Lawrence T. Kennedy, Jr., and +their terms expire at the 2025 annual meeting of stockholders; and +• +the Class III directors are Jean Franchi, Hany Massarany and Jack Schuler, and their terms will expire at +the 2026 annual meeting of stockholders. +Our amended and restated certificate of incorporation and amended and restated +bylaws provide that the authorized number of directors may be changed only by resolution of the board of directors. Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so +that, as nearly as possible, each class will consist of one third of the directors. Each director’s term continues until the election and qualification of his or her successor, or, if sooner, his or her death, resignation or removal. +Director Independence +Under the listing requirements and rules of Nasdaq Stock Market (Nasdaq), independent directors must comprise a majority of our board of +directors as a listed company within one year of the closing of our initial public offering. +Our board of directors has undertaken a +review of its composition, the composition of its committees and the independence of each director. Based upon information requested from and provided by each director concerning his or her background, employment and affiliations, including family +relationships, our board of directors has determined that Ms. Franchi, Messrs. Massarany, Schuler, Patience and Kennedy and Drs. Kayyem, Strobeck and Watts do not have any relationships that would interfere with the exercise of independent +judgment in carrying out the responsibilities of a director and that each of these directors is “independent” as that term is defined under the applicable listing requirements and rules of Nasdaq. In making this determination, our board of +directors considered the current and prior relationships that each non-employee director has with our Company and all other facts and circumstances our board of directors deemed relevant in determining their +independence, including the beneficial ownership of our capital stock by each non-employee director. +Board Leadership Structure +Our corporate governance guidelines provide our board of +directors with flexibility to combine or separate the positions of Chairman of the board of directors and the Chief Executive Officer and/or the implementation of a lead director in accordance with its determination that utilizing one or the other +structure would be in the best interests of the Company. Mr. Patience currently serves as the independent Chairman of our board of directors. Our board of directors believes that separating these positions reinforces the independence of our +board of directors from management, creates an environment that encourages objective oversight of management’s performance and enhances the effectiveness of our board of directors as a whole. +Role of our Board of Directors in Risk Oversight +Our board of directors is responsible for overseeing the overall risk management process at Biodesix. The day-to-day responsibility for managing risks and exposures resides with our executive management team while our board committees and our board of directors as a whole participate in the oversight process. The +risk oversight process includes receiving regular reports from committees and management to enable our board of directors to understand management’s risk assessment and mitigation processes, which includes areas of potential material risk, +including long-term strategic and operational planning, strategic biopharmaceutical partnerships, executive development and evaluation, regulatory and legal compliance, information technology (including cybersecurity), financial reporting and +internal controls and reputational risk. Our board of directors focuses on +2024 Proxy Statement +13 +Table of Contents +the overall risks affecting us, and each of its standing committees has been delegated responsibility for oversight of specific risks that fall within its areas of responsibility. For example: +• +Our audit committee is responsible for overseeing our major financial, legal and regulatory risk exposures, which +spans a variety of areas including litigation, regulatory compliance, financial reporting, insurance and cybersecurity. Our audit committee also oversees the steps management has taken to monitor and control such exposures, including guidelines and +policies for assessing and managing risk and related compliance efforts. +• +Our nominating and corporate governance committee oversees the management of risks associated with our overall +compliance and corporate governance practices and the independence and composition of our board of directors, including monitoring the effectiveness of our corporate governance guidelines and cybersecurity risk profile and other policies such as our +code of conduct and overseeing our environmental and sustainability efforts and progress. +• +Our compensation committee regularly assesses risks arising from our compensation plans, policies and programs, +including whether any such plans encourage excessive or inappropriate risk-taking. +While each committee is responsible +for evaluating certain risks and overseeing the management of such risks, the full board of directors is regularly informed through committee reports about such risks. +Meetings of our Board of Directors +Our board of directors held five meetings during 2023. Each incumbent director attended at least 75% of the aggregate total number of +meetings of the board of directors and the committees on which he or she served held during the portion of 2023 for which he or she was a director or committee member. We encourage our directors to attend our annual meetings of stockholders. +Six directors, including our Chief Executive Officer, Mr. +Hutton, attended our 2023 annual meeting of stockholders. +Committees of our Board of Directors +Our board of directors has established an audit committee, a compensation committee and a nominating and corporate governance +committee. Our board of directors may establish other committees to facilitate the management of our business. The composition and functions of each committee are described below. Members serve on these committees until their resignation or until +otherwise determined by our board of directors. The charter of each committee is available on our corporate website at www.biodesix.com in the Investors section under “Governance—Governance Highlights.” Reference to our website does +not constitute incorporation by reference of the information contained at or accessible through our website into this proxy statement. +2024 Proxy Statement +14 +Table of Contents +Committee Composition and Meetings +The following table provides current membership and 2023 meeting information for each committee of our board of directors: +Name: +Audit Committee +Compensation +Committee +Nominating and Corporate +Governance Committee +Jean Franchi +Chair +X +Jon Faiz Kayyem, Ph.D. +X +Lawrence T. Kennedy, Jr. +X +Hany Massarany +X +Chair +John Patience +X +Jack Schuler +X +Matthew Strobeck, Ph.D. +X +Chair +Charles Watts, M.D. +X +Total meetings held in 2023 +4 +7 +4 +Audit Committee +Our audit committee consists of Ms. Franchi, Messrs. Kennedy and Massarany and Dr. Strobeck, each of whom our board of +directors has determined satisfies the independence requirements under Nasdaq listing rules and Rule 10A-3(b)(1)(ii) of the Exchange Act. The chair of our audit committee is Ms. Franchi, whom our board of +directors has determined is an “audit committee financial expert” within the meaning of the SEC regulations. Each member of our audit committee can read and understand fundamental financial statements in accordance with applicable listing +standards. In arriving at these determinations, our board of directors has examined each audit committee member’s scope of experience and the nature of her or his employment in the corporate finance sector. The functions of this committee +include: +• +helping our board of directors oversee our corporate accounting and financial reporting processes; +• +reviewing and discussing with our management the adequacy and effectiveness of our disclosure controls and +procedures; +• +assisting with design and implementation of our risk assessment functions; +• +evaluating the qualifications, performance and independence of our independent registered public accounting firm +and deciding whether to retain its services; +• +monitoring the rotation of partners of our independent registered public accounting firm on our engagement team +as required by law; +• +discussing the scope and results of the audit with the independent registered public accounting firm, and +reviewing, with management and the independent accountants, our interim and year-end results; +• +developing procedures for employees to submit concerns anonymously about questionable accounting or audit +matters; +• +reviewing related-party transactions; +• +approving, or as permitted, pre-approving, audit and permissible non-audit services to be performed by our independent registered public accounting firm; and +2024 Proxy Statement +15 +Table of Contents +• +reviewing and assessing, at least annually, the performance of the audit committee and adequacy of its charter. +Compensation Committee +Our compensation committee consists of Messrs. Massarany and Patience and Drs. Kayyem and Watts, and the chair of our compensation committee +is Mr. Massarany. Our board of directors has determined that each of Messrs. Massarany and Patience and Drs. Kayyem and Watts is independent under the applicable Nasdaq listing rules and is a +“non-employee director” as defined in Rule 16b-3 promulgated under the Exchange Act. The functions of this committee include: +• +reviewing, modifying and overseeing overall compensation strategy and policies; +• +reviewing and approving the compensation arrangements and other terms of employment of our chief executive +officer, other executive officers and senior management, as appropriate; +• +reviewing and recommending to the full board of directors the compensation of our directors; +• +appointing and overseeing the work of compensation consultants, legal counsel or any other advisors and +consultants engaged for the purpose of advising the compensation committee; +• +reviewing, recommending to the full board of directors, as appropriate, and administering equity award plans, +compensation plans and similar programs, as well as modification or termination of plans and programs; +• +establishing policies with respect to equity compensation arrangements; +• +reviewing and evaluating with the chief executive officer and the full board of directors the succession plans +for our executive officers; and +• +reviewing and assessing, at least annually, the performance of the compensation committee and the adequacy of its +charter. +Compensation Committee Interlocks and Insider Participation +None of the members of the compensation committee is currently, or has been at any time during 2023, one of our officers or +employees. None of our executive officers currently serve, or has served during 2023, as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving as a member of our board of directors +or compensation committee. +Nominating and Corporate Governance Committee +Our nominating and corporate governance committee consists of Ms. Franchi, Dr. Strobeck and Mr. Schuler, and the chair of our +nominating and corporate governance committee is Dr. Strobeck. Our board of directors has determined that Ms. Franchi, Dr. Strobeck and Mr. Schuler are independent under the applicable Nasdaq listing rules. The functions of this +committee include: +• +reviewing periodically and evaluating director performance of our board of directors and its applicable +committees, and recommending to our board of directors and management areas for improvement; +• +identifying, evaluating, nominating and recommending individuals for membership on our board of directors; +2024 Proxy Statement +16 +Table of Contents +• +reviewing with our chief executive officer the plans for succession to the offices of our executive officers and +make recommendations to our board of directors with respect to the selection of appropriate individuals to succeed to these positions; +• +reviewing and recommending to our board of directors any amendments to our corporate governance policies; +• +monitoring our cybersecurity risk profile, receiving periodic updates from management on all matters related to +cybersecurity, and reporting to our full Board of Directors on an annual or as necessary basis; and +• +reviewing and assessing, at least annually, the performance of the nominating and corporate governance committee +and the adequacy of its charter. +Director Nomination Process +Selection and Nomination Process +Our board of directors is responsible for nominating members for election to our board of directors by our stockholders at our annual meetings +of stockholders. Whenever a vacancy occurs on our board of directors, whether due to a newly created director position or the death, resignation, removal or retirement of an existing director, our board of directors is authorized to select a person +to fill the vacancy to serve as a director until the annual meeting of stockholders at which the director’s term expires and until the election and qualification of his or her successor or, if sooner, his or her death, resignation or removal. +Any increase or decrease in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors. +Criteria for Board Membership +The board of directors and the nominating and corporate governance committee will determine the appropriate characteristics, skills and +experience for the board of directors as a whole and for its individual members. The board of directors and the nominating and corporate governance committee will consider the minimum general criteria set forth below, and may add any specific +additional criteria with respect to specific searches, in selecting candidates and existing directors for service on the board of directors. An acceptable candidate may not fully satisfy all of the criteria, but is expected to satisfy nearly all of +them. While the nominating and corporate governance committee does not have a formal policy in this regard, the diversity of the board of the directors is a consideration in evaluating candidates for director positions, among others. +The board of directors and the nominating and corporate governance committee believe that candidates for director should have certain minimum +qualifications, including being able to read and understand basic financial statements, being over 21 years of age and having the highest personal integrity and ethics. In considering candidates, the board of directors and the nominating and +corporate governance committee intend to consider such factors as possessing relevant expertise upon which to be able to offer advice and guidance to management, having sufficient time to devote to the affairs of the Company, demonstrated excellence +in his or her field, having the ability to exercise sound business judgment and having the commitment to rigorously represent the long-term interests of our stockholders. +The board of directors and the nominating and corporate governance committee review candidates for director nomination in the context of the +current composition of the board of directors, the operating requirements of the Company and the long-term interests of our stockholders. In conducting this assessment, the board of directors and the nominating and corporate governance committee +consider diversity, age, skills, and such other factors as it deems appropriate given the current needs of the board of directors and the Company to +2024 Proxy Statement +17 +Table of Contents +maintain a balance of knowledge, experience and capability. In the case of incumbent directors whose terms of office are set to expire, the board of directors and the nominating and corporate +governance committee review such directors’ overall service to the Company during their term, including the number of meetings attended, level of participation, quality of performance, and any other relationships and transactions that might +impair such directors’ independence. In the case of new director candidates, the board of directors and the nominating and corporate governance committee also determine whether the nominee must be independent for purposes of any stock exchange +on which any of the Company’s capital stock is listed. +Stockholder Recommendations and Nominations +Stockholders who wish to recommend candidates may contact the nominating and corporate governance committee in the manner described below +under “Board and Corporate Governance Matters—Stockholder Communications with our Board of Directors.” Stockholder nominations must be made according to the procedures required under our bylaws and described in this proxy statement +under the heading “Additional Information—Stockholder Proposals and Nominations for Next Year’s Annual Meeting of Stockholders.” Stockholder-recommended candidates and stockholder nominees whose nominations comply with these +procedures will be evaluated by our nominating and corporate governance committee in the same manner as other nominees. +Board Diversity Matrix +The table below provides certain highlights of the composition of our board of directors members and +nominees as of March 25, 2024. Nasdaq listing requirements require each listed company to have, or explain why it does not have, two diverse directors on the board, including at least one diverse director who self-identifies as female and at +least one diverse director who self-identifies as an underrepresented minority or LGBTQ+, or for smaller reporting companies, two female directors. Companies listed on the Nasdaq Global Market must have at least one diverse director by +December 31, 2023 and two diverse directors by December 31, 2025. As of March 25, 2024, our board of directors has one diverse director, and we intend to be fully compliant with Nasdaq’s diversity requirement by December 31, +2025. Each of the categories listed in the below table has the meaning as it is used in Nasdaq Listing Rule 5605(f). To see our Board Diversity Matrix as of March 24, 2023, please see our proxy statement filed with the SEC on April 12, +2023. +Board Diversity Matrix as of March 25, 2024 +Total Number of Directors +Female +Male +Non-Binary +Did Not Disclose Gender +Part I: Gender Identity +Directors +1 +8 +- +- +Part II: Demographic Background +African American or Black +- +- +- +- +Alaskan Native or Native American +- +- +- +- +Asian +- +- +- +- +Hispanic or Latinx +- +- +- +- +Native Hawaiian or Pacific Islander +White +1 +8 +- +- +Two or More Races or Ethnicities +LGBTQ+ +- +- +- +- +Did Not Disclose Demographic Background +- +- +- +- +2024 Proxy Statement +18 +Table of Contents +Executive Officers +Set forth below is biographical information with respect to each current executive officer of the Company, except Mr. Hutton, our +President and Chief Executive Officer. Mr. Hutton also serves as a director of the Company, and his biographical information is available above in the section titled “Overview of Our Nominees and Continuing Directors—Director +Nominees.” +Robin Harper Cowie , age 44. Ms. Harper Cowie has served as our Chief Financial Officer since April +2017. She has been with the Company in multiple financial and reimbursement positions since March 2011, serving as Vice President of Finance from February 2016 to April 2017, Vice President of Reimbursement & Health Economics from February +2015 to February 2016, Senior Director of Reimbursement from January 2014 to February 2015, and Director of Reimbursement from March 2011 to January 2014. Prior to joining Biodesix, Ms. Harper Cowie held a leadership role in payer and +government relations at Precision Therapeutics, Inc. Ms. Harper Cowie’s background includes corporate finance, managed care and payer relations, reimbursement and regulatory policy, and revenue cycle operations. Additionally, she spent +several years as a researcher at the University of Pittsburgh Medical Center. Ms. Harper has also served on the board of the Colorado Bioscience Association since 2023. Ms. Harper Cowie holds a B.S. in Molecular Biology from the University +of Pittsburgh, and an M.B.A. in Finance from the Joseph M. Katz Graduate School of Business from the University of Pittsburgh. +Kieran O’Kane , age 47. Mr. O’Kane has served as our Chief Commercial Officer since March 2020 and has been with +the Company in multiple marketing management roles since February 2018. From April 2016 to February 2018, prior to joining Biodesix, Mr. O’Kane led the Global Diagnostics Marketing team at NanoString Technologies, a biotechnology company +focused in developing cancer diagnostic tools. He is a highly experienced strategic and tactical global sales and marketing leader for both in-line and pipeline products with a career focus in oncology. +Mr. O’Kane has held commercial leadership positions and managed multiple new product launches at Biotheranostics, Cell Therapeutics, Eisai, Cephalon, Bristol-Myers Squibb, and Roche. Mr. O’Kane received a B.S. in Pharmacology at +King’s College, University of London. +Code of Business Conduct and Ethics +We have adopted a Code of Business Conduct and Ethics (the Code of Conduct) that applies to all of our employees, officers (including our +principal executive officer, principal financial officer and principal accounting officer or controller, or persons performing similar functions), and directors. Stockholders may request a free copy of our Code of Business Conduct and Ethics by +contacting Biodesix, Inc., Attention: Chief Financial Officer, 919 West Dillon Rd., Louisville, Colorado 80027. We intend to disclose future amendments to certain provisions of our Code of Conduct, or waivers of such provisions, applicable to any +principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions, and our directors, on our website at www.biodesix.com. Reference to our website does not constitute +incorporation by reference of the information contained at or accessible through our website into this proxy statement. +Corporate Governance Guidelines +We have adopted written corporate governance guidelines which provide the framework for our +corporate governance, along with our amended and restated certificate of incorporation, amended and restated bylaws, committee charters and other key governance practices and policies. Our corporate governance guidelines cover a range of topics +including, but not limited to, board composition, independence and selection of directors, board membership criteria, conduct of board meetings, board committee composition and functions, board assessment, director compensation and succession +planning. Our corporate governance guidelines will be reviewed at least annually by our nominating and corporate governance committee and any proposed changes will be recommended to our full board of directors for approval. A copy of our corporate +governance guidelines is +2024 Proxy Statement +19 +Table of Contents +available on our corporate website at www.biodesix.com in the Investor section under “Governance—Governance Highlights.” Reference to our website does not constitute incorporation +by reference of the information contained at or accessible through our website into this proxy statement. +Anti-Hedging and Anti-Pledging Policy +Our insider trading policy prohibits our directors, executive officers and other employees from engaging in hedging transactions or other +inherently speculative transactions with respect to Company securities, such as short sales or transactions in put or call options. Our directors, executive officers and other employees are also prohibited from holding Company securities in a margin +account or pledging company securities as collateral for a loan. +Stockholder Communications with our +Board of Directors +Any stockholder or other interested party who wishes to communicate with our board of directors or any +individual director may send written communications to our board of directors or such director c/o Corporate Secretary, Biodesix, Inc., 919 West Dillon Rd., Louisville, CO 80027. The communication must include the stockholder’s name, address +and an indication that the person is our stockholder. The Corporate Secretary will review any communications received from stockholders and will forward such communications to the appropriate director or directors, or committee of our board of +directors, based on the subject matter. Communications that are deemed inappropriate (such as communications that are commercial or frivolous in nature) will not be forwarded. In addition, communications that appear to be unduly hostile, +intimidating, threatening, illegal or similarly inappropriate will not be forwarded. +Certain +Relationships and Related-Party Transactions +The following is a summary of the transactions since January 1, 2023 to which we +have been a participant in which the amount involved in the transaction exceeds or will exceed $120,000 and in which any of our directors, director nominees, executive officers, or holders of more than 5% of our capital stock, or any immediate +family member of, or person sharing the household with, any of these individuals, had or will have a direct or indirect material interest, with certain exceptions, other than compensation arrangements, which are under the section of this proxy +statement captioned “Executive Compensation.” +Subscription Agreements +On August 3, 2023, we entered into subscription agreements with a consortium of investors, including all members of our board of +directors, certain members of the Company’s management team, including our Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer, for the issuance and sale by the Company of an aggregate of 16,975,298 shares at a +purchase price of $1.62 per share in a private placement offering, for an aggregate purchase price of $27.5 million. The net proceeds were used, among other things, to fund the commercial expansion of the Company’s sales and research and +development business units, and for general corporate purposes. +Investor Rights Agreement +In October 2018, we entered into an amended and restated investor rights agreement (IRA) with certain holders of our preferred stock and +common stock, including certain holders of 5% of our capital stock, and including certain members of, and affiliates of, our directors and certain of our executive officers. The IRA provides the holders of our preferred stock with certain +registration rights. After the closing of our initial public offering, the holders of 20,090,745 shares of common stock issuable from conversion of outstanding preferred stock, became entitled to rights with respect to the registration of their +shares of common stock under the Securities Act under this agreement. +2024 Proxy Statement +20 +Table of Contents +Indemnification of Directors and Executive Officers +We have entered into indemnification agreements with each of our directors and executive officers in connection with our initial public +offering or the start of their service on our board. The indemnification agreements and our bylaws will require us to indemnify our directors against certain liabilities, costs and expenses to the fullest extent not prohibited by DGCL, and have +purchased directors’ and officers’ liability insurance. Subject to very limited exceptions, our bylaws will also require us to advance expenses incurred by our directors and officers. +Policies and Procedures for Related-Party Transactions +Our audit committee has the primary responsibility for the review, approval and oversight of any “related-party transaction,” which +is any transaction, arrangement or relationship (or series of similar transactions, arrangements or relationships) in which we are, were or will be a participant and the amount involved exceeds $120,000, and in which the related person has, had or +will have a direct or indirect material interest. We adopted a written related-party transaction policy effective October 2020. Under our related-party transaction policy, our management is required to submit any related-party transaction not +previously approved or ratified by our audit committee to our audit committee. In approving or rejecting the proposed transactions, our audit committee takes into account all of the relevant facts and circumstances available. All of the transactions +described in this section, except for certain equity award grants, occurred prior to the adoption of this policy. +Private +Placement Transaction +On April 5, 2024, we entered into securities purchase agreements with a consortium of investors, +including members of our board of directors, certain members of the Company’s management team, including our Chief Executive Officer, Chief Financial Officer and Chief Commercial Officer, for the issuance and sale by the Company of 760,857 +shares of Series A Preferred Stock at a price of $46.00 per share. On April 5, 2024 we also entered into a registration rights agreement with the consortium of investors, pursuant to which the investors are entitled to certain resale +registration rights with respect to shares of our common stock underlying the Series A Preferred Stock that will be held by such investors. +2024 Proxy Statement +21 +Table of Contents +EQUITY COMPENSATION PLAN INFORMATION +The following table summarizes the number of outstanding stock options and restricted stock unit (RSU) awards granted to our +employees, consultants, and directors, as well as the number of shares of common stock remaining available for future issuance, under our equity compensation plans in effect as of December 31, 2023. +Plan Category: +Number of +securities to be +issued upon exercise of +outstanding options +(a) +Weighted-average +exercise price of +outstanding options +(b)($) +Number of securities +remaining available for +issuance under equity +compensation plans +(excluding securities +reflected in +column +(a)) +Equity compensation plans approved by security holders (1) +5,820,680 +(2) +$ +3.17 +(3) +1,269,317 +(4) +Equity compensation plans not approved by security +holders +—  +—  +—  +Total +5,820,680 +$ +3.17 +1,269,317 +(1) +Includes the 2006 Employee, Director and Consultant Stock Plan (2006 Incentive Plan), the 2016 Equity Incentive +Plan (2016 Incentive Plan), the 2020 Equity Incentive Plan (2020 Incentive Plan), the 2020 Employee Stock Purchase Plan (ESPP), the 2011 Second Amended and Restated +Bonus-to-Options Program and the 2015 Third Amended and Restated Bonus-to-Options +Program. +(2) +Includes 79,104 RSUs that were outstanding on December 31, 2023 under the 2016 Incentive Plan and 2,649,951 +RSUs that were outstanding on December 31, 2023 under the 2020 Incentive Plan. RSU awards may be settled only for shares of common stock on a one-for-one basis. +(3) +Only option awards were used in computing the weighted-average exercise price. +(4) +This amount represents 960,305 shares of common stock available for issuance under the 2020 Incentive Plan and +309,012 shares of common stock available for issuance under the ESPP, 216,506 of which were subject to purchase under the offering period in effect as of December 31, 2023, which offering period ended on February 29, 2024. Awards available +for grant under the Company’s 2020 Incentive Plan include stock options, stock appreciation rights, restricted stock, RSUs, other stock awards, performance awards, and any combination of the foregoing awards. The number of shares of our common +stock reserved for issuance under our 2020 Incentive Plan will automatically increase on the first day of each fiscal year by 4% of the number of shares of common stock outstanding on the immediately preceding December 31 or such lesser amount +as is determined by our board of directors. The ESPP provides the opportunity for eligible coworkers to acquire shares of our common stock at a discount. The number of shares of our common stock reserved for issuance under our ESPP will +automatically increase on the first day of each fiscal year by the lesser of 1% of the number of shares of common stock outstanding on the immediately preceding December 31, 338,106 shares of our common stock or such lesser amount as is +determined by our board of directors. +2024 Proxy Statement +22 +Table of Contents +DIRECTOR COMPENSATION +Non-Employee Director Compensation Policy +The following summarizes our non-employee director compensation policy, which was amended in the first +quarter of 2023. Our employee director receives no additional compensation for service on our board of directors. +● Annual Retainers : +– +Each non-employee director was entitled to a retainer in the amount of +$10,000 for the period of January 1, 2023 to March 31, 2023, and the Audit Committee Chair, Compensation Committee Chair, and Nominating and Corporate Governance Committee Chair were entitled to an additional retainer in the amount of +$5,000, $3,750 and $2,500, respectively, for such period. Non-employee directors elected to receive this retainer in the form of RSUs, which were granted on January 3, 2023, valued based on the closing +price of our common stock on the date of grant, and vested on March 31, 2023. If a non-employee director became a director after January 1, 2023, his or her RSU grant was prorated based on the period +of the non-employee director’ service on our board during the quarter. The closing price of our common stock on January 3, 2023 was $2.05. Based on this price, it was determined that each non-employee director other than Mr. Kennedy was entitled to a grant of 4,878 RSUs. In addition, the Audit Committee Chair, Compensation Committee Chair, and Nominating and Corporate Governance Committee Chair +were entitled to a grant of 2,439 RSUs, 1,829 RSUs, and 1,219 RSUs, respectively. Mr. Kennedy received a prorated grant of 4,769 RSUs based on the closing price of our common stock on January 3, 2023. +– +For service from April 1, 2023 to March 31, 2024, each +non-employee director is entitled to receive annual retainers in the amount summarized in the table below. +Position +Annual Cash Retainer +Board Member +$ +40,000 +Chair of the Board of Directors +$ +0 +Committee Chairs: +Audit +$ +20,000 +Compensation +$ +15,000 +Nominating and Corporate Governance +$ +10,000 +Committee Members: +Audit +$ +0 +Compensation +$ +0 +Nominating and Corporate Governance +$ +0 +– +For service from April 1, 2023 to March 31, 2024, +non-employee directors could elect to receive annual retainers in cash or equity, or a mixture of 50% cash and 50% equity. Annual retainers paid in cash would be paid in equal quarterly installments, in +arrears following the end of each quarter in which the service was performed. Equity grants made in respect of annual retainers could have been in the form of stock options or RSUs, or an equal mixture of stock options and RSUs, were granted as of +the date of our 2023 annual meeting of stockholders, were valued based on the average price of our common stock over a 90-day period preceding the date of grant, and vested on March 31, 2024. If a non-employee director became a director after April 1, 2023, his or her annual retainers were pro-rated based on the period of the +non-employee director’s service on our board of directors during the year. +– +For service from April 1, 2023 to March 31, 2024, all of our +non-employee directors elected to receive their annual retainers with respect to service on our board of directors or any of its committees in the form of RSUs. The average closing price of our common stock +for the 90-day +2024 Proxy Statement +23 +Table of Contents +period beginning on February 22, 2023 and ending on May 22, 2023 was $1.73. Based on this price, it was determined that each non-employee +director was entitled to a grant of 23,099 RSUs. In addition, the Audit Committee Chair, Compensation Committee Chair, and Nominating and Corporate Governance Committee Chair were entitled to a grant of 11,549 RSUs, 8,662 RSUs, and 5,774 RSUs, +respectively. +● +Equity Compensation : +– +Upon appointment to our board of directors, each non-employee director +is entitled to receive an initial stock option grant having a Black Scholes value of $187,500, determined as of the date of grant based on the average price of our common stock over a 90-day period preceding +the date of grant, with 40% vesting on the two-year anniversary of the grant date and the remainder vesting ratably on each subsequent monthly anniversary of the grant date for 36 months, subject to such +director’s continuous service through each applicable vesting date. +– +Upon appointment to our board of directors, each non-employee director +is also entitled to receive an initial RSU grant valued at $187,500 as of the date of grant based on the average price of our common stock over a 90-day period preceding the date of grant, which will vest on +the one-year anniversary of the grant date subject to such director’s continuous service through such date. +– +In January of 2023, each of Ms. Franchi, Drs. Kayyem, Strobeck and Watts, and Messrs. Massarany, Patience +and Schuler received a grant of 62,500 RSUs, with a grant date value of $143,750, in respect of the portion of their annual RSU grant for 2022 that was not made because there were not sufficient shares available under the 2020 Incentive Plan to make +such grants as of the date of the 2022 annual meeting of stockholders. The awards vested on March 31, 2023, at the time that all 2022 annual RSU awards vested. +– +For service from April 1, 2023 to March 31, 2024, each +non-employee director continuing his or her service on our board of directors following the annual meeting of stockholders was entitled to receive an annual RSU grant valued at $192,500 as of the date of the +2023 annual meeting of stockholders, based on the average price of our common stock over the preceding 90 days, which vested on March 31, 2024, subject to such director’s continuous service through such date. The average closing price of +our common stock for the 90-day period beginning on February 22, 2023 and ending on May 22, 2023 was $1.73. Based on this price, it was determined that each +non-employee director was entitled to a grant of 111,164 RSUs, but there were not sufficient shares available under the 2020 Incentive Plan as of such date to make such grants. The board of directors therefore +granted 5,774 RSUs to each non-employee director on May 23, 2023, with a grant date value of $6,756, and granted the remaining 105,389 RSUs to each non-employee +director on January 1, 2024, with a grant date value of $193,916 after the number of shares of our common stock reserved for issuance under the 2020 Incentive Plan automatically increased in accordance with such plan’s terms. +– +Notwithstanding the vesting schedules described above, each +non-employee director who remains in continuous service until a change of control (as defined in our 2020 Incentive Plan) will become fully vested in all then-outstanding equity awards. In addition, annual +equity grants and equity grants in respect of annual retainers will vest on a prorated basis in the event a director resigns or otherwise experiences a termination of service other than for cause. +● Expense Reimbursement : Our non-employee directors are also reimbursed for their reasonable out-of-pocket travel expenses to cover in-person attendance at and +participation in board and committee meetings. +The non-employee director compensation policy was +further amended effective as of April 1, 2024 to provide that non-employee directors may elect to receive annual retainers in cash or RSUs, or a mixture of cash and RSUs. In addition, initial equity +grants to be made after the effective date and annual equity grants to be +2024 Proxy Statement +24 +Table of Contents +made as of the date of the 2024 annual meeting of stockholders will be a mixture of stock options and RSUs, and the number of shares subject to the stock options and RSUs will be limited by a +maximum percentage of our outstanding common stock. +Director Deferred Compensation Plan +On December 21, 2021, our compensation committee adopted the 2021 Non-Employee Director Deferred +Compensation Plan (the Director Deferred Compensation Plan), an unfunded, non-qualified deferred compensation plan that allows our non-employee directors to defer RSU +awards that they receive. +Any RSU deferred will be credited as deferred units to the non-employee +director’s account as of the date on which it vests. Each deferred unit is credited with dividend equivalents equal to the dividends paid, if any, on our common stock, which are deemed reinvested in additional deferred units on the dividend +payment date. Deferred units will be appropriately adjusted in the event of any change in our common stock through merger, consolidation, or otherwise; a stock dividend; or a stock split, combination or other change in our common stock. +Payments will be made in shares of our common stock equal to the number of deferred units credited to the director’s account, with a cash +payment for any fractional deferred unit. A director may elect to receive deferred amounts in a lump sum within 90 days after either his or her separation from service or, alternatively the later of his or her separation from service or +January 1 of a calendar year elected by the director which may not be more than 15 years after the calendar year in which the director’s initial deferral election under the Director Deferred Compensation Plan was made. Within 90 days +following a non-employee director’s death, a lump sum equal to the then-remaining balance in his or her account will be made to his or her beneficiary. Within 10 business days after a change in control +(as defined in our 2020 Incentive Plan) and to the extent permitted by federal tax law, each non-employee director (or former non-employee director) will receive a cash +lump sum payment equal to the number of deferred units credited to his or her account on the date of the change in control, multiplied by the fair market value of one share of our common stock on such date. If payment within 10 business days +following a change in control is not permitted by federal tax laws, then payment will be made at the time and in the form that payment would have been made if a change in control had not occurred. +2023 Director Compensation Table +The following table sets forth information for the fiscal year ended December 31, 2023 regarding the compensation awarded to, earned by or +paid to our non-employee directors. The compensation received by our non-employee directors in respect of annual retainers and annual equity grants for 2023 service was +in the form of RSU awards. Each of Messrs. Schuler and Patience, and Drs. Kayyem and Watts received grants for a total of 96,251 RSUs. Dr. Strobeck received grants for a total of 103,244 RSUs. Mr. Massarany received grants for a total of +106,742 RSUs. Ms. Franchi received grants for a total of 110,239 RSUs. Mr. Kennedy received an initial stock option grant in respect of 124,998 shares of our common stock and an initial grant of 91,463 RSUs for his appointment to the board +of directors on January 3, 2023. In addition, Mr. Kennedy received grants for a total of 56,281 RSUs throughout 2023. Mr. Hutton, our Chief Executive Officer, does not receive any separate compensation for his service on our board of +directors. +Stock +Awards +Option +Awards +Total +Name +($) (1) +($) (2) +($) +Jean Franchi (3) +$ +206,104 +— +$ +206,104 +Jon Faiz Kayyem, Ph.D (3) +$ +187,575 +— +$ +187,575 +Hany Massarany (3) +$ +201,472 +— +$ +201,472 +John Patience (3) +$ +187,575 +— +$ +187,575 +Jack Schuler (3) +$ +187,575 +— +$ +187,575 +Matthew Strobeck, Ph.D (3) +$ +196,838 +— +$ +196,838 +Charles M. Watts, M.D (3) +$ +187,575 +— +$ +187,575 +Lawrence Kennedy (3)(4) +$ +277,510 +$ +187,589 +$ +465,099 +2024 Proxy Statement +25 +Table of Contents +(1) +The amounts reported represent the aggregate grant date fair market value of the RSUs, calculated in accordance +with FASB ASC Topic 718 based on the assumption that the value of each RSU granted on January 1, 2023, January 3, 2023, and May 23, 2023 was equal to $2.30, $2.05, and $1.17, respectively, with such amount being the closing price of +our common stock on the grant date. The assumptions used in calculating the grant date fair value of the award disclosed in this column are set forth in Note 12 of our audited financial statements included in the 2023 Annual Report on Form 10-K Item 8. “Financial Statements and Supplementary Data” for the year ended December 31, 2023. Pursuant to the Director Deferred Compensation Plan, +non-employee directors may choose to defer receipt of the shares to be issued in connection with settlement of the annual RSU award. Dr. Kayyem chose to defer receipt of 33,751 shares upon their vesting. +Mr. Massarany chose to defer receipt of 44,242 shares upon their vesting. Messrs. Schuler and Patience chose to defer receipt of 96,251 shares upon their vesting. Dr. Strobeck chose to defer receipt of 103,244 shares upon their vesting. +Mr. Massarany chose to defer receipt of 37,535 shares upon their vesting. Ms. Franchi chose to defer receipt of 110,239 upon their vesting. Mr. Kennedy chose to defer receipt of 147,744 shares upon their vesting. +(2) +The amounts reported represent the aggregate grant date fair market value of the stock options calculated in +accordance with FASB ASC Topic 718. The assumptions used in calculating the grant date fair value of the award disclosed in this column are set forth in Note 12 of our audited financial statements included in the 2023 Form 10-K Report under “Item 8. Financial Statements and Supplementary Data” for the year ended December 31, 2023. These amounts do not correspond to the actual value that may be recognized by the non-employee directors upon exercise of the applicable awards. +(3) +As of December 31, 2023, Ms. Franchi held options to purchase 29,363 shares of our common stock and +RSUs in respect of 219,940 shares of our common stock; Dr. Kayyem held options to purchase 77,406 shares of our common stock and RSUs in respect of 33,751 shares of our common stock; Mr. Massarany held options to purchase 60,946 shares of +our common stock and RSUs in respect of 70,610 shares of our common stock; Mr. Patience held options to purchase 46,102 shares of our common stock and RSUs in respect of 179,584 shares of our common stock; Mr. Schuler held options to +purchase 46,102 shares of our common stock and RSUs in respect of 179,584 shares of our common stock; Dr. Strobeck held options to purchase 11,717 shares of our common stock and RSUs in respect of 186,577 shares of our common stock; +Dr. Watts held options to purchase 95,910 shares of our common stock and RSUs in respect of 55,241 shares of our common stock; and Mr. Kennedy held options to purchase 124,998 shares of our common stock and RSUs in respect of 147,744 +shares of our common stock. +(4) +In connection with his appointment to the Board of Directors on January 3, 2023, Mr. Kennedy received +an initial equity grant in the form of stock options and RSUs. In addition, Mr. Kennedy received a prorated annual equity award in the form of RSUs. +2024 Proxy Statement +26 +Table of Contents +EXECUTIVE COMPENSATION +The following is a discussion of compensation arrangements of our named executive officers. This discussion contains forward-looking +statements that are based on our current plans, considerations, expectations, and determinations regarding future compensation programs. Actual compensation programs that we adopt may differ materially from currently planned programs as summarized +in this discussion. As an “emerging growth company” as defined in the JOBS Act, we are not required to include a Compensation Discussion and Analysis section and have elected to comply with the scaled back disclosure requirements +applicable to emerging growth companies. In addition, as an emerging growth company, we are not required to conduct votes seeking approval, on an advisory basis, of either the compensation of our named executive officers or the frequency with which +such votes must be conducted. +Overview +This section provides a discussion of the compensation paid or awarded to our Chief Executive Officer and our two other most highly compensated +executive officers as of December 31, 2023. We refer to these individuals as our “named executive officers.” For 2023, our named executive officers were: +• +Scott Hutton, President and Chief Executive Officer; +• +Robin Harper Cowie, Chief Financial Officer, Secretary and Treasurer; and +• +Kieran O’Kane, Chief Commercial Officer. +Our executive compensation program is intended to align executive compensation with our performance objectives and business strategy and to +enable us to attract, motivate, retain and reward executive officers who operate in a highly competitive and technologically challenging environment and whose contributions are critical to our long-term success. The compensation paid or awarded to +our executive officers is generally based on the assessment of each individual’s performance compared against the business objectives established for the fiscal year as well as our historical compensation practices. The compensation paid to +newly hired executive officers is primarily determined based on the negotiations of the parties as well as our historical compensation practices, and we seek fairness in total compensation paid to our executive officers. As a result, we benchmark +executive compensation against external and internal comparisons and look at the relationship between team member roles in the organization to determine appropriate compensation. For the year ended December 31, 2023, the material elements of +our executive compensation program were base salary, annual cash bonus and equity awards in the form of RSUs. +Performance-based, at risk +and variable compensation in the form of annual cash bonuses and equity-based compensation is a significant portion of the overall compensation paid to each named executive officer. Our annual cash bonuses are earned or vest only upon the +achievement of certain performance metrics. In addition, the value received from RSUs and stock options (if any) depends on our stock price. +We expect that our executive compensation program will continue to evolve over the coming years, while still supporting our overall business +and compensation objectives. The compensation committee of our board of directors oversees our executive compensation program. In addition, during the year ended December 31, 2023, the compensation committee utilized our independent executive +compensation consultant to advise us on the elements of our executive compensation program. +2024 Proxy Statement +27 +Table of Contents +Compensation of Named Executive Officers +Base Salary +Base salaries are intended to provide a level of compensation sufficient to attract and retain an effective management team, when considered in +combination with the other components of our executive compensation program. The relative levels of base salary for our named executive officers are designed to reflect each executive officer’s scope of responsibility and accountability to us. +Please see the “Salary” column in the Summary Compensation Table for the base salary amounts received by each named executive officer during the years ended December 31, 2022 and December 31, 2023. +As of January 1, 2023, Mr. Hutton’s annual base salary was $515,000, Ms. Harper Cowie’s annual base salary was +$355,000, and Mr. O’Kane’s annual base salary was $335,000. The compensation committee did not increase base salaries for the named executive officers in 2023 as the result of efforts to conserve cash resources. +Annual Cash Bonuses +We provide our senior leadership team with short-term incentive compensation through an annual cash bonus program. Annual bonus compensation +holds executives accountable, rewards the executives based on actual business results and helps create a “pay for performance” culture. Our annual cash bonus program provides cash incentive award opportunities based on the achievement of +performance goals approved by our compensation committee at the beginning of each fiscal year. +Generally, our compensation committee +establishes a Company-based performance metric as a threshold vesting criterion for any payouts for a particular annual bonus period. For 2023, individual performance goals did not factor into determining payouts for the annual bonus period. +For 2023, the compensation committee determined that the Company’s short-term incentive compensation would be based on the achievement of +three financial objectives, (i) total revenue determined in accordance with U.S. GAAP, (ii) gross margin percentage and (iii) total operating expense (excluding certain non-cash expenses). +Actual results were measured at year end against targeted outcomes. Mr. Hutton’s, Ms. Harper Cowie’s and Mr. O’Kane’s 2023 bonus targets as a percentage of annual base salary were 100%, 50% and 60%, respectively. +Based on our 2023 performance, our compensation committee determined, and our board of directors approved, a corporate funding percentage under our annual cash bonus program equal to approximately 38.1% of the target bonus opportunity. +Under the Company’s 2021 Senior Management Bonus to Equity Plan, eligible executives, including each of our named executive officers, were +permitted to elect to receive 25%, 50%, 75% or 100% of the annual bonus earned during 2023 in the form of a bonus-to-options award, subject to an individual cap equal to +the executive’s target annual bonus or any maximum dollar amount approved by the Company or the executive for such year. Effective as of December 14, 2022, the plan was amended to further provide that the amount of the annual bonus an +eligible executive may elect to receive in the form of a bonus-to-options award may also be subject to a maximum percentage approved by the Company for such year. The +maximum percentage that applied for 2023 was 50%. The bonus-to-options awards, if any, are fully vested on the grant date and have an exercise price equal to the fair +market value of our common stock on the grant date. The program reflects our commitment to a “pay for performance” philosophy and further aligns our executive compensation program with the long-term interests of our stockholders because an +executive who participates foregoes a portion of his or her annual cash bonus in exchange for an option award that will be valuable only if the stock price increases. +Pursuant to elections made in 2022, each named executive officer received a portion of their respective annual bonuses earned in 2023 in the +form of a bonus-to-options award instead of in cash. For annual bonuses earned in 2023, the number of shares of the Company’s common stock subject to each bonus-to-options award granted in 2024 was determined by multiplying the cash value of the bonus that was elected to be received in the form of an option award by three, and +then dividing the product of that calculation by $1.63 (the Company’s +2024 Proxy Statement +28 +Table of Contents +average stock price during 2023, calculated based on the daily closing price of our publicly traded common stock). Accordingly, each of Mr. Hutton, Ms. Harper Cowie and +Mr. O’Kane received a payout under the 2023 annual cash bonus program in cash and/or a bonus-to-options award, as illustrated below: +2023 +Name +Incentive +Cash Payout +Shares Subject to Bonus- +to-Option +Award +Scott Hutton +$ +98,058 +180,926 +Robin Harper Cowie +$ +33,797 +62,358 +Kieran O’Kane +$ +57,407 +35,307 +Equity Awards +In the year ended December 31, 2023, the compensation committee awarded Mr. Hutton, Ms. Harper Cowie and Mr. O’Kane, +751,042 RSUs, 194,141 RSUs and 122,135 RSUs, respectively, which vest ratably on an annual basis for four years from the vesting commencement date, subject to continued service through the applicable vesting date. +For 2024, the compensation committee has determined to award a blend of stock options and RSUs to each of our named executive officers. +Stock Option Exchange Program +At the Company’s 2023 Annual Meeting of Stockholders on May 23, 2023, shareholders approved a stock option exchange program. As a +result, on June 23, 2023, the Company offered eligible employees the opportunity to participate in a stock option exchange program under which they could tender eligible stock options that were substantially “out-of-the-money” (those with an exercise price greater than $10.00 per share) for exchange and, if accepted, receive a grant of new stock options +exercisable for fewer shares of our common stock with an exercise price equal to the closing price of our common stock reported on Nasdaq on the date the new option was granted. The new stock options had different vesting terms than the stock +options that were tendered for exchange, as well as a new expiration date. The stock option exchange program closed in accordance with its terms on July 24, 2023 and the new stock options were granted on that date, after the program had closed, +with an exercise price of $1.20 per share. Non-employee directors were not eligible to participate in the stock option exchange program. +Mr. Hutton, Ms. Harper Cowie and Mr. O’Kane tendered eligible stock options in respect of 370,891, 132,963, and 56,654 +shares of our common stock, respectively, each with an exercise price of $20.67 per share, in exchange for new stock options in respect of 75,693, 27,138, and 11,564 shares of our common stock, respectively, each with an exercise price of $1.20 per +share. The incremental fair value of the new stock options, computed in accordance with FASB ASC Topic 718 on the grant date of the new stock options, was $8,056 for Mr. Hutton, $3,575 for Ms. Harper Cowie and $1,537 for +Mr. O’Kane. +Please see “Outstanding Equity Awards at Fiscal 2023 Year-End” +below for a summary of the outstanding equity awards held by each of the named executive officers as of 2023 year-end. +2024 Proxy Statement +29 +Table of Contents +2023 Summary Compensation Table +The following table shows information regarding the compensation of our named executive officers for services performed during the years ended +December 31, 2023 and 2022. +Name and Principal Position +Fiscal +Year +Salary +($) (1) +Stock +Awards +($) (2) +Option +Awards +($) (3) +Non-Equity +Incentive Plan +Compensation +($) (4) +All Other +Compensation +($) (5) +Total ($) +Scott Hutton +President and Chief +Executive Officer +2023 +515,000 +1,442,001 +233,622 +98,058 (6) +1,865 +2,290,546 +2022 +515,000 +1,441,997 +680,532 +114,869 (7) +2,134 +2,754,532 +Robin Harper Cowie +Chief Financial Officer, Secretary and Treasurer +2023 +355,000 +372,751 +81,319 +33,797 (8) +1,500 +844,367 +2022 +350,096 +372,749 +231,882 +39,140 (9) +1,633 +995,500 +Kieran O’Kane +Chief Commercial Officer (10) +2023 +335,000 +234,449 +45,555 +57,407 (11) +205 +672,666 +(1) +The amounts disclosed represent the dollar value of base salary earned by the named executive officer as of +December 31 of each applicable fiscal year. +(2) +The amounts disclosed represent the aggregate grant date fair value of RSU awards as calculated in accordance +with FASB ASC Topic 718. The assumptions used in calculating the grant date fair value of the award disclosed in this column are set forth in Note 12 of our audited financial statements included in the 2023 Annual Report on Form 10-K Item 8. “Financial Statements and Supplementary Data” for the year ended December 31, 2023. These amounts do not correspond to the actual value that may be realized by the named executive +officers upon vesting or exercise of the applicable awards. +(3) +The amounts disclosed represent the aggregate grant date fair value of awards, including an estimate of the +grant date fair value of bonus-to-options awards, as calculated in accordance with FASB ASC Topic 718 as well as the incremental fair value of the new stock options +granted to each of the named executive officers on July 24, 2023 as a result of the stock option exchange program described under “Compensation of Named Executive Officers – Equity Awards – Stock Option Exchange Program.” +The assumptions used in calculating the grant date fair value of the award disclosed in this column are set forth in Note 12 of our audited financial statements included in the 2023 Annual Report on Form 10-K +Item 8. “Financial Statements and Supplementary Data” for the year ended December 31, 2023. For the bonus-to-options awards, the estimated grant date fair +value was used to correspond to the treatment of such expense under U.S. GAAP in the 2023 Annual Report on Form 10-K, as the service inception period precedes the grant date. These amounts do not correspond to +the actual value that may be realized by the named executive officers upon vesting or exercise of the applicable awards. +(4) +Based on our 2022 and 2023 performance measured against the Company’s achievement of three financial +objectives, (i) total revenue determined in accordance with U.S. GAAP, (ii) gross margin percentage, and (iii) total operating expense (excluding certain non-cash expenses), and for 2022 only, +one commercial catalyst objective intended to incentivize the advancement of certain major projects and commercial objectives of the Company, our compensation committee determined, and our board of directors approved, payouts under the 2022 and 2023 +annual cash bonus program at a 65.5% and 38.1% achievement level, respectively. The Non-Equity Incentive Plan Compensation listed for each named +executive officer represents the annual cash bonus award for the 2022 and 2023 fiscal years after taking into consideration the election of each individual to participate in the bonus-to-options program. +2024 Proxy Statement +30 +Table of Contents +(5) +The amounts disclosed primarily represent an electronics allowance stipend and the tax gross-up on awards through the Company’s Wishlist Rewards Program, a peer-to-peer recognition program, received by each named +executive officer as of December 31 of each applicable fiscal year for specific contributions and demonstrating the Company’s core values. +(6) +At a 38.1% achievement level, Mr. Hutton was entitled to a payout under the 2023 annual cash bonus program +of $196,116. However, Mr. Hutton elected to receive a portion of his 2023 annual cash bonus in the form of an option award under the bonus-to-options program. In +accordance with Mr. Hutton’s election and the terms of the bonus-to-options program, Mr. Hutton received a cash payment of $98,058 in respect of his 2023 +annual cash bonus, as reflected in this column, and in place of the remaining amount, received an option award representing the right to purchase 180,926 shares of our common stock, the value of which is reflected in the “Option Awards” +column. +(7) +At a 65.5% achievement level, Mr. Hutton was entitled to a payout under the 2022 annual cash bonus program +of $337,202. However, Mr. Hutton elected to receive a portion of his 2022 annual cash bonus in the form of an option award under the bonus-to-options program. +Because the 2021 Senior Management Bonus to Equity Plan is a sub-plan of the 2020 Incentive Plan, any grants under the plan are subject to the overall availability of shares for grant under the 2020 Incentive +Plan. As a result, the number of shares of the Company’s common stock subject to each bonus-to-options award granted in 2023 was reduced by 12.1% with such portion +paid in cash. In accordance with Mr. Hutton’s election and the terms of the bonus-to-options program, Mr. Hutton received a cash payment of $114,869 in +respect of his 2022 annual cash bonus, as reflected in this column, and in place of the remaining amount, received an option award representing the right to purchase 435,668 shares of our common stock, the value of which is reflected in the +“Option Awards” column. +(8) +At a 38.1% achievement level, Ms. Harper Cowie was entitled to a payout under the 2023 annual cash bonus +program of $67,593. However, Ms. Harper Cowie elected to receive a portion of her 2023 annual cash bonus in the form of an option award under the bonus-to-options +program. In accordance with Ms. Harper Cowie’s election and the terms of the bonus-to-options program, Ms. Harper Cowie received a cash payment of $33,797 +in respect of her 2023 annual cash bonus, as reflected in this column, and in place of the remaining amount, received an option award representing the right to purchase 62,358 shares of our common stock, the value of which is reflected in the +“Option Awards” column. +(9) +At a 65.5% achievement level, Ms. Harper Cowie was entitled to a payout under the 2022 annual cash bonus +program of $114,897. However, Ms. Harper Cowie elected to receive a portion of her 2022 annual cash bonus in the form of an option award under the bonus-to-options +program. Because the 2021 Senior Management Bonus to Equity Plan is a sub-plan of the 2020 Incentive Plan, any grants under the plan are subject to the overall availability of shares for grant under the 2020 +Incentive Plan. As a result, the number of shares of the Company’s common stock subject to each bonus-to-options award granted in 2023 was reduced by 12.1% with +such portion paid in cash. In accordance with Ms. Harper Cowie’s election and the terms of the bonus-to-options program, Ms. Harper Cowie received a cash +payment of $39,140 in respect of her 2022 annual cash bonus, as reflected in this column, and in place of the remaining amount, received an option award representing the right to purchase 148,448 shares of our common stock, the value of which is +reflected in the “Option Awards” column. +(10) +Mr. O’Kane was not a named executive officer for the 2022 fiscal year. +(11) +At a 38.1% achievement level, Mr. O’Kane was entitled to a payout under the 2023 annual cash bonus +program of $76,542. However, Mr. O’Kane elected to receive a portion of his 2023 annual cash bonus in the form of an option award under the bonus-to-options +program. In accordance with Mr. O’Kane’s election and the terms of the bonus-to-options program, Mr. O’Kane received a cash payment of $57,407 +in respect of his 2023 annual cash bonus, as reflected in this column, and in place of the remaining amount, received an option award representing the right to purchase 35,307 shares of our common stock, the value of which is reflected in the +“Option Awards” column. +2024 Proxy Statement +31 +Table of Contents +Outstanding Equity Awards at Fiscal 2023 Year-End +The following table presents information regarding the outstanding equity awards held +by each of the named executive officers as of December 31, 2023. As of the year ended December 31, 2023, none of the named executive officers held any outstanding stock awards other than options and RSUs. +Option Awards +Stock Awards +Name +Grant +Date +Number of +Securities +Underlying +Unexercised +Options +(#) Exercisable +Number of +Securities +Underlying +Unexercised +Options +(#) Unexercisable +Equity +Incentive +Plan +Awards: +Number of +Securities +Underlying +Unexercised +Unearned +Options (#) +Option +Exercise +Price +($) +Option +Expiration +Date +Number of +Shares or Units +of Stock That +Have Not Vested +(#) +Market Value +of Shares or +Units of Stock +That Have +Not Vested +($) (7) +Scott Hutton +4/4/2018 +84,231 +– +– +0.42 +4/3/2028 +– +– +3/22/2019 +41,414 +701 (2) +– +0.77 +12/31/2028 +– +– +3/22/2019 +16,846 (4) +– +– +0.77 +12/31/2028 +– +– +4/15/2020 +118,769 +32,848 (1) +– +0.77 +4/14/2030 +– +– +2/8/2022 +– +– +– +– +– +109,908 (6) +202,231 +3/10/2022 +85,875 (5) +– +– +2.29 +3/9/2032 +– +– +2/8/2023 +– +– +– +– +– +751,042 (3) +1,381,917 +3/1/2023 +435,668 (5) +– +– +2.00 +2/2/2033 +– +– +7/24/2023 +– +48,733 (8) +– +1.20 +7/23/2033 +– +– +7/24/2023 +– +26,960 (9) +– +1.20 +7/23/2033 +– +– +Robin Harper Cowie +2/4/2014 +10,107 +– +– +4.40 +2/3/2024 +– +– +4/8/2015 +6,738 +– +– +4.40 +4/7/2025 +– +– +4/7/2016 +35,377 +– +– +0.84 +4/6/2026 +– +– +4/4/2018 +4,209 +– +– +0.42 +4/3/2028 +– +– +3/22/2019 +34,788 +589 (2) +– +0.77 +12/31/2028 +– +– +3/22/2019 +11,792 (4) +– +– +0.77 +12/31/2028 +– +– +4/15/2020 +23,758 +6,565 (1) +– +0.77 +4/14/2030 +– +– +2/8/2022 +– +– +– +– +– +28,411 (6) +52,276 +3/10/2022 +27,758 (5) +– +– +2.29 +3/9/2032 +– +– +2/8/2023 +– +– +– +– +– +194,141 (3) +357,219 +3/1/2023 +148,448 (5) +– +– +2.00 +2/28/2033 +– +– +7/24/2023 +– +20,659 (8) +– +1.20 +7/23/2033 +– +– +7/24/2023 +– +6,479 (9) +– +1.20 +7/23/2033 +– +– +Kieran O’Kane +4/4/2018 +12,634 +– +– +0.42 +4/3/2028 +– +– +3/22/2019 +12,424 +210 (1) +– +0.77 +12/31/2028 +– +– +4/15/2020 +29,511 +5,865 (1) +– +0.77 +4/14/2030 +– +– +2/8/2022 +– +– +– +– +– +13,405 (6) +24,665 +3/10/2022 +6,162 (5) +– +– +2.29 +3/9/2032 +– +– +2/8/2023 +– +– +– +– +– +122,135 (3) +224,728 +3/1/2023 +52,531 (5) +– +– +2.00 +2/28/2033 +– +– +7/24/2023 +– +8,864 (8) +– +1.20 +7/23/2033 +– +– +7/24/2023 +– +2,700 (9) +– +1.20 +7/23/2033 +– +– +(1) +These stock options vest in a series of 60 successive, equal monthly installments measured from the vesting +commencement date. +(2) +Two fifths of these time-vested options vest on the second anniversary of the vesting commencement date, with +the remaining balance vesting in a series of 36 successive equal monthly installments measured from the second anniversary of the vesting commencement date, subject to the award recipient’s continued employment through the applicable vesting +date. In September 2020, the board of directors amended these time-vested options such that 21/60 of the time-vested options vest on the date that is 21 months after the vesting commencement date, with the remaining balance vesting in a series of 39 +successive equal monthly installments measured from such date, subject to the award recipient’s continued employment through the applicable vesting date. +2024 Proxy Statement +32 +Table of Contents +(3) +These time-vested RSUs vest in a series of four successive equal annual installments measured from the vesting +commencement date, subject to the award recipient’s continued employment through the applicable vesting date. +(4) +In the year ended December 31, 2019, the board of directors awarded Mr. Hutton and Ms. Harper +Cowie performance-vested options representing the right to purchase 25,269 and 17,688 shares of our common stock, respectively. One third of these performance-vested options were eligible to vest after each of the first, second and third +anniversaries of the vesting commencement date, subject to the Company’s achievement of recognized revenue of at least $31 million, $67 million and $134 million for the years ended December 31, 2019, 2020 and 2021, +respectively. The board of directors has sole discretion to determine if the performance hurdles are met and to determine the vesting date, and shall make such determinations within 90 days after the end of the applicable fiscal year. For the 2019 +tranche, the board of directors determined that the performance hurdle was not met. As a result, one third of each of Mr. Hutton’s and Ms. Harper Cowie’s awards were cancelled, and two thirds of each of Mr. Hutton’s and +Ms. Harper Cowie’s awards remained outstanding. In addition, in September 2020 and in light of the impact of the COVID-19 pandemic on the Company’s operations and other considerations, the board +of directors amended the performance-vested options to adjust the performance hurdles for the 2020 tranche and the 2021 tranche to $28.6 million and $51.5 million, respectively. For each of the 2020 tranche and the 2021 tranche, the board +of directors determined that the applicable performance hurdles were met and one third of each of Mr. Hutton’s and Ms. Harper Cowie’s performance-vested option award became fully vested and exercisable on January 1, 2021 and +January 1, 2022, respectively. +(5) +100% vested at Date of Grant. +(6) +These time-vested RSUs vest in a series of 16 successive equal quarterly installments measured from the vesting +commencement date, subject to the award recipient’s continued employment through the applicable vesting date. +(7) +The dollar amount is calculated based on $1.84 per share, the closing price of our common stock on +December 30, 2023. +(8) +These time-vested options vest on August 1, 2024 (the first day of the month following the first +anniversary of the month of grant under the stock option exchange program described under “Compensation of Named Executive Officers – Equity Awards – Stock Option Exchange Program”). +(9) +These time-vested options vest in a series of 31 successive equal monthly installments beginning on +August 1, 2024 (the first day of the month following the first anniversary of the month of grant under the stock option exchange program described under “Compensation of Named Executive Officers – Equity Awards – Stock Option +Exchange Program”). The number of installments is equal to the number of months that were remaining the in the vesting schedule of the stock options that were tendered under the stock option exchange program as of immediately prior to the +exchange. +Additional Matters +Offer Letter Agreements +We entered in an offer letter agreement with each of Mr. Hutton and Ms. Harper Cowie on February 23, 2020. The offer letter +agreements, as amended in November of 2020, provide for annual salary subject to the discretion of our board of directors, an annual cash incentive opportunity targeted at 100% of annual base salary for Mr. Hutton and 50% of annual base salary +for Ms. Harper Cowie, and eligibility to participate in our employee benefit plans, subject to the terms of those plans. The offer letter agreements also provide for certain severance benefits. +On April 23, 2024, each of Mr. Hutton and Ms. Harper Cowie entered into an Executive Severance and Change in Control Agreement which +replaces and supersedes their offer letter agreement. Please see “Executive Severance and Change in Control Agreements” below for a summary of the terms of such agreements. +2024 Proxy Statement +33 +Table of Contents +Executive Severance and Change in Control Agreements +On April 16, 2024, the Company approved a form of Executive Severance and Change in Control Agreement that it intends to enter into with +each of its executive officers. On April 23, 2024, each of Mr. Hutton, Ms. Harper Cowie and Mr. O’Kane entered into an Executive Severance and Change in Control Agreement with the Company. +In the event an executive who is party to an Executive Severance and Change in Control Agreement experiences a termination of employment +without cause (as defined in the Executive Severance and Change in Control Agreement), other than within three months prior to, or one year following, the consummation of a change in control (as defined in the Executive Severance and Change in +Control Agreement), the executive will be entitled to receive: +• +base salary continuation for a period of nine months or, in the case of the chief executive officer, 12 months; +• +for the chief executive officer only, a lump sum cash payment equal to 100% of his or her target annual cash +incentive for the year in which the qualifying termination of employment occurs; and +• +Company-paid COBRA premium payments for the executive and his or her covered dependents for up to 12 months. +In the event the executive’s employment is terminated without cause or the executive resigns for good reason (as +defined in the Executive Severance and Change in Control Agreement) within three months prior to, or one year following, the consummation of a change in control, the executive will be entitled to receive: +• +a lump sum cash payment equal to 100%, or in the case of the chief executive officer, 150%, of his or her +then-current annual base salary; +• +a lump sum cash payment equal to 100%, or in the case of the chief executive officer, 150%, of his or her target +annual cash incentive for the year in which the qualifying termination of employment occurs; +• +a lump sum cash payment equal to 12 months, or in the case of the chief executive officer, 18 months, of COBRA +premium payments for the executive and his or her covered dependents; +• +accelerated vesting of all equity awards which vest based solely on the executive’s continued service with +us; and +• +for the chief executive officer and chief financial officer only, a lump sum cash payment of $15,000 to help +defray legal fees, tax and accounting fees, executive outplacement services, and other costs associated with transitional matters. +The payment of severance benefits under the Executive Severance and Change in Control Agreements is subject to a general release of claims by +the executive in favor of the Company and its affiliates. +We believe the severance benefits payable under the Executive Severance and +Change in Control Agreements provide reasonable compensation in the form of severance pay and certain limited benefits to our executive officers in the event of a qualifying termination of employment to facilitate the transition to new employment. +In addition, we believe that these benefits help maintain our executive officers’ continued focus on their assigned duties to maximize stockholder value in the event of a potential change in control transaction, and mitigate the risk of +subsequent disputes or litigation. The terms and conditions of these agreements were approved by the compensation committee after an analysis of competitive market data in consultation with our independent executive compensation consultant. +The Company has filed the form of Executive Severance and Change in Control Agreement as Exhibit 10.42 to the Company’s Registration +Statement on Form S-1 filed April 23, 2024. The foregoing summary does not purport to be complete and is qualified in its entirety by reference to the full text of such form. +401(k) Plan +The +Company participates in a multiple employer tax-qualified 401(k) savings plan which allows participants to defer eligible compensation up to the maximum amount allowed under Internal Revenue Service +guidelines. The Company does not currently make any discretionary or employer matching contributions under the plan. +2024 Proxy Statement +34 +Table of Contents +Clawback Policy +During the year ended December 31, 2023, the Company adopted a Dodd-Frank Clawback Policy to comply with SEC and Nasdaq listing rules. +Under that policy, the Company is required in certain situations to recoup incentive compensation paid or payable to certain current or former executive officers of the Company, including the named executive officers, in the event of an accounting +restatement. +2024 Proxy Statement +35 +Table of Contents +STOCK OWNERSHIP +Security Ownership of Certain Beneficial Owners and Management +The following table sets forth certain information with respect to the beneficial ownership of our common stock as of March 1, 2024: +• +each of our named executive officers; +• +each of our directors; +• +all of our directors and executive officers as a group; and +• +each person, or group of affiliated persons, known by us to beneficially own more than 5% of our common stock. +We have determined beneficial ownership in accordance with the rules of the SEC, and therefore it represents sole or +shared voting or investment power with respect to our securities. Unless otherwise indicated below, to our knowledge, the persons and entities named in the table have sole voting and sole investment power with respect to all shares that they +beneficially owned, subject to community property laws where applicable. We have deemed shares of common stock subject to options that are currently exercisable or exercisable within 60 days of March 1, 2024 and RSUs representing the right to +receive shares of common stock that were deferred under the Director Deferred Compensation Plan or that vest within 60 days of March 1, 2024, to be outstanding and to be beneficially owned by the person holding the option or restricted stock +unit for the purpose of computing the percentage ownership of that person but have not treated them as outstanding for the purpose of computing the percentage ownership of any other person. +We have based percentage ownership of common stock on 97,158,580 shares of common stock outstanding as of March 1, 2024. Unless otherwise +indicated, the address for each beneficial owner listed in the table below is c/o Biodesix, Inc., 919 West Dillon Rd., Louisville, CO 80027. +Shares Beneficially +Owned +Name and Address of Beneficial Owner +Shares  +%   +Principal Stockholders: +Jack Schuler and entities affiliated with Jack Schuler (1) +31,038,797 +31.8 +% +Lawrence T. Kennedy, Jr. and entities affiliated with Lawrence T. Kennedy, Jr. (2) +21,253,376 +21.8 +% +John Patience and entities affiliated with John Patience (3) +7,412,498 +7.6 +% +Matthew Strobeck and entities affiliated with Matthew Strobeck (4) +5,672,000 +5.8 +% +Directors and Executive Officers: +Jack Schuler (5) +31,038,797 +31.8 +% +Lawrence T. Kennedy, Jr. (6) +21,253,376 +21.8 +% +John Patience (7) +7,412,498 +7.6 +% +Matthew Strobeck, Ph.D. (8) +5,672,000 +5.8 +% +Scott Hutton (9) +1,476,198 +1.5 +% +Jon Faiz Kayyem, Ph.D. (10) +547,220 +* +Hany Massarany (11) +544,985 +* +Robin Harper Cowie (12) +535,386 +* +Charles Watts, M.D. (13) +469,612 +* +Jean Franchi (14) +431,192 +* +Kieran O’Kane (15) +233,126 +* +All directors and named executive officers as a group (13 persons) +69,946,274 +69.2 +% +* +Represents beneficial ownership of less than 1%. +2024 Proxy Statement +36 +Table of Contents +(1) +Consists of (a) 46,102 shares of common stock issuable upon the exercise of options held by Jack Schuler that +are vested and exercisable within 60 days of March 1, 2024, (b) RSUs held by Mr. Schuler representing the right to receive 284,973 shares of common stock that will vest within 60 days of March 1, 2024 and be deferred under the +Director Deferred Compensation Plan until separation from service to the Company, and (c) 30,707,722 shares of common stock held by Jack W. Schuler Living Trust. +(2) +Consists of (a) 9,582,783 shares of common stock held by Lawrence T. Kennedy, Jr. Revocable Trust UAD 6/19/01 +and as amended from time to time, (b) 10,528,753 shares of common stock held by Lawrence T. Kennedy, Jr. Perpetuity Trust UAD 6/30/16, (c) 166,666 shares of common stock held by KFDI-B LLC, (d) 722,041 shares +of common stock held by Lair BDSX GRAT 2022-03-02, and (e) RSUs held by Mr. Kennedy representing the right to receive 253,133 shares of common stock that will +vest within 60 days of March 1, 2024 and be deferred under the Director Deferred Compensation Plan. +(3) +Consists of (a) 337,926 shares of common stock held directly by John Patience, (b) 46,102 shares of common +stock issuable upon the exercise of options held by Mr. Patience that are vested and exercisable within 60 days of March 1, 2024, (c) RSUs held by Mr. Patience representing the right to receive 284,973 shares of common stock that will +vest within 60 days of March 1, 2024 and be deferred under the Director Deferred Compensation Plan until separation from service to the Company, (d) 2,078,298 shares of common stock held by Patience Enterprises LP, (e) 4,612,211 shares of +common stock held by John Patience Living Trust, dated July 23, 1993, and (f) 52,988 shares of common stock held by Diane Patience. +(4) +Consists of (a) 11,717 shares of common stock issuable upon the exercise of options held by Dr. Matthew +Strobeck that are vested and exercisable within 60 days of March 1, 2024, (b) RSUs held by Dr. Strobeck representing the right to receive 291,966 shares of common stock that will vest within 60 days of March 1, 2024 and be deferred +under the Director Deferred Compensation Plan until separation from service to the Company, (c) 2,542,928 shares of common stock held by Dr. Strobeck, (d) 2,275,199 shares of common stock held by Birchview Fund LLC, (e) 33,513 shares of common +stock held by Birchview Capital Separately Managed Account, (f) 40,665 shares of common stock held by Clajer Capital LLC and (g) 119,003 shares of common stock held in each of four UTMA accounts (for an aggregate amount of 476,012 shares). +(5) +Consists of 31,038,797 shares beneficially owned by Jack Schuler and entities affiliated with Mr. Schuler, +as set forth in footnote (1). +(6) +Consists of 21,253,376 shares beneficially owned by Lawrence T. Kennedy, Jr. and entities affiliated with +Mr. Kennedy, as set forth in footnote (2). +(7) +Consists of 7,412,498 shares beneficially owned by John Patience and entities affiliated with +Mr. Patience, as set forth in footnote (3). +(8) +Consists of 5,672,000 shares beneficially owned by Dr. Matthew Strobeck and entities affiliated with +Dr. Strobeck, as set forth in footnote (4). +(9) +Consists of (a) 1,000,866 shares of common stock issuable upon the exercise of options held by Scott Hutton +that are vested and exercisable within 60 days of March 1, 2024, and (b) 475,332 shares of common stock held by Mr. Hutton. +(10) +Consists of (a) 50,543 shares of common stock issuable upon the exercise of options held by Dr. Jon Faiz +Kayyem that are vested and exercisable within 60 days of March 1, 2024, (b) RSUs held by Dr. Kayyem representing the right to receive 139,140 shares of common stock that will vest within 60 days of March 1, 2024 and be deferred under +the Director Deferred Compensation Plan until separation from service to the Company, (c) 180,085 shares of common stock held by The Jon Faiz Kayyem Revocable Trust, for which Dr. Kayyem and his spouse serve as +co-trustees, and (d) 177,452 shares of common stock held by Dr. Kayyem. Dr. Kayyem disclaims beneficial ownership of the shares held by The Jon Faiz Kayyem Revocable Trust. +(11) +Consists of (a) 60,946 shares of common stock issuable upon the exercise of options held by Hany Massarany that +are vested and exercisable within 60 days of March 1, 2024, (b) RSUs held by Mr. Massarany representing the right to receive 149,631 shares of common stock that will vest within 60 days of March 1, 2024 and be deferred under the Director +Deferred Compensation Plan until separation from service to the Company, (c) RSUs held by Mr. Massarany representing the right to receive 19,777 shares of common stock which are vested and will generally settle in shares of common stock on the +earlier of July 1, 2025 and separation from service to the Company, and (d) 283,767 shares of common stock held by Mr. Massarany. +2024 Proxy Statement +37 +Table of Contents +(12) +Consists of (a) 365,883 shares of common stock issuable upon the exercise of options held by Robin Harper Cowie +that are vested and exercisable within 60 days of March 1, 2024, and (b) 169,503 shares of common stock held by Ms. Harper Cowie. +(13) +Consists of (a) 95,913 shares of common stock issuable upon the exercise of options held by Dr. Charles Watts +that are vested and exercisable within 60 days of March 1, 2024, (b) RSUs held by Dr. Watts representing the right to receive 134,262 shares of common stock that will vest within 60 days of March 1, 2024, (c) RSUs held by Dr. Watts +representing the right to receive 25,051 shares of common stock which are vested and will generally settle in shares of common stock on the earlier of July 16, 2024 and separation from service to the Company, and (d) 214,389 shares of common +stock held by Dr. Watts. +(14) +Consists of (a) 29,363 shares of common stock issuable upon the exercise of options held by Jean Franchi that +are vested and exercisable within 60 days of March 1, 2024, (b) RSUs held by Ms. Franchi representing the right to receive 298,961 shares of common stock that will vest within 60 days of March 1, 2024 and be deferred under the Director +Deferred Compensation Plan until separation from service to the Company, (c) RSUs held by Ms. Franchi representing the right to receive 21,096 shares of common stock which are vested and will generally settle in shares of common stock on the earlier +of April 1, 2025 and separation from service to the Company, and (d) 81,772 shares of common stock held by Ms. Franchi. +(15) +Consists of (a) 158,623 shares of common stock issuable upon the exercise of options held by Kieran O’Kane +that are vested and exercisable within 60 days of March 1, 2024, and (b) 74,503 shares of common stock held by Mr. O’Kane. +Delinquent Section 16(a) Reports +Based solely on a review of the +Section 16(a) reports filed electronically with the SEC, and written representations from our directors and executive officers that no other reports were required, all reports filed by or on behalf of our directors and executive officers and +any persons holding more than ten percent of our common stock were filed on a timely basis under Section 16(a), other than an inadvertent late reporting of: one transaction on one Form 4 by Jack Schuler, one of our directors; two transactions +on one Form 4 by Scott Hutton, our Chief Executive Officer and one of our directors; two transactions on one Form 4 by Robin Harper Cowie, our Chief Financial Officer; two transactions on one Form 4 by Gary Pestano, our Chief Development Officer; +and two transactions on one Form 4 by Kieran O’Kane, our Chief Commercial Officer. +2024 Proxy Statement +38 +Table of Contents +AUDIT MATTERS +Proposal Two: Ratification of Appointment of Independent Registered Public Accounting Firm +Our audit committee has appointed KPMG LLP as our independent registered public accounting firm for the year ending December 31, 2024. +Although stockholder ratification of the appointment of KPMG LLP is not required by our bylaws, other governing documents or the law, our board of directors considers the appointment of our independent registered public accounting firm to be an +important matter of stockholder concern and is submitting the appointment of KPMG LLP for ratification by our stockholders as a matter of good corporate practice. If our stockholders fail to ratify the appointment, our audit committee will review +its future selection of KPMG LLP as its independent registered public accounting firm. Even if the appointment is ratified, our audit committee, in its discretion, may direct the appointment of a different independent registered public accounting +firm at any time during the year if they determine that such a change would be in the best interests of the Company and our stockholders. +Our board of directors considers the appointment of KPMG LLP as our independent registered public accounting firm for 2024 to be in the best +interests of the Company and our stockholders. We expect representatives of KPMG LLP to attend the Annual Meeting. They will have an opportunity to make a statement if they wish and will be available to respond to appropriate questions from +stockholders. +KPMG LLP has served as our independent registered public accounting firm since 2016. +Principal Accountant Fees and Services +The following is a summary of the fees and services provided by KPMG LLP to us for the years ended December 31, 2023 and 2022. +Year Ended December 31, +2023 +2022 +Audit Fees (1) +$ +451,899 +$ +423,415 +(2) +Audit-Related Fees +- +- +Tax Fees +- +- +All Other Fees +- +- +Total +$ +451,899 +$ +423,415 +(1) +Audit Fees consist of professional services rendered by KPMG LLP for the audits of our annual financial +statements and reviews of quarterly financial statements. +(2) +Includes $15,000 approved by Audit Committee in May 2023 for additional procedures associated with 2022. +Pre-Approval Policies and Procedures +Our audit committee is responsible for appointing, setting compensation for, and overseeing the work of our independent registered public +accounting firm. Our audit committee’s charter establishes a policy that all audit and permitted non-audit and tax services to be provided by our independent registered public accounting firm must be pre-approved by our audit committee. Our audit committee has pre-approved all such audit and permissible non-audit and tax services in +accordance with this policy for the years ended December 31, 2023 and 2022. As part of this review, our audit committee considers whether the provision of any such non-audit or tax services by KPMG LLP is +compatible with maintaining the independence of our independent registered public accounting firm. +2024 Proxy Statement +39 +Table of Contents +Our audit committee may delegate authority to +pre-approve services to one or more of its members, provided any decisions made by such member to grant pre-approvals must be presented to the full audit committee at +its next scheduled meeting. +Vote Required: +Ratification of the appointment of KPMG LLP as our independent registered public accounting firm for 2024 requires the affirmative vote of a majority of the shares present or represented by proxy and entitled to vote +at the Annual Meeting. Abstentions have the same impact as votes “Against” the proposal. Brokers have discretion to vote on this proposal. +Board Recommendation: +OUR BOARD OF DIRECTORS AND THE AUDIT COMMITTEE OF OUR BOARD OF DIRECTORS EACH UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS OUR INDEPENDENT REGISTERED +PUBLIC ACCOUNTING FIRM FOR 2024. +Report of the Audit Committee +The audit committee oversees our independent registered public accounting firm and assists our board of directors in fulfilling its oversight +responsibilities on matters relating to the integrity of our financial statements, our compliance with legal and regulatory requirements and the independent registered public accounting firm’s qualifications and independence by meeting +regularly with the independent registered public accounting firm and financial management personnel. Management is responsible for the preparation, presentation and integrity of our financial statements. +In fulfilling its oversight responsibilities, the audit committee: +• +reviewed and discussed our financial statements as of and for the year ended December 31, 2023 with +management and KPMG LLP; +• +discussed with KPMG LLP the matters required to be discussed by the applicable requirements of the Public Company +Accounting Oversight Board and the SEC; +• +received the written disclosures and the letter from KPMG LLP required by the applicable requirements of the +Public Company Accounting Oversight Board; and +• +discussed the independence of KPMG LLP with that firm. +Based on the audit committee’s review and discussions noted above, the audit committee recommended to our board of directors, and our +board of directors approved, that the audited financial statements be included in the 2023 Annual Report on Form 10-K for filing with the SEC. The audit committee also appointed KPMG LLP as our independent +registered public accounting firm for the fiscal year ending December 31, 2024. +Submitted by the audit committee of +our board of directors: +Jean Franchi, Chair +Lawrence T. Kennedy, Jr. +Hany Massarany +Matthew Strobeck, Ph.D. +2024 Proxy Statement +40 +Table of Contents +SERIES A PREFERRED STOCK CONVERSION AND +ISSUANCE +Proposal Three: Approval of the conversion of the Series A Preferred Stock into +shares of Common Stock +General +We entered into definitive agreements (the Securities Purchase Agreements) for a private placement with new and existing investors (the +Investors) to raise $35.0 million, pursuant to which we issued 760,857 shares of Series A Preferred Stock at a price of $46.00 per share of Series A Preferred Stock (the Private Placement). The Series A Preferred Stock is intended to have +rights that are generally equivalent to shares of our common stock, provided that the Series A Preferred Stock does not have the right to vote on most matters (including the election of directors). Subject to the approval of Proposal Three, each +share of Series A Preferred Stock will automatically convert into 40 shares of Common Stock, subject to certain beneficial ownership limitations set by each holder. This Proposal Three would provide the necessary approval to permit such conversion. +Concurrent with our entry into the Securities Purchase Agreements on April 5, 2024, we entered into a Registration Rights Agreement +(the RRA) with the Investors. Pursuant to the RRA, we intend to file a resale registration statement with the SEC. We will use our reasonable best efforts to cause this registration statement to be declared effective by the SEC as soon as +practicable following our Annual Meeting. Following the effectiveness of the registration statement, the shares subject to the registration statement will no longer constitute restricted securities and may be sold freely in the public markets, +subject to lapse on any related contractual restrictions related thereto of any Investor and, for shares of Common Stock issuable upon the conversion of Series A Preferred Stock, the approval of our stockholders of such conversion. The RRA also +contains customary terms, including an obligation to indemnify the Investors and certain affiliates from certain liabilities relating to any misstatements or omissions in the resale registration statement. +Shares Issuable Upon Conversion +30,434,280 shares of our common stock are issuable upon the conversion of the Series A Preferred Stock issued in the Private Placement. The +sale into the public market of the underlying Common Stock could materially and adversely affect the market price of our Common Stock. +Potential +Effects of the Proposal +If our stockholders do not approve this Proposal Three, the limitation on converting the Series A Preferred +Stock will remain in effect and neither we, nor the holders of such securities, shall be entitled to convert or exercise such securities into or for shares of common stock other than as allowable under the Certificate of Designation for the Series A +Preferred Stock. Your approval of the Proposal Three will assist us in meeting our obligations under the Securities Purchase Agreements. +Description +of Series A Preferred Stock +Conversion . Following stockholder approval of this Proposal Three, effective as of 5:00 p.m. +(Eastern time) on the third business day after the date on which such stockholder approval is received, each share of Series A Preferred Stock will automatically convert into 40 shares of Common Stock, subject to certain beneficial ownership +limitations, including that a holder of Series A Preferred Stock is prohibited from converting shares of Series A Preferred Stock into shares of Common Stock if, as a result of such conversion, such holder, together with its affiliates, would +beneficially own more than a specified percentage (initially set by the holder to a number up to 19.9% and thereafter adjusted) of the total number of shares of Common Stock issued and outstanding immediately after giving effect to such conversion. +2024 Proxy Statement +41 +Table of Contents +Voting Rights. Except as otherwise required by law (e.g. voting on a change to +the authorized shares of Series A Non-Voting Preferred Stock or the rights of such shares as required by Delaware General Corporation Law) and the Certificate of Designation, the Series A Preferred +Stock does not have voting rights. However, as long as any shares of Series A Preferred Stock are outstanding, we will not, without the affirmative vote of the holders of a majority of the then outstanding shares of the Series A Preferred Stock, +(a) alter or change adversely the powers, preferences or rights given to the Series A Preferred Stock, or alter or amend the Certificate of Designation, amend or repeal any provision of, or add any provision to, the Certificate of Incorporation +or our Bylaws, or file any articles of amendment, certificate of designations, preferences, limitations and relative rights of any series of our preferred stock, if such action would adversely alter or change the preferences, rights, privileges or +powers of, or restrictions provided for the benefit of the Series A Preferred Stock, regardless of whether any of the foregoing actions shall be by means of amendment to the Certificate of Incorporation or by merger, consolidation, recapitalization, +reclassification, conversion or otherwise, (b) issue further shares of Series A Preferred Stock or increase or decrease (other than by conversion) the number of authorized shares of Series A Preferred Stock, (c) prior to the stockholder +approval of the Conversion Proposal or at any time while at least 30% of the originally issued Series A Preferred Stock remains issued and outstanding, consummate either (A) any Fundamental Transaction (as defined in the Certificate of +Designation) or (B) any merger or consolidation of the Company or other business combination in which our stockholders immediately before such transaction do not hold at least a majority of our capital stock immediately after such transaction, +or (d) enter into any agreement with respect to any of the foregoing. +Dividends. Holders of Preferred Stock are entitled +to receive dividends on shares of Series A Preferred Stock equal, on +an as-if-converted-to-Common-Stock basis, and in the same form as dividends if +such dividends were to be paid on shares of the Common Stock. +Liquidation and Dissolution. The Series A Preferred Stock ranks +on parity with Common Stock upon any liquidation, dissolution or winding-up of the Company. +Reasons for Stockholder Approval. Our Common Stock is listed on The Nasdaq Global Market, and, as such, we are subject to +the applicable rules of the Nasdaq Stock Market, including Nasdaq Listing Rule 5635(d), which requires stockholder approval in connection with a 20% issuance at a price that is the lower of: (i) the Nasdaq Official Closing Price (as reflected +on Nasdaq.com) immediately preceding the signing of the binding agreement; or (ii) the average Nasdaq Official Closing Price of the common stock (as reflected on Nasdaq.com) for the five trading days immediately preceding the signing of the +binding agreement. +Beneficial Ownership Limitations. We are not seeking stockholder approval of a potential +“change in control” under Nasdaq Listing Rule 5635(b), which generally prohibits Nasdaq-listed companies from issuing common stock to a stockholder in a transaction that would cause the holder to beneficially own more than 20% of the +then-outstanding common stock (subject to certain exceptions). Assuming that Proposal Three is approved, the Series A Preferred Stock will continue to have a beneficial ownership conversion limit that would prevent a stockholder from converting its +shares if, as a result of such conversion, it would beneficially own a number of shares above its applicable conversion blocker (which cannot exceed 19.9% of the outstanding Common Stock). +Vote Required: +Approval of the conversion of the Series A Preferred Stock into shares of Common Stock requires the affirmative vote of a majority of the shares present or represented by proxy and entitled to vote at the Annual +Meeting. Abstentions have the same impact as votes “Against” the proposal. Brokers have discretion to vote on this proposal. +Board Recommendation: +OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE CONVERSION OF THE SERIES A PREFERRED STOCK INTO SHARES OF COMMON STOCK +2024 Proxy Statement +42 +Table of Contents +Proposal Four: Approval of the issuance of shares of Series +A Preferred Stock to certain directors and officers and any shares of the Company’s Common Stock issuable upon the conversion thereof +General +As mentioned above, on +April 5, 2024, we entered into Securities Purchase Agreements with new and existing investors. These investors included certain of our directors and funds affiliated with these directors and officer. The directors and officers were issued +126,788 shares of Series A Preferred Stock at a price of $46.00 per share of Series A Preferred Stock. +Reasons for Stockholder +Approval. Our Common Stock is listed on The Nasdaq Global Market, and, as such, we are subject to the applicable rules of the Nasdaq Stock Market, including Nasdaq Listing Rule 5635(c), which requires stockholder approval in +connection with certain non-public offerings involving the sale, issuance or potential issuance by a listed company of equity compensation. For this purpose, “equity compensation” includes Common +Stock (and/or securities convertible into or exercisable for Common Stock) issued to our officers, directors, employees or consultants at a discount to the market value of the Common Stock, and “market value” is the closing bid price +immediately preceding the time that the listed company enters into a binding agreement with such officer, director, employee or consultant to issue the equity compensation. The issuance of our Common Stock underlying the Series A Preferred Stock may +result in shares of our Common Stock being issuable to Scott Hutton, Robin Harper Cowie, Kieran O’Kane, Gary Pestano and Chris Vazquez, executive officers of the Company, and Lawrence Kennedy, Matt Strobeck, John Patience and Jack Schuler, +members of our Board of Directors, and certain of their affiliates and investment vehicles, upon conversion of their Series A Preferred Stock, at a price which may be deemed to be below the fair market value of our common stock at the time we sold +our Series A Preferred Stock to these holders (as described above). Thus, the issuance of such shares of common stock may be considered “equity compensation” under Nasdaq Listing Rule 5635(c). By approving this Proposal 4, you are +approving the proposal for purposes of the requirements under Nasdaq Listing Rule 5635(c), which may result in Messrs. Hutton, O’Kane, Pestano, Vazquez, Kennedy, Strobeck, Patience and Schuler and Ms. Harper Cowie, or one of their +affiliates, acquiring shares of our common stock at a price of less than fair market value. In order for their shares of common stock to be fully issued as contemplated by the Securities Purchase Agreements, stockholder approval is required because, +for purposes of the Nasdaq Listing Rule 5635(c), the issuance of the Series A Preferred Stock could result in shares of our Common Stock being issuable to Messrs. Hutton, O’Kane, Pestano, Vazquez, Kennedy, Strobeck, Patience and Schuler and +Ms. Harper Cowie, and certain of their affiliates, upon conversion of their Series A Preferred Stock. +The closing price of our +Common Stock immediately preceding the date of the Securities Purchase Agreements was $1.51 per share. +Vote Required: +Approval of the issuance of Series A Preferred Stock to certain directors and officers and any shares of the Company’s Common Stock issuable upon the conversion thereof requires the affirmative vote of a majority +of the shares present or represented by proxy and entitled to vote at the Annual Meeting. Abstentions have the same impact as votes “Against” the proposal. Brokers have discretion to vote on this proposal. +Board Recommendation: +OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE ISSUANCE OF SHARES OF SERIES A PREFERRED STOCK TO CERTAIN DIRECTORS AND OFFICERS AND ANY SHARES OF THE +COMPANY’S COMMON STOCK ISSUABLE UPON THE CONVERSION THEREOF. +2024 Proxy Statement +43 +Table of Contents +ADDITIONAL INFORMATION +Other Matters +Our board of directors is not aware of any other matters that will be presented for consideration at the Annual Meeting. However, if any other +matters are properly brought before the Annual Meeting, the persons named in the accompanying proxy intend to vote on those matters in accordance with their best judgment. +Stockholder Proposals and Nominations for Next Year’s Annual Meeting of Stockholders +In order to be considered for inclusion in the proxy materials for our 2025 annual meeting of stockholders, proposals submitted by +stockholders pursuant to Rule 14a-8 under the Exchange Act must be received by our Corporate Secretary at Biodesix, Inc., 919 West Dillon Rd., Louisville, CO 80027 on or before December 14, 2024, and also +must otherwise comply with the procedures and requirements set forth in Rule 14a-8. +Alternatively, stockholders intending to present a proposal (outside of the process established in +Rule 14a-8) or nominate a director for election at our 2025 annual meeting of stockholders without having the proposal or nomination included in the proxy materials for the meeting must comply with the +requirements set forth in our bylaws. Our bylaws require, among other things, that our Corporate Secretary receive the proposal or nomination no earlier than the close of business on the 120 th +day, and no later than the close of business on the 90 th day, prior to the first anniversary of the preceding year’s annual meeting of stockholders. Accordingly, for our 2025 annual meeting +of stockholders, our Corporate Secretary must receive the proposal or nomination no earlier than January 21, 2025 and no later than the close of business on February 20, 2025. The proposal or nomination must contain the information +required by our bylaws and otherwise comply with the requirements set forth in our bylaws. +In addition to satisfying the foregoing +requirements under our amended and restated bylaws, to comply with the universal proxy rules, stockholders who intend to solicit proxies in support of director nominees other than management’s nominees must provide notice that sets forth the +information required by Rule 14a-19 under the Exchange Act no later than March 24, 2025. +Availability of Annual Report on Form 10-K +A +copy the 2023 Annual Report on Form 10-K as filed with the SEC is available free of charge on our website at www.biodesix.com or on the SEC’s website at www.sec.gov. Stockholders may also obtain a copy of +our 2023 Annual Report on Form 10-K, including financial statements but excluding exhibits, without charge by sending a written request to: Biodesix, Inc., Attention: Corporate Secretary, 919 West Dillon Rd., +Louisville, CO 80027. +2024 Proxy Statement +44 +Table of Contents +biodesix P.O. BOX 8016, CARY, NC 27512-9903 Your vote matters! Have your ballot ready and please use one of the methods below for easy +voting: Your control number Have the 12 digit control number located in the box above available when you access the website and follow the instructions. Scan QR for digital voting Biodesix, Inc. Annual Meeting of Stockholders For Stockholders of +record as of March 25, 2024 Tuesday, May 21, 2024 1:00 PM, Mountain Time Annual Meeting to be held live via the Internet. Please visit www.proxydocs.com/BDSX for more details. YOUR VOTE IS IMPORTANT! PLEASE VOTE BY: 1:00 PM, Mountain Time, May 21, +2024. Internet: www.proxypush.com/BDSX • Cast your vote online • Have your Proxy Card ready • Follow the simple instructions to record your vote Phone: 1-866-291-6774 • Use any touch-tone telephone • Have your Proxy Card +ready • Follow the simple recorded instructions Mail: • Mark, sign and date your Proxy Card • Fold and return your Proxy Card in the postage-paid envelope provided Virtual: You must register to attend the meeting online and/or +participate at www.proxydocs.com/BDSX This proxy is being solicited on behalf of the Board of Directors The undersigned stockholder of Biodesix, Inc. hereby appoints Robin Harper Cowie and Chris Vazquez, and each or either of them, as the true and +lawful attorneys of the undersigned, with full power of substitution and revocation, and authorizes them, and each of them, to vote all the shares of capital stock of Biodesix, Inc. which the undersigned is entitled to vote at said meeting and any +adjournment thereof upon the matters specified and upon such other matters as may be properly brought before the meeting or any adjournment thereof, conferring authority upon such true and lawful attorneys to vote in their discretion on such other +matters as may properly come before the meeting and revoking any proxy heretofore given. THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN, SHARES WILL BE VOTED IDENTICAL TO THE BOARD OF DIRECTORS +RECOMMENDATION. This proxy, when properly executed, will be voted in the manner directed herein. In their discretion, the named proxies are authorized to vote upon such other matters that may properly come before the meeting or any adjournment or +postponement thereof. You are encouraged to specify your choice by marking the appropriate box (SEE REVERSE SIDE) but you need not mark any box if you wish to vote in accordance with the Board of Directors’ recommendation. The named proxies +cannot vote your shares unless you sign (on the reverse side) and return this card. PLEASE BE SURE TO SIGN AND DATE THIS PROXY CARD AND MARK ON THE REVERSE SIDE Copyright © 2024 BetaNXT, Inc. or its affiliates. All Rights Reserved +Table of Contents +biodesix Biodesix, Inc. Annual Meeting of Stockholders Please make your marks like this: THE BOARD OF DIRECTORS RECOMMENDS A VOTE: FOR +ALL OF THE LISTED NOMINEES AND ON PROPOSALS 2, 3 & 4 PROPOSAL YOUR VOTE 1. To elect the three Class I directors named in this proxy statement to hold office until the 2027 annual meeting of stockholders; FOR WITHHOLD 1.01 Jon Faiz Kayyem, Ph.D. +1.02 Scott Hutton 1.03 John Patience 2. To ratify the appointment of KPMG LLP as our independent registered public accounting firm for the year ending December 31, 2024; 3. To approve, for purposes of complying with Nasdaq Listing Rule 5635(d), the +conversion of the Company’s Series A Non-Voting Convertible Preferred Stock, par value $0.001 per share (“Series A Preferred Stock”) into shares of the Company’s common stock, par value $0.001 per share (“Common +Stock”); 4. To approve, for purposes of complying with Nasdaq Listing Rule 5635(c), the issuance of the Company’s Series A Preferred Stock to certain of the Company’s directors and officers and any shares of the Company’s Common +Stock issuable upon the conversion thereof; and 5. To conduct any other business properly brought before the meeting, or any adjournment or postponement thereof. BOARD OF DIRECTORS RECOMMENDS FOR FOR FOR FOR FOR FOR You must register to attend the +meeting online and/or participate at www.proxydocs.com/BDSX Authorized Signatures - Must be completed for your instructions to be executed. Please sign exactly as your name(s) appears on your account. If held in joint tenancy, all persons should +sign. Trustees, administrators, etc., should include title and authority. Corporations should provide full name of corporation and title of authorized officer signing the Proxy/Vote Form. Signature (and Title if applicable) Date Signature (if held +jointly) Date \ No newline at end of file diff --git a/raw/proxies/0001439725/0001193125-24-118069/proxy_rpt.txt b/raw/proxies/0001439725/0001193125-24-118069/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..a0d6d19896d27e4c2d60de821fb5ee0f3b1a2a78 --- /dev/null +++ b/raw/proxies/0001439725/0001193125-24-118069/proxy_rpt.txt @@ -0,0 +1,150 @@ +reviewing related-party transactions; +• +approving, or as permitted, pre-approving, audit and permissible non-audit services to be performed by our independent registered public accounting firm; and +2024 Proxy Statement +15 +Table of Contents +• +reviewing and assessing, at least annually, the performance of the audit committee and adequacy of its charter. +Compensation Committee +Our compensation committee consists of Messrs. Massarany and Patience and Drs. Kayyem and Watts, and the chair of our compensation committee +is Mr. Massarany. Our board of directors has determined that each of Messrs. Massarany and Patience and Drs. Kayyem and Watts is independent under the applicable Nasdaq listing rules and is a +“non-employee director” as defined in Rule 16b-3 promulgated under the Exchange Act. The functions of this committee include: +• +reviewing, modifying and overseeing overall compensation strategy and policies; +• +reviewing and approving the compensation arrangements and other terms of employment of our chief executive +officer, other executive officers and senior management, as appropriate; +• +reviewing and recommending to the full board of directors the compensation of our directors; +• +appointing and overseeing the work of compensation consultants, legal counsel or any other advisors and +consultants engaged for the purpose of advising the compensation committee; +• +reviewing, recommending to the full board of directors, as appropriate, and administering equity award plans, +compensation plans and similar programs, as well as modification or termination of plans and programs; +• +establishing policies with respect to equity compensation arrangements; +• +reviewing and evaluating with the chief executive officer and the full board of directors the succession plans +for our executive officers; and +• +reviewing and assessing, at least annually, the performance of the compensation committee and the adequacy of its +charter. +Compensation Committee Interlocks and Insider Participation +None of the members of the compensation committee is currently, or has been at any time during 2023, one of our officers or +employees. None of our executive officers currently serve, or has served during 2023, as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving as a member of our board of directors +or compensation committee. +Nominating and Corporate Governance Committee +Our nominating and corporate governance committee consists of Ms. Franchi, Dr. Strobeck and Mr. Schuler, and the chair of our +nominating and corporate governance committee is Dr. Strobeck. Our board of directors has determined that Ms. Franchi, Dr. Strobeck and Mr. Schuler are independent under the applicable Nasdaq listing rules. The functions of this +committee include: +• +reviewing periodically and evaluating director performance of our board of directors and its applicable +committees, and recommending to our board of directors and management areas for improvement; +• +identifying, evaluating, nominating and recommending individuals for membership on our board of directors; +2024 Proxy Statement +16 +Table of Contents +• +reviewing with our chief executive officer the plans for succession to the offices of our executive officers and +make recommendations to our board of directors with respect to the selection of appropriate individuals to succeed to these positions; +• +reviewing and recommending to our board of directors any amendments to our corporate governance policies; +• +monitoring our cybersecurity risk profile, receiving periodic updates from management on all matters related to +cybersecurity, and reporting to our full Board of Directors on an annual or as necessary basis; and +• +reviewing and assessing, at least annually, the performance of the nominating and corporate governance committee +and the adequacy of its charter. +Director Nomination Process +Selection and Nomination Process +Our board of directors is responsible for nominating members for election to our board of directors by our stockholders at our annual meetings +of stockholders. Whenever a vacancy occurs on our board of directors, whether due to a newly created director position or the death, resignation, removal or retirement of an existing director, our board of directors is authorized to select a person +to fill the vacancy to serve as a director until the annual meeting of stockholders at which the director’s term expires and until the election and qualification of his or her successor or, if sooner, his or her death, resignation or removal. +Any increase or decrease in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors. +Criteria for Board Membership +The board of directors and the nominating and corporate governance committee will determine the appropriate characteristics, skills and +experience for the board of directors as a whole and for its individual members. The board of directors and the nominating and corporate governance committee will consider the minimum general criteria set forth below, and may add any specific +additional criteria with respect to specific searches, in selecting candidates and existing directors for service on the board of directors. An acceptable candidate may not fully satisfy all of the criteria, but is expected to satisfy nearly all of +them. While the nominating and corporate governance committee does not have a formal policy in this regard, the diversity of the board of the directors is a consideration in evaluating candidates for director positions, among others. +The board of directors and the nominating and corporate governance committee believe that candidates for director should have certain minimum +qualifications, including being able to read and understand basic financial statements, being over 21 years of age and having the highest personal integrity and ethics. In considering candidates, the board of directors and the nominating and +corporate governance committee intend to consider such factors as possessing relevant expertise upon which to be able to offer advice and guidance to management, having sufficient time to devote to the affairs of the Company, demonstrated excellence +in his or her field, having the ability to exercise sound business judgment and having the commitment to rigorously represent the long-term interests of our stockholders. +The board of directors and the nominating and corporate governance committee review candidates for director nomination in the context of the +current composition of the board of directors, the operating requirements of the Company and the long-term interests of our stockholders. In conducting this assessment, the board of directors and the nominating and corporate governance committee +consider diversity, age, skills, and such other factors as it deems appropriate given the current needs of the board of directors and the Company to +2024 Proxy Statement +17 +Table of Contents +maintain a balance of knowledge, experience and capability. In the case of incumbent directors whose terms of office are set to expire, the board of directors and the nominating and corporate +governance committee review such directors’ overall service to the Company during their term, including the number of meetings attended, level of participation, quality of performance, and any other relationships and transactions that might +impair such directors’ independence. In the case of new director candidates, the board of directors and the nominating and corporate governance committee also determine whether the nominee must be independent for purposes of any stock exchange +on which any of the Company’s capital stock is listed. +Stockholder Recommendations and Nominations +Stockholders who wish to recommend candidates may contact the nominating and corporate governance committee in the manner described below +under “Board and Corporate Governance Matters—Stockholder Communications with our Board of Directors.” Stockholder nominations must be made according to the procedures required under our bylaws and described in this proxy statement +under the heading “Additional Information—Stockholder Proposals and Nominations for Next Year’s Annual Meeting of Stockholders.” Stockholder-recommended candidates and stockholder nominees whose nominations comply with these +procedures will be evaluated by our nominating and corporate governance committee in the same manner as other nominees. +Board Diversity Matrix +The table below provides certain highlights of the composition of our board of directors members and +nominees as of March 25, 2024. Nasdaq listing requirements require each listed company to have, or explain why it does not have, two diverse directors on the board, including at least one diverse director who self-identifies as female and at +least one diverse director who self-identifies as an underrepresented minority or LGBTQ+, or for smaller reporting companies, two female directors. Companies listed on the Nasdaq Global Market must have at least one diverse director by +December 31, 2023 and two diverse directors by December 31, 2025. As of March 25, 2024, our board of directors has one diverse director, and we intend to be fully compliant with Nasdaq’s diversity requirement by December 31, +2025. Each of the categories listed in the below table has the meaning as it is used in Nasdaq Listing Rule 5605(f). To see our Board Diversity Matrix as of March 24, 2023, please see our proxy statement filed with the SEC on April 12, +2023. +Board Diversity Matrix as of March 25, 2024 +Total Number of Directors +Female +Male +Non-Binary +Did Not Disclose Gender +Part I: Gender Identity +Directors +1 +8 +- +- +Part II: Demographic Background +African American or Black +- +- +- +- +Alaskan Native or Native American +- +- +- +- +Asian +- +- +- +- +Hispanic or Latinx +- +- +- +- +Native Hawaiian or Pacific Islander +White +1 +8 +- +- +Two or More Races or Ethnicities +LGBTQ+ +- +- +- +- +Did Not Disclose Demographic Background +- +- +- +- +2024 Proxy Statement +18 +Table of Contents \ No newline at end of file diff --git a/raw/proxies/0001439725/0001193125-25-100458/proxy.txt b/raw/proxies/0001439725/0001193125-25-100458/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..62ed69e0bc8aa237c12efedff87581950aa247f3 --- /dev/null +++ b/raw/proxies/0001439725/0001193125-25-100458/proxy.txt @@ -0,0 +1,1915 @@ +DEF 14A +Table of Contents +DEF 14A false 0001439725 0001439725 2024-01-01 2024-12-31 +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +Washington, DC 20549 +SCHEDULE 14A +(Rule +14a-101) +SCHEDULE 14A INFORMATION +Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 +(Amendment No. +) +☒ +Filed by the Registrant +☐ +Filed by a Party other than the Registrant +Check the appropriate box: +☐ +Preliminary Proxy Statement +☐ +Confidential, for Use of the Commission Only (as permitted by Rule +14a-6(e)(2)) +☒ +Definitive Proxy Statement +☐ +Definitive Additional Materials +☐ +Soliciting Material under § +240.14a-12 +Biodesix, Inc. +(Name of Registrant as Specified in its Charter) +(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant) +Payment of Filing Fee (Check the appropriate box): +☒ +No fee required. +☐ +Fee paid previously with preliminary materials. +☐ +Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules +14a-6(i)(1) +and +0-11. +Table of Contents +Biodesix, Inc. +919 West Dillon Rd., +Louisville, CO 80027 +Notice of 2025 Annual Meeting of Stockholders +Dear Biodesix Stockholders: +You are invited to attend Biodesix, Inc.’s 2025 Annual Meeting of Stockholders (the Annual Meeting). +Date: +May 20, 2025 (Tuesday) +Time: +1:00 p.m., Mountain Time +Virtual Location: +You can attend the Annual Meeting online, including to vote and/or submit questions, at www.proxydocs.com/BDSX . See page 1 of the accompanying proxy statement for additional information regarding participation in the virtual meeting. +Items of Business: +At the Annual Meeting, stockholders will be asked to vote: +1.  To elect the two Class II directors named in this proxy statement to hold office until the 2028 annual meeting of stockholders; +2.  To ratify the appointment of KPMG LLP as our independent registered public accounting firm for the year ending December 31, 2025; +3.  To approve an amendment to the Company’s amended and restated certificate of incorporation to effect a reverse stock split of the Company’s Common Stock at a ratio ranging from any whole number between 1-for-2 and 1-for-20 inclusive, as determined by our board of directors in its discretion, subject to our board of directors’ authority to abandon such amendments; +4.  To approve the Company’s Amended and Restated Employee Stock Purchase Plan; and +5.  To conduct any other business properly brought before the meeting, or any adjournment or postponement thereof. +Record Date: +You can participate in the Annual Meeting and vote if you were a stockholder of record as of the close of business on March 24, 2025. +Voting: +Your vote is very important to us. Whether or not you plan to attend the virtual Annual Meeting, please ensure your shares are represented by voting promptly. For instructions on how to vote your shares, please refer to the instructions included with this proxy statement and your proxy card. +By order of the Board of Directors, +Robin Harper Cowie +Chief Financial Officer, Secretary and Treasurer +April 28, 2025 +This Notice of 2025 Annual Meeting of Stockholders, the accompanying proxy statement and our 2024 Annual Report on Form 10-K are available on our website at https://investors.biodesix.com/investor-relations in the SEC Filings section, as well as at www.proxydocs.com/BDSX . +Table of Contents +Table of Contents +ANNUAL MEETING INFORMATION +1 +BOARD AND CORPORATE GOVERNANCE MATTERS +8 +Proposal One: Election of Directors +8 +Overview of Our Nominees and Continuing Directors +9 +Board Composition +12 +Director Independence +12 +Board Leadership Structure +12 +Role of our Board of Directors in Risk Oversight +13 +Meetings of our Board of Directors +13 +Committees of our Board of Directors +13 +Committee Composition and Meetings +14 +Audit Committee +14 +Compensation Committee +15 +Compensation Committee Interlocks and Insider Participation +15 +Nominating and Corporate Governance Committee +15 +Director Nomination Process +16 +Executive Officers +17 +Code of Business Conduct and Ethics +18 +Corporate Governance Guidelines +18 +Insider Trading Policy +18 +Stockholder Communications with our Board of Directors +19 +Certain Relationships and Related Party Transactions +19 +EQUITY COMPENSATION PLAN INFORMATION +21 +DIRECTOR COMPENSATION +22 +Non-Employee Director Compensation Policy +22 +Director Deferred Compensation Plan +23 +2024 Director Compensation Table +24 +EXECUTIVE COMPENSATION +26 +Overview +26 +Compensation of Named Executive Officers +27 +2024 Summary Compensation Table +29 +Outstanding Equity Awards at Fiscal 2024 Year-End +31 +Additional Matters +34 +STOCK OWNERSHIP +36 +Security Ownership of Certain Beneficial Owners and Management +36 +Delinquent Section 16(a) Reports +38 +Table of Contents +AUDIT MATTERS +39 +Proposal Two: Ratification of Appointment of Independent Registered Public Accounting Firm +39 +Report of the Audit Committee +40 +REVERSE STOCK SPLIT +41 +Proposal Three: Approval of an amendment to the Company’s amended and restated certificate of incorporation to effect a reverse stock split of the Company’s Common Stock at a ratio ranging from any whole number between 1-for-2 and 1-for-20, inclusive, as determined by our board of directors in its discretion, subject to our board of directors’ authority to abandon such amendments +41 +APPROVAL OF THE COMPANY’S AMENDED AND RESTATED EMPLOYEE STOCK PURCHASE PLAN +50 +Proposal Four: Approval of the Company’s Amended and Restated ESPP to increase the available shares of the Company’s Common Stock under the plan by 1,451,500 and to increase the maximum number of shares of the Company’s Common Stock that may be provided as the result of the plan’s annual automatic increase to 3,000,000 +50 +ADDITIONAL INFORMATION +54 +Other Matters +54 +Stockholder Proposals and Nominations for Next Year’s Annual Meeting of Stockholders +54 +Availability of Annual Report on Form 10-K +54 +Annex A +A-1 +Annex B +B-1 +Table of Contents +Proxy Statement +2025 Annual Meeting of Stockholders +May 20, 2025 +ANNUAL MEETING INFORMATION +Our board of directors is soliciting your proxy for the 2025 Annual Meeting of Stockholders (the Annual Meeting) of Biodesix, Inc. (Biodesix, the Company, we, us or our) and at any adjournment, continuation or postponement of the meeting for the purposes described in this proxy statement and the accompanying Notice of 2025 Annual Meeting of Stockholders. The Annual Meeting will take place virtually on May 20, 2025 at 1:00 p.m. Mountain Time. You must register to attend the meeting online and/or participate at www.proxydocs.com/BDSX using the control number on your proxy card or notice. You will receive an email one hour prior to the meeting containing a link which will connect you to the meeting portal. If you held shares of our Common Stock as of the close of business on March 24, 2025, you will be able to vote on the proposals described in this proxy statement and submit questions online through the virtual meeting platform during the Annual Meeting. On or about April 28, 2025, we will be mailing a copy of our Annual Report on Form 10-K for the year ended December 31, 2024 (the 2024 Annual Report), this Proxy Statement and the proxy card (together, the Proxy Materials). The documents will be available at www.proxydocs.com/BDSX .The proxy card will also include information on how to vote online or by telephone or by returning your proxy card by mail. +Who can vote? +If you were a stockholder of record as of the close of business on March 24, 2025 (the record date), you are entitled to vote your shares at the Annual Meeting. As of the record date, 146,443,291 shares of our Common Stock were issued and outstanding. Each share of our Common Stock is entitled to one vote with respect to each matter on which it is entitled to vote and that is properly brought before the Annual Meeting. +What am I voting on? +You are being asked to vote on four proposals: +● +Proposal One: To elect the two Class II directors named in this proxy statement to hold office until the 2028 annual meeting of stockholders; +● +Proposal Two: To ratify the appointment of KPMG LLP as our independent registered public accounting firm for 2025; +● +Proposal Three: To approve an amendment to the Company’s amended and restated certificate of incorporation to effect a reverse stock split of the Company’s Common Stock at a ratio ranging from any whole number between 1-for-2 and 1-for-20, inclusive, as determined by our board of directors in its discretion, subject to our board of directors’ authority to abandon such amendments; and +● +Proposal Four: To approve the Company’s Amended and Restated Employee Stock Purchase Plan to increase the available shares of the Company’s Common Stock under the plan by 1,451,500 and to increase the maximum number of shares of the Company’s Common Stock that may be provided as the result of the plan’s annual automatic increase to 3,000,000. +2025 Proxy Statement +1 +Table of Contents +How does the board of directors recommend that I vote on each proposal? +The board of directors recommends that our stockholders vote: +● +“For” the election of the two Class II directors named in this proxy statement to hold office until the 2028 annual meeting of stockholders; +● +“For” the ratification of the appointment of KPMG LLP as our independent registered public accounting firm for 2025; +● +“For” the approval of an amendment to the Company’s amended and restated certificate of incorporation to effect a reverse stock split of the Company’s Common Stock; and +● +“For” the approval of the Company’s Amended and Restated Employee Stock Purchase Plan. +What if another matter is properly brought before the meeting? +The board of directors is not aware of any other matters that will be presented for consideration at the Annual Meeting. However, if any other matters are properly brought before the Annual Meeting, the persons named in the accompanying proxy intend to vote on those matters in accordance with their best judgment. +How do I vote? +The procedures for voting depend on whether your shares are registered in your name or are held by a bank, broker or other nominee. You may also vote your shares electronically during a designated portion of the virtual Annual Meeting after your successful registration at www.proxydocs.com/BDSX . Whether or not you plan to attend the Annual Meeting, we encourage you to vote and submit your proxy in advance of the meeting by one of the methods described below. +● +Stockholders of Record: Shares Registered in Your Name +Vote by Proxy in Advance of the Annual Meeting : If, on the record date, your shares were registered directly in your name with Biodesix’s transfer agent, Computershare Trust Company, N.A., then you are a “stockholder of record.” As a stockholder of record, you may vote by proxy in advance of the Annual Meeting in three ways: +Vote by Internet +Go to +http://www.proxypush.com/ BDSX to complete an electronic proxy card. You will be asked to provide the Company number and control number from your proxy card. Your vote must be received prior to the meeting start time to be counted. +Vote by telephone +Dial toll-free 1-866-291-6774 using a touch-tone phone and follow the recorded instructions. You will be asked to provide the Company number and control number from your proxy card. Your vote must be received prior to the meeting start time to be counted. +Vote by mail +Complete, sign and date the proxy card you received as part of the Proxy Materials, and return it promptly in the envelope provided. If your signed proxy card is received prior to the meeting date, we will vote your shares as you direct. +2025 Proxy Statement +2 +Table of Contents +● +Beneficial Owner: Shares Registered in the Name of Broker, Bank or Other Nominee +If, on the record date, your shares were held not in your name, but in an account with a broker, bank or other nominee as custodian on your behalf, then you are considered the “beneficial owner” of shares held in “street name.” The Proxy Materials are being forwarded to you by that broker, bank or other nominee who is considered the stockholder of record of those shares for purposes of voting at the Annual Meeting. As the beneficial owner, you have the right to direct your broker, bank or other nominee on how to vote your shares by following the instructions for voting set forth on that organization’s voting instruction card. +What is the effect of giving a proxy? What if I return a proxy card or otherwise vote but do not make specific choices? +Proxies are solicited by and on behalf of the board of directors. Robin Harper Cowie (our Chief Financial Officer, Secretary and Treasurer) and Christopher C. Vazquez (our Chief Accounting Officer) have been designated as proxy holders by the board of directors. If you properly grant your proxy, your shares will be voted as you instruct. If you return a signed proxy card or otherwise vote without marking specific voting selections, your shares will be voted as the board of directors recommends: “For” the election of two Class II directors (Proposal One); “For” the ratification of the appointment of KPMG LLP as our independent registered public accounting firm for 2025 (Proposal Two); “For” the approval of the amendment to the Company’s amended and restated certificate of incorporation to effect a reverse stock split of the Company’s Common Stock (Proposal Three); “For” the approval of the Company’s Amended and Restated Employee Stock Purchase Plan (Proposal Four); and in accordance with the best judgment of your proxy holder for any other matters properly brought before the meeting, if any. +Can I change my vote or revoke my proxy? +Yes. If you are a stockholder of record, you can change your vote or revoke your proxy and voting instructions at any time prior to the vote at the Annual Meeting. To do so: +● Submit a new proxy card or voting instructions to the independent tabulator, Mediant Communications Inc. (Mediant), by mail, telephone or through the Internet by the closing of the polls at the Annual Meeting. +● Attend the virtual Annual Meeting and vote electronically during the meeting. Simply attending the meeting will not, by itself, revoke your proxy. +If you are the beneficial owner of shares held in street name, you should follow the instructions provided by your broker, bank or other nominee to revoke previously submitted voting instructions. +What are broker non-votes? +Brokers, banks or other nominees holding shares on behalf of a beneficial owner may vote those shares in their discretion on certain “routine” matters even if they do not receive timely voting instructions from the beneficial owner. With respect to “non-routine” matters, the broker, bank or other nominee is not permitted to vote shares for a beneficial owner without timely received voting instructions. The routine matters to be presented at the Annual Meeting are the proposal to ratify the appointment of KPMG LLP as our independent registered public accounting firm for 2025 (Proposal Two) and approval of an amendment to the Company’s amended and restated certificate of incorporation to effect a reverse stock split of the Company’s Common Stock (Proposal Three). The election of two Class II directors (Proposal One) and the approval of the Company’s Amended and Restated Employee Stock Purchase Plan (Proposal Four) are non-routine matters. +2025 Proxy Statement +3 +Table of Contents +A broker non-vote occurs when a broker, bank or other nominee does not vote on a non-routine matter because the beneficial owner of such shares has not provided voting instructions with regard to such matter. If a broker, bank or other nominee exercises discretionary voting authority on Proposal Two and Proposal Three, such shares will be considered present at the Annual Meeting for quorum purposes and broker non-votes will occur as to Proposal One and Proposal Four and any other non-routine matters that are properly presented at the Annual Meeting. Broker non-votes will have no impact on the voting results. +How many shares must be present to hold the Annual Meeting? +A quorum must be present at the Annual Meeting for any business to be conducted. A quorum will be present if the holders of at least a majority of the outstanding shares of our Common Stock entitled to vote are present at the Annual Meeting online or represented by proxy. On the record date, there were 146,443,291 shares of our Common Stock outstanding and entitled to vote. Therefore, the holders of 73,221,646 shares must be present online or represented by proxy at the Annual Meeting to have a quorum. For purposes of determining the presence of a quorum, abstentions, withheld votes and broker non-votes are counted. If there is no quorum, the holders of a majority of shares present or represented by proxy at the Annual Meeting may adjourn the meeting to a later date. +2025 Proxy Statement +4 +Table of Contents +What vote is required for the approval of each proposal? What effect do “withhold” votes, abstentions and broker non-votes have on the proposals? +The following chart summarizes the proposals to be considered at the Annual Meeting, the vote required for approval of each proposal, and the manner in which votes will be counted: +Proposal +Voting Options +Vote Required to Adopt the +Proposal +Effect of “Withheld” +Votes or Abstentions +Effect of “Broker +Non-Votes” +Proposal One: Election of the two Class II directors named in this proxy statement +For or Withhold on each nominee +Plurality of the votes cast. This means that the two nominees receiving the highest number of “For” votes (from the holders of votes of shares present or represented by proxy and entitled to vote on the election of directors) will be elected as Class II directors. +“Withheld” votes have no effect; only “For” votes affect the outcome of the election. +Brokers do not have discretion to vote. Broker non-votes will have no effect; only “For” votes affect the outcome of the election. +Proposal Two: Ratification of appointment of KPMG LLP as our independent registered public accounting firm for the year ended December 31, 2025 +For, Against or Abstain +Affirmative vote of a majority of the shares present or represented by proxy and entitled to vote on the proposal. +Abstentions are considered shares present and entitled to vote, and therefore have the same impact as votes “Against” the proposal. +Brokers have discretion to vote. Therefore, we do not expect any broker non-votes. +Proposal Three: Approval of an amendment to the Company’s amended and restated certificate of incorporation to effect a reverse stock split of the Company’s Common Stock at a ratio ranging from any whole number between 1-for-2 and 1-for-20, inclusive, as determined by our board of directors in its discretion, subject to our board of directors’ authority to abandon such amendments +For, Against or Abstain +Affirmative vote of a majority of the shares present or represented by proxy and entitled to vote on the proposal. +Abstentions are considered shares present and entitled to vote, and therefore have the same impact as votes “Against” the proposal. +Brokers have discretion to vote. Therefore, we do not expect any broker non-votes. +Proposal Four: Approval of the Company’s Amended and Restated Employee Stock Purchase Plan to increase the available shares of the Company’s Common Stock under the plan by 1,451,500 and to increase the maximum number of shares of the Company’s Common Stock that may be provided as the result of the plan’s annual automatic increase to 3,000,000 +For, Against or Abstain +Affirmative vote of a majority of the shares present or represented by proxy and entitled to vote on the proposal. +Abstentions are considered shares present and entitled to vote, and therefore have the same impact as votes “Against” the proposal. +Brokers do not have discretion to vote. Broker non-votes will have no effect; only “For” votes affect the outcome of the election. +2025 Proxy Statement +5 +Table of Contents +Important Information About Our Virtual Annual Meeting: +• +Why is the Annual Meeting being held in a virtual format this year? The Annual Meeting will be held in a virtual meeting format via live audio webcast, and will provide access to the Annual Meeting for our stockholders regardless of geographic location. We have designed our virtual format to help ensure that our stockholders who attend the Annual Meeting virtually will be afforded similar rights and opportunities to participate as they would at an in-person meeting. +• +How can I attend the Annual Meeting online? To join the Annual Meeting online, visit www.proxydocs.com/BDSX and register using your control number on your proxy card or on the instructions that accompanied your Proxy Materials, and following the instructions received via email, including a unique link that will allow you access to the Annual Meeting, to vote, and submit questions during the meeting. +• +When can I join the virtual Annual Meeting? The meeting will begin promptly at 1:00 p.m. Mountain Time on Tuesday, May 20, 2025. You may access the meeting platform 15 minutes earlier, and we encourage you to join in advance of the meeting start time to allow sufficient time to log in and confirm your connection and audio are working properly. +• +Can I ask questions during the virtual Annual Meeting? Yes. If you are logged in as a “stockholder” at the virtual Annual Meeting, you will have an opportunity to submit questions live via the Internet during a designated portion of the virtual Annual Meeting. Once you are logged in, type your question into the question box and click “submit.” Subject to time constraints, we intend to answer questions pertinent to the Company and meeting matters submitted by stockholders during the Annual Meeting that comply with our rules of conduct for the Annual Meeting, which will be posted on the meeting website during the meeting. +• +How do I vote during the virtual Annual Meeting? You will have an opportunity to vote your shares electronically during a designated portion of the virtual Annual Meeting after logging in. Whether or not you plan to join the Annual Meeting, we encourage you to vote and submit your proxy in advance of the meeting by one of the methods described in these Proxy Materials. +• +What if I have technical difficulties? On the day of the Annual Meeting, if you have trouble accessing the virtual meeting platform or encounter other technical difficulties with the platform before or during the meeting, please call the technical support number provided in your email instructions. +• +Will a list of stockholders be available for inspection prior to and during the meeting? Yes. A complete list of stockholders of record will be available for inspection, by appointment only, by any stockholder for at least ten (10) days prior to the Annual Meeting during ordinary business hours at our headquarters located at 919 West Dillon Rd., Louisville, CO 80027. +• +Will a recording of the meeting be available? Yes, following the Annual Meeting, a recording of the meeting will be available on www.proxydocs.com/BDSX for one year following the meeting date. +Who will count the votes? +Representatives of Mediant will tabulate the votes, and a representative of Mediant will act as inspector of election. +Who is paying for this proxy solicitation? +We will pay the cost of soliciting proxies. Proxies may be solicited on our behalf by our directors, officers or employees (for no additional compensation) in person, by telephone or by other means of communication. Arrangements may be made with brokerage houses, custodians, nominees and fiduciaries to send proxy materials to their principals and we may reimburse them for the cost of forwarding proxy materials to beneficial owners. +2025 Proxy Statement +6 +Table of Contents +What does it mean if I receive more than one set of Proxy Materials? +If you receive more than one set of Proxy Materials, your shares may be registered in more than one name or in different accounts. Please follow the voting instructions included in each set of Proxy Materials to ensure that all of your shares are voted. +How can I find out the results of the voting at the Annual Meeting? +Preliminary voting results will be announced at the Annual Meeting. In addition, final voting results will be published in a current report on Form 8-K that we expect to file with the SEC within four business days after the Annual Meeting. +Why were my Proxy Materials included in the same envelope as other people at my address? How may I obtain an additional copy of the Proxy Materials? +We have adopted a procedure approved by the SEC called “householding.” Under this procedure, we deliver a single copy of our Proxy Materials to stockholders of record who share the same address, unless we have received contrary instructions from any stockholder at that address. This practice is designed to eliminate duplicate mailings, conserve natural resources and reduce our printing and mailing costs. Stockholders who participate in householding will continue to be able to access and receive separate proxy cards. If you share an address with another stockholder and receive only a single copy of our Proxy Materials, but would like to request a separate copy of these materials, please contact our mailing agent, Mediant, by calling 1-866-648-8133 or e-mailing paper@investorelections.com and an additional copy of the materials will be promptly delivered to you. Similarly, if you receive multiple copies of the Proxy Materials, but would prefer to receive a single copy in the future, you may also contact Mediant at the above telephone number or address. Beneficial owners should contact their broker, bank or other nominee to request information about householding procedures. +2025 Proxy Statement +7 +Table of Contents +BOARD AND CORPORATE GOVERNANCE MATTERS +Proposal One: Election of Directors +General +The primary responsibilities of our board of directors are to provide oversight, strategic guidance, counseling and direction to our management. Our board of directors currently consists of nine directors and is divided into three classes of directors that serve staggered three-year terms, currently Class II, with a term expiring in 2025, Class III, with a term expiring in 2026 and Class I, with a term expiring in 2027. At the Annual Meeting, our stockholders will vote on the election of two Class II directors whose terms will expire at our 2028 annual meeting of stockholders. Each of our other current directors will continue to serve as a director until the election and qualification of his or her successor. +One current Class II member of our board of directors, Charles Watts, M.D., will not stand for reelection at the Annual Meeting. One current Class III member of our board of directors, Jack Schuler, will transition to the role of emeritus director at the Annual Meeting. As a result, the size of our board of directors will be reduced from nine (9) to seven (7) directors effective as of immediately prior to the closing of the polls at the Annual Meeting. The other two directors currently serving on our board of directors in Class II, the class whose term of office expires in 2025, have both been nominated by our board of directors, upon the recommendation of our nominating and corporate governance committee, to stand for election at the Annual Meeting. Lawrence T. Kennedy, Jr. has served on our board of directors since 2023. Matthew Strobeck, Ph.D. has served on our board of directors since 2012. Both of these two nominees have consented to being named as a nominee in this proxy statement and have agreed to serve, if elected, until our 2028 annual meeting of stockholders and until the election and qualification of his successor. +For more information about each of the director nominees and continuing directors, including information regarding the experience, qualifications, attributes and skills that led to the conclusion that each director should serve as a member of the board of directors, please refer to the section below entitled “Overview of Our Nominees and Continuing Directors.” +Vote Required: +Directors are elected by a plurality of the votes cast by our stockholders at the Annual Meeting. This means that the two nominees receiving the highest number of affirmative votes (from the holders of votes of shares present or represented by proxy and entitled to vote on the election of directors) will be elected. Broker non-votes and “Withheld” votes will have no effect. +Board +Recommendation: +OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE ELECTION OF EACH OF THE TWO CLASS II DIRECTOR NOMINEES NAMED ABOVE. +2025 Proxy Statement +8 +Table of Contents +Overview of Our Nominees and Continuing Directors +The following table and the brief biographies that follow provide information, as of the date of this proxy statement, about each director nominee and each continuing director: +Age +Position(s) +Director +Since +Class +Current +Term +Expires +Expiration +of Term for +which +Nominated +Independent +Committee +Membership* +AC +CC +NCG +DIRECTOR NOMINEES +Lawrence T. Kennedy, Jr. +53 +Director +2023 +II +2025 +2028 +Yes +X +Matthew Strobeck, Ph.D. +52 +Director +2012 +II +2025 +2028 +Yes +X +Chair  +CONTINUING DIRECTORS +Jean Franchi +58 +Director +2020 +III +2026 +— +Yes +Chair  +X +Hany Massarany +63 +Director +2020 +III +2026 +— +Yes +X +Chair  +Jon Faiz Kayyem, Ph.D. +61 +Director +2021 +I +2027 +— +Yes +X +Scott Hutton +53 +President, Chief Executive Officer and Director  +2020 +I +2027 +— +No +John Patience +78 +Chairman of the Board +2008 +I +2027 +— +Yes +X +* AC - Audit Committee; CC - Compensation Committee; NCG - Nominating and Corporate Governance Committee +Director Nominees +Class II Directors – Nominees for Election at the Annual Meeting +Lawrence T. Kennedy, Jr. has served as a Director of the Company since January 2023. Mr. Kennedy brings to Biodesix more than 25 years of broad operating, corporate finance, company creation and investment experience with a specific focus in the healthcare industry. Mr. Kennedy currently serves as the Managing Partner and Chief Executive Officer of Westwood Management, a private investment and wealth management firm directing a diverse investment portfolio across a range of alternative and traditional asset classes. Prior to his role at Westwood Management, Mr. Kennedy was the co-founder, Chief Financial Officer and chairman of Health Carousel, a talent management company with a leading portfolio of healthcare staffing and workforce solution businesses. Mr. Kennedy currently serves on the boards of directors of Healthcare for Kids, Caliber Healthcare Solutions, Revolution 4.0 and Health Carousel. Mr. Kennedy has received an M.B.A. from Duke University’s Fuqua School of Business and a B.A. from Colgate University. +We believe that Mr. Kennedy is qualified to serve on our board of directors because of his experience in leadership and management roles in the field of healthcare, as well as his experience as a board member and investor in companies in the healthcare industry. +Matthew Strobeck, Ph.D . has served as a Director of the Company since January 2012. Dr. Strobeck is currently the Managing Partner of Birchview Capital LP, an investment management company. In addition, Dr. Strobeck is currently a director of QuidelOrtho Corporation (Quidel), Accelerate Diagnostics, Monteris Medical Corporation and the Schuler Education Foundation. Dr. Strobeck was a director of Yield 10 Biosciences from 2012 to 2017. Dr. Strobeck received a B.S. from St. Lawrence University, a Ph.D. from the University of +2025 Proxy Statement +9 +Table of Contents +Cincinnati, an M.S. from the Harvard University-MIT Health Sciences and Technology Program, and an M.S. from the MIT Sloan School of Management. We believe that Dr. Strobeck is qualified to serve on our board of directors because of his experience in leadership and management roles at medical technology companies, as well as his experience as a board member and investor in the medical technology industry. +Continuing Directors +Class III Directors – Term Expiring at the 2026 Annual Meeting +Jean M. Franchi has served as a Director of the Company since April 2020. Ms. Franchi is currently Chief Financial Officer of Disc Medicine, Inc., a clinical stage company focused on hematologic diseases, prior to which she served as Chief Financial Officer of Replimune Group, Inc. (Replimune) from 2019 to 2023, a biotechnology company developing oncolytic immuno-gene therapies. Prior to Replimune, Ms. Franchi was Chief Financial Officer at Merrimack Pharmaceuticals, Inc., a biopharmaceutical company, from 2017 to 2019, Dimension Therapeutics, Inc., a gene therapy company, from 2015 to 2017, and Good Start Genetics, Inc., a molecular genetic information company, from 2012 to 2015. From 1995 to 2011, Ms. Franchi held various positions at Genzyme Corporation, including Senior Vice President of Corporate Finance, Senior Vice President of Business Unit Finance, and Vice President of Finance and Controller, Product Line and International Group. Ms. Franchi currently serves on the board of directors of VectorY Therapeutics. Ms. Franchi also served on the board of directors of Biophytis S.A. through July 2021, Visioneering Technologies, Inc. through December 2022 and Flamingo Therapeutics through March 2024. Ms. Franchi received her B.A. in Accounting from Hofstra University. +We believe that Ms. Franchi is qualified to serve on our board of directors because of her experience in leadership and management roles in the healthcare industry as well as her experience holding finance-related roles of increasing responsibility. +Hany Massarany has served as a Director of the Company since July 2020. Mr. Massarany currently serves as both a director (since 2020) and chairman (since February 2023) of Accelerate Diagnostics. Mr. Massarany was President and Chief Executive Officer of GenMark Diagnostics, Inc., a provider of multiplex molecular diagnostic solutions, from April 2011 to March 2020. From February 2009 to April 2011, Mr. Massarany served as President at Ventana and Head of Roche Tissue Diagnostics, a division of F. Hoffman-La Roche Ltd. focused on manufacturing instruments and reagents that automate tissue processing and slide staining diagnostics for cancer. From 1999 to 2009, Mr. Massarany held various global leadership positions with Ventana, including Chief Operating Officer, Executive Vice President, Worldwide Operations, Senior Vice President, Corporate Strategy and Development, and Vice President, North American Commercial Operations. Mr. Massarany also held executive management positions with Bayer Diagnostics and Chiron Diagnostics, working in both the Asia Pacific region and the United States. Mr. Massarany served on the board of directors of GenMark Diagnostics, Inc. from May 2011 to February 2020. Mr. Massarany earned a B.S. in Microbiology and Immunology from Monash University in Australia and an M.B.A. from Melbourne University. +We believe that Mr. Massarany is qualified to serve on our board of directors because of his experience in leadership and management roles, and experience as a board member, in the healthcare industry. +Class I Directors – Term Expiring at the 2027 Annual Meeting +Jon Faiz Kayyem, Ph.D. has served as a Director of the Company since December 2021. Dr. Kayyem has over 25 years of experience inventing, patenting, licensing, developing, and commercializing novel solutions for +2025 Proxy Statement +10 +Table of Contents +molecular diagnostics and DNA detection opportunities. Dr. Kayyem has served in various leadership positions throughout his career. He held numerous roles at GenMark Diagnostics, Inc., including Founder, CEO and President, Chief Scientific Officer, Senior Vice President of Research and Development. Prior to his work at GenMark Diagnostics, Dr. Kayyem served as director and founder of Calimmune, Inc. and was Vice President of Life Sciences at Motorola Solutions, Inc. In October 2004, he co-founded the biotechnology fund management company, Efficacy Capital Limited and served as a managing partner. Additionally, Dr. Kayyem founded Clinical Micro Sensors Inc., the predecessor company of GenMark Diagnostics, to commercialize multiple technical innovations that he developed while serving as a Senior Research Fellow at the California Institute of Technology (Caltech). Dr. Kayyem holds a B.S. and M.S. in Biochemistry from Yale University and a Ph.D. in Molecular Biology from Caltech. Currently, Dr. Kayyem is on the board of directors of Inhibrix Biosciences, Inc. +We believe that Dr. Kayyem is qualified to serve on our board of directors because of his experience in leadership and management roles in the field of medicine, as well as his experience as a board member and investor in companies in the healthcare industry. +Scott Hutton has served as our President, Chief Executive Officer and Director since January 2020, and previously held the role of Chief Operating Officer from March 2018 to December 2019. Mr. Hutton also serves as a director and board secretary for the Coalition for 21st Century Medicine, a non-profit organization that advocates for high-quality diagnostic testing availability. Additionally, Mr. Hutton has served on the board of directors of Eximis Surgical, Inc. since February 2018 and was on the board of the Colorado Bioscience Association from April 2011 to April 2013. Mr. Hutton was an observer on the board of directors of Aqueduct Critical Care, Inc. from September 2014 to January 2017, and an observer on the Board of Visualase, Inc. from October 2012 to July 2014. Mr. Hutton joined Biodesix from Spectranetics Corp. (Spectranetics), a U.S.-based global leader in vascular intervention and lead management solutions (now part of Royal Philips), where he served as Senior Vice President and General Manager of the Vascular Intervention division from January 2017 to December 2017. Prior to joining Spectranetics, Mr. Hutton held several positions of increasing responsibility, including Vice President and General Manager, at Medtronic plc, a global healthcare products company and manufacturer of medical devices and supplies, over a period of 16 years. From April 2012 to January 2017, Mr. Hutton was Vice President and General Manager of Neurosurgery, where he oversaw the operations of the approximately $1 billion Neurosurgery business unit. From 2008 to 2012, he grew from Senior Director of Global Marketing to Vice President and Business Leader of the Surgical Navigation and Intra-Operative Imaging business. Mr. Hutton holds a B.A. from the College of Health and Human Sciences, Department of Health and Kinesiology at Purdue University. In March 2021, Mr. Hutton was named a Significant Sig by Sigma Chi International Fraternity. Mr. Hutton was named a Top 25 Biotech CEO of 2021 and 2022 by the Healthcare Technology Report in February 2021 and February 2022, respectively. In January 2021, Mr. Hutton was named 2020 CEO of the Year-USA by CEO Monthly Magazine. In July 2011, Mr. Hutton received the Medtronic plc Wallin Leadership Award for his focus on talent development, business performance, and his personal and intentional demonstration of leadership. +We believe that Mr. Hutton is qualified to serve on our board of directors because of his experience in leadership and management roles at our Company, as well as his experience as a board member in the healthcare and medical device industries. +John Patience has served as a Director of the Company since June 2008 and as Chairman of the Board since September 2020. Mr. Patience currently serves as a director (since 2012) of Accelerate Diagnostics, Inc., an in vitro diagnostics company (Accelerate Diagnostics). Mr. Patience served as a director of Ventana Medical Systems, Inc. (Ventana), from 1989 and as Vice Chairman from 1999 until Ventana’s acquisition by Roche in 2008. Mr. Patience also served as a director of Stericycle, Inc. since its founding in 1989 to June 2018. Mr. Patience is a founding partner of Crabtree Partners, a private equity investment partnership in Lake Forest, Illinois, and an angel investor. He was also previously a partner of a venture capital investment firm that provided both Ventana and Stericycle, Inc. with early-stage funding. Mr. Patience was also previously a partner at the consulting firm McKinsey & Company, Inc., specializing in healthcare. Mr. Patience holds a B.A. in +2025 Proxy Statement +11 +Table of Contents +Liberal Arts and an L.L.B. from the University of Sydney, Australia, and an M.B.A. from the University of Pennsylvania’s Wharton School of Business. +We believe that Mr. Patience is qualified to serve on our board of directors because of his experience in leadership and management roles in the field of medicine, as well as his experience as a board member and investor in companies in the healthcare industry. +Board Composition +In accordance with our amended and restated certificate of incorporation, our board of directors is divided into three classes with staggered, three-year terms. At each annual meeting of stockholders, the successors to directors whose terms then expire will be elected to serve from the time of election and qualification until the third annual meeting following election. Our directors are divided among the three classes as follows: +• +the Class II directors are Matthew Strobeck, Ph.D. and Lawrence T. Kennedy Jr., and their terms will expire at the Annual Meeting; +• +the Class III directors are Jean Franchi and Hany Massarany, and their terms expire at the 2026 annual meeting of stockholders; and +• +the Class I directors are Jon Faiz Kayyem, Ph.D., John Patience and Scott Hutton, and their terms will expire at the 2027 annual meeting of stockholders. +Our amended and restated certificate of incorporation and amended and restated bylaws provide that the authorized number of directors may be changed only by resolution of the board of directors. Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one third of the directors. Each director’s term continues until the election and qualification of his or her successor, or, if sooner, his or her death, resignation or removal. +Director Independence +Under the listing requirements and rules of Nasdaq Stock Market (Nasdaq), independent directors must comprise a majority of our board of directors as a listed company within one year of the closing of our initial public offering. +Our board of directors has undertaken a review of its composition, the composition of its committees and the independence of each director. Based upon information requested from and provided by each director concerning his or her background, employment and affiliations, including family relationships, our board of directors has determined that Ms. Franchi, Messrs. Massarany, Patience and Kennedy and Drs. Kayyem and Strobeck do not have any relationships that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors is “independent” as that term is defined under the applicable listing requirements and rules of Nasdaq. In making this determination, our board of directors considered the current and prior relationships that each non-employee director has with our Company and all other facts and circumstances our board of directors deemed relevant in determining their independence, including the beneficial ownership of our capital stock by each non-employee director. +Board Leadership Structure +Our corporate governance guidelines provide our board of directors with flexibility to combine or separate the positions of Chairman of the board of directors and the Chief Executive Officer and/or the implementation of a lead director in accordance with its determination that utilizing one or the other structure +2025 Proxy Statement +12 +Table of Contents +would be in the best interests of the Company. Mr. Patience currently serves as the independent Chairman of our board of directors. Our board of directors believes that separating these positions reinforces the independence of our board of directors from management, creates an environment that encourages objective oversight of management’s performance and enhances the effectiveness of our board of directors as a whole. +Role of our Board of Directors in Risk Oversight +Our board of directors is responsible for overseeing the overall risk management process at Biodesix. The day-to-day responsibility for managing risks and exposures resides with our executive management team while our board committees and our board of directors as a whole participate in the oversight process. The risk oversight process includes receiving regular reports from committees and management to enable our board of directors to understand management’s risk assessment and mitigation processes, which includes areas of potential material risk, including long-term strategic and operational planning, strategic biopharmaceutical partnerships, executive development and evaluation, regulatory and legal compliance, information technology (including cybersecurity), financial reporting and internal controls and reputational risk. Our board of directors focuses on the overall risks affecting us, and each of its standing committees has been delegated responsibility for oversight of specific risks that fall within its areas of responsibility. For example: +• +Our audit committee is responsible for overseeing our major financial, legal and regulatory risk exposures, which spans a variety of areas including litigation, regulatory compliance, financial reporting, insurance and cybersecurity. Our audit committee also oversees the steps management has taken to monitor and control such exposures, including guidelines and policies for assessing and managing risk and related compliance efforts. +• +Our nominating and corporate governance committee oversees the management of risks associated with our overall compliance and corporate governance practices and the independence and composition of our board of directors, including monitoring the effectiveness of our corporate governance guidelines and cybersecurity risk profile and other policies such as our code of conduct and overseeing our environmental and sustainability efforts and progress. +• +Our compensation committee regularly assesses risks arising from our compensation plans, policies and programs, including whether any such plans encourage excessive or inappropriate risk-taking. +While each committee is responsible for evaluating certain risks and overseeing the management of such risks, the full board of directors is regularly informed through committee reports about such risks. +Meetings of our Board of Directors +Our board of directors held five meetings during 2024. Each incumbent director attended at least 75% of the aggregate total number of meetings of the board of directors and the committees on which he or she served held during the portion of 2024 for which he or she was a director or committee member. We encourage our directors to attend our annual meetings of stockholders. Eight directors, including our Chief Executive Officer, Mr. Hutton, attended our 2024 annual meeting of stockholders. +Committees of our Board of Directors +Our board of directors has established an audit committee, a compensation committee and a nominating and corporate governance committee. Our board of directors may establish other committees to facilitate the management of our business. The composition and functions of each committee are described below. Members serve on these committees until their resignation or until otherwise determined by our board of directors. The charter of each committee is available on our corporate website at www.biodesix.com in the Investors section +2025 Proxy Statement +13 +Table of Contents +under “Governance—Governance Highlights.” Reference to our website does not constitute incorporation by reference of the information contained at or accessible through our website into this proxy statement. +Committee Composition and Meetings +The following table provides current membership and 2024 meeting information for each committee of our board of directors: +Name: +Audit Committee +Compensation +Committee +Nominating and Corporate +Governance Committee +Jean Franchi +Chair +X +Jon Faiz Kayyem, Ph.D. +X +Lawrence T. Kennedy, Jr. +X +Hany Massarany +X +Chair +John Patience +X +Matthew Strobeck, Ph.D. +X +Chair +Total meetings held in 2024 +4 +6 +4 +Audit Committee +Our audit committee consists of Ms. Franchi, Messrs. Kennedy and Massarany and Dr. Strobeck, each of whom our board of directors has determined satisfies the independence requirements under Nasdaq listing rules and Rule 10A-3(b)(1)(ii) of the Exchange Act. The chair of our audit committee is Ms. Franchi, whom our board of directors has determined is an “audit committee financial expert” within the meaning of the SEC regulations. Each member of our audit committee can read and understand fundamental financial statements in accordance with applicable listing standards. In arriving at these determinations, our board of directors has examined each audit committee member’s scope of experience and the nature of her or his employment in the corporate finance sector. The functions of this committee include: +• +helping our board of directors oversee our corporate accounting and financial reporting processes; +• +reviewing and discussing with our management the adequacy and effectiveness of our disclosure controls and procedures; +• +assisting with design and implementation of our risk assessment functions; +• +evaluating the qualifications, performance and independence of our independent registered public accounting firm and deciding whether to retain its services; +• +monitoring the rotation of partners of our independent registered public accounting firm on our engagement team as required by law; +• +discussing the scope and results of the audit with the independent registered public accounting firm, and reviewing, with management and the independent accountants, our interim and year-end results; +• +developing procedures for employees to submit concerns anonymously about questionable accounting or audit matters; +• +reviewing related-party transactions; +2025 Proxy Statement +14 +Table of Contents +• +approving, or as permitted, pre-approving, audit and permissible non-audit services to be performed by our independent registered public accounting firm; and +• +reviewing and assessing, at least annually, the performance of the audit committee and adequacy of its charter. +Compensation Committee +Our compensation committee consists of Messrs. Massarany and Patience and Dr. Kayyem, and the chair of our compensation committee is Mr. Massarany. Our board of directors has determined that each of Messrs. Massarany and Patience and Dr. Kayyem is independent under the applicable Nasdaq listing rules and is a “non-employee director” as defined in Rule 16b-3 promulgated under the Exchange Act. The functions of this committee include: +• +reviewing, modifying and overseeing overall compensation strategy and policies; +• +reviewing and approving the compensation arrangements and other terms of employment of our chief executive officer, other executive officers and senior management, as appropriate; +• +reviewing and recommending to the full board of directors the compensation of our directors; +• +appointing and overseeing the work of compensation consultants, legal counsel or any other advisors and consultants engaged for the purpose of advising the compensation committee; +• +reviewing, recommending to the full board of directors, as appropriate, and administering equity award plans, compensation plans and similar programs, as well as modification or termination of plans and programs; +• +establishing policies with respect to equity compensation arrangements; +• +reviewing and evaluating with the chief executive officer and the full board of directors the succession plans for our executive officers; and +• +reviewing and assessing, at least annually, the performance of the compensation committee and the adequacy of its charter. +Compensation Committee Interlocks and Insider Participation +None of the members of the compensation committee is currently, or has been at any time during 2024, one of our officers or employees. None of our executive officers currently serve, or has served during 2024, as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving as a member of our board of directors or compensation committee. +Nominating and Corporate Governance Committee +Our nominating and corporate governance committee consists of Ms. Franchi, Dr. Strobeck and Mr. Kennedy, and the chair of our nominating and corporate governance committee is Dr. Strobeck. Our board of directors has determined that Ms. Franchi, Dr. Strobeck and Mr. Kennedy are independent under the applicable Nasdaq listing rules. The functions of this committee include: +• +reviewing periodically and evaluating director performance of our board of directors and its applicable committees, and recommending to our board of directors and management areas for improvement; +2025 Proxy Statement +15 +Table of Contents +• +identifying, evaluating, nominating and recommending individuals for membership on our board of directors; +• +reviewing with our chief executive officer the plans for succession to the offices of our executive officers and make recommendations to our board of directors with respect to the selection of appropriate individuals to succeed to these positions; +• +reviewing and recommending to our board of directors any amendments to our corporate governance policies; +• +monitoring our cybersecurity risk profile, receiving periodic updates from management on all matters related to cybersecurity, and reporting to our full board of directors on an annual or as necessary basis; and +• +reviewing and assessing, at least annually, the performance of the nominating and corporate governance committee and the adequacy of its charter. +Director Nomination Process +Selection and Nomination Process +Our board of directors is responsible for nominating members for election to our board of directors by our stockholders at our annual meetings of stockholders. Whenever a vacancy occurs on our board of directors, whether due to a newly created director position or the death, resignation, removal or retirement of an existing director, our board of directors is authorized to select a person to fill the vacancy to serve as a director until the annual meeting of stockholders at which the director’s term expires and until the election and qualification of his or her successor or, if sooner, his or her death, resignation or removal. Any increase or decrease in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors. +Criteria for Board Membership +The board of directors and the nominating and corporate governance committee will determine the appropriate characteristics, skills and experience for the board of directors as a whole and for its individual members. The board of directors and the nominating and corporate governance committee will consider the minimum general criteria set forth below, and may add any specific additional criteria with respect to specific searches, in selecting candidates and existing directors for service on the board of directors. An acceptable candidate may not fully satisfy all of the criteria, but is expected to satisfy nearly all of them. While the nominating and corporate governance committee does not have a formal policy in this regard, the diversity of the board of the directors is a consideration in evaluating candidates for director positions, among others. +The board of directors and the nominating and corporate governance committee believe that candidates for director should have certain minimum qualifications, including being able to read and understand basic financial statements, being over 21 years of age and having the highest personal integrity and ethics. In considering candidates, the board of directors and the nominating and corporate governance committee intend to consider such factors as possessing relevant expertise upon which to be able to offer advice and guidance to management, having sufficient time to devote to the affairs of the Company, demonstrated excellence in his or her field, having the ability to exercise sound business judgment and having the commitment to rigorously represent the long-term interests of our stockholders. +The board of directors and the nominating and corporate governance committee review candidates for director nomination in the context of the current composition of the board of directors, the operating +2025 Proxy Statement +16 +Table of Contents +requirements of the Company and the long-term interests of our stockholders. In conducting this assessment, the board of directors and the nominating and corporate governance committee consider diversity, age, skills, and such other factors as it deems appropriate given the current needs of the board of directors and the Company to maintain a balance of knowledge, experience and capability. In the case of incumbent directors whose terms of office are set to expire, the board of directors and the nominating and corporate governance committee review such directors’ overall service to the Company during their term, including the number of meetings attended, level of participation, quality of performance, and any other relationships and transactions that might impair such directors’ independence. In the case of new director candidates, the board of directors and the nominating and corporate governance committee also determine whether the nominee must be independent for purposes of any stock exchange on which any of the Company’s capital stock is listed. +Stockholder Recommendations and Nominations +Stockholders who wish to recommend candidates may contact the nominating and corporate governance committee in the manner described below under “Board and Corporate Governance Matters—Stockholder Communications with our Board of Directors.” Stockholder nominations must be made according to the procedures required under our bylaws and described in this proxy statement under the heading “Additional Information—Stockholder Proposals and Nominations for Next Year’s Annual Meeting of Stockholders.” Stockholder-recommended candidates and stockholder nominees whose nominations comply with these procedures will be evaluated by our nominating and corporate governance committee in the same manner as other nominees. +Executive Officers +Set forth below is biographical information with respect to each current executive officer of the Company, except Mr. Hutton, our President and Chief Executive Officer. Mr. Hutton also serves as a director of the Company, and his biographical information is available above in the section titled “Overview of Our Nominees and Continuing Directors—Director Nominees.” +Robin Harper Cowie , age 45. Ms. Harper Cowie has served as our Chief Financial Officer since April 2017. She has been with the Company in multiple financial and reimbursement positions since March 2011, serving as Vice President of Finance from February 2016 to April 2017, Vice President of Reimbursement & Health Economics from February 2015 to February 2016, Senior Director of Reimbursement from January 2014 to February 2015, and Director of Reimbursement from March 2011 to January 2014. Prior to joining Biodesix, Ms. Harper Cowie held a leadership role in payer and government relations at Precision Therapeutics, Inc. Ms. Harper Cowie’s background includes corporate finance, managed care and payer relations, reimbursement and regulatory policy, and revenue cycle operations. Additionally, she spent several years as a researcher at the University of Pittsburgh Medical Center. Ms. Harper has also served on the board of the Colorado Bioscience Association since 2023. Ms. Harper Cowie holds a B.S. in Molecular Biology from the University of Pittsburgh, and an M.B.A. in Finance from the Joseph M. Katz Graduate School of Business from the University of Pittsburgh. +Kieran O’Kane , age 48. Mr. O’Kane has served as our Chief Commercial Officer since March 2020 and has been with the Company in multiple marketing management roles since February 2018. From April 2016 to February 2018, prior to joining Biodesix, Mr. O’Kane led the Global Diagnostics Marketing team at NanoString Technologies, a biotechnology company focused in developing cancer diagnostic tools. He is a highly experienced strategic and tactical global sales and marketing leader for both in-line and pipeline products with a career focus in oncology. Mr. O’Kane has held commercial leadership positions and managed multiple new product launches at Biotheranostics, Cell Therapeutics, Eisai, Cephalon, Bristol-Myers Squibb, and Roche. Mr. O’Kane received a B.S. in Pharmacology at King’s College, University of London. +2025 Proxy Statement +17 +Table of Contents +Code of Business Conduct and Ethics +We have adopted a Code of Business Conduct and Ethics (the Code of Conduct) that applies to all of our employees, officers (including our principal executive officer, principal financial officer and principal accounting officer or controller, or persons performing similar functions), and directors. Stockholders may request a free copy of our Code of Business Conduct and Ethics by contacting Biodesix, Inc., Attention: Chief Financial Officer, 919 West Dillon Rd., Louisville, Colorado 80027. We intend to disclose future amendments to certain provisions of our Code of Conduct, or waivers of such provisions, applicable to any principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions, and our directors, on our website at www.biodesix.com. Reference to our website does not constitute incorporation by reference of the information contained at or accessible through our website into this proxy statement. +Corporate Governance Guidelines +We have adopted written corporate governance guidelines which provide the framework for our corporate governance, along with our amended and restated certificate of incorporation, amended and restated bylaws, committee charters and other key governance practices and policies. Our corporate governance guidelines cover a range of topics including, but not limited to, board composition, independence and selection of directors, board membership criteria, conduct of board meetings, board committee composition and functions, board assessment, director compensation and succession planning. Our corporate governance guidelines will be reviewed at least annually by our nominating and corporate governance committee and any proposed changes will be recommended to our full board of directors for approval. A copy of our corporate governance guidelines is available on our corporate website at www.biodesix.com in the Investor section under “Governance—Governance Highlights.” Reference to our website does not constitute incorporation by reference of the information contained at or accessible through our website into this proxy statement. +Insider Trading Policy +We have adopted an insider trading policy to establish guidelines for our employees, directors, executive officers, and other employees regarding transactions in our securities and the disclosure of material nonpublic information related to our Company. In addition, our insider trading policy prohibits our directors, executive officers and other employees from engaging in hedging transactions or other inherently speculative transactions with respect to Company securities, such as short sales or transactions in put or call options. Our directors, executive officers and other employees are also prohibited from holding Company securities in a margin account or pledging company securities as collateral for a loan. Our policy is reasonably designed to promote compliance with insider trading laws, rules and regulations, and any listing standards applicable to the registrant. In addition, it is the policy of the Company to comply with applicable U.S. securities laws, including laws, rules and regulations related to trading in our securities. A copy of our Insider Trading Policy was filed as Exhibit 19.1 to our Form 10-K for the year ended December 31, 2024. +2025 Proxy Statement +18 +Table of Contents +Stockholder Communications with our Board of Directors +Any stockholder or other interested party who wishes to communicate with our board of directors or any individual director may send written communications to our board of directors or such director c/o Corporate Secretary, Biodesix, Inc., 919 West Dillon Rd., Louisville, CO 80027. The communication must include the stockholder’s name, address and an indication that the person is our stockholder. The Corporate Secretary will review any communications received from stockholders and will forward such communications to the appropriate director or directors, or committee of our board of directors, based on the subject matter. Communications that are deemed inappropriate (such as communications that are commercial or frivolous in nature) will not be forwarded. In addition, communications that appear to be unduly hostile, intimidating, threatening, illegal or similarly inappropriate will not be forwarded. +Certain Relationships and Related-Party Transactions +The following is a summary of the transactions since January 1, 2023 to which we have been a participant in which the amount involved in the transaction exceeds or will exceed $120,000 and in which any of our directors, director nominees, executive officers, or holders of more than 5% of our capital stock, or any immediate family member of, or person sharing the household with, any of these individuals, had or will have a direct or indirect material interest, with certain exceptions, other than compensation arrangements, which are under the section of this proxy statement captioned “Executive Compensation.” +Subscription Agreements +On August 3, 2023, we entered into subscription agreements with a consortium of investors, including all members of our board of directors, certain members of the Company’s management team, including our Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer, for the issuance and sale by the Company of an aggregate of 16,975,298 shares at a purchase price of $1.62 per share in a private placement offering, for an aggregate purchase price of $27.5 million. The net proceeds were used, among other things, to fund the commercial expansion of the Company’s sales and research and development business units, and for general corporate purposes. +Consulting Agreements +In November 2023, we entered into a two-year consulting agreement with Aspira Women’s Health Inc. and Aspira Labs (collectively, “Aspira”), a gynecological health company, to provide consulting services related to our research programs to test the efficacy of Aspira’s new ovarian cancer MDx ddPCR assay. Two members of our board of directors, Jack Schuler and Matthew Strobeck, Ph.D., have ownership interests in Aspira. As of March 24, 2025, we have recognized $251,653 in revenue. The net proceeds were used, among other things, to fund the commercial expansion of the Company’s sales and research and development business units, and for general corporate purposes. The agreement is set to expire in November 2025 but may be extended. +Investor Rights Agreement +In October 2018, we entered into an amended and restated investor rights agreement (IRA) with certain holders of our preferred stock and Common Stock, including certain holders of 5% of our capital stock, and including certain members of, and affiliates of, our directors and certain of our executive officers. The IRA provides the holders of our preferred stock with certain registration rights. After the closing of our initial public offering, the holders of 20,090,745 shares of Common Stock issuable from conversion of outstanding preferred stock, became entitled to rights with respect to the registration of their shares of Common Stock under the Securities Act under this agreement. +2025 Proxy Statement +19 +Table of Contents +Indemnification of Directors and Executive Officers +We have entered into indemnification agreements with each of our directors and executive officers in connection with our initial public offering or the start of their service on our board. The indemnification agreements and our bylaws will require us to indemnify our directors against certain liabilities, costs and expenses to the fullest extent not prohibited by the Delaware General Corporation Law, and have purchased directors’ and officers’ liability insurance. Subject to very limited exceptions, our bylaws will also require us to advance expenses incurred by our directors and officers. +Policies and Procedures for Related-Party Transactions +Our audit committee has the primary responsibility for the review, approval and oversight of any “related-party transaction,” which is any transaction, arrangement or relationship (or series of similar transactions, arrangements or relationships) in which we are, were or will be a participant and the amount involved exceeds $120,000, and in which the related person has, had or will have a direct or indirect material interest. We adopted a written related-party transaction policy effective October 2020. Under our related-party transaction policy, our management is required to submit any related-party transaction not previously approved or ratified by our audit committee to our audit committee. In approving or rejecting the proposed transactions, our audit committee takes into account all of the relevant facts and circumstances available. +Private Placement Transaction +On April 5, 2024, we entered into securities purchase agreements with a consortium of investors, including members of our board of directors, certain members of the Company’s management team, including our Chief Executive Officer, Chief Financial Officer and Chief Commercial Officer, for the issuance and sale by the Company of 760,857 shares of Series A Preferred Stock at a price of $46.00 per share. On April 5, 2024, we also entered into a registration rights agreement with the consortium of investors, pursuant to which the investors are entitled to certain resale registration rights with respect to shares of our Common Stock underlying the Series A Preferred Stock that will be held by such investors. On May 23, 2024, after approval from our stockholders at last year’s annual meeting, we issued 30,434,280 shares of Common Stock in exchange for all outstanding shares of Series A Preferred Stock, and no shares of Series A Preferred Stock remain outstanding. +2025 Proxy Statement +20 +Table of Contents +EQUITY COMPENSATION PLAN INFORMATION +The following table summarizes the number of outstanding stock options and restricted stock unit (RSU) awards granted to our employees, consultants, and directors, as well as the number of shares of Common Stock remaining available for future issuance, under our equity compensation plans in effect as of December 31, 2024. +Plan Category: +Number of +securities to be +issued upon exercise of +outstanding options +(a) +Weighted-average +exercise price of +outstanding options +(b)($) +Number of securities +remaining available for +issuance under equity +compensation plans +(excluding securities +reflected in column +(a)) +Equity compensation plans approved by security holders (1) +9,297,420 +(2) +$ +2.38 +(3) +837,381 +(4) +Equity compensation plans not approved by security holders +—  +—  +—  +Total +9,297,420 +$ +2.38 +837,381 +(1) +Includes the 2006 Employee, Director and Consultant Stock Plan (2006 Incentive Plan), the 2016 Equity Incentive Plan (2016 Incentive Plan), the 2020 Equity Incentive Plan (2020 Incentive Plan), the Employee Stock Purchase Plan (ESPP), the 2011 Second Amended and Restated Bonus-to-Options Program and the 2015 Third Amended and Restated Bonus-to-Options Program. +(2) +Includes 52,736 RSUs that were outstanding on December 31, 2024 under the 2016 Incentive Plan and 3,717,523 RSUs that were outstanding on December 31, 2024 under the 2020 Incentive Plan. RSU awards may be settled only for shares of Common Stock on a one-for-one basis. +(3) +Only option awards were used in computing the weighted-average exercise price. +(4) +This amount represents 662,106 shares of Common Stock available for issuance under the 2020 Incentive Plan and 175,275 shares of Common Stock available for issuance under the ESPP, all of which were subject to purchase under the offering period in effect as of December 31, 2024, which offering period ended on February 28, 2025. Awards available for grant under the Company’s 2020 Incentive Plan include stock options, stock appreciation rights, restricted stock, RSUs, other stock awards, performance awards, and any combination of the foregoing awards. The number of shares of our Common Stock reserved for issuance under our 2020 Incentive Plan will automatically increase on the first day of each fiscal year by 4% of the number of shares of Common Stock outstanding on the immediately preceding December 31 or such lesser amount as is determined by our board of directors. The ESPP provides the opportunity for eligible coworkers to acquire shares of our Common Stock at a discount. The number of shares of our Common Stock reserved for issuance under our ESPP will automatically increase on the first day of each fiscal year by the lesser of (i) 1% of the number of shares of Common Stock issued and outstanding on the immediately preceding December 31, (ii) 338,106 shares of our Common Stock or (iii) such lesser amount as is determined by our board of directors. +2025 Proxy Statement +21 +Table of Contents +DIRECTOR COMPENSATION +Non-Employee Director Compensation Policy +The following summarizes our non-employee director compensation policy, as amended in the first quarter of 2024. Our employee director receives no additional compensation for service on our board of directors. +● Annual Retainers: +– +Each non-employee director is entitled to receive annual retainers in the amount summarized in the table below. +Position +Annual Retainer +Board Member +$ +40,000 +Chair of the Board of Directors +$ +0 +Committee Chairs: +Audit +$ +20,000 +Compensation +$ +15,000 +Nominating and Corporate Governance +$ +10,000 +Committee Members: +Audit +$ +0 +Compensation +$ +0 +Nominating and Corporate Governance +$ +0 +– +For service from April 1, 2024 to March 31, 2025, non-employee directors could elect to receive annual retainers in cash or RSUs, or a mixture of cash and RSUs (with 25%, 50% or 75% of such annual retainers paid in RSUs). Annual retainers paid in cash would be paid in equal quarterly installments, in arrears following the end of each quarter in which the service was performed. Equity grants made in respect of annual retainers were granted as of the date of our 2024 annual meeting of stockholders, were valued based on the average price of our Common Stock over a 90-day period preceding the date of grant, and vested on March 31, 2025. If a non-employee director became a director after April 1, 2024, his or her annual retainers were pro-rated based on the period of the non-employee director’s service on our board of directors during the year. +– +For service from April 1, 2024 to March 31, 2025, all of our non-employee directors elected to receive their annual retainers with respect to service on our board of directors or any of its committees in the form of RSUs. The average closing price of our Common Stock for the 90-day period beginning on February 21, 2024 and ending on May 20, 2024 was $1.42. Based on this price, it was determined that each non-employee director was entitled to a grant of 28,161 RSUs. In addition, the Audit Committee Chair, Compensation Committee Chair, and Nominating and Corporate Governance Committee Chair were entitled to a grant of 14,080 RSUs, 10,560, RSUs, and 7,040 RSUs, respectively. +● Equity Compensation: +– +Upon appointment to our board of directors, each non-employee director is entitled to receive an initial stock option grant having a Black Scholes value of $187,500, determined as of the date of grant based on the average price of our Common Stock over a 90-day period preceding the date of grant, with 40% vesting on the two-year anniversary of the grant date and the remainder vesting ratably on each subsequent monthly anniversary of the grant date for 36 months, subject to such director’s continuous service through each applicable vesting date. The Company limits the number of shares of Common Stock that may be subject to the initial stock option grant to 0.075% of the Company’s outstanding shares of Common Stock as of the immediately preceding January 1, which may result in a newly appointed non-employee director receiving an initial stock option grant having a Black Scholes value that is less than $187,500. +2025 Proxy Statement +22 +Table of Contents +– +Upon appointment to our board of directors, each non-employee director is also entitled to receive an initial RSU grant valued at $187,500 as of the date of grant based on the average price of our Common Stock over a 90-day period preceding the date of grant, which will vest on the one-year anniversary of the grant date subject to such director’s continuous service through such date. The Company limits the number of shares of Common Stock that may be subject to the initial RSU grant to 0.0375% of the Company’s outstanding shares of Common Stock as of the immediately preceding January 1, which may result in a newly appointed non-employee director receiving an initial RSU grant having a value that is less than $187,500. +– +For service from April 1, 2024 to March 31, 2025, each non-employee director continuing his or her service on our board of directors following the annual meeting of stockholders was entitled to receive an annual stock option grant having a Black Scholes value of $96,250 and an annual RSU grant valued at $96,250, in each case determined as of the date of the 2024 annual meeting of stockholders, based on the average price of our Common Stock over the preceding 90 days, which vested on March 31, 2025, subject to such director’s continuous service through such date. The Company limits the number of shares of Common Stock that may be subject to an annual stock option grant or an annual RSU grant to 0.0385% and 0.01925%, respectively, of the Company’s outstanding shares of Common Stock as of the immediately preceding January 1. The average closing price of our Common Stock for the 90-day period beginning on February 21, 2024 and ending on May 20, 2024 was $1.42. Based on this price, each non-employee director would have been granted an option to purchase 103,354 shares of the Company’s Common Stock and 67,762 RSUs on May 21, 2024. However, as a result of the grant limitations described above, each non-employee director was instead granted an option to purchase 37,050 shares of the Company’s Common Stock, having a Black Scholes value as of the date of grant of $1.06, and 18,525 RSUs with a grant date value of $1.42. +– +Notwithstanding the vesting schedules described above, each non-employee director who remains in continuous service until a change of control (as defined in our 2020 Incentive Plan) will become fully vested in all then-outstanding equity awards. In addition, annual equity grants and equity grants in respect of annual retainers that were granted during 2024 will vest on a prorated basis in the event a director resigns or otherwise experiences a termination of service other than for cause. +● Expense Reimbursement : Our non-employee directors are also reimbursed for their reasonable out-of-pocket travel expenses to cover in-person attendance at and participation in board and committee meetings. +The non-employee director compensation policy was further amended on October 30, 2024, effective as of April 1, 2025, to provide that non-employee directors will receive annual retainers in the form of RSUs that vest in equal quarterly installments and to provide that annual equity grants will also vest in equal quarterly installments, beginning with 2025 grants. +Director Deferred Compensation Plan +On December 21, 2021, our compensation committee adopted the 2021 Non-Employee Director Deferred Compensation Plan (the Director Deferred Compensation Plan), an unfunded, non-qualified deferred compensation plan that allows our non-employee directors to defer RSU awards that they receive. +Any RSU deferred will be credited as deferred units to the non-employee director’s account as of the date on which it vests. Each deferred unit is credited with dividend equivalents equal to the dividends paid, if any, on our Common Stock, which are deemed reinvested in additional deferred units on the dividend payment date. Deferred units will be appropriately adjusted in the event of any change in our Common Stock through merger, consolidation, or otherwise; a stock dividend; or a stock split, combination or other change in our Common Stock. +2025 Proxy Statement +23 +Table of Contents +Payments will be made in shares of our Common Stock equal to the number of deferred units credited to the director’s account, with a cash payment for any fractional deferred unit. A director may elect to receive deferred amounts in a lump sum within 90 days after either his or her separation from service or, alternatively the later of his or her separation from service or January 1 of a calendar year elected by the director which may not be more than 15 years after the calendar year in which the director’s initial deferral election under the Director Deferred Compensation Plan was made. Within 90 days following a non-employee director’s death, a lump sum equal to the then-remaining balance in his or her account will be made to his or her beneficiary. Within 10 business days after a change in control (as defined in our 2020 Incentive Plan) and to the extent permitted by federal tax law, each non-employee director (or former non-employee director) will receive a cash lump sum payment equal to the number of deferred units credited to his or her account on the date of the change in control, multiplied by the fair market value of one share of our Common Stock on such date. If payment within 10 business days following a change in control is not permitted by federal tax laws, then payment will be made at the time and in the form that payment would have been made if a change in control had not occurred. +2024 Director Compensation Table +The following table sets forth information for the fiscal year ended December 31, 2024 regarding the compensation awarded to, earned by or paid to our non-employee directors. The compensation received by our non-employee directors in respect of annual retainers for 2024 service was in the form of RSU awards and the compensation received by our non-employee directors in respect of annual equity grants was a mixture of stock option and RSU awards. Each of Messrs. Schuler, Patience and Kennedy, and Drs. Kayyem and Watts received grants for a total of 152,075 RSUs and stock options in respect of 37,050 shares of our Common Stock. Dr. Strobeck received grants for a total of 159,115 RSUs and stock options in respect of 37,050 shares of our Common Stock. Mr. Massarany received grants for a total of 162,635 RSUs and stock options in respect of 37,050 shares of our Common Stock. Ms. Franchi received grants for a total of 166,155 RSUs and stock options in respect of 37,050 shares of our Common Stock. Mr. Hutton, our Chief Executive Officer, does not receive any separate compensation for his service on our board of directors. Please see the 2024 Summary Compensation Table for the compensation paid or awarded to Mr. Hutton. +Stock +Awards +Option +Awards +Total +Name +($) (1) +($) (2) +($) +Jean Franchi (3) +$ +289,318 +$39,181 +$ +328,499 +Jon Faiz Kayyem, Ph.D (3) +$ +267,213 +$39,181 +$ +306,394 +Hany Massarany (3) +$ +283,792 +$39,181 +$ +322,973 +John Patience (3) +$ +267,213 +$39,181 +$ +306,394 +Jack Schuler (3) +$ +267,213 +$39,181 +$ +306,394 +Matthew Strobeck, Ph.D (3) +$ +278,266 +$39,181 +$ +317,447 +Charles M. Watts, M.D (3) +$ +267,213 +$39,181 +$ +306,394 +Lawrence Kennedy (3) +$ +267,213 +$39,181 +$ +306,394 +(1) +The amounts reported represent the aggregate grant date fair market value of the RSUs, calculated in accordance with FASB ASC Topic 718 based on the assumption that the value of each RSU granted on January 1, 2024 and May 21, 2024, was equal to $1.84, and $1.57, respectively, with such amount being the closing price of our Common Stock on the grant date. The assumptions used in calculating the grant date fair value of the award disclosed in this column are set forth in Note 12 of our audited financial statements included in the 2024 Annual Report on Form 10-K Item 8. “Financial Statements and Supplementary Data” for the year ended December 31, 2024. Pursuant to the Director Deferred Compensation Plan, non-employee directors may choose to defer receipt of the shares to be issued in connection with settlement of the annual RSU award. Dr. Kayyem chose to defer receipt of 152,075 shares upon their vesting. Mr. Massarany chose to defer receipt of 162,635 shares upon their +2025 Proxy Statement +24 +Table of Contents +vesting. Mr. Schuler chose to defer receipt of 152,075 shares upon their vesting. Mr. Patience chose to defer receipt of 105,389 shares upon their vesting. Dr. Strobeck chose to defer receipt of 159,115 shares upon their vesting. Ms. Franchi chose to defer receipt of 166,155 shares upon their vesting. Mr. Kennedy chose to defer receipt of 152,075 shares upon their vesting. +(2) +The amounts reported represent the aggregate grant date fair market value of the stock options calculated in accordance with FASB ASC Topic 718. The assumptions used in calculating the grant date fair value of the award disclosed in this column are set forth in Note 12 of our audited financial statements included in the 2024 Form 10-K Report under “Item 8. Financial Statements and Supplementary Data” for the year ended December 31, 2024. These amounts do not correspond to the actual value that may be recognized by the non-employee directors upon exercise of the applicable awards. +(3) +As of December 31, 2024, Ms. Franchi held options to purchase 66,413 shares of our Common Stock and RSUs in respect of 386,095 shares of our Common Stock; Dr. Kayyem held options to purchase 114,456 shares of our Common Stock and RSUs in respect of 185,826 shares of our Common Stock; Mr. Massarany held options to purchase 97,996 shares of our Common Stock and RSUs in respect of 233,245 shares of our Common Stock; Mr. Patience held options to purchase 83,152 shares of our Common Stock and RSUs in respect of 331,659 shares of our Common Stock; Mr. Schuler held options to purchase 83,152 shares of our Common Stock and RSUs in respect of 331,659 shares of our Common Stock; Dr. Strobeck held options to purchase 48,767 shares of our Common Stock and RSUs in respect of 345,692 shares of our Common Stock; Dr. Watts held options to purchase 132,960 shares of our Common Stock and RSUs in respect of 46,686 shares of our Common Stock; and Mr. Kennedy held options to purchase 162,048 shares of our Common Stock and RSUs in respect of 299,819 shares of our Common Stock. +2025 Proxy Statement +25 +Table of Contents +EXECUTIVE COMPENSATION +The following is a discussion of compensation arrangements of our named executive officers. This discussion contains forward-looking statements that are based on our current plans, considerations, expectations, and determinations regarding future compensation programs. Actual compensation programs that we adopt may differ materially from currently planned programs as summarized in this discussion. As an “emerging growth company” as defined in the JOBS Act, we are not required to include a Compensation Discussion and Analysis section and have elected to comply with the scaled back disclosure requirements applicable to emerging growth companies. In addition, as an emerging growth company, we are not required to conduct votes seeking approval, on an advisory basis, of either the compensation of our named executive officers or the frequency with which such votes must be conducted. +Overview +This section provides a discussion of the compensation paid or awarded to our Chief Executive Officer and our two other most highly compensated executive officers as of December 31, 2024. We refer to these individuals as our “named executive officers.” For 2024, our named executive officers were: +• +Scott Hutton, President and Chief Executive Officer; +• +Robin Harper Cowie, Chief Financial Officer, Secretary and Treasurer; and +• +Kieran O’Kane, Chief Commercial Officer. +Our executive compensation program is intended to align executive compensation with our performance objectives and business strategy and to enable us to attract, motivate, retain and reward executive officers who operate in a highly competitive and technologically challenging environment and whose contributions are critical to our long-term success. The compensation paid or awarded to our executive officers is generally based on the assessment of each individual’s performance compared against the business objectives established for the fiscal year as well as our historical compensation practices. The compensation paid to newly hired executive officers is primarily determined based on the negotiations of the parties as well as our historical compensation practices, and we seek fairness in total compensation paid to our executive officers. As a result, we benchmark executive compensation against external and internal comparisons and look at the relationship between team member roles in the organization to determine appropriate compensation. For the year ended December 31, 2024, the material elements of our executive compensation program were base salary, annual cash bonus and equity awards in the form of RSUs and stock options. +Performance-based, at risk and variable compensation in the form of annual cash bonuses and equity-based compensation is a significant portion of the overall compensation paid to each named executive officer. Our annual cash bonuses are earned or vest only upon the achievement of certain performance metrics. In addition, the value received from RSUs and stock options depends on our stock price. +We expect that our executive compensation program will continue to evolve over the coming years, while still supporting our overall business and compensation objectives. The compensation committee of our board of directors oversees our executive compensation program. In addition, during the year ended December 31, 2024, the compensation committee utilized our independent executive compensation consultant to advise us on the elements of our executive compensation program. +2025 Proxy Statement +26 +Table of Contents +Compensation of Named Executive Officers +Base Salary +Base salaries are intended to provide a level of compensation sufficient to attract and retain an effective management team, when considered in combination with the other components of our executive compensation program. The relative levels of base salary for our named executive officers are designed to reflect each executive officer’s scope of responsibility and accountability to us. Please see the “Salary” column in the Summary Compensation Table for the base salary amounts received by each named executive officer during the years ended December 31, 2023 and December 31, 2024. +As of January 1, 2024, Mr. Hutton’s annual base salary was $515,000, Ms. Harper Cowie’s annual base salary was $355,000, and Mr. O’Kane’s annual base salary was $335,000. The compensation committee retained an independent executive compensation consultant and after review of external market data and consideration of individual factors including, but not limited to, performance and scope of role, determined to increase base salaries for the named executive officers. As of March 1, 2024, Mr. Hutton’s annual base salary was increased to $608,000, and each of Ms. Harper Cowie’s and Mr. O’Kane’s annual base salary was increased to $419,000. As of March 1, 2025, Mr. Hutton’s annual base salary was increased to $652,500, Ms. Harper Cowie’s annual base salary was increased to $449,500 and Mr. O’Kane’s annual base salary was increased to $449,500. +Annual Cash Bonuses +We provide our senior leadership team with short-term incentive compensation through an annual cash bonus program. Annual bonus compensation holds executives accountable, rewards the executives based on actual business results and helps create a “pay for performance” culture. Our annual cash bonus program provides cash incentive award opportunities based on the achievement of performance goals approved by our compensation committee at the beginning of each fiscal year. +Generally, our compensation committee establishes a Company-based performance metric as a threshold vesting criterion for any payouts for a particular annual bonus period. For 2024, individual performance goals did not factor into determining payouts for the annual bonus period. +For 2024, the compensation committee determined that the Company’s short-term incentive compensation would be based on the achievement of three financial objectives, (i) total revenue determined in accordance with U.S. GAAP, (ii) lung diagnostic gross margin percentage and (iii) total operating expense (excluding certain non-cash expenses). Actual results were measured at year end against targeted outcomes. Mr. Hutton’s, Ms. Harper Cowie’s and Mr. O’Kane’s 2024 bonus targets as a percentage of annual base salary were 100%, 50% and 60%, respectively. Based on our 2024 performance, our compensation committee determined, and our board of directors approved, a corporate funding percentage under our annual cash bonus program equal to approximately 75.4% of the target bonus opportunity. +Under the Company’s 2021 Senior Management Bonus to Equity Plan, eligible executives, including each of our named executive officers, were permitted to elect to receive 25%, 50%, 75% or 100% of the annual bonus earned in the form of a bonus-to-options award, subject to an individual cap equal to the executive’s target annual bonus or any maximum dollar amount or percentage approved by the Company or the executive for such year. The maximum percentage that applied for 2024 was 50%. The bonus-to-options awards, if any, are fully vested on the grant date and have an exercise price equal to the fair market value of our Common Stock on the grant date. The program reflects our commitment to a “pay for performance” philosophy and further aligns our executive compensation program with the long-term interests of our stockholders because an executive who participates foregoes a portion of his or her annual cash bonus in exchange for an option award that will be valuable only if the stock price increases. +2025 Proxy Statement +27 +Table of Contents +Pursuant to elections made in 2023, each named executive officer received a portion of their respective annual bonuses earned for 2024 in the form of a bonus-to-options award instead of in cash. For annual bonuses earned in 2024, the number of shares of the Company’s Common Stock subject to each bonus-to-options award granted in 2024 was determined by multiplying the cash value of the bonus that was elected to be received in the form of an option award by three, and then dividing the product of that calculation by $1.57 (the Company’s average stock price during 2024, calculated based on the daily closing price of our publicly traded Common Stock). Accordingly, each of Mr. Hutton, Ms. Harper Cowie and Mr. O’Kane received a payout under the 2024 annual cash bonus program in cash and/or a bonus-to-options award, as illustrated below: +2024 +Name +Incentive +Cash Payout +Shares Subject to Bonus- +to-Option Award +Scott Hutton +$ +223,604 +$ +425,929 +Robin Harper Cowie +$ +115,597 +$ +73,398 +Kieran O’Kane +$ +137,522 +$ +87,319 +Equity Awards +In the year ended December 31, 2024, the compensation committee awarded Mr. Hutton, Ms. Harper Cowie and Mr. O’Kane, 210,625 RSUs, 64,381 RSUs and 64,381 RSUs, respectively, which vest ratably on an annual basis for four years from the vesting commencement date, subject to continued service through the applicable vesting date. In addition, the compensation committee awarded Mr. Hutton, Ms. Harper Cowie and Mr. O’Kane, stock options in respect of 421,250, 128,761 and 128,761 shares of our Common Stock, respectively, which vest ratably on a monthly basis for four years from the vesting commencement date, subject to continued service through the applicable vesting date. +For 2025, the compensation committee has determined to continue to award a blend of stock options and RSUs to each of our named executive officers. +2025 Proxy Statement +28 +Table of Contents +2024 Summary Compensation Table +The following table shows information regarding the compensation of our named executive officers for services performed during the years ended December 31, 2024 and 2023. +Name and Principal Position +Fiscal +Year +Salary +($) +(1) +Stock +Awards +($) +(2) +Option +Awards +($) +(3) +Non-Equity +Incentive Plan +Compensation +($) +(4) +All Other +Compensation +($) +(5) +Total ($) +Scott Hutton +President and Chief Executive Officer +2024 +588,858 +419,144 +852,017 +223,604 +(6) +1,250 +2,084,873 +2023 +515,000 +1,442,001 +233,622 +98,058 +(7) +1,865 +2,290,546 +Robin Harper Cowie +Chief Financial Officer, Secretary and Treasurer +2024 +405,881 +128,118 +224,690 +115,597 +(8) +1,250 +875,536 +2023 +355,000 +372,751 +81,319 +33,797 +(9) +1,500 +844,367 +Kieran O’Kane +Chief Commercial Officer +2024 +401,554 +128,118 +233,451 +137,522 +(10) +– +900,645 +2023 +335,000 +234,499 +45,555 +57,407 +(11) +205 +672,666 +(1) +The amounts disclosed represent the dollar value of base salary earned by the named executive officer as of December 31 of each applicable fiscal year. +(2) +The amounts disclosed represent the aggregate grant date fair value of RSU awards as calculated in accordance with FASB ASC Topic 718. The assumptions used in calculating the grant date fair value of the award disclosed in this column are set forth in Note 12 of our audited financial statements included in the 2024 Annual Report on Form 10-K Item 8. “Financial Statements and Supplementary Data” for the year ended December 31, 2024. These amounts do not correspond to the actual value that may be realized by the named executive officers upon vesting or exercise of the applicable awards. +(3) +The amounts disclosed represent the aggregate grant date fair value of option awards, including an estimate of the grant date fair value of bonus-to-options awards, as calculated in accordance with FASB ASC Topic 718 as well as the incremental fair value of certain new stock options granted to each of the named executive officers on July 24, 2023 as a result of the shareholder approved stock option exchange program by which Mr. Hutton, Ms. Harper Cowie and Mr. O’Kane tendered stock options in respect of 370,891, 132,963, and 56,654 shares of our Common Stock, respectively, each with an exercise price of $20.67 per share, in exchange for new stock options in respect of 75,693, 27,138, and 11,564 shares of our Common Stock, respectively, each with an exercise price of $1.20 per share. The incremental fair value of the new stock options, computed in accordance with FASB ASC Topic 718 on the grant date of the new stock options, was $8,056 for Mr. Hutton, $3,575 for Ms. Harper Cowie and $1,537 for Mr. O’Kane. The assumptions used in calculating the grant date fair value of the awards disclosed in this column are set forth in Note 12 of our audited financial statements included in the 2024 Annual Report on Form 10-K Item 8. “Financial Statements and Supplementary Data” for the year ended December 31, 2024. For the bonus-to-options awards, the estimated grant date fair value was used to correspond to the treatment of such expense under U.S. GAAP in the 2024 Annual Report on Form 10-K, as the service inception period precedes the grant date. These amounts do not correspond to the actual value that may be realized by the named executive officers upon vesting or exercise of the applicable awards. +(4) +Based on our 2023 and 2024 performance measured against the Company’s achievement of three financial objectives, (i) total revenue determined in accordance with U.S. GAAP, (ii) lung diagnostic +2025 Proxy Statement +29 +Table of Contents +gross margin percentage, and (iii) total operating expense (excluding certain non-cash expenses), our compensation committee determined, and our board of directors approved, payouts under the 2023 and 2024 annual cash bonus program at a 38.1% and 75.4% achievement level, respectively. The Non-Equity Incentive Plan Compensation listed for each named executive officer represents the annual cash bonus award for the 2023 and 2024 fiscal years after taking into consideration the election of each individual to participate in the bonus-to-options program. +(5) +The amounts disclosed primarily represent an electronics allowance stipend and the tax gross-up on awards through the Company’s Wishlist Rewards Program, a peer-to-peer recognition program, received by each named executive officer as of December 31 of each applicable fiscal year for specific contributions and demonstrating the Company’s core values. +(6) +At a 75.4% achievement level, Mr. Hutton was entitled to a payout under the 2024 annual cash bonus program of $447,207. However, Mr. Hutton elected to receive a portion of his 2024 annual cash bonus in the form of an option award under the bonus-to-options program. In accordance with Mr. Hutton’s election and the terms of the bonus-to-options program, Mr. Hutton received a cash payment of $223,604 in respect of his 2024 annual cash bonus, as reflected in this column, and in place of the remaining amount, received an option award representing the right to purchase 425,929 shares of our Common Stock, the value of which is reflected in the “Option Awards” column. +(7) +At a 38.1% achievement level, Mr. Hutton was entitled to a payout under the 2023 annual cash bonus program of $196,116. However, Mr. Hutton elected to receive a portion of his 2023 annual cash bonus in the form of an option award under the bonus-to-options program. In accordance with Mr. Hutton’s election and the terms of the bonus-to-options program, Mr. Hutton received a cash payment of $98,058 in respect of his 2023 annual cash bonus, as reflected in this column, and in place of the remaining amount, received an option award representing the right to purchase 180,926 shares of our Common Stock, the value of which is reflected in the “Option Awards” column. +(8) +At a 75.4% achievement level, Ms. Harper Cowie was entitled to a payout under the 2024 annual cash bonus program of $154,129. However, Ms. Harper Cowie elected to receive a portion of her 2024 annual cash bonus in the form of an option award under the bonus-to-options program. In accordance with Ms. Harper Cowie’s election and the terms of the bonus-to-options program, Ms. Harper Cowie received a cash payment of $115,597 in respect of her 2024 annual cash bonus, as reflected in this column, and in place of the remaining amount, received an option award representing the right to purchase 73,398 shares of our Common Stock, the value of which is reflected in the “Option Awards” column. +(9) +At a 38.1% achievement level, Ms. Harper Cowie was entitled to a payout under the 2023 annual cash bonus program of $67,593. However, Ms. Harper Cowie elected to receive a portion of her 2023 annual cash bonus in the form of an option award under the bonus-to-options program. In accordance with Ms. Harper Cowie’s election and the terms of the bonus-to-options program, Ms. Harper Cowie received a cash payment of $33,797 in respect of her 2023 annual cash bonus, as reflected in this column, and in place of the remaining amount, received an option award representing the right to purchase 62,358 shares of our Common Stock, the value of which is reflected in the “Option Awards” column. +(10) +At a 75.4% achievement level, Mr. O’Kane was entitled to a payout under the 2024 annual cash bonus program of $183,363. However, Mr. O’Kane elected to receive a portion of his 2024 annual cash bonus in the form of an option award under the bonus-to-options program. In accordance with Mr. O’Kane’s election and the terms of the bonus-to-options program, Mr. O’Kane received a cash payment of $137,522 in respect of his 2024 annual cash bonus, as reflected in this column, and in place of the remaining amount, received an option award representing the right to purchase 87,319 shares of our Common Stock, the value of which is reflected in the “Option Awards” column. +(11) +At a 38.1% achievement level, Mr. O’Kane was entitled to a payout under the 2023 annual cash bonus program of $76,542. However, Mr. O’Kane elected to receive a portion of his 2023 annual cash bonus in the form of an option award under the bonus-to-options program. In accordance with Mr. O’Kane’s election and the terms of the bonus-to-options program, Mr. O’Kane received a cash payment of $57,407 in respect of his 2023 annual cash bonus, as reflected in this column, and in place of the remaining amount, received an option award representing the right to purchase 35,307 shares of our Common Stock, the value of which is reflected in the “Option Awards” column. +2025 Proxy Statement +30 +Table of Contents +Outstanding Equity Awards at Fiscal 2024 Year-End +The following table presents information regarding the outstanding equity awards held by each of the named executive officers as of December 31, 2024. As of the year ended December 31, 2024, none of the named executive officers held any outstanding stock awards other than options and RSUs. +Option Awards +Stock Awards +Name +Grant +Date +Number of +Securities +Underlying +Unexercised +Options +(#) Exercisable +Number of +Securities +Underlying +Unexercised +Options +(#) Unexercisable +Equity +Incentive +Plan +Awards: +Number of +Securities +Underlying +Unexercised +Unearned +Options (#) +Option +Exercise +Price +($) +Option +Expiration +Date +Number of +Shares or Units +of Stock That +Have Not Vested +(#) +Market Value +of Shares or +Units of Stock +That Have +Not Vested +($) +(7) +Scott Hutton +4/4/2018 +84,231 +– +– +0.42 +4/3/2028 +– +– +3/22/2019 +42,115 +(2) +– +– +0.77 +12/31/2028 +– +– +3/22/2019 +16,846 +(4) +– +– +0.77 +12/31/2028 +– +– +4/15/2020 +149,091 +2,526 +(1) +– +0.77 +4/14/2030 +– +– +2/8/2022 +– +– +– +– +– +61,060 +(6) +93,422 +3/10/2022 +85,875 +(5) +– +– +2.29 +3/9/2032 +– +– +2/8/2023 +– +– +– +– +– +563,281 +(3) +861,820 +3/1/2023 +435,668 +(5) +– +– +2.00 +2/28/2033 +– +– +7/24/2023 +48,733 +– +– +1.20 +7/23/2033 +– +– +7/24/2023 +4,345 +22,615 +(8) +– +1.20 +7/23/2033 +– +– +2/8/2024 +96,536 +324,714 +(9) +– +1.99 +2/7/2034 +– +– +2/8/2024 +– +– +– +– +– +210,625 +(3) +322,256 +2/21/2024 +180,926 +(5) +– +– +1.46 +2/20/2034 +– +– +Robin Harper Cowie +4/8/2015 +6,738 +(1) +– +– +4.40 +4/7/2025 +– +– +4/7/2016 +35,377 +(1) +– +– +0.84 +4/6/2026 +– +– +3/22/2019 +35,377 +(2) +– +– +0.77 +12/31/2028 +– +– +3/22/2019 +11,792 +(4) +– +– +0.77 +12/31/2028 +– +– +4/15/2020 +29,818 +505 +(1) +– +0.77 +4/14/2030 +– +– +2/8/2022 +– +– +– +– +– +15,784 +(6) +24,150 +3/10/2022 +27,758 +(5) +– +– +2.29 +3/9/2032 +– +– +2/8/2023 +– +– +– +– +– +145,606 +(3) +222,777 +3/1/2023 +148,448 +(5) +– +– +2.00 +2/28/2033 +– +– +7/24/2023 +20,659 +– +1.20 +7/23/2033 +– +– +7/24/2023 +1,045 +5,434 +(8) +– +1.20 +7/23/2033 +– +– +2/8/2024 +29,508 +99,253 +(9) +– +1.99 +2/7/2034 +– +– +2/8/2024 +– +– +– +– +– +64,381 +(3) +98,503 +2/21/2024 +62,358 +(5) +– +– +1.46 +2/20/2034 +– +– +Kieran O’Kane +4/4/2018 +12,634 +(2) +– +– +0.42 +4/3/2028 +– +– +3/22/2019 +12,634 +(1) +– +– +0.77 +12/31/2028 +– +– +4/15/2020 +34,899 +477 +(1) +– +0.77 +4/14/2030 +– +– +2/8/2022 +– +– +– +– +– +7,447 +(6) +11,394 +3/10/2022 +6,162 +(5) +– +– +2.29 +3/9/2032 +– +– +2/8/2023 +– +– +– +– +– +91,601 +(3) +140,150 +3/1/2023 +52,531 +(5) +– +– +2.00 +2/28/2033 +– +– +7/24/2023 +8,864 +– +1.20 +7/23/2033 +– +– +7/24/2023 +438 +2,262 +(8) +– +1.20 +7/23/2033 +– +– +2/8/2024 +29,508 +99,253 +(9) +– +1.99 +2/7/2034 +– +– +2/8/2024 +– +– +– +– +– +64,381 +(3) +98,503 +2/21/2024 +35,307 +(5) +– +– +1.46 +2/20/2034 +– +– +(1) +These stock options vest in a series of 60 successive, equal monthly installments measured from the vesting commencement date. +(2) +Two fifths of these time-vested options vest on the second anniversary of the vesting commencement date, with the remaining balance vesting in a series of 36 successive equal monthly installments measured from the second anniversary of the vesting commencement date, subject to the award recipient’s +2025 Proxy Statement +31 +Table of Contents +continued employment through the applicable vesting date. In September 2020, the board of directors amended these time-vested options such that 21/60 of the time-vested options vest on the date that is 21 months after the vesting commencement date, with the remaining balance vesting in a series of 39 successive equal monthly installments measured from such date, subject to the award recipient’s continued employment through the applicable vesting date. +(3) +These time-vested RSUs vest in a series of four successive equal annual installments measured from the vesting commencement date, subject to the award recipient’s continued employment through the applicable vesting date. +(4) +In the year ended December 31, 2019, the board of directors awarded Mr. Hutton and Ms. Harper Cowie performance-vested options representing the right to purchase 25,269 and 17,688 shares of our Common Stock, respectively. One third of these performance-vested options were eligible to vest after each of the first, second and third anniversaries of the vesting commencement date, subject to the Company’s achievement of recognized revenue of at least $31 million, $67 million and $134 million for the years ended December 31, 2019, 2020 and 2021, respectively. The board of directors had sole discretion to determine if the performance hurdles are met and to determine the vesting date, and shall make such determinations within 90 days after the end of the applicable fiscal year. For the 2019 tranche, the board of directors determined that the performance hurdle was not met. As a result, one third of each of Mr. Hutton’s and Ms. Harper Cowie’s awards were cancelled, and two thirds of each of Mr. Hutton’s and Ms. Harper Cowie’s awards remained outstanding. In addition, in September 2020 and in light of the impact of the COVID-19 pandemic on the Company’s operations and other considerations, the board of directors amended the performance-vested options to adjust the performance hurdles for the 2020 tranche and the 2021 tranche to $28.6 million and $51.5 million, respectively. For each of the 2020 tranche and the 2021 tranche, the board of directors determined that the applicable performance hurdles were met and one third of each of Mr. Hutton’s and Ms. Harper Cowie’s performance-vested option award became fully vested and exercisable on January 1, 2021 and January 1, 2022, respectively. +(5) +These options were bonus-to-options awards and were 100% vested at date of grant. +(6) +These time-vested RSUs vest in a series of 16 successive equal quarterly installments measured from the vesting commencement date, subject to the award recipient’s continued employment through the applicable vesting date. +(7) +The market values reflected in this column are calculated based on $1.53 per share, the closing price of our Common Stock on December 31, 2024. +(8) +These time-vested options vest in a series of 31 successive equal monthly installments beginning on August 1, 2024 (the first day of the month following the first anniversary of the month of grant under the shareholder approved stock option exchange program pursuant to which these time-vested options were granted). The number of installments is equal to the number of months that were remaining the in the vesting schedule of the stock options that were tendered under the stock option exchange program as of immediately prior to the exchange. +(9) +These stock options vest in a series of 48 successive, equal monthly installments measured from the vesting commencement date. +2025 Proxy Statement +32 +Table of Contents +Policies and Practices Related to the Timing of Grants of Certain Equity Awards +The compensation committee and senior management monitor the Company’s equity grant practices to evaluate whether such policies comply with governing regulations and are consistent with good corporate practices. When making regular annual equity grants, the compensation committee’s practice is to approve them at its meeting in February of each year as part of the annual compensation review and after results for the preceding fiscal year become available. Because the compensation committee’s regular meeting schedule is determined in the prior fiscal year, the proximity of any awards to other significant corporate events is coincidental. In addition, the compensation committee may make grants at any time during the year it deems appropriate, including with respect to new hires or transitions. The Company does not schedule its equity grants in anticipation of the release of material non-public information nor does the Company time the release of material non-public information based on equity grant dates. +During 2024, no stock option grants were made to any of our named executive officers during any period beginning four business days before the filing or furnishing of a periodic report or current report and ending one business day after the filing or furnishing of any such report with the SEC. +2025 Proxy Statement +33 +Table of Contents +Additional Matters +Executive Severance and Change in Control Agreements +On April 16, 2024, the Company approved a form of Executive Severance and Change in Control Agreement. On April 23, 2024, each of Mr. Hutton, Ms. Harper Cowie and Mr. O’Kane entered into an Executive Severance and Change in Control Agreement with the Company. +In the event an executive who is party to an Executive Severance and Change in Control Agreement experiences a termination of employment without cause (as defined in the Executive Severance and Change in Control Agreement), other than within three months prior to, or one year following, the consummation of a change in control (as defined in the Executive Severance and Change in Control Agreement), the executive will be entitled to receive: +• +base salary continuation for a period of nine months or, in the case of the chief executive officer, 12 months; +• +for the chief executive officer only, a lump sum cash payment equal to 100% of his or her target annual cash incentive for the year in which the qualifying termination of employment occurs; and +• +Company-paid COBRA premium payments for the executive and his or her covered dependents for up to 12 months. +In the event the executive’s employment is terminated without cause or the executive resigns for good reason (as defined in the Executive Severance and Change in Control Agreement) within three months prior to, or one year following, the consummation of a change in control, the executive will be entitled to receive: +• +a lump sum cash payment equal to 100%, or in the case of the chief executive officer, 150%, of his or her then-current annual base salary; +• +a lump sum cash payment equal to 100%, or in the case of the chief executive officer, 150%, of his or her target annual cash incentive for the year in which the qualifying termination of employment occurs; +• +a lump sum cash payment equal to 12 months, or in the case of the chief executive officer, 18 months, of COBRA premium payments for the executive and his or her covered dependents; +• +accelerated vesting of all equity awards which vest based solely on the executive’s continued service with us; and +• +for the chief executive officer and chief financial officer only, a lump sum cash payment of $15,000 to help defray legal fees, tax and accounting fees, executive outplacement services, and other costs associated with transitional matters. +The payment of severance benefits under the Executive Severance and Change in Control Agreements is subject to a general release of claims by the executive in favor of the Company and its affiliates. +We believe the severance benefits payable under the Executive Severance and Change in Control Agreements provide reasonable compensation in the form of severance pay and certain limited benefits to our executive officers in the event of a qualifying termination of employment to facilitate the transition to new employment. In addition, we believe that these benefits help maintain our executive officers’ continued focus on their assigned duties to maximize stockholder value in the event of a potential change in control transaction, and mitigate the risk of subsequent disputes or litigation. The terms and conditions of these agreements were approved by the compensation committee after an analysis of competitive market data in consultation with our independent executive compensation consultant. +2025 Proxy Statement +34 +Table of Contents +401(k) Plan +The Company participates in a multiple employer tax-qualified 401(k) savings plan which allows participants to defer eligible compensation up to the maximum amount allowed under Internal Revenue Service (IRS) guidelines. The Company did not make any discretionary or employer matching contributions under the plan during 2024. +Clawback Policy +During the year ended December 31, 2023, the Company adopted a Dodd-Frank Clawback Policy to comply with SEC and Nasdaq listing rules. Under that policy, the Company is required in certain situations to recoup incentive compensation paid or payable to certain current or former executive officers of the Company, including the named executive officers, in the event of an accounting restatement. +2025 Proxy Statement +35 +Table of Contents +STOCK OWNERSHIP +Security Ownership of Certain Beneficial Owners and Management +The following table sets forth certain information with respect to the beneficial ownership of our Common Stock as of March 3, 2025: +• +each of our named executive officers; +• +each of our directors; +• +all of our directors and executive officers as a group; and +• +each person, or group of affiliated persons, known by us to beneficially own more than 5% of our Common Stock. +We have determined beneficial ownership in accordance with the rules of the SEC, and therefore it represents sole or shared voting or investment power with respect to our securities. Unless otherwise indicated below, to our knowledge, the persons and entities named in the table have sole voting and sole investment power with respect to all shares that they beneficially owned, subject to community property laws where applicable. We have deemed shares of Common Stock subject to options that are currently exercisable or exercisable within 60 days of March 3, 2025 and RSUs representing the right to receive shares of Common Stock that were deferred under the Director Deferred Compensation Plan or that vest within 60 days of March 3, 2025, to be outstanding and to be beneficially owned by the person holding the option or restricted stock unit for the purpose of computing the percentage ownership of that person but have not treated them as outstanding for the purpose of computing the percentage ownership of any other person. +We have based percentage ownership of Common Stock on 146,443,291 shares of Common Stock outstanding as of March 3, 2025. Unless otherwise indicated, the address for each beneficial owner listed in the table below is c/o Biodesix, Inc., 919 West Dillon Rd., Louisville, CO 80027. +Shares Beneficially +Owned +Name and Address of Beneficial Owner +Shares  +%   +Principal Stockholders: +Jack Schuler and entities affiliated with Jack Schuler (1) +31,609,746 +21.5 +% +Lawrence T. Kennedy, Jr. and entities affiliated with Lawrence T. Kennedy, Jr. (2) +25,847,401 +17.6 +% +John Patience and entities affiliated with John Patience (3) +7,788,634 +5.3 +% +Directors and Executive Officers: +Lawrence T. Kennedy, Jr. (4) +25,847,401 +17.6 +% +John Patience (5) +7,788,634 +5.3 +% +Matthew Strobeck, Ph.D. (6) +6,150,616 +4.2 +% +Scott Hutton (7) +2,356,510 +1.6 +% +Jon Faiz Kayyem, Ph.D. (8) +641,030 +* +Hany Massarany (9) +667,494 +* +Robin Harper Cowie (10) +744,070 +* +Jean Franchi (11) +534,280 +* +Kieran O’Kane (12) +439,769 +* +All directors and named executive officers as a group (11 persons) +45,657,411 +30.1 +% +* +Represents beneficial ownership of less than 1%. +2025 Proxy Statement +36 +Table of Contents +(1) +Consists of (a) 83,152 shares of common stock issuable upon the exercise of options held by Jack Schuler that are vested and exercisable within 60 days of March 3, 2025, (b) RSUs held by Mr. Schuler representing the right to receive 331,659 shares of common stock that vest within 60 days of March 3, 2025 and be deferred under the Director Deferred Compensation Plan until separation from service to the Company, and (c) 31,194,935 shares of common stock held by Jack W. Schuler Living Trust. Mr. Schuler will transition to the role of emeritus director at the Annual Meeting. +(2) +Consists of (a) 10,411,024 shares of common stock held by Lawrence T. Kennedy, Jr. Revocable Trust UAD 6/19/01 and as amended from time to time, (b) 12,267,873 shares of common stock held by Lawrence T. Kennedy, Jr. Perpetuity Trust UAD 6/30/16, (c) 2,775,386 shares of common stock held by KFDI-B LLC, (d) RSUs held by Mr. Kennedy representing the right to receive 299,819 shares of common stock that will vest within 60 days of March 3, 2025 and be deferred under the Director Deferred Compensation Plan, and (e) 93,299 shares of common stock issuable upon the exercise of options held by Mr. Kennedy that are vested and exercisable within 60 days of March 3, 2025. +(3) +Consists of (a) 83,152 shares of common stock issuable upon the exercise of options held by Mr. Patience that are vested and exercisable within 60 days of March 3, 2025, (b) RSUs held by Mr. Patience representing the right to receive 46,686 shares of common stock that will vest within 60 days of March 3, 2025, (c) RSUs held by Mr. Patience representing the right to receive 284,973 shares of common stock that are deferred under the Director Deferred Compensation Plan until separation from service to the Company, and (d) 2,153,298 shares of common stock held by Patience Enterprises LP, (e) 4,829,611 shares of common stock held by John Patience Living Trust, dated July 23, 1993, (f) 52,988 shares of common stock held by Diane Patience, and (g) 337,926 shares of common stock held directly by John Patience. +(4) +Consists of 25,847,401 shares beneficially owned by Lawrence T. Kennedy, Jr. and entities affiliated with Mr. Kennedy, as set forth in footnote (2). +(5) +Consists of 7,788,634 shares beneficially owned by John Patience and entities affiliated with Mr. Patience, as set forth in footnote (3). +(6) +Consists of (a) 48,767 shares of common stock issuable upon the exercise of options held by Dr. Matthew Strobeck that are vested and exercisable within 60 days of March 3, 2025, (b) RSUs held by Dr. Strobeck representing the right to receive 345,692 shares of common stock that vest within 60 days of March 3, 2025 and be deferred under the Director Deferred Compensation Plan until separation from service to the Company, (c) 2,542,928 shares of common stock held by Dr. Strobeck, (d) 2,606,879 shares of common stock held by Birchview Fund LLC, (e) 89,673 shares of common stock held by Birchview Capital Separately Managed Account, (f) 40,665 shares of common stock held by Clajer Capital LLC and (g) 119,003 shares of common stock held in each of four UTMA accounts for the benefit of the minor children of Dr. Strobeck (for an aggregate amount of 476,012 shares). +(7) +Consists of (a) 1,644,563 shares of Common Stock issuable upon the exercise of options held by Scott Hutton that are vested and exercisable within 60 days of March 3, 2025, and (b) 711,947 shares of Common Stock held by Mr. Hutton. +(8) +Consists of (a) 97,667 shares of common stock issuable upon the exercise of options held by Dr. Jon Faiz Kayyem that are vested and exercisable within 60 days of March 3, 2025, (b) RSUs held by Dr. Kayyem representing the right to receive 185,826 shares of common stock that will vest within 60 days of March 3, 2025 and be deferred under the Director Deferred Compensation Plan until separation from service to the Company, (c) 180,085 shares of common stock held by The Jon Faiz Kayyem Revocable Trust, for which Dr. Kayyem and his spouse serve as co-trustees, and (d) 177,452 shares of common stock held by Dr. Kayyem. Dr. Kayyem disclaims beneficial ownership of the shares held by The Jon Faiz Kayyem Revocable Trust. +(9) +Consists of (a) 97,996 shares of common stock issuable upon the exercise of options held by Hany Massarany that are vested and exercisable within 60 days of March 3, 2025, (b) RSUs held by Mr. Massarany representing the right to receive 206,877 shares of common stock vested but for which settlement has been deferred under the Director Deferred Compensation Plan until separation from service to the Company or that vest within 60 days of March 3, 2025, (c) RSUs held by Mr. Massarany representing the right to receive 25,490 shares of common stock which are vested and will generally settle in shares of common stock on the earlier of July 1, 2025 and separation from service to the Company, (d) 283,767 shares +2025 Proxy Statement +37 +Table of Contents +of common stock held by Mr. Massarany, and (e) 53,364 shares of common stock held by the Massarany Family Trust 11/15/2012. +(10) +Consists of (a) 497,610 shares of Common Stock issuable upon the exercise of options held by Robin Harper Cowie that are vested and exercisable within 60 days of March 3, 2025, and (b) 246,460 shares of Common Stock held by Ms. Harper Cowie. +(11) +Consists of (a) 66,413 shares of common stock issuable upon the exercise of options held by Jean Franchi that are vested and exercisable within 60 days of March 3, 2025, (b) RSUs held by Ms. Franchi representing the right to receive 359,727 shares of common stock that will vest within 60 days of March 3, 2025 and be deferred under the Director Deferred Compensation Plan until separation from service to the Company, (c) RSUs held by Ms. Franchi representing the right to receive 26,368 shares of common stock which are vested and will generally settle in shares of common stock on the earlier of April 1, 2025 and separation from service to the Company, and (d) 81,772 shares of common stock held by Ms. Franchi. +(12) +Consists of (a) 301,730 shares of Common Stock issuable upon the exercise of options held by Kieran O’Kane that are vested and exercisable within 60 days of March 3, 2025, and (b) 138,039 shares of Common Stock held by Mr. O’Kane. +Delinquent Section 16(a) Reports +Based solely on a review of the Section 16(a) reports filed electronically with the SEC, and written representations from our directors and executive officers that no other reports were required, all reports filed by or on behalf of our directors and executive officers and any persons holding more than ten percent of our Common Stock were filed on a timely basis under Section 16(a), other than an inadvertent late reporting of: one transaction on one Form 4 by Scott Hutton, our Chief Executive Officer and one of our directors; one transaction on one Form 4 by Robin Harper Cowie, our Chief Financial Officer; one transaction on one Form 4 by Gary Pestano, our Chief Development Officer; one transaction on one Form 4 by Kieran O’Kane, our Chief Commercial Officer; and one transaction on one Form 4 by Christopher C. Vazquez, our Chief Accounting Officer. +2025 Proxy Statement +38 +Table of Contents +AUDIT MATTERS +Proposal Two: Ratification of Appointment of Independent Registered Public Accounting Firm +Our audit committee has appointed KPMG LLP as our independent registered public accounting firm for the year ending December 31, 2025. Although stockholder ratification of the appointment of KPMG LLP is not required by our bylaws, other governing documents or the law, our board of directors considers the appointment of our independent registered public accounting firm to be an important matter of stockholder concern and is submitting the appointment of KPMG LLP for ratification by our stockholders as a matter of good corporate practice. If our stockholders fail to ratify the appointment, our audit committee will review its future selection of KPMG LLP as its independent registered public accounting firm. Even if the appointment is ratified, our audit committee, in its discretion, may direct the appointment of a different independent registered public accounting firm at any time during the year if they determine that such a change would be in the best interests of the Company and our stockholders. +Our board of directors considers the appointment of KPMG LLP as our independent registered public accounting firm for 2025 to be in the best interests of the Company and our stockholders. We expect representatives of KPMG LLP to attend the Annual Meeting. They will have an opportunity to make a statement if they wish and will be available to respond to appropriate questions from stockholders. +KPMG LLP has served as our independent registered public accounting firm since 2016. +Principal Accountant Fees and Services +The following is a summary of the fees and services provided by KPMG LLP to us for the years ended December 31, 2024 and 2023. +Year Ended December 31, +2024 +2023 +Audit Fees (1) +$ +664,408 +$ +451,899 +Audit-Related Fees +- +- +Tax Fees +- +- +All Other Fees +- +- +Total +$ +664,408 +$ +451,899 +(1) +Audit Fees consist of professional services rendered by KPMG LLP for the audits of our annual financial statements and reviews of quarterly financial statements. +Pre-Approval Policies and Procedures +Our audit committee is responsible for appointing, setting compensation for, and overseeing the work of our independent registered public accounting firm. Our audit committee’s charter establishes a policy that all audit and permitted non-audit and tax services to be provided by our independent registered public accounting firm must be pre-approved by our audit committee. Our audit committee has pre-approved all such audit and permissible non-audit and tax services in accordance with this policy for the years ended December 31, 2024 and 2023. As part of this review, our audit committee considers whether the provision of any such non-audit or tax services by KPMG LLP is compatible with maintaining the independence of our independent registered public accounting firm. +2025 Proxy Statement +39 +Table of Contents +Our audit committee may delegate authority to pre-approve services to one or more of its members, provided any decisions made by such member to grant pre-approvals must be presented to the full audit committee at its next scheduled meeting. +Vote Required: +Ratification of the appointment of KPMG LLP as our independent registered public accounting firm for 2025 requires the affirmative vote of a majority of the shares present or represented by proxy and entitled to vote on such matter at the Annual Meeting. Abstentions have the same impact as votes “Against” the proposal. Brokers have discretion to vote on this proposal. +Board Recommendation: +OUR BOARD OF DIRECTORS AND THE AUDIT COMMITTEE OF OUR BOARD OF DIRECTORS EACH UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2025. +Report of the Audit Committee +The audit committee oversees our independent registered public accounting firm and assists our board of directors in fulfilling its oversight responsibilities on matters relating to the integrity of our financial statements, our compliance with legal and regulatory requirements and the independent registered public accounting firm’s qualifications and independence by meeting regularly with the independent registered public accounting firm and financial management personnel. Management is responsible for the preparation, presentation and integrity of our financial statements. +In fulfilling its oversight responsibilities, the audit committee: +• +reviewed and discussed our financial statements as of and for the year ended December 31, 2024 with management and KPMG LLP; +• +discussed with KPMG LLP the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board and the SEC; +• +received the written disclosures and the letter from KPMG LLP required by the applicable requirements of the Public Company Accounting Oversight Board; and +• +discussed the independence of KPMG LLP with that firm. +Based on the audit committee’s review and discussions noted above, the audit committee recommended to our board of directors, and our board of directors approved, that the audited financial statements be included in the 2024 Annual Report on Form 10-K for filing with the SEC. The audit committee also appointed KPMG LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2025. +Submitted by the audit committee of our board of directors: +Jean Franchi, Chair +Lawrence T. Kennedy, Jr. +Hany Massarany +Matthew Strobeck, Ph.D. +2025 Proxy Statement +40 +Table of Contents +REVERSE STOCK SPLIT +Proposal Three: Approval of an amendment to the Company’s amended and restated certificate of incorporation to effect a reverse stock split of the Company’s Common Stock at a ratio ranging from any whole number between 1-for-2 and 1-for-20, inclusive, as determined by our board of directors in its discretion, subject to our board of directors’ authority to abandon such amendments +General +The amendment proposal (the “Reverse Stock Split Proposal”), if approved, would not immediately cause a reverse stock split, but rather would grant authorization to our board of directors to determine whether or not to adopt an amendment to our amended and restated certificate of incorporation to effect a reverse stock split of our Common Stock (without reducing the number of authorized shares of our Common Stock) at a ratio ranging from any whole number between 1-for-2 and 1-for-20, inclusive (the “Split Ratio Range”), in the form set forth in Annex A to this Proxy Statement. Our board of directors has deemed advisable, approved and recommended that our stockholders adopt, and is hereby soliciting stockholder approval of, the proposed amendment to our amended and restated certificate of incorporation to effect a reverse stock split at a ratio within the Split Ratio Range, in the form set forth in Annex A to this Proxy Statement. +If we receive the required stockholder approval of this proposal, our board of directors will have the sole authority to elect, at any time prior to the one year anniversary of the Annual Meeting, whether or not to effect a reverse stock split. Even with stockholder approval of the Reverse Stock Split Proposal, our board of directors will not be obligated to pursue the reverse stock split. Rather, our board of directors will have the flexibility to decide whether or not a reverse stock split (and at what ratio within the Split Ratio Range) is in the best interests of the Company and its stockholders. +If approved by our stockholders and following such approval our board of directors determines that effecting a reverse stock split is in the best interests of the Company and our stockholders, the reverse stock split would become effective upon filing a certificate of amendment to our amended and restated certificate of incorporation with the Secretary of State of the State of Delaware. As filed, the certificate of amendment would state the number of outstanding shares to be combined into one share of our Common Stock, at the ratio approved by our board of directors within the Split Ratio Range. The amendment would not change the par value of our Common Stock and would not impact the total number of authorized shares of our Common Stock. Therefore, upon effectiveness of a reverse stock split, the number of shares of our Common Stock that are authorized and unissued will increase relative to the number of issued and outstanding shares of our Common Stock. +Under Section 242(c) of the Delaware General Corporation Law, our board of directors has reserved the right, notwithstanding our stockholders’ approval of the proposed amendment of the amended and restated certificate of incorporation at the Annual Meeting, to abandon the proposed amendment at any time (without further action by our stockholders) before the certificate of amendment with respect thereto is filed with the Secretary of State of the State of Delaware. Our board of directors may consider a variety of factors in determining whether or not to proceed with the proposed amendment of the amended and restated certificate of incorporation and the appropriate range within the Split Ratio Range for any such amendment, including overall trends in the stock market, recent changes and anticipated trends in the per-share market price of our Common Stock, business developments and our actual and projected financial performance. +2025 Proxy Statement +41 +Table of Contents +Purpose and Overview of the Reverse Stock Split +Our Common Stock is listed on The Nasdaq Global Market. Our primary objective in effectuating a reverse stock split would be to attempt to raise the per-share trading price of our Common Stock to continue our listing on The Nasdaq Global Market. To maintain listing, The Nasdaq Global Market requires, among other things, that our Common Stock maintain a minimum closing bid price of at least $1.00 per share. On April 25, 2025, the closing bid price for our Common Stock on The Nasdaq Global Market was $0.54 per share. +On March 24, 2025, we received a written deficiency notice from Nasdaq’s Listing Qualifications Staff notifying the Company that, for the last 30 consecutive trading days, beginning on February 7, 2025 and ending on March 21, 2025, the bid price for the Company’s Common Stock had closed below the $1.00 minimum bid price. In accordance with Nasdaq listing rules, we were provided an initial compliance period of 180 calendar days, or until September 22, 2025, for our Common Stock to regain compliance by having a closing price of at least $1.00 per share for at least ten consecutive trading days. If we do not regain compliance with the minimum bid price rule, Nasdaq will provide us written notice that our Common Stock may be transferred to The Nasdaq Capital Market, or ultimately delisted. Following a transfer to The Nasdaq Capital Market, we may be afforded a second compliance period, unless it does not appear to Nasdaq that it is possible for us to cure the deficiency. We may also request a hearing to remain on The Nasdaq Global Market. +Our board of directors is seeking stockholder approval for the authority to effectuate the reverse stock split as a means of increasing the share price of our Common Stock at or above $1.00 per share in order to avoid further action by Nasdaq, in the event we are not able to satisfy the minimum bid price requirement prior to the expiration of the 180-day compliance period, or any additional time we may become eligible for. We expect that the reverse stock split would increase the bid price per share of our Common Stock above the $1.00 per share minimum bid price, thereby satisfying this listing requirement. However, there can be no assurance that the reverse stock split would have that effect, initially or in the future, or that it would enable us to maintain the listing of our Common Stock on The Nasdaq Global Market. +Additionally, we believe that the low per-share market price of our Common Stock impairs its marketability to, and acceptance by, institutional investors and other members of the investing public and creates a negative impression of the Company. Theoretically, decreasing the number of shares of our Common Stock outstanding should not, by itself, affect the marketability of the shares, the type of investor who would be interested in acquiring them or our reputation in the financial community. In practice, however, many investors, brokerage firms and market makers consider low-priced stocks as unduly speculative in nature and, as a matter of policy, avoid investment and trading in such stocks. Moreover, the analysts at many brokerage firms do not monitor the trading activity or otherwise provide coverage of lower-priced stocks. The presence of these factors may be adversely affecting, and may continue to adversely affect, not only the price of our Common Stock but also its trading liquidity. In addition, these factors may affect our ability to raise additional capital through the sale of our Common Stock. +We also believe that a higher stock price could help us attract and retain employees and other service providers. We believe that some potential employees and service providers are less likely to work for or provide services to a company with a low stock price, regardless of the size of the Company’s market capitalization. If the reverse stock split successfully increases the per-share price of our Common Stock, we believe this increase would enhance our ability to attract and retain employees and service providers. Further, the reverse stock split will result in additional authorized and unissued shares becoming available for general corporate purposes as the board of directors may determine from time to time, including for use under its equity compensation plans. +We further believe that a higher stock price could help us improve relations with existing and potential new customers. We believe that some prospective customers may take a more cautious view of a company with a low stock price, regardless of the size of the Company’s market capitalization, and may be less likely to use a +product or service from such a company. If the reverse stock split successfully increases the per-share price of our Common Stock, we believe this increase would reduce the likelihood of a potential negative sentiment from both existing and potential customers. +2025 Proxy Statement +42 +Table of Contents +We believe that the decrease in the number of shares of our outstanding Common Stock because of the reverse stock split, and the anticipated increase in the price per share, would possibly promote greater liquidity for our stockholders with respect to their shares. However, liquidity may be adversely affected by the reduced number of shares that would be outstanding if the reverse stock split is effected, particularly if the price per share of our Common Stock begins a declining trend after the reverse stock split is effectuated. The proposed reverse stock split is not intended to be an anti-takeover device. +There can be no assurance that the reverse stock split would achieve any of the desired results. There also can be no assurance that the price per share of our Common Stock immediately after the reverse stock split would increase proportionately with the reverse stock split, or that any increase would be sustained for any period of time. +If our stockholders do not approve the Reverse Stock Split Proposal and the price of our Common Stock does not otherwise close at $1.00 per share or more for at least ten consecutive trading days before September 22, 2025, it is possible that we would be subject to a delisting action by Nasdaq. We believe a reverse stock split is the most likely way for our Common Stock to reach the minimum bid price requirement of The Nasdaq Global Market, although effectuating the reverse stock split cannot guarantee that we would be in compliance with the minimum bid price requirement for even the minimum ten-day trading period required by The Nasdaq Global Market. +If our Common Stock were delisted from The Nasdaq Global Market, trading of our Common Stock would thereafter be conducted on the OTC Bulletin Board or the “pink sheets,” which are generally considered to be less efficient markets. As a result, investors may find it more difficult to dispose of, or to obtain accurate quotations as to the price of, our Common Stock. Many investors would likely not buy or sell our Common Stock due to difficulty in accessing OTC markets or policies preventing them from trading in securities not listed on a national exchange. To relist shares of our Common Stock on any one of Nasdaq’s three market tiers, we would be required to meet Nasdaq’s initial listing requirements, which are more stringent than the maintenance requirements. +If our Common Stock was delisted from The Nasdaq Global Market (or The Nasdaq Capital Market if we transferred tiers following an unsuccessful attempt to satisfy the minimum bid price requirement prior to the expiration of the initial 180-day compliance period) and the market price of our Common Stock was below $5.00 at such time, such stock would come within the definition of “penny stock” as defined in the Exchange Act and would be covered by Rule 15g-9 of the Exchange Act. Rule 15g-9 imposes additional sales practice requirements on broker-dealers who sell such securities that would make trading in our Common Stock more difficult and the market less efficient. +In evaluating whether to seek stockholder approval of the Reverse Stock Split Proposal, our board of directors took into consideration negative factors associated with reverse stock splits. These factors include: the negative perception of reverse stock splits that investors, analysts and other stock market participants may hold; the fact that the stock prices of some companies that have effected reverse stock splits have subsequently declined, sometimes significantly, following their reverse stock splits; the possible adverse effect on liquidity that a reduced number of outstanding shares could cause; and the costs associated with implementing a reverse stock split. +Even if our stockholders approve the Reverse Stock Split Proposal, our board of directors reserves the right not to effect the proposed amendment in its entirety if in our board of directors opinion it would not be in the best interests of the Company or our stockholders to effect a reverse stock split. +2025 Proxy Statement +43 +Table of Contents +Risks Associated with the Reverse Stock Split +We cannot predict whether the reverse stock split, if completed, will increase the market price for our Common Stock. The history of similar stock split combinations for companies in like circumstances is varied. There is no assurance that: +• +the market price per share of our Common Stock after the reverse stock split would rise in proportion to the reduction in the number of shares outstanding before the reverse stock split; +• +the reverse stock split would result in a per-share price that would attract brokers and investors who do not trade in lower-priced stocks; +• +the reverse stock split would result in a per-share price that would increase our ability to attract and retain employees and other service providers; or +• +the reverse stock split would promote greater liquidity for our stockholders with respect to their shares. +In addition, the reverse stock split would reduce the number of outstanding shares of our Common Stock without reducing the number of shares of available but unissued Common Stock, increasing the number of authorized but unissued shares of Common Stock. Therefore, the number of shares of our Common Stock that are authorized and unissued will increase relative to the number of issued and outstanding shares of our Common Stock following the reverse stock split. The board of directors may authorize the issuance of the remaining authorized and unissued shares without further stockholder action for a variety of purposes, except as such stockholder approval may be required in particular cases by our amended and restated certificate of incorporation, applicable law or the rules of any stock exchange on which our securities may then be listed. The issuance of additional shares would be dilutive to our existing stockholders and may cause a decline in the trading price of our Common Stock. The issuance of authorized but unissued shares of Common Stock could be used to deter a potential takeover of us that may otherwise be beneficial to stockholders by diluting the shares held by a potential suitor or issuing shares to a stockholder that will vote in accordance with the board of directors’ desires. A takeover may be beneficial to independent stockholders because, among other reasons, a potential suitor may offer such stockholders a premium for their shares of stock compared to the then-existing market price. We do not have any plans or proposals to adopt provisions or enter into agreements that may have material anti-takeover consequences. +The market price of our Common Stock is based on our performance and other factors, some of which are unrelated to the number of shares outstanding. If the reverse stock split is effected and the market price of our Common Stock declines, the percentage decline as an absolute number and as a percentage of our overall market capitalization may be greater than would occur in the absence of a reverse stock split. +Principal Effects of the Reverse Stock Split on the Market for Our Common Stock +On April 25, 2025, the closing bid price for our Common Stock on The Nasdaq Global Market was $0.54 per share. By decreasing the number of shares of our Common Stock outstanding without altering the aggregate economic interest represented by the shares, we believe the market price would be increased. However, there can be no assurance that the market price of the Common Stock would rise to or maintain any particular level. In addition, the fewer number of shares of Common Stock that will be available to trade will possibly cause the trading market of our Common Stock to become less liquid, which could have an adverse effect on the price of our Common Stock. +Principal Effects of the Reverse Stock Split on Our Common Stock; No Fractional Shares +If our stockholders approve the Reverse Stock Split Proposal, and if our board of directors decides to effectuate a proposed amendment to effect a reverse stock split, the principal effect of the amendment would be to reduce the number of issued and outstanding shares of our Common Stock, depending on the Split Ratio Range set forth in such amendment, from 146,443,291 shares as of the Record Date to between approximately +2025 Proxy Statement +44 +Table of Contents +73,221,645 shares and approximately 7,322,164 shares. If the reverse stock split is effectuated, the total number of shares of our Common Stock each stockholder holds would be reclassified automatically into the number of shares of our Common Stock equal to the number of shares of our Common Stock each stockholder held immediately prior to the reverse stock split divided by the ratio approved by the board of directors within the Split Ratio Range and set forth in the applicable amendment. +Effecting the reverse stock split will not change the total authorized number of shares of our Common Stock. However, the reduction in the issued and outstanding shares would provide more authorized shares available for future issuance. Other than the shares available for future issuance under our 2006 Incentive Plan, 2016 Incentive Plan, 2020 Incentive Plan, ESPP, 2011 Second Amended and Restated Bonus-to-Options Program, and 2015 Third Amended and Restated Bonus-to-Options Program (collectively, the “Plans”), we have no specific plan, commitment, arrangement, understanding or agreement, either oral or written, regarding the issuance of Common Stock subsequent to this proposed reverse stock split at this time. However, we have in the past conducted certain public and private offerings of our securities, and we may continue to require additional capital in the future to fund our operations. As a result, it is possible that we will seek to issue such additional shares of Common Stock in connection with any such capital raising activities, or any of the other activities described above. The board of directors does not intend to issue any Common Stock or securities convertible into Common Stock except on terms that the board of directors deems to be in the best interests of us and our stockholders. +The reverse stock split would affect all holders of our Common Stock uniformly and would not affect any stockholder’s percentage ownership interests, except to the extent that the reverse stock split results in such stockholder owning a fractional share. No fractional shares will be issued in connection with the reverse stock split. Stockholders who otherwise would be entitled to receive fractional shares because they hold a number of pre-split shares not evenly divisible by the number of pre-split shares for which each post-split share is to be exchanged, will be entitled to a cash payment in lieu thereof at a price equal to the fraction to which the stockholder would otherwise be entitled multiplied by the closing price of the Common Stock, as reported by Nasdaq, on the last trading day prior to the effective date of the split. The proceeds would be subject to certain taxes as discussed below. In addition, stockholders would not be entitled to receive interest for the period of time between the filing of the certificate of amendment to the amended and restated certificate of incorporation and the date a stockholder receives payment for the cashed-out fractional shares. The payment amount would be paid to the stockholder in accordance with the procedures outlined below. +After the reverse stock split, a stockholder would have no further interest in the Company with respect to such stockholder’s cashed-out fractional shares. A person otherwise entitled to a fractional interest would not have any voting, dividend or other rights except to receive payment as described above. +The reverse stock split may result in some stockholders owning “odd lots” of less than 100 shares of Common Stock. Odd lot shares may be more difficult to sell, and brokerage commissions and other costs of transactions in odd lots may be higher than the costs of transactions in “round lots” of even multiples of 100 shares. +After the effective date, our Common Stock would have a new CUSIP number, which is a number used to identify our equity securities. Stock certificates issued before the reverse stock split will reflect the older CUSIP number and should be returned to our transfer agent by following the procedures described below under “Effect on Registered Certificated Shares.” +Principal Effects of the Reverse Stock Split on Outstanding Equity +As of the Record Date, we had outstanding (a) options to purchase an aggregate of 8,612,580 shares of our Common Stock with exercise prices ranging from $0.4155 to $20.67 per share, (b) warrants to purchase an aggregate of 5,603,324 shares of our Common Stock with exercise prices ranging from $0.793 to $4.452 per share, and (c) 4,073,180 RSUs outstanding. +2025 Proxy Statement +45 +Table of Contents +Under the terms of the Plans, the compensation committee will have discretion to determine the appropriate adjustment to the awards granted under our Plans in the event of a reverse stock split. Accordingly, if the reverse stock split is effected, the number of shares available for issuance under the Plans, as well as the number of shares subject to any outstanding award under the Plans, and the exercise price, grant price or purchase price relating to any such award under our Plans, will be proportionately adjusted by the compensation committee, as applicable, to reflect the reverse stock split. The compensation committee will also determine the treatment of fractional shares subject to outstanding awards under the Plans. Accordingly, pursuant to the authority as provided under each of the Plans, the compensation committee is expected to authorize the Company to effect any other changes necessary, desirable or appropriate to give effect to the reverse stock split, including any applicable technical, conforming changes to our Plans-based awards, which would also be proportionally adjusted by the ratio approved by the board of directors within the Split Ratio Range. Under the terms of the warrants, the number of warrant shares issuable upon exercise of the warrant shall be proportionally adjusted by the ratio approved by the board of directors within the Split Range Ratio, effective the date of the reverse stock split. +Principal Effects of the Reverse Stock Split on Legal Ability to Pay Dividends +We have never declared or paid cash dividends on our Common Stock, nor do we have any plans to declare in the foreseeable future any distributions of cash or other property to holders of Common Stock, and we are not in arrears on any dividends. Therefore, we do not believe that the reverse stock split would have any effect with respect to future distributions, if any, to holders of our Common Stock. +Accounting Matters +The reverse stock split would not affect the par value of our Common Stock, which would remain unchanged at $0.001 per share. As a result, on the effective date, the present value of the stated capital on the Company’s balance sheet attributable to the Common Stock will be reduced based on the designated reverse stock split ratio, and the additional paid-in capital account will be increased with the amount by which the stated capital is reduced. The per share net loss and net book value of the Common Stock will be retroactively increased for each period because there will be fewer shares of Common Stock outstanding. +Beneficial Holders of Our Common Stock (Stockholders Who Hold in “Street Name”) +Upon the reverse stock split, we intend to treat shares held by stockholders in “street name,” through a broker, in the same manner as registered stockholders whose shares are registered in their names. Brokers would be instructed to effect the reverse stock split for their beneficial holders holding our Common Stock in “street name.” However, brokers may have different procedures than registered stockholders for processing the reverse stock split and making payment for fractional shares. Stockholders holding shares of our Common Stock with a broker and having any questions in this regard should contact their broker. +Effect on Registered “Book-Entry” Holders of Our Common Stock +If a stockholder holds registered shares in book-entry form with the transfer agent, no action needs to be taken to receive post- split shares or cash payment in lieu of any fractional share interest, if applicable. If such a stockholder is entitled to post-split shares, a transaction statement would automatically be sent to such stockholder’s address of record indicating the number of shares of our Common Stock held following the reverse stock split. +If such a stockholder is entitled to a payment in lieu of any fractional share interest, a check would be mailed to the stockholder’s registered address as soon as practicable after the effective time of the reverse stock split. By signing and cashing the check, stockholders would warrant that they owned the shares of our Common Stock for which they received a cash payment. The cash payment is subject to applicable federal and state income tax and state abandoned property laws. No stockholders would be entitled to receive interest for the period of time between the effective time of the reverse stock split and the date payment is received. +2025 Proxy Statement +46 +Table of Contents +Effect on Registered Certificated Shares +Some stockholders hold their shares in certificated form or a combination of certificated and book-entry form. If any of a stockholder’s shares are held in certificated form, they will receive a letter of transmittal from Computershare as soon as practicable after the effective time of the reverse stock split. The letter of transmittal will be accompanied by instructions specifying how stockholders can exchange their certificate representing the pre-split shares for a statement of holding for their post-split shares. Please note, when sending Computershare their completed letter of transmittal, stockholders should ensure they enclose all of their original physical stock certificates with their letter of transmittal. It is recommended that stockholders send this presentation to Computershare by trackable mail, return receipt requested. After a stockholder submits their certificate representing the pre-split shares, together with a duly completed letter of transmittal, their post-split shares will be issued to them electronically in book-entry form. This means that, instead of receiving a new stock certificate, such stockholders will receive a statement of holding that indicates the number of post-split shares they own in book-entry form. We will no longer issue physical stock certificates unless a stockholder makes a specific request for a physical stock certificate representing the stockholder’s post-split shares. +Beginning on the effective date of the reverse stock split, each certificate representing pre-split shares will be deemed for all corporate purposes to evidence ownership of post-split shares. Stockholders will need to exchange their old certificates in order to effect transfers of shares on The Nasdaq Global Market. If a stockholder is entitled to a payment in lieu of any fractional shares, payment will be made as described above under “Principal Effects of the Reverse Stock Split on Our Common Stock; No Fractional Shares.” +STOCKHOLDERS SHOULD NOT DESTROY ANY SHARE CERTIFICATE(S) AND SHOULD NOT SUBMIT ANY CERTIFICATE(S) UNTIL REQUESTED TO DO SO. +As applicable, new share certificates evidencing post-split shares that are issued in exchange for pre-split shares representing restricted shares will contain the same restrictive legend as on the old certificates. For purposes of determining the term of the restrictive period applicable to the post-split shares, the time period during which a stockholder has held their existing pre-split shares will be included in the total holding period. +No Dissenters’ Rights +Under the Delaware General Corporation Law, stockholders are not entitled to dissenters’ rights with respect to the reverse stock split. +Material Federal Income Tax Consequences of the Reverse Stock Split +The following is a general summary of certain material U.S. federal income tax consequences of the reverse stock split to stockholders that hold their shares of Common Stock as capital assets for U.S. federal income tax purposes (generally, property held for investment). This summary is based upon the provisions of the U.S. Internal Revenue Code of 1986 (the “Code”) Treasury regulations promulgated thereunder, administrative rulings and judicial decisions, all as in effect as of the date hereof, and all of which are subject to change and differing interpretations, possibly with retroactive effect. Changes in these authorities or their interpretation may result in the U.S. federal income tax consequences of the Reverse Stock Split differing substantially from the consequences summarized below. +This summary is for general information purposes only and does not address all aspects of U.S. federal income taxation that may be relevant to stockholders in light of their particular circumstances, including the impact of the alternative minimum tax, the Medicare surtax on net investment income or the special tax accounting rules under Section 451(b) of the Code, or to stockholders that may be subject to special tax rules, including, without limitation: (i) banks, insurance companies, or other financial institutions; (ii) tax-exempt organizations; (iii) dealers in securities or commodities; (iv) regulated investment companies or real estate investment trusts; (v) partnerships (including entities or arrangements treated as partnerships for U.S. federal income tax purposes and their partners or members); (vi) traders in securities that elect to use the mark-to-market method of accounting; (vii) persons whose “functional currency” is not the U.S. dollar; (viii) persons holding our +2025 Proxy Statement +47 +Table of Contents +Common Stock in a hedging transaction, “straddle,” “conversion transaction” or other risk reduction transaction; (ix) persons who acquired our Common Stock in connection with employment or the performance of services; (x) retirement plans; (xi) persons holding our Common Stock as “qualified small business stock” under Section 1202 of the Code; (xii) persons who are not U.S. Holders (as defined below); or (xiii) certain former citizens or long-term residents of the United States. In addition, this summary of certain material U.S. federal income tax consequences does not address the tax consequences arising under the laws of any foreign, state or local jurisdiction or any U.S. federal tax consequences other than U.S. federal income taxation (such as U.S. federal estate and gift tax consequences). If a partnership (including any entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds shares of our Common Stock, the tax treatment of a partner in the partnership generally will depend upon the status of the partner, the activities of the partnership, and certain determinations made at the partner level. Partnerships holding our Common Stock and the partners in such partnerships should consult their tax advisors regarding the tax consequences to them of the Reverse Stock Split. +We have not sought, and will not seek, an opinion of counsel or a ruling from the IRS regarding the U.S. federal income tax consequences of the Reverse Stock Split and there can be no assurance that the IRS will not challenge the statements and conclusions set forth below or that a court would not sustain any such challenge. +EACH STOCKHOLDER SHOULD CONSULT ITS TAX ADVISORS WITH RESPECT TO THE PARTICULAR TAX CONSEQUENCES OF THE REVERSE STOCK SPLIT TO SUCH STOCKHOLDER. +This summary addresses only stockholders that are U.S. Holders. For purposes of this discussion, a “U.S. Holder” is any beneficial owner of our Common Stock that, for U.S. federal income tax purposes, is or is treated as any of the following: +• +an individual who is a citizen or resident of the United States; +• +a corporation created or organized under the laws of the United States, any state thereof or the District of Columbia; +• +an estate, the income of which is subject to U.S. federal income tax regardless of its source; or +• +a trust that (i) is subject to the primary supervision of a U.S. court and all substantial decisions of which are subject to the control of one or more “United States persons” (within the meaning of Section 7701(a)(30) of the Code), or (ii) has a valid election in effect to be treated as a United States person for U.S. federal income tax purposes. +It is intended that the reverse stock split should constitute a “recapitalization” for U.S. federal income tax purposes. Assuming the reverse stock split qualifies as a “recapitalization” for U.S. federal income tax purposes, then, except as described below with respect to cash received in lieu of fractional shares, a stockholder should not recognize gain or loss as a result of the reverse stock split. A stockholder’s aggregate tax basis in the shares of the Common Stock received pursuant to the reverse stock split should equal the stockholder’s aggregate tax basis in the shares of the Common Stock surrendered (excluding any portion of such basis that is allocated to any fractional share of our Common Stock), and such stockholder’s holding period in the shares of the Common Stock received should include the holding period of the shares of the Common Stock surrendered. Treasury regulations promulgated under the Code provide detailed rules for allocating the tax basis and holding period of shares of Common Stock surrendered pursuant to the reverse stock split to shares of Common Stock received pursuant to the reverse stock split. Stockholders holding shares of Common Stock that were acquired on different dates and at different prices should consult their tax advisors regarding the allocation of the tax basis and holding period of such shares. +A stockholder who receives cash in lieu of a fractional share of Common Stock should be treated as first receiving such fractional share and then receiving cash in redemption of such fractional share. A stockholder who +2025 Proxy Statement +48 +Table of Contents +receives cash in lieu of a fractional share in the reverse stock split should recognize capital gain or loss equal to the difference between the amount of the cash received in lieu of the fractional share and the portion of the stockholder’s adjusted tax basis allocable to the fractional share. Stockholders should consult their tax advisors regarding the tax effects to them of receiving cash in lieu of fractional shares based on their particular circumstances. +A stockholder may be subject to information reporting with respect to any cash received in exchange for a fractional share interest in a new share in the reverse stock split. Stockholders who are subject to information reporting and who do not provide a correct taxpayer identification number and other required information (such as by submitting a properly completed IRS Form W-9) may also be subject to backup withholding at the applicable rate. Any amount withheld under such rules is not an additional tax and may be refunded or credited against the stockholder’s U.S. federal income tax liability, provided that the required information is properly furnished in a timely manner to the IRS. +Vote Required: +Approval of an amendment to the Company’s amended and restated certificate of incorporation to effect a reverse stock split of the Company’s Common Stock at a ratio ranging from any whole number between 1-for-2 and 1-for-20, inclusive, as determined by our board of directors in its discretion, subject to our board of directors’ authority to abandon such amendments requires the affirmative vote of a majority of the shares present or represented by proxy and entitled to vote on such matter at the Annual Meeting. Abstentions have the same impact as votes “Against” the proposal. Brokers have discretion to vote on this proposal. +Board Recommendation: +OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” AN AMENDMENT TO THE COMPANY’S AMENDED AND RESTATED CERTIFICATE OF INCORPORATION TO EFFECT A REVERSE STOCK SPLIT OF THE COMPANY’S COMMON STOCK. +2025 Proxy Statement +49 +Table of Contents +APPROVAL OF THE COMPANY’S AMENDED AND RESTATED EMPLOYEE STOCK PURCHASE PLAN +Proposal Four: Approval of the Company’s Amended and Restated ESPP to increase the available shares of the Company’s Common Stock under the plan by 1,451,500 and to increase the maximum number of shares of the Company’s Common Stock that may be provided as the result of the plan’s annual automatic increase to 3,000,000 +General +Effective with our IPO in October 2020, the Company’s board of directors and its stockholders approved the Company’s Employee Stock Purchase Plan (the “ESPP”). The ESPP allows the Company’s employees to purchase shares of the Company’s Common Stock at a discount through payroll deductions. We are asking our stockholders to approve an amendment and restatement of the ESPP to increase the number of shares of Common Stock authorized for issuance under the ESPP by 1,451,500 and to provide that the maximum number of shares available under the ESPP automatically increases on the first trading day of each calendar year by an amount equal to the lesser of (i) 1% of the shares of Common Stock issued and outstanding on December 31st of the immediately preceding calendar year, (ii) (x) beginning with the fiscal year ending December 31, 2022, and continuing until (and including) the fiscal year ending December 31, 2025, 338,106 Shares and (y) beginning with the fiscal year ending December 31, 2026, and continuing until (and including) the fiscal year ending December 31, 2030, 3,000,000, and (iii) an amount determined by the board of directors. +We initially reserved 338,106 shares of Common Stock for issuance under the ESPP. In addition, pursuant to its terms, the number of shares of Common Stock available for issuance automatically increases on the first day of each fiscal year, beginning with the fiscal year ending December 31, 2022 and continuing until (and including) the fiscal year ending December 31, 2030, with the annual increase equal to the lesser of (i) 1% of the shares of Common Stock issued and outstanding on December 31st of the immediately preceding calendar year, (ii) 338,106, and (iii) an amount determined by the board of directors. As a result of the annual automatic increase, the number of shares of Common Stock available for issuance increased by 307,896 for the fiscal year ending December 31, 2022 and by 338,106 beginning with the fiscal year ending December 31, 2023 and continuing until (and including) the fiscal year ending December 31, 2025. As of March 1, 2025, 48,500 shares of Common Stock remained available for issuance under the ESPP. If this proposal is approved by our stockholders, the total shares available for issuance under the ESPP would increase by 1,451,500 and the maximum annual increase would increase from 338,106 to 3,000,000. +Reasons for Stockholder Approval +The Company views the ESPP as an integral tool for attracting, retaining, and motivating employees. The ESPP promotes stock ownership by employees, thereby aligning their interests with those of the Company’s stockholders. +As of March 1, 2025, there were 48,500 shares of Common Stock available for issuance under the ESPP. Our board of directors believes the currently available shares are insufficient to meet the Company’s needs with respect to competing for qualified personnel in the competitive market in which it operates. +Accordingly, on or about April 15, 2025 our board of directors approved the Company’s Amended and Restated ESPP, which will increase the available shares under the ESPP by 1,451,500, subject to shareholder approval at the Annual Meeting, and change the automatic increase provisions under our ESPP to provide that the annual increase will be the lesser of (i) 1% of the shares of Common Stock issued and outstanding on December 31st of the immediately preceding calendar year, (ii) (x) beginning with the fiscal year ending December 31, 2022, and continuing until (and including) the fiscal year ending December 31, 2025, 338,106 +2025 Proxy Statement +50 +Table of Contents +Shares and (y) beginning with the fiscal year ending December 31, 2026, and continuing until (and including) the fiscal year ending December 31, 2030, 3,000,000, and (iii) an amount determined by the board of directors. Our board of directors believes that if this proposal is not approved, we may be at a disadvantage against our competitors when competing for qualified personnel, which could result in the need to increase cash compensation, thereby reducing resources available to meet our business needs. +We are asking our stockholders to approve the Company’s Amended and Restated ESPP, as required by the Internal Revenue Code. +Summary of the ESPP +The purpose of the ESPP is to assist eligible employees of the Company and its designated affiliates in acquiring stock ownership interest in the Company. The following is a summary of the material terms of the ESPP, which is qualified by reference to the complete text of the ESPP, as amended and restated, a copy of which is attached as Annex B to this Proxy Statement: +• +All employees of the Company who meet certain service requirements are eligible to participate in the ESPP. However, employees who own 5% or more of the total combined voting power or value of the Company’s stock are not eligible to participate. As of April 25, 2025, approximately 285 employees are eligible to participate in the ESPP. +• +The ESPP includes two components: (a) a component intended to qualify as an “employee stock purchase plan” under Section 423 of the Internal Revenue Code of 1986, as amended (Code) (423 Component) and (b) a component that does not qualify as an “employee stock purchase plan” under Section 423 of the Code (Non-423 Component), under which options shall be granted in ways designed by the compensation committee to achieve desirable tax outcomes or other objectives for plan participants and the Company. Except as otherwise provided in the ESPP, both components will operate and be administered in the same manner. +• +The ESPP operates with successive six-month offering periods. Unless otherwise specified by the compensation committee, these offering periods begin on September 1st and March 1st of each year (or if such dates are not trading days, then the first trading day immediately following such dates). During these offering periods, participants can elect to purchase shares of the Company’s Common Stock through payroll deductions. +• +Participants may contribute up to 15% of their earnings towards the purchase of Common Stock. These contributions are made through payroll deductions, which accumulate during the offering period. +• +The purchase price for shares under the ESPP is generally set at 85% of the fair market value of the Company’s Common Stock on either the first or last day of the offering period, whichever is lower. However, the compensation committee may, at is discretion, choose a higher per share purchase price, so long as that price is communicated to plan participants prior to the beginning of the offering period. +• +As amended, an additional 1,451,000 shares of Common Stock will be reserved for issuance under the ESPP. The maximum number of shares available under the ESPP will automatically increase on the first trading day of each calendar year by an amount equal to the lesser of (i) 1% of the shares of Common Stock issued and outstanding on December 31st of the immediately preceding calendar year, (ii) 3,000,000, and (iii) an amount determined by the board of directors. As of April 25, 2025, the closing sales price per share of the Company’s Common Stock was $0.54. +• +Rights granted under the ESPP are not transferable by the participant other than by will or the laws of descent and distribution. During the participant’s lifetime, the rights are exercisable only by the participant. +• +The ESPP will be administered by the compensation committee or a designee of the compensation committee. The ESPP may be amended by the Company’s board of directors or compensation committee but may not be amended without prior stockholder approval to the extent required by Section 423 of the Code. +2025 Proxy Statement +51 +Table of Contents +• +The ESPP shall continue in effect until the earlier of (i) the termination of the ESPP by the Company’s board of directors or the compensation committee pursuant to the terms of the ESPP and (ii) the ten-year anniversary of the effective date of the amended and restated ESPP, with no new offering periods commencing on or after such ten-year anniversary. +U.S. Federal Income Tax Consequences +The following is a brief summary of certain United States federal income tax consequences generally arising with respect to the ESPP. This discussion does not address all aspects of the United States federal income tax consequences of participating in the ESPP that may be relevant to participants in light of their personal investment or tax circumstances and does not discuss any state, local or non-United States tax consequences of participating in the ESPP. Each participant is advised to consult his or her personal tax advisor concerning the application of the United States federal income tax laws to such participant’s particular situation, as well as the applicability and effect of any state, local or non-United States tax laws before taking any actions with respect to the ESPP. +423 Component Offerings +Under the 423 Component of the ESPP, no taxable income will be recognized by a participant, and no deductions will be allowable to the Company (or, if applicable, the affiliate employer), upon either the grant or the exercise of the purchase rights. Taxable income will not be recognized until there is a sale or other disposition of the shares acquired under the ESPP or in the event the participant should die while still owning the purchased shares. +If the participant sells or otherwise disposes of the purchased shares within two years after the start date of the option period in which the shares were acquired or within one year after the actual purchase date of those shares, whichever is later, then the participant will recognize ordinary income, in the year of sale or disposition, equal to the amount by which the fair market value of the shares on the purchase date exceeded the purchase price paid for those shares, and the Company (or, if appliable, the affiliate employer) will be entitled to an income tax deduction (subject to applicable limits under the Code, including, if applicable, those imposed by Section 162(m) of the Code), for the taxable year equal to the amount recognized as ordinary income by the participant. The amount of this ordinary income will be added to the participant’s basis in the shares and any resulting gain or loss recognized upon the sale or disposition will be a capital gain or loss. If the shares have been held for more than one year since the date of purchase, the gain or loss will be long-term. +If the participant sells or disposes of the purchased shares more than two years after the start date of the option period in which the shares were acquired and more than one year after the actual purchase date of those shares (a “qualifying disposition”), then the participant will recognize ordinary income in the year of sale or disposition equal to the lesser of (a) the amount by which the fair market value of the shares on the sale or disposition date exceeded the purchase price paid for those shares or (b) the applicable purchase price discount on the purchased shares, measured against the fair market value of the shares on the first day of that option period. Any additional gain upon the disposition will be taxed as a long-term capital gain. Alternatively, if the fair market value of the shares on the date of the sale or disposition is less than the purchase price, there will be no ordinary income and any loss recognized will be a long-term capital loss. The Company (or, if applicable, the affiliate employer) will not be entitled to an income tax deduction with respect to a qualifying disposition. +If the participant still owns the purchased shares at the time of death, the lesser of (i) the amount by which the fair market value of the shares on the date of death exceeds the purchase price or (ii) the applicable purchase price discount on the purchased shares, measured against the fair market value of the shares on the first day of the option period in which those shares were acquired will constitute ordinary income in the year of death. The Company (or, if applicable, the affiliate employer) will not be entitled to an income tax deduction with respect to a qualifying disposition. +2025 Proxy Statement +52 +Table of Contents +Non-423 Component Offerings +If a purchase right is granted under the Non-423 Component of the ESPP, then to the extent a participant is subject to U.S. federal income tax, the participant will recognize ordinary income, in the year of purchase, in an amount equal to the excess of the fair market value of the shares on the purchase date over the purchase price. The amount of such ordinary income will be added to the participant’s basis in the shares, and any additional gain or resulting loss recognized on the disposition of the shares, after such basis adjustment, will be a capital gain or loss. A capital gain or loss will be long-term if the participant holds the shares for more than one year after the purchase date. The Company (or, if applicable, the affiliate employer) may be entitled to a deduction in the year of purchase equal to the amount of ordinary income realized by the participant (subject to applicable limits under the Code, including, if applicable, those imposed by Section 162(m) of the Code). +The foregoing is only a summary of the U.S. federal income taxation of participants and the Company as to the participation in the ESPP. This discussion is not intended to be exhaustive and does not provide tax guidance to participants in the ESPP, as the consequences may vary. The summary does not address the effects of other federal taxes (including employment taxes or excise taxes, or taxability under Section 409A of the Code) or taxes imposed under state, local, or non-U.S. tax laws. The summary is not intended or written to be used, and cannot be used, for the purposes of avoiding tax penalties. +Registration with the SEC +If our stockholders approve this proposal, we will file with the SEC, as soon as reasonably practicable after such approval, a registration statement of Form S-8 relating to the additional shares available for issuance under the amended and restated ESPP. +Plan Benefits +It is not possible to determine how many eligible employees will participate in the ESPP in the future or their level of participation. Therefore, it is not possible to determine with certainty the dollar value or number of shares of Company Common Stock that will be distributed under the ESPP. Our non-employee directors do not participate in the ESPP. During 2024, Mr. Hutton, Ms. Harper Cowie and Mr. O’Kane purchased 16,139, 10,000 and 13,231 shares of Company Common Stock, respectively, under the ESPP. During 2024, our executive officers as a group purchased 39,370 shares of Company Common Stock under the ESPP, and our employees as a group (other than executive officers) purchased 432,473 shares of Company Common Stock under the ESPP. +Vote Required: +Approval of the amendment and restatement of the ESPP requires the affirmative vote of a majority of the shares present or represented by proxy and entitled to vote on such matter at the Annual Meeting. Abstentions have the same impact as votes “Against” the proposal. Brokers do not have discretion to vote on this proposal. +Board Recommendation: +OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE COMPANY’S AMENDED AND RESTATED ESPP TO INCREASE THE NUMBER OF SHARES RESERVED FOR ISSUANCE AND PROVIDED BY THE AUTOMATIC INCREASE THAT OCCURS ANNUALLY UNDER THE COMPANY’S ESPP. +2025 Proxy Statement +53 +Table of Contents +ADDITIONAL INFORMATION +Other Matters +Our board of directors is not aware of any other matters that will be presented for consideration at the Annual Meeting. However, if any other matters are properly brought before the Annual Meeting, the persons named in the accompanying proxy intend to vote on those matters in accordance with their best judgment. +Stockholder Proposals and Nominations for Next Year’s Annual Meeting of Stockholders +In order to be considered for inclusion in the proxy materials for our 2026 annual meeting of stockholders, proposals submitted by stockholders pursuant to Rule 14a-8 under the Exchange Act must be received by our Corporate Secretary at Biodesix, Inc., 919 West Dillon Rd., Louisville, CO 80027 on or before December 11, 2025, and also must otherwise comply with the procedures and requirements set forth in Rule 14a-8. +Alternatively, stockholders intending to present a proposal (outside of the process established in Rule 14a-8) or nominate a director for election at our 2025 annual meeting of stockholders without having the proposal or nomination included in the proxy materials for the meeting must comply with the requirements set forth in our bylaws. Our bylaws require, among other things, that our Corporate Secretary receive the proposal or nomination no earlier than the close of business on the 120 th day, and no later than the close of business on the 90 th day, prior to the first anniversary of the preceding year’s annual meeting of stockholders. Accordingly, for our 2026 annual meeting of stockholders, our Corporate Secretary must receive the proposal or nomination no earlier than January 20, 2026 and no later than the close of business on February 19, 2026. The proposal or nomination must contain the information required by our bylaws and otherwise comply with the requirements set forth in our bylaws. +In addition to satisfying the foregoing requirements under our amended and restated bylaws, to comply with the universal proxy rules, stockholders who intend to solicit proxies in support of director nominees other than management’s nominees must provide notice that sets forth the information required by Rule 14a-19 under the Exchange Act no later than March 21, 2026. +Availability of Annual Report on Form 10-K +A copy the 2024 Annual Report on Form 10-K as filed with the SEC is available free of charge on our website at www.biodesix.com or on the SEC’s website at www.sec.gov. Stockholders may also obtain a copy of our 2024 Annual Report on Form 10-K, including financial statements but excluding exhibits, without charge by sending a written request to: Biodesix, Inc., Attention: Corporate Secretary, 919 West Dillon Rd., Louisville, CO 80027. +2025 Proxy Statement +54 +Table of Contents +Annex A +CERTIFICATE OF AMENDMENT +OF THE +CERTIFICATE OF INCORPORATION +OF +BIODESIX, INC. +Biodesix, Inc., a corporation organized and existing under the laws of the State of Delaware (the “Corporation”), hereby certifies as follows: +FIRST: The name of the Corporation is Biodesix, Inc. The Corporation was originally incorporated under the name Elston Technologies, Inc. The Corporation’s original certificate of incorporation was filed with the office of the Secretary of State of the State of Delaware on December 23, 2005, and amended on October 30, 2020 (as amended, the Certificate of Incorporation”). +SECOND: This amendment to the Certificate of Incorporation has been duly authorized by the directors and the requisite stockholders of the Corporation in accordance with the provisions of Sections 228 and 242 of the Delaware General Corporation Law. +THIRD: The Certificate of Incorporation is hereby amended in the form set forth in the following resolution: +RESOLVED: The Certificate of Incorporation is hereby amended to include a new Section 4.5 in Article IV as follows: +4.5 Reverse Stock Split. Upon the filing and effectiveness of this Certificate of Amendment of the Certificate of Incorporation with the Secretary of State of the State of Delaware, each [ ] 2 shares of Common Stock either issued and outstanding or held by the Corporation in treasury stock immediately prior to the Effective Time (as defined below) shall, automatically and without any action on the part of the respective holders thereof, be combined and converted into one (1) share of Common Stock without increasing or decreasing the par value of each share (the “Reverse Stock Split”). +No fractional interest in a share of Common Stock shall be deliverable upon the Reverse Stock Split. All shares of Common Stock (including fractions thereof) issuable upon the Reverse Stock Split held by a holder prior to the Reverse Stock Split shall be aggregated for purposes of determining whether the Reverse Stock Split would result in the issuance of any fractional share. Any fractional share resulting from such aggregation upon the Reverse Stock Split shall be rounded down to the nearest whole number. Each holder who would otherwise be entitled to a fraction of a share of Common Stock upon the Reverse Stock Split (after aggregating all fractions of a share to which such stockholder would otherwise be entitled) shall, in lieu thereof, be entitled to receive a cash payment (without interest) in an amount equal to the fraction to which the stockholder would otherwise be entitled multiplied by the closing price of the Corporation’s Common Stock as reported by The Nasdaq Stock Market LLC on the last trading day prior +2 +This amendment approves the combination of not less than 2 nor more than 20 shares of the Corporation’s Common Stock into one share of the Corporation’s Common Stock, with the specific ratio and the implementation and timing of such Reverse Stock Split to be determined in the discretion of the Corporation’s board of directors. If the Reverse Stock Split Proposal is approved by stockholders, the Certificate of Amendment filed with the Secretary of State of the State of Delaware will include only that reverse stock split ratio determined by the Corporation’s board of directors to be in the best interests of the Corporation and its stakeholders. The other amendments will be abandoned pursuant to Section 242(c) of the General Corporation Law of the State of Delaware. The Corporation’s board of directors may also elect not to effect any reverse stock split, in which case all proposed alternate amendments will be abandoned. +2025 Proxy Statement +A-1 +Table of Contents +to the effective date of the Reverse Stock Split (as adjusted to give effect to the Reverse Stock Split). The Corporation shall not be obliged to issue certificates evidencing the shares of Common Stock outstanding as a result of the Reverse Stock Split unless and until the certificates evidencing the shares held by a holder prior to the Reverse Stock Split are either delivered to the Corporation or its transfer agent, or the holder notifies the Corporation or its transfer agent that such certificates have been lost, stolen or destroyed and executes an agreement satisfactory to the Corporation to indemnify the Corporation from any loss incurred by it in connection with such certificates. +FOURTH: The Certificate of Amendment of the Certificate of Incorporation so adopted reads in full as set forth above and is hereby incorporated herein by this reference. All other provisions of the Certificate of Incorporation remain in full force and effect. +FIFTH: The foregoing amendment shall be effective as of 12:01 a.m., Eastern Time, on [DATE], 202[5] (the “Effective Time”). +IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to be signed on      , 202[5]. +BIODESIX, INC. +By: +Name: +Robin Harper Cowie +Title: +Chief Financial Officer +2025 Proxy Statement +A-2 +Table of Contents +Annex B +B IODESIX , I NC . +E MPLOYEE S TOCK P URCHASE P LAN +(A MENDED AND R ESTATED E FFECTIVE A PRIL 15, 2025) +1.    P URPOSE . The purpose of the Biodesix, Inc. Employee Share Purchase Plan (this “ Plan ”) is to provide eligible Employees of the Company and Participating Subsidiaries with a convenient means of acquiring an equity interest in the Company through payroll deductions or other contributions in order to enhance such employees’ sense of participation in the affairs of the Company. This Plan is amended and restated as set forth herein and such amendment and restatement shall apply to Offering Periods beginning on or after March 1, 2025 . +This Plan includes two components: (a) a component intended to qualify as an “employee stock purchase plan” under Section 423 of the Code (the “ 423 Component ”), the provisions of which shall be construed so as to extend and limit participation in a uniform and nondiscriminatory manner consistent with the requirements of Section 423 of the Code; and (b) a component that does not qualify as an “employee stock purchase plan” under Section 423 of the Code (the “ Non-423 Component ”), under which options shall be granted pursuant to rules, procedures or sub-plans adopted by the Committee designed to achieve tax, securities laws or other objectives for eligible Employees, the Company and its Participating Subsidiaries. Except as otherwise provided in this Plan, the Non-423 Component will operate and be administered in the same manner as the 423 Component. +2.    D EFINITIONS . As used herein, the terms set forth below have the meanings assigned to them in this Section 2 and shall include the plural as well as the singular, as appropriate. +“ 1933 Act ” means the Securities Act of 1933, as amended. +“ 1934 Act ” means the Securities Exchange Act of 1934, as amended. +“ Board ” means the Board of Directors of Biodesix, Inc. +“ Business Day ” shall mean a day on which NASDAQ is open for trading. +“ Brokerage Account ” means the account in which the Purchased Shares may be held. +“ Code ” means the Internal Revenue Code of 1986, as amended. +“ Committee ” means the Compensation Committee of the Board, or the designee of the Compensation Committee. +“ Company ” means Biodesix, Inc., a Delaware corporation, or any successor thereto. +“ Compensation ” means base pay, commissions, overtime, and vacation, holiday and sick pay. Compensation does not include: (1) income related to stock option awards, stock grants and other equity incentive awards; (2) expense reimbursements; (3) relocation-related payments; (4) benefit plan payments (including but not limited to short-term disability pay, long-term disability pay, maternity pay, military pay, tuition reimbursement and adoption assistance); (5) accrued but unpaid compensation for a deceased Participant; (6) income from non-cash and fringe benefits; (7) severance payments; (8) annual, quarterly, monthly and other cash bonuses; and (9) other forms of compensation not specifically listed herein. +“ Employee ” means any individual who is a common law employee of the Company or any other Participating Subsidiary. For purposes of the Plan, the employment relationship shall be treated as continuing +2025 Proxy Statement +B-1 +Table of Contents +intact while the individual is on sick leave or other leave of absence approved by the Company or the Participating Subsidiary, as appropriate, and only to the extent permitted under Section 423 of the Code with respect to the 423 Component. For purposes of the Plan, an individual who performs services for the Company or a Participating Subsidiary pursuant to an agreement (written or oral) that classifies such individual’s relationship with the Company or a Participating Subsidiary as other than a common law employee shall not be considered an “employee” with respect to any period preceding the date on which a court or administrative agency issues a final determination that such individual is an “employee.” +“ Enrollment Date ” means the first Business Day of each Offering Period. +“ Exercise Date ” means the last Business Day of each Offering Period (or, if determined by the Committee, the Purchase Period if different from the Offering Period). +“ Fair Market Value ” means the closing transaction price for a Share as reported on NASDAQ on the date as of which such value is being determined or, if the Common Stock is not listed on NASDAQ, the closing transaction price for a Share on the principal national stock exchange on which the Shares are traded on the date as of which such value is being determined or, if there shall be no reported transactions for such date, on the next preceding date for which transactions were reported. Notwithstanding the foregoing, if the first Offering Period commences on the first Business Day on or after the date on which the Securities and Exchange Commission declares the Company’s Registration Statement to be effective, the Fair Market Value for purposes of the Enrollment Date for such first Offering Period shall be the initial price to the public as set forth in the final prospectus included in the Registration Statement. +“ Offering Period ” means every six-month period beginning the first Business Day of March and the first Business Day of September or such other period designated by the Committee; provided that in no event shall an Offering Period exceed 27 months, with the commencement of the first Offering Period to be determined by the Board or the Committee, as determined by the Board. Notwithstanding anything herein to the contrary, the Committee may establish an Offering Period with multiple Purchase Periods within such Offering Period. +“ Option ” means an option granted under this Plan that entitles a Participant to purchase Shares. +“ Participant ” means an Employee who satisfies the requirements of Sections 3 and 5 of the Plan. +“ Participating Subsidiary ” means each Subsidiary other than those that the Committee or the Board has excluded from participation in the Plan. +“ Plan ” means this Biodesix, Inc. Employee Stock Purchase Plan, as amended from time to time. +“ Purchase Account ” means the account used to purchase Shares through the exercise of Options under the Plan. +“ Purchase Period ” means the period designated by the Committee during which payroll deductions or other contributions of the Participants are accumulated under the Plan. A Purchase Period may coincide with an entire Offering Period or there may be multiple Purchase Periods within an Offering Period, as determined by the Committee prior to the commencement of the applicable Offering Period. +“ Purchase Price ” shall be the lesser of: (i) 85% percent of the Fair Market Value of a Share on the applicable Enrollment Date for an Offering Period and (ii) 85% percent of the Fair Market Value of a Share on the applicable Exercise Date; provided , however , that the Committee may determine a different per share Purchase Price provided that such per share Purchase Price is communicated to Participants prior to the beginning of the Offering Period and provided that in no event shall such per share Purchase Price be less than the lesser of (i) 85% of the Fair Market Value of a Share on the applicable Enrollment Date or (ii) 85% of the Fair Market Value of a Share on the Exercise Date. +2025 Proxy Statement +B-2 +Table of Contents +“ Purchased Shares ” means the full Shares issued or delivered pursuant to the exercise of Options under the Plan. +“ Registration Statement ” means the registration statement on Form S-1 filed with the Securities and Exchange Commission for the initial public offering of the Common Stock. +“ Shares ” means shares of the common stock of the Company. +“ Subsidiary ” means an entity, domestic or foreign, of which not less than 50% of the voting equity is held by the Company or a Subsidiary, whether or not such entity now exists or is hereafter organized or acquired by the Company or a Subsidiary; provided such entity is also a “subsidiary” within the meaning of Section 424 of the Code. +“ Termination Date ” means (i) the date on which a Participant terminates employment or on which the Participant ceases to provide services to the Company or a Subsidiary as an employee or as otherwise required under Section 423 with respect to the 423 Component or (ii) subject to Section 423 of the Code with respect to the 423 Component, the date on which the Participant’s employment is determined to have been terminated for purposes of the Plan by the Committee. The Termination Date specifically does not include any period following that date which the Participant may be eligible for or in receipt of other payments from the Company including in lieu of notice or termination or severance pay or as wrongful dismissal damages. +3.   E LIGIBILITY . +(a)  Only Employees of the Company or a Participating Subsidiary shall be eligible to be granted Options under the Plan and, in no event may a Participant be granted an Option under the Plan following his or her Termination Date. +(b)  Any provisions of the Plan to the contrary notwithstanding, no Employee shall be granted an Option under the 423 Component of the Plan if (i) immediately after the grant, such Employee (or any other person whose stock would be attributed to such Employee pursuant to Section 424(d) of the Code) would own capital stock of the Company and/or hold outstanding Options or options to purchase stock possessing 5% or more of the total combined voting power or value of all classes of stock of the Company or of any of its Subsidiaries or (ii) such Option would permit his or her rights to purchase stock under all employee stock purchase plans (described in Section 423 of the Code) of the Company and its Subsidiaries to accrue at a rate that exceeds $25,000 of the Fair Market Value of such stock (determined at the time each such Option is granted) for each calendar year in which such Option is outstanding at any time. Except as otherwise determined by the Committee prior to the commencement of an Offering Period, no Participant may purchase more than 10,000 Shares during any Offering Period. +4.     E XERCISE OF AN O PTION . Options shall be exercised on behalf of Participants in the Plan every Exercise Date, using payroll deductions that have accumulated in the Participants’ Purchase Accounts during the immediately preceding Purchase Period or that have been retained from a prior Purchase Period pursuant to Section 8 hereof. +5.   P ARTICIPATION . +(a)  Unless otherwise determined by the Committee prior to the commencement of an Offering Period and in accordance with Section 423 of the Code with respect to the 423 Component, an Employee shall be eligible to participate on the first Enrollment Date that occurs after such Employee’s first date of employment with the Company or a Participating Subsidiary; provided, that such Employee properly completes and submits an election form by the deadline prescribed by the Company. +2025 Proxy Statement +B-3 +Table of Contents +(b)  An Employee who does not become a Participant on the first Enrollment Date on which he or she is eligible may thereafter become a Participant on any subsequent Enrollment Date by properly completing and submitting an election form by the deadline prescribed by the Company. +(c)  Payroll deductions for a Participant shall commence on the first payroll date following the Enrollment Date and shall end on the last payroll date in the Purchase Period to which such authorization is applicable, unless sooner terminated by the Participant as provided in Section 12 hereof. +6.   P AYROLL D EDUCTIONS . +(a)  A Participant shall elect to have payroll deductions made during a Purchase Period equal to no less than 1% of the Participant’s Compensation up to a maximum of 15% (or such greater amount as the Committee establishes from time to time). The amount of such payroll deductions shall be in whole percentages. All payroll deductions made by a Participant shall be credited to his or her Purchase Account. A Participant may not make any additional payments into his or her Purchase Account. Notwithstanding the foregoing or any provisions to the contrary in the Plan, the Committee may allow participants to make other contributions under the Plan via cash, check, or other means instead of payroll deductions if payroll deductions are not permitted under applicable local law, and for any Offering Period under the 423 Component, if the Committee determines that such other contributions are permissible under Section 423 of the Code. +(b)  Except as otherwise determined by the Committee prior to the commencement of an Offering Period, a Participant may not increase the rate of payroll deductions during an Offering Period. A Participant may decrease the rate of payroll deductions during an Offering Period by properly completing and submitting an election change form in accordance with the procedures prescribed by the Committee and/or any other forms required by the Committee and by following any other procedures as may be established by the Committee, in which case the new rate shall become effective as soon as administratively practicable after the Participant elects such change and shall continue for the remainder of the Offering Period unless changed as described below. Such change in the rate of payroll deductions may be made at any time during an Offering Period, but not more than one (1) change may be made effective during any Offering Period, except that a Participant may elect at any time during an Offering Period, regardless of whether the Participant previously decreased his or her contribution percentage, to reduce his or her contribution percentage to 0% and such change shall become effective as soon as administratively practicable after the Participant elects such change and shall continue for the remainder of the Offering Period unless changed as described below. A Participant may change his or her payroll deduction percentage under subsection (a) above for any subsequent Offering Period by properly completing and submitting an election change form in accordance with the procedures prescribed by the Committee. The change in amount shall be effective as of the first Enrollment Date following the date of filing of the election change form. Unless otherwise determined by the Committee prior to the commencement of an Offering Period, a payroll deduction election will automatically apply to the next Offering Period, unless otherwise cancelled or changed by the Participant prior to the commencement of such Offering Period. +(c)  Notwithstanding the foregoing, to the extent necessary to comply with Section 423(b)(8) of the Code and Section 3(b) hereof, a Participant’s payroll deductions may be decreased to 0% at any time during an Offering Period. Payroll deductions shall recommence at the rate provided in such Participant’s election form at the beginning of the first Offering Period which is scheduled to end in the following calendar year, unless terminated by the Participant as provided in Section 12 hereof. +7.     G RANT OF O PTION . On the applicable Enrollment Date, each Participant in an Offering Period shall be granted an Option to purchase on the applicable Exercise Date a number of full Shares determined by dividing such Participant’s payroll deductions accumulated prior to such Exercise Date and retained in the Participant’s Purchase Account as of the applicable Exercise Date by the applicable Purchase Price. +8.     E XERCISE OF O PTION . A Participant’s Option for the purchase of Shares shall be exercised automatically on the Exercise Date, and the maximum number of Shares subject to the Option shall be purchased for such +2025 Proxy Statement +B-4 +Table of Contents +Participant at the applicable Purchase Price with the accumulated payroll deductions in his or her Purchase Account. If the Fair Market Value of a Share on the first day of the current Offering Period in which a participant is enrolled is higher than the Fair Market Value of a Share on the first day of any subsequent Offering Period, the Company may establish procedures to automatically enroll such participant in the subsequent Offering Period and any funds accumulated in a participant’s account prior to the first day of such subsequent Offering Period will be applied to the purchase of shares on the Exercise Date immediately prior to the first day of such subsequent Offering Period. A participant does not need to file any forms with the Company to be automatically enrolled in the subsequent Offering Period. +No fractional Shares shall be purchased; any payroll deductions accumulated in a Participant’s Purchase Account which are not sufficient to purchase a full Share shall be retained in the Purchase Account for the next subsequent Purchase Period, subject to earlier withdrawal by the Participant as provided in Section 12 hereof. All other payroll deductions accumulated in a Participant’s Purchase Account and not used to purchase Shares on an Exercise Date shall be distributed to the Participant. During a Participant’s lifetime, a Participant’s Option is exercisable only by him or her. The Company shall satisfy the exercise of all Participants’ Options for the purchase of Shares through (a) the issuance of authorized but unissued Shares, (b) the transfer of treasury Shares, (c) the purchase of Shares on behalf of the applicable Participants on the open market through an independent broker and/or (d) a combination of the foregoing. +9.     I SSUANCE OF S TOCK . The Shares purchased by each Participant shall be issued in book entry form and shall be considered to be issued and outstanding to such Participant’s credit as of the end of the last day of each Purchase Period. The Committee may permit or require that shares be deposited directly in a Brokerage Account with one or more brokers designated by the Committee or to one or more designated agents of the Company, and the Committee may use electronic or automated methods of share transfer. The Committee may require that Shares be retained with such brokers or agents for a designated period of time and/or may establish other procedures to permit tracking of disqualifying dispositions of such shares, and may also impose a transaction fee with respect to a sale of Shares issued to a Participant’s credit and held by such a broker or agent. The Committee may permit Shares purchased under the Plan to participate in a dividend reinvestment plan or program maintained by the Company, and establish a default method for the payment of dividends. +10.     A PPROVAL BY S TOCKHOLDERS . Notwithstanding the above, the Plan is expressly made subject to the approval of the stockholders of the Company within 12 months before or after the date the Plan is adopted by the Board. Such stockholder approval shall be obtained in the manner and to the degree required under applicable federal and state law. If the Plan is not so approved by the stockholders within 12 months before or after the date the Plan is adopted by the Board, this Plan shall not come into effect. +11.   A DMINISTRATION . +(a)   Powers and Duties of the Committee . The Plan shall be administered by the Committee. Subject to the provisions of the Plan, Section 423 of the Code and the regulations thereunder with respect to the 423 Component, the Committee shall have the discretionary authority to determine the time and frequency of granting Options, the duration of Offering Periods and Purchase Periods, the terms and conditions of the Options and the number of Shares subject to each Option. The Committee shall also have the discretionary authority to do everything necessary and appropriate to administer the Plan, including, without limitation, interpreting the provisions of the Plan (but any such interpretation shall not be inconsistent with the provisions of Section 423 of the Code with respect to the 423 Component). All actions, decisions and determinations of, and interpretations by the Committee with respect to the Plan shall be final and binding upon all Participants and upon their executors, administrators, personal representatives, heirs and legatees. No member of the Board or the Committee shall be liable for any action, decision, determination or interpretation made in good faith with respect to the Plan or any Option granted hereunder. With respect to the 423 Component, an Offering Period shall be administered so as to ensure that all Participants have the same rights and privileges as provided by Section 423(b)(5) of the Code. +2025 Proxy Statement +B-5 +Table of Contents +(b)   Administrator . The Company, Board or the Committee may engage the services of a brokerage firm or financial institution to perform certain ministerial and procedural duties under the Plan including, but not limited to, mailing and receiving notices contemplated under the Plan, determining the number of Purchased Shares for each Participant, maintaining or causing to be maintained the Purchase Account and the Brokerage Account, disbursing funds maintained in the Purchase Account or proceeds from the sale of Shares through the Brokerage Account, and filing with the appropriate tax authorities proper tax returns and forms (including information returns) and providing to each Participant statements as required by law or regulation. +(c)   Indemnification . Each person who is or shall have been (i) a member of the Board, (ii) a member of the Committee, or (iii) an officer or employee of the Company to whom authority was delegated in relation to this Plan, shall be indemnified and held harmless by the Company against and from any loss, cost, liability or expense that may be imposed upon or reasonably incurred by him or her in connection with or resulting from any claim, action, suit or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by him or her in settlement thereof, with the Company’s approval, or paid by him or her in satisfaction of any judgment in any such claim, action, suit or proceeding against him or her; provided , however , that he or she shall give the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf, unless such loss, cost, liability or expense is a result of his or her own willful misconduct or except as expressly provided by statute. +The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company’s certificate of incorporation or bylaws, any contract with the Company, as a matter of law, or otherwise, or of any power that the Company may have to indemnify them or hold them harmless. +12.     W ITHDRAWAL . A Participant may withdraw from the Plan by properly completing and submitting to the Company a withdrawal form in accordance with the procedures prescribed by the Committee, which must be submitted prior to the date specified by the Committee before the last day of the applicable Offering Period. Upon withdrawal, any payroll deductions credited to the Participant’s Purchase Account prior to the effective date of the Participant’s withdrawal from the Plan will be returned to the Participant. No further payroll deductions for the purchase of Shares will be made during subsequent Offering Periods, unless the Participant properly completes and submits an election form, by the deadline prescribed by the Company in respect of such Offering Period. A Participant’s withdrawal from an offering will not have any effect upon his or her eligibility to participate in the Plan or in any similar plan that may hereafter be adopted by the Company. +13.     T ERMINATION OF E MPLOYMENT . On the Termination Date of a Participant for any reason prior to the applicable Exercise Date, whether voluntary or involuntary, and including termination of employment due to retirement, death or as a result of liquidation, dissolution, sale, merger or a similar event affecting the Company or a Participating Subsidiary, the corresponding payroll deductions credited to his or her Purchase Account will be returned to him or her or, in the case of the Participant’s death, to the person or persons entitled thereto under Section 16, and his or her Option will be automatically terminated. +14.     I NTEREST . No interest shall accrue on the payroll deductions of a Participant in the Plan. +15.   S TOCK . +(a)  The stock subject to Options shall be common stock of the Company as traded on NASDAQ or on such other exchange as the Shares may be listed. +(b)  Subject to adjustment upon changes in capitalization of the Company as provided in Section 18 hereof, the maximum number of Shares which shall be initially made available for sale under the Plan shall be 1,789,606 Shares. In addition, subject to adjustments upon changes in capitalization of the Company as provided +2025 Proxy Statement +B-6 +Table of Contents +in Section 18 hereof, the maximum number of Shares which shall be made available for sale under the Plan shall automatically increase on the first day of each fiscal year, beginning with the fiscal year ending December 31, 2022, and continuing until (and including) the fiscal year ending December 31, 2030, with such annual increase equal to the lesser of (i) (x) beginning with the fiscal year ending December 31, 2022, and continuing until (and including) the fiscal year ending December 31, 2025, 338,106 Shares and (y) beginning with the fiscal year ending December 31, 2026, and continuing until (and including) the fiscal year ending December 31, 2030, 3,000,000, (ii) 1% of the number of Shares issued and outstanding on December 31 of the immediately preceding fiscal year, and (iii) an amount determined by the Board. If, on a given Exercise Date, the number of Shares with respect to which Options are to be exercised exceeds the number of Shares then available under the Plan, the Committee shall make a pro rata allocation of the Shares remaining available for purchase in as uniform a manner as shall be practicable and as it shall determine to be equitable. +(c)  A Participant shall have no interest or voting right in Shares covered by his or her Option until such Option has been exercised and the Participant has become a holder of record of Shares acquired pursuant to such exercise. +16.     D ESIGNATION OF B ENEFICIARY . The Committee may permit Participants to designate beneficiaries to receive any Purchased Shares or payroll deductions, if any, in the Participant’s accounts under the Plan in the event of such Participant’s death. Beneficiary designations shall be made in accordance with procedures prescribed by the Committee. If no properly designated beneficiary survives the Participant, the Purchased Shares and payroll deductions, if any, will be distributed to the Participant’s estate. +17.     A SSIGNABILITY OF O PTIONS . Neither payroll deductions credited to a Participant’s Purchase Account nor any rights with regard to the exercise of an Option or to receive Shares under the Plan may be assigned, transferred, pledged or otherwise disposed of in any way (other than by will, the laws of descent and distribution or as provided in Section 16 hereof) by the Participant. Any such attempt at assignment, transfer, pledge or other disposition shall be without effect, except that the Company may treat such act as an election to withdraw from an Offering Period in accordance with Section 12 hereof. +18.   A DJUSTMENT OF N UMBER OF S HARES S UBJECT TO O PTIONS . +(a)   Adjustment . Subject to any required action by the stockholders of the Company, the maximum number of securities available for purchase under the Plan, as well as the price per security and the number of securities covered by each Option under the Plan which has not yet been exercised shall be appropriately adjusted in the event of any a stock split, reverse stock split, stock dividend, combination or reclassification of the common stock of the Company, or any other increase or decrease in the number of Shares effected without receipt of consideration by the Company; provided , however , that conversion of any convertible securities of the Company shall not be deemed to have been “effected without receipt of consideration.” Such adjustment shall be made by the Board or the Committee, whose determination in that respect shall be final, binding and conclusive. If any such adjustment would result in a fractional security being available under the Plan, such fractional security shall be disregarded. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of Shares subject to an Option. With respect to the 423 Component, the Options granted pursuant to the Plan shall not be adjusted in a manner that causes the Options to fail to qualify as options issued pursuant to an “employee stock purchase plan” within the meaning of Section 423 of the Code. +(b)   Dissolution or Liquidation . In the event of the proposed dissolution or liquidation of the Company, any Offering Period then in progress will terminate immediately prior to the consummation of such proposed action, unless otherwise provided by the Board, and the Board may either provide for the purchase of Shares as of the date on which such Offering Period terminates or return to each Participant the payroll deductions credited to such Participant’s Purchase Account. +2025 Proxy Statement +B-7 +Table of Contents +(c)   Merger or Asset Sale . In the event of a proposed sale of all or substantially all of the assets of the Company, or the merger of the Company with or into another corporation, each outstanding Option shall be assumed or an equivalent option substituted by the successor corporation or a parent or subsidiary of the successor corporation, unless the Board determines, in the exercise of its sole discretion, that in lieu of such assumption or substitution to either terminate all outstanding Options and return to each Participant the payroll deductions credited to such Participant’s Purchase Account or to provide for the Offering Period in progress to end on a date prior to the consummation of such sale or merger. +19.   A MENDMENTS OR T ERMINATION OF THE P LAN . +(a)  The Board or the Committee may at any time and for any reason amend, modify, suspend, discontinue or terminate the Plan without notice; provided that no Participant’s existing rights in respect of existing Options are adversely affected thereby. To the extent necessary to comply with Section 423 of the Code (or any other applicable law, regulation or stock exchange rule), the Company shall obtain stockholder approval in such a manner and to such a degree as required. +(b)  Without stockholder consent and without regard to whether any Participant rights may be considered to have been “adversely affected,” the Board or the Committee shall be entitled to change the Purchase Price, Offering Periods, Purchase Periods, eligibility requirements, limit or increase the frequency and/or number of changes in the amount withheld during a Purchase Period, establish the exchange ratio applicable to amounts withheld in a currency other than U.S. dollars, permit payroll withholding in an amount less than or greater than the amount designated by a Participant in order to adjust for delays or mistakes in the Company’s processing of properly completed withholding elections, establish reasonable waiting and adjustment periods and/or accounting and crediting procedures to ensure that amounts applied toward the purchase of Shares for each Participant properly correspond with amounts withheld from the Participant’s Compensation, and establish such other limitations or procedures as the Board or the Committee determines in its sole discretion advisable which are consistent with the Plan; provided , however , that changes to (i) the Purchase Price, (ii) the Offering Period, (iii) the Purchase Period, (iv) the maximum percentage of Compensation that may be deducted pursuant to Section 6(a) or (v) the maximum number of Shares that may be purchased in a Purchase Period, shall not be effective until communicated to Participants in a reasonable manner, with the determination of such reasonable manner in the sole discretion of the Board or the Committee. +20.     N O O THER O BLIGATIONS . The receipt of an Option pursuant to the Plan shall impose no obligation upon the Participant to purchase any Shares covered by such Option. Nor shall the granting of an Option pursuant to the Plan constitute an agreement or an understanding, express or implied, on the part of the Company to employ the Participant for any specified period. +21.     N OTICES AND C OMMUNICATION . Any notice or other form of communication which the Company or a Participant may be required or permitted to give to the other shall be provided through such means as designated by the Committee, including but not limited to any paper or electronic method. +22.   C ONDITION UPON I SSUANCE OF S HARES . +(a)  Shares shall not be issued with respect to an Option unless the exercise of such Option and the issuance and delivery of such Shares pursuant thereto shall comply with all applicable provisions of law, domestic or foreign, including, without limitation, the 1933 Act and the 1934 Act and the rules and regulations promulgated thereunder, and the requirements of any stock exchange upon which the Shares may then be listed, and shall be further subject to the approval of counsel for the Company with respect to such compliance. +(b)  As a condition to the exercise of an Option, the Company may require the person exercising such Option to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required by any of the aforementioned applicable provisions of law. +2025 Proxy Statement +B-8 +Table of Contents +23.     G ENERAL C OMPLIANCE . The Plan will be administered and Options will be exercised in compliance with the 1933 Act, the 1934 Act and all other applicable securities laws and Company policies, including without limitation, any insider trading policy of the Company. +24.     T ERM OF THE P LAN . The Plan shall become effective upon the earlier to occur of (i) its adoption by the Board and (ii) its approval by the stockholders of the Company (the earlier of such events, the “Effective Date”), and shall continue in effect until the earlier of (A) the termination of the Plan pursuant to Section 19 hereof and (B) the ten-year anniversary of the Effective Date, with no new Offering Periods commencing on or after such ten-year anniversary. +25.     G OVERNING L AW . The Plan and all Options granted hereunder shall be construed in accordance with and governed by the laws of the State of Delaware without reference to choice of law principles and subject in all cases to the Code and the regulations thereunder. +26.     N ON -U.S. P ARTICIPANTS . To the extent permitted under Section 423 of the Code, without the amendment of the Plan, the Company may provide for the participation in the Plan by Employees who are subject to the laws of foreign countries or jurisdictions on such terms and conditions different from those specified in the Plan as may in the judgment of the Company be necessary or desirable to foster and promote achievement of the purposes of the Plan and, in furtherance of such purposes the Company may make such modifications, amendments, procedures, subplans and the like as may be necessary or advisable to comply with provisions of laws of other countries or jurisdictions in which the Company or the Participating Subsidiaries operate or have employees. Each subplan shall constitute a separate “offering” under this Plan in accordance with Treas. Reg. §1.423-2(a) and, to the extent inconsistent with the requirements of Section 423, any such subplan shall be considered part of the Non-423 Component, and rights granted thereunder shall not be required by the terms of the Plan to comply with Section 423 of the Code. +27.     S ECTION 409A. The 423 Component is exempt from the application of Section 409A of the Code, and any ambiguities herein shall be interpreted to so be exempt from Section 409A of the Code. The Non-423 Component is intended to be exempt from the application of Section 409A of the Code under the short-term deferral exception and any ambiguities shall be construed and interpreted in accordance with such intent. In furtherance of the foregoing and notwithstanding any provision in the Plan to the contrary, if the Committee determines that an option granted under the Plan may be subject to Section 409A of the Code or that any provision in the Plan would cause an option under the Plan to be subject to Section 409A, the Committee may amend the terms of the Plan and/or of an outstanding option granted under the Plan, or take such other action the Committee determines is necessary or appropriate, in each case, without the participant’s consent, to exempt any outstanding option or future option that may be granted under the Plan from or to allow any such options to comply with Section 409A of the Code, but only to the extent any such amendments or action by the Committee would not violate Section 409A of the Code. Notwithstanding the foregoing, the Company shall have no liability to a participant or any other party if the option under the Plan that is intended to be exempt from or compliant with Section 409A of the Code is not so exempt or compliant or for any action taken by the Committee with respect thereto. +2025 Proxy Statement +B-9 +Table of Contents +P.O. BOX 8016, CARY, NC 27512-9903 matters! Have your ballot ready and please use one of the methods below for easy voting: Your control number Have the 12 digit control number located in the box above available when you access the website and follow the instructions. Biodesix, Inc. Internet: www.proxypush.com/BDSX Cast your vote online Annual Meeting of Stockholders Have your Proxy Card ready Follow the simple instructions to record your vote For Stockholders of record as of March 24, 2025 Phone: Tuesday, May 20, 2025 1:00 PM, Mountain Time 1-866-291-6774 Annual meeting to be held virtually via the internet- please visit Use any touch-tone telephone Have your Proxy Card ready www.proxydocs.com/BDSX for more details. Follow the simple recorded instructions Mail: Mark, sign and date your Proxy Card Fold and return your Proxy Card in the postage-paid YOUR VOTE IS IMPORTANT! envelope provided PLEASE VOTE BY: 1:00 PM, Mountain Time, May 20, 2025. Virtual: You must register to attend the meeting online and/or participate at www.proxydocs.com/BDSX This proxy is being solicited on behalf of the Board of Directors The undersigned stockholder of Biodesix, Inc. hereby appoints Robin Harper Cowie and Chris Vazquez, and each or either of them, as the true and lawful attorneys of the undersigned, with full power of substitution and revocation, and authorizes them, and each of them, to vote all the shares of capital stock of Biodesix, Inc. which the undersigned is entitled to vote at said meeting and any adjournment thereof upon the matters specified and upon such other matters as may be properly brought before the meeting or any adjournment thereof, conferring authority upon such true and lawful attorneys to vote in their discretion on such other matters as may properly come before the meeting and revoking any proxy heretofore given. THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN, SHARES WILL BE VOTED IDENTICAL TO THE BOARD OF DIRECTORS RECOMMENDATION. This proxy, when properly executed, will be voted in the manner directed herein. In their discretion, the named proxies are authorized to vote upon such other matters that may properly come before the meeting or any adjournment or postponement thereof. You are encouraged to specify your choice by marking the appropriate box (SEE REVERSE SIDE) but you need not mark any box if you wish to vote in accordance with the Board of Directors’ recommendation. The named proxies cannot vote your shares unless you sign (on the reverse side) and return this card. PLEASE BE SURE TO SIGN AND DATE THIS PROXY CARD AND MARK ON THE REVERSE SIDE Copyright © 2025 BetaNXT, Inc. or its affiliates. All Rights Reserved +Table of Contents +Biodesix, Inc. Annual Meeting of Stockholders Please make your marks like this: THE BOARD OF DIRECTORS RECOMMENDS A VOTE:FOR ALL OF THE LISTED NOMINEES AND ON PROPOSALS 2, 3 & 4 BOARD OF DIRECTORS PROPOSAL YOUR VOTE RECOMMENDS 1. To elect the two Class II directors named in this proxy statement to hold office until the 2028 annual meeting of stockholders; FOR WITHHOLD 1.01 Lawrence T. Kennedy, Jr. Fatthew Strobeck, Ph.D. FOR FOR AGAINST ABSTAIN 2. To ratify the appointment of KPMG LLP as our independent registered public accounting firm for FOR the year ending December 31, 2025; approve an amendment to the Company’s amended and restated certificate of incorporation to FOR effect a reverse stock split of the Company’s Common Stock at a ratio ranging from any whole number between 1-for-2 and 1-for-20 inclusive, as determined by our board of directors in its discretion, subject to our board of directors’ authority to abandon such amendments; 4. To approve the Company’s Amended and Restated Employee Stock Purchase Plan to increase FOR the available shares of the Company’s Common Stock under the plan by 1,451,500 and to # increase the maximum number of shares of the Company’s Common Stock that may be provided as the result of the plan’s annual automatic increase to 3,000,000; and 5. To conduct any other business properly brought before the meeting, or any adjournment or postponement thereof. You must register to attend the meeting online and/or participate at www.proxydocs.com/BDSX Authorized Signatures—Must be completed for your instructions to be executed. Please sign exactly as your name(s) appears on your account. If held in joint tenancy, all persons should sign. Trustees, administrators, etc., should include title and authority. Corporations should provide full name of corporation and title of authorized officer signing the Proxy/Vote Form. Signature (and Title if applicable) Date Signature (if held jointly) Date \ No newline at end of file diff --git a/raw/proxies/0001439725/0001193125-25-100458/proxy_rpt.txt b/raw/proxies/0001439725/0001193125-25-100458/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..b171e2d6fc9d86a4c483346f87d8569b818cd46e --- /dev/null +++ b/raw/proxies/0001439725/0001193125-25-100458/proxy_rpt.txt @@ -0,0 +1,58 @@ +reviewing related-party transactions; +2025 Proxy Statement +14 +Table of Contents +• +approving, or as permitted, pre-approving, audit and permissible non-audit services to be performed by our independent registered public accounting firm; and +• +reviewing and assessing, at least annually, the performance of the audit committee and adequacy of its charter. +Compensation Committee +Our compensation committee consists of Messrs. Massarany and Patience and Dr. Kayyem, and the chair of our compensation committee is Mr. Massarany. Our board of directors has determined that each of Messrs. Massarany and Patience and Dr. Kayyem is independent under the applicable Nasdaq listing rules and is a “non-employee director” as defined in Rule 16b-3 promulgated under the Exchange Act. The functions of this committee include: +• +reviewing, modifying and overseeing overall compensation strategy and policies; +• +reviewing and approving the compensation arrangements and other terms of employment of our chief executive officer, other executive officers and senior management, as appropriate; +• +reviewing and recommending to the full board of directors the compensation of our directors; +• +appointing and overseeing the work of compensation consultants, legal counsel or any other advisors and consultants engaged for the purpose of advising the compensation committee; +• +reviewing, recommending to the full board of directors, as appropriate, and administering equity award plans, compensation plans and similar programs, as well as modification or termination of plans and programs; +• +establishing policies with respect to equity compensation arrangements; +• +reviewing and evaluating with the chief executive officer and the full board of directors the succession plans for our executive officers; and +• +reviewing and assessing, at least annually, the performance of the compensation committee and the adequacy of its charter. +Compensation Committee Interlocks and Insider Participation +None of the members of the compensation committee is currently, or has been at any time during 2024, one of our officers or employees. None of our executive officers currently serve, or has served during 2024, as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving as a member of our board of directors or compensation committee. +Nominating and Corporate Governance Committee +Our nominating and corporate governance committee consists of Ms. Franchi, Dr. Strobeck and Mr. Kennedy, and the chair of our nominating and corporate governance committee is Dr. Strobeck. Our board of directors has determined that Ms. Franchi, Dr. Strobeck and Mr. Kennedy are independent under the applicable Nasdaq listing rules. The functions of this committee include: +• +reviewing periodically and evaluating director performance of our board of directors and its applicable committees, and recommending to our board of directors and management areas for improvement; +2025 Proxy Statement +15 +Table of Contents +• +identifying, evaluating, nominating and recommending individuals for membership on our board of directors; +• +reviewing with our chief executive officer the plans for succession to the offices of our executive officers and make recommendations to our board of directors with respect to the selection of appropriate individuals to succeed to these positions; +• +reviewing and recommending to our board of directors any amendments to our corporate governance policies; +• +monitoring our cybersecurity risk profile, receiving periodic updates from management on all matters related to cybersecurity, and reporting to our full board of directors on an annual or as necessary basis; and +• +reviewing and assessing, at least annually, the performance of the nominating and corporate governance committee and the adequacy of its charter. +Director Nomination Process +Selection and Nomination Process +Our board of directors is responsible for nominating members for election to our board of directors by our stockholders at our annual meetings of stockholders. Whenever a vacancy occurs on our board of directors, whether due to a newly created director position or the death, resignation, removal or retirement of an existing director, our board of directors is authorized to select a person to fill the vacancy to serve as a director until the annual meeting of stockholders at which the director’s term expires and until the election and qualification of his or her successor or, if sooner, his or her death, resignation or removal. Any increase or decrease in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors. +Criteria for Board Membership +The board of directors and the nominating and corporate governance committee will determine the appropriate characteristics, skills and experience for the board of directors as a whole and for its individual members. The board of directors and the nominating and corporate governance committee will consider the minimum general criteria set forth below, and may add any specific additional criteria with respect to specific searches, in selecting candidates and existing directors for service on the board of directors. An acceptable candidate may not fully satisfy all of the criteria, but is expected to satisfy nearly all of them. While the nominating and corporate governance committee does not have a formal policy in this regard, the diversity of the board of the directors is a consideration in evaluating candidates for director positions, among others. +The board of directors and the nominating and corporate governance committee believe that candidates for director should have certain minimum qualifications, including being able to read and understand basic financial statements, being over 21 years of age and having the highest personal integrity and ethics. In considering candidates, the board of directors and the nominating and corporate governance committee intend to consider such factors as possessing relevant expertise upon which to be able to offer advice and guidance to management, having sufficient time to devote to the affairs of the Company, demonstrated excellence in his or her field, having the ability to exercise sound business judgment and having the commitment to rigorously represent the long-term interests of our stockholders. +The board of directors and the nominating and corporate governance committee review candidates for director nomination in the context of the current composition of the board of directors, the operating +2025 Proxy Statement +16 +Table of Contents +requirements of the Company and the long-term interests of our stockholders. In conducting this assessment, the board of directors and the nominating and corporate governance committee consider diversity, age, skills, and such other factors as it deems appropriate given the current needs of the board of directors and the Company to maintain a balance of knowledge, experience and capability. In the case of incumbent directors whose terms of office are set to expire, the board of directors and the nominating and corporate governance committee review such directors’ overall service to the Company during their term, including the number of meetings attended, level of participation, quality of performance, and any other relationships and transactions that might impair such directors’ independence. In the case of new director candidates, the board of directors and the nominating and corporate governance committee also determine whether the nominee must be independent for purposes of any stock exchange on which any of the Company’s capital stock is listed. +Stockholder Recommendations and Nominations +Stockholders who wish to recommend candidates may contact the nominating and corporate governance committee in the manner described below under “Board and Corporate Governance Matters—Stockholder Communications with our Board of Directors.” Stockholder nominations must be made according to the procedures required under our bylaws and described in this proxy statement under the heading “Additional Information—Stockholder Proposals and Nominations for Next Year’s Annual Meeting of Stockholders.” Stockholder-recommended candidates and stockholder nominees whose nominations comply with these procedures will be evaluated by our nominating and corporate governance committee in the same 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ecd:FrValAsOfPrrYrEndOfEqtyAwrdsGrntdInPrrYrsFldVstngCondsDrngCvrdYrMember ecd:NonPeoNeoMember 2025-01-01 2025-12-31 0001439725 1 2025-01-01 2025-12-31 0001439725 2 2025-01-01 2025-12-31 iso4217:USD +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +Washington, DC 20549 +SCHEDULE 14A +(Rule +14a-101) +SCHEDULE 14A INFORMATION +Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 +(Amendment No. +) +☒ +Filed by the Registrant +☐ +Filed by a Party other than the Registrant +Check the appropriate box: +☐ +Preliminary Proxy Statement +☐ +Confidential, for Use of the Commission Only (as permitted by Rule +14a-6(e)(2)) +☒ +Definitive Proxy Statement +☐ +Definitive Additional Materials +☐ +Soliciting Material under § +240.14a-12 +Biodesix, Inc. +(Name of Registrant as Specified in its Charter) +(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant) +Payment of Filing Fee (Check the appropriate box): +☒ +No fee required. +☐ +Fee paid previously with preliminary materials. +☐ +Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules +14a-6(i)(1) +and +0-11. +Table of Contents +Biodesix, Inc. +919 West Dillon Rd., +Louisville, CO 80027 +Notice of 2026 Annual Meeting of Stockholders +Dear Biodesix Stockholders: +You are invited to attend Biodesix, Inc.’s 2026 Annual Meeting of Stockholders (the Annual Meeting). +Date: +May 19, 2026 (Tuesday) +Time: +1:00 p.m., Mountain Time +Virtual Location: +You can attend the Annual Meeting online, including to vote and/or submit questions, at www.proxydocs.com/BDSX . See page 1 of the accompanying proxy statement for additional information regarding participation in the virtual meeting. +Items of Business: +At the Annual Meeting, stockholders will be asked to vote: +1.  To elect the two Class III directors named in this proxy statement to hold office until the 2029 annual meeting of stockholders; +2.  To hold a non-binding advisory vote to approve the compensation of our named executive officers, as described in the accompanying proxy statement; +3.  To hold a non-binding advisory vote on the frequency of solicitation of advisory votes to approve named executive officer compensation; and +4.  To ratify the appointment of KPMG LLP as our independent registered public accounting firm for the year ending December 31, 2026. +In addition, we will conduct any other business properly brought before the meeting, or any adjournment or postponement thereof. +Record Date: +You can participate in the Annual Meeting and vote if you were a stockholder of record as of the close of business on March 23, 2026. +Voting: +Your vote is very important to us. Whether or not you plan to attend the virtual Annual Meeting, please ensure your shares are represented by voting promptly. For instructions on how to vote your shares, please refer to the Internet Notice, the section entitled “Annual Meeting Information” beginning on page 1 of the accompanying proxy statement or, if you requested to receive printed copies of these materials, your enclosed proxy card. +By order of the Board of Directors, +Robin Harper Cowie +Chief Financial Officer, Secretary and Treasurer +April 9, 2026 +Important Notice Regarding the Internet Availability of Proxy Materials for the Annual Meeting to be Held on May 19, 2026 at 1:00 p.m. Mountain Time via live audio webcast at www.proxydocs.com/BDSX +This Notice of 2026 Annual Meeting of Stockholders, the accompanying proxy statement and our 2025 Annual Report on Form 10-K are available on our website at https://investors.biodesix.com/investor-relations in the SEC Filings section, as well as at www.proxydocs.com/BDSX . +Table of Contents +Table of Contents +ANNUAL MEETING INFORMATION +1 +BOARD AND CORPORATE GOVERNANCE MATTERS +8 +Proposal One: Election of Directors +8 +Overview of Our Nominees and Continuing Directors +9 +Board Composition +12 +Director Independence +12 +Board Leadership Structure +13 +Role of our Board of Directors in Risk Oversight +13 +Meetings of our Board of Directors +13 +Committees of our Board of Directors +14 +Committee Composition and Meetings +14 +Audit Committee +14 +Compensation Committee +15 +Compensation Committee Interlocks and Insider Participation +15 +Nominating and Corporate Governance Committee +15 +Director Nomination Process +16 +Executive Officers +17 +Code of Business Conduct and Ethics +18 +Corporate Governance Guidelines +18 +Insider Trading Policy +18 +Stockholder Communications with our Board of Directors +20 +Certain Relationships and Related Party Transactions +20 +EQUITY COMPENSATION PLAN INFORMATION +22 +DIRECTOR COMPENSATION +23 +Non-Employee Director Compensation Policy +23 +Director Deferred Compensation Plan +24 +2025 Director Compensation Table +25 +Proposal Two: Non-Binding, Advisory Vote on Named Executive Officer Compensation +27 +EXECUTIVE COMPENSATION +28 +Overview +28 +Compensation of Named Executive Officers +28 +2025 Summary Compensation Table +31 +Outstanding Equity Awards at Fiscal 2025 Year-End +33 +Additional Matters +36 +Pay Versus Performance +38 +Proposal Three: Non-Binding, Advisory Vote on the Frequency of Solicitation of Advisory Votes to Approve Executive Compensation +40 +Table of Contents +STOCK OWNERSHIP +41 +Security Ownership of Certain Beneficial Owners and Management +41 +Delinquent Section 16(a) Reports +43 +AUDIT MATTERS +44 +Proposal Four: Ratification of Appointment of Independent Registered Public Accounting Firm +44 +Report of the Audit Committee +45 +ADDITIONAL INFORMATION +46 +Other Matters +46 +Stockholder Proposals and Nominations for Next Year’s Annual Meeting of Stockholders +46 +Availability of Annual Report on Form 10-K +46 +Table of Contents +Proxy Statement +2026 Annual Meeting of Stockholders +May 19, 2026 +ANNUAL MEETING INFORMATION +Our board of directors is soliciting your proxy for the 2026 Annual Meeting of Stockholders (the Annual Meeting) of Biodesix, Inc. (Biodesix, the Company, we, us or our) and at any adjournment, continuation or postponement of the meeting for the purposes described in this proxy statement and the accompanying Notice of 2026 Annual Meeting of Stockholders. The Annual Meeting will take place virtually on May 19, 2026 at 1:00 p.m. Mountain Time. You must register to attend the meeting online and/or participate at www.proxydocs.com/BDSX using the control number on your proxy card or notice. You will receive an email one hour prior to the meeting containing a link which will connect you to the meeting portal. If you held shares of our Common Stock as of the close of business on March 23, 2026, you will be able to vote on the proposals described in this proxy statement and submit questions online through the virtual meeting platform during the Annual Meeting. On or about April 9, 2026, we will be mailing a Notice of Internet Availability of Proxy Materials (the Internet Notice) to our stockholders. The Notice will include instructions on how to access the proxy materials over the Internet, including our proxy statement, Notice of 2026 Annual Meeting of Stockholders, proxy card and our Annual Report on Form 10-K for the year ended December 31, 2025 (the 2025 Annual Report). The Internet Notice will also describe how to vote online or by telephone and, if desired, how to receive a printed set of proxy materials. +Why did I receive a Notice of Internet Availability of Proxy Materials in the mail instead of a full set of proxy materials? +Pursuant to the “notice and access” rules adopted by the Securities and Exchange Commission (the SEC), we have elected to provide access to our proxy materials over the Internet. Accordingly, we are sending the Internet Notice to our stockholders as of the record date, beginning on or about April 9, 2026. The Internet Notice will instruct you as to how you may access and review the proxy materials on the Internet and, if desired, how to request a printed set of proxy materials. In addition, by following the instructions in the Internet Notice, you may request to receive proxy materials in printed form by mail or electronically by email on an ongoing basis. We believe that these rules allow us to conserve natural resources and reduce our costs of printing and delivering proxy materials, while providing a convenient method for stockholders to access the materials and vote. +Who can vote? +If you were a stockholder of record as of the close of business on March 23, 2026 (the record date), you are entitled to vote your shares at the Annual Meeting. As of the record date, 10,107,219 shares of our Common Stock were issued and outstanding. Each share of our Common Stock is entitled to one vote with respect to each matter on which it is entitled to vote and that is properly brought before the Annual Meeting. +What am I voting on? +You are being asked to vote on four proposals: +● +Proposal One: To elect the two Class III directors named in this proxy statement to hold office until the 2029 annual meeting of stockholders; +2026 Proxy Statement +1 +Table of Contents +● +Proposal Two: To hold a non-binding advisory vote to approve the compensation of our named executive officers; +● +Proposal Three: To hold a non-binding advisory vote on the frequency of solicitation of advisory votes to approve named executive officer compensation; and +● +Proposal Four: To ratify the appointment of KPMG LLP as our independent registered public accounting firm for the year ending December 31, 2026. +How does the board of directors recommend that I vote on each proposal? +The board of directors recommends that our stockholders vote: +● +“For” the election of the two Class III directors named in this proxy statement to hold office until the 2029 annual meeting of stockholders; +● +“ For ” the approval, on a non-binding advisory basis, of the compensation of our named executive officers; +● +“ For ” the approval, on a non-binding advisory basis, on the frequency of solicitation of advisory votes to approve named executive officer compensation to be held at a frequency of “EVERY ONE YEAR”; and +● +“For” the ratification of the appointment of KPMG LLP as our independent registered public accounting firm for 2026. +What if another matter is properly brought before the meeting? +The board of directors is not aware of any other matters that will be presented for consideration at the Annual Meeting. However, if any other matters are properly brought before the Annual Meeting, the persons named in the accompanying proxy intend to vote on those matters in accordance with their best judgment. +How do I vote? +The procedures for voting depend on whether your shares are registered in your name or are held by a bank, broker or other nominee. You may also vote your shares electronically during a designated portion of the virtual Annual Meeting after your successful registration at www.proxydocs.com/BDSX . Whether or not you +2026 Proxy Statement +2 +Table of Contents +plan to attend the Annual Meeting, we encourage you to vote and submit your proxy in advance of the meeting by one of the methods described below. +● +Stockholders of Record: Shares Registered in Your Name +Vote by Proxy in Advance of the Annual Meeting : If, on the record date, your shares were registered directly in your name with Biodesix’s transfer agent, Computershare Trust Company, N.A., then you are a “stockholder of record.” As a stockholder of record, you may vote by proxy in advance of the Annual Meeting in three ways: +Vote by Internet +Go to +http://www.proxypush.com/ BDSX to complete an electronic proxy card. You will be asked to provide the Company number and control number from your proxy card. Your vote must be received prior to the meeting start time to be counted. +Vote by telephone +Dial toll-free 1-866-291-6774 using a touch-tone phone and follow the recorded instructions. You will be asked to provide the Company number and control number from your proxy card. Your vote must be received prior to the meeting start time to be counted. +Vote by mail +If you received printed copies of the proxy materials, complete, date and sign the enclosed proxy card and return it promptly in the envelope provided. If your signed proxy card is received prior to the meeting date, we will vote your shares as you direct. +● +Beneficial Owner: Shares Registered in the Name of Broker, Bank or Other Nominee +If, on the record date, your shares were held not in your name, but in an account with a broker, bank or other nominee as custodian on your behalf, then you are considered the “beneficial owner” of shares held in “street name.” The Internet Notice or the proxy materials, as applicable, are being forwarded to you by that broker, bank or other nominee who is considered the stockholder of record of those shares for purposes of voting at the Annual Meeting. As the beneficial owner, you have the right to direct your broker, bank or other nominee on how to vote your shares by following the instructions for voting set forth on that organization’s voting instruction card. +What is the effect of giving a proxy? What if I return a proxy card or otherwise vote but do not make specific choices? +Proxies are solicited by and on behalf of the board of directors. Robin Harper Cowie (our Chief Financial Officer, Secretary and Treasurer) and Christopher C. Vazquez (our Chief Accounting Officer) have been designated as proxy holders by the board of directors. If you properly grant your proxy, your shares will be voted as you instruct. If you return a signed proxy card or otherwise vote without marking specific voting selections, your shares will be voted as the board of directors recommends: “For” the election of two Class III directors (Proposal One); “For” the approval of named executive officer compensation (Proposal Two); “For” “Every One Year” as the frequency of solicitation of advisory votes to approve named executive officer compensation (Proposal Three); “For” the ratification of the appointment of KPMG LLP as our independent registered public accounting firm for 2026 (Proposal Four); and in accordance with the best judgment of your proxy holder for any other matters properly brought before the meeting, if any. +2026 Proxy Statement +3 +Table of Contents +Can I change my vote or revoke my proxy? +Yes. If you are a stockholder of record, you can change your vote or revoke your proxy and voting instructions at any time prior to the vote at the Annual Meeting. To do so: +● Vote again over the Internet or by telephone as instructed above before 11:59 p.m., Eastern Time on May 18, 2026. Only your latest Internet or telephone vote is counted. +● Submit a properly signed proxy card with a later date that is received no later than 11:59 p.m., Eastern Time on May 18, 2026. Only your latest dated proxy card will be counted. +● Send a timely written notice that you are revoking your proxy to Biodesix’s Corporate Secretary at 919 West Dillon Rd., Louisville, CO 80027. +● Attend the virtual Annual Meeting and vote electronically during the meeting. Simply attending the meeting will not, by itself, revoke your proxy. +If you are the beneficial owner of shares held in street name, you should follow the instructions provided by your broker, bank or other nominee to revoke previously submitted voting instructions. +What are broker non-votes? +Brokers, banks or other nominees holding shares on behalf of a beneficial owner may vote those shares in their discretion on certain “routine” matters even if they do not receive timely voting instructions from the beneficial owner. With respect to “non-routine” matters, the broker, bank or other nominee is not permitted to vote shares for a beneficial owner without timely received voting instructions. The only routine matter to be presented at the Annual Meeting is the proposal to ratify the appointment of KPMG LLP as our independent registered public accounting firm for 2026 (Proposal Four). The election of two Class III directors (Proposal One), the approval of named executive officer compensation (Proposal Two), and the frequency of solicitation of advisory votes to approve named executive officer compensation (Proposal Three) are non-routine matters. +A broker non-vote occurs when a broker, bank or other nominee does not vote on a non-routine matter because the beneficial owner of such shares has not provided voting instructions with regard to such matter. If a broker, bank or other nominee exercises discretionary voting authority on Proposal Four, such shares will be considered present at the Annual Meeting for quorum purposes and broker non-votes will occur as to Proposal One, Proposal Two, and Proposal Three and any other non-routine matters that are properly presented at the Annual Meeting. Broker non-votes will have no impact on the voting results. +How many shares must be present to hold the Annual Meeting? +A quorum must be present at the Annual Meeting for any business to be conducted. A quorum will be present if the holders of at least a majority of the outstanding shares of our Common Stock entitled to vote are present at the Annual Meeting online or represented by proxy. On the record date, there were 10,107,219 shares of our Common Stock outstanding and entitled to vote. Therefore, the holders of 5,053,611 shares must be present online or represented by proxy at the Annual Meeting to have a quorum. For purposes of determining the presence of a quorum, abstentions, withheld votes and broker non-votes are counted. If there is no quorum, the holders of a majority of shares present or represented by proxy at the Annual Meeting may adjourn the meeting to a later date. +2026 Proxy Statement +4 +Table of Contents +What vote is required for the approval of each proposal? What effect do “withhold” votes, abstentions and broker non-votes have on the proposals? +The following chart summarizes the proposals to be considered at the Annual Meeting, the vote required for approval of each proposal, and the manner in which votes will be counted: +Proposal +Voting Options +Vote Required to Adopt the +Proposal +Effect of “Withheld” +Votes or Abstentions +Effect of “Broker +Non-Votes” +Proposal One : Election of the two Class III directors named in this proxy statement +For or Withhold on each nominee +Plurality of the votes cast. This means that the two nominees receiving the highest number of “For” votes (from the holders of votes of shares present or represented by proxy and entitled to vote on the election of directors) will be elected as Class III directors. +“Withheld” votes have no effect; only “For” votes affect the outcome of the election. +Brokers do not have discretion to vote. Broker non-votes will have no effect on the outcome of the election. +Proposal Two: The approval of, on a non-binding advisory basis, of the compensation of our named executive officers +For, Against or Abstain +Affirmative vote of a majority of the shares present or represented by proxy and entitled to vote on the proposal. +Abstentions are considered shares present and entitled to vote, and therefore have the same impact as votes “Against” the proposal. +Brokers do not have discretion to vote. Broker non-votes will have no effect on the outcome of the proposal. +Proposal Three: The approval, on a non-binding advisory basis, on the frequency of solicitation of advisory votes to approve named executive officer compensation to be held at a frequency of “EVERY ONE YEAR” +Every +One Year, Every Two Years, Every Three Years or Abstain +The choice of frequency receiving the highest number of votes will be considered our stockholders’ recommendation. The board of directors has approved a frequency of every one year for future say-on-pay votes, subject to the same frequency receiving the highest number of votes from stockholders at the Annual Meeting. +Abstentions will have no effect on the outcome of the proposal. +Brokers do not have discretion to vote. Broker non-votes will have no effect on the outcome of the proposal. +Proposal Four: Ratification of appointment of KPMG LLP as our independent registered public accounting firm for the year ended December 31, 2026 +For, Against or Abstain +Affirmative vote of a majority of the shares present or represented by proxy and entitled to vote on the proposal. +Abstentions are considered shares present and entitled to vote, and therefore have the same impact as votes “Against” the proposal. +Brokers have discretion to vote. Therefore, we do not expect any broker non-votes. +2026 Proxy Statement +5 +Table of Contents +Important Information About Our Virtual Annual Meeting: +• +Why is the Annual Meeting being held in a virtual format this year? The Annual Meeting will be held in a virtual meeting format via live audio webcast, and will provide access to the Annual Meeting for our stockholders regardless of geographic location. We have designed our virtual format to help ensure that our stockholders who attend the Annual Meeting virtually will be afforded similar rights and opportunities to participate as they would at an in-person meeting. +• +How can I attend the Annual Meeting online? To join the Annual Meeting online, visit www.proxydocs.com/BDSX and register using your control number on your proxy card or on the instructions that accompanied your proxy materials, and following the instructions received via email, including a unique link that will allow you access to the Annual Meeting, to vote, and submit questions during the meeting. +• +When can I join the virtual Annual Meeting? The meeting will begin promptly at 1:00 p.m. Mountain Time on Tuesday, May 19, 2026. You may access the meeting platform 15 minutes earlier, and we encourage you to join in advance of the meeting start time to allow sufficient time to log in and confirm your connection and audio are working properly. +• +Can I ask questions during the virtual Annual Meeting? Yes. If you are logged in as a “stockholder” at the virtual Annual Meeting, you will have an opportunity to submit questions live via the Internet during a designated portion of the virtual Annual Meeting. Once you are logged in, type your question into the question box and click “submit.” Subject to time constraints, we intend to answer questions pertinent to the Company and meeting matters submitted by stockholders during the Annual Meeting that comply with our rules of conduct for the Annual Meeting, which will be posted on the meeting website during the meeting. +• +How do I vote during the virtual Annual Meeting? You will have an opportunity to vote your shares electronically during a designated portion of the virtual Annual Meeting after logging in. Whether or not you plan to join the Annual Meeting, we encourage you to vote and submit your proxy in advance of the meeting by one of the methods described in these proxy materials. +• +What if I have technical difficulties? On the day of the Annual Meeting, if you have trouble accessing the virtual meeting platform or encounter other technical difficulties with the platform before or during the meeting, please call the technical support number provided in your email instructions. +• +Will a list of stockholders be available for inspection prior to and during the meeting? Yes. A complete list of stockholders of record will be available for inspection, by appointment only, by any stockholder for at least ten (10) days prior to the Annual Meeting during ordinary business hours at our headquarters located at 919 West Dillon Rd., Louisville, CO 80027. +• +Will a recording of the meeting be available? Yes, following the Annual Meeting, a recording of the meeting will be available on www.proxydocs.com/BDSX for one year following the meeting date. +Who will count the votes? +Representatives of BetaNXT, Inc. (BetaNXT) will tabulate the votes, and a representative of BetaNXT will act as inspector of election. +Who is paying for this proxy solicitation? +We will pay the cost of soliciting proxies. Proxies may be solicited on our behalf by our directors, officers or employees (for no additional compensation) in person, by telephone or by other means of communication. Arrangements may be made with brokerage houses, custodians, nominees and fiduciaries to send proxy materials to their principals and we may reimburse them for the cost of forwarding proxy materials to beneficial owners. +2026 Proxy Statement +6 +Table of Contents +What does it mean if I receive more than one Internet Notice? +If you receive more than one Internet Notice, your shares may be registered in more than one name or in different accounts. Please follow the voting instructions in each Internet Notice to ensure that all of your shares are voted. +How can I find out the results of the voting at the Annual Meeting? +Preliminary voting results will be announced at the Annual Meeting. In addition, final voting results will be published in a Current Report on Form 8-K that we expect to file with the SEC within four business days after the Annual Meeting. +Why were my proxy materials included in the same envelope as other people at my address? How may I obtain an additional copy of the proxy materials? +We have adopted a procedure approved by the SEC called “householding.” Under this procedure, we deliver a single copy of the Internet Notice and, if applicable, the proxy materials to stockholders of record who share the same address, unless we have received contrary instructions from any stockholder at that address. This practice is designed to eliminate duplicate mailings, conserve natural resources and reduce our printing and mailing costs. Stockholders who participate in householding will continue to be able to access and receive separate proxy cards. If you share an address with another stockholder and receive only a single copy of the Internet Notice and, if applicable, the proxy materials, but would like to request a separate copy of these materials, please contact our mailing agent, BetaNXT, by calling 1-866-648-8133 or e-mailing paper@investorelections.com and an additional copy of the materials will be promptly delivered to you. Similarly, if you receive multiple copies of the Internet Notice and, if applicable, the proxy materials, but would prefer to receive a single copy in the future, you may also contact BetaNXT at the above telephone number or address. Beneficial owners should contact their broker, bank or other nominee to request information about householding procedures. +2026 Proxy Statement +7 +Table of Contents +BOARD AND CORPORATE GOVERNANCE MATTERS +Proposal One: Election of Directors +General +The primary responsibilities of our board of directors are to provide oversight, strategic guidance, counseling and direction to our management. Our board of directors currently consists of seven directors and is divided into three classes of directors that serve staggered three-year terms, currently Class III, with a term expiring in 2026, Class I, with a term expiring in 2027 and Class II, with a term expiring in 2028. At the Annual Meeting, our stockholders will vote on the election of two Class III directors whose terms will expire at our 2029 annual meeting of stockholders. Each of our other current directors will continue to serve as a director until the election and qualification of his or her successor. +The two directors currently serving on our board of directors in Class III, the class whose term of office expires in 2026, have both been nominated by our board of directors, upon the recommendation of our nominating and corporate governance committee, to stand for election at the Annual Meeting. Jean Franchi has served on our board of directors since 2020. Hany Massarany has also served on our board of directors since 2020. Both of these two nominees have consented to being named as a nominee in this proxy statement and have agreed to serve, if elected, until our 2029 annual meeting of stockholders and until the election and qualification of his or her successor. +For more information about each of the director nominees and continuing directors, including information regarding the experience, qualifications, attributes and skills that led to the conclusion that each director should serve as a member of the board of directors, please refer to the section below entitled “Overview of Our Nominees and Continuing Directors.” +Vote Required: +Directors are elected by a plurality of the votes cast by our stockholders at the Annual Meeting. This means that the two nominees receiving the highest number of affirmative votes (from the holders of votes of shares present or represented by proxy and entitled to vote on the election of directors) will be elected. Broker non-votes and “Withheld” votes will have no effect. +Board +Recommendation: +OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE ELECTION OF EACH OF THE TWO CLASS III DIRECTOR NOMINEES NAMED ABOVE. +2026 Proxy Statement +8 +Table of Contents +Overview of Our Nominees and Continuing Directors +The following table and the brief biographies that follow provide information, as of the date of this proxy statement, about each director nominee and each continuing director: +Age +Position(s) +Director +Since +Class +Current +Term +Expires +Expiration +of Term for +which +Nominated +Independent +Committee +Membership* +AC +CC +NCG +DIRECTOR NOMINEES +Jean Franchi +59 +Director +2020 +III +2026 +2029 +Yes +Chair  +X +Hany Massarany +64 +Director +2020 +III +2026 +2029 +Yes +X +Chair  +CONTINUING DIRECTORS +Jon Faiz Kayyem, Ph.D. +62 +Director +2021 +I +2027 +— +Yes +X +Scott Hutton +54 +President, Chief Executive Officer and Director  +2020 +I +2027 +— +No +John Patience +79 +Chairman of the Board +2008 +I +2027 +— +Yes +X +Lawrence T. Kennedy, Jr. +54 +Director +2023 +II +2028 +— +Yes +X +X +Matthew Strobeck, Ph.D. +53 +Director +2012 +II +2028 +— +Yes +X +Chair  +* AC - Audit Committee; CC - Compensation Committee; NCG - Nominating and Corporate Governance Committee +Director Nominees +Class III Directors – Nominees for Election at the Annual Meeting +Jean M. Franchi has served as a Director of the Company since April 2020. Ms. Franchi is currently Chief Financial Officer of Disc Medicine, Inc., a clinical stage company focused on hematologic diseases, prior to which she served as Chief Financial Officer of Replimune Group, Inc. (Replimune) from 2019 to 2023, a biotechnology company developing oncolytic immuno-gene therapies. Prior to Replimune, Ms. Franchi was Chief Financial Officer at Merrimack Pharmaceuticals, Inc., a biopharmaceutical company, from 2017 to 2019, Dimension Therapeutics, Inc., a gene therapy company, from 2015 to 2017, and Good Start Genetics, Inc., a molecular genetic information company, from 2012 to 2015. From 1995 to 2011, Ms. Franchi held various positions at Genzyme Corporation, including Senior Vice President of Corporate Finance, Senior Vice President of Business Unit Finance, and Vice President of Finance and Controller, Product Line and International Group. Ms. Franchi currently serves on the board of directors of VectorY Therapeutics. Ms. Franchi also served on the board of directors of Biophytis S.A. through July 2021, Visioneering Technologies, Inc. through December 2022 and Flamingo Therapeutics through March 2024. Ms. Franchi received her B.A. in Accounting from Hofstra University. +We believe that Ms. Franchi is qualified to serve on our board of directors because of her experience in leadership and management roles in the healthcare industry as well as her experience holding finance-related roles of increasing responsibility. +Hany Massarany has served as a Director of the Company since July 2020. Mr. Massarany currently serves as both a director (since 2020) and chairman (since February 2023) of Accelerate Diagnostics. Mr. Massarany was President and Chief Executive Officer of GenMark Diagnostics, Inc., a provider of multiplex molecular diagnostic solutions, from April 2011 to March 2020. From February 2009 to April 2011, Mr. Massarany served as President at Ventana and Head of Roche Tissue Diagnostics, a division of F. Hoffman-La Roche Ltd. focused +2026 Proxy Statement +9 +Table of Contents +on manufacturing instruments and reagents that automate tissue processing and slide staining diagnostics for cancer. From 1999 to 2009, Mr. Massarany held various global leadership positions with Ventana, including Chief Operating Officer, Executive Vice President, Worldwide Operations, Senior Vice President, Corporate Strategy and Development, and Vice President, North American Commercial Operations. Mr. Massarany also held executive management positions with Bayer Diagnostics and Chiron Diagnostics, working in both the Asia Pacific region and the United States. Mr. Massarany served on the board of directors of GenMark Diagnostics, Inc. from May 2011 to February 2020. Mr. Massarany earned a B.S. in Microbiology and Immunology from Monash University in Australia and an M.B.A. from Melbourne University. +We believe that Mr. Massarany is qualified to serve on our board of directors because of his experience in leadership and management roles, and experience as a board member, in the healthcare industry. +Continuing Directors +Class I Directors – Term Expiring at the 2027 Annual Meeting +Jon Faiz Kayyem, Ph.D. has served as a Director of the Company since December 2021. Dr. Kayyem has over 25 years of experience inventing, patenting, licensing, developing, and commercializing novel solutions for molecular diagnostics and DNA detection opportunities. Dr. Kayyem has served in various leadership positions throughout his career. He held numerous roles at GenMark Diagnostics, Inc., including Founder, CEO and President, Chief Scientific Officer, Senior Vice President of Research and Development. Prior to his work at GenMark Diagnostics, Dr. Kayyem served as director and founder of Calimmune, Inc. and was Vice President of Life Sciences at Motorola Solutions, Inc. In October 2004, he co-founded the biotechnology fund management company, Efficacy Capital Limited and served as a managing partner. Additionally, Dr. Kayyem founded Clinical Micro Sensors Inc., the predecessor company of GenMark Diagnostics, to commercialize multiple technical innovations that he developed while serving as a Senior Research Fellow at the California Institute of Technology (Caltech). Dr. Kayyem holds a B.S. and M.S. in Biochemistry from Yale University and a Ph.D. in Molecular Biology from Caltech. Currently, Dr. Kayyem is on the board of directors of Inhibrix Biosciences, Inc. +We believe that Dr. Kayyem is qualified to serve on our board of directors because of his experience in leadership and management roles in the field of medicine, as well as his experience as a board member and investor in companies in the healthcare industry. +Scott Hutton has served as our President, Chief Executive Officer and Director since January 2020, and previously held the role of Chief Operating Officer from March 2018 to December 2019. Mr. Hutton also serves as a director and board secretary for the Coalition for 21st Century Medicine, a non-profit organization that advocates for high-quality diagnostic testing availability. Additionally, Mr. Hutton has served on the board of directors of Eximis Surgical, Inc. since February 2018 and was on the board of the Colorado Bioscience Association from April 2011 to April 2013. Mr. Hutton was an observer on the board of directors of Aqueduct Critical Care, Inc. from September 2014 to January 2017, and an observer on the Board of Visualase, Inc. from October 2012 to July 2014. Mr. Hutton joined Biodesix from Spectranetics Corp. (Spectranetics), a U.S.-based global leader in vascular intervention and lead management solutions (now part of Royal Philips), where he served as Senior Vice President and General Manager of the Vascular Intervention division from January 2017 to December 2017. Prior to joining Spectranetics, Mr. Hutton held several positions of increasing responsibility, including Vice President and General Manager, at Medtronic plc, a global healthcare products company and manufacturer of medical devices and supplies, over a period of 16 years. From April 2012 to January 2017, Mr. Hutton was Vice President and General Manager of Neurosurgery, where he oversaw the operations of the approximately $1 billion Neurosurgery business unit. From 2008 to 2012, he grew from Senior Director of Global Marketing to Vice President and Business Leader of the Surgical Navigation and Intra-Operative Imaging +2026 Proxy Statement +10 +Table of Contents +business. Mr. Hutton holds a B.A. from the College of Health and Human Sciences, Department of Health and Kinesiology at Purdue University. In January 2026 and August 2025, Mr. Hutton was named a Top Healthcare Technology CEO and Top 25 Biotech and Life Sciences Executive, respectively, of 2025 by the Healthcare Technology Report. Mr. Hutton was also named a Top 25 Biotech Executive of 2024 by the Healthcare Technology Report in May 2024. In March 2021, Mr. Hutton was named a Significant Sig by Sigma Chi International Fraternity. Mr. Hutton was named a Top 25 Biotech CEO of 2021 and 2022 by the Healthcare Technology Report in February 2021 and February 2022, respectively. In January 2021, Mr. Hutton was named 2020 CEO of the Year-USA by CEO Monthly Magazine. In July 2011, Mr. Hutton received the Medtronic plc Wallin Leadership Award for his focus on talent development, business performance, and his personal and intentional demonstration of leadership. +We believe that Mr. Hutton is qualified to serve on our board of directors because of his experience in leadership and management roles at our Company, as well as his experience as a board member in the healthcare and medical device industries. +John Patience has served as a Director of the Company since June 2008 and as Chairman of the Board since September 2020. Mr. Patience currently serves as a director (since 2012) of Accelerate Diagnostics, Inc., an in vitro diagnostics company (Accelerate Diagnostics). Mr. Patience served as a director of Ventana Medical Systems, Inc. (Ventana), from 1989 and as Vice Chairman from 1999 until Ventana’s acquisition by Roche in 2008. Mr. Patience also served as a director of Stericycle, Inc. since its founding in 1989 to June 2018. Mr. Patience is a founding partner of Crabtree Partners, a private equity investment partnership in Lake Forest, Illinois, and an angel investor. He was also previously a partner of a venture capital investment firm that provided both Ventana and Stericycle, Inc. with early-stage funding. Mr. Patience was also previously a partner at the consulting firm McKinsey & Company, Inc., specializing in healthcare. Mr. Patience holds a B.A. in Liberal Arts and an L.L.B. from the University of Sydney, Australia, and an M.B.A. from the University of Pennsylvania’s Wharton School of Business. +We believe that Mr. Patience is qualified to serve on our board of directors because of his experience in leadership and management roles in the field of medicine, as well as his experience as a board member and investor in companies in the healthcare industry. +Class II Directors – Term Expiring at the 2028 Annual Meeting +Lawrence T. Kennedy, Jr. has served as a Director of the Company since January 2023. Mr. Kennedy brings to Biodesix more than 25 years of broad operating, corporate finance, company creation and investment experience with a specific focus in the healthcare industry. Mr. Kennedy currently serves as the Managing Partner and Chief Executive Officer of Westwood Management, a private investment and wealth management firm directing a diverse investment portfolio across a range of alternative and traditional asset classes. Prior to his role at Westwood Management, Mr. Kennedy was the co-founder, Chief Financial Officer and chairman of Health Carousel, a talent management company with a leading portfolio of healthcare staffing and workforce solution businesses. Mr. Kennedy currently serves on the boards of directors of Healthcare for Kids, Caliber Healthcare Solutions, Revolution 4.0 and Health Carousel. Mr. Kennedy has received an M.B.A. from Duke University’s Fuqua School of Business and a B.A. from Colgate University. +We believe that Mr. Kennedy is qualified to serve on our board of directors because of his experience in leadership and management roles in the field of healthcare, as well as his experience as a board member and investor in companies in the healthcare industry. +Matthew Strobeck, Ph.D . has served as a Director of the Company since January 2012. Dr. Strobeck is currently the Managing Partner of Birchview Capital LP, an investment management company. In addition, Dr. Strobeck is currently a director of QuidelOrtho Corporation (Quidel), Accelerate Diagnostics, Monteris Medical Corporation and the Schuler Education Foundation. Dr. Strobeck was a director of Yield 10 Biosciences from 2012 to 2017. Dr. Strobeck received a B.S. from St. Lawrence University, a Ph.D. from the University of Cincinnati, an M.S. from the Harvard University-MIT Health Sciences and Technology Program, and an M.S. +2026 Proxy Statement +11 +Table of Contents +from the MIT Sloan School of Management. We believe that Dr. Strobeck is qualified to serve on our board of directors because of his experience in leadership and management roles at medical technology companies, as well as his experience as a board member and investor in the medical technology industry. +Director Emeritus +Jack Schuler retired from the board of directors in 2025 and received the honorary designation of Director Emeritus in a non-voting, advisory capacity. Mr. Schuler does not stand for election by stockholders, is not entitled to vote on any matter and does not count for meeting quorum purposes. Mr. Schuler does not receive compensation for his service in this capacity. +Board Composition +In accordance with our amended and restated certificate of incorporation, our board of directors is divided into three classes with staggered, three-year terms. At each annual meeting of stockholders, the successors to directors whose terms then expire will be elected to serve from the time of election and qualification until the third annual meeting following election. Our directors are divided among the three classes as follows: +• +the Class III directors are Jean Franchi and Hany Massarany, and their terms expire at the Annual Meeting; +• +the Class I directors are Jon Faiz Kayyem, Ph.D., John Patience and Scott Hutton, and their terms will expire at the 2027 annual meeting of stockholders; and +• +the Class II directors are Matthew Strobeck, Ph.D. and Lawrence T. Kennedy Jr., and their terms will expire at the 2028 annual meeting of stockholders. +Our amended and restated certificate of incorporation and amended and restated bylaws provide that the authorized number of directors may be changed only by resolution of the board of directors. Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one third of the directors. Each director’s term continues until the election and qualification of his or her successor, or, if sooner, his or her death, resignation or removal. +Director Independence +Under the listing requirements and rules of Nasdaq Stock Market (Nasdaq), independent directors must comprise a majority of our board of directors as a listed company within one year of the closing of our initial public offering. +Our board of directors has undertaken a review of its composition, the composition of its committees and the independence of each director. Based upon information requested from and provided by each director concerning his or her background, employment and affiliations, including family relationships, our board of directors has determined that Ms. Franchi, Messrs. Massarany, Patience and Kennedy and Drs. Kayyem and Strobeck do not have any relationships that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors is “independent” as that term is defined under the applicable listing requirements and rules of Nasdaq. In making this determination, our board of directors considered the current and prior relationships that each non-employee director has with our Company and all other facts and circumstances our board of directors deemed relevant in determining their independence, including the beneficial ownership of our capital stock by each non-employee director. +2026 Proxy Statement +12 +Table of Contents +Board Leadership Structure +Our corporate governance guidelines provide our board of directors with flexibility to combine or separate the positions of Chairman of the board of directors and the Chief Executive Officer and/or the implementation of a lead director in accordance with its determination that utilizing one or the other structure would be in the best interests of the Company. Mr. Patience currently serves as the independent Chairman of our board of directors. Our board of directors believes that separating these positions reinforces the independence of our board of directors from management, creates an environment that encourages objective oversight of management’s performance and enhances the effectiveness of our board of directors as a whole. +Role of our Board of Directors in Risk Oversight +Our board of directors is responsible for overseeing the overall risk management process at Biodesix. The day-to-day responsibility for managing risks and exposures resides with our executive management team while our board committees and our board of directors as a whole participate in the oversight process. The risk oversight process includes receiving regular reports from committees and management to enable our board of directors to understand management’s risk assessment and mitigation processes, which includes areas of potential material risk, including long-term strategic and operational planning, strategic biopharmaceutical partnerships, executive development and evaluation, regulatory and legal compliance, information technology (including cybersecurity), financial reporting and internal controls and reputational risk. Our board of directors focuses on the overall risks affecting us, and each of its standing committees has been delegated responsibility for oversight of specific risks that fall within its areas of responsibility. For example: +• +Our audit committee is responsible for overseeing our major financial, legal and regulatory risk exposures, which spans a variety of areas including litigation, regulatory compliance, financial reporting, insurance and cybersecurity. Our audit committee also oversees the steps management has taken to monitor and control such exposures, including guidelines and policies for assessing and managing risk and related compliance efforts. +• +Our nominating and corporate governance committee oversees the management of risks associated with our overall compliance and corporate governance practices and the independence and composition of our board of directors, including monitoring the effectiveness of our corporate governance guidelines and cybersecurity risk profile and other policies such as our code of conduct and overseeing our environmental and sustainability efforts and progress. +• +Our compensation committee regularly assesses risks arising from our compensation plans, policies and programs, including whether any such plans encourage excessive or inappropriate risk-taking. +While each committee is responsible for evaluating certain risks and overseeing the management of such risks, the full board of directors is regularly informed through committee reports about such risks. +Meetings of our Board of Directors +Our board of directors held 5 meetings during 2025. Each incumbent director attended at least 75% of the aggregate total number of meetings of the board of directors and the committees on which he or she served held during the portion of 2025 for which he or she was a director or committee member. We encourage our directors to attend our annual meetings of stockholders. Eight directors, including our Chief Executive Officer, Mr. Hutton, attended our 2025 annual meeting of stockholders. +2026 Proxy Statement +13 +Table of Contents +Committees of our Board of Directors +Our board of directors has established an audit committee, a compensation committee and a nominating and corporate governance committee. Our board of directors may establish other committees to facilitate the management of our business. The composition and functions of each committee are described below. Members serve on these committees until their resignation or until otherwise determined by our board of directors. The charter of each committee is available on our corporate website at www.biodesix.com in the Investors section under “Governance—Governance Highlights.” Reference to our website does not constitute incorporation by reference of the information contained at or accessible through our website into this proxy statement. +Committee Composition and Meetings +The following table provides current membership and 2025 meeting information for each committee of our board of directors: +Name: +Audit Committee +Compensation +Committee +Nominating and Corporate +Governance Committee +Jean Franchi +Chair +X +Jon Faiz Kayyem, Ph.D. +X +Lawrence T. Kennedy, Jr. +X +X +Hany Massarany +X +Chair +John Patience +X +Matthew Strobeck, Ph.D. +X +Chair +Total meetings held in 2025 +4 +4 +4 +Audit Committee +Our audit committee consists of Ms. Franchi, Messrs. Kennedy and Massarany and Dr. Strobeck, each of whom our board of directors has determined satisfies the independence requirements under Nasdaq listing rules and Rule 10A-3(b)(1)(ii) of the Securities Exchange Act of 1934, as amended (the Exchange Act). The chair of our audit committee is Ms. Franchi, whom our board of directors has determined is an “audit committee financial expert” within the meaning of the SEC regulations. Each member of our audit committee can read and understand fundamental financial statements in accordance with applicable listing standards. In arriving at these determinations, our board of directors has examined each audit committee member’s scope of experience and the nature of her or his employment in the corporate finance sector. The functions of this committee include: +• +helping our board of directors oversee our corporate accounting and financial reporting processes; +• +reviewing and discussing with our management the adequacy and effectiveness of our disclosure controls and procedures; +• +assisting with design and implementation of our risk assessment functions; +• +evaluating the qualifications, performance and independence of our independent registered public accounting firm and deciding whether to retain its services; +• +monitoring the rotation of partners of our independent registered public accounting firm on our engagement team as required by law; +• +discussing the scope and results of the audit with the independent registered public accounting firm, and reviewing, with management and the independent accountants, our interim and year-end results; +2026 Proxy Statement +14 +Table of Contents +• +developing procedures for employees to submit concerns anonymously about questionable accounting or audit matters; +• +reviewing related-party transactions; +• +approving, or as permitted, pre-approving, audit and permissible non-audit services to be performed by our independent registered public accounting firm; and +• +reviewing and assessing, at least annually, the performance of the audit committee and adequacy of its charter. +Compensation Committee +Our compensation committee consists of Messrs. Massarany and Patience and Dr. Kayyem, and the chair of our compensation committee is Mr. Massarany. Our board of directors has determined that each of Messrs. Massarany and Patience and Dr. Kayyem is independent under the applicable Nasdaq listing rules and is a “non-employee director” as defined in Rule 16b-3 promulgated under the Exchange Act. The functions of this committee include: +• +reviewing, modifying and overseeing overall compensation strategy and policies; +• +reviewing and approving the compensation arrangements and other terms of employment (including, when and if appropriate, employment agreements, severance agreements, consulting agreements and change in control or termination agreements) of our chief executive officer, other executive officers and senior management, as appropriate; +• +reviewing and recommending to the full board of directors the compensation of our directors; +• +appointing and overseeing the work of compensation consultants, legal counsel or any other advisors and consultants engaged for the purpose of advising the compensation committee; +• +reviewing, recommending to the full board of directors, as appropriate, and administering equity award plans, compensation plans and similar programs, as well as modification or termination of plans and programs; +• +establishing policies with respect to equity compensation arrangements; +• +reviewing and evaluating with the chief executive officer and the full board of directors the succession plans for our executive officers; and +• +reviewing and assessing, at least annually, the performance of the compensation committee and the adequacy of its charter. +Compensation Committee Interlocks and Insider Participation +None of the members of the compensation committee is currently, or has been at any time during 2025, one of our officers or employees. None of our executive officers currently serve, or has served during 2025, as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving as a member of our board of directors or compensation committee. +Nominating and Corporate Governance Committee +Our nominating and corporate governance committee consists of Ms. Franchi, Dr. Strobeck and Mr. Kennedy, and the chair of our nominating and corporate governance committee is Dr. Strobeck. Our board of +2026 Proxy Statement +15 +Table of Contents +directors has determined that Ms. Franchi, Dr. Strobeck and Mr. Kennedy are independent under the applicable Nasdaq listing rules. The functions of this committee include: +• +reviewing periodically and evaluating director performance of our board of directors and its applicable committees, and recommending to our board of directors and management areas for improvement; +• +identifying, evaluating, nominating and recommending individuals for membership on our board of directors; +• +reviewing with our chief executive officer the plans for succession to the offices of our executive officers and make recommendations to our board of directors with respect to the selection of appropriate individuals to succeed to these positions; +• +reviewing and recommending to our board of directors any amendments to our corporate governance policies; +• +monitoring our cybersecurity risk profile, receiving periodic updates from management on all matters related to cybersecurity, and reporting to our full board of directors on an annual or as necessary basis; and +• +reviewing and assessing, at least annually, the performance of the nominating and corporate governance committee and the adequacy of its charter. +Director Nomination Process +Selection and Nomination Process +Our board of directors is responsible for nominating members for election to our board of directors by our stockholders at our annual meetings of stockholders. Whenever a vacancy occurs on our board of directors, whether due to a newly created director position or the death, resignation, removal or retirement of an existing director, our board of directors is authorized to select a person to fill the vacancy to serve as a director until the annual meeting of stockholders at which the director’s term expires and until the election and qualification of his or her successor or, if sooner, his or her death, resignation or removal. Any increase or decrease in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors. +Criteria for Board Membership +The board of directors and the nominating and corporate governance committee will determine the appropriate characteristics, skills and experience for the board of directors as a whole and for its individual members. The board of directors and the nominating and corporate governance committee will consider the minimum general criteria set forth below, and may add any specific additional criteria with respect to specific searches, in selecting candidates and existing directors for service on the board of directors. An acceptable candidate may not fully satisfy all of the criteria, but is expected to satisfy nearly all of them. While the nominating and corporate governance committee does not have a formal policy in this regard, the diversity of the board of the directors is a consideration in evaluating candidates for director positions, among others. +The board of directors and the nominating and corporate governance committee believe that candidates for director should have certain minimum qualifications, including being able to read and understand basic financial statements, being over 21 years of age and having the highest personal integrity and ethics. In considering candidates, the board of directors and the nominating and corporate governance committee intend to +2026 Proxy Statement +16 +Table of Contents +consider such factors as possessing relevant expertise upon which to be able to offer advice and guidance to management, having sufficient time to devote to the affairs of the Company, demonstrated excellence in his or her field, having the ability to exercise sound business judgment and having the commitment to rigorously represent the long-term interests of our stockholders. +The board of directors and the nominating and corporate governance committee review candidates for director nomination in the context of the current composition of the board of directors, the operating requirements of the Company and the long-term interests of our stockholders. In conducting this assessment, the board of directors and the nominating and corporate governance committee consider age, skills, diversity and such other factors as it deems appropriate given the current needs of the board of directors and the Company to maintain a balance of knowledge, experience and capability. In the case of incumbent directors whose terms of office are set to expire, the board of directors and the nominating and corporate governance committee review such directors’ overall service to the Company during their term, including the number of meetings attended, level of participation, quality of performance, and any other relationships and transactions that might impair such directors’ independence. In the case of new director candidates, the board of directors and the nominating and corporate governance committee also determine whether the nominee must be independent for purposes of any stock exchange on which any of the Company’s capital stock is listed. +Stockholder Recommendations and Nominations +Stockholders who wish to recommend candidates may contact the nominating and corporate governance committee in the manner described below under “Board and Corporate Governance Matters—Stockholder Communications with our Board of Directors.” Stockholder nominations must be made according to the procedures required under our bylaws and described in this proxy statement under the heading “Additional Information—Stockholder Proposals and Nominations for Next Year’s Annual Meeting of Stockholders.” Stockholder-recommended candidates and stockholder nominees whose nominations comply with these procedures will be evaluated by our nominating and corporate governance committee in the same manner as other nominees. +Executive Officers +Set forth below is biographical information with respect to each current executive officer of the Company, except Mr. Hutton, our President and Chief Executive Officer. Mr. Hutton also serves as a director of the Company, and his biographical information is available above in the section titled “Overview of Our Nominees and Continuing Directors—Director Nominees.” +2026 Proxy Statement +17 +Table of Contents +Robin Harper Cowie +, age 46. Ms. Harper Cowie has served as our Chief Financial Officer since April 2017. She has been with the Company in multiple financial and reimbursement positions since March 2011, serving as Vice President of Finance from February 2016 to April 2017, Vice President of Reimbursement & Health Economics from February 2015 to February 2016, Senior Director of Reimbursement from January 2014 to February 2015, and Director of Reimbursement from March 2011 to January 2014. Prior to joining Biodesix, Ms. Harper Cowie held a leadership role in payer and government relations at Precision Therapeutics, Inc. Ms. Harper Cowie’s background includes corporate finance, managed care and payer relations, reimbursement and regulatory policy, and revenue cycle operations. Additionally, she spent several years as a researcher at the University of Pittsburgh Medical Center. Ms. Harper has also served on the board of the Colorado Bioscience Association since 2023. Ms. Harper Cowie holds a B.S. in Molecular Biology from the University of Pittsburgh, and an M.B.A. in Finance from the Joseph M. Katz Graduate School of Business from the University of Pittsburgh. For 2025, Ms. Harper Cowie was named both CFO of the Year and a recipient of the 2025 Outstanding Women in Business honor by the Denver Business Journal. +Kieran O’Kane +, age 48. Mr. O’Kane has served as our Chief Commercial Officer since March 2020 and has been with the Company in multiple marketing management roles since February 2018. From April 2016 to February 2018, prior to joining Biodesix, Mr. O’Kane led the Global Diagnostics Marketing team at NanoString Technologies, a biotechnology company focused in developing cancer diagnostic tools. He is a highly experienced strategic and tactical global sales and marketing leader for both +in-line +and pipeline products with a career focus in oncology. Mr. O’Kane has held commercial leadership positions and managed multiple new product launches at Biotheranostics, Cell Therapeutics, Eisai, Cephalon, Bristol-Myers Squibb, and Roche. Mr. O’Kane received a B.S. in Pharmacology at King’s College, University of London. +Code of Business Conduct and Ethics +We have adopted a Code of Business Conduct and Ethics (the Code of Conduct) that applies to all of our employees, officers (including our principal executive officer, principal financial officer and principal accounting officer or controller, or persons performing similar functions), and directors. Stockholders may request a free copy of our Code of Business Conduct and Ethics by contacting Biodesix, Inc., Attention: Chief Financial Officer, 919 West Dillon Rd., Louisville, Colorado 80027. We intend to disclose future amendments to certain provisions of our Code of Conduct, or waivers of such provisions, applicable to any principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions, and our directors, on our website at www.biodesix.com. Reference to our website does not constitute incorporation by reference of the information contained at or accessible through our website into this proxy statement. +Corporate Governance Guidelines +We have adopted written corporate governance guidelines which provide the framework for our corporate governance, along with our amended and restated certificate of incorporation, amended and restated bylaws, committee charters and other key governance practices and policies. Our corporate governance guidelines cover a range of topics including, but not limited to, board composition, independence and selection of directors, board membership criteria, conduct of board meetings, board committee composition and functions, board assessment, director compensation and succession planning. Our corporate governance guidelines will be reviewed at least annually by our nominating and corporate governance committee and any proposed changes will be recommended to our full board of directors for approval. A copy of our corporate governance guidelines is available on our corporate website at www.biodesix.com in the Investor section under “Governance—Governance Highlights.” Reference to our website does not constitute incorporation by reference of the information contained at or accessible through our website into this proxy statement. +Insider Trading Policy +We have adopted an insider trading policy to establish guidelines for our employees, directors, executive officers, and other employees regarding transactions in our securities and the disclosure of material nonpublic +2026 Proxy Statement +18 +Table of Contents +information related to our Company. In addition, our insider trading policy prohibits our directors, executive officers and other employees from engaging in hedging transactions or other inherently speculative transactions with respect to Company securities, such as short sales or transactions in put or call options. Our directors, executive officers and other employees are also prohibited from holding Company securities in a margin account or pledging company securities as collateral for a loan. Our policy is reasonably designed to promote compliance with insider trading laws, rules and regulations, and any listing standards applicable to the registrant. In addition, it is the policy of the Company to comply with applicable U.S. securities laws, including laws, rules and regulations related to trading in our securities. A copy of our Insider Trading Policy is included as Exhibit 19.1 to our Annual Report on Form +10-K +for the year ended December 31, 2025. +2026 Proxy Statement +19 +Table of Contents +Stockholder Communications with our Board of Directors +Any stockholder or other interested party who wishes to communicate with our board of directors or any individual director may send written communications to our board of directors or such director c/o Corporate Secretary, Biodesix, Inc., 919 West Dillon Rd., Louisville, CO 80027. The communication must include the stockholder’s name, address and an indication that the person is our stockholder. The Corporate Secretary will review any communications received from stockholders and will forward such communications to the appropriate director or directors, or committee of our board of directors, based on the subject matter. Communications that are deemed inappropriate (such as communications that are commercial or frivolous in nature) will not be forwarded. In addition, communications that appear to be unduly hostile, intimidating, threatening, illegal or similarly inappropriate will not be forwarded. +Certain Relationships and Related-Party Transactions +The following is a summary of the transactions since January 1, 2024 to which we have been a participant in which the amount involved in the transaction exceeds or will exceed $120,000 and in which any of our directors, director nominees, executive officers, or holders of more than 5% of our capital stock, or any immediate family member of, or person sharing the household with, any of these individuals, had or will have a direct or indirect material interest, with certain exceptions, other than compensation arrangements, which are under the section of this proxy statement captioned “Executive Compensation.” +Investor Rights Agreement +In October 2018, we entered into an amended and restated investor rights agreement (IRA) with certain holders of our preferred stock and Common Stock, including certain holders of 5% of our capital stock, and including certain members of, and affiliates of, our directors and certain of our executive officers. The IRA provides the holders of our preferred stock with certain registration rights. After the closing of our initial public offering, the holders of 20,090,745 shares of Common Stock issuable from conversion of outstanding preferred stock, became entitled to rights with respect to the registration of their shares of Common Stock under the Securities Act under this agreement. The IRA terminated in October 2025 pursuant to its terms. +Indemnification of Directors and Executive Officers +We have entered into indemnification agreements with each of our directors and executive officers in connection with our initial public offering or the start of their service on our board. The indemnification agreements and our bylaws will require us to indemnify our directors against certain liabilities, costs and expenses to the fullest extent not prohibited by the Delaware General Corporation Law, and have purchased directors’ and officers’ liability insurance. Subject to very limited exceptions, our bylaws will also require us to advance expenses incurred by our directors and officers. +Policies and Procedures for Related-Party Transactions +Our audit committee has the primary responsibility for the review, approval and oversight of any “related-party transaction,” which is any transaction, arrangement or relationship (or series of similar transactions, arrangements or relationships) in which we are, were or will be a participant and the amount involved exceeds $120,000, and in which the related person has, had or will have a direct or indirect material interest. We adopted a written related-party transaction policy effective October 2020. Under our related-party transaction policy, our management is required to submit any related-party transaction not previously approved or ratified by our audit committee to our audit committee. In approving or rejecting the proposed transactions, our audit committee takes into account all of the relevant facts and circumstances available. +2026 Proxy Statement +20 +Table of Contents +Private Placement Transaction +On April 5, 2024, we entered into securities purchase agreements with a consortium of investors, including members of our board of directors, certain members of the Company’s management team, including our Chief Executive Officer, Chief Financial Officer and Chief Commercial Officer, for the issuance and sale by the Company of 760,857 shares of Series A Preferred Stock at a price of $46.00 per share. On April 5, 2024, we also entered into a registration rights agreement with the consortium of investors, pursuant to which the investors are entitled to certain resale registration rights with respect to shares of our Common Stock underlying the Series A Preferred Stock that will be held by such investors. On May 23, 2024, after approval from our stockholders at our annual meeting held in 2024, we issued 1,521,714 shares of Common Stock (after giving effect to our 1-for-20 reverse stock split, which was effective September 15, 2025 (the “Reverse Stock Split”) in exchange for all outstanding shares of Series A Preferred Stock, and no shares of Series A Preferred Stock remain outstanding. +2026 Proxy Statement +21 +Table of Contents +EQUITY COMPENSATION PLAN INFORMATION +The following table summarizes the number of outstanding stock options and restricted stock unit (RSU) awards granted to our employees, consultants, and directors, as well as the number of shares of Common Stock remaining available for future issuance, under our equity compensation plans in effect as of December 31, 2025. +Plan Category: +Number of +securities to be +issued upon exercise of +outstanding options +(a) +Weighted-average +exercise price of +outstanding options +(b)($) +Number of securities +remaining available for +issuance under equity +compensation plans +(excluding securities +reflected in column +(a)) +Equity compensation plans approved by security holders (1) +653,425 +(2) +$ +33.48 +(3) +148,035 +(4) +Equity compensation plans not approved by security holders +—  +—  +—  +Total +653,425 +$ +33.48 +148,035 +(1) +Includes the 2016 Equity Incentive Plan (2016 Incentive Plan), the 2020 Equity Incentive Plan (2020 Incentive Plan), and the Employee Stock Purchase Plan (ESPP). +(2) +Includes 213,165 RSUs that were outstanding on December 31, 2025 under the 2020 Incentive Plan. RSU awards may be settled only for shares of Common Stock on a one-for-one basis. +(3) +Only option awards were used in computing the weighted-average exercise price. +(4) +This amount represents 98,393 shares of Common Stock available for issuance under the 2020 Incentive Plan and 49,642 shares of Common Stock available for issuance under the ESPP, 48,083 of which were subject to purchase under the offering period in effect as of December 31, 2025, which offering period ended on February 27, 2026. Awards available for grant under the Company’s 2020 Incentive Plan include stock options, stock appreciation rights, restricted stock, RSUs, other stock awards, performance awards, and any combination of the foregoing awards. The number of shares of our Common Stock reserved for issuance under our 2020 Incentive Plan will automatically increase on the first day of each fiscal year by 4% of the number of shares of Common Stock outstanding on the immediately preceding December 31 or such lesser amount as is determined by our board of directors. The ESPP provides the opportunity for eligible coworkers to acquire shares of our Common Stock at a discount. The number of shares of our Common Stock reserved for issuance under our ESPP will automatically increase on the first day of each fiscal year by the lesser of (i) 1% of the number of shares of Common Stock issued and outstanding on the immediately preceding December 31, (ii) 150,000 shares of our Common Stock or (iii) such lesser amount as is determined by our board of directors. +2026 Proxy Statement +22 +Table of Contents +DIRECTOR COMPENSATION +Non-Employee Director Compensation Policy +The following summarizes our non-employee director compensation policy, as amended in the third quarter of 2025. Our employee director receives no additional compensation for service on our board of directors. +● Annual Retainers: +– +Each non-employee director is entitled to receive annual retainers in the amount summarized in the table below. +Position +Annual Retainer +Board Member +$ +40,000 +Chair of the Board of Directors +$ +0 +Committee Chairs: +Audit +$ +20,000 +Compensation +$ +15,000 +Nominating and Corporate Governance +$ +10,000 +Committee Members: +Audit +$ +0 +Compensation +$ +0 +Nominating and Corporate Governance +$ +0 +– +Non-employee directors received annual retainers in the form of RSUs granted as of May 20, 2025, valued based on the average price of our Common Stock over a 90-day period preceding the date of grant, and vesting ratably on the first day of each remaining calendar quarter during the 2025 fiscal year, subject to such director’s continuous service through each applicable vesting date. If a non-employee director became a director after April 1, 2025, his or her annual retainers were pro-rated based on the period of the non-employee director’s service on our board of directors during the year. For fiscal year 2025, the Annual Retainers were prorated to account for the transition to payment under the director compensation policy on a fiscal year basis, and only 75% of the annual retainers described above were paid. +– +The average closing price of our Common Stock for the 90-day period beginning on February 19, 2025 and ending on May 19, 2025 was $12.60. Based on this price, it was determined that each non-employee director was entitled to a grant of 2,380 RSUs. In addition, the Audit Committee Chair, Compensation Committee Chair, and Nominating and Corporate Governance Committee Chair were entitled to a grant of 1,190 RSUs, 892 RSUs, and 595 RSUs, respectively. +● Equity Compensation: +– +Upon appointment to our board of directors, each non-employee director is entitled to receive an initial stock option grant having a Black Scholes value of $187,500, determined as of the date of grant based on the average price of our Common Stock over a 90-day period preceding the date of grant, with 40% vesting on the two-year anniversary of the grant date and the remainder vesting ratably on each subsequent monthly anniversary of the grant date for 36 months, subject to such director’s continuous service through each applicable vesting date. The Company limits the number of shares of Common Stock that may be subject to the initial stock option grant to 0.075% of the Company’s outstanding shares of Common Stock as of the immediately preceding January 1, which may result in a newly appointed non-employee director receiving an initial stock option grant having a Black Scholes value that is less than $187,500. +– +Upon appointment to our board of directors, each non-employee director is also entitled to receive an initial RSU grant valued at $187,500 as of the date of grant based on the average price of our +2026 Proxy Statement +23 +Table of Contents +Common Stock over a 90-day period preceding the date of grant, which will vest on the one-year anniversary of the grant date subject to such director’s continuous service through such date. The Company limits the number of shares of Common Stock that may be subject to the initial RSU grant to 0.0375% of the Company’s outstanding shares of Common Stock as of the immediately preceding January 1, which may result in a newly appointed non-employee director receiving an initial RSU grant having a value that is less than $187,500. +– +Each non-employee director continuing his or her service on our board of directors for the 2025 fiscal year was entitled to receive an annual stock option grant having a Black Scholes value of $96,250 and an annual RSU grant valued at $96,250, in each case determined as of the grant date, based on the average price of our Common Stock over the preceding 90 days, which awards were granted on May 20, 2025 and vested ratably on the first day of each remaining calendar quarter during the 2025 fiscal year, subject to such director’s continuous service through each applicable vesting date. The Company limits the number of shares of Common Stock that may be subject to an annual stock option grant or an annual RSU grant to 0.0385% and 0.01925%, respectively, of the Company’s outstanding shares of Common Stock as of January 1, 2025. For fiscal year 2025, the annual stock options and the annual RSUs, and the maximum share limits in respect thereof, were prorated to account for the transition to payment under the director compensation policy on a fiscal year basis, and only 75% of the annual stock options and annual RSUs described above were paid. The average closing price of our Common Stock for the 90-day period beginning on February 19, 2025 and ending on May 19, 2025 was $12.60. Based on this price, each non-employee director would have been granted an option to purchase 6,867 shares of the Company’s Common Stock and 5,728 RSUs on May 19, 2025. However, as a result of the grant limitations described above, each non-employee director was instead granted an option to purchase 2,100 shares of the Company’s Common Stock, having a Black Scholes value as of the date of grant of $10.51, and 1,050 RSUs with a grant date value of $5.42. +– +Notwithstanding the vesting schedules described above, each non-employee director who remains in continuous service until a change of control (as defined in our 2020 Incentive Plan) will become fully vested in all then-outstanding equity awards. +● Expense Reimbursement : Our non-employee directors are also reimbursed for their reasonable out-of-pocket travel expenses to cover in-person attendance at and participation in board and committee meetings. +The non-employee director compensation policy was further amended effective as of December 30, 2025, to provide that non-employee directors will receive annual equity grants entirely in the form of stock option grants, beginning with 2026 grants. The stock option grants will have a grant date Black Scholes value of $192,500, with the number of shares of Common Stock that may be subject to any such grant limited to 0.077% of the Company’s outstanding shares of Common Stock as of January 1 of the applicable fiscal year. +Director Deferred Compensation Plan +On December 21, 2021, our compensation committee adopted the 2021 Non-Employee Director Deferred Compensation Plan (the Director Deferred Compensation Plan), an unfunded, non-qualified deferred compensation plan that allows our non-employee directors to defer RSU awards that they receive. +Any RSU deferred will be credited as deferred units to the non-employee director’s account as of the date on which it vests. Each deferred unit is credited with dividend equivalents equal to the dividends paid, if any, on our Common Stock, which are deemed reinvested in additional deferred units on the dividend payment date. Deferred units will be appropriately adjusted in the event of any change in our Common Stock through merger, consolidation, or otherwise; a stock dividend; or a stock split, combination or other change in our Common Stock. +2026 Proxy Statement +24 +Table of Contents +Payments will be made in shares of our Common Stock equal to the number of deferred units credited to the director’s account, with a cash payment for any fractional deferred unit. A director may elect to receive deferred amounts in a lump sum within 90 days after either his or her separation from service or, alternatively the later of his or her separation from service or January 1 of a calendar year elected by the director which may not be more than 15 years after the calendar year in which the director’s initial deferral election under the Director Deferred Compensation Plan was made. Within 90 days following a non-employee director’s death, a lump sum equal to the then-remaining balance in his or her account will be made to his or her beneficiary. Within 10 business days after a change in control (as defined in our 2020 Incentive Plan) and to the extent permitted by federal tax law, each non-employee director (or former non-employee director) will receive a cash lump sum payment equal to the number of deferred units credited to his or her account on the date of the change in control, multiplied by the fair market value of one share of our Common Stock on such date. If payment within 10 business days following a change in control is not permitted by federal tax laws, then payment will be made at the time and in the form that payment would have been made if a change in control had not occurred. +2025 Director Compensation Table +The following table sets forth information for the fiscal year ended December 31, 2025 regarding the compensation awarded to, earned by or paid to our non-employee directors. The compensation received by our non-employee directors in respect of annual retainers for 2025 service was in the form of RSU awards and the compensation received by our non-employee directors in respect of annual equity grants was a mixture of stock option and RSU awards. Each of Messrs. Patience and Kennedy and Dr. Kayyem received grants for a total of 3,430 RSUs and stock options in respect of 2,100 shares of our Common Stock. Dr. Strobeck received grants for a total of 4,026 RSUs and stock options in respect of 2,100 shares of our Common Stock. Mr. Massarany received grants for a total of 4,323 RSUs and stock options in respect of 2,100 shares of our Common Stock. Ms. Franchi received grants for a total of 4,621 RSUs and stock options in respect of 2,100 shares of our Common Stock. Mr. Hutton, our Chief Executive Officer, does not receive any separate compensation for his service on our board of directors. Please see the 2025 Summary Compensation Table for the compensation paid or awarded to Mr. Hutton. +Stock +Awards +Option +Awards +Total +Name +($) (1) +($) (2) +($) +Jean Franchi (3) +$ +25,027 +$8,293 +$ +33,320 +Jon Faiz Kayyem, Ph.D (3) +$ +18,577 +$8,293 +$ +26,870 +Hany Massarany (3) +$ +23,413 +$8,293 +$ +31,706 +John Patience (3) +$ +18,577 +$8,293 +$ +26,870 +Jack Schuler (3)(4) +$ +0 +$    0 +$ +0 +Matthew Strobeck, Ph.D (3) +$ +21,805 +$8,293 +$ +30,098 +Charles M. Watts, M.D (3)(4) +$ +0 +$    0 +$ +0 +Lawrence Kennedy (3) +$ +18,577 +$8,293 +$ +26,870 +(1) +The amounts reported represent the aggregate grant date fair market value of the RSUs, calculated in accordance with FASB ASC Topic 718 based on the assumption that the value of each RSU granted on May 20, 2025 was equal to $5.42, with such amount being the closing price of our Common Stock on the grant date. The assumptions used in calculating the grant date fair value of the award disclosed in this column are set forth in Note 12 of our audited financial statements included in the 2025 Annual Report on Form 10-K Item 8. “Financial Statements and Supplementary Data” for the year ended December 31, 2025. Pursuant to the Director Deferred Compensation Plan, non-employee directors may choose to defer receipt of the shares to be issued in connection with settlement of the annual RSU award. Dr. Kayyem chose to defer receipt of 3,430 shares upon their vesting. Mr. Massarany chose to defer receipt of 4,323 shares upon their vesting. Dr. Strobeck chose to defer receipt of 4,026 shares +2026 Proxy Statement +25 +Table of Contents +upon their vesting. Ms. Franchi chose to defer receipt of 4,621 shares upon their vesting. Mr. Kennedy chose to defer receipt of 3,430 shares upon their vesting. +(2) +The amounts reported represent the aggregate grant date fair market value of the stock options calculated in accordance with FASB ASC Topic 718. The assumptions used in calculating the grant date fair value of the award disclosed in this column are set forth in Note 12 of our audited financial statements included in the 2025 Form 10-K Report under “Item 8. Financial Statements and Supplementary Data” for the year ended December 31, 2025. These amounts do not correspond to the actual value that may be recognized by the non-employee directors upon exercise of the applicable awards. +(3) +As of December 31, 2025, Ms. Franchi held options to purchase 5,420 shares of our Common Stock and RSUs in respect of 22,604 shares of our Common Stock; Dr. Kayyem held options to purchase 7,821 shares of our Common Stock and RSUs in respect of 12,718 shares of our Common Stock; Mr. Massarany held options to purchase 6,998 shares of our Common Stock and RSUs in respect of 14,665 shares of our Common Stock; Mr. Patience held options to purchase 6,256 shares of our Common Stock and RSUs in respect of 15,388 shares of our Common Stock; Mr. Schuler held options to purchase 4,156 shares of our Common Stock and RSUs in respect of 16,579 shares of our Common Stock; Dr. Strobeck held options to purchase 4,537 shares of our Common Stock and RSUs in respect of 21,307 shares of our Common Stock; Dr. Watts held options to purchase 0 shares of our Common Stock and RSUs in respect of 0 shares of our Common Stock; and Mr. Kennedy held options to purchase 10,201 shares of our Common Stock and RSUs in respect of 18,417 shares of our Common Stock. +(4) +Dr. Watts and Mr. Schuler did not stand for re-election at our 2025 Annual Meeting of Stockholders on May 20, 2025 and therefore did not receive annual retainers or annual grants in 2025. Mr. Schuler continues to provide services to our board of directors in a non-voting, advisory capacity as a director emeritus, for which he does not receive any compensation or benefits. +2026 Proxy Statement +26 +Table of Contents +Proposal Two: Non-Binding, Advisory Vote on Named Executive Officer Compensation (“Say-on-Pay Vote”) +Pursuant to Section 14A of the Exchange Act, we are providing our stockholders an opportunity to cast an advisory vote to approve of the compensation of our “named executive officers,” as disclosed in this proxy statement. +As described in detail under the heading “Executive Compensation” in this proxy statement, our executive compensation programs are designed to align compensation to business strategy and outcomes that deliver value to stockholders; reward high-performing individuals; and assure compensation is competitive in the relevant employment marketplace to support the attraction, motivation and retention of executive talent. Please read the compensation tables and the related narrative disclosure contained in this proxy statement for additional details about our executive compensation programs, including information about the fiscal year 2025 compensation of our named executive officers. +We are asking our stockholders to indicate their support for our named executive officer compensation as described in this proxy statement. This proposal, commonly known as a “say-on-pay” proposal, gives our stockholders the opportunity to express their views on our named executive officers’ compensation. This vote is not intended to address any specific type of compensation, but rather the overall compensation of our named executive officers and policies and practices described in this proxy statement. Accordingly, our board of directors recommends that our stockholders vote “FOR” the following resolution: +“RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the compensation tables and narrative discussion that accompanies the compensation tables, is hereby APPROVED.” +Vote Required: +The Say-on-Pay Vote is advisory, and therefore not binding on the Company, our board of directors, or the compensation committee of our board of directors. However, we value stockholders’ opinions, and we will consider the outcome of the Say-on-Pay Vote when determining future executive compensation programs. +Board Recommendation: +OUR BOARD OF DIRECTORS AND THE COMPENSATION COMMITTEE OF OUR BOARD OF DIRECTORS EACH UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE APPROVAL, ON A NON-BINDING, ADVISORY BASIS, OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS AS DESCRIBED IN THIS PROXY STATEMENT. +2026 Proxy Statement +27 +Table of Contents +EXECUTIVE COMPENSATION +The following is a discussion of compensation arrangements of our named executive officers. This discussion contains forward-looking statements that are based on our current plans, considerations, expectations, and determinations regarding future compensation programs. Actual compensation programs that we adopt may differ materially from currently planned programs as summarized in this discussion. As a “smaller reporting company,” we are not required to include a Compensation Discussion and Analysis section and have elected to comply with the scaled back disclosure requirements applicable to smaller reporting companies. +Overview +This section provides a discussion of the compensation paid or awarded to our Chief Executive Officer and our two other most highly compensated executive officers as of December 31, 2025. We refer to these individuals as our “named executive officers.” For 2025, our named executive officers were: +• +Scott Hutton, President and Chief Executive Officer; +• +Robin Harper Cowie, Chief Financial Officer, Secretary and Treasurer; and +• +Kieran O’Kane, Chief Commercial Officer. +Our executive compensation program is intended to align executive compensation with our performance objectives and business strategy and to enable us to attract, motivate, retain and reward executive officers who operate in a highly competitive and technologically challenging environment and whose contributions are critical to our long-term success. The compensation paid or awarded to our executive officers is generally based on the assessment of each individual’s performance compared against the business objectives established for the fiscal year as well as our historical compensation practices. The compensation paid to newly hired executive officers is primarily determined based on the negotiations of the parties as well as our historical compensation practices, and we seek fairness in total compensation paid to our executive officers. As a result, we benchmark executive compensation against external and internal comparisons and look at the relationship between team member roles in the organization to determine appropriate compensation. For the year ended December 31, 2025, the material elements of our executive compensation program were base salary, annual cash bonus and equity awards in the form of RSUs and stock options. +Performance-based, at risk and variable compensation in the form of annual cash bonuses and equity-based compensation is a significant portion of the overall compensation paid to each named executive officer. Our annual cash bonuses are earned or vest only upon the achievement of certain performance metrics which, for 2025, consisted entirely of Company-based performance metrics, linking our named executive officers’ compensation directly to Company performance versus operating goals. In addition, the value received from RSUs and stock options depends on our stock price. +We expect that our executive compensation program will continue to evolve over the coming years, while still supporting our overall business and compensation objectives. The compensation committee of our board of directors oversees our executive compensation program. In addition, during the year ended December 31, 2025, the compensation committee utilized our independent executive compensation consultant to advise us on the elements of our executive compensation program. +Compensation of Named Executive Officers +Base Salary +Base salaries are intended to provide a level of compensation sufficient to attract and retain an effective management team, when considered in combination with the other components of our executive compensation +2026 Proxy Statement +28 +Table of Contents +program. The relative levels of base salary for our named executive officers are designed to reflect each executive officer’s scope of responsibility and accountability to us. Please see the “Salary” column in the Summary Compensation Table for the base salary amounts received by each named executive officer during the years ended December 31, 2024 and December 31, 2025. +As of January 1, 2025, Mr. Hutton’s annual base salary was $608,000, Ms. Harper Cowie’s annual base salary was $419,000, and Mr. O’Kane’s annual base salary was $419,000. The compensation committee retained an independent executive compensation consultant and after review of external market data and consideration of individual factors including, but not limited to, performance and scope of role, determined to increase base salaries for the named executive officers. As of March 1, 2025, Mr. Hutton’s annual base salary was increased to $652,500, Ms. Harper Cowie’s annual base salary was increased to $449,500 and Mr. O’Kane’s annual base salary was increased to $449,500. The resulting salaries were generally positioned between the 25th and 50th percentiles of our competitive market for talent. As of March 1, 2026, Mr. Hutton’s annual base salary was increased to $741,500, Ms. Harper Cowie’s annual base salary was increased to $526,500 and Mr. O’Kane’s annual base salary was increased to $496,500. +2026 Proxy Statement +29 +Table of Contents +Annual Cash Bonuses +We provide our senior leadership team with short-term incentive compensation through an annual cash bonus program. Annual bonus compensation holds executives accountable, rewards the executives based on actual business results and helps create a “pay for performance” culture. Our annual cash bonus program provides cash incentive award opportunities based on the achievement of performance goals approved by our compensation committee at the beginning of each fiscal year. +Generally, our compensation committee establishes a Company-based performance metric as a threshold vesting criterion for any payouts for a particular annual bonus period. For 2025, individual performance goals did not factor into determining payouts for the annual bonus period. +For 2025, the compensation committee determined that the Company’s short-term incentive compensation would be based on the achievement of four financial objectives: (i) lung diagnostic revenue determined in accordance with U.S. GAAP, (ii) development services revenue determined in accordance with U.S. GAAP, (iii) lung diagnostic gross margin percentage and (iv) total operating expense (excluding certain non-cash expenses). Actual results were measured at year end against targeted outcomes. Mr. Hutton’s, Ms. Harper Cowie’s and Mr. O’Kane’s 2025 bonus targets as a percentage of annual base salary were 100%, 50% and 60%, respectively. Based on our 2025 performance, our compensation committee determined, and our board of directors approved, a corporate funding percentage under our annual cash bonus program equal to approximately 110% of the target bonus opportunity. Accordingly, each of Mr. Hutton, Ms. Harper Cowie and Mr. O’Kane received a cash payout under the 2025 annual cash bonus program, as illustrated below: +2025 +Name +Incentive +Cash Payout +Scott Hutton +$ +710,280 +Robin Harper Cowie +$ +244,707 +Kieran O’Kane +$ +293,489 +Equity Awards +In the year ended December 31, 2025, the compensation committee awarded Mr. Hutton, Ms. Harper Cowie and Mr. O’Kane, 19,375 RSUs, 5,875 RSUs and 5,875 RSUs, respectively, which vest ratably on an annual basis for four years from the vesting commencement date, subject to continued service through the applicable vesting date. In addition, the compensation committee awarded Mr. Hutton, Ms. Harper Cowie and Mr. O’Kane, stock options in respect of 38,750, 11,750 and 11,750 shares of our Common Stock, respectively, which vest ratably on a monthly basis for four years from the vesting commencement date, subject to continued service through the applicable vesting date. +For 2026, the compensation committee has determined to provide equity awards to each of our named executive officers entirely in the form of stock options, which is intended to further align the compensation of our named executive officers with Company performance. +2026 Proxy Statement +30 +Table of Contents +2025 Summary Compensation Table +The following table shows information regarding the compensation of our named executive officers for services performed during the years ended December 31, 2025 and 2024. +Name and Principal Position +Fiscal +Year +Salary +($) (1) +Stock +Awards +($) (2) +Option +Awards +($) (3) +Non-Equity +Incentive Plan +Compensation +($) (4) +All Other +Compensation +($) (5) +Total ($) +Scott Hutton +President and Chief Executive Officer +2025 +643,404 +356,849 +524,437 +710,280 +3,500 +2,238,470 +2024 +588,858 +419,144 +852,017 +223,604 (6) +1,250 +2,084,873 +Robin Harper Cowie +Chief Financial Officer, Secretary and Treasurer +2025 +443,366 +108,206 +159,023 +244,707 +6,699 +962,001 +2024 +405,881 +128,118 +224,690 +115,597 (7) +1,250 +875,536 +Kieran O’Kane +Chief Commercial Officer +2025 +443,048 +108,206 +159,023 +293,489 +3,526 +1,007,292 +2024 +401,554 +128,118 +233,451 +137,522 (8) +– +900,645 +(1) +The amounts disclosed represent the dollar value of base salary earned by the named executive officer as of December 31 of each applicable fiscal year. +(2) +The amounts disclosed represent the aggregate grant date fair value of RSU awards as calculated in accordance with FASB ASC Topic 718. The assumptions used in calculating the grant date fair value of the award disclosed in this column are set forth in Note 12 of our audited financial statements included in the 2025 Annual Report on Form 10-K Item 8. “Financial Statements and Supplementary Data” for the year ended December 31, 2025. These amounts do not correspond to the actual value that may be realized by the named executive officers upon vesting or exercise of the applicable awards. +(3) +The amounts disclosed represent the aggregate grant date fair value of option awards, including an estimate of the grant date fair value of bonus-to-options awards granted with respect to annual bonuses earned for the 2024 fiscal year, as calculated in accordance with FASB ASC Topic 718. The assumptions used in calculating the grant date fair value of the awards disclosed in this column are set forth in Note 12 of our audited financial statements included in the 2025 Annual Report on Form 10-K Item 8. “Financial Statements and Supplementary Data” for the year ended December 31, 2025. Prior to 2025, under the Company’s 2021 Senior Management Bonus to Equity Plan, eligible executives, including each of our named executive officers, were permitted to elect to receive a portion of their annual bonus earned in the form of a bonus-to-options award. The bonus-to-options awards were fully vested on the grant date and had an exercise price equal to the fair market value of our Common Stock on the grant date. For the bonus-to-options awards granted with respect to annual bonuses earned for the 2024 fiscal year, the estimated grant date fair value was used to correspond to the treatment of such expense under U.S. GAAP in the 2024 Annual Report on Form 10-K, as the service inception period precedes the grant date. These amounts do not correspond to the actual value that may be realized by the named executive officers upon vesting or exercise of the applicable awards. +(4) +Based on our 2024 performance measured against the Company’s achievement of three financial objectives, (i) total revenue determined in accordance with U.S. GAAP, (ii) lung diagnostic gross margin percentage, and (iii) total operating expense (excluding certain non-cash expenses), our compensation +2026 Proxy Statement +31 +Table of Contents +committee determined, and our board of directors approved, payouts under the 2024 annual cash bonus program at a 75.4% achievement level. The Non-Equity Incentive Plan Compensation listed for each named executive officer represents the annual cash bonus award for the 2024 fiscal year after taking into consideration the election of each individual to participate in the bonus-to-options program. Based on our 2025 performance measured against the Company’s achievement of four financial objectives, (i) lung diagnostic revenue determined in accordance with U.S. GAAP, (ii) development services revenue determined in accordance with U.S. GAAP, (iii) lung diagnostic gross margin percentage and (iv) total operating expense (excluding certain non-cash expenses), our compensation committee determined, and our board of directors approved, payouts under the 2025 annual cash bonus program at a 110% achievement level. +(5) +The amounts disclosed primarily represent discretionary employer matching contributions under the Company’s 401(k) plan, an electronics allowance stipend and the tax gross-up on awards through the Company’s Wishlist Rewards Program, a peer-to-peer recognition program, received by each named executive officer as of December 31 of each applicable fiscal year for specific contributions and demonstrating the Company’s core values. +(6) +At a 75.4% achievement level, Mr. Hutton was entitled to a payout under the 2024 annual cash bonus program of $447,207. However, Mr. Hutton elected to receive a portion of his 2024 annual cash bonus in the form of an option award under the bonus-to-options program. In accordance with Mr. Hutton’s election and the terms of the bonus-to-options program, Mr. Hutton received a cash payment of $223,604 in respect of his 2024 annual cash bonus, as reflected in this column, and in place of the remaining amount, received an option award representing the right to purchase 425,929 shares of our Common Stock, the value of which is reflected in the “Option Awards” column. +(7) +At a 75.4% achievement level, Ms. Harper Cowie was entitled to a payout under the 2024 annual cash bonus program of $154,129. However, Ms. Harper Cowie elected to receive a portion of her 2024 annual cash bonus in the form of an option award under the bonus-to-options program. In accordance with Ms. Harper Cowie’s election and the terms of the bonus-to-options program, Ms. Harper Cowie received a cash payment of $115,597 in respect of her 2024 annual cash bonus, as reflected in this column, and in place of the remaining amount, received an option award representing the right to purchase 73,398 shares of our Common Stock, the value of which is reflected in the “Option Awards” column. +(8) +At a 75.4% achievement level, Mr. O’Kane was entitled to a payout under the 2024 annual cash bonus program of $183,363. However, Mr. O’Kane elected to receive a portion of his 2024 annual cash bonus in the form of an option award under the bonus-to-options program. In accordance with Mr. O’Kane’s election and the terms of the bonus-to-options program, Mr. O’Kane received a cash payment of $137,522 in respect of his 2024 annual cash bonus, as reflected in this column, and in place of the remaining amount, received an option award representing the right to purchase 87,319 shares of our Common Stock, the value of which is reflected in the “Option Awards” column. +2026 Proxy Statement +32 +Table of Contents +Outstanding Equity Awards at Fiscal 2025 Year-End +The following table presents information regarding the outstanding equity awards held by each of the named executive officers as of December 31, 2025, after giving effect to the Reverse Stock Split. As of the year ended December 31, 2025, none of the named executive officers held any outstanding stock awards other than options and RSUs. +Option Awards +Stock Awards +Name +Grant +Date +Number of +Securities +Underlying +Unexercised +Options +(#) Exercisable +Number of +Securities +Underlying +Unexercised +Options +(#) Unexercisable +Equity +Incentive +Plan +Awards: +Number of +Securities +Underlying +Unexercised +Unearned +Options (#) +Option +Exercise +Price +($) +Option +Expiration +Date +Number of +Shares or Units +of Stock That +Have Not Vested +(#) +Market Value +of Shares or +Units of Stock +That Have +Not Vested +($) (7) +Scott Hutton +4/4/2018 +4,211 (2) +– +– +8.31 +4/3/2028 +– +– +3/22/2019 +2,105 (2) +– +– +15.43 +12/31/2028 +– +– +3/22/2019 +842 (4) +– +– +15.43 +12/31/2028 +– +– +4/15/2020 +7,580 (1) +– +– +15.43 +4/14/2030 +– +– +2/8/2022 +– +– +– +– +– +610 (6) +4,418 +3/10/2022 +4,293 (5) +– +– +45.80 +3/9/2032 +– +– +2/8/2023 +– +– +– +– +– +18,776 (3) +127,677 +3/1/2023 +21,783 (5) +– +– +40.00 +2/28/2033 +– +– +7/24/2023 +2,436 (8) +– +– +24.00 +7/23/2033 +– +– +7/24/2023 +738 +610 (8) +– +24.00 +7/23/2033 +– +– +2/8/2024 +10,097 +10,965 (9) +– +39.80 +2/7/2034 +– +– +2/8/2024 +– +– +– +– +– +7,898 (3) +53,706 +2/21/2024 +9,046 (5) +– +– +29.20 +2/20/2034 +– +– +2/20/2025 +8,080 +30,670 (9) +18.42 +2/19/2035 +– +– +2/20/2025 +21,296 (5) +– +– +– +– +– +2/20/2025 +– +– +– +19,375 (3) +131,750 +Robin Harper Cowie +4/7/2016 +1,768 (1) +– +– +16.62 +4/6/2026 +– +– +3/22/2019 +1,768 (2) +– +– +15.43 +12/31/2028 +– +– +3/22/2019 +589 (4) +– +– +15.43 +12/31/2028 +– +– +4/15/2020 +1,516 (1) +– +– +15.43 +4/14/2030 +– +– +2/8/2022 +– +– +– +– +– +157 (6) +1,068 +3/10/2022 +1,387 (5) +– +– +45.80 +3/9/2032 +– +– +2/8/2023 +– +– +– +– +– +4,853 (3) +33,000 +3/1/2023 +7,422 (5) +– +– +40.00 +2/28/2033 +– +– +7/24/2023 +1,032 (8) +– +– +24.00 +7/23/2033 +– +– +7/24/2023 +183 +140 (8) +– +24.00 +7/23/2033 +– +– +2/8/2024 +3,088 +3,350 (9) +– +39.80 +2/7/2034 +– +– +2/8/2024 +– +– +– +– +– +2,414 (3) +16,415 +2/21/2024 +3,117 (5) +– +– +29.20 +2/20/2034 +– +– +2/20/2025 +2,450 +9,300 (9) +18.42 +2/19/2035 +– +– +2/20/2025 +3,669 (5) +– +18.42 +2/19/2035 +– +– +2/20/2025 +– +– +– +– +5,875 (3) +39,950 +4/4/2018 +631 (2) +– +– +8.31 +4/3/2028 +– +– +Kieran O’Kane +3/22/2019 +631 (1) +– +– +15.43 +12/31/2028 +– +– +4/15/2020 +1,768 (1) +– +– +15.43 +4/14/2030 +– +– +2/8/2022 +– +– +– +– +– +73 (6) +496 +3/10/2022 +308 (5) +– +– +45.80 +3/9/2032 +– +– +2/8/2023 +– +– +– +– +– +3,053 (3) +20,760 +3/1/2023 +2,626 (5) +– +– +40.00 +2/28/2033 +– +– +7/24/2023 +442 (8) +– +24.00 +7/23/2033 +– +– +7/24/2023 +79 +56 (8) +– +24.00 +7/23/2033 +– +– +2/8/2024 +3,088 +3,350 (9) +– +39.80 +2/7/2034 +– +– +2/8/2024 +– +– +– +– +– +2,414 (3) +16,415 +2/21/2024 +1,765 (5) +– +– +29.20 +2/20/2034 +– +– +2/20/2025 +2,450 +9,300 (9) +18.42 +2/19/2035 +– +– +2/20/2025 +4,365 (5) +– +18.42 +2/19/2035 +– +– +2/20/2025 +– +– +– +– +5,875 (3) +39,950 +2026 Proxy Statement +33 +Table of Contents +(1) +These stock options vest in a series of 60 successive, equal monthly installments measured from the vesting commencement date. +(2) +Two fifths of these time-vested options vest on the second anniversary of the vesting commencement date, with the remaining balance vesting in a series of 36 successive equal monthly installments measured from the second anniversary of the vesting commencement date, subject to the award recipient’s continued employment through the applicable vesting date. In September 2020, the board of directors amended these time-vested options such that 21/60 of the time-vested options vest on the date that is 21 months after the vesting commencement date, with the remaining balance vesting in a series of 39 successive equal monthly installments measured from such date, subject to the award recipient’s continued employment through the applicable vesting date. +(3) +These time-vested RSUs vest in a series of four successive equal annual installments measured from the vesting commencement date, subject to the award recipient’s continued employment through the applicable vesting date. +(4) +In the year ended December 31, 2019, the board of directors awarded Mr. Hutton and Ms. Harper Cowie performance-vested options representing the right to purchase 1,263 and 884 shares of our Common Stock, respectively (adjusted to reflect the impact of the Reverse Stock Split). One third of these performance-vested options were eligible to vest after each of the first, second and third anniversaries of the vesting commencement date, subject to the Company’s achievement of recognized revenue of at least $31 million, $67 million and $134 million for the years ended December 31, 2019, 2020 and 2021, respectively. The board of directors had sole discretion to determine if the performance hurdles are met and to determine the vesting date, and shall make such determinations within 90 days after the end of the applicable fiscal year. For the 2019 tranche, the board of directors determined that the performance hurdle was not met. As a result, one third of each of Mr. Hutton’s and Ms. Harper Cowie’s awards were cancelled, and two thirds of each of Mr. Hutton’s and Ms. Harper Cowie’s awards remained outstanding. In addition, in September 2020 and in light of the impact of the COVID-19 pandemic on the Company’s operations and other considerations, the board of directors amended the performance-vested options to adjust the performance hurdles for the 2020 tranche and the 2021 tranche to $28.6 million and $51.5 million, respectively. For each of the 2020 tranche and the 2021 tranche, the board of directors determined that the applicable performance hurdles were met and one third of each of Mr. Hutton’s and Ms. Harper Cowie’s performance-vested option award became fully vested and exercisable on January 1, 2021 and January 1, 2022, respectively. +(5) +These options were bonus-to-options awards and were 100% vested at date of grant. +(6) +These time-vested RSUs vest in a series of 16 successive equal quarterly installments measured from the vesting commencement date, subject to the award recipient’s continued employment through the applicable vesting date. +(7) +The market values reflected in this column are calculated based on $6.80 per share, the closing price of our Common Stock on December 31, 2025. +(8) +These time-vested options vest in a series of 31 successive equal monthly installments beginning on August 1, 2024 (the first day of the month following the first anniversary of the month of grant under the shareholder approved stock option exchange program pursuant to which these time-vested options were granted). The number of installments is equal to the number of months that were remaining the in the vesting schedule of the stock options that were tendered under the stock option exchange program as of immediately prior to the exchange. +(9) +These stock options vest in a series of 48 successive, equal monthly installments measured from the vesting commencement date. +2026 Proxy Statement +34 +Table of Contents +Policies and Practices Related to the Timing of Grants of Certain Equity Awards +The compensation committee and senior management monitor the Company’s equity grant practices to evaluate whether such policies comply with governing regulations and are consistent with good corporate practices. When making regular annual equity grants, the compensation committee’s practice for the 2025 fiscal year and prior years was to approve them at its meeting in February of each year as part of the annual compensation review and after results for the preceding fiscal year become available. Because the compensation committee’s regular meeting schedule is determined in the prior fiscal year, the proximity of any awards to other significant corporate events is coincidental. In addition, the compensation committee may make grants at any time during the year it deems appropriate, including with respect to new hires or transitions. The Company does not schedule its equity grants in anticipation of the release of material +non-public +information nor does the Company time the release of material +non-public +information based on equity grant dates. +During 2025, no stock option grants were made to any of our named executive officers during any period beginning four business days before the filing or furnishing of a periodic report or current report and ending one business day after the filing or furnishing of any such +report +with the +SEC +. +2026 Proxy Statement +35 +Table of Contents +Additional Matters +Executive Severance and Change in Control Agreements +On April 16, 2024, the Company approved a form of Executive Severance and Change in Control Agreement. On April 23, 2024, each of Mr. Hutton, Ms. Harper Cowie and Mr. O’Kane entered into an Executive Severance and Change in Control Agreement with the Company. +In the event an executive who is party to an Executive Severance and Change in Control Agreement experiences a termination of employment without cause (as defined in the Executive Severance and Change in Control Agreement), other than within three months prior to, or one year following, the consummation of a change in control (as defined in the Executive Severance and Change in Control Agreement), the executive will be entitled to receive: +• +base salary continuation for a period of nine months or, in the case of the chief executive officer, 12 months; +• +for the chief executive officer only, a lump sum cash payment equal to 100% of his or her target annual cash incentive for the year in which the qualifying termination of employment occurs; and +• +Company-paid COBRA premium payments for the executive and his or her covered dependents for up to 12 months. +In the event the executive’s employment is terminated without cause or the executive resigns for good reason (as defined in the Executive Severance and Change in Control Agreement) within three months prior to, or one year following, the consummation of a change in control, the executive will be entitled to receive: +• +a lump sum cash payment equal to 100%, or in the case of the chief executive officer, 150%, of his or her then-current annual base salary; +• +a lump sum cash payment equal to 100%, or in the case of the chief executive officer, 150%, of his or her target annual cash incentive for the year in which the qualifying termination of employment occurs; +• +a lump sum cash payment equal to 12 months, or in the case of the chief executive officer, 18 months, of COBRA premium payments for the executive and his or her covered dependents; +• +accelerated vesting of all equity awards which vest based solely on the executive’s continued service with us; and +• +for the chief executive officer and chief financial officer only, a lump sum cash payment of $15,000 to help defray legal fees, tax and accounting fees, executive outplacement services, and other costs associated with transitional matters. +The payment of severance benefits under the Executive Severance and Change in Control Agreements is subject to a general release of claims by the executive in favor of the Company and its affiliates. +We believe the severance benefits payable under the Executive Severance and Change in Control Agreements provide reasonable compensation in the form of severance pay and certain limited benefits to our executive officers in the event of a qualifying termination of employment to facilitate the transition to new employment. In addition, we believe that these benefits help maintain our executive officers’ continued focus on their assigned duties to maximize stockholder value in the event of a potential change in control transaction, and mitigate the risk of subsequent disputes or litigation. The terms and conditions of these agreements were approved by the compensation committee after an analysis of competitive market data in consultation with our independent executive compensation consultant. +2026 Proxy Statement +36 +Table of Contents +401(k) Plan +The Company participates in a multiple employer tax-qualified 401(k) savings plan which allows participants to defer eligible compensation up to the maximum amount allowed under Internal Revenue Service (IRS) guidelines. The Company did not make any discretionary or employer matching contributions under the plan during 2024. Beginning in 2025, the Company began making discretionary employer matching contributions. During 2025, the Company provided matching contributions in an amount equal to 50% of the participant’s eligible compensation contributed to the plan for the plan year up to a maximum of $3,500. The Company’s total contributions to the plan were $0.7 million for the 2025 fiscal year. The Company’s contributions to each of our named executive officers during 2025 are reflected in the “All Other Compensation” column in the 2025 Summary Compensation Table. +Clawback Policy +During the year ended December 31, 2023, the Company adopted a Dodd-Frank Clawback Policy to comply with SEC and Nasdaq listing rules. Under that policy, the Company is required in certain situations to recoup incentive compensation paid or payable to certain current or former executive officers of the Company, including the named executive officers, in the event of an accounting restatement. +2026 Proxy Statement +37 +Table of Contents +Pay Versus Performance +In accordance with rules adopted by the SEC pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, we provide the following disclosure regarding executive “compensation actually paid” (“CAP”), as calculated per the SEC disclosure rules, and certain measures of Company performance for the fiscal years listed below. As permitted under the rules applicable to smaller reporting companies, we are not including a peer group total shareholder return or company-selected measure, as contemplated under Item 402(v) of Regulation +S-K. +Year +(1) +Summary +Compensation +Table Total +for PEO ($) +(2) +Compensation +Actually +Paid +to PEO +($) +(3) +Average +Summary +Compensation +Table Total +for +Non-PEO +NEOs ($) +(2) +Average +Compensation +Actually +Paid +to +Non-PEO +NEOs ($) +(3) +Value of +Initial Fixed +$100 +Investment +Based On +Total +Shareholder +Return ($) +(4) +Net +Income +($ in millions) +2025 +$ +2,238,470 +$ +666,305 +$ +984,646 +$ +536,035 +$ +18.48 +$ +( 35.27 +) +2024 +$ +2,084,873 +$ +1,735,646 +$ +888,091 +$ +823,556 +$ +83.15 +$ +( 42.93 +) +(1) +Mr. Hutton has served as the Principal Executive Officer (“PEO”) for the entirety of 2024 and 2025. Our other named executive officers (“NEOs”) for the applicable years were Robin Harper Cowie and Kieran O’Kane. +(2) +Amounts reported in this column represent (i) the total compensation reported in the Summary Compensation Table for the applicable year in the case of Mr. Hutton and (ii) the average of the total compensation reported in the Summary Compensation Table for the applicable year for our other named executive officers reported for the applicable year other than Mr. Hutton. +(3) +To calculate CAP, adjustments were made to the amounts reported in the Summary Compensation Table for the applicable year. A reconciliation of the adjustments for Mr. Hutton, and for the average of the other named executive officers, is set forth following the footnotes to this table. +(4) +Pursuant to rules of the SEC, the comparison assumes $100 was invested on December 31, 2023 in our common stock. Historic stock price performance is not necessarily indicative of future stock price performance. +2025 +2024 +Scott Hutton +Average +Non-PEO +NEOs +Scott Hutton +Average +Non-PEO +NEOs +Total Compensation from Summary Compensation Table +$ +2,238,470 +$ +984,646 +$ +2,084,873 +$ +888,091 +Adjustments for Equity Awards +Adjustment for grant date values in the Summary Compensation Table +$ +( 881,286 +) +$ +( 267,229 +) +$ +( 1,271,161 +) +$ +( 357,189 +) +Year-end +fair value of unvested awards granted in the current year +$ +230,947 +$ +70,029 +$ +755,703 +$ +230,890 +Year-over-year difference of +year-end +fair values for unvested awards granted in prior years +$ +( 936,529 +) +$ +( 239,828 +) +$ +( 201,625 +) +$ +( 41,724 +) +Fair values at vest date for awards granted and vested in current year +$ +313,406 +$ +63,183 +$ +367,841 +$ +104,043 +Difference in fair values between prior +year-end +fair values and vest +$ +( 298,673 +) +$ +( 74,690 +) +$ +15 +$ +( 555 +) +Forfeitures during current year equal to prior +year-end +fair value +$ +( 30 +) +$ +( 76 +) +$ +0 +$ +0 +Dividends or dividend equivalents not otherwise included in total compensation +$ +0 +$ +0 +$ +0 +$ +0 +Total Adjustments for Equity Awards +$ +( 690,879 +) +$ +( 181,382 +) +$ +921,934 +$ +292,654 +Compensation Actually Paid (as calculated) +$ +666,305 +$ +536,035 +$ +1,735,646 +$ +823,556 +2026 Proxy Statement +38 +Table of Contents +Relationship Between Pay and Performance +The illustrations below provide a graphical description of CAP (as calculated in accordance with the SEC rules) and the following measures: +• +the Company’s cumulative Total Stockholder Return (“TSR”); and +• +the Company’s Net Income +CAP and Cumulative TSR +CAP and Company Net Income +2026 Proxy Statement +39 +Table of Contents +Proposal Three: Advisory Vote on the Frequency of Solicitation of Advisory Votes to Approve Executive Compensation +The Dodd-Frank Wall Street Reform and Consumer Protection Act and Section 14A of the Exchange Act enable the Company’s stockholders, at least once every six years, to indicate their preference regarding how frequently the Company should solicit a say-on-pay vote/non-binding advisory vote on the compensation of the Company’s named executive officers as disclosed in the Company’s proxy statement. Currently, the policy of our board of directors is to solicit a say-on-pay vote/non-binding advisory vote on the compensation of the named executive officers every one year. The Company is asking its stockholders to indicate whether they would prefer an advisory vote every one year, every two years or every three years. Alternatively, stockholders may abstain from casting a vote. Our board of directors recommends that the stockholders select a frequency of every one year. +We recognize that the widely adopted standard among public companies is to hold “say-on-pay” votes annually. We also value the opportunity for stockholders to express their views on the Company’s compensation of its named executive officers on an annual basis. +The result of this advisory vote on the frequency of the vote on named executive officers compensation is not binding on the Company, our board of directors, or the compensation committee of the board of directors, and will not be construed as overruling a decision by the Company, the board of directors, or the compensation committee or creating or implying any additional fiduciary duty for the Company, the board of directors, or the compensation committee. However, our board of directors values the opinions that stockholders express in their votes. The board of directors will consider the outcome of the vote and stockholder feedback when deciding how frequently to conduct the advisory vote on named executive officers. Notwithstanding our board of directors’ recommendation and the outcome of the stockholder vote, the board of directors may in the future decide to conduct “say-on-pay” votes on a more or less frequent basis. +Vote Required: +Approval of our recommendation of “Every One Year” on the advisory vote on the frequency of solicitation of stockholder approval of named executive officers compensation requires that the frequency of “One Year” must receive a plurality of votes of the holders of shares of common stock present virtually in person or represented by proxy and entitled to vote at the Company’s 2026 Annual Meeting of Stockholders. Abstentions and broker non-votes will have no effect on the outcome of the vote. +Board Recommendation: +OUR BOARD OF DIRECTORS AND THE COMPENSATION COMMITTEE OF OUR BOARD OF DIRECTORS EACH UNANIMOUSLY RECOMMENDS A VOTE TO HOLD THE ADVISORY VOTE ON EXECUTIVE COMPENSATION “EVERY ONE YEAR.” +2026 Proxy Statement +40 +Table of Contents +STOCK OWNERSHIP +Security Ownership of Certain Beneficial Owners and Management +The following table sets forth certain information with respect to the beneficial ownership of our Common Stock as of March 4, 2026: +• +each of our named executive officers; +• +each of our directors; +• +all of our directors and executive officers as a group; and +• +each person, or group of affiliated persons, known by us to beneficially own more than 5% of our Common Stock. +We have determined beneficial ownership in accordance with the rules of the SEC, and therefore it represents sole or shared voting or investment power with respect to our securities. Unless otherwise indicated below, to our knowledge, the persons and entities named in the table have sole voting and sole investment power with respect to all shares that they beneficially owned, subject to community property laws where applicable. We have deemed shares of Common Stock subject to options that are currently exercisable or exercisable within 60 days of March 4, 2026 and RSUs representing the right to receive shares of Common Stock that were deferred under the Director Deferred Compensation Plan or that vest within 60 days of March 4, 2026, to be outstanding and to be beneficially owned by the person holding the option or restricted stock unit for the purpose of computing the percentage ownership of that person but have not treated them as outstanding for the purpose of computing the percentage ownership of any other person. +We have based percentage ownership of Common Stock on 10,060,263 shares of Common Stock outstanding as of March 4, 2026. Unless otherwise indicated, the address for each beneficial owner listed in the table below is c/o Biodesix, Inc., 919 West Dillon Rd., Louisville, CO 80027. +Shares Beneficially +Owned +Name and Address of Beneficial Owner +Shares  +%   +Principal Stockholders: +Jack Schuler and entities affiliated with Jack Schuler (1) +2,333,945 +23.2 +% +Lawrence T. Kennedy, Jr. and entities affiliated with Lawrence T. Kennedy, Jr. (2) +1,302,201 +12.9 +% +John Patience and entities affiliated with John Patience (3) +397,905 +3.9 +% +Directors and Named Executive Officers: +Lawrence T. Kennedy, Jr. (4) +1,302,201 +12.9 +% +John Patience (5) +397,905 +3.9 +% +Matthew Strobeck, Ph.D. (6) +316,939 +3.1 +% +Scott Hutton (7) +155,448 +1.5 +% +Robin Harper Cowie (8) +47,348 +* +Hany Massarany (9) +43,297 +* +Jon Faiz Kayyem (10) +41,029 +* +Jean Franchi (11) +37,060 +* +Kieran O’Kane (12) +32,060 +* +All directors and executive officers as a group (11 persons) +2,410,718 +23.2 +% +* +Represents beneficial ownership of less than 1%. +2026 Proxy Statement +41 +Table of Contents +(1) +Consists of (a) 4,156 shares of common stock issuable upon the exercise of options held by Jack Schuler that are vested and exercisable within 60 days of March 4, 2026, (b) RSUs held by Mr. Schuler representing the right to receive 16,579 shares of common stock that vest within 60 days of March 4, 2026 and be deferred under the Director Deferred Compensation Plan until separation from service to the Company, (c) 1,563,210 shares of common stock held by Jack W. Schuler Living Trust, and (d) 750,000 shares of common stock held by Jack W. Schuler 2025 GRAT. Mr. Schuler is emeritus director. +(2) +Consists of (a) 520,551 shares of common stock held by Lawrence T. Kennedy, Jr. Revocable Trust UAD 6/19/01 and as amended from time to time, (b) 613,393 shares of common stock held by Lawrence T. Kennedy, Jr. Perpetuity Trust UAD 6/30/16, (c) 138,769 shares of common stock held by KFDI-B LLC, (d) RSUs held by Mr. Kennedy representing the right to receive 19,778 shares of common stock that will vest within 60 days of March 4, 2026 and be deferred under the Director Deferred Compensation Plan, and (e) 9,710 shares of common stock issuable upon the exercise of options held by Mr. Kennedy that are vested and exercisable within 60 days of March 4, 2026. +(3) +Consists of (a) 7,845 shares of common stock issuable upon the exercise of options held by Mr. Patience that are vested and exercisable within 60 days of March 4, 2026, (b) RSUs held by Mr. Patience representing the right to receive 1,361 shares of common stock that will vest within 60 days of March 4, 2026, (c) RSUs held by Mr. Patience representing the right to receive 14,245 shares of common stock that are deferred under the Director Deferred Compensation Plan until separation from service to the Company, and (d) 107,664 shares of common stock held by Patience Enterprises LP, (e) 241,480 shares of common stock held by John Patience Living Trust, dated July 23, 1993, (f) 2,649 shares of common stock held by Diane Patience, and (g) 22,661 shares of common stock held directly by John Patience. +(4) +Consists of 1,302,201 shares beneficially owned by Lawrence T. Kennedy, Jr. and entities affiliated with Mr. Kennedy, as set forth in footnote (2). +(5) +Consists of 397,905 shares beneficially owned by John Patience and entities affiliated with Mr. Patience, as set forth in footnote (3). +(6) +Consists of (a) 6,126 shares of common stock issuable upon the exercise of options held by Dr. Matthew Strobeck that are vested and exercisable within 60 days of March 4, 2026, (b) RSUs held by Dr. Strobeck representing the right to receive 23,008 shares of common stock that vest within 60 days of March 4, 2026 and be deferred under the Director Deferred Compensation Plan until separation from service to the Company, (c) 127,146 shares of common stock held by Dr. Strobeck, (d) 130,343 shares of common stock held by Birchview Fund LLC, (e) 4,483 shares of common stock held by Birchview Capital Separately Managed Account, (f) 2,033 shares of common stock held by Clajer Capital LLC and (g) 5,950 shares of common stock held in each of four UTMA accounts for the benefit of the minor children of Dr. Strobeck (for an aggregate amount of 23,800 shares). +(7) +Consists of (a) 105,798 shares of Common Stock issuable upon the exercise of options held by Scott Hutton that are vested and exercisable within 60 days of March 4, 2026, and (b) 49,650 shares of Common Stock held by Mr. Hutton. +(8) +Consists of (a) 30,204 shares of Common Stock issuable upon the exercise of options held by Robin Harper Cowie that are vested and exercisable within 60 days of March 4, 2026, and (b) 17,144 shares of Common Stock held by Ms. Harper Cowie. +(9) +Consists of (a) 8,587 shares of common stock issuable upon the exercise of options held by Hany Massarany that are vested and exercisable within 60 days of March 4, 2026, (b) RSUs held by Mr. Massarany representing the right to receive 16,536 shares of common stock vested but for which settlement has been deferred under the Director Deferred Compensation Plan until separation from service to the Company or that vest within 60 days of March 4, 2026, (c) 15,506 shares of common stock held by Mr. Massarany, and (d) 2,668 shares of common stock held by the Massarany Family Trust 11/15/2012. +(10) +Consists of (a) 9,074 shares of common stock issuable upon the exercise of options held by Dr. Jon Faiz Kayyem that are vested and exercisable within 60 days of March 4, 2026, (b) RSUs held by Dr. Kayyem representing the right to receive 14,079 shares of common stock that will vest within 60 days of March 4, 2026 and be deferred under the Director Deferred Compensation Plan until separation from service to the Company, (c) 8,872 shares of common stock held by The Jon Faiz Kayyem Revocable Trust, for which +2026 Proxy Statement +42 +Table of Contents +Dr. Kayyem and his spouse serve as co-trustees, and (d) 9,004 shares of common stock held by Dr. Kayyem. Dr. Kayyem disclaims beneficial ownership of the shares held by The Jon Faiz Kayyem Revocable Trust. +(11) +Consists of (a) 7,009 shares of common stock issuable upon the exercise of options held by Jean Franchi that are vested and exercisable within 60 days of March 4, 2026, (b) RSUs held by Ms. Franchi representing the right to receive 24,645 shares of common stock that will vest within 60 days of March 4, 2026 and be deferred under the Director Deferred Compensation Plan until separation from service to the Company, and (c) 5,406 shares of common stock held by Ms. Franchi. +(12) +Consists of (a) 21,939 shares of Common Stock issuable upon the exercise of options held by Kieran O’Kane that are vested and exercisable within 60 days of March 4, 2026, and (b) 10,121 shares of Common Stock held by Mr. O’Kane. +Delinquent Section 16(a) Reports +Based solely on a review of the Section 16(a) reports filed electronically with the SEC, and written representations from our directors and executive officers that no other reports were required, all reports filed by or on behalf of our directors and executive officers and any persons holding more than ten percent of our Common Stock were filed on a timely basis under Section 16(a), other than an inadvertent late reporting of: one transaction on one Form 4 by Scott Hutton, our Chief Executive Officer and one of our directors; one transaction on one Form 4 by Robin Harper Cowie, our Chief Financial Officer; one transaction on one Form 4 by Gary Pestano, our Chief Scientific Officer; one transaction on one Form 4 by Kieran O’Kane, our Chief Commercial Officer; and one transaction on one Form 4 by Christopher C. Vazquez, our Chief Accounting Officer. +2026 Proxy Statement +43 +Table of Contents +AUDIT MATTERS +Proposal Four: Ratification of Appointment of Independent Registered Public Accounting Firm +Our audit committee has appointed KPMG LLP as our independent registered public accounting firm for the year ending December 31, 2026. Although stockholder ratification of the appointment of KPMG LLP is not required by our bylaws, other governing documents or the law, our board of directors considers the appointment of our independent registered public accounting firm to be an important matter of stockholder concern and is submitting the appointment of KPMG LLP for ratification by our stockholders as a matter of good corporate practice. If our stockholders fail to ratify the appointment, our audit committee will review its future selection of KPMG LLP as its independent registered public accounting firm. Even if the appointment is ratified, our audit committee, in its discretion, may direct the appointment of a different independent registered public accounting firm at any time during the year if they determine that such a change would be in the best interests of the Company and our stockholders. +Our board of directors considers the appointment of KPMG LLP as our independent registered public accounting firm for 2026 to be in the best interests of the Company and our stockholders. We expect representatives of KPMG LLP to attend the Annual Meeting. They will have an opportunity to make a statement if they wish and will be available to respond to appropriate questions from stockholders. +KPMG LLP has served as our independent registered public accounting firm since 2016. +Principal Accountant Fees and Services +The following is a summary of the fees and services provided by KPMG LLP to us for the years ended December 31, 2025 and 2024. +Year Ended December 31, +2025 +2024 +Audit Fees (1) +$ +624,250 +$ +664,408 +Audit-Related Fees +- +- +Tax Fees +- +- +All Other Fees +- +- +Total +$ +624,250 +$ +664,408 +(1) +Audit Fees consist of professional services rendered by KPMG LLP for the audits of our annual financial statements and reviews of quarterly financial statements. +Pre-Approval Policies and Procedures +Our audit committee is responsible for appointing, setting compensation for, and overseeing the work of our independent registered public accounting firm. Our audit committee’s charter establishes a policy that all audit and permitted non-audit and tax services to be provided by our independent registered public accounting firm must be pre-approved by our audit committee. Our audit committee has pre-approved all such audit and permissible non-audit and tax services in accordance with this policy for the years ended December 31, 2025 and 2024. As part of this review, our audit committee considers whether the provision of any such non-audit or tax services by KPMG LLP is compatible with maintaining the independence of our independent registered public accounting firm. +2026 Proxy Statement +44 +Table of Contents +Our audit committee may delegate authority to pre-approve services to one or more of its members, provided any decisions made by such member to grant pre-approvals must be presented to the full audit committee at its next scheduled meeting. +Vote Required: +Ratification of the appointment of KPMG LLP as our independent registered public accounting firm for 2026 requires the affirmative vote of a majority of the shares present or represented by proxy and entitled to vote on such matter at the Annual Meeting. Abstentions have the same impact as votes “Against” the proposal. Brokers have discretion to vote on this proposal. +Board Recommendation: +OUR BOARD OF DIRECTORS AND THE AUDIT COMMITTEE OF OUR BOARD OF DIRECTORS EACH UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2026. +Report of the Audit Committee +The audit committee oversees our independent registered public accounting firm and assists our board of directors in fulfilling its oversight responsibilities on matters relating to the integrity of our financial statements, our compliance with legal and regulatory requirements and the independent registered public accounting firm’s qualifications and independence by meeting regularly with the independent registered public accounting firm and financial management personnel. Management is responsible for the preparation, presentation and integrity of our financial statements. +In fulfilling its oversight responsibilities, the audit committee: +• +reviewed and discussed our financial statements as of and for the year ended December 31, 2025 with management and KPMG LLP; +• +discussed with KPMG LLP the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board and the SEC; +• +received the written disclosures and the letter from KPMG LLP required by the applicable requirements of the Public Company Accounting Oversight Board; and +• +discussed the independence of KPMG LLP with that firm. +Based on the audit committee’s review and discussions noted above, the audit committee recommended to our board of directors, and our board of directors approved, that the audited financial statements be included in the 2025 Annual Report on Form 10-K for filing with the SEC. The audit committee also appointed KPMG LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2026. +Submitted by the audit committee of our board of directors: +Jean Franchi, Chair +Lawrence T. Kennedy, Jr. +Hany Massarany +Matthew Strobeck, Ph.D. +2026 Proxy Statement +45 +Table of Contents +ADDITIONAL INFORMATION +Other Matters +Our board of directors is not aware of any other matters that will be presented for consideration at the Annual Meeting. However, if any other matters are properly brought before the Annual Meeting, the persons named in the accompanying proxy intend to vote on those matters in accordance with their best judgment. +Stockholder Proposals and Nominations for Next Year’s Annual Meeting of Stockholders +In order to be considered for inclusion in the proxy materials for our 2027 annual meeting of stockholders, proposals submitted by stockholders pursuant to Rule 14a-8 under the Exchange Act must be received by our Corporate Secretary at Biodesix, Inc., 919 West Dillon Rd., Louisville, CO 80027 no later than the close of business on December 10, 2026, and also must otherwise comply with the procedures and requirements set forth in Rule 14a-8. +Alternatively, stockholders intending to present a proposal (outside of the process established in Rule 14a-8) or nominate a director for election at our 2027 annual meeting of stockholders without having the proposal or nomination included in the proxy materials for the meeting must comply with the requirements set forth in our bylaws. Our bylaws require, among other things, that our Corporate Secretary receive the proposal or nomination no earlier than the close of business on the 120 th day, and no later than the close of business on the 90 th day, prior to the first anniversary of the preceding year’s annual meeting of stockholders. Accordingly, for our 2027 annual meeting of stockholders, our Corporate Secretary must receive the proposal or nomination no earlier than the close of business on January 19, 2027 and no later than the close of business on February 18, 2027. The proposal or nomination must contain the information required by our bylaws and otherwise comply with the requirements set forth in our bylaws. +In addition to satisfying the foregoing requirements under our amended and restated bylaws, to comply with the universal proxy rules, stockholders who intend to solicit proxies in support of director nominees other than management’s nominees must provide notice that sets forth the information required by Rule 14a-19 under the Exchange Act no later than March 20, 2027. +Rule 14a-19 imposes additional requirements beyond this notice deadline, including minimum solicitation requirements and representations regarding compliance with the rule. Stockholders are advised to review Rule 14a-19 and our bylaws carefully to ensure full compliance. +Availability of Annual Report on Form 10-K +A copy the 2025 Annual Report on Form 10-K as filed with the SEC is available free of charge on our website at www.biodesix.com or on the SEC’s website at www.sec.gov. Stockholders may also obtain a copy of our 2025 Annual Report on Form 10-K, including financial statements but excluding exhibits, without charge by sending a written request to: Biodesix, Inc., Attention: Corporate Secretary, 919 West Dillon Rd., Louisville, CO 80027. +2026 Proxy Statement +46 +Table of Contents +Your vote P.O. BOX 8016, CARY, NC 27512-9903 matters! Have your ballot ready and please use one of the methods below for easy voting: Your control number Have the 12 digit control number located in the box above available when you access the website and follow the instructions. Biodesix, Inc. Internet: www.proxypush.com/BDSX Cast your vote online Annual Meeting of Stockholders Have your Proxy Card ready Follow the simple instructions to record your vote For stockholders of record as of March 23, 2026 Phone: Tuesday, May 19, 2026 1:00 PM, Mountain Time 1-866-291-6774 Annual meeting to be held virtually via the internet - please visit Use any touch-tone telephone Have your Proxy Card ready www.proxydocs.com/BDSX for more details. Follow the simple recorded instructions Mail: Mark, sign and date your Proxy Card Fold and return your Proxy Card in the postage-paid YOUR VOTE IS IMPORTANT! envelope provided PLEASE VOTE BY: 1:00 PM, Mountain Time, May 19, 2026. Virtual: You must register to attend the meeting online and/or participate at www.proxydocs.com/BDSX This proxy is being solicited on behalf of the Board of Directors The undersigned stockholder of Biodesix, Inc. hereby appoints Robin Harper Cowie and Chris Vazquez, and each or either of them, as the proxies of the undersigned, with full power of substitution and revocation, and authorizes them, and each of them, to vote all the shares of common stock of Biodesix, Inc. which the undersigned is entitled to vote at the Annual Meeting of Stockholders to be held at 1:00 PM, Mountain Time on Tuesday May 19, 2026, at www.proxydocs.com/BDSX, and any adjournment or postponement thereof upon the matters specified and upon such other matters as may be properly brought before the meeting or any adjournment or postponement thereof, conferring authority upon such proxies to vote in their discretion on such other matters as may properly come before the meeting and revoking any proxy heretofore given. THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN, SHARES WILL BE VOTED IDENTICAL TO THE BOARD OF DIRECTORS RECOMMENDATION. This proxy, when properly executed, will be voted in the manner directed herein. In their discretion, the named proxies are authorized to vote upon such other matters that may properly come before the meeting or any adjournment or postponement thereof. You are encouraged to specify your choice by marking the appropriate box (SEE REVERSE SIDE) but you need not mark any box if you wish to vote in accordance with the Board of Directors’ recommendation. The named proxies cannot vote your shares unless you sign (on the reverse side) and return this card. PLEASE BE SURE TO SIGN AND DATE THIS PROXY CARD AND MARK ON THE REVERSE SIDE Copyright © 2026 BetaNXT, Inc. or its affiliates. All Rights Reserved +Table of Contents +Biodesix, Inc. Annual Meeting of Stockholders Please make your marks like this: THE BOARD OF DIRECTORS RECOMMENDS A VOTE: FOR ALL OF THE NOMINEES LISTED IN PROPOSAL 1 AND ON PROPOSALS 2 & 4 THE BOARD RECOMMENDS THAT AN ADVISORY VOTE ON THE COMPENSATION FOR NAMED EXECUTIVE OFFICERS BE HELD EVERY 1 YEAR ON PROPOSAL 3. BOARD OF DIRECTORS PROPOSAL YOUR VOTE RECOMMENDS 1. To elect the two Class III directors named in this proxy statement to hold office until the 2029 annual meeting of stockholders; FOR WITHHOLD 1.01 Jean Franchi FOR 1.02 Hany Massarany FOR FOR AGAINST ABSTAIN 2. To approve, on a non-binding advisory basis, the compensation of our named FOR executive officers; 1YR 2YR 3YR ABSTAIN 3. To approve, on a non-binding advisory basis, the frequency of solicitation of advisory 1 YEAR votes to approve named executive officer compensation; FOR AGAINST ABSTAIN 4. To ratify the appointment of KPMG LLP as our independent registered public FOR accounting firm for the year ending December 31, 2026; NOTE: Such other business properly brought before the Annual Meeting, or any adjournment or postponement thereof. You must register to attend the meeting online and/or participate at www.proxydocs.com/BDSX Authorized Signatures - Must be completed for your instructions to be executed. Please sign exactly as your name(s) appears on your account. If held in joint tenancy, all persons should sign. Trustees, administrators, etc., should include title and authority. Corporations should provide full name of corporation and title of authorized officer signing the Proxy/Vote Form. Signature (and Title if applicable) Date Signature (if held jointly) Date \ No newline at end of file diff --git a/raw/proxies/0001439725/0001193125-26-149633/proxy_rpt.txt b/raw/proxies/0001439725/0001193125-26-149633/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..63902532006188db2163bfe3ead6627bd09cfa13 --- /dev/null +++ b/raw/proxies/0001439725/0001193125-26-149633/proxy_rpt.txt @@ -0,0 +1,56 @@ +reviewing related-party transactions; +• +approving, or as permitted, pre-approving, audit and permissible non-audit services to be performed by our independent registered public accounting firm; and +• +reviewing and assessing, at least annually, the performance of the audit committee and adequacy of its charter. +Compensation Committee +Our compensation committee consists of Messrs. Massarany and Patience and Dr. Kayyem, and the chair of our compensation committee is Mr. Massarany. Our board of directors has determined that each of Messrs. Massarany and Patience and Dr. Kayyem is independent under the applicable Nasdaq listing rules and is a “non-employee director” as defined in Rule 16b-3 promulgated under the Exchange Act. The functions of this committee include: +• +reviewing, modifying and overseeing overall compensation strategy and policies; +• +reviewing and approving the compensation arrangements and other terms of employment (including, when and if appropriate, employment agreements, severance agreements, consulting agreements and change in control or termination agreements) of our chief executive officer, other executive officers and senior management, as appropriate; +• +reviewing and recommending to the full board of directors the compensation of our directors; +• +appointing and overseeing the work of compensation consultants, legal counsel or any other advisors and consultants engaged for the purpose of advising the compensation committee; +• +reviewing, recommending to the full board of directors, as appropriate, and administering equity award plans, compensation plans and similar programs, as well as modification or termination of plans and programs; +• +establishing policies with respect to equity compensation arrangements; +• +reviewing and evaluating with the chief executive officer and the full board of directors the succession plans for our executive officers; and +• +reviewing and assessing, at least annually, the performance of the compensation committee and the adequacy of its charter. +Compensation Committee Interlocks and Insider Participation +None of the members of the compensation committee is currently, or has been at any time during 2025, one of our officers or employees. None of our executive officers currently serve, or has served during 2025, as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving as a member of our board of directors or compensation committee. +Nominating and Corporate Governance Committee +Our nominating and corporate governance committee consists of Ms. Franchi, Dr. Strobeck and Mr. Kennedy, and the chair of our nominating and corporate governance committee is Dr. Strobeck. Our board of +2026 Proxy Statement +15 +Table of Contents +directors has determined that Ms. Franchi, Dr. Strobeck and Mr. Kennedy are independent under the applicable Nasdaq listing rules. The functions of this committee include: +• +reviewing periodically and evaluating director performance of our board of directors and its applicable committees, and recommending to our board of directors and management areas for improvement; +• +identifying, evaluating, nominating and recommending individuals for membership on our board of directors; +• +reviewing with our chief executive officer the plans for succession to the offices of our executive officers and make recommendations to our board of directors with respect to the selection of appropriate individuals to succeed to these positions; +• +reviewing and recommending to our board of directors any amendments to our corporate governance policies; +• +monitoring our cybersecurity risk profile, receiving periodic updates from management on all matters related to cybersecurity, and reporting to our full board of directors on an annual or as necessary basis; and +• +reviewing and assessing, at least annually, the performance of the nominating and corporate governance committee and the adequacy of its charter. +Director Nomination Process +Selection and Nomination Process +Our board of directors is responsible for nominating members for election to our board of directors by our stockholders at our annual meetings of stockholders. Whenever a vacancy occurs on our board of directors, whether due to a newly created director position or the death, resignation, removal or retirement of an existing director, our board of directors is authorized to select a person to fill the vacancy to serve as a director until the annual meeting of stockholders at which the director’s term expires and until the election and qualification of his or her successor or, if sooner, his or her death, resignation or removal. Any increase or decrease in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors. +Criteria for Board Membership +The board of directors and the nominating and corporate governance committee will determine the appropriate characteristics, skills and experience for the board of directors as a whole and for its individual members. The board of directors and the nominating and corporate governance committee will consider the minimum general criteria set forth below, and may add any specific additional criteria with respect to specific searches, in selecting candidates and existing directors for service on the board of directors. An acceptable candidate may not fully satisfy all of the criteria, but is expected to satisfy nearly all of them. While the nominating and corporate governance committee does not have a formal policy in this regard, the diversity of the board of the directors is a consideration in evaluating candidates for director positions, among others. +The board of directors and the nominating and corporate governance committee believe that candidates for director should have certain minimum qualifications, including being able to read and understand basic financial statements, being over 21 years of age and having the highest personal integrity and ethics. In considering candidates, the board of directors and the nominating and corporate governance committee intend to +2026 Proxy Statement +16 +Table of Contents +consider such factors as possessing relevant expertise upon which to be able to offer advice and guidance to management, having sufficient time to devote to the affairs of the Company, demonstrated excellence in his or her field, having the ability to exercise sound business judgment and having the commitment to rigorously represent the long-term interests of our stockholders. +The board of directors and the nominating and corporate governance committee review candidates for director nomination in the context of the current composition of the board of directors, the operating requirements of the Company and the long-term interests of our stockholders. In conducting this assessment, the board of directors and the nominating and corporate governance committee consider age, skills, diversity and such other factors as it deems appropriate given the current needs of the board of directors and the Company to maintain a balance of knowledge, experience and capability. In the case of incumbent directors whose terms of office are set to expire, the board of directors and the nominating and corporate governance committee review such directors’ overall service to the Company during their term, including the number of meetings attended, level of participation, quality of performance, and any other relationships and transactions that might impair such directors’ independence. In the case of new director candidates, the board of directors and the nominating and corporate governance committee also determine whether the nominee must be independent for purposes of any stock exchange on which any of the Company’s capital stock is listed. +Stockholder Recommendations and Nominations +Stockholders who wish to recommend candidates may contact the nominating and corporate governance committee in the manner described below under “Board and Corporate Governance Matters—Stockholder Communications with our Board of Directors.” Stockholder nominations must be made according to the procedures required under our bylaws and described in this proxy statement under the heading “Additional Information—Stockholder Proposals and Nominations for Next Year’s Annual Meeting of Stockholders.” Stockholder-recommended candidates and stockholder nominees whose nominations comply with these procedures will be evaluated by our nominating and corporate governance committee in the same manner as other nominees. \ No newline at end of file diff --git a/raw/proxies/0001520006/0001193125-15-060943/proxy.txt b/raw/proxies/0001520006/0001193125-15-060943/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..2dff5b64ee42cc7348f016ccb414d8461e9f8de7 --- /dev/null +++ b/raw/proxies/0001520006/0001193125-15-060943/proxy.txt @@ -0,0 +1,807 @@ +DEF 14A +1 +d866768ddef14a.htm +DEFINITIVE PROXY STATEMENT +Definitive Proxy Statement +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +Washington, D.C. 20549 +SCHEDULE 14A +Proxy Statement Pursuant to Section 14(a) of the +Securities Exchange Act of 1934 +(Amendment No. ) +Filed by the +Registrant x Filed by +a Party other than the Registrant ¨ +Check the appropriate box: +¨ +Preliminary Proxy Statement +¨ +Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +x +Definitive Proxy Statement +¨ +Definitive Additional Materials +¨ +Soliciting Material Pursuant to §240. 14a-12 +MATADOR RESOURCES COMPANY +(Name of Registrant as Specified In Its Charter) +(Name of Person(s) Filing Proxy Statement, if other than the Registrant) +Payment of Filing Fee (Check the appropriate box): +x +No fee required. +¨ +Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. +(1) +Title of each class of securities to which transaction applies: +(2) +Aggregate number of securities to which transaction applies: +(3) +Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing +fee is calculated and state how it was determined): +(4) +Proposed maximum aggregate value of transaction: +(5) +Total fee paid: +¨ +Fee paid previously with preliminary materials. +¨ +Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement +number, or the Form or Schedule and the date of its filing. +(1) +Amount Previously Paid: +(2) +Form, Schedule or Registration Statement No.: +(3) +Filing Party: +(4) +Date Filed: +To the Matador Resources Company Shareholders: +On behalf of the Board of Directors of Matador Resources Company (the “Company”), we invite you to attend a special meeting of +shareholders of the Company. The special meeting will be held at the Hilton Dallas Lincoln Centre, 5410 LBJ Freeway, Dallas, Texas 75240, on April 2, 2015, at 9:30 a.m., Central Time, for the purpose of approving an amendment to the Company’s +amended and restated certificate of formation to (i) increase the amount of the Company’s authorized common stock (“Common Stock”) from 80,000,000 shares to 120,000,000 shares and (ii) increase the total number of shares of +capital stock that the Company is authorized to issue to reflect such increase in the Company’s authorized Common Stock. +The +purpose of the proposed amendment is to (i) provide sufficient additional authorized shares of Common Stock so that all of the shares of the Company’s new class of Series A Convertible Preferred Stock to be issued to HEYCO Energy Group, +Inc. upon the closing of the previously announced Agreement and Plan of Merger, dated as of January 19, 2015 (as amended, the “Merger Agreement”), as described in the accompanying proxy statement, may be converted into shares of +Common Stock and (ii) give the Company flexibility to take timely advantage of market conditions and opportunities to issue shares of Common Stock for various future corporate purposes, including potential strategic transactions (including +mergers, acquisitions and other business combinations), capital-raising or financing transactions, grants and awards under equity compensation plans, stock splits and stock dividends. +Shareholders are not being asked to approve the Merger Agreement or the transactions contemplated by the Merger Agreement (the +“Merger”), and the consummation of the Merger is not conditioned on shareholder approval of the proposed amendment. The Company expects to consummate the Merger prior to the special meeting and regardless of whether or not the proposed +amendment is approved. Information provided in the accompanying proxy statement with respect to the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement is for informational purposes only. +Our Board of Directors unanimously recommends that our shareholders vote “ FOR ” the proposed amendment. +All shareholders of record at the close of business on February 18, 2015 will be entitled to vote at the special meeting or any postponement +or adjournment thereof. A list of the shareholders is available at the Company’s offices in Dallas, Texas. +Your vote is +important. Please take the time to read the accompanying proxy statement and to vote so that your shares are represented at the special meeting. We appreciate your interest and continued support. +By Order of the Board of Directors +Joseph Wm. Foran +Chairman and Chief Executive Officer +February 25, 2015 +YOUR VOTE IS +IMPORTANT! +Whether or not you will attend the meeting, please vote as promptly as possible by using the Internet or telephone or by signing, +dating and returning your proxy card to the address listed on the card. +One Lincoln Centre +5400 LBJ Freeway, Suite 1500 +Dallas, Texas 75240 +www.matadorresources.com +NOTICE OF SPECIAL MEETING OF SHAREHOLDERS +To Be Held on April 2, 2015 +A special meeting of shareholders of Matador Resources Company (the “Company”) will be held at the Hilton Dallas Lincoln Centre, +5410 LBJ Freeway, Dallas, Texas 75240, on April 2, 2015, at 9:30 a.m., Central Time, to approve an amendment to the Company’s amended and restated certificate of formation to (i) increase the amount of authorized common stock from 80,000,000 +shares to 120,000,000 shares and (ii) increase the total number of shares of capital stock that the Company is authorized to issue to reflect such increase in the Company’s authorized common stock. Attached to this notice is a proxy +statement setting forth information with respect to the proposal and certain other information. +All shareholders of record at the close +of business on February 18, 2015 will be entitled to vote at the meeting or any postponement or adjournment thereof. A list of the shareholders is available at the Company’s offices in Dallas, Texas. +This Proxy Statement and the accompanying form of proxy are being mailed to shareholders on or about February 25, 2015. +By Order of the Board of Directors +Joseph Wm. Foran +Chairman and Chief Executive Officer +February 25, 2015 +YOUR VOTE IS +IMPORTANT! +Whether or not you will attend the meeting, please vote as promptly as possible by using the Internet or telephone or by signing, +dating and returning your proxy card to the address listed on the card. +Important Notice Regarding the Availability of Proxy +Materials for the +Special Meeting of Shareholders to Be Held on April 2, 2015: +The notice of meeting and our Proxy Statement are available for viewing, printing and downloading at https://materials.proxyvote.com/576485. +Matador Resources Company +One Lincoln Centre +5400 +LBJ Freeway, Suite 1500 +Dallas, Texas 75240 +www.matadorresources.com +PROXY STATEMENT +For +SPECIAL MEETING OF SHAREHOLDERS +To Be Held on April 2, 2015 +This Proxy Statement is being mailed on or about February 25, 2015 to the shareholders of Matador Resources Company (“Matador” or +the “Company”) in connection with the solicitation of proxies by the Board of Directors (the “Board”) of the Company to be voted at the Special Meeting of Shareholders of the Company (the “Special Meeting”) to be held +at the Hilton Dallas Lincoln Centre, 5410 LBJ Freeway, Dallas, Texas 75240 on April 2, 2015, at 9:30 a.m., Central Time, or at any postponement or adjournment thereof, for the purposes set forth in the accompanying Notice of Special Meeting of +Shareholders. The address of the Company’s principal executive office is One Lincoln Centre, 5400 LBJ Freeway, Suite 1500, Dallas, Texas 75240. +If you are a shareholder of record, you may vote in person by attending the meeting, by completing and returning a proxy by mail or by using +the Internet or telephone. You may vote your proxy by mail by marking your vote on the enclosed proxy card and following the instructions on the card. To vote your proxy using the Internet or telephone, see the instructions on the proxy form and +have the proxy form available when you access the Internet website or place your telephone call. +As previously announced, and as is +described in additional detail under the section entitled “The Merger” beginning on page 11 of this Proxy Statement, on January 19, 2015, the Company entered into an Agreement and Plan of Merger (as amended, the “Merger +Agreement”) with HEYCO Energy Group, Inc. (“HEYCO”) and Harvey E. Yates Company (the “Target”), pursuant to which the Target will merge with and into a wholly-owned subsidiary of the Company (the “Merger”) and the +Company will indirectly acquire certain oil and natural gas properties located in Lea and Eddy Counties, New Mexico. Upon the closing of the Merger (the “Closing”), which is expected to occur on February 27, 2015, the Company will pay +aggregate cash and equity consideration in the Merger, subject to certain adjustments, consisting of (i) $37.4 million in cash, including the assumption of debt, (ii) 3,140,960 shares of the Company’s common stock, $0.01 par value per +share (“Common Stock”), and (iii) 150,000 shares of a new class of the Company’s Series A Convertible Preferred Stock (“Series A Preferred Stock”). Once the Proposed Amendment (as defined below) is approved by the +Company’s shareholders and a certificate of amendment (the “Certificate of Amendment”) to the Company’s amended and restated certificate of formation (the “Certificate of Formation”) is filed with the Secretary of State +of the State of Texas (and evidence of such filing is received), the outstanding shares of Series A Preferred Stock will automatically convert into shares of Common Stock on the basis of ten shares of Common Stock for each share of Series A +Preferred Stock. +The Certificate of Formation currently authorizes the issuance of 80,000,000 shares of Common Stock. To account for the +additional shares of Common Stock into which the Series A Preferred Stock will convert, and to give the Company flexibility to take timely advantage of market conditions and opportunities to issue shares of Common Stock for various future corporate +purposes, the Company’s shareholders are being asked to approve an amendment to Section 1 of Article 4 of the Certificate of Formation to (i) increase the number of shares of Common Stock that the Company is authorized to issue to +120,000,000 and (ii) increase the total number of shares of capital stock that the Company is authorized to issue to reflect such increase in the Company’s authorized Common Stock (the “Proposed Amendment”). If the Proposed +Amendment is not approved, the Series A Preferred Stock will remain outstanding and will begin accruing dividends at a quarterly rate of $1.80 per share beginning on the date that is six months from the Closing. These materials describe the Proposed +Amendment and are being sent to the Company’s shareholders as the Company’s Proxy Statement in connection with the Special Meeting. +The named proxies will vote your shares according to your directions. When voting regarding the +approval of the Proposed Amendment, shareholders may vote for or against the Proposed Amendment or may abstain from voting. If you sign and return your proxy card but do not make any of the selections, the named proxies will vote your shares +“FOR” the Proposed Amendment. The proxy may be revoked at any time before it is exercised by filing with the Company a written revocation addressed to the Corporate Secretary, by executing a proxy bearing a later date or by attending the +Special Meeting and voting in person. +The record date for the determination of the shareholders entitled to notice of and to vote at +the Special Meeting, or any postponement or adjournment thereof, is February 18, 2015 (the “Record Date”). As of the Record Date, there were outstanding and entitled to vote 73,455,117 shares of Common Stock. +The presence, in person or by proxy, of the holders of record of a majority of the outstanding shares entitled to vote at the Special Meeting +is necessary to constitute a quorum for the transaction of business at the Special Meeting, but if a quorum should not be present, the meeting may be adjourned from time to time until a quorum is obtained. Holders of Common Stock will be entitled to +one vote per share on the Proposed Amendment and each other matter properly brought before the Special Meeting. +The Proposed Amendment +requires the affirmative vote of two-thirds of the outstanding shares of Common Stock. Shares held by a shareholder who abstains from voting on the Proposed Amendment will be included for the purpose of determining the presence of a quorum. An +abstention will effectively count as a vote cast against the Proposed Amendment. Broker non-votes will not be counted in determining the outcome of the Proposed Amendment and will not be considered present and entitled to vote on the Proposed +Amendment for quorum purposes. Pursuant to the Merger Agreement, at the Closing, HEYCO will enter into a voting agreement with the Company pursuant to which, if the Proposed Amendment is not approved at the Special Meeting, HEYCO will agree to vote +all of its shares of Common Stock and Series A Preferred Stock in favor of the Proposed Amendment at the 2015 Annual Meeting and any other meeting at which action is to be taken with respect to the approval of the Proposed Amendment. Please see the +section entitled “Ancillary Agreements—Voting Agreement” beginning on page 16 of this Proxy Statement for a description of the Voting Agreement. +The cost of preparing and mailing this Proxy Statement, the accompanying Notice of Special Meeting and proxy and any additional materials +relating to the Special Meeting and the cost of soliciting proxies will be borne by the Company. We have engaged MacKenzie Partners, Inc. (the “Proxy Solicitor”), a professional solicitation firm, as proxy solicitor for the Special +Meeting, to whom we expect to pay approximately $30,000 for the services it will perform in connection with the Special Meeting. Further, the Company will reimburse the Proxy Solicitor for its reasonable out-of-pocket expenses in connection +therewith. +In addition to solicitation by mail, our directors, officers and employees may solicit proxies from shareholders by +telephone or facsimile or in person. None of our directors, officers or employees will receive additional compensation for such solicitation. We will supply banks, brokers, dealers and other custodian nominees and fiduciaries with proxy materials to +enable them to send a copy of such materials by mail to each beneficial owner of shares of Common Stock that they hold of record and will, upon request, reimburse them for their reasonable expenses in doing so. +Shareholders are not being asked to approve the Merger and the Merger is not conditioned on shareholder approval of the Proposed Amendment. +The Company expects to consummate the Merger prior to the Special Meeting and regardless of whether or not the Proposed Amendment is approved. Information provided herein with respect to the Merger Agreement, the Merger and the transactions +contemplated thereby is for informational purposes only. +2 +SUMMARY TERM SHEET +At the Special Meeting, you will be asked to approve an amendment to Section 1 of Article 4 of the Company’s amended and restated +certificate of formation (the “Certificate of Formation”) to (i) increase the number of shares of Common Stock that the Company is authorized to issue to 120,000,000 and (ii) increase the total number of shares of capital stock +that the Company is authorized to issue to reflect such increase in the Company’s authorized Common Stock (the “Proposed Amendment”). Once the Proposed Amendment is approved by the Company’s shareholders and the Certificate of +Amendment is filed with the Secretary of State of the State of Texas (and evidence of such filing is received), all issued and outstanding shares of Series A Preferred Stock will automatically convert into shares of Common Stock. The Series A +Preferred Stock will be issued in connection with the Merger Agreement and is described in more detail beginning on page 15 of this Proxy Statement. Following is a Summary Term Sheet regarding the Merger Agreement and the transactions +contemplated thereby. +Parties to the Merger Agreement: +HEYCO Energy Group, Inc., a Delaware corporation +Harvey E. Yates Company, a New Mexico corporation, which will reincorporate as a Texas corporation prior to the Closing +Matador Resources Company, a Texas corporation +MRC Delaware Resources, LLC, a Texas limited liability company (“MRC Delaware”) +The Merger: +On January 19, 2015, the Company entered into an Agreement and Plan of Merger (as amended, the “Merger Agreement”) with HEYCO and the Target in which the Target will merge with and into MRC Delaware (the “Merger”), with MRC +Delaware continuing as a wholly-owned subsidiary of the Company and holding all of the assets of the Target, including certain oil and natural gas properties in Lea and Eddy Counties, New Mexico. +Board Appointment: +Subject to the Closing, which is expected to occur on February 27, 2015, the Board has (i) increased the size of the Board from eight to nine members and (ii) appointed George M. Yates, the Chairman, President and Chief Executive Officer of +HEYCO, to fill the vacancy created by such increase until the next election of directors by the Company’s shareholders and, thereafter, until his successor is duly appointed. In addition, subject to the Board’s fiduciary duties, the +Company has agreed in the Merger Agreement to nominate Mr. Yates for re-election at the Company’s 2015 Annual Meeting. +Consideration: +The Company will pay aggregate cash and equity consideration in the Merger, subject to certain adjustments, consisting of (i) $37.4 million in cash (including the assumption of debt), (ii) +3,140,960 shares of Common Stock and (iii) 150,000 shares of Series A Preferred Stock. The Company and HEYCO have agreed to deposit at the Closing a portion of the shares of Series A Preferred Stock issued pursuant to the Merger Agreement into +escrow to satisfy potential title defect and environmental condition claims. The shares of Series A Preferred Stock held in escrow will be subject to the terms of an escrow agreement to be entered into at the Closing among the Company, +3 +HEYCO and an escrow agent to be agreed upon by the Company and HEYCO. The private placement of the Common Stock and Series A Preferred Stock will be made in reliance upon an exemption from the +registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), pursuant to Section 4(a)(2) thereof. +Rights and Preferences of the Series A +Preferred Stock: +The shares of Series A Preferred Stock will be entitled to receive any cash dividends declared on the Common Stock on an as-converted basis. In addition, if the Proposed Amendment is not approved by the Company’s shareholders within six +months after the Closing, the holders of Series A Preferred Stock will be entitled to receive dividends on the Series A Preferred Stock in cash at a quarterly rate of $1.80 per share of Series A Preferred Stock. The holders of Series A Preferred +Stock will vote together with the holders of Common Stock as a single class on an as-converted basis, except with respect to matters to which the holders of Common Stock have a separate class vote as required by applicable law or regulation, in +which case the holders of Common Stock will vote as a separate class. The holders of Series A Preferred Stock will vote as a separate class on matters that would adversely affect the holders of Series A Preferred Stock as compared to the holders of +Common Stock. +Conversion of Series A Preferred +Stock: +Once the Proposed Amendment is approved by the Company’s shareholders and the Certificate of Amendment is filed with the Secretary of State of the State of Texas (and evidence of such filing is received), all issued and outstanding shares +of Series A Preferred Stock will automatically convert into shares of Common Stock. +Ancillary Agreements : +The Company and HEYCO have agreed to deposit at the Closing a portion of the shares of Series A Preferred Stock issued pursuant to the Merger Agreement into escrow to satisfy potential title defect and environmental condition claims. The shares +of Series A Preferred Stock held in escrow will be subject to the terms of an escrow agreement to be entered into at the Closing among the Company, HEYCO and an escrow agent to be agreed upon by the Company and HEYCO. The Company has also agreed to +enter into a registration rights agreement with HEYCO at the Closing, pursuant to which the Company will be required, upon request from HEYCO at any time on or after the one year anniversary of the Closing, to file and maintain a shelf registration +statement with respect to the resale of the shares of Common Stock issued as consideration in the Merger and upon conversion of the Series A Preferred Stock, respectively, and to provide piggyback registration rights for such shares of Common Stock. +In addition, at the Closing, HEYCO will enter into a voting agreement with the Company pursuant to which, if the Proposed Amendment is not approved at the Special Meeting, HEYCO will agree to vote all of its shares of Common Stock and Series A +Preferred Stock in favor of the Proposed Amendment at the 2015 Annual Meeting and any other meeting at which action is to be taken with respect to the approval of the Proposed Amendment. +4 +INFORMATION ABOUT THE SPECIAL MEETING +We are furnishing you this Proxy Statement in connection with the solicitation of proxies by the Board to be used at the Special Meeting and +any adjournment thereof. The Special Meeting will be held on April 2, 2015 at 9:30 a.m., Central Daylight Time. We are sending this Proxy Statement to our shareholders on or about February 25, 2015. +All references in this Proxy Statement to “we,” “our,” “us,” “Matador” or the “Company” +refer to Matador Resources Company, including our subsidiaries and affiliates. +What is the purpose of the Special Meeting? +At the Special Meeting, shareholders will vote on the Proposed Amendment. Shareholders are not being asked to approve or authorize the Merger +Agreement, the Merger or the other transactions contemplated by the Merger Agreement. The Merger is not conditioned on shareholder approval of the Proposed Amendment. The Company expects to consummate the Merger prior to the Special Meeting and +regardless of whether or not the Proposed Amendment is approved. Information provided herein with respect to the Merger Agreement, the Merger and the transactions contemplated thereby is for informational purposes only. +What is the Board’s voting recommendation? +FOR the approval of the Proposed Amendment. +Who is entitled to vote? +Shareholders as of the close of business on February 18, 2015 are eligible to vote their shares at the Special Meeting. As of the Record Date, +there were outstanding and entitled to vote 73,455,117 shares of Common Stock. Holders of Common Stock will be entitled to one vote per share on the Proposed Amendment and each other matter properly brought before the Special Meeting. +How do I vote? +You may: +• +attend the Special Meeting and vote in person; or +• +dial the toll-free number listed on the Notice, proxy card or voting instruction form provided by your broker. Easy-to-follow voice prompts allow you to vote your shares and confirm that your voting instructions have +been properly recorded. Telephone voting will be available 24 hours a day and will close at 11:59 p.m. Eastern Daylight Time on April 1, 2015; or +• +go to the website www.proxyvote.com and follow the instructions, then confirm that your voting instructions have been properly recorded. If you vote using the website, you can request electronic delivery of future proxy +materials. Internet voting will be available 24 hours a day and will close at 11:59 p.m. Eastern Daylight Time on April 1, 2015; or +• +if you received a paper copy of your proxy materials and elect to vote by written submission, mark your selections on the proxy card, date and sign it, and return the card in the pre-addressed, postage-paid envelope +provided. +5 +Who may I contact if I have any questions or need assistance in voting my shares? +If you have any questions about the Special Meeting or require assistance in voting your shares, please contact our proxy solicitor, MacKenzie +Partners, at: +MacKenzie Partners, Inc. +105 Madison Ave +New York, NY +10016 +Call Toll-Free (800) 322-2885 +Call Collect (212) 929-5500 +Email: proxy@mackenziepartners.com +Will each +shareholder in our household receive proxy materials? +Generally, no. To the extent you are receiving printed proxy materials, we try +to provide only one set of proxy materials to be delivered to multiple shareholders sharing an address, unless you have given us other instructions. Any shareholder at a shared address may request delivery of single or multiple copies of printed +proxy materials for future meetings by contacting us at: +Matador Resources Company +Attention: Corporate Secretary +5400 LBJ Freeway, Suite 1500 +Dallas, Texas 75240 +Email: investors@matadorresources.com +Telephone: (972) 371-5200 +We hereby undertake to deliver promptly, upon written or oral request, a copy of proxy materials to a shareholder at a shared address to which +a single copy of the proxy materials was delivered. Requests should be directed to the Corporate Secretary at the address or phone number set forth above. +Who will be admitted to the Special Meeting? +Admission to the Special Meeting will be limited to our shareholders of record, persons holding proxies from our shareholders, beneficial +owners of our Common Stock and our employees. If your shares are registered in your name, we will verify your ownership at the meeting in our list of shareholders as of the Record Date. If your shares are held through a broker, bank or other +nominee, you must bring proof of your ownership of the shares. This proof could consist of, for example, a bank or brokerage firm account statement or a letter from your bank or broker confirming your ownership as of the Record Date. You may also +send proof of ownership to us at Matador Resources Company, Attention: Corporate Secretary, 5400 LBJ Freeway, Suite 1500, Dallas, Texas 75240, or email: investors@matadorresources.com before the Special Meeting, and we will send you an admission +card. +If I vote via telephone or the Internet or by mailing my Proxy Card, may I still attend the Special Meeting? +Yes. +What if I want to change my vote? +You may revoke your proxy before it is voted by submitting a new proxy with a later date (by mail, telephone or Internet), by voting +at the Special Meeting or by filing a written revocation with our Corporate Secretary. Your attendance at the Special Meeting will not automatically revoke your proxy. +6 +What constitutes a quorum? +A majority of the shares entitled to vote, present in person or represented by proxy, constitutes a quorum. If you vote by telephone or +Internet or by returning your Proxy Card, you will be considered part of the quorum. The Inspector of Election will treat shares represented by a properly executed proxy as present at the meeting. Shares held by a shareholder who abstains from +voting on the Proposed Amendment will be included for the purpose of determining the presence of a quorum. Broker non-votes will not be considered present and entitled to vote on the Proposed Amendment for quorum purposes. A broker non-vote occurs +when a nominee holding shares for a beneficial owner submits a proxy but does not vote on a particular proposal because the nominee does not have discretionary voting power for that item and has not received instructions from the beneficial owner. +How many votes will be required to approve the Proposed Amendment? +The Proposed Amendment requires the affirmative vote of two-thirds of the outstanding shares of Common Stock. Shares cannot be voted at the +Special Meeting unless the holder of record is present in person or by proxy. All shares that have been properly voted pursuant to a proxy and not revoked will be voted at the meeting. If you sign and return your proxy but do not make any of the +selections, the named proxies will vote your shares “FOR” the Proposed Amendment. +Can brokers who hold shares in street name vote those +shares if they have received no instructions? +Under the rules of the New York Stock Exchange (“NYSE”), brokers may not vote +the shares held by them in street name for their customers and for which they have not received instructions, except with respect to a routine matter. The Proposed Amendment is not considered a routine matter. Accordingly, brokers may not vote your +shares on the Proposed Amendment if you have not given specific instructions as to how to vote. Please be sure to give specific voting instructions to your broker so that your vote will be counted. +How will you treat abstentions and broker non-votes? +Shares of a shareholder who abstains from voting on the Proposed Amendment will be included for the purpose of determining the presence of a +quorum, but an abstention will effectively count as a vote cast against the Proposed Amendment. Broker non-votes will not be counted in determining the outcome of the Proposed Amendment. +Who pays the solicitation expenses? +The cost of preparing and mailing this Proxy Statement, the accompanying Notice of Special Meeting and proxy and any additional materials +relating to the Special Meeting and the cost of soliciting proxies will be borne by the Company. We have engaged MacKenzie Partners, Inc. (the “Proxy Solicitor”), a professional solicitation firm, as proxy solicitor for the Special +Meeting, to whom we expect to pay approximately $30,000 for the services it will perform in connection with the Special Meeting. Further, the Company will reimburse the Proxy Solicitor for its reasonable out-of-pocket expenses in connection +therewith. +In addition to solicitation by mail, proxies may be solicited personally by our directors, officers or employees, none of whom +will receive additional compensation for such solicitation. Those holding shares of Common Stock of record for the benefit of others, or nominee holders, are being asked to distribute proxy soliciting materials to, and request voting instructions +from, the beneficial owners of such shares. We will reimburse nominee holders for their reasonable out-of-pocket expenses. +7 +Where can I find the voting results of the Special Meeting? +We will announce preliminary voting results at the Special Meeting, and we will publish final results in a Current Report on Form 8-K that will +be filed with the SEC within four business days of the Special Meeting. You may obtain a copy of this and other reports free of charge at www.matadorresources.com, or by contacting our Investor Relations Department at (972) 371-5200 or +investors@matadorresources.com or by accessing the SEC’s website at www.sec.gov. +Where can I contact the Company? +Our mailing address is: +Matador Resources Company +5400 LBJ Freeway, Suite 1500 +Dallas, Texas 75240 +Our telephone number is (972) 371-5200. +Our email address is investors@matadorresources.com. +8 +APPROVAL OF THE AMENDMENT TO THE AMENDED AND RESTATED CERTIFICATE OF FORMATION TO INCREASE THE +AMOUNT OF AUTHORIZED COMMON STOCK +Introduction +The Certificate of Formation currently authorizes the issuance of 80,000,000 shares of the Company’s Common Stock. On January 19, +2015, the Board unanimously adopted a resolution approving, and recommending that the Company’s shareholders approve, an amendment to Section 1 of Article 4 of the Certificate of Formation to (i) increase the number of shares of +Common Stock that the Company is authorized to issue to 120,000,000 and (ii) increase the total number of shares of capital stock that the Company is authorized to issue to reflect such increase in the Company’s authorized Common Stock. +As of the Record Date, there were 73,455,117 shares of Common Stock outstanding and 37,290 shares of Common Stock held in treasury by +the Company. In addition to these shares, as of the Record Date, there were 638,573 shares of Common Stock reserved for issuance under the Company’s equity compensation plans and 2,562,106 shares of Common Stock issuable upon conversion of +outstanding options and/or the vesting of outstanding restricted stock units issued by the Company. Accordingly, as of the Record Date, the Company had only 3,306,914 shares of Common Stock available for other corporate purposes, including the +shares of Common Stock to be issued to HEYCO at the Closing. +Purpose of the Proposed Amendment +The purpose of the Proposed Amendment is to (i) provide sufficient additional authorized shares of Common Stock so that all of the +outstanding shares of Series A Preferred Stock issued to HEYCO in connection with the Merger may be converted into shares of Common Stock and (ii) give the Company flexibility to take timely advantage of market conditions and opportunities to +issue shares of Common Stock for various future corporate purposes, including potential strategic transactions (including mergers, acquisitions and other business combinations), capital-raising or financing transactions, grants and awards under +equity compensation plans, stock splits and stock dividends. +As a general matter, the additional shares of Common Stock would be +available for issuance without further action by shareholders unless such action is required by applicable law or the rules of any stock exchange on which the Common Stock may be listed. +If the Proposed Amendment is approved, approximately 1,500,000 shares of Common Stock will be issued to the holders of Series A Preferred +Stock in conversion of the 150,000 shares of Series A Preferred Stock to be issued to HEYCO at the Closing (subject to adjustment pursuant to the Merger Agreement, and some of which shares of Series A Preferred Stock will be held in an escrow +account pursuant to the Merger Agreement and related escrow agreement). Other than such issuance to HEYCO upon conversion of the Series A Preferred Stock, the Company has no other present plans, commitments, arrangements, understandings or +agreements, written or otherwise, to issue any of the additional shares of Common Stock that would be authorized by the Proposed Amendment. +The Board believes that the Proposed Amendment is necessary to provide sufficient additional authorized shares of Common Stock so that all of +the outstanding shares of Series A Preferred Stock issued to HEYCO in connection with the Merger may be converted into shares of Common Stock and to give the Company flexibility to issue shares of Common Stock for future corporate needs. +Accordingly, the Board has declared the Proposed Amendment to be advisable and in the best interests of the Company and its shareholders. Shareholder approval of the Proposed Amendment is not a condition to the Merger. The Company expects to +consummate the Merger prior to the Special Meeting and regardless of whether or not the Proposed Amendment is approved. +9 +Text of the Proposed Amendment +The Company proposes to amend Section 1 of Article 4 of the Certificate of Formation so that it would state in its entirety as follows: +“ Classes of Stock and Authorized Shares . The Corporation is authorized to issue two classes of stock which shall be +designated, respectively, “Common Stock” and “Preferred Stock.” The aggregate number of shares of all classes of stock which the Corporation shall have authority to issue is one hundred twenty-two million (122,000,000), +consisting of (a) one hundred twenty million (120,000,000) shares of Common Stock having a par value of $0.01 per share (“Common Stock”), and (b) two million (2,000,000) shares of Preferred Stock, par value $0.01 per +share (“Preferred Stock”).” +The only substantive changes that would be made to Section 1 of Article 4 of the +Certificate of Formation, as currently in effect, would be to increase the number of shares of Common Stock that the Company may issue from 80,000,000 shares to 120,000,000 shares and to reflect a corresponding increase in the aggregate number of +shares of capital stock that may be issued from 82,000,000 to 122,000,000 shares. +Potential Effects of the Proposed Amendment +If the Proposed Amendment is approved by the Company’s shareholders, the additional authorized shares of Common Stock would have rights +identical to holders of the Company’s currently outstanding shares of Common Stock. Under the Certificate of Formation, holders of Common Stock do not have preemptive rights to subscribe to additional securities which may be issued by the +Company (including Series A Preferred Stock or any new issuances of Common Stock), which means that current shareholders do not have a prior right to purchase any new issue of our capital stock in order to maintain their proportionate ownership. +Future issuances of shares of Common Stock, including the conversion of Series A Preferred Stock into Common Stock (as discussed herein), +or securities convertible into shares of Common Stock could have a dilutive effect on the Company’s earnings per share, book value per share and the voting interest and power of current shareholders since holders of Common Stock are not +entitled to preemptive rights. +The Board has not authorized the increase in the authorized number of shares of Common Stock with the +intention of using the additional shares for anti-takeover purposes, although the Company could theoretically use the additional shares to make it more difficult, or to discourage an attempt, to acquire control of the Company. The Board is not aware +of any pending or threatened efforts to acquire control of the Company. +Appraisal Rights +Under the Texas Business Organizations Code (the “TBOC”), the Company’s shareholders are not entitled to appraisal or +dissenter’s rights with respect to the Proposed Amendment, and the Company will not independently provide its shareholders with any such rights. +Timing of the Proposed Amendment +If +the Proposed Amendment is approved by the Company’s shareholders, it will become effective upon the filing of a Certificate of Amendment to the Certificate of Formation with the Secretary of State of the State of Texas, which the Company +expects to file promptly after the Special Meeting. If the Proposed Amendment is not approved by the Company’s shareholders, the number of authorized shares of Common Stock will remain unchanged. +Board Recommendation +The Board +unanimously recommends that shareholders vote “FOR” approval of the Proposed Amendment. +10 +THE MERGER +This section presents information on the Merger, the Merger Agreement and the transactions contemplated by the Merger Agreement. You are not being asked to +vote on or approve the Merger Agreement, the Merger or the transactions contemplated by the Merger Agreement. Shareholder approval of the Proposed Amendment is not a condition to closing the Merger. The Company expects to consummate the Merger prior +to the Special Meeting and regardless of whether or not the Proposed Amendment is approved. The information provided herein regarding the Merger Agreement, the Merger and the transactions contemplated by the Merger Agreement is for informational +purposes only. +General +Pursuant +to the Merger Agreement, and subject to its terms and conditions, the Target will merge with and into MRC Delaware and the Target’s separate corporate existence will cease, with MRC Delaware continuing as a wholly-owned subsidiary of the +Company and holding all of the assets of the Target, which, at the Closing, will consist of certain oil and natural gas properties in Lea and Eddy Counties, New Mexico (together with related equipment, contracts, records and other assets, the +“Assets”). HEYCO will receive the consideration described below. The Closing is expected to occur on February 27, 2015, subject to the satisfaction or waiver of all of the conditions to closing specified in the Merger Agreement. The +Merger will become effective as of the date and time specified in the certificate of merger filed by the parties with the Secretary of State of the State of Texas or such other date and time the parties agree. +You are not being asked to vote on or approve the Merger Agreement, the Merger or the transactions contemplated by the Merger Agreement. +Shareholder approval of the Proposed Amendment is not a condition to closing the Merger. The Company expects to consummate the Merger prior to the Special Meeting and regardless of whether or not the Proposed Amendment is approved by shareholders. +The information provided herein regarding the Merger Agreement, the Merger and the transactions contemplated by the Merger Agreement is for informational purposes only. +The Parties to the Merger Agreement +Matador Resources Company +The Company is an independent energy company founded in July 2003 and engaged in the exploration, development, production and acquisition of +oil and natural gas resources in the United States, with an emphasis on oil and natural gas shale and other unconventional plays. The Company’s current operations are focused primarily on the oil and liquids-rich portion of the Eagle Ford shale +play in South Texas and the Wolfcamp and Bone Spring plays in the Permian Basin in Southeast New Mexico and West Texas. The Company also operates in the Haynesville shale and Cotton Valley plays in Northwest Louisiana and East Texas. +The Company’s Common Stock is traded on the NYSE under the symbol “MTDR.” On January 16, 2015, the last trading day +immediately preceding the public announcement of the Merger, the Company’s Common Stock closed at a price of $21.42 per share. As of the Record Date, the Company had approximately 350 shareholders of record. +For further information concerning the Company, reference is made to the reports and other information the Company files with the SEC, +including the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013 and Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2014, both of which are incorporated herein by this +reference. Please see “Where You Can Find Additional Information; Incorporation by Reference” below. +11 +MRC Delaware +MRC Delaware is a wholly-owned subsidiary of the Company and was formed in Texas in January 2015 solely for the purpose of facilitating the +Merger and holding the Assets following the Merger. MRC Delaware has not carried on any activities to date, except for activities incidental to its formation and activities undertaken in connection with the transactions contemplated by the Merger +Agreement. +HEYCO Energy Group +HEYCO is a U.S. holding company with subsidiaries and affiliates active in upstream oil and natural gas operations in the United States and +Europe. It is privately owned by members of the Yates family of Southeastern New Mexico, who have been active in the upstream oil and natural gas business since the 1920s. +HEYCO corporate headquarters are located at 2911 Turtle Creek Blvd., Suite 250, Dallas, Texas 75219 and its telephone phone number is +(214) 219-2998. +Harvey E. Yates Company +The Target is a subsidiary of HEYCO and owns acreage located in Lea and Eddy Counties, New Mexico. Over 95% of the Target’s acreage +consists of state and federal leases and essentially all acreage is currently held by production. Approximately one-third of the acreage is operated, one-third is non-operated, and operations on the remaining one-third will be pursued by the Company +under various operating, farm-in and other agreements. +The Target’s corporate headquarters are located at 2911 Turtle Creek Blvd., +Suite 250, Dallas, Texas 75219 and its telephone phone number is (214) 219-2998. +Merger Consideration +The Company will pay aggregate cash and equity consideration in the Merger, subject to certain adjustments, including for the operation of the +Assets from September 1, 2014 until the Closing, title defects and environmental conditions, consisting of (i) $37.4 million in cash (including the assumption of debt), (ii) 3,140,960 shares of Common Stock and (iii) 150,000 +shares of Series A Preferred Stock (collectively, the “Merger Consideration”). The private placement of the Common Stock and Series A Preferred Stock will be made in reliance upon an exemption from the registration requirements of the +Securities Act pursuant to Section 4(a)(2) thereof. +Reasons for Engaging in the Transaction +The Board unanimously (i) determined that the Merger Agreement and the transactions contemplated by the Merger Agreement, including the +Merger, are in the best interests of the Company and its shareholders and (ii) approved the Merger Agreement and the transactions contemplated thereby. +In evaluating the Merger Agreement and related transactions contemplated by the Merger Agreement, the Board consulted with the Company’s +management and advisors and, in approving and reaching its determination that the Merger Agreement and such transactions are in the best interests of the Company and its shareholders, the Board considered the following factors that supported such +determination: +• +the view that the transactions contemplated by the Merger Agreement meet the strategic objectives established by the Board and management of the Company with respect to achieving increased operational scale in the +Delaware Basin and strengthening the Company’s financial position; +• +the fact that, following the transactions contemplated by the Merger Agreement, the Company’s shareholders will have the opportunity to participate in the significant value creation of the transactions contemplated +by the Merger Agreement and benefit from any increases in the value of the Assets; +12 +• +the fact that essentially all of the acreage to be acquired in the Merger is held by production from existing wells and production units; +• +the view that the transactions contemplated by the Merger Agreement should result in an improved potential total return to the Company’s shareholders; +• +the opportunity to align with the Target, an experienced exploration and production company in the state of New Mexico, and its Chairman, Chief Executive Officer and President, George M. Yates, a respected and +experienced oil and natural gas professional; +• +the attractive location of the Assets, in relation to the Company’s existing Permian Basin acreage; +• +the significant experience and tenure of existing employees of the Target; and +• +all of the terms and conditions of the Merger Agreement, including, among other things, the representations, warranties, covenants and agreements of the parties, the conditions to the Closing, the form and structure of +the consideration being paid and the termination rights. +The above discussion of the information and factors considered by +the Board is not intended to be exhaustive, but includes the material matters considered. In reaching its determination to approve the Merger Agreement and the transactions contemplated thereby, the Board did not quantify, rank or assign any +relative or specific weight to the foregoing factors, and individual members of the Board may have considered various factors differently. The Board did not undertake to make any specific determination as to whether any factor, or any particular +aspect of any factor, supported or did not support its ultimate determination. The Board based its recommendation on the totality of the information presented. +Federal Income Tax Consequences of the Merger +The following disclosure is based on the Internal Revenue Code of 1986, as amended (the “Code”), laws, regulations, rulings and +decisions in effect as of the date of the Merger, all of which are subject to change, possibly with retroactive effect, and to differing interpretations. We did not request or receive a ruling from the Internal Revenue Service with regard to the +consequences of the Merger. Nevertheless, it is a condition to the completion of the Merger that we obtain an opinion from counsel that the Merger will qualify as a reorganization under Section 368(a) of the Code. Opinions of counsel are based +on, among other things, current law and certain assumptions and representations as to factual matters, which if incorrect in certain material respects would jeopardize the conclusions reached by counsel in its opinion. Furthermore, there can be no +assurance that future legislation, regulations, administrative rulings or court decisions would not alter the consequences set forth below. +The Merger is intended to qualify as a reorganization under Section 368(a) of the Code. Assuming the Merger qualifies as such a +reorganization, no gain or loss will be recognized by the Company or the Target as a result of the Merger. +Legal and Regulatory Requirements +In connection with the Merger, except for the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust +Improvements Act of 1976, as amended (the “HSR Act”), and the filing of a certificate of merger with the Secretary of State of the State of Texas, no federal or state regulatory requirements or approvals are required to be complied with or +obtained. On January 27, 2015, the Company and HEYCO completed filings with the Federal Trade Commission and Department of Justice under the HSR Act, and requested early termination of the applicable waiting periods thereunder. On February 6, +2015, the Company and HEYCO received early termination of the applicable waiting periods under the HSR Act. +Texas law governs the steps +that the Company, which is a Texas corporation, is required and/or permitted to take in issuing stock. Under Texas law, Matador shareholder approval was not required to approve the Merger +13 +Agreement and is not be required to consummate the Merger. In addition, advance shareholder approval was not required to create or issue shares of the Series A Preferred Stock. The Company’s +Certificate of Formation authorizes us to issue up to 2,000,000 shares of preferred stock and gives the Board the authority to create one or more classes of preferred stock and to designate the rights, privileges and preferences of each such class. +The Merger Agreement is not conditioned on the approval of the Proposed Amendment. If, for any reason, the Company’s shareholders do +not approve the Proposed Amendment at the Special Meeting as set forth in this Proxy Statement, it would have no impact on the effectiveness of the Merger or the Company’s ability to consummate the Merger. +The Common Stock and Series A Preferred Stock will be issued to HEYCO in a private placement of securities exempt from registration under +Section 4(a)(2) of the Securities Act. The Company’s reliance on the exemption from the registration requirement afforded by Section 4(a)(2) of the Act is based on the following: +• +HEYCO was advised prior to the Merger Agreement that, among other things, none of the shares of Common Stock or Series A Preferred Stock that would be issued pursuant to the Merger Agreement nor any of the shares of +Common Stock issuable upon conversion of the Series A Preferred Stock would be registered under the Securities Act and therefore none of the issued or issuable shares would be transferable. +• +HEYCO was provided access to the Company’s recent filings with the SEC. +• +All communications with HEYCO were effected without any general solicitation or public advertising. +• +Pursuant to Section 5.2(g)(iv) of the Merger Agreement, HEYCO represented and warranted to the Company and MRC Delaware that HEYCO is an accredited investor within the meaning of Rule 501 of Regulation D under the +Securities Act, and that HEYCO is acquiring the Common Stock and Series A Preferred Stock for its own account for investment and not with a view to, or for sale or other disposition in connection with, any distribution of all or any part thereof, +except in compliance with applicable federal and state securities laws. +Background of the Merger +The terms of the Merger Agreement are the result of arm’s-length negotiations between certain executive officers and representatives of +the Company and HEYCO. The following is a summary of the background of these negotiations. +Joseph Wm. Foran, Chairman and Chief Executive +Officer of the Company, and George M. Yates, Chairman, Chief Executive Officer and President of HEYCO, have known each other since the early 1980s and have conducted business with each other’s companies from time to time. +On an ongoing basis, the Company evaluates many opportunities, including acquisitions of oil and natural gas properties and oil and natural +gas companies in its areas of interest. +In May 2014, a disinterested third party contacted Van H. Singleton, II, the Company’s +then Vice President of Land, regarding the fact that HEYCO may have acreage that was complementary to the Company’s existing Permian Basin acreage and that HEYCO may be considering its alternatives for developing its acreage. Mr. Singleton +advised Mr. Foran of this possibility. Then in early September 2014, Mr. Foran contacted Mr. Yates about the Company’s interest in certain of HEYCO’s Delaware Basin acreage. Following that conversation, on September 5, +2014, Trent Green, Chief Operating Officer of the Target, and other representatives of HEYCO met with the Company’s management team and technical staff, including Mr. Foran, Mr. Singleton, Matthew V. Hairford, President, David E. +Lancaster, Executive Vice President, Chief Operating Officer and Chief Financial Officer, and Bradley M. Robinson, Vice President of Reservoir Engineering and Chief Technology Officer, and provided an overview of the Target’s oil and natural +gas properties. +14 +Following the technical overview of HEYCO’s properties, the Company and HEYCO entered into a +confidentiality agreement, and the Company was provided with a confidential information memorandum related to the Target. Following the receipt of this confidential information memorandum, the parties had further discussions about the potential +transaction and additional materials were provided by representatives of HEYCO to representatives of the Company to assist the Company in evaluating the Target. +During September 2014, representatives of HEYCO were also conducting a series of presentations to other industry participants regarding +strategic alternatives for the Target’s properties and business. During this period, HEYCO and the Company continued to discuss initial matters related to a possible transaction, including their relative plans and objectives for the Assets. +In early October 2014, HEYCO’s financial advisor advised the Company that HEYCO had concluded its presentations to other +industry participants and was requesting that parties interested in conducting a transaction with respect to the Target or the Assets provide a proposal outlining the terms upon which such a transaction could be completed. On October 10, 2014, +Craig N. Adams, Executive Vice President—Land & Legal of the Company, sent a proposal on behalf of the Company to Mr. Yates relating to the potential acquisition by the Company of certain of HEYCO’s Delaware Basin acreage. On +October 13, 2014, representatives of HEYCO contacted Mr. Adams and asked that additional information be included in the Company’s proposal. +On October 21, 2014, representatives of the Company, including Mr. Foran, Mr. Hairford, Mr. Adams, Mr. Singleton and +Mr. Robinson, met with representatives of HEYCO, including Mr. Yates and Tara Lewis, Vice President of HEYCO. During such meeting, the Company provided HEYCO with a draft letter of intent related to a potential acquisition of certain +properties of the Target. On November 6, 2014, representatives of HEYCO sent a revised version of the letter of intent on behalf of HEYCO to Mr. Foran proposing certain changes to the terms of the letter of intent initially proposed by the +Company. Thereafter, representatives of each of the Company and HEYCO negotiated the terms of the letter of intent and exchanged several drafts of the letter of intent, and on November 19, 2015, the Company and HEYCO executed a letter of intent +pertaining to the potential acquisition of the Target by the Company. Shortly thereafter, legal counsel for the parties began drafting the definitive documents related to the potential transaction. +On November 25, 2014, representatives of the Company distributed an initial draft of the Merger Agreement to representatives of HEYCO. +Over the course of the next several weeks and culminating in the execution of the Merger Agreement and other related agreements, the management teams and legal advisors of the Company and HEYCO had frequent negotiations telephonically and in person +regarding the terms of the Merger Agreement and related agreements. In particular, the parties negotiated the purchase price and adjustments to the purchase price, title and environmental due diligence review periods and remedies, closing +conditions, the scope of the representations and warranties, matters for which the parties would be indemnified from and after the Closing, and the covenants applicable to the Company related to the Proposed Amendment. +On January 19, 2015, the Company, HEYCO and the Target executed the Merger Agreement. The Merger Agreement included a target closing date +of February 27, 2015. The Company expects to close the Merger prior to the Special Meeting. +Description of Material Terms of the Series A +Preferred Stock +The Series A Preferred Stock is convertible into shares of Common Stock on a basis of ten shares of Common Stock for +each share of Series A Preferred Stock, subject to customary anti-dilution provisions. The holders of Series A Preferred Stock are entitled to one vote for each share of Common Stock into which such share of Series A Preferred Stock would be +convertible. The holders of Series A Preferred Stock will vote together with the holders of Common Stock as a single class on an as-converted basis, except with respect to matters to which the holders of Common Stock have a separate class vote as +required by applicable law or +15 +regulation, in which case the holders of Common Stock will vote as a separate class. The holders of Series A Preferred Stock will vote as a separate class on matters that would adversely affect +the holders of Series A Preferred Stock as compared to the holders of Common Stock. +The shares of Series A Preferred Stock will be +entitled to receive any cash dividends declared on the Common Stock on an as-converted basis. In addition, if the Proposed Amendment is not approved by the Company’s shareholders prior to the date that is six months after the Closing, the +holders of Series A Preferred Stock shall be entitled to receive dividends on the Series A Preferred Stock in cash at a quarterly rate of $1.80 per share of Series A Preferred Stock. +Pursuant to Section 7.3 of the Merger Agreement, the Company has agreed to use reasonable efforts to cause its shareholders to approve +the Proposed Amendment at the next regularly scheduled annual meeting of the Company’s shareholders following the Closing or at a special meeting of the Company’s shareholders occurring prior to such next annual meeting called for the +purpose of approving the Proposed Amendment (the “Shareholder Approval”). If the Company’s shareholders fail to approve the Proposed Amendment at the Special Meeting, the Company shall reintroduce the Proposed Amendment at each +regularly scheduled annual meeting of shareholders until Shareholder Approval has been obtained. +In a liquidation or change of +control (whether by asset sale, stock sale, merger or otherwise) prior to the conversion to Common Stock, each holder of Series A Preferred Stock will be entitled, at the option of such holder, to (i) a liquidation preference payable in cash of +$240.00 per share of Series A Preferred Stock, plus accrued and unpaid dividends, or (ii) the proceeds (including cash or stock or a combination thereof) that would be paid in respect of Common Stock on an as-converted basis. +Upon receipt of Shareholder Approval and evidence of filing of the Certificate of Amendment from the Secretary of State of the State of Texas, +all outstanding shares of Series A Preferred Stock will automatically convert into shares of Common Stock. Upon conversion, the Series A Preferred Stock will no longer be outstanding, and the shares of Common Stock issued upon conversion will +participate equally in dividends with all other shares of Common Stock. +Ancillary Agreements +Registration Rights Agreement +The Company has agreed to enter into a registration rights agreement with HEYCO at the Closing, pursuant to which the Company will be required, +upon request from HEYCO at any time after the one year anniversary of the Closing, to file and maintain a shelf registration statement with respect to the resale of the shares of Common Stock issued as consideration in the Merger and upon conversion +of the Series A Preferred Stock, respectively, and to provide piggyback registration rights for such shares of Common Stock. +Voting +Agreement +If the Proposed Amendment is not approved at the Special Meeting, the Proposed Amendment will be considered at the 2015 +Annual Meeting. Pursuant to the Merger Agreement, at the Closing HEYCO will enter into the Voting Agreement with the Company pursuant to which HEYCO will agree to vote all of its shares of Common Stock and Series A Preferred Stock (collectively, the +“Covered Shares”) in favor of the Proposed Amendment if such proposal is presented at the 2015 Annual Meeting and any other meeting of the Company’s shareholders at which action is to be taken with respect to approval of the Proposed +Amendment (including any adjournment or postponement thereof), and on any action or approval by written consent of the Company’s shareholders with respect to the approval of the Proposed Amendment. Pursuant to the Voting Agreement, HEYCO will +grant an irrevocable proxy to the Company and any designee of the Company to vote HEYCO’s Covered Shares in accordance with the requirements of the Voting Agreement. The Voting Agreement will terminate on the date that the Series A Preferred +Stock automatically converts into Common Stock pursuant to the statement of resolutions. +16 +Escrow Agreement +The Company and HEYCO have agreed to deposit at the Closing a portion of the shares of Series A Preferred Stock issued pursuant to the Merger +Agreement into escrow to satisfy potential title defect and environmental condition claims. The shares of Series A Preferred Stock held in escrow will be subject to the terms of an escrow agreement to be entered into at the Closing among the +Company, HEYCO and an escrow agent to be agreed upon by the Company and HEYCO. Pursuant to the escrow agreement, any dividends issued with respect to the shares held in escrow will be deposited into the escrow account. Subject to the voting +agreement described above, HEYCO will have the right to vote shares held in escrow. +17 +SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT +The following table presents the beneficial ownership of our Common Stock as of February 13, 2015 for (i) each person beneficially owning +more than 5% of the outstanding shares of our Common Stock, (ii) each director and nominee for director of the Company, (iii) each named executive officer of the Company and (iv) all of our directors, nominees for director and +executive officers as a group. Except pursuant to applicable community property laws and except as otherwise indicated, each shareholder possesses sole voting and investment power with respect to its, his or her shares. The business address of each +of our directors and executive officers is c/o Matador Resources Company, One Lincoln Centre, 5400 LBJ Freeway, Suite 1500, Dallas, Texas 75240. The applicable percentage ownership is based on 73,453,117 shares of our Common Stock issued and +outstanding as of February 13, 2015, plus, on an individual basis, the right of that individual to (i) obtain Common Stock upon exercise of stock options or (ii) obtain Common Stock upon the vesting of restricted stock units, in each case +within 60 days of February 13, 2015. The information is based on Form 3s, Form 4s, Schedule 13Ds and Schedule 13Gs filed through February 13, 2015. +Name +Amount and +Nature of +Ownership of +Common Stock +Percent +of Class +Directors and Named Executive Officers: (17) +Joseph Wm. Foran (1) +4,116,585 +5.6 +% +Reynald A. Baribault (2) +26,000 +* +Matthew V. Hairford (3) +278,231 +* +David E. Lancaster (4) +406,161 +* +David F. Nicklin (5) +123,573 +* +Ryan C. London (6) +126,990 +* +David M. Laney (7) +473,102 +* +Gregory E. Mitchell (8) +203,167 +* +Steven W. Ohnimus (9) +99,902 +* +Michael C. Ryan (10) +263,695 +* +Carlos M. Sepulveda, Jr. (11) +295,276 +* +Margaret B. Shannon (12) +51,317 +* +All Directors and Executive Officers as a Group (15 persons) (13) : +6,862,686 +9.3 +% +Other 5% Owners: +T. Rowe Price Associates, Inc. (14) +5,343,273 +7.3 +% +The Vanguard Group (15) +4,154,914 +5.7 +% +BlackRock, Inc. (16) +4,046,143 +5.5 +% +* +Less than 1% of issued and outstanding shares of our Common Stock. +(1) +Includes (i) 1,084,933 shares of Common Stock held of record by Sage Resources, Ltd., a limited partnership owned by the Foran family, including +Mr. Foran; (ii) 4,000 shares of Common Stock held of record by the reporting person’s spouse through her Individual Retirement Account; (iii) 135,500 shares and 50,000 shares of Common Stock held of record by The Don Foran Family +Trust 2008 and The Foran Family Special Needs Trust, respectively, for which Mr. Foran is the co-trustee and over which Mr. Foran has shared voting and investment power with other members of his family; (iv) 524,053 shares of Common +Stock held of record by each of the JWF 2011-1 GRAT and the NNF 2011-1 GRAT, for which Mr. Foran is the trustee and over which Mr. Foran has sole voting and investment power; (v) 312,190 shares of Common Stock held of record by each +of the JWF 2013-1 GRAT and the NNF 2013-1 GRAT, for which Mr. Foran is the trustee and over which Mr. Foran has sole voting and investment power; (vi) 82,077 shares of Common Stock held of record by each of the JWF 2014-1 GRAT and the +NNF 2014-1 GRAT, for which Mr. Foran is the trustee and over which Mr. Foran has sole voting and investment power; (vii) 59,269 shares of Common Stock held of record by each of the JWF 2014-2 GRAT and the NNF 2014-2 GRAT, for which +Mr. Foran is the trustee and over which Mr. Foran has sole voting and investment power (viii) 231,051 shares of +18 +Common Stock held of record by each of the JWF 2015-1 GRAT and the NNF 2015-1 GRAT, for which Mr. Foran is the trustee and over which Mr. Foran has sole voting and investment power +(ix) 37,250 shares of Common Stock held of record by the Foran 2012 Security Trust, for which Mr. Foran is the trustee and over which Mr. Foran has sole voting and investment power; (x) 158,550 shares of Common Stock held of +record by the Foran 2012 Savings Trust, for which Mr. Foran’s spouse is a trustee; (xi) 270 shares held of record by the Individual Retirement Account of Mr. Foran’s adult child, who gave Mr. Foran investment power over +such shares through a revocable power of attorney; and (xii) 87,172 shares of restricted stock. Pursuant to the terms of the restricted stock grants, Mr. Foran has the right to vote such shares but may only dispose of such shares to the +extent they have vested. Also includes 127,604 shares of Common Stock issuable to Mr. Foran upon the exercise of stock options. +(2) +Includes 2,000 shares of Common Stock held by the Individual Retirement Account of Mr. Baribault. Also includes 19,000 shares of Common Stock held by the Reynald A. Baribault Maritalized Revocable Living Trust, for +which Mr. Baribault has shared voting and investment power with his spouse, and 5,000 shares of Common Stock held by the Sally K. Baribault Maritalized Revocable Living Trust, for which Mr. Baribault has shared voting and investment power +with his spouse. +(3) +Includes 84,875 shares of Common Stock issuable to Mr. Hairford upon the exercise of stock options and 5,000 shares held of record by his Individual Retirement Account. Also includes 45,494 shares of restricted +stock. Pursuant to the terms of the restricted stock grants, Mr. Hairford has the right to vote such shares but may only dispose of such shares to the extent they have vested. Mr. Hairford has pledged 67,400 shares of Common Stock. +(4) +Includes 98,750 shares of Common Stock issuable to Mr. Lancaster upon the exercise of stock options and 75,500 shares of Common Stock held of record by his Individual Retirement Account. Also includes 64,802 shares +of restricted stock. Pursuant to the terms of the restricted stock grants, Mr. Lancaster has the right to vote such shares but may only dispose of such shares to the extent they have vested. +(5) +Includes 45,312 shares of Common Stock issuable to Mr. Nicklin upon the exercise of stock options and 38,600 shares of Common Stock held of record by his Individual Retirement Account. Also includes 35,833 shares +of restricted stock. Pursuant to the terms of the restricted stock grants, Mr. Nicklin has the right to vote such shares but may only dispose of such shares to the extent they have vested. +(6) +Includes 38,875 shares of Common Stock issuable to Mr. London upon the exercise of stock options. Also includes 64,763 shares of restricted stock. Pursuant to the terms of the restricted stock grants, +Mr. London has the right to vote such shares but may only dispose of such shares to the extent they have vested. +(7) +Includes 66,000 shares of Common Stock held of record by Laney Investments Ltd., for which Mr. Laney has sole voting and investment power. Also includes 1,645 shares of Common Stock issuable to Mr. Laney upon +the vesting of restricted stock units. +(8) +Includes 191,292 shares of Common Stock held of record by JAMAL Enterprises, LP, for which Mr. Mitchell has sole voting and investment power. Also includes 1,645 shares of Common Stock issuable to Mr. Mitchell +upon the vesting of restricted stock units. +(9) +Includes 2,235 vested restricted stock units, delivery of which has been deferred pursuant to the award agreement, and 1,645 shares of Common Stock issuable to Dr. Ohnimus upon the vesting of restricted stock +units. Dr. Ohnimus has pledged 23,070 shares of Common Stock. +(10) +Includes 4,000 shares of Common Stock held of record by Mr. Ryan’s one college-age child and three minor age children. Also includes 1,645 shares of Common Stock issuable to Mr. Ryan upon the vesting of +restricted stock units. +(11) +Includes 309 shares of Common Stock issuable to Mr. Sepulveda upon the vesting of restricted stock units. +(12) +Includes 1,645 shares of Common Stock issuable to Ms. Shannon upon the vesting of restricted stock units. +(13) +Includes an aggregate of 484,582 shares of Common Stock which our executive officers as a group have the right to acquire within 60 days of February 13, 2015 upon the exercise of stock options. Also includes 380,963 +shares of restricted stock held by our executive officers. Pursuant to the terms of the restricted stock grants, the executive officers have the right to vote such shares but may only dispose of such shares to the extent they have vested. Also +includes 10,769 shares of Common Stock issuable to directors upon the vesting and delivery of restricted stock units. Includes 120,470 shares of Common Stock pledged by our executive officers and directors. +19 +(14) +Information based solely on a Schedule 13G/A filed with the SEC on February 13, 2015. The Schedule 13G/A reports that T. Rowe Price Associates, Inc. (“Price Associates”) beneficially owns 5,343,273 +shares, has sole voting power with respect to 1,084,249 shares and has sole dispositive power with respect to 5,343,273 shares. According to the Schedule 13G/A, these securities are owned by various individual and institutional investors, for which +Price Associates serves as an investment adviser registered under the Investment Advisers Act of 1940, as amended, with power to direct investments and/or sole power to vote the securities. For purposes of the reporting requirements of the +Securities Exchange Act of 1934, as amended, Price Associates is deemed to be a beneficial owner of such securities; however, Price Associates expressly disclaims that it is, in fact, the beneficial owner of such securities. According to the +Schedule 13G/A, Price Associates’ address is 100 E. Pratt Street, Baltimore, MD 21202. +(15) +Information based solely on a Schedule 13G/A filed with the SEC on February 11, 2015. The Schedule 13G/A reports that The Vanguard Group (“Vanguard”) beneficially owns 4,154,914 shares, has sole +voting power with respect to 97,191 shares, has sole dispositive power with respect to 4,063,123 shares and has shared dispositive power with respect to 97,791 shares. According to the Schedule 13G/A, Vanguard’s address is 100 Vanguard +Blvd., Malvern, PA 19355. +(16) +Information based solely on a Schedule 13G filed with the SEC on February 3, 2015. The Schedule 13G reports that BlackRock, Inc. (“BlackRock”) beneficially owns 4,046,143 shares, has sole voting power +with respect to 3,872,602 shares and has sole dispositive power with respect to 4,046,143 shares. According to the Schedule 13G, BlackRock’s address is 55 East 52nd Street, New York, NY 10022. +(17) +Subject to the Closing, which is expected to occur on February 27, 2015, the Board has (i) increased the size of the Board from eight to nine members and (ii) appointed George M. Yates, the Chairman, +President and Chief Executive Officer of HEYCO, to fill the vacancy created by such increase until the next election of directors by the Company’s shareholders, which will occur at the 2015 Annual Meeting and, thereafter, until his successor is +duly appointed. Upon assuming his duties as a member of the Board following the Closing, Mr. Yates will receive equity compensation that is consistent with Matador’s compensation policy for outside directors. In addition, upon the Closing, +HEYCO will receive (ii) 3,140,960 shares of Common Stock, and (iii) 150,000 shares of Series A Preferred Stock (subject to adjustment pursuant to the Merger Agreement, and some of which shares of Series A Preferred Stock will be held in an +escrow account pursuant to the Merger Agreement and related escrow agreement). As Chairman, President and Chief Executive Officer of HEYCO, Mr. Yates will have ultimate voting and dispositive power with respect to all shares held by HEYCO. Mr. +Yates has voting and dispositive power with respect to 2,500 shares of Common Stock owned by Spiral, Inc., an entity owned by certain trusts of which Mr. Yates is the sole trustee. +20 +ADDITIONAL INFORMATION +Shareholder Proposals for the 2015 Proxy Statement +For shareholder proposals to be included in the Company’s Proxy Statement and form of proxy relating to the 2015 Annual Meeting of +Shareholders, such proposals must have been received by the Company at its offices in Dallas, Texas, addressed to the Corporate Secretary of the Company, no later than December 25, 2014. No such proposals were received. +Director Nominations or Other Business for Presentation at the 2015 Annual Meeting +Under the Amended and Restated Bylaws of the Company, certain procedures are provided that a shareholder must follow in order to place in +nomination persons for election as directors at an Annual Meeting of Shareholders or to introduce an item of business at an Annual Meeting of Shareholders. These procedures provide, generally, among other things, that shareholders desiring to place +in nomination persons for election as directors, and/or bring a proper subject of business before an Annual Meeting, must do so by a written notice timely received (on or before March 10, 2015, but no earlier than February 8, 2015, for the +2015 Annual Meeting) to the Corporate Secretary of the Company containing the name and address of the shareholder and the number of shares of the Company’s Common Stock beneficially owned by the shareholder. If the notice relates to a +nomination for director, it must also set forth the name, age, business and residence addresses of the candidate, the candidate’s résumé or a listing of his or her qualifications to be a director of the Company, the person’s +written consent to be a director if selected by the Nominating, Compensation and Planning Committee, nominated by the Board and elected by the shareholders and any other information that would be required to be disclosed in solicitations of proxies +for the election of directors. The Company may require any proposed nominee to furnish such other information as may reasonably be required by the Company to determine the eligibility of such proposed nominee to serve as director. Notice of an item +of business shall include a brief description of the proposed business and any material interest of the shareholder in such business. +The +Chairman of the meeting may refuse to allow the transaction of any business not presented, or to acknowledge the nomination of any person not made, in compliance with the foregoing procedures. Copies of the Company’s Amended and Restated Bylaws +are available from the Corporate Secretary of the Company. +Householding +The SEC permits a single copy of this Proxy Statement to be sent to any household at which two or more shareholders reside if they appear to be +members of the same family. This procedure, referred to as householding, reduces the volume of duplicate information shareholders receive and reduces mailing and printing expenses. A number of brokerage firms have instituted householding. +As a result, if you hold your shares through a broker and you reside at an address at which two or more shareholders reside, you will likely +be receiving only one copy of the Proxy Statement unless any shareholder at that address has given the broker contrary instructions. However, if any such beneficial shareholder residing at such an address wishes to receive a separate copy of the +proxy statement in the future, or if any such beneficial shareholder that elected to continue to receive separate copies of the Proxy Statement wishes to receive a single copy of the Proxy Statement in the future, that shareholder should contact +their broker or send a request to Matador Resources Company, 5400 LBJ Freeway, Suite 1500, Dallas, Texas 75240, Email: investors@matadorresources.com, telephone: (972) 371-5200. We hereby undertake to deliver promptly, upon written or oral +request, a separate copy of the Proxy Statement to a beneficial shareholder at a shared address to which a single copy of the Proxy Statement was delivered. +Where You Can Find Additional Information; Incorporation by Reference +The Company files annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy any +document that the Company files at the Public Reference Room of the SEC at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public +21 +Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains a website at www.sec.gov, from which interested persons can electronically access the Company’s SEC +filings. +The SEC allows us to “incorporate by reference” into this Proxy Statement documents that we file with the SEC. This +means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is considered to be a part of this Proxy Statement, and later information that we file with the SEC will update +and supersede that information. This Proxy Statement incorporates by reference the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013 and Quarterly Report on Form 10-Q for the quarterly period ended +September 30, 2014 that we have previously filed with the SEC. These documents contain important information about the Company and its financial condition. +Any person, including any beneficial owner, to whom this Proxy Statement is delivered may request copies of proxy statements and any of the +documents incorporated by reference in this document or other information concerning us, without charge, by written request to Matador Resources Company, 5400 LBJ Freeway, Suite 1500, Dallas, Texas 75240, Email: investors@matadorresources.com, +telephone: (972) 371-5200, or from the SEC through the SEC’s website at the address provided above. Documents incorporated by reference are available without charge, excluding any exhibits to those documents unless the exhibit is +specifically incorporated by reference into those documents. +THIS PROXY STATEMENT DOES NOT CONSTITUTE THE SOLICITATION OF A PROXY IN +ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM OR FROM WHOM IT IS UNLAWFUL TO MAKE SUCH PROXY SOLICITATION IN THAT JURISDICTION. YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROXY STATEMENT TO VOTE YOUR +SHARES AT THE SPECIAL MEETING. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT FROM WHAT IS CONTAINED IN THIS PROXY STATEMENT. THIS PROXY STATEMENT IS DATED FEBRUARY 25, 2015. YOU SHOULD NOT ASSUME THAT THE +INFORMATION CONTAINED IN THIS PROXY STATEMENT IS ACCURATE AS OF ANY DATE OTHER THAN THAT DATE, AND THE MAILING OF THIS PROXY STATEMENT TO SHAREHOLDERS DOES NOT CREATE ANY IMPLICATION TO THE CONTRARY. +OTHER BUSINESS +Management of the Company is not aware of other business to be presented for action at the Special Meeting; however, if other matters are +presented for action, it is the intention of the persons named in the accompanying form of proxy to vote in accordance with their judgment on such matters. +By Order of the Board of Directors +Joseph Wm. Foran +Chairman and Chief Executive Officer +22 +MATADOR RESOURCES +COMPANY +5400 LBJ FREEWAY, SUITE 1500 +DALLAS, TX 75240 +VOTE BY INTERNET—www.proxyvote.com +Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the meeting +date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. +ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS +If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards +and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials +electronically in future years. +VOTE BY PHONE—1-800-690-6903 +Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. +Eastern Time the day before the meeting date. Have your proxy card in hand when you call and then follow the instructions. +VOTE BY MAIL +Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes +Way, Edgewood, NY 11717. +TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: +KEEP THIS PORTION FOR YOUR RECORDS +DETACH AND RETURN THIS PORTION ONLY +THIS PROXY CARD IS +VALID ONLY WHEN SIGNED AND DATED. +MATADOR RESOURCES COMPANY +The Board of Directors recommends you vote FOR the following proposal: +For +Against +Abstain +1. +Amendment to the Amended and Restated Certificate of Formation to Increase the Amount of Authorized Common Stock and Correspondingly Increase the Aggregate Number of Authorized Shares. +¨ +¨ +¨ +NOTE: The proxies are authorized to vote in their discretion on such other business as may properly come before the meeting or any adjournment thereof. +Yes +No +Please indicate if you plan to attend this meeting +¨ +¨ +Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, +executor, administrator, or other fiduciary, please give full title as such. Joint +owners should each sign +personally. All holders must sign. If a corporation or partnership, +please sign in full corporate or partnership name, by authorized officer. +Signature [PLEASE SIGN WITHIN BOX] +Date +Signature (Joint Owners) +Date +Important Notice Regarding the Availability of Proxy Materials for the Special Meeting : The Notice of +Special Meeting and Proxy Statement are available at www.proxyvote.com. +MATADOR RESOURCES COMPANY +Special Meeting of Shareholders +April 2, 2015 9:30 A.M. +This proxy is solicited by the Board of Directors. +As an alternative to completing this form, you may enter your vote instruction by telephone at 1-800-690-6903, or via the internet at www.proxyvote.com . Have your proxy card in hand and follow the instructions. +The shareholder hereby appoints Joseph Wm. Foran and David M. Laney, +or either of them, as proxies, each with the power to appoint his substitute, and hereby authorizes them to represent and to vote, as designated on the reverse side of this ballot, all of the shares of common stock of MATADOR RESOURCES COMPANY that +the shareholder is entitled to vote at the Special Meeting of Shareholders to be held at 9:30 A.M., CDT on April 2, 2015, at the Hilton Dallas Lincoln Centre, 5410 LBJ Freeway, Dallas, Texas 75240, and any adjournment or postponement thereof. The +shareholder hereby revokes any proxy or proxies heretofore given to vote upon or act with respect to such shares of stock. +This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted +in accordance with the Board of Directors’ recommendations. +Continued and to be signed on reverse side \ No newline at end of file diff --git a/raw/proxies/0001520006/0001193125-15-060943/proxy_rpt.txt b/raw/proxies/0001520006/0001193125-15-060943/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..e69de29bb2d1d6434b8b29ae775ad8c2e48c5391 diff --git a/raw/proxies/0001520006/0001193125-15-156985/proxy.txt b/raw/proxies/0001520006/0001193125-15-156985/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..c5fa090375f721d2f3edb502d5435e1b5607c854 --- /dev/null +++ b/raw/proxies/0001520006/0001193125-15-156985/proxy.txt @@ -0,0 +1,4530 @@ +DEF 14A +1 +d900799ddef14a.htm +DEFINITIVE PROXY STATEMENT +Definitive Proxy Statement +Table of Contents +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +Washington, D.C. 20549 +SCHEDULE 14A +Proxy Statement Pursuant to Section 14(a) of the +Securities Exchange Act of 1934 (Amendment No.) +Filed by the Registrant þ Filed by a Party other than the +Registrant ¨ +Check the appropriate box: +¨ +Preliminary Proxy Statement +¨ +Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +þ +Definitive Proxy Statement +¨ +Definitive Additional Materials +¨ +Soliciting Material Pursuant to §240.14a-12 +Matador Resources Company +(Name of Registrant as Specified In Its Charter) +(Name of Person(s) Filing Proxy Statement, if other than the Registrant) +Payment of Filing Fee (Check the appropriate box): +þ +No fee required. +¨ +Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. +1) +Title of each class of securities to which transaction applies: +2) +Aggregate number of securities to which transaction applies: +3) +Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the +filing fee is calculated and state how it was determined): +4) +Proposed maximum aggregate value of transaction: +5) +Total fee paid: +¨ +Fee paid previously with preliminary materials. +¨ +Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify +the previous filing by registration statement number, or the Form or Schedule and the date of its filing. +1) +Amount Previously Paid: +2) +Form, Schedule or Registration Statement No.: +3) +Filing Party: +4) +Date Filed: +Table of Contents +One Lincoln Centre +5400 LBJ Freeway, Suite 1500 +Dallas, Texas 75240 +www.matadorresources.com +NOTICE OF ANNUAL MEETING OF SHAREHOLDERS +To Be Held on June 10, +2015 +To the Matador Resources Company Shareholders: +Please join us for the 2015 Annual Meeting of Shareholders of Matador Resources Company. The meeting will be held at the Hilton Anatole, 2201 North Stemmons Freeway, Dallas, Texas 75207, on Wednesday, +June 10, 2015, at 9:30 a.m. , Central Daylight Time. +At the meeting, you will hear a report on our business and act +on the following matters: +(1) +Election of the three nominees for director named in the attached Proxy Statement; +(2) +Vote to approve the Company’s Amended and Restated 2012 Long-Term Incentive Plan; +(3) +Advisory vote to approve the compensation of our named executive officers as described herein; +(4) +Ratification of the appointment of KPMG LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2015; and +(5) +Any other matters that may properly come before the meeting. +All shareholders of record at the close of business on April 15, 2015 are entitled to vote at the meeting or any postponement or adjournment of the meeting. A list of the shareholders of record is +available at the Company’s offices in Dallas, Texas. +By Order of the Board of Directors, +Joseph Wm. Foran +Chairman and Chief Executive Officer +April 29, 2015 +YOUR VOTE IS IMPORTANT! +Whether or not you will attend the meeting, please vote as +promptly as possible by using the Internet or telephone or by signing, dating and returning your proxy card to the address listed on the card. +Important Notice Regarding the Availability of Proxy Materials for the +Annual Meeting of Shareholders to Be Held on June 10, 2015: +Our Proxy Statement and the Annual Report to Shareholders for the fiscal year ended December 31, 2014 are available for viewing, +printing and downloading at https://materials.proxyvote.com/576485 . +Table of Contents +TABLE OF CONTENTS +Page +Proxy Statement +1 +Proxy Summary +3 +Information About the Annual Meeting +5 +Proposal 1 — Election of Directors +9 +Nominees +9 +Vote Required +10 +Directors Continuing in Office +11 +Special Board Advisors +13 +Corporate Governance +16 +Independence of Directors +16 +Board Leadership Structure +16 +Board Committees +17 +Board’s Role in Risk Oversight +21 +Compensation Committee Interlocks and Insider Participation +21 +Communications with Directors +22 +Executive Officers and Other Senior Officers of the Company +22 +Proposal 2 — Approval of Our Amended and Restated 2012 Long-Term Incentive Plan +27 +Description of the Amended 2012 Plan +27 +Federal Income Tax Consequences +33 +New Plan Benefits +36 +Vote Required +36 +Proposal 3 — Advisory Vote to Approve Named Executive Officer Compensation +37 +Vote Required +37 +Proposal 4 — Ratification of the Appointment of KPMG LLP +38 +Fees of Independent Registered Public Accounting Firm for Fiscal Years 2014 and 2013 +39 +Report of the Audit Committee +40 +Vote Required +41 +Executive Compensation +42 +Compensation Discussion and Analysis +42 +Nominating, Compensation and Planning Committee Report +55 +Summary Compensation Table +56 +Grants of Plan-Based Awards Table +57 +Discussion Regarding Summary Compensation Table and Grants of Plan-Based Awards Table +57 +Outstanding Equity Awards at December 31, 2014 +59 +Potential Payments Upon Termination or Change in Control +60 +Director Compensation +65 +Securities Authorized for Issuance Under Equity Compensation Plans +66 +Transactions with Related Persons +67 +Security Ownership +69 +Additional Information +71 +Section 16(a) Beneficial Ownership Reporting Compliance +71 +Shareholder Proposals for the 2016 Proxy Statement +71 +Director Nominations or Other Business for Presentation at the 2016 Annual Meeting +71 +Annual Report on Form 10-K +71 +Other Business +72 +Table of Contents +Matador Resources Company +One Lincoln Centre +5400 LBJ Freeway, Suite 1500 +Dallas, Texas 75240 +www.matadorresources.com +PROXY STATEMENT +For +ANNUAL MEETING OF SHAREHOLDERS +To Be Held on June 10, 2015 +This Proxy Statement is being mailed on +or about April 29, 2015 to the shareholders of Matador Resources Company (“Matador” or the “Company”) in connection with the solicitation of proxies by the Board of Directors (the “Board”) of the Company to be +voted at the Annual Meeting of Shareholders of the Company to be held at the Hilton Anatole, 2201 North Stemmons Freeway, Dallas, Texas 75207, on June 10, 2015, at 9:30 a.m., Central Daylight Time (the “Annual Meeting”), or at any +postponement or adjournment thereof, for the purposes set forth in the accompanying Notice of Annual Meeting of Shareholders. The address of the Company’s principal executive office is One Lincoln Centre, 5400 LBJ Freeway, Suite 1500, Dallas, +Texas 75240. +If you are a shareholder of record, you may vote in person by attending the meeting, by completing and returning +a proxy by mail or by using the Internet or telephone. You may vote your proxy by mail by marking your vote on the enclosed proxy card and following the instructions on the card. To vote your proxy using the Internet or telephone, see the +instructions on the proxy form and have the proxy form available when you access the Internet website or place your telephone call. +The named proxies will vote your shares according to your directions. If you sign and return your proxy but do not make any of the selections, the named proxies will vote your shares: (i) FOR the +election of the three nominees for director as set forth in this Proxy Statement, (ii) FOR the approval of the Company’s Amended and Restated 2012 Long-Term Incentive Plan, (iii) FOR the approval, on an advisory basis, of the +compensation of the Company’s named executive officers as disclosed in this Proxy Statement and (iv) FOR the ratification of KPMG LLP as the independent registered public accounting firm of the Company for the year ending December 31, +2015. The proxy may be revoked at any time before it is exercised by filing with the Company a written revocation addressed to the Corporate Secretary, by executing a proxy bearing a later date or by attending the Annual Meeting and voting in +person. +The cost of soliciting proxies will be borne by the Company. In addition to the use of postal services and the +Internet, proxies may be solicited by directors, officers and employees of the Company (none of whom will receive any additional compensation for any assistance they may provide in the solicitation of proxies) in person or by telephone. +The outstanding voting securities of the Company consist of shares of common stock, $0.01 par value per share (“Common Stock”). +The record date for the determination of the shareholders entitled to notice of and to vote at the Annual Meeting, or any postponement or adjournment thereof, has been established by the Board as the close of business on April 15, 2015 (the +“Record Date”). As of the Record Date, there were outstanding and entitled to vote 78,307,729 shares of Common Stock. +The presence, in person or by proxy, of the holders of record of a majority of the outstanding shares entitled to vote is necessary to +constitute a quorum for the transaction of business at the Annual Meeting, but if a quorum should not be present, the meeting may be adjourned from time to time until a quorum is obtained. A holder of Common Stock will be entitled to one vote per +share on each matter properly brought before the meeting. Cumulative voting is not permitted in the election of directors. +1 +Table of Contents +The proxy card provides space for a shareholder to withhold voting for any or all nominees +for the Board. The election of directors requires a plurality of the votes cast at the meeting. All other proposals require the affirmative vote of a majority of the shares present in person or represented by proxy and entitled to vote at the +meeting. Shares held by a shareholder who abstains from voting on any or all proposals will be included for the purpose of determining the presence of a quorum. Votes withheld with respect to the election of the Company’s directors will have no +effect on the election of the nominees. In the case of the other proposals being submitted for shareholder approval, an abstention will effectively count as a vote cast against such proposal. Broker non-votes on any matter, as to which the broker +has indicated on the proxy that it does not have discretionary authority to vote, will be treated as shares not entitled to vote with respect to that matter and therefore will have no effect upon the approval of such matter. However, such shares +will be considered present and entitled to vote for quorum purposes so long as they are entitled to vote on at least one other matter. +2 +Table of Contents +PROXY SUMMARY +This summary highlights information contained elsewhere in this Proxy Statement. This summary does not contain all of the information +that you should consider, and you should read the entire Proxy Statement carefully prior to voting. For more complete information regarding our 2014 performance, please review our Annual Report on Form 10-K for the year ended December 31, 2014. +2015 Annual Meeting of Stockholders +Date and Time: June 10, 2015, at 9:30 a.m., Central Daylight Time +Location: Hilton Anatole, 2201 North Stemmons Freeway, Dallas, Texas 75207 +Record Date: April 15, 2015 +Voting: +Shareholders as of the close of business on the Record Date are entitled to vote. Each share of Common Stock is entitled to one vote at the Annual Meeting. +Voting Matters and Board Recommendation +Proposal +Board +Recommendation +Election of Three Director Nominees to Serve for a Three-Year Term Expiring in 2018 (page 9) +FOR +Approval of the Company’s Amended and Restated 2012 Long-Term Incentive Plan (page 27) +FOR +Advisory Vote to Approve Named Executive Officer Compensation (page 37) +FOR +Ratification of the Appointment of KPMG LLP as the Company’s Independent Registered Public Accounting Firm for +2015 (page 38) +FOR +2014 Business Highlights +In 2014, Matador delivered record results as our oil and natural gas revenues, total oil production, average daily oil equivalent production and Adjusted EBITDA were the highest achieved for any year in +Matador’s history. Business highlights achieved during 2014 include the following: +• +A 56% increase in oil production from 2.1 million barrels (“Bbl”) produced in 2013 to 3.3 million Bbl produced in 2014. +• +A 37% increase in daily oil equivalent production from 11,740 barrels of oil equivalent (“BOE”) per day produced in 2013 to 16,082 BOE per +day produced in 2014. +• +An increase of 37% in oil and natural gas revenues from $269.0 million in 2013 to $367.7 million in 2014. +• +An increase of 37% in Adjusted EBITDA from $191.8 million reported for 2013 to $262.9 million reported for 2014. Adjusted EBITDA is a non-GAAP +financial measure. For a definition of Adjusted EBITDA and a reconciliation to our net income (loss) and net cash provided by operating activities, see our Annual Report on Form 10-K for the year ended December 31, 2014. +• +An increase of 33% in total proved oil and natural gas reserves from 51.7 million BOE, including 16.4 million Bbl of oil and 212.2 billion +cubic feet (“Bcf”) of natural gas, at December 31, 2013 to 68.7 million BOE, including 24.2 million Bbl of oil and 267.1 Bcf of natural gas, at December 31, 2014. The PV-10 of our total proved reserves increased 59% +from $655.2 million at December 31, 2013 to $1.04 billion at December 31, 2014. PV-10 is a non-GAAP financial measure. For a reconciliation of PV-10 to Standardized Measure, see our Annual Report on Form 10-K for the year ended +December 31, 2014. +3 +Table of Contents +Director Nominees (page 9) +Our Board currently has nine members divided into three classes of directors, designated Class I, Class II and Class III. Directors are elected for three-year terms. The table below provides certain +summary information about each nominee for director named in this Proxy Statement. +Name +Age +Director +Since +Principal Occupation +Committee +Memberships +Carlos M. Sepulveda, Jr.* +57 +2013 +Executive Chairman, Triumph +Bancorp, Inc. +A, CG, F +Margaret B. Shannon* +65 +2011 +Retired, Formerly Vice +President and General +Counsel, BJ Services Company +CG, F, NCP +George M. Yates** +68 +2015 +Chairman and Chief Executive +Officer, HEYCO Energy +Group, Inc. +— +* +Independent Director +** +Mr. Yates was appointed to our Board on April 28, 2015. We anticipate that Mr. Yates will be added to the Prospect Committee and the Operations and +Engineering Committee following the Annual Meeting. +A +Audit Committee +CG +Corporate Governance Committee +F +Financial Committee +NCP +Nominating, Compensation and Planning Committee +Amended and Restated 2012 Long-Term Incentive Plan (page 27) +On April 23, 2015, our Board adopted, subject to shareholder approval, the Matador Resources Company Amended and Restated 2012 Long-Term Incentive Plan (the “Amended 2012 Plan”). The Amended +2012 Plan amends, restates and replaces the Matador Resources Company 2012 Long-Term Incentive Plan (the “2012 Plan”) in its entirety, effective upon receipt of shareholder approval. Subject to certain adjustments, the number of shares +that were issuable under the 2012 Plan was 4,000,000 shares, of which 489,338 shares remained available for issuance as of March 31, 2015. The Amended 2012 Plan increases the number of available shares by 4,700,000 shares and increases the total +number of shares under the Amended 2012 Plan to 8,700,000 shares. +The Amended 2012 Plan is intended to enable the Company to +remain competitive and innovative in its ability to attract, motivate, reward and retain the services of key employees, certain key contractors and non-employee directors. More information regarding the Amended 2012 Plan, including a description +thereof, is set forth herein beginning on page 27. +Executive Compensation Highlights (page 42) +Our compensation program is designed to reward, in both the short-term and the long-term, performance that contributes to the +implementation of our business strategies, maintenance of our culture and values and the achievement of our objectives. In addition, we reward qualities that we believe help achieve our business strategies such as teamwork, individual performance in +light of general economic and industry-specific conditions, relationships with shareholders and vendors, the ability to manage and enhance production from our existing assets, the ability to explore new opportunities to increase oil and natural gas +production, the ability to identify and acquire additional acreage, the ability to increase year-over-year proved reserves, the ability to control unit production costs, level of job responsibility, industry experience and general professional +growth. +Our Board has a “pay for performance” philosophy and recognizes the leadership of Mr. Joseph Wm. +Foran, our Chairman and Chief Executive Officer, and our other executive officers in contributing to the Company’s success in 2014. Accordingly, approximately 71% of Mr. Foran’s 2014 total compensation was performance based with +approximately 46% of his total compensation consisting of long-term incentive awards. Details of our executive compensation are shown in the 2014 Summary Compensation Table on page 56. +4 +Table of Contents +INFORMATION ABOUT THE ANNUAL MEETING +We are furnishing you this Proxy Statement in connection with the solicitation of proxies by the Board to be used at the Annual Meeting +and any adjournment thereof. The Annual Meeting will be held on Wednesday, June 10, 2015 at 9:30 a.m., Central Daylight Time. We are sending this Proxy Statement to our shareholders on or about April 29, 2015. +All references in this Proxy Statement to “we,” “our,” “us,” “Matador” or the “Company” +refer to Matador Resources Company, including our subsidiaries and affiliates. +What is the purpose of the Annual Meeting? +At the Annual Meeting, shareholders will act upon the matters outlined in the Annual Meeting notice, including the following: +• +the election of the three nominees for director named in this Proxy Statement for a term expiring at the 2018 Annual Meeting of Shareholders; +• +the approval of the Company’s Amended and Restated 2012 Long-Term Incentive Plan; +• +an advisory vote to approve the compensation of our named executive officers as described herein; +• +the ratification of the appointment of KPMG LLP as the Company’s independent registered public accounting firm for the year ending +December 31, 2015; and +• +any other matters that may properly come before the meeting. +What are the Board’s voting recommendations? +• +For the election of the three nominees for director named in this Proxy Statement for a term expiring at the 2018 Annual Meeting of +Shareholders; +• +For the approval of the Company’s Amended and Restated 2012 Long-Term Incentive Plan; +• +For the approval, on an advisory basis, of the compensation of the Company’s named executive officers; and +• +For the ratification of the appointment of KPMG LLP as the Company’s independent registered public accounting firm for the year ending +December 31, 2015. +Who is entitled to vote? +Shareholders as of the close of business on April 15, 2015 are eligible to vote their shares at the Annual Meeting. As of the Record +Date, there were 78,307,729 shares of our Common Stock outstanding. Each share of Common Stock is entitled to one vote at the Annual Meeting. +Why did I receive a Notice Regarding the Internet Availability of Proxy Materials in the mail instead of a full set of proxy materials? +Securities and Exchange Commission (“SEC”) rules allow companies to furnish proxy materials over the Internet. +We have elected to send a separate Notice of Internet Availability of Proxy Materials (the “Notice”) to most of our shareholders instead of a paper copy of the proxy materials. This approach conserves natural resources and reduces the +costs of printing and distributing our proxy materials while providing shareholders with a convenient way to access our proxy materials. Instructions on how to access the proxy materials over the Internet or to request a paper copy of proxy +materials, including a proxy card or voting instruction form, may be found in the Notice. In addition, shareholders may request to receive future proxy materials in printed form by mail or electronically by email by following the instructions in the +Notice. A shareholder’s election to receive proxy materials by mail or email will remain in effect until the shareholder terminates it. +5 +Table of Contents +How do I vote? +You may: +• +attend the Annual Meeting and vote in person; or +• +dial the toll-free number listed on the Notice, proxy card or voting instruction form provided by your broker. Easy-to-follow voice prompts allow you +to vote your shares and confirm that your voting instructions have been properly recorded. Telephone voting will be available 24 hours a day and will close at 11:59 p.m., Eastern Daylight Time on June 9, 2015; or +• +go to the website www.proxyvote.com and follow the instructions, then confirm that your voting instructions have been properly recorded. If you +vote using the website, you can request electronic delivery of future proxy materials. Internet voting will be available 24 hours a day and will close at 11:59 p.m., Eastern Daylight Time on June 9, 2015; or +• +if you received a paper copy of your proxy materials and elect to vote by written submission, mark your selections on the proxy card, date and sign it, +and return the card in the pre-addressed, postage-paid envelope provided. +Why did I receive paper copies of proxy +materials? +We are providing certain shareholders with paper copies of the proxy materials instead of a separate Notice. If +you received a paper copy and would no longer like to receive printed proxy materials, you may consent to receive all future proxy materials electronically via email or the Internet. To sign up for electronic delivery, please follow the instructions +provided in your proxy materials. When prompted, indicate that you agree to receive or access shareholder communications electronically in the future. +Will each shareholder in our household receive proxy materials? +Generally, +no. To the extent you are receiving printed proxy materials, we try to provide only one set of proxy materials to be delivered to multiple shareholders sharing an address, unless you have given us other instructions. Any shareholder at a shared +address may request delivery of single or multiple copies of printed proxy materials for future meetings by contacting us at: +Matador Resources Company +Attention: Corporate Secretary +5400 LBJ Freeway, Suite 1500 +Dallas, Texas 75240 +Email: investors@matadorresources.com +Telephone: (972) 371-5200 +We hereby undertake to deliver promptly, upon written or oral request, a copy of proxy materials to a shareholder at a shared address to +which a single copy of the proxy materials was delivered. Requests should be directed to the Corporate Secretary at the address or phone number set forth above. +Who will be admitted to the Annual Meeting? +Admission to the Annual +Meeting will be limited to our shareholders of record, persons holding proxies from our shareholders, beneficial owners of our Common Stock and our employees. If your shares are registered in your name, we will verify your ownership at the meeting +in our list of shareholders as of the Record Date. If your shares are held through a broker, bank or other nominee, you must bring proof of your ownership of the shares. This proof could consist of, for example, a bank or brokerage firm account +statement or a letter from your bank or broker confirming your ownership as of the Record Date. You may also send proof of ownership to us at Matador Resources Company, Attention: Corporate Secretary, 5400 LBJ Freeway, Suite 1500, Dallas, Texas +75240, or email: investors@matadorresources.com before the Annual Meeting, and we will send you an admission card. +6 +Table of Contents +If I vote via telephone or the Internet or by mailing my Proxy Card, may I still attend the Annual +Meeting? +Yes. +What if I want to change my vote? +You may revoke your proxy before it is voted by submitting a new proxy with a later date (by mail, telephone or Internet), by voting at the Annual Meeting or by filing a written revocation with our +Corporate Secretary. Your attendance at the Annual Meeting will not automatically revoke your proxy. +What constitutes a quorum? +A majority of the shares entitled to vote, present in person or represented by proxy, constitutes a quorum. If you vote by +telephone or Internet or by returning your Proxy Card, you will be considered part of the quorum. The Inspector of Election will treat shares represented by a properly executed proxy as present at the meeting. Abstentions and broker non-votes will +be counted for purposes of determining a quorum. A broker non-vote occurs when a nominee holding shares for a beneficial owner submits a proxy but does not vote on a particular proposal because the nominee does not have discretionary voting power +for that item and has not received instructions from the beneficial owner. +How many votes will be required to approve a proposal? +Election of directors at the Annual Meeting will be by a plurality of votes cast at the Annual Meeting. Votes may be cast +in favor of the election of each director nominee or withheld. With respect to other matters, the affirmative vote of the holders of a majority of the shares, present in person or by proxy, and entitled to vote at the Annual Meeting, is required to +take any other action. +Shares cannot be voted at the Annual Meeting unless the holder of record is present in person or by +proxy. +Can brokers who hold shares in street name vote those shares if they have received no instructions? +Under the rules of the New York Stock Exchange (“NYSE”), brokers may not vote the shares held by them in street name for their +customers and for which they have not received instructions, except with respect to a routine matter. The only matter to be voted on at the Annual Meeting that is considered routine for these purposes is the ratification of the appointment of our +independent registered public accounting firm. Accordingly, brokers may not vote your shares on any other matter if you have not given specific instructions as to how to vote. Please be sure to give specific voting instructions to your broker so +that your vote will be counted. +How will you treat abstentions and broker non-votes? +A plurality of the votes cast at the Annual Meeting is required to elect each nominee for director. Accordingly, abstentions and broker +non-votes will have no effect on the election of directors. Shares of a shareholder who abstains from voting on any or all proposals will be included for the purpose of determining the presence of a quorum. Votes withheld with respect to the +election of the Company’s directors will have no effect on the election of the nominees. In the case of the other proposals being submitted for shareholder approval, an abstention will effectively count as a vote cast against such proposal. +Broker non-votes on any matter, as to which the broker has indicated on the proxy that it does not have discretionary authority to vote, will be treated as shares not entitled to vote with respect to that matter and therefore will have no effect +upon the approval of such matter. However, such shares will be considered present and entitled to vote for quorum purposes so long as they are entitled to vote on at least one other matter. +7 +Table of Contents +Who pays the solicitation expenses? +We will bear the cost of solicitation of proxies. Proxies may be solicited by mail or personally by our directors, officers or employees, +none of whom will receive additional compensation for such solicitation. Those holding shares of Common Stock of record for the benefit of others, or nominee holders, are being asked to distribute proxy soliciting materials to, and request voting +instructions from, the beneficial owners of such shares. We will reimburse nominee holders for their reasonable out-of-pocket expenses. +Where can I find the voting results of the Annual Meeting? +We will announce preliminary voting results at the Annual Meeting, and we will publish final results in a Current Report on Form 8-K that will be filed with the SEC within four business days of the Annual +Meeting. You may obtain a copy of this and other reports free of charge at www.matadorresources.com , by contacting our Investor Relations Department at (972) 371-5200 or investors@matadorresources.com or by accessing the SEC’s +website at www.sec.gov . +Will the Company’s independent registered public accounting firm be available at the Annual Meeting to +respond to questions? +Yes. The Audit Committee of the Board has approved KPMG LLP to serve as our independent registered +public accounting firm for the year ending December 31, 2015. Representatives of KPMG LLP will be present at the Annual Meeting. They will have an opportunity to make a statement, if they desire to do so, and will be available to respond to +appropriate questions. +Where can I contact the Company? +Our mailing address is: +Matador Resources Company +5400 LBJ Freeway, Suite 1500 +Dallas, Texas 75240 +Our telephone number is (972) 371-5200. +8 +Table of Contents +PROPOSAL 1 — ELECTION OF DIRECTORS +The Board currently consists of nine members. Our Board is divided into three classes of directors, designated Class I, Class II and +Class III, with the term of office of each director ending on the date of the third Annual Meeting following the Annual Meeting at which such director’s class was elected. The number of directors in each class will be as nearly equal as +possible at all times. The current Class I directors are Ms. Margaret B. Shannon and Messrs. Michael C. Ryan, Carlos M. Sepulveda, Jr. and George M. Yates. Ms. Shannon and Messrs. Sepulveda and Yates are Class I director nominees at +the Annual Meeting. Mr. Ryan’s term will expire at the Annual Meeting, and he is not being nominated for re-election to the Board, creating a vacancy on the Board. However, Mr. Ryan is expected to serve as a special Board advisor +following the Annual Meeting. In accordance with the terms of the February 2015 merger of Harvey E. Yates Company with and into a wholly-owned subsidiary of the Company (the “HEYCO Merger”), Mr. Yates, Chairman and Chief Executive +Officer of HEYCO Energy Group, Inc., was appointed to the Board on April 28, 2015 as a Class I director and has been nominated by the Board as a Class I director nominee. The Class II directors are Mr. Gregory E. Mitchell and +Dr. Steven W. Ohnimus, who will hold office until the 2016 Annual Meeting of Shareholders and until the election and qualification of their respective successors or until their earlier death, retirement, resignation or removal. The Class +III directors are Messrs. Joseph Wm. Foran, David M. Laney and Reynald A. Baribault, who will hold office until the 2017 Annual Meeting of Shareholders and until the election and qualification of their respective successors or until their earlier +death, retirement, resignation or removal. +Ms. Margaret B. Shannon and Messrs. Sepulveda and Yates have been +nominated by the Board for election as Class I directors at the Annual Meeting to hold office until the 2018 Annual Meeting of Shareholders and until the election and qualification of their respective successors or until their earlier death, +retirement, resignation or removal. +The Board believes that each of the director nominees possesses the qualifications +described below in “Corporate Governance — Board Committees — Nominating, Compensation and Planning Committee.” That is, the Board believes that each nominee possesses: (i) deep experience at the policy making level in +business, government or education; (ii) the availability and willingness to devote adequate time to Board duties; (iii) the character, judgment and ability to make independent analytical, probing and other inquiries; (iv) a +willingness to exercise independent judgment along with a willingness to listen and learn from others; (v) business knowledge and experience that provides a balance with the other directors; (vi) financial independence; and (vii) with +respect to incumbent directors, excellent past performance on the Board. +The information provided below is biographical +information about each of the nominees, as well as a description of the experience, qualifications, attributes or skills that led the Board to conclude that the individual should be nominated for election as a director of the Company. +Nominees +Ms. Margaret B. Shannon . Ms. Shannon, age 65, joined our Board in June 2011 and currently serves as chair of the Board’s Corporate Governance Committee. She served as Vice President +and General Counsel of BJ Services Company, an international oilfield services company, from 1994 to 2010, when Baker Hughes Incorporated acquired BJ Services. Prior to 1994, she was a partner with the law firm of Andrews Kurth LLP. Ms. Shannon +has served on the board of directors of Quanta Services Inc. (NYSE: PWR), a Houston-based public company that provides specialized infrastructure contracting services for the electric power, natural gas and pipeline and telecommunication industries, +since December 2012. Ms. Shannon is also active in community activities, currently serving on the board of directors of the Harris County Health Alliance and as a member of the board of directors of the Houston Health Foundation. She previously +served as chair of the Executive Women’s Partnership sponsored by the Greater Houston Partnership, chair of the audit committee of the board of directors of the South Texas College of Law, chair of the Endowment Board of Palmer Memorial +Episcopal Church and the board chair of the Harris County Health Alliance. Ms. Shannon received her J.D. cum laude from +9 +Table of Contents +the Southern Methodist University Dedman School of Law in 1976 and her Bachelor of Arts degree from Baylor University in 1971. Ms. Shannon’s experience as an attorney, as a +partner with Andrews Kurth LLP, as general counsel for a public company for more than 15 years and as a director for numerous other organizations provides our Board with important insights into public company obligations, corporate governance and +board functions. +Mr. Carlos M. Sepulveda, Jr . Mr. Sepulveda, age 57, joined our Board in April 2013 +and currently serves as chair of the Board’s Audit Committee. Mr. Sepulveda is Executive Chairman of Triumph Bancorp, Inc. (NASDAQ: TBK) a financial holding company with interests in wholesale and community banking, specialty finance and +investment management. He has served on Triumph’s board of directors since 2010. In November 2013, Triumph acquired THE National Bank, and Mr. Sepulveda became vice chairman of its board of directors. Mr. Sepulveda served from March +2004 until his retirement in May 2013 as President and Chief Executive Officer of Interstate Battery System International, Inc. He remains a member of its board of directors, a position he has held since 1995. He has also served since 2007 on the +board of directors of Cinemark Holdings, Inc. (NYSE: CNK), a company that owns and manages movie theaters, and is chair of its audit committee. In March 2014, Mr. Sepulveda became a member of the board of directors of Savoya LLC, an +industry-leading provider of chauffeured ground transportation services. From 1979 to 1990, Mr. Sepulveda was with KPMG Peat Marwick and was a partner in its audit department from July 1989 to October 1990. Mr. Sepulveda received his +Bachelor of Business Administration degree in accounting from the University of Texas in 1979 and is a licensed Certified Public Accountant. Mr. Sepulveda’s experience as President and Chief Executive Officer of Interstate Batteries along +with his extensive public accounting background provide the Board invaluable executive leadership and financial and accounting expertise. As a certified public accountant with proven management skills, Mr. Sepulveda brings to the Board strong +accounting and financial oversight coupled with experience in enterprise and operational risk management. +Mr. George M. Yates. In accordance with the terms of the HEYCO Merger, Mr. Yates, age 68, was appointed to our +Board on April 28, 2015 and has been nominated by the Board for election at the Annual Meeting. See “Transactions with Related Persons” below. He is Chairman and Chief Executive Officer of HEYCO Energy Group, Inc., an oil and natural +gas exploration and production business based in Roswell, New Mexico. HEYCO Energy Group, Inc. was the sole shareholder of Harvey E. Yates Company prior to the HEYCO Merger. Mr. Yates is a New Mexico native and graduated from the New Mexico +Military Institute in Roswell in 1964 and from the University of Texas at Austin with a Bachelor of Business Administration Degree in January 1969. He is also a graduate of the Owners/Presidents Management Program at Harvard Business School. He has +been President of the New Mexico Landmen’s Association and the Independent Petroleum Association of New Mexico. He is past Chairman of the Board of Directors of Mountain States Legal Foundation of Denver, Colorado and the Environmental Issues +Council based in Washington, D.C. He is also past Chairman of the Independent Petroleum Association of America and the Natural Gas Council. He served as Chairman of the board of directors of the Business and Industrial Political Action Committee +(BIPAC) based in Washington, D.C. and as President of the Twenty-Five Year Club of the Petroleum Industry. He is currently a member of the National Petroleum Council. In 2004, Mr. Yates received the prestigious “Roughneck of the Year” +award sponsored by Lone Star Steel Company. He was inducted into the Rocky Mountain Oil and Gas Hall of Fame in 2009. As a proven oil and natural gas executive, Mr. Yates provides our Board with decades of experience and tremendous knowledge +with respect to the Delaware Basin and the assets acquired by Matador in the HEYCO Merger. +Vote Required +To be elected as a director, each director nominee must receive a plurality of the votes cast by the shareholders entitled +to vote for the election of directors. If you hold your shares through a broker and you do not instruct the broker how to vote, your broker will not have the authority to vote your shares. Abstentions and broker non-votes will each be counted as +present for purposes of determining the presence of a quorum but will have no effect upon the outcome of the vote. +The Board of Directors recommends that you vote FOR each of the nominees. +10 +Table of Contents +Directors Continuing in Office +Biographical information for our directors who are continuing in office is provided below. +Mr. Reynald A. Baribault . Mr. Baribault, age 51, was elected to our Board in June 2014 and currently serves as the +chair of the Board’s Operations and Engineering Committee. He is Vice President / Engineering of North Plains Energy, LLC, a Denver-based exploration and production operator he co-founded in 2007. North Plains Energy’s operations are +solely focused on the Bakken play in North Dakota. In addition, he co-founded and serves as President and Chief Executive Officer of IPR Energy Partners, LLC, a Dallas-based oil and natural gas production operator with past operations in Louisiana, +Southeast New Mexico and North Central Texas and current operations in the Fort Worth Basin. Prior to co-founding North Plains Energy and IPR Energy Partners, Mr. Baribault served as Vice President, Supervisor and Petroleum Engineering +Consultant of Netherland, Sewell & Associates, Inc. from 1990 to 2002. Mr. Baribault began his professional career with Exxon Company in 1985 and oversaw operations reservoir engineering matters for high-pressure natural gas fields in +South Louisiana. Mr. Baribault received his Bachelor of Science degree in Petroleum Engineering from Louisiana State University in 1985 and is a registered Petroleum Engineer in the State of Texas. Mr. Baribault provides valuable insight +to our Board on our drilling, completion and reservoir engineering operations. +Mr. Joseph Wm. Foran. +Mr. Foran, age 62, founded Matador Resources Company in July 2003 and has served as Chairman of the Board, Chief Executive Officer and Secretary since our founding. He served as President from our founding until November 2013 and is also +chair of the Board’s Executive Committee. Mr. Foran began his career as an oil and natural gas independent in 1983 when he and his wife, Nancy, founded Foran Oil Company with $270,000 in contributed capital from 17 of his closest friends +and neighbors. Foran Oil Company was later contributed into Matador Petroleum Corporation upon its formation by Mr. Foran in 1988, and Mr. Foran served as Chairman and Chief Executive Officer of that company from inception until the time +of its sale to Tom Brown, Inc. in June 2003 for an enterprise value of $388 million in an all-cash transaction. Under Mr. Foran’s guidance, Matador Petroleum realized a 21% average annual rate of return for its shareholders for 15 years. +Mr. Foran is originally from Amarillo, Texas, where his family owned a pipeline construction business. From 1980 to 1983, he was Vice President and General Counsel of J. Cleo Thompson and James Cleo Thompson, Jr., Oil Producers. Prior to that +time, he was a briefing attorney to Chief Justice Joe R. Greenhill of the Supreme Court of Texas. Mr. Foran graduated with a Bachelor of Science degree in Accounting from the University of Kentucky with highest honors and a law degree from the +Southern Methodist University Dedman School of Law, where he was a Hatton W. Sumners scholar and the Leading Articles Editor of the Southwestern Law Review. He is currently active as a member of various industry and civic organizations, including +his church and various youth activities. In 2002, Mr. Foran was honored as the Ernst & Young “Entrepreneur of the Year” for the Southwest Region. As the founder, Chairman of the Board and Chief Executive Officer of Matador +Resources Company, Mr. Foran has provided leadership, experience and long relationships with many of our shareholders. +Mr. David M. Laney. Mr. Laney, age 66, is an original shareholder in Matador Resources Company and was an original shareholder in Matador Petroleum Corporation. He was one of the +original directors on our Board and currently serves as lead independent director and chair of the Board’s Nominating, Compensation and Planning Committee. He is an attorney who since March 2007 has practiced law as a solo practitioner. Between +2003 and 2007, he was a partner with the law firm of Jackson Walker LLP in Dallas where he practiced in the area of corporate and financial law. Prior to joining Jackson Walker, Mr. Laney practiced at the law firm of Jenkens & +Gilchrist from 1977 to 2003 and was Managing Partner of Jenkens & Gilchrist from 1990 to 2002. Mr. Laney has also served in several capacities as an appointee of Texas Governors William Clements and George W. Bush on state boards +continuously from 1989 to 2001. He was Governor Clements’ appointee to the Texas Finance Commission, responsible for regulatory oversight of state chartered banking and thrift institutions from 1989 to 1995. He served as Governor Bush’s +Texas Commissioner of Transportation (Chair of the Texas Transportation Commission) from 1995 to 2001. In 2002, Mr. Laney was nominated by President George W. Bush to the board of directors of Amtrak and confirmed by the U.S. Senate for a +five-year term. In 2007, he completed his term as +11 +Table of Contents +Chairman of Amtrak’s board of directors. From 1998 to 2003, Mr. Laney served as a member of the Stanford University Board of Trustees, and for two years as chair of its audit committee. +Mr. Laney currently serves on boards overseeing the development and operation of major transportation projects and serves as a director or an advisor to various transportation initiatives. He has also served in various capacities in connection +with numerous civic and educational organizations and projects in the Dallas area. Mr. Laney graduated with a Bachelor of Arts degree with honors from Stanford University and a law degree from the Southern Methodist University Dedman School of +Law. Mr. Laney’s legal and leadership experience in government and the private sector provide our Board with additional perspective on matters of corporate governance, legal and governmental relations as well as general business issues. +Mr. Gregory E. Mitchell . Mr. Mitchell, age 63, joined our Board in June 2011. With 47 years of grocery +and petroleum retailing experience, he is currently President and Chief Executive Officer of Toot’n Totum Food Stores, LLC, his family company located in Amarillo, Texas. The company, founded in 1950, consists of 73 convenience store/fueling +locations, as well as eight car wash and car care centers, and 10 Mr. Payroll check cashing locations with an employee base of over 900 team members. His experience within the petroleum industry includes extensive negotiations with various +major refiners in the United States. A 1973 graduate of the University of Oklahoma with a Bachelor of Business Administration degree, Mr. Mitchell was appointed by former Governor William Clements to the Texas Higher Education Coordinating +Board, where he served from 1987 through 1993. Additionally, he has served as Chairman of the Amarillo Chamber of Commerce, Chairman of the United Way of Amarillo and Canyon, Chairman of the Harrington Foundation and President of the Amarillo Area +Foundation. Mr. Mitchell is a former director of the Holding Committee of Amarillo National Bank and is the present Board Chairman of Cal Farley’s Boys Ranch. Mr. Mitchell’s experience as President and Chief Executive Officer of +his large family business, and as a past director of several large companies, provides our Board with extensive business, strategic and executive leadership experience. +Dr. Steven W. Ohnimus . Dr. Ohnimus, age 68, was first elected to our Board in January 2004. He spent his entire professional career from 1971 to 2000 with Unocal Corporation, an +integrated energy company. From 1995 to 2000, he was General Manager — Partner Operated Ventures, where he represented Unocal’s non-operated international interests at board meetings, management +committees and other high level meetings involving projects in the $200 million range in countries such as Azerbaijan, Bangladesh, China, Congo, Myanmar and Yemen. From 1994 to 1995, Dr. Ohnimus was General Manager of Asset Analysis, where he +managed and directed planning, business plan budgeting and scenario plans for the domestic and international business unit with an asset portfolio totaling $5.5 billion. From 1990 to 1994, Dr. Ohnimus was Vice President and General Manager, +Unocal Indonesia, located in Balikpapan, operating five offshore fields and one onshore liquid extraction plant and employing 1,200 nationals and 50 expatriates. From 1989 to 1990, he served as Regional Operations Manager in Anchorage, Alaska, and +from 1988 to 1989, he was District Operations Manager in Houma, Louisiana. From 1981 to 1988, Dr. Ohnimus was in various management assignments in Houston and Houma, Louisiana, and from 1971 to 1981 he handled various technical assignments in +reservoir engineering, production and drilling in the Gulf Coast area (Houston, Van, Lafayette and Houma). From 1975 to 1979, Dr. Ohnimus was Assistant Professor of Petroleum Engineering at the University of Southwest Louisiana (now University +of Southern Louisiana) where he taught eleven undergraduate and graduate night classes. In 1980, he taught drilling seminars at the University of Texas Petroleum Extension Service of the International Association of Drilling Contractors +(“IADC”). Dr. Ohnimus has authored several published papers concerning reservoir recompletion and increased recovery. He received his Bachelor of Science degree in Chemical Engineering from the University of Missouri at Rolla in 1968, +a Master of Science degree in Petroleum Engineering from the University of Missouri at Rolla in 1969 and a PhD degree in Petroleum Engineering from the University of Missouri at Rolla in 1971. Dr. Ohnimus served as a director of the American +Petroleum Institute in 1978 and 1979, served as Session Chairman for the Society of Petroleum Engineers’ Annual Convention in 1982, was the Evangeline Section Chairman of the Society of Petroleum Engineers in 1978 and 1979 and served as +President of the Unocal Credit Union from 1986 to 1988. In 2007, he was elected President of the Unocal Gulf Coast Alumni Club, which reports through the Chevron Retirees Association, for which Dr. Ohnimus is a director. From 2008 to 2009, +Dr. Ohnimus served as the vice chairman of the advisory board of +12 +Table of Contents +Western Standard Energy Corp. (OTCBB: WSEG), an oil and natural gas exploration company. Due to his long oil and natural gas industry career and significant operational and international +experience, Dr. Ohnimus provides valuable insight to our Board on our drilling and completion operations and management, as well as providing a global technology and operations perspective. +Special Board Advisors +In addition to our Board, following the Annual Meeting, we expect to have nine individuals with significant oil and natural gas experience or legal, accounting or other business experience who will advise +our Board on various matters. From time to time, we enter into various agreements with these individuals with respect to their service as special advisors to our Board, as well as indemnification agreements in form similar to those entered into with +our directors and officers. Their business histories are described below: +Mr. Marlan W. Downey. +Mr. Downey worked for Shell Oil Company, an integrated energy company, from 1957 to 1987. In 1977, he moved to Shell Oil’s International Exploration & Production business and became Vice President of Shell, and then President of +Shell Oil’s newly-formed international subsidiary, Pecten International, retiring in 1987. Mr. Downey joined ARCO International in 1990 as Senior Vice President of Exploration, becoming President of ARCO International and then Senior Vice +President and Executive Exploration Advisor to ARCO. Mr. Downey retired from ARCO in 1996. He serves on the board of TransAtlantic Petroleum Ltd., operating internationally. He is a fellow of the American Association for the Advancement of +Science. He is an elected fellow of the Geological Society in London. Mr. Downey is past President of the American Association of Petroleum Geologists (“AAPG”) and has served as Bartell Professor and Chief Scientist — Sarkeys +Energy Center at the University of Oklahoma. Mr. Downey is the 2009 recipient of the AAPG’s Sidney Powers Medal, which is the highest honor awarded by the AAPG. He is active in several scientific organizations and serves on the board of +Berkeley Earth, a non-profit organization. Mr. Downey received a Bachelor of Arts degree in Chemistry in 1952 at Peru State College in Nebraska. He served in the U.S. Army in Korea and the Philippines, then entered graduate school at the +University of Nebraska, and received a Bachelor of Science degree in 1956 and a Master of Science degree in Geology in 1957. Mr. Downey previously served on Matador Petroleum Corporation’s board of directors. He has served as a special +advisor to the Board since our inception in July 2003 and currently serves as chair of the Board’s Prospect Committee and on the Operations and Engineering Committee. +Mr. John R. Gass. Mr. Gass is Senior Vice President, Eastern Hemisphere Operations, for Nabors Drilling +International Limited in Dubai, United Arab Emirates. Mr. Gass joined Nabors in its Houston, Texas office in 2004 as Senior Vice President, Business Development and Contracts, and held that position until 2011 when he was transferred to Dubai. +Prior to joining Nabors, Mr. Gass served as Vice President, Global Operations at Parker Drilling Company. He spent 28 years with Parker and has extensive experience in drilling operations worldwide, including Latin America, the Middle East, +Europe, Africa, the former Soviet Union and the Far East. Mr. Gass received a Bachelor of Business Administration degree from the University of Oklahoma in 1974 and a Master of Business Administration degree in international management from the +Thunderbird Graduate School of International Management in Glendale, Arizona. +Mr. Wade I. Massad . +Mr. Massad served as a consultant to the Company and a special advisor to the Board from 2010 to December 2011, when he was elected Executive Vice President — Capital Markets of the Company. He held this role until July 2012, when he +resumed his role as a consultant to the Company and as a special advisor to the Board, pursuant to a consulting agreement entered into in August 2012. Mr. Massad is the Co-Founder and Co-Managing Member of Cleveland Capital Management L.L.C., a +registered investment advisor and General Partner of Cleveland Capital L.P., a private investment fund focused on micro-cap public and private equity securities, established in October 1996. Previously, Mr. Massad was an investment banker with +Keybanc Capital Markets and RBC Capital Markets, where he was the head of U.S. equity institutional sales from 1997 to 1998 and the head of U.S. Capital Markets business from 1999 to 2003. He also served on the firm’s executive +committee. Mr. Massad has served on multiple public and private company boards and currently +13 +Table of Contents +is a board member of 4Licensing Corporation. Mr. Massad received a Bachelor of Arts in business management from Baldwin-Wallace University in 1989 and currently serves on its Board of +Trustees. +Mr. Greg L. McMichael. Mr. McMichael served as a member of the Board of Directors of +Matador Resources Company from 2004 to 2008. He presently serves on the board of directors for Denbury Resources, Inc. (NYSE: DNR). Mr. McMichael retired in October 2004 as Vice President and Group Leader — Energy Research, of A.G. +Edwards. In that capacity, he was responsible for all of the firm’s equity research in the Energy Sector, including the integrated oils, exploration and production, oil service and master limited partnerships. Prior to joining A.G. Edwards, +Mr. McMichael served as Managing Director of Equity Research at Hanifen, Imhoff, Inc., a Denver-based regional investment firm. He had previously served as Chief Executive Officer of a private oil and natural gas acquisition and production +company he co-founded in 1987. Mr. McMichael is a member of the National Association of Corporate Directors, where he is currently a Leadership Fellow. Mr. McMichael received a Bachelor of Arts degree in Political Science and Economics +from Schiller International University (London) in 1973. +Mr. David F. Nicklin. Mr. Nicklin +joined Matador Resources Company in February 2009 as Executive Director of Exploration after working with us as a consultant since November 2007. He retired from his position as Executive Director of Exploration on March 31, 2015 but continues +to serve the Company as a consultant and special advisor to the Board. From January 2000 until he joined Matador in 2009, Mr. Nicklin provided executive level consulting services to a variety of clients. In 2006, Mr. Nicklin co-founded and +currently leads a small, private oil and natural gas company, Salt Creek Petroleum LLC. Salt Creek Petroleum owns small, non-operated interests in a variety of onshore oil and natural gas fields in the United States. Since 2009, Mr. Nicklin has +consulted almost exclusively for Matador, with the primary exception of the minimal time he has devoted to Salt Creek Petroleum. In 2000, Mr. Nicklin founded and led for three years a private oil and natural gas exploration company, Serica +Energy, which is now a public company with assets in Indonesia, the United Kingdom, Spain, Ireland and Morocco. Between 1981 and 2000, Mr. Nicklin was an employee of ARCO, where he participated in and led several international exploration +teams, particularly in the Middle East, southeast Asia and Australasia. In 1991, he became the Chief Geologist for ARCO, a position he held until his retirement in 2000. In this position, Mr. Nicklin was responsible for the quality of the +geological effort at ARCO, in particular, ensuring the application of state-of-the-art geological technology, the company’s risk management process, the selection of new ventures and the high-grading of a large geoscience staff. Throughout his +career at ARCO, Mr. Nicklin was closely involved with the successful exploration for and development of a number of large oil and natural gas discoveries. Prior to joining ARCO, Mr. Nicklin was a senior development and operations geologist +in a variety of positions in the United Kingdom, Angola, Norway and the Middle East. He was a specialist in well-site operations and provided training in operations to entry-level personnel. Mr. Nicklin was born in the United Kingdom and +received a Bachelor of Science degree in Geology from the University of Wales in 1971. He is an active member of the American Association of Petroleum Geologists and various other professional groups. +Dr. James D. Robertson . Dr. Robertson is a founder and co-managing partner of Salt Creek Petroleum, LLC, a +privately held company that explores for and produces oil and natural gas in conventional onshore plays in Texas. He is also founder and owner of Rannoch Petroleum LLC, an oil and natural gas investment and consulting firm based in Fort Worth, +Texas. Prior to becoming an independent petroleum explorer, Dr. Robertson worked for ARCO for 25 years, serving as Vice President of Exploration for ARCO’s international division prior to his retirement from ARCO upon its acquisition by BP +plc in 2000. Dr. Robertson has served as president of the Society of Exploration Geophysicists (SEG), chairman of the Fort Worth Chapter of the Society of Independent Professional Earth Scientists (SIPES) and as a national director of SIPES +from 2012 to 2013. He is a licensed professional geoscientist in the State of Texas. Dr. Robertson received a Bachelor of Science degree in geological engineering from Princeton University and a PhD in geophysics from the University of +Wisconsin. +Mr. Michael C. Ryan. Mr. Ryan joined our Board in February 2009. His term as a director will +expire at the Annual Meeting, and we expect he will continue to serve the Board as a special advisor. Prior to joining the Board, he served as an advisor to the Financial Committee and frequently participated in Board planning and +14 +Table of Contents +strategy sessions. Since October 2004, Mr. Ryan has been a Partner and member of the Investment Committee at Berens Capital Management LLC, an investment firm based in New York. +From February 1998 to June 2004, he worked with Goldman, Sachs & Co., a global investment banking and securities services firm, leading its West Coast international institutional equities business. In this role, he developed and built a +team of professionals to advise large institutional clients on their global investment decisions. From 1995 to 1998, Mr. Ryan lived in Oslo, Norway, where he was a Partner at Pareto Securities, a Scandinavian-based securities firm where he led +and built the institutional equities business into the United States and United Kingdom. From 1991 to 1994, Mr. Ryan represented multiple eastern European governments in the preparation, negotiation and sale of many of their largest state-owned +companies. He began his career with Honeywell, Inc., which invents and manufactures technologies, including in the safety, security and energy areas, in 1983, working in the Systems and Research Center, which focused on advanced weapons development +programs. Mr. Ryan received a Master of Business Administration degree from The Wharton School at the University of Pennsylvania in 1991 and a Bachelor of Science degree from the University of Minnesota in 1983. +Mr. Edward R. Scott, Jr. Mr. Scott is a successful Amarillo, Texas lawyer, civic leader and businessman, managing a +varied portfolio of real estate and development-related concerns. Currently, he is the primary developer for two residential developments in Amarillo: Pheasant Run and The Greenways. From 1968 to 1996, Mr. Scott was an attorney with the +Amarillo law firm of Gibson, Ochsner & Adkins. From 1965 to 1968, he served as an accountant with Price Waterhouse & Co. Mr. Scott received his Bachelor of Business Administration degree in Accounting from West Texas State +University in 1962 and an LLB from The University of Texas School of Law in 1965. Mr. Scott has previously served as a director and chairman of the Amarillo Economic Development Corporation and is currently serving as a board member of the +Amarillo Area Foundation. He is a past President of the Rotary Club of Amarillo, the Amarillo Businessmen’s Club, the Amarillo Club, Big Brothers and Big Sisters and the Amarillo Business Foundation. He is a former chairman of the Amarillo +Board of City Development and a former member of the Board of Regents for West Texas State University. Mr. Scott has previously served as an officer and/or board member to many other local civic and/or charitable organizations. He is a member +of the Texas Bar Association, the Amarillo Bar Association, the Texas Society of Certified Public Accountants and the Panhandle Chapter of the Texas Society of Certified Public Accountants. Mr. Scott is an original shareholder in both Matador +Resources Company and Matador Petroleum Corporation. He was an original director of Matador Resources Company and served as chair of the Audit Committee for eight years until his retirement from the Board in June 2011. +Mr. W.J. “Jack” Sleeper, Jr. Mr. Sleeper has over 55 years of experience evaluating oil and natural gas +properties. Mr. Sleeper joined DeGolyer and MacNaughton, a petroleum consulting firm, as a Petroleum Engineer in 1965. He performed numerous field studies in North and South America, the North Sea and the Middle East. Mr. Sleeper retired +as President and Chief Operating Officer of DeGolyer and MacNaughton on January 1, 1995. He served on DeGolyer and MacNaughton’s board of directors from 1978 until his retirement. Upon his graduation from the University of Oklahoma with a +Bachelor of Science degree in Petroleum Engineering (with Distinction) in 1955, he was employed by Shell Oil Company, an integrated energy company, as an Exploitation Engineer. During his 10 years with Shell, he spent three years performing research +at Shell Development Company in the fields of Reservoir Engineering, Geology and Petrophysics. He held the titles of Project Engineer, Senior Exploitation Engineer and Senior Production Geologist during his tenure with Shell. Mr. Sleeper has +served on the Mewborne Petroleum and Geological Board of Advisors at the University of Oklahoma since 1995. He is a Licensed Professional Engineer (retired) in the states of Oklahoma and Texas. Mr. Sleeper previously served on Matador Petroleum +Corporation’s board of directors. He has served as a special advisor to the Board since our inception in July 2003. He currently serves on our Operations and Engineering Committee and Prospect Committee. +15 +Table of Contents +CORPORATE GOVERNANCE +The business affairs of Matador are managed under the direction of the Board in accordance with the Texas Business Organizations Code, +the Company’s Amended and Restated Certificate of Formation and its Amended and Restated Bylaws. The Board has adopted Corporate Governance Guidelines, which are reviewed annually by the Corporate Governance Committee of the Board. The Company +has a Code of Ethics and Business Conduct for Officers, Directors and Employees (“Code of Ethics”), which is applicable to all officers, directors and employees of the Company. The Company intends to post any amendments to, and may post +any waivers from, its Code of Ethics on the Company’s website to the extent applicable to an executive officer or a director of the Company. The Corporate Governance Guidelines and the Code of Ethics are available on the Company’s website +at www.matadorresources.com under the heading “Investors — Corporate Governance.” +The Board holds +regular and special meetings and spends such time on the affairs of the Company as its duties require. During 2014, the Board held 12 meetings. The Board also meets regularly in non-management executive sessions in accordance with NYSE regulations. +The Corporate Governance Guidelines provide that one of the Company’s independent directors should serve as lead independent director at any time when the chief executive officer serves as the chairman of the board. The lead independent +director presides over the non-management executive sessions, serves as a liaison between the chairman and the independent directors and performs such additional duties as the Board may otherwise determine and delegate. Because Mr. Foran serves +as Chairman of the Board and Chief Executive Officer, our independent directors have appointed Mr. Laney to serve as lead independent director. In 2014, all incumbent directors of the Company attended at least 75% of the meetings of the Board +and the committees on which they served. Our Company policy states that each of our directors is expected to attend Annual Meetings of Shareholders. All of our directors were in attendance at the 2014 Annual Meeting. +Independence of Directors +The Board makes all determinations with respect to director independence in accordance with the NYSE listing standards and the rules and regulations promulgated by the SEC. The actual determination of +whether a director is independent is made by the Board on a case-by-case basis. +In connection with its preparation for the +Annual Meeting, the Board undertook its annual review of director independence and considered transactions and relationships between each director or any member of his or her immediate family and the Company and its subsidiaries and affiliates. In +making its determination, the Board applied the NYSE listing standards and SEC rules and regulations. +The Board reviewed the +independence of our directors and considered whether any director has a material relationship with us that could compromise his or her ability to exercise independent judgment in carrying out his or her responsibilities. After this review, our Board +determined that seven of our nine current directors are “independent directors” as defined under the rules of the SEC and the NYSE: Ms. Shannon, Messrs. Baribault, Laney, Mitchell, Ryan and Sepulveda and Dr. Ohnimus. +Mr. Ryan’s term will expire at the Annual Meeting, creating a vacancy on the Board. No member of or nominee for our Board has a family relationship with any executive officer or other members of our Board. +Board Leadership Structure +Mr. Foran serves as Chairman of the Board and Chief Executive Officer of the Company. As stated in the Corporate Governance Guidelines, the Board does not believe that the offices of Chairman of the +Board and Chief Executive Officer must be separate. The members of the Board possess experience and unique knowledge of the challenges and opportunities the Company faces. They are, therefore, in the best position to evaluate the current and future +needs of the Company and to judge how the capabilities of the directors and senior managers can be most effectively organized to meet those needs. Given his deep knowledge of the Company and experience in leading it, the Board currently believes +that the most effective leadership structure for the Company is to have Mr. Foran serve as Chairman of the Board and Chief Executive Officer. +16 +Table of Contents +While Mr. Foran serves as Chairman and Chief Executive Officer, seven of nine of our +non-employee directors are independent. After considering the recommendations of our Nominating, Compensation and Planning Committee, the independent directors determine Mr. Foran’s compensation. Further, the Company has four standing +committees and an independent lead director. The Board believes that each of these measures counterbalances any risk that may exist in having Mr. Foran serve as Chairman and Chief Executive Officer. For these reasons, the Board believes that +this leadership structure is effective for the Company. +As the Lead Director, Mr. Laney has the following roles and +responsibilities: +• +he chairs the executive sessions of the non-management and independent directors; +• +he leads the independent directors in the evaluation of the Chief Executive Officer; +• +he facilitates communication among the non-management and independent directors; and +• +he acts as a liaison between the non-management and independent directors and the Chief Executive Officer. +Mr. Laney, as Lead Director, may also perform such other duties as the Board or the Corporate Governance Committee from time to time +may assign, which may include, but are not limited to, the following: +• +help develop Board agendas and ensure critical issues are included; +• +determine quality, quantity and timeliness of information from management; +• +make recommendations about retaining consultants or special advisors for the Board; +• +interview Board candidates; +• +oversee Board and director evaluations; and +• +help improve communications and processes by and between management and the Board and the Chief Executive Officer. +Board Committees +The standing committees of the Board are the Audit Committee; Nominating, Compensation and Planning Committee; Corporate Governance Committee; and Executive Committee. The Board has also established the +following advisory committees: Operations and Engineering Committee; Financial Committee; and Prospect Committee. Each of the standing committees is governed by a charter, and a copy of the charters of each of these committees is available on the +Company’s website at www.matadorresources.com under the heading “Investors — Corporate Governance.” Director membership of all of our committees at December 31, 2014 is identified below. Mr. Yates joined the +Board on April 28, 2015 in accordance with the terms of the HEYCO Merger. We anticipate that Mr. Yates will be added to the Prospect Committee and the Operations and Engineering Committee following the Annual Meeting. +Director +Audit +Committee +Nominating, +Compensation +and Planning +Committee +Corporate +Governance +Committee +Executive +Committee +Operations +and +Engineering +Committee +Financial +Committee +Prospect +Committee +Joseph Wm. Foran +** +* +* +* +Reynald A. Baribault +* +** +* +David M. Laney +* +** +* +* +* +Gregory E. Mitchell +* +Steven W. Ohnimus +* +* +* +* +Michael C. Ryan +* +* +** +Carlos M. Sepulveda, Jr. +** +* +* +Margaret B. Shannon +* +** +* +* +Member +** +Chair +17 +Table of Contents +Audit Committee +The Audit Committee assists the Board in monitoring: +• +the integrity of our financial statements and disclosures; +• +our compliance with legal and regulatory requirements; +• +the qualifications and independence of our independent auditor; +• +the performance of our internal audit function and our independent auditor; and +• +our internal control systems. +In addition, the Audit Committee is charged with review of compliance with our Code of Ethics. +During 2014, our Audit Committee met five times and as of December 31, 2014 consisted of Messrs. Laney, Ryan and Sepulveda and Dr. Ohnimus, each of whom is independent under the rules of the +NYSE and the SEC. Mr. Sepulveda is the chair of the Audit Committee. SEC rules require a public company to disclose whether or not its audit committee has an “audit committee financial expert” as defined by applicable SEC rules and +regulations. Our Board has determined that each of Messrs. Ryan and Sepulveda is an “audit committee financial expert.” Mr. Ryan’s term as a director, and as a member of the Audit Committee, will expire at the Annual +Meeting; however, we anticipate that Mr. Ryan will continue to advise the Audit Committee in his role as a special advisor to the Board. +Nominating, Compensation and Planning Committee +The Nominating, Compensation and Planning Committee has the following responsibilities: +• +identifies and recommends to the Board individuals qualified to be nominated for election to the Board; +• +recommends to the Board the members and chair of each committee of the Board; +• +assists the Board and the independent members of the Board in the discharge of their fiduciary responsibilities relating to the fair and competitive +compensation of our executive officers; +• +provides overall guidance with respect to the establishment, maintenance and administration of our compensation programs, including stock and benefit +plans; +• +oversees and advises the Board and the independent members of the Board on the adoption of policies that govern our compensation programs; and +• +recommends to the Board the strategy, tactical and performance goals of the Company, including those performance and tactical goals that relate to +performance-based compensation, including but not limited to goals for production, reserves, cash flows and shareholder value. +Our Nominating, Compensation and Planning Committee has the authority to delegate authority and responsibilities to subcommittees of its members, so long as the subcommittee consists of at least two +members. +As of December 31, 2014, our Nominating, Compensation and Planning Committee consisted of Ms. Shannon, and +Messrs. Baribault, Laney and Ryan, each of whom is independent under the rules of the NYSE, a “non-employee director” pursuant to Rule 16b-3 of the Securities Exchange Act of 1934, as amended, or the “Exchange Act,” and an +“outside director” pursuant to Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”). Mr. Laney is the chair of the Nominating, Compensation and Planning Committee. During 2014, the Nominating, +Compensation and Planning Committee met seven times. Mr. Ryan’s term as a director, and as a member of the Nominating, Compensation and Planning Committee, will expire at the Annual Meeting. +The Board has also established a Shareholder Advisory Committee for Board Nominations (formerly the Director Nominating Advisory +Committee) that is charged with receiving and considering possible nominees for +18 +Table of Contents +election by shareholders to the Board. Pursuant to the Shareholder Advisory Committee for Board Nominations charter, this committee is comprised of eight to 12 persons selected by the Nominating, +Compensation and Planning Committee, and consists of at least: +• +two members of the Nominating, Compensation and Planning Committee; +• +two former members of or special advisors to the Board; +• +two shareholders who beneficially own Common Stock having a market value of at least $1.0 million (such value to be based on the market value of the +Common Stock immediately prior to designation of such shareholders to the Shareholder Advisory Committee for Board Nominations); and +• +two shareholders who have beneficially owned Common Stock continuously for at least the five years prior to such shareholder’s designation to the +Shareholder Advisory Committee for Board Nominations. +The current members of the Shareholder Advisory +Committee for Board Nominations are Messrs. Laney, Ryan and Scott, Craig T. Burkert, Joe E. Coleman, Kevin M. Grevey, Scott E. King, James S. Kone, Jr. and James H. “Jake” Trewin. +The Shareholder Advisory Committee for Board Nominations makes recommendations based on its conclusions to the Nominating, Compensation +and Planning Committee for its consideration and review. +The Nominating, Compensation and Planning Committee and the +Shareholder Advisory Committee for Board Nominations consider individuals recommended by the Company’s shareholders to serve on the Board. In considering candidates submitted by shareholders, the Shareholder Advisory Committee for Board +Nominations and the Nominating, Compensation and Planning Committee take into consideration the needs of the Board and the qualifications of the candidate. To have a candidate considered by the Shareholder Advisory Committee for Board Nominations +and the Nominating, Compensation and Planning Committee, a shareholder must submit the recommendation in writing and must include the following information: +• +The name and address of the shareholder, evidence of the person’s ownership of Common Stock or derivatives, including the number of shares owned, +a description of all arrangements or understandings regarding the right to vote shares of the Company, any short interest in any security of the Company, any rights to dividends that are separated or separable from the underlying shares, any +proportionate interest in shares or derivatives held by a general or limited partnership whereby the shareholder is a general partner or beneficially owns an interest in the general partner, any performance-related fees (other than an asset-based +fee) that the shareholder is entitled to based on any change in the value of the shares or derivatives, any other information relating to the shareholder that would be required to be disclosed in connection with solicitations of proxies for the +election of directors in a contested election and a statement whether or not the shareholder will deliver a proxy to shareholders; and +• +The name, age, business and residence addresses of the candidate, the candidate’s résumé or a listing of his or her qualifications +to be a director of the Company, the person’s consent to be a director if selected by the Nominating, Compensation and Planning Committee, nominated by the Board and elected by the shareholders and any other information that would be required +to be disclosed in solicitations of proxies for the election of directors. +The shareholder recommendation +and information described above and in more detail in our Amended and Restated Bylaws must be sent to the Corporate Secretary at One Lincoln Centre, 5400 LBJ Freeway, Suite 1500, Dallas, Texas 75240 and must be received by the Corporate Secretary +not less than 45 or more than 75 days prior to the one-year anniversary date of the date the Company’s proxy statement was mailed in connection with the previous year’s Annual Meeting of Shareholders. +The Nominating, Compensation and Planning Committee believes that a potential director of the Company must demonstrate that such +candidate has: +• +a depth of experience at the policy-making level in business, government or education; +19 +Table of Contents +• +a balance with the business knowledge and experience of the incumbent or nominated directors; +• +availability and willingness to devote adequate time to Board duties; +• +any unfilled expertise needed on the Board or one of its committees; +• +character, judgment and ability to make independent analytical, probing and other inquiries; +• +willingness to exercise independent judgment yet willingness to listen and learn from the other directors and the Company’s staff; and +• +financial independence to ensure such candidate will not be financially dependent on director compensation. +In the case of an incumbent director, the Nominating, Compensation and Planning Committee will also consider such director’s past +performance on the Board. +The Nominating, Compensation and Planning Committee or the Shareholder Advisory Committee for Board +Nominations may identify potential nominees by asking, from time to time, current directors and executive officers for their recommendation of persons meeting the criteria described above who might be available to serve on the Board. The Nominating, +Compensation and Planning Committee or the Shareholder Advisory Committee for Board Nominations may also engage firms that specialize in identifying director candidates. As described above, the Nominating, Compensation and Planning Committee and +Shareholder Advisory Committee for Board Nominations will also consider candidates recommended by shareholders. +Once a person +has been identified by the Nominating, Compensation and Planning Committee or the Shareholder Advisory Committee for Board Nominations as a potential candidate, the Nominating, Compensation and Planning Committee or the Shareholder Advisory +Committee for Board Nominations will make an initial determination regarding the need for additional Board members to fill vacancies or expand the size of the Board. If the Nominating, Compensation and Planning Committee or the Shareholder Advisory +Committee for Board Nominations determines that additional consideration is warranted, the Nominating, Compensation and Planning Committee or the Shareholder Advisory Committee for Board Nominations will review such information and conduct +interviews as it deems necessary to fully evaluate each director candidate. In addition to the qualifications of a candidate, the Nominating, Compensation and Planning Committee or the Shareholder Advisory Committee for Board Nominations will +consider such relevant factors as it deems appropriate, including the current composition of the Board, the evaluations of other prospective nominees and the need for any required expertise on the Board or one of its committees. The Nominating, +Compensation and Planning Committee or the Shareholder Advisory Committee for Board Nominations also contemplate multiple dynamics that promote and advance diversity amongst the members of the Board. Although the Nominating, Compensation and +Planning Committee does not have a formal diversity policy, the Nominating, Compensation and Planning Committee considers a number of factors regarding diversity of personal and professional backgrounds, specialized skills and acumen and breadth of +experience in energy production, consumption, distribution or transportation, government policy, finance or law. The Nominating, Compensation and Planning Committee’s evaluation process will not vary based on whether or not a candidate is +recommended by a shareholder. +Corporate Governance Committee +The Corporate Governance Committee is responsible for periodically reviewing and assessing our Corporate Governance Guidelines and making +recommendations for changes thereto to the Board, reviewing any other matters related to our corporate governance, unless the authority to conduct such review has been retained by the Board or delegated to another committee, and overseeing the +evaluation of the Board and management. +As of December 31, 2014, our Corporate Governance Committee consisted of +Ms. Shannon and Messrs. Laney, Mitchell and Sepulveda, each of whom is independent under the rules of the NYSE. Ms. Shannon is the chair of the Corporate Governance Committee. During 2014, the Corporate Governance Committee met five times. +20 +Table of Contents +Executive Committee +The Executive Committee has authority to discharge all the responsibilities of the Board in the management of the business and affairs of the Company, except where action of the full Board is required by +statute or by our Amended and Restated Certificate of Formation. +As of December 31, 2014, our Executive Committee +consisted of Messrs. Foran and Laney and Dr. Ohnimus. Mr. Foran is the chair of the Executive Committee. The Executive Committee did not meet during 2014. +Operations and Engineering Committee +The Operations and +Engineering Committee provides oversight of the development of our prospects, our drilling and completion operations and our production operations and associated costs. In addition, the Operations and Engineering Committee provides oversight of the +amount and classifications of our reserves and the design of our completion techniques and hydraulic fracturing operations and various other reservoir engineering matters. As of December 31, 2014, the members of the Operations and Engineering +Committee were Messrs. Baribault and Foran, Dr. Ohnimus and Messrs. Downey ( ex officio ) and Sleeper ( ex officio ), who are special advisors to our Board. Mr. Baribault is the chair of the Operations and Engineering +Committee. +Financial Committee +The Financial Committee provides oversight of our financial position, liquidity and capital needs and the various methods for financing our business. As of December 31, 2014, the members of the +Financial Committee were Ms. Shannon and Messrs. Foran, Laney, Ryan and Sepulveda. Mr. Ryan is the chair of the Financial Committee. Mr. Ryan’s term as a director, and as a member of the Financial Committee, will expire at the +Annual Meeting; however, we anticipate that Mr. Ryan will continue to advise the Financial Committee in his role as a special advisor to the Board. +Prospect Committee +The Prospect Committee provides oversight +of the technical analysis, evaluation and selection of our oil and natural gas prospects. As of December 31, 2014, the members of the Prospect Committee were Messrs. Baribault, Foran, Downey ( ex officio ) and Sleeper ( ex officio ) +and Dr. Ohnimus. Mr. Downey is the chair of the Prospect Committee. +Board’s Role in Risk +Oversight +The Audit Committee has the responsibility to oversee the Company’s guidelines and policies to govern the +process by which risk assessment and risk management are undertaken by management. The Nominating, Compensation and Planning Committee has the responsibility to oversee that our incentive pay does not encourage unnecessary risk taking and to review +and discuss the relationship between risk management policies and practices, corporate strategy and senior executive compensation. +Compensation Committee Interlocks and Insider Participation +Ms. Shannon and Messrs. Baribault, Laney and Ryan +served on our Nominating, Compensation and Planning Committee during the last completed fiscal year. In addition, Stephen A. Holditch served on our Nominating, Compensation and Planning Committee until the expiration of his term as a director at the +2014 Annual Meeting of Shareholders. None of our executive officers serve on the board of directors or compensation committee of a company that has an executive officer that serves on our Board or Nominating, Compensation and Planning Committee. No +member of our Board serves as an executive officer of a company in which one of our executive officers serves as a member of the board of directors or compensation committee of that company. There were no compensation committee interlocks during +2014. +21 +Table of Contents +Communications with Directors +The Board has established a process to receive communications from shareholders and other interested parties by mail. Shareholders and +other interested parties may contact any member of the Board, any Board committee or the entire Board. To communicate with the Board, any individual director or any committee of directors, correspondence should be addressed to the Board. All such +correspondence should be sent “c/o Corporate Secretary” at One Lincoln Centre, 5400 LBJ Freeway, Suite 1500, Dallas, Texas 75240. The Corporate Secretary will review and forward correspondence to the appropriate person or persons. +Any communications to the Company from one of the Company’s officers or directors will not be considered +“shareholder communications.” Communications to the Company from one of the Company’s employees or agents will only be considered “shareholder communications” if they are made solely in such employee’s or agent’s +capacity as a shareholder. Any shareholder proposal submitted pursuant to Rule 14a-8 promulgated under the Exchange Act will not be viewed as “shareholder communications.” +Executive Officers and Other Senior Officers of the Company +The following table sets forth the names, ages and positions of our executive officers and certain of our other senior officers at April 28, 2015: +Name +Age +Positions Held With Us +Executive Officers +Joseph Wm. Foran +62 +Chairman of the Board and Chief Executive Officer +Matthew V. Hairford +54 +President +David E. Lancaster +58 +Executive Vice President, Chief Operating Officer and Chief Financial Officer +Craig N. Adams +48 +Executive Vice President — Land & Legal +Ryan C. London +36 +Executive Vice President and General Manager +Van H. Singleton, II +37 +Executive Vice President of Land +Bradley M. Robinson +60 +Vice President of Reservoir Engineering, Chief Technology Officer +Other Senior Officers +Billy E. Goodwin +57 +Vice President of Drilling +G. Gregg Krug +54 +Vice President of Marketing; Vice President of Longwood Gathering and Disposal Systems, LP +Jennifer S. Queen +47 +Vice President of Human Resources & Administration +Trent W. Green +48 +Vice President of Production +Sandra K. Fendley +52 +Vice President and Chief Accounting Officer +Kathryn L. Wayne +54 +Controller and Treasurer +The following biographies describe the business experience of our executive officers and certain of our +other senior officers. Each officer serves at the discretion of our Board. There are no family relationships among any of our officers. +Executive Officers +Mr. Joseph Wm. Foran . Please see the biography of Mr. Foran on page 11 of this Proxy Statement. +Mr. Matthew V. Hairford . Mr. Hairford joined Matador Resources Company in July 2004 as its Drilling Manager. He was +named Vice President of Drilling in May 2005; Vice President of Operations in May 2006; Executive Vice President of Operations in May 2009; and in November 2013 assumed the title of President. He was previously with Samson Resources, an exploration +and production company, as Senior Drilling Engineer, having joined Samson in 1999. His responsibilities there included difficult Texas and Louisiana Gulf Coast projects, horizontal drilling projects and a start-up drilling program in Wyoming. The +scope of this work ranged from multi-lateral James Lime wells in East Texas to deep wells in South Texas and South Louisiana. +22 +Table of Contents +Mr. Hairford has drilled many geo-pressured wells in Texas and Louisiana, along with normally pressured wells in Southwest Wyoming and East Texas. Additional responsibilities included a +horizontal well program in Roger Mills County, Oklahoma at 15,000 feet vertical depth. Mr. Hairford has experience in air drilling, underbalanced drilling, drilling under mud caps and high temperature and pressure environments. From 1998 until +1999, Mr. Hairford served as Senior Drilling Engineer with Sonat, Inc., a global company involved with natural gas transmission and marketing, oil and natural gas exploration and production and oil services. His responsibilities included +Pinnacle Reef wells in East Texas and deep horizontal drilling in the Austin Chalk field in Central Louisiana. From 1984 to 1998, Mr. Hairford served in various drilling engineering capacities with Conoco, Inc., an integrated energy company. +His operational areas included the Appalachian Basin, Illinois Basin, Permian Basin, Texas Panhandle and Val Verde Basin. Mr. Hairford was selected as a member of a three-person team to explore the use of unconventional technologies to identify +a potential step change in the drilling sector. Multiple techniques were evaluated and tested, including declassified defense department technologies. Additional Conoco assignments included both field and office drilling positions in Midland, Texas +and Oklahoma City, Oklahoma. Earlier in his career with Conoco, Mr. Hairford was selected to participate in the Conoco Drilling Rig Supervisor Training Program in Houston, Texas. This program consisted of two years working a regular rotation as +a drilling representative on rigs and as a drilling engineer in various domestic offices. Mr. Hairford began his career in 1984 with Conoco in a field production assignment in Hobbs, New Mexico. Mr. Hairford received his Bachelor of +Science degree in Petroleum Engineering Technology from Oklahoma State University in 1984. He is an active member of the American Association of Drilling Engineers, the American Petroleum Institute and the Society of Petroleum Engineers. +Mr. Hairford has also undertaken additional training through Stanford University’s Executive Education programs including, most recently in the summer of 2011, the Stanford Graduate School of Business flagship six week Stanford Executive +Program. +Mr. David E. Lancaster . Mr. Lancaster joined Matador Resources Company in December 2003 +and serves as Executive Vice President, Chief Operating Officer and Chief Financial Officer. Mr. Lancaster has served in several capacities since joining Matador, including Vice President of Business Development, Acquisitions and Finance from +December 2003 to May 2005; Vice President and Chief Financial Officer from May 2005 to May 2007; and Executive Vice President and Chief Financial Officer from May 2007 to May 2009. He was named Chief Operating Officer in May 2009. From August 2000 +to December 2003, he was Marketing Manager for Schlumberger Limited’s Data & Consulting Services, which provided full-field reservoir characterization, production enhancement, multidisciplinary reservoir and production solutions and +field development planning. In this position, he was responsible for global marketing strategies, business models, input to research and development, commercialization of new products and services and marketing communications. From 1999 to 2000, +Mr. Lancaster was Business Manager, North and South America, for Schlumberger Holditch-Reservoir Technologies, the petroleum engineering consulting organization formed following Schlumberger’s acquisitions of S.A. Holditch & +Associates, Inc. and Intera Petroleum Services. In this role, he was responsible for the business operations of 12 consulting offices throughout North and South America. Mr. Lancaster worked with Schlumberger for six years following its +acquisition of S.A. Holditch & Associates, Inc. in October 1997. He joined S.A. Holditch & Associates in 1980, and was one of the principals in that well-known petroleum engineering consulting firm. Between 1980 and 1997, +Mr. Lancaster held positions ranging from Senior Petroleum Engineer to Senior Vice President — Business Development. In this latter role, he was responsible for marketing and sales, as well as the company’s commercial +training business. During most of his tenure at S.A. Holditch & Associates, Inc., Mr. Lancaster was a consulting reservoir engineer with particular emphasis on characterizing and improving production from unconventional natural +gas reservoirs. For more than seven years during this time, he was the Project Manager for the Gas Research Institute’s Devonian Shales applied research projects investigating ways to improve reservoir characterization, completion practices and +natural gas recovery in low permeability, natural gas shale reservoirs. He was also the lead reservoir engineer for the Secondary Gas Recovery project sponsored by the Gas Research Institute and the U.S. Department of Energy, looking at ways to +improve recovery from compartmentalized natural gas reservoirs in North and South Texas. Mr. Lancaster began his career as a reservoir engineer for Diamond Shamrock Corporation in 1979. Mr. Lancaster received Bachelor and Master of Science +degrees in Petroleum Engineering from Texas A&M University in 1979 and 1988, respectively, graduating summa cum laude. He has authored or co-authored more than 50 technical papers and +23 +Table of Contents +articles, as well as numerous other published reports and industry presentations. He is a member of the Society of Petroleum Engineers, and he served as a charter member and former Vice Chairman +of the Texas A&M University Petroleum Engineering Advisory Board. In 2014, Mr. Lancaster was inducted into the Texas A&M University Petroleum Engineering Academy of Distinguished Graduates. Mr. Lancaster is a Licensed Professional +Engineer in the State of Texas. +Mr. Craig N. Adams . Mr. Adams joined Matador Resources Company in +September 2012 as its Vice President and General Counsel. In July 2013, Mr. Adams became Executive Vice President — Land & Legal. Before joining Matador Resources Company, Mr. Adams was a partner with Baker Botts +L.L.P. from March 2001 to September 2012 where he focused his practice on securities, mergers and acquisitions and corporate governance matters. He was a partner with Thompson & Knight L.L.P. from January 1999 to February 2001 and an +associate from September 1992 to December 1998. Mr. Adams received a Bachelor of Business Administration degree in finance from Southern Methodist University in 1988 and his law degree in 1992 from Texas Tech University School of Law, where he +was a Comment Editor of the Texas Tech Law Review. +Mr. Ryan C. London . Mr. London first worked +at Matador Resources Company in the summer of 2004 as a student intern. He joined Matador Resources Company full-time as a Petroleum Engineer in May 2005 and advanced to the positions of Senior Operations Engineer in January 2008 and Asset Manager +in March 2012. He was promoted to Vice President and General Manager in March 2013 and to Executive Vice President and General Manager in February 2015. In this position, Mr. London manages the day-to-day activities of our various asset teams. +Mr. London received his Bachelor of Science degree in Mechanical Engineering from Texas A&M University in 2002 and his Master of Engineering degree in Petroleum Engineering from Colorado School of Mines in 2005. Mr. London is a member +of the Society of Petroleum Engineers and is a Licensed Professional Engineer in the State of Texas. Mr. London has also undertaken additional training through Harvard University’s Executive Education programs, including most recently in +the fall of 2014, the General Management Program. +Mr. Van H. Singleton, II. Mr. Singleton joined +Matador Resources Company in August 2007 as a Landman and was promoted to Senior Staff Landman in 2009 and then to General Land Manager in 2011. In September 2013, Mr. Singleton became Vice President of Land for the Company, and he was promoted +to Executive Vice President of Land in February 2015. Prior to joining Matador, Mr. Singleton founded and was President of VanBrannon and Associates, LLC and Southern Escrow and Title of Mississippi, LLC from 1998 to 2003, which provided +full-spectrum land title work and title insurance in Mississippi, Louisiana, Texas and Arkansas. From 2003 until joining Matador in 2007 he served as general manager of his family’s real estate brokerage in Houston, Texas. Mr. Singleton +received a Bachelor of Arts degree in Criminal Justice from the University of Mississippi in 2000. He is an active member of the American Association of Professional Landmen, the New Mexico Landman Association, the Permian Basin Landman Association +and the Dallas Association of Petroleum Landmen. +Mr. Bradley M. Robinson . Mr. Robinson joined +Matador Resources Company in August 2003 as one of its founders and has served as our Vice President of Reservoir Engineering since that time. He assumed the additional role of Chief Technology Officer in May 2013. Prior to joining Matador, from +1997 to August 2003, Mr. Robinson held the position of Advisor with Schlumberger Limited’s Data & Consulting Services business unit, which provided full-field reservoir characterization, production enhancement, multidisciplinary +reservoir and production solutions and field development planning, where he was responsible for the development and application of new technologies for well completions and stimulation, provided technical expertise for reservoir management and field +development projects, taught basic and advanced industry courses in well completions and stimulation and provided internal training in production engineering and stimulation methods. Mr. Robinson worked with Schlumberger for six years following +its acquisition of S.A. Holditch & Associates, Inc. in 1997. Mr. Robinson joined Holditch in 1979, and was one of the principals in that well-known petroleum engineering consulting firm. From 1979 to 1982, Mr. Robinson served as +Senior Petroleum Engineer and was involved in all aspects of reservoir and production engineering for both conventional and low permeability oil and natural gas fields. From 1982 to 1997, he was Holditch’s Vice +President — Production Engineering, where he was responsible for coordination and management of production and completion engineering projects, including +24 +Table of Contents +development drilling and openhole data acquisition programs, design and supervision of initial well completions and workovers, transient well test design and analysis and hydraulic fracture +stimulation design and supervision. His duties also included reserves evaluation and economic analysis of new and existing wells, and his areas of specialization included low permeability natural gas sands, coalbed methane reservoirs and horizontal +wells. For approximately 10 years during this time, he served as assistant project manager for the Gas Research Institute’s Tight Gas Sands and Horizontal Gas Wells applied research projects investigating ways to improve reservoir +characterization, completion practices and natural gas recovery in low permeability natural gas reservoirs and horizontal natural gas wells. During his career, he has worked all over the world, including the United States, Canada, Venezuela, +Colombia, Mexico, Egypt, the North Sea, Russia and Indonesia, among others. Mr. Robinson began his career in 1977 with Marathon Oil Company, serving as an Associate Production Engineer and later as a Reservoir Engineer in Midland. +Mr. Robinson received Bachelor and Master of Science degrees in Petroleum Engineering from Texas A&M University in 1977 and 1986, respectively. He has authored or co-authored more than 30 technical articles appearing in industry and/or +technical publications and has made numerous engineering technical presentations. Mr. Robinson is a member of the Society of Petroleum Engineers and is a Licensed Professional Engineer in the State of Texas. He served as Chairman of the Dallas +Section of the Society of Petroleum Engineers in 2011 and 2012. He also received the 2013 Engineer of the Year Award presented by the Dallas Section of the Society of Petroleum Engineers and the 2013 Completions Optimization and Technology award +presented by the Mid-Continent region of the Society of Petroleum Engineers. +Other Senior Officers +Mr. Billy E. Goodwin. Mr. Goodwin joined Matador Resources Company in July 2010 as Drilling Manager. He was promoted +to Vice President of Drilling in September 2013. He was previously with Samson Resources, a company he joined in 2001 to supervise the drilling of underbalanced multilateral horizontal wells. In his roles as Senior Drilling Engineer +and Area Drilling Manager for Samson, Mr. Goodwin engineered and managed operations in the Permian Basin, South Texas, East Texas, Mid-Continent and Gulf Coast areas. Mr. Goodwin worked with Conoco, Inc. before joining Samson. He +began his career in 1985 in Conoco’s production department before joining the drilling department in 1989. Mr. Goodwin has diverse horizontal operational experience both onshore and offshore, and both domestically and internationally, +including in the Middle East, Southeast Asia and South America. Throughout his career, Mr. Goodwin has developed underbalanced drilling, managed pressure drilling and drill-in casing techniques for normal and geo-pressured environments. +Mr. Goodwin received a Bachelor of Science degree in Petroleum Engineering Technology from Oklahoma State University in 1984. He is a member of the Society of Petroleum Engineers and the American Association of Drilling +Engineers. Mr. Goodwin served in the United States Marine Corps. +Mr. G. Gregg Krug. +Mr. Krug joined Matador Resources Company in April 2012 as its Marketing Manager. He was named Vice President of Marketing and Vice President of Longwood Gathering & Disposal Systems, LP in September 2013. He has overall +responsibility for Matador’s marketing activities of its oil and natural gas, as well as responsibility for all business aspects for Longwood Gathering & Disposal Systems, LP. Previously, Mr. Krug was with Unit Petroleum Company, +an exploration and production company based in Tulsa, Oklahoma, as Marketing Manager, having joined in 2006. He and his staff were responsible for marketing, gas measurement, contract administration and production reporting in their core areas +of Oklahoma, the Texas Panhandle, East Texas and Northwestern Louisiana. From 2005 to 2006, Mr. Krug served as Marketing Manager with Matador Resources Company developing our Marketing Department. From 2000 to 2005, Mr. Krug served as +Gas Scheduling Supervisor with Samson Resources in Tulsa, Oklahoma where he and his staff were responsible for scheduling natural gas sales as well as procurement of natural gas supply on Samson owned gathering systems. From 1983 to 2000, +Mr. Krug served with The Williams Companies in various capacities including in the Kansas Hugoton Field in Ulysses, Kansas and Tulsa, Oklahoma for Williams Natural Gas Pipeline and on the trading floor in Tulsa, Oklahoma for Williams Energy +Services Company. Mr. Krug received a Bachelor of Business Administration degree from Oklahoma City University in 1996. +Mr. Trent W. Green. Mr. Green joined Matador Resources Company in connection with the HEYCO Merger in February 2015 as Vice President of Production. Previously, Mr. Green served +as Chief Operating +25 +Table of Contents +Officer of Harvey E. Yates Company and oversaw all of its oil and natural gas operations, including safety and regulatory compliance. Prior to joining Harvey E. Yates Company in 2012, +Mr. Green was Rocky Mountain Division Manager for BOPCO, L.P., a Fort Worth, Texas based company. From 2002 to 2007, Mr. Green served as Division Manager for Pinnacle Technologies, where he expanded its microseismic and tiltmeter mapping +business in the Rocky Mountain Region. Mr. Green owned his own oilfield service business from 2000 to 2002. That business provided specialized in-situ reservoir testing services to coalbed methane and shale developers. Mr. Green previously +worked for S.A. Holditch & Associates, Inc. and Amerada Hess performing production, reservoir and completion engineering duties throughout North America. He has also taught courses worldwide through NeXT, LLC, an industry training company. +Mr. Green received his Bachelor of Science degree in Petroleum Engineering from Montana Tech of the University of Montana in 1989 and his Master of Business Administration from the University of Denver in 2007. He is a registered professional +engineer in the State of Colorado. +Ms. Jennifer S. Queen. Ms. Queen joined Matador Resources Company in +December 2014 as Vice President of Human Resources and Administration. She most recently served as the firm-wide Director of Recruiting and Development for Baker Botts L.L.P where she managed and oversaw the law firm’s law school and +recruitment programs and managed lawyer development, training and evaluation programs. From 1992 to 2014, Ms. Queen worked at McKenna Long & Aldridge, a 500-attorney law firm in Atlanta, Georgia, where she served as the Chief +Recruitment and Development Officer prior to her departure. In that role, Ms. Queen led the firm’s recruiting, hiring and professional development efforts. Ms. Queen received her Bachelor of Business Administration degree from the +University of Texas at Austin in 1989. +Ms. Sandra K. Fendley . Ms. Fendley joined Matador +Resources Company in December 2013 as Vice President and Chief Accounting Officer. She has over 20 years of experience in the utility, oil and natural gas and midstream industries. Ms. Fendley previously served as Controller of J-W Midstream, a +subsidiary of J-W Energy Company. Prior to joining J-W Midstream, she held a number of financial roles with Crosstex Energy (now EnLink Midstream), including serving as Director of Financial Accounting, Director of Financial Reporting and Corporate +Controller from 2006 until her departure in 2013. She also held numerous and varied accounting roles with TXU (currently Energy Future Holdings) from 1991 to 2006. In her various roles, Ms. Fendley has led the financial accounting group and SEC +reporting group for a publicly traded master limited partnership, a crude oil operational accounting group, a financial planning and analysis group and fixed asset accounting, inventory and accounts payable departments. Ms. Fendley received a +Bachelor of Business Administration degree in Accounting from Texas A&M University at Commerce in 1991, earned a Master of Business Administration degree from Tarleton State University in 2001 and is a licensed certified public accountant. +Ms. Kathryn L. Wayne . Ms. Wayne was one of the original employees of Matador Resources Company and +has served as the Company’s Controller and Treasurer since 2003. She was previously with Matador Petroleum Corporation, joining the company in 1991. Immediately prior to its sale, Ms. Wayne was Senior Revenue Accountant, and her duties +included supervision of the revenue accounting staff, management of the revenue distribution process and preparation of monthly accruals and various required regulatory reports. Ms. Wayne began her career with Mobil Oil Corporation, where she +held various positions in the gas accounting department. Ms. Wayne received a Bachelor of Arts degree in Accounting from Texas A&M University in 1983. She is recognized by the Council of Petroleum Accountants Societies (COPAS) as an +Accredited Petroleum Accountant (APA), having passed all eight parts of the accreditation examination. She is an active member of COPAS and served a three-year term on the COPAS APA Board of Examiners. +26 +Table of Contents +PROPOSAL 2 — APPROVAL OF OUR AMENDED AND RESTATED 2012 +LONG-TERM INCENTIVE PLAN +On April 23, 2015, the Board adopted, subject to shareholder approval, the Matador +Resources Company Amended and Restated 2012 Long-Term Incentive Plan (the “Amended 2012 Plan”). The Amended 2012 Plan amends, restates and replaces the Matador Resources Company 2012 Long-Term Incentive Plan (the “2012 Plan”) in +its entirety, effective upon the receipt of shareholder approval. The 2012 Plan was approved by the Board effective January 1, 2012, and approved by the Company’s shareholders on June 7, 2012. +The Amended 2012 Plan is intended to enable the Company to remain competitive and innovative in its ability to attract, motivate, reward +and retain the services of key employees, certain key contractors and non-employee directors. The Amended 2012 Plan provides for the granting of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, +restricted stock units, performance awards, dividend equivalent rights and other awards, which may be granted singly, in combination or in tandem, and which may be paid in cash or shares of the Company’s Common Stock. The Amended 2012 Plan is +expected to provide flexibility to the Company’s compensation methods in order to adapt the compensation of employees, contractors and non-employee directors to a changing business environment, after giving due consideration to competitive +conditions and the impact of federal tax laws. +As part of the request that shareholders approve the Amended 2012 Plan, we are +requesting that our shareholders approve the material terms of the performance goals contained in the Amended 2012 Plan in order to allow certain awards to be potentially eligible for exemption from the $1,000,000 deduction limit imposed by +Section 162(m) of the Code, as discussed under “Description of the Amended 2012 Plan — Performance Awards” and “— Performance Goals” below. For purposes of Section 162(m) of the Code, the material terms of the +performance goals for awards granted under the Amended 2012 Plan include: (i) the employees eligible to receive compensation; (ii) the description of the business measures on which the performance goals may be based; and (iii) the +maximum amount, or the formula used to calculate the maximum amount, of compensation that can be paid to an employee under the arrangement. Each of these aspects is discussed in this proposal, and shareholder approval of this proposal constitutes +approval of each of these aspects for purposes of the Section 162(m) shareholder approval requirements. +The Board has +determined that the Amended 2012 Plan is in the best interest of the Company and its shareholders and has recommended that the Company’s shareholders approve the Amended 2012 Plan. +Description of the Amended 2012 Plan +The +following is a brief description of the Amended 2012 Plan. A copy of the Amended 2012 Plan is attached as Appendix A to this Proxy Statement, and the following description is qualified in its entirety by reference to the Amended 2012 Plan. +Effective Date and Expiration . The Amended 2012 Plan was adopted by the Board on April 23, 2015 (the “Board +Approval Date”), subject to and conditioned upon shareholder approval of the Amended 2012 Plan. The Amended 2012 Plan will become effective on the date of shareholder approval of the Amended 2012 Plan (the “Effective Date”), if the +shareholders so approve the Amended 2012 Plan. Unless sooner terminated by the Board, the Amended 2012 Plan will terminate and expire on the tenth anniversary of the Effective Date. No award may be made under the Amended 2012 Plan after the tenth +anniversary of the Board Approval Date, but awards made prior thereto may extend beyond that date. +Share +Authorization . Subject to certain adjustments, the number of shares that were issuable under the 2012 Plan was 4,000,000 shares, of which 489,338 shares remained available for issuance as of March 31, 2015. Subject to certain adjustments, the +number of shares that may be issued pursuant to awards under the Amended 2012 Plan is 8,700,000 total shares of Common Stock, inclusive of the original 4,000,000 shares authorized under the 2012 Plan, and of which 100% may be delivered +pursuant to incentive stock options. On April 28, 2015, the last sale price of our Common Stock as reported on the NYSE was $27.39 per share. Subject to certain adjustments, with respect to +27 +Table of Contents +any participant who is an officer of the Company subject to Section 16 of the Exchange Act, or a “covered employee” as defined in Section 162(m)(3) of the Code, a maximum +of 500,000 shares may be granted in any one year in the form of stock options or stock appreciation rights to such participant. +Shares to be issued may be made available from authorized but unissued shares of Common Stock, shares held by the Company in its treasury, or shares purchased by the Company on the open market or +otherwise. During the term of the Amended 2012 Plan, the Company will at all times reserve and keep enough shares available to satisfy the requirements of the Amended 2012 Plan. If any shares of Common Stock subject to an award shall not be issued +or transferred to a participant and shall cease to be issuable or transferable to a participant because of the forfeiture, termination, expiration or cancellation, in whole or in part, of such award or for any other reason, the shares not so issued +or transferred, or the shares so reacquired by the Company, as the case may be, shall no longer be charged against the maximum number of shares reserved under the Amended 2012 Plan and may be used thereafter for additional awards. The following +additional parameters shall apply: +(a) To the extent an award under the Amended 2012 Plan is settled or paid in cash, shares +subject to such award will not be considered to have been issued and will not be applied against the maximum number of shares of Common Stock reserved under the Amended 2012 Plan. +(b) If an award may be settled in shares of Common Stock or cash, such shares shall be deemed issued only when and to the extent that +settlement or payment is actually made in shares of Common Stock. To the extent an award is settled or paid in cash, and not shares of Common Stock, any shares previously reserved for issuance or transfer pursuant to such award will again be deemed +available for issuance or transfer under the Amended 2012 Plan, and the maximum number of shares of Common Stock that may be issued or transferred under the Amended 2012 Plan shall be reduced only by the number of shares actually issued and +transferred to the Participant. +(c) Notwithstanding the foregoing, (i) shares withheld or tendered to pay withholding +taxes or the exercise price of an award shall not again be available for the grant of awards under the Amended 2012 Plan, and (ii) the full number of shares subject to a stock option or stock appreciation right granted that are settled by the +issuance of shares shall be counted against the shares authorized for issuance under this Amended 2012 Plan, regardless of the number of shares actually issued upon the settlement of such stock option or stock appreciation right. +(d) Any shares repurchased by the Company on the open market using the proceeds from the exercise of an award shall not increase the +number of shares available for the future grant of awards. +Administration . The Amended 2012 Plan will be administered +by the Board or a committee of the Board (the “Committee”) consisting of two or more members. At any time there is no Committee to administer the Amended 2012 Plan, any reference to the Committee is a reference to the Board. The Committee +will determine the persons to whom awards are to be made, determine the type, size and terms of awards, interpret the Amended 2012 Plan, establish and revise rules and regulations relating to the Amended 2012 Plan, establish performance goals for +awards and certify the extent of their achievement, and make any other determinations that it believes necessary for the administration of the Amended 2012 Plan. The Committee may delegate certain duties to one or more officers of the Company as +provided in the Amended 2012 Plan. +Eligibility . Employees (including any employee who is also a director or an +officer), contractors and non-employee directors of the Company or its subsidiaries whose judgment, initiative and efforts contributed to or may be expected to contribute to the successful performance of the Company are eligible to participate in +the Amended 2012 Plan. As of April 28, 2015, the Company had 136 employees, eight non-employee directors and approximately 15 contractors who would be eligible for awards under the Amended 2012 Plan. +Stock Options . The Committee may grant either incentive stock options (“ISOs”) qualifying under Section 422 of the +Code, or nonqualified stock options, provided that only employees of the Company and its subsidiaries (excluding subsidiaries that are not corporations) are eligible to receive ISOs. Stock options may not +28 +Table of Contents +be granted with an option price less than 100% of the fair market value of a share of Common Stock on the date the stock option is granted. If an ISO is granted to an employee who owns or is +deemed to own more than 10% of the combined voting power of all classes of stock of the Company (or any parent or subsidiary), the option price shall be at least 110% of the fair market value of a share of Common Stock on the date of grant. The +Committee will determine the terms of each stock option at the time of grant, including without limitation, the methods by or forms in which shares will be delivered to participants. The maximum term of each option, the times at which each option +will be exercisable and provisions requiring forfeiture of unexercised options at or following termination of employment or service generally are fixed by the Committee, except that the Committee may not grant stock options with a term exceeding 10 +years. +Recipients of stock options may pay the option price: (i) in cash, check, bank draft or money order +payable to the order of the Company; (ii) by delivering to the Company shares of Common Stock (including restricted stock) already owned by the participant having a fair market value equal to the aggregate option price and that the participant +has not acquired from the Company within six months prior to the exercise date; (iii) by delivering to the Company or its designated agent an executed irrevocable option exercise form together with irrevocable instructions from the participant +to a broker or dealer, reasonably acceptable to the Company, to sell certain of the shares purchased upon the exercise of the option or to pledge such shares to the broker as collateral for a loan from the broker and to deliver to the Company the +amount of sale or loan proceeds necessary to pay the purchase price; and (iv) by any other form of valid consideration that is acceptable to the Committee in its sole discretion. In the event that shares of restricted stock are tendered to pay +the option price, a number of shares of Common Stock issued upon the exercise of the stock option equal to the number of shares of restricted stock tendered to pay the option price shall be subject to the same restrictions and provisions as the +restricted stock so tendered. +Stock Appreciation Rights . The Committee is authorized to grant stock appreciation +rights (“SARs”) as a stand alone award, or freestanding SARs, or in conjunction with stock options granted under the Amended 2012 Plan, or tandem SARs. SARs entitle a participant to receive an amount, in cash and/or Common Stock, equal to +the excess of the fair market value of a share of Common Stock on the date of exercise (or, as provided in the award agreement, conversion) over the fair market value of a share of Common Stock on the date of grant. The grant price of a SAR cannot +be less than 100% of the fair market value of a share on the date of grant. The Committee will determine the terms of each SAR at the time of the grant, including, without limitation, the methods by or forms in which shares will be delivered to +participants. The maximum term of each SAR, the times at which each SAR will be exercisable and provisions requiring forfeiture of unexercised SARs at or following termination of employment or service generally are fixed by the Committee, except +that no freestanding SAR may have a term exceeding 10 years and no tandem SAR may have a term exceeding the term of the option granted in conjunction with the tandem SAR. +Restricted Stock and Restricted Stock Units . The Committee is authorized to grant restricted stock and restricted stock units. +Restricted stock consists of shares of Common Stock that may not be sold, transferred, pledged, assigned, hypothecated, encumbered or otherwise disposed of, and that may be forfeited in the event of certain terminations of employment or service, +prior to the end of a restricted period as specified by the Committee. Restricted stock units are the right to receive shares of Common Stock at a future date in accordance with the terms of such grant upon the attainment of certain conditions +specified by the Committee, which include a substantial risk of forfeiture and restrictions on their sale or other transfer by the participant. The Committee determines the eligible participants to whom, and the time or times at which, grants of +restricted stock or restricted stock units will be made, the number of shares or units to be granted, the price to be paid, if any, the time or times within which the shares covered by such grants will be subject to forfeiture, the time or times at +which the restrictions will terminate and all other terms and conditions of the grants. Restrictions or conditions could include, but are not limited to, the attainment of performance goals (as described below), continuous service with the +Company, the passage of time or other restrictions or conditions. The value of the restricted stock units may be paid in shares, cash or a combination of both, as determined by the Committee at the time of grant. +Dividend Equivalent Rights . The Committee is authorized to grant a dividend equivalent right to any participant either as a +component of another award or as a separate award, conferring on participants the right to +29 +Table of Contents +receive credits based on the dividends that would have been paid on a specific number of shares of Common Stock specified in the award agreement if such shares were held by the participant. +The terms and conditions of the dividend equivalent right shall be specified by the grant. If a dividend equivalent right is granted as a component of another award, the dividend equivalent right may contain terms and conditions that are different +from such other award. Dividend equivalents credited to the holder of a dividend equivalent right may be paid currently or may be deemed to be reinvested in additional shares. Any such reinvestment shall be at the fair market value at the time +thereof. A dividend equivalent right may be settled in cash, shares or a combination thereof, in a single payment or in installments. +Performance Awards . The Committee may grant performance awards payable in cash, shares of Common Stock, a combination thereof or other consideration at the end of a specified performance period. +Payment will be contingent upon achieving pre-established performance goals (as discussed below) by the end of the performance period. The Committee will determine the length of the performance period, the maximum payment value of an award and the +minimum performance goals required before payment will be made, so long as such provisions are not inconsistent with the terms of the Amended 2012 Plan, and to the extent an award is subject to Section 409A of the Code, are in compliance with +the applicable requirements of Section 409A of the Code and any applicable regulations or guidance. To the extent the Company determines that Section 162(m) of the Code shall apply to a performance award granted under the Amended 2012 +Plan, it is the intent of the Company that performance awards constitute “performance-based compensation” within the meaning of Section 162(m) of the Code and the regulations thereunder. Further, if complying with Section 162(m) +of the Code, no participant may receive performance awards in any calendar year that have an aggregate value of more than $10,000,000, and if such awards involve the issuance of Common Stock, the aggregate value shall be based on the fair market +value of such shares on the date of grant of such awards. In certain circumstances, the Committee may, in its discretion, determine that the amount payable with respect to certain performance awards will be reduced from the amount of any potential +awards. However, the Committee may not, in any event, increase the amount of compensation payable to an individual upon the attainment of a performance goal intended to satisfy the requirements of Section 162(m) of the Code. With respect to a +performance award that is not intended to satisfy the requirements of Section 162(m) of the Code, if the Committee determines in its sole discretion that the established performance measures or objectives are no longer suitable because of a +change in the Company’s business, operations, corporate structure or for other reasons that the Committee deems satisfactory, the Committee may modify the performance measures or objectives and/or the performance period. +Performance Goals . Awards of restricted stock, restricted stock units, performance awards and other awards (whether relating to +cash or shares of Common Stock) under the Amended 2012 Plan may be made subject to the attainment of performance goals relating to one or more business criteria, which, where applicable, shall be within the meaning of Section 162(m) of the Code +and consist of one or more or any combination of the following criteria (“Performance Criteria”): earnings (either in the aggregate or on a per-share basis); net income; operating income; operating profit; cash flow; shareholder returns, +including returns on assets, investment, invested capital and equity (and including income applicable to common shareholders or other class of shareholders); return measures (including return on assets, equity or invested capital); total shareholder +return (change in share price plus reinvestment of dividends into shares when declared, if any, from period to period); earnings before or after either, or any combination of, interest, taxes, depletion, depreciation, amortization or other non-cash +items (EBITDA); adjusted EBITDA (as defined by the Committee); gross revenues; reduction in expense levels in each case, where applicable, determined either on a Company-wide basis or in respect to any one or more subsidiaries or business units +thereof; economic value or economic value added; market share or market share added; annual net income to Common Stock; earnings per share or growth in earnings per share; annual cash flow provided by operations; changes in annual revenues; +strategic and operational business criteria, consisting of one or more objectives based on specified revenue, market penetration, geographic business expansion goals, objectively identified project milestones, production volume levels, cost targets, +lease operating expenses, G&A expenses, finding and development costs, reserves or reserves added, reserve replacement ratio and goals relating to acquisitions or divestures; or goals relating to specific environmental compliance measures +and safety and accident rates. +30 +Table of Contents +For the Performance Criteria listed above, the Committee may designate whether a particular +Performance Criteria is to be measured on a pre-tax basis or post-tax basis. In addition, certain Performance Criteria may be stated in reference to a production volume of measurement such as in per cubic feet equivalents or barrels of oil +equivalents (e.g., per Mcfe, MMcfe, Bcfe, BOE, MBOE or MMBOE), including such production volume on a daily basis. Any Performance Criteria may be used to measure the performance of the Company as a whole or any business unit of the Company and may +be measured relative to a peer group or index. Any Performance Criteria may include or exclude: (i) extraordinary, unusual and/or non-recurring items of gain or loss; (ii) gains or losses on the disposition of a business; +(iii) changes in tax or accounting regulations or laws; (iv) the effect of a merger or acquisition, as identified in the Company’s quarterly and annual earnings releases; or (v) other similar occurrences. In all other respects, +Performance Criteria shall be calculated in accordance with the Company’s financial statements, under generally accepted accounting principles or under a methodology established by the Committee prior to the issuance of an award, which is +consistently applied and identified in the audited financial statements, including footnotes, or the Compensation Discussion and Analysis section of the Company’s annual report. However, to the extent Section 162(m) of the Code is +applicable, the Committee may not in any event increase the amount of compensation payable to an individual upon the attainment of a Performance Goal. +Other Awards . The Committee may grant other forms of awards based upon, payable in or otherwise related to, in whole or in part, shares of Common Stock if the Committee determines that such other +form of award is consistent with the purpose and restrictions of the Amended 2012 Plan. The terms and conditions of such other form of award shall be specified by the grant. Such other awards may be granted for no cash consideration, for such +minimum consideration as may be required by applicable law or for such other consideration as may be specified by the grant. +Vesting, Forfeiture, Assignment . The Committee, in its sole discretion, shall establish the vesting terms applicable to an award, including whether all or any portion will not be vested until a +date, or dates, subsequent to its date of grant, or until the occurrence of one or more specified events, provided that any such vesting terms shall not be inconsistent with the terms of the Amended 2012 Plan. If the Committee imposes conditions +upon vesting, then, except as otherwise provided below, subsequent to the date of grant the Committee may, in its sole discretion, accelerate the date on which all or a portion of the award may be vested, provided that any such acceleration must +comply with the terms of the Amended 2012 Plan. “Full Value Awards” (i.e., restricted stock or restricted stock units) that constitute performance awards must vest no earlier than one year after the date of grant, and Full Value Awards +that are payable upon the completion of future services must vest no earlier than over the three year period commencing on the date of grant. Notwithstanding the foregoing, the Committee may, in its sole discretion, accelerate the vesting or waive +any applicable restriction period for such Full Value Awards, provided that the shares of Common Stock subject to such awards shall be Exempt Shares (as defined in the Amended 2012 Plan), unless such acceleration or waiver occurs by reason of the +occurrence of a change in control or the participant’s death, disability, or termination of employment or service on or following a change in control. The number of Exempt Shares is limited to 10% of the number of shares available for issuance +under the Amended 2012 Plan. +The Committee may impose on any award, at the time of grant or thereafter, such additional terms +and conditions as the Committee determines, including terms requiring forfeiture of awards in the event of a participant’s termination of service. The Committee will specify the circumstances under which performance awards may be forfeited in +the event of a termination of service by a participant prior to the end of a performance period or settlement of awards. Except as otherwise determined by the Committee, restricted stock will be forfeited upon a participant’s termination of +service during the applicable restriction period. +Awards granted under the Amended 2012 Plan generally are not assignable or +transferable except by will or by the laws of descent and distribution, except that the Committee may, in its discretion and pursuant to the terms of an award agreement, permit certain transfers of nonqualified stock options or SARs to: (i) the +spouse (or former spouse), children or grandchildren of the participant (“Immediate Family Members”); (ii) a trust or trusts for the exclusive benefit of such Immediate Family Members; (iii) a partnership in which the only +partners are (1) such Immediate Family Members and/or (2) entities which are controlled by Immediate Family Members; +31 +Table of Contents +(iv) an entity exempt from federal income tax pursuant to Section 501(c)(3) of the Code or any successor provision; or (v) a split interest trust or pooled income fund described in +Section 2522(c)(2) of the Code or any successor provision, provided that (x) there shall be no consideration for any such transfer, (y) the applicable award agreement pursuant to which such award is granted must be approved by the +Committee and must expressly provide for such transferability and (z) subsequent transfers of transferred awards shall be prohibited except those by will or the laws of descent and distribution. +Adjustments Upon Changes in Capitalization . In the event that any dividend or other distribution, recapitalization, stock split, +reverse stock split, rights offering, reorganization, merger, consolidation, split-up, spin-off, split-off, combination, subdivision, repurchase or exchange of shares of Common Stock or other securities of the Company, issuance of warrants or other +rights to purchase shares of Common Stock or other securities of the Company, or other similar corporate transaction or event affects the fair value of an award, then the Committee shall adjust any or all of the following so that the fair value of +the award immediately after the transaction or event is equal to the fair value of the award immediately prior to the transaction or event: (i) the number of shares and type of Common Stock (or the securities or property) which thereafter may +be made the subject of awards, (ii) the number of shares and type of Common Stock (or other securities or property) subject to outstanding awards, (iii) the number of shares and type of Common Stock (or other securities or property) +specified as the annual per-participant limitation under the Amended 2012 Plan, (iv) the option price of each outstanding award, (v) the amount, if any, the Company pays for forfeited shares in accordance with the terms of the Amended 2012 +Plan and (vi) the number of shares subject to or the exercise price of then outstanding SARs, to the end that the same proportion of the Company’s issued and outstanding shares of Common Stock in each instance shall remain subject to +exercise (if applicable) at the same aggregate exercise price; provided however, that the number of shares of Common Stock (or other securities or property) subject to any award shall always be a whole number. Notwithstanding the foregoing, no +adjustment shall be made or authorized to the extent that such adjustment would cause the Amended 2012 Plan or any stock option to violate Section 422 of the Code or Section 409A of the Code. All such adjustments must be made in accordance +with the rules of any securities exchange, stock market or stock quotation system to which the Company is subject. +Amendment or Discontinuance of the Amended 2012 Plan . The Board may, at any time and from time to time, without the consent of the +participants, alter, amend, revise, suspend or discontinue the Amended 2012 Plan in whole or in part; provided, however, that: (i) no amendment that requires shareholder approval in order for the Amended 2012 Plan and any awards under the +Amended 2012 Plan to continue to comply with Sections 162(m), 421 and 422 of the Code (including any successors to such sections, or other applicable law) or any applicable requirements of any securities exchange or inter-dealer quotation system on +which the Company’s stock is listed or traded, shall be effective unless such amendment is approved by the requisite vote of the Company’s shareholders entitled to vote on the amendment; and (ii) unless required by law, no action by +the Board regarding amendment or discontinuance of the Amended 2012 Plan may adversely affect any rights of any participants or obligations of the Company to any participants with respect to any outstanding award under the Amended 2012 Plan without +the consent of the affected participant. +No Repricing of Stock Options or SARs . The Committee may not +“reprice” any stock option or SAR. For purposes of the Amended 2012 Plan, “reprice” means any of the following or any other action that has the same effect: (i) amending a stock option or SAR to reduce its exercise price or +base price, (ii) canceling a stock option or SAR at a time when its exercise price or base price exceeds the fair market value of a common share in exchange for cash or a stock option, SAR, award of restricted stock or other equity award or +(iii) taking any other action that is treated as a repricing under generally accepted accounting principles, provided that nothing shall prevent the Committee from (x) making adjustments to awards upon changes in capitalization; +(y) exchanging or cancelling awards upon a merger, consolidation or recapitalization or (z) substituting awards for awards granted by other entities, to the extent permitted by the Amended 2012 Plan. +Recoupment for Restatements . The Committee may recoup all or any portion of any shares or cash paid to a participant in connection +with an award, in the event of a restatement of the Company’s financial statements as set forth in the Company’s clawback policy, if any, approved by the Board from time to time. +32 +Table of Contents +Federal Income Tax Consequences +The following is a brief summary of certain federal income tax consequences relating to the transactions described under the Amended 2012 +Plan as set forth below. This summary does not purport to address all aspects of federal income taxation and does not describe state, local or foreign tax consequences. This discussion is based upon provisions of the Code and the treasury +regulations issued thereunder, and judicial and administrative interpretations under the Code and treasury regulations, all as in effect as of the date hereof and all of which are subject to change (possibly on a retroactive basis) or different +interpretation. +Law Affecting Deferred Compensation . In 2004, Section 409A was added to the Code to regulate all +types of deferred compensation. If the requirements of Section 409A of the Code are not satisfied, deferred compensation and earnings thereon will be subject to tax as it vests, plus an interest charge at the underpayment rate plus 1% and a 20% +penalty tax. Certain performance awards, stock options, stock appreciation rights, restricted stock units and certain types of restricted stock are subject to Section 409A of the Code. +Incentive Stock Options . A participant will not recognize income at the time an ISO is granted. When a participant exercises an +ISO, a participant also generally will not be required to recognize income (either as ordinary income or capital gain). However, to the extent that the fair market value (determined as of the date of grant) of the shares with respect to which the +participant’s ISOs are exercisable for the first time during any year exceeds $100,000, the ISOs for the shares over $100,000 will be treated as nonqualified stock options, and not ISOs, for federal tax purposes, and the participant will +recognize income as if the ISOs were nonqualified stock options. In addition to the foregoing, if the fair market value of the shares received upon exercise of an ISO exceeds the exercise price, then the excess may be deemed a tax preference +adjustment for purposes of the federal alternative minimum tax calculation. The federal alternative minimum tax may produce significant tax repercussions depending upon the participant’s particular tax status. +The tax treatment of any shares acquired by exercise of an ISO will depend upon whether the participant disposes of his or her shares +prior to two years after the date the ISO was granted or one year after the shares were transferred to the participant (referred to as the “Holding Period”). If a participant disposes of shares acquired by exercise of an ISO after the +expiration of the Holding Period, any amount received in excess of the participant’s tax basis for such shares will be treated as short-term or long-term capital gain, depending upon how long the participant has held the shares. If the amount +received is less than the participant’s tax basis for such shares, the loss will be treated as short-term or long-term capital loss, depending upon how long the participant has held the shares. +If the participant disposes of shares acquired by exercise of an ISO prior to the expiration of the Holding Period, the disposition will +be considered a “disqualifying disposition.” If the amount received for the shares is greater than the fair market value of the shares on the exercise date, then the difference between the ISO’s exercise price and the fair market +value of the shares at the time of exercise will be treated as ordinary income for the tax year in which the “disqualifying disposition” occurs. The participant’s basis in the shares will be increased by an amount equal to the amount +treated as ordinary income due to such “disqualifying disposition.” In addition, the amount received in such “disqualifying disposition” over the participant’s increased basis in the shares will be treated as capital gain. +However, if the price received for shares acquired by exercise of an ISO is less than the fair market value of the shares on the exercise date and the disposition is a transaction in which the participant sustains a loss which otherwise would be +recognizable under the Code, then the amount of ordinary income that the participant will recognize is the excess, if any, of the amount realized on the “disqualifying disposition” over the basis of the shares. +Nonqualified Stock Options . A participant generally will not recognize income at the time a nonqualified stock option is granted. +When a participant exercises a nonqualified stock option, the difference between the option price and any higher market value of the shares of Common Stock on the date of exercise will be treated as compensation taxable as ordinary income to the +participant. The participant’s tax basis for the shares acquired under a nonqualified stock option will be equal to the option price paid for such shares, plus any amounts +33 +Table of Contents +included in the participant’s income as compensation. When a participant disposes of shares acquired by exercise of a nonqualified stock option, any amount received in excess of the +participant’s tax basis for such shares will be treated as short-term or long-term capital gain, depending upon how long the participant has held the shares. If the amount received is less than the participant’s tax basis for such shares, +the loss will be treated as short-term or long-term capital loss, depending upon how long the participant has held the shares. +Special Rule if Option Price is Paid for in Shares . If a participant pays the option price of a nonqualified stock option with +previously-owned shares of Common Stock and the transaction is not a disqualifying disposition of shares previously acquired under an ISO, the shares received equal to the number of shares surrendered are treated as having been received in a +tax-free exchange. The participant’s tax basis and holding period for these shares received will be equal to the participant’s tax basis and holding period for the shares surrendered. The shares received in excess of the number of shares +surrendered will be treated as compensation taxable as ordinary income to the participant to the extent of their fair market value. The participant’s tax basis in these shares will be equal to their fair market value on the date of exercise, +and the participant’s holding period for such shares will begin on the date of exercise. +If the use of previously +acquired shares to pay the exercise price of a nonqualified stock option constitutes a disqualifying disposition of shares previously acquired under an ISO, the participant will have ordinary income as a result of the disqualifying disposition in an +amount equal to the excess of the fair market value of the shares surrendered, determined at the time such shares were originally acquired on exercise of the ISO, over the aggregate option price paid for such shares. As discussed above, a +disqualifying disposition of shares previously acquired under an ISO occurs when the participant disposes of such shares before the end of the Holding Period. The other tax results from paying the exercise price with previously-owned shares are as +described above, except that the participant’s tax basis in the shares that are treated as having been received in a tax-free exchange will be increased by the amount of ordinary income recognized by the participant as a result of the +disqualifying disposition. +Restricted Stock . A participant who receives restricted stock generally will recognize as +ordinary income the excess, if any, of the fair market value of the shares granted as restricted stock at such time as the shares are no longer subject to forfeiture or restrictions, over the amount paid, if any, by the participant for such shares. +However, a participant who receives restricted stock may make an election under Section 83(b) of the Code within 30 days of the date of transfer of the shares to recognize ordinary income on the date of transfer of the shares equal to the +excess of the fair market value of such shares (determined without regard to the restrictions on such shares) over the purchase price, if any, of such shares. If a participant does not make an election under Section 83(b) of the Code, then the +participant will recognize as ordinary income any dividends received with respect to such shares. At the time of sale of such shares, any gain or loss realized by the participant will be treated as either short-term or long-term capital gain (or +loss) depending on the holding period. For purposes of determining any gain or loss realized, the participant’s tax basis will be the amount previously taxable as ordinary income, plus the purchase price paid by the participant, if any, for +such shares. +Stock Appreciation Rights . Generally, a participant who receives a stand-alone SAR will not +recognize taxable income at the time the stand-alone SAR is granted, provided that the SAR is exempt from or complies with Section 409A of the Code. If a participant receives the appreciation inherent in the SARs in cash, the cash will be taxed +as ordinary income to the recipient at the time it is received. If a participant receives the appreciation inherent in the SARs in stock, the spread between the then current market value and the grant price, if any, will be taxed as ordinary income +to the employee at the time it is received. In general, there will be no federal income tax deduction allowed to the Company upon the grant or termination of SARs. However, upon the exercise of a SAR, the Company will be entitled to a deduction +equal to the amount of ordinary income the recipient is required to recognize as a result of the exercise. +Other +Awards . In the case of an award of restricted stock units, performance awards, dividend equivalent rights or other stock or cash awards, the recipient will generally recognize ordinary income in an amount equal to +34 +Table of Contents +any cash received and the fair market value of any shares received on the date of payment or delivery, provided that the award is exempt from or complies with Section 409A of the Code. +In that taxable year, the Company will receive a federal income tax deduction in an amount equal to the ordinary income which the participant has recognized. +Federal Tax Withholding . Any ordinary income realized by a participant upon the exercise of an award under the Amended 2012 Plan is subject to withholding of federal, state and local income tax and +to withholding of the participant’s share of tax under the Federal Insurance Contribution Act and the Federal Unemployment Tax Act. To satisfy federal income tax withholding requirements, the Company will have the right to require that, as a +condition to delivery of any shares of Common Stock, the participant remit to the Company an amount sufficient to satisfy the withholding requirements. The participant can make such payment by (i) the delivery of cash to the Company in an +amount that equals or exceeds (to avoid the issuance of fractional shares) the required tax withholding obligations of the Company; (ii) if the Company, in its sole discretion, so consents in writing, the actual delivery by the exercising +participant to the Company of shares of Common Stock that the participant has not acquired from the Company within six months prior to the date of exercise, vesting or conversion of the award, as applicable, which shares so delivered have an +aggregate fair market value that equals or exceeds (to avoid the issuance of fractional shares) the required tax withholding payment; (iii) if the Company, in its sole discretion, so consents in writing, the Company’s withholding of a +number of shares to be delivered upon the exercise, vesting or conversion of the award, which shares so withheld have an aggregate fair market value that equals (but does not exceed) the required tax withholding payment; or (iv) any combination +of (i), (ii) or (iii) or any other method consented to by the Company in writing. Withholding does not represent an increase in the participant’s total income tax obligation, since it is fully credited toward his or her tax liability +for the year. Additionally, withholding does not affect the participant’s tax basis in the shares. Compensation income realized and tax withheld will be reflected on Forms W-2 supplied by the Company to employees by January 31 of the +succeeding year. Deferred compensation that is subject to Section 409A of the Code will be subject to certain federal income tax withholding and reporting requirements. +Tax Consequences to the Company . To the extent that a participant recognizes ordinary income in the circumstances described above, the Company will be entitled to a corresponding deduction provided +that, among other things, the income meets the test of reasonableness, is an ordinary and necessary business expense, is not an “excess parachute payment” within the meaning of Section 280G of the Code and is not disallowed by the +$1,000,000 limitation on certain executive compensation under Section 162(m) of the Code. +Million Dollar +Deduction Limit and Other Tax Matters . The Company may not deduct compensation of more than $1,000,000 that is paid to an individual who, on the last day of the taxable year, is either the Company’s principal executive officer or an +individual who is among the three highest compensated officers for the taxable year (other than the principal executive officer or the principal financial officer). This limitation on deductions does not apply to certain types of compensation, +including qualified performance-based compensation, and only applies to compensation paid by a publicly-traded corporation (and not compensation paid by non-corporate entities). To the extent that the Company determines that Section 162(m) of +the Code will apply to any awards granted pursuant to the Amended 2012 Plan, the Company intends that such awards will be constructed so as to constitute qualified performance-based compensation and, as such, will be exempt from the $1,000,000 +limitation on deductible compensation. +If an individual’s rights under the Amended 2012 Plan are accelerated as a +result of a change in control and the individual is a “disqualified individual” under Section 280G of the Code, the value of any such accelerated rights received by such individual may be included in determining whether or not such +individual has received an “excess parachute payment” under Section 280G of the Code, which could result in (i) the imposition of a 20% federal excise tax (in addition to federal income tax) payable by the individual on the value +of such accelerated rights and (ii) the loss by the Company of a compensation deduction. +35 +Table of Contents +New Plan Benefits +The Company cannot currently determine the benefits or number of shares subject to awards that may be granted in the future to eligible +participants under the Amended 2012 Plan because the grant of awards and terms of such awards are to be determined in the sole discretion of the Committee. +Vote Required +The affirmative vote of the +holders of a majority of the shares present in person or by proxy and entitled to vote at the Annual Meeting is required to approve the Amended 2012 Plan. If you hold your shares through a broker and you do not instruct the broker how to vote, your +broker will not have the authority to vote your shares. Abstentions will have the effect as a vote cast against the proposal. Broker non-votes will be counted as present for purposes of determining the presence of a quorum but will have no effect +upon the outcome of the vote. +The Board of Directors recommends that you vote FOR approval of the Matador Resources Company Amended and Restated +2012 Long-Term Incentive Plan. +36 +Table of Contents +PROPOSAL 3 — ADVISORY VOTE TO APPROVE NAMED +EXECUTIVE OFFICER COMPENSATION +The Company seeks a non-binding advisory vote from its shareholders to approve the +compensation of its Named Executive Officers (as defined below) as described in this Proxy Statement. +As discussed under the +“Executive Compensation — Compensation Discussion and Analysis” section of this Proxy Statement (“CD&A”), we believe the Company’s future success and the ability to create long-term value for our shareholders +depends on our ability to attract, retain and motivate highly qualified individuals in the oil and natural gas industry. Additionally, we believe that our success also depends on the continued contributions of our Named Executive Officers. The +Company’s compensation system plays a significant role in its ability to attract, motivate and retain a high quality workforce. As described in CD&A, the Company’s compensation program for Named Executive Officers is designed to +reward, in both the short-term and the long-term, performance that contributes to the implementation of our business strategies, maintenance of our culture and values and the achievement of our objectives. In addition, we reward qualities that we +believe help achieve our business strategies such as teamwork; individual performance in light of general economic and industry-specific conditions; relationships with shareholders and vendors; the ability to manage and enhance production from our +existing assets; the ability to explore new opportunities to increase oil and natural gas production; the ability to identify and acquire additional acreage; the ability to increase year-over-year proved reserves; the ability to control unit +production costs; level of job responsibility; industry experience; and general professional growth. +This proposal provides +shareholders the opportunity to endorse or not endorse the Company’s executive compensation program through the following resolution: +“Resolved, that the compensation paid to the Company’s Named Executive Officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, +compensation tables and narrative discussion, is hereby approved.” +The above referenced CD&A disclosure appears on +pages 42 to 55 of this Proxy Statement. +Because this is an advisory vote, it will not be binding upon the Board. However, the +Nominating, Compensation and Planning Committee and the independent members of the Board (the “Independent Directors”) will take into account the outcome of the vote when considering future executive compensation arrangements. +Vote Required +The affirmative vote of the holders of a majority of the shares present in person or by proxy and entitled to vote at the Annual Meeting is required to approve this resolution on a non-binding basis. If +you hold your shares through a broker and you do not instruct the broker how to vote, your broker will not have the authority to vote your shares. Abstentions will have the effect as a vote cast against the proposal. Broker non-votes will be counted +as present for purposes of determining the presence of a quorum but will have no effect upon the outcome of the vote. +During +our 2012 Annual Meeting of Shareholders, our shareholders approved a non-binding, advisory proposal to hold annual advisory votes to approve our executive compensation. In consideration of the results of this advisory vote, the Board has adopted a +policy providing for annual advisory votes on executive compensation. Unless the Board modifies this policy, the next advisory vote on compensation following this vote will be held at our 2016 Annual Meeting of Shareholders. +The Board of Directors recommends that you vote FOR approval of this resolution. +37 +Table of Contents +PROPOSAL 4 — RATIFICATION OF THE APPOINTMENT OF +KPMG LLP +The Audit Committee has appointed KPMG LLP (“KPMG”) as the independent registered public accounting +firm of the Company for the year ending December 31, 2015, and the Board has directed that such appointment be submitted to our shareholders for ratification at the Annual Meeting. +The Audit Committee conducted a competitive process to review the appointment of our independent registered public accounting firm for +the year ending December 31, 2014. The process included consideration of audit firms in addition to Grant Thornton LLP (“Grant Thornton”), which was the Company’s independent registered public accounting firm for the year ended +December 31, 2013. The decision to evaluate more than one potential audit firm was made in connection with the Audit Committee’s annual review of the independent registered public accounting firm. Upon completion of this process, on +April 9, 2014, the Audit Committee appointed KPMG as the Company’s registered public accounting firm for the year ending December 31, 2014. +Grant Thornton’s audit report on the Company’s consolidated financial statements for the year ended December 31, 2013 did not contain an adverse opinion or disclaimer of opinion, nor was it +qualified or modified as to uncertainty, audit scope or accounting principles. During the year ended December 31, 2013, there were no (i) disagreements (as defined in Item 304(a)(1)(iv) of Regulation S-K) between the Company and Grant +Thornton on any matter of accounting principle or practice, financial statement disclosure, or auditing scope or procedure which, if not resolved to Grant Thornton’s satisfaction, would have caused it to make reference to the matter in +conjunction with its report on the Company’s consolidated financial statements for the relevant year or (ii) reportable events as defined in Item 304(a)(1)(v) of Regulation S-K. +KPMG’s audit report on the Company’s consolidated financial statements for the year ended December 31, 2014 did not +contain an adverse opinion or disclaimer of opinion, nor was it qualified or modified as to uncertainty, audit scope or accounting principles. During the year ended December 31, 2014, and through April 28, 2015, there were no +(i) disagreements (as defined in Item 304(a)(1)(iv) of Regulation S-K) between the Company and KPMG on any matter of accounting principle or practice, financial statement disclosure, or auditing scope or procedure which, if not resolved to +KPMG’s satisfaction, would have caused it to make reference to the matter in conjunction with its report on the Company’s consolidated financial statements for the relevant year or (ii) reportable events as defined in +Item 304(a)(1)(v) of Regulation S-K. +During the years ended December 31, 2013 and through April 9, 2014, the +date that the Audit Committee appointed KPMG as the Company’s registered public accounting firm for the year ended December 31, 2014, neither the Company, nor anyone on behalf of the Company, consulted with KPMG with respect to either +(i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s consolidated financial statements, and no written report or oral +advice was provided by KPMG to the Company that KPMG concluded was an important factor considered by the Company in reaching a decision as to the accounting, auditing or financial reporting issue or (ii) any matter that was the subject of +either a disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K) or a reportable event (as described in Item 304(a)(1)(v) of Regulation S-K). The Company has been advised by KPMG that the firm has no relationship with the Company +or its subsidiaries other than that arising from the firm’s engagement as auditors. +If the shareholders do not ratify +the appointment of KPMG, the Audit Committee will consider whether to engage a different independent registered public accounting firm but will not be obligated to do so. +The Company has been advised that representatives of KPMG will be present at the Annual Meeting and will be available to respond to appropriate questions and make a statement if they desire to do so. +38 +Table of Contents +Fees of Independent Registered Public Accounting Firm for Fiscal Years 2014 +and 2013 +The following table presents fees for professional audit services rendered by KPMG for the audit of the +Company’s annual financial statements for the year ended December 31, 2014, and fees for other services rendered by KPMG during that period: +2014 +Audit fees +$ +879,850 +Audit-related fees +— +Tax fees +— +All other fees +— +Total +$ +879,850 +The following table presents fees for professional audit services rendered by Grant Thornton for the +audit of the Company’s annual financial statements for the year ended December 31, 2013, and fees for other services rendered by Grant Thornton during that period: +2013 +Audit fees +$ +604,815 +Audit-related fees +— +Tax fees +— +All other fees +4,900 +Total +$ +609,715 +Services rendered by KPMG or Grant Thornton, as applicable, in connection with the fees presented above +were as follows: +Audit Fees +For fiscal year 2014, audit fees consisted of fees associated with the audit of the Company’s consolidated financial statements, including the audit of the effectiveness of the Company’s +internal control over financial reporting, required reviews of our quarterly condensed consolidated financial statements, including for inclusion in our prospectus related to our 2014 equity offering, and providing the underwriter of such offering +with comfort letters on certain information contained, or incorporated by reference, in the prospectus. For fiscal year 2013, audit fees consisted of fees associated with the audit of the Company’s consolidated financial statements, including +the audit of the effectiveness of the Company’s internal control over financial reporting, required reviews of our quarterly condensed consolidated financial statements, including for inclusion in our prospectus related to our 2013 equity +offering, and providing the underwriters of such offering with comfort letters on certain information contained, or incorporated by reference, in the prospectus. +Audit-Related Fees +We did not incur any audit-related fees in 2014 +or 2013. +Tax Fees +We did not incur any fees for tax advice, planning and other services in 2014 or 2013. +All +Other Fees +We did not incur any other fees in 2014. For fiscal year 2013, all other fees included the use of online +research tools provided by Grant Thornton. +39 +Table of Contents +The Audit Committee pre-approves all audit and permissible non-audit services provided by +KPMG. These services may include audit services, audit-related services, tax services and other services. The Audit Committee has authorized the chair of the Audit Committee to pre-approve audit and permissible non-audit services provided by KPMG up +to $750,000. Pursuant to this delegation, the decisions of the chair must be presented to the Audit Committee at its next meeting. +Report of the Audit Committee +We are a standing committee comprised of independent directors as currently defined by +SEC regulations and the applicable listing standards of the NYSE. The Board has determined that at least one of the members of the Audit Committee is an “audit committee financial expert” as defined by applicable SEC rules and regulations. +We operate under a written charter adopted by the Board. A copy of the charter is available free of charge on the Company’s website at www.matadorresources.com under “Investors — Corporate Governance.” +We annually select the Company’s independent registered public accounting firm. If the shareholders do not ratify the appointment of +KPMG at the Annual Meeting, the Audit Committee will consider whether to engage a different independent registered public accounting firm but will not be obligated to do so. +Management is responsible for the Company’s internal controls and the financial reporting process. The independent registered public accounting firm is responsible for performing an independent audit +of the Company’s consolidated financial statements in accordance with the standards of the United States Public Company Accounting Oversight Board and issuing a report thereon. As provided in our charter, our responsibilities include the +monitoring and oversight of these processes. +Consistent with our charter responsibilities, we have met and held discussions +with management and the independent registered public accounting firm. In this context, management and the independent registered public accounting firm represented to us that the Company’s consolidated financial statements for the fiscal year +ended December 31, 2014 were prepared in accordance with U.S. generally accepted accounting principles. We reviewed and discussed the consolidated financial statements with management and the independent registered public accounting firm and +discussed with the independent registered public accounting firm matters required to be discussed by Auditing Standard No. 16, as amended (AICPA, Professional Standards, Vol. 1. AU Section 380), as adopted by the Public Company Accounting +Oversight Board in Rule 3200T. +The Company’s independent registered public accounting firm has also provided to us the +written disclosures and the letter required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent registered public accounting firm’s communications with the Audit Committee, and we discussed with +the independent registered public accounting firm that firm’s independence. +Based upon our reviews and discussions with +management and the independent registered public accounting firm and our review of the representation of management and the report of the independent registered public accounting firm to the Audit Committee, we recommended that the Board include the +audited consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 filed with the SEC. +Audit Committee, +Carlos M. Sepulveda, Jr., Chair +David M. Laney +Steven W. Ohnimus +Michael C. Ryan +40 +Table of Contents +Vote Required +The affirmative vote of the holders of a majority of the shares present in person or by proxy and entitled to vote at the Annual Meeting +is required for the ratification of the appointment of KPMG as the Company’s independent registered public accounting firm for the year ending December 31, 2015. If the shareholders do not ratify the appointment of KPMG, the Audit +Committee will consider whether to engage a different independent registered public accounting firm but will not be obligated to do so. Abstentions will have the effect as a vote cast against the proposal. +The Board of Directors recommends that you vote FOR the ratification of the appointment of KPMG as the Company’s +independent registered public accounting firm for the year ending December 31, 2015. +41 +Table of Contents +EXECUTIVE COMPENSATION +Compensation Discussion and Analysis +In this compensation discussion and analysis, we discuss our compensation objectives, our decisions and the rationale behind those decisions relating to compensation for 2014 for our principal executive +officer, our principal financial officer and our other three most highly compensated executive officers. This compensation discussion and analysis provides a general description of our compensation program and specific information about its various +components. +Named Executive Officers +Throughout this discussion, the following individuals are referred to as the “Named Executive Officers” and are included in the Summary Compensation Table: +• +Joseph Wm. Foran, Chairman of the Board and Chief Executive Officer; +• +Matthew V. Hairford, President; +• +David E. Lancaster, Executive Vice President, Chief Operating Officer and Chief Financial Officer; +• +David F. Nicklin, Executive Director of Exploration; and +• +Ryan C. London, Executive Vice President and General Manager. +Executive Summary +We are an independent energy company engaged in +the exploration, development, production and acquisition of oil and natural gas resources in the United States, with an emphasis on oil and natural gas shale and other unconventional plays. Our current operations are focused primarily on the oil and +liquids-rich portion of the Eagle Ford shale play in South Texas and the Wolfcamp and Bone Spring plays in the Permian Basin in Southeast New Mexico and West Texas. We also operate in the Haynesville shale and Cotton Valley plays in Northwest +Louisiana and East Texas. +2014 Business Highlights +In 2014, our Company delivered record results as our oil and natural gas revenues, total oil production, average daily oil equivalent production and Adjusted EBITDA were the highest in our Company’s +history. Our Board has a “pay for performance” philosophy and recognizes the leadership of Mr. Foran and our executive officers in contributing to the Company’s success in 2014. Highlights of our 2014 success are summarized in +the table below: +(1) +We define Adjusted EBITDA as earnings before interest expense, income taxes, depletion, depreciation and amortization, accretion of asset retirement obligations, +property impairments, unrealized derivative gains and losses, certain other non-cash items and non-cash stock-based compensation expense, and net gain or loss on assets sales and inventory impairment. Adjusted EBITDA is a non-GAAP financial measure. +For a reconciliation of Adjusted EBITDA to our net income (loss) and net cash provided by operating activities, see our Annual Report on Form 10-K for the year ended December 31, 2014. +42 +Table of Contents +Objectives of Our Compensation Program +Our future success and the ability to create long-term value for our shareholders depends on our ability to attract, retain and motivate +highly qualified individuals in the oil and natural gas industry. Additionally, we believe that our success also depends on the continued contributions of our Named Executive Officers. Our executive compensation program is designed to provide a +comprehensive compensation program to meet the following objectives: +• +to be fair to both the executive and the Company; +• +to attract and retain talented and experienced executives with the skills necessary for us to execute our business plan; +• +to provide opportunities to achieve a total compensation level that is competitive with comparable positions at companies with which we may compete for +executives; +• +to align the interests of our executive officers with the interests of our shareholders and with the performance of our Company for long-term value +creation; +• +to provide financial incentives to our executives to achieve our key corporate and individual objectives; +• +to provide an appropriate mix of fixed and variable pay components to maintain a “pay-for-performance” oriented compensation program; +• +to foster a shared commitment among executives by coordinating their corporate and individual goals; +• +to provide compensation that takes into consideration the education, professional experience and knowledge that is specific to each job and the unique +qualities the executive possesses; and +• +to recognize an executive’s commitment and dedication in his job performance and in support of our culture. +What Our Compensation Program Is Designed to Reward +Our compensation program is designed to reward, in both the short-term and the long-term, performance that contributes to the implementation of our business strategies, maintenance of our culture and +values and the achievement of our objectives. In addition, we reward qualities that we believe help achieve our business strategies such as teamwork, individual performance in light of general economic and industry-specific conditions, relationships +with shareholders and vendors, the ability to manage and enhance production from our existing assets, the ability to explore new opportunities to increase oil and natural gas production, the ability to identify and acquire additional acreage, the +ability to increase year-over-year proved reserves, the ability to control unit production costs, level of job responsibility, industry experience and general professional growth. +How We Determined Each Element of 2014 Compensation +The Nominating, +Compensation and Planning Committee has engaged Pay Governance LLC as its independent executive compensation advisory firm. The Nominating, Compensation and Planning Committee has assessed the independence of Pay Governance LLC pursuant to +applicable SEC and NYSE rules and concluded that Pay Governance LLC’s engagement by the Nominating, Compensation and Planning Committee does not raise any conflict of interest. +For purposes of benchmarking executive compensation, Pay Governance LLC developed a list of recommended peer companies in the oil and +natural gas exploration and production sector with comparable revenue size (approximately $90 million to approximately $775 million), market capitalization (less than $1 billion to approximately $3.1 billion) and competitors. These companies and the +rationale for their inclusion in +43 +Table of Contents +our peer group were considered and approved by the Nominating, Compensation and Planning Committee and the Independent Directors. The compensation peer companies are as follows (the “Peer +Group”): +Abraxas Petroleum Corporation +Approach Resources Inc. +Bonanza Creek Energy, +Inc. +Callon Petroleum Company +Carrizo +Oil & Gas, Inc. +Clayton Williams Energy, Inc. +Comstock Resources, Inc. +Contango Oil & Gas Company +Goodrich Petroleum Corporation +Magnum Hunter Resources Corporation +Penn Virginia Corporation +Resolute Energy +Corporation +Rex Energy Corporation +Rosetta Resources Inc. +As an overall compensation philosophy for 2014, we increased Named Executive Officer +base salaries to meet the objective of having total compensation for the Named Executive Officers in approximately the +50 th percentile of the Peer Group. +Elements of Our 2014 Compensation Program and Why We Paid Each Element +For 2014, our management compensation program was comprised of the following five elements: +• +Base Salary. We paid base salary to compensate each executive for his assigned responsibilities, experience, leadership and expected future +contribution. +• +Performance-Based Cash Bonus. We adopted the Matador Resources Company Annual Incentive Plan for Management and Key Employees (the “Annual +Incentive Plan”) effective January 1, 2012 as part of our management compensation program because we believed this element of compensation (i) helps focus and motivate management to achieve key corporate and individual objectives by +rewarding the achievement of these objectives; (ii) helps retain management; (iii) rewards our successes over the prior year; and (iv) is necessary to be competitive from a total remuneration standpoint. +• +Discretionary Bonus. Our Independent Directors have discretionary authority to award executives for particular accomplishments at times and in +amounts that the Independent Directors approve, upon the recommendation of the Nominating, Compensation and Planning Committee. +• +Equity Awards. We used stock options and restricted stock as the primary vehicles for (i) linking our long-term performance and increases +in shareholder value to the total compensation for our executive officers and (ii) providing competitive compensation to attract and retain our executive officers. +• +Benefits. We offered a variety of health and welfare programs to all eligible employees, including the Named Executive Officers other than +Mr. Nicklin. The health and welfare programs were intended to protect employees against catastrophic loss and encourage a healthy lifestyle. +Nominating, Compensation and Planning Committee +The Nominating, +Compensation and Planning Committee has the authority, at our expense, to retain and terminate independent third-party compensation consultants and other expert advisors. +In addition, the Nominating, Compensation and Planning Committee confirms at least annually that our incentive pay does not encourage unnecessary risk taking and reviews and discusses the relationship +between risk management policies and practices, corporate strategy and senior executive compensation. The Nominating, Compensation and Planning Committee considered, in establishing and reviewing our executive compensation program, whether the +program encourages unnecessary or excessive risk taking and has concluded that it does not. Several features of our program reflect sound risk management practices. Base salaries are fixed in amount and thus do not encourage risk taking. While our +bonuses are tied to management’s achievements during the previous fiscal year and may encourage the taking of short-term risks at the expense of long-term results, +44 +Table of Contents +executives’ annual bonuses take into account multiple performance criteria based on the executive’s individual performance and are within the discretion of the Independent Directors. +The Nominating, Compensation and Planning Committee believes that our bonus awards appropriately balance risk and the desire to focus executives on specific short-term goals important to the Company’s success, and that they do not encourage +unnecessary or excessive risk taking. In addition, the Nominating, Compensation and Planning Committee believes that our current equity compensation program provides an appropriate balance between the goals of increasing the price of our Common +Stock and avoiding potential risks that could threaten our growth and stability due to the fact that stock options and service-based restricted stock typically vest over three or four years. +With regard to all of the Named Executive Officers, the Nominating, Compensation and Planning Committee recommends to the Independent +Directors: +• +option guidelines and size of overall grants; +• +option grants and other equity and non-equity related awards; and +• +limitations, restrictions and conditions upon any award as the Nominating, Compensation and Planning Committee deems appropriate and as permitted under +the applicable plan. +The Independent Directors are required to be independent pursuant to the listing +standards of the NYSE and the rules and regulations promulgated under the Exchange Act and Section 162(m) of the Code. +The Nominating, Compensation and Planning Committee annually reviews and makes recommendations to the Independent Directors regarding the +matters related to Mr. Foran’s compensation, including corporate goals and objectives applicable to Mr. Foran’s compensation. The Nominating, Compensation and Planning Committee also evaluates Mr. Foran’s performance in +light of these established goals and objectives at least annually. Based upon these evaluations, the Nominating, Compensation and Planning Committee makes recommendations to the Independent Directors regarding Mr. Foran’s annual +compensation, including salary, bonus and equity and non-equity incentive compensation. The Nominating, Compensation and Planning Committee reviews and recommends to the Independent Directors with regard to Mr. Foran: +• +any employment agreement, severance agreement, change in control agreement or provision or separation agreement or amendment thereof; +• +any deferred compensation arrangement or retirement plan or benefits; and +• +any benefits and perquisites. +On an annual basis, after consultation with Mr. Foran, the Nominating, Compensation and Planning Committee reviews and makes recommendations to the Independent Directors on the evaluation process and +compensation structure for the other Named Executive Officers. After considering the evaluation and recommendations of Mr. Foran, the Nominating, Compensation and Planning Committee evaluates the performance of the other Named Executive +Officers and makes recommendations to the Independent Directors regarding the annual compensation of such Named Executive Officers, including salary, bonus and equity and non-equity incentive compensation. The Nominating, Compensation and Planning +Committee also takes into account the outcome of the most recent advisory vote from its shareholders when considering executive compensation arrangements. +After considering the recommendations of Mr. Foran with regard to the other Named Executive Officers, the Nominating, Compensation and Planning Committee reviews and recommends to the Independent +Directors regarding the other Named Executive Officers: +• +any employment agreement, severance agreement, change in control agreement or provision or separation agreement or amendment thereof; +45 +Table of Contents +• +any deferred compensation arrangement or retirement plan or benefits; and +• +any benefits and perquisites. +In addition, pursuant to its charter, the Nominating, Compensation and Planning Committee reviews and recommends to the Independent Directors any proposals for the adoption, amendment, modification or +termination of our incentive compensation, equity-based plans and non-equity based plans. +2014 Base Salary +In early 2014, based on the recommendations of Mr. Foran (other than with regard to his base salary), the Nominating, Compensation +and Planning Committee recommended and the Independent Directors approved the following 2014 base salaries for our Named Executive Officers: +Executive Officer +2014 Base +Salary +Joseph Wm. Foran +$ +750,000 +Chairman of the Board and Chief Executive Officer +Matthew V. Hairford +$ +450,000 +President +David E. Lancaster +$ +400,000 +Executive Vice President, +Chief Operating Officer and Chief Financial Officer +Ryan C. London +$ +375,000 +Executive Vice President and General Manager +Although Mr. Nicklin was retained officially as an independent contractor, he served as our +Executive Director of Exploration until March 31, 2015 and was included and treated as a Named Executive Officer for 2014. Mr. Nicklin retired in 2000 as the Chief Geologist for ARCO and desired to maintain a measure of independence and +flexibility in his schedule. Under this independent contractor arrangement, we were able to obtain the benefit of his experience and expertise. Based on the recommendation of Mr. Foran, the Nominating, Compensation and Planning Committee and +Independent Directors decided that, for 2014, Mr. Nicklin’s base rate would be $2,000 per day of which $250 would be deferred until the end of his independent contractor agreement, provided that Mr. Nicklin’s engagement continued +until that point. Mr. Nicklin’s agreement was amended effective August 2014, at which point he was paid the deferred amount. +The base salaries of the Named Executive Officers were set at the +50 th percentile of base compensation levels of the Peer +Group based on compensation set forth in the Peer Group’s 2013 proxy statements. +2014 Annual Incentive Compensation +Effective January 1, 2012, we adopted the Annual Incentive Plan, pursuant to which we may award Named Executive +Officers annual incentive compensation cash awards based on certain terms and conditions established by the Board. We set annual performance criteria each year for the Named Executive Officers based on the performance criteria that are set forth in +the Annual Incentive Plan (each, an “Annual Incentive Program”). Such criteria include financial, operational and strategic performance goals for the Company, Company performance measures and Company performance relative to peers. These +performance criteria have corresponding performance payment amounts that serve as guidelines for actual amounts to be paid based on the achievement of such performance criteria by each Named Executive Officer. +In addition to the annual performance criteria, in order to give the Nominating, Compensation and Planning Committee and the Independent +Directors flexibility, the Nominating, Compensation and Planning Committee +46 +Table of Contents +has the discretion to make recommendations to the Independent Directors and the Independent Directors have the discretion to decide after the completion of each year to decrease the amount of the +payments relating to the corresponding performance criteria or to increase the amount of the payments to the Named Executive Officers. Any increase could be in response to unforeseen circumstances when the performance criteria were set. Any such +increase could be or not be based on the list of performance criteria set forth in the Annual Incentive Program and could be made irrespective of whether any payments were made based upon the performance criteria. +For 2014, the Chair of the Nominating, Compensation and Planning Committee met with Pay Governance LLC and management to determine +potential criteria for the 2014 Annual Incentive Program (the “2014 Incentive Program”). Based on these meetings, the Chair proposed certain preliminary performance criteria metrics for consideration by the Nominating, Compensation and +Planning Committee. The Nominating, Compensation and Planning Committee then met with Pay Governance and management to review the proposed criteria. As a result of these meetings, the Nominating, Compensation and Planning Committee recommended and +the Independent Directors determined to use the following performance criteria as guidelines: +• +Adjusted +EBITDA (1) growth for 2014 as compared to 2013; +• +reserves +growth (2) for 2014 as compared to 2013; +• +increase in stock price for 2014 as compared to 2013; and +• +increase in oil production for 2014 as compared to 2013. +The Nominating, Compensation and Planning Committee and the Independent Directors determined that these four criteria were general measures of our performance and were the key criteria on which management +should focus during 2014. The Independent Directors established the threshold levels of the performance criteria as representing an achievable increase over 2013, the target levels as representing a considerable but reasonable increase over 2013 and +the maximum levels as representing an exceptional increase over 2013. Since the actual payments to be made under the 2014 Incentive Program were discretionary with the Independent Directors, there was no weighting among the performance criteria. +Below are the threshold, target and maximum performance criteria set for 2014, as well as the Company’s actual results. +2014 Incentive Program Metrics +Performance Metric +2013 Baseline +Threshold +Target +Maximum +2014 Actual +Adjusted EBITDA (1) +$191.8 million +$235 million +$250 million +$270 million +$262.9 million +Reserves Growth +$655 million +$800 million +$855 million +$900 million +$974 million (2) +Stock Price/Share +$18.64 +$22.00 +$26.00 +$30.00 +$20.23 +Oil Production +2.1 million Bbl +2.8 million Bbl +3.0 million Bbl +3.2 million Bbl +3.3 million Bbl +(1) +We define Adjusted EBITDA as earnings before interest expense, income taxes, depletion, depreciation and amortization, accretion of asset retirement obligations, +property impairments, unrealized derivative gains and losses, certain other non-cash items and non-cash stock-based compensation expense, and net gain or loss on assets sales and inventory impairment. Adjusted EBITDA is a non-GAAP financial measure. +For a reconciliation of Adjusted EBITDA to our net income (loss) and net cash provided by operating activities, see our Annual Report on Form 10-K for the year ended December 31, 2014. +(2) +This amount differs from the actual value of the Company’s estimated proved reserves at December 31, 2014 due to commodity prices at December 31, 2013 +being held constant at $3.67 per MMBtu for natural gas and $93.42 per Bbl for oil, solely for purposes of this 2014 Incentive Program calculation. +47 +Table of Contents +In making recommendations regarding the potential payment guidelines under the 2014 +Incentive Program, Pay Governance LLC made recommendations regarding the target payment guidelines. The Nominating, Compensation and Planning Committee reviewed the Pay Governance LLC recommendations regarding target payment guidelines as well as +the recommendations of management regarding the threshold, target and maximum payment guidelines. Based on the review of the Pay Governance recommendations and the management recommendations, which took into account the differing responsibilities of +each Named Executive Officer by the Nominating, Compensation and Planning Committee and the Independent Directors, the threshold, target and maximum payment guidelines set forth below were adopted. +Participant +Threshold +Annual +Incentive +Opportunity +as % of 2014 +Base +Salary +Target +Annual +Incentive +Opportunity +as % of 2014 +Base Salary +Maximum +Annual +Incentive +Opportunity +as % of 2014 +Base Salary +Joseph Wm. Foran +40 +% +75 +% +200 +% +Chairman of the Board and Chief Executive Officer +Matthew V. Hairford +35 +% +70 +% +150 +% +President +David E. Lancaster +35 +% +65 +% +120 +% +Executive Vice President, Chief Operating Officer and Chief Financial Officer +David F. Nicklin (1) +30 +% +50 +% +100 +% +Executive Director of Exploration +Ryan C. London +25 +% +45 +% +75 +% +Executive Vice President and General Manager +(1) +The target annual incentive opportunity, expressed in dollars, assumes that Mr. Nicklin works 200 days per year at the daily rate of $1,750 per day. +Pursuant to the 2014 Incentive Program, the amount of any annual award could have been greater or less than the +payment opportunity based on the performance criteria guidelines so long as the annual award did not exceed 200% of the Named Executive Officer’s annual base salary. +In December 2014, after reviewing the Company’s 2014 expected results compared to the financial and operational metrics set forth above, the Nominating, Compensation and Planning Committee concluded +that the Company would exceed the maximum performance metrics for oil production and reserves growth and the target performance metric for Adjusted EBITDA. +48 +Table of Contents +With regard to each Named Executive Officer, after taking into account the performance +criteria guidelines, the Company’s 2014 results and other information with regard to such Named Executive Officer, the Nominating, Compensation and Planning Committee recommended to the Independent Directors that the Named Executive Officers be +paid annual cash awards as set forth below, and the Independent Directors approved such annual cash awards. The Independent Directors exercised their discretion in awarding the amounts of annual cash awards under the 2014 Incentive Program set forth +below. Since the actual payments to be made under the 2014 Incentive Program were discretionary with the Independent Directors, there was no formulaic calculation nor weighting among the performance criteria by the Independent Directors. All awards +made pursuant to the 2014 Incentive Program were cash awards and were paid to the Named Executive Officers in the first quarter of 2015. +Executive Officer +2014 Incentive +Program +Compensation +% of 2014 +Base Salary +Joseph Wm. Foran +$ +550,000 +73.3 +% +Chairman of the Board and President +Matthew V. Hairford +$ +300,000 +66.7 +% +President +David E. Lancaster +$ +250,000 +62.5 +% +Executive Vice President, Chief Operating Officer and Chief Financial Officer +David F. Nicklin +$ +250,000 +71.4 +% (1) +Executive Director of Exploration +Ryan C. London +$ +250,000 +66.7 +% +Executive Vice President and General Manager +(1) +The value assumes that Mr. Nicklin works 200 days per year at the daily rate of $1,750 per day. +Discretionary Bonuses +Our Independent Directors have discretionary authority to award executives for particular accomplishments at times and in amounts that the Independent Directors approve, upon the recommendation of the +Nominating, Compensation and Planning Committee. In June 2014, the Nominating, Compensation and Planning Committee recommended, and the Board approved, discretionary bonuses to certain of our Named Executive Officers in recognition of each +officer’s efforts in connection with the Company’s 2014 public equity offering. +2014 Long-Term Incentive Compensation +Effective January 1, 2012, the Board adopted the 2012 Long-Term Incentive Plan (the “2012 Plan”). This +plan permits the granting of long-term equity and cash incentive awards, including the following: +• +stock options; +• +stock appreciation rights; +• +restricted stock (service-based and performance-based); +• +restricted stock units (service-based and performance-based); +• +performance shares; +• +performance units; +• +stock grants; and +• +performance cash awards. +49 +Table of Contents +After receiving recommendations from the Nominating, Compensation and Planning Committee, +the Independent Directors administer the 2012 Plan. For 2014, the Nominating, Compensation and Planning Committee met with Pay Governance LLC and management regarding the appropriate types and amounts of equity grants based on differing levels of +responsibility of the Named Executive Officers and made recommendations to the Independent Directors. +As a result of our 2013 +performance, in February 2014, the Nominating, Compensation and Planning Committee recommended, and the Independent Directors awarded, one-time equity grants of stock options and/or restricted stock to our Named Executive Officers in addition to the +cash awards under the 2013 Incentive Program and in addition to the traditional annual equity awards to the Named Executive Officers that were granted in March 2014. The Nominating, Compensation and Planning Committee and Independent Directors +determined to make such awards in lieu of higher 2013 Incentive Program awards and believe such awards will serve to further align our Named Executive Officers’ long-term interests with the interests of our shareholders. +The February 2014 stock options have a five-year term, vest 50% on the second and 50% on the fourth anniversaries of the grant date if +the Named Executive Officer is still employed by us on the vesting dates, and have an exercise price of $19.71 per share. The February 2014 restricted stock vests 50% on the second and 50% on the fourth anniversaries of the grant date if the Named +Executive Officer is still employed by us on the vesting dates. During the restricted period prior to vesting of the restricted stock, the Named Executive Officer will be eligible to receive dividends on and vote the restricted stock. +In March 2014, the Nominating, Compensation and Planning Committee granted the annual equity awards of non-qualified stock options and/or +restricted stock to each Named Executive Officer. The stock options and restricted stock were granted in order to facilitate retention of our Named Executive Officers and provide a reward for positive future results. The March 2014 stock options +have a five-year term, vest 50% on the second and 50% on the fourth anniversaries of the grant date if the Named Executive Officer is still employed by us on the vesting dates, and have an exercise price of $23.40 per share. The March 2014 +restricted stock awards vest 50% on the second and 50% on the fourth anniversaries of the grant date if the Named Executive Officer is still employed by us on the vesting dates. During the restricted period prior to vesting of the restricted stock, +the Named Executive Officer will be eligible to receive dividends on and vote the restricted stock. +The approximate value of +the 2014 equity grants as a percentage of 2014 base salary and the number of shares underlying each grant are set forth in the table below: +Participant +% of 2014 +Base Salary +Stock +Options +Restricted Stock +Joseph Wm. Foran +163 +% +88,670 +17,094 +Chairman of the Board and Chief Executive Officer +Matthew V. Hairford +149 +% +51,228 +8,306 +President +David E. Lancaster +148 +% +28,978 +14,489 +Executive Vice President, Chief Operating Officer and Chief Financial Officer +David F. Nicklin +109 +% (1) +18,696 +9,348 +Executive Director of Exploration +Ryan C. London +152 +% +— +25,106 +Executive Vice President and General Manager +(1) +The value assumes that Mr. Nicklin works 200 days per year at the daily rate of $1,750 per day. +50 +Table of Contents +Benefits +We offer a variety of health and welfare programs to all eligible employees, including the Named Executive Officers other than Mr. Nicklin. The health and welfare programs are intended to protect +employees against catastrophic loss and encourage a healthy lifestyle. Our health and welfare programs include medical, pharmacy, dental, disability and life insurance. We also have a 401(k) plan for all full time employees, including the Named +Executive Officers, other than Mr. Nicklin, in which we contribute 3% of the employee’s base salary and have the discretion to contribute up to an additional 4% of the employee’s base salary as a dollar-for-dollar match of his or her +elective deferral contributions. The discretionary dollar-for-dollar match is subject to vesting based upon years of service to the Company. In addition, we provide long-term care insurance for certain of our executive officers. +How Elements of Our Compensation Program Are Related to Each Other +We view the various components of compensation as related but distinct with generally a significant portion of total compensation reflecting “pay for performance.” We do not have any formal or +informal policies or guidelines for allocating compensation between long-term and currently paid out compensation or between cash or non-cash compensation. +Accounting and Tax Considerations +Under Section 162(m) of the +Code, a limitation is placed on tax deductions of any publicly-held corporation for individual compensation to certain executives of such corporation exceeding $1.0 million in any taxable year, unless the compensation is performance-based. However, +due to the transition rules of Section 162(m), the $1.0 million deduction limit has not applied to us and generally is not intended to apply to us until the first meeting of our shareholders that occurs after the close of the third calendar +year following our initial public offering, which occurred in February 2012. If the Amended 2012 Plan is approved by the shareholders at the Annual Meeting, Section 162(m) of the Code will apply to awards granted under the Amended 2012 Plan. +Termination of Employment Arrangements and Independent Contractor Agreement +Employment Agreements and Independent Contractor Agreement +As described under “Discussion Regarding Summary Compensation Table and Grants of Plan-Based Awards Table,” in contemplation of our initial public offering, on August 9, 2011, we entered +into employment agreements with Messrs. Foran, Hairford and Lancaster and an independent contractor agreement with Mr. Nicklin and his consulting company. In March 2014, we entered into an employment agreement with Mr. London in +substantially the same form as that of Messrs. Foran, Hairford and Lancaster. The principal difference in Mr. London’s employment agreement as compared to the employment agreement of Messrs. Foran, Hairford and Lancaster is that +Mr. London’s agreement does not include a “modified single trigger” that would have allowed him to receive a “change in control” payment if he terminated his agreement without “good reason” within 30 days +prior to or 12 months after a change in control. +Under the employment agreements, if one of the following occurs: +• +the Named Executive Officer dies; +• +the Named Executive Officer is totally disabled; +• +we mutually agree to end the employment agreement; +• +we dissolve and liquidate; or +• +the term of the employment agreement ends, +we will pay the Named Executive Officer the average of his annual bonus, which includes non-equity incentive compensation, for the prior two years pro-rated based on the number of complete or partial +months completed during the year of termination. +51 +Table of Contents +Also, under the employment agreements, if one of the following occurs: +• +the Named Executive Officer is terminated other than (i) as set forth above, (ii) by us for just cause, or (iii) in connection with a +“change in control” as described below; or +• +the Named Executive Officer terminates his employment for “good reason,” +if the Named Executive Officer is Mr. Foran, we will pay him twice his base salary and twice the average of his annual bonus for the prior two +years; if the Named Executive Officer is Messrs. Hairford, Lancaster or London we will pay him 1.5 times his base salary and 1.5 times the average of his annual bonus for the prior two years. +Finally, under the employment agreements of Messrs. Foran, Hairford and Lancaster, upon a “change in control” and within 30 +days prior to the “change in control” or within 12 months after the “change in control,” if we terminate a Named Executive Officer without just cause or the Named Executive Officer terminates his employment with or without +“good reason,” we will pay him three times his base salary and three times the average of his annual bonus for the prior two years. These agreements were entered into prior to our initial public offering. At that time, we believed a +“single trigger” or “modified single trigger” was appropriate given the Company’s size, early stage of development and strong growth aspirations. The agreement entered into with Mr. London in March 2014, however, +includes a “double trigger” such that upon a “change in control” and within 30 days prior to the “change in control” or within 12 months after the “change in control,” if we terminate him without just cause or +he terminates his employment with “good reason,” we will make the same required payments. In addition, if Messrs. Foran, Hairford, Lancaster or London are terminated or terminate their employment as set forth above in connection with a +“change in control,” all equity awards of such Named Executive Officer vest immediately prior to such termination. +“Change in control” is defined under Section 409A of the Code as follows: +• +a change in ownership of the Company occurs on the date that, except in certain situations, results in someone acquiring more than 50% of the total +fair market value or voting power of the Company’s stock; +• +a change in effective control of the Company occurs on one of the following dates: +• +the date that a person acquires (or has acquired in a 12 month period) ownership of 30% or more of the Company’s total voting power; however, if a +person already owns at least 30% of the Company’s total voting power, the acquisition of additional control does not constitute a change in control; or +• +the date during a 12 month period where a majority of the Company’s Board is replaced by directors whose appointment or election was not endorsed +by a majority of the Board; or +• +a change in the ownership of a substantial portion of the Company’s assets occurs on the date a person acquires (or has acquired in a 12 month +period) assets of the Company having a total gross market value of at least 40% of the total gross fair market value of all of the Company’s assets immediately before such acquisition. +For purposes of the employment agreements, “good reason” means: +• +the assignment of duties inconsistent with the title of the Named Executive Officer or his current office or a material diminution of the Named +Executive Officer’s current authority, duties or responsibilities; +• +a diminution of the Named Executive Officer’s base salary or a material breach of the employment agreement by the Company; or +• +the relocation of the Company’s principal executive offices more than 30 miles from the Company’s present principal executive offices or the +transfer of the Named Executive Officer to a place other than the Company’s principal executive offices; and +• +the action causing the “good reason” is not cured within the applicable cure period. +52 +Table of Contents +For purposes of the employment agreements, “just cause” means: +• +the Named Executive Officer’s continued and material failure to perform the duties of his employment consistent with his position other than due +to disability; +• +the Named Executive Officer’s failure to perform his material obligations under the employment agreement other than due to disability; +• +the Named Executive Officer’s material breach of the Company’s written policies concerning discrimination, harassment or securities trading; +• +the Named Executive Officer’s refusal or failure to follow lawful directives of the Board and any supervisors other than due to disability; +• +the Named Executive Officer’s commission of fraud, theft or embezzlement; +• +the Named Executive Officer’s conviction or indictment of a felony or other crime involving moral turpitude; or +• +the Named Executive Officer’s intentional breach of fiduciary duty; and +• +the action causing the “just cause” is not cured within the applicable cure period, if any. +On February 26, 2015, we entered into an amendment to Mr. Nicklin’s independent contractor agreement pursuant to which the +term of the agreement was extended to March 31, 2015 with automatic monthly extensions thereafter unless either party elected to terminate the agreement upon notice provided not less than fifteen days before the end of the then-current month. +In addition, the daily rate paid to Mr. Nicklin was increased to $2,000 per full business day worked, retroactive to August 15, 2014. Mr. Nicklin retired from his position as Executive Director of Exploration effective March 31, +2015 and is no longer an executive officer, but continues to serve the Company as a consultant and special advisor to the Board. Under Mr. Nicklin’s independent contractor agreement, if one of the following were to occur: +• +he died; +• +he became totally disabled; +• +we mutually agreed to end the independent contractor agreement; +• +we dissolved and liquidated; or +• +the term of the independent contractor agreement ended, +we would have been required to pay his consulting company (i) the average of the annual bonus paid to the consulting company for the prior two years pro-rated based on the number of complete or +partial months completed during the year of termination and (ii) all accrued and vested compensation under our incentive plans. In addition, if Mr. Nicklin died or became totally disabled during the initial three-year term of the +independent contractor agreement, his consulting company was to be paid $250 per day that Mr. Nicklin consulted for us during the term of the independent contractor agreement. +Also, under the independent contractor agreement, if one of the following occurred: +• +the independent contractor agreement was terminated by us for a reason other than as set forth above or in connection with a “change in +control” as described below; or +• +he terminated the independent contractor agreement for “good reason” (as described in connection with the employment agreements set forth +above), +we would have been required to pay an amount equal to $1,000 per full business day that Mr. Nicklin consulted +for us during the prior twelve months of the term of the independent contractor agreement plus accrued and vested compensation under our equity plans. +53 +Table of Contents +Finally, under the independent contractor agreement, upon a “change in control” +(as described in connection with the employment agreements set forth above) and within 30 days prior to the “change in control” or within 12 months after the “change in control,” if we terminated Mr. Nicklin’s +independent contractor arrangement without “just cause” (as described in connection with the employment agreements set forth above) or Mr. Nicklin terminated his independent contractor agreement with or without “good reason” +(as described in connection with the employment agreements set forth above), we would have been required to pay an amount equal to two times the aggregate amount paid based on the daily rate during the prior twelve months plus accrued and vested +compensation under our equity plans. +Equity Plans +The 2003 Stock and Incentive Plan (the “2003 Plan”) provides that all awards automatically vest upon a “change in +control.” For equity grants under the 2012 Plan, vesting upon a “change in control” for Messrs. Foran, Hairford and Lancaster mirrors the terms of their employment agreements. For Mr. Nicklin, and for Mr. London with respect +to equity grants made prior to March 2014, for equity grants under the 2012 Plan, vesting occurs if within 12 months after a “change in control” the Named Executive Officer is terminated without “just cause” (as defined above) or +terminates his employment with “good reason” (as defined above other than with respect to relocation). For Mr. London, with respect to equity grants made in March 2014 or later under the 2012 Plan, vesting upon a “change in +control” mirrors the terms of his employment agreement. +For the 2003 Plan, see the definition of “change in +control” below in the section “— Potential Payments upon Termination or Change in Control.” +The +“change in control” provisions in the employment agreements, independent contractor agreement and the equity grants under the 2012 Plan and the 2003 Plan help prevent management from being distracted by rumored or actual changes in +control. The “change in control” provisions provide: +• +incentives for those Named Executive Officers to remain with us despite the uncertainties of a potential or actual change in control; +• +assurance of severance payments for terminated Named Executive Officers; and +• +access to equity compensation after a change in control. +Stock Ownership Guidelines +We have adopted stock ownership +guidelines for the following officers and designated amounts: +• +Chairman and Chief Executive Officer — shares equal to five times base salary; +• +President — shares equal to five times base salary; +• +Executive Vice Presidents — shares equal to two and +1 / 2 times base salary; and +• +Vice Presidents and Executive Directors — shares equal to one and 1 / 2 times base salary. +Each of the foregoing officers has +five years from the later of the date of the closing of our initial public offering and the fifth anniversary of his or her appointment as an officer of the Company in which to achieve the stock ownership position. Shares that will count toward the +stock ownership guidelines include time-lapse restricted stock that are still restricted and any shares held in trust by the officer or his immediate family over which he has direct beneficial ownership interest. Shares that will not count toward +the stock ownership guidelines include shares underlying unexercised stock options, unexercised stock appreciation rights and performance-based awards for which the performance requirements have not been satisfied. Messrs. Foran, Hairford, +Lancaster, Nicklin and London each own shares in excess of the minimum requirement set forth in the stock ownership guidelines. +54 +Table of Contents +At its July 2013 meeting, the Corporate Governance Committee recommended, and the Board +subsequently adopted, a revised insider trading policy that prohibits hedging of the Company’s securities by directors, officers or employees. The revised insider trading policy also restricts directors and executive officers from pledging more +than 25% of his or her holdings of the Company’s stock without the prior written consent of the Corporate Governance Committee. +Nominating, Compensation and Planning Committee Report +We have reviewed and discussed with management the Compensation +Discussion and Analysis required by Item 402(b) of Regulation S-K and based on such review and discussions, we recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement. +Nominating, Compensation and Planning Committee +David M. Laney, Chair +Reynald A. Baribault +Michael C. Ryan +Margaret B. Shannon +55 +Table of Contents +Summary Compensation Table +The following table summarizes the total compensation awarded to, earned by or paid to Messrs. Foran, Hairford, Lancaster, Nicklin and +London for 2014, 2013 and 2012. This table and the accompanying narrative should be read in conjunction with the Compensation Discussion and Analysis, which sets forth the objectives and other information regarding our executive compensation +program. +Name and Principal Position +Year +Salary +Bonus +Stock +Awards +(1) +Option +Awards +(2) +Non-Equity +Incentive Plan +Compensation (3) +All Other +Compensation +Total +Joseph Wm. Foran +2014 +$ +750,000 +$ +125,000 +(4) +$ +400,000 +$ +822,159 +$ +550,000 +$ +21,558 +(5) +$ +2,668,717 +Chairman of the Board and +Chief Executive Officer +2013 +$ +600,000 +$ +— +$ +328,400 +$ +652,750 +$ +600,000 +$ +19,818 +(6) +$ +2,200,968 +2012 +$ +550,000 +$ +— +$ +475,834 +$ +455,581 +$ +330,000 +$ +18,471 +(7) +$ +1,829,886 +Matthew V. Hairford +2014 +$ +450,000 +$ +50,000 +(4) +$ +184,999 +$ +485,101 +$ +300,000 +$ +20,205 +(8) +$ +1,490,305 +President +2013 +$ +330,000 +$ +— +$ +205,250 +$ +438,275 +$ +250,000 +$ +18,826 +(9) +$ +1,242,351 +2012 +$ +300,000 +$ +— +$ +192,806 +$ +184,600 +$ +200,000 +$ +17,500 +(10) +$ +894,906 +David E. Lancaster +2014 +$ +400,000 +$ +50,000 +(4) +$ +325,002 +$ +267,201 +$ +250,000 +$ +20,179 +(11) +$ +1,312,382 +Executive Vice President, +Chief Operating Officer +and Chief Financial Officer +2013 +$ +375,000 +$ +— +$ +246,300 +$ +466,250 +$ +225,000 +$ +17,850 +(10) +$ +1,330,400 +2012 +$ +340,000 +$ +— +$ +252,131 +$ +241,400 +$ +200,000 +$ +17,500 +(10) +$ +1,051,031 +David F. Nicklin +2014 +$ +459,000 +(12) +$ +200,000 +(13) +$ +209,382 +$ +172,143 +$ +250,000 +— +$ +1,290,525 +Executive Director +2013 +$ +415,625 +(14) +$ +— +$ +123,150 +$ +149,200 +$ +200,000 +$ +— +$ +887,975 +of Exploration +2012 +$ +402,500 +(14) +$ +— +$ +181,687 +$ +173,950 +$ +150,000 +$ +— +$ +908,137 +Ryan C. London +2014 +$ +375,000 +$ +85,000 +(15) +$ +568,758 +$ +— +$ +250,000 +$ +20,149 +(16) +$ +1,298,907 +Executive Vice President and +2013 +$ +260,000 +$ +— +$ +159,510 +$ +143,520 +$ +180,000 +$ +18,530 +(17) +$ +761,560 +General Manager +2012 +(18) +$ +— +$ +— +$ +— +$ +— +$ +— +$ +— +$ +— +(1) +Reflects the grant date fair value of service-based restricted stock and performance-based restricted stock and restricted stock units computed in accordance with FASB +ASC Topic 718. The grant date fair value of the performance-based awards granted in 2012 was estimated based on the most likely outcome of the performance-based awards as determined using the Monte Carlo method. This is the amount that will be +expensed for these awards, regardless of the actual number of shares of Common Stock ultimately issued to the recipients of the awards, provided that the requisite service is furnished. +(2) +Reflects the grant date fair value of option awards computed in accordance with FASB ASC Topic 718. Our policy and assumptions made in the valuation of the stock +options are contained in Note 2 and Note 8 of the audited financial statements included in our Annual Report on 10-K for the year ended December 31, 2014. +(3) +Represents awards pursuant to the 2014, 2013 and 2012 Incentive Programs, respectively. +(4) +Reflects ad hoc discretionary bonuses awarded following the Company’s 2014 public equity offering. +(5) +Consists of $18,200 in 401(k) matching contributions as described in “— Compensation Discussion and Analysis — Benefits,” $2,447 in +premiums reimbursed to Mr. Foran for a disability policy covering Mr. Foran and $911 in long-term care insurance premiums. +(6) +Consists of $17,850 in 401(k) matching contributions as described in “— Compensation Discussion and Analysis — Benefits,” $1,318 in +premiums reimbursed to Mr. Foran for a disability policy covering Mr. Foran and $650 in long-term care insurance premiums. +(7) +Consists of $17,500 in 401(k) matching contributions as described in “— Compensation Discussion and Analysis — Benefits” and $971 in +premiums reimbursed to Mr. Foran for a disability policy covering Mr. Foran. +(8) +Consists of $18,200 in 401(k) matching contributions as described in “— Compensation Discussion and Analysis — Benefits” and $2,005 +in long-term care insurance premiums. +(9) +Consists of $17,850 in 401(k) matching contributions as described in “— Compensation Discussion and Analysis — Benefits” and $976 in +long-term care insurance premiums. +(10) +Consists of 401(k) matching contributions as described in “— Compensation Discussion and Analysis — Benefits.” +(11) +Consists of $18,200 in 401(k) matching contributions as described in “— Compensation Discussion and Analysis — Benefits” and $1,979 +in long-term care insurance premiums. +(12) +Based on the aggregate amount of payments made to Mr. Nicklin under his independent contractor agreement as determined by his base rate of $1,750 per day from +January 1, 2014 through August 14, 2014 and $2,000 per day from August 15, 2014 through December 31, 2014. +(13) +Reflects $25,000 ad hoc discretionary bonus awarded following the Company’s 2014 public equity offering and one-time bonus of $175,000, or $250 per day that Mr. +Nicklin consulted for us during his initial thirty-six month term. +(14) +Based on the aggregate amount of payments made to Mr. Nicklin under his independent contractor agreement as determined by his base rate of $1,750 per day. +(15) +Reflects retention payment made pursuant to an agreement entered into prior to Mr. London becoming an executive officer. +(16) +Consists of $18,200 in 401(k) matching contributions as described in “— Compensation Discussion and Analysis — Benefits” and $1,949 +in long-term care insurance premiums. +(17) +Consists of $17,850 in 401(k) matching contributions as described in “— Compensation Discussion and Analysis — Benefits” and $680 in +long-term care insurance premiums. +(18) +Mr. London was not a Named Executive Officer in 2012. +56 +Table of Contents +Grants of Plan-Based Awards Table +The following table sets forth certain information regarding non-equity awards granted by the Company pursuant to the 2014 Incentive +Program and stock and option awards granted by the Company pursuant to the 2012 Plan during the year ended December 31, 2014 to the Named Executive Officers below: +Estimated Future Payouts +Under +Non-Equity Incentive +Plan Awards (1) +All +Other +Stock +Awards: +Number +of Shares +of Stock +or Units +All +Other +Option +Awards: +Number of +Securities +Underlying +Options (2) +Exercise +or +Base +Price of +Option +Awards +Grant +Date +Fair +Value of +Stock +and +Option +Awards +Threshold +Target +Maximum +Name +Grant Date +($) +($) +($) +(# shares) +(# shares) +($/share) +($) +Joseph Wm. Foran +2/11/2014 +— +— +— +— +20,294 +19.71 +164,382 +3/7/2014 +300,000 +562,500 +1,500,000 +— +68,376 +23.40 +657,777 +3/7/2014 +— +— +— +17,094 +— +— +400,000 +Matthew V. Hairford +2/11/2014 +— +— +— +— +5,074 +19.71 +41,099 +2/11/2014 +— +— +— +2,537 +— +— +50,004 +3/7/2014 +157,500 +315,000 +675,000 +— +46,154 +23.40 +444,001 +3/7/2014 +— +— +— +5,769 +— +— +134,995 +David E. Lancaster +2/11/2014 +— +— +— +— +7,610 +19.71 +61,641 +2/11/2014 +— +— +— +3,805 +— +— +74,997 +3/7/2014 +140,000 +260,000 +480,000 +— +21,368 +23.40 +205,560 +3/7/2014 +— +— +— +10,684 +— +— +250,006 +David F. Nicklin +2/11/2014 +— +— +— +— +5,074 +19.71 +41,099 +2/11/2014 +— +— +— +2,537 +— +— +50,004 +3/7/2014 +105,000 +175,000 +350,000 +— +13,622 +23.40 +131,044 +3/7/2014 +— +— +— +6,811 +— +— +159,377 +Ryan C. London +2/11/2014 +— +— +— +5,074 +— +— +100,009 +3/7/2014 +93,750 +168,750 +281,250 +20,032 +— +— +468,749 +(1) +See “— Compensation Discussion and Analysis — 2014 Annual Incentive Compensation” and “— Summary Compensation +Table — Non-Equity Incentive Plan Compensation” regarding the actual payments made to the Named Executive Officers pursuant to the 2014 Incentive Program. +(2) +The term of such option awards is five years. +Discussion Regarding Summary Compensation Table and Grants of Plan-Based Awards Table +On August 9, 2011, we entered into employment agreements with Messrs. Foran, Lancaster and Hairford and an independent contractor +agreement with Mr. Nicklin. On March 13, 2014, we entered into an employment agreement with Mr. London. The principal difference in Mr. London’s employment agreement as compared to the employment agreement of Messrs. Foran, +Hairford and Lancaster is that Mr. London’s agreement does not include a “modified single trigger” that would have allowed him to receive a “change in control” payment if he terminated his agreement without “good +reason” within 30 days prior to or 12 months after a change in control. +Mr. Foran . His employment agreement +extends for a twenty-four month term which automatically renews each month for an additional month unless either the Company or Mr. Foran gives written notice that the term will no longer be extended. For 2014, his base salary was $750,000. +Effective January 1, 2015, his base salary is $800,000, and he is eligible to participate in the 2015 Incentive Program and receive awards pursuant to the 2012 Plan. See “— Compensation Discussion and Analysis — Termination of +Employment Arrangements and Independent Contractor Agreement — Employment Agreements and Independent Contractor Agreement” regarding the payments to be made to Mr. Foran upon termination of his employment and/or a “change in +control.” +57 +Table of Contents +Mr. Hairford . His employment agreement extends for an eighteen month term which +automatically renews each month for an additional month unless either the Company or Mr. Hairford gives written notice that the term will no longer be extended. For 2014, his base salary was $450,000. Effective January 1, 2015, his base +salary is $500,000, and he is eligible to participate in the 2015 Incentive Program and receive awards pursuant to the 2012 Plan. See “— Compensation Discussion and Analysis — Termination of Employment Arrangements and Independent +Contractor Agreement — Employment Agreements and Independent Contractor Agreement” regarding the payments to be made to Mr. Hairford upon termination of his employment and/or a “change in control.” +Mr. Lancaster . His employment agreement extends for an eighteen month term which automatically renews each month for an +additional month unless either the Company or Mr. Lancaster gives written notice that the term will no longer be extended. For 2014, his base salary was $400,000. Effective January 1, 2015, his base salary is $425,000, and he is +eligible to participate in the 2015 Incentive Program and receive awards pursuant to the 2012 Plan. See “— Compensation Discussion and Analysis — Termination of Employment Arrangements and Independent Contractor Agreement — +Employment Agreements and Independent Contractor Agreement” regarding the payments to be made to Mr. Lancaster upon termination of his employment and/or a “change in control.” +Mr. Nicklin . His independent contractor agreement extended for a thirty-six month term that expired in August 2014. For 2014, +the daily rate was $1,750 per day that Mr. Nicklin consulted for us through August 14, 2014 and $2,000 per day from August 15, 2014 through December 31, 2014. Because the independent contractor agreement remained in effect until +the end of the thirty-six month term expiring in August 2014, pursuant to the agreement we paid Mr. Nicklin an additional one time bonus of $175,000, or $250 per day that he consulted for us during the initial thirty-six month term of the +agreement. Mr. Nicklin was paid at a rate of $2,000 per day in 2015 up until his retirement as our Executive Director of Exploration on March 31, 2015. See “— Compensation Discussion and Analysis — Termination of Employment +Arrangements and Independent Contractor Agreement — Employment Agreements and Independent Contractor Agreement” regarding the payments to be made to Mr. Nicklin’s consulting company upon termination of the independent contractor +agreement and/or a “change in control.” +Mr. London . His employment agreement extends for an +eighteen month term which automatically renews each month for an additional month unless either the Company or Mr. London gives written notice that the term will no longer be extended. For 2014, his base salary was $375,000. Effective +January 1, 2015, his base salary is $425,000, and he is eligible to participate in the 2015 Incentive Program and receive awards pursuant to the 2012 Plan. See “— Compensation Discussion and Analysis — Termination of Employment +Arrangements and Independent Contractor Agreement — Employment Agreements and Independent Contractor Agreement” regarding the payments to be made to Mr. London upon termination of his employment and/or a “change in +control.” +Non-Equity Incentive Plan Compensation. See “— Compensation Discussion and Analysis +— 2014 Annual Incentive Compensation” regarding the 2014 Incentive Program compensation goals, threshold, target and maximum potential payments and actual payments. +Long-Term Incentive Compensation . See “— Compensation Discussion and Analysis — 2014 Long-Term Incentive +Compensation” regarding 2014 long-term incentive compensation. +General . Base salary and the amount of cash +bonuses, including non-equity awards granted by the Company pursuant to the 2014 Incentive Program, paid for 2014 represented from approximately 53% to approximately 70% of the Named Executive Officers’ total compensation as represented in the +Summary Compensation Table with the percentages being as follows: Mr. Foran — 53.4%; Mr. Hairford — 53.7%; Mr. Lancaster — 53.3%; Mr. Nicklin — 70.4%; and +Mr. London — 54.7%. +58 +Table of Contents +Outstanding Equity Awards at December 31, 2014 +The following table summarizes the total outstanding option awards at December 31, 2014 for each Named Executive Officer: +Option Awards +Name +Number of +Securities +Underlying +Unexercised +Stock +Options (#) +Exercisable +Number +of +Securities +Underlying +Unexercised +Stock +Options (#) +Unexercisable +Option +Exercise +Price +Option +Expiration +Date +Joseph Wm. Foran +40,104 +40,104 +$ +10.49 +4/15/17 +— +175,000 +$ +8.21 +3/7/18 +— +20,294 +$ +19.71 +2/10/19 +— +68,376 +$ +23.40 +3/6/19 +Matthew V. Hairford +10,000 +— +$ +9.00 +2/21/20 +16,250 +16,250 +$ +10.49 +4/15/17 +— +117,500 +$ +8.21 +3/7/18 +— +5,074 +$ +19.71 +2/10/19 +— +46,154 +$ +23.40 +3/6/19 +David E. Lancaster +15,000 +— +$ +9.00 +2/21/20 +21,250 +21,250 +$ +10.49 +4/15/17 +— +125,000 +$ +8.21 +3/7/18 +— +7,610 +$ +19.71 +2/10/19 +— +21,368 +$ +23.40 +3/6/19 +David F. Nicklin +10,000 +— +$ +9.00 +2/21/20 +15,312 +15,313 +$ +10.49 +4/15/17 +— +40,000 +$ +8.21 +3/7/18 +— +5,074 +$ +19.71 +2/10/19 +— +13,622 +$ +23.40 +3/6/19 +Ryan C. London +10,000 +— +$ +9.00 +2/21/20 +9,375 +9,375 +$ +10.49 +4/15/17 +— +39,000 +$ +8.18 +3/11/18 +The following table provides the vesting dates at December 31, 2014 for unvested stock options: +Vesting Date +Joseph Wm. +Foran +Matthew V. +Hairford +David E. +Lancaster +David F. +Nicklin +Ryan C. +London +3/8/15 +87,500 +58,750 +62,500 +20,000 +— +3/12/15 +— +— +— +— +19,500 +2/11/16 +10,147 +2,537 +3,805 +2,537 +— +3/7/16 +34,188 +23,077 +10,684 +6,811 +— +4/16/16 +40,104 +16,250 +21,250 +15,313 +9,375 +3/8/17 +87,500 +58,750 +62,500 +20,000 +— +3/12/17 +— +— +— +— +19,500 +2/11/18 +10,147 +2,537 +3,805 +2,537 +— +3/7/18 +34,188 +23,077 +10,684 +6,811 +— +Total Unvested Stock Options +303,774 +184,978 +175,228 +74,009 +48,375 +59 +Table of Contents +The following table summarizes the total outstanding stock awards at December 31, 2014 +for each Named Executive Officer: +Stock Awards +Name +Number of +Shares or +Units of +Stock That +Have Not +Vested (#) +Market Value of +Shares or Units of +Stock That +Have +Not Vested +Number of +Unearned +Shares, Units +or Other +Rights That +Have Not +Vested (#) (1) +Market or +Payout Value of +Unearned +Shares, Units or +Other +Rights +That Have +Not Vested (1) +Joseph Wm. Foran +67,120 +$ +1,357,838 +40,104 +$ +811,304 +Matthew V. Hairford +37,369 +$ +755,975 +16,250 +$ +328,738 +David E. Lancaster +49,802 +$ +1,007,494 +21,250 +$ +429,888 +David F. Nicklin +28,177 +$ +570,021 +15,312 +$ +309,762 +Ryan C. London +46,950 +$ +949,799 +9,376 +$ +189,676 +(1) +Represents performance-based shares and units granted in April 2012 that vest depending upon the percentile rank of the Company’s Common Stock within a specified +peer group based upon the annualized total equivalent shareholder return from March 19, 2012 to April 15, 2015. The performance-based shares vest up to 100% of the shares granted. Any amounts above 100% up to 200% of the shares granted +consist of the performance-based restricted stock units, which vest and are converted into a corresponding number of shares of Common Stock, subject to the Company meeting certain performance criteria. The number of shares that would have been +issued based on the performance criteria as measured on December 31, 2014 was 200% of the shares granted. Based upon the annualized total equivalent shareholder return through April 15, 2015, 200% of the shares vested in April 2015. The +number of performance-based shares or units listed herein, and the market value thereof, represents 200% of the shares granted in April 2012. +The following table provides the vesting dates at December 31, 2014 for restricted stock and restricted stock units: +Vesting Date +Joseph Wm. +Foran +Matthew V. +Hairford +David E. +Lancaster +David F. +Nicklin +Ryan C. +London +4/16/15 (1) +40,104 +16,250 +21,250 +15,312 +9,376 +2/11/16 +— +1,268 +1,902 +1,268 +2,537 +3/7/16 +8,547 +2,884 +5,342 +3,405 +10,016 +4/16/16 +10,026 +4,063 +5,313 +3,829 +2,344 +3/8/17 +40,000 +25,000 +30,000 +15,000 +— +3/12/17 +— +— +— +— +19,500 +2/11/18 +— +1,269 +1,903 +1,269 +2,537 +3/7/18 +8,547 +2,885 +5,342 +3,406 +10,016 +Total Unvested Shares and Units +107,224 +53,619 +71,052 +43,489 +56,326 +(1) +The restricted stock and restricted stock units vesting on this date are performance-based shares or units. The performance-based shares vest up to 100% of the shares +granted. Any amounts above 100% up to 200% of the shares granted consist of the performance-based restricted stock units, which vest and are converted into a corresponding number of shares of Common Stock, subject to the Company meeting certain +performance criteria. The number of shares that would have been issued based on the performance criteria as measured on December 31, 2014 was 200% of the shares granted. Based upon the annualized total equivalent shareholder return through +April 15, 2015, 200% of the shares vested in April 2015. The number of performance-based shares or units listed herein represents 200% of the shares granted in April 2012. +Potential Payments Upon Termination or Change in Control +2003 Plan +All +equity awards granted to Named Executive Officers under the 2003 Plan vest upon a change in control. A “change in control” occurs upon any of the following events: +• +any person (or group of persons acting in concert), other than the Company or an affiliate, becomes the beneficial owner, directly or indirectly, of +voting securities representing 30% or more of the voting power of our then outstanding voting securities (with the threshold percentage being increased, not to +60 +Table of Contents +exceed 50% for the beneficial owners of our voting securities for whom Wellington Management Company, LLP serves as an investment advisor if those owners are deemed to be a “group” for +this purpose); +• +our Board ceases to consist of a majority of continuing directors; where “continuing director” means a member of the Board who was either +(i) a member of the Board at October 31, 2008 or (ii) nominated, appointed or approved (following nomination by our shareholders), to serve as a director by a majority of the then continuing directors; +• +our shareholders approve (i) any consolidation or merger with us or any subsidiary that results in the shareholders immediately prior to the +consolidation or merger holding less than a majority ownership interest in the outstanding voting securities of the surviving entity, (ii) any sale, lease, exchange or other transfer of all or substantially all of our assets or (iii) any +plan or proposal for our liquidation or dissolution; or +• +our shareholders accept a share exchange in which our shareholders immediately before such share exchange do not hold, immediately following such share +exchange, the total voting securities of the surviving entity in substantially the same proportion as held before the share exchange. +2012 Plan +Equity awards under the 2012 Plan vest upon a +“change in control” for Messrs. Foran, Hairford and Lancaster according to the terms of their employment agreements described below. For Messrs. Nicklin and London, vesting occurs for all equity awards other than performance-based awards +if within 12 months after a “change in control” such officer is terminated without “just cause” or terminates his employment with “good reason.” For performance-based awards, vesting occurs following a “change in +control” as described above with respect to performance shares, but not performance-based restricted stock units. The definitions of “change in control,” “just cause” and “good reason” are consistent with the +definitions of such terms (except for the definition of “good reason” which excludes relocation of the Company’s principal executive offices) as defined in the employment agreements and independent contractor agreement described in +“— Compensation Discussion and Analysis — Termination of Employment Arrangements and Independent Contractor Agreement — Employment Agreements and Independent Contractor Agreement.” +Employment Agreements and Independent Contractor Agreement +As described under “Discussion Regarding Summary Compensation Table and Grants of Plan-Based Awards Table,” in contemplation of our initial public offering, on August 9, 2011, we entered +into employment agreements with Messrs. Foran, Hairford and Lancaster and an independent contractor agreement with Mr. Nicklin and his consulting company. In addition, on March 13, 2014, we entered into an employment agreement with +Mr. London. The principal difference in Mr. London’s employment agreement as compared to the employment agreement of Messrs. Foran, Hairford and Lancaster is that Mr. London’s agreement does not include a “modified +single trigger” that would have allowed him to receive a “change in control” payment if he terminated his agreement without “good reason” within 30 days prior to or 12 months after a change in control. Pursuant to the terms +of the employment agreements and independent contractor agreement, we may be required to make certain payments to one or more of our Named Executive Officers upon the occurrence of certain events resulting in such Named Executive Officer’s +termination. For a detailed description of the events that may trigger such payments, see “— Compensation Discussion and Analysis — Termination of Employment Arrangements and Independent Contractor Agreement — Employment +Agreements and Independent Contractor Agreement.” +The employment agreements and the independent contractor agreement +each contain a non-disclosure of confidential information provision that requires each Named Executive Officer to maintain, both during and after employment, the confidentiality of information used by such Named Executive Officer in the performance +of his job duties. +61 +Table of Contents +Additionally, each of the employment agreements contains a non-competition provision, +pursuant to which Messrs. Foran, Hairford, Lancaster and London have agreed that: (i) for six months following termination by us for total disability, or by such Named Executive Officer for good reason, or (ii) for 12 months following +termination (a) by us for just cause, (b) by such Named Executive Officer other than for good reason or (c) in connection with a change in control, such Named Executive Officer shall not, without our prior written consent (not to be +unreasonably withheld if the Named Executive Officer’s employment is terminated by the Named Executive Officer other than for good reason), directly or indirectly: (x) invest in (other than investments in publicly-owned companies which +constitute not more than 1% of the voting securities of any such company) a competing business with significant assets in the restricted area (each as defined below), or (y) participate in a competing business as a manager, employee, director, +officer, consultant, independent contractor or other capacity or otherwise provide, directly or indirectly, services or assistance to a competing business in a position that involves input into or direction of such competing business’s +decisions within the restricted area. +Mr. Nicklin served as Executive Director of Exploration for the Company pursuant +to his independent contractor agreement, as amended, during 2014 and until his retirement as our Executive Director of Exploration on March 31, 2015. Mr. Nicklin’s independent contractor agreement contained a non-competition provision +pursuant to which Mr. Nicklin agreed that following termination: (i) by us for total disability or just cause, (ii) by Mr. Nicklin for good reason or other than for good reason or (iii) in connection with a change in +control, then for a period of 12 months thereafter, Mr. Nicklin was not permitted to, without our prior written consent, directly or indirectly (x) invest in (other than investments in publicly-owned companies which constitute not more +than 5% of the voting securities of any such company) a competing business with significant assets in the restricted area, or (y) participate in a competing business as a manager, employee, director, officer, consultant, independent contractor +or other capacity or otherwise provide, directly or indirectly, services or assistance to a competing business in a position that involves input into or direction of the competing business’s decisions within the restricted area. +For purposes of the employment agreements and independent contractor agreement: +“competing business” means any person or entity engaged in oil and natural gas exploration, development, production and +acquisition activities; +“significant assets” means oil and natural gas reserves with an aggregate fair market value +of $25 million or more; and +“restricted area” means a one-mile radius of any oil and natural gas reserves held by +us as of the end of the Named Executive Officer’s employment, plus any county or parish where we have significant assets as of the end of the Named Executive Officer’s employment. However, for purposes of Mr. Nicklin’s +independent contractor agreement, “restricted area” means a one-mile radius of any oil and natural gas reserves held by us as of the end of the performance of his independent contractor services, plus any county or parish where we have +significant assets as of the end of the performance of his independent contractor services other than a one-mile radius of any oil and natural gas reserves held by Salt Creek Petroleum as of August 9, 2011 to the extent previously disclosed to +us and any new oil and natural gas reserves that may be approved by us after August 9, 2011. See the definitions of “change in control,” “good reason” and “just cause” set forth in “— Compensation +Discussion and Analysis — Termination of Employment Arrangements and Independent Contractor Agreement — Employment Agreements and Independent Contractor Agreement.” +Furthermore, other than Mr. Foran’s employment agreement, each employment agreement and the independent contractor agreement +contains an anti-solicitation provision, pursuant to which, during the restricted periods described above, subject to certain exceptions, Messrs. Hairford, Lancaster, Nicklin and London shall not, without our prior written consent, solicit for +employment or a contracting relationship, or employ or retain any person who is or has been, within six months prior to such time, employed by or engaged as an individual independent contractor by us or our affiliates or induce or attempt to induce +any such person to leave his or her employment or independent contractor relationship with us or our affiliates. +62 +Table of Contents +For the Named Executive Officer to receive any severance payments described below for +termination by us without just cause, by the Named Executive Officer for good reason or, following a change in control, by us without cause or by the Named Executive Officer with good reason, with respect to Mr. London, or with or without good +reason, with respect to Messrs. Foran, Hairford, Lancaster and Nicklin, the Named Executive Officer must comply with the non-disclosure, non-competition and non-solicitation provisions described above. +Finally, as a condition to receiving any severance payments and other payments under their respective employment agreements or +independent contractor agreement, as applicable, each Named Executive Officer is required to execute a separation agreement and release in favor of us. +To describe the payments and benefits that are triggered for each event of termination, we have created the following table estimating the payments and benefits that would be paid to each Named Executive +Officer under each element of our compensation program assuming that such Named Executive Officer’s employment agreement or independent contractor agreement, as applicable, terminated on December 31, 2014, the last day of our 2014 fiscal +year. In all cases, the amounts were valued as of December 31, 2014, based upon, where applicable, the closing price of our Common Stock of $20.23 per share. The amounts in the table below are calculated as of December 31, 2014 pursuant to +SEC rules and are not intended to reflect actual payments that may be made. Actual payments that may be made will be based on the dates and circumstances of the applicable event. +Payment Upon Termination +Named Executive Officer +Category of +Payment +Upon Death or +Total +Disability (1) +Upon Mutual +Agreement or +Dissolution/ +Liquidation (1) +Termination by +Us Without Just +Cause or by +Named +Executive +Officer for Good +Reason (1) +Termination +Following a Change +in Control Without +Cause or by +Named +Executive Officer +With or Without +Good Reason (8) +Joseph Wm. Foran +Salary +$ +— +$ +— +$ +1,500,000 +(3) +$ +2,250,000 +(9) +Bonus +637,500 +(2) +637,500 +(2) +1,275,000 +(4) +1,912,500 +(10) +Vesting equity +— +— +— +4,673,807 +(11) +Total +$ +637,500 +$ +637,500 +$ +2,775,000 +$ +8,836,307 +Matthew V. Hairford +Salary +$ +— +$ +— +$ +675,000 +(5) +$ +1,350,000 +(9) +Bonus +300,000 +(2) +300,000 +(2) +450,000 +(6) +900,000 +(10) +Vesting equity +— +— +— +2,657,976 +(11) +Total +$ +300,000 +$ +300,000 +$ +1,125,000 +$ +4,907,976 +David E. Lancaster +Salary +$ +— +$ +— +$ +600,000 +(5) +$ +1,200,000 +(9) +Bonus +262,500 +(2) +262,500 +(2) +393,750 +(6) +787,500 +(10) +Vesting equity +— +— +— +3,150,814 +(11) +Total +$ +262,500 +$ +262,500 +$ +993,750 +$ +5,138,314 +David F. Nicklin +Salary +$ +— +$ +— +$ +235,500 +(7) +$ +918,000 +(12) +Bonus +325,000 +(2) +325,000 +(2) +— +— +Vesting equity +— +— +— +1,357,489 +(13) +Total +$ +325,000 +$ +325,000 +$ +235,500 +$ +2,275,489 +Ryan C. London +Salary +$ +— +$ +— +$ +562,500 +(5) +$ +1,125,000 +(9) +Bonus +257,500 +(2) +257,500 +(2) +386,250 +(6) +772,500 +(10) +Vesting equity +— +— +— +1,605,899 +(13) +Total +$ +257,500 +$ +257,500 +$ +948,750 +$ +3,503,399 +(1) +Amounts due upon death, total disability, mutual agreement, dissolution or liquidation, termination by us without cause or termination by Named Executive Officer for +good reason are payable in a lump sum on the sixtieth day following the date of termination unless otherwise required by Section 409A of the Code. +63 +Table of Contents +(2) +Represents the average annual amount of bonuses, including pursuant to the 2013 and 2014 Incentive Programs, paid to such Named Executive Officer with respect to prior +two calendar years (2013-2014). +(3) +Represents two times such Named Executive Officer’s base salary as of the termination date. +(4) +Represents two times an amount equal to the average annual amount of bonuses, including pursuant to the 2013 and 2014 Incentive Programs, paid to such Named Executive +Officer with respect to prior two calendar years (2013-2014). +(5) +Represents 1.5 times such Named Executive Officer’s base salary as of the termination date. +(6) +Represents 1.5 times an amount equal to the average annual amount of bonuses, including pursuant to the 2013 and 2014 Incentive Programs, paid to such Named Executive +Officer with respect to prior two calendar years (2013-2014). +(7) +Consists of a cash payment of $1,000 for each full business day worked by Mr. Nicklin during the prior 12 months. +(8) +Amounts due following a change in control are payable in a lump sum on the date which immediately follows six months from the date of termination or, if earlier, within +30 days of such Named Executive Officer’s death. +(9) +Represents three times such Named Executive Officer’s base salary as of the termination date. +(10) +Represents three times an amount equal to the average annual amount of bonuses, including pursuant to the 2013 and 2014 Incentive Programs, paid to such Named Executive +Officer with respect to prior two calendar years (2013-2014). +(11) +The employment agreements provide for accelerated and full vesting of unvested incentive awards held by these Named Executive Officers in the event that such Named +Executive Officer is terminated without “Just Cause” or terminates his employment with or without “Good Reason,” with respect to Messrs. Foran, Hairford and Lancaster, within 30 days prior to, or 12 months following, a +“change in control.” The 2003 Plan provides that all awards automatically vest upon a “change in control.” The amount disclosed reflects the closing price of our Common Stock on December 31, 2014 of $20.23 per share +multiplied by the number of unvested (i) service-based shares of restricted stock, (ii) performance-based shares of restricted stock and (iii) performance-based restricted stock units held by such Named Executive Officer on +December 31, 2014, in addition to the intrinsic value of the stock options held by such Named Executive Officer based upon the exercise price of such stock options being less than the closing price of our Common Stock on December 31, 2014. +(12) +Consists of a cash payment consisting of two times his daily contract rate for each full business day worked during the year ended December 31, 2014. +(13) +The equity grants under the 2012 Plan to Messrs. Nicklin and London as of December 31, 2013 provide for accelerated and full vesting of certain unvested incentive +awards in the event that either is terminated without “Just Cause” or terminates his employment for “Good Reason” within 12 months following a “change in control.” The 2003 Plan provides that all awards automatically +vest upon a “change in control.” The amount disclosed reflects the closing price of our Common Stock on December 31, 2014 of $20.23 per share multiplied by the number of unvested (i) service-based shares of restricted stock and +(ii) performance-based shares of restricted stock held by Mr. Nicklin and Mr. London, respectively, on December 31, 2014, in addition to the intrinsic value of the stock options held by Mr. Nicklin and Mr. London, +respectively, based upon the exercise price of such stock options being less than the closing price of our Common Stock on December 31, 2014. None of the unvested performance-based restricted stock units held by Messrs. Nicklin or London +on December 31, 2014 would vest under a change in control. +64 +Table of Contents +DIRECTOR COMPENSATION +Name +Fees Earned or +Paid in Cash +($) +Stock +Awards +($) +Restricted +Stock Units +(1) +($) +All Other +Compensation +($) +Total +($) +Reynald A. Baribault (2) +44,917 +— +45,434 +— +90,351 +Stephen A. Holditch (3) +30,084 +— +44,563 +— +74,647 +David M. Laney +65,000 +— +89,997 +— +154,997 +Gregory E. Mitchell +59,000 +— +89,997 +— +148,997 +Steven W. Ohnimus +62,000 +— +89,997 +— +151,997 +Michael C. Ryan +59,000 +— +89,997 +— +148,997 +Carlos M. Sepulveda, Jr. +73,000 +— +89,997 +— +162,997 +Margaret B. Shannon +65,000 +— +89,997 +— +154,997 +(1) +Based on the fair market value of the stock awards on the date of grant. Subject to a three year vesting period. One-third of these restricted stock units vest on each +of the first, second and third anniversaries of the grant dates. +(2) +Mr. Baribault was elected to the Board at the 2014 Annual Meeting of Shareholders. +(3) +Dr. Holditch’s term as a director expired at the 2014 Annual Meeting of Shareholders. +Compensation for 2014 +During 2014, we targeted our +non-employee directors’ compensation between the 25 th +and 50 th percentiles of the Peer Group used for +benchmarking the non-employee directors’ compensation. During 2014, our director compensation program was the following: +• +annual cash retainer of $50,000; +• +cash meeting fee of $1,000 per day for each day of Board and committee service; +• +the chairs of the Audit Committee and the Operations and Engineering Committee each received an additional annual cash retainer of $15,000 and the +chairs of the Nominating, Compensation and Planning Committee and the Corporate Governance Committee each received an additional annual cash retainer of $5,000; and +• +each non-employee director received restricted stock units (“RSUs”) equal to up to $90,000 in value annually with the restrictions lapsing in +one-third increments on each of the first, second and third anniversaries of the date of grant. Each grant was subject to downward (but not upward) adjustment in value based upon the non-employee director’s attendance and contributions at Board +or committee meetings called during the period for which RSUs are due. +In addition, we reimbursed our +directors for travel, lodging and related expenses incurred in attending Board and committee meetings. +Compensation for 2015 +For 2015, our non-employee directors’ compensation program has been adjusted as set forth below: +• +annual cash retainer of $60,000; +• +cash meeting fee of $1,000 per day for each day of Board and committee service; +• +the chairs of the Audit Committee and the Operations and Engineering Committee will each receive an additional cash retainer of $15,000 annually and +the chairs of the Nominating, Compensation and Planning Committee and the Corporate Governance Committee will each receive an additional cash retainer of $5,000 annually; and +• +each non-employee director receives RSUs equal to up to $100,000 in value annually with the restrictions lapsing in one-third increments on each of the +first, second and third anniversaries of the +65 +Table of Contents +date of grant. Each grant may be adjusted downward (but not upward) in value based upon the non-employee director’s attendance and contributions at Board or committee meetings called during +the period for which RSUs are due. +In addition, we will continue to reimburse our directors for travel, +lodging and related expenses incurred in attending Board and committee meetings. +Director Ownership Guidelines +The non-employee directors follow our voluntary stock ownership guidelines for non-employee directors. Within three years of becoming a +director, each non-employee director will be expected to own $250,000 of Common Stock and continue to hold such shares while serving as a director. All directors own in excess of $250,000 of Common Stock and presently meet this standard. Shares +which will count toward the stock ownership guidelines include time-lapse restricted stock or RSUs that are still restricted and any shares held in trust by the director or his or her immediate family over which he or she has direct beneficial +ownership interest. Shares which will not count toward the stock ownership guidelines include shares underlying unexercised stock options and unexercised stock appreciation rights. +Special Board Advisor Compensation +Our special Board advisors are +compensated with stock and/or cash awards based upon meeting attendance or as otherwise agreed to pursuant to consulting arrangements with such advisors. We reimburse our special Board advisors for travel, lodging and related expenses incurred in +attending Board and committee meetings. Mr. Downey’s special Board advisor compensation is the same as for the non-employee directors as described above, except that, effective January 1, 2015, he receives an additional $15,000 annual +cash retainer. +SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS +The following table presents the securities authorized for issuance under our equity compensation plans as of +December 31, 2014. +Plan Category +Number of +Shares to be +Issued Upon +Exercise +of +Outstanding +Options, +Warrants +and +Rights +Weighted- +Average +Exercise +Price of +Outstanding +Options, +Warrants +and +Rights +Number of +Shares +Remaining +Available for +Future +Issuance +Under +Equity +Compensation +Plans +Equity compensation plans approved by security holders (1)(2) +1,968,182 +$ +12.47 +1,347,463 +Equity compensation plans not approved by security holders +— +— +— +Total +1,968,182 +$ +12.47 +1,347,463 +(1) +Our Board has determined not to make any additional awards under the 2003 Plan. +(2) +Our 2012 Plan was approved by our Board in December 2011 and took effect on January 1, 2012. The 2012 Plan was approved by our shareholders at the Annual Meeting +of Shareholders on June 7, 2012. The Board approved the Amended and Restated 2012 Long-Term Incentive Plan on April 23, 2015 and has recommended that the shareholders approve the Amended and Restated 2012 Long-Term Incentive Plan at the +Annual Meeting. +66 +Table of Contents +TRANSACTIONS WITH RELATED PERSONS +Except as disclosed below, since January 1, 2014, there has not been, nor is there currently proposed, any transaction or series of +similar transactions to which we were or are a party in which the amount involved exceeded or exceeds $120,000 and in which any of our directors, executive officers, holders of more than 5% of any class of our voting securities or any member of the +immediate family of any of the foregoing persons had or will have a direct or indirect material interest, other than compensation arrangements with directors and executive officers, which are described in “Executive +Compensation—Compensation Discussion and Analysis” above. +George M. Yates was appointed to the Board on +April 28, 2015 and is a nominee for director at the Annual Meeting. Mr. Yates is Chairman and Chief Executive Officer of HEYCO Energy Group, Inc., an oil and natural gas exploration and production business based in Roswell, New Mexico +(“HEYCO”). HEYCO was the sole owner of Harvey E. Yates Company prior to the HEYCO Merger. While negotiating the HEYCO Merger, Matador was also negotiating the terms and conditions of proposed joint ventures (the “Joint Ventures”) +with three affiliates of HEYCO and/or Mr. Yates (the “HEYCO Affiliates”). In April 2015, Matador and the HEYCO Affiliates entered into non-binding letters of intent with respect to the Joint Ventures. The parties are currently +negotiating the terms of definitive agreements relating to the Joint Ventures. Pursuant to the Joint Ventures, a wholly-owned subsidiary of Matador would invest in two new entities with the HEYCO Affiliates for the purpose of developing certain +Delaware Basin properties in New Mexico. If we consummate the Joint Ventures, the Joint Ventures will result in Matador acquiring additional working interests in properties acquired by it in the HEYCO Merger. Mr. Yates is affiliated with each +of the HEYCO Affiliates and, therefore, following the closing of the transactions, the Joint Ventures will constitute related party transactions as defined in the Company’s Related Party Transaction Policy and applicable securities and stock +exchange rules. As presently negotiated, Matador’s collective investment in the Joint Ventures would equal approximately $14.2 million. +The Audit Committee has reviewed the terms of the Joint Ventures for potential conflicts of interest under the Company’s Related Party Transaction Policy and, after being fully informed as to +Mr. Yates’ relationship and interest and all other material facts related to the Joint Ventures, determined that the Joint Ventures were fair to the Company and recommended the Joint Ventures to the full Board for approval. The Board +subsequently approved such Joint Ventures. +In addition, in light of Mr. Yates’ ongoing services to HEYCO Energy +Group, Inc., the Board has, in accordance with Texas corporate law, adopted resolutions which renounce and provide for a waiver of certain corporate opportunities with respect to Mr. Yates. As a result, Mr. Yates will have no fiduciary +duty to present certain corporate opportunities related to Mr. Yates’ existing oil and gas holdings and/or in areas where Matador does not currently operate. +Procedures for Approval of Related Party Transactions +Our Board has +adopted a written related party transaction policy. Pursuant to this policy, a “Related Party Transaction” is defined as a transaction (including any financial transaction, arrangement or relationship (including any indebtedness or +guarantee of indebtedness)), or series of related transactions, or any material amendment to any such transaction, involving a Related Party (as defined below) and in which we are a participant, other than: +• +a transaction involving compensation of directors; +• +a transaction involving compensation of an executive officer or involving an employment agreement, severance agreement, change in control provision or +agreement or a special supplemental benefit for an executive officer; +• +a transaction available to all employees generally or to all salaried employees generally; +• +a transaction with a Related Party involving less than $120,000; +67 +Table of Contents +• +a transaction in which the interest of the Related Party arises solely from the ownership of a class of our equity securities and all holders of that +class receive the same benefit on a pro rata basis; or +• +a transaction in which the rates or charges involved therein are determined by competitive bids, or a transaction that involves the rendering of +services as a common or contract carrier, or public utility, at rates or charges fixed in conformity with law or governmental authority. +“Related Party” means: +• +any person who is, or at any time during the applicable period was, one of our executive officers or one of our directors or nominees for directors; +• +any person who is known by us to be the beneficial owner of more than 5% of our Common Stock; +• +any immediate family member of any of the foregoing persons, which means any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, +father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law of a director, nominee for director, executive officer or a beneficial owner of more than 5% of our Common Stock; and +• +any firm, corporation or other entity that is owned or controlled by any of the foregoing persons or in which any of the foregoing persons is a general +partner or executive officer or in which such person, together with all other of the foregoing persons, owns 10% or more of the equity interests thereof. +Pursuant to our related party transaction policy, the Audit Committee must review all material facts of each Related Party Transaction and recommend either approval or disapproval of the Related Party +Transaction to the full Board, subject to certain limited exceptions. In determining whether to recommend approval or disapproval of the Related Party Transaction, the Audit Committee must, after reviewing all material facts of the Related Party +Transaction and the Related Party’s relationship and interest, determine whether the Related Party Transaction is fair to the Company. Further, the policy requires that all Related Party Transactions be disclosed in our filings with the SEC +and/or our website in accordance with applicable laws, rules and regulations. +68 +Table of Contents +SECURITY OWNERSHIP +Security Ownership of Certain Beneficial Owners and Management +The following table presents the beneficial ownership of our Common Stock as of April 28, 2015 for (i) each person beneficially owning more than 5% of the outstanding shares of our Common Stock, +(ii) each director of the Company, (iii) each executive officer of the Company listed in the Summary Compensation Table and (iv) all of our directors and executive officers as a group. Except pursuant to applicable community property +laws and except as otherwise indicated, each shareholder possesses sole voting and investment power with respect to its, his or her shares. The business address of each of our directors, nominees for director and executive officers is c/o Matador +Resources Company, One Lincoln Centre, 5400 LBJ Freeway, Suite 1500, Dallas, Texas 75240. The applicable percentage ownership is based on 85,360,529 shares of our Common Stock issued and outstanding as of April 28, 2015, plus, on an individual +basis, the right of that individual to (i) obtain Common Stock upon exercise of stock options or (ii) obtain Common Stock upon the vesting or delivery of restricted stock units, in each case within 60 days of April 28, 2015. The +information is based on Form 3s, Form 4s, Schedule 13Ds and Schedule 13Gs filed through April 28, 2015. +Name +Amount and +Nature of +Ownership of +Common Stock +Percent +of Class +Directors and Named Executive Officers: +Joseph Wm. Foran (1) +4,120,152 +4.8 +% +Reynald A. Baribault (2) +26,000 +* +Matthew V. Hairford (3) +281,911 +* +David E. Lancaster (4) +410,974 +* +David M. Laney (5) +474,035 +* +Ryan C. London (6) +129,113 +* +Gregory E. Mitchell (7) +204,100 +* +David F. Nicklin (8) +131,229 +* +Steven W. Ohnimus (9) +100,835 +* +Michael C. Ryan (10) +264,628 +* +Carlos M. Sepulveda, Jr. (11) +296,209 +* +Margaret B. Shannon (12) +52,250 +* +George M. Yates (13) +4,802,500 +5.6 +% +All Directors and Executive Officers as a Group (16 persons) (14) : +11,696,553 +13.6 +% +Other 5% Owners: +T. Rowe Price Associates, Inc. (15) +5,343,273 +6.3 +% +* +Less than one percent (1%) +(1) +Includes (i) 1,084,933 shares of Common Stock held of record by Sage Resources, Ltd., a limited partnership owned by the Foran family, including +Mr. Foran; (ii) 4,000 shares of Common Stock held of record by the reporting person’s spouse through her Individual Retirement Account; (iii) 119,500 shares and 50,000 shares of Common Stock held of record by The Don Foran Family +Trust 2008 and The Foran Family Special Needs Trust, respectively, for which Mr. Foran is the co-trustee and over which Mr. Foran has shared voting and investment power with other members of his family; (iv) 524,053 shares of Common +Stock held of record by each of the JWF 2011-1 GRAT and the NNF 2011-1 GRAT, for which Mr. Foran is the trustee and over which Mr. Foran has sole voting and investment power; (v) 312,190 shares of Common Stock held of record by each +of the JWF 2013-1 GRAT and the NNF 2013-1 GRAT, for which Mr. Foran is the trustee and over which Mr. Foran has sole voting and investment power; (vi) 82,077 shares of Common Stock held of record by each of the JWF 2014-1 GRAT and the +NNF 2014-1 GRAT, for which Mr. Foran is the trustee and over which Mr. Foran has sole voting and investment power; (vii) 59,269 shares of Common Stock held of record by each of the JWF 2014-2 GRAT and the NNF 2014-2 GRAT, for which +Mr. Foran is the trustee and over which Mr. Foran has sole voting and investment power; (viii) 231,051 shares of Common Stock held of record by each of the JWF 2015-1 GRAT and the NNF 2015-1 GRAT, for which Mr. Foran is the trustee +and over which Mr. Foran has sole voting and investment power; (ix) 39,750 shares of Common Stock held of record by the Foran 2012 Security Trust, for which Mr. Foran is the trustee and over which Mr. Foran has sole voting and +investment power; (x) 161,050 shares of Common Stock held of record by the Foran 2012 Savings Trust, for which Mr. Foran’s spouse is a trustee; (xi) 270 shares held of record by the Individual Retirement Account of +Mr. Foran’s adult child, who gave Mr. Foran investment power over such shares through a +69 +Table of Contents +revocable power of attorney; and (xii) 67,120 shares of restricted stock. Pursuant to the terms of the restricted stock grants, Mr. Foran has the right to vote such shares but may only +dispose of such shares to the extent they have vested. Also includes 127,604 shares of Common Stock issuable to Mr. Foran upon the exercise of stock options. +(2) +Includes 2,000 shares of Common Stock held by the Individual Retirement Account of Mr. Baribault. Also includes 19,000 shares of Common Stock held by the Reynald +A. Baribault Maritalized Revocable Living Trust, for which Mr. Baribault has shared voting and investment power with his spouse, and 5,000 shares of Common Stock held by the Sally K. Baribault Maritalized Revocable Living Trust, for which +Mr. Baribault has shared voting and investment power with his spouse. +(3) +Includes 84,875 shares of Common Stock issuable to Mr. Hairford upon the exercise of stock options and 5,000 shares held of record by his Individual Retirement +Account. Also includes 37,369 shares of restricted stock. Pursuant to the terms of the restricted stock grants, Mr. Hairford has the right to vote such shares but may only dispose of such shares to the extent they have vested. Mr. Hairford +has pledged 67,400 shares of Common Stock. +(4) +Includes 98,750 shares of Common Stock issuable to Mr. Lancaster upon the exercise of stock options and 75,500 shares of Common Stock held of record by his +Individual Retirement Account. Also includes 54,177 shares of restricted stock. Pursuant to the terms of the restricted stock grants, Mr. Lancaster has the right to vote such shares but may only dispose of such shares to the extent they have +vested. +(5) +Includes 66,000 shares of Common Stock held of record by Laney Investments Ltd., for which Mr. Laney has sole voting and investment power. Also includes 933 shares +of Common Stock issuable to Mr. Laney upon the vesting of restricted stock units. +(6) +Includes 38,875 shares of Common Stock issuable to Mr. London upon the exercise of stock options. Also includes 60,075 shares of restricted stock. Pursuant to the +terms of the restricted stock grants, Mr. London has the right to vote such shares but may only dispose of such shares to the extent they have vested. +(7) +Includes 191,292 shares of Common Stock held of record by JAMAL Enterprises, LP, for which Mr. Mitchell has sole voting and investment power. Also includes 933 +shares of Common Stock issuable to Mr. Mitchell upon the vesting of restricted stock units. +(8) +Includes 45,312 shares of Common Stock issuable to Mr. Nicklin upon the exercise of stock options and 38,600 shares of Common Stock held of record by his +Individual Retirement Account. Also includes 28,177 shares of restricted stock. Pursuant to the terms of the restricted stock grants, Mr. Nicklin has the right to vote such shares but may only dispose of such shares to the extent they have +vested. Mr. Nicklin retired from his position as Executive Director of Exploration effective March 31, 2015 and is no longer an executive officer, but continues to serve the Company as a consultant and special advisor to the Board. He is included in +this table due to his status as a Named Executive Officer for 2014. +(9) +Includes 3,313 vested restricted stock units, delivery of which has been deferred pursuant to the award agreement, and 933 shares of Common Stock issuable to +Dr. Ohnimus upon the vesting of restricted stock units. Dr. Ohnimus has pledged 43,209 shares of Common Stock. +(10) +Includes 4,000 shares of Common Stock held of record by Mr. Ryan’s one college-age child and three minor age children. Also includes 933 shares of Common +Stock issuable to Mr. Ryan upon the vesting of restricted stock units. +(11) +Includes 933 shares of Common Stock issuable to Mr. Sepulveda upon the vesting of restricted stock units. +(12) +Includes 933 shares of Common Stock issuable to Ms. Shannon upon the vesting of restricted stock units. +(13) +Includes 4,800,000 shares of Common Stock, 1,250,000 of which are being held in an escrow account pursuant to the HEYCO Merger and related escrow agreement. As Chairman +and Chief Executive Officer of HEYCO, Mr. Yates will have ultimate voting and dispositive power with respect to all shares held by HEYCO. Also includes 2,500 shares of Common Stock owned by Spiral, Inc., an entity owned by certain trusts of +which Mr. Yates is the sole trustee and with respect to which Mr. Yates has voting and dispositive power. +(14) +Includes an aggregate of 484,582 shares of Common Stock which our executive officers as a group have the right to acquire within 60 days of April 28, 2015 upon the +exercise of stock options. Also includes 321,171 shares of restricted stock held by our executive officers. Pursuant to the terms of the restricted stock grants, the executive officers have the right to vote such shares but may only dispose of such +shares to the extent they have vested. Also includes 8,911 shares of Common Stock issuable to directors upon the vesting of restricted stock units. Includes 140,609 shares of Common Stock pledged by our executive officers and directors. +(15) +Information based solely on a Schedule 13G/A filed with the SEC on February 13, 2015. The Schedule 13G/A reports that T. Rowe Price Associates, Inc. (“Price +Associates”) beneficially owns 5,343,273 shares, has sole voting power with respect to 1,084,249 shares and has sole dispositive power with respect to 5,343,273 shares. According to the Schedule 13G/A, these securities are owned by various +individual and institutional investors, for which Price Associates serves as an investment adviser registered under the Investment Advisers Act of 1940, as amended, with power to direct investments and/or sole power to vote the securities. For +purposes of the reporting requirements of the Securities Exchange Act of 1934, as amended, Price Associates is deemed to be a beneficial owner of such securities; however, Price Associates expressly disclaims that it is, in fact, the beneficial +owner of such securities. According to the Schedule 13G/A, Price Associates’ address is 100 E. Pratt Street, Baltimore, MD 21202. +70 +Table of Contents +ADDITIONAL INFORMATION +Section 16(a) Beneficial Ownership Reporting Compliance +Section 16(a) of the Exchange Act requires the Company’s executive officers, directors and persons who own more than ten percent +of the Company’s Common Stock to file initial reports of ownership and changes in ownership with the SEC. +Additionally, +SEC regulations require that the Company identify any individuals for whom one of the referenced reports was not filed on a timely basis during the most recent fiscal year. Based solely on the Company’s review of copies of the reports received +and written inquiries to the Company’s directors and officers, the Company believes that all persons subject to Section 16(a) of the Exchange Act timely filed all reports required pursuant to such section relating to the Company’s +Common Stock in 2014. +Shareholder Proposals for the 2016 Proxy Statement +For shareholder proposals to be included in the Company’s Proxy Statement and form of proxy relating to the 2016 Annual Meeting of +Shareholders, such proposals must be received by the Company at its offices in Dallas, Texas, addressed to the Corporate Secretary of the Company, no later than December 26, 2015. Upon timely receipt of any such proposal, the Company will +determine whether or not to include such proposal in the proxy statement and proxy in accordance with applicable regulations and provisions governing the solicitation of proxies. +Director Nominations or Other Business for Presentation at the 2016 Annual Meeting +Under the Amended and Restated Bylaws of the Company, certain procedures are provided that a shareholder must follow in order to place in nomination persons for election as directors at an Annual Meeting +of Shareholders or to introduce an item of business at an Annual Meeting of Shareholders. These procedures provide, generally, among other things, that shareholders desiring to place in nomination persons for election as directors, and/or bring a +proper subject of business before an Annual Meeting, must do so by a written notice timely received (on or before March 15, 2016, but no earlier than February 14, 2016, for the 2016 Annual Meeting) to the Corporate Secretary of the Company +containing the name and address of the shareholder and the number of shares of the Company’s Common Stock beneficially owned by the shareholder. If the notice relates to a nomination for director, it must also set forth the name, age, business +and residence addresses of the candidate, the candidate’s résumé or a listing of his or her qualifications to be a director of the Company, the person’s written consent to be a director if selected by the Nominating, +Compensation and Planning Committee, nominated by the Board and elected by the shareholders and any other information that would be required to be disclosed in solicitations of proxies for the election of directors. The Company may require any +proposed nominee to furnish such other information as may reasonably be required by the Company to determine the eligibility of such proposed nominee to serve as director. Notice of an item of business shall include a brief description of the +proposed business and any material interest of the shareholder in such business. +The Chairman of the meeting may refuse to +allow the transaction of any business not presented, or to acknowledge the nomination of any person not made, in compliance with the foregoing procedures. Copies of the Company’s Amended and Restated Bylaws are available from the Corporate +Secretary of the Company. +See “Corporate Governance—Board Committees—Nominating, Compensation and Planning +Committee” for the process for shareholders to follow to suggest a director candidate to the Nominating, Compensation and Planning Committee for nomination by the Board. +Annual Report on Form 10-K +The Company’s +Annual Report on Form 10-K for the fiscal year ended December 31, 2014, as filed with the SEC, including financial statements, accompanies this proxy statement. Shareholders may obtain without charge another copy of the Annual Report on Form +10-K, excluding certain exhibits, by writing to Investor Relations, Matador Resources Company, One Lincoln Centre, 5400 LBJ Freeway, Suite 1500, Dallas, Texas 75240. +71 +Table of Contents +OTHER BUSINESS +Management of the Company is not aware of other business to be presented for action at the Annual Meeting; however, if other matters are +presented for action, it is the intention of the persons named in the accompanying form of proxy to vote in accordance with their judgment on such matters. +By Order of the Board of Directors, +Joseph Wm. Foran +Chairman and Chief Executive Officer +April 29, 2015 +72 +Table of Contents +ANNEX A +MATADOR RESOURCES COMPANY +AMENDED AND RESTATED 2012 LONG-TERM INCENTIVE +PLAN +The Matador Resources Company Amended and Restated 2012 Long-Term Incentive Plan (the +“ Plan ”) was adopted by the Board of Directors of Matador Resources Company, a Texas corporation (the “ Company ”), on April 23, 2015 (the “ Board Approval Date ”), to be +effective as of the date the Plan is approved by the Company’s shareholders (the “ Effective Date ”). This Plan amends, restates and replaces the Matador Resources Company 2012 Long-Term Incentive Plan adopted on by the +Board on January 1, 2012 (and approved by the Company’s shareholders on June 7, 2012) in its entirety. +ARTICLE 1 +PURPOSE +The purpose of the Plan is to attract and retain the services of key Employees, key Contractors and Outside Directors and to provide such +persons with a proprietary interest in the Company through the granting of Incentive Stock Options, Nonqualified Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Awards, Dividend Equivalent Rights and +Other Awards, whether granted singly, or in combination, or in tandem, that will: +(a) increase the interest of +such persons in the Company’s welfare; +(b) furnish an incentive to such persons to continue their +services for the Company or its Subsidiaries; and +(c) provide a means through which the Company may attract +able persons as Employees, Contractors and Outside Directors. +With respect to Reporting Participants, the Plan and all +transactions under the Plan are intended to comply with all applicable conditions of Rule 16b-3 promulgated under the Exchange Act. To the extent any provision of the Plan or action by the Committee fails to so comply, such provision or action shall +be deemed null and void ab initio , to the extent permitted by law and deemed advisable by the Committee. +ARTICLE 2 +DEFINITIONS +For the purpose of the Plan, unless the context requires otherwise, the following terms shall have the meanings indicated: +2.1 “ Applicable Law ” means all legal requirements relating to the administration of equity incentive plans and the issuance and distribution of shares of Common Stock, if any, +under applicable corporate laws, applicable securities laws, the rules of any exchange or inter-dealer quotation system upon which the Company’s securities are listed or quoted, and any other applicable law, rule or restriction. +2.2 “ Award ” means the grant of any Incentive Stock Option, Nonqualified Stock Option, Restricted Stock, SAR, +Restricted Stock Unit, Performance Award, Dividend Equivalent Right or Other Award, whether granted singly or in combination or in tandem (each individually referred to herein as an “ Incentive ”). +A-1 +Table of Contents +2.3 “ Award Agreement ” means a written agreement between a +Participant and the Company which sets out the terms of the grant of an Award. +2.4 “ Award Period ” +means the period set forth in the Award Agreement during which one or more Incentives granted under an Award may be exercised. +2.5 “ Board ” means the Board of Directors of the Company. +2.6 “ Board Approval Date ” is defined above in the introductory paragraph of the Plan. +2.7 “ Change in Control ” occurs upon a change in the Company’s ownership, its effective control or the +ownership of a substantial portion of its assets, as follows: +(a) Change in Ownership . A change in +ownership of the Company occurs on the date that any “Person” (as defined in Section 2.7(d) below), other than (i) the Company or any of its Subsidiaries, (ii) a trustee or other fiduciary holding securities under an +employee benefit plan of the Company or any of its Affiliates, (iii) an underwriter temporarily holding stock pursuant to an offering of such stock or (iv) a corporation owned, directly or indirectly, by the shareholders of the Company in +substantially the same proportions as their ownership of the Company’s stock, acquires ownership of the Company’s stock that, together with stock held by such Person, constitutes more than 50% of the total fair market value or total voting +power of the Company’s stock. However, if any Person is considered to own already more than 50% of the total fair market value or total voting power of the Company’s stock, the acquisition of additional stock by the same Person is not +considered to be a Change of Control. In addition, if any Person has effective control of the Company through ownership of 30% or more of the total voting power of the Company’s stock, as discussed in paragraph (b) below, the acquisition +of additional control of the Company by the same Person is not considered to cause a Change in Control pursuant to this paragraph (a); or +(b) Change in Effective Control . Even though the Company may not have undergone a change in ownership under paragraph (a) above, a change in the effective control of the Company occurs on +either of the following dates: +(i) the date that any Person acquires (or has acquired during the 12-month +period ending on the date of the most recent acquisition by such Person) ownership of the Company’s stock possessing 30% or more of the total voting power of the Company’s stock. However, if any Person owns 30% or more of the total voting +power of the Company’s stock, the acquisition of additional control of the Company by the same Person is not considered to cause a Change in Control pursuant to this subparagraph (b)(i); or +(ii) the date during any 12-month period when a majority of members of the Board is replaced by directors whose +appointment or election is not endorsed by a majority of the Board before the date of the appointment or election; provided, however, that any such director shall not be considered to be endorsed by the Board if his or her initial assumption of +office occurs as a result of an actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or +(c) Change in Ownership of Substantial Portion of Assets . A change in the ownership of a substantial portion of the Company’s assets occurs on the date that a Person acquires (or has acquired +during the 12-month period ending on the date of the most recent acquisition by such Person) assets of the Company, that have a total gross fair market value equal to at least 40% of the total gross fair market value of all of the Company’s +assets immediately before such acquisition or acquisitions. However, there is no Change in Control when there is such a transfer to (i) a shareholder of the Company (immediately before the asset transfer) in exchange for or with respect to the +Company’s stock; (ii) an entity, at least 50% of the total value or voting power of the stock of which is owned, directly or indirectly, by the Company; (iii) a Person that owns directly or indirectly, at least 50% of the total value +or voting power of the Company’s outstanding stock; or (iv) an entity, at least 50% of the total value or voting power of the stock of which is owned by a Person that owns, directly or indirectly, at least 50% of the total value or voting +power of the Company’s outstanding stock. +A-2 +Table of Contents +(d) Definitions . For purposes of subparagraphs (a), (b) and +(c) above: +(i) “Person” shall have the meaning given in Section 7701(a)(1) of the Code. +Person shall include more than one Person acting as a group as defined by the Final Treasury Regulations issued under Section 409A of the Code. +(ii) “Affiliate” shall have the meaning set forth in Rule 12b-2 promulgated under Section 12 of the 1934 Act. +(e) Interpretation . The provisions of this Section 2.7 shall be interpreted in accordance with the +requirements of the Final Treasury Regulations under Section 409A of the Code, it being the intent of the parties that this Section 2.7 shall be in compliance with the requirements of said Code Section and said Regulations. +2.8 “ Claim ” means any claim, liability or obligation of any nature, arising out of or relating to +this Plan or an alleged breach of this Plan, or an Award Agreement. +2.9 “ Code ” means the United +States Internal Revenue Code of 1986, as amended, together with the published rulings, regulations and interpretations duly promulgated thereunder. +2.10 “ Committee ” is defined below in Section 3.1 . +2.11 “ Common Stock ” means the common stock, par value $0.01 per share, which the Company is currently authorized to issue or may in the future be authorized to issue, or any +securities into which or for which the common stock of the Company may be converted or exchanged, as the case may be, pursuant to the terms of this Plan. +2.12 “ Company ” means Matador Resources Company, a Texas corporation, and any successor entity. +2.13 “ Contractor ” means any person, who is not an Employee, rendering bona fide services to the Company or a Subsidiary, with compensation, provided that such services are +not rendered in connection with the offer or sale of securities in a capital raising transaction and do not directly or indirectly promote or maintain a market for the Company’s securities. +2.14 “ Corporation ” means any entity that (i) is defined as a corporation under Section 7701 of the Code +and (ii) is the Company or is in an unbroken chain of corporations (other than the Company) beginning with the Company, if each of the corporations other than the last corporation in the unbroken chain owns stock possessing a majority of the +total combined voting power of all classes of stock in one of the other corporations in the chain. For purposes of clause (ii) hereof, an entity shall be treated as a “corporation” if it satisfies the definition of a corporation under +Section 7701 of the Code. +2.15 “ Date of Grant ” means the effective date on which an Award is +made to a Participant as set forth in the applicable Award Agreement. +2.16 “ Dividend Equivalent +Right ” means the right of the holder thereof to receive credits based on the cash dividends that would have been paid on the shares of Common Stock specified in the Award if such shares were held by the Participant to whom the Award is +made. +2.17 “ Effective Date ” is defined above in the introductory paragraph of the Plan. +2.18 “ Employee ” means a common law employee (as defined in accordance with the Regulations and Revenue Rulings +then applicable under Section 3401(c) of the Code) of the Company or any Subsidiary of the Company. +A-3 +Table of Contents +2.19 “ Exchange Act ” means the United States Securities Exchange Act +of 1934, as amended. +2.20 “ Executive Officer ” means an officer of the Company or a Subsidiary subject +to Section 16 of the Exchange Act or a “covered employee” as defined in Section 162(m)(3) of the Code. +2.21 “ Exempt Shares ” means shares of Common Stock subject to an Award for which the Committee has accelerated +vesting in accordance with Section 7.2 . No more than ten percent (10%) of the shares of Common Stock that may be delivered pursuant to Awards may be shares designated as “Exempt Shares.” +2.22 “ Exercise Date ” is defined below in Section 8.3(b) . +2.23 “ Fair Market Value ” means, as of a particular date, (a) if the shares of Common Stock are listed on any +established national securities exchange, the closing sales price per share of Common Stock on the consolidated transaction reporting system for the principal securities exchange for the Common Stock on that date, or, if there shall have been no +such sale so reported on that date, on the last preceding date on which such a sale was so reported; (b) if the shares of Common Stock are not so listed, but are quoted on an automated quotation system, the closing sales price per share of +Common Stock reported on an automated quotation system on that date, or, if there shall have been no such sale so reported on that date, on the last preceding date on which such a sale was so reported; (c) if the Common Stock is not so listed +or quoted, the mean between the closing bid and asked price on that date, or, if there are no quotations available for such date, on the last preceding date on which such quotations shall be available, as reported by the OTC Bulletin Board operated +by the Financial Industry Regulation Authority, Inc. or the OTC Markets Group Inc., formerly known as Pink OTC Markets Inc.; or (d) if none of the above is applicable, such amount as may be determined by the Committee (acting on the advice of +an Independent Third Party, should the Committee elect in its sole discretion to utilize an Independent Third Party for this purpose), in good faith, to be the fair market value per share of Common Stock. The determination of Fair Market Value +shall, where applicable, be in compliance with Section 409A of the Code. +2.24 “ Full Value Award ” +means any Award with a net benefit to the Participant, without regard to any restrictions such as those described in Section 6.4(b) , equal to the aggregate Fair Market Value of the total shares of Common Stock subject to the Award. Full +Value Awards include Restricted Stock and Restricted Stock Units, but do not include Stock Options and SARs. +2.25 +“ Immediate Family Members ” is defined below in Section 15.7 . +2.26 +“ Incentive ” is defined below in Section 2.2 . +2.27 “ Incentive Stock +Option ” means an incentive stock option within the meaning of Section 422 of the Code, granted pursuant to this Plan. +2.28 “ Independent Third Party ” means an individual or entity independent of the Company having experience in providing investment banking or similar appraisal or valuation services +and with expertise generally in the valuation of securities or other property for purposes of this Plan. The Committee may utilize one or more Independent Third Parties. +2.29 “ Nonqualified Stock Option ” means a nonqualified stock option, granted pursuant to this Plan, which is not an Incentive Stock Option. +2.30 “ Option Price ” means the price which must be paid by a Participant upon exercise of a Stock Option to +purchase a share of Common Stock. +2.31 “ Other Award ” means an Award issued pursuant to +Section 6.9 hereof. +2.32 “ Outside Director ” means a director of the Company or Subsidiary +who is not an Employee or a Contractor. +A-4 +Table of Contents +2.33 “ Participant ” means an Employee, Contractor or Outside Director +to whom an Award is granted under this Plan. +2.34 “ Performance Award ” means an Award hereunder of +cash, shares of Common Stock, units or rights based upon, payable in, or otherwise related to, Common Stock pursuant to Section 6.7 hereof. +2.35 “ Performance Criteria ” is defined below in Section 6.10 . +2.36 “ Performance Goal ” means any of the goals set forth in Section 6.10 hereof. +2.37 “ Plan ” is defined above in the introductory paragraph of the Plan. +2.38 “ Reporting Participant ” means a Participant who is subject to the reporting requirements of Section 16 of the Exchange Act. +2.39 “ Restricted Stock ” means shares of Common Stock issued or transferred to a Participant pursuant to +Section 6.4 of this Plan which are subject to restrictions or limitations set forth in this Plan and in the related Award Agreement. +2.40 “ Restricted Stock Units ” means units awarded to Participants pursuant to Section 6.6 hereof, which are convertible into Common Stock at such time as such units are +no longer subject to restrictions as established by the Committee. +2.41 “ Restriction Period ” is +defined below in Section 6.4(b)(i) . +2.42 “ SAR ” or “ Stock Appreciation +Right ” means the right to receive an amount, in cash and/or Common Stock, equal to the excess of the Fair Market Value of a specified number of shares of Common Stock as of the date the SAR is exercised (or, as provided in the Award +Agreement, converted) over the SAR Price for such shares. +2.43 “ SAR Price ” means the exercise price +or conversion price of each share of Common Stock covered by a SAR, determined on the Date of Grant of the SAR. +2.44 +“ Spread ” is defined below in Section 12.4(b) . +2.45 “ Stock Option ” +means a Nonqualified Stock Option or an Incentive Stock Option. +2.46 “ Subsidiary ” means (i) any +Corporation in an unbroken chain of corporations beginning with the Company, if each of the corporations other than the last Corporation in the unbroken chain owns stock possessing a majority of the total combined voting power of all classes of +stock in one of the other Corporations in the chain, (ii) any limited partnership, if the Company or any corporation described in item (i) above owns a majority of the general partnership interest and a majority of the limited partnership +interests entitled to vote on the removal and replacement of the general partner and (iii) any partnership or limited liability company, if the partners or members thereof are composed only of the Company, any corporation listed in item +(i) above or any limited partnership listed in item (ii) above. “ Subsidiaries ” means more than one of any such Corporations, limited partnerships, partnerships or limited liability companies. +2.47 “ Tenure Award ” means an Award hereunder of cash, shares of Common Stock, units or rights based upon, payable +in, or otherwise related to, Common Stock that vests over time based upon the Participant’s continued employment with or service to the Company or its Subsidiaries. +A-5 +Table of Contents +2.48 “ Termination of Service ” occurs when a Participant who is +(i) an Employee of the Company or any Subsidiary ceases to serve as an Employee of the Company and its Subsidiaries, for any reason; (ii) an Outside Director of the Company or a Subsidiary ceases to serve as a director of the Company and +its Subsidiaries for any reason; or (iii) a Contractor of the Company or a Subsidiary ceases to serve as a Contractor of the Company and its Subsidiaries for any reason. Except as may be necessary or desirable to comply with applicable federal +or state law, a “Termination of Service” shall not be deemed to have occurred when a Participant who is an Employee becomes an Outside Director or Contractor or vice versa. If, however, a Participant who is an Employee and who has an +Incentive Stock Option ceases to be an Employee but does not suffer a Termination of Service, and if that Participant does not exercise the Incentive Stock Option within the time required under Section 422 of the Code upon ceasing to be an +Employee, the Incentive Stock Option shall thereafter become a Nonqualified Stock Option. Notwithstanding the foregoing provisions of this Section 2.48 , in the event an Award issued under the Plan is subject to Section 409A of the +Code, then, in lieu of the foregoing definition and to the extent necessary to comply with the requirements of Section 409A of the Code, the definition of “Termination of Service” for purposes of such Award shall be the definition of +“separation from service” provided for under Section 409A of the Code and the regulations or other guidance issued thereunder. +2.49 “ Total and Permanent Disability ” means a Participant is qualified for long-term disability benefits under the Company’s or Subsidiary’s disability plan or insurance +policy; or, if no such plan or policy is then in existence or if the Participant is not eligible to participate in such plan or policy, that the Participant, because of a physical or mental condition resulting from bodily injury, disease or mental +disorder, is unable to perform his or her duties of employment for a period of six (6) continuous months, as determined in good faith by the Committee, based upon medical reports or other evidence satisfactory to the Committee; provided +that , with respect to any Incentive Stock Option, Total and Permanent Disability shall have the meaning given it under the rules governing Incentive Stock Options under the Code. Notwithstanding the foregoing provisions of this +Section 2.49 , in the event an Award issued under the Plan is subject to Section 409A of the Code, then, in lieu of the foregoing definition and to the extent necessary to comply with the requirements of Section 409A of the +Code, the definition of “Total and Permanent Disability” for purposes of such Award shall be the definition of “disability” provided for under Section 409A of the Code and the regulations or other guidance issued thereunder. +ARTICLE 3 +ADMINISTRATION +3.1 General Administration; Establishment of +Committee . Subject to the terms of this Article 3 , the Plan shall be administered by the Board or such committee of the Board as is designated by the Board to administer the Plan (the “ Committee ”). The +Committee shall consist of not fewer than two persons. Any member of the Committee may be removed at any time, with or without cause, by resolution of the Board. Any vacancy occurring in the membership of the Committee may be filled by appointment +by the Board. At any time there is no Committee to administer the Plan, any references in this Plan to the Committee shall be deemed to refer to the Board. +Membership on the Committee shall be limited to those members of the Board who are “outside directors” under Section 162(m) of the Code and “non-employee directors” as defined in +Rule 16b-3 promulgated under the 1934 Act. The Committee shall select one of its members to act as its Chairman. A majority of the Committee shall constitute a quorum, and the act of a majority of the members of the Committee present at a meeting at +which a quorum is present shall be the act of the Committee. +3.2 Designation of Participants and Awards. +(a) The Committee or the Board shall determine and designate from time to time the eligible persons to whom Awards will +be granted and shall set forth in each related Award Agreement, where applicable, the +A-6 +Table of Contents +Award Period, the Date of Grant and such other terms, provisions, limitations and performance requirements, as are approved by the Committee, but not inconsistent with the Plan. The Committee +shall determine whether an Award shall include one type of Incentive or two or more Incentives granted in combination or two or more Incentives granted in tandem (that is, a joint grant where exercise of one Incentive results in cancellation of all +or a portion of the other Incentive). Although the members of the Committee shall be eligible to receive Awards, all decisions with respect to any Award, and the terms and conditions thereof, to be granted under the Plan to any member of the +Committee shall be made solely and exclusively by the other members of the Committee, or if such member is the only member of the Committee, by the Board. +(b) Notwithstanding Section 3.2(a) , to the extent permitted by Applicable Law, the Board may, in its discretion and by a resolution adopted by the Board, authorize one or more officers of the +Company to (i) designate one or more Employees as eligible persons to whom Awards will be granted under the Plan and (ii) determine the number of shares of Common Stock that will be subject to such Awards; provided, however, that the +resolution of the Board granting such authority shall (x) specify the total number of shares of Common Stock that may be made subject to the Awards, (y) set forth the price or prices (or a formula by which such price or prices may be +determined) to be paid for the purchase of the Common Stock subject to such Awards and (z) not authorize an officer to designate himself as a recipient of any Award. +3.3 Authority of the Committee . The Committee, in its discretion, shall (i) interpret the Plan, (ii) prescribe, amend and rescind any rules and regulations necessary or appropriate for +the administration of the Plan, (iii) establish performance goals for an Award and certify the extent of their achievement and (iv) make such other determinations or certifications and take such other action as it deems necessary or +advisable in the administration of the Plan. Any interpretation, determination, or other action made or taken by the Committee shall be final, binding and conclusive on all interested parties. The Committee’s discretion set forth herein shall +not be limited by any provision of the Plan, including any provision which by its terms is applicable notwithstanding any other provision of the Plan to the contrary. +The Committee may delegate to officers of the Company, pursuant to a written delegation, the authority to perform specified functions under the Plan. Any actions taken by any officers of the Company +pursuant to such written delegation of authority shall be deemed to have been taken by the Committee. +With respect to +restrictions in the Plan that are based on the requirements of Rule 16b-3 promulgated under the 1934 Act, Section 422 of the Code, Section 162(m) of the Code, the rules of any exchange or +inter-dealer quotation system upon which the Company’s securities are listed or quoted or any other Applicable Law, to the extent that any such restrictions are no longer required by Applicable Law, the Committee shall have the sole discretion +and authority to grant Awards that are not subject to such mandated restrictions and/or to waive any such mandated restrictions with respect to outstanding Awards. +ARTICLE 4 +ELIGIBILITY +Any Employee (including an Employee who is also a director or an officer), Contractor or Outside Director whose judgment, initiative and +efforts contributed or may be expected to contribute to the successful performance of the Company is eligible to participate in the Plan; provided that only Employees of a Corporation shall be eligible to receive Incentive Stock Options. The +Committee, upon its own action, may grant, but shall not be required to grant, an Award to any Employee, Contractor or Outside Director. Awards may be granted by the Committee at any time and from time to time to new Participants, or to then +Participants, or to a greater or lesser number of Participants, and may include or exclude previous Participants, as the Committee shall determine. Except as required by this Plan, Awards need not contain similar provisions. The Committee’s +determinations under the Plan (including without limitation determinations of which Employees, Contractors or Outside +A-7 +Table of Contents +Directors, if any, are to receive Awards, the form, amount and timing of such Awards, the terms and provisions of such Awards and the agreements evidencing same) need not be uniform and may be +made by it selectively among Participants who receive, or are eligible to receive, Awards under the Plan. +ARTICLE 5 +SHARES SUBJECT TO PLAN +5.1 Number Available for Awards . Subject to adjustment as provided in Articles 11 and 12 , the maximum number of shares of Common Stock that may be delivered pursuant to Awards granted under +the Plan is 8,700,000 shares, of which 100% may be delivered pursuant to Incentive Stock Options. Subject to adjustment pursuant to Articles 11 and 12 , the maximum number of shares of Common Stock with respect to which Stock Options or SARs +may be granted to an Executive Officer during any calendar year is 500,000 shares of Common Stock. Shares to be issued may be made available from authorized but unissued Common Stock, Common Stock held by the Company in its treasury or Common Stock +purchased by the Company on the open market or otherwise. During the term of this Plan, the Company will at all times reserve and keep available the number of shares of Common Stock that shall be sufficient to satisfy the requirements of this Plan. +5.2 Restoration and Retention of Shares (“Share Counting”). If any shares of Common Stock subject to an +Award shall not be issued or transferred to a Participant and shall cease to be issuable or transferable to a Participant because of the forfeiture, termination, expiration or cancellation, in whole or in part, of such Award or for any other reason, +the shares not so issued or transferred, or the shares so reacquired by the Company, as the case may be, shall no longer be charged against the limitation provided for in Section 5.1 and may be used thereafter for additional Awards under +the Plan. The following additional parameters shall apply: +(a) To the extent an Award under the Plan is +settled or paid in cash, shares subject to such Award will not be considered to have been issued and will not be applied against the maximum number of shares of Common Stock provided for in Section 5.1 . +(b) If an Award may be settled in shares of Common Stock or cash, such shares shall be deemed issued only when and to the +extent that settlement or payment is actually made in shares of Common Stock. To the extent an Award is settled or paid in cash, and not shares of Common Stock, any shares previously reserved for issuance or transfer pursuant to such Award will +again be deemed available for issuance or transfer under the Plan, and the maximum number of shares of Common Stock that may be issued or transferred under the Plan shall be reduced only by the number of shares actually issued and transferred to the +Participant. +(c) Notwithstanding the foregoing, (i) shares withheld or tendered to pay withholding taxes +or the exercise price of an Award shall not again be available for the grant of Awards under the Plan and (ii) the full number of shares subject to a Stock Option or SAR granted that are settled by the issuance of shares shall be counted +against the shares authorized for issuance under this Plan, regardless of the number of shares actually issued upon the settlement of such Stock Option or SAR. +(d) Any shares repurchased by the Company on the open market using the proceeds from the exercise of an Award shall not increase the number of shares available for the future grant of Awards. +ARTICLE 6 +GRANT OF AWARDS +6.1 +In General. +(a) The grant of an Award shall be authorized by the Committee and shall be evidenced by an Award Agreement setting forth the Incentive or Incentives being granted, the total number of shares of Common +Stock subject to the Incentive(s), the Option Price (if applicable), the Award Period, the Date of Grant and +A-8 +Table of Contents +such other terms, provisions, limitations and performance objectives, as are approved by the Committee, but (i) not inconsistent with the Plan, (ii) to the extent an Award issued under +the Plan is subject to Section 409A of the Code, in compliance with the applicable requirements of Section 409A of the Code and the regulations or other guidance issued thereunder and (iii) to the extent the Committee determines that +an Award shall comply with the requirements of Section 162(m) of the Code, in compliance with the applicable requirements of Section 162(m) of the Code and the regulations and other guidance issued thereunder. The Company shall execute an +Award Agreement with a Participant after the Committee approves the issuance of an Award. Any Award granted pursuant to this Plan must be granted within ten (10) years of the Board Approval Date. The Plan shall be submitted to the +Company’s shareholders for approval at the first shareholder meeting after the Board Approval Date and no Awards may be granted under the Plan prior to the Effective Date. The grant of an Award to a Participant shall not be deemed either to +entitle the Participant to, or to disqualify the Participant from, receipt of any other Award under the Plan. +(b) If the Committee establishes a purchase price for an Award, the Participant must accept such Award within a period of +thirty (30) days (or such shorter period as the Committee may specify) after the Date of Grant by executing the applicable Award Agreement and paying such purchase price. +(c) Any Award under this Plan that is settled in whole or in part in cash on a deferred basis may provide for interest +equivalents to be credited with respect to such cash payment. Interest equivalents may be compounded and shall be paid upon such terms and conditions as may be specified by the grant. +6.2 Option Price . The Option Price for any share of Common Stock which may be purchased under a Nonqualified Stock Option for any +share of Common Stock must be equal to or greater than the Fair Market Value of the share on the Date of Grant. The Option Price for any share of Common Stock which may be purchased under an Incentive Stock Option must be at least equal to the Fair +Market Value of the share on the Date of Grant; if an Incentive Stock Option is granted to an Employee who owns or is deemed to own (by reason of the attribution rules of Section 424(d) of the Code) more than ten percent (10%) of the +combined voting power of all classes of stock of the Company (or any parent or Subsidiary), the Option Price shall be at least one hundred ten percent (110%) of the Fair Market Value of the Common Stock on the Date of Grant. +6.3 Maximum ISO Grants . The Committee may not grant Incentive Stock Options under the Plan to any Employee which would permit the +aggregate Fair Market Value (determined on the Date of Grant) of the Common Stock with respect to which Incentive Stock Options (under this and any other plan of the Company and its Subsidiaries) are exercisable for the first time by such Employee +during any calendar year to exceed $100,000. To the extent any Stock Option granted under this Plan which is designated as an Incentive Stock Option exceeds this limit or otherwise fails to qualify as an Incentive Stock Option, such Stock Option (or +any such portion thereof) shall be a Nonqualified Stock Option. In such case, the Committee shall designate which stock will be treated as Incentive Stock Option stock by causing the issuance of a separate stock certificate and identifying such +stock as Incentive Stock Option stock on the Company’s stock transfer records. +6.4 Restricted Stock . If +Restricted Stock is granted to or received by a Participant under an Award (including a Stock Option), the Committee shall set forth in the related Award Agreement: (i) the number of shares of Common Stock awarded, (ii) the price, if any, +to be paid by the Participant for such Restricted Stock and the method of payment of the price, (iii) the time or times within which such Award may be subject to forfeiture, (iv) specified Performance Goals of the Company, a Subsidiary, +any division thereof or any group of Employees of the Company, or other criteria, which the Committee determines must be met in order to remove any restrictions (including vesting) on such Award and (v) all other terms, limitations, +restrictions and conditions of the Restricted Stock, which shall be consistent with this Plan, to the extent applicable and in the event the Committee determines that an Award shall comply with the requirements of Section 162(m) of the Code, in +compliance with the requirements of Section 162(m) of the Code and the regulations and other guidance issued thereunder and, to the extent Restricted Stock granted under the Plan is subject to Section 409A of the Code, in compliance with +the applicable requirements of Section 409A of the Code and the regulations or other guidance issued thereunder. The provisions of Restricted Stock need not be the same with respect to each Participant. +A-9 +Table of Contents +(a) Legend on Shares . The Company shall electronically register the +Restricted Stock awarded to a Participant in the name of such Participant, which shall bear an appropriate legend referring to the terms, conditions and restrictions applicable to such Restricted Stock, substantially as provided in +Section 15.9 of the Plan. No stock certificate or certificates shall be issued with respect to such shares of Common Stock, unless, following the expiration of the Restriction Period (as defined in Section 6.4(b)(i) ) without +forfeiture in respect of such shares of Common Stock, the Participant requests delivery of the certificate or certificates by submitting a written request to the Committee (or such party designated by the Company) requesting delivery of the +certificates. The Company shall deliver the certificates requested by the Participant to the Participant as soon as administratively practicable following the Company’s receipt of such request. +(b) Restrictions and Conditions . Shares of Restricted Stock shall be subject to the following restrictions and +conditions: +(i) Subject to the other provisions of this Plan and the terms of the particular Award Agreements, +during such period as may be determined by the Committee commencing on the Date of Grant or the date of exercise of an Award (the “ Restriction Period ”), the Participant shall not be permitted to sell, transfer, pledge or +assign shares of Restricted Stock. Except for these limitations and the limitations set forth in Section 7.2 below, the Committee may in its sole discretion, remove any or all of the restrictions on such Restricted Stock whenever it may +determine that, by reason of changes in Applicable Laws or other changes in circumstances arising after the date of the Award, such action is appropriate. +(ii) Except as provided in sub-paragraph (i) above or in the applicable Award Agreement, the Participant shall have, with respect to the Participant’s Restricted Stock, all of the rights of a +shareholder of the Company, including the right to vote the shares, and the right to receive any dividends thereon; provided, however, that the Participant shall not have the right to receive dividends on any Restricted Stock Award based on +Performance Goals until the restriction lapses. Certificates for shares of Common Stock free of restriction under this Plan shall be delivered to the Participant promptly after, and only after, the Restriction Period shall expire without forfeiture +in respect of such shares of Common Stock or after any other restrictions imposed on such shares of Common Stock by the applicable Award Agreement or other agreement have expired. Certificates for the shares of Common Stock forfeited under the +provisions of the Plan and the applicable Award Agreement shall be promptly returned to the Company by the forfeiting Participant. Each Award Agreement shall require that each Participant, in connection with the issuance of a certificate for +Restricted Stock, shall endorse such certificate in blank or execute a stock power in form satisfactory to the Company in blank and deliver such certificate and executed stock power to the Company. +(iii) The Restriction Period of Restricted Stock shall commence on the Date of Grant or the date of exercise of an Award, +as specified in the Award Agreement, and, subject to Article 12 of the Plan, unless otherwise established by the Committee in the Award Agreement setting forth the terms of the Restricted Stock, shall expire upon satisfaction of the +conditions set forth in the Award Agreement; such conditions may provide for vesting based on such Performance Goals as may be determined by the Committee in its sole discretion. +(iv) Except as otherwise provided in the particular Award Agreement, upon Termination of Service for any reason during the +Restriction Period, the nonvested shares of Restricted Stock shall be forfeited by the Participant. In the event a Participant has paid any consideration to the Company for such forfeited Restricted Stock, the Committee shall specify in the Award +Agreement that either (i) the Company shall be obligated to, or (ii) the Company may, in its sole discretion, elect to, pay to the Participant, as soon as practicable after the event causing forfeiture, in cash, an amount equal to the +lesser of the total consideration paid by the Participant for such forfeited shares or the Fair Market Value of such forfeited shares as of the date of Termination of Service, as the Committee, in its sole discretion shall select. Upon any +forfeiture, all rights of a Participant with respect to the forfeited shares of the Restricted Stock shall cease and terminate, without any further obligation on the part of the Company. +A-10 +Table of Contents +6.5 SARs . The Committee may grant SARs to any Participant, either as a separate Award +or in connection with a Stock Option. SARs shall be subject to such terms and conditions as the Committee shall impose, provided that such terms and conditions are (i) not inconsistent with the Plan, (ii) to the extent a SAR issued under +the Plan is subject to Section 409A of the Code, in compliance with the applicable requirements of Section 409A of the Code and the regulations or other guidance issued thereunder and (iii) to the extent the Committee determines that +a SAR shall comply with the requirements of Section 162(m) of the Code, in compliance with the applicable requirements of Section 162(m) of the Code and the regulations and other guidance issued thereunder. The grant of the SAR may provide +that the holder may be paid for the value of the SAR either in cash or in shares of Common Stock, or a combination thereof. In the event of the exercise of a SAR payable in shares of Common Stock, the holder of the SAR shall receive that number of +whole shares of Common Stock having an aggregate Fair Market Value on the date of exercise equal to the value obtained by multiplying (i) the difference between the Fair Market Value of a share of Common Stock on the date of exercise over the +SAR Price as set forth in such SAR (or other value specified in the agreement granting the SAR), by (ii) the number of shares of Common Stock as to which the SAR is exercised, with a cash settlement to be made for any fractional shares of +Common Stock. The SAR Price for any share of Common Stock subject to a SAR may be equal to or greater than the Fair Market Value of the share on the Date of Grant. The Committee, in its sole discretion, may place a ceiling on the amount payable upon +exercise of a SAR, but any such limitation shall be specified at the time that the SAR is granted. +6.6 Restricted Stock +Units. Restricted Stock Units may be awarded or sold to any Participant under such terms and conditions as shall be established by the Committee, provided, however, that such terms and conditions are (i) not inconsistent with the Plan, +(ii) to the extent a Restricted Stock Unit issued under the Plan is subject to Section 409A of the Code, in compliance with the applicable requirements of Section 409A of the Code and the regulations or other guidance issued +thereunder and (iii) to the extent the Committee determines that a Restricted Stock Unit award shall comply with the requirements of Section 162(m) of the Code, in compliance with the applicable requirements of Section 162(m) of the +Code and the regulations and other guidance issued thereunder. The grant of a Restricted Stock Unit may provide that the holder may be paid for the value of the Restricted Stock Unit either in cash or in shares of Common Stock, or a combination +thereof. Restricted Stock Units shall be subject to such restrictions as the Committee determines, including, without limitation, (a) a prohibition against sale, assignment, transfer, pledge, hypothecation or other encumbrance for a specified +period; or (b) a requirement that the holder forfeit (or in the case of shares of Common Stock or units sold to the Participant, resell to the Company at cost) such shares or units in the event of Termination of Service during the period of +restriction. +6.7 Performance Awards. +(a) The Committee may grant Performance Awards to one or more Participants. The terms and conditions of Performance +Awards shall be specified at the time of the grant and may include provisions establishing the performance period, the Performance Goals to be achieved during a performance period and the maximum or minimum settlement values, provided that such +terms and conditions are (i) not inconsistent with the Plan and (ii) to the extent a Performance Award issued under the Plan is subject to Section 409A of the Code, in compliance with the applicable requirements of Section 409A +of the Code and the regulations or other guidance issued thereunder. If the Performance Award is to be in shares of Common Stock, the Performance Awards may provide for the issuance of the shares of Common Stock at the time of the grant of the +Performance Award or at the time of the certification by the Committee that the Performance Goals for the performance period have been met; provided , however , if shares of Common Stock are issued at the time of the grant of the +Performance Award and if, at the end of the performance period, the Performance Goals are not certified by the Committee to have been fully satisfied, then, notwithstanding any other provisions of this Plan to the contrary, the Common Stock shall be +forfeited in accordance with the terms of the grant to the extent the Committee determines that the Performance Goals were not met. The forfeiture of shares of Common Stock issued at the time of the grant of the Performance Award due to failure to +achieve the established Performance Goals shall be separate from and in addition to +A-11 +Table of Contents +any other restrictions provided for in this Plan that may be applicable to such shares of Common Stock. Each Performance Award granted to one or more Participants shall have its own terms and +conditions. +To the extent the Committee determines that a Performance Award shall comply with the requirements +of Section 162(m) of the Code and the regulations and other guidance issued thereunder, and if it is determined to be necessary in order to satisfy Section 162(m) of the Code, at the time of the grant of a Performance Award (other than a +Stock Option) and to the extent permitted under Section 162(m) of the Code and the regulations issued thereunder, the Committee shall provide for the manner in which the Performance Goals shall be reduced to take into account the negative +effect on the achievement of specified levels of the Performance Goals which may result from enumerated corporate transactions, extraordinary events, accounting changes and other similar occurrences which were unanticipated at the time the +Performance Goal was initially established. In no event, however, may the Committee increase the amount earned under such a Performance Award, unless the reduction in the Performance Goals would reduce or eliminate the amount to be earned under the +Performance Award and the Committee determines not to make such reduction or elimination. +With respect to a +Performance Award that is not intended to satisfy the requirements of Section 162(m) of the Code, if the Committee determines, in its sole discretion, that the established performance measures or objectives are no longer suitable because of a +change in the Company’s business, operations, corporate structure or for other reasons that the Committee deemed satisfactory, the Committee may modify the performance measures or objectives and/or the performance period. +(b) Performance Awards may be valued by reference to the Fair Market Value of a share of Common Stock or according to any +formula or method deemed appropriate by the Committee, in its sole discretion, including, but not limited to, achievement of Performance Goals or other specific financial, production, sales or cost performance objectives that the Committee believes +to be relevant to the Company’s business and/or remaining in the employ of the Company or a Subsidiary for a specified period of time. Performance Awards may be paid in cash, shares of Common Stock, or other consideration, or any combination +thereof. If payable in shares of Common Stock, the consideration for the issuance of such shares may be the achievement of the performance objective established at the time of the grant of the Performance Award. Performance Awards may be payable in +a single payment or in installments and may be payable at a specified date or dates or upon attaining the performance objective. The extent to which any applicable performance objective has been achieved shall be conclusively determined by the +Committee. +(c) Notwithstanding the foregoing, in order to comply with the requirements of Section 162(m) +of the Code, if applicable, no Participant may receive in any calendar year Performance Awards intended to comply with the requirements of Section 162(m) of the Code which have an aggregate value of more than $10,000,000, and if such +Performance Awards involve the issuance of shares of Common Stock, said aggregate value shall be based on the Fair Market Value of such shares on the time of the grant of the Performance Award. In no event, however, shall any Performance Awards not +intended to comply with the requirements of Section 162(m) of the Code be issued contingent upon the failure to attain the Performance Goals applicable to any Performance Awards granted hereunder that the Committee intends to comply with the +requirements of Section 162(m) of the Code. +6.8 Dividend Equivalent Rights . The Committee may grant a Dividend +Equivalent Right to any Participant, either as a component of another Award or as a separate Award. The terms and conditions of the Dividend Equivalent Right shall be specified by the grant. Dividend equivalents credited to the holder of a Dividend +Equivalent Right may be paid currently or may be deemed to be reinvested in additional shares of Common Stock (which may thereafter accrue additional dividend equivalents). Any such reinvestment shall be at the Fair Market Value at the time thereof. +Dividend Equivalent Rights may be settled in cash or shares of Common Stock, or a combination thereof, in a single payment or in installments. A Dividend Equivalent Right granted as a component of another Award may provide that such Dividend +Equivalent Right shall be settled upon exercise, settlement, or payment of, or lapse of restrictions on, such other Award, and that such Dividend Equivalent Right granted as a component of another Award may also contain terms and conditions +different from such other Award. +A-12 +Table of Contents +6.9 Other Awards . The Committee may grant to any Participant other forms of Awards, +based upon, payable in, or otherwise related to, in whole or in part, shares of Common Stock, if the Committee determines that such other form of Award is consistent with the purpose and restrictions of this Plan. The terms and conditions of such +other form of Award shall be specified by the grant. Such Other Awards may be granted for no cash consideration, for such minimum consideration as may be required by Applicable Law, or for such other consideration as may be specified by the grant. +6.10 Performance Goals . Awards of Restricted Stock, Restricted Stock Units, Performance Awards and Other Awards +(whether relating to cash or shares of Common Stock) under the Plan may be made subject to the attainment of Performance Goals relating to one or more business criteria, which, where applicable, shall be within the meaning of Section 162(m) of +the Code and consist of one or more or any combination of the following criteria: earnings (either in the aggregate or on a per-share basis); net income; operating income; operating profit; cash flow; shareholder returns, including returns on +assets, investment, invested capital and equity (and including income applicable to common shareholders or other class of shareholders); return measures (including return on assets, equity, or invested capital); total shareholder return (change in +share price plus reinvestment of dividends into shares when declared, if any, from period to period); earnings before or after either, or any combination of, interest, taxes, depletion, depreciation, amortization or other non-cash items (EBITDA); +adjusted EBITDA (as defined by the Committee); gross revenues; reduction in expense levels in each case, where applicable, determined either on a Company-wide basis or in respect to any one or more Subsidiaries or business units thereof; economic +value or economic value added™; market share or market share added; annual net income to Common Stock; earnings per share or growth in earnings per share; annual cash flow provided by operations; changes in annual revenues; strategic and +operational business criteria, consisting of one or more objectives based on specified revenue, market penetration, geographic business expansion goals, objectively identified project milestones, production volume levels, cost targets, lease +operating expenses, G&A expenses, finding and development costs, reserves or reserves added, reserve replacement ratio and goals relating to acquisitions or divestures; or goals relating to specific environmental compliance measures and safety +and accident rates (“ Performance Criteria ”). +For the Performance Criteria listed above, the Committee +may designate whether a particular Performance Criteria is to be measured on a pre-tax basis or post-tax basis. In addition, certain Performance Criteria may be stated in reference to a production volume of measurement such as in per cubic feet +equivalents or barrels of oil equivalents (e.g., per Mcfe, MMcfe, Bcfe, BOE, MBOE or MMBOE), including such production volume on a daily basis. Any Performance Criteria may be used to measure the performance of the Company as a whole or any business +unit of the Company and may be measured relative to a peer group or index. Any Performance Criteria may include or exclude (i) extraordinary, unusual and/or non-recurring items of gain or loss, (ii) gains or losses on the disposition of a +business, (iii) changes in tax or accounting regulations or laws, (iv) the effect of a merger or acquisition, as identified in the Company’s quarterly and annual earnings releases or (v) other similar occurrences. In all other +respects, Performance Criteria shall be calculated in accordance with the Company’s financial statements, under generally accepted accounting principles or under a methodology established by the Committee prior to the issuance of an Award which +is consistently applied and identified in the audited financial statements, including footnotes, or the Compensation Discussion and Analysis section of the Company’s annual report. However, to the extent Section 162(m) of the Code is +applicable, the Committee may not in any event increase the amount of compensation payable to an individual upon the attainment of a Performance Goal. +6.11 Tandem Awards . The Committee may grant two or more Incentives in one Award in the form of a “tandem Award,” so that the right of the Participant to exercise one Incentive shall be +canceled if, and to the extent, the other Incentive is exercised. For example, if a Stock Option and a SAR are issued in a tandem Award, and the Participant exercises the SAR with respect to one hundred (100) shares of Common Stock, the right +of the Participant to exercise the related Stock Option shall be canceled to the extent of one hundred (100) shares of Common Stock. +6.12 No Repricing of Stock Options or SARs . The Committee may not “reprice” any Stock Option or SAR. For purposes of this Section 6.12 , “reprice” means any of the +following or any other action that has the +A-13 +Table of Contents +same effect: (i) amending a Stock Option or SAR to reduce its exercise price or base price, (ii) canceling a Stock Option or SAR at a time when its exercise price or base price exceeds +the Fair Market Value of a share of Common Stock in exchange for cash or a Stock Option, SAR, award of Restricted Stock or other equity award or (iii) taking any other action that is treated as a repricing under generally accepted accounting +principles, provided that nothing in this Section 6.12 shall prevent the Committee from making adjustments pursuant to Article 11 , from exchanging or cancelling Incentives pursuant to Article 12 or substituting Incentives +in accordance with Article 14 . +6.13 Recoupment for Restatements . Notwithstanding any other language in this +Plan to the contrary, the Company may recoup all or any portion of any shares or cash paid to a Participant in connection with an Award, in the event of a restatement of the Company’s financial statements as set forth in the Company’s +clawback policy, if any, approved by the Company’s Board from time to time. +ARTICLE 7 +AWARD PERIOD; VESTING +7.1 Award Period . Subject to the other provisions of this Plan, the Committee may, in its discretion, provide that an Incentive may not be exercised in whole or in part for any period or periods of +time or beyond any date specified in the Award Agreement. Except as provided in the Award Agreement, an Incentive may be exercised in whole or in part at any time during its term. The Award Period for an Incentive shall be reduced or terminated upon +Termination of Service. No Incentive granted under the Plan may be exercised at any time after the end of its Award Period. No portion of any Incentive may be exercised after the expiration of ten (10) years from its Date of Grant. However, if +an Employee owns or is deemed to own (by reason of the attribution rules of Section 424(d) of the Code) more than ten percent (10%) of the combined voting power of all classes of stock of the Company (or any parent or Subsidiary) and an +Incentive Stock Option is granted to such Employee, the term of such Incentive Stock Option (to the extent required by the Code at the time of grant) shall be no more than five (5) years from the Date of Grant. +7.2 Vesting. The Committee, in its sole discretion, shall establish the vesting terms applicable to an Incentive, including +whether all or any portion will not be vested until a date or dates subsequent to its Date of Grant, or until the occurrence of one or more specified events, provided that any such vesting terms shall not be inconsistent with the terms of the Plan, +including, without limitation, this Section 7.2 . If the Committee imposes conditions upon vesting, then subsequent to the Date of Grant, the Committee may, in its sole discretion, accelerate the date on which all or a portion of the +Incentive may be vested, provided that any such acceleration must comply with the terms of the Plan, including, without, limitation, this Section 7.2 . Except as otherwise provided herein, the Committee must grant all Full Value Awards in +accordance with the following provisions: (i) all Full Value Awards that are Performance Awards must vest no earlier than one (1) year after the Date of Grant; (ii) all Full Value Awards granted by the Committee that constitute Tenure +Awards must vest no earlier than on a pro rata basis over the three (3) year period commencing on the Date of Grant and (iii) the Committee may not accelerate the date on which all or any portion of a Full Value Award may be vested or +waive the Restriction Period on a Full Value Award except (A) upon the Participant’s death or Total and Permanent Disability; (B) upon a Change in Control or (C) upon a Termination of Service on or following a Change in Control. +Notwithstanding the foregoing, the Committee may, in its sole discretion, grant Awards with more favorable vesting provisions than set forth in this Section 7.2 , provided that the shares of Common Stock subject to such Awards shall be +Exempt Shares. +ARTICLE 8 +EXERCISE OR CONVERSION OF INCENTIVE +8.1 In General . A vested +Incentive may be exercised or converted, during its Award Period, subject to limitations and restrictions set forth in the Award Agreement. +A-14 +Table of Contents +8.2 Securities Law and Exchange Restrictions . In no event may an Incentive be +exercised or shares of Common Stock be issued pursuant to an Award if a necessary listing or quotation of the shares of Common Stock on a stock exchange or inter- dealer quotation system or any registration under state or federal securities laws +required under the circumstances has not been accomplished. +8.3 Exercise of Stock Option. +(a) In General. If a Stock Option is exercisable prior to the time it is vested, the Common Stock obtained on the +exercise of the Stock Option shall be Restricted Stock which is subject to the applicable provisions of the Plan and the Award Agreement. If the Committee imposes conditions upon exercise, then subsequent to the Date of Grant, the Committee may, in +its sole discretion, accelerate the date on which all or any portion of the Stock Option may be exercised. No Stock Option may be exercised for a fractional share of Common Stock. The granting of a Stock Option shall impose no obligation upon the +Participant to exercise that Stock Option. +(b) Notice and Payment. Subject to such administrative +regulations as the Committee may from time to time adopt, a Stock Option may be exercised by the delivery of written notice to the Committee setting forth the number of shares of Common Stock with respect to which the Stock Option is to be exercised +and the date of exercise thereof (the “ Exercise Date ”) which shall be at least three (3) days after giving such notice unless an earlier time shall have been mutually agreed upon. On the Exercise Date, the Participant +shall deliver to the Company consideration with a value equal to the total Option Price of the shares to be purchased, payable as provided in the Award Agreement, which may provide for payment in any one or more of the following ways: (a) cash +or check, bank draft or money order payable to the order of the Company, (b) Common Stock (including Restricted Stock) owned by the Participant on the Exercise Date, valued at its Fair Market Value on the Exercise Date, and which the +Participant has not acquired from the Company within six (6) months prior to the Exercise Date, (c) by delivery (including by FAX) to the Company or its designated agent of an executed irrevocable option exercise form together with +irrevocable instructions from the Participant to a broker or dealer, reasonably acceptable to the Company, to sell certain of the shares of Common Stock purchased upon exercise of the Stock Option or to pledge such shares as collateral for a loan +and promptly deliver to the Company the amount of sale or loan proceeds necessary to pay such purchase price and/or (d) in any other form of valid consideration that is acceptable to the Committee in its sole discretion. In the event that +shares of Restricted Stock are tendered as consideration for the exercise of a Stock Option, a number of shares of Common Stock issued upon the exercise of the Stock Option equal to the number of shares of Restricted Stock used as consideration +therefor shall be subject to the same restrictions and provisions as the Restricted Stock so tendered. +Except +as otherwise provided in Section 6.4 hereof (with respect to shares of Restricted Stock) or in the applicable Award Agreement, upon payment of all amounts due from the Participant, the Company shall cause the Common Stock then being +purchased to be registered in the Participant’s name (or the person exercising the Participant’s Stock Option in the event of his or her death), but shall not issue certificates for the Common Stock unless the Participant or such other +person requests delivery of the certificates for the Common Stock, in writing in accordance with the procedures established by the Committee. The Company shall deliver certificates to the Participant (or the person exercising the Participant’s +Stock Option in the event of his or her death) as soon as administratively practicable following the Company’s receipt of a written request from the Participant or such other person for delivery of the certificates. Notwithstanding the +forgoing, if the Participant has exercised an Incentive Stock Option, the Company may at its option retain physical possession of the certificate evidencing the shares acquired upon exercise until the expiration of the holding periods described in +Section 422(a)(1) of the Code. Any obligation of the Company to deliver shares of Common Stock shall, however, be subject to the condition that, if at any time the Committee shall determine in its discretion that the listing, registration or +qualification of the Stock Option or the Common Stock upon any securities exchange or inter-dealer quotation system or under any state or federal law, or the consent or approval of any governmental regulatory body, is necessary as a condition of, or +in connection with, the Stock Option or the issuance or purchase of shares of Common Stock thereunder, the Stock Option +A-15 +Table of Contents +may not be exercised in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not reasonably +acceptable to the Committee. +(c) Failure to Pay . Except as may otherwise be provided in an Award +Agreement, if the Participant fails to pay for any of the Common Stock specified in such notice or fails to accept delivery thereof, that portion of the Participant’s Stock Option and right to purchase such Common Stock may be forfeited by the +Participant. +8.4 SARs. Subject to the conditions of this Section 8.4 and such administrative regulations +as the Committee may from time to time adopt, a SAR may be exercised by the delivery (including by FAX) of written notice to the Committee setting forth the number of shares of Common Stock with respect to which the SAR is to be exercised and the +date of exercise thereof (the “ Exercise Date ”) which shall be at least three (3) days after giving such notice unless an earlier time shall have been mutually agreed upon. Subject to the terms of the Award Agreement and +only if permissible under Section 409A of the Code and the regulations or other guidance issued thereunder (or, if not so permissible, at such time as permitted by Section 409A of the Code and the regulations or other guidance issued +thereunder), the Participant shall receive from the Company in exchange therefor in the discretion of the Committee, and subject to the terms of the Award Agreement: +(a) cash in an amount equal to the excess (if any) of the Fair Market Value (as of the Exercise Date, or if provided in +the Award Agreement, conversion, of the SAR) per share of Common Stock over the SAR Price per share specified in such SAR, multiplied by the total number of shares of Common Stock of the SAR being surrendered; +(b) that number of shares of Common Stock having an aggregate Fair Market Value (as of the Exercise Date, or if provided +in the Award Agreement, conversion, of the SAR) equal to the amount of cash otherwise payable to the Participant, with a cash settlement to be made for any fractional share interests; or +(c) the Company may settle such obligation in part with shares of Common Stock and in part with cash. +The distribution of any cash or Common Stock pursuant to the foregoing sentence shall be made at such time as set forth in the Award +Agreement. +8.5 Disqualifying Disposition of Incentive Stock Option . If shares of Common Stock acquired upon exercise +of an Incentive Stock Option are disposed of by a Participant prior to the expiration of either two (2) years from the Date of Grant of such Stock Option or one (1) year from the transfer of shares of Common Stock to the Participant +pursuant to the exercise of such Stock Option, or in any other disqualifying disposition within the meaning of Section 422 of the Code, such Participant shall notify the Company in writing of the date and terms of such disposition. A +disqualifying disposition by a Participant shall not affect the status of any other Stock Option granted under the Plan as an Incentive Stock Option within the meaning of Section 422 of the Code. +ARTICLE 9 +AMENDMENT OR DISCONTINUANCE +Subject to the limitations set forth in this Article 9 , the Board may at any time and from time to time, without the consent of the Participants, alter, amend, revise, suspend, or discontinue +the Plan in whole or in part; provided, however, that no amendment for which shareholder approval is required either (i) by any securities exchange or inter-dealer quotation system on which the Common Stock is listed or traded or (ii) in +order for the Plan and Incentives awarded under the Plan to continue to comply with Sections 162(m), 421 and 422 of the Code, including any successors to such Sections, or other Applicable Law, shall be effective unless such amendment shall be +approved by the requisite vote of the shareholders of the Company entitled to vote thereon. Any such amendment shall, to the extent deemed necessary or advisable by the Committee, be applicable to any outstanding Incentives theretofore granted under +the Plan, notwithstanding any contrary provisions contained in +A-16 +Table of Contents +any Award Agreement. In the event of any such amendment to the Plan, the holder of any Incentive outstanding under the Plan shall, upon request of the Committee and as a condition to the +exercisability thereof, execute a conforming amendment in the form prescribed by the Committee to any Award Agreement relating thereto. Notwithstanding anything contained in this Plan to the contrary, unless required by law, no action contemplated +or permitted by this Article 9 shall adversely affect any rights of Participants or obligations of the Company to Participants with respect to any Incentive theretofore granted under the Plan without the consent of the affected +Participant. +ARTICLE 10 +TERM +The Plan shall be effective from the Effective Date. Unless sooner +terminated by action of the Board, the Plan will terminate on the tenth anniversary of the Effective Date, but Incentives granted before that date will continue to be effective in accordance with their terms and conditions. +ARTICLE 11 +CAPITAL ADJUSTMENTS +In the event that any dividend or other distribution (whether in the form of cash, Common Stock, other securities or other property), recapitalization, stock split, reverse stock split, rights offering, +reorganization, merger, consolidation, split-up, spin-off, split-off, combination, subdivision, repurchase, or exchange of Common Stock or other securities of the Company, issuance of warrants or other rights to purchase Common Stock or other +securities of the Company, or other similar corporate transaction or event affects the fair value of an Award, then the Committee shall adjust any or all of the following so that the fair value of the Award immediately after the transaction or event +is equal to the fair value of the Award immediately prior to the transaction or event: (i) the number of shares and type of Common Stock (or the securities or property) which thereafter may be made the subject of Awards, (ii) the number of +shares and type of Common Stock (or other securities or property) subject to outstanding Awards, (iii) the number of shares and type of Common Stock (or other securities or property) specified as the annual per-Participant limitation under +Section 5.1 of the Plan, (iv) the Option Price of each outstanding Award, (v) the amount, if any, the Company pays for forfeited shares of Common Stock in accordance with Section 6.4 and (vi) the number of or +SAR Price of shares of Common Stock then subject to outstanding SARs previously granted and unexercised under the Plan, to the end that the same proportion of the Company’s issued and outstanding shares of Common Stock in each instance shall +remain subject to exercise at the same aggregate SAR Price; provided however, that the number of shares of Common Stock (or other securities or property) subject to any Award shall always be a whole number. Notwithstanding the foregoing, no such +adjustment shall be made or authorized to the extent that such adjustment would cause the Plan or any Stock Option to violate Section 422 of the Code or Section 409A of the Code. Such adjustments shall be made in accordance with the rules +of any securities exchange, stock market or stock quotation system to which the Company is subject. +Upon the occurrence of +any such adjustment, the Company shall provide notice to each affected Participant of its computation of such adjustment which shall be conclusive and shall be binding upon each such Participant. +ARTICLE 12 +RECAPITALIZATION, MERGER AND CONSOLIDATION +12.1 No Effect on Company’s Authority . The existence of this Plan and Incentives granted hereunder shall not affect in any way the right or power of the Company or its shareholders to make or +authorize any or all adjustments, recapitalizations, reorganizations or other changes in the Company’s capital structure and its +A-17 +Table of Contents +business, or any Change in Control, or any merger or consolidation of the Company, or any issuance of bonds, debentures, preferred or preference stocks ranking prior to or otherwise affecting the +Common Stock or the rights thereof (or any rights, options or warrants to purchase same), or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business or any other corporate act or +proceeding, whether of a similar character or otherwise. +12.2 Conversion of Incentives Where Company Survives . Subject +to any required action by the shareholders and except as otherwise provided by Section 12.4 hereof or as may be required to comply with Section 409A of the Code and the regulations or other guidance issued thereunder, if the Company +shall be the surviving or resulting corporation in any merger, consolidation or share exchange, any Incentive granted hereunder shall pertain to and apply to the securities or rights (including cash, property or assets) to which a holder of the +number of shares of Common Stock subject to the Incentive would have been entitled. +12.3 Exchange or Cancellation of +Incentives Where Company Does Not Survive . Except as otherwise provided by Section 12.4 hereof or as may be required to comply with Section 409A of the Code and the regulations or other guidance issued thereunder, in the event +of any merger, consolidation or share exchange pursuant to which the Company is not the surviving or resulting corporation, there shall be substituted for each share of Common Stock subject to the unexercised portions of outstanding Incentives, that +number of shares of each class of stock or other securities or that amount of cash, property or assets of the surviving, resulting or consolidated company which were distributed or distributable to the shareholders of the Company in respect to each +share of Common Stock held by them, such outstanding Incentives to be thereafter exercisable for such stock, securities, cash or property in accordance with their terms. +12.4 Cancellation of Incentives . Notwithstanding the provisions of Sections 12.2 and 12.3 hereof, and except as may be required to comply with Section 409A of the Code and the +regulations or other guidance issued thereunder, in the event the acquiror or the surviving or resulting corporation does not agree to assume the Incentives, all Incentives granted hereunder may be canceled by the Company, in its sole discretion, as +of the effective date of any Change in Control, merger, consolidation or share exchange, or any issuance of bonds, debentures, preferred or preference stocks ranking prior to or otherwise affecting the Common Stock or the rights thereof (or any +rights, options or warrants to purchase same), or of any proposed sale of all or substantially all of the assets of the Company, or of any dissolution or liquidation of the Company, by either: +(a) giving notice to each holder thereof or the holder’s representative of its intention to cancel those Incentives +for which the issuance of shares of Common Stock involved payment by the Participant for such shares, and permitting the purchase during the thirty (30) day period next preceding such effective date of any or all of the shares of Common Stock +subject to such outstanding Incentives, including in the Board’s discretion some or all of the shares as to which such Incentives would not otherwise be vested and exercisable; or +(b) in the case of Incentives that are either (i) settled only in shares of Common Stock or (ii) at the election +of the Participant, settled in shares of Common Stock, paying the holder thereof an amount equal to a reasonable estimate of the difference between the net amount per share payable in such transaction or as a result of such transaction, and the +price per share of such Incentive to be paid by the Participant (hereinafter the “Spread”), multiplied by the number of shares subject to the Incentive. In cases where the shares constitute, or would after exercise, constitute Restricted +Stock, the Company, in its discretion, may include some or all of those shares in the calculation of the amount payable hereunder. In estimating the Spread, appropriate adjustments to give effect to the existence of the Incentives shall be made, +such as deeming the Incentives to have been exercised, with the Company receiving the exercise price payable thereunder, and treating the shares receivable upon exercise of the Incentives as being outstanding in determining the net amount per share. +In cases where the proposed transaction consists of the acquisition of assets of the Company, the net amount per share shall be calculated on the basis of the net amount receivable with respect to shares of Common Stock upon a distribution and +liquidation by the Company after giving effect to expenses and charges, including but not limited to taxes, payable by the Company before such liquidation could be completed. +A-18 +Table of Contents +An Award that by its terms would be fully vested or exercisable upon a Change in Control +will be considered vested or exercisable for purposes of Section 12.4(a) hereof. +ARTICLE 13 +LIQUIDATION OR DISSOLUTION +Subject to Section 12.4 hereof, in case the Company shall, at any time while any Incentive under this Plan shall be in force and remain unexpired, (i) sell all or substantially all of its +property, or (ii) dissolve, liquidate or wind up its affairs, then each Participant shall be entitled to receive, in lieu of each share of Common Stock of the Company which such Participant would have been entitled to receive under the +Incentive, the same kind and amount of any securities or assets as may be issuable, distributable, or payable upon any such sale, dissolution, liquidation or winding up with respect to each share of Common Stock of the Company. If the Company shall, +at any time prior to the expiration of any Incentive, make any partial distribution of its assets, in the nature of a partial liquidation, whether payable in cash or in kind (but excluding the distribution of a cash dividend payable out of earned +surplus and designated as such) and an adjustment is determined by the Committee to be appropriate to prevent the dilution of the benefits or potential benefits intended to be made available under the Plan, then the Committee shall, in such manner +as it may deem equitable, make such adjustment in accordance with the provisions of Article 11 hereof. +ARTICLE 14 +INCENTIVES IN SUBSTITUTION FOR +INCENTIVES GRANTED BY OTHER ENTITIES +Incentives may be granted under the +Plan from time to time in substitution for similar instruments held by employees, independent contractors or directors of a corporation, partnership or limited liability company who become or are about to become Employees, Contractors or Outside +Directors of the Company or any Subsidiary as a result of a merger or consolidation of the employing corporation with the Company, the acquisition by the Company of equity of the employing entity or any other similar transaction pursuant to which +the Company becomes the successor employer. The terms and conditions of the substitute Incentives so granted may vary from the terms and conditions set forth in this Plan to such extent as the Committee at the time of grant may deem appropriate to +conform, in whole or in part, to the provisions of the incentives in substitution for which they are granted. +ARTICLE 15 +MISCELLANEOUS PROVISIONS +15.1 Investment Intent . The Company may require that there be presented to and filed with it by any Participant under the Plan, such evidence as it may deem necessary to establish that the +Incentives granted or the shares of Common Stock to be purchased or transferred are being acquired for investment and not with a view to their distribution. +15.2 No Right to Continued Employment . Neither the Plan nor any Incentive granted under the Plan shall confer upon any Participant any right with respect to continuance of employment by the Company +or any Subsidiary. +15.3 Indemnification of Board and Committee . No member of the Board or the Committee, nor any +officer or Employee of the Company acting on behalf of the Board or the Committee, shall be personally liable for any action, determination or interpretation taken or made in good faith with respect to the Plan, and all members of the Board and the +Committee, each officer of the Company and each Employee of the Company +A-19 +Table of Contents +acting on behalf of the Board or the Committee shall, to the extent permitted by law, be fully indemnified and protected by the Company in respect of any such action, determination or +interpretation to the fullest extent provided by Applicable Law. Except to the extent required by any unwaiveable requirement under Applicable Law, no member of the Board or the Committee (and no Subsidiary of the Company) shall have any duties or +liabilities, including without limitation any fiduciary duties, to any Participant (or any Person claiming by and through any Participant) as a result of this Plan, any Award or any Claim arising hereunder and, to the fullest extent permitted under +Applicable Law, each Participant (as consideration for receiving and accepting an Award) irrevocably waives and releases any right or opportunity such Participant might have to assert (or participate or cooperate in) any Claim against any member of +the Board or the Committee and any Subsidiary of the Company arising out of this Plan. +15.4 Effect of the Plan . +Neither the adoption of this Plan nor any action of the Board or the Committee shall be deemed to give any person any right to be granted an Award or any other rights except as may be evidenced by an Award Agreement or any amendment thereto, duly +authorized by the Committee and executed on behalf of the Company, and then only to the extent and upon the terms and conditions expressly set forth therein. +15.5 Compliance With Other Laws and Regulations . Notwithstanding anything contained herein to the contrary, the Company shall not be required to sell or issue shares of Common Stock under any +Incentive if the issuance thereof would constitute a violation by the Participant or the Company of any provisions of any law or regulation of any governmental authority or any national securities exchange or inter-dealer quotation system or other +forum in which shares of Common Stock are quoted or traded (including without limitation Section 16 of the Exchange Act and Section 162(m) of the Code); and, as a condition of any sale or issuance of shares of Common Stock under an +Incentive, the Committee may require such agreements or undertakings, if any, as the Committee may deem necessary or advisable to assure compliance with any such law or regulation. The Plan, the grant and exercise of Incentives hereunder, and the +obligation of the Company to sell and deliver shares of Common Stock, shall be subject to all applicable federal and state laws, rules and regulations and to such approvals by any government or regulatory agency as may be required. +15.6 Tax Requirements . The Company or, if applicable, any Subsidiary (for purposes of this Section 15.6 , the term +“ Company ” shall be deemed to include any applicable Subsidiary), shall have the right to deduct from all amounts paid in cash or other form in connection with the Plan, any Federal, state, local or other taxes required by law +to be withheld in connection with an Award granted under this Plan. The Company may, in its sole discretion, also require the Participant receiving shares of Common Stock issued under the Plan to pay the Company the amount of any taxes that the +Company is required to withhold in connection with the Participant’s income arising with respect to the Award. Such payments shall be required to be made when requested by the Company and may be required to be made prior to the delivery of any +certificate representing shares of Common Stock. Such payment may be made (i) by the delivery of cash to the Company in an amount that equals or exceeds (to avoid the issuance of fractional shares under (iii) below) the required tax +withholding obligations of the Company; (ii) if the Company, in its sole discretion, so consents in writing, the actual delivery by the exercising Participant to the Company of shares of Common Stock that the Participant has not acquired from +the Company within six (6) months prior to the date of exercise, vesting or conversion of the Award, as applicable, which shares so delivered have an aggregate Fair Market Value that equals or exceeds (to avoid the issuance of fractional shares +under (iii) below) the required tax withholding payment; (iii) if the Company, in its sole discretion, so consents in writing, the Company’s withholding of a number of shares to be delivered upon the exercise, vesting, or conversion +of the Award, which shares so withheld have an aggregate fair market value that equals (but does not exceed) the required tax withholding payment; or (iv) any combination of (i), (ii) or (iii) or any other method consented to by the +Company in writing. The Company may, in its sole discretion, withhold any such taxes from any other cash remuneration otherwise paid by the Company to the Participant. The Committee may in the Award Agreement impose any additional tax requirements +or provisions that the Committee deems necessary or desirable. +A-20 +Table of Contents +15.7 Assignability . Incentive Stock Options may not be transferred, assigned, +pledged, hypothecated or otherwise conveyed or encumbered other than by will or the laws of descent and distribution and may be exercised during the lifetime of the Participant only by the Participant or the Participant’s legally authorized +representative, and each Award Agreement in respect of an Incentive Stock Option shall so provide. The designation by a Participant of a beneficiary will not constitute a transfer of the Stock Option. The Committee may waive or modify any limitation +contained in the preceding sentences of this Section 15.7 that is not required for compliance with Section 422 of the Code. +Except as otherwise provided herein, Awards may not be transferred, assigned, pledged, hypothecated or otherwise conveyed or encumbered other than by will or the laws of descent and +distribution. Notwithstanding the foregoing, the Committee may, in its discretion, authorize all or a portion of a Nonqualified Stock Option or SAR to be granted to a Participant on terms which permit transfer by such Participant to (i) the +spouse (or former spouse), children or grandchildren of the Participant (“ Immediate Family Members ”), (ii) a trust or trusts for the exclusive benefit of such Immediate Family Members, (iii) a partnership in which +the only partners are (1) such Immediate Family Members and/or (2) entities which are controlled by Immediate Family Members, (iv) an entity exempt from federal income tax pursuant to Section 501(c)(3) of the Code or any +successor provision or (v) a split interest trust or pooled income fund described in Section 2522(c)(2) of the Code or any successor provision, provided that (x) there shall be no consideration for any such transfer, (y) the +Award Agreement pursuant to which such Nonqualified Stock Option or SAR is granted must be approved by the Committee and must expressly provide for transferability in a manner consistent with this Section and (z) subsequent transfers of +transferred Nonqualified Stock Options or SARs shall be prohibited except those by will or the laws of descent and distribution. +Following any transfer, any such Award shall continue to be subject to the same terms and conditions as were applicable immediately prior to transfer, provided that for purposes of Articles 8, 9, 11, +13 and 15 hereof the term “ Participant ” shall be deemed to include the transferee. The events of Termination of Service shall continue to be applied with respect to the original Participant, following which, with respect +to any Award that is a Nonqualified Stock Option and SAR, the Award shall be exercisable or convertible by the transferee only to the extent and for the periods specified in the Award Agreement. The Committee and the Company shall have no obligation +to inform any transferee of an Award of any expiration, termination, lapse or acceleration of such Award. The Company shall have no obligation to register with any federal or state securities commission or agency any Common Stock issuable or issued +under an Award that has been transferred by a Participant under this Section 15.7 . +15.8 Use of Proceeds . +Proceeds from the sale of shares of Common Stock pursuant to Incentives granted under this Plan shall constitute general funds of the Company. +15.9 Legend . Each certificate representing shares of Restricted Stock issued to a Participant shall bear the following legend, or a similar legend deemed by the Company to constitute an appropriate +notice of the provisions hereof (any such certificate not having such legend shall be surrendered upon demand by the Company and so endorsed): +On the face of the certificate: +“Transfer of this stock is restricted in +accordance with conditions printed on the reverse of this certificate.” +On the reverse: +“The shares of stock evidenced by this certificate are subject to and transferable only in accordance with that certain Matador +Resources Company Amended and Restated 2012 Long-Term Incentive Plan, a copy of which is on file at the principal office of the Company in Dallas, Texas. No transfer or pledge of the shares evidenced hereby may be made except in accordance with and +subject to the provisions of said Plan. By acceptance of this certificate, any holder, transferee or pledgee hereof agrees to be bound by all of the provisions of said Plan.” +A-21 +Table of Contents +The following legend shall be inserted on a certificate evidencing Common Stock issued under +the Plan if the shares were not issued in a transaction registered under the applicable federal and state securities laws: +“Shares of stock represented by this certificate have been acquired by the holder for investment and not for resale, transfer or +distribution, have been issued pursuant to exemptions from the registration requirements of applicable state and federal securities laws, and may not be offered for sale, sold or transferred other than pursuant to effective registration under such +laws, or in transactions otherwise in compliance with such laws, and upon evidence satisfactory to the Company of compliance with such laws, as to which the Company may rely upon an opinion of counsel satisfactory to the Company.” +15.10 Governing Law . The Plan shall be governed by, construed and enforced in accordance with the laws of the State of Texas +(excluding any conflict of laws, rule or principle of Texas law that might refer the governance, construction, or interpretation of this Plan to the laws of another state). A Participant’s sole remedy for any Claim shall be against the Company, +and no Participant shall have any claim or right of any nature against any Subsidiary of the Company or any shareholder or existing or former director, officer or Employee of the Company or any Subsidiary of the Company. Each Award Agreement shall +require the Participant to release and covenant not to sue any Person other than the Company over any Claims. The individuals and entities described above in this Section 15.10 (other than the Company) shall be third-party beneficiaries +of this Plan for purposes of enforcing the terms of this Section 15.10 . +A copy of this Plan shall be kept on file in +the principal office of the Company in Dallas, Texas +*************** +A-22 +Table of Contents +IN WITNESS WHEREOF, the Company has caused this instrument to be executed as of +, 2015, by its Chief Executive Officer and Secretary pursuant to prior action taken by the Board. +MATADOR RESOURCES COMPANY +By: +Name: +Title: +Attest: +A-23 +Table of Contents +VOTE BY INTERNET - www.proxyvote.com +Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the meeting date. Have your proxy card in hand when you +access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. +ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS +If you would like to reduce the costs +incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the +instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. +VOTE BY PHONE - 1-800-690-6903 +Use any +touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the meeting date. Have your proxy card in hand when you call and then follow the instructions. +VOTE BY MAIL +Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. +TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: +x +KEEP THIS PORTION FOR YOUR RECORDS +DETACH AND RETURN THIS PORTION ONLY +THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. +For +All +Withhold +All +For All +Except +To withhold authority to vote +for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below. +The Board of Directors recommends you vote FOR the following: +1. +Election of Directors +¨ +¨ +¨ +Nominees +01 +Carlos M. Sepulveda, +Jr 02 Margaret B. Shannon 03 George M. Yates +The Board of Directors recommends you vote FOR +proposals 2, 3 and 4. +For +Against +Abstain +2. +Vote to approve the Company’s Amended and Restated +2012 Long-Term Incentive Plan. +¨ +¨ +¨ +3. +Advisory vote to approve the compensation of our named +executive officers. +¨ +¨ +¨ +4. +Ratification of the appointment of KPMG LLP as the +Company’s independent registered public accounting firm for the year ending December 31, 2015. +¨ +¨ +¨ +NOTE: The proxies are authorized to vote in their discretion on such other business as may properly come before the meeting or any adjournment +thereof. +Yes +No +Please indicate if you plan to attend this meeting +¨ +¨ +Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint +owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name, by authorized officer. +Table of Contents +Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Annual Report for the year ended December 31, 2014, Notice of Annual Meeting and Proxy Statement +is/are available at www.proxyvote.com . +MATADOR RESOURCES COMPANY +Annual Meeting of Shareholders +June 10, 2015 9:30 A.M. +This proxy is solicited by the Board of Directors. +As an alternative to completing +this form, you may enter your vote instruction by telephone at 1-800-690-6903, or via the internet at www.proxyvote.com . Have your proxy card in hand and follow the instructions. +The shareholder hereby appoints Joseph Wm. Foran and David M. +Laney, or either of them, as proxies, each with the power to appoint his substitute, and hereby authorizes them to represent and to vote, as designated on the reverse side of this ballot, all of the shares of common stock of MATADOR RESOURCES +COMPANY that the shareholder is entitled to vote at the Annual Meeting of Shareholders to be held at 9:30 A.M., CDT on June 10, 2015, at the Hilton Anatole, 2201 North Stemmons Freeway, Dallas, Texas 75207, and any adjournment or postponement +thereof. The shareholder hereby revokes any proxy or proxies heretofore given to vote upon or act with respect to such shares of stock. +This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be +voted in accordance with the Board of Directors’ recommendations. +Continued and to be signed on reverse +side \ No newline at end of file diff --git a/raw/proxies/0001520006/0001193125-15-156985/proxy_rpt.txt b/raw/proxies/0001520006/0001193125-15-156985/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..a9c6506fb75e5a9cdb7608fafd6ca88bf7ddddbf --- /dev/null +++ b/raw/proxies/0001520006/0001193125-15-156985/proxy_rpt.txt @@ -0,0 +1,57 @@ +TRANSACTIONS WITH RELATED PERSONS +Except as disclosed below, since January 1, 2014, there has not been, nor is there currently proposed, any transaction or series of +similar transactions to which we were or are a party in which the amount involved exceeded or exceeds $120,000 and in which any of our directors, executive officers, holders of more than 5% of any class of our voting securities or any member of the +immediate family of any of the foregoing persons had or will have a direct or indirect material interest, other than compensation arrangements with directors and executive officers, which are described in “Executive +Compensation—Compensation Discussion and Analysis” above. +George M. Yates was appointed to the Board on +April 28, 2015 and is a nominee for director at the Annual Meeting. Mr. Yates is Chairman and Chief Executive Officer of HEYCO Energy Group, Inc., an oil and natural gas exploration and production business based in Roswell, New Mexico +(“HEYCO”). HEYCO was the sole owner of Harvey E. Yates Company prior to the HEYCO Merger. While negotiating the HEYCO Merger, Matador was also negotiating the terms and conditions of proposed joint ventures (the “Joint Ventures”) +with three affiliates of HEYCO and/or Mr. Yates (the “HEYCO Affiliates”). In April 2015, Matador and the HEYCO Affiliates entered into non-binding letters of intent with respect to the Joint Ventures. The parties are currently +negotiating the terms of definitive agreements relating to the Joint Ventures. Pursuant to the Joint Ventures, a wholly-owned subsidiary of Matador would invest in two new entities with the HEYCO Affiliates for the purpose of developing certain +Delaware Basin properties in New Mexico. If we consummate the Joint Ventures, the Joint Ventures will result in Matador acquiring additional working interests in properties acquired by it in the HEYCO Merger. Mr. Yates is affiliated with each +of the HEYCO Affiliates and, therefore, following the closing of the transactions, the Joint Ventures will constitute related party transactions as defined in the Company’s Related Party Transaction Policy and applicable securities and stock +exchange rules. As presently negotiated, Matador’s collective investment in the Joint Ventures would equal approximately $14.2 million. +The Audit Committee has reviewed the terms of the Joint Ventures for potential conflicts of interest under the Company’s Related Party Transaction Policy and, after being fully informed as to +Mr. Yates’ relationship and interest and all other material facts related to the Joint Ventures, determined that the Joint Ventures were fair to the Company and recommended the Joint Ventures to the full Board for approval. The Board +subsequently approved such Joint Ventures. +In addition, in light of Mr. Yates’ ongoing services to HEYCO Energy +Group, Inc., the Board has, in accordance with Texas corporate law, adopted resolutions which renounce and provide for a waiver of certain corporate opportunities with respect to Mr. Yates. As a result, Mr. Yates will have no fiduciary +duty to present certain corporate opportunities related to Mr. Yates’ existing oil and gas holdings and/or in areas where Matador does not currently operate. +Procedures for Approval of Related Party Transactions +Our Board has +adopted a written related party transaction policy. Pursuant to this policy, a “Related Party Transaction” is defined as a transaction (including any financial transaction, arrangement or relationship (including any indebtedness or +guarantee of indebtedness)), or series of related transactions, or any material amendment to any such transaction, involving a Related Party (as defined below) and in which we are a participant, other than: +• +a transaction involving compensation of directors; +• +a transaction involving compensation of an executive officer or involving an employment agreement, severance agreement, change in control provision or +agreement or a special supplemental benefit for an executive officer; +• +a transaction available to all employees generally or to all salaried employees generally; +• +a transaction with a Related Party involving less than $120,000; +67 +Table of Contents +• +a transaction in which the interest of the Related Party arises solely from the ownership of a class of our equity securities and all holders of that +class receive the same benefit on a pro rata basis; or +• +a transaction in which the rates or charges involved therein are determined by competitive bids, or a transaction that involves the rendering of +services as a common or contract carrier, or public utility, at rates or charges fixed in conformity with law or governmental authority. +“Related Party” means: +• +any person who is, or at any time during the applicable period was, one of our executive officers or one of our directors or nominees for directors; +• +any person who is known by us to be the beneficial owner of more than 5% of our Common Stock; +• +any immediate family member of any of the foregoing persons, which means any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, +father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law of a director, nominee for director, executive officer or a beneficial owner of more than 5% of our Common Stock; and +• +any firm, corporation or other entity that is owned or controlled by any of the foregoing persons or in which any of the foregoing persons is a general +partner or executive officer or in which such person, together with all other of the foregoing persons, owns 10% or more of the equity interests thereof. +Pursuant to our related party transaction policy, the Audit Committee must review all material facts of each Related Party Transaction and recommend either approval or disapproval of the Related Party +Transaction to the full Board, subject to certain limited exceptions. In determining whether to recommend approval or disapproval of the Related Party Transaction, the Audit Committee must, after reviewing all material facts of the Related Party +Transaction and the Related Party’s relationship and interest, determine whether the Related Party Transaction is fair to the Company. Further, the policy requires that all Related Party Transactions be disclosed in our filings with the SEC +and/or our website in accordance with applicable laws, rules and regulations. +68 +Table of Contents \ No newline at end of file diff --git a/raw/proxies/0001520006/0001193125-16-563736/proxy.txt b/raw/proxies/0001520006/0001193125-16-563736/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..5e2cf3af1a943bc960671fb618a32bf14f52304a --- /dev/null +++ b/raw/proxies/0001520006/0001193125-16-563736/proxy.txt @@ -0,0 +1,4394 @@ +DEF 14A +1 +d132192ddef14a.htm +DEF 14A +DEF 14A +Table of Contents +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +Washington, D.C. 20549 +SCHEDULE 14A +Proxy Statement Pursuant to Section 14(a) of the +Securities Exchange Act of 1934 (Amendment No.) +Filed by the Registrant þ Filed by a Party other than the +Registrant ¨ +Check the appropriate box: +¨ +Preliminary Proxy Statement +¨ +Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +þ +Definitive Proxy Statement +¨ +Definitive Additional Materials +¨ +Soliciting Material Pursuant to §240.14a-12 +Matador Resources Company +(Name of Registrant as Specified In Its Charter) +(Name of Person(s) Filing Proxy Statement, if other than the Registrant) +Payment of Filing Fee (Check the appropriate box): +þ +No fee required. +¨ +Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. +1) +Title of each class of securities to which transaction applies: +2) +Aggregate number of securities to which transaction applies: +3) +Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the +filing fee is calculated and state how it was determined): +4) +Proposed maximum aggregate value of transaction: +5) +Total fee paid: +¨ +Fee paid previously with preliminary materials. +¨ +Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify +the previous filing by registration statement number, or the Form or Schedule and the date of its filing. +1) +Amount Previously Paid: +2) +Form, Schedule or Registration Statement No.: +3) +Filing Party: +4) +Date Filed: +Table of Contents +One Lincoln Centre +5400 LBJ Freeway, Suite 1500 +Dallas, Texas 75240 +www.matadorresources.com +NOTICE OF ANNUAL MEETING OF SHAREHOLDERS +To Be Held on June 9, 2016 +To the Matador Resources Company Shareholders: +Please join us for the 2016 Annual Meeting of Shareholders of Matador Resources Company. The meeting will be held at the Westin Galleria, Dallas Ballroom, 13340 Dallas Parkway, Dallas, Texas 75240, on +Thursday, June 9, 2016, at 9:30 a.m. , Central Daylight Time. +At the meeting, you will hear a report on our business +and act on the following matters: +(1) +Election of the three nominees for director named in the attached Proxy Statement; +(2) +Vote to approve the Company’s Amended and Restated Annual Incentive Plan; +(3) +Advisory vote to approve the compensation of our named executive officers in the attached Proxy Statement; +(4) +Ratification of the appointment of KPMG LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2016; +(5) +Vote on the shareholder proposal set forth in the attached Proxy Statement; and +(6) +Any other matters that may properly come before the meeting. +All shareholders of record at the close of business on April 15, 2016 are entitled to vote at the meeting or any postponement or adjournment of the meeting. A list of the shareholders of record is +available at the Company’s offices in Dallas, Texas. +By Order of the Board of Directors, +Joseph Wm. Foran +Chairman and Chief Executive Officer +April 28, 2016 +YOUR VOTE IS IMPORTANT! +Whether or not you will attend the meeting, please vote as +promptly as possible by using the Internet or telephone or by signing, dating and returning your proxy card to the address listed on the card. +Important Notice Regarding the Availability of Proxy Materials for the +Annual Meeting of Shareholders to Be Held on June 9, 2016: +Our Proxy Statement and the Annual Report to Shareholders for the fiscal year ended December 31, 2015 are available for viewing, +printing and downloading at https://materials.proxyvote.com/576485 . +Table of Contents +TABLE OF CONTENTS +Page +Proxy Statement +1 +Proxy Summary +3 +Information About the Annual Meeting +6 +Proposal 1 — Election of Directors +10 +Nominees +10 +Vote Required +11 +Directors Continuing in Office +12 +Special Board Advisors +14 +Corporate Governance +17 +Independence of Directors +17 +Board Leadership Structure +17 +Board Committees +18 +Board’s Role in Risk Oversight +23 +Compensation Committee Interlocks and Insider Participation +23 +Communications with Directors +23 +Executive Officers and Other Senior Officers of the Company +24 +Proposal 2 — Approval of Our Amended and Restated Annual Incentive Plan +29 +Background +29 +Plan Administration +29 +Plan Eligibility and Participation +30 +Determination of Performance Goals and Awards +30 +Certification and Level of Achievement +32 +Award Payment +32 +Recoupment for Restatements +32 +Plan Term and Amendment or Discontinuance +32 +Federal Income Tax Consequences +33 +Other Compensation +33 +Potential Payments to Named Executive Officers +34 +Vote Required +34 +Proposal 3 — Advisory Vote to Approve Named Executive Officer Compensation +35 +Vote Required +36 +Proposal 4 — Ratification of the Appointment of KPMG LLP +37 +Fees of Independent Registered Public Accounting Firm for Fiscal Years 2015 and 2014 +37 +Report of the Audit Committee +38 +Vote Required +39 +Proposal 5 — Shareholder Proposal to Adopt a Majority Voting Standard for the Election of +Directors +40 +Supporting Statement +40 +Opposition Statement of the Company +41 +Vote Required +42 +Executive Compensation +43 +Compensation Discussion and Analysis +43 +Nominating, Compensation and Planning Committee Report +55 +Summary Compensation Table +56 +Grants of Plan-Based Awards Table +57 +Discussion Regarding Summary Compensation Table and Grants of Plan-Based Awards Table +57 +Outstanding Equity Awards at December 31, 2015 +59 +Potential Payments Upon Termination or Change in Control +61 +i +Table of Contents +Page +Director Compensation +64 +Compensation for 2015 +64 +Compensation for 2016 +64 +Director Ownership Guidelines +65 +Special Board Advisor Compensation +65 +Securities Authorized for Issuance Under Equity Compensation Plans +65 +Transactions with Related Persons +66 +Procedures for Approval of Related Party Transactions +67 +Security Ownership of Certain Beneficial Ownership and Management +68 +Additional Information +71 +Section 16(a) Beneficial Ownership Reporting Compliance +71 +Shareholder Proposals for the 2017 Proxy Statement +71 +Director Nominations or Other Business for Presentation at the 2017 Annual Meeting +71 +Annual Report on Form 10-K +71 +Other Business +72 +Appendix A — Matador Resources Company Amended and Restated Annual Incentive Plan +A-1 +ii +Table of Contents +Matador Resources Company +One Lincoln Centre +5400 LBJ Freeway, Suite 1500 +Dallas, Texas 75240 +www.matadorresources.com +PROXY STATEMENT +For +ANNUAL MEETING OF SHAREHOLDERS +To Be Held on June 9, 2016 +This Proxy Statement is being mailed on +or about April 28, 2016 to the shareholders of Matador Resources Company (“Matador” or the “Company”) in connection with the solicitation of proxies by the Board of Directors (the “Board”) of the Company to be +voted at the Annual Meeting of Shareholders of the Company to be held at the Westin Galleria, Dallas Ballroom, 13340 Dallas Parkway, Dallas, Texas 75240, on June 9, 2016, at 9:30 a.m., Central Daylight Time (the “Annual Meeting”), or +at any postponement or adjournment thereof, for the purposes set forth in the accompanying Notice of Annual Meeting of Shareholders. The address of the Company’s principal executive office is One Lincoln Centre, 5400 LBJ Freeway, Suite 1500, +Dallas, Texas 75240. +If you are a shareholder of record, you may vote in person by attending the meeting, by completing and +returning a proxy by mail or by using the Internet or telephone. You may vote your proxy by mail by marking your vote on the enclosed proxy card and following the instructions on the card. To vote your proxy using the Internet or telephone, see the +instructions on the proxy form and have the proxy form available when you access the Internet website or place your telephone call. +The named proxies will vote your shares according to your directions. If you sign and return your proxy but do not make any of the selections, the named proxies will vote your shares: (i) FOR the +election of the three nominees for director as set forth in this Proxy Statement, (ii) FOR the approval of the Company’s Amended and Restated Annual Incentive Plan, (iii) FOR the approval, on an advisory basis, of the compensation of +the Company’s named executive officers as disclosed in this Proxy Statement, (iv) FOR the ratification of KPMG LLP as the independent registered public accounting firm of the Company for the year ending December 31, 2016 and +(v) AGAINST the shareholder proposal as set forth in this Proxy Statement regarding a majority voting standard for the election of directors. The proxy may be revoked at any time before it is exercised by filing with the Company a written +revocation addressed to the Corporate Secretary, by executing a proxy bearing a later date or by attending the Annual Meeting and voting in person. +The cost of soliciting proxies will be borne by the Company. In addition to the use of postal services and the Internet, proxies may be solicited by directors, officers and employees of the Company (none +of whom will receive any additional compensation for any assistance they may provide in the solicitation of proxies) in person or by telephone. +The outstanding voting securities of the Company consist of shares of common stock, $0.01 par value per share (“Common Stock”). The record date for the determination of the shareholders entitled +to notice of and to vote at the Annual Meeting, or any postponement or adjournment thereof, has been established by the Board as the close of business on April 15, 2016 (the “Record Date”). As of the Record Date, there were +outstanding and entitled to vote 93,265,146 shares of Common Stock. +The presence, in person or by proxy, of the holders of +record of a majority of the outstanding shares entitled to vote is necessary to constitute a quorum for the transaction of business at the Annual Meeting, but if a quorum should not be present, the meeting may be adjourned from time to time until a +quorum is obtained. A holder of Common Stock will be entitled to one vote per share on each matter properly brought before the meeting. Cumulative voting is not permitted in the election of directors. +1 +Table of Contents +The proxy card provides space for a shareholder to withhold voting for any or all nominees +for the Board. The election of directors requires a plurality of the votes cast at the meeting. All other proposals require the affirmative vote of a majority of the shares present in person or represented by proxy and entitled to vote at the +meeting. Shares held by a shareholder who abstains from voting on any or all proposals will be included for the purpose of determining the presence of a quorum. Votes withheld with respect to the election of the Company’s directors will have no +effect on the election of the nominees. In the case of the other proposals being submitted for shareholder approval, an abstention will effectively count as a vote cast against such proposal. Broker non-votes on any matter, as to which the broker +has indicated on the proxy that it does not have discretionary authority to vote, will be treated as shares not entitled to vote with respect to that matter and therefore will have no effect upon the approval of such matter. However, such shares +will be considered present and entitled to vote for quorum purposes so long as they are entitled to vote on at least one other matter. +2 +Table of Contents +PROXY SUMMARY +This summary highlights information contained elsewhere in this Proxy Statement. This summary does not contain all of the information +that you should consider, and you should read the entire Proxy Statement carefully prior to voting. For more complete information regarding our 2015 performance, please review our Annual Report on Form 10-K for the year ended December 31, 2015. +2016 Annual Meeting of Stockholders +Date and Time: June 9, 2016, at 9:30 a.m., Central Daylight Time +Location: Westin Galleria, Dallas Ballroom, 13340 Dallas Parkway, Dallas, Texas 75240 +Record Date: April 15, 2016 +Voting: +Shareholders as of the close of business on the Record Date are entitled to vote. Each share of Common Stock is entitled to one vote at the Annual Meeting. +Voting Matters and Board Recommendation +Proposal +Board +Recommendation +Election of Three Director Nominees to Serve for a Three-Year Term Expiring in 2019 (page 10) +FOR +Approval of the Company’s Amended and Restated Annual Incentive Plan (page 29) +FOR +Advisory Vote to Approve Named Executive Officer Compensation (page 35) +FOR +Ratification of the Appointment of KPMG LLP as the Company’s Independent Registered Public Accounting Firm for +2016 (page 37) +FOR +Vote on the Shareholder Proposal Regarding a Majority Voting Standard for the Election of Directors (page 40) +AGAINST +2015 Business Highlights +In 2015, Matador achieved record oil, natural gas and average daily oil equivalent production. In addition, Matador successfully completed several important transactions in 2015, including (i) the +merger with Harvey E. Yates Company (“HEYCO”), a subsidiary of HEYCO Energy Group, Inc., which added substantially to Matador’s Delaware Basin acreage position, (ii) Matador’s first issuance of senior unsecured notes, +(iii) a follow-on equity offering and (iv) the sale of a portion of Matador’s midstream assets in Loving County, Texas to an affiliate of EnLink Midstream Partners, LP (“EnLink”). +Business highlights achieved during 2015 include the following: +• +A 35% increase in oil production from 3.3 million barrels (“Bbl”) produced in 2014 to 4.5 million Bbl produced in 2015. +• +An 81% increase in natural gas production from 15.3 billion cubic feet (“Bcf”) of natural gas produced in 2014 to 27.7 Bcf of natural gas +produced in 2015. +• +A 55% increase in average daily oil equivalent production from 16,082 barrels of oil equivalent (“BOE”) per day, including 9,095 Bbl of oil +per day and 41.9 million cubic feet (“MMcf”) of natural gas per day, in 2014 to 24,955 BOE per day, including 12,306 Bbl of oil per day and 75.9 MMcf of natural gas per day, in 2015. +• +On February 27, 2015, Matador completed a business combination pursuant to which one of its wholly-owned subsidiaries merged with HEYCO (the +“HEYCO Merger”), combining certain oil and natural gas producing properties and undeveloped acreage located in Lea and Eddy Counties, New Mexico with its Delaware Basin operations. In the HEYCO Merger, Matador obtained approximately 58,600 +gross (18,200 net) acres strategically located between Matador’s existing acreage in its Ranger and Rustler Breaks prospect areas. +3 +Table of Contents +• +On April 14, 2015, Matador issued $400.0 million of 6.875% senior unsecured notes due 2023 in a private placement and, on October 21, 2015, +Matador exchanged all of the privately-placed senior notes for a like principal amount of 6.875% senior notes due 2023 that have been registered under the Securities Act of 1933, as amended. +• +On April 21, 2015, Matador completed a public offering of 7,000,000 shares of its common stock for net proceeds of approximately $187.6 million. +• +On October 1, 2015, Matador completed the sale of its wholly-owned subsidiary that owned certain natural gas gathering and processing assets in +the Delaware Basin in Loving County, Texas to EnLink for cash consideration of approximately $143.4 million, excluding customary purchase price adjustments. +Director Nominees (page 10) +Our Board currently has nine members divided +into three classes of directors, designated Class I, Class II and Class III. Directors are elected for three-year terms. The table below provides certain summary information about each nominee for director named in this Proxy Statement. +Name +Age +Director +Since +Principal Occupation +Committee +Memberships +Gregory E. Mitchell* +64 +2011 +President and Chief Executive +Officer, Toot’n Totum Food +Stores, LLC +CG +Dr. Steven W. Ohnimus* +69 +2004 +Retired, Formerly General +Manager — Partner Operated +Ventures, Unocal Corporation +A, OP, P +Craig T. Burkert* +59 +** +Chief Financial Officer, +ROMCO Equipment Co. +** +* +Independent Director +** +Mr. Burkert has not previously served on our Board. We anticipate that Mr. Burkert will be appointed to the Audit Committee following the Annual Meeting. +A +Audit Committee +CG +Corporate Governance Committee +OP +Operations and Engineering Committee +P +Prospect Committee +Amended and Restated +Annual Incentive Plan (page 29) +The Company previously sponsored and maintained the Matador Resources Company Annual +Incentive Plan for Management and Key Employees, effective January 1, 2012. On February 19, 2016, our Board adopted, subject to shareholder approval, the Matador Resources Company Amended and Restated Annual Incentive Plan for Management +and Key Employees (the “Incentive Plan”). +The Incentive Plan is designed to link executive decision-making and +performance with the Company’s goals, reinforce these goals and ensure the highest level of accountability for the success of the Company as a whole. More information regarding the Incentive Plan, including a description thereof, is set forth +below beginning on page 29. +Executive Compensation Highlights (page 43) +Our compensation program is designed to reward, in both the short-term and the long-term, performance that contributes to the +implementation of our business strategies, maintenance of our culture and values and the achievement of our objectives. In addition, we reward qualities that we believe help achieve our business strategies such as teamwork, individual performance in +light of general economic and industry-specific +4 +Table of Contents +conditions, relationships with shareholders and vendors, the ability to manage and enhance production from our existing assets, the ability to explore new opportunities to increase oil and +natural gas production, the ability to identify and acquire additional acreage, the ability to increase year-over-year proved reserves, the ability to control unit production costs, level of job responsibility, industry experience and general +professional growth. +Our Board has a “pay for performance” philosophy and recognizes the leadership of +Mr. Joseph Wm. Foran, our Chairman and Chief Executive Officer, and our other executive officers in contributing to the Company’s success in 2015. Accordingly, approximately 87% of Mr. Foran’s 2015 total compensation was +performance based with approximately 57% of his total compensation consisting of long-term incentive awards. Details of our executive compensation are shown in the 2015 Summary Compensation Table on page 56. +5 +Table of Contents +INFORMATION ABOUT THE ANNUAL MEETING +We are furnishing you this Proxy Statement in connection with the solicitation of proxies by the Board to be used at the Annual Meeting +and any adjournment thereof. The Annual Meeting will be held on Thursday, June 9, 2016 at 9:30 a.m., Central Daylight Time. We are sending this Proxy Statement to our shareholders on or about April 28, 2016. +All references in this Proxy Statement to “we,” “our,” “us,” “Matador” or the “Company” +refer to Matador Resources Company, including our subsidiaries and affiliates. +What is the purpose of the Annual Meeting? +At the Annual Meeting, shareholders will act upon the matters outlined in the Annual Meeting notice, including the following: +• +the election of the three nominees for director named in this Proxy Statement for a term expiring at the 2019 Annual Meeting of Shareholders; +• +the approval of the Company’s Amended and Restated Annual Incentive Plan; +• +an advisory vote to approve the compensation of our named executive officers as described herein; +• +the ratification of the appointment of KPMG LLP as the Company’s independent registered public accounting firm for the year ending +December 31, 2016; +• +the vote on the shareholder proposal as set forth in this Proxy Statement regarding a majority voting standard for the election of directors; and +• +any other matters that may properly come before the meeting. +What are the Board’s voting recommendations? +• +FOR the election of the three nominees for director named in this Proxy Statement for a term expiring at the 2019 Annual Meeting of +Shareholders; +• +FOR the approval of the Company’s Amended and Restated Annual Incentive Plan; +• +FOR the approval, on an advisory basis, of the compensation of the Company’s named executive officers; +• +FOR the ratification of the appointment of KPMG LLP as the Company’s independent registered public accounting firm for the year ending +December 31, 2016; and +• +AGAINST the approval of the shareholder proposal as set forth in this Proxy Statement regarding a majority voting standard for the election of +directors. +Who is entitled to vote? +Shareholders as of the close of business on April 15, 2016 are eligible to vote their shares at the Annual Meeting. As of the Record Date, there were 93,265,146 shares of our Common Stock +outstanding. Each share of Common Stock is entitled to one vote at the Annual Meeting. +Why did I receive a Notice Regarding the Internet +Availability of Proxy Materials in the mail instead of a full set of proxy materials? +Securities and Exchange Commission +(“SEC”) rules allow companies to furnish proxy materials over the Internet. We have elected to send a separate Notice of Internet Availability of Proxy Materials (the “Notice”) to most of our shareholders instead of a paper copy +of the proxy materials. This approach conserves natural +6 +Table of Contents +resources and reduces the costs of printing and distributing our proxy materials while providing shareholders with a convenient way to access our proxy materials. Instructions on how to access +the proxy materials over the Internet or to request a paper copy of proxy materials, including a proxy card or voting instruction form, may be found in the Notice. In addition, shareholders may request to receive future proxy materials in printed +form by mail or electronically by email by following the instructions in the Notice. A shareholder’s election to receive proxy materials by mail or email will remain in effect until the shareholder terminates it. +How do I vote? +You may: +• +attend the Annual Meeting and vote in person; or +• +dial the toll-free number listed on the Notice, proxy card or voting instruction form provided by your broker. Easy-to-follow voice prompts allow you +to vote your shares and confirm that your voting instructions have been properly recorded. Telephone voting will be available 24 hours a day and will close at 11:59 p.m., Eastern Daylight Time on June 8, 2016; or +• +go to the website www.proxyvote.com and follow the instructions, then confirm that your voting instructions have been properly recorded. If you +vote using the website, you can request electronic delivery of future proxy materials. Internet voting will be available 24 hours a day and will close at 11:59 p.m., Eastern Daylight Time on June 8, 2016; or +• +if you received a paper copy of your proxy materials and elect to vote by written submission, mark your selections on the proxy card, date and sign it, +and return the card in the pre-addressed, postage-paid envelope provided. +Why did I receive paper copies of proxy +materials? +We are providing certain shareholders with paper copies of the proxy materials instead of a separate Notice. If +you received a paper copy and would no longer like to receive printed proxy materials, you may consent to receive all future proxy materials electronically via email or the Internet. To sign up for electronic delivery, please follow the instructions +provided in your proxy materials. When prompted, indicate that you agree to receive or access shareholder communications electronically in the future. +Will each shareholder in our household receive proxy materials? +Generally, +no. To the extent you are receiving printed proxy materials, we try to provide only one set of proxy materials to be delivered to multiple shareholders sharing an address, unless you have given us other instructions. Any shareholder at a shared +address may request delivery of single or multiple copies of printed proxy materials for future meetings by contacting us at: +Matador Resources Company +Attention: Corporate Secretary +5400 LBJ Freeway, Suite 1500 +Dallas, Texas 75240 +Email: investors@matadorresources.com +Telephone: (972) 371-5200 +We undertake to deliver promptly, upon written or oral request, a copy of proxy materials to a shareholder at a shared address to which a +single copy of the proxy materials was delivered. Requests should be directed to the Corporate Secretary at the address or phone number set forth above. +7 +Table of Contents +Who will be admitted to the Annual Meeting? +Admission to the Annual Meeting will be limited to our shareholders of record, persons holding proxies from our shareholders, beneficial +owners of our Common Stock and our employees. If your shares are registered in your name, we will verify your ownership at the meeting in our list of shareholders as of the Record Date. If your shares are held through a broker, bank or other +nominee, you must bring proof of your ownership of the shares. This proof could consist of, for example, a bank or brokerage firm account statement or a letter from your bank or broker confirming your ownership as of the Record Date. You may also +send proof of ownership to us at Matador Resources Company, Attention: Corporate Secretary, 5400 LBJ Freeway, Suite 1500, Dallas, Texas 75240, or email: investors@matadorresources.com before the Annual Meeting, and we will send you an admission +card. +If I vote via telephone or the Internet or by mailing my Proxy Card, may I still attend the Annual Meeting? +Yes. +What if I want to +change my vote? +You may revoke your proxy before it is voted by submitting a new proxy with a later date (by mail, +telephone or Internet), by voting at the Annual Meeting or by filing a written revocation with our Corporate Secretary. Your attendance at the Annual Meeting will not automatically revoke your proxy. +What constitutes a quorum? +A majority of the shares entitled to vote, present in person or represented by proxy, constitutes a quorum. If you vote by telephone or Internet or by returning your Proxy Card, you will be considered +part of the quorum. The Inspector of Election will treat shares represented by a properly executed proxy as present at the meeting. Abstentions and broker non-votes will be counted for purposes of determining a quorum. A broker non-vote occurs when +a nominee holding shares for a beneficial owner submits a proxy but does not vote on a particular proposal because the nominee does not have discretionary voting power for that item and has not received instructions from the beneficial owner. +How many votes will be required to approve a proposal? +Election of directors at the Annual Meeting will be by a plurality of votes cast at the Annual Meeting. Votes may be cast in favor of the election of each director nominee or withheld. With respect to +other matters, the affirmative vote of the holders of a majority of the shares, present in person or by proxy, and entitled to vote at the Annual Meeting, is required to take any other action. +Shares cannot be voted at the Annual Meeting unless the holder of record is present in person or by proxy. +Can brokers who hold shares in street name vote those shares if they have received no instructions? +Under the rules of the New York Stock Exchange (“NYSE”), brokers may not vote the shares held by them in street name for their +customers and for which they have not received instructions, except with respect to a routine matter. The only matter to be voted on at the Annual Meeting that is considered routine for these purposes is the ratification of the appointment of our +independent registered public accounting firm. Accordingly, brokers may not vote your shares on any other matter if you have not given specific instructions as to how to vote. Please be sure to give specific voting instructions to your broker so +that your vote will be counted. +8 +Table of Contents +How will you treat abstentions and broker non-votes? +A plurality of the votes cast at the Annual Meeting is required to elect each nominee for director. Accordingly, abstentions and broker +non-votes will have no effect on the election of directors. Shares of a shareholder who abstains from voting on any or all proposals will be included for the purpose of determining the presence of a quorum. Votes withheld with respect to the +election of the Company’s directors will have no effect on the election of the nominees. In the case of the other proposals being submitted for shareholder approval, an abstention will effectively count as a vote cast against such proposal. +Broker non-votes on any matter, as to which the broker has indicated on the proxy that it does not have discretionary authority to vote, will be treated as shares not entitled to vote with respect to that matter and therefore will have no effect +upon the approval of such matter. However, such shares will be considered present and entitled to vote for quorum purposes so long as they are entitled to vote on at least one other matter. +Who pays the solicitation expenses? +We will bear the cost of solicitation +of proxies. Proxies may be solicited by mail or personally by our directors, officers or employees, none of whom will receive additional compensation for such solicitation. Those holding shares of Common Stock of record for the benefit of others, or +nominee holders, are being asked to distribute proxy soliciting materials to, and request voting instructions from, the beneficial owners of such shares. We will reimburse nominee holders for their reasonable out-of-pocket expenses. +Where can I find the voting results of the Annual Meeting? +We will announce preliminary voting results at the Annual Meeting, and we will publish final results in a Current Report on Form 8-K that will be filed with the SEC within four business days of the Annual +Meeting. You may obtain a copy of this and other reports free of charge at www.matadorresources.com , by contacting our Investor Relations Department at (972) 371-5200 or investors@matadorresources.com or by accessing the SEC’s +website at www.sec.gov . +Will the Company’s independent registered public accounting firm be available at the Annual Meeting to +respond to questions? +Yes. The Audit Committee of the Board has approved KPMG LLP to serve as our independent registered +public accounting firm for the year ending December 31, 2016. Representatives of KPMG LLP will be present at the Annual Meeting. They will have an opportunity to make a statement, if they desire to do so, and will be available to respond to +appropriate questions. +Where can I contact the Company? +Our mailing address is: +Matador Resources Company +5400 LBJ Freeway, Suite 1500 +Dallas, Texas 75240 +Our telephone number is (972) 371-5200. +9 +Table of Contents +PROPOSAL 1 — ELECTION OF DIRECTORS +The Board currently consists of nine members. Our Board is divided into three classes of directors, designated Class I, Class II and +Class III, with the term of office of each director ending on the date of the third annual meeting following the annual meeting at which such director’s class was elected. The number of directors in each class will be as nearly equal as +possible at all times. The current Class I directors are Ms. Margaret B. Shannon and Messrs. Carlos M. Sepulveda, Jr. and George M. Yates, who will hold office until the 2018 Annual Meeting of Shareholders and until the election and +qualification of their respective successors or until their earlier death, retirement, resignation or removal. The Class II directors are Messrs. Gregory E. Mitchell and Don C. Stephenson and Dr. Steven W. Ohnimus. +Mr. Stephenson’s term will expire at the Annual Meeting, creating a vacancy on the Board. Messrs. Craig T. Burkert and Mitchell and Dr. Steven W. Ohnimus are the Class II director nominees at the Annual Meeting. The Class +III directors are Messrs. Joseph Wm. Foran, David M. Laney and Reynald A. Baribault, who will hold office until the 2017 Annual Meeting of Shareholders and until the election and qualification of their respective successors or until their earlier +death, retirement, resignation or removal. +Mr. Burkert has been nominated by the Board for election as a Class II +director at the Annual Meeting and Mr. Mitchell and Dr. Ohnimus have been nominated by the Board for re-election as Class II directors at the Annual Meeting, in each case, to hold office until the 2019 Annual Meeting of Shareholders and +until the election and qualification of their respective successors or until their earlier death, retirement, resignation or removal. +The Board believes that each of the director nominees possesses the qualifications described below in “Corporate Governance — Board Committees — Nominating, Compensation and Planning +Committee.” That is, the Board believes that each nominee possesses: (i) deep experience at the policy making level in business, government or education; (ii) the availability and willingness to devote adequate time to Board duties; +(iii) the character, judgment and ability to make independent analytical, probing and other inquiries; (iv) a willingness to exercise independent judgment along with a willingness to listen and learn from others; (v) business +knowledge and experience that provides a balance with the other directors; (vi) financial independence; and (vii) with respect to incumbent directors, excellent past performance on the Board. +The information provided below is biographical information about each of the nominees, as well as a description of the experience, +qualifications, attributes or skills that led the Board to conclude that the individual should be nominated for election as a director of the Company. +Nominees +Mr. Craig T. Burkert . +Mr. Burkert, age 59, has been nominated for election by the Board as a Class II director at the Annual Meeting. With over 30 years of experience in distribution businesses, he currently serves as the Chief Financial Officer of ROMCO Equipment +Co., a dealer of heavy construction equipment that serves customers in a variety of sectors throughout most of Texas. Mr. Burkert joined ROMCO in 1984 as a Product Manager, later serving as a Branch Manager from 1986 to 1989 and as General +Manager from 1989 to 1994. In 1994 he left ROMCO to start a dealership in the lift truck industry in New England, but he returned to ROMCO in 2003 to take on his current position of Chief Financial Officer, where he is responsible for all financial, +administrative and technology aspects of the company. Mr. Burkert has been involved with Matador since its inception. He has served on the Shareholder Advisory Committee for Board Nominations since 2014, has acted as a special advisor to the +Company for midstream related matters and is an active participant in shareholder meetings and various Board activities. Mr. Burkert’s accounting and financial knowledge and leadership experience, coupled with his familiarity with the +operations and corporate governance of the Company, provides our Board with a valuable perspective on these matters and other business issues. +Mr. Gregory E. Mitchell . Mr. Mitchell, age 64, joined our Board in June 2011. With 47 years of grocery and petroleum retailing experience, he is currently President and Chief +Executive Officer of Toot’n Totum Food Stores, LLC, his family company located in Amarillo, Texas. The company, founded in 1950, consists of over 100 convenience stores, car washes, lube centers and check cashing locations, with an employee +base of over 1,000 team members in the organization. His experience within the petroleum industry includes extensive +10 +Table of Contents +negotiations with various major refiners in the United States. A 1973 graduate of the University of Oklahoma with a Bachelor of Business Administration degree, Mr. Mitchell was appointed by +former Governor William Clements to the Texas Higher Education Coordinating Board, where he served from 1987 through 1993. Additionally, he has served as Chairman of the Amarillo Chamber of Commerce, Chairman of the United Way of Amarillo and +Canyon, Chairman of the Harrington Foundation and President of the Amarillo Area Foundation. Mr. Mitchell is a former director of the Holding Committee of Amarillo National Bank, former board member of Cal Farley’s Boys Ranch and former +Chairman of the Cal Farley’s Boys Ranch Foundation. Mr. Mitchell’s experience as President and Chief Executive Officer of his large family business provides our Board with extensive business, strategic and executive leadership +experience. +Dr. Steven W. Ohnimus . Dr. Ohnimus, age 69, was first elected to our Board in January 2004. +He spent his entire professional career from 1971 to 2000 with Unocal Corporation, an integrated energy company. From 1995 to 2000, he was General Manager — Partner Operated Ventures, where he represented Unocal’s non-operated +international interests at board meetings, management committees and other high level meetings involving projects in the $200 million range in countries such as Azerbaijan, Bangladesh, China, Congo, Myanmar and Yemen. From 1994 to 1995, +Dr. Ohnimus was General Manager of Asset Analysis, where he managed and directed planning, business plan budgeting and scenario plans for the domestic and international business unit with an asset portfolio totaling $5.5 billion. From 1990 to +1994, Dr. Ohnimus was Vice President and General Manager, Unocal Indonesia, located in Balikpapan, operating five offshore fields and one onshore liquid extraction plant and employing 1,200 nationals and 50 expatriates. From 1989 to 1990, he +served as Regional Operations Manager in Anchorage, Alaska, and from 1988 to 1989, he was District Operations Manager in Houma, Louisiana. From 1981 to 1988, Dr. Ohnimus was in various management assignments in Houston and Houma, Louisiana, and +from 1971 to 1981 he handled various technical assignments in reservoir engineering, production and drilling in the Gulf Coast area (Houston, Van, Lafayette and Houma). From 1975 to 1979, Dr. Ohnimus was Assistant Professor of Petroleum +Engineering at the University of Southwest Louisiana (now University of Southern Louisiana) where he taught eleven undergraduate and graduate night classes. In 1980, he taught drilling seminars at the University of Texas Petroleum Extension Service +of the International Association of Drilling Contractors (“IADC”). Dr. Ohnimus has authored several published papers concerning reservoir recompletion and increased recovery. He received his Bachelor of Science degree in Chemical +Engineering from the University of Missouri at Rolla in 1968, a Master of Science degree in Petroleum Engineering from the University of Missouri at Rolla in 1969 and a PhD degree in Petroleum Engineering from the University of Missouri at Rolla in +1971. Dr. Ohnimus served as a director of the American Petroleum Institute in 1978 and 1979, served as Session Chairman for the Society of Petroleum Engineers’ Annual Convention in 1982, was the Evangeline Section Chairman of the Society +of Petroleum Engineers in 1978 and 1979 and served as President of the Unocal Credit Union from 1986 to 1988. In 2007, he was elected President of the Unocal Gulf Coast Alumni Club, which reports through the Chevron Retirees Association, for which +Dr. Ohnimus is a director. Effective July 2015, Dr. Ohnimus assumed the position of South Texas Area Vice President of the Chevron Retirees Association. From 2008 to 2009, Dr. Ohnimus served as the vice chairman of the advisory board +of Western Standard Energy Corp. (OTCBB: WSEG), an oil and natural gas exploration company. Due to his long oil and natural gas industry career and significant operational and international experience, Dr. Ohnimus provides valuable insight to +our Board on our drilling and completion operations and management, as well as providing a global technology and operations perspective. +Vote Required +To be elected as a director, each director nominee must receive a plurality of the votes cast by the +shareholders entitled to vote for the election of directors. If you hold your shares through a broker and you do not instruct the broker how to vote, your broker will not have the authority to vote your shares. Abstentions and broker non-votes will +each be counted as present for purposes of determining the presence of a quorum but will have no effect upon the outcome of the vote. +The Board of Directors recommends that you vote FOR each of the nominees. +11 +Table of Contents +Directors Continuing in Office +Biographical information for our directors who are continuing in office is provided below. +Mr. Reynald A. Baribault . Mr. Baribault, age 52, was elected to our Board in June 2014 and currently serves as the +chair of the Board’s Operations and Engineering Committee. He is Vice President / Engineering of North Plains Energy, LLC, a Denver-based exploration and production operator he co-founded in 2007. North Plains Energy’s operations are +solely focused on the Bakken play in North Dakota. In addition, he co-founded and serves as President and Chief Executive Officer of IPR Energy Partners, LLC, a Dallas-based oil and natural gas production operator with past operations in Louisiana, +Southeast New Mexico and North Central Texas and current operations in the Fort Worth Basin. Prior to co-founding North Plains Energy and IPR Energy Partners, Mr. Baribault served as Vice President, Supervisor and Petroleum Engineering +Consultant of Netherland, Sewell & Associates, Inc. from 1990 to 2002. Mr. Baribault began his professional career with Exxon Company in 1985 and oversaw operations reservoir engineering matters for high-pressure natural gas fields in +South Louisiana. Mr. Baribault received his Bachelor of Science degree in Petroleum Engineering from Louisiana State University in 1985 and is a registered Petroleum Engineer in the State of Texas. Mr. Baribault provides valuable insight +to our Board on our drilling, completion and reservoir engineering operations. +Mr. Joseph Wm. Foran. +Mr. Foran, age 63, founded Matador Resources Company in July 2003 and has served as Chairman of the Board, Chief Executive Officer and Secretary since our founding. He served as President from our founding until November 2013 and is also chair +of the Board’s Executive Committee. Mr. Foran began his career as an oil and natural gas independent in 1983 when he and his wife, Nancy, founded Foran Oil Company with $270,000 in contributed capital from 17 of his closest friends and +neighbors. Foran Oil Company was later contributed into Matador Petroleum Corporation upon its formation by Mr. Foran in 1988, and Mr. Foran served as Chairman and Chief Executive Officer of that company from inception until the time of +its sale to Tom Brown, Inc. in June 2003 for an enterprise value of $388 million in an all-cash transaction. Under Mr. Foran’s guidance, Matador Petroleum realized a 21% average annual rate of return for its shareholders for 15 years. +Mr. Foran is originally from Amarillo, Texas, where his family owned a pipeline construction business. From 1980 to 1983, he was Vice President and General Counsel of J. Cleo Thompson and James Cleo Thompson, Jr., Oil Producers. Prior to that +time, he was a briefing attorney to Chief Justice Joe R. Greenhill of the Supreme Court of Texas. Mr. Foran graduated with a Bachelor of Science degree in Accounting from the University of Kentucky with highest honors and a law degree from the +Southern Methodist University Dedman School of Law, where he was a Hatton W. Sumners scholar and the Leading Articles Editor of the Southwestern Law Review. He is currently active as a member of various industry and civic organizations, including +his church and various youth activities. In 2002, Mr. Foran was honored as the Ernst & Young “Entrepreneur of the Year” for the Southwest Region. As the founder, Chairman of the Board and Chief Executive Officer of Matador +Resources Company, Mr. Foran has provided leadership, experience and long relationships with many of our shareholders. +Mr. David M. Laney. Mr. Laney, age 67, is an original shareholder in Matador Resources Company and was an original +shareholder in Matador Petroleum Corporation. He was one of the original directors on our Board and currently serves as lead independent director and chair of the Board’s Nominating, Compensation and Planning Committee. He is an attorney who +since March 2007 has practiced law as a solo practitioner. Between 2003 and 2007, he was a partner with the law firm of Jackson Walker LLP in Dallas where he practiced in the area of corporate and financial law. Prior to joining Jackson Walker, +Mr. Laney practiced at the law firm of Jenkens & Gilchrist from 1977 to 2003 and was Managing Partner of Jenkens & Gilchrist from 1990 to 2002. Mr. Laney has also served in several capacities as an appointee of Texas +Governors William Clements and George W. Bush on state boards continuously from 1989 to 2001. He was Governor Clements’ appointee to the Texas Finance Commission, responsible for regulatory oversight of state chartered banking and thrift +institutions from 1989 to 1995. He served as Governor Bush’s Texas Commissioner of Transportation (Chair of the Texas Transportation Commission) from 1995 to 2001. In 2002, Mr. Laney was nominated by President George W. Bush to the board +of directors of Amtrak and confirmed by the U.S. Senate for a five-year term. In 2007, he completed his term as +12 +Table of Contents +Chairman of Amtrak’s board of directors. From 1998 to 2003, Mr. Laney served as a member of the Stanford University Board of Trustees, and for two years as chair of its audit committee. +Mr. Laney currently serves on boards overseeing the development and operation of major transportation projects and serves as a director or an advisor to various transportation initiatives. He has also served in various capacities in connection +with numerous civic and educational organizations and projects in the Dallas area. Mr. Laney graduated with a Bachelor of Arts degree with honors from Stanford University and a law degree from the Southern Methodist University Dedman School of +Law. Mr. Laney’s legal and leadership experience in government and the private sector provide our Board with additional perspective on matters of corporate governance, legal and governmental relations as well as general business issues. +Mr. Carlos M. Sepulveda, Jr . Mr. Sepulveda, age 58, joined our Board in April 2013 and currently serves +as chair of the Board’s Audit Committee and Financial Committee. Since 2010, Mr. Sepulveda has been Chairman of Triumph Bancorp, Inc. (NASDAQ: TBK) a financial holding company with interests in wholesale and community banking, specialty +finance and investment management. He also serves as Chairman of TBK Bank, SSB, which is owned and operated by Triumph Bancorp. Mr. Sepulveda served as President and Chief Executive Officer of Interstate Battery System International, Inc. from +March 2004 until his retirement in May 2013. He served as Executive Vice President of Interstate Batteries from 1993 to 2004 and Chief Financial Officer from 1990 to 1995. He remains a member of the Interstate Batteries board of directors, a +position he has held since 1995. He has also served since 2007 on the board of directors of Cinemark Holdings, Inc. (NYSE: CNK), a company that owns and manages movie theaters, and is chair of its audit committee. In March 2014, Mr. Sepulveda +became a member of the board of directors of Savoya LLC, an industry-leading provider of chauffeured ground transportation services. From 1979 to 1990, Mr. Sepulveda was with KPMG Peat Marwick and was a partner in its audit department from July +1989 to October 1990. Mr. Sepulveda received his Bachelor of Business Administration degree in accounting from the University of Texas in 1979 and is a licensed Certified Public Accountant. Mr. Sepulveda’s experience as President and +Chief Executive Officer of Interstate Batteries along with his extensive public accounting background provide the Board invaluable executive leadership and financial and accounting expertise. As a certified public accountant with proven management +skills, Mr. Sepulveda brings to the Board strong accounting and financial oversight coupled with experience in enterprise and operational risk management. +Ms. Margaret B. Shannon . Ms. Shannon, age 66, joined our Board in June 2011 and currently serves as chair of the Board’s Corporate Governance Committee. She served as Vice +President and General Counsel of BJ Services Company, an international oilfield services company, from 1994 to 2010, when Baker Hughes Incorporated acquired BJ Services. Prior to 1994, she was a partner with the law firm of Andrews Kurth LLP. +Ms. Shannon has served on the board of directors of Quanta Services Inc. (NYSE: PWR), a Houston-based public company that provides specialized infrastructure contracting services for the electric power, natural gas and pipeline and +telecommunication industries, since December 2012. Ms. Shannon is also active in community activities, currently serving as a member of the board of directors of the Houston Health Foundation. She previously served as chair of the Executive +Women’s Partnership sponsored by the Greater Houston Partnership, chair of the audit committee of the board of directors of the South Texas College of Law, chair of the Endowment Board of Palmer Memorial Episcopal Church and the board chair of +the Harris County Health Alliance. Ms. Shannon received her J.D. cum laude from the Southern Methodist University Dedman School of Law in 1976 and her Bachelor of Arts degree from Baylor University in 1971. Ms. Shannon’s experience as +an attorney, as a partner with Andrews Kurth LLP, as general counsel for a public company for more than 15 years and as a director for numerous other organizations provides our Board with important insights into public company obligations, corporate +governance and board functions. +Mr. George M. Yates . Mr. Yates, age 69, joined our Board in April 2015 +in accordance with the terms of the HEYCO Merger. See “Transactions with Related Persons” below. He is Chairman and Chief Executive Officer of HEYCO Energy Group, Inc., an oil and natural gas exploration and production business based in +Dallas with additional offices in Roswell, New Mexico. HEYCO Energy Group, Inc. was the sole shareholder of Harvey E. Yates Company prior to the HEYCO Merger. Mr. Yates is a New Mexico native and graduated from the New +13 +Table of Contents +Mexico Military Institute in Roswell in 1964 and from the University of Texas at Austin with a Bachelor of Business Administration Degree in January 1969. He is also a graduate of the +Owners/Presidents Management Program at Harvard Business School. He has been President of the New Mexico Landmen’s Association and the Independent Petroleum Association of New Mexico. He is past Chairman of the Board of Directors of Mountain +States Legal Foundation of Denver, Colorado and the Environmental Issues Council based in Washington, D.C. He is also past Chairman of the Independent Petroleum Association of America and the Natural Gas Council. He served as Chairman of the board +of directors of the Business and Industrial Political Action Committee (BIPAC) based in Washington, D.C. and as President of the Twenty-Five Year Club of the Petroleum Industry. He is currently a member of the National Petroleum Council. In 2004, +Mr. Yates received the prestigious “Roughneck of the Year” award sponsored by Lone Star Steel Company. He was inducted into the Rocky Mountain Oil and Gas Hall of Fame in 2009. As a proven oil and natural gas executive, Mr. Yates +provides our Board with decades of experience and tremendous knowledge with respect to the Delaware Basin and the assets acquired by Matador in the HEYCO Merger. +Special Board Advisors +In addition to our Board, +we have nine individuals with significant oil and natural gas experience or legal, accounting or other business experience who will advise our Board on various matters. From time to time, we enter into various agreements with these individuals with +respect to their service as special advisors to our Board, as well as indemnification agreements in form similar to those entered into with our directors and officers. Their business histories are described below: +Mr. Ronald F. Coleman. Mr. Coleman retired in 2014 from his joint role at Archer Limited as Executive Vice +President and President — North America. Mr. Coleman had joined the global oil services company in 2012 and was responsible for the integration of multiple product service lines as part of a significant geographic expansion for Archer. He +had previously served as Chief Operating Officer and Executive Vice-President of Select Energy Services, a position he held from January 2011 to December 2011. He joined Select Energy following 33 years with BJ Services Company, where he held +various roles including Vice President — North America Pumping from 2007 to 2010 and Vice President — Operations (United States and Mexico) from 1998 to 2007. Mr. Coleman received a Bachelor of Business Administration degree from the +University of Texas Permian Basin in 1993. +Mr. Marlan W. Downey. Mr. Downey worked for Shell Oil +Company, an integrated energy company, from 1957 to 1987. In 1977, he moved to Shell Oil’s International Exploration & Production business and became Vice President of Shell, and then President of Shell Oil’s newly-formed +international subsidiary, Pecten International, retiring in 1987. Mr. Downey joined ARCO International in 1990 as Senior Vice President of Exploration, becoming President of ARCO International and then Senior Vice President and Executive +Exploration Advisor to ARCO. Mr. Downey retired from ARCO in 1996. He serves on the board of TransAtlantic Petroleum Ltd., an international oil and natural gas company. Mr. Downey is a founder and director of Foundation Energy, a company +that purchases and operates producing oil and natural gas properties. He is a fellow of the American Association for the Advancement of Science. He is an elected fellow of the Geological Society in London. Mr. Downey is past President of the +American Association of Petroleum Geologists (“AAPG”) and has served as Bartell Professor and Chief Scientist — Sarkeys Energy Center at the University of Oklahoma. Mr. Downey is the 2009 recipient of the AAPG’s Sidney +Powers Medal, which is the highest honor awarded by the AAPG. He is active in several scientific organizations and serves on the board of Berkeley Earth, a non-profit organization. Mr. Downey received a Bachelor of Arts degree in Chemistry in +1952 at Peru State College in Nebraska. He served in the U.S. Army in Korea and the Philippines, then enrolled at the University of Nebraska, and received a Bachelor of Science degree in 1956 and a Master of Science degree in Geology in 1957. +Mr. Downey previously served on Matador Petroleum Corporation’s board of directors. He has served as a special advisor to the Board since our inception in July 2003 and currently serves as chair of the Board’s Prospect Committee. +14 +Table of Contents +Mr. John R. Gass. Mr. Gass is Senior Vice President, Eastern +Hemisphere Operations, for Nabors Drilling International Limited in Dubai, United Arab Emirates. Mr. Gass joined Nabors in its Houston, Texas office in 2004 as Senior Vice President, Business Development and Contracts, and held that position +until 2011 when he was transferred to Dubai. Prior to joining Nabors, Mr. Gass served as Vice President, Global Operations at Parker Drilling Company. He spent 28 years with Parker and has extensive experience in drilling operations worldwide, +including Latin America, the Middle East, Europe, Africa, the former Soviet Union and the Far East. Mr. Gass received a Bachelor of Business Administration degree from the University of Oklahoma in 1974 and a Master of Business Administration +degree in international management from the Thunderbird Graduate School of International Management in Glendale, Arizona. +Mr. Wade I. Massad . Mr. Massad served as a consultant to the Company and a special advisor to the Board from 2010 to December 2011, when he was elected Executive Vice President +— Capital Markets of the Company. He held that role until July 2012, when he resumed his role as a consultant to the Company and as a special advisor to the Board, pursuant to a consulting agreement entered into in August 2012. Mr. Massad +is the Co-Founder and Co-Managing Member of Cleveland Capital Management L.L.C., a registered investment advisor and General Partner of Cleveland Capital L.P., a private investment fund focused on micro-cap public and private equity securities, +established in October 1996. Previously, Mr. Massad was an investment banker with Keybanc Capital Markets and RBC Capital Markets, where he was the head of U.S. equity institutional sales from 1997 to 1998 and the head of U.S. Capital Markets +business from 1999 to 2003. He also served on the firm’s executive committee. Mr. Massad has served on multiple public and private company boards. Mr. Massad received a Bachelor of Arts in business management from Baldwin-Wallace +University in 1989 and currently serves on its Board of Trustees. +Mr. Greg L. McMichael. Mr. McMichael +served as a member of the Board of Matador Resources Company from 2004 to 2008. He presently serves on the board of directors for Denbury Resources, Inc. (NYSE: DNR). Mr. McMichael retired in October 2004 as Vice President and Group Leader +— Energy Research, of A.G. Edwards. In that capacity, he was responsible for overseeing all of the firm’s equity research in the Energy Sector, including the integrated oils, exploration and production, oil service and master limited +partnerships. Prior to joining A.G. Edwards, Mr. McMichael served as Managing Director of Equity Research at Hanifen, Imhoff, Inc., a Denver-based regional investment firm. He had previously served as Chief Executive Officer of a private oil +and natural gas acquisition and production company he co-founded in 1987. Mr. McMichael is a member of the National Association of Corporate Directors, where he is currently a Leadership Fellow and serves on the board of the Colorado chapter. +Mr. McMichael received a Bachelor of Arts degree in Political Science and Economics from Schiller International University (London) in 1973. +Mr. David F. Nicklin. Mr. Nicklin joined Matador Resources Company in February 2009 as Executive Director of Exploration after working with the Company as a consultant since November +2007. He retired from his position as Executive Director of Exploration on March 31, 2015 but continues to serve the Company as a consultant and special advisor to the Board. From January 2000 until he joined Matador in 2009, Mr. Nicklin +provided executive level consulting services to a variety of clients. In 2006, Mr. Nicklin co-founded and currently leads a small, private oil and natural gas company, Salt Creek Petroleum LLC. Salt Creek Petroleum owns small, non-operated +interests in a variety of onshore oil and natural gas fields in the United States. In 2000, Mr. Nicklin founded and led for three years a private oil and natural gas exploration company, Serica Energy, which is now a public company with assets +in Indonesia, the United Kingdom, Spain, Ireland and Morocco. Between 1981 and 2000, Mr. Nicklin was an employee of ARCO, where he participated in and led several international exploration teams, particularly in the Middle East, southeast Asia +and Australasia. In 1991, he became the Chief Geologist for ARCO, a position he held until his retirement in 2000. In this position, Mr. Nicklin was responsible for the quality of the geological effort at ARCO, in particular, ensuring the +application of state-of-the-art geological technology, the company’s risk management process, the selection of new ventures and the high-grading of a large geoscience staff. Throughout his career at ARCO, Mr. Nicklin was closely involved +with the successful exploration for and development of a number of large oil and natural gas discoveries. Prior to joining ARCO, Mr. Nicklin was a senior development and operations geologist in a variety +15 +Table of Contents +of positions in the United Kingdom, Angola, Norway and the Middle East. He was a specialist in well-site operations and provided training in operations to entry-level personnel. Mr. Nicklin +was born in the United Kingdom and received a Bachelor of Science degree in Geology from the University of Wales in 1971. He is an active member of the AAPG and various other professional groups. +Dr. James D. Robertson . Dr. Robertson is a founder and co-managing partner of Salt Creek Petroleum, LLC, a +privately-held company that explores for and produces oil and natural gas in conventional onshore plays in Texas. He is also founder and owner of Rannoch Petroleum LLC, an oil and natural gas investment and consulting firm based in Fort Worth, +Texas. Prior to becoming an independent petroleum explorer, Dr. Robertson worked for ARCO for 25 years, serving as Vice President of Exploration for ARCO’s international division prior to his retirement from ARCO upon its acquisition by BP +plc in 2000. Dr. Robertson has served as president of the Society of Exploration Geophysicists (SEG), chairman of the Fort Worth Chapter of the Society of Independent Professional Earth Scientists (SIPES) and as a national director of SIPES +from 2012 to 2013. He is a licensed professional geoscientist in the State of Texas. Dr. Robertson received a Bachelor of Science degree in geological engineering from Princeton University and a PhD in geophysics from the University of +Wisconsin. +Mr. James A. Rolfe. Mr. Rolfe is Of Counsel with Kendall Law Group, a Dallas, Texas law firm +specializing in litigation that he joined in 2009. From 2005 to 2009, Mr. Rolfe served as Of Counsel with Fitzpatrick Hagood Smith & Uhl LLP, a boutique litigation firm. He worked as a sole practitioner in private practice from 1985 to +2005. From 1981 to 1985, Mr. Rolfe served as United States Attorney for the Northern District of Texas, having been appointed to that position by President Reagan. From 1979 to 1981, he worked in private practice following his service as +Assistant United States Attorney for the Northern District of Texas, a position he held from 1973 to 1979. Mr. Rolfe was Assistant District Attorney for Dallas County from 1969 to 1973. He began his public service in the role of Assistant City +Attorney for the City of Dallas, which position he held from 1968 to 1969. Mr. Rolfe served in the United States Army from 1959 to 1962. He received a Bachelor of Arts degree from Austin College in 1965 and received its Distinguished Alumnus +Award in 2000. He received his law degree from the University of Texas at Austin in 1968. +Mr. Michael C. Ryan. +Mr. Ryan served as a member of the Board of Matador Resources Company from February 2009 to June 2015. Prior to joining the Board, he served as an advisor to the Financial Committee and frequently participated in Board planning and strategy +sessions. Mr. Ryan is a private investor. From October 2004 to December 2015, he was a Partner and member of the Investment Committee at Berens Capital Management LLC, an investment firm based in New York. From February 1998 to June 2004, he +worked with Goldman, Sachs & Co., a global investment banking and securities services firm, leading its West Coast international institutional equities business. In this role, he developed and built a team of professionals to advise large +institutional clients on their global investment decisions. From 1995 to 1998, Mr. Ryan lived in Oslo, Norway, where he was a Partner at Pareto Securities, a Scandinavian-based securities firm where he led and built the institutional equities +business into the United States and United Kingdom. From 1991 to 1994, Mr. Ryan represented multiple eastern European governments in the preparation, negotiation and sale of many of their largest state-owned companies. He began his career with +Honeywell, Inc., which invents and manufactures technologies, including in the safety, security and energy areas, in 1983, working in the Systems and Research Center, which focused on advanced weapons development programs. Mr. Ryan received a +Master of Business Administration degree from The Wharton School at the University of Pennsylvania in 1991 and a Bachelor of Science degree from the University of Minnesota in 1983. +16 +Table of Contents +CORPORATE GOVERNANCE +The business affairs of Matador are managed under the direction of the Board in accordance with the Texas Business Organizations Code, +the Company’s Amended and Restated Certificate of Formation and its Amended and Restated Bylaws, each as amended to date. The Board has adopted Corporate Governance Guidelines, which are reviewed annually by the Corporate Governance Committee +of the Board. The Company has a Code of Ethics and Business Conduct for Officers, Directors and Employees (“Code of Ethics”), which is applicable to all officers, directors and employees of the Company. The Company intends to post any +amendments to, and may post any waivers of, its Code of Ethics on the Company’s website to the extent applicable to an executive officer or a director of the Company. The Corporate Governance Guidelines and the Code of Ethics are available on +the Company’s website at www.matadorresources.com under the heading “Investors — Corporate Governance.” +The Board holds regular and special meetings and spends such time on the affairs of the Company as its duties require. During 2015, the Board held 15 meetings. The Board also meets regularly in +non-management executive sessions in accordance with NYSE regulations. The Corporate Governance Guidelines provide that one of the Company’s independent directors should serve as lead independent director at any time when the chief executive +officer serves as the chairman of the board. The lead independent director presides over the non-management executive sessions, serves as a liaison between the chairman and the independent directors and performs such additional duties as the Board +may otherwise determine and delegate. Because Mr. Foran serves as Chairman of the Board and Chief Executive Officer, our independent directors have appointed Mr. Laney to serve as lead independent director. In 2015, all incumbent directors +of the Company attended at least 75% of the meetings of the Board and the committees on which they served, other than Mr. Yates who did not join the Board until April 28, 2015 and attended six of nine board meetings, including all three of +the regularly scheduled meetings, following his appointment to the Board. Our Company policy states that each of our directors is expected to attend Annual Meetings of Shareholders. All of our directors were in attendance at the 2015 Annual Meeting. +Independence of Directors +The Board makes all determinations with respect to director independence in accordance with the NYSE listing standards and the rules and regulations promulgated by the SEC. The actual determination of +whether a director is independent is made by the Board on a case-by-case basis. +In connection with its preparation for the +Annual Meeting, the Board undertook its annual review of director independence and considered transactions and relationships between each director or any member of his or her immediate family and the Company and its subsidiaries and affiliates. In +making its determination, the Board applied the NYSE listing standards and SEC rules and regulations. +The Board reviewed the +independence of our directors and considered whether any director has a material relationship with us that could compromise his or her ability to exercise independent judgment in carrying out his or her responsibilities. After this review, our Board +determined that seven of our nine current directors are “independent directors” as defined under the rules of the SEC and the NYSE: Ms. Shannon, Messrs. Baribault, Laney, Mitchell, Sepulveda and Stephenson and Dr. Ohnimus. +Mr. Stephenson’s term will expire at the Annual Meeting, creating a vacancy on the Board. If Mr. Burkert is elected at the Annual Meeting, the Board has determined that he will be an “independent director” as defined under +the rules of the SEC and the NYSE. No member of or nominee for our Board has a family relationship with any executive officer or other members of our Board. +Board Leadership Structure +Mr. Foran +serves as Chairman of the Board and Chief Executive Officer of the Company. As stated in the Corporate Governance Guidelines, the Board does not believe that the offices of Chairman of the Board and +17 +Table of Contents +Chief Executive Officer must be separate. The members of the Board possess experience and unique knowledge of the challenges and opportunities the Company faces. They are, therefore, in the best +position to evaluate the current and future needs of the Company and to judge how the capabilities of the directors and senior managers can be most effectively organized to meet those needs. Given his deep knowledge of the Company and experience in +leading it, the Board currently believes that the most effective leadership structure for the Company is to have Mr. Foran serve as Chairman of the Board and Chief Executive Officer. +While Mr. Foran serves as Chairman and Chief Executive Officer, seven of eight of our non-employee directors are independent under +the rules of the SEC and the NYSE. After considering the recommendations of our Nominating, Compensation and Planning Committee, the independent directors determine Mr. Foran’s compensation. Further, the Company has four standing +committees and an independent lead director. The Board believes that each of these measures counterbalances any risk that may exist in having Mr. Foran serve as Chairman and Chief Executive Officer. For these reasons, the Board believes that +this leadership structure is effective for the Company. +As the Lead Director, Mr. Laney has the following roles and +responsibilities: +• +he chairs the executive sessions of the non-management and independent directors; +• +he leads the independent directors in the evaluation of the Chief Executive Officer; +• +he facilitates communication among the non-management and independent directors; and +• +he acts as a liaison between the non-management and independent directors and the Chief Executive Officer. +Mr. Laney, as Lead Director, may also perform such other duties as the Board or the Corporate Governance Committee from time to time +may assign, which may include, but are not limited to, the following: +• +help develop Board agendas and ensure critical issues are included; +• +determine quality, quantity and timeliness of information from management; +• +make recommendations about retaining consultants or special advisors for the Board; +• +interview Board candidates; +• +oversee Board and director evaluations; and +• +help improve communications and processes by and between management and the Board and the Chief Executive Officer. +Board Committees +The standing committees of the Board are the Audit Committee; Nominating, Compensation and Planning Committee; Corporate Governance Committee; and Executive Committee. The Board has also established the +following advisory committees: Operations and Engineering Committee; Financial Committee; and Prospect Committee. Each of the standing committees is governed by a charter, and a copy of the charters of each of these committees is available on the +Company’s website at www.matadorresources.com under the heading +18 +Table of Contents +“Investors — Corporate Governance.” Director membership of all of our standing and advisory committees at December 31, 2015 is identified below. +Director +Audit +Committee +Nominating, +Compensation +and Planning +Committee +Corporate +Governance +Committee +Executive +Committee +Operations +and +Engineering +Committee +Financial +Committee +Prospect +Committee +Joseph Wm. Foran +** +* +* +* +Reynald A. Baribault +* +** +* +David M. Laney +* +** +* +* +* +Gregory E. Mitchell +* +Steven W. Ohnimus +* +* +* +Carlos M. Sepulveda, Jr. +** +* +** +Margaret B. Shannon +* +** +* +Don C. Stephenson +* +George M. Yates +* +* +* +* +Member +** +Chair +Audit Committee +The Audit Committee assists the Board in monitoring: +• +the integrity of our financial statements and disclosures; +• +our compliance with legal and regulatory requirements; +• +the qualifications and independence of our independent auditor; +• +the performance of our internal audit function and our independent auditor; and +• +our internal control systems. +In addition, the Audit Committee is charged with review of compliance with our Code of Ethics. +During 2015, our Audit Committee met six times and as of December 31, 2015 consisted of Messrs. Laney, Sepulveda and Stephenson and Dr. Ohnimus, each of whom is independent under the rules of +the NYSE and the SEC. Mr. Sepulveda is the chair of the Audit Committee. SEC rules require a public company to disclose whether or not its audit committee has an “audit committee financial expert” as defined by applicable SEC rules +and regulations. Our Board has determined that each of Mr. Sepulveda and Mr. Stephenson is an “audit committee financial expert.” Mr. Stephenson’s term as a director, and as a member of the Audit Committee, will expire +at the Annual Meeting, and, if elected, Mr. Burkert is expected to replace Mr. Stephenson on the Audit Committee. Mr. Burkert is expected to qualify as an “audit committee financial expert.” +Nominating, Compensation and Planning Committee +The Nominating, Compensation and Planning Committee has the following responsibilities: +• +identifies and recommends to the Board individuals qualified to be nominated for election to the Board; +• +recommends to the Board the members and chair of each committee of the Board; +• +assists the Board and the independent members of the Board in the discharge of their fiduciary responsibilities relating to the fair and competitive +compensation of our executive officers; +• +provides overall guidance with respect to the establishment, maintenance and administration of our compensation programs, including stock and benefit +plans; +19 +Table of Contents +• +oversees and advises the Board and the independent members of the Board on the adoption of policies that govern our compensation programs; and +• +recommends to the Board the strategic, tactical and performance goals of the Company, including those performance and tactical goals that relate to +performance-based compensation, including but not limited to goals for production, reserves, cash flows and shareholder value. +Our Nominating, Compensation and Planning Committee has the authority to delegate authority and responsibilities to subcommittees of its members, so long as the subcommittee consists of at least two +members. +As of December 31, 2015, our Nominating, Compensation and Planning Committee consisted of Ms. Shannon and +Messrs. Baribault and Laney, each of whom is independent under the rules of the SEC and the NYSE, a “non-employee director” pursuant to Rule 16b-3 of the Securities Exchange Act of 1934, as amended, or the “Exchange Act,” and an +“outside director” pursuant to Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”). Mr. Laney is the chair of the Nominating, Compensation and Planning Committee. During 2015, the Nominating, +Compensation and Planning Committee met nine times. +The Board has also established a Shareholder Advisory Committee for Board +Nominations (formerly the Director Nominating Advisory Committee) that is charged with receiving and considering possible nominees for election by shareholders to the Board. Pursuant to the Shareholder Advisory Committee for Board Nominations +charter, this committee is comprised of eight to 12 persons selected by the Nominating, Compensation and Planning Committee, and consists of at least: +• +two members of the Nominating, Compensation and Planning Committee; +• +two former members of or special advisors to the Board; +• +two shareholders who beneficially own Common Stock having a market value of at least $1.0 million (such value to be based on the market value of the +Common Stock immediately prior to designation of such shareholders to the Shareholder Advisory Committee for Board Nominations); and +• +two shareholders who have beneficially owned Common Stock continuously for at least the five years prior to such shareholder’s designation to the +Shareholder Advisory Committee for Board Nominations. +The current members of the Shareholder Advisory +Committee for Board Nominations are Messrs. Baribault, Laney, Ryan and Burkert, Dr. Ohnimus, Joe E. Coleman, Kevin M. Grevey, Scott E. King, James S. Kone, Jr. and James H. “Jake” Trewin. +The Shareholder Advisory Committee for Board Nominations makes recommendations based on its conclusions to the Nominating, Compensation +and Planning Committee for its consideration and review. +The Nominating, Compensation and Planning Committee and the +Shareholder Advisory Committee for Board Nominations consider individuals recommended by the Company’s shareholders to serve on the Board. In considering candidates submitted by shareholders, the Shareholder Advisory Committee for Board +Nominations and the Nominating, Compensation and Planning Committee take into consideration the needs of the Board and the qualifications of the candidate. To have a candidate considered by the Shareholder Advisory Committee for Board Nominations +and the Nominating, Compensation and Planning Committee, a shareholder must submit the recommendation in writing and must include the following information: +• +The name and address of the shareholder, evidence of the person’s ownership of Common Stock or derivatives, including the number of shares owned, +a description of all arrangements or understandings regarding the right to vote shares of the Company, any short interest in any security of the Company, any rights to dividends that are separated or separable from the underlying shares, any +proportionate interest in shares or derivatives held by a general or limited partnership whereby the shareholder is a +20 +Table of Contents +general partner or beneficially owns an interest in the general partner, any performance-related fees (other than an asset-based fee) that the shareholder is entitled to based on any change in +the value of the shares or derivatives, any other information relating to the shareholder that would be required to be disclosed in connection with solicitations of proxies for the election of directors in a contested election and a statement +whether or not the shareholder will deliver a proxy to shareholders; and +• +The name, age, business and residence addresses of the candidate, the candidate’s résumé or a listing of his or her qualifications +to be a director of the Company, the person’s consent to be a director if selected by the Nominating, Compensation and Planning Committee, nominated by the Board and elected by the shareholders and any other information that would be required +to be disclosed in solicitations of proxies for the election of directors. +The shareholder recommendation +and information described above and in more detail in our Amended and Restated Bylaws, as amended to date, must be sent to the Corporate Secretary at One Lincoln Centre, 5400 LBJ Freeway, Suite 1500, Dallas, Texas 75240 and must be received by the +Corporate Secretary not fewer than 45 or more than 75 days prior to the one-year anniversary date of the date the Company’s proxy statement was mailed in connection with the previous year’s Annual Meeting of Shareholders. +The Nominating, Compensation and Planning Committee believes that a potential director of the Company must demonstrate that such +candidate has: +• +a depth of experience at the policy-making level in business, government or education; +• +a balance with the business knowledge and experience of the incumbent or nominated directors; +• +availability and willingness to devote adequate time to Board duties; +• +any unfilled expertise needed on the Board or one of its committees; +• +character, judgment and ability to make independent analytical, probing and other inquiries; +• +willingness to exercise independent judgment yet willingness to listen and learn from the other directors and the Company’s staff; and +• +financial independence to ensure such candidate will not be financially dependent on director compensation. +In the case of an incumbent director, the Nominating, Compensation and Planning Committee will also consider such director’s past +performance on the Board. +The Nominating, Compensation and Planning Committee or the Shareholder Advisory Committee for Board +Nominations may identify potential nominees by asking, from time to time, current directors and executive officers for their recommendation of persons meeting the criteria described above who might be available to serve on the Board. The Nominating, +Compensation and Planning Committee or the Shareholder Advisory Committee for Board Nominations may also engage firms that specialize in identifying director candidates. As described above, the Nominating, Compensation and Planning Committee and +Shareholder Advisory Committee for Board Nominations will also consider candidates recommended by shareholders. +Once a person +has been identified by the Nominating, Compensation and Planning Committee or the Shareholder Advisory Committee for Board Nominations as a potential candidate, the Nominating, Compensation and Planning Committee or the Shareholder Advisory +Committee for Board Nominations will make an initial determination regarding the need for additional Board members to fill vacancies or expand the size of the Board. If the Nominating, Compensation and Planning Committee or the Shareholder Advisory +Committee for Board Nominations determines that additional consideration is warranted, the Nominating, Compensation and Planning Committee or the Shareholder Advisory Committee for Board Nominations will review such information and conduct +interviews as it deems necessary to fully evaluate each director candidate. +21 +Table of Contents +In addition to the qualifications of a candidate, the Nominating, Compensation and Planning Committee or the Shareholder Advisory Committee for Board Nominations will consider such relevant +factors as it deems appropriate, including the current composition of the Board, the evaluations of other prospective nominees and the need for any required expertise on the Board or one of its committees. The Nominating, Compensation and Planning +Committee or the Shareholder Advisory Committee for Board Nominations also contemplate multiple dynamics that promote and advance diversity amongst the members of the Board. Although the Nominating, Compensation and Planning Committee does not have +a formal diversity policy, the Nominating, Compensation and Planning Committee considers a number of factors regarding diversity of personal and professional backgrounds, specialized skills and acumen and breadth of experience in energy production, +consumption, distribution or transportation, government policy, finance or law. The Nominating, Compensation and Planning Committee’s evaluation process will not vary based on whether or not a candidate is recommended by a shareholder. +Corporate Governance Committee +The Corporate Governance Committee is responsible for periodically reviewing and assessing our Corporate Governance Guidelines and making recommendations for changes thereto to the Board, reviewing any +other matters related to our corporate governance, unless the authority to conduct such review has been retained by the Board or delegated to another committee, and overseeing the evaluation of the Board and management. +As of December 31, 2015, our Corporate Governance Committee consisted of Ms. Shannon and Messrs. Laney and Mitchell, each +of whom is independent under the rules of the SEC and the NYSE. Ms. Shannon is the chair of the Corporate Governance Committee. During 2015, the Corporate Governance Committee met five times. +Executive Committee +The Executive Committee has authority to discharge all the responsibilities of the Board in the management of the business and affairs of the Company, except where action of the full Board is required by +statute or by our Amended and Restated Certificate of Formation, as amended to date. The Executive Committee did not meet during 2015. +As of December 31, 2015, our Executive Committee consisted of Messrs. Foran, Laney and Sepulveda. Mr. Foran is the chair of the Executive Committee. +Operations and Engineering Committee +The Operations and Engineering Committee provides oversight of the development of our prospects, our drilling and completion operations and our production operations and associated costs. In addition, the +Operations and Engineering Committee provides oversight of the amount and classifications of our reserves and the design of our completion techniques and hydraulic fracturing operations and various other reservoir engineering matters. As of +December 31, 2015, the members of the Operations and Engineering Committee were Messrs. Baribault, Foran and Yates, Dr. Ohnimus and Mr. Downey ( ex officio ) and W.J. “Jack” Sleeper, Jr. ( ex officio ). +Mr. Downey is a special advisor to our Board. Mr. Sleeper, a special advisor to our Board since the Company’s founding, passed away in early 2016. Mr. Baribault is the chair of the Operations and Engineering Committee. +Financial Committee +The Financial Committee provides oversight of our financial position, liquidity and capital needs and the various methods for financing our business. As of December 31, 2015, the members of the +Financial Committee were Ms. Shannon and Messrs. Foran, Laney, Sepulveda and Yates. Mr. Sepulveda is the chair of the Financial Committee. +22 +Table of Contents +Prospect Committee +The Prospect Committee provides oversight of the technical analysis, evaluation and selection of our oil and natural gas prospects. As of December 31, 2015, the members of the Prospect Committee were +Messrs. Baribault, Foran, Yates and Dr. Ohnimus and Messrs. Downey ( ex officio ) and Sleeper ( ex officio ). Mr. Downey is the chair of the Prospect Committee. +Board’s Role in Risk Oversight +The Audit +Committee has the responsibility to oversee the Company’s guidelines and policies to govern the process by which risk assessment and risk management are undertaken by management. The Nominating, Compensation and Planning Committee has the +responsibility to oversee that our incentive pay does not encourage unnecessary risk taking and to review and discuss the relationship between risk management policies and practices, corporate strategy and senior executive compensation. +Compensation Committee Interlocks and Insider Participation +Ms. Shannon and Messrs. Baribault, Laney and Ryan served on our Nominating, Compensation and Planning Committee during the last +completed fiscal year. None of our executive officers serve on the board of directors or compensation committee of a company that has an executive officer that serves on our Board or Nominating, Compensation and Planning Committee. No member of our +Board serves as an executive officer of a company in which one of our executive officers serves as a member of the board of directors or compensation committee of that company. There were no compensation committee interlocks during 2015. +Communications with Directors +The Board has established a process to receive communications from shareholders and other interested parties by mail. Shareholders and other interested parties may contact any member of the Board, any +Board committee or the entire Board. To communicate with the Board, any individual director or any committee of directors, correspondence should be addressed to the Board. All such correspondence should be sent “c/o Corporate Secretary” at +One Lincoln Centre, 5400 LBJ Freeway, Suite 1500, Dallas, Texas 75240. The Corporate Secretary will review and forward correspondence to the appropriate person or persons. +Any communications to the Company from one of the Company’s officers or directors will not be considered “shareholder communications.” Communications to the Company from one of the +Company’s employees or agents will only be considered “shareholder communications” if they are made solely in such employee’s or agent’s capacity as a shareholder. Any shareholder proposal submitted pursuant to Rule 14a-8 +promulgated under the Exchange Act will not be viewed as “shareholder communications.” +23 +Table of Contents +Executive Officers and Other Senior Officers of the Company +The following table sets forth the names, ages and positions of our executive officers and certain of our other senior officers at +April 26, 2016: +Name +Age +Positions Held With Us +Executive Officers +Joseph Wm. Foran +63 +Chairman of the Board and Chief Executive Officer +Matthew V. Hairford +55 +President +David E. Lancaster +59 +Executive Vice President and Chief Financial Officer +Craig N. Adams +49 +Executive Vice President — Land, Legal & Administration +Van H. Singleton, II +38 +Executive Vice President of Land +Bradley M. Robinson +61 +Senior Vice President of Reservoir Engineering and Chief Technology Officer +Billy E. Goodwin +58 +Senior Vice President — Operations +G. Gregg Krug +55 +Senior Vice President — Marketing and Midstream +Other Senior Officers +Matthew D. Spicer +48 +Vice President and General Manager of Midstream +Trent W. Green +49 +Vice President of Production +Robert T. Macalik +37 +Vice President and Chief Accounting Officer +Kathryn L. Wayne +55 +Controller and Treasurer +The following biographies describe the business experience of our executive officers and certain of our +other senior officers. Each officer serves at the discretion of our Board. There are no family relationships among any of our officers. +Executive Officers +Mr. Joseph Wm. Foran . Please see the biography of Mr. Foran on page 12 of this Proxy Statement. +Mr. Matthew V. Hairford . Mr. Hairford joined Matador Resources Company in July 2004 as its Drilling Manager. He was +named Vice President of Drilling in May 2005; Vice President of Operations in May 2006; Executive Vice President of Operations in May 2009; and in November 2013 assumed the title of President. He was previously with Samson Resources, an exploration +and production company, as Senior Drilling Engineer, having joined Samson in 1999. His responsibilities there included difficult Texas and Louisiana Gulf Coast projects, horizontal drilling projects and a start-up drilling program in Wyoming. The +scope of this work ranged from multi-lateral James Lime wells in East Texas to deep wells in South Texas and South Louisiana. Mr. Hairford has drilled many geo-pressured wells in Texas and Louisiana, along with normally pressured wells in +Southwest Wyoming and East Texas. Additional responsibilities included a horizontal well program in Roger Mills County, Oklahoma at 15,000 feet vertical depth. Mr. Hairford has experience in air drilling, underbalanced drilling, drilling under +mud caps and high temperature and pressure environments. From 1998 until 1999, Mr. Hairford served as Senior Drilling Engineer with Sonat, Inc., a global company involved with natural gas transmission and marketing, oil and natural gas +exploration and production and oil services. His responsibilities included Pinnacle Reef wells in East Texas and deep horizontal drilling in the Austin Chalk field in Central Louisiana. From 1984 to 1998, Mr. Hairford served in various drilling +engineering capacities with Conoco, Inc., an integrated energy company. His operational areas included the Appalachian Basin, Illinois Basin, Permian Basin, Texas Panhandle and Val Verde Basin. Mr. Hairford was selected as a member of a +three-person team to explore the use of unconventional technologies to identify a potential step change in the drilling sector. Multiple techniques were evaluated and tested, including declassified defense department technologies. Additional Conoco +assignments included both field and office drilling positions in Midland, Texas and Oklahoma City, Oklahoma. Earlier in his career with Conoco, Mr. Hairford was selected to participate in the Conoco Drilling Rig Supervisor Training Program in +Houston, Texas. This program consisted of two years working a regular rotation as a drilling representative on rigs and as a drilling engineer in various domestic offices. Mr. Hairford began his +24 +Table of Contents +career in 1984 with Conoco in a field production assignment in Hobbs, New Mexico. Mr. Hairford received his Bachelor of Science degree in Petroleum Engineering Technology from Oklahoma State +University in 1984. He is an active member of the American Association of Drilling Engineers, the American Petroleum Institute and the Society of Petroleum Engineers. Mr. Hairford has also undertaken additional training through Stanford +University’s Executive Education programs, including, most recently, the Stanford Graduate School of Business flagship six week Stanford Executive Program. +Mr. David E. Lancaster . Mr. Lancaster joined Matador Resources Company in December 2003 and serves as Executive Vice President and Chief Financial Officer. Mr. Lancaster has +served in several capacities since joining Matador, including Vice President of Business Development, Acquisitions and Finance from December 2003 to May 2005; Vice President and Chief Financial Officer from May 2005 to May 2007; and Executive Vice +President and Chief Financial Officer since May 2007. He also served as Chief Operating Officer from May 2009 to May 2015. From August 2000 to December 2003, he was Marketing Manager for Schlumberger Limited’s Data & Consulting +Services, which provided full-field reservoir characterization, production enhancement, multidisciplinary reservoir and production solutions and field development planning. In this position, he was responsible for global marketing strategies, +business models, input to research and development, commercialization of new products and services and marketing communications. From 1999 to 2000, Mr. Lancaster was Business Manager, North and South America, for Schlumberger Holditch-Reservoir +Technologies, the petroleum engineering consulting organization formed following Schlumberger’s acquisitions of S.A. Holditch & Associates, Inc. and Intera Petroleum Services. In this role, he was responsible for the business +operations of 12 consulting offices throughout North and South America. Mr. Lancaster worked with Schlumberger for six years following its acquisition of S.A. Holditch & Associates, Inc. in October 1997. He joined S.A. +Holditch & Associates in 1980, and was one of the principals in that well-known petroleum engineering consulting firm. Between 1980 and 1997, Mr. Lancaster held positions ranging from Senior Petroleum Engineer to Senior Vice +President — Business Development. In this latter role, he was responsible for marketing and sales, as well as the company’s commercial training business. During most of his tenure at S.A. Holditch & Associates, +Inc., Mr. Lancaster was a consulting reservoir engineer with particular emphasis on characterizing and improving production from unconventional natural gas reservoirs. For more than seven years during this time, he was the Project Manager for +the Gas Research Institute’s Devonian Shales applied research projects investigating ways to improve reservoir characterization, completion practices and natural gas recovery in low permeability, natural gas shale reservoirs. He was also the +lead reservoir engineer for the Secondary Gas Recovery project sponsored by the Gas Research Institute and the U.S. Department of Energy, looking at ways to improve recovery from compartmentalized natural gas reservoirs in North and South Texas. +Mr. Lancaster began his career as a reservoir engineer for Diamond Shamrock Corporation in 1979. Mr. Lancaster received Bachelor and Master of Science degrees in Petroleum Engineering from Texas A&M University in 1979 and 1988, +respectively, graduating summa cum laude. He has authored or co-authored more than 50 technical papers and articles, as well as numerous other published reports and industry presentations. He is a member of the Society of Petroleum Engineers, and he +served as a charter member and former Vice Chairman of the Texas A&M University Petroleum Engineering Advisory Board. In 2014, Mr. Lancaster was inducted into the Texas A&M University Petroleum Engineering Academy of Distinguished +Graduates. Mr. Lancaster is a Licensed Professional Engineer in the State of Texas. +Mr. Craig N. Adams . +Mr. Adams joined Matador Resources Company in September 2012 as its Vice President and General Counsel. In July 2013, Mr. Adams was promoted to Executive Vice President — Land and Legal and became Executive Vice +President — Land, Legal & Administration in June 2015. Before joining Matador Resources Company, Mr. Adams was a partner with Baker Botts L.L.P. from March 2001 to September 2012 where he focused his practice on +securities, mergers and acquisitions and corporate governance matters. He was a partner with Thompson & Knight L.L.P. from January 1999 to February 2001 and an associate from September 1992 to December 1998. Mr. Adams received a +Bachelor of Business Administration degree in finance from Southern Methodist University in 1988 and his law degree in 1992 from Texas Tech University School of Law, where he was a Comment Editor of the Texas Tech Law Review. +25 +Table of Contents +Mr. Van H. Singleton, II. Mr. Singleton joined Matador Resources Company in +August 2007 as a Landman and was promoted to Senior Staff Landman in 2009 and then to General Land Manager in 2011. In September 2013, Mr. Singleton became Vice President of Land for the Company, and he was promoted to Executive Vice President +of Land in February 2015. Prior to joining Matador, Mr. Singleton founded and was President of VanBrannon and Associates, LLC and Southern Escrow and Title of Mississippi, LLC from 1998 to 2003, which provided full-spectrum land title work and +title insurance in Mississippi, Louisiana, Texas and Arkansas. From 2003 until joining Matador in 2007, he served as general manager of his family’s real estate brokerage in Houston, Texas. Mr. Singleton received a Bachelor of Arts degree +in Criminal Justice from the University of Mississippi in 2000. He is an active member of the American Association of Professional Landmen, the New Mexico Landman Association, the Permian Basin Landman Association and the Dallas Association of +Petroleum Landmen. +Mr. Bradley M. Robinson . Mr. Robinson joined Matador Resources Company in August +2003 as one of its founders, serving as our Vice President of Reservoir Engineering until his promotion to Senior Vice President of Reservoir Engineering in February 2016. He assumed the additional role of Chief Technology Officer in May 2013. Prior +to joining Matador, from 1997 to August 2003, Mr. Robinson held the position of Advisor with Schlumberger Limited’s Data & Consulting Services business unit, which provided full-field reservoir characterization, production +enhancement, multidisciplinary reservoir and production solutions and field development planning, where he was responsible for the development and application of new technologies for well completions and stimulation, provided technical expertise for +reservoir management and field development projects, taught basic and advanced industry courses in well completions and stimulation and provided internal training in production engineering and stimulation methods. Mr. Robinson worked with +Schlumberger for six years following its acquisition of S.A. Holditch & Associates, Inc. in 1997. Mr. Robinson joined Holditch in 1979, and was one of the principals in that well-known petroleum engineering consulting firm. From 1979 +to 1982, Mr. Robinson served as Senior Petroleum Engineer and was involved in all aspects of reservoir and production engineering for both conventional and low permeability oil and natural gas fields. From 1982 to 1997, he was Holditch’s +Vice President — Production Engineering, where he was responsible for coordination and management of production and completion engineering projects, including development drilling and openhole data acquisition programs, design and +supervision of initial well completions and workovers, transient well test design and analysis and hydraulic fracture stimulation design and supervision. His duties also included reserves evaluation and economic analysis of new and existing wells, +and his areas of specialization included low permeability natural gas sands, coalbed methane reservoirs and horizontal wells. For approximately 10 years during this time, he served as assistant project manager for the Gas Research Institute’s +Tight Gas Sands and Horizontal Gas Wells applied research projects investigating ways to improve reservoir characterization, completion practices and natural gas recovery in low permeability natural gas reservoirs and horizontal natural gas wells. +During his career, he has worked all over the world, including the United States, Canada, Venezuela, Colombia, Mexico, Egypt, the North Sea, Russia and Indonesia, among others. Mr. Robinson began his career in 1977 with Marathon Oil Company, +serving as an Associate Production Engineer and later as a Reservoir Engineer in Midland. Mr. Robinson received Bachelor and Master of Science degrees in Petroleum Engineering from Texas A&M University in 1977 and 1986, respectively. He has +authored or co-authored more than 30 technical articles appearing in industry and/or technical publications and has made numerous engineering technical presentations. Mr. Robinson is a member of the Society of Petroleum Engineers and is a +Licensed Professional Engineer in the State of Texas. He served as Chairman of the Dallas Section of the Society of Petroleum Engineers in 2011 and 2012. He also received the 2013 Engineer of the Year Award presented by the Dallas Section of the +Society of Petroleum Engineers and the 2013 Completions Optimization and Technology award presented by the Mid-Continent region of the Society of Petroleum Engineers. +Mr. Billy E. Goodwin. Mr. Goodwin joined Matador Resources Company in July 2010 as Drilling Manager. In September 2013 he was named Vice President of Drilling for the Company, +and he was promoted to Senior Vice President — Operations in February 2016. He was previously with Samson Resources, a company he joined in 2001 to supervise the drilling of underbalanced multilateral horizontal wells. In +his roles as Senior Drilling Engineer and Area Drilling Manager for Samson, Mr. Goodwin engineered and managed operations in +26 +Table of Contents +the Permian Basin, South Texas, East Texas, Mid-Continent and Gulf Coast areas. Mr. Goodwin worked with Conoco, Inc. before joining Samson. He began his career in 1985 in Conoco’s +production department before joining the drilling department in 1989. Mr. Goodwin has diverse horizontal operational experience both onshore and offshore, and both domestically and internationally, including in the Middle East, Southeast +Asia and South America. Throughout his career, Mr. Goodwin has developed underbalanced drilling, managed pressure drilling and drill-in casing techniques for normal and geo-pressured environments. Mr. Goodwin received a Bachelor of +Science degree in Petroleum Engineering Technology from Oklahoma State University in 1984. He is a member of the Society of Petroleum Engineers and the American Association of Drilling Engineers. Mr. Goodwin served in the United +States Marine Corps. +Mr. G. Gregg Krug. Mr. Krug joined Matador Resources Company in April 2012 as its +Marketing Manager. In September 2013 he was named Vice President of Marketing and Vice President of Longwood Gathering & Disposal Systems, LP for the Company, and he was promoted to Senior Vice President — Marketing and +Midstream in February 2016. He has overall responsibility for Matador’s marketing activities of its oil and natural gas, as well as responsibility for all business aspects for Longwood Gathering & Disposal Systems, LP. Previously, +Mr. Krug was with Unit Petroleum Company, an exploration and production company based in Tulsa, Oklahoma, as Marketing Manager, having joined in 2006. He and his staff were responsible for marketing, gas measurement, contract +administration and production reporting in their core areas of Oklahoma, the Texas Panhandle, East Texas and Northwestern Louisiana. From 2005 to 2006, Mr. Krug served as Marketing Manager with Matador Resources Company. From 2000 to 2005, +Mr. Krug served as Gas Scheduling Supervisor with Samson Resources in Tulsa, Oklahoma where he and his staff were responsible for scheduling natural gas sales as well as procurement of natural gas supply on Samson owned gathering +systems. From 1983 to 2000, Mr. Krug served with The Williams Companies in various capacities including in the Kansas Hugoton Field in Ulysses, Kansas and Tulsa, Oklahoma for Williams Natural Gas Pipeline and on the trading floor in Tulsa, +Oklahoma for Williams Energy Services Company. Mr. Krug received a Bachelor of Business Administration degree from Oklahoma City University in 1996. +Other Senior Officers +Mr. Matthew D. Spicer. +Mr. Spicer joined Matador Resources Company in March 2014 as Senior Representative of Business Development and was promoted to Manager of Business Development and then General Manager of Midstream later in 2014. In October 2015, Mr. Spicer +was promoted to Vice President and General Manager of Midstream. Prior to joining the Company, Mr. Spicer served as the Director of Flight Operations for L-3 Unmanned Systems, also serving in various roles including as Program Manager and in +Business Development during his tenure with L-3, which began in 2011. Mr. Spicer served in the United States Marine Corps from 1991 to 2014, both in active duty and as a reservist, before his retirement as a Lieutenant Colonel in 2014. +Mr. Spicer also served as a first officer with American Airlines from 2000 to 2003 following his active duty in the United States Marine Corps. Mr. Spicer received a Bachelor of Science degree in Manufacturing Engineering Technology from +Central Michigan University in 1991. +Mr. Trent W. Green. Mr. Green joined Matador Resources Company in +connection with the HEYCO Merger in February 2015 as Vice President of Production. Previously, Mr. Green served as Chief Operating Officer of Harvey E. Yates Company and oversaw all of its oil and natural gas operations, including safety and +regulatory compliance. Prior to joining Harvey E. Yates Company in 2012, Mr. Green was Rocky Mountain Division Manager for BOPCO, L.P., a Fort Worth, Texas based company. From 2002 to 2007, Mr. Green served as Division Manager for Pinnacle +Technologies, where he expanded its microseismic and tiltmeter mapping business in the Rocky Mountain Region. Mr. Green owned his own oilfield service business from 2000 to 2002. That business provided specialized in-situ reservoir testing +services to coalbed methane and shale developers. Mr. Green previously worked for S.A. Holditch & Associates, Inc. and Amerada Hess performing production, reservoir and completion engineering duties throughout North America. He has +also taught courses worldwide through NeXT, LLC, an industry training company. Mr. Green received his Bachelor of Science degree in Petroleum Engineering from Montana Tech of the University of Montana in 1989 and his Master of Business +27 +Table of Contents +Administration from the University of Denver in 2007. He is a registered professional engineer in the State of Colorado. +Mr. Robert T. Macalik . Mr. Macalik joined Matador Resources Company in July 2015 as Vice President and Chief Accounting Officer. He has more than 10 years of experience in public +accounting with significant experience in the upstream oil and natural gas industry. From 2012 to 2015, Mr. Macalik worked at Pioneer Natural Resources Company as Corporate Controller and, previously, as Director of Technical Accounting and +Financial Reporting. At Pioneer, Mr. Macalik supervised corporate accounting and financial reporting functions. Prior to joining Pioneer, he was a Senior Manager with PricewaterhouseCoopers (PwC), joining the public accounting firm in 2002. +During his tenure with PwC, Mr. Macalik conducted and managed audits for various companies, primarily public companies in the oil and natural gas industry, and managed numerous client relationships. Mr. Macalik received a Bachelor of Arts +degree in History, a Bachelor of Business Administration degree and a Master of Professional Accounting degree all from The University of Texas at Austin in 2002. He is a licensed Certified Public Accountant in the State of Texas. +Ms. Kathryn L. Wayne . Ms. Wayne was one of the original employees of Matador Resources Company and has served as +the Company’s Controller and Treasurer since 2003. She was previously with Matador Petroleum Corporation, joining the company in 1991. Immediately prior to its sale, Ms. Wayne was Senior Revenue Accountant, and her duties included +supervision of the revenue accounting staff, management of the revenue distribution process and preparation of monthly accruals and various required regulatory reports. Ms. Wayne began her career with Mobil Oil Corporation, where she held +various positions in the gas accounting department. Ms. Wayne received a Bachelor of Arts degree in Accounting from Texas A&M University in 1983. She is recognized by the Council of Petroleum Accountants Societies (COPAS) as an Accredited +Petroleum Accountant (APA). She is an active member of COPAS and served a three-year term on the COPAS APA Board of Examiners. +28 +Table of Contents +PROPOSAL 2 — APPROVAL OF OUR AMENDED AND RESTATED ANNUAL +INCENTIVE PLAN +Background +The Company previously sponsored and maintained the Matador Resources Company Annual Incentive Plan for Management and Key Employees, effective January 1, 2012 (the “2012 Annual Incentive +Plan”). On February 19, 2016, our Board adopted, subject to shareholder approval, the Matador Resources Company Amended and Restated Annual Incentive Plan for Management and Key Employees (the “Incentive Plan”). The Incentive +Plan is designed to link executive decision-making and performance with the Company’s goals, reinforce these goals and ensure the highest level of accountability for the success of the Company as a whole. +The Incentive Plan advances the interests of the Company and its shareholders by providing the Company with an additional means by which +it can sustain and enhance its culture of personal commitment on the part of its executives, select managers and key employees in the continued growth, development and financial success of the Company, and encourage them to remain with and devote +their best efforts to the business of the Company, thereby advancing the interests of the Company and its shareholders. The Incentive Plan provides for the granting of awards of incentive compensation that may be paid to a participant upon +satisfaction of specified Performance Goals (as defined below) for a particular Performance Period (as defined below). +The +Incentive Plan is designed to satisfy the requirements of Code Section 162(m) so that the Company can take federal income tax deductions for the performance-based compensation paid under the Incentive Plan to its named executive officers. Code +Section 162(m) generally provides that publicly-held companies may not take a federal income tax deduction for certain compensation in excess of $1 million paid to certain named executive officers in any one year unless that compensation is +“performance-based.” Compensation can qualify as performance-based only if the material terms of the performance goals are disclosed to and approved by a company’s shareholders before the compensation is paid and other requirements +are satisfied. The material terms to be disclosed include the following: (a) the employees eligible to receive compensation, (b) a description of the business criteria on which the performance goals are based and (c) either the +maximum amount of compensation that could be paid to an employee if the performance goals are achieved or the formula used to calculate the amount. +The following is a brief summary of the material features of the Incentive Plan as it pertains to certain “Covered Employees” (generally, an individual employed by the Company who, on the last +day of the taxable year, either is the Company’s principal executive officer or an individual who is among the three highest compensated officers for the taxable year (other than the principal executive officer or the principal financial +officer)). The full text of the Incentive Plan is attached as Appendix A to this Proxy Statement. The description of the Incentive Plan contained herein is not intended to be complete and is qualified in its entirety by reference to +Appendix A , which contains the complete text of the Incentive Plan. +The Board has determined that the Incentive Plan +is in the best interest of the Company and its shareholders and has recommended that the Company’s shareholders approve the Incentive Plan. +Plan Administration +The Incentive Plan will be +administered by the Nominating, Compensation and Planning Committee or such other committee as determined by the Board, and which shall consist of two or more “outside directors” within the meaning of Code Section 162(m) (the +“Plan Committee”). The Plan Committee has the authority and discretion to administer and interpret the provisions of the Incentive Plan, to adopt such rules and regulations for the administration of the Incentive Plan and to take such +other actions as permitted under the Incentive Plan, as the Plan Committee deems necessary or advisable in the administration of the Incentive Plan. The Plan Committee has the full authority to (i) designate the employees who are eligible to +participate in the Incentive Plan; (ii) establish the Performance Goals and achievement levels for each participant; and (iii) establish and certify the achievement of the Performance Goals for the applicable Performance Period. Decisions +of the Plan +29 +Table of Contents +Committee will be final, binding and conclusive upon all parties, including, without limitation, the Company and plan participants. +Plan Eligibility and Participation +Participation in the Incentive Plan is limited to those employees who are designated by the Plan Committee. For each period selected by +the Plan Committee for payment of incentive compensation, referred to as a “Performance Period” (a Performance Period coincides with the fiscal year of the Company), the Plan Committee will select the particular employees to whom incentive +compensation may be awarded. With respect to Covered Employees, the Plan Committee must make its determination within the first 90 days of the Performance Period (and in the case of a Performance Period less than a fiscal year, such determinations +will be made no later than the date on which 25% of the Performance Period has elapsed). Awards may be made by the Plan Committee at any time and from time to time during a Performance Period to new participants, or to then participants, and may +include or exclude previous participants, as the Plan Committee shall determine. The Plan Committee’s determinations under the Incentive Plan may be made by the Committee selectively among employees who receive, or are eligible to receive, +awards under the Incentive Plan. +Determination of Performance Goals and Awards +With respect to each Performance Period, the Plan Committee shall establish a performance goal for all participants in such Performance +Period with the creation of a performance pool, which shall be 3.5% of Adjusted EBITDA (as defined in the Incentive Plan) for such Performance Period; provided that Adjusted EBITDA equals or exceeds $50,000,000 for such Performance Period (the +“Adjusted EBITDA Pool Goal”). Once the Adjusted EBITDA Pool Goal is reached or exceeded, the awards will be allocated to each participant based on the allocation formula set forth in the table below. The table below establishes the maximum +award payable to any participant for a specified Performance Period. +Participant +Percentage of Performance +Pool (Maximum) +Chief Executive Officer +30% +Second Highest Paid Participant +17.5% +Third Highest Paid Participant +17.5% +Fourth Highest Paid Participant +17.5% +Fifth Highest Paid Participant +17.5% +Total +100% +In the Plan Committee’s discretion, supplemental performance goals (the +“Discretionary Goals”), in addition to the Adjusted EBITDA Pool Goal set forth above (collectively with the Discretionary Goals, the “Performance Goals”), may be established by the Plan Committee for each Performance Period. The +Discretionary Goals may be identical for all participants or, at the discretion of the Plan Committee, may be different to reflect more appropriate measures of individual performance. No later than the 90 th day of the Performance Period (and in the case of a Performance +Period less than a fiscal year, such determination shall be made no later than the date that 25% of the Performance Period has elapsed), the Plan Committee will approve (i) the Performance Goals for the Performance Period (if applicable), +(ii) the threshold, target, and maximum levels for the Performance Goals for the Performance Period (if applicable), (iii) with respect to each participant, the incentive compensation for achievement of threshold, target and maximum +achievement levels and the relative weighting, if any, of each Performance Goal in determining the participant’s incentive compensation (if applicable) and (iv) a schedule setting forth the payout opportunity for threshold, target and +maximum achievement levels (if applicable). +30 +Table of Contents +In addition to the Adjusted EBITDA Pool Goal, awards under the Incentive Plan may be made +subject to the attainment of the following types of performance goals, which, where applicable, shall be within the meaning of Code Section 162(m) relating to one or more of the following business criteria: +• +earnings (either in aggregate or on a per-share basis) or adjusted earnings; +• +net income or adjusted net income; +• +operating income; +• +operating profit; +• +cash flow; +• +return measures (including return on assets, investments, equity or invested capital); +• +total shareholder return (change in share price plus reinvestment of dividends into shares when declared, if any, from period to period) and other +measures of shareholder return (including income applicable to common shareholders or other classes of shareholders); +• +earnings before or after either, or any combination of, interest, taxes, depletion, depreciation, amortization or other non-cash items; +• +Adjusted EBITDA; +• +acreage; +• +reserves, total reserves or reserves per barrel; +• +present value of estimated future oil and natural gas revenues, net of estimated direct expenses, discounted at an annual discount rate of 10%, or PV +10; +• +gross revenues; +• +reduction in expense levels in each case, where applicable, determined either on a Company-wide basis or in respect of any one or more subsidiaries or +business units thereof; +• +economic value or economic value added; +• +market share or market share added; +• +annual net income to common stock; +• +earnings per share or growth in earnings per share; +• +annual cash flow provided by operations; +• +changes in annual revenues; +• +strategic and operational business criteria, consisting of one or more objectives based on specified revenue, market penetration, geographic business +expansion goals, objectively identified project milestones, production volume levels, cost targets, lease operating expenses, G&A expenses, finding and development costs, reserves or reserves added, reserves replacement ratio and goals relating +to acquisitions or divestitures; and/or +• +goals relating to specific environmental compliance measures and safety and accident rates. +Any Performance Goal may be used to measure the performance of the Company as a whole or any business unit of the Company and may be +measured relative to a peer group or index. Any Performance Goal may include or exclude (i) extraordinary, unusual and/or non-recurring items of gain or loss, (ii) gains or losses on the disposition of a business, (iii) changes in tax +or accounting regulations or laws, (iv) the effect of a merger or acquisition, as identified in the Company’s quarterly and annual earnings releases or (v) other similar occurrences. In all other respects, the Performance Goals shall +be calculated in accordance with the Company’s financial statements, under generally accepted accounting principles or under a methodology established by the Plan Committee which is consistently applied. +31 +Table of Contents +Certification and Level of Achievement +Within 60 days immediately following the end of the applicable Performance Period, the Plan Committee shall determine the awards to +participants for such Performance Period by comparing actual performance to (i) the Adjusted EBITDA Pool Goal adopted by the Plan Committee for such Performance Period and (ii) at the Plan Committee’s discretion, any applicable +Discretionary Goals. With respect to Covered Employees, the Plan Committee shall certify that the amount of the award has been accurately determined in accordance with the terms, conditions and limits of the Incentive Plan. The Plan Committee may, +in its discretion, decrease the award to be paid to one or more participants for such Performance Period. However, the Plan Committee may not in any event increase the amount of an award payable to an individual above the maximum award payable. +Award Payment +Approved awards under the Incentive Plan for a Performance Period will be paid (a) if the Company’s fiscal year is a calendar year, then in the calendar year immediately following the close of +the year in which such Performance Period ends, but in any event within 75 days following the Plan Committee’s certification of the award; or (b) if the Company’s fiscal year is other than a calendar year, then on the 135 th day following the end of such Performance Period. +In addition, in the event of certain terminations of service due to death or disability prior to the end of the applicable Performance +Period, the Plan Committee may, in its discretion, pay a participant a pro-rated amount of incentive compensation under such participant’s award. In the event of a Change in Control (as defined in the Incentive Plan) during a Performance +Period, the Company will pay each participant a pro-rata amount of any potential incentive compensation payable under any award made to such participant, calculated by multiplying the amount payable for target achievement by the percentage of the +Performance Period completed prior to the Change in Control. +The payment for an award shall be in the form of a cash lump sum +payment. +Recoupment for Restatements +The Plan Committee may recoup all or a portion of any incentive compensation paid to a participant in the event of a restatement of the +Company’s financial statements as set forth in the Company’s clawback policy, if any, as approved by the Board from time to time. +Plan Term and Amendment or Discontinuance +The effective date of the Incentive Plan is January 1, 2016, subject to approval by the shareholders at the Annual Meeting. The Incentive Plan will continue in effect until terminated by the Plan +Committee or the Board. The Plan Committee may at any time and from time to time, without the consent of the participants, alter, amend, revise, suspend or discontinue the Incentive Plan in whole or in part; provided, however, that no amendment that +requires shareholder approval in order for the Incentive Plan and awards to comply with any applicable law or the rules and regulations of any applicable stock exchange shall be effective unless such amendment shall be approved by the requisite vote +of the shareholders of the Company entitled to vote thereon, and further provided that, any amendment that modifies any pre-established Performance Goal for a participant who is a Covered Employee (or his successor(s), as may be applicable) with +respect to any particular Performance Period may only be effected on or prior to that date which is 90 days following the commencement of such Performance Period. In addition, the Board of Directors may discontinue the Incentive Plan in whole or in +part and amend the Incentive Plan in any manner advisable in order for incentive compensation granted under the Incentive Plan to qualify as “performance-based” compensation under Code Section 162(m) (including amendments as a result +of changes to Code Section 162(m) or the regulations thereunder to permit greater flexibility with respect to incentive compensation granted under the Incentive Plan). +32 +Table of Contents +Federal Income Tax Consequences +The following is a brief summary of certain federal income tax consequences relating to the transactions described under the Incentive +Plan as set forth below. This summary does not purport to address all aspects of federal income taxation and does not describe state, local or foreign tax consequences. This discussion is based upon provisions of the Code and the treasury +regulations issued thereunder, and judicial and administrative interpretations under the Code and treasury regulations, all as in effect as of the date hereof, and all of which are subject to change (possibly on a retroactive basis) or different +interpretation. +Law Affecting Deferred Compensation . In 2004, Section 409A was added to the Code to regulate all +types of deferred compensation, including, in some instances, incentive compensation. If the requirements of Code Section 409A are not satisfied, deferred compensation and earnings thereon will be subject to tax as it vests, plus an interest +charge at the underpayment rate plus 1% and a 20% penalty tax. +Tax Consequences to Participants . Generally, the +recipient of cash will be subject to tax at ordinary income rates on the amount of the award on the date of payment or delivery. Any ordinary income realized by a participant upon receipt of cash is subject to withholding of federal, state and local +income tax and to withholding of the participant’s share of tax under the Federal Insurance Contribution Act. Deferred compensation that is subject to Code Section 409A will be subject to certain federal income tax withholding and +reporting requirements. Withholding does not represent an increase in the participant’s total income tax obligation, since it is fully credited toward his or her tax liability for the year. +Tax Consequences to the Company . To the extent that a participant recognizes ordinary income in the circumstances described above, +the Company or a subsidiary of the Company for which the participant performs services will be entitled to a corresponding deduction; provided that, among other things, the income meets the test of reasonableness, is an ordinary and necessary +business expense and is not an “excess parachute payment” within the meaning of Code Section 280G and is not disallowed by the $1 million limitation on certain executive compensation under Code Section 162(m). +Section 162(m) Million Dollar Deduction Limit . The Company may not deduct compensation of more than $1 million +that is paid to an individual who, on the last day of the taxable year, is a Covered Employee. The limitation on deductions does not apply to certain types of compensation, including qualified “performance-based” compensation. The Company +intends that any incentive compensation paid under the Incentive Plan will be construed as to constitute qualified “performance-based” compensation and, as such, will be exempt from the $1 million limitation on deductible compensation. +Although the Company generally will attempt to structure the incentive compensation under the Incentive Plan so as to preserve deductibility, there may be circumstances where the Company’s best interests may be best served by maintaining +flexibility in the way compensation is provided even if it might result in the non-deductibility of incentive compensation awarded under the Incentive Plan. +Other Compensation +The Incentive Plan is not +exclusive. The Company may pay other compensation to named executive officers and other key employees as authorized by the Board and applicable law. If the Incentive Plan is not approved by the shareholders, the Company intends to operate the +pre-amended and restated version of the Incentive Plan, which is similar to the Incentive Plan, and the Company contemplates that any cash incentive payments for the Company’s fiscal year ending December 31, 2016 for named executive +officers would not be deductible under Code Section 162(m) to the extent that (when combined with other non-exempt compensation paid) they exceed the $1 million limit on non-exempt compensation paid to the named executive officers. +33 +Table of Contents +Potential Payments to Named Executive Officers +The first awards granted under the Incentive Plan will relate to 2016. Based on the payout percentages approved by the Plan Committee, if +the Adjusted EBITDA Pool Goal is met but not exceeded (i.e., if Adjusted EBITDA equals $50,000,000), the potential amounts payable to the named executive officers for 2016 under the Incentive Plan are as follows: +Name +Potential Awards for +2016 +Under the Incentive Plan +Joseph Wm. Foran +$ +525,000 +Matthew V. Hairford +$ +306,250 +David E. Lancaster +$ +306,250 +Craig N. Adams +$ +306,250 +Van H. Singleton, II +$ +306,250 +The potential payout amounts to the named executive officers may be greater if actual Adjusted EBITDA +exceeds $50,000,000 for 2016. The Plan Committee may establish additional Discretionary Goals for 2016, in its discretion. +Vote Required +The affirmative vote of the holders of a majority of the shares present in person or by proxy and +entitled to vote at the Annual Meeting is required to approve the Incentive Plan. If you hold your shares through a broker and you do not instruct the broker how to vote, your broker will not have the authority to vote your shares. Abstentions will +have the effect as a vote cast against the proposal. Broker non-votes will be counted as present for purposes of determining the presence of a quorum but will have no effect upon the outcome of the vote. +The Board of Directors recommends that you vote FOR approval of the +Matador Resources Company Amended and Restated Annual Incentive Plan. +34 +Table of Contents +PROPOSAL 3 — ADVISORY VOTE TO APPROVE NAMED +EXECUTIVE OFFICER COMPENSATION +The Company seeks a non-binding advisory vote from its shareholders to approve the +compensation of its Named Executive Officers (as defined below) as described in this Proxy Statement. +As discussed under the +“Executive Compensation — Compensation Discussion and Analysis” section of this Proxy Statement (“CD&A”), we believe the Company’s future success and the ability to create long-term value for our shareholders +depends on our ability to attract, retain and motivate highly qualified individuals in the oil and natural gas industry. Additionally, we believe that our success also depends on the continued contributions of our Named Executive Officers. The +Company’s compensation system plays a significant role in its ability to attract, motivate and retain a high quality workforce. As described in CD&A, the Company’s compensation program for Named Executive Officers is designed to +reward, in both the short term and the long term, performance that contributes to the implementation of our business strategies, maintenance of our culture and values and the achievement of our objectives. +In addition, we reward qualities that we believe help achieve our business strategies such as: +• +teamwork; +• +individual performance in light of general economic and industry-specific conditions; +• +relationships with shareholders and vendors; +• +the ability to manage and enhance production from our existing assets; +• +the ability to explore new opportunities to increase oil and natural gas production; +• +the ability to identify and acquire additional acreage; +• +the ability to increase year-over-year proved reserves; +• +the ability to control unit production costs; +• +level of job responsibility; +• +industry experience; and +• +general professional growth. +This proposal provides shareholders the opportunity to endorse or not endorse the Company’s executive compensation program through the following resolution: +“Resolved, that the compensation paid to the Company’s Named Executive Officers, as disclosed pursuant to +Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby approved.” +The above referenced CD&A disclosure appears on pages 43 to 55 of this Proxy Statement. +Because this is an advisory vote, it will not be binding upon the Board. However, the Nominating, Compensation and Planning Committee and the independent members of the Board (the “Independent +Directors”) will take into account the outcome of the vote when considering future executive compensation arrangements. +35 +Table of Contents +Vote Required +The affirmative vote of the holders of a majority of the shares present in person or by proxy and entitled to vote at the Annual Meeting +is required to approve this resolution on a non-binding basis. If you hold your shares through a broker and you do not instruct the broker how to vote, your broker will not have the authority to vote your shares. Abstentions will have the effect as +a vote cast against the proposal. Broker non-votes will be counted as present for purposes of determining the presence of a quorum but will have no effect upon the outcome of the vote. +During our 2012 Annual Meeting of Shareholders, our shareholders approved a non-binding, advisory proposal to hold annual advisory votes +to approve our executive compensation. In consideration of the results of this advisory vote, the Board has adopted a policy providing for annual advisory votes on executive compensation. Unless the Board modifies this policy, the next advisory vote +on compensation following this vote will be held at our 2017 Annual Meeting of Shareholders. +The Board of Directors recommends that you vote FOR approval of this resolution. +36 +Table of Contents +PROPOSAL 4 — RATIFICATION OF THE APPOINTMENT OF KPMG +LLP +The Audit Committee has appointed KPMG LLP (“KPMG”) as the independent registered public accounting firm of +the Company for the year ending December 31, 2016, and the Board has directed that such appointment be submitted to our shareholders for ratification at the Annual Meeting. +The Company has been advised by KPMG that the firm has no relationship with the Company or its subsidiaries other than that arising from +the firm’s engagement as auditors. +If the shareholders do not ratify the appointment of KPMG, the Audit Committee will +consider whether to engage a different independent registered public accounting firm but will not be obligated to do so. +The +Company has been advised that representatives of KPMG will be present at the Annual Meeting and will be available to respond to appropriate questions and make a statement if they desire to do so. +Fees of Independent Registered Public Accounting Firm for Fiscal Years 2015 and 2014 +The following table presents fees for professional audit services rendered by KPMG for the audit of the Company’s annual financial +statements for the years ended December 31, 2015 and 2014, and fees for other services rendered by KPMG during that period: +2015 +2014 +Audit fees +$ +1,073,821 +$ +879,850 +Audit-related fees +— +— +Tax fees +— +— +All other fees +— +— +Total +$ +1,073,821 +$ +879,850 +Services rendered by KPMG in connection with the fees presented above were as follows: +Audit Fees +For +fiscal year 2015, audit fees consisted of fees associated with the audit of the Company’s consolidated financial statements, including the audit of the effectiveness of the Company’s internal control over financial reporting, required +reviews of our quarterly condensed consolidated financial statements, including for inclusion in our prospectus related to our 2015 equity offering, our offering memorandum related to our 2015 senior notes offering and our prospectus related to our +2015 registered exchange offering, and providing the underwriters of such offerings with comfort letters on certain information contained, or incorporated by reference, in the prospectus or offering memorandum, as applicable. For fiscal year 2014, +audit fees consisted of fees associated with the audit of the Company’s consolidated financial statements, including the audit of the effectiveness of the Company’s internal control over financial reporting, required reviews of our +quarterly condensed consolidated financial statements, including for inclusion in our prospectus related to our 2014 equity offering, and providing the underwriter of such offering with comfort letters on certain information contained, or +incorporated by reference, in the prospectus. +Audit-Related Fees +We did not incur any audit-related fees in 2015 or 2014. +Tax Fees +We did not incur any fees for tax advice, planning and +other services in 2015 or 2014. +37 +Table of Contents +All Other Fees +We did not incur any other fees in 2015 or 2014. +The Audit Committee +pre-approves all audit and permissible non-audit services provided by KPMG. These services may include audit services, audit-related services, tax services and other services. The Audit Committee has authorized the chair of the Audit Committee to +pre-approve audit and permissible non-audit services provided by KPMG up to $750,000. Pursuant to this delegation, the decisions of the chair must be presented to the Audit Committee at its next meeting. +Report of the Audit Committee +We are a standing committee comprised of independent directors as currently defined by SEC regulations and the applicable listing standards of the NYSE. The Board has determined that at least one of the +members of the Audit Committee is an “audit committee financial expert” as defined by applicable SEC rules and regulations. We operate under a written charter adopted by the Board. A copy of the charter is available free of charge on the +Company’s website at www.matadorresources.com under “Investors — Corporate Governance.” +We +annually select the Company’s independent registered public accounting firm. If the shareholders do not ratify the appointment of KPMG at the Annual Meeting, the Audit Committee will consider whether to engage a different independent registered +public accounting firm but will not be obligated to do so. +Management is responsible for the Company’s internal controls +and the financial reporting process. The independent registered public accounting firm is responsible for performing an independent audit of the Company’s consolidated financial statements in accordance with the standards of the United States +Public Company Accounting Oversight Board and issuing a report thereon. As provided in our charter, our responsibilities include the monitoring and oversight of these processes. +Consistent with our charter responsibilities, we have met and held discussions with management and the independent registered public +accounting firm. In this context, management and the independent registered public accounting firm represented to us that the Company’s consolidated financial statements for the fiscal year ended December 31, 2015 were prepared in +accordance with U.S. generally accepted accounting principles. We reviewed and discussed the consolidated financial statements with management and the independent registered public accounting firm and discussed with the independent registered public +accounting firm matters required to be discussed by Auditing Standard No. 16, as amended (AICPA, Professional Standards, Vol. 1. AU Section 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T. +The Company’s independent registered public accounting firm has also provided to us the written disclosures and the letter required +by applicable requirements of the Public Company Accounting Oversight Board regarding the independent registered public accounting firm’s communications with the Audit Committee, and we discussed with the independent registered public +accounting firm that firm’s independence. +Based upon our reviews and discussions with management and the independent +registered public accounting firm and our review of the representation of management and the report of the independent registered public accounting firm to the Audit Committee, we recommended that the Board include the audited consolidated financial +statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 filed with the SEC. +Audit Committee, +Carlos M. Sepulveda, Jr., Chair +David M. Laney +Steven W. Ohnimus +Don C. Stephenson +38 +Table of Contents +Vote Required +The affirmative vote of the holders of a majority of the shares present in person or by proxy and entitled to vote at the Annual Meeting +is required for the ratification of the appointment of KPMG as the Company’s independent registered public accounting firm for the year ending December 31, 2016. If the shareholders do not ratify the appointment of KPMG, the Audit +Committee will consider whether to engage a different independent registered public accounting firm but will not be obligated to do so. Abstentions will have the effect as a vote cast against the proposal. +The Board of Directors recommends that you vote FOR the ratification of the appointment +of KPMG as the Company’s independent registered public accounting firm for the +year ending December 31, 2016. +39 +Table of Contents +PROPOSAL 5 — SHAREHOLDER PROPOSAL TO ADOPT A MAJORITY +VOTING STANDARD FOR THE ELECTION OF DIRECTORS +The California State Teachers’ Retirement System +(“CalSTRS”), a shareholder of the Company, has notified the Company that it intends to present the proposal and related supporting statement (which is quoted verbatim) set forth below for action by the shareholders at the Annual Meeting. +Pursuant to Rule 14a-8(l)(1) of the Exchange Act, the Company will provide the address and number of shares of Common Stock held by the proponent of the proposal promptly upon receipt of an oral or written request. Requests should be submitted to +Matador Resources Company, Attention: Corporate Secretary, 5400 LBJ Freeway, Suite 1500, Dallas, Texas 75240, email: investors@matadorresources.com or by calling (972) 371-5200. +As explained in the Company’s opposition statement below, the Board recommends that you vote “AGAINST” this shareholder +proposal. +BE IT RESOLVED: +That the shareholders of Matador Resources Company hereby request that the Board of Directors initiate the appropriate process to amend +the Company’s articles of incorporation and/or bylaws to provide that director nominees shall be elected by the affirmative vote of the majority of votes cast at an annual meeting of shareholders, with a plurality vote standard retained for +contested director elections, that is, when the number of director nominees exceeds the number of board seats. +SUPPORTING STATEMENT: +In order to provide shareholders a meaningful role in director elections, the Company’s +current director election standard should be changed from a plurality vote standard to a majority vote standard. The majority vote standard is the most appropriate voting standard for director elections where only board nominated candidates are on +the ballot, and it will establish a challenging vote standard for board nominees to improve the performance of individual directors and entire boards. Under the Company’s current voting system, a nominee for the board can be elected with as +little as a single affirmative vote, because “withheld” votes have no legal effect. A majority vote standard would require that a nominee receive a majority of the votes cast in order to be re-elected and continue to serve as a +representative for the shareholders. +In response to strong shareholder support a substantial number of the nation’s +leading companies have adopted a majority vote standard in company bylaws or articles of incorporation. In fact, more than 94% of the companies in the S&P 500 have adopted majority voting for uncontested elections. We believe the Company needs +to join the growing list of companies that have already adopted this standard. +CalSTRS is a long-term shareholder of the +Company and we believe that accountability is of upmost importance. We believe the plurality vote standard currently in place at the Company completely disenfranchises shareholders and makes the shareholder’s role in director elections +meaningless. Majority voting in director elections will empower shareholders with the ability to remove poorly performing directors and increase the directors’ accountability to the owners of the Company, its shareholders. In addition, those +directors who receive the majority support from shareholders will know they have the backing of the very shareholders they represent. We therefore ask you to join us in requesting that the Board of directors promptly adopt the majority vote standard +for director elections. +Please vote FOR this proposal. +40 +Table of Contents +OPPOSITION STATEMENT OF THE COMPANY: +The Board has considered the shareholder proposal and believes that the voting procedures currently set forth in the Company’s +Amended and Restated Bylaws, as amended, are in the best interests of the Company and our shareholders. For the reasons discussed below, the Board recommends a vote “AGAINST” the shareholder proposal. +The adoption of a strict majority voting standard is unnecessary because the Company already maintains corporate governance processes +that provide for the identification of qualified individuals to serve on the Board. As described below, the Company’s Shareholder Advisory Committee for Board Nominations (formerly the Director Nominating Advisory Committee) provides the +Company a unique process for receiving shareholder input when selecting director candidates. The Nominating, Compensation and Planning Committee, with input from the Shareholder Advisory Committee for Board Nominations, identifies and considers +potential director candidates and has also established procedures by which shareholders can recommend individuals to serve on the Board. The result of these processes is a Board composed of highly qualified directors with diverse skill sets, +qualifications and experiences who serve the best interests of the Company and its shareholders. +The Company’s current +nominating and voting procedures enable shareholders to express themselves in all phases of the nominating and voting process. As described above under “Corporate Governance — Board Committees — Nominating, Compensation and Planning +Committee,” the Shareholder Advisory Committee for Board Nominations is charged with receiving and considering possible nominees for election by shareholders to the Board. The Shareholder Advisory Committee for Board Nominations is comprised of +eight to 12 persons selected by the Nominating, Compensation and Planning Committee. All members of the Shareholder Advisory Committee for Board Nominations are shareholders, and a majority currently serve solely as shareholders, not being otherwise +affiliated with the Company or the Board. Shareholders can also follow the procedures outlined in the Company’s Amended and Restated Bylaws, as amended, to nominate individuals to serve on the Board. Furthermore, shareholders can express +opposition to any new director nominee or dissatisfaction with any incumbent director by withholding their vote in any election. A significant “withhold” vote for any director would send a strong message to the Board and would be strongly +considered by the Nominating, Compensation and Planning Committee in determining future nominees for election to the Board. +In addition, the proponent’s suggestion that plurality voting allows a director nominee to be elected with a single affirmative vote +is highly unlikely given the extraordinary levels of shareholder support all director candidates have historically received. Since the Company’s initial public offering, no director has received less than 99% of the votes cast for or withheld +in a director election (excluding broker non-votes), meaning the outcome of all elections held to date would have been the same even under a majority voting standard. Given our historical results, all of our directors have very clearly had the +backing of the shareholders they represent. +The Company’s plurality voting standard eliminates the possibility of +“failed elections” where directors do not receive a majority of the votes cast, thus leaving vacancies on the Board. Multiple vacancies on the Board could result in the Company’s inability to comply with NYSE listing standards and +securities regulations relating to director independence, committee composition and financial experts. Furthermore, in the event of a “failed election,” it is the Board’s responsibility to fill the vacancy without any further +shareholder vote until the next upcoming shareholder meeting. Shareholders would have no greater assurance that the person or persons selected to fill any vacancy would be any more satisfactory than the failed nominee. Addressing “failed +elections” would undoubtedly be distracting to the Board and require both the Board and the Nominating, Compensation and Planning Committee to divert their attention from other important matters and repeat much of the process each had +previously conducted in order to identify new nominees. Accordingly, the Board believes it is the best interests of the Company and its shareholders to maintain the plurality voting standard and avoid the potential corporate governance complications +and administrative burdens that could arise out of a transition to a mandated majority voting standard. +41 +Table of Contents +A majority voting standard may also increase the difficulty of recruiting qualified director +nominees and increase the Company’s costs without any improved performance by directors or increased accountability to shareholders. Conversely, a plurality voting standard ensures continuity of relevant expertise, advice and experience on the +Board. +Importantly, under the Board’s leadership and with the backing of the Company’s shareholders, the Company +has continued to deliver strong financial and operational results. Despite a challenging commodity price environment in 2015, the successful execution of the Company’s business strategies by the Company’s Board, management and staff led to +significant increases in oil and natural gas production and proved oil and natural gas reserves in 2015. Among other accomplishments, the Company achieved record oil, natural gas and average daily oil equivalent production in 2015. The +Company’s Adjusted EBITDA for 2015 was the second best result in its history, surpassed only by the Company’s Adjusted EBITDA reported for 2014. The Company’s strong performance is, in no small part, attributable to the guidance and +stewardship of the members of the Board, all of whom have enjoyed the strong support of the Company’s shareholders. +Finally, Texas law expressly provides for plurality voting in director elections. While perhaps less commonplace for companies comprising +the S&P 500, of which Matador is not a part, plurality voting is common practice among the Company’s peers. Of the companies constituting Matador’s 2016 peer group as identified below under “Executive Compensation — +Compensation Discussion and Analysis,” two-thirds have adopted a plurality voting standard for directors. Of the companies constituting Matador’s 2015 peer group as identified below under “Executive Compensation — Compensation +Discussion and Analysis,” a majority of the companies have adopted a plurality voting standard for directors. Therefore, Matador’s plurality voting standard is in line with its peers. +Accordingly, the Board does not believe that moving to a majority voting standard will enhance the shareholders’ role in director +elections in any meaningful way or will increase directors’ accountability to the shareholders. +Vote Required +The affirmative vote of the holders of a majority of the shares present in person or by proxy and entitled to vote at the Annual Meeting +is required to approve the shareholder proposal. If you hold your shares through a broker and you do not instruct the broker how to vote, your broker will not have the authority to vote your shares. Abstentions will have the effect as a vote cast +against the proposal. Broker non-votes will be counted as present for purposes of determining the presence of a quorum but will have no effect upon the outcome of the vote. +The Board of Directors recommends that you vote AGAINST approval of the +shareholder proposal to adopt a majority voting standard for the election of directors. +42 +Table of Contents +EXECUTIVE COMPENSATION +Compensation Discussion and Analysis +In this compensation discussion and analysis, we discuss our compensation objectives, our decisions and the rationale behind those decisions relating to compensation for 2015 for our principal executive +officer, our principal financial officer and our other three most highly compensated executive officers. This compensation discussion and analysis provides a general description of our compensation program and specific information about its various +components. +Named Executive Officers +Throughout this discussion, the following individuals are referred to as the “Named Executive Officers” and are included in the Summary Compensation Table: +• +Joseph Wm. Foran, Chairman of the Board and Chief Executive Officer; +• +Matthew V. Hairford, President; +• +David E. Lancaster, Executive Vice President and Chief Financial Officer; +• +Craig N. Adams, Executive Vice President — Land, Legal & Administration; and +• +Van H. Singleton, II, Executive Vice President of Land +Executive Summary +We are an independent energy company engaged in +the exploration, development, production and acquisition of oil and natural gas resources in the United States, with an emphasis on oil and natural gas shale and other unconventional plays. Our current operations are focused primarily on the oil and +liquids-rich portion of the Wolfcamp and Bone Spring plays in the Delaware Basin in Southeast New Mexico and West Texas. We also operate in the Eagle Ford shale play in South Texas and the Haynesville shale and Cotton Valley plays in Northwest +Louisiana and East Texas. In addition, we have a growing midstream business that supports our operations. +2015 Business Highlights +In 2015, we achieved record oil, natural gas and average daily oil equivalent production. In addition, we successfully +completed several important transactions in 2015, including (i) the HEYCO Merger, which added substantially to our Delaware Basin acreage position, (ii) our first issuance of senior unsecured notes, (iii) a follow-on equity offering +and (iv) the sale of a portion of our midstream assets in Loving County, Texas to an affiliate of EnLink. Our Board has a “pay for performance” philosophy and recognizes the leadership of Mr. Foran and our executive officers in +contributing to the Company’s success in 2015. Highlights of our 2015 success are summarized in the table below: +43 +Table of Contents +Objectives of Our Compensation Program +Our future success and the ability to create long-term value for our shareholders depends on our ability to attract, retain and motivate +highly qualified individuals in the oil and natural gas industry. Additionally, we believe that our success also depends on the continued contributions of our Named Executive Officers. Our executive compensation program is designed to provide a +comprehensive compensation program to meet the following objectives: +• +to be fair to both the executive and the Company; +• +to attract and retain talented and experienced executives with the skills necessary for us to execute our business plan; +• +to provide opportunities to achieve a total compensation level that is competitive with comparable positions at companies with which we may compete for +executives; +• +to align the interests of our executive officers with the interests of our shareholders and with the performance of our Company for long-term value +creation; +• +to provide financial incentives to our executives to achieve our key corporate and individual objectives; +• +to provide an appropriate mix of fixed and variable pay components to maintain a “pay-for-performance” oriented compensation program; +• +to foster a shared commitment among executives by coordinating their corporate and individual goals; +• +to provide compensation that takes into consideration the education, professional experience and knowledge that is specific to each job and the unique +qualities the executive possesses; and +• +to recognize an executive’s commitment and dedication in his job performance and in support of our culture. +What Our Compensation Program Is Designed to Reward +Our compensation program is designed to reward, in both the short term and the long term, performance that contributes to the implementation of our business strategies, maintenance of our culture and +values and the achievement of our objectives. In addition, we reward qualities that we believe help achieve our business strategies such as teamwork, individual performance in light of general economic and industry-specific conditions, relationships +with shareholders and vendors, the ability to manage and enhance production from our existing assets, the ability to explore new opportunities to increase oil and natural gas production, the ability to identify and acquire additional acreage, the +ability to increase year-over-year proved reserves, the ability to control unit production costs, level of job responsibility, industry experience and general professional growth. +How We Determined Each Element of 2015 Compensation +The Nominating, +Compensation and Planning Committee has engaged Pay Governance LLC as its independent executive compensation advisory firm. The Nominating, Compensation and Planning Committee has assessed the independence of Pay Governance LLC pursuant to +applicable SEC and NYSE rules and concluded that Pay Governance LLC’s engagement by the Nominating, Compensation and Planning Committee does not raise any conflict of interest. +For purposes of benchmarking executive compensation, for the 2014 fiscal year, Pay Governance LLC developed a list of recommended peer +companies in the oil and natural gas exploration and production sector with comparable revenue size (approximately $90 million to approximately $775 million) and market capitalization (less than $1 billion to approximately $3.1 billion) and that +were competitors. These companies and the rationale for their inclusion in our peer group were considered and approved by the Nominating, Compensation and Planning Committee and the Independent Directors. The Nominating, Compensation and +44 +Table of Contents +Planning Committee and the Independent Directors reviewed such peer group with respect to 2015 and determined that such peer group should remain in place for 2015. The compensation peer companies +for 2015 are as follows (the “Peer Group”): +Abraxas Petroleum Corporation +Approach Resources Inc. +Bonanza Creek Energy, Inc. +Callon Petroleum Company +Carrizo Oil & Gas, Inc. +Clayton Williams Energy, Inc. +Comstock Resources, Inc. +Contango Oil & Gas Company +Goodrich Petroleum Corporation +Magnum Hunter Resources Corporation +Penn Virginia Corporation +Resolute Energy Corporation +Rex Energy Corporation +Rosetta Resources Inc. +As an overall compensation philosophy for 2015, we increased Named Executive Officer +base salaries to meet the objective of having total compensation for the Named Executive Officers range between the +50 th and 75 th percentiles of the Peer Group. +Elements of Our 2015 Compensation Program and Why We Paid Each Element +For 2015, our management compensation program was comprised of the following five elements: +• +Base Salary. We paid base salary to compensate each executive for his assigned responsibilities, experience, leadership and expected future +contribution. +• +Performance-Based Cash Bonus. We adopted the 2012 Annual Incentive Plan effective January 1, 2012 as part of our management compensation +program because we believed this element of compensation (i) helps focus and motivate management to achieve key corporate and individual objectives by rewarding the achievement of these objectives; (ii) helps retain management; +(iii) rewards our successes over the prior year; and (iv) is necessary to be competitive from a total remuneration standpoint. +• +Discretionary Bonus. Our Independent Directors have discretionary authority to award executives for particular accomplishments at times and in +amounts that the Independent Directors approve, upon the recommendation of the Nominating, Compensation and Planning Committee. +• +Equity Awards. We used stock options and restricted stock as the primary vehicles for (i) linking our long-term performance and increases +in shareholder value to the total compensation for our executive officers; and (ii) providing competitive compensation to attract and retain our executive officers. +• +Benefits. We offered a variety of health and welfare programs to all eligible employees, including the Named Executive Officers. The health and +welfare programs were intended to protect employees against catastrophic loss and encourage a healthy lifestyle. +Nominating, Compensation and Planning Committee +The Nominating, Compensation and Planning Committee has the authority, at our expense, to retain and terminate independent third-party compensation consultants and other expert advisors. +In addition, the Nominating, Compensation and Planning Committee confirms at least annually that our incentive pay does not encourage +unnecessary risk taking and reviews and discusses the relationship between risk management policies and practices, corporate strategy and senior executive compensation. The Nominating, Compensation and Planning Committee considered, in establishing +and reviewing our executive compensation program, whether the program encourages unnecessary or excessive risk taking and has concluded that it does not. Several features of our program reflect sound risk management practices. Base salaries are +fixed in amount and thus do not encourage risk taking. While our bonuses are tied to management’s achievements during the previous fiscal year and may encourage the taking of short-term risks at the expense of long-term results, +executives’ annual bonuses take into account multiple performance criteria based on the executive’s individual +45 +Table of Contents +performance and are within the discretion of the Independent Directors. The Nominating, Compensation and Planning Committee believes that our bonus awards appropriately balance risk and the +desire to focus executives on specific short-term goals important to the Company’s success, and that they do not encourage unnecessary or excessive risk taking. In addition, the Nominating, Compensation and Planning Committee believes that our +current equity compensation program provides an appropriate balance between the goals of increasing the price of our Common Stock and avoiding potential risks that could threaten our growth and stability due to the fact that stock options and +service-based restricted stock typically vest over three or four years. +With regard to all of the Named Executive Officers, +the Nominating, Compensation and Planning Committee recommends to the Independent Directors: +• +option guidelines and size of overall grants; +• +option grants and other equity and non-equity related awards; and +• +limitations, restrictions and conditions upon any award as the Nominating, Compensation and Planning Committee deems appropriate and as permitted under +the applicable plan. +The Independent Directors are required to be independent pursuant to the listing +standards of the NYSE and the rules and regulations promulgated by the SEC and are “outside directors” under Section 162(m) of the Code. Upon Mr. Stephenson’s appointment to the Board in 2015, the Board determined that +Mr. Stephenson met the independence requirements of the NYSE and SEC but did not meet the definition of an “outside director” under Section 162(m) of the Code. As a result, Mr. Stephenson has recused himself from any +Section 162(m)-related votes of the Board. +The Nominating, Compensation and Planning Committee annually reviews and +makes recommendations to the Independent Directors regarding the matters related to Mr. Foran’s compensation, including corporate goals and objectives applicable to Mr. Foran’s compensation. The Nominating, Compensation and +Planning Committee also evaluates Mr. Foran’s performance in light of these established goals and objectives at least annually. Based upon these evaluations, the Nominating, Compensation and Planning Committee makes recommendations to the +Independent Directors regarding Mr. Foran’s annual compensation, including salary, bonus and equity and non-equity incentive compensation. The Nominating, Compensation and Planning Committee reviews and recommends to the Independent +Directors with regard to Mr. Foran: +• +any employment agreement, severance agreement, change in control agreement or provision or separation agreement or amendment thereof; +• +any deferred compensation arrangement or retirement plan or benefits; and +• +any benefits and perquisites. +On an annual basis, after consultation with Mr. Foran, the Nominating, Compensation and Planning Committee reviews and makes recommendations to the Independent Directors on the evaluation process and +compensation structure for the other Named Executive Officers. After considering the evaluation and recommendations of Mr. Foran, the Nominating, Compensation and Planning Committee evaluates the performance of the other Named Executive +Officers and makes recommendations to the Independent Directors regarding the annual compensation of such Named Executive Officers, including salary, bonus and equity and non-equity incentive compensation. The Nominating, Compensation and Planning +Committee also takes into account the outcome of the most recent advisory vote from its shareholders when considering executive compensation arrangements. +After considering the recommendations of Mr. Foran with regard to the other Named Executive Officers, the Nominating, Compensation and Planning Committee reviews and recommends to the Independent +Directors regarding the other Named Executive Officers: +• +any employment agreement, severance agreement, change in control agreement or provision or separation agreement or amendment thereof; +46 +Table of Contents +• +any deferred compensation arrangement or retirement plan or benefits; and +• +any benefits and perquisites. +In addition, pursuant to its charter, the Nominating, Compensation and Planning Committee reviews and recommends to the Independent Directors any proposals for the adoption, amendment, modification or +termination of our incentive compensation, equity-based plans and non-equity based plans. +2015 Base Salary +In late 2014, based on the recommendations of Mr. Foran (other than with regard to his base salary), the Nominating, Compensation and +Planning Committee recommended and the Independent Directors approved the following 2015 base salaries for our Named Executive Officers, except with respect to Mr. Singleton, who was not appointed as an executive officer until February 2015. +Mr. Singleton’s 2015 base salary was ratified, approved and confirmed by the Nominating, Compensation and Planning Committee and the Independent Directors in connection with his appointment as an executive officer. +Executive Officer +2015 Base +Salary +Joseph Wm. Foran +$ +800,000 +Chairman of the Board and Chief Executive Officer +Matthew V. Hairford +$ +500,000 +President +David E. Lancaster +$ +425,000 +Executive Vice President and Chief Financial Officer +Craig N. Adams +$ +425,000 +Executive Vice President — Land, Legal & Administration +Van H. Singleton, II +$ +325,000 +Executive Vice President of Land +The base salaries of the Named Executive Officers were set between the 50 th and 75 th percentiles of base compensation levels of the Peer Group based on compensation set forth in the Peer Group’s +2014 proxy statements. +2015 Annual Incentive Compensation +Effective January 1, 2012, we adopted the 2012 Annual Incentive Plan, pursuant to which we may award Named Executive Officers annual +incentive compensation cash awards based on certain terms and conditions established by the Board. We set annual performance criteria each year for the Named Executive Officers based on the performance criteria that are set forth in the 2012 Annual +Incentive Plan (each, an “Annual Incentive Program”). Such criteria include financial, operational and strategic performance goals for the Company, Company performance measures and Company performance relative to peers. These performance +criteria have corresponding performance payment amounts that serve as guidelines for actual amounts to be paid based on the achievement of such performance criteria by each Named Executive Officer. +In addition to the annual performance criteria, in order to give the Nominating, Compensation and Planning Committee and the Independent +Directors flexibility, the Nominating, Compensation and Planning Committee has the discretion to make recommendations to the Independent Directors and the Independent Directors have the discretion to decide after the completion of each year to +decrease the amount of the payments relating to the corresponding performance criteria or to increase the amount of the payments to the Named Executive Officers. Any increase could be in response to unforeseen circumstances when the performance +criteria were set. Any such +47 +Table of Contents +increase could be or not be based on the list of performance criteria set forth in the Annual Incentive Program and could be made irrespective of whether any payments were made based upon the +performance criteria. +For 2015, the Chair of the Nominating, Compensation and Planning Committee met with Pay Governance LLC +and management to determine potential criteria for the 2015 Annual Incentive Program (the “2015 Incentive Program”). Based on these meetings, the Chair proposed certain preliminary performance criteria metrics for consideration by the +Nominating, Compensation and Planning Committee. The Nominating, Compensation and Planning Committee then met with Pay Governance and management to review the proposed criteria. As a result of these meetings, the Nominating, Compensation and +Planning Committee recommended and the Independent Directors determined to use the following performance criteria as guidelines: +• +increase in oil production for 2015 as compared to 2014; +• +increase in total production for 2015 as compared to 2014; +• +decrease in cash operating costs for 2015 as compared to 2014. +• +Adjusted EBITDA (1) +growth for 2015 as compared to 2014; +• +debt/Adjusted +EBITDA (1) ratio for 2015 as compared to 2014; +• +increase in stock price for 2015 as compared to 2014; and +• +increase in Permian Basin acreage for 2015 as compared to 2014. +The Nominating, Compensation and Planning Committee and the Independent Directors determined that these seven criteria were general +measures of our performance and were the key criteria on which management should focus during 2015. The Independent Directors established the threshold levels of the performance criteria as representing an achievable improvement over 2014, the +target levels as representing a considerable but reasonable improvement over 2014 and the maximum levels as representing an exceptional improvement over 2014. Since the actual payments to be made under the 2015 Incentive Program were discretionary +with the Independent Directors, there was no weighting among the performance criteria. Below are the threshold, target and maximum performance criteria set for 2015, as well as the Company’s actual results. +2015 Incentive Program Metrics +Performance Metric +2014 Baseline +Threshold +Target +Maximum +2015 Actual +Oil Production +3.3 million Bbl +4.0 million Bbl +4.1 million Bbl +4.3 million Bbl +4.5 million Bbl +Total Production (million BOE) +5.9 million BOE +8.0 million BOE +8.3 million BOE +8.6 million BOE +9.1 million BOE +Cash Operating Costs (2) +$19.88/BOE +$18.00/BOE +$17.00/BOE +$16.00/BOE +$15.79/BOE +Adjusted EBITDA (1) +$262.9 million +$200.0 million +$215.0 million +$230.0 million +$223.2 million +Year End Debt/Adjusted EBITDA +1.3 +2.2 +2.0 +1.8 +1.5 +Stock Price/Share +$20.23 +$22.50 +$26.00 +$30.00 +$19.77 +Year-End Permian Basin Acreage (Net) +66,100 +66,100 +90,000 +100,000 +88,800 +(1) +We define Adjusted EBITDA as earnings before interest expense, income taxes, depletion, depreciation and amortization, accretion of asset retirement obligations, +property impairments, unrealized derivative gains and losses, certain other non-cash items and non-cash stock-based compensation expense, and net gain or loss on assets sales and inventory impairment. Adjusted EBITDA is a non-GAAP financial measure. +For a reconciliation of Adjusted EBITDA to our net income (loss) and net cash provided by operating activities, see our Annual Report on Form 10-K for the year ended December 31, 2015. +(2) +Includes production taxes and marketing, lease operating and general administrative expenses. Does not include interest expense. +48 +Table of Contents +In making recommendations regarding the potential payment guidelines under the 2015 +Incentive Program, Pay Governance LLC made recommendations regarding the target payment guidelines. The Nominating, Compensation and Planning Committee reviewed the Pay Governance LLC recommendations regarding target payment guidelines as well as +the recommendations of management regarding the threshold, target and maximum payment guidelines. Based on the review of the Pay Governance recommendations and the management recommendations, which took into account the differing responsibilities of +each Named Executive Officer by the Nominating, Compensation and Planning Committee and the Independent Directors, the threshold, target and maximum payment guidelines set forth below were adopted. +Participant +Threshold +Annual +Incentive +Opportunity +as % of 2015 +Base Salary +Target +Annual +Incentive +Opportunity +as % of 2015 +Base Salary +Maximum +Annual +Incentive +Opportunity +as % of 2015 +Base Salary +Joseph Wm. Foran +40 +% +75 +% +150 +% +Chairman of the Board and Chief Executive Officer +Matthew V. Hairford +35 +% +70 +% +125 +% +President +David E. Lancaster +35 +% +65 +% +120 +% +Executive Vice President and Chief Financial Officer +Craig N. Adams +25 +% +50 +% +100 +% +Executive Vice President — Land, Legal & Administration +Van H. Singleton, II +25 +% +50 +% +100 +% +Executive Vice President of Land +Pursuant to the 2015 Incentive Program, the amount of any annual award could have been greater or less +than the payment opportunity based on the performance criteria guidelines so long as the annual award did not exceed 200% of the Named Executive Officer’s annual base salary. +In January 2016, after reviewing the Company’s 2015 expected results compared to the financial and operational metrics set forth +above, the Nominating, Compensation and Planning Committee concluded that the Company would (i) achieve the maximum performance metrics for oil production, total production, cash operating costs and year end debt/Adjusted EBITDA, +(ii) exceed the target performance metric for Adjusted EBITDA and (iii) nearly meet the target performance metric for year-end Permian Basin acreage. +49 +Table of Contents +With regard to each Named Executive Officer, after taking into account the performance +criteria guidelines, the Company’s 2015 results and other information with regard to such Named Executive Officer, the Nominating, Compensation and Planning Committee recommended to the Independent Directors that the Named Executive Officers be +paid annual cash awards as set forth below, and the Independent Directors approved such annual cash awards. The Independent Directors exercised their discretion in awarding the amounts of annual cash awards under the 2015 Incentive Program set forth +below. Since the actual payments to be made under the 2015 Incentive Program were discretionary with the Independent Directors, there was no formulaic calculation nor weighting among the performance criteria by the Independent Directors. All awards +made pursuant to the 2015 Incentive Program were cash awards and were paid to the Named Executive Officers in the first quarter of 2016. +Executive Officer +2015 +Incentive +Program +Compensation +% of 2015 +Base +Salary +Joseph Wm. Foran +$ +1,080,000 +135.0 +% +Chairman of the Board and Chief Executive Officer +Matthew V. Hairford +$ +563,000 +112.6 +% +President +David E. Lancaster +$ +470,000 +110.6 +% +Executive Vice President and Chief Financial Officer +Craig N. Adams +$ +385,000 +90.6 +% +Executive Vice President — Land, Legal & Administration +Van H. Singleton, II +$ +295,000 +90.8 +% +Executive Vice President of Land +Discretionary Bonuses +Our Independent Directors have discretionary authority to award executives for particular accomplishments at times and in amounts that the Independent Directors approve, upon the recommendation of the +Nominating, Compensation and Planning Committee. In the first and second quarters of 2015, the Nominating, Compensation and Planning Committee recommended, and the Board approved, discretionary bonuses to certain of our Named Executive Officers in +recognition of each officer’s efforts in connection with the HEYCO Merger and the Company’s 2015 senior notes offering and public equity offering, respectively. +2015 Long-Term Incentive Compensation +Effective January 1, +2012, the Board adopted the 2012 Long-Term Incentive Plan. The Board and shareholders approved the Amended and Restated 2012 Long-Term Incentive Plan (the “2012 Plan”) effective as of June 10, 2015. This plan permits the granting of +long-term equity and cash incentive awards, including the following: +• +stock options; +• +stock appreciation rights; +• +restricted stock (service-based and performance-based); +• +restricted stock units (service-based and performance-based); +• +performance shares; +• +performance units; +• +stock grants; and +• +performance cash awards. +50 +Table of Contents +After receiving recommendations from the Nominating, Compensation and Planning Committee, +the Independent Directors administer the 2012 Plan. For 2015, the Nominating, Compensation and Planning Committee met with Pay Governance LLC and management regarding the appropriate types and amounts of equity grants based on differing levels of +responsibility of the Named Executive Officers and made recommendations to the Independent Directors. +In January 2015, the +Nominating, Compensation and Planning Committee recommended, and the Independent Directors awarded, the annual equity awards of non-qualified stock options and/or restricted stock to each Named Executive Officer. The stock options and restricted +stock were granted in order to facilitate retention of our Named Executive Officers and provide a reward for positive future results. The January 2015 stock options have a five-year term, vest 100% on the third anniversary of the grant date if the +Named Executive Officer is still employed by us on the vesting date, and have an exercise price of $22.01 per share. The January 2015 restricted stock awards vest 100% on the third anniversary of the grant date if the Named Executive Officer is +still employed by us on the vesting date. During the restricted period prior to vesting of the restricted stock, the Named Executive Officer will be eligible to receive dividends on and vote the restricted stock. +In connection with the HEYCO Merger, in January 2015, the Nominating, Compensation and Planning Committee also recommended, and the +Independent Directors awarded, a one-time equity grant of stock options to Mr. Foran effective upon closing of the HEYCO Merger. These stock options have a five-year term, vest 100% on the third anniversary of the grant date if Mr. Foran +is still employed by us on the vesting date, and have an exercise price of $21.66 per share. +In April 2015, the Nominating, +Compensation and Planning Committee also recommended, and the Independent Directors awarded, one-time equity grants of stock options and/or restricted stock to our Named Executive Officers in connection with the Company’s April 2015 senior +notes offering and public equity offering. The April 2015 stock options have a five-year term, vest 50% on the second and 50% on the fourth anniversaries of the grant date if the Named Executive Officer is still employed by us on the vesting dates, +and have an exercise price of $27.72 per share. The April 2015 restricted stock vests 100% on the third anniversary of the grant date if the Named Executive Officer is still employed by us on the vesting date. During the restricted period prior to +vesting of the restricted stock, the Named Executive Officer will be eligible to receive dividends on and vote the restricted stock. +The approximate value of the 2015 equity grants as a percentage of 2015 base salary and the number of shares underlying each grant are set forth in the table below: +Participant +% of 2015 +Base +Salary +Stock +Options +Restricted Stock +Joseph Wm. Foran +448 +% +361,022 +— +Chairman of the Board and Chief Executive Officer +Matthew V. Hairford +136 +% +68,739 +— +President +David E. Lancaster +114 +% +33,922 +6,179 +Executive Vice President and Chief Financial Officer +Craig N. Adams +114 +% +33,922 +6,179 +Executive Vice President — Land, Legal & Administration +Van H. Singleton, II +117 +% +29,390 +3,902 +Executive Vice President of Land +51 +Table of Contents +2016 Peer Group +In late 2015, Pay Governance LLC recommended that, given the Company’s relative size, performance, industry focus and other factors, the Nominating, Compensation and Planning Committee and +Independent Directors consider adopting a new peer group for 2016. The recommended peer companies consisted of companies in the oil and natural gas exploration and production sector with comparable revenue size (approximately $280 million to +approximately $1.7 billion) and market capitalization ($1.3 billion to approximately $4.3 billion) and that were competitors. These companies and the rationale for their inclusion in our peer group were considered and approved by the Nominating, +Compensation and Planning Committee and the Independent Directors. The compensation peer companies for 2016 are as follows: +Carrizo Oil & Gas, Inc. +Diamondback Energy, Inc. +Energen +Corp. +EP Energy Corporation +Gulfport +Energy Corp. +Laredo Petroleum, Inc. +Parsley +Energy, Inc. +PDC Energy, Inc. +RSP +Permian, Inc. +Benefits +We offer a variety of health and welfare programs to all eligible employees, including the Named Executive Officers. The health and welfare programs are intended to protect employees against catastrophic +loss and encourage a healthy lifestyle. Our health and welfare programs include medical, pharmacy, dental, disability and life insurance. We also have a 401(k) plan for all full time employees, including the Named Executive Officers, in which we +contribute 3% of the employee’s base salary and have the discretion to contribute up to an additional 4% of the employee’s base salary as a dollar-for-dollar match of his or her elective deferral contributions. The discretionary +dollar-for-dollar match is subject to vesting based upon years of service to the Company. In addition, we provide long-term care insurance for certain of our executive officers. +How Elements of Our Compensation Program Are Related to Each Other +We view the various components of compensation as related but distinct with generally a significant portion of total compensation +reflecting “pay for performance.” We do not have any formal or informal policies or guidelines for allocating compensation between long-term and currently paid out compensation or between cash or non-cash compensation. +Accounting and Tax Considerations +Under Section 162(m) of the Code, a limitation is placed on tax deductions of any publicly-held corporation for individual compensation to certain executives of such corporation exceeding $1.0 +million in any taxable year, unless the compensation is performance-based. However, due to the transition rules of Section 162(m), the $1.0 million deduction limit will not apply to us until the first meeting of our shareholders that occurs +after the close of the third calendar year following the calendar year in which our initial public offering occurred, which was February 2012. Thus, Section 162(m) of the Code applies to awards granted under the 2012 Annual Incentive Plan +(amended and restated as the Incentive Plan) on or after June 9, 2016. +Termination of Employment Arrangements +Employment Agreements +As described under “Discussion Regarding Summary Compensation Table and Grants of Plan-Based Awards Table,” in contemplation of our initial public offering, on August 9, 2011, we entered +into employment agreements with Messrs. Foran, Hairford and Lancaster. In March 2014, we entered into an employment agreement with Mr. Adams in substantially the same form as that of Messrs. Foran, Hairford and Lancaster, and +52 +Table of Contents +in February 2015 we entered into an employment agreement with Mr. Singleton in substantially the same form as that of Mr. Adams. The principal difference in Mr. Adams’ and +Mr. Singleton’s employment agreements as compared to the employment agreement of Messrs. Foran, Hairford and Lancaster is that Mr. Adams’ and Mr. Singleton’s agreements do not include a “modified single +trigger” that would have allowed them to receive a “change in control” payment if they terminated their agreements without “good reason” within 30 days prior to or 12 months after a change in control. +Under the employment agreements, if one of the following occurs: +• +the Named Executive Officer dies; +• +the Named Executive Officer is totally disabled; +• +we mutually agree to end the employment agreement; +• +we dissolve and liquidate; or +• +the term of the employment agreement ends, +we will pay the Named Executive Officer the average of his annual bonus, which includes non-equity incentive compensation, for the prior two years pro-rated based on the number of complete or partial +months completed during the year of termination. +Also, under the employment agreements, if one of the following occurs: +• +the Named Executive Officer is terminated other than (i) as set forth above, (ii) by us for just cause, or (iii) in connection with a +“change in control” as described below; or +• +the Named Executive Officer terminates his employment for “good reason,” +if the Named Executive Officer is Mr. Foran, we will pay him twice his base salary and twice the average of his annual bonus for the prior two +years; if the Named Executive Officer is Messrs. Hairford, Lancaster, Adams or Singleton, we will pay him 1.5 times his base salary and 1.5 times the average of his annual bonus for the prior two years. +Finally, under the employment agreements of Messrs. Foran, Hairford and Lancaster, upon a “change in control” and within 30 +days prior to the “change in control” or within 12 months after the “change in control,” if we terminate a Named Executive Officer without just cause or the Named Executive Officer terminates his employment with or without +“good reason,” we will pay him three times his base salary and three times the average of his annual bonus for the prior two years. These agreements were entered into prior to our initial public offering. At that time, we believed a +“single trigger” or “modified single trigger” was appropriate given the Company’s size, early stage of development and strong growth aspirations. The agreement entered into with Mr. Adams in March 2014 and the agreement +entered into with Mr. Singleton in February 2015, however, each include a “double trigger” such that upon a “change in control” and within 30 days prior to the “change in control” or within 12 months after the +“change in control,” if we terminate them without just cause or they terminate their employment with “good reason,” we will make the same required payments. In addition, if Messrs. Foran, Hairford, Lancaster, Adams or Singleton +are terminated or terminate their employment as set forth above in connection with a “change in control,” all equity awards of such Named Executive Officer vest immediately prior to such termination. +“Change in control” is defined under Section 409A of the Code as follows: +• +a change in ownership of the Company occurs on the date that, except in certain situations, results in someone acquiring more than 50% of the total +fair market value or voting power of the Company’s stock; +53 +Table of Contents +• +a change in effective control of the Company occurs on one of the following dates: +• +the date that a person acquires (or has acquired in a 12 month period) ownership of 30% or more of the Company’s total voting power; however, if a +person already owns at least 30% of the Company’s total voting power, the acquisition of additional control does not constitute a change in control; or +• +the date during a 12 month period where a majority of the Company’s Board is replaced by directors whose appointment or election was not endorsed +by a majority of the Board; or +• +a change in the ownership of a substantial portion of the Company’s assets occurs on the date a person acquires (or has acquired in a 12 month +period) assets of the Company having a total gross market value of at least 40% of the total gross fair market value of all of the Company’s assets immediately before such acquisition. +For purposes of the employment agreements, “good reason” means: +• +the assignment of duties inconsistent with the title of the Named Executive Officer or his current office or a material diminution of the Named +Executive Officer’s current authority, duties or responsibilities; +• +a diminution of the Named Executive Officer’s base salary or a material breach of the employment agreement by the Company; or +• +the relocation of the Company’s principal executive offices more than 30 miles from the Company’s present principal executive offices or the +transfer of the Named Executive Officer to a place other than the Company’s principal executive offices; and +• +the action causing the “good reason” is not cured within the applicable cure period. +For purposes of the employment agreements, “just cause” means: +• +the Named Executive Officer’s continued and material failure to perform the duties of his employment consistent with his position other than due +to disability; +• +the Named Executive Officer’s failure to perform his material obligations under the employment agreement other than due to disability; +• +the Named Executive Officer’s material breach of the Company’s written policies concerning discrimination, harassment or securities trading; +• +the Named Executive Officer’s refusal or failure to follow lawful directives of the Board and any supervisors other than due to disability; +• +the Named Executive Officer’s commission of fraud, theft or embezzlement; +• +the Named Executive Officer’s conviction or indictment of a felony or other crime involving moral turpitude; or +• +the Named Executive Officer’s intentional breach of fiduciary duty; and +• +the action causing the “just cause” is not cured within the applicable cure period, if any. +Equity Plans +For equity grants under the 2012 Plan, vesting upon a “change in control” for the Named Executive Officers mirrors the terms of their employment agreements. +54 +Table of Contents +The “change in control” provisions in the employment agreements and the equity +grants under the 2012 Plan help prevent management from being distracted by rumored or actual changes in control. The “change in control” provisions provide: +• +incentives for those Named Executive Officers to remain with us despite the uncertainties of a potential or actual change in control; +• +assurance of severance payments for terminated Named Executive Officers; and +• +access to equity compensation after a change in control. +Stock Ownership Guidelines +We have adopted stock ownership +guidelines for the following officers and designated amounts: +• +Chairman and Chief Executive Officer — shares equal to five times base salary; +• +President — shares equal to five times base salary; +• +Executive Vice Presidents — shares equal to two and +1 / 2 times base salary; +• +Senior Vice Presidents — shares equal to two times base salary; +• +Vice Presidents and Executive Directors — shares equal to one and 1 / 2 times base salary. +Each of the foregoing officers has +five years from the later of the date of the closing of our initial public offering and the fifth anniversary of his or her appointment as an officer of the Company in which to achieve the stock ownership position. Shares that will count toward the +stock ownership guidelines include time-lapse restricted shares that are still restricted and any shares held in trust by the officer or his immediate family over which he has direct beneficial ownership interest. Shares that will not count toward +the stock ownership guidelines include shares underlying unexercised stock options, unexercised stock appreciation rights and performance-based awards for which the performance requirements have not been satisfied. Until each of the above officers +reaches the stock ownership level required of his or her position, such officer must hold at least fifty percent (50%) of all “net shares” received through restricted stock vesting or realized through stock option exercises. For this +purpose, “net shares” means all shares retained after applicable withholding of any shares for tax purposes. Messrs. Foran, Hairford, Lancaster, Adams and Singleton each own shares in excess of the minimum requirement set forth in the +stock ownership guidelines. +Pursuant to the Company’s insider trading policy, the Company prohibits hedging of its +securities by directors, officers or employees. The insider trading policy also restricts directors and executive officers from pledging more than 25% of his or her holdings of the Company’s stock without the prior written consent of the +Corporate Governance Committee. +Nominating, Compensation and Planning Committee Report +We have reviewed and discussed with management the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K and +based on such review and discussions, we recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement. +Nominating, Compensation and Planning Committee, +David M. +Laney, Chair +Reynald A. Baribault +Margaret B. Shannon +55 +Table of Contents +Summary Compensation Table +The following table summarizes the total compensation awarded to, earned by or paid to Messrs. Foran, Hairford, Lancaster, Adams and +Singleton for 2015, 2014 and 2013. This table and the accompanying narrative should be read in conjunction with the Compensation Discussion and Analysis, which sets forth the objectives and other information regarding our executive compensation +program. +Name and Principal Position +Year +Salary +Bonus +Stock +Awards (1) +Option +Awards (2) +Non-Equity +Incentive Plan +Compensation (3) +All Other +Compensation +Total +Joseph Wm. Foran +2015 +$ +800,000 +$ +750,000 +(4) +$ +— +$ +3,586,811 +$ +1,080,000 +$ +21,795 +(5) +$ +6,238,606 +Chairman of the Board and +Chief Executive Officer +2014 +$ +750,000 +$ +125,000 +$ +400,000 +$ +822,159 +$ +550,000 +$ +21,710 +(6) +$ +2,668,869 +2013 +$ +600,000 +$ +— +$ +328,400 +$ +652,750 +$ +600,000 +$ +19,818 +(7) +$ +2,200,968 +Matthew V. Hairford +2015 +$ +500,000 +$ +125,000 +(4) +$ +— +$ +682,293 +$ +563,000 +$ +22,452 +(8) +$ +1,892,746 +President +2014 +$ +450,000 +$ +50,000 +$ +184,999 +$ +485,101 +$ +300,000 +$ +22,102 +(9) +$ +1,492,202 +2013 +$ +330,000 +$ +— +$ +205,250 +$ +438,275 +$ +250,000 +$ +18,826 +(10) +$ +1,242,351 +David E. Lancaster +2015 +$ +425,000 +$ +175,000 +(4) +$ +146,301 +$ +339,753 +$ +470,000 +$ +18,550 +(11) +$ +1,574,603 +Executive Vice President +and Chief Financial Officer +2014 +$ +400,000 +$ +50,000 +$ +325,002 +$ +267,201 +$ +250,000 +$ +18,200 +(11) +$ +1,310,403 +2013 +$ +375,000 +$ +— +$ +246,300 +$ +466,250 +$ +225,000 +$ +17,850 +(11) +$ +1,330,400 +Craig N. Adams +2015 +$ +425,000 +$ +200,000 +(4) +$ +146,301 +$ +339,753 +$ +385,000 +$ +20,831 +(12) +$ +1,516,884 +Executive Vice President — +2014 +(13) +$ +— +$ +— +$ +— +$ +— +$ +— +$ +— +$ +— +Land, Legal & Administration +2013 +(13) +$ +— +$ +— +$ +— +$ +— +$ +— +$ +— +$ +— +Van H. Singleton, II +2015 +$ +325,000 +$ +100,000 +(4) +$ +91,033 +$ +290,065 +$ +295,000 +$ +18,550 +(11) +$ +1,119,648 +Executive Vice President of +2014 +(13) +$ +— +$ +— +$ +— +$ +— +$ +— +$ +— +$ +— +Land +2013 +(13) +$ +— +$ +— +$ +— +$ +— +$ +— +$ +— +$ +— +(1) +Reflects the grant date fair value of service-based restricted stock computed in accordance with FASB ASC Topic 718. This is the amount that will be expensed for these +awards, regardless of the actual number of shares of Common Stock ultimately issued to the recipients of the awards, provided that the requisite service is furnished. +(2) +Reflects the grant date fair value of option awards computed in accordance with FASB ASC Topic 718. Our policy and assumptions made in the valuation of the stock +options are contained in Note 2 and Note 8 of the audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2015. +(3) +Represents awards pursuant to the 2015, 2014 and 2013 Incentive Programs, respectively. +(4) +Reflects ad hoc discretionary bonuses awarded following the HEYCO Merger in February 2015 and the Company’s senior notes offering and public equity offering in +April 2015. +(5) +Consists of $18,550 in 401(k) matching contributions as described in “— Compensation Discussion and Analysis — Benefits,” $646 in premiums +reimbursed to Mr. Foran for a life insurance policy covering Mr. Foran and $2,599 in long-term care insurance premiums. +(6) +Consists of $18,200 in 401(k) matching contributions as described in “— Compensation Discussion and Analysis — Benefits,” $911 in premiums +reimbursed to Mr. Foran for a life insurance policy covering Mr. Foran and $2,599 in long-term care insurance premiums. +(7) +Consists of $17,850 in 401(k) matching contributions as described in “— Compensation Discussion and Analysis — Benefits,” $1,318 in premiums +reimbursed to Mr. Foran for a life insurance policy covering Mr. Foran and $650 in long-term care insurance premiums. +(8) +Consists of $18,550 in 401(k) matching contributions as described in “— Compensation Discussion and Analysis — Benefits” and $3,902 in +long-term care insurance premiums. +(9) +Consists of $18,200 in 401(k) matching contributions as described in “— Compensation Discussion and Analysis — Benefits” and $3,902 in +long-term care insurance premiums. +(10) +Consists of $17,850 in 401(k) matching contributions as described in “— Compensation Discussion and Analysis — Benefits” and $976 in long-term +care insurance premiums. +(11) +Reflects 401(k) matching contributions as described in “— Compensation Discussion and Analysis — Benefits.” +(12) +Consists of $18,550 in 401(k) matching contributions as described in “— Compensation Discussion and Analysis — Benefits” and $2,281 in +long-term care insurance premiums. +(13) +Messrs. Adams and Singleton were not Named Executive Officers in 2014 and 2013. +56 +Table of Contents +Grants of Plan-Based Awards Table +The following table sets forth certain information regarding non-equity awards granted by the Company pursuant to the 2015 Incentive +Program and stock and option awards granted by the Company pursuant to the 2012 Plan during the year ended December 31, 2015 to the Named Executive Officers below: +Estimated Future Payouts +Under +Non-Equity Incentive +Plan Awards (1) +All +Other +Stock +Awards: +Number +of Shares +of Stock +or Units +All +Other +Option +Awards: +Number of +Securities +Underlying +Options (2) +Exercise +or +Base +Price of +Option +Awards +Grant +Date +Fair +Value of +Stock +and +Option +Awards +Threshold +Target +Maximum +Name +Grant Date +($) +($) +($) +(# shares) +(# shares) +($/share) +($) +Joseph Wm. Foran +1/21/2015 +— +— +— +— +228,571 +22.01 +2,210,282 +2/27/2015 +— +— +— +— +105,000 +21.66 +1,029,000 +4/30/2015 +320,000 +600,000 +1,200,000 +— +27,451 +27.72 +347,530 +Matthew V. Hairford +1/21/2015 +— +— +— +— +62,857 +22.01 +607,827 +4/30/2015 +175,000 +350,000 +625,000 +— +5,882 +27.72 +74,466 +David E. Lancaster +1/21/2015 +— +— +— +4,375 +— +— +96,294 +1/21/2015 +— +— +— +— +30,000 +22.01 +290,100 +4/30/2015 +148,750 +276,250 +510,000 +1,804 +— +— +50,007 +4/30/2015 +— +— +— +— +3,922 +27.72 +49,653 +Craig N. Adams +1/21/2015 +— +— +— +4,375 +— +— +96,294 +1/21/2015 +— +— +— +— +30,000 +22.01 +290,100 +4/30/2015 +106,250 +212,500 +425,000 +1,804 +— +— +50,007 +4/30/2015 +— +— +— +— +3,922 +27.72 +49,653 +Van H. Singleton, II +1/21/2015 +— +— +— +3,000 +— +— +66,030 +1/21/2015 +— +— +— +— +27,429 +22.01 +265,238 +4/30/2015 +81,250 +162,500 +325,000 +902 +— +— +25,003 +4/30/2015 +— +— +— +— +1,961 +27.72 +24,826 +(1) +See “— Compensation Discussion and Analysis — 2015 Annual Incentive Compensation” and “— Summary Compensation Table — +Non-Equity Incentive Plan Compensation” regarding the actual payments made to the Named Executive Officers pursuant to the 2015 Incentive Program. +(2) +The term of such option awards is five years. +Discussion Regarding Summary Compensation Table and Grants of Plan-Based Awards Table +On August 9, 2011, we entered into employment agreements with Messrs. Foran, Lancaster and Hairford. On March 13, 2014, we +entered into an employment agreement with Mr. Adams, and on February 27, 2015 we entered into an employment agreement with Mr. Singleton. +Mr. Foran . His employment agreement extends for a twenty-four month term that automatically renews each month for an additional month unless either the Company or Mr. Foran gives written +notice that the term will no longer be extended. For 2015, his base salary was $800,000. Effective January 1, 2016, his base salary is $900,000, and he is eligible to participate in the Incentive Plan and receive awards pursuant to the 2012 +Plan. See “— Compensation Discussion and Analysis — Termination of Employment Arrangements — Employment Agreements” regarding the payments to be made to Mr. Foran upon termination of his employment and/or a “change +in control.” +Mr. Hairford . His employment agreement extends for an eighteen month term that automatically +renews each month for an additional month unless either the Company or Mr. Hairford gives written notice that the term will no longer be extended. For 2015, his base salary was $500,000. Effective January 1, 2016, his base salary is +$550,000, and he is eligible to participate in the Incentive Plan and receive awards pursuant to the 2012 Plan. See “— Compensation Discussion and Analysis — Termination of Employment Arrangements — Employment +57 +Table of Contents +Agreements” regarding the payments to be made to Mr. Hairford upon termination of his employment and/or a “change in control.” +Mr. Lancaster . His employment agreement extends for an eighteen month term that automatically renews each month for an +additional month unless either the Company or Mr. Lancaster gives written notice that the term will no longer be extended. For 2015, his base salary was $425,000. Effective January 1, 2016, his base salary is $475,000, and he is eligible +to participate in the Incentive Plan and receive awards pursuant to the 2012 Plan. See “— Compensation Discussion and Analysis — Termination of Employment Arrangements — Employment Agreements” regarding the payments to be +made to Mr. Lancaster upon termination of his employment and/or a “change in control.” +Mr. Adams . +His employment agreement extends for an eighteen month term that automatically renews each month for an additional month unless either the Company or Mr. Adams gives written notice that the term will no longer be extended. For 2015, his base +salary was $425,000. Effective January 1, 2016, his base salary is $475,000, and he is eligible to participate in the Incentive Plan and receive awards pursuant to the 2012 Plan. See “— Compensation Discussion and Analysis — +Termination of Employment Arrangements — Employment Agreements” regarding the payments to be made to Mr. Adams upon termination of his employment and/or a “change in control.” +Mr. Singleton . His employment agreement extends for an eighteen month term that automatically renews each month for an +additional month unless either the Company or Mr. Singleton gives written notice that the term will no longer be extended. For 2015, his base salary was $325,000. Effective January 1, 2016, his base salary is $375,000, and he is eligible +to participate in the Incentive Plan and receive awards pursuant to the 2012 Plan. See “— Compensation Discussion and Analysis — Termination of Employment Arrangements — Employment Agreements” regarding the payments to be +made to Mr. Singleton upon termination of his employment and/or a “change in control.” +Non-Equity Incentive +Plan Compensation. See “— Compensation Discussion and Analysis — 2015 Annual Incentive Compensation” regarding the 2015 Incentive Program compensation goals, threshold, target and maximum potential payments and actual +payments. +Long-Term Incentive Compensation . See “— Compensation Discussion and Analysis — 2015 +Long-Term Incentive Compensation” regarding 2015 long-term incentive compensation. +General . Base salary and the +amount of cash bonuses, including non-equity awards granted by the Company pursuant to the 2015 Incentive Program, paid for 2015 represented from approximately 42% to approximately 68% of the Named Executive Officers’ total compensation as +represented in the Summary Compensation Table with the percentages being as follows: Mr. Foran — 42.4%; Mr. Hairford — 62.8%; Mr. Lancaster — 68.0%; Mr. Adams — 66.6%; and +Mr. Singleton — 64.3%. +58 +Table of Contents +Outstanding Equity Awards at December 31, 2015 +The following table summarizes the total outstanding option awards at December 31, 2015 for each Named Executive Officer: +Option Awards +Name +Number of +Securities +Underlying +Unexercised +Stock +Options (#) +Exercisable +Number of +Securities +Underlying +Unexercised +Stock +Options (#) +Unexercisable +Option +Exercise +Price +Option +Expiration +Date +Joseph Wm. Foran +40,104 +40,104 +$ +10.49 +4/15/17 +87,500 +87,500 +$ +8.21 +3/7/18 +— +20,294 +$ +19.71 +2/10/19 +— +68,376 +$ +23.40 +3/6/19 +— +228,571 +$ +22.01 +1/20/20 +— +105,000 +$ +21.66 +2/26/20 +— +27,451 +$ +27.72 +4/29/20 +Matthew V. Hairford +10,000 +— +$ +9.00 +2/21/20 +16,250 +16,250 +$ +10.49 +4/15/17 +58,750 +58,750 +$ +8.21 +3/7/18 +— +5,074 +$ +19.71 +2/10/19 +— +46,154 +$ +23.40 +3/6/19 +— +62,857 +$ +22.01 +1/20/20 +— +5,882 +$ +27.72 +4/29/20 +David E. Lancaster +15,000 +— +$ +9.00 +2/21/20 +21,250 +21,250 +$ +10.49 +4/15/17 +62,500 +62,500 +$ +8.21 +3/7/18 +— +7,610 +$ +19.71 +2/10/19 +— +21,368 +$ +23.40 +3/6/19 +— +30,000 +$ +22.01 +1/20/20 +— +3,922 +$ +27.72 +4/29/20 +Craig N. Adams +10,000 +10,000 +$ +10.39 +9/27/17 +20,000 +20,000 +$ +8.21 +3/7/18 +— +6,342 +$ +19.71 +2/10/19 +— +25,801 +$ +23.40 +3/6/19 +— +30,000 +$ +22.01 +1/20/20 +— +3,922 +$ +27.72 +4/29/20 +Van H. Singleton, II +10,000 +— +$ +9.00 +2/21/20 +7,291 +7,292 +$ +10.49 +4/15/17 +16,875 +16,875 +$ +8.18 +3/11/18 +— +8,274 +$ +22.66 +3/16/19 +— +27,429 +$ +22.01 +1/20/20 +— +1,961 +$ +27.72 +4/29/20 +59 +Table of Contents +The following table provides the vesting dates at December 31, 2015 for unvested stock +options: +Vesting Date +Joseph Wm. +Foran +Matthew V. +Hairford +David E. +Lancaster +Craig N. +Adams +Van H. +Singleton, II +2/11/16 +10,147 +2,537 +3,805 +3,171 +— +3/7/16 +34,188 +23,077 +10,684 +12,900 +— +3/17/16 +— +— +— +— +4,137 +4/16/16 +40,104 +16,250 +21,250 +— +7,292 +9/28/16 +— +— +— +10,000 +— +3/8/17 +87,500 +58,750 +62,500 +20,000 +— +3/12/17 +— +— +— +— +16,875 +4/30/17 +13,725 +2,941 +1,961 +1,961 +980 +1/21/18 +228,571 +62,857 +30,000 +30,000 +27,429 +2/11/18 +10,147 +2,537 +3,805 +3,171 +— +2/27/18 +105,000 +— +— +— +— +3/7/18 +34,188 +23,077 +10,684 +12,901 +— +3/17/18 +— +— +— +— +4,137 +4/30/19 +13,726 +2,941 +1,961 +1,961 +981 +Total Unvested Stock Options +577,296 +194,967 +146,650 +96,065 +61,830 +The following table summarizes the total outstanding stock awards at December 31, 2015 for each +Named Executive Officer: +Stock Awards +Name +Number of +Shares or +Units of +Stock That +Have Not +Vested (#) +Market Value of +Shares +or Units of +Stock That Have +Not Vested +Number of +Unearned +Shares, Units +or Other +Rights That +Have Not +Vested (#) +Market or +Payout Value +of +Unearned +Shares, Units +or +Other Rights +That Have +Not Vested +Joseph Wm. Foran +67,120 +$ +1,326,962 +— +— +Matthew V. Hairford +37,369 +$ +738,785 +— +— +David E. Lancaster +55,981 +$ +1,106,744 +— +— +Craig N. Adams +31,150 +$ +615,836 +— +— +Van H. Singleton, II +23,979 +$ +474,065 +— +— +The following table provides the vesting dates at December 31, 2015 for restricted stock: +Vesting Date +Joseph Wm. +Foran +Matthew V. +Hairford +David E. +Lancaster +Craig N. +Adams +Van H. +Singleton, II +2/11/16 +— +1,268 +1,902 +1,585 +— +3/7/16 +8,547 +2,884 +5,342 +2,150 +— +3/17/16 +— +— +— +— +689 +4/16/16 +10,026 +4,063 +5,313 +— +1,823 +9/28/16 +— +— +— +2,500 +— +3/8/17 +40,000 +25,000 +30,000 +15,000 +— +3/12/17 +— +— +— +— +16,875 +1/21/18 +— +— +4,375 +4,375 +3,000 +2/11/18 +— +1,269 +1,903 +1,586 +— +3/7/18 +8,547 +2,885 +5,342 +2,150 +— +3/17/18 +— +— +— +— +690 +4/30/18 +— +— +1,804 +1,804 +902 +Total Unvested Shares +67,120 +37,369 +55,981 +31,150 +23,979 +60 +Table of Contents +Potential Payments Upon Termination or Change in Control +2012 Plan +Equity +awards under the 2012 Plan vest upon a “change in control” for the Named Executive Officers according to the terms of their employment agreements described below. +Employment Agreements +As described under “Discussion Regarding +Summary Compensation Table and Grants of Plan-Based Awards Table,” in contemplation of our initial public offering, on August 9, 2011, we entered into employment agreements with Messrs. Foran, Hairford and Lancaster. In addition, on +March 13, 2014, we entered into an employment agreement with Mr. Adams, and on February 27, 2015 we entered into an employment agreement with Mr. Singleton. The principal difference in Mr. Adams’ and +Mr. Singleton’s employment agreements as compared to the employment agreement of Messrs. Foran, Hairford and Lancaster is that Mr. Adams’ and Mr. Singleton’s agreements do not include a “modified single +trigger” that would have allowed them to receive a “change in control” payment if they terminated their agreements without “good reason” within 30 days prior to or 12 months after a change in control. Pursuant to the terms +of the employment agreements, we may be required to make certain payments to one or more of our Named Executive Officers upon the occurrence of certain events resulting in such Named Executive Officer’s termination. For a detailed description +of the events that may trigger such payments, see “— Compensation Discussion and Analysis — Termination of Employment Arrangements — Employment Agreements.” +The employment agreements each contain a non-disclosure of confidential information provision that requires each Named Executive Officer +to maintain, both during and after employment, the confidentiality of information used by such Named Executive Officer in the performance of his job duties. +Additionally, each of the employment agreements contains a non-competition provision, pursuant to which Messrs. Foran, Hairford, Lancaster, Adams and Singleton have agreed that: (i) for six months +following termination by us for total disability, or by such Named Executive Officer for good reason, or (ii) for 12 months following termination (a) by us for just cause, (b) by such Named Executive Officer other than for good reason +or (c) in connection with a change in control, such Named Executive Officer shall not, without our prior written consent (not to be unreasonably withheld if the Named Executive Officer’s employment is terminated by the Named Executive +Officer other than for good reason), directly or indirectly: (x) invest in (other than investments in publicly-owned companies which constitute not more than 1% of the voting securities of any such company) a competing business with significant +assets in the restricted area (each as defined below), or (y) participate in a competing business as a manager, employee, director, officer, consultant, independent contractor or other capacity or otherwise provide, directly or indirectly, +services or assistance to a competing business in a position that involves input into or direction of such competing business’s decisions within the restricted area. +For purposes of the employment agreements: +“competing business” means +any person or entity engaged in oil and natural gas exploration, development, production and acquisition activities; +“significant assets” means oil and natural gas reserves with an aggregate fair market value of $25 million or more; and +“restricted area” means a one-mile radius of any oil and natural gas reserves held by us as of the end of the Named +Executive Officer’s employment, plus any county or parish where we have significant assets as of the end of the Named Executive Officer’s employment. See the definitions of “change in control,” “good reason” and +“just cause” set forth in “— Compensation Discussion and Analysis — Termination of Employment Arrangements — Employment Agreements.” +61 +Table of Contents +Furthermore, other than Mr. Foran’s employment agreement, each employment +agreement contains an anti-solicitation provision, pursuant to which, during the restricted periods described above, subject to certain exceptions, Messrs. Hairford, Lancaster, Adams and Singleton shall not, without our prior written consent, +solicit for employment or a contracting relationship, or employ or retain any person who is or has been, within six months prior to such time, employed by or engaged as an individual independent contractor by us or our affiliates or induce or +attempt to induce any such person to leave his or her employment or independent contractor relationship with us or our affiliates. +For the Named Executive Officer to receive any severance payments described below for termination by us without just cause, by the Named Executive Officer for good reason or, following a change in +control, by us without cause or by the Named Executive Officer with good reason, with respect to Mr. Adams and Mr. Singleton, or with or without good reason, with respect to Messrs. Foran, Hairford and Lancaster, the Named Executive +Officer must comply with the non-disclosure, non-competition and non-solicitation provisions described above. +Finally, as a +condition to receiving any severance payments and other payments under their respective employment agreements, each Named Executive Officer is required to execute a separation agreement and release in favor of us. +To describe the payments and benefits that are triggered for each event of termination, we have created the following table estimating +the payments and benefits that would be paid to each Named Executive Officer under each element of our compensation program assuming that such Named Executive Officer’s employment agreement terminated on December 31, 2015, the last day of +our 2015 fiscal year. In all cases, the amounts were valued as of December 31, 2015, based upon, where applicable, the closing price of our Common Stock of $19.77 per share. The amounts in the table below are calculated as of December 31, +2015 pursuant to SEC rules and are not intended to reflect actual payments that may be made. Actual payments that may be made will be based on the dates and circumstances of the applicable event. +62 +Table of Contents +Payment Upon Termination +Named Executive Officer +Category of +Payment +Upon Death or +Total +Disability (1) +Upon Mutual +Agreement or +Dissolution/ +Liquidation (1) +Termination by +Us Without Just +Cause or by +Named +Executive +Officer for Good +Reason (1) +Termination +Following a Change +in Control Without +Cause or by +Named +Executive Officer +With or Without +Good Reason (2) +Joseph Wm. Foran +Salary +$ +— +$ +— +$ +1,600,000 +(3) +$ +2,400,000 +(4) +Bonus +1,252,500 +(5) +1,252,500 +(5) +2,505,000 +(6) +3,757,500 +(7) +Vesting equity +— +— +— +2,711,845 +(8) +Total +$ +1,252,500 +$ +1,252,500 +$ +4,105,000 +$ +8,869,345 +Matthew V. Hairford +Salary +$ +— +$ +— +$ +750,000 +(9) +$ +1,500,000 +(4) +Bonus +519,000 +(5) +519,000 +(5) +778,500 +(10) +1,557,000 +(7) +Vesting equity +— +— +— +1,569,040 +(8) +Total +$ +519,000 +$ +519,000 +$ +1,528,500 +$ +4,626,039 +David E. Lancaster +Salary +$ +— +$ +— +$ +637,500 +(9) +$ +1,275,000 +(4) +Bonus +472,500 +(5) +472,500 +(5) +708,750 +(10) +1,417,500 +(7) +Vesting equity +— +— +— +2,026,901 +(8) +Total +$ +472,500 +$ +472,500 +$ +1,346,250 +$ +4,719,401 +Craig N. Adams +Salary +$ +— +$ +— +$ +637,500 +(9) +$ +1,275,000 +(4) +Bonus +442,500 +(5) +442,500 +(5) +663,750 +(10) +1,327,500 +(7) +Vesting equity +— +— +— +1,092,575 +(8) +Total +$ +442,500 +$ +442,500 +$ +1,301,250 +$ +3,695,075 +Van H. Singleton, II +Salary +$ +— +$ +— +$ +487,500 +(9) +$ +975,000 +(4) +Bonus +370,000 +(5) +370,000 +(5) +555,000 +(10) +1,110,000 +(7) +Vesting equity +— +— +— +829,998 +(8) +Total +$ +370,000 +$ +370,000 +$ +1,042,500 +$ +2,914,998 +(1) +Amounts due upon death, total disability, mutual agreement, dissolution or liquidation, termination by us without cause or termination by Named Executive Officer for +good reason are payable in a lump sum on the sixtieth day following the date of termination unless otherwise required by Section 409A of the Code. +(2) +Amounts due following a change in control are payable in a lump sum on the date which immediately follows six months from the date of termination or, if earlier, within +30 days of such Named Executive Officer’s death. +(3) +Represents two times such Named Executive Officer’s base salary as of the termination date. +(4) +Represents three times such Named Executive Officer’s base salary as of the termination date. +(5) +Represents the average annual amount of bonuses, including pursuant to the 2014 and 2015 Incentive Programs, paid to such Named Executive Officer with respect to prior +two calendar years (2014-2015). +(6) +Represents two times an amount equal to the average annual amount of bonuses, including pursuant to the 2014 and 2015 Incentive Programs, paid to such Named Executive +Officer with respect to prior two calendar years (2014-2015). +(7) +Represents three times an amount equal to the average annual amount of bonuses, including pursuant to the 2014 and 2015 Incentive Programs, paid to such Named Executive +Officer with respect to prior two calendar years (2014-2015). +(8) +The employment agreements provide for accelerated and full vesting of unvested incentive awards held by these Named Executive Officers in the event that such Named +Executive Officer is terminated without “Just Cause” or terminates his employment with or without “Good Reason,” with respect to Messrs. Foran, Hairford and Lancaster, within 30 days prior to, or 12 months following, a +“change in control.” With respect to Messrs. Adams and Singleton, the employment agreements provide for accelerated and full vesting of unvested incentive awards held by these Named Executive Officers in the event that such Named Executive +Officer is terminated without “Just Cause” or terminates his employment with “Good Reason,” within 30 days prior to, or 12 months following, a “change in control.” The amount disclosed reflects the closing price of our +Common Stock on December 31, 2015 of $19.77 per share multiplied by the number of unvested service-based shares of restricted stock held by such Named Executive Officer on December 31, 2015, in addition to the intrinsic value of the stock +options held by such Named Executive Officer based upon the exercise price of such stock options being less than the closing price of our Common Stock on December 31, 2015. +(9) +Represents 1.5 times such Named Executive Officer’s base salary as of the termination date. +(10) +Represents 1.5 times an amount equal to the average annual amount of bonuses, including pursuant to the 2014 and 2015 Incentive Programs, paid to such Named Executive +Officer with respect to prior two calendar years (2014-2015). +63 +Table of Contents +DIRECTOR COMPENSATION +Name +Fees Earned or +Paid in +Cash +($) +Stock +Awards +($) +Restricted +Stock Units (1) +($) +All Other +Compensation +($) +Total +($) +Reynald A. Baribault +87,000 +— +99,986 +— +186,986 +David M. Laney (2) +116,000 +— +99,986 +— +215,986 +Gregory E. Mitchell +70,000 +— +99,986 +— +169,986 +Steven W. Ohnimus +72,000 +— +99,986 +— +171,986 +Michael C. Ryan (3) +36,000 +— +49,712 +— +85,712 +Carlos M. Sepulveda, Jr. (2) +125,000 +— +99,986 +— +224,986 +Margaret B. Shannon +76,000 +— +99,986 +— +175,986 +Don C. Stephenson (2)(4) +77,000 +— +50,274 +— +127,274 +George M. Yates (5) +50,000 +— +75,051 +— +125,051 +(1) +Based on the fair market value of the restricted stock units on the date of grant. Subject to a three year ratable vesting period. +(2) +Includes $40,000 earned by the director for additional committee service provided during 2015. +(3) +Mr. Ryan retired from the Board of Directors effective June 10, 2015. +(4) +Mr. Stephenson joined the Board of Directors on July 6, 2015. +(5) +Mr. Yates joined the Board of Directors on April 28, 2015. +Compensation for 2015 +During 2015, we targeted our non-employee directors’ compensation to approximate the 50 th percentile of the Peer Group used for benchmarking the non-employee +directors’ compensation. During 2015, our director compensation program was the following: +• +annual cash retainer of $60,000; +• +cash meeting fee of $1,000 per day for each day of Board and committee service; +• +the chairs of the Audit Committee and the Operations and Engineering Committee each received an additional cash retainer of $15,000 annually and the +chairs of the Nominating, Compensation and Planning Committee and the Corporate Governance Committee each received an additional cash retainer of $5,000 annually; and +• +each non-employee director received restricted stock units (“RSUs”) equal to up to $100,000 in value annually with the restrictions lapsing +in one-third increments on each of the first, second and third anniversaries of the date of grant. Each grant was subject to downward (but not upward) adjustment in value based upon the non-employee director’s attendance and contributions at +Board or committee meetings called during the period for which RSUs were due. +In addition, we reimbursed +our directors for travel, lodging and related expenses incurred in attending Board and committee meetings. +Compensation for 2016 +For 2016, our non-employee directors’ compensation program has been adjusted as set forth below: +• +annual cash retainer of $54,000; +• +cash meeting fee of $1,000 per day for each day of Board and committee service; +• +the chair of the Audit Committee will receive an additional cash retainer of $25,000 annually and the chairs of the Nominating, Compensation and +Planning Committee, the Corporate Governance Committee, the Prospect Committee and the Operations and Engineering Committee will each receive an additional cash retainer of $15,000 annually; and +64 +Table of Contents +• +each non-employee director receives RSUs equal to up to $135,000 in value annually with the restrictions lapsing in one-third increments on each of the +first, second and third anniversaries of the date of grant. Each grant may be adjusted downward (but not upward) in value based upon the non-employee director’s attendance and contributions at Board or committee meetings called during the +period for which RSUs are due. +In addition, we will continue to reimburse our directors for travel, lodging +and related expenses incurred in attending Board and committee meetings. +Director Ownership Guidelines +The non-employee directors follow our voluntary stock ownership guidelines for non-employee directors. Within three years +of becoming a director, each non-employee director will be expected to own $250,000 of Common Stock and continue to hold such shares while serving as a director. All directors and director nominees own in excess of $250,000 of Common Stock and +presently meet this standard. Shares which will count toward the stock ownership guidelines include time-lapse restricted stock or RSUs that are still restricted and any shares held in trust by the director or his or her immediate family over which +he or she has direct beneficial ownership interest. Shares which will not count toward the stock ownership guidelines include shares underlying unexercised stock options and unexercised stock appreciation rights. +Special Board Advisor Compensation +Our special Board advisors are compensated with stock and/or cash awards based upon meeting attendance or as otherwise agreed to pursuant to consulting arrangements with such advisors. We reimburse our +special Board advisors for travel, lodging and related expenses incurred in attending Board and committee meetings. Mr. Downey’s special Board advisor compensation is the same as for the non-employee directors as described above. +SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS +The following table presents the securities authorized for issuance under our equity compensation plans as of December 31, 2015. +Plan Category +Number of +Shares to be +Issued Upon +Exercise +of +Outstanding +Options, +Warrants +and +Rights +Weighted- +Average +Exercise +Price of +Outstanding +Options, +Warrants +and +Rights +Number of +Shares +Remaining +Available for +Future +Issuance +Under +Equity +Compensation +Plans +Equity compensation plans approved by security holders (1)(2) +2,436,784 +$ +15.40 +5,066,503 +Equity compensation plans not approved by security holders +— +— +— +Total +2,436,784 +$ +15.40 +5,066,503 +(1) +Our Board has determined not to make any additional awards under the Matador Resources Company 2003 Stock and Incentive Plan. +(2) +The Amended and Restated 2012 Long-Term Incentive Plan was adopted by our Board of Directors in April 2015 and approved by our shareholders on June 10, 2015. +65 +Table of Contents +TRANSACTIONS WITH RELATED PERSONS +Except as disclosed below, since January 1, 2015, there has not been, nor is there currently proposed, any transaction or series of +similar transactions to which we were or are a party in which the amount involved exceeded or exceeds $120,000 and in which any of our directors, executive officers, holders of more than 5% of any class of our voting securities or any member of the +immediate family of any of the foregoing persons had or will have a direct or indirect material interest, other than compensation arrangements with directors and executive officers, which are described in “Executive Compensation — +Compensation Discussion and Analysis” above. +In June 2015, the Company entered into two joint ventures (the “Joint +Ventures”) to develop certain leasehold interests held by certain affiliates (the “HEYCO Affiliates”) of HEYCO Energy Group, Inc., the former parent company of HEYCO. The HEYCO Affiliates are owned by George M. Yates, who was +appointed to the Board on April 28, 2015 in accordance with the terms of the HEYCO Merger, and certain of his affiliates. Pursuant to the terms of the transaction, the HEYCO Affiliates contributed an aggregate of approximately 1,900 net acres, +primarily in the same properties previously held by HEYCO, to the two newly-formed entities in exchange for a 50% interest in each entity. The Company has agreed to contribute an aggregate of approximately $14 million in exchange for the other 50% +interest in both entities. As of December 31, 2015, the Company had contributed an aggregate of approximately $0.7 million to the two entities. The Company’s contributions will be used to fund future capital expenditures associated with +the interests being acquired as well as to fund acquisitions of other non-operated acreage opportunities. +The Audit Committee +reviewed the terms of the Joint Ventures for potential conflicts of interest under the Company’s related party transaction policy, effective October 12, 2011 (the “Related Party Transaction Policy”), and, after being fully +informed as to Mr. Yates’ relationship and interest and all other material facts related to the Joint Ventures, determined that the Joint Ventures were fair to the Company and recommended the Joint Ventures to the full Board for approval. +The Board subsequently approved such Joint Ventures. +In addition, in light of Mr. Yates’ ongoing services to HEYCO +Energy Group, Inc., the Board, in accordance with Texas corporate law, adopted resolutions which renounce and provide for a waiver of certain corporate opportunities with respect to Mr. Yates. As a result, Mr. Yates will have no fiduciary +duty to present certain corporate opportunities related to Mr. Yates’ existing oil and gas holdings and/or in areas where Matador does not currently operate. +Additionally, substantially all of the oil production from the wells acquired in the HEYCO Merger was subject to pre-existing sales contracts with an entity owned by affiliates of HEYCO Energy Group, Inc. +The Company recorded revenue of $1.1 million for oil sold pursuant to such contracts for the year ended December 31, 2015. The Audit Committee reviewed the terms of the sales contracts for potential conflicts of interest under the +Company’s Related Party Transaction Policy and, after being fully informed as to Mr. Yates’ relationship and interest and all other material facts related to the sales contracts, determined that the sales contracts were fair to the +Company and recommended the sales contracts to the full Board for approval and ratification. The Board subsequently approved and ratified such sales contracts. Such contracts were terminated in the third quarter of 2015. +Billy E. Goodwin, Senior Vice President — Operations, was appointed as an executive officer of the Company in connection with his +February 2016 promotion to his present role. Two of Mr. Goodwin’s adult children are employees of the Company and are each expected to be compensated between $120,000 and $300,000 in 2016. The Audit Committee reviewed the terms of the +employment arrangements for potential conflicts of interest under the Company’s Related Party Transaction Policy and, after being fully informed as to the employment arrangements and historical and anticipated compensation of +Mr. Goodwin’s adult children, and all other material facts related to the relationship, determined that the employment arrangements were fair to the Company and recommended the employment arrangements to the full Board for approval and +ratification. The Board subsequently approved and ratified such employment arrangements. +66 +Table of Contents +Procedures for Approval of Related Party Transactions +Pursuant to the Related Party Transaction Policy, a “Related Party Transaction” is defined as a transaction (including any +financial transaction, arrangement or relationship (including any indebtedness or guarantee of indebtedness)), or series of related transactions, or any material amendment to any such transaction, involving a Related Party (as defined below) and in +which we are a participant, other than: +• +a transaction involving compensation of directors; +• +a transaction involving compensation of an executive officer or involving an employment agreement, severance agreement, change in control provision or +agreement or a special supplemental benefit for an executive officer; +• +a transaction available to all employees generally or to all salaried employees generally; +• +a transaction with a Related Party involving less than $120,000; +• +a transaction in which the interest of the Related Party arises solely from the ownership of a class of our equity securities and all holders of that +class receive the same benefit on a pro rata basis; or +• +a transaction in which the rates or charges involved therein are determined by competitive bids, or a transaction that involves the rendering of +services as a common or contract carrier, or public utility, at rates or charges fixed in conformity with law or governmental authority. +“Related Party” means: +• +any person who is, or at any time during the applicable period was, one of our executive officers or one of our directors or nominees for directors; +• +any person who is known by us to be the beneficial owner of more than 5% of our Common Stock; +• +any immediate family member of any of the foregoing persons, which means any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, +father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law of a director, nominee for director, executive officer or a beneficial owner of more than 5% of our Common Stock; and +• +any firm, corporation or other entity that is owned or controlled by any of the foregoing persons or in which any of the foregoing persons is a general +partner or executive officer or in which such person, together with all other of the foregoing persons, owns 10% or more of the equity interests thereof. +Pursuant to the Related Party Transaction Policy, the Audit Committee must review all material facts of each Related Party Transaction and recommend either approval or disapproval of the Related Party +Transaction to the full Board, subject to certain limited exceptions. In determining whether to recommend approval or disapproval of the Related Party Transaction, the Audit Committee must, after reviewing all material facts of the Related Party +Transaction and the Related Party’s relationship and interest, determine whether the Related Party Transaction is fair to the Company. Further, the policy requires that all Related Party Transactions be disclosed in our filings with the SEC +and/or our website in accordance with applicable laws, rules and regulations. +67 +Table of Contents +SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT +The following table presents the beneficial ownership of our Common Stock as of April 26, 2016 for (i) each +person beneficially owning more than 5% of the outstanding shares of our Common Stock, (ii) each director and nominee for director of the Company, (iii) each executive officer of the Company listed in the Summary Compensation Table and +(iv) all of our directors, nominees for director and executive officers as a group. Except pursuant to applicable community property laws and except as otherwise indicated, each shareholder possesses sole voting and investment power with +respect to its, his or her shares. The business address of each of our directors, nominees for director and executive officers is c/o Matador Resources Company, One Lincoln Centre, 5400 LBJ Freeway, Suite 1500, Dallas, Texas 75240. The applicable +percentage ownership is based on 93,256,049 shares of our Common Stock issued and outstanding as of April 26, 2016, plus, on an individual basis, the right of that individual to (i) obtain Common Stock upon exercise of stock options or +(ii) obtain Common Stock upon the vesting or delivery of restricted stock units, in each case within 60 days of April 26, 2016. The information is based on Form 3s, Form 4s, Schedule 13Ds and Schedule 13Gs filed through April 26, +2016. +Name +Amount and +Nature of +Ownership of +Common Stock +Percent +of Class +Directors, Nominees for Director and Named Executive +Officers: +Joseph Wm. Foran (1) +4,313,478 +4.6 +% +Craig N. Adams (2) +117,131 +* +Reynald A. Baribault (3) +27,263 +* +Matthew V. Hairford (4) +353,398 +* +David E. Lancaster (5) +473,383 +* +David M. Laney (6) +480,050 +* +Gregory E. Mitchell (7) +210,115 +* +Steven W. Ohnimus (8) +106,850 +* +Carlos M. Sepulveda, Jr. (9) +300,522 +* +Margaret B. Shannon (10) +58,265 +* +Van H. Singleton, II (11) +93,593 +* +Don C. Stephenson (12) +35,415 +* +George M. Yates (13) +4,802,800 +5.2 +% +Craig T. Burkert (14) +70,409 +* +All Directors, Nominees for Director and Executive Officers as a Group (17 persons) (15) : +11,918,486 +12.7 +% +Other 5% Owners: +T. Rowe Price Associates, Inc. (16) +9,180,717 +9.8 +% +The VanGuard Group (17) +5,225,110 +5.6 +% +BlackRock, Inc. (18) +4,423,718 +4.7 +% +* +Less than one percent (1%) +(1) +Includes (i) 1,084,933 shares of Common Stock held of record by Sage Resources, Ltd., a limited partnership owned by the Foran family, including +Mr. Foran; (ii) 4,000 shares of Common Stock held of record by the reporting person’s spouse through her Individual Retirement Account; (iii) 119,500 shares and 50,000 shares of Common Stock held of record by The Don Foran Family +Trust 2008 and The Foran Family Special Needs Trust, respectively, for which Mr. Foran is the co-trustee and over which Mr. Foran has shared voting and investment power with other members of his family; (iv) 370,878 shares of Common +Stock held of record by each of the JWF 2011-1 GRAT and the NNF 2011-1 GRAT, for which Mr. Foran is the trustee and over which Mr. Foran has sole voting and investment power; (v) 239,963 +shares of Common Stock held of record by each of the JWF 2013-1 GRAT and the NNF 2013-1 GRAT, for which Mr. Foran is the trustee and over which Mr. Foran has sole voting and investment power; (vi) 22,485 shares of Common Stock held of +record by each of the JWF 2014-2 GRAT and the NNF 2014-2 GRAT, for which Mr. Foran is the trustee and over which Mr. Foran has sole voting and investment power; (vii) 104,048 shares of Common Stock held of record by each of the JWF +2015-1 GRAT and the NNF 2015-1 GRAT, for which Mr. Foran is the trustee and over which Mr. Foran has sole voting and investment power; (viii) 109,011 shares of Common Stock held of record by each of the JWF 2015-2 GRAT and the NNF +2015-2 GRAT, for which Mr. Foran is the trustee and over which Mr. Foran has sole voting and investment power; (ix) 387,418 shares of Common Stock held of record by each of the JWF 2016-1 GRAT and the NNF 2016-1 GRAT, for which +Mr. Foran is the trustee and over which Mr. Foran has +68 +Table of Contents +sole voting and investment power; (x) 43,750 shares of Common Stock held of record by the Foran 2012 Security Trust, for which Mr. Foran is the trustee and over which Mr. Foran has +sole voting and investment power; (xi) 165,050 shares of Common Stock held of record by the Foran 2012 Savings Trust, for which Mr. Foran’s spouse is a trustee; (xii) 270 shares held of record by the Individual Retirement Account +of Mr. Foran’s adult child, who gave Mr. Foran investment power over such shares through a revocable power of attorney; (xiii) 4,976 shares held of record, collectively, by the LRF 2011 Non-GST Trust, WJF 2011 Non-GST Trust, JNF +2011 Non-GST Trust, SIF 2011 Non-GST Trust and MCF 2011 Non-GST Trust, for which trusts Mr. Foran and his spouse, as settlors of each of the Non-GST Trusts, retain the power of substitution with respect to the property of the Non-GST Trusts; +and (xiv) 142,777 shares of restricted stock. Pursuant to the terms of the restricted stock grants, Mr. Foran has the right to vote such shares but may only dispose of such shares to the extent they have vested. Also includes 212,043 +shares of Common Stock issuable to Mr. Foran upon the exercise of stock options. +(2) +Includes 46,071 shares of Common Stock issuable to Mr. Adams upon the exercise of stock options. Also includes 52,281 shares of restricted stock. Pursuant to the +terms of the restricted stock grants, Mr. Adams has the right to vote such shares but may only dispose of such shares to the extent they have vested. +(3) +Includes 2,000 shares of Common Stock held by the Individual Retirement Account of Mr. Baribault. Also includes 19,000 shares of Common Stock held by the Reynald +A. Baribault Maritalized Revocable Living Trust, for which Mr. Baribault has shared voting and investment power with his spouse, and 5,000 shares of Common Stock held by the Sally K. Baribault Maritalized Revocable Living Trust, for which +Mr. Baribault has shared voting and investment power with his spouse. Also includes 300 shares of Common Stock issuable to Mr. Baribault upon the vesting of restricted stock units. +(4) +Includes 126,864 shares of Common Stock issuable to Mr. Hairford upon the exercise of stock options and 5,000 shares held of record by his Individual Retirement +Account. Also includes 61,146 shares of restricted stock. Pursuant to the terms of the restricted stock grants, Mr. Hairford has the right to vote such shares but may only dispose of such shares to the extent they have vested. Mr. Hairford +has pledged 67,400 shares of Common Stock. +(5) +Includes 134,489 shares of Common Stock issuable to Mr. Lancaster upon the exercise of stock options and 75,500 shares of Common Stock held of record by his +Individual Retirement Account. Also includes 68,290 shares of restricted stock. Pursuant to the terms of the restricted stock grants, Mr. Lancaster has the right to vote such shares but may only dispose of such shares to the extent they have +vested. +(6) +Includes 66,000 shares of Common Stock held of record by Laney Investments Ltd., for which Mr. Laney has sole voting and investment power. Also includes 1,233 +shares of Common Stock issuable to Mr. Laney upon the vesting of restricted stock units. +(7) +Includes 191,292 shares of Common Stock held of record by JAMAL Enterprises, LP, for which Mr. Mitchell has sole voting and investment power. Also includes 1,233 +shares of Common Stock issuable to Mr. Mitchell upon the vesting of restricted stock units. +(8) +Includes 6,327 vested restricted stock units, delivery of which has been deferred pursuant to the award agreement, and 1,233 shares of Common Stock issuable to +Dr. Ohnimus upon the vesting of restricted stock units. Dr. Ohnimus has pledged 43,209 shares of Common Stock. +(9) +Includes 1,233 shares of Common Stock issuable to Mr. Sepulveda upon the vesting of restricted stock units. +(10) +Includes 1,233 shares of Common Stock issuable to Ms. Shannon upon the vesting of restricted stock units. +(11) +Includes 45,595 shares of Common Stock issuable to Mr. Singleton upon the exercise of stock options. Also includes 38,917 shares of restricted stock. Pursuant to +the terms of the restricted stock grants, Mr. Singleton has the right to vote such shares but may only dispose of such shares to the extent they have vested. +(12) +Includes 3,965 shares of Common Stock held by the Individual Retirement Account of Mr. Stephenson. +(13) +Includes 4,800,000 shares of Common Stock held by HEYCO Energy Group, Inc. (“HEGI”), 166,667 of which are being held in an escrow account pursuant to the +HEYCO Merger and related escrow agreement. As Chairman and Chief Executive Officer of HEGI, Mr. Yates will have ultimate voting and dispositive power with respect to all shares held by HEGI. Also includes 2,500 shares of Common Stock owned by +Spiral, Inc., an entity owned by certain trusts of which Mr. Yates is the sole trustee and with respect to which Mr. Yates has voting and dispositive power. Also includes 300 shares of Common Stock issuable to Mr. Yates upon the +vesting of restricted stock units. +(14) +Mr. Burkert is a nominee for director at the Annual Meeting. Includes 34,742 shares held by the Individual Retirement Account of Mr. Burkert. +(15) +Includes an aggregate of 684,600 shares of Common Stock which our executive officers as a group have the right to acquire within 60 days of April 26, 2016 +upon the exercise of stock options. Also includes 442,067 shares of restricted stock held by our executive officers. Pursuant to the terms of the restricted stock grants, the executive officers have the right to vote such shares but may only dispose +of such shares to the extent they have vested. Also includes 13,092 shares of Common Stock issuable to directors upon the vesting and delivery of restricted stock units. Includes 140,609 shares of Common Stock pledged by our executive officers and +directors. +(16) +Information based solely on a Schedule 13G/A filed with the SEC on February 10, 2016. The Schedule 13G/A reports that T. Rowe Price Associates, Inc. (“Price +Associates”) beneficially owns 9,180,717 shares, has sole voting power with respect to 2,294,732 shares and has sole dispositive power with respect to 9,180,717 shares. According to the Schedule 13G/A, these securities are owned by various +individual and institutional investors, for which Price Associates serves as an investment adviser registered under the Investment Advisers Act of 1940, as amended, with power to direct investments and/or sole power to vote the securities. For +purposes of the reporting requirements of the Securities Exchange Act of 1934, as amended, Price Associates is deemed to be a beneficial owner of such securities; however, Price Associates expressly disclaims that it is, in fact, the beneficial +owner of such securities. According to the Schedule 13G/A, Price Associates’ address is 100 E. Pratt Street, Baltimore, MD 21202. +(17) +Information based solely on a Schedule 13G/A filed with the SEC on February 10, 2016. The Schedule 13G/A reports that The VanGuard Group (“VanGuard”) +beneficially owns 5,225,110 shares, has sole voting power with respect to 135,848 shares, has shared voting power with respect to 4,700 shares, has sole dispositive power with respect to 5,089,162 shares and has shared dispositive power with respect +to 135,948 shares. According to the Schedule 13G/A, VanGuard’s address is 100 Vanguard Blvd, Malvern, PA 19355. +69 +Table of Contents +(18) +Information based solely on a Schedule 13G filed with the SEC on January 28, 2016. The Schedule 13G reports that BlackRock, Inc. +(“BlackRock”) beneficially owns 4,423,718 shares, has sole voting power with respect to 4,258,551 shares and has sole dispositive power with respect to 4,423,718 shares. According to the Schedule 13G, BlackRock’s address is 55 East 52 nd Street, New York, NY 10055. +70 +Table of Contents +ADDITIONAL INFORMATION +Section 16(a) Beneficial Ownership Reporting Compliance +Section 16(a) of the Exchange Act requires the Company’s executive officers, directors and persons who own more than ten percent +of the Company’s Common Stock to file initial reports of ownership and changes in ownership with the SEC. +Additionally, +SEC regulations require that the Company identify any individuals for whom one of the referenced reports was not filed on a timely basis during the most recent fiscal year. Based solely on the Company’s review of copies of the reports received +and written inquiries to the Company’s directors and officers, the Company believes that all persons subject to Section 16(a) of the Exchange Act timely filed all reports required pursuant to such section relating to the Company’s +Common Stock in 2015. +Shareholder Proposals for the 2017 Proxy Statement +For shareholder proposals to be included in the Company’s Proxy Statement and form of proxy relating to the 2017 Annual Meeting of +Shareholders, such proposals must be received by the Company at its offices in Dallas, Texas, addressed to the Corporate Secretary of the Company, no later than December 29, 2016. Upon timely receipt of any such proposal, the Company will +determine whether or not to include such proposal in the proxy statement and proxy in accordance with applicable regulations and provisions governing the solicitation of proxies. +Director Nominations or Other Business for Presentation at the 2017 Annual Meeting +Under the Amended and Restated Bylaws of the Company, certain procedures are provided that a shareholder must follow in order to place in nomination persons for election as directors at an Annual Meeting +of Shareholders or to introduce an item of business at an Annual Meeting of Shareholders. These procedures provide, generally, among other things, that shareholders desiring to place in nomination persons for election as directors, and/or bring a +proper subject of business before an Annual Meeting, must do so by a written notice timely received (on or before March 14, 2017, but no earlier than February 12, 2017, for the 2017 Annual Meeting) to the Corporate Secretary of the Company +containing the name and address of the shareholder and the number of shares of the Company’s Common Stock beneficially owned by the shareholder. If the notice relates to a nomination for director, it must also set forth the name, age, business +and residence addresses of the candidate, the candidate’s résumé or a listing of his or her qualifications to be a director of the Company, the person’s written consent to be a director if selected by the Nominating, +Compensation and Planning Committee, nominated by the Board and elected by the shareholders and any other information that would be required to be disclosed in solicitations of proxies for the election of directors. The Company may require any +proposed nominee to furnish such other information as may reasonably be required by the Company to determine the eligibility of such proposed nominee to serve as director. Notice of an item of business shall include a brief description of the +proposed business and any material interest of the shareholder in such business. +The Chairman of the meeting may refuse to +allow the transaction of any business not presented, or to acknowledge the nomination of any person not made, in compliance with the foregoing procedures. Copies of the Company’s Amended and Restated Bylaws, as amended to date, are available +from the Corporate Secretary of the Company. +See “Corporate Governance — Board Committees — Nominating, +Compensation and Planning Committee” for the process for shareholders to follow to suggest a director candidate to the Nominating, Compensation and Planning Committee for nomination by the Board. +Annual Report on Form 10-K +The Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015, as filed with the SEC, including financial statements, accompanies this proxy statement. Shareholders may +obtain without charge another copy of the Annual Report on Form 10-K, excluding certain exhibits, by writing to Investor Relations, Matador Resources Company, One Lincoln Centre, 5400 LBJ Freeway, Suite 1500, Dallas, Texas 75240. +71 +Table of Contents +OTHER BUSINESS +Management of the Company is not aware of other business to be presented for action at the Annual Meeting; however, if other matters are +presented for action, it is the intention of the persons named in the accompanying form of proxy to vote in accordance with their judgment on such matters. +By Order of the Board of Directors, +Joseph Wm. Foran +Chairman and Chief Executive Officer +April 28, 2016 +72 +Table of Contents +Appendix A +MATADOR RESOURCES COMPANY +AMENDED AND RESTATED ANNUAL INCENTIVE PLAN +FOR +MANAGEMENT AND KEY EMPLOYEES +(effective as of January 1, 2016) +ARTICLE 1 +PURPOSE +The Plan is intended to provide the Company, and any successor thereto, a means by which it can engender and sustain a sense of personal +commitment on the part of its executives, select managers and key employees in the continued growth, development and financial success of the Company and encourage them to remain with and devote their best efforts to the business of the Company, +thereby advancing the interests of the Company and its shareholders. The Company may award to such employees annual incentive compensation, which is tied to the achievement of pre-established and objective performance goals, based on the terms and +conditions established herein. +The Plan is intended to provide Participants (as hereinafter defined) with incentive +compensation which is not subject to the deduction limitation rules prescribed under Section 162(m) of the Code, and should be construed to the extent possible as providing for remuneration which is “performance-based compensation” +within the meaning of Code Section 162(m) and the treasury regulations promulgated thereunder. +ARTICLE 2 +DEFINITIONS +For the purposes of the Plan, unless the context requires otherwise, the following terms shall have the meanings indicated: +2.1 “ Adjusted EBITDA ” means earnings before interest expenses, income taxes, depletion, depreciation, amortization, accretion of asset-retirement obligations, property impairments, +unrealized derivative gains and losses, certain other non-cash items and non-cash stock-based compensation expenses and net gain or loss on asset sales and inventory impairments, of the Company and its Subsidiaries, determined on a consolidated +income basis. +2.2 “ Affiliate ” shall have the meaning set forth in Rule +12b-2 promulgated under Section 12 of the Securities Exchange Act of 1934, as amended. +2.3 “ Award ” means a grant of Incentive Compensation by the Committee that may be paid to a Participant upon the satisfaction of a specified Performance Goal for a particular +Performance Period, pursuant to such terms, conditions, restrictions and limitations established by the Committee and the Plan. +2.4 “ Board ” means the Board of Directors of the Company. +2.5 “ Cause ” means (i) Participant’s continued and material failure to perform the duties of his +employment consistent with Participant’s position, except as a result of being Partially Disabled (during any period of Partial Disability) or Totally Disabled, (ii) if Participant is a party to an employment agreement or independent +A-1 +Table of Contents +contractor agreement, Participant’s failure to perform his material obligations under such agreement, except as a result of being Partially Disabled (during any period of Partial Disability) +or Totally Disabled, or a material breach by the Participant of Company’s written policies concerning discrimination, harassment or securities trading, (iii) Participant’s refusal or failure to follow lawful directives of the Board, +the Chairman of the Board and/or Chief Executive Officer, except as a result of being Partially Disabled (during any period of Partial Disability) or Totally Disabled, (iv) Participant’s commission of an act of fraud, theft, or +embezzlement, (v) Participant’s indictment for or conviction of a felony or other crime involving moral turpitude, or (vi) Participant’s intentional breach of fiduciary duty; provided , however , that Participant +shall have thirty (30) days after written notice from the Board (or the Committee) to remedy any actions alleged under subsections (i), (ii) or (iii) in the manner reasonably specified by the Board (or the Committee). +2.6 (a) “ Change in Control ” means a change in the Company’s ownership, its effective control or the +ownership of a substantial portion of its assets, as follows: +(i) Change in Ownership . A change in +ownership of the Company occurs on the date that any Person, other than (i) the Company or any of its Subsidiaries, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its +Affiliates, (iii) an underwriter temporarily holding stock pursuant to an offering of such stock or (iv) a corporation owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their +ownership of the Company’s stock, acquires ownership of the Company’s stock that, together with stock held by such Person, constitutes more than 50% of the total fair market value or total voting power of the Company’s stock. However, +if any Person is considered to own already more than 50% of the total fair market value or total voting power of the Company’s stock, the acquisition of additional stock by the same Person is not considered to be a Change in Control. In +addition, if any Person has effective control of the Company through ownership of 30% or more of the total voting power of the Company’s stock, as discussed in paragraph (ii) below, the acquisition of additional control of the Company by +the same Person is not considered to cause a Change in Control pursuant to this paragraph (i) ; or +(ii) +Change in Effective Control . Even though the Company may not have undergone a change in ownership under paragraph (i) above, a change in the effective control of the Company occurs on either of the following dates: +(A) the date that any Person acquires (or has acquired during the 12-month period ending on the date of the most recent +acquisition by such Person) ownership of the Company’s stock possessing 30% or more of the total voting power of the Company’s stock. However, if any Person owns 30% or more of the total voting power of the Company’s stock, the +acquisition of additional control of the Company by the same Person is not considered to cause a Change in Control pursuant to this subparagraph (ii)(A) ; or +(B) the date during any 12-month period when a majority of members of the Board is replaced by directors whose appointment +or election is not endorsed by a majority of the Board before the date of the appointment or election; provided , however , that any such director shall not be considered to be endorsed by the Board if his or her initial assumption of +office occurs as a result of an actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or +(iii) Change in Ownership of Substantial Portion of Assets. A change in the ownership of a substantial portion of the Company’s assets occurs on the date that a Person acquires (or has +acquired during the 12-month period ending on the date of the most recent acquisition by such Person) assets of the Company, that have a total gross fair market value equal to at least 40% of the total gross +fair market value of all of the Company’s assets immediately before such acquisition or acquisitions. However, there is no Change in Control when there is such a transfer to an entity that is controlled by the shareholders of the Company +immediately after the transfer, through a transfer to (i) a shareholder of the Company (immediately before the asset transfer) in exchange for or with respect to the Company’s stock; (ii) an entity, at least 50% of the total value or +voting power of the stock of which is owned, directly or indirectly, by the Company; (iii) a Person that owns, directly or indirectly, at least 50% of the total value or voting power of the Company’s +A-2 +Table of Contents +outstanding stock; or (iv) an entity, at least 50% of the total value or voting power of the stock of which is owned by a Person that owns, directly or indirectly, at least 50% of the total +value or voting power of the Company’s outstanding stock. +(b) The provisions of this +Section 2.6 shall be interpreted in accordance with the requirements of Code Section 409A, it being the intent of the parties that, to the extent necessary to comply with Code Section 409A, an event shall not constitute a +“Change in Control” for purposes of the Plan, unless such event also constitutes a change in the Company’s ownership, its effective control or the ownership of a substantial portion of its assets within the meaning of Code +Section 409A. +2.7 “ Claim ” shall have the meaning set forth in Section 7.5 . +2.8 “ Code ” means the Internal Revenue Code of 1986, as amended, together with the published rulings, +regulations and interpretations duly promulgated thereunder. +2.9 “ Committee ” means the +“Nominating, Compensation and Planning Committee” of the Board or any other committee as determined by the Board, which shall consist of two or more “outside directors” within the meaning of Code Section 162(m). +2.10 “ Company ” means Matador Resources Company, a Texas corporation, and any successor entity. +2.11 “ Covered Employee ” shall have the same meaning as the term “covered employee” (or its counterpart, +as such term may be changed from time to time) contained in the treasury regulations promulgated under Code Section 162(m), or their respective successor provision or provisions, that being an employee for whom the limitation on deductibility +for compensation pursuant to Code Section 162(m) is applicable. +2.12 “ Employee ” means a common +law employee (as defined in accordance with the Regulations and Revenue Rulings then applicable under Section 3401(c) of the Code) of the Company and any Subsidiary of the Company. +2.13 “ Fiscal Year ” means the fiscal year of the Company. +2.14 “ Incentive Compensation ” means the compensation approved by the Committee to be paid to a Participant for +any Performance Period under the Plan. +2.15 “ Maximum Achievement ” means, for a Participant for any +Performance Period, the maximum level of achievement of a set of Performance Goals required for Incentive Compensation to be paid at the maximum bonus level, which may be established by the Committee in accordance with Section 5.2 below. +2.16 “ Participant ” means an Employee who satisfies the eligibility requirements of Article 4 +of the Plan and who is selected by the Committee to participate in the Plan for any Performance Period. +2.17 +“ Partially Disabled ” means the inability because of any physical or emotional illness lasting no more than 90 days to perform his assigned duties under his employment agreement or independent contractor agreement, or if the +Participant is not a party to any such agreement, to perform his assigned duties for no less than 20 hours per week (and including any period of short term total absence due to illness or injury, including recovery from surgery, but in no event +lasting more than the 90-day period of Partial Disability). +2.18 “ Performance Goals ” means, as +applicable, the performance goal set forth in Section 5.1 , the objectives established by the Committee based on the factors set forth in Section 5.3 for the Performance Period pursuant to Section 5.2 hereof, and +other performance metrics or conditions established by the Committee in accordance with Section 5.6 for the purpose of determining Awards under the Plan. +A-3 +Table of Contents +2.19 “ Performance Period ” means the consecutive 12 month period that +constitutes the Company’s fiscal year. +2.20 “ Performance Pool ” shall have the meaning set forth +in Section 5.1 . +2.21 “ Person ” shall have the meaning given in Section 7701(a)(1) of +the Code. Person shall include more than one Person acting as a group as defined by the Final Treasury Regulations issued under Section 409A. +2.22 “ Plan ” means this Matador Resources Company Amended and Restated Annual Incentive Plan for Management and Key Employees, as set forth herein and as amended from time to time. +2.23 “ Section 409A ” means Section 409A of the Code and the regulations and other guidance +promulgated thereunder. +2.24 “ Subsidiary ” means (i) any corporation in an unbroken chain of +corporations beginning with the Company, if each of the corporations other than the last corporation in the unbroken chain owns stock possessing a majority of the total combined voting power of all classes of stock in one of the other corporations +in the chain, (ii) any limited partnership, if the Company or any corporation described in item (i) above owns a majority of the general partnership interest and a majority of the limited partnership interests entitled to vote on the +removal and replacement of the general partner and (iii) any partnership or limited liability company, if the partners or members thereof are composed only of the Company, any corporation listed in item (i) above or any limited partnership +listed in item (ii) above. “ Subsidiaries ” means more than one of any such corporations, limited partnerships, partnerships or limited liability companies. +2.25 “ Termination of Service ” occurs when a Participant who is an Employee has a “separation from +service” as defined in Section 1.409A-1(h) of the Final Treasury Regulations under Section 409A, or any successor provision thereto, for any reason. +2.26 “ Target Achievement ” means, for a Participant for any Performance Period, the level of achievement of a set of Performance Goals required for Incentive Compensation to be paid +at the target bonus level, which may be established by the Committee in accordance with Section 5.2 below. +2.27 +“ Threshold Achievement ” means, for a Participant for any Performance Period, the minimum level of achievement of a set of Performance Goals required for any Incentive Compensation to be paid at the threshold bonus level, +which may be established by the Committee in accordance with Section 5.2 below. +2.28 “ Totally +Disabled ” or “ Total Disability ” means in and for the period necessary to qualify for benefits under any disability income insurance policy and any replacement policy or policies covering Participant and +Participant has been declared to be Totally Disabled by the insurer. +ARTICLE 3 +ADMINISTRATION +Subject to the terms of this Article 3 , the Plan shall be administered by the Committee. The Committee shall consist of not fewer than two persons. Any member of the Committee may be removed at any +time, with or without cause, by resolution of the Board, and any vacancy occurring in the membership of the Committee may be filled by appointment by the Board. The Committee shall select one of its members to act as its Chairman. A majority of the +Committee shall constitute a quorum, and the act of a majority of the members of the Committee present at a meeting at which a quorum is present shall be the act of the Committee. +A-4 +Table of Contents +The Committee, in its discretion, shall (i) interpret the Plan, (ii) prescribe, +amend, and rescind any rules and regulations necessary or appropriate for the administration of the Plan, (iii) make such other determinations and take such other action as it deems necessary or advisable in the administration of the Plan, +(iv) supply any omissions herein, and reconcile and correct any errors or inconsistencies, (v) decide any questions in the administration and application of the Plan, (vi) make equitable adjustments for any mistakes or errors made in +the administration of the Plan, (vi) maintain complete and accurate records of all Plan transactions and other data in the manner necessary for proper administration of the Plan, (vii) enforce the terms of the Plan and the rules and +regulations adopted thereunder, (viii) review claims and render decisions on claims for benefits under the Plan, (ix) furnish the Company or the Participants, upon request, with information that they require for tax or other purposes, +(x) employ agents, attorneys, accountants or other persons (who may be employed by or represent the Company) for such purposes as the Committee considers necessary or desirable in connection with its duties hereunder and (xi) perform any +and all other acts necessary or appropriate for the proper management and administration of the Plan. All such actions or determinations made by the Committee, and the application of rules and regulations to a particular case or issue by the +Committee, in good faith, shall not be subject to review by anyone, but shall be final, binding and conclusive on all interested parties. +For each Performance Period, the Committee shall have full authority to (i) designate the Employees who shall participate in the Plan, (ii) establish the Performance Goals and achievement levels +for each Participant pursuant to Article 5 hereof and (iii) establish and certify the achievement of the Performance Goals. Notwithstanding any provision of the Plan to the contrary, any decision concerning the awarding of Incentive +Compensation hereunder (including, without limitation, establishment of Performance Goals, Threshold Achievement, Target Achievement, Maximum Achievement, and any other information necessary to calculate Incentive Compensation for a Covered Employee +for such Performance Period) shall be made exclusively by the members of the Committee who are at that time “outside directors,” as that term is used in Code Section 162(m) and the treasury regulations promulgated thereunder. +With respect to restrictions in the Plan that are based on the requirements of Code Section 162(m), Code +Section 409A, or any other applicable law, rule or restriction (collectively, “applicable law”), to the extent that any such restrictions are no longer required by applicable law, the Committee shall have the sole discretion and +authority to make Awards hereunder that are no longer subject to such restrictions. +ARTICLE 4 +ELIGIBILITY +Any Employee (including an Employee who is also a director or an officer) is eligible to participate in the Plan. For each Performance Period, the Committee shall select the particular Employees to whom +an Award may be awarded for such Performance Period, which determination shall be made within the first ninety (90) days of such Performance Period (and in the case of a Performance Period less than a Fiscal Year, such determination shall be +made no later than the date that 25% of the Performance Period has elapsed). Awards may be made by the Committee at any time and from time to time during a Performance Period to new Participants, or to then Participants, and may include or exclude +previous Participants, as the Committee shall determine. The Committee’s determinations under the Plan (including without limitation determinations of which Employees, if any, are to receive Awards, the form, amount and timing of such Awards, +the terms and provisions of such Awards and the agreements evidencing same) may be made by the Committee selectively among Employees who receive, or are eligible to receive, Awards under the Plan. To the extent permitted by the Committee, Employees +who participate in the Plan may also participate in other incentive or benefit plans of the Company or any Subsidiary. +A-5 +Table of Contents +ARTICLE 5 +PERFORMANCE POOL AND PERFORMANCE GOALS +5.1 Financial Formula For +Funding Maximum Pool of Awards; Limitation on Total Incentive Compensation. The financial formula that will fund the maximum pool of Awards for all Participants in a Performance Period (each, a “ Performance Pool ”) shall +be three and one-half percent (3.5%) of Adjusted EBITDA for such Performance Period; provided that , Adjusted EBITDA equals or exceeds fifty million dollars ($50,000,000) for such Performance Period. Once the Performance Pool is +calculated as set forth above, the Awards will be allocated to each Participant based on the achievement of the established Performance Goal for such Performance Period, with the maximum amount of each Award for each Participant as set forth in the +table below. The table below establishes the maximum Award payable to any Participant for a specified Performance Period. +Participant +Percentage of Performance Pool (Maximum) +Chief Executive Officer +Thirty Percent (30%) +Second Highest Paid Participant +Seventeen and One-Half Percent (17.5%) +Third Highest Paid Participant +Seventeen and One-Half Percent (17.5%) +Fourth Highest Paid Participant +Seventeen and One-Half Percent (17.5%) +Fifth Highest Paid Participant +Seventeen and One-Half Percent (17.5%) +Total +One Hundred Percent (100%) +To determine the actual amount of an Award payable to a Participant for any Performance Period, the +Committee may exercise its discretion to adjust the Awards downward in accordance with Section 5.6 below. +5.2 Performance Goals Establishment . Performance Goals in addition to the Performance Goal set forth in Section 5.1 may be established by the Committee for each Performance Period; +provided , however , the Committee must establish such additional Performance Goals to the extent the Committee determines that it is necessary to comply with Code Section 162(m). The Performance Goals may be identical for all +Participants or, at the discretion of the Committee, may be different to reflect more appropriate measures of individual performance. No later than the ninetieth (90 th ) day of the Performance Period (and in the case of a Performance Period less than a Fiscal Year, such +determination shall be made no later than the date that 25% of the Performance Period has elapsed), the Committee shall approve, as applicable, the following: (i) the Performance Goals for the Performance Period, (ii) the Threshold +Achievement, Target Achievement, and Maximum Achievement levels for the Performance Goals for the Performance Period (if applicable), (iii) with respect to each Participant, Incentive Compensation for achievement of Threshold Achievement, +Target Achievement, and Maximum Achievement levels and the relative weighting, if any, of each Performance Goal in determining the Participant’s Incentive Compensation (if applicable) and (iv) a schedule setting forth the payout +opportunity for Threshold Achievement, Target Achievement and Maximum Achievement levels (if applicable). +5.3 Performance +Goals . The Performance Goals, if any, established by the Committee for any Performance Period shall relate to the achievement of predetermined financial and operating objectives for the Company and its Subsidiaries, which, where applicable, +shall be within the meaning of Code Section 162(m) and consist of one or more of any combination of the factors set forth below. In establishing the Performance Goals for the Performance Period, the Committee in its discretion may include one +or any combination of the following criteria in either absolute or relative terms (as compared to an external benchmark or performance of a designated peer group of companies), for either the Company or any of its Subsidiary organizations: +(a) Earnings (either in aggregate or on a per-share basis) or adjusted earnings; +(b) Net income or adjusted net income; +(c) Operating income; +(d) Operating profit; +A-6 +Table of Contents +(e) Cash flow; +(f) Return measures (including return on assets, investments, equity or invested capital); +(g) Total shareholder return (change in share price plus reinvestment of dividends into shares when declared, if any, from +period to period) and other measures of shareholder return (including income applicable to common shareholders or other class of shareholders); +(h) Earnings before or after either, or any combination of, interest, taxes, depletion, depreciation, amortization or other non-cash items; +(i) Adjusted EBITDA; +(j) Acreage; +(k) Reserves, total reserves, reserves per barrel; +(l) Present value of estimated future oil and gas revenues, net of estimated direct expenses, discounted at an +annual discount rate of 10% (or PV 10); +(m) Gross revenues; +(n) Reduction in expense levels in each case, where applicable, determined either on a Company-wide basis or in respect of +any one or more Subsidiaries or business units thereof; +(o) Economic value or economic value added; +(p) Market share or market share added; +(q) Annual net income to common stock; +(r) Earnings per share or growth in earnings per share; +(s) Annual cash flow provided by operations; +(t) Changes in annual revenues; +(u) Strategic and operational business criteria, consisting of one or more objectives based on specified revenue, market penetration, geographic business expansion goals, objectively identified project +milestones, production volume levels, cost targets, lease operating expenses, G&A expenses, finding and development costs, reserves or reserves added, reserve replacement ratio and goals relating to acquisitions or divestitures; and/or +(v) Goals relating to specific environmental compliance measures and safety and accident rates. +For the Performance Goals listed above, the Committee may designate whether a particular Performance Goal is to be measured on a pre-tax +basis or post-tax basis. In addition, certain Performance Goals may be stated in reference to a production volume of measurement such as in per cubic feet equivalents (e.g., per Mcfe, MMcfe or Bcfe). Any Performance Goal may be used to measure the +performance of the Company as a whole or any business unit of the Company and may be measured relative to a peer group or index. Any Performance Goal may include or exclude (i) extraordinary, unusual and/or non-recurring items of gain or loss, +(ii) gains or losses on the disposition of a business, (iii) changes in tax or accounting regulations or laws, (iv) the effect of a merger or acquisition, as identified in the Company’s quarterly and annual earnings releases or +(v) other similar occurrences. In all other respects, the Performance Goals shall be calculated in accordance with the Company’s financial statements, under generally accepted accounting principles or under a methodology established by the +Committee which is consistently applied. Further, the Committee may select any one or more of the Performance Goals applicable to a Participant, and Performance Goals may differ for one Participant to the next. +5.4 Adjustments for Extraordinary Items . The Committee shall be authorized to make adjustments in the method of calculating +attainment of Performance Goals in recognition of: (i) extraordinary or non-recurring items; (ii) changes in tax laws; (iii) changes in generally accepted accounting principles or changes in accounting +A-7 +Table of Contents +policies; (iv) changes related to restructured or discontinued operations; (v) restatement of prior period financial results; and (vi) any other unusual, non-recurring gain or loss +that is separately identified and quantified in the Company’s financial statements. Notwithstanding the foregoing, the Committee may, at its sole discretion, reduce the performance results upon which Awards are based under the Plan to offset +any unintended result(s) arising from events not anticipated when the Performance Goals were established. +5.5 +Certification . Within sixty (60) days immediately following the end of the applicable Performance Period, the Committee shall certify in writing and in compliance with the requirements of Treasury Regulation 1.162-27 (and successor +regulations thereto) in the case of any Award intended to qualify under Code Section 162(m): (i) the extent to which the Performance Goals were achieved, if any, for the Performance Period, (ii) the calculation of the +Participants’ Incentive Compensation and (iii) the determination by the Committee of the amount of Incentive Compensation, if any, to be paid to each Participant for the Performance Period. In determining whether Performance Goals have +been achieved and Incentive Compensation is payable for a given Performance Period, generally accepted accounting principles to the extent applicable to the Performance Goal shall be applied on a basis consistent with prior periods, and such +determinations shall be based on the calculations made by the Company and binding on each Participant. Approved minutes of the Committee meeting in which the certification required by this Section 5.5 is made shall be treated as written +certification for purposes for this Section 5.5 . +5.6 Discretion to Reduce Incentive Compensation . After +the certification described in Section 5.5 the Committee may, in its sole and absolute discretion, decrease the Incentive Compensation to be paid to one or more Participants for such Performance Period. The Committee may consider +subjective factors, including factors communicated to the Participant at the beginning of the Performance Period or other factors the Committee considers appropriate, in determining whether to reduce the Incentive Compensation to be paid to a +Participant. Notwithstanding anything to the contrary contained herein, the reduction of an Award for any Participant shall not result in the increase in the maximum amount of any Award payable to any Participant under Section 5.1 above. +ARTICLE 6 +PAYMENT OF INCENTIVE COMPENSATION +6.1 Form and +Time of Payment . Except as otherwise provided herein, a Participant’s Award for a Performance Period shall be paid: (a) if the Company’s Fiscal Year is a calendar year, then such Award shall be paid in the calendar year +immediately following the close of the year in which such Performance Period ends, but in any event within seventy-five (75) days following the Committee’s certification described in Section 5.5 ; or (b) if the +Company’s Fiscal Year is other than a calendar year, such Awards shall be paid on the one hundred and thirty-fifth +(135 th ) day following the end of such Performance +Period. The payment for an Award shall be in the form of a cash lump sum payment. +6.2 Forfeiture Upon Termination Prior to +End of Performance Period . If a Participant’s employment with the Company and all of its Subsidiaries is terminated voluntarily by the Participant for any reason, or is terminated by his or her employer for any reason during a Performance +Period, then such Participant will immediately forfeit any right to receive any Incentive Compensation hereunder for such Performance Period. Under such circumstances where the termination of employment occurs after the Performance Period has ended +but prior to the date of actual payment, the Committee shall pay the Participant an amount not to exceed the amount set forth according to the terms of the Award; provided , however , if Participant was terminated for Cause prior to the +date of actual payment, then the Participant will not be eligible to receive a payment under the Plan for that Performance Period. +A-8 +Table of Contents +6.3 Pro-Rata Payment for Death or Total Disability; New Hires and Promotions . +(a) Death or Disability . If during a Performance Period, a Participant’s employment is terminated +by reason of the Participant’s death or Disability, then such Participant (or the Participant’s guardian or personal representative, beneficiary or estate, as applicable) shall, if the Committee so determines, be eligible to receive a pro +rata portion of the Incentive Compensation that would have been payable to such Participant, if he or she had remained employed, based on the number of days worked during the Performance Period. Such Incentive Compensation shall be paid at the time +and in the manner set forth in Section 6.1 hereof. +(b) New Hires; Promotions . Any +individual who is newly-hired or becomes an Employee during a Performance Period and who is selected by the Committee to participate in the Plan shall be eligible to receive a pro rata portion of the Incentive Compensation to which he or she could +have been entitled if he or she had been employed for the full Performance Period, based on the number of days during the Performance Period during which he or she is a Participant in the Plan. Such Incentive Compensation shall be paid at the time +and in the manner set forth in Section 6.1 hereof. +6.4 Recoupment for Restatements . Notwithstanding any +other language in this Plan, the Committee may recoup all or any portion of any Incentive Compensation paid to a Participant, in the event of a restatement of the Company’s financial statements as set forth in the Company’s clawback +policy, if any, approved by the Company’s Board from time to time. +6.5 Change in Control . In the event of a +Change in Control during a Performance Period, the Company shall make a lump sum payment to each Participant equal to a pro rata amount of any potential Incentive Compensation payable under any Award made to such Participant, calculated by +multiplying the amount payable for Target Achievement by the percentage of the Performance Period completed prior to the Change in Control. In the event of such a lump sum payment, no further Incentive Compensation shall be payable under any such +Award. +ARTICLE 7 +MISCELLANEOUS PROVISIONS +7.1 +Non-Assignability . A Participant may not alienate, assign, pledge, encumber, transfer, sell or otherwise dispose of any rights or benefits awarded hereunder prior to the actual receipt thereof; and any +attempt to alienate, assign, pledge, sell, transfer or assign prior to such receipt, or any levy, attachment, execution or similar process upon any such rights or benefits shall be null and void ab initio . +7.2 No Right To Continue In Employment . Nothing in the Plan confers upon any Employee the right to continue in the employ of the +Company or any Subsidiary, or interferes with or restricts in any way the right of the Company and its Subsidiaries to discharge any Employee at any time (subject to any contract rights of such Employee), including, without limitation, before or +after the date such Participant is entitled to payment with respect to an Award. +7.3 Indemnification of Committee; No +Duties; Waiver of Claims . No member of the Committee, nor any officer or Employee of the Company acting with or on behalf of the Committee, shall be personally liable for any action, determination or interpretation taken or made in good faith +with respect to the Plan, and all of the members of the Committee and each and any officer or Employee of the Company acting with or on their behalf shall be indemnified and protected by the Company in respect of any such action, determination or +interpretation to the fullest extent provided by law. Except to the extent required by any unwaiveable requirement under applicable law, no member of the Committee (and no officer, Employee or Affiliate of the Company) shall have any duties or +liabilities, including without limitation any fiduciary duties, to any Participant (or any Person claiming by and through any Participant) as a result of this Plan, any Award or any Claim arising hereunder and, +A-9 +Table of Contents +to the fullest extent permitted under applicable law, each Participant (as consideration for receiving and accepting an Award) irrevocably waives and releases any right or opportunity such +Participant might have to assert (or participate or cooperate in) any Claim against any member of the Committee and any officer, Employee or Affiliate of the Company arising out of this Plan. +7.4 No Trust or Plan Funding . The Company (and not any of its Affiliates) will be solely responsible for the payment of all +amounts hereunder. The Plan shall at all times be entirely unfunded and no provision shall at any time be made with respect to segregating assets of the Company for payment of any amounts hereunder. Neither the Plan nor any Award shall create or be +construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company and any Participant. No Participant, beneficiary or other person shall have any interest in any particular assets of the Company (or any of its +Affiliates) by reason of the right to receive any Incentive Compensation under the Plan. To the extent that any Participant acquires a right to receive any payment from the Company pursuant to an Award, such right shall be no greater than the right +of any general unsecured creditor of the Company. +7.5 Governing Law . This Plan shall be construed in accordance with +the laws of the State of Texas, without giving effect to principles of conflict of laws, and the rights and obligations created hereby shall be governed by the laws of the State of Texas. The Participant’s sole remedy for any claim, liability +or obligation of any nature, arising out of or relating to this Plan or an alleged breach of this Plan, or an Award (collectively, “ Claims ”) shall be against the Company, and no Participant shall have any claim or right of +any nature against any Affiliate or any owner or existing or former director, officer or Employee of the Company or any Affiliate. The individuals and entities described above in this Section 7.5 (other than the Company) shall be +third-party beneficiaries of this Plan for purposes of enforcing the terms of this Section 7.5 . +7.6 Binding +Effect . This Plan shall be binding upon and inure to the benefit of the Company, its successors and assigns, and the Participants and their heirs, assigns and personal representatives. +7.7 Construction of Plan . The captions used in this Plan are for convenience only and shall not be construed in interpreting the +Plan. Whenever the context so requires, the masculine shall include the feminine and neuter, and the singular shall also include the plural, and conversely. +7.8 Integrated Plan . This Plan constitutes the final and complete expression of agreement with respect to the subject matter hereof. +7.9 Tax Requirements . The Company (and, where applicable, its Subsidiaries) shall have the power and the right to deduct or +withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy applicable taxes required by law to be withheld with respect to any payment of any Incentive Compensation to a Participant. +7.10 Accounting of Compensation . Unless otherwise specifically provided in such benefit plan, any amounts paid to a Participant +hereunder shall not be treated as compensation paid to such Participant for the purposes of any other benefit plan. +7.11 +Adjustments . In the event of (a) any merger, reorganization, consolidation, recapitalization, liquidation, reclassification, stock dividend, stock split, combination of shares, rights, offering, extraordinary dividend (including a +spin-off) or other similar change affecting the Company’s common stock; (b) any purchase, acquisition, sale or disposition of a significant amount of assets other than in the ordinary course of business, or of a significant business; +(c) any change resulting from the accounting effects of discontinued operations, extraordinary income or loss, changes in accounting as determined under generally accepted accounting principles or restatement of earnings; or (d) any charge +or credit resulting from an item which is classified as “non-recurring,” “restructuring” or similar unusual item on the Company’s audited financial statements which, in the case of (a) – (d), results in a change in +the components of the calculations of any of the criteria upon which +A-10 +Table of Contents +the Performance Goals are based, as established by the Committee, in each case with respect to the Company or any other entity whose performance is relevant to the achievement of any Performance +Goal included in an Award, the Committee shall, without the consent of any affected Participant, amend or modify the terms of any outstanding Award that includes any Performance Goal based in whole or in part on the financial performance of the +Company (or any Subsidiary or division thereof) or such other entity so as equitably to reflect such event or events, such that the criteria for evaluating such financial performance of the Company or such other entity (and the achievement of the +corresponding Performance Goal) will be substantially the same (as determined by the Committee or the committee of the board of directors of the surviving corporation) following such event as prior to such event; provided , however , +that the Committee shall not take any action pursuant to this Section which would constitute an impermissible exercise of discretion pursuant to Code Section 162(m). +ARTICLE 8 +AMENDMENT, MODIFICATION, SUSPENSION +Except as provided in Section 7.11 , the Committee may at any time and from time to time, without the consent of the +Participants, alter, amend, revise, suspend or discontinue the Plan in whole or in part; provided , however , that no amendment that requires shareholder approval in order for the Plan and Awards under the Plan to comply with any +applicable law or the rules and regulations of any applicable stock exchange shall be effective unless such amendment shall be approved by the requisite vote of the shareholders of the Company entitled to vote thereon, and further provided , +that any amendment that modifies any pre-established Performance Goal for a Participant who is a Covered Employee (or his successor(s), as may be applicable) under this Plan with respect to any particular Performance Period may only be effected on +or prior to that date which is ninety (90) days following the commencement of such Performance Period. In addition, the Board shall have the power to discontinue the Plan in whole or in part and amend the Plan in any manner advisable in order +for Incentive Compensation granted under the Plan to qualify as “performance-based” compensation under Code Section 162(m) (including amendments as a result of changes to Code Section 162(m) or the regulations thereunder to +permit greater flexibility with respect to Incentive Compensation granted under the Plan). +ARTICLE 9 +EFFECT OF THE PLAN +Neither the adoption of this Plan nor any action of the Board or the Committee shall be deemed to give any Participant any right to be granted Incentive Compensation or any other rights. In addition, +nothing contained in this Plan and no action taken pursuant to its provisions shall be construed to (a) give any Participant any right to any compensation, except as expressly provided herein; (b) be evidence of any agreement, contract or +understanding, express or implied, that the Company or any Subsidiary will employ a Participant in any particular position; (c) give any Participant any right, title or interest whatsoever in or to any investments which the Company may make to +aid it in meeting its obligations hereunder; or (d) create a trust of any kind or a fiduciary relationship between the Company and a Participant or any other person. +ARTICLE 10 +SECTION 409A COMPLIANCE +This Plan is intended to comply with Section 409A and shall be interpreted in a manner consistent with Section 409A. To the +extent (i) any payment to which a Participant becomes entitled under this Plan in connection with the Participant’s Termination of Service with the Company (for reasons other than death) constitutes a payment of deferred compensation +subject to Section 409A, and (ii) the Participant is deemed at the time of such termination of employment to be a “specified employee” under Section 409A to whom the following provisions must apply, then such payment shall +not be made or commence until the earliest of (A) the +A-11 +Table of Contents +expiration of the six (6) month period measured from the date of Participant’s Termination of Service with the Company; or (B) the date of the Participant’s death following +such Termination of Service. Upon the expiration of the applicable deferral period, any payment which would have otherwise been made during that period in the absence of this Article 10 shall be made to the Participant or the +Participant’s beneficiary. +ARTICLE 11 +TERM +The effective date of this Plan shall be as of January 1, 2016, +subject to shareholder approval. The material terms of this Plan shall be disclosed and submitted to the shareholders of the Company at the next annual meeting of shareholders and thereafter every five (5) years (unless earlier terminated) for +approval in accordance with the requirements of Code Section 162(m). This Plan and any benefits granted hereunder shall be null and void if shareholder approval is not obtained at the applicable meeting of shareholders of the Company, and no +award or payment of Incentive Compensation under this Plan to any Covered Employee shall be made unless such applicable shareholder approval is obtained. This Plan shall remain in effect until it is terminated by the Committee or the Board. After +termination of the Plan, no future Awards may be made. However, all Awards granted before such termination will continue to be effective in accordance with their terms and conditions. +********* +A-12 +Table of Contents +IN WITNESS WHEREOF, the Company has caused this instrument to be +effective as of the 1 st day of January, 2016 pursuant to +prior action taken by the Boards of Directors of the Company. +MATADOR RESOURCES COMPANY +By: +Name: +Title: +Attest: +Name: +Title: +Signature Page to the Matador Resources Company +Amended and Restated Annual Incentive Plan +A-13 +Table of Contents +MATADOR RESOURCES COMPANY +5400 LBJ FREEWAY, SUITE 1500 +DALLAS, TX +75240 +VOTE BY INTERNET - www.proxyvote.com +Use +the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the meeting date. Have your proxy card in hand when you access the web site and follow the instructions to +obtain your records and to create an electronic voting instruction form. +ELECTRONIC +DELIVERY OF FUTURE PROXY MATERIALS +If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to +receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that +you agree to receive or access proxy materials electronically in future years. +VOTE +BY PHONE - 1-800-690-6903 +Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the meeting +date. Have your proxy card in hand when you call and then follow the instructions. +VOTE BY MAIL +Mark, sign and date your proxy card and return +it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. +TO VOTE, MARK +BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: +KEEP THIS PORTION FOR YOUR RECORDS +DETACH AND RETURN THIS PORTION ONLY +THIS PROXY CARD IS VALID +ONLY WHEN SIGNED AND DATED. +For +All +Withhold +All +For All +Except +To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below. +The Board of Directors recommends you vote FOR the following: +1. +Election of Directors +¨ +¨ +¨ +Nominees +01 +Craig T. +Burkert 02 Gregory E. Mitchell 03 Steven W. Ohnimus +The Board of Directors recommends you vote FOR proposals +2, 3 and 4. +For +Against +Abstain +2. +Vote to approve the Company’s Amended and Restated +Annual Incentive Plan. +¨ +¨ +¨ +3. +Advisory vote to approve the compensation of the +Company’s named executive officers. +¨ +¨ +¨ +4. +Ratification of the appointment of KPMG LLP as the +Company’s independent registered public accounting firm for the year ending December 31, 2016. +¨ +¨ +¨ +The Board of Directors recommends you vote AGAINST +proposal 5. +For +Against +Abstain +5. +Shareholder proposal regarding a majority voting standard for +director elections. +¨ +¨ +¨ +NOTE: The proxies are authorized to vote in their discretion on such other business as may properly come before the meeting or any adjournment thereof. +Yes +No +Please indicate if you plan to attend this meeting +¨ +¨ +Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, +please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name, by authorized officer. +Signature [PLEASE SIGN WITHIN BOX] +Date +Signature (Joint Owners) +Date +Table of Contents +Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Annual Report for the year ended December 31, 2015, +Notice of Annual Meeting and Proxy Statement is/are available at www.proxyvote.com . +MATADOR RESOURCES COMPANY +Annual Meeting of Shareholders +June 9, 2016 9:30 A.M. +This proxy is solicited by the Board of Directors. +As an alternative to completing this +form, you may enter your vote instruction by telephone at 1-800-690-6903, or via the internet at www.proxyvote.com . Have your proxy card in hand and follow the instructions. +The shareholder hereby appoints Joseph Wm. Foran and David M. Laney, +or either of them, as proxies, each with the power to appoint his substitute, and hereby authorizes them to represent and to vote, as designated on the reverse side of this ballot, all of the shares of common stock of MATADOR RESOURCES COMPANY that +the shareholder is entitled to vote at the Annual Meeting of Shareholders to be held at 9:30 A.M., CDT on June 9, 2016, at the Westin Galleria, Dallas Ballroom, 13340 Dallas Parkway, Dallas, Texas 75240, and any adjournment or postponement thereof. +The shareholder hereby revokes any proxy or proxies heretofore given to vote upon or act with respect to such shares of stock. +This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted +in accordance with the Board of Directors’ recommendations. +Continued and to be signed on reverse +side \ No newline at end of file diff --git a/raw/proxies/0001520006/0001193125-16-563736/proxy_rpt.txt b/raw/proxies/0001520006/0001193125-16-563736/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..51e22723553501b644f441236768a306950bb841 --- /dev/null +++ b/raw/proxies/0001520006/0001193125-16-563736/proxy_rpt.txt @@ -0,0 +1,4 @@ +TRANSACTIONS WITH RELATED PERSONS +Except as disclosed below, since January 1, 2015, there has not been, nor is there currently proposed, any transaction or series of +similar transactions to which we were or are a party in which the amount involved exceeded or exceeds $120,000 and in which any of our directors, executive officers, holders of more than 5% of any class of our voting securities or any member of the +immediate family of any of the foregoing persons had or will have a direct or indirect material interest, other than compensation arrangements with directors and executive officers, which are described in “Executive Compensation — \ No newline at end of file diff --git a/raw/proxies/0001520006/0001193125-17-131270/proxy.txt b/raw/proxies/0001520006/0001193125-17-131270/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..aa939624fefb7e0baa07e0f881b84b5cf35385c5 --- /dev/null +++ b/raw/proxies/0001520006/0001193125-17-131270/proxy.txt @@ -0,0 +1,3890 @@ +DEF 14A +1 +d321668ddef14a.htm +DEFINITIVE PROXY STATEMENT +Definitive Proxy Statement +Table of Contents +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +Washington, D.C. 20549 +SCHEDULE 14A +Proxy Statement Pursuant to Section 14(a) of the +Securities Exchange Act of 1934 (Amendment No.) +Filed by the +Registrant ☑ Filed by a Party other than the +Registrant ☐ +Check the appropriate box: +☐ +Preliminary Proxy Statement +☐ +Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +☑ +Definitive Proxy Statement +☐ +Definitive Additional Materials +☐ +Soliciting Material Pursuant to §240.14a-12 +Matador Resources Company +(Name of Registrant as Specified In Its Charter) +(Name of Person(s) Filing Proxy Statement, if other than the Registrant) +Payment of Filing Fee (Check the appropriate box): +☑ +No fee required. +☐ +Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. +1) +Title of each class of securities to which transaction applies: +2) +Aggregate number of securities to which transaction applies: +3) +Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the +filing fee is calculated and state how it was determined): +4) +Proposed maximum aggregate value of transaction: +5) +Total fee paid: +☐ +Fee paid previously with preliminary materials. +☐ +Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify +the previous filing by registration statement number, or the Form or Schedule and the date of its filing. +1) +Amount Previously Paid: +2) +Form, Schedule or Registration Statement No.: +3) +Filing Party: +4) +Date Filed: +Table of Contents +One Lincoln Centre +5400 LBJ Freeway, Suite 1500 +Dallas, Texas 75240 +www.matadorresources.com +NOTICE OF ANNUAL MEETING OF SHAREHOLDERS +To Be Held on June 1, 2017 +To the Matador Resources Company Shareholders: +Please join us for the 2017 Annual Meeting of Shareholders of Matador Resources Company. The meeting will be held at the Westin Galleria, Dallas Ballroom, 13340 Dallas Parkway, Dallas, Texas 75240, on +Thursday, June 1, 2017, at 9:30 a.m. , Central Daylight Time. +At the meeting, you will hear a report on +our business and act on the following matters: +(1) +Election of the six nominees for director named in the attached Proxy Statement; +(2) +Approval of an amendment to Matador Resources Company’s amended and restated certificate of formation to (i) increase the amount of authorized shares of +common stock from 120,000,000 shares to 160,000,000 shares and (ii) increase the total number of shares of capital stock that Matador Resources Company is authorized to issue to reflect such increase in the authorized shares of common stock; +(3) +Advisory vote to approve the compensation of our named executive officers as described in the attached Proxy Statement; +(4) +Ratification of the appointment of KPMG LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2017; and +(5) +Any other matters that may properly come before the meeting. +All shareholders of record at the close of business on April 7, 2017 are entitled to vote at the meeting or any postponement or adjournment of the meeting. A list of the shareholders of record is +available at the Company’s offices in Dallas, Texas. +By Order of the Board of Directors, +Joseph Wm. Foran +Chairman and Chief Executive Officer +April 21, 2017 +YOUR VOTE IS IMPORTANT! +Whether or not you will attend the meeting, please vote as +promptly as possible by using the Internet or telephone or by signing, dating and returning your proxy card to the address listed on the card. +Important Notice Regarding the Availability of Proxy Materials for the +Annual Meeting of Shareholders to Be Held on June 1, 2017: +Our Proxy Statement and the Annual Report to Shareholders for the fiscal year ended December 31, 2016 are available for viewing, +printing and downloading at https://materials.proxyvote.com/576485 . +Table of Contents +TABLE OF CONTENTS +Page +Proxy Statement +1 +Proxy Summary +3 +Information About the Annual Meeting +5 +Proposal 1 — Election of Directors +9 +Nominees +9 +Vote Required +11 +Directors Continuing in Office +12 +Special Board Advisors +13 +Corporate Governance +17 +Independence of Directors +17 +Majority Vote in Director Elections +17 +Board Leadership Structure +18 +Board Committees +19 +Board’s Role in Risk Oversight +23 +Compensation Committee Interlocks and Insider Participation +23 +Communications with Directors +23 +Executive Officers and Other Senior Officers of the Company +24 +Proposal 2 — +Approval of the Amendment to the Amended and Restated Certificate of Formation to Increase the Amount of Authorized Common Stock +29 +Purpose of the Proposed Amendment +29 +Text of the Proposed Amendment +29 +Potential Effects of the Proposed Amendment +30 +Appraisal Rights +30 +Timing of the Proposed Amendment +30 +Vote Required +30 +Proposal 3 — Advisory Vote to Approve Named Executive Officer +Compensation +31 +Vote Required +31 +Proposal 4 — Ratification of the Appointment of KPMG LLP +33 +Fees of Independent Registered Public Accounting Firm for Fiscal Years 2016 and 2015 +33 +Report of the Audit Committee +34 +Vote Required +35 +Executive Compensation +36 +Compensation Discussion and Analysis +36 +Compensation Committee Report +48 +Summary Compensation Table +49 +Grants of Plan-Based Awards Table +50 +Discussion Regarding Summary Compensation Table and Grants of Plan-Based Awards Table +50 +Outstanding Equity Awards at December 31, 2016 +52 +Option Exercises and Stock Vested +53 +Potential Payments Upon Termination or Change in Control +54 +Director Compensation +57 +Compensation for 2016 +57 +Compensation for 2017 +58 +Director Ownership Guidelines +58 +Special Board Advisor Compensation +59 +Securities Authorized for Issuance Under Equity Compensation Plans +59 +Transactions with Related Persons +60 +Security Ownership of Certain Beneficial Owners and Management +64 +Additional Information +67 +Section 16(a) Beneficial Ownership Reporting Compliance +67 +Shareholder Proposals for the 2018 Proxy Statement +67 +Director Nominations or Other Business for Presentation at the 2018 Annual Meeting +67 +Annual Report on Form 10-K +67 +Other Business +68 +i +Table of Contents +Matador Resources Company +One Lincoln Centre +5400 LBJ Freeway, Suite 1500 +Dallas, Texas 75240 +www.matadorresources.com +PROXY STATEMENT +For +ANNUAL MEETING OF SHAREHOLDERS +To Be Held on June 1, 2017 +This Proxy Statement is being mailed +on or about April 21, 2017 to the shareholders of Matador Resources Company (“Matador” or the “Company”) in connection with the solicitation of proxies by the Board of Directors (the “Board”) of the Company to be +voted at the Annual Meeting of Shareholders of the Company to be held at the Westin Galleria, Dallas Ballroom, 13340 Dallas Parkway, Dallas, Texas 75240, on June 1, 2017, at 9:30 a.m., Central Daylight Time (the “Annual Meeting”), or +at any postponement or adjournment thereof, for the purposes set forth in the accompanying Notice of Annual Meeting of Shareholders. The address of the Company’s principal executive office is One Lincoln Centre, 5400 LBJ Freeway, Suite 1500, +Dallas, Texas 75240. +If you are a shareholder of record, you may vote in person by attending the meeting, by completing +and returning a proxy by mail or by using the Internet or telephone. You may vote your proxy by mail by marking your vote on the enclosed proxy card and following the instructions on the card. To vote your proxy using the Internet or telephone, see +the instructions on the proxy form and have the proxy form available when you access the Internet website or place your telephone call. +The named proxies will vote your shares according to your directions. If you sign and return your proxy but do not make any of the selections, the named proxies will vote your shares: (i) FOR the +election of the six nominees for director as set forth in this Proxy Statement, (ii) FOR the proposed amendment to the Company’s amended and restated certificate of formation to (A) increase the amount of authorized shares of common +stock, $0.01 par value per share (“Common Stock”) from 120,000,000 shares to 160,000,000 shares and (B) increase the total number of shares of capital stock that the Company is authorized to issue to reflect such increase in the +Company’s authorized common stock (the “Proposed Amendment”), (iii) FOR the approval, on an advisory basis, of the compensation of the Company’s named executive officers as disclosed in this Proxy Statement and (iv) FOR the +ratification of KPMG LLP as the independent registered public accounting firm of the Company for the year ending December 31, 2017. The proxy may be revoked at any time before it is exercised by filing with the Company a written revocation +addressed to the Corporate Secretary, by executing a proxy bearing a later date or by attending the Annual Meeting and voting in person. +The cost of soliciting proxies will be borne by the Company. In addition to the use of postal services and the Internet, proxies may be solicited by directors, officers and employees of the Company (none +of whom will receive any additional compensation for any assistance they may provide in the solicitation of proxies) in person or by telephone. +The outstanding voting securities of the Company consist of Common Stock. The record date for the determination of the shareholders entitled to notice of and to vote at the Annual Meeting, or any +postponement or adjournment thereof, has been established by the Board as the close of business on April 7, 2017 (the “Record Date”). As of the Record Date, there were 100,142,297 shares of Common Stock outstanding and entitled to +vote. +The presence, in person or by proxy, of the holders of record of a majority of the outstanding shares entitled to vote +is necessary to constitute a quorum for the transaction of business at the Annual Meeting, but if a quorum should not be present, the meeting may be adjourned from time to time until a quorum is obtained. A holder of Common Stock will be entitled to +one vote per share on each matter properly brought before the meeting. Cumulative voting is not permitted in the election of directors. +1 +Table of Contents +The proxy card provides space for a shareholder to abstain with respect to any or all +nominees for the Board. The affirmative vote of a majority of the votes cast by holders of shares present in person or represented by proxy and entitled to vote on the election of directors at the Annual Meeting is required for the election of each +nominee for director. With respect to the election of directors in an uncontested election, such as that being held at the Annual Meeting, “majority of the votes cast” means the number of votes cast “FOR” the election as a +director of such nominee exceeds the number of votes cast “AGAINST” such nominee. See “Corporate Governance — Majority Vote in Director Elections” for additional information regarding election of directors. +The Proposed Amendment requires the affirmative vote of two-thirds of the outstanding +shares of Common Stock. All other proposals require the affirmative vote of a majority of the shares of Common Stock present in person or represented by proxy and entitled to vote at the meeting. Shares held by a shareholder who abstains from voting +on any or all proposals will be included for the purpose of determining the presence of a quorum. Other than with respect to the election of directors, an abstention will effectively count as a vote cast against each proposal. Broker non-votes on any matter, as to which the broker has indicated on the proxy that it does not have discretionary authority to vote, will be treated as shares not entitled to vote with respect to that matter. However, +such shares will be considered present and entitled to vote for quorum purposes so long as they are entitled to vote on at least one other matter. +2 +Table of Contents +PROXY SUMMARY +This summary highlights information contained elsewhere in this Proxy Statement. This summary does not contain all of the information +that you should consider, and you should read the entire Proxy Statement carefully prior to voting. For more complete information regarding our 2016 performance, please review our Annual Report on Form 10-K +for the year ended December 31, 2016. +2017 Annual Meeting of Stockholders +Date and Time : June 1, 2017, at 9:30 a.m., Central Daylight Time +Location : Westin Galleria, Dallas Ballroom, 13340 Dallas Parkway, Dallas, Texas 75240 +Record Date : April 7, 2017 +Voting : +Shareholders as of the close of business on the Record Date are entitled to vote. Each share of Common Stock is entitled to one vote at the Annual Meeting. +Voting Matters and Board Recommendation +Proposal +Board +Recommendation +Election of Six Director Nominees (page 9) +FOR +Approval of the Proposed Amendment (page 29) +FOR +Advisory Vote to Approve Named Executive Officer Compensation (page 31) +FOR +Ratification of the Appointment of KPMG LLP as the Company’s Independent Registered Public Accounting Firm for +2017 (page 33) +FOR +2016 Business Highlights +In 2016, Matador achieved record oil, natural gas and average daily oil equivalent production. In addition, Matador increased its estimated total proved oil and natural gas reserves 24% as of +December 31, 2016, as compared to December 31, 2015. +Business highlights achieved during 2016 include the +following: +• +A 13% increase in oil production from 4.5 million barrels (“Bbl”) produced in 2015 to 5.1 million Bbl produced in 2016. +• +A 10% increase in natural gas production from 27.7 billion cubic feet (“Bcf”) of natural gas produced in 2015 to 30.5 Bcf of natural gas +produced in 2016. +• +A 12% increase in average daily oil equivalent production from 24,955 barrels of oil equivalent (“BOE”) per day, including 12,306 Bbl of oil +per day and 75.9 million cubic feet (“MMcf”) of natural gas per day, in 2015 to 27,813 BOE per day, including 13,924 Bbl of oil per day and 83.3 MMcf of natural gas per day, in 2016. +• +A net loss (GAAP) of $97.4 million and Adjusted EBITDA (non-GAAP) of $157.9 million for the year +ended December 31, 2016. For a definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to our net loss and net cash provided by operating activities, see Schedule A to this Proxy Statement. +• +On March 11, 2016, we completed a public offering of 7,500,000 shares of our Common Stock. After deducting offering costs totaling +approximately $0.8 million, we received net proceeds of approximately $141.5 million. +• +On December 9, 2016, we issued $175.0 million of our 6.875% senior unsecured notes due 2023 in a private placement. We received net +proceeds from the issuance of the notes of $181.5 million, including the issue premium, but after deducting the initial purchasers’ discounts and estimated +3 +Table of Contents +offering expenses and excluding accrued interest paid by buyers of the notes. Also on December 9, 2016, we completed a public offering of 6,000,000 shares of our Common Stock. After +deducting offering costs totaling approximately $0.4 million, we received net proceeds of approximately $145.8 million. +Director Nominees (page 9) +Our Board currently has 12 members divided into +three classes of directors, designated Class I, Class II and Class III. Directors are elected for three-year terms. The table below provides certain summary information about each nominee for director named in this Proxy Statement. +Name +Age +Director +Since +Principal Occupation +Committee +Memberships +Joseph Wm. Foran +64 +2003 +Chairman and CEO, Matador +Resources Company +E, OP, P +Reynald A. Baribault*† +53 +2014 +Vice President / Engineering, +NP Resources, LLC +A, C, CG, E, +OP, P +R. Gaines Baty* +66 +2016 +CEO, R. Gaines Baty +Associates, Inc. +C, CG +William M. Byerley* +63 +2016 +Retired Partner, +PricewaterhouseCoopers +(PwC) +A, CG +Julia P. Forrester* +57 +2017 +Associate Provost for Student +Academic Services, Southern +Methodist University +A, CG +Kenneth L. Stewart* +63 +2017 +Chair — United States, Norton +Rose Fulbright US LLP +C, CG +† +Lead Independent Director +* +Independent Director +A +Audit Committee +C +Compensation Committee +CG +Corporate Governance Committee +E +Executive Committee +N +Nominating Committee +OP +Operations and Engineering Committee +P +Prospect Committee +Executive Compensation +Highlights (page 36) +Our compensation program is designed to reward, in both the short term and the long term, performance +that contributes to the implementation of our business strategies, maintenance of our culture and values and the achievement of our objectives. In addition, we reward qualities that we believe help achieve our business strategies such as teamwork, +individual performance in light of general economic and industry-specific conditions, relationships with shareholders and vendors, the ability to manage and enhance production from our existing assets, the ability to explore new opportunities to +increase oil and natural gas production, the ability to identify and acquire additional acreage, the ability to increase year-over-year proved reserves, the ability to control unit production costs, level of job responsibility, industry experience +and general professional growth. +Our Board has a “pay for performance” philosophy and recognizes the leadership of +Mr. Joseph Wm. Foran, our Chairman and Chief Executive Officer, and our other executive officers in contributing to the Company’s success in 2016. Accordingly, approximately 85% of Mr. Foran’s 2016 total compensation was +performance based with approximately 45% of his total compensation consisting of long-term incentive awards. Details of our executive compensation are shown in the 2016 Summary Compensation Table on page 49. +4 +Table of Contents +INFORMATION ABOUT THE ANNUAL MEETING +We are furnishing you this Proxy Statement in connection with the solicitation of proxies by the Board to be used at the Annual Meeting +and any adjournment thereof. The Annual Meeting will be held on Thursday, June 1, 2017, at 9:30 a.m., Central Daylight Time. We are sending this Proxy Statement to our shareholders on or about April 21, 2017. +All references in this Proxy Statement to “we,” “our,” “us,” “Matador” or the “Company” +refer to Matador Resources Company, including our subsidiaries and affiliates. +What is the purpose of the Annual Meeting? +At the Annual Meeting, shareholders will act upon the matters outlined in the Annual Meeting notice, including the following: +• +the election of the six nominees for director named in this Proxy Statement; +• +the approval of an amendment to the Company’s amended and restated certificate of formation to (i) increase the amount of authorized shares +of Common Stock from 120,000,000 to 160,000,000 shares and (ii) increase the total number of shares of capital stock that the Company is authorized to issue to reflect such increase in the Company’s authorized common stock (the +“Proposed Amendment”); +• +an advisory vote to approve the compensation of our named executive officers as described herein; +• +the ratification of the appointment of KPMG LLP as the Company’s independent registered public accounting firm for the year ending +December 31, 2017; and +• +any other matters that may properly come before the meeting. +What are the Board’s voting recommendations? +• +FOR the election of the six nominees for director named in this Proxy Statement; +• +FOR the Proposed Amendment; +• +FOR the approval, on an advisory basis, of the compensation of the Company’s named executive officers; and +• +FOR the ratification of the appointment of KPMG LLP as the Company’s independent registered public accounting firm for the year ending +December 31, 2017. +Who is entitled to vote? +Shareholders as of the close of business on April 7, 2017 are eligible to vote their shares at the Annual Meeting. As of the Record +Date, there were 100,142,297 shares of our Common Stock outstanding. Each share of Common Stock is entitled to one vote at the Annual Meeting. +Why did I receive a Notice Regarding the Internet Availability of Proxy Materials in the mail instead of a full set of proxy materials? +Securities and Exchange Commission (“SEC”) rules allow companies to furnish proxy materials over the Internet. +We have elected to send a separate Notice of Internet Availability of Proxy Materials (the “Notice”) to most of our shareholders instead of a paper copy of the proxy materials. This approach conserves natural resources and reduces the +costs of printing and distributing our proxy materials while providing shareholders +5 +Table of Contents +with a convenient way to access our proxy materials. Instructions on how to access the proxy materials over the Internet or to request a paper copy of proxy materials, including a proxy card or +voting instruction form, may be found in the Notice. In addition, shareholders may request to receive future proxy materials in printed form by mail or electronically by email by following the instructions in the Notice. A shareholder’s +election to receive proxy materials by mail or email will remain in effect until the shareholder terminates it. +How do I vote? +You may: +• +attend the Annual Meeting and vote in person; or +• +dial the toll-free number listed on the Notice, proxy card or voting instruction form provided by your broker. Easy-to-follow voice prompts allow you to vote your shares and confirm that your voting instructions have been properly recorded. Telephone voting will be available 24 hours a day and will close at 11:59 +p.m., Eastern Daylight Time on May 31, 2017; or +• +go to the website www.proxyvote.com and follow the instructions, then confirm that your voting instructions have been properly recorded. If you +vote using the website, you can request electronic delivery of future proxy materials. Internet voting will be available 24 hours a day and will close at 11:59 p.m., Eastern Daylight Time on May 31, 2017; or +• +if you received a paper copy of your proxy materials and elect to vote by written submission, mark your selections on the proxy card, date and sign it, +and return the card in the pre-addressed, postage-paid envelope provided. +Why +did I receive paper copies of proxy materials? +We are providing certain shareholders with paper copies of the proxy +materials instead of a separate Notice. If you received a paper copy and would no longer like to receive printed proxy materials, you may consent to receive all future proxy materials electronically via email or the Internet. To sign up for +electronic delivery, please follow the instructions provided in your proxy materials. When prompted, indicate that you agree to receive or access shareholder communications electronically in the future. +Will each shareholder in our household receive proxy materials? +Generally, no. To the extent you are receiving printed proxy materials, we try to provide only one set of proxy materials to be delivered to multiple shareholders sharing an address, unless you have given +us other instructions. Any shareholder at a shared address may request delivery of single or multiple copies of printed proxy materials for future meetings by contacting us at: +Matador Resources Company +Attention: Corporate Secretary +5400 LBJ Freeway, Suite 1500 +Dallas, Texas 75240 +Email: investors@matadorresources.com +Telephone: +(972) 371-5200 +We undertake to deliver promptly, upon written or oral request, a +copy of proxy materials to a shareholder at a shared address to which a single copy of the proxy materials was delivered. Requests should be directed to the Corporate Secretary at the address or phone number set forth above. +Who will be admitted to the Annual Meeting? +Admission to the Annual Meeting will be limited to our shareholders of record, persons holding proxies from our shareholders, beneficial owners of our Common Stock and our employees. If your shares are +registered +6 +Table of Contents +in your name, we will verify your ownership at the meeting in our list of shareholders as of the Record Date. If your shares are held through a broker, bank or other nominee, you must bring proof +of your ownership of the shares. This proof could consist of, for example, a bank or brokerage firm account statement or a letter from your bank or broker confirming your ownership as of the Record Date. You may also send proof of ownership to us at +Matador Resources Company, Attention: Corporate Secretary, 5400 LBJ Freeway, Suite 1500, Dallas, Texas 75240, or email: investors@matadorresources.com before the Annual Meeting, and we will send you an admission card. +If I vote via telephone or the Internet or by mailing my Proxy Card, may I still attend the Annual Meeting? +Yes. +What if I want to +change my vote? +You may revoke your proxy before it is voted by submitting a new proxy with a later date (by mail, +telephone or Internet), by voting at the Annual Meeting or by filing a written revocation with our Corporate Secretary. Your attendance at the Annual Meeting will not automatically revoke your proxy. +What constitutes a quorum? +A majority of the shares entitled to vote, present in person or represented by proxy, constitutes a quorum. If you vote by telephone or Internet or by returning your Proxy Card, you will be considered +part of the quorum. The Inspector of Election will treat shares represented by a properly executed proxy as present at the meeting. Abstentions and broker non-votes will be counted for purposes of determining +a quorum. A broker non-vote occurs when a nominee holding shares for a beneficial owner submits a proxy but does not vote on a particular proposal because the nominee does not have discretionary voting power +for that item and has not received instructions from the beneficial owner. +How many votes will be required to approve a proposal? +The affirmative vote of a majority of the votes cast by holders of shares of Common Stock present in person or represented +by proxy and entitled to vote on the election of directors at the Annual Meeting is required for the election of each nominee for director. With respect to the election of directors in an uncontested election, such as that being held at the Annual +Meeting, “majority of the votes” cast means the number of votes cast “FOR” such nominee exceeds the number of votes cast “AGAINST” such nominee. +The Proposed Amendment requires the affirmative vote of two-thirds of the outstanding shares of Common Stock. +With respect to all other matters, the affirmative vote of the holders of a majority of the shares of Common Stock, present in person or +by proxy, and entitled to vote at the Annual Meeting, is required. +Shares cannot be voted at the Annual Meeting unless the +holder of record is present in person or by proxy. +Can brokers who hold shares in street name vote those shares if they have received no +instructions? +Under the rules of the New York Stock Exchange (“NYSE”), brokers may not vote the shares held by +them in street name for their customers and for which they have not received instructions, except with respect to a routine matter. The only matter to be voted on at the Annual Meeting that is considered routine for these purposes is the +ratification of the appointment of our independent registered public accounting firm. Accordingly, brokers may not vote your shares on any other matter if you have not given specific instructions as to how to vote. Please be sure to give specific +voting instructions to your broker so that your vote will be counted. +7 +Table of Contents +How will you treat abstentions and broker non-votes? +Shares of a shareholder who abstains from voting on any or all proposals will be included for the purpose of determining +the presence of a quorum. Other than with respect to the election of directors, an abstention will effectively count as a vote cast against each proposal. Broker non-votes on any matter, as to which the broker +has indicated on the proxy that it does not have discretionary authority to vote, will be treated as shares not entitled to vote with respect to that matter. However, such shares will be considered present and entitled to vote for quorum purposes so +long as they are entitled to vote on at least one other matter. +Who pays the solicitation expenses? +We will bear the cost of solicitation of proxies. Proxies may be solicited by mail or personally by our directors, officers or employees, +none of whom will receive additional compensation for such solicitation. Those holding shares of Common Stock of record for the benefit of others, or nominee holders, are being asked to distribute proxy soliciting materials to, and request voting +instructions from, the beneficial owners of such shares. We will reimburse nominee holders for their reasonable out-of-pocket expenses. +Where can I find the voting results of the Annual Meeting? +We will announce preliminary voting results at the Annual Meeting, and we will publish final results in a Current Report on Form 8-K that will be filed with the SEC +within four business days of the Annual Meeting. You may obtain a copy of this and other reports free of charge at www.matadorresources.com , by contacting our Investor Relations Department at +(972) 371-5200 or investors@matadorresources.com or by accessing the SEC’s website at www.sec.gov . +Will the Company’s independent registered public accounting firm be available at the Annual Meeting to respond to questions? +Yes. The Audit Committee of the Board has approved KPMG LLP to serve as our independent registered public accounting firm for the year +ending December 31, 2017. Representatives of KPMG LLP will be present at the Annual Meeting. They will have an opportunity to make a statement, if they desire to do so, and will be available to respond to appropriate questions. +Where can I contact the Company? +Our mailing address is: +Matador Resources Company +Attention: Corporate Secretary +5400 LBJ Freeway, Suite 1500 +Dallas, Texas 75240 +Our telephone number is (972) 371-5200. +8 +Table of Contents +PROPOSAL 1 — ELECTION OF DIRECTORS +The Board currently consists of 12 members. Our Board is divided into three classes of directors, designated +Class I, Class II and Class III, with the term of office of each director ending on the date of the third annual meeting following the annual meeting at which such director’s class was elected. The number of directors in each +class will be as nearly equal as possible. The current Class I directors are Ms. Julia P. Forrester and Messrs. William M. Byerley, Kenneth L. Stewart and George M. Yates. Ms. Forrester and Messrs. Byerley and Stewart were appointed +to the Board following the 2016 Annual Meeting of Shareholders and are therefore Class I director nominees at the Annual Meeting, in each case, to hold office until the 2018 Annual Meeting of Shareholders or his or her earlier death, +retirement, resignation or removal. Mr. Yates’ term as a director will continue until the 2018 Annual Meeting of Shareholders or his earlier death, retirement, resignation or removal. The Class II directors are Messrs. R. Gaines +Baty, Craig T. Burkert and Gregory E. Mitchell and Dr. Steven W. Ohnimus. Mr. Baty was appointed to the Board following the 2016 Annual Meeting of Shareholders and is therefore a Class II director nominee at the Annual +Meeting, to hold office until the 2019 Annual Meeting of Shareholders or his earlier death, retirement, resignation or removal. The terms of each of Messrs. Burkert and Mitchell and Dr. Ohnimus will continue until the 2019 Annual Meeting of +Shareholders or his earlier death, retirement, resignation or removal. The Class III directors are Messrs. Joseph Wm. Foran, Reynald A. Baribault, Joe A. Davis and David M. Laney. The term of Messrs. Davis and Laney will expire at the Annual +Meeting, creating two vacancies on the Board. Messrs. Foran and Baribault are the Class II director nominees at the Annual Meeting, in each case, to hold office until the 2020 Annual Meeting of Shareholders or his earlier death, retirement, +resignation or removal. +The Board believes that each of the director nominees possesses the qualifications described below in +“Corporate Governance — Board Committees — Nominating Committee.” That is, the Board believes that each nominee possesses: (i) deep experience at the policy making level in business, government or +education; (ii) the availability and willingness to devote adequate time to Board duties; (iii) the character, judgment and ability to make independent analytical, probing and other inquiries; (iv) a willingness to exercise +independent judgment along with a willingness to listen and learn from others; (v) business knowledge and experience that provides a balance with the other directors; (vi) financial independence; and (vii) with respect to incumbent +directors, excellent past performance on the Board. +The information provided below is biographical information about each of +the nominees, as well as a description of the experience, qualifications, attributes or skills that led the Board to conclude that the individual should be nominated for election as a director of the Company. +Nominees +Mr. Joseph Wm. Foran . Mr. Foran, age 64, founded Matador Resources Company in July 2003 and has served as Chairman of the Board, Chief Executive Officer and Secretary since +our founding. He served as President from our founding until November 2013 and is also chair of the Board’s Executive Committee. Mr. Foran began his career as an oil and natural gas independent in 1983 when he and his wife, Nancy, founded +Foran Oil Company with $270,000 in contributed capital from 17 of his closest friends and neighbors. Foran Oil Company was later contributed into Matador Petroleum Corporation upon its formation by Mr. Foran in 1988, and Mr. Foran served +as Chairman and Chief Executive Officer of that company from inception until the time of its sale to Tom Brown, Inc. in June 2003 for an enterprise value of $388 million in an all-cash transaction. Under +Mr. Foran’s guidance, Matador Petroleum realized a 21% average annual rate of return for its shareholders for 15 years. Mr. Foran is originally from Amarillo, Texas, where his family owned a pipeline construction business. From +1980 to 1983, he was Vice President and General Counsel of J. Cleo Thompson and James Cleo Thompson, Jr., Oil Producers. Prior to that time, he was a briefing attorney to Chief Justice Joe R. Greenhill of the Supreme Court of Texas. Mr. Foran +graduated with a Bachelor of Science degree in Accounting from the University of Kentucky with highest honors and a law degree from the Southern Methodist University Dedman School of Law, where he was a Hatton W. Sumners scholar and the Leading +Articles Editor of the Southwestern +9 +Table of Contents +Law Review. He is currently active as a member of various industry and civic organizations, including his church and various youth activities. In 2002, Mr. Foran was honored as the +Ernst & Young “Entrepreneur of the Year” for the Southwest Region. As the founder, Chairman of the Board and Chief Executive Officer of Matador Resources Company, Mr. Foran has provided leadership, experience and long +relationships with many of our shareholders. +Mr. Reynald A. Baribault . +Mr. Baribault, age 53, was elected to our Board in June 2014 and currently serves as lead independent director and is chair of the Board’s Compensation Committee. He is Vice President / Engineering of NP Resources, LLC, a Denver-based +exploration and production operator solely focused on the horizontal Bakken play in the North Dakota Williston Basin. In 2007, he co-founded NP Resources’ predecessor company, North Plains Energy, LLC, +which developed and sold its North Dakota production and assets in 2012. In addition, he co-founded and serves as President and Chief Executive Officer of IPR Energy Partners, LLC, a Dallas-based oil and +natural gas production operator with previous operations in Louisiana, Southeast New Mexico and North Central Texas and current operations in the Fort Worth Basin. Prior to co-founding North Plains Energy, NP +Resources and IPR Energy Partners, Mr. Baribault served as Vice President, Supervisor and Petroleum Engineering Consultant of Netherland, Sewell & Associates, Inc. from 1990 to 2002. Mr. Baribault began his professional career +with Exxon Company in 1985 and oversaw operations reservoir engineering matters for high-pressure natural gas fields in South Louisiana. Mr. Baribault received his Bachelor of Science degree in Petroleum Engineering from Louisiana State +University in 1985 and is a Licensed Professional Engineer in the State of Texas. Mr. Baribault provides valuable insight to our Board on our drilling, completion and reservoir engineering operations, as well as growth strategies, midstream +operations and administration. +Mr. R. Gaines Baty . Mr. Baty, age 66, was appointed +to the Board in 2016. Mr. Baty is Founder and CEO of R. Gaines Baty Associates, Inc., an executive search firm he founded in 1982. Mr. Baty has over 30 years of experience as an executive search consultant. In this role, he has +provided companies across the country and in a variety of industries, with executive search and advisory services. Mr. Baty has served as a two-term President of the Society of Executive Recruiting +Consultants and a two-term President of the Independent Recruiter Group. Mr. Baty is also a published author. Mr. Baty received a Bachelor of Business Administration degree from Texas Tech +University, where he was a letterman and captain of the football team. Mr. Baty’s experience and expertise in executive leadership and development provide our Board with an important and unique perspective on these matters, and +Mr. Baty assists the Board and the Company with recruitment, board administration, compensation and growth strategies. +Mr. William M. Byerley . Mr. Byerley, age 63, was appointed to the Board in 2016 and is chair of the Board’s Audit Committee. Mr. Byerley retired +from PricewaterhouseCoopers LLP (PwC) in 2014. From 1988 through 2014, Mr. Byerley was a Partner with PwC, serving as an Assurance Partner on various audit engagements primarily for energy sector clients. From 1988 through 1990, +Mr. Byerley served in the PwC National Office Accounting Services Group. Mr. Byerley received a Bachelor of Business Administration degree in 1975 and his Master in Business Administration degree in 1976, both from Southern Methodist +University. He is a licensed Certified Public Accountant. Mr. Byerley’s extensive experience in public accounting and longtime service to energy sector clients of PwC provide the Board with invaluable financial and accounting expertise, +particularly for oil and natural gas companies, strong accounting and financial oversight and general knowledge of the industry. +Ms. Julia P. Forrester . Ms. Forrester, age 57, is Associate Provost for Student Academic Services at Southern Methodist University, a role she has held +since June 2015. Her responsibilities in that role include oversight of International Student and Scholar Services, Study Abroad, the Center for Academic Development of Student Athletes, the President’s Scholars Program and the Hunt Leadership +Scholars Program, among others. She has served in various administrative positions at SMU, including serving as Associate Dean for Academic Affairs for the 1995-1996 academic year and as Dean ad interim of the Dedman School of Law +from June 2013 through June 2014. Ms. Forrester is also Professor of Law at SMU, having begun her teaching career at SMU in 1990 as an Assistant Professor. She previously practiced law with Thompson & Knight LLP. Ms. Forrester +holds +10 +Table of Contents +a Bachelor of Science degree in Electrical Engineering from the University of Texas at Austin, graduating with highest honors, and a law degree from the University of Texas School of Law, +graduating with high honors. She is a member of the Order of the Coif, and she received the highest score in the state on the Texas bar exam following her graduation. Ms. Forrester’s academic and legal experience provide our Board with a +unique perspective on the Company’s business and operations. +Mr. Kenneth L. +Stewart . Mr. Stewart, age 63, is presently a Partner in, and holds the position of Chair —United States with, Norton Rose Fulbright US LLP, a Texas limited liability partnership, which constitutes the United States operations of +Norton Rose Fulbright, an international legal practice with over 3,500 legal professionals in over 50 cities worldwide. Mr. Stewart began his legal career with Fulbright & Jaworski LLP, the predecessor to Norton Rose Fulbright US LLP, +and previously held at differing times positions of Global Chair of the international organization, Managing Partner of the United States region, and Partner-in-Charge +of the Dallas office. Prior to entering into full-time management for his firm in 2012, he engaged in a transactional legal practice, both domestic and international, focusing principally on merger, acquisition, financing and joint venture +activities for both public and privately-held entities. Mr. Stewart has extensive experience representing and advising companies and their executive officers and boards of directors engaged in oil and natural gas exploration and midstream +activities. Mr. Stewart graduated from the University of Arkansas School of Business in 1976 with a B.S.B.A in Accounting and was licensed as a Certified Public Accountant in Texas in 1981 (certificate now on +non-practice status). He graduated with honors from Vanderbilt Law School in 1979 and was a member of the Order of the Coif. Mr. Stewart has been active in numerous civic and professional organizations in +the Dallas area in the past, including among others, the Dallas Regional Chamber (board and executive committee), The Center for American and International Law (board and executive committee) and the Dallas Citizens Council. Mr. Stewart’s +extensive experience representing public companies, and particularly oil and gas companies, along with his years of management experience, provide our Board with important legal, corporate governance and leadership insight. +Vote Required +The affirmative vote of a majority of the votes cast by holders of shares present in person or represented by proxy and entitled to vote on the election of directors at the Annual Meeting is required for +the election of each nominee for director. With respect to the election of directors in an uncontested election, such as that being held at the Annual Meeting, “majority of the votes” cast means the number of votes cast “FOR” the +election as a director of such nominee exceeds the number of votes cast “AGAINST” such nominee. If you hold your shares through a broker and you do not instruct the broker how to vote, your broker will not have the authority to vote your +shares. Abstentions and broker non-votes will each be counted as present for purposes of determining the presence of a quorum. +The Board of Directors recommends that you vote FOR each of the nominees. +11 +Table of Contents +Directors Continuing in Office +Biographical information for our directors who are continuing in office is provided below. +Mr. Craig T. Burkert . Mr. Burkert, age 60, was elected to the Board in 2016 and is +chair of the Board’s Corporate Governance Committee. With over 30 years of experience in distribution businesses, he currently serves as the Chief Financial Officer of ROMCO Equipment Co., a dealer of heavy construction equipment that serves +customers in a variety of sectors throughout most of Texas. Mr. Burkert joined ROMCO in 1984 as a Product Manager, later serving as a Branch Manager from 1986 to 1989 and as General Manager from 1989 to 1994. In 1994 he left ROMCO to start a +dealership in the lift truck industry in New England, but he returned to ROMCO in 2003 to take on his current position of Chief Financial Officer, where he is responsible for all financial, administrative and technology aspects of the company. +Mr. Burkert received a Bachelor of Science degree in Electrical Engineering and Computer and Information Systems from Tulane University. He also holds a Master in Business Administration degree from Harvard Business School. Mr. Burkert has +been involved with Matador since its inception. He has served on the Shareholder Advisory Committee for Board Nominations since 2014, has acted as a special advisor to the Company for midstream related matters and is an active participant in +shareholder meetings and various Board activities. Mr. Burkert’s accounting and financial knowledge and leadership experience, coupled with his familiarity with the operations and corporate governance of the Company, provide our Board with +a valuable perspective on these matters and other business issues. +Mr. Gregory E. +Mitchell . Mr. Mitchell, age 65, joined our Board in June 2011 and is chair of the Board’s Nominating Committee. With 47 years of grocery and petroleum retailing experience, he is currently Chairman of Toot’n Totum Food Stores, +LLC, his family company located in Amarillo, Texas. For more than 20 years, he served as President and Chief Executive Officer of Toot’n Totum, until transitioning to the role of Chairman in November 2016. The company, founded in 1950, consists +of over 100 convenience stores, car washes, lube centers and check cashing locations, with an employee base of over 1,000 team members in the organization. His experience within the petroleum industry includes extensive negotiations with various +major refiners in the United States. A 1973 graduate of the University of Oklahoma with a Bachelor of Business Administration degree, Mr. Mitchell was appointed by former Governor William Clements to the Texas Higher Education Coordinating +Board, where he served from 1987 through 1993. Additionally, he has served as Chairman of the Amarillo Chamber of Commerce, Chairman of the United Way of Amarillo and Canyon, Chairman of the Harrington Foundation and President of the Amarillo Area +Foundation. Mr. Mitchell is a former director of the Holding Committee of Amarillo National Bank, former board member of Cal Farley’s Boys Ranch and former Chairman of the Cal Farley’s Boys Ranch Foundation. Mr. Mitchell’s +experience as President and Chief Executive Officer of his large family business provides our Board with extensive business, strategic and executive leadership experience. +Dr. Steven W. Ohnimus . Dr. Ohnimus, age 70, was first elected to our Board in January 2004 and is chair of the Board’s Operations and Engineering +Committee. He spent his entire professional career from 1971 to 2000 with Unocal Corporation, an integrated energy company. From 1995 to 2000, he was General Manager — Partner Operated Ventures, where he represented Unocal’s non-operated international interests at board meetings, management committees and other high level meetings involving projects in the $200 million range in countries such as Azerbaijan, Bangladesh, China, +Congo, Myanmar and Yemen. From 1994 to 1995, Dr. Ohnimus was General Manager of Asset Analysis, where he managed and directed planning, business plan budgeting and scenario plans for the domestic and international business unit with an asset +portfolio totaling $5.5 billion. From 1990 to 1994, Dr. Ohnimus was Vice President and General Manager, Unocal Indonesia, located in Balikpapan, operating five offshore fields and one onshore liquid extraction plant and employing 1,200 +nationals and 50 expatriates. From 1989 to 1990, he served as Regional Operations Manager in Anchorage, Alaska, and from 1988 to 1989, he was District Operations Manager in Houma, Louisiana. From 1981 to 1988, Dr. Ohnimus was in various +management assignments in Houston and Houma, Louisiana, and from 1971 to 1981 he handled various technical assignments in reservoir engineering, production and drilling in the Gulf Coast area (Houston, Van, Lafayette and Houma). From 1975 to 1979, +Dr. Ohnimus was Assistant Professor of Petroleum +12 +Table of Contents +Engineering at the University of Southwest Louisiana (now University of Southern Louisiana) where he taught eleven undergraduate and graduate night classes. In 1980, he taught drilling seminars +at the University of Texas Petroleum Extension Service of the International Association of Drilling Contractors (IADC). Dr. Ohnimus has authored several published papers concerning reservoir recompletion and increased recovery. He received his +Bachelor of Science degree in Chemical Engineering from the University of Missouri at Rolla in 1968, a Master of Science degree in Petroleum Engineering from the University of Missouri at Rolla in 1969 and a PhD degree in Petroleum Engineering from +the University of Missouri at Rolla in 1971. Dr. Ohnimus served as a director of the American Petroleum Institute in 1978 and 1979, served as Session Chairman for the Society of Petroleum Engineers’ Annual Convention in 1982, was the +Evangeline Section Chairman of the Society of Petroleum Engineers in 1978 and 1979 and served as President of the Unocal Credit Union from 1986 to 1988. In 2007, he was elected President of the Unocal Gulf Coast Alumni Club, which reports through +the Chevron Retirees Association, for which Dr. Ohnimus is a director. Effective July 2015, Dr. Ohnimus assumed the position of South Texas Area Vice President of the Chevron Retirees Association. From 2008 to 2009, Dr. Ohnimus served +as the vice chairman of the advisory board of Western Standard Energy Corp. (OTCBB: WSEG), an oil and natural gas exploration company. Due to his long oil and natural gas industry career and significant operational and international experience, +Dr. Ohnimus provides valuable insight to our Board on our drilling and completion operations and management, as well as providing a global technology and operations perspective. +Mr. George M. Yates . Mr. Yates, age 70, joined our Board in April 2015 in accordance +with the terms of the February 2015 merger with Harvey E. Yates Company (the “HEYCO Merger”). See “Transactions with Related Persons” below. He is Chairman and Chief Executive Officer of HEYCO Energy Group, Inc., an oil and +natural gas exploration and production business based in Dallas with additional offices in Roswell, New Mexico. HEYCO Energy Group, Inc. was the sole shareholder of Harvey E. Yates Company prior to the HEYCO Merger. Mr. Yates is a New Mexico +native and graduated from the New Mexico Military Institute in Roswell in 1964 and from the University of Texas at Austin with a Bachelor of Business Administration Degree in January 1969. He is also a graduate of the Owners/Presidents Management +Program at Harvard Business School. He has been President of the New Mexico Landmen’s Association and the Independent Petroleum Association of New Mexico. He is past Chairman of the Board of Directors of Mountain States Legal Foundation of +Denver, Colorado and the Environmental Issues Council based in Washington, D.C. He is also past Chairman of the Independent Petroleum Association of America and the Natural Gas Council. He served as Chairman of the board of directors of the Business +and Industrial Political Action Committee (BIPAC) based in Washington, D.C. and as President of the Twenty-Five Year Club of the Petroleum Industry. He is currently a member of the National Petroleum Council. In 2004, Mr. Yates received the +prestigious “Roughneck of the Year” award sponsored by Lone Star Steel Company. He was inducted into the Rocky Mountain Oil and Gas Hall of Fame in 2009. In 2015, Mr. Yates was inducted into the New Mexico Military Institute Hall of +Fame. As a proven oil and natural gas executive, Mr. Yates provides our Board with decades of experience and tremendous knowledge with respect to the Delaware Basin and the assets acquired by Matador in the HEYCO Merger. +Special Board Advisors +In addition to our Board, we have nine individuals with significant oil and natural gas experience or legal, accounting or other business experience who advise our Board on various matters. From time to +time, we enter into various agreements with these individuals with respect to their service as special advisors to our Board. Their business histories are described below: +Mr. Ronald F. Coleman. Mr. Coleman retired in 2014 from his joint role at Archer Limited as Executive Vice President and President — North +America. He serves on the board of directors of Goodrich Petroleum Corporation. Mr. Coleman had joined the global oil services company in 2012 and was responsible for the integration of multiple product service lines as part of a significant +geographic expansion for Archer. He had previously served as Chief Operating Officer and Executive Vice President of Select Energy Services, a position he held from January 2011 to December 2011. He joined Select Energy following 33 years with BJ +Services Company, where he held various roles including Vice President — North America Pumping from 2007 to 2010 +13 +Table of Contents +and Vice President — Operations (United States and Mexico) from 1998 to 2007. Mr. Coleman received a Bachelor of Business Administration degree from the University of Texas +Permian Basin in 1993. +Mr. Marlan W. Downey. Mr. Downey worked for Shell +Oil Company, an integrated energy company, from 1957 to 1987. In 1977, he moved to Shell Oil’s International Exploration & Production business and became Vice President of Shell, and then President of Shell Oil’s newly-formed +international subsidiary, Pecten International, retiring in 1987. Mr. Downey joined ARCO International in 1990 as Senior Vice President of Exploration, becoming President of ARCO International and then Senior Vice President and Executive +Exploration Advisor to ARCO. Mr. Downey retired from ARCO in 1996. He serves on the board of TransAtlantic Petroleum Ltd., an international oil and natural gas company. Mr. Downey is a founder and director of Foundation Energy, a company +that purchases and operates producing oil and natural gas properties. He is a fellow of the American Association for the Advancement of Science. He is an elected fellow of the Geological Society in London. Mr. Downey is past President of the +American Association of Petroleum Geologists (AAPG) and has served as Bartell Professor and Chief Scientist — Sarkeys Energy Center at the University of Oklahoma. Mr. Downey is the 2009 recipient of the AAPG’s Sidney Powers +Medal, which is the highest honor awarded by the AAPG. He is active in several scientific organizations and serves on the board of Berkeley Earth, a non-profit organization. Mr. Downey received a Bachelor +of Arts degree in Chemistry in 1952 at Peru State College in Nebraska. He served in the U.S. Army in Korea and the Philippines, then enrolled at the University of Nebraska, and received a Bachelor of Science degree in 1956 and a Master of Science +degree in Geology in 1957. Mr. Downey previously served on Matador Petroleum Corporation’s board of directors. He has served as a special advisor to the Board since our inception in July 2003 and currently serves as chair of the +Board’s Prospect Committee. +Ms. Tara W. Lewis . Ms. Lewis presently +serves as a consultant to HEYCO Energy Group, Inc., previously serving as Vice President from 1998 to 2015. She previously served as Director of Internal Audit and Business Analysis at Apache Corporation and, prior to that role, spent more than 10 +years with PwC, ultimately serving as Senior Tax Manager with the World Petroleum Group from 1993 to 1997. She also worked as a Resident Tax Specialist for the Independent Petroleum Association of America (IPAA) from 1991 to 1993. Ms. Lewis is +Chairman of the International Committee of IPAA and serves on various civic boards, including The Arts Community Alliance (TACA) and Dallas Children’s Theater. Ms. Lewis is a licensed Certified Public Accountant in the State of Texas. She +received a Bachelor of Arts degree from Rice University and a law degree from the University of Houston Law School. +Mr. Wade I. Massad . Mr. Massad served as a consultant to the Company and a special +advisor to the Board from 2010 to December 2011, when he was elected Executive Vice President — Capital Markets of the Company. He held that role until July 2012, when he resumed his role as a consultant to the Company and as a +special advisor to the Board, pursuant to a consulting agreement entered into in August 2012. Mr. Massad is the Co-Founder and Co-Managing Member of Cleveland +Capital Management L.L.C., a registered investment advisor and General Partner of Cleveland Capital L.P., a private investment fund focused on micro-cap public and private equity securities, established in +October 1996. Previously, Mr. Massad was an investment banker with Keybanc Capital Markets and RBC Capital Markets, where he was the head of U.S. equity institutional sales from 1997 to 1998 and the head of U.S. Capital Markets business from +1999 to 2003. He also served on the firm’s executive committee. Mr. Massad serves on the board of the Investors Exchange Group, Inc. (IEX). Mr. Massad received a Bachelor of Arts in business management from Baldwin-Wallace University +in 1989 and currently serves on its Board of Trustees. +Mr. Greg L. McMichael. +Mr. McMichael served as a member of the Board of Matador Resources Company from 2004 to 2008. He presently serves on the board of directors for Denbury Resources, Inc. (NYSE: DNR). Mr. McMichael retired in October 2004 as Vice President +and Group Leader — Energy Research, of A.G. Edwards, Inc. In that capacity, he was responsible for overseeing all of the firm’s equity research in the Energy Sector, including integrated oils, exploration and production, oil +service and master limited partnerships. Prior to joining A.G. Edwards, Mr. McMichael served as Managing Director of Equity Research at Hanifen, Imhoff, Inc., a Denver-based regional investment firm. He had previously served as Chief Executive +Officer of a private oil and natural gas acquisition and production company he co-founded in 1987. Mr. McMichael is a member of the +14 +Table of Contents +National Association of Corporate Directors, where he is currently a Leadership Fellow and serves on the board of the Colorado chapter. Mr. McMichael received a Bachelor of Arts degree in +Political Science and Economics from Schiller International University (London) in 1973. +Mr. David F. Nicklin. Mr. Nicklin joined Matador Resources Company in February 2009 as +Executive Director of Exploration after working with the Company as a consultant since November 2007. He retired from his position as Executive Director of Exploration on March 31, 2015 but continues to serve the Company as a consultant and +special advisor to the Board. From January 2000 until he joined Matador in 2009, Mr. Nicklin provided executive level consulting services to a variety of clients. In 2006, Mr. Nicklin co-founded and +currently leads a small, private oil and natural gas company, Salt Creek Petroleum LLC and its sister company Salt Creek Resources LLC. Salt Creek owns small, non-operated interests in a variety of onshore oil +and natural gas fields in the United States. In 2000, Mr. Nicklin founded and led for three years a private oil and natural gas exploration company, Serica Energy, which is now a public company with assets in the United Kingdom, Ireland, +Namibia and Morocco. Between 1981 and 2000, Mr. Nicklin was an employee of ARCO, where he participated in and led several international exploration teams, particularly in the Middle East, southeast Asia and Australasia. In 1991, he became the +Chief Geologist for ARCO, a position he held until his retirement in 2000. In this position, Mr. Nicklin was responsible for the quality of the geological effort at ARCO, in particular, ensuring the application of +state-of-the-art geological technology, the company’s risk management process, the selection of new ventures and the +high-grading of a large geoscience staff. Throughout his career at ARCO, Mr. Nicklin was closely involved with the successful exploration for and development of a number of large oil and natural gas discoveries. Prior to joining ARCO, +Mr. Nicklin was a senior development and operations geologist in a variety of positions in the United Kingdom, Angola, Norway and the Middle East. He was a specialist in well-site operations and provided training in operations to entry-level +personnel. Mr. Nicklin was born in the United Kingdom and received a Bachelor of Science degree with honors in Geology from the University of Wales in 1971. He is an active member of the AAPG, Society of Independent Professional Earth +Scientists (SIPES) and various other professional groups. +Dr. James D. +Robertson . Dr. Robertson is a founder and co-managing partner of Salt Creek Petroleum, LLC, a privately-held company that explores for and produces oil and natural gas in conventional onshore plays in +Texas. He is also founder and owner of Rannoch Petroleum LLC, an oil and natural gas investment and consulting firm based in Fort Worth, Texas. Prior to becoming an independent petroleum explorer, Dr. Robertson worked for ARCO for 25 years, +serving as Vice President of Exploration for ARCO’s international division prior to his retirement from ARCO upon its acquisition by BP plc in 2000. Dr. Robertson has served as president of the Society of Exploration Geophysicists, +chairman of the Fort Worth Chapter of SIPES and as a national director of SIPES from 2012 to 2013. He is a licensed professional geoscientist in the State of Texas. Dr. Robertson received a Bachelor of Science degree in geological engineering +from Princeton University and a PhD in geophysics from the University of Wisconsin. +Mr. James A. +Rolfe. Mr. Rolfe is a solo legal practitioner. Until 2015, he served as Of Counsel with Kendall Law Group, a Dallas, Texas law firm specializing in litigation that he joined in 2009. From 2005 to 2009, Mr. Rolfe served as Of Counsel +with Fitzpatrick Hagood Smith & Uhl LLP, a boutique litigation firm. He worked as a sole practitioner in private practice from 1985 to 2005. From 1981 to 1985, Mr. Rolfe served as United States Attorney for the Northern District of +Texas, having been appointed to that position by President Reagan. From 1979 to 1981, he worked in private practice following his service as Assistant United States Attorney for the Northern District of Texas, a position he held from 1973 to 1979. +Mr. Rolfe was Assistant District Attorney for Dallas County from 1969 to 1973. He began his public service in the role of Assistant City Attorney for the City of Dallas, which position he held from 1968 to 1969. Mr. Rolfe served in the +United States Army from 1959 to 1962. He received a Bachelor of Arts degree from Austin College in 1965 and received its Distinguished Alumnus Award in 2000. He received his law degree from the University of Texas at Austin in 1968. +Mr. Michael C. Ryan. Mr. Ryan served as a member of the Board of Matador Resources Company from February +2009 to June 2015. Prior to joining the Board, he served as an advisor to the Financial Committee and +15 +Table of Contents +frequently participated in Board planning and strategy sessions. Mr. Ryan is a private investor. From October 2004 to December 2015, he was a Partner and member of the Investment Committee +at Berens Capital Management LLC, an investment firm based in New York. From February 1998 to June 2004, he worked with Goldman, Sachs & Co., a global investment banking and securities services firm, leading its West Coast international +institutional equities business. In this role, he developed and built a team of professionals to advise large institutional clients on their global investment decisions. From 1995 to 1998, Mr. Ryan lived in Oslo, Norway, where he was a Partner +at Pareto Securities, a Scandinavian-based securities firm where he led and built the institutional equities business into the United States and United Kingdom. From 1991 to 1994, Mr. Ryan represented multiple eastern European governments in +the preparation, negotiation and sale of many of their largest state-owned companies. He began his career with Honeywell, Inc., which invents and manufactures technologies, including in the safety, security and energy areas, in 1983, working in the +Systems and Research Center, which focused on advanced weapons development programs. Mr. Ryan received a Master of Business Administration degree from The Wharton School at the University of Pennsylvania in 1991 and a Bachelor of Science degree +from the University of Minnesota in 1983. +16 +Table of Contents +CORPORATE GOVERNANCE +The business affairs of Matador are managed under the direction of the Board in accordance with the Texas Business Organizations Code, +the Company’s Amended and Restated Certificate of Formation and its Amended and Restated Bylaws, each as amended to date. The Board has adopted Corporate Governance Guidelines, which are reviewed annually by the Corporate Governance Committee +of the Board. The Company has a Code of Ethics and Business Conduct for Officers, Directors and Employees (“Code of Ethics”), which is applicable to all officers, directors and employees of the Company. The Company intends to post any +amendments to, and may post any waivers of, its Code of Ethics on the Company’s website to the extent applicable to an executive officer or a director of the Company. The Corporate Governance Guidelines and the Code of Ethics are available on +the Company’s website at www.matadorresources.com under the heading “Investors — Corporate Governance.” +The Board holds regular and special meetings and spends such time on the affairs of the Company as its duties require. During 2016, the Board held 13 meetings. The Board also meets regularly in non-management executive sessions in accordance with NYSE regulations. The Corporate Governance Guidelines provide that one of the Company’s independent directors should serve as lead independent director at +any time when the chief executive officer serves as the chairman of the board. The lead independent director presides over the non-management executive sessions, serves as a liaison between the chairman and +the independent directors and performs such additional duties as the Board may otherwise determine and delegate. Because Mr. Foran serves as Chairman of the Board and Chief Executive Officer, our independent directors have appointed +Mr. Baribault to serve as lead independent director. In 2016, all directors of the Company attended at least 75% of the meetings of the Board and the committees on which they served. Our Company policy states that each of our directors is +expected to attend Annual Meetings of Shareholders. All of our directors were in attendance at the 2016 Annual Meeting. +Independence of Directors +The Board makes all determinations with respect to director independence in accordance with +the NYSE listing standards and the rules and regulations promulgated by the SEC. The actual determination of whether a director is independent is made by the Board on a +case-by-case basis. +In connection with its +preparation for the Annual Meeting, the Board undertook its annual review of director independence and considered transactions and relationships between each director or any member of his or her immediate family and the Company and its subsidiaries +and affiliates. In making its determination, the Board applied the NYSE listing standards and SEC rules and regulations. +The +Board reviewed the independence of our directors and considered whether any director has a material relationship with us that could compromise his or her ability to exercise independent judgment in carrying out his or her responsibilities. After +this review, our Board determined that 10 of our 12 current directors are “independent directors” as defined under the rules of the SEC and the NYSE: Ms. Forrester, Messrs. Baribault, Baty, Burkert, Byerley, Davis, Laney, Mitchell and +Stewart and Dr. Ohnimus. No member of or nominee for our Board has a family relationship with any executive officer or other members of our Board. +Majority Vote in Director Elections +On +December 21, 2016, the Board of Directors amended the Company’s Amended and Restated Bylaws (as so amended, the “Bylaws”) to implement a majority voting standard in uncontested director elections. Pursuant to the Bylaws, in an +election of directors at a meeting of shareholders at which a quorum is present, (i) if the number of nominees exceeds the number of directors to be elected (a “contested election”), directors shall be elected by a plurality of the +votes cast by the holders of shares present in person or represented by proxy and entitled to vote on the election of directors at such meeting and (ii) in an election of directors that is not a contested election (an “uncontested +election”), such as that being held at the Annual Meeting, directors shall be +17 +Table of Contents +elected by a majority of the votes cast by the holders of shares present in person or represented by proxy and entitled to vote on the election of directors at such meeting. For purposes of the +Bylaws, in an uncontested election, a “majority of the votes cast” means that the number of shares voted “for” a director must exceed the number of votes cast “against” that director. Prior to the amendment of the +Bylaws, directors were elected by a plurality of the votes cast, whether or not the election was a contested election. +In +connection with the amendment to the Bylaws, the Board approved and adopted an amendment to the Company’s Corporate Governance Guidelines to implement a resignation policy for directors who fail to receive the required number of votes in an +uncontested election in accordance with the Bylaws. Pursuant to the Guidelines, as amended, in an uncontested election, any nominee for director who receives a greater number of votes “against” his or her election than votes +“for” such election (a “majority against vote”) shall promptly tender his or her resignation following certification of the shareholder vote. +The Nominating Committee shall promptly consider the resignation offer, and a range of possible responses based on the circumstances that led to the majority against vote, if known, and make a +recommendation to the Board concerning whether to accept or reject such resignation. The Board shall act on the Nominating Committee’s recommendation and publicly disclose its decision with respect to such resignation offer within 90 days +following certification of the shareholder vote. The resignation, if accepted by the Board, will be effective at the time specified by the Board when it determines to accept the resignation, which effective time may be deferred until a replacement +director is identified and appointed to the Board. +Board Leadership Structure +Mr. Foran serves as Chairman of the Board and Chief Executive Officer of the Company. As stated in the Corporate Governance +Guidelines, the Board does not believe that the offices of Chairman of the Board and Chief Executive Officer must be separate. The members of the Board possess experience and unique knowledge of the challenges and opportunities the Company faces. +They are, therefore, in the best position to evaluate the current and future needs of the Company and to judge how the capabilities of the directors and senior managers can be most effectively organized to meet those needs. Given his deep knowledge +of the Company and experience in leading it, the Board currently believes that the most effective leadership structure for the Company is to have Mr. Foran serve as Chairman of the Board and Chief Executive Officer. +While Mr. Foran serves as Chairman and Chief Executive Officer, 10 of 11 of our non-employee +directors are independent under the rules of the SEC and the NYSE. After considering the recommendations of our Compensation Committee, the independent directors determine Mr. Foran’s compensation. Further, the Company has five standing +committees and a lead independent director, who is currently Mr. Baribault. The Board believes that each of these measures counterbalances any risk that may exist in having Mr. Foran serve as Chairman and Chief Executive Officer. For these +reasons, the Board believes that this leadership structure is effective for the Company. +As lead independent director, +Mr. Baribault has the following roles and responsibilities: +• +he chairs the executive sessions of the non-management and independent directors; +• +he leads the independent directors in the evaluation of the Chief Executive Officer; +• +he facilitates communication among the non-management and independent directors; and +• +he acts as a liaison between the non-management and independent directors and the Chief Executive Officer. +Mr. Baribault, as lead independent director, may also perform such other duties as the Board or the +Corporate Governance Committee from time to time may assign, which may include, but are not limited to, the following: +• +help develop Board agendas and ensure critical issues are included; +18 +Table of Contents +• +determine quality, quantity and timeliness of information from management; +• +make recommendations about retaining consultants or special advisors for the Board; +• +interview Board candidates; +• +oversee Board and director evaluations; and +• +help improve communications and processes by and between management and the Board and the Chief Executive Officer. +Board Committees +The standing committees of the Board are the Audit Committee; Compensation Committee; Corporate Governance Committee; Executive Committee; and Nominating Committee. The Board has also established the +following advisory committees: Operations and Engineering Committee and Prospect Committee. Each of the standing committees is governed by a charter, and a copy of the charters of each of these committees is available on the Company’s website +at www.matadorresources.com under the heading “Investors — Corporate Governance.” Director membership of all of our standing and advisory committees is identified below, as of April 7, 2017. +Director +Audit +Committee +Compensation +Committee +Corporate +Governance +Committee +Executive +Committee +Nominating +Committee +Operations +and +Engineering +Committee +Prospect +Committee +Joseph Wm. Foran +** +* +* +Reynald A. Baribault +* +** +* +* +* +* +R. Gaines Baty +* +* +Craig T. Burkert +* +* +** +* +William M. Byerley +** +* +Joe A. Davis +* +* +Julia P. Forrester +* +* +David M. Laney +* +Gregory E. Mitchell +* +* +** +Steven W. Ohnimus +* +* +* +* +** +* +Kenneth L. Stewart +* +* +George M. Yates +* +* +* +* +Member +** +Chair +Audit Committee +The Audit Committee assists the Board in monitoring: +• +the integrity of our financial statements and disclosures; +• +our compliance with legal and regulatory requirements; +• +the qualifications and independence of our independent auditor; +• +the performance of our internal audit function and our independent auditor; and +• +our internal control systems. +In addition, the Audit Committee is charged with review of compliance with our Code of Ethics. +During 2016, the Audit Committee met six times and as of April 7, 2017 consisted of Ms. Forrester, Messrs. Baribault, Burkert and Byerley and Dr. Ohnimus, each of whom is independent under +the rules of the SEC and +19 +Table of Contents +the NYSE. Mr. Byerley is the chair of the Audit Committee. SEC rules require a public company to disclose whether or not its audit committee has an “audit committee financial +expert” as defined by applicable SEC rules and regulations. Our Board has determined that each of Messrs. Byerley and Burkert is an “audit committee financial expert.” +Compensation Committee +The Nominating, Compensation and Planning Committee was formed by the Board on October 12, 2011 and operated pursuant to its charter until June 9, 2016. At that time, the Board determined that +it was in the best interests of the Company and its shareholders to segregate the responsibilities of the Nominating, Compensation and Planning Committee into two distinct committees — the Compensation Committee and the Nominating +Committee. Effective June 9, 2016, the Board reconstituted the Nominating, Compensation and Planning Committee as the Compensation Committee and established a separate Nominating Committee. Each of the Compensation Committee and the Nominating +Committee has a distinct charter governing its operation and establishing its authority and responsibilities. +The Compensation +Committee has the following responsibilities: +• +assists the Board and the independent members of the Board in the discharge of their fiduciary responsibilities relating to the fair and competitive +compensation of our executive officers; +• +provides overall guidance with respect to the establishment, maintenance and administration of our compensation programs, including stock and benefit +plans; +• +oversees and advises the Board and the independent members of the Board on the adoption of policies that govern our compensation programs; and +• +recommends to the Board the strategic, tactical and performance goals of the Company, including those performance and tactical goals that relate to +performance-based compensation, including but not limited to goals for production, reserves, cash flows and shareholder value. +The Compensation Committee has the authority to delegate authority and responsibilities to subcommittees of its members, so long as the subcommittee consists of at least two members. +As of April 7, 2017, the Compensation Committee consisted of Messrs. Baribault, Baty, Burkert, Davis, Mitchell and Stewart and +Dr. Ohnimus, each of whom is independent under the rules of the SEC and the NYSE, a “non-employee director” pursuant to Rule 16b-3 of the Securities +Exchange Act of 1934, as amended (the “Exchange Act”) and an “outside director” pursuant to Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”). Mr. Baribault is the chair of the +Compensation Committee. During 2016, the Compensation Committee met seven times and its predecessor committee, the Nominating, Compensation and Planning Committee, also met seven times. +Nominating Committee +The Nominating Committee has the following +responsibilities: +• +identifies and recommends to the Board individuals qualified to be nominated for election to the Board; and +• +recommends to the Board the members and chair of each committee of the Board. +The Nominating Committee has the authority to delegate authority and responsibilities to subcommittees of its members, so long as the +subcommittee consists of at least two members. +As of April 7, 2017, the Nominating Committee consisted of Messrs. +Mitchell and Burkert and Dr. Ohnimus, each of whom is independent under the rules of the SEC and the NYSE. Mr. Mitchell is the chair of the Nominating Committee. During 2016, the Nominating Committee met four times and its predecessor +committee, the Nominating, Compensation and Planning Committee, met seven times. +20 +Table of Contents +The Board has also established a Shareholder Advisory Committee for Board Nominations that +is charged with receiving and considering possible nominees for election to the Board by shareholders. Pursuant to the Shareholder Advisory Committee for Board Nominations charter, this committee is comprised of eight to 12 persons selected by the +Nominating Committee and consists of at least: +• +two members of the Nominating Committee; +• +two former members of or special advisors to the Board; +• +two shareholders who beneficially own Common Stock having a market value of at least $1.0 million (such value to be based on the market value of +the Common Stock immediately prior to designation of such shareholders to the Shareholder Advisory Committee for Board Nominations); and +• +two shareholders who have beneficially owned Common Stock continuously for at least the five years prior to such shareholder’s designation to the +Shareholder Advisory Committee for Board Nominations. +The current members of the Shareholder Advisory +Committee for Board Nominations are Messrs. Burkert, McMichael, Mitchell and Ryan and Dr. Ohnimus, J. Barry Banker, Kevin M. Grevey and Scott E. King. +The Shareholder Advisory Committee for Board Nominations makes recommendations based on its conclusions to the Nominating Committee for its consideration and review. +The Nominating Committee and the Shareholder Advisory Committee for Board Nominations consider individuals recommended by the +Company’s shareholders to serve on the Board. In considering candidates submitted by shareholders, the Shareholder Advisory Committee for Board Nominations and the Nominating Committee take into consideration the needs of the Board and the +qualifications of the candidate. To have a candidate considered by the Shareholder Advisory Committee for Board Nominations and the Nominating Committee, a shareholder must submit the recommendation in writing and must include the following +information: +• +The name and address of the shareholder, evidence of the person’s ownership of Common Stock or derivatives, including the number of shares owned, +a description of all arrangements or understandings regarding the right to vote shares of the Company, any short interest in any security of the Company, any rights to dividends that are separated or separable from the underlying shares, any +proportionate interest in shares or derivatives held by a general or limited partnership whereby the shareholder is a general partner or beneficially owns an interest in the general partner, any performance-related fees (other than an asset-based +fee) that the shareholder is entitled to based on any change in the value of the shares or derivatives, any other information relating to the shareholder that would be required to be disclosed in connection with solicitations of proxies for the +election of directors in a contested election and a statement whether or not the shareholder will deliver a proxy to shareholders; and +• +The name, age, business and residence addresses of the candidate, the candidate’s résumé or a listing of his or her qualifications +to be a director of the Company, the person’s consent to be a director if selected by the Nominating Committee, nominated by the Board and elected by the shareholders and any other information that would be required to be disclosed in +solicitations of proxies for the election of directors. +The shareholder recommendation and information +described above and in more detail in our Amended and Restated Bylaws, as amended to date, must be sent to the Corporate Secretary at One Lincoln Centre, 5400 LBJ Freeway, Suite 1500, Dallas, Texas 75240 and must be received by the Corporate +Secretary not fewer than 45 nor more than 75 days prior to the one-year anniversary date of the date the Company’s proxy statement was mailed in connection with the previous year’s Annual Meeting of +Shareholders. +21 +Table of Contents +The Nominating Committee believes that a potential director of the Company must demonstrate +that such candidate has: +• +a depth of experience at the policy-making level in business, government or education; +• +a balance with the business knowledge and experience of the incumbent or nominated directors; +• +availability and willingness to devote adequate time to Board duties; +• +any unfilled expertise needed on the Board or one of its committees; +• +character, judgment and ability to make independent analytical, probing and other inquiries; +• +willingness to exercise independent judgment yet willingness to listen and learn from the other directors and the Company’s staff; and +• +financial independence to ensure such candidate will not be financially dependent on director compensation. +In the case of an incumbent director, the Nominating Committee will also consider such director’s past performance on the Board. +The Nominating Committee or the Shareholder Advisory Committee for Board Nominations may identify potential nominees by +asking, from time to time, current directors and executive officers for their recommendation of persons meeting the criteria described above who might be available to serve on the Board. The Nominating Committee or the Shareholder Advisory Committee +for Board Nominations may also engage firms that specialize in identifying director candidates. As described above, the Nominating Committee and Shareholder Advisory Committee for Board Nominations will also consider candidates recommended by +shareholders. +Once a person has been identified by the Nominating Committee or the Shareholder Advisory Committee for Board +Nominations as a potential candidate, the Nominating Committee or the Shareholder Advisory Committee for Board Nominations will make an initial determination regarding the need for additional Board members to fill vacancies or expand the size of the +Board. If the Nominating Committee or the Shareholder Advisory Committee for Board Nominations determines that additional consideration is warranted, the Nominating Committee or the Shareholder Advisory Committee for Board Nominations will review +such information and conduct interviews as it deems necessary to fully evaluate each director candidate. In addition to the qualifications of a candidate, the Nominating Committee or the Shareholder Advisory Committee for Board Nominations will +consider such relevant factors as it deems appropriate, including the current composition of the Board, the evaluations of other prospective nominees and the need for any required expertise on the Board or one of its committees. The Nominating +Committee or the Shareholder Advisory Committee for Board Nominations also contemplate multiple dynamics that promote and advance diversity among the members of the Board. Although the Nominating Committee does not have a formal diversity policy, +the Nominating Committee considers a number of factors regarding diversity of personal and professional backgrounds, specialized skills and acumen and breadth of experience in energy production, consumption, distribution or transportation, +government policy, finance or law. The Nominating Committee’s evaluation process will not vary based on whether or not a candidate is recommended by a shareholder. +Corporate Governance Committee +The Corporate Governance Committee +is responsible for periodically reviewing and assessing our Corporate Governance Guidelines and making recommendations for changes thereto to the Board, reviewing any other matters related to our corporate governance, unless the authority to conduct +such review has been retained by the Board or delegated to another committee, and overseeing the process for evaluation of the Board and management. +22 +Table of Contents +As of April 7, 2017, the Corporate Governance Committee consisted of +Ms. Forrester, Messrs. Baribault, Baty, Burkert, Byerley, Davis, Laney, Mitchell and Stewart and Dr. Ohnimus, each of whom is independent under the rules of the SEC and the NYSE. Mr. Burkert is the chair of the Corporate +Governance Committee. During 2016, the Corporate Governance Committee met nine times. +Executive Committee +The Executive Committee has authority to discharge all the responsibilities of the Board in the management of the business and affairs of +the Company, except where action of the full Board is required by statute or by our Amended and Restated Certificate of Formation, as amended to date. The Executive Committee met once during 2016. +As of April 7, 2017, our Executive Committee consisted of Messrs. Foran, Baribault and Yates. Mr. Foran is the chair of the +Executive Committee. +Operations and Engineering Committee +The Operations and Engineering Committee provides oversight of the development of our prospects, our drilling and completion operations +and our production operations and associated costs. In addition, the Operations and Engineering Committee provides oversight of the amount and classifications of our reserves and the design of our completion techniques and hydraulic fracturing +operations and various other reservoir engineering matters. As of April 7, 2017, the members of the Operations and Engineering Committee were Messrs. Baribault, Foran and Yates, Dr. Ohnimus and Mr. Downey ( ex officio ). +Mr. Downey is a special advisor to our Board. Dr. Ohnimus is the chair of the Operations and Engineering Committee. +Prospect +Committee +The Prospect Committee provides oversight of the technical analysis, evaluation and selection of our oil and +natural gas prospects. As of April 7, 2017, the members of the Prospect Committee were Messrs. Baribault, Foran, Yates and Dr. Ohnimus and Mr. Downey ( ex officio ). Mr. Downey is the chair of the Prospect Committee. +Board’s Role in Risk Oversight +The Audit Committee has the responsibility to oversee the Company’s guidelines and policies to govern the process by which risk +assessment and risk management are undertaken by management. The Compensation Committee has the responsibility to oversee that our incentive pay does not encourage unnecessary risk taking and to review and discuss the relationship between risk +management policies and practices, corporate strategy and senior executive compensation. +Compensation Committee +Interlocks and Insider Participation +Margaret Shannon (who resigned from the Board on December 2, 2016) and +Messrs. Baribault, Burkert, Davis, Laney and Mitchell and Dr. Ohnimus served on the Compensation Committee or its predecessor committee, the Nominating, Compensation and Planning Committee, during the last completed fiscal year. None of our +executive officers serve on the board of directors or compensation committee of a company that has an executive officer that serves on our Board or Compensation Committee. No member of our Board serves as an executive officer of a company in which +one of our executive officers serves as a member of the board of directors or compensation committee of that company. There were no compensation committee interlocks during 2016. +Communications with Directors +The Board has +established a process to receive communications from shareholders and other interested parties by mail. Shareholders and other interested parties may contact any member of the Board, any Board +23 +Table of Contents +committee or the entire Board. To communicate with the Board, any individual director or any committee of directors, correspondence should be addressed to the Board. All such correspondence +should be sent “c/o Corporate Secretary” at One Lincoln Centre, 5400 LBJ Freeway, Suite 1500, Dallas, Texas 75240. The Corporate Secretary will review and forward correspondence to the appropriate person or persons. +Any communications to the Company from one of the Company’s officers or directors will not be considered “shareholder +communications.” Communications to the Company from one of the Company’s employees or agents will only be considered “shareholder communications” if they are made solely in such employee’s or agent’s capacity as a +shareholder. Any shareholder proposal submitted pursuant to Rule 14a-8 promulgated under the Exchange Act will not be viewed as “shareholder communications.” +Executive Officers and Other Senior Officers of the Company +The following table sets forth the names, ages and positions of our executive officers and certain of our other senior officers at +April 7, 2017: +Name +Age +Positions Held With Us +Executive Officers +Joseph Wm. Foran +64 +Chairman of the Board and Chief Executive Officer +Matthew V. Hairford +56 +President +David E. Lancaster +60 +Executive Vice President and Chief Financial Officer +Craig N. Adams +50 +Executive Vice President — Land, Legal & Administration +Van H. Singleton, II +39 +Executive Vice President of Land +Billy E. Goodwin +59 +Senior Vice President — Operations +Bradley M. Robinson +62 +Senior Vice President of Reservoir Engineering and Chief Technology Officer +G. Gregg Krug +56 +Senior Vice President — Marketing and Midstream +Other Senior Officers +Matthew D. Spicer +49 +Vice President and General Manager of Midstream +Trent W. Green +50 +Vice President of Production +Robert T. Macalik +38 +Vice President and Chief Accounting Officer +Kathryn L. Wayne +56 +Vice President, Controller and Treasurer +Bryan A. Erman +39 +Vice President and Co-General Counsel +Brian J. Willey +40 +Vice President and Co-General Counsel +The following biographies describe the business experience of our executive officers and certain of our +other senior officers. Each officer serves at the discretion of our Board. There are no family relationships among any of our officers. +Executive Officers +Mr. Joseph Wm. Foran . Please see the biography of Mr. Foran on page 9 of this Proxy Statement. +Mr. Matthew V. Hairford . Mr. Hairford joined Matador Resources Company in July 2004 as +its Drilling Manager. He was named Vice President of Drilling in May 2005; Vice President of Operations in May 2006; Executive Vice President of Operations in May 2009; and in November 2013 assumed the title of President. He was previously with +Samson Resources, an exploration and production company, as Senior Drilling Engineer, having joined Samson in 1999. His responsibilities there included difficult Texas and Louisiana Gulf Coast projects, horizontal drilling projects and a start-up drilling program in Wyoming. The scope of this work ranged from multi-lateral James Lime wells in East Texas to deep wells in South Texas and South Louisiana. Mr. Hairford has drilled many geo-pressured wells in Texas and Louisiana, along with normally pressured wells in Southwest Wyoming and East Texas. Additional responsibilities included a horizontal well program in Roger Mills County, Oklahoma at +15,000 feet vertical depth. Mr. Hairford has experience in air drilling, underbalanced drilling, drilling under mud caps and high temperature and pressure environments. From 1998 until 1999, +24 +Table of Contents +Mr. Hairford served as Senior Drilling Engineer with Sonat, Inc., a global company involved with natural gas transmission and marketing, oil and natural gas exploration and production and +oil services. His responsibilities included Pinnacle Reef wells in East Texas and deep horizontal drilling in the Austin Chalk field in Central Louisiana. From 1984 to 1998, Mr. Hairford served in various drilling engineering capacities with +Conoco, Inc. His operational areas included the Appalachian Basin, Illinois Basin, Permian Basin, Texas Panhandle and Val Verde Basin. Mr. Hairford was selected as a member of a three-person team to explore the use of unconventional +technologies to identify a potential step change in the drilling sector. Multiple techniques were evaluated and tested, including declassified defense department technologies. Additional Conoco assignments included both field and office drilling +positions in Midland, Texas and Oklahoma City, Oklahoma. Earlier in his career with Conoco, Mr. Hairford was selected to participate in the Conoco Drilling Rig Supervisor Training Program in Houston, Texas. This program consisted of two years +working a regular rotation as a drilling representative on rigs and as a drilling engineer in various domestic offices. Mr. Hairford began his career in 1984 with Conoco in a field production assignment in Hobbs, New Mexico. Mr. Hairford +received his Bachelor of Science degree in Petroleum Engineering Technology from Oklahoma State University in 1984. He is an active member of the American Association of Drilling Engineers, the American Petroleum Institute and the Society of +Petroleum Engineers. Mr. Hairford has also undertaken additional training through Stanford University’s Executive Education programs, including, most recently, the Stanford Graduate School of Business flagship six week Stanford Executive +Program. +Mr. David E. Lancaster . Mr. Lancaster joined Matador Resources +Company in December 2003 and serves as Executive Vice President and Chief Financial Officer. Mr. Lancaster has served in several capacities since joining Matador, including Vice President of Business Development, Acquisitions and Finance from +December 2003 to May 2005; Vice President and Chief Financial Officer from May 2005 to May 2007; and Executive Vice President and Chief Financial Officer since May 2007. He also served as Chief Operating Officer from May 2009 to May 2015. From +August 2000 to December 2003, he was Marketing Manager for Schlumberger Limited’s Data & Consulting Services, which provided full-field reservoir characterization, production enhancement, multidisciplinary reservoir and production +solutions and field development planning. In this position, he was responsible for global marketing strategies, business models, input to research and development, commercialization of new products and services and marketing communications. From +1999 to 2000, Mr. Lancaster was Business Manager, North and South America, for Schlumberger Holditch-Reservoir Technologies, the petroleum engineering consulting organization formed following Schlumberger’s acquisitions of S.A. +Holditch & Associates, Inc. and Intera Petroleum Services. In this role, he was responsible for the business operations of 12 consulting offices throughout North and South America. Mr. Lancaster worked with Schlumberger for six years +following its acquisition of S.A. Holditch & Associates, Inc. in 1997. He joined S.A. Holditch & Associates in 1980, and was one of the principals in the petroleum engineering consulting firm. Between 1980 and 1997, +Mr. Lancaster held positions ranging from Senior Petroleum Engineer to Senior Vice President — Business Development. In this latter role, he was responsible for marketing and sales, as well as the company’s commercial +training business. During most of his tenure at S.A. Holditch & Associates, Inc., Mr. Lancaster was a consulting reservoir engineer with particular emphasis on characterizing and improving production from unconventional natural +gas reservoirs. For more than seven years during this time, he was the Project Manager for the Gas Research Institute’s Devonian Shales applied research projects investigating ways to improve reservoir characterization, completion practices and +natural gas recovery in low permeability, natural gas shale reservoirs. He was also the lead reservoir engineer for the Secondary Gas Recovery project sponsored by the Gas Research Institute and the U.S. Department of Energy, looking at ways to +improve recovery from compartmentalized natural gas reservoirs in North and South Texas. Mr. Lancaster began his career as a reservoir engineer for Diamond Shamrock Corporation in 1979. Mr. Lancaster received Bachelor and Master of Science +degrees in Petroleum Engineering from Texas A&M University in 1979 and 1988, respectively, graduating summa cum laude. He has authored or co-authored more than 50 technical papers and articles, as well as +numerous other published reports and industry presentations. He is a member of the Society of Petroleum Engineers, and he served as a charter member and former Vice Chairman of the Texas A&M University Petroleum Engineering Advisory Board. In +2014, Mr. Lancaster was inducted into the Texas A&M University Petroleum Engineering Academy of Distinguished Graduates. Mr. Lancaster is a Licensed Professional Engineer in the State of Texas. +25 +Table of Contents +Mr. Craig N. Adams . Mr. Adams joined +Matador Resources Company in September 2012 as its Vice President and General Counsel. In July 2013, Mr. Adams was promoted to Executive Vice President — Land and Legal and became Executive Vice President — Land, +Legal & Administration in June 2015. Before joining Matador Resources Company, Mr. Adams was a partner with Baker Botts L.L.P. from March 2001 to September 2012 where he focused his practice on securities, mergers and acquisitions and +corporate governance matters. He was a partner with Thompson & Knight L.L.P. from January 1999 to February 2001 and an associate from September 1992 to December 1998. Mr. Adams received a Bachelor of Business Administration degree in +finance from Southern Methodist University in 1988 and his law degree in 1992 from Texas Tech University School of Law, where he graduated magna cum laude and was a member of the Order of the Coif and a Comment Editor of the Texas Tech Law Review. +Mr. Van H. Singleton, II. Mr. Singleton joined Matador Resources Company in August 2007 as a +Landman and was promoted to Senior Staff Landman in 2009 and then to General Land Manager in 2011. In September 2013, Mr. Singleton became Vice President of Land for the Company, and he was promoted to Executive Vice President of Land in +February 2015. Prior to joining Matador, Mr. Singleton founded and was President of VanBrannon and Associates, LLC and Southern Escrow and Title of Mississippi, LLC from 1998 to 2003, which provided full-spectrum land title work and title +insurance in Mississippi, Louisiana, Texas and Arkansas. From 2003 until joining Matador in 2007, he served as general manager of his family’s real estate brokerage in Houston, Texas. Mr. Singleton received a Bachelor of Arts degree in +Criminal Justice from the University of Mississippi in 2000. He is an active member of the American Association of Professional Landmen, the New Mexico Landman Association, the Permian Basin Landman Association and the Dallas Association of +Petroleum Landmen. +Mr. Billy E. Goodwin. Mr. Goodwin joined Matador Resources Company in July +2010 as Drilling Manager. In September 2013 he was named Vice President of Drilling for the Company, and he was promoted to Senior Vice President — Operations in February 2016. He was previously with Samson Resources, a +company he joined in 2001 to supervise the drilling of underbalanced multilateral horizontal wells. In his roles as Senior Drilling Engineer and Area Drilling Manager for Samson, Mr. Goodwin engineered and managed operations in the Permian +Basin, South Texas, East Texas, Mid-Continent and Gulf Coast areas. Mr. Goodwin worked with Conoco, Inc. before joining Samson. He began his career in 1985 in Conoco’s production department +before joining the drilling department in 1989. Mr. Goodwin has diverse horizontal operational experience both onshore and offshore, and both domestically and internationally, including in the Middle East, Southeast Asia and South +America. Throughout his career, Mr. Goodwin has developed underbalanced drilling, managed pressure drilling and drill-in casing techniques for normal and +geo-pressured environments. Mr. Goodwin received a Bachelor of Science degree in Petroleum Engineering Technology from Oklahoma State University in 1984. He is a member of the Society of Petroleum +Engineers and the American Association of Drilling Engineers. Mr. Goodwin served in the United States Marine Corps. +Mr. Bradley M. Robinson . Mr. Robinson joined Matador Resources Company in August 2003 +as one of its founders, serving as our Vice President of Reservoir Engineering until his promotion to Senior Vice President of Reservoir Engineering in February 2016. He assumed the additional role of Chief Technology Officer in May 2013. Prior to +joining Matador, from 1997 to August 2003, Mr. Robinson held the position of Advisor with Schlumberger Limited’s Data & Consulting Services, where he was responsible for the development and application of new well completion and +fracture stimulation technologies, managed field development projects, taught industry courses and provided internal training. Mr. Robinson worked with Schlumberger for six years following its acquisition of S.A. Holditch & Associates, +Inc. in 1997. Mr. Robinson joined S.A. Holditch & Associates in 1979, and was one of the principals in the petroleum engineering consulting firm. From 1979 to 1982, Mr. Robinson served as Senior Petroleum Engineer and was involved +in all aspects of reservoir and production engineering for both conventional and low permeability oil and natural gas fields. From 1982 to 1997, he was S.A. Holditch & Associates’ Vice President — Production Engineering, +where he was responsible for coordination and management of production and completion engineering projects, including hydraulic fracture stimulation design and supervision. His duties also included reserves and economic analysis of new and existing +26 +Table of Contents +wells. For approximately 10 years during this time, Mr. Robinson served as assistant project manager for the Gas Research Institute’s Tight Gas Sands and Horizontal Gas Wells applied +research projects investigating ways to improve reservoir characterization, completion practices and natural gas recovery in low permeability natural gas reservoirs and horizontal natural gas wells. During his career, he has worked all over the +world, including the United States, Canada, Venezuela, Colombia, Mexico, Egypt, the North Sea, Russia and Indonesia, among others. Mr. Robinson began his career in 1977 with Marathon Oil Company, serving as an Associate Production Engineer and +later as a Reservoir Engineer in Midland. Mr. Robinson received Bachelor and Master of Science degrees in Petroleum Engineering from Texas A&M University in 1977 and 1986, respectively. He has authored or +co-authored more than 30 technical papers and articles appearing in industry publications. Mr. Robinson is a member of the Society of Petroleum Engineers and is a Licensed Professional Engineer in the +State of Texas. He served as Chairman of the Dallas Section of the Society of Petroleum Engineers in 2011 and 2012. He also received the 2013 Engineer of the Year Award presented by the Dallas Section of the Society of Petroleum Engineers and the +2013 Completions Optimization and Technology award presented by the Mid-Continent region of the Society of Petroleum Engineers. +Mr. G. Gregg Krug. Mr. Krug joined Matador Resources Company in April 2012 as its Marketing Manager. In September 2013 he was named Vice President of Marketing for the +Company and Vice President of Longwood Gathering & Disposal Systems, LP, and he was promoted to Senior Vice President — Marketing and Midstream in February 2016. He has overall responsibility for Matador’s marketing +activities of its oil and natural gas, as well as responsibility for all business aspects for Longwood Gathering & Disposal Systems, LP. Previously, Mr. Krug was with Unit Petroleum Company, an exploration and production company based +in Tulsa, Oklahoma, as Marketing Manager, having joined in 2006. He and his staff were responsible for marketing, gas measurement, contract administration and production reporting in their core areas of Oklahoma, the Texas Panhandle, East Texas +and Northwestern Louisiana. From 2005 to 2006, Mr. Krug served as Marketing Manager with Matador Resources Company. From 2000 to 2005, Mr. Krug served as Gas Scheduling Supervisor with Samson Resources in Tulsa, Oklahoma where he and +his staff were responsible for scheduling natural gas sales as well as procurement of natural gas supply on Samson-owned gathering systems. From 1983 to 2000, Mr. Krug served with The Williams Companies in various capacities including in +the Kansas Hugoton Field in Ulysses, Kansas and Tulsa, Oklahoma for Williams Natural Gas Pipeline and on the trading floor in Tulsa, Oklahoma for Williams Energy Services Company. Mr. Krug received a Bachelor of Business Administration degree +from Oklahoma City University in 1996. +Other Senior Officers +Mr. Matthew D. Spicer. Mr. Spicer joined Matador Resources Company in March 2014 as +Senior Representative of Business Development and was promoted to Manager of Business Development and then General Manager of Midstream later in 2014. In October 2015, Mr. Spicer was promoted to Vice President and General Manager of Midstream. +Prior to joining the Company, Mr. Spicer served as the Director of Flight Operations for L-3 Unmanned Systems, also serving in various roles including as Program Manager and in Business Development during +his tenure with L-3, which began in 2011. Mr. Spicer served in the United States Marine Corps from 1991 to 2014, both in active duty and as a reservist, before his retirement as a Lieutenant Colonel in +2014. Mr. Spicer also served as a first officer with American Airlines from 2000 to 2003 following his active duty in the United States Marine Corps. Mr. Spicer received a Bachelor of Science degree in Manufacturing Engineering Technology +from Central Michigan University in 1991. +Mr. Trent W. Green. Mr. Green +joined Matador Resources Company in connection with the HEYCO Merger in February 2015 as Vice President of Production. Previously, Mr. Green served as Chief Operating Officer of Harvey E. Yates Company and oversaw all of its oil and natural gas +operations, including safety and regulatory compliance. Prior to joining Harvey E. Yates Company in 2012, Mr. Green was Rocky Mountain Division Manager for BOPCO, L.P., a Fort Worth, Texas based company. From 2002 to 2007, Mr. Green served +as Division Manager for Pinnacle Technologies, where he expanded its microseismic and tiltmeter mapping business in the Rocky Mountain Region. Mr. Green owned his own oilfield service business from 2000 to 2002. That business provided +specialized in-situ reservoir testing services to coalbed methane and shale developers. +27 +Table of Contents +Mr. Green previously worked for S.A. Holditch & Associates, Inc. and Amerada Hess performing production, reservoir and completion engineering duties throughout North America. He has +also taught courses worldwide through NeXT, LLC, an industry training company. Mr. Green received his Bachelor of Science degree in Petroleum Engineering from Montana Tech of the University of Montana in 1989 and his Master of Business +Administration from the University of Denver in 2007. He is a registered professional engineer in the State of Colorado. +Mr. Robert T. Macalik . Mr. Macalik joined Matador Resources Company in July 2015 as +Vice President and Chief Accounting Officer. He has more than 10 years of experience in public accounting with significant experience in the upstream oil and natural gas industry. From 2012 to 2015, Mr. Macalik worked at Pioneer Natural +Resources Company as Corporate Controller and, previously, as Director of Technical Accounting and Financial Reporting. At Pioneer, Mr. Macalik supervised corporate accounting and financial reporting functions. Prior to joining Pioneer, he was +a Senior Manager with PricewaterhouseCoopers (PwC), joining the public accounting firm in 2002. During his tenure with PwC, Mr. Macalik conducted and managed audits for various companies, primarily public companies in the oil and natural gas +industry, and managed numerous client relationships. Mr. Macalik received a Bachelor of Arts degree in History, a Bachelor of Business Administration degree and a Master of Professional Accounting degree all from The University of Texas at +Austin in 2002. He is a licensed Certified Public Accountant in the State of Texas. +Ms. Kathryn L. Wayne . Ms. Wayne was one of the original employees of Matador Resources +Company and has served as the Company’s Controller and Treasurer since 2003. She was promoted to Vice President, Controller and Treasurer in February 2017. She was previously with Matador Petroleum Corporation, joining the company in 1991. +Immediately prior to its sale, Ms. Wayne was Senior Revenue Accountant, and her duties included supervision of the revenue accounting staff, management of the revenue distribution process and preparation of monthly accruals and various required +regulatory reports. Ms. Wayne began her career with Mobil Oil Corporation, where she held various positions in the gas accounting department. Ms. Wayne received a Bachelor of Arts degree in Accounting from Texas A&M University in 1983. +She is recognized by the Council of Petroleum Accountants Societies (COPAS) as an Accredited Petroleum Accountant (APA). She is an active member of COPAS and served a three-year term on the COPAS APA Board of Examiners. +Mr. Bryan A. Erman . Mr. Erman joined Matador Resources Company in January 2016 as its Co-General Counsel. In August 2016, Mr. Erman was promoted to Vice President and Co-General Counsel. Prior to joining Matador, Mr. Erman was a Partner at Carrington, +Coleman, Sloman & Blumenthal, L.L.P. in Dallas, having joined the firm in 2010. From 2003 to 2010, he was an associate in the Dallas and Washington, D.C. offices of Baker Botts L.L.P. Mr. Erman’s practice focused on litigation +matters, including oil and natural gas, securities and other commercial litigation, as well as corporate governance matters. Before attending law school, Mr. Erman worked for Oklahoma Governor Frank Keating. Mr. Erman received a Bachelor +of Arts in Political Science in 1999 from the University of Oklahoma. He received his law degree in 2003 from Southern Methodist University School of Law, where he graduated cum laude and was a Hatton W. Sumners Scholar, a member of the Order of the +Coif and an Articles Editor on the SMU Law Review. +Mr. Brian J. Willey . +Mr. Willey joined Matador Resources Company in February 2014 as its Deputy General Counsel. In January 2016, Mr. Willey was appointed as Co-General Counsel, and he was promoted to Vice President and Co-General Counsel in August 2016. Prior to joining Matador, Mr. Willey was an attorney with Dean Foods Company where he most recently served as Vice President, Chief Counsel — Corporate. Before +Dean Foods, Mr. Willey served as a senior associate in the Dallas office of Baker Botts L.L.P. Mr. Willey’s practice focused on corporate matters, including mergers and acquisitions, public and private securities offerings, venture +capital transactions and SEC compliance matters as well as board of director and corporate governance matters. Mr. Willey received a Bachelor of Science in Accounting in 2002 from Brigham Young University. He received his law degree in 2005 +from The University of Texas School of Law, where he graduated with High Honors and was a member of the Order of the Coif in addition to being named a Chancellor and an Associate Editor on the University of Texas Law Review. Mr. Willey also +served a church mission in the Philippines from 1995 to 1997. +28 +Table of Contents +PROPOSAL 2 — APPROVAL OF THE AMENDMENT TO THE +AMENDED AND RESTATED CERTIFICATE OF FORMATION TO INCREASE THE AMOUNT OF AUTHORIZED COMMON STOCK +The Company’s amended +and restated certificate of formation (the “Certificate of Formation”) currently authorizes the issuance of 120,000,000 shares of the Company’s Common Stock. On April 11, 2017, the Board unanimously adopted a resolution +approving, and recommending that the Company’s shareholders approve, an amendment to Section 1 of Article 4 of the Certificate of Formation to (i) increase the number of shares of Common Stock that the Company is authorized to issue +to 160,000,000 and (ii) increase the total number of shares of capital stock that the Company is authorized to issue to reflect such increase in the Company’s authorized Common Stock. +As of the Record Date, there were 100,142,297 shares of Common Stock outstanding and 68,207 shares of Common Stock held in treasury by +the Company. In addition to these shares, as of the Record Date, there were 3,139,321 shares of Common Stock reserved for issuance under the Company’s equity compensation plans and 3,002,498 shares of Common Stock issuable upon conversion of +outstanding options and/or the vesting of outstanding restricted stock units issued by the Company. Accordingly, as of the Record Date, the Company had only 13,647,677 shares of Common Stock available for other corporate purposes. As of the Record +Date, no shares of preferred stock were issued and outstanding or reserved for issuance. +Purpose of the +Proposed Amendment +The purpose of the Proposed Amendment is to give the Company flexibility to take timely advantage of +market conditions and opportunities to issue shares of Common Stock for various future corporate purposes, including potential strategic transactions (including mergers, acquisitions and other business combinations), capital-raising or financing +transactions, grants and awards under equity compensation plans, stock splits and stock dividends. +As a general matter, the +additional shares of Common Stock would be available for issuance without further action by shareholders unless such action is required by applicable law or the rules of the NYSE. The NYSE, on which the Common Stock is currently traded, currently +requires shareholder approval in certain circumstances, including in connection with transactions where the present or potential issuance of shares will be equal to in excess of 20% of the number of shares of Common Stock outstanding before such +issuance. +Historically, we have funded a portion of our capital expenditures, including the acquisitions of leasehold +interests and other oil and natural gas properties, with the net proceeds of Common Stock offerings. Depending upon the number and size of any future prospective acquisition opportunities, we may not have a sufficient number of authorized, but +unissued, shares of Common Stock to access capital markets to fund, or otherwise complete, such acquisitions on an opportunistic basis. +Therefore, the Board believes that the Proposed Amendment is necessary to provide sufficient additional authorized shares of Common Stock to give the Company flexibility to issue shares of Common Stock +for future corporate needs. Accordingly, the Board has determined the Proposed Amendment to be advisable and in the best interests of the Company and its shareholders. +Text of the Proposed Amendment +The Company +proposes to amend Section 1 of Article 4 of the Certificate of Formation so that it would state in its entirety as follows: +“ Classes of Stock and Authorized Shares . The Corporation is authorized to issue two classes of stock which shall be designated, respectively, “Common Stock” and “Preferred +Stock.” The aggregate number of shares of all +29 +Table of Contents +classes of stock which the Corporation shall have authority to issue is 162 million (162,000,000), consisting of (a) 160 million (160,000,000) shares of Common Stock having a par value +of $0.01 per share (“Common Stock”), and (b) two million (2,000,000) shares of Preferred Stock, par value $0.01 per share (“Preferred Stock”).” +The only substantive changes that would be made to Section 1 of Article 4 of the Certificate of Formation, as currently in effect, would be to increase the number of shares of Common Stock that the +Company may issue from 120,000,000 shares to 160,000,000 shares and to reflect a corresponding increase in the aggregate number of shares of capital stock that may be issued from 122,000,000 to 162,000,000 shares. +Potential Effects of the Proposed Amendment +If the Proposed Amendment is approved by the Company’s shareholders, the additional authorized shares of Common Stock would have rights identical to holders of the Company’s currently +outstanding shares of Common Stock. Under the Certificate of Formation, holders of Common Stock do not have preemptive rights to subscribe to additional securities which may be issued by the Company, which means that current shareholders do not have +a prior right to purchase any new issue of our capital stock in order to maintain their proportionate ownership. +Future +issuances of shares of Common Stock, or securities convertible into shares of Common Stock, could have a dilutive effect on the Company’s earnings per share, book value per share and the voting interest and power of current shareholders since +holders of Common Stock are not entitled to preemptive rights. +The Board has not authorized the increase in the authorized +number of shares of Common Stock with the intention of using the additional shares for anti-takeover purposes, although the Company could theoretically use the additional shares to make it more difficult, or to discourage an attempt, to acquire +control of the Company. The Board is not aware of any pending or threatened efforts to acquire control of the Company. +Appraisal Rights +Under the Texas Business Organizations Code (the “TBOC”), the Company’s shareholders +are not entitled to appraisal or dissenter’s rights with respect to the Proposed Amendment, and the Company will not independently provide its shareholders with any such rights. +Timing of the Proposed Amendment +If the +Proposed Amendment is approved by the Company’s shareholders, it will become effective upon the filing (and receipt of evidence of such filing) of a Certificate of Amendment to the Certificate of Formation with the Secretary of State of the +State of Texas, which the Company expects to file promptly after the Annual Meeting. If the Proposed Amendment is not approved by the Company’s shareholders, the number of authorized shares of Common Stock will remain unchanged. +Vote Required +The affirmative vote of the holders of two-thirds of the outstanding shares of Common Stock is required to approve the Proposed Amendment. If you hold your shares +through a broker and you do not instruct the broker how to vote, your broker will not have the authority to vote your shares. Abstentions will have the effect as a vote cast against the Proposed Amendment. Broker +non-votes will be counted as present for purposes of determining the presence of a quorum but will have the effect as a vote cast against the Proposed Amendment because the Proposed Amendment requires the +affirmative vote of the holders of two-thirds of the outstanding shares of Common Stock. +The Board of Directors recommends that you vote FOR approval of the Proposed Amendment. +30 +Table of Contents +PROPOSAL 3 — ADVISORY VOTE TO APPROVE NAMED +EXECUTIVE OFFICER COMPENSATION +The Company seeks a non-binding advisory vote from +its shareholders to approve the compensation of its Named Executive Officers (as defined below) as described in this Proxy Statement. +As discussed under the “Executive Compensation — Compensation Discussion and Analysis” section of this Proxy Statement (“CD&A”), we believe the Company’s future +success and the ability to create long-term value for our shareholders depends on our ability to attract, retain and motivate highly qualified individuals in the oil and natural gas industry. Additionally, we believe that our success also depends on +the continued contributions of our Named Executive Officers. The Company’s compensation system plays a significant role in its ability to attract, motivate and retain a high quality workforce. As described in CD&A, the Company’s +compensation program for Named Executive Officers is designed to reward, in both the short term and the long term, performance that contributes to the implementation of our business strategies, maintenance of our culture and values and the +achievement of our objectives. +In addition, we reward qualities that we believe help achieve our business strategies such as: +• +teamwork; +• +individual performance in light of general economic and industry-specific conditions; +• +relationships with shareholders and vendors; +• +the ability to manage and enhance production from our existing assets; +• +the ability to explore new opportunities to increase oil and natural gas production; +• +the ability to identify and acquire additional acreage; +• +the ability to increase year-over-year proved reserves; +• +the ability to control unit production costs; +• +level of job responsibility; +• +industry experience; and +• +general professional growth. +This proposal provides shareholders the opportunity to endorse or not endorse the Company’s executive compensation program through the following resolution: +“Resolved, that the compensation paid to the Company’s Named Executive Officers, as disclosed pursuant to Item 402 of +Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby approved.” +The above-referenced CD&A disclosure appears on pages 36 to 48 of this Proxy Statement. +Because this is an advisory vote, it will not be binding upon the Board. However, the Compensation Committee and the independent members +of the Board (the “Independent Board”) will take into account the outcome of the vote when considering future executive compensation arrangements. +Vote Required +The affirmative vote of the +holders of a majority of the shares present in person or by proxy and entitled to vote at the Annual Meeting is required to approve this resolution on a non-binding basis. If you hold your shares through a +broker and you do not instruct the broker how to vote, your broker will not have the authority to vote +31 +Table of Contents +your shares. Abstentions will have the effect as a vote cast against the proposal. Broker non-votes will be counted as present for purposes of determining +the presence of a quorum but will have no effect upon the outcome of the vote. +During our 2012 Annual Meeting of +Shareholders, our shareholders approved a non-binding, advisory proposal to hold annual advisory votes to approve our executive compensation. In consideration of the results of this advisory vote, the Board +has adopted a policy providing for annual advisory votes on executive compensation. Unless the Board modifies this policy, the next advisory vote on compensation following this vote will be held at our 2018 Annual Meeting of Shareholders. +The Board of Directors recommends that you vote FOR approval of this resolution. +32 +Table of Contents +PROPOSAL 4 — RATIFICATION OF THE APPOINTMENT OF +KPMG LLP +The Audit Committee has appointed KPMG LLP (“KPMG”) as the independent registered public accounting +firm of the Company for the year ending December 31, 2017, and the Board has directed that such appointment be submitted to our shareholders for ratification at the Annual Meeting. +The Company has been advised by KPMG that the firm has no relationship with the Company or its subsidiaries other than that arising from +the firm’s engagement as auditors. +If the shareholders do not ratify the appointment of KPMG, the Audit Committee will +consider whether to engage a different independent registered public accounting firm but will not be obligated to do so. +The +Company has been advised that representatives of KPMG will be present at the Annual Meeting and will be available to respond to appropriate questions and make a statement if they desire to do so. +Fees of Independent Registered Public Accounting Firm for Fiscal Years 2016 and 2015 +The following table presents fees for professional audit services rendered by KPMG for the audit of the Company’s annual financial +statements for the years ended December 31, 2016 and 2015, and fees for other services rendered by KPMG during that period: +2016 +2015 +Audit fees +$ +1,174,970 +$ +1,073,821 +Audit-related fees +— +— +Tax fees +— +— +All other fees +— +— +Total +$ +1,174,970 +$ +1,073,821 +Services rendered by KPMG in connection with the fees presented above were as follows: +Audit Fees +For +fiscal year 2016, audit fees consisted of fees associated with the audit of the Company’s consolidated financial statements, including the audit of the effectiveness of the Company’s internal control over financial reporting, required +reviews of our quarterly condensed consolidated financial statements, including for inclusion in each prospectus related to our 2016 equity offerings and our offering memorandum related to our 2016 senior notes offering, and providing the +underwriters of such offerings with comfort letters on certain information contained, or incorporated by reference, in each prospectus or offering memorandum, as applicable. +For fiscal year 2015, audit fees consisted of fees associated with the audit of the Company’s consolidated financial statements, including the audit of the effectiveness of the Company’s +internal control over financial reporting, required reviews of our quarterly condensed consolidated financial statements, including for inclusion in our prospectus related to our 2015 equity offering, our offering memorandum related to our 2015 +senior notes offering and our prospectus related to our 2015 registered exchange offering, and providing the underwriters of such offerings with comfort letters on certain information contained, or incorporated by reference, in the prospectus or +offering memorandum, as applicable. +Audit-Related Fees +We did not incur any audit-related fees in 2016 or 2015. +Tax Fees +We did not incur any fees for tax advice, planning and other services in 2016 or 2015. +33 +Table of Contents +All Other Fees +We did not incur any other fees in 2016 or 2015. +The Audit Committee pre-approves all audit and permissible non-audit services provided by KPMG. These services may include audit services, audit-related services, tax services and other services. +The Audit Committee has authorized the chair of the Audit Committee to pre-approve audit and permissible non-audit services provided by KPMG up to $750,000. Pursuant to +this delegation, the decisions of the chair must be presented to the Audit Committee at its next meeting. +Report of the Audit Committee +We are a standing committee comprised of independent directors as currently defined by SEC regulations and the applicable listing standards of the NYSE. The Board has determined that at least one of the +members of the Audit Committee is an “audit committee financial expert” as defined by applicable SEC rules and regulations. We operate under a written charter adopted by the Board. A copy of the charter is available free of charge on the +Company’s website at www.matadorresources.com under “Investors — Corporate Governance.” +We annually select the Company’s independent registered public accounting firm. If the shareholders do not ratify the appointment of +KPMG at the Annual Meeting, the Audit Committee will consider whether to engage a different independent registered public accounting firm but will not be obligated to do so. +Management is responsible for the Company’s internal controls and the financial reporting process. The independent registered public accounting firm is responsible for performing an independent audit +of the Company’s consolidated financial statements in accordance with the standards of the United States Public Company Accounting Oversight Board and issuing a report thereon. As provided in our charter, our responsibilities include the +monitoring and oversight of these processes. +Consistent with our charter responsibilities, we have met and held discussions +with management and the independent registered public accounting firm. In this context, management and the independent registered public accounting firm represented to us that the Company’s consolidated financial statements for the fiscal year +ended December 31, 2016 were prepared in accordance with U.S. generally accepted accounting principles. We reviewed and discussed the consolidated financial statements with management and the independent registered public accounting firm and +discussed with the independent registered public accounting firm matters required to be discussed by Auditing Standard No. 1301, Communications with Audit Committees, as adopted by the Public Company Accounting Oversight Board in Rule 3200T. +The Company’s independent registered public accounting firm has also provided to us the written disclosures and the +letter required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent registered public accounting firm’s communications with the Audit Committee, and we discussed with the independent registered +public accounting firm that firm’s independence. +Based upon our reviews and discussions with management and the +independent registered public accounting firm and our review of the representation of management and the report of the independent registered public accounting firm to the Audit Committee, we recommended that the Board include the audited +consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 filed with the SEC. +Audit Committee, +William M. Byerley, Chair +Reynald A. Baribault +Craig T. Burkert +Julia P. Forrester* +Steven W. Ohnimus +* +Member of the Audit Committee as of February 15, 2017 +34 +Table of Contents +Vote Required +The affirmative vote of the holders of a majority of the shares present in person or by proxy and entitled to vote at the Annual Meeting +is required for the ratification of the appointment of KPMG as the Company’s independent registered public accounting firm for the year ending December 31, 2017. If the shareholders do not ratify the appointment of KPMG, the Audit +Committee will consider whether to engage a different independent registered public accounting firm but will not be obligated to do so. Abstentions will have the effect as a vote cast against the proposal. +The Board of Directors recommends that you vote FOR the ratification of the appointment +of KPMG as the Company’s independent registered public accounting firm for the +year ending December 31, 2017. +35 +Table of Contents +EXECUTIVE COMPENSATION +Compensation Discussion and Analysis +In this Compensation Discussion and Analysis, we discuss our compensation objectives, our decisions and the rationale behind those decisions relating to compensation for 2016 for our principal executive +officer, our principal financial officer and our other three most highly compensated executive officers. This Compensation Discussion and Analysis provides a general description of our compensation program and specific information about its various +components. +Named Executive Officers +Throughout this discussion, the following individuals are referred to as the “Named Executive Officers” and are included in the Summary Compensation Table: +• +Joseph Wm. Foran, Chairman of the Board and Chief Executive Officer; +• +Matthew V. Hairford, President; +• +David E. Lancaster, Executive Vice President and Chief Financial Officer; +• +Craig N. Adams, Executive Vice President — Land, Legal & Administration; and +• +Billy E. Goodwin, Senior Vice President — Operations. +Executive Summary +We are an independent energy company engaged in +the exploration, development, production and acquisition of oil and natural gas resources in the United States, with an emphasis on oil and natural gas shale and other unconventional plays. Our current operations are focused primarily on the oil and +liquids-rich portion of the Wolfcamp and Bone Spring plays in the Delaware Basin in Southeast New Mexico and West Texas. We also operate in the Eagle Ford shale play in South Texas and the Haynesville shale and Cotton Valley plays in Northwest +Louisiana and East Texas. Additionally, we conduct midstream operations primarily, as of February 17, 2017, through our midstream joint venture, San Mateo Midstream, LLC, in support of our exploration, development and production operations and +provide natural gas processing, natural gas, oil and salt water gathering services and salt water disposal services to third parties on a limited basis. +2016 Business Highlights +In 2016, we achieved record oil, natural +gas and average daily oil equivalent production. We completed and began producing oil and natural gas from 55 gross (37.0 net) wells in the Delaware Basin in 2016, including 40 gross (35.6 net) operated and 15 gross (1.4 net) non-operated wells. We also added to and upgraded our acreage position in the Delaware Basin during 2016. As a result, at December 31, 2016, our total acreage position in the Delaware Basin had increased to +approximately 163,700 gross (94,300 net) acres, primarily in Loving County, Texas and Lea and Eddy Counties, New Mexico. Overall, we have been very pleased with the initial performance of the wells we have drilled and completed, or participated in +as a non-operator, thus far in our six main asset areas in the Delaware Basin — the Wolf and Jackson Trust asset areas in Loving County, Texas, the Rustler Breaks and Arrowhead asset areas in +Eddy County, New Mexico and the Ranger and Twin Lakes asset areas in Lea County, New Mexico. As a result, our Delaware Basin properties have become an increasingly important component of our asset portfolio. Our average daily oil equivalent +production from the Delaware Basin increased approximately 145% (2.5-fold) to 15,941 BOE per day (57% of total oil equivalent production), including 10,395 Bbl of oil per day (75% of total oil production) and +33.3 MMcf of natural gas per day (40% of total natural gas production), in 2016, as compared to 6,518 BOE per day (26% of total oil equivalent production), including 4,648 Bbl of oil per day (38% of total oil production) and 11.2 MMcf of natural gas +per day (15% of total natural gas production), in 2015. We expect our Delaware Basin production to increase throughout 2017 as we continue the delineation and development of these asset areas. +36 +Table of Contents +Operational highlights in the Delaware Basin in 2016 included: +• +our continued improvement in operational efficiencies throughout the Delaware Basin, particularly in our Rustler Breaks and Wolf asset areas, as we +achieved improvements in both drilling times and well costs; +• +in our Rustler Breaks asset area, the continued delineation and development of previously tested horizons — the Second Bone Spring, the +Wolfcamp A-XY and two benches of the Wolfcamp B — and the successful testing of a new, deeper bench of the Wolfcamp B interval, which is sometimes referred to as the Blair Shale; +• +in our Wolf asset area, continued development of the Wolfcamp A-XY interval as well as the significant +improvement in well results in the Second Bone Spring, as compared to our initial tests in that interval; +• +in our Ranger asset area, the initial results from three wells completed in the Third Bone Spring formation on our Mallon leasehold, which tested at +the highest 24-hour initial potential flow rates of any wells we have drilled to date in the Delaware Basin and which illustrate the potential of our northern Delaware Basin acreage position; +• +a positive test of the Strawn formation in our Twin Lakes asset area from the Olivine State 5-16S-37E TL #1, a vertical well; and +• +the significant progress made with our midstream operations, including the start-up of our Black River +cryogenic natural gas processing plant and associated natural gas gathering system in our Rustler Breaks asset area, our initial salt water disposal well and facility and associated water gathering lines in our Rustler Breaks asset area and two +additional salt water disposal wells and facilities in our Wolf asset area. +In addition, we successfully +completed several important financing transactions in 2016, including (i) a March 2016 follow-on equity offering raising net proceeds of $141.5 million, (ii) a December 2016 follow-on equity offering raising net proceeds of $145.8 million and (iii) a December 2016 senior notes offering raising net proceeds of $181.5 million, including the issue premium, but deducting the +initial purchasers’ discounts and estimated offering expenses and excluding accrued interest paid by buyers of the notes. +Our Board has a “pay for performance” philosophy and recognizes the leadership of Mr. Foran and our executive officers in +contributing to the Company’s achievements in 2016. Highlights of our 2016 operational success are summarized in the graphs below: +37 +Table of Contents +Objectives of Our Compensation Program +Our future success and the ability to create long-term value for our shareholders depends on our ability to attract, retain and motivate +highly qualified individuals in the oil and natural gas industry. Additionally, we believe that our success also depends on the continued contributions of our Named Executive Officers. Our executive compensation program is designed to provide a +comprehensive compensation program to meet the following objectives: +• +to be fair to both the executive and the Company; +• +to attract and retain talented and experienced executives with the skills necessary for us to execute our business plan; +• +to provide opportunities to achieve a total compensation level that is competitive with comparable positions at companies with which we may compete for +executives; +• +to align the interests of our executive officers with the interests of our shareholders and with the performance of our Company for long-term value +creation; +• +to provide financial incentives to our executives to achieve our key corporate and individual objectives; +• +to provide an appropriate mix of fixed and variable pay components to maintain a “pay for performance” oriented compensation program; +• +to foster a shared commitment among executives by coordinating their corporate and individual goals; +• +to provide compensation that takes into consideration the education, professional experience and knowledge that is specific to each job and the unique +qualities the executive possesses; and +• +to recognize an executive’s commitment and dedication in his job performance and in support of our culture. +What Our Compensation Program Is Designed to Reward +Our compensation program is designed to reward, in both the short term and the long term, performance that contributes to the implementation of our business strategies, maintenance of our culture and +values and the achievement of our objectives. In addition, we reward qualities that we believe help achieve our business strategies such as teamwork, individual performance in light of general economic and industry-specific conditions, relationships +with shareholders and vendors, the ability to manage and enhance production from our existing assets, the ability to explore new opportunities to increase oil and natural gas production, the ability to identify and acquire additional acreage, the +ability to increase year-over-year proved reserves, the ability to control unit production costs, level of job responsibility, industry experience and general professional growth. +What We Do: +What We Don’t Do: +✓ +Pay for performance — approximately 85% of our CEO’s total direct compensation varies with performance +× +No hedging of Company stock +✓ +Robust stock ownership guidelines for officers +× +No excise tax gross-ups for severance or change in control payments +✓ +Independent compensation consultant +× +No guaranteed bonuses +✓ +Competitive benchmarking +× +No repricing of stock options +✓ +Annual risk assessment of compensation practices +How We Determined Each Element of 2016 Compensation +The Compensation Committee has engaged Pay Governance LLC as its independent executive compensation advisory firm. Pay Governance LLC +provides assessments of the competitiveness of the +38 +Table of Contents +Company’s executive compensation levels and practices relative to relevant executive labor markets and performs other tasks as requested by the Compensation Committee. The Compensation +Committee has assessed the independence of Pay Governance LLC pursuant to applicable SEC and NYSE rules and concluded that Pay Governance LLC’s engagement by the Compensation Committee does not raise any conflict of interest. +In late 2015, Pay Governance LLC recommended that, given the Company’s relative size, performance, industry focus and other factors, +the Nominating, Compensation and Planning Committee, as predecessor to the Compensation Committee, and the Independent Board consider adopting a new peer group for 2016. The recommended peer companies consisted of companies in the oil and natural +gas exploration and production sector with comparable revenue size (approximately $280 million to approximately $1.7 billion) and market capitalization (approximately $1.3 billion to approximately $4.3 billion) and that were competitors. +The final peer company selections were made from within the recommended group through discussions with Pay Governance LLC, the Nominating, Compensation and Planning Committee, as predecessor to the Compensation Committee, and the Independent Board, +and were ultimately approved by the Nominating, Compensation and Planning Committee and the Independent Board. The peer companies for 2016 (the “Peer Group”) are as follows: +Carrizo Oil & Gas, Inc. +Diamondback Energy, Inc. +Energen Corp. +EP Energy Corporation +Gulfport Energy +Corp. +Laredo Petroleum, Inc. +Parsley Energy, Inc. +PDC Energy, Inc. +RSP Permian, Inc. +The Company’s overall compensation philosophy and strategy is to target total direct compensation +for executives at the 50th percentile (median) of competitive market practice for expected performance. In the event that the Company’s performance and the performance of the individual executive exceed performance expectations, the +Company’s executive compensation program has the ability to provide total pay above the 50th percentile, aligning pay with performance. +Elements of Our 2016 Compensation Program and Why We Paid Each Element +For 2016, our management compensation program was comprised of the following six elements: +• +Base Salary. We paid base salary to compensate each executive for his assigned responsibilities, experience, leadership and expected future +contribution. +• +Performance-Based Cash Bonus. We adopted the Matador Resources Company Amended and Restated Annual Incentive Plan effective January 1, 2016 +and granted awards thereunder as part of our management compensation program because we believed this element of compensation (i) helps focus and motivate management to achieve key corporate and individual objectives by rewarding the +achievement of these objectives; (ii) helps retain management; (iii) rewards our successes over the prior year; and (iv) is necessary to be competitive from a total remuneration standpoint. +• +Discretionary Bonus. Our Independent Board has discretionary authority to award executives for particular accomplishments at times and in +amounts that the Independent Board approves, upon the recommendation of the Compensation Committee. +• +Equity Awards. We granted stock options and restricted stock awards as the primary vehicles for (i) linking our long-term performance and +increases in shareholder value to the total compensation for our executive officers; and (ii) providing competitive compensation to attract and retain our executive officers. +• +Severance and Change of Control Benefits. We have entered into employment agreements with each Named Executive Officer that provide for +specified severance pay and benefits upon certain termination events, including termination events after a change in control. We intend for such benefits to provide an incentive for the Named Executive Officers to remain with us despite the +uncertainties of +39 +Table of Contents +a potential or actual change in control and to provide a measure of financial security in the event a Named Executive Officer’s employment is terminated without cause. +• +Other Benefits. We offered a variety of retirement (401(k)), health and welfare programs to all eligible employees, including the Named +Executive Officers. The health and welfare programs were intended to protect employees against catastrophic loss and encourage a healthy lifestyle. +Compensation Committee +The Compensation Committee has the +authority, at our expense, to retain and terminate independent third-party compensation consultants and other expert advisors. +In addition, the Compensation Committee confirms at least annually that our incentive pay does not encourage unnecessary risk taking and +reviews and discusses the relationship between risk management policies and practices, corporate strategy and senior executive compensation. The Compensation Committee considered, in establishing and reviewing our executive compensation program, +whether the program encourages unnecessary or excessive risk taking and has concluded that it does not. Several features of our program reflect sound risk management practices. Base salaries are fixed in amount and thus do not encourage risk taking. +While our bonuses are tied to management’s achievements during the previous fiscal year, executives’ annual bonuses take into account multiple performance criteria based on the executive’s individual performance and are within the +discretion of the Independent Board. Thus, the Compensation Committee believes that our bonus awards appropriately balance risk and the desire to focus executives on specific short-term goals important to the Company’s success, and that they do +not encourage unnecessary or excessive risk taking. In addition, the Compensation Committee believes that our current equity compensation program provides an appropriate balance between the goals of increasing the price of our Common Stock and +avoiding potential risks that could threaten our growth and stability due to the fact that stock options and service-based restricted stock typically vest over three or four years. +With regard to all of the Named Executive Officers, the Compensation Committee recommends to the Independent Board: +• +option guidelines and size of overall grants; +• +option grants and other equity and non-equity related awards; and +• +limitations, restrictions and conditions upon any award as the Compensation Committee deems appropriate and as permitted under the applicable plan. +The members of the Independent Board are required to be independent pursuant to the listing standards of +the NYSE and the rules and regulations promulgated by the SEC and are “outside directors” for purposes of Section 162(m) of the Code. Upon Mr. Baty’s appointment to the Board in October 2016, the Board determined that +Mr. Baty met the independence requirements of the NYSE and SEC but did not meet the definition of an “outside director” under Section 162(m) of the Code for the fiscal year ended December 31, 2016. As a result, the Board +determined that Mr. Baty should recuse himself from any Section 162(m)-related votes of the Board during 2016. The Board determined that Mr. Baty meets the definition of an “outside director” under Section 162(m) of the Code for +the fiscal year ended December 31, 2017. Mr. Baty was appointed to the Compensation Committee effective January 1, 2017. +The Compensation Committee annually reviews and makes recommendations to the Independent Board regarding the matters related to Mr. Foran’s compensation, including corporate goals and objectives +applicable to Mr. Foran’s compensation. The Compensation Committee also evaluates Mr. Foran’s performance in light of these established goals and objectives at least annually. Based upon these evaluations, the Compensation +Committee makes recommendations to the Independent Board regarding Mr. Foran’s annual compensation, including salary, bonus and equity and non-equity incentive compensation. As part of the +Compensation +40 +Table of Contents +Committee’s annual review and recommendation to the Independent Board with regard to Mr. Foran’s compensation, the Compensation Committee: +• +conducts an analysis of the Company’s annual performance relative to any performance criteria or performance targets pursuant to incentive +compensation plans, along with Mr. Foran’s individual performance, and determines whether to recommend to the Independent Board the use of negative discretion in the determination of final incentive awards (as described further under +“— 2016 Annual Incentive Compensation”); +• +reviews and recommends the form of and number of shares to be awarded pursuant to long-term incentive compensation awards, including vesting terms, +expiration dates of stock options and other material provisions of such awards; +• +reviews and recommends any employment agreement, severance agreement, change in control agreement or provision or separation agreement or amendment +thereof; and +• +reviews and recommends any deferred compensation arrangement, retirement plan, other benefits and perquisites. +On an annual basis, after consultation with Mr. Foran, the Compensation Committee reviews and makes recommendations to the +Independent Board on the evaluation process and compensation structure for the other Named Executive Officers. After considering the evaluation and recommendations of Mr. Foran, the Compensation Committee evaluates the performance of the other +Named Executive Officers and makes recommendations to the Independent Board regarding the annual compensation of such Named Executive Officers, including salary, bonus and equity and non-equity incentive +compensation. The Compensation Committee also takes into account the outcome of the most recent advisory vote from its shareholders when considering executive compensation arrangements. +After considering the recommendations of Mr. Foran with regard to the other Named Executive Officers, as part of the Compensation +Committee’s annual review and recommendation to the Independent Board regarding the compensation of the other Named Executive Officers, the Compensation Committee reviews and recommends the same items described in the list above with respect to +Mr. Foran. +In addition, pursuant to its charter, the Compensation Committee reviews and recommends to the Independent +Board any proposals for the adoption, amendment, modification or termination of our incentive compensation, equity-based plans and non-equity based plans. +2016 Base Salary +In early 2016, based on the recommendations of Mr. Foran (other than with regard to his base salary), the Nominating, Compensation +and Planning Committee, as predecessor to the Compensation Committee, recommended and the Independent Board approved the following 2016 base salaries for our Named Executive Officers. +Executive Officer +2016 Base +Salary +Joseph Wm. Foran +$ +900,000 +Chairman of the Board and Chief Executive Officer +Matthew V. Hairford +$ +550,000 +President +David E. Lancaster +$ +475,000 +Executive Vice President and Chief Financial Officer +Craig N. Adams +$ +475,000 +Executive Vice President — Land, Legal & Administration +Billy E. Goodwin +$ +425,000 +Senior Vice President — Operations +41 +Table of Contents +2016 Annual Incentive Compensation +The Company previously sponsored and maintained the Matador Resources Company Annual Incentive Plan for Management and Key Employees, +effective January 1, 2012 (the “2012 Annual Incentive Plan”). On February 19, 2016, the Board adopted, subject to shareholder approval, an amendment and restatement to the 2012 Annual Incentive Plan (as amended and restated, the +“Incentive Plan”). The Incentive Plan was approved by our shareholders at the 2016 Annual Meeting of Shareholders and became effective as of January 1, 2016. The Incentive Plan is designed to link executive decision-making and +performance with the Company’s goals, reinforce these goals and ensure the highest level of accountability for the success of the Company as a whole. +The Incentive Plan is intended to advance the interests of the Company and its shareholders by providing the Company with an additional means by which it can sustain and enhance its culture of personal +commitment on the part of its executives, select managers and key employees in the continued growth, development and financial success of the Company, and encourage them to remain with, and devote their best efforts to the business of, the Company, +thereby advancing the interests of the Company and its shareholders. The Incentive Plan provides for the granting of awards of incentive compensation that may be paid to a participant upon satisfaction of specified performance goals for a particular +performance period. The Incentive Plan is designed in a manner such that awards may satisfy the requirements of “qualified performance based compensation” within the meaning of Section 162(m) of the Code so that the Company can take +federal income tax deductions for any “qualified performance-based compensation” paid under the Incentive Plan to its named executive officers who are covered by the deduction limitations of Section 162(m) of the Code (i.e., our principal +executive officer and our other three most highly compensated executive officers (other than our principal financial officer)) for annual compensation paid to such individuals that is in excess of $1.0 million. +The Incentive Plan establishes a performance goal for all participants with the creation of a performance pool, which is equal to 3.5% of +Adjusted EBITDA (as defined in the Incentive Plan); provided that Adjusted EBITDA equals or exceeds $50.0 million (the “Adjusted EBITDA Pool Goal”). If the Adjusted EBITDA Pool Goal is reached or exceeded, the Incentive Plan provides +that the maximum amount that would be payable to each participant is according to the allocation formula set forth in the table below. The Independent Board, upon the recommendation of the Compensation Committee, may use negative discretion to +reduce the amount paid to a participant below the maximum amounts shown in the table. +Participant +Percentage of Performance +Pool +(Maximum) +Chief Executive Officer +30.0 +% +Second Highest Paid Participant +17.5 +% +Third Highest Paid Participant +17.5 +% +Fourth Highest Paid Participant +17.5 +% +Fifth Highest Paid Participant +17.5 +% +Total +100.0 +% +In the Independent Board’s discretion, supplemental performance goals (the “Discretionary +Goals”), in addition to the Adjusted EBITDA Pool Goal set forth above, may be established by the Independent Board for each year. Such Discretionary Goals can be used by the Independent Board in determining the award payable to a participant, +but in no event may the Independent Board increase the amount of an award payable to a participant above the maximum award payable set out in the table above. For 2016, the Chair of the Compensation Committee met with Pay Governance LLC and +management to determine potential criteria for the Discretionary Goals. Based on these meetings, the Chair of the Compensation Committee proposed certain preliminary performance criteria categories for consideration as the Discretionary Goals for +2016. The Compensation Committee then met with Pay Governance and management to review the proposed criteria. As a result of these meetings, the Compensation Committee recommended and the Independent Board determined to use the following performance +categories for establishing the Discretionary Goals for 2016 in determining whether to exercise negative discretion in reducing the amount paid to a participant below the maximum amounts: +42 +Table of Contents +• +oil production; +• +total production; +• +cash operating costs; +• +drilling program capital expenditures; +• +Adjusted EBITDA; +• +total net debt outstanding; and +• +total shareholder return as compared to the Company’s Peer Group. +In February 2017, after reviewing the Company’s 2016 expected results in connection with the financial and operational metrics set +forth above, the Compensation Committee concluded that the Company had achieved Adjusted EBITDA of $157.9 million, which is in excess of the $50.0 million Adjusted EBITDA Pool Goal. After taking into account the achievement of the Adjusted +EBITDA Pool Goal, the Discretionary Goals and the Company’s 2016 results and other information with regard to each such Named Executive Officer, the Compensation Committee recommended to the Independent Board the annual cash awards listed below +for each Named Executive Officer under the Incentive Plan. The Independent Board approved such annual cash awards. All awards made pursuant to the Incentive Plan were cash awards and were paid to the Named Executive Officers in the first quarter of +2017. Adjusted EBITDA is a non-GAAP financial measure included herein solely as a reference point under the Incentive Plan. For a definition of Adjusted EBITDA when used as a financial metric and a +reconciliation of Adjusted EBITDA to our net income (loss) and net cash provided by operating activities, see Schedule A to this Proxy Statement. +Executive Officer +Percentage of +Performance +Pool (Maximum) +Maximum Bonus +Payable under +Incentive Plan +2016 Incentive +Plan Bonus +% of 2016 +Base Salary +Joseph Wm. Foran +30.0 +% +$ +1,658,244 +$ +1,575,000 +175.0 +% +Chairman of the Board and Chief Executive Officer +Matthew V. Hairford +17.5 +% +$ +967,309 +$ +908,000 +165.1 +% +President +David E. Lancaster +17.5 +% +$ +967,309 +$ +784,000 +165.1 +% +Executive Vice President and Chief Financial Officer +Craig N. Adams +17.5 +% +$ +967,309 +$ +665,000 +140.0 +% +Executive Vice President — Land, Legal & Administration +Billy E. Goodwin +17.5 +% +$ +967,309 +$ +595,000 +140.0 +% +Senior Vice President — Operations +Discretionary Bonuses +The Independent Board has discretionary authority to award executives for particular accomplishments at times and in amounts that the Independent Board approves, upon the recommendation of the +Compensation Committee. In the second and fourth quarters of 2016, the Compensation Committee recommended, and the Independent Board approved, discretionary bonuses to certain of our Named Executive Officers in recognition of each officer’s +efforts in connection with the Company’s March 2016 public equity offering and the Company’s December 2016 senior notes offering and public equity offering, respectively. +2016 Long-Term Incentive Compensation +Effective January 1, +2012, the Board adopted the Matador Resources Company 2012 Long-Term Incentive Plan. On April 23, 2015, the Board adopted, subject to shareholder approval, the Matador Resources Company +43 +Table of Contents +Amended and Restated 2012 Long-Term Incentive Plan (the “2012 Plan”). The 2012 Plan was approved by our shareholders at the 2015 Annual Meeting of Shareholders and became effective as +of June 10, 2015. The 2012 Plan permits the granting of long-term equity and cash incentive awards, including the following: +• +stock options; +• +stock appreciation rights; +• +restricted stock (service-based and performance-based); +• +restricted stock units (service-based and performance-based); +• +performance shares; +• +performance units; +• +stock grants; and +• +performance cash awards. +After receiving recommendations from the Compensation Committee, the Independent Board administers the 2012 Plan. For 2016, the Compensation Committee met with Pay Governance LLC and management regarding +the appropriate types and amounts of equity grants based on differing levels of responsibility of the Named Executive Officers and made recommendations to the Independent Board. Pursuant to the 2012 Plan, all time-based restricted stock and +restricted stock units issued thereunder must vest no earlier than on a pro rata basis over a three-year period; otherwise, the shares subject to such restricted stock and restricted stock units will be deemed “exempt shares” subject to a +cap under the 2012 Plan of 10% of the total shares authorized thereunder. +In February 2016, the Nominating, Compensation and +Planning Committee, as predecessor to the Compensation Committee, recommended, and the Independent Board awarded, annual equity awards of non-qualified stock options and restricted stock to each Named +Executive Officer. The stock options and restricted stock were granted in order to facilitate retention of our Named Executive Officers and incentivize positive future results. The February 2016 stock options have a five-year term, vest 100% on the +third anniversary of the grant date if the Named Executive Officer is still employed by us on the vesting date and have an exercise price of $15.00 per share, which was the closing price on the grant date. The February 2016 restricted stock awards +vest 100% on the third anniversary of the grant date if the Named Executive Officer is still employed by us on the vesting date. During the restricted period prior to vesting of the restricted stock, the Named Executive Officer will be eligible to +receive dividends on and vote the restricted stock. +The approximate value of the February 2016 equity grants as a percentage +of 2016 base salary and the number of shares underlying each grant are set forth in the table below: +Participant +% of 2016 +Base +Salary +Stock +Options +Restricted Stock +Joseph Wm. Foran +301 +% +235,465 +94,230 +Chairman of the Board and Chief Executive Officer +Matthew V. Hairford +167 +% +79,942 +31,992 +President +David E. Lancaster +150 +% +62,137 +24,866 +Executive Vice President and Chief Financial Officer +Craig N. Adams +150 +% +62,137 +24,866 +Executive Vice President — Land, Legal & Administration +Billy E. Goodwin +134 +% +49,419 +19,777 +Senior Vice President — Operations +44 +Table of Contents +Benefits +We offer a variety of health and welfare programs to eligible employees, including the Named Executive Officers. The health and welfare programs are intended to protect employees against catastrophic loss +and encourage a healthy lifestyle. Our health and welfare programs include medical, pharmacy, dental, disability and life insurance. We also have a 401(k) plan for eligible employees, including the Named Executive Officers, in which we contribute 3% +of the employee’s eligible compensation and have the discretion to contribute up to an additional 4% of the employee’s eligible compensation as a +dollar-for-dollar matching contribution with respect to his or her elective deferral contributions. The discretionary dollar-for-dollar match is subject to vesting based upon years of service to the Company and the limits on the compensation that may be considered for purposes of calculating matching contributions. In +addition, we provide long-term care insurance for certain of our executive officers. +How Elements of Our Compensation Program Are +Related to Each Other +We view the various components of compensation as related but distinct with generally a +significant portion of total compensation reflecting “pay for performance.” In particular, our program places a considerable amount of an executive’s compensation at risk in the form of incentive compensation which can be variable +from year to year, and we believe there is an appropriate balance between annual incentives and long-term incentives to ensure that an executive is motivated to consider longer-term Company performance in preference to short-term results. +Accounting and Tax Considerations +Under Section 162(m) of the Code, a limitation is placed on tax deductions of any publicly-held corporation for individual compensation to certain executives of such corporation exceeding +$1.0 million in any taxable year, unless the compensation is “qualified performance-based compensation.” The Incentive Plan is designed to provide awards that constitute “qualified performance-based compensation” for +purposes of Section 162(m) of the Code. +Employment Agreements +As described under “Discussion Regarding Summary Compensation Table and Grants of Plan-Based Awards Table,” in contemplation of +our initial public offering, on August 9, 2011, we entered into employment agreements with Messrs. Foran, Hairford and Lancaster. In March 2014, we entered into an employment agreement with Mr. Adams in substantially the same form as that +of Messrs. Foran, Hairford and Lancaster, and effective February 2016 we entered into an employment agreement with Mr. Goodwin in substantially the same form as that of Mr. Adams. The principal difference in Mr. Adams’ and +Mr. Goodwin’s employment agreements as compared to the employment agreement of Messrs. Foran, Hairford and Lancaster is that Mr. Adams’ and Mr. Goodwin’s agreements do not include a “modified single trigger” +that would have allowed them to receive a “change in control” payment if they terminated their agreements without “good reason” within 30 days prior to or 12 months after a change in control. +Under the employment agreements, if a termination of employment occurs pursuant to one of the following events: +• +the Named Executive Officer dies; +• +the Named Executive Officer is totally disabled; +• +we mutually agree to end the employment agreement; +• +we dissolve and liquidate; or +• +the term of the employment agreement ends, +45 +Table of Contents +we will pay the Named Executive Officer the average of his annual bonus, which includes non-equity incentive compensation, for the prior two years pro-rated based on the number of complete or partial months completed during the year of termination. +Also, under the employment agreements, if one of the following occurs: +• +the Named Executive Officer’s employment is terminated other than (i) as set forth above, (ii) by us for just cause, or (iii) in +connection with a “change in control” as described below; or +• +the Named Executive Officer terminates his employment for “good reason,” +if the Named Executive Officer is Mr. Foran, we will pay him twice his base salary and twice the average of his annual bonus for the prior two +years; if the Named Executive Officer is Messrs. Hairford, Lancaster or Adams, we will pay him 1.5 times his base salary and 1.5 times the average of his annual bonus for the prior two years; and if the Named Executive Officer is Mr. Goodwin, +we will pay him an amount equal to his base salary plus an amount equal to the average of his annual bonus for the prior two years. +Finally, under the employment agreements of Messrs. Foran, Hairford and Lancaster, upon a “change in control” and within 30 days prior to the “change in control” or within 12 months +after the “change in control,” if we terminate a Named Executive Officer without just cause or the Named Executive Officer terminates his employment with or without “good reason,” we will pay him three times his base salary and +three times the average of his annual bonus for the prior two years. These agreements were entered into prior to our initial public offering. At that time, we believed a “single trigger” or “modified single trigger” was +appropriate given the Company’s size, early stage of development and strong growth aspirations. The agreement entered into with Mr. Adams in March 2014 and the agreement entered into with Mr. Goodwin effective February 2016, however, +each include a “double trigger” such that upon a “change in control” and within 30 days prior to the “change in control” or within 12 months after the “change in control,” if we terminate them without just +cause or they terminate their employment with “good reason,” we will pay Mr. Adams three times his base salary and three times the average of his annual bonus for the prior two years and we will pay Mr. Goodwin two times his base +salary and two times the average of his annual bonus for the prior two years. In addition, if Messrs. Foran, Hairford, Lancaster, Adams or Goodwin are terminated or terminate their employment as set forth above in connection with a “change in +control,” all equity awards of such Named Executive Officer vest immediately prior to such termination. +For purposes of +the employment agreements, “change in control” is defined as a change in control event for purposes of Section 409A of the Code, which is defined as follows: +• +a change in ownership of the Company occurs on the date that, except in certain situations, results in someone acquiring more than 50% of the total +fair market value or voting power of the Company’s stock; +• +a change in effective control of the Company occurs on one of the following dates: +• +the date that a person acquires (or has acquired in a 12 month period) ownership of 30% or more of the Company’s total voting power; however, if a +person already owns at least 30% of the Company’s total voting power, the acquisition of additional control does not constitute a change in control; or +• +the date during a 12 month period where a majority of the Company’s Board is replaced by directors whose appointment or election was not endorsed +by a majority of the Board; or +• +a change in the ownership of a substantial portion of the Company’s assets occurs on the date a person acquires (or has acquired in a 12 month +period) assets of the Company having a total gross market value of at least 40% of the total gross fair market value of all of the Company’s assets immediately before such acquisition. +46 +Table of Contents +For purposes of the employment agreements, “good reason” means: +• +the assignment of duties inconsistent with the title of the Named Executive Officer or his current office or a material diminution of the Named +Executive Officer’s current authority, duties or responsibilities; +• +a diminution of the Named Executive Officer’s base salary or a material breach of the employment agreement by the Company; or +• +the relocation of the Company’s principal executive offices more than 30 miles from the Company’s present principal executive offices or the +transfer of the Named Executive Officer to a place other than the Company’s principal executive offices; and +• +the action causing the “good reason” is not cured within the applicable cure period. +For purposes of the employment agreements, “just cause” means: +• +the Named Executive Officer’s continued and material failure to perform the duties of his employment consistent with his position other than due +to disability; +• +the Named Executive Officer’s failure to perform his material obligations under the employment agreement other than due to disability; +• +the Named Executive Officer’s material breach of certain of the Company’s written policies; +• +the Named Executive Officer’s refusal or failure to follow lawful directives of the Board and any supervisors other than due to disability; +• +the Named Executive Officer’s commission of fraud, theft or embezzlement; +• +the Named Executive Officer’s conviction or indictment of a felony or other crime involving moral turpitude; or +• +the Named Executive Officer’s intentional breach of fiduciary duty; and +• +the action causing the “just cause” is not cured within the applicable cure period, if any. +Equity Plans +For equity grants under the 2012 Plan and its predecessor, vesting upon a “change in control” for the Named Executive Officers mirrors the terms of their employment agreements. +The “change in control” provisions in the employment agreements and the equity grants under the 2012 Plan and its predecessor +help prevent management from being distracted by rumored or actual changes in control. The “change in control” provisions provide: +• +incentives for those Named Executive Officers to remain with us despite the uncertainties of a potential or actual change in control; +• +assurance of severance payments for terminated Named Executive Officers; and +• +access to equity compensation after a change in control. +Stock Ownership Guidelines +We have adopted stock ownership +guidelines for the following officers and designated amounts: +• +Chairman and Chief Executive Officer — shares equal to five times base salary; +• +President — shares equal to five times base salary; +47 +Table of Contents +• +Executive Vice Presidents — shares equal to two and 1/2 times base salary; +• +Senior Vice Presidents — shares equal to two times base salary; and +• +Vice Presidents and Executive Directors — shares equal to one and 1/2 times base salary. +Each of the foregoing officers has five years from the later of the date of the closing of our initial public offering and the fifth +anniversary of his or her appointment as an officer of the Company in which to achieve the stock ownership position. Shares that will count toward the stock ownership guidelines include time-lapse restricted shares that are still restricted and any +shares held in trust by the officer or his immediate family over which he has direct beneficial ownership interest. Shares that will not count toward the stock ownership guidelines include shares underlying unexercised stock options, unexercised +stock appreciation rights and performance-based awards for which the performance requirements have not been satisfied. Until each of the above officers reaches the stock ownership level required of his or her position, such officer must hold at +least 50% of all “net shares” received through restricted stock vesting or realized through stock option exercises. For this purpose, “net shares” means all shares retained after applicable withholding of any shares for tax +purposes. Messrs. Foran, Hairford, Lancaster, Adams and Goodwin each own shares in excess of the minimum requirement set forth in the stock ownership guidelines. +Pursuant to the Company’s insider trading policy, the Company prohibits hedging of its securities by directors, officers or employees. The insider trading policy also restricts directors and +executive officers from pledging more than 25% of his or her holdings of the Company’s stock without the prior written consent of the Corporate Governance Committee. +Compensation Committee Report +We have reviewed +and discussed with management the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K and based on such review and discussions, we recommended to the Board that the Compensation +Discussion and Analysis be included in this Proxy Statement. +Compensation Committee, +Reynald A. Baribault, Chair +R. Gaines Baty +Craig T. Burkert +Joe A. Davis +Gregory E. Mitchell +Steven W. Ohnimus +Kenneth L. Stewart +48 +Table of Contents +Summary Compensation Table +The following table summarizes the total compensation awarded to, earned by or paid to Messrs. Foran, Hairford, Lancaster, Adams and +Goodwin for 2016, 2015 and 2014. This table and the accompanying narrative should be read in conjunction with the Compensation Discussion and Analysis, which sets forth the objectives and other information regarding our executive compensation +program. +Name and Principal Position +Year +Salary +Bonus (1) +Stock +Awards (2) +Option +Awards (3) +Non-Equity +Incentive Plan +Compensation (4) +All Other +Compensation +Total +Joseph Wm. Foran +2016 +$ +900,000 +$ +800,000 +$ +1,413,450 +$ +1,292,703 +$ +1,575,000 +$ +22,251 +(5) +$ +6,003,404 +Chairman of the Board and +Chief Executive Officer +2015 +$ +800,000 +$ +750,000 +$ +— +$ +3,586,811 +$ +1,080,000 +$ +21,795 +(6) +$ +6,238,606 +2014 +$ +750,000 +$ +125,000 +$ +400,000 +$ +822,159 +$ +550,000 +$ +21,710 +(7) +$ +2,668,869 +Matthew V. Hairford +2016 +$ +550,000 +$ +200,000 +$ +479,880 +$ +438,882 +$ +908,000 +$ +22,452 +(8) +$ +2,599,214 +President +2015 +$ +500,000 +$ +125,000 +$ +— +$ +682,293 +$ +563,000 +$ +22,452 +(8) +$ +1,892,745 +2014 +$ +450,000 +$ +50,000 +$ +184,999 +$ +485,101 +$ +300,000 +$ +22,102 +(9) +$ +1,492,202 +David E. Lancaster +2016 +$ +475,000 +$ +250,000 +$ +372,990 +$ +341,132 +$ +784,000 +$ +18,550 +(10) +$ +2,241,672 +Executive Vice President +and Chief Financial Officer +2015 +$ +425,000 +$ +175,000 +$ +146,301 +$ +339,753 +$ +470,000 +$ +18,550 +(10) +$ +1,574,604 +2014 +$ +400,000 +$ +50,000 +$ +325,002 +$ +267,201 +$ +250,000 +$ +18,200 +(10) +$ +1,310,403 +Craig N. Adams +2016 +$ +475,000 +$ +350,000 +$ +372,990 +$ +341,132 +$ +665,000 +$ +20,831 +(11) +$ +2,224,953 +Executive Vice President — +2015 +$ +425,000 +$ +200,000 +$ +146,301 +$ +339,753 +$ +385,000 +$ +20,831 +(11) +$ +1,516,885 +Land, Legal & Administration +2014 +(12) +$ +— +$ +— +$ +— +$ +— +$ +— +$ +— +$ +— +Billy E. Goodwin +2016 +$ +425,000 +$ +165,000 +$ +296,655 +$ +271,310 +$ +595,000 +$ +18,550 +(10) +1,771,515 +Senior Vice President — +2015 +(12) +$ +— +$ +— +$ +— +$ +— +$ +— +$ +— +$ +— +Operations +2014 +(12) +$ +— +$ +— +$ +— +$ +— +$ +— +$ +— +$ +— +(1) +Reflects ad hoc discretionary bonuses awarded by the Independent Board to recognize such Named Executive Officer’s contributions to certain transactions and +accomplishments of the Company. +(2) +Reflects the grant date fair value of service-based restricted stock computed in accordance with FASB ASC Topic 718. +(3) +Reflects the grant date fair value of option awards computed in accordance with FASB ASC Topic 718. Our policy and assumptions made in the valuation of the stock +options are contained in Note 2 and Note 8 of the audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2016. +(4) +Represents awards pursuant to the Incentive Plan in 2016 or the 2015 and 2014 Incentive Programs pursuant to the 2012 Annual Incentive Plan, respectively. +(5) +Consists of $18,550 in 401(k) matching contributions as described in “— Compensation Discussion and Analysis — Benefits,” $1,102 in premiums +reimbursed to Mr. Foran for a life insurance policy covering Mr. Foran and $2,599 in long-term care insurance premiums. +(6) +Consists of $18,550 in 401(k) matching contributions as described in “— Compensation Discussion and Analysis — Benefits,” $646 in premiums +reimbursed to Mr. Foran for a life insurance policy covering Mr. Foran and $2,599 in long-term care insurance premiums. +(7) +Consists of $18,200 in 401(k) matching contributions as described in “— Compensation Discussion and Analysis — Benefits,” $911 in premiums +reimbursed to Mr. Foran for a life insurance policy covering Mr. Foran and $2,599 in long-term care insurance premiums. +(8) +Consists of $18,550 in 401(k) matching contributions as described in “— Compensation Discussion and Analysis — Benefits” and $3,902 in +long-term care insurance premiums. +(9) +Consists of $18,200 in 401(k) matching contributions as described in “— Compensation Discussion and Analysis — Benefits” and $3,902 in +long-term care insurance premiums. +(10) +Reflects 401(k) matching contributions as described in “— Compensation Discussion and Analysis — Benefits.” +(11) +Consists of $18,550 in 401(k) matching contributions as described in “— Compensation Discussion and Analysis — Benefits” and $2,281 in +long-term care insurance premiums. +(12) +Mr. Adams was not a Named Executive Officer in 2014. Mr. Goodwin was not a Named Executive Officer in 2015 or 2014. +49 +Table of Contents +Grants of Plan-Based Awards Table +The following table sets forth certain information regarding non-equity awards granted by the +Company pursuant to the Incentive Plan and stock and option awards granted by the Company pursuant to the 2012 Long-Term Incentive Plan during the year ended December 31, 2016 to the Named Executive Officers below: +Estimated Future Payouts +Under Non-Equity Incentive +Plan Awards (1) +All +Other +Stock +Awards: +Number +of Shares +of Stock +or Units +All +Other +Option +Awards: +Number of +Securities +Underlying +Options (2) +Exercise +or +Base +Price of +Option +Awards +Grant +Date +Fair +Value of +Stock +and +Option +Awards +Threshold +Target +Maximum +Name +Grant Date +($) +($) +($) +(# shares) +(# shares) +($/share) +($) +Joseph Wm. Foran +2/19/16 +— +— +1,658,244 +94,230 +235,465 +15.00 +2,706,153 +Matthew V. Hairford +2/19/16 +— +— +967,309 +31,992 +79,942 +15.00 +918,762 +David E. Lancaster +2/19/16 +— +— +967,309 +24,866 +62,137 +15.00 +714,122 +Craig N. Adams +2/19/16 +— +— +967,309 +24,866 +62,137 +15.00 +714,122 +Billy E. Goodwin +2/19/16 +— +— +967,309 +19,777 +49,419 +15.00 +567,965 +(1) +See “— Compensation Discussion and Analysis — 2016 Annual Incentive Compensation” and “— Summary Compensation Table — Non-Equity Incentive Plan Compensation” regarding the actual payments made to the Named Executive Officers pursuant to the Incentive Plan. As discussed in “Compensation Discussion and Analysis,” a +maximum payout is provided under the Incentive Plan for the 2016 awards granted thereunder, which maximum payout may be reduced (but not increased) at the discretion of the Independent Directors. Thus, for 2016, the Incentive Plan does not provide +for threshold or target payouts. +(2) +The term of such option awards is five years. +Discussion Regarding Summary Compensation Table and Grants of Plan-Based Awards Table +On August 9, 2011, we entered into employment agreements with Messrs. Foran, Hairford and Lancaster. On March 13, 2014, we +entered into an employment agreement with Mr. Adams and effective February 19, 2016, we entered into an employment agreement with Mr. Goodwin. +Mr. Foran . His employment agreement extends for a 24-month term that automatically renews each month for an additional month unless either +the Company or Mr. Foran gives written notice that the term will no longer be extended. For 2016, his base salary was $900,000. Effective January 1, 2017, his base salary is $1,000,000, and he is eligible to participate in the Incentive +Plan and receive awards pursuant to the 2012 Plan. See “— Compensation Discussion and Analysis — Termination of Employment Arrangements — Employment Agreements” regarding the payments to be made to +Mr. Foran upon termination of his employment and/or a “change in control.” +Mr. Hairford . His employment agreement extends for an 18-month term +that automatically renews each month for an additional month unless either the Company or Mr. Hairford gives written notice that the term will no longer be extended. For 2016, his base salary was $550,000. Effective January 1, 2017, his +base salary is $600,000, and he is eligible to participate in the Incentive Plan and receive awards pursuant to the 2012 Plan. See “— Compensation Discussion and Analysis — Termination of Employment +Arrangements — Employment Agreements” regarding the payments to be made to Mr. Hairford upon termination of his employment and/or a “change in control.” +Mr. Lancaster . His employment agreement extends for an 18-month term +that automatically renews each month for an additional month unless either the Company or Mr. Lancaster gives written notice that the term will no longer be extended. For 2016, his base salary was $475,000. Effective January 1, 2017, his +base salary is $550,000, and he is eligible to participate in the Incentive Plan and receive awards pursuant to the 2012 Plan. See “— Compensation Discussion and Analysis — Termination of Employment +Arrangements — Employment Agreements” regarding the payments to be made to Mr. Lancaster upon termination of his employment and/or a “change in control.” +50 +Table of Contents +Mr. Adams . His employment agreement extends for an 18-month term that automatically renews each month for an additional month unless either the Company or Mr. Adams gives written notice that the term will no longer be extended. For 2016, his base salary was +$475,000. Effective January 1, 2017, his base salary is $525,000, and he is eligible to participate in the Incentive Plan and receive awards pursuant to the 2012 Plan. See “— Compensation Discussion and +Analysis — Termination of Employment Arrangements — Employment Agreements” regarding the payments to be made to Mr. Adams upon termination of his employment and/or a “change in control.” +Mr. Goodwin . His employment agreement extends for an 18-month term that +automatically renews each month for an additional month unless either the Company or Mr. Goodwin gives written notice that the term will no longer be extended. For 2016, his base salary was $425,000. Effective January 1, 2017, his base +salary is $500,000, and he is eligible to participate in the Incentive Plan and receive awards pursuant to the 2012 Plan. See “— Compensation Discussion and Analysis — Termination of Employment +Arrangements — Employment Agreements” regarding the payments to be made to Mr. Goodwin upon termination of his employment and/or a “change in control.” +Non-Equity Incentive Plan Compensation. See “— Compensation Discussion and +Analysis — 2016 Annual Incentive Compensation” regarding payments under the Incentive Plan. +Long-Term +Incentive Compensation . See “— Compensation Discussion and Analysis — 2016 Long-Term Incentive Compensation” regarding 2016 long-term incentive compensation. +General . Base salary and the amount of cash bonuses, including non-equity awards granted +by the Company pursuant to the Incentive Plan, paid for 2016 represented from approximately 55% to approximately 67% of the Named Executive Officers’ total compensation as represented in the Summary Compensation Table with the percentages being +as follows: Mr. Foran — 54.6%; Mr. Hairford — 63.8%; Mr. Lancaster — 67.3%; Mr. Adams — 67.0%; and Mr. Goodwin — 66.9%. +51 +Table of Contents +Outstanding Equity Awards at December 31, 2016 +The following table summarizes the total outstanding option awards at December 31, 2016 for each Named Executive Officer: +Option Awards +Name +Number of +Securities +Underlying +Unexercised +Stock +Options (#) +Exercisable +Number of +Securities +Underlying +Unexercised +Stock +Options (#) +Unexercisable +Option +Exercise +Price +Option +Expiration +Date +Joseph Wm. Foran +80,208 +— +$ +10.49 +4/15/17 +87,500 +87,500 +$ +8.21 +3/7/18 +10,147 +10,147 +$ +19.71 +2/10/19 +34,188 +34,188 +$ +23.40 +3/6/19 +— +228,571 +$ +22.01 +1/20/20 +— +105,000 +$ +21.66 +2/26/20 +— +27,451 +$ +27.72 +4/29/20 +— +235,465 +$ +15.00 +2/18/21 +Matthew V. Hairford +10,000 +— +$ +9.00 +2/21/20 +32,500 +— +$ +10.49 +4/15/17 +58,750 +58,750 +$ +8.21 +3/7/18 +2,537 +2,537 +$ +19.71 +2/10/19 +23,077 +23,077 +$ +23.40 +3/6/19 +— +62,857 +$ +22.01 +1/20/20 +— +5,882 +$ +27.72 +4/29/20 +— +79,942 +$ +15.00 +2/18/21 +David E. Lancaster +15,000 +— +$ +9.00 +2/21/20 +42,500 +— +$ +10.49 +4/15/17 +62,500 +62,500 +$ +8.21 +3/7/18 +3,805 +3,805 +$ +19.71 +2/10/19 +10,684 +10,684 +$ +23.40 +3/6/19 +— +30,000 +$ +22.01 +1/20/20 +— +3,922 +$ +27.72 +4/29/20 +— +62,137 +$ +15.00 +2/18/21 +Craig N. Adams +20,000 +20,000 +$ +8.21 +3/7/18 +3,171 +3,171 +$ +19.71 +2/10/19 +12,900 +12,901 +$ +23.40 +3/6/19 +— +30,000 +$ +22.01 +1/20/20 +— +3,922 +$ +27.72 +4/29/20 +— +62,137 +$ +15.00 +2/18/21 +Billy E. Goodwin +— +18,750 +$ +8.18 +3/11/18 +5,516 +5,517 +$ +22.66 +3/16/19 +— +34,286 +$ +22.01 +1/20/20 +— +49,419 +$ +15.00 +2/18/21 +52 +Table of Contents +The following table provides the vesting dates at December 31, 2016 for unvested stock +options: +Vesting Date +Joseph Wm. +Foran +Matthew V. +Hairford +David E. +Lancaster +Craig N. +Adams +Billy E. +Goodwin +3/8/17 +87,500 +58,750 +62,500 +20,000 +— +3/12/17 +— +— +— +— +18,750 +4/30/17 +13,725 +2,941 +1,961 +1,961 +— +1/21/18 +228,571 +62,857 +30,000 +30,000 +34,286 +2/11/18 +10,147 +2,537 +3,805 +3,171 +— +2/27/18 +105,000 +— +— +— +— +3/7/18 +34,188 +23,077 +10,684 +12,901 +— +3/17/18 +— +— +— +— +5,517 +2/19/19 +235,465 +79,942 +62,137 +62,137 +49,419 +4/30/19 +13,726 +2,941 +1,961 +1,961 +— +Total Unvested Stock Options +728,322 +233,045 +173,048 +132,131 +107,972 +The following table summarizes the total outstanding restricted stock awards at December 31, 2016 +for each Named Executive Officer: +Stock Awards +Name +Number of +Shares or +Units of +Stock That +Have Not +Vested (#) +Market Value of +Shares +or Units of +Stock That Have +Not Vested +Number of +Unearned +Shares, Units +or Other +Rights That +Have Not +Vested (#) +Market or +Payout Value +of +Unearned +Shares, Units +or +Other Rights +That +Have +Not Vested +Joseph Wm. Foran +142,777 +$ +3,677,936 +— +— +Matthew V. Hairford +61,146 +$ +1,575,121 +— +— +David E. Lancaster +68,290 +$ +1,759,150 +— +— +Craig N. Adams +49,781 +$ +1,282,359 +— +— +Billy E. Goodwin +19,777 +$ +509,456 +— +— +The following table provides the vesting dates at December 31, 2016 for restricted stock: +Vesting Date +Joseph Wm. +Foran +Matthew V. +Hairford +David E. +Lancaster +Craig N. +Adams +Billy E. +Goodwin +3/8/17 +40,000 +25,000 +30,000 +15,000 +— +1/21/18 +— +— +4,375 +4,375 +— +2/11/18 +— +1,269 +1,903 +1,586 +— +3/7/18 +8,547 +2,885 +5,342 +2,150 +— +4/30/18 +— +— +1,804 +1,804 +— +2/19/19 +94,230 +31,992 +24,866 +24,866 +19,777 +Total Unvested Shares +142,777 +61,146 +68,290 +49,781 +19,777 +Option Exercises and Stock Vested +The following table provides each exercise of stock options and each vesting of restricted stock for each Named Executive Officer during +2016: +Option +Awards Stock Awards +Name +Number of +Shares +Acquired +on +Exercise (#) +Value +Realized on +Exercise +Number of +Shares +Acquired on +Vesting (#) +Value +Realized on +Vesting +Joseph Wm. Foran +— +$ +— +18,573 +$ +381,251 +Matthew V. Hairford +— +$ +— +8,215 +$ +160,396 +David E. Lancaster +— +$ +— +12,557 +$ +244,219 +Craig N. Adams +20,000 +$ +307,000 +6,235 +$ +121,918 +Billy E. Goodwin +20,833 +$ +247,288 +2,604 +$ +55,023 +53 +Table of Contents +Potential Payments Upon Termination or Change in Control +2012 Plan and its Predecessor +Equity awards under the 2012 Plan and its predecessor vest upon a “change in control” for the Named Executive Officers according to the terms of their employment agreements described below. +Employment Agreements +As described under “Discussion Regarding Summary Compensation Table and Grants of Plan-Based Awards Table,” in contemplation of our initial public offering, on August 9, 2011, we entered +into employment agreements with Messrs. Foran, Hairford and Lancaster. In addition, on March 13, 2014, we entered into an employment agreement with Mr. Adams, and effective February 19, 2016, we entered into an employment agreement +with Mr. Goodwin. The principal difference in Mr. Adams’ and Mr. Goodwin’s employment agreements as compared to the employment agreement of Messrs. Foran, Hairford and Lancaster is that Mr. Adams’ and +Mr. Goodwin’s agreements do not include a “modified single trigger” that would have allowed them to receive a “change in control” payment if they terminated their agreements without “good reason” within 30 +days prior to or 12 months after a change in control. Pursuant to the terms of the employment agreements, we may be required to make certain payments to one or more of our Named Executive Officers upon the occurrence of certain events resulting in +such Named Executive Officer’s termination. The employment agreements do not provide for gross-ups for excise taxes on severance or other payments in connection with a change in control. For a detailed +description of the events that may trigger such payments, see “— Compensation Discussion and Analysis — Termination of Employment Arrangements — Employment Agreements.” +The employment agreements each contain a non-disclosure of confidential information provision +that requires each Named Executive Officer to maintain, both during and after employment, the confidentiality of information used by such Named Executive Officer in the performance of his job duties. +Additionally, each of the employment agreements contains a non-competition provision, pursuant to +which Messrs. Foran, Hairford, Lancaster, Adams and Goodwin have agreed that: (i) for six months following termination by us for total disability, or by such Named Executive Officer for good reason, or (ii) for 12 months following +termination (a) by us for just cause, (b) by such Named Executive Officer other than for good reason or (c) in connection with a change in control, such Named Executive Officer shall not, without our prior written consent (not to be +unreasonably withheld if the Named Executive Officer’s employment is terminated by the Named Executive Officer other than for good reason), directly or indirectly: (x) invest in (other than investments in publicly-owned companies which +constitute not more than 1% of the voting securities of any such company) a competing business with significant assets in the restricted area (each as defined below), or (y) participate in a competing business as a manager, employee, director, +officer, consultant, independent contractor or other capacity or otherwise provide, directly or indirectly, services or assistance to a competing business in a position that involves input into or direction of such competing business’s +decisions within the restricted area. +For purposes of the employment agreements: +“competing business” means any person or entity engaged in oil and natural gas exploration, development, production and +acquisition activities; +“significant assets” means oil and natural gas reserves with an aggregate fair market value +of $25 million or more; and +“restricted area” means a one-mile radius +of any oil and natural gas reserves held by us as of the end of the Named Executive Officer’s employment, plus any county or parish where we have significant assets as of the end of the Named Executive Officer’s employment. See the +definitions of “change in control,” “good reason” and “just cause” set forth in “— Compensation Discussion and Analysis — Termination of Employment Arrangements — Employment +Agreements.” +54 +Table of Contents +Furthermore, other than Mr. Foran’s employment agreement, each employment +agreement contains an anti-solicitation provision, pursuant to which, during the restricted periods described above, subject to certain exceptions, Messrs. Hairford, Lancaster, Adams and Goodwin shall not, without our prior written consent, solicit +for employment or a contracting relationship, or employ or retain any person who is or has been, within six months prior to such time, employed by or engaged as an individual independent contractor by us or our affiliates or induce or attempt to +induce any such person to leave his or her employment or independent contractor relationship with us or our affiliates. +For +the Named Executive Officer to receive any severance payments described below for termination by us without just cause, by the Named Executive Officer for good reason or, following a change in control, by us without cause or by the Named Executive +Officer with good reason, with respect to Mr. Adams and Mr. Goodwin, or with or without good reason, with respect to Messrs. Foran, Hairford and Lancaster, the Named Executive Officer must comply with the +non-disclosure, non-competition and non-solicitation provisions described above. +Finally, as a condition to receiving any severance payments and other payments under their respective employment agreements, each Named +Executive Officer is required to execute a separation agreement and release in favor of us. +To describe the payments and +benefits that are triggered for each event of termination, we have created the following table estimating the payments and benefits that would be paid to each Named Executive Officer under each element of our compensation program assuming that such +Named Executive Officer’s employment agreement terminated on December 31, 2016, the last day of our 2016 fiscal year. In all cases, the amounts were valued as of December 31, 2016, based upon, where applicable, the closing price of +our Common Stock of $25.76 per share. The amounts in the table below are calculated as of December 31, 2016 pursuant to SEC rules and are not intended to reflect actual payments that may be made. Actual payments that may be made will be based +on the dates and circumstances of the applicable event. +55 +Table of Contents +Payment Upon Termination +Named Executive Officer +Category of +Payment +Upon Death +or +Total +Disability +(1) +Upon Mutual +Agreement +or +Dissolution/ +Liquidation +(1) +Termination by +Us Without +Just +Cause or by +Named +Executive +Officer for +Good +Reason (1) +Termination +Following a +Change +in Control Without +Cause or by Named +Executive Officer +With or Without +Good Reason (2) +Joseph Wm. Foran +Salary +$ +— +$ +— +$ +1,800,000 +(3) +$ +2,700,000 +(4) +Bonus +2,102,500 +(5) +2,102,500 +(5) +4,205,000 +(6) +6,307,500 +(7) +Vesting equity +— +— +— +9,176,878 +(8) +Total +$ +2,102,500 +$ +2,102,500 +$ +6,005,000 +$ +18,184,378 +Matthew V. Hairford +Salary +$ +— +$ +— +$ +825,000 +(9) +$ +1,650,000 +(4) +Bonus +898,000 +(5) +898,000 +(5) +1,347,000 +(10) +2,694,000 +(7) +Vesting equity +— +— +— +3,771,884 +(8) +Total +$ +898,000 +$ +898,000 +$ +2,172,000 +$ +8,115,884 +David E. Lancaster +Salary +$ +— +$ +— +$ +712,500 +(9) +$ +1,425,000 +(4) +Bonus +839,500 +(5) +839,500 +(5) +1,259,250 +(10) +2,518,500 +(7) +Vesting equity +— +— +— +3,685,354 +(8) +Total +$ +839,500 +$ +839,500 +$ +1,971,750 +$ +7,628,854 +Craig N. Adams +Salary +$ +— +$ +— +$ +712,500 +(9) +$ +1,425,000 +(4) +Bonus +800,000 +(5) +800,000 +(5) +1,200,000 +(10) +2,400,000 +(7) +Vesting equity +— +— +— +2,464,084 +(8) +Total +$ +800,000 +$ +800,000 +$ +1,912,500 +$ +6,289,084 +Billy E. Goodwin +Salary +$ +— +$ +— +$ +425,000 +(11) +$ +850,000 +(3) +Bonus +562,500 +(5) +562,500 +(5) +562,500 +(5) +1,125,000 +(6) +Vesting equity +— +— +— +1,516,504 +(8) +Total +$ +562,500 +$ +562,500 +$ +987,500 +$ +3,491,504 +(1) +Amounts due upon death, total disability, mutual agreement, dissolution or liquidation, termination by us without cause or termination by Named +Executive Officer for good reason are payable in a lump sum on the 60 th day following the date of termination unless otherwise required by Section 409A of the Code. +(2) +Amounts due following a change in control are payable in a lump sum on the date which immediately follows six months from the date of termination or, if earlier, within +30 days of such Named Executive Officer’s death. +(3) +Represents two times such Named Executive Officer’s base salary as of the termination date. +(4) +Represents three times such Named Executive Officer’s base salary as of the termination date. +(5) +Represents the average annual amount of bonuses, including pursuant to the Incentive Plan and its predecessor, paid to such Named Executive Officer with respect to +prior two calendar years (2015-2016). +(6) +Represents two times an amount equal to the average annual amount of bonuses, including pursuant to the Incentive Plan and its predecessor, paid to such Named Executive +Officer with respect to prior two calendar years (2015-2016). +(7) +Represents three times an amount equal to the average annual amount of bonuses, including pursuant to the Incentive Plan and its predecessor, paid to such Named +Executive Officer with respect to prior two calendar years (2015-2016). +(8) +The employment agreements provide for accelerated and full vesting of unvested incentive awards held by these Named Executive Officers in the event that such Named +Executive Officer is terminated without “Just Cause” or terminates his employment with or without “Good Reason,” with respect to Messrs. Foran, Hairford and Lancaster, within 30 days prior to, or 12 months following, a +“change in control.” With respect to Messrs. Adams and Goodwin, the employment agreements provide for accelerated and full vesting of unvested incentive awards held by these Named Executive Officers in the event that such Named Executive +Officer is terminated without “Just Cause” or terminates his employment with “Good Reason,” within 30 days prior to, or 12 months following, a “change in control.” The amount disclosed reflects the closing price of our +Common Stock on December 31, 2016 of $25.76 per share multiplied by the number of unvested service-based shares of restricted stock held by such Named Executive Officer on December 31, 2016, in addition to the intrinsic value of the stock +options held by such Named Executive Officer based upon the exercise price of such stock options being less than the closing price of our Common Stock on December 31, 2016. +(9) +Represents 1.5 times such Named Executive Officer’s base salary as of the termination date. +(10) +Represents 1.5 times an amount equal to the average annual amount of bonuses, including pursuant to the Incentive Plan and its predecessor, paid to such Named Executive +Officer with respect to prior two calendar years (2015-2016). +(11) +Represents an amount equal to such Named Executive Officer’s base salary as of the termination date. +56 +Table of Contents +DIRECTOR COMPENSATION +Name +Fees Earned or +Paid in +Cash +($) +Stock +Awards +($) +Restricted +Stock Units (1) +($) +All Other +Compensation +($) +Total +($) +Reynald A. Baribault +86,000 +— +134,602 +— +220,602 +R. Gaines Baty (2) +11,000 +— +34,108 +— +45,108 +Craig T. Burkert (3) +40,500 +— +67,749 +— +108,249 +William M. Byerley (4) +35,050 +— +67,749 +— +102,799 +Joe A. Davis (4) +37,050 +— +67,749 +— +104,799 +David M. Laney (5) +91,000 +— +134,602 +— +225,602 +Gregory E. Mitchell +67,000 +— +134,602 +— +201,602 +Steven W. Ohnimus +72,000 +— +134,602 +— +206,602 +Carlos M. Sepulveda, Jr. (6) +112,000 +— +134,602 +— +246,602 +Margaret B. Shannon (7) +75,250 +— +134,602 +— +209,852 +Don C. Stephenson (8) +51,850 +— +66,853 +— +118,703 +George M. Yates +69,000 +— +134,602 +— +203,602 +(1) +Based on the fair market value of the restricted stock units on the date of grant. Subject to a three year ratable vesting period; provided, however, the vesting of +restricted stock units may be accelerated upon certain termination of service events, as discussed in more detail under “— Compensation for 2017.” +(2) +Mr. Baty joined the Board on October 28, 2016. +(3) +Mr. Burkert joined the Board on June 9, 2016. +(4) +Messrs. Byerley and Davis joined the Board on June 24, 2016. +(5) +Includes $10,000 earned by the director for additional committee service provided during 2016. +(6) +Includes $20,000 earned by the director for additional committee service provided during 2016. Mr. Sepulveda retired from the Board effective January 6, 2017. +In connection with his retirement, the Board accelerated the vesting of his then-outstanding unvested restricted stock units. +(7) +Ms. Shannon retired from the Board effective December 2, 2016. In connection with her retirement, the Board accelerated the vesting of her then-outstanding +unvested restricted stock units. +(8) +Includes $20,000 earned by the director for additional committee service provided during 2016. Mr. Stephenson’s term on the Board expired on June 9, +2016. In connection with the expiration of Mr. Stephenson’s term, the Board accelerated the vesting of his then-outstanding unvested restricted stock units. +Compensation for 2016 +During 2016, we targeted our non-employee directors’ compensation to +approximate the 50 th percentile of the Peer Group used for +benchmarking the non-employee directors’ compensation. During 2016, our director compensation program was the following: +• +annual cash retainer of $54,000; +• +cash meeting fee of $1,000 per day for each day of Board and committee service; +• +the chair of the Audit Committee would receive an additional cash retainer of $25,000 annually and the chairs of the Nominating, Compensation and +Planning Committee (as predecessor to the Compensation Committee and the Nominating Committee), the Corporate Governance Committee, the Prospect Committee and the Operations and Engineering Committee would each receive an additional cash retainer of +$15,000 annually; and +• +each non-employee director would receive RSUs equal to up to $135,000 in value annually with the restrictions +lapsing in one-third increments on each of the first, second and third anniversaries of the date of grant. Each grant may be adjusted downward (but not upward) in value based upon the non-employee director’s attendance and contributions at Board or committee meetings called during the period for which RSUs are due. +In addition, we reimbursed our directors for travel, lodging and related expenses incurred in attending Board and committee meetings. +57 +Table of Contents +Compensation for 2017 +For 2017, our non-employee directors’ compensation program has been adjusted as set forth +below: +• +annual cash retainer of $54,000; +• +cash meeting fee of $1,000 per day for each day of Board and committee service; +• +the chair of the Audit Committee will receive an additional cash retainer of $25,000 annually and the chairs of the Compensation Committee, the +Corporate Governance Committee, the Nominating Committee, the Operations and Engineering Committee and the Prospect Committee will each receive an additional cash retainer of $15,000 annually; +• +The lead independent director will receive an additional cash retainer of $100,000 annually; +• +for each of the first and second quarters of 2017, each non-employee director will receive RSUs equal to up to +$33,750 in value quarterly with the restrictions lapsing in one-third increments on each of the first, second and third anniversaries of the date of grant. Each grant may be adjusted downward (but not upward) +in value based upon the non-employee director’s attendance and contributions at Board or committee meetings called during the period for which RSUs are due; and +• +at the meeting of the Board immediately following the Annual Meeting, each non-employee director will receive a +one-time annual grant of RSUs equal to up to $135,000 in value with the restrictions lapsing immediately prior to the election of the nominees for director at the 2018 Annual Meeting (the “2017 RSU +Award”). Each grant may be adjusted downward (but not upward) in value based upon the non-employee director’s attendance and contributions at Board or committee meetings called during the period for +which RSUs are due. +If a director is appointed or elected to the Board at any time following the Annual +Meeting but prior to the 2018 Annual Meeting, such director will be granted the applicable percentage of the 2017 RSU Award detailed below, effective on the date of such director’s appointment: (i) if a director is appointed or elected to +the Board within 90 days after the Annual Meeting, such director shall be entitled to receive 100% of the 2017 RSU Award; (ii) if a director is appointed or elected to the Board more than 90 days but 180 or fewer days after the Annual Meeting, +such director shall be entitled to receive 75% of the 2017 RSU Award; (iii) if a director is appointed or elected to the Board more than 180 days but 270 or fewer days after the Annual Meeting, such director shall be entitled to receive 50% of +the 2017 RSU Award; and (iv) if a director is appointed or elected to the Board more than 270 days after the Annual Meeting but prior to the 2018 Annual Meeting, such director shall be entitled to receive 25% of the 2017 RSU award. +For 2017, the Board determined that, effective immediately prior to the election of the nominees for director at the Annual Meeting, the +vesting of all outstanding RSUs granted prior to the Annual Meeting and held by a director or special Board advisor (the “Outstanding RSUs”) would be automatically accelerated immediately prior to, and on the date of, such director’s +or special Board advisor’s termination of service (as defined in, and pursuant to, the 2012 Plan), subject to certain exceptions. +In addition, we will continue to reimburse our directors for travel, lodging and related expenses incurred in attending Board and committee meetings. +Director Ownership Guidelines +The non-employee directors follow our voluntary stock ownership guidelines for non-employee directors. Within three years of +becoming a director, each non-employee director will be expected to own $250,000 of Common Stock and continue to hold such shares while serving as a director. All directors own in excess of $250,000 of Common +Stock or expect to meet the guidelines within three years of becoming a director. Shares that count toward the stock ownership guidelines include time-lapse restricted stock or RSUs that are still restricted and any shares held in trust by the +director or his or her immediate family over which he or she has direct beneficial ownership interest. Shares that do not count toward the stock ownership guidelines include shares underlying unexercised stock options and unexercised stock +appreciation rights. +58 +Table of Contents +Special Board Advisor Compensation +Our special Board advisors are compensated with stock and/or cash awards based upon meeting attendance or as otherwise agreed to pursuant +to consulting arrangements with such advisors. We reimburse our special Board advisors for travel, lodging and related expenses incurred in attending Board and committee meetings. The special Board advisor compensation of Messrs. Downey and Rolfe is +the same as for the non-employee directors as described above. +SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS +The following table presents the securities +authorized for issuance under our equity compensation plans as of December 31, 2016. +Plan Category +Number of +Shares to +be +Issued Upon +Exercise +of +Outstanding +Options, +Warrants +and +Rights +Weighted- +Average +Exercise +Price of +Outstanding +Options, +Warrants +and Rights +Number of +Shares +Remaining +Available for +Future +Issuance +Under Equity +Compensation +Plans +Equity compensation plans approved by security holders (1)(2) +2,872,954 +$ +15.59 +3,963,427 +Equity compensation plans not approved by security holders +— +— +— +Total +2,872,954 +$ +15.59 +3,963,427 +(1) +Our Board has determined not to make any additional awards under the Matador Resources Company 2003 Stock and Incentive Plan. +(2) +The Amended and Restated 2012 Long-Term Incentive Plan was adopted by our Board of Directors in April 2015 and approved by our shareholders on June 10, 2015. +59 +Table of Contents +TRANSACTIONS WITH RELATED PERSONS +Except as disclosed below, during 2016 there was not, nor was there proposed as of December 31, 2016, any transaction or series of +similar transactions to which we were or are a party in which the amount involved exceeded or exceeds $120,000 and in which any of our directors, executive officers, holders of more than 5% of any class of our voting securities or any member of the +immediate family of any of the foregoing persons had or will have a direct or indirect material interest, other than compensation arrangements with directors and executive officers, which are described in “Executive +Compensation — Compensation Discussion and Analysis” above. +HEYCO Joint Ventures +In June 2015, the Company entered into two joint ventures (the “Joint Ventures”) to develop certain leasehold interests held by +certain affiliates (the “HEYCO Affiliates”) of HEYCO Energy Group, Inc., the former parent company of Harvey E. Yates Company. The HEYCO Affiliates are owned by George M. Yates, who was appointed to the Board on April 28, 2015 in +accordance with the terms of the HEYCO Merger, and certain of his affiliates. Pursuant to the terms of the transaction, the HEYCO Affiliates contributed an aggregate of approximately 1,900 net acres, primarily in the same properties previously held +by HEYCO, to the two newly-formed entities in exchange for a 50% interest in each entity. The Company has agreed to contribute an aggregate of approximately $14 million in exchange for the other 50% interest in both entities. As of +December 31, 2016, the Company had contributed an aggregate of approximately $2.1 million to the two entities. The Company’s contributions are being used to fund capital expenditures associated with the interests owned by the Joint +Ventures as well as to fund acquisitions by the Joint Ventures of other non-operated acreage opportunities. +The Audit Committee reviewed the terms of the Joint Ventures for potential conflicts of interest under the Company’s related party transaction policy, effective October 12, 2011 (the +“Related Party Transaction Policy”), and, after being fully informed as to Mr. Yates’ relationship and interest and all other material facts related to the Joint Ventures, determined that the Joint Ventures were fair to the +Company and recommended the Joint Ventures to the full Board for approval and ratification. The Board subsequently approved and ratified the Joint Ventures. +In addition, in light of Mr. Yates’ ongoing services to HEYCO Energy Group, Inc., the Board, in accordance with Texas corporate law, adopted resolutions which renounce and provide for a waiver +of certain corporate opportunities with respect to Mr. Yates. As a result, Mr. Yates will have no fiduciary duty to present certain corporate opportunities related to Mr. Yates’ existing oil and gas holdings and/or in areas where +Matador does not currently operate. +Working Interest Acquisition +A sibling of Mr. Yates is affiliated with and controls Jalapeno Corporation (“Jalapeno”). In an arms-length transaction +completed in 2016, the Company acquired Jalapeno’s working interest in certain oil and natural gas properties operated by the Company (the “Working Interest Acquisition”). The Company paid Jalapeno approximately $3.6 million for +the Working Interest Acquisition. +The Audit Committee reviewed the terms of the Working Interest Acquisition for potential +conflicts of interest under the Related Party Transaction Policy and, after being fully informed as to Mr. Yates’ relationship and interest and all other material facts related to the Working Interest Acquisition, determined that the +Working Interest Acquisition was fair to the Company and recommended the Working Interest Acquisition to the full Board for approval and ratification. The Board subsequently approved and ratified the Working Interest Acquisition. +Term Assignment +A +sibling of Mr. Yates is affiliated with and controls Yates Energy Corporation (“Yates Energy”). In an arms-length transaction completed in 2016, the Company acquired a term assignment of Yates Energy’s working +60 +Table of Contents +interest in certain oil and natural gas properties operated by the Company (the “Term Assignment”). The Company paid Yates Energy approximately $170,000 for the Term Assignment. +The Audit Committee reviewed the terms of the Term Assignment for potential conflicts of interest under the Related Party +Transaction Policy and, after being fully informed as to Mr. Yates’ relationship and interest and all other material facts related to the Term Assignment, determined that the Term Assignment was fair to the Company and recommended the Term +Assignment to the full Board for approval and ratification. The Board subsequently approved and ratified the Term Assignment. +Working +Interest and Overriding Royalty Interest Owners +Certain HEYCO Affiliates or entities controlled by members of +Mr. Yates’ family (collectively, the “Yates Entities”) are working interest owners and/or overriding royalty interest owners in certain properties operated by the Company or in which the Company also holds a working interest. As +working interest owners, the Yates Entities are required to pay their proportionate share of all costs and are entitled to receive their proportionate share of revenues in the normal course of business. As overriding royalty interest owners, the +Yates Entities are entitled to receive their proportionate share of revenues from the wells in which they own an interest in the normal course of business. During 2016, revenues, net of costs, received by the Yates Entities in their capacities as +working interest owners or overriding royalty interest owners were approximately $883,000 (the “Yates Net Revenue Payments”). +In our capacity as operator, we incur drilling and operating costs that are billed to our partners based on their respective working interests. During 2016, our joint interest billings to the Yates +Entities attributable to their share of costs were approximately $1.1 million (the “Yates Billings”). This represents less than 1% of our total joint interest billings during 2016. As a result of this ownership by the Yates Entities, +from time to time, we will be in a net receivable or net payable position with the Yates Entities. We do not consider any net receivables from these parties to be uncollectible. +The Audit Committee reviewed the terms of the working interests and/or overriding royalty interests of the Yates Entities for potential +conflicts of interest under the Related Party Transaction Policy, and, after being fully informed as to Mr. Yates’ relationship and interest in such transactions and all other material facts related to the Yates Net Revenue Payments and +Yates Billings, determined that such transactions and the Yates Net Revenue Payments and Yates Billings were fair to the Company and recommended such transactions and the Yates Net Revenue Payments and Yates Billings to the full Board for approval +and ratification. The Board subsequently approved and ratified the transactions and the Yates Net Revenue Payments and Yates Billings. +Certain Employment Relationships +Billy E. Goodwin, Senior Vice President — Operations, was appointed as an executive officer of the Company in connection with his February 2016 promotion to his present role. Two of +Mr. Goodwin’s adult children are employees of the Company and each earned in 2016, and are expected to be compensated in 2017, between $120,000 and $500,000. One of Mr. Goodwin’s children has a bachelor’s degree in petroleum +engineering from the University of Tulsa and over seven years of industry experience, including as a regional drilling supervisor for another publicly traded exploration and production company. Mr. Goodwin’s other child has a bachelor’s +degree in energy management from the University of Tulsa and a bachelor’s degree in general business and management from Oklahoma State University. He also has over seven years of industry experience, including as a drilling fluids engineer for +a publicly traded oilfield services company and as a landman for a publicly traded exploration and production company. The Audit Committee reviewed the terms of the employment arrangements for potential conflicts of interest under the Company’s +Related Party Transaction Policy and, after being fully informed as to the employment arrangements and historical and anticipated compensation of Mr. Goodwin’s adult children, and all other material facts related to the relationship, +determined that the employment arrangements were fair to the Company and recommended the employment arrangements to +61 +Table of Contents +the full Board for approval and ratification. The Board subsequently approved and ratified such employment arrangements. +Reynald A. Baribault is a member of the Board. Mr. Baribault’s +sister-in-law is an employee of the Company and earned in 2016, and is expected to be compensated in 2017 between $120,000 and $200,000. Mr. Baribault’s +sister-in-law has a diploma from the Executive Secretarial School and is a certified legal assistant, having completed the Southern Methodist University Legal Assistants Program. She has over 35 years of experience as a legal assistant. The Audit +Committee reviewed the terms of the employment arrangements for potential conflicts of interest under the Company’s Related Party Transaction Policy and, after being fully informed as to the employment arrangements and historical and +anticipated compensation of Mr. Baribault’s sister-in-law, and all other material facts related to the relationship, determined that the employment arrangement +was fair to the Company and recommended the employment arrangement to the full Board for approval and ratification. The Board subsequently approved and ratified such employment arrangement. +An adult child of Joseph Wm. Foran, Chairman and CEO, is an employee of the Company and is expected to be compensated in 2017 between +$120,000 and $200,000. Mr. Foran’s child has a bachelor’s degree in human resources development and a master’s degree in human resources management, both from Texas A&M University. She has more than six years of industry +experience, including with another publicly traded exploration and production company. The Audit Committee reviewed the terms of the employment arrangement for potential conflicts of interest under the Company’s Related Party Transaction Policy +and, after being fully informed as to the employment arrangement and historical and anticipated compensation of Mr. Foran’s adult child, and all other material facts related to the relationship, determined that the employment arrangement +was fair to the Company and recommended the employment arrangement to the full Board for approval and ratification. The Board subsequently approved and ratified such employment arrangement. +Procedures for Approval of Related Party Transactions +Pursuant to the Related Party Transaction Policy, a “Related Party Transaction” is defined as a transaction (including any financial transaction, arrangement or relationship (including any +indebtedness or guarantee of indebtedness)), or series of related transactions, or any material amendment to any such transaction, involving a Related Party (as defined below) and in which we are a participant, other than: +• +a transaction involving compensation of directors; +• +a transaction involving compensation of an executive officer or involving an employment agreement, severance agreement, change in control provision or +agreement or a special supplemental benefit for an executive officer; +• +a transaction available to all employees generally or to all salaried employees generally; +• +a transaction with a Related Party involving less than $120,000; +• +a transaction in which the interest of the Related Party arises solely from the ownership of a class of our equity securities and all holders of that +class receive the same benefit on a pro rata basis; or +• +a transaction in which the rates or charges involved therein are determined by competitive bids, or a transaction that involves the rendering of +services as a common or contract carrier, or public utility, at rates or charges fixed in conformity with law or governmental authority. +“Related Party” means: +• +any person who is, or at any time during the applicable period was, one of our executive officers or one of our directors or nominees for directors; +• +any person who is known by us to be the beneficial owner of more than 5% of our Common Stock; +• +any immediate family member of any of the foregoing persons, which means any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, +son-in-law, daughter-in-law, +62 +Table of Contents +brother-in-law or sister-in-law of +a director, nominee for director, executive officer or a beneficial owner of more than 5% of our Common Stock; and +• +any firm, corporation or other entity that is owned or controlled by any of the foregoing persons or in which any of the foregoing persons is a general +partner or executive officer or in which such person, together with all other of the foregoing persons, owns 10% or more of the equity interests thereof. +Pursuant to the Related Party Transaction Policy, the Audit Committee must review all material facts of each Related Party Transaction and recommend either approval or disapproval of the Related Party +Transaction to the full Board, subject to certain limited exceptions. In determining whether to recommend approval or disapproval of the Related Party Transaction, the Audit Committee must, after reviewing all material facts of the Related Party +Transaction and the Related Party’s relationship and interest, determine whether the Related Party Transaction is fair to the Company. Further, the policy requires that all Related Party Transactions be disclosed in our filings with the SEC +and/or our website in accordance with applicable laws, rules and regulations. +63 +Table of Contents +SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT +The following table presents the beneficial ownership of our Common Stock as of April 7, 2017 for (i) each +person beneficially owning more than 5% of the outstanding shares of our Common Stock, (ii) each director of the Company, (iii) each executive officer of the Company listed in the Summary Compensation Table and (iv) all of our +directors and executive officers as a group. Except pursuant to applicable community property laws and except as otherwise indicated, each shareholder possesses sole voting and investment power with respect to its, his or her shares. The business +address of each of our directors and executive officers is c/o Matador Resources Company, One Lincoln Centre, 5400 LBJ Freeway, Suite 1500, Dallas, Texas 75240. The applicable percentage ownership is based on 100,142,297 shares of our Common Stock +issued and outstanding as of April 7, 2017, plus, on an individual basis, the right of that individual to (i) obtain Common Stock upon exercise of stock options or (ii) obtain Common Stock upon the vesting or delivery of restricted +stock units, in each case within 60 days of April 7, 2017. The information is based on Form 3s, Form 4s, Schedule 13Ds, Schedule 13Gs and Schedule 13G/As filed through April 7, 2017. +Name +Amount and +Nature of +Ownership of +Common Stock +Percent +of Class +Directors and Named Executive Officers: +Joseph Wm. Foran (1) +4,470,646 +4.5 +% +Craig N. Adams (2) +161,660 +* +Reynald A. Baribault (3) +30,482 +* +R. Gaines Baty +15,450 +* +Craig T. Burkert (4) +70,409 +* +William M. Byerley +4,207 +* +Joe A. Davis (5) +8,767 +* +Julia P. Forrester +2,000 +* +Billy E. Goodwin (6) +112,142 +* +Matthew V. Hairford (7) +433,758 +* +David E. Lancaster (8) +557,045 +* +David M. Laney (9) +484,659 +* +Gregory E. Mitchell (10) +214,724 +* +Steven W. Ohnimus (11) +91,459 +* +Kenneth L. Stewart +10,000 +* +George M. Yates (12) +4,805,055 +4.8 +% +All Directors and Executive Officers as a Group (19 persons) (13) : +11,982,478 +11.9 +% +Other 5% Owners: +T. Rowe Price Associates, Inc. (14) +10,731,277 +10.7 +% +TIAA-CREF Investment Management, LLC (15) +7,236,283 +7.2 +% +The VanGuard Group (16) +6,992,438 +7.0 +% +BlackRock, Inc. (17) +5,800,706 +5.8 +% +* +Less than one percent (1%) +(1) +Includes (i) 1,084,933 shares of Common Stock held of record by Sage Resources, Ltd., a limited partnership owned by the Foran family, including +Mr. Foran; (ii) 4,000 shares of Common Stock held of record by the reporting person’s spouse through her Individual Retirement Account; (iii) 119,500 shares and 50,000 shares of Common Stock held of record by The Don Foran Family Trust +2008 and The Foran Family Special Needs Trust, respectively, for which Mr. Foran is the co-trustee and over which Mr. Foran has shared voting and investment power with other members of his family; +(iv) 51,807 shares of Common Stock held of record by each of the JWF 2015-2 GRAT and the NNF 2015-2 GRAT, for which Mr. Foran is the trustee and over which +Mr. Foran has sole voting and investment power; (v) 261,391 shares of Common Stock held of record by each of the JWF 2016-1 GRAT and the NNF 2016-1 GRAT, for which +Mr. Foran is the trustee and over which Mr. Foran has sole voting and investment power; (vi) 169,728 shares of Common Stock held of record by each of the JWF 2016-2 GRAT and the NNF 2016-2 GRAT, for which Mr. Foran is the trustee and over which Mr. Foran has sole voting and investment power; (vii) 325,769 shares of Common Stock held of record by each of the JWF 2017-1 GRAT and the NNF 2017-1 GRAT, for which Mr. Foran is the trustee and over which Mr. Foran has sole voting and investment power; (viii) 43,750 shares +64 +Table of Contents +of Common Stock held of record by the Foran 2012 Security Trust, for which Mr. Foran is the trustee and over which Mr. Foran has sole voting and investment power; (ix) 165,050 shares of +Common Stock held of record by the Foran 2012 Savings Trust, for which Mr. Foran’s spouse is a trustee; (x) 270 shares held of record by the Individual Retirement Account of Mr. Foran’s adult child, who gave Mr. Foran +investment power over such shares through a revocable power of attorney; (xi) 873,764 shares held of record, collectively, by the LRF 2011 Non-GST Trust, WJF 2011 +Non-GST Trust, JNF 2011 Non-GST Trust, SIF 2011 Non-GST Trust and MCF 2011 Non-GST Trust, +for which trusts Mr. Foran and his spouse, as settlors of each of the Non-GST Trusts, retain the power of substitution with respect to the property of the Non-GST +Trusts; and (xii) 158,720 shares of restricted stock. Pursuant to the terms of the restricted stock grants, Mr. Foran has the right to vote such shares but may only dispose of such shares to the extent they have vested. Also includes 145,560 +shares of Common Stock issuable to Mr. Foran upon the exercise of stock options. +(2) +Includes 58,032 shares of Common Stock issuable to Mr. Adams upon the exercise of stock options. Also includes 61,267 shares of restricted stock. Pursuant to the +terms of the restricted stock grants, Mr. Adams has the right to vote such shares but may only dispose of such shares to the extent they have vested. +(3) +Includes 2,000 shares of Common Stock held by the Individual Retirement Account of Mr. Baribault. Also includes 19,000 shares of Common Stock held by the Reynald +A. Baribault Maritalized Revocable Living Trust, for which Mr. Baribault has shared voting and investment power with his spouse, and 5,000 shares of Common Stock held by the Sally K. Baribault Maritalized Revocable Living Trust, for which +Mr. Baribault has shared voting and investment power with his spouse. Also includes 816 shares of Common Stock issuable to Mr. Baribault upon the vesting of restricted stock units. +(4) +Includes 34,742 shares held by the Individual Retirement Account of Mr. Burkert. +(5) +Includes 8,767 shares held by the Davis Living Trust for which both Mr. Davis and his spouse are trustees. +(6) +Includes 5,516 shares of Common Stock issuable to Mr. Goodwin upon the exercise of stock options. Also includes 41,329 shares of restricted stock. Pursuant to the +terms of the restricted stock grants, Mr. Goodwin has the right to vote such shares but may only dispose of such shares to the extent they have vested. +(7) +Includes 156,055 shares of Common Stock issuable to Mr. Hairford upon the exercise of stock options and 5,000 shares held of record by his Individual Retirement +Account. Also includes 72,463 shares of restricted stock. Pursuant to the terms of the restricted stock grants, Mr. Hairford has the right to vote such shares but may only dispose of such shares to the extent they have vested. Mr. Hairford +has pledged 67,400 shares of Common Stock. +(8) +Includes 198,950 shares of Common Stock issuable to Mr. Lancaster upon the exercise of stock options and 75,500 shares of Common Stock held of record by his +Individual Retirement Account. Also includes 70,076 shares of restricted stock. Pursuant to the terms of the restricted stock grants, Mr. Lancaster has the right to vote such shares but may only dispose of such shares to the extent they have +vested. +(9) +Includes 76,000 shares of Common Stock held of record by Laney Investments Ltd., for which Mr. Laney has sole voting and investment power. Also includes 1,088 +shares of Common Stock issuable to Mr. Laney upon the vesting of restricted stock units. Mr. Laney has pledged 40,000 shares of Common Stock. +(10) +Includes 191,292 shares of Common Stock held of record by JAMAL Enterprises, LP, for which Mr. Mitchell has sole voting and investment power. Also includes 1,088 +shares of Common Stock issuable to Mr. Mitchell upon the vesting of restricted stock units. +(11) +Includes 8,536 vested restricted stock units, delivery of which has been deferred pursuant to the award agreement, and 1,088 shares of Common Stock issuable to +Dr. Ohnimus upon the vesting of restricted stock units. Dr. Ohnimus has pledged 43,209 shares of Common Stock. +(12) +Includes 4,800,000 shares of Common Stock held by HEYCO Energy Group, Inc. (“HEGI”), 166,667 of which are being held in an escrow account pursuant to the +HEYCO Merger and related escrow agreement. As Chairman and Chief Executive Officer of HEGI, Mr. Yates has ultimate voting and dispositive power with respect to all shares held by HEGI. Also includes 2,500 shares of Common Stock owned by Spiral, +Inc., an entity owned by certain trusts of which Mr. Yates is the sole trustee and with respect to which Mr. Yates has voting and dispositive power. Also includes 816 shares of Common Stock issuable to Mr. Yates upon the vesting of +restricted stock units. HEGI has pledged 4,000,000 shares of Common Stock. +(13) +Includes an aggregate of 682,213 shares of Common Stock which our executive officers as a group have the right to acquire within 60 days of April 7, 2017 upon the +exercise of stock options. Also includes 525,866 shares of restricted stock held by our executive officers. Pursuant to the terms of the restricted stock grants, the executive officers have the right to vote such shares but may only dispose of such +shares to the extent they have vested. Also includes 13,432 shares of Common Stock issuable to directors upon the vesting and delivery of restricted stock units. Includes 4,180,609 shares of pledged Common Stock beneficially owned by our executive +officers and directors. +(14) +Information based solely on a Schedule 13G/A filed with the SEC on February 7, 2017. The Schedule 13G/A reports that T. Rowe Price Associates, Inc. (“Price +Associates”) beneficially owns 10,731,277 shares, has sole voting power with respect to 2,368,214 shares and has sole dispositive power with respect to 10,731,277 shares. According to the Schedule 13G/A, these securities are owned by various +individual and institutional investors, for which Price Associates serves as an investment adviser registered under the Investment Advisers Act of 1940, as amended, with power to direct investments and/or sole power to vote the securities. For +purposes of the reporting requirements of the Securities Exchange Act of 1934, as amended, Price Associates is deemed to be a beneficial owner of such securities; however, Price Associates expressly disclaims that it is, in fact, the beneficial +owner of such securities. According to the Schedule 13G/A, Price Associates’ address is 100 E. Pratt Street, Baltimore, MD 21202. +(15) +Information based solely on two Schedules 13G filed with the SEC on February 14, 2017. The Schedules 13G report that (i) TIAA-CREF Investment +Management, LLC (“TIAA”) beneficially owns 3,717,127 shares, has sole voting power with respect to 3,717,127 shares and has sole dispositive power with respect to 3,717,127 shares and (ii) Teachers Advisors, LLC (“Teachers”) +beneficially owns 3,519,156 shares, has sole voting power with respect to 3,519,156 shares and has sole dispositive power with respect to 3,519,156 shares. According to the Schedules 13G, TIAA is the investment adviser to the College Retirement +Equities Fund (“CREF”), a registered investment company, and may be deemed to be a beneficial owner of 3,717,127 shares of the Company’s common stock owned by +65 +Table of Contents +CREF. According to the Schedules 13G, Teachers is the investment adviser to three registered investment companies, TIAA-CREF Funds (“Funds”), TIAA-CREF Life Funds (“Life +Funds”), and TIAA Separate Account VA-1 (“VA-1”), as well as one or more separately managed accounts of Advisors (collectively, the “Separate +Accounts”), and may be deemed to be a beneficial owner of 3,519,156 shares of the Company’s common stock owned separately by Funds, Life Funds, VA-1, and/or the Separate Accounts. TIAA and Teachers +reported their combined holdings for the purpose of administrative convenience. Each of TIAA and Teachers expressly disclaims beneficial ownership of the other’s securities holdings and each disclaims that it is a member of a “group” +with the other. According to the Schedules 13G, the address of both TIAA and Teachers is 730 Third Avenue, New York, NY 10017-3206. +(16) +Information based solely on a Schedule 13G/A filed with the SEC on February 10, 2017. The Schedule 13G/A reports that The VanGuard Group (“VanGuard”) +beneficially owns 6,992,438 shares, has sole voting power with respect to 168,047 shares, has shared voting power with respect to 9,844 shares, has sole dispositive power with respect to 6,818,803 shares and has shared dispositive power with respect +to 173,635 shares. According to the Schedule 13G/A, VanGuard’s address is 100 Vanguard Blvd, Malvern, PA 19355. +(17) +Information based solely on a Schedule 13G filed with the SEC on January 25, 2017. The Schedule 13G reports that BlackRock, Inc. +(“BlackRock”) beneficially owns 5,800,706 shares, has sole voting power with respect to 5,541,338 shares and has sole dispositive power with respect to 5,800,706 shares. According to the Schedule 13G, BlackRock’s address is 55 East 52 nd Street, New York, NY 10055. +66 +Table of Contents +ADDITIONAL INFORMATION +Section 16(a) Beneficial Ownership Reporting Compliance +Section 16(a) of the Exchange Act requires the Company’s executive officers, directors and persons who own more than ten percent +of the Company’s Common Stock to file initial reports of ownership and changes in ownership with the SEC. +Additionally, +SEC regulations require that the Company identify any individuals for whom one of the referenced reports was not filed on a timely basis during the most recent fiscal year. Based solely on the Company’s review of copies of the reports received +and written inquiries to the Company’s directors and officers, the Company believes that all persons subject to Section 16(a) of the Exchange Act timely filed all reports required pursuant to such section relating to the Company’s +Common Stock in 2016. +Shareholder Proposals for the 2018 Proxy Statement +For shareholder proposals to be included in the Company’s Proxy Statement and form of proxy relating to the 2018 Annual Meeting of +Shareholders, such proposals must be received by the Company at its offices in Dallas, Texas, addressed to the Corporate Secretary of the Company, no later than December 22, 2017. Upon timely receipt of any such proposal, the Company will +determine whether or not to include such proposal in the proxy statement and proxy in accordance with applicable regulations and provisions governing the solicitation of proxies. +Director Nominations or Other Business for Presentation at the 2018 Annual Meeting +Under the Amended and Restated Bylaws of the Company, as amended to date, certain procedures are provided that a shareholder must follow in order to place in nomination persons for election as directors +at an Annual Meeting of Shareholders or to introduce an item of business at an Annual Meeting of Shareholders. These procedures provide, generally, among other things, that shareholders desiring to place in nomination persons for election as +directors, and/or bring a proper subject of business before an Annual Meeting, must do so by a written notice timely received (on or before March 7, 2018, but no earlier than February 5, 2018, for the 2018 Annual Meeting) to the Corporate Secretary +of the Company containing the name and address of the shareholder and the number of shares of the Company’s Common Stock beneficially owned by the shareholder. If the notice relates to a nomination for director, it must also set forth the name, +age, business and residence addresses of the candidate, the candidate’s résumé or a listing of his or her qualifications to be a director of the Company, the person’s written consent to be a director if selected by the +Nominating Committee, nominated by the Board and elected by the shareholders and any other information that would be required to be disclosed in solicitations of proxies for the election of directors. The Company may require any proposed nominee to +furnish such other information as may reasonably be required by the Company to determine the eligibility of such proposed nominee to serve as director. Notice of an item of business shall include a brief description of the proposed business and any +material interest of the shareholder in such business. +The Chairman of the meeting may refuse to allow the transaction +of any business not presented, or to acknowledge the nomination of any person not made, in compliance with the foregoing procedures. Copies of the Company’s Amended and Restated Bylaws, as amended to date, are available from the Corporate +Secretary of the Company. +See “Corporate Governance — Board Committees — Nominating +Committee” for the process for shareholders to follow to suggest a director candidate to the Nominating Committee for nomination by the Board. +Annual Report on Form 10-K +The Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016, as filed with the SEC, including financial statements, accompanies +this proxy statement. Shareholders may obtain without charge another copy of the Annual Report on Form 10-K, excluding certain exhibits, by writing to Investor Relations, Matador Resources Company, One Lincoln +Centre, 5400 LBJ Freeway, Suite 1500, Dallas, Texas 75240. +67 +Table of Contents +OTHER BUSINESS +Management of the Company is not aware of other business to be presented for action at the Annual Meeting; however, if other matters are +presented for action, it is the intention of the persons named in the accompanying form of proxy to vote in accordance with their judgment on such matters. +By Order of the Board of Directors, +Joseph Wm. +Foran +Chairman and Chief Executive Officer +April 21, 2017 +68 +Table of Contents +Schedule A +Non-GAAP Financial Measures +We +define Adjusted EBITDA as earnings before interest expense, income taxes, depletion, depreciation and amortization, accretion of asset retirement obligations, property impairments, unrealized derivative gains and losses, certain other non-cash items and non-cash stock-based compensation expense, and net gain or loss on asset sales and inventory impairment. Adjusted EBITDA is not a measure of net income +(loss) or cash flows as determined by GAAP. Adjusted EBITDA is a supplemental non-GAAP financial measure that is used by management and external users of our consolidated financial statements, such as industry +analysts, investors, lenders and rating agencies. +Management believes Adjusted EBITDA is necessary because it allows us to +evaluate our operating performance and compare the results of operations from period to period without regard to our financing methods or capital structure. We exclude the items listed above from net income (loss) in calculating Adjusted EBITDA, +because these amounts can vary substantially from company to company within our industry depending upon accounting methods and book values of assets, capital structures and the method by which certain assets were acquired. +Adjusted EBITDA should not be considered an alternative to, or more meaningful than, net income or cash flows from operating activities +as determined in accordance with GAAP or as a primary indicator of our operating performance or liquidity. Certain items excluded from Adjusted EBITDA are significant components of understanding and assessing a company’s financial performance, +such as a company’s cost of capital and tax structure. Our Adjusted EBITDA may not be comparable to similarly titled measures of another company because all companies may not calculate Adjusted EBITDA in the same manner. +The following table presents our calculation of Adjusted EBITDA and the reconciliation of Adjusted EBITDA to the GAAP financial measures +of net loss and net cash provided by operating activities, respectively. +Year Ended December 31, 2016 +(In thousands) +Unaudited Adjusted EBITDA Reconciliation to Net Loss: +Net loss attributable to Matador Resources Company shareholders +$ +(97,421 +) +Interest expense +28,199 +Total income tax benefit +(1,036 +) +Depletion, depreciation and amortization +122,048 +Accretion of asset retirement obligations +1,182 +Full-cost ceiling impairment +158,633 +Unrealized loss on derivatives +41,238 +Stock-based compensation expense +12,362 +Net gain on asset sales and inventory impairment +(107,277 +) +Adjusted EBITDA +$ +157,928 +Year Ended December 31, 2016 +(In thousands) +Unaudited Adjusted EBITDA Reconciliation to Net Cash Provided by Operating Activities: +Net cash provided by operating activities +$ +134,086 +Net change in operating assets and liabilities +(1,809 +) +Interest expense, net of non-cash portion +27,051 +Current income tax benefit +(1,036 +) +Net income attributable to non-controlling interest in subsidiaries +(364 +) +Adjusted EBITDA +$ +157,928 +69 +Table of Contents +VOTE BY INTERNET - www.proxyvote.com +Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the meeting date. Have your proxy card in hand when you +access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. +ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS +If you would like to reduce the costs +incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the +instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. +VOTE BY PHONE - 1-800-690-6903 +Use any +touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the meeting date. Have your proxy card in hand when you call and then follow the instructions. +VOTE BY MAIL +Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, +NY 11717. +TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: +☒ +KEEP THIS PORTION FOR YOUR RECORDS +DETACH AND RETURN THIS PORTION ONLY +THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. +The Board of Directors recommends you vote FOR each of the following nominees: +1. +Election of Directors +Nominees +For +Against +Abstain +For +Against +Abstain +01 +Joseph Wm. Foran +☐ +☐ +☐ +04 William M. Byerley +☐ +☐ +☐ +02 +Reynald A. Baribault +☐ +☐ +☐ +05 Julia P. Forrester +☐ +☐ +☐ +03 +R. Gaines Baty +☐ +☐ +☐ +06 Kenneth L. Stewart +☐ +☐ +☐ +The Board of Directors recommends you vote FOR +proposals 2, 3 and 4. +For +Against +Abstain +2. +Vote to approve an amendment to the Amended and +Restated Certificate of Formation to increase the amount of authorized common stock and correspondingly increase the aggregate number of authorized shares. +☐ +☐ +☐ +3. +Advisory vote to approve the compensation of the +Company’s named executive officers. +☐ +☐ +☐ +4. +Ratification of the appointment of KPMG LLP as the +Company’s independent registered public accounting firm for the year ending December 31, 2017. +☐ +☐ +☐ +NOTE: The proxies are authorized to vote in their discretion on such other business as may properly come before the meeting or any adjournment +thereof. +Yes +No +Please indicate if you plan to attend this meeting +☐ +☐ +Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other +fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name, by authorized officer. +Table of Contents +Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Annual Report for the year ended December 31, 2016, Notice of Annual Meeting and Proxy Statement +is/are available at www.proxyvote.com +MATADOR RESOURCES COMPANY +Annual Meeting of Shareholders +June 1, 2017 9:30 A.M. +This proxy is solicited by the Board of Directors. +As an alternative to completing +this form, you may enter your vote instruction by telephone at 1-800-690-6903, or via the internet at www.proxyvote.com . Have your proxy card in hand and follow the instructions. +The shareholder hereby appoints Joseph Wm. Foran and Reynald A. +Baribault, or either of them, as proxies, each with the power to appoint his substitute, and hereby authorizes them to represent and to vote, as designated on the reverse side of this ballot, all of the shares of common stock of MATADOR RESOURCES +COMPANY that the shareholder is entitled to vote at the Annual Meeting of Shareholders to be held at 9:30 A.M., CDT on June 1, 2017, at the Westin Galleria, Dallas Ballroom, 13340 Dallas Parkway, Dallas, Texas 75240, and any adjournment or +postponement thereof. The shareholder hereby revokes any proxy or proxies heretofore given to vote upon or act with respect to such shares of stock. +This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be +voted in accordance with the Board of Directors’ recommendations. +Continued and to be signed on reverse +side \ No newline at end of file diff --git a/raw/proxies/0001520006/0001193125-17-131270/proxy_rpt.txt b/raw/proxies/0001520006/0001193125-17-131270/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..9aa8b65e318ecfc8b860ad8484b9d2dd0cd9d463 --- /dev/null +++ b/raw/proxies/0001520006/0001193125-17-131270/proxy_rpt.txt @@ -0,0 +1,109 @@ +TRANSACTIONS WITH RELATED PERSONS +Except as disclosed below, during 2016 there was not, nor was there proposed as of December 31, 2016, any transaction or series of +similar transactions to which we were or are a party in which the amount involved exceeded or exceeds $120,000 and in which any of our directors, executive officers, holders of more than 5% of any class of our voting securities or any member of the +immediate family of any of the foregoing persons had or will have a direct or indirect material interest, other than compensation arrangements with directors and executive officers, which are described in “Executive +Compensation — Compensation Discussion and Analysis” above. +HEYCO Joint Ventures +In June 2015, the Company entered into two joint ventures (the “Joint Ventures”) to develop certain leasehold interests held by +certain affiliates (the “HEYCO Affiliates”) of HEYCO Energy Group, Inc., the former parent company of Harvey E. Yates Company. The HEYCO Affiliates are owned by George M. Yates, who was appointed to the Board on April 28, 2015 in +accordance with the terms of the HEYCO Merger, and certain of his affiliates. Pursuant to the terms of the transaction, the HEYCO Affiliates contributed an aggregate of approximately 1,900 net acres, primarily in the same properties previously held +by HEYCO, to the two newly-formed entities in exchange for a 50% interest in each entity. The Company has agreed to contribute an aggregate of approximately $14 million in exchange for the other 50% interest in both entities. As of +December 31, 2016, the Company had contributed an aggregate of approximately $2.1 million to the two entities. The Company’s contributions are being used to fund capital expenditures associated with the interests owned by the Joint +Ventures as well as to fund acquisitions by the Joint Ventures of other non-operated acreage opportunities. +The Audit Committee reviewed the terms of the Joint Ventures for potential conflicts of interest under the Company’s related party transaction policy, effective October 12, 2011 (the +“Related Party Transaction Policy”), and, after being fully informed as to Mr. Yates’ relationship and interest and all other material facts related to the Joint Ventures, determined that the Joint Ventures were fair to the +Company and recommended the Joint Ventures to the full Board for approval and ratification. The Board subsequently approved and ratified the Joint Ventures. +In addition, in light of Mr. Yates’ ongoing services to HEYCO Energy Group, Inc., the Board, in accordance with Texas corporate law, adopted resolutions which renounce and provide for a waiver +of certain corporate opportunities with respect to Mr. Yates. As a result, Mr. Yates will have no fiduciary duty to present certain corporate opportunities related to Mr. Yates’ existing oil and gas holdings and/or in areas where +Matador does not currently operate. +Working Interest Acquisition +A sibling of Mr. Yates is affiliated with and controls Jalapeno Corporation (“Jalapeno”). In an arms-length transaction +completed in 2016, the Company acquired Jalapeno’s working interest in certain oil and natural gas properties operated by the Company (the “Working Interest Acquisition”). The Company paid Jalapeno approximately $3.6 million for +the Working Interest Acquisition. +The Audit Committee reviewed the terms of the Working Interest Acquisition for potential +conflicts of interest under the Related Party Transaction Policy and, after being fully informed as to Mr. Yates’ relationship and interest and all other material facts related to the Working Interest Acquisition, determined that the +Working Interest Acquisition was fair to the Company and recommended the Working Interest Acquisition to the full Board for approval and ratification. The Board subsequently approved and ratified the Working Interest Acquisition. +Term Assignment +A +sibling of Mr. Yates is affiliated with and controls Yates Energy Corporation (“Yates Energy”). In an arms-length transaction completed in 2016, the Company acquired a term assignment of Yates Energy’s working +60 +Table of Contents +interest in certain oil and natural gas properties operated by the Company (the “Term Assignment”). The Company paid Yates Energy approximately $170,000 for the Term Assignment. +The Audit Committee reviewed the terms of the Term Assignment for potential conflicts of interest under the Related Party +Transaction Policy and, after being fully informed as to Mr. Yates’ relationship and interest and all other material facts related to the Term Assignment, determined that the Term Assignment was fair to the Company and recommended the Term +Assignment to the full Board for approval and ratification. The Board subsequently approved and ratified the Term Assignment. +Working +Interest and Overriding Royalty Interest Owners +Certain HEYCO Affiliates or entities controlled by members of +Mr. Yates’ family (collectively, the “Yates Entities”) are working interest owners and/or overriding royalty interest owners in certain properties operated by the Company or in which the Company also holds a working interest. As +working interest owners, the Yates Entities are required to pay their proportionate share of all costs and are entitled to receive their proportionate share of revenues in the normal course of business. As overriding royalty interest owners, the +Yates Entities are entitled to receive their proportionate share of revenues from the wells in which they own an interest in the normal course of business. During 2016, revenues, net of costs, received by the Yates Entities in their capacities as +working interest owners or overriding royalty interest owners were approximately $883,000 (the “Yates Net Revenue Payments”). +In our capacity as operator, we incur drilling and operating costs that are billed to our partners based on their respective working interests. During 2016, our joint interest billings to the Yates +Entities attributable to their share of costs were approximately $1.1 million (the “Yates Billings”). This represents less than 1% of our total joint interest billings during 2016. As a result of this ownership by the Yates Entities, +from time to time, we will be in a net receivable or net payable position with the Yates Entities. We do not consider any net receivables from these parties to be uncollectible. +The Audit Committee reviewed the terms of the working interests and/or overriding royalty interests of the Yates Entities for potential +conflicts of interest under the Related Party Transaction Policy, and, after being fully informed as to Mr. Yates’ relationship and interest in such transactions and all other material facts related to the Yates Net Revenue Payments and +Yates Billings, determined that such transactions and the Yates Net Revenue Payments and Yates Billings were fair to the Company and recommended such transactions and the Yates Net Revenue Payments and Yates Billings to the full Board for approval +and ratification. The Board subsequently approved and ratified the transactions and the Yates Net Revenue Payments and Yates Billings. +Certain Employment Relationships +Billy E. Goodwin, Senior Vice President — Operations, was appointed as an executive officer of the Company in connection with his February 2016 promotion to his present role. Two of +Mr. Goodwin’s adult children are employees of the Company and each earned in 2016, and are expected to be compensated in 2017, between $120,000 and $500,000. One of Mr. Goodwin’s children has a bachelor’s degree in petroleum +engineering from the University of Tulsa and over seven years of industry experience, including as a regional drilling supervisor for another publicly traded exploration and production company. Mr. Goodwin’s other child has a bachelor’s +degree in energy management from the University of Tulsa and a bachelor’s degree in general business and management from Oklahoma State University. He also has over seven years of industry experience, including as a drilling fluids engineer for +a publicly traded oilfield services company and as a landman for a publicly traded exploration and production company. The Audit Committee reviewed the terms of the employment arrangements for potential conflicts of interest under the Company’s +Related Party Transaction Policy and, after being fully informed as to the employment arrangements and historical and anticipated compensation of Mr. Goodwin’s adult children, and all other material facts related to the relationship, +determined that the employment arrangements were fair to the Company and recommended the employment arrangements to +61 +Table of Contents +the full Board for approval and ratification. The Board subsequently approved and ratified such employment arrangements. +Reynald A. Baribault is a member of the Board. Mr. Baribault’s +sister-in-law is an employee of the Company and earned in 2016, and is expected to be compensated in 2017 between $120,000 and $200,000. Mr. Baribault’s +sister-in-law has a diploma from the Executive Secretarial School and is a certified legal assistant, having completed the Southern Methodist University Legal Assistants Program. She has over 35 years of experience as a legal assistant. The Audit +Committee reviewed the terms of the employment arrangements for potential conflicts of interest under the Company’s Related Party Transaction Policy and, after being fully informed as to the employment arrangements and historical and +anticipated compensation of Mr. Baribault’s sister-in-law, and all other material facts related to the relationship, determined that the employment arrangement +was fair to the Company and recommended the employment arrangement to the full Board for approval and ratification. The Board subsequently approved and ratified such employment arrangement. +An adult child of Joseph Wm. Foran, Chairman and CEO, is an employee of the Company and is expected to be compensated in 2017 between +$120,000 and $200,000. Mr. Foran’s child has a bachelor’s degree in human resources development and a master’s degree in human resources management, both from Texas A&M University. She has more than six years of industry +experience, including with another publicly traded exploration and production company. The Audit Committee reviewed the terms of the employment arrangement for potential conflicts of interest under the Company’s Related Party Transaction Policy +and, after being fully informed as to the employment arrangement and historical and anticipated compensation of Mr. Foran’s adult child, and all other material facts related to the relationship, determined that the employment arrangement +was fair to the Company and recommended the employment arrangement to the full Board for approval and ratification. The Board subsequently approved and ratified such employment arrangement. +Procedures for Approval of Related Party Transactions +Pursuant to the Related Party Transaction Policy, a “Related Party Transaction” is defined as a transaction (including any financial transaction, arrangement or relationship (including any +indebtedness or guarantee of indebtedness)), or series of related transactions, or any material amendment to any such transaction, involving a Related Party (as defined below) and in which we are a participant, other than: +• +a transaction involving compensation of directors; +• +a transaction involving compensation of an executive officer or involving an employment agreement, severance agreement, change in control provision or +agreement or a special supplemental benefit for an executive officer; +• +a transaction available to all employees generally or to all salaried employees generally; +• +a transaction with a Related Party involving less than $120,000; +• +a transaction in which the interest of the Related Party arises solely from the ownership of a class of our equity securities and all holders of that +class receive the same benefit on a pro rata basis; or +• +a transaction in which the rates or charges involved therein are determined by competitive bids, or a transaction that involves the rendering of +services as a common or contract carrier, or public utility, at rates or charges fixed in conformity with law or governmental authority. +“Related Party” means: +• +any person who is, or at any time during the applicable period was, one of our executive officers or one of our directors or nominees for directors; +• +any person who is known by us to be the beneficial owner of more than 5% of our Common Stock; +• +any immediate family member of any of the foregoing persons, which means any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, +son-in-law, daughter-in-law, +62 +Table of Contents +brother-in-law or sister-in-law of +a director, nominee for director, executive officer or a beneficial owner of more than 5% of our Common Stock; and +• +any firm, corporation or other entity that is owned or controlled by any of the foregoing persons or in which any of the foregoing persons is a general +partner or executive officer or in which such person, together with all other of the foregoing persons, owns 10% or more of the equity interests thereof. +Pursuant to the Related Party Transaction Policy, the Audit Committee must review all material facts of each Related Party Transaction and recommend either approval or disapproval of the Related Party +Transaction to the full Board, subject to certain limited exceptions. In determining whether to recommend approval or disapproval of the Related Party Transaction, the Audit Committee must, after reviewing all material facts of the Related Party +Transaction and the Related Party’s relationship and interest, determine whether the Related Party Transaction is fair to the Company. Further, the policy requires that all Related Party Transactions be disclosed in our filings with the SEC +and/or our website in accordance with applicable laws, rules and regulations. +63 +Table of Contents \ No newline at end of file diff --git a/raw/proxies/0001520006/0001193125-18-134930/proxy.txt b/raw/proxies/0001520006/0001193125-18-134930/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..057f7bb16c417638141962164153097a5e19396c --- /dev/null +++ b/raw/proxies/0001520006/0001193125-18-134930/proxy.txt @@ -0,0 +1,4414 @@ +DEF 14A +1 +d527263ddef14a.htm +DEF 14A +DEF 14A +Table of Contents +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +Washington, D.C. 20549 +SCHEDULE 14A +Proxy Statement Pursuant to Section 14(a) of the +Securities Exchange Act of 1934 (Amendment No.) +Filed by the +Registrant ☑ Filed by a Party other than the +Registrant ☐ +Check the appropriate box: +☐ +Preliminary Proxy Statement +☐ +Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +☑ +Definitive Proxy Statement +☐ +Definitive Additional Materials +☐ +Soliciting Material Pursuant to §240.14a-12 +Matador Resources Company +(Name of Registrant as Specified In Its Charter) +(Name of Person(s) Filing Proxy Statement, if other than the Registrant) +Payment of Filing Fee (Check the appropriate box): +☑ +No fee required. +☐ +Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. +1) +Title of each class of securities to which transaction applies: +2) +Aggregate number of securities to which transaction applies: +3) +Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the +filing fee is calculated and state how it was determined): +4) +Proposed maximum aggregate value of transaction: +5) +Total fee paid: +☐ +Fee paid previously with preliminary materials. +☐ +Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify +the previous filing by registration statement number, or the Form or Schedule and the date of its filing. +1) +Amount Previously Paid: +2) +Form, Schedule or Registration Statement No.: +3) +Filing Party: +4) +Date Filed: +Table of Contents +2018 +Notice of Annual Meeting of Shareholders +and +Proxy Statement +June 7, +2018 | Dallas, Texas +Table of Contents +One Lincoln Centre +5400 LBJ Freeway, Suite 1500 +Dallas, Texas +75240 +www.matadorresources.com +NOTICE OF ANNUAL MEETING OF SHAREHOLDERS +To +Be Held on June 7, 2018 +To the Matador Resources Company Shareholders: +Please join us for the 2018 Annual Meeting of Shareholders of Matador Resources Company. The meeting will be held at the Westin Galleria, San Antonio +Ballroom, 13340 Dallas Parkway, Dallas, Texas 75240, on Thursday, June 7, 2018, at 9:30 a.m. , Central Daylight Time. +At +the meeting, you will hear a report on our business and act on the following matters: +(1) +Election of the five nominees for director named in the attached Proxy Statement; +(2) +Advisory vote to approve the compensation of our named executive officers as described in the attached Proxy Statement; +(3) +Advisory vote on the frequency of advisory votes to approve executive compensation; +(4) +Ratification of the appointment of KPMG LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2018; and +(5) +Any other matters that may properly come before the meeting. +All shareholders of record at the close of +business on April 13, 2018 are entitled to vote at the meeting or any postponement or adjournment of the meeting. A list of the shareholders of record is available at the Company’s offices in Dallas, Texas. +By Order of the Board of Directors, +Joseph Wm. Foran +Chairman and Chief Executive Officer +April 26, 2018 +YOUR VOTE IS IMPORTANT! +Whether or not you will attend the meeting, please vote as promptly as possible by using the Internet or telephone or by signing, dating and +returning your proxy card to the address listed on the card. +Important Notice Regarding the Availability of Proxy Materials for the +Annual Meeting of Shareholders to Be Held on June 7, 2018: +Our Proxy Statement and the Annual Report to Shareholders for the fiscal year ended December 31, 2017 are available for viewing, printing and +downloading at https://materials.proxyvote.com/576485 . +Table of Contents +TABLE OF CONTENTS +TABLE OF CONTENTS +Page +Proxy Statement +1 +Proxy Summary +3 +Information About the Annual Meeting +6 +Proposal 1—Election of Directors +10 +Nominees +10 +Vote Required +12 +Directors Continuing in Office +13 +Advisors to the Board +16 +Corporate Governance +18 +Independence of Directors +18 +Majority Vote in Director Elections +18 +Board Leadership Structure +19 +Board Committees +20 +Board’s Role in Risk Oversight +24 +Strategic Planning and Compensation Committee Interlocks and Insider +Participation +24 +Communications with Directors +24 +Executive Officers and Other Senior Officers of the Company +25 +Proposal 2—Advisory Vote to Approve Named Executive Officer +Compensation +32 +Vote Required +33 +Proposal 3—Advisory Vote on the Frequency of Advisory Votes to Approve Named Executive +Officer Compensation +34 +Proposal 4—Ratification of the Appointment of KPMG LLP +35 +Fees of Independent Registered Public Accounting Firm for Fiscal Years 2017 and +2016 +35 +Report of the Audit Committee +36 +Vote Required +37 +Executive Compensation +38 +Compensation Discussion and Analysis +38 +Strategic Planning and Compensation Committee Report +54 +Summary Compensation Table +55 +Grants of Plan-Based Awards Table +56 +Outstanding Equity Awards at December 31, 2017 +57 +Option Exercises and Stock Vested +59 +Potential Payments Upon Termination or Change in Control +59 +Chief Executive Officer Pay Ratio +63 +Director Compensation +64 +Compensation for 2017 +65 +Compensation for 2018-2019 +66 +Director Ownership Guidelines +66 +Board Advisor Compensation +66 +2018 +Proxy Statement | Matador Resources Company i +Table of Contents +TABLE OF CONTENTS +Page +Securities Authorized for Issuance Under Equity Compensation Plans +67 +Transactions with Related Persons +68 +Security Ownership of Certain Beneficial Owners and Management +71 +Additional Information +74 +Section 16(a) Beneficial Ownership Reporting Compliance +74 +Shareholder Proposals for the 2019 Proxy Statement +74 +Director Nominations or Other Business for Presentation at the 2019 Annual +Meeting +74 +Annual Report on Form 10-K +75 +Other Business +76 +Schedule A—Non-GAAP Financial +Measures +A-1 +ii Matador Resources Company | 2018 Proxy Statement +Table of Contents +PROXY STATEMENT +Matador Resources Company +One Lincoln Centre +5400 LBJ Freeway, Suite 1500 +Dallas, Texas 75240 +www.matadorresources.com +PROXY STATEMENT +For +ANNUAL +MEETING OF SHAREHOLDERS +To Be Held on June 7, 2018 +This Proxy Statement is being mailed on or about April 26, 2018 to the shareholders of Matador Resources Company (“Matador” or the “Company”) in +connection with the solicitation of proxies by the Board of Directors (the “Board”) of the Company to be voted at the Annual Meeting of Shareholders of the Company to be held at the Westin Galleria, San Antonio Ballroom, 13340 Dallas +Parkway, Dallas, Texas 75240, on June 7, 2018, at 9:30 a.m., Central Daylight Time (the “Annual Meeting” or the “2018 Annual Meeting”), or at any postponement or adjournment thereof, for the purposes set forth in the +accompanying Notice of Annual Meeting of Shareholders. The address of the Company’s principal executive office is One Lincoln Centre, 5400 LBJ Freeway, Suite 1500, Dallas, Texas 75240. +If you are a shareholder of record, you may vote in person by attending the meeting, by completing and returning a proxy by mail or by using the Internet or telephone. +You may vote your proxy by mail by marking your vote on the enclosed proxy card and following the instructions on the card. To vote your proxy using the Internet or telephone, see the instructions on the proxy form and have the proxy form available +when you access the Internet website or place your telephone call. +The named proxies will vote your shares according to your directions. If you sign and return +your proxy but do not make any of the selections, the named proxies will vote your shares: (i) FOR the election of the five nominees for director as set forth in this Proxy Statement, (ii) FOR the approval, on an advisory +basis, of the compensation of the Company’s named executive officers as disclosed in this Proxy Statement, (iii) for future advisory votes on executive compensation (the “Frequency Vote”) to occur EVERY YEAR and +(iv) FOR the ratification of KPMG LLP as the independent registered public accounting firm of the Company for the year ending December 31, 2018. Your proxy may be revoked at any time before it is exercised by filing with the Company +a written revocation addressed to the Corporate Secretary, by executing a proxy bearing a later date or by attending the Annual Meeting and voting in person. +The +cost of soliciting proxies will be borne by the Company. In addition to the use of postal services and the Internet, proxies may be solicited by directors, officers and employees of the Company (none of whom will receive any additional compensation +for any assistance they may provide in the solicitation of proxies) in person or by telephone. +The outstanding voting securities of the Company consist of Common +Stock. The record date for the determination of the shareholders entitled to notice of and to vote at the Annual Meeting, or any postponement or adjournment thereof, has been established by the Board as the close of business on April 13, 2018 +(the “Record Date”). As of the Record Date, there were 109,263,103 shares of Common Stock outstanding and entitled to vote. +The presence, in person or by +proxy, of the holders of record of a majority of the outstanding shares entitled to vote is necessary to constitute a quorum for the transaction of business at the Annual Meeting, but if a quorum should not be present, the meeting may be adjourned +from time to time until a quorum is obtained. A holder of Common Stock will be entitled to one vote per share on each matter properly brought before the meeting. Cumulative voting is not permitted in the election of directors. +The proxy card provides space for a shareholder to abstain with respect to any or all nominees for the Board. The affirmative vote of a majority of the votes cast by +holders of shares present in person or represented by proxy and entitled to vote on the election of directors at the Annual Meeting is required for the election of each nominee for +2018 +Proxy Statement | Matador Resources Company 1 +Table of Contents +PROXY STATEMENT +director. With respect to the election of directors in an uncontested election, such as that being held at the Annual Meeting, “majority of the votes cast” means the number of votes +cast “for” the election of such nominee exceeds the number of votes cast “against” such nominee. See “Corporate Governance—Majority Vote in Director Elections” for additional information regarding election of +directors. +With respect to the Frequency Vote, because this vote is non-binding, the choice receiving the greatest number +of votes will be considered the frequency recommended by the Company’s shareholders, even if that choice does not receive a majority of the votes. +The other +proposals require the affirmative vote of a majority of the shares of Common Stock present in person or represented by proxy and entitled to vote at the meeting. Shares held by a shareholder who abstains from voting on any or all proposals will be +included for the purpose of determining the presence of a quorum. Other than with respect to the election of directors and the Frequency Vote, an abstention will effectively count as a vote cast against the remaining proposals. Broker non-votes on any matter as to which the broker has indicated on the proxy that it does not have discretionary authority to vote will be treated as shares not entitled to vote with respect to that matter. However, +such shares will be considered present and entitled to vote for quorum purposes so long as they are entitled to vote on at least one other matter. +2 Matador Resources Company | 2018 Proxy Statement +Table of Contents +PROXY SUMMARY +PROXY SUMMARY +This summary +highlights information contained elsewhere in this Proxy Statement. This summary does not contain all of the information that you should consider, and you should read the entire Proxy Statement carefully prior to voting. For more complete +information regarding our 2017 performance, please review our Annual Report on Form 10-K for the year ended December 31, 2017. +2018 Annual Meeting of Stockholders +Date and Time : June 7, 2018, at 9:30 a.m., Central +Daylight Time +Location : Westin Galleria, San Antonio Ballroom, 13340 Dallas Parkway, Dallas, Texas 75240 +Record Date : April 13, 2018 +Voting : Shareholders as of the +close of business on the Record Date are entitled to vote. Each share of Common Stock is entitled to one vote at the Annual Meeting. +Voting +Matters and Board Recommendation +Proposal +Board +Recommendation +Election of Five Director Nominees (page 10) +FOR +Advisory Vote to Approve Named Executive Officer Compensation (page 32) +FOR +Advisory Vote on the Frequency of Advisory Votes to Approve Named Executive Officer Compensation (page +34) +1 YEAR +Ratification of the Appointment of KPMG LLP as the Company’s Independent Registered Public Accounting +Firm for 2018 (page 35) +FOR +2017 Business Highlights +In 2017, Matador achieved record oil, natural gas and average +daily oil equivalent production. In addition, Matador increased its estimated total proved oil and natural gas reserves 44% as of December 31, 2017, as compared to December 31, 2016. +Business highlights achieved during 2017 include the following: +• +A 54% increase in oil production from 5.1 million barrels (“Bbl”) of oil produced in 2016 to 7.9 million Bbl of oil produced in 2017. +• +A 25% increase in natural gas production from 30.5 billion cubic feet (“Bcf”) of natural gas produced in 2016 to 38.2 Bcf of natural gas produced in 2017. +• +A 40% increase in average daily oil equivalent production from 27,813 barrels of oil equivalent (“BOE”) per day, including 13,924 Bbl of oil per day and 83.3 million cubic feet (“MMcf”) of +natural gas per day, in 2016 to 38,936 BOE per day, including 21,510 Bbl of oil per day and 104.6 MMcf of natural gas per day, in 2017. +• +Net income (GAAP) of $125.9 million and Adjusted EBITDA (non-GAAP) of $336.1 million for the year ended December 31, 2017, as compared to a net loss (GAAP) of +$97.4 million and Adjusted EBITDA (non-GAAP) of $157.9 million for the year ended December 31, 2016. For a definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to our net income +(loss) and net cash provided by operating activities, see Schedule A to this Proxy Statement. +2018 +Proxy Statement | Matador Resources Company 3 +Table of Contents +PROXY SUMMARY +• +On October 10, 2017, we completed a public offering of 8,000,000 shares of our Common Stock. We received net proceeds of approximately $208.7 million (before expenses). +• +On February 17, 2017, we announced the formation of San Mateo Midstream, LLC (“San Mateo”), a strategic joint venture with a subsidiary of Five Point Energy LLC (“Five Point”). The midstream +assets that were contributed to San Mateo included (i) a cryogenic natural gas processing plant in the Rustler Breaks asset area (the “Black River Processing Plant”); (ii) one salt water disposal well and a related commercial salt +water disposal facility in the Rustler Breaks asset area; (iii) three salt water disposal wells and related commercial salt water disposal facilities in the Wolf asset area and (iv) substantially all related oil, natural gas and salt water +gathering systems and pipelines in both the Rustler Breaks and Wolf asset areas (collectively, the “Delaware Midstream Assets”). We received $171.5 million in connection with the formation of San Mateo. In March 2018, we received +an additional $14.7 million in performance incentives from Five Point and may earn up to an additional $58.8 million in performance incentives over the next four years. We continue to operate the Delaware Midstream Assets and retain +operational control of San Mateo. The Company and Five Point own 51% and 49% of San Mateo, respectively. San Mateo provides firm capacity service to us at market rates, while also being a midstream service provider to third +parties in and around our Wolf and Rustler Breaks asset areas. +Director Nominees (page 10) +Our Board currently has 11 members divided into three classes of +directors, designated Class I, Class II and Class III. Directors are elected for three-year terms. The table below provides certain summary information about each nominee for director named in this Proxy Statement. +Name +Age +Director +Since +Principal Occupation +Committee +Memberships +William M. Byerley* +64 +2016 +Retired Partner, PricewaterhouseCoopers LLP (PwC) +A, CG +Julia P. Forrester* +58 +2017 +Associate Provost for Student Academic Services, Southern Methodist University +A, CG +Timothy E. Parker* +43 +2018 +Former Portfolio Manager and Analyst—Natural Resources, T. Rowe Price & Associates +A, CM, P, SPC +David M. Posner* +64 +2017 +President, EnVent Energy LLC +A, CG, OP +Kenneth L. Stewart* +64 +2017 +Chair—United States, Norton Rose Fulbright US LLP +CG, CM, P, SPC +* +Independent Director +A +Audit Committee +CG +Corporate Governance Committee +CM +Capital Markets and Finance Committee +N +Nominating Committee +OP +Operations and Engineering Committee +P +Prospect Committee +SPC +Strategic Planning and Compensation Committee +Executive Compensation Highlights (page 38) +Our compensation program is designed to reward, in +both the short term and the long term, performance that contributes to the implementation of our business strategies, maintenance of our culture and values and achievement of our objectives. In addition, we reward qualities that we believe help +achieve our business strategies such as teamwork, mentoring future leaders within the Company to drive long-term shareholder value, individual performance in light of general economic and industry-specific conditions, relationships with shareholders +and vendors, the ability to manage and enhance production from our existing assets, the ability to explore new opportunities to increase oil and natural gas production, the ability to identify and acquire additional acreage, the ability to improve +total shareholder returns, the ability to increase year-over-year proved reserves, the ability to control unit production costs, the ability to pursue midstream opportunities, level of job responsibility, industry experience and general professional +growth. +4 Matador Resources Company | 2018 Proxy Statement +Table of Contents +PROXY SUMMARY +Our Board has a “pay for performance” philosophy and recognizes the leadership of Mr. Joseph Wm. Foran, our Chairman and Chief Executive Officer, and our +other executive officers in contributing to the Company’s success in 2017. Accordingly, approximately 90% of Mr. Foran’s 2017 total compensation was performance based. Details of our executive compensation are shown in the 2017 +Summary Compensation Table on page 55. +2018 +Proxy Statement | Matador Resources Company 5 +Table of Contents +INFORMATION ABOUT THE ANNUAL MEETING +INFORMATION +ABOUT THE ANNUAL MEETING +We are furnishing you this Proxy Statement in connection with the solicitation of proxies by the Board to be used at the Annual +Meeting and any adjournment thereof. The Annual Meeting will be held on Thursday, June 7, 2018, at 9:30 a.m., Central Daylight Time. We are sending this Proxy Statement to our shareholders on or about April 26, 2018. +All references in this Proxy Statement to “we,” “our,” “us,” “Matador” or the “Company” refer to Matador Resources +Company, including our subsidiaries and affiliates. +What is the purpose of the Annual Meeting? +At the Annual Meeting, shareholders will act upon the matters +outlined in the Annual Meeting notice, including the following: +• +the election of the five nominees for director named in this Proxy Statement; +• +an advisory vote to approve the compensation of our named executive officers as described herein; +• +an advisory vote on the frequency of advisory votes to approve the compensation of our named executive officers; +• +the ratification of the appointment of KPMG LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2018; and +• +any other matters that may properly come before the meeting. +What are the Board’s voting +recommendations? +• +FOR the election of the five nominees for director named in this Proxy Statement; +• +FOR the approval, on an advisory basis, of the compensation of the Company’s named executive officers; +• +For, on an advisory basis, future advisory votes to approve the compensation of the Company’s named executive officers to occur EVERY YEAR ; and +• +FOR the ratification of the appointment of KPMG LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2018. +Who is entitled to vote? +Shareholders as of the close of business on April 13, 2018 are eligible to vote their shares at the Annual Meeting. As of the Record Date, there were 109,263,103 +shares of our Common Stock outstanding. Each share of Common Stock is entitled to one vote at the Annual Meeting. +Why did I receive a Notice +Regarding the Internet Availability of Proxy Materials in the mail instead of a full set of proxy materials? +Securities and Exchange Commission (“SEC”) rules allow companies to furnish proxy materials over the Internet. We have elected to send a separate Notice of +Internet Availability of Proxy Materials (the “Notice”) to most of our shareholders instead of a paper copy of the proxy materials. This approach conserves natural resources and reduces the costs of printing and distributing our proxy +materials while providing shareholders with a convenient way to access our proxy materials. Instructions on how to access the proxy materials over the Internet or to request a paper copy of proxy materials, including a proxy card or voting +instruction form, may be found in the Notice. In addition, shareholders may request to receive future proxy materials in printed form by mail or electronically by email by following the instructions in the Notice. A shareholder’s election to +receive proxy materials by mail or email will remain in effect until the shareholder terminates it. +6 Matador Resources Company | 2018 Proxy Statement +Table of Contents +INFORMATION ABOUT THE ANNUAL MEETING +How do I vote? +You may: +• +attend the Annual Meeting and vote in person; or +• +dial the toll-free number listed on the Notice, proxy card or voting instruction form provided by your broker. Easy-to-follow voice prompts +allow you to vote your shares and confirm that your voting instructions have been properly recorded. Telephone voting will be available 24 hours a day and will close at 11:59 p.m., Eastern Daylight Time on June 6, 2018; or +• +go to the website www.proxyvote.com and follow the instructions, then confirm that your voting instructions have been properly recorded. If you vote using the website, you can request electronic delivery of +future proxy materials. Internet voting will be available 24 hours a day and will close at 11:59 p.m., Eastern Daylight Time on June 6, 2018; or +• +if you received a paper copy of your proxy materials and elect to vote by written submission, mark your selections on the proxy card, date and sign it, and return the card in the +pre-addressed, postage-paid envelope provided. +Why did I receive paper copies of proxy +materials? +We are providing certain shareholders +with paper copies of the proxy materials instead of a separate Notice. If you received a paper copy and would no longer like to receive printed proxy materials, you may consent to receive all future proxy materials electronically via email or the +Internet. To sign up for electronic delivery, please follow the instructions provided in your proxy materials. When prompted, indicate that you agree to receive or access shareholder communications electronically in the future. +Will each shareholder in our household receive proxy materials? +Generally, no. To the extent you are receiving printed proxy +materials, we try to provide only one set of proxy materials to be delivered to multiple shareholders sharing an address, unless you have given us other instructions. Any shareholder at a shared address may request delivery of single or multiple +copies of printed proxy materials for future meetings by contacting us at: +Matador Resources Company +Attention: Corporate Secretary +5400 LBJ Freeway, Suite 1500 +Dallas, Texas 75240 +Email: investors@matadorresources.com +Telephone: (972) 371-5200 +We undertake to deliver promptly, upon written or oral request, a copy of proxy materials to a shareholder at a shared address to which a single copy of the proxy +materials was delivered. Requests should be directed to the Corporate Secretary at the address or phone number set forth above. +Who will be +admitted to the Annual Meeting? +Admission to the +Annual Meeting will be limited to our shareholders of record, persons holding proxies from our shareholders, beneficial owners of our Common Stock and our employees. If your shares are registered in your name, we will verify your ownership at the +meeting in our list of shareholders as of the Record Date. If your shares are held through a broker, bank or other nominee, you must bring proof of your ownership of the shares. This proof could consist of, for example, a bank or brokerage firm +account statement or a letter from your bank or broker confirming your ownership as of the Record Date. You may also send proof of ownership to us at Matador Resources Company, Attention: Corporate Secretary, 5400 LBJ Freeway, Suite 1500, Dallas, +Texas 75240, or email: investors@matadorresources.com, before the Annual Meeting, and we will send you an admission card. +2018 +Proxy Statement | Matador Resources Company 7 +Table of Contents +INFORMATION ABOUT THE ANNUAL MEETING +If I vote via telephone or the Internet +or by mailing my Proxy Card, may I still attend the Annual Meeting? +Yes. +What if I want to change my vote? +You may revoke your proxy before it is voted by submitting a new proxy with a later date (by mail, telephone or Internet), by voting at the Annual Meeting or by filing a +written revocation with our Corporate Secretary. Your attendance at the Annual Meeting will not automatically revoke your proxy. +What +constitutes a quorum? +A majority of the shares +entitled to vote, present in person or represented by proxy, constitutes a quorum. If you vote by telephone or Internet or by returning your Proxy Card, you will be considered part of the quorum. The Inspector of Election will treat shares +represented by a properly executed proxy as present at the meeting. Abstentions and broker non-votes will be counted for purposes of determining a quorum. A broker +non-vote occurs when a nominee holding shares for a beneficial owner submits a proxy but does not vote on a particular proposal because the nominee does not have discretionary voting power for that item and +has not received instructions from the beneficial owner. +How many votes will be required to approve a proposal? +The affirmative vote of a majority of the votes cast by holders +of shares of Common Stock present in person or represented by proxy and entitled to vote on the election of directors at the Annual Meeting is required for the election of each nominee for director. With respect to the election of directors in an +uncontested election, such as that being held at the Annual Meeting, “majority of the votes” cast means the number of votes cast “for” such nominee exceeds the number of votes cast “against” such nominee. +With respect to the advisory vote on the frequency of advisory votes to approve named executive officer compensation, because this vote is non-binding, the choice receiving the greatest number of votes will be considered the frequency recommended by the Company’s shareholders, even if that choice does not receive a majority of the votes. +With respect to all other matters, the affirmative vote of the holders of a majority of the shares of Common Stock, present in person or by proxy and entitled to vote +at the Annual Meeting, is required. +Shares cannot be voted at the Annual Meeting unless the holder of record is present in person or by proxy. +Can brokers who hold shares in street name vote those shares if they have received no instructions? +Under the rules of the New York Stock Exchange +(“NYSE”), brokers may not vote the shares held by them in street name for their customers and for which they have not received instructions, except with respect to a routine matter. The only matter to be voted on at the Annual Meeting that +is considered routine for these purposes is the ratification of the appointment of our independent registered public accounting firm. Accordingly, brokers may not vote your shares on any other matter if you have not given specific instructions as to +how to vote. Please be sure to give specific voting instructions to your broker so that your vote will be counted. +How will you treat +abstentions and broker non-votes? +Shares of a shareholder who abstains from voting on any or all proposals will be included for the purpose of determining the presence of a quorum. Other than with +respect to the election of directors and the Frequency Vote, an abstention will effectively count as a vote cast against the remaining proposals. Broker non-votes on any +8 Matador Resources Company | 2018 Proxy Statement +Table of Contents +INFORMATION ABOUT THE ANNUAL MEETING +matter, as to which the broker has indicated on the proxy that it does not have discretionary authority to vote, will be treated as shares not entitled to vote with respect to that matter. +However, such shares will be considered present and entitled to vote for quorum purposes so long as they are entitled to vote on at least one other matter. +Who pays the solicitation expenses? +We will bear the cost of solicitation of proxies. Proxies may be solicited by mail or personally by our directors, officers or employees, none of whom will receive +additional compensation for such solicitation. Those holding shares of Common Stock of record for the benefit of others, or nominee holders, are being asked to distribute proxy soliciting materials to, and request voting instructions from, the +beneficial owners of such shares. We will reimburse nominee holders for their reasonable out-of-pocket expenses. +Where can I find the voting results of the Annual Meeting? +We will announce preliminary voting results at the Annual +Meeting, and we will publish final results in a Current Report on Form 8-K that will be filed with the SEC within four business days of the Annual Meeting. You may obtain a copy of this and other reports free +of charge at www.matadorresources.com , by contacting our Investor Relations Department at (972) 371-5200 or investors@matadorresources.com or by accessing the SEC’s website at +www.sec.gov . +Will the Company’s independent registered public accounting firm be available at the Annual Meeting to respond to +questions? +Yes. The Audit Committee of the Board has +approved KPMG LLP to serve as our independent registered public accounting firm for the year ending December 31, 2018. Representatives of KPMG LLP will be present at the Annual Meeting. They will have an opportunity to make a statement, if they +desire to do so, and will be available to respond to appropriate questions. +Where can I contact the Company? +Our mailing address is: +Matador Resources Company +Attention: Corporate Secretary +5400 LBJ Freeway, Suite 1500 +Dallas, Texas 75240 +Our telephone number is (972) 371-5200. +2018 +Proxy Statement | Matador Resources Company 9 +Table of Contents +PROPOSAL 1 +PROPOSAL +1 | ELECTION OF DIRECTORS +The Board currently +consists of 11 members. Our Board is divided into three classes of directors, designated Class I, Class II and Class III, with the term of office of each director ending on the date of the third annual meeting following the annual +meeting at which such director’s class was elected. The number of directors in each class will be as nearly equal as possible. The current Class I directors are Ms. Julia P. Forrester and Messrs. William M. Byerley, Kenneth L. Stewart +and George M. Yates. Ms. Forrester and Messrs. Byerley and Stewart are the Class I director nominees at the Annual Meeting, in each case, to hold office until the 2021 Annual Meeting of Shareholders or his or her earlier death, retirement, +resignation or removal. Mr. Yates’ term will expire at the Annual Meeting, at which time we anticipate that he will begin serving as an advisor to our Board. The Class II directors are Messrs. R. Gaines Baty and Craig T. Burkert and +Dr. Steven W. Ohnimus. The terms of each of Messrs. Baty and Burkert and Dr. Ohnimus will continue until the 2019 Annual Meeting of Shareholders or his earlier death, retirement, resignation or removal. The Class III directors +are Messrs. Joseph Wm. Foran, Reynald A. Baribault, Timothy E. Parker and David M. Posner. Messrs. Parker and Posner were appointed to the Board following the 2017 Annual Meeting of Shareholders and are therefore Class III nominees at the +Annual Meeting, in each case, to hold office until the 2020 Annual Meeting of Shareholders or his earlier death, retirement, resignation or removal. The terms of each of Messrs. Foran and Baribault will continue until the 2020 Annual Meeting of +Shareholders or his earlier death, retirement, resignation or removal. +The Board believes that each of the director nominees possesses the qualifications described +below in “Corporate Governance—Board Committees—Nominating Committee.” That is, the Board believes that each nominee possesses: (i) deep experience at the policy making level in business, government or education; +(ii) the availability and willingness to devote adequate time to Board duties; (iii) the character, judgment and ability to make independent analytical, probing and other inquiries; (iv) a willingness to exercise independent judgment +along with a willingness to listen and learn from others; (v) business knowledge and experience that provides a balance with the other directors; (vi) financial independence; and (vii) with respect to incumbent directors, excellent +past performance on the Board. +The information provided below is biographical information about each of the nominees, as well as a description of the experience, +qualifications, attributes or skills that led the Board to conclude that the individual should be nominated for election as a director of the Company. +Nominees +Mr. William M. +Byerley +Class +I +Retired Partner, PricewaterhouseCoopers LLP (PwC) +Director +Director since: 2016 +Independent: Yes +Age: 64 +Committees: +•   Audit (Chair) +•   Corporate Governance +Mr. Byerley was appointed to the Board in 2016 and is chair of the Board’s Audit Committee. Mr. Byerley retired from +PricewaterhouseCoopers LLP (PwC) in 2014. From 1988 through 2014, Mr. Byerley was a Partner with PwC, serving as an Assurance Partner on various audit engagements primarily for energy sector clients. From 1988 through 1990, Mr. Byerley +served in the PwC National Office Accounting Services Group. Mr. Byerley received a Bachelor of Business Administration degree in 1975 and a Master of Business Administration degree in 1976, both from Southern Methodist University. He is a +licensed Certified Public Accountant. Mr. Byerley’s extensive experience in public accounting and longtime service to energy sector clients of PwC provide the Board with invaluable financial and accounting expertise, particularly for oil +and natural gas companies, strong accounting and financial oversight and general industry knowledge. +10 Matador Resources Company | 2018 Proxy Statement +Table of Contents +PROPOSAL 1 +Ms. Julia P. Forrester +Class +I +Associate Provost for Student Academic Services, Southern Methodist University +Director +Director since: 2017 +Independent: Yes +Age: 58 +Committees: +•   Corporate Governance (Chair) +•   Audit +Ms. Forrester was appointed to the Board in 2017 and is chair of the Board’s Corporate Governance Committee. Ms. Forrester is Associate +Provost for Student Academic Services at Southern Methodist University, a role she has held since June 2015. Her responsibilities in that role include oversight of International Student and Scholar Services, Study Abroad, the Center for Academic +Development of Student Athletes, the President’s Scholars Program and the Hunt Leadership Scholars Program, among others. She has served in various administrative positions at SMU, including serving as Associate Dean for Academic Affairs for +the 1995-1996 academic year and as Dean ad interim of the Dedman School of Law from June 2013 through June 2014. Ms. Forrester is also Professor of Law at SMU, having begun her teaching career at SMU in 1990 as an Assistant +Professor. She previously practiced law with Thompson & Knight LLP. Ms. Forrester holds a Bachelor of Science degree in Electrical Engineering from the University of Texas at Austin, graduating with highest honors, and a law degree +from the University of Texas School of Law, graduating with high honors. She is a member of the Order of the Coif, and she received the highest score on the Texas bar exam following her graduation. Ms. Forrester’s academic and legal +experience provide our Board with a unique perspective on the Company’s business and operations. +Mr. Timothy E. +Parker +Class +III +Former Portfolio Manager and Analyst—Natural Resources, T. Rowe Price & +Associates +Director +Director since: 2018 +Independent: Yes +Age: 43 +Committees: +•   Capital Markets and Finance (Chair) +•   Audit +•   Prospect +•   Strategic Planning and Compensation +Mr. Parker was appointed to the Board in 2018 and is chair of the Board’s Capital Markets and Finance Committee. Mr. Parker recently +retired as Portfolio Manager and Analyst—Natural Resources for T. Rowe Price & Associates. Mr. Parker joined T. Rowe Price in 2001 as an equity analyst before becoming a portfolio manager in 2010. He managed the New Era fund +from 2010 to 2013 and managed the energy and natural resources portions of T. Rowe Price’s Small Cap Value, Small Cap Stock and New Horizons funds from 2013 to 2017. Prior to joining T. Rowe Price, Mr. Parker was an investment banking +analyst at Robert W. Baird & Co., Inc. Mr. Parker holds a Bachelor of Science degree in Commerce from the University of Virginia and a Master of Business Administration degree from the Darden School of Graduate Business (University of +Virginia). Mr. Parker’s experience with a large institutional shareholder and his extensive familiarity with the capital markets provide the Company with valuable insight. +Mr. David M. +Posner +Class +III +President, EnVent Energy LLC +Director +Director since: 2017 +Independent: Yes +Age: 64 +Committees: +•   Audit +•   Corporate Governance +•   Operations and Engineering +Mr. Posner was appointed to the Board in 2017. Mr. Posner is the founder and President of EnVent Energy LLC, a privately-held project +development and consulting company focused on advising oil and natural gas exploration and production companies on commercial negotiations related to marketing, gathering, processing and transportation of oil, natural gas and natural gas liquids. He +founded EnVent in 2000 following his tenure with Santa Fe Snyder Corporation/Snyder Oil Corporation, where he ultimately served as Vice President, Marketing, having responsibility over the company’s worldwide marketing of oil, natural gas and +natural gas liquids. Prior to joining Snyder in 1991, Mr. Posner worked for Ladd Petroleum Corporation serving as, among other roles, its Vice President, Natural Gas. Mr. Posner has served as Chairman of the Colorado Oil and Gas +Association and has served as a member of its board for more than 25 years. Mr. Posner received a Bachelor of Arts degree from Brown University and a Master of Science degree in Mineral Economics from the Colorado School of Mines. +Mr. Posner’s unique midstream experience provides the Board with an important perspective on marketing, gathering, processing and transportation of the Company’s products. +2018 +Proxy Statement | Matador Resources Company 11 +Table of Contents +PROPOSAL 1 +Mr. Kenneth L. Stewart +Class +I +Chair—United States, Norton Rose Fulbright US LLP +Director +Director since: 2017 +Independent: Yes +Age: 64 +Committees: +•   Corporate Governance +•   Capital Markets and Finance +•   Prospect +•   Strategic Planning and Compensation +Mr. Stewart, was appointed to the Board in 2017. Mr. Stewart is a Partner in, and holds the position of Chair—United States with, Norton +Rose Fulbright US LLP, a Texas limited liability partnership, which constitutes the United States operations of Norton Rose Fulbright, an international legal practice with over 4,000 legal professionals in over 50 cities worldwide. Mr. Stewart +began his legal career with Fulbright & Jaworski LLP, the predecessor to Norton Rose Fulbright US LLP, and previously held at differing times positions of Global Chair of the international organization, Managing Partner of the United States +region and Partner-in-Charge of the Dallas office. Prior to entering into full-time management for his firm in 2012, he engaged in a domestic and international +transactional legal practice, focusing principally on merger, acquisition, financing and joint venture activities for both public and privately-held entities. Mr. Stewart has extensive experience representing and advising companies and their +executive officers and boards of directors engaged in oil and natural gas exploration and midstream activities. Mr. Stewart graduated from the University of Arkansas School of Business in 1976 with a B.S.B.A degree in Accounting and was +licensed as a Certified Public Accountant in Texas in 1981 (certificate now on non-practice status). He graduated with honors from Vanderbilt Law School in 1979 and was a member of the Order of the Coif. +Mr. Stewart has been active in numerous civic and professional organizations in the Dallas area in the past, including among others, the Dallas Regional Chamber, The Center for American and International Law and the Dallas Citizens Council. +Mr. Stewart’s extensive experience representing public companies, and particularly oil and natural gas companies, along with his years of management experience, provide our Board with important legal, corporate governance and leadership +insight. +Vote Required +The affirmative vote of a majority of the votes cast by holders +of shares present in person or represented by proxy and entitled to vote on the election of directors at the Annual Meeting is required for the election of each nominee for director. With respect to the election of directors in an uncontested +election, such as that being held at the Annual Meeting, “majority of the votes” cast means the number of votes cast “for” such nominee exceeds the number of votes cast “against” such nominee. If you hold your shares +through a broker and you do not instruct the broker how to vote, your broker will not have the authority to vote your shares. Abstentions and broker non-votes will each be counted as present for purposes of +determining the presence of a quorum. +The Board of Directors recommends that you vote FOR each of the nominees. +12 Matador Resources Company | 2018 Proxy Statement +Table of Contents +PROPOSAL 1 +Directors Continuing in Office +Biographical information for our directors who are continuing in +office is provided below. +Mr. Joseph Wm. +Foran +Class +III +Chairman and CEO, Matador Resources Company +Chairman of the Board +Director since: 2003 +Independent: No +Age: 65 +Committees: +•   Executive (Chair) +•   Capital Markets and Finance +•   Operations and Engineering +•   Prospect +Mr. Foran founded Matador Resources Company in July 2003 and has served as Chairman of the Board, Chief Executive Officer and Secretary since our founding. He served as President from our founding until November 2013 and is also +chair of the Board’s Executive Committee. Mr. Foran began his career as an oil and natural gas independent in 1983 when he and his wife, Nancy, founded Foran Oil Company with $270,000 in contributed capital from 17 of his closest friends and +neighbors. Foran Oil Company was later contributed into Matador Petroleum Corporation upon its formation by Mr. Foran in 1988, and Mr. Foran served as Chairman and Chief Executive Officer of that company from inception until the time of its sale to +Tom Brown, Inc. in June 2003 for an enterprise value of $388 million in an all-cash transaction. Under Mr. Foran’s guidance, Matador Petroleum realized a 21% average annual rate of return for its shareholders for 15 years. Mr. Foran is +originally from Amarillo, Texas, where his family owned a pipeline construction business. From 1980 to 1983, he was Vice President and General Counsel of J. Cleo Thompson and James Cleo Thompson, Jr., Oil Producers. Prior to that time, he was a +briefing attorney to Chief Justice Joe R. Greenhill of the Supreme Court of Texas. Mr. Foran graduated with a Bachelor of Science degree in Accounting from the University of Kentucky with highest honors and a law degree from the Southern Methodist +University Dedman School of Law, where he was a Hatton W. Sumners scholar and the Leading Articles Editor of the Southwestern Law Review. He is currently active as a member of various industry and civic organizations, including his church and +various youth activities. In 2002, Mr. Foran was honored as the Ernst & Young “Entrepreneur of the Year” for the Southwest Region. As the founder, Chairman of the Board and Chief Executive Officer of Matador Resources Company, Mr. +Foran provides Board leadership, industry experience and long relationships with many of our shareholders. +Mr. Reynald A. +Baribault +Class +III +Vice President / Engineering, NP Resources, LLC +Lead Independent Director +Director since: 2014 +Independent: Yes +Age: 54 +Committees: +•   Prospect (Chair) +•   Audit +•   Corporate Governance +•   Executive +•   Operations and Engineering +•   Strategic Planning and Compensation +Mr. Baribault was elected to the Board in 2014, serves as lead independent director and is chair of the Board’s Prospect Committee. He is Vice President / Engineering of NP Resources, LLC, a +Denver-based exploration and production operator solely focused on the horizontal Bakken play in the North Dakota Williston Basin. In 2007, he co-founded NP Resources’ predecessor company, North Plains +Energy, LLC, which developed and sold its North Dakota production and assets in 2012. In addition, he co-founded and serves as President and Chief Executive Officer of IPR Energy Partners, LLC, a Dallas-based +oil and natural gas production operator with previous operations in Louisiana, Southeast New Mexico and North Central Texas and current operations in the Fort Worth Basin. Prior to co-founding North Plains +Energy, NP Resources and IPR Energy Partners, Mr. Baribault served as Vice President, Supervisor and Petroleum Engineering Consultant of Netherland, Sewell & Associates, Inc. from 1990 to 2002. Mr. Baribault began his professional +career with Exxon Company in 1985 where his responsibilities included operations reservoir engineering for deep, pressured natural gas fields in South Louisiana. Mr. Baribault received his Bachelor of Science degree in Petroleum Engineering +from Louisiana State University in 1985 and is a Licensed Professional Engineer in the State of Texas. Mr. Baribault provides valuable insight to our Board on our drilling, completion and reservoir engineering operations, as well as growth +strategies, midstream operations and administration. +2018 +Proxy Statement | Matador Resources Company 13 +Table of Contents +PROPOSAL 1 +Mr. R. Gaines Baty +Class +II +CEO, R. Gaines Baty Associates, Inc. +Director +Director since: 2016 +Independent: Yes +Age: 67 +Committees: +•   Strategic Planning and Compensation (Chair) +•   Corporate Governance +•   Nominating +Mr. Baty was appointed to the Board in 2016 and is chair of the Board’s Strategic Planning and Compensation Committee. Mr. Baty is Founder and CEO of R. Gaines Baty Associates, Inc., an executive search firm he +founded in 1982. Mr. Baty has over 30 years of experience as an executive search consultant. In this role, he has provided companies across the country and in a variety of industries with executive search and advisory services. Mr. Baty +has served as a two-term President of the Society of Executive Recruiting Consultants and a two-term President of the Independent Recruiter Group. Mr. Baty is also +a published author. Mr. Baty received a Bachelor of Business Administration degree from Texas Tech University, where he was a letterman and captain of the football team. Mr. Baty’s experience and expertise in executive leadership and +development provide our Board with an important and unique perspective on these matters, and Mr. Baty assists the Board and the Company with recruitment, board administration, compensation and growth strategies. +Mr. Craig T. +Burkert +Class +II +CFO, ROMCO Equipment Co. +Director +Director since: 2016 +Independent: Yes +Age: 61 +Committees: +•   Nominating (Chair) +•   Audit +•   Corporate Governance +•   Strategic Planning and Compensation +Mr. Burkert was elected to the Board in 2016 and is chair of the Board’s Nominating Committee. With over 30 years of experience in distribution businesses, he currently serves as the Chief Financial Officer of ROMCO +Equipment Co., a dealer of heavy construction equipment that serves customers in a variety of sectors throughout most of Texas. Mr. Burkert joined ROMCO in 1984 as a Product Manager, later serving as a Branch Manager from 1986 to 1989 and as +General Manager from 1989 to 1994. In 1994 he left ROMCO to start a dealership in the lift truck industry in New England, but he returned to ROMCO in 2003 to take on his current position of Chief Financial Officer, where he is responsible for all +financial, administrative and technology aspects of the company. Mr. Burkert received a Bachelor of Science degree in Electrical Engineering and Computer and Information Systems from Tulane University. He also holds a Master in Business +Administration degree from Harvard Business School. Mr. Burkert has been involved with Matador since its inception. He has served on the Shareholder Advisory Committee for Board Nominations since 2014. Mr. Burkert’s accounting and +financial knowledge and leadership experience, coupled with his familiarity with the operations and corporate governance of the Company, provide our Board with a valuable perspective on these matters and other business issues. +14 Matador Resources Company | 2018 Proxy Statement +Table of Contents +PROPOSAL 1 +Dr. Steven W. +Ohnimus +Class +II +Retired Vice President and General Manager, Unocal Indonesia +Director +Director since: 2004 +Independent: Yes +Age: 71 +Committees: +•   Operations and Engineering (Chair) +•   Audit +•   Corporate Governance +•   Nominating +•   Prospect +•   Strategic Planning and Compensation +Dr. Ohnimus was elected to the Board in 2004 and is chair of the Board’s Operations and Engineering Committee. He spent his entire professional career from 1971 to 2000 with Unocal Corporation, an integrated energy +company. From 1995 to 2000, he was General Manager—Partner Operated Ventures, where he represented Unocal’s non-operated international interests at board meetings, management committees and other +high level meetings involving projects in the $200 million range in countries such as Azerbaijan, Bangladesh, China, Congo, Myanmar and Yemen. From 1994 to 1995, Dr. Ohnimus was General Manager of Asset Analysis, where he managed and +directed planning, business plan budgeting and scenario plans for the domestic and international business unit with an asset portfolio totaling $5.5 billion. From 1990 to 1994, Dr. Ohnimus was Vice President and General Manager, Unocal +Indonesia, located in Balikpapan, operating five offshore fields and one onshore liquid extraction plant and employing over 1,200 employees. From 1989 to 1990, he served as Regional Operations Manager in Anchorage, Alaska, and from 1988 to 1989, he +was District Operations Manager in Houma, Louisiana. From 1981 to 1988, Dr. Ohnimus was in various management assignments in Houston and Houma, Louisiana, and from 1971 to 1981 he handled various technical assignments in reservoir engineering, +production and drilling in the Gulf Coast area (Houston, Van, Lafayette and Houma). From 1975 to 1979, Dr. Ohnimus was Assistant Professor of Petroleum Engineering at the University of Southwest Louisiana (now University of Southern Louisiana) +where he taught eleven undergraduate and graduate night classes. In 1980, he taught drilling seminars at the University of Texas Petroleum Extension Service of the International Association of Drilling Contractors (IADC). Dr. Ohnimus has +authored several published papers concerning reservoir recompletion and increased recovery. He received his Bachelor of Science degree in Chemical Engineering from the University of Missouri at Rolla in 1968, a Master of Science degree in Petroleum +Engineering from the University of Missouri at Rolla in 1969 and a PhD degree in Petroleum Engineering from the University of Missouri at Rolla in 1971. Dr. Ohnimus served as a director of the American Petroleum Institute in 1978 and 1979, +served as Session Chairman for the Society of Petroleum Engineers’ Annual Convention in 1982, was the Evangeline Section Chairman of the Society of Petroleum Engineers in 1978 and 1979 and served as President of the Unocal Credit Union from +1986 to 1988. In 2007, he was elected President of the Unocal Gulf Coast Alumni Club, which reports through the Chevron Retirees Association, for which Dr. Ohnimus is a director. Effective July 2015, Dr. Ohnimus assumed the position of +South Texas Area Vice President of the Chevron Retirees Association. From 2008 to 2009, Dr. Ohnimus served as the vice chairman of the advisory board of Western Standard Energy Corp. (OTCBB: WSEG), an oil and natural gas exploration company. +Due to his long oil and natural gas industry career and significant operational and international experience, Dr. Ohnimus provides valuable insight to our Board on our drilling and completion operations and management, as well as providing a +global technology and operations perspective. +2018 +Proxy Statement | Matador Resources Company 15 +Table of Contents +PROPOSAL 1 +Advisors to +the Board +In addition to our Board, we have eight +individuals with significant oil and natural gas experience or legal, accounting or other business experience who advise our Board on various matters. From time to time, we enter into various agreements with these individuals with respect to their +service as advisors to our Board. Their business histories are described below: +Mr. Rick H. Fenlaw . Mr. Fenlaw is +owner of Fenlaw Land Services, a company he founded in 1999 to provide title, leasing and curative professionals to upstream oil and natural gas clients, particularly in the Barnett Shale play. From 1990 through the formation of Fenlaw Land +Services, Mr. Fenlaw operated a similar land services company, Rick Fenlaw & Associates, with a focus on East Texas and the Hardeman Basin. Through his companies, Mr. Fenlaw has employed up to 75 +sub-brokers servicing his oil and natural gas clients. Mr. Fenlaw has worked as an independent petroleum landman since 1979. Prior to beginning his career as a landman, he played football for the St. +Louis Football Cardinals. Mr. Fenlaw received a Bachelor of Journalism degree from the University of Texas in Austin in 1977. +Mr. Scott E. King . Mr. King recently retired as Vice President—Exploration and Development of Petro Harvester Oil +and Gas, LLC, having joined that company in October 2012. Mr. King joined Matador Resources Company at its founding in 2003 and served as Vice President—Exploration from 2003 to 2009 and Vice President—Geophysics and New Ventures from +2009 until 2012. He was previously with Matador Petroleum Corporation, joining that company in December 1996 as Chief Geophysicist. Immediately prior to Matador Petroleum’s sale, Mr. King served as its Portfolio Manager and was responsible +for recommending which drilling opportunities Matador Petroleum should pursue. Prior to joining Matador Petroleum, Mr. King worked for Enserch Corporation, a diversified energy company with interests in petroleum exploration and production, +oilfield services, engineering design and construction, and natural gas transmission and distribution, as Team Leader for the Oklahoma Asset Group. Mr. King began his career in 1983 with Sohio Petroleum, an integrated energy company. +Mr. King received a Bachelor of Science degree in Geology from Alfred University, Alfred, New York in 1981 and a Master of Science degree in Geophysics from Wright State University, Dayton, Ohio in 1983. +Ms. Tara W. Lewis . Ms. Lewis presently serves as a consultant to HEYCO Energy Group, Inc., previously serving as Vice +President from 1998 to 2015. She previously served as Director of Internal Audit and Business Analysis at Apache Corporation and, prior to that role, spent more than 10 years with PwC, ultimately serving as Senior Tax Manager with the World +Petroleum Group from 1993 to 1997. She also worked as a Resident Tax Specialist for the IPAA from 1991 to 1993. Ms. Lewis is Chairman of the International Committee of IPAA and serves on various civic boards, including The Arts Community +Alliance (TACA) and Dallas Children’s Theater. Ms. Lewis is a licensed Certified Public Accountant in the State of Texas. She received a Bachelor of Arts degree in Accounting from Rice University and a law degree from the University of +Houston Law School. +Mr. Wade I. Massad . Mr. Massad served as a consultant to the Company and an advisor to the +Board from 2010 to December 2011, when he was elected Executive Vice President—Capital Markets of the Company. He held that role until July 2012, when he resumed his role as a consultant to the Company and as an advisor to the Board. +Mr. Massad is the Co-Founder and Co-Managing Member of Cleveland Capital Management L.L.C., a registered investment advisor and General Partner of Cleveland Capital +L.P., a private investment fund focused on micro-cap public and private equity securities, established in October 1996. Previously, Mr. Massad was an investment banker with Keybanc Capital Markets and RBC +Capital Markets, where he was the head of U.S. equity institutional sales from 1997 to 1998 and the head of U.S. Capital Markets business from 1999 to 2003. He also served on the firm’s executive committee. Mr. Massad serves on the board +of the Investors Exchange Group, Inc. (IEX). Mr. Massad received a Bachelor of Arts degree in Business Management from Baldwin-Wallace University in 1989 and currently serves on its Board of Trustees. +Mr. Greg L. McMichael. Mr. McMichael served as a member of the Board of Matador Resources Company from 2004 to 2008. +He presently serves on the board of directors for Denbury Resources, Inc. (NYSE: DNR). Mr. McMichael retired in October 2004 as Vice President and Group Leader—Energy Research of A.G. Edwards, Inc. In that capacity, he was responsible for +overseeing all of the firm’s equity research in the Energy Sector, including integrated oils, exploration and production, oil service and master limited partnerships. Prior to joining +16 Matador Resources Company | 2018 Proxy Statement +Table of Contents +PROPOSAL 1 +A.G. Edwards, Mr. McMichael served as Managing Director of Equity Research at Hanifen, Imhoff, Inc., a Denver-based regional investment firm. He had previously served as Chief Executive +Officer of a private oil and natural gas acquisition and production company he co-founded in 1987. Mr. McMichael is a member of the National Association of Corporate Directors, where he is currently a +Leadership Fellow and serves on the board of the Colorado chapter. Mr. McMichael received a Bachelor of Arts degree in Political Science and Economics from Schiller International University (London) in 1973. +Dr. James D. Robertson . Dr. Robertson is a founder and co-managing partner of +Salt Creek Petroleum, LLC, a privately-held company that explores for and produces oil and natural gas in conventional onshore plays in Texas. He is also founder and owner of Rannoch Petroleum LLC, an oil and natural gas investment and consulting +firm based in Fort Worth, Texas. Prior to becoming an independent petroleum explorer, Dr. Robertson worked for ARCO for 25 years, serving as Vice President of Exploration for ARCO’s international division prior to his retirement from ARCO +upon its acquisition by BP plc in 2000. Dr. Robertson has served as president of the Society of Exploration Geophysicists, chairman of the Fort Worth Chapter of the Society of Independent Professional Earth Scientists (SIPES) and as a national +director of SIPES from 2012 to 2013. He is a licensed professional geoscientist in the State of Texas. Dr. Robertson received a Bachelor of Science degree in Geological Engineering from Princeton University and a PhD degree in Geophysics from +the University of Wisconsin. +Mr. James A. Rolfe. Mr. Rolfe is a solo legal practitioner. Until 2015, he served as Of Counsel with +Kendall Law Group, a Dallas, Texas law firm specializing in litigation that he joined in 2009. From 2005 to 2009, Mr. Rolfe served as Of Counsel with Fitzpatrick Hagood Smith & Uhl LLP, a boutique litigation firm. He worked as a sole +practitioner in private practice from 1985 to 2005. From 1981 to 1985, Mr. Rolfe served as United States Attorney for the Northern District of Texas, having been appointed to that position by President Reagan. From 1979 to 1981, he worked in +private practice following his service as Assistant United States Attorney for the Northern District of Texas, a position he held from 1973 to 1979. Mr. Rolfe was Assistant District Attorney for Dallas County from 1969 to 1973. He began his +public service in the role of Assistant City Attorney for the City of Dallas, which position he held from 1968 to 1969. Mr. Rolfe served in the United States Army from 1959 to 1962. He received a Bachelor of Arts degree from Austin College in +1965 and received its Distinguished Alumnus Award in 2000. He received his law degree from the University of Texas at Austin in 1968. +Mr. Michael C. Ryan. Mr. Ryan served as a member of the Board of Matador Resources Company from February 2009 to June 2015. Prior to +joining the Board, he served as an advisor to the Financial Committee (now the Capital Markets and Finance Committee) and frequently participated in Board planning and strategy sessions. Mr. Ryan is a private investor. From October 2004 to +December 2015, he was a Partner and member of the Investment Committee at Berens Capital Management LLC, an investment firm based in New York. From February 1998 to June 2004, he worked with Goldman, Sachs & Co., a global investment banking +and securities services firm, leading its West Coast international institutional equities business. In this role, he developed and built a team of professionals to advise large institutional clients on their global investment decisions. From 1995 to +1998, Mr. Ryan lived in Oslo, Norway, where he was a Partner at Pareto Securities, a Scandinavian-based securities firm where he led and built the institutional equities business into the United States and United Kingdom. From 1991 to 1994, +Mr. Ryan represented multiple eastern European governments in the preparation, negotiation and sale of many of their largest state-owned companies. He began his career with Honeywell, Inc., which invents and manufactures technologies, including +in the safety, security and energy areas, in 1983, working in the Systems and Research Center, which focused on advanced weapons development programs. Mr. Ryan received a Bachelor of Science degree from the University of Minnesota in 1983 and a +Master of Business Administration degree from The Wharton School at the University of Pennsylvania in 1991. +2018 +Proxy Statement | Matador Resources Company 17 +Table of Contents +CORPORATE GOVERNANCE +CORPORATE +GOVERNANCE +The business affairs of Matador are managed under the direction of the Board in accordance with the Texas Business Organizations Code, the +Company’s Amended and Restated Certificate of Formation and its Amended and Restated Bylaws, each as amended to date. The Board has adopted Corporate Governance Guidelines, which are reviewed annually by the Corporate Governance Committee of +the Board. The Company has a Code of Ethics and Business Conduct for Officers, Directors and Employees (“Code of Ethics”), which is applicable to all officers, directors and employees of the Company. The Company intends to post any +amendments to, and may post any waivers of, its Code of Ethics on the Company’s website to the extent applicable to an executive officer or a director of the Company. The Corporate Governance Guidelines and the Code of Ethics are available on +the Company’s website at www.matadorresources.com under the heading “Investors—Corporate Governance.” +The Board holds regular and +special meetings and spends such time on the affairs of the Company as its duties require. During 2017, the Board held 11 meetings. The Board also meets regularly in non-management executive sessions in +accordance with NYSE regulations. The Corporate Governance Guidelines provide that one of the Company’s independent directors should serve as lead independent director at any time when the chief executive officer serves as the chairman of the +board. The lead independent director presides over the non-management executive sessions, serves as a liaison between the chairman and the independent directors and performs such additional duties as the Board +may otherwise determine and delegate. Because Mr. Foran serves as Chairman of the Board and Chief Executive Officer, our independent directors have appointed Mr. Baribault to serve as lead independent director. In 2017, all incumbent +directors of the Company attended at least 75% of the meetings of the Board and the committees on which they served. It is our policy that each of our directors is expected to attend annual meetings of shareholders. Of our 10 directors that +continued in office through the 2017 Annual Meeting, nine attended the 2017 Annual Meeting. +Independence of +Directors +The Board makes all determinations with +respect to director independence in accordance with the NYSE listing standards and the rules and regulations promulgated by the SEC. The actual determination of whether a director is independent is made by the Board on a case-by-case basis. +In connection with its preparation for the Annual Meeting, the Board +undertook its annual review of director independence and considered transactions and relationships between each director or any member of his or her immediate family and the Company and its subsidiaries and affiliates. In making its determination, +the Board applied the NYSE listing standards and SEC rules and regulations. +The Board reviewed the independence of our directors and considered whether any +director has a material relationship with us that could compromise his or her ability to exercise independent judgment in carrying out his or her responsibilities. After this review, our Board determined that nine of our 11 current directors are +“independent directors” as defined under the rules of the SEC and the NYSE: Ms. Forrester, Messrs. Baribault, Baty, Burkert, Byerley, Parker, Posner and Stewart and Dr. Ohnimus. No member of or nominee for our Board has a family +relationship with any executive officer or other members of our Board. +Majority Vote in Director Elections +On December 21, 2016, the Board amended the +Company’s Amended and Restated Bylaws (as so amended, the “Bylaws”) to implement a majority voting standard in uncontested director elections. Pursuant to the Bylaws, in an election of directors at a meeting of shareholders at which a +quorum is present, (i) if the number of nominees exceeds the number of directors to be elected (a “contested election”), directors shall be elected by a plurality of the votes cast by the holders of shares present in person or +represented by proxy and entitled to vote on the election of directors at such meeting and (ii) in an election of directors that is not a contested election (an “uncontested election”), such as that being held at the Annual Meeting, +directors shall be elected by a majority of +18 Matador Resources Company | 2018 Proxy Statement +Table of Contents +CORPORATE GOVERNANCE +the votes cast by the holders of shares present in person or represented by proxy and entitled to vote on the election of directors at such meeting. For purposes of the Bylaws, in an uncontested +election, a “majority of the votes cast” means that the number of shares voted “for” a director must exceed the number of votes cast “against” that director. Prior to the amendment of the Bylaws, directors were elected +by a plurality of the votes cast, whether or not the election was a contested election. +In connection with the amendment to the Bylaws, the Board approved and +adopted an amendment to the Company’s Corporate Governance Guidelines to implement a resignation policy for directors who fail to receive the required number of votes in an uncontested election in accordance with the Bylaws. Pursuant to the +Corporate Governance Guidelines, as amended, in an uncontested election, any nominee for director who receives a greater number of votes “against” his or her election than votes “for” such election (a “majority against +vote”) shall promptly tender his or her resignation following certification of the shareholder vote. +The Nominating Committee shall promptly consider the +resignation offer and a range of possible responses based on the circumstances that led to the majority against vote, if known, and make a recommendation to the Board concerning whether to accept or reject such resignation. The Board shall act on +the Nominating Committee’s recommendation and publicly disclose its decision with respect to such resignation offer within 90 days following certification of the shareholder vote. The resignation, if accepted by the Board, will be effective at +the time specified by the Board when it determines to accept the resignation, which effective time may be deferred until a replacement director is identified and appointed to the Board. +Board Leadership Structure +Mr. Foran serves as Chairman of the Board and Chief +Executive Officer of the Company. As stated in the Corporate Governance Guidelines, the Board does not believe that the offices of Chairman of the Board and Chief Executive Officer must be separate. The members of the Board possess experience and +unique knowledge of the challenges and opportunities the Company faces. They are, therefore, in the best position to evaluate the current and future needs of the Company and to judge how the capabilities of the directors and senior managers can be +most effectively organized to meet those needs. Given his deep knowledge of the Company and experience in leading it, the Board currently believes that the most effective leadership structure for the Company is to have Mr. Foran serve as +Chairman of the Board and Chief Executive Officer. +While Mr. Foran serves as Chairman and Chief Executive Officer, nine of 10 of our non-employee directors are independent under the rules of the SEC and the NYSE. After considering the recommendations of our Strategic Planning and Compensation Committee, the independent directors determine +Mr. Foran’s compensation. Further, the Company has five standing committees and a lead independent director, who is currently Mr. Baribault. The Board believes that each of these measures counterbalances any risk that may exist in +having Mr. Foran serve as Chairman and Chief Executive Officer. For these reasons, the Board believes that this leadership structure is effective for the Company. +As lead independent director, Mr. Baribault has the following roles and responsibilities: +• +he chairs the executive sessions of the non-management and independent directors; +• +he leads the independent directors in the evaluation of the Chief Executive Officer; +• +he facilitates communication among the non-management and independent directors; and +• +he acts as a liaison between the non-management and independent directors and the Chief Executive Officer. +Mr. Baribault, as lead independent director, may also perform such other duties as the Board or the Corporate Governance Committee from time to time may assign, +which may include, but are not limited to, the following: +• +help develop Board agendas and ensure critical issues are included; +• +determine quality, quantity and timeliness of information from management; +2018 +Proxy Statement | Matador Resources Company 19 +Table of Contents +CORPORATE GOVERNANCE +• +make recommendations about retaining consultants or advisors for the Board; +• +interview Board candidates; +• +oversee Board and director evaluations; and +• +help improve communications and processes by and between management and the Board and the Chief Executive Officer. +Board Committees +The standing committees of the Board are the Audit Committee, Corporate Governance Committee, Executive Committee, Nominating Committee and Strategic Planning and +Compensation Committee. The Board has also established the following advisory committees: Capital Markets and Finance Committee, Operations and Engineering Committee and Prospect Committee. Each of the standing committees is governed by a charter, +and a copy of the charters of each of these committees is available on the Company’s website at www.matadorresources.com under the heading “Investors—Corporate Governance.” Director membership of all of our standing and +advisory committees is identified below, as of April 13, 2018. Mr. Yates’ term as a director, and as a member of the committees noted below, will expire at the Annual Meeting. +Director +Audit +Committee +Corporate +Governance +Committee +Executive +Committee +Nominating +Committee +Strategic +Planning and +Compensation +Committee +Capital +Markets +and +Finance +Committee +Operations +and +Engineering +Committee +Prospect +Committee +Joseph Wm. Foran +** +* +* +* +Reynald A. Baribault +* +* +* +* +* +** +R. Gaines Baty +* +* +** +Craig T. Burkert +* +* +** +* +William M. Byerley +** +* +Julia P. Forrester +* +** +Steven W. Ohnimus +* +* +* +* +** +* +Timothy E. Parker +* +* +** +* +David M. Posner +* +* +* +Kenneth L. Stewart +* +* +* +* +George M. Yates +* +* +* +* +* +Member +** +Chair +Audit Committee +The Audit Committee assists the Board in monitoring: +• +the integrity of our financial statements and disclosures; +• +our compliance with legal and regulatory requirements; +• +the qualifications and independence of our independent auditor; +• +the performance of our internal audit function and our independent auditor; and +• +our internal control systems. +In addition, the Audit Committee is charged with review of compliance with our Code of +Ethics. +During 2017, the Audit Committee met five times and as of April 13, 2018 consisted of Ms. Forrester, Messrs. Baribault, Burkert, Byerley, Parker +and Posner and Dr. Ohnimus, each of whom is independent under the rules of +20 Matador Resources Company | 2018 Proxy Statement +Table of Contents +CORPORATE GOVERNANCE +the SEC and the NYSE. Mr. Byerley is the chair of the Audit Committee. SEC rules require a public company to disclose whether or not its audit committee has an “audit committee +financial expert” as defined by applicable SEC rules and regulations. Our Board has determined that each of Messrs. Byerley and Burkert is an “audit committee financial expert.” +Strategic Planning and Compensation Committee +In February 2018, the +Board renamed the Compensation Committee as the Strategic Planning and Compensation Committee. The Strategic Planning and Compensation Committee has the following responsibilities: +• +assists the Board and the independent members of the Board in the discharge of their fiduciary responsibilities relating to the fair and competitive compensation of our executive officers; +• +provides overall guidance with respect to the establishment, maintenance and administration of our compensation programs, including stock and benefit plans; +• +oversees and advises the Board and the independent members of the Board on the adoption of policies that govern our compensation programs; and +• +recommends to the Board the strategic, tactical and performance goals of the Company, including those performance and tactical goals that relate to performance-based compensation, including but not limited to goals for +production, reserves, cash flows and shareholder value. +The Strategic Planning and Compensation Committee has the authority to delegate authority and +responsibilities to subcommittees of its members, so long as the subcommittee consists of at least two members. +As of April 13, 2018, the Strategic Planning +and Compensation Committee consisted of Messrs. Baribault, Baty, Burkert, Parker and Stewart and Dr. Ohnimus, each of whom is independent under the rules of the SEC and the NYSE, a “non-employee +director” pursuant to Rule 16b-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and an “outside director” pursuant to Section 162(m) of the Internal +Revenue Code of 1986, as amended (the “Code”). Mr. Baty is the chair of the Strategic Planning and Compensation Committee. During 2017, the Strategic Planning and Compensation Committee met 16 times. +Nominating Committee +The Nominating Committee has the following +responsibilities: +• +identifies and recommends to the Board individuals qualified to be nominated for election to the Board; and +• +recommends to the Board the members and chair of each committee of the Board. +The Nominating Committee has the +authority to delegate authority and responsibilities to subcommittees of its members, so long as the subcommittee consists of at least two members. Pursuant to the Nominating Committee Charter, no director may serve on the Nominating Committee if +such director is subject to re-election to the Board at the next annual meeting of shareholders. +As of April 13, 2018, +the Nominating Committee consisted of Messrs. Baty and Burkert and Dr. Ohnimus, each of whom is independent under the rules of the SEC and the NYSE. Mr. Burkert is the chair of the Nominating Committee. During 2017, the Nominating +Committee met six times. +The Board has also established a Shareholder Advisory Committee for Board Nominations (the “Advisory Committee”) that is charged +with receiving and considering possible nominees for election to the Board by shareholders. Pursuant to the Advisory Committee charter, this committee is comprised of eight to 12 persons selected by the Nominating Committee and consists of at least: +• +two members of the Nominating Committee; +• +two former members of or special advisors to the Board; +2018 +Proxy Statement | Matador Resources Company 21 +Table of Contents +CORPORATE GOVERNANCE +• +two shareholders who beneficially own Common Stock having a market value of at least $1.0 million (such value to be based on the market value of the Common Stock immediately prior to designation of such +shareholders to the Advisory Committee); and +• +two shareholders who have beneficially owned Common Stock continuously for at least the five years prior to such shareholder’s designation to the Advisory Committee. +The current members of the Advisory Committee are Messrs. Burkert, McMichael, Ryan and King and Dr. Ohnimus and J. Barry Banker, Joe E. Coleman, Kevin M. Grevey +and Bobby K. Pickard. +The Advisory Committee makes recommendations based on its conclusions to the Nominating Committee for its consideration and review. +The Nominating Committee and the Advisory Committee consider individuals recommended by the Company’s shareholders to serve on the Board. In considering candidates +submitted by shareholders, the Advisory Committee and the Nominating Committee take into consideration the needs of the Board and the qualifications of the candidate. To have a candidate considered by the Advisory Committee and the Nominating +Committee, a shareholder must submit the recommendation in writing and must include the following information: +• +The name and address of the shareholder, evidence of the person’s ownership of Common Stock or derivatives, including the number of shares owned, a description of all arrangements or understandings regarding the +right to vote shares of the Company, any short interest in any security of the Company, any rights to dividends that are separated or separable from the underlying shares, any proportionate interest in shares or derivatives held by a general or +limited partnership whereby the shareholder is a general partner or beneficially owns an interest in the general partner, any performance-related fees (other than an asset-based fee) that the shareholder is entitled to based on any change in the +value of the shares or derivatives, any other information relating to the shareholder that would be required to be disclosed in connection with solicitations of proxies for the election of directors in a contested election and a statement whether or +not the shareholder will deliver a proxy to shareholders; and +• +The name, age, business and residence addresses of the candidate, the candidate’s résumé or a listing of his or her qualifications to be a director of the Company, the person’s consent to be a +director if selected by the Nominating Committee, nominated by the Board and elected by the shareholders and any other information that would be required to be disclosed in solicitations of proxies for the election of directors. +The shareholder recommendation and information described above, and in more detail in our Bylaws, must be sent to the Corporate Secretary at One Lincoln Centre, 5400 +LBJ Freeway, Suite 1500, Dallas, Texas 75240 and must be received by the Corporate Secretary not fewer than 45 nor more than 75 days prior to the one year anniversary date of the date the Company’s proxy statement was mailed in connection with +the previous year’s annual meeting of shareholders. +The Nominating Committee believes that a potential director of the Company must demonstrate that such +candidate has: +• +a depth of experience at the policy-making level in business, government or education; +• +a balance with the business knowledge and experience of the incumbent or nominated directors; +• +availability and willingness to devote adequate time to Board duties; +• +any unfilled expertise needed on the Board or one of its committees; +• +character, judgment and ability to make independent analytical, probing and other inquiries; +• +willingness to exercise independent judgment yet willingness to listen and learn from the other directors and the Company’s staff; and +• +financial independence to ensure such candidate will not be financially dependent on director compensation. +22 Matador Resources Company | 2018 Proxy Statement +Table of Contents +CORPORATE GOVERNANCE +In the case of an incumbent director, the Nominating Committee will also consider such director’s past performance on the Board. +The Nominating Committee or the Advisory Committee may identify potential nominees by asking, from time to time, current directors and executive officers for their +recommendation of persons meeting the criteria described above who might be available to serve on the Board. The Nominating Committee or the Advisory Committee may also engage firms that specialize in identifying director candidates. As described +above, the Nominating Committee and Advisory Committee will also consider candidates recommended by shareholders. +Once a person has been identified by the +Nominating Committee or the Advisory Committee as a potential candidate, the Nominating Committee or the Advisory Committee will make an initial determination regarding the need for additional Board members to fill vacancies or expand the size of +the Board. If the Nominating Committee or the Advisory Committee determines that additional consideration is warranted, the Nominating Committee or the Advisory Committee will review such information and conduct interviews as it deems necessary to +fully evaluate each director candidate. In addition to the qualifications of a candidate, the Nominating Committee or the Advisory Committee will consider such relevant factors as it deems appropriate, including the current composition of the Board, +the evaluations of other prospective nominees and the need for any required expertise on the Board or one of its committees. The Nominating Committee or the Advisory Committee also contemplates multiple dynamics that promote and advance diversity +among the members of the Board. Although the Nominating Committee does not have a formal diversity policy, the Nominating Committee considers a number of factors regarding diversity of personal and professional backgrounds, specialized skills and +acumen and breadth of experience in energy exploration and production, midstream and marketing, executive leadership, accounting, finance or law. The Nominating Committee’s evaluation process will not vary based on whether or not a candidate is +recommended by a shareholder. +Corporate Governance Committee +The +Corporate Governance Committee is responsible for periodically reviewing and assessing our Corporate Governance Guidelines and Code of Ethics and making recommendations for changes thereto to the Board, reviewing any other matters related to our +corporate governance, unless the authority to conduct such review has been retained by the Board or delegated to another committee, and overseeing the process for evaluation of the Board and management. +As of April 13, 2018, the Corporate Governance Committee consisted of Ms. Forrester, Messrs. Baribault, Baty, Burkert, Byerley, Posner and Stewart and +Dr. Ohnimus, each of whom is independent under the rules of the SEC and the NYSE. Ms. Forrester is the chair of the Corporate Governance Committee. During 2017, the Corporate Governance Committee met three times. +Executive Committee +The Executive Committee has authority to +discharge all the responsibilities of the Board in the management of the business and affairs of the Company, except where action of the full Board is required by statute or by our Amended and Restated Certificate of Formation or Bylaws, each as +amended to date. The Executive Committee met once during 2017. +As of April 13, 2018, the Executive Committee consisted of Messrs. Foran, Baribault and Yates. +Mr. Foran is the chair of the Executive Committee. +Capital Markets and Finance Committee +The Board formed the Capital Markets and Finance Committee in February 2018. The Capital Markets and Finance Committee provides oversight of the Company’s financial +objectives, financial policies, capital structure and financing requirements. As of April 13, 2018, the members of the Capital Markets and Finance Committee were Messrs. Foran, Parker, Stewart and Yates. Mr. Parker is the chair of the +Capital Markets and Finance Committee. +2018 +Proxy Statement | Matador Resources Company 23 +Table of Contents +CORPORATE GOVERNANCE +Operations and Engineering Committee +The Operations and Engineering Committee provides oversight of the development of our prospects, our drilling and completion operations and our production operations and +associated costs. In addition, the Operations and Engineering Committee provides oversight of the amount and classifications of our reserves and the design of our completion techniques and hydraulic fracturing operations and various other reservoir +engineering matters. As of April 13, 2018, the members of the Operations and Engineering Committee were Messrs. Baribault, Foran, Posner and Yates and Dr. Ohnimus. Dr. Ohnimus is the chair of the Operations and Engineering +Committee. +Prospect Committee +The Prospect Committee provides +oversight of the technical analysis, evaluation and selection of our oil and natural gas prospects. As of April 13, 2018, the members of the Prospect Committee were Messrs. Baribault, Foran, Parker, Stewart and Yates and Dr. Ohnimus. +Mr. Baribault is the chair of the Prospect Committee. +Board’s Role in Risk Oversight +The Audit Committee has the responsibility to oversee the +Company’s guidelines and policies to govern the process by which risk assessment and risk management are undertaken by management. The Strategic Planning and Compensation Committee has the responsibility to oversee that our incentive pay does +not encourage unnecessary risk taking and to review and discuss the relationship between risk management policies and practices, corporate strategy and senior executive compensation. +Strategic Planning and Compensation Committee Interlocks and Insider Participation +Mr. Joe A. Davis (whose term as a director expired at +the 2017 Annual Meeting), Mr. Gregory E. Mitchell (who resigned from the Board in July 2017) and Messrs. Baribault, Baty, Burkert and Stewart and Dr. Ohnimus served on the Strategic Planning and Compensation Committee during the last +completed fiscal year. None of these individuals is or was previously one of our officers or employees. None of our executive officers serve on the board of directors or compensation committee of a company that has an executive officer that serves +on our Board or Strategic Planning and Compensation Committee. No member of our Board serves as an executive officer of a company in which one of our executive officers serves as a member of the board of directors or compensation committee of that +company. There were no compensation committee interlocks during 2017. Mr. Baribault’s sister-in-law is an employee of the Company. For more information on this +related party transaction, see “Transactions with Related Persons.” +Communications with Directors +The Board has established a process to receive +communications from shareholders and other interested parties by mail. Shareholders and other interested parties may contact any member of the Board, any Board committee or the entire Board. To communicate with the Board, any individual director or +any committee of directors, correspondence should be addressed to the Board. All such correspondence should be sent “c/o Corporate Secretary” at One Lincoln Centre, 5400 LBJ Freeway, Suite 1500, Dallas, Texas 75240. The Corporate Secretary +will review and forward correspondence to the appropriate person or persons. +Any communications to the Company from one of the Company’s officers or directors +will not be considered “shareholder communications.” Communications to the Company from one of the Company’s employees or agents will only be considered “shareholder communications” if they are made solely in such +employee’s or agent’s capacity as a shareholder. Any shareholder proposal submitted pursuant to Rule 14a-8 promulgated under the Exchange Act will not be viewed as “shareholder +communications.” +24 Matador Resources Company | 2018 Proxy Statement +Table of Contents +CORPORATE GOVERNANCE +Executive Officers and Other Senior Officers of the Company +The following table sets forth the names, ages and positions of +our executive officers and certain of our other senior officers at April 13, 2018: +Name +Age +Positions Held With +Us +Executive Officers +Joseph Wm. Foran +65 +Chairman of the Board and Chief Executive Officer +Matthew V. Hairford +57 +President +David E. Lancaster +61 +Executive Vice President and Chief Financial Officer +Craig N. Adams +51 +Executive Vice President—Land, Legal & Administration +Van H. Singleton, II +40 +Executive Vice President of Land +Billy E. Goodwin +60 +Executive Vice President and Head of Operations +Bradley M. Robinson +63 +Senior Vice President of Reservoir Engineering and Chief Technology Officer +G. Gregg Krug +57 +Senior Vice President—Marketing and Midstream +Other Senior Officers +Robert T. Macalik +39 +Senior Vice President and Chief Accounting Officer +Matthew D. Spicer +50 +Vice President and General Manager of Midstream +Kathryn L. Wayne +57 +Vice President, Controller and Treasurer +Bryan A. Erman +40 +Vice President and Co-General Counsel +Brian J. Willey +41 +Vice President and Co-General Counsel +Edmund L. Frost III +43 +Vice President of Geoscience +W. Thomas Elsener +33 +Vice President—Engineering and Asset Manager +James R. Basich +52 +Vice President and Managing Director—Information Technology +The following biographies describe the business experience of our executive officers and certain of our other senior officers. Each +officer serves at the discretion of our Board. There are no family relationships among any of our officers. +Executive Officers +Mr. Joseph Wm. +Foran +Chairman of the Board and Chief Executive Officer +Please see the biography of Mr. Foran on page 13 of this Proxy Statement. +2018 +Proxy Statement | Matador Resources Company 25 +Table of Contents +CORPORATE GOVERNANCE +Mr. Matthew V. Hairford +President +Mr. Hairford joined Matador Resources Company in July 2004 as its Drilling Manager. He was named Vice President of Drilling in May 2005; Vice President of Operations in May 2006; Executive Vice President of Operations in May +2009; and in November 2013 assumed the title of President. He was previously with Samson Resources, an exploration and production company, as Senior Drilling Engineer, having joined Samson in 1999. His responsibilities there included difficult Texas +and Louisiana Gulf Coast projects, horizontal drilling projects and a start-up drilling program in Wyoming. The scope of this work ranged from multi-lateral James Lime wells in East Texas to deep wells in +South Texas and South Louisiana. Mr. Hairford has drilled many geo-pressured wells in Texas and Louisiana, along with normally pressured wells in Southwest Wyoming and East Texas. Additional +responsibilities included a horizontal well program in Roger Mills County, Oklahoma at 15,000 feet vertical depth. Mr. Hairford has experience in air drilling, underbalanced drilling, drilling under mud caps and high temperature and pressure +environments. From 1998 to 1999, Mr. Hairford served as Senior Drilling Engineer with Sonat, Inc., a global company involved with natural gas transmission and marketing, oil and natural gas exploration and production and oil services. His +responsibilities included drilling Pinnacle Reef wells in East Texas and deep horizontal wells in the Austin Chalk field in Central Louisiana. From 1984 to 1998, Mr. Hairford served in various drilling engineering capacities with Conoco, Inc. +His operational areas included the Appalachian Basin, Illinois Basin, Permian Basin, Texas Panhandle and Val Verde Basin. Mr. Hairford was selected as a member of a three-person team to explore the use of unconventional technologies to identify +a potential step change in the drilling sector. Multiple techniques were evaluated and tested, including declassified defense department technologies. Additional Conoco assignments included both field and office drilling positions in Midland, Texas +and Oklahoma City, Oklahoma. Earlier in his career with Conoco, Mr. Hairford was selected to participate in the Conoco Drilling Rig Supervisor Training Program in Houston, Texas. This program consisted of two years working a regular rotation as +a drilling representative on rigs and as a drilling engineer in various domestic offices. Mr. Hairford began his career in 1984 with Conoco in a field production assignment in Hobbs, New Mexico. Mr. Hairford received his Bachelor of +Science degree in Petroleum Engineering Technology from Oklahoma State University in 1984. He is an active member of the American Association of Drilling Engineers, the American Petroleum Institute and the Society of Petroleum Engineers. +Mr. Hairford has also undertaken additional training through Stanford University’s Executive Education programs, including, most recently, the Stanford Graduate School of Business flagship six week Stanford Executive Program. +Mr. David E. +Lancaster +Executive Vice President and Chief Financial +Officer +Mr. Lancaster joined Matador Resources Company in December 2003 and serves as Executive Vice President and Chief Financial Officer. Mr. Lancaster has served in several capacities since joining Matador, including Vice +President of Business Development, Acquisitions and Finance from December 2003 to May 2005; Vice President and Chief Financial Officer from May 2005 to May 2007; and Executive Vice President and Chief Financial Officer since May 2007. He also served +as Chief Operating Officer from May 2009 to May 2015. From August 2000 to December 2003, he was Marketing Manager for Schlumberger Limited’s Data & Consulting Services, which provided full-field reservoir characterization, production +enhancement, multidisciplinary reservoir and production solutions and field development planning. In this position, he was responsible for global marketing strategies, business models, input to research and development, commercialization of new +products and services and marketing communications. From 1999 to 2000, Mr. Lancaster was Business Manager, North and South America, for Schlumberger Holditch-Reservoir Technologies, the petroleum engineering consulting organization formed +following Schlumberger’s acquisitions of S.A. Holditch & Associates, Inc. and Intera Petroleum Services. In this role, he was responsible for the business operations of 12 consulting offices throughout North and South America. +Mr. Lancaster worked with Schlumberger for six years following its acquisition of S.A. Holditch & +26 Matador Resources Company | 2018 Proxy Statement +Table of Contents +CORPORATE GOVERNANCE +Associates, Inc. in 1997. He joined S.A. Holditch & Associates in 1980, and was one of the principals in the petroleum engineering consulting firm. Between 1980 and 1997, Mr. Lancaster held positions ranging from +Senior Petroleum Engineer to Senior Vice President—Business Development. In this latter role, he was responsible for marketing and sales, as well as the company’s commercial training business. During most of his tenure at +S.A. Holditch & Associates, Inc., Mr. Lancaster was a consulting reservoir engineer with particular emphasis on characterizing and improving production from unconventional natural gas reservoirs. For more than seven years during +this time, he was the Project Manager for the Gas Research Institute’s Devonian Shales applied research projects investigating ways to improve reservoir characterization, completion practices and natural gas recovery in low permeability, +natural gas shale reservoirs. He was also the lead reservoir engineer for the Secondary Gas Recovery project sponsored by the Gas Research Institute and the U.S. Department of Energy, looking at ways to improve recovery from compartmentalized +natural gas reservoirs in North and South Texas. Mr. Lancaster began his career as a reservoir engineer for Diamond Shamrock Corporation in 1979. Mr. Lancaster received Bachelor and Master of Science degrees in Petroleum Engineering from +Texas A&M University in 1979 and 1988, respectively, graduating summa cum laude. He has authored or co-authored more than 50 technical papers and articles, as well as numerous other published reports and +industry presentations. He is a member of the Society of Petroleum Engineers, and he served as a charter member and former Vice Chairman of the Texas A&M University Petroleum Engineering Advisory Board. In 2014, Mr. Lancaster was inducted +into the Texas A&M University Petroleum Engineering Academy of Distinguished Graduates. Mr. Lancaster is a Licensed Professional Engineer in the State of Texas. +Mr. Craig N. Adams +Executive Vice President—Land, Legal & +Administration +Mr. Adams joined Matador Resources Company in September 2012 as its Vice President and General Counsel. In July 2013, Mr. Adams was promoted to Executive Vice President—Land and Legal and became Executive Vice +President—Land, Legal & Administration in June 2015. Before joining Matador Resources Company, Mr. Adams was a partner with Baker Botts L.L.P. from March 2001 to September 2012 where he focused his practice on securities, mergers +and acquisitions and corporate governance matters. He was a partner with Thompson & Knight L.L.P. from January 1999 to February 2001 and an associate from September 1992 to December 1998. Mr. Adams received a Bachelor of Business +Administration degree in Finance from Southern Methodist University in 1988 and his law degree in 1992 from Texas Tech University School of Law, where he graduated magna cum laude and was a member of the Order of the Coif and a Comment Editor of the +Texas Tech Law Review. +Mr. Van H. Singleton, II +Executive Vice President of Land +Mr. Singleton joined Matador Resources Company in August 2007 as a Landman and was promoted to Senior Staff Landman in 2009 and then to General Land Manager in 2011. In September 2013, Mr. Singleton became Vice President +of Land for the Company, and he was promoted to Executive Vice President of Land in February 2015. Prior to joining Matador, Mr. Singleton founded and was President of VanBrannon and Associates, LLC and Southern Escrow and Title of Mississippi, +LLC from 1998 to 2003, which provided full-spectrum land title work and title insurance in Mississippi, Louisiana, Texas and Arkansas. From 2003 until joining Matador in 2007, he served as general manager of his family’s real estate brokerage +in Houston, Texas. Mr. Singleton received a Bachelor of Arts degree in Criminal Justice from the University of Mississippi in 2000. He is an active member of the American Association of Professional Landmen, the New Mexico Landman Association, +the Permian Basin Landman Association and the Dallas Association of Petroleum Landmen. +2018 +Proxy Statement | Matador Resources Company 27 +Table of Contents +CORPORATE GOVERNANCE +Mr. Billy E. Goodwin +Executive Vice President and Head of Operations +Mr. Goodwin joined Matador Resources Company in July 2010 as Drilling Manager. In September 2013 he was named Vice President of Drilling for the Company, and he was promoted to Senior Vice President—Operations in +February 2016 and to Executive Vice President and Head of Operations in August 2017. He was previously with Samson Resources, a company he joined in 2001 to supervise the drilling of underbalanced multilateral horizontal wells. In his +roles as Senior Drilling Engineer and Area Drilling Manager for Samson, Mr. Goodwin engineered and managed operations in the Permian Basin, South Texas, East Texas, Mid-Continent and Gulf Coast areas. +Mr. Goodwin worked with Conoco, Inc. before joining Samson. He began his career in 1985 in Conoco’s production department before joining the drilling department in 1989. Mr. Goodwin has diverse horizontal operational +experience both onshore and offshore, and both domestically and internationally, including in the Middle East, Southeast Asia and South America. Throughout his career, Mr. Goodwin has developed underbalanced drilling, managed pressure +drilling and drill-in casing techniques for normal and geo-pressured environments. Mr. Goodwin received a Bachelor of Science degree in Petroleum Engineering +Technology from Oklahoma State University in 1984. He is a member of the Society of Petroleum Engineers and the American Association of Drilling Engineers. Mr. Goodwin served in the United States Marine Corps. +Mr. Bradley M. Robinson +Senior Vice President of Reservoir Engineering and Chief Technology +Officer +Mr. Robinson joined Matador Resources Company in August 2003 as our Vice President of Reservoir Engineering until his promotion to Senior Vice President of Reservoir Engineering in February 2016. He assumed the additional role +of Chief Technology Officer in May 2013. Prior to joining Matador, from 1997 to August 2003, Mr. Robinson held the position of Advisor with Schlumberger Limited’s Data & Consulting Services, where he was responsible for the +development and application of new well completion and fracture stimulation technologies, managed field development projects, taught industry courses and provided internal training. Mr. Robinson worked with Schlumberger for six years following +its acquisition of S.A. Holditch & Associates, Inc. in 1997. Mr. Robinson joined S.A. Holditch & Associates in 1979, and was one of the principals in the petroleum engineering consulting firm. From 1979 to 1982, +Mr. Robinson served as Senior Petroleum Engineer and was involved in all aspects of reservoir and production engineering for both conventional and low permeability oil and natural gas fields. From 1982 to 1997, he was Vice +President—Production Engineering of S.A. Holditch & Associates, where he was responsible for coordination and management of production and completion engineering projects, including hydraulic fracture stimulation design and +supervision. His duties also included reserves and economic analysis of new and existing wells. For approximately 10 years during this time, Mr. Robinson served as assistant project manager for the Gas Research Institute’s Tight Gas Sands +and Horizontal Gas Wells applied research projects investigating ways to improve reservoir characterization, completion practices and natural gas recovery in low permeability natural gas reservoirs and horizontal natural gas wells. During his +career, he has worked all over the world, including the United States, Canada, Venezuela, Colombia, Mexico, Egypt, the North Sea, Russia and Indonesia, among other locations. Mr. Robinson began his career in 1977 with Marathon Oil Company, +serving as an Associate Production Engineer and later as a Reservoir Engineer in Midland. Mr. Robinson received Bachelor and Master of Science degrees in Petroleum Engineering from Texas A&M University in 1977 and 1986, respectively. He has +authored or co-authored more than 30 technical papers and articles appearing in industry publications. Mr. Robinson is a member of the Society of Petroleum Engineers and is a Licensed Professional +Engineer in the State of Texas. He served as Chairman of the Dallas Section of the Society of Petroleum Engineers in 2011 and 2012. He also received the 2013 Engineer of the Year Award presented by the Dallas Section of the Society of Petroleum +Engineers and the 2013 Completions Optimization and Technology award presented by the Mid-Continent region of the Society of Petroleum Engineers. +28 Matador Resources Company | 2018 Proxy Statement +Table of Contents +CORPORATE GOVERNANCE +Mr. G. Gregg Krug +Senior Vice President—Marketing and Midstream +Mr. Krug joined Matador Resources Company in April 2012 as its Marketing Manager. In September 2013 he was named Vice President of Marketing for the Company and Vice President of Longwood Gathering & Disposal Systems, +LP, and he was promoted to Senior Vice President—Marketing and Midstream in February 2016. He has overall responsibility for Matador’s marketing activities of its oil and natural gas, as well as responsibility for all business aspects for +Longwood Gathering & Disposal Systems, LP. Previously, Mr. Krug was with Unit Petroleum Company, an exploration and production company based in Tulsa, Oklahoma, as Marketing Manager, having joined in 2006. He and his staff were +responsible for marketing, gas measurement, contract administration and production reporting in their core areas of Oklahoma, the Texas Panhandle, East Texas and Northwestern Louisiana. From 2005 to 2006, Mr. Krug served as Marketing Manager +with Matador Resources Company. From 2000 to 2005, Mr. Krug served as Gas Scheduling Supervisor with Samson Resources in Tulsa, Oklahoma where he and his staff were responsible for scheduling natural gas sales as well as procurement of +natural gas supply on Samson-owned gathering systems. From 1983 to 2000, Mr. Krug served with The Williams Companies in various capacities including in the Kansas Hugoton Field in Ulysses, Kansas and Tulsa, Oklahoma for Williams Natural +Gas Pipeline and on the trading floor in Tulsa, Oklahoma for Williams Energy Services Company. Mr. Krug received a Bachelor of Business Administration degree from Oklahoma City University in 1996. +Other Senior Officers +Mr. Robert T. Macalik . Mr. Macalik joined Matador Resources Company in July 2015 as Vice President and Chief Accounting +Officer. He was promoted to Senior Vice President and Chief Accounting Officer in November 2017. He has more than 10 years of experience in public accounting with significant experience in the upstream oil and natural gas industry. From 2012 to +2015, Mr. Macalik worked at Pioneer Natural Resources Company as Corporate Controller and, previously, as Director of Technical Accounting and Financial Reporting. At Pioneer, Mr. Macalik supervised corporate accounting and financial +reporting functions. Prior to joining Pioneer, he was a Senior Manager with PricewaterhouseCoopers (PwC), joining the public accounting firm in 2002. During his tenure with PwC, Mr. Macalik conducted and managed audits for various companies, +primarily public companies in the oil and natural gas industry, and managed numerous client relationships. Mr. Macalik received a Bachelor of Arts degree in History, a Bachelor of Business Administration degree and a Master of Professional +Accounting degree all from The University of Texas at Austin in 2002. He is a licensed Certified Public Accountant in the State of Texas. +Mr. Matthew D. Spicer. Mr. Spicer joined Matador Resources Company in March 2014 as Senior Representative of Business +Development and was promoted to Manager of Business Development and then General Manager of Midstream later in 2014. In October 2015, Mr. Spicer was promoted to Vice President and General Manager of Midstream. Prior to joining the Company, +Mr. Spicer served as the Director of Flight Operations for L-3 Unmanned Systems, also serving in various roles including as Program Manager and in Business Development during his tenure with L-3, which began in 2011. Mr. Spicer served in the United States Marine Corps from 1991 to 2014, both in active duty and as a reservist, before his retirement as a Lieutenant Colonel in 2014. Mr. Spicer +also served as a first officer with American Airlines from 2000 to 2003 following his active duty in the United States Marine Corps. Mr. Spicer received a Bachelor of Science degree in Manufacturing Engineering Technology from Central Michigan +University in 1991. +Ms. Kathryn L. Wayne . Ms. Wayne was one of the original employees of Matador Resources +Company and has served as the Company’s Controller and Treasurer since 2003. She was promoted to Vice President, Controller and Treasurer in February 2017. She was previously with Matador Petroleum Corporation, joining the company in 1991. +Immediately prior to its sale, Ms. Wayne was Senior Revenue Accountant, and her duties included supervision of the revenue accounting staff, management of the revenue distribution process and preparation of monthly accruals and various required +regulatory reports. Ms. Wayne began her career with Mobil Oil Corporation, where she held various positions in the gas accounting department. Ms. Wayne received a Bachelor of Arts degree in Accounting from Texas A&M University in 1983. +She is recognized by the Council of Petroleum +2018 +Proxy Statement | Matador Resources Company 29 +Table of Contents +CORPORATE GOVERNANCE +Accountants Societies (COPAS) as an Accredited Petroleum Accountant (APA). She is an active member of COPAS and served a three-year term on the COPAS APA Board of Examiners. +Mr. Bryan A. Erman . Mr. Erman joined Matador Resources Company in January 2016 as its Co-General +Counsel. In August 2016, Mr. Erman was promoted to Vice President and Co-General Counsel. Prior to joining Matador, Mr. Erman was a Partner at Carrington, Coleman, Sloman & Blumenthal, +L.L.P. in Dallas, having joined the firm in 2010. From 2003 to 2010, he was an associate in the Dallas and Washington, D.C. offices of Baker Botts L.L.P. Mr. Erman’s practice focused on litigation matters, including oil and natural gas, +securities and other commercial litigation, as well as corporate governance matters. Before attending law school, Mr. Erman worked for Oklahoma Governor Frank Keating. Mr. Erman received a Bachelor of Arts degree in Political Science in +1999 from the University of Oklahoma. He received his law degree in 2003 from Southern Methodist University School of Law, where he graduated cum laude and was a Hatton W. Sumners Scholar, a member of the Order of the Coif and an Articles Editor on +the SMU Law Review. +Mr. Brian J. Willey . Mr. Willey joined Matador Resources Company in February 2014 as its +Deputy General Counsel. In January 2016, Mr. Willey was appointed as Co-General Counsel, and he was promoted to Vice President and Co-General Counsel in August +2016. Prior to joining Matador, Mr. Willey was an attorney with Dean Foods Company where he most recently served as Vice President, Chief Counsel—Corporate. Before Dean Foods, Mr. Willey served as a senior associate in the Dallas +office of Baker Botts L.L.P. Mr. Willey’s practice focused on corporate matters, including mergers and acquisitions, public and private securities offerings, venture capital transactions and SEC compliance matters as well as board of +director and corporate governance matters. Mr. Willey received a Bachelor of Science degree in Accounting in 2002 from Brigham Young University. He received his law degree in 2005 from The University of Texas School of Law, where he graduated +with High Honors and was a member of the Order of the Coif in addition to being named a Chancellor and an Associate Editor on the University of Texas Law Review. Mr. Willey also served a church mission in the Philippines from 1995 to 1997. +Dr. Edmund L. Frost III . Dr. Frost Joined Matador Resources Company in August 2014 as a Senior Geologist. In July +2015, he was promoted to Chief Geologist, and in June 2017, he was promoted to Vice President of Geoscience. In 2011, Dr. Frost joined the Bureau of Economic Geology at the University of Texas at Austin as a Research Associate. While at the +University of Texas, his research focused on unconventional resource development in the Delaware Basin and in the Austin Chalk-Eagle Ford system. Dr. Frost began his career in the Subsurface Technology Group at ConocoPhillips in 2007, where he +worked a variety of international and domestic basins. Dr. Frost received a Bachelor of Science degree in Geology from the University of Colorado at Boulder in 1998 and a PhD degree in Geology in 2007 from the University of Texas at Austin. +Dr. Frost has authored several peer-reviewed papers, conducted multiple industry presentations and led a number of industry field trips in the Delaware Basin. +Mr. W. Thomas Elsener. Mr. Elsener joined Matador Resources Company in April 2013 as Senior Staff Engineer. He served as Team Leader of +various of the Company’s asset areas beginning in April 2014, including Rustler Breaks and Antelope Ridge, South Texas and East Texas/North Louisiana before being promoted to Senior Area Asset Manager in September 2016. Mr. Elsener was +promoted to Vice President—Engineering and Asset Manager in June 2017. Prior to joining Matador, Mr. Elsener served in various engineering roles at Encana Oil & Gas (USA) from 2007 to 2013, including reservoir, completions, +drilling, business development and new ventures. Mr. Elsener received a Bachelor of Science degree in Petroleum Engineering in 2007 from Texas A&M University. He is a member of the Society of Petroleum Engineers. +Mr. James R. Basich . Mr. Basich joined Matador Resources Company in March 2016 as Director, IT Corporate Applications. +In November 2017, he was promoted to Vice President and Managing Director—IT. He has more than 25 years of experience in information technology with the majority of this experience in the upstream oil and natural gas industry. Prior to joining +Matador, Mr. Basich was IT Director, Corporate Applications at Apache Corporation. In this role he was responsible for the application development and support for finance, human resources, land, legal, administrative and marketing functions. +Mr. Basich joined Apache Corporation in 2003 as Senior Manager, Corporate Applications. From 1995 until 2003, Mr. Basich served as a Practice Manager for +30 Matador Resources Company | 2018 Proxy Statement +Table of Contents +CORPORATE GOVERNANCE +Oracle Corporation. In this role he was responsible for several enterprise-wide software implementations for various clients in the upstream oil and natural gas and manufacturing industries. +Before joining Oracle Corporation, Mr. Basich held positions with PricewaterhouseCoopers (PwC) in their Petroleum Special Practice Unit and with ORYX Corporation. Mr. Basich received a Bachelor of Business Administration degree in +Information Systems and Quantitative Business Analysis from Baylor University in 1988. +2018 +Proxy Statement | Matador Resources Company 31 +Table of Contents +PROPOSAL 2 +PROPOSAL +2 | ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION +In accordance with the requirements of Section 14A of the Exchange Act, the Company seeks a non-binding advisory vote from +its shareholders to approve the compensation of its Named Executive Officers (as defined below) as described in this Proxy Statement. +As discussed under the +“Executive Compensation—Compensation Discussion and Analysis” section of this Proxy Statement (“CD&A”), we believe the Company’s future success and the ability to create long-term value for our shareholders depends +on our ability to attract, retain and motivate highly qualified individuals in the oil and natural gas industry. Additionally, we believe that our success also depends on the continued contributions of our Named Executive Officers. The +Company’s compensation system plays a significant role in its ability to attract, motivate and retain a high quality workforce. As described in the CD&A, the Company’s compensation program for Named Executive Officers is designed to +reward, in both the short term and the long term, performance that contributes to the implementation of our business strategies, maintenance of our culture and values and achievement of our objectives. +In addition, we reward qualities that we believe help achieve our business strategies such as: +• +teamwork; +• +mentoring future leaders within the Company to drive long-term shareholder value; +• +individual performance in light of general economic and industry-specific conditions; +• +relationships with shareholders and vendors; +• +the ability to manage and enhance production from our existing assets; +• +the ability to explore new opportunities to increase oil and natural gas production; +• +the ability to identify and acquire additional acreage; +• +the ability to improve total shareholder returns; +• +the ability to increase year-over-year proved reserves; +• +the ability to control unit production costs; +• +the ability to pursue midstream opportunities; +• +level of job responsibility; +• +industry experience; and +• +general professional growth. +This proposal provides shareholders the opportunity to endorse or not endorse the +Company’s executive compensation program through approval of the following resolution: +“Resolved, that the compensation paid to the Company’s Named +Executive Officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby approved.” +The above-referenced CD&A and accompanying disclosures appear on pages 38 to 63 of this Proxy Statement. +Because this is an advisory vote, it will not be binding upon the Board. However, the Strategic Planning and Compensation Committee and the independent members of the +Board (the “Independent Board”) will take into account the outcome of the vote when considering future executive compensation arrangements. +32 Matador Resources Company | 2018 Proxy Statement +Table of Contents +PROPOSAL 2 +Vote Required +The affirmative vote of the holders of a majority of the shares +present in person or by proxy and entitled to vote at the Annual Meeting is required to approve this resolution on a non-binding basis. If you hold your shares through a broker and you do not instruct the +broker how to vote, your broker will not have the authority to vote your shares. Abstentions will have the effect as a vote cast against the proposal. Broker non-votes will be counted as present for purposes +of determining the presence of a quorum but will have no effect upon the outcome of the vote. +During our 2012 Annual Meeting of Shareholders, our shareholders +approved a non-binding, advisory proposal to hold advisory votes to approve our executive compensation every year. In consideration of the results of this advisory vote, the Board has adopted a policy +providing for annual advisory votes to approve executive compensation. Pursuant to applicable rules, the Company is required to hold another advisory vote on the frequency of future advisory votes to approve executive compensation at the Annual +Meeting. Accordingly, Proposal 3 of this Proxy Statement is a non-binding advisory vote on the frequency of such advisory votes to approve executive compensation. Unless the Board modifies its current policy +after consideration of the results of the advisory vote under Proposal 3, the next advisory vote to approve executive compensation following this vote will be held at our 2019 Annual Meeting of Shareholders. +The Board of Directors recommends that you vote FOR approval of this resolution. +2018 +Proxy Statement | Matador Resources Company 33 +Table of Contents +PROPOSAL 3 +PROPOSAL 3 | ADVISORY VOTE ON THE FREQUENCY OF ADVISORY VOTES TO +APPROVE NAMED EXECUTIVE OFFICER COMPENSATION +In accordance with the requirements of Section 14A +of the Exchange Act, the Company seeks a non-binding advisory vote from its shareholders regarding the desired frequency for holding future advisory votes to approve the compensation of our Named Executive +Officers as described in our annual proxy statements. +This proposal gives shareholders the opportunity to express their views as to whether the advisory vote on +the Company’s Named Executive Officer compensation program should occur every year, every two years or every three years. Because this vote is advisory, it will not be binding upon the Board. However, the Board will take into account the +outcome of the vote when deciding the frequency of future non-binding advisory votes on the Company’s executive compensation. +The Board recommends that a non-binding advisory vote to approve the compensation of our executive officers as disclosed in the +Company’s proxy statements occur every year. +While the Board believes this recommendation is appropriate at this time, shareholders are not voting to approve +or disapprove this recommendation, but are instead asked to provide an advisory vote on whether the non-binding advisory vote on the approval of the Company’s Named Executive Officer compensation should +be held every year, every two years or every three years. The choice receiving the greatest number of votes will be considered the frequency recommended by the Company’s shareholders, even if that choice does not receive a majority of the +votes. +The Board of Directors recommends that you vote for “1 YEAR” on this proposal. +34 Matador Resources Company | 2018 Proxy Statement +Table of Contents +PROPOSAL 4 +PROPOSAL 4 | RATIFICATION OF THE APPOINTMENT OF KPMG LLP +The Audit Committee has appointed KPMG LLP (“KPMG”) as the independent registered public accounting +firm of the Company for the year ending December 31, 2018, and the Board has directed that such appointment be submitted to our shareholders for ratification at the Annual Meeting. +The Company has been advised by KPMG that the firm has no relationship with the Company or its subsidiaries other than that arising from the firm’s engagement as +auditors. +If the shareholders do not ratify the appointment of KPMG, the Audit Committee will consider whether to engage a different independent registered public +accounting firm but will not be obligated to do so. +The Company has been advised that representatives of KPMG will be present at the Annual Meeting and will be +available to respond to appropriate questions and make a statement if they desire to do so. +Fees of Independent +Registered Public Accounting Firm for Fiscal Years 2017 and 2016 +The following table presents fees for professional audit services rendered by KPMG for the audit of the Company’s annual financial statements for the years ended +December 31, 2017 and 2016, and fees for other services rendered by KPMG during that period: +2017 +2016 +Audit fees +$ +1,584,000 +$ +1,174,970 +Audit-related fees +— +— +Tax fees +— +— +All other fees +— +— +Total +$ +1,584,000 +$ +1,174,970 +Services rendered by KPMG in connection with the fees presented above were as follows: +Audit Fees +For fiscal year 2017, audit fees consisted of fees +associated with the audit of the Company’s consolidated financial statements, including the audit of the effectiveness of the Company’s internal control over financial reporting, required reviews of our quarterly condensed consolidated +financial statements, including for inclusion in the prospectus related to our October 2017 equity offering, and providing the underwriters of such offering with comfort letters on certain information contained, or incorporated by reference, in the +prospectus. +For fiscal year 2016, audit fees consisted of fees associated with the audit of the Company’s consolidated financial statements, including the +audit of the effectiveness of the Company’s internal control over financial reporting, required reviews of our quarterly condensed consolidated financial statements, including for inclusion in each prospectus related to our 2016 equity +offerings and our offering memorandum related to our 2016 senior notes offering, and providing the underwriters of such offerings with comfort letters on certain information contained, or incorporated by reference, in each prospectus or offering +memorandum, as applicable. +Audit-Related Fees +We did not incur +any audit-related fees in 2017 or 2016. +2018 +Proxy Statement | Matador Resources Company 35 +Table of Contents +PROPOSAL 4 +Tax Fees +We did not incur any fees for tax advice, planning and other services in 2017 or 2016. +All Other Fees +We did not incur any other fees in 2017 or 2016. +The Audit Committee pre-approves all audit and permissible non-audit services provided +by KPMG. These services may include audit services, audit-related services, tax services and other services. The Audit Committee has authorized the chair of the Audit Committee to pre-approve audit and +permissible non-audit services provided by KPMG up to $750,000. Pursuant to this delegation, the decisions of the chair must be presented to the Audit Committee at its next meeting. +Report of the Audit Committee +We are a standing committee comprised of independent directors +as currently defined by SEC regulations and the applicable listing standards of the NYSE. The Board has determined that at least one of the members of the Audit Committee is an “audit committee financial expert” as defined by applicable +SEC rules and regulations. We operate under a written charter adopted by the Board. A copy of the charter is available free of charge on the Company’s website at www.matadorresources.com under “Investors—Corporate +Governance.” +We annually select the Company’s independent registered public accounting firm. If the shareholders do not ratify the appointment of KPMG +LLP at the Annual Meeting, the Audit Committee will consider whether to engage a different independent registered public accounting firm but will not be obligated to do so. +Management is responsible for the Company’s internal controls and the financial reporting process. The independent registered public accounting firm is responsible +for performing an independent audit of the Company’s consolidated financial statements in accordance with the standards of the United States Public Company Accounting Oversight Board and issuing a report thereon. As provided in our charter, our +responsibilities include the monitoring and oversight of these processes. +Consistent with our charter responsibilities, we have met and held discussions with +management and the independent registered public accounting firm. In this context, management and the independent registered public accounting firm represented to us that the Company’s consolidated financial statements for the fiscal year ended +December 31, 2017 were prepared in accordance with U.S. generally accepted accounting principles. We reviewed and discussed the consolidated financial statements with management and the independent registered public accounting firm and +discussed with the independent registered public accounting firm matters required to be discussed by Auditing Standard No. 1301: Communications with Audit Committees. +The Company’s independent registered public accounting firm has also provided to us the written disclosures and the letter required by applicable requirements of +the Public Company Accounting Oversight Board regarding the independent registered public accounting firm’s communications with the Audit Committee, and we discussed with the independent registered public accounting firm that firm’s +independence. +36 Matador Resources Company | 2018 Proxy Statement +Table of Contents +PROPOSAL 4 +Based upon our reviews and discussions with management and the independent registered public accounting firm and our review of the representation of management and the +report of the independent registered public accounting firm to the Audit Committee, we recommended that the Board include the audited consolidated financial statements in the Company’s Annual Report on Form +10-K for the year ended December 31, 2017 filed with the SEC. +Audit Committee, +William M. Byerley, Chair +Reynald A. Baribault +Craig T. Burkert +Julia P. Forrester +Steven W. Ohnimus +Timothy E. Parker* +David M. Posner +* +Member of the Audit Committee as of February 16, 2018 +Vote +Required +The affirmative vote of the holders of a +majority of the shares present in person or by proxy and entitled to vote at the Annual Meeting is required for the ratification of the appointment of KPMG as the Company’s independent registered public accounting firm for the year ending +December 31, 2018. If the shareholders do not ratify the appointment of KPMG, the Audit Committee will consider whether to engage a different independent registered public accounting firm but will not be obligated to do so. Abstentions will +have the effect as a vote cast against the proposal. +The Board of Directors recommends that you vote FOR the ratification of the appointment +of KPMG as the Company’s independent registered public accounting firm for the +year ending December 31, 2018. +2018 +Proxy Statement | Matador Resources Company 37 +Table of Contents +EXECUTIVE COMPENSATION +EXECUTIVE +COMPENSATION +Compensation Discussion and Analysis +In this Compensation Discussion and Analysis, or CD&A, we +discuss our compensation objectives, our decisions and the rationale behind those decisions relating to compensation for our principal executive officer, our principal financial officer and our other three most highly compensated executive officers +for 2017. This CD&A provides a general description of our compensation program and specific information about its various components. +Named Executive +Officers +Throughout this discussion, the following individuals are referred to as the “Named Executive Officers” and are included in the Summary +Compensation Table and other compensation tables that follow: +• +Joseph Wm. Foran, Chairman of the Board and Chief Executive Officer; +• +Matthew V. Hairford, President; +• +David E. Lancaster, Executive Vice President and Chief Financial Officer; +• +Craig N. Adams, Executive Vice President—Land, Legal & Administration; and +• +Billy E. Goodwin, Executive Vice President and Head of Operations. +Executive Summary +We are an independent energy company engaged in the exploration, development, production and acquisition of oil and natural gas resources in the United States, with an +emphasis on oil and natural gas shale and other unconventional plays. Our current operations are focused primarily on the oil and liquids-rich portion of the Wolfcamp and Bone Spring plays in the Delaware Basin in Southeast New Mexico and West +Texas. We also operate in the Eagle Ford shale play in South Texas and the Haynesville shale and Cotton Valley plays in Northwest Louisiana and East Texas. Additionally, we conduct midstream operations, primarily through our midstream joint venture, +San Mateo, in support of our exploration, development and production operations and provide natural gas processing, oil transportation services, natural gas, oil and salt water gathering services and salt water disposal services to third parties. +We are a growth oriented company with the objective of increasing assets and shareholder value over an extended period of time. We compete successfully with much +larger companies in the Delaware Basin for assets, resources, services, personnel and expertise on a daily basis. In order to meet these competitive challenges, we have attempted to establish a strong culture of character, teamwork, continuous +improvement, recruitment of top-tier talent, leadership and mentorship. The Strategic Planning and Compensation Committee (referred to within this Executive Compensation section as the “Compensation +Committee”) and the Independent Board have sought to establish a compensation structure designed to preserve this culture and develop and retain our current and future leaders. +38 Matador Resources Company | 2018 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +2017 Business Highlights +Our Board has a “pay for +performance” philosophy and recognizes the leadership of Mr. Foran and our executive officers in contributing to the Company’s achievements. The year ended December 31, 2017 was a year highlighted by many accomplishments and +increasing value for our shareholders. As seen in the table on page 48, total shareholder return was one of the key metrics tied to our Named Executive Officers’ 2017 annual incentive compensation. The below chart shows the Company’s total +shareholder return in 2017 as compared to its 2017 peer group (see “—Use of Peer Group Market Data in 2017” for a list of companies in our 2017 peer group). +2018 +Proxy Statement | Matador Resources Company 39 +Table of Contents +EXECUTIVE COMPENSATION +Increased Oil, Natural Gas and Oil Equivalent Production +Both total oil production and total oil equivalent production were identified by the Compensation Committee and the Independent Board as key metrics tied to our +Named Executive Officers’ 2017 annual incentive compensation. In 2017, we produced 7.9 million Bbl of oil, a Company record and an increase of 54%, as compared to 5.1 million Bbl of oil produced in 2016. We +also produced 38.2 Bcf of natural gas, an increase of 25% from 30.5 Bcf of natural gas produced in 2016. Our total oil equivalent production for 2017 was 14.2 million BOE, another Company record and an +increase of 40%, as compared to 10.2 million BOE for 2016. The increase in oil and natural gas production was primarily attributable to our ongoing delineation and development drilling activities in the Delaware Basin throughout 2017, +but also to production from five operated wells we completed and turned to sales in the Eagle Ford shale late in the second quarter and early in the third quarter of 2017. Oil production comprised 55% of our total production (using a +conversion ratio of one Bbl of oil per six Mcf of natural gas) for 2017, as compared to 50% for 2016. The charts below show our production growth over the past five years. +Increased Oil and Oil Equivalent Reserves +At December 31, 2017, our estimated total proved oil and natural gas reserves were 152.8 million BOE, including 86.7 million Bbl of oil +and 396.2 Bcf of natural gas, which was a Company record and an increase of 44% from 105.8 million BOE, including 57.0 million Bbl of oil and 292.6 Bcf of natural gas, at December 31, 2016. +Our proved oil reserves grew 52% to 86.7 million Bbl at December 31, 2017 from 57.0 million Bbl +at December 31, 2016. Our proved natural gas reserves increased 35% to 396.2 Bcf at December 31, 2017 from 292.6 Bcf at December 31, 2016. This growth in oil and natural gas reserves +was primarily attributable to our ongoing delineation and development drilling activities in the Delaware Basin during 2017. +40 Matador Resources Company | 2018 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +At December 31, 2017, proved developed reserves included 37.0 million Bbl of oil and 190.1 Bcf of natural gas, and proved undeveloped +reserves included 49.8 million Bbl of oil and 206.1 Bcf of natural gas. Proved developed reserves and proved oil reserves comprised 45% and 57%, respectively, of our total proved oil and natural gas reserves +at December 31, 2017. Proved developed reserves and proved oil reserves comprised 41% and 54%, respectively, of our total proved oil and natural gas reserves at December 31, 2016. The charts below show our +total proved oil and natural gas reserves at December 31, 2015, December 31, 2016 and December 31, 2017 and a breakdown of total reserves among our various operating areas. +Operational Highlights +We completed and +began producing oil and natural gas from 86 gross (59.6 net) wells in the Delaware Basin in 2017, including 65 gross (56.1 net) operated and 21 gross (3.5 net) non-operated wells. We also added to and upgraded +our acreage position in the Delaware Basin during 2017. As a result, at December 31, 2017, our total acreage position in the Delaware Basin had increased to approximately 199,600 gross (114,000 net) acres, primarily in +Loving County, Texas and Lea and Eddy Counties, New Mexico. This significant increase in acreage greatly exceeded the threshold, target and maximum goals established by the Compensation Committee and the Independent Board under the 2017 annual +incentive program. +Overall, we have been pleased with the aggregate performance of the wells we have drilled and completed, or participated in as a non-operator, thus far in our seven main asset areas in the Delaware Basin—the Wolf and Jackson Trust asset areas in Loving County, Texas, the Rustler Breaks and Arrowhead asset areas in Eddy County, New Mexico +and the Antelope Ridge, Ranger and Twin Lakes asset areas in Lea County, New Mexico. As a result, our Delaware Basin properties have become an increasingly important component of our asset portfolio. Our average daily oil equivalent production from +the Delaware Basin increased approximately 85% to 29,463 BOE per day (76% of total oil equivalent production), including 18,023 Bbl of oil per day (84% of total oil production) and 68.6 MMcf of natural gas per day +(66% of total natural gas production), in 2017, as compared to 15,941 BOE per day (57% of total oil equivalent production), including 10,395 Bbl of oil per day (75% of total oil production) +and 33.3 MMcf of natural gas per day (40% of total natural gas production), in 2016. +Financing Arrangements +On October 10, 2017, we completed a public offering of 8,000,000 shares of our Common Stock, receiving proceeds of approximately $208.7 +million (before expenses). A portion of the proceeds from this offering were used to acquire approximately 6,600 net acres of additional leasehold and minerals in the Delaware Basin at a total acquisition cost of +approximately $38 million and to fund certain midstream initiatives and opportunities. The remaining proceeds have been and are expected to be used for other midstream development, leasehold and mineral acquisitions and general corporate +purposes, including to fund a portion of our current and future capital expenditures. +Haynesville/Cotton +Valley 19.0 MMBOE 22% Eagle Ford 19.0 MMBOE 22% Delaware Basin 47.1 MMBOE 55% Haynesville/Cotton Valley 13.1 MMBOE 12% Eagle Ford 13.3 MMBOE +13% Delaware Basin 79.4 MMBOE 75% Haynesville/Cotton Valley 11.4 MMBOE 8% Eagle Ford 12.4 MMBOE 8% Delaware Basin 129.0 MMBOE 84% +2018 +Proxy Statement | Matador Resources Company 41 +Table of Contents +EXECUTIVE COMPENSATION +Midstream Joint Venture +On February 17, 2017, we announced the formation of San Mateo, a strategic joint venture with a subsidiary of Five Point and contributed the Delaware Midstream +Assets to San Mateo. We received $171.5 million in connection with the formation of San Mateo. In March 2018, we received an additional $14.7 million in performance and may earn up to an additional $58.8 million in +performance incentives over the next four years. We continue to operate the Delaware Midstream Assets and retain operational control of San Mateo. The Company and Five Point own 51% and 49% of San Mateo, respectively. San Mateo +continues to provide firm capacity service to us at market rates, while also being a midstream service provider to third parties in and around our Wolf and Rustler Breaks asset areas. +Objectives of Our Compensation Program +Our future success and the +ability to create long-term value for our shareholders depends on our ability to attract, retain and motivate highly qualified individuals in the oil and natural gas industry. Additionally, we believe that our success also depends on the continued +contributions of our Named Executive Officers. Our executive compensation program is designed to provide a comprehensive compensation program to meet the following objectives: +• +to be fair to both the executive and the Company; +• +to attract talented and experienced executives with the skills necessary for us to execute our business plan; +• +to retain our executives in light of the intense competition for talent in our industry and areas of operation, including from peers and larger industry competitors; +• +to provide opportunities to achieve a total compensation level that is competitive with comparable positions at companies in our peer group, after taking into account our performance relative to our peer group; +• +to align the interests of our executives with the interests of our shareholders and with the performance of our Company for long-term value creation; +• +to provide financial incentives to our executives to achieve our key corporate and individual objectives; +• +to provide an appropriate mix of fixed and variable pay components to maintain a “pay for performance” oriented compensation program; +• +to foster a shared commitment among executives by coordinating their corporate and individual goals; +• +to provide compensation that takes into consideration the education, professional experience and knowledge that is specific to each job and the unique qualities the executive possesses; and +• +to recognize an executive’s commitment and dedication in his job performance and in support of our culture. +42 Matador Resources Company | 2018 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +What Our Compensation Program Is Designed to Reward +Our compensation +program is designed to reward, in both the short term and the long term, performance that contributes to the implementation of our business strategies, maintenance of our culture and values and achievement of our objectives. In addition, we reward +qualities that we believe help achieve our business strategies such as teamwork, mentoring future leaders within the Company to drive long-term shareholder value, individual performance in light of general economic and industry-specific conditions, +relationships with shareholders and vendors, the ability to manage and enhance production from our existing assets, the ability to explore new opportunities to increase oil and natural gas production, the ability to identify and acquire additional +acreage, the ability to improve total shareholder returns, the ability to increase year-over-year proved reserves, the ability to control unit production costs, the ability to pursue midstream opportunities, level of job responsibility, industry +experience and general professional growth. +What We Do: +What We Don’t +Do: +✓ +We pay for performance—approximately 90% of our CEO’s total direct compensation for 2017 was performance-based +× +We prohibit hedging of Company stock +✓ +We have robust stock ownership guidelines for officers +× +We do not gross-up excise taxes for severance or change in control payments +✓ +We engage an independent compensation consultant +× +We do not guarantee bonuses +✓ +We utilize competitive benchmarking in setting compensation +× +We do not reprice stock options without shareholder approval +✓ +We conduct annual risk assessments of compensation practices +× +We have no defined benefit or supplemental executive retirement plans +× +We discourage and limit pledging of Company +stock +Elements of Our 2017 Compensation Program and Why We Paid Each Element +We view the various components of compensation as related but distinct generally with a significant portion of total compensation reflecting our “pay for +performance” philosophy. In particular, our program places a considerable amount of an executive’s compensation at risk in the form of incentive or equity-based compensation, which can be variable from year to year, and we believe there is +an appropriate balance between annual incentives and long-term incentives to ensure that an executive is motivated to consider longer-term Company performance in preference to short-term results. +For 2017, our management compensation program was comprised of the following six elements: +• +Base Salary. We pay base salary to compensate each executive for his assigned responsibilities, experience, leadership and expected future contribution. +• +Performance-Based Cash Bonus. We adopted the Matador Resources Company Amended and Restated Annual Incentive Plan effective January 1, 2016 and grant awards thereunder as part of our management compensation +program because we believe this element of compensation (i) helps focus and motivate management to achieve key corporate and individual objectives by rewarding the achievement of these objectives; (ii) helps retain management; +(iii) rewards our successes over the prior year; and (iv) is necessary to be competitive from a total remuneration standpoint. +• +Discretionary Bonus. Our Independent Board has discretionary authority under our long-term incentive plan to reward +executives for extraordinary accomplishments at times and in amounts that the Independent Board approves, upon the recommendation of the Compensation Committee. Such awards can be in the form of cash or equity. These discretionary bonuses are +commonly referred to within the Company as “Marlan” awards in honor of the late Marlan W. Downey (1931-2017), a long-time advisor to the Board. During his many decades +2018 +Proxy Statement | Matador Resources Company 43 +Table of Contents +EXECUTIVE COMPENSATION +as an executive at Shell Oil Company and ARCO International, Mr. Downey stressed the importance of contemporaneously rewarding his staff for impressive professional achievements as a way to +incentivize similar future accomplishments and professional growth, which create value for a company and its shareholders. +• +Equity Awards. We grant nonqualified stock options and restricted stock awards as the primary vehicles for (i) linking our long-term performance and increases in shareholder value to the total compensation +for our executive officers; and (ii) providing competitive compensation to attract and retain our executive officers. The total compensation for our Named Executive Officers in 2017 is significantly weighted toward equity awards. +• +Severance and Change of Control Benefits. We have entered into employment agreements with each Named Executive Officer that provide for specified severance pay and benefits upon certain termination events, +including termination events after a change in control. We intend for such benefits to provide an incentive for the Named Executive Officers to remain with us despite the uncertainties of a potential or actual change in control and to provide a +measure of financial security in the event a Named Executive Officer’s employment is terminated without cause. +• +Other Benefits. We offer a variety of retirement (401(k)), health and welfare programs to all eligible employees, including the Named Executive Officers. The health and welfare programs are intended to protect +employees against catastrophic loss and encourage a healthy lifestyle. +Role of the Compensation Committee and Management +The Compensation Committee has the authority, at our expense, to retain and terminate independent third-party compensation consultants and other expert advisors. See +“—Role of the Independent Compensation Consultant” below. +In addition, the Compensation Committee confirms at least annually that our compensation +policies and practices do not encourage unnecessary risk taking and reviews and discusses the relationship between risk management, corporate strategy and senior executive compensation. The Compensation Committee considered, in establishing and +reviewing our compensation program, whether the program encourages unnecessary or excessive risk taking and has concluded that it does not and is not reasonably likely to have a material adverse effect on us. Several features of our program reflect +sound risk management practices. Base salaries are fixed in amount and thus do not encourage risk taking. While annual executive bonuses are tied to management’s achievements during the previous fiscal year, they also take into account multiple +performance criteria based on the executive’s individual performance and are within the discretion of the Independent Board. Thus, the Compensation Committee believes that our bonus awards appropriately balance risk and the desire to focus +executives on specific short-term goals important to the Company’s success, and that they do not encourage unnecessary or excessive risk taking. In addition, the Compensation Committee believes that our current equity compensation program +provides an appropriate balance between the goals of increasing the price of our Common Stock and avoiding potential risks that could threaten our growth and stability due to the fact that stock options and service-based restricted stock typically +vest over three or four years. +With regard to all of the Named Executive Officers, the Compensation Committee recommends to the Independent Board: +• +option guidelines and size of overall grants; +• +option grants and other equity and non-equity related awards; and +• +limitations, restrictions and conditions upon any award as the Compensation Committee deems appropriate and as permitted under the applicable plan. +44 Matador Resources Company | 2018 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +The Compensation Committee annually evaluates Mr. Foran’s compensation, including setting and evaluating corporate goals and objectives applicable to his +compensation. Based upon these evaluations, the Compensation Committee makes recommendations to the Independent Board regarding Mr. Foran’s annual compensation, including salary, bonus and equity incentive compensation. The members of the +Independent Board are required to be independent pursuant to the listing standards of the NYSE and the rules and regulations promulgated by the SEC. As part of their annual evaluation, the Compensation Committee: +• +conducts an analysis of the Company’s annual performance relative to any performance criteria or performance targets pursuant to incentive compensation plans, along with Mr. Foran’s individual +performance, and determines whether to recommend to the Independent Board the use of negative discretion in the determination of final incentive awards (as described further under “—2017 Annual Incentive Compensation”); +• +reviews and recommends the form of and number of shares to be awarded pursuant to long-term incentive compensation awards, including vesting terms, expiration dates of stock options and other material provisions of such +awards; +• +reviews and recommends any employment agreement, severance agreement, change in control agreement or provision or separation agreement or amendment thereof; and +• +reviews and recommends any deferred compensation arrangement, retirement plan, other benefits and perquisites. +On an +annual basis, after consultation with Mr. Foran, the Compensation Committee reviews and makes recommendations to the Independent Board on the evaluation of and compensation structure for the other Named Executive Officers. After considering the +evaluation and recommendations of Mr. Foran, the Compensation Committee evaluates the performance of the other Named Executive Officers and makes recommendations to the Independent Board regarding the annual compensation of such Named Executive +Officers, including salary, bonus and equity and non-equity incentive compensation. +The Compensation Committee also takes +into account the outcome of the most recent advisory vote from our shareholders, which was approved with approximately 99% support at our 2017 Annual Meeting, when considering executive compensation arrangements. Given this high level of support, +the Compensation Committee did not make any adjustments to the overall structure of our compensation program in 2017. +After considering the recommendations of +Mr. Foran with regard to the other Named Executive Officers, as part of the Compensation Committee’s annual review and recommendation to the Independent Board regarding the compensation of the other Named Executive Officers, the +Compensation Committee reviews and recommends the same items described in the list above with respect to Mr. Foran. +In addition, pursuant to its charter, the +Compensation Committee reviews and recommends to the Independent Board any proposals for the adoption, amendment, modification or termination of our incentive compensation, equity-based plans and non-equity +based plans. +Role of the Independent Compensation Consultant +During the third quarter of 2017, the Compensation Committee engaged Meridian Compensation Partners, LLC (“Meridian”) as its independent executive compensation +advisory firm. Prior to the engagement of Meridian, the Compensation Committee had engaged Pay Governance LLC as its independent executive compensation advisory firm. As the Compensation Committee’s independent executive compensation advisory +firm, Meridian provides assessments of the competitiveness of the Company’s executive compensation levels and practices relative to relevant executive labor markets and performs other tasks as requested by the Compensation Committee. For 2017, +the Compensation Committee assessed the independence of both Meridian and Pay Governance LLC pursuant to applicable SEC and NYSE rules and concluded that neither Meridian’s nor Pay Governance LLC’s engagement by the Compensation Committee +raised any conflict of interest. +2018 +Proxy Statement | Matador Resources Company 45 +Table of Contents +EXECUTIVE COMPENSATION +Use of Peer Group Market Data in 2017 +Our independent compensation consultant benchmarks the pay levels of our officers against a group of competitor companies in the oil and natural gas exploration and +production sector (the “Peer Group”). Upon the initial selection of the Peer Group in late 2015, the peers represented competitors in the oil and natural gas exploration and production sector with one or more of the following +characteristics: comparable revenue size (approximately $280 million to $1.7 billion); comparable market capitalization (approximately $1.3 billion to $4.3 billion); similar operating areas (particularly the Delaware Basin); and similar +growth profile. The Compensation Committee and Independent Board adopted the Peer Group for 2016 and determined that the Peer Group remained appropriate for 2017. The companies included in the Peer Group for 2017 are as follows: +Carrizo Oil & Gas, Inc. +Diamondback Energy, Inc. +Energen Corp. +EP Energy Corporation +Gulfport Energy +Corp. +Laredo Petroleum, Inc. +Parsley Energy, Inc. +PDC Energy, Inc. +RSP Permian, Inc. +The Compensation Committee and Independent Board, with advice from the independent compensation consultant, review the Peer Group on an +annual basis. The Peer Group is used by the Compensation Committee and the Independent Board in setting Named Executive Officer salaries, annual bonus opportunities, long-term incentive awards and target total direct compensation levels. The +Compensation Committee and Independent Board use this data to inform its pay decisions as one data point among many others, including Company performance, individual performance, experience and responsibilities, leadership and professional growth. +2017 Base Salary +In early 2017, based on the recommendations of +Mr. Foran (other than with regard to his base salary), the Compensation Committee recommended and the Independent Board approved the following 2017 base salaries for our Named Executive Officers. The Independent Board determined raises for each +Named Executive Officer were warranted based upon each Named Executive Officer’s individual contributions to, among other items, (i) the Company’s record oil, natural gas and average daily oil equivalent production for 2016 (each of +which were subsequently exceeded in 2017), (ii) the significant additions to the Company’s Delaware Basin acreage position throughout 2016, (iii) the Company’s continued improvement in operational efficiencies throughout 2016 and +(iv) the Company’s significant progress made in our midstream operations in 2016. +Executive Officer +2016 Base +Salary +2017 Base +Salary +Joseph Wm. Foran +$ +900,000 +$ +1,000,000 +Chairman of the Board and Chief Executive Officer +Matthew V. Hairford +$ +550,000 +$ +600,000 +President +David E. Lancaster +$ +475,000 +$ +550,000 +Executive Vice President and Chief Financial Officer +Craig N. Adams +$ +475,000 +$ +525,000 +Executive Vice President—Land, Legal & +Administration +Billy E. Goodwin +$ +425,000 +$ +500,000 +Executive Vice President and Head of Operations +2017 Annual Incentive Compensation +The Company sponsors and maintains the Amended and Restated Matador Resources Company Annual Incentive Plan for Management and Key Employees, effective January 1, +2016 (the “Incentive Plan”), which was +46 Matador Resources Company | 2018 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +approved by our shareholders at the 2016 Annual Meeting. The Incentive Plan is designed to link executive decision-making and performance with the Company’s goals, reinforce these goals and +ensure the highest level of accountability for the success of the Company as a whole. +The Incentive Plan is intended to advance the interests of the Company and +its shareholders by providing the Company with an additional means by which it can sustain and enhance its culture of personal commitment on the part of its executives, select managers and key employees in the continued growth, development and +financial success of the Company, and encourage them to remain with, and devote their best efforts to the business of, the Company, thereby advancing the interests of the Company and its shareholders. The Incentive Plan provides for the granting of +awards of incentive compensation that may be paid to a participant upon satisfaction of specified performance goals for a particular performance period. +The +Incentive Plan was designed in a manner such that awards were intended to satisfy the requirements of “qualified performance based compensation” within the meaning of Section 162(m) of the Code so that the Company could take federal +income tax deductions for any “qualified performance-based compensation” paid under the Incentive Plan to certain individuals who are covered by the deduction limitations of Section 162(m) of the Code for annual compensation paid to +such individuals that is in excess of $1.0 million. For taxable years beginning after December 31, 2017, this “qualified performance based compensation” exemption has been repealed for all but certain grandfathered compensation +arrangements that were in effect as of November 2, 2017. The rules and regulations promulgated under Section 162(m) are complicated and subject to change and the scope of relief for grandfathered arrangements is currently uncertain. As +such, there can be no assurance that any compensation awarded or paid in prior years will be fully tax deductible. However, we have currently elected to continue our use of the Incentive Plan as currently structured for 2018 as we feel that the plan +fits well within our “pay for performance” philosophy and drives our executives to achieve our short-term and long-term performance objectives. +The +Incentive Plan establishes a performance goal for all participants with the creation of a performance pool, which is equal to 3.5% of Adjusted EBITDA; provided that Adjusted EBITDA equals or exceeds $50.0 million (the “Adjusted EBITDA Pool +Goal”). For these purposes, Adjusted EBITDA is defined as earnings before interest expense, income taxes, depletion, depreciation and amortization, accretion of asset-retirement obligations, property impairments, unrealized derivative gains and +losses, certain other non-cash items and non-cash stock-based compensation expense and net gain or loss on asset sales and inventory impairment, of the Company and its +subsidiaries, determined on a consolidated income basis. If the Adjusted EBITDA Pool Goal is reached or exceeded, the Incentive Plan provides that the maximum amount that would be payable to each participant is according to the allocation formula +set forth in the table below. The Independent Board, upon the recommendation of the Compensation Committee, may use negative discretion to reduce the amount paid to a participant below the maximum amounts shown in the table. +Participant +Percentage of Performance +Pool (Maximum) +Joseph Wm. Foran +30.0 +% +Matthew V. Hairford +17.5 +% +David E. Lancaster +17.5 +% +Craig N. Adams +17.5 +% +Billy E. Goodwin +17.5 +% +Total +100.0 +% +In the Independent Board’s discretion, supplemental performance goals (the “Performance Goals”), in addition to the +Adjusted EBITDA Pool Goal set forth above, may be established by the Independent Board for each year. Such Performance Goals can be used by the Independent Board in determining the award payable to a participant, but in no event may the Independent +Board increase the amount of an award payable to a participant above the maximum award payable set out in the table above. For 2017, the Chair of the Compensation +2018 +Proxy Statement | Matador Resources Company 47 +Table of Contents +EXECUTIVE COMPENSATION +Committee met with Pay Governance LLC (as predecessor to Meridian) and management to determine potential criteria for the Performance Goals. Based on these meetings, the Chair of the Compensation +Committee proposed certain preliminary performance criteria categories for consideration as the Performance Goals for 2017. The Compensation Committee then met with Pay Governance LLC and management to review the proposed criteria. As a result of +these meetings, the Compensation Committee recommended and the Independent Board determined to use the following performance categories and threshold, target and maximum levels for establishing the Performance Goals for 2017 in determining whether +to exercise negative discretion in reducing the amount paid to a participant below the maximum amounts: +2017 +Performance Goals +Threshold +Target +Maximum +Actual +Results +Actual +Results as +Percent +of +Target +Oil production (millions of Bbl) +6.9 +7.05 +7.2 +7.85 +111% +Total production (millions of BOE) +12.4 +12.7 +13.0 +14.2 +112% +Cash operating costs per BOE, excluding interest +($/BOE) (1) +$16.35 +$16.15 +$15.85 +$14.41 +Exceeded +Acreage acquisition (net acres) (2) +5,000 +10,000 +15,000 +25,000+ +167%+ +Adjusted EBITDA (millions of $) (3) +$255.0 +$265.0 +$275.0 +$336.1 +127% +Total shareholder return vs. Peer Group +Upper 50% +Upper 35% +Upper 25% +Upper 25% +Exceeded +(1) +Cash operating costs per BOE, excluding interest, is a non-GAAP financial measure included herein solely as a reference point under the Incentive Plan and is commonly used by +similar companies in our industry. The Compensation Committee and the Independent Board believe cash operating costs per BOE, excluding interest, is an appropriate Performance Goal because it allows them to evaluate the efficiency of our operations +and their impact on our cash flows and compare our cash operating costs from period to period without regard to our financing methods or capital structure. Cash operating costs per BOE, excluding interest, can be calculated from the Company’s +audited financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2017 by adding the following expenses per BOE: production taxes, transportation and processing; +lease operating; plant and other midstream operating; and general and administrative. +(2) +Net acres added in the Delaware Basin after accounting for expirations and dispositions in 2016. +(3) +Adjusted EBITDA is a non-GAAP financial measure included herein solely as a reference point under the Incentive Plan is commonly used by similar companies in our industry. The +Compensation Committee and the Independent Board believe Adjusted EBITDA is an appropriate Performance Goal because it allows them to evaluate our operating performance and compare the results of operations from period to period without regard to +our financing methods or capital structure. For a definition of Adjusted EBITDA when used as a financial metric and a reconciliation of Adjusted EBITDA to our net income (loss) and net cash provided by operating activities, see Schedule A to +this Proxy Statement. +In making recommendations regarding the potential payment guidelines under the 2017 Performance Goals, the Compensation +Committee reviewed the Pay Governance LLC recommendations and recommendations of management regarding target payment guidelines. Based on the review of the Pay Governance LLC recommendations and the management recommendations, which took into +account the differing responsibilities of each Named Executive Officer by the Compensation Committee and the Independent Board, the target payment guidelines set forth below were adopted. +Participant +Target +Annual +Incentive +Opportunity +as % of 2017 +Base Salary +Joseph Wm. Foran +110.0% +Matthew V. Hairford +90.0% +David E. Lancaster +85.0% +Craig N. Adams +80.0% +Billy E. Goodwin +75.0% +48 Matador Resources Company | 2018 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +Pursuant to the Incentive Plan, the amount of any annual award could be greater or less than the annual incentive opportunity outlined above based on achievement of the +Performance Goals; provided, however, that no award could exceed the maximum bonus payable under the Incentive Plan, as determined based upon achievement of the Adjusted EBITDA Pool Goal. +In February 2018, the Compensation Committee and the Independent Board concluded that the Company had achieved Adjusted EBITDA of $336.1 million, which is in +excess of the $50.0 million Adjusted EBITDA Pool Goal. After taking into account (i) the achievement of the Adjusted EBITDA Pool Goal, (ii) the Company’s 2017 results in light of the Performance Goals, (iii) the target +annual incentive opportunities for each Named Executive Officer and (iv) other information with regard to each Named Executive Officer, the Compensation Committee recommended to the Independent Board the annual cash awards listed below for each +Named Executive Officer under the Incentive Plan. The Independent Board approved such annual cash awards, which were paid to the Named Executive Officers in the first quarter of 2018. Adjusted EBITDA is a +non-GAAP financial measure included herein solely as a reference point under the Incentive Plan. For a definition of Adjusted EBITDA when used as a financial metric and a reconciliation of Adjusted EBITDA to +our net income (loss) and net cash provided by operating activities, see Schedule A to this Proxy Statement. +Executive Officer +Percentage of +Performance +Pool (Maximum) +Maximum Bonus +Payable under +Incentive Plan +2017 Incentive +Plan Bonus +% of 2017 +Base Salary +Joseph Wm. Foran +30.0 +% +$ +3,528,662 +$ +3,000,000 +300.0 +Matthew V. Hairford +17.5 +% +$ +2,058,386 +$ +1,030,000 +171.7 +David E. Lancaster +17.5 +% +$ +2,058,386 +$ +935,000 +170.0 +Craig N. Adams +17.5 +% +$ +2,058,386 +$ +840,000 +160.0 +Billy E. Goodwin +17.5 +% +$ +2,058,386 +$ +800,000 +160.0 +Discretionary Bonuses +The Independent +Board has discretionary authority under the 2012 Plan (as defined below) to reward executives for particular accomplishments at times and in amounts that the Independent Board approves, upon the recommendation of the Compensation Committee. For +further discussion of such discretionary “Marlan” bonuses, see “—Elements of Our 2017 Compensation Program and Why We Paid Each Element” above. In the first and fourth quarters of 2017, the Compensation Committee +recommended, and the Independent Board approved, discretionary cash “Marlan” bonuses to certain of our Named Executive Officers in recognition of each officer’s efforts in connection with the formation of San Mateo in February 2017 +(in the amounts of $500,000, $125,000, $125,000, $175,000 and $50,000, respectively, for each of Messrs. Foran, Hairford, Lancaster, Adams and Goodwin) and the Company’s October 2017 public equity offering (in the amounts of $450,000, $150,000, +$200,000, $200,000 and $50,000, respectively, for each of Messrs. Foran, Hairford, Lancaster, Adams and Goodwin), respectively. These bonuses are reflected in the “Bonus” column of the Summary Compensation Table below. +2018 +Proxy Statement | Matador Resources Company 49 +Table of Contents +EXECUTIVE COMPENSATION +In June 2017, the Compensation Committee recommended, and the +Independent Board awarded, Mr. Foran a one-time equity grant of 87,757 shares of Common Stock targeting a value of approximately two times Mr. Foran’s 2017 base salary. The grant date fair value +of this stock award was $2,057,902. These shares of Common Stock were vested at the date of grant. Given Mr. Foran’s instrumental role in the Company’s significant accomplishments in the first half of 2017, including (i) the +formation of San Mateo with a joint venture valuation of $500 million, (ii) record average daily oil, average daily natural gas and average daily oil equivalent production in the first quarter of 2017 and (iii) an all-time high in oil, natural gas and total proved reserves at March 31, 2017, the Independent Board believed Mr. Foran was entitled to additional compensation. While the Compensation Committee and +Independent Board deliberated a cash award, the Compensation Committee recommended, and the Independent Board approved, an award of Common Stock in order to further align Mr. Foran’s interests with those of the Company’s shareholders +and to incentivize future performance. +2017 Long-Term Incentive Compensation +The Board maintains the Matador Resources Company Amended and Restated 2012 Long-Term Incentive Plan (the “2012 Plan”), which was approved by our shareholders +on June 10, 2015. The 2012 Plan permits the granting of long-term equity and cash incentive awards, including the following: +• +stock options; +• +stock appreciation rights; +• +restricted stock (service-based and performance-based); +• +restricted stock units (service-based and performance-based); +• +performance shares; +• +performance units; +• +stock grants; and +• +performance cash awards. +After receiving recommendations from the Compensation Committee, the Independent Board +administers the 2012 Plan. For 2017, the Compensation Committee met with Pay Governance LLC (as predecessor to Meridian) and management regarding the appropriate types and amounts of equity grants based on differing levels of responsibility of the +Named Executive Officers and made recommendations to the Independent Board. Pursuant to the 2012 Plan, all time-based restricted stock and restricted stock units issued thereunder must vest no earlier than on a pro rata basis over a three-year +period; otherwise, the shares subject to such restricted stock and restricted stock units will be deemed “exempt shares” subject to a cap under the 2012 Plan of 10% of the total shares authorized thereunder. +In February 2017, the Compensation Committee recommended, and the Independent Board awarded, annual equity awards of +non-qualified stock options and restricted stock to each Named Executive Officer. The stock options and restricted stock were granted in order to facilitate retention of our Named Executive Officers, +incentivize positive future results and further align the interests of our Named Executive Officers with those of the Company’s shareholders. The table below provides the key terms of the February 2017 equity awards. +Key Terms +Non-Qualified Stock Options +Restricted +Stock +Targeted percentage of total award value +50% +50% +Vesting terms +Three years ratably on each anniversary +Three years ratably on each anniversary +Exercise price +$27.26 (closing price on grant date) +— +Term of option +Six years +— +Rights to receive dividends and vote +No +Yes +50 Matador Resources Company | 2018 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +The number of shares underlying each grant, the grant date fair value and the approximate value of the 2017 annual equity grants as a percentage of 2017 base salary are +set forth in the table below. +Participant +Stock +Options +Restricted +Stock +Grant Date +Fair Value +% of 2017 +Base Salary +Joseph Wm. Foran +144,686 +55,943 +$ +3,049,997 +305 +% +Chairman of the Board and Chief Executive +Officer +Matthew V. Hairford +93,927 +36,317 +$ +1,979,992 +330 +% +President +David E. Lancaster +82,211 +31,786 +$ +1,732,990 +315 +% +Executive Vice President and Chief Financial +Officer +Craig N. Adams +68,500 +26,486 +$ +1,443,998 +275 +% +Executive Vice President—Land, Legal & +Administration +Billy E. Goodwin +55,739 +21,552 +$ +1,174,997 +235 +% +Executive Vice President and Head of Operations +Benefits +We offer a variety of health +and welfare programs to eligible employees, including the Named Executive Officers. The health and welfare programs are intended to protect employees against catastrophic loss and encourage a healthy lifestyle. Our health and welfare programs +include medical, pharmacy, dental, disability and life insurance. We also have a 401(k) plan for eligible employees, including the Named Executive Officers, to which we contribute 3% of the employee’s eligible compensation, which is subject to +limits established by the Code, and have the discretion to contribute up to an additional 4% of the employee’s eligible compensation as a dollar-for-dollar matching +contribution with respect to his or her elective deferral contributions. The discretionary dollar-for-dollar match is subject to vesting based upon years of service to +the Company and the limits on the compensation that may be considered for purposes of calculating matching contributions. In addition, we provide long-term care insurance for certain of our executive officers. +Accounting and Tax Considerations +Section 162(m) of the Code +limits the deductibility for individual compensation paid to certain covered employees of a corporation exceeding $1.0 million in any taxable year. For taxable years commencing on or before December 31, 2017, there was an exception to this +limitation for certain “qualified performance-based compensation.” For taxable years beginning after December 31, 2017, this exemption has been repealed for all but certain grandfathered compensation arrangements that were in effect +as of November 2, 2017. Awards under the Incentive Plan were historically structured to comply with this exemption. However, the rules and regulations promulgated under Section 162(m) are complicated and subject to change and the scope of +relief for grandfathered arrangements is currently uncertain. As such, there can be no assurance that any compensation awarded or paid in prior years will be fully tax deductible. Furthermore, to maintain flexibility in compensating our executive +officers in a manner designed to promote varying corporate goals, we have not adopted a policy requiring all compensation to be tax deductible. +Termination +of Employment Arrangements +Employment Agreements +In +contemplation of our initial public offering, on August 9, 2011, we entered into employment agreements with Messrs. Foran, Hairford and Lancaster. In March 2014, we entered into an employment agreement with Mr. Adams in substantially the +same form as that of Messrs. Foran, Hairford and Lancaster, and effective +2018 +Proxy Statement | Matador Resources Company 51 +Table of Contents +EXECUTIVE COMPENSATION +February 2016 we entered into an employment agreement with Mr. Goodwin in substantially the same form as that of Mr. Adams. The principal difference in Mr. Adams’ and +Mr. Goodwin’s employment agreements as compared to the employment agreements of Messrs. Foran, Hairford and Lancaster is that Mr. Adams’ and Mr. Goodwin’s agreements do not include a “modified single trigger” +that would have allowed them to receive a “change in control” payment if they terminated their agreements without “good reason” within 30 days prior to or 12 months after a change in control. +Under the employment agreements, if a termination of employment occurs pursuant to one of the following events: +• +the Named Executive Officer dies; +• +the Named Executive Officer is totally disabled; +• +we mutually agree to end the employment agreement; +• +we dissolve and liquidate; or +• +the term of the employment agreement ends, +we will pay the Named Executive Officer the average of his annual bonus, +which includes non-equity incentive compensation, for the prior two years pro-rated based on the number of complete or partial months completed during the year of +termination. +Also, under the employment agreements, if one of the following occurs: +• +the Named Executive Officer’s employment is terminated other than (i) as set forth above, (ii) by us for just cause or (iii) in connection with a “change in control” as described below; or +• +the Named Executive Officer terminates his employment for “good reason,” +if the Named Executive Officer is +Mr. Foran, we will pay him twice his base salary and twice the average of his annual bonus for the prior two years; if the Named Executive Officer is Messrs. Hairford, Lancaster or Adams, we will pay him 1.5 times his base salary and 1.5 times +the average of his annual bonus for the prior two years; and if the Named Executive Officer is Mr. Goodwin, we will pay him an amount equal to his base salary plus an amount equal to the average of his annual bonus for the prior two years. +Finally, under the employment agreements of Messrs. Foran, Hairford and Lancaster, upon a “change in control” and within 30 days prior to the “change in +control” or within 12 months after the “change in control,” if we terminate a Named Executive Officer without just cause or the Named Executive Officer terminates his employment with or without “good reason,” we will pay him +three times his base salary and three times the average of his annual bonus for the prior two years. These agreements were entered into prior to our initial public offering. At that time, we believed a “modified single trigger” was +appropriate given the Company’s size, early stage of development and strong growth aspirations. Since that time, however, we have ceased to use “modified single triggers” in executive employment agreements, and we intend to +exclusively use “double triggers” going forward, as we have since 2014. The agreement entered into with Mr. Adams in March 2014 and the agreement entered into with Mr. Goodwin effective February 2016, however, each include a +“double trigger” such that upon a “change in control” and within 30 days prior to the “change in control” or within 12 months after the “change in control,” if we terminate either executive without just cause +or he terminates his employment with “good reason,” we will pay Mr. Adams three times his base salary and three times the average of his annual bonus for the prior two years and we will pay Mr. Goodwin two times his base salary +and two times the average of his annual bonus for the prior two years. In addition, if Messrs. Foran, Hairford, Lancaster, Adams or Goodwin are terminated or terminate their employment as set forth above in connection with a “change in +control,” all equity awards of such Named Executive Officer vest immediately prior to such termination. +52 Matador Resources Company | 2018 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +For purposes of the employment agreements, “change in control” is defined as a change in control event for purposes of Section 409A of the Code, which is +generally defined as follows: +• +a change in ownership of the Company occurs on the date that, except in certain situations, results in someone acquiring more than 50% of the total fair market value or voting power of the Company’s stock; +• +a change in effective control of the Company occurs on one of the following dates: +• +the date that a person acquires (or has acquired in a 12 month period) ownership of 30% or more of the Company’s total voting power; however, if a person already owns at least 30% of the Company’s total voting +power, the acquisition of additional control does not constitute a change in control; or +• +the date during a 12 month period where a majority of the Company’s Board is replaced by directors whose appointment or election was not endorsed by a majority of the Board; or +• +a change in the ownership of a substantial portion of the Company’s assets occurs on the date a person acquires (or has acquired in a 12 month period) assets of the Company having a total gross market value of at +least 40% of the total gross fair market value of all of the Company’s assets immediately before such acquisition. +For purposes of the +employment agreements, “good reason” means: +• +the assignment of duties inconsistent with the title of the Named Executive Officer or his current office or a material diminution of the Named Executive Officer’s current authority, duties or responsibilities; +• +a diminution of the Named Executive Officer’s base salary or a material breach of the employment agreement by the Company; or +• +the relocation of the Company’s principal executive offices more than 30 miles from the Company’s present principal executive offices or the transfer of the Named Executive Officer to a place other than the +Company’s principal executive offices; and +• +the action causing the “good reason” is not cured within the applicable cure period. +For purposes of the +employment agreements, “just cause” means: +• +the Named Executive Officer’s continued and material failure to perform the duties of his employment consistent with his position other than due to disability; +• +the Named Executive Officer’s failure to perform his material obligations under the employment agreement other than due to disability; +• +the Named Executive Officer’s material breach of certain of the Company’s written policies; +• +the Named Executive Officer’s refusal or failure to follow lawful directives of the Board and any supervisors other than due to disability; +• +the Named Executive Officer’s commission of fraud, theft or embezzlement; +• +the Named Executive Officer’s conviction or indictment of a felony or other crime involving moral turpitude; or +• +the Named Executive Officer’s intentional breach of fiduciary duty; and +• +the action causing the “just cause” is not cured within the applicable cure period, if any. +Equity Plans +For equity grants under the 2012 Plan and its predecessor, vesting upon a “change in control” for the Named Executive Officers mirrors the terms of +their employment agreements. +The “change in control” provisions in the employment agreements and the equity grants under the 2012 Plan and its +predecessor help prevent management from being distracted by rumored or actual changes in control. The “change in control” provisions provide: +• +incentives for those Named Executive Officers to remain with us despite the uncertainties of a potential or actual change in control; +2018 +Proxy Statement | Matador Resources Company 53 +Table of Contents +EXECUTIVE COMPENSATION +• +assurance of severance payments for terminated Named Executive Officers; and +• +access to equity compensation after a change in control. +Stock Ownership Guidelines +We have adopted stock ownership guidelines for the following officers in the following designated amounts: +• +Chairman and Chief Executive Officer—shares equal to five times base salary; +• +President—shares equal to five times base salary; +• +Executive Vice Presidents—shares equal to two and 1/2 times base salary; +• +Senior Vice Presidents—shares equal to two times base salary; and +• +Vice Presidents and Executive Directors—shares equal to one and 1/2 times base salary. +Each of the foregoing +officers has five years from the later of the date of the closing of our initial public offering and the fifth anniversary of his or her appointment as an officer of the Company in which to achieve the stock ownership position. Shares that count +toward the stock ownership guidelines include time-lapse restricted shares that are still restricted and any shares held in trust by the officer or his immediate family over which he has direct beneficial ownership interest. Shares that will not +count toward the stock ownership guidelines include shares underlying unexercised stock options, unexercised stock appreciation rights and performance-based awards for which the performance requirements have not been satisfied. +Until each of the above officers reaches the stock ownership level required of his or her position, such officer must hold at least 50% of all “net +shares” received through restricted stock vesting or realized through stock option exercises. For this purpose, “net shares” means all shares retained after applicable withholding of any shares for tax purposes. Messrs. Foran, +Hairford, Lancaster, Adams and Goodwin each own shares in excess of the minimum requirement set forth in the stock ownership guidelines. +Anti-Hedging and +Anti-Pledging Policies +Pursuant to the Company’s insider trading policy, the Company prohibits hedging of its securities by directors, officers or +employees. The insider trading policy also restricts directors and executive officers from pledging more than 25% of his or her holdings of the Company’s stock without the prior written consent of the Corporate Governance Committee. +Strategic Planning and Compensation Committee Report +We have reviewed and discussed with management the Compensation +Discussion and Analysis required by Item 402(b) of Regulation S-K and based on such review and discussions, we recommended to the Board that the Compensation Discussion and Analysis be included in this +Proxy Statement. +Strategic Planning and Compensation Committee, +R. Gaines Baty, Chair +Reynald A. Baribault +Craig T. Burkert +Steven W. Ohnimus +Timothy E. Parker* +Kenneth L. Stewart +* +Member of the Strategic Planning and Compensation Committee as of February 16, 2018 +54 Matador Resources Company | 2018 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +Summary Compensation Table +The following table summarizes the total compensation awarded +to, earned by or paid to Messrs. Foran, Hairford, Lancaster, Adams and Goodwin for 2017, 2016 and 2015. This table and the accompanying narrative should be read in conjunction with the CD&A, which sets forth the objectives and other information +regarding our executive compensation program. +Name and Principal Position +Year +Salary +Bonus (1) +Stock +Awards (2) +Option +Awards (3) +Non-Equity +Incentive Plan +Compensation (4) +All Other +Compensation +Total +Joseph Wm. Foran +2017 +$ +1,000,000 +$ +950,000 +$ +3,582,908 +$ +1,524,990 +$ +3,000,000 +$ +22,489 +(5) +$ +10,080,387 +Chairman of the Board and +Chief Executive Officer +2016 +$ +900,000 +$ +800,000 +$ +1,413,450 +$ +1,292,703 +$ +1,575,000 +$ +22,251 +$ +6,003,404 +2015 +$ +800,000 +$ +750,000 +$ +— +$ +3,586,811 +$ +1,080,000 +$ +21,795 +$ +6,238,606 +Matthew V. Hairford +2017 +$ +600,000 +$ +275,000 +$ +990,001 +$ +989,991 +$ +1,030,000 +$ +22,802 +(6) +$ +3,907,794 +President +2016 +$ +550,000 +$ +200,000 +$ +479,880 +$ +438,882 +$ +908,000 +$ +22,452 +$ +2,599,214 +2015 +$ +500,000 +$ +125,000 +$ +— +$ +682,293 +$ +563,000 +$ +22,452 +$ +1,892,745 +David E. Lancaster +2017 +$ +550,000 +$ +325,000 +$ +866,486 +$ +866,504 +$ +935,000 +$ +18,900 +(7) +$ +3,561,890 +Executive Vice President +and Chief Financial Officer +2016 +$ +475,000 +$ +250,000 +$ +372,990 +$ +341,132 +$ +784,000 +$ +18,550 +$ +2,241,672 +2015 +$ +425,000 +$ +175,000 +$ +146,301 +$ +339,753 +$ +470,000 +$ +18,550 +$ +1,574,604 +Craig N. Adams +2017 +$ +525,000 +$ +375,000 +$ +722,008 +$ +721,990 +$ +840,000 +$ +21,181 +(8) +$ +3,205,179 +Executive Vice President — +Land, Legal & +Administration +2016 +$ +475,000 +$ +350,000 +$ +372,990 +$ +341,132 +$ +665,000 +$ +20,831 +$ +2,224,953 +2015 +$ +425,000 +$ +200,000 +$ +146,301 +$ +339,753 +$ +385,000 +$ +20,831 +$ +1,516,885 +Billy E. Goodwin +2017 +$ +500,000 +$ +100,000 +$ +587,508 +$ +587,489 +$ +800,000 +$ +18,900 +(7) +$ +2,593,897 +Executive Vice President and +Head of Operations +2016 +$ +425,000 +$ +165,000 +$ +296,655 +$ +271,310 +$ +595,000 +$ +18,550 +$ +1,771,515 +2015 +(9) +$ +— +$ +— +$ +— +$ +— +$ +— +$ +— +$ +— +(1) +Reflects ad hoc discretionary bonuses awarded by the Independent Board to recognize such Named Executive Officer’s contributions to certain transactions and accomplishments of the Company. See +“—Compensation Discussion and Analysis—Discretionary Bonuses” above. +(2) +Reflects the grant date fair value of restricted stock or Common Stock awards, as applicable, computed in accordance with FASB ASC Topic 718. +(3) +Reflects the grant date fair value of option awards computed in accordance with FASB ASC Topic 718. Our policy and assumptions made in the valuation of the stock options are contained in Note 2 and Note 8 of the audited +financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2017. +(4) +Represents awards pursuant to the Incentive Plan. See “—Compensation Discussion and Analysis—2017 Annual Incentive Compensation” above. +(5) +Consists of $18,900 in 401(k) matching contributions as described in “—Compensation Discussion and Analysis—Benefits,” $990 in premiums reimbursed to Mr. Foran for a life insurance policy +covering Mr. Foran and $2,599 in long-term care insurance premiums. +(6) +Consists of $18,900 in 401(k) matching contributions as described in “—Compensation Discussion and Analysis—Benefits” and $3,902 in long-term care insurance premiums. +(7) +Reflects 401(k) matching contributions as described in “—Compensation Discussion and Analysis—Benefits.” +(8) +Consists of $18,900 in 401(k) matching contributions as described in “—Compensation Discussion and Analysis—Benefits” and $2,281 in long-term care insurance premiums. +(9) +Mr. Goodwin was not a Named Executive Officer in 2015. +2018 +Proxy Statement | Matador Resources Company 55 +Table of Contents +EXECUTIVE COMPENSATION +Grants of +Plan-Based Awards Table +The following table sets +forth certain information regarding non-equity awards granted by the Independent Board pursuant to the Incentive Plan and stock and option awards granted by the Independent Board pursuant to the 2012 Plan +during the year ended December 31, 2017 to the Named Executive Officers below: +Estimated Future Payouts +Under Non-Equity +Incentive +Plan Awards (1) +All +Other +Stock +Awards: +Number +of Shares +of Stock +or Units +All +Other +Option +Awards: +Number of +Securities +Underlying +Options (2) +Exercise +or Base +Price of +Option +Awards +Grant +Date +Fair +Value of +Stock +and +Option +Awards +Threshold +Target +Maximum +Name +Grant Date +($) +($) +($) +(# shares) +(# shares) +($/share) +($) +Joseph Wm. Foran +— +— +— +3,528,662 +— +— +— +— +2/15/17 +— +— +— +55,943 +— +— +1,525,006 +2/15/17 +— +— +— +— +144,686 +27.26 +1,524,990 +6/1/17 +— +— +— +87,757 +— +— +2,057,902 +Matthew V. Hairford +— +— +— +2,058,386 +— +— +— +— +2/15/17 +— +— +— +36,317 +— +— +990,001 +2/15/17 +— +— +— +— +93,927 +27.26 +989,991 +David E. Lancaster +— +— +— +2,058,386 +— +— +— +— +2/15/17 +— +— +— +31,786 +— +— +866,486 +2/15/17 +— +— +— +— +82,211 +27.26 +866,504 +Craig N. Adams +— +— +— +2,058,386 +— +— +— +— +2/15/17 +— +— +— +26,486 +— +— +722,008 +2/15/17 +— +— +— +— +68,500 +27.26 +721,990 +Billy E. Goodwin +— +— +— +2,058,386 +— +— +— +— +2/15/17 +— +— +— +21,552 +— +— +587,508 +2/15/17 +— +— +— +— +55,739 +27.26 +587,489 +(1) +See “—Compensation Discussion and Analysis—2017 Annual Incentive Compensation” and “—Summary Compensation Table—Non-Equity Incentive Plan +Compensation” regarding the actual payments made to the Named Executive Officers pursuant to the Incentive Plan. As discussed in “Compensation Discussion and Analysis,” a maximum payout is provided under the Incentive Plan for the +2017 awards granted thereunder, which maximum payout may be reduced (but not increased) at the discretion of the Independent Board. Thus, for 2017, the Incentive Plan does not provide for threshold or target payouts. +(2) +The term of such option awards is six years. +56 Matador Resources Company | 2018 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +Outstanding Equity Awards at December 31, 2017 +The following table summarizes the total outstanding option +awards at December 31, 2017 for each Named Executive Officer: +Option +Awards +Name +Number of +Securities +Underlying +Unexercised +Stock +Options (#) +Exercisable +Number of +Securities +Underlying +Unexercised +Stock +Options (#) +Unexercisable +Option +Exercise +Price +Option +Expiration +Date +Joseph Wm. Foran +10,147 +10,147 +$ +19.71 +2/10/19 +34,188 +34,188 +$ +23.40 +3/6/19 +— +228,571 +$ +22.01 +1/20/20 +— +105,000 +$ +21.66 +2/26/20 +13,725 +13,726 +$ +27.72 +4/29/20 +— +235,465 +$ +15.00 +2/18/21 +— +144,686 +$ +27.26 +2/14/23 +Matthew V. Hairford +10,000 +— +$ +9.00 +2/21/20 +58,750 +— +$ +8.21 +3/7/18 +2,537 +2,537 +$ +19.71 +2/10/19 +23,077 +23,077 +$ +23.40 +3/6/19 +— +62,857 +$ +22.01 +1/20/20 +2,941 +2,941 +$ +27.72 +4/29/20 +— +79,942 +$ +15.00 +2/18/21 +— +93,927 +$ +27.26 +2/14/23 +David E. Lancaster +15,000 +— +$ +9.00 +2/21/20 +62,500 +— +$ +8.21 +3/7/18 +3,805 +3,805 +$ +19.71 +2/10/19 +10,684 +10,684 +$ +23.40 +3/6/19 +— +30,000 +$ +22.01 +1/20/20 +1,961 +1,961 +$ +27.72 +4/29/20 +— +62,137 +$ +15.00 +2/18/21 +— +82,211 +$ +27.26 +2/14/23 +Craig N. Adams +3,171 +3,171 +$ +19.71 +2/10/19 +12,900 +12,901 +$ +23.40 +3/6/19 +— +30,000 +$ +22.01 +1/20/20 +1,961 +1,961 +$ +27.72 +4/29/20 +— +62,137 +$ +15.00 +2/18/21 +— +68,500 +$ +27.26 +2/14/23 +Billy E. Goodwin +5,516 +5,517 +$ +22.66 +3/16/19 +— +34,286 +$ +22.01 +1/20/20 +— +49,419 +$ +15.00 +2/18/21 +— +55,739 +$ +27.26 +2/14/23 +2018 +Proxy Statement | Matador Resources Company 57 +Table of Contents +EXECUTIVE COMPENSATION +The following table provides the vesting dates for unvested +stock options as of December 31, 2017: +Vesting Date +Joseph Wm. +Foran +Matthew V. +Hairford +David E. +Lancaster +Craig N. +Adams +Billy E. +Goodwin +1/21/18 +228,571 +62,857 +30,000 +30,000 +34,286 +2/11/18 +10,147 +2,537 +3,805 +3,171 +— +2/15/18 +48,228 +31,309 +27,403 +22,833 +18,579 +2/27/18 +105,000 +— +— +— +— +3/7/18 +34,188 +23,077 +10,684 +12,901 +— +3/17/18 +— +— +— +— +5,517 +2/15/19 +48,229 +31,309 +27,404 +22,833 +18,580 +2/19/19 +235,465 +79,942 +62,137 +62,137 +49,419 +4/30/19 +13,726 +2,941 +1,961 +1,961 +— +2/15/20 +48,229 +31,309 +27,404 +22,834 +18,580 +Total Unvested Stock Options +771,783 +265,281 +190,798 +178,670 +144,961 +The following table summarizes the total outstanding restricted stock awards at December 31, 2017 for each Named Executive Officer: +Stock Awards +Name +Number of +Shares or +Units of +Stock That +Have Not +Vested (#) +Market Value +of Shares or +Units of +Stock That +Have Not +Vested +Joseph Wm. Foran +158,720 +$ +4,940,954 +Matthew V. Hairford +72,463 +$ +2,255,773 +David E. Lancaster +70,076 +$ +2,181,466 +Craig N. Adams +61,267 +$ +1,907,242 +Billy E. Goodwin +41,329 +$ +1,286,572 +The following table provides the vesting dates for restricted stock outstanding as of December 31, 2017: +Vesting Date +Joseph Wm. +Foran +Matthew V. +Hairford +David E. +Lancaster +Craig N. +Adams +Billy E. +Goodwin +1/21/18 +— +— +4,375 +4,375 +— +2/11/18 +— +1,269 +1,903 +1,586 +— +2/15/18 +18,647 +12,105 +10,595 +8,828 +7,184 +3/7/18 +8,547 +2,885 +5,342 +2,150 +— +4/30/18 +— +— +1,804 +1,804 +— +2/15/19 +18,648 +12,106 +10,595 +8,829 +7,184 +2/19/19 +94,230 +31,992 +24,866 +24,866 +19,777 +2/15/20 +18,648 +12,106 +10,596 +8,829 +7,184 +Total Unvested Shares +158,720 +72,463 +70,076 +61,267 +41,329 +58 Matador Resources Company | 2018 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +Option Exercises and Stock Vested +The following table provides information on the stock options +exercised and stock awards that vested for each Named Executive Officer during 2017: +Option Awards +Stock Awards +Name +Number of +Shares +Acquired +on +Exercise +(#) +Value +Realized on +Exercise +Number of +Shares +Acquired on +Vesting +(#) +Value +Realized on +Vesting +Joseph Wm. Foran (1) +255,208 +$ +3,914,818 +127,757 +$ +2,959,502 +Matthew V. Hairford +91,250 +$ +1,630,163 +25,000 +$ +563,500 +David E. Lancaster +105,000 +$ +1,887,400 +30,000 +$ +676,200 +Craig N. Adams +40,000 +$ +726,800 +15,000 +$ +338,100 +Billy E. Goodwin +18,750 +$ +276,375 +— +$ +— +(1) +Stock award numbers in the table reflect the vesting of shares of restricted stock for Mr. Foran in February 2017 as well as a grant of Common Stock to Mr. Foran made in June 2017, which shares were fully +vested at the time of grant. See “—Compensation Discussion and Analysis—Discretionary Bonuses.” +Potential Payments upon Termination or Change in Control +2012 Plan and its Predecessor +Equity awards under the 2012 Plan and +its predecessor vest upon a “change in control” for the Named Executive Officers according to the terms of their employment agreements described below. +Employment Agreements +As described under “Termination of +Employment Arrangements—Employment Agreements,” in contemplation of our initial public offering, on August 9, 2011, we entered into employment agreements with Messrs. Foran, Hairford and Lancaster. In addition, in March 2014, we +entered into an employment agreement with Mr. Adams, and effective February 2016, we entered into an employment agreement with Mr. Goodwin. The principal difference in Mr. Adams’ and Mr. Goodwin’s employment agreements +as compared to the employment agreement of Messrs. Foran, Hairford and Lancaster is that Mr. Adams’ and Mr. Goodwin’s agreements do not include a “modified single trigger” that would have allowed them to receive a +“change in control” payment if they terminated their agreements without “good reason” within 30 days prior to or 12 months after a change in control. Pursuant to the terms of the employment agreements, we may be required to make +certain payments to one or more of our Named Executive Officers upon the occurrence of certain events resulting in such Named Executive Officer’s termination. The employment agreements do not provide for +gross-ups for excise taxes on severance or other payments in connection with a change in control. For a detailed description of the events that may trigger such payments, see “—Compensation +Discussion and Analysis—Termination of Employment Arrangements—Employment Agreements.” +The employment agreements each contain a non-disclosure of confidential information provision that requires each Named Executive Officer to maintain, both during and after employment, the confidentiality of information used by such Named Executive Officer +in the performance of his job duties. +Additionally, each of the employment agreements contains a non-competition provision, +pursuant to which Messrs. Foran, Hairford, Lancaster, Adams and Goodwin have agreed that: (i) for six months following termination by us for total disability, or by such Named Executive Officer for good reason, or (ii) for 12 months +following termination (a) by us for just cause, (b) by such Named Executive Officer other than for good reason or (c) in connection with a change in control, such Named Executive Officer shall not, without our prior written +2018 +Proxy Statement | Matador Resources Company 59 +Table of Contents +EXECUTIVE COMPENSATION +consent (not to be unreasonably withheld if the Named Executive Officer’s employment is terminated by the Named Executive Officer other than for good reason), directly or indirectly: +(x) invest in (other than investments in publicly-owned companies which constitute not more than 1% of the voting securities of any such company) a competing business with significant assets in the restricted area (each as defined below), or +(y) participate in a competing business as a manager, employee, director, officer, consultant, independent contractor or other capacity or otherwise provide, directly or indirectly, services or assistance to a competing business in a position +that involves input into or direction of such competing business’s decisions within the restricted area. +For purposes of the employment agreements: +• +“competing business” means any person or entity engaged in oil and natural gas exploration, development, production and acquisition activities; +• +“significant assets” means oil and natural gas reserves with an aggregate fair market value of $25 million or more; and +• +“restricted area” means a one-mile radius of any oil and natural gas reserves held by us as of the end of the Named Executive Officer’s employment, plus any county +or parish where we have significant assets as of the end of the Named Executive Officer’s employment. See the definitions of “change in control,” “good reason” and “just cause” set forth in “—Compensation +Discussion and Analysis—Termination of Employment Arrangements—Employment Agreements.” +Furthermore, other than Mr. Foran’s +employment agreement, each employment agreement contains an anti-solicitation provision, pursuant to which, during the restricted periods described above, subject to certain exceptions, Messrs. Hairford, Lancaster, Adams and Goodwin shall not, +without our prior written consent, solicit for employment or a contracting relationship, or employ or retain any person who is or has been, within six months prior to such time, employed by or engaged as an individual independent contractor by us or +our affiliates or induce or attempt to induce any such person to leave his or her employment or independent contractor relationship with us or our affiliates. +For +the Named Executive Officer to receive any severance payments described below for termination by us without just cause, by the Named Executive Officer for good reason or, following a change in control, by us without cause or by the Named Executive +Officer with good reason, with respect to Mr. Adams and Mr. Goodwin, or with or without good reason, with respect to Messrs. Foran, Hairford and Lancaster, the Named Executive Officer must comply with the applicable non-disclosure, non-competition and non-solicitation provisions described above. +Finally, as a condition to receiving any severance payments and other payments under their respective employment agreements, each Named Executive Officer is required to +execute a separation agreement and release in favor of us. +60 Matador Resources Company | 2018 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +To describe the payments and benefits that are triggered for each event of termination, we have created the following table estimating the payments and benefits that +would be paid to each Named Executive Officer under each element of our compensation program assuming that such Named Executive Officer’s employment agreement terminated on December 31, 2017, the last day of our 2017 fiscal year. In all +cases, the amounts were valued as of December 31, 2017, based upon, where applicable, $31.13 per share (the closing price of our Common Stock on December 29, 2017, the last trading day of the year). The amounts in the table below are +calculated as of December 31, 2017 pursuant to SEC rules and are not intended to reflect actual payments that may be made. Actual payments that may be made will be based on the dates and circumstances of the applicable event. +Payment Upon +Termination +Named Executive Officer +Category of +Payment +Upon Death or +Total +Disability (1) +Upon Mutual +Agreement or +Dissolution/ +Liquidation (1) +Termination by +Us Without Just +Cause or by +Named Executive +Officer for Good +Reason (1) +Termination +Following a Change +in Control Without +Cause or by Named +Executive Officer +With or Without +Good Reason (2) +Joseph Wm. Foran +Salary +$ +— +$ +— +$ +2,000,000 +(3) +$ +3,000,000 +(4) +Bonus +3,162,500 +(5) +3,162,500 +(5) +6,325,000 +(6) +9,487,500 +(7) +Vesting equity +— +— +— +12,804,814 +(8) +Total +$ +3,162,500 +$ +3,162,500 +$ +8,325,000 +$ +25,292,314 +Matthew V. Hairford +Salary +$ +— +$ +— +$ +900,000 +(9) +$ +1,800,000 +(4) +Bonus +1,206,500 +(5) +1,206,500 +(5) +1,809,750 +(10) +3,619,500 +(7) +Vesting equity +— +— +— +4,699,378 +(8) +Total +$ +1,206,500 +$ +1,206,500 +$ +2,709,750 +$ +10,118,878 +David E. Lancaster +Salary +$ +— +$ +— +$ +825,000 +(9) +$ +1,650,000 +(4) +Bonus +1,147,000 +(5) +1,147,000 +(5) +1,720,500 +(10) +3,441,000 +(7) +Vesting equity +— +— +— +3,908,220 +(8) +Total +$ +1,147,000 +$ +1,147,000 +$ +2,545,500 +$ +8,999,220 +Craig N. Adams +Salary +$ +— +$ +— +$ +787,500 +(9) +$ +1,575,000 +(4) +Bonus +1,115,000 +(5) +1,115,000 +(5) +1,672,500 +(10) +3,345,000 +(7) +Vesting equity +— +— +— +3,590,831 +(8) +Total +$ +1,115,000 +$ +1,115,000 +$ +2,460,000 +$ +8,510,831 +Billy E. Goodwin +Salary +$ +— +$ +— +$ +500,000 +(11) +$ +1,000,000 +(3) +Bonus +830,000 +(5) +830,000 +(5) +830,000 +(5) +1,660,000 +(6) +Vesting equity +— +— +— +2,658,827 +(8) +Total +$ +830,000 +$ +830,000 +$ +1,330,000 +$ +5,318,827 +(1) +Amounts due upon death, total disability, mutual agreement, dissolution or liquidation, termination by us without cause or termination by Named Executive Officer for good reason are payable in a lump sum on the 60 th day following the date of termination unless otherwise required by Section 409A of the Code. +(2) +Amounts due following a change in control are payable in a lump sum on the date which immediately follows six months from the date of termination or, if earlier, within 30 days of such Named Executive Officer’s +death. +(3) +Represents two times such Named Executive Officer’s base salary as of the termination date. +(4) +Represents three times such Named Executive Officer’s base salary as of the termination date. +(5) +Represents the average annual amount of bonuses, including pursuant to the Incentive Plan, paid to such Named Executive Officer with respect to the prior two calendar years (2016-2017). +(6) +Represents two times an amount equal to the average annual amount of bonuses, including pursuant to the Incentive Plan, paid to such Named Executive Officer with respect to the prior two calendar years (2016-2017). +2018 +Proxy Statement | Matador Resources Company 61 +Table of Contents +EXECUTIVE COMPENSATION +(7) +Represents three times an amount equal to the average annual amount of bonuses, including pursuant to the Incentive Plan, paid to such Named Executive Officer with respect to the prior two calendar years (2016-2017). +(8) +The employment agreements provide for accelerated and full vesting of unvested incentive awards held by these Named Executive Officers in the event that such Named Executive Officer is terminated without “Just +Cause” or terminates his employment with or without “Good Reason,” with respect to Messrs. Foran, Hairford and Lancaster, within 30 days prior to, or 12 months following, a “change in control.” With respect to Messrs. Adams +and Goodwin, the employment agreements provide for accelerated and full vesting of unvested incentive awards held by these Named Executive Officers in the event that such Named Executive Officer is terminated without “Just Cause” or +terminates his employment with “Good Reason,” within 30 days prior to, or 12 months following, a “change in control.” The amount disclosed reflects the closing price of our Common Stock on December 29, 2017 of $31.13 per +share multiplied by the number of unvested service-based shares of restricted stock held by such Named Executive Officer on December 31, 2017, in addition to the intrinsic value of the stock options held by such Named Executive Officer based +upon the exercise price of such stock options being less than the closing price of our Common Stock on December 29, 2017. +(9) +Represents 1.5 times such Named Executive Officer’s base salary as of the termination date. +(10) +Represents 1.5 times an amount equal to the average annual amount of bonuses, including pursuant to the Incentive Plan and its predecessor, paid to such Named Executive Officer with respect to prior two calendar years +(2016-2017). +(11) +Represents an amount equal to such Named Executive Officer’s base salary as of the termination date. +62 Matador Resources Company | 2018 Proxy Statement +Table of Contents +CHIEF EXECUTIVE OFFICER PAY RATIO +CHIEF EXECUTIVE OFFICER PAY RATIO +As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(u) of Regulation +S-K (“Item 402(u)”), we are providing the following information regarding the ratio of the annual total compensation of our median-compensated employee (as described below) and that of our Chairman +and Chief Executive Officer, Joseph Wm. Foran. We believe that the pay ratio reflected below is a reasonable estimate calculated in a manner consistent with Item 402(u). +The SEC’s rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow +companies to adopt a variety of methodologies, to apply certain exclusions and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices. As a result, the pay ratio reported by other companies +may not be comparable to the pay ratio reported below, as other companies have different employee populations and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay +ratios. +Pursuant to Item 402(u), we identified the median-compensated employee of all our employees (other than the CEO) using our employee population as of +December 15, 2017, which consisted of 213 employees (all of which are located in the United States), and using a compensation measure of total cash compensation, consisting of total base pay and bonuses earned during the year ended +December 31, 2017. The compensation measure was consistently applied to all employees. Compensation was annualized on a straight-line basis for employees who did not work all of 2017. +Using this methodology, we identified a median employee. In calculating such employee’s annual total compensation, we determined that the selected employee’s +compensation was anomalous because the employee did not receive an award of equity in 2017, although such awards are widely distributed throughout the Company. As permitted by Item 402(u), due to the anomalous nature of the employee originally +identified, we substituted another employee with substantially similar compensation. We then calculated that employee’s annual total compensation in the same manner as the Named Executive Officers’ total compensation, as reported in the +Summary Compensation Table. +For 2017, the annual total compensation of our median-compensated employee was $179,344, and the annual total compensation of +Mr. Foran was $10,080,387, as reported in the Summary Compensation Table. Based on this information, for 2017, the ratio of Mr. Foran’s annual total compensation to the annual total compensation of our median-compensated employee was +estimated to be 56 to 1. +2018 +Proxy Statement | Matador Resources Company 63 +Table of Contents +DIRECTOR COMPENSATION +DIRECTOR +COMPENSATION +Name +Fees Earned or +Paid in Cash +($) +Stock +Awards (1) +($) +All Other +Compensation +($) +Total +($) +Reynald A. Baribault (2) +190,000 +206,713 +— +396,713 +R. Gaines Baty +80,750 +206,713 +— +287,463 +Craig T. Burkert +88,000 +206,713 +— +294,713 +William M. Byerley +89,000 +206,713 +— +295,713 +Joe A. Davis (3) +28,500 +67,818 +— +96,318 +Julia P. Forrester (4) +63,161 +172,610 +— +235,771 +David M. Laney (5) +24,500 +67,818 +— +92,318 +Gregory E. Mitchell (6) +46,250 +206,713 +— +252,963 +Steven W. Ohnimus +88,000 +206,713 +— +294,713 +David M. Posner (7) +38,532 +133,978 +— +172,510 +Carlos M. Sepulveda, Jr. (8) +— +— +— +— +Kenneth L. Stewart (9) +60,411 +172,610 +— +233,021 +George M. Yates +69,000 +206,713 +— +275,713 +(1) +All stock awards represent restricted stock units. Value based on the fair market value of the restricted stock units on the date of grant. Restricted stock units granted during the first and second quarters of 2017 +were subject to a three year ratable vesting period; provided, however, the vesting of restricted stock units could be accelerated upon certain termination of service events. Restricted stock units granted immediately following the 2017 Annual +Meeting vest immediately prior to the election of the nominees for director at the 2018 Annual Meeting. See “—Compensation for 2017.” As of December 31, 2017, each individual who served as a director during 2017 held the +following outstanding unvested stock awards, all of which were restricted stock units: +Name +Outstanding Stock Awards +Reynald A. Baribault +14,598 +R. Gaines Baty +9,433 +Craig T. Burkert +10,717 +William M. Byerley +10,717 +Joe A. Davis +— +Julia P. Forrester +7,322 +David M. Laney +— +Gregory E. Mitchell +— +Steven W. Ohnimus +14,598 +David M. Posner +5,923 +Carlos M. Sepulveda, Jr. +— +Kenneth L. Stewart +7,322 +George M. Yates +14,236 +(2) +Mr. Baribault served as lead independent director in 2017. Beginning in 2017, the lead independent director received an additional cash retainer of $100,000 annually. +(3) +Mr. Davis’ term as a director expired at the 2017 Annual Meeting. In connection with the expiration of his term, the Board accelerated the vesting of his then-outstanding unvested restricted stock units. +(4) +Ms. Forrester was appointed to the Board on February 15, 2017. +(5) +Mr. Laney’s term as a director expired at the 2017 Annual Meeting. In connection with the expiration of his term, the Board accelerated the vesting of his then-outstanding unvested restricted stock units. +(6) +Mr. Mitchell retired from the Board effective July 13, 2017. In connection with his retirement, the Board accelerated the vesting of his then-outstanding unvested restricted stock units, excluding the +restricted stock units granted immediately following the 2017 Annual Meeting. +(7) +Mr. Posner joined the Board on July 18, 2017. +64 Matador Resources Company | 2018 Proxy Statement +Table of Contents +DIRECTOR COMPENSATION +(8) +Mr. Sepulveda retired from the Board effective January 6, 2017. In connection with his retirement, the Board accelerated the vesting of his then-outstanding unvested restricted stock units. +(9) +Mr. Stewart was appointed to the Board on February 15, 2017. +Compensation for 2017 +During 2017, we targeted our +non-employee directors’ compensation to approximate the 50 th percentile of the Peer Group. During 2017, our director compensation program was comprised +of the following: +• +annual cash retainer of $54,000; +• +cash meeting fee of $1,000 per day for each day of Board and committee service; +• +the chair of the Audit Committee would receive an additional cash retainer of $25,000 annually and the chairs of the Strategic Planning and Compensation Committee, the Corporate Governance Committee, the Nominating +Committee, the Operations and Engineering Committee and the Prospect Committee would each receive an additional cash retainer of $15,000 annually; +• +The lead independent director would receive an additional cash retainer of $100,000 annually; +• +for each of the first and second quarters of 2017, each non-employee director would receive RSUs equal to up to $33,750 in value quarterly with the restrictions lapsing in one-third increments on each of the first, second and third anniversaries of the date of grant. Each grant may be adjusted downward (but not upward) in value based upon the +non-employee director’s attendance and contributions at Board or committee meetings called during the period for which RSUs are due; and +• +at the meeting of the Board immediately following the 2017 Annual Meeting, each non-employee director would receive a one-time annual grant +of RSUs equal to up to $135,000 in value with the restrictions lapsing immediately prior to the election of the nominees for director at the 2018 Annual Meeting (the “2017 RSU Award”). Each grant may be adjusted downward (but not upward) +in value based upon the non-employee director’s attendance and contributions at Board or committee meetings called during the period for which RSUs are due. +If a director was appointed or elected to the Board at any time following the 2017 Annual Meeting but prior to the 2018 Annual Meeting, such director would be granted +the applicable percentage of the 2017 RSU Award detailed below, effective on the date of such director’s appointment: (i) if a director was appointed or elected to the Board within 90 days after the 2017 Annual Meeting, such director would +be entitled to receive 100% of the 2017 RSU Award; (ii) if a director was appointed or elected to the Board more than 90 days but 180 or fewer days after the 2017 Annual Meeting, such director would be entitled to receive 75% of the 2017 RSU +Award; (iii) if a director was appointed or elected to the Board more than 180 days but 270 or fewer days after the 2017 Annual Meeting, such director would be entitled to receive 50% of the 2017 RSU Award; and (iv) if a director was +appointed or elected to the Board more than 270 days after the 2017 Annual Meeting but prior to the 2018 Annual Meeting, such director would be entitled to receive 25% of the 2017 RSU award. +For 2017, the Board determined that, effective immediately prior to the election of the nominees for director at the 2017 Annual Meeting, the vesting of all outstanding +RSUs granted prior to the 2017 Annual Meeting and held by a director or advisor to the Board (the “Outstanding RSUs”) would be automatically accelerated immediately prior to, and on the date of, such director’s or advisor’s +termination of service (as defined in, and pursuant to, the 2012 Plan), subject to certain exceptions. +In addition, we reimbursed our directors for travel, lodging +and related expenses incurred in attending Board and committee meetings. +2018 +Proxy Statement | Matador Resources Company 65 +Table of Contents +DIRECTOR COMPENSATION +Compensation +for 2018-2019 +Beginning at the 2018 Annual Meeting +and until the 2019 Annual Meeting, our non-employee directors’ compensation program has been adjusted as set forth below based on the increased size of the Company and the corresponding demands on +directors’ time: +• +annual cash retainer of $60,000; +• +cash meeting fee of $1,000 per day for each day of Board and committee service; +• +the chair of the Audit Committee will receive an additional cash retainer of $25,000 annually and the chairs of the Strategic Planning and Compensation Committee, the Corporate Governance Committee, the Nominating +Committee, the Operations and Engineering Committee, the Prospect Committee and the Capital Markets and Finance Committee will each receive an additional cash retainer of $15,000 annually; +• +The lead independent director will receive an additional cash retainer of $100,000 annually; +• +at the meeting of the Board immediately following the 2018 Annual Meeting, each non-employee director will receive a one-time annual grant +of RSUs equal to up to $135,000 in value with the restrictions lapsing immediately prior to the election of the nominees for director at the 2019 Annual Meeting (the “2018 RSU Award”). Each grant may be adjusted downward (but not upward) +in value based upon the non-employee director’s attendance and contributions at Board or committee meetings called during the period for which RSUs are due. +If a director is appointed or elected to the Board at any time following the 2018 Annual Meeting but prior to the 2019 Annual Meeting, such director will be granted the +applicable percentage of the 2018 RSU Award detailed below, effective on the date of such director’s appointment: (i) if a director is appointed or elected to the Board within 90 days after the 2018 Annual Meeting, such director shall be +entitled to receive 100% of the 2018 RSU Award; (ii) if a director is appointed or elected to the Board more than 90 days but 180 or fewer days after the 2018 Annual Meeting, such director shall be entitled to receive 75% of the 2018 RSU Award; +(iii) if a director is appointed or elected to the Board more than 180 days but 270 or fewer days after the 2018 Annual Meeting, such director shall be entitled to receive 50% of the 2018 RSU Award; and (iv) if a director is appointed or +elected to the Board more than 270 days after the 2018 Annual Meeting but prior to the 2019 Annual Meeting, such director shall be entitled to receive 25% of the 2018 RSU award. +In addition, we will continue to reimburse our directors for travel, lodging and related expenses incurred in attending Board and committee meetings. +Director Ownership Guidelines +The non-employee +directors follow our voluntary stock ownership guidelines for non-employee directors. Within three years of becoming a director, each non-employee director will be +expected to own $250,000 of Common Stock and continue to hold such shares while serving as a director. All directors own in excess of $250,000 of Common Stock or expect to meet the guidelines within three years of becoming a director. Shares that +count toward the stock ownership guidelines include RSUs and any shares held in trust by the director or his or her immediate family over which he or she has direct beneficial ownership interest. Shares that do not count toward the stock ownership +guidelines include shares underlying unexercised stock options and unexercised stock appreciation rights. +Board +Advisor Compensation +Our advisors to the Board are +compensated with stock and/or cash awards based upon meeting attendance or as otherwise agreed to pursuant to consulting arrangements with such advisors. We reimburse our advisors to the Board for travel, lodging and related expenses incurred in +attending Board and committee meetings. The advisor compensation of Ms. Lewis and Messrs. Rolfe and King is the same as for the non-employee directors as described above. +66 Matador Resources Company | 2018 Proxy Statement +Table of Contents +SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS +SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS +The following table presents the securities authorized for issuance under our equity compensation plans as of December 31, 2017. +Plan Category +Number +of +Shares to be +Issued Upon +Exercise of +Outstanding +Options, +Warrants +and +Rights +Weighted- +Average +Exercise +Price of +Outstanding +Options, +Warrants +and Rights +Number of +Shares +Remaining +Available for +Future +Issuance +Under Equity +Compensation +Plans +Equity compensation plans approved by security +holders (1)(2) +3,152,691 +$ +21.14 +2,356,467 +Equity compensation plans not approved by security holders +— +— +— +Total +3,152,691 +$ +21.14 +2,356,467 +(1) +Our Board has determined not to make any additional awards under the Matador Resources Company 2003 Stock and Incentive Plan. +(2) +The 2012 Plan was adopted by the Board in April 2015 and approved by our shareholders on June 10, 2015. +2018 +Proxy Statement | Matador Resources Company 67 +Table of Contents +TRANSACTIONS WITH RELATED PERSONS +TRANSACTIONS +WITH RELATED PERSONS +Except as disclosed below, during 2017 there was not, nor was there proposed as of December 31, 2017, any transaction or series of +similar transactions to which we were or are a party in which the amount involved exceeded or exceeds $120,000 and in which any of our directors, executive officers, holders of more than 5% of any class of our voting securities or any member of the +immediate family of any of the foregoing persons had or will have a direct or indirect material interest, other than compensation arrangements with directors and executive officers, which are described in “Executive +Compensation—Compensation Discussion and Analysis” above. +HEYCO Joint Ventures +In June 2015, the Company entered into two joint ventures (the +“Joint Ventures”) to develop certain leasehold interests held by certain affiliates (the “HEYCO Affiliates”) of HEYCO Energy Group, Inc., the former parent company of Harvey E. Yates Company. The HEYCO Affiliates are owned by +George M. Yates, who was appointed to the Board on April 28, 2015 in accordance with the terms of the HEYCO Merger, and certain of his affiliates. Mr. Yates’ term as a director will expire at the Annual Meeting. Pursuant to the terms of +the transaction, the HEYCO Affiliates contributed an aggregate of approximately 1,900 net acres, primarily in the same properties previously held by HEYCO, to the two newly-formed entities in exchange for a 50% interest in each entity. The Company +has agreed to contribute an aggregate of approximately $14 million in exchange for the other 50% interest in both entities. As of December 31, 2017, the Company had contributed an aggregate of approximately $4.4 million to the two +entities. The Company’s contributions are being used to fund capital expenditures associated with the interests owned by the Joint Ventures as well as to fund acquisitions by the Joint Ventures of other +non-operated acreage opportunities. +The Audit Committee reviewed the terms of the Joint Ventures for potential conflicts of +interest under the Company’s related party transaction policy, effective October 12, 2011 (the “Related Party Transaction Policy”), and, after being fully informed as to Mr. Yates’ relationship and interest and all +other material facts related to the Joint Ventures, determined that the Joint Ventures were fair to the Company and recommended the Joint Ventures to the full Board for approval and ratification. The Board subsequently approved and ratified the +Joint Ventures. +In addition, in light of Mr. Yates’ ongoing services to HEYCO Energy Group, Inc., the Board, in accordance with Texas corporate law, +adopted resolutions which renounce and provide for a waiver of certain corporate opportunities with respect to Mr. Yates. As a result, Mr. Yates will have no fiduciary duty to present certain corporate opportunities related to +Mr. Yates’ existing oil and natural gas holdings and/or in areas where Matador does not currently operate. +Working Interest and +Overriding Royalty Interest Owners +Certain related +parties, including Mr. Foran and certain HEYCO Affiliates or entities controlled by members of Mr. Yates’ family (the “Yates Entities” and, collectively with Mr. Foran, the “Interest Owners”) are working +interest owners and/or overriding royalty interest owners in certain properties operated by the Company or in which the Company also holds a working interest. As working interest owners, the Interest Owners are required to pay their proportionate +share of all costs and are entitled to receive their proportionate share of revenues in the normal course of business. As overriding royalty interest owners, the Interest Owners are entitled to receive their proportionate share of revenues from the +wells in which they own an interest in the normal course of business. During 2017, revenues, net of costs, received by the Yates Entities in their capacities as working interest owners or overriding royalty interest owners were approximately +$2.6 million (the “Yates Net Revenue Payments”). During 2017, revenues, net of costs, received by Mr. Foran in his capacity as a working interest owner or overriding royalty interest owner were approximately $1.0 million +(collectively with the Yates Net Revenue Payments, the “Related Net Revenue Payments”). The Related Net Revenue Payments represent approximately 2% of our total third-party net revenue payments during 2017. +68 Matador Resources Company | 2018 Proxy Statement +Table of Contents +TRANSACTIONS WITH RELATED PERSONS +In our capacity as operator, we incur drilling and operating costs that are billed to our partners based on their respective working interests. During 2017, our joint +interest billings to the Yates Entities attributable to their share of costs were approximately $7.9 million (the “Yates Billings”) and our joint interest billings to Mr. Foran attributable to his share of costs were +approximately $0.2 million (collectively with the Yates Billings, the “Related Joint Interest Billings”). The Related Joint Interest Billings represent approximately 1% of our total joint interest billings during 2017. As a result of +this ownership by the Interest Owners, from time to time, we will be in a net receivable or net payable position with certain of the Interest Owners. We do not consider any net receivables from these parties to be uncollectible. +The Audit Committee reviewed the terms of the working interests and/or overriding royalty interests of the Interest Owners for potential conflicts of interest under the +Related Party Transaction Policy, and, after being fully informed as to Mr. Yates’ and Mr. Foran’s respective relationships and interests in such transactions and all other material facts related to the Related Net Revenue +Payments and Related Joint Interest Billings, determined that such transactions and the Related Net Revenue Payments and Related Joint Interest Billings were fair to the Company and recommended such transactions and the Related Net Revenue Payments +and Related Joint Interest Billings to the full Board for approval and ratification. The Board subsequently approved and ratified the transactions and the Related Net Revenue Payments and Related Joint Interest Billings. +Certain Employment Relationships +Billy E. Goodwin, Executive Vice President and Head of +Operations, was appointed as an executive officer of the Company in connection with his February 2016 promotion to Senior Vice President—Operations. Two of Mr. Goodwin’s adult children are employees of the Company and each earned in +2017, and are expected to be compensated in 2018, between $120,000 and $600,000. One of Mr. Goodwin’s children has a Bachelor of Science degree in Petroleum Engineering from the University of Tulsa and over eight years of industry +experience, including as a regional drilling supervisor for another publicly traded exploration and production company. Mr. Goodwin’s other child has a B.S.B.A. degree in Energy Management from the University of Tulsa and a Bachelor of +Arts degree in General Business and Management from Oklahoma State University. He also has over eight years of industry experience, including as a drilling fluids engineer for a publicly traded oilfield services company and as a landman for a +publicly traded exploration and production company. The Audit Committee reviewed the terms of the employment arrangements for potential conflicts of interest under the Company’s Related Party Transaction Policy and, after being fully informed +as to the employment arrangements and historical and anticipated compensation of Mr. Goodwin’s adult children, and all other material facts related to the relationship, determined that the employment arrangements were fair to the Company +and recommended the employment arrangements to the full Board for approval and ratification. The Board subsequently approved and ratified such employment arrangements. +Reynald A. Baribault is a member of the Board. Mr. Baribault’s sister-in-law +is an employee of the Company and earned in 2017, and is expected to be compensated in 2018, between $120,000 and $250,000. Mr. Baribault’s sister-in-law has a +diploma from the Executive Secretarial School and is a certified legal assistant, having completed the Southern Methodist University Legal Assistants Program. She has over 36 years of experience as a legal assistant. The Audit Committee reviewed the +terms of the employment arrangements for potential conflicts of interest under the Company’s Related Party Transaction Policy and, after being fully informed as to the employment arrangements and historical and anticipated compensation of +Mr. Baribault’s sister-in-law, and all other material facts related to the relationship, determined that the employment arrangement was fair to the Company and +recommended the employment arrangement to the full Board for approval and ratification. The Board subsequently approved and ratified such employment arrangement. +An adult child of Mr. Foran is an employee of the Company and earned in 2017, and is expected to be compensated in 2018, between $120,000 and $200,000. +Mr. Foran’s child has a Bachelor of Science degree in Human Resource Development and a Master of Science degree in Human Resource Management, both from Texas A&M University. She has more than seven years of industry experience, +including with another publicly traded exploration and production company. The Audit Committee reviewed the terms of the employment arrangement for potential conflicts of interest under the Company’s Related Party Transaction Policy and, after +2018 +Proxy Statement | Matador Resources Company 69 +Table of Contents +TRANSACTIONS WITH RELATED PERSONS +being fully informed as to the employment arrangement and historical and anticipated compensation of Mr. Foran’s adult child, and all other material facts related to the relationship, +determined that the employment arrangement was fair to the Company and recommended the employment arrangement to the full Board for approval and ratification. The Board subsequently approved and ratified such employment arrangement. +Procedures for Approval of Related Party Transactions +Pursuant to the Related Party Transaction Policy, a +“Related Party Transaction” is defined as a transaction (including any financial transaction, arrangement or relationship (including any indebtedness or guarantee of indebtedness)), or series of related transactions, or any material +amendment to any such transaction, involving a Related Party (as defined below) and in which we are a participant, other than: +• +a transaction involving compensation of directors; +• +a transaction involving compensation of an executive officer or involving an employment agreement, severance agreement, change in control provision or agreement or a special supplemental benefit for an executive +officer; +• +a transaction available to all employees generally or to all salaried employees generally; +• +a transaction with a Related Party involving less than $120,000; +• +a transaction in which the interest of the Related Party arises solely from the ownership of a class of our equity securities and all holders of that class receive the same benefit on a pro rata basis; or +• +a transaction in which the rates or charges involved therein are determined by competitive bids, or a transaction that involves the rendering of services as a common or contract carrier, or public utility, at rates or +charges fixed in conformity with law or governmental authority. +“Related Party” means: +• +any person who is, or at any time during the applicable period was, one of our executive officers or one of our directors or nominees for directors; +• +any person who is known by us to be the beneficial owner of more than 5% of our Common Stock; +• +any immediate family member of any of the foregoing persons, which means any child, stepchild, parent, stepparent, spouse, sibling, +mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law of a director, nominee for director, executive officer or a beneficial owner of more than 5% of our Common Stock; and +• +any firm, corporation or other entity that is owned or controlled by any of the foregoing persons or in which any of the foregoing persons is a general partner or executive officer or in which such person, together with +all other of the foregoing persons, owns 10% or more of the equity interests thereof. +Pursuant to the Related Party Transaction Policy, the Audit +Committee must review all material facts of each Related Party Transaction and recommend either approval or disapproval of the Related Party Transaction to the full Board, subject to certain limited exceptions. In determining whether to recommend +approval or disapproval of the Related Party Transaction, the Audit Committee must, after reviewing all material facts of the Related Party Transaction and the Related Party’s relationship and interest, determine whether the Related Party +Transaction is fair to the Company. Further, the policy requires that all Related Party Transactions be disclosed in our filings with the SEC and/or our website in accordance with applicable laws, rules and regulations. +70 Matador Resources Company | 2018 Proxy Statement +Table of Contents +SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT +SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT +The following table presents the beneficial ownership of our Common Stock as of April 13, 2018 for (i) each person beneficially owning more than 5% of the +outstanding shares of our Common Stock, (ii) each director of the Company, (iii) each executive officer of the Company listed in the Summary Compensation Table and (iv) all of our directors and executive officers as a group. Except +pursuant to applicable community property laws and except as otherwise indicated, each shareholder possesses sole voting and investment power with respect to its, his or her shares. The business address of each of our directors and executive +officers is c/o Matador Resources Company, One Lincoln Centre, 5400 LBJ Freeway, Suite 1500, Dallas, Texas 75240. The applicable percentage ownership is based on 109,263,103 shares of our Common Stock issued and outstanding as of April 13, +2018, plus, on an individual basis, the right of that individual to (i) obtain Common Stock upon exercise of stock options or (ii) obtain Common Stock upon the vesting or delivery of restricted stock units, in each case within 60 days of +April 13, 2018. The information is based on Form 3s, Form 4s, Schedule 13Ds, Schedule 13Gs and Schedule 13G/As filed through April 13, 2018. +Name +Amount and +Nature of +Ownership of +Common Stock +Percent +of Class +Directors and Named Executive Officers: +Joseph Wm. Foran (1) +5,004,614 +4.6% +Craig N. Adams (2) +241,476 +* +Reynald A. Baribault (3) +41,580 +* +R. Gaines Baty (4) +22,686 +* +Craig T. Burkert (5) +78,286 +* +William M. Byerley (6) +12,084 +* +Julia P. Forrester (7) +10,374 +* +Billy E. Goodwin (8) +170,057 +* +Matthew V. Hairford (9) +528,326 +* +David E. Lancaster (10) +567,870 +* +Steven W. Ohnimus (11) +102,557 +* +Timothy E. Parker (12) +2,962 +* +David M. Posner (13) +12,484 +* +Kenneth L. Stewart (14) +16,389 +* +George M. Yates (15) +4,814,971 +4.4% +All Directors and Executive Officers as a Group (18 +persons) (16) : +12,287,637 +11.1% +Other 5% Owners: +BlackRock, Inc. (17) +10,633,736 +9.7% +T. Rowe Price Associates, Inc. (18) +9,437,899 +8.6% +The VanGuard +Group (19) +8,401,124 +7.7% +* +Less than one percent (1%) +(1) +Includes (i) 1,096,413 shares of Common Stock held of record by Sage Resources, Ltd., a limited partnership owned by the +Foran family, including Mr. Foran; (ii) 4,000 shares of Common Stock held of record by the reporting person’s spouse through her Individual Retirement Account; (iii) 105,000 shares and 40,000 shares of Common Stock held of record by The +Don Foran Family Trust 2008 and The Foran Family Special Needs Trust, respectively, for which Mr. Foran is the co-trustee and over which Mr. Foran has shared voting and +2018 +Proxy Statement | Matador Resources Company 71 +Table of Contents +SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT +investment power with other members of his family; (iv) 88,005 shares of Common Stock held of record by each of the JWF 2016-2 GRAT and the NNF 2016-2 GRAT, for which Mr. Foran is the trustee and over which Mr. Foran has sole voting and investment power; (v) 190,461 shares of Common Stock held of record by each of the JWF 2017-1 GRAT and the NNF 2017-1 GRAT, for which Mr. Foran is the trustee and over which Mr. Foran has sole voting and investment power; (vi) 198,530 shares of Common +Stock held of record by each of the JWF 2017-2 GRAT and the NNF 2017-2 GRAT, for which Mr. Foran is the trustee and over which Mr. Foran has sole voting and +investment power; (vii) 239,413 shares of Common Stock held of record by each of the JWF 2018-1 GRAT and the NNF 2018-1 GRAT, for which Mr. Foran is the trustee and +over which Mr. Foran has sole voting and investment power; (viii) 215,951 shares of Common Stock held of record by the Foran 2012 Security Trust, for which Mr. Foran is the trustee and over which Mr. Foran has sole voting and +investment power; (ix) 253,550 shares of Common Stock held of record by the Foran 2012 Savings Trust, for which Mr. Foran’s spouse is a trustee; (x) 1,143,336 shares held of record, collectively, by the LRF 2011 Non-GST Trust, WJF 2011 Non-GST Trust, JNF 2011 Non-GST Trust, SIF 2011 Non-GST Trust and MCF +2011 Non-GST Trust, for which trusts Mr. Foran and his spouse, as settlors of each of the Non-GST Trusts, retain the power of substitution with respect to the +property of the Non-GST Trusts; and (xi) 221,373 shares of restricted stock. Pursuant to the terms of the restricted stock grants, Mr. Foran has the right to vote such shares but may only dispose of such +shares to the extent they have vested. Also includes 484,194 shares of Common Stock issuable to Mr. Foran upon the exercise of stock options. +(2) +Includes 86,937 shares of Common Stock issuable to Mr. Adams upon the exercise of stock options. Also includes 82,513 shares of restricted stock. Pursuant to the terms of the restricted stock grants, Mr. Adams +has the right to vote such shares but may only dispose of such shares to the extent they have vested. +(3) +Includes 2,000 shares of Common Stock held by the Individual Retirement Account of Mr. Baribault. Also includes 19,000 shares of Common Stock held by the Reynald A. Baribault Maritalized Revocable Living Trust, for +which Mr. Baribault has shared voting and investment power with his spouse, and 5,000 shares of Common Stock held by the Sally K. Baribault Maritalized Revocable Living Trust, for which Mr. Baribault has shared voting and investment power +with his spouse. Also includes 6,741 shares of Common Stock issuable to Mr. Baribault upon the vesting of restricted stock units. +(4) +Includes 6,365 shares of Common Stock issuable to Mr. Baty upon the vesting and delivery of restricted stock units. +(5) +Includes 34,742 shares held by the Individual Retirement Account of Mr. Burkert. Also includes 6,365 shares of Common Stock issuable to Mr. Burkert upon the vesting and delivery of restricted stock units. +(6) +Includes 5,923 shares of Common Stock issuable to Mr. Byerley upon the vesting of restricted stock units. +(7) +Includes 1,985 shares held by the Individual Retirement Account of Ms. Forrester. Also includes 5,923 shares of Common Stock issuable to Ms. Forrester upon the vesting of restricted stock units. +(8) +Includes 24,096 shares of Common Stock issuable to Mr. Goodwin upon the exercise of stock options. Also includes 67,837 shares of restricted stock. Pursuant to the terms of the restricted stock grants, +Mr. Goodwin has the right to vote such shares but may only dispose of such shares to the extent they have vested. +(9) +Includes 158,335 shares of Common Stock issuable to Mr. Hairford upon the exercise of stock options and 5,000 shares held of record by his Individual Retirement Account. Also includes 103,373 shares of restricted +stock. Pursuant to the terms of the restricted stock grants, Mr. Hairford has the right to vote such shares but may only dispose of such shares to the extent they have vested. +(10) +Includes 103,342 shares of Common Stock issuable to Mr. Lancaster upon the exercise of stock options and 75,500 shares of Common Stock held of record by his Individual Retirement Account. Also includes 90,538 +shares of restricted stock. Pursuant to the terms of the restricted stock grants, Mr. Lancaster has the right to vote such shares but may only dispose of such shares to the extent they have vested. +(11) +Includes 13,867 shares of Common Stock issuable to Dr. Ohnimus upon the vesting and delivery of restricted stock units. Dr. Ohnimus has pledged 43,209 shares of Common Stock. +(12) +Mr. Parker joined the Board in January 2018. Represents shares of Common Stock issuable to Mr. Parker upon the vesting of restricted stock units. +(13) +Includes 6,210 shares of Common Stock held of record by the Individual Retirement Account of Mr. Posner. Also includes 5,923 shares of Common Stock issuable to Mr. Posner upon the vesting of restricted stock +units. +(14) +Includes 6,389 shares of Common Stock issuable to Mr. Stewart upon the vesting and delivery of restricted stock units. +(15) +Includes 4,800,000 shares of Common Stock held by HEYCO Energy Group, Inc. (“HEGI”), 166,667 of which are being held in an escrow account pursuant to the HEYCO Merger and related escrow agreement. As Chairman +and Chief Executive Officer of HEGI, Mr. Yates has ultimate voting and dispositive power with respect to all shares held by HEGI. Also includes 2,500 shares of Common Stock owned by Spiral, Inc., an entity owned by certain trusts of which +Mr. Yates is the sole trustee and with respect to which Mr. Yates has voting and dispositive power. Also includes 6,224 shares of Common Stock issuable to Mr. Yates upon the vesting of restricted stock units. HEGI has pledged +4,000,000 shares of Common Stock. Mr. Yates’ term as a director will expire at the Annual Meeting. +(16) +Includes an aggregate of 1,016,034 shares of Common Stock which our executive officers as a group have the right to acquire within 60 days of April 13, 2018 upon the exercise of stock options. Also includes 747,854 +shares of restricted stock held by our executive officers. Pursuant to the terms of the restricted stock grants, the executive officers have the right to vote such shares but may only dispose of such shares to the extent they have vested. Also +includes 66,682 shares of Common Stock issuable to directors upon the vesting and delivery of restricted stock units. Includes 4,043,209 shares of pledged Common Stock beneficially owned by our executive officers and directors. +(17) +Information based solely on a Schedule 13G/A filed with the SEC on January 23, 2018. The Schedule 13G/A reports that BlackRock, Inc. (“BlackRock”) beneficially owns 10,633,736 shares, has sole voting +power with respect to 10,428,549 shares and has sole dispositive power with respect to 10,633,736 shares. According to the Schedule 13G/A, BlackRock’s address is 55 East 52 nd Street, New +York, NY 10055. +(18) +Information based solely on a Schedule 13G/A filed with the SEC on February 14, 2018. The Schedule 13G/A reports that +T. Rowe Price Associates, Inc. (“Price Associates”) beneficially owns 9,437,899 shares, has sole voting power with respect to 2,385,430 shares and has sole dispositive power with respect to 9,437,899 shares. According to the Schedule +13G/A, these securities are owned by various individual and institutional investors, for which Price Associates serves as an investment adviser registered under the Investment Advisers +72 Matador Resources Company | 2018 Proxy Statement +Table of Contents +SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT +Act of 1940, as amended, with power to direct investments and/or sole power to vote the securities. For purposes of the reporting requirements of the Securities Exchange Act of 1934, as amended, +Price Associates is deemed to be a beneficial owner of such securities; however, Price Associates expressly disclaims that it is, in fact, the beneficial owner of such securities. According to the Schedule 13G/A, Price Associates’ address is +100 E. Pratt Street, Baltimore, MD 21202. +(19) +Information based solely on a Schedule 13G/A filed with the SEC on February 9, 2018. The Schedule 13G/A reports that The Vanguard Group (“Vanguard”) beneficially owns 8,401,124 shares, has sole voting +power with respect to 188,555 shares, has shared voting power with respect to 11,444 shares, has sole dispositive power with respect to 8,208,916 shares and has shared dispositive power with respect to 192,208 shares. According to the Schedule +13G/A, VanGuard’s address is 100 Vanguard Blvd, Malvern, PA 19355. +2018 +Proxy Statement | Matador Resources Company 73 +Table of Contents +ADDITIONAL INFORMATION +ADDITIONAL +INFORMATION +Section 16(a) Beneficial Ownership Reporting Compliance +Section 16(a) of the Exchange Act requires the +Company’s executive officers, directors and persons who own more than ten percent of the Company’s Common Stock to file initial reports of ownership and changes in ownership with the SEC. +Additionally, SEC regulations require that the Company identify any individuals for whom one of the referenced reports was not filed on a timely basis during the most +recent fiscal year. Based solely on the Company’s review of Forms 3, 4 and 5 furnished to the Company and any amendments thereto, the Company believes that all persons subject to Section 16(a) of the Exchange Act timely filed all reports +required pursuant to such section relating to the Company’s Common Stock in 2017, with the exception of a Form 4 filed by Mr. Macalik on July 12, 2017 in connection with his receipt of a grant of restricted stock and stock options. +Shareholder Proposals for the 2019 Proxy Statement +For shareholder proposals to be included in the Company’s +proxy statement and form of proxy relating to the 2019 Annual Meeting of Shareholders, such proposals must be received by the Company at its offices in Dallas, Texas, addressed to the Corporate Secretary of the Company, no later than +December 27, 2018. Upon timely receipt of any such proposal, the Company will determine whether or not to include such proposal in the proxy statement and proxy in accordance with applicable regulations and provisions governing the solicitation +of proxies. +Director Nominations or Other Business for Presentation at the 2019 Annual Meeting +Under the Bylaws, certain procedures are provided that a +shareholder must follow in order to place in nomination persons for election as directors at an annual meeting of shareholders or to introduce an item of business at an annual meeting of shareholders. These procedures provide, generally, among other +things, that shareholders desiring to place in nomination persons for election as directors, and/or bring a proper subject of business before an annual meeting, must do so by a written notice timely received (on or before March 12, 2019, but no +earlier than February 10, 2019, for the 2019 Annual Meeting) to the Corporate Secretary of the Company containing the name and address of the shareholder and the number of shares of the Company’s Common Stock beneficially owned by the +shareholder. If the notice relates to a nomination for director, it must also set forth the name, age, business and residence addresses of the candidate, the candidate’s résumé or a listing of his or her qualifications to be a +director of the Company, the person’s written consent to be a director if selected by the Nominating Committee, nominated by the Board and elected by the shareholders and any other information that would be required to be disclosed in +solicitations of proxies for the election of directors. The Company may require any proposed nominee to furnish such other information as may reasonably be required by the Company to determine the eligibility of such proposed nominee to serve as +director. Notice of an item of business shall include a brief description of the proposed business and any material interest of the shareholder in such business. +The Chairman of the meeting may refuse to allow the transaction of any business not presented, or to acknowledge the nomination of any person not made, in compliance +with the foregoing procedures. Copies of the Bylaws are available from the Corporate Secretary of the Company. +See “Corporate Governance—Board +Committees—Nominating Committee” for the process for shareholders to follow to suggest a director candidate to the Nominating Committee for nomination by the Board. +74 Matador Resources Company | 2018 Proxy Statement +Table of Contents +ADDITIONAL INFORMATION +Annual Report on Form 10-K +The Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017, as filed with the SEC, including financial statements, accompanies this Proxy Statement. Shareholders may obtain without charge another copy of the Annual +Report on Form 10-K, excluding certain exhibits, by writing to Investor Relations, Matador Resources Company, One Lincoln Centre, 5400 LBJ Freeway, Suite 1500, Dallas, Texas 75240. +2018 +Proxy Statement | Matador Resources Company 75 +Table of Contents +OTHER BUSINESS +OTHER +BUSINESS +Management of the Company is not aware of other business to be presented for action at the Annual Meeting; however, if other matters are presented +for action, it is the intention of the persons named in the accompanying form of proxy to vote in accordance with their judgment on such matters. +By Order of the Board of Directors, +Joseph Wm. Foran +Chairman and Chief Executive Officer +April 26, 2018 +76 Matador Resources Company | 2018 Proxy Statement +Table of Contents +SCHEDULE A +Schedule A +Non-GAAP Financial Measures +We define Adjusted EBITDA as earnings before interest expense, income +taxes, depletion, depreciation and amortization, accretion of asset retirement obligations, property impairments, unrealized derivative gains and losses, certain other non-cash items and non-cash stock-based compensation expense, and net gain or loss on asset sales and inventory impairment. Adjusted EBITDA is not a measure of net income (loss) or cash flows as determined by GAAP. Adjusted EBITDA is +a supplemental non-GAAP financial measure that is used by management and external users of our consolidated financial statements, such as industry analysts, investors, lenders and rating agencies. +Management believes Adjusted EBITDA is necessary because it allows us to evaluate our operating performance and compare the results of operations from period to period +without regard to our financing methods or capital structure. We exclude the items listed above from net income (loss) in calculating Adjusted EBITDA, because these amounts can vary substantially from company to company within our industry depending +upon accounting methods and book values of assets, capital structures and the method by which certain assets were acquired. +Adjusted EBITDA should not be +considered an alternative to, or more meaningful than, net income or cash flows from operating activities as determined in accordance with GAAP or as a primary indicator of our operating performance or liquidity. Certain items excluded from Adjusted +EBITDA are significant components of understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure. Our Adjusted EBITDA may not be comparable to similarly titled measures of another +company because all companies may not calculate Adjusted EBITDA in the same manner. +The following table presents our calculation of Adjusted EBITDA and the +reconciliation of Adjusted EBITDA to the GAAP financial measures of net loss and net cash provided by operating activities, respectively. +Year +Ended +December 31, 2017 +Year +Ended +December 31, 2016 +(In thousands) +Unaudited Adjusted EBITDA Reconciliation to Net Income (Loss): +Net income (loss) attributable to Matador Resources Company shareholders +$ +125,867 +$ +(97,421 +) +Net income attributable to non-controlling interest in +subsidiaries +12,140 +364 +Net income (loss) +138,007 +(97,057 +) +Interest expense +34,565 +28,199 +Total income tax benefit +(8,157 +) +(1,036 +) +Depletion, depreciation and amortization +177,502 +122,048 +Accretion of asset retirement obligations +1,290 +1,182 +Full-cost ceiling impairment +— +158,633 +Unrealized (gain) loss on derivatives +(9,715 +) +41,238 +) +Stock-based compensation expense +16,654 +12,362 +Net gain on asset sales and inventory impairment +(23 +) +(107,277 +) +Consolidated Adjusted EBITDA +350,123 +158,292 +Adjusted EBITDA attributable to non-controlling interest in +subsidiaries +(14,060 +) +(400 +) +Adjusted EBITDA attributable to Matador Resources Company shareholders +$ +336,063 +$ +157,892 +2018 +Proxy Statement | Matador Resources Company A-1 +Table of Contents +SCHEDULE A +Year +Ended +December 31, 2017 +Year +Ended +December 31, 2016 +(In thousands) +Unaudited Adjusted EBITDA Reconciliation to Net Cash Provided by Operating Activities: +Net cash provided by operating activities +$ +299,125 +$ +134,086 +Net change in operating assets and liabilities +25,058 +(1,809 +) +Interest expense, net of non-cash portion +34,097 +27,051 +Current income tax benefit +(8,157 +) +(1,036 +) +Adjusted EBITDA attributable to non-controlling interest in +subsidiaries +(14,060 +) +(400 +) +Adjusted EBITDA attributable to Matador Resources Company shareholders +$ +336,063 +$ +157,892 +A-2 Matador Resources Company | 2018 Proxy Statement +Table of Contents +MATADOR RESOURCES COMPANY +5400 LBJ FREEWAY, SUITE 1500 +DALLAS, TX 75240 +VOTE BY INTERNET - www.proxyvote.com +Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the meeting date. Have your proxy card in hand when you +access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. +ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS +If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail +or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. +VOTE BY PHONE - 1-800-690-6903 +Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the meeting date. Have your proxy card +in hand when you call and then follow the instructions. +VOTE BY MAIL +Mark, sign and date your proxy card and return it in the postage-paid envelope +we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. +TO +VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: +KEEP THIS PORTION FOR YOUR RECORDS +— — — — — — — — — — +— — — — — — — — — — — — — — — — — — — — +— — — — — — — — — — — — — — — — — — — +— — — — — — — — — — +DETACH AND RETURN THIS PORTION ONLY +THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. +The Board of Directors recommends you vote FOR +the following: +1. +Election of Directors +Nominees +For +Against +Abstain +01 +William M. Byerley +☐ +☐ +☐ +The Board of Directors recommends you vote 1 YEAR on the following proposal: +1 year +2 years +3 years +Abstain +02 +Julia P. Forrester +☐ +☐ +☐ +3.   Advisory vote on the frequency of advisory votes +on executive +compensation +☐ +☐ +☐ +☐ +03 +Timothy E. Parker +☐ +☐ +☐ +04 +David M. Posner +☐ +☐ +☐ +The Board of Directors recommends you vote +FOR the following proposal: +For +Against +Abstain +05 +Kenneth L. Stewart +☐ +☐ +☐ +4.  Ratification of the appointment of KPMG LLP as the Company’s independent +registered public accounting firm for the year ending December 31, 2018. +☐ +☐ +☐ +The Board of Directors recommends you vote FOR the following proposal: +For +Against +Abstain +NOTE: The proxies are +authorized to vote in their discretion on such other business as may properly come before the meeting or any adjournment thereof. +2. +Advisory vote to approve the compensation of +the Company’s named executive officers. +☐ +☐ +☐ +Yes +No +Please indicate if you plan to attend this meeting +☐ +☐ +Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other +fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name, by authorized officer. +Signature [PLEASE SIGN WITHIN BOX] +Date +Signature (Joint Owners) +Date +Table of Contents +Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Annual Report for the year ended December 31, 2017, Notice of Annual Meeting and Proxy Statement is/are +available at www.proxyvote.com +— — — — — — — — — — +— — — — — — — — — — — — — — — — — — — — +— — — — — — — — — — — — — — — — — — — +— — — — — — — — — — +MATADOR RESOURCES COMPANY +Annual Meeting of Shareholders +June 7, 2018 9:30 A.M. +This proxy is solicited by the Board of Directors. +As an +alternative to completing this form, you may enter your vote instruction by telephone at 1-800-690-6903, or via the internet at www.proxyvote.com . Have your proxy card in hand and follow the instructions. +The shareholder hereby appoints Joseph Wm. +Foran and Reynald A. Baribault, or either of them, as proxies, each with the power to appoint his substitute, and hereby authorizes them to represent and to vote, as designated on the reverse side of this ballot, all of the shares of common stock of +MATADOR RESOURCES COMPANY that the shareholder is entitled to vote at the Annual Meeting of Shareholders to be held at 9:30 A.M., CDT on June 7, 2018, at the Westin Galleria, San Antonio Ballroom, 13340 Dallas Parkway, Dallas, Texas 75240, and any +adjournment or postponement thereof. The shareholder hereby revokes any proxy or proxies heretofore given to vote upon or act with respect to such shares of stock. +This proxy, when properly executed, +will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the Board of Directors’ recommendations. +Continued and +to be signed on reverse side \ No newline at end of file diff --git a/raw/proxies/0001520006/0001193125-18-134930/proxy_rpt.txt b/raw/proxies/0001520006/0001193125-18-134930/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..31e3f0886c98b72878d0a9ab0bc8a304fd00131c --- /dev/null +++ b/raw/proxies/0001520006/0001193125-18-134930/proxy_rpt.txt @@ -0,0 +1,101 @@ +TRANSACTIONS WITH RELATED PERSONS +TRANSACTIONS +WITH RELATED PERSONS +Except as disclosed below, during 2017 there was not, nor was there proposed as of December 31, 2017, any transaction or series of +similar transactions to which we were or are a party in which the amount involved exceeded or exceeds $120,000 and in which any of our directors, executive officers, holders of more than 5% of any class of our voting securities or any member of the +immediate family of any of the foregoing persons had or will have a direct or indirect material interest, other than compensation arrangements with directors and executive officers, which are described in “Executive +Compensation—Compensation Discussion and Analysis” above. +HEYCO Joint Ventures +In June 2015, the Company entered into two joint ventures (the +“Joint Ventures”) to develop certain leasehold interests held by certain affiliates (the “HEYCO Affiliates”) of HEYCO Energy Group, Inc., the former parent company of Harvey E. Yates Company. The HEYCO Affiliates are owned by +George M. Yates, who was appointed to the Board on April 28, 2015 in accordance with the terms of the HEYCO Merger, and certain of his affiliates. Mr. Yates’ term as a director will expire at the Annual Meeting. Pursuant to the terms of +the transaction, the HEYCO Affiliates contributed an aggregate of approximately 1,900 net acres, primarily in the same properties previously held by HEYCO, to the two newly-formed entities in exchange for a 50% interest in each entity. The Company +has agreed to contribute an aggregate of approximately $14 million in exchange for the other 50% interest in both entities. As of December 31, 2017, the Company had contributed an aggregate of approximately $4.4 million to the two +entities. The Company’s contributions are being used to fund capital expenditures associated with the interests owned by the Joint Ventures as well as to fund acquisitions by the Joint Ventures of other +non-operated acreage opportunities. +The Audit Committee reviewed the terms of the Joint Ventures for potential conflicts of +interest under the Company’s related party transaction policy, effective October 12, 2011 (the “Related Party Transaction Policy”), and, after being fully informed as to Mr. Yates’ relationship and interest and all +other material facts related to the Joint Ventures, determined that the Joint Ventures were fair to the Company and recommended the Joint Ventures to the full Board for approval and ratification. The Board subsequently approved and ratified the +Joint Ventures. +In addition, in light of Mr. Yates’ ongoing services to HEYCO Energy Group, Inc., the Board, in accordance with Texas corporate law, +adopted resolutions which renounce and provide for a waiver of certain corporate opportunities with respect to Mr. Yates. As a result, Mr. Yates will have no fiduciary duty to present certain corporate opportunities related to +Mr. Yates’ existing oil and natural gas holdings and/or in areas where Matador does not currently operate. +Working Interest and +Overriding Royalty Interest Owners +Certain related +parties, including Mr. Foran and certain HEYCO Affiliates or entities controlled by members of Mr. Yates’ family (the “Yates Entities” and, collectively with Mr. Foran, the “Interest Owners”) are working +interest owners and/or overriding royalty interest owners in certain properties operated by the Company or in which the Company also holds a working interest. As working interest owners, the Interest Owners are required to pay their proportionate +share of all costs and are entitled to receive their proportionate share of revenues in the normal course of business. As overriding royalty interest owners, the Interest Owners are entitled to receive their proportionate share of revenues from the +wells in which they own an interest in the normal course of business. During 2017, revenues, net of costs, received by the Yates Entities in their capacities as working interest owners or overriding royalty interest owners were approximately +$2.6 million (the “Yates Net Revenue Payments”). During 2017, revenues, net of costs, received by Mr. Foran in his capacity as a working interest owner or overriding royalty interest owner were approximately $1.0 million +(collectively with the Yates Net Revenue Payments, the “Related Net Revenue Payments”). The Related Net Revenue Payments represent approximately 2% of our total third-party net revenue payments during 2017. +68 Matador Resources Company | 2018 Proxy Statement +Table of Contents +TRANSACTIONS WITH RELATED PERSONS +In our capacity as operator, we incur drilling and operating costs that are billed to our partners based on their respective working interests. During 2017, our joint +interest billings to the Yates Entities attributable to their share of costs were approximately $7.9 million (the “Yates Billings”) and our joint interest billings to Mr. Foran attributable to his share of costs were +approximately $0.2 million (collectively with the Yates Billings, the “Related Joint Interest Billings”). The Related Joint Interest Billings represent approximately 1% of our total joint interest billings during 2017. As a result of +this ownership by the Interest Owners, from time to time, we will be in a net receivable or net payable position with certain of the Interest Owners. We do not consider any net receivables from these parties to be uncollectible. +The Audit Committee reviewed the terms of the working interests and/or overriding royalty interests of the Interest Owners for potential conflicts of interest under the +Related Party Transaction Policy, and, after being fully informed as to Mr. Yates’ and Mr. Foran’s respective relationships and interests in such transactions and all other material facts related to the Related Net Revenue +Payments and Related Joint Interest Billings, determined that such transactions and the Related Net Revenue Payments and Related Joint Interest Billings were fair to the Company and recommended such transactions and the Related Net Revenue Payments +and Related Joint Interest Billings to the full Board for approval and ratification. The Board subsequently approved and ratified the transactions and the Related Net Revenue Payments and Related Joint Interest Billings. +Certain Employment Relationships +Billy E. Goodwin, Executive Vice President and Head of +Operations, was appointed as an executive officer of the Company in connection with his February 2016 promotion to Senior Vice President—Operations. Two of Mr. Goodwin’s adult children are employees of the Company and each earned in +2017, and are expected to be compensated in 2018, between $120,000 and $600,000. One of Mr. Goodwin’s children has a Bachelor of Science degree in Petroleum Engineering from the University of Tulsa and over eight years of industry +experience, including as a regional drilling supervisor for another publicly traded exploration and production company. Mr. Goodwin’s other child has a B.S.B.A. degree in Energy Management from the University of Tulsa and a Bachelor of +Arts degree in General Business and Management from Oklahoma State University. He also has over eight years of industry experience, including as a drilling fluids engineer for a publicly traded oilfield services company and as a landman for a +publicly traded exploration and production company. The Audit Committee reviewed the terms of the employment arrangements for potential conflicts of interest under the Company’s Related Party Transaction Policy and, after being fully informed +as to the employment arrangements and historical and anticipated compensation of Mr. Goodwin’s adult children, and all other material facts related to the relationship, determined that the employment arrangements were fair to the Company +and recommended the employment arrangements to the full Board for approval and ratification. The Board subsequently approved and ratified such employment arrangements. +Reynald A. Baribault is a member of the Board. Mr. Baribault’s sister-in-law +is an employee of the Company and earned in 2017, and is expected to be compensated in 2018, between $120,000 and $250,000. Mr. Baribault’s sister-in-law has a +diploma from the Executive Secretarial School and is a certified legal assistant, having completed the Southern Methodist University Legal Assistants Program. She has over 36 years of experience as a legal assistant. The Audit Committee reviewed the +terms of the employment arrangements for potential conflicts of interest under the Company’s Related Party Transaction Policy and, after being fully informed as to the employment arrangements and historical and anticipated compensation of +Mr. Baribault’s sister-in-law, and all other material facts related to the relationship, determined that the employment arrangement was fair to the Company and +recommended the employment arrangement to the full Board for approval and ratification. The Board subsequently approved and ratified such employment arrangement. +An adult child of Mr. Foran is an employee of the Company and earned in 2017, and is expected to be compensated in 2018, between $120,000 and $200,000. +Mr. Foran’s child has a Bachelor of Science degree in Human Resource Development and a Master of Science degree in Human Resource Management, both from Texas A&M University. She has more than seven years of industry experience, +including with another publicly traded exploration and production company. The Audit Committee reviewed the terms of the employment arrangement for potential conflicts of interest under the Company’s Related Party Transaction Policy and, after +2018 +Proxy Statement | Matador Resources Company 69 +Table of Contents +TRANSACTIONS WITH RELATED PERSONS +being fully informed as to the employment arrangement and historical and anticipated compensation of Mr. Foran’s adult child, and all other material facts related to the relationship, +determined that the employment arrangement was fair to the Company and recommended the employment arrangement to the full Board for approval and ratification. The Board subsequently approved and ratified such employment arrangement. +Procedures for Approval of Related Party Transactions +Pursuant to the Related Party Transaction Policy, a +“Related Party Transaction” is defined as a transaction (including any financial transaction, arrangement or relationship (including any indebtedness or guarantee of indebtedness)), or series of related transactions, or any material +amendment to any such transaction, involving a Related Party (as defined below) and in which we are a participant, other than: +• +a transaction involving compensation of directors; +• +a transaction involving compensation of an executive officer or involving an employment agreement, severance agreement, change in control provision or agreement or a special supplemental benefit for an executive +officer; +• +a transaction available to all employees generally or to all salaried employees generally; +• +a transaction with a Related Party involving less than $120,000; +• +a transaction in which the interest of the Related Party arises solely from the ownership of a class of our equity securities and all holders of that class receive the same benefit on a pro rata basis; or +• +a transaction in which the rates or charges involved therein are determined by competitive bids, or a transaction that involves the rendering of services as a common or contract carrier, or public utility, at rates or +charges fixed in conformity with law or governmental authority. +“Related Party” means: +• +any person who is, or at any time during the applicable period was, one of our executive officers or one of our directors or nominees for directors; +• +any person who is known by us to be the beneficial owner of more than 5% of our Common Stock; +• +any immediate family member of any of the foregoing persons, which means any child, stepchild, parent, stepparent, spouse, sibling, +mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law of a director, nominee for director, executive officer or a beneficial owner of more than 5% of our Common Stock; and +• +any firm, corporation or other entity that is owned or controlled by any of the foregoing persons or in which any of the foregoing persons is a general partner or executive officer or in which such person, together with +all other of the foregoing persons, owns 10% or more of the equity interests thereof. +Pursuant to the Related Party Transaction Policy, the Audit +Committee must review all material facts of each Related Party Transaction and recommend either approval or disapproval of the Related Party Transaction to the full Board, subject to certain limited exceptions. In determining whether to recommend +approval or disapproval of the Related Party Transaction, the Audit Committee must, after reviewing all material facts of the Related Party Transaction and the Related Party’s relationship and interest, determine whether the Related Party +Transaction is fair to the Company. Further, the policy requires that all Related Party Transactions be disclosed in our filings with the SEC and/or our website in accordance with applicable laws, rules and regulations. +70 Matador Resources Company | 2018 Proxy Statement +Table of Contents \ No newline at end of file diff --git a/raw/proxies/0001520006/0001193125-19-119876/proxy.txt b/raw/proxies/0001520006/0001193125-19-119876/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..d7b25626511db8a9d203b34031eb20a083257ba6 --- /dev/null +++ b/raw/proxies/0001520006/0001193125-19-119876/proxy.txt @@ -0,0 +1,5510 @@ +DEF 14A +1 +d682056ddef14a.htm +DEF 14A +DEF 14A +Table of Contents +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +Washington, D.C. 20549 +SCHEDULE 14A +Proxy Statement Pursuant to Section 14(a) of the +Securities Exchange Act of 1934 (Amendment No.) +Filed by the +Registrant ☑ Filed by a Party other than the +Registrant ☐ +Check the appropriate box: +☐ +Preliminary Proxy Statement +☐ +Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +☑ +Definitive Proxy Statement +☐ +Definitive Additional Materials +☐ +Soliciting Material Pursuant to §240.14a-12 +Matador Resources Company +(Name of Registrant as Specified In Its Charter) +(Name of Person(s) Filing Proxy Statement, if other than the Registrant) +Payment of Filing Fee (Check the appropriate box): +☑ +No fee required. +☐ +Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. +1) +Title of each class of securities to which transaction applies: +2) +Aggregate number of securities to which transaction applies: +3) +Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the +filing fee is calculated and state how it was determined): +4) +Proposed maximum aggregate value of transaction: +5) +Total fee paid: +☐ +Fee paid previously with preliminary materials. +☐ +Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify +the previous filing by registration statement number, or the Form or Schedule and the date of its filing. +1) +Amount Previously Paid: +2) +Form, Schedule or Registration Statement No.: +3) +Filing Party: +4) +Date Filed: +Table of Contents +2019 +Notice of Annual Meeting of Shareholders +and +Proxy Statement +June 6, +2019 | Dallas, Texas +Table of Contents +One Lincoln Centre +5400 LBJ Freeway, Suite 1500 +Dallas, Texas +75240 +www.matadorresources.com +NOTICE OF ANNUAL MEETING OF SHAREHOLDERS +To +Be Held on June 6, 2019 +To the Matador Resources Company Shareholders: +Please join us for the 2019 Annual Meeting of Shareholders of Matador Resources Company. The meeting will be held at the Westin Galleria, San Antonio +Ballroom, 13340 Dallas Parkway, Dallas, Texas 75240, on Thursday, June 6, 2019, at 9:30 a.m. , Central Daylight Time. +At +the meeting, you will hear a report on our business and act on the following matters: +(1) +Election of the three nominees for director named in the attached Proxy Statement; +(2) +Vote to approve the Company’s 2019 Long-Term Incentive Plan; +(3) +Advisory vote to approve the compensation of our named executive officers as described in the attached Proxy Statement; +(4) +Ratification of the appointment of KPMG LLP as the Company’s independent registered public accounting firm for the +year ending December 31, 2019; and +(5) +Any other matters that may properly come before the meeting. +All shareholders of record at the close of business on April 12, 2019 are entitled to vote at the meeting or any postponement or adjournment of the +meeting. A list of the shareholders of record is available at the Company’s offices in Dallas, Texas. +By Order of the Board of Directors, +Joseph Wm. Foran +Chairman and Chief Executive Officer +April 25, 2019 +YOUR VOTE IS IMPORTANT! +Whether or not you will attend the meeting, please vote as promptly as possible by using the Internet or telephone or by signing, dating and +returning your proxy card to the address listed on the card. +Important Notice Regarding the Availability of Proxy Materials for the +Annual Meeting of Shareholders to Be Held on June 6, 2019: +Our Proxy Statement and the Annual Report to Shareholders for the fiscal year ended December 31, 2018 are available for viewing, printing and +downloading at https://materials.proxyvote.com/576485 . +Table of Contents +TABLE OF CONTENTS +TABLE OF CONTENTS +Page +Proxy Statement +1 +Proxy Summary +3 +Information About the Annual Meeting +6 +Proposal 1—Election of Directors +10 +Nominees +10 +Vote Required +11 +Directors Continuing in Office +12 +Advisors to the Board +15 +Corporate Governance +16 +Independence of Directors +16 +Majority Vote in Director Elections +16 +Board Leadership Structure +17 +Board Committees +18 +Board’s Role in Risk Oversight +22 +Strategic Planning and Compensation Committee Interlocks and Insider +Participation +22 +Communications with Directors +23 +Executive Officers and Other Senior Officers of the Company +23 +Proposal 2—Approval of Our 2019 Long-Term Incentive Plan +29 +Promotion of Good Corporate Governance Practices +30 +Description of the 2019 Plan +30 +Federal Income Tax Consequences +36 +New Plan Benefits +39 +Vote Required +39 +Proposal 3—Advisory Vote to Approve Named Executive Officer +Compensation +40 +Vote Required +41 +Proposal 4—Ratification of the Appointment of KPMG LLP +42 +Fees of Independent Registered Public Accounting Firm for Fiscal Years 2018 and +2017 +42 +Report of the Audit Committee +43 +Vote Required +44 +Letter to Shareholders +45 +Executive Compensation +46 +Compensation Discussion and Analysis +46 +Strategic Planning and Compensation Committee Report +65 +Summary Compensation Table +66 +Grants of Plan-Based Awards Table +67 +Outstanding Equity Awards at December 31, 2018 +68 +Option Exercises and Stock Vested +70 +Potential Payments Upon Termination or Change in Control +70 +2019 +Proxy Statement | Matador Resources Company i +Table of Contents +TABLE OF CONTENTS +Page +Chief Executive Officer Pay Ratio +74 +Director Compensation +75 +Compensation for 2018-2019 +76 +Compensation for 2019-2020 +76 +Director Ownership Guidelines +76 +Board Advisor Compensation +77 +Securities Authorized for Issuance Under Equity Compensation Plans +78 +Transactions with Related Persons +79 +Security Ownership of Certain Beneficial Owners and Management +82 +Additional Information +84 +Section 16(a) Beneficial Ownership Reporting Compliance +84 +Shareholder Proposals for the 2020 Proxy Statement +84 +Director Nominations or Other Business for Presentation at the 2020 Annual +Meeting +84 +Annual Report on Form 10-K +85 +Other Business +86 +Annex A—Non-GAAP Financial +Measures +A-1 +Annex B—Matador Resources Company 2019 Long-Term Incentive Plan +B-1 +ii Matador Resources Company | 2019 Proxy Statement +Table of Contents +PROXY STATEMENT +Matador Resources Company +One Lincoln Centre +5400 LBJ Freeway, Suite 1500 +Dallas, Texas 75240 +www.matadorresources.com +PROXY STATEMENT +For +ANNUAL +MEETING OF SHAREHOLDERS +To Be Held on June 6, 2019 +This Proxy Statement is being mailed on or about April 25, 2019 to the shareholders of Matador Resources Company (“Matador” or the “Company”) +in connection with the solicitation of proxies by the Board of Directors (the “Board”) of the Company to be voted at the Annual Meeting of Shareholders of the Company to be held at the Westin Galleria, San Antonio Ballroom, 13340 Dallas +Parkway, Dallas, Texas 75240, on June 6, 2019, at 9:30 a.m., Central Daylight Time (the “Annual Meeting” or the “2019 Annual Meeting”), or at any postponement or adjournment thereof, for the purposes set forth in the +accompanying Notice of Annual Meeting of Shareholders. The address of the Company’s principal executive office is One Lincoln Centre, 5400 LBJ Freeway, Suite 1500, Dallas, Texas 75240. +If you are a shareholder of record, you may vote in person by attending the meeting, by completing and returning a proxy by mail or by using the Internet or telephone. +You may vote your proxy by mail by marking your vote on the enclosed proxy card and following the instructions on the card. To vote your proxy using the Internet or telephone, see the instructions on the proxy form and have the proxy form available +when you access the Internet website or place your telephone call. +The named proxies will vote your shares according to your directions. If you sign and return +your proxy but do not make any of the selections, the named proxies will vote your shares: (i) FOR the election of the three nominees for director as set forth in this Proxy Statement, (ii) FOR the approval of the +Company’s 2019 Long-Term Incentive Plan, (iii) FOR the approval, on an advisory basis, of the compensation of the Company’s named executive officers as disclosed in this Proxy Statement and (iv) FOR +the ratification of KPMG LLP as the independent registered public accounting firm of the Company for the year ending December 31, 2019. Your proxy may be revoked at any time before it is exercised by filing with the Company a written revocation +addressed to the Corporate Secretary, by executing a proxy bearing a later date or by attending the Annual Meeting and voting in person. +The cost of soliciting +proxies will be borne by the Company. In addition to the use of postal services and the Internet, proxies may be solicited by directors, officers and employees of the Company (none of whom will receive any additional compensation for any assistance +they may provide in the solicitation of proxies) in person or by telephone. +The outstanding voting securities of the Company consist of Common Stock. The record +date for the determination of the shareholders entitled to notice of and to vote at the Annual Meeting, or any postponement or adjournment thereof, has been established by the Board as the close of business on April 12, 2019 (the “Record +Date”). As of the Record Date, there were 116,392,034 shares of Common Stock outstanding and entitled to vote. +The presence, in person or by proxy, of the +holders of record of a majority of the outstanding shares entitled to vote is necessary to constitute a quorum for the transaction of business at the Annual Meeting, but if a quorum should not be present, the meeting may be adjourned from time to +time until a quorum is obtained. A holder of Common Stock will be entitled to one vote per share on each matter properly brought before the meeting. Cumulative voting is not permitted in the election of directors. +The proxy card provides space for a shareholder to abstain with respect to any or all nominees for the Board. The affirmative vote of a majority of the votes cast by +holders of shares present in person or represented by proxy and entitled to vote on the election of directors at the Annual Meeting is required for the election of each nominee for +2019 +Proxy Statement | Matador Resources Company 1 +Table of Contents +PROXY STATEMENT +director. With respect to the election of directors in an +uncontested election, such as that being held at the Annual Meeting, “majority of the votes cast” means the number of votes cast “for” the election of such nominee exceeds the number of votes cast “against” such +nominee. See “Corporate Governance—Majority Vote in Director Elections” for additional information regarding election of directors. +The other +proposals require the affirmative vote of a majority of the shares of Common Stock present in person or represented by proxy and entitled to vote at the meeting. Shares held by a shareholder who abstains from voting on any or all proposals will be +included for the purpose of determining the presence of a quorum. Other than with respect to the election of directors, an abstention will effectively count as a vote cast against the remaining proposals. Broker +non-votes on any matter as to which the broker has indicated on the proxy that it does not have discretionary authority to vote will be treated as shares not entitled to vote with respect to that matter. +However, such shares will be considered present and entitled to vote for quorum purposes so long as they are entitled to vote on at least one other matter. +2 Matador Resources Company | 2019 Proxy Statement +Table of Contents +PROXY SUMMARY +PROXY SUMMARY +This summary +highlights information contained elsewhere in this Proxy Statement. This summary does not contain all of the information that you should consider, and you should read the entire Proxy Statement carefully prior to voting. For more complete +information regarding our 2018 performance, please review our Annual Report on Form 10-K for the year ended December 31, 2018. +2019 Annual Meeting of Stockholders +Date and Time : June 6, 2019, at 9:30 a.m., Central +Daylight Time +Location : Westin Galleria, San Antonio Ballroom, 13340 Dallas Parkway, Dallas, Texas 75240 +Record Date : April 12, 2019 +Voting : Shareholders as of the +close of business on the Record Date are entitled to vote. Each share of Common Stock is entitled to one vote at the Annual Meeting. +Voting +Matters and Board Recommendation +Proposal +Board +Recommendation +Election of Three Director Nominees (page 10) +FOR +Approval of the Company’s 2019 Long-Term Incentive Plan (page 29) +FOR +Advisory Vote to Approve Named Executive Officer Compensation (page 40) +FOR +Ratification of the Appointment of KPMG LLP as the Company’s Independent Registered Public Accounting +Firm for 2019 (page 42) +FOR +2018 Business Highlights +In 2018, Matador achieved record oil, natural gas and average +daily oil equivalent production. In addition, Matador increased its estimated total proved oil and natural gas reserves 41% as of December 31, 2018, as compared to December 31, 2017. +Business highlights achieved during 2018 include the following: +• +A 42% increase in oil production from 7.9 million barrels (“Bbl”) of oil produced in 2017 to +11.1 million Bbl of oil produced in 2018. +• +A 24% increase in natural gas production from 38.2 billion cubic feet (“Bcf”) of natural gas produced in +2017 to 47.3 Bcf of natural gas produced in 2018. +• +A 34% increase in average daily oil equivalent production from 38,936 barrels of oil equivalent (“BOE”) per day, +including 21,510 Bbl of oil per day and 104.6 million cubic feet (“MMcf”) of natural gas per day, in 2017, to 52,128 BOE per day, including 30,524 Bbl of oil per day and 129.6 MMcf of natural gas per day, in 2018. +• +Net income (GAAP) of $274.2 million and Adjusted EBITDA (non-GAAP) of +$553.2 million for the year ended December 31, 2018, as compared to net income (GAAP) of $125.9 million and Adjusted EBITDA (non-GAAP) of $336.1 million for the year ended December 31, +2017. For a definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to our net income (loss) and net cash provided by operating activities, see Annex A to this Proxy Statement. +• +On May 17, 2018, we completed a public offering of 7,000,000 shares of our Common Stock. We received net +proceeds of approximately $226.4 million after deducting offering costs totaling approximately $0.2 million. +2019 +Proxy Statement | Matador Resources Company 3 +Table of Contents +PROXY SUMMARY +• +In 2018, we completed a series of transactions whereby we (i) issued $1.05 billion aggregate principal amount of +senior notes and received net proceeds of $1.04 billion, (ii) redeemed $575.0 million aggregate principal amount of senior notes, (iii) lowered the coupon rate on our senior notes outstanding to 5.875% from 6.875% and +(iv) extended the maturity date of our senior notes from 2023 to 2026. +• +On September 12, 2018, we announced the successful acquisition of 8,400 gross and net leasehold acres in Lea and Eddy +Counties, New Mexico for approximately $387 million, or a weighted average cost of approximately $46,000 per net acre, in the Bureau of Land Management (the “BLM”) New Mexico Oil and Gas Lease Sale on September 5 and 6, 2018 (the +“BLM Acquisition”). The acquired leasehold acreage includes approximately 2,800 gross and net acres in the Stateline asset area on the Texas/New Mexico border, 4,800 gross and net acres in the Antelope Ridge asset area, 400 gross and net +acres in the Arrowhead asset area and 400 gross and net acres in the Twin Lakes asset area. The leases for all tracts covering the BLM Acquisition were issued in the fourth quarter of 2018. +• +In October 2018, we amended our third amended and restated credit agreement (the “Credit Agreement”) to, among +other items, (i) increase the maximum facility amount to $1.5 billion, (ii) increase the borrowing base to $850.0 million, (iii) increase the elected borrowing commitment to $500.0 million, (iv) extend the maturity +to October 31, 2023, (v) reduce borrowing rates by 0.25% per annum and (vi) set the maximum leverage ratio at 4.00 to 1.00. +• +In December 2018, the Company’s midstream joint venture, San Mateo Midstream, LLC (“San Mateo”), entered +into a $250.0 million credit facility led by The Bank of Nova Scotia, as administrative agent, following which there was a cash distribution of $195.0 million, which was distributed 51% to us and 49% to our partner, Five Point Energy, LLC +(“Five Point”). +Recent Developments +• +On February 25, 2019, we announced the formation of San Mateo Midstream II, LLC (“San Mateo II”), a +strategic joint venture with a subsidiary of Five Point designed to expand our midstream operations in the Delaware Basin, specifically in Eddy County, New Mexico. San Mateo II is owned 51% by us and 49% by Five Point. As part of this transaction, +we dedicated to San Mateo II acreage in the Stebbins area and the Stateline asset area pursuant to 15-year, fixed-fee agreements for oil, natural gas and salt water +gathering, natural gas processing and salt water disposal. In addition, Five Point has committed to pay $125 million of the first $150 million of capital expenditures incurred by San Mateo II to develop facilities in the Stebbins area and +the Stateline asset area. Five Point has also provided us the opportunity to earn deferred performance incentives of up to $150 million over the next five years as we execute our operational plans in and around the Stebbins area and the +Stateline asset area, plus additional performance incentives for securing volumes from third-party customers. +Director +Nominees (page 10) +Our Board currently has 10 +members divided into three classes of directors, designated Class I, Class II and Class III. Directors are elected for three-year terms. The table below provides certain summary information about each nominee for director named in +this Proxy Statement. +Name +Age +Director +Since +Principal Occupation +Committee +Memberships +R. Gaines Baty* +68 +2016 +CEO, R. Gaines Baty Associates, Inc. +CG, E, SPC +Craig T. Burkert* +62 +2016 +CFO, ROMCO Equipment Co. +A, CG, M, SPC +Matthew P. Clifton* +67 +2018 +Former Chairman and CEO, Holly Logistic Services, L.L.C. +A, CG, M +* +Independent Director +A +Audit Committee +E +Executive Committee +CG +Corporate Governance Committee +M +Marketing and Midstream Committee +SPC +Strategic Planning and Compensation Committee +4 Matador Resources Company | 2019 Proxy Statement +Table of Contents +PROXY SUMMARY +Executive Compensation Highlights (page 45) +Our compensation program is designed to reward, in both the +short term and the long term, performance that contributes to the implementation of our business strategies, maintenance of our culture and values and achievement of our objectives. In addition, we reward qualities that we believe help achieve our +business strategies such as teamwork, mentoring future leaders within the Company to drive long-term shareholder value, individual performance in light of general economic and industry-specific conditions, relationships with shareholders and +vendors, the ability to manage and enhance production from our existing assets, the ability to explore new opportunities to increase oil and natural gas production, the ability to identify and acquire additional acreage, the ability to improve total +shareholder returns, the ability to increase year-over-year proved reserves, the ability to control unit production costs, the ability to pursue midstream opportunities, level of job responsibility, industry experience and general professional +growth. +At our 2018 annual meeting of shareholders (the “2018 Annual Meeting”), we received approximately 72% shareholder support for our executive +compensation program. This level of support was a significant decrease from the average 99% level of support that we received at our three previous annual shareholder meetings. Our Board and management were disappointed with the 2018 say-on-pay voting results, and the Strategic Planning and Compensation Committee and management jointly undertook an extensive review of the Company’s executive +compensation program with input from our independent compensation consultant, Meridian Compensation Partners, LLC. The review included reaching out to shareholders representing approximately 50% of our outstanding stock (excluding stock held by our +directors and officers). +As a result of this outreach, the Strategic Planning and Compensation Committee implemented numerous changes to our executive compensation +program for 2018 and 2019, including the following: +• +In light of industry factors, our 2018 +say-on-pay voting results and shareholder feedback and the Company’s 2018 stock performance, Mr. Foran’s 2018 total compensation was reduced 27.0% from +2017 to 2018. In particular, his compensation pursuant to the Company’s annual cash incentive plan was reduced 35.5% from 2017 to 2018. +• +We transitioned from a long-term incentive compensation program for executive officers of 67% service-based restricted +stock and 33% stock options to a program comprised of 50% service-based restricted stock units and 50% performance-based stock units, commencing with grants made in February 2019. +• +We eliminated discretionary bonuses, commonly referred to within the Company as “Marlan” awards in honor of the +late Marlan W. Downey (1931-2017), a long-time advisor to the Board. Such bonuses have historically been awarded as a way to contemporaneously reward significant performance achievements by select officers and employees. While, consistent with +feedback we received from our shareholders, we still believe in the value to the Company and our shareholders of such awards in motivating our non-executive employees, no Marlan bonuses were awarded to +executive officers following our 2018 Annual Meeting, and the Board does not anticipate granting future Marlan bonuses to our executive officers. +Details of our executive compensation are shown in the 2018 Summary Compensation Table on page 66 and a thorough discussion of the above changes to our executive +compensation program, for both 2018 and 2019, are included under “Executive Compensation—Compensation Discussion and Analysis” beginning on page 46. +2019 +Proxy Statement | Matador Resources Company 5 +Table of Contents +INFORMATION ABOUT THE ANNUAL MEETING +INFORMATION +ABOUT THE ANNUAL MEETING +We are furnishing you this Proxy Statement in connection with the solicitation of proxies by the Board to be used at the Annual +Meeting and any adjournment thereof. The Annual Meeting will be held on Thursday, June 6, 2019, at 9:30 a.m., Central Daylight Time. We are sending this Proxy Statement to our shareholders on or about April 25, 2019. +All references in this Proxy Statement to “we,” “our,” “us,” “Matador” or the “Company” refer to Matador Resources +Company, including our subsidiaries and affiliates. +What is the purpose of the Annual Meeting? +At the Annual Meeting, shareholders will act upon the following +matters outlined in the Annual Meeting notice: +• +the election of the three nominees for director named in this Proxy Statement; +• +the approval of the Company’s 2019 Long-Term Incentive Plan; +• +an advisory vote to approve the compensation of our named executive officers as described herein; +• +the ratification of the appointment of KPMG LLP as the Company’s independent registered public accounting firm for the +year ending December 31, 2019; and +• +any other matters that may properly come before the meeting. +What are the Board’s voting recommendations? +• +FOR the election of the three nominees for director named in this Proxy Statement; +• +FOR the approval of the Company’s 2019 Long-Term Incentive Plan; +• +FOR the approval, on an advisory basis, of the compensation of the Company’s named executive officers; and +• +FOR the ratification of the appointment of KPMG LLP as the Company’s independent registered public accounting +firm for the year ending December 31, 2019. +Who is entitled to vote? +Shareholders as of the close of business on April 12, 2019 +are eligible to vote their shares at the Annual Meeting. As of the Record Date, there were 116,392,034 shares of our Common Stock outstanding. Each share of Common Stock is entitled to one vote at the Annual Meeting. +Why did I receive a Notice Regarding the Internet Availability of Proxy Materials in the mail instead of a full set of proxy materials? +Securities and Exchange Commission (“SEC”) +rules allow companies to furnish proxy materials over the Internet. We have elected to send a separate Notice of Internet Availability of Proxy Materials (the “Notice”) to most of our shareholders instead of a paper copy of the proxy +materials. This approach conserves natural resources and reduces the costs of printing and distributing our proxy materials while providing shareholders with a convenient way to access our proxy materials. Instructions on how to access the proxy +materials over the Internet or to request a paper copy of proxy materials, including a proxy card or voting instruction form, may be found in the Notice. In addition, shareholders may request to receive future proxy materials in printed form by mail +or electronically by email by following the instructions in the Notice. A shareholder’s election to receive proxy materials by mail or email will remain in effect until the shareholder terminates it. +6 Matador Resources Company | 2019 Proxy Statement +Table of Contents +INFORMATION ABOUT THE ANNUAL MEETING +How do I vote? +You may: +• +attend the Annual Meeting and vote in person; +• +dial the toll-free number listed on the Notice, proxy card or voting instruction form provided by your broker. Easy-to-follow voice prompts allow you to vote your shares and confirm that your voting instructions have been properly recorded. Telephone voting will be available 24 hours a +day and will close at 11:59 p.m., Eastern Daylight Time on June 5, 2019; +• +go to the website www.proxyvote.com and follow the instructions, then confirm that your voting instructions have +been properly recorded. If you vote using the website, you can request electronic delivery of future proxy materials. Internet voting will be available 24 hours a day and will close at 11:59 p.m., Eastern Daylight Time on June 5, 2019; or +• +if you received a paper copy of your proxy materials and elect to vote by written submission, mark your selections on the +proxy card, date and sign it, and return the card in the pre-addressed, postage-paid envelope provided. +Why did I receive paper copies of proxy materials? +We are providing certain shareholders with paper copies of the proxy materials instead of a separate Notice. If you received a paper copy and would no longer like to +receive printed proxy materials, you may consent to receive all future proxy materials electronically via email or the Internet. To sign up for electronic delivery, please follow the instructions provided in your proxy materials. When prompted, +indicate that you agree to receive or access shareholder communications electronically in the future. +Will each shareholder in our household +receive proxy materials? +Generally, no. To the +extent you are receiving printed proxy materials, we try to provide only one set of proxy materials to be delivered to multiple shareholders sharing an address, unless you have given us other instructions. Any shareholder at a shared address may +request delivery of single or multiple copies of printed proxy materials for future meetings by contacting us at: +Matador Resources +Company +Attention: Investor Relations +5400 LBJ Freeway, Suite 1500 +Dallas, Texas 75240 +Email: investors@matadorresources.com +Telephone: (972) 371-5200 +We undertake to deliver promptly, upon written or oral request, a copy of proxy materials to a shareholder at a shared address to which a single copy of the proxy +materials was delivered. Requests should be directed to Investor Relations at the address or phone number set forth above. +Who will be +admitted to the Annual Meeting? +Admission to the +Annual Meeting will be limited to our shareholders of record, persons holding proxies from our shareholders, beneficial owners of our Common Stock and our employees. If your shares are registered in your name, we will verify your ownership at the +meeting in our list of shareholders as of the Record Date. If your shares are held through a broker, bank or other nominee, you must bring proof of your ownership of the shares. This proof could consist of, for example, a bank or brokerage firm +account statement or a letter from your bank or broker confirming your ownership as of the Record Date. You may also send proof of ownership to us at Matador Resources Company, Attention: Corporate Secretary, 5400 LBJ Freeway, Suite 1500, Dallas, +Texas 75240, or email: investors@matadorresources.com, before the Annual Meeting, and we will send you an admission card. +2019 +Proxy Statement | Matador Resources Company 7 +Table of Contents +INFORMATION ABOUT THE ANNUAL MEETING +If I vote via telephone or the Internet +or by mailing my proxy card, may I still attend the Annual Meeting? +Yes. +What if I want to change my vote? +You may revoke your proxy before it is voted by submitting a new +proxy with a later date (by mail, telephone or the Internet), by voting at the Annual Meeting or by filing a written revocation with our Corporate Secretary. Your attendance at the Annual Meeting will not automatically revoke your proxy. +What constitutes a quorum? +A majority of the shares entitled to vote, present in person or represented by proxy, constitutes a quorum. If you vote by telephone or Internet or by returning your +proxy card, you will be considered part of the quorum. The Inspector of Election will treat shares represented by a properly executed proxy as present at the meeting. Abstentions and broker non-votes will be +counted for purposes of determining a quorum. A broker non-vote occurs when a nominee holding shares for a beneficial owner submits a proxy but does not vote on a particular proposal because the nominee does +not have discretionary voting power for that item and has not received instructions from the beneficial owner. +How many votes will be +required to approve a proposal? +The affirmative vote +of a majority of the votes cast by holders of shares of Common Stock present in person or represented by proxy and entitled to vote on the election of directors at the Annual Meeting is required for the election of each nominee for director. With +respect to the election of directors in an uncontested election, such as that being held at the Annual Meeting, “majority of the votes cast” means the number of votes cast “for” such nominee exceeds the number of votes cast +“against” such nominee. +With respect to all other matters, the affirmative vote of the holders of a majority of the shares of Common Stock, present in +person or represented by proxy and entitled to vote at the Annual Meeting, is required. +Shares cannot be voted at the Annual Meeting unless the holder of record is +present in person or represented by proxy. +Can brokers who hold shares in street name vote those shares if they have received no +instructions? +Under the rules of the New York Stock +Exchange (“NYSE”), brokers may not vote the shares held by them in street name for their customers and for which they have not received instructions, except with respect to a routine matter. The only matter to be voted on at the Annual +Meeting that is considered routine for these purposes is the ratification of the appointment of our independent registered public accounting firm. Accordingly, brokers may not vote your shares on any other matter if you have not given specific +instructions as to how to vote. Please be sure to give specific voting instructions to your broker so that your vote will be counted. +How +will you treat abstentions and broker non-votes? +Shares of a shareholder who abstains from voting on any or all proposals will be included for the purpose of determining the presence of a quorum. Other than with +respect to the election of directors, an abstention will effectively count as a vote cast against the remaining proposals. Broker non-votes on any matter, as to which the broker has indicated on the proxy that +it does not have discretionary authority to vote, will be treated as shares not entitled to vote with respect to that matter. However, such shares will be considered present and entitled to vote for quorum purposes so long as they are entitled to +vote on at least one other matter. +8 Matador Resources Company | 2019 Proxy Statement +Table of Contents +INFORMATION ABOUT THE ANNUAL MEETING +Who pays the solicitation expenses? +We will bear the cost of solicitation of proxies. Proxies may be +solicited by mail or personally by our directors, officers or employees, none of whom will receive additional compensation for such solicitation. Those holding shares of Common Stock of record for the benefit of others, or nominee holders, are being +asked to distribute proxy soliciting materials to, and request voting instructions from, the beneficial owners of such shares. We will reimburse nominee holders for their reasonable +out-of-pocket expenses. +Where can I find the voting results +of the Annual Meeting? +We will announce preliminary +voting results at the Annual Meeting, and we will publish final results in a Current Report on Form 8-K that will be filed with the SEC within four business days of the Annual Meeting. You may obtain a copy of +this and other reports free of charge at www.matadorresources.com , by contacting our Investor Relations Department at (972) 371-5200 or investors@matadorresources.com or by accessing the SEC’s +website at www.sec.gov . +Will the Company’s independent registered public accounting firm be available at the Annual Meeting to +respond to questions? +Yes. The Audit Committee of +the Board has approved KPMG LLP to serve as our independent registered public accounting firm for the year ending December 31, 2019. Representatives of KPMG LLP will be present at the Annual Meeting. They will have an opportunity to make a +statement, if they desire to do so, and will be available to respond to appropriate questions. +Where can I contact the Company? +Our mailing address is: +Matador Resources Company +Attention: Investor Relations +5400 LBJ Freeway, Suite 1500 +Dallas, Texas 75240 +Our telephone number is (972) 371-5200. +2019 +Proxy Statement | Matador Resources Company 9 +Table of Contents +PROPOSAL 1 +PROPOSAL +1 | ELECTION OF DIRECTORS +The Board currently +consists of 10 members and is divided into three classes of directors, designated Class I, Class II and Class III, with the term of office of each director ending on the date of the third annual meeting following the annual meeting at +which such director’s class was elected. The number of directors in each class will be as nearly equal as possible. The Class I directors are Ms. Julia P. Forrester Rogers and Messrs. William M. Byerley and Kenneth L. Stewart, the +terms of which will each continue until the 2021 Annual Meeting of Shareholders or his or her earlier death, retirement, resignation or removal. The Class II directors are Messrs. R. Gaines Baty, Craig T. Burkert and Matthew P. Clifton, +all of which are Class II director nominees at the Annual Meeting, in each case, to hold office until the 2022 Annual Meeting of Shareholders or his earlier death, retirement, resignation or removal. The Class III directors are Messrs. +Reynald A. Baribault, Joseph Wm. Foran, Timothy E. Parker and David M. Posner, the terms of which will each continue until the 2020 Annual Meeting of Shareholders or his earlier death, retirement, resignation or removal. +The Board believes that each of the director nominees possesses the qualifications described below in “Corporate Governance—Board Committees—Nominating +Committee.” That is, the Board believes that each nominee possesses: (i) deep experience at the policy making level in business, government or education; (ii) the availability and willingness to devote adequate time to Board duties; +(iii) the character, judgment and ability to make independent analytical, probing and other inquiries; (iv) a willingness to exercise independent judgment along with a willingness to listen and learn from others; (v) business +knowledge and experience that provides a balance with the other directors; (vi) financial independence; and (vii) excellent past performance on the Board. +The information provided below is biographical information about each of the nominees, as well as a description of the experience, qualifications, attributes or skills +that led the Board to conclude that the individual should be nominated for election as a director of the Company. +Nominees +Mr. R. Gaines Baty +Class II +CEO, R. Gaines Baty +Associates, +Inc. +Director +Director since: 2016 +Independent: Yes +Age: 68 +Committees: +• Strategic Planning and +Compensation (Chair) +• Corporate Governance +• Executive +Mr. Baty was appointed to the Board in 2016 and is chair of the Board’s Strategic Planning and Compensation Committee. Mr. Baty is Founder and CEO of R. Gaines Baty Associates, Inc., an executive search firm he +founded in 1982. Mr. Baty has over 30 years of experience as an executive search consultant. In this role, he has provided companies across the country and in a variety of industries with executive search and advisory services. Mr. Baty +has served as a two-term President of the Society of Executive Recruiting Consultants and a two-term President of the Independent Recruiter Group. Mr. Baty is also +a published author. Mr. Baty received a Bachelor of Business Administration degree from Texas Tech University, where he was a letterman and captain of the football team. Mr. Baty’s experience and expertise in executive leadership and +development provide our Board with an important and unique perspective on these matters, and Mr. Baty assists the Board and the Company with recruitment, board administration, compensation and growth strategies. +10 Matador Resources Company | 2019 Proxy Statement +Table of Contents +PROPOSAL 1 +Mr. Craig T. +Burkert +Class II +CFO, ROMCO +Equipment Co. +Director +Director since: 2016 +Independent: Yes +Age: 62 +Committees: +• Audit +• Corporate Governance +• Marketing and Midstream +• Strategic Planning and +Compensation +Mr. Burkert was elected to the Board in 2016. With over 30 years of experience in distribution businesses, he currently serves as the Chief Financial Officer of ROMCO Equipment Co., a dealer of heavy construction equipment that +serves customers in a variety of sectors throughout most of Texas. Mr. Burkert joined ROMCO in 1984 as a Product Manager, later serving as a Branch Manager from 1986 to 1989 and as General Manager from 1989 to 1994. In 1994, he left ROMCO to +start a dealership in the lift truck industry in New England, but he returned to ROMCO in 2003 to take on his current position of Chief Financial Officer, where he is responsible for all financial, administrative and technology aspects of the +company. Mr. Burkert received a Bachelor of Science degree in Electrical Engineering and Computer and Information Systems from Tulane University. He also holds a Master in Business Administration degree from Harvard Business School. +Mr. Burkert has been involved with Matador since its inception. Mr. Burkert’s accounting and financial knowledge and leadership experience, coupled with his familiarity with the operations and corporate governance of the Company, +provide our Board with a valuable perspective on these matters and other business issues. +Mr. Matthew P. Clifton +Class II +Former Chairman and CEO, +Holly +Logistic Services, L.L.C. +Director +Director since: 2018 +Independent: Yes +Age: 67 +Committees: +• Audit +• Corporate Governance +• Marketing and Midstream +Mr. Clifton was appointed to the Board in 2018. Mr. Clifton retired in November 2017 as Chairman of Holly Logistic Services, L.L.C (“HLS”), a subsidiary of HollyFrontier Corporation (“HFC”) and the +general partner of Holly Energy Partners, L.P. (“HEP”). HEP is a publicly held master limited partnership that provides petroleum product and crude oil transportation, terminalling, storage and throughput services to the petroleum +industry. Mr. Clifton had previously served as Chairman and Chief Executive Officer of HLS from 2004 through 2013, Executive Chairman of HLS from January 2014 to February 2014 and Chairman of the Board of HLS from February 2014 to November +2017. Mr. Clifton also served as President of Holly Corporation from 1995 to 2006 and Chief Executive Officer of Holly Corporation from 2006 until its merger with Frontier Oil Corporation in 2011 that formed HFC. Holly Corporation was an +independent petroleum refiner and marketer that produced high value light products such as gasoline, diesel fuel, jet fuel and specialty lubricant products and had principal operations in the Delaware Basin. He served as Executive Chairman of HFC +from 2011 until his retirement effective January 1, 2013. HFC is an independent petroleum refiner and marketer that produces high value light products such as gasoline, diesel fuel, jet fuel and other specialty products. Mr. Clifton holds +a Bachelor of Science degree in Accounting and Finance from St. Joseph’s University. Mr. Clifton serves as a valuable resource for the Board with his in depth experience in the midstream oil and natural gas industry and his public company +leadership. +Vote Required +The affirmative vote of a majority of the votes cast by holders +of shares present in person or represented by proxy and entitled to vote on the election of directors at the Annual Meeting is required for the election of each nominee for director. With respect to the election of directors in an uncontested +election, such as that being held at the Annual Meeting, “majority of the votes cast” means the number of votes cast “for” such nominee exceeds the number of votes cast “against” such nominee. If you hold your shares +through a broker and you do not instruct the broker how to vote, your broker will not have the authority to vote your shares. Abstentions and broker non-votes will each be counted as present for purposes of +determining the presence of a quorum. +The Board of Directors recommends that you vote FOR each of the nominees. +2019 +Proxy Statement | Matador Resources Company 11 +Table of Contents +PROPOSAL 1 +Directors +Continuing in Office +Biographical information for +our directors who are continuing in office is provided below. +Mr. Joseph Wm. Foran +Class III +Chairman and CEO, Matador Resources Company +Chairman of the Board +Director since: 2003 +Independent: No +Age: 66 +Committees: +•   Executive (Chair) +•   Capital +Markets and Finance +•   Operations and Engineering +•   Prospect +Mr. Foran founded Matador Resources Company in July 2003 and has served as Chairman of the Board, Chief Executive Officer and Secretary since our founding. He served as President from our founding until November 2013 and is +also chair of the Board’s Executive Committee. Mr. Foran began his career as an oil and natural gas independent in 1983 when he and his wife, Nancy, founded Foran Oil Company with $270,000 in contributed capital from 17 of his closest +friends and neighbors. Foran Oil Company was later contributed into Matador Petroleum Corporation upon its formation by Mr. Foran in 1988, and Mr. Foran served as Chairman and Chief Executive Officer of that company from inception until +the time of its sale to Tom Brown, Inc. in June 2003 for an enterprise value of $388 million in an all-cash transaction. Under Mr. Foran’s guidance, Matador Petroleum realized a 21% average +annual rate of return for its shareholders for 15 years. Mr. Foran is originally from Amarillo, Texas, where his family owned a pipeline construction business. From 1980 to 1983, he was Vice President and General Counsel of J. Cleo Thompson and +James Cleo Thompson, Jr., Oil Producers. Prior to that time, he was a briefing attorney to Chief Justice Joe R. Greenhill of the Supreme Court of Texas. Mr. Foran graduated with a Bachelor of Science degree in Accounting from the University of +Kentucky with highest honors and a law degree from the Southern Methodist University Dedman School of Law, where he was a Hatton W. Sumners scholar and the Leading Articles Editor of the Southwestern Law Review. He is currently active as a member of +various industry and civic organizations, including his church and various youth activities. In 2002, Mr. Foran was honored as the Ernst & Young “Entrepreneur of the Year” for the Southwest Region. In 2019, he received the +SMU Dedman School of Law Distinguished Alumni Award for Corporate Service. As the founder, Chairman of the Board and Chief Executive Officer of Matador Resources Company, Mr. Foran provides Board leadership, industry experience and long +relationships with many of our shareholders. +Mr. Reynald A. +Baribault +Class III +Vice President / Engineering, +NP Resources, LLC +Lead Independent Director +Director since: 2014 +Independent: Yes +Age: 55 +Committees: +•   Operations and Engineering (Chair) +•   Prospect (Chair) +•   Audit +•   Corporate Governance +•   Executive +•   Nominating +•   Strategic Planning and Compensation +Mr. Baribault was elected to the Board in 2014, serves as lead independent director and is chair of the Board’s Operations and Engineering Committee and Prospect Committee. He is Vice President / Engineering of NP +Resources, LLC, a Denver-based exploration and production operator solely focused on the horizontal Bakken play in the North Dakota Williston Basin. In 2007, he co-founded NP Resources’ predecessor +company, North Plains Energy, LLC, which developed and sold its North Dakota Bakken production and assets in 2012. In addition, he co-founded and serves as President and Chief Executive Officer of IPR Energy +Partners, LLC, a Dallas-based oil and natural gas production operator with current operations in the Fort Worth Basin. Prior to co-founding North Plains Energy, NP Resources and IPR Energy Partners, +Mr. Baribault served as Vice President, Supervisor and Petroleum Engineering Consultant with Netherland, Sewell & Associates, Inc. from 1990 to 2002. Mr. Baribault began his professional career as a reservoir engineer with Exxon +Company in 1985 in the New Orleans Eastern Division Office. Mr. Baribault received his Bachelor of Science degree in Petroleum Engineering from Louisiana State University in 1985 and is a Licensed Professional Engineer in the State of Texas. +Mr. Baribault provides valuable insight to our Board on our drilling, completion and reservoir engineering operations, as well as growth strategies, midstream operations and administration. +12 Matador Resources Company | 2019 Proxy Statement +Table of Contents +PROPOSAL 1 +Mr. William M. +Byerley +Class I +Retired Partner, PricewaterhouseCoopers LLP (PwC) +Director +Director since: 2016 +Independent: Yes +Age: 65 +Committees: +•   Audit (Chair) +•   Corporate +Governance +•   Marketing and Midstream +Mr. Byerley was appointed to the Board in 2016 and is chair of the Board’s Audit Committee. Mr. Byerley retired from PricewaterhouseCoopers LLP (PwC) in 2014. From 1988 through 2014, Mr. Byerley was a Partner +with PwC, serving as an Assurance Partner on various audit engagements primarily for energy sector clients. From 1988 through 1990, Mr. Byerley served in the PwC National Office Accounting Services Group. Mr. Byerley received a Bachelor of +Business Administration degree in 1975 and a Master of Business Administration degree in 1976, both from Southern Methodist University. He is a licensed Certified Public Accountant. Mr. Byerley’s extensive experience in public accounting +and longtime service to energy sector clients of PwC provide the Board with invaluable financial and accounting expertise, particularly for oil and natural gas companies, strong accounting and financial oversight and general industry +knowledge. +Ms. Julia P. Forrester +Rogers +Class I +Professor of Law, Southern Methodist University Dedman School of Law +Director +Director since: 2017 +Independent: Yes +Age: 59 +Committees: +•   Corporate Governance (Chair) +•   Nominating Committee +Ms. Rogers was appointed to the Board in 2017 and is chair of the Board’s Corporate Governance Committee. Ms. Rogers is a Professor of Law at Southern Methodist University Dedman School of Law where she has been a +member of the faculty since 1990, teaching and serving in various administrative positions. From 2015 through 2018, Ms. Rogers served as Associate Provost for Student Academic Services at SMU, overseeing International Student and Scholar +Services, Study Abroad, the Center for Academic Development of Student Athletes, the President’s Scholars Program and the Hunt Scholars Program, among others. She has served in various administrative positions at SMU, including serving as +Associate Dean for Academic Affairs for the 1995-1996 academic year and as Dean ad interim of the Dedman School of Law from June 2013 through June 2014. Before beginning her academic career at SMU, Ms. Rogers practiced +law with Thompson & Knight LLP. Ms. Rogers holds a Bachelor of Science degree in Electrical Engineering from the University of Texas at Austin, graduating with highest honors, and a law degree from the University of Texas School of +Law, graduating with high honors. She is a member of the Order of the Coif, and she received the highest score on the Texas bar exam following her graduation. More recently, she was elected as a member of the American Law Institute. +Ms. Rogers’ academic, administrative and legal experience provide our Board with a unique perspective on the Company’s business and operations. +Mr. Timothy E. +Parker +Class III +Former Portfolio Manager and Analyst—Natural Resources, T. Rowe Price & Associates +Director +Director since: 2018 +Independent: Yes +Age: 44 +Committees: +•   Capital Markets and Finance (Chair) +•   Audit +•   Nominating +•   Prospect +•   Strategic Planning and Compensation +Mr. Parker was appointed to the Board in 2018 and is chair of the Board’s Capital Markets and Finance Committee. Mr. Parker retired in 2017 as Portfolio Manager and Analyst—Natural Resources for T. Rowe +Price & Associates. Mr. Parker joined T. Rowe Price in 2001 as an equity analyst before becoming a portfolio manager in 2010. He managed the New Era fund from 2010 to 2013 and managed the energy and natural resources portions of T. +Rowe Price’s Small Cap Value, Small Cap Stock and New Horizons funds from 2013 to 2017. Prior to joining T. Rowe Price, Mr. Parker was an investment banking analyst at Robert W. Baird & Co., Inc. Mr. Parker holds a Bachelor +of Science degree in Commerce from the University of Virginia and a Master of Business Administration degree from the Darden School of Graduate Business (University of Virginia). Mr. Parker’s experience with a large institutional +shareholder and his extensive familiarity with the capital markets provide the Company with valuable insight. +2019 +Proxy Statement | Matador Resources Company 13 +Table of Contents +PROPOSAL 1 +Mr. David M. Posner +Class III +President, EnVent Energy LLC +Director +Director since: 2017 +Independent: Yes +Age: 65 +Committees: +•   Marketing and Midstream (Chair) +•   Corporate Governance +•   Operations and Engineering +Mr. Posner was appointed to the Board in 2017 and is chair of the Board’s Marketing and Midstream Committee. Mr. Posner is the founder and President of EnVent Energy LLC, a privately-held project development and +consulting company focused on advising oil and natural gas exploration and production companies on commercial negotiations related to marketing, gathering, processing and transportation of oil, natural gas and natural gas liquids. He founded EnVent +in 2000 following his tenure with Santa Fe Snyder Corporation/Snyder Oil Corporation, where he ultimately served as Vice President, Marketing, having responsibility over the company’s worldwide marketing of oil, natural gas and natural gas +liquids. Prior to joining Snyder in 1991, Mr. Posner worked for Ladd Petroleum Corporation serving as, among other roles, its Vice President, Natural Gas. Mr. Posner has served as Chairman of the Colorado Oil and Gas Association and has +served as a member of its board for more than 25 years. Mr. Posner received a Bachelor of Arts degree from Brown University and a Master of Science degree in Mineral Economics from the Colorado School of Mines. Mr. Posner’s unique +midstream experience provides the Board with an important perspective on marketing, gathering, processing and transportation of the Company’s products. +Mr. Kenneth L. Stewart +Class I +EVP, Compliance and Legal Affairs, Children’s Health System of Texas +Director +Director since: 2017 +Independent: Yes +Age: 65 +Committees: +•   Nominating Committee (Chair) +•   Corporate Governance +•   Capital Markets and Finance +•   Marketing and Midstream +•   Strategic Planning and Compensation +Mr. Stewart was appointed to the Board in 2017 and is chair of the Board’s Nominating Committee. Mr. Stewart is Executive Vice President, Compliance and Legal Affairs, for Children’s Health System of Texas, a +position that he began on January 1, 2019. Children’s Health System of Texas and its affiliates constitute the eighth largest pediatric hospital system in the United States. Effective December 31, 2018, Mr. Stewart retired from +Norton Rose Fulbright US LLP, which constitutes the United States operations of Norton Rose Fulbright, an international legal practice with over 4,000 legal professionals in over 50 cities worldwide. At the time of his retirement, Mr. Stewart +was a Partner with Norton Rose Fulbright and held the position of Chair—United States. Mr. Stewart began his legal career with Fulbright & Jaworski LLP, the predecessor to Norton Rose Fulbright US LLP, and previously held at +differing times positions of Global Chair of the international organization, Managing Partner of the United States region and Partner-in-Charge of the Dallas office. +Prior to entering into full-time management for his firm in 2012, he engaged in a domestic and international transactional legal practice, focusing principally on merger, acquisition, financing and joint venture activities for both public and +privately-held entities. Mr. Stewart has extensive experience representing and advising companies and their executive officers and boards of directors engaged in oil and natural gas exploration and midstream activities. Mr. Stewart +graduated from the University of Arkansas School of Business in 1976 with a Bachelor of Science in Business Administration degree in Accounting and was licensed as a Certified Public Accountant in Texas in 1981 (certificate now on non-practice status). He graduated with honors from Vanderbilt Law School in 1979 and was a member of the Order of the Coif. Mr. Stewart has been active in numerous civic and professional organizations in the +Dallas area in the past, including among others, the Dallas Regional Chamber, The Center for American and International Law and the Dallas Citizens Council. Mr. Stewart’s extensive experience representing public companies, and particularly +oil and natural gas companies, along with his years of management experience, provide our Board with important legal, corporate governance and leadership insight. +14 Matador Resources Company | 2019 Proxy Statement +Table of Contents +PROPOSAL 1 +Advisors to the Board +In addition to our Board, we have four individuals with +significant oil and natural gas, legal or other business experience who advise our Board on various matters. From time to time, we enter into various agreements with these individuals with respect to their service as advisors to our Board. Their +business histories are described below: +Mr. Rick H. Fenlaw . Mr. Fenlaw is owner of Fenlaw Land Services, a company +he founded in 1999 to provide title, leasing and curative professionals to upstream oil and natural gas clients, particularly in the Barnett Shale play. From 1990 through the formation of Fenlaw Land Services, Mr. Fenlaw operated a similar land +services company, Rick Fenlaw & Associates, with a focus on East Texas and the Hardeman Basin. Through his companies, Mr. Fenlaw has employed over 100 sub-brokers servicing his oil and natural +gas clients. Mr. Fenlaw has worked as an independent petroleum landman since 1979. Prior to beginning his career as a landman, he played football for the St. Louis Football Cardinals. Mr. Fenlaw received a Bachelor of Journalism degree +from the University of Texas at Austin in 1977, where he was captain of the football team in 1976. +Mr. Scott E. King . +Mr. King retired in October 2017 as Vice President—Exploration and Development of Petro Harvester Oil and Gas, LLC, having joined that company in October 2012. Mr. King joined Matador Resources Company at its founding in 2003 and +served as Vice President—Exploration from 2003 to 2009 and Vice President—Geophysics and New Ventures from 2009 until 2012. He was previously with Matador Petroleum Corporation, joining that company in December 1996 as Chief Geophysicist. +Immediately prior to Matador Petroleum’s sale, Mr. King served as its Portfolio Manager and was responsible for recommending which drilling opportunities Matador Petroleum should pursue. Prior to joining Matador Petroleum, Mr. King +worked for Enserch Corporation, a diversified energy company with interests in petroleum exploration and production, oilfield services, engineering design and construction, and natural gas transmission and distribution, as Team Leader for the +Oklahoma Asset Group. Mr. King began his career in 1983 with Sohio Petroleum, an integrated energy company. Mr. King received a Bachelor of Science degree in Geology from Alfred University in 1981 and a Master of Science degree in +Geophysics from Wright State University in 1983. +Mr. Wade I. Massad . Mr. Massad served as a consultant to the +Company and an advisor to the Board from 2010 to December 2011, when he was elected Executive Vice President—Capital Markets of the Company. He held that role until July 2012, when he resumed his role as a consultant to the Company and as an +advisor to the Board. Mr. Massad is the Co-Founder and Co-Managing Member of Cleveland Capital Management L.L.C., a registered investment advisor and General +Partner of Cleveland Capital L.P., a private investment fund focused on micro-cap public and private equity securities established in October 1996. Previously, Mr. Massad was an investment banker with +Keybanc Capital Markets and RBC Capital Markets, where he was the head of U.S. equity institutional sales from 1997 to 1998 and the head of U.S. Capital Markets business from 1999 to 2003. He also served on the firm’s executive committee. +Mr. Massad serves on the board of the Investors Exchange Group, Inc. (IEX). Mr. Massad received a Bachelor of Arts degree in Business Management from Baldwin-Wallace University in 1989 and currently serves on its Board of Trustees. +Mr. James A. Rolfe. Mr. Rolfe is Of Counsel at Elliott Sauter PLLC, a white collar and healthcare criminal defense boutique law firm he +joined in October 2018 following three years as a sole practitioner. Until 2015, he served as Of Counsel with Kendall Law Group, a Dallas, Texas law firm specializing in litigation that he joined in 2009. From 2005 to 2009, Mr. Rolfe served as +Of Counsel with Fitzpatrick Hagood Smith & Uhl LLP, a boutique litigation firm. He worked as a sole practitioner in private practice from 1985 to 2005. From 1981 to 1985, Mr. Rolfe served as United States Attorney for the Northern +District of Texas, having been appointed to that position by President Reagan. From 1979 to 1981, he worked in private practice following his service as Assistant United States Attorney for the Northern District of Texas, a position he held from +1973 to 1979. Mr. Rolfe was Assistant District Attorney for Dallas County from 1969 to 1973. He began his public service in the role of Assistant City Attorney for the City of Dallas, which position he held from 1968 to 1969. Mr. Rolfe +served in the United States Army from 1959 to 1962. He received a Bachelor of Arts degree from Austin College in 1965 where he was a three-year letterman in basketball. He is a past president of Austin College’s alumni association and received +its Distinguished Alumnus Award in 2000. He received his law degree from the University of Texas at Austin in 1968. +2019 +Proxy Statement | Matador Resources Company 15 +Table of Contents +CORPORATE GOVERNANCE +CORPORATE +GOVERNANCE +The business affairs of Matador are managed under the direction of the Board in accordance with the Texas Business Organizations Code, the +Company’s Amended and Restated Certificate of Formation and its Amended and Restated Bylaws, each as amended to date. The Board has adopted Corporate Governance Guidelines, which are reviewed annually by the Corporate Governance Committee of +the Board. The Company has a Code of Ethics and Business Conduct for Officers, Directors and Employees (“Code of Ethics”), which is applicable to all officers, directors and employees of the Company. The Company intends to post any +amendments to, and may post any waivers of, its Code of Ethics on the Company’s website to the extent applicable to an executive officer or a director of the Company. The Corporate Governance Guidelines and the Code of Ethics are available on +the Company’s website at www.matadorresources.com under the heading “Investor Relations—Corporate Governance.” +The Board holds regular +and special meetings and spends such time on the affairs of the Company as its duties require. During 2018, the Board held 12 meetings. The Board also meets regularly in non-management executive sessions in +accordance with NYSE regulations. The Corporate Governance Guidelines provide that one of the Company’s independent directors should serve as lead independent director at any time when the chief executive officer serves as the chairman of the +board. The lead independent director presides over the non-management executive sessions, serves as a liaison between the chairman and the independent directors and performs such additional duties as the Board +may otherwise determine and delegate. Because Mr. Foran serves as Chairman of the Board and Chief Executive Officer, our independent directors have appointed Mr. Baribault to serve as lead independent director. In 2018, all incumbent +directors of the Company attended at least 75% of the meetings of the Board and the committees on which they served. It is our policy that each of our directors is expected to attend annual meetings of shareholders. All of our directors that +continued in office through the 2018 Annual Meeting attended such meeting. +Independence of Directors +The Board makes all determinations with respect to director +independence in accordance with the NYSE listing standards and the rules and regulations promulgated by the SEC. The actual determination of whether a director is independent is made by the Board on a case-by-case basis. +In connection with its preparation for the Annual Meeting, the Board undertook its annual review of +director independence and considered transactions and relationships between each director or any member of his or her immediate family and the Company and its subsidiaries and affiliates. In making its determination, the Board applied the NYSE +listing standards and SEC rules and regulations. +The Board reviewed the independence of our directors and considered whether any director has a material +relationship with us that could compromise his or her ability to exercise independent judgment in carrying out his or her responsibilities. After this review, our Board determined that nine of our 10 current directors are “independent +directors” as defined under the rules of the SEC and the NYSE: Ms. Rogers and Messrs. Baribault, Baty, Burkert, Byerley, Clifton, Parker, Posner and Stewart. No member of or nominee for our Board has a family relationship with any +executive officer or other members of our Board. +Majority Vote in Director Elections +On December 21, 2016, the Board amended the Company’s +Amended and Restated Bylaws (as so amended, the “Bylaws”) to implement a majority voting standard in uncontested director elections. Pursuant to the Bylaws, in an election of directors at a meeting of shareholders at which a quorum is +present, (i) if the number of nominees exceeds the number of directors to be elected (a “contested election”), directors shall be elected by a plurality of the votes cast by the holders of shares present in person or represented by +proxy and entitled to vote on the election of directors at such meeting and (ii) in an election of directors that is not a contested election (an “uncontested election”), such as that being held at the Annual Meeting, directors shall +be elected by a majority of +16 Matador Resources Company | 2019 Proxy Statement +Table of Contents +CORPORATE GOVERNANCE +the votes cast by the holders of shares present in person or represented by proxy and entitled to vote on the election of directors at such meeting. For purposes of the Bylaws, in an uncontested +election, a “majority of the votes cast” means that the number of shares voted “for” a director must exceed the number of votes cast “against” that director. Prior to the amendment of the Bylaws, directors were elected +by a plurality of the votes cast, whether or not the election was a contested election. +In connection with the amendment to the Bylaws, the Board approved and +adopted an amendment to the Company’s Corporate Governance Guidelines to implement a resignation policy for directors who fail to receive the required number of votes in an uncontested election in accordance with the Bylaws. Pursuant to the +Corporate Governance Guidelines, as amended, in an uncontested election, any nominee for director who receives a greater number of votes “against” his or her election than votes “for” such election (a “majority against +vote”) shall promptly tender his or her resignation following certification of the shareholder vote. +The Nominating Committee shall promptly consider the +resignation offer and a range of possible responses based on the circumstances that led to the majority against vote, if known, and make a recommendation to the Board concerning whether to accept or reject such resignation. The Board shall act on +the Nominating Committee’s recommendation and publicly disclose its decision with respect to such resignation offer within 90 days following certification of the shareholder vote. The resignation, if accepted by the Board, will be effective at +the time specified by the Board when it determines to accept the resignation, which effective time may be deferred until a replacement director is identified and appointed to the Board. +Board Leadership Structure +Mr. Foran serves as Chairman of the Board and Chief +Executive Officer of the Company. As stated in the Corporate Governance Guidelines, the Board does not believe that the offices of Chairman of the Board and Chief Executive Officer must be separate. The members of the Board possess experience and +unique knowledge of the challenges and opportunities the Company faces. They are, therefore, in the best position to evaluate the current and future needs of the Company and to judge how the capabilities of the directors and senior managers can be +most effectively organized to meet those needs. Given Mr. Foran’s deep knowledge of the Company and experience in leading it, the Board currently believes that the most effective leadership structure for the Company is to have Mr. Foran +serve as Chairman of the Board and Chief Executive Officer. +While Mr. Foran serves as Chairman of the Board and Chief Executive Officer, all of our non-employee directors are independent under the rules of the SEC and the NYSE. After considering the recommendations of our Strategic Planning and Compensation Committee, the independent directors determine +Mr. Foran’s compensation. Further, the Company has five standing committees and a lead independent director, who is currently Mr. Baribault. The Board believes that each of these measures counterbalances any risk that may exist in +having Mr. Foran serve as Chairman of the Board and Chief Executive Officer. For these reasons, the Board believes that this leadership structure is effective for the Company. +As lead independent director, Mr. Baribault has the following roles and responsibilities: +• +chairs the executive sessions of the non-management and independent directors; +• +leads the independent directors in the evaluation of the Chief Executive Officer; +• +facilitates communication among the independent directors; and +• +acts as a liaison between the independent directors and the Chief Executive Officer. +Mr. Baribault, as lead independent director, may also perform such other duties as the Board or the Corporate Governance Committee from time to time may assign, +which may include, but are not limited to, the following: +• +help develop Board agendas and ensure critical issues are included; +• +determine quality, quantity and timeliness of information from management; +• +make recommendations about retaining consultants or advisors for the Board; +2019 +Proxy Statement | Matador Resources Company 17 +Table of Contents +CORPORATE GOVERNANCE +• +interview Board candidates; +• +oversee Board and director evaluations; and +• +help improve communications and processes by and between management and the Board and the Chief Executive Officer. +Board Committees +The standing committees of the Board are the Audit Committee, +Corporate Governance Committee, Executive Committee, Nominating Committee and Strategic Planning and Compensation Committee. The Board has also established the following advisory committees: Capital Markets and Finance Committee, Marketing and +Midstream Committee, Operations and Engineering Committee and Prospect Committee. Each of the standing committees is governed by a charter, and a copy of the charters of each of these committees is available on the Company’s website at +www.matadorresources.com under the heading “Investor Relations—Corporate Governance.” Director membership of all of our standing and advisory committees is identified below, as of April 12, 2019. +18 Matador Resources Company | 2019 Proxy Statement +Table of Contents +CORPORATE GOVERNANCE +Audit Committee +The Audit Committee assists the Board in monitoring: +• +the integrity of our financial statements and disclosures; +• +our compliance with legal and regulatory requirements; +• +the qualifications and independence of our independent auditor; +• +the performance of our internal audit function and our independent auditor; and +• +our internal control systems. +In addition, the Audit Committee is charged with review of compliance with our Code of Ethics. +As of April 12, 2019, the Audit Committee consisted of Messrs. Baribault, Burkert, Byerley, Clifton and Parker, each of whom is independent under the rules of the +SEC and the NYSE. Mr. Byerley is the chair of the Audit Committee. SEC rules require a public company to disclose whether or not its audit committee has an “audit committee financial expert” as defined by applicable SEC rules and +regulations. Our Board has determined that each of Messrs. Byerley, Burkert, Clifton and Parker is an “audit committee financial expert.” During 2018, the Audit Committee met five times. +Strategic Planning and Compensation Committee +In February 2018, the +Board renamed the Compensation Committee as the Strategic Planning and Compensation Committee. The Strategic Planning and Compensation Committee has the following responsibilities: +• +assists the Board and the independent members of the Board (the “Independent Board”) in the discharge of their +fiduciary responsibilities relating to the fair and competitive compensation of our executive officers; +• +provides overall guidance with respect to the establishment, maintenance and administration of our compensation programs, +including stock and benefit plans; +• +oversees and advises the Board and the Independent Board on the adoption of policies that govern our compensation programs; +and +• +recommends to the Board the strategic, tactical and performance goals of the Company, including those performance and +tactical goals that relate to performance-based compensation, including but not limited to goals for production, reserves, cash flows and shareholder value. +The Strategic Planning and Compensation Committee has the authority to delegate authority and responsibilities to subcommittees of its members, so long as the +subcommittee consists of at least two members. +As of April 12, 2019, the Strategic Planning and Compensation Committee consisted of Messrs. Baribault, Baty, +Burkert, Parker and Stewart, each of whom is independent under the rules of the SEC and the NYSE and a “non-employee director” pursuant to Rule 16b-3 of the +Securities Exchange Act of 1934, as amended (the “Exchange Act”). Mr. Baty is the chair of the Strategic Planning and Compensation Committee. During 2018, the Strategic Planning and Compensation Committee met six times. +Nominating Committee +The Nominating Committee has the following +responsibilities: +• +identifies and recommends to the Board individuals qualified to be nominated for election to the Board; and +• +recommends to the Board the members and chair of each committee of the Board. +The Nominating Committee has the authority to delegate authority and responsibilities to subcommittees of its members, so long as the subcommittee consists of at least +two members. Pursuant to the Nominating Committee Charter, no director may serve on the Nominating Committee if such director is subject to re-election to the Board at the next annual meeting of shareholders. +2019 +Proxy Statement | Matador Resources Company 19 +Table of Contents +CORPORATE GOVERNANCE +As of April 12, 2019, the Nominating Committee consisted +of Ms. Rogers and Messrs. Baribault, Parker and Stewart, each of whom is independent under the rules of the SEC and the NYSE. Mr. Stewart is the chair of the Nominating Committee. During 2018, the Nominating Committee met six times. +The Board has also established a Shareholder Advisory Committee for Board Nominations (the “Advisory Committee”) that is charged with receiving and +considering possible nominees for election to the Board by shareholders. Pursuant to the Advisory Committee charter, this committee is comprised of eight to 12 persons selected by the Nominating Committee and consists of at least: +• +two members of the Nominating Committee; +• +two former members of or special advisors to the Board; +• +two shareholders who beneficially own Common Stock having a market value of at least $1.0 million (such value to be +based on the market value of the Common Stock immediately prior to designation of such shareholders to the Advisory Committee); and +• +two shareholders who have beneficially owned Common Stock continuously for at least the five years prior to such +shareholder’s designation to the Advisory Committee. +The current members of the Advisory Committee are Ms. Rogers, Messrs. Stewart, +Rolfe and King, George M. Yates, J. Barry Banker, Joe E. Coleman, Kevin M. Grevey and Bobby K. Pickard. Messrs. King and Rolfe are co-chairs of the Advisory Committee. +The Advisory Committee makes recommendations based on its conclusions to the Nominating Committee for its consideration and review. +The Nominating Committee and the Advisory Committee consider individuals recommended by the Company’s shareholders to serve on the Board. In considering candidates +submitted by shareholders, the Advisory Committee and the Nominating Committee take into consideration the needs of the Board and the qualifications of the candidate. To have a candidate considered by the Advisory Committee and the Nominating +Committee, a shareholder must submit the recommendation in writing and must include the following information: +• +The name and address of the shareholder, evidence of the person’s ownership of Common Stock or derivatives, including +the number of shares owned, a description of all arrangements or understandings regarding the right to vote shares of the Company, any short interest in any security of the Company, any rights to dividends that are separated or separable from the +underlying shares, any proportionate interest in shares or derivatives held by a general or limited partnership whereby the shareholder is a general partner or beneficially owns an interest in the general partner, any performance-related fees (other +than an asset-based fee) that the shareholder is entitled to based on any change in the value of the shares or derivatives, any other information relating to the shareholder that would be required to be disclosed in connection with solicitations of +proxies for the election of directors in a contested election and a statement whether or not the shareholder will deliver a proxy to shareholders; and +• +The name, age, business and residence addresses of the candidate, the candidate’s résumé or a listing of +his or her qualifications to be a director of the Company, the person’s consent to be a director if selected by the Nominating Committee, nominated by the Board and elected by the shareholders and any other information that would be required to +be disclosed in solicitations of proxies for the election of directors. +The shareholder recommendation and information described above, and in +more detail in our Bylaws, must be sent to the Corporate Secretary at One Lincoln Centre, 5400 LBJ Freeway, Suite 1500, Dallas, Texas 75240 and must be received by the Corporate Secretary not fewer than 45 nor more than 75 days prior to the one year +anniversary date of the date the Company’s proxy statement was mailed in connection with the previous year’s annual meeting of shareholders. +20 Matador Resources Company | 2019 Proxy Statement +Table of Contents +CORPORATE GOVERNANCE +The Nominating Committee believes that a potential director of the Company must demonstrate that such candidate has: +• +a depth of experience at the policy-making level in business, government or education; +• +a balance with the business knowledge and experience of the incumbent or nominated directors; +• +availability and willingness to devote adequate time to Board duties; +• +any unfilled expertise needed on the Board or one of its committees; +• +character, judgment and ability to make independent analytical, probing and other inquiries; +• +willingness to exercise independent judgment yet willingness to listen and learn from the other directors and the +Company’s staff; and +• +financial independence to ensure such candidate will not be financially dependent on director compensation. +In the case of an incumbent director, the Nominating Committee will also consider such director’s past performance on the Board. +The Nominating Committee or the Advisory Committee may identify potential nominees by asking, from time to time, current directors and executive officers for their +recommendation of persons meeting the criteria described above who might be available to serve on the Board. The Nominating Committee or the Advisory Committee may also engage firms that specialize in identifying director candidates. As described +above, the Nominating Committee and Advisory Committee will also consider candidates recommended by shareholders. +Once a person has been identified by the +Nominating Committee or the Advisory Committee as a potential candidate, the Nominating Committee or the Advisory Committee will make an initial determination regarding the need for additional Board members to fill vacancies or expand the size of +the Board. If the Nominating Committee or the Advisory Committee determines that additional consideration is warranted, the Nominating Committee or the Advisory Committee will review such information and conduct interviews as it deems necessary to +fully evaluate each director candidate. In addition to the qualifications of a candidate, the Nominating Committee or the Advisory Committee will consider such relevant factors as it deems appropriate, including the current composition of the Board, +the evaluations of other prospective nominees and the need for any required expertise on the Board or one of its committees. The Nominating Committee or the Advisory Committee also contemplates multiple dynamics that promote and advance diversity +among the members of the Board. Although the Nominating Committee does not have a formal diversity policy, the Nominating Committee considers a number of factors regarding diversity of personal and professional backgrounds, gender, race, age, +specialized skills and acumen and breadth of experience in energy exploration and production, midstream and marketing, executive leadership, accounting, finance or law. The Nominating Committee does not discriminate based upon race, religion, +gender, national origin, age, disability, citizenship or any other legally protected status. The Nominating Committee’s evaluation process will not vary based on whether or not a candidate is recommended by a shareholder. +Corporate Governance Committee +The Corporate Governance Committee is +responsible for periodically reviewing and assessing our Corporate Governance Guidelines and Code of Ethics and making recommendations for changes thereto to the Board, reviewing any other matters related to our corporate governance, unless the +authority to conduct such review has been retained by the Board or delegated to another committee, and overseeing the process for evaluation of the Board and management. +As of April 12, 2019, the Corporate Governance Committee consisted of Ms. Rogers and Messrs. Baribault, Baty, Burkert, Byerley, Clifton, Posner and +Stewart, each of whom is independent under the rules of the SEC and the NYSE. Ms. Rogers is the chair of the Corporate Governance Committee. During 2018, the Corporate Governance Committee met three times. +2019 +Proxy Statement | Matador Resources Company 21 +Table of Contents +CORPORATE GOVERNANCE +Executive Committee +The Executive Committee has authority to discharge all the responsibilities of the Board in the management of the business and affairs of the Company, except where +action of the full Board is required by statute or by our Amended and Restated Certificate of Formation or Bylaws, each as amended to date. +As of April 12, +2019, the Executive Committee consisted of Messrs. Foran, Baribault and Baty. Mr. Foran is the chair of the Executive Committee. During 2018, the Executive Committee met three times. +Capital Markets and Finance Committee +The Board formed the Capital +Markets and Finance Committee in February 2018. The Capital Markets and Finance Committee provides oversight of the Company’s financial objectives, financial policies, capital structure and financing requirements. As of April 12, 2019, the +members of the Capital Markets and Finance Committee were Messrs. Foran, Parker and Stewart. Mr. Parker is the chair of the Capital Markets and Finance Committee. +Marketing and Midstream Committee +The Board formed the Marketing and +Midstream Committee in June 2018. The Marketing and Midstream Committee provides oversight of the Company’s marketing and midstream activities, projects, joint ventures and plans. As of April 12, 2019, the members of the Marketing and +Midstream Committee were Messrs. Burkert, Byerley, Clifton, Posner and Stewart. Mr. Posner is the chair of the Marketing and Midstream Committee. +Operations and Engineering Committee +The Operations and Engineering +Committee provides oversight of the development of our prospects, our drilling and completion operations and our production operations and associated costs. In addition, the Operations and Engineering Committee provides oversight of the amount and +classifications of our reserves and the design of our completion techniques and hydraulic fracturing operations and various other reservoir engineering matters. As of April 12, 2019, the members of the Operations and Engineering Committee were +Messrs. Baribault, Foran and Posner and Mr. King ( ex officio ). Mr. Baribault is the chair of the Operations and Engineering Committee. +Prospect Committee +The Prospect Committee provides oversight of the +technical analysis, evaluation and selection of our oil and natural gas prospects. As of April 12, 2019, the members of the Prospect Committee were Messrs. Baribault, Foran and Parker and Mr. King ( ex +officio ). Mr. Baribault is the chair of the Prospect Committee. +Board’s Role in Risk Oversight +The Audit Committee has the responsibility to +oversee the Company’s guidelines and policies to govern the process by which risk assessment and risk management are undertaken by management. The Strategic Planning and Compensation Committee has the responsibility to oversee that our +incentive pay does not encourage unnecessary risk taking and to review and discuss the relationship between risk management policies and practices, corporate strategy and senior executive compensation. +Strategic Planning and Compensation Committee Interlocks and Insider Participation +Dr. Steven W. Ohnimus (who resigned from the Board +concurrently with the 2018 Annual Meeting due to health reasons) and Messrs. Baribault, Baty, Burkert, Parker and Stewart served on the Strategic Planning and Compensation Committee during the last completed fiscal year. None of these individuals is +or was previously one of our officers or employees. None of our executive officers serve on the board of directors or compensation committee of a company that has an executive officer that serves on our Board or Strategic Planning and Compensation +Committee. No member of our Board serves as an executive officer of a company in which one of our executive officers serves as a member of the board of directors or compensation committee of that company. There were no compensation committee +interlocks during 2018. Mr. Baribault’s sister-in-law is an employee of the Company. For more information on this related party transaction, see +“Transactions with Related Persons.” +22 Matador Resources Company | 2019 Proxy Statement +Table of Contents +CORPORATE GOVERNANCE +Communications with Directors +The Board has established a process to receive communications +from shareholders and other interested parties by mail. Shareholders and other interested parties may contact any member of the Board, any Board committee or the entire Board. To communicate with the Board, any individual director or any committee +of directors, correspondence should be addressed to the Board. All such correspondence should be sent “c/o Corporate Secretary” at One Lincoln Centre, 5400 LBJ Freeway, Suite 1500, Dallas, Texas 75240. The Corporate Secretary will review +and forward correspondence to the appropriate person or persons. +Any communications to the Company from one of the Company’s officers or directors will not be +considered “shareholder communications.” Communications to the Company from one of the Company’s employees or agents will only be considered “shareholder communications” if they are made solely in such employee’s or +agent’s capacity as a shareholder. Any shareholder proposal submitted pursuant to Rule 14a-8 promulgated under the Exchange Act will not be viewed as “shareholder communications.” +Executive Officers and Other Senior Officers of the Company +The following table sets forth the names, ages and positions of +our executive officers and certain of our other senior officers at April 25, 2019: +Name +Age +Positions Held With +Us +Executive Officers +Joseph Wm. Foran +66 +Chairman of the Board and Chief Executive Officer +Matthew V. Hairford +58 +President +David E. Lancaster +62 +Executive Vice President and Chief Financial Officer +Craig N. Adams +52 +Executive Vice President—Land, Legal & Administration +Billy E. Goodwin +61 +Executive Vice President and Head of Operations +Van H. Singleton, II +41 +Executive Vice President of Land +Bradley M. Robinson +64 +Executive Vice President of Reservoir Engineering and Chief Technology Officer +G. Gregg Krug +58 +Executive Vice President—Marketing and Midstream Strategy +Other Senior Officers +Bryan A. Erman +41 +Senior Vice President and Co-General Counsel +Robert T. Macalik +40 +Senior Vice President and Chief Accounting Officer +Matthew D. Spicer +51 +Senior Vice President and General Manager of Midstream +Brian J. Willey +42 +Senior Vice President and Co-General Counsel +The following biographies describe the business experience of our executive officers and certain of our other senior officers. Each +officer serves at the discretion of our Board. There are no family relationships among any of our officers. +Executive Officers +Mr. Joseph Wm. Foran +Chairman of the Board and +Chief Executive Officer +Please see the biography of Mr. Foran on page 12 of this Proxy Statement. +2019 +Proxy Statement | Matador Resources Company 23 +Table of Contents +CORPORATE GOVERNANCE +Mr. Matthew V. +Hairford +President +Mr. Hairford joined Matador Resources Company in July 2004 as its Drilling Manager. He was named Vice President of Drilling in May 2005; Vice President of Operations in May 2006; Executive Vice President of Operations in May +2009; and in November 2013 assumed the title of President. He was previously with Samson Resources, an exploration and production company, as Senior Drilling Engineer, having joined Samson in 1999. His responsibilities there included difficult Texas +and Louisiana Gulf Coast projects, horizontal drilling projects and a start-up drilling program in Wyoming. The scope of this work ranged from multi-lateral James Lime wells in East Texas to deep wells in +South Texas and South Louisiana. Mr. Hairford has drilled many geo-pressured wells in Texas and Louisiana, along with normally pressured wells in Southwest Wyoming and East Texas. Additional +responsibilities included a horizontal well program in Roger Mills County, Oklahoma at 15,000 feet vertical depth. Mr. Hairford has experience in air drilling, underbalanced drilling, drilling under mud caps and high temperature and pressure +environments. From 1998 to 1999, Mr. Hairford served as Senior Drilling Engineer with Sonat, Inc., a global company involved with natural gas transmission and marketing, oil and natural gas exploration and production and oil services. His +responsibilities included drilling Pinnacle Reef wells in East Texas and deep horizontal wells in the Austin Chalk field in Central Louisiana. From 1984 to 1998, Mr. Hairford served in various drilling engineering capacities with Conoco, Inc. +His operational areas included the Appalachian Basin, Illinois Basin, Permian Basin, Texas Panhandle and Val Verde Basin. Mr. Hairford was selected as a member of a three-person team to explore the use of unconventional technologies to identify +a potential step change in the drilling sector. Multiple techniques were evaluated and tested, including declassified defense department technologies. Additional Conoco assignments included both field and office drilling positions in Midland, Texas +and Oklahoma City, Oklahoma. Earlier in his career with Conoco, Mr. Hairford was selected to participate in the Conoco Drilling Rig Supervisor Training Program in Houston, Texas. This program consisted of two years working a regular rotation as +a drilling representative on rigs and as a drilling engineer in various domestic offices. Mr. Hairford began his career in 1984 with Conoco in a field production assignment in Hobbs, New Mexico. Mr. Hairford received his Bachelor of +Science degree in Petroleum Engineering Technology from Oklahoma State University in 1984. He is an active member of the American Association of Drilling Engineers, the American Petroleum Institute and the Society of Petroleum Engineers. +Mr. Hairford has also undertaken additional training through Stanford University’s Executive Education programs, including the Stanford Graduate School of Business flagship six week Stanford Executive Program. +Mr. David E. +Lancaster +Executive Vice President and +Chief Financial Officer +Mr. Lancaster joined Matador Resources Company in December 2003 and serves as Executive Vice President and Chief Financial Officer. Mr. Lancaster has served in several capacities since joining Matador, including Vice +President of Business Development, Acquisitions and Finance from December 2003 to May 2005; Vice President and Chief Financial Officer from May 2005 to May 2007; and Executive Vice President and Chief Financial Officer since May 2007. He also served +as Chief Operating Officer from May 2009 to May 2015. From August 2000 to December 2003, he was Marketing Manager for Schlumberger Limited’s Data & Consulting Services, which provided full-field reservoir characterization, production +enhancement, multidisciplinary reservoir and production solutions and field development planning. In this position, he was responsible for global marketing strategies, business models, input to research and development, commercialization of new +products and services and marketing communications. From 1999 to 2000, Mr. Lancaster was Business Manager, North and South America, for Schlumberger Holditch-Reservoir Technologies, the petroleum engineering consulting organization formed +following Schlumberger’s acquisitions of S.A. Holditch & Associates, Inc. and Intera Petroleum Services. In this role, he was responsible for the business operations of 12 consulting offices throughout North and South America. +Mr. Lancaster worked with Schlumberger for six years following its acquisition of S.A. Holditch & Associates, Inc. in 1997. He joined S.A. Holditch & Associates in 1980, and was one of the principals in the petroleum +engineering consulting firm. Between 1980 and 1997, Mr. Lancaster held positions ranging from Senior Petroleum Engineer to Senior Vice +24 Matador Resources Company | 2019 Proxy Statement +Table of Contents +CORPORATE GOVERNANCE +President—Business Development. In this latter role, he was responsible for marketing and sales, as well as the company’s commercial training business. During most of his tenure at S.A. Holditch & Associates, +Inc., Mr. Lancaster was a consulting reservoir engineer with particular emphasis on characterizing and improving production from unconventional natural gas reservoirs. For more than seven years during this time, he was the Project Manager for +the Gas Research Institute’s Devonian Shales applied research projects investigating ways to improve reservoir characterization, completion practices and natural gas recovery in low permeability, natural gas shale reservoirs. He was also the +lead reservoir engineer for the Secondary Gas Recovery project sponsored by the Gas Research Institute and the U.S. Department of Energy, looking at ways to improve recovery from compartmentalized natural gas reservoirs in North and South Texas. +Mr. Lancaster began his career as a reservoir engineer for Diamond Shamrock Corporation in 1979. Mr. Lancaster received Bachelor and Master of Science degrees in Petroleum Engineering from Texas A&M University in 1979 and 1988, +respectively, graduating summa cum laude. He has authored or co-authored more than 50 technical papers and articles, as well as numerous other published reports and industry presentations. He is a member of +the Society of Petroleum Engineers, and he served as a charter member and former Vice Chairman of the Texas A&M University Petroleum Engineering Advisory Board. In 2014, Mr. Lancaster was inducted into the Texas A&M University Petroleum +Engineering Academy of Distinguished Graduates. Mr. Lancaster is a Licensed Professional Engineer in the State of Texas. +Mr. Craig N. Adams +Executive Vice President— +Land, Legal & Administration +Mr. Adams joined Matador Resources Company in September 2012 as its Vice President and General Counsel. In July 2013, Mr. Adams was promoted to Executive Vice President—Land and Legal and became Executive Vice +President—Land, Legal & Administration in June 2015. Before joining Matador Resources Company, Mr. Adams was a partner with Baker Botts L.L.P. from March 2001 to September 2012 where he focused his practice on securities, mergers +and acquisitions and corporate governance matters. He was a partner with Thompson & Knight L.L.P. from January 1999 to February 2001 and an associate from September 1992 to December 1998. Mr. Adams received a Bachelor of Business +Administration degree in Finance from Southern Methodist University in 1988 and his law degree in 1992 from Texas Tech University School of Law, where he graduated magna cum laude and was a member of the Order of the Coif and a Comment Editor of the +Texas Tech Law Review. +Mr. Billy E. Goodwin +Executive Vice President and +Head of Operations +Mr. Goodwin joined Matador Resources Company in July 2010 as Drilling Manager. In September 2013 he was named Vice President of Drilling for the Company, and he was promoted to Senior Vice President—Operations in +February 2016 and to Executive Vice President and Head of Operations in August 2017. He was previously with Samson Resources, a company he joined in 2001 to supervise the drilling of underbalanced multilateral horizontal wells. In his +roles as Senior Drilling Engineer and Area Drilling Manager for Samson, Mr. Goodwin engineered and managed operations in the Permian Basin, South Texas, East Texas, Mid-Continent and Gulf Coast areas. +Mr. Goodwin worked with Conoco, Inc. before joining Samson. He began his career in 1985 in Conoco’s production department before joining the drilling department in 1989. Mr. Goodwin has diverse horizontal operational +experience both onshore and offshore, and both domestically and internationally, including in the Middle East, Southeast Asia and South America. Throughout his career, Mr. Goodwin has developed underbalanced drilling, managed pressure +drilling and drill-in casing techniques for normal and geo-pressured environments. Mr. Goodwin received a Bachelor of Science degree in Petroleum Engineering +Technology from Oklahoma State University in 1984. He is a member of the Society of Petroleum Engineers and the American Association of Drilling Engineers. Mr. Goodwin served in the United States Marine Corps. +2019 +Proxy Statement | Matador Resources Company 25 +Table of Contents +CORPORATE GOVERNANCE +Mr. Van H. Singleton, II +Executive Vice President of +Land +Mr. Singleton joined Matador Resources Company in August 2007 as a Landman and was promoted to Senior Staff Landman in 2009 and then to General Land Manager in 2011. In September 2013, Mr. Singleton became Vice President +of Land for the Company, and he was promoted to Executive Vice President of Land in February 2015. Prior to joining Matador, Mr. Singleton founded and was President of VanBrannon and Associates, LLC and Southern Escrow and Title of Mississippi, +LLC from 1998 to 2003, which provided full-spectrum land title work and title insurance in Mississippi, Louisiana, Texas and Arkansas. From 2003 until joining Matador in 2007, he served as general manager of his family’s real estate brokerage +in Houston, Texas. Mr. Singleton received a Bachelor of Arts degree in Criminal Justice from the University of Mississippi in 2000. He is an active member of the American Association of Professional Landmen, the New Mexico Landman Association, +the Permian Basin Landman Association and the Dallas Association of Petroleum Landmen. +Mr. Bradley M. Robinson +Executive Vice President of +Reservoir Engineering and +Chief Technology Officer +Mr. Robinson joined Matador Resources Company in August 2003 as our Vice President of Reservoir Engineering until his promotion to Senior Vice President of Reservoir Engineering in February 2016. He assumed the additional role +of Chief Technology Officer in May 2013 and was promoted to Executive Vice President of Reservoir Engineering in August 2018. Prior to joining Matador, from 1997 to August 2003, Mr. Robinson held the position of Advisor with Schlumberger +Limited’s Data & Consulting Services, where he was responsible for the development and application of new well completion and fracture stimulation technologies, managed field development projects, taught industry courses and provided +internal training. Mr. Robinson worked with Schlumberger for six years following its acquisition of S.A. Holditch & Associates, Inc. in 1997. Mr. Robinson joined S.A. Holditch & Associates in 1979, and was one of the +principals in the petroleum engineering consulting firm. From 1979 to 1982, Mr. Robinson served as Senior Petroleum Engineer and was involved in all aspects of reservoir and production engineering for both conventional and low permeability oil +and natural gas fields. From 1982 to 1997, he was Vice President—Production Engineering of S.A. Holditch & Associates, where he was responsible for coordination and management of production and completion engineering projects, +including hydraulic fracture stimulation design and supervision. His duties also included reserves and economic analysis of new and existing wells. For approximately 10 years during this time, Mr. Robinson served as assistant project manager +for the Gas Research Institute’s Tight Gas Sands and Horizontal Gas Wells applied research projects investigating ways to improve reservoir characterization, completion practices and natural gas recovery in low permeability natural gas +reservoirs and horizontal natural gas wells. During his career, he has worked all over the world, including the United States, Canada, Venezuela, Colombia, Mexico, Egypt, the North Sea, Russia and Indonesia, among other locations. Mr. Robinson +began his career in 1977 with Marathon Oil Company, serving as an Associate Production Engineer and later as a Reservoir Engineer in Midland. Mr. Robinson received Bachelor and Master of Science degrees in Petroleum Engineering from Texas +A&M University in 1977 and 1986, respectively. He has authored or co-authored more than 30 technical papers and articles appearing in industry publications. Mr. Robinson is a member of the Society of +Petroleum Engineers and is a Licensed Professional Engineer in the State of Texas. He served as Chairman of the Dallas Section of the Society of Petroleum Engineers in 2011 and 2012. He also received the 2013 Engineer of the Year Award presented by +the Dallas Section of the Society of Petroleum Engineers and the 2013 Completions Optimization and Technology award presented by the Mid-Continent region of the Society of Petroleum Engineers. +26 Matador Resources Company | 2019 Proxy Statement +Table of Contents +CORPORATE GOVERNANCE +Mr. G. Gregg Krug +Executive Vice President— +Marketing and Midstream +Strategy +Mr. Krug joined Matador Resources Company in April 2012 as its Marketing Manager. In September 2013 he was named Vice President of Marketing for the Company and Vice President of Longwood Gathering & Disposal Systems, +LP, and he was promoted to Senior Vice President—Marketing and Midstream in February 2016. He was promoted to Executive Vice President—Marketing and Midstream Strategy in April 2019. He has overall responsibility for Matador’s +marketing activities of its oil and natural gas, as well as responsibility for all business aspects for Longwood Gathering & Disposal Systems, LP. Previously, Mr. Krug was with Unit Petroleum Company, an exploration and production +company based in Tulsa, Oklahoma, as Marketing Manager, having joined in 2006. He and his staff were responsible for marketing, gas measurement, contract administration and production reporting in their core areas of Oklahoma, the Texas +Panhandle, East Texas and Northwestern Louisiana. From 2005 to 2006, Mr. Krug served as Marketing Manager with Matador Resources Company. From 2000 to 2005, Mr. Krug served as Gas Scheduling Supervisor with Samson Resources in Tulsa, +Oklahoma where he and his staff were responsible for scheduling natural gas sales as well as procurement of natural gas supply on Samson-owned gathering systems. From 1983 to 2000, Mr. Krug served with The Williams Companies in various +capacities including in the Kansas Hugoton Field in Ulysses, Kansas and Tulsa, Oklahoma for Williams Natural Gas Pipeline and on the trading floor in Tulsa, Oklahoma for Williams Energy Services Company. Mr. Krug received a Bachelor of Business +Administration degree from Oklahoma City University in 1996. +Other Senior Officers +Mr. Bryan A. Erman . Mr. Erman joined Matador Resources Company in January 2016 as its Co-General +Counsel. In August 2016, Mr. Erman was promoted to Vice President and Co-General Counsel. He became Senior Vice President and Co-General Counsel in July 2018. Prior +to joining Matador, Mr. Erman was a Partner at Carrington, Coleman, Sloman & Blumenthal, L.L.P. in Dallas, having joined the firm in 2010. From 2003 to 2010, he was an associate in the Dallas and Washington, D.C. offices of Baker Botts +L.L.P. Mr. Erman’s practice focused on litigation matters, including oil and natural gas, securities and other commercial litigation, as well as corporate governance matters. Before attending law school, Mr. Erman worked for Oklahoma +Governor Frank Keating. Mr. Erman received a Bachelor of Arts degree in Political Science in 1999 from the University of Oklahoma. He received his law degree in 2003 from Southern Methodist University School of Law, where he graduated cum laude +and was a Hatton W. Sumners Scholar, a member of the Order of the Coif and an Articles Editor on the SMU Law Review. +Mr. Robert T. Macalik . Mr. Macalik joined Matador Resources Company in July 2015 as Vice President and Chief +Accounting Officer. He was promoted to Senior Vice President and Chief Accounting Officer in November 2017. He has more than 10 years of experience in public accounting with significant experience in the upstream oil and natural gas industry. From +2012 to 2015, Mr. Macalik worked at Pioneer Natural Resources Company as Corporate Controller and, previously, as Director of Technical Accounting and Financial Reporting. At Pioneer, Mr. Macalik supervised corporate accounting and +financial reporting functions. Prior to joining Pioneer, he was a Senior Manager with PricewaterhouseCoopers (PwC), joining the public accounting firm in 2002. During his tenure with PwC, Mr. Macalik conducted and managed audits for various +companies, primarily public companies in the oil and natural gas industry, and managed numerous client relationships. Mr. Macalik received a Bachelor of Arts degree in History, a Bachelor of Business Administration degree and a Master of +Professional Accounting degree all from The University of Texas at Austin in 2002. He is a licensed Certified Public Accountant in the State of Texas. +Mr. Matthew D. Spicer. Mr. Spicer joined Matador Resources Company in March 2014 as Senior Representative of Business +Development and was promoted to Manager of Business Development and then General Manager of Midstream later in 2014. In October 2015, Mr. Spicer was promoted to Vice President and General Manager of Midstream. He became Senior Vice President +and General Manager of Midstream in July 2018. Prior to joining the Company, Mr. Spicer served as the Director of Flight Operations for L-3 Unmanned Systems, also serving in various roles including as +Program Manager and in Business Development during his tenure with L-3, which +2019 +Proxy Statement | Matador Resources Company 27 +Table of Contents +CORPORATE GOVERNANCE +began in 2011. Mr. Spicer served in the United States Marine Corps from 1991 to 2014, both in active duty and as a reservist, before his retirement as a Lieutenant Colonel in 2014. +Mr. Spicer also served as a first officer with American Airlines from 2000 to 2003 following his active duty in the United States Marine Corps. Mr. Spicer received a Bachelor of Science degree in Manufacturing Engineering Technology from +Central Michigan University in 1991. +Mr. Brian J. Willey . Mr. Willey joined Matador Resources Company in February +2014 as its Deputy General Counsel. In January 2016, Mr. Willey was appointed as Co-General Counsel, and he was promoted to Vice President and Co-General Counsel in +August 2016. He became Senior Vice President and Co-General Counsel in July 2018. Prior to joining Matador, Mr. Willey was an attorney with Dean Foods Company where he most recently served as Vice +President, Chief Counsel—Corporate. Before Dean Foods, Mr. Willey served as a senior associate in the Dallas office of Baker Botts L.L.P. Mr. Willey’s practice focused on corporate matters, including mergers and acquisitions, +public and private securities offerings, venture capital transactions and SEC compliance matters as well as board of director and corporate governance matters. Mr. Willey received a Bachelor of Science degree in Accounting in 2002 from Brigham +Young University. He received his law degree in 2005 from The University of Texas School of Law, where he graduated with High Honors and was a member of the Order of the Coif in addition to being named a Chancellor and an Associate Editor on the +Texas Law Review. Mr. Willey also served a church mission in the Philippines from 1995 to 1997. +28 Matador Resources Company | 2019 Proxy Statement +Table of Contents +PROPOSAL 2 +PROPOSAL 2 | APPROVAL OF OUR 2019 LONG-TERM INCENTIVE PLAN +On April 22, 2019, the Board adopted, subject to shareholder approval, the Matador Resources Company 2019 +Long-Term Incentive Plan (the “2019 Plan”). +We currently maintain two equity compensation plans, the Matador Resources Company 2003 Stock and Incentive +Plan, as amended (the “2003 Plan”), and the Matador Resources Company Amended and Restated 2012 Long-Term Incentive Plan, as amended (the “2012 Plan,” and together with the 2003 Plan, the “Prior Plans”). We no longer +grant awards under the 2003 Plan and upon approval of the 2019 Plan, we will no longer grant awards under the 2012 Plan. The following table sets forth certain information about the 2019 Plan and the Prior Plans as of April 12, 2019: +Number of shares of the Company’s common stock, par value $0.01 per share (“Common Stock” as +used in this Proposal) being requested under the 2019 Plan +3,225,000 +* +Number of shares of Common Stock available for future awards under the 2012 Plan +400,968 +** +Number of shares of Common Stock subject to outstanding stock options under the Prior Plans +2,761,049 +Number of shares of Common Stock subject to outstanding awards of restricted stock and restricted stock +units (full value awards) under the Prior Plans +1,713,632 +*** +Weighted average remaining term of outstanding options under the Prior Plans +2.9 years +Weighted average exercise price of outstanding options under the Prior Plans +$24.15 +Total number of shares of Common Stock outstanding as of April 12, 2019 +116,392,034 +* +Plus shares of Common Stock remaining available for issuance under the 2012 Plan on the date the 2019 Plan is approved by +our shareholders and certain shares of Common Stock subject to outstanding awards under the 2012 Plan (see “—Description of the 2019 Plan—Share Authorization” below). +** +The Board has determined not to make any additional grants of awards under the Matador Resources Company 2003 Stock and +Incentive Plan. +*** +Consists of 856,012 performance stock units (assuming maximum performance), 94,371 restricted stock units held by +directors and advisors and 763,249 shares of restricted stock, all of which are outstanding under the 2012 Plan. Excludes 428,006 phantom units granted in February 2019, which may only be settled in cash upon vesting. +We anticipate that the shares of Common Stock available for future awards under the Prior Plans will not be sufficient to cover equity incentives to current and +prospective employees, directors and other service providers. The 2019 Plan is intended to enable us to remain competitive and innovative in our ability to attract, motivate, reward and retain the services of key employees, key contractors and non-employee directors. The 2019 Plan provides for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalent rights +and other awards, any of which may be granted as performance awards, or singly, in combination or in tandem, and which may be paid in cash or shares of Common Stock. The 2019 Plan will provide flexibility to our compensation methods in order to +adapt the compensation of employees, contractors and non-employee directors to a changing business environment, after giving due consideration to compensation program goals, competitive conditions and the +potential dilutive impact of grants. +As part of the Board’s decision to approve the 2019 Plan, including the total number of shares available for issuance +under the 2019 Plan, the Board and Strategic Planning and Compensation Committee (the “Compensation Committee”) also analyzed the anticipated dilutive impact of the 2019 Plan’s share reserve and the historical rate at which the +Independent Board grants equity awards: +• +The potential dilution from the 3,225,000 shares of Common Stock to be authorized for issuance under the 2019 Plan, for +which shareholder approval is being requested, is approximately 2.8% of our outstanding shares of Common Stock as of April 12, 2019. +2019 +Proxy Statement | Matador Resources Company 29 +Table of Contents +PROPOSAL 2 +• +The equity plan share usage rate over 2016, 2017 and 2018 represented a three-year average usage rate of 2.0% of our +weighted average Common Stock outstanding for each such year, placing the Company in the 77 th percentile of its 2018 peer group. The peer group’s median three-year average usage rate was +1.5%. +In addition, the Board and Compensation Committee reviewed projected future share usage and projected future forfeitures. The projected +future usage of shares for awards under the 2019 Plan was reviewed under scenarios based on a variety of assumptions. Depending on the assumptions, the 3,225,000 shares of Common Stock being requested under the 2019 Plan are currently expected to +satisfy our equity compensation needs for approximately three years. This could change depending on our future equity grant practices. The Board and the Compensation Committee are committed to effectively managing the number of shares reserved for +issuance under the 2019 Plan while minimizing shareholder dilution. +The Board has determined that the 2019 Plan is in the best interest of the Company and its +shareholders and has recommended that the Company’s shareholders approve the 2019 Plan. +Promotion of Good +Corporate Governance Practices +The 2019 Plan +includes the following features, emphasizing our commitment to strong corporate governance practices: +• +Prohibits liberal share recycling and shares withheld to cover tax obligations or the exercise price of an award will not +again be available for issuance under the 2019 Plan; +• +Prohibits repricing of stock options or stock appreciation rights without shareholder approval; +• +Prohibits the payment of dividends or dividend equivalent rights on any unearned or unvested award; +• +Stock options and stock appreciation rights may not be granted at a discount to the fair market value on the date of grant +and are subject to a maximum term of ten years; +• +Provides for an annual limit on compensation that may be paid to outside directors (whether in cash or equity and under the +2019 Plan or otherwise) of $600,000 in the aggregate (except in limited circumstances); +• +Limits awards that may be granted during any calendar year to no more than 500,000 shares subject to any option or stock +appreciation right granted to any executive officer and $10,000,000 for any performance awards granted to any participant; +• +Except with respect to up to 5% of the shares of Common Stock authorized for issuance under the 2019 Plan, and for certain +accelerated vesting permitted in the case of death, disability or a change in control, no awards may vest sooner than one year from the date of grant (or upon the next annual meeting for awards granted to outside directors); and +• +Awards granted under the 2019 Plan are subject to any clawback policy adopted by us from time to time. +Description of the 2019 Plan +The following is a brief description of the 2019 Plan. A copy of +the 2019 Plan is attached as Annex B to this Proxy Statement, and the following description is qualified in its entirety by reference to the 2019 Plan. +Effective Date and Expiration +The 2019 Plan was adopted by the Board +on April 22, 2019 (the “Board Approval Date”), subject to shareholder approval. The 2019 Plan will become effective on the date of shareholder approval of the 2019 Plan (the “Effective Date”). Unless sooner terminated by the +Board, the 2019 Plan will terminate and expire on the tenth anniversary of the Board Approval Date. No award may be made under the 2019 Plan after the tenth anniversary of the Board Approval Date, but awards made prior to such date may extend beyond +that date. +30 Matador Resources Company | 2019 Proxy Statement +Table of Contents +PROPOSAL 2 +Share Authorization +Subject to certain adjustments, the number of +shares that may be issued pursuant to awards under the 2019 Plan is 3,225,000 total shares of Common Stock, plus the number of shares of Common Stock remaining available for issuance under the Prior Plan on the Effective Date, plus the number of +shares of Common Stock subject to any award outstanding under the 2012 Plan as of the Effective Date that is not issued because such award is forfeited, terminates, expires or otherwise lapses without being exercised, or is settled in cash. On +April 12, 2019, the closing sale price of our Common Stock as reported on the NYSE was $20.95 per share. +Shares to be issued may be made available from +authorized but unissued shares of Common Stock, shares held by us in our treasury or shares purchased by us on the open market or otherwise. During the term of the 2019 Plan, we will at all times reserve and keep enough shares available to satisfy +the requirements of the 2019 Plan. If any shares of Common Stock subject to an award are not issued or transferred to a participant and cease to be issuable or transferable to a participant because of the forfeiture, termination, expiration or +cancellation, in whole or in part, of such award or for any other reason, the shares not so issued or transferred, or the shares so reacquired by us, as the case may be, will no longer be charged against the maximum number of shares reserved under +the 2019 Plan and may be used thereafter for additional awards. The following additional parameters also apply: +• +If an award may be settled in shares of Common Stock or cash, such shares will be deemed issued only when and to the extent +that settlement or payment is actually made in shares of Common Stock. To the extent an award is settled or paid in cash, and not shares of Common Stock, any shares previously reserved for issuance or transfer pursuant to such award will again be +deemed available for issuance or transfer under the 2019 Plan, and the maximum number of shares of Common Stock that may be issued or transferred under the 2019 Plan will be reduced only by the number of shares actually issued and transferred to the +Participant. +• +Notwithstanding the foregoing, (i) shares withheld or tendered to pay withholding taxes or the exercise price of an +award will not again be available for the grant of awards under the 2019 Plan, and (ii) the full number of shares subject to a stock option or stock-settled stock appreciation right exercised will be counted against the shares authorized for +issuance under this 2019 Plan, regardless of the number of shares actually issued upon the settlement of such stock option or stock appreciation right. +• +Any shares repurchased by us on the open market using the proceeds from the exercise of an award will not increase the +number of shares available for the future grant of awards. +Individual Limits +Subject to certain adjustments, the following limitations apply to individuals under the 2019 Plan: +• +with respect to any participant who is an executive officer of the Company, a maximum of 500,000 shares may be granted in +any one year in the form of stock options or stock appreciation rights to such participant; +• +no participant may receive performance awards in any calendar year which have an aggregate value of more than $10,000,000, +and if such an award involves the issuance of Common Stock, the value will be based on the grant date fair market value of the Common Stock; and +• +with respect to any participant who is an outside director of the Company, the grant date fair market value of equity based +awards and any cash compensation granted in any calendar year will not exceed $600,000 in the aggregate, provided that in a calendar year in which an outside director first joins the Board or serves as Chairman of the Board or Lead Director, the +maximum dollar value of such individual’s cash and equity based compensation (based on grant date fair market value) in any calendar year may be up to $1,200,000 in the aggregate. +Administration +The 2019 Plan will be administered by the Board or a +committee of the Board (the “Committee”) consisting of two or more members. At any time there is no Committee to administer the 2019 Plan, any reference to the Committee is a reference to the Board. Currently, the Independent Board serves +as the Committee that will +2019 +Proxy Statement | Matador Resources Company 31 +Table of Contents +PROPOSAL 2 +administer the 2019 Plan. The Committee will determine the persons to whom awards are to be made, determine the type, size and terms of awards, interpret the 2019 Plan, establish and revise rules +and regulations relating to the 2019 Plan, establish performance goals for awards and certify the extent of their achievement, and make any other determinations that it believes necessary for the administration of the 2019 Plan. The Committee may +delegate certain duties to one or more officers of the Company as provided in the 2019 Plan. +Eligibility +Employees (including any employee who is also a director or an officer), contractors and non-employee directors of the Company or +its subsidiaries are eligible to participate in the 2019 Plan. As of April 12, 2019, the Company had approximately 280 employees, nine non-employee directors and approximately 10 contractors who would be +eligible for awards under the 2019 Plan. +Stock Options +The +Committee may grant either incentive stock options (“ISOs”) qualifying under Section 422 of the United States Internal Revenue Code of 1986, as amended, together with the published rulings, regulations and interpretations duly +promulgated thereunder (the “Code”), or nonqualified stock options, provided that only employees of the Company and its subsidiaries (excluding subsidiaries that are not corporations) are eligible to receive ISOs. Stock options may not be +granted with an option price less than 100% of the fair market value of a share of Common Stock on the date the stock option is granted. If an ISO is granted to an employee who owns or is deemed to own more than 10% of the combined voting power of +all classes of stock of the Company (or any parent or subsidiary), the option price will be at least 110% of the fair market value of a share of Common Stock on the date of grant. The Committee will determine the terms of each stock option at the +time of grant, including without limitation, the methods by or forms in which shares will be delivered to participants. The maximum term of each option, the times at which each option will be exercisable and provisions requiring forfeiture of +unexercised options at or following termination of employment or service generally are fixed by the Committee, except that the Committee may not grant stock options with a term exceeding 10 years. +Recipients of stock options may pay the option price: (i) in cash, check, bank draft or money order payable to the order of the Company; (ii) by delivering to +the Company shares of Common Stock (including restricted stock) already owned by the participant having a fair market value equal to the aggregate option price and that the participant has not acquired from the Company within six months prior to the +exercise date; (iii) by delivering to the Company or its designated agent an executed irrevocable option exercise form together with irrevocable instructions from the participant to a broker or dealer, reasonably acceptable to the Company, to +sell certain of the shares purchased upon the exercise of the option or to pledge such shares to the broker as collateral for a loan from the broker and to deliver to the Company the amount of sale or loan proceeds necessary to pay the purchase +price; (iv) by the Company withholding a number of shares of Common Stock, valued at the fair market value on the exercise date, otherwise issuable upon exercise of the stock option; and/or (v) by any other form of valid consideration that +is acceptable to the Committee in its sole discretion. In the event that shares of restricted stock are tendered to pay the option price, a number of shares of Common Stock issued upon the exercise of the stock option equal to the number of shares +of restricted stock tendered to pay the option price will be subject to the same restrictions and provisions as the restricted stock so tendered. +Stock +Appreciation Rights +The Committee is authorized to grant stock appreciation rights (“SARs”) as a stand-alone award, or freestanding SARs, or in +conjunction with stock options granted under the 2019 Plan, or tandem SARs. SARs entitle a participant to receive an amount, in cash and/or Common Stock, equal to the excess of the fair market value of a share of Common Stock on the date of exercise +(or, as provided in the award agreement, conversion) over the fair market value of a share of Common Stock on the date of grant. The grant price of a SAR cannot be less than 100% of the fair market value of a share on the date of grant. The +Committee will determine the terms of each SAR at the time of the grant, including, without limitation, the methods by or forms in which shares will be delivered to participants. The maximum term of each SAR, the times at which each SAR will be +exercisable and +32 Matador Resources Company | 2019 Proxy Statement +Table of Contents +PROPOSAL 2 +provisions requiring forfeiture of unexercised SARs at or following termination of employment or service generally are fixed by the Committee, except that no freestanding SAR may have a term +exceeding 10 years and no tandem SAR may have a term exceeding the term of the option granted in conjunction with the tandem SAR. +Restricted Stock and +Restricted Stock Units +The Committee is authorized to grant restricted stock and restricted stock units. Restricted stock consists of shares of Common Stock +that may not be sold, transferred, pledged, assigned, hypothecated, encumbered or otherwise disposed of, and that may be forfeited in the event of certain terminations of employment or service, prior to the end of a restricted period as specified by +the Committee. Restricted stock units are the right to receive shares of Common Stock at a future date in accordance with the terms of such grant upon the attainment of certain conditions specified by the Committee, which include a substantial risk +of forfeiture and restrictions on their sale or other transfer by the participant. The Committee determines the eligible participants to whom, and the time or times at which, grants of restricted stock or restricted stock units will be made, the +number of shares or units to be granted, the price to be paid, if any, the time or times within which the shares covered by such grants will be subject to forfeiture, the time or times at which the restrictions will terminate and all other terms and +conditions of the grants. Restrictions or conditions could include, but are not limited to, the attainment of performance goals (as described below), continuous service with the Company, the passage of time or other restrictions or conditions. The +value of the restricted stock units may be paid in shares, cash or a combination of both, as determined by the Committee at the time of grant. +Dividends and +Dividend Equivalent Rights +A participant who receives a grant of restricted stock will have all the rights of a shareholder of the Company; provided, +however that the participant will not have the right to receive dividends on any unvested restricted stock award unless and until the restriction lapses. Accrued dividends will be paid as soon as practicable following vesting of the underlying +restricted stock award. +The Committee is authorized to grant a dividend equivalent right to any participant either as a component of another award or as a separate +award, conferring on participants the right to receive credits based on the dividends that would have been paid on a specific number of shares of Common Stock specified in the award agreement if such shares were held by the participant. The terms +and conditions of the dividend equivalent right will be specified by the grant. If a dividend equivalent right is granted as a component of another award, the dividend equivalent right will provide that such dividend equivalent right may be settled +only upon settlement or payment of, or lapse of restrictions on, such other award, and that such dividend equivalent right will expire or be forfeited or annulled under the same conditions as such other award. Dividend equivalents credited to the +holder of a dividend equivalent right may be paid currently or may be deemed to be reinvested in additional shares. Any such reinvestment will be at the fair market value at the time thereof. A dividend equivalent right may be settled in cash, +shares or a combination thereof, in a single payment or in installments. +No dividends or dividend equivalent rights will be paid out or settled unless and until, +and then only to the extent that, the applicable underlying award vests. +Other Awards +The Committee may grant other forms of awards based upon, payable in or otherwise related to, in whole or in part, shares of Common Stock if the Committee determines +that such other form of award is consistent with the purpose and restrictions of the 2019 Plan. The terms and conditions of such other form of award will be specified in the applicable grant agreement. Such other awards may be granted for no cash +consideration, for such minimum consideration as may be required by applicable law or for such other consideration as may be specified by the grant. +Performance Awards +The Committee may grant any of the award types as +performance awards payable in cash, shares of Common Stock, a combination thereof or other consideration at the end of a specified performance period. Payment will be +2019 +Proxy Statement | Matador Resources Company 33 +Table of Contents +PROPOSAL 2 +contingent upon achieving pre-established performance goals (as discussed below) by the end of the performance period. The Committee will determine the +length of the performance period, the maximum payment value of an award and the minimum performance goals required before payment will be made. If the Committee determines in its sole discretion that the established performance measures or +objectives are no longer suitable because of a change in the Company’s business, operations, corporate structure or for other reasons that the Committee deems satisfactory, the Committee may modify the performance measures or objectives and/or +the performance period. +Performance Goals +Awards under the 2019 +Plan may be made subject to the attainment of performance goals relating to one or more business criteria, which may consist of one or more or any combination of the following criteria (“Performance Criteria”): earnings (either in the +aggregate or on a per-share basis) or adjusted earnings; net income or adjusted net income; operating income; operating profit; cash flow; return measures, including cash return on cash invested, return on +average capital employed or other return on assets, investments, equity or invested capital; total shareholder return (change in share price plus reinvestment of dividends into shares when declared, if any, from period to period) and other measures +of shareholder return (including income applicable to common shareholders or other class of shareholders); earnings before or after either, or any combination of, interest, taxes, depletion, depreciation, amortization or other non-cash items (EBITDA); adjusted EBITDA; acreage; reserves; present value of estimated future oil and gas revenues, net of estimated direct expenses, discounted at an annual discount rate of 10%; gross revenues; +reduction in expense levels in each case, where applicable, determined either on a Company-wide basis or in respect of any one or more subsidiaries or business units thereof; economic value or economic value added; market share or market share +added; annual net income to Common Stock; earnings per share or growth in earnings per share; annual cash flow provided by operations; changes in annual revenues; strategic and operational business criteria, consisting of one or more objectives +based on specified revenue, market penetration, geographic business expansion goals, execution of new midstream third-party agreements, identified project milestones, completion of significant projects, production, gathering, processing or disposal +volume levels (on an absolute or debt-adjusted basis), cost targets, lease operating expenses, general and administrative expenses, leverage ratio, finding and development costs, reserves or reserves added, reserve replacement ratio and goals +relating to acquisitions or divestures; goals relating to specific environmental compliance measures and safety and accident rates; individual management objectives; certain strategic goals, such as consummation of transactions or events, or other +qualitative matters, that improve operational efficiencies or results, preserve the Company’s balance sheet, create additional value through acquisitions, divestitures, joint ventures or other value creating transactions, expand or increase the +per share value of the Company’s midstream business, represent an assumption of additional duties beyond those within an executive’s responsibilities, assist in staff development, retention and training or serve to maintain the +Company’s culture and working conditions; and/or any other performance goal that the Committee deems appropriate. +The Committee may designate, in its sole +discretion, whether a particular Performance Criterion is to be measured on a pre-tax basis or post-tax basis. In addition, certain Performance Criteria may be stated in +reference to a production volume of measurement such as in per barrels of oil equivalents or cubic feet equivalents (e.g., per BOE, MBOE, MMBOE, Mcfe, MMcfe or Bcfe), including such production volume on a daily basis. Any Performance Criteria may be +used to measure the performance of the Company as a whole or any business unit of the Company and may be measured relative to a peer group or index. Any Performance Criteria may include or exclude: (i) extraordinary, unusual and/or non-recurring items of gain or loss; (ii) gains or losses on the disposition of a business; (iii) changes in tax or accounting regulations or laws; (iv) the effect of a merger or acquisition, as +identified in the Company’s quarterly and annual earnings releases; or (v) other similar occurrences. +Vesting, Forfeiture, Assignment +The Committee, in its sole discretion, will establish the vesting terms applicable to an award, including whether all or any portion will not be vested until a date, or +dates, subsequent to its date of grant, or until the occurrence of +34 Matador Resources Company | 2019 Proxy Statement +Table of Contents +PROPOSAL 2 +one or more specified events, provided that any such vesting terms may not be inconsistent with the terms of the 2019 Plan. If the Committee imposes conditions upon vesting, then, except as +otherwise provided below, subsequent to the date of grant the Committee may, in its sole discretion, accelerate the date on which all or a portion of the award may be vested, provided that any such acceleration must comply with the terms of the 2019 +Plan. Awards granted under the 2019 Plan to participants other than outside directors must vest no earlier than one year after the date of grant, while awards granted to outside directors must vest no earlier than the earlier of one year after the +date of grant or the next annual meeting of shareholders (provided that such annual meetings are at least fifty (50) weeks apart). Notwithstanding the foregoing, the Committee may, in its sole discretion, accelerate the vesting or waive any +applicable restriction period awards granted under the 2019 Plan, provided that the shares of Common Stock subject to such awards will be Exempt Shares (as defined in the 2019 Plan), unless such acceleration or waiver occurs by reason of the +occurrence of a change in control or the participant’s death, disability, or termination of employment or service on or following a change in control. The number of Exempt Shares is limited to 5% of the number of shares available for issuance +under the 2019 Plan. +The Committee may impose on any award, at the time of grant or thereafter, such additional terms and conditions as the Committee determines, +including terms requiring forfeiture of awards in the event of a participant’s termination of service. The Committee will specify the circumstances under which performance awards may be forfeited in the event of a termination of service by a +participant prior to the end of a performance period or settlement of awards. +Except for limited permitted transfers to certain family members or related entities +for no consideration, awards granted under the 2019 Plan generally are not assignable or transferable except by will or by the laws of descent and distribution. Incentive stock options granted under the 2019 Plan are not transferable and are only +exercisable during the lifetime of the participant by the participant. +Adjustments upon Changes in Capitalization +In the event that any dividend or other distribution, recapitalization, stock split, reverse stock split, rights offering, reorganization, merger, consolidation, split-up, spin-off, split-off, combination, subdivision, repurchase or exchange of shares of Common Stock or other securities of the +Company, issuance of warrants or other rights to purchase shares of Common Stock or other securities of the Company, or other similar corporate transaction or event affects the fair value of an award, then the Committee will adjust any or all of the +following so that the fair value of the award immediately after the transaction or event is equal to the fair value of the award immediately prior to the transaction or event: (i) the number of shares and type of Common Stock (or the securities +or property) which thereafter may be made the subject of awards, (ii) the number of shares and type of Common Stock (or other securities or property) subject to outstanding awards, (iii) the option price of each outstanding award and +(iv) the number of shares subject to or the exercise price of then outstanding SARs, to the end that the same proportion of the Company’s issued and outstanding shares of Common Stock in each instance will remain subject to exercise (if +applicable) at the same aggregate exercise price; provided however, that the number of shares of Common Stock (or other securities or property) subject to any award will always be a whole number. Notwithstanding the foregoing, no adjustment will be +made or authorized to the extent that such adjustment would cause the 2019 Plan or any stock option to violate Section 422 of the Code or Section 409A of the Code. All such adjustments must be made in accordance with the rules of any +securities exchange, stock market or stock quotation system to which the Company is subject. +Treatment in Connection with Recapitalization, Merger and +Consolidation +In the event of a merger, consolidation or share exchange, where the Company is not the surviving corporation, unless the surviving +corporation does not agree to do so, the outstanding awards under the 2019 Plan will be substituted with awards representing the right to shares of stock of other securities or that amount of cash, property or assets of the surviving corporation, in +accordance with the terms of the outstanding award. +2019 +Proxy Statement | Matador Resources Company 35 +Table of Contents +PROPOSAL 2 +In the event of a merger, consolidation or share exchange, +where the Company is not the surviving corporation and the surviving corporation does not agree to assume the outstanding awards under the 2019 Plan, all awards may be cancelled by the Company, in its sole discretion, as of the date of such +transaction by either: +• +giving notice to each participant of its intention to cancel such participant’s award for which the issuance of shares +involved payment by the participant, and allowing the participant to purchase any or all shares underlying such award, including unvested awards (as determined by the Board), during the thirty day period preceding the cancellation of the award; or +• +in the case of awards that are either (i) settled only in shares of Common Stock or (ii) at the election of the +participant, settled in shares of Common Stock, paying the participant a reasonable estimate of the difference between the net amount per share payable in such transaction and the price per share of such award, multiplied by the number of shares +subject to the award. Reasonable adjustments and determinations will be made to account for the structure of the transaction. +Amendment or +Discontinuance of the 2019 Plan +The Board may, at any time and from time to time, without the consent of the participants, alter, amend, revise, suspend or +discontinue the 2019 Plan in whole or in part; provided, however, that: (i) no amendment that requires shareholder approval in order for the 2019 Plan and any awards under the 2019 Plan to continue to comply with Sections 421 and 422 of the +Code (including any successors to such sections, or other applicable law) or any applicable requirements of any securities exchange or inter-dealer quotation system on which the Company’s stock is listed or traded, will be effective unless such +amendment is approved by the requisite vote of the Company’s shareholders entitled to vote on the amendment; and (ii) unless required by law, no action by the Board regarding amendment or discontinuance of the 2019 Plan may materially +adversely affect any rights of any participants or obligations of the Company to any participants with respect to any outstanding award under the 2019 Plan without the consent of the affected participant. +No Repricing of Stock Options or SARs +The Committee may not +“reprice” any stock option or SAR without shareholder approval. For purposes of the 2019 Plan, “reprice” means any of the following or any other action that has the same effect: (i) amending a stock option or SAR to reduce +its exercise price or base price, (ii) canceling a stock option or SAR at a time when its exercise price or base price exceeds the fair market value of a common share in exchange for cash or a stock option, SAR, award of restricted stock or +other equity award or (iii) taking any other action that is treated as a repricing under generally accepted accounting principles, provided that nothing will prevent the Committee from (x) making adjustments to awards upon changes in +capitalization; (y) exchanging or cancelling awards upon a merger, consolidation or recapitalization or (z) substituting awards for awards granted by other entities, to the extent permitted by the 2019 Plan. +Recoupment for Restatements +The Committee may recoup all or any +portion of any shares or cash paid to a participant in connection with an award, to the extent provided for under the Company’s clawback policy, if any, approved by the Board from time to time. +Federal Income Tax Consequences +The following is a brief summary of certain U.S. federal income +tax consequences relating to the transactions described under the 2019 Plan as set forth below. This summary does not purport to address all aspects of federal income taxation and does not describe state, local or foreign tax consequences. This +discussion is based upon provisions of the Code and the treasury regulations issued thereunder, and judicial and administrative interpretations under the Code and treasury regulations, all as in effect as of the date hereof and all of which are +subject to change (possibly on a retroactive basis) or different interpretation. +36 Matador Resources Company | 2019 Proxy Statement +Table of Contents +PROPOSAL 2 +Law Affecting Deferred Compensation +Section 409A of the Code +regulates all types of deferred compensation. If the requirements of Section 409A of the Code are not satisfied, deferred compensation and earnings thereon will be subject to tax as it vests, plus an interest charge at the underpayment rate +plus 1% and a 20% penalty tax. Certain awards under the 2019 Plan may be subject to Section 409A of the Code. +Incentive Stock Options +A participant will not recognize income at the time an ISO is granted. When a participant exercises an ISO, a participant also generally will not be required to +recognize income (either as ordinary income or capital gain). However, to the extent that the fair market value (determined as of the date of grant) of the shares with respect to which the participant’s ISOs are exercisable for the first time +during any year exceeds $100,000, the ISOs for the shares over $100,000 will be treated as nonqualified stock options, and not ISOs, for federal tax purposes, and the participant will recognize income as if the ISOs were nonqualified stock options. +In addition to the foregoing, if the fair market value of the shares received upon exercise of an ISO exceeds the exercise price, then the excess may be deemed a tax preference adjustment for purposes of the federal alternative minimum tax +calculation. The federal alternative minimum tax may produce significant tax repercussions depending upon the participant’s particular tax status. +The tax +treatment of any shares acquired by exercise of an ISO will depend upon whether the participant disposes of his or her shares prior to two years after the date the ISO was granted or one year after the shares were transferred to the participant +(referred to as the “Holding Period”). If a participant disposes of shares acquired by exercise of an ISO after the expiration of the Holding Period, any amount received in excess of the participant’s tax basis for such shares will be +treated as short-term or long-term capital gain, depending upon how long the participant has held the shares. If the amount received is less than the participant’s tax basis for such shares, the loss will be treated as short-term or long-term +capital loss, depending upon how long the participant has held the shares. +If the participant disposes of shares acquired by exercise of an ISO prior to the +expiration of the Holding Period, the disposition will be considered a “disqualifying disposition.” If the amount received for the shares is greater than the fair market value of the shares on the exercise date, then the difference between +the ISO’s exercise price and the fair market value of the shares at the time of exercise will be treated as ordinary income for the tax year in which the “disqualifying disposition” occurs. The participant’s basis in the shares +will be increased by an amount equal to the amount treated as ordinary income due to such “disqualifying disposition.” In addition, the amount received in such “disqualifying disposition” over the participant’s increased +basis in the shares will be treated as capital gain. However, if the price received for shares acquired by exercise of an ISO is less than the fair market value of the shares on the exercise date and the disposition is a transaction in which the +participant sustains a loss that otherwise would be recognizable under the Code, then the amount of ordinary income that the participant will recognize is the excess, if any, of the amount realized on the “disqualifying disposition” over +the basis of the shares. +Nonqualified Stock Options +A +participant generally will not recognize income at the time a nonqualified stock option is granted. When a participant exercises a nonqualified stock option, the difference between the option price and any higher market value of the shares of Common +Stock on the date of exercise will be treated as compensation taxable as ordinary income to the participant. The participant’s tax basis for the shares acquired under a nonqualified stock option will be equal to the option price paid for such +shares, plus any amounts included in the participant’s income as compensation. When a participant disposes of shares acquired by exercise of a nonqualified stock option, any amount received in excess of the participant’s tax basis for such +shares will be treated as short-term or long-term capital gain, depending upon how long the participant has held the shares. If the amount received is less than the participant’s tax basis for such shares, the loss will be treated as short-term +or long-term capital loss, depending upon how long the participant has held the shares. +2019 +Proxy Statement | Matador Resources Company 37 +Table of Contents +PROPOSAL 2 +Special Rule if Option Price is Paid for in Shares +If a participant pays the option price of a nonqualified stock option with previously-owned shares of Common Stock and the transaction is not a +disqualifying disposition of shares previously acquired under an ISO, the shares received equal to the number of shares surrendered are treated as having been received in a tax-free exchange. The +participant’s tax basis and holding period for these shares received will be equal to the participant’s tax basis and holding period for the shares surrendered. The shares received in excess of the number of shares surrendered will be +treated as compensation taxable as ordinary income to the participant to the extent of their fair market value. The participant’s tax basis in these shares will be equal to their fair market value on the date of exercise, and the +participant’s holding period for such shares will begin on the date of exercise. +If the use of previously acquired shares to pay the exercise price of a +nonqualified stock option constitutes a disqualifying disposition of shares previously acquired under an ISO, the participant will have ordinary income as a result of the disqualifying disposition in an amount equal to the excess of the fair market +value of the shares surrendered, determined at the time such shares were originally acquired on exercise of the ISO, over the aggregate option price paid for such shares. As discussed above, a disqualifying disposition of shares previously acquired +under an ISO occurs when the participant disposes of such shares before the end of the Holding Period. The other tax results from paying the exercise price with previously-owned shares are as described above, except that the participant’s tax +basis in the shares that are treated as having been received in a tax-free exchange will be increased by the amount of ordinary income recognized by the participant as a result of the disqualifying +disposition. +Restricted Stock +A participant who receives +restricted stock generally will recognize as ordinary income the excess, if any, of the fair market value of the shares granted as restricted stock at such time as the shares are no longer subject to forfeiture or restrictions, over the amount paid, +if any, by the participant for such shares. However, a participant who receives restricted stock may make an election under Section 83(b) of the Code within 30 days of the date of transfer of the shares to recognize ordinary income on the date +of transfer of the shares equal to the excess of the fair market value of such shares (determined without regard to the restrictions on such shares) over the purchase price, if any, of such shares. If a participant does not make an election under +Section 83(b) of the Code, then the participant will recognize as ordinary income any dividends received with respect to such shares. At the time of sale of such shares, any gain or loss realized by the participant will be treated as either +short-term or long-term capital gain (or loss) depending on the holding period. For purposes of determining any gain or loss realized, the participant’s tax basis will be the amount previously taxable as ordinary income, plus the purchase price +paid by the participant, if any, for such shares. +Stock Appreciation Rights +Generally, a participant who receives a stand-alone SAR will not recognize taxable income at the time the stand-alone SAR is granted, provided that the SAR is exempt +from or complies with Section 409A of the Code. If a participant receives the appreciation inherent in the SARs in cash, the cash will be taxed as ordinary income to the recipient at the time it is received. If a participant receives the +appreciation inherent in the SARs in stock, the spread between the then current market value and the grant price, if any, will be taxed as ordinary income to the employee at the time it is received. In general, there will be no federal income tax +deduction allowed to the Company upon the grant or termination of SARs. However, upon the exercise of a SAR, the Company will be entitled to a deduction equal to the amount of ordinary income the recipient is required to recognize as a result of the +exercise. +Other Awards +In the case of an award of restricted +stock units, performance awards, dividend equivalent rights or other stock or cash awards, the recipient will generally recognize ordinary income in an amount equal to any cash received and the fair market value of any shares received on the date of +payment or delivery, provided that the award is exempt from or complies with Section 409A of the Code. In that taxable year, the Company will receive a federal income tax deduction in an amount equal to the ordinary income that the participant +has recognized. +38 Matador Resources Company | 2019 Proxy Statement +Table of Contents +PROPOSAL 2 +Federal Tax Withholding +Any ordinary income realized by a participant +upon the exercise of an award under the 2019 Plan is subject to withholding of federal, state and local income tax and to withholding of the participant’s share of tax under the Federal Insurance Contribution Act and the Federal Unemployment +Tax Act. To satisfy federal income tax withholding requirements, the Company will have the right to require that, as a condition to delivery of any shares of Common Stock, the participant remit to the Company an amount sufficient to satisfy the +withholding requirements. The participant can make such payment by (i) the delivery of cash to the Company in an amount that equals or exceeds (to avoid the issuance of fractional shares) the required tax withholding obligations of the Company; +(ii) if the Company, in its sole discretion, so consents in writing, the actual delivery by the exercising participant to the Company of shares of Common Stock that the participant has not acquired from the Company within six months prior to +the date of exercise, vesting or conversion of the award, as applicable, which shares so delivered have an aggregate fair market value that equals or exceeds (to avoid the issuance of fractional shares) the required tax withholding payment; +(iii) if the Company, in its sole discretion, so consents in writing, the Company’s withholding of a number of shares to be delivered upon the exercise, vesting or conversion of the award, which shares so withheld have an aggregate fair +market value that equals or exceeds (to avoid the issuance of fractional shares) the required tax withholding payment; or (iv) any combination of (i), (ii) or (iii) or any other method consented to by the Company in writing. Withholding +does not represent an increase in the participant’s total income tax obligation, since it is fully credited toward his or her tax liability for the year. Additionally, withholding does not affect the participant’s tax basis in the shares. +Compensation income realized and tax withheld will be reflected on Forms W-2 supplied by the Company to employees by January 31 of the succeeding year. Deferred compensation that is subject to +Section 409A of the Code will be subject to certain federal income tax withholding and reporting requirements. +Tax Consequences to the Company +To the extent that a participant recognizes ordinary income in the circumstances described above, the Company will be entitled to a corresponding deduction +provided that, among other things, the income meets the test of reasonableness, is an ordinary and necessary business expense, is not an “excess parachute payment” within the meaning of Section 280G of the Code and is not disallowed +by the $1,000,000 limitation on certain compensation paid to certain covered employees in any year under Section +162(m) of the Code. +New Plan Benefits +The Company cannot currently determine the benefits or number of +shares subject to awards that may be granted in the future to eligible participants under the 2019 Plan because the grant of awards and terms of such awards are to be determined in the sole discretion of the Committee. Information about awards +granted in 2018 under the 2012 Plan to the Company’s named executive officers can be found in the table under the heading “Grants of Plan-Based Awards” on page 67. +Vote Required +The affirmative vote of the holders of a majority of the shares +present in person or represented by proxy and entitled to vote at the Annual Meeting is required to approve the 2019 Plan. If you hold your shares through a broker and you do not instruct the broker how to vote, your broker will not have the +authority to vote your shares. Abstentions will have the same effect as a vote cast against the proposal. Broker non-votes will be counted as present for purposes of determining the presence of a quorum but +will have no effect upon the outcome of the vote. +The Board of Directors recommends that you vote FOR approval of the Matador Resources +Company 2019 Long-Term Incentive Plan. +2019 +Proxy Statement | Matador Resources Company 39 +Table of Contents +PROPOSAL 3 +PROPOSAL +3 | ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION +In accordance with the requirements of Section 14A of the Exchange Act, the Company seeks a non-binding advisory vote from +its shareholders to approve the compensation of its Named Executive Officers (as defined below) as described in this Proxy Statement. +As discussed under the +“Executive Compensation—Compensation Discussion and Analysis” section of this Proxy Statement (“CD&A”), we believe the Company’s future success and the ability to create long-term value for our shareholders depends +on our ability to attract, retain and motivate highly qualified individuals in the oil and natural gas industry. Additionally, we believe that our success also depends on the continued contributions of our Named Executive Officers. The +Company’s compensation system plays a significant role in its ability to attract, motivate and retain a high quality workforce. As described in the CD&A, the Company’s compensation program for Named Executive Officers is designed to +reward, in both the short term and the long term, performance that contributes to the implementation of our business strategies, maintenance of our culture and values and achievement of our objectives. +In addition, we reward qualities that we believe help achieve our business strategies such as: +• +teamwork; +• +mentoring future leaders within the Company to drive long-term shareholder value; +• +individual performance in light of general economic and industry-specific conditions; +• +relationships with shareholders and vendors; +• +the ability to manage and enhance production from our existing assets; +• +the ability to explore new opportunities to increase oil and natural gas production; +• +the ability to identify and acquire additional acreage; +• +the ability to improve total shareholder returns; +• +the ability to increase year-over-year proved reserves; +• +the ability to control unit production costs; +• +the ability to pursue midstream opportunities; +• +level of job responsibility; +• +industry experience; and +• +general professional growth. +Our Board has a “pay for performance” philosophy and recognizes the leadership of our executive officers in contributing to the Company’s achievements. +As noted above, in 2018, Matador achieved record oil, natural gas and average daily oil equivalent production. In addition, Matador increased its estimated total proved oil and natural gas reserves 41% as of December 31, 2018, as compared to +December 31, 2017. +Despite our 2018 successes, support for our executive compensation program decreased from the average 99% level that we received at our +three previous annual shareholder meetings to approximately 72% at our 2018 Annual Meeting. In response to this lower than anticipated shareholder support, we implemented an extensive shareholder outreach program, reaching out to shareholders +representing approximately 50% of our outstanding stock (other than directors and officers). This outreach effort was led by our lead independent director and the chair of our Compensation Committee. Based upon the feedback we received from our +shareholders and our review of industry best practices, we implemented certain changes to our compensation program, many of which will take full effect with our 2019 compensation program year. Further detail regarding this outreach effort, and the +changes we have made in response, are included in the CD&A. +40 Matador Resources Company | 2019 Proxy Statement +Table of Contents +PROPOSAL 3 +This proposal provides shareholders the opportunity to endorse or not endorse the Company’s executive compensation program through approval of the following +resolution: +“Resolved, that the compensation paid to the Company’s Named Executive Officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby approved.” +The above-referenced CD&A and accompanying disclosures appear on pages 45 to 74 of this Proxy Statement. +Because this is an advisory vote, it will not be binding upon the Board. However, the Compensation Committee and the Independent Board will take into account the +outcome of the vote when considering future executive compensation arrangements. +Vote Required +The affirmative vote of the holders of a majority of the shares +present in person or represented by proxy and entitled to vote at the Annual Meeting is required to approve this resolution on a non-binding basis. If you hold your shares through a broker and you do not +instruct the broker how to vote, your broker will not have the authority to vote your shares. Abstentions will have the effect as a vote cast against the proposal. Broker non-votes will be counted as present +for purposes of determining the presence of a quorum but will have no effect upon the outcome of the vote. +During our 2018 Annual Meeting of Shareholders, our +shareholders approved a non-binding, advisory proposal to hold advisory votes to approve our executive compensation every year. In consideration of the results of this advisory vote, the Board has maintained +its policy of providing for annual advisory votes to approve executive compensation. Unless the Board modifies this policy, the next advisory vote to approve executive compensation following this vote will be held at our 2020 Annual Meeting of +Shareholders. +The Board of Directors recommends that you vote FOR approval of this resolution. +2019 +Proxy Statement | Matador Resources Company 41 +Table of Contents +PROPOSAL 4 +PROPOSAL 4 | RATIFICATION OF THE +APPOINTMENT OF KPMG LLP +The Audit Committee has appointed KPMG LLP (“KPMG”) as the independent registered public accounting firm of the Company +for the year ending December 31, 2019, and the Board has directed that such appointment be submitted to our shareholders for ratification at the Annual Meeting. +The Company has been advised by KPMG that the firm has no relationship with the Company or its subsidiaries other than that arising from the firm’s engagement as +auditors. +If the shareholders do not ratify the appointment of KPMG, the Audit Committee will consider whether to engage a different independent registered public +accounting firm but will not be obligated to do so. +The Company has been advised that representatives of KPMG will be present at the Annual Meeting and will be +available to respond to appropriate questions and make a statement if they desire to do so. +Fees of Independent +Registered Public Accounting Firm for Fiscal Years 2018 and 2017 +The following table presents fees for professional audit services rendered by KPMG for the audit of the Company’s annual financial statements for the years ended +December 31, 2018 and 2017, and fees for other services rendered by KPMG during those periods: +2018 +2017 +Audit fees +$ +1,469,000 +$ +1,584,000 +Audit-related fees +— +— +Tax fees +— +— +All other fees +— +— +Total +$ +1,469,000 +$ +1,584,000 +Services rendered by KPMG in connection with the fees presented above were as follows: +Audit Fees +For fiscal year 2018, audit fees consisted of fees +associated with the audit of the Company’s consolidated financial statements, including the audit of the effectiveness of the Company’s internal control over financial reporting, required reviews of our quarterly condensed consolidated +financial statements, including for inclusion in the prospectus related to our May 2018 equity offering and the offering memoranda related to our 2018 senior notes offerings, and providing the underwriters or initial purchasers, respectively, of +such offerings with comfort letters on certain information contained, or incorporated by reference, in the prospectus or offering memoranda, as applicable. Audit fees also included fees paid to KPMG by San Mateo Midstream, LLC for the audit of its +2018 financial statements. +For fiscal year 2017, audit fees consisted of fees associated with the audit of the Company’s consolidated financial statements, +including the audit of the effectiveness of the Company’s internal control over financial reporting, required reviews of our quarterly condensed consolidated financial statements, including for inclusion in the prospectus related to our October +2017 equity offering, and providing the underwriters of such offering with comfort letters on certain information contained, or incorporated by reference, in the prospectus. Audit fees also included fees paid to KPMG by San Mateo Midstream, LLC for +the audit of its 2017 financial statements. +42 Matador Resources Company | 2019 Proxy Statement +Table of Contents +PROPOSAL 4 +Audit-Related Fees +We did not incur any audit-related fees in 2018 or +2017. +Tax Fees +We did not incur any fees for tax advice, +planning and other services in 2018 or 2017. +All Other Fees +We +did not incur any other fees in 2018 or 2017. +The Audit Committee pre-approves all audit and permissible non-audit services provided by KPMG. These services may include audit services, audit-related services, tax services and other services. The Audit Committee has authorized the chair of the Audit Committee to pre-approve audit and permissible non-audit services provided by KPMG up to $750,000. Pursuant to this delegation, the decisions of the chair must be presented to the Audit +Committee at its next meeting. +Report of the Audit Committee +We are a standing committee comprised of independent directors +as currently defined by SEC regulations and the applicable listing standards of the NYSE. The Board has determined that at least one of the members of the Audit Committee is an “audit committee financial expert” as defined by applicable +SEC rules and regulations. We operate under a written charter adopted by the Board. A copy of the charter is available free of charge on the Company’s website at www.matadorresources.com under “Investor Relations—Corporate +Governance.” +We annually select the Company’s independent registered public accounting firm. If the shareholders do not ratify the appointment of KPMG +LLP at the Annual Meeting, the Audit Committee will consider whether to engage a different independent registered public accounting firm but will not be obligated to do so. +Management is responsible for the Company’s internal controls and the financial reporting process. The independent registered public accounting firm is responsible +for performing an independent audit of the Company’s consolidated financial statements in accordance with the standards of the United States Public Company Accounting Oversight Board and issuing a report thereon. As provided in our charter, our +responsibilities include the monitoring and oversight of these processes. +Consistent with our charter responsibilities, we have met and held discussions with +management and the independent registered public accounting firm. In this context, management and the independent registered public accounting firm represented to us that the Company’s consolidated financial statements for the fiscal year ended +December 31, 2018 were prepared in accordance with U.S. generally accepted accounting principles. We reviewed and discussed the consolidated financial statements with management and the independent registered public accounting firm and +discussed with the independent registered public accounting firm matters required to be discussed by Auditing Standard No. 1301: Communications with Audit Committees. +The Company’s independent registered public accounting firm has also provided to us the written disclosures and the letter required by applicable requirements of +the Public Company Accounting Oversight Board regarding the independent registered public accounting firm’s communications with the Audit Committee, and we discussed with the independent registered public accounting firm that firm’s +independence. +2019 +Proxy Statement | Matador Resources Company 43 +Table of Contents +PROPOSAL 4 +Based upon our reviews and discussions with management and the +independent registered public accounting firm and our review of the representation of management and the report of the independent registered public accounting firm to the Audit Committee, we recommended that the Board include the audited +consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 filed with the SEC. +Audit Committee, +William M. Byerley, Chair +Reynald A. Baribault +Craig T. Burkert +Matthew P. Clifton +Timothy E. Parker +Vote Required +The affirmative vote of the +holders of a majority of the shares present in person or represented by proxy and entitled to vote at the Annual Meeting is required for the ratification of the appointment of KPMG as the Company’s independent registered public accounting firm +for the year ending December 31, 2019. If the shareholders do not ratify the appointment of KPMG, the Audit Committee will consider whether to engage a different independent registered public accounting firm but will not be obligated to do so. +Abstentions will have the effect as a vote cast against the proposal. +The Board of Directors recommends that you vote FOR the ratification of +the appointment +of KPMG as the Company’s independent registered public accounting firm for the +year ending December 31, 2019. +44 Matador Resources Company | 2019 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +Dear Fellow Shareholders, +On behalf of the Board of Directors (the “Board”) and the Strategic Planning and +Compensation Committee (the “Compensation Committee”) of the Board, thank you for partnering with us and entrusting Matador with your hard-earned capital. We and the Board take our responsibilities to you very seriously—we are always +eager to hear from our shareholders, and we pledge to continue to listen to your views and respond, as appropriate. +In 2018, Matador’s operational results were +excellent. We achieved record oil, natural gas and average daily oil equivalent production. In addition, Matador increased its estimated total proved oil and natural gas reserves 41% as of December 31, 2018, as compared to December 31, +2017. Yet, at the 2018 Annual Meeting of Shareholders, the support for our say-on-pay proposal decreased from the average 99% level we have experienced in recent years +to 72%. +In light of these disappointing say-on-pay results, shortly after the 2018 +Annual Meeting, the Board and Compensation Committee began taking important steps to both understand the decrease in shareholder support for our executive compensation program and to improve our program in order to further align executive +compensation with shareholder expectations. +The most significant step in this process was an extensive outreach effort to our shareholder base. All told, we reached +out to shareholders representing approximately 50% of our outstanding stock (excluding stock held by our directors and officers) in an effort to provide them a meaningful opportunity to help us improve our executive compensation program in 2018, +2019 and beyond. +We heard from many of you and, as a result of those discussions, are pleased to report that we have already implemented or are now implementing the +following changes to our executive compensation program: +• +In consideration of industry factors, shareholder support for our executive compensation program and the Company’s +2018 stock performance, Chairman and Chief Executive Officer Joseph Wm. Foran’s total compensation was reduced by 27.0% for 2018, including a 35.5% reduction in annual bonus compensation. +• +We transitioned from a mix of long-term incentive compensation for executive officers +of 67% service-based restricted stock and 33% stock options to 50% service-based restricted stock units and 50% performance-based stock units , commencing with grants made in February 2019. By replacing the stock +option component with performance shares, we further aligned executive compensation with long-term performance . +• +We eliminated discretionary bonuses for executive officers, commonly referred to within +the Company as “Marlan” awards in honor of the late Marlan W. Downey (1931-2017), a long-time advisor to the Board. Such bonuses have historically been awarded to contemporaneously reward impressive performance achievements. No Marlan +bonuses have been awarded to executive officers following our 2018 Annual Meeting, and the Board does not anticipate granting future Marlan bonuses to our executive officers. +These are just a few of the changes we have implemented since hearing from so many of you in 2018 and early 2019. We look forward to ongoing dialogue with our +shareholders and to demonstrating responsiveness to your feedback, including by continuing to improve our executive compensation program. +We are honored to serve on +your behalf and hope you will join us at the 2019 Annual Meeting of Shareholders. +Sincerely, +Reynald A. Baribault +R. Gaines Baty +Lead Independent Director +Chair, Strategic Planning and Compensation Committee +2019 +Proxy Statement | Matador Resources Company 45 +Table of Contents +EXECUTIVE COMPENSATION +EXECUTIVE +COMPENSATION +Compensation Discussion and Analysis +This Compensation Discussion and Analysis, or CD&A, provides +a general description of our compensation program and specific information about its various components for the following “Named Executive Officers” for 2018: +• +Joseph Wm. Foran, Chairman of the Board and Chief Executive Officer; +• +Matthew V. Hairford, President; +• +David E. Lancaster, Executive Vice President and Chief Financial Officer; +• +Craig N. Adams, Executive Vice President—Land, Legal & Administration; and +• +Billy E. Goodwin, Executive Vice President and Head of Operations. +2018 Highlights +Increased Production +The charts below show our total production growth over the past five years. +We also increased our average daily oil equivalent production from the Delaware Basin, our most significant operating area, +approximately 54% to 45,200 BOE per day (87% of total oil equivalent production), including 28,000 Bbl of oil per day (92% of total oil production) and 103.3 MMcf of natural gas per day (80% of total natural gas +production), in 2018, as compared to 29,500 BOE per day (76% of total oil equivalent production), including 18,000 Bbl of oil per day (84% of total oil production) and 68.6 MMcf of natural gas per day +(66% of total natural gas production), in 2017. +Increased Oil and Oil Equivalent Reserves +Estimated total proved oil and natural gas reserves were 215.3 million BOE at December 31, 2018, which was a Company record and an increase +of 41% from 152.8 million BOE at December 31, 2017. +46 Matador Resources Company | 2019 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +The charts below show our total proved oil and natural gas reserves at December 31, 2016, December 31, 2017 and December 31, 2018 and a breakdown of total +reserves among our various operating areas. +Operational Highlights +• +We completed and began producing oil and natural gas from 141 gross (73.8 net) wells in the Delaware Basin in 2018, +including 82 gross (66.8 net) operated and 59 gross (7.0 net) non-operated wells. +• +We increased our total acreage position in the Delaware Basin to approximately 222,200 gross (132,000 net) +acres at December 31, 2018. +Strategic Transactions +We accomplished several important strategic transactions and milestones in 2018 that increased our operational flexibility and opportunities, while preserving the +strength of our balance sheet and improving our liquidity position. These transactions included: +• +a public offering of 7,000,000 shares of our common stock and the receipt of approximately $226.4 million of net +proceeds in connection therewith; +• +a series of transactions whereby we issued $1.05 billion aggregate principal amount of senior notes at a coupon rate +of 5.875% and redeemed our outstanding 6.875% senior notes; +• +an amendment of the Credit Agreement to, among other items, increase the maximum facility amount to $1.5 billion and +increase the borrowing base to $850.0 million while reducing borrowing rates by 0.25% per annum; +• +a strategic relationship between a subsidiary of San Mateo and a subsidiary of Plains to gather and transport crude oil for +upstream producers in and around the Rustler Breaks asset area in Eddy County, New Mexico within a joint development area of approximately 400,000 acres; +• +the expansion of our Black River cryogenic natural gas processing plant (the “Black River Processing Plant”), +adding an incremental designed inlet capacity of 200 MMcf of natural gas per day and bringing the total designed inlet capacity of the Black River Processing Plant to 260 MMcf of natural gas per day; and +• +the $387 million acquisition of 8,400 gross and net leasehold acres in the September 2018 BLM lease sale, which added +$249 million of proved reserves value (Standardized Measure) and also included the Stateline asset area, a critical operating area for the Company’s 2019 expansion of San Mateo II. +The net result of these strategic transactions was a notable increase in our liquidity, the addition of significant assets to our balance sheet and the expansion in the +value of our growing midstream business. +2019 +Proxy Statement | Matador Resources Company 47 +Table of Contents +EXECUTIVE COMPENSATION +Overview +Our Board has a “pay for performance” philosophy and recognizes the leadership of our executive officers in contributing to the Company’s achievements. As +noted above, in 2018, Matador achieved record oil, natural gas and average daily oil equivalent production. In addition, Matador increased its estimated total proved oil and natural gas reserves 41% as of December 31, 2018, as compared to +December 31, 2017. +Despite our 2018 successes, support for our executive compensation program decreased from the average 99% level that we received at our +three previous annual shareholder meetings to approximately 72% at our 2018 Annual Meeting. In response to this lower than anticipated shareholder support, we implemented an extensive shareholder outreach program, reaching out to shareholders +representing approximately 50% of our outstanding stock (excluding stock held by our directors and officers). This outreach effort was led by our lead independent director and the chair of our Compensation Committee. Based upon the feedback we +received from our shareholders and our review of industry best practices, we implemented certain changes to our compensation program, many of which will take full effect with our 2019 compensation program year. Such changes are described in more +detail below. We value feedback from our shareholders and expect to continue our shareholder outreach program in 2019 and beyond. +As a result of industry factors, +our 2018 say-on-pay vote and the Company’s 2018 stock performance, the overall compensation for our Chairman of the Board and Chief Executive Officer, +Mr. Foran, was reduced 27.0% in 2018 as compared to 2017. A portion of this decrease was due to Mr. Foran, along with the other Named Executive Officers, forfeiting approximately $1.2 million in discretionary “Marlan” +bonuses that were accrued in our quarterly financial statements but were ultimately not paid, as reflected in our financial statements for the year ended December 31, 2018. We believe that the forfeiture of such payments shows our commitment to a +pay for performance philosophy and our desire to align our executive officers’ interests with those of our shareholders. +Compensation Program Objectives +Our future success and the ability to create long-term value for our shareholders depend on our ability to attract, retain and motivate highly qualified +individuals in the oil and natural gas industry. In furtherance of these goals, our executive compensation program is designed to meet the following key objectives: +• +to be fair to both the executive and the Company and be competitive with comparable positions at companies in +our peer group; +• +to attract and retain talented and experienced executives in light of the intense competition for +talent in our industry and areas of operation, including from peers and larger industry competitors; +• +to align the interests of our executives with the interests of our shareholders and with the performance of +our Company for long-term value creation; +• +to provide financial incentives to our executives to achieve our key corporate and individual objectives with an +appropriate mix of fixed and variable pay ; +• +to foster a shared commitment among executives by coordinating their corporate and individual goals; and +• +to provide compensation that takes into consideration the education, professional experience, knowledge, commitment and +dedication that is specific to each job and the unique qualities the executive possesses. +2018 Say-On-Pay Vote, Investor Outreach and 2019 Compensation Changes +As noted above, the Compensation Committee and +management undertook an extensive review of the Company’s executive compensation program with input from our independent compensation consultant, Meridian Compensation Partners, LLC (“Meridian”). We held +one-on-one meetings with shareholders representing approximately 50% of our outstanding stock (excluding stock held by our directors and officers). Among the feedback we +received, shareholders expressed concern over alignment of executive compensation with the Company’s long-term performance, the lack of performance-based equity compensation for executives and the use of discretionary bonuses and fully vested +equity awards. +48 Matador Resources Company | 2019 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +Our Compensation Committee and Independent Board considered this feedback, as well as other input received as part of the shareholder outreach efforts, when implementing +the following changes to our executive compensation program, many of which will take full effect with our 2019 compensation program year. +What We Heard +What We Did +Improve alignment of executive compensation with the Company’s long-term performance +2018 +•   Given industry factors, the results of our 2018 +say-on-pay vote and the Company’s 2018 stock performance, Mr. Foran’s total compensation was reduced 27.0% from 2017 to 2018, including a 35.5% +reduction in his annual cash incentive plan compensation . +•   Approximately 85% of Mr. Foran’s 2018 total +compensation was variable and at risk . +2019 +•    Performance stock units (“PSUs”) represent 50% of the total +2019 equity award value granted to the Named Executive Officers (see below). +Incorporate performance-based awards into executive equity compensation program +2019 +•   We transitioned from a long-term incentive mix for executive officers of 67% +service-based restricted stock and 33% stock options to 50% service-based restricted stock units and 50% PSUs , commencing with grants made in February 2019. +•   The newly introduced PSU equity component provides for settlement of between 0% +and 200% of the total target shares subject to the award based on achievement of a relative total shareholder return performance metric over a three-year performance period from January 1, 2019 through December 31, 2021. If +our total shareholder return over such performance period is negative, no more than 100% of the PSUs may vest. +2019 +Proxy Statement | Matador Resources Company 49 +Table of Contents +EXECUTIVE COMPENSATION +What We Heard +What We Did +Limit use of off-cycle discretionary bonuses and fully-vested equity awards +2018 +•   Discretionary bonuses commonly referred to within the Company as +“Marlan” awards in honor of the late Marlan W. Downey (1931-2017), a long-time advisor to the Board, were historically awarded as a way to contemporaneously reward significant performance achievements by select officers and employees. +•    No +Marlan bonuses were awarded to executive officers in 2018 following our 2018 Annual Meeting. +•   Marlan bonuses for executive officers totaling $1.2 million that had been +accrued in our quarterly financial statements, but ultimately were not paid, were forfeited by the executive officers . +•    No fully-vested equity awards were granted to executive officers. +2019 +•    No Marlan bonuses have been awarded to executive officers in 2019, and +the Board has determined to cease its practice of awarding Marlan bonuses to executive officers. Consistent with shareholder feedback, we do intend to continue awarding non-executive employees with +Marlan awards to further incentivize the performance of our staff. +•   We adopted a new Annual Cash Incentive Plan (the “2019 +Incentive Plan”) that provides that the Compensation Committee and Independent Board may make adjustments for individual executive officers for exceptional performance and attainment of certain strategic goals. For the 2019 short-term incentive +program, our Independent Board capped this adjustment for each executive officer. +•    No fully-vested equity awards have been granted to executive officers, +and the Board has determined to cease its practice of granting fully-vested equity awards to executive officers. +Compensation Program Best Practices +What We Do: +What We Don’t +Do: +✓ +We pay for performance—approximately 85% of our CEO’s total direct compensation for 2018 was variable and at risk +× +We prohibit hedging of Company stock +✓ +We maintain robust stock ownership guidelines for officers +× +We do not gross-up excise taxes for severance or change in control payments +✓ +We engage an independent compensation consultant +× +We do not guarantee bonuses +✓ +We utilize competitive benchmarking in setting compensation +× +We do not reprice stock options without shareholder approval +✓ +We conduct annual risk assessments of compensation practices +× +We have no defined benefit or supplemental executive retirement plans +✓ +We conduct shareholder engagement to gather feedback on compensation practices +× +We discourage and limit pledging of Company stock +Elements of 2018 Compensation Program +Our executive compensation program places a considerable amount of an executive’s compensation at risk in the form of incentive or equity-based compensation, which +can be variable from year to year. We also seek to provide +50 Matador Resources Company | 2019 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +an appropriate balance between annual incentives and long-term incentives to ensure that each executive is motivated to consider longer-term Company performance in preference to short-term +results. +For 2018, our management compensation program was comprised of the following primary elements. For additional information on changes to these program +elements for 2019, see “—2018 Say-On-Pay Vote, Investor Outreach and 2019 Compensation Changes” above. +2018 Element +Key Features +Why We Paid This Element +Base Salary +Fixed level of cash compensation +•   Compensates each +executive for his assigned responsibilities, experience, leadership and expected future contributions +Annual Short-Term Incentive Payments +Variable, annual, performance-based cash compensation +•   Focuses and motivates +management to achieve key corporate and individual objectives +•   Rewards achievements over the prior year +Marlan Bonuses +Discretionary cash or equity-based contemporaneous bonuses +•   Provides a +contemporaneous reward for individual professional achievements that create value for the Company and its shareholders +•   In response to feedback received from our shareholders, this element has been +eliminated for executive officers +Restricted Stock +Approximately 67% of targeted total long-term equity award value; Vests ratably in annual installments over three years from grant date +•   Directly aligns +executive and stockholder interests with significant portion of executive compensation in the form of Company stock +•   Retains executives over vesting period +•   This +element has been replaced with cash settled RSUs for executive officers for 2019 +Stock Options +Approximately 33% of targeted total long-term equity award value; Vests ratably in annual installments over three years from grant date; Exercise price equal to closing stock price on grant +date +•   Aligns compensation +with Company’s long-term performance as award only has value to the extent that our stock price increases from the grant date +•   Retains executives over vesting period +•   In +response to feedback received from our shareholders, this element has been replaced with PSUs for executive officers for 2019 +Severance and Change of Control Benefits +Specified severance pay and benefits are provided under each Named Executive Officer’s employment agreement in connection with termination events, including after a change in control +•   Provides an incentive +for executives to remain with the Company despite the uncertainties of a potential or actual change in control +•   Provides a measure of financial security in the event an executive’s +employment is terminated without cause +Other Benefits +Broad-based 401(k) retirement, health and welfare benefits offered to all eligible employees +•   Provide market +competitive benefits. +•   Protect employees against catastrophic loss and encourage a healthy +lifestyle +2019 +Proxy Statement | Matador Resources Company 51 +Table of Contents +EXECUTIVE COMPENSATION +Consistent with our compensation program objectives, we +provide our executive officers with a significant portion of their total target compensation opportunity in the form of variable, rather than fixed, compensation. +As noted above, the structure of executive long-term equity compensation transitioned in 2019 to 50% service-based restricted stock +units and 50% performance stock units. +Role of the Independent Board, Compensation Committee and Management +The Compensation Committee annually evaluates each of the Company’s executive officers, including Mr. Foran, and recommends to the Independent Board the +proposed compensation structure for each of the executives, including salary, bonus and equity and non-equity incentive compensation. Based on such recommendations, the Independent Board sets +Mr. Foran’s compensation each year. Mr. Foran consults with and provides recommendations to the Compensation Committee and Independent Board regarding the compensation structure for each of the other Named Executive Officers. Based on +the recommendations of the Compensation Committee and Mr. Foran, the Independent Board sets the other Named Executive Officers’ compensation each year. The members of the Independent Board are required to be independent pursuant to the +listing standards of the NYSE and the rules and regulations promulgated by the SEC. +As part of their annual evaluations, the Compensation Committee: +• +conducts an analysis of the Company’s annual performance relative to any performance criteria or targets established +under incentive compensation plans and determines whether to recommend to the Independent Board the use of negative discretion in the determination of final incentive awards (to the extent negative discretion is provided for under the applicable +annual performance plan, as described further under “—2018 Annual Incentive Compensation”); +• +reviews and recommends the form of and number of shares to be awarded pursuant to long-term incentive compensation awards, +including vesting terms, expiration dates of stock options and other material provisions of such awards; +• +reviews and recommends any employment agreement, severance agreement, change in control agreement or provision or +separation agreement or amendment thereof; and +• +reviews and recommends any deferred compensation arrangement, retirement plan, other benefits and perquisites. +52 Matador Resources Company | 2019 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +In addition, the Compensation Committee confirms at least annually that our compensation policies and practices do not encourage unnecessary risk taking and reviews the +relationship between risk management, corporate strategy and executive compensation. The Compensation Committee considers, in establishing and reviewing our compensation program, whether the program encourages unnecessary or excessive risk taking +and has concluded that it does not and is not reasonably likely to have a material adverse effect on us. Several features of our program reflect sound risk management practices. Base salaries are fixed in amount and thus do not encourage risk +taking. While annual executive short-term incentive payments are tied to management’s achievements during the previous fiscal year, they also take into account multiple performance criteria based on the executive’s individual performance +and are within the discretion of the Independent Board. Thus, the Compensation Committee believes that our short-term incentive awards appropriately balance risk and the desire to focus executives on specific short-term goals important to the +Company’s success, and that they do not encourage unnecessary or excessive risk taking. In addition, the Compensation Committee believes that our equity compensation program provides an appropriate balance between the goals of increasing the +price of our Common Stock and avoiding potential risks that could threaten our growth and stability due to the fact that the 2018 stock options and service-based restricted stock vest over three years. Furthermore, the Compensation Committee and +Independent Board added PSUs to the equity compensation program for 2019 to further align our executives’ interests with the interests of our shareholders. +In +addition, pursuant to its charter, the Compensation Committee reviews and recommends to the Independent Board any proposals for the adoption, amendment, modification or termination of our incentive compensation, equity-based plans and non-equity based plans. +Role of the Independent Compensation Consultant +The Compensation Committee has engaged Meridian as its independent executive compensation advisory firm. Meridian provides assessments of the competitiveness of the +Company’s executive compensation levels and practices relative to relevant executive labor markets and performs other tasks as requested by the Compensation Committee. For 2018, the Compensation Committee assessed the independence of Meridian +pursuant to applicable SEC and NYSE rules and concluded that Meridian’s engagement by the Compensation Committee did not raise any conflicts of interest. +Use of Peer Group Market Data +Our independent compensation consultant +benchmarks the pay levels of our officers against a group of competitor companies in the oil and natural gas exploration and production sector (the “Peer Group”). In connection with its annual review, the Compensation Committee and +Independent Board adopted the following new Peer Group in 2018, which was used in setting 2018 compensation levels: +Callon Petroleum Company +Centennial Resource Development, Inc. +Cimarex +Energy Co. +Diamondback Energy, Inc. +Energen Corporation +Jagged Peak Energy +Inc. +Laredo Petroleum, Inc. +Parsley Energy, Inc. +QEP Resources, Inc. +SM Energy Company +WPX Energy, Inc. +In addition to considering companies in the oil and natural gas exploration and production sector, the Committee also considered company +size characteristics such as assets, enterprise value and market value when approving the Peer Group. As of December 31, 2018, the Peer Group had a median market capitalization of $2.5 billion, compared to the Company’s market +capitalization of $1.8 billion at such date, placing the Company at the 40 th percentile of the Peer Group. The Peer Group also includes certain companies with operations in the Permian Basin +that face similar opportunities and challenges that we face. The Peer Group is used by the Compensation Committee and the Independent Board in setting Named Executive Officer salaries, annual short-term incentive award opportunities, long-term +incentive awards and target total direct compensation levels. The Compensation +2019 +Proxy Statement | Matador Resources Company 53 +Table of Contents +EXECUTIVE COMPENSATION +Committee and Independent Board use this data to inform their pay decisions as one data point among many others, including Company performance, individual performance, experience and +responsibilities, leadership and professional growth. +2018 Base Salaries +In late 2017, based on the recommendations of Mr. Foran (other than with regard to his base salary), the Compensation Committee recommended and the Independent +Board approved the following 2018 base salaries for our Named Executive Officers. The Independent Board determined raises for each Named Executive Officer were warranted based upon each Named Executive Officer’s individual contributions to, +among other items: +• +the Company’s record oil, natural gas and average daily oil equivalent production for 2017; +• +the significant additions to the Company’s Delaware Basin acreage position throughout 2017; +• +the Company’s continued improvement in operational efficiencies throughout 2017; +• +the significant growth of our midstream business in 2017; +• +the Company’s record reserves for 2017; and +• +the accomplishment of key corporate and individual objectives, including: +¡ +the formation of the San Mateo midstream joint venture in February 2017; and +¡ +the completion of a public offering of our common stock resulting in $208.7 million of proceeds (before expenses). +Executive Officer +2017 Base +Salary +2018 Base +Salary +Joseph Wm. Foran +$ +1,000,000 +$ +1,100,000 +Chairman of the Board and Chief Executive Officer +Matthew V. Hairford +$ +600,000 +$ +660,000 +President +David E. Lancaster +$ +550,000 +$ +625,000 +Executive Vice President and Chief Financial Officer +Craig N. Adams +$ +525,000 +$ +600,000 +Executive Vice President—Land, Legal & +Administration +Billy E. Goodwin +$ +500,000 +$ +575,000 +Executive Vice President and Head of Operations +2018 Annual Incentive Compensation +For 2018, the Company maintained the Amended and Restated Matador Resources Company Annual Incentive Plan for Management and Key Employees, effective January 1, +2016 (the “Incentive Plan”). The Incentive Plan is designed to link executive decision making and performance with the Company’s goals, reinforce these goals and ensure the highest level of accountability for the success of the +Company as a whole. +The Incentive Plan advances Company and shareholder interests by providing an additional means to (i) sustain and enhance the culture of +personal commitment on the part of executives, select managers and key employees in the continued growth, development and financial success of the Company and (ii) encourage them to remain with, and devote their best efforts to, the Company. +The Incentive Plan provides for the granting of awards of incentive compensation that may be paid to a participant upon satisfaction of specified performance goals for a particular performance period. +54 Matador Resources Company | 2019 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +The Incentive Plan was also originally designed in a manner such that awards were intended to satisfy the requirements of “qualified performance based +compensation” within the meaning of Section 162(m) of the Code so that the Company could take federal income tax deductions for any “qualified performance-based compensation” paid under the Incentive Plan to certain individuals +who are covered by the deduction limitations of Section 162(m) of the Code for annual compensation paid to such individuals in excess of $1.0 million. For taxable years beginning after December 31, 2017, this “qualified +performance based compensation” exemption has been repealed for all but certain grandfathered compensation arrangements that were in effect as of November 2, 2017. Our 2018 annual short-term incentive payments are not grandfathered +arrangements and will be subject to the deduction limits of Section 162(m) of the Code. However, we elected to continue our use of the Incentive Plan for 2018 as we felt that the plan fit well within our “pay for performance” +philosophy and would drive our executives to achieve our short-term and long-term performance objectives. Effective as of January 1, 2019, we adopted the 2019 Incentive Plan, which we intend to use for annual short-term incentive awards in 2019 +and future years. Although the Independent Board has implemented an annual performance period with performance goals under the 2019 Incentive Plan that are similar to the supplemental goals that have historically applied under the Incentive Plan, +the 2019 Incentive Plan does not include the overall Adjusted EBITDA Pool Goal discussed below. +The Incentive Plan establishes a performance goal for all +participants with the creation of a performance pool, which is equal to 3.5% of Adjusted EBITDA; provided that Adjusted EBITDA equals or exceeds $50.0 million (the “Adjusted EBITDA Pool Goal”). For these purposes, Adjusted EBITDA is +defined as earnings before interest expense, income taxes, depletion, depreciation and amortization, accretion of asset-retirement obligations, property impairments, unrealized derivative gains and losses, certain other non-cash items and non-cash stock-based compensation expense and net gain or loss on asset sales and inventory impairment and prepayment premium on extinguishment of debt, of +the Company and its subsidiaries, determined on a consolidated income basis. If the Adjusted EBITDA Pool Goal is reached or exceeded, the Incentive Plan provides that the maximum amount that would be payable to each participant is according to the +allocation formula set forth in the table below. The Independent Board, upon the recommendation of the Compensation Committee, may use negative discretion to reduce the amount paid to a participant below the maximum amounts shown in the table. +Participant +Percentage of Performance +Pool +(Maximum) +Joseph Wm. Foran +30.0 +% +Matthew V. Hairford +17.5 +% +David E. Lancaster +17.5 +% +Craig N. Adams +17.5 +% +Billy E. Goodwin +17.5 +% +Total +100.0 +% +2019 +Proxy Statement | Matador Resources Company 55 +Table of Contents +EXECUTIVE COMPENSATION +In the Independent Board’s discretion, supplemental +performance goals (the “Performance Goals”), in addition to the Adjusted EBITDA Pool Goal set forth above, may be established by the Independent Board for each year. Such Performance Goals can be used by the Independent Board in +determining the award payable to a participant, but in no event may the Independent Board increase the amount of an award payable to a participant above the maximum award payable set out in the table above. For 2018, the Chair of the Compensation +Committee met with Meridian and management to determine potential criteria for the Performance Goals. Based on these meetings, the Chair of the Compensation Committee proposed certain preliminary performance criteria categories for consideration as +the Performance Goals for 2018. The Compensation Committee then met with Meridian and management to review the proposed criteria. As a result of these meetings, the Compensation Committee recommended and the Independent Board determined to use the +following performance categories and threshold, target and maximum levels for the Performance Goals for 2018 in determining whether to exercise negative discretion in reducing the amount paid to a participant below the maximum pool amounts described +above: +2018 Performance Goals +Threshold +Target +Maximum +Actual +Results +Actual +Results as +Percent +of +Target +Oil production (millions of Bbl) +9.7 +9.9 +10.1 +11.1 +112% +Total production (millions of BOE) +16.5 +16.9 +17.3 +19.0 +112% +Acreage acquisition (net acres) (1) +5,000 +10,000 +15,000 +30,000 +300% +Return on average capital employed (ROACE) (2) +20.2% +20.8% +21.2% +23% +109% +Q4 2018 San Mateo Adjusted EBITDA +(millions of $) (3) +$19.0 +$22.0 +$25.0 +$19.7 +90% +Adjusted EBITDA (millions of $) (3)(4) +$425 +$440 +$455 +$553.2 +126% +Total 2018 shareholder return vs. Peer Group +Upper 50% +Upper 35% +Upper 25% +Bottom 25% +N/A +(1) +Net acres added in the Delaware Basin after accounting for expirations and dispositions in 2017. +(2) +ROACE is a non-GAAP financial measure included herein solely as a reference point +under the Incentive Plan. It is commonly used by similar companies in our industry. The Compensation Committee and the Independent Board believe ROACE is an appropriate Performance Goal because it allows them to evaluate our return on capital and +compare our profitability and the efficiency with which we have employed capital over time relative to other companies. For a definition of ROACE and a reconciliation of ROACE to our net income (loss), see Annex A to this Proxy Statement. +(3) +Adjusted EBITDA is a non-GAAP financial measure included herein solely as a +reference point under the Incentive Plan. It is commonly used by similar companies in our industry. The Compensation Committee and the Independent Board believe Adjusted EBITDA is an appropriate Performance Goal because it allows them to evaluate +our operating performance and compare the results of operations from period to period without regard to our financing methods or capital structure. For a definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to our net income (loss) +and net cash provided by operating activities, see Annex A to this Proxy Statement. +(4) +Attributable to Matador Resources Company shareholders. +56 Matador Resources Company | 2019 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +In making recommendations regarding the potential payment guidelines under the 2018 Performance Goals, the Compensation Committee reviewed Meridian’s +recommendations and recommendations of management regarding target payment guidelines. Based on such review, which took into account the differing responsibilities of each Named Executive Officer, the target payment guidelines set forth below were +adopted, which remain unchanged from 2017. +Participant +Target +Annual +Incentive +Opportunity +as % of 2018 +Base Salary +Joseph Wm. Foran +110.0 +% +Matthew V. Hairford +90.0 +% +David E. Lancaster +85.0 +% +Craig N. Adams +80.0 +% +Billy E. Goodwin +75.0 +% +Pursuant to the Incentive Plan, the amount of any annual award could be greater or less than the annual incentive opportunity outlined +above based on achievement of the Performance Goals; provided, however, that no award could exceed the maximum payable under the Incentive Plan, as determined based upon achievement of the Adjusted EBITDA Pool Goal. +In February 2019, the Compensation Committee and the Independent Board concluded that the Company had achieved Adjusted EBITDA of $553.2 million for 2018, which is +in excess of the $50.0 million Adjusted EBITDA Pool Goal. Adjusted EBITDA is a non-GAAP financial measure included herein solely as a reference point under the Incentive Plan. For a definition of Adjusted +EBITDA and a reconciliation of Adjusted EBITDA to our net income (loss) and net cash provided by operating activities, see Annex A to this Proxy Statement. +2019 +Proxy Statement | Matador Resources Company 57 +Table of Contents +EXECUTIVE COMPENSATION +The Compensation Committee then assessed the Company’s +2018 results in light of the Performance Goals and the following individual performance milestones for each Named Executive Officer when determining appropriate adjustments to short-term incentive award amounts: +Participant +Individual Performance +Milestones +Joseph Wm. Foran Chairman and Chief Executive Officer +•    Collaborates with the Board and other executive +officers to create an effective team culture throughout each level of Matador’s organization that has built value through (1) selective acreage acquisitions , (2) traditional oil and gas operations growing +organically through the drill bit and (3) expanding midstream operations in Matador’s various asset areas +•   Provided direction and leadership throughout Matador in +developing and executing Matador’s strategy and operational plan in 2018, which resulted in record operational and midstream results, including +¡    41% +reserves growth +¡    34% oil equivalent production growth +¡    118% +net income (GAAP) growth +¡    65% Adjusted EBITDA growth +•    Provided leadership to the Board , including attracting candidates with +additional expertise and experience and improving the Board’s function and processes +•   Directed the Company’s collective efforts to evaluate, negotiate terms and +acquire approximately 30,000 net acres of additional leasehold and mineral interests, including 8,400 gross and net leasehold acres in the September 2018 BLM lease sale +•   Worked +with other executive officers and directors to establish the vision and strategy for Matador’s midstream operations , including the negotiations for the San Mateo II joint venture and the expansion of the San Mateo system +•    Oversaw +the collaborative management of the Company’s balance sheet and strong financial position , including through the issuance of common stock and senior notes and an increase in the maximum facility amount under the Credit Agreement +•   Led +firmwide focus on attracting, training and retaining talent , encouraging employee and director engagement and aligning our strategy and operational plan throughout the organization +•   Directed +efforts to develop and maintain relationships with directors, shareholders, vendors and other key stakeholders with the assistance of other executive officers +Matthew V. Hairford President +•    Oversaw the team +efforts that resulted in record oil equivalent production, particularly in the Delaware Basin where daily oil equivalent production increased 54% in 2018 +•   Directs the work of the Company’s field +personnel and the implementation of the Company’s health, safety and environmental initiatives and interacts with shareholders and directors on financial matters +•   Works with other executive officers to contain +costs while maintaining and improving relationships with key vendors +58 Matador Resources Company | 2019 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +Participant +Individual Performance +Milestones +•   As Chairman of the Board and President of San Mateo, led the Company’s +midstream efforts to, among other items, +¡    Expand San Mateo’s infrastructure , including increasing the Black River Processing Plant’s designed inlet capacity from +60 MMcf per day to 260 MMcf per day +¡   Enter into strategic relationships and long-term agreements with other midstream companies and producers near the +Rustler Breaks asset area +David E. Lancaster Executive Vice President and Chief Financial Officer +•    Led the collective effort +to manage the Company’s balance sheet and improve the Company’s already strong financial position through +¡    Public +offering of 7,000,000 shares of common stock resulting in net proceeds of approximately $226.4 million +¡   Issuance of +$1.05 billion aggregate principal amount of senior notes and redemption of $575.0 million aggregate principal amount of senior notes +¡   Amendment of +the Credit Agreement to increase the maximum facility amount to $1.5 billion , increase the borrowing base to $850 million and reduce borrowing rates by 0.25% per annum +¡   Responsible for the Company’s financial modeling, guidance and relationships with shareholders and public markets +•   As a +distinguished petroleum engineer, provides oversight and quality control to the Company’s exploration and development activities and its reserve studies +Craig N. Adams +Executive Vice President—Land, Legal and Administration +•   Coordinates and oversees the +general legal matters of the Company through the management of the Company’s legal staff +•    Led the Company’s legal efforts to +document and complete the Company’s debt and equity financing transactions described above +•    Managed the Company’s legal and land +efforts to document and complete its strategic acquisition and disposition activities , including in the BLM lease sale described above and other transactions that led to the acquisition of approximately 30,000 net acres of additional +leasehold and mineral interests +•    Responsible for coordinating administrative functions of the Company, including Board functions and interaction with management, office facilities and the oversight +of the Company’s human resource activities and departmental efficiencies +Billy E. Goodwin +Executive Vice President and Head of Operations +•    Led the Company’s +collaborative drilling, completions and production activities, managing approximately $686 million of capital expenditures in 2018 related to the Company’s operations in its primary operating areas, +resulting in +¡    41% reserves growth +¡    34% +oil equivalent production growth +•   Worked with other executive officers and staff members to innovate and to increase capital efficiencies by drilling longer laterals, using central facilities and reducing costs, while +maintaining and improving relationships with key vendors +•   Conceived and implemented MaxOps program to increase drilling, +completions and production experience among our engineering staff and MaxCom program to ensure coordination of drilling and completion operations +•   Oversaw team efforts to drill salt water disposal wells in connection +with the expansion of San Mateo’s salt water gathering and disposal systems +2019 +Proxy Statement | Matador Resources Company 59 +Table of Contents +EXECUTIVE COMPENSATION +The Compensation Committee also reviewed with Mr. Foran +the individual performance of the other Named Executive Officers to make a determination as to whether any individual Named Executive Officer merited a short-term incentive payment above or below the payout level determined for the Named Executive +Officers generally. The Compensation Committee took into consideration the individual performance milestones listed above as well as additional contributions to the achievement of Company-wide goals. Based on this review, the Compensation Committee +determined that each of the Named Executive Officers performed at a high level contributing to the Company’s success. In addition, the Compensation Committee determined that Mr. Goodwin merited a payout at a greater level. Mr. Goodwin +was recognized for his leadership role in the Company’s drilling and completions programs, including the implementation of the Company’s MaxCom program, which allows for real-time monitoring of the Company’s drilling and completion +operations and contributed to reduced drilling times and increased well productivity in 2018. In light of these significant achievements, Mr. Goodwin’s short-term incentive payout level was set at 195% of his target award under the +Incentive Plan. +Based on such assessment, the Compensation Committee recommended to the Independent Board the annual cash awards listed below for each Named +Executive Officer under the Incentive Plan. The Independent Board approved such annual cash awards, which were paid to the Named Executive Officers in the first quarter of 2019. +Executive Officer +Percentage of +Performance +Pool (Maximum) +Maximum Award +Payable under +Incentive Plan +Target Award +Payable under +Incentive Plan +2018 Incentive +Plan Actual +Award +Actual Award +as % of +Target Award +Joseph Wm. Foran +30.0 +% +$ +5,808,842 +$ +1,210,000 +$ +1,936,000 +160 +% +Matthew V. Hairford +17.5 +% +$ +3,388,491 +$ +594,000 +$ +900,400 +152 +% +David E. Lancaster +17.5 +% +$ +3,388,491 +$ +531,250 +$ +850,000 +160 +% +Craig N. Adams +17.5 +% +$ +3,388,491 +$ +480,000 +$ +790,000 +165 +% +Billy E. Goodwin +17.5 +% +$ +3,388,491 +$ +431,250 +$ +840,000 +195 +% +Marlan Bonuses +The Independent Board +has discretionary authority under the 2012 Plan (as defined below) to reward executives for particular accomplishments at times and in amounts that the Independent Board approves, upon the recommendation of the Compensation Committee. In the first +quarter of 2018, prior to our 2018 Annual Meeting, the Compensation Committee recommended, and the Independent Board approved and paid, discretionary cash Marlan bonuses to certain of our Named Executive Officers in recognition of their particular +roles in the formation of the strategic relationship between a subsidiary of San Mateo and a subsidiary of Plains to gather and transport crude oil for upstream producers in and around the Rustler Breaks asset area in Eddy County, New Mexico (in the +amounts of $300,000, $100,000, $100,000, $100,000 and $50,000, respectively, for each of Messrs. Foran, Hairford, Lancaster, Adams and Goodwin). These bonuses are reflected in the “Bonus” column of the Summary Compensation Table below. As +discussed above, the Compensation Committee and Independent Board determined to discontinue Marlan bonuses for executive officers following the 2018 Annual Meeting. As a result, additional Marlan bonuses for executive officers totaling +$1.2 million that had been accrued in our quarterly financial statements were not paid and were forfeited by the executive officers. Consistent with shareholder feedback, we do intend to continue awarding +non-executive employees with Marlan awards to further incentivize the performance of our staff. +60 Matador Resources Company | 2019 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +2018 Long-Term Incentive Compensation +The Board maintains the Matador +Resources Company Amended and Restated 2012 Long-Term Incentive Plan (the “2012 Plan”). In February 2018, after consulting with Meridian and management, the Compensation Committee recommended, and the Independent Board awarded, annual +equity awards of non-qualified stock options and restricted stock under the 2012 Plan to each Named Executive Officer. The stock options and restricted stock were granted in order to facilitate retention of +our Named Executive Officers, incentivize positive future results and further align the interests of our Named Executive Officers with those of the Company’s shareholders. The table below provides the key terms of the February 2018 equity +awards. +Key Terms +Restricted Stock +Non-Qualified +Stock Options +Targeted percentage of total award value +67% +33% +Vesting terms +Three years ratably on each anniversary +Three years ratably on each anniversary +Exercise price +— +$29.68 (closing price on grant date) +Term of option +— +Six years +Rights to receive dividends and vote +Yes +No +The number of shares underlying each grant and the grant date fair value of the 2018 annual equity grants are set forth in the table +below. +Participant +Stock +Options +Restricted +Stock +Grant Date +Fair Value +Joseph Wm. Foran +105,485 +89,847 +$ +3,999,989 +Chairman of the Board and Chief Executive +Officer +Matthew V. Hairford +55,379 +47,169 +$ +2,099,967 +President +David E. Lancaster +50,105 +42,677 +$ +1,899,980 +Executive Vice President and Chief Financial +Officer +Craig N. Adams +44,831 +38,185 +$ +1,699,995 +Executive Vice President—Land, Legal & +Administration +Billy E. Goodwin +39,556 +33,692 +$ +1,499,967 +Executive Vice President and Head of Operations +As discussed above under “2018 Say-On-Pay Vote, +Investor Outreach and 2019 Compensation Changes,” the Company has revised its long-term equity incentive program for 2019. +2019 Annual Incentive +Compensation +As discussed above, we adopted the 2019 Incentive Plan effective as of January 1, 2019. We intend to use the 2019 Incentive Plan for +annual short-term incentive awards in 2019 and future years. Although the Independent Board has implemented an annual performance period with performance goals under the 2019 Incentive Plan that are similar to the supplemental goals that have +historically applied under the Incentive Plan, the 2019 Incentive Plan does not include the overall Adjusted EBITDA Pool Goal that was in place under the Incentive Plan. The 2019 Incentive Plan, among other items, also provides that the Compensation +Committee and Independent Board may make adjustments for individual executive officers for exceptional performance and attainment of certain strategic goals. In implementing the short-term incentive program for 2019 under the 2019 Incentive Plan, +our Independent Board capped this adjustment for each executive officer. +2019 +Proxy Statement | Matador Resources Company 61 +Table of Contents +EXECUTIVE COMPENSATION +For 2019, the Chair of the Compensation Committee met with +Meridian and management to determine potential performance goal categories for 2019. Based on these meetings, the Chair of the Compensation Committee proposed certain preliminary performance goal categories for consideration. The Compensation +Committee then met with Meridian and management to review the proposed categories. As a result of these meetings, the Compensation Committee recommended and the Independent Board determined to use the following performance categories for the 2019 +performance goals under the 2019 Incentive Plan: +2019 Performance Goal Categories +Oil production +Return on Average Capital Employed (ROACE) +San Mateo Adjusted EBITDA +Net Debt/Adjusted EBITDA +Total 2019 shareholder return vs. peer group +Cash operating costs per BOE, excluding interest +2019 Long-Term Incentive Compensation +For 2019, we transitioned from a long-term incentive mix for executive officers of 67% service-based restricted stock and 33% stock options to 50% service-based +restricted stock units, settling in cash, and 50% PSUs, commencing with grants made in February 2019. +The table below provides the key terms of the February 2019 +equity awards. +Key Terms +Restricted Stock Units +Performance Stock Units +Targeted percentage of total award value +50% +50% +Vesting terms +Three years ratably on each anniversary +Following three-year performance period ending December 31, 2021 +Rights to receive dividends and vote +No +No +The newly introduced PSU equity component provides for settlement of between 0% and 200% of the total target shares subject to the award +based on achievement of a relative total shareholder return performance metric over a three-year performance period from January 1, 2019 through December 31, 2021. If our total shareholder return over such performance period is negative, +no more than 100% of the PSUs may vest. The applicable percentage of vested units is shown below with respect to each possible percentile ranking. +Company’s Relative Total +Shareholder +Return Percentile Ranking +Percentage of Target Units +That Will +Vest +0 +0% +10 th +20% +20 th +40% +30 th +60% +40 th +80% +50 th +100% +60 th +120% +70 th +140% +80 th +160% +90 th +180% +100 th +200% +62 Matador Resources Company | 2019 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +The peer group used for determination of the Company’s relative total shareholder return is as follows: +Callon Petroleum Company +Laredo Petroleum, Inc. +Centennial Resource Development, Inc. +Oasis Petroleum, Inc. +Cimarex Energy Co. +Parsley Energy, Inc. +Diamondback Energy, Inc. +SM Energy Company +Encana Corp. +WPX Energy, Inc. +Jagged Peak Energy Inc. +The number of shares underlying the 2019 annual equity grants are set forth in the table below. +Participant +Restricted +Stock Unit +Performance +Stock Units +Joseph Wm. Foran +113,379 +113,379 +Chairman of the Board and Chief Executive +Officer +Matthew V. Hairford +59,524 +59,524 +President +David E. Lancaster +53,855 +53,855 +Executive Vice President and Chief Financial +Officer +Craig N. Adams +48,186 +48,816 +Executive Vice President—Land, Legal & +Administration +Billy E. Goodwin +48,186 +48,186 +Executive Vice President and Head of +Operations +Benefits +We offer a variety of health +and welfare programs to eligible employees, including the Named Executive Officers. The health and welfare programs are intended to protect employees against catastrophic loss and encourage a healthy lifestyle. Our health and welfare programs +include medical, pharmacy, dental, disability and life insurance. We also have a 401(k) plan for eligible employees, including the Named Executive Officers, to which we contribute 3% of the employee’s eligible compensation, which is subject to +limits established by the Code, and have the discretion to contribute up to an additional 4% of the employee’s eligible compensation as a dollar-for-dollar matching +contribution with respect to his or her elective deferral contributions. The discretionary dollar-for-dollar match is subject to vesting based upon years of service to +the Company and the limits on the compensation that may be considered under the Code. In addition, we provide long-term care insurance for certain of our executive officers. +Severance and Separation Arrangements +Employment Agreements +We have entered into employment agreements with each of our Named Executive Officers. Under the employment agreements, if a termination of employment occurs +pursuant to one of the following events: +• +the Named Executive Officer dies; +• +the Named Executive Officer is totally disabled; +• +we mutually agree to end the employment agreement; +• +we dissolve and liquidate; or +• +the term of the employment agreement ends, +we will pay the Named Executive Officer the average of his annual bonus, which includes non-equity incentive compensation, for +the prior two years pro-rated based on the number of complete or partial months completed during the year of termination. +2019 +Proxy Statement | Matador Resources Company 63 +Table of Contents +EXECUTIVE COMPENSATION +Also, under the employment agreements, if one of the following +occurs: +• +the Named Executive Officer’s employment is terminated other than (i) as set forth above, (ii) by us for +just cause or (iii) in connection with a “change in control” as described below; or +• +the Named Executive Officer terminates his employment for “good reason,” +if the Named Executive Officer is Mr. Foran, we will pay him twice his base salary and twice the average of his annual bonus for the prior two years; if the Named +Executive Officer is Messrs. Hairford, Lancaster, Adams or Goodwin, we will pay him 1.5 times his base salary and 1.5 times the average of his annual bonus for the prior two years. +Finally, under the employment agreements of Messrs. Foran, Hairford and Lancaster, which were entered into in 2011 in connection with our initial public offering, if we +terminate the Named Executive Officer within 30 days prior to the “change in control” or within 12 months after the “change in control” without just cause or the Named Executive Officer terminates his employment with or without +“good reason” during such period, we will pay him three times his base salary and three times the average of his annual bonus for the prior two years. These agreements were entered into prior to our initial public offering. At that time, +we believed a “modified single trigger” was appropriate given the Company’s size, early stage of development and strong growth aspirations. Since that time, however, we have ceased to use “modified single triggers” in +executive employment agreements, and we intend to exclusively use “double triggers” going forward, as we have since 2014. The agreement entered into with Mr. Adams in March 2014 and the agreement entered into with Mr. Goodwin +effective February 2016 each include a “double trigger” such that if we terminate either executive within 30 days prior to the “change in control” or within 12 months after the “change in control” without just cause or +he terminates his employment with “good reason,” we will pay Mr. Adams or Mr. Goodwin three times his base salary and three times the average of his annual bonus for the prior two years. In addition, if any of our Named Executive Officers +are terminated or terminate their employment as set forth above in connection with a “change in control,” all equity awards of such Named Executive Officer vest immediately prior to such termination. +For definitions of “change in control,” “good reason” and “just cause,” please see the employment agreement of each Named Executive +Officer, each of which is included as an exhibit to the Company’s most recent Annual Report on Form 10-K. +Equity +Plans +For equity grants under the 2012 Plan, vesting upon a “change in control” for the Named Executive Officers mirrors the terms of their employment +agreements. +The “change in control” provisions in the employment agreements and the equity grants under the 2012 Plan and its predecessor help prevent +management from being distracted by rumored or actual changes in control. The “change in control” provisions provide: +• +incentives for those Named Executive Officers to remain with us despite the uncertainties of a potential or actual change +in control; +• +assurance of severance payments for terminated Named Executive Officers; and +• +access to equity compensation after a change in control. +Stock Ownership Guidelines +We have adopted stock ownership guidelines +for the following officers in the following designated amounts: +• +Chairman and Chief Executive Officer—shares equal to five times base salary; +• +President—shares equal to five times base salary; +• +Executive Vice Presidents—shares equal to two and 1/2 times base salary; +64 Matador Resources Company | 2019 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +• +Senior Vice Presidents—shares equal to two times base salary; and +• +Vice Presidents and Executive Directors—shares equal to one and 1/2 times base salary. +Newly appointed officers have until the fifth anniversary of his or her appointment as an officer of the Company within which to achieve the stock ownership position. +Shares that count toward the stock ownership guidelines include time-based restricted shares. Shares that will not count toward the stock ownership guidelines include shares underlying unexercised stock options, unexercised stock appreciation rights +and performance-based awards for which the performance requirements have not been satisfied. +Until each of the above officers reaches the stock ownership level +required of his or her position, such officer must hold at least 50% of all “net shares” received through restricted stock or restricted stock unit vesting or realized through stock option exercises. For this purpose, “net +shares” means all shares retained after applicable withholding of any shares for tax purposes. Additionally, upon the vesting of restricted stock or restricted stock units or the exercise of stock options, each officer must hold the net shares +for a minimum of 12 months following such vesting or exercise, or until his earlier retirement. Messrs. Foran, Hairford, Lancaster, Adams and Goodwin each own shares in excess of the applicable minimum requirement set forth in the stock ownership +guidelines. As of April 12, 2019, Mr. Foran held shares with a value equal to approximately 90 times his 2018 base salary. +Anti-Hedging and +Anti-Pledging Policies +Pursuant to the Company’s insider trading policy, the Company prohibits hedging of its securities by directors, officers or +employees. The insider trading policy also restricts directors and executive officers from pledging more than 25% of his or her holdings of the Company’s stock without the prior written consent of the Corporate Governance Committee. +Strategic Planning and Compensation Committee Report +We have reviewed and discussed with management the Compensation +Discussion and Analysis required by Item 402(b) of Regulation S-K and based on such review and discussions, we recommended to the Board that the Compensation Discussion and Analysis be included in +this Proxy Statement. +Strategic Planning and Compensation Committee, +R. Gaines Baty, Chair +Reynald A. Baribault +Craig T. Burkert +Timothy E. Parker +Kenneth L. Stewart +2019 +Proxy Statement | Matador Resources Company 65 +Table of Contents +EXECUTIVE COMPENSATION +Summary +Compensation Table +The following table summarizes +the total compensation awarded to, earned by or paid to Messrs. Foran, Hairford, Lancaster, Adams and Goodwin for 2018, 2017 and 2016. This table and the accompanying narrative should be read in conjunction with the CD&A, which sets forth the +objectives and other information regarding our executive compensation program. +Name and Principal Position +Year +Salary +Bonus (1) +Stock +Awards (2) +Option +Awards (3) +Non-Equity +Incentive Plan +Compensation (4) +All Other +Compensation +Total +Joseph Wm. Foran +2018 +$ +1,100,000 +$ +300,000 +$ +2,666,659 +$ +1,333,330 +$ +1,936,000 +$ +23,331 +(5) +$ +7,359,320 +Chairman of the Board and +Chief Executive Officer +2017 +$ +1,000,000 +$ +950,000 +$ +3,582,908 +$ +1,524,990 +$ +3,000,000 +$ +22,489 +$ +10,080,387 +2016 +$ +900,000 +$ +800,000 +$ +1,413,450 +$ +1,292,703 +$ +1,575,000 +$ +22,251 +$ +6,003,404 +Matthew V. Hairford +2018 +$ +660,000 +$ +100,000 +$ +1,399,976 +$ +699,991 +$ +900,400 +$ +21,112 +(6) +$ +3,781,479 +President +2017 +$ +600,000 +$ +275,000 +$ +990,001 +$ +989,991 +$ +1,030,000 +$ +22,802 +$ +3,907,794 +2016 +$ +550,000 +$ +200,000 +$ +479,880 +$ +438,882 +$ +908,000 +$ +22,452 +$ +2,599,214 +David E. Lancaster +2018 +$ +625,000 +$ +100,000 +$ +1,266,653 +$ +633,327 +$ +850,000 +$ +19,250 +(7) +$ +3,494,230 +Executive Vice President +and Chief Financial Officer +2017 +$ +550,000 +$ +325,000 +$ +866,486 +$ +866,504 +$ +935,000 +$ +18,900 +$ +3,561,890 +2016 +$ +475,000 +$ +250,000 +$ +372,990 +$ +341,132 +$ +784,000 +$ +18,550 +$ +2,241,672 +Craig N. Adams +2018 +$ +600,000 +$ +100,000 +$ +1,133,331 +$ +566,664 +$ +790,000 +$ +21,531 +(8) +$ +3,211,526 +Executive Vice President — +Land, Legal & Administration +2017 +$ +525,000 +$ +375,000 +$ +722,008 +$ +721,990 +$ +840,000 +$ +21,181 +$ +3,205,179 +2016 +$ +475,000 +$ +350,000 +$ +372,990 +$ +341,132 +$ +665,000 +$ +20,831 +$ +2,224,953 +Billy E. Goodwin +2018 +$ +575,000 +$ +50,000 +$ +999,979 +$ +499,988 +$ +840,000 +$ +19,250 +(7) +$ +2,984,217 +Executive Vice President and +Head of Operations +2017 +$ +500,000 +$ +100,000 +$ +587,508 +$ +587,489 +$ +800,000 +$ +18,900 +$ +2,593,897 +2016 +$ +425,000 +$ +165,000 +$ +296,655 +$ +271,310 +$ +595,000 +$ +18,550 +$ +1,771,515 +(1) +Reflects ad hoc discretionary “Marlan” bonuses awarded by the Independent Board to recognize such Named +Executive Officer’s contributions to certain transactions and accomplishments of the Company. As a result of feedback received during shareholder outreach efforts following the 2018 Annual Meeting, the Board has ceased to award its executive +officers with such Marlan bonuses. See “—Compensation Discussion and Analysis—2018 Say-on-Pay Vote, Investor Outreach and 2019 Compensation Changes” +above. +(2) +Reflects the grant date fair value of restricted stock or, for 2017, Common Stock awards, as applicable, computed in +accordance with FASB ASC Topic 718. +(3) +Reflects the grant date fair value of option awards computed in accordance with FASB ASC Topic 718. Our policy and +assumptions made in the valuation of the stock options are contained in Note 2 and Note 8 of the audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, +2018. +(4) +Represents awards pursuant to the Incentive Plan. See “—Compensation Discussion and Analysis—2018 Annual +Incentive Compensation” above. +(5) +Consists of $19,250 in 401(k) matching contributions as described in “—Compensation Discussion and +Analysis—Benefits,” $1,482 in premiums reimbursed to Mr. Foran for a life insurance policy covering Mr. Foran and $2,599 in long-term care insurance premiums. +(6) +Consists of $19,250 in 401(k) matching contributions as described in “—Compensation Discussion and +Analysis—Benefits” and $1,862 in long-term care insurance premiums. +(7) +Reflects 401(k) matching contributions as described in “—Compensation Discussion and +Analysis—Benefits.” +(8) +Consists of $19,250 in 401(k) matching contributions as described in “—Compensation Discussion and +Analysis—Benefits” and $2,281 in long-term care insurance premiums. +66 Matador Resources Company | 2019 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +Grants of Plan-Based Awards Table +The following table sets forth certain information regarding non-equity awards granted by the Independent Board pursuant to the Incentive Plan and stock and option awards granted by the Independent Board pursuant to the 2012 Plan during the year ended December 31, 2018 +to the Named Executive Officers below: +Estimated Future Payouts +Under Non-Equity Incentive +Plan Awards (1) +All +Other +Stock +Awards: +Number +of Shares +of Stock +or Units +All Other +Option +Awards: +Number of +Securities +Underlying +Options (2) +Exercise +or Base +Price of +Option +Awards +Grant +Date +Fair +Value of +Stock +and +Option +Awards +Threshold +Target +Maximum +Name +Grant Date +($) +($) +($) +(# shares) +(# shares) +($/share) +($) +Joseph Wm. Foran +— +— +— +5,808,842 +— +— +— +— +2/16/18 +— +— +— +89,847 +— +— +2,666,659 +2/16/18 +— +— +— +— +105,485 +29.68 +1,333,330 +Matthew V. Hairford +— +— +— +3,388,491 +— +— +— +— +2/16/18 +— +— +— +47,169 +— +— +1,399,976 +2/16/18 +— +— +— +— +55,379 +29.68 +699,991 +David E. Lancaster +— +— +— +3,388,491 +— +— +— +— +2/16/18 +— +— +— +42,677 +— +— +1,266,653 +2/16/18 +— +— +— +— +50,105 +29.68 +633,327 +Craig N. Adams +— +— +— +3,388,491 +— +— +— +— +2/16/18 +— +— +— +38,185 +— +— +1,133,331 +2/16/18 +— +— +— +— +44,831 +29.68 +566,664 +Billy E. Goodwin +— +— +— +3,388,491 +— +— +— +— +2/16/18 +— +— +— +33,692 +— +— +999,979 +2/16/18 +— +— +— +— +39,556 +29.68 +499,988 +(1) +See “—Compensation Discussion and Analysis—2018 Annual Incentive Compensation” and “—Summary +Compensation Table—Non-Equity Incentive Plan Compensation” regarding the actual payments made to the Named Executive Officers pursuant to the Incentive Plan. As discussed in “Compensation +Discussion and Analysis,” a maximum payout is provided under the Incentive Plan for the 2018 awards granted thereunder, which maximum payout may be reduced (but not increased) at the discretion of the Independent Board. Thus, for 2018, the +Incentive Plan does not provide for threshold or target payouts. +(2) +The term of such option awards is six years. +2019 +Proxy Statement | Matador Resources Company 67 +Table of Contents +EXECUTIVE COMPENSATION +Outstanding +Equity Awards at December 31, 2018 +The +following table summarizes the total outstanding option awards at December 31, 2018 for each Named Executive Officer: +Option +Awards +Name +Number of +Securities +Underlying +Unexercised +Stock +Options (#) +Exercisable +Number of +Securities +Underlying +Unexercised +Stock +Options (#) +Unexercisable +Option +Exercise +Price +Option +Expiration +Date +Joseph Wm. Foran +68,376 +— +$ +23.40 +3/6/19 +228,571 +— +$ +22.01 +1/20/20 +105,000 +— +$ +21.66 +2/26/20 +13,725 +13,726 +$ +27.72 +4/29/20 +— +235,465 +$ +15.00 +2/18/21 +48,228 +96,458 +$ +27.26 +2/14/23 +— +105,485 +$ +29.68 +2/15/24 +Matthew V. Hairford +5,074 +— +$ +19.71 +2/10/19 +46,154 +— +$ +23.40 +3/6/19 +62,857 +— +$ +22.01 +1/20/20 +10,000 +— +$ +9.00 +2/21/20 +2,941 +2,941 +$ +27.72 +4/29/20 +— +79,942 +$ +15.00 +2/18/21 +31,309 +62,618 +$ +27.26 +2/14/23 +— +55,379 +$ +29.68 +2/15/24 +David E. Lancaster +7,610 +— +$ +19.71 +2/10/19 +21,368 +— +$ +23.40 +3/6/19 +30,000 +— +$ +22.01 +1/20/20 +15,000 +— +$ +9.00 +2/21/20 +1,961 +1,961 +$ +27.72 +4/29/20 +— +62,137 +$ +15.00 +2/18/21 +27,403 +54,808 +$ +27.26 +2/14/23 +— +50,105 +$ +29.68 +2/15/24 +Craig N. Adams +6,342 +— +$ +19.71 +2/10/19 +25,801 +— +$ +23.40 +3/6/19 +30,000 +— +$ +22.01 +1/20/20 +1,961 +1,961 +$ +27.72 +4/29/20 +— +62,137 +$ +15.00 +2/18/21 +22,833 +45,667 +$ +27.26 +2/14/23 +— +44,831 +$ +29.68 +2/15/24 +Billy E. Goodwin +5,517 +— +$ +22.66 +3/16/19 +— +49,419 +$ +15.00 +2/18/21 +18,579 +37,160 +$ +27.26 +2/14/23 +— +39,556 +$ +29.68 +2/15/24 +68 Matador Resources Company | 2019 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +The following table provides the vesting dates for unvested stock options as of December 31, 2018: +Vesting Date +Joseph Wm. +Foran +Matthew V. +Hairford +David E. +Lancaster +Craig N. +Adams +Billy E. +Goodwin +2/15/19 +48,229 +31,309 +27,404 +22,833 +18,580 +2/16/19 +35,161 +18,459 +16,701 +14,943 +13,185 +2/19/19 +235,465 +79,942 +62,137 +62,137 +49,419 +4/30/19 +13,726 +2,941 +1,961 +1,961 +— +2/15/20 +48,229 +31,309 +27,404 +22,834 +18,580 +2/16/20 +35,162 +18,460 +16,702 +14,944 +13,185 +2/16/21 +35,162 +18,460 +16,702 +14,944 +13,186 +Total Unvested Stock Options +451,134 +200,880 +169,011 +154,596 +126,135 +The following table summarizes the total outstanding restricted stock awards at December 31, 2018 for each Named Executive Officer: +Stock Awards +Name +Number of +Shares or +Units of +Stock That +Have Not +Vested (#) +Market Value +of Shares or +Units of +Stock That +Have Not +Vested +Joseph Wm. Foran +221,373 +$ +3,437,923 +Matthew V. Hairford +103,373 +$ +1,605,383 +David E. Lancaster +88,734 +$ +1,378,039 +Craig N. Adams +80,709 +$ +1,253,411 +Billy E. Goodwin +67,837 +$ +1,053,509 +The following table provides the vesting dates for restricted stock outstanding as of December 31, 2018: +Vesting Date +Joseph Wm. +Foran +Matthew V. +Hairford +David E. +Lancaster +Craig N. +Adams +Billy E. +Goodwin +2/15/19 +18,648 +12,106 +10,595 +8,829 +7,184 +2/16/19 +29,949 +15,723 +14,225 +12,728 +11,230 +2/19/19 +94,230 +31,992 +24,866 +24,866 +19,777 +2/15/20 +18,648 +12,106 +10,596 +8,829 +7,184 +2/16/20 +29,949 +15,723 +14,226 +12,728 +11,231 +2/16/21 +29,949 +15,723 +14,226 +12,729 +11,231 +Total Unvested Shares +221,373 +103,373 +88,734 +80,709 +67,837 +2019 +Proxy Statement | Matador Resources Company 69 +Table of Contents +EXECUTIVE COMPENSATION +Option +Exercises and Stock Vested +The following table +provides information on the stock options exercised and stock awards that vested for each Named Executive Officer during 2018: +Option Awards +Stock Awards +Name +Number of +Shares +Acquired +on +Exercise +(#) +Value +Realized on +Exercise +Number of +Shares +Acquired on +Vesting +(#) +Value +Realized on +Vesting +Joseph Wm. Foran +20,294 +$ +235,816 +27,194 +$ +794,383 +Matthew V. Hairford +58,750 +$ +1,474,038 +16,259 +$ +475,815 +David E. Lancaster +62,500 +$ +1,461,250 +24,019 +$ +716,502 +Craig N. Adams +— +— +18,743 +$ +564,548 +Billy E. Goodwin +39,802 +$ +439,656 +7,184 +$ +212,431 +Potential Payments upon Termination or Change in Control +2012 Plan +Equity awards under the 2012 Plan vest upon a “change in control” for the Named Executive Officers according to the terms of their employment agreements +described below. +Employment Agreements +As described under +“—Compensation Discussion and Analysis—Severance and Separation Arrangements—Employment Agreements,” in contemplation of our initial public offering, on August 9, 2011, we entered into employment agreements with Messrs. +Foran, Hairford and Lancaster. In addition, in March 2014, we entered into an employment agreement with Mr. Adams, and effective February 2016, we entered into an employment agreement with Mr. Goodwin. We amended Mr. Goodwin’s +employment agreement in August 2018. The principal difference in Mr. Adams’ and Mr. Goodwin’s employment agreements as compared to the employment agreement of Messrs. Foran, Hairford and Lancaster is that Mr. Adams’ and +Mr. Goodwin’s agreements do not include a “modified single trigger” that would have allowed them to receive “change in control” severance if they terminated their agreements without “good reason” within 30 +days prior to or 12 months after a change in control. Pursuant to the terms of the employment agreements, we may be required to make certain payments to one or more of our Named Executive Officers upon the occurrence of certain events resulting in +such Named Executive Officer’s termination. The employment agreements do not provide for gross-ups for excise taxes on severance or other payments in connection with a change in control. For a detailed +description of the events that may trigger such payments, see “—Compensation Discussion and Analysis—Severance and Separation Arrangements—Employment Agreements.” +The employment agreements each contain a non-disclosure of confidential information provision that requires each Named Executive +Officer to maintain, both during and after employment, the confidentiality of information used by such Named Executive Officer in the performance of his job duties. +Additionally, each of the employment agreements contains a non-competition provision, pursuant to which Messrs. Foran, Hairford, +Lancaster, Adams and Goodwin have agreed that: (i) for six months following termination by us for total disability, or by such Named Executive Officer for good reason, or (ii) for 12 months, or 24 months with respect to Mr. Goodwin, +following termination (a) by us for just cause, (b) by such Named Executive Officer other than for good reason or (c) in connection with a change in control, such Named Executive Officer shall not, without our prior written consent +(not to be unreasonably withheld if the Named Executive Officer’s employment is terminated by the Named Executive Officer other than for good reason), directly or +70 Matador Resources Company | 2019 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +indirectly: (x) invest in (other than investments in publicly-owned companies which constitute not more than 1% of the voting securities of any such company) a competing business with +significant assets in the restricted area (each as defined below), or (y) participate in a competing business as a manager, employee, director, officer, consultant, independent contractor or other capacity or otherwise provide, directly or +indirectly, services or assistance to a competing business in a position that involves input into or direction of such competing business’s decisions within the restricted area. +For purposes of the employment agreements: +• +“competing business” means any person or entity engaged in oil and natural gas exploration, development, +production and acquisition activities; +• +“significant assets” means oil and natural gas reserves with an aggregate fair market value of $25 million +or more; and +• +“restricted area” means a one-mile radius of any oil and natural gas +reserves held by us as of the end of the Named Executive Officer’s employment, plus any county or parish where we have significant assets as of the end of the Named Executive Officer’s employment. +For definitions of “change in control,” “good reason” and “just cause,” please see the employment agreement of each Named Executive +Officer, each of which is included as an exhibit to the Company’s most recent Annual Report on Form 10-K. +Furthermore, other than Mr. Foran’s +employment agreement, each employment agreement contains a non-solicitation provision, pursuant to which, during the restricted periods described above, subject to certain exceptions, Messrs. Hairford, +Lancaster, Adams and Goodwin shall not, without our prior written consent, solicit for employment or a contracting relationship, or employ or retain any person who is or has been, within six months prior to such time, employed by or engaged as an +individual independent contractor by us or our affiliates or induce or attempt to induce any such person to leave his or her employment or independent contractor relationship with us or our affiliates. +For the Named Executive Officer to receive any severance payments described below for termination by us without just cause, by the Named Executive Officer for good +reason or, following a change in control, by us without cause or by the Named Executive Officer with good reason, with respect to Mr. Adams and Mr. Goodwin, or with or without good reason, with respect to Messrs. Foran, Hairford and +Lancaster, the Named Executive Officer must comply with the applicable non-disclosure, non-competition and non-solicitation +provisions described above. +Finally, as a condition to receiving any severance payments and other payments under their respective employment agreements, each Named +Executive Officer is required to execute a separation agreement and release in favor of us. +2019 +Proxy Statement | Matador Resources Company 71 +Table of Contents +EXECUTIVE COMPENSATION +To describe the payments and benefits that are triggered for +each event of termination, we have created the following table estimating the payments and benefits that would be paid to each Named Executive Officer under each element of our compensation program assuming that such Named Executive Officer’s +employment agreement terminated on December 31, 2018, the last day of our 2018 fiscal year. In all cases, the amounts were valued as of December 31, 2018, based upon, where applicable, $15.53 per share (the closing price of our Common +Stock on such date). The amounts in the table below are calculated as of December 31, 2018 pursuant to SEC rules and are not intended to reflect actual payments that may be made. Actual payments that may be made would be based on the dates and +circumstances of the applicable event. +Payment Upon +Termination +Named Executive Officer +Category of +Payment +Upon Death or +Total +Disability (1) +Upon Mutual +Agreement or +Dissolution/ +Liquidation (1) +Termination by +Us Without Just +Cause or by +Named Executive +Officer for Good +Reason (1) +Termination +Following a Change +in Control Without +Cause or by Named +Executive Officer +With or Without +Good Reason (2) +Joseph Wm. Foran +Salary +$ — +$ — +$2,200,000 +(3) +$ 3,300,000 +(4) +Bonus +3,093,000 +(5) +3,093,000 +(5) +6,186,000 +(6) +9,279,000 +(7) +Vesting equity +— +— +— +3,562,719 +(8) +Total +$3,093,000 +$3,093,000 +$8,386,000 +$16,141,719 +Matthew V. Hairford +Salary +$ — +$ — +$ 990,000 +(9) +$ 1,980,000 +(4) +Bonus +1,152,700 +(5) +1,152,700 +(5) +1,729,050 +(10) +3,458,100 +(7) +Vesting equity +— +— +— +1,647,752 +(8) +Total +$1,152,700 +$1,152,700 +$2,719,050 +$ 7,085,852 +David E. Lancaster +Salary +$ — +$ — +$ 937,500 +(9) +$ 1,875,000 +(4) +Bonus +1,105,000 +(5) +1,105,000 +(5) +1,657,500 +(10) +3,315,000 +(7) +Vesting equity +— +— +— +1,410,972 +(8) +Total +$1,105,000 +$1,105,000 +$2,595,000 +$ 6,600,972 +Craig N. Adams +Salary +$ — +$ — +$ 900,000 +(9) +$ 1,800,000 +(4) +Bonus +1,052,500 +(5) +1,052,500 +(5) +1,578,750 +(10) +3,157,500 +(7) +Vesting equity +— +— +— +1,286,343 +(8) +Total +$1,052,500 +$1,052,500 +$2,478,750 +$ 6,243,843 +Billy E. Goodwin +Salary +$ — +$ — +$ 862,500 +(9) +$ 1,725,000 +(4) +Bonus +895,000 +(5) +895,000 +(5) +1,342,500 +(10) +2,685,000 +(7) +Vesting equity +— +— +— +1,079,701 +(8) +Total +$ 895,000 +$ 895,000 +$2,205,000 +$ 5,489,701 +(1) +Amounts due upon death, total disability, mutual agreement, dissolution or liquidation, termination by us without cause or +termination by Named Executive Officer for good reason are payable in a lump sum on the 60 th day following the date of termination unless otherwise required by Section 409A of the Code. +(2) +Amounts due following a change in control are payable in a lump sum on the date which immediately follows six months from +the date of termination or, if earlier, within 30 days following such Named Executive Officer’s death. +(3) +Represents two times such Named Executive Officer’s base salary as of the termination date. +(4) +Represents three times such Named Executive Officer’s base salary as of the termination date. +(5) +Represents the average annual amount of bonuses, including pursuant to the Incentive Plan, paid to such Named Executive +Officer with respect to the prior two calendar years (2017-2018). +(6) +Represents two times an amount equal to the average annual amount of bonuses, including pursuant to the Incentive Plan, +paid to such Named Executive Officer with respect to the prior two calendar years (2017-2018). +72 Matador Resources Company | 2019 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +(7) +Represents three times an amount equal to the average annual amount of bonuses, including pursuant to the Incentive Plan, +paid to such Named Executive Officer with respect to the prior two calendar years (2017-2018). +(8) +The employment agreements provide for accelerated and full vesting of unvested incentive awards held by the Named +Executive Officers in the event that such Named Executive Officer is terminated without “Just Cause” or terminates his employment with or without “Good Reason,” with respect to Messrs. Foran, Hairford and Lancaster, within 30 +days prior to, or 12 months following, a “change in control.” With respect to Messrs. Adams and Goodwin, the employment agreements provide for accelerated and full vesting of unvested incentive awards held by these Named Executive Officers +in the event that such Named Executive Officer is terminated without “Just Cause” or terminates his employment with “Good Reason,” within 30 days prior to, or 12 months following, a “change in control.” The amount +disclosed reflects the closing price of our Common Stock on December 31, 2018 of $15.53 per share multiplied by the number of unvested service-based shares of restricted stock held by such Named Executive Officer on December 31, 2018, in +addition to the intrinsic value of the stock options held by such Named Executive Officer to the extent the exercise price of such stock options was less than the closing price of our Common Stock on December 31 2018. +(9) +Represents 1.5 times such Named Executive Officer’s base salary as of the termination date. +(10) +Represents 1.5 times an amount equal to the average annual amount of bonuses, including pursuant to the Incentive Plan, +paid to such Named Executive Officer with respect to the prior two calendar years (2017-2018). +2019 +Proxy Statement | Matador Resources Company 73 +Table of Contents +CHIEF EXECUTIVE OFFICER PAY RATIO +CHIEF +EXECUTIVE OFFICER PAY RATIO +As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(u) of +Regulation S-K (“Item 402(u)”), we are providing the following information regarding the ratio of the annual total compensation of our median-compensated employee (as described below) and that of our +Chairman and Chief Executive Officer, Joseph Wm. Foran. We believe that the pay ratio reflected below is a reasonable estimate calculated in a manner consistent with Item 402(u). +The SEC’s rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow +companies to adopt a variety of methodologies, to apply certain exclusions and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices. As a result, the pay ratio reported by other companies +may not be comparable to the pay ratio reported below, as other companies have different employee populations and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay +ratios. +Pursuant to Item 402(u), we identified the median-compensated employee of all our employees (other than Mr. Foran) using our employee population as of +December 15, 2018, which consisted of 259 employees (all of which are located in the United States), and using a compensation measure of total cash compensation, consisting of total base pay and bonuses earned during the year ended +December 31, 2018. The compensation measure was consistently applied to all employees. Compensation was annualized on a straight-line basis for employees who did not work all of 2018. +After identifying the median-compensated employee using the consistently applied compensation measure, we then calculated that employee’s annual total compensation +in the same manner as the Named Executive Officers’ total compensation, as reported in the Summary Compensation Table. In performing such calculation, we determined that the selected employee’s annual total compensation was anomalous +because the employee began working for the Company in November 2018 and did not receive an award of equity in 2018, although such awards are widely distributed throughout the Company. As permitted by Item 402(u), due to the anomalous nature of the +employee originally identified, we substituted another employee with substantially similar compensation. We then calculated that employee’s annual total compensation in the same manner as the Named Executive Officers’ total compensation. +For 2018, the annual total compensation of our median-compensated employee was $178,116, and the annual total compensation of Mr. Foran was $7,359,320, as +reported in the Summary Compensation Table. Based on this information, for 2018, the ratio of Mr. Foran’s annual total compensation to the annual total compensation of our median-compensated employee was estimated to be 41 to 1. +74 Matador Resources Company | 2019 Proxy Statement +Table of Contents +DIRECTOR COMPENSATION +DIRECTOR COMPENSATION +Name +Fees Earned or +Paid in Cash +($) +Stock +Awards (1) +($) +All Other +Compensation +($) +Total +($) +Reynald A. Baribault (2) +195,250 +140,305 +— +335,555 +R. Gaines Baty +84,500 +140,305 +— +224,805 +Craig T. Burkert +77,750 +140,305 +— +218,055 +William M. Byerley +93,500 +140,305 +— +233,805 +Matthew P. Clifton (3) +26,226 +170,992 +197,218 +Julia P. Forrester Rogers +83,500 +140,305 +— +223,805 +Steven W. Ohnimus (4) +35,092 +— +— +35,092 +Timothy E. Parker (5) +81,960 +228,217 +— +310,177 +David M. Posner +78,250 +140,305 +— +218,555 +Kenneth L. Stewart +79,250 +140,305 +— +219,555 +George M. +Yates (6) +30,500 +— +— +30,550 +(1) +All stock awards represent restricted stock units. Value based on the fair market value of the restricted stock units on +the date of grant. Restricted stock units granted for 2018-2019 service vest immediately prior to the election of the nominees for director at the 2019 Annual Meeting. See “—Compensation for 2018-2019.” As of December 31, 2018, +each individual who served as a director during 2018 held the following outstanding unvested stock awards, all of which were restricted stock units: +Name +Outstanding Stock Awards +Reynald A. Baribault +8,894 +R. Gaines Baty +6,990 +Craig T. Burkert +7,633 +William M. Byerley +7,633 +Matthew P. Clifton +5,210 +Julia P. Forrester Rogers +6,143 +Steven W. Ohnimus +— +Timothy E. Parker +5,210 +David M. Posner +5,210 +Kenneth L. Stewart +6,143 +George M. Yates +— +(2) +Mr. Baribault serves as lead independent director for 2018-2019. The lead independent director receives an additional +cash retainer of $100,000 annually. +(3) +Mr. Clifton was appointed to the Board on July 27, 2018. Because he was appointed to the Board within 90 days +after the 2018 Annual Meeting, upon his appointment, Mr. Clifton was granted 5,210 restricted stock units, the same number of restricted stock units that the other members of the Board received on June 7, 2018. The difference in value +shown in the table is attributable to the difference in the fair market value of the restricted stock units on the respective dates of grant. +(4) +Dr. Ohnimus resigned from the Board concurrently with the 2018 Annual Meeting due to health reasons. In connection +with his resignation, the Board accelerated the vesting of Dr. Ohnimus’ then-outstanding unvested restricted stock units. +(5) +Mr. Parker was appointed to the Board on January 26, 2018. Because he was appointed to the Board more than 180 +days but 270 or fewer days after our 2017 annual meeting of shareholders (the “2017 Annual Meeting”), Mr. Parker was granted 2,962 restricted stock units following his appointment, 50% of the number of restricted stock units as the +other members of the Board received following the 2017 Annual Meeting. Such restricted stock units vested immediately prior to the election of the nominees for director at the 2018 Annual Meeting. In connection with the 2018 Annual Meeting, +Mr. Parker also received 5,210 restricted stock units. +(6) +Mr. Yates’ term as a director expired at the 2018 Annual Meeting. In connection with the expiration of his term, +the Board accelerated the vesting of Mr. Yates’ then-outstanding unvested restricted stock units. +2019 +Proxy Statement | Matador Resources Company 75 +Table of Contents +DIRECTOR COMPENSATION +Compensation +for 2018-2019 +Beginning at the 2018 Annual Meeting +and until the 2019 Annual Meeting, our non-employee directors’ compensation program was adjusted as set forth below based on the increased size of the Company and the corresponding demands on +directors’ time: +• +annual cash retainer of $60,000; +• +cash meeting fee of $1,000 per day for each day of Board and committee service; +• +the chair of the Audit Committee receives an additional cash retainer of $25,000 annually and the chairs of the Corporate +Governance Committee, the Nominating Committee, the Strategic Planning and Compensation Committee, the Capital Markets and Finance Committee, the Marketing and Midstream Committee, the Operations and Engineering Committee and the Prospect Committee +each receive an additional cash retainer of $15,000 annually; +• +the lead independent director receives an additional cash retainer of $100,000 annually; and +• +at the meeting of the Board immediately following the 2018 Annual Meeting, each +non-employee director received a one-time annual grant of RSUs equal to approximately $135,000 in value with the restrictions lapsing immediately prior to the election +of the nominees for director at the 2019 Annual Meeting (the “2018 RSU Award”). +If a director was appointed or elected to the Board at +any time following the 2018 Annual Meeting but prior to the 2019 Annual Meeting, such director was granted the applicable percentage of the 2018 RSU Award detailed below, effective on the date of such director’s appointment: (i) if a +director was appointed or elected to the Board within 90 days after the 2018 Annual Meeting, such director was entitled to receive 100% of the 2018 RSU Award; (ii) if a director was appointed or elected to the Board more than 90 days but 180 or +fewer days after the 2018 Annual Meeting, such director was entitled to receive 75% of the 2018 RSU Award; (iii) if a director was appointed or elected to the Board more than 180 days but 270 or fewer days after the 2018 Annual Meeting, such +director was entitled to receive 50% of the 2018 RSU Award; and (iv) if a director was appointed or elected to the Board more than 270 days after the 2018 Annual Meeting but prior to the 2019 Annual Meeting, such director was entitled to +receive 25% of the 2018 RSU award. As noted in the table above, Mr. Clifton was appointed to the Board within 90 days after the 2018 Annual Meeting and received 100% of the 2018 RSU Award. +In addition, we reimburse our directors for travel, lodging and related expenses incurred in attending Board and committee meetings. +Compensation for 2019-2020 +Beginning at the 2019 Annual Meeting and until the 2020 annual +meeting of shareholders, our non-employee directors’ compensation program is expected to remain substantially identical to the 2018-2019 compensation program. +Director Ownership Guidelines +Our non-employee +directors are expected to follow our voluntary stock ownership guidelines for non-employee directors. Within three years of becoming a director, each non-employee +director is expected to own $250,000 of Common Stock and continue to hold such shares while serving as a director. All directors own in excess of $250,000 of Common Stock or are on track to meet the guidelines within three years of becoming a +director. Shares that count toward the stock ownership guidelines include RSUs. +76 Matador Resources Company | 2019 Proxy Statement +Table of Contents +DIRECTOR COMPENSATION +Board Advisor Compensation +Our advisors to the Board are compensated with stock and/or cash +awards based upon meeting attendance or as otherwise agreed to pursuant to consulting arrangements with such advisors. We reimburse our advisors to the Board for travel, lodging and related expenses incurred in attending Board and committee +meetings. The advisor compensation of Messrs. Rolfe and King is the same as for the non-employee directors as described above. +2019 +Proxy Statement | Matador Resources Company 77 +Table of Contents +SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS +SECURITIES +AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS +The following table presents the securities authorized for issuance under our equity compensation +plans as of December 31, 2018. +Plan Category +Number +of +Shares to be +Issued Upon +Exercise of +Outstanding +Options, +Warrants +and +Rights +Weighted- +Average +Exercise +Price of +Outstanding +Options, +Warrants +and Rights +Number of +Shares +Remaining +Available for +Future +Issuance +Under Equity +Compensation +Plans +Equity compensation plans approved by security +holders (1)(2) +2,962,249 +$ +23.48 +991,281 +Equity compensation plans not approved by security holders +— +— +— +Total +2,962,249 +$ +23.48 +991,281 +(1) +Our Board has determined not to make any additional awards under the Matador Resources Company 2003 Stock and Incentive +Plan. +(2) +The 2012 Plan was adopted by the Board in April 2015 and approved by our shareholders on June 10, 2015. +78 Matador Resources Company | 2019 Proxy Statement +Table of Contents +TRANSACTIONS WITH RELATED PERSONS +TRANSACTIONS WITH RELATED PERSONS +Except as disclosed below, during 2018 there was not, nor was there proposed as of December 31, 2018, any transaction or series of similar transactions to which we +were or are a party in which the amount involved exceeded or exceeds $120,000 and in which any of our directors, executive officers, holders of more than 5% of any class of our voting securities or any member of the immediate family of any of the +foregoing persons had or will have a direct or indirect material interest, other than compensation arrangements with directors and executive officers, which are described in “Executive Compensation—Compensation Discussion and +Analysis” above. +HEYCO Joint Ventures +In June 2015, the Company entered into two joint ventures (the +“Joint Ventures”) to develop certain leasehold interests held by certain affiliates (the “HEYCO Affiliates”) of HEYCO Energy Group, Inc., the former parent company of Harvey E. Yates Company. The Company acquired Harvey E. Yates +Company in a 2015 merger (the “HEYCO Merger.”) The HEYCO Affiliates are owned by George M. Yates, who was appointed to the Board on April 28, 2015 in accordance with the terms of the HEYCO Merger, and certain of his affiliates. +Mr. Yates’ term as a director expired at the 2018 Annual Meeting. Pursuant to the terms of the Joint Ventures, the HEYCO Affiliates contributed an aggregate of approximately 1,900 net acres, primarily in the same properties previously held +by HEYCO, to the two newly-formed entities in exchange for a 50% interest in each entity. The Company agreed to contribute an aggregate of approximately $14 million in exchange for the other 50% interest in both entities. As of +December 31, 2018, the Company had contributed an aggregate of approximately $9.4 million to the two entities. The Company’s contributions are being used to fund capital expenditures associated with the interests owned by the Joint +Ventures as well as to fund acquisitions by the Joint Ventures of other non-operated acreage opportunities. +The Audit +Committee reviewed the terms of the Joint Ventures for potential conflicts of interest under the Company’s related party transaction policy, effective October 12, 2011 (the “Related Party Transaction Policy”), and, after being +fully informed as to Mr. Yates’ relationship and interest and all other material facts related to the Joint Ventures, determined that the Joint Ventures were fair to the Company and recommended the Joint Ventures to the full Board for +approval and ratification. The Board subsequently approved and ratified the Joint Ventures. +In addition, in light of Mr. Yates’ ongoing services to HEYCO +Energy Group, Inc., the Board, in accordance with Texas corporate law, adopted resolutions that renounced and provided for a waiver of certain corporate opportunities with respect to Mr. Yates. As a result, during his term on the Board, +Mr. Yates had no fiduciary duty to present certain corporate opportunities related to Mr. Yates’ existing oil and natural gas holdings and/or in areas where Matador did not then operate. +Working Interest and Overriding Royalty Interest Owners +Certain related parties, including Mr. Foran, certain of +Mr. Foran’s affiliated entities (collectively, the “Foran Entities”) and certain HEYCO Affiliates or entities controlled by members of Mr. Yates’ family (the “Yates Entities” and, collectively with the Foran +Entities, the “Interest Owners”) are working interest owners and/or overriding royalty interest owners in certain properties operated by the Company or in which the Company also holds a working interest. As working interest owners, the +Interest Owners are required to pay their proportionate share of all costs and are entitled to receive their proportionate share of revenues in the normal course of business. As overriding royalty interest owners, the Interest Owners are entitled to +receive their proportionate share of revenues from the wells in which they own an interest in the normal course of business. During 2018, revenues, net of costs, received by the Yates Entities in their capacities as working interest owners or +overriding royalty interest owners were approximately $10.6 million (the “Yates Net Revenue Payments”). During 2018, revenues, net of costs, received by the Foran Entities in their capacity as working interest owners or overriding +royalty interest owners were approximately $1.7 million (collectively with the Yates Net Revenue Payments, the “Related Net Revenue Payments”). The Related Net Revenue Payments represent approximately 4.5% of our total third-party net +revenue payments during 2018. +2019 +Proxy Statement | Matador Resources Company 79 +Table of Contents +TRANSACTIONS WITH RELATED PERSONS +In our capacity as operator, we incur drilling and operating +costs that are billed to our partners based on their respective working interests. During 2018, our joint interest billings to the Yates Entities attributable to their share of costs were approximately $10.8 million (the “Yates +Billings”) and our joint interest billings to the Foran Entities attributable to their share of costs were approximately $0.4 million (collectively with the Yates Billings, the “Related Joint Interest Billings”). The Related +Joint Interest Billings represent approximately 1.3% of our total joint interest billings during 2018. As a result of this ownership by the Interest Owners, from time to time, we will be in a net receivable or net payable position with certain of +the Interest Owners. We do not consider any net receivables from these parties to be uncollectible. +The Audit Committee reviewed the terms of the working interests +and/or overriding royalty interests of the Interest Owners for potential conflicts of interest under the Related Party Transaction Policy, and, after being fully informed as to Mr. Yates’ and Mr. Foran’s respective relationships +and interests in such transactions and all other material facts related to the Related Net Revenue Payments and Related Joint Interest Billings, determined that such transactions and the Related Net Revenue Payments and Related Joint Interest +Billings were fair to the Company and recommended such transactions and the Related Net Revenue Payments and Related Joint Interest Billings to the full Board for approval and ratification. The Board subsequently approved and ratified the +transactions and the Related Net Revenue Payments and Related Joint Interest Billings. +Certain Employment Relationships +Billy E. Goodwin, Executive Vice President and Head of +Operations, was appointed as an executive officer of the Company in connection with his February 2016 promotion to Senior Vice President—Operations. Two of Mr. Goodwin’s adult children have been employees of the Company since 2014 and +2015, respectively, and each earned in 2018, and are expected to be compensated in 2019, between $120,000 and $700,000. One of Mr. Goodwin’s children has a Bachelor of Science degree in Petroleum Engineering from the University of Tulsa +and over nine years of industry experience, including as a regional drilling supervisor for another publicly traded exploration and production company. Mr. Goodwin’s other child has a Bachelor of Science in Business Administration degree +in Energy Management from the University of Tulsa and a Bachelor of Arts degree in General Business and Management from Oklahoma State University. He also has over nine years of industry experience, including as a drilling fluids engineer for a +publicly traded oilfield services company and as a landman for a publicly traded exploration and production company. The Audit Committee reviewed the terms of the employment arrangements for potential conflicts of interest under the Company’s +Related Party Transaction Policy and, after being fully informed as to the employment arrangements and historical and anticipated compensation of Mr. Goodwin’s adult children, and all other material facts related to the relationship, +determined that the employment arrangements were fair to the Company and recommended the employment arrangements to the full Board for approval and ratification. The Board subsequently approved and ratified such employment arrangements. +Reynald A. Baribault is a member of the Board. Mr. Baribault’s sister-in-law +has been an employee of the Company since 2016 and earned in 2018, and is expected to be compensated in 2019, between $120,000 and $250,000. Mr. Baribault’s +sister-in-law has a diploma from the Executive Secretarial School and is a certified legal assistant, having completed the Southern Methodist University Legal Assistants +Program. She has over 37 years of experience as a legal assistant. The Audit Committee reviewed the terms of the employment arrangement for potential conflicts of interest under the Company’s Related Party Transaction Policy and, after being +fully informed as to the employment arrangement and historical and anticipated compensation of Mr. Baribault’s sister-in-law, and all other material facts +related to the relationship, determined that the employment arrangement was fair to the Company and recommended the employment arrangement to the full Board for approval and ratification. The Board subsequently approved and ratified such employment +arrangement. +An adult child of Mr. Foran has been an employee of the Company since 2015 and earned in 2018, and is expected to be compensated in 2019, between +$120,000 and $200,000. Mr. Foran’s child has a Bachelor of Science degree in Human Resource Development and a Master of Science degree in Human Resource Management, both from Texas A&M University. She has more than eight years of +industry experience, including with another publicly traded exploration and production company. The Audit Committee reviewed the terms of the employment +80 Matador Resources Company | 2019 Proxy Statement +Table of Contents +TRANSACTIONS WITH RELATED PERSONS +arrangement for potential conflicts of interest under the Company’s Related Party Transaction Policy and, after being fully informed as to the employment arrangement and historical and +anticipated compensation of Mr. Foran’s adult child, and all other material facts related to the relationship, determined that the employment arrangement was fair to the Company and recommended the employment arrangement to the full Board +for approval and ratification. The Board subsequently approved and ratified such employment arrangement. +Procedures for Approval of Related +Party Transactions +Pursuant to the Related Party +Transaction Policy, a “Related Party Transaction” is defined as a transaction (including any financial transaction, arrangement or relationship (including any indebtedness or guarantee of indebtedness)), or series of related transactions, +or any material amendment to any such transaction, involving a Related Party (as defined below) and in which we are a participant, other than: +• +a transaction involving compensation of directors; +• +a transaction involving compensation of an executive officer or involving an employment agreement, severance agreement, +change in control provision or agreement or a special supplemental benefit for an executive officer; +• +a transaction available to all employees generally or to all salaried employees generally; +• +a transaction with a Related Party involving less than $120,000; +• +a transaction in which the interest of the Related Party arises solely from the ownership of a class of our equity +securities and all holders of that class receive the same benefit on a pro rata basis; or +• +a transaction in which the rates or charges involved therein are determined by competitive bids, or a transaction that +involves the rendering of services as a common or contract carrier, or public utility, at rates or charges fixed in conformity with law or governmental authority. +“Related Party” means: +• +any person who is, or at any time during the applicable period was, one of our executive officers or one of our directors +or nominees for directors; +• +any person who is known by us to be the beneficial owner of more than 5% of our Common Stock; +• +any immediate family member of any of the foregoing persons, which means any child, stepchild, parent, stepparent, spouse, +sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law of a director, nominee for director, executive officer or a beneficial owner of more than 5% of our Common Stock; and +• +any firm, corporation or other entity that is owned or controlled by any of the foregoing persons or in which any of the +foregoing persons is a general partner or executive officer or in which such person, together with all other of the foregoing persons, owns 10% or more of the equity interests thereof. +Pursuant to the Related Party Transaction Policy, the Audit Committee must review all material facts of each Related Party Transaction and recommend either approval or +disapproval of the Related Party Transaction to the full Board, subject to certain limited exceptions. In determining whether to recommend approval or disapproval of the Related Party Transaction, the Audit Committee must, after reviewing all +material facts of the Related Party Transaction and the Related Party’s relationship and interest, determine whether the Related Party Transaction is fair to the Company. Further, the policy requires that all Related Party Transactions be +disclosed in our filings with the SEC and/or our website in accordance with applicable laws, rules and regulations. +2019 +Proxy Statement | Matador Resources Company 81 +Table of Contents +SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT +SECURITY +OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT +The following table presents the beneficial ownership of our Common Stock as of April 12, 2019 +for (i) each person beneficially owning more than 5% of the outstanding shares of our Common Stock, (ii) each director of the Company, (iii) each executive officer of the Company listed in the Summary Compensation Table and +(iv) all of our directors and executive officers as a group. Except pursuant to applicable community property laws and except as otherwise indicated, each shareholder possesses sole voting and investment power with respect to its, his or her +shares. The business address of each of our directors and executive officers is c/o Matador Resources Company, One Lincoln Centre, 5400 LBJ Freeway, Suite 1500, Dallas, Texas 75240. The applicable percentage ownership is based on 116,392,034 shares +of our Common Stock issued and outstanding as of April 12, 2019, plus, on an individual basis, the right of that individual to (i) obtain Common Stock upon exercise of stock options or (ii) obtain Common Stock upon the vesting or +delivery of restricted stock units, in each case within 60 days of April 12, 2019. The information is based on Form 3s, Form 4s, Schedule 13Ds, Schedule 13Gs and Schedule 13G/As filed through April 12, 2019. +Name +Amount and +Nature of +Ownership of +Common Stock +Percent +of Class +Directors and Named Executive +Officers: +Joseph Wm. Foran (1) +5,251,819 +4.5% +Craig N. Adams (2) +293,938 +* +Reynald A. Baribault (3) +53,702 +* +R. Gaines Baty (4) +30,028 +* +Craig T. Burkert (5) +86,450 +* +William M. Byerley (6) +20,248 +* +Matthew P. Clifton (7) +30,210 +* +Julia P. Forrester Rogers (8) +17,600 +* +Billy E. Goodwin (9) +231,694 +* +Matthew V. Hairford (10) +588,208 +* +David E. Lancaster (11) +630,042 +* +Timothy E. Parker (12) +12,172 +* +David M. Posner (13) +19,854 +* +Kenneth L. Stewart (14) +32,065 +* +All Directors and Executive Officers as +a Group (17 persons) (15) : +8,091,622 +6.9% +Other 5% Owners: +BlackRock, Inc. (16) +12,834,279 +11.0% +The VanGuard Group (17) +9,747,610 +8.4% +T. Rowe Price Associates, Inc. (18) +8,099,014 +7.0% +State Street Corporation (19) +6,130,677 +5.3% +* +Less than one percent (1%) +(1) +Includes (i) 1,105,913 shares of Common Stock held of record by Sage Resources, Ltd., a limited partnership owned by the +Foran family, including Mr. Foran; (ii) 4,000 shares of Common Stock held of record by Mr. Foran’s spouse through her Individual Retirement Account; (iii) 105,000 shares and 40,000 shares of Common Stock held of record by The Joseph Donald +Foran Family Trust 2008 and The Foran Family Special Needs Trust, respectively, for which Mr. Foran is the co-trustee and over which Mr. Foran has shared voting and investment power with other +members of his family; (iv) 125,043 shares of Common Stock held of record by each of the JWF 2017-2 GRAT and the NNF 2017-2 GRAT, for which Mr. Foran is the trustee +and over which Mr. Foran has sole voting and investment power; (v) 39,067 shares of Common Stock held of record by each of the JWF 2018-1 GRAT and the NNF +2018-1 GRAT, for which Mr. Foran is the trustee and over which Mr. Foran has sole voting and investment power; (vi) 131,876 shares of Common Stock +82 Matador Resources Company | 2019 Proxy Statement +Table of Contents +SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT +held of record by each of the JWF 2018-2 GRAT and the NNF 2018-2 GRAT, for which Mr. Foran is the trustee and +over which Mr. Foran has sole voting and investment power; (vii) 390,807 shares of Common Stock held of record by each of the JWF 2019-1 GRAT and the NNF 2019-1 +GRAT, for which Mr. Foran is the trustee and over which Mr. Foran has sole voting and investment power; (viii) 335,952 shares of Common Stock held of record by the Foran 2012 Security Trust, for which Mr. Foran is the trustee and over +which Mr. Foran has sole voting and investment power; (ix) 339,350 shares of Common Stock held of record by the Foran 2012 Savings Trust, for which Mr. Foran’s spouse is a trustee; (x) 1,177,568 shares held of record, collectively, by +the LRF 2011 Non-GST Trust, WJF 2011 Non-GST Trust, JNF 2011 Non-GST Trust, SIF 2011 +Non-GST Trust and MCF 2011 Non-GST Trust, for which trusts Mr. Foran and his spouse, as settlors of each of the Non-GST +Trusts, retain the power of substitution with respect to the property of the Non-GST Trusts; and (xi) 78,546 shares of restricted stock. Pursuant to the terms of the restricted stock grants, Mr. Foran has +the right to vote such shares but may only dispose of such shares to the extent they have vested. Also includes 518,105 shares of Common Stock issuable to Mr. Foran upon the exercise of stock options. +(2) +Includes 156,668 shares of Common Stock issuable to Mr. Adams upon the exercise of stock options. Also includes +34,286 shares of restricted stock. Pursuant to the terms of the restricted stock grants, Mr. Adams has the right to vote such shares but may only dispose of such shares to the extent they have vested. +(3) +Includes 3,500 shares of Common Stock held by the Individual Retirement Account of Mr. Baribault. Also includes +20,500 shares of Common Stock held by the Reynald A. Baribault Maritalized Revocable Living Trust, for which Mr. Baribault has shared voting and investment power with his spouse, and 5,000 shares of Common Stock held by the Sally K. Baribault +Maritalized Revocable Living Trust, for which Mr. Baribault has shared voting and investment power with his spouse. Also includes 5,727 shares of Common Stock issuable to Mr. Baribault upon the vesting of restricted stock units. +(4) +Includes 8,614 shares of Common Stock issuable to Mr. Baty upon the vesting and delivery of restricted stock units. +(5) +Includes 34,742 shares held by the Individual Retirement Account of Mr. Burkert. Also includes 9,056 shares of Common +Stock issuable to Mr. Burkert upon the vesting and delivery of restricted stock units. +(6) +Includes 5,210 shares of Common Stock issuable to Mr. Byerley upon the vesting of restricted stock units. +(7) +Includes 5,210 shares of Common Stock issuable to Mr. Clifton upon the vesting of restricted stock units. +(8) +Includes 1,985 shares held by the Individual Retirement Account of Ms. Rogers and 800 shares held of record by Ms. +Rogers’ spouse. Also includes 5,210 shares of Common Stock issuable to Ms. Rogers upon the vesting of restricted stock units. +(9) +Includes 99,763 shares of Common Stock issuable to Mr. Goodwin upon the exercise of stock options. Also includes +29,646 shares of restricted stock. Pursuant to the terms of the restricted stock grants, Mr. Goodwin has the right to vote such shares but may only dispose of such shares to the extent they have vested. +(10) +Includes 239,758 shares of Common Stock issuable to Mr. Hairford upon the exercise of stock options and 6,000 shares +held of record by his Individual Retirement Account. Also includes 298,898 shares held of record by the Hairford Family Trust, for which both Mr. Hairford and his spouse are trustees. Also includes 43,552 shares of restricted stock. Pursuant to +the terms of the restricted stock grants, Mr. Hairford has the right to vote such shares but may only dispose of such shares to the extent they have vested. +(11) +Includes 182,567 shares of Common Stock issuable to Mr. Lancaster upon the exercise of stock options and 75,500 +shares of Common Stock held of record by his Individual Retirement Account. Also includes 39,048 shares of restricted stock. Pursuant to the terms of the restricted stock grants, Mr. Lancaster has the right to vote such shares but may only +dispose of such shares to the extent they have vested. +(12) +Includes 5,210 shares of Common Stock issuable to Mr. Parker upon the vesting of restricted stock units. +(13) +Includes 8,370 shares of Common Stock held of record by the Individual Retirement Account of Mr. Posner. Also +includes 11,133 shares of Common Stock issuable to Mr. Posner upon the vesting and delivery of restricted stock units. +(14) +Includes 12,065 shares of Common Stock issuable to Mr. Stewart upon the vesting and delivery of restricted stock +units. +(15) +Includes an aggregate of 1,522,877 shares of Common Stock which our executive officers as a group have the right to +acquire within 60 days of April 12, 2019 upon the exercise of stock options. Also includes 299,181 shares of restricted stock held by our executive officers. Pursuant to the terms of the restricted stock grants, the executive officers have +the right to vote such shares but may only dispose of such shares to the extent they have vested. Also includes 67,435 shares of Common Stock issuable to directors upon the vesting and delivery of restricted stock units. +(16) +Information based solely on a Schedule 13G/A filed with the SEC on January 31, 2019. The Schedule 13G/A reports that +BlackRock, Inc. (“BlackRock”) beneficially owns 12,834,279 shares, has sole voting power with respect to 12,484,880 shares and has sole dispositive power with respect to 12,834,279 shares. According to the Schedule 13G/A, BlackRock’s +address is 55 East 52 nd Street, New York, NY 10055. +(17) +Information based solely on a Schedule 13G/A filed with the SEC on February 11, 2019. The Schedule 13G/A reports that +The Vanguard Group (“Vanguard”) beneficially owns 9,747,610 shares, has sole voting power with respect to 211,661 shares, has shared voting power with respect to 11,444 shares, has sole dispositive power with respect to 9,537,441 shares +and has shared dispositive power with respect to 210,169 shares. According to the Schedule 13G/A, VanGuard’s address is 100 Vanguard Blvd, Malvern, PA 19355. +(18) +Information based solely on a Schedule 13G/A filed with the SEC on February 14, 2019. The Schedule 13G/A reports that +T. Rowe Price Associates, Inc. (“Price Associates”) beneficially owns 8,099,014 shares, has sole voting power with respect to 2,246,451 shares and has sole dispositive power with respect to 8,099,014 shares. According to the Schedule +13G/A, these securities are owned by various individual and institutional investors, for which Price Associates serves as an investment adviser registered under the Investment Advisers Act of 1940, as amended, with power to direct investments and/or +sole power to vote the securities. For purposes of the reporting requirements of the Exchange Act, Price Associates is deemed to be a beneficial owner of such securities; however, Price Associates expressly disclaims that it is, in fact, the +beneficial owner of such securities. According to the Schedule 13G/A, Price Associates’ address is 100 E. Pratt Street, Baltimore, MD 21202. +(19) +Information based solely on a Schedule 13G filed with the SEC on February 14, 2019. The Schedule 13G reports that +State Street Corporation (“State Street”) beneficially owns 6,130,677 shares, has shared voting power with respect to 5,814,385 shares and has shared dispositive power with respect to 6,130,677 shares. According to the Schedule 13G, State +Street’s address is State Street Financial Center, One Lincoln Street, Boston, MA 02111. +2019 +Proxy Statement | Matador Resources Company 83 +Table of Contents +ADDITIONAL INFORMATION +ADDITIONAL +INFORMATION +Section 16(a) Beneficial Ownership Reporting Compliance +Section 16(a) of the Exchange Act requires the +Company’s executive officers, directors and persons who own more than 10% of the Company’s Common Stock to file initial reports of ownership and changes in ownership with the SEC. +Additionally, SEC regulations require that the Company identify any individuals for whom one of the referenced reports was not filed on a timely basis during the most +recent fiscal year. Based solely on the Company’s review of Forms 3, 4 and 5 furnished to the Company and any amendments thereto, the Company believes that all persons subject to Section 16(a) of the Exchange Act timely filed all reports +required pursuant to such section relating to the Company’s Common Stock in 2018. +Shareholder Proposals for +the 2020 Proxy Statement +For shareholder proposals +to be included in the Company’s proxy statement and form of proxy relating to the 2020 Annual Meeting of Shareholders, such proposals must be received by the Company at its offices in Dallas, Texas, addressed to the Corporate Secretary of the +Company, no later than December 27, 2019. Upon timely receipt of any such proposal, the Company will determine whether or not to include such proposal in the proxy statement and proxy in accordance with applicable regulations and provisions +governing the solicitation of proxies. +Director Nominations or Other Business for Presentation at the 2020 Annual +Meeting +Under the Bylaws, certain procedures are +provided that a shareholder must follow in order to place in nomination persons for election as directors at an annual meeting of shareholders or to introduce an item of business at an annual meeting of shareholders. These procedures provide, +generally, among other things, that shareholders desiring to place in nomination persons for election as directors, and/or bring a proper subject of business before an annual meeting, must do so by a written notice timely received (on or before +March 11, 2020, but no earlier than February 10, 2020, for the 2020 Annual Meeting) to the Corporate Secretary of the Company containing the name and address of the shareholder and the number of shares of the Company’s Common Stock +beneficially owned by the shareholder. If the notice relates to a nomination for director, it must also set forth the name, age, business and residence addresses of the candidate, the candidate’s résumé or a listing of his or her +qualifications to be a director of the Company, the person’s written consent to be a director if selected by the Nominating Committee, nominated by the Board and elected by the shareholders and any other information that would be required to be +disclosed in solicitations of proxies for the election of directors. The Company may require any proposed nominee to furnish such other information as may reasonably be required by the Company to determine the eligibility of such proposed nominee to +serve as director. Notice of an item of business shall include a brief description of the proposed business and any material interest of the shareholder in such business. +The Chairman of the meeting may refuse to allow the transaction of any business not presented, or to acknowledge the nomination of any person not made, in compliance +with the foregoing procedures. Copies of the Bylaws are available from the Corporate Secretary of the Company and on the Company’s website at www.matadorresources.com under the heading “Investor Relations—Corporate +Governance.” +See “Corporate Governance—Board Committees—Nominating Committee” for the process for shareholders to follow to suggest a +director candidate to the Nominating Committee for nomination by the Board. +84 Matador Resources Company | 2019 Proxy Statement +Table of Contents +ADDITIONAL INFORMATION +Annual Report on Form 10-K +The Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018, as filed with the SEC, including financial statements, is being made available to our shareholders concurrently with this Proxy Statement at +www.proxyvote.com and does not form part of the proxy solicitation material. Shareholders may obtain without charge another copy of the Annual Report on Form 10-K, excluding certain exhibits, by writing +to Investor Relations, Matador Resources Company, One Lincoln Centre, 5400 LBJ Freeway, Suite 1500, Dallas, Texas 75240. +2019 +Proxy Statement | Matador Resources Company 85 +Table of Contents +OTHER BUSINESS +OTHER +BUSINESS +Management of the Company is not aware of other business to be presented for action at the Annual Meeting; however, if other matters are presented +for action, it is the intention of the persons named in the accompanying form of proxy to vote in accordance with their judgment on such matters. +By Order of the Board of Directors, +Joseph Wm. Foran +Chairman and Chief Executive Officer +April 25, 2019 +86 Matador Resources Company | 2019 Proxy Statement +Table of Contents +ANNEX A +ANNEX A +Non-GAAP Financial Measures +Adjusted EBITDA +We define Adjusted EBITDA as earnings before interest +expense, income taxes, depletion, depreciation and amortization, accretion of asset retirement obligations, property impairments, unrealized derivative gains and losses, certain other non-cash items and non-cash stock-based compensation expense, net gain or loss on asset sales and inventory impairment and prepayment premium on extinguishment of debt. Adjusted EBITDA is not a measure of net income (loss) or cash +flows as determined by GAAP. Adjusted EBITDA is a supplemental non-GAAP financial measure that is used by management and external users of our consolidated financial statements, such as industry analysts, +investors, lenders and rating agencies. +Management believes Adjusted EBITDA is necessary because it allows us to evaluate our operating performance and compare the +results of operations from period to period without regard to our financing methods or capital structure. We exclude the items listed above from net income (loss) in calculating Adjusted EBITDA, because these amounts can vary substantially from +company to company within our industry depending upon accounting methods and book values of assets, capital structures and the method by which certain assets were acquired. +Adjusted EBITDA should not be considered an alternative to, or more meaningful than, net income (loss) or cash flows from operating activities as determined in +accordance with GAAP or as a primary indicator of our operating performance or liquidity. Certain items excluded from Adjusted EBITDA are significant components of understanding and assessing a company’s financial performance, such as a +company’s cost of capital and tax structure. Our Adjusted EBITDA may not be comparable to similarly titled measures of another company because all companies may not calculate Adjusted EBITDA in the same manner. +The following table presents our calculation of Adjusted EBITDA and the reconciliation of Adjusted EBITDA to the GAAP financial measures of net income (loss) and net +cash provided by operating activities, respectively. +Year +Ended +December 31, 2018 +Year +Ended +December 31, 2017 +(In thousands) +Unaudited Adjusted EBITDA Reconciliation to Net Income (Loss): +Net income (loss) attributable to Matador Resources Company shareholders +$ +274,207 +$ +125,867 +Net income attributable to non-controlling interest in +subsidiaries +25,557 +12,140 +Net income (loss) +299,764 +138,007 +Interest expense +41,327 +34,565 +Total income tax benefit +(7,691 +) +(8,157 +) +Depletion, depreciation and amortization +265,142 +177,502 +Accretion of asset retirement obligations +1,530 +1,290 +Unrealized gain on derivatives +(65,085 +) +(9,715 +) +Stock-based compensation expense +17,200 +16,654 +Net loss (gain) on asset sales and inventory impairment +196 +(23 +) +Prepayment premium on extinguishment of debt +31,226 +— +Consolidated Adjusted EBITDA +583,609 +350,123 +Adjusted EBITDA attributable to non-controlling interest in +subsidiaries +(30,386 +) +(14,060 +) +Adjusted EBITDA attributable to Matador Resources Company shareholders +$ +553,223 +$ +336,063 +2019 +Proxy Statement | Matador Resources Company A-1 +Table of Contents +ANNEX A +Year +Ended +December 31, 2018 +Year +Ended +December 31, 2017 +(In thousands) +Unaudited Adjusted EBITDA Reconciliation to Net Cash Provided by Operating Activities: +Net cash provided by operating activities +$ +608,523 +$ +299,125 +Net change in operating assets and liabilities +(64,429 +) +25,058 +Interest expense, net of non-cash portion +39,970 +34,097 +Current income tax benefit +(455 +) +(8,157 +) +Adjusted EBITDA attributable to non-controlling interest in +subsidiaries +(30,386 +) +(14,060 +) +Adjusted EBITDA attributable to Matador Resources Company shareholders +$ +553,223 +$ +336,063 +San Mateo Adjusted EBITDA +The +following table presents our calculation of Adjusted EBITDA for San Mateo Midstream, LLC and the reconciliation of Adjusted EBITDA to the GAAP financial measures of net income (loss) and net cash provided by operating activities, respectively. +Three Months Ended +December 31, 2018 +(In thousands) +Unaudited Adjusted EBITDA Reconciliation to Net Income: +Net income +$ +15,051 +Depletion, depreciation and amortization +3,713 +Interest expense +333 +Accretion of asset retirement obligations +20 +Certain other non-cash items +573 +Adjusted EBITDA +$ +19,690 +Three Months Ended +December 31, 2018 +(In thousands) +Unaudited Adjusted EBITDA Reconciliation to Net Cash Provided by Operating Activities: +Net cash provided by operating activities +$ +22,801 +Net change in operating assets and liabilities +(4,017 +) +Interest expense +333 +Certain other non-cash items +573 +Adjusted EBITDA +$ +19,690 +A-2 Matador Resources Company | 2019 Proxy Statement +Table of Contents +ANNEX A +Return on Average Capital Employed +Return on Average Capital Employed +(ROACE) is defined as Adjusted EBITDA (defined above) attributable to Matador Resources Company shareholders, plus cash inflows from midstream transactions, divided by average total capitalization (defined as total assets less total current +liabilities). ROACE is not a measure of net income (loss) or cash flows as determined by GAAP. ROACE is a supplemental non-GAAP financial measure that is used by management and external users of our +consolidated financial statements, such as industry analysts, investors, lenders and rating agencies. +The following table presents our calculation of ROACE and the +reconciliation of ROACE to the GAAP financial measure of net income. +Year Ended +December 31, 2018 +Year Ended +December 31, 2017 +($ in thousands) +Return on Average Capital Employed +Net income +$ +229,764 +$ +138,007 +Adjustments to net income (see Adjusted EBITDA reconciliation) +253,459 +198,056 +Adjusted EBITDA attributable to Matador Resources Company Shareholders +553,223 +336,063 +Cash flows from midstream transactions +14,700 +171,500 +(a) Total cash inflows from midstream transactions and Adjusted EBITDA +$ +567,923 +507,563 +Total assets +$ +3,455,518 +2,145,690 +Less: Total current liabilities +(330,022 +) +(282,606 +) +Total capitalization +$ +3,125,496 +1,863,084 +(b) Average total capitalization for 2018 and 2017 +$ +2,494,290 +N/A +Return on average capital employed = (a) / (b) +23 +% +N/A +2019 +Proxy Statement | Matador Resources Company A-3 +Table of Contents +ANNEX B +ANNEX B +Matador Resources Company 2019 Long-Term Incentive Plan +The Matador Resources Company 2019 Long-Term Incentive Plan (as the same may be amended, the “ Plan ”) was adopted by the Board of Directors of Matador +Resources Company, a Texas corporation (the “ Company ”), on April 22, 2019 (the “ Board Approval Date ”), to be effective as of the date the Plan is approved by the Company’s shareholders (the +“ Effective Date ”). +ARTICLE 1 – PURPOSE +The +purpose of the Plan is to attract and retain the services of key Employees, key Contractors and Outside Directors and to provide such persons with a proprietary interest in the Company through the granting of Incentive Stock Options, Nonqualified +Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Awards, Dividend Equivalent Rights and Other Awards, whether granted singly, or in combination, or in tandem, that will: +(a) increase the interest of such persons in the Company’s welfare; +(b) furnish an incentive to such persons to continue their services for the Company or its Subsidiaries; and +(c) provide a means through which the Company may attract able persons as Employees, Contractors and Outside Directors. +With respect to Reporting Participants, the Plan and all transactions under the Plan are intended to comply with all applicable conditions of Rule 16b-3 promulgated under the Exchange Act. To the extent any provision of the Plan or action by the Committee fails to so comply, such provision or action shall be deemed null and void ab initio , to the extent +permitted by law and deemed advisable by the Committee. +ARTICLE 2 – DEFINITIONS +For the purpose of the Plan, unless the context requires otherwise, the following terms shall have the meanings indicated: +2.1 “ Applicable Law ” means all legal requirements relating to the administration of equity incentive plans and the issuance and +distribution of shares of Common Stock, if any, under applicable corporate laws, applicable securities laws, the rules of any exchange or inter-dealer quotation system upon which the Company’s securities are listed or quoted, and any other +applicable law, rule or restriction. +2.2 “ Award ” means the grant of any Incentive Stock Option, Nonqualified Stock Option, +Restricted Stock, SAR, Restricted Stock Unit, Performance Award, Dividend Equivalent Right or Other Award, whether granted singly or in combination or in tandem. +2.3 “ Award Agreement ” means a written or electronic agreement between a Participant and the Company which sets out the terms of +the grant of an Award. +2.4 “ Board ” means the Board of Directors of the Company. +2.5 “ Board Approval Date ” is defined above in the introductory paragraph of the Plan. +2.6 A “ Change in Control ” occurs upon a change in the Company’s ownership, its effective control or the ownership of a +substantial portion of its assets, as follows: +(a) Change in Ownership . A change in ownership of the Company occurs +on the date that any “Person” (as defined in Section 2.6(d) below), other than (i) the Company or any Subsidiary, (ii) a trustee or other fiduciary +2019 +Proxy Statement | Matador Resources Company B-1 +Table of Contents +ANNEX B +holding securities under an employee benefit plan of the Company or any of its Affiliates, (iii) an underwriter temporarily holding stock pursuant to an offering of such stock or (iv) a +corporation owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of the Company’s stock, acquires ownership of the Company’s stock that, together with stock held by such +Person, constitutes more than 50% of the total fair market value or total voting power of the Company’s stock. However, if any Person is considered to own already more than 50% of the total fair market value or total voting power of the +Company’s stock, the acquisition of additional stock by the same Person is not considered to be a Change in Control. In addition, if any Person has effective control of the Company through ownership of 30% or more of the total voting power of +the Company’s stock, as discussed in paragraph (b) below, the acquisition of additional control of the Company by the same Person is not considered to cause a Change in Control pursuant to this paragraph (a); or +(b) Change in Effective Control . Even though the Company may not have undergone a change in ownership under paragraph +(a) above, a change in the effective control of the Company occurs on either of the following dates: +(i) the date that any Person acquires (or has acquired during the 12-month +period ending on the date of the most recent acquisition by such Person) ownership of the Company’s stock possessing 30% or more of the total voting power of the Company’s stock. However, if any Person owns 30% or more of the total voting +power of the Company’s stock, the acquisition of additional control of the Company by the same Person is not considered to cause a Change in Control pursuant to this subparagraph (b)(i); or +(ii) the date during any 12-month period when a majority of members of the +Board is replaced by directors whose appointment or election is not endorsed by a majority of the Board before the date of the appointment or election; provided, however, that any such director shall not be considered to be endorsed by the Board if +his or her initial assumption of office occurs as a result of an actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or +(c) Change in Ownership of a Substantial Portion of Assets . A change in the ownership of a substantial portion of the +Company’s assets occurs on the date that a Person acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such Person) assets of the Company, that have a +total gross fair market value equal to at least 40% of the total gross fair market value of all of the Company’s assets immediately before such acquisition or acquisitions. However, there is no Change in Control when there is such a transfer to +(i) a shareholder of the Company (immediately before the asset transfer) in exchange for or with respect to the Company’s stock; (ii) an entity, at least 50% of the total value or voting power of the stock of which is owned, directly +or indirectly, by the Company; (iii) a Person that owns directly or indirectly, at least 50% of the total value or voting power of the Company’s outstanding stock; or (iv) an entity, at least 50% of the total value or voting power of +the stock of which is owned by a Person that owns, directly or indirectly, at least 50% of the total value or voting power of the Company’s outstanding stock. +(d) Definitions . For purposes of subparagraphs (a), (b) and (c) above: +(i) “ Person ” shall have the meaning given in Section 7701(a)(1) of the Code. Person +shall include more than one Person acting as a group as defined under Section 409A of the Code. +(ii) “ Affiliate ” shall have the meaning set forth in Rule +12b-2 promulgated under Section 12 of the Exchange Act. +(e) Interpretation . The provisions of this Section 2.6 shall be interpreted in accordance with +the requirements of Section 409A of the Code, it being the intent of the parties that this Section 2.6 shall be in compliance with the requirements of said Code Section. +2.7 “ Claim ” means any claim, liability or obligation of any nature, arising out of or relating to this Plan or an alleged breach +of this Plan, or an Award Agreement. +2.8 “ Code ” means the United States Internal Revenue Code of 1986, as amended, together +with the published rulings, regulations and interpretations duly promulgated thereunder. +B-2 Matador Resources Company | 2019 Proxy Statement +Table of Contents +ANNEX B +2.9 “ Committee ” is defined below in Section 3.1 . +2.10 “ Common Stock ” means the common stock, par value $0.01 per share, which the Company is currently authorized to issue or may +in the future be authorized to issue, or any securities into which or for which the common stock of the Company may be converted or exchanged, as the case may be, pursuant to the terms of this Plan. +2.11 “ Company ” means Matador Resources Company, a Texas corporation, and any successor entity. +2.12 “ Contractor ” means any person, who is not an Employee, rendering bona fide services to the Company or a Subsidiary, +for compensation, provided that such services are not rendered in connection with the offer or sale of securities in a capital raising transaction and do not directly or indirectly promote or maintain a market for the Company’s securities. +2.13 “ Date of Grant ” means the effective date on which an Award is made to a Participant as set forth in the applicable Award +Agreement. +2.14 “ Dividend Equivalent Right ” means the right of the holder thereof to receive credits based on the cash +dividends that would have been paid on the shares of Common Stock specified in the Award if such shares were held by the Participant to whom the Award is made. +2.15 “ Effective Date ” is defined above in the introductory paragraph of the Plan. +2.16 “ Employee ” means a common law employee (as defined in accordance with Section 3401(c) of the Code) of the Company or +any Subsidiary of the Company. +2.17 “ Exchange Act ” means the United States Securities Exchange Act of 1934, as amended. +2.18 “ Executive Officer ” means an executive officer of the Company as designated by the Board in accordance with Rule 405 +promulgated under the Securities Act of 1933, as amended, and Rule 3b-7 promulgated under the Exchange Act. +2.19 “ Exempt Shares ” means shares of Common Stock subject to an Award for which the Committee has established or accelerated +vesting in accordance with Article 7 . No more than five percent (5%) of the shares of Common Stock that may be delivered pursuant to Awards may be shares designated as “ Exempt Shares .” +2.20 “ Exercise Date ” is defined below in Section 8.3(b) . +2.21 “ Fair Market Value ” means, as of a particular date, (a) if the shares of Common Stock are listed on any established +national securities exchange, the closing sales price per share of Common Stock on the consolidated transaction reporting system for the principal securities exchange for the Common Stock on the date prior to such date, or, if there shall have been +no such sale so reported on that date, on the last preceding date on which such a sale was so reported; (b) if the shares of Common Stock are not so listed, but are quoted on an automated quotation system, the closing sales price per share of +Common Stock reported on an automated quotation system on the date prior to such date, or, if there shall have been no such sale so reported on that date, on the last preceding date on which such a sale was so reported; (c) if the Common Stock +is not so listed or quoted, the mean between the closing bid and asked price on the date prior to such date, or, if there are no quotations available for such date, on the last preceding date on which such quotations shall be available, as reported +by the OTC Bulletin Board operated by the Financial Industry Regulation Authority, Inc. or the OTC Markets Group Inc., formerly known as Pink OTC Markets Inc.; or (d) if none of the above is applicable, such amount as may be determined by the +Committee, in good faith, to be the fair market value per share of Common Stock. The determination of Fair Market Value shall, where applicable, be in compliance with Section 409A of the Code. +2.22 “ Immediate Family ” is defined below in Section 14.7 . +2019 +Proxy Statement | Matador Resources Company B-3 +Table of Contents +ANNEX B +2.23 “ Incentive Stock +Option ” means a Stock Option that is intended to qualify as an incentive stock option within the meaning of Section 422 of the Code, granted pursuant to this Plan. +2.24 “ Nonqualified Stock Option ” means a nonqualified stock option, granted pursuant to this Plan, which is not an Incentive +Stock Option. +2.25 “ Option Price ” means the price which must be paid by a Participant upon exercise of a Stock Option to +purchase a share of Common Stock. +2.26 “ Other Award ” means an Award issued pursuant to +Section 6.9 hereof. +2.27 “ Outside Director ” means a director of the Company or any Subsidiary who +is not an Employee. +2.28 “ Participant ” means an Employee, Contractor or Outside Director to whom an Award is granted under +this Plan. +2.29 “ Performance Award ” means an Award hereunder of cash, shares of Common Stock, units or rights based upon, +payable in, or otherwise related to, Common Stock pursuant to Section 6.7 hereof. +2.30 “ Performance +Criteria ” is defined below in Section 6.10 . +2.31 “ Performance Goal ” means any of the +goals set forth in Section 6.10 hereof. +2.32 “ Plan ” is defined above in the introductory +paragraph of the Plan. +2.33 “ Prior Plan ” means the Matador Resources Company Amended and Restated 2012 Long-Term Incentive +Plan, as amended from time to time. +2.34 “ Reporting Participant ” means a Participant who is subject to the reporting +requirements of Section 16 of the Exchange Act. +2.35 “ Restricted Stock ” means one or more shares of Common Stock +issued or transferred to a Participant pursuant to Section 6.4 of this Plan which are subject to restrictions or limitations set forth in this Plan and in the related Award Agreement. +2.36 “ Restricted Stock Units ” means one or more units awarded to a Participant pursuant to Section 6.6 +hereof, which are convertible into Common Stock at such time as such units are no longer subject to restrictions as established by the Committee. +2.37 “ SAR ” or “ Stock Appreciation Right ” means the right to receive an amount, in cash and/or Common Stock, +equal to the excess of the Fair Market Value of a specified number of shares of Common Stock as of the date the SAR is exercised (or, as provided in the Award Agreement, converted) over the SAR Price for such shares. +2.38 “ SAR Price ” means the exercise price or conversion price of each share of Common Stock covered by a SAR, determined on the +Date of Grant of the SAR. +2.39 “ Spread ” is defined below in Section 12.4(b) . +2.40 “ Stock Option ” means a Nonqualified Stock Option or an Incentive Stock Option. +2.41 “ Subsidiary ” means (a) any corporation in an unbroken chain of corporations beginning with the Company, if each of the +corporations other than the last corporation in the unbroken chain owns stock possessing a majority of the total combined voting power of all classes of stock in one of the other corporations in the chain, (b) any limited partnership, if the +Company or any corporation described in item (a) above owns a majority of the general +B-4 Matador Resources Company | 2019 Proxy Statement +Table of Contents +ANNEX B +partnership interest and a majority of the limited partnership interests entitled to vote on the removal and replacement of the general partner and (c) any partnership or limited liability +company, if the partners or members thereof are composed only of the Company, any corporation listed in item (a) above or any limited partnership listed in item (b) above. “ Subsidiaries ” means more than one of any such +corporations, limited partnerships, partnerships or limited liability companies. +2.42 “ Substitute Award ” is defined below +in Section 5.4 . +2.43 “ Tenure Award ” means an Award hereunder of cash, shares of Common Stock, +units or rights based upon, payable in, or otherwise related to, Common Stock that vests over time based upon the Participant’s continued employment with or service to the Company or its Subsidiaries. +2.44 “ Termination of Service ” occurs when a Participant who is (a) an Employee of the Company or any Subsidiary ceases to +serve as an Employee of the Company and its Subsidiaries, for any reason; (b) an Outside Director of the Company or a Subsidiary ceases to serve as a director of the Company and its Subsidiaries for any reason; or (c) a Contractor of the +Company or a Subsidiary ceases to serve as a Contractor of the Company and its Subsidiaries for any reason. Except as may be necessary or desirable to comply with applicable federal or state law, a “Termination of Service” shall not be +deemed to have occurred when a Participant who is an Employee becomes an Outside Director or Contractor or when an Outside Director becomes a Contractor or, in each case, vice versa. If, however, a Participant who is an Employee and who has an +Incentive Stock Option ceases to be an Employee but does not suffer a Termination of Service, and if that Participant does not exercise the Incentive Stock Option within the time required under Section 422 of the Code upon ceasing to be an +Employee, the Incentive Stock Option shall thereafter become a Nonqualified Stock Option. Notwithstanding the foregoing provisions of this Section 2.44 , in the event an Award issued under the Plan is subject to +Section 409A of the Code, then, in lieu of the foregoing definition and to the extent necessary to comply with the requirements of Section 409A of the Code, the definition of “Termination of Service” for purposes of such Award +shall be the definition of “separation from service” provided for under Section 409A of the Code. +2.45 “ Total and +Permanent Disability ” means a Participant is qualified for long-term disability benefits under the Company’s or Subsidiary’s disability plan or insurance policy; or, if no such plan or policy is then in existence or if the +Participant is not eligible to participate in such plan or policy, that the Participant, because of a physical or mental condition resulting from bodily injury, disease or mental disorder, is unable to perform his or her duties of employment for a +period of six (6) continuous months, as determined in good faith by the Committee, based upon medical reports or other evidence satisfactory to the Committee; provided that , with respect to any Incentive Stock Option, Total and +Permanent Disability shall have the meaning given it under the rules governing Incentive Stock Options under the Code. Notwithstanding the foregoing provisions of this Section 2.45 , in the event an Award issued under the +Plan is subject to Section 409A of the Code, then, in lieu of the foregoing definition and to the extent necessary to comply with the requirements of Section 409A of the Code, the definition of “Total and Permanent Disability” +for purposes of such Award shall be the definition of “disability” provided for under Section 409A of the Code. +ARTICLE 3 – +ADMINISTRATION +3.1 General Administration; Establishment of Committee . Subject to the terms of this Article 3 , the Plan +shall be administered by the Board or such committee of the Board as is designated by the Board to administer the Plan (the “ Committee ”). The Committee shall consist of not fewer than two persons. Any member of the Committee may be +removed at any time, with or without cause, by resolution of the Board. Any vacancy occurring in the membership of the Committee may be filled by appointment by the Board. At any time there is no Committee to administer the Plan, any references in +this Plan to the Committee shall be deemed to refer to the Board. +Membership on the Committee shall be limited to those members of the Board who are “non-employee directors” as defined in Rule 16b-3 promulgated under the Exchange Act. A majority of the Committee shall constitute a quorum, and the act of a +majority of the members of the Committee present at a meeting at which a quorum is present shall be the act of the Committee. +2019 +Proxy Statement | Matador Resources Company B-5 +Table of Contents +ANNEX B +3.2 Designation of Participants and +Awards . +(a) The Committee or the Board shall determine and designate from time to time the eligible persons to whom +Awards will be granted and shall set forth in each related Award Agreement, where applicable, the term of such Award, the Date of Grant and such other terms, provisions, limitations and performance requirements, as are approved by the Committee, but +not inconsistent with the Plan. Although the members of the Committee shall be eligible to receive Awards, all decisions with respect to any Award, and the terms and conditions thereof, to be granted under the Plan to any member of the Committee +shall be made solely and exclusively by the other members of the Committee, or if such member is the only member of the Committee, by the Board. +(b) Notwithstanding Section 3.2(a) , to the extent permitted by Applicable Law, the Board or the +Committee may, in its discretion and by a resolution adopted by the Board or Committee, authorize one or more officers of the Company to (i) designate one or more Employees as eligible persons to whom Awards will be granted under the Plan and +(ii) determine the number of shares of Common Stock that will be subject to such Awards and the terms and conditions of such Awards; provided, however, that the resolution of the Board granting such authority shall (x) specify the total +number of shares of Common Stock that may be made subject to the Awards, (y) set forth the price or prices (or a formula by which such price or prices may be determined) to be paid for the purchase of the Common Stock subject to such Awards and +(z) not authorize an officer to designate himself or any Executive Officer as a recipient of any Award. +3.3 Authority of the +Committee . The Committee, in its discretion, shall (a) interpret the Plan, (b) prescribe, amend and rescind any rules and regulations necessary or appropriate for the administration of the Plan, (c) establish performance goals for +an Award and certify the extent of their achievement and (d) make such other determinations or certifications and take such other action as it deems necessary or advisable in the administration of the Plan. Any interpretation, determination, or +other action made or taken by the Committee shall be final, binding and conclusive on all interested parties. The Committee’s discretion set forth herein shall not be limited by any provision of the Plan, including any provision which by its +terms is applicable notwithstanding any other provision of the Plan to the contrary. +The Committee may delegate to any subcommittee or, subject to the limitations +set forth in Section 3.2(b) above, to officers of the Company the authority to perform specified functions under the Plan. Any actions taken by any officers of the Company pursuant to such delegation of authority shall be deemed to have been +taken by the Committee. +With respect to restrictions in the Plan that are based on the requirements of Rule 16b-3 +promulgated under the Exchange Act, Section 422 of the Code, the rules of any exchange or interdealer quotation system upon which the Company’s securities are listed or quoted or any other Applicable Law, to the extent that any such +restrictions are no longer required by Applicable Law, the Committee shall have the sole discretion and authority to grant Awards that are not subject to such mandated restrictions and/or to waive any such mandated restrictions with respect to +outstanding Awards. +ARTICLE 4 – ELIGIBILITY +Any Employee +(including an Employee who is also a director or an officer), Contractor or Outside Director is eligible to be selected to participate in the Plan; provided that only Employees shall be eligible to receive Incentive Stock Options. The Committee, +upon its own action, may grant, but shall not be required to grant, an Award to any Employee, Contractor or Outside Director. Awards may be granted by the Committee at any time and from time to time to new Participants, or to then Participants, or +to a greater or lesser number of Participants, and may include or exclude previous Participants, as the Committee shall determine. Except as required by this Plan, Awards need not contain similar provisions. The Committee’s determinations under +the Plan (including without limitation determinations of which Employees, Contractors or Outside Directors, if any, are to receive Awards, the form, amount and timing of such Awards and the terms and provisions of such Awards and Award Agreements) +need not be uniform and may be made by it selectively among Participants who receive, or are eligible to receive, Awards under the Plan. +B-6 Matador Resources Company | 2019 Proxy Statement +Table of Contents +ANNEX B +ARTICLE 5 – SHARES SUBJECT TO PLAN; AWARD LIMITATIONS +5.1 Number Available for Awards . Subject to adjustment as provided in Articles 11 and 12 , the maximum number of shares of +Common Stock that may be delivered pursuant to Awards granted under the Plan is 3,225,000 shares, of which 100% may be delivered pursuant to Incentive Stock Options, plus the number of shares of Common Stock remaining available for issuance under +the Prior Plan on the Effective Date, plus the number of shares of Common Stock subject to any award outstanding under the Prior Plan as of the Effective Date that after the Effective Date is not issued because such award is forfeited, terminates, +expires or otherwise lapses without being exercised (to the extent applicable), or is settled in cash. Subject to adjustment pursuant to Articles 11 and 12 , the maximum number of shares of Common Stock with respect to which Stock +Options or SARs may be granted to an Executive Officer during any calendar year is 500,000 shares of Common Stock. Shares to be issued may be made available from authorized but unissued Common Stock, Common Stock held by the Company in its treasury +or Common Stock purchased by the Company on the open market or otherwise. During the term of this Plan, the Company will at all times reserve and keep available the number of shares of Common Stock that shall be sufficient to satisfy the +requirements of this Plan. +5.2 Restoration and Retention of Shares . If any shares of Common Stock subject to an Award shall not be +issued or transferred to a Participant and shall cease to be issuable or transferable to a Participant because of the forfeiture, termination, expiration or cancellation, in whole or in part, of such Award or for any other reason, the shares not so +issued or transferred, or the shares so reacquired by the Company, as the case may be, shall no longer be charged against the limitation provided for in Section 5.1 and may be used thereafter for additional Awards under the +Plan. The following additional parameters shall apply: +(a) If an Award may be settled in shares of Common Stock or cash (in +whole or in part), shares shall be deemed issued only when and to the extent that settlement or payment is actually made in shares of Common Stock. To the extent an Award is settled or paid in cash, and not shares of Common Stock, any shares +previously reserved for issuance or transfer pursuant to such Award will again be deemed available for issuance or transfer under the Plan, and the maximum number of shares of Common Stock that may be issued or transferred under the Plan shall be +reduced only by the number of shares actually issued and transferred to the Participant. +(b) Notwithstanding the foregoing, +(i) shares withheld or tendered to pay withholding taxes or the exercise price of an Award shall not again be available for the grant of Awards under the Plan and (ii) the full number of shares subject to a Stock Option or SAR granted that +are settled by the issuance of shares shall be counted against the shares authorized for issuance under this Plan, regardless of the number of shares actually issued upon the settlement of such Stock Option or SAR. +(c) Any shares repurchased by the Company on the open market using the proceeds from the exercise of an Award shall not increase +the number of shares available for the future grant of Awards. +5.3 Outside Director Awards . The aggregate dollar value of +equity-based (based on the grant date Fair Market Value of equity-based Awards) and cash compensation granted under this Plan or otherwise during any calendar year to any Outside Director shall not exceed $600,000; provided, however, that in the +calendar year in which an Outside Director first joins the Board or serves as Chairman of the Board or Lead Director, the maximum aggregate dollar value of equity-based and cash compensation granted to the Outside Director may be up to two hundred +percent (200%) of the foregoing limit. +5.4 Substitute Awards . Awards granted or Common Stock issued by the Company in assumption of, +or in substitution or exchange for, awards previously granted, or the right or obligation to make future awards, by a company acquired by the Company or any Subsidiary or with which the Company or any Subsidiary combines (“ Substitute +Awards ”) shall not be charged against the limitation provided for in Section 5.1 . The terms and conditions of the Substitute Awards may vary from the terms and conditions set forth in this Plan to such extent as +the Committee may deem appropriate to conform, in whole or in part, to the provisions of the awards in substitution for which they are granted. Additionally, in the event that a company acquired by the Company or any Subsidiary, or with which the +Company or any Subsidiary combines, has shares available under a pre-existing plan approved by stockholders and not adopted in contemplation of such acquisition or combination, the shares +2019 +Proxy Statement | Matador Resources Company B-7 +Table of Contents +ANNEX B +available for grant pursuant to the terms of such pre-existing plan (as adjusted, to the extent appropriate, using the exchange ratio or other adjustment +or valuation ratio or formula used in such acquisition or combination to determine the consideration payable to the holders of common stock of the entities party to such acquisition or combination) may be used for Awards under the Plan and shall not +reduce the shares of Common Stock authorized for issuance under the Plan; provided that Awards using such available shares shall not be made after the date awards or grants could have been made under the terms of the +pre-existing plan, absent the acquisition or combination, and shall only be made to individuals who were employees of such acquired or combined company before such acquisition or combination. +ARTICLE 6 – GRANT OF AWARDS +6.1 In +General . The grant of an Award shall be authorized by the Committee and shall be evidenced by an Award Agreement setting forth the Award(s) being granted, the total number of shares of Common Stock subject to the Award(s), the Option Price (if +applicable), the term of the Award, the Date of Grant and such other terms, provisions, limitations and performance objectives, as are approved by the Committee, but (i) not inconsistent with the Plan, and (ii) to the extent an Award +issued under the Plan is subject to Section 409A of the Code, in compliance with the applicable requirements of Section 409A of the Code . The Company shall execute an Award Agreement with a Participant after the Committee approves the +issuance of an Award and the terms of Awards and Award Agreements need not be the same with respect to different Participants. The grant of an Award to a Participant shall not be deemed either to entitle the Participant to, or to disqualify the +Participant from, receipt of any other Award under the Plan. +6.2 Option Terms . The Option Price for any share of Common Stock which +may be purchased under a Nonqualified Stock Option for any share of Common Stock must be equal to or greater than the Fair Market Value of the share on the Date of Grant. The Option Price for any share of Common Stock which may be purchased under an +Incentive Stock Option must be at least equal to the Fair Market Value of the share on the Date of Grant; if an Incentive Stock Option is granted to an Employee who owns or is deemed to own (by reason of the attribution rules of Section 424(d) +of the Code) more than ten percent (10%) of the combined voting power of all classes of stock of the Company (or any parent or Subsidiary), the Option Price shall be at least one hundred ten percent (110%) of the Fair Market Value of the Common +Stock on the Date of Grant. No Stock Option granted under this Plan may be exercised at any time after the expiration of ten (10) years from its Date of Grant or such shorter period as may be specified in the Award Agreement. However, if an +Employee owns or is deemed to own (by reason of the attribution rules of Section 424(d) of the Code) more than ten percent (10%) of the combined voting power of all classes of stock of the Company (or any parent or Subsidiary) and an Incentive +Stock Option is granted to such Employee, the term of such Incentive Stock Option (to the extent required by the Code at the time of grant) shall be no more than five (5) years from the Date of Grant. +6.3 Maximum ISO Grants . The Committee may not grant Incentive Stock Options under the Plan to any Employee which would permit the +aggregate Fair Market Value (determined on the Date of Grant) of the Common Stock with respect to which Incentive Stock Options (under this and any other plan of the Company and its Subsidiaries) are exercisable for the first time by such Employee +during any calendar year to exceed $100,000. To the extent any Stock Option granted under this Plan which is designated as an Incentive Stock Option exceeds this limit or otherwise fails to qualify as an Incentive Stock Option, such Stock Option (or +any such portion thereof) shall be a Nonqualified Stock Option. +6.4 Restricted Stock . Restricted Stock may be granted to or sold to +any Participant under such terms and conditions as shall be established by the Committee (including service-based, performance-based conditions or otherwise), provided, however, that such terms and conditions are consistent with the Plan. Restricted +Stock shall be subject to such restrictions as the Committee determines, including, without limitation, (a) a prohibition against sale, assignment, transfer, pledge, hypothecation or other encumbrance for a specified period; or (b) a +requirement that the holder forfeit such Award in the event of Termination of Service during the period of restriction. +B-8 Matador Resources Company | 2019 Proxy Statement +Table of Contents +ANNEX B +Except as provided in the applicable Award Agreement, the Participant shall have, with respect to the Participant’s Restricted Stock, all of the rights of a +shareholder of the Company, including the right to vote the shares, and the right to receive any dividends thereon; provided, however, that the Participant shall not have the right to receive dividends on any Restricted Stock that has not yet +vested. Except as provided in the applicable Award Agreement, any dividends declared with respect to any portion of such Restricted Stock prior to the vesting of such portion shall be (i) accrued or (ii) reinvested in additional shares of +Common Stock (which may thereafter accrue additional dividends). Any such reinvestment shall be at the Fair Market Value at the time thereof and subject to the same terms as the underlying Award. Accrued dividends shall be paid as soon as +practicable following vesting of the Restricted Stock and may be settled in cash or shares of Common Stock, or a combination thereof, in a single payment or in installments. +6.5 SARs . The Committee may grant SARs to any Participant, either as a separate Award or in connection with a Stock Option. SARs shall be +subject to such terms and conditions as the Committee shall impose (including service-based, performance-based conditions or otherwise), provided that such terms and conditions are consistent with the Plan. The grant of the SAR may provide that the +holder may be paid for the value of the SAR either in cash or in shares of Common Stock, or a combination thereof. In the event of the exercise of a SAR payable in shares of Common Stock, the holder of the SAR shall receive that number of whole +shares of Common Stock having an aggregate Fair Market Value on the date of exercise equal to the value obtained by multiplying (a) the difference between the Fair Market Value of a share of Common Stock on the date of exercise over the SAR +Price as set forth in such SAR (or other value specified in the agreement granting the SAR), by (b) the number of shares of Common Stock as to which the SAR is exercised, with a cash settlement to be made for any fractional shares of Common +Stock. The SAR Price for any share of Common Stock subject to a SAR may be equal to or greater than the Fair Market Value of the share on the Date of Grant. The Committee, in its sole discretion, may place a ceiling on the amount payable upon +exercise of a SAR, but any such limitation shall be specified at the time that the SAR is granted. +6.6 Restricted Stock Units . +Restricted Stock Units may be awarded or sold to any Participant under such terms and conditions as shall be established by the Committee (including service-based, performance-based conditions or otherwise), provided, however, that such terms and +conditions are consistent with the Plan. The grant of a Restricted Stock Unit may provide that the holder may be paid for the value of the Restricted Stock Unit either in cash or in shares of Common Stock, or a combination thereof. Restricted Stock +Units shall be subject to such restrictions as the Committee determines, including, without limitation, (a) a prohibition against sale, assignment, transfer, pledge, hypothecation or other encumbrance for a specified period; or (b) a +requirement that the holder forfeit (or in the case of shares of Common Stock or units sold to the Participant, resell to the Company at cost) such shares or units in the event of Termination of Service during the period of restriction. +6.7 Dividend Equivalent Rights . The Committee may grant a Dividend Equivalent Right to any Participant, either as a component of another +Award or as a separate Award. The terms and conditions of the Dividend Equivalent Right shall be specified by the grant. Dividend equivalents credited to the holder of a Dividend Equivalent Right may be paid currently or may be deemed to be +reinvested in additional shares of Common Stock (which may thereafter accrue additional dividend equivalents). Any such reinvestment shall be at the Fair Market Value at the time thereof. Dividend Equivalent Rights may be settled in cash or shares +of Common Stock, or a combination thereof, in a single payment or in installments. A Dividend Equivalent Right granted as a component of an Award shall provide that such Dividend Equivalent Right shall be settled only upon settlement or payment of, +or lapse of restrictions on, such other Award, and that such Dividend Equivalent Right shall expire or be forfeited or annulled under the same conditions as such other Award. +6.8 Other Awards . The Committee may grant to any Participant other forms of Awards, based upon, payable in, or otherwise related to, in +whole or in part, shares of Common Stock, if the Committee determines that such other form of Award is consistent with the purpose and restrictions of this Plan. The terms and conditions of such other form of Award shall be specified by the grant. +Such Other Awards may be granted for no cash consideration, for such minimum consideration as may be required by Applicable Law, or for such other consideration as may be specified by the grant. +2019 +Proxy Statement | Matador Resources Company B-9 +Table of Contents +ANNEX B +6.9 Performance Awards . +(a) The Committee may grant any of the Awards described in Sections 6.2 through 6.8 as Performance Awards. The terms and +conditions of Performance Awards shall be specified at the time of the grant and may include provisions establishing the performance period, the Performance Goals to be achieved during a performance period and the maximum or minimum settlement +values, provided that such terms and conditions are consistent with the Plan. If the Performance Award is to be in shares of Common Stock, the Performance Awards may provide for the issuance of the shares of Common Stock at the time of the grant of +the Performance Award or at the time of the certification by the Committee that the Performance Goals for the performance period have been met; provided , however , if shares of Common Stock are issued at the time of the grant of the +Performance Award and if, at the end of the performance period, the Performance Goals are not certified by the Committee to have been fully satisfied, then, notwithstanding any other provisions of this Plan to the contrary, the Common Stock shall be +forfeited in accordance with the terms of the grant to the extent the Committee determines that the Performance Goals were not met. The forfeiture of shares of Common Stock issued at the time of the grant of the Performance Award due to failure to +achieve the established Performance Goals shall be separate from and in addition to any other restrictions provided for in this Plan that may be applicable to such shares of Common Stock. Each Performance Award granted to one or more Participants +shall have its own terms and conditions. +If the Committee determines, in its sole discretion, that with respect to a Performance Award, the established performance +measures or objectives are no longer suitable because of a change in the Company’s business, operations, corporate structure or for other reasons that the Committee deemed satisfactory, the Committee may modify the performance measures or +objectives and/or the performance period. +(b) Performance Awards may be paid in cash, shares of Common Stock, or other +consideration, or any combination thereof. If payable in shares of Common Stock, the consideration for the issuance of such shares may be the achievement of the performance objective established at the time of the grant of the Performance Award. +Performance Awards may be payable in a single payment or in installments and may be payable at a specified date or dates or upon attaining the performance objective. The extent to which any applicable performance objective has been achieved shall be +conclusively determined by the Committee. +(c) Notwithstanding the foregoing, no Participant may receive in any calendar year +Performance Awards which have an aggregate value of more than $10,000,000, and if such Performance Awards involve the issuance of shares of Common Stock, said aggregate value shall be based on the Fair Market Value of such shares on the time of the +grant of the Performance Award. +(d) Performance Awards may be made subject to the attainment of Performance Goals relating +to one or more factors determined in the sole discretion of the Committee, which may consist of one or more or any combination of the following criteria in either absolute or relative terms (as compared to an external benchmark or performance of a +designated peer group of companies), for either any individual Participant, the Company or any of its Subsidiary organizations or divisions (the “ Performance Criteria ”): +(i) Earnings (either in the aggregate or on a per-share basis) or adjusted +earnings; +(ii) Net income or adjusted net income; +(iii) Operating income; +(iv) Operating profit; +(v) Cash flow; +(vi) Return measures (including cash return on cash invested (CROCI), return on average capital employed (ROACE) +or other return on assets, investments, equity or invested capital); +(vii) Total shareholder return (change +in share price plus reinvestment of dividends into shares when declared, if any, from period to period) and other measures of shareholder return (including income applicable to common shareholders or other class of shareholders); +B-10 Matador Resources Company | 2019 Proxy Statement +Table of Contents +ANNEX B +(viii) Earnings before or after either, or any combination of, interest, taxes, depletion, depreciation, +amortization or other non-cash items; +(ix) Adjusted EBITDA; +(x) Acreage; +(xi) Reserves; +(xii) Present value of estimated future oil and gas revenues, net of estimated direct expenses, discounted at an +annual discount rate of 10% (or PV 10); +(xiii) Gross revenues; +(xiv) Reduction in expense levels in each case, where applicable, determined either on a Company-wide basis or in +respect of any one or more Subsidiaries or business units thereof; +(xv) Economic value or economic value +added; +(xvi) Market share or market share added; +(xvii) Annual net income to common stock; +(xviii) Earnings per share or growth in earnings per share; +(xix) Annual cash flow provided by operations; +(xx) Changes in annual revenues; +(xxi) Strategic and operational business criteria, consisting of one or more objectives based on specified +revenue, market penetration, geographic business expansion goals, execution of new midstream third-party agreements, identified project milestones, completion of significant projects, production, gathering, processing or disposal volume levels (on +an absolute or debt-adjusted basis), cost targets, lease operating expenses, G&A expenses, leverage ratio, finding and development costs, reserves or reserves added, reserve replacement ratio and goals relating to acquisitions or divestitures; +(xxii) Goals relating to specific environmental compliance measures and safety and accident rates; +(xxiii) Individual management objectives; +(xxiv) Certain strategic goals, such as consummation of transactions or events, or other qualitative matters, that +improve operational efficiencies or results, preserve the Company’s balance sheet, create additional value through acquisitions, divestitures, joint ventures or other value creating transactions, expand or increase the per share value of the +Company’s midstream business, represent an assumption of additional duties beyond those within an executive’s responsibilities, assist in staff development, retention and training or serve to maintain the Company’s culture and working +conditions; and/or +(xxv) Any other Performance Goal that the Committee deems appropriate. +The Committee may designate, in its sole discretion, whether a particular Performance Criteria is to be measured on a pre-tax +basis or post-tax basis. In addition, certain Performance Criteria may be stated in reference to a production volume of measurement such as in per cubic feet equivalents or barrels of oil equivalents (e.g., +per Mcfe, MMcfe, Bcfe, BOE, MBOE or MMBOE), including such production volume on a daily basis. Any Performance Criteria may be used to measure the performance of the Company as a whole or any business unit of the Company and may be measured relative +to a peer group or index. Any Performance Criteria may include or exclude (i) extraordinary, unusual and/or non-recurring items of gain or loss, (ii) gains or losses on the disposition of a business, +(iii) changes in tax or accounting regulations or laws, (iv) the effect of a merger or acquisition, as identified in the Company’s quarterly and annual earnings releases or (v) other similar occurrences. +6.10 Tandem Awards . The Committee may grant two or more Award types in the form of a “tandem Award,” so that the right of the +Participant to exercise one shall be canceled if, and to the extent, the other is exercised. For example, if a Stock Option and a SAR are issued in a tandem Award, and the Participant exercises the SAR with respect to one hundred (100) shares +of Common Stock, the right of the Participant to exercise the related Stock Option shall be canceled to the extent of one hundred (100) shares of Common Stock. +2019 +Proxy Statement | Matador Resources Company B-11 +Table of Contents +ANNEX B +6.11 No Repricing of Stock Options +or SARs . Unless approved by the Company’s shareholders, the Committee may not “reprice” any Stock Option or SAR. For purposes of this Section 6.12 , “reprice” means any of the following or any +other action that has the same effect: (a) amending a Stock Option or SAR to reduce its exercise price or base price, (b) canceling a Stock Option or SAR at a time when its exercise price or base price exceeds the Fair Market Value of a +share of Common Stock in exchange for cash or a Stock Option, SAR, award of Restricted Stock or other equity award or (c) taking any other action that is treated as a repricing under generally accepted accounting principles, provided that +nothing in this Section 6.12 shall prevent the Committee from substituting Awards in accordance with Section 5.4 , making adjustments pursuant to Article 11 or from exchanging or cancelling +Awards pursuant to Article 12 . +6.12 Recoupment . Notwithstanding any other language in this Plan to the contrary, the Company +may recoup all or any portion of any shares or cash paid to a Participant in connection with an Award, to the extent provided for under the Company’s clawback policy, if any, approved by the Company’s Board from time to time. +ARTICLE 7 – VESTING +The Committee, in its sole discretion, shall +establish the vesting terms applicable to an Award, including whether all or any portion will not be vested until a date or dates subsequent to its Date of Grant, or until the occurrence of one or more specified events, provided that any such +vesting terms shall not be inconsistent with the terms of the Plan, including, without limitation, this Article 7 . If the Committee imposes conditions upon vesting, then subsequent to the Date of Grant, the Committee may, in its sole +discretion, accelerate the date on which all or a portion of the Award may be vested, provided that any such acceleration must comply with the terms of the Plan, including, without, limitation, this Article 7 . Except as otherwise provided +herein, the Committee must grant all Awards in accordance with the following provisions: (a) all Awards granted to Participants other than Outside Directors must vest no earlier than one (1) year after the Date of Grant; (b) all +Awards granted to Outside Directors must vest no earlier than the earlier of one (1) year after the Date of Grant or the next annual meeting of shareholders (provided that such annual meetings are at least fifty (50) weeks apart); and +(c) the Committee may not accelerate the date on which all or any portion of an Award may be vested or waive the period of restriction on an Award except (i) upon the Participant’s death or Total and Permanent Disability; +(ii) upon a Change in Control or (iii) upon a Termination of Service on or following a Change in Control. Notwithstanding the foregoing, the Committee may, in its sole discretion, grant Awards with more favorable vesting provisions than +set forth in this Article 7 , provided that the shares of Common Stock subject to such Awards shall be Exempt Shares. +ARTICLE 8 – EXERCISE OR +CONVERSION OF AWARD +8.1 In General . A vested Award may be exercised or converted, during its term, subject to limitations and +restrictions set forth in the Award Agreement. +8.2 Securities Law and Exchange Restrictions . In no event may an Award be exercised or +shares of Common Stock be issued pursuant to an Award if the Company determines in its sole discretion that a necessary listing or quotation of the shares of Common Stock on a stock exchange or inter-dealer quotation system, any registration under +state or federal securities laws required under the circumstances, or the necessary consent or approval of any governmental regulatory body has not been obtained or accomplished. +8.3 Exercise of Stock Option . +(a) In General . If a Stock Option is exercisable prior to the time it is vested, the Common Stock obtained on the exercise +of the Stock Option shall be Restricted Stock which is subject to the applicable provisions of the Plan and the Award Agreement. If the Committee imposes conditions upon exercise, then subsequent to the Date of Grant, the Committee may, in its sole +discretion, accelerate the date on which all or any portion of the Stock Option may be exercised subject to the vesting requirements set forth in Article 7 . No Stock Option may be exercised for a fractional share of Common Stock. The granting +of a Stock Option shall impose no obligation upon the Participant to exercise that Stock Option. +(b) Notice and +Payment . Subject to such administrative conditions as the Company may from time to time adopt, a Stock Option may be exercised by the delivery of written notice in the form specified by the Company +B-12 Matador Resources Company | 2019 Proxy Statement +Table of Contents +ANNEX B +setting forth the number of shares of Common Stock with respect to which the Stock Option is to be exercised and the date of exercise thereof (the “ Exercise Date ”). On the +Exercise Date, the Participant shall deliver to the Company consideration with a value equal to the total Option Price of the shares to be purchased, payable as provided in the Award Agreement, which may provide for payment in any one or more of the +following ways: (i) cash or check, bank draft or money order payable to the order of the Company, (ii) Common Stock (including Restricted Stock) owned by the Participant on the Exercise Date, valued at its Fair Market Value on the Exercise +Date, and which the Participant has not acquired from the Company within six (6) months prior to the Exercise Date, (iii) by delivery (including electronic delivery) to the Company or its designated agent of an executed irrevocable option +exercise form together with irrevocable instructions from the Participant to a broker or dealer, reasonably acceptable to the Company, to sell certain of the shares of Common Stock purchased upon exercise of the Stock Option or to pledge such shares +as collateral for a loan and promptly deliver to the Company the amount of sale or loan proceeds necessary to pay such purchase price, (iv) by the Company withholding a number of shares of Common Stock, valued at its Fair Market Value on the +Exercise Date, otherwise issuable upon exercise of the Stock Option and/or (v) in any other form of valid consideration that is acceptable to the Committee in its sole discretion. In the event that shares of Restricted Stock are tendered as +consideration for the exercise of a Stock Option, a number of shares of Common Stock issued upon the exercise of the Stock Option equal to the number of shares of Restricted Stock used as consideration therefor shall be subject to the same +restrictions and provisions as the Restricted Stock so tendered. +Except as otherwise provided in the applicable Award Agreement, upon payment of all amounts due +from the Participant, the Company shall cause the Common Stock then being purchased to be registered in the Participant’s name (or the person exercising the Participant’s Stock Option in the event of his or her death). +(c) Failure to Pay . Except as may otherwise be provided in an Award Agreement, if the Participant fails to pay for any of +the Common Stock specified in such notice or fails to accept delivery thereof, that portion of the Participant’s Stock Option and right to purchase such Common Stock may be forfeited by the Participant. +8.4 SARs . Subject to the conditions of this Section 8.4 and such conditions as the Company may from time to time +adopt, a SAR may be exercised by the delivery (including by electronic delivery) of written notice to the Company, in the form specified by the Company, setting forth the number of shares of Common Stock with respect to which the SAR is to be +exercised and the date of exercise thereof (the “ Exercise Date ”) which shall be at least three (3) days after giving such notice unless an earlier time shall have been mutually agreed upon. Subject to the terms of the Award +Agreement and only if permissible under Section 409A of the Code (or, if not so permissible, at such time as permitted by Section 409A of the Code), the Participant shall receive from the Company in exchange therefor in the discretion of +the Committee, and subject to the terms of the Award Agreement: +(a) cash in an amount equal to the excess (if any) of the +Fair Market Value (as of the Exercise Date, or if provided in the Award Agreement, conversion, of the SAR) per share of Common Stock over the SAR Price per share specified in such SAR, multiplied by the total number of shares of Common Stock of the +SAR being surrendered; +(b) that number of shares of Common Stock having an aggregate Fair Market Value (as of the Exercise +Date, or if provided in the Award Agreement, conversion, of the SAR) equal to the amount of cash otherwise payable to the Participant, with a cash settlement to be made for any fractional share interests; or +(c) the Company may settle such obligation in part with shares of Common Stock and in part with cash. +The distribution of any cash or Common Stock pursuant to the foregoing sentence shall be made at such time as set forth in the Award Agreement. +8.5 Disqualifying Disposition of Incentive Stock Option . If shares of Common Stock acquired upon exercise of an Incentive Stock Option are +disposed of by a Participant prior to the expiration of either two (2) years from the Date of Grant of such Stock Option or one (1) year from the transfer of shares of Common Stock to the Participant pursuant to the exercise of such Stock +Option, or in any other disqualifying disposition within the meaning of +2019 +Proxy Statement | Matador Resources Company B-13 +Table of Contents +ANNEX B +Section 422 of the Code, such Participant shall notify the Company in writing of the date and terms of such disposition. A disqualifying disposition by a Participant shall not affect the +status of any other Stock Option granted under the Plan as an Incentive Stock Option within the meaning of Section 422 of the Code. +ARTICLE 9 – +AMENDMENT OR DISCONTINUANCE +Subject to the limitations set forth in this Article 9 , the Committee may at any time and from time to time, without the +consent of the Participants, alter, amend, revise, suspend, or discontinue the Plan in whole or in part; provided, however, that no amendment for which shareholder approval is required either (a) by any securities exchange or inter-dealer +quotation system on which the Common Stock is listed or traded or (b) in order for the Plan and Awards to continue to comply with Sections 421 and 422 of the Code, including any successors to such Sections, or other Applicable Law, shall be +effective unless such amendment shall be approved by the requisite vote of the shareholders of the Company entitled to vote thereon. Any such amendment shall, to the extent deemed necessary or advisable by the Committee, be applicable to any +outstanding Awards theretofore granted under the Plan, notwithstanding any contrary provisions contained in any Award Agreement. In the event of any such amendment to the Plan, the holder of any Award outstanding under the Plan shall, upon request +of the Committee and as a condition to the exercisability thereof, execute a conforming amendment in the form prescribed by the Committee to any Award Agreement relating thereto. Notwithstanding anything contained in this Plan to the contrary, +unless required by law, no action contemplated or permitted by this Article 9 shall materially adversely affect any rights of Participants or obligations of the Company to Participants with respect to any Award theretofore granted under the +Plan without the consent of the affected Participant. +ARTICLE 10 – TERM +The Plan shall be effective from the Effective Date. Unless sooner terminated by action of the Board, the Plan will terminate on the tenth anniversary of the Board +Approval Date, but Awards granted before that date will continue to be effective in accordance with their terms and conditions. +ARTICLE 11 – CAPITAL +ADJUSTMENTS +In the event that any dividend or other distribution (whether in the form of cash, Common Stock, other securities or other property), +recapitalization, stock split, reverse stock split, rights offering, reorganization, merger, consolidation, split-up, spin-off, +split-off, combination, subdivision, repurchase, or exchange of Common Stock or other securities of the Company, issuance of warrants or other rights to purchase Common Stock or other securities of the +Company, or other similar corporate transaction or event affects the fair value of an Award, then the Committee shall adjust any or all of the following so that the fair value of the Award immediately after the transaction or event is equal to the +fair value of the Award immediately prior to the transaction or event: (a) the number of shares and type of Common Stock (or the securities or property) which thereafter may be made the subject of Awards, (b) the number of shares and type +of Common Stock (or other securities or property) subject to outstanding Awards, (c) the Option Price of each outstanding Award, and (d) the number of or SAR Price of shares of Common Stock then subject to outstanding SARs previously +granted and unexercised under the Plan, to the end that the same proportion of the Company’s issued and outstanding shares of Common Stock in each instance shall remain subject to exercise at the same aggregate SAR Price; provided however, that +the number of shares of Common Stock (or other securities or property) subject to any Award shall always be a whole number. Notwithstanding the foregoing, no such adjustment shall be made or authorized to the extent that such adjustment would cause +the Plan or any Stock Option to violate Section 422 of the Code or Section 409A of the Code. Such adjustments shall be made in accordance with the rules of any securities exchange, stock market or stock quotation system to which the +Company is subject. +Upon the occurrence of any such adjustment, the Company shall provide notice to each affected Participant of its computation of such adjustment +which shall be conclusive and shall be binding upon each such Participant. +ARTICLE 12 – RECAPITALIZATION, MERGER AND CONSOLIDATION +12.1 No Effect on Company’s Authority . The existence of this Plan and Awards granted hereunder shall not affect in any way the right +or power of the Company or its shareholders to make or authorize any or all +B-14 Matador Resources Company | 2019 Proxy Statement +Table of Contents +ANNEX B +adjustments, recapitalizations, reorganizations or other changes in the Company’s capital structure and its business, or any Change in Control, or any merger or consolidation of the Company, +or any issuance of bonds, debentures, preferred or preference stocks ranking prior to or otherwise affecting the Common Stock or the rights thereof (or any rights, options or warrants to purchase same), or the dissolution or liquidation of the +Company, or any sale or transfer of all or any part of its assets or business or any other corporate act or proceeding, whether of a similar character or otherwise. +12.2 Conversion of Awards Where Company Survives . Subject to any required action by the shareholders and except as otherwise provided by +Section 12.4 hereof or as may be required to comply with Section 409A of the Code, if the Company shall be the surviving or resulting corporation in any merger, consolidation or share exchange, any Award granted +hereunder shall pertain to and apply to the securities or rights (including cash, property or assets) to which a holder of the number of shares of Common Stock subject to the Award would have been entitled. +12.3 Exchange or Cancellation of Awards Where Company Does Not Survive . Except as otherwise provided by +Section 12.4 hereof or as may be required to comply with Section 409A of the Code, in the event of any merger, consolidation or share exchange pursuant to which the Company is not the surviving or resulting +corporation, there shall be substituted for each share of Common Stock subject to the unexercised portions of outstanding Awards, that number of shares of each class of stock or other securities or that amount of cash, property or assets of the +surviving, resulting or consolidated company which were distributed or distributable to the shareholders of the Company in respect to each share of Common Stock held by them, such outstanding Awards to be thereafter exercisable for such stock, +securities, cash or property in accordance with their terms. +12.4 Cancellation of Awards . Notwithstanding the provisions of +Sections 12.2 and 12.3 hereof, and except as may be required to comply with Section 409A of the Code, in the event the acquiror or the surviving or resulting corporation does not agree to assume the Awards, all Awards granted +hereunder may be canceled by the Company, in its sole discretion, as of the effective date of any Change in Control, merger, consolidation or share exchange, or any issuance of bonds, debentures, preferred or preference stocks ranking prior to or +otherwise affecting the Common Stock or the rights thereof (or any rights, options or warrants to purchase same), or of any dissolution or liquidation of the Company, by either: +(a) giving notice to each holder thereof or the holder’s representative of its intention to cancel those Awards for which the +issuance of shares of Common Stock involved payment by the Participant for such shares, and permitting the purchase of any or all of the shares of Common Stock subject to such outstanding Awards including, as determined by the Board, unvested +Awards, to occur during the thirty (30) day period preceding such effective date of cancelation; or +(b) in the case of +Awards that are either (i) settled only in shares of Common Stock or (ii) at the election of the Participant, settled in shares of Common Stock, paying the holder thereof an amount equal to a reasonable estimate of the difference between +the net amount per share payable in such transaction or as a result of such transaction, and the price per share of such Award to be paid by the Participant (hereinafter the “ Spread ”), multiplied by the number of shares subject to +the Award. In estimating the Spread, appropriate adjustments to give effect to the existence of the Awards shall be made, such as deeming the Awards to have been exercised, with the Company receiving the exercise price payable thereunder, and +treating the shares receivable upon exercise of the Awards as being outstanding in determining the net amount per share. In cases where the proposed transaction consists of the acquisition of assets of the Company, the net amount per share shall be +calculated on the basis of the net amount receivable with respect to shares of Common Stock upon a distribution and liquidation by the Company after giving effect to expenses and charges, including but not limited to taxes, payable by the Company +before such liquidation could be completed. +An Award that by its terms would be fully vested or exercisable upon a Change in Control will be considered vested or +exercisable for purposes of Section 12.4(a) hereof. +2019 +Proxy Statement | Matador Resources Company B-15 +Table of Contents +ANNEX B +ARTICLE 13 – LIQUIDATION OR DISSOLUTION +Subject to Section 12.4 hereof, in case the Company shall, at any time while any Award under this Plan shall be in force and +remain unexpired, (a) sell all or substantially all of its property, or (b) dissolve, liquidate or wind up its affairs, then each Participant shall be entitled to receive, in lieu of each share of Common Stock of the Company which such +Participant would have been entitled to receive under the Award, the same kind and amount of any securities or assets as may be issuable, distributable, or payable upon any such sale, dissolution, liquidation or winding up with respect to each share +of Common Stock of the Company. If the Company shall, at any time prior to the expiration of any Award, make any partial distribution of its assets, in the nature of a partial liquidation, whether payable in cash or in kind (but excluding the +distribution of a cash dividend payable out of earned surplus and designated as such) and an adjustment is determined by the Committee to be appropriate to prevent the dilution of the benefits or potential benefits intended to be made available +under the Plan, then the Committee shall, in such manner as it may deem equitable, make such adjustment in accordance with the provisions of Article 11 hereof. +ARTICLE 14 – MISCELLANEOUS PROVISIONS +14.1 Investment Intent . The Company may require that there be presented to and filed with it by any Participant under the Plan, such +evidence as it may deem necessary to establish that the Awards granted or the shares of Common Stock to be purchased or transferred are being acquired for investment and not with a view to their distribution. +14.2 No Right to Continued Employment . Neither the Plan nor any Award granted under the Plan shall confer upon any Participant any right +with respect to continuance of employment by the Company or any Subsidiary. +14.3 Indemnification of Board and Committee . No member of +the Board or the Committee, nor any officer or Employee of the Company acting on behalf of the Board or the Committee, shall be personally liable for any action, determination or interpretation taken or made in good faith with respect to the Plan, +and all members of the Board and the Committee, each officer of the Company and each Employee of the Company acting on behalf of the Board or the Committee shall, to the extent permitted by law, be fully indemnified and protected by the Company in +respect of any such action, determination or interpretation to the fullest extent provided by Applicable Law. Except to the extent required by any unwaiveable requirement under Applicable Law, no member of the Board or the Committee (and no +Subsidiary) shall have any duties or liabilities, including without limitation any fiduciary duties, to any Participant (or any Person claiming by and through any Participant) as a result of this Plan, any Award or any Claim arising hereunder and, +to the fullest extent permitted under Applicable Law, each Participant (as consideration for receiving and accepting an Award) irrevocably waives and releases any right or opportunity such Participant might have to assert (or participate or +cooperate in) any Claim against any member of the Board or the Committee and any Subsidiary of the Company arising out of this Plan. +14.4 Effect of the Plan . Neither the adoption of this Plan nor any action of the Board or the Committee shall be deemed to give any person +any right to be granted an Award or any other rights except as may be evidenced by an Award Agreement or any amendment thereto, duly authorized by the Committee and executed on behalf of the Company, and then only to the extent and upon the terms +and conditions expressly set forth therein. +14.5 Compliance With Other Laws and Regulations . Notwithstanding anything contained +herein to the contrary, the Company shall not be required to sell or issue shares of Common Stock under any Award if the issuance thereof would constitute a violation by the Participant or the Company of any provisions of any law or regulation of +any governmental authority or any national securities exchange or inter-dealer quotation system or other forum in which shares of Common Stock are quoted or traded (including without limitation Section 16 of the Exchange Act); and, as a +condition of any sale or issuance of shares of Common Stock under an Award, the Committee may require such agreements or undertakings, if any, as the Committee may deem necessary or advisable to assure compliance with any such law or regulation. The +Plan, the grant and exercise of Awards hereunder, and the obligation of the Company to sell and deliver shares of Common Stock, shall be subject to all applicable federal and state laws, rules and regulations and to such approvals by any government +or regulatory agency as may be required. +B-16 Matador Resources Company | 2019 Proxy Statement +Table of Contents +ANNEX B +14.6 Tax Requirements . The Company or, if applicable, any Subsidiary (for purposes of this Section 14.6 , the term +“Company” shall be deemed to include any applicable Subsidiary), shall have the right to deduct from all amounts paid in cash or other form in connection with the Plan, any Federal, state, local or other taxes permitted by law to be +withheld in connection with an Award granted under this Plan. The Company may, in its sole discretion, also require the Participant receiving shares of Common Stock issued under the Plan to pay the Company the amount of any taxes that the Company is +permitted to withhold in connection with the Participant’s income arising with respect to the Award. Such payments shall be required to be made when requested by the Company and may be required to be made prior to the delivery of any +certificate representing shares of Common Stock. Such payment may be made (a) by the delivery of cash to the Company in an amount that equals or exceeds (to avoid the issuance of fractional shares under (c) below) the applicable tax +withholding obligations of the Company; (b) if the Company, in its sole discretion, so consents in writing, the actual delivery by the exercising Participant to the Company of shares of Common Stock that the Participant has not acquired from +the Company within six (6) months prior to the date of exercise, vesting or conversion of the Award, as applicable, which shares so delivered have an aggregate Fair Market Value that equals or exceeds (to avoid the issuance of fractional shares +under (c) below) the applicable tax withholding payment; (c) if the Company, in its sole discretion, so consents in writing, the Company’s withholding of a number of shares to be delivered upon the exercise, vesting or conversion of +the Award, which shares so withheld have an aggregate Fair Market Value that equals or exceeds (to avoid the issuance of fractional shares) the applicable tax withholding payment; or (d) any combination of (a), (b) or (c) or any other +method consented to by the Company in writing. The Company may, in its sole discretion, withhold any such taxes from any other cash remuneration otherwise paid by the Company to the Participant. The Committee may in the Award Agreement impose any +additional tax requirements or provisions that the Committee deems necessary or desirable. +14.7 Assignability . Incentive Stock +Options may not be transferred, assigned, pledged, hypothecated or otherwise conveyed or encumbered other than by will or the laws of descent and distribution and may be exercised during the lifetime of the Participant only by the Participant or the +Participant’s legally authorized representative, and each Award Agreement in respect of an Incentive Stock Option shall so provide. The designation by a Participant of a beneficiary will not constitute a transfer of the Stock Option. The +Committee may waive or modify any limitation contained in the preceding sentences of this Section 14.7 that is not required for compliance with Section 422 of the Code. +Except as otherwise provided herein, Awards may not be transferred, assigned, pledged, hypothecated or otherwise conveyed or encumbered other than by +will or the laws of descent and distribution. Notwithstanding the foregoing, unless otherwise provided in an Award Agreement, all or a portion of any Award may be transferred, for no consideration, by a Participant to (a) one or more members of +the Participant’s Immediate Family, (b) a trust in which the Participant or members of his or her Immediate Family have more than fifty percent of the beneficial interest, (c) a foundation in which the Participant or members of his or +her Immediate Family control the management of assets or (d) any other entity in which the Participant or members of his or her Immediate Family own more than fifty percent of the voting interests. As used herein, “ Immediate +Family ” means any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, +daughter-in-law, brother-in-law or sister-in-law, and shall include adoptive relationships. +Following any transfer, any such Award shall continue to be +subject to the same terms and conditions as were applicable immediately prior to transfer, provided that for purposes of Articles 8, 9, 11, 13 and 14 hereof the term “Participant” shall be deemed to include the transferee. The events of +Termination of Service shall continue to be applied with respect to the original Participant, following which, the Award shall be exercisable or convertible by the transferee only to the extent and for the periods specified in the Award Agreement. +The Committee and the Company shall have no obligation to inform any transferee of an Award of any expiration, termination, lapse or acceleration of such Award. The Company shall have no obligation to register with any federal or state securities +commission or agency any Common Stock issuable or issued under an Award that has been transferred by a Participant under this Section 14.7 . +2019 +Proxy Statement | Matador Resources Company B-17 +Table of Contents +ANNEX B +14.8 Use of Proceeds . Proceeds +from the sale of shares of Common Stock pursuant to Awards granted under this Plan shall constitute general funds of the Company. +14.9 Governing Law . The Plan shall be governed by, construed and enforced in accordance with the laws of the State of Texas (excluding any +conflict of laws, rule or principle of Texas law that might refer the governance, construction, or interpretation of this Plan to the laws of another state). A Participant’s sole remedy for any Claim shall be against the Company, and no +Participant shall have any claim or right of any nature against any Subsidiary of the Company or any shareholder or existing or former director, officer or Employee of the Company or any Subsidiary of the Company. Each Award Agreement shall require +the Participant to release and covenant not to sue any Person other than the Company over any Claims. The individuals and entities described above in this Section 14.9 (other than the Company) shall be third-party +beneficiaries of this Plan for purposes of enforcing the terms of this Section 14.9 . +14.10 Electronic +Delivery . Awards granted under the Plan and/or communications regarding the Plan and any Award under the Plan may be sent, accepted, executed, or exercised, as applicable, via electronic means through an online or electronic system established +and maintained by the Company or a third party designated by the Company. +14.11 Dividends and Dividend Equivalent Rights . For the +avoidance of doubt, and notwithstanding anything to the contrary contained herein, dividends and Dividend Equivalent Rights may accrue, but shall not be paid out or settled unless and until, and then only to the extent that, the applicable +underlying Award vests. +A copy of this Plan shall be kept on file in the principal office of the Company in Dallas, Texas +*************** +B-18 Matador Resources Company | 2019 Proxy Statement +Table of Contents +ANNEX B +IN WITNESS WHEREOF, the Company has caused this instrument to be executed as of +, 2019, by its Chief Executive Officer and Secretary pursuant to prior action taken by the Board. +MATADOR RESOURCES COMPANY +By: +Name: +Title: +Attest: +2019 +Proxy Statement | Matador Resources Company B-19 +Table of Contents +MATADOR RESOURCES COMPANY +5400 LBJ FREEWAY, SUITE 1500 +DALLAS, TX 75240 +VOTE BY INTERNET - www.proxyvote.com +Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the meeting date. Have your proxy card in hand when you access the +web site and follow the instructions to obtain your records and to create an electronic voting instruction form. +ELECTRONIC DELIVERY OF FUTURE PROXY +MATERIALS +If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all +future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to +receive or access proxy materials electronically in future years. +VOTE BY PHONE - 1-800-690-6903 +Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the meeting date. Have your proxy +card in hand when you call and then follow the instructions. +VOTE BY MAIL +Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 +Mercedes Way, Edgewood, NY 11717. +TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK +INK AS FOLLOWS: +KEEP THIS PORTION FOR YOUR +RECORDS +— — — — — — — — — — — — +— — — — — — — — — — — — — — — — — — — — +— — — — — — — — — — — — — — — — — +DETACH AND RETURN THIS PORTION ONLY +THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. +The Board of Directors recommends you +vote FOR the following: +1. +Election of Directors +Nominees +For +Against +Abstain +01 +R. Gaines Baty +☐ +☐ +☐ +02 +Craig T. Burkert +☐ +☐ +☐ +NOTE: The proxies are authorized to vote in their discretion on such other business as may properly come before the meeting or any adjournment thereof. +03 +Matthew P. Clifton +☐ +☐ +☐ +The Board of Directors recommends you vote FOR the following proposals: +For +Against +Abstain +2. +Vote to approve the Company’s 2019 Long-Term Incentive Plan. +☐ +☐ +☐ +3. +Advisory vote to approve the compensation of the Company’s named executive officers. +☐ +☐ +☐ +4. +Ratification of the appointment of KPMG LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2019. +☐ +☐ +☐ +Yes +No +Please indicate if you plan to attend this meeting +☐ +☐ +Please sign exactly as your name (s) +appear (s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate +or partnership name by authorized officer. +Signature +[PLEASE SIGN WITHIN BOX] Date +Signature (Joint Owners) +Date +Table of Contents +Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Annual Report for the year ended December 31, +2018, Notice of Annual Meeting and Proxy Statement is/are available at www.proxyvote.com +— — — — — — — — — — — — +— — — — — — — — — — — — — — — — — — — — +— — — — — — — — — — — — — — — — — +MATADOR RESOURCES +COMPANY +Annual Meeting of Shareholders +June 6, 2019 9:30 A.M. +This proxy is solicited by the Board of Directors. +As an alternative to completing this form, you may enter your vote instruction by telephone at 1-800-690-6903, or via the internet at www.proxyvote.com . Have your proxy card in hand and follow the +instructions. +The shareholder hereby appoints +Joseph Wm. Foran and Reynald A. Baribault, or either of them, as proxies, each with the power to appoint his substitute, and hereby authorizes them to represent and to vote, as designated on the reverse side of this ballot, all of the shares of +common stock of MATADOR RESOURCES COMPANY that the shareholder is entitled to vote at the Annual Meeting of Shareholders to be held at 9:30 A.M., CDT on June 6, 2019, at the Westin Galleria, San Antonio Ballroom, 13340 Dallas Parkway, Dallas, Texas +75240, and any adjournment or postponement thereof. The shareholder hereby revokes any proxy or proxies heretofore given to vote upon or act with respect to such shares of stock. +This proxy, when properly executed, will be voted in the +manner directed herein. If no such direction is made, this proxy will be voted in accordance with the Board of Directors’ recommendations. +Continued and to be signed on reverse side \ No newline at end of file diff --git a/raw/proxies/0001520006/0001193125-19-119876/proxy_rpt.txt b/raw/proxies/0001520006/0001193125-19-119876/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..ab374c6eeea97e0c9434c4a06dca25ac7101f32d --- /dev/null +++ b/raw/proxies/0001520006/0001193125-19-119876/proxy_rpt.txt @@ -0,0 +1,108 @@ +TRANSACTIONS WITH RELATED PERSONS +TRANSACTIONS WITH RELATED PERSONS +Except as disclosed below, during 2018 there was not, nor was there proposed as of December 31, 2018, any transaction or series of similar transactions to which we +were or are a party in which the amount involved exceeded or exceeds $120,000 and in which any of our directors, executive officers, holders of more than 5% of any class of our voting securities or any member of the immediate family of any of the +foregoing persons had or will have a direct or indirect material interest, other than compensation arrangements with directors and executive officers, which are described in “Executive Compensation—Compensation Discussion and +Analysis” above. +HEYCO Joint Ventures +In June 2015, the Company entered into two joint ventures (the +“Joint Ventures”) to develop certain leasehold interests held by certain affiliates (the “HEYCO Affiliates”) of HEYCO Energy Group, Inc., the former parent company of Harvey E. Yates Company. The Company acquired Harvey E. Yates +Company in a 2015 merger (the “HEYCO Merger.”) The HEYCO Affiliates are owned by George M. Yates, who was appointed to the Board on April 28, 2015 in accordance with the terms of the HEYCO Merger, and certain of his affiliates. +Mr. Yates’ term as a director expired at the 2018 Annual Meeting. Pursuant to the terms of the Joint Ventures, the HEYCO Affiliates contributed an aggregate of approximately 1,900 net acres, primarily in the same properties previously held +by HEYCO, to the two newly-formed entities in exchange for a 50% interest in each entity. The Company agreed to contribute an aggregate of approximately $14 million in exchange for the other 50% interest in both entities. As of +December 31, 2018, the Company had contributed an aggregate of approximately $9.4 million to the two entities. The Company’s contributions are being used to fund capital expenditures associated with the interests owned by the Joint +Ventures as well as to fund acquisitions by the Joint Ventures of other non-operated acreage opportunities. +The Audit +Committee reviewed the terms of the Joint Ventures for potential conflicts of interest under the Company’s related party transaction policy, effective October 12, 2011 (the “Related Party Transaction Policy”), and, after being +fully informed as to Mr. Yates’ relationship and interest and all other material facts related to the Joint Ventures, determined that the Joint Ventures were fair to the Company and recommended the Joint Ventures to the full Board for +approval and ratification. The Board subsequently approved and ratified the Joint Ventures. +In addition, in light of Mr. Yates’ ongoing services to HEYCO +Energy Group, Inc., the Board, in accordance with Texas corporate law, adopted resolutions that renounced and provided for a waiver of certain corporate opportunities with respect to Mr. Yates. As a result, during his term on the Board, +Mr. Yates had no fiduciary duty to present certain corporate opportunities related to Mr. Yates’ existing oil and natural gas holdings and/or in areas where Matador did not then operate. +Working Interest and Overriding Royalty Interest Owners +Certain related parties, including Mr. Foran, certain of +Mr. Foran’s affiliated entities (collectively, the “Foran Entities”) and certain HEYCO Affiliates or entities controlled by members of Mr. Yates’ family (the “Yates Entities” and, collectively with the Foran +Entities, the “Interest Owners”) are working interest owners and/or overriding royalty interest owners in certain properties operated by the Company or in which the Company also holds a working interest. As working interest owners, the +Interest Owners are required to pay their proportionate share of all costs and are entitled to receive their proportionate share of revenues in the normal course of business. As overriding royalty interest owners, the Interest Owners are entitled to +receive their proportionate share of revenues from the wells in which they own an interest in the normal course of business. During 2018, revenues, net of costs, received by the Yates Entities in their capacities as working interest owners or +overriding royalty interest owners were approximately $10.6 million (the “Yates Net Revenue Payments”). During 2018, revenues, net of costs, received by the Foran Entities in their capacity as working interest owners or overriding +royalty interest owners were approximately $1.7 million (collectively with the Yates Net Revenue Payments, the “Related Net Revenue Payments”). The Related Net Revenue Payments represent approximately 4.5% of our total third-party net +revenue payments during 2018. +2019 +Proxy Statement | Matador Resources Company 79 +Table of Contents +TRANSACTIONS WITH RELATED PERSONS +In our capacity as operator, we incur drilling and operating +costs that are billed to our partners based on their respective working interests. During 2018, our joint interest billings to the Yates Entities attributable to their share of costs were approximately $10.8 million (the “Yates +Billings”) and our joint interest billings to the Foran Entities attributable to their share of costs were approximately $0.4 million (collectively with the Yates Billings, the “Related Joint Interest Billings”). The Related +Joint Interest Billings represent approximately 1.3% of our total joint interest billings during 2018. As a result of this ownership by the Interest Owners, from time to time, we will be in a net receivable or net payable position with certain of +the Interest Owners. We do not consider any net receivables from these parties to be uncollectible. +The Audit Committee reviewed the terms of the working interests +and/or overriding royalty interests of the Interest Owners for potential conflicts of interest under the Related Party Transaction Policy, and, after being fully informed as to Mr. Yates’ and Mr. Foran’s respective relationships +and interests in such transactions and all other material facts related to the Related Net Revenue Payments and Related Joint Interest Billings, determined that such transactions and the Related Net Revenue Payments and Related Joint Interest +Billings were fair to the Company and recommended such transactions and the Related Net Revenue Payments and Related Joint Interest Billings to the full Board for approval and ratification. The Board subsequently approved and ratified the +transactions and the Related Net Revenue Payments and Related Joint Interest Billings. +Certain Employment Relationships +Billy E. Goodwin, Executive Vice President and Head of +Operations, was appointed as an executive officer of the Company in connection with his February 2016 promotion to Senior Vice President—Operations. Two of Mr. Goodwin’s adult children have been employees of the Company since 2014 and +2015, respectively, and each earned in 2018, and are expected to be compensated in 2019, between $120,000 and $700,000. One of Mr. Goodwin’s children has a Bachelor of Science degree in Petroleum Engineering from the University of Tulsa +and over nine years of industry experience, including as a regional drilling supervisor for another publicly traded exploration and production company. Mr. Goodwin’s other child has a Bachelor of Science in Business Administration degree +in Energy Management from the University of Tulsa and a Bachelor of Arts degree in General Business and Management from Oklahoma State University. He also has over nine years of industry experience, including as a drilling fluids engineer for a +publicly traded oilfield services company and as a landman for a publicly traded exploration and production company. The Audit Committee reviewed the terms of the employment arrangements for potential conflicts of interest under the Company’s +Related Party Transaction Policy and, after being fully informed as to the employment arrangements and historical and anticipated compensation of Mr. Goodwin’s adult children, and all other material facts related to the relationship, +determined that the employment arrangements were fair to the Company and recommended the employment arrangements to the full Board for approval and ratification. The Board subsequently approved and ratified such employment arrangements. +Reynald A. Baribault is a member of the Board. Mr. Baribault’s sister-in-law +has been an employee of the Company since 2016 and earned in 2018, and is expected to be compensated in 2019, between $120,000 and $250,000. Mr. Baribault’s +sister-in-law has a diploma from the Executive Secretarial School and is a certified legal assistant, having completed the Southern Methodist University Legal Assistants +Program. She has over 37 years of experience as a legal assistant. The Audit Committee reviewed the terms of the employment arrangement for potential conflicts of interest under the Company’s Related Party Transaction Policy and, after being +fully informed as to the employment arrangement and historical and anticipated compensation of Mr. Baribault’s sister-in-law, and all other material facts +related to the relationship, determined that the employment arrangement was fair to the Company and recommended the employment arrangement to the full Board for approval and ratification. The Board subsequently approved and ratified such employment +arrangement. +An adult child of Mr. Foran has been an employee of the Company since 2015 and earned in 2018, and is expected to be compensated in 2019, between +$120,000 and $200,000. Mr. Foran’s child has a Bachelor of Science degree in Human Resource Development and a Master of Science degree in Human Resource Management, both from Texas A&M University. She has more than eight years of +industry experience, including with another publicly traded exploration and production company. The Audit Committee reviewed the terms of the employment +80 Matador Resources Company | 2019 Proxy Statement +Table of Contents +TRANSACTIONS WITH RELATED PERSONS +arrangement for potential conflicts of interest under the Company’s Related Party Transaction Policy and, after being fully informed as to the employment arrangement and historical and +anticipated compensation of Mr. Foran’s adult child, and all other material facts related to the relationship, determined that the employment arrangement was fair to the Company and recommended the employment arrangement to the full Board +for approval and ratification. The Board subsequently approved and ratified such employment arrangement. +Procedures for Approval of Related +Party Transactions +Pursuant to the Related Party +Transaction Policy, a “Related Party Transaction” is defined as a transaction (including any financial transaction, arrangement or relationship (including any indebtedness or guarantee of indebtedness)), or series of related transactions, +or any material amendment to any such transaction, involving a Related Party (as defined below) and in which we are a participant, other than: +• +a transaction involving compensation of directors; +• +a transaction involving compensation of an executive officer or involving an employment agreement, severance agreement, +change in control provision or agreement or a special supplemental benefit for an executive officer; +• +a transaction available to all employees generally or to all salaried employees generally; +• +a transaction with a Related Party involving less than $120,000; +• +a transaction in which the interest of the Related Party arises solely from the ownership of a class of our equity +securities and all holders of that class receive the same benefit on a pro rata basis; or +• +a transaction in which the rates or charges involved therein are determined by competitive bids, or a transaction that +involves the rendering of services as a common or contract carrier, or public utility, at rates or charges fixed in conformity with law or governmental authority. +“Related Party” means: +• +any person who is, or at any time during the applicable period was, one of our executive officers or one of our directors +or nominees for directors; +• +any person who is known by us to be the beneficial owner of more than 5% of our Common Stock; +• +any immediate family member of any of the foregoing persons, which means any child, stepchild, parent, stepparent, spouse, +sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law of a director, nominee for director, executive officer or a beneficial owner of more than 5% of our Common Stock; and +• +any firm, corporation or other entity that is owned or controlled by any of the foregoing persons or in which any of the +foregoing persons is a general partner or executive officer or in which such person, together with all other of the foregoing persons, owns 10% or more of the equity interests thereof. +Pursuant to the Related Party Transaction Policy, the Audit Committee must review all material facts of each Related Party Transaction and recommend either approval or +disapproval of the Related Party Transaction to the full Board, subject to certain limited exceptions. In determining whether to recommend approval or disapproval of the Related Party Transaction, the Audit Committee must, after reviewing all +material facts of the Related Party Transaction and the Related Party’s relationship and interest, determine whether the Related Party Transaction is fair to the Company. Further, the policy requires that all Related Party Transactions be +disclosed in our filings with the SEC and/or our website in accordance with applicable laws, rules and regulations. +2019 +Proxy Statement | Matador Resources Company 81 +Table of Contents \ No newline at end of file diff --git a/raw/proxies/0001520006/0001193125-20-117323/proxy.txt b/raw/proxies/0001520006/0001193125-20-117323/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..a73d53b904f14b1a3c0b2e9b6238a3b72055aef9 --- /dev/null +++ b/raw/proxies/0001520006/0001193125-20-117323/proxy.txt @@ -0,0 +1,4629 @@ +DEF 14A +1 +d896314ddef14a.htm +DEF 14A +DEF 14A +Table of Contents +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +Washington, D.C. 20549 +SCHEDULE 14A +Proxy Statement Pursuant to Section 14(a) of the +Securities Exchange Act of 1934 (Amendment No.) +Filed by the +Registrant ☑ Filed by a Party other than the +Registrant ☐ +Check the appropriate box: +☐ +Preliminary Proxy Statement +☐ +Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +☑ +Definitive Proxy Statement +☐ +Definitive Additional Materials +☐ +Soliciting Material Pursuant to §240.14a-12 +Matador Resources Company +(Name of Registrant as Specified In Its Charter) +(Name of Person(s) Filing Proxy Statement, if other than the Registrant) +Payment of Filing Fee (Check the appropriate box): +☑ +No fee required. +☐ +Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. +1) +Title of each class of securities to which transaction applies: +2) +Aggregate number of securities to which transaction applies: +3) +Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the +filing fee is calculated and state how it was determined): +4) +Proposed maximum aggregate value of transaction: +5) +Total fee paid: +☐ +Fee paid previously with preliminary materials. +☐ +Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify +the previous filing by registration statement number, or the Form or Schedule and the date of its filing. +1) +Amount Previously Paid: +2) +Form, Schedule or Registration Statement No.: +3) +Filing Party: +4) +Date Filed: +Table of Contents +2020 +Notice of Annual Meeting of Shareholders +and +Proxy Statement +June 5, +2020 | Dallas, Texas +Table of Contents +One Lincoln Centre +5400 LBJ Freeway, Suite 1500 +Dallas, Texas +75240 +www.matadorresources.com +NOTICE OF ANNUAL MEETING OF SHAREHOLDERS +To +Be Held on June 5, 2020 +To the Matador Resources Company Shareholders: +Please join us for the 2020 Annual Meeting of Shareholders of Matador Resources Company. The meeting will be held at the Westin Galleria, San Antonio +Ballroom, 13340 Dallas Parkway, Dallas, Texas 75240, on Friday, June 5, 2020, at 9:30 a.m. , Central Daylight Time. +At the +meeting, you will hear a report on our business and act on the following matters: +(1) +Election of the four nominees for director named in the attached Proxy Statement; +(2) +Advisory vote to approve the compensation of our named executive officers as described in the attached Proxy Statement; +(3) +Ratification of the appointment of KPMG LLP as the Company’s independent registered public accounting firm for the +year ending December 31, 2020; and +(4) +Any other matters that may properly come before the meeting. +All shareholders of record at the close of business on April 9, 2020 are entitled to vote at the meeting or any postponement or adjournment of the +meeting. A list of the shareholders of record is available at the Company’s offices in Dallas, Texas. +Depending on concerns about the novel +coronavirus, or COVID-19, we might hold a virtual annual meeting instead of holding an in-person meeting. We would publicly announce a determination to hold a virtual +annual meeting in a press release available at our website, www.matadorresources.com , as soon as practicable before the meeting. In that event, the annual meeting would be conducted solely virtually, on the above date and time, via live audio +webcast. You or your proxyholder could participate, vote and examine our stockholder list at the virtual annual meeting by visiting www.virtualshareholdermeeting.com/MTDR2020 and using your control number, but only if we decide to hold a +virtual annual meeting. +By Order of the Board of Directors, +Joseph Wm. Foran +Chairman and Chief Executive Officer +April 23, 2020 +YOUR VOTE IS IMPORTANT! +Whether or not you will attend the meeting, please vote as promptly as possible by using the Internet or telephone or by signing, dating and +returning your proxy card to the address listed on the card. +Important Notice Regarding the Availability of Proxy Materials for the +Annual Meeting of Shareholders to Be Held on June 5, 2020: +Our Proxy Statement and the Annual Report to Shareholders for the fiscal year ended December 31, 2019 are available for viewing, printing and +downloading at https://materials.proxyvote.com/576485 . +Table of Contents +TABLE OF CONTENTS +TABLE OF CONTENTS +Page +Proxy Statement +1 +Proxy Summary +3 +Information About the Annual Meeting +7 +Proposal 1—Election of Directors +11 +Director Diversity +11 +Core Competencies +12 +Nominees +12 +Vote Required +14 +Directors Continuing in Office +15 +Advisors to the Board +18 +Corporate Governance +19 +Independence of Directors +19 +Majority Vote in Director Elections +19 +Board Leadership Structure +20 +Board Committees +21 +Board’s Role in Risk Oversight +25 +Environmental, Social and Governance Initiatives +26 +Strategic Planning and Compensation Committee Interlocks and Insider +Participation +27 +Communications with Directors +27 +Executive Officers and Other Senior Officers of the Company +27 +Proposal 2—Advisory Vote to Approve Named Executive Officer +Compensation +34 +Vote Required +34 +Proposal 3—Ratification of the Appointment of KPMG LLP +35 +Fees of Independent Registered Public Accounting Firm for Fiscal Years 2019 and +2018 +35 +Report of the Audit Committee +36 +Vote Required +37 +Page +Letter to Shareholders +38 +Executive Compensation +39 +Compensation Discussion and Analysis +39 +Strategic Planning and Compensation Committee Report +56 +Summary Compensation Table +57 +Grants of Plan-Based Awards Table +58 +Outstanding Equity Awards at December 31, 2019 +59 +Option Exercises and Stock Vested +61 +Potential Payments upon Termination or Change in Control +61 +Chief Executive Officer Pay Ratio +65 +Director Compensation +66 +Compensation for 2019-2020 +67 +Compensation for 2020-2021 +67 +Director Stock Ownership Guidelines +68 +Board Advisor Compensation +68 +Securities Authorized for Issuance Under Equity Compensation Plans +69 +Transactions with Related Persons +70 +Security Ownership of Certain Beneficial Owners and Management +73 +Additional Information +76 +Shareholder Proposals for the 2021 Proxy Statement +76 +Director Nominations or Other Business for Presentation at the 2021 Annual +Meeting +76 +Annual Report on Form 10-K +76 +Other Business +77 +Annex A—Non-GAAP Financial +Measures +A-1 +2020 +Proxy Statement | Matador Resources Company i +Table of Contents +PROXY STATEMENT +Matador Resources Company +One Lincoln Centre +5400 LBJ Freeway, Suite 1500 +Dallas, Texas 75240 +www.matadorresources.com +PROXY +STATEMENT +For +ANNUAL MEETING OF +SHAREHOLDERS +To Be Held on June 5, 2020 +This +Proxy Statement is being mailed on or about April 23, 2020 to the shareholders of Matador Resources Company (“Matador” or the “Company”) in connection with the solicitation of proxies by the Board of Directors (the +“Board”) of the Company to be voted at the Annual Meeting of Shareholders of the Company to be held at the Westin Galleria, San Antonio Ballroom, 13340 Dallas Parkway, Dallas, Texas 75240, on June 5, 2020, at 9:30 a.m., Central +Daylight Time (the “Annual Meeting” or the “2020 Annual Meeting”), or at any postponement or adjournment thereof, for the purposes set forth in the accompanying Notice of Annual Meeting of Shareholders. The address of the +Company’s principal executive office is One Lincoln Centre, 5400 LBJ Freeway, Suite 1500, Dallas, Texas 75240. +If you are a shareholder of record, you may +vote in person by attending the meeting, by completing and returning a proxy by mail or by using the Internet or telephone. You may vote your proxy by mail by marking your vote on the enclosed proxy card and following the instructions on the card. +To vote your proxy using the Internet or telephone, see the instructions on the proxy form and have the proxy form available when you access the Internet website or place your telephone call. +The named proxies will vote your shares according to your directions. If you sign and return your proxy but do not make any of the selections, the named proxies will +vote your shares: (i) FOR the election of the four nominees for director as set forth in this Proxy Statement, (ii) FOR the approval, on an advisory basis, of the compensation of the Company’s named +executive officers as disclosed in this Proxy Statement and (iii) FOR the ratification of KPMG LLP as the independent registered public accounting firm of the Company for the year ending December 31, 2020. Your proxy may be +revoked at any time before it is exercised by filing with the Company a written revocation addressed to the Corporate Secretary, by executing a proxy bearing a later date or by attending the Annual Meeting and voting in person. +The cost of soliciting proxies will be borne by the Company. In addition to the use of postal services and the Internet, proxies may be solicited by directors, officers +and employees of the Company (none of whom will receive any additional compensation for any assistance they may provide in the solicitation of proxies) in person or by telephone. +The outstanding voting securities of the Company consist of issued and outstanding common stock, par value $0.01 per share (the “Common Stock”). The record +date for the determination of the shareholders entitled to notice of and to vote at the Annual Meeting, or any postponement or adjournment thereof, has been established by the Board as the close of business on April 9, 2020 (the “Record +Date”). As of the Record Date, there were 116,563,969 shares of Common Stock outstanding and entitled to vote. +The presence, in person or by proxy, of the +holders of record of a majority of the outstanding shares entitled to vote is necessary to constitute a quorum for the transaction of business at the Annual Meeting, but if a quorum should not be present, the meeting may be adjourned from time to +time until a quorum is obtained. A holder of Common Stock will be entitled to one vote per share on each matter properly brought before the meeting. Cumulative voting is not permitted in the election of directors. +The proxy card provides space for a shareholder to abstain with respect to any or all nominees for the Board. The affirmative vote of a majority of the votes cast by +holders of shares present in person or represented by proxy and +2020 +Proxy Statement | Matador Resources Company 1 +Table of Contents +PROXY STATEMENT +entitled to vote on the election of directors at the Annual Meeting is required for the election of each nominee for director. With respect to the election of directors in an uncontested +election, such as that being held at the Annual Meeting, “majority of the votes cast” means the number of votes cast “for” the election of such nominee exceeds the number of votes cast “against” such nominee. See +“Corporate Governance—Majority Vote in Director Elections” for additional information regarding election of directors. +The other proposals require +the affirmative vote of a majority of the shares of Common Stock present in person or represented by proxy and entitled to vote at the meeting. Shares held by a shareholder who abstains from voting on any or all proposals will be included for the +purpose of determining the presence of a quorum. Other than with respect to the election of directors, an abstention will effectively count as a vote cast against the remaining proposals. Broker non-votes on +any matter as to which the broker has indicated on the proxy that it does not have discretionary authority to vote will be treated as shares not entitled to vote with respect to that matter. However, such shares will be considered present and +entitled to vote for quorum purposes so long as they are entitled to vote on at least one other matter. +2 Matador Resources Company | 2020 Proxy Statement +Table of Contents +PROXY SUMMARY +PROXY SUMMARY +This summary +highlights information contained elsewhere in this Proxy Statement. This summary does not contain all of the information that you should consider, and you should read the entire Proxy Statement carefully prior to voting. For more complete +information regarding our 2019 performance, please review our Annual Report on Form 10-K for the year ended December 31, 2019. +2020 Annual Meeting of Shareholders +Voting Matters and Board Recommendation +Proposal +Board +Recommendation +Election of Four Director Nominees (page 11) +FOR +Advisory Vote to Approve Named Executive Officer Compensation (page +34) +FOR +Ratification of the Appointment of KPMG LLP as the Company’s Independent +Registered Public Accounting Firm for 2020 (page 35) +FOR +2019 Business Highlights +In 2019, we achieved record oil, natural gas and average daily +oil equivalent production. In addition, we increased our estimated total proved oil and natural gas reserves 17% as of December 31, 2019, as compared to December 31, 2018. +2020 +Proxy Statement | Matador Resources Company 3 +Table of Contents +PROXY SUMMARY +Business highlights achieved during 2019 include the +following: +• +A 26% increase in oil production from 11.1 million barrels (“Bbl”) of oil produced in 2018 to +14.0 million Bbl of oil produced in 2019. +• +A 29% increase in natural gas production from 47.3 billion cubic feet (“Bcf”) of natural gas produced in +2018 to 61.1 Bcf of natural gas produced in 2019. +• +A 27% increase in average daily oil equivalent production from 52,128 barrels of oil equivalent (“BOE”) per day, +including 30,524 Bbl of oil per day and 129.6 million cubic feet (“MMcf”) of natural gas per day, in 2018, to 66,203 BOE per day, including 38,312 Bbl of oil per day and 167.4 MMcf of natural gas per day, in 2019. +• +Net income (GAAP) of $87.8 million and Adjusted EBITDA (non-GAAP) of +$610.8 million for the year ended December 31, 2019, as compared to net income (GAAP) of $274.2 million and Adjusted EBITDA (non-GAAP) of $553.2 million for the year ended December 31, +2018. For a definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to our net income (loss) and net cash provided by operating activities, see Annex A to this Proxy Statement. +• +The formation of San Mateo Midstream II, LLC (“San Mateo II”), a strategic joint venture with a subsidiary of +Five Point Energy LLC (“Five Point”) designed to expand our midstream operations in the Delaware Basin, specifically in Eddy County, New Mexico. +• +The increase of the borrowing base under our third amended and restated credit agreement (the “Credit Agreement”) +from $850.0 million to $900.0 million. +• +The increase of the lender commitments under the credit facility of San Mateo Midstream, LLC (“San Mateo I,” and, +together with San Mateo II, “San Mateo”) to $375.0 million, using the accordion feature of such facility. +Recent Developments +In response to the outbreak of the novel coronavirus, or COVID-19, along with the actions of Saudi Arabia, other members of the +Organization of Petroleum Exporting Countries and Russia (“OPEC+”) and their effects on oil supply and demand and oil prices, in early March 2020, we modified our original 2020 plans to protect our balance sheet by reducing our expected +capital spending significantly. We plan to reduce our operated drilling program from six to three rigs, lower certain operating costs and continue to pursue divestitures of non-core assets. We are currently +evaluating multiple options to optimize our drilling and completions activities and plan to keep two of our three drilling rigs operating in the Stateline asset area in Eddy County, New Mexico, where we are expecting to drill a number of our high +potential wells in 2020. +We are also evaluating other options for increasing our cash flow and further reducing operating and capital expenses, if necessary, to +protect the balance sheet and our businesses until oil and natural gas prices improve. For instance, in March 2020, Mr. Foran voluntarily agreed to reduce his 2020 base salary by 25%, and our other executive officers and vice presidents +voluntarily agreed to reduce their 2020 base salaries by 20% and 10%, respectively. +Environmental, Social and Governance (“ESG”) +Initiatives (page 26) +• +We maintain an active ESG program and continued working in 2019 to improve upon our various ESG efforts. For instance, we +significantly increased the number of our production facilities operating on electrical grid power, lowering emissions by removing on-site generators. We increased the volumes of produced water we recycled in the Delaware Basin as well as the +volumes of both produced water and oil transported via pipeline, taking trucks off the roads. We also reduced the number of well pads built in 2019 through our use of batch drilling and longer laterals, reducing our surface footprint. Finally, we +continued our commitment to a proactive safety culture, with over 1.4 million employee man-hours and no lost time accidents since 2017. +4 Matador Resources Company | 2020 Proxy Statement +Table of Contents +PROXY SUMMARY +Director Nominees (page 12) +Our Board currently has 11 members divided into three classes of directors, designated Class I, Class II and Class III. Directors are elected for +three-year terms. The table below provides certain summary information about each nominee for director named in this Proxy Statement. +Name +Age +Director +Since +Principal Occupation +Committee +Memberships +Joseph Wm. Foran +67 +2003 +Chairman and CEO, Matador Resources Company +E, CM, O, P +Reynald A. Baribault* +56 +2014 +Vice President / Engineering, NP Resources, LLC +A, ESCG, E, O, P, SPC +Monika U. Ehrman* +42 +2019 +Professor of Law and Faculty Director of Oil & Gas, Natural Resources, and Energy Center, University of Oklahoma College of Law +ESCG, O, P +Timothy E. Parker* +45 +2018 +Former Portfolio Manager and Analyst – Natural Resources, T. Rowe Price & Associates +A, CM, E, P, SPC +* +Independent Director +A +Audit Committee +CM +Capital Markets and Finance Committee +E +Executive Committee +ESCG +Environmental, Social and Corporate Governance Committee +O +Operations and Engineering Committee +P +Prospect Committee +SPC +Strategic Planning and Compensation Committee +Executive Compensation Highlights (page 38) +Our compensation program is designed to reward, in both the +short term and the long term, performance that contributes to the implementation of our business strategies, maintenance of our culture and values and achievement of our objectives. In addition, we reward qualities that we believe help achieve our +business strategies such as: +• +teamwork; +• +mentoring future leaders within the Company to drive long-term shareholder value; +• +individual performance in light of general economic and industry-specific conditions; +• +relationships with shareholders and vendors; +• +level of job responsibility +• +industry experience; +• +general professional growth; and; +• +the ability to: +¡ +manage and enhance production from our existing assets; +¡ +explore new opportunities to increase oil and natural gas production; +¡ +identify and acquire additional acreage; +¡ +improve total shareholder returns; +¡ +increase year-over-year proved reserves; +¡ +control unit production costs; and +¡ +pursue midstream opportunities. +2020 +Proxy Statement | Matador Resources Company 5 +Table of Contents +PROXY SUMMARY +At our 2018 Annual Meeting of Shareholders (the “2018 +Annual Meeting”), we received approximately 72% shareholder support for our executive compensation program. This level of support was a significant decrease from the average 99% level of support that we received at our three previous annual +shareholder meetings. Our Board and management were disappointed with the 2018 say-on-pay voting results, and the Strategic Planning and Compensation Committee and +management jointly undertook an extensive review of the Company’s executive compensation program with input from our independent compensation consultant, Meridian Compensation Partners, LLC. The review included reaching out to shareholders +representing approximately 50% of our outstanding stock (excluding stock held by our directors and officers). +As a result of this outreach, the Strategic Planning +and Compensation Committee implemented numerous changes to our executive compensation program for 2018, 2019 and 2020, including the following: +• +In light of industry factors, our 2018 +say-on-pay voting results, shareholder feedback and the Company’s 2018 stock performance, Mr. Foran’s 2018 total compensation was reduced 27.0% from 2017 +to 2018. In particular, his compensation pursuant to the Company’s annual cash incentive plan was reduced 35.5% from 2017 to 2018. +• +We transitioned from a long-term incentive compensation program for executive officers of 67% service-based restricted +stock and 33% stock options to a program comprised of 50% service-based restricted stock units and 50% performance-based stock units, commencing with grants made in February 2019. +• +We eliminated discretionary bonuses for executive officers, commonly referred to within the Company as “Marlan” +awards in honor of the late Marlan W. Downey (1931-2017), a long-time advisor to the Board. Such bonuses were historically awarded as a way to contemporaneously reward significant performance achievements by select officers and employees. While, +consistent with feedback we received from our shareholders, we still believe in the value to the Company and our shareholders of such awards in motivating our non-executive employees, no Marlan bonuses have +been awarded to executive officers since our 2018 Annual Meeting, and the Board does not anticipate granting future Marlan bonuses to our executive officers. +As a result of our efforts in 2018 and 2019, support for our executive compensation program increased to approximately 97% at our 2019 Annual Meeting of Shareholders +(the “2019 Annual Meeting”). Further detail regarding this outreach effort, and the changes we have made in response, are included in “Executive Compensation—Compensation Discussion and Analysis” beginning on page 39. +In early 2020, following the outbreak of the novel coronavirus, or COVID-19, along with the actions of OPEC+ and their effects +on oil supply and demand, oil prices and our stock price, Mr. Foran voluntarily agreed to reduce his 2020 base salary by 25%, and our other executive officers and vice presidents voluntarily agreed to reduce their 2020 base salaries by 20% and +10%, respectively. Furthermore, in determining the size of 2020 long-term incentive awards for executive officers granted in March 2020, the Strategic Planning and Compensation Committee and the independent members of the Board used a value of +approximately $13 per share—reflecting the trading price of our Common Stock in mid-February before the coronavirus pandemic and precipitous drop in oil prices began to impact the price of our Common +Stock—instead of the significantly lower grant date fair value, which approximated $2 per share. +Details of our executive compensation are shown in the 2019 +Summary Compensation Table on page 57 and a thorough discussion of the above changes to our executive compensation program, for both 2019 and 2020, are included under “Executive Compensation—Compensation Discussion and Analysis” +beginning on page 39. +6 Matador Resources Company | 2020 Proxy Statement +Table of Contents +INFORMATION ABOUT THE ANNUAL MEETING +INFORMATION ABOUT THE ANNUAL MEETING +We are furnishing you this Proxy Statement in connection with the solicitation of proxies by the Board to be used at the Annual Meeting and any adjournment thereof. The +Annual Meeting will be held on Friday, June 5, 2020, at 9:30 a.m., Central Daylight Time. We are sending this Proxy Statement to our shareholders on or about April 23, 2020. +All references in this Proxy Statement to “we,” “our,” “us,” “Matador” or the “Company” refer to Matador Resources +Company, including our subsidiaries and affiliates. +What is the purpose of the Annual Meeting? +At the Annual Meeting, shareholders will act upon the following +matters outlined in the Annual Meeting notice: +• +the election of the four nominees for director named in this Proxy Statement; +• +an advisory vote to approve the compensation of our named executive officers as described herein; +• +the ratification of the appointment of KPMG LLP as the Company’s independent registered public accounting firm for the +year ending December 31, 2020; and +• +any other matters that may properly come before the meeting. +What are the Board’s voting recommendations? +• +FOR the election of the four nominees for director named in this Proxy Statement; +• +FOR the approval, on an advisory basis, of the compensation of the Company’s named executive officers; and +• +FOR the ratification of the appointment of KPMG LLP as the Company’s independent registered public accounting +firm for the year ending December 31, 2020. +Who is entitled to vote? +Shareholders as of the close of business on April 9, 2020 +are eligible to vote their shares at the Annual Meeting. As of the Record Date, there were 116,563,969 shares of our Common Stock outstanding. Each share of Common Stock is entitled to one vote at the Annual Meeting. +Why did I receive a Notice Regarding the Internet Availability of Proxy Materials in the mail instead of a full set of proxy materials? +Securities and Exchange Commission (“SEC”) +rules allow companies to furnish proxy materials over the Internet. We have elected to send a separate Notice of Internet Availability of Proxy Materials (the “Notice”) to most of our shareholders instead of a paper copy of the proxy +materials. This approach conserves natural resources and reduces the costs of printing and distributing our proxy materials while providing shareholders with a convenient way to access our proxy materials. Instructions on how to access the proxy +materials over the Internet or to request a paper copy of proxy materials, including a proxy card or voting instruction form, may be found in the Notice. In addition, shareholders may request to receive future proxy materials in printed form by mail +or electronically by email by following the instructions in the Notice. A shareholder’s election to receive proxy materials by mail or email will remain in effect until the shareholder terminates it. +2020 +Proxy Statement | Matador Resources Company 7 +Table of Contents +INFORMATION ABOUT THE ANNUAL MEETING +How do I vote? +You may: +• +attend the Annual Meeting and vote in person; +• +dial the toll-free number listed on the Notice, proxy card or voting instruction form provided by your broker. Easy-to-follow voice prompts allow you to vote your shares and confirm that your voting instructions have been properly recorded. Telephone voting will be available 24 hours a +day and will close at 11:59 p.m., Eastern Daylight Time on June 4, 2020; +• +go to the website www.proxyvote.com and follow the instructions, then confirm that your voting instructions have +been properly recorded. If you vote using the website, you can request electronic delivery of future proxy materials. Internet voting will be available 24 hours a day and will close at 11:59 p.m., Eastern Daylight Time on June 4, 2020; or +• +if you received a paper copy of your proxy materials and elect to vote by written submission, mark your selections on the +proxy card, date and sign it, and return the card in the pre-addressed, postage-paid envelope provided. +Why did I receive paper copies of proxy materials? +We are providing certain shareholders with paper copies of the proxy materials instead of a separate Notice. If you received a paper copy and would no longer like to +receive printed proxy materials, you may consent to receive all future proxy materials electronically via email or the Internet. To sign up for electronic delivery, please follow the instructions provided in your proxy materials. When prompted, +indicate that you agree to receive or access shareholder communications electronically in the future. +Will each shareholder in our household +receive proxy materials? +Generally, no. To the +extent you are receiving printed proxy materials, we try to provide only one set of proxy materials to be delivered to multiple shareholders sharing an address, unless you have given us other instructions. Any shareholder at a shared address may +request delivery of single or multiple copies of printed proxy materials for future meetings by contacting us at: +Matador Resources +Company +Attention: Investor Relations +5400 LBJ Freeway, Suite 1500 +Dallas, Texas 75240 +Email: investors@matadorresources.com +Telephone: (972) 371-5200 +We undertake to deliver promptly, upon written or oral request, a copy of proxy materials to a shareholder at a shared address to which a single copy of the proxy +materials was delivered. Requests should be directed to Investor Relations at the address or phone number set forth above. +Who will be +admitted to the Annual Meeting? +Admission to the +Annual Meeting will be limited to our shareholders of record, persons holding proxies from our shareholders, beneficial owners of our Common Stock and our employees. If your shares are registered in your name, we will verify your ownership at the +meeting in our list of shareholders as of the Record Date. If your shares are held through a broker, bank or other nominee, you must bring proof of your ownership of the shares. This proof could consist of, for example, a bank or brokerage firm +account statement or a letter from your bank or broker confirming your ownership as of the Record Date. You may also send proof of ownership to us at Matador Resources Company, Attention: Corporate Secretary, 5400 LBJ Freeway, Suite 1500, Dallas, +Texas 75240, or email: investors@matadorresources.com, before the Annual Meeting, and we will send you an admission card. +8 Matador Resources Company | 2020 Proxy Statement +Table of Contents +INFORMATION ABOUT THE ANNUAL MEETING +If I vote via telephone or the Internet or by mailing my proxy card, may I still attend the Annual Meeting? +Yes. +What if I want to change my vote? +You may revoke your proxy before it is voted by submitting a new +proxy with a later date (by mail, telephone or the Internet), by voting at the Annual Meeting or by filing a written revocation with our Corporate Secretary. Your attendance at the Annual Meeting will not automatically revoke your proxy. +What constitutes a quorum? +A majority of the shares entitled to vote, present in person or represented by proxy, constitutes a quorum. If you vote by telephone or Internet or by returning your +proxy card, you will be considered part of the quorum. The Inspector of Election will treat shares represented by a properly executed proxy as present at the meeting. Abstentions and broker non-votes will be +counted for purposes of determining a quorum. A broker non-vote occurs when a nominee holding shares for a beneficial owner submits a proxy but does not vote on a particular proposal because the nominee does +not have discretionary voting power for that item and has not received instructions from the beneficial owner. +How many votes will be +required to approve a proposal? +The affirmative vote +of a majority of the votes cast by holders of shares of Common Stock present in person or represented by proxy and entitled to vote on the election of directors at the Annual Meeting is required for the election of each nominee for director. With +respect to the election of directors in an uncontested election, such as that being held at the Annual Meeting, “majority of the votes cast” means the number of votes cast “for” such nominee exceeds the number of votes cast +“against” such nominee. +With respect to all other matters, the affirmative vote of the holders of a majority of the shares of Common Stock, present in +person or represented by proxy and entitled to vote at the Annual Meeting, is required. +Shares cannot be voted at the Annual Meeting unless the holder of record is +present in person or represented by proxy. +Can brokers who hold shares in street name vote those shares if they have received no +instructions? +Under the rules of the New York Stock +Exchange (“NYSE”), brokers may not vote the shares held by them in street name for their customers and for which they have not received instructions, except with respect to a routine matter. The only matter to be voted on at the Annual +Meeting that is considered routine for these purposes is the ratification of the appointment of our independent registered public accounting firm. Accordingly, brokers may not vote your shares on any other matter if you have not given specific +instructions as to how to vote. Please be sure to give specific voting instructions to your broker so that your vote will be counted. +How +will you treat abstentions and broker non-votes? +Shares of a shareholder who abstains from voting on any or all proposals will be included for the purpose of determining the presence of a quorum. Other than with +respect to the election of directors, an abstention will effectively count as a vote cast against the remaining proposals. Broker non-votes on any matter, as to which the broker has indicated on the proxy that +it does not have discretionary authority to vote, will be treated as shares not entitled to vote with respect to that matter. However, such shares will be considered present and entitled to vote for quorum purposes so long as they are entitled to +vote on at least one other matter. +2020 +Proxy Statement | Matador Resources Company 9 +Table of Contents +INFORMATION ABOUT THE ANNUAL MEETING +Who pays the solicitation expenses? +We will bear the cost of solicitation of proxies. +Proxies may be solicited by mail or personally by our directors, officers or employees, none of whom will receive additional compensation for such solicitation. Those holding shares of Common Stock of record for the benefit of others, or nominee +holders, are being asked to distribute proxy soliciting materials to, and request voting instructions from, the beneficial owners of such shares. We will reimburse nominee holders for their reasonable out-of-pocket expenses. +Where can I find the voting results of the Annual Meeting? +We will announce preliminary voting results at the Annual +Meeting, and we will publish final results in a Current Report on Form 8-K that will be filed with the SEC within four business days of the Annual Meeting. You may obtain a copy of this and other reports free +of charge at www.matadorresources.com , by contacting our Investor Relations Department at (972) 371-5200 or investors@matadorresources.com or by accessing the SEC’s website at +www.sec.gov . +Will the Company’s independent registered public accounting firm be available at the Annual Meeting to respond to +questions? +Yes. The Audit Committee of the Board has +approved KPMG LLP to serve as our independent registered public accounting firm for the year ending December 31, 2020. Representatives of KPMG LLP will be present at the Annual Meeting. They will have an opportunity to make a statement, if they +desire to do so, and will be available to respond to appropriate questions. +Where can I contact the Company? +Our mailing address is: +Matador Resources Company +Attention: Investor Relations +5400 LBJ Freeway, Suite 1500 +Dallas, Texas 75240 +Our telephone number is (972) 371-5200. +10 Matador Resources Company | 2020 Proxy Statement +Table of Contents +PROPOSAL 1 +PROPOSAL 1 | ELECTION OF DIRECTORS +The Board currently consists of 11 members and is divided into three classes of directors, +designated Class I, Class II and Class III, with the term of office of each director ending on the date of the third annual meeting following the annual meeting at which such director’s class was elected. The number of directors +in each class will be as nearly equal as possible. The Class I directors are William M. Byerley, Monika U. Ehrman, Julia P. Forrester Rogers and Kenneth L. Stewart. The terms of Ms. Rogers and Messrs. Byerley and Stewart will each +continue until the 2021 Annual Meeting of Shareholders (the “2021 Annual Meeting”) or his or her earlier death, retirement, resignation or removal. Ms. Ehrman was appointed to the Board following the 2019 Annual Meeting and is +therefore a Class I nominee at the 2020 Annual Meeting to hold office until the 2021 Annual Meeting or her earlier death, retirement, resignation or removal. The Class II directors are R. Gaines Baty, Craig T. Burkert and Matthew P. +Clifton, the terms of whom will each continue until the 2022 Annual Meeting of Shareholders or his earlier death, retirement, resignation or removal. The Class III directors are Joseph Wm. Foran, Reynald A. Baribault, Timothy E. Parker and +David M. Posner. Messrs. Foran, Baribault and Parker are Class III director nominees at the 2020 Annual Meeting, in each case, to hold office until the 2023 Annual Meeting of Shareholders or his earlier death, retirement, resignation or +removal. Mr. Posner’s term will expire at the 2020 Annual Meeting. +The Board believes that each of the director nominees possesses the qualifications +described below in “Corporate Governance—Board Committees—Nominating Committee.” That is, the Board believes that each nominee possesses: +• +deep experience at the policy making level in business, government or education; +• +the availability and willingness to devote adequate time to Board duties; +• +the character, judgment and ability to make independent analytical, probing and other inquiries; +• +a willingness to exercise independent judgment along with a willingness to listen and learn from others; +• +business knowledge and experience that provides a balance with the other directors; +• +financial independence; and +excellent past performance on the Board. +Director Diversity +TENURE +AGE +GENDER +2020 +Proxy Statement | Matador Resources Company 11 +Table of Contents +PROPOSAL 1 +Core +Competencies +Senior Leadership Experience +Energy Industry Experience +Financial Expertise +Legal, Risk Management and ESG Experience +Strategic Planning Expertise +Capital Markets Experience +The information provided below is biographical information about each of the nominees, as well as a description of the experience, +qualifications, attributes or skills that led the Board to conclude that the individual should be nominated for election as a director of the Company. +Nominees +M R . J OSEPH W M . +F ORAN +CEO, Matador Resources Company +Class III +Chairman of the Board +Director since: 2003 +Independent: No +Age: 67 +Committees: +•   Executive (Chair) +•   Capital Markets and Finance +•   Operations and Engineering +•   Prospect +Biographical Information: +Mr. Foran founded Matador Resources Company in July 2003 and has served as Chairman of the Board, Chief Executive Officer and Secretary since our founding in 2003. +He is also chair of the Board’s Executive Committee. Mr. Foran began his career as an oil and natural gas independent in 1983 when he and his wife, Nancy, founded Foran Oil Company with $270,000 in contributed capital from 17 of his +closest friends and neighbors. Foran Oil Company was later contributed into Matador Petroleum Corporation upon its formation by Mr. Foran in 1988, and Mr. Foran served as Chairman and Chief Executive Officer of that company from inception +until the time of its sale to Tom Brown, Inc. in June 2003 for an enterprise value of $388 million in an all-cash transaction. Mr. Foran is originally from Amarillo, Texas, where his family owned a +pipeline construction business. From 1980 to 1983, he was Vice President and General Counsel of J. Cleo Thompson and James Cleo Thompson, Jr., Oil Producers, a large independent producer. Prior to that time, he was a briefing attorney to Chief +Justice Joe R. Greenhill of the Supreme Court of Texas. Mr. Foran graduated with a Bachelor of Science degree in Accounting from the University of Kentucky with highest honors and a law degree from the Southern Methodist University Dedman +School of Law, where he was a Hatton W. Sumners scholar and the Leading Articles Editor of the Southwestern Law Review. He is currently active as a member of various industry and civic organizations, including his church and various youth +activities. In 2002, Mr. Foran was honored as the Ernst & Young “Entrepreneur of the Year” for the Southwest Region. In 2019, he received the SMU Dedman School of Law Distinguished Alumni Award for Corporate Service and was +named D Magazine’s 2019 Upstream CEO of the Year. In 2020, he was inducted into the Philosophical Society of Texas. +Qualifications: +As the founder, Chairman of the Board and Chief Executive Officer of Matador +Resources Company, Mr. Foran provides Board leadership, industry experience and long relationships with many of our shareholders. +12 Matador Resources Company | 2020 Proxy Statement +Table of Contents +PROPOSAL 1 +M R . R EYNALD A. B ARIBAULT +Vice President / Engineering, NP Resources, LLC +Class III +Director +Director since: 2014 +Independent: Yes +Age: 56 +Committees: +•   Operations and Engineering (Chair) +•   Prospect (Chair) +•   Audit +•   Environmental, Social and Corporate Governance +•   Executive +•   Strategic Planning and Compensation +Biographical Information: +Mr. Baribault was elected to the Board in 2014 and is chair of the Board’s Operations and Engineering Committee and Prospect Committee. He served as lead +independent director of the Board from 2016 to 2019. He is Vice President / Engineering of NP Resources, LLC, a Denver-based exploration and production operator solely focused on the horizontal Bakken-Three Forks and Red River plays in the North +Dakota Williston Basin. In 2007, he co-founded NP Resources’ predecessor company, North Plains Energy, LLC, which developed and sold its North Dakota Bakken production and assets in 2012. In addition, he co-founded and serves as President and Chief Executive Officer of IPR Energy Partners, LLC, a Plano, Texas-based oil and natural gas production operator with current operations in the Fort Worth Basin. Prior to co-founding North Plains Energy, NP Resources and IPR Energy Partners, Mr. Baribault served as Vice President, Supervisor and Petroleum Engineering Consultant with Netherland, Sewell & Associates, Inc. +from 1990 to 2002. Mr. Baribault began his professional career as a reservoir engineer with Exxon Company in 1985 in the New Orleans Eastern Division Office. Mr. Baribault received his Bachelor of Science degree in Petroleum Engineering +from Louisiana State University in 1985 and is a Licensed Professional Engineer in the State of Texas. +Qualifications: +Mr. Baribault provides valuable insight to our Board on our drilling, completions and +reservoir engineering operations, as well as growth strategies, midstream operations and administration. +M S . M ONIKA U. E HRMAN +Professor of Law and Faculty Director of Oil & Gas, Natural Resources, and +Energy Center, University of Oklahoma College of Law +Class I +Director +Director since: 2019 +Independent: Yes +Age: 42 +Committees: +•   Environmental, Social and Corporate Governance +•   Operations and Engineering +•   Prospect +Biographical Information: +Ms. Ehrman was appointed to the Board in 2019. She is Professor of Law, earning tenure in 2019, and Faculty Director of the Oil & Gas, Natural Resources, +and Energy Center (ONE C) at the University of Oklahoma College of Law. Professor Ehrman also serves as Adjunct Associate Professor, Energy Management, at the University of Oklahoma Michael F. Price College of Business. Professor Ehrman joined the +University of Oklahoma College of Law in 2013 as Associate Professor of Law. Prior to teaching, she served as in-house legal counsel for two oil and natural gas companies from 2008 to 2012 and as an associate +oil and natural gas attorney at an international law firm from 2005 to 2008. Before law school, Professor Ehrman worked as a petroleum engineer in the upstream, midstream and pipeline sectors of the energy industry. In addition to serving on various +oil and natural gas law committees, she also served as an Editor of the Oil and Gas Reporter for the Institute for Energy Law. She is the faculty advisor to the Oil and Gas, Natural Resources, and Energy Journal (ONE J), published by the University +of Oklahoma College of Law. Professor Ehrman received her Bachelor of Science degree in Petroleum Engineering from the University of Alberta; J.D. from Southern Methodist University Dedman School of Law; and Master of Laws degree from Yale Law +School. +Qualifications: +Professor Ehrman provides valuable insight to our Board on our engineering and midstream +operations as well as legal and governance matters. +2020 +Proxy Statement | Matador Resources Company 13 +Table of Contents +PROPOSAL 1 +M R . T IMOTHY E. +P ARKER +Former Portfolio Manager and Analyst—Natural Resources, T. Rowe +Price & Associates +Class III +Lead Independent Director +Director since: 2018 +Independent: Yes +Age: 45 +Committees: +•   Capital Markets and Finance (Chair) +•   Audit +•   Executive +•   Prospect +•   Strategic Planning and Compensation +Biographical Information: +Mr. Parker was appointed to the Board in 2018, serves as lead independent director and is chair of the Board’s Capital Markets and Finance Committee. Mr. Parker +retired in 2017 as Portfolio Manager and Analyst—Natural Resources for T. Rowe Price & Associates. Mr. Parker joined T. Rowe Price in 2001 as an equity analyst before becoming a portfolio manager in 2010. He managed the New Era fund +from 2010 to 2013 and managed the energy and natural resources portions of T. Rowe Price’s Small Cap Value, Small Cap Stock and New Horizons funds from 2013 to 2017. Prior to joining T. Rowe Price, Mr. Parker was an investment banking +analyst at Robert W. Baird & Co., Inc. Mr. Parker holds a Bachelor of Science degree in Commerce from the University of Virginia and a Master of Business Administration degree from the Darden School of Graduate Business (University of +Virginia). +Qualifications: +Mr. Parker’s experience with a large institutional shareholder and his extensive +familiarity with the capital markets provide the Company with valuable insight. +Vote Required +The affirmative vote of a majority of the votes cast by holders +of shares present in person or represented by proxy and entitled to vote on the election of directors at the Annual Meeting is required for the election of each nominee for director. With respect to the election of directors in an uncontested +election, such as that being held at the Annual Meeting, “majority of the votes cast” means the number of votes cast “for” such nominee exceeds the number of votes cast “against” such nominee. If you hold your shares +through a broker and you do not instruct the broker how to vote, your broker will not have the authority to vote your shares. Abstentions and broker non-votes will each be counted as present for purposes of +determining the presence of a quorum. +The Board of Directors recommends that you vote FOR each of the nominees. +14 Matador Resources Company | 2020 Proxy Statement +Table of Contents +PROPOSAL 1 +Directors Continuing in Office +Biographical information for our directors who are continuing in +office is provided below. +M R . R. G AINES B ATY +CEO, R. Gaines Baty Associates, Inc. +Class II +Deputy Lead Independent Director +Director since: 2016 +Independent: Yes +Age: 69 +Committees: +•   Strategic Planning and Compensation (Chair) +•   Environmental, Social and Corporate Governance +•   Executive +•   Nominating +Biographical Information: +Mr. Baty was appointed to the Board in 2016, serves as deputy lead independent director and is chair of the Board’s Strategic Planning and Compensation Committee. +Mr. Baty is Founder and CEO of R. Gaines Baty Associates, Inc., an executive search firm he founded in 1982. Mr. Baty has over 30 years of experience as an executive search consultant. In this role, he has provided companies across the country and +in a variety of industries with executive search and advisory services. Mr. Baty has served as a two-term President of the Society of Executive Recruiting Consultants and a two-term President of the Independent Recruiter Group. Mr. Baty is also a +published author. Mr. Baty received a Bachelor of Business Administration degree from Texas Tech University, where he was a letterman and captain of the football team. +Qualifications: +Mr. Baty’s experience and expertise in executive leadership and development provide our Board with an important and unique perspective on these matters, and +Mr. Baty assists the Board and the Company with recruitment, board administration, compensation and growth strategies. +M R . C RAIG T. +B URKERT +CFO, ROMCO Equipment Co. +Class II +Director +Director since: 2016 +Independent: Yes +Age: 63 +Committees: +•   Audit +•   Environmental, Social and Corporate Governance +•   Marketing and Midstream +•   Nominating +•   Strategic Planning and Compensation +Biographical Information: +Mr. Burkert was elected to the Board in 2016. With over 30 years of experience in distribution businesses, he currently serves as the Chief Financial Officer of ROMCO +Equipment Co., a dealer of heavy construction equipment that serves customers in a variety of sectors throughout most of Texas. Mr. Burkert joined ROMCO in 1984 as a Product Manager, later serving as a Branch Manager from 1986 to 1989 and as General +Manager from 1989 to 1994. In 1994, he left ROMCO to start a dealership in the lift truck industry in New England, but he returned to ROMCO in 2003 to take on his current position of Chief Financial Officer, where he is responsible for all +financial, administrative and technology aspects of the company. Mr. Burkert received a Bachelor of Science degree in Electrical Engineering and Computer and Information Systems from Tulane University. He also holds a Master in Business +Administration degree from Harvard Business School. Mr. Burkert has been involved with Matador since its inception. +Qualifications: +Mr. Burkert’s accounting and financial knowledge and leadership experience, coupled with +his familiarity with the operations, information services and corporate governance of the Company, provide our Board with a valuable perspective on these matters and other business issues. +2020 +Proxy Statement | Matador Resources Company 15 +Table of Contents +PROPOSAL 1 +M R . W ILLIAM M. +B YERLEY +Retired Partner, PricewaterhouseCoopers LLP (PwC) +Class I +Director +Director since: 2016 +Independent: Yes +Age: 66 +Committees: +•   Audit (Chair) +•   Environmental, Social and Corporate Governance +•   Marketing and Midstream +Biographical Information: +Mr. Byerley was appointed to the Board in 2016 and is chair of the Board’s Audit Committee. Mr. Byerley retired from PricewaterhouseCoopers LLP (PwC) in 2014. From +1988 through 2014, Mr. Byerley was a Partner with PwC, serving as an Assurance Partner on various audit engagements primarily for energy sector clients. From 1988 through 1990, Mr. Byerley served in the PwC National Office Accounting Services Group. +Mr. Byerley received a Bachelor of Business Administration degree in 1975 and a Master of Business Administration degree in 1976, both from Southern Methodist University. He is a licensed Certified Public Accountant. +Qualifications: +Mr. Byerley’s extensive experience in public accounting and longtime service to energy +sector clients of PwC provide the Board with invaluable financial and accounting expertise, particularly for oil and natural gas companies, strong accounting and financial oversight and general industry knowledge. +M R . M ATTHEW P. C LIFTON +Former Chairman and CEO, Holly Logistic Services, +L.L.C. +Class II +Director +Director since: 2018 +Independent: Yes +Age: 68 +Committees: +•   Marketing and Midstream (Chair) +•   Audit +•   Environmental, Social and Corporate Governance +Biographical Information: +Mr. Clifton was appointed to the Board in 2018 and is chair of the Board’s Marketing and Midstream Committee. Mr. Clifton retired in November 2017 as Chairman of +Holly Logistic Services, L.L.C (“HLS”), a subsidiary of HollyFrontier Corporation (“HFC”) and the general partner of Holly Energy Partners, L.P. (“HEP”). HEP is a publicly held master limited partnership that provides +petroleum product and crude oil transportation, terminalling, storage and throughput services to the petroleum industry. Mr. Clifton had previously served as Chairman and Chief Executive Officer of HLS from 2004 through 2013, Executive Chairman of +HLS from January 2014 to February 2014 and Chairman of the Board of HLS from February 2014 to November 2017. Mr. Clifton also served as President of Holly Corporation from 1995 to 2006 and Chief Executive Officer of Holly Corporation from 2006 until +its merger with Frontier Oil Corporation in 2011 that formed HFC. Holly Corporation was an independent petroleum refiner and marketer that produced high value light products such as gasoline, diesel fuel, jet fuel and specialty lubricant products +and had principal operations in the Delaware Basin. He served as Executive Chairman of HFC from 2011 until his retirement effective January 1, 2013. HFC is an independent petroleum refiner and marketer that produces high value light products such as +gasoline, diesel fuel, jet fuel and other specialty products. Mr. Clifton holds a Bachelor of Science degree in Accounting and Finance from St. Joseph’s University. +Qualifications: +Mr. Clifton serves as a valuable resource for the Board with his in-depth experience in the midstream oil and natural gas industry and his public company leadership. +16 Matador Resources Company | 2020 Proxy Statement +Table of Contents +PROPOSAL 1 +M S . J ULIA P. F ORRESTER +R OGERS +Professor of Law, Southern Methodist University Dedman School of +Law +Class I +Director +Director since: 2017 +Independent: Yes +Age: 60 +Committees: +•   Environmental, Social and Corporate Governance (Chair) +•   Nominating Committee +Biographical Information: +Ms. Rogers was appointed to the Board in 2017 and is chair of the Board’s Environmental, Social and Corporate Governance Committee. Ms. Rogers is a Professor of +Law at Southern Methodist University Dedman School of Law where she has been a member of the faculty since 1990, teaching and serving in various administrative positions. From 2015 through 2018, Ms. Rogers served as Associate Provost for Student +Academic Services at SMU, overseeing International Student and Scholar Services, Study Abroad, the Center for Academic Development of Student Athletes, the President’s Scholars Program and the Hunt Scholars Program, among others. She has served +in various administrative positions at SMU, including serving as Associate Dean for Academic Affairs for the 1995-1996 academic year and as Dean ad interim of the Dedman School of Law from June 2013 through June 2014. Before beginning her academic +career at SMU, Ms. Rogers practiced law with Thompson & Knight LLP. Ms. Rogers holds a Bachelor of Science degree in Electrical Engineering from The University of Texas at Austin, graduating with highest honors, and a law degree from The +University of Texas School of Law, graduating with high honors. She is a member of the Order of the Coif, and she received the highest score on the Texas bar exam following her graduation. More recently, she was elected as a member of the American +Law Institute. +Qualifications: +Ms. Rogers’ academic, administrative and legal experience provide our Board with a unique perspective on the Company’s business, operations and corporate +governance. +M R . K ENNETH L. +S TEWART +EVP, Compliance and Legal Affairs, Children’s Health System of +Texas +Class I +Director +Director since: 2017 +Independent: Yes +Age: 66 +Committees: +•   Nominating Committee (Chair) +•   Capital Markets and Finance +•   Environmental, Social and Corporate Governance +•   Marketing and Midstream +•   Strategic Planning and Compensation +Biographical Information: +Mr. Stewart was appointed to the Board in 2017 and is chair of the Board’s Nominating Committee. Mr. Stewart is Executive Vice President, Compliance and Legal +Affairs, for Children’s Health System of Texas, a position that he began on January 1, 2019. Children’s Health System of Texas and its affiliates constitute the eighth largest pediatric hospital system in the United States. Effective +December 31, 2018, Mr. Stewart retired from Norton Rose Fulbright US LLP, which constitutes the United States operations of Norton Rose Fulbright, an international legal practice with over 4,000 legal professionals in over 50 cities worldwide. At +the time of his retirement, Mr. Stewart was a Partner with Norton Rose Fulbright and held the position of Chair—United States. Mr. Stewart began his legal career with Fulbright & Jaworski LLP, the predecessor to Norton Rose Fulbright US +LLP, and previously held at differing times positions of Global Chair of the international organization, Managing Partner of the United States region and Partner-in-Charge of the Dallas office. Prior to entering into full-time management for his +firm in 2012, he engaged in a domestic and international transactional legal practice, focusing principally on merger, acquisition, financing and joint venture activities for both public and privately-held entities. Mr. Stewart has extensive +experience representing and advising companies and their executive officers and boards of directors engaged in oil and natural gas exploration and midstream activities. Mr. Stewart graduated from the University of Arkansas School of Business in 1976 +with a Bachelor of Science in Business Administration degree in Accounting and was licensed as a Certified Public Accountant in Texas in 1981 (certificate now on non-practice status). He graduated with honors from Vanderbilt Law School in 1979 and +was a member of the Order of the Coif. Mr. Stewart has been active in numerous civic and professional organizations in the Dallas area in the past, including among others, the Dallas Regional Chamber, The Center for American and International Law +and the Dallas Citizens Council. +Qualifications: +Mr. Stewart’s extensive experience representing public companies, and particularly oil and natural gas companies, along with his years of management +experience, provide our Board with important legal, corporate governance and leadership insight. +2020 +Proxy Statement | Matador Resources Company 17 +Table of Contents +PROPOSAL 1 +Advisors to +the Board +In addition to our Board, we have three +individuals with significant oil and natural gas, legal or other business experience who advise our Board on various matters. From time to time, we enter into various agreements with these individuals with respect to their service as advisors to our +Board. Their business histories are described below: +Mr. Rick H. Fenlaw . Mr. Fenlaw is owner of Fenlaw Land +Services, a company he founded in 1999 to provide title, leasing and curative professionals to upstream oil and natural gas clients, particularly in the Barnett Shale play. From 1990 through the formation of Fenlaw Land Services, Mr. Fenlaw +operated a similar land services company, Rick Fenlaw & Associates, with a focus on East Texas and the Hardeman Basin. Through his companies, Mr. Fenlaw has employed over 100 sub-brokers +servicing his oil and natural gas clients. Mr. Fenlaw has worked as an independent petroleum landman since 1979. Prior to beginning his career as a landman, he played football for the St. Louis Football Cardinals. Mr. Fenlaw received a +Bachelor of Journalism degree from The University of Texas at Austin in 1977, where he was captain of the football team in 1976. +Mr. Wade I. Massad . Mr. Massad served as a consultant to the Company and an advisor to the Board from 2010 to December +2011, when he was elected Executive Vice President—Capital Markets of the Company. He held that role until July 2012, when he resumed his role as a consultant to the Company and as an advisor to the Board. Mr. Massad is the Co-Founder and Co-Managing Member of Cleveland Capital Management L.L.C., General Partner of Cleveland Capital L.P. and Rocky River Partners L.P., private investment funds +focused on micro-cap public and private equity securities established in October 1996. Previously, Mr. Massad was an investment banker with Keybanc Capital Markets and RBC Capital Markets, where he was +the head of U.S. equity institutional sales from 1997 to 1998 and the head of U.S. Capital Markets business from 1999 to 2003. He also served on the firm’s executive committee. Mr. Massad serves on the board of the Investors Exchange +Group, Inc. (IEX). Mr. Massad received a Bachelor of Arts degree in Business Management from Baldwin-Wallace University in 1989 and currently serves on its Board of Trustees. +Mr. James A. Rolfe. Mr. Rolfe is Of Counsel at Elliott Sauter PLLC, a white collar and healthcare criminal defense boutique law firm he +joined in 2018 following three years as a sole practitioner. Until 2015, he served as Of Counsel with Kendall Law Group, a Dallas, Texas law firm specializing in litigation that he joined in 2009. From 2005 to 2009, Mr. Rolfe served as Of +Counsel with Fitzpatrick Hagood Smith & Uhl LLP, a boutique litigation firm. He worked as a sole practitioner in private practice from 1985 to 2005. From 1981 to 1985, Mr. Rolfe served as United States Attorney for the Northern +District of Texas, having been appointed to that position by President Reagan. He previously served as Assistant United States Attorney for the Northern District of Texas, Assistant District Attorney for Dallas County and Assistant City Attorney for +the City of Dallas. Mr. Rolfe served in the United States Army from 1959 to 1962. He received a Bachelor of Arts degree from Austin College in 1965 where he was a three-year letterman in basketball. He is a past president of Austin +College’s alumni association and received its Distinguished Alumnus Award in 2000. He received his law degree from The University of Texas at Austin in 1968. +18 Matador Resources Company | 2020 Proxy Statement +Table of Contents +CORPORATE GOVERNANCE +CORPORATE GOVERNANCE +The +business affairs of Matador are managed under the direction of the Board in accordance with the Texas Business Organizations Code, the Company’s Amended and Restated Certificate of Formation (the “Certificate of Formation”) and its +Amended and Restated Bylaws (the “Bylaws”), each as amended to date. The Board has adopted Corporate Governance Guidelines, which are reviewed annually by the Environmental, Social and Corporate Governance Committee of the Board. The +Company has a Code of Ethics and Business Conduct for Officers, Directors and Employees (“Code of Ethics”), which is applicable to all officers, directors and employees of the Company. The Company intends to post any amendments to, and may +post any waivers of, its Code of Ethics on the Company’s website to the extent applicable to an executive officer or a director of the Company. The Corporate Governance Guidelines and the Code of Ethics are available on the Company’s +website at www.matadorresources.com under the heading “Investor Relations—Corporate Governance.” +The Board holds regular and special meetings +and spends such time on the affairs of the Company as its duties require. During 2019, the Board held eight meetings. The Board also meets regularly in non-management executive sessions in accordance with NYSE +regulations. The Corporate Governance Guidelines provide that one of the Company’s independent directors should serve as lead independent director at any time when the chief executive officer serves as the chairman of the board. The lead +independent director presides over the non-management executive sessions, serves as a liaison between the chairman and the independent directors and performs such additional duties as the Board may otherwise +determine and delegate. Because Mr. Foran serves as Chairman of the Board and Chief Executive Officer, our independent directors have appointed Mr. Parker to serve as lead independent director and Mr. Baty to serve as deputy lead +independent director. In 2019, all incumbent directors of the Company attended at least 75% of the meetings of the Board and the committees on which they served. It is our policy that each of our directors is expected to attend annual meetings of +shareholders. All of our directors that continued in office through the 2019 Annual Meeting attended such meeting, except for one director, who was unable to attend due to health reasons. +Independence of Directors +The Board makes all determinations with respect to director +independence in accordance with the NYSE listing standards and the rules and regulations promulgated by the SEC. The actual determination of whether a director is independent is made by the Board on a case-by-case basis. +In connection with its preparation for the Annual Meeting, the Board undertook its annual review of +director independence and considered transactions and relationships between each director or any member of his or her immediate family and the Company and its subsidiaries and affiliates. In making its determination, the Board applied the NYSE +listing standards and SEC rules and regulations. +The Board reviewed the independence of our directors and considered whether any director has a material +relationship with us that could compromise his or her ability to exercise independent judgment in carrying out his or her responsibilities. After this review, our Board determined that 10 of our 11 current directors are “independent +directors” as defined under the rules of the SEC and the NYSE: Mmes. Ehrman and Rogers and Messrs. Baribault, Baty, Burkert, Byerley, Clifton, Parker, Posner and Stewart. No member of or nominee for our Board has a family relationship with any +executive officer or other members of our Board. +Majority Vote in Director Elections +On December 21, 2016, the Board amended the Bylaws to +implement a majority voting standard in uncontested director elections. Pursuant to the Bylaws, in an election of directors at a meeting of shareholders at which a quorum is present, (i) if the number of nominees exceeds the number of directors +to be elected (a “contested election”), directors shall be elected by a plurality of the votes cast by the holders of shares present in person or represented by proxy and entitled to vote on the election of directors at such meeting and +(ii) in an election of directors that is not a contested election (an “uncontested election”), such as that being held at the Annual Meeting, directors shall be elected by a majority of the votes cast by the holders of shares present +in person or +2020 +Proxy Statement | Matador Resources Company 19 +Table of Contents +CORPORATE GOVERNANCE +represented by proxy and entitled to vote on the election of directors at such meeting. For purposes of the Bylaws, in an uncontested election, a “majority of the votes cast” means that +the number of shares voted “for” a director must exceed the number of votes cast “against” that director. Prior to the amendment of the Bylaws, directors were elected by a plurality of the votes cast, whether or not the election +was a contested election. +In connection with the amendment to the Bylaws, the Board approved and adopted an amendment to the Company’s Corporate Governance +Guidelines to implement a resignation policy for directors who fail to receive the required number of votes in an uncontested election in accordance with the Bylaws. Pursuant to the Corporate Governance Guidelines, as amended, in an uncontested +election, any nominee for director who receives a greater number of votes “against” his or her election than votes “for” such election (a “majority against vote”) shall promptly tender his or her resignation following +certification of the shareholder vote. +The Nominating Committee shall promptly consider the resignation offer and a range of possible responses based on the +circumstances that led to the majority against vote, if known, and make a recommendation to the Board concerning whether to accept or reject such resignation. The Board shall act on the Nominating Committee’s recommendation and publicly +disclose its decision with respect to such resignation offer within 90 days following certification of the shareholder vote. The resignation, if accepted by the Board, will be effective at the time specified by the Board when it determines to accept +the resignation, which effective time may be deferred until a replacement director is identified and appointed to the Board. +Board Leadership Structure +Mr. Foran serves +as Chairman of the Board and Chief Executive Officer of the Company. As stated in the Corporate Governance Guidelines, the Board does not believe that the offices of Chairman of the Board and Chief Executive Officer must be separate. The members of +the Board possess experience and unique knowledge of the challenges and opportunities the Company faces. They are, therefore, in the best position to evaluate the current and future needs of the Company and to judge how the capabilities of the +directors and senior managers can be most effectively organized to meet those needs. Given Mr. Foran’s deep knowledge of the Company and experience in leading it, the Board currently believes that the most effective leadership structure +for the Company is to have Mr. Foran serve as Chairman of the Board and Chief Executive Officer. +While Mr. Foran serves as Chairman of the Board and +Chief Executive Officer, all of our non-employee directors are independent under the rules of the SEC and the NYSE. After considering the recommendations of our Strategic Planning and Compensation Committee, +the independent directors determine Mr. Foran’s compensation. Further, the Company has five standing committees, a lead independent director (Mr. Parker) and a deputy lead independent director (Mr. Baty). The Board believes that +each of these measures counterbalances any risk that may exist in having Mr. Foran serve as Chairman of the Board and Chief Executive Officer. For these reasons, the Board believes that this leadership structure is effective for the Company. +As lead independent director, Mr. Parker has the following roles and responsibilities: +• +chairs the executive sessions of the non-management and independent directors; +• +leads the independent directors in the evaluation of the Chief Executive Officer; +• +facilitates communication among the independent directors; and +• +acts as a liaison between the independent directors and the Chief Executive Officer. +Mr. Parker, as lead independent director, may also perform such other duties as the Board or the Environmental, Social and Corporate Governance Committee from time +to time may assign, which may include, but are not limited to, the following: +• +help develop Board agendas and ensure critical issues are included; +• +determine quality, quantity and timeliness of information from management; +• +make recommendations about retaining consultants or advisors for the Board; +• +interview Board candidates; +20 Matador Resources Company | 2020 Proxy Statement +Table of Contents +CORPORATE GOVERNANCE +• +oversee Board and director evaluations; and +• +help improve communications and processes by and between management and the Board and the Chief Executive Officer. +Mr. Baty, as deputy lead independent director, may also carry out the above duties in the absence of or at the direction of Mr. Parker, +as lead independent director. +Board Committees +The standing committees of the Board are the Audit Committee, +Environmental, Social and Corporate Governance Committee, Executive Committee, Nominating Committee and Strategic Planning and Compensation Committee. The Board has also established the following advisory committees: Capital Markets and Finance +Committee, Marketing and Midstream Committee, Operations and Engineering Committee and Prospect Committee. Each of the standing committees is governed by a charter, and a copy of the charters of each of these committees is available on the +Company’s website at www.matadorresources.com under the heading “Investor Relations—Corporate Governance.” Director membership of all of our standing and advisory committees is identified below, as of April 9, 2020. +2020 +Proxy Statement | Matador Resources Company 21 +Table of Contents +CORPORATE GOVERNANCE +Audit Committee +The Audit Committee assists the Board in monitoring: +• +the integrity of our financial statements and disclosures; +• +our compliance with legal and regulatory requirements; +• +the qualifications and independence of our independent auditor; +• +the performance of our internal audit function and our independent auditor; and +• +our internal control systems. +In addition, the Audit Committee is charged with the review of compliance with our Code of Ethics. +As of April 9, 2020, the Audit Committee consisted of Messrs. Baribault, Burkert, Byerley, Clifton and Parker, each of whom is independent under the rules of the +SEC and the NYSE. Mr. Byerley is the chair of the Audit Committee. SEC rules require a public company to disclose whether or not its audit committee has an “audit committee financial expert” as defined by applicable SEC rules and +regulations. Our Board has determined that each of Messrs. Burkert, Byerley, Clifton and Parker is an “audit committee financial expert.” During 2019, the Audit Committee met five times. +Environmental, Social and Corporate Governance Committee +The +Environmental, Social and Corporate Governance Committee is responsible for periodically reviewing and assessing our Corporate Governance Guidelines and Code of Ethics and making recommendations for changes thereto to the Board, reviewing any other +matters related to our corporate governance, unless the authority to conduct such review has been retained by the Board or delegated to another committee, and overseeing the process for evaluation of the Board and management. In 2020, the +Environmental, Social and Corporate Governance Committee (formerly the Corporate Governance Committee), in conjunction with the Company’s CEO, was also delegated oversight authority with respect to ESG matters. +As of April 9, 2020, the Environmental, Social and Corporate Governance Committee consisted of Mmes. Ehrman and Rogers and Messrs. Baribault, Baty, +Burkert, Byerley, Clifton, Posner and Stewart, each of whom is independent under the rules of the SEC and the NYSE. Ms. Rogers is the chair of the Environmental, Social and Corporate Governance Committee. During 2019, the Environmental, Social +and Corporate Governance Committee met four times. +Executive Committee +The Executive Committee has authority to discharge all the responsibilities of the Board in the management of the business and affairs of the Company, except where +action of the full Board is required by statute or by our Certificate of Formation or Bylaws, each as amended to date. As of April 9, 2020, the Executive Committee consisted of Messrs. Foran, Baribault, Baty and Parker. Mr. Foran is the +chair of the Executive Committee. During 2019, the Executive Committee met two times. +Nominating Committee +The Nominating Committee has the following responsibilities: +• +identifies and recommends to the Board individuals qualified to be nominated for election to the Board; and +• +recommends to the Board the members and chair of each committee of the Board. +Pursuant to the Nominating Committee charter, no director may serve on the Nominating Committee if such director is subject to +re-election to the Board at the next annual meeting of shareholders. +As of April 9, 2020, the Nominating Committee +consisted of Ms. Rogers and Messrs. Baty, Burkert and Stewart, each of whom is independent under the rules of the SEC and the NYSE. Mr. Stewart is the chair of the Nominating Committee. During 2019, the Nominating Committee met seven +times. +22 Matador Resources Company | 2020 Proxy Statement +Table of Contents +CORPORATE GOVERNANCE +The Board has also established a Shareholder Advisory Committee for Board Nominations (the “Advisory Committee”) that is charged with receiving and considering +possible nominees for election to the Board by shareholders. Pursuant to the Advisory Committee charter, this committee is comprised of eight to 12 persons selected by the Nominating Committee and consists of at least: +• +two members of the Nominating Committee; +• +two former members of or special advisors to the Board; +• +two shareholders who beneficially own Common Stock having a market value of at least $1.0 million (such value to be +based on the market value of the Common Stock immediately prior to designation of such shareholders to the Advisory Committee); and +• +two shareholders who have beneficially owned Common Stock continuously for at least the five years prior to such +shareholder’s designation to the Advisory Committee. +The current members of the Advisory Committee are Ms. Rogers, Messrs. Stewart and +Rolfe, Scott E. King, George M. Yates, J. Barry Banker, Joe E. Coleman, Kevin M. Grevey and Bobby K. Pickard. Messrs. King and Rolfe are co-chairs of the Advisory Committee. +The Advisory Committee makes recommendations based on its conclusions to the Nominating Committee for its consideration and review. +The Nominating Committee and the Advisory Committee consider individuals recommended by the Company’s shareholders to serve on the Board. In considering candidates +submitted by shareholders, the Advisory Committee and the Nominating Committee take into consideration the needs of the Board and the qualifications of the candidate. To have a candidate considered by the Advisory Committee and the Nominating +Committee, a shareholder must submit the recommendation in writing and must include the following information: +• +The name and address of the shareholder, evidence of the person’s ownership of Common Stock or derivatives, including +the number of shares owned, a description of all arrangements or understandings regarding the right to vote shares of the Company, any short interest in any security of the Company, any rights to dividends that are separated or separable from the +underlying shares, any proportionate interest in shares or derivatives held by a general or limited partnership whereby the shareholder is a general partner or beneficially owns an interest in the general partner, any performance-related fees (other +than an asset-based fee) that the shareholder is entitled to based on any change in the value of the shares or derivatives, any other information relating to the shareholder that would be required to be disclosed in connection with solicitations of +proxies for the election of directors in a contested election and a statement whether or not the shareholder will deliver a proxy to shareholders; and +• +The name, age, business and residence addresses of the candidate, the candidate’s résumé or a listing of +his or her qualifications to be a director of the Company, the person’s consent to be a director if selected by the Nominating Committee, nominated by the Board and elected by the shareholders and any other information that would be required to +be disclosed in solicitations of proxies for the election of directors. +The shareholder recommendation and information described above, and in +more detail in our Bylaws, must be sent to the Corporate Secretary at One Lincoln Centre, 5400 LBJ Freeway, Suite 1500, Dallas, Texas 75240 and must be received by the Corporate Secretary not fewer than 45 nor more than 75 days prior to the one year +anniversary date of the date the Company’s proxy statement was mailed in connection with the previous year’s annual meeting of shareholders. +The +Nominating Committee believes that a potential director of the Company must demonstrate that such candidate has: +• +a depth of experience at the policy-making level in business, government or education; +• +a balance with the business knowledge and experience of the incumbent or nominated directors; +2020 +Proxy Statement | Matador Resources Company 23 +Table of Contents +CORPORATE GOVERNANCE +• +availability and willingness to devote adequate time to Board duties; +• +any unfilled expertise needed on the Board or one of its committees; +• +character, judgment and ability to make independent analytical, probing and other inquiries; +• +willingness to exercise independent judgment while remaining willing to listen and learn from the other directors and the +Company’s staff; and +• +financial independence to ensure such candidate will not be financially dependent on director compensation. +In the case of an incumbent director, the Nominating Committee will also consider such director’s past performance on the Board. +The Nominating Committee or the Advisory Committee may identify potential nominees by asking, from time to time, current directors and executive officers for their +recommendation of persons meeting the criteria described above who might be available to serve on the Board. The Nominating Committee or the Advisory Committee may also engage firms that specialize in identifying director candidates. As described +above, the Nominating Committee and Advisory Committee will also consider candidates recommended by shareholders. +Once a person has been identified by the +Nominating Committee or the Advisory Committee as a potential candidate, the Nominating Committee or the Advisory Committee will make an initial determination regarding the need for additional Board members to fill vacancies or expand the size of +the Board. If the Nominating Committee or the Advisory Committee determines that additional consideration is warranted, the Nominating Committee or the Advisory Committee will review such information and conduct interviews as it deems necessary to +fully evaluate each director candidate. In addition to the qualifications of a candidate, the Nominating Committee or the Advisory Committee will consider such relevant factors as it deems appropriate, including the current composition of the Board, +the evaluations of other prospective nominees and the need for any required expertise on the Board or one of its committees. The Nominating Committee or the Advisory Committee also contemplates multiple dynamics that promote and advance diversity +among the members of the Board. Although the Nominating Committee does not have a formal diversity policy, the Nominating Committee considers a number of factors regarding diversity of personal and professional backgrounds, gender, race, age, +specialized skills and acumen and breadth of experience in energy exploration and production, midstream and marketing, executive leadership, accounting, finance or law. The Nominating Committee does not discriminate based upon race, religion, +gender, national origin, age, disability, citizenship or any other legally protected status. The Nominating Committee’s evaluation process will not vary based on whether or not a candidate is recommended by a shareholder. +Strategic Planning and Compensation Committee +The Strategic Planning +and Compensation Committee has the following responsibilities: +• +assists the Board and the independent members of the Board (the “Independent Board”) in the discharge of their +fiduciary responsibilities relating to the fair and competitive compensation of our executive officers; +• +provides overall guidance with respect to the establishment, maintenance and administration of our compensation programs, +including stock and benefit plans; +• +oversees and advises the Board and the Independent Board on the adoption of policies that govern our compensation programs; +• +recommends to the Board the strategic, tactical and performance goals of the Company, including those performance and +tactical goals that relate to performance-based compensation, including but not limited to goals for production, reserves, cash flows and shareholder value; and +• +in conjunction with the Company’s CEO, oversees management succession planning. +The Strategic Planning and Compensation Committee has the authority to delegate authority and responsibilities to subcommittees of its members, so long as any +subcommittee consists of at least two members. +24 Matador Resources Company | 2020 Proxy Statement +Table of Contents +CORPORATE GOVERNANCE +As of April 9, 2020, the Strategic Planning and Compensation Committee consisted of Messrs. Baribault, Baty, Burkert, Parker and Stewart, each of whom is +independent under the rules of the SEC and the NYSE and a “non-employee director” pursuant to Rule 16b-3 of the Securities Exchange Act of 1934, as amended +(the “Exchange Act”). Mr. Baty is the chair of the Strategic Planning and Compensation Committee. During 2019, the Strategic Planning and Compensation Committee met eight times. +Capital Markets and Finance Committee +The Capital Markets and Finance +Committee provides oversight of the Company’s financial objectives, financial policies, capital structure and financing requirements. As of April 9, 2020, the members of the Capital Markets and Finance Committee were Messrs. Foran, +Parker and Stewart. Mr. Parker is the chair of the Capital Markets and Finance Committee. +Marketing and Midstream Committee +The Marketing and Midstream Committee provides oversight of the Company’s marketing and midstream activities, projects, joint ventures and plans. As of +April 9, 2020, the members of the Marketing and Midstream Committee were Messrs. Burkert, Byerley, Clifton, Posner and Stewart. Mr. Clifton is the chair of the Marketing and Midstream Committee. +Operations and Engineering Committee +The Operations and Engineering +Committee provides oversight of the development of our prospects, our drilling, completions and production operations and associated costs. In addition, the Operations and Engineering Committee provides oversight of the amount and classifications of +our reserves and the design of our completion techniques and hydraulic fracturing operations and various other reservoir engineering matters. As of April 9, 2020, the members of the Operations and Engineering Committee were Ms. Ehrman and +Messrs. Baribault, Foran and Posner. Mr. Baribault is the chair of the Operations and Engineering Committee. +Prospect Committee +The Prospect Committee provides oversight of the technical analysis, evaluation and selection of our oil and natural gas prospects. As of April 9, 2020, the members +of the Prospect Committee were Ms. Ehrman and Messrs. Baribault, Foran and Parker. Mr. Baribault is the chair of the Prospect Committee. +Board’s Role in Risk Oversight +The Audit Committee has the responsibility to oversee the Company’s guidelines and policies to govern the process by which risk assessment and risk management are +undertaken by management. The Strategic Planning and Compensation Committee has the responsibility to oversee that our incentive pay does not encourage unnecessary risk taking and to review and discuss the relationship between risk management +policies and practices, corporate strategy and senior executive compensation. +2020 +Proxy Statement | Matador Resources Company 25 +Table of Contents +CORPORATE GOVERNANCE +Environmental, Social and Governance Initiatives +We maintain an active ESG program and continued working in 2019 to improve upon our various ESG efforts. In 2020, the Environmental, +Social and Corporate Governance Committee (formerly the Corporate Governance Committee), in conjunction with the Company’s CEO, was delegated oversight authority with respect to ESG matters. +Environmental +•   Reducing emissions +•   Recycling, protecting and using water resources prudently +•   Eliminating trucking by transporting oil and water on pipe +•   Reducing our surface footprint with fewer pads and increased batch drilling +Social +•   Commitment to a proactive safety culture +•   Over 17,000 hours of employee continuing education in 2019 +•   Support for communities and charities where we live, work and operate +•   Over 1.4 million employee man-hours and no lost time +accidents since 2017 +Governance +•   Majority voting standard for election of our Board of Directors +•   Active shareholder outreach program, including discussion of compensation, governance, social, safety +and environmental practices and disclosures +•   Anonymous whistleblower reporting +program +For more information regarding the Company’s ESG initiatives, please see the Company’s website at +www.matadorresources.com under the heading “Investor Relations—ESG.” +26 Matador Resources Company | 2020 Proxy Statement +Table of Contents +CORPORATE GOVERNANCE +Strategic Planning and Compensation Committee Interlocks and Insider Participation +Messrs. Baribault, Baty, Burkert, Parker and Stewart served on +the Strategic Planning and Compensation Committee during 2019. None of these individuals is or was previously one of our officers or employees. None of our executive officers serve on the board of directors or compensation committee of a company +that has an executive officer that serves on our Board or Strategic Planning and Compensation Committee. No member of our Board serves as an executive officer of a company in which one of our executive officers serves as a member of the board of +directors or compensation committee of that company. There were no compensation committee interlocks during 2019. Mr. Baribault’s sister-in-law is an employee +of the Company. For more information on this related party transaction, see “Transactions with Related Persons.” +Communications with Directors +The Board has +established a process to receive communications from shareholders and other interested parties by mail. Shareholders and other interested parties may contact any member of the Board, any Board committee or the entire Board. To communicate with the +Board, any individual director or any committee, correspondence should be addressed to the Board. All such correspondence should be sent “c/o Corporate Secretary” at One Lincoln Centre, 5400 LBJ Freeway, Suite 1500, Dallas, Texas 75240. +The Corporate Secretary will review and forward correspondence to the appropriate person or persons. +Any communications to the Company from one of the +Company’s officers or directors will not be considered “shareholder communications.” Communications to the Company from one of the Company’s employees or agents will only be considered “shareholder communications” if +they are made solely in such employee’s or agent’s capacity as a shareholder. Any shareholder proposal submitted pursuant to Rule 14a-8 promulgated under the Exchange Act will not be viewed as +“shareholder communications.” +Executive Officers and Other Senior Officers of the Company +The following table sets forth the names, ages and positions of +our executive officers and certain of our other senior officers at April 9, 2020: +Name +Age +Positions Held With +Us +Executive Officers +Joseph Wm. Foran +67 +Chairman of the Board and Chief Executive Officer +Matthew V. Hairford +59 +President +David E. Lancaster +63 +Executive Vice President and Chief Financial Officer +Craig N. Adams +53 +Executive Vice President and Chief Operating Officer—Land, Legal & Administration +Billy E. Goodwin +62 +Executive Vice President and Chief Operating Officer—Drilling, Completions & Production +Van H. Singleton, II +42 +Executive Vice President of Land +Bradley M. Robinson +65 +Executive Vice President of Reservoir Engineering and Chief Technology Officer +G. Gregg Krug +59 +Executive Vice President—Marketing and Midstream Strategy +Other Senior Officers +Christopher P. Calvert +41 +Senior Vice President of Operations +W. Thomas Elsener +35 +Senior Vice President of Reservoir Engineering and Senior Asset Manager +Bryan A. Erman +42 +Senior Vice President and Co-General Counsel +Edmund L. Frost III, PhD +45 +Senior Vice President of Geoscience +Robert T. Macalik +41 +Senior Vice President and Chief Accounting Officer +Matthew D. Spicer +52 +Senior Vice President and General Manager of Midstream +Glenn W. Stetson +35 +Senior Vice President of Production and Asset Manager +Brian J. Willey +43 +Senior Vice President and Co-General Counsel +2020 +Proxy Statement | Matador Resources Company 27 +Table of Contents +CORPORATE GOVERNANCE +The following biographies describe the business experience of +our executive officers and the senior officers listed above. Each officer serves at the discretion of our Board. There are no family relationships among any of our executive officers. +Executive Officers +Mr. Joseph Wm. Foran +Chairman of the Board and +Chief Executive Officer +Please see the biography of Mr. Foran on page 12 of this Proxy Statement. +Mr. Matthew V. +Hairford +President +Mr. Hairford joined Matador Resources Company in July 2004 as its Drilling Manager. He was named Vice President of Drilling in May 2005; Vice President of Operations in May 2006; Executive Vice President of Operations in May +2009; and in November 2013 assumed the title of President. He was previously with Samson Resources, an exploration and production company, as Senior Drilling Engineer, having joined Samson in 1999. His responsibilities there included difficult Texas +and Louisiana Gulf Coast projects, horizontal drilling projects and a start-up drilling program in Wyoming. The scope of this work ranged from multi-lateral James Lime wells in East Texas to deep wells in +South Texas and South Louisiana. Mr. Hairford has drilled many geo-pressured wells in Texas and Louisiana, along with normally pressured wells in Southwest Wyoming and East Texas. Additional +responsibilities included a horizontal well program in Roger Mills County, Oklahoma at 15,000 feet vertical depth. Mr. Hairford has experience in air drilling, underbalanced drilling, drilling under mud caps and high temperature and pressure +environments. From 1998 to 1999, Mr. Hairford served as Senior Drilling Engineer with Sonat, Inc., a global company involved with natural gas transmission and marketing, oil and natural gas exploration and production and oil services. His +responsibilities included drilling Pinnacle Reef wells in East Texas and deep horizontal wells in the Austin Chalk field in Central Louisiana. From 1984 to 1998, Mr. Hairford served in various drilling engineering capacities with Conoco, Inc. +His operational areas included the Appalachian Basin, Illinois Basin, Permian Basin, Texas Panhandle and Val Verde Basin. Mr. Hairford was selected as a member of a three-person team to explore the use of unconventional technologies to identify +a potential step change in the drilling sector. Multiple techniques were evaluated and tested, including declassified defense department technologies. Additional Conoco assignments included both field and office drilling positions in Midland, Texas +and Oklahoma City, Oklahoma. Earlier in his career with Conoco, Mr. Hairford was selected to participate in the Conoco Drilling Rig Supervisor Training Program in Houston, Texas. This program consisted of two years working a regular rotation as +a drilling representative on rigs and as a drilling engineer in various domestic offices. Mr. Hairford began his career in 1984 with Conoco in a field production assignment in Hobbs, New Mexico. Mr. Hairford received his Bachelor of +Science degree in Petroleum Engineering Technology from Oklahoma State University in 1984. He is an active member of the American Association of Drilling Engineers, the American Petroleum Institute and the Society of Petroleum Engineers. He is also +a member of the board of the Texas Independent Producers and Royalty Owners (TIPRO). Mr. Hairford has also undertaken additional training through Stanford University’s Executive Education programs, including the Stanford Graduate School of +Business flagship six week Stanford Executive Program. +Mr. David E. +Lancaster +Executive Vice President and +Chief Financial +Officer +Mr. Lancaster joined Matador Resources Company in December 2003 and serves as Executive Vice President and Chief Financial Officer. Mr. Lancaster has served in several capacities since joining Matador, including Vice +President of Business Development, Acquisitions and Finance from December 2003 to May 2005; Vice President and Chief Financial Officer from May 2005 to May 2007; and Executive Vice President and Chief Financial Officer since May 2007. He also served +as Chief Operating Officer from May 2009 +28 Matador Resources Company | 2020 Proxy Statement +Table of Contents +CORPORATE GOVERNANCE +to May 2015. From August 2000 to December 2003, he was Marketing Manager for Schlumberger Limited’s Data & Consulting Services, which provided full-field reservoir characterization, production enhancement, +multidisciplinary reservoir and production solutions and field development planning. In this position, he was responsible for global marketing strategies, business models, input to research and development, commercialization of new products and +services and marketing communications. From 1999 to 2000, Mr. Lancaster was Business Manager, North and South America, for Schlumberger Holditch-Reservoir Technologies, the petroleum engineering consulting organization formed following +Schlumberger’s acquisitions of S.A. Holditch & Associates, Inc. and Intera Petroleum Services. In this role, he was responsible for the business operations of 12 consulting offices throughout North and South America. Mr. Lancaster +worked with Schlumberger for six years following its acquisition of S.A. Holditch & Associates, Inc. in 1997. He joined S.A. Holditch & Associates in 1980, and was one of the principals in the petroleum engineering consulting firm. +Between 1980 and 1997, Mr. Lancaster held positions ranging from Senior Petroleum Engineer to Senior Vice President—Business Development. In this latter role, he was responsible for marketing and sales, as well as the company’s +commercial training business. During most of his tenure at S.A. Holditch & Associates, Inc., Mr. Lancaster was a consulting reservoir engineer with particular emphasis on characterizing and improving production from unconventional +natural gas reservoirs. For more than seven years during this time, he was the Project Manager for the Gas Research Institute’s Devonian Shales applied research projects investigating ways to improve reservoir characterization, completion +practices and natural gas recovery in low permeability, natural gas shale reservoirs. He was also the lead reservoir engineer for the Secondary Gas Recovery project sponsored by the Gas Research Institute and the U.S. Department of Energy, looking +at ways to improve recovery from compartmentalized natural gas reservoirs in North and South Texas. Mr. Lancaster began his career as a reservoir engineer for Diamond Shamrock Corporation in 1979. Mr. Lancaster received Bachelor and Master +of Science degrees in Petroleum Engineering from Texas A&M University in 1979 and 1988, respectively, graduating summa cum laude. He has authored or co-authored more than 50 technical papers and articles, +as well as numerous other published reports and industry presentations. He is a member of the Society of Petroleum Engineers, and he served as a charter member and former Vice Chairman of the Texas A&M University Petroleum Engineering Advisory +Board. In 2014, Mr. Lancaster was inducted into the Texas A&M University Petroleum Engineering Academy of Distinguished Graduates. Mr. Lancaster is a Licensed Professional Engineer in the State of Texas. In 2017, Mr. Lancaster was +named CFO of the Year—Upper Middle Market, Public by Dallas Business Journal and he was named to Institutional Investors’ 2018 and 2020 All-American Executive Team for Midcap and Small Cap Companies, +recognized as one of the top two Chief Financial Officers in Energy: Oil and Gas Exploration and Production. +Mr. Craig N. Adams +Executive Vice President +and Chief Operating Officer— +Land, Legal & Administration +Mr. Adams joined Matador Resources Company in September 2012 as its Vice President and General Counsel. In July 2013, Mr. Adams was promoted to Executive Vice President—Land and Legal and became Executive Vice +President—Land, Legal & Administration in June 2015. He assumed the role of Executive Vice President and Chief Operating Officer—Land, Legal & Administration in April 2019. Before joining Matador Resources Company, +Mr. Adams was a partner with Baker Botts L.L.P. from March 2001 to September 2012 where he focused his practice on securities, mergers and acquisitions and corporate governance matters. He was a partner with Thompson & Knight L.L.P. +from January 1999 to February 2001 and an associate from September 1992 to December 1998. Mr. Adams received a Bachelor of Business Administration degree in Finance from Southern Methodist University in 1988 and his law degree in 1992 from +Texas Tech University School of Law, where he graduated magna cum laude and was a member of the Order of the Coif and a Comment Editor of the Texas Tech Law Review. In 2018, he was named D Magazine’s Outstanding General +Counsel—Midsize Legal Department. +2020 +Proxy Statement | Matador Resources Company 29 +Table of Contents +CORPORATE GOVERNANCE +Mr. Billy E. Goodwin +Executive Vice President and +Chief Operating +Officer— +Drilling, Completions & +Production +Mr. Goodwin joined Matador Resources Company in July 2010 as Drilling Manager. In September 2013 he was named Vice President of Drilling for the Company, and he was promoted to Senior Vice President—Operations in +February 2016 and to Executive Vice President and Head of Operations in August 2017. He assumed the role of Executive Vice President and Chief Operating Officer—Drilling, Completions & Production in April 2019. He was previously +with Samson Resources, a company he joined in 2001 to supervise the drilling of underbalanced multilateral horizontal wells. In his roles as Senior Drilling Engineer and Area Drilling Manager for Samson, Mr. Goodwin engineered and managed +operations in the Permian Basin, South Texas, East Texas, Mid-Continent and Gulf Coast areas. Mr. Goodwin worked with Conoco, Inc. before joining Samson. He began his career in 1985 in Conoco’s +production department before joining the drilling department in 1989. Mr. Goodwin has diverse horizontal operational experience both onshore and offshore, and both domestically and internationally, including in the Middle East, Southeast +Asia and South America. Throughout his career, Mr. Goodwin has developed underbalanced drilling, managed pressure drilling and drill-in casing techniques for normal and +geo-pressured environments. Mr. Goodwin received a Bachelor of Science degree in Petroleum Engineering Technology from Oklahoma State University in 1984. He is a member of the Society of Petroleum +Engineers and the American Association of Drilling Engineers. Mr. Goodwin served in the United States Marine Corps. +Mr. Van H. Singleton, II +Executive Vice President of +Land +Mr. Singleton joined Matador Resources Company in August 2007 as a Landman and was promoted to Senior Staff Landman in 2009 and then to General Land Manager in 2011. In September 2013, Mr. Singleton became Vice President +of Land for the Company, and he was promoted to Executive Vice President of Land in February 2015. Prior to joining Matador, Mr. Singleton founded and was President of VanBrannon and Associates, LLC and Southern Escrow and Title of Mississippi, +LLC from 1998 to 2003, which provided full-spectrum land title work and title insurance in Mississippi, Louisiana, Texas and Arkansas. From 2003 until joining Matador in 2007, he served as general manager of his family’s real estate brokerage +in Houston, Texas. Mr. Singleton received a Bachelor of Arts degree in Criminal Justice from the University of Mississippi in 2000. He is an active member of the American Association of Professional Landmen, the New Mexico Landman Association, +the Permian Basin Landman Association and the Dallas Association of Petroleum Landmen. +Mr. Bradley M. Robinson +Executive Vice President of +Reservoir +Engineering +and Chief Technology +Officer +Mr. Robinson joined Matador Resources Company in August 2003 as our Vice President of Reservoir Engineering until his promotion to Senior Vice President of Reservoir Engineering in February 2016. He assumed the additional role +of Chief Technology Officer in May 2013 and was promoted to Executive Vice President of Reservoir Engineering in August 2018. Prior to joining Matador, from 1997 to August 2003, Mr. Robinson held the position of Advisor with Schlumberger +Limited’s Data & Consulting Services, where he was responsible for the development and application of new well completion and fracture stimulation technologies, managed field development projects, taught industry courses and provided +internal training. Mr. Robinson worked with Schlumberger for six years following its acquisition of S.A. Holditch & Associates, Inc. in 1997. Mr. Robinson joined S.A. Holditch & Associates in 1979, and was one of the +principals in the petroleum engineering consulting firm. From 1979 to 1982, Mr. Robinson served as Senior Petroleum Engineer and was involved in all aspects of reservoir and production engineering for both conventional and low permeability oil +and natural gas fields. From 1982 to 1997, he was Vice President—Production Engineering of S.A. Holditch & Associates, where he was responsible for coordination and management of production and completion engineering projects, +including hydraulic fracture stimulation design and supervision. His duties also included reserves and economic analysis of new and existing wells. For approximately 10 years during this time, Mr. Robinson served as assistant project manager +for the Gas Research Institute’s Tight Gas Sands and Horizontal Gas Wells +30 Matador Resources Company | 2020 Proxy Statement +Table of Contents +CORPORATE GOVERNANCE +applied research projects investigating ways to improve reservoir characterization, completion practices and natural gas recovery in low permeability natural gas reservoirs and horizontal natural gas wells. During his career, he has +worked all over the world, including the United States, Canada, Venezuela, Colombia, Mexico, Egypt, the North Sea, Russia and Indonesia, among other locations. Mr. Robinson began his career in 1977 with Marathon Oil Company, serving as an +Associate Production Engineer and later as a Reservoir Engineer in Midland. Mr. Robinson received Bachelor and Master of Science degrees in Petroleum Engineering from Texas A&M University in 1977 and 1986, respectively. He has authored or co-authored more than 30 technical papers and articles appearing in industry publications. Mr. Robinson is a member of the Society of Petroleum Engineers and is a Licensed Professional Engineer in the State of +Texas. He served as Chairman of the Dallas Section of the Society of Petroleum Engineers in 2011 and 2012. He also received the 2013 Engineer of the Year Award presented by the Dallas Section of the Society of Petroleum Engineers and the 2013 +Completions Optimization and Technology award presented by the Mid-Continent region of the Society of Petroleum Engineers. +Mr. G. Gregg Krug +Executive Vice President— +Marketing and +Midstream +Strategy +Mr. Krug joined Matador Resources Company in April 2012 as its Marketing Manager. In September 2013 he was named Vice President of Marketing for the Company and Vice President of Longwood Gathering & Disposal Systems, +LP, and he was promoted to Senior Vice President—Marketing and Midstream in February 2016. He was promoted to Executive Vice President—Marketing and Midstream Strategy in April 2019. He has overall responsibility for Matador’s +marketing activities of its oil and natural gas, as well as responsibility for all business aspects for Longwood Gathering & Disposal Systems, LP. Previously, Mr. Krug was with Unit Petroleum Company, an exploration and production +company based in Tulsa, Oklahoma, as Marketing Manager, having joined in 2006. He and his staff were responsible for marketing, gas measurement, contract administration and production reporting in their core areas of Oklahoma, the Texas +Panhandle, East Texas and Northwestern Louisiana. From 2005 to 2006, Mr. Krug served as Marketing Manager with Matador Resources Company. From 2000 to 2005, Mr. Krug served as Gas Scheduling Supervisor with Samson Resources in Tulsa, +Oklahoma where he and his staff were responsible for scheduling natural gas sales as well as procurement of natural gas supply on Samson-owned gathering systems. From 1983 to 2000, Mr. Krug served with The Williams Companies in various +capacities including in the Kansas Hugoton Field in Ulysses, Kansas and Tulsa, Oklahoma for Williams Natural Gas Pipeline and on the trading floor in Tulsa, Oklahoma for Williams Energy Services Company. Mr. Krug received a Bachelor of Business +Administration degree from Oklahoma City University in 1996. +Other Senior Officers +Mr. Christopher P. +Calvert +Senior Vice President— +Operations +Mr. Calvert joined Matador Resources Company in October 2014 as a Senior Completions Engineer. In July 2018 he was named Vice President of Completions for the Company, and he was promoted to Senior Vice +President—Operations in October 2019. Prior to joining Matador, Mr. Calvert worked as a Staff Reservoir Engineer in Chesapeake Energy Corporation’s South Texas—Eagle Ford group focusing on A&D evaluations and production and +completions optimization. At Chesapeake, Mr. Calvert also held roles as a Senior Asset Manager responsible for completions and operations in the Niobrara Shale, a Senior Completions Engineer responsible for Bakken/Three Forks development and a +Senior Operations Engineer focused on production and facility optimization on the Texas Gulf Coast. Prior to Chesapeake, Mr. Calvert worked as an Operations Engineer for Williams Production Company, now WPX Energy. In addition to his oil and +natural gas industry experience, Mr. Calvert has worked in corporate financial controls as an internal Sarbanes-Oxley compliance auditor. Mr. Calvert received Bachelor of Science degrees in Finance and Petroleum Engineering from the +University of Wyoming in 2002 and 2008, respectively. He is a member of the Society of Petroleum Engineers. +2020 +Proxy Statement | Matador Resources Company 31 +Table of Contents +CORPORATE GOVERNANCE +Mr. W. Thomas Elsener +Senior Vice President— +Reservoir Engineering and +Senior Asset Manager +Mr. Elsener joined Matador Resources Company in April 2013 as an Engineer. In June 2017, he was promoted to Vice President—Engineering and Asset Manager, and he was promoted to Senior Vice President—Reservoir +Engineering and Senior Asset Manager in October 2019. Mr. Elsener has served in several capacities since joining Matador, including Asset Manager for Rustler Breaks and Antelope Ridge, Team Leader for South Texas and Team Leader for East Texas +and Northwest Louisiana. Prior to joining Matador, Mr. Elsener served in various engineering roles at Encana Oil & Gas (USA) in Dallas, Texas from 2007 to 2013, including reservoir, completions, drilling, business development and new +ventures. While at Encana, Mr. Elsener was involved with the exploration and development of assets in the Barnett shale, Deep Bossier, Haynesville shale and other new domestic ventures. Mr. Elsener received a Bachelor of Science degree in +Petroleum Engineering from Texas A&M University in 2007. He is a member of the Society of Petroleum Engineers. +Mr. Bryan A. Erman +Senior Vice President and Co- +General Counsel +Mr. Erman joined Matador Resources Company in January 2016 as its Co-General Counsel. In August 2016, Mr. Erman was promoted to Vice President and +Co-General Counsel. He became Senior Vice President and Co-General Counsel in July 2018. Prior to joining Matador, Mr. Erman was a Partner at Carrington, Coleman, +Sloman & Blumenthal, L.L.P. in Dallas, having joined the firm in 2010. From 2003 to 2010, he was an associate in the Dallas and Washington, D.C. offices of Baker Botts L.L.P. Mr. Erman’s practice focused on litigation matters, +including oil and natural gas, securities and other commercial litigation, as well as corporate governance matters. Before attending law school, Mr. Erman worked for Oklahoma Governor Frank Keating. Mr. Erman received a Bachelor of Arts +degree in Political Science in 1999 from the University of Oklahoma. He received his law degree in 2003 from Southern Methodist University Dedman School of Law, where he graduated cum laude and was a Hatton W. Sumners Scholar, a member of the Order +of the Coif and an Articles Editor of the SMU Law Review. +Dr. Edmund L. Frost III +Senior Vice President of +Geoscience +Dr. Frost joined Matador Resources Company in August 2014 as a Senior Geologist and in July 2015 was promoted to Chief Geologist. In June 2017, he was promoted to Vice President of Geoscience, and in July 2019, Dr. Frost +was promoted to Senior Vice President of Geoscience. Prior to joining the Company, Dr. Frost worked at the Bureau of Economic Geology at The University of Texas at Austin as a Research Associate, a role he began in 2011. While at The University +of Texas, his research focused on unconventional resource development in the Delaware Basin and in the Austin Chalk-Eagle Ford system. Dr. Frost began his career in the Subsurface Technology Group at ConocoPhillips in 2007, where he worked a +variety of international and domestic basins. Dr. Frost received a Bachelor of Science degree in Geology from the University of Colorado at Boulder in 1998 and a PhD degree in Geology in 2007 from The University of Texas at Austin. +Dr. Frost has authored several peer-reviewed papers, conducted multiple industry presentations and led a number of industry field trips in the Delaware Basin. +Mr. Robert T. Macalik +Senior Vice President and +Chief Accounting +Officer +Mr. Macalik joined Matador Resources Company in July 2015 as Vice President and Chief Accounting Officer. He was promoted to Senior Vice President and Chief Accounting Officer in November 2017. He has more than 10 years of +experience in public accounting with significant experience in the upstream oil and natural gas industry. From 2012 to 2015, Mr. Macalik worked at Pioneer Natural Resources Company as Corporate Controller and, previously, as Director of +Technical Accounting and Financial Reporting. At Pioneer, Mr. Macalik supervised corporate accounting and financial reporting functions. +32 Matador Resources Company | 2020 Proxy Statement +Table of Contents +CORPORATE GOVERNANCE +Prior to joining Pioneer, he was a Senior Manager with PricewaterhouseCoopers (PwC), joining the public accounting firm in 2002. During his tenure with PwC, Mr. Macalik conducted and managed audits for various companies, +primarily public companies in the oil and natural gas industry, and managed numerous client relationships. Mr. Macalik received a Bachelor of Arts degree in History, a Bachelor of Business Administration degree and a Master of Professional +Accounting degree all from The University of Texas at Austin in 2002. He is a licensed Certified Public Accountant in the State of Texas. +Mr. Matthew D. Spicer +Senior Vice President and +General Manager of Midstream +Mr. Spicer joined Matador Resources Company in March 2014 as Senior Representative of Business Development and was promoted to Manager of Business Development and then General Manager of Midstream later in 2014. In October +2015, Mr. Spicer was promoted to Vice President and General Manager of Midstream. He became Senior Vice President and General Manager of Midstream in July 2018. Prior to joining the Company, Mr. Spicer served as the Director of Flight +Operations for L-3 Unmanned Systems, also serving in various roles including as Program Manager and in Business Development during his tenure with L-3, which began in +2011. Mr. Spicer served in the United States Marine Corps from 1991 to 2014, both in active duty and as a reservist, before his retirement as a Lieutenant Colonel in 2014. Mr. Spicer also served as a first officer with American Airlines +from 2000 to 2003 following his active duty in the United States Marine Corps. Mr. Spicer received a Bachelor of Science degree in Manufacturing Engineering Technology from Central Michigan University in 1991. +Mr. Glenn W. Stetson +Senior Vice President of +Production and Asset Manager +Mr. Stetson joined Matador Resources Company in August 2014 as a Production Engineer, and in July 2015, he was promoted to Asset Manager. Mr. Stetson was promoted to the role of Vice President and Asset Manager in July +2018 before being promoted to his current role as Senior Vice President of Production and Asset Manager in October 2019. Prior to joining Matador, Mr. Stetson worked at Chesapeake Energy Corporation from 2008 to 2014, holding multiple positions +in both the production and completions departments. Most of his time at Chesapeake was spent in the Barnett shale in North Texas, although he also spent some time working in northern Pennsylvania managing the northeast portion of Chesapeake’s +Marcellus shale operated production. Mr. Stetson graduated Cum Laude from Oklahoma State University in 2007, receiving a Bachelor of Science degree in Mechanical Engineering Technology. Mr. Stetson is a Licensed Professional Engineer in +the State of Oklahoma. +Mr. Brian J. Willey +Senior Vice President and Co- +General +Counsel +Mr. Willey joined Matador Resources Company in February 2014 as its Deputy General Counsel. In January 2016, Mr. Willey was appointed as Co-General Counsel, and he was promoted to +Vice President and Co-General Counsel in August 2016. He became Senior Vice President and Co-General Counsel in July 2018. Prior to joining Matador, Mr. Willey was +an attorney with Dean Foods Company where he most recently served as Vice President, Chief Counsel—Corporate. Before Dean Foods, Mr. Willey served as a senior associate in the Dallas office of Baker Botts L.L.P. Mr. Willey’s +practice focused on corporate matters, including mergers and acquisitions, public and private securities offerings, venture capital transactions and SEC compliance matters as well as board of director and corporate governance matters. +Mr. Willey received a Bachelor of Science degree in Accounting in 2002 from Brigham Young University. He received his law degree in 2005 from The University of Texas School of Law, where he graduated with High Honors and was a member of the +Order of the Coif in addition to being named a Chancellor and an Associate Editor on the Texas Law Review. Mr. Willey also served a church mission in the Philippines from 1995 to 1997. +2020 +Proxy Statement | Matador Resources Company 33 +Table of Contents +PROPOSAL 2 +PROPOSAL +2 | ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION +In accordance with the requirements of Section 14A of the Exchange Act, the Company seeks a non-binding advisory vote from +its shareholders to approve the compensation of its Named Executive Officers (as defined below) as described in this Proxy Statement. +As discussed under the +“Executive Compensation—Compensation Discussion and Analysis” section of this Proxy Statement (“CD&A”), we believe the Company’s future success and the ability to create long-term value for our shareholders depends +on our ability to attract, retain and motivate highly qualified individuals in the oil and natural gas industry. Additionally, we believe that our success also depends on the continued contributions of our Named Executive Officers. The +Company’s compensation system plays a significant role in its ability to attract, motivate and retain a high quality workforce. As described in the CD&A, the Company’s compensation program for Named Executive Officers is designed to +reward, in both the short term and the long term, performance that contributes to the implementation of our business strategies, maintenance of our culture and values and achievement of our objectives. +This proposal provides shareholders the opportunity to endorse or not endorse the Company’s executive compensation program through approval of the following +resolution: +“Resolved, that the compensation paid to the Company’s Named Executive Officers, as disclosed pursuant to Item 402 of +Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby approved.” +The above-referenced CD&A and accompanying disclosures appear on pages 38 to 65 of this Proxy Statement. +Because this is an advisory vote, it will not be binding upon the Board. However, the Strategic Planning and Compensation Committee and the Independent Board will take +into account the outcome of the vote when considering future executive compensation arrangements. +Vote Required +The affirmative vote of the holders of a majority of +the shares present in person or represented by proxy and entitled to vote at the Annual Meeting is required to approve this resolution on a non-binding basis. If you hold your shares through a broker and you +do not instruct the broker how to vote, your broker will not have the authority to vote your shares. Abstentions will have the effect as a vote cast against the proposal. Broker non-votes will be counted as +present for purposes of determining the presence of a quorum but will have no effect upon the outcome of the vote. +During our 2018 Annual Meeting, our shareholders +approved a non-binding, advisory proposal to hold advisory votes to approve our executive compensation every year. In consideration of the results of this advisory vote, the Board has maintained its policy of +providing for annual advisory votes to approve executive compensation. Unless the Board modifies this policy, the next advisory vote to approve executive compensation following this vote will be held at our 2021 Annual Meeting. +The Board of Directors recommends that you vote FOR approval of this resolution. +34 Matador Resources Company | 2020 Proxy Statement +Table of Contents +PROPOSAL 3 +PROPOSAL 3 | RATIFICATION OF THE APPOINTMENT OF KPMG LLP +The Audit Committee has appointed KPMG LLP (“KPMG”) as the independent registered +public accounting firm of the Company for the year ending December 31, 2020, and the Board has directed that such appointment be submitted to our shareholders for ratification at the Annual Meeting. +The Company has been advised by KPMG that the firm has no relationship with the Company or its subsidiaries other than that arising from the firm’s engagement as +auditors. +If the shareholders do not ratify the appointment of KPMG, the Audit Committee will consider whether to engage a different independent registered public +accounting firm but will not be obligated to do so. +The Company has been advised that representatives of KPMG will be present at the Annual Meeting and will be +available to respond to appropriate questions and make a statement if they desire to do so. +Fees of Independent +Registered Public Accounting Firm for Fiscal Years 2019 and 2018 +The following table presents fees for professional audit services rendered by KPMG for the audit of the Company’s annual financial statements for the years ended +December 31, 2019 and 2018, and fees for other services rendered by KPMG during those periods: +2019 +2018 +Audit fees +$ +1,440,017 +$ +1,469,000 +Audit-related fees +— +— +Tax fees +— +— +All other fees +— +— +Total +$ +1,440,017 +$ +1,469,000 +Services rendered by KPMG in connection with the fees presented above were as follows: +Audit Fees +For fiscal year 2019, audit fees consisted of fees +associated with the audit of the Company’s consolidated financial statements, including the audit of the effectiveness of the Company’s internal control over financial reporting, required reviews of our quarterly condensed consolidated +financial statements, procedures related to registration statements and consultation on significant accounting matters. Audit fees also included fees paid to KPMG by San Mateo for the audit of its 2019 financial statements. +For fiscal year 2018, audit fees consisted of fees associated with the audit of the Company’s consolidated financial statements, including the audit of the +effectiveness of the Company’s internal control over financial reporting, required reviews of our quarterly condensed consolidated financial statements, including for inclusion in the prospectus related to our May 2018 equity offering and the +offering memoranda related to our 2018 senior notes offerings, and providing the underwriters or initial purchasers, respectively, of such offerings with comfort letters on certain information contained, or incorporated by reference, in the +prospectus or offering memoranda, as applicable. Audit fees also included fees paid to KPMG by San Mateo I for the audit of its 2018 financial statements. +2020 +Proxy Statement | Matador Resources Company 35 +Table of Contents +PROPOSAL 3 +Audit-Related Fees +We did not incur any audit-related fees in 2019 or 2018. +Tax Fees +We did not incur any fees for tax advice, planning and other services in 2019 or 2018. +All Other Fees +We did not incur any other fees in 2019 or 2018. +The Audit Committee pre-approves all audit and permissible non-audit services provided +by KPMG. These services may include audit services, audit-related services, tax services and other services. The Audit Committee has authorized the chair of the Audit Committee to pre-approve audit and +permissible non-audit services provided by KPMG up to $750,000. Pursuant to this delegation, the decisions of the chair must be presented to the Audit Committee at its next meeting. +Report of the Audit Committee +We are a standing committee comprised of independent directors +as currently defined by SEC regulations and the applicable listing standards of the NYSE. The Board has determined that at least one of the members of the Audit Committee is an “audit committee financial expert” as defined by applicable +SEC rules and regulations. We operate under a written charter adopted by the Board. A copy of the charter is available free of charge on the Company’s website at www.matadorresources.com under “Investor Relations—Corporate +Governance.” +We annually select the Company’s independent registered public accounting firm. If the shareholders do not ratify the appointment of KPMG +LLP at the Annual Meeting, the Audit Committee will consider whether to engage a different independent registered public accounting firm but will not be obligated to do so. +Management is responsible for the Company’s internal controls and the financial reporting process. The independent registered public accounting firm is responsible +for performing an independent audit of the Company’s consolidated financial statements in accordance with the standards of the United States Public Company Accounting Oversight Board (the “PCAOB”) and issuing a report thereon. As +provided in our charter, our responsibilities include the monitoring and oversight of these processes. +Consistent with our charter responsibilities, we have met +and held discussions with management and the independent registered public accounting firm. In this context, management and the independent registered public accounting firm represented to us that the Company’s consolidated financial statements +for the fiscal year ended December 31, 2019 were prepared in accordance with U.S. generally accepted accounting principles. We reviewed and discussed the consolidated financial statements with management and the independent registered public +accounting firm and discussed with the independent registered public accounting firm matters required to be discussed by the applicable requirements of the PCAOB and the SEC. +The Company’s independent registered public accounting firm has also provided to us the written disclosures and the letter required by applicable requirements of +the PCAOB regarding the independent registered public accounting firm’s communications with the Audit Committee, and we discussed with the independent registered public accounting firm that firm’s independence. +36 Matador Resources Company | 2020 Proxy Statement +Table of Contents +PROPOSAL 3 +Based upon our reviews and discussions with management and the independent registered public accounting firm and our review of the representation of management and the +report of the independent registered public accounting firm to the Audit Committee, we recommended that the Board include the audited consolidated financial statements in the Company’s Annual Report on Form +10-K for the year ended December 31, 2019 filed with the SEC. +Audit Committee, +William M. Byerley, Chair +Reynald A. Baribault +Craig T. Burkert +Matthew P. Clifton +Timothy E. Parker +Vote Required +The affirmative vote of the +holders of a majority of the shares present in person or represented by proxy and entitled to vote at the Annual Meeting is required for the ratification of the appointment of KPMG as the Company’s independent registered public accounting firm +for the year ending December 31, 2020. If the shareholders do not ratify the appointment of KPMG, the Audit Committee will consider whether to engage a different independent registered public accounting firm but will not be obligated to do so. +Abstentions will have the effect as a vote cast against the proposal. +The Board of Directors recommends that you vote +FOR the ratification of the appointment +of KPMG as the Company’s independent registered public +accounting firm for the +year ending December 31, 2020. +2020 +Proxy Statement | Matador Resources Company 37 +Table of Contents +LETTER TO SHAREHOLDERS +Dear Fellow Shareholders, +On behalf of the Board +and the Strategic Planning and Compensation Committee (the “Compensation Committee”) of the Board, thank you for partnering with us and entrusting Matador with your hard-earned capital. We and the Board take our responsibilities to you +very seriously—we are always eager to hear from our shareholders, and we pledge to continue to listen to your views and respond, as appropriate. +At the +Company’s 2018 Annual Meeting, the support for our say-on-pay proposal decreased from the average 99% level we had experienced in recent years to 72%. In light of +these disappointing say-on-pay results, shortly after the 2018 Annual Meeting, the Board and Compensation Committee began taking important steps to both understand the +decrease in shareholder support for our executive compensation program and to improve our program in order to further align executive compensation with shareholder expectations. +The most significant step in this process was an extensive outreach effort to our shareholder base. All told, we reached out to shareholders representing approximately +50% of our outstanding stock (excluding stock held by our directors and officers) in an effort to provide them a meaningful opportunity to help us improve our executive compensation program in 2018, 2019, 2020 and beyond. +We heard from many of you and, as a result of those discussions, in 2018 we began implementing the following changes to our executive compensation program: +• +In consideration of industry factors, the 2018 +say-on-pay vote and the Company’s 2018 stock performance, Chairman and Chief Executive Officer Joseph Wm. Foran’s total compensation was reduced by +27.0% for 2018, including a 35.5% reduction in annual bonus compensation. +• +We transitioned from a mix of long-term incentive compensation for executive officers of 67% service-based +restricted stock and 33% stock options in 2018 to 50% service-based restricted stock units and 50% performance-based stock units in 2019. By replacing the stock option component with performance stock units, we further aligned executive +compensation with long-term performance . +• +We eliminated discretionary bonuses for executive officers, commonly referred to within the Company as +“Marlan” awards in honor of the late Marlan W. Downey (1931-2017), a long-time advisor to the Board. Such bonuses have historically been awarded to contemporaneously reward impressive performance achievements. No Marlan bonuses have been +awarded to executive officers since our 2018 Annual Meeting, and the Board does not anticipate granting future Marlan bonuses to our executive officers. +At our 2019 Annual Meeting, support for our executive compensation program returned to the levels we were accustomed to, reaching approximately 97% as a result of, +among other items, the above changes to the program made since the 2018 Annual Meeting. +In early 2020, following the outbreak of the novel coronavirus, or COVID-19, along with the actions of OPEC+ and their effects on oil supply and demand, oil prices and our stock price, Mr. Foran voluntarily agreed to reduce his 2020 base salary by 25%, and our other executive +officers and vice presidents voluntarily agreed to reduce their 2020 base salaries by 20% and 10%, respectively. +These are just a few of the changes we have +implemented since hearing from so many of you, many of which took full effect over the past year. We look forward to ongoing dialogue with our shareholders and to demonstrating responsiveness to your feedback, including by continuing to improve our +executive compensation program. +We are honored to serve on your behalf and hope you will join us at the 2020 Annual Meeting of Shareholders. +Sincerely, +Timothy E. Parker +R. Gaines Baty +Lead Independent Director +Chair, Strategic Planning and Compensation Committee +38 Matador Resources Company | 2020 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +EXECUTIVE COMPENSATION +Compensation Discussion and Analysis +This Compensation Discussion and Analysis, or CD&A, provides a general description of our compensation program and specific information about its various components +for the following “Named Executive Officers” for 2019: +• +Joseph Wm. Foran, Chairman of the Board and Chief Executive Officer; +• +Matthew V. Hairford, President; +• +David E. Lancaster, Executive Vice President and Chief Financial Officer; +• +Craig N. Adams, Executive Vice President and Chief Operating Officer—Land, Legal & Administration; and +• +Billy E. Goodwin, Executive Vice President and Chief Operating Officer—Drilling, Completions & Production. +2019 Highlights +Increased Production and +Revenues +The year ended December 31, 2019 was marked by strong operational and financial results across the Company. The charts below show the five-year +growth experienced by both our exploration and production business and our midstream business. As shown below, our third-party midstream services revenues have experienced significant growth since the formation of San Mateo I in 2017. +We increased our average daily oil equivalent production from the Delaware Basin approximately 23% to 55,599 BOE per day +(84% of total oil equivalent production), including 35,184 Bbl of oil per day (92% of total oil production) and 122.5 MMcf of natural gas per day (73% of total natural gas production), in 2019, as compared +to 45,237 BOE per day (87% of total oil equivalent production), including 28,026 Bbl of oil per day (92% of total oil production) and 103.3 MMcf of natural gas per day (80% of total natural gas production), +in 2018. +Increased Oil and Oil Equivalent Reserves +Estimated total +proved oil and natural gas reserves were 252.5 million BOE at December 31, 2019, which was a Company record and an increase of 17% from 215.3 million BOE at December 31, 2018. +2020 +Proxy Statement | Matador Resources Company 39 +Table of Contents +EXECUTIVE COMPENSATION +The charts below show our total proved oil and natural gas +reserves at December 31, 2017, December 31, 2018 and December 31, 2019 and a breakdown of total reserves among our various operating areas. +Financing Transactions +We accomplished +several important financing transactions in 2019 that increased our operational flexibility and opportunities, while preserving the strength of our balance sheet and improving our liquidity position. These transactions included: +• +the amendment of the Credit Agreement to increase the borrowing base to $900.0 million, which was further amended +in February 2020 to increase our elected borrowing commitment from $500.0 million to $700.0 million; +• +the increase of the lender commitments under San Mateo I’s credit facility to $375.0 million, using the accordion +feature; and +• +the conversion of approximately $21.9 million of non-core assets to cash +during 2019. These properties were primarily located in South Texas and Northwest Louisiana and East Texas but included a small portion of our leasehold in a non-operated area of the Delaware Basin. +Midstream Highlights +On February 25, 2019, we +announced the formation of San Mateo II, a strategic joint venture with a subsidiary of Five Point Energy LLC (“Five Point”) designed to expand our midstream operations in the Delaware Basin, specifically in Eddy County, New Mexico. San +Mateo II is owned 51% by us and 49% by Five Point. As part of this transaction, we dedicated to San Mateo II acreage in the Stebbins area and surrounding leaseholds in the southern portion of the Arrowhead asset area (the “Greater Stebbins +Area”) and the Stateline asset area pursuant to 15-year, fixed-fee agreements for oil, natural gas and salt water gathering, natural gas processing and salt water +disposal. In addition, Five Point has committed to pay $125.0 million of the first $150.0 million of capital expenditures incurred by San Mateo II to develop facilities in the Greater Stebbins Area and the Stateline asset area. Five Point +has also provided us the opportunity to earn deferred performance incentives of up to $150.0 million over the next several years as we execute our operational plans in and around the Greater Stebbins Area and the Stateline asset area, plus +additional performance incentives for securing volumes from third-party customers. +San Mateo achieved strong operating results in 2019 as compared to 2018, +highlighted by (i) increased third-party midstream services revenues, (ii) increased natural gas gathering and processing volumes, (iii) increased water gathering and water disposal volumes and (iv) increased oil gathering +volumes. San Mateo initiated construction on an additional 200 MMcf per day of designed natural gas processing inlet capacity as part of the expansion of San Mateo’s cryogenic natural gas processing plant in Eddy County, New Mexico (the +“Black River Processing +40 Matador Resources Company | 2020 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +Plant”), which is anticipated to be placed in service during the summer of 2020 and would bring the total designed inlet capacity of the Black River Processing Plant to 460 MMcf of natural +gas per day. San Mateo also initiated plans to construct large diameter natural gas gathering lines southward from the Greater Stebbins Area and northward from the Stateline asset area to connect these areas with the Black River Processing Plant. +During 2019, San Mateo added four commercial salt water disposal wells, two in the Rustler Breaks asset area and two in the Greater Stebbins Area, and placed into service one additional commercial salt water disposal well in the Rustler Breaks asset +area in the first quarter of 2020, bringing San Mateo’s designed salt water disposal capacity to approximately 335,000 Bbl per day. +During 2019, San Mateo +received an increased natural gas gathering and processing commitment from an existing natural gas customer, plus other interruptible volumes, obtained significant additional acreage dedications from existing salt water customers and added an +acreage dedication from a new oil customer. At certain times near the end of the third quarter and early in the fourth quarter of 2019, as a result of increased throughput from existing natural gas processing customers, San Mateo was operating the +Black River Processing Plant at greater than 95% of the then-current designed inlet capacity of 260 MMcf per day. +Compensation Program Objectives +Our Board has a “pay for performance” philosophy and recognizes the leadership of our executive officers in contributing to the Company’s +achievements. Our future success and the ability to create long-term value for our shareholders depend on our ability to attract, retain and motivate highly qualified individuals in the oil and natural gas industry. In furtherance of these goals, +our executive compensation program is designed to meet the following key objectives: +• +to be fair to both the executive and the Company and be competitive with comparable positions at companies in +our peer group; +• +to attract and retain talented and experienced executives in light of the intense competition for talent in our +industry and areas of operation, including from peers and larger industry competitors; +• +to align the interests of our executives with the interests of our shareholders and with the performance of +our Company for long-term value creation; +• +to provide financial incentives to our executives to achieve our key corporate and individual objectives with an +appropriate mix of fixed and variable pay ; +• +to foster a shared commitment among executives by coordinating their corporate and individual goals; and +• +to provide compensation that takes into consideration the education, professional experience, knowledge, commitment and +dedication that is specific to each job and the unique qualities the executive possesses. +Investor Outreach and Compensation +Program Changes +At the Company’s 2018 Annual Meeting, support for our executive compensation program decreased from the average 99% level that we +received at our three previous annual shareholder meetings to approximately 72%. In response to this lower than anticipated shareholder support, we implemented an extensive shareholder outreach program, reaching out to shareholders representing +approximately 50% of our outstanding stock (excluding stock held by our directors and officers). This outreach effort, which began in 2018 and has continued through 2019 and early 2020, was led by the directors serving as lead independent director +and as the chairs of our Compensation Committee and Environmental, Social and Corporate Governance Committee. Among the feedback we received, shareholders expressed concern over alignment of executive compensation with the Company’s long-term +performance, the lack of performance-based equity compensation for executives and the use of discretionary bonuses and fully vested equity awards. +In conjunction +with this shareholder outreach effort and in direct response to much of the feedback received, the Compensation Committee and management undertook an extensive review of the Company’s executive compensation program, along with industry best +practices, with input from our independent compensation consultant, Meridian Compensation Partners, LLC (“Meridian”). As a result, we implemented certain changes to +2020 +Proxy Statement | Matador Resources Company 41 +Table of Contents +EXECUTIVE COMPENSATION +our compensation program, which are described in more detail below. We value feedback from our shareholders and expect to continue our shareholder outreach program on an ongoing basis. +At our 2019 Annual Meeting, support for our executive compensation program returned to the levels we were accustomed to, reaching approximately 97% as a result of, +among other items, the various changes to the program made since the 2018 Annual Meeting. +Our Compensation Committee and Independent Board considered the input +received as part of the shareholder outreach efforts described above when implementing the following changes to our executive compensation program. +What We Heard +What We Did +Improve alignment of executive compensation with the Company’s long-term performance +•   Approximately 85% of +Mr. Foran’s 2019 total compensation as calculated in the Summary Compensation Table was variable and at risk . +•    Performance stock units (“PSUs”) represented approximately 50% +of the total 2019 equity award targeted value granted to the Named Executive Officers (see below). +Incorporate performance-based awards into executive equity compensation program +•   We transitioned from a long-term incentive mix for +executive officers of 67% service-based restricted stock and 33% stock options to approximately 50% service-based restricted stock units (“RSUs”) and approximately 50% PSUs , commencing with grants made in February 2019. +•   The PSU +equity component introduced as part of our executive officers’ equity compensation in 2019 provides for settlement of between 0% and 200% of the total target PSUs subject to the award based on achievement of a relative total shareholder +return performance metric over a three-year performance period from January 1, 2019 through December 31, 2021. If our absolute total shareholder return over such performance period is negative, no more than 100% of the PSUs (the +target level) will vest. +42 Matador Resources Company | 2020 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +What We Heard +What We Did +Limit use of off-cycle discretionary bonuses and fully-vested equity awards +•   Discretionary bonuses commonly referred to within the +Company as “Marlan” awards in honor of the late Marlan W. Downey (1931-2017), a long-time advisor to the Board, were historically awarded as a way to contemporaneously reward significant performance achievements by select officers and +employees. +•    No Marlan bonuses have been awarded to executive officers since our 2018 +Annual Meeting, and the Board has determined to cease its practice of awarding Marlan bonuses to executive officers. +•    No fully-vested equity awards have been granted to executive officers +since 2018, and the Board has determined that it will not grant fully-vested equity awards to executive officers. +•   We adopted a new Annual Cash Incentive Plan (the “2019 Incentive +Plan”) that provides that the Compensation Committee and Independent Board may make adjustments for individual executive officers for exceptional performance and attainment of certain strategic goals. For the 2019 short-term incentive program, +our Independent Board capped this adjustment for each executive officer. +Compensation Program Best Practices +What We Do: +What We Don’t +Do: +✓ +We pay for performance—approximately 85% of our CEO’s total compensation for 2019, as reported in the Summary Compensation Table, was variable and at risk +× +We prohibit hedging of Company stock +✓ +We maintain robust stock ownership guidelines for officers +× +We do not gross-up excise taxes for severance or change in control payments +✓ +We engage an independent compensation consultant +× +We do not guarantee bonuses +✓ +We use competitive benchmarking in setting compensation +× +We do not reprice stock options without shareholder approval +✓ +We conduct annual risk assessments of compensation practices +× +We have no defined benefit or supplemental executive retirement plans +✓ +We conduct shareholder engagement to gather feedback on compensation practices and hold an annual say-on-pay vote +× +We discourage and limit pledging of Company stock +Elements of 2019 Compensation Program +Our executive compensation program places a considerable amount of an executive’s compensation at risk in the form of incentive or equity-based compensation, which +can be variable from year to year. We also seek to provide an appropriate balance between annual incentives and long-term incentives to ensure that each executive is motivated to consider longer-term Company performance in preference to short-term +results. +2020 +Proxy Statement | Matador Resources Company 43 +Table of Contents +EXECUTIVE COMPENSATION +For 2019, our management compensation program was comprised of +the following primary elements. +2019 Element +Key Features +Why We Paid This Element +Base Salary +•   Fixed level of cash +compensation +•   Compensates each +executive for his assigned responsibilities, experience, leadership and expected future contributions +Annual Short-Term Incentive Payments +•   Variable, annual, +performance-based cash compensation +•   Focuses and motivates +management to achieve key corporate and individual objectives +•   Rewards achievements over the prior year +Restricted Stock Units +•   Approximately 50% of +targeted total long-term equity award value +•   Vest ratably in annual installments over three years from grant date +•   Settle in cash +•   Directly aligns +executive and stockholder interests by tying the cash received on settlement to the Company’s stock price +•   Retains executives over vesting period +•   Cash +settlement avoids dilution of Common Stock +Performance Stock Units +•   Approximately 50% of +targeted total long-term equity award value +•   Vest between 0% and 200% following three-year performance period ending December 31, 2021 based on relative total shareholder return +•   If +relative total shareholder return is above target but absolute total shareholder return is negative, payout is capped at target (100%) +•   Focuses executives on +the Company’s long-term performance as award is tied to the Company’s total shareholder return relative to the total shareholder return of its peers +•   Settlement in shares of the Company’s stock increases alignment between +executives and stockholders +•   Retains executives over vesting period +Severance and Change of Control Benefits +•   Specified severance +pay and benefits are provided under each Named Executive Officer’s employment agreement in connection with termination events, including after a change in control +•   Provides an incentive +for executives to remain with the Company despite the uncertainties of a potential or actual change in control +•   Provides a measure of financial security in the event an executive’s +employment is terminated without cause +Other Benefits +•   Broad-based 401(k) +retirement, health and welfare benefits offered to all eligible employees +•   Provides market +competitive benefits +•   Protects employees against catastrophic loss and encourage a healthy +lifestyle +44 Matador Resources Company | 2020 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +Consistent with our compensation program objectives, we provide our executive officers with a significant portion of their total compensation in the form of variable, +rather than fixed, compensation. The percentages shown below reflect each executive’s compensation as calculated in the Summary Compensation Table. +Role of the Independent Board, Compensation Committee and Management +The Compensation Committee annually evaluates each of the Company’s executive officers, including Mr. Foran, and recommends to the Independent Board the +proposed compensation structure for each of the executives, including salary, equity and non-equity incentive compensation. Based on such recommendations, the Independent Board sets Mr. Foran’s +compensation each year. Mr. Foran consults with and provides recommendations to the Compensation Committee and Independent Board regarding the compensation structure for each of the other Named Executive Officers. Based on the recommendations +of the Compensation Committee and Mr. Foran, the Independent Board sets the other Named Executive Officers’ compensation each year. The members of the Independent Board are required to be independent pursuant to the listing standards of +the NYSE and the rules and regulations promulgated by the SEC. +As part of their annual evaluations, the Compensation Committee: +• +conducts an analysis of the Company’s annual performance relative to any performance criteria or targets established +under the 2019 Incentive Plan and recommends to the Independent Board the amount of final annual incentive awards; +• +reviews and recommends the form of and number of shares to be awarded pursuant to long-term incentive compensation awards, +including vesting terms, performance metrics, performance peer groups and other material provisions of such awards; +• +reviews executive officer compensation levels as compared to the Company’s peers; +• +reviews and recommends any employment agreement, severance agreement, change in control agreement or provision or +separation agreement or amendment thereof; and +• +reviews and recommends any deferred compensation arrangement, retirement plan, other benefits and perquisites. +2020 +Proxy Statement | Matador Resources Company 45 +Table of Contents +EXECUTIVE COMPENSATION +In addition, the Compensation Committee confirms at least +annually that our compensation policies and practices do not encourage unnecessary risk taking and reviews the relationship between risk management, corporate strategy and executive compensation. The Compensation Committee considers, in establishing +and reviewing our compensation program, whether the program encourages unnecessary or excessive risk taking and has concluded that it does not and is not reasonably likely to have a material adverse effect on us. Several features of our program +reflect sound risk management practices. Base salaries are fixed in amount and thus do not encourage risk taking. While annual executive short-term incentive payments are tied to management’s achievements during the previous fiscal year, they +also take into account multiple performance criteria based on the executive’s individual performance and are within the discretion of the Independent Board. Thus, the Compensation Committee believes that our short-term incentive awards +appropriately balance risk and the desire to focus executives on specific short-term goals important to the Company’s success, and that they do not encourage unnecessary or excessive risk taking. In addition, the Compensation Committee believes +that our equity compensation program provides an appropriate balance between the goals of increasing the price of our Common Stock and avoiding potential risks that could threaten our growth and stability due to the fact that the RSUs and PSUs vest +over three years and the PSUs vest based on our relative total shareholder return. +In addition, pursuant to its charter, the Compensation Committee reviews and +recommends to the Independent Board any proposals for the adoption, amendment, modification or termination of our incentive compensation, equity-based plans and non-equity based plans. +Role of the Independent Compensation Consultant +The Compensation +Committee has engaged Meridian as its independent executive compensation advisory firm. Meridian provides assessments of the competitiveness of the Company’s executive compensation levels and practices relative to relevant executive labor +markets and performs other tasks as requested by the Compensation Committee. For 2019, the Compensation Committee assessed the independence of Meridian pursuant to applicable SEC and NYSE rules and concluded that Meridian’s engagement by the +Compensation Committee did not raise any conflicts of interest. +Use of Peer Group Market Data +Our independent compensation consultant benchmarks the pay levels of our officers against a group of competitor companies in the oil and natural gas exploration and +production sector (the “Peer Group”). In connection with its annual review, the Compensation Committee and Independent Board adopted the following new Peer Group in 2019, which was used in setting 2019 compensation levels: +Callon Petroleum Company +Centennial Resource Development, Inc. +Cimarex +Energy Co. +Diamondback Energy, Inc. +Encana Corp. (now Ovintiv Inc.) +Jagged Peak +Energy Inc. +Laredo Petroleum, Inc. +Oasis Petroleum, Inc. +Parsley Energy, Inc. +SM Energy Company +WPX Energy, Inc. +Following the October 2019 announcement of the merger of Jagged Peak Energy Inc. into Parsley Energy, Inc., Jagged Peak Energy Inc. was +no longer considered in determining any elements of executive compensation. In addition to considering companies in the oil and natural gas exploration and production sector, the Compensation Committee also considered company size characteristics +such as assets, enterprise value and market value when approving the Peer Group. As of December 31, 2019, the Peer Group had a median market capitalization of $1.89 billion, compared to the Company’s market capitalization of +$2.1 billion at such date, placing the Company at the 51 st percentile of the Peer Group. The Peer Group also includes certain companies with operations in the Permian Basin that face similar +opportunities and challenges that we face. The Peer Group is used by the Compensation Committee and the Independent Board in setting Named Executive Officer salaries, annual short-term incentive award opportunities, long-term incentive awards and +target total direct compensation levels. The +46 Matador Resources Company | 2020 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +Compensation Committee and Independent Board use this data to inform their pay decisions as one data point among many others, including Company performance, individual performance, experience and +responsibilities, leadership and professional growth. +2019 Base Salaries +In early 2019, based on the recommendations of Mr. Foran (other than with regard to his base salary), the Compensation Committee recommended, and the Independent +Board approved, the following 2019 base salaries for our Named Executive Officers. +Executive Officer +2018 Base +Salary +2019 Base +Salary +Joseph Wm. Foran +$ +1,100,000 +$ +1,200,000 +Chairman of the Board and Chief Executive Officer +Matthew V. Hairford +$ +660,000 +$ +700,000 +President +David E. Lancaster +$ +625,000 +$ +680,000 +Executive Vice President and Chief Financial Officer +Craig N. Adams +$ +600,000 +$ +660,000 +Executive Vice President and Chief Operating Officer—Land, +Legal & Administration +Billy E. Goodwin +$ +575,000 +$ +660,000 +Executive Vice President and Chief Operating Officer—Drilling, +Completions & Production +The Independent Board determined raises for each Named Executive Officer were warranted based upon each Named Executive Officer’s +individual contributions to, among other items: +• +the Company’s record oil, natural gas and average daily oil equivalent production for 2018; +• +the significant additions to the Company’s Delaware Basin acreage position throughout 2018, including 8,400 gross and +net acres acquired in the September 2018 Bureau of Land Management New Mexico Oil and Gas Lease Sale; +• +the Company’s continued improvement in operational efficiencies throughout 2018; +• +the Company’s record reserves for 2018; +• +the significant growth of our midstream business in 2018, highlighted by San Mateo’s execution of numerous +accomplishments; and +• +the completion of several key financing arrangements in 2018 that improved our liquidity and capital structure. +2019 Annual Incentive Compensation +We adopted +the 2019 Incentive Plan effective as of January 1, 2019. The 2019 Incentive Plan is designed to link executive decision making and performance with the Company’s goals, reinforce these goals and ensure the highest level of accountability +for the success of the Company as a whole. The 2019 Incentive Plan advances Company and shareholder interests by providing an additional means to (i) sustain and enhance the culture of personal commitment on the part of executives, select +managers and key employees in the continued growth, development and financial success of the Company and (ii) encourage them to remain with, and devote their best efforts to, the Company. The 2019 Incentive Plan provides for the granting of +awards of incentive compensation that may be paid to a participant upon satisfaction of specified performance goals for a particular performance period. In addition, the 2019 Incentive Plan provides that the Compensation Committee and Independent +Board may make adjustments for individual executive officers for exceptional performance and attainment of certain strategic goals (the “Discretionary Adjustment”). +2020 +Proxy Statement | Matador Resources Company 47 +Table of Contents +EXECUTIVE COMPENSATION +Performance Goals +For 2019, the chair of the Compensation Committee met with Meridian and management to discuss potential criteria for the performance goals. Based on these meetings, the +chair of the Compensation Committee proposed certain preliminary performance goal categories for consideration for 2019. The Compensation Committee then met with Meridian and management to review the proposed performance goals. The categories of +these performance goals reflect the continuation of the Compensation Committee’s strategic shift initiated several years ago from primarily growth-oriented performance goals to performance goals that incentivize capital efficiency and returns, +in addition to growth-oriented goals. As a result of these meetings, the Compensation Committee recommended and the Independent Board determined to use the following threshold, target and maximum performance goals for 2019, which were each achieved +above target, as shown below: +2019 Performance Goals +Threshold +Target +Maximum +Actual +Results +Assessment +Oil production (millions of Bbl) +12.9 +13.1 +13.3 +14.0 +Exceeded +maximum +Return on average capital employed +(ROACE) (1) +16.0% +18.0% +21.0% +20.5% +Approached +maximum +San Mateo Adjusted EBITDA +(millions of $) (2) (3) +$80.0 +$90.0 +$100.0 +$96.3 +Exceeded +target +Net Debt/Adjusted EBITDA (2)(4)(5) +2.7x +2.4x +2.1x +2.3x +Exceeded +target +Total 2019 shareholder return vs. Peer Group +Upper 75% +Upper 33% +Upper 25% +Upper 25% +Achieved +maximum +Adjusted Operating Expenses per BOE (6) +$13.75 +$13.25 +$12.75 +$11.98 +Exceeded +maximum +(1) +ROACE is a non-GAAP financial measure included herein solely as a reference point +under the 2019 Incentive Plan. It is similar to “return on capital employed” metrics used by other companies in our industry. The Compensation Committee and the Independent Board believe ROACE is an appropriate performance goal because it +allows them to evaluate our return on capital and compare our profitability and the efficiency with which we have employed capital over time relative to other companies. For a definition of ROACE and a reconciliation of ROACE to our net income +(loss), see Annex A to this Proxy Statement. +(2) +Adjusted EBITDA is a non-GAAP financial measure included herein solely as a +reference point under the 2019 Incentive Plan. It is commonly used by similar companies in our industry. For a definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to our net income (loss) and net cash provided by operating +activities, see Annex A to this Proxy Statement. +(3) +The Compensation Committee and the Independent Board believe Adjusted EBITDA attributable to San Mateo is an appropriate +performance goal because it allows them to evaluate San Mateo’s operating performance and compare the results of operations from period to period without regard to San Mateo’s financing methods or capital structure. +(4) +Net Debt is equal to the principal amount of Matador’s outstanding senior notes, plus Matador’s outstanding +revolving credit facility debt, plus Matador’s share of San Mateo I’s outstanding credit facility debt, less available cash (including Matador’s share of restricted cash, which is primarily attributable to San Mateo). +(5) +Attributable to Matador Resources Company shareholders. +(6) +Adjusted Operating Expenses per BOE is defined as the sum of the following operating expenses per BOE: (i) production +taxes, transportation and processing, (ii) lease operating and (iii) general and administrative. +48 Matador Resources Company | 2020 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +2019 Incentive Opportunities +In making recommendations regarding potential +2019 annual incentive opportunities for our Named Executive Officers, the Compensation Committee reviewed Meridian’s recommendations and recommendations of management regarding proposed target opportunities. Based on such review, which took +into account the differing responsibilities of each Named Executive Officer and peer group data, where available, for bonus levels for comparable positions, the 2019 target annual incentive opportunities set forth below were approved. +Participant +Target +Annual +Incentive +Opportunity +as % of 2019 +Base Salary +Joseph Wm. Foran +110.0 +% +Matthew V. Hairford +90.0 +% +David E. Lancaster +85.0 +% +Craig N. Adams +80.0 +% +Billy E. Goodwin +80.0 +% +Our Independent Board also determined to cap the Discretionary Adjustment for each Named Executive Officer at 30% of the each Named +Executive Officer’s total 2019 annual incentive payment. +2020 +Proxy Statement | Matador Resources Company 49 +Table of Contents +EXECUTIVE COMPENSATION +2019 Performance Results +The Compensation Committee then assessed the Company’s 2019 results in light of the performance goals and the following individual performance milestones for each +Named Executive Officer when determining appropriate short-term incentive award amounts: +Individual Performance +Milestones +Joseph Wm. Foran +Chairman and Chief Executive Officer +•    Collaborated with the Board and other executive +officers to create and maintain an effective team culture throughout each level of Matador’s organization that has built value through (1) selective acreage acquisitions , (2) traditional +oil and natural gas operations growing organically through the drill bit and (3) expanding midstream operations in Matador’s various asset areas +•   Provided direction and leadership throughout Matador in +developing and executing Matador’s strategy and operational plan in 2019, which resulted in record operational and midstream results, including +¡    17% +reserves growth +¡    27% oil equivalent production growth +¡    9% +total revenue growth +•    Provided leadership to the Board , including recommending to the +Nominating Committee a highly qualified Board candidate with additional expertise and experience and improving the Board’s function and processes +•   Directed the Company’s collective efforts to convert approximately +$21.9 million of non-core assets to cash +•   Worked with other executive officers and directors to expand the vision and +strategy for Matador’s midstream operations , including the negotiations for the San Mateo II joint venture and the expansion of the San Mateo system +•    Oversaw the collaborative management of the Company’s balance +sheet and strong financial position , including through an increase in the borrowing base under the Credit Agreement +•   Led firmwide focus on attracting, training and retaining talent , +encouraging employee and director engagement and aligning our strategy and operational plan throughout the organization +•   Directed efforts to develop and maintain relationships with directors, +shareholders, vendors and other key stakeholders with the assistance of other executive officers +Matthew V. Hairford +President +•    Oversaw the team efforts that resulted in record +daily oil equivalent production and an increase of 27% in 2019 +•   Directed the work of the Company’s field personnel and the +implementation of the Company’s health, safety and environmental initiatives and interacted with shareholders and directors on financial matters +•   Worked with other executive officers to contain costs while maintaining and +improving relationships with key vendors +•   As Chairman of the Board and President of San Mateo, led the Company’s midstream efforts to, among other items, +¡    Form San +Mateo II , expanding our midstream operations in Eddy County, New Mexico +50 Matador Resources Company | 2020 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +Individual Performance +Milestones +¡   Achieve +strong operating results , highlighted by increased third-party midstream services revenues, natural gas gathering and processing volumes, water gathering and disposal volumes and oil gathering volumes +¡   Secure increased third-party commitments or dedications , such that the Black River Processing Plant operated at 95% of its designed inlet capacity at certain times near the +end of the third quarter and early in the fourth quarter of 2019 +David E. Lancaster Executive Vice President and Chief Financial +Officer +•    Led the collective effort to +manage the Company’s balance sheet and improve the Company’s already strong financial position through +¡    An +increase of the borrowing base under the Credit Agreement to $900 million +¡    An +i ncrease of the lender commitments under San Mateo I’s credit facility to $375.0 million using the accordion feature +•   Responsible for the Company’s financial modeling, guidance and +relationships with financial institutions, shareholders, bondholders, equity and bond analysts and public markets +•   As a distinguished petroleum engineer, provided oversight and quality +control to the Company’s exploration and development activities and its reserve studies +Craig N. Adams +Executive Vice President and Chief Operating Officer—Land, Legal & +Administration +•   Coordinated and oversaw the general legal matters +of the Company through the management of the Company’s legal staff +•    Managed the Company’s legal and land efforts to convert +approximately $21.9 million of non-core assets to cash +•    Responsible for coordinating administrative functions of the Company, +including Board functions and interaction with management, office facilities and the oversight of the Company’s human resource activities and departmental efficiencies +•    Helped +implement the Company’s ESG initiatives +Billy E. Goodwin +Executive Vice President and Chief Operating Officer—Drilling, +Completions & Production +•    Led the Company’s +collaborative drilling, completions and production activities, managing approximately $672 million of capital expenditures in 2019 related to the Company’s operations in its primary operating areas, resulting +in +¡    17% reserves growth +¡    27% +oil equivalent production growth +•   Worked with other executive officers and staff members to innovate and to increase capital efficiencies by drilling longer laterals, using central facilities and multi-well pads and reducing +costs, while maintaining and improving relationships with key vendors +•   Directed the MaxOps program to increase drilling, completions and +production experience among our engineering staff and the MaxCom program to ensure coordination of drilling and completion operations +•   Oversaw team efforts to drill salt water disposal wells in connection +with the expansion of San Mateo’s salt water gathering and disposal systems +2020 +Proxy Statement | Matador Resources Company 51 +Table of Contents +EXECUTIVE COMPENSATION +The Compensation Committee also reviewed with Mr. Foran +the individual performance of the other Named Executive Officers to make a determination as to whether any individual Named Executive Officer merited a short-term incentive payment above or below the payout level determined for the Named Executive +Officers generally. The Compensation Committee took into consideration the individual performance milestones listed above as well as additional contributions to the achievement of Company-wide goals. Based on this review, the Compensation Committee +determined that each of the Named Executive Officers performed at a high level in 2019 contributing to the Company’s success. However, the Compensation Committee did not recommend that the Independent Board make any Discretionary Adjustment to +the annual cash awards for any Named Executive Officer. +Based on such assessment, the Compensation Committee recommended to the Independent Board the annual cash +awards listed below for each Named Executive Officer under the 2019 Incentive Plan. The Independent Board approved such annual cash awards, which were paid to the Named Executive Officers in February 2020. Consistent with the recommendation of the +Compensation Committee, the annual cash awards reflected no Discretionary Adjustment for individual executive officers for exceptional performance and attainment of certain strategic goals. +Executive Officer +Target Award +Payable under 2019 +Incentive Plan +Maximum Award +Payable under 2019 +Incentive Plan +2019 Incentive +Plan Actual +Award +Actual Award +as % of +Target Award +Joseph Wm. Foran +$ +1,320,000 +$ +2,640,000 +$ +2,510,000 +190.2 +% +Matthew V. Hairford +$ +630,000 +$ +1,260,000 +$ +1,200,000 +190.5 +% +David E. Lancaster +$ +578,000 +$ +1,156,000 +$ +1,100,000 +190.3 +% +Craig N. Adams +$ +528,000 +$ +1,056,000 +$ +1,005,000 +190.3 +% +Billy E. Goodwin +$ +528,000 +$ +1,056,000 +$ +1,005,000 +190.3 +% +2019 Long-Term Incentive Compensation +In February 2019, after consulting with Meridian and management and considering shareholder feedback, the Compensation Committee recommended that we transition from a +long-term incentive mix for executive officers of 67% service-based restricted stock and 33% stock options to 50% service-based cash-settled RSUs and 50% PSUs. The Independent Board granted such awards in February 2019. These long-term equity awards +facilitate retention of our Named Executive Officers, incentivize positive future results and further align the interests of our Named Executive Officers with those of the Company’s shareholders. The table below provides the key terms of the +February 2019 equity awards. +Key Terms +Restricted Stock Units +Performance Stock +Units +Targeted percentage of total +award value +50% +50% +Vesting terms +Three years ratably on each anniversary +Following three-year performance period ending December 31, 2021 +Performance metric +N/A +Relative total shareholder return +52 Matador Resources Company | 2020 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +The number of shares underlying each grant and the target value of the 2019 annual equity grants are set forth in the table below. +Participant +Restricted +Stock Units +Target +Performance +Stock Units +Targeted +Value +Joseph Wm. Foran +113,379 +113,379 +$ +4,000,000 +Matthew V. Hairford +59,524 +59,524 +$ +2,100,000 +David E. Lancaster +53,855 +53,855 +$ +1,900,000 +Craig N. Adams +48,186 +48,186 +$ +1,700,000 +Billy E. Goodwin +48,186 +48,186 +$ +1,700,000 +The Independent Board approved the total targeted value for the year for each Named Executive Officer and then converted that value into +an aggregate number of units based on the closing price of our Common Stock on the date prior to the date of grant. The units were then granted 50% in the form of RSUs and 50% in the form of PSUs (at target). The newly introduced PSU equity +component provides for settlement of between 0% and 200% of the total target PSUs subject to the award based on our total shareholder return relative to the total shareholder return of a specified peer group over a three-year performance period from +January 1, 2019 through December 31, 2021. If our absolute total shareholder return over such performance period is negative, no more than 100% of the PSUs may vest. The applicable percentage of vested units is shown below with respect to +each percentile ranking. +Company’s Relative Total +Shareholder +Return Percentile Ranking +Percentage of Target Units +That Will +Vest +0 +0% +10 th +20% +20 th +40% +30 th +60% +40 th +80% +50 th +100% +60 th +120% +70 th +140% +80 th +160% +90 th +180% +100 th +200% +2020 +Proxy Statement | Matador Resources Company 53 +Table of Contents +EXECUTIVE COMPENSATION +The peer group used for determination of the Company’s +relative total shareholder return is as follows, which is the same as the Company’s 2019 Peer Group: +Callon Petroleum Company +Centennial Resource Development, Inc. +Cimarex +Energy Co. +Diamondback Energy, Inc. +Encana Corp. (now Ovintiv Inc.) +Jagged Peak +Energy Inc. +Laredo Petroleum, Inc. +Oasis Petroleum, Inc. +Parsley Energy, Inc. +SM Energy Company +WPX Energy, Inc. +Due to the merger of Jagged Peak Energy Inc. into Parsley Energy, Inc. in early 2020, Jagged Peak Energy Inc. will no longer be +considered in determining the Company’s relative total shareholder return under the PSUs. +2020 Compensation +The information provided in this CD&A focuses primarily on the compensation program in effect during 2019 and the Compensation Committee’s analysis and +decision-making process undertaken with respect to the 2019 compensation program. It is important to note that all decisions with respect to 2019 executive compensation were made in or prior to February 2020 and based on the Company’s strong +2019 performance. In particular, both the quarter and year ended December 31, 2019 were the best in the Company’s history. In 2019, the Company increased its oil and natural gas production and proved oil and natural gas reserves to all-time +highs, maintained its focus on improving operational and capital efficiencies and continued to grow and increase its cash flows. At the same time, the Company reduced its capital expenditures for drilling, completing and equipping wells while +keeping its unit operating costs flat as compared to 2018. Finally, at the time these executive compensation decisions were made, the NYMEX West Texas Intermediate oil price was over $50 per Bbl. +Since that time, the emergence of the novel coronavirus, or COVID-19, as a global pandemic has significantly reduced demand for oil and natural gas, and escalating +tensions between Saudi Arabia and Russia regarding OPEC+ oil production have resulted in a substantial decrease in oil and natural gas prices. The severity of these events has caused the Compensation Committee to review their impact on the oil and +natural gas industry and the broader economy to ensure executive compensation is aligned with the interests of our shareholders in today’s operating environment. +In further support of our compensation philosophy and objectives and in response to these challenging market conditions, in March 2020, the Compensation Committee, in +conjunction with Mr. Foran, reviewed the previously approved 2020 base salaries for executive officers and proposed Board compensation. The Compensation Committee and Mr. Foran specifically focused on the impact of COVID-19 and the actions of Saudi +Arabia, Russia and other OPEC+ countries on the trading price of our Common Stock. +In light of these developments, the Company was the first in the oil and natural +gas industry to publicly announce reductions in executive compensation when Mr. Foran voluntarily agreed to reduce his 2020 base salary by 25% and the Board agreed to reduce their compensation by 25%, too. Our other executive officers also +voluntarily agreed to reduce their 2020 base salaries by 20%. Furthermore, in determining the size of 2020 long-term incentive awards for executive officers granted in March 2020, the Compensation Committee and Independent Board used a value of +approximately $13 per share—reflecting the trading price of our Common Stock in mid-February before the coronavirus pandemic and precipitous drop in oil prices began to impact the price of our Common Stock—instead of the significantly +lower grant date fair value, which approximated $2 per share. The Compensation Committee is continuing to assess whether further changes to our 2020 executive compensation program are warranted. +Benefits +We offer a variety of health and welfare programs to +eligible employees, including the Named Executive Officers. The health and welfare programs are intended to protect employees against catastrophic loss and encourage a healthy lifestyle. Our health and welfare programs include medical, pharmacy, +dental, disability and life insurance. We also have a 401(k) plan for eligible employees, including the Named Executive Officers, to which we contribute 3% of the employee’s eligible compensation, which is subject to limits established by the +Code, and have the discretion to contribute up to an additional 4% of the employee’s eligible compensation as a dollar-for-dollar matching contribution with respect +to his or her elective deferral contributions. The discretionary dollar-for-dollar match is subject to vesting based upon years of service to the Company and the limits +on the compensation that may be considered under the Code. In addition, we provide long-term care insurance for certain of our executive officers. +54 Matador Resources Company | 2020 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +Severance and Separation Arrangements +Employment Agreements +We have entered into employment agreements with each of our Named Executive Officers. Under the employment agreements, if a termination of employment occurs +pursuant to one of the following events: +• +the Named Executive Officer dies; +• +the Named Executive Officer is totally disabled; +• +we mutually agree to end the employment agreement; +• +we dissolve and liquidate; or +• +the term of the employment agreement ends, +we will pay the Named Executive Officer the average of his annual bonus, which includes non-equity incentive compensation, for +the prior two years, pro-rated based on the number of complete or partial months completed during the year of termination. +Also, under the employment agreements, if one of the following occurs: +• +the Named Executive Officer’s employment is terminated other than (i) as set forth above, (ii) by us for +just cause or (iii) in connection with a “change in control” as described below; or +• +the Named Executive Officer terminates his employment for “good reason,” +if the Named Executive Officer is Mr. Foran, we will pay him twice his base salary and twice the average of his annual bonus for the prior two years; if the Named +Executive Officer is Messrs. Hairford, Lancaster, Adams or Goodwin, we will pay him 1.5 times his base salary and 1.5 times the average of his annual bonus for the prior two years. +Finally, under the employment agreements of Messrs. Foran, Hairford and Lancaster, which were entered into in 2011, if we terminate the Named Executive Officer within +30 days prior to the “change in control” or within 12 months after the “change in control” without just cause or the Named Executive Officer terminates his employment with or without “good reason” during such period, we +will pay him three times his base salary and three times the average of his annual bonus for the prior two years. These agreements were entered into prior to our initial public offering. At that time, we believed a “modified single +trigger” was appropriate given the Company’s size, early stage of development and strong growth aspirations. Since that time, however, we have ceased to use “modified single triggers” in executive employment agreements, and we +intend to exclusively use “double triggers” going forward, as we have since 2014. The agreement entered into with Mr. Adams in March 2014 and the agreement entered into with Mr. Goodwin effective February 2016 each include a +“double trigger” such that if we terminate either executive within 30 days prior to the “change in control” or within 12 months after the “change in control” without just cause or he terminates his employment with +“good reason,” we will pay Mr. Adams or Mr. Goodwin three times his base salary and three times the average of his annual bonus for the prior two years. In addition, if any of our Named Executive Officers are terminated or +terminate their employment as set forth above in connection with a “change in control,” all equity awards of such Named Executive Officer vest immediately prior to such termination. +For definitions of “change in control,” “good reason” and “just cause,” please see the employment agreement of each Named Executive +Officer, each of which is included as an exhibit to the Company’s most recent Annual Report on Form 10-K. +Equity +Plans +For equity grants under the 2012 Long-Term Plan and the Matador Resources Company 2019 Long-Term Incentive Plan (the “2019 Long-Term Plan,” and, +together with the 2012 Long-Term Plan, the “Long-Term Plans”), other than the PSUs, vesting upon a “change in control” for the Named Executive Officers mirrors the terms of their employment agreements. The PSUs vest upon a +“change in control” based on performance achieved through the date of such change in control, as it is anticipated that a change in control would make achievement of relative total shareholder performance impractical to measure. +2020 +Proxy Statement | Matador Resources Company 55 +Table of Contents +EXECUTIVE COMPENSATION +The “change in control” provisions in the employment +agreements and the equity grants under the Long-Term Plans help prevent management from being distracted by rumored or actual changes in control. The “change in control” provisions provide: +• +incentives for those Named Executive Officers to remain with us despite the uncertainties of a potential or actual change +in control; +• +assurance of severance payments for terminated Named Executive Officers; and +• +access to equity compensation after a change in control. +Stock Ownership Guidelines +We have adopted stock ownership +guidelines for the following officers in the following designated amounts: +• +Chairman and Chief Executive Officer—shares equal to five times base salary; +• +President—shares equal to five times base salary; +• +Executive Vice Presidents—shares equal to two and 1/2 times base salary; +• +Senior Vice Presidents—shares equal to two times base salary; and +• +Vice Presidents and Executive Directors—shares equal to one and 1/2 times base salary. +Newly appointed officers have until the fifth anniversary of his or her appointment as an officer of the Company within which to achieve the stock ownership position. +Shares that count toward the stock ownership guidelines include time-based restricted shares. Shares that will not count toward the stock ownership guidelines include shares underlying unexercised stock options, unexercised stock appreciation +rights, RSUs that provide for settlement in cash and performance-based awards for which the performance requirements have not been satisfied. +Until each of the +above officers reaches the stock ownership level required of his or her position, such officer must hold at least 50% of all “net shares” received through restricted stock or RSU vesting or realized through stock option exercises. For +this purpose, “net shares” means all shares retained after applicable withholding of any shares for tax purposes. Additionally, upon the vesting of restricted stock or RSUs or the exercise of stock options, each officer must hold the net +shares for a minimum of 12 months following such vesting or exercise, or until his earlier retirement. As of December 31, 2019, each Named Executive Officer owned shares in excess of the applicable minimum requirement set forth in the stock +ownership guidelines, and Mr. Foran held shares with a value equal to approximately 75 times his 2019 base salary. +Anti-Hedging and Anti-Pledging +Policies +Pursuant to the Company’s insider trading policy, the Company prohibits hedging of its securities by directors, officers or employees. +Specifically, no such person shall purchase or sell, or make any offer to purchase or offer to sell, derivative securities relating to the Company’s stock, whether or not issued by the Company, or financial instruments that are designed to +hedge or offset any decrease in the market value of the Company’s stock (including but not limited to prepaid variable forward contracts, equity swaps, collars and exchange funds) or otherwise engage in transactions that hedge or offset, or are +designed to hedge or offset, any decrease in the market value of Company equity securities (a) granted to such person by the Company as part of the compensation of such person; or (b) held, directly or indirectly, by such person. The +insider trading policy also restricts directors and executive officers from pledging more than 25% of his or her holdings of the Company’s stock without the prior written consent of the Environmental, Social and Corporate Governance Committee. +Strategic Planning and Compensation Committee Report +We have reviewed and discussed with management the Compensation +Discussion and Analysis required by Item 402(b) of Regulation S-K and based on such review and discussions, we recommended to the Board that the Compensation Discussion and Analysis be included in +this Proxy Statement. +Strategic Planning and Compensation Committee, +R. Gaines Baty, Chair +Reynald A. Baribault +Craig T. Burkert +Timothy E. Parker +Kenneth L. Stewart +56 Matador Resources Company | 2020 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +Summary Compensation Table +The following table summarizes the total compensation awarded +to, earned by or paid to Messrs. Foran, Hairford, Lancaster, Adams and Goodwin for 2019, 2018 and 2017. This table and the accompanying narrative should be read in conjunction with the CD&A, which sets forth the objectives and other information +regarding our executive compensation program. +Name and Principal Position +Year +Salary +Bonus (1) +Stock +Awards (2) +Option +Awards (3) +Non-Equity +Incentive Plan +Compensation (4) +All Other +Compensation +Total +Joseph Wm. Foran +2019 +$ +1,200,000 +$ +— +$ +4,293,663 +$ +— +$ +2,510,000 +$ +24,646 +(5) +$ +8,028,309 +Chairman of the Board and Chief Executive Officer +2018 +$ +1,100,000 +$ +300,000 +$ +2,666,659 +$ +1,333,330 +$ +1,936,000 +$ +23,331 +$ +7,359,320 +2017 +$ +1,000,000 +$ +950,000 +$ +3,582,908 +$ +1,524,990 +$ +3,000,000 +$ +22,489 +$ +10,080,387 +Matthew V. Hairford +2019 +$ +700,000 +$ +— +$ +2,254,174 +$ +— +$ +1,200,000 +$ +23,502 +(6) +$ +4,177,676 +President +2018 +$ +660,000 +$ +100,000 +$ +1,399,976 +$ +699,991 +$ +900,400 +$ +21,112 +$ +3,781,479 +2017 +$ +600,000 +$ +275,000 +$ +990,001 +$ +989,991 +$ +1,030,000 +$ +22,802 +$ +3,907,794 +David E. Lancaster +2019 +$ +680,000 +$ +— +$ +2,039,489 +$ +— +$ +1,100,000 +$ +19,600 +(7) +$ +3,839,089 +Executive Vice President and Chief Financial Officer +2018 +$ +625,000 +$ +100,000 +$ +1,266,653 +$ +633,327 +$ +850,000 +$ +19,250 +$ +3,494,230 +2017 +$ +550,000 +$ +325,000 +$ +866,486 +$ +866,504 +$ +935,000 +$ +18,900 +$ +3,561,890 +Craig N. Adams +2019 +$ +660,000 +$ +— +$ +1,824,804 +$ +— +$ +1,005,000 +$ +21,881 +(8) +$ +3,511,685 +Executive Vice President and Chief Operating Officer — +Land, Legal & Administration +2018 +$ +600,000 +$ +100,000 +$ +1,133,331 +$ +566,664 +$ +790,000 +$ +21,531 +$ +3,211,526 +2017 +$ +525,000 +$ +375,000 +$ +722,008 +$ +721,990 +$ +840,000 +$ +21,181 +$ +3,205,179 +Billy E. Goodwin +2019 +$ +660,000 +$ +— +$ +1,824,804 +$ +— +$ +1,005,000 +$ +19,600 +(7) +$ +3,509,404 +Executive Vice President and +Chief Operating Officer — Drilling, Completions & Production +2018 +$ +575,000 +$ +50,000 +$ +999,979 +$ +499,988 +$ +840,000 +$ +19,250 +$ +2,984,217 +2017 +$ +500,000 +$ +100,000 +$ +587,508 +$ +587,489 +$ +800,000 +$ +18,900 +$ +2,593,897 +(1) +Reflects ad hoc discretionary “Marlan” bonuses awarded by the Independent Board to recognize such Named +Executive Officer’s contributions to certain transactions and accomplishments of the Company. As a result of feedback received during shareholder outreach efforts following the 2018 Annual Meeting, the Board has ceased to award its executive +officers with such Marlan bonuses. See “—Compensation Discussion and Analysis—Investor Outreach and Compensation Program Changes” above. +(2) +Reflects the grant date fair value of RSUs, PSUs, restricted stock or Common Stock awards, as applicable, computed in +accordance with FASB ASC Topic 718. +(3) +Reflects the grant date fair value of option awards computed in accordance with FASB ASC Topic 718. Our policy and +assumptions made in the valuation of the stock options are contained in Note 2 and Note 9 of the audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, +2019. +(4) +Represents awards pursuant to the Amended and Restated Matador Resources Company Annual Incentive Plan for Management and +Key Employees, effective January 1, 2016 (the “2016 Incentive Plan”) or the 2019 Incentive Plan, as applicable. See “—Compensation Discussion and Analysis—2019 Annual Incentive Compensation” above. +(5) +Consists of $19,600 in 401(k) matching contributions as described in “—Compensation Discussion and +Analysis—Benefits,” $2,447 in premiums reimbursed to Mr. Foran for a life insurance policy covering Mr. Foran and $2,599 in long-term care insurance premiums. +(6) +Consists of $19,600 in 401(k) matching contributions as described in “—Compensation Discussion and +Analysis—Benefits” and $3,902 in long-term care insurance premiums. +(7) +Reflects 401(k) matching contributions as described in “—Compensation Discussion and +Analysis—Benefits.” +(8) +Consists of $19,600 in 401(k) matching contributions as described in “—Compensation Discussion and +Analysis—Benefits” and $2,281 in long-term care insurance premiums. +2020 +Proxy Statement | Matador Resources Company 57 +Table of Contents +EXECUTIVE COMPENSATION +Grants of +Plan-Based Awards Table +The following table sets +forth certain information regarding non-equity awards granted by the Independent Board pursuant to the 2019 Incentive Plan and awards of PSUs and cash-settled RSUs granted by the Independent Board pursuant to +the 2012 Long-Term Plan during the year ended December 31, 2019 to the Named Executive Officers below: +Estimated Future Payouts +Under Non-Equity Incentive +Plan Awards (1) +Estimated Future Payouts +Under Equity Incentive +Plan Awards (2) +All +Other +Stock +Awards: +Number +of Shares +of Stock +or Units (3) +Grant +Date +Fair +Value of +Stock +Awards +Threshold +Target +Maximum +Threshold +Target +Maximum +Name +Grant Date +($) +($) +($) +(#) +(#) +(#) +(# shares) +($) +Joseph Wm. Foran +— +660,000 +1,320,000 +2,640,000 +— +— +— +— +— +2/13/19 +— +— +— +— +113,379 +226,758 +— +2,267,580 +2/13/19 +— +— +— +— +— +— +113,379 +2,026,083 +Matthew V. Hairford +— +315,000 +630,000 +1,260,000 +— +— +— +— +— +2/13/19 +— +— +— +— +59,524 +119,048 +1,190,480 +2/13/19 +— +— +— +— +— +— +59,524 +1,063,694 +David E. Lancaster +— +289,000 +578,000 +1,156,000 +— +— +— +— +— +2/13/19 +— +— +— +— +53,855 +107,710 +— +1,077,100 +2/13/19 +— +— +— +— +— +— +53,855 +962,389 +Craig N. Adams +— +264,000 +561,000 +1,056,000 +— +— +— +— +— +2/13/19 +— +— +— +— +48,186 +96,372 +— +963,720 +2/13/19 +— +— +— +— +— +— +48,186 +861,084 +Billy E. Goodwin +— +264,000 +561,000 +1,056,000 +— +— +— +— +— +2/13/19 +— +— +— +— +48,186 +96,372 +— +963,720 +2/13/19 +— +— +— +— +— +— +48,186 +861,084 +(1) +See “—Compensation Discussion and Analysis—2019 Annual Incentive Compensation” and “—Summary +Compensation Table—Non-Equity Incentive Plan Compensation” regarding the actual payments made to the Named Executive Officers pursuant to the 2019 Incentive Plan. +(2) +Represents PSUs that provide for settlement of between 0% and 200% of the total target shares subject to the award based +on achievement of a relative total shareholder return performance metric over a three-year performance period from January 1, 2019 through December 31, 2021. If our total shareholder return over such performance period is negative, no more +than 100%, the target level, of the PSUs may vest. See “—Compensation Discussion and Analysis—2019 Long-Term Incentive Compensation.” The PSUs do not provide for a threshold number of shares that may be earned. +(3) +Represents RSUs that provide for settlement in cash. See “—Compensation Discussion and Analysis—2019 +Long-Term Incentive Compensation.” +58 Matador Resources Company | 2020 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +Outstanding Equity Awards at December 31, 2019 +The following table summarizes the total outstanding option +awards at December 31, 2019 for each Named Executive Officer: +Option +Awards +Name +Number of +Securities +Underlying +Unexercised +Stock +Options (#) +Exercisable +Number of +Securities +Underlying +Unexercised +Stock +Options (#) +Unexercisable +Option +Exercise +Price +Option +Expiration +Date +Joseph Wm. Foran +228,571 +— +$ +22.01 +1/20/20 +105,000 +— +$ +21.66 +2/26/20 +27,451 +— +$ +27.72 +4/29/20 +15,465 +— +$ +15.00 +2/18/21 +96,457 +48,229 +$ +27.26 +2/14/23 +35,161 +70,324 +$ +29.68 +2/15/24 +Matthew V. Hairford +62,857 +— +$ +22.01 +1/20/20 +10,000 +— +$ +9.00 +2/21/20 +5,882 +— +$ +27.72 +4/29/20 +79,942 +— +$ +15.00 +2/18/21 +62,618 +31,309 +$ +27.26 +2/14/23 +18,459 +36,920 +$ +29.68 +2/15/24 +David E. Lancaster +30,000 +— +$ +22.01 +1/20/20 +15,000 +— +$ +9.00 +2/21/20 +3,922 +— +$ +27.72 +4/29/20 +62,137 +— +$ +15.00 +2/18/21 +54,807 +27,404 +$ +27.26 +2/14/23 +16,701 +33,404 +$ +29.68 +2/15/24 +Craig N. Adams +30,000 +— +$ +22.01 +1/20/20 +3,922 +— +$ +27.72 +4/29/20 +62,137 +— +$ +15.00 +2/18/21 +45,666 +22,834 +$ +27.26 +2/14/23 +14,943 +29,888 +$ +29.68 +2/15/24 +Billy E. Goodwin +49,419 +— +$ +15.00 +2/18/21 +37,159 +18,580 +$ +27.26 +2/14/23 +13,185 +26,371 +$ +29.68 +2/15/24 +The following table provides the vesting dates for unvested stock options as of December 31, 2019: +Vesting Date +Joseph Wm. +Foran +Matthew V. +Hairford +David E. +Lancaster +Craig N. +Adams +Billy E. +Goodwin +2/15/20 +48,229 +31,309 +27,404 +22,834 +18,580 +2/16/20 +35,162 +18,460 +16,702 +14,944 +13,185 +2/16/21 +35,162 +18,460 +16,702 +14,944 +13,186 +Total Unvested Stock Options +118,553 +68,229 +60,808 +52,722 +44,951 +2020 +Proxy Statement | Matador Resources Company 59 +Table of Contents +EXECUTIVE COMPENSATION +The following table summarizes the total outstanding +restricted stock awards, cash-settled RSUs and PSUs at December 31, 2019 for each Named Executive Officer: +Stock Awards +Name +Award Type +Number of +Shares or +Units of +Stock That +Have Not +Vested +(#) +Market Value +of Shares or +Units of +Stock That +Have Not +Vested +($) +Equity Incentive Plan +Awards: +Number of +Unearned Shares, +Units or +Other Rights That +Have Not +Vested +(#) +Equity Incentive Plan +Awards: +Market or +Payout Value +of Unearned +Shares, +Units or +Other Rights That +Have Not +Vested (1) +($) +Joseph Wm. Foran +Restricted stock; RSUs +191,925 +3,448,892 +— +— +PSUs +— +— +113,379 +2,037,421 +Matthew V. Hairford +Restricted stock; RSUs +103,076 +1,852,276 +— +— +PSUs +— +— +59,524 +1,069,646 +David E. Lancaster +Restricted stock; RSUs +92,903 +1,669,467 +— +— +PSUs +— +— +53,855 +967,774 +Craig N. Adams +Restricted stock; RSUs +82,472 +1,482,022 +— +— +PSUs +— +— +48,186 +865,902 +Billy E. Goodwin +Restricted stock; RSUs +77,832 +1,398,641 +— +— +PSUs +— +— +48,186 +865,902 +(1) +The market value presented is based upon achievement of the 50 th +percentile under the PSU award agreements with 100% of target units vesting, calculated based upon the closing price of our Common Stock on December 31, 2019 of $17.97 per share. +The following table provides the vesting dates for restricted stock, RSUs and PSUs outstanding as of December 31, 2019: +Vesting Date +Award Type +Joseph Wm. +Foran +Matthew V. +Hairford +David E. +Lancaster +Craig N. +Adams +Billy E. +Goodwin +2/13/20 +RSUs +37,793 +19,841 +17,951 +16,062 +16,062 +2/15/20 +Restricted stock +18,648 +12,106 +10,596 +8,829 +7,184 +2/16/20 +Restricted stock +29,949 +15,723 +14,226 +12,728 +11,231 +2/13/21 +RSUs +37,793 +19,841 +17,952 +16,062 +16,062 +2/16/21 +Restricted stock +29,949 +15,723 +14,226 +12,729 +11,231 +12/31/21 +PSUs +(1) +113,379 +59,524 +53,855 +48,186 +48,186 +2/13/22 +RSUs +37,793 +19,842 +17,952 +16,062 +16,062 +Total Unvested Shares and Units +305,304 +162,600 +146,758 +130,658 +126,018 +(1) +The date shown reflects the end of the performance period established by the PSU award agreements. The PSUs vest upon the +Compensation Committee’s certification of the achievement of the performance goal, which must occur within 60 days of completion of the performance period. The number of units shown assumes achievement of the 50 th percentile under the PSU award agreements with 100% of target units vesting. +60 Matador Resources Company | 2020 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +Option Exercises and Stock Vested +The following table provides information on the stock options +exercised and stock awards that vested for each Named Executive Officer during 2019: +Option Awards +Stock Awards +Name +Number of +Shares +Acquired +on +Exercise +(#) +Value +Realized on +Exercise +Number of +Shares +Acquired on +Vesting +(#) +Value +Realized on +Vesting +Joseph Wm. Foran +220,000 +$ +769,600 +142,827 +$ +2,700,509 +Matthew V. Hairford +— +$ +— +59,821 +$ +1,135,628 +David E. Lancaster +— +$ +— +49,686 +$ +944,268 +Craig N. Adams +— +$ +— +46,423 +$ +881,260 +Billy E. Goodwin +— +$ +— +38,191 +$ +725,404 +Mr. Foran or his affiliate paid the Company a total of $3.3 million to cover the exercise price of the 220,000 options noted +above and paid a total of $0.3 million in related tax liability. No tax liability was incurred by Mr. Foran upon the vesting of the restricted stock noted above because, upon each grant of restricted stock, Mr. Foran made elections +under the Code to be taxed upon grant instead of upon vesting. Pursuant to such elections, upon the granting of such restricted stock awards in 2016, 2017 and 2018, Mr. Foran paid a total of $1.0 million in taxes attributable to the +restricted stock that vested in 2019. +Potential Payments upon Termination or Change in Control +Long-Term Incentive Plans +Equity awards under the Long-Term Plans, other than the PSUs, vest upon a “change in control” for the Named Executive Officers according to the terms of their +employment agreements described below. +Pursuant to the terms of the PSU award agreements, upon a “change in control,” the Named Executive Officer would +vest in the number of PSUs that would have otherwise vested based on the Company’s performance through an abbreviated performance period that ends immediately prior to the effective date of such change in control. +For definition of “change in control,” please see the 2012 Long-Term Plan and 2019 Long-Term Plan, as applicable, each of which is included as an exhibit to +the Company’s most recent Annual Report on Form 10-K. +Employment Agreements +As described under “—Compensation Discussion and Analysis—Severance and Separation Arrangements—Employment Agreements,” in contemplation of our +initial public offering, on August 9, 2011, we entered into employment agreements with Messrs. Foran, Hairford and Lancaster. In addition, in March 2014, we entered into an employment agreement with Mr. Adams, and effective February 2016, +we entered into an employment agreement with Mr. Goodwin. We amended Mr. Goodwin’s employment agreement in August 2018. The principal difference in Mr. Adams’ and Mr. Goodwin’s employment agreements as compared to +the employment agreement of Messrs. Foran, Hairford and Lancaster is that Mr. Adams’ and Mr. Goodwin’s agreements do not include a “modified single trigger” that would have allowed them to receive “change in +control” severance if they terminated their agreements without “good reason” within 30 days prior to or 12 months after a change in control. Pursuant to the terms of the employment agreements, we may be required to make certain +payments to one or more of our Named Executive Officers upon the occurrence of certain events resulting in such Named Executive Officer’s +2020 +Proxy Statement | Matador Resources Company 61 +Table of Contents +EXECUTIVE COMPENSATION +termination. The employment agreements do not provide for gross-ups for excise taxes on severance or other payments in connection with a change in control. +For a detailed description of the events that may trigger such payments, see “—Compensation Discussion and Analysis—Severance and Separation Arrangements—Employment Agreements.” +The employment agreements each contain a non-disclosure of confidential information provision that requires each Named Executive +Officer to maintain, both during and after employment, the confidentiality of information used by such Named Executive Officer in the performance of his job duties. +Additionally, each of the employment agreements contains a non-competition provision, pursuant to which Messrs. Foran, Hairford, +Lancaster, Adams and Goodwin have agreed that: (i) for six months following termination by us for total disability, or by such Named Executive Officer for good reason, or (ii) for 12 months, or 24 months with respect to Mr. Goodwin, +following termination (a) by us for just cause, (b) by such Named Executive Officer other than for good reason or (c) in connection with a change in control, such Named Executive Officer shall not, without our prior written consent +(not to be unreasonably withheld if the Named Executive Officer’s employment is terminated by the Named Executive Officer other than for good reason), directly or indirectly: (x) invest in (other than investments in publicly-owned +companies which constitute not more than 1% of the voting securities of any such company) a competing business with significant assets in the restricted area (each as defined below), or (y) participate in a competing business as a manager, +employee, director, officer, consultant, independent contractor or other capacity or otherwise provide, directly or indirectly, services or assistance to a competing business in a position that involves input into or direction of such competing +business’s decisions within the restricted area. +For purposes of the employment agreements: +• +“competing business” means any person or entity engaged in oil and natural gas exploration, development, +production and acquisition activities; +• +“significant assets” means oil and natural gas reserves with an aggregate fair market value of $25 million +or more; and +• +“restricted area” means a one-mile radius of any oil and natural gas +reserves held by us as of the end of the Named Executive Officer’s employment, plus any county or parish where we have significant assets as of the end of the Named Executive Officer’s employment. +For definitions of “change in control,” “good reason” and “just cause,” please see the employment agreement of each Named Executive +Officer, each of which is included as an exhibit to the Company’s most recent Annual Report on Form 10-K. +Furthermore, other than Mr. Foran’s employment agreement, each employment agreement contains a non-solicitation +provision, pursuant to which, during the restricted periods described above, subject to certain exceptions, Messrs. Hairford, Lancaster, Adams and Goodwin shall not, without our prior written consent, solicit for employment or a contracting +relationship, or employ or retain any person who is or has been, within six months prior to such time, employed by or engaged as an individual independent contractor by us or our affiliates or induce or attempt to induce any such person to leave his +or her employment or independent contractor relationship with us or our affiliates. +For the Named Executive Officer to receive any severance payments described +below for termination by us without just cause, by the Named Executive Officer for good reason or, following a change in control, by us without cause or by the Named Executive Officer with good reason, with respect to Mr. Adams and +Mr. Goodwin, or with or without good reason, with respect to Messrs. Foran, Hairford and Lancaster, the Named Executive Officer must comply with the applicable non-disclosure, non-competition and non-solicitation provisions described above. +62 Matador Resources Company | 2020 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +Finally, as a condition to receiving any severance payments and other payments under their respective employment agreements, each Named Executive Officer is required to +execute a separation agreement and release in favor of us. +To describe the payments and benefits that are triggered for each event of termination, we have created +the following table estimating the payments and benefits that would be paid to each Named Executive Officer under each element of our compensation program assuming that such Named Executive Officer’s employment agreement terminated on +December 31, 2019, the last day of our 2019 fiscal year. In all cases, the amounts were valued as of December 31, 2019, based upon, where applicable, $17.97 per share (the closing price of our Common Stock on such date). The amounts in the +table below are calculated as of December 31, 2019 pursuant to SEC rules and are not intended to reflect actual payments that may be made. Actual payments that may be made would be based on the dates and circumstances of the applicable event. +Payment Upon Change in Control or +Termination +Category of +Payment +Upon Death or +Total +Disability (1) +Upon Mutual +Agreement or +Dissolution/ +Liquidation (1) +Termination by +Us Without Just +Cause or by +Named Executive +Officer for Good +Reason (1) +Termination +Following a +Change in Control +Without +Cause +or by Named +Executive Officer +With or Without +Good Reason (2) +Change in +Control +Without +Termination (3) +Joseph Wm. Foran +Salary +$ +— +$ +— +$ +2,400,000 +(4) +$ +3,600,000 +(5) +$ +— +Bonus +2,373,000 +(6) +2,373,000 +(6) +4,746,000 +(7) +7,119,000 +(8) +— +Vesting equity (9) +Restricted stock +— +— +— +1,411,472 +— +RSUs +— +— +— +2,037,421 +— +PSUs +— +— +— +2,037,421 +2,037,421 +Total +$ +2,373,000 +$ +2,373,000 +$ +7,146,000 +$ +16,205,313 +$ +2,037,421 +Matthew V. Hairford +Salary +$ +— +$ +— +$ +1,050,000 +(10) +$ +2,100,000 +(5) +$ +— +Bonus +1,100,200 +(6) +1,100,200 +(6) +1,650,300 +(11) +3,300,600 +(8) +— +Vesting equity (9) +Restricted stock +— +— +— +782,629 +— +RSUs +— +— +— +1,069,646 +— +PSUs +— +— +— +1,069,646 +1,069,646 +Total +$ +1,100,200 +$ +1,100,200 +$ +2,700,300 +8,322,521 +$ +1,069,646 +David E. Lancaster +Salary +$ +— +$ +— +$ +1,020,000 +(10) +$ +2,040,000 +(5) +$ +— +Bonus +1,025,000 +(6) +1,025,000 +(6) +1,537,500 +(11) +3,075,000 +(8) +— +Vesting equity (9) +Restricted stock +— +— +— +701,693 +— +RSUs +— +— +— +967,774 +— +PSUs +— +— +— +967,774 +967,774 +Total +$ +1,025,000 +$ +1,025,000 +$ +2,557,500 +$ +7,752,241 +$ +967,774 +2020 +Proxy Statement | Matador Resources Company 63 +Table of Contents +EXECUTIVE COMPENSATION +Payment Upon Change in Control or +Termination +Category of +Payment +Upon Death or +Total +Disability (1) +Upon Mutual +Agreement or +Dissolution/ +Liquidation (1) +Termination by +Us Without Just +Cause or by +Named Executive +Officer for Good +Reason (1) +Termination +Following a +Change in Control +Without +Cause +or by Named +Executive Officer +With or Without +Good Reason (2) +Change in +Control +Without +Termination (3) +Craig N. Adams +Salary +$ +— +$ +— +$ +990,000 +(10) +$ +1,980,000 +(5) +$ +— +Bonus +947,500 +(6) +947,500 +(6) +1,421,250 +(11) +2,842,500 +(8) +— +Vesting equity (9) +Restricted stock +— +— +— +616,119 +— +RSUs +— +— +— +865,902 +— +PSUs +— +— +— +865,902 +865,902 +Total +$ +947,500 +$ +947,500 +$ +2,411,250 +$ +7,170,423 +$ +865,902 +Billy E. Goodwin +Salary +$ +— +$ +— +$ +990,000 +(10) +$ +1,980,000 +(5) +$ +— +Bonus +947,500 +(6) +947,500 +(6) +1,421,250 +(11) +2,842,500 +(8) +— +Vesting equity (9) +Restricted stock +— +— +— +532,739 +— +RSUs +— +— +— +865,902 +— +PSUs +— +— +— +865,902 +865,902 +Total +$ +947,500 +$ +947,500 +$ +2,411,250 +$ +7,087,043 +$ +865,902 +(1) +Amounts due upon death, total disability, mutual agreement, dissolution or liquidation, termination by us without cause or +termination by Named Executive Officer for good reason are payable in a lump sum on the 60 th day following the date of termination unless otherwise required by Section 409A of the Code. +(2) +Amounts due following a change in control are payable in a lump sum on the date which immediately follows six months from +the date of termination or, if earlier, within 30 days following such Named Executive Officer’s death. +(3) +Pursuant to the terms of the PSU award agreements, upon a “change in control,” the Named Executive Officer would +vest in the number of PSUs that would have otherwise vested based on the Company’s performance through an abbreviated performance period that ends immediately prior to the effective date of such change in control. The amount shown assumes +achievement of the 50 th percentile under the PSU award agreements with 100% of target units vesting. +(4) +Represents two times such Named Executive Officer’s base salary as of the termination date. +(5) +Represents three times such Named Executive Officer’s base salary as of the termination date. +(6) +Represents the average annual amount of bonuses, including pursuant to the 2016 Incentive Plan and the 2019 Incentive +Plan, paid to such Named Executive Officer with respect to the prior two calendar years (2018-2019). +(7) +Represents two times an amount equal to the average annual amount of bonuses, including pursuant to the 2016 Incentive +Plan and the 2019 Incentive Plan, paid to such Named Executive Officer with respect to the prior two calendar years (2018-2019). +(8) +Represents three times an amount equal to the average annual amount of bonuses, including pursuant to the 2016 Incentive +Plan and the 2019 Incentive Plan, paid to such Named Executive Officer with respect to the prior two calendar years (2018-2019). +(9) +The employment agreements provide for accelerated and full vesting of unvested incentive awards held by the Named +Executive Officers in the event that such Named Executive Officer is terminated without “Just Cause” or terminates his employment with or without “Good Reason,” with respect to Messrs. Foran, Hairford and Lancaster, within 30 +days prior to, or 12 months following, a “change in control.” With respect to Messrs. Adams and Goodwin, the employment agreements provide for accelerated and full vesting of unvested incentive awards held by these Named Executive Officers +in the event that such Named Executive Officer is terminated without “Just Cause” or terminates his employment with “Good Reason,” within 30 days prior to, or 12 months following, a “change in control.” The amounts +disclosed reflect the closing price of our Common Stock on December 31, 2019 of $17.97 per share multiplied by the number of unvested shares of restricted stock, RSUs or PSUs, as applicable, held by such Named Executive Officer on +December 31, 2019. Pursuant to the terms of the PSU award agreements, upon a change in control, the Named Executive Officer would vest in the number of PSUs that would have otherwise vested based on the Company’s performance through an +abbreviated performance period that ends immediately prior to the effective date of such event. With respect to PSUs, the amount shown assumes achievement of the 50 th percentile under the PSU +award agreements with 100% of target units vesting. +(10) +Represents 1.5 times such Named Executive Officer’s base salary as of the termination date. +(11) +Represents 1.5 times an amount equal to the average annual amount of bonuses, including pursuant to the 2016 Incentive +Plan and the 2019 Incentive Plan, paid to such Named Executive Officer with respect to the prior two calendar years (2018-2019). +64 Matador Resources Company | 2020 Proxy Statement +Table of Contents +CHIEF EXECUTIVE OFFICER PAY RATIO +CHIEF EXECUTIVE OFFICER PAY RATIO +As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(u) of Regulation +S-K (“Item 402(u)”), we are providing the following information regarding the ratio of the annual total compensation of our median-compensated employee (as described below) and that of our Chairman +and Chief Executive Officer, Joseph Wm. Foran. We believe that the pay ratio reflected below is a reasonable estimate calculated in a manner consistent with Item 402(u). +The SEC’s rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow +companies to adopt a variety of methodologies, to apply certain exclusions and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices. As a result, the pay ratio reported by other companies +may not be comparable to the pay ratio reported below, as other companies have different employee populations and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay +ratios. +Pursuant to SEC rules, we are using the same median employee for the 2019 pay ratio calculation as we used in our 2018 pay ratio disclosure. We determined +that there were no changes to our employee population or compensation arrangements in 2019 that we reasonably believe would significantly affect our pay ratio disclosure if the same median employee was used. While our total employee population grew +by approximately 17% from December 31, 2018 to December 31, 2019, we determined that such growth would not have a significant impact on our pay ratio disclosure, as our new employees were proportionately distributed among all compensation +levels. Pursuant to Item 402(u), we identified the median-compensated employee of all our employees (other than Mr. Foran) using our employee population as of December 15, 2018, which consisted of 259 employees (all of which are located in +the United States), and using a compensation measure of total cash compensation, consisting of total base pay and bonuses earned during the year ended December 31, 2018. The compensation measure was consistently applied to all employees. +Compensation was annualized on a straight-line basis for employees who did not work all of 2018. +After identifying the median-compensated employee using the +consistently applied compensation measure, we then calculated that employee’s 2019 annual total compensation in the same manner as the Named Executive Officers’ total compensation, as reported in the Summary Compensation Table. +For 2019, the annual total compensation of our median-compensated employee was $198,876, and the annual total compensation of Mr. Foran was $8,028,309, as reported +in the Summary Compensation Table. Based on this information, for 2019, the ratio of Mr. Foran’s annual total compensation to the annual total compensation of our median-compensated employee was estimated to be 40 to 1. +2020 +Proxy Statement | Matador Resources Company 65 +Table of Contents +DIRECTOR COMPENSATION +DIRECTOR +COMPENSATION +Name +Fees Earned or +Paid in Cash +($) +Stock +Awards (1) +($) +All Other +Compensation +($) +Total +($) +Reynald A. Baribault (2) +194,500 +134,992 +— +329,492 +R. Gaines Baty (3) +122,167 +134,992 +— +257,159 +Craig T. Burkert +70,000 +134,992 +— +204,992 +William M. Byerley +99,167 +134,992 +— +234,159 +Matthew P. Clifton +70,581 +134,992 +— +205,573 +Monika U. Ehrman (4) +23,081 +133,061 +— +156,142 +Julia P. Forrester Rogers +84,000 +134,992 +— +218,992 +Timothy E. Parker (5) +132,667 +134,992 +— +267,659 +David M. Posner +84,000 +134,992 +— +218,992 +Kenneth L. Stewart +85,000 +134,992 +— +219,992 +(1) +All stock awards represent RSUs with a value based on the fair market value of the RSUs on the date of grant. RSUs granted +for 2019-2020 service vest immediately prior to the election of the nominees for director at the 2020 Annual Meeting. See “—Compensation for 2019-2020.” As of December 31, 2019, each individual who served as a director during +2019 held the following outstanding unvested stock awards, all of which were RSUs. +Name +Outstanding Stock Awards +Reynald A. Baribault +9,279 +R. Gaines Baty +9,279 +Craig T. Burkert +9,279 +William M. Byerley +9,279 +Matthew P. Clifton +8,395 +Monika U. Ehrman +8,395 +Julia P. Forrester Rogers +8,862 +Timothy E. Parker +8,395 +David M. Posner +8,395 +Kenneth L. Stewart +8,862 +(2) +Mr. Baribault served as lead independent director until July 2019. The lead independent director receives an +additional cash retainer of $100,000 annually. +(3) +Mr. Baty began serving as deputy lead independent director in July 2019. The deputy lead independent director +receives an additional cash retainer of $50,000 annually. +(4) +Ms. Ehrman was appointed to the Board on August 30, 2019. Because she was appointed to the Board within 90 days +after the 2019 Annual Meeting, upon her appointment, Ms. Ehrman was granted 8,395 RSUs, the same number of RSUs that the other members of the Board received on June 6, 2019. The difference in value shown in the table is attributable to the +difference in the fair market value of the RSUs on the respective dates of grant. +(5) +Mr. Parker began serving as lead independent director in July 2019. The lead independent director receives an +additional cash retainer of $100,000 annually. +66 Matador Resources Company | 2020 Proxy Statement +Table of Contents +DIRECTOR COMPENSATION +Compensation for 2019-2020 +For the period commencing at the 2019 Annual Meeting and until +the 2020 Annual Meeting, our non-employee directors’ compensation program was as set forth below: +• +annual cash retainer of $60,000; +• +cash meeting fee of $1,000 per day for each day of Board and committee service; +• +the chair of each of the below committees received the following additional, annual cash retainer: +Committee +Retainer +Operations and Engineering +$ +50,000 +Prospect +$ +50,000 +Audit +$ +35,000 +Strategic Planning and Compensation +$ +35,000 +Environmental, Social and Corporate Governance +$ +15,000 +Nominating +$ +15,000 +Capital Markets and Finance +$ +15,000 +Marketing and Midstream +$ +15,000 +• +the lead independent director received an additional cash retainer of $100,000; +• +the deputy lead independent director received an additional cash retainer of $50,000; and +• +at the meeting of the Board immediately following the 2019 Annual Meeting, each +non-employee director received a one-time annual grant of RSUs equal to approximately $135,000 in value with the restrictions lapsing immediately prior to the election +of the nominees for director at the 2020 Annual Meeting (the “2019 RSU Award”). +If a director was appointed or elected to the Board at +any time following the 2019 Annual Meeting but prior to the 2020 Annual Meeting, such director was granted the applicable percentage of the 2019 RSU Award detailed below, effective on the date of such director’s appointment: (i) if a +director was appointed or elected to the Board within 90 days after the 2019 Annual Meeting, such director was entitled to receive 100% of the 2019 RSU Award; (ii) if a director was appointed or elected to the Board more than 90 days but 180 or +fewer days after the 2019 Annual Meeting, such director was entitled to receive 75% of the 2019 RSU Award; (iii) if a director was appointed or elected to the Board more than 180 days but 270 or fewer days after the 2019 Annual Meeting, such +director was entitled to receive 50% of the 2019 RSU Award; and (iv) if a director was appointed or elected to the Board more than 270 days after the 2019 Annual Meeting but prior to the 2020 Annual Meeting, such director was entitled to +receive 25% of the 2019 RSU award. As noted in the table above, Ms. Ehrman was appointed to the Board within 90 days after the 2019 Annual Meeting and received 100% of the 2019 RSU Award. +In addition, we reimburse our directors for travel, lodging and related expenses incurred in attending Board and committee meetings. +Compensation for 2020-2021 +In early 2020, following the outbreak of the novel coronavirus, +or COVID-19, along with the actions of OPEC+ and their effects on oil supply and demand, oil prices and our stock price, the Board voluntarily agreed to reduce its compensation by 25%. The Board is continuing +to assess its compensation and has not yet determined all of the components or amounts of the 2020-2021 non-employee director compensation program. +2020 +Proxy Statement | Matador Resources Company 67 +Table of Contents +DIRECTOR COMPENSATION +Director +Stock Ownership Guidelines +Our non-employee directors are expected to follow our voluntary stock ownership guidelines for non-employee directors. Within three years of becoming a director, each non-employee director is expected to own $250,000 of Common Stock and continue to hold such shares while serving as a director. As of December 31, 2019, all directors owned in excess of $250,000 of Common Stock +or were on track to meet the guidelines within three years of becoming a director. Shares that count toward the stock ownership guidelines include RSUs. +Board Advisor Compensation +Our advisors to the Board are compensated with stock and/or cash awards based upon meeting attendance or as otherwise agreed to pursuant to consulting arrangements with +such advisors. We reimburse our advisors to the Board for travel, lodging and related expenses incurred in attending Board and committee meetings. The advisor compensation of Mr. Rolfe is the same as for the +non-employee directors as described above. +68 Matador Resources Company | 2020 Proxy Statement +Table of Contents +SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS +SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS +The following table presents the securities authorized for issuance under our equity compensation plans as of December 31, 2019. +Plan Category +Number +of +Shares to be +Issued Upon +Exercise of +Outstanding +Options, +Warrants +and +Rights +Weighted- +Average +Exercise +Price of +Outstanding +Options, +Warrants +and Rights +Number of +Shares +Remaining +Available for +Future +Issuance +Under Equity +Compensation +Plans +Equity compensation plans approved by security holders (1)(2)(3) +3,956,574 +$ +22.64 +2,801,761 +Equity compensation plans not approved by security holders +— +— +— +Total +3,956,574 +$ +22.64 +2,801,761 +(1) +Includes shares authorized under the Matador Resources Company 2003 Stock and Incentive Plan (the “2003 Plan”), +the 2012 Long-Term Plan and the 2019 Long-Term Plan. Our Board has determined not to make any additional awards under the 2003 Plan or the 2012 Long-Term Plan, although awards remain outstanding under the 2012 Long-Term Plan. As of February 21, +2020, all awards outstanding under the 2003 Plan had expired or settled. +(2) +The 2019 Long-Term Plan was adopted by the Board in April 2019 and approved by our shareholders on June 6, 2019. +(3) +Includes the number of PSUs granted under the 2012 Long-Term Plan based on the maximum level of achievement, which may be +more than the number of shares issued in settlement of PSUs that are ultimately earned. +2020 +Proxy Statement | Matador Resources Company 69 +Table of Contents +TRANSACTIONS WITH RELATED PERSONS +TRANSACTIONS +WITH RELATED PERSONS +Except as disclosed below, during 2019 there was not, nor was there proposed as of December 31, 2019, any transaction or series of +similar transactions to which we were or are a party in which the amount involved exceeded or exceeds $120,000 and in which any of our directors, executive officers, holders of more than 5% of any class of our voting securities or any member of the +immediate family of any of the foregoing persons had or will have a direct or indirect material interest, other than compensation arrangements with directors and executive officers, which are described in “Executive +Compensation—Compensation Discussion and Analysis” above. +Working Interest and Overriding Royalty Interest Owners +Mr. Foran and certain of Mr. Foran’s affiliated +entities (collectively, the “Foran Entities”) are working interest owners and/or overriding royalty interest owners in certain properties operated by the Company or in which the Company also holds a working interest. As working interest +owners, the Foran Entities are required to pay their proportionate share of all costs and are entitled to receive their proportionate share of revenues in the normal course of business. As overriding royalty interest owners, the Foran Entities are +entitled to receive their proportionate share of revenues from the wells in which they own an interest in the normal course of business. During 2019, revenues, net of costs, received by the Foran Entities in their capacity as working interest owners +or overriding royalty interest owners were approximately $1.8 million (the “Related Net Revenue Payments”). The Related Net Revenue Payments represent less than 1% of our total third-party net revenue payments during 2019. +In our capacity as operator, we incur drilling and operating costs that are billed to our partners based on their respective working interests. During 2019, our joint +interest billings to the Foran Entities attributable to their share of costs were approximately $0.5 million (the “Related Joint Interest Billings”). The Related Joint Interest Billings represent less than 1% of our total joint +interest billings during 2019. As a result of this ownership by the Foran Entities, from time to time, we will be in a net receivable or net payable position with certain of the Foran Entities. We do not consider any net receivables from the Foran +Entities to be uncollectible. +The Audit Committee reviewed the terms of the working interests and/or overriding royalty interests of the Foran Entities for +potential conflicts of interest under the Related Party Transaction Policy, and, after being fully informed as to Mr. Foran’s relationships and interests in such transactions and all other material facts related to the Related Net Revenue +Payments and Related Joint Interest Billings, determined that such transactions and the Related Net Revenue Payments and Related Joint Interest Billings were fair to the Company and recommended such transactions and the Related Net Revenue Payments +and Related Joint Interest Billings to the full Board for approval and ratification. The Board subsequently approved and ratified the transactions and the Related Net Revenue Payments and Related Joint Interest Billings. +Certain Employment Relationships +Billy E. Goodwin, Executive Vice President and Chief Operating +Officer—Drilling, Completions & Production, was appointed as an executive officer of the Company in connection with his February 2016 promotion to Senior Vice President—Operations. Two of Mr. Goodwin’s adult children +have been employees of the Company since 2014 and 2015, respectively, and each earned in 2019, and are expected to be compensated in 2020, between $120,000 and $600,000. One of Mr. Goodwin’s children has a Bachelor of Science degree in +Petroleum Engineering from the University of Tulsa and over 10 years of industry experience, including as a regional drilling supervisor for another publicly traded exploration and production company. Mr. Goodwin’s other child has a +Bachelor of Science in Business Administration degree in Energy Management from the University of Tulsa and a Bachelor of Arts degree in General Business and Management from Oklahoma State University. He also has over 10 years of industry +experience, including as a drilling fluids engineer for a publicly traded oilfield services company and as a landman for a publicly traded exploration and production company. The Audit Committee reviewed the terms of the employment arrangements for +potential conflicts of interest under the Company’s +70 Matador Resources Company | 2020 Proxy Statement +Table of Contents +TRANSACTIONS WITH RELATED PERSONS +Related Party Transaction Policy and, after being fully informed as to the employment arrangements and historical and anticipated compensation of Mr. Goodwin’s adult children, and all +other material facts related to the relationship, determined that the employment arrangements were fair to the Company and recommended the employment arrangements to the full Board for approval and ratification. The Board subsequently approved and +ratified such employment arrangements. +Reynald A. Baribault is a member of the Board. Mr. Baribault’s sister-in-law has been an employee of the Company since 2016 and earned in 2019, and is expected to be compensated in 2020, between $120,000 and $200,000. Mr. Baribault’s sister-in-law has a diploma from the Executive Secretarial School and is a certified legal assistant, having completed the Southern Methodist University Legal Assistants +Program. She has over 38 years of experience as a legal assistant. The Audit Committee reviewed the terms of the employment arrangement for potential conflicts of interest under the Company’s Related Party Transaction Policy and, after being +fully informed as to the employment arrangement and historical and anticipated compensation of Mr. Baribault’s sister-in-law, and all other material facts +related to the relationship, determined that the employment arrangement was fair to the Company and recommended the employment arrangement to the full Board for approval and ratification. The Board subsequently approved and ratified such employment +arrangement. +An adult child of Mr. Foran has been an employee of the Company since 2015 and earned in 2019, and is expected to be compensated in 2020, between +$120,000 and $200,000. Mr. Foran’s child has a Bachelor of Science degree in Human Resource Development and a Master of Science degree in Human Resource Management, both from Texas A&M University. She has more than nine years of +industry experience, including with another publicly traded exploration and production company. The Audit Committee reviewed the terms of the employment arrangement for potential conflicts of interest under the Company’s Related Party +Transaction Policy and, after being fully informed as to the employment arrangement and historical and anticipated compensation of Mr. Foran’s adult child, and all other material facts related to the relationship, determined that the +employment arrangement was fair to the Company and recommended the employment arrangement to the full Board for approval and ratification. The Board subsequently approved and ratified such employment arrangement. +Procedures for Approval of Related Party Transactions +Pursuant to the Related Party Transaction Policy as in effect as +of December 31, 2019, a “Related Party Transaction” is defined as a transaction (including any financial transaction, arrangement or relationship (including any indebtedness or guarantee of indebtedness)), or series of related +transactions, or any material amendment to any such transaction, involving a Related Party (as defined below) and in which we are a participant, other than: +• +a transaction involving compensation of directors; +• +a transaction involving compensation of an executive officer or involving an employment agreement, severance agreement, +change in control provision or agreement or a special supplemental benefit for an executive officer; +• +a transaction available to all employees generally or to all salaried employees generally; +• +a transaction with a Related Party involving less than $120,000; +• +a transaction in which the interest of the Related Party arises solely from the ownership of a class of our equity +securities and all holders of that class receive the same benefit on a pro rata basis; or +• +a transaction in which the rates or charges involved therein are determined by competitive bids, or a transaction that +involves the rendering of services as a common or contract carrier, or public utility, at rates or charges fixed in conformity with law or governmental authority. +“Related Party” means: +• +any person who is, or at any time during the applicable period was, one of our executive officers or one of our directors +or nominees for directors; +• +any person who is known by us to be the beneficial owner of more than 5% of our Common Stock; +2020 +Proxy Statement | Matador Resources Company 71 +Table of Contents +TRANSACTIONS WITH RELATED PERSONS +• +any immediate family member of any of the foregoing persons, which means any child, stepchild, parent, stepparent, spouse, +sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law of a director, nominee for director, executive officer or a beneficial owner of more than 5% of our Common Stock; and +• +any firm, corporation or other entity that is owned or controlled by any of the foregoing persons or in which any of the +foregoing persons is a general partner or executive officer or in which such person, together with all other of the foregoing persons, owns 10% or more of the equity interests thereof. +Pursuant to the Related Party Transaction Policy, the Audit Committee must review all material facts of each Related Party Transaction and recommend either approval or +disapproval of the Related Party Transaction to the full Board, subject to certain limited exceptions. In determining whether to recommend approval or disapproval of the Related Party Transaction, the Audit Committee must, after reviewing all +material facts of the Related Party Transaction and the Related Party’s relationship and interest, determine whether the Related Party Transaction is fair to the Company. Further, the policy requires that all Related Party Transactions be +disclosed in our filings with the SEC and/or our website in accordance with applicable laws, rules and regulations. +72 Matador Resources Company | 2020 Proxy Statement +Table of Contents +SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT +SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT +The following table presents the beneficial ownership of our Common Stock as of April 9, 2020 for (i) each person beneficially owning more than 5% of the +outstanding shares of our Common Stock, (ii) each director of the Company, (iii) each executive officer of the Company listed in the Summary Compensation Table and (iv) all of our directors and executive officers as a group. Except +pursuant to applicable community property laws and except as otherwise indicated, each shareholder possesses sole voting and investment power with respect to its, his or her shares. The business address of each of our directors and executive +officers is c/o Matador Resources Company, One Lincoln Centre, 5400 LBJ Freeway, Suite 1500, Dallas, Texas 75240. The applicable percentage ownership is based on 116,563,969 shares of our Common Stock issued and outstanding as of April 9, 2020, +plus, on an individual basis, the right of that individual to (i) obtain Common Stock upon exercise of stock options or (ii) obtain Common Stock upon the vesting or delivery of RSUs, in each case within 60 days of April 9, +2020. The information is based on Form 3s, Form 4s, Form 5s, Schedule 13Ds, Schedule 13Gs and Schedule 13G/As filed through April 9, 2020. +Name +Amount and +Nature of +Ownership of +Common Stock +Percent +of Class +Directors and Named Executive Officers: +Joseph Wm. Foran (1) +5,420,371 +4.6% +Craig N. Adams (2) +318,732 +* +Reynald A. Baribault (3) +119,554 +* +R. Gaines Baty (4) +44,237 +* +Craig T. Burkert (5) +96,802 +* +William M. Byerley (6) +30,950 +* +Matthew P. Clifton (7) +38,605 +* +Monika U. Ehrman (8) +10,995 +* +Julia P. Forrester Rogers (9) +49,262 +* +Billy E. Goodwin (10) +270,212 +* +Matthew V. Hairford (11) +585,296 +* +David E. Lancaster (12) +659,967 +* +Timothy E. Parker (13) +51,191 +* +David M. Posner (14) +47,049 +* +Kenneth L. Stewart (15) +65,927 +* +All Directors and Executive Officers as a Group (18 +persons) (16) : +8,673,424 +7.4% +Other 5% Owners: +BlackRock, Inc. (17) +13,995,518 +12.0% +The Vanguard Group (18) +10,533,801 +9.0% +Dimensional Fund Advisors LP (19) +7,565,986 +6.5% +State Street +Corporation (20) +6,471,321 +5.6% +* +Less than one percent (1%) +2020 +Proxy Statement | Matador Resources Company 73 +Table of Contents +SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT +(1) +Includes (i) 1,105,913 shares of Common Stock held of record by Sage Resources, Ltd., a limited partnership owned by the +Foran family, including Mr. Foran; (ii) 4,000 shares of Common Stock held of record by Mr. Foran’s spouse through her Individual Retirement Account; (iii) 105,000 shares and 40,000 shares of Common Stock held of record by The Joseph +Donald Foran Family Trust 2008 and The Foran Family Special Needs Trust, respectively, for which Mr. Foran is the co-trustee and over which Mr. Foran has shared voting and investment power with other +members of his family; (iv) 168,156 shares of Common Stock held of record by each of the JWF 2019-1 GRAT and the NNF 2019-1 GRAT, for which Mr. Foran is the trustee +and over which Mr. Foran has sole voting and investment power; (v) 324,013 shares of Common Stock held of record by each of the JWF 2019-2 GRAT and the NNF +2019-2 GRAT, for which Mr. Foran is the trustee and over which Mr. Foran has sole voting and investment power; (vi) 261,718 shares of Common Stock held of record by each of the JWF 2020-1 GRAT and the NNF 2020-1 GRAT, for which Mr. Foran is the trustee and over which Mr. Foran has sole voting and investment power; (vii) 375,984 shares of Common +Stock held of record by the Foran 2012 Security Trust, for which Mr. Foran is the trustee and over which Mr. Foran has sole voting and investment power; (viii) 394,928 shares of Common Stock held of record by the Foran 2012 Savings Trust, +for which Mr. Foran’s spouse is a trustee; (ix) 1,177,568 shares held of record, collectively, by the LRF 2011 Non-GST Trust, WJF 2011 Non-GST Trust, JNF 2011 Non-GST Trust, SIF 2011 Non-GST Trust and MCF 2011 Non-GST Trust, for which trusts Mr. Foran and his spouse, as settlors of each +of the Non-GST Trusts, retain the power of substitution with respect to the property of the Non-GST Trusts; and (x) 29,949 shares of restricted stock. Pursuant to the +terms of the restricted stock grants, Mr. Foran has the right to vote such shares but may only dispose of such shares to the extent they have vested. Also includes 257,925 shares of Common Stock issuable to Mr. Foran upon the exercise of +stock options. +(2) +Includes 164,446 shares of Common Stock issuable to Mr. Adams upon the exercise of stock options and 2,850 shares of +Common Stock held of record by his 401(k) account. Also includes 12,729 shares of restricted stock. Pursuant to the terms of the restricted stock grants, Mr. Adams has the right to vote such shares but may only dispose of such shares to the +extent they have vested. +(3) +Includes 6,500 shares of Common Stock held of record by the Individual Retirement Account of Mr. Baribault. Also +includes 70,500 shares of Common Stock held of record by the Reynald A. Baribault Maritalized Revocable Living Trust and 7,500 shares of Common Stock held of record by the Sally K. Baribault Maritalized Revocable Living Trust, for which trusts both +Mr. Baribault and his spouse are trustees and share voting and investment power. Also includes 8,862 shares of Common Stock issuable to Mr. Baribault upon the vesting of RSUs. +(4) +Includes 14,514 shares of Common Stock issuable to Mr. Baty upon the vesting and delivery of RSUs. +(5) +Includes 34,742 shares of Common Stock held of record by the Individual Retirement Account of Mr. Burkert. Also +includes 18,127 shares of Common Stock issuable to Mr. Burkert upon the vesting and delivery of RSUs. +(6) +Includes 8,862 shares of Common Stock issuable to Mr. Byerley upon the vesting of RSUs. +(7) +Includes 8,395 shares of Common Stock issuable to Mr. Clifton upon the vesting of RSUs. +(8) +Includes 8,395 shares of Common Stock issuable to Ms. Ehrman upon the vesting of RSUs. +(9) +Includes 19,785 shares of Common Stock held of record by the Individual Retirement Account of Ms. Rogers and 5,800 +shares of Common Stock held of record by Ms. Rogers’ spouse. Also includes 8,862 shares of Common Stock issuable to Ms. Rogers upon the vesting of RSUs. +(10) +Includes 131,528 shares of Common Stock issuable to Mr. Goodwin upon the exercise of stock options. Also includes +11,231 shares of restricted stock. Pursuant to the terms of the restricted stock grants, Mr. Goodwin has the right to vote such shares but may only dispose of such shares to the extent they have vested. +(11) +Includes 216,670 shares of Common Stock issuable to Mr. Hairford upon the exercise of stock options and 19,500 shares +of Common Stock held of record by his Individual Retirement Account. Also includes 333,403 shares of Common Stock held of record by the Hairford Family Trust, for which both Mr. Hairford and his spouse are trustees. Also includes 15,723 shares +of restricted stock. Pursuant to the terms of the restricted stock grants, Mr. Hairford has the right to vote such shares but may only dispose of such shares to the extent they have vested. +(12) +Includes 181,673 shares of Common Stock issuable to Mr. Lancaster upon the exercise of stock options and 85,500 +shares of Common Stock held of record by his Individual Retirement Account. Also includes 14,226 shares of restricted stock. Pursuant to the terms of the restricted stock grants, Mr. Lancaster has the right to vote such shares but may only +dispose of such shares to the extent they have vested. +(13) +Includes 8,395 shares of Common Stock issuable to Mr. Parker upon the vesting of RSUs. +(14) +Includes 27,170 shares of Common Stock held of record by the Individual Retirement Account of Mr. Posner. Also +includes 19,528 shares of Common Stock issuable to Mr. Posner upon the vesting and delivery of RSUs. +(15) +Includes 20,927 shares of Common Stock issuable to Mr. Stewart upon the vesting and delivery of RSUs. +(16) +Includes an aggregate of 1,287,423 shares of Common Stock which our executive officers as a group have the right to +acquire within 60 days of April 9, 2020 upon the exercise of stock options. Also includes 111,561 shares of restricted stock held by our executive officers. Pursuant to the terms of the restricted stock grants, the executive officers have +the right to vote such shares but may only dispose of such shares to the extent they have vested. Also includes 124,867 shares of Common Stock issuable to directors upon the vesting and delivery of RSUs. +(17) +Information based solely on a Schedule 13G/A filed with the SEC on February 4, 2020. The Schedule 13G/A reports that +BlackRock, Inc. (“BlackRock”) beneficially owns 13,995,518 shares, has sole voting power with respect to 13,592,721 shares and has sole dispositive power with respect to 13,995,518 shares. According to the Schedule 13G/A, BlackRock’s +address is 55 East 52 nd Street, New York, NY 10055. +(18) +Information based solely on a Schedule 13G/A filed with the SEC on February 12, 2020. The Schedule 13G/A reports that +The Vanguard Group (“Vanguard”) beneficially owns 10,533,801 shares, has sole voting power with respect to 122,157 shares, has shared voting power with respect to 28,523 shares, has sole dispositive power with respect to 10,400,432 shares +and has shared dispositive power with respect to 133,369 shares. According to the Schedule 13G/A, Vanguard’s address is 100 Vanguard Blvd, Malvern, PA 19355. +74 Matador Resources Company | 2020 Proxy Statement +Table of Contents +SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT +(19) +Information based solely on a Schedule 13G filed with the SEC on February 12, 2020. The Schedule 13G reports that +Dimensional Fund Advisors LP (“Dimensional”) beneficially owns 7,565,986 shares, has sole voting power with respect to 7,512,848 shares and has sole dispositive power with respect to 7,565,986 shares. According to the Schedule 13G, +Dimensional furnishes investment advice to four investment companies registered under the Investment Company Act of 1940, and serves as investment manager or sub-advisor to certain other commingled funds, +group trusts and separate accounts (collectively, “Funds”). In certain cases, subsidiaries of Dimensional may act as an advisor or sub-advisor to certain Funds. In its role as investment advisor, sub-advisor and/or manager, Dimensional may possess voting and/or investment power over the securities of the Company that are owned by the Funds, and may be deemed to be the beneficial owner of the shares of the +Company held by the Funds. However, according to the Schedule 13G, all such securities are owned by the Funds and Dimensional disclaims beneficial ownership of such securities. According to the Schedule 13G, Dimensional’s address is Building +One, 6300 Bee Cave Road, Austin, TX 78746. +(20) +Information based solely on a Schedule 13G filed with the SEC on February 14, 2020. The Schedule 13G reports that +State Street Corporation (“State Street”) beneficially owns 6,471,321 shares, has shared voting power with respect to 6,026,177 shares and has shared dispositive power with respect to 6,471,321 shares. According to the Schedule 13G, State +Street’s address is State Street Financial Center, One Lincoln Street, Boston, MA 02111. +2020 +Proxy Statement | Matador Resources Company 75 +Table of Contents +ADDITIONAL INFORMATION +ADDITIONAL +INFORMATION +Shareholder Proposals for the 2021 Proxy Statement +For shareholder proposals to be included in the Company’s +proxy statement and form of proxy relating to the 2021 Annual Meeting, such proposals must be received by the Company at its offices in Dallas, Texas, addressed to the Corporate Secretary of the Company, no later than December 24, 2020. Upon +timely receipt of any such proposal, the Company will determine whether or not to include such proposal in the proxy statement and proxy in accordance with applicable regulations and provisions governing the solicitation of proxies. +Director Nominations or Other Business for Presentation at the 2021 Annual Meeting +Under the Bylaws, certain procedures are provided that a +shareholder must follow in order to place in nomination persons for election as directors at an annual meeting of shareholders or to introduce an item of business at an annual meeting of shareholders. These procedures provide, generally, among other +things, that shareholders desiring to place in nomination persons for election as directors, and/or bring a proper subject of business before an annual meeting, must do so by a written notice timely received (on or before March 9, 2021, but no +earlier than February 7, 2021, for the 2021 Annual Meeting) to the Corporate Secretary of the Company containing the name and address of the shareholder and the number of shares of the Company’s Common Stock beneficially owned by the +shareholder. If the notice relates to a nomination for director, it must also set forth the name, age, business and residence addresses of the candidate, the candidate’s résumé or a listing of his or her qualifications to be a +director of the Company, the person’s written consent to be a director if selected by the Nominating Committee, nominated by the Board and elected by the shareholders and any other information that would be required to be disclosed in +solicitations of proxies for the election of directors. The Company may require any proposed nominee to furnish such other information as may reasonably be required by the Company to determine the eligibility of such proposed nominee to serve as +director. Notice of an item of business shall include a brief description of the proposed business and any material interest of the shareholder in such business. +The Chairman of the meeting may refuse to allow the transaction of any business not presented, or to acknowledge the nomination of any person not made, in compliance +with the foregoing procedures. Copies of the Bylaws are available from the Corporate Secretary of the Company and on the Company’s website at www.matadorresources.com under the heading “Investor Relations—Corporate +Governance.” +See “Corporate Governance—Board Committees—Nominating Committee” for the process for shareholders to follow to suggest a +director candidate to the Nominating Committee for nomination by the Board. +Annual Report on Form 10-K +The +Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, as filed with the SEC, including financial statements, is being made available to our shareholders concurrently with +this Proxy Statement at www.proxyvote.com and does not form part of the proxy solicitation material. Shareholders may obtain without charge another copy of the Annual Report on Form 10-K, excluding +certain exhibits, by writing to Investor Relations, Matador Resources Company, One Lincoln Centre, 5400 LBJ Freeway, Suite 1500, Dallas, Texas 75240. +76 Matador Resources Company | 2020 Proxy Statement +Table of Contents +OTHER BUSINESS +OTHER BUSINESS +Management +of the Company is not aware of other business to be presented for action at the Annual Meeting; however, if other matters are presented for action, it is the intention of the persons named in the accompanying form of proxy to vote in accordance with +their judgment on such matters. +By Order of the Board of Directors, +Joseph Wm. Foran +Chairman and Chief Executive Officer +April 23, 2020 +2020 +Proxy Statement | Matador Resources Company 77 +Table of Contents +ANNEX A +ANNEX A +Non-GAAP Financial Measures +Adjusted EBITDA +We define Adjusted EBITDA as earnings before interest +expense, income taxes, depletion, depreciation and amortization, accretion of asset retirement obligations, property impairments, unrealized derivative gains and losses, certain other non-cash items and non-cash stock-based compensation expense, net gain or loss on asset sales and inventory impairment and prepayment premium on extinguishment of debt. Adjusted EBITDA is not a measure of net income (loss) or cash +flows as determined by GAAP. Adjusted EBITDA is a supplemental non-GAAP financial measure that is used by management and external users of our consolidated financial statements, such as industry analysts, +investors, lenders and rating agencies. All references to Matador’s Adjusted EBITDA are those values attributable to Matador Resources Company shareholders after giving effect to Adjusted EBITDA attributable to third-party non-controlling +interests, including in San Mateo. +Management believes Adjusted EBITDA is necessary because it allows us to evaluate our operating performance and compare the +results of operations from period to period without regard to our financing methods or capital structure. We exclude the items listed above from net income (loss) in calculating Adjusted EBITDA because these amounts can vary substantially from +company to company within our industry depending upon accounting methods and book values of assets, capital structures and the method by which certain assets were acquired. +Adjusted EBITDA should not be considered an alternative to, or more meaningful than, net income (loss) or cash flows from operating activities as determined in +accordance with GAAP or as a primary indicator of our operating performance or liquidity. Certain items excluded from Adjusted EBITDA are significant components of understanding and assessing a company’s financial performance, such as a +company’s cost of capital and tax structure. Our Adjusted EBITDA may not be comparable to similarly titled measures of another company because all companies may not calculate Adjusted EBITDA in the same manner. +The following table presents our calculation of Adjusted EBITDA and the reconciliation of Adjusted EBITDA to the GAAP financial measures of net income and net cash +provided by operating activities, respectively. +Year Ended +December 31, 2019 +Year Ended +December 31, 2018 +(In thousands) +Unaudited Adjusted EBITDA Reconciliation to Net Income: +Net income attributable to Matador Resources Company shareholders +$ +87,777 +$ +274,207 +Net income attributable to non-controlling interest in +subsidiaries +35,205 +25,557 +Net income +122,982 +299,764 +Interest expense +73,873 +41,327 +Total income tax provision (benefit) +35,532 +(7,691 +) +Depletion, depreciation and amortization +350,540 +265,142 +Accretion of asset retirement obligations +1,822 +1,530 +Unrealized loss (gain) on derivatives +53,727 +(65,085 +) +Stock-based compensation expense +18,505 +17,200 +Net loss on asset sales and inventory impairment +967 +196 +Prepayment premium on extinguishment of debt +— +31,226 +Consolidated Adjusted EBITDA +657,948 +583,609 +Adjusted EBITDA attributable to non-controlling interest in +subsidiaries +(47,192 +) +(30,386 +) +Adjusted EBITDA attributable to Matador Resources Company shareholders +$ +610,756 +$ +553,223 +2020 +Proxy Statement | Matador Resources Company A-1 +Table of Contents +ANNEX A +Year Ended +December 31, 2019 +Year Ended +December 31, 2018 +(In thousands) +Unaudited Adjusted EBITDA Reconciliation to Net Cash Provided by Operating Activities: +Net cash provided by operating activities +$ +552,042 +$ +608,523 +Net change in operating assets and liabilities +34,517 +(64,429 +) +Interest expense, net of non-cash portion +71,389 +39,970 +Current income tax benefit +— +(455 +) +Adjusted EBITDA attributable to non-controlling interest in +subsidiaries +(47,192 +) +(30,386 +) +Adjusted EBITDA attributable to Matador Resources Company shareholders +$ +610,756 +$ +553,223 +San Mateo Adjusted EBITDA +The +following table presents our calculation of the combined Adjusted EBITDA of San Mateo I and San Mateo II and the reconciliation of Adjusted EBITDA to the GAAP financial measures of net income and net cash provided by operating activities, +respectively. +Year Ended +December 31, 2019 +(In thousands) +Unaudited Adjusted EBITDA Reconciliation to Net Income: +Net income +$ +71,850 +Depletion, depreciation and amortization +15,068 +Interest expense +9,282 +Accretion of asset retirement obligations +110 +Adjusted EBITDA +$ +96,310 +Year Ended +December 31, 2019 +(In thousands) +Unaudited Adjusted EBITDA Reconciliation to Net Cash Provided by Operating Activities: +Net cash provided by operating activities +$ +106,650 +Net change in operating assets and liabilities +(19,137 +) +Interest expense, net of non-cash portion +8,797 +Adjusted EBITDA +$ +96,310 +A-2 Matador Resources Company | 2020 Proxy Statement +Table of Contents +ANNEX A +Return on Average Capital Employed +Return on Average Capital Employed +(ROACE) is defined as Adjusted EBITDA (defined above) attributable to Matador Resources Company shareholders, plus cash inflows from midstream transactions, divided by average total capitalization (defined as total assets less total current +liabilities). ROACE is not a measure of net income (loss) or cash flows as determined by GAAP. ROACE is a supplemental non-GAAP financial measure that is used by management and external users of our +consolidated financial statements, such as industry analysts, investors, lenders and rating agencies. +The following table presents our calculation of ROACE and the +reconciliation of ROACE to the GAAP financial measure of net income. +Year Ended +December 31, 2019 +Year +Ended +December 31, 2018 +($ in thousands) +Return on Average Capital Employed +Net income +$ +122,982 +Adjustments to net income (see Adjusted EBITDA reconciliation) +487,774 +(a) Adjusted EBITDA attributable to Matador Resources Company shareholders +610,756 +Cash flows from midstream transactions +14,700 +Proceeds from sale of assets +21,921 +(b) Total cash inflows from midstream transactions, proceeds from sale of assets and Adjusted +EBITDA +$ +647,377 +(c) Total assets +$ +4,069,676 +$ +3,455,518 +(d) Total assets – non-guarantor subsidiaries +654,121 +444,374 +(e) Total assets attributable to Matador Resources Company shareholders = [(c) – 49% * +(d)] +3,749,157 +3,237,775 +(f) Total current liabilities +399,772 +330,022 +(g) Total current liabilities – non-guarantor subsidiaries +73,086 +27,988 +(h) Total current liabilities attributable to Matador Resources Company shareholders = [(f) +– 49% * (g)] +363,960 +316,308 +Total capitalization = [(e) – (h)] +$ +3,385,197 +$ +2,921,467 +(i) Average total capitalization for 2019 and 2018 +$ +3,153,332 +Return on average capital employed = (b) / (i) +20.5 +% +2020 +Proxy Statement | Matador Resources Company A-3 +Table of Contents +Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: KEEP THIS +PORTION FOR YOUR RECORDS THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. DETACH AND RETURN THIS PORTION ONLY D12830-P36528 Nominees: 1a. Joseph Wm. Foran 1b. Reynald A. Baribault 1c. Monika U. Ehrman 1d. Timothy E. Parker 3. Ratification of the +appointment of KPMG LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2020. Please indicate if you plan to attend this meeting. The Board of Directors recommends you vote FOR the following +proposals: 2. Advisory vote to approve the compensation of the Company’s named executive officers. Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full +title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. NOTE: The proxies are authorized to vote in their discretion on +such other business as may properly come before the meeting or any adjournment thereof. 1. Election of Directors For Against Abstain For Against Abstain MATADOR RESOURCES COMPANY The Board of Directors recommends you vote FOR the following: MATADOR +RESOURCES COMPANY 5400 LBJ FREEWAY, SUITE 1500 DALLAS, TX 75240 Yes No VOTE BY INTERNET - www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Time the day +before the meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would +like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, +please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit +your voting instructions up until 11:59 p.m. Eastern Time the day before the meeting date. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the +postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717 +Table of Contents +Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Annual Report for the year ended December 31, 2019, +Notice of Annual Meeting and Proxy Statement are available at www.proxyvote.com D12831-P36528 MATADOR RESOURCES COMPANY Annual Meeting of Shareholders June 5, 2020 9:30 A.M. This proxy is solicited by the Board of Directors As an alternative to +completing this form, you may enter your vote instruction by telephone at 1-800-690-6903, or via the internet at www.proxyvote.com. Have your proxy card in hand and follow the instructions. Depending on concerns about the novel coronavirus, or +COVID-19, we might hold a virtual annual meeting instead of holding an in-person meeting. We would publicly announce a determination to a hold a virtual annual meeting in a press release available at our website, www.matadorresources.com, as soon as +practicable before the meeting. In that event, the annual meeting would be conducted solely virtually, on the above date and time, via live audio webcast. You or your proxyholder could participate, vote and examine our stockholder list at the +virtual annual meeting by visiting ww.virtualshareholdermeeting.com/MTDR2020 and using your control number, but only if we decide to hold a virtual annual meeting. The shareholder hereby appoints Joseph Wm. Foran and Timothy E. Parker, or either of +them, as proxies, each with the power to appoint his substitute, and hereby authorizes them to represent and to vote, as designated on the reverse side of this ballot, all of the shares of common stock of MATADOR RESOURCES COMPANY that the +shareholder is entitled to vote at the Annual Meeting of Shareholders to be held at 9:30 A.M., CDT on June 5, 2020, at the Westin Galleria, San Antonio Ballroom, 13340 Dallas Parkway, Dallas, Texas 75240, and any adjournment or postponement thereof. +The shareholder hereby revokes any proxy or proxies heretofore given to vote upon or act with respect to such shares of stock. This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy +will be voted in accordance with the Board of Directors’ recommendations. Continued and to be signed on reverse side \ No newline at end of file diff --git a/raw/proxies/0001520006/0001193125-20-117323/proxy_rpt.txt b/raw/proxies/0001520006/0001193125-20-117323/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..d265543cb87fc2cd0da386c8136e9dfafd1068e3 --- /dev/null +++ b/raw/proxies/0001520006/0001193125-20-117323/proxy_rpt.txt @@ -0,0 +1,86 @@ +TRANSACTIONS WITH RELATED PERSONS +TRANSACTIONS +WITH RELATED PERSONS +Except as disclosed below, during 2019 there was not, nor was there proposed as of December 31, 2019, any transaction or series of +similar transactions to which we were or are a party in which the amount involved exceeded or exceeds $120,000 and in which any of our directors, executive officers, holders of more than 5% of any class of our voting securities or any member of the +immediate family of any of the foregoing persons had or will have a direct or indirect material interest, other than compensation arrangements with directors and executive officers, which are described in “Executive +Compensation—Compensation Discussion and Analysis” above. +Working Interest and Overriding Royalty Interest Owners +Mr. Foran and certain of Mr. Foran’s affiliated +entities (collectively, the “Foran Entities”) are working interest owners and/or overriding royalty interest owners in certain properties operated by the Company or in which the Company also holds a working interest. As working interest +owners, the Foran Entities are required to pay their proportionate share of all costs and are entitled to receive their proportionate share of revenues in the normal course of business. As overriding royalty interest owners, the Foran Entities are +entitled to receive their proportionate share of revenues from the wells in which they own an interest in the normal course of business. During 2019, revenues, net of costs, received by the Foran Entities in their capacity as working interest owners +or overriding royalty interest owners were approximately $1.8 million (the “Related Net Revenue Payments”). The Related Net Revenue Payments represent less than 1% of our total third-party net revenue payments during 2019. +In our capacity as operator, we incur drilling and operating costs that are billed to our partners based on their respective working interests. During 2019, our joint +interest billings to the Foran Entities attributable to their share of costs were approximately $0.5 million (the “Related Joint Interest Billings”). The Related Joint Interest Billings represent less than 1% of our total joint +interest billings during 2019. As a result of this ownership by the Foran Entities, from time to time, we will be in a net receivable or net payable position with certain of the Foran Entities. We do not consider any net receivables from the Foran +Entities to be uncollectible. +The Audit Committee reviewed the terms of the working interests and/or overriding royalty interests of the Foran Entities for +potential conflicts of interest under the Related Party Transaction Policy, and, after being fully informed as to Mr. Foran’s relationships and interests in such transactions and all other material facts related to the Related Net Revenue +Payments and Related Joint Interest Billings, determined that such transactions and the Related Net Revenue Payments and Related Joint Interest Billings were fair to the Company and recommended such transactions and the Related Net Revenue Payments +and Related Joint Interest Billings to the full Board for approval and ratification. The Board subsequently approved and ratified the transactions and the Related Net Revenue Payments and Related Joint Interest Billings. +Certain Employment Relationships +Billy E. Goodwin, Executive Vice President and Chief Operating +Officer—Drilling, Completions & Production, was appointed as an executive officer of the Company in connection with his February 2016 promotion to Senior Vice President—Operations. Two of Mr. Goodwin’s adult children +have been employees of the Company since 2014 and 2015, respectively, and each earned in 2019, and are expected to be compensated in 2020, between $120,000 and $600,000. One of Mr. Goodwin’s children has a Bachelor of Science degree in +Petroleum Engineering from the University of Tulsa and over 10 years of industry experience, including as a regional drilling supervisor for another publicly traded exploration and production company. Mr. Goodwin’s other child has a +Bachelor of Science in Business Administration degree in Energy Management from the University of Tulsa and a Bachelor of Arts degree in General Business and Management from Oklahoma State University. He also has over 10 years of industry +experience, including as a drilling fluids engineer for a publicly traded oilfield services company and as a landman for a publicly traded exploration and production company. The Audit Committee reviewed the terms of the employment arrangements for +potential conflicts of interest under the Company’s +70 Matador Resources Company | 2020 Proxy Statement +Table of Contents +TRANSACTIONS WITH RELATED PERSONS +Related Party Transaction Policy and, after being fully informed as to the employment arrangements and historical and anticipated compensation of Mr. Goodwin’s adult children, and all +other material facts related to the relationship, determined that the employment arrangements were fair to the Company and recommended the employment arrangements to the full Board for approval and ratification. The Board subsequently approved and +ratified such employment arrangements. +Reynald A. Baribault is a member of the Board. Mr. Baribault’s sister-in-law has been an employee of the Company since 2016 and earned in 2019, and is expected to be compensated in 2020, between $120,000 and $200,000. Mr. Baribault’s sister-in-law has a diploma from the Executive Secretarial School and is a certified legal assistant, having completed the Southern Methodist University Legal Assistants +Program. She has over 38 years of experience as a legal assistant. The Audit Committee reviewed the terms of the employment arrangement for potential conflicts of interest under the Company’s Related Party Transaction Policy and, after being +fully informed as to the employment arrangement and historical and anticipated compensation of Mr. Baribault’s sister-in-law, and all other material facts +related to the relationship, determined that the employment arrangement was fair to the Company and recommended the employment arrangement to the full Board for approval and ratification. The Board subsequently approved and ratified such employment +arrangement. +An adult child of Mr. Foran has been an employee of the Company since 2015 and earned in 2019, and is expected to be compensated in 2020, between +$120,000 and $200,000. Mr. Foran’s child has a Bachelor of Science degree in Human Resource Development and a Master of Science degree in Human Resource Management, both from Texas A&M University. She has more than nine years of +industry experience, including with another publicly traded exploration and production company. The Audit Committee reviewed the terms of the employment arrangement for potential conflicts of interest under the Company’s Related Party +Transaction Policy and, after being fully informed as to the employment arrangement and historical and anticipated compensation of Mr. Foran’s adult child, and all other material facts related to the relationship, determined that the +employment arrangement was fair to the Company and recommended the employment arrangement to the full Board for approval and ratification. The Board subsequently approved and ratified such employment arrangement. +Procedures for Approval of Related Party Transactions +Pursuant to the Related Party Transaction Policy as in effect as +of December 31, 2019, a “Related Party Transaction” is defined as a transaction (including any financial transaction, arrangement or relationship (including any indebtedness or guarantee of indebtedness)), or series of related +transactions, or any material amendment to any such transaction, involving a Related Party (as defined below) and in which we are a participant, other than: +• +a transaction involving compensation of directors; +• +a transaction involving compensation of an executive officer or involving an employment agreement, severance agreement, +change in control provision or agreement or a special supplemental benefit for an executive officer; +• +a transaction available to all employees generally or to all salaried employees generally; +• +a transaction with a Related Party involving less than $120,000; +• +a transaction in which the interest of the Related Party arises solely from the ownership of a class of our equity +securities and all holders of that class receive the same benefit on a pro rata basis; or +• +a transaction in which the rates or charges involved therein are determined by competitive bids, or a transaction that +involves the rendering of services as a common or contract carrier, or public utility, at rates or charges fixed in conformity with law or governmental authority. +“Related Party” means: +• +any person who is, or at any time during the applicable period was, one of our executive officers or one of our directors +or nominees for directors; +• +any person who is known by us to be the beneficial owner of more than 5% of our Common Stock; +2020 +Proxy Statement | Matador Resources Company 71 +Table of Contents +TRANSACTIONS WITH RELATED PERSONS +• +any immediate family member of any of the foregoing persons, which means any child, stepchild, parent, stepparent, spouse, +sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law of a director, nominee for director, executive officer or a beneficial owner of more than 5% of our Common Stock; and +• +any firm, corporation or other entity that is owned or controlled by any of the foregoing persons or in which any of the +foregoing persons is a general partner or executive officer or in which such person, together with all other of the foregoing persons, owns 10% or more of the equity interests thereof. +Pursuant to the Related Party Transaction Policy, the Audit Committee must review all material facts of each Related Party Transaction and recommend either approval or +disapproval of the Related Party Transaction to the full Board, subject to certain limited exceptions. In determining whether to recommend approval or disapproval of the Related Party Transaction, the Audit Committee must, after reviewing all +material facts of the Related Party Transaction and the Related Party’s relationship and interest, determine whether the Related Party Transaction is fair to the Company. Further, the policy requires that all Related Party Transactions be +disclosed in our filings with the SEC and/or our website in accordance with applicable laws, rules and regulations. +72 Matador Resources Company | 2020 Proxy Statement +Table of Contents \ No newline at end of file diff --git a/raw/proxies/0001520006/0001193125-21-126934/proxy.txt b/raw/proxies/0001520006/0001193125-21-126934/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..6517818fffc12c0f2d58934e2b450f7cc53f710d --- /dev/null +++ b/raw/proxies/0001520006/0001193125-21-126934/proxy.txt @@ -0,0 +1,4629 @@ +DEF 14A +1 +d134685ddef14a.htm +DEF 14A +DEF 14A +Table of Contents +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +Washington, D.C. 20549 +SCHEDULE 14A +Proxy Statement Pursuant to Section 14(a) of the +Securities Exchange Act of 1934 (Amendment No.) +Filed by the +Registrant ☑ Filed by a Party other than the +Registrant ☐ +Check the appropriate box: +☐ +Preliminary Proxy Statement +☐ +Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +☑ +Definitive Proxy Statement +☐ +Definitive Additional Materials +☐ +Soliciting Material Pursuant to §240.14a-12 +Matador Resources Company +(Name of Registrant as Specified In Its Charter) +(Name of Person(s) Filing Proxy Statement, if other than the Registrant) +Payment of Filing Fee (Check the appropriate box): +☑ +No fee required. +☐ +Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. +1) +Title of each class of securities to which transaction applies: +2) +Aggregate number of securities to which transaction applies: +3) +Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the +filing fee is calculated and state how it was determined): +4) +Proposed maximum aggregate value of transaction: +5) +Total fee paid: +☐ +Fee paid previously with preliminary materials. +☐ +Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify +the previous filing by registration statement number, or the Form or Schedule and the date of its filing. +1) +Amount Previously Paid: +2) +Form, Schedule or Registration Statement No.: +3) +Filing Party: +4) +Date Filed: +Table of Contents +2021 +Notice of Annual Meeting of Shareholders +and +Proxy Statement +June 4, +2021 | Dallas, Texas +Table of Contents +One Lincoln Centre +5400 LBJ Freeway, Suite 1500 +Dallas, Texas +75240 +www.matadorresources.com +NOTICE OF ANNUAL MEETING OF SHAREHOLDERS +To +Be Held on June 4, 2021 +To the Matador Resources Company Shareholders: +Please join us for the 2021 Annual Meeting of Shareholders of Matador Resources Company. The meeting will be held at the Westin Galleria, San Antonio +Ballroom, 13340 Dallas Parkway, Dallas, Texas 75240, on Friday, June 4, 2021, at 9:30 a.m. , Central Daylight Time. +At the +meeting, you will hear a report on our business and act on the following matters: +(1) +Election of the five nominees for director named in the attached Proxy Statement; +(2) +Advisory vote to approve the compensation of our named executive officers as described in the attached Proxy Statement; +(3) +Ratification of the appointment of KPMG LLP as the Company’s independent registered public accounting firm for the +year ending December 31, 2021; and +(4) +Any other matters that may properly come before the meeting. +All shareholders of record at the close of business on April 8, 2021 are entitled to vote at the meeting or any postponement or adjournment of the +meeting. A list of the shareholders of record is available at the Company’s offices in Dallas, Texas. +Depending on concerns about the novel +coronavirus, or COVID-19, we might hold a virtual annual meeting instead of holding an in-person meeting. We would publicly announce a determination to hold a virtual +annual meeting in a press release available at our website, www.matadorresources.com , as soon as practicable before the meeting. In that event, the annual meeting would be conducted solely virtually, on the above date and time, via live audio +webcast. You or your proxyholder could participate, vote and examine our shareholder list at the virtual annual meeting by visiting www.virtualshareholdermeeting.com/MTDR2021 and using your control number, but only if we decide to hold a +virtual annual meeting. +By Order of the Board of Directors, +Joseph Wm. Foran +Chairman and Chief Executive Officer +April 22, 2021 +YOUR VOTE IS IMPORTANT! +Whether or not you will attend the meeting, please vote as promptly as possible by using the Internet or telephone or by signing, dating and +returning your proxy card to the address listed on the card. +Important Notice Regarding the Availability of Proxy Materials for the +Annual Meeting of Shareholders to Be Held on June 4, 2021: +Our Proxy Statement and the Annual Report to Shareholders for the fiscal year ended December 31, 2020 are available for viewing, printing and +downloading at https://materials.proxyvote.com/576485 . +Table of Contents +TABLE OF CONTENTS +TABLE OF CONTENTS +Page +Proxy Statement +1 +Proxy Summary +3 +Information About the Annual Meeting +8 +Proposal 1—Election of Directors +12 +Director Diversity +12 +Core Competencies +13 +Nominees +13 +Vote Required +16 +Directors Continuing in Office +17 +Corporate Governance +20 +Independence of Directors +20 +Majority Vote in Director Elections +20 +Board Leadership Structure +21 +Board Committees +22 +Board’s Role in Risk Oversight +26 +Environmental, Social and Governance Initiatives +27 +Strategic Planning and Compensation Committee Interlocks and Insider +Participation +29 +Communications with Directors +29 +Executive Officers and Other Senior Officers of the Company +29 +Proposal 2—Advisory Vote to Approve Named Executive Officer +Compensation +36 +Vote Required +36 +Proposal 3—Ratification of the Appointment of KPMG LLP +37 +Fees of Independent Registered Public Accounting Firm for Fiscal Years 2020 and +2019 +37 +Report of the Audit Committee +38 +Vote Required +39 +Page +Letter to Shareholders +40 +Executive Compensation +41 +Compensation Discussion and Analysis +41 +Strategic Planning and Compensation Committee Report +58 +Summary Compensation Table +59 +Grants of Plan-Based Awards Table +60 +Outstanding Equity Awards at December 31, 2020 +61 +Option Exercises and Stock Vested +62 +Potential Payments upon Termination or Change in Control +63 +Chief Executive Officer Pay Ratio +67 +Director Compensation +68 +Compensation for 2020-2021 +69 +Director Stock Ownership Guidelines +69 +Securities Authorized for Issuance Under Equity Compensation Plans +70 +Transactions with Related Persons +71 +Security Ownership of Certain Beneficial Owners and Management +74 +Additional Information +76 +Shareholder Proposals for the 2022 Proxy Statement +76 +Director Nominations or Other Business for Presentation at the 2022 Annual +Meeting +76 +Annual Report on Form 10-K +76 +Other Business +77 +Annex A—Non-GAAP Financial +Measures +A-1 +2021 +Proxy Statement | Matador Resources Company i +Table of Contents +PROXY STATEMENT +Matador Resources Company +One Lincoln Centre +5400 LBJ Freeway, Suite 1500 +Dallas, Texas 75240 +www.matadorresources.com +PROXY +STATEMENT +For +ANNUAL MEETING OF +SHAREHOLDERS +To Be Held on June 4, 2021 +This +Proxy Statement is being mailed on or about April 22, 2021 to the shareholders of Matador Resources Company (“Matador” or the “Company”) in connection with the solicitation of proxies by the Board of Directors (the +“Board”) of the Company to be voted at the Annual Meeting of Shareholders of the Company to be held at the Westin Galleria, San Antonio Ballroom, 13340 Dallas Parkway, Dallas, Texas 75240, on June 4, 2021, at 9:30 a.m., Central +Daylight Time (the “Annual Meeting” or the “2021 Annual Meeting”), or at any postponement or adjournment thereof, for the purposes set forth in the accompanying Notice of Annual Meeting of Shareholders. The address of the +Company’s principal executive office is One Lincoln Centre, 5400 LBJ Freeway, Suite 1500, Dallas, Texas 75240. +If you are a shareholder of record, you may +vote in person by attending the meeting, by completing and returning a proxy by mail or by using the Internet or telephone. You may vote your proxy by mail by marking your vote on the enclosed proxy card and following the instructions on the card. +To vote your proxy using the Internet or telephone, see the instructions on the proxy form and have the proxy form available when you access the Internet website or place your telephone call. +The named proxies will vote your shares according to your directions. If you sign and return your proxy but do not make any of the selections, the named proxies will +vote your shares: (i) FOR the election of the five nominees for director as set forth in this Proxy Statement, (ii) FOR the approval, on an advisory basis, of the compensation of the Company’s named +executive officers as disclosed in this Proxy Statement and (iii) FOR the ratification of KPMG LLP as the independent registered public accounting firm of the Company for the year ending December 31, 2021. Your proxy may be +revoked at any time before it is exercised by filing with the Company a written revocation addressed to the Corporate Secretary, by executing a proxy bearing a later date or by attending the Annual Meeting and voting in person. +The cost of soliciting proxies will be borne by the Company. In addition to the use of postal services and the Internet, proxies may be solicited by directors, officers +and employees of the Company (none of whom will receive any additional compensation for any assistance they may provide in the solicitation of proxies) in person or by telephone. +The outstanding voting securities of the Company consist of issued and outstanding common stock, par value $0.01 per share (the “Common Stock”). The record +date for the determination of the shareholders entitled to notice of and to vote at the Annual Meeting, or any postponement or adjournment thereof, has been established by the Board as the close of business on April 8, 2021 (the “Record +Date”). As of the Record Date, there were 116,781,445 shares of Common Stock outstanding and entitled to vote. +The presence, in person or by proxy, of the +holders of record of a majority of the outstanding shares entitled to vote is necessary to constitute a quorum for the transaction of business at the Annual Meeting, but if a quorum should not be present, the meeting may be adjourned from time to +time until a quorum is obtained. A holder of Common Stock will be entitled to one vote per share on each matter properly brought before the meeting. Cumulative voting is not permitted in the election of directors. +The proxy card provides space for a shareholder to abstain with respect to any or all nominees for the Board. The affirmative vote of a majority of the votes cast by +holders of shares present in person or represented by proxy and +2021 +Proxy Statement | Matador Resources Company 1 +Table of Contents +PROXY STATEMENT +entitled to vote on the election of directors at the Annual +Meeting is required for the election of each nominee for director. With respect to the election of directors in an uncontested election, such as that being held at the Annual Meeting, “majority of the votes cast” means the number of votes +cast “for” the election of such nominee exceeds the number of votes cast “against” such nominee. See “Corporate Governance—Majority Vote in Director Elections” for additional information regarding election of +directors. +The other proposals require the affirmative vote of a majority of the shares of Common Stock present in person or represented by proxy and entitled to +vote at the meeting. Shares held by a shareholder who abstains from voting on any or all proposals will be included for the purpose of determining the presence of a quorum. Other than with respect to the election of directors, an abstention will +effectively count as a vote cast against the remaining proposals. Broker non-votes on any matter as to which the broker has indicated on the proxy that it does not have discretionary authority to vote will be +treated as shares not entitled to vote with respect to that matter. However, such shares will be considered present and entitled to vote for quorum purposes so long as they are entitled to vote on at least one other matter. +2 Matador Resources Company | 2021 Proxy Statement +Table of Contents +PROXY SUMMARY +PROXY SUMMARY +This summary highlights information +contained elsewhere in this Proxy Statement. This summary does not contain all of the information that you should consider, and you should read the entire Proxy Statement carefully prior to voting. For more complete information regarding our 2020 +performance, please review our Annual Report on Form 10-K for the year ended December 31, 2020. +2021 Annual Meeting of Shareholders +Voting Matters and Board Recommendation +Proposal +Board +Recommendation +Election of Five Director Nominees (page +12) +FOR +Advisory Vote to Approve Named Executive Officer +Compensation (page 36) +FOR +Ratification of the Appointment of KPMG LLP as +the Company’s Independent Registered Public Accounting Firm for 2021 (page 37) +FOR +2020 Business Highlights +Despite the precipitous decline in global oil demand resulting +from the worldwide spread of the novel coronavirus (“COVID-19”) in 2020 along with the actions of the Organization of Petroleum Exporting Countries, Russia and certain other oil-exporting countries (“OPEC+”), which led to a very challenging oil and natural gas price environment, the successful execution of our business strategies led to increases in our oil and natural gas +production and proved oil and natural gas reserves in 2020. We achieved these results despite reducing our operated drilling rig count from six at the beginning of the year to three by the end of the second quarter. We also improved the capital +efficiency of our drilling and completion operations and achieved several key operational milestones throughout the year. In addition, we concluded several important financing transactions in 2020, including an increase in the elected commitment +under our third amended and restated credit agreement (the “Credit Agreement”), the reaffirmation of the borrowing base and the restructuring of our oil hedging portfolio. San Mateo Midstream, LLC, our midstream joint venture (“San +Mateo”), also achieved several important milestones in 2020, +2021 +Proxy Statement | Matador Resources Company 3 +Table of Contents +PROXY SUMMARY +including the expansion of its cryogenic natural gas processing plant in Eddy County, New Mexico (the “Black River Processing Plant”) and associated pipelines and the merger of San +Mateo Midstream II, LLC (“San Mateo II”) with and into San Mateo. These achievements and transactions increased our operational flexibility and opportunities while preserving the strength of our balance sheet and our liquidity position. +In 2020, we achieved record oil, natural gas and average daily oil equivalent production. In addition, we increased our estimated total proved oil and natural gas +reserves 7% as of December 31, 2020, as compared to December 31, 2019. +Reserves and Production Growth +Business highlights achieved during 2020 include the following: +• +A 14% increase in oil production from 14.0 million barrels (“Bbl”) of oil produced in 2019 to +15.9 million Bbl of oil produced in 2020. +• +A 14% increase in natural gas production from 61.1 billion cubic feet (“Bcf”) of natural gas produced in +2019 to 69.5 Bcf of natural gas produced in 2020. +• +A 14% increase in average daily oil equivalent production from 66,203 barrels of oil equivalent (“BOE”) per day, +including 38,312 Bbl of oil per day and 167.4 million cubic feet (“MMcf”) of natural gas per day, in 2019, to 75,175 BOE per day, including 43,526 Bbl of oil per day and 189.9 MMcf of natural gas per day, in 2020. +• +The ongoing transition to drilling longer laterals, whereby 83% of the operated horizontal wells we completed and turned to +sales in 2020 had lateral lengths greater than one mile, as compared to 29% in 2019 and 9% in 2018. +• +The continuing improvement in capital efficiency as demonstrated by (i) our average drilling and completion +(“D&C”) costs for all operated horizontal wells completed and turned to sales of approximately $850 per lateral foot in 2020, a decrease of 27% as compared to average drilling and completion costs of $1,165 per lateral foot in 2019 and +a decrease of 44% as compared to average drilling and completion costs of $1,528 per lateral foot in 2018, and (ii) the sequential quarterly decrease in our drilling and completion costs per lateral foot on operated wells turned to sales +throughout 2020, from $1,009 in the first quarter to $881 in the second quarter to $790 in the third quarter and, finally, to $625 in the fourth quarter. +• +Record-low unit operating costs for lease operating expenses (“LOE”) of +$3.81 per BOE and general and administrative (“G&A”) expenses of $2.27 per BOE, both for the year ended December 31, 2020. +Lower Costs and Increased Capital Efficiency +4 Matador Resources Company | 2021 Proxy Statement +Table of Contents +PROXY SUMMARY +Financial highlights achieved during 2020 include the following: +• +The amendment of the Credit Agreement in February 2020 to reaffirm the borrowing base at $900.0 million, increase our +elected borrowing commitment from $500.0 million to $700.0 million and add two new banks to our lending group. +• +Achievement of free cash flow in the fourth quarter of 2020. +Recent Developments +In February 2021, the Board adopted a dividend policy pursuant to which the Company intends to pay quarterly cash dividends on its common stock of $0.025 per share. +Pursuant to this policy, the Board declared Matador’s first quarterly cash dividend of $0.025 per share of common stock, which was paid on March 31, 2021 to shareholders of record as of March 24, 2021. +Environmental, Social and Governance (“ESG”) Initiatives (page 27) +At Matador, we are committed to creating long-term value in a responsible manner. In alignment with this +goal, we maintain an active ESG program and continued working in 2020 to improve upon that foundation, including by revising the mandate of the Board’s Environmental, Social and Corporate Governance Committee to enhance focus, oversight and +support for the Company’s ESG efforts. Furthermore, we anticipate publishing ESG metrics in alignment with the Sustainability Accountability Standards Board (SASB) framework later this year as part of our ongoing efforts to raise the profile of +the Company’s ESG initiatives and to provide stakeholders with consistent and comparable ESG disclosures. See “Corporate Governance—Environmental, Social and Governance Initiatives” on page 27 for additional information and 2020 +ESG performance highlights. +2021 +Proxy Statement | Matador Resources Company 5 +Table of Contents +PROXY SUMMARY +Director Nominees (page 12) +Our Board currently has 10 members divided into three classes of +directors, designated Class I, Class II and Class III. Directors are elected for three-year terms. The table below provides certain summary information about each nominee for director named in this Proxy Statement: +Name +Age +Director +Since +Principal Occupation +Committee +Memberships +William M. Byerley* +67 +2016 +Retired Partner, PricewaterhouseCoopers LLP (PwC) +A, ESG, M +Monika U. Ehrman* +43 +2019 +Professor of Law and Faculty Director of Oil & Gas, Natural Resources, and Energy Center, University of Oklahoma College of Law +A, ESG, M, O, P +Julia P. Forrester Rogers* +61 +2017 +Professor of Law, Southern Methodist University Dedman School of Law +A, ESG +James M. Howard* +70 +2021 +Retired Trustee, Private Family Trust +A, ESG, M +Kenneth L. Stewart* +67 +2017 +Retired EVP, Compliance and Legal Affairs, Children’s Health System of Texas +CM, E, ESG, SPC +* +Independent Director +A +Audit Committee +CM +Capital Markets and Finance Committee +E +Executive +ESG +Environmental, Social and Corporate Governance Committee +M +Marketing and Midstream Committee +O +Operations and Engineering Committee +P +Prospect Committee +SPC +Strategic Planning and Compensation Committee +Executive Compensation Highlights (page 40) +Response to +COVID-19 and Oil Price Decline +During the first quarter and through April 2020, the oil and natural gas industry +witnessed an abrupt and significant decline in oil prices from $63 per Bbl in early January to as low as ($38) per Bbl in late April. This sudden decline in oil prices was attributable to two primary factors: (i) the precipitous decline in +global oil demand resulting from the worldwide spread of COVID-19 and (ii) a sudden, unexpected increase in global oil supply resulting from actions initiated by Saudi Arabia to increase its oil +production to world markets following the failure of efforts by OPEC+ to agree on coordinated production cuts at their March 6, 2020 meetings in Vienna, Austria. +In connection with these events, we implemented compensation reductions effective April 1, 2020 for our entire workforce, including our executive officers. +Chairman and Chief Executive Officer Joseph Wm. Foran voluntarily agreed to a 25% base salary reduction with the other executive officers and vice presidents agreeing to 20% and 10% reductions, respectively. These pay cuts were not restored until +March 1, 2021, at which time our stock price had rebounded from a low of $1.11 in March 2020 to close at $22.04 on March 1, 2021. +In March 2020, after +consulting with the Strategic Planning and Compensation Committee’s independent compensation consultant, Meridian Compensation Partners, LLC (“Meridian”) and management and considering shareholder feedback, the Independent Board +granted executive officer awards consisting of 50% service-based cash-settled restricted stock units and 50% share-settled performance stock units. These awards reflect the Company’s continued commitment to transition to additional +performance-based compensation. Importantly, in determining the targeted value of these awards, the Independent Board used a stock price of approximately $12.50 on a date at which the Company’s stock price closed at $2.41. The use of this +considerably higher stock price in sizing the 2020 long-term incentive awards significantly lowered the number of units granted to each officer, preserving shares under the Company’s long-term incentive plan for future grants, preventing +additional +6 Matador Resources Company | 2021 Proxy Statement +Table of Contents +PROXY SUMMARY +shareholder dilution and further aligning the interests of our executive officers with shareholders. Mr. Foran’s 2020 long-term award grant date fair value of $651,373 represented an +85% decrease from his 2019 long-term incentive award grant date fair value. +Consistent with the compensation reductions noted above, in setting 2020 annual cash +incentive opportunities under our annual cash incentive plan for our Named Executive Officers, the Strategic Planning and Compensation Committee and Independent Board also lowered these amounts as compared to 2019. Mr. Foran’s target +annual incentive opportunity as a percentage of his earned 2020 base salary was reduced from 110.0% to 73.3%, and his maximum annual incentive opportunity was reduced from 220.0% to 110.0%. +The 2020 operational and financial successes noted above contributed to the Company meeting or exceeding the maximum level of each of the Independent Board-approved +performance metrics under our annual cash incentive plan. Nonetheless, to strengthen the Company’s balance sheet and further align the interests of our executive officers with our shareholders, the Company’s executive officers and the +Independent Board agreed that the executive officers would forego receiving any 2020 annual cash bonuses. +As a result of the base salary reduction, the lower +long-term incentive award grant date fair value and the absence of an annual cash bonus payment, Mr. Foran’s total 2020 compensation of $1.7 million reflects a 79% reduction from 2019 levels. Similarly, the total 2020 compensation of +the other Named Executive Officers decreased an average of 75% from 2019 levels. +Details of our executive compensation are shown in the 2020 Summary Compensation +Table on page 59. For further discussion of the above changes to our executive compensation program, see “Executive Compensation—Compensation Discussion and Analysis” beginning on page 41. +Our Executive Compensation Philosophy +Our compensation program is +designed to reward, in both the short term and the long term, performance that contributes to the implementation of our business strategies, maintenance of our culture and values and achievement of our objectives. In addition, we reward qualities +that we believe help achieve our business strategies such as: +• +teamwork; +• +mentoring future leaders within the Company to drive long-term shareholder value; +• +individual performance in light of general economic and industry-specific conditions; +• +relationships with shareholders and vendors; +• +level of job responsibility; +• +industry experience; +• +general professional growth; and +• +the ability to: +¡ +manage and enhance production from our existing assets; +¡ +explore new opportunities to increase oil and natural gas production; +¡ +identify and acquire additional acreage; +¡ +improve total shareholder returns; +¡ +increase year-over-year proved reserves; +¡ +control unit production costs; and +¡ +pursue midstream opportunities. +2021 +Proxy Statement | Matador Resources Company 7 +Table of Contents +INFORMATION ABOUT THE ANNUAL MEETING +INFORMATION ABOUT THE ANNUAL MEETING +We are furnishing you this Proxy Statement in connection with the solicitation of proxies by the Board to be used at the Annual Meeting and any adjournment +thereof. The Annual Meeting will be held on Friday, June 4, 2021, at 9:30 a.m., Central Daylight Time. We are sending this Proxy Statement to our shareholders on or about April 22, 2021. +All references in this Proxy Statement to “we,” “our,” “us,” “Matador” or the “Company” refer to Matador Resources +Company, including our subsidiaries and affiliates. +What is the purpose of the Annual Meeting? +At the Annual Meeting, shareholders will act upon the following +matters outlined in the Annual Meeting notice: +• +the election of the five nominees for director named in this Proxy Statement; +• +an advisory vote to approve the compensation of our named executive officers as described herein; +• +the ratification of the appointment of KPMG LLP as the Company’s independent registered public accounting firm for the +year ending December 31, 2021; and +• +any other matters that may properly come before the meeting. +What are the Board’s voting recommendations? +• +FOR the election of the five nominees for director named in this Proxy Statement; +• +FOR the approval, on an advisory basis, of the compensation of the Company’s named executive officers; and +• +FOR the ratification of the appointment of KPMG LLP as the Company’s independent registered public accounting +firm for the year ending December 31, 2021. +Who is entitled to vote? +Shareholders as of the close of business on April 8, 2021 +are eligible to vote their shares at the Annual Meeting. As of the Record Date, there were 116,781,445 shares of our Common Stock outstanding. Each share of Common Stock is entitled to one vote at the Annual Meeting. +Why did I receive a Notice Regarding the Internet Availability of Proxy Materials in the mail instead of a full set of proxy materials? +Securities and Exchange Commission (“SEC”) +rules allow companies to furnish proxy materials over the Internet. We have elected to send a separate Notice of Internet Availability of Proxy Materials (the “Notice”) to most of our shareholders instead of a paper copy of the proxy +materials. This approach conserves natural resources and reduces the costs of printing and distributing our proxy materials while providing shareholders with a convenient way to access our proxy materials. Instructions on how to access the proxy +materials over the Internet or to request a paper copy of proxy materials, including a proxy card or voting instruction form, may be found in the Notice. In addition, shareholders may request to receive future proxy materials in printed form by mail +or electronically by email by following the instructions in the Notice. A shareholder’s election to receive proxy materials by mail or email will remain in effect until the shareholder terminates it. +8 Matador Resources Company | 2021 Proxy Statement +Table of Contents +INFORMATION ABOUT THE ANNUAL MEETING +How do I vote? +You may: +• +attend the Annual Meeting and vote in person; +• +dial the toll-free number listed on the Notice, proxy card or voting instruction form provided by your broker. Easy-to-follow voice prompts allow you to vote your shares and confirm that your voting instructions have been properly recorded. Telephone voting will be available 24 hours a +day and will close at 11:59 p.m., Eastern Daylight Time on June 3, 2021; +• +go to the website www.proxyvote.com and follow the instructions, then confirm that your voting instructions have +been properly recorded. If you vote using the website, you can request electronic delivery of future proxy materials. Internet voting will be available 24 hours a day and will close at 11:59 p.m., Eastern Daylight Time on June 3, 2021; or +• +if you received a paper copy of your proxy materials and elect to vote by written submission, mark your selections on the +proxy card, date and sign it, and return the card in the pre-addressed, postage-paid envelope provided. +Why did I receive paper copies of proxy materials? +We are providing certain shareholders with paper copies of the proxy materials instead of a separate Notice. If you received a paper copy and would no longer like to +receive printed proxy materials, you may consent to receive all future proxy materials electronically via email or the Internet. To sign up for electronic delivery, please follow the instructions provided in your proxy materials. When prompted, +indicate that you agree to receive or access shareholder communications electronically in the future. +Will each shareholder in our household +receive proxy materials? +Generally, no. To the +extent you are receiving printed proxy materials, we try to provide only one set of proxy materials to be delivered to multiple shareholders sharing an address, unless you have given us other instructions. Any shareholder at a shared address may +request delivery of single or multiple copies of printed proxy materials for future meetings by contacting us at: +Matador Resources +Company +Attention: Investor Relations +5400 LBJ Freeway, Suite 1500 +Dallas, Texas 75240 +Email: investors@matadorresources.com +Telephone: (972) 371-5200 +We undertake to deliver promptly, upon written or oral request, a copy of proxy materials to a shareholder at a shared address to which a single copy of the proxy +materials was delivered. Requests should be directed to Investor Relations at the address or phone number set forth above. +Who will be +admitted to the Annual Meeting? +Admission to the +Annual Meeting will be limited to our shareholders of record, persons holding proxies from our shareholders, beneficial owners of our Common Stock and our employees. If your shares are registered in your name, we will verify your ownership at the +meeting in our list of shareholders as of the Record Date. If your shares are held through a broker, bank or other nominee, you must bring proof of your ownership of the shares. This proof could consist of, for example, a bank or brokerage firm +account statement or a letter from your bank or broker confirming your ownership as of the Record Date. You may also send proof of ownership to us at Matador Resources Company, Attention: Corporate Secretary, 5400 LBJ Freeway, Suite 1500, Dallas, +Texas 75240, or email: investors@matadorresources.com, before the Annual Meeting, and we will send you an admission card. +2021 +Proxy Statement | Matador Resources Company 9 +Table of Contents +INFORMATION ABOUT THE ANNUAL MEETING +If I vote via telephone or the Internet +or by mailing my proxy card, may I still attend the Annual Meeting? +Yes. +What if I want to change my vote? +You may revoke your proxy before it is voted by submitting a new +proxy with a later date (by mail, telephone or the Internet), by voting at the Annual Meeting or by filing a written revocation with our Corporate Secretary. Your attendance at the Annual Meeting will not automatically revoke your proxy. +What constitutes a quorum? +A majority of the shares entitled to vote, present in person or represented by proxy, constitutes a quorum. If you vote by telephone or Internet or by returning your +proxy card, you will be considered part of the quorum. The Inspector of Election will treat shares represented by a properly executed proxy as present at the meeting. Abstentions and broker non-votes will be +counted for purposes of determining a quorum. A broker non-vote occurs when a nominee holding shares for a beneficial owner submits a proxy but does not vote on a particular proposal because the nominee does +not have discretionary voting power for that item and has not received instructions from the beneficial owner. +How many votes will be +required to approve a proposal? +The affirmative vote +of a majority of the votes cast by holders of shares of Common Stock present in person or represented by proxy and entitled to vote on the election of directors at the Annual Meeting is required for the election of each nominee for director. With +respect to the election of directors in an uncontested election, such as that being held at the Annual Meeting, “majority of the votes cast” means the number of votes cast “for” such nominee exceeds the number of votes cast +“against” such nominee. +With respect to all other matters, the affirmative vote of the holders of a majority of the shares of Common Stock, present in +person or represented by proxy and entitled to vote at the Annual Meeting, is required. +Shares cannot be voted at the Annual Meeting unless the holder of record is +present in person or represented by proxy. +Can brokers who hold shares in street name vote those shares if they have received no +instructions? +Under the rules of the New York Stock +Exchange (“NYSE”), brokers may not vote the shares held by them in street name for their customers and for which they have not received instructions, except with respect to a routine matter. The only matter to be voted on at the Annual +Meeting that is considered routine for these purposes is the ratification of the appointment of our independent registered public accounting firm. Accordingly, brokers may not vote your shares on any other matter if you have not given specific +instructions as to how to vote. Please be sure to give specific voting instructions to your broker so that your vote will be counted. +How +will you treat abstentions and broker non-votes? +Shares of a shareholder who abstains from voting on any or all proposals will be included for the purpose of determining the presence of a quorum. Other than with +respect to the election of directors, an abstention will effectively count as a vote cast against the remaining proposals. Broker non-votes on any matter, as to which the broker has indicated on the proxy that +it does not have discretionary authority to vote, will be treated as shares not entitled to vote with respect to that matter. However, such shares will be considered present and entitled to vote for quorum purposes so long as they are entitled to +vote on at least one other matter. +10 Matador Resources Company | 2021 Proxy Statement +Table of Contents +INFORMATION ABOUT THE ANNUAL MEETING +Who pays the solicitation expenses? +We will bear the cost of solicitation of proxies. Proxies may be +solicited by mail or personally by our directors, officers or employees, none of whom will receive additional compensation for such solicitation. Those holding shares of Common Stock of record for the benefit of others, or nominee holders, are being +asked to distribute proxy soliciting materials to, and request voting instructions from, the beneficial owners of such shares. We will reimburse nominee holders for their reasonable +out-of-pocket expenses. +Where can I find the voting results +of the Annual Meeting? +We will announce preliminary +voting results at the Annual Meeting, and we will publish final results in a Current Report on Form 8-K that will be filed with the SEC within four business days of the Annual Meeting. You may obtain a copy of +this and other reports free of charge at www.matadorresources.com , by contacting our Investor Relations Department at (972) 371-5200 or investors@matadorresources.com or by accessing the SEC’s +website at www.sec.gov . +Will the Company’s independent registered public accounting firm be available at the Annual Meeting to +respond to questions? +Yes. The Audit Committee of +the Board has approved KPMG LLP to serve as our independent registered public accounting firm for the year ending December 31, 2021. Representatives of KPMG LLP will be present at the Annual Meeting. They will have an opportunity to make a +statement, if they desire to do so, and will be available to respond to appropriate questions. +Where can I contact the Company? +Our mailing address is: +Matador Resources Company +Attention: Investor Relations +5400 LBJ Freeway, Suite 1500 +Dallas, Texas 75240 +Our telephone number is (972) 371-5200. +2021 +Proxy Statement | Matador Resources Company 11 +Table of Contents +PROPOSAL 1 +PROPOSAL 1 | ELECTION OF DIRECTORS +The Board currently +consists of 10 members and is divided into three classes of directors, designated Class I, Class II and Class III, with the term of office of each director ending on the date of the third annual meeting following the annual meeting at +which such director’s class was elected. The number of directors in each class will be as nearly equal as possible. The Class I directors are William M. Byerley, Monika U. Ehrman, Julia P. Forrester Rogers and Kenneth L. Stewart, each +of whom is a Class I director nominee at the 2021 Annual Meeting, in each case, to hold office until the 2024 Annual Meeting of Shareholders or his or her earlier death, retirement, resignation or removal. The Class II directors +are R. Gaines Baty, Craig T. Burkert and James M. Howard. The terms of Messrs. Baty and Burkert will each continue until the 2022 Annual Meeting of Shareholders (the “2022 Annual Meeting”) or his earlier death, retirement, +resignation or removal. Mr. Howard was appointed to the Board following the 2020 Annual Meeting and is therefore a Class II nominee at the 2021 Annual Meeting to hold office until the 2022 Annual Meeting or his earlier death, retirement, +resignation or removal. The Class III directors are Joseph Wm. Foran, Reynald A. Baribault and Timothy E. Parker, the terms of whom will each continue until the 2023 Annual Meeting of Shareholders or his earlier death, retirement, resignation +or removal. +The Board believes that each of the director nominees possesses the qualifications described below in “Corporate Governance—Board +Committees—Nominating Committee.” That is, the Board believes that each nominee possesses: +• +deep experience at the policy making level in business, government or education; +• +the availability and willingness to devote adequate time to Board duties; +• +the character, judgment and ability to make independent analytical, probing and other inquiries; +• +a willingness to exercise independent judgment along with a willingness to listen and learn from others; +• +business knowledge and experience that provides a balance with the other directors; +• +financial independence; and +• +excellent past performance on the Board. +Director Diversity +TENURE +AGE +GENDER +12 Matador Resources Company | 2021 Proxy Statement +Table of Contents +PROPOSAL 1 +Core Competencies +Senior Leadership Experience +Energy Industry Experience +Financial Expertise +Legal and Risk Management Experience +Strategic Planning Expertise +ESG Experience +Capital Markets Experience +Information Technology Expertise +The information provided below is biographical +information about each of the nominees, as well as a description of the experience, qualifications, attributes or skills that led the Board to conclude that the individual should be nominated for election as a director of the Company. +Nominees +M R . W ILLIAM M. +B YERLEY +Retired Partner, PricewaterhouseCoopers LLP (PwC) +Class I +Director +Director since: 2016 +Independent: Yes +Age: 67 +Committees: +•   Audit (Chair) +•   Environmental, Social and Corporate Governance +•   Marketing and Midstream +Biographical Information: +Mr. Byerley was appointed to the Board in 2016 and is chair of the Board’s Audit Committee. Mr. Byerley retired from PricewaterhouseCoopers LLP (PwC) in +2014. From 1988 through 2014, Mr. Byerley was a Partner with PwC, serving as an Assurance Partner on various audit engagements primarily for energy sector clients. From 1988 through 1990, Mr. Byerley served in the PwC National Office +Accounting Services Group. Mr. Byerley received a Bachelor of Business Administration degree in 1975 and a Master of Business Administration degree in 1976, both from Southern Methodist University. He is a licensed Certified Public +Accountant. +Qualifications: +Mr. Byerley’s extensive experience in public accounting and +longtime service to energy sector clients of PwC provide the Board with invaluable financial and accounting expertise, particularly for oil and natural gas companies, strong accounting and financial oversight and general industry knowledge. +2021 +Proxy Statement | Matador Resources Company 13 +Table of Contents +PROPOSAL 1 +M S . M ONIKA U. E HRMAN +Professor of Law and Faculty Director of Oil & Gas, Natural Resources, and +Energy Center, University of Oklahoma College of Law +Class I +Director +Director since: 2019 +Independent: Yes +Age: 43 +Committees: +•   Audit +•   Environmental, Social and Corporate Governance +•   Marketing and Midstream +•   Operations and Engineering +•   Prospect +Biographical Information: +Ms. Ehrman was appointed to the Board in 2019. She is Professor of Law, earning tenure in 2019, and Faculty Director of the Oil & Gas, Natural Resources, +and Energy Center (ONE C) at the University of Oklahoma College of Law. Professor Ehrman also serves as Adjunct Associate Professor, Energy Management, at the University of Oklahoma Michael F. Price College of Business. She is also Visiting +Professor of Law at the University of North Texas at Dallas College of Law for the 2020-2021 academic year. Professor Ehrman joined the University of Oklahoma College of Law in 2013 as Associate Professor of Law. Prior to teaching, she served as in-house legal counsel for two oil and natural gas companies from 2008 to 2012 and as an associate oil and natural gas attorney at an international law firm from 2005 to 2008. Before law school, Professor Ehrman +worked as a petroleum engineer in the upstream, midstream and pipeline sectors of the energy industry. In addition to serving on various oil and natural gas law committees, she also served as an Editor of the Oil and Gas Reporter for the Institute +for Energy Law. Professor Ehrman received her Bachelor of Science degree in Petroleum Engineering from the University of Alberta; J.D. from Southern Methodist University Dedman School of Law; and Master of Laws degree from Yale Law School. +Qualifications: +Professor Ehrman provides valuable insight to our Board on our engineering and midstream +operations as well as legal and governance matters. +M S . J ULIA P. F ORRESTER +R OGERS +Professor of Law, Southern Methodist University Dedman School of +Law +Class I +Director +Director since: 2017 +Independent: Yes +Age: 61 +Committees: +•   Environmental, Social and Corporate Governance (Chair) +•   Audit +Biographical Information: +Ms. Rogers was appointed to the Board in 2017 and is chair of the Board’s Environmental, Social and Corporate Governance Committee. Ms. Rogers is a +Professor of Law at Southern Methodist University Dedman School of Law where she has been a member of the faculty since 1990, teaching and serving in various administrative positions. From 2015 through 2018, Ms. Rogers served as Associate +Provost for Student Academic Services at SMU, overseeing International Student and Scholar Services, Study Abroad, the Center for Academic Development of Student Athletes, the President’s Scholars Program and the Hunt Scholars Program, among +others. She has served in various administrative positions at SMU, including serving as Associate Dean for Academic Affairs for the 1995-1996 academic year and as Dean ad interim of the Dedman School of Law from June 2013 through June 2014. Before +beginning her academic career at SMU, Ms. Rogers practiced law with Thompson & Knight LLP. Ms. Rogers holds a Bachelor of Science degree in Electrical Engineering from The University of Texas at Austin, graduating with highest +honors, and a law degree from The University of Texas School of Law, graduating with high honors. She is a member of the Order of the Coif, and she received the highest score on the Texas bar exam following her graduation. More recently, she was +elected as a member of the American Law Institute. +Qualifications: +Ms. Rogers’ academic, administrative and legal experience provide our Board with a +unique perspective on the Company’s business, operations and corporate governance. +14 Matador Resources Company | 2021 Proxy Statement +Table of Contents +PROPOSAL 1 +M R . J AMES M. H OWARD +Retired Trustee, Private Family Trust +Class II +Director +Director since: 2021 +Independent: Yes +Age: 70 +Committees: +•   Marketing and Midstream (Chair) +•   Audit +•   Environmental, Social and Corporate Governance +Biographical Information: +Mr. Howard was appointed to the Board in 2021. He retired in March 2020 from his long-time role as a trustee of a private family trust in Houston, Texas where, +since 1999, he exercised sole responsibility for all trust assets and actions. The trust was comprised of over 40 privately held limited partnerships, limited liability companies and public market positions in various asset classes and sectors. From +2000 to 2020, Mr. Howard also served as trustee of a private secondary trust with a different mix of assets than the primary family trust. Prior to his work as a trustee, he served as Vice President of Texon, L.P. from 1996 to 2000, marketing +all crude oil, condensate and liquefied petroleum gas for the company and their public utility joint venture partner. From 1986 to 1996, he served as Vice President of Tripetrol Oil Trading, Inc., through which he also served on the New York +Mercantile Exchange (NYMEX) Crude Oil Advisory Committee. Mr. Howard previously served in other trading positions at various Houston-based trading and petroleum companies from 1975 to 1986. He received a Bachelor of Arts degree from Florida +Presbyterian College and a Master of International Management degree from Thunderbird School of International Management. +Qualifications: +Mr. Howard’s petroleum marketing and trading experience provide the Company with +valuable insight, particularly with respect to its marketing activities and the operations of San Mateo. +2021 +Proxy Statement | Matador Resources Company 15 +Table of Contents +PROPOSAL 1 +M R . K ENNETH L. +S TEWART +Retired EVP, Compliance and Legal Affairs, Children’s Health System of +Texas +Class I +Director +Director since: 2017 +Independent: Yes +Age: 67 +Committees: +•   Capital Markets and Finance +•   Environmental, Social and Corporate Governance +•   Executive +•   Strategic Planning and Compensation +Biographical Information: +Mr. Stewart was appointed to the Board in 2017. Mr. Stewart was most recently employed as Executive Vice President, Compliance and Legal Affairs, for +Children’s Health System of Texas, a position that he began on January 1, 2019 and from which he retired on January 2, 2021. Children’s Health System of Texas and its affiliates constitute one of the 10 largest pediatric hospital +systems in the United States. Previously, effective December 31, 2018, Mr. Stewart retired from Norton Rose Fulbright US LLP, which constitutes the United States operations of Norton Rose Fulbright, an international legal practice with +3,700 legal professionals in over 50 cities worldwide. At the time of his retirement, Mr. Stewart was a Partner with Norton Rose Fulbright and held the position of Chair—United States. Mr. Stewart began his legal career with +Fulbright & Jaworski LLP, the predecessor to Norton Rose Fulbright US LLP, and previously held at differing times positions of Global Chair of the international organization, Managing Partner of the United States region and Partner-in-Charge of the Dallas office. Prior to entering into full-time management for his firm in 2012, he engaged in a domestic and international transactional legal +practice, focusing principally on merger, acquisition, financing and joint venture activities for both public and privately-held entities. Mr. Stewart has extensive experience representing and advising companies and their executive officers and +boards of directors engaged in oil and natural gas exploration and midstream activities. Since his retirement from Norton Rose Fulbright, Mr. Stewart has acted, and from time to time continues to act, on a limited basis as an independent +contractor senior business consultant to family offices for which he provided services during his legal career. Mr. Stewart graduated from the University of Arkansas School of Business in 1976 with a Bachelor of Science in Business +Administration degree in Accounting and was licensed as a Certified Public Accountant in Texas in 1981 (certificate now on non-practice status). He graduated with honors from Vanderbilt Law School in 1979 and +was a member of the Order of the Coif. Mr. Stewart has been active in numerous civic and professional organizations in the Dallas area in the past, including among others, the Dallas Regional Chamber, The Center for American and International +Law and the Dallas Citizens Council. +Qualifications: +Mr. Stewart’s extensive experience representing public companies, and particularly oil +and natural gas companies, along with his years of management experience, provide our Board with important legal, corporate governance and leadership insight. +Vote Required +The affirmative vote of a majority of the votes cast by holders +of shares present in person or represented by proxy and entitled to vote on the election of directors at the Annual Meeting is required for the election of each nominee for director. With respect to the election of directors in an uncontested +election, such as that being held at the Annual Meeting, “majority of the votes cast” means the number of votes cast “for” such nominee exceeds the number of votes cast “against” such nominee. If you hold your shares +through a broker and you do not instruct the broker how to vote, your broker will not have the authority to vote your shares. Abstentions and broker non-votes will each be counted as present for purposes of +determining the presence of a quorum. +The Board of Directors recommends that you vote FOR each of the nominees. +16 Matador Resources Company | 2021 Proxy Statement +Table of Contents +PROPOSAL 1 +Directors Continuing in Office +Biographical information for our directors who are continuing in +office is provided below. +M R . J OSEPH W M . +F ORAN +CEO, Matador Resources Company +Class III +Chairman of the Board +Director since: 2003 +Independent: No +Age: 68 +Committees: +•   Executive (Chair) +•   Capital Markets and Finance +•   Operations and Engineering +•   Prospect +Biographical Information: +Mr. Foran founded Matador Resources Company in July 2003 and has served as Chairman of the Board, Chief Executive Officer and Secretary since our founding in 2003. +He is also chair of the Board’s Executive Committee. Mr. Foran began his career as an oil and natural gas independent in 1983 when he and his wife, Nancy, founded Foran Oil Company with $270,000 in contributed capital from 17 of his +closest friends and neighbors. Foran Oil Company was later contributed into Matador Petroleum Corporation (Matador I) upon its formation by Mr. Foran in 1988, and Mr. Foran served as Chairman and Chief Executive Officer of that company +from inception until the time of its sale to Tom Brown, Inc. in June 2003 for an enterprise value of $388 million in an all-cash transaction on a Friday. On the following Monday, Mr. Foran founded Matador +Resources Company (Matador II). Today, Matador is one of the top 20 public exploration and production companies in the country by market capitalization and one of the top 10 oil and natural gas producers in New Mexico. Mr. Foran is +originally from Amarillo, Texas, where his family owned a pipeline construction business. From 1980 to 1983, he was Vice President and General Counsel of J. Cleo Thompson and James Cleo Thompson, Jr., Oil Producers, a large independent producer. +Prior to that time, he was a briefing attorney to Chief Justice Joe R. Greenhill of the Supreme Court of Texas. Mr. Foran graduated with a Bachelor of Science degree in Accounting from the University of Kentucky with highest honors and a law +degree from the Southern Methodist University Dedman School of Law, where he was a Hatton W. Sumners scholar and the Leading Articles Editor on the Southwestern Law Review. He is currently active as a member of various industry and civic +organizations, including his church and various youth activities. In 2002, Mr. Foran was honored as the Ernst & Young “Entrepreneur of the Year” for the Southwest Region. In 2015, he was inducted into the University of +Kentucky Gatton College of Business and Economics Hall of Fame. In 2019, Mr. Foran received the SMU Dedman School of Law Distinguished Alumni Award for Corporate Service and was named D CEO Magazine’s 2019 Upstream CEO of the Year. In +2020, he was inducted into the Philosophical Society of Texas. He was also named to Institutional Investors’ All-American Executive Team as one of the top chief executive officers in the Small Cap Energy Division in 2021. +Qualifications: +As the founder, Chairman of the Board and Chief Executive Officer of Matador Resources Company, +Mr. Foran provides Board leadership, industry experience and long relationships with many of our shareholders. +2021 +Proxy Statement | Matador Resources Company 17 +Table of Contents +PROPOSAL 1 +M R . R EYNALD A. B ARIBAULT +Executive Vice President / Engineering, NP Resources, LLC +Class III +Director +Director since: 2014 +Independent: Yes +Age: 57 +Committees: +•   Operations and Engineering (Chair) +•   Prospect (Chair) +•   Audit +•   Executive +•   Strategic Planning and Compensation +Biographical Information: +Mr. Baribault was elected to the Board in 2014 and is chair of the Board’s Operations and Engineering Committee and Prospect Committee. He served as lead +independent director of the Board from 2016 to 2019. He is Executive Vice President / Engineering of NP Resources, LLC, a Denver-based exploration and production operator with sole focus on the North Dakota Williston Basin. He co-founded NP Resources’ predecessor company, North Plains Energy, LLC, which developed and sold its North Dakota Bakken production and assets in 2012. In addition, he +co-founded and serves as President and Chief Executive Officer of IPR Energy Partners, LLC, a Plano, Texas-based oil and natural gas production operator with current operations in the Fort Worth Basin. Prior +to co-founding North Plains Energy, NP Resources and IPR Energy Partners, Mr. Baribault served as Vice President, Supervisor and Petroleum Engineering Consultant with Netherland, Sewell & +Associates, Inc. in their Dallas office from 1990 to 2002. Mr. Baribault began his professional career as a reservoir engineer with Exxon Company in 1985 in the New Orleans Eastern Division Office. Mr. Baribault received his Bachelor of +Science degree in Petroleum Engineering from Louisiana State University in 1985 and is a Licensed Professional Engineer in the State of Texas. +Qualifications: +Mr. Baribault provides valuable insight to our Board on our drilling, completions and +reservoir engineering operations, as well as growth strategies, midstream operations and administration. +M R . R. G AINES B ATY +CEO, R. Gaines Baty Associates, Inc. +Class II +Deputy Lead Independent Director +Director since: 2016 +Independent: Yes +Age: 70 +Committees: +•   Strategic Planning and Compensation (Chair) +•   Nominating (Chair) +•   Environmental, Social and Corporate Governance +•   Executive +Biographical Information: +Mr. Baty was appointed to the Board in 2016. He serves as deputy lead independent director and is chair of the Board’s Nominating Committee and Strategic +Planning and Compensation Committee. Mr. Baty is CEO of R. Gaines Baty Associates, Inc., a leading executive search firm he founded in 1982 after working with the IBM Corporation. With over 30 years of experience, Mr. Baty has provided +companies across the country and in a variety of industries with executive search and advisory services. Mr. Baty has served as a two-term President of the Society of Executive Recruiting Consultants and +a two-term President of the Independent Recruiter Group. Mr. Baty is also a published author. Mr. Baty received a Bachelor of Business Administration degree from Texas Tech University, where he was a +football team letterman, captain and, later, graduate assistant coach. +Qualifications: +Mr. Baty’s experience and expertise in executive leadership and development provide our +Board with an important and unique perspective on these matters, and Mr. Baty assists the Board and the Company with recruitment, board administration, compensation and growth strategies. +18 Matador Resources Company | 2021 Proxy Statement +Table of Contents +PROPOSAL 1 +M R . C RAIG T. +B URKERT +CFO, ROMCO Equipment Co. +Class II +Director +Director since: 2016 +Independent: Yes +Age: 64 +Committees: +•   Audit +•   Capital Markets and Finance +•   Marketing and Midstream +•   Nominating +Biographical Information: +Mr. Burkert was elected to the Board in 2016. With over 30 years of experience in distribution businesses, he currently serves as the Chief Financial Officer of +ROMCO Equipment Co., a dealer of heavy construction equipment that serves customers in a variety of sectors throughout most of Texas. Mr. Burkert joined ROMCO in 1984 as a Product Manager, later serving as a Branch Manager from 1986 to 1989 and +as General Manager from 1989 to 1994. In 1994, he left ROMCO to start a dealership in the lift truck industry in New England, but he returned to ROMCO in 2003 to take on his current position of Chief Financial Officer, where he is responsible for +all financial, administrative and technology aspects of the company. Mr. Burkert received a Bachelor of Science degree in Electrical Engineering and Computer and Information Systems from Tulane University. He also holds a Master in Business +Administration degree from Harvard Business School. Mr. Burkert has been involved with Matador since its inception. +Qualifications: +Mr. Burkert’s accounting and financial knowledge and leadership experience, coupled with +his familiarity with the operations, information services and corporate governance of the Company, provide our Board with a valuable perspective on these matters and other business issues. +M R . T IMOTHY E. +P ARKER +Former Portfolio Manager and Analyst—Natural Resources, T. Rowe +Price & Associates +Class III +Lead Independent Director +Director since: 2018 +Independent: Yes +Age: 46 +Committees: +•   Capital Markets and Finance (Chair) +•   Audit +•   Environmental, Social and Corporate Governance +•   Executive +•   Nominating +•   Prospect +•   Strategic Planning and Compensation +Biographical Information: +Mr. Parker was appointed to the Board in 2018, serves as lead independent director and is chair of the Board’s Capital Markets and Finance Committee. +Mr. Parker retired in 2017 as Portfolio Manager and Analyst—Natural Resources for T. Rowe Price & Associates. Mr. Parker joined T. Rowe Price in 2001 as an equity analyst before becoming a portfolio manager in 2010. He +managed the New Era fund from 2010 to 2013 and managed the energy and natural resources portions of T. Rowe Price’s Small Cap Value, Small Cap Stock and New Horizons funds from 2013 to 2017. Prior to joining T. Rowe Price, Mr. Parker was +an investment banking analyst at Robert W. Baird & Co., Inc. Mr. Parker holds a Bachelor of Science degree in Commerce from the University of Virginia and a Master of Business Administration degree from the Darden School of Graduate +Business (University of Virginia). +Qualifications: +Mr. Parker’s experience with a large institutional shareholder and his extensive +familiarity with the capital markets provide the Company with valuable insight. +2021 +Proxy Statement | Matador Resources Company 19 +Table of Contents +CORPORATE GOVERNANCE +CORPORATE GOVERNANCE +The business affairs of Matador are managed under the direction of the Board in accordance with the Texas Business Organizations Code, the Company’s Amended and +Restated Certificate of Formation (the “Certificate of Formation”) and its Amended and Restated Bylaws (the “Bylaws”), each as amended to date. The Board has adopted Corporate Governance Guidelines, which are reviewed annually by +the Environmental, Social and Corporate Governance Committee of the Board. The Company has a Code of Ethics and Business Conduct for Officers, Directors and Employees (“Code of Ethics”), which is applicable to all officers, directors and +employees of the Company. The Company intends to post any amendments to, and may post any waivers of, its Code of Ethics on the Company’s website to the extent applicable to an executive officer or a director of the Company. The Corporate +Governance Guidelines and the Code of Ethics are available on the Company’s website at www.matadorresources.com under the heading “Investor Relations—Corporate Governance.” +The Board holds regular and special meetings and spends such time on the affairs of the Company as its duties require. During 2020, the Board held nine meetings. The +Board also meets regularly in non-management executive sessions in accordance with NYSE regulations. The Corporate Governance Guidelines provide that one of the Company’s independent directors should +serve as lead independent director at any time when the chief executive officer serves as the chairman of the board. The lead independent director presides over the non-management executive sessions, serves as +a liaison between the chairman and the independent directors and performs such additional duties as the Board may otherwise determine and delegate. Because Mr. Foran serves as Chairman of the Board and Chief Executive Officer, our independent +directors have appointed Mr. Parker to serve as lead independent director and Mr. Baty to serve as deputy lead independent director. In 2020, all incumbent directors of the Company attended at least 75% of the meetings of the Board and the +committees on which they served. It is our policy that each of our directors is expected to attend annual meetings of shareholders. All of our directors attended the 2020 Annual Meeting. +Independence of Directors +The Board makes all determinations with respect to director +independence in accordance with the NYSE listing standards and the rules and regulations promulgated by the SEC. The actual determination of whether a director is independent is made by the Board on a case-by-case basis. +In connection with its preparation for the Annual Meeting, the Board undertook its annual review of +director independence and considered transactions and relationships between each director or any member of his or her immediate family and the Company and its subsidiaries and affiliates. In making its determination, the Board applied the NYSE +listing standards and SEC rules and regulations. +The Board reviewed the independence of our directors and considered whether any director has a material +relationship with us that could compromise his or her ability to exercise independent judgment in carrying out his or her responsibilities. After this review, our Board determined that nine of our 10 current directors are “independent +directors” as defined under the rules of the SEC and the NYSE: Mmes. Ehrman and Rogers and Messrs. Baribault, Baty, Burkert, Byerley, Howard, Parker and Stewart. No member of or nominee for our Board has a family relationship with any executive +officer or other members of our Board. +Majority Vote in Director Elections +On December 21, 2016, the Board amended the Bylaws to +implement a majority voting standard in uncontested director elections. Pursuant to the Bylaws, in an election of directors at a meeting of shareholders at which a quorum is present, (i) if the number of nominees exceeds the number of directors +to be elected (a “contested election”), directors shall be elected by a plurality of the votes cast by the holders of shares present in person or represented by proxy and entitled to vote on the election of directors at such meeting and +(ii) in an election of directors that is not a contested election (an “uncontested election”), such as that being held at the Annual Meeting, directors shall be elected by a majority of the votes cast by the holders of shares present +in person or +20 Matador Resources Company | 2021 Proxy Statement +Table of Contents +CORPORATE GOVERNANCE +represented by proxy and entitled to vote on the election of directors at such meeting. For purposes of the Bylaws, in an uncontested election, a “majority of the votes cast” means that +the number of shares voted “for” a director must exceed the number of votes cast “against” that director. Prior to the amendment of the Bylaws, directors were elected by a plurality of the votes cast, whether or not the election +was a contested election. +In connection with the amendment to the Bylaws, the Board approved and adopted an amendment to the Company’s Corporate Governance +Guidelines to implement a resignation policy for directors who fail to receive the required number of votes in an uncontested election in accordance with the Bylaws. Pursuant to the Corporate Governance Guidelines, as amended, in an uncontested +election, any nominee for director who receives a greater number of votes “against” his or her election than votes “for” such election (a “majority against vote”) shall promptly tender his or her resignation following +certification of the shareholder vote. +The Nominating Committee shall promptly consider the resignation offer and a range of possible responses based on the +circumstances that led to the majority against vote, if known, and make a recommendation to the Board concerning whether to accept or reject such resignation. The Board shall act on the Nominating Committee’s recommendation and publicly +disclose its decision with respect to such resignation offer within 90 days following certification of the shareholder vote. The resignation, if accepted by the Board, will be effective at the time specified by the Board when it determines to accept +the resignation, which effective time may be deferred until a replacement director is identified and appointed to the Board. +Board Leadership Structure +Mr. Foran serves +as Chairman of the Board and Chief Executive Officer of the Company. As stated in the Corporate Governance Guidelines, the Board does not believe that the offices of Chairman of the Board and Chief Executive Officer must be separate. The members of +the Board possess experience and unique knowledge of the challenges and opportunities the Company faces. They are, therefore, in the best position to evaluate the current and future needs of the Company and to judge how the capabilities of the +directors and senior managers can be most effectively organized to meet those needs. Given Mr. Foran’s deep knowledge of the Company and experience in leading it, the Board currently believes that the most effective leadership structure +for the Company is to have Mr. Foran serve as Chairman of the Board and Chief Executive Officer. +While Mr. Foran serves as Chairman of the Board and +Chief Executive Officer, all of our non-employee directors are independent under the rules of the SEC and the NYSE. After considering the recommendations of our Strategic Planning and Compensation Committee, +the independent directors determine Mr. Foran’s compensation. Further, the Company has five standing committees, a lead independent director (Mr. Parker) and a deputy lead independent director (Mr. Baty). The Board believes that +each of these measures counterbalances any risk that may exist in having Mr. Foran serve as Chairman of the Board and Chief Executive Officer. For these reasons, the Board believes that this leadership structure is effective for the Company. +As lead independent director, Mr. Parker has the following roles and responsibilities: +• +chairs the executive sessions of the non-management and independent directors; +• +leads the independent directors in the evaluation of the Chief Executive Officer; +• +facilitates communication among the independent directors; and +• +acts as a liaison between the independent directors and the Chief Executive Officer. +Mr. Parker, as lead independent director, may also perform such other duties as the Board or the Environmental, Social and Corporate Governance Committee from time +to time may assign, which may include, but are not limited to, the following: +• +help develop Board agendas and ensure critical issues are included; +• +determine quality, quantity and timeliness of information from management; +• +make recommendations about retaining consultants or advisors for the Board; +2021 +Proxy Statement | Matador Resources Company 21 +Table of Contents +CORPORATE GOVERNANCE +• +interview Board candidates; +• +oversee Board and director evaluations; and +• +help improve communications and processes by and between management and the Board and the Chief Executive Officer. +Mr. Baty, as deputy lead independent director, may also carry out the above duties in the absence of or at the direction of Mr. Parker, +as lead independent director. +Board Committees +The standing committees of the Board are the Audit Committee, +Environmental, Social and Corporate Governance Committee, Executive Committee, Nominating Committee and Strategic Planning and Compensation Committee. The Board has also established the following advisory committees: Capital Markets and Finance +Committee, Marketing and Midstream Committee, Operations and Engineering Committee and Prospect Committee. Each of the standing committees is governed by a charter, and a copy of the charters of each of these committees is available on the +Company’s website at www.matadorresources.com under the heading “Investor Relations—Corporate Governance.” Director membership of all of our standing and advisory committees is identified below, as of April 22, 2021. +22 Matador Resources Company | 2021 Proxy Statement +Table of Contents +CORPORATE GOVERNANCE +Audit Committee +The Audit Committee assists the Board in monitoring: +• +the integrity of our financial statements and disclosures; +• +our compliance with legal and regulatory requirements; +• +the qualifications and independence of our independent auditor; +• +the performance of our internal audit function and our independent auditor; and +• +our internal control systems. +In addition, the Audit Committee is charged with the (i) review of compliance with our Code of Ethics and (ii) oversight of the Company’s guidelines and +policies to govern the process by which risk assessment and risk management are undertaken by management, including with respect to corporate governance, financial, accounting, operational, environmental, health and safety, regulatory and +cybersecurity risks. +As of April 22, 2021, the Audit Committee consisted of Mmes. Ehrman and Rogers and Messrs. Baribault, Burkert, Byerley, Howard and +Parker, each of whom is independent under the rules of the SEC and the NYSE. Mr. Byerley is the chair of the Audit Committee. SEC rules require a public company to disclose whether or not its audit committee has an “audit committee +financial expert” as defined by applicable SEC rules and regulations. Our Board has determined that each of Messrs. Burkert, Byerley and Parker is an “audit committee financial expert.” During 2020, the Audit Committee met five +times. +Environmental, Social and Corporate Governance Committee +The Environmental, Social and Corporate Governance Committee is responsible for periodically reviewing and assessing our Corporate Governance Guidelines and Code of +Ethics and making recommendations for changes thereto to the Board, reviewing any other matters related to our corporate governance, unless the authority to conduct such review has been retained by the Board or delegated to another committee, and +overseeing the process for evaluation of the Board and management. The Environmental, Social and Corporate Governance Committee (formerly the Corporate Governance Committee), in conjunction with the Company’s CEO, also oversees ESG matters. +As of April 22, 2021, the Environmental, Social and Corporate Governance Committee consisted of Mmes. Ehrman and Rogers and Messrs. Baty, Byerley, +Howard, Parker and Stewart, each of whom is independent under the rules of the SEC and the NYSE. Ms. Rogers is the chair of the Environmental, Social and Corporate Governance Committee. During 2020, the Environmental, Social and Corporate +Governance Committee met four times. +Executive Committee +The +Executive Committee has authority to discharge all the responsibilities of the Board in the management of the business and affairs of the Company, except where action of the full Board is required by statute or by our Certificate of Formation or +Bylaws, each as amended to date. As of April 22, 2021, the Executive Committee consisted of Messrs. Foran, Baribault, Baty, Parker and Stewart. Mr. Foran is the chair of the Executive Committee. During 2020, the Executive Committee did not +meet. +Nominating Committee +The Nominating Committee has the +following responsibilities: +• +identifies and recommends to the Board individuals qualified to be nominated for election to the Board; and +• +recommends to the Board the members and chair of each committee of the Board. +2021 +Proxy Statement | Matador Resources Company 23 +Table of Contents +CORPORATE GOVERNANCE +Pursuant to the Nominating Committee charter, no director may +serve on the Nominating Committee if such director is subject to re-election to the Board at the next annual meeting of shareholders. +As of April 22, 2021, the Nominating Committee consisted of Messrs. Baty, Burkert and Parker, each of whom is independent under the rules of the SEC and the NYSE. +Mr. Baty is the chair of the Nominating Committee. During 2020, the Nominating Committee met five times. +The Board has also established a Shareholder Advisory +Committee for Board Nominations (the “Advisory Committee”) that is charged with receiving and considering possible nominees for election to the Board by shareholders. Pursuant to the Advisory Committee charter, this committee is comprised +of eight to 12 persons selected by the Nominating Committee and consists of at least: +• +two members of the Nominating Committee; +• +two former members of or special advisors to the Board; +• +two shareholders who beneficially own Common Stock having a market value of at least $1.0 million (such value to be +based on the market value of the Common Stock immediately prior to designation of such shareholders to the Advisory Committee); and +• +two shareholders who have beneficially owned Common Stock continuously for at least the five years prior to such +shareholder’s designation to the Advisory Committee. +The current members of the Advisory Committee are Messrs. Baty and Parker and Rick H. +Fenlaw, Scott E. King, George M. Yates, J. Barry Banker, Joe E. Coleman, Kevin M. Grevey and Bobby K. Pickard. Messrs. King and Fenlaw are co-chairs of the Advisory Committee. +The Advisory Committee makes recommendations based on its conclusions to the Nominating Committee for its consideration and review. +The Nominating Committee and the Advisory Committee consider individuals recommended by the Company’s shareholders to serve on the Board. In considering candidates +submitted by shareholders, the Advisory Committee and the Nominating Committee take into consideration the needs of the Board and the qualifications of the candidate. To have a candidate considered by the Advisory Committee and the Nominating +Committee, a shareholder must submit the recommendation in writing and must include the following information: +• +The name and address of the shareholder, evidence of the person’s ownership of Common Stock or derivatives, including +the number of shares owned, a description of all arrangements or understandings regarding the right to vote shares of the Company, any short interest in any security of the Company, any rights to dividends that are separated or separable from the +underlying shares, any proportionate interest in shares or derivatives held by a general or limited partnership whereby the shareholder is a general partner or beneficially owns an interest in the general partner, any performance-related fees (other +than an asset-based fee) that the shareholder is entitled to based on any change in the value of the shares or derivatives, any other information relating to the shareholder that would be required to be disclosed in connection with solicitations of +proxies for the election of directors in a contested election and a statement whether or not the shareholder will deliver a proxy to shareholders; and +• +The name, age and business and residence addresses of the candidate, the candidate’s résumé or a listing +of his or her qualifications to be a director of the Company, the person’s consent to be a director if selected by the Nominating Committee, nominated by the Board and elected by the shareholders and any other information that would be required +to be disclosed in solicitations of proxies for the election of directors. +The shareholder recommendation and information described above, and in +more detail in our Bylaws, must be sent to the Corporate Secretary at One Lincoln Centre, 5400 LBJ Freeway, Suite 1500, Dallas, Texas 75240 and must be received by the Corporate Secretary not fewer than 45 nor more than 75 days prior to the one year +anniversary date of the date the Company’s proxy statement was mailed in connection with the previous year’s annual meeting of shareholders. +24 Matador Resources Company | 2021 Proxy Statement +Table of Contents +CORPORATE GOVERNANCE +The Nominating Committee believes that a potential director of the Company must demonstrate that such candidate has: +• +a depth of experience at the policy-making level in business, government or education; +• +a balance with the business knowledge and experience of the incumbent or nominated directors; +• +availability and willingness to devote adequate time to Board duties; +• +any unfilled expertise needed on the Board or one of its committees; +• +character, judgment and ability to make independent analytical, probing and other inquiries; +• +willingness to exercise independent judgment while remaining willing to listen and learn from the other directors and the +Company’s staff; and +• +financial independence to ensure such candidate will not be financially dependent on director compensation. +In the case of an incumbent director, the Nominating Committee will also consider such director’s past performance on the Board. +The Nominating Committee or the Advisory Committee may identify potential nominees by asking, from time to time, current directors and executive officers for their +recommendation of persons meeting the criteria described above who might be available to serve on the Board. The Nominating Committee or the Advisory Committee may also engage firms that specialize in identifying director candidates. As described +above, the Nominating Committee and Advisory Committee will also consider candidates recommended by shareholders. +Once a person has been identified by the +Nominating Committee or the Advisory Committee as a potential candidate, the Nominating Committee or the Advisory Committee will make an initial determination regarding the need for additional Board members to fill vacancies or expand the size of +the Board. If the Nominating Committee or the Advisory Committee determines that additional consideration is warranted, the Nominating Committee or the Advisory Committee will review such information and conduct interviews as it deems necessary to +fully evaluate each director candidate. In addition to the qualifications of a candidate, the Nominating Committee or the Advisory Committee will consider such relevant factors as it deems appropriate, including the current composition of the Board, +the evaluations of other prospective nominees and the need for any required expertise on the Board or one of its committees. The Nominating Committee or the Advisory Committee also contemplates multiple dynamics that promote and advance diversity +among the members of the Board. Although the Nominating Committee does not have a formal diversity policy, the Nominating Committee considers a number of factors regarding diversity of personal and professional backgrounds, gender, race, age, +specialized skills and acumen and breadth of experience in energy exploration and production, midstream and marketing, executive leadership, accounting, finance or law. The Nominating Committee does not discriminate based upon race, religion, +gender, national origin, age, disability, citizenship or any other legally protected status. The Nominating Committee’s evaluation process will not vary based on whether or not a candidate is recommended by a shareholder. +Strategic Planning and Compensation Committee +The Strategic Planning +and Compensation Committee has the following responsibilities: +• +assists the Board and the independent members of the Board (the “Independent Board”) in the discharge of their +fiduciary responsibilities relating to the fair and competitive compensation of our executive officers; +• +provides overall guidance with respect to the establishment, maintenance and administration of our compensation programs, +including stock and benefit plans; +• +oversees and advises the Board and the Independent Board on the adoption of policies that govern our compensation programs; +• +recommends to the Board the strategic, tactical and performance goals of the Company, including those performance and +tactical goals that relate to performance-based compensation, including but not limited to goals for production, reserves, cash flows and shareholder value; and +• +in conjunction with the Company’s CEO, oversees management succession planning. +2021 +Proxy Statement | Matador Resources Company 25 +Table of Contents +CORPORATE GOVERNANCE +The Strategic Planning and Compensation Committee has the +authority to delegate authority and responsibilities to subcommittees of its members, so long as any subcommittee consists of at least two members. +As of +April 22, 2021, the Strategic Planning and Compensation Committee consisted of Messrs. Baribault, Baty, Parker and Stewart, each of whom is independent under the rules of the SEC and the NYSE and a +“non-employee director” pursuant to Rule 16b-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Mr. Baty is the chair of +the Strategic Planning and Compensation Committee. During 2020, the Strategic Planning and Compensation Committee met seven times. +Capital Markets and +Finance Committee +The Capital Markets and Finance Committee provides oversight of the Company’s financial objectives, financial policies, capital +structure and financing requirements. As of April 22, 2021, the members of the Capital Markets and Finance Committee were Messrs. Foran, Burkert, Parker and Stewart. Mr. Parker is the chair of the Capital Markets and Finance +Committee. +Marketing and Midstream Committee +The Marketing and +Midstream Committee provides oversight of the Company’s marketing and midstream activities, projects, joint ventures and plans. As of April 22, 2021, the members of the Marketing and Midstream Committee were Ms. Ehrman and +Messrs. Burkert, Byerley and Howard. Mr. Howard is the chair of the Marketing and Midstream Committee. +Operations and Engineering Committee +The Operations and Engineering Committee provides oversight of the development of our prospects, our drilling, completions and production operations and +associated costs. In addition, the Operations and Engineering Committee provides oversight of the amount and classifications of our reserves and the design of our completion techniques and hydraulic fracturing operations and various other reservoir +engineering matters. As of April 22, 2021, the members of the Operations and Engineering Committee were Ms. Ehrman and Messrs. Baribault and Foran. Mr. Baribault is the chair of the Operations and Engineering Committee. +Prospect Committee +The Prospect Committee provides oversight of the +technical analysis, evaluation and selection of our oil and natural gas prospects. As of April 22, 2021, the members of the Prospect Committee were Ms. Ehrman and Messrs. Baribault, Foran and Parker. Mr. Baribault is the +chair of the Prospect Committee. +Board’s Role in Risk Oversight +The Audit Committee has the responsibility to oversee the +Company’s guidelines and policies to govern the process by which risk assessment and risk management are undertaken by management, including with respect to corporate governance, financial, accounting, operational, environmental, health and +safety, regulatory and cybersecurity risks. In connection with the Audit Committee’s oversight responsibility, executive management briefs the Audit Committee on a quarterly basis on risks faced by the Company. Under the Audit Committee’s +oversight, management maintains a commercial insurance program for the Company’s benefit covering casualty, property, workers’ compensation, well operations and cybersecurity risks, among others. The Strategic Planning and Compensation +Committee has the responsibility to oversee that our incentive pay does not encourage unnecessary risk taking and to review and discuss the relationship between risk management policies and practices, corporate strategy and senior executive +compensation. +26 Matador Resources Company | 2021 Proxy Statement +Table of Contents +CORPORATE GOVERNANCE +Environmental, Social and Governance (ESG) Initiatives +Affirmation of Our Commitment +At Matador, we are committed to creating long-term value in a responsible manner. This commitment extends across our operations and includes a dedication to excellence +with respect to environmental, social and governance (ESG) matters. Our guiding focus on good stewardship is reflected in our Code of Ethics and in our Corporate Governance Guidelines, which are reviewed annually by the Environmental, Social and +Corporate Governance Committee of the Board. See “Corporate Governance” on page 20 for additional information. +Oversight and Coordination of ESG +Efforts +The Board and senior management understand the importance of ESG matters and of supporting the Company’s ongoing efforts in this area. In 2020, +the Board adopted changes to the charter of the Environmental, Social and Corporate Governance Committee (formerly the Corporate Governance Committee) to (i) delegate oversight authority with respect to ESG matters to the committee, in +conjunction with the Company’s CEO, and (ii) change the name of the committee to reflect its expanded oversight authority. +Approach to ESG +Reporting +In continuing to raise the profile of the Company’s ESG initiatives externally, we recognize the growing value to investors of consistent and +comparable ESG disclosures. As a result, we plan to publish ESG metrics in alignment with the Sustainability Accounting Standards Board (SASB) framework later this year. +For more information regarding the Company’s ESG initiatives, please see the Company’s website at www.matadorresources.com under the heading +“Investor Relations—ESG.” +ESG Performance +Highlights +Highlights from the Company’s 2020 ESG initiatives are shown below. +Environmental +Reducing Flaring and Associated Emissions +•    Decreased flaring intensity by 38%, resulting in a 9,300 tonnes/year reduction in CO 2 e onsite emissions (2020 vs. 2019) +Expanding Use of Grid Power +•    Significantly increased the percentage of new production facilities operating on electrical grid power, lowering emissions by removing on-site generators +Growing Usage of Recycled Water +•    Doubled the percentage of recycled water used in fracture stimulation operations from 2018 to 2020 +•    Used over 680 million gallons of recycled produced water in our +operations by year-end 2020 +Reducing Surface Impact +•    Reduced our surface footprint per well with fewer pads, longer laterals, and increased batch drilling +2021 +Proxy Statement | Matador Resources Company 27 +Table of Contents +CORPORATE GOVERNANCE +Social +Maintaining Commitment to a Proactive Safety Culture +•    Zero lost time incidents during more than 2.1 million employee man-hours from 2017 to 2020 +Investing in Human Capital +•    Approximately 15,000 hours of employee continuing education in 2020, equating to approximately 55 hours per employee +Providing a Leadership Development Program +•    Six-month leadership course designed to enhance tactical leadership capabilities +Supporting Military +Veterans +•    Congressional Medal of Honor Foundation +•    Michael E. Thornton Foundation +Support +Communities & Charities Where We Live, Work, and Operate +•    Donated a Company record amount of food to the North Texas Food Bank in 2020, contact-free +•    Donated hundreds of toys to the Eddy, New Mexico and Lea, New Mexico +County Sheriff’s Offices and Courthouses in 2019 and 2020 +Governance +Diverse and Independent Board Composition +•    Lead independent director +•    9 of 10 independent directors +•    Female membership since inception of predecessor company in +1988 +Engaged Board of Directors with Majority Voting Standard +•    No “overboarding” +•    Shareholder Advisory Committee for Board Nominations +Active Stakeholder Engagement +•    Shareholder outreach program, including discussion of compensation, governance, social, safety and environmental practices and disclosures +28 Matador Resources Company | 2021 Proxy Statement +Table of Contents +CORPORATE GOVERNANCE +Strategic Planning and Compensation Committee Interlocks and Insider Participation +Messrs. Baribault, Baty, Burkert, Parker and Stewart served on +the Strategic Planning and Compensation Committee during 2020. None of these individuals is or was previously one of our officers or employees. None of our executive officers serve on the board of directors or compensation committee of a company +that has an executive officer that serves on our Board or Strategic Planning and Compensation Committee. No member of our Board serves as an executive officer of a company in which one of our executive officers serves as a member of the board of +directors or compensation committee of that company. There were no compensation committee interlocks during 2020. Mr. Baribault’s sister-in-law is an employee +of the Company. For more information on this related person transaction, see “Transactions with Related Persons.” +Communications with Directors +The Board has +established a process to receive communications from shareholders and other interested parties by mail. Shareholders and other interested parties may contact any member of the Board, any Board committee or the entire Board. To communicate with the +Board, any individual director or any committee, correspondence should be addressed to the Board. All such correspondence should be sent “c/o Corporate Secretary” at One Lincoln Centre, 5400 LBJ Freeway, Suite 1500, Dallas, Texas 75240. +The Corporate Secretary will review and forward correspondence to the appropriate person or persons. +Any communications to the Company from one of the +Company’s officers or directors will not be considered “shareholder communications.” Communications to the Company from one of the Company’s employees or agents will only be considered “shareholder communications” if +they are made solely in such employee’s or agent’s capacity as a shareholder. Any shareholder proposal submitted pursuant to Rule 14a-8 promulgated under the Exchange Act will not be viewed as +“shareholder communications.” +Executive Officers and Other Senior Officers of the Company +The following table sets forth the names, ages and positions of +our executive officers and certain of our other senior officers at April 8, 2021: +Name +Age +Positions Held With +Us +Executive Officers +Joseph Wm. Foran +68 +Chairman of the Board and Chief Executive Officer +Matthew V. Hairford +60 +President +David E. Lancaster +64 +Executive Vice President and Chief Financial Officer +Craig N. Adams +54 +Executive Vice President and Chief Operating Officer—Land, Legal & Administration +Billy E. Goodwin +63 +Executive Vice President and Chief Operating Officer—Drilling, Completions & Production +Van H. Singleton, II +43 +Executive Vice President of Land +G. Gregg Krug +60 +Executive Vice President—Marketing and Midstream Strategy +Other Senior Officers +Christopher P. Calvert +42 +Senior Vice President—Operations +W. Thomas Elsener +36 +Senior Vice President—Reservoir Engineering and Senior Asset Manager +Bryan A. Erman +43 +Senior Vice President and Co-General Counsel +Jonathan J. Filbert +34 +Senior Vice President of Land +Michael D. Frenzel +39 +Senior Vice President and Treasurer +Edmund L. Frost III, PhD +46 +Senior Vice President of Geoscience +Robert T. Macalik +42 +Senior Vice President and Chief Accounting Officer +Matthew D. Spicer +53 +Senior Vice President and General Manager of Midstream +Glenn W. Stetson +36 +Senior Vice President of Production and Asset Manager +Brian J. Willey +44 +Senior Vice President and Co-General Counsel +2021 +Proxy Statement | Matador Resources Company 29 +Table of Contents +CORPORATE GOVERNANCE +The following biographies describe the business experience of +our executive officers and the senior officers listed above. Each officer serves at the discretion of our Board. There are no family relationships among any of our executive officers. +Executive Officers +Mr. Joseph Wm. Foran +Chairman of the Board and +Chief Executive Officer +Please see the biography of Mr. Foran on page 17 of this Proxy Statement. +Mr. Matthew V. +Hairford +President +Mr. Hairford joined Matador Resources Company in July 2004 as its Drilling Manager. He was named Vice President of Drilling in May 2005; Vice President of Operations in May 2006; Executive Vice President of Operations in May +2009; and in November 2013 assumed the title of President. He was previously with Samson Resources, an exploration and production company, as Senior Drilling Engineer, having joined Samson in 1999. His responsibilities there included difficult Texas +and Louisiana Gulf Coast projects, horizontal drilling projects and a start-up drilling program in Wyoming. The scope of this work ranged from multi-lateral James Lime wells in East Texas to deep wells in +South Texas and South Louisiana. Mr. Hairford has drilled many geo-pressured wells in Texas and Louisiana, along with normally pressured wells in Southwest Wyoming and East Texas. Additional +responsibilities included a horizontal well program in Roger Mills County, Oklahoma at 15,000 feet vertical depth. Mr. Hairford has experience in air drilling, underbalanced drilling, drilling under mud caps and high temperature and pressure +environments. From 1998 to 1999, Mr. Hairford served as Senior Drilling Engineer with Sonat, Inc., a global company involved with natural gas transmission and marketing, oil and natural gas exploration and production and oil services. His +responsibilities included drilling Pinnacle Reef wells in East Texas and deep horizontal wells in the Austin Chalk field in Central Louisiana. From 1984 to 1998, Mr. Hairford served in various drilling engineering capacities with Conoco, Inc. +His operational areas included the Appalachian Basin, Illinois Basin, Permian Basin, Texas Panhandle and Val Verde Basin. Mr. Hairford was selected as a member of a three-person team to explore the use of unconventional technologies to identify +a potential step change in the drilling sector. Multiple techniques were evaluated and tested, including declassified defense department technologies. Additional Conoco assignments included both field and office drilling positions in Midland, Texas +and Oklahoma City, Oklahoma. Earlier in his career with Conoco, Mr. Hairford was selected to participate in the Conoco Drilling Rig Supervisor Training Program in Houston, Texas. This program consisted of two years working a regular rotation as +a drilling representative on rigs and as a drilling engineer in various domestic offices. Mr. Hairford began his career in 1984 with Conoco in a field production assignment in Hobbs, New Mexico. Mr. Hairford received his Bachelor of +Science degree in Petroleum Engineering Technology from Oklahoma State University in 1984. He is an active member of the American Association of Drilling Engineers and the Society of Petroleum Engineers. He is also a member of the board of the Texas +Independent Producers and Royalty Owners (TIPRO). Mr. Hairford has also undertaken additional training through Stanford University’s Executive Education programs, including the Stanford Graduate School of Business flagship six week +Stanford Executive Program. +Mr. David E. +Lancaster +Executive Vice President and +Chief Financial +Officer +Mr. Lancaster joined Matador Resources Company in December 2003 and serves as Executive Vice President and Chief Financial Officer. Mr. Lancaster has served in several capacities since joining Matador, including Vice +President of Business Development, Acquisitions and Finance from December 2003 to May 2005; Vice President and Chief Financial Officer from May 2005 to May 2007; and Executive Vice President and Chief Financial Officer since May 2007. He also served +as Chief Operating Officer from May 2009 +30 Matador Resources Company | 2021 Proxy Statement +Table of Contents +CORPORATE GOVERNANCE +to May 2015. From August 2000 to December 2003, he was Marketing Manager for Schlumberger Limited’s Data & Consulting Services, which provided full-field reservoir characterization, production enhancement, +multidisciplinary reservoir and production solutions and field development planning. In this position, he was responsible for global marketing strategies, business models, input to research and development, commercialization of new products and +services and marketing communications. From 1999 to 2000, Mr. Lancaster was Business Manager, North and South America, for Schlumberger Holditch-Reservoir Technologies, the petroleum engineering consulting organization formed following +Schlumberger’s acquisitions of S.A. Holditch & Associates, Inc. and Intera Petroleum Services. In this role, he was responsible for the business operations of 12 consulting offices throughout North and South America. Mr. Lancaster +worked with Schlumberger for six years following its acquisition of S.A. Holditch & Associates, Inc. in 1997. He joined S.A. Holditch & Associates in 1980, and was one of the principals in the petroleum engineering consulting firm. +Between 1980 and 1997, Mr. Lancaster held positions ranging from Senior Petroleum Engineer to Senior Vice President—Business Development. In this latter role, he was responsible for marketing and sales, as well as the company’s +commercial training business. During most of his tenure at S.A. Holditch & Associates, Inc., Mr. Lancaster was a consulting reservoir engineer with particular emphasis on characterizing and improving production from unconventional +natural gas reservoirs. For more than seven years during this time, he was the Project Manager for the Gas Research Institute’s Devonian Shales applied research projects investigating ways to improve reservoir characterization, completion +practices and natural gas recovery in low permeability, natural gas shale reservoirs. He was also the lead reservoir engineer for the Secondary Gas Recovery project sponsored by the Gas Research Institute and the U.S. Department of Energy, looking +at ways to improve recovery from compartmentalized natural gas reservoirs in North and South Texas. Mr. Lancaster began his career as a reservoir engineer for Diamond Shamrock Corporation in 1979. Mr. Lancaster received Bachelor and Master +of Science degrees in Petroleum Engineering from Texas A&M University in 1979 and 1988, respectively, graduating summa cum laude. He has authored or co-authored more than 50 technical papers and articles, +as well as numerous other published reports and industry presentations. He is a member of the Society of Petroleum Engineers, and he served as a charter member and former Vice Chairman of the Texas A&M University Petroleum Engineering Advisory +Board. In 2014, Mr. Lancaster was inducted into the Texas A&M University Petroleum Engineering Academy of Distinguished Graduates. Mr. Lancaster is a Licensed Professional Engineer in the State of Texas. In 2017, Mr. Lancaster was +named CFO of the Year—Upper Middle Market, Public by Dallas Business Journal. In 2018, 2020 and 2021, he was named to Institutional Investors’ All-American Executive Teams, including in 2021 as the +number one chief financial officer in the Small Cap Energy division and the number three chief financial officer of oil and natural gas exploration and production companies of all sizes. Mr. Lancaster was also named by D CEO Magazine as +outstanding chief financial officer for large public companies in 2020 and as a member of D CEO’s “Dallas 500” for 2021. +Mr. Craig N. Adams +Executive Vice President +and Chief Operating Officer— +Land, Legal & Administration +Mr. Adams joined Matador Resources Company in September 2012 as its Vice President and General Counsel. In July 2013, Mr. Adams was promoted to Executive Vice President—Land and Legal and became Executive Vice +President—Land, Legal & Administration in June 2015. He assumed the role of Executive Vice President and Chief Operating Officer—Land, Legal & Administration in April 2019. Before joining Matador Resources Company, +Mr. Adams was a partner with Baker Botts L.L.P. from March 2001 to September 2012 where he focused his practice on securities, mergers and acquisitions and corporate governance matters. He was a partner with Thompson & Knight L.L.P. +from January 1999 to February 2001 and an associate from September 1992 to December 1998. Mr. Adams received a Bachelor of Business Administration degree in Finance from Southern Methodist University in 1988 and his law degree in 1992 from +Texas Tech University School of Law, where he graduated magna cum laude and was a member of the Order of the Coif and a Comment Editor on the Texas Tech Law Review. In 2018, he was named D CEO Magazine’s Outstanding General +Counsel—Midsize Legal Department. +2021 +Proxy Statement | Matador Resources Company 31 +Table of Contents +CORPORATE GOVERNANCE +Mr. Billy E. Goodwin +Executive Vice President and +Chief Operating +Officer— +Drilling, Completions & +Production +Mr. Goodwin joined Matador Resources Company in July 2010 as Drilling Manager. In September 2013 he was named Vice President of Drilling. He was promoted to Senior Vice President—Operations in February 2016 and +to Executive Vice President and Head of Operations in August 2017. He assumed the role of Executive Vice President and Chief Operating Officer—Drilling, Completions & Production in April 2019. He was previously with Samson +Resources, a company he joined in 2001 to supervise the drilling of underbalanced multilateral horizontal wells. In his roles as Senior Drilling Engineer and Area Drilling Manager for Samson, Mr. Goodwin engineered and managed operations +in the Permian Basin, South Texas, East Texas, Mid-Continent and Gulf Coast areas. Mr. Goodwin worked with Conoco, Inc. before joining Samson. He began his career in 1985 in Conoco’s production +department before joining the drilling department in 1989. Mr. Goodwin has diverse horizontal operational experience both onshore and offshore, and both domestically and internationally, including in the Middle East, Southeast Asia and +South America. Throughout his career, Mr. Goodwin has developed underbalanced drilling, managed pressure drilling and drill-in casing techniques for normal and +geo-pressured environments. Mr. Goodwin received a Bachelor of Science degree in Petroleum Engineering Technology from Oklahoma State University in 1984. He is a member of the Society of Petroleum +Engineers and the American Association of Drilling Engineers. Mr. Goodwin served in the United States Marine Corps. +Mr. Van H. Singleton, II +Executive Vice President of +Land +Mr. Singleton joined Matador Resources Company in August 2007 as a Landman and was promoted to Senior Staff Landman in 2009 and then to General Land Manager in 2011. In September 2013, Mr. Singleton became Vice President +of Land, and he was promoted to Executive Vice President of Land in February 2015. Prior to joining Matador, Mr. Singleton founded and was President of VanBrannon and Associates, LLC and Southern Escrow and Title of Mississippi, LLC from 1998 +to 2003, which provided full-spectrum land title work and title insurance in Mississippi, Louisiana, Texas and Arkansas. From 2003 until joining Matador in 2007, he served as general manager of his family’s real estate brokerage in Houston, +Texas. Mr. Singleton received a Bachelor of Arts degree in Criminal Justice from the University of Mississippi in 2000. He is an active member of the American Association of Professional Landmen, the New Mexico Landman Association, the Permian +Basin Landman Association and the Dallas Association of Petroleum Landmen. +Mr. G. Gregg Krug +Executive Vice President— +Marketing and +Midstream +Strategy +Mr. Krug joined Matador Resources Company in April 2012 as its Marketing Manager. In September 2013 he was named Vice President of Marketing for the Company and Vice President of Longwood Gathering & Disposal Systems, +LP, and he was promoted to Senior Vice President—Marketing and Midstream in February 2016. He was promoted to Executive Vice President—Marketing and Midstream Strategy in April 2019. He has overall responsibility for Matador’s +marketing activities of its oil and natural gas, as well as responsibility for all business aspects for Longwood Gathering & Disposal Systems, LP. Previously, Mr. Krug was with Unit Petroleum Company, an exploration and production +company based in Tulsa, Oklahoma, as Marketing Manager, having joined in 2006. He and his staff were responsible for marketing, gas measurement, contract administration and production reporting in their core areas of Oklahoma, the Texas +Panhandle, East Texas and Northwestern Louisiana. From 2005 to 2006, Mr. Krug served as Marketing Manager with Matador Resources Company. From 2000 to 2005, Mr. Krug served as Gas Scheduling Supervisor with Samson Resources in Tulsa, +Oklahoma where he and his staff were responsible for scheduling natural gas sales as well as procurement of natural gas supply on Samson-owned gathering systems. From 1983 to 2000, Mr. Krug served with The Williams Companies in various +capacities including in the Kansas Hugoton Field in Ulysses, Kansas and Tulsa, Oklahoma for Williams Natural Gas Pipeline and on the trading floor in Tulsa, Oklahoma for Williams Energy Services Company. Mr. Krug received a Bachelor of Business +Administration degree from Oklahoma City University in 1996. +32 Matador Resources Company | 2021 Proxy Statement +Table of Contents +CORPORATE GOVERNANCE +Other Senior Officers +Mr. Christopher P. +Calvert +Senior Vice President— +Operations +Mr. Calvert joined Matador Resources Company in October 2014 as a Senior Completions Engineer. In July 2018 he was named Vice President of Completions for the Company, and he was promoted to Senior Vice +President—Operations in October 2019. Prior to joining Matador, Mr. Calvert worked as a Staff Reservoir Engineer in Chesapeake Energy Corporation’s South Texas—Eagle Ford group focusing on A&D evaluations and production and +completions optimization. At Chesapeake, Mr. Calvert also held roles as a Senior Asset Manager responsible for completions and operations in the Niobrara Shale, a Senior Completions Engineer responsible for Bakken/Three Forks development and a +Senior Operations Engineer focused on production and facility optimization on the Texas Gulf Coast. Prior to Chesapeake, Mr. Calvert worked as an Operations Engineer for Williams Production Company, now WPX Energy. In addition to his oil and +natural gas industry experience, Mr. Calvert has worked in corporate financial controls as an internal Sarbanes-Oxley compliance auditor. Mr. Calvert received Bachelor of Science degrees in Finance and Petroleum Engineering from the +University of Wyoming in 2002 and 2008, respectively. He is a member of the Society of Petroleum Engineers. +Mr. W. Thomas Elsener +Senior Vice President— +Reservoir Engineering and +Senior Asset Manager +Mr. Elsener joined Matador Resources Company in April 2013 as an Engineer. In June 2017, he was promoted to Vice President—Engineering and Asset Manager, and he was promoted to Senior Vice President—Reservoir +Engineering and Senior Asset Manager in October 2019. Mr. Elsener has served in several capacities since joining Matador, including Asset Manager for Rustler Breaks, Antelope Ridge and Stateline, Team Leader for South Texas and Team Leader for +East Texas and Northwest Louisiana. Prior to joining Matador, Mr. Elsener served in various engineering roles at Encana Oil & Gas (USA) in Dallas, Texas from 2007 to 2013, including reservoir, completions, drilling, business +development and new ventures. While at Encana, Mr. Elsener was involved with the exploration and development of assets in the Barnett shale, Deep Bossier, Haynesville shale and other new domestic ventures. Mr. Elsener received a Bachelor +of Science degree in Petroleum Engineering from Texas A&M University in 2007. He is a member of the Society of Petroleum Engineers. +Mr. Bryan A. Erman +Senior Vice President and Co- +General Counsel +Mr. Erman joined Matador Resources Company in January 2016 as its Co-General Counsel. In August 2016, Mr. Erman was promoted to Vice President and +Co-General Counsel. He became Senior Vice President and Co-General Counsel in July 2018. Prior to joining Matador, Mr. Erman was a Partner at Carrington, Coleman, +Sloman & Blumenthal, L.L.P. in Dallas, having joined the firm in 2010. From 2003 to 2010, he was an associate in the Dallas and Washington, D.C. offices of Baker Botts L.L.P. Mr. Erman’s practice focused on litigation matters, +including oil and natural gas, securities and other commercial litigation, as well as corporate governance matters. Before attending law school, Mr. Erman worked for Oklahoma Governor Frank Keating. Mr. Erman received a Bachelor of Arts +degree in Political Science in 1999 from the University of Oklahoma. He received his law degree in 2003 from Southern Methodist University Dedman School of Law, where he graduated cum laude and was a Hatton W. Sumners Scholar, a member of the Order +of the Coif and an Articles Editor on the SMU Law Review. +Mr. Jonathan J. Filbert +Senior Vice President of +Land +Mr. Filbert joined Matador Resources Company in February 2013 as a Senior Staff Landman. In April 2015, he was promoted to General Land Manager, and in December 2017, he was promoted to General Land Manager and Director of +Acquisitions. Mr. Filbert was promoted to the role of Vice President of Land in July 2018 before being promoted to +2021 +Proxy Statement | Matador Resources Company 33 +Table of Contents +CORPORATE GOVERNANCE +his current role as Senior Vice President of Land in October 2020. Prior to joining Matador, Mr. Filbert worked as a landman at Chesapeake Energy Corporation from 2010 to 2013. Most of his time at Chesapeake was spent working +with the new ventures team on their Utica and Marcellus shale assets in Ohio and northern Pennsylvania. Mr. Filbert graduated from the University of Oklahoma in 2010, receiving a Bachelor of Business Administration degree in Energy Management +and Finance. He is an active member of the American Association of Professional Landmen, the New Mexico Landman Association, the Permian Basin Landman Association and the Dallas Association of Petroleum Landmen. +Mr. Michael D. Frenzel +Senior Vice President and +Treasurer +Mr. Frenzel serves as Senior Vice President and Treasurer of Matador Resources Company after having been promoted to that position in October 2020. Mr. Frenzel originally worked for Matador from 2006 to 2010 as a Senior +Financial Analyst before leaving to obtain his M.B.A. from Duke University’s Fuqua School of Business. Mr. Frenzel rejoined Matador in 2013 as its Senior Strategy and Financial Analyst and Assistant Treasurer and was promoted to Finance +Director and Assistant Treasurer in January 2017. In August 2018, Mr. Frenzel was promoted to Vice President and Treasurer. Mr. Frenzel’s responsibilities include treasury, financial planning and forecasting, capital markets, hedging, +financial reporting and investor relations. Before rejoining Matador in 2013, Mr. Frenzel worked as an Investment Associate for Hamm Capital, LLC and as a Financial Analyst and Assistant to the CEO at Continental Resources. In addition to his +energy industry experience, Mr. Frenzel also has consulting experience with Deloitte Consulting LLP. Mr. Frenzel graduated summa cum laude from Vanderbilt University in 2004, receiving a Bachelor of Arts degree in Economics and +Mathematics, and earned the designation of Fuqua Scholar while receiving a Master of Business Administration degree from Duke University’s Fuqua School of Business in 2012. +Dr. Edmund L. Frost III +Senior Vice President of +Geoscience +Dr. Frost joined Matador Resources Company in August 2014 as a Senior Geologist and in July 2015 was promoted to Chief Geologist. In June 2017, he was promoted to Vice President of Geoscience, and in July 2019, Dr. Frost +was promoted to Senior Vice President of Geoscience. Prior to joining the Company, Dr. Frost worked at the Bureau of Economic Geology at The University of Texas at Austin as a Research Associate, a role he began in 2011. While at The University +of Texas, his research focused on unconventional resource development in the Delaware Basin and in the Austin Chalk-Eagle Ford system. Dr. Frost began his career in the Subsurface Technology Group at ConocoPhillips in 2007, where he worked a +variety of international and domestic basins. Dr. Frost received a Bachelor of Science degree in Geology from the University of Colorado at Boulder in 1998 and a PhD degree in Geology in 2007 from The University of Texas at Austin. +Dr. Frost has authored several peer-reviewed papers, conducted multiple industry presentations and led a number of industry field trips in the Delaware Basin. +Mr. Robert T. Macalik +Senior Vice President and +Chief Accounting +Officer +Mr. Macalik joined Matador Resources Company in July 2015 as Vice President and Chief Accounting Officer. He was promoted to Senior Vice President and Chief Accounting Officer in November 2017. He has more than 10 years of +experience in public accounting with significant experience in the upstream oil and natural gas industry. From 2012 to 2015, Mr. Macalik worked at Pioneer Natural Resources Company as Corporate Controller and, previously, as Director of +Technical Accounting and Financial Reporting. At Pioneer, Mr. Macalik supervised corporate accounting and financial reporting functions. Prior to joining Pioneer, he was a Senior Manager with PricewaterhouseCoopers (PwC), joining the public +accounting firm in 2002. During his tenure with PwC, Mr. Macalik conducted and managed audits for various companies, primarily public companies in the oil and natural +34 Matador Resources Company | 2021 Proxy Statement +Table of Contents +CORPORATE GOVERNANCE +gas industry, and managed numerous client relationships. Mr. Macalik received a Bachelor of Arts degree in History, a Bachelor of Business Administration degree and a Master of Professional Accounting degree all from The +University of Texas at Austin in 2002. He is a licensed Certified Public Accountant in the State of Texas. +Mr. Matthew D. Spicer +Senior Vice President and +General Manager of Midstream +Mr. Spicer joined Matador Resources Company in March 2014 as Senior Representative of Business Development and was promoted to Manager of Business Development and then General Manager of Midstream later in 2014. In October +2015, Mr. Spicer was promoted to Vice President and General Manager of Midstream. He became Senior Vice President and General Manager of Midstream in July 2018. Prior to joining the Company, Mr. Spicer served as the Director of Flight +Operations for L-3 Unmanned Systems, also serving in various roles including as Program Manager and in Business Development during his tenure with L-3, which began in +2011. From 2004 to 2011, he held various roles in the defense industry, in both a technical and a business development capacity. Mr. Spicer served in the United States Marine Corps from 1991 to 2014, both in active duty and as a reservist, +before his retirement as a Lieutenant Colonel in 2014. Mr. Spicer also served as a first officer with American Airlines from 2000 to 2003 following his active duty in the United States Marine Corps. Mr. Spicer received a Bachelor of +Science degree in Manufacturing Engineering Technology from Central Michigan University in 1991. +Mr. Glenn W. Stetson +Senior Vice President of +Production and Asset Manager +Mr. Stetson joined Matador Resources Company in August 2014 as a Production Engineer, and in July 2015, he was promoted to Asset Manager. Mr. Stetson was promoted to the role of Vice President and Asset Manager in July +2018 before being promoted to his current role as Senior Vice President of Production and Asset Manager in October 2019. Prior to joining Matador, Mr. Stetson worked at Chesapeake Energy Corporation from 2008 to 2014, holding multiple positions +in both the production and completions departments. Most of his time at Chesapeake was spent in the Barnett shale in North Texas, although he also spent some time working in northern Pennsylvania managing the northeast portion of Chesapeake’s +Marcellus shale operated production. Mr. Stetson graduated Cum Laude from Oklahoma State University in 2007, receiving a Bachelor of Science degree in Mechanical Engineering Technology. Mr. Stetson is a Licensed Professional Engineer in +the State of Oklahoma. +Mr. Brian J. Willey +Senior Vice President and Co- +General +Counsel +Mr. Willey joined Matador Resources Company in February 2014 as its Deputy General Counsel. In January 2016, Mr. Willey was appointed as Co-General Counsel, and he was promoted to +Vice President and Co-General Counsel in August 2016. He became Senior Vice President and Co-General Counsel in July 2018. Prior to joining Matador, Mr. Willey was +an attorney with Dean Foods Company where he most recently served as Vice President, Chief Counsel—Corporate. Before Dean Foods, Mr. Willey served as a senior associate in the Dallas office of Baker Botts L.L.P. Mr. Willey’s +practice focused on corporate matters, including mergers and acquisitions, public and private securities offerings, venture capital transactions and SEC compliance matters as well as board of director and corporate governance matters. +Mr. Willey received a Bachelor of Science degree in Accounting in 2002 from Brigham Young University. He received his law degree in 2005 from The University of Texas School of Law, where he graduated with High Honors and was a member of the +Order of the Coif in addition to being named a Chancellor and an Associate Editor on the Texas Law Review. Mr. Willey also served a church mission in the Philippines from 1995 to 1997. +2021 +Proxy Statement | Matador Resources Company 35 +Table of Contents +PROPOSAL 2 +PROPOSAL 2 | ADVISORY VOTE TO APPROVE NAMED +EXECUTIVE OFFICER COMPENSATION +In accordance with the requirements of Section 14A of the Exchange Act, the Company seeks a non-binding advisory vote from its shareholders to approve the compensation of its Named Executive Officers (as defined below) as described in this Proxy Statement. +As discussed under the “Executive Compensation—Compensation Discussion and Analysis” section of this Proxy Statement (“CD&A”), we made +significant changes to our executive compensation program in 2020 in response to the COVID-19 pandemic and the sudden decline in oil prices. As a result of these changes, Mr. Foran’s total +compensation was reduced by 79% from 2019 levels. Similarly, the total 2020 compensation of the other Named Executive Officers decreased an average of 75% from 2019 levels. Please see “Executive Compensation—Compensation Discussion and +Analysis—2020 Compensation Program Changes” for further detail. +We believe the Company’s future success and the ability to create long-term value +for our shareholders depends on our ability to attract, retain and motivate highly qualified individuals in the oil and natural gas industry. Additionally, we believe that our success also depends on the continued contributions of our Named +Executive Officers. The Company’s compensation system plays a significant role in its ability to attract, motivate and retain a high quality workforce. As described in the CD&A, the Company’s compensation program for Named Executive +Officers is designed to reward, in both the short term and the long term, performance that contributes to the implementation of our business strategies, maintenance of our culture and values and achievement of our objectives. +This proposal provides shareholders the opportunity to endorse or not endorse the Company’s executive compensation program through approval of the following +resolution: +“Resolved, that the compensation paid to the Company’s Named Executive Officers, as disclosed pursuant to Item 402 of +Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby approved.” +The above-referenced CD&A and accompanying disclosures appear on pages 40 to 67 of this Proxy Statement. +Because this is an advisory vote, it will not be binding upon the Board. However, the Strategic Planning and Compensation Committee and the Independent Board will take +into account the outcome of the vote when considering future executive compensation arrangements. +Vote Required +The affirmative vote of the holders of a majority of +the shares present in person or represented by proxy and entitled to vote at the Annual Meeting is required to approve this resolution on a non-binding basis. If you hold your shares through a broker and you +do not instruct the broker how to vote, your broker will not have the authority to vote your shares. Abstentions will have the effect as a vote cast against the proposal. Broker non-votes will be counted as +present for purposes of determining the presence of a quorum but will have no effect upon the outcome of the vote. +During our 2018 Annual Meeting, our shareholders +approved a non-binding, advisory proposal to hold advisory votes to approve our executive compensation every year. In consideration of the results of this advisory vote, the Board has maintained its policy of +providing for annual advisory votes to approve executive compensation. Unless the Board modifies this policy, the next advisory vote to approve executive compensation following this vote will be held at our 2022 Annual Meeting. +The Board of Directors recommends that you vote FOR approval of this resolution. +36 Matador Resources Company | 2021 Proxy Statement +Table of Contents +PROPOSAL 3 +PROPOSAL 3 | RATIFICATION OF THE APPOINTMENT OF +KPMG LLP +The Audit Committee +has appointed KPMG LLP (“KPMG”) as the independent registered public accounting firm of the Company for the year ending December 31, 2021, and the Board has directed that such appointment be submitted to our shareholders for +ratification at the Annual Meeting. +The Company has been advised by KPMG that the firm has no relationship with the Company or its subsidiaries other than that +arising from the firm’s engagement as auditors. +If the shareholders do not ratify the appointment of KPMG, the Audit Committee will consider whether to engage +a different independent registered public accounting firm but will not be obligated to do so. +The Company has been advised that representatives of KPMG will be +present at the Annual Meeting and will be available to respond to appropriate questions and make a statement if they desire to do so. +Fees of Independent Registered Public Accounting Firm for Fiscal Years 2020 and 2019 +The following table presents fees for professional audit services rendered by KPMG for the audit of the Company’s annual financial statements for the years ended +December 31, 2020 and 2019, and fees for other services rendered by KPMG during those periods: +2020 +2019 +Audit fees +$ +1,263,100 +$ +1,440,017 +Audit-related fees +— +— +Tax fees +— +— +All other fees +— +— +Total +$ +1,263,100 +$ +1,440,017 +Services rendered by KPMG in connection with the fees presented above were as follows: +Audit Fees +For fiscal year 2020, audit fees consisted of fees +associated with the audit of the Company’s consolidated financial statements, including the audit of the effectiveness of the Company’s internal control over financial reporting, required reviews of our quarterly condensed consolidated +financial statements and consultation on significant accounting matters. Audit fees also included fees paid to KPMG by San Mateo for the audit of its 2020 financial statements. +For fiscal year 2019, audit fees consisted of fees associated with the audit of the Company’s consolidated financial statements, including the audit of the +effectiveness of the Company’s internal control over financial reporting, required reviews of our quarterly condensed consolidated financial statements, procedures related to registration statements and consultation on significant accounting +matters. Audit fees also included fees paid to KPMG by San Mateo and San Mateo II for the audit of their 2019 financial statements. +Audit-Related +Fees +We did not incur any audit-related fees in 2020 or 2019. +2021 +Proxy Statement | Matador Resources Company 37 +Table of Contents +PROPOSAL 3 +Tax Fees +We did not incur any fees for tax advice, planning and other services in 2020 or 2019. +All Other Fees +We did not incur any other fees in 2020 or 2019. +The Audit Committee pre-approves all audit and permissible non-audit services provided +by KPMG. These services may include audit services, audit-related services, tax services and other services. The Audit Committee has authorized the chair of the Audit Committee to pre-approve audit and +permissible non-audit services provided by KPMG up to $750,000. Pursuant to this delegation, the decisions of the chair must be presented to the Audit Committee at its next meeting. +Report of the Audit Committee +We are a standing committee comprised of independent directors +as currently defined by SEC regulations and the applicable listing standards of the NYSE. The Board has determined that at least one of the members of the Audit Committee is an “audit committee financial expert” as defined by applicable +SEC rules and regulations. We operate under a written charter adopted by the Board. A copy of the charter is available free of charge on the Company’s website at www.matadorresources.com under “Investor Relations—Corporate +Governance.” +We annually select the Company’s independent registered public accounting firm. If the shareholders do not ratify the appointment of KPMG +LLP at the Annual Meeting, the Audit Committee will consider whether to engage a different independent registered public accounting firm but will not be obligated to do so. +Management is responsible for the Company’s internal controls and the financial reporting process. The independent registered public accounting firm is responsible +for performing an independent audit of the Company’s consolidated financial statements in accordance with the standards of the United States Public Company Accounting Oversight Board (the “PCAOB”) and issuing a report thereon. As +provided in our charter, our responsibilities include the monitoring and oversight of these processes. +Consistent with our charter responsibilities, we have met +and held discussions with management and the independent registered public accounting firm. In this context, management and the independent registered public accounting firm represented to us that the Company’s consolidated financial statements +for the fiscal year ended December 31, 2020 were prepared in accordance with U.S. generally accepted accounting principles. We reviewed and discussed the consolidated financial statements with management and the independent registered public +accounting firm and discussed with the independent registered public accounting firm matters required to be discussed by the applicable requirements of the PCAOB and the SEC. +The Company’s independent registered public accounting firm has also provided to us the written disclosures and the letter required by applicable requirements of +the PCAOB regarding the independent registered public accounting firm’s communications with the Audit Committee, and we discussed with the independent registered public accounting firm that firm’s independence. +Based upon our reviews and discussions with management and the independent registered public accounting firm and our review of the representation of management and the +report of the independent registered public accounting firm to the Audit Committee, we recommended that the Board include the audited consolidated financial statements in the Company’s Annual Report on Form +10-K for the year ended December 31, 2020 filed with the SEC. +Audit Committee, (1) +William M. Byerley, Chair +Reynald A. Baribault +Craig T. Burkert +James M. Howard +Timothy E. Parker +(1) +Reflects the membership of the Audit Committee at the time of adoption of this report. +38 Matador Resources Company | 2021 Proxy Statement +Table of Contents +PROPOSAL 3 +Vote Required +The affirmative vote of the holders of a majority of the shares +present in person or represented by proxy and entitled to vote at the Annual Meeting is required for the ratification of the appointment of KPMG as the Company’s independent registered public accounting firm for the year ending +December 31, 2021. If the shareholders do not ratify the appointment of KPMG, the Audit Committee will consider whether to engage a different independent registered public accounting firm but will not be obligated to do so. Abstentions will +have the effect as a vote cast against the proposal. +The Board of Directors recommends that you vote FOR the +ratification of the appointment +of KPMG as the Company’s independent registered public accounting +firm for the +year ending December 31, 2021. +2021 +Proxy Statement | Matador Resources Company 39 +Table of Contents +LETTER TO SHAREHOLDERS +Dear Fellow Shareholders, +On behalf of the Board +and the Strategic Planning and Compensation Committee (the “Compensation Committee”) of the Board, thank you for partnering with us and entrusting Matador with your hard-earned capital. We and the Board take our responsibilities to you +very seriously—we are always eager to hear from our shareholders, and we pledge to continue to listen to your views and respond, as appropriate. +During the +first quarter and through April 2020, the oil and natural gas industry witnessed an abrupt and significant decline in oil prices from $63 per Bbl in early January to as low as ($38) per Bbl in late April. This sudden decline in oil prices was +attributable to two primary factors: (i) the precipitous decline in global oil demand resulting from the worldwide spread of COVID-19 and (ii) a sudden, unexpected increase in global oil supply +resulting from actions initiated by Saudi Arabia to increase its oil production to world markets following the failure of efforts by OPEC+ to agree on coordinated production cuts at their March 6, 2020 meetings in Vienna, Austria. +In connection with these events, we implemented compensation reductions effective April 1, 2020 for our entire workforce, including our executive officers. +Chairman and Chief Executive Officer Joseph Wm. Foran voluntarily agreed to a 25% base salary reduction with the other executive officers and vice presidents agreeing to 20% and 10% reductions, respectively. These pay cuts were not restored +until March 1, 2021, at which time our stock price had rebounded from a low of $1.11 in March 2020 to close at $22.04 on March 1, 2021. +Despite the +precipitous decline in global oil demand resulting from the worldwide spread of COVID-19, the successful execution of our business strategies led to increases in our oil and natural gas production and proved +oil and natural gas reserves in 2020. We achieved these results despite reducing our operated drilling rig count from six at the beginning of the year to three by the end of the second quarter. We also improved the capital efficiency of our drilling +and completion operations and achieved several key operational milestones throughout the year. With an increased focus on sustainability in 2020, we reduced greenhouse gas emissions, increased our use of grid power instead of generators, +continued the development of our water recycling program, reduced our surface footprint through the use of batch drilling and longer laterals and recorded no employee injuries. In addition, we concluded several important financing transactions in +2020, including an increase in the elected commitment under the Credit Agreement, the reaffirmation of the borrowing base and the restructuring of our oil hedging portfolio. Furthermore, San Mateo achieved several important milestones in 2020, +including the expansion of its cryogenic natural gas processing plant in Eddy County, New Mexico and associated pipelines and the merger of San Mateo II with and into San Mateo. These achievements and transactions increased our operational +flexibility and opportunities while preserving the strength of our balance sheet and our liquidity position. +Furthermore, in the fourth quarter of 2020, we met our +goal of achieving free cash flow and began to pay down debt, while continuing to grow production. Additionally, in early 2021, we announced that the Board had adopted a dividend policy pursuant to which the Company intends to pay +quarterly cash dividends on its common stock of $0.025 per share. The first quarterly dividend was paid to shareholders on March 31, 2021. +These 2020 +operational and financial successes contributed to the Company meeting or exceeding the maximum level of each of the Independent Board-approved performance metrics under the Company’s annual cash incentive plan. Nonetheless, the Company’s +executive officers and the Board agreed that the executive officers would forego receiving any 2020 annual cash bonuses . The Board believes this decision demonstrates management’s commitment to continuing to (i) align their +interests with shareholders, (ii) generate profitable growth at a measured pace and (iii) strengthen our balance sheet. +Mr. Foran’s total +2020 compensation of $1.7 million reflects a 79% reduction from 2019 levels. +We look forward to ongoing dialogue with our shareholders and to +demonstrating responsiveness to your feedback, including by continuing to improve our executive compensation program. We are honored to serve on your behalf and hope you will join us at the 2021 Annual Meeting of Shareholders. +Sincerely, +Timothy E. Parker +R. Gaines Baty +Lead Independent Director +Chair, Strategic Planning and Compensation Committee +40 Matador Resources Company | 2021 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +EXECUTIVE COMPENSATION +Compensation Discussion and Analysis +This +Compensation Discussion and Analysis, or CD&A, provides a general description of our compensation program and specific information about its various components for the following “Named Executive Officers” for 2020: +• +Joseph Wm. Foran, Chairman of the Board and Chief Executive Officer; +• +Matthew V. Hairford, President; +• +David E. Lancaster, Executive Vice President and Chief Financial Officer; +• +Craig N. Adams, Executive Vice President and Chief Operating Officer—Land, Legal & Administration; and +• +Billy E. Goodwin, Executive Vice President and Chief Operating Officer—Drilling, Completions & Production. +Response to COVID-19 and Oil Price Decline +In 2020, we faced unprecedented challenges with regards to the global pandemic, dramatically decreased oil demand, the actions of OPEC+ with regards to oil supply and a +suddenly declining oil price environment. Recognizing the potential impacts of these challenges on our Company and the desire to align their interests with shareholders, our Named Executive Officers were among the first executives in the industry to +voluntarily agree to compensation reductions effective April 1, 2020. In addition, to further align their interests with shareholders, our Named Executive Officers and the Board agreed that the Named Executive Officers would forego any cash +bonuses for the year ended December 31, 2020 despite the Company meeting or exceeding the maximum level of each of the Independent Board-approved performance metrics under our annual cash incentive plan. +Despite the many challenges of 2020, our Named Executive Officers led the Company in achieving the following records in 2020: (i) record high oil, natural gas and +average daily oil equivalent production, (ii) record low unit operating costs for lease operating expenses and general and administrative expenses, (iii) record high oil, natural gas and total proved reserves and proved developed reserves +as of December 31, 2020 and (iv) record high midstream revenues, including record high third-party midstream services revenues, while maintaining the Company’s commitment to safety and the environment. In addition, our Named Executive +Officers led efforts to strengthen our balance sheet by increasing our elected borrowing commitment and reaffirming our borrowing base under the Credit Agreement and restructuring certain derivative financial instruments to provide assurance that we +would remain in compliance with the leverage covenant under our Credit Agreement even if prices continued to decline further in 2020. +2020 Highlights +Increased Production, Reserves and Midstream Revenues +The year +ended December 31, 2020 was marked by strong operational and financial results across the Company. The charts below show the five-year growth experienced by both our exploration and production business and our midstream business. As shown +below, our third-party midstream services revenues have experienced significant growth since the formation of San Mateo in 2017. +2021 +Proxy Statement | Matador Resources Company 41 +Table of Contents +EXECUTIVE COMPENSATION +Our production growth noted in the chart above was largely attributable to the increase of our average daily oil equivalent +production from the Delaware Basin by approximately 21% to 67,522 BOE per day (90% of total oil equivalent production). This increase included 41,678 Bbl of oil per day (96% of total oil production) and 155.1 MMcf of natural +gas per day (82% of total natural gas production) in 2020, as compared to 55,599 BOE per day (84% of total oil equivalent production), including 35,184 Bbl of oil per day (92% of total oil production) +and 122.5 MMcf of natural gas per day (73% of total natural gas production), in 2019. +Furthermore, in 2020 we continued our transition to drilling +more wells with longer horizontal laterals. By combining longer laterals with increased pad development, we significantly reduced development costs per foot between 2018 and 2020. In 2020, 74% of our operated horizontal wells had lateral lengths of +two miles, as compared to only one such well in 2018. Drilling and completion costs for our operated horizontal wells turned to sales averaged $850 per completed lateral foot for 2020, a decrease of approximately 27% from an average of $1,165 per +completed lateral foot for 2019 and a decrease of approximately 44% from an average of $1,528 per completed lateral foot achieved in full year 2018. +Financing Highlights +We concluded several +important financing transactions in 2020 that increased our operational flexibility and opportunities, while preserving the strength of our balance sheet and improving our liquidity position. These +42 Matador Resources Company | 2021 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +transactions included: +• +the amendment of the Credit Agreement in February 2020 to reaffirm the borrowing base at $900.0 million, increase our +elected borrowing commitment from $500.0 million to $700.0 million and add two new banks to our lending group; +• +the reaffirmation of the borrowing base under the Credit Agreement in October 2020 at $900.0 million; and +• +the restructuring of a portion of our then-existing 2020 NYMEX West Texas Intermediate (“WTI”) oil derivative +financial instruments in April 2020 to provide additional revenue assurance had oil prices declined further and help us remain in compliance with our Credit Agreement leverage covenant in 2020. +Midstream Highlights +Effective October 1, 2020, together with our joint +venture partner, a subsidiary of Five Point Energy LLC (“Five Point”), we completed the successful merger of San Mateo II with and into San Mateo. San Mateo is owned 51% by us and 49% by Five Point. +San Mateo achieved strong operating results in 2020, highlighted by (i) increased midstream services revenues, (ii) increased produced water handling volumes +and (iii) increased oil gathering and transportation volumes, all as compared to 2019. San Mateo’s natural gas gathering and processing volumes declined slightly in 2020 as compared to 2019 due to reduced volumes from a significant +third-party customer, but, on a quarterly sequential basis, San Mateo’s natural gas gathering and processing volumes, water handling volumes and oil gathering and transportation volumes all increased significantly in the fourth quarter of 2020, +as compared to the third quarter, as we realized the first full quarter of production from the Boros wells in the Stateline asset area and the Leatherneck wells in the Stebbins area and surrounding leaseholds in the southern portion of the Arrowhead +asset area (the “Greater Stebbins Area”). +During the third quarter of 2020, San Mateo completed the construction and successful start-up of the expansion of the Black River Processing Plant, which added an incremental designed inlet capacity of 200 MMcf of natural gas per day to the previously designed inlet capacity of 260 MMcf per day for +a total designed inlet capacity of 460 MMcf per day. The expanded Black River Processing Plant supports our exploration and development activities in the Delaware Basin and, at December 31, 2020, was gathering and processing natural gas from +the Stateline asset area and from the Greater Stebbins Area. The Black River Processing Plant also processes natural gas from our Rustler Breaks asset area and provides natural gas processing services for other San Mateo customers in the area. +In September 2020, San Mateo also completed and placed in service approximately 43 miles of large diameter natural gas gathering pipelines between the Black River +Processing Plant and the Stateline asset area (approximately 24 miles) and the Greater Stebbins Area (approximately 19 miles). In addition, San Mateo completed and placed in service approximately 19 miles of various diameter crude oil pipelines from +certain points of origin in the Greater Stebbins Area to the existing San Mateo interconnect with a subsidiary of Plains All American Pipeline, L.P. (“Plains”) in Eddy County, New Mexico. At December 31, 2020, San Mateo was gathering +or transporting our oil and natural gas production via pipeline in both the Stateline asset area and the Greater Stebbins Area, as well as in the Wolf and Rustler Breaks asset areas. San Mateo was handling our produced water via pipeline in each of +these areas as well. +At December 31, 2020, San Mateo’s midstream system included: +• +Natural Gas Assets : 460 MMcf per day of designed natural gas cryogenic processing capacity and approximately 140 +miles of natural gas gathering pipelines in Eddy County, New Mexico and Loving County, Texas, including approximately 43 miles of large-diameter natural gas gathering lines spanning from the Stateline asset area to the Greater Stebbins Area in Eddy +County, New Mexico; +• +Oil Assets : Three oil central delivery points with over 100,000 Bbl of designed oil throughput capacity and +approximately 90 miles of oil gathering and transportation pipelines in Eddy County, New Mexico and Loving County, Texas, as well as a 400,000-acre joint development area with Plains to gather our and other +producers’ oil production in Eddy County, New Mexico; and +• +Produced Water Assets : 13 commercial salt water disposal wells and associated facilities with designed produced +water disposal capacity of 335,000 Bbl per day and approximately 120 miles of produced water gathering pipelines in Eddy County, New Mexico and Loving County, Texas. +Compensation Program Objectives +Our Board has a “pay for +performance” philosophy and recognizes the leadership of our executive officers in contributing to the Company’s achievements. Our future success and the ability to create long-term value for our shareholders depend +2021 +Proxy Statement | Matador Resources Company 43 +Table of Contents +EXECUTIVE COMPENSATION +on our ability to attract, retain and motivate highly qualified individuals in the oil and natural gas industry. In furtherance of these goals, our executive compensation program is designed to +meet the following key objectives: +• +to be fair to both the executive and the Company and be competitive with comparable positions at companies in +our peer group; +• +to attract and retain talented and experienced executives in light of the intense competition for talent in our +industry and areas of operation, including from peers and larger industry competitors; +• +to align the interests of our executives with the interests of our shareholders and with the performance of +our Company for long-term value creation; +• +to provide financial incentives to our executives to achieve our key corporate and individual objectives with an +appropriate mix of fixed and variable pay ; +• +to foster a shared commitment among executives by coordinating their corporate and individual goals; and +• +to provide compensation that takes into consideration the education, professional experience, knowledge, commitment and +dedication that is specific to each job and the unique qualities the executive possesses. +2020 Say-on-Pay Results +At our 2020 Annual Meeting, support for our executive compensation program remained strong at +over 95%, indicating that our shareholders remain supportive of the changes we have implemented to our executive compensation program during the preceding years, including the 2020 compensation program changes described below. +2020 Compensation Program Changes +During the first quarter and +through April 2020, the oil and natural gas industry witnessed an abrupt and significant decline in oil prices from $63 per Bbl in early January to as low as ($38) per Bbl in late April. This sudden decline in oil prices was attributable to two +primary factors: (i) the precipitous decline in global oil demand resulting from the worldwide spread of COVID-19 and (ii) a sudden, unexpected increase in global oil supply resulting from actions +initiated by Saudi Arabia to increase its oil production to world markets following the failure of efforts by OPEC+ to agree on coordinated production cuts at their March 6, 2020 meetings in Vienna, Austria. +In connection with these events, we implemented compensation reductions effective April 1, 2020 for our entire workforce, including our executive officers. +Chairman and Chief Executive Officer Joseph Wm. Foran voluntarily agreed to a 25% base salary reduction with the other Named Executive Officers, other executive officers and vice presidents agreeing to 20%, 20% and 10% reductions, respectively. +These pay cuts were not restored until March 1, 2021, at which time our stock price had rebounded from a low of $1.11 in March 2020 to close at $22.04 on March 1, 2021. +In March 2020, after consulting with Meridian and management and considering shareholder feedback, the Independent Board granted executive officer equity-based awards +consisting of 50% service-based cash-settled restricted stock units and 50% share-settled performance stock units. This award structure reflects the Company’s continued commitment to its transition to additional performance-based compensation +that began in 2019. Importantly, in determining the targeted value of these awards, the Independent Board used a stock price of approximately $12.50, which approximated the Company’s stock price in late February 2020 when the Compensation +Committee began its consideration of 2020 equity-based awards. The Independent Board elected to use this higher stock price regardless of the fact that the Company’s stock price had declined to $2.41 on the March 10, 2020 grant date. The use of +this considerably higher stock price in sizing the 2020 long-term incentive awards resulted in a significantly lower number of units granted to each officer, preserving shares under the Company’s long-term incentive plan, preventing additional +shareholder dilution and further aligning the interests of our executive officers with shareholders. The grant date fair value of Mr. Foran’s 2020 long-term incentive award of $651,373 represents an 85% decrease from his 2019 long-term +incentive award. +Consistent with the compensation reductions noted above, in setting 2020 annual cash incentive opportunities under our annual cash incentive plan +for our Named Executive Officers, the Compensation Committee and Independent Board also reduced these amounts as compared to 2019. Mr. Foran’s target annual incentive opportunity as a percentage of his earned 2020 base salary was reduced +from 110.0% to 73.3%, and his maximum annual incentive opportunity was reduced from 220.0% to 110.0%. +44 Matador Resources Company | 2021 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +The 2020 operational and financial successes noted above contributed to the Company meeting or exceeding the maximum level of each of the Independent Board-approved +performance metrics under our annual cash incentive plan. Nonetheless, in an effort to strengthen the Company’s balance sheet and further align the interests of our executive officers with our shareholders, the Company’s Named Executive +Officers, other executive officers and the Board agreed that all executive officers would forego receiving any 2020 annual cash bonuses. +The following table +summarizes the modifications made to the key components of our executive compensation program in 2020: +2020 Component +2020 +Modifications +Base Salary +From April 1, 2020 to February 28, 2021: +•   25% reduction for our Chairman and CEO +•   20% reduction for our other executive officers, including the other Named +Executive Officers +•   10% reduction for our vice presidents +Annual Cash Incentive Payments +•   Reduction of +target opportunity from 110.0% to 73.3% for our Chairman and CEO +•   Reduction +of maximum opportunity from 220.0% to 110.0% for our Chairman and CEO +•   Reduction of target opportunity from average of 83.8% to 55.8% for our other +Named Executive Officers +•   Reduction of maximum opportunity from average of +167.5% to 83.8% for our other Named Executive Officers +•   No cash bonuses paid +in 2020 +Long-Term Incentive Awards +•   85% reduction in +grant date fair value for our Named Executive Officers +As a result of the base salary reduction, the lower long-term incentive award value and the absence of an annual cash bonus payment, +Mr. Foran’s total 2020 compensation of $1.7 million, as calculated in the Summary Compensation Table, reflects a 79% reduction from 2019 levels. Our other Named Executive Officers experienced similar decreases in their 2020 +compensation as compared to their 2019 compensation. +2021 +Proxy Statement | Matador Resources Company 45 +Table of Contents +EXECUTIVE COMPENSATION +In addition to the specific changes noted above, we also +maintained other changes made to our executive compensation program in recent years as a result of our ongoing shareholder outreach effort, as noted below. +What We Heard +What We Did +Improve alignment of executive compensation with the Company’s long-term +performance +•   Approximately +79% of Mr. Foran’s 2020 total target compensation was variable and at risk, with approximately 46% performance-based . +Incorporate performance-based awards into executive equity compensation program +•   In lieu of +service-based restricted stock and stock options granted in 2018 and earlier, we granted executive officers awards consisting of approximately 50% service-based restricted stock units (“RSUs”) and approximately 50% share-settled +performance stock units (“PSUs”). +•   The PSU equity component provides for settlement of between 0% and 200% of the total target PSUs subject to the award based on achievement of a relative total shareholder return performance metric +over a three-year performance period from January 1, 2020 through December 31, 2022. If our absolute total shareholder return over such performance period is negative, no more than 100% of the PSUs (the target level) will +vest. +Limit use of off-cycle discretionary bonuses and +fully-vested equity awards +•   Discretionary bonuses +commonly referred to within the Company as “Marlan” awards in honor of the late Marlan W. Downey (1931-2017), a long-time advisor to the Board, were historically awarded as a way to contemporaneously reward significant performance +achievements by select officers and employees. +•    No Marlan bonuses have been awarded to executive officers since our 2018 Annual Meeting, and the Board has determined to cease its practice of awarding Marlan bonuses to executive +officers. +•    No fully-vested equity awards have been granted to executive officers +since 2018, and the Board has determined that it will not grant fully-vested equity awards to executive officers. +•   In 2019, we adopted a new Annual Cash Incentive Plan (the +“Cash Incentive Plan”) that provides that the Compensation Committee and Independent Board may make adjustments for individual executive officers for exceptional performance and attainment of certain strategic goals. For 2020, our +Independent Board capped this potential adjustment for each executive officer. +Compensation Program Best Practices +What We Do: +What We Don’t +Do: +✓ +We pay for performance—approximately 79% of our CEO’s target total compensation for 2020 was variable and at risk, with approximately 46% performance-based +× +We do not permit hedging of Company stock +✓ +We maintain robust stock ownership guidelines for officers +× +We do not gross-up excise taxes for severance or change in control payments +✓ +We engage an independent compensation consultant +× +We do not guarantee bonuses +✓ +We use competitive benchmarking in setting compensation +× +We do not reprice stock options without shareholder approval +✓ +We conduct annual risk assessments of compensation practices +× +We have no defined benefit or supplemental executive retirement plans +✓ +We conduct shareholder engagement to gather feedback on compensation practices +× +We do not allow pledging of Company stock, except in limited circumstances +✓ +We hold an annual say-on-pay vote +× +We do not pay dividends on RSUs or PSUs +46 Matador Resources Company | 2021 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +Elements of 2020 Compensation Program +Our executive compensation +program places a considerable amount of an executive’s compensation at risk in the form of incentive or equity-based compensation, which can be variable from year to year. We also seek to provide an appropriate balance between annual incentives +and long-term incentives to ensure that each executive is motivated to consider longer-term Company performance in preference to short-term results. +For 2020, our +management compensation program was comprised of the following primary elements: +2020 Element +Key Features +Why We Include This +Element +Base Salary +•   Fixed level of cash +compensation +•   Compensates each +executive for his assigned responsibilities, experience, leadership and expected future contributions +Annual Cash Incentive Payments +•   Variable, annual, +performance-based cash compensation +•   Focuses and motivates +management to achieve key corporate and individual objectives +•   Rewards achievements over the prior year +Restricted Stock Units +•   Approximately 50% of +targeted total long-term equity award value +•   Vest ratably in annual installments over three years from grant date +•   Settle in cash +•   Directly aligns +executive and shareholder interests by tying the cash received on settlement to the Company’s stock price +•   Retains executives over vesting period +•   Cash +settlement avoids dilution of Common Stock +Performance Stock Units +•   Approximately 50% of +targeted total long-term equity award value +•   Vest between 0% and 200% following three-year performance period ending December 31, 2022 based on relative total shareholder return +•   If +absolute total shareholder return is negative, payout is capped at target (100%) +•   Focuses executives on +the Company’s long-term performance as award is tied to the Company’s total shareholder return relative to the total shareholder return of its peers +•   Settlement in shares of the Company’s stock increases alignment between +executives and shareholders +•   Retains executives over vesting period +Severance and Change of Control Benefits +•   Specified severance +pay and benefits are provided under each Named Executive Officer’s employment agreement in connection with termination events, including after a change in control +•   Provides an incentive +for executives to remain with the Company despite the uncertainties of a potential or actual change in control +•   Provides a measure of financial security in the event an executive’s +employment is terminated without cause +Other Benefits +•   Broad-based 401(k) +retirement, health and welfare benefits offered to all eligible employees +•   Provides market +competitive benefits +•   Protects employees against catastrophic loss and encourages a healthy +lifestyle +2021 +Proxy Statement | Matador Resources Company 47 +Table of Contents +EXECUTIVE COMPENSATION +Consistent with our compensation program objectives, we +provide our executive officers with a significant portion of their total compensation in the form of variable, rather than fixed, compensation. Importantly, a significant portion of total compensation is also performance-based. The percentages shown +below reflect each executive’s target compensation opportunity determined by the Compensation Committee and the Independent Board and do not reflect actual payments made to the executives for 2020. As noted previously, executive officer base +salaries were reduced effective April 1, 2020, and no 2020 annual cash bonuses were paid to any executive officers. +Role of the Independent Board, Compensation Committee and Management +The Compensation Committee annually evaluates each of the Company’s executive officers, including Mr. Foran, and recommends to the Independent Board the +proposed compensation structure for each of the executives, including salary, equity and non-equity incentive compensation. Based on such recommendations, the Independent Board sets Mr. Foran’s +compensation each year. Mr. Foran consults with and provides recommendations to the Compensation Committee and Independent Board regarding the compensation structure for each of the other Named Executive Officers. Based on the recommendations +of the Compensation Committee and Mr. Foran, the Independent Board sets the other Named Executive Officers’ compensation each year. The members of the Independent Board are required to be independent pursuant to the listing standards of +the NYSE and the rules and regulations promulgated by the SEC. +As part of their annual evaluations, the Compensation Committee: +• +conducts an analysis of the Company’s annual performance relative to any performance criteria or targets established +under the Cash Incentive Plan and recommends to the Independent Board the amount of final annual cash incentive awards; +• +reviews and recommends the form of and number of shares to be awarded pursuant to long-term incentive compensation awards, +including vesting terms, performance metrics, performance peer groups and other material provisions of such awards; +• +reviews executive officer compensation levels as compared to the Company’s peers; +• +reviews and recommends any employment agreement, severance agreement, change in control agreement or provision or +separation agreement or amendment thereof; and +• +reviews and recommends any deferred compensation arrangement, retirement plan, other benefits and perquisites. +48 Matador Resources Company | 2021 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +In addition, the Compensation Committee confirms at least annually that our compensation policies and practices do not encourage unnecessary risk taking and reviews the +relationship between risk management, corporate strategy and executive compensation. The Compensation Committee considers, in establishing and reviewing our compensation program, whether the program encourages unnecessary or excessive risk taking +and has concluded that it does not and is not reasonably likely to have a material adverse effect on us. Several features of our program reflect sound risk management practices. Base salaries are fixed in amount and thus do not encourage risk +taking. While annual cash incentive payments are tied to management’s achievements during the previous fiscal year, they also take into account multiple performance criteria based on the executive’s individual performance and are within +the discretion of the Independent Board, with payout limits for each participant. Thus, the Compensation Committee believes that our annual cash incentive awards appropriately balance risk and the desire to focus executives on specific short-term +goals important to the Company’s success, and that they do not encourage unnecessary or excessive risk taking. In addition, the Compensation Committee believes that our equity compensation program provides an appropriate balance between the +goals of increasing the price of our Common Stock and avoiding potential risks that could threaten our growth and stability due to the fact that the RSUs and PSUs vest over three years and the PSUs vest based on our relative total shareholder +return, with an overall payout limit and a further limit if absolute total shareholder return is negative. +In addition, pursuant to its charter, the Compensation +Committee reviews and recommends to the Independent Board any proposals for the adoption, amendment, modification or termination of our incentive compensation, equity-based plans and non-equity based plans. +Role of the Independent Compensation Consultant +The Compensation +Committee has engaged Meridian as its independent executive compensation advisory firm. Meridian provides assessments of the competitiveness of the Company’s executive compensation levels and practices relative to relevant executive labor +markets and performs other tasks as requested by the Compensation Committee. For 2020, the Compensation Committee assessed the independence of Meridian pursuant to applicable SEC and NYSE rules and concluded that Meridian’s engagement by the +Compensation Committee did not raise any conflicts of interest. +Use of Peer Group Market Data +Our independent compensation consultant benchmarks the pay levels of our officers against a group of competitor companies in the oil and natural gas exploration and +production sector (the “Peer Group”). In connection with its annual review, the Compensation Committee and Independent Board added the S&P Oil and Gas Exploration and Production Select Industry Index (XOP) as it adopted the following +new Peer Group in 2020, which was used in setting 2020 compensation levels: +Callon Petroleum Company +Centennial Resource Development, Inc. +Cimarex +Energy Co. +Devon Energy Corp. +Diamondback +Energy, Inc. +Marathon Oil Corporation +Oasis Petroleum, Inc. +Parsley Energy, Inc. +SM Energy Company +WPX Energy, Inc. +S&P Oil and Gas Exploration and +Production Select Industry Index (XOP) +Following the (i) September 2020 announcement of the merger of WPX Energy, Inc. into Devon Energy Corp., +(ii) the October 2020 announcement of the merger of Parsley Energy, Inc. into Pioneer Natural Resources Company and (iii) the September 2020 declaration of +bankruptcy by Oasis Petroleum, Inc., each of Parsley Energy, Inc., WPX Energy, Inc. and Oasis Petroleum, Inc. ceased to be considered in determining any elements of executive compensation. In addition to considering companies in the oil and natural +gas exploration and production sector, the Compensation Committee also considered company size characteristics such as assets, enterprise value and market value when approving the Peer Group. As of December 31, 2020, the Peer Group, excluding +the XOP, had a median market capitalization of $3.9 billion, compared to the Company’s market capitalization of $1.4 billion +2021 +Proxy Statement | Matador Resources Company 49 +Table of Contents +EXECUTIVE COMPENSATION +at such date, placing the Company at the 43 rd percentile of the Peer Group. The Peer Group also includes certain companies with operations in +the Permian Basin that face similar opportunities and challenges that we face. The Peer Group is used by the Compensation Committee and the Independent Board in setting Named Executive Officer salaries, annual cash incentive award opportunities, +long-term incentive awards and target total direct compensation levels. The Compensation Committee and Independent Board use this data to inform their pay decisions as one data point among many others, including Company performance, individual +performance, experience and responsibilities, leadership and professional growth. +2020 Base Salaries +In February 2020, based on the recommendations of Mr. Foran (other than with regard to his base salary), the Compensation Committee recommended, and the Independent +Board approved, initial 2020 base salaries for our Named Executive Officers that reflected modest raises based upon the Company’s success in 2019. Effective April 1, 2020, as noted above, Mr. Foran’s salary was reduced by 25% +with each other Named Executive Officer’s salary being reduced by 20%. +Executive Officer +2019 Base +Salary +Initial +2020 Base +Salary +Reduced +2020 Base +Salary +Joseph Wm. Foran +$ +1,200,000 +$ +1,250,000 +$ +937,500 +Matthew V. Hairford +$ +700,000 +$ +725,000 +$ +580,000 +David E. Lancaster +$ +680,000 +$ +700,000 +$ +560,000 +Craig N. Adams +$ +660,000 +$ +700,000 +$ +560,000 +Billy E. Goodwin +$ +660,000 +$ +700,000 +$ +560,000 +2020 Annual Cash Incentive Compensation +The Company’s 2020 annual cash incentive compensation was awarded pursuant to the Cash Incentive Plan, which is designed to link executive decision making and +performance with the Company’s goals, reinforce these goals and ensure the highest level of accountability for the success of the Company as a whole. The Cash Incentive Plan advances Company and shareholder interests by providing an additional +means to (i) sustain and enhance the culture of personal commitment on the part of executives, select managers and key employees in the continued growth, development and financial success of the Company and (ii) encourage them to remain +with, and devote their best efforts to, the Company. The Cash Incentive Plan provides for the granting of awards of incentive compensation that may be paid to a participant upon satisfaction of specified performance goals for a particular +performance period. In addition, the Cash Incentive Plan provides that the Compensation Committee and Independent Board may make adjustments for individual executive officers for exceptional performance and attainment of certain strategic goals (the +“Discretionary Adjustment”). +Performance Goals +For 2020, the +chair of the Compensation Committee met with Meridian and management to discuss potential criteria for the performance goals. Based on these meetings, which occurred after the April 2020 sharp decline in oil prices as a result of the worldwide +spread of COVID-19 and the failure of efforts by OPEC+ to agree on coordinated production cuts, the chair of the Compensation Committee proposed certain preliminary performance goal categories for +consideration for 2020. The Compensation Committee then met with Meridian and management to review the proposed performance goal categories. In 2018, the Compensation Committee had implemented a strategic shift, which continued in 2019, to focus on +performance goals that incentivize capital efficiency and returns in addition to growth. In light of the concerns regarding COVID-19 and declining oil prices, and in an effort to further align executive +compensation with shareholder interests, the Compensation Committee recommended that the Independent Board exclude any growth-oriented goals for 2020, focusing instead on performance, efficiency and sustainability. As a result of these discussions, +and upon the recommendation of the +50 Matador Resources Company | 2021 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +Compensation Committee, the Independent Board determined to use the following threshold, target and maximum performance goals for 2020, which were each achieved at or above the maximum level, as +shown below: +2020 +Performance Goals +Threshold +Target +Maximum +Actual +Results +Assessment +Net Debt/Adjusted EBITDA (1)(2)(3) +3.7x +3.5x +3.3x +2.9x +Exceeded +maximum +Total 2020 shareholder return vs. Peer Group +— +Upper 50% +Upper 25% +Upper 25% +Achieved +maximum +Adjusted Operating Expenses per BOE (4) +$11.50 +$10.50 +$10.00 +$9.47 +Exceeded +maximum +Health, Safety and Environmental (5) +— +— +— +— +— +(1) +Adjusted EBITDA is a non-GAAP financial measure included herein solely as a +reference point under the Cash Incentive Plan. It is commonly used by similar companies in our industry. For a definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to our net income (loss) and net cash provided by operating +activities, see Annex A to this Proxy Statement. +(2) +As a reference point under the Cash Incentive Plan, Net Debt as of December 31, 2020 is calculated as (i) +$1.05 billion in senior notes outstanding, plus (ii) $486.0 million in debt under the Credit Agreement, including outstanding borrowings and letters of credit, less (iii) $50.0 million in available cash. +(3) +Attributable to Matador Resources Company shareholders after giving effect to those values attributable to third-party non-controlling interests, including in San Mateo. +(4) +Adjusted Operating Expenses per BOE is defined as the sum of the following operating expenses per BOE: (i) production +taxes, transportation and processing, (ii) lease operating and (iii) general and administrative. +(5) +Based on a qualitative assessment of the Company’s overall health, safety and environmental record for the year, +including a review of the Company’s performance in the areas of training of personnel, safety investigations and environmental risk management. +2020 Incentive Opportunities +In making recommendations regarding potential +2020 annual cash incentive opportunities for our Named Executive Officers, the Compensation Committee reviewed Meridian’s recommendations and recommendations of management regarding proposed target opportunities. Based on such review, which +took into account the differing responsibilities of each Named Executive Officer and Peer Group data, where available, for bonus levels for comparable positions, the 2020 target annual incentive opportunities set forth below were approved. As noted +above, in light of the outbreak of COVID-19 along with the actions of OPEC+ and their effects on oil supply and demand, oil prices and our stock price, Mr. Foran’s target annual incentive opportunity +as a percentage of his earned 2020 base salary was reduced from 110.0% for 2019 to 73.3% for 2020, and his maximum annual incentive opportunity was reduced from 220.0% for 2019 to 110.0% for 2020. For our other Named Executive Officers, the average +target opportunity was reduced from 83.8% to 55.8%. +Participant +2019 Target +Annual +Incentive +Opportunity +as % of 2019 +Base Salary +2020 Target +Annual +Incentive +Opportunity +as % of 2020 +Base Salary +Joseph Wm. Foran +110.0 +% +73.3 +% +Matthew V. Hairford +90.0 +% +60.0 +% +David E. Lancaster +85.0 +% +56.7 +% +Craig N. Adams +80.0 +% +53.3 +% +Billy E. Goodwin +80.0 +% +53.3 +% +2021 +Proxy Statement | Matador Resources Company 51 +Table of Contents +EXECUTIVE COMPENSATION +Our Independent Board also determined to cap the Discretionary +Adjustment for each Named Executive Officer at 30% of each Named Executive Officer’s total 2020 annual cash incentive payment. +2020 Performance Results +The Compensation Committee then assessed the Company’s 2020 results in light of the performance goals and the following individual performance milestones +for each Named Executive Officer when determining appropriate annual cash incentive award amounts: +Executive Officer +Individual Performance +Milestones +Joseph Wm. Foran +Chairman and Chief Executive Officer +•    Collaborated with the Board and other executive officers to create +and maintain an effective team culture throughout each level of Matador’s organization that has built value through (1) selective acreage acquisitions , (2) traditional oil and natural gas +operations growing organically through the drill bit and (3) expanding midstream operations in Matador’s various asset areas +•   Provided direction and leadership throughout Matador in +developing and executing Matador’s strategy and operational plan in 2020, which, despite a reduction from six to three operated rigs, resulted in record operational and midstream results, including +¡    7 % proved reserves growth +¡    14 % +daily oil equivalent production growth +•    Provided leadership to the Board , including recommending to the Nominating Committee a highly qualified Board candidate with additional expertise and experience and improving the Board’s +function and processes +•   Oversaw Matador’s continuing improvement in capital efficiency as +demonstrated by our average drilling and completion costs for all operated horizontal wells completed and turned to sales of approximately $850 per completed lateral foot in 2020 , a decrease of 27% as compared to average drilling and +completion costs of $1,165 per completed lateral foot in 2019 +•   Worked with other executive officers to complete the expansion of the San +Mateo system and the Black River Processing Plant and the merger of San Mateo II into San Mateo +•    Oversaw the collaborative management of the Company’s balance +sheet and strong financial position , including through two reaffirmations of the borrowing base under the Credit Agreement and the achievement of free cash flow in the fourth quarter of 2020 +•   Led +firmwide focus on attracting, training and retaining talent , encouraging employee leadership development and director engagement and aligning our strategy and operational plan throughout the organization +•   Directed +efforts to develop and maintain relationships with directors, shareholders, vendors and other key stakeholders with the assistance of other executive officers +•    Helped advance the Company’s ESG initiatives , including by +forming a working group to compile and report data highlighting the Company’s efforts to respond to increased investor focus on sustainability +52 Matador Resources Company | 2021 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +Executive Officer +Individual Performance +Milestones +Matthew V. Hairford +President +•    Oversaw the +team efforts that resulted in record daily oil equivalent production and an increase of 14% in 2020 over 2019 levels +•   Directed the work of the Company’s field personnel and the +implementation of the Company’s health, safety and environmental initiatives and interacted with shareholders and directors on financial matters +•   Worked with other executive officers to contain costs , evidenced +by record-low unit operating costs for lease operating expenses of $3.81 per BOE, while maintaining and improving relationships with key vendors +•   As +Chairman of the Board and President of San Mateo, led the Company’s midstream efforts to, among other items: +¡   Expand our +midstream operations in Eddy County, New Mexico, including the expansion of the Black River Processing Plant , which added an incremental designed inlet capacity of 200 MMcf of natural gas per day to the previously designed inlet capacity of +260 MMcf per day for a total designed inlet capacity of 460 MMcf per day +¡   Achieve +strong operating results , highlighted by increased midstream services revenues, increased produced water handling volumes and increased oil gathering and transportation volumes +¡   Complete the merger of San Mateo II into San Mateo +David +E. Lancaster Executive Vice President and Chief Financial Officer +•    Led the collective effort to manage the Company’s balance +sheet and improve the Company’s already strong financial position through +¡    Two +reaffirmations of the borrowing base under the Credit Agreement of $900.0 million, in both February and October 2020 +¡    An +increase of our elected borrowing commitment under the Credit Agreement from $500.0 million to $700.0 million +¡   The +restructuring of a portion of our then-existing 2020 WTI oil derivative financial instruments in April 2020 to provide additional revenue assurance +¡   Achievement +of free cash flow in the fourth quarter of 2020 +•   Responsible for the Company’s financial modeling, guidance and relationships with financial institutions, shareholders, bondholders, equity and bond analysts and public markets +•   As a +distinguished petroleum engineer, provided oversight and quality control to the Company’s exploration and development activities and its reserve studies +Craig N. Adams +Executive +Vice President and Chief Operating Officer—Land, Legal & Administration +•   Coordinated and +oversaw the general legal matters of the Company through the management of the Company’s legal staff +•   Managed the Company’s legal and land efforts to convert approximately +$4.8 million of non-core assets to cash +•    Responsible for coordinating administrative functions of the Company, +including Board functions and interaction with management, office facilities and the oversight of the Company’s human resource activities and departmental efficiencies +•    Helped +advance the Company’s ESG initiatives +•   Led the Company’s COVID-19 response with a focus on prioritizing employee health and safety while maintaining the Company’s operations in +order to achieve its 2020 goals +2021 +Proxy Statement | Matador Resources Company 53 +Table of Contents +EXECUTIVE COMPENSATION +Executive Officer +Individual Performance +Milestones +Billy E. +Goodwin +Executive Vice President and Chief Operating Officer—Drilling, Completions & Production +•    Led the Company’s collaborative drilling, completions and +production activities, managing approximately $450.0 million of capital expenditures in 2020 related to the Company’s operations in its primary operating areas, resulting in +¡    7% proved reserves growth +¡    14% +daily oil equivalent production growth +•   Led Matador’s continuing improvement in capital efficiency as demonstrated by our average drilling and completion costs for all operated horizontal wells completed and turned to sales of +approximately $850 per completed lateral foot in 2020, a decrease of 27% as compared to average drilling and completion costs of $1,165 per completed lateral foot in 2019 +•   Directed the MaxOps program to increase drilling, completions and +production experience among our engineering staff and the MaxCom program to ensure coordination of drilling and completion s operations +•   Worked with other executive officers and staff members to innovate and to +reduce operating costs , evidenced by record-low unit operating costs for lease operating expenses of $3.81 per BOE, while maintaining and improving relationships with key +vendors +The Compensation Committee reviewed the individual performance milestones listed above as well as additional contributions to the +achievement of Company-wide goals. Additionally, the Compensation Committee performed a qualitative assessment of the Company’s health, safety and environmental record for the year. Among other items, the Compensation Committee noted the +reduction in the Company’s greenhouse gas emissions, the increased use of grid power instead of generators, the continued development of the Company’s water recycling program, the reduction in surface footprint through the use of batch +drilling and longer laterals and the absence of any recordable employee injuries. Based on this review, the Compensation Committee determined that each of the Named Executive Officers performed at a high level in 2020 contributing to the +Company’s success, including achievement of each performance metric at or above the maximum level. As noted above, however, the Company’s executive officers and the Board agreed that the executive officers would forego receiving any 2020 +annual cash bonuses. +Executive +Officer +Target Award +Payable for 2020 +Maximum Award +Payable for 2020 +Actual +Award for 2020 +Joseph Wm. +Foran +$ +744,453 +$ +1,117,188 +$ +— +Matthew V. Hairford +$ +369,750 +$ +554,625 +$ +— +David E. +Lancaster +$ +337,365 +$ +505,750 +$ +— +Craig N. Adams +$ +317,135 +$ +476,000 +$ +— +Billy E. +Goodwin +$ +317,135 +$ +476,000 +$ +— +2020 Long-Term Incentive Compensation +In March 2020, the Independent Board granted awards of 50% service-based cash-settled RSUs and 50% share-settled PSUs to our +executive officers. As noted above, in determining the total targeted value of these awards, the Independent Board used a stock price of approximately $12.50 on a date at which the Company’s stock price closed at $2.41. The use of this +considerably higher stock price in sizing the 2020 long-term incentive awards significantly lowered the number of units granted to each officer, preserving shares under the Matador Resources Company 2019 Long-Term Incentive Plan (the “2019 +Long-Term Plan”) and preventing additional shareholder dilution in a low share price environment. These long-term equity awards facilitate retention of our +54 Matador Resources Company | 2021 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +Named Executive Officers, incentivize positive future results and further align the interests of our Named Executive Officers with those of the Company’s shareholders. The table below +provides the key terms of the March 2020 equity awards: +Key +Terms +Restricted Stock Units +Performance Stock +Units +Targeted percentage of total +award +value +50% +50% +Vesting terms +Three years ratably on each anniversary +Following three-year performance period ending December 31, 2022 +Performance metric +N/A +Relative total shareholder return +The number of shares underlying each grant and the target value and grant date fair value of the 2020 annual equity grants are set forth +in the table below: +Participant +Restricted +Stock Units +Target +Performance +Stock Units +Targeted +Value +Grant Date +Fair Value +Joseph Wm. Foran +159,260 +159,260 +$ +4,000,000 +$ +651,373 +Matthew V. Hairford +83,612 +83,612 +$ +2,100,000 +$ +341,973 +David E. Lancaster +75,649 +75,649 +$ +1,900,000 +$ +309,404 +Craig N. Adams +67,686 +67,686 +$ +1,700,000 +$ +276,836 +Billy E. Goodwin +67,686 +67,686 +$ +1,700,000 +$ +276,836 +The Independent Board approved the total targeted value for the year for each Named Executive Officer and then converted that value into +an aggregate number of units based on a price of approximately $12.50, as noted above, even though the closing price of our Common Stock on the date of grant was $2.41. The units were then granted 50% in the form of RSUs and 50% in the form of PSUs +(at target). The PSU equity component provides for settlement of between 0% and 200% of the total target PSUs subject to the award based on our total shareholder return relative to the total shareholder return of the Peer Group over a three-year +performance period from January 1, 2020 through December 31, 2022. If our absolute total shareholder return over such performance period is negative, no more than 100% of the PSUs may vest. The applicable percentage of vested units is +shown below with respect to each percentile ranking. +Company’s Relative Total +Shareholder +Return Percentile Ranking +Percentage of Target Units +That Will +Vest +0 +0% +10 th +20% +20 th +40% +30 th +60% +40 th +80% +50 th +100% +60 th +120% +70 th +140% +80 th +160% +90 th +180% +100 th +200% +2021 +Proxy Statement | Matador Resources Company 55 +Table of Contents +EXECUTIVE COMPENSATION +The Peer Group used for determination of the Company’s +relative total shareholder return is as follows, which is the same as the Company’s 2020 Peer Group: +Callon Petroleum Company +Centennial Resource Development, Inc. +Cimarex +Energy Co. +Devon Energy Corp. +Diamondback +Energy, Inc. +Marathon Oil Corporation +Oasis Petroleum, Inc. +Parsley Energy, Inc. +SM Energy Company +WPX Energy, Inc. +S&P Oil and Gas Exploration and Production Select Industry Index (XOP) +Benefits +We offer a variety of health +and welfare programs to eligible employees, including the Named Executive Officers. The health and welfare programs are intended to protect employees against catastrophic loss and encourage a healthy lifestyle. Our health and welfare programs +include medical, pharmacy, dental, disability and life insurance. We also have a 401(k) plan for eligible employees, including the Named Executive Officers, to which we contribute 3% of the employee’s eligible compensation, which is subject to +limits established by the Internal Revenue Code of 1986 (the “Code”), and have the discretion to contribute up to an additional 4% of the employee’s eligible compensation as a dollar-for-dollar matching contribution with respect to his or her elective deferral contributions. The discretionary +dollar-for-dollar match is subject to vesting based upon years of service to the Company and the limits on the compensation that may be considered under the Code. In +addition, we provide long-term care insurance for certain of our executive officers. +Severance and Separation Arrangements +Employment Agreements +We have entered into employment agreements with each of +our Named Executive Officers. Under the employment agreements, if a termination of employment occurs pursuant to one of the following events: +• +the Named Executive Officer dies; +• +the Named Executive Officer is totally disabled; +• +we mutually agree to end the employment agreement; +• +we dissolve and liquidate; or +• +the term of the employment agreement ends, +we will pay the Named Executive Officer the average of his annual cash bonus, which includes non-equity incentive compensation, +for the prior two years, pro-rated based on the number of complete or partial months completed during the year of termination. +Also, under the employment agreements, if one of the following occurs: +• +the Named Executive Officer’s employment is terminated other than (i) as set forth above, (ii) by us for +just cause or (iii) in connection with a “change in control” as described below; or +• +the Named Executive Officer terminates his employment for “good reason,” +if the Named Executive Officer is Mr. Foran, we will pay him twice his base salary and twice the average of his annual cash bonus for the prior two years; if the +Named Executive Officer is Messrs. Hairford, Lancaster, Adams or Goodwin, we will pay him 1.5 times his base salary and 1.5 times the average of his annual cash bonus for the prior two years. +Finally, under the employment agreements of Messrs. Foran, Hairford and Lancaster, which were entered into in 2011, if we terminate the Named Executive Officer within +30 days prior to the “change in control” or within 12 months +56 Matador Resources Company | 2021 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +after the “change in control” without just cause or the Named Executive Officer terminates his employment with or without “good reason” during such period, we will pay him +three times his base salary and three times the average of his annual cash bonus for the prior two years. These agreements were entered into prior to our initial public offering. At that time, we believed a “modified single trigger” was +appropriate given the Company’s size, early stage of development and strong growth aspirations. Since that time, however, we have ceased to use “modified single triggers” in executive employment agreements, and we intend to +exclusively use “double triggers” going forward, as we have since 2014. The agreement entered into with Mr. Adams in March 2014 and the agreement entered into with Mr. Goodwin effective February 2016 each include a “double +trigger” such that if we terminate either executive within 30 days prior to the “change in control” or within 12 months after the “change in control” without just cause or he terminates his employment with “good +reason,” we will pay Mr. Adams or Mr. Goodwin three times his base salary and three times the average of his annual cash bonus for the prior two years. In addition, if any of our Named Executive Officers are terminated or terminate +their employment as set forth above in connection with a “change in control,” all equity awards of such Named Executive Officer vest immediately prior to such termination. +For definitions of “change in control,” “good reason” and “just cause,” please see the employment agreement of each Named Executive +Officer, each of which is included as an exhibit to the Company’s most recent Annual Report on Form 10-K. +Equity +Plans +For equity grants under the Matador Resources Company Amended and Restated 2012 Long-Term Incentive Plan (the “2012 Long-Term Plan”) and the +2019 Long-Term Plan (together with the 2012 Long-Term Plan, the “Long-Term Plans”), other than the PSUs, vesting upon a “change in control” for the Named Executive Officers mirrors the terms of their employment agreements. The +PSUs vest upon a “change in control” based on performance achieved through the date of such change in control, as it is anticipated that a change in control would make achievement of relative total shareholder performance impractical to +measure. +The “change in control” provisions in the employment agreements and the equity grants under the Long-Term Plans help prevent management from +being distracted by rumored or actual changes in control. The “change in control” provisions provide: +• +incentives for those Named Executive Officers to remain with us despite the uncertainties of a potential or actual change +in control; +• +assurance of severance payments for terminated Named Executive Officers; and +• +access to equity compensation after a change in control. +Stock Ownership Guidelines +We have adopted stock ownership +guidelines for the following officers in the following designated amounts: +• +Chairman and Chief Executive Officer—shares equal to five times base salary; +• +President—shares equal to five times base salary; +• +Executive Vice Presidents—shares equal to two and 1/2 times base salary; +• +Senior Vice Presidents—shares equal to two times base salary; and +• +Vice Presidents and Executive Directors—shares equal to one and 1/2 times base salary. +Newly appointed officers have until the fifth anniversary of his or her appointment as an officer of the Company within which to achieve the stock ownership position. +Shares that count toward the stock ownership guidelines include time-based restricted shares. Shares that will not count toward the stock ownership guidelines include shares underlying unexercised stock options, unexercised stock appreciation +rights, RSUs that provide for settlement in cash and performance-based awards for which the performance requirements have not been satisfied. +2021 +Proxy Statement | Matador Resources Company 57 +Table of Contents +EXECUTIVE COMPENSATION +Until each of the above officers reaches the stock ownership +level required of his or her position, such officer must hold at least 50% of all “net shares” received through restricted stock or RSU vesting or realized through stock option exercises. For this purpose, “net shares” means +all shares retained after applicable withholding of any shares for tax purposes. Additionally, upon the vesting of restricted stock or RSUs or the exercise of stock options, each officer must hold the net shares for a minimum of 12 months following +such vesting or exercise, or until his earlier retirement. As of December 31, 2020, each Named Executive Officer owned shares in excess of the applicable minimum requirement set forth in the stock ownership guidelines, and Mr. Foran held +shares with a value equal to approximately 67 times his base salary then in effect. +Anti-Hedging and Anti-Pledging Policies +Pursuant to the Company’s insider trading policy, the Company prohibits hedging of its securities by directors, officers or employees. Specifically, no such person +shall purchase or sell, or make any offer to purchase or offer to sell, derivative securities relating to the Company’s stock, whether or not issued by the Company, or financial instruments that are designed to hedge or offset any decrease in +the market value of the Company’s stock (including but not limited to prepaid variable forward contracts, equity swaps, collars and exchange funds) or otherwise engage in transactions that hedge or offset, or are designed to hedge or offset, +any decrease in the market value of Company equity securities (a) granted to such person by the Company as part of the compensation of such person; or (b) held, directly or indirectly, by such person. The insider trading policy also +restricts directors and executive officers from pledging more than 25% of his or her holdings of the Company’s stock without the prior written consent of the Environmental, Social and Corporate Governance Committee. +Strategic Planning and Compensation Committee Report +We have reviewed and discussed with management the Compensation +Discussion and Analysis required by Item 402(b) of Regulation S-K and based on such review and discussions, we recommended to the Board that the Compensation Discussion and Analysis be included in +this Proxy Statement and incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. +Strategic Planning and Compensation Committee, +R. Gaines Baty, Chair +Reynald A. Baribault +Timothy E. Parker +Kenneth L. Stewart +58 Matador Resources Company | 2021 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +Summary Compensation Table +The following table summarizes the total compensation awarded +to, earned by or paid to Messrs. Foran, Hairford, Lancaster, Adams and Goodwin for 2020, 2019 and 2018. This table and the accompanying narrative should be read in conjunction with the CD&A, which sets forth the objectives and other information +regarding our executive compensation program: +Name and Principal Position +Year +Salary (1) +Bonus (2) +Stock +Awards (3) +Option +Awards (4) +Non-Equity +Incentive Plan +Compensation (5) +All Other +Compensation +Total +Joseph Wm. Foran +2020 +$ +1,015,625 +$ +— +$ +651,373 +$ +— +$ +— +$ +22,549 +(6) +$ +1,689,547 +Chairman of the Board and Chief Executive Officer +2019 +$ +1,200,000 +$ +— +$ +4,293,663 +$ +— +$ +2,510,000 +$ +24,646 +$ +8,028,309 +2018 +$ +1,100,000 +$ +300,000 +$ +2,666,659 +$ +1,333,330 +$ +1,936,000 +$ +23,331 +$ +7,359,320 +Matthew V. Hairford +2020 +$ +616,250 +$ +— +$ +341,973 +$ +— +$ +— +$ +23,852 +(7) +$ +982,075 +President +2019 +$ +700,000 +$ +— +$ +2,254,174 +$ +— +$ +1,200,000 +$ +23,502 +$ +4,177,676 +2018 +$ +660,000 +$ +100,000 +$ +1,399,976 +$ +699,991 +$ +900,400 +$ +21,112 +$ +3,781,479 +David E. Lancaster +2020 +$ +595,000 +$ +— +$ +309,404 +$ +— +$ +— +$ +19,950 +(8) +$ +924,354 +Executive Vice President and Chief Financial Officer +2019 +$ +680,000 +$ +— +$ +2,039,489 +$ +— +$ +1,100,000 +$ +19,600 +$ +3,839,089 +2018 +$ +625,000 +$ +100,000 +$ +1,266,653 +$ +633,327 +$ +850,000 +$ +19,250 +$ +3,494,230 +Craig N. Adams +2020 +$ +595,000 +$ +— +$ +276,836 +$ +— +$ +— +$ +22,231 +(9) +$ +894,067 +Executive Vice President and Chief Operating Officer — +Land, Legal & Administration +2019 +$ +660,000 +$ +— +$ +1,824,804 +$ +— +$ +1,005,000 +$ +21,881 +$ +3,511,685 +2018 +$ +600,000 +$ +100,000 +$ +1,133,331 +$ +566,664 +$ +790,000 +$ +21,531 +$ +3,211,526 +Billy E. Goodwin +2020 +$ +595,000 +$ +— +$ +276,836 +$ +— +$ +— +$ +19,950 +(8) +$ +891,786 +Executive Vice President and +Chief Operating Officer — Drilling, Completions & Production +2019 +$ +660,000 +$ +— +$ +1,824,804 +$ +— +$ +1,005,000 +$ +19,600 +$ +3,509,404 +2018 +$ +575,000 +$ +50,000 +$ +999,979 +$ +499,988 +$ +840,000 +$ +19,250 +$ +2,984,217 +(1) +Salary amounts shown for 2020 reflect actual salary paid. For a discussion of 2020 executive salaries, which were reduced +effective April 1, 2020, see “—Compensation Discussion and Analysis—2020 Base Salaries” above. +(2) +Reflects ad hoc discretionary “Marlan” bonuses awarded by the Independent Board to recognize such Named +Executive Officer’s contributions to certain transactions and accomplishments of the Company. As a result of feedback received during shareholder outreach efforts following the 2018 Annual Meeting, the Board has ceased to award its executive +officers with such Marlan bonuses. See “—Compensation Discussion and Analysis—2020 Compensation Program Changes” above. +(3) +Reflects the grant date fair value of RSUs, PSUs or restricted stock awards, as applicable, computed in accordance with +FASB ASC Topic 718. +(4) +Reflects the grant date fair value of option awards computed in accordance with FASB ASC Topic 718. Our policy and +assumptions made in the valuation of the stock options are contained in Note 2 and Note 9 of the audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, +2020. +(5) +Represents awards pursuant to the Amended and Restated Matador Resources Company Annual Incentive Plan for Management and +Key Employees, effective January 1, 2016, or the Cash Incentive Plan, as applicable. See “—Compensation Discussion and Analysis—2020 Annual Cash Incentive Compensation” above. +(6) +Consists of $19,950 in 401(k) Company and matching contributions as described in “—Compensation Discussion and +Analysis—Benefits” and $2,599 in long-term care insurance premiums. +(7) +Consists of $19,950 in 401(k) Company and matching contributions as described in “—Compensation Discussion and +Analysis—Benefits” and $3,902 in long-term care insurance premiums. +(8) +Reflects 401(k) Company and matching contributions as described in “—Compensation Discussion and +Analysis—Benefits.” +(9) +Consists of $19,950 in 401(k) Company and matching contributions as described in “—Compensation Discussion and +Analysis—Benefits” and $2,281 in long-term care insurance premiums. +2021 +Proxy Statement | Matador Resources Company 59 +Table of Contents +EXECUTIVE COMPENSATION +Grants of +Plan-Based Awards Table +The following table sets +forth certain information regarding non-equity awards granted by the Independent Board pursuant to the Cash Incentive Plan and awards of share-settled PSUs and cash-settled RSUs granted by the Independent +Board pursuant to the 2019 Long-Term Plan during the year ended December 31, 2020 to the Named Executive Officers below: +Estimated Future Payouts +Under Non-Equity Incentive +Plan Awards (1) +Estimated Future Payouts +Under Equity Incentive +Plan Awards (2) +All +Other +Stock +Awards: +Number +of Shares +of Stock +or Units (3) +Grant +Date +Fair +Value of +Stock +Awards +Threshold +Target +Maximum +Threshold +Target +Maximum +Name +Grant Date +($) +($) +($) +(#) +(#) +(#) +(# shares) +($) +Joseph Wm. Foran +— +— +744,453 +1,117,188 +— +— +— +— +— +3/10/20 +— +— +— +— +159,260 +318,520 +— +277,112 +3/10/20 +— +— +— +— +— +— +159,260 +374,261 +Matthew V. Hairford +— +— +369,750 +554,625 +— +— +— +— +— +3/10/20 +— +— +— +— +83,612 +167,224 +145,485 +3/10/20 +— +— +— +— +— +— +83,612 +196,488 +David E. Lancaster +— +— +337,365 +505,750 +— +— +— +— +— +3/10/20 +— +— +— +— +75,649 +151,298 +— +131,629 +3/10/20 +— +— +— +— +— +— +75,649 +177,775 +Craig N. Adams +— +— +317,135 +476,000 +— +— +— +— +— +3/10/20 +— +— +— +— +67,686 +135,372 +— +117,774 +3/10/20 +— +— +— +— +— +— +67,686 +159,062 +Billy E. Goodwin +— +— +317,135 +476,000 +— +— +— +— +— +3/10/20 +— +— +— +— +67,686 +135,372 +— +117,774 +3/10/20 +— +— +— +— +— +— +67,686 +159,062 +(1) +See “—Compensation Discussion and Analysis—2020 Annual Cash Incentive Compensation” and +“—Summary Compensation Table—Non-Equity Incentive Plan Compensation” regarding the actual payments made to the Named Executive Officers pursuant to the Cash Incentive Plan. No such payments +were made for 2020. +(2) +Represents PSUs that provide for settlement of between 0% and 200% of the total target shares subject to the award based +on achievement of a relative total shareholder return performance metric over a three-year performance period from January 1, 2020 through December 31, 2022. If our total shareholder return over such performance period is negative, no more +than 100%, the target level, of the PSUs may vest. See “—Compensation Discussion and Analysis—2020 Long-Term Incentive Compensation.” The PSUs do not provide for a threshold number of shares that may be earned. +(3) +Represents RSUs that provide for settlement in cash. See “—Compensation Discussion and Analysis—2020 +Long-Term Incentive Compensation.” +60 Matador Resources Company | 2021 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +Outstanding Equity Awards at December 31, 2020 +The following table summarizes the total outstanding option +awards at December 31, 2020 for each Named Executive Officer: +Option +Awards +Name +Number of +Securities +Underlying +Unexercised +Stock +Options (#) +Exercisable +Number of +Securities +Underlying +Unexercised +Stock +Options (#) +Unexercisable +Option +Exercise +Price +Option +Expiration +Date +Joseph Wm. Foran +15,465 +— +$ +15.00 +2/18/21 +144,686 +— +$ +27.26 +2/14/23 +70,323 +35,162 +$ +29.68 +2/15/24 +Matthew V. Hairford +79,942 +— +$ +15.00 +2/18/21 +93,927 +— +$ +27.26 +2/14/23 +36,919 +18,460 +$ +29.68 +2/15/24 +David E. Lancaster +62,137 +— +$ +15.00 +2/18/21 +82,211 +— +$ +27.26 +2/14/23 +33,403 +16,702 +$ +29.68 +2/15/24 +Craig N. Adams +62,137 +— +$ +15.00 +2/18/21 +68,500 +— +$ +27.26 +2/14/23 +29,887 +14,944 +$ +29.68 +2/15/24 +Billy E. Goodwin +49,419 +— +$ +15.00 +2/18/21 +55,739 +— +$ +27.26 +2/14/23 +26,370 +13,186 +$ +29.68 +2/15/24 +All unvested stock options held by the Named Executive Officers as of December 31, 2020 became fully vested on February 16, +2021. +The following table summarizes the total outstanding restricted stock awards, cash-settled RSUs and share-settled PSUs at December 31, 2020 for each +Named Executive Officer: +Stock Awards +Name +Award Type +Number of +Shares or +Units of +Stock That +Have Not +Vested +(#) +Market Value +of Shares or +Units of +Stock That +Have Not +Vested +($) +Equity Incentive Plan +Awards: +Number of +Unearned Shares, +Units or +Other Rights That +Have Not +Vested (1) +(#) +Equity Incentive Plan +Awards: +Market or +Payout Value +of Unearned +Shares, +Units or +Other Rights That +Have Not +Vested (1) +($) +Joseph Wm. Foran +Restricted stock; RSUs +264,795 +3,193,428 +— +— +PSUs +— +— +545,278 +6,576,053 +Matthew V. Hairford +Restricted stock; RSUs +139,018 +1,676,557 +— +— +PSUs +— +— +286,272 +3,452,440 +David E. Lancaster +Restricted stock; RSUs +125,779 +1,516,895 +— +— +PSUs +— +— +259,008 +3,123,636 +Craig N. Adams +Restricted stock; RSUs +112,539 +1,357,220 +— +— +PSUs +— +— +231,744 +2,794,833 +Billy E. Goodwin +Restricted stock; RSUs +111,041 +1,339,154 +— +— +PSUs +— +— +231,744 +2,794,833 +(1) +The number of unearned PSUs and market value presented are based upon achievement of the 100 th percentile under the PSU award agreements with 200% of target units vesting, calculated based upon the closing price of our Common Stock on December 31, 2020 of $12.06 per share. +2021 +Proxy Statement | Matador Resources Company 61 +Table of Contents +EXECUTIVE COMPENSATION +The following table provides the vesting dates for restricted +stock, RSUs and PSUs outstanding as of December 31, 2020: +Vesting Date +Award Type +Joseph Wm. +Foran +Matthew V. +Hairford +David E. +Lancaster +Craig N. +Adams +Billy E. +Goodwin +2/13/21 +RSUs +37,793 +19,841 +17,952 +16,062 +16,062 +2/16/21 +Restricted stock +29,949 +15,723 +14,226 +12,729 +11,231 +3/10/21 +RSUs +53,086 +27,870 +25,216 +22,562 +22,562 +12/31/21 +PSUs +(1) +226,758 +119,048 +107,710 +96,372 +96,372 +2/13/22 +RSUs +37,793 +19,842 +17,952 +16,062 +16,062 +3/10/22 +RSUs +53,087 +27,871 +25,216 +22,562 +22,562 +12/31/22 +PSUs +(1) +318,520 +167,224 +151,298 +135,372 +135,372 +3/10/23 +RSUs +53,087 +27,871 +25,217 +22,562 +22,562 +Total Unvested Shares and Units +810,073 +425,290 +384,787 +344,283 +342,785 +(1) +The date shown reflects the end of the performance period established by the PSU award agreements. The PSUs vest upon the +Compensation Committee’s certification of the achievement of the performance goal, which must occur within 60 days of completion of the performance period. The number of units shown assumes achievement of the 100 th percentile under the PSU award agreements with 200% of target units vesting. +Option Exercises and Stock Vested +The following table provides information on the stock options exercised and stock awards (consisting of restricted stock and cash-settled RSUs) that vested for each +Named Executive Officer during 2020: +Option Awards +Stock Awards +Name +Number of +Shares +Acquired +on +Exercise +(#) +Value +Realized on +Exercise +Number of +Shares +Acquired on +Vesting (1) +(#) +Value +Realized on +Vesting +Joseph Wm. Foran +— +$ +— +86,390 +$ +1,120,532 +Matthew V. Hairford +10,000 +$ +40,100 +47,670 +$ +618,239 +David E. Lancaster +15,000 +$ +54,600 +42,773 +$ +554,739 +Craig N. Adams +— +$ +— +37,619 +$ +487,914 +Billy E. Goodwin +— +$ +— +34,477 +$ +447,257 +(1) +Reflects the aggregate number of restricted shares or cash-settled RSUs that vested. Pursuant to the terms thereof, the +cash-settled RSUs were settled in cash, and the grantee did not acquire any shares upon vesting. +No tax liability was incurred by Mr. Foran +upon the vesting of the restricted stock included above because, upon each grant of restricted stock, Mr. Foran made elections under the Code to be taxed upon grant instead of upon vesting. Pursuant to such elections, upon the granting of such +restricted stock awards in 2017 and 2018, Mr. Foran paid a total of $0.6 million in taxes attributable to the restricted stock that vested in 2020. +62 Matador Resources Company | 2021 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +Potential Payments upon Termination or Change in Control +Long-Term Incentive Plans +Equity awards under the Long-Term Plans, other than the PSUs, vest upon a “change in control” for the Named Executive Officers according to the terms of their +employment agreements described below. +Pursuant to the terms of the PSU award agreements, upon a “change in control,” the Named Executive Officer would +vest in the number of PSUs that would have otherwise vested based on the Company’s performance through an abbreviated performance period that ends immediately prior to the effective date of such change in control. +For definition of “change in control,” please see the 2012 Long-Term Plan and 2019 Long-Term Plan, as applicable, each of which is included as an exhibit to +the Company’s most recent Annual Report on Form 10-K. +Employment Agreements +As described under “—Compensation Discussion and Analysis—Severance and Separation Arrangements—Employment Agreements,” in contemplation of our +initial public offering, on August 9, 2011, we entered into employment agreements with Messrs. Foran, Hairford and Lancaster. In addition, in March 2014, we entered into an employment agreement with Mr. Adams, and effective February 2016, +we entered into an employment agreement with Mr. Goodwin. We amended Mr. Goodwin’s employment agreement in August 2018. The principal difference in Mr. Adams’ and Mr. Goodwin’s employment agreements as compared to +the employment agreements of Messrs. Foran, Hairford and Lancaster is that Mr. Adams’ and Mr. Goodwin’s agreements do not include a “modified single trigger” that would have allowed them to receive “change in +control” severance if they terminated their agreements without “good reason” within 30 days prior to or 12 months after a change in control. Pursuant to the terms of the employment agreements, we may be required to make certain +payments to one or more of our Named Executive Officers upon the occurrence of certain events resulting in such Named Executive Officer’s termination. The employment agreements do not provide for +gross-ups for excise taxes on severance or other payments in connection with a change in control. For a detailed description of the events that may trigger such payments, see “—Compensation +Discussion and Analysis—Severance and Separation Arrangements—Employment Agreements.” +The employment agreements each contain a non-disclosure of confidential information provision that requires each Named Executive Officer to maintain, both during and after employment, the confidentiality of information used by such Named Executive Officer +in the performance of his job duties. +Additionally, each of the employment agreements contains a non-competition provision, +pursuant to which each Named Executive Officer has agreed that: (i) for six months following termination by us for total disability, or by such Named Executive Officer for good reason, or (ii) for 12 months, or 24 months with respect to +Mr. Goodwin, following termination (a) by us for just cause, (b) by such Named Executive Officer other than for good reason or (c) in connection with a change in control, such Named Executive Officer shall not, without our prior +written consent (not to be unreasonably withheld if the Named Executive Officer’s employment is terminated by the Named Executive Officer other than for good reason), directly or indirectly: (x) invest in (other than investments in +publicly-owned companies which constitute not more than 1% of the voting securities of any such company) a competing business with significant assets in the restricted area (each as defined below), or (y) participate in a competing business as +a manager, employee, director, officer, consultant, independent contractor or other capacity or otherwise provide, directly or indirectly, services or assistance to a competing business in a position that involves input into or direction of such +competing business’s decisions within the restricted area. +For purposes of the employment agreements: +• +“competing business” means any person or entity engaged in oil and natural gas exploration, development, +production and acquisition activities; +2021 +Proxy Statement | Matador Resources Company 63 +Table of Contents +EXECUTIVE COMPENSATION +• +“significant assets” means oil and natural gas reserves with an aggregate fair market value of $25 million +or more; and +• +“restricted area” means a one-mile radius of any oil and natural gas +reserves held by us as of the end of the Named Executive Officer’s employment, plus any county or parish where we have significant assets as of the end of the Named Executive Officer’s employment. +For definitions of “change in control,” “good reason” and “just cause,” please see the employment agreement of each Named Executive +Officer, each of which is included as an exhibit to the Company’s most recent Annual Report on Form 10-K. +Furthermore, other than Mr. Foran’s employment agreement, each employment agreement contains a non-solicitation +provision, pursuant to which, during the restricted periods described above, subject to certain exceptions, Messrs. Hairford, Lancaster, Adams and Goodwin shall not, without our prior written consent, solicit for employment or a contracting +relationship, or employ or retain any person who is or has been, within six months prior to such time, employed by or engaged as an individual independent contractor by us or our affiliates or induce or attempt to induce any such person to leave his +or her employment or independent contractor relationship with us or our affiliates. +For the Named Executive Officer to receive any severance payments described +below for termination by us without just cause, by the Named Executive Officer for good reason or, following a change in control, by us without cause or by the Named Executive Officer with good reason, with respect to Mr. Adams and +Mr. Goodwin, or with or without good reason, with respect to Messrs. Foran, Hairford and Lancaster, the Named Executive Officer must comply with the applicable non-disclosure, non-competition and non-solicitation provisions described above. +Finally, as a condition +to receiving any severance payments and other payments under their respective employment agreements, each Named Executive Officer is required to execute a separation agreement and release in favor of us. +To describe the payments and benefits that are triggered for each event of termination, we have created the following table estimating the payments and benefits that +would be paid to each Named Executive Officer under each element of our compensation program assuming that such Named Executive Officer’s employment agreement terminated on December 31, 2020, the last day of our 2020 fiscal year. In all +cases, the amounts were valued as of December 31, 2020, based upon, where applicable, $12.06 per share (the closing price of our Common Stock on such date). The amounts in the table below are calculated as of December 31, 2020 pursuant to +SEC rules and are not intended to reflect actual payments that may be made. Actual payments that may be made would be based on the dates and circumstances of the applicable event. +Payment Upon Change in Control or +Termination +Executive Officer +Category of +Payment +Upon Death or +Total +Disability (1) +Upon Mutual +Agreement or +Dissolution/ +Liquidation (1) +Termination by +Us Without Just +Cause or by +Named Executive +Officer for Good +Reason (1) +Termination +Following a +Change in Control +Without +Cause +or by Named +Executive Officer +With or Without +Good Reason (2) +Change in +Control +Without +Termination (3) +Joseph Wm. Foran +Salary +$ +— +$ +— +$ +1,875,000 +(4) +$ +2,812,500 +(5) +$ +— +Bonus +1,255,000 +(6) +1,255,000 +(6) +2,510,000 +(7) +3,765,000 +(8) +— +Vesting equity: (9) +Restricted stock +— +— +— +361,185 +— +RSUs +— +— +— +2,832,243 +— +PSUs +— +— +— +3,288,026 +3,228,026 +Total +$ +1,255,000 +$ +1,255,000 +$ +4,385,000 +$ +13,058,954 +$ +3,228,026 +64 Matador Resources Company | 2021 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +Payment Upon Change in Control or +Termination +Executive Officer +Category of +Payment +Upon Death or +Total +Disability (1) +Upon Mutual +Agreement or +Dissolution/ +Liquidation (1) +Termination by +Us Without Just +Cause or by +Named Executive +Officer for Good +Reason (1) +Termination +Following a +Change in Control +Without +Cause +or by Named +Executive Officer +With or Without +Good Reason (2) +Change in +Control +Without +Termination (3) +Matthew V. Hairford +Salary +$ +— +$ +— +$ +870,000 +(10) +$ +1,740,000 +(5) +$ +— +Bonus +600,000 +(6) +600,000 +(6) +900,000 +(11) +1,800,000 +(8) +— +Vesting equity: (9) +Restricted stock +— +— +— +189,619 +— +RSUs +— +— +— +1,486,938 +— +PSUs +— +— +— +1,726,220 +1,726,220 +Total +$ +600,000 +$ +600,000 +$ +1,770,000 +6,942,777 +$ +1,726,220 +David E. Lancaster +Salary +$ +— +$ +— +$ +840,000 +(10) +$ +1,680,000 +(5) +$ +— +Bonus +550,000 +(6) +550,000 +(6) +825,000 +(11) +1,650,000 +(8) +— +Vesting equity: (9) +Restricted stock +— +— +— +171,566 +— +RSUs +— +— +— +1,345,329 +— +PSUs +— +— +— +1,561,818 +1,561,818 +Total +$ +550,000 +$ +550,000 +$ +1,665,000 +$ +6,408,713 +$ +1,561,818 +Craig N. Adams +Salary +$ +— +$ +— +$ +840,000 +(10) +$ +1,680,000 +(5) +$ +— +Bonus +502,500 +(6) +502,500 +(6) +753,750 +(11) +1,507,500 +(8) +— +Vesting equity: (9) +Restricted stock +— +— +— +153,512 +— +RSUs +— +— +— +1,203,709 +— +PSUs +— +— +— +1,397,416 +1,397,416 +Total +$ +502,500 +$ +502,500 +$ +1,593,750 +$ +5,942,137 +$ +1,397,416 +Billy E. Goodwin +Salary +$ +— +$ +— +$ +840,000 +(10) +$ +1,680,000 +(5) +$ +— +Bonus +502,500 +(6) +502,500 +(6) +753,750 +(11) +1,507,500 +(8) +— +Vesting equity: (9) +Restricted stock +— +— +— +135,446 +— +RSUs +— +— +— +1,203,709 +— +PSUs +— +— +— +1,397,416 +1,397,416 +Total +$ +502,500 +$ +502,500 +$ +1,593,750 +$ +5,924,071 +$ +1,397,416 +(1) +Amounts due upon death, total disability, mutual agreement, dissolution or liquidation, termination by us without cause or +termination by a Named Executive Officer for good reason are payable in a lump sum on the 60 th day following the date of termination unless otherwise required by Section 409A of the Code. +(2) +Amounts due following a change in control are payable in a lump sum on the date that immediately follows six months from +the date of termination or, if earlier, within 30 days following such Named Executive Officer’s death. +(3) +Pursuant to the terms of the PSU award agreements, upon a “change in control,” the Named Executive Officer would +vest in the number of PSUs that would have otherwise vested based on the Company’s performance through an abbreviated performance period that ends immediately prior to the effective date of such change in control. The amount shown assumes +achievement of the 50 th percentile with 100% of target units vesting. +2021 +Proxy Statement | Matador Resources Company 65 +Table of Contents +EXECUTIVE COMPENSATION +(4) +Represents two times such Named Executive Officer’s base salary as of the termination date. +(5) +Represents three times such Named Executive Officer’s base salary as of the termination date. +(6) +Represents an amount equal to the average annual cash bonus pursuant to the Cash Incentive Plan paid to such Named +Executive Officer for 2019 and 2020. As previously noted, despite the Company meeting or exceeding the maximum level of each 2020 performance metric, the Named Executive Officers and the Board agreed that the Named Executive Officers would forego +receiving any 2020 annual cash bonuses. +(7) +Represents two times an amount equal to the average annual cash bonus pursuant to the Cash Incentive Plan paid to such +Named Executive Officer for 2019 and 2020. As previously noted, despite the Company meeting or exceeding the maximum level of each 2020 performance metric, the Named Executive Officers and the Board agreed that the Named Executive Officers would +forego receiving any 2020 annual cash bonuses. +(8) +Represents three times an amount equal to the average annual cash bonus pursuant to the Cash Incentive Plan paid to such +Named Executive Officer for 2019 and 2020. As previously noted, despite the Company meeting or exceeding the maximum level of each 2020 performance metric, the Named Executive Officers and the Board agreed that the Named Executive Officers would +forego receiving any 2020 annual cash bonuses. +(9) +The employment agreements provide for accelerated and full vesting of unvested incentive awards held by the Named +Executive Officers in the event that such Named Executive Officer is terminated without “Just Cause” or terminates his employment with or without “Good Reason,” with respect to Messrs. Foran, Hairford and Lancaster, within 30 +days prior to, or 12 months following, a “change in control.” With respect to Messrs. Adams and Goodwin, the employment agreements provide for accelerated and full vesting of unvested incentive awards held by these Named Executive Officers +in the event that such Named Executive Officer is terminated without “Just Cause” or terminates his employment with “Good Reason,” within 30 days prior to, or 12 months following, a “change in control.” The amounts +disclosed reflect the closing price of our Common Stock on December 31, 2020 of $12.06 per share multiplied by the number of unvested shares of restricted stock, RSUs or PSUs, as applicable, held by such Named Executive Officer on +December 31, 2020. Pursuant to the terms of the PSU award agreements, upon a change in control, the Named Executive Officer would vest in the number of PSUs that would have otherwise vested based on the Company’s performance through an +abbreviated performance period that ends immediately prior to the effective date of such event. With respect to PSUs, the amount shown assumes achievement of the 50 th percentile with 100% of +target units vesting. +(10) +Represents 1.5 times such Named Executive Officer’s base salary as of the termination date. +(11) +Represents 1.5 times an amount equal to the average annual cash bonus pursuant to the Cash Incentive Plan paid to such +Named Executive Officer for 2019 and 2020. As previously noted, despite the Company meeting or exceeding the maximum level of each 2020 performance metric, the Named Executive Officers and the Board agreed that the Named Executive Officers would +forego receiving any 2020 annual cash bonuses. +66 Matador Resources Company | 2021 Proxy Statement +Table of Contents +CHIEF EXECUTIVE OFFICER PAY RATIO +CHIEF EXECUTIVE OFFICER PAY RATIO +As required by +Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(u) of Regulation S-K (“Item 402(u)”), we are providing the following information regarding the ratio +of the annual total compensation of our median-compensated employee (as described below) and that of our Chairman and Chief Executive Officer, Joseph Wm. Foran. We believe that the pay ratio reflected below is a reasonable estimate calculated in a +manner consistent with Item 402(u). +The SEC’s rules for identifying the median compensated employee and calculating the pay ratio based on that +employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices. As a +result, the pay ratio reported by other companies may not be comparable to the pay ratio reported below, as other companies have different employee populations and compensation practices and may utilize different methodologies, exclusions, estimates +and assumptions in calculating their own pay ratios. +Pursuant to SEC rules, we are using the same median employee for the 2020 pay ratio calculation as we used in +our 2018 and 2019 pay ratio disclosures. We determined that there were no changes to our employee population or compensation arrangements in 2019 or 2020 that we reasonably believe would significantly affect our pay ratio disclosure if the same +median employee were used. While our total employee population grew by approximately 17% from December 31, 2018 to December 31, 2019, it decreased by approximately 5% from December 31, 2019 to December 31, 2020. We determined +that these immaterial changes to our employee population would not have a significant impact on our pay ratio disclosure, especially since our employees remained consistently distributed among all compensation levels over these periods. Pursuant to +Item 402(u), we identified the median-compensated employee of all our employees (other than Mr. Foran) using our employee population as of December 15, 2018, which consisted of 259 employees (all of which are located in the United States), +and using a compensation measure of total cash compensation, consisting of total base pay and bonuses earned during the year ended December 31, 2018. The compensation measure was consistently applied to all employees. Compensation was +annualized on a straight-line basis for employees who did not work all of 2018. +After identifying the median-compensated employee using the consistently applied +compensation measure, we then calculated that employee’s 2020 annual total compensation in the same manner as the Named Executive Officers’ total compensation, as reported in the Summary Compensation Table. +For 2020, the annual total compensation of our median-compensated employee was $211,317, and the annual total compensation of Mr. Foran was $1,689,547, as reported +in the Summary Compensation Table. Based on this information, for 2020, the ratio of Mr. Foran’s annual total compensation to the annual total compensation of our median-compensated employee was estimated to be 8 to 1. +2021 +Proxy Statement | Matador Resources Company 67 +Table of Contents +DIRECTOR COMPENSATION +DIRECTOR COMPENSATION +Name +Fees Earned or +Paid in Cash +($) +Stock +Awards (1) +($) +All Other +Compensation +($) +Total +($) +Reynald A. Baribault +179,656 +73,119 +— +252,775 +R. Gaines Baty (2) +173,406 +73,119 +— +246,525 +Craig T. Burkert +78,656 +73,119 +— +151,775 +William M. Byerley +112,656 +73,119 +— +185,775 +Matthew P. Clifton (3) +70,719 +73,119 +— +143,838 +Monika U. Ehrman +77,656 +73,119 +— +150,775 +Julia P. Forrester Rogers +91,656 +73,119 +— +164,775 +Timothy E. Parker (4) +193,656 +73,119 +— +266,775 +David M. Posner (5) +34,250 +— +— +34,250 +Kenneth L. Stewart +85,906 +73,119 +— +159,025 +(1) +All stock awards represent RSUs with a value based on the fair market value of the RSUs on the date of grant. RSUs granted +for 2020-2021 service vest immediately prior to the election of the nominees for director at the 2021 Annual Meeting. See “—Compensation for 2020-2021.” As of December 31, 2020, each individual who served as a director during +2020 held the following outstanding unvested stock awards, all of which were RSUs. +Name +Outstanding Stock Awards +Reynald A. Baribault +8,262 +R. Gaines Baty +8,262 +Craig T. Burkert +8,262 +William M. Byerley +8,262 +Matthew P. +Clifton (3) +— +Monika U. Ehrman +8,262 +Julia P. Forrester Rogers +8,262 +Timothy E. Parker +8,262 +David M. +Posner (5) +— +Kenneth L. Stewart +8,262 +(2) +Mr. Baty serves as deputy lead independent director. The deputy lead independent director receives an additional cash +retainer of $50,000 annually. +(3) +Mr. Clifton resigned from the Board effective October 30, 2020. As a result of his resignation, his unvested +RSUs were forfeited pursuant to the terms thereof. +(4) +Mr. Parker serves as lead independent director. The lead independent director receives an additional cash retainer of +$100,000 annually. +(5) +Mr. Posner’s term as a director expired at the 2020 Annual Meeting. +68 Matador Resources Company | 2021 Proxy Statement +Table of Contents +DIRECTOR COMPENSATION +Compensation for 2020-2021 +In early 2020, following the outbreak of COVID-19, along with the actions of OPEC+ and their effects on oil supply and demand, oil prices and our stock price, the Board voluntarily agreed to reduce its total compensation by 25%. For the period commencing +at the 2020 Annual Meeting and until the 2021 Annual Meeting, our non-employee directors’ compensation program was as set forth below: +• +annual cash retainer of $73,125; +• +cash meeting fee of $1,000 per day for each day of Board and committee service; +• +the chair of each of the below committees received the following additional, annual cash retainer: +Committee +Retainer +Operations and Engineering +$ +50,000 +Prospect +$ +50,000 +Audit +$ +35,000 +Strategic Planning and Compensation +$ +35,000 +Environmental, Social and Corporate Governance +$ +15,000 +Nominating +$ +15,000 +Capital Markets and Finance +$ +15,000 +Marketing and Midstream +$ +15,000 +• +the lead independent director received an additional cash retainer of $100,000; +• +the deputy lead independent director received an additional cash retainer of $50,000; and +• +at the meeting of the Board immediately following the 2020 Annual Meeting, each +non-employee director received a one-time annual grant of RSUs equal to approximately $73,125 in value with the restrictions lapsing immediately prior to the election of +the nominees for director at the 2021 Annual Meeting (the “2020 RSU Award”). +If a director was appointed or elected to the Board at any +time following the 2020 Annual Meeting but prior to the 2021 Annual Meeting, such director was granted the applicable percentage of the 2020 RSU Award detailed below, effective on the date of such director’s appointment: (i) if a director +was appointed or elected to the Board within 90 days after the 2020 Annual Meeting, such director was entitled to receive 100% of the 2020 RSU Award; (ii) if a director was appointed or elected to the Board more than 90 days but 180 or fewer +days after the 2020 Annual Meeting, such director was entitled to receive 75% of the 2020 RSU Award; (iii) if a director was appointed or elected to the Board more than 180 days but 270 or fewer days after the 2020 Annual Meeting, such director +was entitled to receive 50% of the 2020 RSU Award; and (iv) if a director was appointed or elected to the Board more than 270 days after the 2020 Annual Meeting but prior to the 2021 Annual Meeting, such director was entitled to receive 25% of +the 2020 RSU award. Mr. Howard was appointed to the Board effective January 1, 2021, which date was more than 180 days but fewer than 270 days after the 2020 Annual Meeting. As a result, Mr. Howard received a grant of 4,131 RSUs +representing 50% of the 2020 RSU Award. +In addition, we reimburse our directors for travel, lodging and related expenses incurred in attending Board and committee +meetings. +Director Stock Ownership Guidelines +Our non-employee +directors are expected to follow our voluntary stock ownership guidelines for non-employee directors. Within three years of becoming a director, each non-employee +director is expected to own $250,000 of Common Stock and continue to hold such shares while serving as a director. As of December 31, 2020, all directors owned in excess of $250,000 of Common Stock. Shares that count toward the stock ownership +guidelines include RSUs. +2021 +Proxy Statement | Matador Resources Company 69 +Table of Contents +SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION +PLANS +SECURITIES AUTHORIZED FOR ISSUANCE +UNDER EQUITY COMPENSATION PLANS +The following table presents the securities authorized for issuance under our equity compensation plans as of +December 31, 2020: +Plan Category +Number +of +Shares to be +Issued Upon +Exercise of +Outstanding +Options, +Warrants +and +Rights +Weighted- +Average +Exercise +Price of +Outstanding +Options, +Warrants +and Rights +Number of +Shares +Remaining +Available for +Future +Issuance +Under Equity +Compensation +Plans +Equity compensation plans approved by security +holders (1)(2)(3) +4,374,342 +$ +23.08 +1,940,386 +Equity compensation plans not approved by +security holders +— +— +— +Total +4,374,342 +$ +23.08 +1,940,386 +(1) +Includes shares authorized under the 2012 Long-Term Plan and the 2019 Long-Term Plan. Our Board has determined not to make +any additional awards under the 2012 Long-Term Plan, although awards remain outstanding thereunder. +(2) +The 2019 Long-Term Plan was adopted by the Board in April 2019 and approved by our shareholders on June 6, 2019. +(3) +Includes the number of PSUs granted under the 2012 Long-Term Plan and the 2019 Long-Term Plan based on the maximum level +of achievement, which may be more than the number of shares issued in settlement of PSUs that are ultimately earned. +70 Matador Resources Company | 2021 Proxy Statement +Table of Contents +TRANSACTIONS WITH RELATED PERSONS +TRANSACTIONS WITH RELATED PERSONS +Except as disclosed +below, during 2020 there was not, nor was there proposed as of December 31, 2020, any transaction or series of similar transactions to which we were or are a party in which the amount involved exceeded or exceeds $120,000 and in which any of +our directors, executive officers, holders of more than 5% of any class of our voting securities or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest, other than compensation +arrangements with directors and executive officers, which are described in “Executive Compensation—Compensation Discussion and Analysis” and “Director Compensation” above. +Working Interest and Overriding Royalty Interest Owners +Mr. Foran and certain of Mr. Foran’s affiliated +entities (collectively, the “Foran Entities”) are working interest owners and/or overriding royalty interest owners in certain properties operated by the Company or in which the Company also holds a working interest. As working interest +owners, the Foran Entities are required to pay their proportionate share of all costs and are entitled to receive their proportionate share of revenues in the normal course of business. As overriding royalty interest owners, the Foran Entities are +entitled to receive their proportionate share of revenues from the wells in which they own an interest in the normal course of business. During 2020, revenues, net of costs, received by the Foran Entities in their capacity as working interest owners +or overriding royalty interest owners were approximately $1.9 million (the “Related Net Revenue Payments”). The Related Net Revenue Payments represent less than 1% of our total third-party net revenue payments during 2020. +In our capacity as operator, we incur drilling and operating costs that are billed to our partners based on their respective working interests. During 2020, our joint +interest billings to the Foran Entities attributable to their share of costs were approximately $1.8 million (the “Related Joint Interest Billings”). The Related Joint Interest Billings represent less than 1% of our total joint +interest billings during 2020. As a result of this ownership by the Foran Entities, from time to time, we will be in a net receivable or net payable position with certain of the Foran Entities. We do not consider any net receivables from the Foran +Entities to be uncollectible. +The Audit Committee reviewed the terms of the working interests and/or overriding royalty interests of the Foran Entities for +potential conflicts of interest under the Related Person Transaction Policy, and, after being fully informed as to Mr. Foran’s relationships and interests in such transactions and all other material facts related to the Related Net Revenue +Payments and Related Joint Interest Billings, determined that such transactions and the Related Net Revenue Payments and Related Joint Interest Billings were fair to the Company and recommended such transactions and the Related Net Revenue Payments +and Related Joint Interest Billings to the full Board for approval and ratification. The Board subsequently approved and ratified the transactions and the Related Net Revenue Payments and Related Joint Interest Billings. +Certain Employment Relationships +Billy E. Goodwin, Executive Vice President and Chief Operating +Officer—Drilling, Completions & Production, was appointed as an executive officer of the Company in connection with his February 2016 promotion to Senior Vice President—Operations. Two of Mr. Goodwin’s adult children +have been employees of the Company since 2014 and 2015, respectively, and each earned in 2020, and are expected to be compensated in 2021, between $120,000 and $500,000. One of Mr. Goodwin’s children has a Bachelor of Science degree in +Petroleum Engineering from the University of Tulsa and over 11 years of industry experience, including as a regional drilling supervisor for another publicly traded exploration and production company. Mr. Goodwin’s other child has a +Bachelor of Science in Business Administration degree in Energy Management from the University of Tulsa and a Bachelor of Arts degree in General Business and Management from Oklahoma State University. He also has over 11 years of industry +experience, including as a drilling fluids engineer for a publicly traded oilfield services company and as a landman for a publicly traded exploration and production company. The Audit Committee reviewed the terms of the employment arrangements for +potential conflicts of interest under the Company’s Related Person Transaction Policy and, after being fully informed as to the employment arrangements and +2021 +Proxy Statement | Matador Resources Company 71 +Table of Contents +TRANSACTIONS WITH RELATED PERSONS +historical and anticipated compensation of Mr. Goodwin’s adult children, and all other material facts related to the relationship, determined that the employment arrangements were fair +to the Company and recommended +the employment arrangements to the full Board for approval and ratification. The Board subsequently approved and ratified such +employment arrangements. +Reynald A. Baribault is a member of the Board. Mr. Baribault’s +sister-in-law has been an employee of the Company since 2016 and earned in 2020, and is expected to be compensated in 2021, between $120,000 and $200,000. +Mr. Baribault’s sister-in-law has a diploma from the Executive Secretarial School and is a certified legal assistant, having completed the Southern Methodist +University Legal Assistants Program. She has over 39 years of experience as a legal assistant. The Audit Committee reviewed the terms of the employment arrangement for potential conflicts of interest under the Company’s Related Person +Transaction Policy and, after being fully informed as to the employment arrangement and historical and anticipated compensation of Mr. Baribault’s +sister-in-law, and all other material facts related to the relationship, determined that the employment arrangement was fair to the Company and recommended the +employment arrangement to the full Board for approval and ratification. The Board subsequently approved and ratified such employment arrangement. +An adult child of +Mr. Foran has been an employee of the Company since 2015 and earned in 2020, and is expected to be compensated in 2021, between $120,000 and $200,000. Mr. Foran’s child has a Bachelor of Science degree in Human Resource Development +and a Master of Science degree in Human Resource Management, both from Texas A&M University. She has more than 10 years of industry experience, including with another publicly traded exploration and production company. The Audit Committee +reviewed the terms of the employment arrangement for potential conflicts of interest under the Company’s Related Person Transaction Policy and, after being fully informed as to the employment arrangement and historical and anticipated +compensation of Mr. Foran’s adult child, and all other material facts related to the relationship, determined that the employment arrangement was fair to the Company and recommended the employment arrangement to the full Board for approval +and ratification. The Board subsequently approved and ratified such employment arrangement. +Procedures for Approval of Related Person +Transactions +Pursuant to the Related Person +Transaction Policy as in effect as of December 31, 2020, a “Related Person Transaction” is defined as a transaction (including any financial transaction, arrangement or relationship (including any indebtedness or guarantee of +indebtedness)), or series of related transactions, or any material amendment to any such transaction, in which a Related Person (as defined below) has or will have a direct or indirect material interest and in which we are a participant, other than: +• +a transaction involving compensation of directors that is required to be reported in our proxy statement under Item 402 of +the SEC’s compensation disclosure requirements (“Item 402”); +• +any employment by us of an executive officer if: +o +the related compensation is required to be reported in our proxy statement under Item 402; or +o +the executive officer is not an “immediate family member” of another executive officer or director of the +Company, the related compensation would be reported in our proxy statement under Item 402 if the executive officer was a “named executive officer” and the Compensation Committee approved (or recommended that the Board approve) such +compensation; +• +a transaction with a Related Person involving less than $120,000; +• +a transaction in which the interest of the Related Person arises solely from the ownership of a class of our equity +securities and all holders of that class receive the same benefit on a pro rata basis; +• +a transaction in which a Related Person has an indirect interest solely as a result of being (a) a director or, +together with all other Related Persons, a less than 10% beneficial owner of an equity interest in another entity, or both, or (b) a limited partner in a partnership in which the Related Person, together with all other Related Persons, has an +interest of less than 10%; +72 Matador Resources Company | 2021 Proxy Statement +Table of Contents +TRANSACTIONS WITH RELATED PERSONS +• +a transaction in which the rates or charges involved therein are determined by competitive bids, or a transaction that +involves the rendering of services as a common or contract carrier, or public utility, at rates or charges fixed in conformity with law or governmental authority; +• +any transaction with another company at which a Related Person’s only relationship is as an employee (other than an +executive officer), if the aggregate amount involved does not exceed the greater of $1,000,000, or 2% of that company’s total annual revenues; +• +any charitable contribution, grant or endowment by us to a charitable organization, foundation or university at which a +Related Person’s only relationship is as an employee (other than an executive officer), if the aggregate amount involved does not exceed the lesser of $1,000,000, or 2% of the charitable organization’s total annual receipts; or +• +any transaction with another publicly traded company where the Related Person’s interest arises solely from beneficial +ownership of more than 5% of our Common Stock and ownership of a non-controlling interest in the other publicly traded company. +“Related Person” means: +• +any person who is, or at any time during the applicable period was, one of our executive officers or one of our directors +or nominees for director; +• +any person who is known by us to be the beneficial owner of more than 5% of our Common Stock; +• +any immediate family member of any of the foregoing persons, which means any child, stepchild, parent, stepparent, spouse, +sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, sister-in-law or person residing (other than a tenant or employee) in the home of a director, nominee for director, executive officer or a beneficial owner of more than 5% of +our Common Stock; and +• +any entity that is owned or controlled by any of the foregoing persons or in which any of the foregoing persons is a +general partner or executive officer or in which such person, together with all other of the foregoing persons, owns 10% or more of the equity interests thereof. +Pursuant to the Related Person Transaction Policy, the Audit Committee must review all material facts of each Related Person Transaction and recommend either approval +or disapproval of the Related Person Transaction to the full Board, subject to certain limited exceptions. In determining whether to recommend approval or disapproval of the Related Person Transaction, the Audit Committee must, after reviewing all +material facts of the Related Person Transaction and the Related Person’s relationship and interest, determine whether the Related Person Transaction is fair to the Company. Further, the policy requires that all Related Person Transactions be +disclosed in our filings with the SEC and/or our website in accordance with applicable laws, rules and regulations. +2021 +Proxy Statement | Matador Resources Company 73 +Table of Contents +SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND +MANAGEMENT +SECURITY OWNERSHIP OF CERTAIN BENEFICIAL +OWNERS AND MANAGEMENT +The following table presents the beneficial ownership of our Common Stock as of April 8, 2021 for (i) each person +beneficially owning more than 5% of the outstanding shares of our Common Stock, (ii) each director of the Company, (iii) each executive officer of the Company listed in the Summary Compensation Table and (iv) all of our directors and +executive officers as a group. Except pursuant to applicable community property laws and except as otherwise indicated, each shareholder possesses sole voting and investment power with respect to its, his or her shares. The business address of each +of our directors and executive officers is c/o Matador Resources Company, One Lincoln Centre, 5400 LBJ Freeway, Suite 1500, Dallas, Texas 75240. The applicable percentage ownership is based on 116,781,445 shares of our Common Stock issued and +outstanding as of April 8, 2021, plus, on an individual basis, the right of that individual to (i) obtain Common Stock upon exercise of stock options or (ii) obtain Common Stock upon the vesting or delivery of RSUs, in each case +within 60 days of April 8, 2021. The information is based on Form 3s, Form 4s, Form 5s, Schedule 13Ds, Schedule 13Gs and Schedule 13G/As filed through April 8, 2021. +Name +Amount and +Nature of +Ownership of +Common Stock +Percent +of Class +Directors and Named Executive Officers +Joseph Wm. +Foran (1) +5,429,117 +4.6% +Craig N. +Adams (2) +262,608 +* +Reynald A. +Baribault (3) +127,816 +* +R. Gaines +Baty (4) +54,619 +* +Craig T. +Burkert (5) +107,003 +* +William M. +Byerley (6) +40,212 +* +Monika U. +Ehrman (7) +23,130 +* +Julia P. Forrester +Rogers (8) +58,524 +* +James M. +Howard (9) +114,131 +* +Billy E. +Goodwin (10) +235,559 +* +Matthew V. +Hairford (11) +511,744 +* +David E. +Lancaster (12) +605,012 +* +Timothy E. +Parker (13) +61,053 +* +Kenneth L. +Stewart (14) +75,189 +* +All Directors and Executive Officers as a Group (16 persons) (15) +8,068,502 +6.8% +Other 5% Owners +BlackRock, +Inc. (16) +17,455,006 +14.9% +The Vanguard +Group (17) +11,719,082 +10.0% +Dimensional Fund Advisors LP (18) +7,150,274 +6.1% +* +Less than one percent (1%) +74 Matador Resources Company | 2021 Proxy Statement +Table of Contents +SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT +(1) +Includes (i) 1,105,913 shares of Common Stock held of record by Sage Resources, Ltd., a limited partnership owned by the +Foran family, including Mr. Foran; (ii) 17,488 shares of Common Stock held of record by Mr. Foran’s spouse as her separate property; (iii) 105,000 shares and 40,000 shares of Common Stock held of record by The Joseph Donald Foran +Family Trust 2008 and The Foran Family Special Needs Trust, respectively, for which Mr. Foran is the co-trustee and over which Mr. Foran has shared voting and investment power with other members of +his family; (iv) 60,796 shares of Common Stock held of record by each of the JWF 2019-2 GRAT and the NNF 2019-2 GRAT, for which Mr. Foran is the trustee and over +which Mr. Foran has sole voting and investment power; (v) 114,236 shares of Common Stock held of record by each of the JWF 2020-1 GRAT and the NNF 2020-1 GRAT, for +which Mr. Foran is the trustee and over which Mr. Foran has sole voting and investment power; (vi) 473,217 shares of Common Stock held of record by each of the JWF 2020-2 GRAT and the NNF 2020-2 GRAT, for which Mr. Foran is the trustee and over which Mr. Foran has sole voting and investment power; (vii) 290,000 shares of Common Stock held of record by each of the JWF 2021-1 GRAT and the NNF 2021-1 GRAT, for which Mr. Foran is the trustee and over which Mr. Foran has sole voting and investment power; (viii) 389,634 shares of +Common Stock held of record by the Foran 2012 Security Trust, for which Mr. Foran is the trustee and over which Mr. Foran has sole voting and investment power; (ix) 435,566 shares of Common Stock held of record by the Foran 2012 Savings +Trust, for which Mr. Foran’s spouse is a trustee; and (x) 1,177,568 shares held of record, collectively, by the LRF 2011 Non-GST Trust, WJF 2011 Non-GST Trust, +JNF 2011 Non-GST Trust, SIF 2011 Non-GST Trust and MCF 2011 Non-GST Trust, for which trusts Mr. Foran and his spouse, as +settlors of each of the Non-GST Trusts, retain the power of substitution with respect to the property of the Non-GST Trusts. Also includes 250,171 shares of Common Stock +issuable to Mr. Foran upon the exercise of stock options. +(2) +Includes 113,331 shares of Common Stock issuable to Mr. Adams upon the exercise of stock options and 2,850 shares of +Common Stock held of record by his 401(k) account. +(3) +Includes 6,500 shares of Common Stock held of record by the Individual Retirement Account of Mr. Baribault. Also +includes 105,554 shares of Common Stock held of record by the Reynald A. Baribault Maritalized Revocable Living Trust and 7,500 shares of Common Stock held of record by the Sally K. Baribault Maritalized Revocable Living Trust, for which trusts both +Mr. Baribault and his spouse are trustees and share voting and investment power. Also includes 8,262 shares of Common Stock issuable to Mr. Baribault upon the vesting and delivery of RSUs. +(4) +Includes 19,496 shares of Common Stock issuable to Mr. Baty upon the vesting and delivery of RSUs. +(5) +Includes 34,742 shares of Common Stock held of record by the Individual Retirement Account of Mr. Burkert. Also +includes 26,156 shares of Common Stock issuable to Mr. Burkert upon the vesting and delivery of RSUs. +(6) +Includes 16,657 shares of Common Stock issuable to Mr. Byerley upon the vesting and delivery of RSUs. +(7) +Includes 8,262 shares of Common Stock issuable to Ms. Ehrman upon the vesting of RSUs. +(8) +Includes 19,785 shares of Common Stock held of record by the Individual Retirement Account of Ms. Rogers and 5,800 +shares of Common Stock held of record by Ms. Rogers’ spouse. Also includes 8,262 shares of Common Stock issuable to Ms. Rogers upon the vesting of RSUs. +(9) +Includes 50,000 shares of Common Stock held of record by the Individual Retirement Account of Mr. Howard and 50,000 +shares of Common Stock held by PBH Family Partners, Ltd., a family limited partnership owned by Mr. Howard’s family, including Mr. Howard, and over which Mr. Howard and his spouse share voting and investment authority. Also +includes 4,131 shares of Common Stock issuable to Mr. Howard upon the vesting and delivery of RSUs. +(10) +Includes 95,295 shares of Common Stock issuable to Mr. Goodwin upon the exercise of stock options and 5,000 shares of +Common Stock held of record by his 401(k) account. +(11) +Includes 149,306 shares of Common Stock issuable to Mr. Hairford upon the exercise of stock options and 19,500 shares +of Common Stock held of record by his Individual Retirement Account. Also includes 333,403 shares of Common Stock held of record by the Hairford Family Trust, for which both Mr. Hairford and his spouse are trustees. +(12) +Includes 132,316 shares of Common Stock issuable to Mr. Lancaster upon the exercise of stock options and 85,500 +shares of Common Stock held of record by his Individual Retirement Account. +(13) +Includes 8,262 shares of Common Stock issuable to Mr. Parker upon the vesting of RSUs. +(14) +Includes 20,794 shares of Common Stock issuable to Mr. Stewart upon the vesting and delivery of RSUs. +(15) +Includes an aggregate of 906,610 shares of Common Stock which our executive officers as a group have the right to acquire +within 60 days of April 8, 2021 upon the exercise of stock options. Also includes 120,282 shares of Common Stock issuable to directors upon the vesting and delivery of RSUs. +(16) +Information based solely on a Schedule 13G/A filed with the SEC on January 26, 2021. The Schedule 13G/A reports that +BlackRock, Inc. (“BlackRock”) beneficially owns 17,455,006 shares, has sole voting power with respect to 17,192,381 shares and has sole dispositive power with respect to 17,455,006 shares. According to the Schedule 13G/A, BlackRock’s +address is 55 East 52 nd Street, New York, NY 10055. +(17) +Information based solely on a Schedule 13G/A filed with the SEC on February 10, 2021. The Schedule 13G/A reports that +The Vanguard Group (“Vanguard”) beneficially owns 11,719,082 shares, has shared voting power with respect to 115,564 shares, has sole dispositive power with respect to 11,507,740 shares and has shared dispositive power with respect to +211,342 shares. According to the Schedule 13G/A, Vanguard’s address is 100 Vanguard Blvd, Malvern, PA 19355. +(18) +Information based solely on a Schedule 13G/A filed with the SEC on February 12, 2021. The Schedule 13G/A reports that +Dimensional Fund Advisors LP (“Dimensional”) beneficially owns 7,150,274 shares, has sole voting power with respect to 7,085,321 shares and has sole dispositive power with respect to 7,150,274 shares. According to the Schedule 13G/A, +Dimensional furnishes investment advice to four investment companies registered under the Investment Company Act of 1940, and serves as investment manager or sub-advisor to certain other commingled funds, +group trusts and separate accounts (collectively, “Funds”). In certain cases, subsidiaries of Dimensional may act as an advisor or sub-advisor to certain Funds. In its role as investment advisor, sub-advisor and/or manager, Dimensional may possess voting and/or investment power over the securities of the Company that are owned by the Funds, and may be deemed to be the beneficial owner of the shares of the +Company held by the Funds. However, according to the Schedule 13G/A, all such securities are owned by the Funds and Dimensional disclaims beneficial ownership of such securities. According to the Schedule 13G/A, Dimensional’s address is +Building One, 6300 Bee Cave Road, Austin, TX 78746. +2021 +Proxy Statement | Matador Resources Company 75 +Table of Contents +ADDITIONAL INFORMATION +ADDITIONAL INFORMATION +Shareholder Proposals for the 2022 Proxy Statement +For shareholder proposals to be included in the Company’s +proxy statement and form of proxy relating to the 2022 Annual Meeting, such proposals must be received by the Company at its offices in Dallas, Texas, addressed to the Corporate Secretary of the Company, no later than December 23, 2021. Upon +timely receipt of any such proposal, the Company will determine whether or not to include such proposal in the proxy statement and proxy in accordance with applicable regulations and provisions governing the solicitation of proxies. +Director Nominations or Other Business for Presentation at the 2022 Annual Meeting +Under the Bylaws, certain procedures are provided that a +shareholder must follow in order to place in nomination persons for election as directors at an annual meeting of shareholders or to introduce an item of business at an annual meeting of shareholders. These procedures provide, generally, among other +things, that shareholders desiring to place in nomination persons for election as directors, and/or bring a proper subject of business before an annual meeting, must do so by a written notice timely received (on or before March 8, 2022, but no +earlier than February 6, 2022, for the 2022 Annual Meeting) to the Corporate Secretary of the Company containing the name and address of the shareholder and the number of shares of the Company’s Common Stock beneficially owned by the +shareholder. If the notice relates to a nomination for director, it must also set forth the name, age, business and residence addresses of the candidate, the candidate’s résumé or a listing of his or her qualifications to be a +director of the Company, the person’s written consent to be a director if selected by the Nominating Committee, nominated by the Board and elected by the shareholders and any other information that would be required to be disclosed in +solicitations of proxies for the election of directors. The Company may require any proposed nominee to furnish such other information as may reasonably be required by the Company to determine the eligibility of such proposed nominee to serve as +director. Notice of an item of business shall include a brief description of the proposed business and any material interest of the shareholder in such business. +The Chairman of the meeting may refuse to allow the transaction of any business not presented, or to acknowledge the nomination of any person not made, in compliance +with the foregoing procedures. Copies of the Bylaws are available from the Corporate Secretary of the Company and on the Company’s website at www.matadorresources.com under the heading “Investor Relations—Corporate +Governance.” +See “Corporate Governance—Board Committees—Nominating Committee” for the process for shareholders to follow to suggest a +director candidate to the Nominating Committee for nomination by the Board. +Annual Report on Form 10-K +The +Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020, as filed with the SEC, including financial statements, is being made available to our shareholders concurrently with +this Proxy Statement at www.proxyvote.com and does not form part of the proxy solicitation material. Shareholders may obtain without charge another copy of the Annual Report on Form 10-K, excluding +certain exhibits, by writing to Investor Relations, Matador Resources Company, One Lincoln Centre, 5400 LBJ Freeway, Suite 1500, Dallas, Texas 75240. +76 Matador Resources Company | 2021 Proxy Statement +Table of Contents +OTHER BUSINESS +OTHER BUSINESS +Management of the Company is not aware +of other business to be presented for action at the Annual Meeting; however, if other matters are presented for action, it is the intention of the persons named in the accompanying form of proxy to vote in accordance with their judgment on such +matters. +By Order of the Board of Directors, +Joseph Wm. Foran +Chairman and Chief Executive Officer +April 22, 2021 +2021 +Proxy Statement | Matador Resources Company 77 +Table of Contents +ANNEX A +ANNEX A +Non-GAAP Financial Measures +Adjusted EBITDA +We define Adjusted EBITDA as earnings before interest expense, income taxes, depletion, depreciation and amortization, accretion of asset retirement obligations, +property impairments, unrealized derivative gains and losses, certain other non-cash items and non-cash stock-based compensation expense, net gain or loss on asset sales +and inventory impairment and prepayment premium on extinguishment of debt. Adjusted EBITDA is not a measure of net income (loss) or cash flows as determined by GAAP. Adjusted EBITDA is a supplemental non-GAAP +financial measure that is used by management and external users of our consolidated financial statements, such as industry analysts, investors, lenders and rating agencies. All references to Matador’s Adjusted EBITDA are those values +attributable to Matador Resources Company shareholders after giving effect to Adjusted EBITDA attributable to third-party non-controlling interests, including in San Mateo. +Management believes Adjusted EBITDA is necessary because it allows us to evaluate our operating performance and compare the results of operations from period to period +without regard to our financing methods or capital structure. We exclude the items listed above from net income (loss) in calculating Adjusted EBITDA because these amounts can vary substantially from company to company within our industry depending +upon accounting methods and book values of assets, capital structures and the method by which certain assets were acquired. +Adjusted EBITDA should not be +considered an alternative to, or more meaningful than, net income (loss) or cash flows from operating activities as determined in accordance with GAAP or as a primary indicator of our operating performance or liquidity. Certain items excluded from +Adjusted EBITDA are significant components of understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure. Our Adjusted EBITDA may not be comparable to similarly titled measures of +another company because all companies may not calculate Adjusted EBITDA in the same manner. +The following table presents our calculation of Adjusted EBITDA and the +reconciliation of Adjusted EBITDA to the GAAP financial measures of net income (loss) and net cash provided by operating activities, respectively: +Year Ended +December 31, 2020 +(In thousands) +Unaudited Adjusted EBITDA Reconciliation to Net Income (Loss): +Net loss attributable to Matador Resources Company shareholders +$ +(593,205 +) +Net income attributable to non-controlling interest in +subsidiaries +39,645 +Net loss +(553,560 +) +Interest expense +76,692 +Total income tax benefit +(45,599 +) +Depletion, depreciation and amortization +361,831 +Accretion of asset retirement obligations +1,948 +Full-cost ceiling impairment +684,743 +Unrealized loss on derivatives +32,008 +Non-cash stock-based compensation expense +13,625 +Net loss on asset sales and inventory impairment +2,832 +Consolidated Adjusted EBITDA +574,520 +Adjusted EBITDA attributable to non-controlling interest in +subsidiaries +(55,243 +) +Adjusted EBITDA attributable to Matador Resources Company shareholders +$ +519,277 +A-1 Matador Resources Company | 2021 Proxy Statement +Table of Contents +ANNEX A +Year Ended +December 31, 2020 +(In thousands) +Unaudited Adjusted EBITDA Reconciliation to Net Cash Provided by Operating Activities: +Net cash provided by operating activities +$ +477,582 +Net change in operating assets and liabilities +23,078 +Interest expense, net of non-cash portion +73,860 +Adjusted EBITDA attributable to non-controlling interest in +subsidiaries +(55,243 +) +Adjusted EBITDA attributable to Matador Resources Company shareholders +$ +519,277 +2021 +Proxy Statement | Matador Resources Company A-2 +Table of Contents +MATADOR RESOURCES +COMPANY +5400 LBJ FREEWAY, SUITE 1500 +DALLAS, TX 75240 +VOTE BY INTERNET - www.proxyvote.com +Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Time the day before the meeting +date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. +ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS +If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards +and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials +electronically in future years. +VOTE BY PHONE - 1-800-690-6903 +Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. +Eastern Time the day before the meeting date. Have your proxy card in hand when you call and then follow the instructions. +VOTE BY MAIL +Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes +Way, Edgewood, NY 11717. +TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: +D46844-P54847 KEEP +THIS PORTION FOR YOUR RECORDS +— — — — — — — — — — — — — — — +— — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — +DETACH AND RETURN THIS PORTION ONLY +THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. +MATADOR RESOURCES COMPANY +The Board of Directors recommends you vote FOR the following: +1. +Election of Directors +For +Against +Abstain +Nominees: +1a. William M. Byerley +☐ +☐ +☐ +1b. Monika U. Ehrman +☐ +☐ +☐ +1c. Julia P. Forrester Rogers +☐ +☐ +☐ +1d. James M. Howard +☐ +☐ +☐ +1e. Kenneth L. Stewart +☐ +☐ +☐ +The Board of Directors recommends you vote FOR the following proposals: +For +Against +Abstain +2. +Advisory vote to approve the compensation of the Company’s named executive officers. +☐ +☐ +☐ +3. +Ratification of the appointment of KPMG LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2021. +☐ +☐ +☐ +NOTE: The proxies are authorized to vote +in their discretion on such other business as may properly come before the meeting or any adjournment thereof. +Yes +No +Please indicate if you plan to attend this meeting. +☐ +☐ +Please sign exactly as your name(s) appear(s) hereon. When +signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by +authorized officer. +Signature [PLEASE SIGN WITHIN BOX] +Date +Signature (Joint Owners) +Date +Table of Contents +Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: +The Annual Report for the year ended December 31, 2020, Notice of Annual Meeting and Proxy Statement are available at www.proxyvote.com +— — — — — — — — — — — — — — — — — — — — — +— — — — — — — — — — — — — — — — — — — — — — — — — — — — +D46845-P54847 +MATADOR RESOURCES COMPANY +Annual Meeting of Shareholders +June 4, 2021 9:30 A.M. +This proxy is solicited by the Board of Directors +As an alternative to completing this form, you may enter your vote instruction by telephone at 1-800-690-6903, or via the +internet at www.proxyvote.com. Have your proxy card in hand and follow the instructions. +Depending on concerns about the +novel coronavirus, or COVID-19, we might hold a virtual Annual Meeting instead of holding an in-person meeting. We would publicly announce a determination to hold a virtual Annual Meeting in a press release available at our website, +www.matadorresources.com, as soon as practicable before the meeting. In that event, the Annual Meeting would be conducted solely virtually, on the above date and time, via live audio webcast. You or your proxyholder could participate, vote and +examine our shareholder list at the virtual Annual Meeting by visiting www.virtualshareholdermeeting.com/MTDR2021 and using your control number, but only if we decide to hold a virtual Annual Meeting. +The shareholder hereby appoints Joseph Wm. Foran and Timothy E. Parker, or either of them, as proxies, each with the power to +appoint his substitute, and hereby authorizes them to represent and to vote, as designated on the reverse side of this ballot, all of the shares of common stock of MATADOR RESOURCES COMPANY that the shareholder is entitled to vote at the Annual +Meeting of Shareholders to be held at 9:30 A.M., CDT on June 4, 2021, at the Westin Galleria, San Antonio Ballroom, 13340 Dallas Parkway, Dallas, Texas 75240, and any adjournment or postponement thereof. The shareholder hereby revokes any proxy or +proxies heretofore given to vote upon or act with respect to such shares of stock. +This proxy, when properly +executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the Board of Directors’ recommendations. +Continued and to be signed on reverse side \ No newline at end of file diff --git a/raw/proxies/0001520006/0001193125-21-126934/proxy_rpt.txt b/raw/proxies/0001520006/0001193125-21-126934/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..990d6ab1f47ff2c0bd11cd391041b04e4b17e9a4 --- /dev/null +++ b/raw/proxies/0001520006/0001193125-21-126934/proxy_rpt.txt @@ -0,0 +1,109 @@ +TRANSACTIONS WITH RELATED PERSONS +TRANSACTIONS WITH RELATED PERSONS +Except as disclosed +below, during 2020 there was not, nor was there proposed as of December 31, 2020, any transaction or series of similar transactions to which we were or are a party in which the amount involved exceeded or exceeds $120,000 and in which any of +our directors, executive officers, holders of more than 5% of any class of our voting securities or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest, other than compensation +arrangements with directors and executive officers, which are described in “Executive Compensation—Compensation Discussion and Analysis” and “Director Compensation” above. +Working Interest and Overriding Royalty Interest Owners +Mr. Foran and certain of Mr. Foran’s affiliated +entities (collectively, the “Foran Entities”) are working interest owners and/or overriding royalty interest owners in certain properties operated by the Company or in which the Company also holds a working interest. As working interest +owners, the Foran Entities are required to pay their proportionate share of all costs and are entitled to receive their proportionate share of revenues in the normal course of business. As overriding royalty interest owners, the Foran Entities are +entitled to receive their proportionate share of revenues from the wells in which they own an interest in the normal course of business. During 2020, revenues, net of costs, received by the Foran Entities in their capacity as working interest owners +or overriding royalty interest owners were approximately $1.9 million (the “Related Net Revenue Payments”). The Related Net Revenue Payments represent less than 1% of our total third-party net revenue payments during 2020. +In our capacity as operator, we incur drilling and operating costs that are billed to our partners based on their respective working interests. During 2020, our joint +interest billings to the Foran Entities attributable to their share of costs were approximately $1.8 million (the “Related Joint Interest Billings”). The Related Joint Interest Billings represent less than 1% of our total joint +interest billings during 2020. As a result of this ownership by the Foran Entities, from time to time, we will be in a net receivable or net payable position with certain of the Foran Entities. We do not consider any net receivables from the Foran +Entities to be uncollectible. +The Audit Committee reviewed the terms of the working interests and/or overriding royalty interests of the Foran Entities for +potential conflicts of interest under the Related Person Transaction Policy, and, after being fully informed as to Mr. Foran’s relationships and interests in such transactions and all other material facts related to the Related Net Revenue +Payments and Related Joint Interest Billings, determined that such transactions and the Related Net Revenue Payments and Related Joint Interest Billings were fair to the Company and recommended such transactions and the Related Net Revenue Payments +and Related Joint Interest Billings to the full Board for approval and ratification. The Board subsequently approved and ratified the transactions and the Related Net Revenue Payments and Related Joint Interest Billings. +Certain Employment Relationships +Billy E. Goodwin, Executive Vice President and Chief Operating +Officer—Drilling, Completions & Production, was appointed as an executive officer of the Company in connection with his February 2016 promotion to Senior Vice President—Operations. Two of Mr. Goodwin’s adult children +have been employees of the Company since 2014 and 2015, respectively, and each earned in 2020, and are expected to be compensated in 2021, between $120,000 and $500,000. One of Mr. Goodwin’s children has a Bachelor of Science degree in +Petroleum Engineering from the University of Tulsa and over 11 years of industry experience, including as a regional drilling supervisor for another publicly traded exploration and production company. Mr. Goodwin’s other child has a +Bachelor of Science in Business Administration degree in Energy Management from the University of Tulsa and a Bachelor of Arts degree in General Business and Management from Oklahoma State University. He also has over 11 years of industry +experience, including as a drilling fluids engineer for a publicly traded oilfield services company and as a landman for a publicly traded exploration and production company. The Audit Committee reviewed the terms of the employment arrangements for +potential conflicts of interest under the Company’s Related Person Transaction Policy and, after being fully informed as to the employment arrangements and +2021 +Proxy Statement | Matador Resources Company 71 +Table of Contents +TRANSACTIONS WITH RELATED PERSONS +historical and anticipated compensation of Mr. Goodwin’s adult children, and all other material facts related to the relationship, determined that the employment arrangements were fair +to the Company and recommended +the employment arrangements to the full Board for approval and ratification. The Board subsequently approved and ratified such +employment arrangements. +Reynald A. Baribault is a member of the Board. Mr. Baribault’s +sister-in-law has been an employee of the Company since 2016 and earned in 2020, and is expected to be compensated in 2021, between $120,000 and $200,000. +Mr. Baribault’s sister-in-law has a diploma from the Executive Secretarial School and is a certified legal assistant, having completed the Southern Methodist +University Legal Assistants Program. She has over 39 years of experience as a legal assistant. The Audit Committee reviewed the terms of the employment arrangement for potential conflicts of interest under the Company’s Related Person +Transaction Policy and, after being fully informed as to the employment arrangement and historical and anticipated compensation of Mr. Baribault’s +sister-in-law, and all other material facts related to the relationship, determined that the employment arrangement was fair to the Company and recommended the +employment arrangement to the full Board for approval and ratification. The Board subsequently approved and ratified such employment arrangement. +An adult child of +Mr. Foran has been an employee of the Company since 2015 and earned in 2020, and is expected to be compensated in 2021, between $120,000 and $200,000. Mr. Foran’s child has a Bachelor of Science degree in Human Resource Development +and a Master of Science degree in Human Resource Management, both from Texas A&M University. She has more than 10 years of industry experience, including with another publicly traded exploration and production company. The Audit Committee +reviewed the terms of the employment arrangement for potential conflicts of interest under the Company’s Related Person Transaction Policy and, after being fully informed as to the employment arrangement and historical and anticipated +compensation of Mr. Foran’s adult child, and all other material facts related to the relationship, determined that the employment arrangement was fair to the Company and recommended the employment arrangement to the full Board for approval +and ratification. The Board subsequently approved and ratified such employment arrangement. +Procedures for Approval of Related Person +Transactions +Pursuant to the Related Person +Transaction Policy as in effect as of December 31, 2020, a “Related Person Transaction” is defined as a transaction (including any financial transaction, arrangement or relationship (including any indebtedness or guarantee of +indebtedness)), or series of related transactions, or any material amendment to any such transaction, in which a Related Person (as defined below) has or will have a direct or indirect material interest and in which we are a participant, other than: +• +a transaction involving compensation of directors that is required to be reported in our proxy statement under Item 402 of +the SEC’s compensation disclosure requirements (“Item 402”); +• +any employment by us of an executive officer if: +o +the related compensation is required to be reported in our proxy statement under Item 402; or +o +the executive officer is not an “immediate family member” of another executive officer or director of the +Company, the related compensation would be reported in our proxy statement under Item 402 if the executive officer was a “named executive officer” and the Compensation Committee approved (or recommended that the Board approve) such +compensation; +• +a transaction with a Related Person involving less than $120,000; +• +a transaction in which the interest of the Related Person arises solely from the ownership of a class of our equity +securities and all holders of that class receive the same benefit on a pro rata basis; +• +a transaction in which a Related Person has an indirect interest solely as a result of being (a) a director or, +together with all other Related Persons, a less than 10% beneficial owner of an equity interest in another entity, or both, or (b) a limited partner in a partnership in which the Related Person, together with all other Related Persons, has an +interest of less than 10%; +72 Matador Resources Company | 2021 Proxy Statement +Table of Contents +TRANSACTIONS WITH RELATED PERSONS +• +a transaction in which the rates or charges involved therein are determined by competitive bids, or a transaction that +involves the rendering of services as a common or contract carrier, or public utility, at rates or charges fixed in conformity with law or governmental authority; +• +any transaction with another company at which a Related Person’s only relationship is as an employee (other than an +executive officer), if the aggregate amount involved does not exceed the greater of $1,000,000, or 2% of that company’s total annual revenues; +• +any charitable contribution, grant or endowment by us to a charitable organization, foundation or university at which a +Related Person’s only relationship is as an employee (other than an executive officer), if the aggregate amount involved does not exceed the lesser of $1,000,000, or 2% of the charitable organization’s total annual receipts; or +• +any transaction with another publicly traded company where the Related Person’s interest arises solely from beneficial +ownership of more than 5% of our Common Stock and ownership of a non-controlling interest in the other publicly traded company. +“Related Person” means: +• +any person who is, or at any time during the applicable period was, one of our executive officers or one of our directors +or nominees for director; +• +any person who is known by us to be the beneficial owner of more than 5% of our Common Stock; +• +any immediate family member of any of the foregoing persons, which means any child, stepchild, parent, stepparent, spouse, +sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, sister-in-law or person residing (other than a tenant or employee) in the home of a director, nominee for director, executive officer or a beneficial owner of more than 5% of +our Common Stock; and +• +any entity that is owned or controlled by any of the foregoing persons or in which any of the foregoing persons is a +general partner or executive officer or in which such person, together with all other of the foregoing persons, owns 10% or more of the equity interests thereof. +Pursuant to the Related Person Transaction Policy, the Audit Committee must review all material facts of each Related Person Transaction and recommend either approval +or disapproval of the Related Person Transaction to the full Board, subject to certain limited exceptions. In determining whether to recommend approval or disapproval of the Related Person Transaction, the Audit Committee must, after reviewing all +material facts of the Related Person Transaction and the Related Person’s relationship and interest, determine whether the Related Person Transaction is fair to the Company. Further, the policy requires that all Related Person Transactions be +disclosed in our filings with the SEC and/or our website in accordance with applicable laws, rules and regulations. +2021 +Proxy Statement | Matador Resources Company 73 +Table of Contents \ No newline at end of file diff --git a/raw/proxies/0001520006/0001193125-22-124767/proxy.txt b/raw/proxies/0001520006/0001193125-22-124767/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..fccf3f3fc607e1cb595887d0f9aa501925776b5e --- /dev/null +++ b/raw/proxies/0001520006/0001193125-22-124767/proxy.txt @@ -0,0 +1,6078 @@ +DEF 14A +1 +d282764ddef14a.htm +DEF 14A +DEF 14A +Table of Contents +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +Washington, D.C. 20549 +SCHEDULE 14A +Proxy +Statement Pursuant to Section 14(a) of the +Securities Exchange Act of 1934 +(Amendment No.) +Filed by the +Registrant ☒ +Filed by a Party other than the Registrant ☐ +Check the appropriate box: +☐ +Preliminary Proxy Statement +☐ +Confidential, for Use of the Commission Only (as permitted by +Rule 14a-6(e)(2)) +☒ +Definitive Proxy Statement +☐ +Definitive Additional Materials +☐ +Soliciting Material Pursuant to §240.14a-12 +Matador Resources Company +(Name of Registrant as Specified In Its Charter) +(Name of Person(s) Filing Proxy Statement, if other than the Registrant) +Payment of Filing Fee (Check the appropriate box): +☒ +No fee required. +☐ +Fee paid previously with preliminary materials. +☐ +Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11 +Table of Contents +2022 +Notice of Annual Meeting of Shareholders +and +Proxy Statement +June 10, +2022 | Dallas, Texas +Table of Contents +One Lincoln Centre +5400 LBJ Freeway, Suite 1500 +Dallas, Texas +75240 +www.matadorresources.com +NOTICE OF ANNUAL MEETING OF SHAREHOLDERS +To +Be Held on June 10, 2022 +To the Matador Resources Company Shareholders: +Please join us for the 2022 Annual Meeting of Shareholders of Matador Resources Company. The meeting will be held at the Hilton Dallas Lincoln Centre, +Lakeside Ballroom, 5410 LBJ Freeway, Dallas, Texas 75240, on Friday, June 10, 2022, at 9:30 a.m. , Central Daylight Time. +At the meeting, you will hear a report on our business and act on the following matters: +(1) +Election of the two nominees for director named in the attached Proxy Statement; +(2) +Approval of the First Amendment to the Matador Resources Company 2019 Long-Term Incentive Plan; +(3) +Approval of the Matador Resources Company 2022 Employee Stock Purchase Plan; +(4) +Advisory vote to approve the compensation of our named executive officers as described in the attached Proxy Statement; +(5) +Ratification of the appointment of KPMG LLP as the Company’s independent registered public accounting firm for the +year ending December 31, 2022; and +(6) +Any other matters that may properly come before the meeting. +All shareholders of record at the close of business on April 13, 2022 are entitled to vote at the meeting or any postponement or adjournment of the +meeting. A list of the shareholders of record is available at the Company’s offices in Dallas, Texas. +Depending on concerns about the novel +coronavirus, or COVID-19, we might hold a virtual annual meeting instead of holding an in-person meeting. We would publicly announce a determination to hold a virtual +annual meeting in a press release available at our website, www.matadorresources.com , as soon as practicable before the meeting. In that event, the annual meeting would be conducted solely virtually, on the above date and time, via live audio +webcast. You or your proxyholder could participate, vote and examine our shareholder list at the virtual annual meeting by visiting www.virtualshareholdermeeting.com/MTDR2022 and using your control number, but only if we decide to hold a +virtual annual meeting. +By Order of the Board of Directors, +Joseph Wm. Foran +Chairman and Chief Executive Officer +April 28, 2022 +YOUR VOTE IS IMPORTANT! +Whether or not you will attend the meeting, please vote as promptly as possible by using the Internet or telephone or by signing, dating and +returning your proxy card to the address listed on the card. +Important Notice Regarding the Availability of Proxy Materials for the +Annual Meeting of Shareholders to Be Held on June 10, 2022: +Our Proxy Statement and the Annual Report to Shareholders for the fiscal year ended December 31, 2021 are available for viewing, printing and +downloading at https://materials.proxvvote.com/576485 . +Table of Contents +TABLE OF CONTENTS +TABLE OF CONTENTS +Page +Proxy Statement +1 +Proxy Summary +3 +Information About the Annual Meeting +8 +Proposal 1 | Election of Directors +12 +Director Diversity +12 +Core Competencies +13 +Nominees +13 +Vote Required +14 +Directors Continuing in Office +15 +Corporate Governance +21 +Independence of Directors +21 +Majority Vote in Director Elections +21 +Board Leadership Structure +22 +Board Committees +23 +Board’s Role in Risk Oversight +27 +Environmental, Social and Governance (ESG) +Initiatives +28 +Strategic Planning and Compensation Committee Interlocks and +Insider Participation +30 +Communications with Directors +30 +Executive Officers and Other Senior Officers of the Company +31 +Proposal 2 | Approval of the First Amendment to the Matador +Resources Company 2019 Long-Term Incentive Plan +37 +Key Features +38 +Description of the Amended Plan +39 +Federal Income Tax Consequences +44 +New Plan Benefits +46 +Awards Granted Under the Plan +46 +Vote Required +47 +Proposal 3 | Approval of the Matador Resources Company 2022 +Employee Stock Purchase Plan +48 +Description of the ESPP +48 +Federal Income Tax Consequences +49 +New Plan Benefits +50 +Vote Required +50 +Proposal 4 | Advisory Vote to Approve Named Executive Officer +Compensation +51 +Vote Required +51 +Page +Proposal 5 | Ratification of the Appointment of KPMG LLP +52 +Fees of Independent Registered Public Accounting Firm for +Fiscal Years 2021 and 2020 +52 +Report of the Audit Committee +53 +Vote Required +54 +Letter to Shareholders +55 +Executive Compensation +56 +Compensation Discussion and Analysis +56 +Strategic Planning and Compensation Committee +Report +74 +Summary Compensation Table +75 +Grants of Plan-Based Awards Table +76 +Outstanding Equity Awards at December 31, +2021 +77 +Option Exercises and Stock Vested +78 +Potential Payments upon Termination or Change in Control +78 +Chief Executive Officer Pay Ratio +83 +Director Compensation +84 +Compensation for 2021-2022 +85 +Director Stock Ownership Guidelines +85 +Securities Authorized for Issuance Under Equity Compensation +Plans +86 +Transactions With Related Persons +87 +Security Ownership of Certain Beneficial Owners and Management +91 +Additional Information +93 +Shareholder Proposals for the 2023 Proxy +Statement +93 +Director Nominations or Other Business for Presentation at +the 2023 Annual Meeting +93 +Annual Report on Form 10-K +93 +Other Business +94 +Annex A Matador Resources Company 2019 Long-Term Incentive +Plan (as proposed to be amended) +A-1 +Annex B Matador Resources Company 2022 Employee Stock Purchase +Plan +B-1 +Annex C Non-GAAP Financial +Measures +C-1 +2022 +Proxy Statement | Matador Resources Company i +Table of Contents +PROXY STATEMENT +Matador Resources Company +One Lincoln Centre +5400 LBJ Freeway, Suite +1500 +Dallas, Texas 75240 +www.matadorresources.com +PROXY +STATEMENT +For +ANNUAL MEETING OF +SHAREHOLDERS +To Be Held on June 10, 2022 +This +Proxy Statement is being mailed on or about April 28, 2022 to the shareholders of Matador Resources Company (“Matador” or the “Company”) in connection with the solicitation of proxies by the Board of Directors (the +“Board”) of the Company to be voted at the Annual Meeting of Shareholders of the Company to be held at the Hilton Dallas Lincoln Centre, Lakeside Ballroom, 5410 LBJ Freeway, Dallas, Texas 75240, on June 10, 2022, at 9:30 a.m., Central +Daylight Time (the “Annual Meeting” or the “2022 Annual Meeting”), or at any postponement or adjournment thereof, for the purposes set forth in the accompanying Notice of Annual Meeting of Shareholders. The address of the +Company’s principal executive office is One Lincoln Centre, 5400 LBJ Freeway, Suite 1500, Dallas, Texas 75240. +If you are a shareholder of record, you may +vote in person by attending the meeting, by completing and returning a proxy by mail or by using the Internet or telephone. You may vote your proxy by mail by marking your vote on the enclosed proxy card and following the instructions on the card. +To vote your proxy using the Internet or telephone, see the instructions on the proxy form and have the proxy form available when you access the Internet website or place your telephone call. +The named proxies will vote your shares according to your directions. If you sign and return your proxy but do not make any of the selections, the named proxies will +vote your shares: (i) FOR the election of the two nominees for director as set forth in this Proxy Statement, (ii) FOR the approval of the First Amendment to the Matador Resources Company 2019 Long-Term Incentive Plan, +(iii) FOR the approval of the Matador Resources Company 2022 Employee Stock Purchase Plan, (iv) FOR the approval, on an advisory basis, of the compensation of the Company’s named executive officers as disclosed in this +Proxy Statement and (v) FOR the ratification of KPMG LLP as the independent registered public accounting firm of the Company for the year ending December 31, 2022. Your proxy may be revoked at any time before it is exercised by +filing with the Company a written revocation addressed to the Corporate Secretary, by executing a proxy bearing a later date or by attending the Annual Meeting and voting in person. +The cost of soliciting proxies will be borne by the Company. In addition to the use of postal services and the Internet, proxies may be solicited by directors, officers +and employees of the Company (none of whom will receive any additional compensation for any assistance they may provide in the solicitation of proxies) in person or by telephone. +The outstanding voting securities of the Company consist of issued and outstanding common stock, par value $0.01 per share (the “Common Stock”). The record +date for the determination of the shareholders entitled to notice of and to vote at the Annual Meeting, or any postponement or adjournment thereof, has been established by the Board as the close of business on April 13, 2022 (the “Record +Date”). As of the Record Date, there were 118,129,981 shares of Common Stock outstanding and entitled to vote. +The presence, in person or by proxy, of the +holders of record of a majority of the outstanding shares entitled to vote is necessary to constitute a quorum for the transaction of business at the Annual Meeting, but if a quorum should not be present, the meeting may be adjourned from time to +time until a quorum is obtained. A holder of Common Stock will be entitled to one vote per share on each matter properly brought before the meeting. Cumulative voting is not permitted in the election of directors. +The proxy card provides space for a shareholder to abstain with respect to any or all nominees for the Board. The affirmative vote of a majority of the votes cast by +holders of shares present in person or represented by proxy and +2022 +Proxy Statement | Matador Resources Company 1 +Table of Contents +PROXY STATEMENT +entitled to vote on the election of directors at the Annual Meeting is required for the election of each nominee for director. With respect to the election of directors in an uncontested +election, such as that being held at the Annual Meeting, “majority of the votes cast” means the number of votes cast “for” the election of such nominee exceeds the number of votes cast “against” such nominee. See +“Corporate Governance—Majority Vote in Director Elections” for additional information regarding election of directors. +The other proposals require +the affirmative vote of a majority of the shares of Common Stock present in person or represented by proxy and entitled to vote at the meeting. Shares held by a shareholder who abstains from voting on any or all proposals will be included for the +purpose of determining the presence of a quorum. Other than with respect to the election of directors, an abstention will effectively count as a vote cast against the remaining proposals. Broker non-votes on +any matter as to which the broker has indicated on the proxy that it does not have discretionary authority to vote will be treated as shares not entitled to vote with respect to that matter. However, such shares will be considered present and +entitled to vote for quorum purposes so long as they are entitled to vote on at least one other matter. +2 Matador Resources Company | 2022 Proxy Statement +Table of Contents +PROXY SUMMARY +PROXY SUMMARY +This summary highlights information contained elsewhere in this Proxy Statement. This summary does +not contain all of the information that you should consider, and you should read the entire Proxy Statement carefully prior to voting. For more complete information regarding our 2021 performance, please review our Annual Report on Form 10-K for the year ended December 31, 2021. +2022 Annual Meeting of Shareholders +Voting Matters and Board Recommendation +Proposal +Board +Recommendation +Election of Two Director Nominees (page 12) +FOR +Approval of the First Amendment to the Matador Resources Company 2019 Long-Term +Incentive Plan (page 37) +FOR +Approval of the Matador Resources Company 2022 Employee Stock Purchase Plan +(page 48) +FOR +Advisory Vote to Approve Named Executive Officer Compensation (page +51) +FOR +Ratification of the Appointment of KPMG LLP as the Company’s Independent +Registered Public Accounting Firm for 2022 (page 52) +FOR +2021 Business Highlights +The year 2021 was a tremendous year for Matador, including +record total oil and natural gas production, record oil and natural gas revenues, record net income, record earnings per diluted common share and record adjusted earnings before interest expense, income taxes, depletion, depreciation and +amortization and certain other items (“Adjusted EBITDA”, a non-GAAP financial measure), among other milestones. San Mateo Midstream, LLC (“San Mateo”), our midstream joint venture, also had +a record year in 2021, including all-time high throughput volumes for natural gas gathering and processing, oil gathering and transportation and water handling, as well as record net income and record Adjusted +EBITDA. In 2021, both Matador and San Mateo generated free cash flow in all +2022 +Proxy Statement | Matador Resources Company 3 +Table of Contents +PROXY SUMMARY +four quarters. In addition, we initiated our first quarterly dividend in the first quarter of 2021 and doubled the quarterly dividend in the fourth quarter of 2021. We also aggressively paid down +debt and ended the year with a leverage ratio of 1.1x (calculated in accordance with the Credit Agreement (as defined below)), the lowest we have achieved since mid-2014. +Production Growth +Business Highlights +• +A 12% increase in oil production to 17.8 million barrels (“Bbl”) of oil produced in 2021 from +15.9 million Bbl of oil produced in 2020. +• +An 18% increase in natural gas production to 81.7 billion cubic feet (“Bcf”) of natural gas produced in 2021 +from 69.5 Bcf of natural gas produced in 2020. +• +A 15% increase in average daily oil equivalent production to 86,176 barrels of oil equivalent (“BOE”) per day, +including 48,876 Bbl of oil per day and 223.8 million cubic feet (“MMcf”) of natural gas per day, in 2021, from 75,175 BOE per day, including 43,526 Bbl of oil per day and 189.9 MMcf of natural gas per day, in 2020. +• +The transition to drilling longer laterals, whereby 98% of the operated horizontal wells we turned to sales in 2021 had +lateral lengths of two miles or greater, as compared to 74% in 2020, 8% in 2019 and only one two-mile lateral in 2018. +• +The continuing improvement in capital efficiency as demonstrated by our average drilling and completion +(“D&C”) costs for all operated horizontal wells completed and turned to sales of $670 per lateral foot in 2021, a decrease of 21% as compared to $850 per lateral foot in 2020, a decrease of 42% as compared to average drilling and +completion costs of $1,165 per lateral foot in 2019 and a decrease of 56% as compared to average drilling and completion costs of $1,528 per lateral foot in 2018. +• +Record-low unit operating costs for lease operating expenses (“LOE”) of +$3.46 per BOE for the year ended December 31, 2021. +Lower Costs and Increased Capital Efficiency +4 Matador Resources Company | 2022 Proxy Statement +Table of Contents +PROXY SUMMARY +Capital +Resources and Financial Highlights +• +The generation of free cash flow in all four quarters of 2021 by both Matador and San Mateo. +• +The net repayment of $340 million in borrowings under our revolving credit facility, resulting in outstanding +borrowings of $100 million at December 31, 2021. +• +The adoption of a dividend policy in the first quarter of 2021 pursuant to which we initiated a quarterly cash dividend of +$0.025 per share of common stock and the subsequent amendment of that dividend policy in the fourth quarter of 2021, pursuant to which we doubled the quarterly cash dividend to $0.05 per share of common stock. +• +The receipt of $48.6 million in performance incentives directly from Five Point Energy LLC (“Five Point”), +our partner in San Mateo, in 2021. +• +The closing of our fourth amended and restated credit agreement (the “Credit Agreement”) in November 2021 to +(i) extend the maturity date by three years to October 31, 2026 from October 31, 2023 previously, (ii) increase the borrowing base by 50% to $1.35 billion, as compared to $900.0 million previously, (iii) reaffirm +the elected borrowing commitment at $700.0 million, (iv) reaffirm the maximum facility amount at $1.5 billion and (v) add three new banks to our lending group. +• +The amendment of San Mateo’s revolving credit facility (the “San Mateo Credit Facility”) in June 2021 to +increase the lender commitments under the revolving credit facility to $450.0 million from $375.0 million and increased the accordion feature that provides for potential increases in lender commitments to up to $700.0 million. +Returning Value to Shareholders +Environmental, Social and Governance (“ESG”) Initiatives (page 28) +At Matador, we are committed to creating long-term value in a responsible manner. In alignment with this goal, we maintain an active +ESG program that is overseen and supported by senior management and the Board’s Environmental, Social and Corporate Governance Committee. In 2021, we were pleased to issue Matador’s inaugural Sustainability Report, which included +quantitative metrics aligned with standards developed by the Sustainability Accounting Standards Board (“SASB”). For additional information on the Company’s ESG efforts, see “Corporate Governance—Environmental, Social and +Governance (ESG) Initiatives” on page 28. +2022 +Proxy Statement | Matador Resources Company 5 +Table of Contents +PROXY SUMMARY +Director Nominees (page 12) +Our Board currently has nine members divided into three classes +of directors, designated Class I, Class II and Class III. Directors are elected for three-year terms. The table below provides certain summary information about each nominee for director named in this Proxy Statement: +Name +Age +Director +Since +Principal Occupation +Committee +Memberships +R. Gaines Baty* +71 +2016 +CEO of R. Gaines Baty Associates, Inc. +E, ESG, SPC +James M. Howard* +71 +2021 +Retired Trustee, Private Family Trust +A, CM, ESG, M +* +Independent Director +A +Audit Committee +CM +Capital Markets and Finance Committee +E +Executive +ESG +Environmental, Social and Corporate Governance Committee +M +Marketing and Midstream Committee +SPC +Strategic Planning and Compensation Committee +Executive Compensation Highlights (page 56) +Our Executive Compensation Philosophy +Our compensation program is designed to reward, in both the short term and the long term, performance that contributes to the implementation of our business strategies, +maintenance of our culture and values and achievement of our objectives. In addition, we reward qualities that we believe help achieve our business strategies such as: +• +teamwork; +• +recruiting and mentoring future leaders within the Company to drive long-term shareholder value; +• +individual performance in light of general economic and industry-specific conditions; +• +relationships with shareholders and vendors; +• +level of job responsibility; +• +industry experience; +• +general professional growth; and +• +the ability to: +¡ +manage and enhance production from our existing assets; +¡ +explore new opportunities to increase oil and natural gas production; +¡ +identify and acquire additional acreage; +¡ +improve total shareholder returns; +¡ +increase year-over-year proved reserves; +¡ +control unit production costs; and +¡ +pursue midstream opportunities. +Impact of COVID-19 and Related Items on our Compensation Programs for 2020 and 2021 +2020 +The year 2020 was a challenging year. During the first quarter and +through April 2020, the oil and natural gas industry witnessed an abrupt and significant decline in oil prices from $63 per Bbl in early January to as low as +6 Matador Resources Company | 2022 Proxy Statement +Table of Contents +PROXY SUMMARY +($38) per Bbl in late April. This sudden decline in oil prices was attributable to two primary factors: (i) the precipitous decline in global oil demand resulting from the worldwide spread of COVID-19 and (ii) a sudden, unexpected increase in global oil supply resulting from actions initiated by Saudi Arabia to increase its oil production to world markets following the failure of efforts by the +Organization of Petroleum Exporting Countries, Russia and certain other oil-exporting countries (“OPEC+”) to agree on coordinated production cuts at their March 6, 2020 meetings in Vienna, +Austria. +In connection with these events, we implemented certain changes to our compensation program to strengthen the balance sheet and further align the +interests of our executive officers with our shareholders. Effective April 1, 2020, we reduced the base salary for our entire workforce, including our executive officers. Our Chairman and Chief Executive Officer, Joseph Wm. Foran, voluntarily +agreed to a 25% base salary reduction with the other executive officers and vice presidents agreeing to 20% and 10% reductions, respectively. Additionally, in March 2020, our executive officers were awarded equity grants that had a significantly +lower grant date fair value than in 2019. For example, Mr. Foran’s 2020 long-term award grant date fair value of $651,373 represented an 85% decrease from his 2019 long-term incentive award grant date fair value. The independent members of +the Board (the “Independent Board”), upon recommendation of the Strategic Planning and Compensation Committee, also lowered the target annual incentive opportunity as a percentage of each executive officer’s base salary. For example, +Mr. Foran’s target annual incentive opportunity as a percentage of his earned 2020 base salary was reduced from 110.0% to 73.3%, and his maximum annual incentive opportunity was reduced from 220.0% to 110.0%. Finally, although each of the +Independent Board-approved metrics under our annual cash incentive plan were met or exceeded, the Company’s executive officers and the Independent Board agreed that the executive officers would forego receiving any 2020 annual cash +bonuses. +As a result of the base salary reduction, the lower long-term incentive award grant date fair value and the absence of an annual +cash bonus payment, Mr. Foran’s total 2020 compensation of $1.7 million reflected a 79% reduction from 2019 levels. Similarly, the total 2020 compensation of the other Named Executive Officers decreased an average of 75% from 2019 +levels. +2021 +During the latter half of 2020 and through 2021, the oil +and natural gas industry experienced improvement in commodity prices, as compared to mid-2020, primarily resulting from (i) improvements in oil demand as the impact from +COVID-19 had begun to abate, (ii) actions taken by OPEC+ to reduce the worldwide supply of oil through coordinated production cuts and (iii) changes in supply and demand dynamics in general, +particularly with respect to natural gas markets. As a result of this improvement in commodity prices and general market conditions, after consulting with the Strategic Planning and Compensation Committee’s independent compensation consultant, +Meridian Compensation Partners, LLC (“Meridian”), the Independent Board reinstated many of the compensation components that were eliminated or reduced during 2020 and implemented a compensation program during 2021 that was similar to the +Company’s compensation program in 2019, prior to the decline in oil prices in 2020 and the COVID-19 pandemic. As such, the pay cuts instituted in April 2020 were restored on March 1, 2021, at which +time our stock price had rebounded from a low of $1.11 in March 2020 to close at $22.04 on March 1, 2021. In addition, our Named Executive Officers received increases in their base salary, were granted long-term equity awards in 2021 with +higher grant date fair values than in 2020 and were paid annual cash bonuses for 2021. +Details of our executive compensation are shown in the 2021 Summary +Compensation Table on page 75. For further discussion of the above changes to our executive compensation program, see “Executive Compensation—Compensation Discussion and Analysis” beginning on page 56. +2022 +Proxy Statement | Matador Resources Company 7 +Table of Contents +INFORMATION ABOUT THE ANNUAL MEETING +INFORMATION +ABOUT THE ANNUAL MEETING +We are furnishing you this Proxy Statement in connection with the solicitation of proxies by the Board to be used at the Annual +Meeting and any adjournment thereof. The Annual Meeting will be held on Friday, June 10, 2022, at 9:30 a.m., Central Daylight Time. We are sending this Proxy Statement to our shareholders on or about April 28, 2022. +All references in this Proxy Statement to “we,” “our,” “us,” “Matador” or the “Company” refer to Matador Resources +Company, including our subsidiaries and affiliates. +What is the purpose of the Annual Meeting? +At the Annual Meeting, shareholders will act upon the following +matters outlined in the Annual Meeting notice: +• +the election of the two nominees for director named in this Proxy Statement; +• +the approval of the First Amendment to the Matador Resources Company 2019 Long-Term Incentive Plan; +• +the approval of the Matador Resources Company 2022 Employee Stock Purchase Plan; +• +an advisory vote to approve the compensation of our named executive officers as described herein; +• +the ratification of the appointment of KPMG LLP as the Company’s independent registered public accounting firm for the +year ending December 31, 2022; and +• +any other matters that may properly come before the meeting. +What are the Board’s voting recommendations? +• +FOR the election of the two nominees for director named in this Proxy Statement; +• +FOR the approval of the First Amendment to the Matador Resources Company 2019 Long-Term Incentive Plan; +• +FOR the approval of the Matador Resources Company 2022 Employee Stock Purchase Plan; +• +FOR the approval, on an advisory basis, of the compensation of the Company’s named executive officers; and +• +FOR the ratification of the appointment of KPMG LLP as the Company’s independent registered public accounting +firm for the year ending December 31, 2022. +Who is entitled to vote? +Shareholders as of the close of business on April 13, 2022 +are eligible to vote their shares at the Annual Meeting. As of the Record Date, there were 118,129,981 shares of our Common Stock outstanding. Each share of Common Stock is entitled to one vote at the Annual Meeting. +Why did I receive a Notice Regarding the Internet Availability of Proxy Materials in the mail instead of a full set of proxy materials? +Securities and Exchange Commission (“SEC”) +rules allow companies to furnish proxy materials over the Internet. We have elected to send a separate Notice of Internet Availability of Proxy Materials (the “Notice”) to most of our shareholders instead of a paper copy of the proxy +materials. This approach conserves natural resources and reduces the costs of printing and distributing our proxy materials while providing shareholders with a convenient way to access our proxy materials. Instructions on how to access the proxy +materials over the Internet or to request a paper copy of proxy materials, including a proxy card or voting instruction form, may be found in the Notice. In addition, shareholders may request to receive future proxy materials in printed form by mail +or electronically by email by following the instructions in the Notice. A shareholder’s election to receive proxy materials by mail or email will remain in effect until the shareholder terminates it. +8 Matador Resources Company | 2022 Proxy Statement +Table of Contents +INFORMATION ABOUT THE ANNUAL MEETING +How do I vote? +You may: +• +attend the Annual Meeting and vote in person; +• +dial the toll-free number listed on the Notice, proxy card or voting instruction form provided by your broker. Easy-to-follow voice prompts allow you to vote your shares and confirm that your voting instructions have been properly recorded. Telephone voting will be available 24 hours a +day and will close at 11:59 p.m., Eastern Daylight Time, on June 9, 2022; +• +go to the website www.proxyvote.com and follow the instructions, then confirm that your voting instructions have +been properly recorded. If you vote using the website, you can request electronic delivery of future proxy materials. Internet voting will be available 24 hours a day and will close at 11:59 p.m., Eastern Daylight Time, on June 9, 2022; or +• +if you received a paper copy of your proxy materials and elect to vote by written submission, mark your selections on the +proxy card, date and sign it, and return the card in the pre-addressed, postage-paid envelope provided. +Why did I receive paper copies of proxy materials? +We are providing certain shareholders with paper copies of the proxy materials instead of a separate Notice. If you received a paper copy and would no longer like to +receive printed proxy materials, you may consent to receive all future proxy materials electronically via email or the Internet. To sign up for electronic delivery, please follow the instructions provided in your proxy materials. When prompted, +indicate that you agree to receive or access shareholder communications electronically in the future. +Will each shareholder in our household +receive proxy materials? +Generally, no. To the +extent you are receiving printed proxy materials, we try to provide only one set of proxy materials to be delivered to multiple shareholders sharing an address, unless you have given us other instructions. Any shareholder at a shared address may +request delivery of single or multiple copies of printed proxy materials for future meetings by contacting us at: +Matador Resources +Company +Attention: Investor Relations +5400 LBJ Freeway, Suite 1500 +Dallas, Texas 75240 +Email: investors@matadorresources.com +Telephone: (972) 371-5200 +We undertake to deliver promptly, upon written or oral request, a copy of proxy materials to a shareholder at a shared address to which a single copy of the proxy +materials was delivered. Requests should be directed to Investor Relations at the address or phone number set forth above. +Who will be +admitted to the Annual Meeting? +Admission to the +Annual Meeting will be limited to our shareholders of record, persons holding proxies from our shareholders, beneficial owners of our Common Stock and our employees. If your shares are registered in your name, we will verify your ownership at the +meeting in our list of shareholders as of the Record Date. If your shares are held through a broker, bank or other nominee, you must bring proof of your ownership of the shares. This proof could consist of, for example, a bank or brokerage firm +account statement or a letter from your bank or broker confirming your ownership as of the Record Date. You may also send proof of ownership to us at Matador Resources Company, Attention: Corporate Secretary, 5400 LBJ Freeway, Suite 1500, Dallas, +Texas 75240, or email: investors@matadorresources.com , before the Annual Meeting, and we will send you an admission card. +2022 +Proxy Statement | Matador Resources Company 9 +Table of Contents +INFORMATION ABOUT THE ANNUAL MEETING +If I vote via telephone or the Internet +or by mailing my proxy card, may I still attend the Annual Meeting? +Yes. +What if I want to change my vote? +You may revoke your proxy before it is voted by submitting a new +proxy with a later date (by mail, telephone or the Internet), by voting at the Annual Meeting or by filing a written revocation with our Corporate Secretary. Your attendance at the Annual Meeting will not automatically revoke your proxy. +What constitutes a quorum? +A majority of the shares entitled to vote, present in person or represented by proxy, constitutes a quorum. If you vote by telephone or Internet or by returning your +proxy card, you will be considered part of the quorum. The Inspector of Election will treat shares represented by a properly executed proxy as present at the meeting. Abstentions and broker non-votes will be +counted for purposes of determining a quorum. A broker non-vote occurs when a nominee holding shares for a beneficial owner submits a proxy but does not vote on a particular proposal because the nominee does +not have discretionary voting power for that item and has not received instructions from the beneficial owner. +How many votes will be +required to approve a proposal? +The affirmative vote +of a majority of the votes cast by holders of shares of Common Stock present in person or represented by proxy and entitled to vote on the election of directors at the Annual Meeting is required for the election of each nominee for director. With +respect to the election of directors in an uncontested election, such as that being held at the Annual Meeting, “majority of the votes cast” means the number of votes cast “for” such nominee exceeds the number of votes cast +“against” such nominee. +With respect to all other matters, the affirmative vote of the holders of a majority of the shares of Common Stock, present in +person or represented by proxy and entitled to vote at the Annual Meeting, is required. +Shares cannot be voted at the Annual Meeting unless the holder of record is +present in person or represented by proxy. +Can brokers who hold shares in street name vote those shares if they have received no +instructions? +Under the rules of the New York Stock +Exchange (“NYSE”), brokers may not vote the shares held by them in street name for their customers and for which they have not received instructions, except with respect to a routine matter. The only matter to be voted on at the Annual +Meeting that is considered routine for these purposes is the ratification of the appointment of our independent registered public accounting firm. Accordingly, brokers may not vote your shares on any other matter if you have not given specific +instructions as to how to vote. Please be sure to give specific voting instructions to your broker so that your vote will be counted. +How +will you treat abstentions and broker non-votes? +Shares of a shareholder who abstains from voting on any or all proposals will be included for the purpose of determining the presence of a quorum. Other than with +respect to the election of directors, an abstention will effectively count as a vote cast against the remaining proposals. Broker non-votes on any matter, as to which the broker has indicated on the proxy that +it does not have discretionary authority to vote, will be treated as shares not entitled to vote with respect to that matter. However, such shares will be considered present and entitled to vote for quorum purposes so long as they are entitled to +vote on at least one other matter. +10 Matador Resources Company | 2022 Proxy Statement +Table of Contents +INFORMATION ABOUT THE ANNUAL MEETING +Who pays the solicitation expenses? +We will bear the cost of solicitation of proxies. Proxies may be solicited by mail or personally by our directors, officers or employees, none of whom will receive +additional compensation for such solicitation. Those holding shares of Common Stock of record for the benefit of others, or nominee holders, are being asked to distribute proxy soliciting materials to, and request voting instructions from, the +beneficial owners of such shares. We will reimburse nominee holders for their reasonable out-of-pocket expenses. +Where can I find the voting results of the Annual Meeting? +We will announce preliminary voting results at the Annual +Meeting, and we will publish final results in a Current Report on Form 8-K that will be filed with the SEC within four business days of the Annual Meeting. You may obtain a copy of this and other reports free +of charge at www.matadorresources.com , by contacting our Investor Relations Department at (972) 371-5200 or investors@matadorresources.com or by accessing the SEC’s website at +www.sec.gov . +Will the Company’s independent registered public accounting firm be available at the Annual Meeting to respond to +questions? +Yes. The Audit Committee of the Board has +appointed KPMG LLP to serve as our independent registered public accounting firm for the year ending December 31, 2022. Representatives of KPMG LLP will be present at the Annual Meeting. They will have an opportunity to make a statement, if +they desire to do so, and will be available to respond to appropriate questions. +Where can I contact the Company? +Our mailing address is: +Matador Resources Company +Attention: Investor Relations +5400 LBJ Freeway, Suite 1500 +Dallas, Texas 75240 +Our telephone number is (972) 371-5200. +2022 +Proxy Statement | Matador Resources Company 11 +Table of Contents +PROPOSAL 1 +PROPOSAL 1 | ELECTION OF DIRECTORS +The Board +currently consists of nine members and is divided into three classes of directors, designated Class I, Class II and Class III, with the term of office of each director ending on the date of the third annual meeting following the +annual meeting at which such director’s class was elected. The number of directors in each class will be as nearly equal as possible. The Class I directors are William M. Byerley, Monika U. Ehrman, Julia P. Forrester Rogers and Kenneth L. +Stewart, the terms of whom will each continue until the 2024 Annual Meeting of Shareholders or his or her earlier death, retirement, resignation or removal. The Class II directors are R. Gaines Baty and James M. Howard, each of whom is a +Class II director nominee at the 2022 Annual Meeting, in each case, to hold office until the 2025 Annual Meeting of Shareholders or his earlier death, retirement, resignation or removal. The Class III directors are Joseph Wm. Foran, +Reynald A. Baribault and Timothy E. Parker, the terms of whom will each continue until the 2023 Annual Meeting of Shareholders or his earlier death, retirement, resignation or removal. +The Board believes that each of the director nominees possesses the qualifications described below in “Corporate Governance—Board Committees—Nominating +Committee.” That is, the Board believes that each nominee possesses: +• +deep experience at the policy making level in business, government or education; +• +the availability and willingness to devote adequate time to Board duties; +• +the character, judgment and ability to make independent analytical, probing and other inquiries; +• +a willingness to exercise independent judgment along with a willingness to listen and learn from others; +• +business knowledge and experience that provides a balance with the other directors; +• +financial independence; and +• +excellent past performance on the Board. +Director Diversity +TENURE +RACIAL/ETHNIC +DIVERSITY +AGE +GENDER +12 Matador Resources Company | 2022 Proxy Statement +Table of Contents +PROPOSAL 1 +Core Competencies +Senior Leadership Experience +Energy Industry Experience +Financial Expertise +Legal and Risk Management Experience +Strategic Planning Expertise +ESG Experience +Capital Markets Experience +Information Technology Expertise +The information provided below is biographical information about each of the nominees, as well as a description of the experience, +qualifications, attributes or skills that led the Board to conclude that the individual should be nominated for election as a director of the Company. +Nominees +M R . R. G AINES B ATY +CEO, R. Gaines Baty Associates, Inc. +Class II +Deputy Lead Independent +Director +Director since: 2016 +Independent: Yes +Age: 71 +Committees: +•   Strategic Planning and Compensation (Chair) +•   Executive +•   Environmental, Social and Corporate Governance +Biographical Information: +Mr. Baty was appointed to the Board in 2016. He serves as deputy lead independent director and is chair of the Board’s Strategic Planning and Compensation +Committee. Mr. Baty is CEO of R. Gaines Baty Associates, Inc., a leading executive search firm he founded in 1982 after working with the IBM Corporation. With over 30 years of experience, Mr. Baty has provided companies across the country +and in a variety of industries with executive search and advisory services. Mr. Baty has served as a two-term President of the Society of Executive Recruiting Consultants and a two-term President of the Independent Recruiter Group. Mr. Baty is also a published author. Mr. Baty received a Bachelor of Business Administration degree from Texas Tech University, where he was a +football team letterman, captain and, later, graduate assistant coach. +Qualifications: +Mr. Baty’s experience and expertise in executive leadership and +development provide our Board with an important and unique perspective on these matters, and Mr. Baty assists the Board and the Company with recruitment, board administration, compensation and growth strategies. +2022 +Proxy Statement | Matador Resources Company 13 +Table of Contents +PROPOSAL 1 +M R . J AMES M. H OWARD +Retired Trustee, Private Family Trust +Class II +Director +Director since: 2021 +Independent: Yes +Age: 71 +Committees: +•   Marketing and Midstream (Co-Chair) +•   Audit +•   Capital Markets and Finance +•   Environmental, Social and Corporate Governance +Biographical Information: +Mr. Howard was appointed to the Board in 2021 and is co-chair of the Board’s Marketing and Midstream Committee. He +retired in March 2020 from his long-time role as a trustee of a private family trust in Houston, Texas where, since 1999, he exercised sole responsibility for all trust assets and actions. The trust was comprised of over 40 privately held limited +partnerships, limited liability companies and public market positions in various asset classes and sectors. From 2000 to 2020, Mr. Howard also served as trustee of a private secondary trust with a different mix of assets than the primary family +trust. Prior to his work as a trustee, he served as Vice President of Texon, L.P. from 1996 to 2000, marketing all crude oil, condensate and liquefied petroleum gas for the company and its public utility joint venture partner. From 1986 to 1996, he +served as Vice President of Tripetrol Oil Trading, Inc., through which he also served on the New York Mercantile Exchange (NYMEX) Crude Oil Advisory Committee. Mr. Howard previously served in other trading positions at various Houston-based +trading and petroleum companies from 1975 to 1986. He received a Bachelor of Arts degree from Florida Presbyterian College and a Master of International Management degree from Thunderbird School of International Management. +Qualifications: +Mr. Howard’s petroleum marketing and trading experience provide the +Company with valuable insight, particularly with respect to its marketing activities and the operations of San Mateo. +Vote Required +The affirmative vote of a majority of the votes cast by holders +of shares present in person or represented by proxy and entitled to vote on the election of directors at the Annual Meeting is required for the election of each nominee for director. With respect to the election of directors in an uncontested +election, such as that being held at the Annual Meeting, “majority of the votes cast” means the number of votes cast “for” such nominee exceeds the number of votes cast “against” such nominee. If you hold your shares +through a broker and you do not instruct the broker how to vote, your broker will not have the authority to vote your shares. Abstentions and broker non-votes will each be counted as present for purposes of +determining the presence of a quorum. +The Board of Directors recommends that you vote FOR each of the nominees. +14 Matador Resources Company | 2022 Proxy Statement +Table of Contents +PROPOSAL 1 +Directors Continuing in Office +Biographical information for our directors who are continuing in office is provided below. +M R . J OSEPH W M . +F ORAN +CEO, Matador Resources Company +Class III +Chairman of the Board +Director since: 2003 +Independent: No +Age: 69 +Committees: +•   Executive (Chair) +•   Capital Markets and Finance +•   Operations and Engineering +•   Prospect +Biographical Information: +Mr. Foran founded Matador Resources Company in July 2003 and since our founding has served as Chairman of the Board and Chief Executive Officer and, through +March 31, 2022, Secretary. He is also chair of the Board’s Executive Committee. Mr. Foran began his career as an oil and natural gas independent in 1983 when he and his wife, Nancy, founded Foran Oil Company with $270,000 in +contributed capital from 17 of his closest friends and neighbors. Foran Oil Company was later contributed into Matador Petroleum Corporation upon its formation by Mr. Foran in 1988, and Mr. Foran served as Chairman and Chief Executive +Officer of that company from inception until the time of its sale to Tom Brown, Inc. in June 2003 for an enterprise value of $388 million in an all-cash transaction on a Friday. On the following Monday, +Mr. Foran founded Matador Resources Company (Matador II). Today, Matador is one of the top 20 public exploration and production companies in the country by market capitalization and one of the top 10 oil and natural gas producers in New Mexico. +Mr. Foran is originally from Amarillo, Texas, where his family owned a pipeline construction business. From 1980 to 1983, he was Vice President and General Counsel of J. Cleo Thompson and James Cleo Thompson, Jr., Oil Producers, a large +independent producer. Prior to that time, he was a briefing attorney to Chief Justice Joe R. Greenhill of the Supreme Court of Texas. Mr. Foran graduated with a Bachelor of Science degree in Accounting from the University of Kentucky with +highest honors and a law degree from the Southern Methodist University Dedman School of Law, where he was a Hatton W. Sumners scholar and the Leading Articles Editor on the Southwestern Law Review. He is currently active as a member of various +industry and civic organizations, including his church and various youth activities. In 2002, Mr. Foran was honored as the Ernst & Young “Entrepreneur of the Year” for the Southwest Region. In 2015, he was inducted into the +University of Kentucky Gatton College of Business and Economics Hall of Fame. In 2019, Mr. Foran received the SMU Dedman School of Law Distinguished Alumni Award for Corporate Service and was named D CEO Magazine’s 2019 Upstream CEO of the +Year. In 2020, he was inducted into the Philosophical Society of Texas. He was also named to Institutional Investors’ All-American Executive Team as one of the top chief executive officers in the Small +Cap Energy Division in 2021. +Qualifications: +As the founder, Chairman of the Board and Chief Executive Officer of Matador +Resources Company, Mr. Foran provides Board leadership, industry experience and long relationships with many of our shareholders. +2022 +Proxy Statement | Matador Resources Company 15 +Table of Contents +PROPOSAL 1 +M R . R EYNALD A. B ARIBAULT +President and CEO, IPR Energy Partners, LLC +Class III +Director +Director since: 2014 +Independent: Yes +Age: 58 +Committees: +•   Operations and Engineering (Chair) +•   Prospect (Chair) +•   Audit +•   Executive +•   Nominating +•   Strategic Planning and Compensation +Biographical Information: +Mr. Baribault was elected to the Board in 2014 and is chair of the Board’s Operations and Engineering Committee and Prospect Committee. He served as lead +independent director of the Board from 2016 to 2019. In 2007, he co-founded North Plains Energy, LLC, which operated in the North Dakota Williston Basin, and served as its Vice President until the successful +sale of its assets in 2012. In 2014, Mr. Baribault helped co-found NP Resources, LLC, which also operated in the North Dakota Williston Basin, and serves as its Executive Vice President / +Engineering, helping oversee the sale of its assets in late 2021. In addition, he co-founded and serves as President and Chief Executive Officer of IPR Energy Partners, LLC, a Plano, Texas-based oil and +natural gas production operator with current operations in the Fort Worth Basin. Prior to co-founding North Plains Energy, NP Resources and IPR Energy Partners, Mr. Baribault served as Vice President, +Supervisor and Petroleum Engineering Consultant with Netherland, Sewell & Associates, Inc. in their Dallas office from 1990 to 2002. Mr. Baribault began his professional career as a reservoir engineer with Exxon Company in 1985 in the +New Orleans Eastern Division Office. Mr. Baribault received his Bachelor of Science degree in Petroleum Engineering from Louisiana State University in 1985 and is a Licensed Professional Engineer in the State of Texas. +Qualifications: +Mr. Baribault provides valuable insight to our Board on our drilling, +completions and reservoir engineering operations, as well as growth strategies, midstream operations and administration. +M R . W ILLIAM M. B YERLEY +Retired Partner, PricewaterhouseCoopers LLP (PwC) +Class I +Director +Director since: 2016 +Independent: Yes +Age: 68 +Committees: +•   Audit (Chair) +•   Environmental, Social and Corporate Governance +•   Marketing and Midstream +Biographical Information: +Mr. Byerley was appointed to the Board in 2016 and is chair of the Board’s Audit Committee. Mr. Byerley retired from PricewaterhouseCoopers LLP +(PwC) in 2014. From 1988 through 2014, Mr. Byerley was a Partner with PwC, serving as an Assurance Partner on various audit engagements primarily for energy sector clients. From 1988 through 1990, Mr. Byerley served in the PwC National +Office Accounting Services Group. Mr. Byerley received a Bachelor of Business Administration degree in 1975 and a Master of Business Administration degree in 1976, both from Southern Methodist University. He is a licensed Certified Public +Accountant. +Qualifications: +Mr. Byerley’s extensive experience in public accounting and +longtime service to energy sector clients of PwC provide the Board with invaluable financial and accounting expertise, particularly for oil and natural gas companies, strong accounting and financial oversight and general industry +knowledge. +16 Matador Resources Company | 2022 Proxy Statement +Table of Contents +PROPOSAL 1 +M S . M ONIKA U. +E HRMAN +Associate Professor of Law, University of North Texas at Dallas College of +Law +Class I +Director +Director since: 2019 +Independent: Yes +Age: 44 +Committees: +•   Marketing and Midstream (Co-Chair) +•   Environmental, Social and Corporate Governance +•   Executive +•   Nominating +•   Strategic Planning and Compensation +•   Operations and Engineering +•   Prospect +Biographical Information: +Professor Ehrman was appointed to the Board in 2019 and is co-chair of the Board’s Marketing and Midstream Committee. +She is Associate Professor of Law, University of North Texas at Dallas College of Law. Prior to joining UNT Dallas, in 2021, she was a tenured Professor of Law at the University of Oklahoma College of Law, where she led the Oil & Gas, +Natural Resources, and Energy (ONE) Program and served as the Faculty Director of the ONE Center. While at OU, she taught in the J.D. and graduate programs at the College of Law and in the Executive Energy Management Program at the Price College of +Business. Professor Ehrman joined the University of Oklahoma College of Law in 2013 as Associate Professor of Law. Prior to teaching, she served as in-house legal counsel for two oil and natural gas companies +from 2008 to 2012 and as an associate oil and natural gas attorney at an international law firm from 2005 to 2008. Before law school, Professor Ehrman worked as a petroleum engineer in the upstream, midstream and pipeline sectors of the energy +industry. In addition to serving on various oil and natural gas law committees, she also served as an Editor of the Oil and Gas Reporter for the Institute for Energy Law. Professor Ehrman received her Bachelor of Science degree in Petroleum +Engineering from the University of Alberta; J.D. from Southern Methodist University Dedman School of Law; and Master of Laws degree from Yale Law School. She is currently Treasurer and on the Executive Committee of the Foundation for Natural +Resources and Energy Law, and she is on the Editorial Board of the Journal of World Energy Law & Business (published by Oxford University Press). +Qualifications: +Professor Ehrman provides valuable insight to our Board on our engineering +and midstream operations as well as legal and governance matters. +2022 +Proxy Statement | Matador Resources Company 17 +Table of Contents +PROPOSAL 1 +M R . T IMOTHY E. P ARKER +Former Portfolio Manager and Analyst—Natural Resources, T. Rowe Price & +Associates +Class III +Lead Independent Director +Director since: 2018 +Independent: Yes +Age: 47 +Committees: +•   Capital Markets and Finance (Chair) +•   Audit +•   Environmental, Social and Corporate Governance +•   Executive +•   Nominating +•   Prospect +•   Strategic Planning and Compensation +Biographical Information: +Mr. Parker was appointed to the Board in 2018, serves as lead independent director and is chair of the Board’s Capital Markets and Finance Committee. Mr. Parker +currently serves as a contractor in charge of research for Brightworks Wealth Management, LLC. Mr. Parker retired in 2017 as Portfolio Manager and Analyst—Natural Resources for T. Rowe Price & Associates. Mr. Parker joined T. Rowe Price in +2001 as an equity analyst before becoming a portfolio manager in 2010. He managed the New Era fund from 2010 to 2013 and managed the energy and natural resources portions of T. Rowe Price’s Small Cap Value, Small Cap Stock and New Horizons +funds from 2013 to 2017. Prior to joining T. Rowe Price, Mr. Parker was an investment banking analyst at Robert W. Baird & Co., Inc. Mr. Parker holds a Bachelor of Science degree in Commerce from the University of Virginia and a Master of +Business Administration degree from the Darden School of Graduate Business (University of Virginia). +Qualifications: +Mr. Parker’s experience with a large institutional shareholder and his +extensive familiarity with the capital markets provide the Company with valuable insight. +18 Matador Resources Company | 2022 Proxy Statement +Table of Contents +PROPOSAL 1 +M S . J ULIA P. F ORRESTER +R OGERS +Professor of Law, Southern Methodist University Dedman School of +Law +Class I +Director +Director since: 2017 +Independent: Yes +Age: 62 +Committees: +•   Environmental, Social and Corporate Governance (Chair) +•   Audit +•   Capital Markets and Finance +Biographical Information: +Professor Rogers was appointed to the Board in 2017 and is chair of the Board’s Environmental, Social and Corporate Governance Committee. Professor Rogers is a +Professor of Law at Southern Methodist University Dedman School of Law where she has been a member of the faculty since 1990, teaching and serving in various administrative positions. From 2015 through 2018, Professor Rogers served the university as +Associate Provost for Student Academic Services, overseeing International Student and Scholar Services, Study Abroad, the Center for Academic Development of Student Athletes, the President’s Scholars Program and the Hunt Scholars Program, among +others. She served as Dean ad interim of the Dedman School of Law from June 2013 through June 2014 and as Associate Dean for Academic Affairs for the 1995-1996 academic year. Before beginning her academic career at SMU, Professor Rogers practiced +law with Thompson & Knight LLP. Professor Rogers holds a Bachelor of Science degree in Electrical Engineering from The University of Texas at Austin, graduating with highest honors, and a law degree from The University of Texas School of Law, +graduating with high honors. She is a member of the Order of the Coif, and she received the highest score on the Texas bar exam following her graduation. More recently, she was elected as a member of the American Law Institute. +Qualifications: +Professor Rogers’ academic, administrative and legal experience provide +our Board with a unique perspective on the Company’s business, operations and corporate governance. +2022 +Proxy Statement | Matador Resources Company 19 +Table of Contents +PROPOSAL 1 +M R . K ENNETH L. +S TEWART +Retired EVP, Compliance and Legal Affairs, Children’s Health System of +Texas +Class I +Director +Director since: 2017 +Independent: Yes +Age: 68 +Committees: +•   Nominating (Chair) +•   Capital Markets and Finance +•   Environmental, Social and Corporate Governance +•   Executive +•   Strategic Planning and Compensation +Biographical Information: +Mr. Stewart was appointed to the Board in 2017 and is chair of the Board’s Nominating Committee. Mr. Stewart was most recently employed as Executive Vice +President, Compliance and Legal Affairs, for Children’s Health System of Texas, a position that he began on January 1, 2019 and from which he retired on January 2, 2021. During the time of his employment, Children’s Health System +of Texas and its affiliates constituted one of the 10 largest pediatric hospital systems in the United States. Previously, effective December 31, 2018, Mr. Stewart retired from Norton Rose Fulbright US LLP, which constitutes the United +States operations of Norton Rose Fulbright, an international legal practice, which then had over 3,700 legal professionals in over 50 cities worldwide. At the time of his retirement, Mr. Stewart was a Partner with Norton Rose Fulbright and held +the position of Chair—United States. Mr. Stewart began his legal career with Fulbright & Jaworski LLP, the predecessor to Norton Rose Fulbright US LLP, and previously held at differing times positions of Global Chair of the +international organization, Managing Partner of the United States region and Partner-in-Charge of the Dallas office. Prior to entering into full-time management for his +firm in 2012, he engaged in a domestic and international transactional legal practice, focusing principally on merger, acquisition, financing and joint venture activities for both public and privately-held entities. Mr. Stewart has extensive +experience representing and advising companies and their executive officers and boards of directors engaged in oil and natural gas exploration and midstream activities. Since his retirement from Norton Rose Fulbright, Mr. Stewart has acted, and +from time to time continues to act, on a limited basis as an independent contractor senior business consultant to family offices for which he provided services during his legal career. Mr. Stewart graduated from the University of Arkansas +School of Business in 1976 with a Bachelor of Science in Business Administration degree in Accounting and was licensed as a Certified Public Accountant in Texas in 1981 (certificate now on non-practice +status). He graduated with honors from Vanderbilt Law School in 1979 and was a member of the Order of the Coif. Mr. Stewart has been active in numerous civic and professional organizations in the Dallas area in the past, including among others, +the Dallas Regional Chamber, The Center for American and International Law and the Dallas Citizens Council. +Qualifications: +Mr. Stewart’s extensive experience representing public companies, +and particularly oil and natural gas companies, along with his years of management experience, provide our Board with important legal, corporate governance and leadership insight. +20 Matador Resources Company | 2022 Proxy Statement +Table of Contents +CORPORATE GOVERNANCE +CORPORATE GOVERNANCE +The business affairs of Matador are managed under the direction of the Board in accordance +with the Texas Business Organizations Code, the Company’s Amended and Restated Certificate of Formation (the “Certificate of Formation”) and its Amended and Restated Bylaws (the “Bylaws”), each as amended to date. The Board +has adopted Corporate Governance Guidelines, which are reviewed annually by the Environmental, Social and Corporate Governance Committee of the Board. The Company has a Code of Ethics and Business Conduct for Officers, Directors and Employees +(“Code of Ethics”), which is applicable to all officers, directors and employees of the Company. The Company intends to post any amendments to, and may post any waivers of, its Code of Ethics on the Company’s website to the extent +applicable to an executive officer or a director of the Company. The Corporate Governance Guidelines and the Code of Ethics are available on the Company’s website at www.matadorresources.com under the heading “Investor +Relations—Corporate Governance.” +The Board holds regular and special meetings and spends such time on the affairs of the Company as its duties require. +During 2021, the Board held eight meetings. The Board also meets regularly in non-management executive sessions in accordance with NYSE regulations. The Corporate Governance Guidelines provide that one of the +Company’s independent directors should serve as lead independent director at any time when the chief executive officer serves as the chairman of the board. The lead independent director presides over the +non-management executive sessions, serves as a liaison between the chairman and the independent directors and performs such additional duties as the Board may otherwise determine and delegate. Because +Mr. Foran serves as Chairman of the Board and Chief Executive Officer, our independent directors have appointed Mr. Parker to serve as lead independent director and Mr. Baty to serve as deputy lead independent director. In 2021, all +incumbent directors of the Company attended at least 75% of the meetings of the Board and the committees on which they served. It is our policy that each of our directors is expected to attend annual meetings of shareholders. All of our directors +attended the 2021 Annual Meeting. +Independence of Directors +The Board makes all determinations with respect to director +independence in accordance with the NYSE listing standards and the rules and regulations promulgated by the SEC. The actual determination of whether a director is independent is made by the Board on a case-by-case basis. +In connection with its preparation for the Annual Meeting, the Board undertook its annual review of +director independence and considered transactions and relationships between each director or any member of his or her immediate family and the Company and its subsidiaries and affiliates. In making its determination, the Board applied the NYSE +listing standards and SEC rules and regulations. +The Board reviewed the independence of our directors and considered whether any director has a material +relationship with us that could compromise his or her ability to exercise independent judgment in carrying out his or her responsibilities. After this review, our Board determined that eight of our nine current directors are “independent +directors” as defined under the rules of the SEC and the NYSE: Mmes. Ehrman and Rogers and Messrs. Baribault, Baty, Byerley, Howard, Parker and Stewart. No member of or nominee for our Board has a family relationship with any executive officer +or other members of our Board. +Majority Vote in Director Elections +On December 21, 2016, the Board amended the Bylaws to +implement a majority voting standard in uncontested director elections. Pursuant to the Bylaws, in an election of directors at a meeting of shareholders at which a quorum is present, (i) if the number of nominees exceeds the number of directors +to be elected (a “contested election”), directors shall be elected by a plurality of the votes cast by the holders of shares present in person or represented by proxy and entitled to vote on the election of directors at such meeting and +(ii) in an election of directors that is not a contested election (an “uncontested election”), such as that being held at the Annual Meeting, directors shall be elected by a majority of the votes cast by the holders of shares present +in person or +2022 +Proxy Statement | Matador Resources Company 21 +Table of Contents +CORPORATE GOVERNANCE +represented by proxy and entitled to vote on the election of directors at such meeting. For purposes of the Bylaws, in an uncontested election, a “majority of the votes cast” means that +the number of shares voted “for” a director must exceed the number of votes cast “against” that director. Prior to the amendment of the Bylaws, directors were elected by a plurality of the votes cast, whether or not the election +was a contested election. +In connection with the amendment to the Bylaws, the Board approved and adopted an amendment to the Company’s Corporate Governance +Guidelines to implement a resignation policy for directors who fail to receive the required number of votes in an uncontested election in accordance with the Bylaws. Pursuant to the Corporate Governance Guidelines, as amended, in an uncontested +election, any nominee for director who receives a greater number of votes “against” his or her election than votes “for” such election (a “majority against vote”) shall promptly tender his or her resignation following +certification of the shareholder vote. +The Nominating Committee shall promptly consider the resignation offer and a range of possible responses based on the +circumstances that led to the majority against vote, if known, and make a recommendation to the Board concerning whether to accept or reject such resignation. The Board shall act on the Nominating Committee’s recommendation and publicly +disclose its decision with respect to such resignation offer within 90 days following certification of the shareholder vote. The resignation, if accepted by the Board, will be effective at the time specified by the Board when it determines to accept +the resignation, which effective time may be deferred until a replacement director is identified and appointed to the Board. +Board Leadership Structure +Mr. Foran serves +as Chairman of the Board and Chief Executive Officer of the Company. As stated in the Corporate Governance Guidelines, the Board does not believe that the offices of Chairman of the Board and Chief Executive Officer must be separate. The members of +the Board possess experience and unique knowledge of the challenges and opportunities the Company faces. They are, therefore, in the best position to evaluate the current and future needs of the Company and to judge how the capabilities of the +directors and senior managers can be most effectively organized to meet those needs. Given Mr. Foran’s deep knowledge of the Company and experience in leading it, the Board currently believes that the most effective leadership structure +for the Company is to have Mr. Foran serve as Chairman of the Board and Chief Executive Officer. +While Mr. Foran serves as Chairman of the Board and +Chief Executive Officer, all of our non-employee directors are independent under the rules of the SEC and the NYSE. After considering the recommendations of our Strategic Planning and Compensation Committee, +the independent directors determine Mr. Foran’s compensation. Further, the Company has five standing committees, a lead independent director (Mr. Parker) and a deputy lead independent director (Mr. Baty). The Board believes that +each of these measures counterbalances any risk that may exist in having Mr. Foran serve as Chairman of the Board and Chief Executive Officer. For these reasons, the Board believes that this leadership structure is effective for the Company. +As lead independent director, Mr. Parker has the following roles and responsibilities: +• +chairs the executive sessions of the non-management and independent directors; +• +leads the independent directors in the evaluation of the Chief Executive Officer; +• +facilitates communication among the independent directors; and +• +acts as a liaison between the independent directors and the Chief Executive Officer. +Mr. Parker, as lead independent director, may also perform such other duties as the Board or the Environmental, Social and Corporate Governance Committee from time +to time may assign, which may include, but are not limited to, the following: +• +help develop Board agendas and ensure critical issues are included; +• +determine quality, quantity and timeliness of information from management; +• +make recommendations about retaining consultants or advisors for the Board; +22 Matador Resources Company | 2022 Proxy Statement +Table of Contents +CORPORATE GOVERNANCE +• +interview Board candidates; +• +oversee Board and director evaluations; and +• +help improve communications and processes by and between management and the Board and the Chief Executive Officer. +Mr. Baty, as deputy lead independent director, may also carry out the above duties in the absence of or at the direction of Mr. Parker, +as lead independent director. +Board Committees +The standing committees of the Board are the Audit Committee, +Environmental, Social and Corporate Governance Committee, Executive Committee, Nominating Committee and Strategic Planning and Compensation Committee. The Board has also established the following advisory committees: Capital Markets and Finance +Committee, Marketing and Midstream Committee, Operations and Engineering Committee and Prospect Committee. Each of the standing committees is governed by a charter, and a copy of the charters of each of these committees is available on the +Company’s website at www.matadorresources.com under the heading “Investor Relations—Corporate Governance.” Director membership of all of our standing and advisory committees is identified below, as of April 13, 2022. +2022 +Proxy Statement | Matador Resources Company 23 +Table of Contents +CORPORATE GOVERNANCE +Audit Committee +The Audit Committee assists the Board in monitoring: +• +the integrity of our financial statements and disclosures; +• +our compliance with legal and regulatory requirements; +• +the qualifications and independence of our independent auditor; +• +the performance of our internal audit function and our independent auditor; and +• +our internal control systems. +In addition, the Audit Committee is charged with the (i) review of compliance with our Code of Ethics and (ii) oversight of the Company’s guidelines and +policies to govern the process by which risk assessment and risk management are undertaken by management, including with respect to corporate governance, financial, accounting, operational, environmental, health and safety, regulatory and +cybersecurity risks. +As of April 13, 2022, the Audit Committee consisted of Ms. Rogers and Messrs. Baribault, Byerley, Howard and Parker, each of whom is +independent under the rules of the SEC and the NYSE. Mr. Byerley is the chair of the Audit Committee. SEC rules require a public company to disclose whether or not its audit committee has an “audit committee financial expert” as +defined by applicable SEC rules and regulations. Our Board has determined that each of Messrs. Byerley and Parker is an “audit committee financial expert.” During 2021, the Audit Committee met four times. +Environmental, Social and Corporate Governance Committee +The +Environmental, Social and Corporate Governance Committee is responsible for periodically reviewing and assessing our Corporate Governance Guidelines and Code of Ethics and making recommendations for changes thereto to the Board, reviewing any other +matters related to our corporate governance, unless the authority to conduct such review has been retained by the Board or delegated to another committee, and overseeing the process for evaluation of the Board and management. The Environmental, +Social and Corporate Governance Committee (formerly the Corporate Governance Committee), in conjunction with the Company’s Chief Executive Officer, also oversees ESG matters. +As of April 13, 2022, the Environmental, Social and Corporate Governance Committee consisted of Mmes. Ehrman and Rogers and Messrs. Baty, Byerley, Howard, Parker +and Stewart, each of whom is independent under the rules of the SEC and the NYSE. Ms. Rogers is the chair of the Environmental, Social and Corporate Governance Committee. During 2021, the Environmental, Social and Corporate Governance Committee +met four times. +Executive Committee +The Executive Committee has +authority to discharge all the responsibilities of the Board in the management of the business and affairs of the Company, except where action of the full Board is required by statute or by our Certificate of Formation or Bylaws, each as amended to +date. As of April 13, 2022, the Executive Committee consisted of Ms. Ehrman and Messrs. Foran, Baribault, Baty, Parker and Stewart. Mr. Foran is the chair of the Executive Committee. During 2021, the Executive Committee met two times. +Nominating Committee +The Nominating Committee has the following +responsibilities: +• +identifies and recommends to the Board individuals qualified to be nominated for election to the Board; and +• +recommends to the Board the members and chair of each committee of the Board. +24 Matador Resources Company | 2022 Proxy Statement +Table of Contents +CORPORATE GOVERNANCE +Pursuant to +the Nominating Committee charter, no director may serve on the Nominating Committee if such director is subject to re-election to the Board at the next annual meeting of shareholders. +As of April 13, 2022, the Nominating Committee consisted of Ms. Ehrman and Messrs. Baribault, Parker and Stewart, each of whom is independent under the rules +of the SEC and the NYSE. Mr. Stewart is the chair of the Nominating Committee. During 2021, the Nominating Committee met five times. +The Board has also +established a Shareholder Advisory Committee for Board Nominations (the “Advisory Committee”) that is charged with receiving and considering possible nominees for election to the Board by shareholders. Pursuant to the Advisory Committee +charter, this committee is comprised of eight to 12 persons selected by the Nominating Committee and consists of at least: +• +two members of the Nominating Committee; +• +two former members of or special advisors to the Board; +• +two shareholders who beneficially own Common Stock having a market value of at least $1.0 million (such value to be +based on the market value of the Common Stock immediately prior to designation of such shareholders to the Advisory Committee); and +• +two shareholders who have beneficially owned Common Stock continuously for at least the five years prior to such +shareholder’s designation to the Advisory Committee. +The current members of the Advisory Committee are Ms. Ehrman and Messrs. Parker +and Stewart and Craig T. Burkert, Rick H. Fenlaw, Scott E. King, George M. Yates, J. Barry Banker, Joe E. Coleman, Kevin M. Grevey and Bobby K. Pickard. Messrs. King and Fenlaw are co-chairs of the Advisory +Committee. +The Advisory Committee makes recommendations based on its conclusions to the Nominating Committee for its consideration and review. +The Nominating Committee and the Advisory Committee consider individuals recommended by the Company’s shareholders to serve on the Board. In considering candidates +submitted by shareholders, the Advisory Committee and the Nominating Committee take into consideration the needs of the Board and the qualifications of the candidate. To have a candidate considered by the Advisory Committee and the Nominating +Committee, a shareholder must submit the recommendation in writing and must include the following information: +• +The name and address of the shareholder, evidence of the person’s ownership of Common Stock or derivatives, including +the number of shares owned, a description of all arrangements or understandings regarding the right to vote shares of the Company, any short interest in any security of the Company, any rights to dividends that are separated or separable from the +underlying shares, any proportionate interest in shares or derivatives held by a general or limited partnership whereby the shareholder is a general partner or beneficially owns an interest in the general partner, any performance-related fees (other +than an asset-based fee) that the shareholder is entitled to based on any change in the value of the shares or derivatives, any other information relating to the shareholder that would be required to be disclosed in connection with solicitations of +proxies for the election of directors in a contested election and a statement whether or not the shareholder will deliver a proxy to shareholders; and +• +The name, age and business and residence addresses of the candidate, the candidate’s résumé or a listing +of his or her qualifications to be a director of the Company, the person’s consent to be a director if selected by the Nominating Committee, nominated by the Board and elected by the shareholders and any other information that would be required +to be disclosed in solicitations of proxies for the election of directors. +The shareholder recommendation and information described above, and in +more detail in our Bylaws, must be sent to the Corporate Secretary at One Lincoln Centre, 5400 LBJ Freeway, Suite 1500, Dallas, Texas 75240 and must be received by the Corporate Secretary not fewer than 45 nor more than 75 days prior to the one year +anniversary date of the date the Company’s proxy statement was mailed in connection with the previous year’s annual meeting of shareholders. +2022 +Proxy Statement | Matador Resources Company 25 +Table of Contents +CORPORATE GOVERNANCE +The Nominating Committee believes that a potential director of +the Company must demonstrate that such candidate has: +• +a depth of experience at the policy-making level in business, government or education; +• +a balance with the business knowledge and experience of the incumbent or nominated directors; +• +availability and willingness to devote adequate time to Board duties; +• +any unfilled expertise needed on the Board or one of its committees; +• +character, judgment and ability to make independent analytical, probing and other inquiries; +• +willingness to exercise independent judgment while remaining willing to listen and learn from the other directors and the +Company’s staff; and +• +financial independence to ensure such candidate will not be financially dependent on director compensation. +In the case of an incumbent director, the Nominating Committee will also consider such director’s past performance on the Board. +The Nominating Committee or the Advisory Committee may identify potential nominees by asking, from time to time, current directors and executive officers for their +recommendation of persons meeting the criteria described above who might be available to serve on the Board. The Nominating Committee or the Advisory Committee may also engage firms that specialize in identifying director candidates. As described +above, the Nominating Committee and Advisory Committee will also consider candidates recommended by shareholders. +Once a person has been identified by the +Nominating Committee or the Advisory Committee as a potential candidate, the Nominating Committee or the Advisory Committee will make an initial determination regarding the need for additional Board members to fill vacancies or expand the size of +the Board. If the Nominating Committee or the Advisory Committee determines that additional consideration is warranted, the Nominating Committee or the Advisory Committee will review such information and conduct interviews as it deems necessary to +fully evaluate each director candidate. In addition to the qualifications of a candidate, the Nominating Committee or the Advisory Committee will consider such relevant factors as it deems appropriate, including the current composition of the Board, +the evaluations of other prospective nominees and the need for any required expertise on the Board or one of its committees. The Nominating Committee or the Advisory Committee also contemplates multiple dynamics that promote and advance diversity +among the members of the Board. Although the Nominating Committee does not have a formal diversity policy, the Nominating Committee considers a number of factors regarding diversity of personal and professional backgrounds, gender, race, age, +specialized skills and acumen and breadth of experience in oil and natural gas exploration and production, midstream and marketing, executive leadership, accounting, finance or law. The Nominating Committee does not discriminate based upon race, +religion, gender, national origin, age, disability, citizenship or any other legally protected status. The Nominating Committee’s evaluation process will not vary based on whether or not a candidate is recommended by a shareholder. +Strategic Planning and Compensation Committee +The Strategic Planning +and Compensation Committee has the following responsibilities: +• +assists the Board and the independent members of the Board (the “Independent Board”) in the discharge of their +fiduciary responsibilities relating to the fair and competitive compensation of our executive officers; +• +provides overall guidance with respect to the establishment, maintenance and administration of our compensation programs, +including stock and benefit plans; +• +oversees and advises the Board and the Independent Board on the adoption of policies that govern our compensation programs; +• +recommends to the Board the strategic, tactical and performance goals of the Company, including those performance and +tactical goals that relate to performance-based compensation, including but not limited to goals for production, reserves, cash flows and shareholder value; and +• +in conjunction with the Company’s CEO, oversees management succession planning. +26 Matador Resources Company | 2022 Proxy Statement +Table of Contents +CORPORATE GOVERNANCE +The +Strategic Planning and Compensation Committee has the authority to delegate authority and responsibilities to subcommittees of its members, so long as any subcommittee consists of at least two members. +As of April 13, 2022, the Strategic Planning and Compensation Committee consisted of Ms. Ehrman and Messrs. Baribault, Baty, Parker and Stewart, each of whom +is independent under the rules of the SEC and the NYSE and a “non-employee director” pursuant to Rule 16b-3 of the Securities Exchange Act of 1934, as amended +(the “Exchange Act”). Mr. Baty is the chair of the Strategic Planning and Compensation Committee. During 2021, the Strategic Planning and Compensation Committee met seven times. +Capital Markets and Finance Committee +The Capital Markets and Finance +Committee provides oversight of the Company’s financial objectives, financial policies, capital structure and financing requirements. As of April 13, 2022, the members of the Capital Markets and Finance Committee were Ms. Rogers and +Messrs. Foran, Howard, Parker and Stewart. Mr. Parker is the chair of the Capital Markets and Finance Committee. +Marketing and Midstream Committee +The Marketing and Midstream Committee provides oversight of the Company’s marketing and midstream activities, projects, joint ventures and plans. As of +April 13, 2022, the members of the Marketing and Midstream Committee were Ms. Ehrman and Messrs. Byerley and Howard. Ms. Ehrman and Mr. Howard serve as co-chairs of the Marketing and +Midstream Committee. +Operations and Engineering Committee +The +Operations and Engineering Committee provides oversight of the development of our prospects, our drilling, completions and production operations and associated costs. In addition, the Operations and Engineering Committee provides oversight of the +amount and classifications of our reserves and the design of our completion techniques and hydraulic fracturing operations and various other reservoir engineering matters. As of April 13, 2022, the members of the Operations and Engineering +Committee were Ms. Ehrman and Messrs. Baribault and Foran. Mr. Baribault is the chair of the Operations and Engineering Committee. +Prospect +Committee +The Prospect Committee provides oversight of the technical analysis, evaluation and selection of our oil and natural gas prospects. As of +April 13, 2022, the members of the Prospect Committee were Ms. Ehrman and Messrs. Baribault, Foran and Parker. Mr. Baribault is the chair of the Prospect Committee. +Board’s Role in Risk Oversight +The Audit Committee has the responsibility to oversee the +Company’s guidelines and policies to govern the process by which risk assessment and risk management are undertaken by management, including with respect to corporate governance, financial, accounting, operational, environmental, health and +safety, regulatory and cybersecurity risks. In connection with the Audit Committee’s oversight responsibility, executive management briefs the Audit Committee on a quarterly basis on risks faced by the Company. Under the Audit Committee’s +oversight, management maintains a commercial insurance program for the Company’s benefit covering casualty, property, workers’ compensation, well operations and cybersecurity risks, among others. The Strategic Planning and Compensation +Committee has the responsibility to oversee that our incentive pay does not encourage unnecessary risk taking and to review and discuss the relationship between risk management policies and practices, corporate strategy and senior executive +compensation. +2022 +Proxy Statement | Matador Resources Company 27 +Table of Contents +CORPORATE GOVERNANCE +Environmental, Social and Governance (ESG) Initiatives +Affirmation of Our Commitment +At Matador, we are committed to creating long-term value in a responsible manner. This commitment extends across our operations and includes a dedication to excellence +with respect to environmental, social and governance (ESG) matters. Our guiding focus on good stewardship is reflected in our Code of Ethics and in our Corporate Governance Guidelines, which are reviewed annually by the Environmental, Social and +Corporate Governance Committee of the Board. See “Corporate Governance” on page 21 for additional information +Oversight and Coordination of ESG +Efforts +The Board and senior management understand the importance of ESG matters and of supporting the Company’s ongoing efforts in this area. +Matador’s senior management and full Board receive regular updates on our ESG efforts and engage with us to pursue continuous improvement in this area. +The +Environmental, Social and Corporate Governance Committee leads the Board’s oversight of Matador’s sustainability practices. In conjunction with senior management, the committee has direct accountability to review and evaluate +sustainability practices, risks and strategies and to make recommendations to the full Board regarding sustainability matters. +The Audit Committee also has +responsibility through its role overseeing risk assessment and risk management processes, including with respect to operational, environmental, health and safety and regulatory risks. +Progress in Enhancing ESG Reporting +In continuing to raise the +profile of the Company’s ongoing ESG-related initiatives externally, we recognize the growing value to stakeholders of consistent and comparable ESG disclosures. In early 2021, we hired an experienced +individual to conduct a review of industry ESG reporting practices and to serve as a dedicated single-focal point for our various ESG efforts. +In May 2021, Matador +published sustainability metrics aligned with standards developed by the Sustainability Accounting Standards Board (SASB), and in July 2021, Matador published an update providing supplemental information to the Company’s initial report on these +SASB-aligned ESG metrics. +In December 2021, Matador issued its inaugural Sustainability Report. This report highlighted Matador’s continued progress and +improvements in its operating practices, including the quantitative metrics aligned with the SASB standards noted above, and should provide Matador’s stakeholders and interested parties with a standardized platform for evaluating the +Company’s recent performance and future progress. Matador’s inaugural Sustainability Report, including the SASB-aligned sustainability metrics, is available on the Company’s website at www.matadorresources.com/sustainability . +Ongoing Shareholder Engagement +In 2021 and early 2022, members +of our Board and management team had conversations with a number of investors regarding our business and our investors’ priorities, consistent with Matador’s regular practice. Regarding ESG topics specifically, we met or reached out to +shareholders representing an estimated 60% of our outstanding stock (excluding stock held by our officers and directors) as of December 31, 2021. In addition, members of our management team attended 11 virtual investor conferences, hosted nine +virtual roadshows, and participated in various investor presentation events and calls. Feedback from these conversations was shared with the Board and served as a valuable input to the enhanced ESG disclosures that we made over the last year. We +appreciate the relationship building that results from cultivating these open dialogues and remain committed to engaging shareholders regularly. +28 Matador Resources Company | 2022 Proxy Statement +Table of Contents +CORPORATE GOVERNANCE +ESG +Performance Highlights +Highlights from the Company’s 2021 ESG initiatives are shown below. ( 1 ) +Environmental +Continued Reduction of Per-Barrel Emissions ( 2 ) +•   More than 45% reduction in methane emissions intensity +from 2020 to 2021 +•   More than 50% reduction in flaring emissions intensity from 2020 to 2021 +Increased Use of Non-Fresh Water, Including +Recycled +Water +•   Over 95% of the total water consumed in 2021 was non-fresh water ( 3 ) +•   Over 70% of operated wells completed in 2021 utilized +recycled produced water ( 4 ) +Reducing Surface Impact +•   Reduced our surface footprint per well with fewer pads, +longer laterals and increased batch drilling, including 98% of the operated horizontal wells we turned to sales in 2021 with lateral lengths of two miles or greater +Increased Transportation by Pipeline +1 +The sustainability metrics included herein have been calculated using the best information available to the Company at the +time of the preparation of this proxy statement. The data utilized in calculating such metrics is subject to certain reporting rules, regulatory reviews, definitions, calculation of methodologies, estimates, adjustments and other factors. As a +result, these metrics are subject to change from time to time as updated or other information becomes available. The metrics provided reflect both Matador’s gross operated exploration and production operations and San Mateo’s gross +operated midstream operations on a consolidated basis, except where otherwise noted. +2 +Emissions and flared volumes are calculated in accordance with Environmental Protection Agency standards and reflect only +Matador’s gross operated exploration and production volumes. +3 +Fresh water is defined as <1,000 mg/L total dissolved solids and includes Matador’s gross operated volumes for +hydraulic fracturing and completions operations, as well as estimates for Matador’s other operations. +4 +As some portion of the total fluid used for hydraulic fracturing operations. +2022 +Proxy Statement | Matador Resources Company 29 +Table of Contents +CORPORATE GOVERNANCE +Social +Maintaining Commitment to a Proactive Safety Culture +•   Zero employee lost time incidents during approximately 2.7 million employee man-hours from 2017 to 2021 +Investing in Human Capital +•   An average of more than 45 hours of continuing education per employee in 2021 +Providing a Leadership Development Program +•   Six-month leadership course designed to enhance tactical leadership capabilities +Supporting Military Veterans +•   Congressional Medal of Honor Foundation +•   Michael E. Thornton Foundation +Supporting Communities & Charities Where We Live, Work, and +Operate +•   Continued donations of food to the North Texas Food Bank and of toys to the Sheriff’s Offices and Courthouses in New Mexico’s Eddy and Lea Counties in 2021 +Governance +Diverse and Independent Board Composition +•   Lead independent director +•   Eight of nine independent directors +•   One minority and two female directors +•   Female membership since inception of predecessor company +in 1988 +Engaged Board of Directors with Majority Voting Standard +•   No “overboarding” +•   Shareholder Advisory Committee for Board +Nominations +Active Stakeholder Engagement +•   Shareholder outreach program, including discussion of compensation, governance, social, safety and environmental practices and disclosures +Strategic Planning and Compensation Committee Interlocks and Insider Participation +Ms. Ehrman and Messrs. Baribault, Baty, Parker +and Stewart served on the Strategic Planning and Compensation Committee during 2021. None of these individuals is or was previously one of our officers or employees. None of our executive officers serve on the board of directors or compensation +committee of a company that has an executive officer that serves on our Board or Strategic Planning and Compensation Committee. No member of our Board serves as an executive officer of a company in which one of our executive officers serves as a +member of the board of directors or compensation committee of that company. There were no compensation committee interlocks during 2021. Mr. Baribault’s +sister-in-law is an employee of the Company. For more information on this related person transaction, see “Transactions with Related Persons.” +Communications with Directors +The Board has established a process to receive communications +from shareholders and other interested parties by mail. Shareholders and other interested parties may contact any member of the Board, any Board committee or the entire Board. To communicate with the Board, any individual director or any committee, +correspondence +30 Matador Resources Company | 2022 Proxy Statement +Table of Contents +CORPORATE GOVERNANCE +should be addressed to the Board. All such correspondence should be sent “c/o Corporate Secretary” at One Lincoln Centre, 5400 LBJ Freeway, Suite 1500, Dallas, Texas 75240. The +Corporate Secretary will review and forward correspondence to the appropriate person or persons. +Any communications to the Company from one of the Company’s +officers or directors will not be considered “shareholder communications.” Communications to the Company from one of the Company’s employees or agents will only be considered “shareholder communications” if they are made +solely in such employee’s or agent’s capacity as a shareholder. Any shareholder proposal submitted pursuant to Rule 14a-8 promulgated under the Exchange Act will not be viewed as “shareholder +communications.” +Executive Officers and Other Senior Officers of the Company +The following table sets forth the names, ages and positions of +our executive officers and certain of our other senior officers at April 13, 2022: +Name +Age +Positions Held With Us +Executive Officers +Joseph Wm. Foran +69 +Chairman of the Board and Chief Executive Officer +Billy E. Goodwin +64 +President—Operations +Van H. Singleton, II +44 +President—Land, Acquisitions and Divestitures and Planning +Craig N. Adams +55 +Executive Vice President, Co-Chief Operating +Officer, Chief of Staff and Corporate Secretary +G. Gregg Krug +61 +Executive Vice President—Marketing and Midstream Strategy +Michael D. Frenzel +40 +Senior Vice President and Treasurer (Principal Financial Officer) +Brian J. Willey +45 +President of San Mateo and Senior Vice President, President and General Counsel of +Midstream +Other Senior Officers +Christopher P. Calvert +43 +Senior Vice President—Operations +W. Thomas Elsener +37 +Senior Vice President of Reservoir Engineering and Senior Asset Manager +Bryan A. Erman +44 +Senior Vice President and General Counsel +Jonathan J. Filbert +35 +Senior Vice President—Land +Edmund L. Frost III, PhD +47 +Senior Vice President of Geoscience +Robert T. Macalik +43 +Senior Vice President and Chief Accounting Officer +Matthew D. Spicer +54 +Senior Vice President and General Manager of Midstream +Glenn W. Stetson +37 +Senior Vice President of Production +Each of Matthew V. Hairford, who served as President during 2021, and David E. Lancaster, who served as Executive Vice President and +Chief Financial Officer during 2021, retired effective March 31, 2022 and both transitioned to the role of Special Advisor to the Board and Executive Committee. +2022 +Proxy Statement | Matador Resources Company 31 +Table of Contents +CORPORATE GOVERNANCE +The following biographies describe the business experience of +our executive officers and the senior officers listed above. Each officer serves at the discretion of our Board. There are no family relationships among any of our executive officers. +Executive Officers +Mr. Joseph Wm. Foran +Chairman of the Board and Chief Executive Officer +Please see the biography of Mr. Foran on page 15 of this Proxy Statement. +Mr. Billy E. Goodwin +President—Operations +Mr. Goodwin joined Matador Resources Company in July 2010 as Drilling Manager. In September 2013 he was named Vice President of Drilling. He was promoted to Senior Vice President—Operations in February 2016 and to +Executive Vice President and Head of Operations in August 2017. He assumed the role of Executive Vice President and Chief Operating Officer—Drilling, Completions & Production in April 2019 and became Matador’s +President—Operations in March 2022. He was previously with Samson Resources, a company he joined in 2001 to supervise the drilling of underbalanced multilateral horizontal wells. In his roles as Senior Drilling Engineer and Area Drilling +Manager for Samson, Mr. Goodwin engineered and managed operations in the Permian Basin, South Texas, East Texas, Mid-Continent and Gulf Coast areas. Mr. Goodwin worked with Conoco, Inc. before +joining Samson. He began his career in 1985 in Conoco’s production department before joining the drilling department in 1989. Mr. Goodwin has diverse horizontal operational experience both onshore and offshore, and both domestically and +internationally, including in the Middle East, Southeast Asia and South America. Throughout his career, Mr. Goodwin has developed underbalanced drilling, managed pressure drilling and drill-in casing +techniques for normal and geo-pressured environments. Mr. Goodwin received a Bachelor of Science degree in Petroleum Engineering Technology from Oklahoma State University in 1984. He is a member of the +Society of Petroleum Engineers and the American Association of Drilling Engineers. Mr. Goodwin served in the United States Marine Corps. +Mr. Van H. Singleton, II +President—Land, Acquisitions and Divestitures and Planning +Mr. Singleton joined Matador Resources Company in August 2007 as a Landman and was promoted to Senior Staff Landman in 2009 and then to General Land Manager in 2011. In September 2013, Mr. Singleton became Vice President +of Land, and he was promoted to Executive Vice President of Land in February 2015. He became the Company’s President—Land, Acquisitions and Divestitures and Planning in March 2022. Prior to joining Matador, Mr. Singleton founded and +was President of VanBrannon and Associates, LLC and Southern Escrow and Title of Mississippi, LLC from 1998 to 2003, which provided full-spectrum land title work and title insurance in Mississippi, Louisiana, Texas and Arkansas. From 2003 until +joining Matador in 2007, he served as general manager of his family’s real estate brokerage in Houston, Texas. Mr. Singleton received a Bachelor of Arts degree from the University of Mississippi in 2000. He is an active member of the +American Association of Professional Landmen, the New Mexico Landman Association, the Permian Basin Landman Association and the Dallas Association of Petroleum Landmen. +32 Matador Resources Company | 2022 Proxy Statement +Table of Contents +CORPORATE GOVERNANCE +Mr. Craig N. Adams +Executive Vice President, Co-Chief Operating Officer, Chief of Staff +and Corporate Secretary +Mr. Adams joined Matador Resources Company in September 2012 as its Vice President and General Counsel. In July 2013, Mr. Adams was promoted to Executive Vice President—Land and Legal and became Executive Vice +President—Land, Legal & Administration in June 2015. He assumed the role of Executive Vice President and Chief Operating Officer—Land, Legal & Administration in April 2019, and became Executive Vice President, Co-Chief Operating Officer, Chief of Staff and Corporate Secretary in March 2022. Before joining Matador Resources Company, Mr. Adams was a partner with Baker Botts L.L.P. from March 2001 to September 2012 +where he focused his practice on securities, mergers and acquisitions and corporate governance matters. He was a partner with Thompson & Knight L.L.P. from January 1999 to February 2001 and an associate from September 1992 to December 1998. +Mr. Adams received a Bachelor of Business Administration degree in Finance from Southern Methodist University in 1988 and his law degree in 1992 from Texas Tech University School of Law, where he graduated magna cum laude and was a member of +the Order of the Coif and a Comment Editor on the Texas Tech Law Review. In 2018, he was named D CEO Magazine’s Outstanding General Counsel—Midsize Legal Department. +Mr. G. Gregg Krug +Executive Vice President— Marketing and Midstream Strategy +Mr. Krug joined Matador Resources Company in April 2012 as its Marketing Manager. In September 2013 he was named Vice President of Marketing for the Company and Vice President of Longwood Gathering & Disposal Systems, +LP, and he was promoted to Senior Vice President—Marketing and Midstream in February 2016. He was promoted to Executive Vice President—Marketing and Midstream Strategy in April 2019. He has overall responsibility for Matador’s +marketing activities of its oil and natural gas, as well as responsibility for all business aspects for Longwood Gathering & Disposal Systems, LP. Previously, Mr. Krug was with Unit Petroleum Company, an exploration and production +company based in Tulsa, Oklahoma, as Marketing Manager, having joined in 2006. He and his staff were responsible for marketing, gas measurement, contract administration and production reporting in their core areas of Oklahoma, the Texas Panhandle, +East Texas and Northwestern Louisiana. From 2005 to 2006, Mr. Krug served as Marketing Manager with Matador Resources Company. From 2000 to 2005, Mr. Krug served as Gas Scheduling Supervisor with Samson Resources in Tulsa, Oklahoma where +he and his staff were responsible for scheduling natural gas sales as well as procurement of natural gas supply on Samson-owned gathering systems. From 1983 to 2000, Mr. Krug served with The Williams Companies in various capacities including in +the Kansas Hugoton Field in Ulysses, Kansas and Tulsa, Oklahoma for Williams Natural Gas Pipeline and on the trading floor in Tulsa, Oklahoma for Williams Energy Services Company. Mr. Krug received a Bachelor of Business Administration degree +from Oklahoma City University in 1996. +Mr. Michael D. Frenzel +Senior Vice President and Treasurer (Principal Financial Officer) +Mr. Frenzel first worked for Matador’s predecessor company, Matador Petroleum Corporation, as an intern in the summers of 2000, 2001 and 2002. From 2006 to 2010, Mr. Frenzel worked as a Senior Financial Analyst before +leaving to obtain his Masters of Business Administration degree from Duke University’s Fuqua School of Business in 2010. Mr. Frenzel rejoined Matador in 2013 as its Senior Strategy and Financial Analyst and Assistant Treasurer and was +promoted to Finance Director and Assistant Treasurer in January 2017. In August 2018, Mr. Frenzel was promoted to Vice President and Treasurer. Mr. Frenzel was promoted to Senior Vice President and Treasurer in October 2020 and his +responsibilities include treasury, financial planning and forecasting, budgeting, capital markets, hedging, financial reporting and investor relations. In March 2022, Mr. Frenzel was designated as the Company’s principal financial officer +and became a member of Matador’s new, diverse and highly experienced financial planning team supporting the CFO’s responsibilities. Before rejoining Matador in 2013, Mr. Frenzel worked as an Investment Associate for Hamm Capital, LLC +and as a Financial Analyst and Assistant to the CEO at Continental Resources. In addition to his energy industry experience, Mr. Frenzel also has consulting experience with Deloitte Consulting LLP. Mr. Frenzel graduated summa cum laude +from Vanderbilt University in 2004, receiving a Bachelor of Arts degree in Economics and Mathematics, and earned the designation of Fuqua Scholar while receiving a Master of Business Administration degree from Duke University’s Fuqua School of +Business in 2012. +2022 +Proxy Statement | Matador Resources Company 33 +Table of Contents +CORPORATE GOVERNANCE +Mr. Brian J. Willey +Senior Vice President, President and General Counsel of Midstream +Mr. Willey joined Matador Resources Company in February 2014 as its Deputy General Counsel. In January 2016, Mr. Willey was appointed as Co-General Counsel, and he was promoted to +Vice President and Co-General Counsel in August 2016. He became Senior Vice President and Co-General Counsel in July 2018. In March 2022, Mr. Willey was promoted to +President of San Mateo and Senior Vice President, President and General Counsel of Midstream. Prior to joining Matador, Mr. Willey was an attorney with Dean Foods Company where he most recently served as Vice President, Chief Counsel – +Corporate. Before Dean Foods, Mr. Willey served as a senior associate in the Dallas office of Baker Botts L.L.P. Mr. Willey’s practice focused on corporate matters, including mergers and acquisitions, public and private securities +offerings, venture capital transactions and SEC compliance matters as well as board of director and corporate governance matters. Mr. Willey received a Bachelor of Science degree in Accounting in 2002 from Brigham Young University. He received +his law degree in 2005 from The University of Texas School of Law, where he graduated with High Honors and was a member of the Order of the Coif in addition to being named a Chancellor and an Associate Editor on the Texas Law Review. Mr. Willey +also served a church mission in the Philippines from 1995 to 1997. +Other Senior Officers +Mr. Christopher P. Calvert +Senior Vice President— Operations +Mr. Calvert joined Matador Resources Company in October 2014 as a Senior Completions Engineer. In July 2018, he was named Vice President of Completions for the Company, and he was promoted to Senior Vice +President—Operations in October 2019. In March 2022, he became a member of Matador’s new, diverse and highly experienced financial planning team supporting the CFO’s responsibilities. Prior to joining Matador, Mr. Calvert worked +as a Staff Reservoir Engineer in Chesapeake Energy Corporation’s South Texas—Eagle Ford group focusing on A&D evaluations and production and completions optimization. At Chesapeake, Mr. Calvert also held roles as a Senior Asset +Manager responsible for completions and operations in the Niobrara Shale, a Senior Completions Engineer responsible for Bakken/Three Forks development and a Senior Operations Engineer focused on production and facility optimization on the Texas Gulf +Coast. Prior to Chesapeake, Mr. Calvert worked as an Operations Engineer for Williams Production Company. In addition to his oil and natural gas industry experience, Mr. Calvert has worked in corporate financial controls as an internal +Sarbanes-Oxley compliance auditor. Mr. Calvert received Bachelor of Science degrees in Finance and Petroleum Engineering from the University of Wyoming in 2002 and 2008, respectively. He is a member of the Society of Petroleum +Engineers. +Mr. W. Thomas Elsener +Senior Vice President— Reservoir Engineering and Senior Asset Manager +Mr. Elsener joined Matador Resources Company in April 2013 as an Engineer. In June 2017, he was promoted to Vice President—Engineering and Asset Manager, and he was promoted to Senior Vice President—Reservoir +Engineering and Senior Asset Manager in October 2019. In March 2022, Mr. Elsener became a member of Matador’s new, diverse and highly experienced financial planning team supporting the CFO’s responsibilities. Prior to joining Matador, +Mr. Elsener served in various engineering roles at Encana Oil & Gas (USA) in Dallas, Texas from 2007 to 2013, including reservoir, completions, drilling, business development and new ventures. While at Encana, Mr. Elsener was +involved with the exploration and development of assets in the Barnett shale, Deep Bossier, Haynesville shale and other new domestic ventures. Mr. Elsener received a Bachelor of Science degree in Petroleum Engineering from Texas A&M +University in 2007. He is a member of the Society of Petroleum Engineers. +34 Matador Resources Company | 2022 Proxy Statement +Table of Contents +CORPORATE GOVERNANCE +Mr. Bryan A. Erman +Senior Vice President and General Counsel +Mr. Erman joined Matador Resources Company in January 2016 as its Co-General Counsel. In August 2016, Mr. Erman was promoted to Vice President and +Co-General Counsel. He became Senior Vice President and Co-General Counsel in July 2018. In March 2022, Mr. Erman became Senior Vice President and General Counsel. +Prior to joining Matador, Mr. Erman was a Partner at Carrington, Coleman, Sloman & Blumenthal, L.L.P. in Dallas, having joined the firm in 2010. From 2003 to 2010, he was an associate in the Dallas and Washington, D.C. offices of Baker +Botts L.L.P. Mr. Erman’s practice focused on litigation matters, including oil and natural gas, securities and other commercial litigation, as well as corporate governance matters. Before attending law school, Mr. Erman worked for +Oklahoma Governor Frank Keating. Mr. Erman received a Bachelor of Arts degree in Political Science in 1999 from the University of Oklahoma. He received his law degree in 2003 from Southern Methodist University Dedman School of Law, where he +graduated cum laude and was a Hatton W. Sumners Scholar, a member of the Order of the Coif and an Articles Editor on the SMU Law Review. +Mr. Jonathan J. Filbert +Senior Vice President— Land +Mr. Filbert joined Matador Resources Company in February 2013 as a Senior Staff Landman. In April 2015, he was promoted to General Land Manager, and in December 2017, he was promoted to General Land Manager and Director of +Acquisitions. Mr. Filbert was promoted to the role of Vice President of Land in July 2018 before being promoted to his current role as Senior Vice President—Land in October 2020. Prior to joining Matador, Mr. Filbert worked as a +landman at Chesapeake Energy Corporation from 2010 to 2013. Most of his time at Chesapeake was spent working with the new ventures team on their Utica and Marcellus shale assets in Ohio and northern Pennsylvania. Mr. Filbert graduated from the +University of Oklahoma in 2010, receiving a Bachelor of Business Administration degree in Energy Management and Finance. He is an active member of the American Association of Professional Landmen, the New Mexico Landman Association, the Permian +Basin Landman Association and the Dallas Association of Petroleum Landmen. +Dr. Edmund L. Frost III +Senior Vice President of Geoscience +Dr. Frost joined Matador Resources Company in August 2014 as a Senior Geologist and in July 2015 was promoted to Chief Geologist. In June 2017, he was promoted to Vice President of Geoscience, and in July 2019, Dr. Frost +was promoted to Senior Vice President of Geoscience. Prior to joining the Company, Dr. Frost worked at the Bureau of Economic Geology at The University of Texas at Austin as a Research Associate, a role he began in 2011. While at The University +of Texas, his research focused on unconventional resource development in the Delaware Basin and in the Austin Chalk-Eagle Ford system. Dr. Frost began his career in the Subsurface Technology Group at ConocoPhillips in 2007, where he worked a +variety of international and domestic basins. Dr. Frost received a Bachelor of Science degree in Geology from the University of Colorado at Boulder in 1998 and a PhD degree in Geology in 2007 from The University of Texas at Austin. +Dr. Frost has authored several peer-reviewed papers, conducted multiple industry presentations and led a number of industry field trips in the Delaware Basin. +2022 +Proxy Statement | Matador Resources Company 35 +Table of Contents +CORPORATE GOVERNANCE +Mr. Robert T. Macalik +Senior Vice President and Chief Accounting Officer +Mr. Macalik joined Matador Resources Company in July 2015 as Vice President and Chief Accounting Officer. He was promoted to Senior Vice President and Chief Accounting Officer in November 2017. In March 2022, Mr. Macalik +became a member of Matador’s new, diverse and highly experienced financial planning team supporting the CFO’s responsibilities. Prior to joining Matador, from 2012 to 2015, Mr. Macalik worked at Pioneer Natural Resources Company as +Corporate Controller and, previously, as Director of Technical Accounting and Financial Reporting. At Pioneer, Mr. Macalik supervised corporate accounting and financial reporting functions. Prior to joining Pioneer, he was a Senior Manager with +PricewaterhouseCoopers (PwC), joining the public accounting firm in 2002. During his tenure with PwC, Mr. Macalik conducted and managed audits for various companies, primarily public companies in the oil and natural gas industry, and managed +numerous client relationships. Mr. Macalik received a Bachelor of Arts degree in History, a Bachelor of Business Administration degree and a Master of Professional Accounting degree all from The University of Texas at Austin in 2002. He is a +licensed Certified Public Accountant in the State of Texas. +Mr. Matthew D. Spicer +Senior Vice President and General Manager of Midstream +Mr. Spicer joined Matador Resources Company in March 2014 as Senior Representative of Business Development and was promoted to Manager of Business Development and then General Manager of Midstream later in 2014. In October +2015, Mr. Spicer was promoted to Vice President and General Manager of Midstream. He became Senior Vice President and General Manager of Midstream in July 2018. Prior to joining the Company, Mr. Spicer served as the Director of Flight +Operations for L-3 Unmanned Systems, also serving in various roles including as Program Manager and in Business Development during his tenure with L-3, which began in +2011. From 2004 to 2011, he held various roles in the defense industry, in both a technical and a business development capacity. Mr. Spicer served in the United States Marine Corps from 1991 to 2014, both in active duty and as a reservist, +before his retirement as a Lieutenant Colonel in 2014. Mr. Spicer also served as a first officer with American Airlines from 2000 to 2003 following his active duty in the United States Marine Corps. Mr. Spicer received a Bachelor of +Science degree in Manufacturing Engineering Technology from Central Michigan University in 1991. +Mr. Glenn W. Stetson +Senior Vice President of Production and Asset Manager +Mr. Stetson joined Matador Resources Company in August 2014 as a Production Engineer, and in July 2015, he was promoted to Asset Manager. Mr. Stetson was promoted to the role of Vice President and Asset Manager in July +2018 before being promoted to his current role as Senior Vice President of Production and Asset Manager in October 2019. In March 2022, Mr. Stetson became a member of Matador’s new, diverse and highly experienced financial planning team +supporting the CFO’s responsibilities. Prior to joining Matador, Mr. Stetson worked at Chesapeake Energy Corporation from 2008 to 2014, holding multiple positions in both the production and completions departments. Most of his time at +Chesapeake was spent in the Barnett shale in North Texas, although he also spent some time working in northern Pennsylvania managing the northeast portion of Chesapeake’s Marcellus shale operated production. Mr. Stetson graduated Cum Laude +from Oklahoma State University in 2007, receiving a Bachelor of Science degree in Mechanical Engineering Technology. Mr. Stetson is a Licensed Professional Engineer in the State of Oklahoma. +36 Matador Resources Company | 2022 Proxy Statement +Table of Contents +PROPOSAL 2 +PROPOSAL 2 | APPROVAL OF THE FIRST AMENDMENT TO THE MATADOR RESOURCES COMPANY 2019 LONG-TERM INCENTIVE PLAN +On April 21, 2022, the Board adopted, subject to shareholder approval, the First Amendment +(the “Amendment”) to the Matador Resources Company 2019 Long-Term Incentive Plan (the “2019 Plan” and, as amended by the Amendment, the “Amended Plan”). +The 2019 Plan is the only equity compensation plan that we currently maintain; however, awards granted prior to the adoption of the 2019 Plan under the Matador +Resources Company Amended and Restated 2012 Long-Term Incentive Plan, as amended (the “2012 Plan”), remain outstanding. The total number of shares of the Company’s common stock, par value $0.01 per share (“Common Stock”), +outstanding as of April 13, 2022 was 118,129,981, and the closing sale price of our Common Stock as reported on the NYSE on April 13, 2022 was $57.19 per share. The following table sets forth certain information about the 2019 Plan and the +2012 Plan as of April 13, 2022: +2019 Plan +2012 Plan +Number of additional shares of Common Stock +being requested under the Amended Plan +3,725,000 +— +Number of shares of Common Stock available for +future awards +918,399 +— +Number of shares of Common Stock subject to +outstanding stock options +216,374 +89,291 +Number of shares of Common Stock subject to +outstanding full value awards +3,134,123 +* +57,778 +** +Weighted average remaining term of outstanding +stock options*** +3.37 years +1.30 years +Weighted average exercise price of outstanding +stock options*** +$ +14.80 +$ +28.15 +* +Consists of 2,386,330 performance stock units (assuming maximum performance), 32,344 stock-settled restricted stock units +and 715,449 shares of restricted stock. Excludes 922,680 cash-settled phantom units. +** +Consists of 57,778 shares of restricted stock. Excludes 72,369 cash-settled phantom units. +*** +The aggregate weighted average remaining term and weighted average exercise price of outstanding stock options under the +2012 Plan and the 2019 Plan is 2.77 years and $18.70, respectively. +We anticipate that the shares of Common Stock available for future awards +under the 2019 Plan will not be sufficient to cover equity incentives to current and prospective employees, directors and other service providers. The Amendment is intended to enable us to remain competitive and innovative in our ability to attract, +motivate, reward and retain the services of key employees, key contractors and non-employee directors. The Amended Plan provides for the grant of incentive stock options, nonqualified stock options, stock +appreciation rights, restricted stock, restricted stock units, dividend equivalent rights and other awards, any of which may be granted as performance awards, or singly, in combination or in tandem, and which may be paid in cash or shares of Common +Stock. The Amended Plan will provide flexibility to our compensation methods in order to adapt the compensation of employees, contractors and non-employee directors to a changing business environment, after +giving due consideration to compensation program goals, competitive conditions and the potential dilutive impact of grants. +As part of the Board’s decision to +approve the Amendment, including the total number of shares available for issuance under the 2019 Plan, the Board and Strategic Planning and Compensation Committee (the “Compensation Committee”) also analyzed the anticipated dilutive +impact of the Amended Plan’s share reserve and the historical rate at which the Independent Board grants equity awards. The potential dilution from the 3,725,000 additional shares of Common Stock to be authorized for issuance under the +Amendment, for which shareholder approval is being requested, is approximately 3.2% of our outstanding shares of Common Stock as of April 13, 2022. The equity plan share usage rate of 2019, 2020 and 2021 represented a three-year average share +usage rate of 0.66% of our weighted average Common Stock outstanding (basic) for each such year, as described in the following table. +2022 +Proxy Statement | Matador Resources Company 37 +Table of Contents +PROPOSAL 2 +Year +Weighted-Average +Common +Stock +Outstanding +Performance +Stock Units +Earned* +Stock-Settled +Restricted +Stock +Units +Granted +Restricted Stock +Granted +Stock Options +Granted +Share Usage +Rate +2019 +116,555,000 +0 +100,740 +240,361 +538,250 +0.75% +2020 +116,068,000 +0 +82,620 +243,500 +0 +0.28% +2021 +116,999,000 +793,654 +36,475 +285,562 +0 +0.95% +3-Year Average Share Usage Rate +0.66% +* +Consists of performance stock units earned during 2019, 2020 and 2021. In 2019, 856,012 performance stock units were +granted, in 2020, 1,282,420 performance stock units were granted, and in 2021, 731,000 performance stock units were granted, in each case, assuming maximum performance. +In addition, the Board and the Compensation Committee reviewed projected future share usage and projected future forfeitures. The projected future usage of shares for +awards under the Amended Plan was reviewed under scenarios based on a variety of assumptions. Depending on the assumptions, the 3,725,000 additional shares of Common Stock being requested under the Amendment are currently expected to satisfy our +equity compensation needs for approximately three years. This could change depending on our future equity grant practices. The Board and the Compensation Committee are committed to effectively managing the number of shares reserved for issuance +under the Amended Plan while minimizing shareholder dilution. +The Board has determined that the Amended Plan is in the best interest of the Company and its +shareholders and has recommended that the Company’s shareholders approve the Amended Plan. +Key Features +The Amended Plan includes the following features, +emphasizing our commitment to strong corporate governance practices: +• +Prohibits liberal share recycling and shares withheld to cover tax obligations or the exercise price of an award will not +again be available for issuance under the Amended Plan; +• +Prohibits repricing of stock options or stock appreciation rights without shareholder approval; +• +Prohibits the payment of dividends or dividend equivalent rights on any unearned or unvested award; +• +Stock options and stock appreciation rights may not be granted at a discount to the fair market value on the date of grant +and are subject to a maximum term of ten years; +• +Provides for an annual limit on compensation that may be paid to outside directors (whether in cash or equity and under the +Amended Plan or otherwise) of $600,000 in the aggregate (except in limited circumstances); +• +Limits awards that may be granted during any calendar year to no more than 500,000 shares subject to any option or stock +appreciation right granted to any executive officer and $10,000,000 for any performance awards granted to any participant; +• +Awards granted under the Amended Plan are subject to a one-year minimum vesting +period (except in limited circumstances); and +• +Awards granted under the Amended Plan are subject to any clawback policy adopted by us from time to time. +38 Matador Resources Company | 2022 Proxy Statement +Table of Contents +PROPOSAL 2 +Description of the Amended Plan +The following is a brief description of the Amended Plan. A copy of the Amended Plan is attached as Annex A to this Proxy Statement, and the following description +is qualified in its entirety by reference to the Amended Plan. +Effective Date and Expiration +The 2019 Plan was originally adopted by the Board on April 22, 2019 (the “Original Board Approval Date”) and became effective on June 6, 2019 (the +“Original Effective Date”), the date of shareholder approval of the 2019 Plan. The Amendment was adopted by the Board on April 21, 2022 and will become effective on the date of shareholder approval of the Amendment. Unless sooner +terminated by the Board, the Amended Plan will terminate and expire on the tenth anniversary of the Original Board Approval Date. No award may be made under the Amended Plan after the tenth anniversary of the Original Board Approval Date, but awards +made prior to such date may extend beyond that date. +Share Authorization +Subject to certain adjustments, the number of shares that may be issued pursuant to awards under the Amended Plan is 6,950,000 total shares of Common Stock, plus the +number of shares of Common Stock remaining available for issuance under the 2012 Plan on the Original Effective Date, plus the number of shares of Common Stock subject to any award outstanding under the 2012 Plan as of the Original Effective Date +that is not issued because such award is forfeited, terminates, expires or otherwise lapses without being exercised, or is settled in cash. +Shares to be issued may +be made available from authorized but unissued shares of Common Stock, shares held by us in our treasury or shares purchased by us on the open market or otherwise. During the term of the Amended Plan, we will at all times reserve and keep enough +shares available to satisfy the requirements of the Amended Plan. If any shares of Common Stock subject to an award are not issued or transferred to a participant and cease to be issuable or transferable to a participant because of the forfeiture, +termination, expiration or cancellation, in whole or in part, of such award or for any other reason, the shares not so issued or transferred, or the shares so reacquired by us, as the case may be, will no longer be charged against the maximum number +of shares reserved under the Amended Plan and may be used thereafter for additional awards. The following additional parameters also apply: +• +If an award may be settled in shares of Common Stock or cash, such shares will be deemed issued only when and to the extent +that settlement or payment is actually made in shares of Common Stock. To the extent an award is settled or paid in cash, and not shares of Common Stock, any shares previously reserved for issuance or transfer pursuant to such award will again be +deemed available for issuance or transfer under the Amended Plan, and the maximum number of shares of Common Stock that may be issued or transferred under the Amended Plan will be reduced only by the number of shares actually issued and transferred +to the Participant. +• +Notwithstanding the foregoing, (i) shares withheld or tendered to pay withholding taxes or the exercise price of an +award will not again be available for the grant of awards under the Amended Plan, and (ii) the full number of shares subject to a stock option or stock-settled stock appreciation right exercised will be counted against the shares authorized for +issuance under this Amended Plan, regardless of the number of shares actually issued upon the settlement of such stock option or stock appreciation right. +• +Any shares repurchased by us on the open market using the proceeds from the exercise of an award will not increase the +number of shares available for the future grant of awards. +Individual Limits +Subject to certain adjustments, the following limitations apply to individuals under the Amended Plan: +• +with respect to any participant who is an executive officer of the Company, a maximum of 500,000 shares may be granted in +any one year in the form of stock options or stock appreciation rights to such participant; +2022 +Proxy Statement | Matador Resources Company 39 +Table of Contents +PROPOSAL 2 +• +no participant may receive performance awards in any calendar year which have an aggregate value of more than $10,000,000, +and if such an award involves the issuance of Common Stock, the value will be based on the grant date fair market value of the Common Stock; and +• +with respect to any participant who is an outside director of the Company, the grant date fair market value of equity based +awards and any cash compensation granted in any calendar year (whether or not granted under the Amended Plan) will not exceed $600,000 in the aggregate, provided that in a calendar year in which an outside director first joins the Board or serves as +Chairman of the Board or Lead Director, the maximum dollar value of such individual’s cash and equity based compensation (based on grant date fair market value) in any calendar year may be up to $1,200,000 in the aggregate. +Administration +The Amended Plan will be +administered by the Board or a committee of the Board (the “Committee”) consisting of two or more members. At any time there is no Committee to administer the Amended Plan, any reference to the Committee is a reference to the Board. +Currently, the Independent Board serves as the Committee that will administer the Amended Plan. The Committee will determine the persons to whom awards are to be made, determine the type, size and terms of awards, interpret the Amended Plan, +establish and revise rules and regulations relating to the Amended Plan, establish performance goals for awards and certify the extent of their achievement, and make any other determinations that it believes necessary for the administration of the +Amended Plan. The Committee may delegate certain duties to one or more officers of the Company as provided in the Amended Plan. +Eligibility +Employees (including any employee who is also a director or an officer), contractors and non-employee directors of the Company or +its subsidiaries are eligible to participate in the Amended Plan. As of April 13, 2022, the Company had approximately 285 employees, eight non-employee directors and approximately 15 contractors who would +be eligible for awards under the Amended Plan. +Stock Options +The +Committee may grant either incentive stock options (“ISOs”) qualifying under Section 422 of the United States Internal Revenue Code of 1986, as amended (the “Code”), together with the published rulings, regulations and +interpretations duly promulgated thereunder, or nonqualified stock options, provided that only employees of the Company and its subsidiaries (excluding subsidiaries that are not corporations) are eligible to receive ISOs. Stock options may not be +granted with an option price less than 100% of the fair market value of a share of Common Stock on the date the stock option is granted. If an ISO is granted to an employee who owns or is deemed to own more than 10% of the combined voting power of +all classes of stock of the Company (or any parent or subsidiary), the option price will be at least 110% of the fair market value of a share of Common Stock on the date of grant. The Committee will determine the terms of each stock option at the +time of grant, including without limitation, the methods by or forms in which shares will be delivered to participants. The maximum term of each option, the times at which each option will be exercisable and provisions requiring forfeiture of +unexercised options at or following termination of employment or service generally are fixed by the Committee, except that the Committee may not grant stock options with a term exceeding 10 years. +Stock Appreciation Rights +The Committee is authorized to grant stock +appreciation rights (“SARs”) as a stand-alone award, or freestanding SARs, or in conjunction with stock options granted under the Amended Plan, or tandem SARs. SARs entitle a participant to receive an amount, in cash and/or Common Stock, +equal to the excess of the fair market value of a share of Common Stock on the date of exercise or conversion over the fair market value of a share of Common Stock on the date of grant. The grant price of a SAR cannot be less than 100% of the fair +market value of a share on the date of grant. The Committee will determine the terms of each SAR at the time of the grant, including, without limitation, the methods by or forms in which shares will be delivered to participants. The maximum term of +40 Matador Resources Company | 2022 Proxy Statement +Table of Contents +PROPOSAL 2 +each SAR, the times at which each SAR will be exercisable and provisions requiring forfeiture of unexercised SARs at or following termination of employment or service generally are fixed by the +Committee, except that no freestanding SAR may have a term exceeding 10 years and no tandem SAR may have a term exceeding the term of the option granted in conjunction with the tandem SAR. +Restricted Stock and Restricted Stock Units +The Committee is +authorized to grant restricted stock and restricted stock units. Restricted stock consists of shares of Common Stock that may not be sold, transferred, pledged, assigned, hypothecated, encumbered or otherwise disposed of, and that may be forfeited +in the event of certain terminations of employment or service, prior to the end of a restricted period as specified by the Committee. Restricted stock units are the right to receive shares of Common Stock (or an equivalent value of cash) at a future +date in accordance with the terms of such grant upon the attainment of certain conditions specified by the Committee, which include a substantial risk of forfeiture and restrictions on their sale or other transfer by the participant. The Committee +determines the eligible participants to whom, and the time or times at which, grants of restricted stock or restricted stock units will be made, the number of shares or units to be granted, the price to be paid, if any, the time or times within +which the shares covered by such grants will be subject to forfeiture, the time or times at which the restrictions will terminate and all other terms and conditions of the grants. Restrictions or conditions could include, but are not limited to, the +attainment of performance goals (as described below), continuous service with the Company, the passage of time or other restrictions or conditions. +Dividends +and Dividend Equivalent Rights +A participant who receives a grant of restricted stock will have all the rights of a shareholder of the Company; provided, +however that the participant will not have the right to receive dividends on any unvested restricted stock award unless and until the restriction lapses. Accrued dividends will be paid as soon as practicable following vesting of the underlying +restricted stock award. +The Committee is authorized to grant a dividend equivalent right to any participant either as a component of another award or as a separate +award, conferring on participants the right to receive credits based on the dividends that would have been paid on a specific number of shares of Common Stock specified in the award agreement if such shares were held by the participant. The terms +and conditions of the dividend equivalent right will be specified by the grant. If a dividend equivalent right is granted as a component of another award, the dividend equivalent right will provide that such dividend equivalent right may be settled +only upon settlement or payment of, or lapse of restrictions on, such other award, and that such dividend equivalent right will expire or be forfeited or annulled under the same conditions as such other award. Dividend equivalents credited to the +holder of a dividend equivalent right may be paid currently or may be deemed to be reinvested in additional shares. Any such reinvestment will be at the fair market value at the time thereof. A dividend equivalent right may be settled in cash, +shares or a combination thereof, in a single payment or in installments. +No dividends or dividend equivalent rights will be paid out or settled unless and until, +and then only to the extent that, the applicable underlying award vests. +Other Awards +The Committee may grant other forms of awards based upon, payable in or otherwise related to, in whole or in part, shares of Common Stock if the Committee determines +that such other form of award is consistent with the purpose and restrictions of the Amended Plan. The terms and conditions of such other form of award will be specified in the applicable grant agreement. Such other awards may be granted for no cash +consideration, for such minimum consideration as may be required by applicable law or for such other consideration as may be specified by the grant. +2022 +Proxy Statement | Matador Resources Company 41 +Table of Contents +PROPOSAL 2 +Performance Awards +The Committee may grant any of the award types as performance awards payable in cash, shares of Common Stock, a combination thereof or other consideration at the end of +a specified performance period. Payment will be contingent upon achieving pre-established performance goals (as discussed below) by the end of the performance period. The Committee will determine the length of +the performance period, the maximum payment value of an award and the minimum performance goals required before payment will be made. If the Committee determines in its sole discretion that the established performance measures or objectives are no +longer suitable because of a change in the Company’s business, operations, corporate structure or for other reasons that the Committee deems satisfactory, the Committee may modify the performance measures or objectives and/or the performance +period. +Performance Goals +Awards under the Amended Plan may be +made subject to the attainment of performance goals relating to one or more business criteria (“Performance Criteria”). Any Performance Criteria may be used to measure the performance of the Company as a whole or any business unit of the +Company and may be measured relative to a peer group or index. Any Performance Criteria may include or exclude: (i) extraordinary, unusual and/or non-recurring items of gain or loss; (ii) gains or +losses on the disposition of a business; (iii) changes in tax or accounting regulations or laws; (iv) the effect of a merger or acquisition, as identified in the Company’s quarterly and annual earnings releases; or (v) other +similar occurrences. +Vesting, Forfeiture, Assignment +The +Committee, in its sole discretion, will establish the vesting terms applicable to an award, including whether all or any portion will not be vested until a date, or dates, subsequent to its date of grant, or until the occurrence of one or more +specified events, provided that any such vesting terms may not be inconsistent with the terms of the Amended Plan. If the Committee imposes conditions upon vesting, then, except as otherwise provided below, subsequent to the date of grant the +Committee may, in its sole discretion, accelerate the date on which all or a portion of the award may be vested, provided that any such acceleration must comply with the terms of the Amended Plan. Awards granted under the Amended Plan to +participants other than outside directors must vest no earlier than one year after the date of grant, while awards granted to outside directors must vest no earlier than the earlier of one year after the date of grant or the next annual meeting of +shareholders (provided that such annual meetings are at least 50 weeks apart). Notwithstanding the foregoing, the Committee may, in its sole discretion, accelerate the vesting or waive any applicable restriction period awards granted under the +Amended Plan, provided that the shares of Common Stock subject to such awards will be Exempt Shares (as defined in the Amended Plan), unless such acceleration or waiver occurs by reason of the occurrence of a change in control or the +participant’s death, disability, or termination of employment or service on or following a change in control. The number of Exempt Shares is limited to 5% of the number of shares available for issuance under the Amended Plan. +The Committee may impose on any award, at the time of grant or thereafter, such additional terms and conditions as the Committee determines, including terms requiring +forfeiture of awards in the event of a participant’s termination of service. The Committee will specify the circumstances under which performance awards may be forfeited in the event of a termination of service by a participant prior to the end +of a performance period or settlement of awards. +Except for limited permitted transfers to certain family members or related entities for no consideration, awards +granted under the Amended Plan generally are not assignable or transferable except by will or by the laws of descent and distribution. ISOs granted under the Amended Plan are not transferable and are only exercisable during the lifetime of the +participant by the participant. +Adjustments upon Changes in Capitalization +In the event that any dividend or other distribution, recapitalization, stock split, reverse stock split, rights offering, reorganization, merger, consolidation, split-up, spin-off, split-off, combination, subdivision, repurchase or +42 Matador Resources Company | 2022 Proxy Statement +Table of Contents +PROPOSAL 2 +exchange of shares of Common Stock or other securities of the Company, issuance of warrants or other rights to purchase shares of Common Stock or other securities of the Company, or other similar +corporate transaction or event affects the fair value of an award, then the Committee will adjust any or all of the following so that the fair value of the award immediately after the transaction or event is equal to the fair value of the award +immediately prior to the transaction or event: (i) the number of shares and type of Common Stock (or the securities or property) which thereafter may be made the subject of awards, (ii) the number of shares and type of Common Stock (or +other securities or property) subject to outstanding awards, (iii) the option price of each outstanding award and (iv) the number of shares subject to or the exercise price of then outstanding SARs, to the end that the same proportion of +the Company’s issued and outstanding shares of Common Stock in each instance will remain subject to exercise (if applicable) at the same aggregate exercise price; provided however, that the number of shares of Common Stock (or other securities +or property) subject to any award will always be a whole number. Notwithstanding the foregoing, no adjustment will be made or authorized to the extent that such adjustment would cause the Amended Plan or any stock option to violate Section 422 +of the Code or Section 409A of the Code. All such adjustments must be made in accordance with the rules of any securities exchange, stock market or stock quotation system to which the Company is subject. +Treatment in Connection with a Merger or Consolidation +In the event +of a merger, consolidation or share exchange, where the Company is not the surviving corporation, unless the surviving corporation does not agree to do so, the outstanding awards under the Amended Plan will be substituted with awards representing +the right to shares of stock of other securities or that amount of cash, property or assets of the surviving corporation, in accordance with the terms of the outstanding award. +In the event of a merger, consolidation or share exchange, where the Company is not the surviving corporation and the surviving corporation does not agree to assume the +outstanding awards under the Amended Plan, all awards may be cancelled by the Company, in its sole discretion, as of the date of such transaction by either: +• +giving notice to each participant of its intention to cancel such participant’s award for which the issuance of shares +involved payment by the participant, and allowing the participant to purchase any or all shares underlying such award, including unvested awards (as determined by the Board), during the thirty day period preceding the cancellation of the award; or +• +in the case of awards that are either (i) settled only in shares of Common Stock or (ii) at the election of the +participant, settled in shares of Common Stock, paying the participant a reasonable estimate of the difference between the net amount per share payable in such transaction and the price per share of such award, multiplied by the number of shares +subject to the award. Reasonable adjustments and determinations will be made to account for the structure of the transaction. +Amendment or +Discontinuance of the 2019 Plan +The Board may, at any time and from time to time, without the consent of the participants, alter, amend, revise, suspend or +discontinue the Amended Plan in whole or in part; provided, however, that: (i) no amendment that requires shareholder approval in order for the Amended Plan and any awards under the Amended Plan to continue to comply with Sections 421 and 422 +of the Code (including any successors to such sections, or other applicable law) or any applicable requirements of any securities exchange or inter-dealer quotation system on which the Company’s stock is listed or traded, will be effective +unless such amendment is approved by the requisite vote of the Company’s shareholders entitled to vote on the amendment; and (ii) unless required by law, no action by the Board regarding amendment or discontinuance of the Amended Plan may +materially adversely affect any rights of any participants or obligations of the Company to any participants with respect to any outstanding award under the Amended Plan without the consent of the affected participant. +No Repricing of Stock Options or SARs +The Committee may not +“reprice” any stock option or SAR without shareholder approval. For purposes of the Amended Plan, “reprice” means any of the following or any other action that has the same effect: (i) amending a +2022 +Proxy Statement | Matador Resources Company 43 +Table of Contents +PROPOSAL 2 +stock option or SAR to reduce its exercise price or base price, (ii) canceling a stock option or SAR at a time when its exercise price or base price exceeds the fair market value of a common +share in exchange for cash or a stock option, SAR, award of restricted stock or other equity award or (iii) taking any other action that is treated as a repricing under generally accepted accounting principles, provided that nothing will +prevent the Committee from (x) making adjustments to awards upon changes in capitalization; (y) exchanging or cancelling awards upon a merger, consolidation or recapitalization or (z) substituting awards for awards granted by other +entities, to the extent permitted by the Amended Plan. +Clawback Policy +The Committee may recoup all or any portion of any shares or cash paid to a participant in connection with an award, to the extent provided for under the Company’s +clawback policy, if any, approved by the Board from time to time. +Federal Income Tax Consequences +The following is a brief summary of certain U.S. federal income +tax consequences relating to the transactions described under the Amended Plan as set forth below. This summary does not purport to address all aspects of federal income taxation and does not describe state, local or foreign tax consequences. This +discussion is based upon provisions of the Code and the Treasury regulations issued thereunder, and judicial and administrative interpretations under the Code and Treasury regulations, all as in effect as of the date hereof and all of which are +subject to change (possibly on a retroactive basis) or different interpretation. +Laws Affecting Deferred Compensation +Section 409A of the Code regulates all types of deferred compensation. If the requirements of Section 409A of the Code are not satisfied, deferred compensation +and earnings thereon will be subject to tax as it vests, plus an interest charge at the underpayment rate plus 1% and a 20% penalty tax. Certain awards under the Amended Plan may be subject to Section 409A of the Code. +Incentive Stock Options +A participant will not recognize income at +the time an ISO is granted. When a participant exercises an ISO, a participant also generally will not be required to recognize income (either as ordinary income or capital gain). However, to the extent that the fair market value (determined as of +the date of grant) of the shares with respect to which the participant’s ISOs are exercisable for the first time during any year exceeds $100,000, the ISOs for the shares over $100,000 will be treated as nonqualified stock options, and not +ISOs, for federal tax purposes, and the participant will recognize income as if the ISOs were nonqualified stock options. In addition to the foregoing, if the fair market value of the shares received upon exercise of an ISO exceeds the exercise +price, then the excess may be deemed a tax preference adjustment for purposes of the federal alternative minimum tax calculation. The federal alternative minimum tax may produce significant tax repercussions depending upon the participant’s +particular tax status. +The tax treatment of any shares acquired by exercise of an ISO will depend upon whether the participant disposes of his or her shares prior +to two years after the date the ISO was granted or one year after the shares were transferred to the participant (referred to as the “Holding Period”). If a participant disposes of shares acquired by exercise of an ISO after the expiration +of the Holding Period, any amount received in excess of the participant’s tax basis for such shares will be treated as short-term or long-term capital gain, depending upon how long the participant has held the shares. If the amount received is +less than the participant’s tax basis for such shares, the loss will be treated as short-term or long-term capital loss, depending upon how long the participant has held the shares. +If the participant disposes of shares acquired by exercise of an ISO prior to the expiration of the Holding Period, the disposition will be considered a +“disqualifying disposition.” If the amount received for the shares is greater +44 Matador Resources Company | 2022 Proxy Statement +Table of Contents +PROPOSAL 2 +than the fair market value of the shares on the exercise date, then the difference between the ISO’s exercise price and the fair market value of the shares at the time of exercise will be +treated as ordinary income for the tax year in which the “disqualifying disposition” occurs. The participant’s basis in the shares will be increased by an amount equal to the amount treated as ordinary income due to such +“disqualifying disposition.” In addition, the amount received in such “disqualifying disposition” over the participant’s increased basis in the shares will be treated as capital gain. However, if the price received for +shares acquired by exercise of an ISO is less than the fair market value of the shares on the exercise date and the disposition is a transaction in which the participant sustains a loss that otherwise would be recognizable under the Code, then the +amount of ordinary income that the participant will recognize is the excess, if any, of the amount realized on the “disqualifying disposition” over the basis of the shares. +Nonqualified Stock Options +A participant generally will not recognize +income at the time a nonqualified stock option is granted. When a participant exercises a nonqualified stock option, the difference between the option price and any higher market value of the shares of Common Stock on the date of exercise will be +treated as compensation taxable as ordinary income to the participant. The participant’s tax basis for the shares acquired under a nonqualified stock option will be equal to the option price paid for such shares, plus any amounts included in +the participant’s income as compensation. When a participant disposes of shares acquired by exercise of a nonqualified stock option, any amount received in excess of the participant’s tax basis for such shares will be treated as short-term +or long-term capital gain, depending upon how long the participant has held the shares. If the amount received is less than the participant’s tax basis for such shares, the loss will be treated as short-term or long-term capital loss, depending +upon how long the participant has held the shares. +Restricted Stock +A participant who receives restricted stock generally will recognize as ordinary income the excess, if any, of the fair market value of the shares granted as restricted +stock at such time as the shares are no longer subject to forfeiture or restrictions, over the amount paid, if any, by the participant for such shares. However, a participant who receives restricted stock may make an election under +Section 83(b) of the Code within 30 days of the date of transfer of the shares to recognize ordinary income on the date of transfer of the shares equal to the excess of the fair market value of such shares (determined without regard to the +restrictions on such shares) over the purchase price, if any, of such shares. If a participant does not make an election under Section 83(b) of the Code, then the participant will recognize as ordinary income any dividends received with respect +to such shares. At the time of sale of such shares, any gain or loss realized by the participant will be treated as either short-term or long-term capital gain (or loss) depending on the holding period. For purposes of determining any gain or loss +realized, the participant’s tax basis will be the amount previously taxable as ordinary income, plus the purchase price paid by the participant, if any, for such shares. +Stock Appreciation Rights +Generally, a participant who receives a +stand-alone SAR will not recognize taxable income at the time the stand-alone SAR is granted, provided that the SAR is exempt from or complies with Section 409A of the Code. If a participant receives the appreciation inherent in the SARs in +cash, the cash will be taxed as ordinary income to the recipient at the time it is received. If a participant receives the appreciation inherent in the SARs in stock, the spread between the then current market value and the grant price, if any, will +be taxed as ordinary income to the employee at the time it is received. In general, there will be no federal income tax deduction allowed to the Company upon the grant or termination of SARs. However, upon the exercise of a SAR, the Company will be +entitled to a deduction equal to the amount of ordinary income the recipient is required to recognize as a result of the exercise. +Other Awards +In the case of an award of restricted stock units, performance awards, dividend equivalent rights or other stock or cash awards, the recipient will generally recognize +ordinary income in an amount equal to any cash received and +2022 +Proxy Statement | Matador Resources Company 45 +Table of Contents +PROPOSAL 2 +the fair market value of any shares received on the date of payment or delivery, provided that the award is exempt from or complies with Section 409A of the Code. In that taxable year, the +Company will receive a federal income tax deduction in an amount equal to the ordinary income that the participant has recognized. +Tax Consequences to the +Company +To the extent that a participant recognizes ordinary income in the circumstances described above, the Company will be entitled to a corresponding +deduction provided that, among other things, the income meets the test of reasonableness, is an ordinary and necessary business expense, is not an “excess parachute payment” within the meaning of Section 280G of the Code and is not +disallowed by the $1,000,000 limitation on certain compensation paid to certain covered employees in any year under Section 162(m) of the Code. +New Plan Benefits +The Company cannot currently determine the benefits or number of shares subject to awards that may be granted in the future to eligible participants under the Amended +Plan because the grant of awards and terms of such awards are to be determined in the sole discretion of the Committee. Information about awards granted in 2021 under the 2019 Plan to the Named Executive Officers can be found in the table under the +heading “Grants of Plan-Based Awards Table” on page 76. +Awards Granted Under the Plan +No awards made under the 2019 Plan prior to the date of the +Annual Meeting will be granted subject to shareholder approval of the Amendment. The following table sets forth information with respect to stock options, RSUs and PSUs (assuming achievement of target performance) that have been granted to the Named +Executive Officers and the specified groups set forth below under the 2019 Plan as of April 13, 2022 (excluding any cash-settled phantom units or other awards). No associates of any director, executive officer or director nominee has received +any stock options, RSUs or PSUs under the 2019 Plan, and no person, other than the individuals set forth below, has received 5% of the stock options, RSUs and PSUs granted under the 2019 Plan. +Name and Position* +Stock +Options +RSUs +PSUs +Joseph Wm. Foran +Chairman of the Board and Chief Executive Officer +— +— +255,807 +Matthew V. Hairford +President +— +— +113,612 +David E. Lancaster +Executive Vice President and Chief Financial Officer +— +— +105,649 +Craig N. Adams +Executive Vice President and Chief Operating Officer – Land, Legal & Administration +— +— +112,221 +Billy E. Goodwin +Executive Vice President and Chief Operating Officer – Drilling, Completions & Production +— +— +112,221 +All current executive officers as a group (7 +persons) +40,000 +— +712,784 +R. Gaines Baty +— +20,700 +— +James M. Howard +— +8,174 +— +All current directors who are not executive +officers as a group (8 persons) +— +153,074 +— +All employees, including current officers who +are not executive officers, as a group (approximately 280 persons) +420,750 +— +261,120 +* +Position as of December 31, 2021. +46 Matador Resources Company | 2022 Proxy Statement +Table of Contents +PROPOSAL 2 +Vote Required +The affirmative vote of the holders of a majority of the shares present in person or represented by proxy and entitled to vote at the Annual Meeting is required to +approve the Amendment. If you hold your shares through a broker and you do not instruct the broker how to vote, your broker will not have the authority to vote your shares. Abstentions will have the same effect as a vote cast against the proposal. +Broker non-votes will be counted as present for purposes of determining the presence of a quorum but will have no effect upon the outcome of the vote. +The Board of Directors recommends that you vote FOR approval of the First Amendment to the Matador Resources Company 2019 +Long-Term Incentive Plan. +2022 +Proxy Statement | Matador Resources Company 47 +Table of Contents +PROPOSAL 3 +PROPOSAL +3 | APPROVAL OF THE MATADOR RESOURCES COMPANY 2022 EMPLOYEE STOCK PURCHASE PLAN +On April 21, 2022, the Board adopted, subject to shareholder approval, the Matador Resources Company 2022 Employee Stock Purchase Plan (the “ESPP”). The +purpose of the ESPP is to encourage and enable our eligible employees to acquire a proprietary interest in us through the ownership of Common Stock. A maximum of 4,000,000 shares of Common Stock may be purchased under the ESPP. The ESPP, and the +rights of participants to make purchases thereunder, is intended to qualify under the provisions of Sections 421 and 423 of the Code. +Description of the ESPP +The following is a brief +description of the ESPP. A copy of the ESPP is attached as Annex B to this Proxy Statement, and the following description is qualified in its entirety by reference to the ESPP. +Administration +The ESPP is administered by the Compensation Committee +or another committee designated by our Board to administer the ESPP, and currently, the Board has designated the Independent Board as such committee (as applicable, the “ESPP Administrator”). All questions of interpretation of the ESPP are +determined by the ESPP Administrator, whose decisions are final and binding upon all participants. The ESPP Administrator may delegate its responsibilities under the ESPP to one or more other persons. +Eligibility; Participation; Withdrawal +Each employee is eligible to +participate in the ESPP. The first offering period will run for four months, with subsequent offering periods lasting for six months, unless otherwise determined by the ESPP Administrator. Each offering period will contain successive six-month purchase periods. +An eligible employee may begin participating in the ESPP effective at the beginning of an offering +period or any purchase periods within an offering period. Once enrolled in the ESPP, a participant is able to purchase Common Stock with payroll deductions at the end of the applicable offering period. Once an offering period is over, a participant +is automatically enrolled in the next offering period unless the participant chooses to withdraw from the ESPP. +A participant may withdraw all, but not less than +all, the contributions credited to his or her account at any time, including during an offering period. Upon withdrawal, all contributions are returned to the participant and the participant’s option to purchase shares under the ESPP will be +automatically terminated. In addition, if a participant ceases to be an eligible employee for any reason, the participant will be deemed to have elected to withdraw from the ESPP. +Purchase Price +The price per share at which shares are purchased +under the ESPP is determined by the ESPP Administrator, but in no event will be less than 85% of the fair market value of the Common Stock on the first or the last day of the offering period, whichever is lower. A participant may designate payroll +deductions to be used to purchase shares equal to at least $200 and a maximum of the percentage of the participant’s compensation set by the ESPP Administrator (which rate may be changed from time to time, but in no event shall be greater than +30%). A participant may only change the percentage of compensation that is deducted to purchase shares under the ESPP (other than to withdraw entirely from the ESPP) effective at the beginning of an offering period. At the end of each offering +period, unless the participant has withdrawn from the ESPP, payroll deductions are applied automatically to purchase Common Stock at the price described above. The number of shares purchased is determined by dividing the payroll deductions by the +applicable purchase price. +48 Matador Resources Company | 2022 Proxy Statement +Table of Contents +PROPOSAL 3 +Adjustments +In the event of any reorganizations, recapitalizations, +stock splits, reverse stock splits, stock dividends, extraordinary dividends or distributions or similar events, the ESPP Administrator will appropriately adjust the number and class of shares available under the ESPP and the applicable purchase +price of such shares. +Limitations on Participation +A participant +is not permitted to purchase shares under the ESPP if the participant would own Common Stock possessing 5% or more of the total combined voting power or value of the Company’s equity interests. A participant is also not permitted to purchase +Common Stock with a fair market value in excess of $25,000 in any one calendar year (or more than 2,500 shares in any purchase period). A participant does not have the rights of a shareholder until the shares are actually issued to the participant. +Transferability +Rights to purchase Common Stock under the ESPP +may not be transferred by a participant and may be exercised during a participant’s lifetime only by the participant. +Amendment and Termination +The ESPP was adopted by the Board, subject to shareholder approval, on April 21, 2022 and will become effective on the date of shareholder approval of +the ESPP. The Board may amend, alter or discontinue the ESPP in any respect at any time; however, shareholder approval is required for any amendment that would increase the number of shares reserved under the ESPP other than pursuant to an +adjustment as provided in the ESPP or materially change the eligibility requirements to participate in the ESPP. +Federal Income Tax Consequences +The following is a brief summary of certain U.S. federal income +tax consequences relating to the transactions described under the ESPP as set forth below. This summary does not purport to address all aspects of federal income taxation and does not describe state, local or foreign tax consequences. This +discussion is based upon provisions of the Code and the Treasury regulations issued thereunder, and judicial and administrative interpretations under the Code and Treasury regulations, all as in effect as of the date hereof and all of which are +subject to change (possibly on a retroactive basis) or different interpretation. +The ESPP is intended to qualify as an “employee stock purchase plan” +under Section 423 of the Code. Participant contributions to the ESPP through payroll deductions are made on an after-tax basis. That is, a participant’s payroll deductions that are contributed to the +ESPP are deducted from compensation that is taxable to the participant and for which the Company is generally entitled to a tax deduction. +Generally, no taxable +income is recognized by a participant with respect to either the grant or exercise of his or her ESPP option. The Company will have no tax deduction with respect to either of those events. A participant will generally recognize income (or loss) only +upon a sale or disposition of any shares that the participant acquires under the ESPP. The particular tax consequences of a sale or disposition of shares acquired under the ESPP depend on whether the participant has held the shares before selling or +disposing of the shares through the later of (i) two years after the first day of the offering period in which the participant acquired the shares, or (ii) one year after the purchase date on which the participant acquired the shares. +If the participant holds the shares for the period described above and then sells the shares at a price in excess of the purchase price paid for the shares, the gain on +the sale of the shares will be taxed as ordinary income to the participant to the extent of the lesser of (i) the amount by which the fair market value of the shares on the first day of the offering period in which the participant acquired the +shares exceeded the purchase price of the shares (calculated as though the shares had been purchased on the first day of the offering period), or (ii) the gain on the sale of the shares. Any portion of the participant’s gain on the sale of +the shares not taxed as ordinary income will +2022 +Proxy Statement | Matador Resources Company 49 +Table of Contents +PROPOSAL 3 +be taxed as long-term capital gain. If the participant holds the shares for the period described above and then sells the shares at a price less than the purchase price paid for the shares, the +loss on the sale will be treated as a long-term capital loss to the participant. The Company will not be entitled to a tax deduction with respect to any shares held by the participant for the period described above, regardless of whether the shares +are eventually sold at a gain or a loss. +The participant has a “disqualifying disposition” for tax purposes if the participant disposes of the shares +before the later of (i) two years after the first day of the offering period in which the participant acquired the shares, or (ii) one year after the purchase date on which the participant acquired the shares. If the participant sells the +shares in a disqualifying disposition, regardless of whether the shares are sold at a gain or a loss, the participant will realize ordinary income in an amount equal to the difference between the purchase price paid for the shares and the fair +market value of the shares on the purchase date on which the participant acquired the shares, and the Company generally will be entitled to a corresponding tax deduction. In addition, if the participant makes a disqualifying disposition of the +shares at a price in excess of the fair market value of the shares on the purchase date, the participant will realize capital gain in an amount equal to the difference between the selling price of the shares and the fair market value of the shares +on the purchase date. Alternatively, if the participant makes a disqualifying disposition of the shares at a price less than the fair market value of the shares on the purchase date, the participant will realize a capital loss in an amount equal to +the difference between the fair market value of the shares on the purchase date and the selling price of the shares. The Company will not be entitled to a tax deduction with respect to any capital gain realized by a participant. +New Plan Benefits +The benefits that will be received by or allocated to eligible +employees under the ESPP cannot be determined at this time because the amount of payroll deductions contributed to purchase shares of Common Stock under the ESPP (subject to the limitations discussed above) is entirely within the discretion of each +participant. +The closing sale price of our Common Stock as reported on the NYSE on April 13, 2022 was $57.19 per share. +Vote Required +The affirmative vote of the holders of a majority of the shares +present in person or represented by proxy and entitled to vote at the Annual Meeting is required to approve the ESPP. If you hold your shares through a broker and you do not instruct the broker how to vote, your broker will not have the authority to +vote your shares. Abstentions will have the same effect as a vote cast against the proposal. Broker non-votes will be counted as present for purposes of determining the presence of a quorum but will have no +effect upon the outcome of the vote. +The Board of Directors recommends that you vote FOR approval of the Matador +Resources Company 2022 Employee Stock Purchase Plan. +50 Matador Resources Company | 2022 Proxy Statement +Table of Contents +PROPOSAL 4 +PROPOSAL 4 | ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION +In accordance with the requirements of Section 14A of the Exchange Act, the Company seeks a non-binding +advisory vote from its shareholders to approve the compensation of its Named Executive Officers (as defined below) as described in this Proxy Statement. +As +discussed under the “Executive Compensation—Compensation Discussion and Analysis” section of this Proxy Statement (“CD&A”), we made significant changes to our executive compensation program in 2020 in response to the COVID-19 pandemic and the sudden decline in oil prices. As commodity prices improved in 2021, we shifted our executive compensation program to more closely resemble our 2019 executive compensation program prior to +the decline in oil prices in 2020 and the COVID-19 pandemic. As such, our executive officers received increases in their base salary, increases in the grant date fair values for long-term equity awards and +annual cash bonuses for 2021. These changes to our compensation program in 2021 corresponded to our performance as the Company’s stock price hit a low of $1.11 in March 2020 and closed at $36.92 on December 31, 2021. +We believe the Company’s future success and the ability to create long-term value for our shareholders depends on our ability to attract, retain and motivate +highly qualified individuals in the oil and natural gas industry. Additionally, we believe that our success also depends on the continued contributions of our Named Executive Officers. The Company’s compensation system plays a significant role +in its ability to attract, motivate and retain a high-quality workforce. As described in the CD&A, the Company’s compensation program for Named Executive Officers is designed to reward, in both the short term and the long term, performance +that contributes to the implementation of our business strategies, maintenance of our culture and values and achievement of our objectives. +This proposal provides +shareholders the opportunity to endorse or not endorse the Company’s executive compensation program through approval of the following resolution: +“Resolved, that the compensation paid to the Company’s Named Executive Officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby approved.” +The above-referenced CD&A and accompanying disclosures appear on pages 56 to 82 of this Proxy Statement. +Because this is an advisory vote, it will not be binding upon the Board. However, the Strategic Planning and Compensation Committee and the Independent Board will take +into account the outcome of the vote when considering future executive compensation arrangements. +Vote Required +The affirmative vote of the holders of a majority of +the shares present in person or represented by proxy and entitled to vote at the Annual Meeting is required to approve this resolution on a non-binding basis. If you hold your shares through a broker and you +do not instruct the broker how to vote, your broker will not have the authority to vote your shares. Abstentions will have the effect as a vote cast against the proposal. Broker non-votes will be counted as +present for purposes of determining the presence of a quorum but will have no effect upon the outcome of the vote. +During our 2018 Annual Meeting, our shareholders +approved a non-binding, advisory proposal to hold advisory votes to approve our executive compensation every year. In consideration of the results of this advisory vote, the Board has maintained its policy of +providing for annual advisory votes to approve executive compensation. Unless the Board modifies this policy, the next advisory vote to approve executive compensation following this vote will be held at our 2023 Annual Meeting. +The Board of Directors recommends that you vote FOR approval of this resolution. +2022 +Proxy Statement | Matador Resources Company 51 +Table of Contents +PROPOSAL 5 +PROPOSAL +5 | RATIFICATION OF THE APPOINTMENT OF KPMG LLP +The Audit Committee has appointed KPMG LLP (“KPMG”) as the independent registered public accounting firm of the Company for the year ending December 31, +2022, and the Board has directed that such appointment be submitted to our shareholders for ratification at the Annual Meeting. +The Company has been advised by +KPMG that the firm has no relationship with the Company or its subsidiaries other than that arising from the firm’s engagement as auditors. +If the +shareholders do not ratify the appointment of KPMG, the Audit Committee will consider whether to engage a different independent registered public accounting firm but will not be obligated to do so. +The Company has been advised that representatives of KPMG will be present at the Annual Meeting and will be available to respond to appropriate questions and make a +statement if they desire to do so. +Fees of Independent Registered Public Accounting Firm for Fiscal Years 2021 and +2020 +The following table presents fees for +professional audit services rendered by KPMG for the audit of the Company’s annual financial statements for the years ended December 31, 2021 and 2020, and fees for other services rendered by KPMG during those periods: +2021 +2020 +Audit fees +$ +1,487,000 +$ +1,263,100 +Audit-related fees +— +— +Tax fees +— +— +All other fees +— +— +Total +$ +1,487,000 +$ +1,263,100 +Services rendered by KPMG in connection with the fees presented above were as follows: +Audit Fees +For fiscal year 2021, audit fees consisted of fees +associated with the audit of the Company’s consolidated financial statements, including the audit of the effectiveness of the Company’s internal control over financial reporting, required reviews of our quarterly condensed consolidated +financial statements and consultation on significant accounting matters. Audit fees also included fees paid to KPMG by San Mateo for the audit of its 2021 financial statements. +For fiscal year 2020, audit fees consisted of fees associated with the audit of the Company’s consolidated financial statements, including the audit of the +effectiveness of the Company’s internal control over financial reporting, required reviews of our quarterly condensed consolidated financial statements and consultation on significant accounting matters. Audit fees also included fees paid to +KPMG by San Mateo for the audit of its 2020 financial statements. +Audit-Related Fees +We did not incur any audit-related fees in 2021 or 2020. +Tax Fees +We did not incur any fees for tax advice, planning and other services in 2021 or 2020. +52 Matador Resources Company | 2022 Proxy Statement +Table of Contents +PROPOSAL 5 +All +Other Fees +We did not incur any other fees in 2021 or 2020. +The Audit +Committee pre-approves all audit and permissible non-audit services provided by KPMG. These services may include audit services, audit-related services, tax services and +other services. The Audit Committee has authorized the chair of the Audit Committee to pre-approve audit and permissible non-audit services provided by KPMG up to +$750,000. Pursuant to this delegation, the decisions of the chair must be presented to the Audit Committee at its next meeting. +Report of the Audit Committee +We are a standing +committee comprised of independent directors as currently defined by SEC regulations and the applicable listing standards of the NYSE. The Board has determined that at least one of the members of the Audit Committee is an “audit committee +financial expert” as defined by applicable SEC rules and regulations. We operate under a written charter adopted by the Board. A copy of the charter is available free of charge on the Company’s website at www.matadorresources.com +under “Investor Relations—Corporate Governance.” +We annually select the Company’s independent registered public accounting firm. If the +shareholders do not ratify the appointment of KPMG LLP at the Annual Meeting, the Audit Committee will consider whether to engage a different independent registered public accounting firm but will not be obligated to do so. +Management is responsible for the Company’s internal controls and the financial reporting process. The independent registered public accounting firm is responsible +for performing an independent audit of the Company’s consolidated financial statements in accordance with the standards of the United States Public Company Accounting Oversight Board (the “PCAOB”) and issuing a report thereon. As +provided in our charter, our responsibilities include the monitoring and oversight of these processes. +Consistent with our charter responsibilities, we have met +and held discussions with management and the independent registered public accounting firm. In this context, management and the independent registered public accounting firm represented to us that the Company’s consolidated financial statements +for the fiscal year ended December 31, 2021 were prepared in accordance with U.S. generally accepted accounting principles. We reviewed and discussed the consolidated financial statements with management and the independent registered public +accounting firm and discussed with the independent registered public accounting firm matters required to be discussed by the applicable requirements of the PCAOB and the SEC. +The Company’s independent registered public accounting firm has also provided to us the written disclosures and the letter required by applicable requirements of +the PCAOB regarding the independent registered public accounting firm’s communications with the Audit Committee, and we discussed with the independent registered public accounting firm that firm’s independence. +Based upon our reviews and discussions with management and the independent registered public accounting firm and our review of the representation of management and the +report of the independent registered public accounting firm to the Audit Committee, we recommended that the Board include the audited consolidated financial statements in the Company’s Annual Report on Form +10-K for the year ended December 31, 2021 filed with the SEC. +Audit Committee, +William M. Byerley, Chair +Reynald A. Baribault +James M. Howard +Timothy E. Parker +Julia P. Forrester Rogers +2022 +Proxy Statement | Matador Resources Company 53 +Table of Contents +PROPOSAL 5 +Vote Required +The affirmative vote of the holders of a majority of +the shares present in person or represented by proxy and entitled to vote at the Annual Meeting is required for the ratification of the appointment of KPMG as the Company’s independent registered public accounting firm for the year ending +December 31, 2022. If the shareholders do not ratify the appointment of KPMG, the Audit Committee will consider whether to engage a different independent registered public accounting firm but will not be obligated to do so. Abstentions will +have the effect as a vote cast against the proposal. +The Board of Directors recommends that you vote FOR the +ratification of the appointment +of KPMG as the Company’s independent registered public accounting +firm for the +year ending December 31, 2022. +54 Matador Resources Company | 2022 Proxy Statement +Table of Contents +LETTER TO SHAREHOLDERS +Dear Fellow Shareholders, +On behalf of the Board and the Strategic Planning and Compensation Committee (the “Compensation Committee”) of the Board, thank you for your continued support +for Matador and entrusting us with your hard-earned capital. We are grateful for the opportunities that we have had to visit with many of you, and we look forward to getting to know more of our shareholders in the future. +While there were many challenges in 2020, it provided us an opportunity to position ourselves to return value to shareholders while continuing to provide profitable +growth at a measured pace in 2021. With improving commodity prices in 2021, we were ready with great people, great rock and the financial strength that allowed Matador and San Mateo to have record years, including record net income and record +Adjusted EBITDA, among other milestones. +The Board, management and the staff were also committed to further return value to shareholders in 2021. Both Matador +and San Mateo generated free cash flow in all four quarters. We were pleased to pay our first quarterly dividend in the first quarter of 2021 and double the quarterly dividend in the fourth quarter of 2021. We also aggressively paid down +debt and ended 2021 with a leverage ratio of 1.1x, the lowest we have achieved since mid-2014. +In +addition to achieving record results and returning value to shareholders, we also made significant progress in ESG-related initiatives, disclosures and shareholder engagement in 2021. Among other items, we +were pleased to issue our inaugural Sustainability Report that highlighted Matador’s continued progress and improvements in its operating practices, including disclosure of quantitative metrics aligned with SASB. Members of the Board and our +management team also met or reached out to shareholders representing an estimated 60% of our outstanding shares (excluding stock held by our officers and directors) with regards to ESG-related matters in 2021. +In connection with the tremendous year that Matador had in 2021, the Compensation Committee and Independent Board reinstated many of the compensation components +that were eliminated or reduced during 2020. Our executive officers received increases in their base salary, increases in the grant date fair values for long-term equity awards and annual cash bonuses for 2021. Our Board has a “pay for +performance” philosophy and recognizes the leadership of our executive officers in contributing to the Company’s achievements. The achievements outlined above resulted in an approximate 32-fold +increase in Matador’s stock price from a low of $1.11 in March 2020 to a closing price of $36.92 on December 31, 2021. As a Board, and as shareholders ourselves, we are grateful for the outstanding execution by Matador’s management +and staff that led to such a remarkable increase in the Company’s stock price. +We look forward to ongoing dialogue with our shareholders and to demonstrating +responsiveness to your feedback, including by continuing to improve our executive compensation program. We are honored to serve on your behalf and hope you will join us at the 2022 Annual Meeting of Shareholders. +Sincerely, +Timothy E. Parker +R. Gaines Baty +Lead Independent Director +Chair, Strategic Planning and Compensation Committee +2022 +Proxy Statement | Matador Resources Company 55 +Table of Contents +EXECUTIVE COMPENSATION +EXECUTIVE +COMPENSATION +Compensation Discussion and Analysis +This Compensation Discussion and Analysis, or CD&A, provides +a general description of our compensation program and specific information about its various components for the following “Named Executive Officers” for 2021: +• +Joseph Wm. Foran, Chairman of the Board and Chief Executive Officer; +• +Matthew V. Hairford, Former President; +• +David E. Lancaster, Former Executive Vice President and Chief Financial Officer; +• +Craig N. Adams, Executive Vice President and Chief Operating Officer—Land, Legal & Administration; and +• +Billy E. Goodwin, Executive Vice President and Chief Operating Officer—Drilling, Completions & Production. +Messrs. Hairford and Lancaster retired effective March 31, 2022, and each transitioned to the role of Special Advisor to the Board and +Executive Committee. In addition, Mr. Adams was promoted to Executive Vice President, Co-Chief Operating Officer, Chief of Staff and Corporate Secretary, and Mr. Goodwin was promoted to President +– Operations, each effective as of March 31, 2022. +2021 Highlights +We achieved all of our primary goals for 2021—to reduce debt, to increase shareholder returns, to reduce drilling and completion costs per lateral foot, to increase +capital efficiency and to achieve record operational results for both Matador and San Mateo. +Record Operational and Financial Results +The year ended December 31, 2021 was marked by record operational and financial results across the Company, including record total oil and natural gas production, +record oil and natural gas revenues, record net income, record earnings per diluted common share and record Adjusted EBITDA, among other milestones. San Mateo also had a record year in 2021, including all-time +high throughput volumes for natural gas gathering and processing, oil gathering and transportation and water handling, as well as record net income and record Adjusted EBITDA. The charts below show the five-year growth experienced by both our +exploration and production business and our midstream business. As shown below, our third-party midstream services revenues have experienced significant growth since the formation of San Mateo in 2017. +56 Matador Resources Company | 2022 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +For the +year ended December 31, 2021, we achieved record oil, natural gas and average daily oil equivalent production. In 2021, we produced 17.8 million Bbl of oil, an increase of 12%, as compared to 15.9 million Bbl of oil produced in 2020. +We also produced 81.7 Bcf of natural gas, an increase of 18% from 69.5 Bcf of natural gas produced in 2020. Our average daily oil equivalent production for the year ended December 31, 2021 was 86,176 BOE per day, including 48,876 Bbl of oil per +day and 223.8 MMcf of natural gas per day, an increase of 15%, as compared to 75,175 BOE per day, including 43,526 Bbl of oil per day and 189.9 MMcf of natural gas per day, for the year ended December 31, 2020. The increase in oil and natural +gas production was primarily attributable to our ongoing delineation and development drilling activities in the Delaware Basin throughout 2021, which offset declining production in the Eagle Ford and Haynesville shales. +Furthermore, in 2021 we realized the transition to drilling longer laterals, whereby 98% of the operated horizontal wells we turned to sales in 2021 had lateral lengths +of two miles or greater, as compared to 74% in 2020, 8% in 2019 and only one two-mile lateral in 2018. Drilling and completion costs for our operated horizontal wells turned to sales averaged $670 per +completed lateral foot for 2021, a decrease of approximately 21% from an average of $850 per completed lateral foot for 2020 and a decrease of approximately 42% from an average of $1,165 per completed lateral foot for 2019. We also achieved record-low unit operating costs for LOE of $3.46 per BOE for the year ended December 31, 2021. +(1) +Cost per completed lateral foot metric shown represents the drilling and completion portion of operated horizontal well +costs only. Excludes costs to equip wells, midstream capital expenditures, capitalized general and administrative or interest expenses and certain other capital expenditures. +Capital Resources and Financing Highlights +In addition to record financial +results, we returned value to shareholders through the generation of free cash flow, repayment of debt and initiating, then doubling, a quarterly dividend. We also concluded several important financing transactions that preserved the strength of our +balance sheet and improved our liquidity position. Highlights of these value-generating items include: +• +The generation of free cash flow in all four quarters of 2021 by both Matador and San Mateo. +• +The net repayment of $340 million in borrowings under our revolving credit facility, resulting in outstanding +borrowings of $100 million and a leverage ratio of 1.1x at December 31, 2021. +• +The adoption of a dividend policy in the first quarter of 2021 pursuant to which we initiated a quarterly cash dividend of +$0.025 per share of common stock and the subsequent amendment of that dividend policy in the fourth quarter of 2021, pursuant to which we doubled the quarterly cash dividend to $0.05 per share of common stock. +• +The receipt of $48.6 million in performance incentives directly from Five Point in 2021. +2022 +Proxy Statement | Matador Resources Company 57 +Table of Contents +EXECUTIVE COMPENSATION +• +The closing of our fourth amended and restated credit agreement in November 2021 to (i) extend the maturity date by +three years to October 31, 2026 from October 31, 2023 previously, (ii) increase the borrowing base by 50% to $1.35 billion, as compared to $900.0 million previously, (iii) reaffirm the elected borrowing commitment at +$700.0 million, (iv) reaffirm the maximum facility amount at $1.5 billion and (v) add three new banks to our lending group. +• +The amendment of the San Mateo Credit Facility in June 2021 to increase the lender commitments under the revolving credit +facility to $450.0 million from $375.0 million and an increase in the accordion feature that provides for potential increases in lender commitments to up to $700.0 million. +ESG Highlights +During 2021, we also made progress in enhancing our ESG +disclosures and in our ESG-related engagement with shareholders. Among other items, we completed the following: +• +The hiring of an experienced individual to conduct a review of industry ESG reporting practices and to serve as a dedicated +single focal point for our various ESG efforts. +• +Publishing sustainability metrics aligned with SASB in May 2021 and supplementing such metrics in July 2021. +• +The publishing of our inaugural Sustainability Report in December 2021, which should provide Matador’s stakeholders +and interested parties with a standardized platform for evaluating the Company’s recent performance and future progress. +• +Communications by members of the Board and our management team to shareholders representing an estimated 60% of our +outstanding shares (excluding stock held by our officers and directors) with regards to ESG-related matters. +Compensation Program Objectives +Our Board has a “pay for +performance” philosophy and recognizes the leadership of our executive officers in contributing to the Company’s achievements. Our future success and the ability to create long-term value for our shareholders depend on our ability to +attract, retain and motivate highly qualified individuals in the oil and natural gas industry. In furtherance of these goals, our executive compensation program is designed to meet the following key objectives: +• +to be fair to both the executive and the Company and be competitive with comparable positions at companies in +our peer group; +• +to attract and retain talented and experienced executives in light of the intense competition for talent in our +industry and areas of operation, including from peers and larger industry competitors; +• +to align the interests of our executives with the interests of our shareholders and with the performance of +our Company for long-term value creation; +• +to provide financial incentives to our executives to achieve our key corporate and individual objectives with an +appropriate mix of fixed and variable pay ; +• +to foster a shared commitment among executives by coordinating their corporate and individual goals; and +• +to provide compensation that takes into consideration the education, professional experience, knowledge, commitment and +dedication that is specific to each job and the unique qualities the executive possesses. +2021 Say-on-Pay Results +At our 2021 Annual Meeting, support for our executive compensation program remained strong at +over 97%, suggesting that our shareholders remain supportive of the changes we implemented to our executive compensation program during 2020. The Compensation Committee took this support into account as one of many factors it considered in +connection with the discharge of its responsibilities in exercising its judgment in establishing and overseeing our executive compensation arrangements throughout the year. +58 Matador Resources Company | 2022 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +Impact of COVID-19 and Related Items on Our Compensation Programs for 2020 and 2021 +2020 +The year 2020 was a challenging year. During the first quarter and +through April 2020, the oil and natural gas industry witnessed an abrupt and significant decline in oil prices from $63 per Bbl in early January to as low as ($38) per Bbl in late April. This sudden decline in oil prices was attributable to two +primary factors: (i) the precipitous decline in global oil demand resulting from the worldwide spread of COVID-19 and (ii) a sudden, unexpected increase in global oil supply resulting from actions +initiated by Saudi Arabia to increase its oil production to world markets following the failure of efforts by OPEC+ to agree on coordinated production cuts at their March 6, 2020 meetings in Vienna, Austria. +In connection with these events, we implemented certain changes to our compensation program to strengthen our balance sheet and further align the interests of our +executive officers with our shareholders. Effective April 1, 2020, we reduced the base salary for our entire workforce, including our executive officers. Our Chairman and Chief Executive Officer, Joseph Wm. Foran, voluntarily agreed to a 25% +base salary reduction with the other executive officers and vice presidents agreeing to 20% and 10% reductions, respectively. Additionally, in March 2020, our executive officers were awarded equity grants that had a significantly lower grant date +fair value than in 2019. For example. Mr. Foran’s 2020 long-term award grant date fair value of $651,373 represented an 85% decrease from his 2019 long-term incentive award grant date fair value. The Independent Board, upon recommendation +of the Strategic Planning and Compensation Committee, also lowered the target annual incentive opportunity as a percentage of each executive officer’s base salary. For example, Mr. Foran’s target annual incentive opportunity as a +percentage of his earned 2020 base salary was reduced from 110.0% to 73.3%, and his maximum annual incentive opportunity was reduced from 220.0% to 110.0%. Finally, although each of the Independent Board-approved metrics under our annual cash +incentive plan were met or exceeded, the Company’s executive officers and the Independent Board agreed that the executive officers would forego receiving any 2020 annual cash bonuses. +As a result of the base salary reduction, the lower long-term incentive award grant date fair value and the absence of an annual cash bonus payment, +Mr. Foran’s total 2020 compensation of $1.7 million reflected a 79% reduction from 2019 levels. Similarly, the total 2020 compensation of the other Named Executive Officers decreased an average of 75% from 2019 levels. +2021 +During the latter half of 2020 and through 2021, the oil and natural +gas industry experienced improvement in commodity prices, as compared to mid-2020, primarily resulting from (i) improvements in oil demand as the impact from +COVID-19 had begun to abate, (ii) actions taken by OPEC+ to reduce the worldwide supply of oil through coordinated production cuts and (iii) changes in supply and demand dynamics in general, +particularly with respect to natural gas markets. As a result of this improvement in commodity prices and general market conditions, after consulting with the Strategic Planning and Compensation Committee’s independent compensation consultant, +Meridian, the Independent Board reinstated many of the compensation components that were eliminated or reduced during 2020 and implemented a compensation program during 2021 that was similar to the Company’s compensation program in 2019, prior +to the decline in oil prices in 2020 and the COVID-19 pandemic. +As such, the April 2020 pay cuts were restored on +March 1, 2021, at which time our stock price had rebounded from a low of $1.11 in March 2020 to close at $22.04 on March 1, 2021. Our Named Executive Officers also received increases in their base salary effective May 1, 2021 as +described in more detail below. In addition, the Independent Board awarded long-term incentive awards to our Named Executive Officers with increased grant date fair values compared to the awards received by the Named Executive Officers in 2020 but +at targeted values commensurate with the long-term incentive awards granted in 2019. Unlike 2020, our Named Executive Officers also received bonuses pursuant to our annual cash incentive plan in connection with the performance of the Company in 2021 +as described in more detail below. +2022 +Proxy Statement | Matador Resources Company 59 +Table of Contents +EXECUTIVE COMPENSATION +Because of these changes to our compensation program, our +Named Executive Officers’ compensation increased significantly in 2021 as compared to 2020 but such increases were not as significant when compared to 2019, prior to the sudden drop in oil prices. In contrast to the 79% reduction in +Mr. Foran’s total compensation in 2020 as compared to 2019, Mr. Foran’s total compensation for 2021 increased approximately 436% as compared to his total compensation for 2020, but only approximately 13% compared to his total +compensation for 2019. Mr. Foran’s average annual total compensation for the three years ended December 31, 2021 was approximately $6.3 million. In addition, although the total 2020 compensation of our other Named Executive +Officers decreased an average of 75% from 2019 levels, our other Named Executive Officers’ average total compensation for 2021 increased approximately 367% as compared to their compensation in 2020, but only approximately 15% as compared to +2019. The average annual total compensation of each of our other Named Executive Officers for the three years ended December 31, 2021 was approximately +$3.0 million. +Compensation Program Best Practices +What We Do: +What We Don’t +Do: +✓ +We pay for performance—approximately 86.4 % of our CEO’s target total compensation for 2021 was variable and at risk, with approximately 63.5% +performance-based +× +We do not permit hedging of Company stock +✓ +We maintain robust stock ownership guidelines for officers +× +We do not gross-up excise taxes for severance or change in control payments +✓ +We engage an independent compensation consultant +× +We do not guarantee bonuses +✓ +We use competitive benchmarking in setting compensation +× +We do not reprice stock options without shareholder approval +✓ +We conduct annual risk assessments of compensation practices +× +We have no defined benefit or supplemental executive retirement plans +✓ +We conduct shareholder engagement to gather feedback on compensation practices +× +We do not allow pledging of Company stock, except in limited circumstances +✓ +We hold an annual say-on-pay vote +× +We do not pay dividends on phantom units, RSUs or PSUs +Elements of 2021 Compensation Program +Our executive compensation program places a considerable amount of an executive’s compensation at risk in the form of incentive or equity-based compensation, which +can be variable from year to year. We also seek to provide an appropriate balance between annual incentives and long-term incentives to ensure that each executive is motivated to consider longer-term Company performance in preference to short-term +results. +60 Matador Resources Company | 2022 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +For 2021, +our management compensation program was comprised of the following primary elements: +2020 Element +Key Features +Why We Include This Element +Base Salary +•   Fixed level of cash +compensation +•   Compensates each +executive for his assigned responsibilities, experience, leadership and expected future contributions +Annual Cash Incentive Payments +•   Variable, annual, +performance-based cash compensation +•   Focuses and motivates +management to achieve key corporate and individual objectives +•   Rewards achievements over the prior year +Phantom Units +•   Approximately 50% of +targeted total long-term equity award value +•   Vests ratably in annual installments over three years from grant date +•   Settles in cash +•   Directly aligns +executive and shareholder interests by tying the cash received on settlement to the Company’s stock price +•   Retains executives over vesting period +•   Cash +settlement avoids dilution of Common Stock +Performance Stock Units +•   Approximately 50% of +targeted total long-term equity award value +•   Vests between 0% and 200% following three-year performance period ending December 31, 2023 based on relative total shareholder return +•   If +absolute total shareholder return is negative, payout is capped at target (100%) +•   Focuses executives on +the Company’s long-term performance as award is tied to the Company’s total shareholder return relative to the total shareholder return of its peers over a three-year performance period +•   Settlement +in shares of the Company’s stock increases alignment between executives and shareholders +•   Retains executives over vesting period +Severance and Change of Control Benefits +•   Specified severance +pay and benefits are provided under each Named Executive Officer’s employment agreement in connection with termination events, including after a change in control +•   Provides an incentive +for executives to remain with the Company despite the uncertainties of a potential or actual change in control +•   Provides a measure of financial security in the event an executive’s +employment is terminated without cause +Other Benefits +•   Broad-based 401(k) +retirement, health and welfare benefits offered to all eligible employees +•   Provides market +competitive benefits +•   Protects employees against catastrophic loss and encourages a healthy +lifestyle +2022 +Proxy Statement | Matador Resources Company 61 +Table of Contents +EXECUTIVE COMPENSATION +Consistent with our compensation program objectives, we +provide our executive officers with a significant portion of their total compensation in the form of variable, rather than fixed, compensation. Importantly, a significant portion of total compensation is also performance-based. The percentages shown +below reflect each executive’s target compensation opportunity determined by the Compensation Committee and the Independent Board and do not reflect actual payments made to the executives for 2021. +Role of the Independent Board, Compensation Committee and Management +The Compensation Committee annually evaluates each of the Company’s executive officers, including Mr. Foran, and recommends to the Independent Board the +proposed compensation structure for each of the executives, including salary, equity and non-equity incentive compensation. Based on such recommendations, the Independent Board sets Mr. Foran’s +compensation each year. Mr. Foran consults with and provides recommendations to the Compensation Committee and Independent Board regarding the compensation structure for each of the other Named Executive Officers. Based on the recommendations +of the Compensation Committee and Mr. Foran, the Independent Board sets the other Named Executive Officers’ compensation each year. The members of the Independent Board are required to be independent pursuant to the listing standards of +the NYSE and the rules and regulations promulgated by the SEC. +As part of their annual evaluations, the Compensation Committee: +• +conducts an analysis of the Company’s annual performance relative to any performance criteria or targets established +under the Cash Incentive Plan and recommends to the Independent Board the amount of final annual cash incentive awards; +• +reviews and recommends the form of and number of shares to be awarded pursuant to long-term incentive compensation awards, +including vesting terms, performance metrics, performance peer groups and other material provisions of such awards; +• +reviews executive officer compensation levels as compared to the Company’s peers; +• +reviews and recommends any employment agreement, severance agreement, change in control agreement or provision or +separation agreement or amendment thereof; and +• +reviews and recommends any deferred compensation arrangement, retirement plan, other benefits and perquisites. +In addition, the Compensation Committee confirms at least annually that our compensation policies and practices do not encourage unnecessary risk +taking and reviews the relationship between risk management, corporate strategy and executive compensation. The Compensation Committee considers, in establishing and reviewing our compensation program, whether the program encourages unnecessary or +excessive risk taking and has +62 Matador Resources Company | 2022 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +concluded that it does not and is not reasonably likely to have a material adverse effect on us. Many features of our program reflect sound risk management practices. Base salaries are fixed in +amount and thus do not encourage risk taking. While annual cash incentive payments are tied to management’s achievements during the previous fiscal year, they also take into account multiple performance criteria based on the executive’s +individual performance and are within the discretion of the Independent Board, with payout limits for each participant. Thus, the Compensation Committee believes that our annual cash incentive awards appropriately balance risk and the desire to +focus executives on specific short-term goals important to the Company’s success, and that they do not encourage unnecessary or excessive risk taking. In addition, the Compensation Committee believes that our equity compensation program +provides an appropriate balance between the goals of increasing the price of our Common Stock and avoiding potential risks that could threaten our growth and stability due to the fact that the RSUs and PSUs vest over three years and the PSUs vest +based on our relative total shareholder return, with an overall payout limit and a further limit if absolute total shareholder return is negative. We also maintain policies prohibiting hedging and pledging (except in limited circumstances) and stock +ownership guidelines, which we believe further mitigate the potential for unnecessary or excessive risk taking. +In addition, pursuant to its charter, the +Compensation Committee reviews and recommends to the Independent Board any proposals for the adoption, amendment, modification or termination of our incentive compensation, equity-based plans and non-equity +based plans. +Role of the Independent Compensation Consultant +The +Compensation Committee has engaged Meridian as its independent executive compensation advisory firm. Meridian provides assessments of the competitiveness of the Company’s executive compensation levels and practices relative to relevant +executive labor markets and performs other tasks as requested by the Compensation Committee. For 2021, the Compensation Committee assessed the independence of Meridian pursuant to applicable SEC and NYSE rules and concluded that Meridian’s +engagement by the Compensation Committee did not raise any conflicts of interest. +Use of Peer Group Market Data +Our independent compensation consultant benchmarks the pay levels of our officers against a group of competitor companies in the oil and natural gas exploration and +production sector (the “Peer Group”). In connection with its annual review, the Compensation Committee and Independent Board adopted the following Peer Group in 2021, which was used in setting 2021 compensation levels: +Callon Petroleum Company +Cimarex Energy Co. +Devon Energy Corp. +Diamondback Energy, Inc. +Marathon Oil +Corporation +Oasis Petroleum, Inc. +Ovintiv Inc. +PDC Energy Inc. +Pioneer Natural Resources Company +SM Energy Company +Centennial Resource Development, Inc. was removed from our Peer Group as compared to the 2020 peer group in light of its smaller market +value. Following the May 2021 announcement of the merger of Cimarex Energy Co. with Cabot Oil and Gas Corporation, Cimarex Energy Co. ceased to be considered in determining any elements of executive compensation. In addition to considering companies +in the oil and natural gas exploration and production sector, the Compensation Committee also considered company size characteristics such as assets, enterprise value and market value when approving the Peer Group. As of December 31, 2021, the +Peer Group had a median market capitalization of $6.7 billion, compared to the Company’s market capitalization of $4.4 billion at such date, placing the Company at the 40th percentile of the Peer Group. The Peer Group also includes +certain companies with operations in the Permian Basin that face similar opportunities and challenges that we face. The Peer Group is used by the Compensation Committee and the Independent Board in setting Named Executive Officer salaries, annual +cash incentive award opportunities, long-term incentive awards and target total direct compensation levels. The Compensation Committee and Independent Board use this data to inform their pay +2022 +Proxy Statement | Matador Resources Company 63 +Table of Contents +EXECUTIVE COMPENSATION +decisions as one data point among many others, including Company performance, individual performance, experience and responsibilities, leadership and professional growth. +2021 Base Salaries +The Compensation Committee recommended, and the +Independent Board approved effective March 1, 2021, the restoration of each Named Executive Officer’s base salary to its April 1, 2020 level, prior to the reductions implemented as a result of the sudden drop in oil prices. In +addition, the Compensation Committee recommended, and the Independent Board approved, effective May 1, 2021, increases in the base salary for the Named Executive Officers as set forth below. +Executive Officer +Reduced +2020 Base +Salary +Restored +Base Salary +May 2021 +Base Salary +Joseph Wm. Foran +$ +937,500 +$ +1,250,000 +$ +1,300,000 +Matthew V. Hairford +$ +580,000 +$ +725,000 +$ +725,000 +David E. Lancaster +$ +560,000 +$ +700,000 +$ +725,000 +Craig N. Adams +$ +560,000 +$ +700,000 +$ +725,000 +Billy E. Goodwin +$ +560,000 +$ +700,000 +$ +725,000 +The Independent Board determined that the restoration of the 2020 base salaries effective March 1, 2021 and the raises for each +Named Executive Officer effective May 1, 2021 were warranted based upon each Named Executive Officer’s individual contributions to, among other items: +• +the Company’s performance during a challenging 2020, including at that time record annual oil, natural gas and average +daily oil equivalent production; +• +the Company’s financial performance during 2021 for the period prior to the restoration of the 2020 salaries effective +March 1, 2021 and the raises effective May 1, 2021; +• +the increase in the Company’s stock price from a low of $1.11 in March 2020 to close at $22.04 on March 1, 2021 +and $26.31 on April 30, 2021 (the last trading day prior to May 1, 2021); +• +the Company’s continued improvement in operational efficiencies; +• +the Company’s continued focus on improvement in its ESG initiatives and disclosure of such initiatives; and +• +the continued growth of the Company’s midstream business throughout 2020 and 2021. +2021 Annual Cash Incentive Compensation +The Company’s 2021 +annual cash incentive compensation was awarded pursuant to the Cash Incentive Plan, which is designed to link executive decision making and performance with the Company’s goals, reinforce these goals and ensure the highest level of +accountability for the success of the Company as a whole. The Cash Incentive Plan advances Company and shareholder interests by providing an additional means to (i) sustain and enhance the culture of personal commitment on the part of +executives, select managers and key employees in the continued growth, development and financial success of the Company and (ii) encourage them to remain with, and devote their best efforts to, the Company. The Cash Incentive Plan provides for +the granting of awards of incentive compensation that may be paid to a participant upon satisfaction of specified performance goals for a particular performance period. In addition, the Cash Incentive Plan provides that the Compensation Committee +and Independent Board may make adjustments for individual executive officers for exceptional performance and attainment of certain strategic goals (the “Discretionary Adjustment”). +Performance Goals +For 2021, the chair of the Compensation Committee met with +Meridian and management to discuss potential criteria for the performance goals. Based on these meetings, the chair of the Compensation Committee proposed +64 Matador Resources Company | 2022 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +certain preliminary performance goal categories for consideration for 2021. The Compensation Committee then met with management to review the proposed performance goal categories. In 2018, the +Compensation Committee had implemented a strategic shift, which has continued through 2021, to focus on performance goals that incentivize capital efficiency and returns in addition to growth. As a result of these discussions, and upon the +recommendation of the Compensation Committee, the Independent Board determined to use the following threshold, target and maximum performance goals for 2021, which, except for adjusted operating expenses per BOE, were each achieved at or above the +maximum level, as shown below: +2021 Performance Goals +Threshold +Target +Maximum +Actual +Results +Assessment +Net Debt/Adjusted EBITDA (1)(2)(3) +2.5x +2.2x +1.9x +1.1x +Exceeded +maximum +Oil Production (millions of Bbls) +17.0 +17.5 +17.8 +17.84 +Exceeded +maximum +Adjusted Free Cash Flow (millions) (4) +$0 +$100 +$150 +$486.9 +Exceeded +maximum +San Mateo Adjusted EBITDA (millions) (1) +$125 +$130 +$135 +$154.3 +Exceeded +maximum +Return on Average Capital Employed (ROACE) (5) +16.7% +20.0% +24.0% +34.5% +Exceeded +maximum +Total 2021 Shareholder Return vs. Peer +Group +— +Upper 50% +Upper 25% +Upper 25% +Achieved +maximum +Adjusted Operating Expenses per BOE, +Excluding Interest (6) +$11.50 +$10.75 +$10.00 +$10.34 (7) +Exceeded +Target +Environmental, Social and Governance (ESG) (8) +— +— +— +— +— (9) +(1) +Adjusted EBITDA is a non-GAAP financial measure included herein solely as a +reference point under the Cash Incentive Plan. It is commonly used by similar companies in our industry. For a definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to Matador’s and San Mateo’s net income (loss) and net +cash provided by operating activities, see Annex C to this Proxy Statement. +(2) +As a reference point under the Cash Incentive Plan, Net Debt as of December 31, 2021 is calculated as (i) +$1.05 billion in senior notes outstanding, plus (ii) $146 million in debt under the Credit Agreement, including outstanding borrowings and letters of credit, less (iii) $48 million in available cash. +(3) +Attributable to Matador Resources Company shareholders after giving effect to those values attributable to third-party non-controlling interests, including in San Mateo. +(4) +Adjusted Free Cash Flow is a non-GAAP financial measure included herein solely as +a reference point under the Cash Incentive Plan. It is commonly used by similar companies in our industry. For a definition of Adjusted Free Cash Flow and a reconciliation of Adjusted Free Cash Flow to our net cash provided by operating activities, +see Annex C to this Proxy Statement. +(5) +ROACE is a non-GAAP financial measure included herein solely as a reference point +under the Cash Incentive Plan. It is commonly used by similar companies in our industry. For a definition of ROACE and a reconciliation of ROACE to its most directly comparable GAAP financial measure, see Annex C to this Proxy Statement. +(6) +Adjusted operating costs per BOE, excluding interest and midstream operating costs, is a +non-GAAP financial measure included herein solely as a reference point under the Cash Incentive Plan. It is commonly used by similar companies in our industry. The Compensation Committee and the Independent +Board believe cash operating costs per BOE, excluding interest, is an appropriate performance metric because it allows them to compare and evaluate the efficiency of the Company’s operations and its impact on the Company’s unit cash flows +and compare the Company’s cash operating costs to prior periods and to its peers’ results without regard to financing methods or capital structure. Adjusted operating costs per BOE, excluding interest, can be calculated from the +Company’s audited financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2021 by adding the following expenses per BOE: (i) production taxes, +transportation and processing; (ii) lease operating; and (iii) general and administrative. +(7) +Excludes approximately $1.87 per BOE of production taxes and general and administrative expenses associated with equity +compensation attributable to higher commodity prices than forecasted in connection with the setting of metrics by the Independent Board. With such amounts per BOE added back in, adjusted operating expenses per BOE were $12.21 for the year ended +December 31, 2021. Matador realized a weighted average oil price of $67.58 per Bbl for our oil production for the year ended December 31, 2021, as compared to $37.38 per Bbl for the year ended December 31, 2020. +(8) +Based on a qualitative assessment of the Company’s overall progress in its +ESG-related efforts, including with respect to enhancements to public disclosures, and a review of the Company’s performance in the areas of environmental stewardship, safety processes and procedures, +training of personnel, risk management, cybersecurity and diversity and inclusion. +2022 +Proxy Statement | Matador Resources Company 65 +Table of Contents +EXECUTIVE COMPENSATION +(9) +Among other items, the Compensation Committee and Independent Board noted the progress in enhancing ESG disclosure, +including the publishing of the Company’s inaugural Sustainability Report, the reduction in surface footprint through the use of batch drilling and longer laterals, the number of training hours conducted by Company personnel, management’s +focus on risk management and cybersecurity, including quarterly reports by executive management to the Audit Committee, and the absence of any recordable employee injuries. +2021 Incentive Opportunities +In making recommendations regarding potential +2021 annual cash incentive opportunities for our Named Executive Officers, the Compensation Committee reviewed Meridian’s recommendations and the recommendations of management regarding proposed target opportunities. Based on such review, which +took into account the differing responsibilities of each Named Executive Officer and Peer Group data, where available, for bonus levels for comparable positions, the 2021 target annual incentive opportunities set forth below were approved. +Participant +2021 Target +Annual +Incentive +Opportunity +as % of 2021 +Base +Salary +Joseph Wm. Foran +100 +% +Matthew V. Hairford +80 +% +David E. Lancaster +80 +% +Craig N. Adams +80 +% +Billy E. Goodwin +80 +% +Our Independent Board also determined to cap the Discretionary Adjustment for each Named Executive Officer at 30% of each Named +Executive Officer’s total 2021 annual cash incentive payment. +66 Matador Resources Company | 2022 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +2021 +Performance Results +The Compensation Committee then assessed the Company’s 2021 results in light of the performance goals and the following individual +performance milestones for each Named Executive Officer when determining appropriate annual cash incentive award amounts: +Executive Officer +Individual Performance +Milestones +Joseph Wm. Foran Chairman and Chief Executive +Officer +•    Collaborated +with the Board and other executive officers to create and maintain an effective team culture throughout each level of Matador’s organization that has built value through (1) traditional oil and natural gas operations +growing organically through the drill bit, (2) expanding midstream operations in Matador’s various asset areas and (3) selective acreage acquisitions +•   Provided +direction and leadership throughout Matador in developing and executing Matador’s strategy and operational plan in 2021, including the recovery from a challenging 2020, which resulted in record operational and financial +results and free cash flow during each quarter of 2021 +•    Provided leadership to the Board , including with respect to declaring +the Company’s first quarterly dividend in the first quarter of 2021 and doubling the dividend in the fourth quarter of 2021 +•   Oversaw Matador’s continuing improvement in capital efficiency as +demonstrated by our average drilling and completion costs for all operated horizontal wells completed and turned to sales of approximately $670 per completed lateral foot in 2021 , a decrease of 21% as compared to average drilling and +completion costs of $850 per completed lateral foot in 2020 +•    Oversaw the collaborative management of the Company’s balance +sheet and strong financial position , including entering into our fourth amended and restated credit agreement and the amendment to the San Mateo Credit Facility +•   Led firmwide focus on attracting, training and retaining talent , +encouraging employee leadership development and director engagement and aligning our strategy and operational plan throughout the organization +•   Directed efforts to develop and maintain relationships with directors, +shareholders, vendors and other key stakeholders with the assistance of other executive officers +•    Helped advance the Company’s ESG initiatives , including by +recommending the hiring of an experienced individual to conduct a review of industry ESG reporting practices and to serve as a dedicated single-focal point for our various ESG efforts +Matthew V. Hairford President +•    Oversaw the team efforts that resulted in record +total oil and natural gas production in 2021 +•   Directed the work of the Company’s field personnel and the implementation of the Company’s health, safety and environmental initiatives and interacted with shareholders and +directors on financial matters +•   Worked with other executive officers to limit costs, evidenced by record-low LOE of $3.46 per BOE for the year ended December 31, 2021, while maintaining and improving relationships with key vendors +•   As +Chairman of the Board and President of San Mateo, led the Company’s midstream efforts to, among other items, +2022 +Proxy Statement | Matador Resources Company 67 +Table of Contents +EXECUTIVE COMPENSATION +Executive Officer +Individual Performance +Milestones +¡   Achieve +record throughput volumes for natural gas gathering and processing, oil gathering and transportation and water handling, as well as record net income and record Adjusted EBITDA +¡   Generate free cash flow by San Mateo during each of the four quarters of 2021 +David E. Lancaster Executive Vice +President and Chief Financial Officer +•    Led the collective effort to manage the Company’s balance sheet +and improve the Company’s already strong financial position through +¡   Entering +into the fourth amended and restated credit agreement , which, among other items, extended the maturity date by three years, increased the borrowing base by 50% to $1.35 billion, affirmed our elected commitment and added three new +banks to our lending group +¡   Entering into the amendment to the San Mateo Credit Facility , which, among other items, increased the lender commitments +under the revolving credit facility to $450.0 million from $375.0 million +¡   Achievement +of free cash flow during each of the four quarters of 2021 +•   Responsible for the Company’s financial modeling, guidance and +relationships with financial institutions, shareholders, bondholders, equity and bond analysts and public markets +•   As a distinguished petroleum engineer, provided oversight and quality +control to the Company’s exploration and development activities and its reserves studies +Craig N. Adams +Executive Vice President and Chief +Operating Officer— Land, Legal & Administration +•   Coordinated and +oversaw the general legal matters of the Company through the management of the Company’s legal staff +•   Managed the Company’s legal and land efforts to convert approximately +$4.2 million of non-core assets to cash +•    Responsible for coordinating administrative functions of the Company, +including Board functions and interaction with management, office facilities and the oversight of the Company’s human resource activities and departmental efficiencies +•    Helped +advance the Company’s ESG initiatives +•   Led the Company’s COVID-19 response with a focus on prioritizing employee health and safety while maintaining the Company’s operations in +order to achieve its 2021 goals +Billy E. Goodwin Executive Vice President and Chief Operating +Officer—Drilling, Completions & Production +•    Led the Company’s +collaborative drilling, completions and production activities, managing approximately $513 million of capital expenditures in 2021 related to the Company’s operations in its primary operating areas, resulting in +record total oil and natural gas production in 2021 +•   Led Matador’s continuing improvement in capital efficiency as +demonstrated by +¡   Our average drilling and completion costs for all operated horizontal wells completed and turned to sales of approximately $670 per +completed lateral foot in 2021 , a decrease of 21% as compared to average drilling and completion costs of $850 per completed lateral foot in 2020 +¡   The realized +transition to drilling longer laterals, whereby 98% of the operated horizontal wells we turned to sales in 2021 had lateral lengths of two miles or greater, as compared to 74% in 2020, 8% in 2019 and only one +two-mile lateral in 2018 +68 Matador Resources Company | 2022 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +Executive Officer +Individual Performance +Milestones +•   Directed the MaxOps program to increase drilling, completions and +production experience among our engineering staff and the MaxCom program to ensure coordination of drilling and completions operations +•   Worked with other executive officers and staff members to innovate and to +reduce operating costs , evidenced by record-low LOE of $3.46 per BOE for the year ended December 31, 2021, while maintaining and improving relationships with key vendors +The Compensation Committee reviewed the individual performance milestones listed above as well as additional contributions to the +achievement of Company-wide goals. Based on this review, the Compensation Committee determined that each of the Named Executive Officers performed at a high level in 2021 contributing to the Company’s success. However, the Compensation +Committee did not recommend that the Independent Board make any Discretionary Adjustment to the annual cash awards for any Named Executive Officer for 2021. +Additionally, the Compensation Committee performed a qualitative assessment of the Company’s ESG record for the year. Among other items, the Compensation Committee +noted the progress in enhancing ESG disclosure, including the publishing of the Company’s inaugural Sustainability Report, the reduction in surface footprint through the use of batch drilling and longer laterals, the number of training hours +conducted by Company personnel, management’s focus on risk management and cybersecurity, including quarterly reports by executive management to the Audit Committee, and the absence of any recordable employee injuries. +Based on such assessment, the Compensation Committee recommended to the Independent Board the annual cash awards listed below for each Named Executive Officer under the +Cash Incentive Plan, which were based upon the base salaries for such individuals as of December 31, 2021. The Independent Board approved such annual cash awards, which were paid to the Named Executive Officers in February 2022. Consistent with +the recommendation of the Compensation Committee, the annual cash awards reflected no Discretionary Adjustment for individual Named Executive Officers for exceptional performance and attainment of certain strategic goals. +Executive Officer +Target +Award +Payable for +2021 +Maximum +Award +Payable for +2021 +Actual +Award for +2021 +Joseph Wm. Foran +$1,300,000 +$2,600,000 +$2,600,000 +Matthew V. Hairford +$ 580,000 +$1,160,000 +$1,160,000 +David E. Lancaster +$ 580,000 +$1,160,000 +$1,160,000 +Craig N. Adams +$ 580,000 +$1,160,000 +$1,160,000 +Billy E. Goodwin +$ 580,000 +$1,160,000 +$1,160,000 +2022 +Proxy Statement | Matador Resources Company 69 +Table of Contents +EXECUTIVE COMPENSATION +2021 Long-Term Incentive Compensation +In June 2021, the Independent Board granted awards of 50% service-based cash-settled phantom units and 50% share-settled PSUs to our executive officers. These long-term +equity awards facilitate retention of our Named Executive Officers, incentivize positive future results and further align the interests of our Named Executive Officers with those of the Company’s shareholders. The table below provides the key +terms of the June 2021 equity awards: +Key Terms +Phantom Units +Performance Stock +Units +Targeted percentage of total award +value +50% +50% +Vesting terms +Three years ratably on each anniversary +Following three-year performance period ending December 31, 2023 +Performance metric +N/A +Relative total shareholder return, with payout capped at target if absolute total shareholder return is negative +The number of shares underlying each grant and the target value and grant date fair value of the 2021 annual equity grants are set forth +in the table below: +Participant +Phantom +Units +Target +Performance +Stock Units +Targeted +Value +Joseph Wm. Foran +62,000 +62,000 +$4,200,000 +Matthew V. Hairford +30,000 +30,000 +$2,000,000 +David E. Lancaster +30,000 +30,000 +$2,000,000 +Craig N. Adams +28,000 +28,000 +$1,900,000 +Billy E. Goodwin +28,000 +28,000 +$1,900,000 +70 Matador Resources Company | 2022 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +The +Independent Board approved the total targeted value for the year for each Named Executive Officer and then converted that value into an approximate aggregate number of units based on the closing price of our Common Stock on the date prior to the +date of grant. The units were then granted 50% in the form of phantom units and 50% in the form of PSUs (at target). The PSU equity component provides for settlement of between 0% and 200% of the total target PSUs subject to the award based on our +total shareholder return relative to the total shareholder return of the Peer Group over a three-year performance period from January 1, 2021 through December 31, 2023. If our absolute total shareholder return over such performance period +is negative, no more than 100% of the PSUs may vest. The applicable percentage of vested units is shown below with respect to each percentile ranking. +Company’s Relative Total Shareholder +Return Percentile Ranking +Percentage of Target Units That +Will +Vest +0 +0% +10 th +20% +20 th +40% +30 th +60% +40 th +80% +50 th +100% +60 th +120% +70 th +140% +80 th +160% +90 th +180% +100 th +200% +In connection with its annual review, the Compensation Committee and Independent Board added the S&P Oil and Gas Exploration and +Production Select Industry Index (XOP) as a peer for purposes of the 2021 PSU grants. The Peer Group used for determination of the Company’s relative total shareholder return is as follows, which is the same as the Company’s 2021 Peer +Group (plus the XOP): +Callon Petroleum Company +Cimarex Energy Co. +Devon Energy Corp. +Diamondback Energy, Inc. +Marathon Oil Corporation +Oasis Petroleum, Inc. +Ovintiv Inc. +PDC Energy Inc. +Pioneer Natural Resources Company +SM Energy Company +S&P Oil and Gas Exploration and +Production Select Industry Index (XOP) +Benefits +We offer a variety of health +and welfare programs to eligible employees, including the Named Executive Officers. The health and welfare programs are intended to protect employees against catastrophic loss and encourage a healthy lifestyle. Our health and welfare programs +include medical, pharmacy, dental, disability and life insurance. We also have a 401(k) plan for eligible employees, including the Named Executive Officers, to which we contribute 3% of the employee’s eligible compensation, which is subject to +limits established by the Code, and have the discretion to contribute up to an additional 4% of the employee’s eligible compensation as a dollar-for-dollar matching +contribution with respect to his or her elective deferral contributions. The discretionary dollar-for-dollar match is subject to vesting based upon years of service to +the Company and the limits on the compensation that may be considered under the Code. In addition, we provide long-term care insurance for certain of our executive officers. +2022 +Proxy Statement | Matador Resources Company 71 +Table of Contents +EXECUTIVE COMPENSATION +Severance and Separation Arrangements +Employment Agreements +We have entered into employment agreements with each of +our Named Executive Officers. Under the employment agreements, if a termination of employment occurs pursuant to one of the following events: +• +the Named Executive Officer dies; +• +the Named Executive Officer is totally disabled; +• +we mutually agree to end the employment agreement; +• +we dissolve and liquidate; or +• +the term of the employment agreement ends, +we will pay the Named Executive Officer the average of his annual cash bonus, which includes non-equity incentive compensation, +for the prior two years, pro-rated based on the number of complete or partial months completed during the year of termination. +Also, under the employment agreements, if one of the following occurs: +• +the Named Executive Officer’s employment is terminated other than (i) as set forth above, (ii) by us for +just cause or (iii) in connection with a “change in control” as described below; or +• +the Named Executive Officer terminates his employment for “good reason,” +if the Named Executive Officer is Mr. Foran, we will pay him twice his base salary and twice the average of his annual cash bonus for the prior two years; if the +Named Executive Officer is Messrs. Hairford, Lancaster, Adams or Goodwin, we will pay him 1.5 times his base salary and 1.5 times the average of his annual cash bonus for the prior two years. +Finally, under the employment agreements of Messrs. Foran, Hairford and Lancaster, which were entered into in 2011, if we terminate the Named Executive Officer within +30 days prior to the “change in control” or within 12 months after the “change in control” without just cause or the Named Executive Officer terminates his employment with or without “good reason” during such period, we +will pay him three times his base salary and three times the average of his annual cash bonus for the prior two years. These agreements were entered into prior to our initial public offering. At that time, we believed a “modified single +trigger” was appropriate given the Company’s size, early stage of development and strong growth aspirations. Since that time, however, we have ceased to use “modified single triggers” in executive employment agreements, and we +intend to exclusively use “double triggers” going forward, as we have since 2014. The agreement entered into with Mr. Adams in March 2014 and the agreement entered into with Mr. Goodwin effective February 2016 each include a +“double trigger” such that if we terminate either executive within 30 days prior to the “change in control” or within 12 months after the “change in control” without just cause or he terminates his employment with +“good reason,” we will pay Mr. Adams or Mr. Goodwin three times his base salary and three times the average of his annual cash bonus for the prior two years. In addition, if any of our Named Executive Officers are terminated or +terminate their employment as set forth above in connection with a “change in control,” all equity awards of such Named Executive Officer vest immediately prior to such termination. +For definitions of “change in control,” “good reason” and “just cause,” please see the employment agreement of each Named Executive +Officer, each of which is included as an exhibit to the Company’s most recent Annual Report on Form 10-K. +Advisor +Agreements +In connection with their transition to Special Advisor roles, Messrs. Hairford and Lancaster have each entered into an Advisor +Agreement (the “Advisor Agreements”) with a subsidiary of the Company, which agreements were effective simultaneously with Messrs. Hairford’s and Lancaster’s retirements on March 31, 2022 and have terms expiring on December 31, +2023, subject to month-to-month extensions thereafter. Messrs. Hairford and Lancaster will each report to the Chief Executive Officer and the Board and provide certain services as outlined in their respective Advisor Agreement. Each of the Advisor +Agreements provides for an annual fee of $250,000 and confirm the continued vesting of each of Messrs. Hairford’s and Lancaster’s outstanding equity awards during the consulting term. +72 Matador Resources Company | 2022 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +Equity +Plans +For equity grants under the 2012 Plan and the 2019 Plan (together with the 2012 Plan, the “Long-Term Plans”), other than the PSUs, vesting upon +a “change in control” for the Named Executive Officers mirrors the terms of their employment agreements. The PSUs vest upon a “change in control” based on performance achieved through the date of such change in control, as it is +anticipated that a change in control would make achievement of relative total shareholder performance impractical to measure. +The “change in control” +provisions in the employment agreements and the equity grants under the Long-Term Plans help prevent management from being distracted by rumored or actual changes in control. The “change in control” provisions provide: +• +incentives for those Named Executive Officers to remain with us despite the uncertainties of a potential or actual change +in control; +• +assurance of severance payments for terminated Named Executive Officers; and +• +access to equity compensation after a change in control. +Stock Ownership Guidelines +We have adopted stock ownership guidelines +for the following officers in the following designated amounts: +• +Chairman and Chief Executive Officer—shares equal to five times base salary; +• +President—shares equal to five times base salary; +• +Executive Vice Presidents—shares equal to two and 1/2 times base salary; +• +Senior Vice Presidents—shares equal to two times base salary; and +• +Vice Presidents and Executive Directors—shares equal to one and 1/2 times base salary. +Newly appointed officers have until the fifth anniversary of his or her appointment as an officer of the Company within which to achieve the stock ownership position. +Shares that count toward the stock ownership guidelines include time-based restricted shares. Shares that will not count toward the stock ownership guidelines include shares underlying unexercised stock options, unexercised stock appreciation +rights, phantom units and performance-based awards for which the performance requirements have not been satisfied. +Until each of the above officers reaches the +stock ownership level required of his or her position, such officer must hold at least 50% of all “net shares” received through restricted stock or RSU vesting or realized through stock option exercises. For this purpose, “net +shares” means all shares retained after applicable withholding of any shares for tax purposes. Additionally, upon the vesting of restricted stock or RSUs or the exercise of stock options, each officer must hold the net shares for a minimum of +12 months following such vesting or exercise, or until his earlier retirement. As of December 31, 2021, each Named Executive Officer owned shares in excess of the applicable minimum requirement set forth in the stock ownership guidelines, and +Mr. Foran held shares with a value equal to approximately 145 times his base salary then in effect. +Anti-Hedging and Anti-Pledging Policies +Pursuant to the Company’s insider trading policy, the Company prohibits hedging of its securities by directors, officers or employees. Specifically, no such person +shall purchase or sell, or make any offer to purchase or offer to sell, derivative securities relating to the Company’s stock, whether or not issued by the Company, or financial instruments that are designed to hedge or offset any decrease in +the market value of the Company’s stock (including but not limited to prepaid variable forward contracts, equity swaps, collars and exchange funds) or otherwise engage in transactions that hedge or offset, or are designed to hedge or offset, +any decrease in the market value of Company equity securities (a) granted to such person by the Company as part of the compensation of such person; or (b) held, directly or indirectly, by such person. The insider trading policy also +restricts directors and executive officers from pledging more than 25% of his or her holdings of the Company’s stock without the prior written consent of the Environmental, Social and Corporate Governance Committee. +2022 +Proxy Statement | Matador Resources Company 73 +Table of Contents +EXECUTIVE COMPENSATION +Strategic +Planning and Compensation Committee Report +We have +reviewed and discussed with management the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K and based on such review and discussions, we recommended to the Board that the +Compensation Discussion and Analysis be included in this Proxy Statement and incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. +Strategic Planning and Compensation Committee, +R. Gaines Baty, Chair +Reynald A. Baribault +Monika U. Ehrman +Timothy E. Parker +Kenneth L. Stewart +74 Matador Resources Company | 2022 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +Summary Compensation Table +The following table summarizes the total compensation awarded to, earned by or paid to the Named Executive Officers for 2021, 2020 and 2019. This table and the +accompanying narrative should be read in conjunction with the CD&A, which sets forth the objectives and other information regarding our executive compensation program: +Name and Principal Position +Year +Salary +Stock +Awards (1) +Option +Awards (2) +Non-Equity +Incentive +Plan +Compensation (3) +All Other +Compensation +Total +Joseph Wm. Foran +2021 +$ +1,231,250 +$ +5,203,040 +$ +— +$ +2,600,000 +$ +22,899 +(4) +$ +9,057,189 +Chairman of the Board and +Chief Executive Officer +2020 +$ +1,015,625 +$ +651,373 +$ +— +$ +— +$ +22,549 +$ +1,689,547 +2019 +$ +1,200,000 +$ +4,293,663 +$ +— +$ +2,510,000 +$ +24,646 +$ +8,028,309 +Matthew V. Hairford +2021 +$ +700,833 +$ +2,517,600 +$ +— +$ +1,160,000 +$ +24,202 +(5) +$ +4,402,635 +President +2020 +$ +616,250 +$ +341,973 +$ +— +$ +— +$ +23,852 +$ +982,075 +2019 +$ +700,000 +$ +2,254,174 +$ +— +$ +1,200,000 +$ +23,502 +$ +4,177,676 +David E. Lancaster +2021 +$ +693,333 +$ +2,517,600 +$ +— +$ +1,160,000 +$ +20,300 +(6) +$ +4,391,233 +Executive Vice President and +Chief Financial Officer +2020 +$ +595,000 +$ +309,404 +$ +— +$ +— +$ +19,950 +$ +924,354 +2019 +$ +680,000 +$ +2,039,489 +$ +— +$ +1,100,000 +$ +19,600 +$ +3,839,089 +Craig N. Adams +2021 +$ +693,333 +$ +2,349,760 +$ +— +$ +1,160,000 +$ +22,581 +(7) +$ +4,225,674 +Executive Vice President and +Chief Operating Officer — +Land, +Legal & Administration +2020 +$ +595,000 +$ +276,836 +$ +— +$ +— +$ +22,231 +$ +894,067 +2019 +$ +660,000 +$ +1,824,804 +$ +— +$ +1,005,000 +$ +21,881 +$ +3,511,685 +Billy E. Goodwin +2021 +$ +693,333 +$ +2,349,760 +$ +— +$ +1,160,000 +$ +20,300 +(6) +$ +4,223,393 +Executive Vice President and +Chief Operating Officer — Drilling, +Completions & Production +2020 +$ +595,000 +$ +276,836 +$ +— +$ +— +$ +19,950 +$ +891,786 +2019 +$ +660,000 +$ +1,824,804 +$ +— +$ +1,005,000 +$ +19,600 +$ +3,509,404 +(1) +Reflects the grant date fair value of phantom units, PSUs or restricted stock awards, as applicable, computed in +accordance with FASB ASC Topic 718. For 2021, the portion of the amount reflected in this column relating to the PSUs is calculated based on probable outcome as of the grant date and assumes achievement between target and maximum. The grant date +value assuming achievement of maximum performance is $4,140,360 for Mr. Foran, $2,003,400 for Messrs. Hairford and Lancaster, and $1,869,840 for Messrs. Adams and Goodwin. +(2) +Reflects the grant date fair value of option awards computed in accordance with FASB ASC Topic 718. Our policy and +assumptions made in the valuation of the stock options are contained in Note 2 and Note 9 of the audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, +2021. +(3) +Represents awards pursuant to the Cash Incentive Plan. See “—Compensation Discussion and Analysis—2021 +Annual Cash Incentive Compensation” above. +(4) +Consists of $20,300 in 401(k) Company and matching contributions as described in “—Compensation Discussion and +Analysis—Benefits” and $2,599 in long-term care insurance premiums. +(5) +Consists of $20,300 in 401(k) Company and matching contributions as described in “—Compensation Discussion and +Analysis—Benefits” and $3,902 in long-term care insurance premiums. +(6) +Reflects 401(k) Company and matching contributions as described in “—Compensation Discussion and +Analysis—Benefits.” +(7) +Consists of $20,300 in 401(k) Company and matching contributions as described in “—Compensation Discussion and +Analysis—Benefits” and $2,281 in long-term care insurance premiums. +2022 +Proxy Statement | Matador Resources Company 75 +Table of Contents +EXECUTIVE COMPENSATION +Grants of +Plan-Based Awards Table +The following table sets +forth certain information regarding non-equity awards granted by the Independent Board pursuant to the Cash Incentive Plan and awards of share-settled PSUs and cash-settled phantom units granted by the +Independent Board pursuant to the 2019 Plan during the year ended December 31, 2021 to the Named Executive Officers below: +Estimated Future Payouts +Under Non-Equity Incentive +Plan Awards (1) +Estimated Future Payouts +Under Equity Incentive +Plan +Awards (2) +All Other +Stock +Awards: +Number +of Shares +of Stock +or Units (3) +Grant +Date +Fair +Value of +Stock +Awards +Threshold +Target +Maximum +Threshold +Target +Maximum +Name +Grant Date +($) +($) +($) +(#) +(#) +(#) +(# shares) +($) +Joseph Wm. Foran +— +— +1,300,000 +2,600,000 +— +— +— +— +— +6/4/21 +— +— +— +— +62,000 +124,000 +— +3,132,860 +6/4/21 +— +— +— +— +— +— +62,000 +2,070,180 +Matthew V. Hairford +— +— +580,000 +1,160,000 +— +— +— +— +6/4/21 +— +— +— +— +30,000 +60,000 +— +1,515,900 +6/4/21 +— +— +— +— +— +— +30,000 +1,001,700 +David E. Lancaster +— +— +580,000 +1,160,000 +— +— +— +— +— +6/4/21 +— +— +— +— +30,000 +60,000 +— +1,515,900 +6/4/21 +— +— +— +— +— +— +30,000 +1,001,700 +Craig N. Adams +— +— +580,000 +1,160,000 +— +— +— +— +— +6/4/21 +— +— +— +— +28,000 +56,000 +— +1,414,840 +6/4/21 +— +— +— +— +— +— +28,000 +934,920 +Billy E. Goodwin +— +— +580,000 +1,160,000 +— +— +— +— +— +6/4/21 +— +— +— +— +28,000 +56,000 +— +1,414,840 +6/4/21 +— +— +— +— +— +— +28,000 +934,920 +(1) +See “—Compensation Discussion and Analysis—2021 Annual Cash Incentive Compensation” and +“—Summary Compensation Table— Non-Equity Incentive Plan Compensation” regarding the actual payments made to the Named Executive Officers pursuant to the Cash Incentive Plan. Amounts assume +no application of the Discretionary Adjustment for individual Named Executive Officers for exceptional performance and attainment of certain strategic goals. +(2) +Represents PSUs that provide for settlement of between 0% and 200% of the total target shares subject to the award based +on achievement of a relative total shareholder return performance metric over a three-year performance period from January 1, 2021 through December 31, 2023. If our total shareholder return over such performance period is negative, no more than +100%, the target level, of the PSUs may vest. See “—Compensation Discussion and Analysis—2021 Long-Term Incentive Compensation.” The PSUs do not provide for a threshold number of shares that may be earned. +(3) +Represents phantom units that provide for settlement in cash. See “—Compensation Discussion and +Analysis—2021 Long-Term Incentive Compensation.” +76 Matador Resources Company | 2022 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +Outstanding Equity Awards at December 31, 2021 +The following table summarizes the total outstanding option awards at December 31, 2021 for each Named Executive Officer: +Option Awards +Name +Number of +Securities +Underlying +Unexercised +Stock +Options (#) +Exercisable +Number of +Securities +Underlying +Unexercised +Stock +Options (#) +Unexercisable +Option +Exercise +Price +Option +Expiration +Date +Joseph Wm. Foran +108,003 +— +$ +27.26 +2/14/23 +105,485 +— +$ +29.68 +2/15/24 +Matthew V. Hairford +— +— +— +— +David E. +Lancaster +— +— +— +— +Craig N. Adams +— +— +— +— +Billy E. +Goodwin +— +— +— +— +The following table summarizes the total outstanding cash-settled phantom units and share-settled PSUs at December 31, 2021 for each +Named Executive Officer: +Stock Awards +Name +Award Type +Number of +Shares +or +Units of +Stock That +Have Not +Vested +(#) +Market Value +of Shares +or +Units of +Stock That +Have Not +Vested +($) (1) +Equity Incentive Plan +Awards: Number of +Unearned Shares, +Units or Other +Rights That +Have +Not Vested (2) +(#) +Equity Incentive Plan +Awards: Market or +Payout Value of +Unearned Shares, +Units or +Other +Rights That Have +Not Vested (2) +($) +Joseph Wm. Foran +Phantom units +PSUs +205,967 +7,604,302 +— +— +— +— +221,260 +8,168,919 +Matthew V. Hairford +Phantom units +PSUs +105,584 +3,898,161 +— +— +— +— +113,612 +4,194,555 +David E. Lancaster +Phantom units +PSUs +98,385 +3,632,374 +— +— +— +— +105,649 +3,900,561 +Craig N. Adams +Phantom units +PSUs +89,186 +3,292,747 +— +— +— +— +95,686 +3,532,727 +Billy E. Goodwin +Phantom units +PSUs +89,186 +3,292,747 +— +— +— +— +95,686 +3,532,727 +(1) +The market value is calculated based upon the closing price of our Common Stock on December 31, 2021 of $36.92 per +share. +(2) +The number of unearned PSUs and market value presented are based upon achievement of the 100 th percentile under the PSU award agreements with 200% of target units vesting, calculated based upon the closing price of our Common Stock on December 31, 2021 of $36.92 per share. +2022 +Proxy Statement | Matador Resources Company 77 +Table of Contents +EXECUTIVE COMPENSATION +The following table provides the vesting dates for +cash-settled phantom units and PSUs outstanding as of December 31, 2021: +Vesting Date +Award Type +Joseph Wm. +Foran +Matthew V. +Hairford +David E. +Lancaster +Craig +N. +Adams +Billy E. +Goodwin +2/13/22 +Phantom units +37,793 +19,842 +17,952 +16,062 +16,062 +3/10/22 +Phantom units +53,087 +27,871 +25,216 +22,562 +22,562 +6/4/22 +Phantom units +20,666 +10,000 +10,000 +9,333 +9,333 +12/31/22 +PSUs +(1) +318,520 +167,224 +151,298 +135,372 +135,372 +3/10/23 +Phantom units +53,087 +27,871 +25,217 +22,562 +22,562 +6/4/23 +Phantom units +20,667 +10,000 +10,000 +9,334 +9,334 +12/31/23 +PSUs +(1) +124,000 +60,000 +60,000 +56,000 +56,000 +6/4/24 +Phantom units +20,667 +10,000 +10,000 +9,334 +9,334 +Total Unvested Shares and Units +648,487 +332,808 +309,683 +280,558 +280,558 +(1) +The date shown reflects the end of the performance period established by the PSU award agreements. The PSUs vest upon the +Compensation Committee’s certification of the achievement of the performance goal, which must occur within 60 days of completion of the performance period. The number of units shown assumes achievement of the 100 th percentile under the PSU award agreements with 200% of target units vesting. +Option Exercises and Stock Vested +The following table provides information on the stock options exercised and stock awards (consisting of restricted stock and cash-settled phantom units) that vested for +each Named Executive Officer during 2021: +Option Awards +Stock Awards +Name +Number of +Shares +Acquired +on +Exercise +(#) +Value +Realized +on +Exercise +Number of +Shares +Acquired +on +Vesting (1) +(#) +Value +Realized on +Vesting +Joseph Wm. +Foran +36,683 +$ +352,157 +317,637 +$ +10,427,634 +Matthew V. +Hairford +149,306 +$ +1,643,332 +182,482 +$ +5,790,060 +David E. +Lancaster +132,316 +$ +2,316,829 +165,104 +$ +5,238,650 +Craig N. +Adams +113,331 +$ +1,055,819 +147,725 +$ +4,687,221 +Billy E. +Goodwin +95,295 +$ +896,187 +146,227 +$ +4,657,156 +(1) +Reflects the aggregate number of restricted shares or cash-settled phantom units that vested. Pursuant to the terms +thereof, the phantom units were settled in cash, and the grantee did not acquire any shares upon vesting. +Potential Payments upon Termination or Change in Control +Long-Term Incentive Plans +Equity awards under the Long-Term Plans, +other than the PSUs, vest upon a “change in control” for the Named Executive Officers according to the terms of their employment agreements described below. +Pursuant to the terms of the PSU award agreements, upon a “change in control,” the Named Executive Officer would vest in the number of PSUs that would have +otherwise vested based on the Company’s performance through an abbreviated performance period that ends immediately prior to the effective date of such change in control. +78 Matador Resources Company | 2022 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +For +definition of “change in control,” please see the 2012 Plan and 2019 Plan, as applicable, each of which is included as an exhibit to the Company’s most recent Annual Report on Form 10-K. +Employment Agreements +As described under “—Compensation +Discussion and Analysis—Severance and Separation Arrangements— Employment Agreements,” in contemplation of our initial public offering, on August 9, 2011, we entered into employment agreements with Messrs. Foran, Hairford and +Lancaster. In addition, in March 2014, we entered into an employment agreement with Mr. Adams, and effective February 2016, we entered into an employment agreement with Mr. Goodwin. We amended Mr. Goodwin’s employment agreement +in August 2018. The principal difference in Mr. Adams’ and Mr. Goodwin’s employment agreements as compared to the employment agreements of Messrs. Foran, Hairford and Lancaster is that Mr. Adams’ and +Mr. Goodwin’s agreements do not include a “modified single trigger” that would have allowed them to receive “change in control” severance if they terminated their agreements without “good reason” within 30 +days prior to or 12 months after a change in control. Pursuant to the terms of the employment agreements, we may be required to make certain payments to one or more of our Named Executive Officers upon the occurrence of certain events resulting in +such Named Executive Officer’s termination. The employment agreements do not provide for gross-ups for excise taxes on severance or other payments in connection with a change in control. For a detailed +description of the events that may trigger such payments, see “—Compensation Discussion and Analysis—Severance and Separation Arrangements— Employment Agreements.” +The employment agreements each contain a non-disclosure of confidential information provision that requires each Named Executive +Officer to maintain, both during and after employment, the confidentiality of information used by such Named Executive Officer in the performance of his job duties. +Additionally, each of the employment agreements contains a non-competition provision, pursuant to which each Named Executive +Officer has agreed that: (i) for six months following termination by us for total disability, or by such Named Executive Officer for good reason, or (ii) for 12 months, or 24 months with respect to Mr. Goodwin, following termination (a) by us +for just cause, (b) by such Named Executive Officer other than for good reason or (c) in connection with a change in control, such Named Executive Officer shall not, without our prior written consent (not to be unreasonably withheld if the +Named Executive Officer’s employment is terminated by the Named Executive Officer other than for good reason), directly or indirectly: (x) invest in (other than investments in publicly-owned companies which constitute not more than 1% of +the voting securities of any such company) a competing business with significant assets in the restricted area (each as defined below), or (y) participate in a competing business as a manager, employee, director, officer, consultant, +independent contractor or other capacity or otherwise provide, directly or indirectly, services or assistance to a competing business in a position that involves input into or direction of such competing business’s decisions within the +restricted area. +For purposes of the employment agreements: +• +“competing business” means any person or entity engaged in oil and natural gas exploration, development, +production and acquisition activities; +• +“significant assets” means oil and natural gas reserves with an aggregate fair market value of $25 million +or more; and +• +“restricted area” means a one-mile radius of any oil and natural gas +reserves held by us as of the end of the Named Executive Officer’s employment, plus any county or parish where we have significant assets as of the end of the Named Executive Officer’s employment. +For definitions of “change in control,” “good reason” and “just cause,” please see the employment agreement of each Named Executive +Officer, each of which is included as an exhibit to the Company’s most recent Annual Report on Form 10-K. +Furthermore, +other than Mr. Foran’s employment agreement, each employment agreement contains a non-solicitation provision, pursuant to which, during the restricted periods described above, subject to certain +2022 +Proxy Statement | Matador Resources Company 79 +Table of Contents +EXECUTIVE COMPENSATION +exceptions, Messrs. Hairford, Lancaster, Adams and Goodwin shall not, without our prior written consent, solicit for employment or a contracting relationship, or employ or retain any person who +is or has been, within six months prior to such time, employed by or engaged as an individual independent contractor by us or our affiliates or induce or attempt to induce any such person to leave his or her employment or independent contractor +relationship with us or our affiliates. +For the Named Executive Officer to receive any severance payments described below for termination by us without just cause, +by the Named Executive Officer for good reason or, following a change in control, by us without cause or by the Named Executive Officer with good reason, with respect to Mr. Adams and Mr. Goodwin, or with or without good reason, with +respect to Messrs. Foran, Hairford and Lancaster, the Named Executive Officer must comply with the applicable non-disclosure, non-competition and non-solicitation provisions described above. +Finally, as a condition to receiving any severance payments and other payments under +their respective employment agreements, each Named Executive Officer is required to execute a separation agreement and release in favor of us. +80 Matador Resources Company | 2022 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +To describe +the payments and benefits that are triggered for each event of termination, we have created the following table estimating the payments and benefits that would be paid to each Named Executive Officer under each element of our compensation program +assuming that such Named Executive Officer’s employment agreement terminated on December 31, 2021, the last day of our 2021 fiscal year. In all cases, the amounts were valued as of December 31, 2021, based upon, where applicable, +$36.92 per share (the closing price of our Common Stock on such date). The amounts in the table below are calculated as of December 31, 2021 pursuant to SEC rules and are not intended to reflect actual payments that may be made. Actual payments +that may be made would be based on the dates and circumstances of the applicable event. +Payment Upon Change in Control or Termination +Executive Officer +Category of +Payment +Upon Death or +Total +Disability (1) +Upon Mutual +Agreement or +Dissolution/ +Liquidation (1) +Termination by +Us Without Just +Cause or by +Named Executive +Officer for Good +Reason (1) +Termination +Following a +Change in Control +Without Cause +or by Named +Executive Officer +With or Without +Good +Reason (2) +Change in +Control +Without +Termination (3) +Joseph Wm. Foran +Salary +$ +— +$ +— +$ +2,600,000 +(4) +$ +3,900,000 +(5) +$ +— +Bonus +1,300,000 +(6) +1,300,000 +(6) +2,600,000 +(7) +3,900,000 +(8) +— +Vesting equity: (9) +Phantom Units +— +— +— +7,604,302 +— +PSUs +— +— +— +8,168,919 +8,168,919 +Total +$ +1,300,000 +$ +1,300,000 +$ +5,200,000 +$ +23,573,221 +$ +8,168,919 +Matthew V. Hairford +Salary +$ +— +$ +— +$ +1,087,500 +(10) +$ +2,175,000 +(5) +$ +— +Bonus +580,000 +(6) +580,000 +(6) +870,000 +(11) +1,740,000 +(8) +— +Vesting equity: (9) +Phantom Units +— +— +— +3,898,161 +— +PSUs +— +— +— +4,194,555 +4,194,555 +Total +$ +580,000 +$ +580,000 +$ +1,957,500 +$ +12,007,716 +$ +4,194,555 +David E. +Lancaster +Salary +$ +— +$ +— +$ +1,087,500 +(10) +$ +2,175,000 +(5) +$ +— +Bonus +580,000 +(6) +580,000 +(6) +870,000 +(11) +1,740,000 +(8) +— +Vesting equity: (9) +Phantom Units +— +— +— +3,632,374 +— +PSUs +— +— +— +3,900,561 +3,900,561 +Total +$ +580,000 +$ +580,000 +$ +1,957,500 +$ +11,447,935 +$ +3,900,561 +Craig N. Adams +Salary +$ +— +$ +— +$ +1,087,500 +(10) +$ +2,175,000 +(5) +$ +— +Bonus +580,000 +(6) +580,000 +(6) +870,000 +(11) +1,740,000 +(8) +— +Vesting equity: (9) +Phantom Units +— +— +— +3,292,747 +— +PSUs +— +— +— +3,532,727 +3,532,727 +Total +$ +580,000 +$ +580,000 +$ +1,957,500 +$ +10,740,474 +$ +3,532,727 +Billy E. Goodwin +Salary +$ +— +$ +— +$ +1,087,500 +(10) +$ +2,175,000 +(5) +$ +— +Bonus +580,000 +(6) +580,000 +(6) +870,000 +(11) +1,740,000 +(8) +— +Vesting equity: (9) +Phantom Units +— +— +— +3,292,747 +— +PSUs +— +— +— +3,532,727 +3,532,727 +Total +$ +580,000 +$ +580,000 +$ +1,957,500 +$ +10,740,474 +$ +3,532,727 +2022 +Proxy Statement | Matador Resources Company 81 +Table of Contents +EXECUTIVE COMPENSATION +(1) +Amounts due upon death, total disability, mutual agreement, dissolution or liquidation, termination by us without cause or +termination by a Named Executive Officer for good reason are payable in a lump sum on the 60th day following the date of termination unless otherwise required by Section 409A of the Code. +(2) +Amounts due following a change in control are payable in a lump sum on the date that immediately follows six months from +the date of termination or, if earlier, within 30 days following such Named Executive Officer’s death. +(3) +Pursuant to the terms of the PSU award agreements, upon a “change in control,” the Named Executive Officer would +vest in the number of PSUs that would have otherwise vested based on the Company’s performance through an abbreviated performance period that ends immediately prior to the effective date of such change in control. The amount shown assumes +achievement of the 50th percentile with 100% of target units vesting. +(4) +Represents two times such Named Executive Officer’s base salary as of the termination date. +(5) +Represents three times such Named Executive Officer’s base salary as of the termination date. +(6) +Represents an amount equal to the average annual cash bonus pursuant to the Cash Incentive Plan paid to such Named +Executive Officer for 2021 and 2020, respectively. Despite the Company meeting or exceeding the maximum level of each 2020 performance metric, the Named Executive Officers and the Board agreed that the Named Executive Officers would forego receiving +any 2020 annual cash bonuses. +(7) +Represents two times an amount equal to the average annual cash bonus pursuant to the Cash Incentive Plan paid to such +Named Executive Officer for 2021 and 2020, respectively. Despite the Company meeting or exceeding the maximum level of each 2020 performance metric, the Named Executive Officers and the Board agreed that the Named Executive Officers would forego +receiving any 2020 annual cash bonuses. +(8) +Represents three times an amount equal to the average annual cash bonus pursuant to the Cash Incentive Plan paid to such +Named Executive Officer for 2021 and 2020, respectively. Despite the Company meeting or exceeding the maximum level of each 2020 performance metric, the Named Executive Officers and the Board agreed that the Named Executive Officers would forego +receiving any 2020 annual cash bonuses. +(9) +The employment agreements provide for accelerated and full vesting of unvested incentive awards held by the Named +Executive Officers in the event that such Named Executive Officer is terminated without “Just Cause” or terminates his employment with or without “Good Reason,” with respect to Messrs. Foran, Hairford and Lancaster, within 30 +days prior to, or 12 months following, a “change in control.” With respect to Messrs. Adams and Goodwin, the employment agreements provide for accelerated and full vesting of unvested incentive awards held by these Named Executive Officers +in the event that such Named Executive Officer is terminated without “Just Cause” or terminates his employment with “Good Reason,” within 30 days prior to, or 12 months following, a “change in control.” The amounts +disclosed reflect the closing price of our Common Stock on December 31, 2021 of $36.92 per share multiplied by the number of unvested phantom units or PSUs, as applicable, held by such Named Executive Officer on December 31, 2021. Pursuant +to the terms of the PSU award agreements, upon a change in control, the Named Executive Officer would vest in the number of PSUs that would have otherwise vested based on the Company’s performance through an abbreviated performance period that +ends immediately prior to the effective date of such event. With respect to PSUs, the amount shown assumes achievement of the 50th percentile with 100% of target units vesting. +(10) +Represents 1.5 times such Named Executive Officer’s base salary as of the termination date. +(11) +Represents 1.5 times an amount equal to the average annual cash bonus pursuant to the Cash Incentive Plan paid to such +Named Executive Officer for 2021 and 2020, respectively. Despite the Company meeting or exceeding the maximum level of each 2020 performance metric, the Named Executive Officers and the Board agreed that the Named Executive Officers would forego +receiving any 2020 annual cash bonuses. +82 Matador Resources Company | 2022 Proxy Statement +Table of Contents +CHIEF EXECUTIVE OFFICER PAY RATIO +CHIEF EXECUTIVE OFFICER PAY RATIO +As required by Section 953(b) of the Dodd-Frank Wall Street Reform and +Consumer Protection Act and Item 402(u) of Regulation S-K (“Item 402(u)”), we are providing the following information regarding the ratio of the annual total compensation of our median-compensated +employee (as described below) and that of our Chairman and Chief Executive Officer, Joseph Wm. Foran. We believe that the pay ratio reflected below is a reasonable estimate calculated in a manner consistent with Item 402(u). +The SEC’s rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow +companies to adopt a variety of methodologies, to apply certain exclusions and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices. As a result, the pay ratio reported by other companies +may not be comparable to the pay ratio reported below, as other companies have different employee populations and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay +ratios. +Pursuant to Item 402(u), we identified the median-compensated employee of all our employees (other than Mr. Foran) using our employee population as of +December 15, 2021, which consisted of 284 employees (all of which are located in the United States), and using a compensation measure of total cash compensation, consisting of total base pay and bonuses earned during the year ended +December 31, 2021. The compensation measure was consistently applied to all employees. Compensation was annualized on a straight-line basis for employees who did not work all of 2021. +After identifying the median-compensated employee using the consistently applied compensation measure, we then calculated that employee’s 2021 annual total +compensation in the same manner as the Named Executive Officers’ total compensation, as reported in the Summary Compensation Table. +For 2021, the annual total +compensation of our median-compensated employee was $155,887, and the annual total compensation of Mr. Foran was $9,057,189, as reported in the Summary Compensation Table. Based on this information, for 2021, the ratio of Mr. Foran’s +annual total compensation to the annual total compensation of our median-compensated employee was estimated to be 58 to 1. +2022 +Proxy Statement | Matador Resources Company 83 +Table of Contents +DIRECTOR COMPENSATION +DIRECTOR +COMPENSATION +Name +Fees Earned or +Paid in Cash +Stock +Awards (1) +All Other +Compensation +Total +Reynald A. Baribault +$ +178,469 +$ +134,996 +$ +— +$ +313,465 +R. Gaines Baty (2) +$ +169,719 +$ +134,996 +$ +— +$ +304,715 +Craig T. Burkert (3) +$ +41,563 +$ +134,996 +$ +— +$ +176,559 +William M. Byerley +$ +112,469 +$ +134,996 +$ +— +$ +247,465 +Monika U. Ehrman +$ +86,219 +$ +134,996 +$ +— +$ +221,215 +James M. Howard +$ +90,415 +$ +134,996 +$ +— +$ +225,411 +Timothy E. Parker (4) +$ +194,469 +$ +134,996 +$ +— +$ +329,465 +Julia P. Forrester Rogers +$ +91,469 +$ +134,996 +$ +— +$ +226,465 +Kenneth L. Stewart +$ +87,219 +$ +134,996 +$ +— +$ +222,215 +(1) +All stock awards represent RSUs with a value based on the fair market value of the RSUs on the date of grant. RSUs granted +for 2021-2022 service vest immediately prior to the election of the nominees for director at the 2022 Annual Meeting. See “—Compensation for 2021-2022.” As of December 31, 2021, each individual who served as a director during +2021 held the following outstanding unvested stock awards, all of which were RSUs. +Name +Outstanding Stock Awards +Reynald A. Baribault +4,043 +R. Gaines Baty +4,043 +Craig T. Burkert +0 +William M. Byerley +4,043 +Monika U. Ehrman +4,043 +James M. Howard +4,043 +Timothy E. Parker +4,043 +Julia P. Forrester Rogers +4,043 +Kenneth L. Stewart +4,043 +(2) +Mr. Baty serves as deputy lead independent director. The deputy lead independent director receives an additional cash +retainer of $50,000 annually. +(3) +Mr. Burkert retired from the Board effective June 5, 2021. +(4) +Mr. Parker serves as lead independent director. The lead independent director receives an additional cash retainer of +$100,000 annually. +84 Matador Resources Company | 2022 Proxy Statement +Table of Contents +DIRECTOR COMPENSATION +Compensation for 2021-2022 +For the period commencing at the 2021 Annual Meeting and until the 2022 Annual Meeting, our non-employee directors’ +compensation program was as set forth below: +• +annual cash retainer of $60,000; +• +cash meeting fee of $1,000 per day for each day of Board and committee service; +• +the chair of each of the below committees received the following additional, annual cash retainer: +Committee +Retainer +Operations and Engineering +$ +50,000 +Prospect +$ +50,000 +Audit +$ +35,000 +Strategic Planning and Compensation +$ +35,000 +Environmental, Social and Corporate Governance +$ +15,000 +Nominating +$ +15,000 +Capital Markets and Finance +$ +15,000 +Marketing and Midstream +$ +15,000 +• +the lead independent director received an additional cash retainer of $100,000; +• +the deputy lead independent director received an additional cash retainer of $50,000; and +• +at the meeting of the Board immediately following the 2021 Annual Meeting, each +non-employee director received a one-time annual grant of RSUs equal to approximately $135,000 in value with the restrictions lapsing immediately prior to the election +of the nominees for director at the 2022 Annual Meeting (the “2021 RSU Award”). +If a director was appointed or elected to the Board at +any time following the 2021 Annual Meeting but prior to the 2022 Annual Meeting, such director was granted the applicable percentage of the 2021 RSU Award detailed below, effective on the date of such director’s appointment: (i) if a +director was appointed or elected to the Board within 90 days after the 2021 Annual Meeting, such director was entitled to receive 100% of the 2021 RSU Award; (ii) if a director was appointed or elected to the Board more than 90 days but 180 or +fewer days after the 2021 Annual Meeting, such director was entitled to receive 75% of the 2021 RSU Award; (iii) if a director was appointed or elected to the Board more than 180 days but 270 or fewer days after the 2021 Annual Meeting, such +director was entitled to receive 50% of the 2021 RSU Award; and (iv) if a director was appointed or elected to the Board more than 270 days after the 2021 Annual Meeting but prior to the 2022 Annual Meeting, such director was entitled to +receive 25% of the 2021 RSU award. +In addition, we reimburse our directors for travel, lodging and related expenses incurred in attending Board and committee +meetings. +Director Stock Ownership Guidelines +Our non-employee +directors are expected to follow our voluntary stock ownership guidelines for non-employee directors. Within three years of becoming a director, each non-employee +director is expected to own $250,000 of Common Stock and continue to hold such shares while serving as a director. As of December 31, 2021, all directors owned in excess of $250,000 of Common Stock. Shares that count toward the stock ownership +guidelines include RSUs. +2022 +Proxy Statement | Matador Resources Company 85 +Table of Contents +SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS +SECURITIES +AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS +The following table presents the securities authorized for issuance under our equity compensation +plans as of December 31, 2021: +Plan Category +Number of +Shares to be +Issued Upon +Exercise +of +Outstanding +Options, +Warrants +and +Rights (2) +Weighted- +Average +Exercise +Price +of +Outstanding +Options, +Warrants +and Rights (3) +Number of +Shares +Remaining +Available for +Future +Issuance +Under Equity +Compensation +Plans +Equity compensation plans approved by security +holders (1) +2,248,984 +$ +22.92 +1,571,972 +Equity compensation plans not approved by +security holders +— +— +— +Total +2,248,984 +$ +22.92 +1,571,972 +(1) +Includes shares authorized under the 2012 Plan and the 2019 Plan. No further awards may be made under the 2012 Plan, +although awards remain outstanding thereunder. +(2) +Includes the number of PSUs granted under the 2012 Plan and the 2019 Plan based on the maximum level of achievement, which +may be more than the number of shares issued in settlement of PSUs that are ultimately earned. +(3) +Reflects the weighted-average exercise price of stock options granted under the 2012 Plan and 2019 Plan. RSUs and PSUs are +not reflected in this column as they do not have an exercise price. +86 Matador Resources Company | 2022 Proxy Statement +Table of Contents +TRANSACTIONS WITH RELATED PERSONS +TRANSACTIONS WITH RELATED PERSONS +Except as disclosed below, during 2021, there was not, nor was there proposed +as of December 31, 2021, any transaction or series of similar transactions to which we were or are a party in which the amount involved exceeded or exceeds $120,000 and in which any of our directors, executive officers, holders of more than 5% +of any class of our voting securities or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest, other than compensation arrangements with directors and executive officers, which +are described in “Executive Compensation—Compensation Discussion and Analysis” and “Director Compensation” above. +Working Interest and Overriding Royalty Interest Owners +Joseph Wm. Foran, Chairman and Chief Executive Officer, and certain of Mr. Foran’s affiliated entities (collectively, the “Foran Entities”) are +working interest owners and/or overriding royalty interest owners in certain properties operated by the Company or in which the Company also holds a working interest. As working interest owners, the Foran Entities are required to pay their +proportionate share of all costs and are entitled to receive their proportionate share of revenues in the normal course of business. As overriding royalty interest owners, the Foran Entities are entitled to receive their proportionate share of +revenues from the wells in which they own an interest in the normal course of business. During 2021, revenues, net of costs, received by the Foran Entities in their capacity as working interest owners or overriding royalty interest owners were +approximately $5.5 million (the “Related Net Revenue Payments”). The Related Net Revenue Payments represent less than 1% of our total third-party net revenue payments during 2021. +In our capacity as operator, we incur drilling and operating costs that are billed to our partners based on their respective working interests. During 2021, our joint +interest billings to the Foran Entities attributable to their share of costs were approximately $2.1 million (the “Related Joint Interest Billings”). The Related Joint Interest Billings represent less than 1% of our total joint +interest billings during 2021. As a result of this ownership by the Foran Entities, from time to time, we will be in a net receivable or net payable position with certain of the Foran Entities. We do not consider any net receivables from the Foran +Entities to be uncollectible. +The Audit Committee reviewed the terms of the working interests and/or overriding royalty interests of the Foran Entities for +potential conflicts of interest under the Related Person Transaction Policy, and, after being fully informed as to Mr. Foran’s relationships and interests in such transactions and all other material facts related to the Related Net Revenue +Payments and Related Joint Interest Billings, determined that such transactions and the Related Net Revenue Payments and Related Joint Interest Billings were fair to the Company and recommended such transactions and the Related Net Revenue Payments +and Related Joint Interest Billings to the full Board for approval and ratification. The Board subsequently approved and ratified the transactions and the Related Net Revenue Payments and Related Joint Interest Billings. +Joint Venture Relationship +The Company has entered into a joint venture (the “Joint +Venture”) with Spearpoint Resources Company (“Spearpoint”) to generate value through a conventional vertical well development program in our Twin Lakes asset area. An adult child of Mr. Foran is the founder of Spearpoint and +serves as an executive officer and director of Spearpoint. Mr. Foran’s child has a Bachelor of Arts degree in Economics from Princeton University, a Master’s of Science degree in Petroleum Engineering from Texas A&M University and +a Master’s degree in Business Administration from Rice University. Mr. Foran’s child worked for a major oil and gas company as a petroleum petrophysicist and has served for over 10 years and achieved the rank of Major in the United +States Marine Corp Reserve. Mr. Foran’s child may perform shared services to the Joint Venture, for which the Joint Venture would reimburse Spearpoint. +During 2021, the Company made capital contributions to the Joint Venture of seismic data and approximately $4.0 million (the “Capital Contributions”). +The Company did not receive any distributions from the Joint Venture in 2021, and the Joint Venture did not pay Spearpoint for any shared services provided by Mr. Foran’s child, +2022 +Proxy Statement | Matador Resources Company 87 +Table of Contents +TRANSACTIONS WITH RELATED PERSONS +although such distributions may be received by the Company or such shared service amounts may be paid by Spearpoint in the future. +The Audit Committee reviewed the terms of the Joint Venture for potential conflicts of interest under the Related Person Transaction Policy, and, after being fully +informed as to Mr. Foran’s relationships and interests in such transactions and all other material facts related to the Joint Venture, determined that such transactions, including the Capital Contributions, were fair to the Company and +recommended such transactions to the full Board for approval and ratification. The Board subsequently approved and ratified the transactions, including the Capital Contributions. +Certain Employment Relationships +Billy E. Goodwin served as an executive officer during 2021 and +currently serves as the Company’s President – Operations. During 2021, two of Mr. Goodwin’s adult children were employees of the Company and had been employees since 2014 and 2015, respectively. One of Mr. Goodwin’s +children resigned in 2021. Each child earned in 2021, and the remaining child that is employed by the Company in 2022 is expected to be compensated in 2022, between $120,000 and $500,000. One of Mr. Goodwin’s children has a Bachelor of +Science degree in Petroleum Engineering from the University of Tulsa and over 11 years of industry experience, including as a regional drilling supervisor for another publicly traded exploration and production company. Mr. Goodwin’s other +child has a Bachelor of Science in Business Administration degree in Energy Management from the University of Tulsa and a Bachelor of Arts degree in General Business and Management from Oklahoma State University. He also has over 11 years of +industry experience, including as a drilling fluids engineer for a publicly traded oilfield services company and as a landman for a publicly traded exploration and production company. The Audit Committee reviewed the terms of the employment +arrangements for potential conflicts of interest under the Company’s Related Person Transaction Policy and, after being fully informed as to the employment arrangements and historical and anticipated compensation of Mr. Goodwin’s +adult children, and all other material facts related to the relationship, determined that the employment arrangements were fair to the Company and recommended the employment arrangements to the full Board for approval and ratification. The Board +subsequently approved and ratified such employment arrangements. +Reynald A. Baribault is a member of the Board. Mr. Baribault’s sister-in-law has been an employee of the Company since 2016 and earned in 2021, and is expected to be compensated in 2022, between $120,000 and $250,000. +Mr. Baribault’s sister-in-law has a diploma from the Executive Secretarial School and is a certified legal assistant, having completed the Southern Methodist +University Legal Assistants Program. She has over 39 years of experience as a legal assistant. The Audit Committee reviewed the terms of the employment arrangement for potential conflicts of interest under the Company’s Related Person +Transaction Policy and, after being fully informed as to the employment arrangement and historical and anticipated compensation of Mr. Baribault’s +sister-in-law, and all other material facts related to the relationship, determined that the employment arrangement was fair to the Company and recommended the +employment arrangement to the full Board for approval and ratification. The Board subsequently approved and ratified such employment arrangement. +An adult child of +Mr. Foran has been an employee of the Company since 2015 and earned in 2021, and is expected to be compensated in 2022, between $120,000 and $250,000. Mr. Foran’s child has a Bachelor of Science degree in Human Resource Development +and a Master of Science degree in Human Resource Management, both from Texas A&M University. She has more than 10 years of industry experience, including with another publicly traded exploration and production company. Another adult child of +Mr. Foran was employed as a consultant to the Company in 2021 and was compensated, and is expected to be compensated in 2022, between $120,000 and $250,000. Mr. Foran’s child has a degree from Yale University and a Master’s +degree in Business Administration from the University of Chicago and also worked for a major oil and gas company for a number of years. The Audit Committee reviewed the terms of the employment arrangement and the consulting arrangement for potential +conflicts of interest under the Company’s Related Person Transaction Policy and, after being fully informed as to the employment arrangement and the consulting arrangement and historical and anticipated compensation of Mr. Foran’s +adult children, and all other material facts related to the relationship, determined that the employment arrangement and the consulting arrangement each was fair to the Company and +88 Matador Resources Company | 2022 Proxy Statement +Table of Contents +TRANSACTIONS WITH RELATED PERSONS +recommended the employment arrangement and the consulting arrangement to the full Board for approval and ratification. The Board subsequently approved and ratified such employment arrangement and +such consulting arrangement. +Procedures for Approval of Related Person Transactions +Pursuant to the Related Person Transaction Policy as in effect +as of December 31, 2021, a “Related Person Transaction” is defined as a transaction (including any financial transaction, arrangement or relationship (including any indebtedness or guarantee of indebtedness)), or series of related +transactions, or any material amendment to any such transaction, in which a Related Person (as defined below) has or will have a direct or indirect material interest and in which we are a participant, other than: +• +a transaction involving compensation of directors that is required to be reported in our proxy statement under Item 402 of +the SEC’s compensation disclosure requirements (“Item 402”); +• +any employment by us of an executive officer if: +¡ +the related compensation is required to be reported in our proxy statement under Item 402; or +¡ +the executive officer is not an “immediate family member” of another executive officer or director of the +Company, the related compensation would be reported in our proxy statement under Item 402 if the executive officer was a “named executive officer” and the Compensation Committee approved (or recommended that the Board approve) such +compensation; +• +a transaction with a Related Person involving less than $120,000; +• +a transaction in which the interest of the Related Person arises solely from the ownership of a class of our equity +securities and all holders of that class receive the same benefit on a pro rata basis; +• +a transaction in which a Related Person has an indirect interest solely as a result of being (a) a director or, +together with all other Related Persons, a less than 10% beneficial owner of an equity interest in another entity, or both, or (b) a limited partner in a partnership in which the Related Person, together with all other Related Persons, has an +interest of less than 10%; +• +a transaction in which the rates or charges involved therein are determined by competitive bids, or a transaction that +involves the rendering of services as a common or contract carrier, or public utility, at rates or charges fixed in conformity with law or governmental authority; +• +any transaction with another company at which a Related Person’s only relationship is as an employee (other than an +executive officer), if the aggregate amount involved does not exceed the greater of $1,000,000, or 2% of that company’s total annual revenues; +• +any charitable contribution, grant or endowment by us to a charitable organization, foundation or university at which a +Related Person’s only relationship is as an employee (other than an executive officer), if the aggregate amount involved does not exceed the lesser of $1,000,000, or 2% of the charitable organization’s total annual receipts; or +• +any transaction with another publicly traded company where the Related Person’s interest arises solely from beneficial +ownership of more than 5% of our Common Stock and ownership of a non-controlling interest in the other publicly traded company. +“Related Person” means: +• +any person who is, or at any time during the applicable period was, one of our executive officers or one of our directors +or nominees for director; +• +any person who is known by us to be the beneficial owner of more than 5% of our Common Stock; +• +any immediate family member of any of the foregoing persons, which means any child, stepchild, parent, stepparent, spouse, +sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, sister-in-law or person residing (other than a tenant or employee) in the home of a director, nominee for director, executive officer or a beneficial owner of more than 5% of +our Common Stock; and +2022 +Proxy Statement | Matador Resources Company 89 +Table of Contents +TRANSACTIONS WITH RELATED PERSONS +• +any entity that is owned or controlled by any of the foregoing persons or in which any of the foregoing persons is a +general partner or executive officer or in which such person, together with all other of the foregoing persons, owns 10% or more of the equity interests thereof. +Pursuant to the Related Person Transaction Policy, the Audit Committee must review all material facts of each Related Person Transaction and recommend either approval +or disapproval of the Related Person Transaction to the full Board, subject to certain limited exceptions. In determining whether to recommend approval or disapproval of the Related Person Transaction, the Audit Committee must, after reviewing all +material facts of the Related Person Transaction and the Related Person’s relationship and interest, determine whether the Related Person Transaction is fair to the Company. Further, the policy requires that all Related Person Transactions be +disclosed in our filings with the SEC and/or our website in accordance with applicable laws, rules and regulations. +90 Matador Resources Company | 2022 Proxy Statement +Table of Contents +SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT +SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT +The following table presents the beneficial +ownership of our Common Stock as of April 13, 2022 for (i) each person beneficially owning more than 5% of the outstanding shares of our Common Stock, (ii) each director of the Company, (iii) each executive officer of the Company +listed in the Summary Compensation Table and (iv) all of our directors and executive officers as a group. Except pursuant to applicable community property laws and except as otherwise indicated, each shareholder possesses sole voting and +investment power with respect to its, his or her shares. The business address of each of our directors and executive officers is c/o Matador Resources Company, One Lincoln Centre, 5400 LBJ Freeway, Suite 1500, Dallas, Texas 75240. The applicable +percentage ownership is based on 118,129,981 shares of our Common Stock issued and outstanding as of April 13, 2022, plus, on an individual basis, the right of that individual to (i) obtain Common Stock upon exercise of stock options or +(ii) obtain Common Stock upon the vesting or delivery of RSUs, in each case within 60 days of April 13, 2022. The information is based on Form 3s, Form 4s, Form 5s, Schedule 13Ds, Schedule 13Gs and Schedule 13G/As filed through +April 13, 2022. +Name +Amount and +Nature of +Ownership of +Common Stock +Percent +of Class +Directors and Named Executive Officers +Joseph Wm. +Foran (1) +5,101,200 +4.3% +Craig N. +Adams (2) +231,083 +* +Reynald A. +Baribault (3) +132,859 +* +R. Gaines +Baty (4) +59,173 +* +William M. +Byerley (5) +44,255 +* +Monika U. +Ehrman (6) +27,763 +* +Julia P. Forrester Rogers (7) +62,567 +* +Billy E. +Goodwin (9) +218,351 +* +James M. +Howard (8) +118,174 +* +Timothy E. +Parker (10) +65,096 +* +Kenneth L. +Stewart (11) +79,232 +* +Matthew V. +Hairford (12) +460,114 +* +David E. +Lancaster (13) +565,337 +* +All Directors and Executive Officers as a Group (15 persons) (14) +6,607,878 +5.6% +Other 5% Owners +BlackRock, +Inc. (15) +17,085,728 +14.5% +The Vanguard +Group (16) +11,855,358 +10.0% +Dimensional Fund Advisors LP (17) +6,615,666 +5.6% +* +Less than one percent (1%) +(1) +Includes (i) 1,105,913 shares of Common Stock held of record by Sage Resources, Ltd., a limited partnership owned by the +Foran family, including Mr. Foran; (ii) 17,488 shares of Common Stock held of record by Mr. Foran’s spouse as her separate property; (iii) 105,000 shares and 40,000 shares of Common Stock held of record by The Joseph Donald Foran +Family Trust 2008 and The Foran Family Special Needs Trust, respectively, for which Mr. Foran is the co-trustee and over which Mr. Foran has shared voting and investment power with other members of +his family; (iv) 60,796 shares of Common Stock held of record by each of the JWF 2019-2 GRAT and the NNF 2019-2 GRAT, for which Mr. Foran is the trustee and over +which Mr. Foran has sole voting and investment power; (v) 114,236 shares of Common Stock held of record by each of the JWF 2020-1 GRAT and the NNF 2020-1 GRAT, for +which Mr. Foran is the trustee and over which Mr. Foran has sole voting and investment power; (vi) 473,217 shares of Common Stock held of record by each of the JWF 2020-2 GRAT and the NNF 2020-2 GRAT, for which Mr. Foran is the trustee and over which Mr. Foran has sole voting and investment power; (vii) 290,000 shares of Common Stock held of record by each of the JWF 2021-1 GRAT and the NNF 2021-1 +2022 +Proxy Statement | Matador Resources Company 91 +Table of Contents +SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT +GRAT, for which Mr. Foran is the trustee and over which Mr. Foran has sole voting and investment power; (viii) 389,634 shares of Common Stock held of record by the Foran 2012 Security +Trust, for which Mr. Foran is the trustee and over which Mr. Foran has sole voting and investment power; (ix) 435,566 shares of Common Stock held of record by the Foran 2012 Savings Trust, for which Mr. Foran’s spouse is a +trustee; and (x) 1,177,568 shares held of record, collectively, by the LRF 2011 Non-GST Trust, WJF 2011 Non-GST Trust, JNF 2011 +Non-GST Trust, SIF 2011 Non-GST Trust and MCF 2011 Non-GST Trust, for which trusts Mr. Foran and his spouse, as settlors of +each of the Non-GST Trusts, retain the power of substitution with respect to the property of the Non-GST Trusts. Also includes 250,171 shares of Common Stock issuable to +Mr. Foran upon the exercise of stock options. +(2) +Includes 113,331 shares of Common Stock issuable to Mr. Adams upon the exercise of stock options and 2,850 shares of +Common Stock held of record by his 401(k) account. +(3) +Includes 6,500 shares of Common Stock held of record by the Individual Retirement Account of Mr. Baribault. Also +includes 105,554 shares of Common Stock held of record by the Reynald A. Baribault Maritalized Revocable Living Trust and 7,500 shares of Common Stock held of record by the Sally K. Baribault Maritalized Revocable Living Trust, for which trusts both +Mr. Baribault and his spouse are trustees and share voting and investment power. Also includes 8,262 shares of Common Stock issuable to Mr. Baribault upon the vesting and delivery of RSUs. +(4) +Includes 19,496 shares of Common Stock issuable to Mr. Baty upon the vesting and delivery of RSUs. +(5) +Includes 16,657 shares of Common Stock issuable to Mr. Byerley upon the vesting and delivery of RSUs. +(6) +Includes 8,262 shares of Common Stock issuable to Ms. Ehrman upon the vesting of RSUs. +(7) +Includes 19,785 shares of Common Stock held of record by the Individual Retirement Account of Ms. Rogers and 5,800 +shares of Common Stock held of record by Ms. Rogers’ spouse. Also includes 8,262 shares of Common Stock issuable to Ms. Rogers upon the vesting of RSUs. +(8) +Includes 50,000 shares of Common Stock held of record by the Individual Retirement Account of Mr. Howard and 50,000 +shares of Common Stock held by PBH Family Partners, Ltd., a family limited partnership owned by Mr. Howard’s family, including Mr. Howard, and over which Mr. Howard and his spouse share voting and investment authority. Also +includes 4,131 shares of Common Stock issuable to Mr. Howard upon the vesting and delivery of RSUs. +(9) +Includes 95,295 shares of Common Stock issuable to Mr. Goodwin upon the exercise of stock options and 5,000 shares of +Common Stock held of record by his 401(k) account. +(10) +Includes 8,262 shares of Common Stock issuable to Mr. Parker upon the vesting of RSUs. +(11) +Includes 20,794 shares of Common Stock issuable to Mr. Stewart upon the vesting and delivery of RSUs. +(12) +Information based solely on a Form 4 filing filed with the SEC on February 15, 2022. Mr. Hairford retired as the +President of the Company on March 31, 2022. +(13) +Information based solely on a Form 4 filing filed with the SEC on January 4, 2022. Mr. Lancaster retired as the +Executive Vice President and Chief Financial Officer of the Company on March 31, 2022. +(14) +Includes an aggregate of 18,772 shares of Common Stock, which our executive officers as a group have the right to acquire +within 60 days of April 13, 2022 upon the exercise of stock options. Also includes 56,398 shares of restricted stock held by our executive officers. Pursuant to the terms of such restricted stock grants, the executive officers have the right to +vote such shares but may only dispose of such shares to the extent they have vested. Also includes 120,282 shares of Common Stock issuable to directors upon the vesting and delivery of RSUs. +(15) +Information based solely on a Schedule 13G/A filed with the SEC on January 27, 2022. The Schedule 13G/A reports that +BlackRock, Inc. (“BlackRock”) beneficially owns 17,085,728 shares, has sole voting power with respect to 16,774,950 shares and has sole dispositive power with respect to 17,085,728 shares. According to the Schedule 13G/A, BlackRock’s +address is 55 East 52nd Street, New York, NY 10055. +(16) +Information based solely on a Schedule 13G/A filed with the SEC on February 10, 2022. The Schedule 13G/A reports that The +Vanguard Group (“Vanguard”) beneficially owns 11,855,358 shares, has shared voting power with respect to 219,153 shares, has sole dispositive power with respect to 11,549,079 shares and has shared dispositive power with respect to 306,279 +shares. According to the Schedule 13G/A, Vanguard’s address is 100 Vanguard Blvd, Malvern, PA 19355. +(17) +Information based solely on a Schedule 13G/A filed with the SEC on February 8, 2022. The Schedule 13G/A reports that +Dimensional Fund Advisors LP (“Dimensional”) beneficially owns 6,615,666 shares, has sole voting power with respect to 6,521,264 shares and has sole dispositive power with respect to 6,615,666 shares. According to the Schedule 13G/A, +Dimensional furnishes investment advice to four investment companies registered under the Investment Company Act of 1940, and serves as investment manager or sub-advisor to certain other commingled funds, +group trusts and separate accounts (collectively, “Funds”). In certain cases, subsidiaries of Dimensional may act as an advisor or sub-advisor to certain Funds. In its role as investment advisor, sub-advisor and/or manager, Dimensional may possess voting and/or investment power over the securities of the Company that are owned by the Funds, and may be deemed to be the beneficial owner of the shares of the +Company held by the Funds. However, according to the Schedule 13G/A, all such securities are owned by the Funds and Dimensional disclaims beneficial ownership of such securities. According to the Schedule 13G/A, Dimensional’s address is 6300 +Bee Cave Road, Building One, Austin, TX 78746. +92 Matador Resources Company | 2022 Proxy Statement +Table of Contents +ADDITIONAL INFORMATION +ADDITIONAL INFORMATION +Shareholder Proposals for the 2023 Proxy +Statement +For shareholder proposals to be included +in the Company’s proxy statement and form of proxy relating to the 2023 Annual Meeting, such proposals must be received by the Company at its offices in Dallas, Texas, addressed to the Corporate Secretary of the Company, no later than +December 29, 2022. Upon timely receipt of any such proposal, the Company will determine whether or not to include such proposal in the proxy statement and proxy in accordance with applicable regulations and provisions governing the solicitation +of proxies. +Director Nominations or Other Business for Presentation at the 2023 Annual Meeting +Under the Bylaws, certain procedures are provided that a +shareholder must follow in order to place in nomination persons for election as directors at an annual meeting of shareholders or to introduce an item of business at an annual meeting of shareholders. These procedures provide, generally, among other +things, that shareholders desiring to place in nomination persons for election as directors, and/or bring a proper subject of business before an annual meeting, must do so by a written notice timely received (on or before March 14, 2023, but no +earlier than February 12, 2023, for the 2023 Annual Meeting) to the Corporate Secretary of the Company containing the name and address of the shareholder and the number of shares of the Company’s Common Stock beneficially owned by the +shareholder. If the notice relates to a nomination for director, it must also set forth the name, age, business and residence addresses of the candidate, the candidate’s résumé or a listing of his or her qualifications to be a +director of the Company, the person’s written consent to be a director if selected by the Nominating Committee, nominated by the Board and elected by the shareholders and any other information that would be required to be disclosed in +solicitations of proxies for the election of directors. The Company may require any proposed nominee to furnish such other information as may reasonably be required by the Company to determine the eligibility of such proposed nominee to serve as +director. Notice of an item of business shall include a brief description of the proposed business and any material interest of the shareholder in such business. +The Chairman of the meeting may refuse to allow the transaction of any business not presented, or to acknowledge the nomination of any person not made, in compliance +with the foregoing procedures. Copies of the Bylaws are available from the Corporate Secretary of the Company and on the Company’s website at www.matadorresources.com under the heading “Investor Relations—Corporate +Governance.” +See “Corporate Governance—Board Committees—Nominating Committee” for the process for shareholders to follow to suggest a +director candidate to the Nominating Committee for nomination by the Board. +Annual Report on Form 10-K +The +Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, as filed with the SEC, including financial statements, is being made available to our shareholders concurrently with +this Proxy Statement at www.proxyvote.com and does not form part of the proxy solicitation material. Shareholders may obtain without charge another copy of the Annual Report on Form 10-K, excluding +certain exhibits, by writing to Investor Relations, Matador Resources Company, One Lincoln Centre, 5400 LBJ Freeway, Suite 1500, Dallas, Texas 75240. +2022 +Proxy Statement | Matador Resources Company 93 +Table of Contents +OTHER BUSINESS +OTHER +BUSINESS +Management of the Company is not aware of other business to be presented for action at the Annual Meeting; however, if other matters are presented +for action, it is the intention of the persons named in the accompanying form of proxy to vote in accordance with their judgment on such matters. +By Order of the Board of Directors, +Joseph Wm. Foran +Chairman and Chief Executive Officer +April 28, 2022 +94 Matador Resources Company | 2022 Proxy Statement +Table of Contents +ANNEX A +ANNEX A +MATADOR RESOURCES COMPANY 2019 LONG-TERM INCENTIVE PLAN (AS PROPOSED TO BE AMENDED) +The Matador Resources Company 2019 Long-Term Incentive Plan (as +the same may be amended, the “ Plan ”) was adopted by the Board of Directors of Matador Resources Company, a Texas corporation (the “ Company ”), on April 22, 2019 (the “ Board Approval Date ”), to +be effective as of the date the Plan is approved by the Company’s shareholders (the “ Effective Date ”). +ARTICLE 1 +PURPOSE +The purpose of the Plan is to +attract and retain the services of key Employees, key Contractors and Outside Directors and to provide such persons with a proprietary interest in the Company through the granting of Incentive Stock Options, Nonqualified Stock Options, Stock +Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Awards, Dividend Equivalent Rights and Other Awards, whether granted singly, or in combination, or in tandem, that will: +(a) increase the interest of such persons in the Company’s welfare; +(b) furnish an incentive to such persons to continue their services for the Company or its Subsidiaries; and +(c) provide a means through which the Company may attract able persons as Employees, Contractors and Outside Directors. +With respect to Reporting Participants, the Plan and all transactions under the Plan are intended to comply with all applicable conditions of Rule 16b-3 promulgated under the Exchange Act. To the extent any provision of the Plan or action by the Committee fails to so comply, such provision or action shall be deemed null and void ab initio , to the extent +permitted by law and deemed advisable by the Committee. +ARTICLE 2 +DEFINITIONS +For the purpose of the Plan, unless the +context requires otherwise, the following terms shall have the meanings indicated: +2.1 “ Applicable Law ” means all legal requirements relating to +the administration of equity incentive plans and the issuance and distribution of shares of Common Stock, if any, under applicable corporate laws, applicable securities laws, the rules of any exchange or inter-dealer quotation system upon which the +Company’s securities are listed or quoted, and any other applicable law, rule or restriction. +2.2 “ Award ” means the grant of any Incentive +Stock Option, Nonqualified Stock Option, Restricted Stock, SAR, Restricted Stock Unit, Performance Award, Dividend Equivalent Right or Other Award, whether granted singly or in combination or in tandem. +2.3 “ Award Agreement ” means a written or electronic agreement between a Participant and the Company which sets out the terms of the grant of an Award. +2.4 “ Board ” means the Board of Directors of the Company. +2.5 +“ Board Approval Date ” is defined above in the introductory paragraph of the Plan. +2022 +Proxy Statement | Matador Resources Company A-1 +Table of Contents +ANNEX A +2.6 A “ Change in Control ” occurs upon a +change in the Company’s ownership, its effective control or the ownership of a substantial portion of its assets, as follows: +(a) Change in +Ownership . A change in ownership of the Company occurs on the date that any “Person” (as defined in Section 2.6(d) below), other than (i) the Company or any Subsidiary, (ii) a trustee or other +fiduciary holding securities under an employee benefit plan of the Company or any of its Affiliates, (iii) an underwriter temporarily holding stock pursuant to an offering of such stock or (iv) a corporation owned, directly or indirectly, +by the shareholders of the Company in substantially the same proportions as their ownership of the Company’s stock, acquires ownership of the Company’s stock that, together with stock held by such Person, constitutes more than 50% of the +total fair market value or total voting power of the Company’s stock. However, if any Person is considered to own already more than 50% of the total fair market value or total voting power of the Company’s stock, the acquisition of +additional stock by the same Person is not considered to be a Change in Control. In addition, if any Person has effective control of the Company through ownership of 30% or more of the total voting power of the Company’s stock, as discussed in +paragraph (b) below, the acquisition of additional control of the Company by the same Person is not considered to cause a Change in Control pursuant to this paragraph (a); or +(b) Change in Effective Control . Even though the Company may not have undergone a change in ownership under paragraph (a) above, a change in +the effective control of the Company occurs on either of the following dates: +(i) the date that any Person acquires (or has acquired +during the 12-month period ending on the date of the most recent acquisition by such Person) ownership of the Company’s stock possessing 30% or more of the total voting power of the Company’s stock. +However, if any Person owns 30% or more of the total voting power of the Company’s stock, the acquisition of additional control of the Company by the same Person is not considered to cause a Change in Control pursuant to this subparagraph +(b)(i); or +(ii) the date during any 12-month period when a majority of members of the Board +is replaced by directors whose appointment or election is not endorsed by a majority of the Board before the date of the appointment or election; provided, however, that any such director shall not be considered to be endorsed by the Board if his or +her initial assumption of office occurs as a result of an actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or +(c) Change in Ownership of a Substantial Portion of Assets . A change in the ownership of a substantial portion of the Company’s assets +occurs on the date that a Person acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such Person) assets of the Company, that have a total gross fair +market value equal to at least 40% of the total gross fair market value of all of the Company’s assets immediately before such acquisition or acquisitions. However, there is no Change in Control when there is such a transfer to (i) a +shareholder of the Company (immediately before the asset transfer) in exchange for or with respect to the Company’s stock; (ii) an entity, at least 50% of the total value or voting power of the stock of which is owned, directly or +indirectly, by the Company; (iii) a Person that owns directly or indirectly, at least 50% of the total value or voting power of the Company’s outstanding stock; or (iv) an entity, at least 50% of the total value or voting power of the +stock of which is owned by a Person that owns, directly or indirectly, at least 50% of the total value or voting power of the Company’s outstanding stock. +(d) Definitions . For purposes of subparagraphs (a), (b) and (c) above: +(i) “ Person ” shall have the meaning given in Section 7701(a)(1) of the Code. Person shall include more than one +Person acting as a group as defined under Section 409A of the Code. +(ii) “ Affiliate ” shall have the meaning +set forth in Rule 12b-2 promulgated under Section 12 of the Exchange Act. +(e) Interpretation . +The provisions of this Section 2.6 shall be interpreted in accordance with the requirements of Section 409A of the Code, it being the intent of the parties that this Section 2.6 shall be in +compliance with the requirements of said Code Section. +2.7 “ Claim ” means any claim, liability or obligation of any nature, arising out of or +relating to this Plan or an alleged breach of this Plan, or an Award Agreement. +A-2 Matador Resources Company | 2022 Proxy Statement +Table of Contents +ANNEX A +2.8 “ Code ” means the United States Internal Revenue Code of 1986, as amended, +together with the published rulings, regulations and interpretations duly promulgated thereunder. +2.9 “ Committee ” is defined below in +Section 3.1 . +2.10 “ Common Stock ” means the common stock, par value $0.01 per share, which the Company is currently +authorized to issue or may in the future be authorized to issue, or any securities into which or for which the common stock of the Company may be converted or exchanged, as the case may be, pursuant to the terms of this Plan. +2.11 “ Company ” means Matador Resources Company, a Texas corporation, and any successor entity. +2.12 “ Contractor ” means any person, who is not an Employee, rendering bona fide services to the Company or a Subsidiary, for compensation, +provided that such services are not rendered in connection with the offer or sale of securities in a capital raising transaction and do not directly or indirectly promote or maintain a market for the Company’s securities. +2.13 “ Date of Grant ” means the effective date on which an Award is made to a Participant as set forth in the applicable Award Agreement. +2.14 “ Dividend Equivalent Right ” means the right of the holder thereof to receive credits based on the cash dividends that would have been paid on the +shares of Common Stock specified in the Award if such shares were held by the Participant to whom the Award is made. +2.15 “ Effective Date ” is +defined above in the introductory paragraph of the Plan. +2.16 “ Employee ” means a common law employee (as defined in accordance with +Section 3401(c) of the Code) of the Company or any Subsidiary of the Company. +2.17 “ Exchange Act ” means the United States Securities Exchange +Act of 1934, as amended. +2.18 “ Executive Officer ” means an executive officer of the Company as designated by the Board in accordance with Rule 405 +promulgated under the Securities Act of 1933, as amended, and Rule 3b-7 promulgated under the Exchange Act. +2.19 +“ Exempt Shares ” means shares of Common Stock subject to an Award for which the Committee has established or accelerated vesting in accordance with Article 7 . No more than five percent (5%) of the shares of Common Stock that +may be delivered pursuant to Awards may be shares designated as “ Exempt Shares .” +2.20 “ Exercise Date ” is defined below in +Section 8.3(b) . +2.21 “ Fair Market Value ” means, as of a particular date, (a) if the shares of Common Stock are +listed on any established national securities exchange, the closing sales price per share of Common Stock on the consolidated transaction reporting system for the principal securities exchange for the Common Stock on the date prior to such date, or, +if there shall have been no such sale so reported on that date, on the last preceding date on which such a sale was so reported; (b) if the shares of Common Stock are not so listed, but are quoted on an automated quotation system, the closing +sales price per share of Common Stock reported on an automated quotation system on the date prior to such date, or, if there shall have been no such sale so reported on that date, on the last preceding date on which such a sale was so reported; +(c) if the Common Stock is not so listed or quoted, the mean between the closing bid and asked price on the date prior to such date, or, if there are no quotations available for such date, on the last preceding date on which such quotations +shall be available, as reported by the OTC Bulletin Board operated by the Financial Industry Regulation Authority, Inc. or the OTC Markets Group Inc., formerly known as Pink OTC Markets Inc.; or (d) if none of the above is applicable, such +amount as may be determined by the Committee, in good faith, to be the fair market value per share of Common Stock. The determination of Fair Market Value shall, where applicable, be in compliance with Section 409A of the Code. +2022 +Proxy Statement | Matador Resources Company A-3 +Table of Contents +ANNEX A +2.22 “ Immediate Family ” is defined below in +Section 14.7 . +2.23 “ Incentive Stock Option ” means a Stock Option that is intended to qualify as an incentive stock +option within the meaning of Section 422 of the Code, granted pursuant to this Plan. +2.24 “ Nonqualified Stock Option ” means a nonqualified +stock option, granted pursuant to this Plan, which is not an Incentive Stock Option. +2.25 “ Option Price ” means the price which must be paid by a +Participant upon exercise of a Stock Option to purchase a share of Common Stock. +2.26 “ Other Award ” means an Award issued pursuant to +Section 6.9 hereof. +2.27 “ Outside Director ” means a director of the Company or any Subsidiary who is not an Employee. +2.28 “ Participant ” means an Employee, Contractor or Outside Director to whom an Award is granted under this Plan. +2.29 “ Performance Award ” means an Award hereunder of cash, shares of Common Stock, units or rights based upon, payable in, or otherwise related to, +Common Stock pursuant to Section 6.7 hereof. +2.30 “ Performance Criteria ” is defined below in +Section 6.10 . +2.31 “ Performance Goal ” means any of the goals set forth in Section 6.10 hereof. +2.32 “ Plan ” is defined above in the introductory paragraph of the Plan. +2.33 “ Prior Plan ” means the Matador Resources Company Amended and Restated 2012 Long-Term Incentive Plan, as amended from time to time. +2.34 “ Reporting Participant ” means a Participant who is subject to the reporting requirements of Section 16 of the Exchange Act. +2.35 “ Restricted Stock ” means one or more shares of Common Stock issued or transferred to a Participant pursuant to +Section 6.4 of this Plan which are subject to restrictions or limitations set forth in this Plan and in the related Award Agreement. +2.36 +“ Restricted Stock Units ” means one or more units awarded to a Participant pursuant to Section 6.6 hereof, which are convertible into Common Stock at such time as such units are no longer subject to +restrictions as established by the Committee. +2.37 “ SAR ” or “ Stock Appreciation Right ” means the right to receive an amount, in +cash and/or Common Stock, equal to the excess of the Fair Market Value of a specified number of shares of Common Stock as of the date the SAR is exercised (or, as provided in the Award Agreement, converted) over the SAR Price for such shares. +2.38 “ SAR Price ” means the exercise price or conversion price of each share of Common Stock covered by a SAR, determined on the Date of Grant of the +SAR. +2.39 “ Spread ” is defined below in Section 12.4(b) . +2.40 “ Stock Option ” means a Nonqualified Stock Option or an Incentive Stock Option. +2.41 “ Subsidiary ” means (a) any corporation in an unbroken chain of corporations beginning with the Company, if each of the corporations other +than the last corporation in the unbroken chain owns stock possessing a majority of +A-4 Matador Resources Company | 2022 Proxy Statement +Table of Contents +ANNEX A +the total combined voting power of all classes of stock in one of the other corporations in the chain, (b) any limited partnership, if the Company or any corporation described in item +(a) above owns a majority of the general partnership interest and a majority of the limited partnership interests entitled to vote on the removal and replacement of the general partner and (c) any partnership or limited liability company, +if the partners or members thereof are composed only of the Company, any corporation listed in item (a) above or any limited partnership listed in item (b) above. “ Subsidiaries ” means more than one of any such +corporations, limited partnerships, partnerships or limited liability companies. +2.42 “ Substitute Award ” is defined below in +Section 5.4 . +2.43 “ Tenure Award ” means an Award hereunder of cash, shares of Common Stock, units or rights based upon, +payable in, or otherwise related to, Common Stock that vests over time based upon the Participant’s continued employment with or service to the Company or its Subsidiaries. +2.44 “ Termination of Service ” occurs when a Participant who is (a) an Employee of the Company or any Subsidiary ceases to serve as an Employee of +the Company and its Subsidiaries, for any reason; (b) an Outside Director of the Company or a Subsidiary ceases to serve as a director of the Company and its Subsidiaries for any reason; or (c) a Contractor of the Company or a Subsidiary +ceases to serve as a Contractor of the Company and its Subsidiaries for any reason. Except as may be necessary or desirable to comply with applicable federal or state law, a “Termination of Service” shall not be deemed to have occurred +when a Participant who is an Employee becomes an Outside Director or Contractor or when an Outside Director becomes a Contractor or, in each case, vice versa. If, however, a Participant who is an Employee and who has an Incentive Stock Option ceases +to be an Employee but does not suffer a Termination of Service, and if that Participant does not exercise the Incentive Stock Option within the time required under Section 422 of the Code upon ceasing to be an Employee, the Incentive Stock +Option shall thereafter become a Nonqualified Stock Option. Notwithstanding the foregoing provisions of this Section 2.44 , in the event an Award issued under the Plan is subject to Section 409A of the Code, then, in +lieu of the foregoing definition and to the extent necessary to comply with the requirements of Section 409A of the Code, the definition of “Termination of Service” for purposes of such Award shall be the definition of +“separation from service” provided for under Section 409A of the Code. +2.45 “ Total and Permanent Disability ” means a Participant is +qualified for long-term disability benefits under the Company’s or Subsidiary’s disability plan or insurance policy; or, if no such plan or policy is then in existence or if the Participant is not eligible to participate in such plan or +policy, that the Participant, because of a physical or mental condition resulting from bodily injury, disease or mental disorder, is unable to perform his or her duties of employment for a period of six (6) continuous months, as determined in +good faith by the Committee, based upon medical reports or other evidence satisfactory to the Committee; provided that , with respect to any Incentive Stock Option, Total and Permanent Disability shall have the meaning given it under +the rules governing Incentive Stock Options under the Code. Notwithstanding the foregoing provisions of this Section 2.45 , in the event an Award issued under the Plan is subject to Section 409A of the Code, then, in +lieu of the foregoing definition and to the extent necessary to comply with the requirements of Section 409A of the Code, the definition of “Total and Permanent Disability” for purposes of such Award shall be the definition of +“disability” provided for under Section 409A of the Code. +ARTICLE 3 +ADMINISTRATION +3.1 General Administration; +Establishment of Committee . Subject to the terms of this Article 3 , the Plan shall be administered by the Board or such committee of the Board as is designated by the Board to administer the Plan (the “ Committee ”). The +Committee shall consist of not fewer than two persons. Any member of the Committee may be removed at any time, with or without cause, by resolution of the Board. Any vacancy occurring in the membership of the Committee may be filled by appointment +by the Board. At any time there is no Committee to administer the Plan, any references in this Plan to the Committee shall be deemed to refer to the Board. +Membership on the Committee shall be limited to those members of the Board who are “non-employee directors” as defined +in Rule 16b-3 promulgated under the Exchange Act. A majority of the Committee shall constitute a +2022 +Proxy Statement | Matador Resources Company A-5 +Table of Contents +ANNEX A +quorum, and the act of a majority of the members of the Committee present at a meeting at which a quorum is present shall be the act of the Committee. +3.2 Designation of Participants and Awards . +(a) The +Committee or the Board shall determine and designate from time to time the eligible persons to whom Awards will be granted and shall set forth in each related Award Agreement, where applicable, the term of such Award, the Date of Grant and such +other terms, provisions, limitations and performance requirements, as are approved by the Committee, but not inconsistent with the Plan. Although the members of the Committee shall be eligible to receive Awards, all decisions with respect to any +Award, and the terms and conditions thereof, to be granted under the Plan to any member of the Committee shall be made solely and exclusively by the other members of the Committee, or if such member is the only member of the Committee, by the Board. +(b) Notwithstanding Section 3.2(a) , to the extent permitted by Applicable Law, the Board or the Committee may, in its +discretion and by a resolution adopted by the Board or Committee, authorize one or more officers of the Company to (i) designate one or more Employees as eligible persons to whom Awards will be granted under the Plan and (ii) determine the +number of shares of Common Stock that will be subject to such Awards and the terms and conditions of such Awards; provided, however, that the resolution of the Board granting such authority shall (x) specify the total number of shares of Common +Stock that may be made subject to the Awards, (y) set forth the price or prices (or a formula by which such price or prices may be determined) to be paid for the purchase of the Common Stock subject to such Awards and (z) not authorize an +officer to designate himself or any Executive Officer as a recipient of any Award. +3.3 Authority of the Committee . The Committee, in its discretion, shall +(a) interpret the Plan, (b) prescribe, amend and rescind any rules and regulations necessary or appropriate for the administration of the Plan, (c) establish performance goals for an Award and certify the extent of their achievement +and (d) make such other determinations or certifications and take such other action as it deems necessary or advisable in the administration of the Plan. Any interpretation, determination, or other action made or taken by the Committee shall be +final, binding and conclusive on all interested parties. The Committee’s discretion set forth herein shall not be limited by any provision of the Plan, including any provision which by its terms is applicable notwithstanding any other provision +of the Plan to the contrary. +The Committee may delegate to any subcommittee or, subject to the limitations set forth in Section 3.2(b) above, to officers of +the Company the authority to perform specified functions under the Plan. Any actions taken by any officers of the Company pursuant to such delegation of authority shall be deemed to have been taken by the Committee. +With respect to restrictions in the Plan that are based on the requirements of Rule 16b-3 promulgated under the Exchange Act, +Section 422 of the Code, the rules of any exchange or interdealer quotation system upon which the Company’s securities are listed or quoted or any other Applicable Law, to the extent that any such restrictions are no longer required by +Applicable Law, the Committee shall have the sole discretion and authority to grant Awards that are not subject to such mandated restrictions and/or to waive any such mandated restrictions with respect to outstanding Awards. +ARTICLE 4 +ELIGIBILITY +Any Employee (including an Employee who is also a director or an officer), Contractor or Outside Director is eligible to be selected to participate in the +Plan; provided that only Employees shall be eligible to receive Incentive Stock Options. The Committee, upon its own action, may grant, but shall not be required to grant, an Award to any Employee, Contractor or Outside Director. Awards may be +granted by the Committee at any time and from time to time to new Participants, or to then Participants, or to a greater or lesser number of Participants, and may include or exclude previous Participants, as the Committee shall determine. Except as +required by this Plan, Awards need not contain similar provisions. The Committee’s determinations under the Plan (including without limitation determinations of which Employees, Contractors or Outside Directors, if any, are to receive Awards, +the +A-6 Matador Resources Company | 2022 Proxy Statement +Table of Contents +ANNEX A +form, amount and timing of such Awards and the terms and provisions of such Awards and Award Agreements) need not be uniform and may be made by it selectively among Participants who receive, or +are eligible to receive, Awards under the Plan. +ARTICLE 5 +SHARES SUBJECT TO PLAN; AWARD LIMITATIONS +5.1 Number +Available for Awards . Subject to adjustment as provided in Articles 11 and 12 , the maximum number of shares of Common Stock that may be delivered pursuant to Awards granted under the Plan is 3,225,000 6,950,000 shares, of which 100% may be delivered +pursuant to Incentive Stock Options, plus the number of shares of Common Stock remaining available for issuance under the Prior Plan on the Effective Date, plus the number of shares of Common Stock subject to any award outstanding under the Prior +Plan as of the Effective Date that after the Effective Date is not issued because such award is forfeited, terminates, expires or otherwise lapses without being exercised (to the extent applicable), or is settled in cash. Subject to adjustment +pursuant to Articles 11 and 12 , the maximum number of shares of Common Stock with respect to which Stock Options or SARs may be granted to an Executive Officer during any calendar year is 500,000 shares of Common Stock. Shares to be +issued may be made available from authorized but unissued Common Stock, Common Stock held by the Company in its treasury or Common Stock purchased by the Company on the open market or otherwise. During the term of this Plan, the Company will at all +times reserve and keep available the number of shares of Common Stock that shall be sufficient to satisfy the requirements of this Plan. +5.2 Restoration +and Retention of Shares . If any shares of Common Stock subject to an Award shall not be issued or transferred to a Participant and shall cease to be issuable or transferable to a Participant because of the forfeiture, termination, expiration or +cancellation, in whole or in part, of such Award or for any other reason, the shares not so issued or transferred, or the shares so reacquired by the Company, as the case may be, shall no longer be charged against the limitation provided for in +Section 5.1 and may be used thereafter for additional Awards under the Plan. The following additional parameters shall apply: +(a) If an Award may be settled in shares of Common Stock or cash (in whole or in part), shares shall be deemed issued only when and to the extent that +settlement or payment is actually made in shares of Common Stock. To the extent an Award is settled or paid in cash, and not shares of Common Stock, any shares previously reserved for issuance or transfer pursuant to such Award will again be deemed +available for issuance or transfer under the Plan, and the maximum number of shares of Common Stock that may be issued or transferred under the Plan shall be reduced only by the number of shares actually issued and transferred to the Participant. +(b) Notwithstanding the foregoing, (i) shares withheld or tendered to pay withholding taxes or the exercise price of an Award shall not again +be available for the grant of Awards under the Plan and (ii) the full number of shares subject to a Stock Option or SAR granted that are settled by the issuance of shares shall be counted against the shares authorized for issuance under this +Plan, regardless of the number of shares actually issued upon the settlement of such Stock Option or SAR. +(c) Any shares repurchased by the Company +on the open market using the proceeds from the exercise of an Award shall not increase the number of shares available for the future grant of Awards. +5.3 +Outside Director Awards . The aggregate dollar value of equity-based (based on the grant date Fair Market Value of equity-based Awards) and cash compensation granted under this Plan or otherwise during any calendar year to any Outside Director +shall not exceed $600,000; provided, however, that in the calendar year in which an Outside Director first joins the Board or serves as Chairman of the Board or Lead Director, the maximum aggregate dollar value of equity-based and cash compensation +granted to the Outside Director may be up to two hundred percent (200%) of the foregoing limit. +5.4 Substitute Awards . Awards granted or Common Stock issued +by the Company in assumption of, or in substitution or exchange for, awards previously granted, or the right or obligation to make future awards, by a company acquired by the Company or any Subsidiary or with which the Company or any Subsidiary +combines (“ Substitute Awards ”) shall not be charged against the limitation provided for in Section 5.1 . The terms and +2022 +Proxy Statement | Matador Resources Company A-7 +Table of Contents +ANNEX A +conditions of the Substitute Awards may vary from the terms and conditions set forth in this Plan to such extent as the Committee may deem appropriate to conform, in whole or in part, to the +provisions of the awards in substitution for which they are granted. Additionally, in the event that a company acquired by the Company or any Subsidiary, or with which the Company or any Subsidiary combines, has shares available under a pre-existing plan approved by stockholders and not adopted in contemplation of such acquisition or combination, the shares available for grant pursuant to the terms of such +pre-existing plan (as adjusted, to the extent appropriate, using the exchange ratio or other adjustment or valuation ratio or formula used in such acquisition or combination to determine the consideration +payable to the holders of common stock of the entities party to such acquisition or combination) may be used for Awards under the Plan and shall not reduce the shares of Common Stock authorized for issuance under the Plan; provided that Awards using +such available shares shall not be made after the date awards or grants could have been made under the terms of the pre-existing plan, absent the acquisition or combination, and shall only be made to +individuals who were employees of such acquired or combined company before such acquisition or combination. +ARTICLE 6 +GRANT OF AWARDS +6.1 In General . The grant of an +Award shall be authorized by the Committee and shall be evidenced by an Award Agreement setting forth the Award(s) being granted, the total number of shares of Common Stock subject to the Award(s), the Option Price (if applicable), the term of the +Award, the Date of Grant and such other terms, provisions, limitations and performance objectives, as are approved by the Committee, but (i) not inconsistent with the Plan, and (ii) to the extent an Award issued under the Plan is subject +to Section 409A of the Code, in compliance with the applicable requirements of Section 409A of the Code . The Company shall execute an Award Agreement with a Participant after the Committee approves the issuance of an Award and the terms +of Awards and Award Agreements need not be the same with respect to different Participants. The grant of an Award to a Participant shall not be deemed either to entitle the Participant to, or to disqualify the Participant from, receipt of any other +Award under the Plan. +6.2 Option Terms . The Option Price for any share of Common Stock which may be purchased under a Nonqualified Stock Option for any +share of Common Stock must be equal to or greater than the Fair Market Value of the share on the Date of Grant. The Option Price for any share of Common Stock which may be purchased under an Incentive Stock Option must be at least equal to the Fair +Market Value of the share on the Date of Grant; if an Incentive Stock Option is granted to an Employee who owns or is deemed to own (by reason of the attribution rules of Section 424(d) of the Code) more than ten percent (10%) of the combined +voting power of all classes of stock of the Company (or any parent or Subsidiary), the Option Price shall be at least one hundred ten percent (110%) of the Fair Market Value of the Common Stock on the Date of Grant. No Stock Option granted under +this Plan may be exercised at any time after the expiration of ten (10) years from its Date of Grant or such shorter period as may be specified in the Award Agreement. However, if an Employee owns or is deemed to own (by reason of the +attribution rules of Section 424(d) of the Code) more than ten percent (10%) of the combined voting power of all classes of stock of the Company (or any parent or Subsidiary) and an Incentive Stock Option is granted to such Employee, the term +of such Incentive Stock Option (to the extent required by the Code at the time of grant) shall be no more than five (5) years from the Date of Grant. +6.3 +Maximum ISO Grants . The Committee may not grant Incentive Stock Options under the Plan to any Employee which would permit the aggregate Fair Market Value (determined on the Date of Grant) of the Common Stock with respect to which Incentive +Stock Options (under this and any other plan of the Company and its Subsidiaries) are exercisable for the first time by such Employee during any calendar year to exceed $100,000. To the extent any Stock Option granted under this Plan which is +designated as an Incentive Stock Option exceeds this limit or otherwise fails to qualify as an Incentive Stock Option, such Stock Option (or any such portion thereof) shall be a Nonqualified Stock Option. +6.4 Restricted Stock . Restricted Stock may be granted to or sold to any Participant under such terms and conditions as shall be established by the Committee +(including service-based, performance-based conditions or otherwise), provided, however, that such terms and conditions are consistent with the Plan. Restricted Stock shall +A-8 Matador Resources Company | 2022 Proxy Statement +Table of Contents +ANNEX A +be subject to such restrictions as the Committee determines, including, without limitation, (a) a prohibition against sale, assignment, transfer, pledge, hypothecation or other encumbrance +for a specified period; or (b) a requirement that the holder forfeit such Award in the event of Termination of Service during the period of restriction. +Except as provided in the applicable Award Agreement, the Participant shall have, with respect to the Participant’s Restricted Stock, all of the rights of a +shareholder of the Company, including the right to vote the shares, and the right to receive any dividends thereon; provided, however, that the Participant shall not have the right to receive dividends on any Restricted Stock that has not yet +vested. Except as provided in the applicable Award Agreement, any dividends declared with respect to any portion of such Restricted Stock prior to the vesting of such portion shall be (i) accrued or (ii) reinvested in additional shares of +Common Stock (which may thereafter accrue additional dividends). Any such reinvestment shall be at the Fair Market Value at the time thereof and subject to the same terms as the underlying Award. Accrued dividends shall be paid as soon as +practicable following vesting of the Restricted Stock and may be settled in cash or shares of Common Stock, or a combination thereof, in a single payment or in installments. +6.5 SARs . The Committee may grant SARs to any Participant, either as a separate Award or in connection with a Stock Option. SARs shall be subject to such terms +and conditions as the Committee shall impose (including service-based, performance-based conditions or otherwise), provided that such terms and conditions are consistent with the Plan. The grant of the SAR may provide that the holder may be paid for +the value of the SAR either in cash or in shares of Common Stock, or a combination thereof. In the event of the exercise of a SAR payable in shares of Common Stock, the holder of the SAR shall receive that number of whole shares of Common Stock +having an aggregate Fair Market Value on the date of exercise equal to the value obtained by multiplying (a) the difference between the Fair Market Value of a share of Common Stock on the date of exercise over the SAR Price as set forth in such +SAR (or other value specified in the agreement granting the SAR), by (b) the number of shares of Common Stock as to which the SAR is exercised, with a cash settlement to be made for any fractional shares of Common Stock. The SAR Price for any +share of Common Stock subject to a SAR may be equal to or greater than the Fair Market Value of the share on the Date of Grant. The Committee, in its sole discretion, may place a ceiling on the amount payable upon exercise of a SAR, but any such +limitation shall be specified at the time that the SAR is granted. +6.6 Restricted Stock Units . Restricted Stock Units may be awarded or sold to any +Participant under such terms and conditions as shall be established by the Committee (including service-based, performance-based conditions or otherwise), provided, however, that such terms and conditions are consistent with the Plan. The grant of a +Restricted Stock Unit may provide that the holder may be paid for the value of the Restricted Stock Unit either in cash or in shares of Common Stock, or a combination thereof. Restricted Stock Units shall be subject to such restrictions as the +Committee determines, including, without limitation, (a) a prohibition against sale, assignment, transfer, pledge, hypothecation or other encumbrance for a specified period; or (b) a requirement that the holder forfeit (or in the case of +shares of Common Stock or units sold to the Participant, resell to the Company at cost) such shares or units in the event of Termination of Service during the period of restriction. +6.7 Dividend Equivalent Rights . The Committee may grant a Dividend Equivalent Right to any Participant, either as a component of another Award or as a separate +Award. The terms and conditions of the Dividend Equivalent Right shall be specified by the grant. Dividend equivalents credited to the holder of a Dividend Equivalent Right may be paid currently or may be deemed to be reinvested in additional shares +of Common Stock (which may thereafter accrue additional dividend equivalents). Any such reinvestment shall be at the Fair Market Value at the time thereof. Dividend Equivalent Rights may be settled in cash or shares of Common Stock, or a combination +thereof, in a single payment or in installments. A Dividend Equivalent Right granted as a component of an Award shall provide that such Dividend Equivalent Right shall be settled only upon settlement or payment of, or lapse of restrictions on, such +other Award, and that such Dividend Equivalent Right shall expire or be forfeited or annulled under the same conditions as such other Award. +6.8 Other +Awards . The Committee may grant to any Participant other forms of Awards, based upon, payable in, or otherwise related to, in whole or in part, shares of Common Stock, if the Committee determines that such other +2022 +Proxy Statement | Matador Resources Company A-9 +Table of Contents +ANNEX A +form of Award is consistent with the purpose and restrictions of this Plan. The terms and conditions of such other form of Award shall be specified by the grant. Such Other Awards may be granted +for no cash consideration, for such minimum consideration as may be required by Applicable Law, or for such other consideration as may be specified by the grant. +6.9 Performance Awards . +(a) The Committee may grant any of +the Awards described in Sections 6.2 through 6.8 as Performance Awards. The terms and conditions of Performance Awards shall be specified at the time of the grant and may include provisions establishing the performance period, the Performance Goals +to be achieved during a performance period and the maximum or minimum settlement values, provided that such terms and conditions are consistent with the Plan. If the Performance Award is to be in shares of Common Stock, the Performance Awards may +provide for the issuance of the shares of Common Stock at the time of the grant of the Performance Award or at the time of the certification by the Committee that the Performance Goals for the performance period have been met; provided , +however , if shares of Common Stock are issued at the time of the grant of the Performance Award and if, at the end of the performance period, the Performance Goals are not certified by the Committee to have been fully satisfied, then, +notwithstanding any other provisions of this Plan to the contrary, the Common Stock shall be forfeited in accordance with the terms of the grant to the extent the Committee determines that the Performance Goals were not met. The forfeiture of shares +of Common Stock issued at the time of the grant of the Performance Award due to failure to achieve the established Performance Goals shall be separate from and in addition to any other restrictions provided for in this Plan that may be applicable to +such shares of Common Stock. Each Performance Award granted to one or more Participants shall have its own terms and conditions. +If the Committee determines, in +its sole discretion, that with respect to a Performance Award, the established performance measures or objectives are no longer suitable because of a change in the Company’s business, operations, corporate structure or for other reasons that +the Committee deemed satisfactory, the Committee may modify the performance measures or objectives and/or the performance period. +(b) Performance +Awards may be paid in cash, shares of Common Stock, or other consideration, or any combination thereof. If payable in shares of Common Stock, the consideration for the issuance of such shares may be the achievement of the performance objective +established at the time of the grant of the Performance Award. Performance Awards may be payable in a single payment or in installments and may be payable at a specified date or dates or upon attaining the performance objective. The extent to which +any applicable performance objective has been achieved shall be conclusively determined by the Committee. +(c) Notwithstanding the foregoing, no +Participant may receive in any calendar year Performance Awards which have an aggregate value of more than $10,000,000, and if such Performance Awards involve the issuance of shares of Common Stock, said aggregate value shall be based on the Fair +Market Value of such shares on the time of the grant of the Performance Award. +(d) Performance Awards may be made subject to the attainment of +Performance Goals relating to one or more factors determined in the sole discretion of the Committee, which may consist of one or more or any combination of the following criteria in either absolute or relative terms (as compared to an external +benchmark or performance of a designated peer group of companies), for either any individual Participant, the Company or any of its Subsidiary organizations or divisions (the “ Performance Criteria ”): +(i) Earnings (either in the aggregate or on a per-share basis) or adjusted earnings; +(ii) Net income or adjusted net income; +(iii) Operating income; +(iv) Operating profit; +(v) Cash flow; +A-10 Matador Resources Company | 2022 Proxy Statement +Table of Contents +ANNEX A +(vi) Return measures (including cash return on cash invested +(CROCI), return on average capital employed (ROACE) or other return on assets, investments, equity or invested capital); +(vii) Total +shareholder return (change in share price plus reinvestment of dividends into shares when declared, if any, from period to period) and other measures of shareholder return (including income applicable to common shareholders or other class of +shareholders); +(viii) Earnings before or after either, or any combination of, interest, taxes, depletion, depreciation, amortization +or other non-cash items; +(ix) Adjusted EBITDA; +(x) Acreage; +(xi) +Reserves; +(xii) Present value of estimated future oil and gas revenues, net of estimated direct expenses, discounted at an annual +discount rate of 10% (or PV 10); +(xiii) Gross revenues; +(xiv) Reduction in expense levels in each case, where applicable, determined either on a Company-wide basis or in respect of any one or +more Subsidiaries or business units thereof; +(xv) Economic value or economic value added; +(xvi) Market share or market share added; +(xvii) Annual net income to common stock; +(xviii) Earnings per share or growth in earnings per share; +(xix) Annual cash flow provided by operations; +(xx) Changes in annual revenues; +(xxi) Strategic and operational business criteria, consisting of one or more objectives based on specified revenue, market penetration, +geographic business expansion goals, execution of new midstream third-party agreements, identified project milestones, completion of significant projects, production, gathering, processing or disposal volume levels (on an absolute or debt-adjusted +basis), cost targets, lease operating expenses, G&A expenses, leverage ratio, finding and development costs, reserves or reserves added, reserve replacement ratio and goals relating to acquisitions or divestitures; +(xxii) Goals relating to specific environmental compliance measures and safety and accident rates; +(xxiii) Individual management objectives; +(xxiv) Certain strategic goals, such as consummation of transactions or events, or other qualitative matters, that improve operational +efficiencies or results, preserve the Company’s balance sheet, create additional value through acquisitions, divestitures, joint ventures or other value creating transactions, expand or increase the per share value of the Company’s +midstream business, represent an assumption of additional duties beyond those within an executive’s responsibilities, assist in staff development, retention and training or serve to maintain the Company’s culture and working conditions; +and/or +(xxv) Any other Performance Goal that the Committee deems appropriate. +The Committee may designate, in its sole discretion, whether a particular Performance Criteria is to be measured on a pre-tax +basis or post-tax basis. In addition, certain Performance Criteria may be stated in reference to a production volume of measurement such as in per cubic feet equivalents or barrels of oil equivalents (e.g., +per Mcfe, MMcfe, Bcfe, BOE, MBOE or MMBOE), including such production volume on a daily basis. Any Performance Criteria may be used to measure the performance of the Company as a whole or any business unit of the Company and may be measured relative +to a peer group or index. Any Performance Criteria may include or exclude (i) extraordinary, unusual and/or non-recurring items of gain or loss, (ii) gains or losses on the disposition of a business, +(iii) changes in tax or accounting regulations or laws, (iv) the effect of a merger or acquisition, as identified in the Company’s quarterly and annual earnings releases or (v) other similar occurrences. +2022 +Proxy Statement | Matador Resources Company A-11 +Table of Contents +ANNEX A +6.10 Tandem Awards . The Committee may grant two or more +Award types in the form of a “tandem Award,” so that the right of the Participant to exercise one shall be canceled if, and to the extent, the other is exercised. For example, if a Stock Option and a SAR are issued in a tandem Award, and +the Participant exercises the SAR with respect to one hundred (100) shares of Common Stock, the right of the Participant to exercise the related Stock Option shall be canceled to the extent of one hundred (100) shares of Common Stock. +6.11 No Repricing of Stock Options or SARs . Unless approved by the Company’s shareholders, the Committee may not “reprice” any Stock Option or +SAR. For purposes of this Section 6.12 , “reprice” means any of the following or any other action that has the same effect: (a) amending a Stock Option or SAR to reduce its exercise price or base price, +(b) canceling a Stock Option or SAR at a time when its exercise price or base price exceeds the Fair Market Value of a share of Common Stock in exchange for cash or a Stock Option, SAR, award of Restricted Stock or other equity award or +(c) taking any other action that is treated as a repricing under generally accepted accounting principles, provided that nothing in this Section 6.12 shall prevent the Committee from substituting Awards in accordance +with Section 5.4 , making adjustments pursuant to Article 11 or from exchanging or cancelling Awards pursuant to Article 12 . +6.12 Recoupment . Notwithstanding any other language in this Plan to the contrary, the Company may recoup all or any portion of any shares or cash paid to a +Participant in connection with an Award, to the extent provided for under the Company’s clawback policy, if any, approved by the Company’s Board from time to time. +ARTICLE 7 +VESTING +The Committee, in its sole discretion, shall establish the vesting terms applicable to an Award, including whether all or any portion will not be vested until a date or +dates subsequent to its Date of Grant, or until the occurrence of one or more specified events, provided that any such vesting terms shall not be inconsistent with the terms of the Plan, including, without limitation, this Article 7 . If the +Committee imposes conditions upon vesting, then subsequent to the Date of Grant, the Committee may, in its sole discretion, accelerate the date on which all or a portion of the Award may be vested, provided that any such acceleration must comply +with the terms of the Plan, including, without, limitation, this Article 7 . Except as otherwise provided herein, the Committee must grant all Awards in accordance with the following provisions: (a) all Awards granted to Participants +other than Outside Directors must vest no earlier than one (1) year after the Date of Grant; (b) all Awards granted to Outside Directors must vest no earlier than the earlier of one (1) year after the Date of Grant or the next annual +meeting of shareholders (provided that such annual meetings are at least fifty (50) weeks apart); and (c) the Committee may not accelerate the date on which all or any portion of an Award may be vested or waive the period of restriction on +an Award except (i) upon the Participant’s death or Total and Permanent Disability; (ii) upon a Change in Control or (iii) upon a Termination of Service on or following a Change in Control. Notwithstanding the foregoing, the +Committee may, in its sole discretion, grant Awards with more favorable vesting provisions than set forth in this Article 7 , provided that the shares of Common Stock subject to such Awards shall be Exempt Shares. +ARTICLE 8 +EXERCISE OR CONVERSION +OF AWARD +8.1 In General . A vested Award may be exercised or converted, during its term, subject to limitations and restrictions set forth in the +Award Agreement. +8.2 Securities Law and Exchange Restrictions . In no event may an Award be exercised or shares of Common Stock be issued pursuant to an +Award if the Company determines in its sole discretion that a necessary listing or quotation of the shares of Common Stock on a stock exchange or inter-dealer quotation system, any registration under state or federal securities laws required under +the circumstances, or the necessary consent or approval of any governmental regulatory body has not been obtained or accomplished. +A-12 Matador Resources Company | 2022 Proxy Statement +Table of Contents +ANNEX A +8.3 Exercise of Stock Option . +(a) In General . If a Stock Option is exercisable prior to the time it is vested, the Common Stock obtained on the exercise of the Stock Option +shall be Restricted Stock which is subject to the applicable provisions of the Plan and the Award Agreement. If the Committee imposes conditions upon exercise, then subsequent to the Date of Grant, the Committee may, in its sole discretion, +accelerate the date on which all or any portion of the Stock Option may be exercised subject to the vesting requirements set forth in Article 7 . No Stock Option may be exercised for a fractional share of Common Stock. The granting of a Stock +Option shall impose no obligation upon the Participant to exercise that Stock Option. +(b) Notice and Payment . Subject to such administrative +conditions as the Company may from time to time adopt, a Stock Option may be exercised by the delivery of written notice in the form specified by the Company setting forth the number of shares of Common Stock with respect to which the Stock Option +is to be exercised and the date of exercise thereof (the “ Exercise Date ”). On the Exercise Date, the Participant shall deliver to the Company consideration with a value equal to the total Option Price of the shares to be purchased, +payable as provided in the Award Agreement, which may provide for payment in any one or more of the following ways: (i) cash or check, bank draft or money order payable to the order of the Company, (ii) Common Stock (including Restricted +Stock) owned by the Participant on the Exercise Date, valued at its Fair Market Value on the Exercise Date, and which the Participant has not acquired from the Company within six (6) months prior to the Exercise Date, (iii) by delivery +(including electronic delivery) to the Company or its designated agent of an executed irrevocable option exercise form together with irrevocable instructions from the Participant to a broker or dealer, reasonably acceptable to the Company, to sell +certain of the shares of Common Stock purchased upon exercise of the Stock Option or to pledge such shares as collateral for a loan and promptly deliver to the Company the amount of sale or loan proceeds necessary to pay such purchase price, +(iv) by the Company withholding a number of shares of Common Stock, valued at its Fair Market Value on the Exercise Date, otherwise issuable upon exercise of the Stock Option and/or (v) in any other form of valid consideration that is +acceptable to the Committee in its sole discretion. In the event that shares of Restricted Stock are tendered as consideration for the exercise of a Stock Option, a number of shares of Common Stock issued upon the exercise of the Stock Option equal +to the number of shares of Restricted Stock used as consideration therefor shall be subject to the same restrictions and provisions as the Restricted Stock so tendered. +Except as otherwise provided in the applicable Award Agreement, upon payment of all amounts due from the Participant, the Company shall cause the Common Stock then +being purchased to be registered in the Participant’s name (or the person exercising the Participant’s Stock Option in the event of his or her death). +(c) Failure to Pay . Except as may otherwise be provided in an Award Agreement, if the Participant fails to pay for any of the Common Stock +specified in such notice or fails to accept delivery thereof, that portion of the Participant’s Stock Option and right to purchase such Common Stock may be forfeited by the Participant. +8.4 SARs . Subject to the conditions of this Section 8.4 and such conditions as the Company may from time to time adopt, a SAR may be +exercised by the delivery (including by electronic delivery) of written notice to the Company, in the form specified by the Company, setting forth the number of shares of Common Stock with respect to which the SAR is to be exercised and the date of +exercise thereof (the “ Exercise Date ”) which shall be at least three (3) days after giving such notice unless an earlier time shall have been mutually agreed upon. Subject to the terms of the Award Agreement and only if +permissible under Section 409A of the Code (or, if not so permissible, at such time as permitted by Section 409A of the Code), the Participant shall receive from the Company in exchange therefor in the discretion of the Committee, and +subject to the terms of the Award Agreement: +(a) cash in an amount equal to the excess (if any) of the Fair Market Value (as of the Exercise Date, +or if provided in the Award Agreement, conversion, of the SAR) per share of Common Stock over the SAR Price per share specified in such SAR, multiplied by the total number of shares of Common Stock of the SAR being surrendered; +(b) that number of shares of Common Stock having an aggregate Fair Market Value (as of the Exercise Date, or if provided in the Award Agreement, +conversion, of the SAR) equal to the amount of cash otherwise payable to the Participant, with a cash settlement to be made for any fractional share interests; or +2022 +Proxy Statement | Matador Resources Company A-13 +Table of Contents +ANNEX A +(c) the Company may settle such obligation in +part with shares of Common Stock and in part with cash. +The distribution of any cash or Common Stock pursuant to the foregoing sentence shall be made at such time +as set forth in the Award Agreement. +8.5 Disqualifying Disposition of Incentive Stock Option . If shares of Common Stock acquired upon exercise of an +Incentive Stock Option are disposed of by a Participant prior to the expiration of either two (2) years from the Date of Grant of such Stock Option or one (1) year from the transfer of shares of Common Stock to the Participant pursuant to +the exercise of such Stock Option, or in any other disqualifying disposition within the meaning of Section 422 of the Code, such Participant shall notify the Company in writing of the date and terms of such disposition. A disqualifying +disposition by a Participant shall not affect the status of any other Stock Option granted under the Plan as an Incentive Stock Option within the meaning of Section 422 of the Code. +ARTICLE 9 +AMENDMENT OR +DISCONTINUANCE +Subject to the limitations set forth in this Article 9 , the Committee may at any time and from time to time, without the consent of +the Participants, alter, amend, revise, suspend, or discontinue the Plan in whole or in part; provided, however, that no amendment for which shareholder approval is required either (a) by any securities exchange or inter-dealer quotation system +on which the Common Stock is listed or traded or (b) in order for the Plan and Awards to continue to comply with Sections 421 and 422 of the Code, including any successors to such Sections, or other Applicable Law, shall be effective unless +such amendment shall be approved by the requisite vote of the shareholders of the Company entitled to vote thereon. Any such amendment shall, to the extent deemed necessary or advisable by the Committee, be applicable to any outstanding Awards +theretofore granted under the Plan, notwithstanding any contrary provisions contained in any Award Agreement. In the event of any such amendment to the Plan, the holder of any Award outstanding under the Plan shall, upon request of the Committee and +as a condition to the exercisability thereof, execute a conforming amendment in the form prescribed by the Committee to any Award Agreement relating thereto. Notwithstanding anything contained in this Plan to the contrary, unless required by law, no +action contemplated or permitted by this Article 9 shall materially adversely affect any rights of Participants or obligations of the Company to Participants with respect to any Award theretofore granted under the Plan without the consent of +the affected Participant. +ARTICLE 10 +TERM +The Plan shall be effective from the Effective +Date. Unless sooner terminated by action of the Board, the Plan will terminate on the tenth anniversary of the Board Approval Date, but Awards granted before that date will continue to be effective in accordance with their terms and conditions. +ARTICLE 11 +CAPITAL ADJUSTMENTS +In the event that any dividend or other distribution (whether in the form of cash, Common Stock, other securities or other property), recapitalization, +stock split, reverse stock split, rights offering, reorganization, merger, consolidation, split-up, spin-off, split-off, +combination, subdivision, repurchase, or exchange of Common Stock or other securities of the Company, issuance of warrants or other rights to purchase Common Stock or other securities of the Company, or other similar corporate transaction or event +affects the fair value of an Award, then the Committee shall adjust any or all of the following so that the fair value of the Award immediately after the transaction or event is equal to the fair value of the Award immediately prior to the +transaction or event: (a) the number of shares and type of Common Stock (or the securities or property) which thereafter may be made the subject of Awards, (b) the number of shares and type of Common Stock (or other securities or property) +subject to outstanding Awards, (c) the Option Price of each outstanding Award, and (d) the number of or SAR Price of shares of Common Stock then subject to outstanding SARs previously granted and unexercised under the Plan, to the end that +the same proportion of the Company’s issued and outstanding shares of Common Stock in each +A-14 Matador Resources Company | 2022 Proxy Statement +Table of Contents +ANNEX A +instance shall remain subject to exercise at the same aggregate SAR Price; provided however, that the number of shares of Common Stock (or other securities or property) subject to any Award shall +always be a whole number. Notwithstanding the foregoing, no such adjustment shall be made or authorized to the extent that such adjustment would cause the Plan or any Stock Option to violate Section 422 of the Code or Section 409A of the +Code. Such adjustments shall be made in accordance with the rules of any securities exchange, stock market or stock quotation system to which the Company is subject. +Upon the occurrence of any such adjustment, the Company shall provide notice to each affected Participant of its computation of such adjustment which shall be +conclusive and shall be binding upon each such Participant. +ARTICLE 12 +RECAPITALIZATION, MERGER AND CONSOLIDATION +12.1 No +Effect on Company’s Authority . The existence of this Plan and Awards granted hereunder shall not affect in any way the right or power of the Company or its shareholders to make or authorize any or all adjustments, recapitalizations, +reorganizations or other changes in the Company’s capital structure and its business, or any Change in Control, or any merger or consolidation of the Company, or any issuance of bonds, debentures, preferred or preference stocks ranking prior to +or otherwise affecting the Common Stock or the rights thereof (or any rights, options or warrants to purchase same), or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business or any other +corporate act or proceeding, whether of a similar character or otherwise. +12.2 Conversion of Awards Where Company Survives . Subject to any required action +by the shareholders and except as otherwise provided by Section 12.4 hereof or as may be required to comply with Section 409A of the Code, if the Company shall be the surviving or resulting corporation in any merger, +consolidation or share exchange, any Award granted hereunder shall pertain to and apply to the securities or rights (including cash, property or assets) to which a holder of the number of shares of Common Stock subject to the Award would have been +entitled. +12.3 Exchange or Cancellation of Awards Where Company Does Not Survive . Except as otherwise provided by Section 12.4 +hereof or as may be required to comply with Section 409A of the Code, in the event of any merger, consolidation or share exchange pursuant to which the Company is not the surviving or resulting corporation, there shall be substituted for each +share of Common Stock subject to the unexercised portions of outstanding Awards, that number of shares of each class of stock or other securities or that amount of cash, property or assets of the surviving, resulting or consolidated company which +were distributed or distributable to the shareholders of the Company in respect to each share of Common Stock held by them, such outstanding Awards to be thereafter exercisable for such stock, securities, cash or property in accordance with their +terms. +12.4 Cancellation of Awards . Notwithstanding the provisions of Sections 12.2 and 12.3 hereof, and except as may be required to comply +with Section 409A of the Code, in the event the acquiror or the surviving or resulting corporation does not agree to assume the Awards, all Awards granted hereunder may be canceled by the Company, in its sole discretion, as of the effective +date of any Change in Control, merger, consolidation or share exchange, or any issuance of bonds, debentures, preferred or preference stocks ranking prior to or otherwise affecting the Common Stock or the rights thereof (or any rights, options or +warrants to purchase same), or of any dissolution or liquidation of the Company, by either: +(a) giving notice to each holder thereof or the +holder’s representative of its intention to cancel those Awards for which the issuance of shares of Common Stock involved payment by the Participant for such shares, and permitting the purchase of any or all of the shares of Common Stock +subject to such outstanding Awards including, as determined by the Board, unvested Awards, to occur during the thirty (30) day period preceding such effective date of cancelation; or +(b) in the case of Awards that are either (i) settled only in shares of Common Stock or (ii) at the election of the Participant, settled in +shares of Common Stock, paying the holder thereof an amount equal to a reasonable estimate of the difference between the net amount per share payable in such transaction or as a result of such +2022 +Proxy Statement | Matador Resources Company A-15 +Table of Contents +ANNEX A +transaction, and the price per share of such Award to be paid by the Participant (hereinafter the “ Spread ”), multiplied by the number of shares subject to the Award. In +estimating the Spread, appropriate adjustments to give effect to the existence of the Awards shall be made, such as deeming the Awards to have been exercised, with the Company receiving the exercise price payable thereunder, and treating the shares +receivable upon exercise of the Awards as being outstanding in determining the net amount per share. In cases where the proposed transaction consists of the acquisition of assets of the Company, the net amount per share shall be calculated on the +basis of the net amount receivable with respect to shares of Common Stock upon a distribution and liquidation by the Company after giving effect to expenses and charges, including but not limited to taxes, payable by the Company before such +liquidation could be completed. +An Award that by its terms would be fully vested or exercisable upon a Change in Control will be considered vested or exercisable +for purposes of Section 12.4(a) hereof. +ARTICLE 13 +LIQUIDATION OR DISSOLUTION +Subject to +Section 12.4 hereof, in case the Company shall, at any time while any Award under this Plan shall be in force and remain unexpired, (a) sell all or substantially all of its property, or (b) dissolve, liquidate or +wind up its affairs, then each Participant shall be entitled to receive, in lieu of each share of Common Stock of the Company which such Participant would have been entitled to receive under the Award, the same kind and amount of any securities or +assets as may be issuable, distributable, or payable upon any such sale, dissolution, liquidation or winding up with respect to each share of Common Stock of the Company. If the Company shall, at any time prior to the expiration of any Award, make +any partial distribution of its assets, in the nature of a partial liquidation, whether payable in cash or in kind (but excluding the distribution of a cash dividend payable out of earned surplus and designated as such) and an adjustment is +determined by the Committee to be appropriate to prevent the dilution of the benefits or potential benefits intended to be made available under the Plan, then the Committee shall, in such manner as it may deem equitable, make such adjustment in +accordance with the provisions of Article 11 hereof. +ARTICLE 14 +MISCELLANEOUS PROVISIONS +14.1 Investment Intent . +The Company may require that there be presented to and filed with it by any Participant under the Plan, such evidence as it may deem necessary to establish that the Awards granted or the shares of Common Stock to be purchased or transferred are +being acquired for investment and not with a view to their distribution. +14.2 No Right to Continued Employment . Neither the Plan nor any Award granted under +the Plan shall confer upon any Participant any right with respect to continuance of employment by the Company or any Subsidiary. +14.3 Indemnification of Board +and Committee . No member of the Board or the Committee, nor any officer or Employee of the Company acting on behalf of the Board or the Committee, shall be personally liable for any action, determination or interpretation taken or made in good +faith with respect to the Plan, and all members of the Board and the Committee, each officer of the Company and each Employee of the Company acting on behalf of the Board or the Committee shall, to the extent permitted by law, be fully indemnified +and protected by the Company in respect of any such action, determination or interpretation to the fullest extent provided by Applicable Law. Except to the extent required by any unwaiveable requirement under Applicable Law, no member of the Board +or the Committee (and no Subsidiary) shall have any duties or liabilities, including without limitation any fiduciary duties, to any Participant (or any Person claiming by and through any Participant) as a result of this Plan, any Award or any Claim +arising hereunder and, to the fullest extent permitted under Applicable Law, each Participant (as consideration for receiving and accepting an Award) irrevocably waives and releases any right or opportunity such Participant might have to assert (or +participate or cooperate in) any Claim against any member of the Board or the Committee and any Subsidiary of the Company arising out of this Plan. +A-16 Matador Resources Company | 2022 Proxy Statement +Table of Contents +ANNEX A +14.4 Effect of the Plan . Neither the adoption of this Plan nor any action of the Board or +the Committee shall be deemed to give any person any right to be granted an Award or any other rights except as may be evidenced by an Award Agreement or any amendment thereto, duly authorized by the Committee and executed on behalf of the Company, +and then only to the extent and upon the terms and conditions expressly set forth therein. +14.5 Compliance With Other Laws and Regulations . Notwithstanding +anything contained herein to the contrary, the Company shall not be required to sell or issue shares of Common Stock under any Award if the issuance thereof would constitute a violation by the Participant or the Company of any provisions of any law +or regulation of any governmental authority or any national securities exchange or inter-dealer quotation system or other forum in which shares of Common Stock are quoted or traded (including without limitation Section 16 of the Exchange Act); +and, as a condition of any sale or issuance of shares of Common Stock under an Award, the Committee may require such agreements or undertakings, if any, as the Committee may deem necessary or advisable to assure compliance with any such law or +regulation. The Plan, the grant and exercise of Awards hereunder, and the obligation of the Company to sell and deliver shares of Common Stock, shall be subject to all applicable federal and state laws, rules and regulations and to such approvals by +any government or regulatory agency as may be required. +14.6 Tax Requirements . The Company or, if applicable, any Subsidiary (for purposes of this +Section 14.6 , the term “Company” shall be deemed to include any applicable Subsidiary), shall have the right to deduct from all amounts paid in cash or other form in connection with the Plan, any Federal, state, +local or other taxes permitted by law to be withheld in connection with an Award granted under this Plan. The Company may, in its sole discretion, also require the Participant receiving shares of Common Stock issued under the Plan to pay the Company +the amount of any taxes that the Company is permitted to withhold in connection with the Participant’s income arising with respect to the Award. Such payments shall be required to be made when requested by the Company and may be required to be +made prior to the delivery of any certificate representing shares of Common Stock. Such payment may be made (a) by the delivery of cash to the Company in an amount that equals or exceeds (to avoid the issuance of fractional shares under +(c) below) the applicable tax withholding obligations of the Company; (b) if the Company, in its sole discretion, so consents in writing, the actual delivery by the exercising Participant to the Company of shares of Common Stock that the +Participant has not acquired from the Company within six (6) months prior to the date of exercise, vesting or conversion of the Award, as applicable, which shares so delivered have an aggregate Fair Market Value that equals or exceeds (to avoid +the issuance of fractional shares under (c) below) the applicable tax withholding payment; (c) if the Company, in its sole discretion, so consents in writing, the Company’s withholding of a number of shares to be delivered upon the +exercise, vesting or conversion of the Award, which shares so withheld have an aggregate Fair Market Value that equals or exceeds (to avoid the issuance of fractional shares) the applicable tax withholding payment; or (d) any combination of +(a), (b) or (c) or any other method consented to by the Company in writing. The Company may, in its sole discretion, withhold any such taxes from any other cash remuneration otherwise paid by the Company to the Participant. The Committee may in +the Award Agreement impose any additional tax requirements or provisions that the Committee deems necessary or desirable. +14.7 Assignability . Incentive +Stock Options may not be transferred, assigned, pledged, hypothecated or otherwise conveyed or encumbered other than by will or the laws of descent and distribution and may be exercised during the lifetime of the Participant only by the Participant +or the Participant’s legally authorized representative, and each Award Agreement in respect of an Incentive Stock Option shall so provide. The designation by a Participant of a beneficiary will not constitute a transfer of the Stock Option. The +Committee may waive or modify any limitation contained in the preceding sentences of this Section 14.7 that is not required for compliance with Section 422 of the Code. +Except as otherwise provided herein, Awards may not be transferred, assigned, pledged, hypothecated or otherwise conveyed or encumbered other than by +will or the laws of descent and distribution. Notwithstanding the foregoing, unless otherwise provided in an Award Agreement, all or a portion of any Award may be transferred, for no consideration, by a Participant to (a) one or more members of +the Participant’s Immediate Family, (b) a trust in which the Participant or members of his or her Immediate Family have more than fifty percent of the beneficial interest, (c) a foundation in which the Participant or members of his or +her Immediate Family control the +2022 +Proxy Statement | Matador Resources Company A-17 +Table of Contents +ANNEX A +management of assets or (d) any other entity in which the Participant or members of his or her Immediate Family own more than fifty percent of the voting interests. As used herein, +“ Immediate Family ” means any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, +mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law, and shall include adoptive relationships. +Following any transfer, any such +Award shall continue to be subject to the same terms and conditions as were applicable immediately prior to transfer, provided that for purposes of Articles 8, 9, 11, 13 and 14 hereof the term “Participant” shall be deemed to include the +transferee. The events of Termination of Service shall continue to be applied with respect to the original Participant, following which, the Award shall be exercisable or convertible by the transferee only to the extent and for the periods specified +in the Award Agreement. The Committee and the Company shall have no obligation to inform any transferee of an Award of any expiration, termination, lapse or acceleration of such Award. The Company shall have no obligation to register with any +federal or state securities commission or agency any Common Stock issuable or issued under an Award that has been transferred by a Participant under this Section 14.7 . +14.8 Use of Proceeds . Proceeds from the sale of shares of Common Stock pursuant to Awards granted under this Plan shall constitute general funds of the Company. +14.9 Governing Law . The Plan shall be governed by, construed and enforced in accordance with the laws of the State of Texas (excluding any conflict of laws, +rule or principle of Texas law that might refer the governance, construction, or interpretation of this Plan to the laws of another state). A Participant’s sole remedy for any Claim shall be against the Company, and no Participant shall have +any claim or right of any nature against any Subsidiary of the Company or any shareholder or existing or former director, officer or Employee of the Company or any Subsidiary of the Company. Each Award Agreement shall require the Participant to +release and covenant not to sue any Person other than the Company over any Claims. The individuals and entities described above in this Section 14.9 (other than the Company) shall be third-party beneficiaries of this Plan +for purposes of enforcing the terms of this Section 14.9 . +14.10 Electronic Delivery . Awards granted under the Plan and/or +communications regarding the Plan and any Award under the Plan may be sent, accepted, executed, or exercised, as applicable, via electronic means through an online or electronic system established and maintained by the Company or a third party +designated by the Company. +14.11 Dividends and Dividend Equivalent Rights . For the avoidance of doubt, and notwithstanding anything to the contrary +contained herein, dividends and Dividend Equivalent Rights may accrue, but shall not be paid out or settled unless and until, and then only to the extent that, the applicable underlying Award vests. +A copy of this Plan shall be kept on file in the principal office of the Company in Dallas, Texas +*************** +A-18 Matador Resources Company | 2022 Proxy Statement +Table of Contents +ANNEX A +IN WITNESS WHEREOF, the Company has caused this instrument to be executed as of +, 2019, by its Chief Executive Officer and Secretary pursuant to prior action taken by the Board. +MATADOR RESOURCES COMPANY +By: +Name: +Title: +Attest: +2022 +Proxy Statement | Matador Resources Company A-19 +Table of Contents +ANNEX B +ANNEX B +Matador Resources Company 2022 Employee Stock Purchase Plan +1. Purpose +The purpose of this Matador Resources Company 2022 Employee Stock Purchase Plan (the “ Plan ”) is to provide employees of the Company and its +Designated Subsidiaries with an opportunity to purchase Common Stock through accumulated Contributions. The Company’s intention is to have Plan qualify as an “employee stock purchase plan” under Section 423 of the Code. The +provisions of the Plan, accordingly, will be construed so as to extend and limit Plan participation in a uniform and nondiscriminatory basis consistent with the requirements of Section 423 of the Code. +2. Definitions. +(a) “ Administrator ” +means the Strategic Planning and Compensation Committee of the Board (or any successor committee) or such other committee as designated by the Board to administer the Plan under Section 14 . +(b) “ Applicable Laws ” means the requirements relating to the administration of equity-based awards under U.S. state corporate +laws, U.S. federal and state securities laws, the Code, any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws of any foreign country or jurisdiction where options are, or will be, granted under +the Plan. +(c) “ Board ” means the Board of Directors of the Company. +(d) “ Code ” means the Internal Revenue Code of 1986, as amended from time to time, and the rulings and regulations issued +thereunder. +(e) “ Common Stock ” means the common stock of the Company, par value $0.01 per share, which the Company is +currently authorized to issue or may in the future be authorized to issue, or any securities into which or for which the common stock of the Company may be converted or exchanged, as the case may be, pursuant to the terms of this Plan. +(f) “ Company ” means Matador Resources Company, a Texas corporation, and any successor corporation. +(g) “ Compensation ” means an Eligible Employee’s base salary or base hourly rate of pay before deduction for any salary +deferral contributions made by the Eligible Employee to any tax-qualified or nonqualified deferred compensation plan, together with any commissions, overtime, incentive compensation, bonuses and other forms of +compensation. The Administrator, in its discretion, may, on a uniform and nondiscriminatory basis, establish a different definition of Compensation for an Offering Period. +(h) “ Contributions ” means the payroll deductions and any other additional payments that the Administrator may permit to be made +by a Participant to fund the exercise of options granted pursuant to the Plan. +(i) “ Designated Subsidiary ” means any +Subsidiary that has been designated by the Administrator from time to time in its sole discretion as eligible to participate in the Plan. As of the date of adoption of the Plan, the Designated Subsidiary consists exclusively of: MRC Energy Company. +(j) “ Eligible Employee ” means any person, including an officer, who is employed by the Company or a Designated Subsidiary +(i) for more than 20 hours per week and (ii) for more than five months in any calendar year. For purposes of the Plan, the employment relationship shall be treated as continuing intact while the individual is on sick leave or other leave +of absence approved by the Company. Where the period of leave +2022 +Proxy Statement | Matador Resources Company B-1 +Table of Contents +ANNEX B +exceeds 90 days and the individual’s right to reemployment is not guaranteed either by statute or by contract, the employment relationship shall be deemed to have terminated on the 91st day +of such leave. “Eligible Employee” shall not include any person who is a citizen or resident of a foreign jurisdiction if granting them an option under the Plan would violate the law of such jurisdiction, or if compliance with the laws of +the jurisdiction would cause the Plan to violate Section 423 of the Code. +(k) “ Employer ” means the Company and each +Designated Subsidiary. +(l) “ Enrollment Date ” means the first Trading Day of each Offering Period. +(m) “ Exchange Act ” means the Securities Exchange Act of 1934, as amended, including the rules and regulations promulgated +thereunder. +(n) “ Exercise Date ” means the last Trading Day of each Offering Period. +(o) “ Fair Market Value ” means as of any date, the value of the Common Stock determined as follows: (i) if the Common Stock +is listed on any established stock exchange, system or market, its Fair Market Value shall be the closing price for the Common Stock as quoted on such exchange, system or market as reported in the Wall Street Journal or such other source as the +Administrator deems reliable (or, if no sale of Common Stock is reported for such date, on the next preceding date on which any sale shall have been reported); and (ii) in the absence of an established market for the Common Stock, the Fair +Market Value thereof shall be determined in good faith by the Administrator. +(p) “ New Exercise Date ” means a new Exercise +Date if the Administrator shortens any Offering Period then in progress. +(q) “ Offering ” means an offer under the Plan of an +option that may be exercised during an Offering Period as further described in Section 4 . For purposes of the Plan, the Administrator may designate separate Offerings under the Plan (the terms of which need not be +identical) in which Eligible Employees of one or more Employers will participate, even if the dates of the applicable Offering Periods of each such Offering are identical and the provisions of the Plan will separately apply to each Offering. To the +extent permitted by Treasury Regulation Section 1.423-2(a)(1), the terms of each Offering need not be identical provided that the terms of the Plan and an Offering together satisfy Treasury Regulation +Sections 1.423-2(a)(2) and (a)(3). +(r) “ Offering Periods ” means the periods +established by the Administrator (not to exceed 27 months) during which an option granted pursuant to the Plan may be exercised. The duration and timing of Offering Periods may be changed pursuant to Sections 4 , 18 and 19 . The +first Offering Period shall commence on the first day of the third month the Common Stock is publicly traded following stockholder approval of the Plan and end on the last day of the Company’s first full fiscal quarter that follows the date on +which such event occurs, and subsequent Offering Periods shall be each six-month period (two full fiscal quarters) commencing after the first Offering Period ends. +(s) “ Parent ” means a “parent corporation,” whether now or hereafter existing, as defined in Section 424(e) of the +Code. +(t) “ Participant ” means an Eligible Employee who elects to participate in the Plan. +(u) “ Purchase Period ” means the period during an Offering Period which shares of Common Stock may be purchased on a +Participant’s behalf in accordance with the terms of the Plan. Unless the Administrator determines otherwise, each Purchase Period will be a six-month period (two full fiscal quarters). +(v) “ Purchase Price ” means an amount equal to 85% of the Fair Market Value of a share of Common Stock on the Enrollment Date or +on the Exercise Date, whichever is lower; provided however, that the Purchase Price may be determined for subsequent Offering Periods by the Administrator subject to compliance with Section 423 of the Code (or any other Applicable Law) or +pursuant to Section 18 . +B-2 Matador Resources Company | 2022 Proxy Statement +Table of Contents +ANNEX B +(w) “ Subsidiary ” means a “subsidiary +corporation,” whether now or hereafter existing, as defined in Section 424(f) of the Code. +(x) “ Trading Day ” +means a day on which the national stock exchange upon which the Common Stock is listed is open for trading or, if the Common Stock is not listed on an national stock exchange, a business day as determined by the Administrator in good faith. +(y) “ Treasury Regulations ” means the Treasury regulations of the Code. Reference to a specific Treasury Regulation or Section of +the Code shall include such Treasury Regulation or Section, any valid regulation promulgated under such Section, and any comparable provision of any future legislation or regulation amending, supplementing or superseding such Section or regulation. +3. Eligibility +(a) Offering Periods . Any +Eligible Employee on a given Enrollment Date will be eligible to participate in the Plan if he or she was employed by the Company for at least 30 days immediately preceding the Enrollment Date, subject to the requirements of +Section 5 . +(b) Non-U.S. Employees . Employees who are citizens or residents +of a non-U.S. jurisdiction (without regard to whether they also are citizens or residents of the United States or resident aliens (within the meaning of Section 7701(b)(1)(A) of the Code)) may be excluded +from participation in the Plan or an Offering if the participation of such employees is prohibited under the laws of the applicable jurisdiction or if complying with the laws of the applicable jurisdiction would cause the Plan or an Offering to +violate Section 423 of the Code. In addition, as provided in Section 14 , the Administrator may establish one or more sub-plans of the Plan (which may, but are not required to, comply with the requirements of +Section 423 of the Code) to provide benefits to employees of Designated Subsidiaries located outside the United States in a manner that complies with local law. Any such sub-plan will be a component of the Plan and will not be a separate plan. +(c) Limitations . Any provisions of the Plan to the contrary notwithstanding, no Eligible Employee will be granted an option under the Plan +(i) to the extent that, immediately after the grant, such Eligible Employee (or any other person whose stock would be attributed to such Eligible Employee pursuant to Section 424(d) of the Code) would own capital stock of the Company or +any Parent or Subsidiary of the Company and/or hold outstanding options to purchase such stock possessing 5% or more of the total combined voting power or value of all classes of the capital stock of the Company or of any Parent or Subsidiary of the +Company, or (ii) to the extent that his or her rights to purchase stock under all employee stock purchase plans (as defined in Section 423 of the Code) of the Company or any Parent or Subsidiary of the Company accrues at a rate, which +exceeds $25,000 worth of stock (determined at the Fair Market Value of the stock at the time such option is granted) for each calendar year in which such option is outstanding at any time, as determined in accordance with Section 423 of the +Code and the regulations thereunder. +4. Offering Periods +The Plan will +be implemented by consecutive Offering Periods with new Offering Periods commencing at such times as determined by the Administrator. The Administrator will have the power to change the duration of Offering Periods (including the commencement dates +thereof) without stockholder approval. +5. Participation +An Eligible +Employee may participate in the Plan by (i) submitting to the Company’s Human Resources department (or its delegate), on or before a date determined by the Administrator prior to an applicable Enrollment Date, a properly completed +subscription agreement authorizing Contributions in the form provided by the Administrator for such purpose, or (ii) following an electronic or other enrollment procedure determined by the Administrator. +2022 +Proxy Statement | Matador Resources Company B-3 +Table of Contents +ANNEX B +6. Contributions +(a) At the time a Participant enrolls in the Plan pursuant to Section 5 , such Participant will elect to have payroll deductions +made on each pay day or other Contributions (to the extent permitted by the Administrator) made during the Offering Period in an amount not exceeding 30% of the Compensation (or such other whole percentage of Compensation as determined by the +Administrator in its sole discretion), which he or she receives on each pay day during the Offering Period; provided, however, that should a pay day occur on an Exercise Date, a Participant will have any payroll deductions made on such day applied +to his or her notional account under the subsequent Purchase Period or Offering Period. The minimum permissible projected Contribution by any Participant for an Offering Period shall be $200. The Administrator, in its sole discretion, may permit all +Participants in a specified Offering to contribute amounts to the Plan through payment by cash, check or other means set forth in the subscription agreement prior to each Exercise Date of each Purchase Period. A Participant’s subscription +agreement will remain in effect for successive Offering Periods unless terminated as provided in Section 10 . +(b) Payroll +deductions for a Participant will commence on the first pay day following the Enrollment Date and will end on the last pay day prior to the Exercise Date of such Purchase Period to which such authorization is applicable, unless sooner terminated by +the Participant as provided in Section 10 ; provided, however, that with respect to the first Offering Period, payroll deduction for a Participant will not commence until such time as determined by the Administrator. +(c) All Contributions made for a Participant will be credited to his or her notional account under the Plan and payroll deductions will be made in whole +percentages only. Except to the extent permitted by the Administrator pursuant to Section 6(a) , a Participant may not make any additional payments into such notional account. +(d) A Participant may discontinue his or her participation in the Plan as provided in Section 10 . Participants shall not be +permitted to increase or to otherwise decrease their rates of Contributions during an Offering Period unless otherwise determined by the Administrator in its sole discretion. +(e) Notwithstanding the foregoing, to the extent necessary to comply with Section 423(b)(8) of the Code, a Participant’s Contributions may be +decreased to 0% at any time during a Purchase Period. Subject to Section 423(b)(8) of the Code, Contributions will recommence at the rate originally elected by the Participant effective as of the beginning of the first Purchase Period scheduled +to end in the following calendar year, unless terminated by the Participant as provided in Section 10 . +(f) At the time +the option under the Plan is exercised, in whole or in part, or at the time some or all of the Common Stock issued under the Plan is disposed of (or any other time that a taxable event related to the Plan occurs), the Participant must make adequate +provision for the Company’s or Employer’s federal, state, local or any other tax liability payable to any authority including taxes imposed by jurisdictions outside of the United States, national insurance, social security or other tax +withholding obligations, if any, which arise upon the exercise of the option or the disposition of the Common Stock (or any other time that a taxable event related to the Plan occurs). At any time, the Company or the Employer may, but will not be +obligated to, withhold from the Participant’s compensation the amount necessary for the Company or the Employer to meet applicable withholding obligations, including any withholding required to make available to the Company or the Employer any +tax deductions or benefits attributable to sale or early disposition of Common Stock by the Eligible Employee. In addition, the Company or the Employer may, but will not be obligated to, withhold from the proceeds of the sale of Common Stock or any +other method of withholding the Company or the Employer deems appropriate to the extent permitted by Treasury Regulation Section 1.423-2(f). +7. Grant of Option +On the Enrollment Date of each Offering Period, each +Eligible Employee participating in such Offering Period will be granted an option to purchase on each Exercise Date during such Offering Period (at the applicable Purchase Price) up to a number of shares of Common Stock determined by dividing such +Eligible Employee’s Contributions accumulated prior to such Exercise Date and retained in the Eligible Employee’s notional account as of the +B-4 Matador Resources Company | 2022 Proxy Statement +Table of Contents +ANNEX B +Exercise Date by the applicable Purchase Price; provided, however, that in no event will an Eligible Employee be permitted to purchase during each Purchase Period more than 2,500 shares of Common +Stock (subject to any adjustment pursuant to Section 18 ); provided, further, that such purchase will be subject to the limitations set forth in Sections 3(c) and 13 . The Eligible Employee may accept the grant +of such option by electing to participate in the Plan in accordance with the requirements of Section 5 . The Administrator may, for future Offering Periods, increase or decrease, in its absolute discretion, the maximum +number of shares of Common Stock that an Eligible Employee may purchase during each Purchase Period of an Offering Period. Exercise of the option will occur as provided in Section 8 , unless the Participant has withdrawn +pursuant to Section 10 . The option will expire on the last day of the Offering Period. +8. Exercise of Option +(a) Unless a Participant withdraws from the Plan as provided in Section 10 , such Participant’s option for the purchase of +shares of Common Stock will be exercised automatically on the Exercise Date, and the maximum number of full shares subject to the option will be purchased for such Participant at the applicable Purchase Price with the accumulated Contributions from +his or her notional account. No fractional shares of Common Stock will be purchased; unless determined by the Administrator, any Contributions accumulated in a Participant’s notional account that are not sufficient to purchase a full share will +be retained in the Participant’s notional account for the subsequent Purchase Period or Offering Period, subject to earlier withdrawal by the Participant as provided in Section 10 . Any other funds left over in a +Participant’s notional account after the Exercise Date will be returned to the Participant. During a Participant’s lifetime, a Participant’s option to purchase shares hereunder is exercisable only by him or her. +(b) If the Administrator determines that, on a given Exercise Date, the number of shares of Common Stock with respect to which options are to be +exercised may exceed (i) the number of shares of Common Stock that were available for sale under the Plan on the Enrollment Date of the applicable Offering Period, or (ii) the number of shares of Common Stock available for sale under the +Plan on such Exercise Date, the Administrator may in its sole discretion (x) provide that the Company will make a pro rata allocation of the shares of Common Stock available for purchase on such Enrollment Date or Exercise Date, as applicable, +in as uniform a manner as will be practicable and as it will determine in its sole discretion to be equitable among all Participants exercising options to purchase Common Stock on such Exercise Date, and continue all Offering Periods then in effect, +or (y) provide that the Company will make a pro rata allocation of the shares available for purchase on such Enrollment Date or Exercise Date, as applicable, in as uniform a manner as will be practicable and as it will determine in its sole +discretion to be equitable among all Participants exercising options to purchase Common Stock on such Exercise Date, and terminate any or all Offering Periods then in effect pursuant to Section 19 . The Company may make a +pro rata allocation of the shares available on the Enrollment Date of any applicable Offering Period pursuant to the preceding sentence, notwithstanding any authorization of additional shares for issuance under the Plan by the Company’s +stockholders subsequent to such Enrollment Date. +9. Delivery +As soon as +reasonably practicable after each Exercise Date on which a purchase of shares of Common Stock occurs, the Company will arrange the delivery to each Participant of the shares purchased upon exercise of his or her option in a form determined by the +Administrator (in its sole discretion) and pursuant to rules established by the Administrator. The Company may permit or require that shares be deposited directly with a broker designated by the Company or to a designated agent of the Company, and +the Company may utilize electronic or automated methods of share transfer. The Company may require that shares be retained with such broker or agent for a designated period of time and/or may establish other procedures to permit tracking of +disqualifying dispositions of such shares. No Participant will have any voting, dividend, or other stockholder rights with respect to shares of Common Stock subject to any option granted under the Plan until such shares have been purchased and +delivered to the Participant as provided in this Section 9 . +2022 +Proxy Statement | Matador Resources Company B-5 +Table of Contents +ANNEX B +10. Withdrawal +A Participant may withdraw all, but not less than all, the Contributions credited to his or her notional account and not yet used to exercise his or her option under the +Plan at any time by (a) submitting to the Company’s Human Resources department (or its delegate) a written notice of withdrawal in the form determined by the Administrator for such purpose, or (b) following an electronic or other +withdrawal procedure determined by the Administrator. All of the Participant’s Contributions credited to his or her notional account will be paid to such Participant as soon as reasonably practicable after receipt of notice of withdrawal and +such Participant’s option for the Offering Period will be automatically terminated, and no further Contributions for the purchase of shares will be made for such Offering Period. If a Participant withdraws from an Offering Period, Contributions +will not resume at the beginning of the succeeding Offering Period, unless the Participant re-enrolls in the Plan in accordance with the provisions of Section 5 . +11. Termination of Employment +Upon a Participant’s ceasing to be an +Eligible Employee, for any reason, he or she will be deemed to have elected to withdraw from the Plan and the Contributions credited to such Participant’s notional account during the Offering Period but not yet used to purchase shares of Common +Stock under the Plan will be returned to such Participant or, in the case of his or her death, to the person or persons entitled thereto under Section 15 , and such Participant’s option will be automatically terminated. +12. Interest +No interest will accrue on the Contributions of a +Participant in the Plan, except as may be required by Applicable Law, as determined by the Company, and if so required by the laws of a particular jurisdiction, shall apply to all Participants in the relevant Offering except to the extent otherwise +permitted by Treasury Regulation Section 1.423-2(f). +13. Stock +(a) Subject to adjustment upon changes in capitalization of the Company as provided in Section 18 hereof, the maximum number of +shares of Common Stock that will be made available for sale under the Plan will be 4,000,000 shares of Common Stock. +(b) Until the shares are +issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), a Participant will only have the rights of an unsecured creditor with respect to such shares, and no right to vote or +receive dividends or any other rights as a stockholder will exist with respect to such shares. +(c) Shares of Common Stock to be delivered to a +Participant under the Plan will be registered in the name of the Participant or the Participant and his or her spouse. +14. Administration +The Plan shall be administered by the Administrator. The Board shall fill vacancies on, and from time to time may remove or add members to, the Administrator. Any power +of the Administrator may also be exercised by the Board. The Administrator will have full and exclusive discretionary authority to construe, interpret and apply the terms of the Plan, to designate separate Offerings under the Plan, to determine +eligibility, to adjudicate all disputed claims filed under the Plan and to establish such procedures that it deems necessary for the administration of the Plan (including, without limitation, to adopt such procedures and sub-plans as are necessary +or appropriate to permit the participation in the Plan by employees who are foreign nationals or employed outside the United States, the terms of which sub-plans may take precedence over other provisions of this Plan, with the exception of +Section 13(a) , but unless otherwise superseded by the terms of such sub-plan, the provisions of this Plan shall govern the operation of such sub-plan). Unless otherwise determined by the Administrator, the employees +eligible to participate in each sub-plan will participate in a separate Offering. Without limiting the +B-6 Matador Resources Company | 2022 Proxy Statement +Table of Contents +ANNEX B +generality of the foregoing, the Administrator is specifically authorized to adopt rules and procedures regarding eligibility to participate, the definition of Compensation, handling of +Contributions, making of Contributions to the Plan (including, without limitation, in forms other than payroll deductions), establishment of bank or trust accounts to hold Contributions, payment of interest, conversion of local currency, obligations +to pay payroll tax, determination of beneficiary designation requirements, withholding procedures and handling of stock certificates that vary with applicable local requirements. The Administrator also is authorized to determine that, to the extent +permitted by Treasury Regulation Section 1.423-2(f), the terms of an option granted under the Plan or an Offering to citizens or residents of a non-U.S. +jurisdiction will be less favorable than the terms of options granted under the Plan or the same Offering to employees resident solely in the United States. The Administrator may also delegate some or all of its responsibilities, including the +authority to assist the Administrator in the day-to-day administration of the Plan, to one or more other officers of the Company or a subcommittee and, to the extent +there has been any such delegation, any reference in the Plan to the Administrator shall include the delegate of the Administrator. Every finding, decision and determination made by the Administrator will, to the full extent permitted by Applicable +Laws, be final and binding upon all parties. +15. Designation of Beneficiary +(a) If permitted by the Administrator, a Participant may file a designation of a beneficiary who is to receive any shares of Common Stock and cash, if +any, from the Participant’s notional account under the Plan in the event of such Participant’s death subsequent to an Exercise Date on which the option is exercised but prior to delivery to such Participant of such shares and cash. In +addition, if permitted by the Administrator, a Participant may file a designation of a beneficiary who is to receive any cash from the Participant’s notional account under the Plan in the event of such Participant’s death prior to exercise +of the option. If a Participant is married and the designated beneficiary is not the spouse, spousal consent will be required for such designation to be effective. +(b) Such designation of beneficiary may be changed by the Participant at any time by notice in a form determined by the Administrator. In the event of +the death of a Participant and in the absence of a beneficiary validly designated under the Plan who is living at the time of such Participant’s death, the Company will deliver such shares and/or cash to the executor or administrator of the +estate of the Participant, or if no such executor or administrator has been appointed (to the knowledge of the Company), the Company, in its discretion, may deliver such shares and/or cash to the spouse or to any one or more dependents or relatives +of the Participant, or if no spouse, dependent or relative is known to the Company, then to such other person as the Company may designate. +(c) All +beneficiary designations will be in such form and manner as the Administrator may designate from time to time. Notwithstanding Sections 15(a) and 15(b) , the Company and/or the Administrator may decide not to permit such designations by +Participants in non-U.S. jurisdictions to the extent permitted by Treasury Regulation Section 1.423-2(f). +16. Transferability +Neither Contributions credited to a Participant’s +notional account nor any rights with regard to the exercise of an option or to receive shares of Common Stock under the Plan may be assigned, transferred, pledged or otherwise disposed of in any way (other than by will, the laws of descent and +distribution or as provided in Section 15 ) by the Participant. Any such attempt at assignment, transfer, pledge or other disposition will be without effect, except that the Company may treat such act as an election to +withdraw funds from an Offering Period in accordance with Section 10 hereof. +17. Use of Funds +The Company may use all Contributions received or held by it under the Plan for any corporate purpose, and the Company will not be obligated to segregate such +Contributions except under Offerings in which applicable local law requires that Contributions to the Plan by Participants be segregated from the Company’s general corporate funds and/or deposited with an independent third party for +Participants in non-U.S. jurisdictions. Until shares of Common Stock are issued, Participants will only have the rights of an unsecured creditor with respect to such shares. +2022 +Proxy Statement | Matador Resources Company B-7 +Table of Contents +ANNEX B +18. Adjustments, Dissolution, Liquidation, Merger or Other +Corporate Transaction +(a) Adjustments . In the event that any dividend or other distribution (whether in the form of cash, Common Stock, +other securities, or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, +repurchase, or exchange of Common Stock or other securities of the Company, or other change in the corporate structure of the Company affecting the Common Stock occurs, the Administrator, in order to prevent dilution or enlargement of the benefits +or potential benefits intended to be made available under the Plan, will, in such manner as it may deem equitable, adjust the number and class of Common Stock that may be delivered under the Plan, the Purchase Price per share and the number of +shares of Common Stock covered by each option under the Plan that has not yet been exercised, and the numerical limits of Sections 7 and 13 . +(b) Dissolution or Liquidation . In the event of the proposed dissolution or liquidation of the Company, any Offering Period then in progress will +be shortened by setting a New Exercise Date, and will terminate immediately prior to the consummation of such proposed dissolution or liquidation, unless provided otherwise by the Administrator. The New Exercise Date will be before the date of the +Company’s proposed dissolution or liquidation. The Administrator will notify each Participant in writing or electronically, prior to the New Exercise Date, that the Exercise Date for the Participant’s option has been changed to the New +Exercise Date and that the Participant’s option will be exercised automatically on the New Exercise Date, unless prior to such date the Participant has withdrawn from the Offering Period as provided in Section 10 . +(c) Merger or Other Corporate Transaction . In the event of a merger, sale or other similar corporate transaction involving the Company, each +outstanding option will be assumed or an equivalent option substituted by the successor corporation or a Parent or Subsidiary of the successor corporation. In the event that the successor corporation refuses to assume or substitute for the option, +the Offering Period with respect to which such option relates will be shortened by setting a New Exercise Date on which such Offering Period shall end. The New Exercise Date will occur before the date of the Company’s proposed merger, sale or +other similar corporate transaction. The Administrator will notify each Participant in writing or electronically prior to the New Exercise Date, that the Exercise Date for the Participant’s option has been changed to the New Exercise Date and +that the Participant’s option will be exercised automatically on the New Exercise Date, unless prior to such date the Participant has withdrawn from the Offering Period as provided in Section 10 . +19. Amendment or Termination +(a) The Administrator, in its +sole discretion, may amend, suspend, or terminate the Plan, or any part thereof, at any time and for any reason. If the Plan is terminated, the Administrator, in its discretion, may elect to terminate all outstanding Offering Periods either +immediately or upon completion of the purchase of shares of Common Stock on the next Exercise Date (which may be sooner than originally scheduled, if determined by the Administrator in its discretion), or may elect to permit Offering Periods to +expire in accordance with their terms (and subject to any adjustment pursuant to Section 18 ). If the Offering Periods are terminated prior to expiration, all amounts then credited to Participants’ notional accounts +that have not been used to purchase shares of Common Stock will be returned to the Participants (without interest thereon, except as otherwise required under local laws, as further set forth in Section 12 ) as soon as +administratively practicable. +(b) Without stockholder consent and without limiting Section 19(a) , the Administrator will +be entitled to change the Offering Periods or Purchase Periods, designate separate Offerings, limit the frequency and/or number of changes in the amount withheld during an Offering Period, establish the exchange ratio applicable to amounts withheld +in a currency other than U.S. dollars, permit payroll withholding in excess of the amount designated by a Participant in order to adjust for delays or mistakes in the Company’s processing of properly completed withholding elections, establish +reasonable waiting and adjustment periods and/or accounting and crediting procedures to ensure that amounts applied toward the purchase of Common Stock for each Participant properly correspond with Contribution amounts, and establish such other +limitations or procedures as the Administrator determines in its sole discretion advisable that are consistent with the Plan. +(c) In the event the +Administrator determines that the ongoing operation of the Plan may result in unfavorable financial accounting consequences, the Administrator may, in its discretion and, to the extent +B-8 Matador Resources Company | 2022 Proxy Statement +Table of Contents +ANNEX B +necessary or desirable, modify, amend or terminate the Plan to reduce or eliminate such accounting consequence including, but not limited to: +(i) amending the Plan to conform with the safe harbor definition under the Financial Accounting Standards Board Accounting Standards +Codification Topic 718 (or any successor thereto), including with respect to an Offering Period underway at the time; +(ii) altering +the Purchase Price for any Offering Period or Purchase Period including an Offering Period or Purchase Period underway at the time of the change in Purchase Price; +(iii) shortening any Offering Period or Purchase Period by setting a New Exercise Date, including an Offering Period or Purchase Period +underway at the time of the Administrator action; +(iv) reducing the maximum percentage of Compensation a Participant may elect to +set aside as Contributions; and +(v) reducing the maximum number of shares of Common Stock a Participant may purchase during any +Offering Period or Purchase Period. +Such modifications or amendments will not require stockholder approval or the consent of any Participants. +20. Notices +All notices or other communications by a Participant to the +Company under or in connection with the Plan will be deemed to have been duly given when received in the form and manner specified by the Company at the location, or by the person, designated by the Company for the receipt thereof. +21. Conditions Upon Issuance of Shares +(a) Shares of Common +Stock will not be issued with respect to an option unless the exercise of such option and the issuance and delivery of such shares pursuant thereto will comply with all applicable provisions of law, domestic or foreign, including the Securities Act +of 1933, as amended, the Exchange Act, the rules and regulations promulgated thereunder, and the requirements of any stock exchange upon which the shares may then be listed, and will be further subject to the approval of counsel for the Company with +respect to such compliance. +(b) As a condition to the exercise of an option, the Company may require the person exercising such option to represent +and warrant at the time of any such exercise that the shares are being purchased only for investment and without any present intention to sell or distribute such shares if, in the opinion of counsel for the Company, such a representation is required +by any of the aforementioned applicable provisions of Applicable Law. +22. Term of Plan +The Plan will become effective upon the earlier to occur of its adoption by the Board or its approval by the stockholders of the Company. It will continue in effect +until terminated pursuant to Section 19 . +23. Stockholder Approval +The Plan will be subject to approval by the stockholders of the Company within 12 months after the date the Plan is adopted by the Board. Such stockholder approval will +be obtained in the manner and to the degree required under Applicable Laws. +24. Governing Law +This Plan and any agreements or other documents hereunder shall be interpreted and construed in accordance with the laws of the State of Texas and applicable federal +law. Any reference in this Plan or in any agreements or other documents hereunder to a provision of law or to a rule or regulation shall be deemed to include any successor law, rule or regulation of similar effect or applicability. +2022 +Proxy Statement | Matador Resources Company B-9 +Table of Contents +ANNEX B +25. Severability +If any provision of the Plan is or becomes or is deemed to be invalid, illegal, or unenforceable for any reason in any jurisdiction or as to any Participant, such +invalidity, illegality or unenforceability shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as to such jurisdiction or Participant as if the invalid, illegal or unenforceable provision had not been +included. +26. Interpretation +Headings are given to the Sections and +subsections of the Plan solely as a convenience to facilitate reference and shall not be deemed in any way material or relevant to the construction or interpretation of the Plan or any provision thereof. Words in the masculine gender shall include +the feminine gender, and where appropriate, the plural shall include the singular and the singular shall include the plural. The use herein of the word “including” following any general statement, term or matter shall not be construed to +limit such statement, term or matter to the specific items or matters set forth immediately following such word or to similar items or matters, whether or not non-limiting language (such as “without +limitation”, “but not limited to”, or words of similar import) is used with reference thereto, but rather shall be deemed to refer to all other items or matters that could reasonably fall within the broadest possible scope of such +general statement, term or matter. References herein to any agreement, instrument or other document means such agreement, instrument or other document as amended, supplemented and modified from time to time to the extent permitted by the provisions +thereof and not prohibited by the Plan. +B-10 Matador Resources Company | 2022 Proxy Statement +Table of Contents +ANNEX C +ANNEX C +Non-GAAP Financial Measures +Adjusted EBITDA +We define, on a consolidated basis and for San Mateo, Adjusted EBITDA as earnings before interest expense, income taxes, depletion, depreciation and amortization, +accretion of asset retirement obligations, property impairments, unrealized derivative gains and losses, certain other non-cash items and non-cash stock-based +compensation expense and net gain or loss on asset sales and impairment. Adjusted EBITDA is not a measure of net income (loss) or cash flows as determined by GAAP. Adjusted EBITDA is a supplemental non-GAAP +financial measure that is used by management and external users of our consolidated financial statements, such as industry analysts, investors, lenders and rating agencies. All references to Matador’s Adjusted EBITDA are those values +attributable to Matador Resources Company shareholders after giving effect to Adjusted EBITDA attributable to third-party non-controlling interests, including in San Mateo. +Management believes Adjusted EBITDA is necessary because it allows us to evaluate our operating performance and compare the results of operations from period to period +without regard to our financing methods or capital structure. We exclude the items listed above from net income (loss) in calculating Adjusted EBITDA because these amounts can vary substantially from company to company within our industry depending +upon accounting methods and book values of assets, capital structures and the method by which certain assets were acquired. +Adjusted EBITDA should not be +considered an alternative to, or more meaningful than, net income (loss) or net cash provided by operating activities as determined in accordance with GAAP or as a primary indicator of our operating performance or liquidity. Certain items excluded +from Adjusted EBITDA are significant components of understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure. Our Adjusted EBITDA may not be comparable to similarly titled measures +of another company because all companies may not calculate Adjusted EBITDA in the same manner. +The following table presents our calculation of Adjusted EBITDA and +the reconciliation of Adjusted EBITDA to the GAAP financial measures of net income (loss) and net cash provided by operating activities, respectively: +Adjusted +EBITDA—Matador Resources Company +Year Ended +December 31, 2021 +(In thousands) +Unaudited Adjusted EBITDA Reconciliation to Net Income: +Net income attributable to Matador Resources Company shareholders +$ +584,968 +Net income attributable to +non-controlling interest in subsidiaries +55,668 +Net income +640,636 +Interest expense +74,687 +Total income tax provision +74,710 +Depletion, depreciation and amortization +344,905 +Accretion of asset retirement obligations +2,068 +Unrealized gain on derivatives +(21,011 +) +Non-cash stock-based compensation +expense +9,039 +Net loss on asset sales and impairment +331 +Expense related to contingent consideration +1,485 +Consolidated Adjusted EBITDA +1,126,850 +Adjusted EBITDA attributable to +non-controlling interest in subsidiaries +(74,877 +) +Adjusted EBITDA attributable to Matador Resources Company +shareholders +$ +1,051,973 +2022 +Proxy Statement | Matador Resources Company C-1 +Table of Contents +ANNEX C +Year Ended +December 31, 2021 +(In thousands) +Unaudited Adjusted EBITDA Reconciliation to Net Cash Provided by Operating Activities: +Net cash provided by operating activities +$ +1,053,355 +Net change in operating assets and liabilities +982 +Interest expense, net of non-cash +portion +71,028 +Expense related to contingent consideration +1,485 +Adjusted EBITDA attributable to +non-controlling interest in subsidiaries +(74,877 +) +Adjusted EBITDA attributable to Matador Resources Company +shareholders +$ +1,051,973 +Adjusted EBITDA—San Mateo (100%) +Year Ended +December 31, 2021 +(In thousands) +Unaudited Adjusted EBITDA Reconciliation to Net Income: +Net income +$ +113,607 +Depletion, depreciation and amortization +30,522 +Interest expense +8,434 +Accretion of asset retirement obligations +247 +One-time plant payment +1,500 +Adjusted EBITDA +$ +154,310 +Year Ended +December 31, 2021 +(In thousands) +Unaudited Adjusted EBITDA Reconciliation to Net Cash Provided by Operating Activities: +Net cash provided by operating activities +$ +143,744 +Net change in operating assets and liabilities +1,689 +Interest expense, net of non-cash +portion +7,377 +One-time plant payment +1,500 +Adjusted EBITDA +$ +154,310 +Adjusted Free Cash Flow +Adjusted free +cash flow is measured, on a consolidated basis for the Company, as net cash provided by operating activities, adjusted for changes in working capital and cash performance incentives that are not included as operating cash flows, less cash flows used +for capital expenditures, adjusted for changes in capital accruals. On a consolidated basis, these numbers are also adjusted for the cash flows related to non-controlling interest in subsidiaries that +represent cash flows not attributable to Matador shareholders. Adjusted free cash flow should not be considered an alternative to, or more meaningful than, net cash provided by operating activities as +C-2 Matador Resources Company | 2022 Proxy Statement +Table of Contents +ANNEX C +determined in accordance with GAAP or an indicator of the Company’s liquidity. Adjusted free cash flow is used by the Company, securities analysts and investors as an indicator of the +Company’s ability to manage its operating cash flow, internally fund its drilling, completion and equipping capital expenditures, pay dividends and service or incur additional debt, without regard to the timing of settlement of either +operating assets and liabilities or accounts payable related to capital expenditures. Additionally, this non-GAAP financial measure may be different than similar measures used by other companies. The Company +believes the presentation of adjusted free cash flow provides useful information to investors, as it provides them an additional relevant comparison of the Company’s performance, sources and uses of capital associated with its operations across +periods and to the performance of the Company’s peers. In addition, this non-GAAP financial measure reflects adjustments for items of cash flows that are often excluded by securities analysts and other +users of the Company’s financial statements in evaluating the Company’s cash spend. +The table below reconciles adjusted free cash flow to its most +directly comparable GAAP measure of net cash provided by operating activities. All references to Matador’s adjusted free cash flow are those values attributable to Matador shareholders after giving effect to adjusted free cash flow attributable +to third-party non-controlling interests, including in San Mateo. +Adjusted Free Cash Flow—Matador Resources +Company +Year Ended +December 31, 2021 +(In thousands) +Net cash provided by operating activities +$ +1,053,355 +Net change in operating assets and liabilities +982 +San Mateo discretionary cash flow attributable to non-controlling interest in subsidiaries (1) +(71,262 +) +Performance incentives received from Five Point +48,626 +Total discretionary cash flow +$ +1,031,701 +Drilling, completion and equipping capital expenditures +431,136 +Midstream capital expenditures +63,359 +Expenditures for other property and equipment +376 +Net change in capital accruals +78,515 +San Mateo accrual-based capital expenditures related to non-controlling interest in subsidiaries (2) +(28,614 +) +Total accrual-based capital expenditures (3) +544,772 +Adjusted free cash flow +$ +486,929 +(1) +Represents Five Point’s 49% interest in San Mateo discretionary cash flow. +(2) +Represents Five Point’s 49% interest in accrual-based San Mateo capital expenditures. +(3) +Represents drilling, completion and equipping costs, Matador’s share of San Mateo capital expenditures plus 100% of +other immaterial midstream capital expenditures not associated with San Mateo. +Return on Average Capital Employed +Return on Average Capital Employed (ROACE) is defined as Adjusted EBITDA (defined above) attributable to Matador Resources Company shareholders, plus or minus (x) a +discretionary adjustment for the estimated change in the value of the Company’s Delaware Basin acreage plus (y) cash inflows from (i) asset sales and other transactions and (ii) strategic midstream transactions divided by total +capitalization (defined as total assets less total current liabilities). ROACE is not a measure of net income (loss) or cash flows as determined by GAAP. ROACE is a supplemental non-GAAP financial +measure that is used by management and external users of our consolidated financial statements, such as industry analysts, investors, lenders and rating agencies. +2022 +Proxy Statement | Matador Resources Company C-3 +Table of Contents +ANNEX C +The following table presents our calculation of ROACE and the +reconciliation of ROACE to the GAAP financial measure of net income. +For the Years Ended +December 31, 2021 +December 31, 2020 +($ in thousands) +Return on Average Capital Employed +Net income +$ +640,636 +Adjustments to net income (see Adjusted EBITDA reconciliation) +411,337 +(a) Adjusted EBITDA attributable to Matador Resources Company shareholders +$ +1,051,973 +Cash inflows from midstream transactions +48,626 +(b) Total cash inflows from midstream transactions and Adjusted EBITDA +$ +1,100,599 +(c) Total assets +$ +4,262,153 +$ +3,687,280 +(d) Total assets – non-guarantor +subsidiaries +894,062 +836,925 +(e) Total assets attributable to Matador Resources Company shareholders = [(c) – +49%*(d)] +$ +3,824,063 +$ +3,277,187 +(f) Total current liabilities +464,837 +290,936 +(g) Total current liabilities – non-guarantor +subsidiaries +35,531 +24,212 +(h) Total current liabilities attributable to Matador Resources Company shareholders = [(f) +– 49%*(g)] +447,427 +279,072 +Total Capitalization = [(e)-(h)] +$ +3,376,636 +$ +2,998,115 +(i) Average total capitalization for 2021 and 2020 +$ +3,187,375 +Return on average capital employed = [(b) / (i)] +34.5 +% +C-4 Matador Resources Company | 2022 Proxy Statement +Table of Contents +MATADOR RESOURCES COMPANY +5400 LBJ FREEWAY, SUITE 1500 +DALLAS, +TX 75240 +VOTE BY INTERNET - www.proxyvote.com or scan the QR Barcode above Use the Internet to transmit your voting instructions and for +electronic delivery of information up until 11:59 p.m. Eastern Time the day before the meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting +instruction form. +ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS +If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual +reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in +future years. +VOTE BY PHONE - 1-800-690-6903 +Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time the day before the meeting date. Have your proxy card in hand when you +call and then follow the instructions. +VOTE BY MAIL +Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, +Edgewood, NY 11717. +TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: +D79796-P70680 KEEP THIS +PORTION FOR YOUR RECORDS +— — — — — — — — — — — — — — — — — — +— — — — — — — — — — — — — — — — — — — — — — — — — — — — — — +DETACH AND RETURN THIS PORTION ONLY +THIS PROXY CARD IS +VALID ONLY WHEN SIGNED AND DATED. +MATADOR RESOURCES COMPANY +The +Board of Directors recommends you vote FOR the following: +1. +Election of Directors +For +Against +Abstain +Nominees: +1a. R. Gaines Baty +☐ +☐ +☐ +1d. James M. Howard +☐ +☐ +☐ +The Board of Directors recommends you vote FOR the following proposals: +For +Against +Abstain +2. +Approval of the First Amendment to the Matador Resources Company 2019 Long-Term Incentive Plan. +☐ +☐ +☐ +3. +Approval of the Matador Resources Company 2022 Employee Stock Purchase Plan. +☐ +☐ +☐ +4. +Advisory vote to approve the compensation of the Company’s named executive officers. +☐ +☐ +☐ +5. +Ratification of the appointment of KPMG LLP as the Company’s independent registered +public accounting firm for the year ending December 31, 2022. +☐ +☐ +☐ +NOTE: The proxies are authorized to vote in their +discretion on such other business as may properly come before the meeting or any adjournment thereof. +Yes +No +Please indicate if you plan to attend this meeting. +☐ +☐ +Please sign exactly as your name(s) appear(s) hereon. When signing as +attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized +officer. +Signature [PLEASE SIGN WITHIN BOX] +Date +Signature (Joint Owners) +Date +Table of Contents +Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: +The Annual Report for the year ended December 31, 2021, Notice of Annual Meeting and Proxy Statement are available at www.proxyvote.com +— — — — — — — — — — — — — — — — — — — — — — — — +— — — — — — — — — — — — — — — — — — — — — — — — +D79797-P70680 +MATADOR RESOURCES COMPANY +Annual Meeting of Shareholders +June 10, 2022 +9:30 A.M. +This proxy is solicited by the Board of Directors +As an alternative to completing this form, you may enter your vote instruction by telephone at 1-800-690-6903, or via the internet at +www.proxyvote.com. Have your proxy card in hand and follow the instructions. +Depending on concerns about the novel coronavirus, or +COVID-19, we might hold a virtual Annual Meeting instead of holding an in-person meeting. We would publicly announce a determination to hold a virtual Annual Meeting in a press release available at our website, www.matadorresources.com, as soon as +practicable before the meeting. In that event, the Annual Meeting would be conducted solely virtually, on the above date and time, via live audio webcast. You or your proxyholder could participate, vote and examine our shareholder list at the +virtual Annual Meeting by visiting www.virtualshareholdermeeting.com/MTDR2022 and using your control number, but only if we decide to hold a virtual Annual Meeting. +The shareholder hereby appoints Joseph Wm. Foran and Timothy E. Parker, or either of them, as proxies, each with the power to appoint +his substitute, and hereby authorizes them to represent and to vote, as designated on the reverse side of this ballot, all of the shares of common stock of MATADOR RESOURCES COMPANY that the shareholder is entitled to vote at the Annual Meeting of +Shareholders to be held at 9:30 A.M., CDT on June 10, 2022, at the Hilton Dallas Lincoln Centre, Lakeside Ballroom, 5410 LBJ Freeway, Dallas, Texas 75240, and any adjournment or postponement thereof. The shareholder hereby revokes any proxy or +proxies heretofore given to vote upon or act with respect to such shares of stock. +This proxy, when properly executed, will be +voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the Board of Directors’ recommendations. +Continued and to be signed on reverse side \ No newline at end of file diff --git a/raw/proxies/0001520006/0001193125-22-124767/proxy_rpt.txt b/raw/proxies/0001520006/0001193125-22-124767/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..6cc4489e17bf12abeee711951b6eeab0212d2da8 --- /dev/null +++ b/raw/proxies/0001520006/0001193125-22-124767/proxy_rpt.txt @@ -0,0 +1,123 @@ +TRANSACTIONS WITH RELATED PERSONS +TRANSACTIONS WITH RELATED PERSONS +Except as disclosed below, during 2021, there was not, nor was there proposed +as of December 31, 2021, any transaction or series of similar transactions to which we were or are a party in which the amount involved exceeded or exceeds $120,000 and in which any of our directors, executive officers, holders of more than 5% +of any class of our voting securities or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest, other than compensation arrangements with directors and executive officers, which +are described in “Executive Compensation—Compensation Discussion and Analysis” and “Director Compensation” above. +Working Interest and Overriding Royalty Interest Owners +Joseph Wm. Foran, Chairman and Chief Executive Officer, and certain of Mr. Foran’s affiliated entities (collectively, the “Foran Entities”) are +working interest owners and/or overriding royalty interest owners in certain properties operated by the Company or in which the Company also holds a working interest. As working interest owners, the Foran Entities are required to pay their +proportionate share of all costs and are entitled to receive their proportionate share of revenues in the normal course of business. As overriding royalty interest owners, the Foran Entities are entitled to receive their proportionate share of +revenues from the wells in which they own an interest in the normal course of business. During 2021, revenues, net of costs, received by the Foran Entities in their capacity as working interest owners or overriding royalty interest owners were +approximately $5.5 million (the “Related Net Revenue Payments”). The Related Net Revenue Payments represent less than 1% of our total third-party net revenue payments during 2021. +In our capacity as operator, we incur drilling and operating costs that are billed to our partners based on their respective working interests. During 2021, our joint +interest billings to the Foran Entities attributable to their share of costs were approximately $2.1 million (the “Related Joint Interest Billings”). The Related Joint Interest Billings represent less than 1% of our total joint +interest billings during 2021. As a result of this ownership by the Foran Entities, from time to time, we will be in a net receivable or net payable position with certain of the Foran Entities. We do not consider any net receivables from the Foran +Entities to be uncollectible. +The Audit Committee reviewed the terms of the working interests and/or overriding royalty interests of the Foran Entities for +potential conflicts of interest under the Related Person Transaction Policy, and, after being fully informed as to Mr. Foran’s relationships and interests in such transactions and all other material facts related to the Related Net Revenue +Payments and Related Joint Interest Billings, determined that such transactions and the Related Net Revenue Payments and Related Joint Interest Billings were fair to the Company and recommended such transactions and the Related Net Revenue Payments +and Related Joint Interest Billings to the full Board for approval and ratification. The Board subsequently approved and ratified the transactions and the Related Net Revenue Payments and Related Joint Interest Billings. +Joint Venture Relationship +The Company has entered into a joint venture (the “Joint +Venture”) with Spearpoint Resources Company (“Spearpoint”) to generate value through a conventional vertical well development program in our Twin Lakes asset area. An adult child of Mr. Foran is the founder of Spearpoint and +serves as an executive officer and director of Spearpoint. Mr. Foran’s child has a Bachelor of Arts degree in Economics from Princeton University, a Master’s of Science degree in Petroleum Engineering from Texas A&M University and +a Master’s degree in Business Administration from Rice University. Mr. Foran’s child worked for a major oil and gas company as a petroleum petrophysicist and has served for over 10 years and achieved the rank of Major in the United +States Marine Corp Reserve. Mr. Foran’s child may perform shared services to the Joint Venture, for which the Joint Venture would reimburse Spearpoint. +During 2021, the Company made capital contributions to the Joint Venture of seismic data and approximately $4.0 million (the “Capital Contributions”). +The Company did not receive any distributions from the Joint Venture in 2021, and the Joint Venture did not pay Spearpoint for any shared services provided by Mr. Foran’s child, +2022 +Proxy Statement | Matador Resources Company 87 +Table of Contents +TRANSACTIONS WITH RELATED PERSONS +although such distributions may be received by the Company or such shared service amounts may be paid by Spearpoint in the future. +The Audit Committee reviewed the terms of the Joint Venture for potential conflicts of interest under the Related Person Transaction Policy, and, after being fully +informed as to Mr. Foran’s relationships and interests in such transactions and all other material facts related to the Joint Venture, determined that such transactions, including the Capital Contributions, were fair to the Company and +recommended such transactions to the full Board for approval and ratification. The Board subsequently approved and ratified the transactions, including the Capital Contributions. +Certain Employment Relationships +Billy E. Goodwin served as an executive officer during 2021 and +currently serves as the Company’s President – Operations. During 2021, two of Mr. Goodwin’s adult children were employees of the Company and had been employees since 2014 and 2015, respectively. One of Mr. Goodwin’s +children resigned in 2021. Each child earned in 2021, and the remaining child that is employed by the Company in 2022 is expected to be compensated in 2022, between $120,000 and $500,000. One of Mr. Goodwin’s children has a Bachelor of +Science degree in Petroleum Engineering from the University of Tulsa and over 11 years of industry experience, including as a regional drilling supervisor for another publicly traded exploration and production company. Mr. Goodwin’s other +child has a Bachelor of Science in Business Administration degree in Energy Management from the University of Tulsa and a Bachelor of Arts degree in General Business and Management from Oklahoma State University. He also has over 11 years of +industry experience, including as a drilling fluids engineer for a publicly traded oilfield services company and as a landman for a publicly traded exploration and production company. The Audit Committee reviewed the terms of the employment +arrangements for potential conflicts of interest under the Company’s Related Person Transaction Policy and, after being fully informed as to the employment arrangements and historical and anticipated compensation of Mr. Goodwin’s +adult children, and all other material facts related to the relationship, determined that the employment arrangements were fair to the Company and recommended the employment arrangements to the full Board for approval and ratification. The Board +subsequently approved and ratified such employment arrangements. +Reynald A. Baribault is a member of the Board. Mr. Baribault’s sister-in-law has been an employee of the Company since 2016 and earned in 2021, and is expected to be compensated in 2022, between $120,000 and $250,000. +Mr. Baribault’s sister-in-law has a diploma from the Executive Secretarial School and is a certified legal assistant, having completed the Southern Methodist +University Legal Assistants Program. She has over 39 years of experience as a legal assistant. The Audit Committee reviewed the terms of the employment arrangement for potential conflicts of interest under the Company’s Related Person +Transaction Policy and, after being fully informed as to the employment arrangement and historical and anticipated compensation of Mr. Baribault’s +sister-in-law, and all other material facts related to the relationship, determined that the employment arrangement was fair to the Company and recommended the +employment arrangement to the full Board for approval and ratification. The Board subsequently approved and ratified such employment arrangement. +An adult child of +Mr. Foran has been an employee of the Company since 2015 and earned in 2021, and is expected to be compensated in 2022, between $120,000 and $250,000. Mr. Foran’s child has a Bachelor of Science degree in Human Resource Development +and a Master of Science degree in Human Resource Management, both from Texas A&M University. She has more than 10 years of industry experience, including with another publicly traded exploration and production company. Another adult child of +Mr. Foran was employed as a consultant to the Company in 2021 and was compensated, and is expected to be compensated in 2022, between $120,000 and $250,000. Mr. Foran’s child has a degree from Yale University and a Master’s +degree in Business Administration from the University of Chicago and also worked for a major oil and gas company for a number of years. The Audit Committee reviewed the terms of the employment arrangement and the consulting arrangement for potential +conflicts of interest under the Company’s Related Person Transaction Policy and, after being fully informed as to the employment arrangement and the consulting arrangement and historical and anticipated compensation of Mr. Foran’s +adult children, and all other material facts related to the relationship, determined that the employment arrangement and the consulting arrangement each was fair to the Company and +88 Matador Resources Company | 2022 Proxy Statement +Table of Contents +TRANSACTIONS WITH RELATED PERSONS +recommended the employment arrangement and the consulting arrangement to the full Board for approval and ratification. The Board subsequently approved and ratified such employment arrangement and +such consulting arrangement. +Procedures for Approval of Related Person Transactions +Pursuant to the Related Person Transaction Policy as in effect +as of December 31, 2021, a “Related Person Transaction” is defined as a transaction (including any financial transaction, arrangement or relationship (including any indebtedness or guarantee of indebtedness)), or series of related +transactions, or any material amendment to any such transaction, in which a Related Person (as defined below) has or will have a direct or indirect material interest and in which we are a participant, other than: +• +a transaction involving compensation of directors that is required to be reported in our proxy statement under Item 402 of +the SEC’s compensation disclosure requirements (“Item 402”); +• +any employment by us of an executive officer if: +¡ +the related compensation is required to be reported in our proxy statement under Item 402; or +¡ +the executive officer is not an “immediate family member” of another executive officer or director of the +Company, the related compensation would be reported in our proxy statement under Item 402 if the executive officer was a “named executive officer” and the Compensation Committee approved (or recommended that the Board approve) such +compensation; +• +a transaction with a Related Person involving less than $120,000; +• +a transaction in which the interest of the Related Person arises solely from the ownership of a class of our equity +securities and all holders of that class receive the same benefit on a pro rata basis; +• +a transaction in which a Related Person has an indirect interest solely as a result of being (a) a director or, +together with all other Related Persons, a less than 10% beneficial owner of an equity interest in another entity, or both, or (b) a limited partner in a partnership in which the Related Person, together with all other Related Persons, has an +interest of less than 10%; +• +a transaction in which the rates or charges involved therein are determined by competitive bids, or a transaction that +involves the rendering of services as a common or contract carrier, or public utility, at rates or charges fixed in conformity with law or governmental authority; +• +any transaction with another company at which a Related Person’s only relationship is as an employee (other than an +executive officer), if the aggregate amount involved does not exceed the greater of $1,000,000, or 2% of that company’s total annual revenues; +• +any charitable contribution, grant or endowment by us to a charitable organization, foundation or university at which a +Related Person’s only relationship is as an employee (other than an executive officer), if the aggregate amount involved does not exceed the lesser of $1,000,000, or 2% of the charitable organization’s total annual receipts; or +• +any transaction with another publicly traded company where the Related Person’s interest arises solely from beneficial +ownership of more than 5% of our Common Stock and ownership of a non-controlling interest in the other publicly traded company. +“Related Person” means: +• +any person who is, or at any time during the applicable period was, one of our executive officers or one of our directors +or nominees for director; +• +any person who is known by us to be the beneficial owner of more than 5% of our Common Stock; +• +any immediate family member of any of the foregoing persons, which means any child, stepchild, parent, stepparent, spouse, +sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, sister-in-law or person residing (other than a tenant or employee) in the home of a director, nominee for director, executive officer or a beneficial owner of more than 5% of +our Common Stock; and +2022 +Proxy Statement | Matador Resources Company 89 +Table of Contents +TRANSACTIONS WITH RELATED PERSONS +• +any entity that is owned or controlled by any of the foregoing persons or in which any of the foregoing persons is a +general partner or executive officer or in which such person, together with all other of the foregoing persons, owns 10% or more of the equity interests thereof. +Pursuant to the Related Person Transaction Policy, the Audit Committee must review all material facts of each Related Person Transaction and recommend either approval +or disapproval of the Related Person Transaction to the full Board, subject to certain limited exceptions. In determining whether to recommend approval or disapproval of the Related Person Transaction, the Audit Committee must, after reviewing all +material facts of the Related Person Transaction and the Related Person’s relationship and interest, determine whether the Related Person Transaction is fair to the Company. Further, the policy requires that all Related Person Transactions be +disclosed in our filings with the SEC and/or our website in accordance with applicable laws, rules and regulations. +90 Matador Resources Company | 2022 Proxy Statement +Table of Contents \ No newline at end of file diff --git a/raw/proxies/0001520006/0001193125-23-122206/proxy.txt b/raw/proxies/0001520006/0001193125-23-122206/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..1a1235cf558923bef70c6658975aa0177c327fa5 --- /dev/null +++ b/raw/proxies/0001520006/0001193125-23-122206/proxy.txt @@ -0,0 +1,3617 @@ +DEF 14A +Table of Contents +DEF 14A false 0001520006 0001520006 2022-01-01 2022-12-31 0001520006 2021-01-01 2021-12-31 0001520006 2020-01-01 2020-12-31 0001520006 mtdr:YearOverYearChangeInFairValueOfEquityAwardsGrantedInPriorYearsThatVestedInTheYearMember ecd:NonPeoNeoMember 2022-01-01 2022-12-31 0001520006 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2020-01-01 2020-12-31 0001520006 mtdr:ValueOfStockAwardsAndOptionAwardsMember ecd:PeoMember 2020-01-01 2020-12-31 iso4217:USD +UNITED STATES +SECURITIES AND EXCHANGE +COMMISSION +Washington, D.C. 20549 +SCHEDULE 14A +Proxy Statement Pursuant to Section 14(a) of the +Securities Exchange Act of 1934 +(Amendment No. ) +Filed by the Registrant ☒ +Filed by a Party other than the Registrant ☐ +Check the appropriate box: +☐ +Preliminary Proxy Statement +☐ +Confidential, for Use of the Commission Only (as permitted by Rule +14a-6(e)(2)) +☒ +Definitive Proxy Statement +☐ +Definitive Additional Materials +☐ +Soliciting Material Pursuant to +§240.14a-12 +Matador Resources Company +(Name of Registrant as Specified In Its Charter) +(Name of Person(s) Filing Proxy Statement, if other than the Registrant) +Payment of Filing Fee (Check the appropriate box): +☒ +No fee required. +☐ +Fee paid previously with preliminary materials. +☐ +Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules +14a-6(i)(1) +and +0-11 +Table of Contents +2023 +Notice of Annual Meeting of Shareholders +and +Proxy Statement +June 9, 2023 | Dallas, Texas +Table of Contents +One Lincoln Centre +5400 LBJ Freeway, Suite 1500 +Dallas, Texas 75240 +www.matadorresources.com +NOTICE OF ANNUAL MEETING OF SHAREHOLDERS +To Be Held on June 9, 2023 +To the Matador Resources Company Shareholders: +Please join us for the 2023 Annual Meeting of Shareholders of Matador Resources Company. The meeting will be held at the Hilton Dallas Lincoln Centre, Lakeside Ballroom, 5410 LBJ Freeway, Dallas, Texas 75240, on Friday, June 9, 2023, at 9:30 a.m. , Central Daylight Time. +At the meeting, you will hear a report on our business and act on the following matters: +(1) +Election of the four nominees for director named in the attached Proxy Statement; +(2) +Advisory vote to approve the compensation of our named executive officers as described in the attached Proxy Statement; +(3) +Ratification of the appointment of KPMG LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2023; and +(4) +Any other matters that may properly come before the meeting. +All shareholders of record at the close of business on April 12, 2023 are entitled to vote at the meeting or any postponement or adjournment of the meeting. A list of the shareholders of record is available at the Company’s offices in Dallas, Texas. +By Order of the Board of Directors, +Joseph Wm. Foran +Chairman and Chief Executive Officer +April 27, 2023 +YOUR VOTE IS IMPORTANT! +Whether or not you will attend the meeting, please vote as promptly as possible by using the Internet or telephone or by signing, dating and returning your proxy card to the address listed on the card. +Important Notice Regarding the Availability of Proxy Materials for the +Annual Meeting of Shareholders to Be Held on June 9, 2023: +Our Proxy Statement and the Annual Report to Shareholders for the fiscal year ended December 31, 2022 are available for viewing, printing and downloading at https://materials.proxyvote.com/576485 . +Table of Contents +TABLE OF CONTENTS +TABLE OF CONTENTS +Page +Proxy Statement +1 +Proxy Summary +3 +Information About the Annual Meeting +7 +Proposal 1 | Election of Directors +11 +Director Diversity +11 +Core Competencies +12 +Nominees +13 +Vote Required +16 +Directors Continuing in Office +17 +Corporate Governance +21 +Independence of Directors +21 +Majority Vote in Director Elections +21 +Board Leadership Structure +22 +Board Committees +23 +Board’s Role in Risk Oversight +28 +Environmental, Social and Governance (ESG) Initiatives +28 +Strategic Planning and Compensation Committee Interlocks and Insider Participation +30 +Communications with Directors +31 +Executive Officers and Other Senior Officers of the Company +31 +Proposal 2 | Advisory Vote to Approve Named Executive Officer Compensation +37 +Vote Required +37 +Proposal 3 | Ratification of the Appointment of KPMG LLP +38 +Fees of Independent Registered Public Accounting Firm for Fiscal Years 2022 and 2021 +38 +Report of the Audit Committee +39 +Vote Required +40 +Page +Letter to Shareholders +41 +Executive Compensation +42 +Compensation Discussion and Analysis +42 +Strategic Planning and Compensation Committee Report +59 +Summary Compensation Table +60 +Grants of Plan-Based Awards Table +61 +Outstanding Equity Awards at December 31, 2022 +62 +Option Exercises and Stock Vested +63 +Potential Payments upon Termination or Change in Control +64 +Chief Executive Officer Pay Ratio +68 +Pay Versus Performance +69 +Director Compensation +73 +Compensation for 2022-2023 +74 +Director Stock Ownership Guidelines +74 +Securities Authorized for Issuance Under Equity Compensation Plans +75 +Transactions With Related Persons +76 +Security Ownership of Certain Beneficial Owners and Management +80 +Additional Information +82 +Shareholder Proposals for the 2024 Proxy Statement +82 +Director Nominations or Other Business for Presentation at the 2024 Annual Meeting +82 +Annual Report on Form 10-K +82 +Other Business +83 +Annex A Non-GAAP Financial Measures +A-1 +2023 Proxy Statement | Matador Resources Company i +Table of Contents +PROXY STATEMENT +Matador Resources Company +One Lincoln Centre +5400 LBJ Freeway, Suite 1500 +Dallas, Texas 75240 +www.matadorresources.com +PROXY STATEMENT +For +ANNUAL MEETING OF SHAREHOLDERS +To Be Held on June 9, 2023 +This Proxy Statement is being mailed on or about April 27, 2023 to the shareholders of Matador Resources Company (“Matador” or the “Company”) in connection with the solicitation of proxies by the Board of Directors (the “Board”) of the Company to be voted at the Annual Meeting of Shareholders of the Company to be held at the Hilton Dallas Lincoln Centre, Lakeside Ballroom, 5410 LBJ Freeway, Dallas, Texas 75240, on June 9, 2023, at 9:30 a.m., Central Daylight Time (the “Annual Meeting” or the “2023 Annual Meeting”), or at any postponement or adjournment thereof, for the purposes set forth in the accompanying Notice of Annual Meeting of Shareholders. The address of the Company’s principal executive office is One Lincoln Centre, 5400 LBJ Freeway, Suite 1500, Dallas, Texas 75240. +If you are a shareholder of record, you may vote in person by attending the meeting, by completing and returning a proxy by mail or by using the Internet or telephone. You may vote your proxy by mail by marking your vote on the enclosed proxy card and following the instructions on the card. To vote your proxy using the Internet or telephone, see the instructions on the proxy form and have the proxy form available when you access the Internet website or place your telephone call. +The named proxies will vote your shares according to your directions. If you sign and return your proxy but do not make any of the selections, the named proxies will vote your shares: (i) FOR the election of the four nominees for director as set forth in this Proxy Statement, (ii) FOR the approval, on an advisory basis, of the compensation of the Company’s named executive officers as disclosed in this Proxy Statement and (iii) FOR the ratification of KPMG LLP as the independent registered public accounting firm of the Company for the year ending December 31, 2023. Your proxy may be revoked at any time before it is exercised by filing with the Company a written revocation addressed to the Corporate Secretary, by executing a proxy bearing a later date or by attending the Annual Meeting and voting in person. +The cost of soliciting proxies will be borne by the Company. In addition to the use of postal services and the Internet, proxies may be solicited by directors, officers and employees of the Company (none of whom will receive any additional compensation for any assistance they may provide in the solicitation of proxies) in person or by telephone. +The outstanding voting securities of the Company consist of issued and outstanding common stock, par value $0.01 per share (the “Common Stock”). The record date for the determination of the shareholders entitled to notice of and to vote at the Annual Meeting, or any postponement or adjournment thereof, has been established by the Board as the close of business on April 12, 2023 (the “Record Date”). As of the Record Date, there were 119,183,914 shares of Common Stock outstanding and entitled to vote. +The presence, in person or by proxy, of the holders of record of a majority of the outstanding shares entitled to vote is necessary to constitute a quorum for the transaction of business at the Annual Meeting, but if a quorum should not be present, the meeting may be adjourned from time to time until a quorum is obtained. A holder of Common Stock will be entitled to one vote per share on each matter properly brought before the meeting. Cumulative voting is not permitted in the election of directors. +The proxy card provides space for a shareholder to abstain with respect to any or all nominees for the Board. The affirmative vote of a majority of the votes cast by holders of shares present in person or represented by proxy and entitled to vote on the election of directors at the Annual Meeting is required for the election of each nominee for +2023 Proxy Statement | Matador Resources Company 1 +Table of Contents +PROXY STATEMENT +director. With respect to the election of directors in an uncontested election, such as that being held at the Annual Meeting, “majority of the votes cast” means the number of votes cast “for” the election of such nominee exceeds the number of votes cast “against” such nominee. See “Corporate Governance—Majority Vote in Director Elections” for additional information regarding election of directors. +The other proposals require the affirmative vote of a majority of the shares of Common Stock present in person or represented by proxy and entitled to vote at the meeting. Shares held by a shareholder who abstains from voting on any or all proposals will be included for the purpose of determining the presence of a quorum. Other than with respect to the election of directors, an abstention will effectively count as a vote cast against the remaining proposals. Broker non-votes on any matter as to which the broker has indicated on the proxy that it does not have discretionary authority to vote will be treated as shares not entitled to vote with respect to that matter. However, such shares will be considered present and entitled to vote for quorum purposes so long as they are entitled to vote on at least one other matter. +2 Matador Resources Company | 2023 Proxy Statement +Table of Contents +PROXY SUMMARY +PROXY SUMMARY +This summary highlights information contained elsewhere in this Proxy Statement. This summary does not contain all of the information that you should consider, and you should read the entire Proxy Statement carefully prior to voting. For more complete information regarding our 2022 performance, please review our Annual Report on Form 10-K for the year ended December 31, 2022. +2023 Annual Meeting of Shareholders +Voting Matters and Board Recommendation +Proposal +Board +Recommendation +Election of Four Director Nominees (page 11) +FOR +Advisory Vote to Approve Named Executive Officer Compensation (page 37) +FOR +Ratification of the Appointment of KPMG LLP as the Company’s Independent Registered Public Accounting Firm for 2023 (page 38) +FOR +2022 Business Highlights +The year 2022 was a tremendous year for Matador, including record total production, net income, adjusted earnings before interest expense, income taxes, depletion, depreciation and amortization and certain other items (“Adjusted EBITDA”, a non-GAAP financial measure), net cash provided by operating activities and adjusted Free Cash Flow (a non-GAAP financial measure). San Mateo Midstream, LLC (“San Mateo”), our midstream joint venture, also had a record year in 2022, including increased throughput volumes for natural gas gathering and processing, oil gathering and transportation and water handling, as well as record net income and record Adjusted EBITDA. In 2022, both Matador and San Mateo generated free cash flow in all four quarters. +In addition, we doubled our quarterly dividend from $0.05 per share in the first and second quarters of 2022 to $0.10 per share in the third and fourth quarters of 2022. In December 2022, we announced that the Board had again amended the Company’s dividend policy, increasing the quarterly dividend by 50% to $0.15 per share. We also paid down debt and ended 2022 with a leverage ratio of 0.1x (calculated in accordance with the Credit Agreement (as defined below) without the application of the maximum available cash set forth in the Credit Agreement), the lowest since we became a public company in 2012. +2023 Proxy Statement | Matador Resources Company 3 +Table of Contents +PROXY SUMMARY +Production Growth +Business Highlights +• +A 23% increase in oil production to 21.9 million barrels (“Bbl”) of oil produced in 2022 from 17.8 million Bbl of oil produced in 2021. +• +A 22% increase in natural gas production to 99.3 billion cubic feet (“Bcf”) of natural gas produced in 2022 from 81.7 Bcf of natural gas produced in 2021. +• +A 22% increase in average daily oil equivalent production to 105,465 barrels of oil equivalent (“BOE”) per day, including 60,119 Bbl of oil per day and 272.1 million cubic feet (“MMcf”) of natural gas per day, in 2022, from 86,176 BOE per day, including 48,876 Bbl of oil per day and 223.8 MMcf of natural gas per day, in 2021. +• +Continued drilling of longer laterals, whereby 90% of the operated horizontal wells we turned to sales in 2022 had lateral lengths of two miles or greater, as compared to only 8% as recently as 2019. +• +Capital expenditures for drilling, completing and equipping wells (“D/C/E capital expenditures”) for 2022 of $772.5 million, which was at the low end of our revised estimated range for 2022 D/C/E capital expenditures of $765 to $835 million as provided on July 26, 2022 and affirmed on October 25, 2022, which included the addition of a seventh operated drilling rig in September 2022. +Returning Value to Shareholders +Capital Resources and Financial Highlights +• +The generation of free cash flow in all four quarters of 2022 by both Matador and San Mateo. +• +The repayment of all outstanding borrowings under our Fourth Amended and Restated Credit Agreement (the “Credit Agreement”), resulting in no outstanding borrowings under that facility at December 31, 2022. +• +The repurchase of an aggregate principal amount of $350.8 million of our outstanding 5.875% senior notes due 2026. +• +The amendments of our dividend policy in the second and fourth quarters of 2022, pursuant to which we increased the quarterly cash dividend from $0.05 per share of Common Stock to $0.15 per share of Common Stock. +• +The receipt of $28.3 million in performance incentives directly from Five Point Energy, LLC, our joint venture partner in San Mateo (“Five Point”). +4 Matador Resources Company | 2023 Proxy Statement +Table of Contents +PROXY SUMMARY +• +The revision of our Credit Agreement at our spring and fall redetermination processes to collectively (i) increase the borrowing base to $2.25 billion, as compared to $1.35 billion at December 31, 2021, (ii) increase the elected borrowing commitment to $775.0 million, as compared to $700.0 million at December 31, 2021, (iii) reaffirm the maximum facility amount at $1.5 billion and (iv) add one new bank to our lending group. +• +The amendment of San Mateo’s revolving credit facility (the “San Mateo Credit Facility”) in December 2022 to (i) extend the maturity date by three years from December 2023 to December 2026, (ii) increase the lender commitments under the San Mateo Credit Facility from $450.0 million to $485.0 million, (iii) refresh the accordion feature that provides for potential increases in lender commitments to up to $735.0 million, as compared to $700.0 million previously, and (iv) add one new bank to San Mateo’s lending group. +Environmental, Social and Governance (“ESG”) Initiatives (page 28) +At Matador, we are committed to creating long-term value in a responsible manner. Our aim is to reliably and profitably provide the energy that society needs in a manner that is safe, protects the environment and is consistent with the industry’s best practices and the highest applicable regulatory and legal standards. In alignment with this goal, we maintain an active ESG program that is overseen and supported by senior management and the Board’s Environmental, Social and Corporate Governance Committee. In December 2022, we were pleased to issue Matador’s annual Sustainability Report, which included quantitative metrics aligned with standards developed by an industry leader, the Sustainability Accounting Standards Board (“SASB”). For additional information on the Company’s ESG efforts, see “Corporate Governance—Environmental, Social and Governance (ESG) Initiatives” on page 28. Information included in our Sustainability Report is not incorporated into this Proxy Statement. +Director Nominees (page 11) +Our Board currently has nine members and one vacancy and is divided into three classes of directors, designated Class I, Class II and Class III. Directors are elected for three-year terms. The table below provides certain summary information about each nominee for director named in this Proxy Statement: +Name +Age +Director +Since +Principal Occupation +Committee +Memberships +Joseph Wm. Foran +70 +2003 +Chairman and CEO, Matador Resources Company +E, CM, O, P +Reynald A. Baribault* +59 +2014 +President and CEO, IPR Energy Partners, LLC +A, E, O, P, SPC +Timothy E. Parker* +48 +2018 +Former Portfolio Manager and Analyst – Natural Resources, T. Rowe Price & Associates +A, CM, E, ESG, P, SPC +Shelley F. Appel** +33 +— +ESG Coordinator and Special Advisor to the Board, Matador Resources Company +— +* +Independent Director +** +Ms. Appel has not previously served on our Board. We anticipate that Ms. Appel will be appointed to the Capital Markets and Finance Committee following the 2023 Annual Meeting. +A +Audit Committee +CM +Capital Markets and Finance Committee +E +Executive Committee +ESG +Environmental, Social and Corporate Governance Committee +O +Operations and Engineering Committee +P +Prospect Committee +SPC +Strategic Planning and Compensation Committee +2023 Proxy Statement | Matador Resources Company 5 +Table of Contents +PROXY SUMMARY +Executive Compensation Highlights (page 42) +Our Executive Compensation Philosophy +Our compensation program is designed to reward, in both the short term and the long term, performance that contributes to the implementation of our business strategies, maintenance of our culture and values and achievement of our objectives. In addition, we reward qualities that we believe help achieve our business strategies such as: +• +teamwork; +• +recruiting and mentoring future leaders within the Company to drive long-term shareholder value; +• +individual performance in light of general economic and industry-specific conditions; +• +relationships with shareholders and vendors; +• +level of job responsibility; +• +industry experience; +• +general professional growth; and +• +the ability to: +¡ +manage and enhance production from our existing assets; +¡ +explore new opportunities to increase oil and natural gas production; +¡ +identify and acquire additional acreage; +¡ +improve total shareholder returns; +¡ +increase year-over-year proved reserves; +¡ +control unit production costs; and +¡ +pursue midstream opportunities. +For discussion of recent changes to our executive compensation program, see “Executive Compensation—Compensation Discussion and Analysis” beginning on page 42. +6 Matador Resources Company | 2023 Proxy Statement +Table of Contents +INFORMATION ABOUT THE ANNUAL MEETING +INFORMATION ABOUT THE ANNUAL MEETING +We are furnishing you this Proxy Statement in connection with the solicitation of proxies by the Board to be used at the Annual Meeting and any adjournment thereof. The Annual Meeting will be held on Friday, June 9, 2023, at 9:30 a.m., Central Daylight Time. We are sending this Proxy Statement to our shareholders on or about April 27, 2023. +All references in this Proxy Statement to “we,” “our,” “us,” “Matador” or the “Company” refer to Matador Resources Company, including our subsidiaries and affiliates. +What is the purpose of the Annual Meeting? +At the Annual Meeting, shareholders will act upon the following matters outlined in the Annual Meeting notice: +• +the election of the four nominees for director named in this Proxy Statement; +• +an advisory vote to approve the compensation of our named executive officers as described herein; +• +the ratification of the appointment of KPMG LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2023; and +• +any other matters that may properly come before the meeting. +What are the Board’s voting recommendations? +• +FOR the election of the four nominees for director named in this Proxy Statement; +• +FOR the approval, on an advisory basis, of the compensation of the Company’s named executive officers; and +• +FOR the ratification of the appointment of KPMG LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2023. +Who is entitled to vote? +Shareholders as of the close of business on April 12, 2023 are eligible to vote their shares at the Annual Meeting. As of the Record Date, there were 119,183,914 shares of our Common Stock outstanding. Each share of Common Stock is entitled to one vote at the Annual Meeting. +Why did I receive a Notice Regarding the Internet Availability of Proxy Materials in the mail instead of a full set of proxy materials? +Securities and Exchange Commission (“SEC”) rules allow companies to furnish proxy materials over the Internet. We have elected to send a separate Notice of Internet Availability of Proxy Materials (the “Notice”) to most of our shareholders instead of a paper copy of the proxy materials. This approach conserves natural resources and reduces the costs of printing and distributing our proxy materials while providing shareholders with a convenient way to access our proxy materials. Instructions on how to access the proxy materials over the Internet or to request a paper copy of proxy materials, including a proxy card or voting instruction form, may be found in the Notice. In addition, shareholders may request to receive future proxy materials in printed form by mail or electronically by email by following the instructions in the Notice. A shareholder’s election to receive proxy materials by mail or email will remain in effect until the shareholder terminates it. +2023 Proxy Statement | Matador Resources Company 7 +Table of Contents +INFORMATION ABOUT THE ANNUAL MEETING +How do I vote? +You may: +• +attend the Annual Meeting and vote in person; +• +dial the toll-free number listed on the Notice, proxy card or voting instruction form provided by your broker. Easy-to-follow voice prompts allow you to vote your shares and confirm that your voting instructions have been properly recorded. Telephone voting will be available 24 hours a day and will close at 11:59 p.m., Eastern Daylight Time, on June 8, 2023; +• +go to the website www.proxyvote.com and follow the instructions, then confirm that your voting instructions have been properly recorded. If you vote using the website, you can request electronic delivery of future proxy materials. Internet voting will be available 24 hours a day and will close at 11:59 p.m., Eastern Daylight Time, on June 8, 2023; or +• +if you received a paper copy of your proxy materials and elect to vote by written submission, mark your selections on the proxy card, date and sign it, and return the card in the pre-addressed, postage-paid envelope provided. +Why did I receive paper copies of proxy materials? +We are providing certain shareholders with paper copies of the proxy materials instead of a separate Notice. If you received a paper copy and would no longer like to receive printed proxy materials, you may consent to receive all future proxy materials electronically via email or the Internet. To sign up for electronic delivery, please follow the instructions provided in your proxy materials. When prompted, indicate that you agree to receive or access shareholder communications electronically in the future. +Will each shareholder in our household receive proxy materials? +Generally, no. To the extent you are receiving printed proxy materials, we try to provide only one set of proxy materials to be delivered to multiple shareholders sharing an address, unless you have given us other instructions. Any shareholder at a shared address may request delivery of single or multiple copies of printed proxy materials for future meetings by contacting us at: +Matador Resources Company +Attention: Investor Relations +5400 LBJ Freeway, Suite 1500 +Dallas, Texas 75240 +Email: investors@matadorresources.com +Telephone: (972) 371-5200 +We undertake to deliver promptly, upon written or oral request, a copy of proxy materials to a shareholder at a shared address to which a single copy of the proxy materials was delivered. Requests should be directed to Investor Relations at the address or phone number set forth above. +Who will be admitted to the Annual Meeting? +Admission to the Annual Meeting will be limited to our shareholders of record, persons holding proxies from our shareholders, beneficial owners of our Common Stock and our employees. If your shares are registered in your name, we will verify your ownership at the meeting in our list of shareholders as of the Record Date. If your shares are held through a broker, bank or other nominee, you must bring proof of your ownership of the shares. This proof could consist of, for example, a bank or brokerage firm account statement or a letter from your bank or broker confirming your ownership as of the Record Date. You may also send proof of ownership to us at Matador Resources Company, Attention: Corporate Secretary, 5400 LBJ Freeway, Suite 1500, Dallas, Texas 75240, or email: investors@matadorresources.com , before the Annual Meeting, and we will send you an admission card. +8 Matador Resources Company | 2023 Proxy Statement +Table of Contents +INFORMATION ABOUT THE ANNUAL MEETING +If I vote via telephone or the Internet or by mailing my proxy card, may I still attend the Annual Meeting? +Yes. +What if I want to change my vote? +You may revoke your proxy before it is voted by submitting a new proxy with a later date (by mail, telephone or the Internet), by voting at the Annual Meeting or by filing a written revocation with our Corporate Secretary. Your attendance at the Annual Meeting will not automatically revoke your proxy. +What constitutes a quorum? +A majority of the shares entitled to vote, present in person or represented by proxy, constitutes a quorum. If you vote by telephone or Internet or by returning your proxy card, you will be considered part of the quorum. The Inspector of Election will treat shares represented by a properly executed proxy as present at the meeting. Abstentions and broker non-votes will be counted for purposes of determining a quorum. A broker non-vote occurs when a nominee holding shares for a beneficial owner submits a proxy but does not vote on a particular proposal because the nominee does not have discretionary voting power for that item and has not received instructions from the beneficial owner. +How many votes will be required to approve a proposal? +The affirmative vote of a majority of the votes cast by holders of shares of Common Stock present in person or represented by proxy and entitled to vote on the election of directors at the Annual Meeting is required for the election of each nominee for director. With respect to the election of directors in an uncontested election, such as that being held at the Annual Meeting, “majority of the votes cast” means the number of votes cast “for” such nominee exceeds the number of votes cast “against” such nominee. +With respect to all other matters, the affirmative vote of the holders of a majority of the shares of Common Stock, present in person or represented by proxy and entitled to vote at the Annual Meeting, is required. +Shares cannot be voted at the Annual Meeting unless the holder of record is present in person or represented by proxy. +Can brokers who hold shares in street name vote those shares if they have received no instructions? +Under the rules of the New York Stock Exchange (“NYSE”), brokers may not vote the shares held by them in street name for their customers and for which they have not received instructions, except with respect to a routine matter. The only matter to be voted on at the Annual Meeting that is considered routine for these purposes is the ratification of the appointment of our independent registered public accounting firm. Accordingly, brokers may not vote your shares on any other matter if you have not given specific instructions as to how to vote. Please be sure to give specific voting instructions to your broker so that your vote will be counted. +How will you treat abstentions and broker non-votes? +Shares of a shareholder who abstains from voting on any or all proposals will be included for the purpose of determining the presence of a quorum. Other than with respect to the election of directors, an abstention will effectively count as a vote cast against the remaining proposals. Broker non-votes on any matter, as to which the broker has indicated on the proxy that it does not have discretionary authority to vote, will be treated as shares not entitled to vote with respect to that matter. However, such shares will be considered present and entitled to vote for quorum purposes so long as they are entitled to vote on at least one other matter. +2023 Proxy Statement | Matador Resources Company 9 +Table of Contents +INFORMATION ABOUT THE ANNUAL MEETING +Who pays the solicitation expenses? +We will bear the cost of solicitation of proxies. Proxies may be solicited by mail or personally by our directors, officers or employees, none of whom will receive additional compensation for such solicitation. Those holding shares of Common Stock of record for the benefit of others, or nominee holders, are being asked to distribute proxy soliciting materials to, and request voting instructions from, the beneficial owners of such shares. We will reimburse nominee holders for their reasonable out-of-pocket expenses. +Where can I find the voting results of the Annual Meeting? +We will announce preliminary voting results at the Annual Meeting, and we will publish final results in a Current Report on Form 8-K that will be filed with the SEC within four business days of the Annual Meeting. You may obtain a copy of this and other reports free of charge at www.matadorresources.com , by contacting our Investor Relations Department at (972) 371-5200 or investors@matadorresources.com or by accessing the SEC’s website at www.sec.gov . +Will the Company’s independent registered public accounting firm be available at the Annual Meeting to respond to questions? +Yes. The Audit Committee of the Board has appointed KPMG LLP to serve as our independent registered public accounting firm for the year ending December 31, 2023. Representatives of KPMG LLP will be present at the Annual Meeting. They will have an opportunity to make a statement, if they desire to do so, and will be available to respond to appropriate questions. +Where can I contact the Company? +Our mailing address is: +Matador Resources Company +Attention: Investor Relations +5400 LBJ Freeway, Suite 1500 +Dallas, Texas 75240 +Our telephone number is (972) 371-5200. +10 Matador Resources Company | 2023 Proxy Statement +Table of Contents +PROPOSAL 1 +PROPOSAL 1 | ELECTION OF DIRECTORS +The Board currently consists of nine members with one vacancy and is divided into three classes of directors, designated Class I, Class II and Class III, with the term of office of each director ending on the date of the third annual meeting following the annual meeting at which such director’s class was elected. The number of directors in each class will be as nearly equal as possible. The Class I directors are William M. Byerley, Monika U. Ehrman, Julia P. Forrester Rogers and Kenneth L. Stewart, the terms of whom will each continue until the 2024 Annual Meeting of Shareholders or his or her earlier death, retirement, resignation or removal. The Class II directors are R. Gaines Baty and James M. Howard, the terms of whom will each continue until the 2025 Annual Meeting of Shareholders or his earlier death, retirement, resignation or removal. Shelley F. Appel is a Class II nominee at the 2023 Annual Meeting to hold office until the 2025 Annual Meeting of Shareholders or her earlier death, retirement, resignation or removal. The Class III directors are Joseph Wm. Foran, Reynald A. Baribault and Timothy E. Parker, each of whom is a Class III director nominee at the 2023 Annual Meeting, in each case, to hold office until the 2026 Annual Meeting of Shareholders or his earlier death, retirement, resignation or removal. +The Board believes that each of the director nominees possesses the qualifications described below in “Corporate Governance—Board Committees—Nominating Committee.” That is, the Board believes that each nominee possesses: +• +deep experience at the policy making level in business, government or education; +• +the availability and willingness to devote adequate time to Board duties; +• +the character, judgment and ability to make independent analytical, probing and other inquiries; +• +a willingness to exercise independent judgment along with a willingness to listen and learn from others; +• +business knowledge and experience that provides a balance with the other directors; +• +financial independence; and +• +excellent past performance on the Board or, in the case of Ms. Appel, as a Special Advisor to the Board. +Director Diversity (Including Nominees) +TENURE +RACIAL/ETHNIC DIVERSITY +AGE +GENDER +2023 Proxy Statement | Matador Resources Company 11 +Table of Contents +PROPOSAL 1 +Core Competencies (Including Nominees) +Senior Leadership Experience +Energy Industry Experience +Financial Expertise +Legal and Risk Management Experience +Strategic Planning Expertise +ESG Experience +Capital Markets Experience +Information Technology Expertise +The information provided below is biographical information about each of the nominees, as well as a description of the experience, qualifications, attributes or skills that led the Board to conclude that the individual should be nominated for election as a director of the Company. No director or director nominee currently holds, or has held within the past five years, any other directorships with public companies. +12 Matador Resources Company | 2023 Proxy Statement +Table of Contents +PROPOSAL 1 +Nominees +M R . J OSEPH W M . F ORAN +CEO, Matador Resources Company +Class III +Chairman of the Board +Director since: 2003 +Independent: No +Age: 70 +Committees: +•   Executive (Chair) +•   Capital Markets and Finance +•   Operations and Engineering +•   Prospect +Biographical Information: +Mr. Foran founded Matador Resources Company in July 2003 and since our founding has served as Chairman of the Board and Chief Executive Officer and, through March 31, 2022, Secretary. He is also chair of the Board’s Executive Committee. Mr. Foran began his career as an oil and natural gas independent in 1983 when he and his wife, Nancy, founded Foran Oil Company with $270,000 in contributed capital from 17 of his closest friends and neighbors. Foran Oil Company was later contributed into Matador Petroleum Corporation upon its formation by Mr. Foran in 1988, and Mr. Foran served as Chairman and Chief Executive Officer of that company from inception until the time of its sale to Tom Brown, Inc. in June 2003 for an enterprise value of $388 million in an all-cash transaction on a Friday. On the following Monday, Mr. Foran founded Matador Resources Company (Matador II). Today, Matador is one of the top 20 public exploration and production companies in the country by market capitalization and one of the top 10 oil and natural gas producers in New Mexico. Mr. Foran is originally from Amarillo, Texas, where his family owned a pipeline construction business. From 1980 to 1983, he was Vice President and General Counsel of J. Cleo Thompson and James Cleo Thompson, Jr., Oil Producers, a large independent producer. Prior to that time, he was a briefing attorney to Chief Justice Joe R. Greenhill of the Supreme Court of Texas. Mr. Foran graduated with a Bachelor of Science degree in Accounting from the University of Kentucky with highest honors and a law degree from the Southern Methodist University Dedman School of Law, where he was a Hatton W. Sumners scholar and the Leading Articles Editor on the Southwestern Law Review. He is currently active as a member of various industry and civic organizations, including his church and various youth activities. In 2002, Mr. Foran was honored as the Ernst & Young “Entrepreneur of the Year” for the Southwest Region. In 2015, he was inducted into the University of Kentucky Gatton College of Business and Economics Hall of Fame. In 2019, Mr. Foran received the SMU Dedman School of Law Distinguished Alumni Award for Corporate Service and was named D CEO Magazine’s 2019 Upstream CEO of the Year. In 2020, he was inducted into the Philosophical Society of Texas. He was also named to Institutional Investors’ All-American Executive Team as one of the top chief executive officers in the Small Cap Energy Division in 2021. +Qualifications: +As the founder, Chairman of the Board and Chief Executive Officer of Matador Resources Company, Mr. Foran provides Board leadership, industry experience and long relationships with many of our shareholders. +2023 Proxy Statement | Matador Resources Company 13 +Table of Contents +PROPOSAL 1 +M R . R EYNALD A. B ARIBAULT +President and CEO, IPR Energy Partners, LLC +Class III +Director +Director since: 2014 +Independent: Yes +Age: 59 +Committees: +•   Operations and Engineering (Chair) +•   Prospect (Chair) +•   Audit +•   Executive +•   Strategic Planning and Compensation +Biographical Information: +Mr. Baribault was elected to the Board in 2014 and is chair of the Board’s Operations and Engineering Committee and Prospect Committee. He served as lead independent director of the Board from 2016 to 2019. In 2007, he co-founded North Plains Energy, LLC, which operated in the North Dakota Williston Basin, and served as its Vice President until the successful sale of its assets in 2012. In 2014, Mr. Baribault helped co-found NP Resources, LLC, which also operated in the North Dakota Williston Basin, and served as its Executive Vice President / Engineering, helping oversee the sale of its assets in late 2021. In addition, he co-founded and serves as President and Chief Executive Officer of IPR Energy Partners, LLC, a Plano, Texas-based oil and natural gas production operator with current operations in the Fort Worth Basin. Prior to co-founding North Plains Energy, NP Resources and IPR Energy Partners, Mr. Baribault served as Vice President, Supervisor and Petroleum Engineering Consultant with Netherland, Sewell & Associates, Inc. in their Dallas office from 1990 to 2002. Mr. Baribault began his professional career as a reservoir engineer with Exxon Company in 1985 in the New Orleans Eastern Division Office. Mr. Baribault received his Bachelor of Science degree in Petroleum Engineering from Louisiana State University in 1985 and is a Licensed Professional Engineer in the State of Texas. +Qualifications: +Mr. Baribault provides valuable insight to our Board on our drilling, completions and reservoir engineering operations, as well as growth strategies, midstream operations and administration. +14 Matador Resources Company | 2023 Proxy Statement +Table of Contents +PROPOSAL 1 +M R . T IMOTHY E. P ARKER +Former Portfolio Manager and Analyst—Natural Resources, T. Rowe Price & Associates +Class III +Lead Independent Director +Director since: 2018 +Independent: Yes +Age: 48 +Committees: +•   Capital Markets and Finance (Chair) +•   Audit +•   Environmental, Social and Corporate Governance +•   Executive +•   Prospect +•   Strategic Planning and Compensation +Biographical Information: +Mr. Parker was appointed to the Board in 2018, serves as lead independent director and is chair of the Board’s Capital Markets and Finance Committee. Mr. Parker currently serves as a contractor in charge of research for Brightworks Wealth Management, LLC. Mr. Parker retired in 2017 as Portfolio Manager and Analyst—Natural Resources for T. Rowe Price & Associates. Mr. Parker joined T. Rowe Price in 2001 as an equity analyst before becoming a portfolio manager in 2010. He managed the New Era fund from 2010 to 2013 and managed the energy and natural resources portions of T. Rowe Price’s Small Cap Value, Small Cap Stock and New Horizons funds from 2013 to 2017. Prior to joining T. Rowe Price, Mr. Parker was an investment banking analyst at Robert W. Baird & Co., Inc. Mr. Parker holds a Bachelor of Science degree in Commerce from the University of Virginia and a Master of Business Administration degree from the Darden School of Graduate Business (University of Virginia). +Qualifications: +Mr. Parker’s experience with a large institutional shareholder and his extensive familiarity with the capital markets provide the Company with valuable insight. +2023 Proxy Statement | Matador Resources Company 15 +Table of Contents +PROPOSAL 1 +M S . S HELLEY F. A PPEL +ESG Coordinator and Special Board Advisor, Matador Resources Company +Class II +Director Nominee +Independent: No +Age: 33 +Biographical Information: +Ms. Appel was retained to serve as Matador’s Environmental, Social and Governance Coordinator in January 2021. In that role, Ms. Appel was the primary author of the Company’s inaugural sustainability report published in 2021 and our sustainability report published in 2022. In October 2022, Ms. Appel was appointed to also serve as a Special Advisor to the Board. Following her graduation from business school at the University of Chicago, Ms. Appel joined Royal Dutch Shell PLC in August 2017 in the Mergers & Acquisitions group, where she served as a manager with responsibility for financial analysis—including valuation, structuring, negotiation and due diligence—for over $18 billion of acquisition and divestment opportunities. In December 2019, Ms. Appel was promoted to Senior Investor Relations Officer. In this role, Ms. Appel had responsibility for Shell’s global Upstream business narrative. She also served as an authorized spokesperson for Shell at investor meetings and conferences and managed relationships with North America-based investors and research analysts. Following graduation from Yale and prior to attending the University of Chicago, Ms. Appel began her career at the parent company of the New York Stock Exchange, NYSE Euronext, as a business analyst in its Corporate Strategy group. She participated in the evaluation and implementation of its $11 billion merger with the Intercontinental Exchange Group and continued in the Corporate Strategy group of the combined company until June 2015. Ms. Appel holds a Bachelor of Arts degree, with honors, in Cognitive Science from Yale University and a Master of Business Administration degree from the Booth School of Business (University of Chicago). Ms. Appel served as Co-Chair of the Energy Group while attending the University of Chicago. +Qualifications: +Ms. Appel’s extensive knowledge and experience with the Company’s Environmental, Social and Governance initiatives and investor relations experience provides the Board valuable insight and leadership on these matters. +Vote Required +The affirmative vote of a majority of the votes cast by holders of shares present in person or represented by proxy and entitled to vote on the election of directors at the Annual Meeting is required for the election of each nominee for director. With respect to the election of directors in an uncontested election, such as that being held at the Annual Meeting, “majority of the votes cast” means the number of votes cast “for” such nominee exceeds the number of votes cast “against” such nominee. If you hold your shares through a broker and you do not instruct the broker how to vote, your broker will not have the authority to vote your shares. Abstentions and broker non-votes will each be counted as present for purposes of determining the presence of a quorum. +The Board of Directors recommends that you vote FOR each of the nominees. +16 Matador Resources Company | 2023 Proxy Statement +Table of Contents +PROPOSAL 1 +Directors Continuing in Office +Biographical information for our directors who are continuing in office is provided below. +M R . R. G AINES B ATY +CEO, R. Gaines Baty Associates, Inc. +Class II +Deputy Lead Independent Director +Director since: 2016 +Independent: Yes +Age: 72 +Committees: +•   Strategic Planning and Compensation (Chair) +•   Executive +•   Environmental, Social and Corporate Governance +•   Nominating +Biographical Information: +Mr. Baty was appointed to the Board in 2016. He serves as deputy lead independent director and is chair of the Board’s Strategic Planning and Compensation Committee. Mr. Baty is CEO of R. Gaines Baty Associates, Inc., a leading executive search firm he founded in 1982 after working with the IBM Corporation. With over 30 years of experience, Mr. Baty has provided companies across the country and in a variety of industries with executive search and advisory services. Mr. Baty has served as a two-term President of the Society of Executive Recruiting Consultants and a two-term President of the Independent Recruiter Group. Mr. Baty is also a published author. Mr. Baty received a Bachelor of Business Administration degree from Texas Tech University, where he was a football team letterman, captain and, later, graduate assistant coach. +Qualifications: +Mr. Baty’s experience and expertise in executive leadership and development provide our Board with an important and unique perspective on these matters, and Mr. Baty assists the Board and the Company with recruitment, board administration, compensation and growth strategies. +M R . W ILLIAM M. B YERLEY +Retired Partner, PricewaterhouseCoopers LLP (PwC) +Class I +Director +Director since: 2016 +Independent: Yes +Age: 69 +Committees: +•   Audit (Chair) +•   Environmental, Social and Corporate Governance +•   Marketing and Midstream +Biographical Information: +Mr. Byerley was appointed to the Board in 2016 and is chair of the Board’s Audit Committee. Mr. Byerley retired from PricewaterhouseCoopers LLP (PwC) in 2014. From 1988 through 2014, Mr. Byerley was a Partner with PwC, serving as an Assurance Partner on various audit engagements primarily for energy sector clients. From 1988 through 1990, Mr. Byerley served in the PwC National Office Accounting Services Group. Mr. Byerley received a Bachelor of Business Administration degree in 1975 and a Master of Business Administration degree in 1976, both from Southern Methodist University. He is a licensed Certified Public Accountant. +Qualifications: +Mr. Byerley’s extensive experience in public accounting and longtime service to energy sector clients of PwC provide the Board with invaluable financial and accounting expertise, particularly for oil and natural gas companies, strong accounting and financial oversight and general industry knowledge. +2023 Proxy Statement | Matador Resources Company 17 +Table of Contents +PROPOSAL 1 +M S . M ONIKA U. E HRMAN +Charles J. and Inez Wright Murray Distinguished Visiting Professor of Law, Southern Methodist University Dedman School of Law +Class I +Director +Director since: 2019 +Independent: Yes +Age: 45 +Committees: +•   Marketing and Midstream (Co-Chair) +•   Environmental, Social and Corporate Governance +•   Executive +•   Nominating +•   Operations and Engineering +•   Prospect +•   Strategic Planning and Compensation +Biographical Information: +Professor Ehrman was appointed to the Board in 2019 and is co-chair of the Board’s Marketing and Midstream Committee. She is the Charles J. and Inez Wright Murray Distinguished Visiting Professor of Law, Southern Methodist University Dedman School of Law, where she will join as Professor of Law in the Fall of 2023. Prior to joining SMU, she worked at the University of North Texas at Dallas and at the University of Oklahoma College of Law (OU). At OU, she was Professor of Law, where she led the energy and natural resources program and served as the Faculty Director of the Oil & Gas, Natural Resources, and Energy Center. While at OU, she taught in the J.D. and graduate programs at the College of Law and in the Executive Energy Management Program at the Price College of Business. Professor Ehrman joined the University of Oklahoma College of Law in 2013 as Associate Professor of Law. Prior to teaching, she served as in-house legal counsel for two oil and natural gas companies from 2008 to 2012 and as an associate oil and natural gas attorney at an international law firm from 2005 to 2008. Before law school, Professor Ehrman worked as a petroleum engineer in the upstream, midstream and pipeline sectors of the energy industry. In addition to serving on various oil and natural gas law committees, she also served as an Editor of the Oil and Gas Reporter for the Institute for Energy Law. Professor Ehrman received her Bachelor of Science degree in Petroleum Engineering from the University of Alberta; J.D. from Southern Methodist University Dedman School of Law; and Master of Laws degree from Yale Law School. She is currently the Secretary for the Section on Natural Resources & Energy Law for the Association of American Law Schools, and she is on the Editorial Board of the Journal of World Energy Law & Business (published by Oxford University Press). She previously served as Treasurer and was on the Executive Committee of the Foundation for Natural Resources and Energy Law. +Qualifications: +Professor Ehrman provides valuable insight to our Board on our engineering and midstream operations as well as legal and governance matters. +18 Matador Resources Company | 2023 Proxy Statement +Table of Contents +PROPOSAL 1 +M R . J AMES M. H OWARD +Retired Trustee, Private Family Trust +Class II +Director +Director since: 2021 +Independent: Yes +Age: 72 +Committees: +•   Marketing and Midstream (Co-Chair) +•   Audit +•   Capital Markets and Finance +•   Environmental, Social and Corporate Governance +Biographical Information: +Mr. Howard was appointed to the Board in 2021 and is co-chair of the Board’s Marketing and Midstream Committee. He retired in March 2020 from his long-time role as a trustee of a private family trust in Houston, Texas where, since 1999, he exercised sole responsibility for all trust assets and actions. The trust was comprised of over 40 privately held limited partnerships, limited liability companies and public market positions in various asset classes and sectors. From 2000 to 2020, Mr. Howard also served as trustee of a private secondary trust with a different mix of assets than the primary family trust. Prior to his work as a trustee, he served as Vice President of Texon, L.P. from 1996 to 2000, marketing all crude oil, condensate and liquefied petroleum gas for the company and its public utility joint venture partner. From 1986 to 1996, he served as Vice President of Tripetrol Oil Trading, Inc., through which he also served on the New York Mercantile Exchange (NYMEX) Crude Oil Advisory Committee. Mr. Howard previously served in other trading positions at various Houston-based trading and petroleum companies from 1975 to 1986. He received a Bachelor of Arts degree from Florida Presbyterian College and a Master of International Management degree from Thunderbird School of International Management. +Qualifications: +Mr. Howard’s petroleum marketing and trading experience provide the Company with valuable insight, particularly with respect to its marketing activities and the operations of San Mateo. +M S . J ULIA P. F ORRESTER R OGERS +Professor of Law, Southern Methodist University Dedman School of Law +Class I +Director +Director since: 2017 +Independent: Yes +Age: 63 +Committees: +•   Environmental, Social and Corporate Governance (Chair) +•   Audit +•   Capital Markets and Finance +Biographical Information: +Professor Rogers was appointed to the Board in 2017 and is chair of the Board’s Environmental, Social and Corporate Governance Committee. Professor Rogers is a Professor of Law at Southern Methodist University Dedman School of Law where she has been a member of the faculty since 1990, teaching and serving in various administrative positions. From 2015 through 2018, Professor Rogers served the university as Associate Provost for Student Academic Services, overseeing International Student and Scholar Services, Study Abroad, the Center for Academic Development of Student Athletes, the President’s Scholars Program and the Hunt Scholars Program, among others. She served as Dean ad interim of the Dedman School of Law from June 2013 through June 2014 and as Associate Dean for Academic Affairs for the 1995-1996 academic year. Before beginning her academic career at SMU, Professor Rogers practiced law with Thompson & Knight LLP. Professor Rogers holds a Bachelor of Science degree in Electrical Engineering from The University of Texas at Austin, graduating with highest honors, and a law degree from The University of Texas School of Law, graduating with high honors. She is a member of the Order of the Coif, and she received the highest score on the Texas bar exam following her graduation. More recently, she was elected as a member of the American Law Institute. +Qualifications: +Professor Rogers’ academic, administrative and legal experience provide our Board with a unique perspective on the Company’s business, operations and corporate governance. +2023 Proxy Statement | Matador Resources Company 19 +Table of Contents +PROPOSAL 1 +M R . K ENNETH L. S TEWART +Retired EVP, Compliance and Legal Affairs, Children’s Health System of Texas +Class I +Director +Director since: 2017 +Independent: Yes +Age: 69 +Committees: +•   Nominating (Chair) +•   Capital Markets and Finance +•   Environmental, Social and Corporate Governance +•   Executive +•   Strategic Planning and Compensation +Biographical Information: +Mr. Stewart was appointed to the Board in 2017 and is chair of the Board’s Nominating Committee and the Shareholder Advisory Committee for Board Nominations. Mr. Stewart was most recently employed as Executive Vice President, Compliance and Legal Affairs, for Children’s Health System of Texas, a position that he began on January 1, 2019 and from which he retired on January 2, 2021. During the time of his employment, Children’s Health System of Texas and its affiliates constituted one of the 10 largest pediatric hospital systems in the United States. Previously, effective December 31, 2018, Mr. Stewart retired from Norton Rose Fulbright US LLP, which constitutes the United States operations of Norton Rose Fulbright, an international legal practice, which then had over 3,700 legal professionals in over 50 cities worldwide. At the time of his retirement, Mr. Stewart was a Partner with Norton Rose Fulbright and held the position of Chair—United States. Mr. Stewart began his legal career with Fulbright & Jaworski LLP, the predecessor to Norton Rose Fulbright US LLP, and previously held at differing times positions of Global Chair of the international organization, Managing Partner of the United States region and Partner-in-Charge of the Dallas office. Prior to entering into full-time management for his firm in 2012, he engaged in a domestic and international transactional legal practice, focusing principally on merger, acquisition, financing and joint venture activities for both public and privately-held entities. Mr. Stewart has extensive experience representing and advising companies and their executive officers and boards of directors engaged in oil and natural gas exploration and midstream activities. Since his retirement from Norton Rose Fulbright, Mr. Stewart has acted, and from time to time continues to act, on a limited basis as an independent contractor senior business consultant to family offices for which he provided services during his legal career. Mr. Stewart graduated from the University of Arkansas School of Business in 1976 with a Bachelor of Science in Business Administration degree in Accounting and was licensed as a Certified Public Accountant in Texas in 1981 (certificate now on non-practice status). He graduated with honors from Vanderbilt Law School in 1979 and was a member of the Order of the Coif. Mr. Stewart has been active in numerous civic and professional organizations in the Dallas area in the past, including among others, the Dallas Regional Chamber, The Center for American and International Law and the Dallas Citizens Council. +Qualifications: +Mr. Stewart’s extensive experience representing public companies, and particularly oil and natural gas companies, along with his years of management experience, provide our Board with important legal, corporate governance and leadership insight. +20 Matador Resources Company | 2023 Proxy Statement +Table of Contents +CORPORATE GOVERNANCE +CORPORATE GOVERNANCE +The business affairs of Matador are managed under the direction of the Board in accordance with the Texas Business Organizations Code, the Company’s Amended and Restated Certificate of Formation (the “Certificate of Formation”) and its Amended and Restated Bylaws (the “Bylaws”), each as amended to date. The Board has adopted Corporate Governance Guidelines, which are reviewed annually by the Environmental, Social and Corporate Governance Committee of the Board. The Company has a Code of Ethics and Business Conduct for Officers, Directors and Employees (“Code of Ethics”), which is applicable to all officers, directors and employees of the Company. The Company intends to post any amendments to, and may post any waivers of, its Code of Ethics on the Company’s website to the extent applicable to an executive officer or a director of the Company. The Corporate Governance Guidelines and the Code of Ethics are available on the Company’s website at www.matadorresources.com under the heading “Investor Relations—Corporate Governance.” +The Board holds regular and special meetings and spends such time on the affairs of the Company as its duties require. During 2022, the Board held eight meetings. The Board also meets regularly in non-management executive sessions in accordance with NYSE regulations. The Corporate Governance Guidelines provide that one of the Company’s independent directors should serve as lead independent director at any time when the chief executive officer serves as the chairman of the board. The lead independent director presides over executive sessions of the non-management directors and the independent members of the Board (the “Independent Board”), serves as a liaison between the chairman and the independent directors and performs such additional duties as the Board may otherwise determine and delegate. Because Mr. Foran serves as Chairman of the Board and Chief Executive Officer, our independent directors have appointed Mr. Parker to serve as lead independent director and Mr. Baty to serve as deputy lead independent director. In 2022, all incumbent directors of the Company attended at least 75% of the meetings of the Board and the committees on which they served. It is our policy that each of our directors is expected to attend annual meetings of shareholders, except if unusual circumstances make attendance impractical. All of our directors attended the 2022 Annual Meeting. +Independence of Directors +The Board makes all determinations with respect to director independence in accordance with the NYSE listing standards and the rules and regulations promulgated by the SEC. The actual determination of whether a director is independent is made by the Board on a case-by-case basis. +In connection with its preparation for the Annual Meeting, the Board undertook its annual review of director independence and considered transactions and relationships between each director or any member of his or her immediate family and the Company and its subsidiaries and affiliates. In making its determination, the Board applied the NYSE listing standards and SEC rules and regulations. +The Board reviewed the independence of our directors and considered whether any director has a material relationship with us that could compromise his or her ability to exercise independent judgment in carrying out his or her responsibilities. After this review, our Board determined that eight of our nine current directors are “independent directors” as defined under the rules of the SEC and the NYSE: Mmes. Ehrman and Rogers and Messrs. Baribault, Baty, Byerley, Howard, Parker and Stewart. In addition, Ms. Appel, who is a nominee to serve on the Board, is the daughter of Mr. Foran and would not be considered an “independent director” as defined under the rules of the SEC and the NYSE if she is elected to the Board at the 2023 Annual Meeting. No member of or nominee for our Board other than Ms. Appel and Mr. Foran has a family relationship with any executive officer or other members of our Board. +Majority Vote in Director Elections +On December 21, 2016, the Board amended the Bylaws to implement a majority voting standard in uncontested director elections. Pursuant to the Bylaws, in an election of directors at a meeting of shareholders at which a quorum is present, (i) if the number of nominees exceeds the number of directors to be elected (a “contested election”), directors shall be elected by a plurality of the votes cast by the holders of shares present in person or +2023 Proxy Statement | Matador Resources Company 21 +Table of Contents +CORPORATE GOVERNANCE +represented by proxy and entitled to vote on the election of directors at such meeting and (ii) in an election of directors that is not a contested election (an “uncontested election”), such as that being held at the Annual Meeting, directors shall be elected by a majority of the votes cast by the holders of shares present in person or +represented by proxy and entitled to vote on the election of directors at such meeting. For purposes of the Bylaws, in an uncontested election, a “majority of the votes cast” means that the number of shares voted “for” a director must exceed the number of votes cast “against” that director. Prior to the amendment of the Bylaws, directors were elected by a plurality of the votes cast, whether or not the election was a contested election. +In connection with the amendment to the Bylaws, the Board approved and adopted an amendment to the Company’s Corporate Governance Guidelines to implement a resignation policy for directors who fail to receive the required number of votes in an uncontested election in accordance with the Bylaws. Pursuant to the Corporate Governance Guidelines, as amended, in an uncontested election, any nominee for director who receives a greater number of votes “against” his or her election than votes “for” such election (a “majority against vote”) shall promptly tender his or her resignation following certification of the shareholder vote. +The Nominating Committee shall promptly consider the resignation offer and a range of possible responses based on the circumstances that led to the majority against vote, if known, and make a recommendation to the Board concerning whether to accept or reject such resignation. The Board shall act on the Nominating Committee’s recommendation and publicly disclose its decision with respect to such resignation offer within 90 days following certification of the shareholder vote. The resignation, if accepted by the Board, will be effective at the time specified by the Board when it determines to accept the resignation, which effective time may be deferred until a replacement director is identified and appointed to the Board. +Board Leadership Structure +Mr. Foran serves as Chairman of the Board and Chief Executive Officer of the Company. As stated in the Corporate Governance Guidelines, the Board does not believe that the offices of Chairman of the Board and Chief Executive Officer must be separate. The members of the Board possess experience and unique knowledge of the challenges and opportunities the Company faces. They are, therefore, in the best position to evaluate the current and future needs of the Company and to judge how the capabilities of the directors and senior managers can be most effectively organized to meet those needs. Given Mr. Foran’s deep knowledge of the Company and experience in leading it, the Board currently believes that the most effective leadership structure for the Company is to have Mr. Foran serve as Chairman of the Board and Chief Executive Officer. +Upon Ms. Appel’s election to the Board, eight of our ten directors will be independent under the rules of the SEC and the NYSE. After considering the recommendations of our Strategic Planning and Compensation Committee, the independent directors determine Mr. Foran’s compensation. Further, the Company has five standing committees, a lead independent director (Mr. Parker) and a deputy lead independent director (Mr. Baty). The Board believes that each of these measures counterbalances any risk that may exist in having Mr. Foran serve as Chairman of the Board and Chief Executive Officer. For these reasons, the Board believes that this leadership structure is effective for the Company. +As lead independent director, Mr. Parker has the following roles and responsibilities: +• +chairs the executive sessions of the non-management and independent directors; +• +leads the independent directors in the evaluation of the Chief Executive Officer; +• +facilitates communication among the independent directors; and +• +acts as a liaison between the independent directors and the Chief Executive Officer. +Mr. Parker, as lead independent director, may also perform such other duties as the Board or the Environmental, Social and Corporate Governance Committee from time to time may assign, which may include, but are not limited to, the following: +• +help develop Board agendas and ensure critical issues are included; +22 Matador Resources Company | 2023 Proxy Statement +Table of Contents +CORPORATE GOVERNANCE +• +determine quality, quantity and timeliness of information from management; +• +make recommendations about retaining consultants or advisors for the Board; +• +interview Board candidates; +• +oversee Board and director evaluations; and +• +help improve communications and processes by and between management and the Board and the Chief Executive Officer. +Mr. Baty, as deputy lead independent director, may also carry out the above duties in the absence of or at the direction of Mr. Parker, as lead independent director. +Board Committees +The standing committees of the Board are the Audit Committee, Environmental, Social and Corporate Governance Committee, Executive Committee, Nominating Committee and Strategic Planning and Compensation Committee. The Board has also established the following advisory committees: Capital Markets and Finance Committee, Marketing and Midstream Committee, Operations and Engineering Committee and Prospect Committee. Each of the standing committees is governed by a charter, and a copy of the charters of each of these committees is available on the Company’s website at www.matadorresources.com under the heading “Investor Relations—Corporate Governance.” Director membership of all of our standing and advisory committees is identified below, as of April 12, 2023. +2023 Proxy Statement | Matador Resources Company 23 +Table of Contents +CORPORATE GOVERNANCE +We anticipate that Ms. Appel will be appointed to the Capital Markets and Finance Committee following the 2023 Annual Meeting. +Audit Committee +The Audit Committee assists the Board in monitoring: +• +the integrity of our financial statements and disclosures; +• +our compliance with legal and regulatory requirements; +• +the qualifications and independence of our independent auditor; +• +the performance of our internal audit function and our independent auditor; and +• +our internal control systems. +In addition, the Audit Committee is charged with the (i) review of compliance with our Code of Ethics and (ii) oversight of the Company’s guidelines and policies to govern the process by which risk assessment and risk management are undertaken by management, including with respect to corporate governance, financial, accounting, operational, environmental, health and safety, regulatory and cybersecurity risks. +As of April 12, 2023, the Audit Committee consisted of Ms. Rogers and Messrs. Baribault, Byerley, Howard and Parker, each of whom is independent under the rules of the SEC and the NYSE. Mr. Byerley is the chair of the Audit Committee. SEC rules require a public company to disclose whether or not its audit committee has an “audit committee financial expert” as defined by applicable SEC rules and regulations. Our Board has determined that each of Messrs. Byerley and Parker is an “audit committee financial expert.” During 2022, the Audit Committee met four times. +Environmental, Social and Corporate Governance Committee +The Environmental, Social and Corporate Governance Committee is responsible for periodically reviewing and assessing our Corporate Governance Guidelines and Code of Ethics and making recommendations for changes thereto to the Board, reviewing any other matters related to our corporate governance, unless the authority to conduct such review has been retained by the Board or delegated to another committee, and overseeing the process for evaluation of the Board and management. The Environmental, Social and Corporate Governance Committee (formerly the Corporate Governance Committee), in conjunction with the Company’s Chief Executive Officer, also oversees and makes recommendations to the Board regarding sustainability matters relevant to the Company’s operations, including ESG-related matters. +As of April 12, 2023, the Environmental, Social and Corporate Governance Committee consisted of Mmes. Ehrman and Rogers and Messrs. Baty, Byerley, Howard, Parker and Stewart, each of whom is independent under the rules of the SEC and the NYSE. Ms. Rogers is the chair of the Environmental, Social and Corporate Governance Committee. During 2022, the Environmental, Social and Corporate Governance Committee met four times. +Executive Committee +The Executive Committee has authority to discharge all the responsibilities of the Board in the management of the business and affairs of the Company, except where action of the full Board is required by statute or by our Certificate of Formation or Bylaws, each as amended to date. As of April 12, 2023, the Executive Committee consisted of Ms. Ehrman and Messrs. Foran, Baribault, Baty, Parker and Stewart. Mr. Foran is the chair of the Executive Committee. During 2022, the Executive Committee did not meet. +Nominating Committee +The Nominating Committee has the following responsibilities: +• +identifies and recommends to the Board individuals qualified to be nominated for election to the Board consistent with criteria approved by the Board; and +24 Matador Resources Company | 2023 Proxy Statement +Table of Contents +CORPORATE GOVERNANCE +• +recommends to the Board the members and chair of each committee of the Board. +Pursuant to the Nominating Committee charter, no director may serve on the Nominating Committee if such director is subject to re-election to the Board at the next annual meeting of shareholders. +As of April 12, 2023, the Nominating Committee consisted of Ms. Ehrman and Messrs. Baty and Stewart, each of whom is independent under the rules of the SEC and the NYSE. Mr. Stewart is the chair of the Nominating Committee. During 2022, the Nominating Committee met five times. +The Board has also established a Shareholder Advisory Committee for Board Nominations (the “Advisory Committee”) that is charged with receiving and considering possible nominees for election to the Board by shareholders. Pursuant to the Advisory Committee charter, this committee is comprised of eight to 12 persons selected by the Nominating Committee and consists of at least: +• +two members of the Nominating Committee; +• +two former members of or special advisors to the Board; +• +two shareholders who beneficially own Common Stock having a market value of at least $1.0 million (such value to be based on the market value of the Common Stock immediately prior to designation of such shareholders to the Advisory Committee); and +• +two shareholders who have beneficially owned Common Stock continuously for at least the five years prior to such shareholder’s designation to the Advisory Committee. +The current members of the Advisory Committee are Ms. Ehrman and Mr. Stewart and Messrs. Craig T. Burkert, J. Barry Banker, Joe E. Coleman, Walter Fister, Robert Garrett, Kevin M. Grevey, David E. Lancaster, Bobby K. Pickard and George M. Yates. Mr. Stewart is the chair of the Advisory Committee. +The Advisory Committee makes recommendations based on its conclusions to the Nominating Committee for its consideration and review. +The Nominating Committee and the Advisory Committee consider individuals recommended by the Company’s shareholders to serve on the Board in accordance with the advance notice provisions of the Bylaws and the applicable rules and regulations of the SEC and the NYSE. In considering candidates submitted by shareholders, the Advisory Committee and the Nominating Committee take into consideration the needs of the Board and the qualifications of the candidate. To have a candidate considered by the Advisory Committee and the Nominating Committee, a shareholder must submit the recommendation in writing and must include the following information: +• +The name and address of the shareholder, evidence of the person’s ownership of Common Stock or derivatives, including the number of shares owned, a description of all arrangements or understandings regarding the right to vote shares of the Company, any short interest in any security of the Company, any rights to dividends that are separated or separable from the underlying shares, any proportionate interest in shares or derivatives held by a general or limited partnership whereby the shareholder is a general partner or beneficially owns an interest in the general partner, any performance-related fees (other than an asset-based fee) that the shareholder is entitled to based on any change in the value of the shares or derivatives, any other information relating to the shareholder that would be required to be disclosed in connection with solicitations of proxies for the election of directors in a contested election and a statement whether or not the shareholder will deliver a proxy to shareholders; and +• +The name, age and business and residence addresses of the candidate, the candidate’s résumé or a listing of his or her qualifications to be a director of the Company, the person’s consent to be a director if selected by the Nominating Committee, nominated by the Board and elected by the shareholders and any other information that would be required to be disclosed in solicitations of proxies for the election of directors. +The shareholder recommendation and information described above, and in more detail in our Bylaws, must be sent to the Corporate Secretary at One Lincoln Centre, 5400 LBJ Freeway, Suite 1500, Dallas, Texas 75240 and must be received by the Corporate Secretary not fewer than 45 nor more than 75 days prior to the one year +2023 Proxy Statement | Matador Resources Company 25 +Table of Contents +CORPORATE GOVERNANCE +anniversary date of the date the Company’s proxy statement was mailed in connection with the previous year’s annual meeting of shareholders. +The Nominating Committee believes that a potential director of the Company must demonstrate that such candidate has: +• +relevant knowledge and a depth and diversity of background and experience at the policy-making level in business, government or education; +• +a balance of the business interest and experience of the incumbent or nominated directors; +• +availability and willingness to devote adequate time to Board duties; +• +any unfilled expertise needed on the Board or one of its committees; +• +ability to make independent analytical, probing and other inquiries; +• +personal qualities of leadership, character, judgment and a reputation in the community at large of integrity, trust, respect, competence and adherence to the highest ethical standards; +• +willingness to exercise independent judgment while remaining willing to listen and learn from the other directors and the Company’s staff; and +• +financial independence to ensure such candidate will not be financially dependent on director compensation. +In the case of an incumbent director, the Nominating Committee will also consider such director’s past performance on the Board. +The Nominating Committee or the Advisory Committee may identify potential nominees by asking, from time to time, current directors and executive officers for their recommendation of persons meeting the criteria described above who might be available to serve on the Board. The Nominating Committee or the Advisory Committee may also engage firms that specialize in identifying director candidates. As described above, the Nominating Committee and Advisory Committee will also consider candidates recommended by shareholders. Ms. Appel, a nominee at the 2023 Annual Meeting, was recommended to serve on our Board by Mr. Stewart. +Once a person has been identified by the Nominating Committee or the Advisory Committee as a potential candidate, the Nominating Committee or the Advisory Committee will make an initial determination regarding the need for additional Board members to fill vacancies or expand the size of the Board. If the Nominating Committee or the Advisory Committee determines that additional consideration is warranted, the Nominating Committee or the Advisory Committee will review such information and conduct interviews as it deems necessary to fully evaluate each director candidate. In addition to the qualifications of a candidate, the Nominating Committee or the Advisory Committee will consider such relevant factors as it deems appropriate, including the current composition of the Board, the evaluations of other prospective nominees and the need for any required expertise on the Board or one of its committees. The Nominating Committee or the Advisory Committee also contemplates multiple dynamics that promote and advance diversity among the members of the Board. Although the Nominating Committee does not have a formal diversity policy, the Nominating Committee considers a number of factors regarding diversity of personal and professional backgrounds, gender, race, age, specialized skills and acumen and breadth of experience in oil and natural gas exploration and production, midstream and marketing, executive leadership, accounting, finance or law. The Nominating Committee does not discriminate based upon race, religion, gender, national origin, age, disability, citizenship or any other legally protected status. The Nominating Committee’s evaluation process will not vary based on whether or not a candidate is recommended by a shareholder. +Strategic Planning and Compensation Committee +The Strategic Planning and Compensation Committee (the “Compensation Committee”) has the following responsibilities: +• +assists the Board and the Independent Board in the discharge of their fiduciary responsibilities relating to the fair and competitive compensation of our executive officers; +26 Matador Resources Company | 2023 Proxy Statement +Table of Contents +CORPORATE GOVERNANCE +• +provides overall guidance with respect to the establishment, maintenance and administration of our compensation programs, including stock and benefit plans; +• +oversees and advises the Board and the Independent Board on the adoption of policies that govern our compensation programs; +• +recommends to the Board the strategic, tactical and performance goals of the Company, including those performance and tactical goals that relate to performance-based compensation, including but not limited to goals for production, reserves, cash flows and shareholder value; +• +in conjunction with the Company’s CEO, oversees management succession planning; and +• +produces and approves the annual Compensation Committee Report on executive compensation for inclusion in the Company’s Annual Report on Form 10-K and/or annual proxy statement in accordance with applicable rules and regulations of the SEC and the NYSE. +The Compensation Committee has the authority to form and delegate authority and responsibilities to subcommittees of its members, so long as any subcommittee consists of at least two members of the Compensation Committee. +As of April 12, 2023, the Compensation Committee consisted of Ms. Ehrman and Messrs. Baribault, Baty, Parker and Stewart, each of whom is independent under the rules of the SEC and the NYSE and a “non-employee director” pursuant to Rule 16b-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Mr. Baty is the chair of the Compensation Committee. During 2022, the Compensation Committee met six times. +Capital Markets and Finance Committee +The Capital Markets and Finance Committee provides oversight of the Company’s financial objectives, financial policies, capital structure and financing requirements. As of April 12, 2023, the members of the Capital Markets and Finance Committee were Ms. Rogers and Messrs. Foran, Howard, Parker and Stewart. Mr. Parker is the chair of the Capital Markets and Finance Committee. We anticipate that Ms. Appel will be appointed to the Capital Markets and Finance Committee following the 2023 Annual Meeting. +Marketing and Midstream Committee +The Marketing and Midstream Committee provides oversight of the Company’s marketing and midstream activities, projects, joint ventures and plans. As of April 12, 2023, the members of the Marketing and Midstream Committee were Ms. Ehrman and Messrs. Byerley and Howard. Ms. Ehrman and Mr. Howard serve as co-chairs of the Marketing and Midstream Committee. +Operations and Engineering Committee +The Operations and Engineering Committee provides oversight of the development of our prospects, our drilling, completions and production operations and associated costs. In addition, the Operations and Engineering Committee provides oversight of the amount and classifications of our reserves and the design of our completion techniques and hydraulic fracturing operations and various other reservoir engineering matters. As of April 12, 2023, the members of the Operations and Engineering Committee were Ms. Ehrman and Messrs. Baribault and Foran. Mr. Baribault is the chair of the Operations and Engineering Committee. +Prospect Committee +The Prospect Committee provides oversight of the technical analysis, evaluation and selection of our oil and natural gas prospects. As of April 12, 2023, the members of the Prospect Committee were Ms. Ehrman and Messrs. Baribault, Foran and Parker. Mr. Baribault is the chair of the Prospect Committee. +2023 Proxy Statement | Matador Resources Company 27 +Table of Contents +CORPORATE GOVERNANCE +Board’s Role in Risk Oversight +The Audit Committee has the responsibility to oversee the Company’s guidelines and policies to govern the process by which risk assessment and risk management are undertaken by management, including with respect to corporate governance, financial, accounting, operational, environmental, health and safety, regulatory and cybersecurity risks. In connection with the Audit Committee’s oversight responsibility, executive management briefs the Audit Committee on a quarterly basis on risks faced by the Company. Under the Audit Committee’s oversight, management maintains a commercial insurance program for the Company’s benefit covering casualty, property, workers’ compensation, well operations and cybersecurity risks, among others. The Compensation Committee has the responsibility to oversee that our incentive pay does not encourage unnecessary risk taking and to review and discuss the relationship between risk management policies and practices, corporate strategy and senior executive compensation. +Environmental, Social and Governance (ESG) Initiatives +Affirmation of Our Commitment +At Matador, we are committed to creating long-term value in a responsible manner. This commitment extends across our operations and includes a dedication to excellence with respect to environmental, social and governance (ESG) matters. Our guiding focus on good stewardship is reflected in our Code of Ethics and in our Corporate Governance Guidelines, which are reviewed annually by the Environmental, Social and Corporate Governance Committee of the Board. See “Corporate Governance” on page 21 for additional information. +Oversight and Coordination of ESG Efforts +The Board and senior management understand the importance of ESG matters and of supporting the Company’s ongoing efforts in this area. Matador’s senior management and full Board receive regular updates on our ESG efforts and engage with us to pursue continuous improvement in this area. +The Environmental, Social and Corporate Governance Committee leads the Board’s oversight of Matador’s sustainability practices. In conjunction with senior management, the committee has direct accountability to review and evaluate sustainability practices, risks and strategies and to make recommendations to the full Board regarding sustainability matters. +The Audit Committee also has responsibility through its role overseeing risk assessment and risk management processes, including with respect to operational, environmental, health and safety and regulatory risks. +Progress in Enhancing ESG Reporting +In continuing to raise the profile of the Company’s ongoing ESG-related initiatives externally, we recognize the growing value to stakeholders of consistent and comparable ESG disclosures. In early 2021, we retained Ms. Appel to conduct a review of industry ESG reporting practices and to serve as a dedicated single-focal point for our various ESG efforts. +In May 2021, Matador published sustainability metrics aligned with standards developed by the Sustainability Accounting Standards Board (SASB), and in July 2021, Matador published an update providing supplemental information to the Company’s initial report on these SASB-aligned ESG metrics. +In December 2022, Matador issued its annual Sustainability Report, which was first issued in December 2021. This report highlights Matador’s continued progress and improvements in its operating practices, including the quantitative metrics aligned with the SASB standards noted above, and should provide Matador’s stakeholders and interested parties with a standardized platform for evaluating the Company’s recent performance and future progress. Matador’s annual Sustainability Report, including the SASB-aligned sustainability metrics, is available on the Company’s website at www.matadorresources.com/sustainability . Information included in our Sustainability Report or otherwise included on our website is not incorporated into this Proxy Statement. +28 Matador Resources Company | 2023 Proxy Statement +Table of Contents +CORPORATE GOVERNANCE +Ongoing Shareholder Engagement +In 2022 and early 2023, members of our Board and management team had conversations with a number of investors regarding our business and our investors’ priorities, consistent with Matador’s regular practice. In addition, members of our management team attended seven investor conferences, hosted 14 roadshows and participated in various investor presentation events and calls. Feedback from these conversations was shared with the Board and served as a valuable input to the enhanced ESG disclosures that we made over the last year. We appreciate the relationship building that results from cultivating these open dialogues and remain committed to engaging shareholders regularly. +ESG Performance Highlights +Highlights from the Company’s 2022 ESG initiatives are shown below. (1) +Environmental +Continued Reduction of +Per-Barrel Emissions (2) +•   More than 80% reduction in flaring emissions intensity from 2019 to 2022 +•   More than 60% reduction in methane emissions intensity from 2019 to 2022 +•   More than 40% reduction in direct greenhouse gas emissions intensity from 2019 to 2022 +Increased Use of Non-Fresh +Water, Including +Recycled Water +•   Over 95% of the total water consumed in 2022 was non-fresh water (3) +•   Over 70% of operated wells completed in 2022 utilized recycled produced water (4) +Increased Transportation by Pipeline +•   99% of operated produced water transported by pipeline in 2022 +•   89% of operated produced oil transported by pipeline in 2022 +2023 Proxy Statement | Matador Resources Company 29 +Table of Contents +CORPORATE GOVERNANCE +1 +The sustainability metrics included herein have been calculated using the best information available to the Company at the time of the preparation of this proxy statement. The data utilized in calculating such metrics is subject to certain reporting rules, regulatory reviews, definitions, calculation of methodologies, estimates, adjustments and other factors. As a result, these metrics are subject to change from time to time as updated or other information becomes available. The metrics provided reflect both Matador’s gross operated exploration and production operations and San Mateo’s gross operated midstream operations on a consolidated basis, except where otherwise noted. +2 +Emissions and flared volumes are calculated in accordance with Environmental Protection Agency standards and reflect only Matador’s gross operated exploration and production volumes. +3 +Fresh water is defined as <1,000 mg/L total dissolved solids and includes Matador’s gross operated volumes for hydraulic fracturing and completions operations, as well as estimates for Matador’s other operations. +4 +As some portion of the total fluid used for hydraulic fracturing operations. +Social +Maintaining Commitment to a Proactive Safety Culture +•   Zero employee lost time incidents during approximately 3.3 million employee man-hours from 2017 to 2022 +Investing in Human Capital +•   Provided approximately 16,000 hours of employee continuing education, equating to approximately 50 hours per employee in 2022 +Supporting Military Veterans +•   Congressional Medal of Honor Foundation +•   Michael E. Thornton Foundation +Supporting Communities & +Charities Where We Live, +Work, and Operate +•   Continued donations of food to the North Texas Food Bank and of toys to the Sheriff’s Offices and Courthouses in New Mexico’s Eddy and Lea Counties in 2022 +Governance +Diverse and Independent Board Composition +•   Lead independent director +•   Eight of nine independent directors +•   One minority and two female directors +•   Female membership since inception of predecessor company in 1988 +Engaged Board of Directors with Majority Voting Standard +•   No “overboarding” +•   Shareholder Advisory Committee for Board Nominations +Active Stakeholder Engagement +•   Shareholder outreach program, including discussion of compensation, governance, social, safety and environmental practices and disclosures +Strategic Planning and Compensation Committee Interlocks and Insider Participation +Ms. Ehrman and Messrs. Baribault, Baty, Parker and Stewart served on the Compensation Committee during 2022. None of these individuals is or was previously one of our officers or employees. None of our executive officers serve on the board of directors or compensation committee of a company that has an executive officer that serves on our Board or the Compensation Committee. No member of our Board serves as an executive officer of a company in which one of our executive officers serves as a member of the board of directors or +30 Matador Resources Company | 2023 Proxy Statement +Table of Contents +CORPORATE GOVERNANCE +compensation committee of that company. There were no compensation committee interlocks during 2022. Mr. Baribault’s sister-in-law is an employee of the Company. For more information on this related person transaction, see “Transactions with Related Persons.” +Communications with Directors +The Board has established a process to receive communications from shareholders and other interested parties by mail. Shareholders and other interested parties may contact any member of the Board, any Board committee or the entire Board. To communicate with the Board, any individual director or any committee, correspondence should be addressed to “c/o Corporate Secretary” at One Lincoln Centre, 5400 LBJ Freeway, Suite 1500, Dallas, Texas 75240. Shareholders should mark the envelope containing any such communication as “Shareholder Communication with Directors” and clearly identify the intended recipient or recipients of the communication. The Corporate Secretary will review and forward correspondence to the appropriate person or persons as expeditiously as reasonably practicable. However, any such communication will not be forwarded if it does not fall within the scope of matters generally considered by the Board or otherwise fails to comply with the requirements of any applicable policy adopted by the Board relating to the subject matter of communications. +Any communications to the Company from one of the Company’s officers or directors will not be considered “shareholder communications.” Communications to the Company from one of the Company’s employees or agents will only be considered “shareholder communications” if they are made solely in such employee’s or agent’s capacity as a shareholder. Any shareholder proposal submitted pursuant to Rule 14a-8 promulgated under the Exchange Act will not be viewed as “shareholder communications.” +Executive Officers and Other Senior Officers of the Company +The following table sets forth the names, ages and positions of our executive officers and certain of our other senior officers at April 12, 2023: +Name +Age +Positions Held With Us +Executive Officers +Joseph Wm. Foran +70 +Chairman of the Board and Chief Executive Officer +Billy E. Goodwin +65 +President—Operations +Van H. Singleton, II +45 +President—Land, Acquisitions & Divestitures and Planning +Craig N. Adams +56 +Executive Vice President, Co-Chief Operating Officer, Chief of Staff and Corporate Secretary +G. Gregg Krug +62 +Executive Vice President—Marketing & Midstream Strategy +Brian J. Willey +46 +Chief Financial Officer, President of Midstream Operations and Executive Vice President +W. Thomas Elsener +38 +Executive Vice President—Reservoir Engineering and Senior Asset Manager +Other Senior Officers +Christopher P. Calvert +44 +Executive Vice President and Co-Chief Operating Officer +Bryan A. Erman +45 +Executive Vice President and General Counsel and Head of M&A +Michael D. Frenzel +41 +Executive Vice President and Treasurer +Edmund L. Frost, III +48 +Executive Vice President of Geosciences +Robert T. Macalik +44 +Executive Vice President and Chief Accounting Officer +Glenn W. Stetson +38 +Executive Vice President—Production +Jonathan J. Filbert +36 +Senior Vice President—Land +2023 Proxy Statement | Matador Resources Company 31 +Table of Contents +CORPORATE GOVERNANCE +Each of Matthew V. Hairford, who served as President during 2022, and David E. Lancaster, who served as Executive Vice President and Chief Financial Officer during 2022, retired effective March 31, 2022. From March 31, 2022 to February 16, 2023, Mr. Frenzel served as the Company’s principal financial officer. +On February 16, 2023, Mr. Willey was promoted to Chief Financial Officer, President of Midstream Operations and Executive Vice President and assumed the role of principal financial officer as of this same date. +The following biographies describe the business experience of our executive officers and the senior officers listed above. Each officer serves at the discretion of our Board. There are no family relationships among any of our executive officers. +Executive Officers +Mr. Joseph Wm. Foran +Chairman of the Board and +Chief Executive Officer +Please see the biography of Mr. Foran on page 13 of this Proxy Statement. +Mr. Billy E. Goodwin +President—Operations +Mr. Goodwin joined Matador Resources Company in July 2010 as Drilling Manager. In September 2013 he was named Vice President of Drilling. He was promoted to Senior Vice President—Operations in February 2016 and to Executive Vice President and Head of Operations in August 2017. He assumed the role of Executive Vice President and Chief Operating Officer—Drilling, Completions & Production in April 2019 and became Matador’s President—Operations in March 2022. He was previously with Samson Resources, a company he joined in 2001 to supervise the drilling of underbalanced multilateral horizontal wells. In his roles as Senior Drilling Engineer and Area Drilling Manager for Samson, Mr. Goodwin engineered and managed operations in the Permian Basin, South Texas, East Texas, Mid-Continent and Gulf Coast areas. Mr. Goodwin worked with Conoco, Inc. before joining Samson. He began his career in 1985 in Conoco’s production department before joining the drilling department in 1989. Mr. Goodwin has diverse horizontal operational experience both onshore and offshore, and both domestically and internationally, including in the Middle East, Southeast Asia and South America. Throughout his career, Mr. Goodwin has developed underbalanced drilling, managed pressure drilling and drill-in casing techniques for normal and geo-pressured environments. Mr. Goodwin received a Bachelor of Science degree in Petroleum Engineering Technology from Oklahoma State University in 1984. He is a member of the Society of Petroleum Engineers and the American Association of Drilling Engineers. Mr. Goodwin served in the United States Marine Corps. +Mr. Van H. Singleton, II +President—Land, Acquisitions & Divestitures and Planning +Mr. Singleton joined Matador Resources Company in August 2007 as a Landman and was promoted to Senior Staff Landman in 2009 and then to General Land Manager in 2011. In September 2013, Mr. Singleton became Vice President of Land, and he was promoted to Executive Vice President of Land in February 2015. He became the Company’s President—Land, Acquisitions & Divestitures and Planning in March 2022. Prior to joining Matador, Mr. Singleton founded and was President of VanBrannon and Associates, LLC and Southern Escrow and Title of Mississippi, LLC from 1998 to 2003, which provided full-spectrum land title work and title insurance in Mississippi, Louisiana, Texas and Arkansas. From 2003 until joining Matador in 2007, he served as general manager of his family’s real estate brokerage in Houston, Texas. Mr. Singleton received a Bachelor of Arts degree from the University of Mississippi in 2000. He is an active member of the American Association of Professional Landmen, the New Mexico Landman Association, the Permian Basin Landman Association and the Dallas Association of Petroleum Landmen. +32 Matador Resources Company | 2023 Proxy Statement +Table of Contents +CORPORATE GOVERNANCE +Mr. Craig N. Adams +Executive Vice President, Co-Chief Operating Officer, Chief of Staff and Corporate Secretary +Mr. Adams joined Matador Resources Company in September 2012 as its Vice President and General Counsel. In July 2013, Mr. Adams was promoted to Executive Vice President—Land and Legal and became Executive Vice President—Land, Legal & Administration in June 2015. He assumed the role of Executive Vice President and Chief Operating Officer—Land, Legal & Administration in April 2019, and became Executive Vice President, Co-Chief Operating Officer, Chief of Staff and Corporate Secretary in March 2022. Before joining Matador Resources Company, Mr. Adams was a partner with Baker Botts L.L.P. from March 2001 to September 2012 where he focused his practice on securities, mergers and acquisitions and corporate governance matters. He was a partner with Thompson & Knight L.L.P. from January 1999 to February 2001 and an associate from September 1992 to December 1998. Mr. Adams received a Bachelor of Business Administration degree in Finance from Southern Methodist University in 1988 and his law degree in 1992 from Texas Tech University School of Law, where he graduated magna cum laude and was a member of the Order of the Coif and a Comment Editor on the Texas Tech Law Review. In 2018, he was named D CEO Magazine’s Outstanding General Counsel—Midsize Legal Department. +Mr. G. Gregg Krug +Executive Vice President—Marketing and Midstream Strategy +Mr. Krug joined Matador Resources Company in April 2012 as its Marketing Manager. In September 2013 he was named Vice President of Marketing for the Company and Vice President of Longwood Gathering & Disposal Systems, LP, and he was promoted to Senior Vice President—Marketing and Midstream in February 2016. He was promoted to Executive Vice President—Marketing and Midstream Strategy in April 2019. He has overall responsibility for Matador’s marketing activities of its oil and natural gas, as well as responsibility for all business aspects for Longwood Gathering & Disposal Systems, LP. Previously, Mr. Krug was with Unit Petroleum Company, an exploration and production company based in Tulsa, Oklahoma, as Marketing Manager, having joined in 2006. He and his staff were responsible for marketing, gas measurement, contract administration and production reporting in their core areas of Oklahoma, the Texas Panhandle, East Texas and Northwestern Louisiana. From 2005 to 2006, Mr. Krug served as Marketing Manager with Matador Resources Company. From 2000 to 2005, Mr. Krug served as Gas Scheduling Supervisor with Samson Resources in Tulsa, Oklahoma where he and his staff were responsible for scheduling natural gas sales as well as procurement of natural gas supply on Samson-owned gathering systems. From 1983 to 2000, Mr. Krug served with The Williams Companies in various capacities including in the Kansas Hugoton Field in Ulysses, Kansas and Tulsa, Oklahoma for Williams Natural Gas Pipeline and on the trading floor in Tulsa, Oklahoma for Williams Energy Services Company. Mr. Krug received a Bachelor of Business Administration degree from Oklahoma City University in 1996. +Mr. Brian J. Willey +Chief Financial Officer, President of Midstream Operations and Executive Vice President +In February 2023, Mr. Willey was promoted to Chief Financial Officer, President of Midstream Operations and Executive Vice President. He also serves as President of San Mateo Midstream, LLC, the Company’s midstream joint venture. Mr. Willey joined Matador Resources Company in February 2014 as its Deputy General Counsel. In January 2016, Mr. Willey was appointed as Co-General Counsel, and in August 2016, he was promoted to Vice President and Co-General Counsel. Mr. Willey became Senior Vice President and Co-General Counsel in July 2018, and in March 2022, he was promoted to President of San Mateo and Senior Vice President, President and General Counsel of Midstream. In October 2022, Mr. Willey was promoted to President and General Counsel of Midstream Operations and Executive Vice President. Prior to joining Matador, Mr. Willey was an attorney with Dean Foods Company where he most recently served as Vice President, Chief Counsel – Corporate. Before Dean Foods, Mr. Willey served as a senior associate in the Dallas office of Baker Botts L.L.P. Mr. Willey’s practice focused on corporate matters, including mergers and acquisitions, public and private securities offerings, venture capital transactions and SEC compliance matters as well as board of director and corporate governance matters. Mr. Willey received a Bachelor of Science degree in Accounting in 2002 from Brigham Young University. He received his law degree in 2005 from The University of Texas School of Law, where he graduated with High Honors and was a member of the Order of the Coif in addition to being named a Chancellor and an Associate Editor on the Texas Law Review. Mr. Willey also served a church mission in the Philippines from 1995 to 1997. +2023 Proxy Statement | Matador Resources Company 33 +Table of Contents +CORPORATE GOVERNANCE +Mr. W. Thomas Elsener +Executive Vice President—Reservoir Engineering and Senior Asset Manager +Mr. Elsener joined Matador Resources Company in April 2013 as an Engineer. In June 2017, he was promoted to Vice President—Engineering and Asset Manager, and he was promoted to Senior Vice President—Reservoir Engineering and Senior Asset Manager in October 2019. In March 2022, Mr. Elsener became a member of Matador’s new, diverse and highly experienced financial planning team supporting the CFO and the finance team. Mr. Elsener was named Executive Vice President—Reservoir Engineering and Senior Asset Manager in April 2022. Prior to joining Matador, Mr. Elsener served in various engineering roles at Encana Oil & Gas (USA) in Dallas, Texas from 2007 to 2013, including reservoir, completions, drilling, business development and new ventures. While at Encana, Mr. Elsener was involved with the exploration and development of assets in the Barnett shale, Deep Bossier, Haynesville shale and other new domestic ventures. Mr. Elsener received a Bachelor of Science degree in Petroleum Engineering from Texas A&M University in 2007. He is a member of the Society of Petroleum Engineers. +Other Senior Officers +Mr. Christopher P. Calvert +Executive Vice President and Co-Chief Operating Officer +Mr. Calvert joined Matador Resources Company in October 2014 as a Senior Completions Engineer. In July 2018, he was named Vice President of Completions for the Company, and he was promoted to Senior Vice President—Operations in October 2019. In March 2022, he became a member of Matador’s new, diverse and highly experienced financial planning team supporting the CFO and the finance team. Mr. Calvert was promoted to Senior Vice President and Co-Chief Operating Officer in April 2022. In February 2023, Mr. Calvert was promoted to Executive Vice President and Co-Chief Operating Officer. Prior to joining Matador, Mr. Calvert worked as a Staff Reservoir Engineer in Chesapeake Energy Corporation’s South Texas—Eagle Ford group focusing on A&D evaluations and production and completions optimization. At Chesapeake, Mr. Calvert also held roles as a Senior Asset Manager responsible for completions and operations in the Niobrara Shale, a Senior Completions Engineer responsible for Bakken/Three Forks development and a Senior Operations Engineer focused on production and facility optimization on the Texas Gulf Coast. Prior to Chesapeake, Mr. Calvert worked as an Operations Engineer for Williams Production Company. In addition to his oil and natural gas industry experience, Mr. Calvert has worked in corporate financial controls as an internal Sarbanes-Oxley compliance auditor. Mr. Calvert received Bachelor of Science degrees in Finance and Petroleum Engineering from the University of Wyoming in 2002 and 2008, respectively. He is a member of the Society of Petroleum Engineers. +Mr. Bryan A. Erman +Executive Vice President and General Counsel and Head of M&A +Mr. Erman joined Matador Resources Company in January 2016 as its Co-General Counsel. In August 2016, Mr. Erman was promoted to Vice President and Co-General Counsel. He became Senior Vice President and Co-General Counsel in July 2018. In March 2022, Mr. Erman became Senior Vice President and General Counsel and in October 2022, Mr. Erman was promoted to Executive Vice President and General Counsel and Head of M&A. Prior to joining Matador, Mr. Erman was a Partner at Carrington, Coleman, Sloman & Blumenthal, L.L.P. in Dallas, having joined the firm in 2010. From 2003 to 2010, he was an associate in the Dallas and Washington, D.C. offices of Baker Botts L.L.P. Mr. Erman’s practice focused on litigation matters, including oil and natural gas, securities and other commercial litigation, as well as corporate governance matters. Before attending law school, Mr. Erman worked for Oklahoma Governor Frank Keating. Mr. Erman received a Bachelor of Arts degree in Political Science in 1999 from the University of Oklahoma. He received his law degree in 2003 from Southern Methodist University Dedman School of Law, where he graduated cum laude and was a Hatton W. Sumners Scholar, a member of the Order of the Coif and an Articles Editor on the SMU Law Review. +34 Matador Resources Company | 2023 Proxy Statement +Table of Contents +CORPORATE GOVERNANCE +Mr. Michael D. Frenzel +Executive Vice President and Treasurer +Mr. Frenzel was named Executive Vice President and Treasurer in April 2022. Mr. Frenzel’s responsibilities include treasury, financial planning and forecasting, budgeting, capital markets, hedging, financial reporting and investor relations, and he has served as the primary financial officer for San Mateo, Matador’s midstream joint venture, since San Mateo’s formation in 2017. In March 2022, Matador’s Board and CEO asked Mr. Frenzel to act as the Company’s principal financial officer until a new CFO was appointed in February 2023. Mr. Frenzel first worked for Matador’s predecessor company, Matador Petroleum Corporation, as an intern in the summers of 2000, 2001 and 2002. From 2006 to 2010, Mr. Frenzel worked as a Senior Financial Analyst before leaving to obtain his Masters of Business Administration degree in 2010 from Duke University’s Fuqua School of Business. Mr. Frenzel rejoined Matador in 2013 as its Senior Strategy and Financial Analyst and Assistant Treasurer and was promoted to Finance Director and Assistant Treasurer in January 2017. In August 2018, Mr. Frenzel was promoted to Vice President and Treasurer. Mr. Frenzel was promoted to Senior Vice President and Treasurer in October 2020. Before rejoining Matador in 2013, Mr. Frenzel worked as an Investment Associate for Hamm Capital, LLC and as a Financial Analyst and Assistant to the CEO at Continental Resources. In addition to his energy industry experience, Mr. Frenzel also has consulting experience with Deloitte Consulting LLP. Mr. Frenzel graduated summa cum laude from Vanderbilt University in 2004, receiving a Bachelor of Arts degree in Economics and Mathematics, and earned the designation of Fuqua Scholar while receiving a Master of Business Administration degree from Duke University’s Fuqua School of Business in 2012. +Dr. Edmund L. Frost III +Executive Vice President of Geosciences +Dr. Frost joined Matador Resources Company in August 2014 as a Senior Geologist and in July 2015 was promoted to Chief Geologist. In June 2017, he was promoted to Vice President of Geosciences, and in July 2019, Dr. Frost was promoted to Senior Vice President of Geosciences. In February 2023, Dr. Frost was promoted to Executive Vice President of Geosciences. Prior to joining the Company, Dr. Frost worked at the Bureau of Economic Geology at The University of Texas at Austin as a Research Associate, a role he began in 2011. While at The University of Texas, his research focused on unconventional resource development in the Delaware Basin and in the Austin Chalk-Eagle Ford system. Dr. Frost began his career in the Subsurface Technology Group at ConocoPhillips in 2007, where he worked a variety of international and domestic basins. Dr. Frost received a Bachelor of Science degree in Geology from the University of Colorado at Boulder in 1998 and a PhD degree in Geology in 2007 from The University of Texas at Austin. Dr. Frost has authored several peer-reviewed papers, conducted multiple industry presentations and led a number of industry field trips in the Delaware Basin. +Mr. Robert T. Macalik +Executive Vice President and Chief Accounting Officer +Mr. Macalik joined Matador Resources Company in July 2015 as Vice President and Chief Accounting Officer. He was promoted to Senior Vice President and Chief Accounting Officer in November 2017. In March 2022, Mr. Macalik became a member of Matador’s new, diverse and highly experienced financial planning team supporting the CFO and the finance team. Mr. Macalik was named Executive Vice President and Chief Accounting Officer in April 2022. Prior to joining Matador, from 2012 to 2015, Mr. Macalik worked at Pioneer Natural Resources Company as Corporate Controller and, previously, as Director of Technical Accounting and Financial Reporting. At Pioneer, Mr. Macalik supervised corporate accounting and financial reporting functions. Prior to joining Pioneer, he was a Senior Manager with PricewaterhouseCoopers (PwC), joining the public accounting firm in 2002. During his tenure with PwC, Mr. Macalik conducted and managed audits for various companies, primarily public companies in the oil and natural gas industry, and managed numerous client relationships. Mr. Macalik received a Bachelor of Arts degree in History, a Bachelor of Business Administration degree and a Master of Professional Accounting degree all from The University of Texas at Austin in 2002. He is a licensed Certified Public Accountant in the State of Texas. +2023 Proxy Statement | Matador Resources Company 35 +Table of Contents +CORPORATE GOVERNANCE +Mr. Glenn W. Stetson +Executive Vice President—Production +Mr. Stetson joined Matador Resources Company in August 2014 as a Production Engineer, and in July 2015, he was promoted to Asset Manager. Mr. Stetson was promoted to the role of Vice President and Asset Manager in July 2018 and to Senior Vice President of Production and Asset Manager in October 2019. In March 2022, Mr. Stetson became a member of Matador’s new, diverse and highly experienced financial planning team supporting the CFO and the finance team. Mr. Stetson was promoted to the role of Executive Vice President—Production in April 2022. Prior to joining Matador, Mr. Stetson worked at Chesapeake Energy Corporation from 2008 to 2014, holding multiple positions in both the production and completions departments. Most of his time at Chesapeake was spent in the Barnett shale in North Texas, although he also spent some time working in northern Pennsylvania managing the northeast portion of Chesapeake’s Marcellus shale operated production. Mr. Stetson graduated Cum Laude from Oklahoma State University in 2007, receiving a Bachelor of Science degree in Mechanical Engineering Technology. Mr. Stetson is a Licensed Professional Engineer in the State of Oklahoma. +Mr. Jonathan J. Filbert +Senior Vice President— Land +Mr. Filbert joined Matador Resources Company in February 2013 as a Senior Staff Landman. In April 2015, he was promoted to General Land Manager, and in December 2017, he was promoted to General Land Manager and Director of Acquisitions. Mr. Filbert was promoted to the role of Vice President of Land in July 2018 before being promoted to his current role as Senior Vice President—Land in October 2020. Prior to joining Matador, Mr. Filbert worked as a landman at Chesapeake Energy Corporation from 2010 to 2013. Most of his time at Chesapeake was spent working with the new ventures team on their Utica and Marcellus shale assets in Ohio and northern Pennsylvania. Mr. Filbert graduated from the University of Oklahoma in 2010, receiving a Bachelor of Business Administration degree in Energy Management and Finance. He is an active member of the American Association of Professional Landmen, the New Mexico Landman Association, the Permian Basin Landman Association and the Dallas Association of Petroleum Landmen. +36 Matador Resources Company | 2023 Proxy Statement +Table of Contents +PROPOSAL 2 +PROPOSAL 2 | ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION +In accordance with the requirements of Section 14A of the Exchange Act, the Company seeks a non-binding advisory vote from its shareholders to approve the compensation of its Named Executive Officers (as defined below) as described in this Proxy Statement. +As discussed under the “Executive Compensation—Compensation Discussion and Analysis” section of this Proxy Statement (“CD&A”), we made significant changes to our executive compensation program in 2020 in response to the COVID-19 pandemic and the sudden decline in oil prices. As commodity prices improved in 2021, we shifted our executive compensation program to more closely resemble our 2019 executive compensation program prior to the decline in oil prices in 2020 and the COVID-19 pandemic. As such, our executive officers received increases in their base salary, increases in the grant date fair values for long-term equity awards and annual cash bonuses for 2021 and 2022. These changes to our compensation program in 2021 and 2022 corresponded to our performance as the Company’s stock price hit a low of $1.11 in March 2020 and then recovered to close at $36.92 on December 31, 2021 and continued to increase to close at $57.24 on December 30, 2022. +We believe the Company’s future success and the ability to create long-term value for our shareholders depends on our ability to attract, retain and motivate highly qualified individuals in the oil and natural gas industry. Additionally, we believe that our success also depends on the continued contributions of our Named Executive Officers. The Company’s compensation system plays a significant role in its ability to attract, motivate and retain a high-quality workforce. As described in the CD&A, the Company’s compensation program for Named Executive Officers is designed to reward, in both the short term and the long term, performance that contributes to the implementation of our business strategies, maintenance of our culture and values and achievement of our objectives. +This proposal provides shareholders the opportunity to endorse or not endorse the Company’s executive compensation program through approval of the following resolution: +“Resolved, that the compensation paid to the Company’s Named Executive Officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby approved.” +The above-referenced CD&A and accompanying disclosures appear on pages 42-64 of this Proxy Statement. +Because this is an advisory vote, it will not be binding upon the Board. However, the Compensation Committee and the Independent Board will take into account the outcome of the vote when considering future executive compensation arrangements. +Vote Required +The affirmative vote of the holders of a majority of the shares present in person or represented by proxy and entitled to vote at the Annual Meeting is required to approve this resolution on a non-binding basis. If you hold your shares through a broker and you do not instruct the broker how to vote, your broker will not have the authority to vote your shares. Abstentions will have the effect as a vote cast against the proposal. Broker non-votes will be counted as present for purposes of determining the presence of a quorum but will have no effect upon the outcome of the vote. +During our 2018 Annual Meeting, our shareholders approved a non-binding, advisory proposal to hold advisory votes to approve our executive compensation every year. In consideration of the results of this advisory vote, the Board has maintained its policy of providing for annual advisory votes to approve executive compensation. Unless the Board modifies this policy, the next advisory vote to approve executive compensation following this vote will be held at our 2024 Annual Meeting. +The Board of Directors recommends that you vote FOR approval of this resolution. +2023 Proxy Statement | Matador Resources Company 37 +Table of Contents +PROPOSAL 3 +PROPOSAL 3 | RATIFICATION OF THE APPOINTMENT OF KPMG LLP +The Audit Committee has appointed KPMG LLP (“KPMG”) as the independent registered public accounting firm of the Company for the year ending December 31, 2023, and the Board has directed that such appointment be submitted to our shareholders for ratification at the Annual Meeting. +The Audit Committee concluded that KPMG’s provision of non-audit services, such as tax services, does not compromise KPMG’s independence. +If the shareholders do not ratify the appointment of KPMG, the Audit Committee will consider whether to engage a different independent registered public accounting firm but will not be obligated to do so. +The Company has been advised that representatives of KPMG will be present at the Annual Meeting and will be available to respond to appropriate questions and make a statement if they desire to do so. +Fees of Independent Registered Public Accounting Firm for Fiscal Years 2022 and 2021 +The following table presents fees for professional audit services rendered by KPMG for the audit of the Company’s annual financial statements for the years ended December 31, 2022 and 2021, and fees for other services rendered by KPMG during those periods: +2022 +2021 +Audit fees +$ +1,615,000 +$ +1,487,000 +Audit-related fees +— +— +Tax fees +$ +170,000 +— +All other fees +— +— +Total +$ +1,785,000 +$ +1,487,000 +Services rendered by KPMG in connection with the fees presented above were as follows: +Audit Fees +For fiscal year 2022, audit fees consisted of fees associated with the audit of the Company’s consolidated financial statements, including the audit of the effectiveness of the Company’s internal control over financial reporting, required reviews of our quarterly condensed consolidated financial statements and consultation on significant accounting matters. Audit fees also included fees paid to KPMG by San Mateo for the audit of their 2022 financial statements. +For fiscal year 2021, audit fees consisted of fees associated with the audit of the Company’s consolidated financial statements, including the audit of the effectiveness of the Company’s internal control over financial reporting, required reviews of our quarterly condensed consolidated financial statements and consultation on significant accounting matters. Audit fees also included fees paid to KPMG by San Mateo for the audit of its 2021 financial statements. +Audit-Related Fees +We did not incur any audit-related fees in 2022 or 2021. +Tax Fees +Tax fees for fiscal year 2022 related to permitted tax planning services. We did not incur any fees for tax advice, planning or other services in 2021. +38 Matador Resources Company | 2023 Proxy Statement +Table of Contents +PROPOSAL 3 +All Other Fees +We did not incur any other fees in 2022 or 2021. +The Audit Committee pre-approves all audit and permissible non-audit services provided by KPMG. These services may include audit services, audit-related services, tax services and other services. The Audit Committee has authorized the chair of the Audit Committee to pre-approve audit and permissible non-audit services provided by KPMG up to $750,000. Pursuant to this delegation, the decisions of the chair must be presented to the Audit Committee at its next meeting. +Report of the Audit Committee +We are a standing committee comprised of independent directors as currently defined by SEC regulations and the applicable listing standards of the NYSE. The Board has determined that at least one of the members of the Audit Committee is an “audit committee financial expert” as defined by applicable SEC rules and regulations. We operate under a written charter adopted by the Board. A copy of the charter is available free of charge on the Company’s website at www.matadorresources.com under “Investor Relations—Corporate Governance.” +We annually select the Company’s independent registered public accounting firm. If the shareholders do not ratify the appointment of KPMG at the Annual Meeting, the Audit Committee will consider whether to engage a different independent registered public accounting firm but will not be obligated to do so. +Management is responsible for the Company’s internal controls and the financial reporting process. The independent registered public accounting firm is responsible for performing an independent audit of the Company’s consolidated financial statements in accordance with the standards of the United States Public Company Accounting Oversight Board (the “PCAOB”) and issuing a report thereon. As provided in our charter, our responsibilities include the monitoring and oversight of these processes. +Consistent with our charter responsibilities, we have met and held discussions with management and the independent registered public accounting firm. In this context, management and the independent registered public accounting firm represented to us that the Company’s consolidated financial statements for the fiscal year ended December 31, 2022 were prepared in accordance with U.S. generally accepted accounting principles. We reviewed and discussed the consolidated financial statements with management and the independent registered public accounting firm and discussed with the independent registered public accounting firm matters required to be discussed by the applicable requirements of the PCAOB and the SEC. +The Company’s independent registered public accounting firm has also provided to us the written disclosures and the letter required by applicable requirements of the PCAOB regarding the independent registered public accounting firm’s communications with the Audit Committee, and we discussed with the independent registered public accounting firm that firm’s independence. +Based upon our reviews and discussions with management and the independent registered public accounting firm and our review of the representation of management and the report of the independent registered public accounting firm to the Audit Committee, we recommended that the Board include the audited consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC. +Audit Committee, +William M. Byerley, Chair +Reynald A. Baribault +James M. Howard +Timothy E. Parker +Julia P. Forrester Rogers +2023 Proxy Statement | Matador Resources Company 39 +Table of Contents +PROPOSAL 3 +Vote Required +The affirmative vote of the holders of a majority of the shares present in person or represented by proxy and entitled to vote at the Annual Meeting is required for the ratification of the appointment of KPMG as the Company’s independent registered public accounting firm for the year ending December 31, 2023. If the shareholders do not ratify the appointment of KPMG, the Audit Committee will consider whether to engage a different independent registered public accounting firm but will not be obligated to do so. Abstentions will have the effect as a vote cast against the proposal. +The Board of Directors recommends that you vote FOR the ratification of the appointment +of KPMG as the Company’s independent registered public accounting firm for the +year ending December 31, 2023. +40 Matador Resources Company | 2023 Proxy Statement +Table of Contents +LETTER TO SHAREHOLDERS +Dear Fellow Shareholders, +On behalf of the Board and the Compensation Committee, thank you for your continued support for Matador and entrusting us with your hard-earned capital. We are grateful for the opportunities that we have had to visit with many of you, and we look forward to getting to know more of our shareholders in the future. +The Board, management and staff are extremely pleased to celebrate with you another record year for Matador in 2022. We achieved operational and financial records across the board during 2022, including record production, net income, Adjusted EBITDA, net cash provided by operating activities and adjusted free cash flow. Additionally, as many of our officers have stepped into new opportunities with the growth of the Company and assumed additional responsibilities in connection with the retirement of our former president and our former chief financial officer, in 2022, we announced the promotion from within of two new presidents and a number of other executive and senior officers, showcasing the depth and talent of our people. +We were also committed to further return value to shareholders in 2022 and were pleased to increase our quarterly dividend multiple times. We began 2022 by paying a quarterly dividend of $0.05 per share in the first and second quarters of 2022, which was doubled to $0.10 per share in the third and fourth quarters of 2022. In December 2022, we announced that the Board had again amended the Company’s dividend policy, increasing the quarterly dividend by 50% to $0.15 per share. We also paid down debt and ended 2022 with a leverage ratio of 0.1x, the lowest since we became a public company in 2012. +In addition to achieving record results and returning value to shareholders, we also made significant progress in ESG-related initiatives and disclosures in 2022. Among other items, we reduced per-barrel emissions, increased our use of non-fresh water, including recycled water, and increased transportation of oil and water by pipeline. In addition, we were pleased to issue our annual Sustainability Report that highlighted Matador’s continued progress and improvements in its operating practices, including disclosure of quantitative metrics aligned with SASB. +Our Board has a “pay for performance” philosophy and recognizes the leadership of our executive officers in contributing to the Company’s achievements. The achievements outlined above have resulted in an over 50-fold increase in Matador’s stock price from a low of $1.11 in March 2020 to a closing price of $57.24 on December 30, 2022. As a Board, and as shareholders ourselves, we are grateful for the outstanding execution by Matador’s management and staff that led to such a remarkable increase in the Company’s stock price. +We look forward to ongoing dialogue with our shareholders and to demonstrating responsiveness to your feedback, including by continuing to improve our executive compensation program. We are honored to serve on your behalf and hope you will join us at the 2023 Annual Meeting of Shareholders. +Sincerely, +Timothy E. Parker +R. Gaines Baty +Lead Independent Director +Chair, Strategic Planning and Compensation Committee +2023 Proxy Statement | Matador Resources Company 41 +Table of Contents +EXECUTIVE COMPENSATION +EXECUTIVE COMPENSATION +Compensation Discussion and Analysis +This Compensation Discussion and Analysis, or CD&A, provides a general description of our compensation program and specific information about its various components for the following “Named Executive Officers” for 2022: +• +Joseph Wm. Foran, Chairman of the Board and Chief Executive Officer; +• +Billy E. Goodwin, President—Operations; +• +Van H. Singleton, II, President—Land, Acquisitions & Divestitures and Planning; +• +Craig N. Adams, Executive Vice President, Co-Chief Operating Officer, Chief of Staff and Corporate Secretary; +• +Michael D. Frenzel, Executive Vice President, Treasurer and Former Principal Financial Officer; and +• +David E. Lancaster, Former Executive Vice President and Chief Financial Officer; +Mr. Lancaster retired effective March 31, 2022 and Mr. Frenzel served as the Company’s principal financial officer from March 31, 2022 to February 16, 2023 and was also named Executive Vice President and Treasurer in April 2022. On February 16, 2023, Brian J. Willey was promoted to Chief Financial Officer, President of Midstream Operations and Executive Vice President and assumed the role of principal financial officer. +2022 Highlights +Despite the precipitous decline in global oil demand resulting from the worldwide spread of COVID-19 in 2020, which led to a very challenging oil and natural gas price environment, global oil demand and oil and natural gas prices improved significantly during 2021 and 2022. These factors, along with the successful execution of our business strategies, led to increases in our oil and natural gas production and proved oil and natural gas reserves in 2022, as well as to increases in our oil and natural gas revenues and cash flows. We also improved the capital efficiency of our drilling and completion operations and achieved several key operational milestones throughout the year. In addition, we achieved numerous key capital resources objectives during the year, including generating free cash flow, paying down borrowings, increasing our quarterly cash dividend and earning performance incentives from Five Point. Further, we concluded several important financing transactions in 2022, including increasing the borrowing base under our Credit Agreement and extending the maturity of and increasing the lender commitments under the San Mateo Credit Facility. San Mateo also achieved important milestones in 2022, including the addition of produced water disposal capacity and being awarded several new customer contracts. These achievements and transactions increased our operational flexibility and opportunities while preserving the strength of our balance sheet and our liquidity position. +42 Matador Resources Company | 2023 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +Record Operational and Financial Results +The year ended December 31, 2022 was marked by record operational and financial results across the Company, including record total production, net income, Adjusted EBITDA, net cash provided by operating activities and adjusted Free Cash Flow. San Mateo also had a record year in 2022, including increased throughput volumes for natural gas gathering and processing, oil gathering and transportation and water handling, as well as record net income and record Adjusted EBITDA. The charts below show the five-year growth experienced by both our exploration and production business and our midstream business. As shown below, our third-party midstream services revenues have experienced significant growth since the formation of San Mateo in 2017. +For the year ended December 31, 2022, we achieved record oil, natural gas and average daily oil equivalent production. In 2022, we produced 21.9 million Bbl of oil, an increase of 23%, as compared to 17.8 million Bbl of oil produced in 2021. We also produced 99.3 Bcf of natural gas, an increase of 22% from 81.7 Bcf of natural gas produced in 2021. Our average daily oil equivalent production for the year ended December 31, 2022 was 105,465 BOE per day, including 60,119 Bbl of oil per day and 272.1 MMcf of natural gas per day, an increase of 22%, as compared to 86,176 BOE per day, including 48,876 Bbl of oil per day and 223.8 MMcf of natural gas per day, for the year ended December 31, 2021. The increase in oil and natural gas production was primarily attributable to our ongoing delineation and development drilling activities in the Delaware Basin throughout 2022, which offset declining production in the Eagle Ford shale. Oil production comprised 57% of our total production (using a conversion ratio of one Bbl of oil per six thousand cubic feet of natural gas) for each of the years ended December 31, 2022 and 2021. +During 2022, we achieved all five significant and important operational milestones in the Delaware Basin that we had set at the beginning of the year. These five operational milestones were each achieved when we turned to sales: +• +11 Voni wells, all of which were 2.3-mile laterals, in the western portion of the Stateline asset area in a staggered fashion in early 2022—these 11 Voni wells have produced in aggregate approximately 3.6 million BOE in 11 months of production; +• +the third group of nine Rodney Robinson wells in the western portion of our Antelope Ridge asset area in March 2022—these nine Rodney Robinson wells have produced in aggregate approximately 3.1 million BOE in 10 months of production; +• +11 Rustler Breaks wells in April 2022—these 11 wells have produced in aggregate approximately 2.6 million BOE in almost nine months of production; +• +16 Antelope Ridge wells in the second half of 2022—these 16 wells have produced in aggregate approximately 1.6 million BOE in 2022; and +• +12 Ranger wells in the fourth quarter of 2022. +2023 Proxy Statement | Matador Resources Company 43 +Table of Contents +EXECUTIVE COMPENSATION +In addition to achieving these five key operational milestones, further operational achievements in the Delaware Basin +in 2022 included: +• +continued drilling of longer laterals, whereby 90% of the operated horizontal wells we turned to sales in 2022 had lateral lengths of two miles or greater, as compared to only 8% as recently as 2019; and +• +capital expenditures for drilling, completing and equipping wells (“D/C/E capital expenditures”) for 2022 of $772.5 million, which was at the low end of our revised estimated range for 2022 D/C/E capital expenditures of $765 to $835 million as provided on July 26, 2022 and affirmed on October 25, 2022, which included the addition of a seventh operated drilling rig in September 2022. +Capital Resources and Financing Highlights +In addition to record financial results, we returned value to shareholders through the generation of free cash flow, repayment of debt and multiple increases to our quarterly dividend. We also concluded several important financing transactions that preserved the strength of our balance sheet and improved our liquidity position. +Highlights of these value-generating items include: +• +The generation of free cash flow in all four quarters of 2022 by both Matador and San Mateo. +• +The repayment of all outstanding borrowings under our Credit Agreement, resulting in no outstanding borrowings under that facility at December 31, 2022. +• +The repurchase of an aggregate principal amount of $350.8 million of our outstanding 5.875% senior notes due 2026. +• +The amendments of our dividend policy in the second and fourth quarters of 2022, pursuant to which we increased the quarterly cash dividend from $0.05 per share of Common Stock to $0.15 per share of Common Stock. +• +The receipt of $28.3 million in performance incentives directly from Five Point in 2022. +44 Matador Resources Company | 2023 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +• +The revision of our Credit Agreement at our spring and fall redetermination processes to collectively (i) increase the borrowing base to $2.25 billion, as compared to $1.35 billion at December 31, 2021, (ii) increase the elected borrowing commitment to $775.0 million, as compared to $700.0 million at December 31, 2021, (iii) reaffirm the maximum facility amount at $1.5 billion and (iv) add one new bank to our lending group. +• +The amendment of the San Mateo Credit Facility in December 2022 to (i) extend the maturity date by three years from December 2023 to December 2026, (ii) increase the lender commitments under the San Mateo Credit Facility from $450.0 million to $485.0 million, (iii) refresh the accordion feature that provides for potential increases in lender commitments to up to $735.0 million, as compared to $700.0 million previously, and (iv) add one new bank to San Mateo’s lending group. +ESG Highlights +During 2022, we also continued to improve our ESG performance and enhance our ESG disclosures. Among other items, our ESG achievements included the following: +• +The continued decrease in per-barrel emissions, including reduction in direct greenhouse gas emissions intensity from 2019 levels, increased use of non-fresh water, including recycled water, and increased transportation of oil and water by pipeline. +• +Approximately 16,000 hours of employee continuing education, equating to approximately 50 hours per employee in 2022, management’s focus on risk management and cybersecurity, including quarterly reports by executive management to the Audit Committee, and the absence of any recordable employee injuries. +• +The publishing of our annual Sustainability Report in December 2022, which provides Matador’s stakeholders and interested parties with a standardized platform for evaluating the Company’s recent performance and future progress. +Compensation Program Objectives +Our Board has a “pay for performance” philosophy and recognizes the leadership of our executive officers in contributing to the Company’s achievements. Our future success and the ability to create long-term value for our shareholders depend on our ability to attract, retain and motivate highly qualified individuals in the oil and natural gas industry. In furtherance of these goals, our executive compensation program is designed to meet the following key objectives: +• +to be fair to both the executive and the Company and be competitive with comparable positions at companies in our peer group; +• +to attract and retain talented and experienced executives in light of the intense competition for talent in our industry and areas of operation, including from peers and larger industry competitors; +• +to align the interests of our executives with the interests of our shareholders and with the performance of our Company for long-term value creation; +• +to provide financial incentives to our executives to achieve our key corporate and individual objectives with an appropriate mix of fixed and variable pay ; +• +to foster a shared commitment among executives by coordinating their corporate and individual goals; and +• +to provide compensation that takes into consideration the education, professional experience, knowledge, commitment and dedication that is specific to each job and the unique qualities the executive possesses. +2022 Say-on-Pay Results +At our 2022 Annual Meeting, support for our executive compensation program remained strong at over 98%, suggesting that our shareholders remain supportive of the changes we implemented to our executive compensation program during 2021. The Compensation Committee took this support into account as one of many factors it considered in connection with the discharge of its responsibilities in exercising its judgment in establishing and overseeing our executive compensation arrangements throughout the year. +2023 Proxy Statement | Matador Resources Company 45 +Table of Contents +EXECUTIVE COMPENSATION +Compensation Program Best Practices +What We Do: +What We Don’t Do: +✓ +We pay for performance—approximately 85% of our CEO’s target total compensation for 2022 was variable and at risk, with approximately 60.1% performance-based +× +We do not permit hedging of Company stock +✓ +We maintain robust stock ownership guidelines for officers +× +We do not gross-up excise taxes for severance or change in control payments +✓ +We engage an independent compensation consultant +× +We do not guarantee bonuses +✓ +We use competitive benchmarking in setting compensation +× +We do not reprice stock options without shareholder approval +✓ +We conduct annual risk assessments of compensation practices +× +We have no defined benefit or supplemental executive retirement plans +✓ +We conduct regular shareholder engagement to gather feedback on compensation practices +× +We do not allow pledging of Company stock, except in limited circumstances +✓ +We hold an annual say-on-pay vote +× +We do not pay dividends on phantom units, restricted stock units (“RSUs”) or performance stock units (“PSUs”) +Impact of COVID-19 and Related Items on Our Compensation Programs +2020 and 2021 +The year 2020 was a challenging year. During the first quarter and through April 2020, the oil and natural gas industry witnessed an abrupt and significant decline in oil prices from $63 per Bbl in early January to as low as ($38) per Bbl in late April resulting from the worldwide spread of COVID-19 and a sudden, unexpected increase in global oil supply. In connection with such events, we implemented certain changes to our compensation program, including reductions in the base salary for our entire workforce, including our executive officers, to strengthen our balance sheet and further align the interests of our executive officers with our shareholders. Our executive officers’ 2020 equity grants also had a significantly lower grant date fair value than in 2019. In addition, although each of the Independent Board-approved metrics under our annual cash incentive plan (the “Cash Incentive Plan”) were met or exceeded, the Company’s executive officers and the Independent Board agreed that the executive officers would forego receiving any 2020 annual cash bonuses. +During the latter half of 2020 and through 2021, the oil and natural gas industry experienced improvement in commodity prices, as compared to mid-2020. In connection with this improvement, the price of our Common Stock increased from a low of $1.11 in March 2020 to close at $22.04 on March 1, 2021. As a result, after consulting with the Compensation Committee’s independent compensation consultant, Meridian Compensation Partners, LLC (“Meridian”), the Independent Board reinstated many of the compensation components that were eliminated or reduced during 2020 and implemented a compensation program during 2021 that was similar to the Company’s compensation program in 2019, prior to the decline in oil prices in 2020 and the COVID-19 pandemic. For example, the Board determined to reinstate our Named Executive Officers’ salaries to the pre-April 2020 levels and our Named Executive Officers also received increases in their base salaries effective May 1, 2021. In addition, the Independent Board awarded long-term incentive awards to our Named Executive Officers with increased grant date fair values compared to the awards received by the Named Executive Officers in 2020 but at targeted values commensurate with the long-term incentive awards granted in 2019. Unlike 2020, our Named Executive Officers also received bonuses pursuant to our Cash Incentive Plan in connection with the performance of the Company in 2021. +46 Matador Resources Company | 2023 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +2022 +During 2022, the oil and natural gas industry continued to strengthen, with prices for oil and natural gas averaging $94.38 per Bbl and $6.37 per MMBtu, respectively, over the year. Matador’s stock price continued to improve as well, closing at $57.24 per share at December 30, 2022. As such, our compensation program in 2022 did not materially differ from our compensation program in 2021. Mr. Foran’s total compensation for 2022 decreased approximately 1% as compared to his total compensation for 2021. Mr. Foran’s average annual total compensation for the three years ended December 31, 2022 was approximately $6.6 million. +Elements of 2022 Compensation Program +Our executive compensation program places a considerable amount of an executive’s compensation at risk in the form of incentive or equity-based compensation, which can be variable from year to year. We also seek to provide an appropriate balance between annual incentives and long-term incentives to ensure that each executive is motivated to consider longer-term Company performance in preference to short-term results. +For 2022, our management compensation program was comprised of the following primary elements: +2022 Element +Key Features +Why We Include This Element +Base Salary +•   Fixed level of cash compensation +•   Compensates each executive for his assigned responsibilities, experience, leadership and expected future contributions +Annual Cash Incentive Payments +•   Variable, annual, performance-based cash compensation +•   Focuses and motivates management to achieve key corporate and individual objectives +•   Rewards achievements over the prior year +Phantom Units (1) +•   Approximately 50% of targeted total long-term equity award value +•   Vests ratably in annual installments over three years from grant date +•   Settles in cash +•   Directly aligns executive and shareholder interests by tying the cash received on settlement to the Company’s stock price +•   Retains executives over vesting period +•   Cash settlement avoids dilution of Common Stock +Performance Stock Units (1) +•   Approximately 50% of targeted total long-term equity award value +•   Vests between 0% and 200% following a three-year performance period ending December 31, 2024 based on the Company’s ranking of relative total shareholder return as compared to our peers +•   If absolute total shareholder return is negative, payout is capped at target (100%) +•   Focuses executives on the Company’s long-term performance as award is tied to the Company’s total shareholder return relative to the total shareholder return of its peers over a three-year performance period +•   Settlement in shares of the Company’s stock increases alignment between executives and shareholders +•   Retains executives over vesting period +2023 Proxy Statement | Matador Resources Company 47 +Table of Contents +EXECUTIVE COMPENSATION +Severance and Change of Control Benefits +•   Specified severance pay and benefits are provided under each Named Executive Officer’s employment agreement in connection with termination events, including after a change in control +•   Provides an incentive for executives to remain with the Company despite the uncertainties of a potential or actual change in control +•   Provides a measure of financial security in the event an executive’s employment is terminated without cause +Other Benefits +•   Broad-based 401(k) retirement, employee stock purchase plan and health and welfare benefits offered to all eligible employees +•   Provides market competitive benefits +•   Protects employees against catastrophic loss and encourages a healthy lifestyle +(1) +Mr. Frenzel was not serving as an executive officer in February 2022 when annual equity grants were approved. Mr. Frenzel’s long-term incentive compensation for 2022 included approximately 50% share-settled PSUs and approximately 50% service based restricted shares of Common Stock that vest in equal annual tranches over three years from grant. +Consistent with our compensation program objectives, we provide our executive officers with a significant portion of their total compensation in the form of variable, rather than fixed, compensation. Importantly, a significant portion of total compensation is also performance-based. The percentages shown below reflect each executive’s target compensation opportunity determined by the Compensation Committee and the Independent Board and do not reflect actual payments made to the executives for 2022. +(1) +Messrs. Frenzel and Lancaster omitted. +Role of the Independent Board, Compensation Committee and Management +The Compensation Committee annually evaluates each of the Company’s executive officers, including Mr. Foran, and recommends to the Independent Board the proposed compensation structure for each of the executives, including salary, equity and non-equity incentive compensation. Based on such recommendations, the Independent Board sets Mr. Foran’s compensation each year. Mr. Foran consults with and provides recommendations to the Compensation Committee and Independent Board regarding the compensation structure for each of the other Named Executive Officers. Based on the recommendations of the Compensation Committee and Mr. Foran, the Independent Board sets the other Named Executive Officers’ compensation each year. The members of the Independent Board are required to be independent pursuant to the listing standards of the NYSE and the rules and regulations promulgated by the SEC. +48 Matador Resources Company | 2023 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +As part of their annual evaluations, the Compensation Committee: +• +conducts an analysis of the Company’s annual performance relative to any performance criteria or targets established under the Cash Incentive Plan and recommends to the Independent Board the amount of final annual cash incentive awards; +• +reviews and recommends the form of and number of shares to be awarded pursuant to long-term incentive compensation awards, including vesting terms, performance metrics, performance peer groups and other material provisions of such awards; +• +reviews executive officer compensation levels as compared to the Company’s peers; +• +reviews and recommends any employment agreement, severance agreement, change in control agreement or provision or separation agreement or amendment thereof; and +• +reviews and recommends any deferred compensation arrangement, retirement plan, other benefits and perquisites. +In addition, the Compensation Committee confirms at least annually that our compensation policies and practices do not encourage unnecessary risk taking and reviews the relationship between risk management, corporate strategy and executive compensation. The Compensation Committee considers, in establishing and reviewing our compensation program, whether the program encourages unnecessary or excessive risk taking and has concluded that it does not and is not reasonably likely to have a material adverse effect on us. Many features of our program reflect sound risk management practices. Base salaries are fixed in amount and thus do not encourage risk taking. While annual cash incentive payments are tied to management’s achievements during the applicable fiscal year, they also take into account multiple performance criteria based on the executive’s individual performance and are within the discretion of the Independent Board, with payout limits for each participant. Thus, the Compensation Committee believes that our annual cash incentive awards appropriately balance risk and the desire to focus executives on specific short-term goals important to the Company’s success, and that they do not encourage unnecessary or excessive risk taking. In addition, the Compensation Committee believes that our equity compensation program provides an appropriate balance between the goals of increasing the price of our Common Stock and avoiding potential risks that could threaten our growth and stability due to the fact that the phantom units and PSUs vest over three years and the PSUs vest based on our relative total shareholder return, with an overall payout limit and a further limit if absolute total shareholder return is negative. We also maintain policies prohibiting hedging and pledging (except in limited circumstances) and stock ownership guidelines, which we believe further mitigate the potential for unnecessary or excessive risk taking. +In addition, pursuant to its charter, the Compensation Committee reviews and recommends to the Independent Board any proposals for the adoption, amendment, modification or termination of our incentive compensation, equity-based plans and non-equity based plans. +Role of the Independent Compensation Consultant +The Compensation Committee has engaged Meridian as its independent executive compensation advisory firm. Meridian provides assessments of the competitiveness of the Company’s executive compensation levels and practices relative to relevant executive labor markets and performs other tasks as requested by the Compensation Committee. For 2022, the Compensation Committee assessed the independence of Meridian pursuant to applicable SEC and NYSE rules and concluded that Meridian’s engagement by the Compensation Committee did not raise any conflicts of interest. +Use of Peer Group Market Data +Our independent compensation consultant benchmarks the pay levels of our officers against a group of competitor companies in the oil and natural gas exploration and production sector (the “Peer Group”). In connection with its annual review, the Compensation Committee and Independent Board adopted the following Peer Group in 2022, which was used in setting 2022 compensation levels: +Callon Petroleum Company +Centennial Resources +Coterra Energy Inc. +Diamondback Energy Inc. +Laredo Petroleum Inc. +Magnolia Oil & Gas Corp. +Marathon Oil Corp. +Ovintiv Inc. +PDC Energy Inc. +SM Energy Company +2023 Proxy Statement | Matador Resources Company 49 +Table of Contents +EXECUTIVE COMPENSATION +In addition to considering companies in the oil and natural gas exploration and production sector, the Compensation Committee also considered company size characteristics such as assets, enterprise value and market value when approving the Peer Group. The Peer Group also includes certain companies with operations in the Permian Basin that face similar opportunities and challenges that we face. For 2022, the Compensation Committee replaced Cimarex Energy Co. with its successor, Coterra Energy, Inc., following Cimarex Energy’s business combination with Cabot Oil & Gas, now doing business as Coterra Energy. The Compensation Committee also removed Devon Energy Corp. and Oasis Petroleum, Inc. following the announcements of their respective business combinations with WPX Energy and Whiting Petroleum Corporation, and removed Pioneer Natural Resources Company in consideration of its market capitalization relative to that of the Company. The Compensation Committee added Centennial Resources, now doing business as Permian Resources following its business combination with Colgate Energy, to the 2022 Peer Group given its exploration and production activities in the Delaware Basin and comparable market capitalization. Additionally, the Compensation Committee added Magnolia Oil & Gas Corp. to the 2022 Peer Group given its comparable market capitalization and Laredo Petroleum Inc., now doing business as Vital Energy, given its exploration and production activities in the Permian Basin. As of December 31, 2022, the Peer Group had a median market capitalization of $5.7 billion, compared to the Company’s market capitalization of $6.8 billion at such date, placing the Company at the 65th percentile of the Peer Group. +The Peer Group is used by the Compensation Committee and the Independent Board in setting Named Executive Officer salaries, annual cash incentive award opportunities, long-term incentive awards and target total direct compensation levels. The Compensation Committee and Independent Board use this data to inform their pay decisions as one data point among many others, including Company performance, individual performance, experience and responsibilities, leadership and professional growth. +2022 Base Salaries +The Compensation Committee recommended, and the Independent Board approved, effective January 1, 2022, increases in base salary levels for the Named Executive Officers as set forth below. +Executive Officer +2021 +Base Salary +(as of Dec. 31) (1) +2022 +Base Salary +(as of Dec. 31) +Joseph Wm. Foran +$ +1,300,000 +$ +1,350,000 +Billy E. Goodwin +$ +725,000 +$ +750,000 +Van H. Singleton, II +$ +— +$ +750,000 +Craig N. Adams +$ +725,000 +$ +750,000 +Michael D. Frenzel +$ +— +$ +450,000 +David E. Lancaster +$ +725,000 +$ +750,000 +(2) +(1) +Information is not provided for Messrs. Singleton and Frenzel for 2021 as they were not Named Executive Officers in 2021. +(2) +Reflects Mr. Lancaster’s annual base salary prior to his retirement and transition to an advisor role effective March 31, 2022. For his compensation arrangement following such transition, see “Advisor Agreement” below. +The Independent Board determined that the base salary increases for each of the Named Executive Officers effective January 1, 2022 were warranted based upon each Named Executive Officer’s individual contributions to, among other items: +• +the Company’s operational performance during 2021, including record annual oil, natural gas and average daily oil equivalent production; +• +the Company’s financial performance during 2021; +• +the significant increase in the Company’s stock price during 2021, especially as compared to the spring of 2020; +• +the Company’s continued improvement in operational efficiencies; +50 Matador Resources Company | 2023 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +• +the Company’s continued focus on improvement in its ESG initiatives and disclosure of such initiatives; +• +the continued growth of the Company’s midstream business throughout 2021; and +• +certain Named Executive Officers’ assumption of additional responsibilities following the retirement of Messrs. Hairford and Lancaster. +2022 Annual Cash Incentive Compensation +The Company’s 2022 annual cash incentive compensation was awarded pursuant to the Cash Incentive Plan, which is designed to link executive decision making and performance with the Company’s goals, reinforce these goals and ensure the highest level of accountability for the success of the Company as a whole. The Cash Incentive Plan advances Company and shareholder interests by providing an additional means to (i) sustain and enhance the culture of personal commitment on the part of executives, select managers and key employees in the continued growth, development and financial success of the Company and (ii) encourage them to remain with, and devote their best efforts to, the Company. The Cash Incentive Plan provides for the granting of incentive compensation awards that may be paid to a participant upon satisfaction of specified performance goals for a particular performance period. In addition, the Cash Incentive Plan provides that the Compensation Committee and Independent Board may make adjustments for individual executive officers for exceptional performance and attainment of certain enumerated strategic goals (the “Discretionary Adjustment”). +Performance Goals +For 2022, the chair of the Compensation Committee met with Meridian and management to discuss potential criteria for the performance goals. Based on these meetings, the chair of the Compensation Committee proposed certain preliminary performance goal categories for consideration for 2022 to the full Compensation Committee. The Compensation Committee then met with management to review the proposed performance goal categories. As a result of these discussions, and upon the recommendation of the Compensation Committee, the Independent Board determined to use the following threshold, target and maximum performance goals for 2022, which were each achieved at or above the maximum level, as shown below: +2022 Performance Goals +Threshold +Target +Maximum +Actual +Results +Assessment +Adjusted Free Cash Flow (millions) (1) +$800 +$935 +$1,100 +$1,231 +Exceeded +maximum +Net Debt/Adjusted EBITDA (2)(3)(4) +0.55x +0.47x +0.40x +0.32x +Exceeded +maximum +Total 2022 Shareholder Return vs. Peer Group +— +Upper 50% +Upper 25% +Upper 25% +Achieved +maximum +Environmental, Social and Governance (ESG) (5) +— +— +— +— +— (6) +(1) +Adjusted Free Cash Flow is a non-GAAP financial measure included herein solely as a reference point under the Cash Incentive Plan. It is commonly used by similar companies in our industry. For a definition of Adjusted Free Cash Flow and a reconciliation of Adjusted Free Cash Flow to our net cash provided by operating activities, see Annex A to this Proxy Statement. +(2) +Adjusted EBITDA is a non-GAAP financial measure included herein solely as a reference point under the Cash Incentive Plan. It is commonly used by similar companies in our industry. For a definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to Matador’s and San Mateo’s net income (loss) and net cash provided by operating activities, see Annex A to this Proxy Statement. +(3) +As a reference point under the Cash Incentive Plan, Net Debt as of December 31, 2022 is calculated as (i) $699.2 million in senior notes outstanding, plus (ii) $45.6 million in debt under the Credit Agreement, including outstanding borrowings and letters of credit, less (iii) $505.2 million in available cash. +(4) +Attributable to Matador Resources Company shareholders after giving effect to those values attributable to third-party non-controlling interests, including in San Mateo. +(5) +Based on a qualitative assessment of the Company’s overall progress in its ESG-related efforts, including with respect to enhancements to public disclosures, and a review of the Company’s performance in the areas of environmental stewardship, safety processes and procedures, training of personnel, risk management, cybersecurity and diversity and inclusion. +(6) +Among other items, the Compensation Committee and Independent Board noted the progress in enhancing ESG disclosure, including the publishing of the Company’s annual Sustainability Report, the reduction in direct greenhouse gas emissions intensity from 2019 levels, the number of training hours conducted by Company personnel, management’s focus on risk management and cybersecurity, including quarterly reports by executive management to the Audit Committee, and the absence of any recordable employee injuries. +2023 Proxy Statement | Matador Resources Company 51 +Table of Contents +EXECUTIVE COMPENSATION +In addition to the 2022 performance goals outlined above, the Compensation Committee also considered certain discretionary factors in connection with the assessment of the performance of the Named Executive Officers during 2022. These other factors included: +• +percentage of oil production growth of 23%; +• +reserves growth of 356.7 MMBOE; +• +drilling and completions cost per foot of $879; +• +lease operating expenses per BOE of $4.08; +• +San Mateo Adjusted EBITDA (a non-GAAP financial measure) of $198.0 million; and +• +the completion of numerous quality acreage, mineral and midstream transactions. +2022 Incentive Opportunities +In making recommendations regarding potential 2022 annual cash incentive opportunities for our Named Executive Officers, the Compensation Committee reviewed Meridian’s recommendations and the recommendations of management regarding proposed target opportunities. Based on such review, which took into account the differing responsibilities of each Named Executive Officer and Peer Group data, where available, for bonus levels for comparable positions, the 2022 target annual incentive opportunities were increased by 20% for each of our Named Executive Officers other than Mr. Foran, whose target did not change, and Mr. Frenzel, who was not an executive officer in 2021, as set forth below. Mr. Lancaster did not participate in the 2022 Cash Incentive Plan due to his announced retirement and transition to a Special Advisor role. +Participant +2022 Target +Annual +Incentive +Opportunity +as % of 2022 +Base Salary +Joseph Wm. Foran +100 +% +Billy E. Goodwin +100 +% +Van H. Singleton, II +100 +% +Craig N. Adams +100 +% +Michael D. Frenzel +100 +% +The maximum award opportunity for Mr. Foran was capped at 200%, for Messrs. Goodwin, Singleton and Adams was capped at 175% and for Mr. Frenzel was capped at 135%, in each case, prior to application of the Discretionary Adjustment. Our Independent Board also determined to cap the Discretionary Adjustment for each of Messrs. Foran, Goodwin, Singleton and Adams at 30% and for Mr. Frenzel at 25% of such Named Executive Officer’s total 2022 annual cash incentive payment. +52 Matador Resources Company | 2023 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +2022 Performance Results +The Compensation Committee then assessed the Company’s 2022 results in light of the performance goals and the following individual performance milestones for each Named Executive Officer when determining appropriate annual cash incentive award amounts: +Named Executive Officer +Individual Performance Milestones +Joseph Wm. Foran +Chairman and Chief +Executive Officer +•    Collaborated with the Board and other executive officers to create and maintain an effective team culture throughout each level of Matador’s organization that has built value through (1) traditional oil and natural gas operations growing organically through the drill bit, (2) expanding midstream operations in Matador’s various asset areas and (3) selective acreage acquisitions +•   Provided direction and leadership throughout Matador in developing and executing Matador’s strategy and operational plan in 2022, which resulted in record operational and financial results and free cash flow during each quarter of 2022 +•    Provided leadership to the Board , including with respect to doubling the Company’s quarterly dividend from $0.05 per share in the first and second quarters of 2022 to $0.10 per share in the third and fourth quarters of 2022 and announcing a 50% increase to $0.15 per share in the fourth quarter of 2022 +•    Oversaw the collaborative management of the Company’s balance sheet and strong financial position , including the generation of $1.22 billion of adjusted free cash flow and the repayment of $405 million in long-term debt in 2022 +•   Led firmwide focus on attracting, training and retaining talent , encouraging employee leadership development and director engagement and aligning our strategy and operational plan throughout the organization +•   Directed efforts to develop and maintain relationships with directors, shareholders, vendors and other key stakeholders with the assistance of other executive officers +Billy E. Goodwin +President—Operations +•    Led the Company’s collaborative drilling, completions and production activities, managing approximately $772.5 million of capital expenditures in 2022 related to the Company’s operations in its primary operating areas, resulting in record total oil and natural gas production in 2022 +•   Led Matador’s continuing improvement in capital efficiency as demonstrated by +¡   D/C/E capital expenditures for 2022 of $772.5 million, which was at the low end of our revised estimated range for 2022 D/C/E capital expenditures of $765 to $835 million as provided on July 26, 2022 and affirmed on October 25, 2022, which included the addition of a seventh operated drilling rig in September 2022 +¡   the continued transition to drilling longer laterals, whereby 90% of the operated horizontal wells we turned to sales in 2022 had lateral lengths of two miles or greater, as compared to only 8% as recently as 2019 +•   Directed the MaxOps program to increase drilling, completions and production experience among our engineering staff and the MaxCom program to ensure coordination of drilling and completions operations +2023 Proxy Statement | Matador Resources Company 53 +Table of Contents +EXECUTIVE COMPENSATION +Named Executive Officer +Individual Performance Milestones +Van H. Singleton II +President—Land, +Acquisitions and +Divestitures and +Planning +•   Oversaw the Company’s land, land administration and acquisition & development activities, including the consummation of over 240 acquisitions +•   Coordinated business development activities and opportunities +•   Managed the Company’s land efforts to convert approximately $45 million of non-core assets to cash +•   Served as Chairman of San Mateo +Craig N. Adams +Executive Vice +President, Co-Chief +Operating Officer, +Chief of Staff and Corporate Secretary +•   Shared Chief Operating Officer responsibilities and acted as chief administrative officer +•   Coordinated and oversaw the general legal matters of the Company through the management of the Company’s legal staff +•    Responsible for coordinating administrative functions of the Company, including Board functions and interaction with management, office facilities and the oversight of the Company’s human resource activities and departmental efficiencies +•    Helped advance the Company’s ESG initiatives +Michael D. Frenzel +Executive Vice President, Treasurer , and Former Principal Financial Officer +•   Served as principal financial officer of the Company and primary financial officer of San Mateo +•   Managed the Company’s treasury, financial planning and forecasting, budgeting, capital markets, hedging, financial reporting and investor relations activities +•   Shared primary responsibility for investor conferences and non-deal roadshows with Mr. Foran +The Compensation Committee reviewed the individual performance milestones listed above as well as additional contributions to the achievement of Company-wide goals. Based on this review, the Compensation Committee determined that each of the Named Executive Officers performed at a high level in 2022 in contributing to the Company’s success. The Compensation Committee recommended that the Independent Board make Discretionary Adjustments to the annual cash awards equal to 15% for each of Messrs. Foran, Goodwin, Singleton and Adams for 2022. +Additionally, the Compensation Committee performed a qualitative assessment of the Company’s ESG record for the year. Among other items, the Compensation Committee noted the progress in enhancing ESG disclosure, including the publishing of the Company’s Sustainability Report, the reduction in direct greenhouse gas emissions intensity from 2019 levels, the number of training hours conducted by Company personnel, management’s focus on risk management and cybersecurity, including quarterly reports by executive management to the Audit Committee, and the absence of any recordable employee injuries. +54 Matador Resources Company | 2023 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +Based on such assessment, the Compensation Committee recommended to the Independent Board the annual cash awards listed below for each Named Executive Officer under the Cash Incentive Plan. The Independent Board approved such annual cash awards, which were paid to the Named Executive Officers in February 2023. As outlined above, the annual cash awards reflected a 15% Discretionary Adjustment for each of Messrs. Foran, Goodwin, Singleton and Adams for exceptional performance and attainment of certain strategic goals. +Named Executive Officer (1) +Target +Award +Payable for +2022 +Maximum +Award +Payable for +2022 (2) +Actual +Award for +2022 (3) +Joseph Wm. Foran +$1,350,000 +$3,510,000 +$3,105,000 +Billy E. Goodwin +$ 750,000 +$1,706,250 +$1,509,375 +Van H. Singleton, II +$ 750,000 +$1,706,250 +$1,509,375 +Craig N. Adams +$ 750,000 +$1,706,250 +$1,509,375 +Michael D. Frenzel +$ 450,000 +$ 759,375 +$ 450,000 +(1) +Excludes Mr. Lancaster who did not participate due to his announced retirement and transition to a Special Advisor role. +(2) +Includes maximum potential Discretionary Adjustment above the target incentive opportunities for each of Mr. Foran, Goodwin, Singleton and Adams of 30% and for Mr. Frenzel of 25%. +(3) +The actual awards reflected a 15% Discretionary Adjustment above the target incentive opportunities for each of Messrs. Foran, Goodwin, Singleton and Adams for exceptional performance and attainment of certain strategic goals. +2022 Long-Term Incentive Compensation +In February 2022, the Independent Board granted awards of 50% service-based cash-settled phantom units and 50% share-settled PSUs to Messrs. Foran, Goodwin, Singleton, and Adams. These long-term equity awards facilitate retention of our Named Executive Officers, incentivize positive future results and further align the interests of our Named Executive Officers with those of the Company’s shareholders. Mr. Frenzel was not serving as an executive officer in February of 2022 when annual equity grants were approved. Mr. Frenzel’s long-term incentive compensation for 2022 included approximately 50% share-settled PSUs and approximately 50% service-based restricted shares of Common Stock that vest in equal annual tranches over three years from grant. Mr. Lancaster did not receive any 2022 equity awards due to his announced retirement and transition to a Special Advisor role. The table below provides the key terms of the February 2022 equity awards for Messrs. Foran, Goodwin, Singleton, and Adams: +Key Terms +Phantom Units +Performance Stock Units +Targeted percentage of +total award value +50% +50% +Vesting terms +Three years ratably on each anniversary +Following three-year performance period ending December 31, 2024 +Performance metric +N/A +Relative total shareholder return, with payout capped at target if absolute total shareholder return is negative +The number of shares underlying each grant and the target value and grant date fair value of the 2022 annual equity grants are set forth in the table below: +Named Executive Officer (1) +Phantom +Units (2) +Target +Performance +Stock Units +Targeted +Value +Joseph Wm. Foran +50,431 +34,547 +$4,387,483 +Billy E. Goodwin +24,138 +16,535 +$2,099,996 +Van H. Singleton, II +24,138 +16,535 +$2,099,996 +Craig N. Adams +24,138 +16,535 +$2,099,996 +Michael D. Frenzel +11,638 +7,972 +$1,012,472 +(1) +Excludes Mr. Lancaster, who did not receive an award in 2022. +(2) +Reflects restricted stock for Mr. Frenzel. +2023 Proxy Statement | Matador Resources Company 55 +Table of Contents +EXECUTIVE COMPENSATION +The Independent Board approved the total targeted value for the year for each Named Executive Officer and then converted that value into an approximate aggregate number of units based on the closing price of our Common Stock on the date prior to the date of grant. The units were then granted 50% in the form of phantom units and 50% in the form of PSUs (at target), except with respect to Mr. Frenzel. The PSU equity component provides for settlement of between 0% and 200% of the total target PSUs subject to the award based on our total shareholder return relative to the total shareholder return of the Peer Group over a three-year performance period from January 1, 2022 through December 31, 2024. If our absolute total shareholder return over such performance period is negative, no more than 100% of the PSUs may vest. The applicable percentage of vested units is shown below with respect to each percentile ranking. +Company’s Relative Total Shareholder +Return Percentile Ranking +Percentage of Target PSUs That +Will Vest +0 +0% +10 th +20% +20 th +40% +30 th +60% +40 th +80% +50 th +100% +60 th +120% +70 th +140% +80 th +160% +90 th +180% +100 th +200% +In connection with its annual review, the Compensation Committee and Independent Board updated the peer group for purposes of the 2022 PSU grants. The Peer Group used for determination of the Company’s relative total shareholder return is as follows: +Callon Petroleum Company +Coterra Energy Inc. +Diamondback Energy Inc. +Laredo Petroleum Inc. +Magnolia Oil & Gas Corp. +Marathon Oil Corp. +Ovintiv Inc. +PDC Energy Inc +Permian Resources Corp. +SM Energy Company +S&P Oil & Gas Exploration & Production Select Industry Index +Vesting of 2020 PSUs +The PSU awards granted to the Named Executive Officers in March and June 2020 vested on December 31, 2022 based on the percentile level at which the total shareholder return to the Company’s stockholders over the three-year period ending December 31, 2022 stood in relation to the total shareholder return realized for that period by each member of a group of peer companies established by the Board at the time of the grant of the awards. In accordance with the terms of the award agreements governing the awards, Oasis Petroleum, Inc. had declared bankruptcy during the period and was therefore included with a negative 100% total shareholder return and each of Cimarex Energy Co., Parsley Energy, Inc. and WPX Energy, Inc. were acquired during the period and were removed from the 2020 peer group and excluded from the relative total shareholder return calculation for the vesting of the 2020 PSUs. Based on our performance and after such adjustments this calculation, the Company’s total shareholder return percentile ranking was at the 88th percentile and the PSUs vested at 175% of target. +56 Matador Resources Company | 2023 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +Benefits +We offer a variety of health and welfare programs to eligible employees, including the Named Executive Officers. The health and welfare programs are intended to protect employees against catastrophic loss and encourage a healthy lifestyle. Our health and welfare programs include medical, pharmacy, dental, disability and life insurance. We also have a 401(k) plan for eligible employees, including the Named Executive Officers, to which we contribute 3% of the employee’s eligible compensation, which is subject to limits established by the U.S. Internal Revenue Code of 1986, as amended (the “Code”), and have the discretion to contribute up to an additional 4% of the employee’s eligible compensation as a dollar-for-dollar matching contribution with respect to his or her elective deferral contributions. The discretionary dollar-for-dollar match is subject to vesting based upon years of service to the Company and the limits on the compensation that may be considered under the Code. In addition, we provide long-term care insurance for certain of our executive officers. +Severance and Separation Arrangements +Employment Agreements +We have entered into employment agreements with each of our Named Executive Officers. Under the employment agreements, if a termination of employment occurs pursuant to one of the following events: +• +the Named Executive Officer dies; +• +the Named Executive Officer is totally disabled; +• +we mutually agree to end the employment agreement; +• +we dissolve and liquidate; or +• +the term of the employment agreement ends, +we will pay the Named Executive Officer the average of his annual cash bonus, which includes non-equity incentive compensation, for the prior two years, pro-rated based on the number of complete or partial months completed during the year of termination. +Also, under the employment agreements, if one of the following occurs: +• +the Named Executive Officer’s employment is terminated other than (i) as set forth above, (ii) by us for just cause or (iii) in connection with a “change in control” as described below; or +• +the Named Executive Officer (other than Mr. Frenzel) terminates his employment for “good reason,” +then, (i) for Mr. Foran, we will pay him twice his base salary and twice the average of his annual cash bonus for the prior two years; (ii) for Messrs. Goodwin, Singleton, or Adams we will pay him 1.5 times his base salary and 1.5 times the average of his annual cash bonus for the prior two years; and (iii) for Mr. Frenzel, we will pay him one-half of his base salary and one-half of the average of his annual cash bonus for the prior two years. +Finally, under the employment agreement of Mr. Foran, which was entered into in 2011, if we terminate Mr. Foran within 30 days prior to the “change in control” or within 12 months after the “change in control” without just cause or Mr. Foran terminates his employment with or without “good reason” during such period, we will pay him three times his base salary and three times the average of his annual cash bonus for the prior two years. This agreement was entered into prior to our initial public offering. At that time, we believed a “modified single trigger” was appropriate given the Company’s size, early stage of development and strong growth aspirations. Since that time, however, we have ceased to use “modified single triggers” in executive employment agreements, and we intend to exclusively use “double triggers” going forward, as we have since 2014. The agreements entered into with Messrs. Goodwin, Singleton, Adams, and Frenzel, each include a “double trigger” such that if we terminate either executive within 30 days prior to the “change in control” or within 12 months after the “change in control” without just cause or he terminates his employment with “good reason,” we will pay Messrs. Goodwin, Singleton, and Adams three times his base salary and three times the average of his annual cash bonus for the prior two years and Mr. Frenzel two times his base salary and two times the average of his annual cash bonus for the prior +2023 Proxy Statement | Matador Resources Company 57 +Table of Contents +EXECUTIVE COMPENSATION +two years. In addition, if any of our Named Executive Officers are terminated or terminate their employment as set forth above in connection with a “change in control,” all equity awards of such Named Executive Officer vest immediately prior to such termination. +For definitions of “change in control,” “good reason” and “just cause,” please see the employment agreement of each Named Executive Officer, each of which is included as an exhibit to the Company’s most recent Annual Report on Form 10-K. +Advisor Agreement +In connection with his retirement and transition to Special Advisor, Mr. Lancaster entered into an Advisor Agreement (the “Advisor Agreement”) with a subsidiary of the Company, which agreement was effective simultaneously with Mr. Lancaster’s retirement on March 31, 2022 and, as amended, expired on January 31, 2023. Mr. Lancaster reported to the Chief Executive Officer and the Board and provided certain services as outlined in the Advisor Agreement. +The Advisor Agreement provided for an annual fee of $250,000 and confirmed the continued vesting of Mr. Lancaster’s outstanding equity awards during the consulting term, which terminated on January 31, 2023. +Equity Plans +For equity grants under the Matador Resources Company 2019 Long-Term Incentive Plan (as amended, the “2019 Plan”), other than the PSUs, vesting upon a “change in control” for the Named Executive Officers mirrors the terms of their employment agreements. The PSUs vest upon a “change in control” based on performance achieved through the date of such change in control, as it is anticipated that a change in control would make achievement of relative total shareholder performance impractical to measure. +The “change in control” provisions in the employment agreements and the equity grants under the 2019 Plan help prevent management from being distracted by rumored or actual changes in control. The “change in control” provisions provide: +• +incentives for those Named Executive Officers to remain with us despite the uncertainties of a potential or actual change in control; +• +assurance of severance payments for terminated Named Executive Officers; and +• +access to equity compensation after a change in control. +Stock Ownership Guidelines +We have adopted stock ownership guidelines for the following officers in the following designated amounts: +• +Chairman and Chief Executive Officer—shares equal to five times base salary; +• +President—shares equal to five times base salary; +• +Executive Vice Presidents—shares equal to two and 1/2 times base salary; +• +Senior Vice Presidents—shares equal to two times base salary; and +• +Vice Presidents and Executive Directors—shares equal to one and 1/2 times base salary. +Newly appointed officers have until the fifth anniversary of his or her appointment as an officer of the Company within which to achieve the stock ownership position. Shares that count toward the stock ownership guidelines include time-based restricted shares. Shares that will not count toward the stock ownership guidelines include shares underlying unexercised stock options, unexercised stock appreciation rights, phantom units and performance-based awards for which the performance requirements have not been satisfied. +Until each of the above officers reaches the stock ownership level required of his or her position, such officer must hold at least 50% of all “net shares” received through restricted stock, PSU or RSU vesting or realized through +58 Matador Resources Company | 2023 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +stock option exercises. For this purpose, “net shares” means all shares retained after applicable withholding of any shares for tax purposes. Additionally, upon the vesting of restricted stock, PSUs or RSUs or the exercise of stock options, each officer must hold the net shares for a minimum of 12 months following such vesting or exercise, or until his earlier retirement. As of December 31, 2022, each Named Executive Officer owned shares in excess of the applicable minimum requirement set forth in the stock ownership guidelines, and Mr. Foran held shares with a value equal to approximately 223 times his base salary then in effect. +Anti-Hedging and Anti-Pledging Policies +Pursuant to the Company’s insider trading policy, the Company prohibits hedging of its securities by directors, officers or employees. Specifically, no such person shall purchase or sell, or make any offer to purchase or offer to sell, derivative securities relating to the Company’s stock, whether or not issued by the Company, or financial instruments that are designed to hedge or offset any decrease in the market value of the Company’s stock (including but not limited to prepaid variable forward contracts, equity swaps, collars and exchange funds) or otherwise engage in transactions that hedge or offset, or are designed to hedge or offset, any decrease in the market value of Company equity securities (a) granted to such person by the Company as part of the compensation of such person; or (b) held, directly or indirectly, by such person. The insider trading policy also restricts directors and executive officers from pledging more than 25% of his or her holdings of the Company’s stock without the prior written consent of the Environmental, Social and Corporate Governance Committee. +Strategic Planning and Compensation Committee Report +We have reviewed and discussed with management the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K and based on such review and discussions, we recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement and incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. +Strategic Planning and Compensation Committee, +R. Gaines Baty, Chair +Reynald A. Baribault +Monika U. Ehrman +Timothy E. Parker +Kenneth L. Stewart +2023 Proxy Statement | Matador Resources Company 59 +Table of Contents +EXECUTIVE COMPENSATION +Summary Compensation Table +The following table summarizes the total compensation awarded to, earned by or paid to the Named Executive Officers for 2022, 2021 and 2020. Mr. Singleton and Mr. Frenzel were not Named Executive Officers prior to 2022. This table and the accompanying narrative should be read in conjunction with the CD&A, which sets forth the objectives and other information regarding our executive compensation program: +Name and Principal Position +Year +Salary +Stock +Awards (1) +Option +Awards (2) +Non-Equity +Incentive Plan +Compensation (3) +All Other +Compensation +Total +Joseph Wm. Foran +2022 +$ +1,350,000 +$ +4,472,369 +$ +— +$ +3,105,000 +$ +23,949 +(4) +$ +8,951,318 +Chairman of the Board and +Chief Executive Officer +2021 +$ +1,231,250 +$ +5,203,040 +$ +— +$ +2,600,000 +$ +22,899 +$ +9,057,189 +2020 +$ +1,015,625 +$ +651,373 +$ +— +$ +— +$ +22,549 +$ +1,689,547 +Billy E. Goodwin +2022 +$ +750,000 +$ +2,140,604 +$ +— +$ +1,509,375 +$ +21,350 +(5) +$ +4,421,329 +President—Operations +2021 +$ +693,333 +$ +2,349,760 +$ +— +$ +1,160,000 +$ +20,300 +$ +4,223,393 +2020 +$ +595,000 +$ +276,836 +$ +— +$ +— +$ +19,950 +$ +891,786 +Van H. Singleton, II +2022 +$ +750,000 +$ +2,140,604 +$ +— +$ +1,509,375 +$ +21,350 +(5) +$ +4,421,329 +President—Land, Acquisitions and Divestitures and Planning +Craig N. Adams +2022 +$ +750,000 +$ +2,140,604 +$ +— +$ +1,509,375 +$ +23,631 +(6) +$ +4,423,610 +Executive Vice President, Co-Chief Operating Officer, Chief of Staff and Corporate Secretary +2021 +$ +693,333 +$ +2,349,760 +$ +— +$ +1,160,000 +$ +22,581 +$ +4,225,674 +2020 +$ +595,000 +$ +276,836 +$ +— +$ +— +$ +22,231 +$ +894,067 +Michael D. Frenzel +2022 +$ +463,540 +$ +1,032,063 +$ +— +$ +450,000 +$ +21,350 +(5) +$ +1,966,953 +Executive Vice President, Treasurer and Former Principal Financial Officer +David E. Lancaster +2022 +$ +376,997 +$ +— +$ +— +$ +— +$ +21,350 +(5) +$ +398,347 +Former Executive Vice President and Chief Financial Officer +2021 +$ +693,333 +$ +2,517,600 +$ +— +$ +1,160,000 +$ +20,300 +$ +4,391,233 +2020 +$ +595,000 +$ +309,404 +$ +— +$ +— +$ +19,950 +$ +924,354 +(1) +Reflects the grant date fair value of phantom units, PSUs or restricted stock awards, as applicable, computed in accordance with FASB ASC Topic 718. For 2022, the portion of the amount reflected in this column relating to the PSUs is calculated based on probable outcome as of the grant date and assumes achievement between target and maximum. The grant date value of PSUs granted in 2022 assuming achievement of maximum performance is $3,027,599 for Mr. Foran, $1,449,127 for Messrs. Goodwin, Singleton and Adams and $698,666 for Mr. Frenzel. +(2) +No stock option awards were granted to our Named Executive Officers. +(3) +Represents awards pursuant to the Cash Incentive Plan. See “—Compensation Discussion and Analysis—2022 Annual Cash Incentive Compensation” above. +(4) +Consists of $21,350 in 401(k) Company and matching contributions as described in “—Compensation Discussion and Analysis—Benefits” and $2,599 in long-term care insurance premiums. +(5) +Reflects 401(k) Company and matching contributions as described in “—Compensation Discussion and Analysis—Benefits.” +(6) +Consists of $21,350 in 401(k) Company and matching contributions as described in “—Compensation Discussion and Analysis—Benefits” and $2,281 in long-term care insurance premiums. +60 Matador Resources Company | 2023 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +Grants of Plan-Based Awards Table +The following table sets forth certain information regarding non-equity incentive awards granted by the Independent Board pursuant to the Cash Incentive Plan and awards of share-settled PSUs, cash-settled phantom units and restricted stock granted by the Independent Board to the Named Executive Officers pursuant to the 2019 Plan during the year ended December 31, 2022. Mr. Lancaster did not receive any awards under the Cash Incentive Plan and did not receive any 2022 equity awards due to his announced retirement and transition to a Special Advisor role: +Estimated Future Payouts +Under Non-Equity Incentive +Plan Awards (1) +Estimated Future Payouts +Under Equity Incentive +Plan Awards (2) +All Other +Stock +Awards: +Number +of Shares +of Stock +or Units (3) +Grant +Date +Fair +Value of +Stock +Awards +Threshold +Target +Maximum +Threshold +Target +Maximum +Name +Grant Date +($) +($) +($) +(#) +(#) +(#) +(#) +($) +Joseph Wm. Foran +— +— +1,350,000 +3,510,000 +— +— +— +— +— +2/17/22 +— +— +— +— +34,547 +69,094 +— +2,262,483 +2/17/22 +— +— +— +— +— +— +50,431 +2,209,886 +Billy E. Goodwin +— +— +750,000 +1,706,250 +— +— +— +— +2/17/22 +— +— +— +— +16,535 +33,070 +— +1,082,877 +2/17/22 +— +— +— +— +— +— +24,138 +1,057,727 +Van H. Singleton, II +— +— +750,000 +1,706,250 +— +— +— +— +— +2/17/22 +— +— +— +— +16,535 +33,070 +— +1,082,877 +2/17/22 +— +— +— +— +— +— +24,138 +1,057,727 +Craig N. Adams +— +— +750,000 +1,706,250 +— +— +— +— +— +2/17/22 +— +— +— +— +16,535 +33,070 +— +1,082,877 +2/17/22 +— +— +— +— +— +— +24,138 +1,057,727 +Michael D. Frenzel +— +— +450,000 +759,375 +— +— +— +— +— +2/17/22 +— +— +— +— +7,972 +15,944 +— +522,086 +2/17/22 +— +— +— +— +— +— +11,638 +509,977 +(1) +See “—Compensation Discussion and Analysis—2022 Annual Cash Incentive Compensation” and “—Summary Compensation Table— Non-Equity Incentive Plan Compensation” regarding the actual payments made to the Named Executive Officers pursuant to the Cash Incentive Plan. +(2) +Represents PSUs that provide for settlement of between 0% and 200% of the total target shares subject to the award based on achievement of the relative total shareholder return performance metric over a three-year performance period from January 1, 2022 through December 31, 2024. If our absolute total shareholder return over such performance period is negative, no more than 100%, the target level, of the PSUs may vest. See “—Compensation Discussion and Analysis—2022 Long-Term Incentive Compensation.” The PSUs do not provide for a threshold number of shares that may be earned. +(3) +For Messrs. Foran, Goodwin, Singleton and Adams, represents phantom units that provide for settlement in cash. For Mr. Frenzel, represents restricted stock. See “—Compensation Discussion and Analysis—2022 Long-Term Incentive Compensation.” +2023 Proxy Statement | Matador Resources Company 61 +Table of Contents +EXECUTIVE COMPENSATION +Outstanding Equity Awards at December 31, 2022 +The following table summarizes the total outstanding option awards at December 31, 2022 held by Mr. Frenzel. None of the other Named Executive Officers held any stock options as of such date. +Option Awards +Name +Number of +Securities +Underlying +Unexercised +Stock +Options (#) +Exercisable +Number of +Securities +Underlying +Unexercised +Stock +Options (#) +Unexercisable +Option +Exercise +Price +Option +Expiration +Date +Michael D. Frenzel +20,000 +— +$ +14.80 +8/27/25 +5,439 +— +$ +29.68 +2/15/24 +The following table summarizes the total outstanding cash-settled phantom units, restricted shares and share-settled PSUs at December 31, 2022 for each Named Executive Officer: +Stock Awards +Name +Award Type +Number of +Shares or +Units of +Stock That +Have Not +Vested +(#) +Market Value +of Shares or +Units of +Stock That +Have Not +Vested +($) (1) +Equity Incentive Plan +Awards: Number of +Unearned Shares, +Units or Other +Rights That Have +Not Vested (2) +(#) +Equity Incentive Plan +Awards: Market or +Payout Value of +Unearned Shares, +Units or Other +Rights That Have +Not Vested (2) +($) +Joseph Wm. Foran +Phantom units +PSUs +144,852 +8,291,328 +— +— +— +— +193,094 +11,052,701 +Billy E. Goodwin +Phantom units +PSUs +65,367 +3,741,607 +— +— +— +— +89,070 +5,098,367 +Van H. Singleton, II +Phantom units +PSUs +59,386 +3,399,255 +— +— +— +— +83,070 +4,754,927 +Craig N. Adams +Phantom units +PSUs +65,367 +3,741,607 +— +— +— +— +89,070 +5,098,367 +Michael D. Frenzel +Phantom units +PSUs +1,250 +71,550 +— +— +— +— +40,944 +2,343,635 +Restricted stock +23,722 +1,357,847 +David E. Lancaster +Phantom units +PSUs +45,217 +2,588,221 +— +— +— +— +60,000 +3,434,400 +(1) +The market value is calculated based upon the closing price of our Common Stock on December 30, 2022 of $57.24 per share. +(2) +The number of unearned PSUs and market value presented are based upon achievement of the 100 th percentile under the PSU award agreements with 200% of target units vesting, calculated based upon the closing price of our Common Stock on December 30, 2022 of $57.24 per share. +62 Matador Resources Company | 2023 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +The following table provides the vesting dates for restricted stock, cash-settled phantom units and PSUs outstanding as of December 31, 2022: +Vesting Date +Award Type +Joseph Wm. +Foran +Billy E. +Goodwin +Van H. +Singleton +Craig +N. +Adams +Michael +D. +Frenzel +David E. +Lancaster +2/17/23 +Restricted stock +3,879 +— +2/17/23 +Phantom units +16,810 +8,046 +8,046 +8,046 +— +— +3/10/23 +Phantom units +53,087 +22,562 +18,581 +22,562 +— +25,217 +6/4/23 +Restricted stock +4,167 +— +6/4/23 +Phantom units +20,667 +9,333 +8,333 +9,333 +— +— +6/22/23 +Restricted stock +3,750 +— +6/22/23 +Phantom units +— +— +— +— +1,250 +— +12/31/23 +PSUs +(1) +124,000 +56,000 +50,000 +56,000 +25,000 +60,000 +2/17/24 +Restricted stock +3,879 +— +2/17/24 +Phantom units +16,810 +8,046 +8,046 +8,046 +— +— +6/4/24 +Restricted stock +4,167 +— +6/4/24 +Phantom units +20,667 +9,334 +8,334 +9,334 +— +20,000 +12/31/24 +PSUs +(1) +69,094 +33,070 +33,070 +33,070 +15,944 +— +2/17/25 +Restricted stock +3,880 +— +2/17/25 +Phantom units +16,811 +8,046 +8,046 +8,046 +— +— +Total Unvested Shares and Units +337,946 +154,437 +142,456 +154,437 +65,916 +105,217 +(1) +The vesting date shown reflects the end of the performance period established by the PSU award agreements. The PSUs vest upon the Compensation Committee’s certification of the achievement of the performance goal, which must occur within 60 days of completion of the performance period. The number of units shown assumes achievement of the 100 th percentile under the PSU award agreements with 200% of target units vesting. +Option Exercises and Stock Vested +The following table provides information on the stock options exercised and stock awards (consisting of restricted stock, cash-settled phantom units and PSUs) that vested for each Named Executive Officer during 2022: +Option Awards +Stock Awards +Name +Number of +Shares +Acquired +on +Exercise +(#) +Value +Realized +on +Exercise +Number of +Shares +Acquired on +Vesting (1) +(#) +Value +Realized on +Vesting +Joseph Wm. Foran +213,488 +$ +5,378,675 +390,251 +$ +21,724,507 +Billy E. Goodwin +— +$ +— +166,407 +$ +9,267,446 +Van H. Singleton, II +— +$ +— +137,690 +$ +7,672,717 +Craig N. Adams +— +$ +— +166,407 +$ +9,267,446 +Michael D. Frenzel +4,497 +$ +121,959 +9,034 +$ +505,097 +David E. Lancaster +— +$ +— +185,553 +$ +10,330,669 +(1) +Reflects the aggregate number of restricted shares, cash-settled phantom units and PSUs that vested. Pursuant to the terms thereof, the phantom units were settled in cash, and the grantee did not acquire any shares upon vesting. +2023 Proxy Statement | Matador Resources Company 63 +Table of Contents +EXECUTIVE COMPENSATION +Potential Payments upon Termination or Change in Control +Long-Term Incentive Plans +Equity awards under the 2019 Plan, other than the PSUs, vest upon a “change in control” for the Named Executive Officers according to the terms of their employment agreements described below. +Pursuant to the terms of the PSU award agreements, upon a “change in control,” the Named Executive Officer would vest in the number of PSUs that would have otherwise vested based on the Company’s performance +through an abbreviated performance period that ends immediately prior to the effective date of such change in control. For definition of “change in control,” please see the 2019 Plan, which is included as an exhibit to the Company’s most recent Annual Report on Form 10-K. +Employment Agreements +As described under “—Compensation Discussion and Analysis—Severance and Separation Arrangements— Employment Agreements,” in contemplation of our initial public offering, on August 9, 2011, we entered into an employment agreement with Mr. Foran. Effective February 2016, we entered into an employment agreement with Mr. Goodwin and amended Mr. Goodwin’s employment agreement in August 2018. In addition, in February 2015 we entered into an employment agreement with Mr. Singleton and in March 2014 we entered into an employment agreement with Mr. Adams. In October 2022, we entered into an employment agreement with Mr. Frenzel. The principal difference in Messrs. Goodwin, Singleton, Adams and Frenzel’s employment agreements as compared to the employment agreement of Mr. Foran is that their agreements do not include a “modified single trigger” that would have allowed them to receive “change in control” severance if they terminated their agreements without “good reason” within 30 days prior to or 12 months after a change in control. In addition to not including a “modified single trigger,” Mr. Frenzel’s employment agreement does not include termination for good reason except following a change in control and includes a longer non-compete, as discussed below. Pursuant to the terms of the employment agreements, we may be required to make certain payments to one or more of our Named Executive Officers upon the occurrence of certain events resulting in such Named Executive Officer’s termination. The employment agreements do not provide for gross-ups for excise taxes on severance or other payments in connection with a change in control. For a detailed description of the events that may trigger such payments, see “—Compensation Discussion and Analysis—Severance and Separation Arrangements— Employment Agreements.” +The employment agreements each contain a non-disclosure of confidential information provision that requires each Named Executive Officer to maintain, both during and after employment, the confidentiality of information used by such Named Executive Officer in the performance of his job duties. +Additionally, each of the employment agreements contains a non-competition provision, pursuant to which each Named Executive Officer has agreed that: (i) for six months following termination by us for total disability, or by such Named Executive Officer for good reason, or (ii) for 12 months, with respect to Messrs. Foran, Goodwin, Singleton, and Adams and 18 months with respect to Mr. Frenzel, following termination (a) by us for just cause, (b) by such Named Executive Officer other than for good reason (excluding Mr. Frenzel) or (c) in connection with a change in control (24 months with respect to Mr. Frenzel), such Named Executive Officer shall not, without our prior written consent (not to be unreasonably withheld if the Named Executive Officer’s employment is terminated by the Named Executive Officer other than for good reason (excluding Mr. Frenzel)), directly or indirectly: (x) invest in (other than investments in publicly-owned companies which constitute not more than 1% of the voting securities of any such company) a competing business with significant assets in the restricted area (each as defined below), or (y) participate in a competing business as a manager, employee, director, officer, consultant, independent contractor or other capacity or otherwise provide, directly or indirectly, services or assistance to a competing business in a position that involves input into or direction of such competing business’s decisions within the restricted area. +64 Matador Resources Company | 2023 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +For purposes of the employment agreements: +• +“competing business” means any person or entity engaged in oil and natural gas exploration, development, production and acquisition activities; +• +“significant assets” means oil and natural gas reserves with an aggregate fair market value of $25 million or more (for Mr. Frenzel, oil and natural gas reserves in excess of 10 million barrels of oil equivalent or midstream assets with an aggregate fair market value of $25 million or more); and +• +“restricted area” means a one-mile radius of any oil and natural gas reserves held by us as of the end of the Named Executive Officer’s employment, plus any county or parish where we have significant assets as of the end of the Named Executive Officer’s employment (for Mr. Frenzel, Eddy and Lea Counties, New Mexico and Loving County, Texas, plus any county or parish where we have significant assets as of the end of his employment). +For definitions of “change in control,” “good reason” and “just cause,” please see the employment agreement of each Named Executive Officer, each of which is included as an exhibit to the Company’s most recent Annual Report on Form 10-K. +Furthermore, other than Mr. Foran’s employment agreement, each employment agreement contains a non-solicitation provision, pursuant to which, during the restricted periods described above (except Mr. Frenzel’s restricted period is six months for disability termination and 24 months for the other terminations specified above), subject to certain exceptions, Messrs. Goodwin, Singleton, Adams and Frenzel shall not, without our prior written consent, solicit for employment or a contracting relationship, or employ or retain any person who is or has been, within six months prior to such time, employed by or engaged as an individual independent contractor by us or our affiliates or induce or attempt to induce any such person to leave his or her employment or independent contractor relationship with us or our affiliates. +For the Named Executive Officer to receive any severance payments described below for termination by us without just cause, by the Named Executive Officer for good reason or, following a change in control, by us without cause or by the Named Executive Officer with good reason, with respect to Messrs. Goodwin, Singleton, Adams and Frenzel, or with or without good reason, with respect to Mr. Foran, the Named Executive Officer must comply with the applicable non-disclosure, non-competition and non-solicitation provisions described above. +Finally, as a condition to receiving any severance payments and other payments under their respective employment agreements, each Named Executive Officer is required to execute a separation agreement and release in favor of us. +In connection with Mr. Lancaster’s retirement and transition into a Special Advisor role, we entered into the Advisor Agreement with Mr. Lancaster, which agreement was effective simultaneously with Mr. Lancaster’s retirement on March 31, 2022 and, as amended, expired on January 31, 2023. The Advisor Agreement provided for an annual fee of $250,000 and confirmed the continued vesting of Mr. Lancaster’s outstanding equity awards during the consulting term, which terminated January 31, 2023. +2023 Proxy Statement | Matador Resources Company 65 +Table of Contents +EXECUTIVE COMPENSATION +To describe the payments and benefits that are triggered for each event of termination, we have created the following table estimating the payments and benefits that would be paid to each Named Executive Officer, other than Mr. Lancaster as he terminated employment on March 31, 2022 and received only the compensation pursuant to the Advisor Agreement, under each element of our compensation program assuming that such Named Executive Officer’s employment agreement terminated on December 31, 2022, the last day of our 2022 fiscal year. In all cases, the amounts were valued as of December 30, 2022, based upon, where applicable, $57.24 per share (the closing price of our Common Stock on such date). The amounts in the table below are calculated as of December 31, 2022 pursuant to SEC rules and are not intended to reflect actual payments that may be made. Actual payments that may be made would be based on the dates and circumstances of the applicable event. +Payment Upon Change in Control or Termination +Named +Executive Officer +Category of +Payment +Upon Death +or +Total +Disability ($) (1) +Upon Mutual +Agreement or +Dissolution/ +Liquidation ($) (1) +Termination by +Us Without Just +Cause or by +Named Executive +Officer for Good +Reason ($) (1) +Termination +Following a +Change in Control +Without Cause +or by Named +Executive Officer +With or Without +Good +Reason ($) (2) +Change in +Control +Without +Termination ($) (3) +Joseph Wm. Foran +Salary +— +— +2,700,000 +(4) +4,050,000 +(5) +— +Bonus +2,852,500 +(6) +2,852,500 +(6) +5,705,000 +(7) +8,557,500 +(8) +— +Vesting equity: (9) +Phantom Units +— +— +— +8,291,328 +— +PSUs +— +— +— +5,526,350 +5,526,350 +Total +2,852,500 +2,852,500 +8,405,000 +26,425,178 +5,526,350 +Billy E. Goodwin +Salary +— +— +1,125,000 +(10) +2,250,000 +(5) +— +Bonus +1,334,688 +(6) +1,334,688 +(6) +2,002,031 +(11) +4,004,063 +(8) +— +Vesting equity: (9) +Phantom Units +— +— +— +3,741,607 +— +PSUs +— +— +— +2,549,183 +2,549,183 +Total +1,334,688 +1,334,688 +3,127,031 +12,544,853 +2,549,183 +Van H. Singleton, II +Salary +— +— +1,125,000 +(10) +2,250,000 +(5) +— +Bonus +1,334,688 +(6) +1,334,688 +(6) +2,002,031 +(11) +4,004,063 +(8) +— +Vesting equity: (9) +Phantom Units +— +— +— +3,399,255 +— +PSUs +— +— +— +2,377,463 +2,377,463 +Total +1,334,688 +1,334,688 +3,127,031 +12,030,781 +2,377,463 +Craig N. Adams +Salary +— +— +1,125,000 +(10) +2,250,000 +(5) +— +Bonus +1,334,688 +(6) +1,334,688 +(6) +2,002,031 +(11) +4,004,063 +(8) +— +Vesting equity: (9) +Phantom Units +— +— +— +3,741,607 +— +PSUs +— +— +— +2,549,183 +2,549,183 +Total +1,334,688 +1,334,688 +3,127,031 +12,544,853 +2,549,183 +Michael D. Frenzel +Salary +— +— +225,000 +(10) +900,000 +(5) +— +Bonus +365,625 +(6) +365,625 +(6) +182,813 +(11) +731,250 +(8) +— +Vesting equity: (9) +Phantom Units +— +— +— +71,550 +— +PSUs +— +— +— +1,171,817 +1,171,817 +Restricted Stock +— +— +— +1,357,847 +Total +365,625 +365,625 +407,813 +4,232,464 +1,171,817 +66 Matador Resources Company | 2023 Proxy Statement +Table of Contents +EXECUTIVE COMPENSATION +(1) +Amounts due upon death, total disability, mutual agreement, dissolution or liquidation, termination by us without cause or termination by a Named Executive Officer for good reason are payable in a lump sum on the 60th day following the date of termination unless otherwise required by Section 409A of the Code. Mr. Frenzel’s employment agreement does not include a provision allowing him to terminate for “good reason” except following a change in control. +(2) +Amounts due following a change in control are payable in a lump sum on the date that immediately follows six months from the date of termination or, if earlier, within 30 days following such Named Executive Officer’s death. +(3) +Pursuant to the terms of the PSU award agreements, upon a “change in control,” the Named Executive Officer would vest in the number of PSUs that would have otherwise vested based on the Company’s performance through an abbreviated performance period that ends immediately prior to the effective date of such change in control. The amount shown assumes achievement of the 50th percentile with 100% of target units vesting. +(4) +Represents two times such Named Executive Officer’s base salary as of the termination date. +(5) +Represents three times, or in the case of Mr. Frenzel two times, such Named Executive Officer’s base salary as of the termination date. +(6) +Represents an amount equal to the average annual cash bonus pursuant to the Cash Incentive Plan paid to such Named Executive Officer for 2022 and 2021, respectively. +(7) +Represents two times an amount equal to the average annual cash bonus pursuant to the Cash Incentive Plan paid to such Named Executive Officer for 2022 and 2021, respectively. +(8) +Represents three times, or in the case of Mr. Frenzel two times, an amount equal to the average annual cash bonus pursuant to the Cash Incentive Plan paid to such Named Executive Officer for 2022 and 2021, respectively. +(9) +The employment agreements provide for accelerated and full vesting of unvested incentive awards held by the Named Executive Officers in the event that such Named Executive Officer is terminated without “Just Cause” or terminates his employment with or without “Good Reason,” with respect to Mr. Foran, within 30 days prior to, or 12 months following, a “change in control.” With respect to Messrs. Goodwin, Singleton, Adams and Frenzel, the employment agreements provide for accelerated and full vesting of unvested incentive awards held by these Named Executive Officers in the event that such Named Executive Officer is terminated without “Just Cause” or terminates his employment with “Good Reason,” within 30 days prior to, or 12 months following, a “change in control.” The amounts disclosed reflect the closing price of our Common Stock on December 30, 2022 of $57.24 per share multiplied by the number of unvested phantom units, restricted stock or PSUs, as applicable, held by such Named Executive Officer on December 31, 2022. Pursuant to the terms of the PSU award agreements, upon a change in control, the Named Executive Officer would vest in the number of PSUs that would have otherwise vested based on the Company’s performance through an abbreviated performance period that ends immediately prior to the effective date of such event. With respect to PSUs, the amount shown assumes achievement of the 50th percentile with 100% of target units vesting. +(10) +Represents 1.5 times, or in the case of Mr. Frenzel 0.5 times, such Named Executive Officer’s base salary as of the termination date. +(11) +Represents 1.5 times, or in the case of Mr. Frenzel 0.5 times, an amount equal to the average annual cash bonus pursuant to the Cash Incentive Plan paid to such Named Executive Officer for 2022 and 2021, respectively. +2023 Proxy Statement | Matador Resources Company 67 +Table of Contents +CHIEF EXECUTIVE OFFICER PAY RATIO +CHIEF EXECUTIVE OFFICER PAY RATIO +As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(u) of Regulation S-K (“Item 402(u)”), we are providing the following information regarding the ratio of the annual total compensation of our median-compensated employee (as described below) and that of our Chairman and Chief Executive Officer, Joseph Wm. Foran. We believe that the pay ratio reflected below is a reasonable estimate calculated in a manner consistent with Item 402(u). +The SEC’s rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices. As a result, the pay ratio reported by other companies may not be comparable to the pay ratio reported below, as other companies have different employee populations and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios. +Pursuant to Item 402(u), we identified the median-compensated employee of all our employees (other than Mr. Foran) using our employee population as of December 15, 2022, which consisted of 351 employees (all of which are located in the United States), and using a compensation measure of total cash compensation, consisting of total base pay and bonuses earned during the year ended December 31, 2022. This compensation measure was consistently applied to all employees. Compensation was annualized on a straight-line basis for employees who did not work all of 2022. +After identifying the median-compensated employee using this consistently applied compensation measure, we then calculated that employee’s 2022 annual total compensation in the same manner as the Named Executive Officers’ total compensation, as reported in the Summary Compensation Table. +For 2022, the annual total compensation of our median-compensated employee was $179,750, and the annual total compensation of Mr. Foran was $8,951,318, as reported in the Summary Compensation Table. Based on this information, for 2022, the ratio of Mr. Foran’s annual total compensation to the annual total compensation of our median-compensated employee was estimated to be 50 to 1. +68 Matador Resources Company | 2023 Proxy Statement +Table of Contents +PAY VERSUS PERFORMANCE +PAY VERSUS PERFORMANCE +As required by Section 953(a) of the Dodd-Frank +Wall +Street Reform and Consumer Protection Act and Item 402(v) of Regulation +S-K, +we are providing the following information about the relationship between executive “compensation actually paid” and certain financial performance of the Company. For further information concerning the Company’s pay for performance philosophy and how the Company aligns executive compensation with the Company’s performance, see “Executive Compensation—Compensation +Discussion +and Analysis.” +Year +(a) +Summary +Compensation +Table Total for +Principal +Executive +Officer +(“PEO”) +(1) +(b) +Compensation +Actually Paid +to PEO +(2) +(c) +Average +Summary +Compensation +Table Total for +Non-PEO +Named +Executive +Officers +(3) +(d) +Average +Compensation +Actually Paid +to Non-PEO +Named +Executive +Officers +(4) +(e) +Value of Initial Fixed $100 +Investment Based On: +Net Income +(thousands) +(7) +(h) +Adj. EBITDA +(thousands) +(8) +(i) +Total +Shareholder +Return +(5) +(f) +Peer Group +Total +Shareholder +Return +(6) +(g) +2022 +$ +8,951,318 +$ +21,872,248 +$ +3,126,314 +$ +7,943,940 +$ +321.55 +$ +196.87 +$ +1,214,206 +$ +2,127,156 +2021 +$ +9,057,189 +$ +27,355,621 +$ +4,310,734 +$ +12,883,431 +$ +206.28 +$ +140.32 +$ +584,968 +$ +1,051,973 +2020 +$ +1,689,547 +$ +4,092,405 +$ +923,071 +$ +2,032,796 +$ +67.11 +$ +102.23 +($ +593,205 +) +$ +519,277 +(1) +The dollar amounts reported in column (b) are the amounts reported for Mr. Foran for each of the corresponding years in the “Total” column of the Summary Compensation Table. See “Executive Compensation—Summary Compensation Table”. +(2) +The dollar amounts reported in column (c) represent the amount of “compensation actually paid” to Mr. Foran, as computed in accordance with Item 402(v) of Regulation +S-K +and do not reflect the total compensation actually realized or received by Mr. Foran. In accordance with these rules, these amounts reflect the amounts included in the “Total” column of the Summary Compensation Table for each year, adjusted as shown below. Equity values are calculated in +accordance +with FASB ASC Topic 718, and the valuation assumptions used to calculate fair values did not materially differ from those disclosed at the time of grant. +Compensation Actually Paid to PEO +2022 +2021 +2020 +Summary Compensation Table Total +$ +8,951,318 +$ +9,057,189 +$ +1,689,547 +Less, value of “Stock Awards” and “Option Awards” reported in Summary Compensation Table +($ +4,472,369 +) +($ +5,203,040 +) +($ +651,373 +) +Plus, +year-end +fair value of outstanding and unvested equity awards granted in the year +$ +5,546,099 +$ +5,780,880 +$ +4,828,763 +Plus (less), year over year change in fair value of outstanding and unvested equity awards granted in prior years +$ +4,006,795 +$ +10,436,755 +($ +1,314,235 +) +Plus (less), year over year change in fair value of equity awards granted in prior years that vested in the year +$ +7,840,405 +$ +7,283,836 +($ +460,297 +) +Compensation Actually Paid to Mr. Foran +$ +21,872,248 +$ +27,355,621 +$ +4,092,405 +(3) +The dollar amounts reported in column (d) represent the average of the amounts reported for the Named Executive Officers as a group (excluding Mr. Foran) in the “Total” column of the Summary Compensation Table in each applicable year. The names of each of the Named Executive Officers included for these purposes in each applicable year are as follows: (i) for 2022, Messrs. Goodwin, Singleton, Adams, Frenzel and Lancaster; and (ii) for 2021 and 2020, Messrs. Adams, Goodwin, Hairford and Lancaster. +(4) +The dollar amounts reported in column (e) represent the average amount of “compensation actually paid” to the Named Executive Officers as a group (excluding Mr. Foran), as computed in accordance with Item 402(v) of Regulation +S-K. +In accordance with these rules, these amounts reflect the amounts in the “Total” column of the Summary Compensation Table for each year, adjusted as shown below. Equity values are calculated in accordance with FASB ASC Topic 718, and the valuation assumptions used to calculate fair values did not materially differ from those disclosed at the time of the grant. +2023 Proxy Statement +| +Matador Resources Company 69 +Table of Contents +PAY VERSUS PERFORMANCE +Average Compensation Actually Paid to Non-PEO Named Executive Officers +2022 +2021 +2020 +Average Summary Compensation Table Total +$ +3,126,314 +$ +4,310,734 +$ +923,071 +Less, average value of Stock Awards reported in Summary +Compensation +Table +($ +1,490,775 +) +($ +2,433,680 +) +($ +301,262 +) +Plus, average +year-end +fair value of outstanding and unvested equity awards granted in the year +$ +1,848,683 +$ +2,703,960 +$ +2,233,318 +Plus (less), average year over year change in fair value of outstanding and unvested equity awards granted in prior years +$ +1,750,284 +$ +4,827,034 +($ +605,170 +) +Plus (less), average year over year change in fair value of equity awards granted in prior years that vested in the year +$ +2,709,434 +$ +3,475,384 +($ +217,161 +) +Average Compensation Actually Paid to +Non-PEO +Named Executive Officers +$ +7,943,940 +$ +12,883,431 +$ +2,032,796 +(5) +Total Shareholder Return (“TSR”) is calculated by dividing (a) the sum of (i) the cumulative amount of dividends for the measurement period, assuming dividend reinvestment, and (ii) the difference between the Company’s share price at the end of each fiscal year shown and the beginning of the measurement period by (b) the Company’s share price at the beginning of the measurement period. The beginning of the measurement period for each +year +in the table is December 31, 2019. +(6) +The peer group used for this purpose is the following published industry index: Russell 2000 Energy Index. +(7) +The dollar amounts reported represent the amount of net income reflected in the Company’s audited financial statements for the applicable year. +(8) +We determined Adjusted EBITDA to be the most important financial performance measure used to link Company performance to Compensation Actually Paid to our PEO and +Non-PEO +Named Executive Officers in 2022. Adjusted EBITDA is a +non-GAAP +financial Measure. For a definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to Matador’s net income (loss) and net cash provided by operating activities, see Annex A to this Proxy Statement. This performance measure may not have been the most important financial performance measure for years 2021 and 2020 and we may determine a different financial performance measure to be the most important financial performance measure in future years. +Description of Certain Relationships between Information Presented in the Pay versus Performance Table +As described in more detail in the section “Executive Compensation—Compensation Discussion and Analysis,” the Company’s executive compensation program reflects a variable +pay-for-performance +philosophy. While the Company utilizes several performance measures to align executive compensation with Company performance, all of those Company measures are not presented in the Pay versus Performance table. Moreover, the Company generally seeks to incentivize long-term performance, and therefore does not specifically align the Company’s performance measures with compensation that is actually paid (as computed in accordance with SEC rules) for a particular year. In accordance with SEC rules, the Company is providing the following descriptions of the relationships between +information +presented in the Pay versus Performance table. +70 Matador Resources Company +| +2023 Proxy Statement +Table of Contents +PAY VERSUS PERFORMANCE +2023 Proxy Statement +| +Matador Resources Company 71 +Table of Contents +PAY VERSUS PERFORMANCE +Financial Performance Measures +As described in greater detail under “Executive Compensation— +Compensation +Discussion and Analysis,” the Company’s +executive +compensation program reflects a variable +pay-for-performance +philosophy. The metrics that the Company uses for both our long-term and short-term incentive awards are selected based on an objective of incentivizing our Named Executive Officers to increase the value of our enterprise for our shareholders. The most important financial performance measures used by the Company to link executive compensation actually paid to the Company’s Named Executive Officers, for the most recently completed fiscal year, to the Company’s performance are as follows: +1. +Total Shareholder Return +2. +Adjusted EBITDA +3. +Net Debt / Adjusted EBITDA +4. +Adjusted Free Cash Flow +72 Matador Resources Company +| +2023 Proxy Statement +Table of Contents +DIRECTOR COMPENSATION +DIRECTOR COMPENSATION +Name +Fees Earned or +Paid in Cash +Stock +Awards (1) +All Other +Compensation +Total +Reynald A. Baribault +$ +172,833 +$ +134,966 +$ +— +$ +307,799 +R. Gaines Baty (2) +$ +156,833 +$ +134,966 +$ +— +$ +291,799 +William M. Byerley +$ +115,583 +$ +134,966 +$ +— +$ +250,549 +Monika U. Ehrman +$ +87,833 +$ +134,966 +$ +— +$ +222,799 +James M. Howard +$ +86,833 +$ +134,966 +$ +— +$ +221,799 +Timothy E. Parker (3) +$ +186,833 +$ +134,996 +$ +— +$ +321,799 +Julia P. Forrester Rogers +$ +98,500 +$ +134,966 +$ +— +$ +233,466 +Kenneth L. Stewart +$ +86,833 +$ +134,966 +$ +— +$ +221,799 +(1) +All stock awards represent RSUs with a value based on the fair market value of the RSUs on the date of grant. RSUs granted for 2022-2023 service vest immediately prior to the election of the nominees for director at the 2023 Annual Meeting. See “—Compensation for 2022-2023.” As of December 31, 2022, each individual who served as a director during 2022 held the following outstanding unvested stock awards, all of which were RSUs. +Name +Outstanding Stock Awards +Reynald A. Baribault +2,040 +R. Gaines Baty +2,040 +William M. Byerley +2,040 +Monika U. Ehrman +2,040 +James M. Howard +2,040 +Timothy E. Parker +2,040 +Julia P. Forrester Rogers +2,040 +Kenneth L. Stewart +2,040 +(2) +Mr. Baty serves as deputy lead independent director. The deputy lead independent director receives an additional cash retainer of $50,000 annually. +(3) +Mr. Parker serves as lead independent director. The lead independent director receives an additional cash retainer of $100,000 annually. +2023 Proxy Statement | Matador Resources Company 73 +Table of Contents +DIRECTOR COMPENSATION +Compensation for 2022-2023 +For the period commencing at the 2022 Annual Meeting and until the 2023 Annual Meeting, our non-employee directors’ compensation program was as set forth below: +• +annual cash retainer of $70,000; +• +the chair of each of the below committees received the following additional, annual cash retainer: +Committee +Retainer +Operations and Engineering +$ +50,000 +Prospect +$ +50,000 +Audit +$ +50,000 +Strategic Planning and Compensation +$ +35,000 +Environmental, Social and Corporate Governance +$ +35,000 +Nominating +$ +15,000 +Capital Markets and Finance +$ +15,000 +Marketing and Midstream +$ +15,000 +• +the lead independent director received an additional cash retainer of $100,000; +• +the deputy lead independent director received an additional cash retainer of $50,000; and +• +at the meeting of the Board immediately following the 2022 Annual Meeting, each non-employee director received an annual grant of RSUs equal to approximately $135,000 in value, which vests immediately prior to the election of the nominees for director at the 2023 Annual Meeting (the “2022 RSU Award”). +If a director was appointed or elected to the Board at any time following the 2022 Annual Meeting but prior to the 2023 Annual Meeting, such director was granted the applicable percentage of the 2022 RSU Award detailed below, effective on the date of such director’s appointment: (i) if a director was appointed or elected to the Board within 90 days after the 2022 Annual Meeting, such director was entitled to receive 100% of the 2022 RSU Award; (ii) if a director was appointed or elected to the Board more than 90 days but 180 or fewer days after the 2022 Annual Meeting, such director was entitled to receive 75% of the 2022 RSU Award; (iii) if a director was appointed or elected to the Board more than 180 days but 270 or fewer days after the 2022 Annual Meeting, such director was entitled to receive 50% of the 2022 RSU Award; and (iv) if a director was appointed or elected to the Board more than 270 days after the 2022 Annual Meeting but prior to the 2023 Annual Meeting, such director was entitled to receive 25% of the 2022 RSU award. +In addition, we reimburse our directors for travel, lodging and related expenses incurred in attending Board and committee meetings. +Director Stock Ownership Guidelines +Our non-employee directors are expected to follow our voluntary stock ownership guidelines for non-employee directors. Within three years of becoming a director, each non-employee director is expected to own $250,000 of Common Stock and continue to hold such shares while serving as a director. As of December 31, 2022, all directors owned in excess of $250,000 of Common Stock. Shares that count toward the stock ownership guidelines include RSUs. +74 Matador Resources Company | 2023 Proxy Statement +Table of Contents +SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS +SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS +The following table presents the securities authorized for issuance under our equity compensation plans as of December 31, 2022: +Plan Category +Number of +Shares to be +Issued Upon +Exercise of +Outstanding +Options, +Warrants +and +Rights (2) +Weighted- +Average +Exercise +Price of +Outstanding +Options, +Warrants +and Rights (3) +Number of +Shares +Remaining +Available for +Future +Issuance +Under Equity +Compensation +Plans +Equity compensation plans approved by security holders (1) +1,357,496 +$ +22.92 +8,755,116 +Equity compensation plans not approved by security holders +— +— +— +Total +1,357,496 +$ +22.92 +8,755,116 +(1) +Includes shares authorized under the Matador Resources Company Amended and Restated 2012 Long-Term Incentive Plan (as amended, the “2012 Plan”), the 2019 Plan and the Matador Resources Company 2022 Employee Stock Purchase Plan. No further awards may be made under the 2012 Plan, although awards remain outstanding thereunder. +(2) +Includes the number of PSUs granted under the 2012 Plan and the 2019 Plan based on the maximum level of achievement, which may be more than the number of shares issued in settlement of PSUs that are ultimately earned. +(3) +Reflects the weighted-average exercise price of stock options granted under the 2012 Plan and 2019 Plan. RSUs and PSUs are not reflected in this column as they do not have an exercise price. +2023 Proxy Statement | Matador Resources Company 75 +Table of Contents +TRANSACTIONS WITH RELATED PERSONS +TRANSACTIONS WITH RELATED PERSONS +Except as disclosed below, during 2022, there was not, nor was there proposed as of December 31, 2022, any transaction or series of similar transactions to which we were or are a party in which the amount involved exceeded or exceeds $120,000 and in which any of our directors, nominees for directors, executive officers, beneficial owners of more than 5% of any class of our voting securities or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest, other than compensation arrangements with directors and executive officers, which are described in “Executive Compensation—Compensation Discussion and Analysis” and “Director Compensation” above. +Working Interest and Overriding Royalty Interest Owners +Joseph Wm. Foran, Chairman and Chief Executive Officer, Shelley F. Appel, a nominee for director at the 2023 Annual Meeting, and certain of their affiliated entities (collectively, the “Foran Entities”) are working interest owners and/or overriding royalty interest owners in certain properties operated by the Company or in which the Company also holds a working interest. As working interest owners, the Foran Entities are required to pay their proportionate share of all costs and are entitled to receive their proportionate share of revenues in the normal course of business. As overriding royalty interest owners, the Foran Entities are entitled to receive their proportionate share of revenues from the wells in which they own an interest in the normal course of business. During 2022, revenues, net of costs, received by the Foran Entities in their capacity as working interest owners or overriding royalty interest owners were approximately $13.2 million (the “Related Net Revenue Payments”). The Related Net Revenue Payments represent less than 1% of our total third-party net revenue payments during 2022. +In our capacity as operator, we incur drilling and operating costs that are billed to our partners based on their respective working interests. During 2022, our joint interest billings to the Foran Entities attributable to their share of costs were approximately $9.8 million (the “Related Joint Interest Billings”). The Related Joint Interest Billings represent less than 1% of our total joint interest billings during 2022. As a result of this ownership by the Foran Entities, from time to time, we will be in a net receivable or net payable position with certain of the Foran Entities. We do not consider any net receivables from the Foran Entities to be uncollectible. +The Audit Committee reviewed the terms of the working interests and/or overriding royalty interests of the Foran Entities for potential conflicts of interest under the Related Person Transaction Policy, and, after being fully informed as to Mr. Foran’s relationships and interests in such transactions and all other material facts related to the Related Net Revenue Payments and Related Joint Interest Billings, determined that such transactions and the Related Net Revenue Payments and Related Joint Interest Billings were fair to the Company and recommended such transactions and the Related Net Revenue Payments and Related Joint Interest Billings to the full Board for approval and ratification. The Board subsequently approved and ratified the transactions and the Related Net Revenue Payments and Related Joint Interest Billings. +Joint Venture Relationship +The Company has entered into a joint venture (the “Joint Venture”) with Spearpoint Resources Company (“Spearpoint”) to generate value through a conventional vertical well development program in our Twin Lakes asset area. An adult child of Mr. Foran and the sibling of Ms. Appel is the founder of Spearpoint and serves as the chief executive officer and chairman of the board of directors of Spearpoint. Mr. Foran’s child has a Bachelor of Arts degree in Economics from Princeton University, a Master’s of Science degree in Petroleum Engineering from Texas A&M University and a Master’s degree in Business Administration from Rice University. Mr. Foran’s child worked for a major oil and gas company as a petroleum petrophysicist. Prior to attending Texas A&M, Mr Foran’s child served in the United States Marine Corp, including two tours of duty overseas, and has continued to serve in United State Marine Corp Reserve, recently achieving the rank of Major. Mr. Foran’s child may perform shared services to the Joint Venture, for which the Joint Venture would reimburse Spearpoint. In addition, Ms. Appel holds an ownership interest in Spearpoint. +76 Matador Resources Company | 2023 Proxy Statement +Table of Contents +TRANSACTIONS WITH RELATED PERSONS +During 2022, the Company made capital contributions to the Joint Venture of approximately $9.5 million (the “Capital Contributions”). The Company did not receive any distributions from the Joint Venture in 2022, and the Joint Venture did not pay Spearpoint for any shared services provided by Mr. Foran’s child, although such distributions may be received by the Company or such shared service amounts may be paid by Spearpoint in the future. +The Audit Committee reviewed the terms of the Joint Venture for potential conflicts of interest under the Related Person Transaction Policy, and, after being fully informed as to Mr. Foran’s and his adult child’s relationships and interests in such transactions and all other material facts related to the Joint Venture, determined that such transactions, including the Capital Contributions, were fair to the Company and recommended such transactions to the full Board for approval and ratification. The Board subsequently approved and ratified the transactions, including the Capital Contributions. +Certain Employment Relationships +Billy E. Goodwin served as an executive officer during 2022 and currently serves as the Company’s President – Operations. During 2022, an adult child of Mr. Goodwin was an employee of the Company and has been an employee since 2015. Mr. Goodwin’s child earned in 2022 and is expected to be compensated in 2023 between $120,000 and $500,000. Mr. Goodwin’s child has a Bachelor of Science in Business Administration degree in Energy Management from the University of Tulsa and a Bachelor of Arts degree in General Business and Management from Oklahoma State University. He has over 12 years of industry experience, including as a drilling fluids engineer for a publicly traded oilfield services company and as a landman for a publicly traded exploration and production company. The Audit Committee reviewed the terms of the employment arrangement for potential conflicts of interest under the Company’s Related Person Transaction Policy and, after being fully informed as to the employment arrangement and historical and anticipated compensation of Mr. Goodwin’s adult child, and all other material facts related to the relationship, determined that the employment arrangement was fair to the Company and recommended the employment arrangement to the full Board for approval and ratification. The Board subsequently approved and ratified such employment arrangements. +Reynald A. Baribault is a member of the Board. Mr. Baribault’s sister-in-law has been an employee of the Company since 2016 and earned in 2022, and is expected to be compensated in 2023, between $120,000 and $250,000. Mr. Baribault’s sister-in-law has a diploma from the Executive Secretarial School and is a certified legal assistant, having completed the Southern Methodist University Legal Assistants Program. She has over 40 years of experience as a legal assistant. The Audit Committee reviewed the terms of the employment arrangement for potential conflicts of interest under the Company’s Related Person Transaction Policy and, after being fully informed as to the employment arrangement and historical and anticipated compensation of Mr. Baribault’s sister-in-law, and all other material facts related to the relationship, determined that the employment arrangement was fair to the Company and recommended the employment arrangement to the full Board for approval and ratification. The Board subsequently approved and ratified such employment arrangement. +An adult child of Mr. Foran and the sibling of Ms. Appel, has been an employee of the Company since 2015 and earned in 2022, and is expected to be compensated in 2023, between $120,000 and $250,000. Mr. Foran’s child has a Bachelor of Science degree in Human Resource Development and a Master of Science degree in Human Resource Management, both from Texas A&M University. She has more than 11 years of industry experience, including with another publicly traded exploration and production company. The Audit Committee reviewed the terms of the employment arrangement for potential conflicts of interest under the Company’s Related Person Transaction Policy and, after being fully informed as to the employment arrangement and historical and anticipated compensation of Mr. Foran’s child, and all other material facts related to the relationship, determined that the employment arrangement was fair to the Company and recommended the employment arrangement to the full Board for approval and ratification. The Board subsequently approved and ratified such employment arrangement. +In addition, Ms. Appel, who is a nominee for director at the 2023 Annual Meeting and is the daughter of Mr. Foran, served as the Company’s Environmental, Social and Governance Coordinator and as a Special Advisor to the Board in 2022. For these services, Ms. Appel was compensated between $120,000 and $250,000. Ms. Appel has a degree from Yale University and a Master’s degree in Business Administration from the University of Chicago +2023 Proxy Statement | Matador Resources Company 77 +Table of Contents +TRANSACTIONS WITH RELATED PERSONS +and also worked for a major oil and gas company for a number of years. For further details of Ms. Appel’s relationship with the Company and her background and experience, please see her biography on page 16 of this Proxy Statement. The Audit Committee reviewed the terms of the employment arrangement and the consulting arrangement for potential conflicts of interest under the Company’s Related Person Transaction Policy and, after being fully informed as to the employment arrangement and the consulting arrangement and historical and anticipated compensation of Ms. Appel, and all other material facts related to the relationship, determined that the employment arrangement and the consulting arrangement each was fair to the Company and recommended the employment arrangement and the consulting arrangement to the full Board for approval and ratification. The Board subsequently approved and ratified such employment arrangement and such consulting arrangement. +Indemnification Agreements +We have entered into indemnification agreements with each of our directors and executive officers and expect to do so in the future for any new directors and executive officers. The indemnification agreements provide the directors and executive officers with contractual rights to indemnification, expense advancement and reimbursement to the fullest extent permitted by applicable law. +Procedures for Approval of Related Person Transactions +Pursuant to the Related Person Transaction Policy as in effect as of December 31, 2022, a “Related Person Transaction” is defined as a transaction (including any financial transaction, arrangement or relationship (including any indebtedness or guarantee of indebtedness)), or series of related transactions, or any material amendment to any such transaction, in which a Related Person (as defined below) has or will have a direct or indirect material interest and in which we are a participant, other than: +• +a transaction involving compensation of directors that is required to be reported in our proxy statement under Item 402 of the SEC’s compensation disclosure requirements (“Item 402”); +• +any employment by us of an executive officer if: +¡ +the related compensation is required to be reported in our proxy statement under Item 402; or +¡ +the executive officer is not an “immediate family member” of another executive officer or director of the Company, the related compensation would be reported in our proxy statement under Item 402 if the executive officer was a “named executive officer” and the Compensation Committee approved (or recommended that the Board approve) such compensation; +• +a transaction with a Related Person involving less than $120,000; +• +a transaction in which the interest of the Related Person arises solely from the ownership of a class of our equity securities and all holders of that class receive the same benefit on a pro rata basis; +• +a transaction in which a Related Person has an indirect interest solely as a result of being (a) a director or, together with all other Related Persons, a less than 10% beneficial owner of an equity interest in another entity, or both, or (b) a limited partner in a partnership in which the Related Person, together with all other Related Persons, has an interest of less than 10%; +• +a transaction in which the rates or charges involved therein are determined by competitive bids, or a transaction that involves the rendering of services as a common or contract carrier, or public utility, at rates or charges fixed in conformity with law or governmental authority; +• +any transaction with another company at which a Related Person’s only relationship is as an employee (other than an executive officer), if the aggregate amount involved does not exceed the greater of $1,000,000, or 2% of that company’s total annual revenues; +• +any charitable contribution, grant or endowment by us to a charitable organization, foundation or university at which a Related Person’s only relationship is as an employee (other than an executive officer), if the aggregate amount involved does not exceed the lesser of $1,000,000, or 2% of the charitable organization’s total annual receipts; +78 Matador Resources Company | 2023 Proxy Statement +Table of Contents +TRANSACTIONS WITH RELATED PERSONS +• +any transaction with another publicly traded company where the Related Person’s interest arises solely from beneficial ownership of more than 5% of our Common Stock and ownership of a non-controlling interest in the other publicly traded company; +• +reimbursement of business expenses incurred by a director, officer or employee of the Company in the performance of his or her duties and approved for reimbursement by the Company in accordance with the Company’s customary policies and practices; or +• +indemnification and advancement of expenses made pursuant to the Certificate of Formation or the Bylaws or pursuant to any agreement. +“Related Person” means: +• +any person who is, or at any time since the beginning of the Company’s last completed fiscal year was, one of our executive officers or one of our directors or nominees for director; +• +any person (including any entity or group) who is known by us to be the beneficial owner of more than 5% of our Common Stock; +• +any immediate family member of any of the foregoing persons, which means any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, sister-in-law or person residing (other than a tenant or employee) in the home of a director, nominee for director, executive officer or a beneficial owner of more than 5% of our Common Stock; and +• +any entity that is owned or controlled by any of the foregoing persons or in which any of the foregoing persons is a general partner or executive officer or in which such person, together with all other of the foregoing persons, owns 10% or more of the equity interests thereof. +Pursuant to the Related Person Transaction Policy, the Audit Committee must review all material facts of each Related Person Transaction and recommend either approval or disapproval of the Related Person Transaction to the full Board, subject to certain limited exceptions. In determining whether to recommend approval or disapproval of the Related Person Transaction, the Audit Committee must, after reviewing all material facts of the Related Person Transaction and the Related Person’s relationship and interest, determine whether the Related Person Transaction is fair to the Company and in, or not consistent with, the interests of the Company and its shareholders. If a Related Person Transaction will be ongoing, the Audit Committee, on at least an annual basis, will review and assess ongoing relationships with the Related Persons to see that they are in compliance with Audit Committee guidelines. Further, the policy requires that all Related Person Transactions be disclosed in our filings with the SEC and/or our website in accordance with applicable laws, rules and regulations. +2023 Proxy Statement | Matador Resources Company 79 +Table of Contents +SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT +SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT +The following table presents the beneficial ownership of our Common Stock as of April 12, 2023 for (i) each person beneficially owning more than 5% of the outstanding shares of our Common Stock, (ii) each director and nominee for director of the Company, (iii) each executive officer of the Company listed in the Summary Compensation Table and (iv) all of our directors, nominees and executive officers as a group. Except pursuant to applicable community property laws and except as otherwise indicated, each shareholder possesses sole voting and investment power with respect to its, his or her shares. The business address of each of our directors and executive officers is c/o Matador Resources Company, One Lincoln Centre, 5400 LBJ Freeway, Suite 1500, Dallas, Texas 75240. The applicable percentage ownership is based on 119,183,914 shares of our Common Stock issued and outstanding as of April 12, 2023, plus, on an individual basis, the right of that individual to (i) obtain Common Stock upon exercise of stock options or (ii) obtain Common Stock upon the vesting or delivery of RSUs, in each case within 60 days of April 12, 2023. The information is based on Form 3s, Form 4s, Form 5s, Schedule 13Ds, Schedule 13Gs and Schedule 13G/As filed through April 12, 2023. +Name +Amount and +Nature of +Ownership of +Common Stock +Percent +of Class +Directors, Nominees and Named Executive Officers +Joseph Wm. Foran (1) +5,274,668 +4.4% +Craig N. Adams (2) +303,356 +* +Shelley F. Appel (3) +1,664,125 +1.4% +Reynald A. Baribault (4) +135,199 +* +R. Gaines Baty (5) +61,713 +* +William M. Byerley (6) +46,420 +* +Monika U. Ehrman (7) +30,203 +* +Julia P. Forrester Rogers (8) +64,267 +* +Michael D. Frenzel (9) +66,932 +* +Billy E. Goodwin (10) +291,624 +* +James M. Howard (11) +120,214 +* +David E. Lancaster (12) +565,337 +* +Timothy E. Parker (13) +71,636 +* +Van H. Singleton, II (14) +243,659 +* +Kenneth L. Stewart (15) +81,272 +* +All Directors, Nominees and Executive Officers as a Group (16 persons) (16) +7,140,158 +6.0% +Other 5% Owners +BlackRock, Inc. (17) +13,726,498 +11.6% +The Vanguard Group (18) +11,454,049 +9.6% +* +Less than one percent (1%) +(1) +Includes (i) 1,105,913 shares of Common Stock held of record by Sage Resources, Ltd., a limited partnership owned by the Foran family, including Mr. Foran; (ii) 17,271 shares of Common Stock held of record by Mr. Foran’s spouse as her separate property; (iii) 113,873 shares of Common Stock held of record by each of the JWF 2021-2 GRAT and the NNF 2021-2 GRAT, for which Mr. Foran is the trustee and over which Mr. Foran has sole voting and investment power; (iv) 125,010 shares of Common Stock held of record by each of the JWF 2022-1 GRAT and the NNF 2022-1 GRAT, for which Mr. Foran is the trustee and over which Mr. Foran has sole voting and investment power; (v) 94,825 shares of Common Stock held of record by each of the JWF 2022-2 GRAT and the NNF 2022-2 GRAT, for which Mr. Foran is the trustee and over which Mr. Foran has sole voting and investment power; (vi) 163,050 shares of Common Stock held of record by each of the JWF 2023-1 GRAT and the NNF 2023-1 GRAT, for which Mr. Foran is the trustee and over +80 Matador Resources Company | 2023 Proxy Statement +Table of Contents +SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT +which Mr. Foran has sole voting and investment power; (vii) 434,449 shares of Common Stock held of record by the Foran 2012 Security Trust, for which Mr. Foran is the trustee and over which Mr. Foran has sole voting and investment power; (viii) 471,276 shares of Common Stock held of record by the Foran 2012 Savings Trust, for which Mr. Foran’s spouse is a trustee; and (ix) 1,137,182 shares held of record, collectively, by the LRF 2011 Non-GST Trust, WJF 2011 Non-GST Trust, JNF 2011 Non-GST Trust, SIF 2011 Non-GST Trust and MCF 2011 Non-GST Trust, for which trusts Mr. Foran and his spouse, as settlors of each of the 2011 Non-GST Trusts, retain the power of substitution with respect to the property of the 2011 Non-GST Trusts; and (x) 1,093,356 shares held of record, collectively, by the LRF 2020 Non-GST Trust, WJF 2020 Non-GST Trust, SIF 2020 Non-GST Trust and MCF 2020 Non-GST Trust, for which trusts Mr. Foran and his spouse, as settlors of each of the 2020 Non-GST Trusts, retain the power of substitution with respect to the property of the 2020 Non-GST Trusts. +(2) +Includes 2,850 shares of Common Stock held of record by the 401(k) account of Mr. Adams. +(3) +Ms. Appel is a nominee for director at the Annual Meeting. Includes (i) 1,105,913 shares of Common Stock held of record by Sage Resources, Ltd., a limited partnership owned by the Foran family, including Ms. Appel; (ii) 227,416 shares of Common Stock held of record by the SIF 2011 Non-GST Trust; (iii) 273,339 shares of Common Stock held of record by the SIF 2020 Non-GST Trust; (iv) 4,727 shares of Common Stock held of record by the Individual Retirement Account of Ms. Appel; (v) 1,185 shares of Common Stock held of record by the 401(k) account of Ms. Appel; (vi) 117 shares of Common Stock held of record by the Health Savings Account of Ms. Appel; and (vi) 58 shares of Common Stock held of record by the Health Savings Account of Ms. Appel’s spouse. +(4) +Includes 6,500 shares of Common Stock held of record by the Individual Retirement Account of Mr. Baribault. Also includes 110,897 shares of Common Stock held of record by the Reynald A. Baribault Maritalized Revocable Living Trust and 7,500 shares of Common Stock held of record by the Sally K. Baribault Maritalized Revocable Living Trust, for which trusts both Mr. Baribault and his spouse are trustees and share voting and investment power. Also includes 10,302 shares of Common Stock issuable to Mr. Baribault upon the vesting and delivery of RSUs. +(5) +Includes 18,543 shares of Common Stock issuable to Mr. Baty upon the vesting and delivery of RSUs. +(6) +Includes 22,740 shares of Common Stock issuable to Mr. Byerley upon the vesting and delivery of RSUs. +(7) +Includes 2,040 shares of Common Stock issuable to Ms. Ehrman upon the vesting of RSUs. +(8) +Includes 19,785 shares of Common Stock held of record by the Individual Retirement Account of Ms. Rogers and 5,800 shares of Common Stock held of record by Ms. Rogers’ spouse. Also includes 2,040 shares of Common Stock issuable to Ms. Rogers upon the vesting of RSUs. +(9) +Information based solely on a Form 4 filing with the SEC on May 3, 2022. Mr. Frenzel served as the Company’s principal financial officer from March 31, 2022 to February 16, 2023. +(10) +Includes 5,000 shares of Common Stock held of record by the 401(k) account of Mr. Goodwin. +(11) +Includes 50,000 shares of Common Stock held of record by the Individual Retirement Account of Mr. Howard and 50,000 shares of Common Stock held by PBH Family Partners, Ltd., a family limited partnership owned by Mr. Howard’s family, including Mr. Howard, and over which Mr. Howard and his spouse share voting and investment authority. Also includes 10,214 shares of Common Stock issuable to Mr. Howard upon the vesting and delivery of RSUs. +(12) +Information based solely on a Form 4 filing filed with the SEC on January 4, 2022. Mr. Lancaster retired as the Executive Vice President and Chief Financial Officer of the Company on March 31, 2022. +(13) +Includes 2,040 shares of Common Stock issuable to Mr. Parker upon the vesting of RSUs. +(14) +Includes 2,505 shares of Common Stock held of record by the 401(k) account of Mr. Singleton. +(15) +Includes 14,572 shares of Common Stock issuable to Mr. Stewart upon the vesting and delivery of RSUs. +(16) +Includes an aggregate of 4,548 shares of Common Stock, which our executive officers as a group have the right to acquire within 60 days of April 12, 2023 upon the exercise of stock options. Includes 48,186 shares of restricted stock held by our executive officers. Pursuant to the terms of such restricted stock grants, the executive officers have the right to vote such shares but may only dispose of such shares to the extent they have vested. Also includes 82,491 shares of Common Stock issuable to directors upon the vesting and delivery of RSUs. +(17) +Information based solely on a Schedule 13G/A filed with the SEC on January 26, 2023. The Schedule 13G/A reports that BlackRock, Inc. (“BlackRock”) beneficially owns 13,726,498 shares, has sole voting power with respect to 13,488,714 shares and has sole dispositive power with respect to 13,726,498 shares. According to the Schedule 13G/A, BlackRock’s address is 55 East 52nd Street, New York, NY 10055. +(18) +Information based solely on a Schedule 13G/A filed with the SEC on February 9, 2023. The Schedule 13G/A reports that The Vanguard Group (“Vanguard”) beneficially owns 11,454,049 shares, has shared voting power with respect to 212,084 shares, has sole dispositive power with respect to 11,139,400 shares and has shared dispositive power with respect to 314,649 shares. According to the Schedule 13G/A, Vanguard’s address is 100 Vanguard Blvd, Malvern, PA 19355. +2023 Proxy Statement | Matador Resources Company 81 +Table of Contents +ADDITIONAL INFORMATION +ADDITIONAL INFORMATION +Shareholder Proposals for the 2024 Proxy Statement +For shareholder proposals to be included in the Company’s proxy statement and form of proxy relating to the 2024 Annual Meeting, such proposals must be received by the Company at its offices in Dallas, Texas, addressed to the Corporate Secretary of the Company, no later than December 29, 2023. If the Company changes the date of the 2024 Annual Meeting by more than 30 days from the anniversary of the 2023 Annual Meeting, shareholder proposals must be received a reasonable time before the Company begins to print and mail the proxy materials for the 2024 Annual Meeting in order to be considered for inclusion in the Company’s proxy statement. Upon timely receipt of any such proposal, the Company will determine whether or not to include such proposal in the proxy statement and proxy in accordance with applicable regulations and provisions governing the solicitation of proxies. In addition, to comply with the universal proxy rules, shareholders who intend to solicit proxies in support of director nominees other than the Company’s nominees must provide notice to the Company that sets forth the information required by Rule 14a-19 under the Exchange Act, no later than April 10, 2024. +Director Nominations or Other Business for Presentation at the 2024 Annual Meeting +Alternatively, shareholders intending to place in nomination persons for election as directors at an annual meeting of shareholders or to introduce an item of business at an annual meeting of shareholders without having the nomination or proposal included in the Company’s proxy statement must comply with certain procedures set forth in the Bylaws. These procedures provide, generally, among other things, that shareholders desiring to place in nomination persons for election as directors, and/or bring a proper subject of business before an annual meeting, must do so by a written notice timely received (on or before March 13, 2024, but no earlier than February 12, 2024, for the 2024 Annual Meeting) to the Corporate Secretary of the Company containing the name and address of the shareholder and the number of shares of the Company’s Common Stock beneficially owned by the shareholder. If the notice relates to a nomination for director, it must also set forth the name, age, business and residence addresses of the candidate, the candidate’s résumé or a listing of his or her qualifications to be a director of the Company, the person’s written consent to be a director if selected by the Nominating Committee, nominated by the Board and elected by the shareholders and any other information that would be required to be disclosed in solicitations of proxies for the election of directors. The Company may require any proposed nominee to furnish such other information as may reasonably be required by the Company to determine the eligibility of such proposed nominee to serve as director. Notice of an item of business shall include a brief description of the proposed business and any material interest of the shareholder in such business. +The Chairman of the meeting may refuse to allow the transaction of any business not presented, or to acknowledge the nomination of any person not made, in compliance with the foregoing procedures. Copies of the Bylaws are available from the Corporate Secretary of the Company and on the Company’s website at www.matadorresources.com under the heading “Investor Relations—Corporate Governance.” +See “Corporate Governance—Board Committees—Nominating Committee” for the process for shareholders to follow to suggest a director candidate to the Nominating Committee for nomination by the Board. +Annual Report on Form 10-K +The Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, as filed with the SEC, including financial statements, is being made available to our shareholders concurrently with this Proxy Statement at www.proxyvote.com and does not form part of the proxy solicitation material. Shareholders may obtain without charge another copy of the Annual Report on Form 10-K, excluding certain exhibits, by writing to Investor Relations, Matador Resources Company, One Lincoln Centre, 5400 LBJ Freeway, Suite 1500, Dallas, Texas 75240. +82 Matador Resources Company | 2023 Proxy Statement +Table of Contents +OTHER BUSINESS +OTHER BUSINESS +Management of the Company is not aware of other business to be presented for action at the Annual Meeting; however, if other matters are presented for action, it is the intention of the persons named in the accompanying form of proxy to vote in accordance with their judgment on such matters. +By Order of the Board of Directors, +Joseph Wm. Foran +Chairman and Chief Executive Officer +April 27, 2023 +2023 Proxy Statement | Matador Resources Company 83 +Table of Contents +ANNEX A +ANNEX A +Non-GAAP Financial Measures +Adjusted EBITDA +We define, on a consolidated basis and for San Mateo, Adjusted EBITDA as earnings before interest expense, income taxes, depletion, depreciation and amortization, accretion of asset retirement obligations, property impairments, unrealized derivative gains and losses, certain other non-cash items and non-cash stock-based compensation expense and net gain or loss on asset sales and impairment. Adjusted EBITDA is not a measure of net income (loss) or cash flows as determined by GAAP. Adjusted EBITDA is a supplemental non-GAAP financial measure that is used by management and external users of our consolidated financial statements, such as industry analysts, investors, lenders and rating agencies. All references to Matador’s Adjusted EBITDA are those values attributable to Matador Resources Company shareholders after giving effect to Adjusted EBITDA attributable to third-party non-controlling interests, including in San Mateo. +Management believes Adjusted EBITDA is necessary because it allows us to evaluate our operating performance and compare the results of operations from period to period without regard to our financing methods or capital structure. We exclude the items listed above from net income (loss) in calculating Adjusted EBITDA because these amounts can vary substantially from company to company within our industry depending upon accounting methods and book values of assets, capital structures and the method by which certain assets were acquired. +Adjusted EBITDA should not be considered an alternative to, or more meaningful than, net income (loss) or net cash provided by operating activities as determined in accordance with GAAP or as a primary indicator of our operating performance or liquidity. Certain items excluded from Adjusted EBITDA are significant components of understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure. Our Adjusted EBITDA may not be comparable to similarly titled measures of another company because all companies may not calculate Adjusted EBITDA in the same manner. +The following table presents our calculation of Adjusted EBITDA and the reconciliation of Adjusted EBITDA to the GAAP financial measures of net income (loss) and net cash provided by operating activities, respectively: +Adjusted EBITDA—Matador Resources Company +Year Ended +December 31, 2022 +(In thousands) +Unaudited Adjusted EBITDA Reconciliation to Net Income: +Net income attributable to Matador Resources Company shareholders +$ +1,214,206 +Net income attributable to non-controlling interest in subsidiaries +72,111 +Net income +1,286,317 +Interest expense +67,164 +Total income tax provision +399,357 +Depletion, depreciation and amortization +466,348 +Accretion of asset retirement obligations +2,421 +Unrealized gain on derivatives +(18,809 +) +Non-cash stock-based compensation expense +15,123 +Net loss on asset sales and impairment +1,311 +Expense related to contingent consideration +4,926 +Consolidated Adjusted EBITDA +2,224,158 +Adjusted EBITDA attributable to non-controlling interest in subsidiaries +(97,002 +) +Adjusted EBITDA attributable to Matador Resources Company shareholders +$ +2,127,156 +2023 Proxy Statement | Matador Resources Company A-1 +Table of Contents +ANNEX A +Year Ended +December 31, 2022 +(In thousands) +Unaudited Adjusted EBITDA Reconciliation to Net Cash Provided by Operating Activities: +Net cash provided by operating activities +$ +1,978,739 +Net change in operating assets and liabilities +117,935 +Interest expense, net of non-cash portion +63,064 +Current income tax provision +54,877 +Expense related to contingent consideration +9,543 +Adjusted EBITDA attributable to non-controlling interest in subsidiaries +(97,002 +) +Adjusted EBITDA attributable to Matador Resources Company shareholders +$ +2,127,156 +Adjusted EBITDA—San Mateo (100%) +Year Ended +December 31, 2022 +(In thousands) +Unaudited Adjusted EBITDA Reconciliation to Net Income: +Net income +$ +147,163 +Depletion, depreciation and amortization +32,378 +Interest expense +16,829 +Accretion of asset retirement obligations +282 +Net loss on asset sales and impairment +1,311 +Adjusted EBITDA +$ +197,963 +Year Ended +December 31, 2022 +(In thousands) +Unaudited Adjusted EBITDA Reconciliation to Net Cash Provided by Operating Activities: +Net cash provided by operating activities +$ +178,549 +Net change in operating assets and liabilities +3,848 +Interest expense, net of non-cash portion +15,556 +Adjusted EBITDA +$ +197,963 +Adjusted Free Cash Flow +Adjusted free cash flow is measured, on a consolidated basis for the Company, as net cash provided by operating activities, adjusted for changes in working capital and cash performance incentives that are not included as operating cash flows, less cash flows used for capital expenditures, adjusted for changes in capital accruals. On a consolidated basis, these numbers are also adjusted for the cash flows related to non-controlling interest in subsidiaries that represent cash flows not attributable to Matador shareholders. Adjusted free cash flow should not be considered an alternative to, or more meaningful than, net cash provided by operating activities as determined in accordance with GAAP or an indicator of the Company’s liquidity. Adjusted free cash flow is used +A-2 Matador Resources Company | 2023 Proxy Statement +Table of Contents +ANNEX A +by the Company, securities analysts and investors as an indicator of the Company’s ability to manage its operating cash flow, internally fund its drilling, completion and equipping capital expenditures, pay dividends and service or incur additional debt, without regard to the timing of settlement of either operating assets and liabilities or accounts payable related to capital expenditures. Additionally, this non-GAAP financial measure may be different than similar measures used by other companies. The Company believes the presentation of adjusted free cash flow provides useful information to investors, as it provides them an additional relevant comparison of the Company’s performance, sources and uses of capital associated with its operations across periods and to the performance of the Company’s peers. In addition, this non-GAAP financial measure reflects adjustments for items of cash flows that are often excluded by securities analysts and other users of the Company’s financial statements in evaluating the Company’s cash spend. +The table below reconciles adjusted free cash flow to its most directly comparable GAAP measure of net cash provided by operating activities. All references to Matador’s adjusted free cash flow are those values attributable to Matador shareholders after giving effect to adjusted free cash flow attributable to third-party non-controlling interests, including in San Mateo. +Adjusted Free Cash Flow—Matador Resources Company +Year Ended +December 31, 2022 +(In thousands) +Net cash provided by operating activities +$ +1,978,739 +Net change in operating assets and liabilities +117,935 +San Mateo discretionary cash flow attributable to non-controlling interest in subsidiaries (1) +(89,375 +) +Performance incentives received from Five Point +28,250 +Total discretionary cash flow +$ +2,035,549 +Drilling, completion and equipping capital expenditures +771,830 +Midstream capital expenditures +80,051 +Expenditures for other property and equipment +1,213 +Net change in capital accruals +4,355 +San Mateo accrual-based capital expenditures related to non-controlling interest in subsidiaries (2) +(39,717 +) +Total accrual-based capital expenditures (3) +817,732 +Adjusted free cash flow +$ +1,217,817 +(1) +Represents Five Point’s 49% interest in San Mateo discretionary cash flow. +(2) +Represents Five Point’s 49% interest in accrual-based San Mateo capital expenditures. +(3) +Represents drilling, completion and equipping costs, Matador’s share of San Mateo capital expenditures plus 100% of other immaterial midstream capital expenditures not associated with San Mateo. +2023 Proxy Statement | Matador Resources Company A-3 +Table of Contents +MATADOR RESOURCES COMPANY 5400 LBJ FREEWAY, SUITE 1500 DALLAS, TX 75240 SCAN TO VIEW MATERIALS & VOTE VOTE BY INTERNET - www.proxyvote.com or scan the QR Barcode above Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Time the day before the meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time the day before the meeting date. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: V13336-P93190 KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. MATADOR RESOURCES COMPANY The Board of Directors recommends you vote FOR the following: 1. Election of Directors Nominees: 1a. Joseph Wm. Foran 1b. Reynald A. Baribault 1c. Timothy E. Parker 1d. Shelley F. Appel For Against Abstain The Board of Directors recommends you vote FOR the following proposals: 2. Advisory vote to approve the compensation of the Company’s named executive officers. 3. Ratification of the appointment of KPMG LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2023. For Against Abstain NOTE: The proxies are authorized to vote in their discretion on such other business as may properly come before the meeting or any adjournment thereof. Yes No Please indicate if you plan to attend this meeting. Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date +Table of Contents +Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Annual Report for the year ended December 31, 2022, Notice of Annual Meeting and Proxy Statement are available at www.proxyvote.com V13337-P93190 MATADOR RESOURCES COMPANY Annual Meeting of Shareholders June 9, 2023 9:30 A.M. This proxy is solicited by the Board of Directors As an alternative to completing this form, you may enter your vote instruction by telephone at 1-800-690-6903, or via the internet at www.proxyvote.com. Have your proxy card in hand and follow the instructions. The shareholder hereby appoints Joseph Wm. Foran and Timothy E. Parker, or either of them, as proxies, each with the power to appoint his substitute, and hereby authorizes them to represent and to vote, as designated on the reverse side of this ballot, all of the shares of common stock of MATADOR RESOURCES COMPANY that the shareholder is entitled to vote at the Annual Meeting of Shareholders to be held at 9:30 A.M., CDT on June 9, 2023, at the Hilton Dallas Lincoln Centre, Lakeside Ballroom, 5410 LBJ Freeway, Dallas, Texas 75240, and any adjournment or postponement thereof. The shareholder hereby revokes any proxy or proxies heretofore given to vote upon or act with respect to such shares of stock. This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the Board of Directors’ recommendations. Continued and to be signed on reverse side \ No newline at end of file diff --git a/raw/proxies/0001520006/0001193125-23-122206/proxy_rpt.txt b/raw/proxies/0001520006/0001193125-23-122206/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..3b2a57e4aee2cec5ccba792776f48ba470e226ea --- /dev/null +++ b/raw/proxies/0001520006/0001193125-23-122206/proxy_rpt.txt @@ -0,0 +1,68 @@ +TRANSACTIONS WITH RELATED PERSONS +TRANSACTIONS WITH RELATED PERSONS +Except as disclosed below, during 2022, there was not, nor was there proposed as of December 31, 2022, any transaction or series of similar transactions to which we were or are a party in which the amount involved exceeded or exceeds $120,000 and in which any of our directors, nominees for directors, executive officers, beneficial owners of more than 5% of any class of our voting securities or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest, other than compensation arrangements with directors and executive officers, which are described in “Executive Compensation—Compensation Discussion and Analysis” and “Director Compensation” above. +Working Interest and Overriding Royalty Interest Owners +Joseph Wm. Foran, Chairman and Chief Executive Officer, Shelley F. Appel, a nominee for director at the 2023 Annual Meeting, and certain of their affiliated entities (collectively, the “Foran Entities”) are working interest owners and/or overriding royalty interest owners in certain properties operated by the Company or in which the Company also holds a working interest. As working interest owners, the Foran Entities are required to pay their proportionate share of all costs and are entitled to receive their proportionate share of revenues in the normal course of business. As overriding royalty interest owners, the Foran Entities are entitled to receive their proportionate share of revenues from the wells in which they own an interest in the normal course of business. During 2022, revenues, net of costs, received by the Foran Entities in their capacity as working interest owners or overriding royalty interest owners were approximately $13.2 million (the “Related Net Revenue Payments”). The Related Net Revenue Payments represent less than 1% of our total third-party net revenue payments during 2022. +In our capacity as operator, we incur drilling and operating costs that are billed to our partners based on their respective working interests. During 2022, our joint interest billings to the Foran Entities attributable to their share of costs were approximately $9.8 million (the “Related Joint Interest Billings”). The Related Joint Interest Billings represent less than 1% of our total joint interest billings during 2022. As a result of this ownership by the Foran Entities, from time to time, we will be in a net receivable or net payable position with certain of the Foran Entities. We do not consider any net receivables from the Foran Entities to be uncollectible. +The Audit Committee reviewed the terms of the working interests and/or overriding royalty interests of the Foran Entities for potential conflicts of interest under the Related Person Transaction Policy, and, after being fully informed as to Mr. Foran’s relationships and interests in such transactions and all other material facts related to the Related Net Revenue Payments and Related Joint Interest Billings, determined that such transactions and the Related Net Revenue Payments and Related Joint Interest Billings were fair to the Company and recommended such transactions and the Related Net Revenue Payments and Related Joint Interest Billings to the full Board for approval and ratification. The Board subsequently approved and ratified the transactions and the Related Net Revenue Payments and Related Joint Interest Billings. +Joint Venture Relationship +The Company has entered into a joint venture (the “Joint Venture”) with Spearpoint Resources Company (“Spearpoint”) to generate value through a conventional vertical well development program in our Twin Lakes asset area. An adult child of Mr. Foran and the sibling of Ms. Appel is the founder of Spearpoint and serves as the chief executive officer and chairman of the board of directors of Spearpoint. Mr. Foran’s child has a Bachelor of Arts degree in Economics from Princeton University, a Master’s of Science degree in Petroleum Engineering from Texas A&M University and a Master’s degree in Business Administration from Rice University. Mr. Foran’s child worked for a major oil and gas company as a petroleum petrophysicist. Prior to attending Texas A&M, Mr Foran’s child served in the United States Marine Corp, including two tours of duty overseas, and has continued to serve in United State Marine Corp Reserve, recently achieving the rank of Major. Mr. Foran’s child may perform shared services to the Joint Venture, for which the Joint Venture would reimburse Spearpoint. In addition, Ms. Appel holds an ownership interest in Spearpoint. +76 Matador Resources Company | 2023 Proxy Statement +Table of Contents +TRANSACTIONS WITH RELATED PERSONS +During 2022, the Company made capital contributions to the Joint Venture of approximately $9.5 million (the “Capital Contributions”). The Company did not receive any distributions from the Joint Venture in 2022, and the Joint Venture did not pay Spearpoint for any shared services provided by Mr. Foran’s child, although such distributions may be received by the Company or such shared service amounts may be paid by Spearpoint in the future. +The Audit Committee reviewed the terms of the Joint Venture for potential conflicts of interest under the Related Person Transaction Policy, and, after being fully informed as to Mr. Foran’s and his adult child’s relationships and interests in such transactions and all other material facts related to the Joint Venture, determined that such transactions, including the Capital Contributions, were fair to the Company and recommended such transactions to the full Board for approval and ratification. The Board subsequently approved and ratified the transactions, including the Capital Contributions. +Certain Employment Relationships +Billy E. Goodwin served as an executive officer during 2022 and currently serves as the Company’s President – Operations. During 2022, an adult child of Mr. Goodwin was an employee of the Company and has been an employee since 2015. Mr. Goodwin’s child earned in 2022 and is expected to be compensated in 2023 between $120,000 and $500,000. Mr. Goodwin’s child has a Bachelor of Science in Business Administration degree in Energy Management from the University of Tulsa and a Bachelor of Arts degree in General Business and Management from Oklahoma State University. He has over 12 years of industry experience, including as a drilling fluids engineer for a publicly traded oilfield services company and as a landman for a publicly traded exploration and production company. The Audit Committee reviewed the terms of the employment arrangement for potential conflicts of interest under the Company’s Related Person Transaction Policy and, after being fully informed as to the employment arrangement and historical and anticipated compensation of Mr. Goodwin’s adult child, and all other material facts related to the relationship, determined that the employment arrangement was fair to the Company and recommended the employment arrangement to the full Board for approval and ratification. The Board subsequently approved and ratified such employment arrangements. +Reynald A. Baribault is a member of the Board. Mr. Baribault’s sister-in-law has been an employee of the Company since 2016 and earned in 2022, and is expected to be compensated in 2023, between $120,000 and $250,000. Mr. Baribault’s sister-in-law has a diploma from the Executive Secretarial School and is a certified legal assistant, having completed the Southern Methodist University Legal Assistants Program. She has over 40 years of experience as a legal assistant. The Audit Committee reviewed the terms of the employment arrangement for potential conflicts of interest under the Company’s Related Person Transaction Policy and, after being fully informed as to the employment arrangement and historical and anticipated compensation of Mr. Baribault’s sister-in-law, and all other material facts related to the relationship, determined that the employment arrangement was fair to the Company and recommended the employment arrangement to the full Board for approval and ratification. The Board subsequently approved and ratified such employment arrangement. +An adult child of Mr. Foran and the sibling of Ms. Appel, has been an employee of the Company since 2015 and earned in 2022, and is expected to be compensated in 2023, between $120,000 and $250,000. Mr. Foran’s child has a Bachelor of Science degree in Human Resource Development and a Master of Science degree in Human Resource Management, both from Texas A&M University. She has more than 11 years of industry experience, including with another publicly traded exploration and production company. The Audit Committee reviewed the terms of the employment arrangement for potential conflicts of interest under the Company’s Related Person Transaction Policy and, after being fully informed as to the employment arrangement and historical and anticipated compensation of Mr. Foran’s child, and all other material facts related to the relationship, determined that the employment arrangement was fair to the Company and recommended the employment arrangement to the full Board for approval and ratification. The Board subsequently approved and ratified such employment arrangement. +In addition, Ms. Appel, who is a nominee for director at the 2023 Annual Meeting and is the daughter of Mr. Foran, served as the Company’s Environmental, Social and Governance Coordinator and as a Special Advisor to the Board in 2022. For these services, Ms. Appel was compensated between $120,000 and $250,000. Ms. Appel has a degree from Yale University and a Master’s degree in Business Administration from the University of Chicago +2023 Proxy Statement | Matador Resources Company 77 +Table of Contents +TRANSACTIONS WITH RELATED PERSONS +and also worked for a major oil and gas company for a number of years. For further details of Ms. Appel’s relationship with the Company and her background and experience, please see her biography on page 16 of this Proxy Statement. The Audit Committee reviewed the terms of the employment arrangement and the consulting arrangement for potential conflicts of interest under the Company’s Related Person Transaction Policy and, after being fully informed as to the employment arrangement and the consulting arrangement and historical and anticipated compensation of Ms. Appel, and all other material facts related to the relationship, determined that the employment arrangement and the consulting arrangement each was fair to the Company and recommended the employment arrangement and the consulting arrangement to the full Board for approval and ratification. The Board subsequently approved and ratified such employment arrangement and such consulting arrangement. +Indemnification Agreements +We have entered into indemnification agreements with each of our directors and executive officers and expect to do so in the future for any new directors and executive officers. The indemnification agreements provide the directors and executive officers with contractual rights to indemnification, expense advancement and reimbursement to the fullest extent permitted by applicable law. +Procedures for Approval of Related Person Transactions +Pursuant to the Related Person Transaction Policy as in effect as of December 31, 2022, a “Related Person Transaction” is defined as a transaction (including any financial transaction, arrangement or relationship (including any indebtedness or guarantee of indebtedness)), or series of related transactions, or any material amendment to any such transaction, in which a Related Person (as defined below) has or will have a direct or indirect material interest and in which we are a participant, other than: +• +a transaction involving compensation of directors that is required to be reported in our proxy statement under Item 402 of the SEC’s compensation disclosure requirements (“Item 402”); +• +any employment by us of an executive officer if: +¡ +the related compensation is required to be reported in our proxy statement under Item 402; or +¡ +the executive officer is not an “immediate family member” of another executive officer or director of the Company, the related compensation would be reported in our proxy statement under Item 402 if the executive officer was a “named executive officer” and the Compensation Committee approved (or recommended that the Board approve) such compensation; +• +a transaction with a Related Person involving less than $120,000; +• +a transaction in which the interest of the Related Person arises solely from the ownership of a class of our equity securities and all holders of that class receive the same benefit on a pro rata basis; +• +a transaction in which a Related Person has an indirect interest solely as a result of being (a) a director or, together with all other Related Persons, a less than 10% beneficial owner of an equity interest in another entity, or both, or (b) a limited partner in a partnership in which the Related Person, together with all other Related Persons, has an interest of less than 10%; +• +a transaction in which the rates or charges involved therein are determined by competitive bids, or a transaction that involves the rendering of services as a common or contract carrier, or public utility, at rates or charges fixed in conformity with law or governmental authority; +• +any transaction with another company at which a Related Person’s only relationship is as an employee (other than an executive officer), if the aggregate amount involved does not exceed the greater of $1,000,000, or 2% of that company’s total annual revenues; +• +any charitable contribution, grant or endowment by us to a charitable organization, foundation or university at which a Related Person’s only relationship is as an employee (other than an executive officer), if the aggregate amount involved does not exceed the lesser of $1,000,000, or 2% of the charitable organization’s total annual receipts; +78 Matador Resources Company | 2023 Proxy Statement +Table of Contents +TRANSACTIONS WITH RELATED PERSONS +• +any transaction with another publicly traded company where the Related Person’s interest arises solely from beneficial ownership of more than 5% of our Common Stock and ownership of a non-controlling interest in the other publicly traded company; +• +reimbursement of business expenses incurred by a director, officer or employee of the Company in the performance of his or her duties and approved for reimbursement by the Company in accordance with the Company’s customary policies and practices; or +• +indemnification and advancement of expenses made pursuant to the Certificate of Formation or the Bylaws or pursuant to any agreement. +“Related Person” means: +• +any person who is, or at any time since the beginning of the Company’s last completed fiscal year was, one of our executive officers or one of our directors or nominees for director; +• +any person (including any entity or group) who is known by us to be the beneficial owner of more than 5% of our Common Stock; +• +any immediate family member of any of the foregoing persons, which means any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, sister-in-law or person residing (other than a tenant or employee) in the home of a director, nominee for director, executive officer or a beneficial owner of more than 5% of our Common Stock; and +• +any entity that is owned or controlled by any of the foregoing persons or in which any of the foregoing persons is a general partner or executive officer or in which such person, together with all other of the foregoing persons, owns 10% or more of the equity interests thereof. +Pursuant to the Related Person Transaction Policy, the Audit Committee must review all material facts of each Related Person Transaction and recommend either approval or disapproval of the Related Person Transaction to the full Board, subject to certain limited exceptions. In determining whether to recommend approval or disapproval of the Related Person Transaction, the Audit Committee must, after reviewing all material facts of the Related Person Transaction and the Related Person’s relationship and interest, determine whether the Related Person Transaction is fair to the Company and in, or not consistent with, the interests of the Company and its shareholders. If a Related Person Transaction will be ongoing, the Audit Committee, on at least an annual basis, will review and assess ongoing relationships with the Related Persons to see that they are in compliance with Audit Committee guidelines. Further, the policy requires that all Related Person Transactions be disclosed in our filings with the SEC and/or our website in accordance with applicable laws, rules and regulations. +2023 Proxy Statement | Matador Resources Company 79 +Table of Contents \ No newline at end of file diff --git a/raw/proxies/0001520006/0001520006-24-000106/proxy.txt b/raw/proxies/0001520006/0001520006-24-000106/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..bf8aac46e8dacd22dd420bdad671f2fbe49ba279 --- /dev/null +++ b/raw/proxies/0001520006/0001520006-24-000106/proxy.txt @@ -0,0 +1,1902 @@ +mtdr-20240426 +FALSE 0001520006 DEF 14A 0001520006 2023-01-01 2023-12-31 iso4217:USD 0001520006 2022-01-01 2022-12-31 0001520006 2021-01-01 2021-12-31 0001520006 2020-01-01 2020-12-31 0001520006 ecd:PeoMember ecd:EqtyAwrdsInSummryCompstnTblForAplblYrMember 2023-01-01 2023-12-31 0001520006 ecd:YrEndFrValOfEqtyAwrdsGrntdInCvrdYrOutsdngAndUnvstdMember ecd:PeoMember 2023-01-01 2023-12-31 0001520006 ecd:PeoMember ecd:ChngInFrValOfOutsdngAndUnvstdEqtyAwrdsGrntdInPrrYrsMember 2023-01-01 2023-12-31 0001520006 ecd:PeoMember ecd:ChngInFrValAsOfVstngDtOfPrrYrEqtyAwrdsVstdInCvrdYrMember 2023-01-01 2023-12-31 0001520006 ecd:EqtyAwrdsInSummryCompstnTblForAplblYrMember ecd:NonPeoNeoMember 2023-01-01 2023-12-31 0001520006 ecd:YrEndFrValOfEqtyAwrdsGrntdInCvrdYrOutsdngAndUnvstdMember ecd:NonPeoNeoMember 2023-01-01 2023-12-31 0001520006 ecd:NonPeoNeoMember ecd:ChngInFrValOfOutsdngAndUnvstdEqtyAwrdsGrntdInPrrYrsMember 2023-01-01 2023-12-31 0001520006 ecd:ChngInFrValAsOfVstngDtOfPrrYrEqtyAwrdsVstdInCvrdYrMember ecd:NonPeoNeoMember 2023-01-01 2023-12-31 0001520006 2 2023-01-01 2023-12-31 0001520006 1 2023-01-01 2023-12-31 0001520006 3 2023-01-01 2023-12-31 0001520006 4 2023-01-01 2023-12-31 0001520006 5 2023-01-01 2023-12-31 +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +Washington, D.C. 20549 +SCHEDULE 14A +Proxy Statement Pursuant to Section 14(a) of the +Securities Exchange Act of 1934 +(Amendment No. ) +Filed by the Registrant ☒ +Filed by a Party other than the Registrant ☐ +Check the appropriate box: +☐ Preliminary Proxy Statement +☐ Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +☒ Definitive Proxy Statement +☐ Definitive Additional Materials +☐ Soliciting Material Pursuant to §240.14a-12 +Matador Resources Company +(Name of Registrant as Specified In Its Charter) +(Name of Person(s) Filing Proxy Statement, if other than the Registrant) +Payment of Filing Fee (Check the appropriate box): +☒ No fee required. +☐ Fee paid previously with preliminary materials. +☐ Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11 +2024 +Notice of Annual Meeting of Shareholders and +Proxy Statement +June 13, 2024 | Dallas, Texas +One Lincoln Centre +5400 LBJ Freeway, Suite 1500 +Dallas, Texas 75240 +www.matadorresources.com +NOTICE OF ANNUAL MEETING OF SHAREHOLDERS +To Be Held on June 13, 2024 +To the Matador Resources Company Shareholders: +Please join us for the 2024 Annual Meeting of Shareholders of Matador Resources Company. The meeting will be held at the Hilton Anatole, Imperial Ballroom, 2201 N. Stemmons Freeway, Dallas, Texas 75207, on Thursday , June 13, 2024 , at 9:30 a.m., Central Daylight Time . +At the meeting, you will hear a report on our business and act on the following matters: +(1) Election of the four nominees for director named in the attached Proxy Statement; +(2) Advisory vote to approve the compensation of our named executive officers as described in the attached Proxy Statement; +(3) Advisory vote on the frequency of future advisory votes to approve named executive officer compensation; +(4) Ratification of the appointment of KPMG LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2024; and +(5) Any other matters that may properly come before the meeting. +All shareholders of record at the close of business on April 16, 2024 are entitled to vote at the meeting or any postponement or adjournment of the meeting. A list of the shareholders of record is available at the Company’s offices in Dallas, Texas. +By Order of the Board of Directors, +Joseph Wm. Foran +Chairman and Chief Executive Officer +April 26, 2024 +YOUR VOTE IS IMPORTANT! +Whether or not you will attend the meeting, please vote as promptly as possible by using the Internet or telephone or by signing, dating and returning your proxy card to the address listed on the card. +Important Notice Regarding the Availability of Proxy Materials for the +Annual Meeting of Shareholders to Be Held on June 13, 2024: +Our Proxy Statement and the Annual Report to Shareholders for the fiscal year ended December 31, 2023 are available for viewing, printing and downloading at https://materials.proxyvote.com/576485 . +TABLE OF CONTENTS +TABLE OF CONTENTS +Page Page +Proxy Statement +2 +Letter to Shareholders +49 +Proxy Summary +4 +Executive Compensation +50 +Information About the Annual Meeting +9 +Compensation Discussion and Analysis +50 +Proposal 1 | Election of Directors +13 +Strategic Planning and Compensation Committee Report +68 +Director S kills & Experience +13 +Summary Compensation Table +69 +Nominees +15 +Grants of Plan-Based Awards Table +69 +Vote Required +18 +Outstanding Equity Awards at December 31, 2023 +71 +Directors Continuing in Office +19 +Option Exercises and Stock Vested +72 +Corporate Governance +25 +Potential Payments upon Termination or Change in Control +73 +Independence of Directors +25 +Chief Executive Officer Pay Ratio +77 +Majority Vote in Director Elections +26 +Pay Versus Performance +78 +Board Leadership Structure +26 +Director Compensation +82 +Board Committees +28 +Compensation for 2023-2024 +83 +Board's Role in Risk Oversight +33 +Director Stock Ownership Guidelines +83 +Environmental, Social, and Governance (ESG) Initiatives +33 +Securities Authorized for Issuance Under Equity Compensation Plans +84 +Strategic Planning and Compensation Committee Interlocks and Insider Participation +35 +Transactions With Related Persons +85 +Communications with Directors +36 +Security Ownership of Certain Beneficial Owners and Management +89 +Executive Officers and Other Senior Officers of the Company +36 +Additional Information +91 +Proposal 2 | Advisory Vote to Approve Named Executive Officer Compensation +44 +Delinquent Section 16(a) Reports +91 +Vote Required +44 +Shareholder Proposals for the 2025 Proxy Statement +91 +Proposal 3 | Advisory Vote on the Frequency of Future Advisory Votes to Approve Named Executive Officer Compensation +45 +Director Nominations or Other Business for Presentation at the 2025 Annual Meeting +91 +Proposal 4 | Ratification of the Appointment of KPMG LLP +46 +Annual Report on Form 10-K +92 +Fees of Independent Registered Public Accounting Firm for Fiscal Years 2023 and 2022 +46 +Other Business +93 +Report of the Audit Committee +47 +Annex A Non-GAAP Financial Measures +94 +Vote Required +48 +1 Matador Resources Company | 2024 Proxy Statement +PROXY STATEMENT +Matador Resources Company +One Lincoln Centre +5400 LBJ Freeway, Suite 1500 +Dallas, Texas 75240 +www.matadorresources.com +PROXY STATEMENT For +ANNUAL MEETING OF SHAREHOLDERS To Be Held on June 13, 2024 +This Proxy Statement is being mailed on or about April 26, 2024 to the shareholders of Matador Resources Company (“Matador” or the “Company”) in connection with the solicitation of proxies by the Board of Directors (the “Board”) of the Company to be voted at the Annual Meeting of Shareholders of the Company to be held at the Hilton Anatole, Imperial Ballroom, 2201 N. Stemmons Freeway, Dallas, Texas 75207, on June 13, 2024, at 9:30 a.m., Central Daylight Time (the “Annual Meeting” or the “2024 Annual Meeting”), or at any postponement or adjournment thereof, for the purposes set forth in the accompanying Notice of Annual Meeting of Shareholders. The address of the Company’s principal executive office is One Lincoln Centre, 5400 LBJ Freeway, Suite 1500, Dallas, Texas 75240. +If you are a shareholder of record, you may vote in person by attending the meeting, by completing and returning a proxy by mail or by using the Internet or telephone. You may vote your proxy by mail by marking your vote on the enclosed proxy card and following the instructions on the card. To vote your proxy using the Internet or telephone, see the instructions on the proxy form and have the proxy form available when you access the Internet website or place your telephone call. +The named proxies will vote your shares according to your directions. If you sign and return your proxy but do not make any of the selections, the named proxies will vote your shares: (i) FOR the election of the four nominees for director as set forth in this Proxy Statement, (ii) FOR the approval, on an advisory basis, of the compensation of the Company’s named executive officers as disclosed in this Proxy Statement, (iii) for future advisory votes on named executive officer compensation (the “Frequency Vote”) to occur EVERY YEAR and (iv) FOR the ratification of KPMG LLP as the independent registered public accounting firm of the Company for the year ending December 31, 2024. Your proxy may be revoked at any time before it is exercised by filing with the Company a written revocation addressed to the Corporate Secretary, by executing a proxy bearing a later date or by attending the Annual Meeting and voting in person. +The cost of soliciting proxies will be borne by the Company. In addition to the use of postal services and the Internet, proxies may be solicited by directors, officers and employees of the Company (none of whom will receive any additional compensation for any assistance they may provide in the solicitation of proxies) in person or by telephone. +The outstanding voting securities of the Company consist of issued and outstanding common stock, par value $0.01 per share (the “Common Stock”). The record date for the determination of the shareholders entitled to notice of and to vote at the Annual Meeting, or any postponement or adjournment thereof, has been established by the Board as the close of business on April 16, 2024 (the “Record Date”). As of the Record Date, there were 124,780,249 shares of Common Stock outstanding and entitled to vote. +The presence, in person or by proxy, of the holders of record of a majority of the outstanding shares entitled to vote is necessary to constitute a quorum for the transaction of business at the Annual Meeting, but if a quorum should not be present, the meeting may be adjourned from time to time until a quorum is obtained. A holder of Common Stock will be entitled to one vote per share on each matter properly brought before the meeting. Cumulative voting is not permitted in the election of directors. +The proxy card provides space for a shareholder to abstain with respect to any or all nominees for the Board. The affirmative vote of a majority of the votes cast by holders of shares present in person or represented by proxy and entitled to vote on the election of directors at the Annual Meeting is required for the election of each nominee for director. With respect to the election of directors in an uncontested election, such as that being held at the Annual Meeting, “majority of the votes cast” means the number of votes cast “for” the election of such nominee exceeds the number of votes cast “against” such nominee. See “Corporate Governance—Majority Vote in Director Elections” for additional information regarding election of directors. +2 Matador Resources Company | 2024 Proxy Statement +With respect to the Frequency Vote, because this vote is non-binding, the choice receiving the greatest number of votes will be considered the frequency recommended by the Company’s shareholders, even if that choice does not receive a majority of the votes. +The other proposals require the affirmative vote of a majority of the shares of Common Stock present in person or represented by proxy and entitled to vote at the meeting. Shares held by a shareholder who abstains from voting on any or all proposals will be included for the purpose of determining the presence of a quorum. Other than with respect to the election of directors and the Frequency Vote, an abstention will effectively count as a vote cast against the remaining proposals. Broker non-votes on any matter as to which the broker has indicated on the proxy that it does not have discretionary authority to vote will be treated as shares not entitled to vote with respect to that matter. However, such shares will be considered present and entitled to vote for quorum purposes so long as they are entitled to vote on at least one other matter. +3 Matador Resources Company | 2024 Proxy Statement +PROXY SUMMARY +This summary highlights information contained elsewhere in this Proxy Statement. This summary does not contain all of the information that you should consider, and you should read the entire Proxy Statement carefully prior to voting. For more complete information regarding our 2023 performance, please review our Annual Report on Form 10-K for the year ended December 31, 2023. +2024 Annual Meeting of Shareholders +DATE AND TIME: LOCATION RECORD DATE: VOTING: +June 13, 2024 at 9:30 a.m., Central Daylight Time +Hilton Anatole +Imperial Ballroom +2201 N. Stemmons Freeway +Dallas, Texas 75207 +April 16, 2024 +Shareholders as of the close of business on the Record Date are entitled to vote. Each share of Common Stock is entitled to one vote at the Annual Meeting. +Proposal Board Recommendation +Election of Four Director Nominees (page 15 ) +FOR +Advisory Vote to Approve Named Executive Officer Compensation (page 44 ) +FOR +Advisory Vote on the Frequency of Future Advisory Votes to Approve Named Executive Officer Compensation (page 45 ) +1 YEAR +Ratification of the Appointment of KPMG LLP as the Company’s Independent Registered Public Accounting Firm for 2024 (page 46 ) +FOR +2023 Business Highlights +The year 2023 was another outstanding year for Matador, including record oil and natural gas production, steadily decreasing costs and better-than-expected free cash flow. We utilized this free cash flow and the strength of our balance sheet, including over $500 million of cash at the beginning of 2023, to repay borrowings under the Credit Agreement (as defined below), make profitable investments in our oil and natural gas properties and our midstream businesses, including the acquisition of Advance Energy Partners Holdings, LLC (“Advance”), and pay a steadily increasing fixed dividend to our shareholders. +Advance Acquisition +On April 12, 2023, we completed the acquisition of Advance from affiliates of EnCap Investments L.P., including certain oil and natural gas properties, undeveloped acreage and midstream assets located primarily in Lea County, New Mexico and Ward County, Texas (the “Initial Advance Acquisition”). On December 1, 2023, we acquired additional interests from affiliates of EnCap Investments L.P., including overriding royalty interests and royalty interests in certain oil and natural gas properties located primarily in Lea County, New Mexico, most of which were included in the Initial Advance Acquisition (the “Advance Royalty Acquisition" and, together with the Initial Advance Acquisition, the “Advance Acquisition”). The Initial Advance Acquisition added approximately 18,500 net acres in the core of the northern Delaware Basin with approximately 99% of such acreage held by production and provided a significant increase in our drilling inventory with 206 gross (174 net) operated locations in our core target formations and an additional 38 gross (35 net) upside locations in the Wolfcamp D formation. This new acreage also provided further expansion opportunities for Pronto Midstream, LLC (“Pronto”), our wholly-owned midstream subsidiary operating in Lea County, New Mexico. +4 Matador Resources Company | 2024 Proxy Statement +Business Highlights +In part as a result of the Advance Acquisition, Matador grew its average daily production from approximately 100,000 barrels of oil and natural gas equivalent (“BOE”) per day in early January 2023 to just over 154,000 BOE per day in the fourth quarter of 2023. Matador also achieved record oil and natural gas reserves in 2023 as total proved oil and natural gas reserves increased 29%, or approximately 103.0 million BOE year-over-year, to a record high of 460.0 million BOE, as compared to 357.0 million BOE in 2022. +Production Growth +26% +24% +25% +increase in oil production +increase in natural gas production +increase in daily oil equivalent production +• A 26% increase in oil production to a record 27.5 million barrels (“Bbl”) of oil produced in 2023 from 21.9 million Bbl of oil produced in 2022. +• A 24% increase in natural gas production to a record 123.4 billion cubic feet (“Bcf”) of natural gas produced in 2023 from 99.3 Bcf of natural gas produced in 2022. +• A 25% increase in average daily oil equivalent production to a record 131,813 BOE per day, including 75,457 Bbl of oil per day and 338.1 million cubic feet (“MMcf”) of natural gas per day, in 2023, from 105,465 BOE per day, including 60,119 Bbl of oil per day and 272.1 MMcf of natural gas per day, in 2022. +• Continued drilling of longer laterals, with an average completed lateral length for operated wells turned to sales in 2023 of approximately 9,800 feet. +• Capital expenditures for drilling, completing and equipping wells (“D/C/E capital expenditures”) for 2023 of $1.16 billion, which was below our estimated range for 2023 D/C/E capital expenditures of $1.18 to $1.32 billion as provided on February 21, 2023 and was in the middle of the revised estimated range of $1.10 to $1.22 billion, as provided on July 25, 2023. +• Continued focus on increasing efficiency and innovation, including successfully implementing "simul-frac" operations, 100% dual-fuel utilization on Matador completed wells and successful execution on our first two "U-turn" two-mile lateral wells. +5 Matador Resources Company | 2024 Proxy Statement +Capital Resources and Financial Highlights +We achieved annual net income of $846.0 million and annual Adjusted EBITDA (a non-GAAP financial measure) of $1.85 billion in 2023 despite significantly lower realized weighted average oil and natural gas prices of $77.88 per barrel and $3.25 per Mcf in 2023 as compared to $96.32 per barrel and $7.98 per Mcf in 2022. San Mateo Midstream, LLC (“San Mateo”), our midstream joint venture, achieved its second-best annual net income of $131.0 million and record high annual Adjusted EBITDA (a non-GAAP financial measure) of $200.0 million in 2023. +Financial Strength +$1.05 Billion $0.20 $38.2 Million +new capital dividend per share in the fourth quarter performance incentives received from Five Point +• The generation of free cash flow in all four quarters of 2023. +• The amendment of our dividend policy in the fourth quarter of 2023, pursuant to which we increased the quarterly cash dividend from $0.15 per share of Common Stock to $0.20 per share of Common Stock. +• The receipt of $38.2 million in performance incentives directly from Five Point Energy, LLC, our joint venture partner in San Mateo (“Five Point”). +• The issuance of $500.0 million in aggregate principal amount of 6.875% senior notes due 2028 (the "2028 Notes"). +• The revision of our Fourth Amended and Restated Credit Agreement (the “Credit Agreement”) at our spring and fall redetermination processes to collectively (i) increase the borrowing base to $2.50 billion, as compared to $2.25 billion at December 31, 2022, (ii) increase the elected borrowing commitment to $1.325 billion, as compared to $775.0 million at December 31, 2022, (iii) increase the maximum facility amount to $2.00 billion, as compared to $1.50 billion at December 31, 2022 and (iv) add two new banks to our lending group. +• The amendment of San Mateo’s revolving credit facility (the “San Mateo Credit Facility”) in October 2023 to +(i) increase the lender commitments from $485.0 million to $535.0 million and (ii) add a new bank to San Mateo’s lending group. +6 Matador Resources Company | 2024 Proxy Statement +Environmental, Social and Governance (“ESG”) Initiatives (page 33 ) +At Matador, we are committed to creating long-term value in a responsible manner. Our aim is to reliably and profitably provide the energy that society needs in a manner that is safe, protects the environment and is consistent with the industry’s best practices and the highest applicable regulatory and legal standards. In alignment with this goal, we maintain an active ESG program that is overseen and supported by senior management and the Board’s Environmental, Social and Corporate Governance Committee. In October 2023, we were pleased to issue Matador’s annual Sustainability Report, which included quantitative metrics aligned with standards developed by an industry leader, the Sustainability Accounting Standards Board (“SASB”). For additional information on the Company’s ESG efforts, see “Corporate Governance—Environmental, Social and Governance (ESG) Initiatives” on page 33 . Information included in our Sustainability Report is not incorporated into this Proxy Statement. +Director Nominees (page 15 ) +Our Board currently has 11 members and is divided into three classes of directors, designated Class I, Class II and Class III. Directors are elected for three-year terms. The table below provides certain summary information about each nominee for director named in this Proxy Statement: +Name Age Director Since Principal Occupation Committee Memberships +William M. Byerley* 70 2016 Retired Partner, PricewaterhouseCoopers LLP (PwC) A,ESG,MM +Monika U. Ehrman* 46 2019 Professor of Law, Southern Methodist University Dedman School of Law ESG,E,SPC,MM,O,P +Kenneth L. Stewart* 70 2017 Retired EVP, Compliance and Legal Affairs, Children’s Health System of Texas; Retired Partner, Chair—United States, Norton Rose Fulbright US LLP ESG,E,SPC,CM +Susan M. Ward* 65 2024 Former Head, M&A and Commercial Finance, Shell Oil Company A,ESG,MM,P +* Independent Director +A Audit Committee +CM Capital Markets and Finance Committee +E Executive Committee +ESG Environmental, Social and Corporate Governance Committee +MM Midstream and Marketing Committee +O Operations and Engineering Committee +P Prospect Committee +SPC Strategic Planning and Compensation Committee +7 Matador Resources Company | 2024 Proxy Statement +Executive Compensation Highlights (page 50 ) +Our Executive Compensation Philosophy +Our compensation program is designed to reward, in both the short term and the long term, performance that contributes to the implementation of our business strategies, maintenance of our culture and values and achievement of our objectives. In addition, we reward qualities that we believe help achieve our business strategies such as: +• teamwork; +• recruiting and mentoring future leaders within Matador to drive long-term shareholder value; +• individual performance in light of general economic and industry-specific conditions; +• relationships with shareholders and vendors; +• level of job responsibility; +• industry experience; +• general professional growth; and +• the ability to: +◦ manage and enhance production from our existing assets; +◦ explore new opportunities to increase oil and natural gas production; +◦ identify and acquire additional acreage; +◦ improve total shareholder returns; +◦ increase year-over-year proved reserves; +◦ control unit production costs; and +◦ pursue midstream opportunities. +For a discussion of our executive compensation program, see “Executive Compensation— Compensation Discussion and Analysis” beginning on page 50 . +8 Matador Resources Company | 2024 Proxy Statement +INFORMATION ABOUT THE ANNUAL MEETING +INFORMATION ABOUT THE ANNUAL MEETING +We are furnishing you this Proxy Statement in connection with the solicitation of proxies by the Board to be used at the Annual Meeting and any adjournment thereof. The Annual Meeting will be held on Thursday, June 13, 2024, at 9:30 a.m., Central Daylight Time. We are sending this Proxy Statement to our shareholders on or about April 26, 2024. +All references in this Proxy Statement to “we,” “our,” “us,” “Matador” or the “Company” refer to Matador Resources Company, including our subsidiaries and affiliates. +What is the purpose of the Annual Meeting? +At the Annual Meeting, shareholders will act upon the following matters outlined in the Annual Meeting notice: +• the election of the four nominees for director named in this Proxy Statement; +• an advisory vote to approve the compensation of our named executive officers as described herein; +• an advisory vote on the frequency of future advisory votes to approve the compensation of our named executive officers; +• the ratification of the appointment of KPMG LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2024; and +• any other matters that may properly come before the meeting. +What are the Board’s voting recommendations? +• FOR the election of the four nominees for director named in this Proxy Statement; +• FOR the approval, on an advisory basis, of the compensation of the Company’s named executive officers; +• FOR , on an advisory basis, future advisory votes to approve the compensation of the Company’s named executive officers to occur EVERY YEAR ; and +• FOR the ratification of the appointment of KPMG LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2024. +Who is entitled to vote? +Shareholders as of the close of business on April 16, 2024 are eligible to vote their shares at the Annual Meeting. As of the Record Date, there were 124,780,249 shares of our Common Stock outstanding. Each share of Common Stock is entitled to one vote at the Annual Meeting. +9 Matador Resources Company | 2024 Proxy Statement +Why did I receive a Notice Regarding the Internet Availability of Proxy Materials in the mail instead of a full set of proxy materials? +Securities and Exchange Commission (“SEC”) rules allow companies to furnish proxy materials over the Internet. We have elected to send a separate Notice of Internet Availability of Proxy Materials (the “Notice”) to most of our shareholders instead of a paper copy of the proxy materials. This approach conserves natural resources and reduces the costs of printing and distributing our proxy materials while providing shareholders with a convenient way to access our proxy materials. Instructions on how to access the proxy materials over the Internet or to request a paper copy of proxy materials, including a proxy card or voting instruction form, may be found in the Notice. In addition, shareholders may request to receive future proxy materials in printed form by mail or electronically by email by following the instructions in the Notice. A shareholder’s election to receive proxy materials by mail or email will remain in effect until the shareholder terminates it. +How do I vote? +You may: +• attend the Annual Meeting and vote in person; +• dial the toll-free number listed on the Notice, proxy card or voting instruction form provided by your broker. Easy-to-follow voice prompts allow you to vote your shares and confirm that your voting instructions have been properly recorded. Telephone voting will be available 24 hours a day and will close at 11:59 p.m., Eastern Daylight Time, on June 12, 2024; +• go to the website www.proxyvote.com and follow the instructions, then confirm that your voting instructions have been properly recorded. If you vote using the website, you can request electronic delivery of future proxy materials. Internet voting will be available 24 hours a day and will close at 11:59 p.m., Eastern Daylight Time, on June 12, 2024; or +• if you received a paper copy of your proxy materials and elect to vote by written submission, mark your selections on the proxy card, date and sign it, and return the card in the pre-addressed, postage-paid envelope provided. +Why did I receive paper copies of proxy materials? +We are providing certain shareholders with paper copies of the proxy materials instead of a separate Notice. If you received a paper copy and would no longer like to receive printed proxy materials, you may consent to receive all future proxy materials electronically via email or the Internet. To sign up for electronic delivery, please follow the instructions provided in your proxy materials. When prompted, indicate that you agree to receive or access shareholder communications electronically in the future. +Will each shareholder in our household receive proxy materials? +Generally, no. To the extent you are receiving printed proxy materials, we try to provide only one set of proxy materials to be delivered to multiple shareholders sharing an address, unless you have given us other instructions. Any shareholder at a shared address may request delivery of single or multiple copies of printed proxy materials for future meetings by contacting us at: +Matador Resources Company +Attention: Investor Relations +5400 LBJ Freeway, Suite 1500 +Dallas, Texas 75240 +Email: investors@matadorresources.com +Telephone: (972) 371-5200 +We undertake to deliver promptly, upon written or oral request, a copy of proxy materials to a shareholder at a shared address to which a single copy of the proxy materials was delivered. Requests should be directed to Investor Relations at the address or phone number set forth above. +10 Matador Resources Company | 2024 Proxy Statement +Who will be admitted to the Annual Meeting? +Admission to the Annual Meeting will be limited to our shareholders of record, persons holding proxies from our shareholders, beneficial owners of our Common Stock and our employees. If your shares are registered in your name, we will verify your ownership at the meeting in our list of shareholders as of the Record Date. If your shares are held through a broker, bank or other nominee, you must bring proof of your ownership of the shares. This proof could consist of, for example, a bank or brokerage firm account statement or a letter from your bank or broker confirming your ownership as of the Record Date. You may also send proof of ownership to us at Matador Resources Company, Attention: Corporate Secretary, 5400 LBJ Freeway, Suite 1500, Dallas, Texas 75240, or email: investors@matadorresources.com, before the Annual Meeting, and we will send you an admission card. +If I vote via telephone or the Internet or by mailing my proxy card, may I still attend the Annual Meeting? +Yes. +What if I want to change my vote? +You may revoke your proxy before it is voted by submitting a new proxy with a later date (by mail, telephone or the Internet), by voting at the Annual Meeting or by filing a written revocation with our Corporate Secretary. Your attendance at the Annual Meeting will not automatically revoke your proxy. +What constitutes a quorum? +A majority of the shares entitled to vote, present in person or represented by proxy, constitutes a quorum. If you vote by telephone or Internet or by returning your proxy card, you will be considered part of the quorum. The Inspector of Election will treat shares represented by a properly executed proxy as present at the meeting. Abstentions and broker non-votes will be counted for purposes of determining a quorum. A broker non-vote occurs when a nominee holding shares for a beneficial owner submits a proxy but does not vote on a particular proposal because the nominee does not have discretionary voting power for that item and has not received instructions from the beneficial owner. +How many votes will be required to approve a proposal? +The affirmative vote of a majority of the votes cast by holders of shares of Common Stock present in person or represented by proxy and entitled to vote on the election of directors at the Annual Meeting is required for the election of each nominee for director. With respect to the election of directors in an uncontested election, such as that being held at the Annual Meeting, “majority of the votes cast” means the number of votes cast “for” such nominee exceeds the number of votes cast “against” such nominee. +With respect to the Frequency Vote, because this vote is non-binding, the choice receiving the greatest number of votes will be considered the frequency recommended by the Company’s shareholders, even if that choice does not receive a majority of the votes. +With respect to all other matters, the affirmative vote of the holders of a majority of the shares of Common Stock, present in person or represented by proxy and entitled to vote at the Annual Meeting, is required. +Shares cannot be voted at the Annual Meeting unless the holder of record is present in person or represented by proxy. +11 Matador Resources Company | 2024 Proxy Statement +Can brokers who hold shares in street name vote those shares if they have received no instructions? +Under the rules of the New York Stock Exchange (“NYSE”), brokers may not vote the shares held by them in street name for their customers and for which they have not received instructions, except with respect to a routine matter. The only matter to be voted on at the Annual Meeting that is considered routine for these purposes is the ratification of the appointment of our independent registered public accounting firm. Accordingly, brokers may not vote your shares on any other matter if you have not given specific instructions as to how to vote. Please be sure to give specific voting instructions to your broker so that your vote will be counted. +How will you treat abstentions and broker non-votes? +Shares of a shareholder who abstains from voting on any or all proposals will be included for the purpose of determining the presence of a quorum. Other than with respect to the election of directors and the Frequency Vote, an abstention will effectively count as a vote cast against the remaining proposals. Broker non-votes on any matter, as to which the broker has indicated on the proxy that it does not have discretionary authority to vote, will be treated as shares not entitled to vote with respect to that matter. However, such shares will be considered present and entitled to vote for quorum purposes so long as they are entitled to vote on at least one other matter. +Who pays the solicitation expenses? +We will bear the cost of solicitation of proxies. Proxies may be solicited by mail or personally by our directors, officers or employees, none of whom will receive additional compensation for such solicitation. Those holding shares of Common Stock of record for the benefit of others, or nominee holders, are being asked to distribute proxy soliciting materials to, and request voting instructions from, the beneficial owners of such shares. We will reimburse nominee holders for their reasonable out-of-pocket expenses. +Where can I find the voting results of the Annual Meeting? +We will announce preliminary voting results at the Annual Meeting, and we will publish final results in a Current Report on Form 8-K that will be filed with the SEC within four business days of the Annual Meeting. You may obtain a copy of this and other reports free of charge at www.matadorresources.com, by contacting our Investor Relations Department at (972) 371-5200 or investors@matadorresources.com or by accessing the SEC’s website at www.sec.gov. +Will the Company’s independent registered public accounting firm be available at the Annual Meeting to respond to questions? +Yes. The Audit Committee of the Board has appointed KPMG LLP to serve as our independent registered public accounting firm for the year ending December 31, 2024. Representatives of KPMG LLP will be present at the Annual Meeting. They will have an opportunity to make a statement, if they desire to do so, and will be available to respond to appropriate questions . +Where can I contact the Company? +Our mailing address is: +Matador Resources Company +Attention: Investor Relations +5400 LBJ Freeway, Suite 1500 +Dallas, Texas 75240 +Our telephone number is (972) 371-5200. +12 Matador Resources Company | 2024 Proxy Statement +PROPOSAL 1 +PROPOSAL 1 | ELECTION OF DIRECTORS +The Board currently consists of 11 members and is divided into three classes of directors, designated Class I, Class II and Class III, with the term of office of each director ending on the date of the third annual meeting following the annual meeting at which such director’s class was elected. The number of directors in each class will be as nearly equal as possible. The Class I directors are William M. Byerley, Monika U. Ehrman, Julia P. Forrester Rogers and Kenneth L. Stewart. Each of Ms. Ehrman and Messrs. Byerley and Stewart is a Class I director nominee at the 2024 Annual Meeting, in each case, to hold office until the 2027 Annual Meeting of Shareholders or his or her earlier death, retirement, resignation or removal. Ms. Rogers’ term will expire at the 2024 Annual Meeting. The Class II directors are Shelley F. Appel, R. Gaines Baty, James M. Howard and Susan M. Ward. The terms of Ms. Appel and Messrs. Baty and Howard will each continue until the 2025 Annual Meeting of Shareholders or his or her earlier death, retirement, resignation or removal. Ms. Ward was appointed to the Board following the 2023 Annual Meeting and is therefore a Class II nominee at the 2024 Annual Meeting, to hold office until the 2025 Annual Meeting of Shareholders or her earlier death, retirement, resignation or removal. The Class III directors are Joseph Wm. Foran, Reynald A. Baribault and Timothy E. Parker, the terms of whom will each continue until the 2026 Annual Meeting of Shareholders or his earlier death, retirement, resignation or removal. +The Board believes that each of the director nominees possesses the qualifications described below in “Corporate Governance—Board Committees—Nominating Committee.” That is, the Board believes that each nominee possesses: +• deep experience at the policy making level in business, government or education; +• the availability and willingness to devote adequate time to Board duties; +• the character, judgment and ability to make independent analytical, probing and other inquiries; +• a willingness to exercise independent judgment along with a willingness to listen and learn from others; +• business knowledge and experience that provides a balance with the other directors; +• financial independence; and +• excellent past performance on the Board. +13 Matador Resources Company | 2024 Proxy Statement +Director Skills & Experience +Foran Parker Baty Appel Baribault Byerley Ehrman Howard Rogers Stewart Ward +Director Skills & Experience +Senior Leadership • • • • • • • • • • +Energy Industry • • • • • • • • • +Finance & Accounting • • • • • • • • +Human Capital Management • • • • • • • • • +Legal, Regulatory & Environmental • • • • • • • • • +Risk Assessment & Management • • • • • • • • • • • +Strategic Planning • • • • • • • • • • +Corporate Governance & Ethics • • • • • • • • • • • +Capital Markets & M&A • • • • • • • • +Demographic Background +Board Tenure 21 6 8 1 10 8 5 3 7 7 0 +Age 1 +71 49 73 34 60 70 46 73 64 70 65 +Gender Diversity • • • • +Racial/Ethnic Diversity • +(1) As of April 16, 2024. +The information provided below is biographical information about each of the nominees, as well as a description of the experience, qualifications, attributes or skills that led the Board to conclude that the individual should be nominated for election as a director of the Company. No director or director nominee currently holds, or has held within the past five years, any other directorships with public companies. +14 Matador Resources Company | 2024 Proxy Statement +PROPOSAL 1 +Nominees +M R . W ILLIAM M. B YERLEY +Retired Partner, PricewaterhouseCoopers LLP (PwC) +Class I +Biographical Information: +Mr. Byerley was appointed to the Board in 2016 and is chair of the Board’s Audit Committee. Mr. Byerley retired from PricewaterhouseCoopers LLP (PwC) in 2014. From 1988 through 2014, Mr. Byerley was a Partner with PwC, serving as an Assurance Partner on various audit engagements primarily for energy sector clients. From 1988 through 1990, Mr. Byerley served in the PwC National Office Accounting Services Group. Mr. Byerley received a Bachelor of Business Administration degree in 1975 and a Master of Business Administration degree in 1976, both from Southern Methodist University. He is a licensed Certified Public Accountant. +Director +Director since: 2016 +Independent: Yes +Age: 70 +Committees: Qualifications: +• Audit (Chair) +Mr. Byerley’s extensive experience in public accounting and longtime service to energy sector clients of PwC provide the Board with invaluable financial and accounting expertise, particularly for oil and natural gas companies, as well as strong accounting and financial oversight and risk management expertise. +• Environmental, Social and Corporate Governance +• Marketing and Midstream +15 Matador Resources Company | 2024 Proxy Statement +M S. M ONIKA U. E HRMAN +Professor of Law, Southern Methodist University Dedman School of Law +Class I +Biographical Information: +Professor Ehrman was appointed to the Board in 2019 and is co-chair of the Board’s Marketing and Midstream Committee. She is Professor of Law, Southern Methodist University Dedman School of Law, and a Professor of Engineering (by courtesy), Southern Methodist University Lyle School of Engineering. Prior to joining SMU, in 2023, she was Associate Professor of Law, University of North Texas at Dallas College of Law and a tenured Professor of Law at the University of Oklahoma College of Law, where she led the Oil & Gas, Natural Resources, and Energy (ONE) Program and served as the Faculty Director of the ONE Center. While at OU, she taught in the J.D. and graduate programs at the College of Law and in the Executive Energy Management Program at the Price College of Business. Professor Ehrman joined the University of Oklahoma College of Law in 2013 as Associate Professor of Law. Prior to teaching, she served as in-house legal counsel for two oil and natural gas companies from 2008 to 2012 and as an associate oil and natural gas attorney at an international law firm from 2005 to 2008. Before law school, Professor Ehrman worked as a petroleum engineer in the upstream, midstream and pipeline sectors of the energy industry. In addition to serving on various oil and natural gas law committees, she also served as an Editor of the Oil and Gas Reporter for the Institute for Energy Law. Professor Ehrman is currently Treasurer and on the Executive Committee of the Foundation for Natural Resources and Energy Law, and she is on the Editorial Board of the Journal of World Energy Law & Business (published by Oxford University Press). Professor Ehrman received her Bachelor of Science degree in Petroleum Engineering from the University of Alberta; J.D. from Southern Methodist University Dedman School of Law; and Master of Laws degree from Yale Law School. +Director +Director since: 2019 +Independent: Yes +Age: 46 +Committees: +• Marketing and Midstream (Co-Chair) +• Environmental, Social and Corporate Governance +• Executive +• Operations and Engineering +• Prospect +• Strategic Planning and Compensation +Qualifications: +Professor Ehrman provides valuable insight to our Board on our engineering and midstream operations as well as legal and governance matters. +16 Matador Resources Company | 2024 Proxy Statement +M R . K ENNETH L. S TEWART +Retired EVP, Compliance and Legal Affairs, Children’s Health System of Texas; Retired Partner, Chair—United States, Norton Rose Fulbright US LLP +Class I +Biographical Information: +Mr. Stewart was appointed to the Board in 2017. Mr. Stewart was most recently employed as Executive Vice President, Compliance and Legal Affairs, for Children’s Health System of Texas from January 1, 2019 until he retired on January 2, 2021. At that time, Children’s Health System of Texas and its affiliates constituted one of the ten largest pediatric hospital systems in the United States. Previously, effective December 31, 2018, Mr. Stewart retired from Norton Rose Fulbright US LLP, the United States operations of Norton Rose Fulbright, an international legal practice, which then had over 3,700 legal professionals in over 50 cities worldwide. At his retirement, Mr. Stewart was a Partner with Norton Rose Fulbright and held the position of Chair—United States. Mr. Stewart began his legal career with Fulbright & Jaworski LLP, the predecessor to Norton Rose Fulbright US LLP, and previously held positions of Global Chair of the international organization, Managing Partner of the United States region and Partner-in-Charge of the Dallas office. Prior to entering into full-time management for his firm in 2012, he engaged in a domestic and international transactional legal practice, focusing principally on merger, acquisition, financing and joint venture activities for both public and privately-held entities. Mr. Stewart has extensive experience representing and advising companies and their executive officers and boards of directors engaged in oil and natural gas exploration and midstream activities. Since his retirement from Norton Rose Fulbright, Mr. Stewart has acted, and from time to time continues to act, on a limited basis as an independent contractor senior business consultant to family offices for which he provided services during his legal career. Mr. Stewart graduated from the University of Arkansas School of Business in 1976 with a Bachelor of Science in Business Administration degree in Accounting and was licensed as a Certified Public Accountant in Texas in 1981 (certificate now on non-practice status). He graduated with honors from Vanderbilt Law School in 1979 and was a member of the Order of the Coif. Mr. Stewart has been active in numerous civic and professional organizations in the Dallas area in the past, including among others, the Dallas Regional Chamber, The Center for American and International Law and the Dallas Citizens Council. +Director +Director since: 2017 +Independent: Yes +Age: 70 +Committees: +• Capital Markets and Finance +• Environmental, Social and Corporate Governance +• Executive +• Strategic Planning and Compensation +Qualifications: +Mr. Stewart’s extensive experience representing public companies, and particularly oil and natural gas companies, along with his years of management experience, provide our Board with important legal, corporate governance and leadership insight. +17 Matador Resources Company | 2024 Proxy Statement +M S . S USAN M. W ARD +Former Head, M&A and Commercial Finance, Shell Oil Company +Class II +Biographical Information: +Ms. Ward was appointed to the Board in 2024. Ms. Ward is a former 12-year Senior Executive of Shell Oil Company (“Shell”) with over 20 years of service at retirement in 2019. Her senior roles at Shell included Head, M&A and Commercial Finance for all of Shell’s businesses in the Americas; Vice President, Chief Financial Officer and Board member of Shell Midstream Partners, which she helped take public for Shell in 2014; and Vice President, Upstream Commercial Finance, Shell International Exploration & Production B.V. while based in The Hague for Royal Dutch Shell. She also served as a Board member of Shell’s deepwater drillship joint venture with Noble Corporation. Ms. Ward has been an independent, non-executive Board member of Crescent Midstream (“Crescent”) since July 2023. Crescent is an independent energy company providing offshore and onshore crude oil services in the Gulf of Mexico and Louisiana. Prior to joining Shell in 1998, Ms. Ward worked as an investment banker in the energy sector for 11 years, including as a Managing Director in the Natural Resources and Energy investment banking group of UBS Securities. She began her career working for Exxon as a refining process engineer and subsequently worked in Mobil’s Finance organization at its New York City headquarters. Ms. Ward earned a Bachelor of Chemical Engineering degree from Villanova University with honors and a Master of Business Administration in Finance with distinction from the Wharton School of the University of Pennsylvania. She has served on Villanova’s Board of Trustees since 2018. She has been a member of the National Association of Corporate Directors since 2016. +Director +Director since: 2024 +Independent: Yes +Age: 65 +Committees: +• Audit +• Environmental, Social and Corporate Governance +• Marketing and Midstream +• Prospect +Qualifications: +Mr. Ward’s extensive experience as a senior executive in the energy industry and midstream experience in particular provide our Board with industry, management and leadership insight. +Vote Required +The affirmative vote of a majority of the votes cast by holders of shares present in person or represented by proxy and entitled to vote on the election of directors at the Annual Meeting is required for the election of each nominee for director. With respect to the election of directors in an uncontested election, such as that being held at the Annual Meeting, “majority of the votes cast” means the number of votes cast “for” such nominee exceeds the number of votes cast “against” such nominee. If you hold your shares through a broker and you do not instruct the broker how to vote, your broker will not have the authority to vote your shares. Abstentions and broker non-votes will each be counted as present for purposes of determining the presence of a quorum. +The Board of Directors recommends that you vote FOR each of the nominees. +18 Matador Resources Company | 2024 Proxy Statement +PROPOSAL 1 +Directors Continuing in Office +Biographical information for our directors who are continuing in office is provided below. +M R . J OSEPH W M . F ORAN +Chairman and CEO, Matador Resources Company +Class III +Biographical Information: +Mr. Foran founded Matador Resources Company in July 2003 and since our founding has served as Chairman of the Board and Chief Executive Officer and, through March 31, 2022, Secretary. He is also chair of the Board’s Executive Committee. Mr. Foran began his career as an oil and natural gas independent in 1983 when he and his wife, Nancy, founded Foran Oil Company with $270,000 in contributed capital from 17 of his closest friends and neighbors. Foran Oil Company was later contributed into Matador Petroleum Corporation upon its formation by Mr. Foran in 1988, and Mr. Foran served as Chairman and Chief Executive Officer of that company from inception until the time of its sale to Tom Brown, Inc. in June 2003 for an enterprise value of $388 million in an all-cash transaction on a Friday. On the following Monday, Mr. Foran founded Matador Resources Company (Matador II). Today, Matador is one of the top 20 public exploration and production companies in the country by market capitalization and one of the top 10 oil and natural gas producers in New Mexico. Mr. Foran is originally from Amarillo, Texas, where his family owned a pipeline construction business. From 1980 to 1983, he was Vice President and General Counsel of J. Cleo Thompson and James Cleo Thompson, Jr., Oil Producers, a large independent producer. Prior to that time, he was a briefing attorney to Chief Justice Joe R. Greenhill of the Supreme Court of Texas. Mr. Foran graduated with a Bachelor of Science degree in Accounting from the University of Kentucky with highest honors and a law degree from the Southern Methodist University Dedman School of Law, where he was a Hatton W. Sumners scholar and the Leading Articles Editor on the Southwestern Law Review. He is currently active as a member of various industry and civic organizations, including his church and various youth activities. In 2002, Mr. Foran was honored as the Ernst & Young “Entrepreneur of the Year” for the Southwest Region. In 2015, he was inducted into the University of Kentucky Gatton College of Business and Economics Hall of Fame. In 2019, Mr. Foran received the SMU Dedman School of Law Distinguished Alumni Award for Corporate Service and was named D CEO Magazine’s 2019 Upstream CEO of the Year. In 2020, he was inducted into the Philosophical Society of Texas. He was also named to Institutional Investors’ All-American Executive Team as one of the top chief executive officers in the Small Cap Energy Division in 2021. +Chairman of the Board +Director since: 2003 +Independent: No +Age: 71 +Committees: +• Executive (Chair) +• Capital Markets and Finance +• Operations and Engineering +• Prospect +Qualifications: +As the founder, Chairman of the Board and Chief Executive Officer of Matador Resources Company, Mr. Foran provides Board leadership, industry experience and long relationships with many of our shareholders. +19 Matador Resources Company | 2024 Proxy Statement +M S. S HELLEY F. A PPEL +Former Senior Investors Relations Officer and Mergers & Acquisitions Manager, Royal Dutch Shell PLC +Class II +Biographical Information: +Ms. Appel was appointed to the Board in 2023 after serving as a Special Advisor to the Board since October 2022. Since January 2021, Ms. Appel has also served as Matador’s Environmental, Social and Governance (“ESG”) Coordinator. As ESG Coordinator, Ms. Appel is the primary author of the Company’s annual sustainability report. Following her graduation from business school at the University of Chicago, Ms. Appel joined Royal Dutch Shell PLC in August 2017 in the Mergers & Acquisitions group, where she served as a manager with responsibility for financial analysis—including valuation, structuring, negotiation and due diligence—for over $18 billion of acquisition and divestment opportunities. In December 2019, Ms. Appel was promoted to Senior Investor Relations Officer. In this role, Ms. Appel had responsibility for Shell’s global Upstream business narrative. She also served as an authorized spokesperson for Shell at investor meetings and conferences and managed relationships with North America based investors and research analysts. Following graduation from Yale and prior to attending the University of Chicago, Ms. Appel began her career at the parent company of the New York Stock Exchange, NYSE Euronext, as a business analyst in its Corporate Strategy group. She participated in the evaluation and implementation of its $11 billion merger with the Intercontinental Exchange Group and continued in the Corporate Strategy group of the combined company until June 2015. Ms. Appel holds a Bachelor of Arts degree, with honors, in Cognitive Science from Yale University and a Master of Business Administration degree from the Booth School of Business (University of Chicago). Ms. Appel served as Co-Chair of the Energy Group while attending the University of Chicago. +Director +Director since: 2023 +Independent: No +Age: 34 +Committees: +• Capital Markets and Finance +Qualifications: +Ms. Appel’s extensive knowledge and experience with the Company’s Environmental, Social and Governance initiatives and investor relations experience provides the Board valuable insight and leadership on these matters. +20 Matador Resources Company | 2024 Proxy Statement +M R . R EYNALD A. B ARIBAULT +President and CEO, IPR Energy Partners LLC +Class III +Biographical Information: +Mr. Baribault was elected to the Board in 2014 and is chair of the Board’s Operations and Engineering Committee and Prospect Committee. He served as lead independent director of the Board from 2016 to 2019. In 2007, he co-founded North Plains Energy, LLC, which operated in the North Dakota Williston Basin, and served as its Vice President until the successful sale of its assets in 2012. In 2014, Mr. Baribault helped co-found NP Resources, LLC, which also operated in the North Dakota Williston Basin, and served as its Executive Vice President / Engineering, helping oversee the sale of its assets in late 2021. In addition, he co-founded and serves as President and Chief Executive Officer of IPR Energy Partners, LLC, a Plano, Texas-based oil and natural gas production operator with current operations in the Fort Worth Basin. Prior to co-founding North Plains Energy, NP Resources and IPR Energy Partners, Mr. Baribault served as Vice President, Supervisor and Petroleum Engineering Consultant with Netherland, Sewell & Associates, Inc. in their Dallas office from 1990 to 2002. Mr. Baribault began his professional career as a reservoir engineer with Exxon Company in 1985 in the New Orleans Eastern Division Office. Mr. Baribault received his Bachelor of Science degree in Petroleum Engineering from Louisiana State University in 1985 and is a Licensed Professional Engineer in the State of Texas. +Director +Director since: 2014 +Independent: Yes +Age: 60 +Committees: +• Operations and Engineering (Chair) +• Prospect (Chair) +• Audit +• Executive +Qualifications: +• Nominating +Mr. Baribault provides valuable insight to our Board on our drilling, completions, production and reservoir engineering operations, as well as growth strategies, midstream operations and administration. +• Strategic Planning and Compensation +21 Matador Resources Company | 2024 Proxy Statement +M R . R. G AINES B ATY +CEO, R. Gaines Baty Associates, Inc. +Class II +Biographical Information: +Mr. Baty was appointed to the Board in 2016. He serves as deputy lead independent director and is chair of the Board’s Strategic Planning and Compensation Committee, Nominating Committee and Shareholder Advisory Committee for Board Nominations. Mr. Baty is CEO of R. Gaines Baty Associates, Inc., a leading executive search firm he founded in 1982 after working with the IBM Corporation. With over 30 years of experience, Mr. Baty has provided companies across the country and in a variety of industries with executive search and advisory services. Mr. Baty has served as a two-term President of the Society of Executive Recruiting Consultants and a two-term President of the Independent Recruiter Group. Mr. Baty is also a published author. Mr. Baty received a Bachelor of Business Administration degree from Texas Tech University, where he was a football team letterman, captain and, later, graduate assistant coach. +Deputy Lead Independent Director +Director since: 2016 +Independent: Yes +Age: 73 +Committees: +• Strategic Planning and Compensation (Chair) +• Nominating (Chair) +Qualifications: +• Executive +Mr. Baty’s experience and expertise in executive leadership and development provide our Board with an important and unique perspective on these matters, and Mr. Baty assists the Board and the Company with recruitment, board administration, compensation and growth strategies. +• Environmental, Social and Corporate Governance +22 Matador Resources Company | 2024 Proxy Statement +M R . J AMES M. H OWARD +Retired Trustee, Private Family Trust +Class II +Biographical Information: +Mr. Howard was appointed to the Board in 2021 and is co-chair of the Board’s Marketing and Midstream Committee. He retired in March 2020 from his long-time role as a trustee of a private family trust in Houston, Texas where, since 1999, he exercised sole responsibility for all trust assets and actions. The trust was comprised of over 40 privately held limited partnerships, limited liability companies and public market positions in various asset classes and sectors. From 2000 to 2020, Mr. Howard also served as trustee of a private secondary trust with a different mix of assets than the primary family trust. Prior to his work as a trustee, he served as Vice President of Texon, L.P. from 1996 to 2000, marketing all crude oil, condensate and liquefied petroleum gas for the company and its public utility joint venture partner. From 1986 to 1996, he served as Vice President of Tripetrol Oil Trading, Inc., through which he also served on the New York Mercantile Exchange (NYMEX) Crude Oil Advisory Committee. Mr. Howard previously served in other trading positions at various Houston-based trading and petroleum companies from 1975 to 1986. He received a Bachelor of Arts degree from Florida Presbyterian College and a Master of International Management degree from Thunderbird School of International Management. +Director +Director since: 2021 +Independent: Yes +Age: 73 +Committees: +• Marketing and Midstream (Co-Chair) +• Audit +• Capital Markets and Finance +Qualifications: +• Environmental, Social and Corporate Governance +Mr. Howard’s petroleum marketing and trading experience provide the Company with valuable insight, particularly with respect to its marketing activities and the Company's midstream operations. +23 Matador Resources Company | 2024 Proxy Statement +M R . T IMOTHY E. P ARKER +Former Portfolio Manager and Analyst—Natural Resources, T. Rowe Price & Associates +Class III +Biographical Information: +Mr. Parker was appointed to the Board in 2018, serves as lead independent director and is chair of the Board’s Capital Markets and Finance Committee. Mr. Parker currently serves as a contractor in charge of research for Brightworks Wealth Management, LLC. Mr. Parker retired in 2017 as Portfolio Manager and Analyst—Natural Resources for T. Rowe Price & Associates. Mr. Parker joined T. Rowe Price in 2001 as an equity analyst before becoming a portfolio manager in 2010. He managed the New Era fund from 2010 to 2013 and managed the energy and natural resources portions of T. Rowe Price’s Small Cap Value, Small Cap Stock and New Horizons funds from 2013 to 2017. Prior to joining T. Rowe Price, Mr. Parker was an investment banking analyst at Robert W. Baird & Co., Inc. Mr. Parker holds a Bachelor of Science degree in Commerce from the University of Virginia and a Master of Business Administration degree from the Darden School of Graduate Business (University of Virginia). +Lead Independent Director +Director since: 2018 +Independent: Yes +Age: 49 +Committees: +• Capital Markets and Finance (Chair) +• Audit +• Environmental, Social and Corporate Governance +• Executive +Qualifications: +• Nominating +Mr. Parker’s experience with a large institutional shareholder and his extensive familiarity with the oil and natural gas industry and capital markets provide the Company with valuable insight. +• Prospect +• Strategic Planning and Compensation +24 Matador Resources Company | 2024 Proxy Statement +CORPORATE GOVERNANCE +CORPORATE GOVERNANCE +The business affairs of Matador are managed under the direction of the Board in accordance with the Texas Business Organizations Code, the Company’s Amended and Restated Certificate of Formation (the “Certificate of Formation”) and its Amended and Restated Bylaws (the “Bylaws”), each as amended to date. The Board has adopted Corporate Governance Guidelines, which are reviewed annually by the Environmental, Social and Corporate Governance Committee of the Board. The Company has a Code of Ethics and Business Conduct for Officers, Directors and Employees (“Code of Ethics”), which is applicable to all officers, directors and employees of the Company. The Company intends to post any amendments to, and may post any waivers of, its Code of Ethics on the Company’s website to the extent applicable to an executive officer or a director of the Company. The Corporate Governance Guidelines and the Code of Ethics are available on the Company’s website at www.matadorresources.com under the heading “Investor Relations—Corporate Governance.” +The Board holds regular and special meetings and spends such time on the affairs of the Company as its duties require. During 2023, the Board held eight meetings. The Board also meets regularly in non-management executive sessions in accordance with NYSE regulations. The Corporate Governance Guidelines provide that one of the Company’s independent directors should serve as lead independent director at any time when the chief executive officer serves as the chairman of the board. The lead independent director presides over executive sessions of the non-management directors and the independent members of the Board (the “Independent Board”), serves as a liaison between the chairman and the independent directors and performs such additional duties as the Board may otherwise determine and delegate. Because Mr. Foran serves as Chairman of the Board and Chief Executive Officer, our independent directors have appointed Mr. Parker to serve as lead independent director and Mr. Baty to serve as deputy lead independent director. In 2023, all incumbent directors of the Company attended at least 75% of the meetings of the Board and the committees on which they served. It is our policy that each of our directors is expected to attend annual meetings of shareholders, except if unusual circumstances make attendance impractical. All of our directors attended the 2023 Annual Meeting. +Independence of Directors +The Board makes all determinations with respect to director independence in accordance with the NYSE listing standards and the rules and regulations promulgated by the SEC. The actual determination of whether a director is independent is made by the Board on a case-by-case basis. +In connection with its preparation for the Annual Meeting, the Board undertook its annual review of director independence and considered transactions and relationships between each director or any member of his or her immediate family and the Company and its subsidiaries and affiliates. In making its determination, the Board applied the NYSE listing standards and SEC rules and regulations. +The Board reviewed the independence of our directors and considered whether any director has a material relationship with us that could compromise his or her ability to exercise independent judgment in carrying out his or her responsibilities. After this review, our Board determined that nine of our 11 current directors are “independent directors” as defined under the rules of the SEC and the NYSE: Mmes. Ehrman, Rogers and Ward and Messrs. Baribault, Baty, Byerley, Howard, Parker and Stewart. No member of our Board other than Ms. Appel and Mr. Foran has a family relationship with any executive officer or other members of our Board. +25 Matador Resources Company | 2024 Proxy Statement +Majority Vote in Director Elections +On December 21, 2016, the Board amended the Bylaws to implement a majority voting standard in uncontested director elections. Pursuant to the Bylaws, in an election of directors at a meeting of shareholders at which a quorum is present, +(i) if the number of nominees exceeds the number of directors to be elected (a “contested election”), directors shall be elected by a plurality of the votes cast by the holders of shares present in person or represented by proxy and entitled to vote on the election of directors at such meeting and (ii) in an election of directors that is not a contested election (an “uncontested election”), such as that being held at the Annual Meeting, directors shall be elected by a majority of the votes cast by the holders of shares present in person or represented by proxy and entitled to vote on the election of directors at such meeting. For purposes of the Bylaws, in an uncontested election, a “majority of the votes cast” means that the number of shares voted “for” a director must exceed the number of votes cast “against” that director. Prior to the amendment of the Bylaws, directors were elected by a plurality of the votes cast, whether or not the election was a contested election. +In connection with the amendment to the Bylaws, the Board approved and adopted an amendment to the Company’s Corporate Governance Guidelines to implement a resignation policy for directors who fail to receive the required number of votes in an uncontested election in accordance with the Bylaws. Pursuant to the Corporate Governance Guidelines, as amended, in an uncontested election, any nominee for director who receives a greater number of votes “against” his or her election than votes “for” such election (a “majority against vote”) shall promptly tender his or her resignation following certification of the shareholder vote. +The Nominating Committee shall promptly consider the resignation offer and a range of possible responses based on the circumstances that led to the majority against vote, if known, and make a recommendation to the Board concerning whether to accept or reject such resignation. The Board shall act on the Nominating Committee’s recommendation and publicly disclose its decision with respect to such resignation offer within 90 days following certification of the shareholder vote. The resignation, if accepted by the Board, will be effective at the time specified by the Board when it determines to accept the resignation, which effective time may be deferred until a replacement director is identified and appointed to the Board. +Board Leadership Structure +Mr. Foran serves as Chairman of the Board and Chief Executive Officer of the Company. As stated in the Corporate Governance Guidelines, the Board does not believe that the offices of Chairman of the Board and Chief Executive Officer must be separate. The members of the Board possess experience and unique knowledge of the challenges and opportunities the Company faces. They are, therefore, in the best position to evaluate the current and future needs of the Company and to judge how the capabilities of the directors and senior managers can be most effectively organized to meet those needs. Given Mr. Foran’s deep knowledge of the Company and experience in leading it, the Board currently believes that the most effective leadership structure for the Company is to have Mr. Foran serve as Chairman of the Board and Chief Executive Officer. +Nine of our 11 directors are independent under the rules of the SEC and the NYSE. After considering the recommendations of our Strategic Planning and Compensation Committee, the independent directors determine Mr. Foran’s compensation. Further, the Company has five standing committees, a lead independent director (Mr. Parker) and a deputy lead independent director (Mr. Baty). The Board believes that each of these measures counterbalances any risk that may exist in having Mr. Foran serve as Chairman of the Board and Chief Executive Officer. For these reasons, the Board believes that this leadership structure is effective for the Company. +26 Matador Resources Company | 2024 Proxy Statement +As lead independent director, Mr. Parker has the following roles and responsibilities: +• chairs the executive sessions of the non-management and independent directors; +• leads the independent directors in the evaluation of the Chief Executive Officer; +• facilitates communication among the independent directors; and +• acts as a liaison between the independent directors and the Chief Executive Officer. +Mr. Parker, as lead independent director, may also perform such other duties as the Board or the Environmental, Social and Corporate Governance Committee from time to time may assign, which may include, but are not limited to, the following: +• help develop Board agendas and ensure critical issues are included; +• determine quality, quantity and timeliness of information from management; +• make recommendations about retaining consultants or advisors for the Board; +• interview Board candidates; +• oversee Board and director evaluations; and +• help improve communications and processes by and between management and the Board and the Chief Executive Officer. +Mr. Baty, as deputy lead independent director, may also carry out the above duties in the absence of or at the direction of Mr. Parker, as lead independent director. +27 Matador Resources Company | 2024 Proxy Statement +Board Committees +The standing committees of the Board are the Audit Committee, Environmental, Social and Corporate Governance Committee, Executive Committee, Nominating Committee and Strategic Planning and Compensation Committee. The Board has also established the following advisory committees: Capital Markets and Finance Committee, Marketing and Midstream Committee, Operations and Engineering Committee and Prospect Committee. Each of the standing committees is governed by a charter, and a copy of the charters of each of these committees is available on the Company’s website at www.matadorresources.com under the heading “Investor Relations—Corporate Governance.” Director membership of all of our standing and advisory committees is identified below, as of April 16, 2024. Ms. Rogers’ term as a director, and as a member of the committees noted below, will expire at the 2024 Annual Meeting. +Director Audit Environmental, Social and Corporate Governance Executive Nominating Strategic Planning and Compensation Capital Markets and Finance Marketing and Midstream Operations and Engineering Prospect +Joseph Wm. Foran C • • • +Shelley F. Appel • +Reynald A. Baribault • • • • C C +R. Gaines Baty • • C C +William M. Byerley C • • +Monika U. Ehrman • • • C • • +James M. Howard • • • C +Timothy E. Parker • • • • • C • +Julia P. Forrester Rogers • C • +Kenneth L. Stewart • • • • +Susan M. Ward • • • • +C +Committee Chair +• +Committee Member +Audit Committee +The Audit Committee assists the Board in monitoring: +• the integrity of our financial statements and disclosures; +• our compliance with legal and regulatory requirements; +• the qualifications and independence of our independent auditor; +• the performance of our internal audit function and our independent auditor; and +• our internal control systems. +In addition, the Audit Committee is charged with the (i) review of compliance with our Code of Ethics and (ii) oversight of the Company’s guidelines and policies to govern the process by which risk assessment and risk management are undertaken by management, including with respect to corporate governance, financial, accounting, operational, environmental, health and safety, regulatory and cybersecurity risks. +As of April 16, 2024, the Audit Committee consisted of Mmes. Rogers and Ward and Messrs. Baribault, Byerley, Howard and Parker, each of whom is independent under the rules of the SEC and the NYSE. Mr. Byerley is the chair of the Audit Committee. SEC rules require a public company to disclose whether or not its audit committee has an “audit committee financial expert” as defined by applicable SEC rules and regulations. Our Board has determined that each of Ms. Ward and Messrs. Byerley and Parker is an “audit committee financial expert.” During 2023, the Audit Committee met four times. +28 Matador Resources Company | 2024 Proxy Statement +Environmental, Social and Corporate Governance Committee +The Environmental, Social and Corporate Governance Committee is responsible for periodically reviewing and assessing our Corporate Governance Guidelines and Code of Ethics and making recommendations for changes thereto to the Board, reviewing any other matters related to our corporate governance, unless the authority to conduct such review has been retained by the Board or delegated to another committee, and overseeing the process for evaluation of the Board and management. The Environmental, Social and Corporate Governance Committee (formerly the Corporate Governance Committee), in conjunction with the Company’s Chief Executive Officer, also oversees and makes recommendations to the Board regarding sustainability matters relevant to the Company’s operations, including ESG-related matters. +As of April 16, 2024, the Environmental, Social and Corporate Governance Committee consisted of Mmes. Ehrman, Rogers and Ward and Messrs. Baty, Byerley, Howard, Parker and Stewart, each of whom is independent under the rules of the SEC and the NYSE. Ms. Rogers is the chair of the Environmental, Social and Corporate Governance Committee. Ms. Rogers’ term as a director, and as a member of the Environmental, Social and Corporate Governance Committee, will expire at the 2024 Annual Meeting. During 2023, the Environmental, Social and Corporate Governance Committee met two times. +Executive Committee +The Executive Committee has authority to discharge all the responsibilities of the Board in the management of the business and affairs of the Company, except where action of the full Board is required by statute or by our Certificate of Formation or Bylaws, each as amended to date. As of April 16, 2024, the Executive Committee consisted of Ms. Ehrman and Messrs. Foran, Baribault, Baty, Parker and Stewart. Mr. Foran is the chair of the Executive Committee. During 2023, the Executive Committee did not meet. +Nominating Committee +The Nominating Committee has the following responsibilities: +• identifies and recommends to the Board individuals qualified to be nominated for election to the Board consistent with criteria approved by the Board; and +• recommends to the Board the members and chair of each committee of the Board. +Pursuant to the Nominating Committee charter, no director may serve on the Nominating Committee if such director is subject to re-election to the Board at the next annual meeting of shareholders. +As of April 16, 2024, the Nominating Committee consisted of Messrs. Baty, Baribault and Parker, each of whom is independent under the rules of the SEC and the NYSE. Mr. Baty is the chair of the Nominating Committee. During 2023, the Nominating Committee met four times. +The Board has also established a Shareholder Advisory Committee for Board Nominations (the “Advisory Committee”) that is charged with receiving and considering possible nominees for election to the Board by shareholders. Pursuant to the Advisory Committee charter, this committee is comprised of eight to 12 persons selected by the Nominating Committee and consists of at least: +• two members of the Nominating Committee; +• two former members of or special advisors to the Board; +• two shareholders who beneficially own Common Stock having a market value of at least $1.0 million (such value to be based on the market value of the Common Stock immediately prior to designation of such shareholders to the Advisory Committee); and two shareholders who have beneficially owned Common Stock continuously for at least the five years prior to such shareholder’s designation to the Advisory Committee. +29 Matador Resources Company | 2024 Proxy Statement +The current members of the Advisory Committee are Messrs. Baty and Parker, J. Barry Banker, Joe E. Coleman, Walter Fister, Robert Garrett, David E. Lancaster, Bobby K. Pickard and George M. Yates. Mr. Baty is the chair of the Advisory Committee. +The Advisory Committee makes recommendations based on its conclusions to the Nominating Committee for its consideration and review. +The Nominating Committee and the Advisory Committee consider individuals recommended by the Company’s shareholders to serve on the Board in accordance with the advance notice provisions of the Bylaws and the applicable rules and regulations of the SEC and the NYSE. In considering candidates submitted by shareholders, the Advisory Committee and the Nominating Committee take into consideration the needs of the Board and the qualifications of the candidate. To have a candidate considered by the Advisory Committee and the Nominating Committee, a shareholder must submit the recommendation in writing and must include the following information: +• The name and address of the shareholder, evidence of the person’s ownership of Common Stock or derivatives, including the number of shares owned, a description of all arrangements or understandings regarding the right to vote shares of the Company, any short interest in any security of the Company, any rights to dividends that are separated or separable from the underlying shares, any proportionate interest in shares or derivatives held by a general or limited partnership whereby the shareholder is a general partner or beneficially owns an interest in the general partner, any performance-related fees (other than an asset-based fee) that the shareholder is entitled to based on any change in the value of the shares or derivatives, any other information relating to the shareholder that would be required to be disclosed in connection with solicitations of proxies for the election of directors in a contested election and a statement whether or not the shareholder will deliver a proxy to shareholders; and +• The name, age and business and residence addresses of the candidate, the candidate’s résumé or a listing of his or her qualifications to be a director of the Company, the person’s consent to be a director if selected by the Nominating Committee, nominated by the Board and elected by the shareholders and any other information that would be required to be disclosed in solicitations of proxies for the election of directors. +The shareholder recommendation and information described above, and in more detail in our Bylaws, must be sent to the Corporate Secretary at One Lincoln Centre, 5400 LBJ Freeway, Suite 1500, Dallas, Texas 75240 and must be received by the Corporate Secretary not fewer than 45 nor more than 75 days prior to the one year anniversary date of the date the Company’s proxy statement was mailed in connection with the previous year’s annual meeting of shareholders. +The Nominating Committee believes that a potential director of the Company must demonstrate that such candidate has: +• relevant knowledge and a depth and diversity of background and experience at the policy-making level in business, government or education; +• a balance of the business interest and experience of the incumbent or nominated directors; +• availability and willingness to devote adequate time to Board duties; +• any unfilled expertise needed on the Board or one of its committees; +• ability to make independent analytical, probing and other inquiries; +• personal qualities of leadership, character, judgment and a reputation in the community at large of integrity, trust, respect, competence and adherence to the highest ethical standards; +• willingness to exercise independent judgment while remaining willing to listen and learn from the other directors and the Company’s staff; and +• financial independence to ensure such candidate will not be financially dependent on director compensation. +In the case of an incumbent director, the Nominating Committee will also consider such director’s past performance on the Board. +30 Matador Resources Company | 2024 Proxy Statement +The Nominating Committee or the Advisory Committee may identify potential nominees by asking, from time to time, current directors and executive officers for their recommendation of persons meeting the criteria described above who might be available to serve on the Board. The Nominating Committee or the Advisory Committee may also engage firms that specialize in identifying director candidates. As described above, the Nominating Committee and Advisory Committee will also consider candidates recommended by shareholders. +Once a person has been identified by the Nominating Committee or the Advisory Committee as a potential candidate, the Nominating Committee or the Advisory Committee will make an initial determination regarding the need for additional Board members to fill vacancies or expand the size of the Board. If the Nominating Committee or the Advisory Committee determines that additional consideration is warranted, the Nominating Committee or the Advisory Committee will review such information and conduct interviews as it deems necessary to fully evaluate each director candidate. In addition to the qualifications of a candidate, the Nominating Committee or the Advisory Committee will consider such relevant factors as it deems appropriate, including the current composition of the Board, the evaluations of other prospective nominees and the need for any required expertise on the Board or one of its committees. The Nominating Committee or the Advisory Committee also contemplates multiple dynamics that promote and advance diversity among the members of the Board. Although the Nominating Committee does not have a formal diversity policy, the Nominating Committee considers a number of factors regarding diversity of personal and professional backgrounds, gender, race, age, specialized skills and acumen and breadth of experience in oil and natural gas exploration and production, midstream and marketing, executive leadership, accounting, finance or law. The Nominating Committee does not discriminate based upon race, religion, gender, national origin, age, disability, citizenship or any other legally protected status. The Nominating Committee’s evaluation process will not vary based on whether or not a candidate is recommended by a shareholder. +Strategic Planning and Compensation Committee +The Strategic Planning and Compensation Committee (the “Compensation Committee”) has the following responsibilities: +• assists the Board and the Independent Board in the discharge of their fiduciary responsibilities relating to the fair and competitive compensation of our executive officers; +• provides overall guidance with respect to the establishment, maintenance and administration of our compensation programs, including stock and benefit plans; +• oversees and advises the Board and the Independent Board on the adoption of policies that govern our compensation programs; +• recommends to the Board the strategic, tactical and performance goals of the Company, including those performance and tactical goals that relate to performance-based compensation, including but not limited to goals for production, reserves, cash flows and shareholder value; +• in conjunction with the Company’s CEO, oversees management succession planning; and +• produces and approves the annual Compensation Committee Report on executive compensation for inclusion in the Company’s Annual Report on Form 10-K and/or annual proxy statement in accordance with applicable rules and regulations of the SEC and the NYSE. +The Compensation Committee has the authority to form and delegate authority and responsibilities to subcommittees of its members, so long as any subcommittee consists of at least two members of the Compensation Committee. +As of April 16, 2024, the Compensation Committee consisted of Ms. Ehrman and Messrs. Baribault, Baty, Parker and Stewart, each of whom is independent under the rules of the SEC and the NYSE and a “non-employee director” pursuant to Rule 16b-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Mr. Baty is the chair of the Compensation Committee. During 2023, the Compensation Committee met six times. +31 Matador Resources Company | 2024 Proxy Statement +Capital Markets and Finance Committee +The Capital Markets and Finance Committee provides oversight of the Company’s financial objectives, financial policies, capital structure and financing requirements. As of April 16, 2024, the members of the Capital Markets and Finance Committee were Mmes. Appel and Rogers and Messrs. Foran, Howard, Parker and Stewart. Mr. Parker is the chair of the Capital Markets and Finance Committee. +Marketing and Midstream Committee +The Marketing and Midstream Committee provides oversight of the Company’s marketing and midstream activities, projects, joint ventures and plans. As of April 16, 2024, the members of the Marketing and Midstream Committee were Mmes. Ehrman and Ward and Messrs. Byerley and Howard. Ms. Ehrman and Mr. Howard serve as co-chairs of the Marketing and Midstream Committee. +Operations and Engineering Committee +The Operations and Engineering Committee provides oversight of the development of our prospects, our drilling, completions and production operations and associated costs. In addition, the Operations and Engineering Committee provides oversight of the amount and classifications of our reserves and the design of our completion techniques and hydraulic fracturing operations and various other reservoir engineering matters. As of April 16, 2024, the members of the Operations and Engineering Committee were Ms. Ehrman and Messrs. Baribault and Foran. Mr. Baribault is the chair of the Operations and Engineering Committee. +Prospect Committee +The Prospect Committee provides oversight of the technical analysis, evaluation and selection of our oil and natural gas prospects. As of April 16, 2024, the members of the Prospect Committee were Mmes. Ehrman and Ward and Messrs. Baribault, Foran and Parker. Mr. Baribault is the chair of the Prospect Committee. +32 Matador Resources Company | 2024 Proxy Statement +CORPORATE GOVERNANCE +Board’s Role in Risk Oversight +The Audit Committee has the responsibility to oversee the Company’s guidelines and policies to govern the process by which risk assessment and risk management are undertaken by management, including with respect to corporate governance, financial, accounting, operational, environmental, health and safety, regulatory and cybersecurity risks. In connection with the Audit Committee’s oversight responsibility, executive management briefs the Audit Committee on a quarterly basis on risks faced by the Company. Under the Audit Committee’s oversight, management maintains a commercial insurance program for the Company’s benefit covering casualty, property, workers’ compensation, well operations and cybersecurity risks, among others. The Compensation Committee has the responsibility to oversee that our incentive pay does not encourage unnecessary risk taking and to review and discuss the relationship between risk management policies and practices, corporate strategy and senior executive compensation. +Environmental, Social and Governance (ESG) Initiatives +Affirmation of Our Commitment +At Matador, we are committed to creating long-term value in a responsible manner. This commitment extends across our operations and includes a dedication to excellence with respect to environmental, social and governance (ESG) matters. Our guiding focus on good stewardship is reflected in our Code of Ethics and in our Corporate Governance Guidelines, which are reviewed annually by the Environmental, Social and Corporate Governance Committee of the Board. See “Corporate Governance” on page 25 for additional information. +Oversight and Coordination of ESG Efforts +The Board and senior management understand the importance of ESG matters and of supporting the Company’s ongoing efforts in this area. Matador’s senior management and full Board receive regular updates on our ESG efforts and engage with us to pursue continuous improvement in this area. +The Environmental, Social and Corporate Governance Committee is responsible for overseeing sustainability-related matters and monitoring the effectiveness of systems necessary to ensure compliance with ESG-related legislation, regulatory requirements, industry standards and internal policies, programs and practices. In conjunction with senior management, the committee has direct accountability to review and evaluate sustainability practices, risks and strategies and to make recommendations to the full Board regarding sustainability matters. +The Audit Committee also has responsibility through its role overseeing risk assessment and risk management processes, including with respect to operational, environmental, health and safety and regulatory risks. +Progress in Enhancing ESG Reporting +In continuing to raise the profile of the Company’s ongoing ESG-related initiatives externally, we recognize the growing value to stakeholders of consistent and comparable ESG disclosures. In early 2021, we retained Ms. Appel to conduct a review of industry ESG reporting practices and to serve as a dedicated single-focal point for our various ESG efforts. +In May 2021, Matador published sustainability metrics aligned with standards developed by the Sustainability Accounting Standards Board (SASB), and in July 2021, Matador published an update providing supplemental information to the Company’s initial report on these SASB-aligned ESG metrics. +In October 2023, Matador issued its annual Sustainability Report, which was first issued in December 2021. This report highlights Matador’s continued progress and improvements in its operating practices, including the quantitative metrics aligned with the SASB standards noted above, and should provide Matador’s stakeholders and interested parties with a standardized platform for evaluating the Company’s recent performance and future progress. Matador’s annual Sustainability Report, including the SASB-aligned sustainability metrics, is available on the Company’s website at www.matadorresources.com/sustainability. Information included in our Sustainability Report or otherwise included on our website is not incorporated into this Proxy Statement. +33 Matador Resources Company | 2024 Proxy Statement +Ongoing Shareholder Engagement +In 2023, members of our Board and management team had conversations with a number of investors regarding our business and our investors’ priorities, consistent with Matador’s regular practice. Regarding ESG topics specifically, we met or reached out to shareholders representing an estimated 71% of the outstanding shares of our Common Stock (excluding shares held by our officers and directors) as of December 31, 2023. In addition, members of our management team attended ten investor conferences, hosted nine roadshows and participated in various investor presentation events and calls. Feedback from these conversations was shared with the Board and served as a valuable input to the enhanced ESG disclosures that we made over the last year. We appreciate the relationship building that results from cultivating these open dialogues and remain committed to engaging shareholders regularly. +ESG Performance Highlights +Highlights from the Company’s 2023 ESG initiatives are shown below. (1) +Environmental +Continued Reduction of Per-Barrel Emissions (2) +• More than 80% reduction in flaring intensity from 2019 to 2023 +• More than 70% reduction in methane intensity from 2019 to 2023 +• More than 55% reduction in direct greenhouse gas emissions intensity from 2019 to 2023 +Meaningful Use of Non-Fresh Water, Including Recycled Water +• More than 95% of total water consumed in 2023 was non-fresh water (3) +• More than 85% of operated wells completed in 2023 utilized recycled produced water (4) +Increased Transportation by Pipeline +• 98% of operated produced water transported by pipeline in 2023 +• 94% of operated produced oil transported by pipeline in 2023 +34 Matador Resources Company | 2024 Proxy Statement +(1) The sustainability metrics included herein have been calculated using the best information available to the Company at the time of publication. The data utilized in calculating such metrics is subject to certain reporting rules, regulatory reviews, definitions, calculation of methodologies, estimates, adjustments and other factors. As a result, these metrics are subject to change from time to time as updated or other information becomes available. The metrics provided reflect both Matador’s gross operated exploration and production operations and gross operated midstream operations on a consolidated basis, except where otherwise noted. +(2) Emissions and flared volumes are calculated in accordance with Environmental Protection Agency standards and reflect only Matador’s gross operated exploration and production volumes. +(3) Fresh water is defined as <1,000 mg/L total dissolved solids and includes Matador’s gross operated volumes for hydraulic fracturing and completions operations, as well as estimates for Matador’s other operations. +(4) As some portion of the total fluid used for hydraulic fracturing operations. +Social +Investing in Human Capital +• Provided approximately 22,000 hours of employee continuing education, equating to approximately 59 hours per employee in 2023 +Supporting Military Veterans +• Congressional Medal of Honor Foundation +• Michael E. Thornton Foundation +Supporting Communities & Charities Where We Live, Work, and Operate +• Continued donations of food to the North Texas Food Bank and of toys to the Sheriff’s Offices and Courthouses in New Mexico’s Eddy and Lea Counties in 2023 +Governance +Diverse and Independent Board Composition +• Lead independent director +• Nine of eleven independent directors +• One minority and four female directors +• Female membership since inception of predecessor company in 1988 +Engaged Board of Directors with Majority Voting Standard +• No “overboarding” +• Shareholder Advisory Committee for Board Nominations +Active Stakeholder Engagement +• Shareholder outreach program, including discussion of compensation, governance, social, safety and environmental practices and disclosures +Strategic Planning and Compensation Committee Interlocks and Insider Participation +Ms. Ehrman and Messrs. Baribault, Baty, Parker and Stewart served on the Compensation Committee during 2023. None of these individuals is or was previously one of our officers or employees. None of our executive officers serve on the board of directors or compensation committee of a company that has an executive officer that serves on our Board or the Compensation Committee. No member of our Board serves as an executive officer of a company in which one of our executive officers serves as a member of the board of directors or compensation committee of that company. There were no compensation committee interlocks during 2023. Mr. Baribault’s sister-in-law is an employee of the Company. For more information on this related person transaction, see “Transactions with Related Persons.” +35 Matador Resources Company | 2024 Proxy Statement +Communications with Directors +The Board has established a process to receive communications from shareholders and other interested parties by mail. Shareholders and other interested parties may contact any member of the Board, any Board committee or the entire Board. To communicate with the Board, any individual director or any committee, correspondence should be addressed to “c/o Corporate Secretary” at One Lincoln Centre, 5400 LBJ Freeway, Suite 1500, Dallas, Texas 75240. Shareholders should mark the envelope containing any such communication as “Shareholder Communication with Directors” and clearly identify the intended recipient or recipients of the communication. The Corporate Secretary will review and forward correspondence to the appropriate person or persons as expeditiously as reasonably practicable. However, any such communication will not be forwarded if it does not fall within the scope of matters generally considered by the Board or otherwise fails to comply with the requirements of any applicable policy adopted by the Board relating to the subject matter of communications. +Any communications to the Company from one of the Company’s officers or directors will not be considered “shareholder communications.” Communications to the Company from one of the Company’s employees or agents will only be considered “shareholder communications” if they are made solely in such employee’s or agent’s capacity as a shareholder. Any shareholder proposal submitted pursuant to Rule 14a-8 promulgated under the Exchange Act will not be viewed as “shareholder communications.” +Executive Officers and Other Senior Officers of the Company +The following table sets forth the names, ages and positions of our executive officers and certain of our other senior officers at April 16, 2024: +Name Age Positions Held With Us +Executive Officers +Joseph Wm. Foran 71 Chairman of the Board and Chief Executive Officer +Van H. Singleton, II 46 President—Land, Acquisitions & Divestitures and Planning +Brian J. Willey 47 Executive Vice President and Chief Financial Officer +G. Gregg Krug 63 Executive Vice President—Marketing & Midstream Strategy +Christopher P. Calvert 45 Executive Vice President and Chief Operating Officer +W. Thomas Elsener 39 Executive Vice President—Reservoir Engineering and Senior Asset Manager +Bryan A. Erman 46 Executive Vice President and General Counsel and Head of M&A +Glenn W. Stetson 39 Executive Vice President—Production +Other Senior Officers +Michael D. Frenzel 42 Executive Vice President and Treasurer +Edmund L. Frost, III 49 Executive Vice President of Geosciences +Robert T. Macalik 45 Executive Vice President and Chief Accounting Officer +Jonathan J. Filbert 37 Executive Vice President—Land +Jordan M. Ellington 32 Executive Vice President and Asset Manager +M. Cliff Humphreys 34 Executive Vice President—Completions +Joshua D. Passauer 38 Executive Vice President—Drilling +The following biographies describe the business experience of our executive officers and the senior officers listed above. Each officer serves at the discretion of our Board. There are no family relationships among any of our executive officers. +Executive Officers +Mr. Joseph Wm. Foran +Chairman of the Board and Chief Executive Officer +Please see the biography of Mr. Foran on page 19 of this Proxy Statement. +36 Matador Resources Company | 2024 Proxy Statement +Mr. Van H. Singleton, II +President—Land, Acquisitions & Divestitures and Planning Mr. Singleton joined Matador Resources Company in August 2007 as a Landman and was promoted to Senior Staff Landman in 2009 and then to General Land Manager in 2011. In September 2013, Mr. Singleton became Vice President of Land, and he was promoted to Executive Vice President of Land in February 2015. He became the Company’s President—Land, Acquisitions & Divestitures and Planning in March 2022. Prior to joining Matador, Mr. Singleton founded and was President of VanBrannon and Associates, LLC and Southern Escrow and Title of Mississippi, LLC from 1998 to 2003, which provided full-spectrum land title work and title insurance in Mississippi, Louisiana, Texas and Arkansas. From 2003 until joining Matador in 2007, he served as general manager of his family’s real estate brokerage in Houston, Texas. Mr. Singleton received a Bachelor of Arts degree from the University of Mississippi in 2000. He is an active member of the American Association of Professional Landmen, the New Mexico Landman Association, the Permian Basin Landman Association and the Dallas Association of Petroleum Landmen. +Mr. Brian J. Willey +Executive Vice President and Chief Financial Officer In February 2023, Mr. Willey was promoted to Executive Vice President and Chief Financial Officer. Mr. Willey joined Matador Resources Company in February 2014 as its Deputy General Counsel. In January 2016, Mr. Willey was appointed as Co-General Counsel, and in August 2016, he was promoted to Vice President and Co-General Counsel. Mr. Willey became Senior Vice President and Co-General Counsel in July 2018, and in March 2022, he was promoted to President of San Mateo and Senior Vice President, President and General Counsel of Midstream. In October 2022, Mr. Willey was promoted to President and General Counsel of Midstream Operations and Executive Vice President. Prior to joining Matador, Mr. Willey was an attorney with Dean Foods Company where he most recently served as Vice President, Chief Counsel – Corporate. Before Dean Foods, Mr. Willey served as a senior associate in the Dallas office of Baker Botts L.L.P. Mr. Willey’s practice focused on corporate matters, including mergers and acquisitions, public and private securities offerings, venture capital transactions and SEC compliance matters as well as board of director and corporate governance matters. Mr. Willey received a Bachelor of Science degree in Accounting in 2002 from Brigham Young University. He received his law degree in 2005 from The University of Texas School of Law, where he graduated with High Honors and was a member of the Order of the Coif in addition to being named a Chancellor and an Associate Editor on the Texas Law Review. Mr. Willey also served a church mission in the Philippines from 1995 to 1997. +37 Matador Resources Company | 2024 Proxy Statement +Mr. G. Gregg Krug +Executive Vice President—Marketing & Midstream Strategy Mr. Krug joined Matador Resources Company in April 2012 as its Marketing Manager. In September 2013 he was named Vice President of Marketing for the Company and Vice President of Longwood Gathering & Disposal Systems, LP, and he was promoted to Senior Vice President—Marketing and Midstream in February 2016. He was promoted to Executive Vice President—Marketing and Midstream Strategy in April 2019. He has overall responsibility for Matador’s marketing activities of its oil and natural gas, as well as responsibility for all business aspects for Longwood Gathering & Disposal Systems, LP. Previously, Mr. Krug was with Unit Petroleum Company, an exploration and production company based in Tulsa, Oklahoma, as Marketing Manager, having joined in 2006. He and his staff were responsible for marketing, gas measurement, contract administration and production reporting in their core areas of Oklahoma, the Texas Panhandle, East Texas and Northwestern Louisiana. From 2005 to 2006, Mr. Krug served as Marketing Manager with Matador Resources Company. From 2000 to 2005, Mr. Krug served as Gas Scheduling Supervisor with Samson Resources in Tulsa, Oklahoma where he and his staff were responsible for scheduling natural gas sales as well as procurement of natural gas supply on Samson-owned gathering systems. From 1983 to 2000, Mr. Krug served with The Williams Companies in various capacities including in the Kansas Hugoton Field in Ulysses, Kansas and Tulsa, Oklahoma for Williams Natural Gas Pipeline and on the trading floor in Tulsa, Oklahoma for Williams Energy Services Company. Mr. Krug received a Bachelor of Business Administration degree from Oklahoma City University in 1996. +Mr. Christopher P. Calvert +Executive Vice President and Chief Operating Officer Mr. Calvert joined Matador Resources Company in October 2014 as a Senior Completions Engineer. In July 2018, he was named Vice President of Completions for the Company, and he was promoted to Senior Vice President—Operations in October 2019. In March 2022, he became a member of Matador’s new, diverse and highly experienced financial planning team supporting the CFO and the finance team. Mr. Calvert was promoted to Senior Vice President and Co-Chief Operating Officer in April 2022. In February 2023, Mr. Calvert was promoted to Executive Vice President and Co-Chief Operating Officer. Prior to joining Matador, Mr. Calvert worked as a Staff Reservoir Engineer in Chesapeake Energy Corporation’s South Texas—Eagle Ford group focusing on A&D evaluations and production and completions optimization. At Chesapeake, Mr. Calvert also held roles as a Senior Asset Manager responsible for completions and operations in the Niobrara Shale, a Senior Completions Engineer responsible for Bakken/Three Forks development and a Senior Operations Engineer focused on production and facility optimization on the Texas Gulf Coast. Prior to Chesapeake, Mr. Calvert worked as an Operations Engineer for Williams Production Company. In addition to his oil and natural gas industry experience, Mr. Calvert has worked in corporate financial controls as an internal Sarbanes-Oxley compliance auditor. Mr. Calvert received Bachelor of Science degrees in Finance and Petroleum Engineering from the University of Wyoming in 2002 and 2008, respectively. He is a member of the Society of Petroleum Engineers. +38 Matador Resources Company | 2024 Proxy Statement +Mr. W. Thomas Elsener +Executive Vice President—Reservoir Engineering and Senior Asset Manager Mr. Elsener joined Matador Resources Company in April 2013 as an Engineer. In June 2017, he was promoted to Vice President—Engineering and Asset Manager, and he was promoted to Senior Vice President—Reservoir Engineering and Senior Asset Manager in October 2019. In March 2022, Mr. Elsener became a member of Matador’s new, diverse and highly experienced financial planning team supporting the CFO and the finance team. Mr. Elsener was named Executive Vice President—Reservoir Engineering and Senior Asset Manager in April 2022. Prior to joining Matador, Mr. Elsener served in various engineering roles at Encana Oil & Gas (USA) in Dallas, Texas from 2007 to 2013, including reservoir, completions, drilling, business development and new ventures. While at Encana, Mr. Elsener was involved with the exploration and development of assets in the Barnett shale, Deep Bossier, Haynesville shale and other new domestic ventures. Mr. Elsener received a Bachelor of Science degree in Petroleum Engineering from Texas A&M University in 2007. He is a member of the Society of Petroleum Engineers. +Mr. Bryan A. Erman +Executive Vice President and General Counsel and Head of M&A Mr. Erman joined Matador Resources Company in January 2016 as its Co-General Counsel. In August 2016, Mr. Erman was promoted to Vice President and Co-General Counsel. He became Senior Vice President and Co-General Counsel in July 2018. In March 2022, Mr. Erman became Senior Vice President and General Counsel and in October 2022, Mr. Erman was promoted to Executive Vice President and General Counsel and Head of M&A. Prior to joining Matador, Mr. Erman was a Partner at Carrington, Coleman, Sloman & Blumenthal, L.L.P. in Dallas, having joined the firm in 2010. From 2003 to 2010, he was an associate in the Dallas and Washington, D.C. offices of Baker Botts L.L.P. Mr. Erman’s practice focused on litigation matters, including oil and natural gas, securities and other commercial litigation, as well as corporate governance matters. Before attending law school, Mr. Erman worked for Oklahoma Governor Frank Keating. Mr. Erman received a Bachelor of Arts degree in Political Science in 1999 from the University of Oklahoma. He received his law degree in 2003 from Southern Methodist University Dedman School of Law, where he graduated cum laude and was a Hatton W. Sumners Scholar, a member of the Order of the Coif and an Articles Editor on the SMU Law Review. +39 Matador Resources Company | 2024 Proxy Statement +Mr. Glenn W. Stetson +Executive Vice President—Production Mr. Stetson joined Matador Resources Company in August 2014 as a Production Engineer, and in July 2015, he was promoted to Asset Manager. Mr. Stetson was promoted to the role of Vice President and Asset Manager in July 2018 and to Senior Vice President of Production and Asset Manager in October 2019. In March 2022, Mr. Stetson became a member of Matador’s new, diverse and highly experienced financial planning team supporting the CFO and the finance team. Mr. Stetson was promoted to the role of Executive Vice President—Production in April 2022. Prior to joining Matador, Mr. Stetson worked at Chesapeake Energy Corporation from 2008 to 2014, holding multiple positions in both the production and completions departments. Most of his time at Chesapeake was spent in the Barnett shale in North Texas, although he also spent some time working in northern Pennsylvania managing the northeast portion of Chesapeake’s Marcellus shale operated production. Mr. Stetson graduated Cum Laude from Oklahoma State University in 2007, receiving a Bachelor of Science degree in Mechanical Engineering Technology. Mr. Stetson is a Licensed Professional Engineer in the State of Oklahoma. +Other Senior Officers +Mr. Michael D. Frenzel +Executive Vice President and Treasurer Mr. Frenzel was named Executive Vice President and Treasurer in April 2022. Mr. Frenzel’s responsibilities include treasury, financial planning and forecasting, budgeting, capital markets, hedging, financial reporting and investor relations, and he has served as the primary financial officer for San Mateo, Matador’s midstream joint venture, since San Mateo’s formation in 2017. In March 2022, Matador’s Board and CEO asked Mr. Frenzel to act as the Company’s principal financial officer until a new CFO was appointed in February 2023. Mr. Frenzel first worked for Matador’s predecessor company, Matador Petroleum Corporation, as an intern in the summers of 2000, 2001 and 2002. From 2006 to 2010, Mr. Frenzel worked as a Senior Financial Analyst before leaving to obtain his Masters of Business Administration degree in 2010 from Duke University’s Fuqua School of Business. Mr. Frenzel rejoined Matador in 2013 as its Senior Strategy and Financial Analyst and Assistant Treasurer and was promoted to Finance Director and Assistant Treasurer in January 2017. In August 2018, Mr. Frenzel was promoted to Vice President and Treasurer. Mr. Frenzel was promoted to Senior Vice President and Treasurer in October 2020. Before rejoining Matador in 2013, Mr. Frenzel worked as an Investment Associate for Hamm Capital, LLC and as a Financial Analyst and Assistant to the CEO at Continental Resources. In addition to his energy industry experience, Mr. Frenzel also has consulting experience with Deloitte Consulting LLP. Mr. Frenzel graduated summa cum laude from Vanderbilt University in 2004, receiving a Bachelor of Arts degree in Economics and Mathematics, and earned the designation of Fuqua Scholar while receiving a Master of Business Administration degree from Duke University’s Fuqua School of Business in 2012. +40 Matador Resources Company | 2024 Proxy Statement +Dr. Edmund L. Frost III +Executive Vice President of Geosciences Dr. Frost joined Matador Resources Company in August 2014 as a Senior Geologist and in July 2015 was promoted to Chief Geologist. In June 2017, he was promoted to Vice President of Geosciences, and in July 2019, Dr. Frost was promoted to Senior Vice President of Geosciences. In February 2023, Dr. Frost was promoted to Executive Vice President of Geosciences. Prior to joining the Company, Dr. Frost worked at the Bureau of Economic Geology at The University of Texas at Austin as a Research Associate, a role he began in 2011. While at The University of Texas, his research focused on unconventional resource development in the Delaware Basin and in the Austin Chalk-Eagle Ford system. Dr. Frost began his career in the Subsurface Technology Group at ConocoPhillips in 2007, where he worked a variety of international and domestic basins. Dr. Frost received a Bachelor of Science degree in Geology from the University of Colorado at Boulder in 1998 and a PhD degree in Geology in 2007 from The University of Texas at Austin. Dr. Frost has authored several peer-reviewed papers, conducted multiple industry presentations and led a number of industry field trips in the Delaware Basin. +Mr. Robert T. Macalik +Executive Vice President and Chief Accounting Officer Mr. Macalik joined Matador Resources Company in July 2015 as Vice President and Chief Accounting Officer. He was promoted to Senior Vice President and Chief Accounting Officer in November 2017. In March 2022, Mr. Macalik became a member of Matador’s new, diverse and highly experienced financial planning team supporting the CFO and the finance team. Mr. Macalik was named Executive Vice President and Chief Accounting Officer in April 2022. Prior to joining Matador, from 2012 to 2015, Mr. Macalik worked at Pioneer Natural Resources Company as Corporate Controller and, previously, as Director of Technical Accounting and Financial Reporting. At Pioneer, Mr. Macalik supervised corporate accounting and financial reporting functions. Prior to joining Pioneer, he was a Senior Manager with PricewaterhouseCoopers (PwC), joining the public accounting firm in 2002. During his tenure with PwC, Mr. Macalik conducted and managed audits for various companies, primarily public companies in the oil and natural gas industry, and managed numerous client relationships. Mr. Macalik received a Bachelor of Arts degree in History, a Bachelor of Business Administration degree and a Master of Professional Accounting degree all from The University of Texas at Austin in 2002. He is a licensed Certified Public Accountant in the State of Texas. +41 Matador Resources Company | 2024 Proxy Statement +Mr. Jonathan J. Filbert +Executive Vice President—Land Mr. Filbert joined Matador Resources Company in February 2013 as a Senior Staff Landman. In April 2015, he was promoted to General Land Manager, and in December 2017, he was promoted to General Land Manager and Director of Acquisitions. Mr. Filbert was promoted to the role of Vice President of Land in July 2018 and to Senior Vice President—Land in October 2020. Mr. Filbert was promoted to his current role of Executive Vice President—Land in October 2023. Prior to joining Matador, Mr. Filbert worked as a landman at Chesapeake Energy Corporation from 2010 to 2013. Most of his time at Chesapeake was spent working with the new ventures team on their Utica and Marcellus shale assets in Ohio and northern Pennsylvania. Mr. Filbert graduated from the University of Oklahoma in 2010, receiving a Bachelor of Business Administration degree in Energy Management and Finance. He is an active member of the American Association of Professional Landmen, the New Mexico Landman Association, the Permian Basin Landman Association and the Dallas Association of Petroleum Landmen. +Mr. Jordan M. Ellington +Executive Vice President and Asset Manager Mr. Ellington joined Matador Resources Company in November 2018 as a Drilling Engineer. In October 2019, Mr. Ellington was promoted to Senior Drilling Engineer and MaxOps Coordinator. He was promoted to Vice President and Asset Manager in April 2021, and then to Senior Vice Present and Asset Manager in February 2023. Mr. Ellington was promoted to the role of Executive Vice President and Asset Manager in February 2024. Prior to joining Matador, Mr. Ellington worked for Chevron from 2014 to 2018 in various roles within the drilling and completions department. Most of his time at Chevron was spent focusing on operations and the execution of major capital projects and exploration and appraisal wells in the Deepwater Gulf of Mexico. Mr. Ellington graduated summa cum laude from Texas A&M University in 2014, receiving a Bachelor of Science degree in Mechanical Engineering. He is an active member of the Society of Petroleum Engineers and American Association of Drilling Engineers. +Mr. M. Cliff Humphreys +Executive Vice President—Completions Mr. Humphreys joined Matador Resources Company in March 2014 as a Completions Engineer. In December 2018, Mr. Humphreys was promoted to Area Completions Manager. He was promoted to Vice President—Completions in October 2019, and then to Senior Vice President—Completions in April 2022. Mr. Humphreys was promoted to his current role of Executive Vice President—Completions in October 2023. Prior to joining Matador, Mr. Humphreys was an Engineer for Encana Oil & Gas (USA), primarily assisting with hydraulic fracturing operations in the company’s East Texas and Louisiana developments. In his time at Matador, Mr. Humphreys has overseen completion operations in both the Delaware Basin and Eagle Ford assets and has directed the company’s efforts in recycling produced water for completion operations. Mr. Humphreys received a Bachelor of Science degree in Mechanical Engineering from The University of Texas at Austin in 2013. He is an active member of the Society of Petroleum Engineers and American Association of Drilling Engineers, and serves on the scholarship selection committee for the Wichita Falls Area Community Foundation. +42 Matador Resources Company | 2024 Proxy Statement +Mr. Joshua D. Passauer +Executive Vice President—Drilling Mr. Passauer joined Matador Resources Company in January 2012 as a Drilling Engineer. In his initial role at Matador, he managed drilling rigs in the Eagle Ford and Austin Chalk plays. In 2013, he was part of Matador’s transition to the Delaware basin. In January 2017, he was promoted to Area Drilling Manager. In July 2018 he was promoted to Vice President of Drilling and then to Senior Vice President of Drilling in April 2022. He also had the opportunity to work alongside management in creating the MAXCOM team, including overseeing the technology and layout components of the MAXCOM room. Mr. Passauer was promoted to his current role of Executive Vice President—Drilling in October 2023. Prior to joining Matador, Mr. Passauer was an Advanced Services Engineer with Schlumberger from 2010 to 2012, working in-house with Exco Resources in their drilling group. While at Exco, he partnered with a team to create an innovative horizontal drill bit design that optimized the most important portion of a horizontal well. This unique bit design won an innovation award from British Gas, and he was honored to receive that award in London. He also co-authored an associated article that was published in Oilfield Technology magazine. Prior to Schlumberger, Mr. Passauer worked for Smith International in-house with Samson in Tulsa, Oklahoma. He began his career in the oil and gas business in Midland, TX, spending two years in a field role with Smith. This role with Smith gave him valuable field experience as he was able to visit a wide array of drilling rigs throughout the Delaware and Midland basins. Mr. Passauer graduated from Baylor University in 2006 with a Bachelor of Science in Mechanical Engineering and a minor in mathematics. He is an active member of the Society of Petroleum Engineers and the American Association of Drilling Engineers. +Mr. Joseph Wm. Foran +43 Matador Resources Company | 2024 Proxy Statement +PROPOSAL 2 +PROPOSAL 2 | ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION +In accordance with the requirements of Section 14A of the Exchange Act, the Company seeks a non-binding advisory vote from its shareholders to approve the compensation of its Named Executive Officers (as defined below) as described in this Proxy Statement. +We believe the Company’s future success and the ability to create long-term value for our shareholders depends on our ability to attract, retain and motivate highly qualified individuals in the oil and natural gas industry. Additionally, we believe that our success also depends on the continued contributions of our Named Executive Officers. The Company’s compensation system plays a significant role in its ability to attract, motivate and retain a high-quality workforce. As described in the CD&A, the Company’s compensation program for Named Executive Officers is designed to reward, in both the short term and the long term, performance that contributes to the implementation of our business strategies, maintenance of our culture and values and achievement of our objectives. +This proposal provides shareholders the opportunity to endorse or not endorse the Company’s executive compensation program through approval of the following resolution: +“Resolved, that the compensation paid to the Company’s Named Executive Officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and related narrative discussion, is hereby approved.” +The above-referenced CD&A and accompanying disclosures appear on pages 50 - 68 of this Proxy Statement. +Because this is an advisory vote, it will not be binding upon the Board. However, the Compensation Committee +and the Independent Board will take into account the outcome of the vote when considering future executive +compensation arrangements. +Vote Required +The affirmative vote of the holders of a majority of the shares present in person or represented by proxy and entitled to vote at the Annual Meeting is required to approve this resolution on a non-binding basis. If you hold your shares through a broker and you do not instruct the broker how to vote, your broker will not have the authority to vote your shares. Abstentions will have the effect as a vote cast against the proposal. Broker non-votes will be counted as present for purposes of determining the presence of a quorum but will have no effect upon the outcome of the vote. +During our 2018 Annual Meeting of Shareholders, our shareholders approved a non-binding, advisory proposal to hold advisory votes to approve our executive compensation every year. In consideration of the results of this advisory vote, the Board has maintained its policy of providing for annual advisory votes to approve executive compensation. Pursuant to applicable rules, the Company is required to hold another advisory vote on the frequency of future advisory votes to approve named executive officer compensation at the 2024 Annual Meeting. Accordingly, Proposal 3 of this Proxy Statement seeks a non-binding advisory vote on the frequency of future advisory votes to approve named executive officer compensation. Unless the Board modifies its current policy after consideration of the results of the advisory vote under Proposal 3, the next advisory vote to approve executive compensation following this vote will be held at our 2025 Annual Meeting. +The Board of Directors recommends that you vote FOR approval of this resolution. +44 Matador Resources Company | 2024 Proxy Statement +PROPOSAL 3 +PROPOSAL 3 | ADVISORY VOTE ON THE FREQUENCY OF FUTURE ADVISORY VOTES TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION +In accordance with the requirements of Section 14A of the Exchange Act, the Company seeks a non-binding advisory vote from its shareholders regarding the desired frequency for holding future advisory votes to approve the compensation of our Named Executive Officers as described in our annual proxy statements. +This proposal gives shareholders the opportunity to express their views as to whether future advisory votes to approve the Company’s Named Executive Officer compensation program should occur every year, every two years or every three years. Because this vote is advisory, it will not be binding upon the Board. However, the Board will take into account the outcome of the vote when deciding the frequency of future non-binding advisory votes on the Company’s named executive officer compensation. +The Board recommends that a non-binding advisory vote to approve the compensation of our executive officers as disclosed in the Company’s proxy statements continue to be held every year. +While the Board believes this recommendation is appropriate at this time, shareholders are not voting to approve or disapprove this recommendation, but are instead asked to provide an advisory vote on whether future non-binding advisory votes to approve the Company’s Named Executive Officer compensation should be held every year, every two years or every three years. The choice receiving the greatest number of votes will be considered the frequency recommended by the Company’s shareholders, even if that choice does not receive a majority of the votes. +The Board of Directors recommends that you vote for “1 YEAR” on this proposal. +45 Matador Resources Company | 2024 Proxy Statement +PROPOSAL 4 | RATIFICATION OF THE APPOINTMENT OF KPMG LLP +The Audit Committee has appointed KPMG LLP (“KPMG”) as the independent registered public accounting firm of the Company for the year ending December 31, 2024, and the Board has directed that such appointment be submitted to our shareholders for ratification at the Annual Meeting. +The Audit Committee concluded that KPMG’s provision of non-audit services, such as tax services, does not compromise KPMG’s independence. +If the shareholders do not ratify the appointment of KPMG, the Audit Committee will consider whether to engage a different independent registered public accounting firm but will not be obligated to do so. +The Company has been advised that representatives of KPMG will be present at the Annual Meeting and will be available to respond to appropriate questions and make a statement if they desire to do so. +Fees of Independent Registered Public Accounting Firm for Fiscal Years 2023 and 2022 +The following table presents fees for professional audit services rendered by KPMG for the audit of the Company’s annual financial statements for the years ended December 31, 2023 and 2022, and fees for other services rendered by KPMG during those periods: +2023 2022 +Audit fees $ 2,020,000 $ 1,615,000 +Audit-related fees $ 50,000 — +Tax fees $ 420,000 $ 170,000 +All other fees — — +Total $ 2,490,000 $ 1,785,000 +Services rendered by KPMG in connection with the fees presented above were as follows: +Audit Fees +For fiscal year 2023, audit fees consisted of fees associated with the audit of the Company’s consolidated financial statements, including the audit of the effectiveness of the Company’s internal control over financial reporting, required reviews of our quarterly condensed consolidated financial statements and consultation on significant accounting matters. Audit fees also included fees paid to KPMG by San Mateo for the audit of their 2023 financial statements. +For fiscal year 2022, audit fees consisted of fees associated with the audit of the Company’s consolidated financial statements, including the audit of the effectiveness of the Company’s internal control over financial reporting, required reviews of our quarterly condensed consolidated financial statements and consultation on significant accounting matters. Audit fees also included fees paid to KPMG by San Mateo for the audit of its 2022 financial statements. +Audit-Related Fees +Audit-related fees for fiscal year 2023 related to fees for assurance and related services for subsidiary audits that are not included in the audit fees listed above. We did not incur any audit-related fees in 2022. +46 Matador Resources Company | 2024 Proxy Statement +Tax Fees +Tax fees for fiscal years 2023 and 2022 related to permitted tax planning services. +All Other Fees +We did not incur any other fees in 2023 or 2022. +The Audit Committee pre-approves all audit and permissible non-audit services provided by KPMG. These services may include audit services, audit-related services, tax services and other services. The Audit Committee has authorized the chair of the Audit Committee to pre-approve audit and permissible non-audit services provided by KPMG up to $750,000. Pursuant to this delegation, the decisions of the chair must be presented to the Audit Committee at its next meeting. +Report of the Audit Committee +We are a standing committee comprised of independent directors as currently defined by SEC regulations and the applicable listing standards of the NYSE. The Board has determined that at least one of the members of the Audit Committee is an “audit committee financial expert” as defined by applicable SEC rules and regulations. We operate under a written charter adopted by the Board. A copy of the charter is available free of charge on the Company’s website at www.matadorresources.com under “Investor Relations—Corporate Governance.” +We annually select the Company’s independent registered public accounting firm. If the shareholders do not ratify the appointment of KPMG at the Annual Meeting, the Audit Committee will consider whether to engage a different independent registered public accounting firm but will not be obligated to do so. +Management is responsible for the Company’s internal controls and the financial reporting process. The independent registered public accounting firm is responsible for performing an independent audit of the Company’s consolidated financial statements in accordance with the standards of the United States Public Company Accounting Oversight Board (the “PCAOB”) and issuing a report thereon. As provided in our charter, our responsibilities include the monitoring and oversight of these processes. +Consistent with our charter responsibilities, we have met and held discussions with management and the independent registered public accounting firm. In this context, management and the independent registered public accounting firm represented to us that the Company’s consolidated financial statements for the fiscal year ended December 31, 2023 were prepared in accordance with U.S. generally accepted accounting principles. We reviewed and discussed the consolidated financial statements with management and the independent registered public accounting firm and discussed with the independent registered public accounting firm matters required to be discussed by the applicable requirements of the PCAOB and the SEC. +The Company’s independent registered public accounting firm has also provided to us the written disclosures and the letter required by applicable requirements of the PCAOB regarding the independent registered public accounting firm’s communications with the Audit Committee, and we discussed with the independent registered public accounting firm that firm’s independence. +Based upon our reviews and discussions with management and the independent registered public accounting firm and our review of the representation of management and the report of the independent registered public accounting firm to the Audit Committee, we recommended that the Board include the audited consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC. +Audit Committee, +William M. Byerley, Chair +Reynald A. Baribault +Julia P. Forrester Rogers +James M. Howard +Timothy E. Parker +Susan M. Ward +47 Matador Resources Company | 2024 Proxy Statement +Vote Required +The affirmative vote of the holders of a majority of the shares present in person or represented by proxy and entitled to vote at the Annual Meeting is required for the ratification of the appointment of KPMG as the Company’s independent registered public accounting firm for the year ending December 31, 2024. If the shareholders do not ratify the appointment of KPMG, the Audit Committee will consider whether to engage a different independent registered public accounting firm but will not be obligated to do so. Abstentions will have the effect as a vote cast against the proposal. +The Board of Directors recommends that you vote FOR the ratification of the appointment of KPMG as the Company’s independent registered public accounting firm for the +year ending December 31, 2024. +48 Matador Resources Company | 2024 Proxy Statement +Dear Fellow Shareholders, +On behalf of the Board and the Compensation Committee, thank you for your continued support of Matador and entrusting us with your hard-earned capital. We continue to be grateful for the opportunities that we have had to visit with many of you, and we look forward to getting to know more of our shareholders in the future. +The Board, management and staff are extremely pleased to celebrate with you another outstanding year for Matador in 2023. Once again, we achieved a number of operational and financial successes across the Company. These achievements include record oil and natural gas production, increased efficiency in our operations, steadily decreasing costs and better-than-expected free cash flow. These record results could not have been achieved without a talented and hardworking team committed to increasing shareholder value through exploring and developing great oil and natural gas assets. Our team continues to find ways to grow and improve both our upstream and midstream businesses and return value to our shareholders. +Of particular note, in 2023, we closed and successfully integrated the strategic Advance Acquisition, which included approximately 18,500 net acres in the core of the northern Delaware Basin, with approximately 99% of such acreage held by production. The Advance Acquisition provided a significant increase in our inventory in our core target formations and additional upside locations. This new acreage also provided further expansion opportunities for Pronto, our wholly-owned midstream subsidiary. The Advance Acquisition was just one of approximately 200 acquisitions and trades completed in 2023 located throughout Matador’s asset areas. As noted in the Compensation Discussion and Analysis that follows, in part as a result of these acquisitions, Matador is now the eighth largest producer by total production in New Mexico according to Enverus data. To successfully close and integrate these acquisitions requires excellent communication, hard work and dedication by every group at Matador. +The remarkable professionalism and teamwork by and between the various groups within Matador—led by our talented team of executives—made these exceptional results possible. Our Board has a “pay for performance” philosophy and recognizes the leadership of our executive officers in contributing to the Company’s achievements outlined above. We are particularly appreciative of the disciplined approach of our Board and executive team that has allowed us to continue to expand our strategic opportunities in both our exploration and production business and our increasingly important midstream businesses. +We look forward to ongoing dialogue with our shareholders and to demonstrating responsiveness to your feedback, including with respect to our executive compensation program. We are honored to serve on your behalf and hope you will join us at the 2024 Annual Meeting of Shareholders. +Sincerely, +Timothy E. Parker +R. Gaines Baty +Lead Independent Director Chair, Strategic Planning and Compensation Committee +49 Matador Resources Company | 2024 Proxy Statement +EXECUTIVE COMPENSATION +EXECUTIVE COMPENSATION +Compensation Discussion and Analysis +This Compensation Discussion and Analysis, or CD&A, provides a general description of our compensation program and specific information about its various components for the following “Named Executive Officers” for 2023: +• Joseph Wm. Foran, Chairman of the Board and Chief Executive Officer; +• Van H. Singleton, II, President—Land, Acquisitions & Divestitures and Planning; +• Brian J. Willey, Executive Vice President and Chief Financial Officer; +• Billy E. Goodwin, Former President—Operations; +• Craig N. Adams, Former Executive Vice President, Co-Chief Operating Officer, Chief of Staff and Corporate Secretary; and +• Michael D. Frenzel, Executive Vice President and Treasurer and Former Principal Financial Officer. +Mr. Frenzel served as the Company’s principal financial officer from March 31, 2022 to February 16, 2023. On February 16, 2023, Mr. Willey was promoted to Executive Vice President and Chief Financial Officer and assumed the role of principal financial officer. Mr. Adams retired from his roles as the Company’s Executive Vice President, Co-Chief Operating Officer and Corporate Secretary effective March 6, 2024, at which time Mr. Adams was no longer an executive officer of the Company, and from his role as Chief of Staff effective March 31, 2024. Mr. Goodwin retired from his role as the Company's President—Operations effective April 10, 2024, at which time Mr. Goodwin was no longer an executive officer of the Company, and is expected to continue to serve as an employee of the Company through April 30, 2024. +2023 Highlights +The successful execution of our business strategies, including the Advance Acquisition, led to increases in our oil and natural gas production and proved oil and natural gas reserves in 2023. We also improved the capital efficiency of our drilling and completion operations and achieved several key operational milestones throughout the year, as further described below. In addition, we achieved several key capital resources objectives during the year, including generating free cash flow, paying down a portion of the borrowings that funded the Advance Acquisition, increasing our quarterly cash dividend and earning performance incentives from Five Point. Further, we completed several important financing transactions in 2023, including the issuance of the 2028 Notes, increasing the elected borrowing commitment and the borrowing base under our Credit Agreement and increasing the lender commitments under the San Mateo Credit Facility. San Mateo also achieved important milestones in 2023, including the addition of produced water disposal capacity and being awarded new customer contracts. These actions increased our operational flexibility and opportunities while preserving the strength of our balance sheet and our liquidity position. +Advance Acquisition +Our strong financial position at the start of 2023, including over $500 million of cash, allowed us to take advantage of a unique and strategic opportunity to acquire Advance. The Advance Acquisition added acreage in the core of the northern Delaware basin, including in our core and upside target formations, and provided further expansion opportunities for Pronto, our wholly-owned midstream subsidiary serving that area in Lea County, New Mexico. The Advance Acquisition was only one of approximately 200 acquisitions and trades we completed during 2023. These transactions and their associated midstream systems were located throughout Matador’s asset areas and continue to build and connect Matador’s core Delaware Basin acreage. +50 Matador Resources Company | 2024 Proxy Statement +Record Operational and Financial Results +The year ended December 31, 2023 was marked by record operational and financial results across the Company. San Mateo also had a record year in 2023, including increased throughput volumes for natural gas gathering and processing, oil gathering and transportation and water handling, as well as our second highest annual net income and record Adjusted EBITDA (a non-GAAP financial measure). The charts below show the five-year growth experienced by both our exploration and production business and our midstream business. +TOTAL OIL EQUIVALENT PRODUCTION (MMBOE) +TOTAL PROVED OIL +EQUIVALENT RESERVES (MMBOE) +THIRD-PARTY MIDSTREAM SERVICES REVENUES ($ millions) +For the year ended December 31, 2023, we achieved record oil, natural gas and average daily oil and natural gas equivalent production. In 2023, we produced 27.5 million Bbl of oil, an increase of 26%, as compared to 21.9 million Bbl of oil produced in 2022. We also produced 123.4 Bcf of natural gas, an increase of 24% from 99.3 Bcf of natural gas produced in 2022. Our average daily oil and natural gas equivalent production for the year ended December 31, 2023 was 131,813 BOE per day, including 75,457 Bbl of oil per day and 338.1 MMcf of natural gas per day, an increase of 25%, as compared to 105,465 BOE per day, including 60,119 Bbl of oil per day and 272.1 MMcf of natural gas per day, for the year ended December 31, 2022. The increase in oil and natural gas production was primarily attributable to the Advance Acquisition and our ongoing delineation and development drilling activities in the Delaware Basin throughout 2023, which offset declining production in the Eagle Ford shale. Oil production comprised 57% of our total oil and natural gas production (using a conversion ratio of one Bbl of oil per six thousand cubic feet of natural gas) for each of the years ended December 31, 2023 and 2022. +51 Matador Resources Company | 2024 Proxy Statement +During 2023, we achieved all five significant and important operational milestones in the Delaware Basin that we had set at the beginning of the year. These five operational milestones were each achieved when we turned to sales: +• eight Rodney Robinson wells in the first half of 2023; +• eight Stateline wells in the first half of 2023; +• 21 Ranger wells on properties acquired in the Advance Acquisition in the second half of 2023, which was the largest single batch development project in our history; +• 17 Stebbins wells in the second half of 2023; and +• 13 Wolf wells in the second half of 2023, including our first two “U-Turn” two-mile lateral wells. +In addition to achieving these five key operational milestones, further operational achievements in the Delaware Basin in 2023 included: +• continued drilling of longer laterals, with an average completed lateral length for operated wells turned to sales in 2023 of approximately 9,800 feet; and +• D/C/E capital expenditures for 2023 of $1.16 billion, which was below our estimated range for 2023 D/C/E capital expenditures of $1.18 to $1.32 billion as provided on February 21, 2023, and was in the middle of the revised estimated range of $1.10 to $1.22 billion, as provided on July 25, 2023. +Capital Resources and Financing Highlights +In addition to record financial results, we returned value to shareholders through the generation of free cash flow and increases to our quarterly dividend. We also completed several important financing transactions in 2023 that increased our operational flexibility while preserving the strength of our balance sheet and improved our liquidity position. +52 Matador Resources Company | 2024 Proxy Statement +Highlights of these value-generating items include: +• The generation of free cash flow in all four quarters of 2023. +• The amendment of our dividend policy in the fourth quarter of 2023, pursuant to which we increased the quarterly cash dividend from $0.15 per share of Common Stock to $0.20 per share of Common Stock. +• The receipt of $38.2 million in performance incentives directly from Five Point in 2023. +• The issuance of $500.0 million in aggregate principal amount of our 2028 Notes. +• The revision of our Credit Agreement at our spring and fall redetermination processes to collectively (i) increase the borrowing base to $2.50 billion, as compared to $2.25 billion at December 31, 2022, (ii) increase the elected borrowing commitment to $1.325 billion, as compared to $775.0 million at December 31, 2022, (iii) increase the maximum facility amount to $2.00 billion, as compared to $1.50 billion at December 31, 2022 and (iv) add two new banks to our lending group. +• The amendment of the San Mateo Credit Facility in October 2023 to (i) increase the lender commitments from $485.0 million to $535.0 million and (ii) add a new bank to San Mateo’s lending group. +ESG Highlights +During 2023, we also continued to improve our ESG performance and enhance our ESG disclosures. Among other items, our ESG achievements included the following: +• The continued decrease in per-barrel emissions, including a reduction in direct greenhouse gas emissions intensity from 2019 levels, increased use of non-fresh water, including recycled water, and increased transportation of oil and water by pipeline. +• Approximately 22,000 hours of employee continuing education, equating to approximately 59 hours per employee in 2023, and management’s continued focus on risk management and cybersecurity, including quarterly reports by executive management to the Audit Committee. +• The publishing of our annual Sustainability Report in October 2023, which provides Matador’s stakeholders and interested parties with a standardized platform for evaluating the Company’s recent performance and future progress. +53 Matador Resources Company | 2024 Proxy Statement +Compensation Program Objectives +Our Board has a “pay for performance” philosophy and recognizes the leadership of our executive officers in contributing to the Company’s achievements. Our future success and the ability to create long-term value for our shareholders depend on our ability to attract, retain and motivate highly qualified individuals in the oil and natural gas industry. In furtherance of these goals, our executive compensation program is designed to meet the following key objectives: +• to be fair to both the executive and the Company and be competitive with comparable positions at companies in our peer group; +• to attract and retain talented and experienced executives in light of the intense competition for talent in our industry and areas of operation, including from peers and larger industry competitors; +• to align the interests of our executives with the interests of our shareholders and with the performance of our Company for long-term value creation; +• to provide financial incentives to our executives to achieve our key corporate and individual objectives with an appropriate mix of fixed and variable pay ; +• to foster a shared commitment among executives by coordinating their corporate and individual goals; and +• to provide compensation that takes into consideration the education, professional experience, knowledge, commitment and dedication that is specific to each job and the unique qualities each executive possesses. +54 Matador Resources Company | 2024 Proxy Statement +2023 Say-on-Pay Results +At our 2023 Annual Meeting, support for our executive compensation program remained strong with 96% approval. The Compensation Committee took this support into account as one of many factors it considered in connection with the discharge of its responsibilities in exercising its judgment in establishing and overseeing our executive compensation arrangements throughout the year. +Compensation Program Best Practices +What We Do: What We Don't Do: +✓ +We pay for performance—approximately 80% of our CEO’s target total compensation for 2023 was variable and at risk, with approximately 50% performance-based +× We do not permit hedging of Company stock +✓ We maintain robust stock ownership guidelines for officers × We do not gross-up excise taxes for severance or change in control payments +✓ We engage an independent compensation consultant × We do not guarantee bonuses +✓ We use competitive benchmarking in setting compensation × We do not reprice stock options without shareholder approval +✓ We conduct annual risk assessments of compensation practices × We have no defined benefit or supplemental executive retirement plans +✓ We conduct regular shareholder engagement to gather feedback on compensation practices × We do not allow pledging of Company stock, except in limited circumstances +✓ We hold an annual say-on-pay vote × We do not pay dividends on phantom units, restricted stock units (“RSUs”) or performance stock units (“PSUs”) +✓ We maintain a clawback policy × We do not pay dividends on unvested restricted stock, which accumulate and only settle once the underlying shares have vested +Impact of COVID-19 and Related Items on Our Compensation Programs +We made significant changes to our executive compensation program in 2020 in response to the COVID-19 pandemic and the sudden decline in oil prices, including reductions in base salaries. Additionally, even though each of the Independent Board-approved metrics under the Company's annual cash incentive plan (the "Cash Incentive Plan") were met or exceeded, the Company's executive officers and the Independent Board agreed that the executive officers would forego receiving any 2020 annual cash bonuses. As commodity prices improved in 2021, we shifted our executive compensation program to more closely resemble our 2019 executive compensation program prior to the decline in oil prices in 2020 and the COVID-19 pandemic. As such, our executive officers received increases in their base salary, increases in the grant date fair values for long-term equity awards and annual cash bonuses for 2021 and 2022. These changes to our compensation program in 2021 and 2022 corresponded to our performance as the Company’s stock price hit a low of $1.11 in March 2020 and then recovered to close at $36.92 on December 31, 2021 and continued to increase to close at $57.24 on December 30, 2022. During 2023, prices for oil were slightly lower, averaging $77.60 per Bbl, and prices for natural gas were significantly lower, averaging $2.66 per MMBtu over the year. Despite lower commodity prices, Matador’s stock price remained strong, closing at $56.86 per share at December 29, 2023. As such, our compensation program in 2023 did not materially differ from our compensation program in 2022. Mr. Foran’s total compensation for 2023 decreased approximately 11% as compared to his total compensation for 2022. Mr. Foran’s average annual total compensation for the three years ended December 31, 2023 was approximately $8.7 million. +55 Matador Resources Company | 2024 Proxy Statement +Elements of 2023 Compensation Program +Our executive compensation program places a considerable amount of an executive’s compensation at risk in the form of incentive or equity-based compensation, which can be variable from year to year. We also seek to provide an appropriate balance between annual incentives and long-term incentives to ensure that each executive is motivated to consider longer-term Company performance in preference to short-term results. +For 2023, our management compensation program was comprised of the following primary elements: +2023 Element +Key Features Why We Include This Element +Base Salary +• Fixed level of cash compensation +• Compensates each executive for his assigned responsibilities, experience, leadership and expected future contributions +Annual Cash Incentive Payments +• Variable, annual, performance-based cash compensation +• Focuses and motivates management to achieve key corporate and individual objectives +• Rewards achievements over the prior year +Phantom Units / Restricted Stock +• Approximately 50% of targeted total long-term equity award value +• Vests ratably in annual installments over three years from grant date +• Phantom Units settle in cash +• Restricted Stock reflect issued shares of the Company's Common Stock +• Directly aligns executive and shareholder interests by tying the cash received on settlement to the Company’s stock price +• Retains executives over vesting period +• Cash settlement of Phantom Units avoids dilution of Common Stock +• Restricted Stock increases overall stock ownership +Performance Stock Units +• Approximately 50% of targeted total long-term equity award value +• Vests between 0% and 200% following a three- year performance period ending December 31, 2025 based on the Company’s ranking of relative total shareholder return as compared to our peers +• If absolute total shareholder return is negative, payout is capped at target (100%) +• Focuses executives on the Company’s long-term performance as award is tied to the Company’s total shareholder return relative to the total shareholder return of its peers over a three-year performance period +• Settlement in shares of the Company’s stock increases alignment between executives and shareholders +• Retains executives over vesting period +Severance and Change of Control Benefits +• Specified severance pay and benefits are provided under each Named Executive Officer’s employment agreement in connection with termination events, including after a change in control +• Provides an incentive for executives to remain with the Company despite the uncertainties of a potential or actual change in control +• Provides a measure of financial security in the event an executive’s employment is terminated without cause +Other Benefits +• Broad-based 401(k) retirement, employee stock purchase plan and health and welfare benefits offered to all eligible employees +• Provides market competitive benefits +• Protects employees against catastrophic loss and encourages a healthy lifestyle +56 Matador Resources Company | 2024 Proxy Statement +Consistent with our compensation program objectives, we provide our executive officers with a significant portion of their total compensation in the form of variable, rather than fixed, compensation. Importantly, a significant portion of total compensation is also performance-based. The percentages shown below reflect each executive’s target compensation opportunity determined by the Compensation Committee and the Independent Board and do not reflect actual payments made to the executives for 2023. +2023 CEO Target Compensation (1) +2023 Average Other NEO Target Compensation (1)(2) +(1) Includes approximately 79% variable pay with approximately 50% performance based. +(1) Includes approximately 77% variable pay with approximately 50% performance based. Mr. Willey was granted restricted stock rather than PSUs. +(2) Mr. Frenzel omitted given his transition from the acting principal financial officer role to Executive Vice President and Treasurer effective February 16, 2023. +Role of the Independent Board, Compensation Committee and Management +The Compensation Committee annually evaluates each of the Company’s executive officers, including Mr. Foran, and recommends to the Independent Board the proposed compensation structure for each of the executives, including salary, equity and non-equity incentive compensation. Based on such recommendations, the Independent Board sets Mr. Foran’s compensation each year. Mr. Foran consults with and provides recommendations to the Compensation Committee and Independent Board regarding the compensation structure for each of the other Named Executive Officers. Based on the recommendations of the Compensation Committee and Mr. Foran, the Independent Board sets the other Named Executive Officers’ compensation each year. The members of the Independent Board are required to be independent pursuant to the listing standards of the NYSE and the rules and regulations promulgated by the SEC. +As part of their annual evaluations, the Compensation Committee: +• conducts an analysis of the Company’s annual performance relative to any performance criteria or targets established under the the Cash Incentive Plan and recommends to the Independent Board the amount of final annual cash incentive awards; +• reviews and recommends the form of and number of shares to be awarded pursuant to long-term incentive compensation awards, including vesting terms, performance metrics, performance peer groups and other material provisions of such awards; +• reviews executive officer compensation levels as compared to the Company’s peers; +• reviews and recommends any employment agreement, severance agreement, change in control agreement or provision or separation agreement or amendment thereof; and +• reviews and recommends any deferred compensation arrangement, retirement plan, other benefits and perquisites. +57 Matador Resources Company | 2024 Proxy Statement +In addition, the Compensation Committee confirms at least annually that our compensation policies and practices do not encourage unnecessary risk taking and reviews the relationship between risk management, corporate strategy and executive compensation. The Compensation Committee considers, in establishing and reviewing our compensation program, whether the program encourages unnecessary or excessive risk taking and has concluded that it does not and is not reasonably likely to have a material adverse effect on us. Many features of our program reflect sound risk management practices. Base salaries are fixed in amount and thus do not encourage risk taking. While annual cash incentive payments are tied to management’s achievements during the applicable fiscal year, they also take into account multiple performance criteria based on the executive’s individual performance and are within the discretion of the Independent Board, with payout limits for each participant. Thus, the Compensation Committee believes that our annual cash incentive awards appropriately balance risk and the desire to focus executives on specific short-term goals important to the Company’s success, and that they do not encourage unnecessary or excessive risk taking. In addition, the Compensation Committee believes that our equity compensation program provides an appropriate balance between the goals of increasing the price of our Common Stock and avoiding potential risks that could threaten our growth and stability due to the fact that the phantom units and PSUs vest over three years and the PSUs vest based on our relative total shareholder return, with an overall payout limit and a further limit if absolute total shareholder return is negative. We also maintain policies prohibiting hedging and pledging (except in limited circumstances) and stock ownership guidelines and a clawback policy, which we believe further mitigate the potential for unnecessary or excessive risk taking. +In addition, pursuant to its charter, the Compensation Committee reviews and recommends to the Independent Board any proposals for the adoption, amendment, modification or termination of our incentive compensation, equity-based plans and non-equity based plans. +Role of the Independent Compensation Consultant +The Compensation Committee has engaged Meridian Compensation Partners, LLC ("Meridian") as its independent executive compensation advisory firm. Meridian provides assessments of the competitiveness of the Company’s executive compensation levels and practices relative to relevant executive labor markets and performs other tasks as requested by the Compensation Committee. For 2023, the Compensation Committee assessed the independence of Meridian pursuant to applicable SEC and NYSE rules and concluded that Meridian’s engagement by the Compensation Committee did not raise any conflicts of interest. +Use of Peer Group Market Data +Our independent compensation consultant benchmarks the pay levels of our officers against a group of competitor companies in the oil and natural gas exploration and production sector (the “Peer Group”). In connection with its annual review, the Compensation Committee and Independent Board adopted the following Peer Group in 2023, which was used in setting 2023 compensation levels: +APA Resources Corp. Marathon Oil Corp +Callon Petroleum Co. Ovintiv Inc. +Coterra Energy Inc. PDC Energy Inc +Diamondback Energy Inc. Permian Resources Corp. +Magnolia Oil & Gas Corp. SM Energy Co. +In addition to considering companies in the oil and natural gas exploration and production sector, the Compensation Committee also considered company size characteristics such as assets, enterprise value and market value when approving the Peer Group. The Peer Group also includes certain companies with operations in the Permian Basin that face similar opportunities and challenges that we face. For 2023, the Compensation Committee removed Vital Energy in consideration of the size of its market capitalization relative to that of the Company and added APA Resources Corp. to the 2023 Peer Group given the comparable size of its market capitalization. As of December 31, 2023, the Peer Group had a median market capitalization of $7.4 billion, compared to the Company’s market capitalization of $6.8 billion at such date, placing the Company at the 46th percentile of the Peer Group. +58 Matador Resources Company | 2024 Proxy Statement +The Peer Group is used by the Compensation Committee and the Independent Board in setting Named Executive Officer salaries, annual cash incentive award opportunities, long-term incentive awards and target total direct compensation levels. The Compensation Committee and Independent Board use this data to inform their pay decisions as one data point among many others, including Company performance, individual performance, experience and responsibilities, leadership and professional growth. +2023 Base Salaries +The Compensation Committee recommended, and the Independent Board approved, effective January 1, 2023, the base salary levels for the Named Executive Officers as set forth below. +Executive Officer +2022 Base Salary (1) +2023 Base Salary +Joseph Wm. Foran $ 1,350,000 $ 1,350,000 +Van H. Singleton, II $ 750,000 $ 800,000 +Brian J. Willey $ — $ 600,000 +Billy E. Goodwin $ 750,000 $ 800,000 +Craig N. Adams $ 750,000 $ 800,000 +Michael D. Frenzel $ 450,000 $ 450,000 +(1) Information is not provided for Mr. Willey for 2022 as he was not a Named Executive Officer in 2022. +The Independent Board determined that the base salary levels for each of the Named Executive Officers effective January 1, 2023 were warranted based upon each Named Executive Officer’s individual contributions to, among other items: +• the Company’s operational performance during 2022, including record annual oil, natural gas and average daily oil equivalent production; +• the Company’s financial performance during 2022; +• the Company’s stock price during 2022; +• the Company’s continued improvement in operational efficiencies; +• the Company’s continued focus on improvement in its ESG initiatives and disclosure of such initiatives; and +• the continued growth of the Company’s midstream business throughout 2022. +59 Matador Resources Company | 2024 Proxy Statement +2023 Annual Cash Incentive Compensation +The Company’s 2023 annual cash incentive compensation was awarded pursuant to the Cash Incentive Plan, which is designed to link executive decision making and performance with the Company’s goals, reinforce these goals and ensure the highest level of accountability for the success of the Company as a whole. The Cash Incentive Plan advances Company and shareholder interests by providing an additional means to (i) sustain and enhance the culture of personal commitment on the part of executives, select managers and key employees in the continued growth, development and financial success of the Company and (ii) encourage them to remain with, and devote their best efforts to, the Company. The Cash Incentive Plan provides for the granting of incentive compensation awards that may be paid to a participant upon satisfaction of specified performance goals for a particular performance period. In addition, the Cash Incentive Plan provides that the Compensation Committee and Independent Board may make adjustments for individual executive officers for exceptional performance and attainment of certain enumerated strategic goals (the “Strategic Objectives Adjustment”). +Performance Goals +For 2023, the chair of the Compensation Committee met with Mr. Foran and certain members of the executive management team to review and discuss potential criteria for the performance goals. Based on these meetings, the chair of the Compensation Committee proposed certain preliminary performance goal categories for consideration for 2023 to the full Compensation Committee. The Compensation Committee then met with our executive management team to review the proposed performance goal categories. As a result of these discussions, and upon the recommendation of the Compensation Committee, the Independent Board determined to use the following threshold, target and maximum performance goals for 2023, which were each achieved at or above the maximum level, as shown below: +2023 Performance Goals +Threshold Target Maximum Actual Results Assessment +Net Debt/Adjusted EBITDA (1)(2)(3) +1.2x 1.0x 0.8x 0.9x Exceeded Target +Adjusted operating costs per BOE, excluding interest ($/BOE) $15.75 $14.75 $13.75 $12.83 Exceeded Maximum +Return on Average Capital Employed (ROACE) 26% 30% 34% 34% Achieved Maximum +Total Shareholder Return vs. Peer Group — Upper 50% Upper 25% Upper 50% Achieved Target +Environmental, Social and Governance (ESG) (4) +— — — — — +(5) +(1) Adjusted EBITDA is a non-GAAP financial measure included herein solely as a reference point under the Cash Incentive Plan. It is commonly used by similar companies in our industry. For a definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to Matador’s net income (loss) and net cash provided by operating activities, see Annex A to this Proxy Statement. +(2) As a reference point under the Cash Incentive Plan, Net Debt as of December 31, 2023 is calculated as (i) $1.2 billion in senior notes outstanding, plus (ii) $552.3 million in debt under the Credit Agreement, including outstanding borrowings and letters of credit, less (iii) $52.7 million in available cash. The increase in Net Debt in 2023 as compared to 2022 was primarily attributable to the Advance Acquisition. +(3) Attributable to Matador Resources Company shareholders after giving effect to those values attributable to third-party non-controlling interests, including in San Mateo. +(4) Based on a qualitative assessment of the Company’s overall progress in its ESG-related efforts, including with respect to enhancements to public disclosures, and a review of the Company’s performance in the areas of environmental stewardship, safety processes and procedures, training of personnel, risk management, cybersecurity and diversity and inclusion. +(5) Among other items, the Compensation Committee and Independent Board noted the continued publication of the Company’s annual Sustainability Report, the continued reduction of per-barrel emissions, the meaningful use of non-fresh water, including recycled water, the increased transportation of operated produced water and operated produced oil by pipeline, the number of training hours conducted by Company personnel and management’s continued focus on risk management and cybersecurity, including quarterly reports by executive management to the Audit Committee. +60 Matador Resources Company | 2024 Proxy Statement +In addition to setting the 2023 performance goals outlined above, the Compensation Committee also identified certain annual financial and strategic achievements to be considered by the Compensation Committee and the Independent Board in connection with the assessment of the performance of the Named Executive Officers during 2023 and the Strategic Objectives Adjustment component for 2023. These additional factors included: +• Adjusted Free Cash Flow (1) of $460 million; +• percentage of oil production growth of 26%; +• reserves growth to 460 MMBOE; +• drilling and completions cost per foot of $1,075; +• lease operating expenses per BOE of $5.06; +• San Mateo Adjusted EBITDA (2) of $200 million; and +• the completion of numerous quality acreage, mineral and midstream transactions, including the Advance Acquisition. +(1) Adjusted Free Cash Flow is a non-GAAP financial measure included herein solely as a reference point under the Cash Incentive Plan. It is commonly used by similar companies in our industry. For a definition of Adjusted Free Cash Flow and a reconciliation of Adjusted Free Cash Flow to Matador’s net cash provided by operating activities, see Annex A to this Proxy Statement. +(2) Adjusted EBITDA is a non-GAAP financial measure included herein solely as a reference point under the Cash Incentive Plan. It is commonly used by similar companies in our industry. For a definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to San Mateo’s net income and net cash provided by operating activities, see Annex A to this Proxy Statement. +2023 Incentive Opportunities +In making recommendations regarding potential 2023 annual cash incentive opportunities for our Named Executive Officers, the Compensation Committee reviewed Meridian’s recommendations and the recommendations of Mr. Foran regarding proposed target opportunities. Based on such review, which took into account the differing responsibilities of each Named Executive Officer and Peer Group data, where available, for bonus levels for comparable positions, the 2023 target annual incentive opportunities for each of our Named Executive Officers were as set forth below. Such opportunities, as a percentage of base salary, remain unchanged from 2022 target opportunities. +Participant +2023 Target Annual Incentive Opportunity as % of 2023 Base Salary +Joseph Wm. Foran 100% +Van H. Singleton, II 100% +Brian J. Willey 100% +Billy E. Goodwin 100% +Craig N. Adams 100% +Michael D. Frenzel 100% +The maximum award opportunity for Mr. Foran was capped at 200%, for Messrs. Singleton, Willey, Goodwin and Adams was capped at 175% and for Mr. Frenzel was capped at 150%, in each case, prior to application of the Strategic Objectives Adjustment. Our Independent Board also determined to cap the Strategic Objectives Adjustment for each of Messrs. Foran, Singleton, Willey, Goodwin and Adams at 30% and for Mr. Frenzel at 25% of such Named Executive Officer’s total 2023 annual cash incentive payment. +61 Matador Resources Company | 2024 Proxy Statement +2023 Performance Results +The Compensation Committee then assessed the Company’s 2023 results in light of the performance goals, annual financial and strategic achievements and the following individual performance milestones for each Named Executive Officer when determining appropriate annual cash incentive award amounts: +Named Executive Officer Individual Performance Milestones +Joseph Wm. Foran +Chairman and Chief Executive Officer +• Collaborated with the Board and other executive officers to create and maintain an effective team culture throughout each level of Matador’s organization building value through (1) traditional oil and natural gas operations growing organically through the drill bit, (2) expanding midstream operations in Matador’s various asset areas and (3) selective acreage acquisitions +• Directed the origination, negotiation, closing and integration of the Advance Acquisition +• Provided direction and leadership throughout Matador in developing and executing Matador’s strategy and operational plan , which resulted in record operational and financial results and free cash flow during each quarter of 2023 +• Provided leadership to the Board on various matters, including with respect to acquisitions, drilling plans and returning value to shareholders through our steadily increasing fixed dividend +• Guided the collaborative management of the Company’s balance sheet and improvement of the Company's already strong financial position through strategic financing transactions +• Led firmwide focus on attracting, training and retaining talent and encouraging employee leadership development and director engagement +• Aligned our strategy and operational plan throughout the organization by effectively communicating to directors, staff, shareholders and the public +• Directed efforts to develop and maintain positive relationships with directors, shareholders, vendors and other key stakeholders with the assistance of other executive officers +Van H. Singleton, II +President - Land, Acquisitions and Divestitures and Planning +• Oversaw the Company’s land, land administration and acquisition & development activities, including over 200 acquisitions completed in 2023 +• Led the negotiation, execution and closing of the Advance Acquisition +• Coordinated business development activities and opportunities +• Directed efforts to develop and maintain positive relationships with potential business partners and create pipeline of acquisition and divestiture opportunities +• Served as Chairman of San Mateo through September of 2023 +Brian J. Willey +Executive Vice President and Chief Financial Officer +• Served as Chief Financial Officer of the Company and led the collective effort to manage the Company's balance sheet and improve the Company's already strong financial position through: +◦ The issuance of $500.0 million in aggregate principal amount of 6.875% senior notes due 2028 +◦ The revision of our Credit Agreement to, among other items, increase the elected borrowing commitment by $550.0 million to $1.325 billion and add two new banks to our lending group +◦ The amendment of the San Mateo Credit Facility to increase the lender commitments from $485.0 million to $535.0 million and add a new bank to San Mateo’s lending group +• Coordinated and oversaw the general financial matters of the Company through the management of the Company’s finance staff +• Shared primary responsibility for investor conferences and non-deal roadshows with Mr. Foran +62 Matador Resources Company | 2024 Proxy Statement +Billy E. Goodwin +Former President - Operations +• Led the Company’s collaborative drilling, completions and production activities, managing approximately $1.16 billion of capital expenditures in 2023 related to the Company’s operations in its primary operating areas, resulting in record total oil and natural gas production in 2023 +• Coordinated the successful operational integration of the assets acquired in the Advance Acquisition +• Led Matador’s continuing improvement in capital efficiency as demonstrated by +◦ D/C/E capital expenditures for 2023 of $1.16 billion, which was below our estimated range for 2023 D/C/E capital expenditures of $1.18 to $1.32 billion as provided on February 21, 2023, and was in the middle of the revised estimated range of $1.10 to $1.22 billion, as provided on July 25, 2023 +◦ Continued drilling of longer laterals, with average completed lateral length for operated wells turned to sales in 2023 of approximately 9,800 feet +• Continued focus on increasing efficiency and innovation , including successfully implementing "simul-frac" operations, 100% dual-fuel utilization on Matador completed wells and successful execution on our first two "U-turn" two-mile lateral wells +Craig N. Adams +Former Executive Vice President, Co-Chief Operating Officer, Chief of Staff and Corporate Secretary +• Shared Chief Operating Officer responsibilities and acted as chief administrative officer +• Coordinated and oversaw the general legal matters of the Company through the management of the Company’s legal staff, including corporate governance and Board functions +• Directed efforts to attract, train and retain talent and oversaw the Company’s human resource activities +• Responsible for coordinating administrative functions of the Company, including interaction with management, office facilities and departmental efficiencies +• Helped advance the Company’s ESG initiatives +Michael D. Frenzel +Executive Vice President, Treasurer, and Former Principal Financial Officer +• Served as treasurer of the Company and primary financial officer of San Mateo throughout 2023 as well as principal financial officer of the Company until February of 2023 +• Managed the Company’s treasury, financial planning and forecasting, budgeting, capital markets, hedging, financial reporting and investor relations activities +Additionally, the Compensation Committee performed a qualitative assessment of the Company’s ESG record for the year. Among other items, the Compensation Committee and Independent Board noted the continued publication of the Company’s annual Sustainability Report, the continued reduction of per-barrel emissions, the meaningful use of non-fresh water, including recycled water, increased transportation of operated produced water and operated produced oil by pipeline, the number of training hours conducted by Company personnel and management’s continued focus on risk management and cybersecurity, including quarterly reports by executive management to the Audit Committee. +In assessing performance under the Strategic Objectives Assessment, the Compensation Committee reviewed the individual performance milestones listed above as well as additional individual contributions to the achievement of the Company-wide performance goals and certain annual financial and strategic achievements. Based on this review, the Compensation Committee determined that each of the Named Executive Officers performed at a high level in 2023 in contributing to the Company’s success and that the individual contributions of Mr. Willey, in particular, to the achievement of these goals exceeded expectations. +63 Matador Resources Company | 2024 Proxy Statement +Based on such assessment, the Compensation Committee recommended to the Independent Board the annual cash awards listed below for each Named Executive Officer under the Cash Incentive Plan, including Strategic Objectives Adjustments equal to 15% for each of Messrs. Foran, Goodwin, Singleton, Adams and Frenzel and 30% for Mr. Willey. The Independent Board approved such annual cash awards, which were paid to the Named Executive Officers in February 2024. +Named Executive Officer +Target Award Payable for 2023 +Maximum Award Payable for 2023 +Actual Award for 2023 +Joseph Wm. Foran $1,350,000 $3,510,000 $3,105,000 +Van H. Singleton, II $800,000 $1,820,000 $1,610,000 +Brian J. Willey $600,000 $1,365,000 $1,365,000 +Billy E. Goodwin $800,000 $1,820,000 $1,610,000 +Craig N. Adams $800,000 $1,820,000 $1,610,000 +Michael D. Frenzel $450,000 $843,750 $776,250 +2023 Long-Term Incentive Compensation +In February 2023, the Independent Board granted awards of 50% service-based cash-settled phantom units and 50% share-settled PSUs to Messrs. Foran, Singleton, Goodwin and Adams and approximately 50% share-settled PSUs and approximately 50% service-based restricted shares of Common Stock that vest in equal annual tranches over three years from grant to Messrs. Willey and Frenzel. Messrs. Willey and Frenzel received restricted shares of Common Stock rather than cash-settled phantom units in order to increase their ownership of the Company's Common Stock. These long-term equity awards facilitate retention of our Named Executive Officers, incentivize positive future results and further align the interests of our Named Executive Officers with those of the Company’s shareholders. The table below provides the key terms of the February 2023 equity awards for our Named Executive Officers: +Key Terms Phantom Units / Restricted Stock Performance Stock Units +Targeted percentage of total award value 50% 50% +Vesting terms Three years ratably on each anniversary +Following three-year performance period ending December 31, 2025 +Performance metric N/A Relative total shareholder return, with payout capped at target if absolute total shareholder return is negative +The number of shares underlying each grant and the target value of the 2023 annual equity grants are set forth in the table below: +Named Executive Officer Phantom Units / Restricted Stock Target Performance Stock Units Targeted Value +Joseph Wm. Foran 30,000 20,000 $3,800,000 +Van H. Singleton, II 15,000 10,000 $1,900,000 +Brian J. Willey 8,000 6,000 $1,000,000 +Billy E. Goodwin 15,000 10,000 $1,900,000 +Craig N. Adams 15,000 10,000 $1,900,000 +Michael D. Frenzel 8,000 3,500 $850,000 +64 Matador Resources Company | 2024 Proxy Statement +The Independent Board approved the total targeted value for the year for each Named Executive Officer and then converted that value into an approximate aggregate number of units based on the closing price of our Common Stock on the date prior to the date of grant. The units were then granted 50% in the form of phantom units or restricted stock, as applicable, and 50% in the form of PSUs (at target). The PSU equity component provides for settlement of between 0% and 200% of the total target PSUs subject to the award based on our total shareholder return relative to the total shareholder return of the Peer Group over a three-year performance period from January 1, 2023 through December 31, 2025. If our absolute total shareholder return over such performance period is negative, no more than 100% of the PSUs may vest. The applicable percentage of vested units is shown below with respect to each percentile ranking and results are interpolated for results between the various rankings shown below. +Company’s Relative Total Shareholder Return Percentile Ranking Percentage of Target PSUs That Will Vest +0 0% +10th 20% +20th 40% +30th 60% +40th 80% +50th 100% +60th 120% +70th 140% +80th 160% +90th 180% +100th 200% +In connection with its annual review, the Compensation Committee and Independent Board updated the peer group for purposes of the 2023 PSU grants. The peer group used for determination of the Company’s relative total shareholder return is as follows: +APA Resources Corp. Ovintiv Inc. +Callon Petroleum Co. PDC Energy Inc +Coterra Energy Inc. Permian Resources Corp. +Diamondback Energy Inc. SM Energy Co. +Magnolia Oil & Gas Corp. SPDR S&P OIL & GAS EXP & PR +Marathon Oil Corp Alternate: Earthstone Energy, Inc.* +*To be substituted in the event that one of the peer group members for purposes of the 2023 PSU grants is acquired during the performance period and removed from the peer group. +Vesting of 2021 Performance Stock Units +The PSU awards granted to the Named Executive Officers in June 2021 vested on December 31, 2023 based on the percentile level at which the total shareholder return to the Company’s stockholders over the three-year period ending December 31, 2023 stood in relation to the total shareholder return realized for that period by each member of a group of peer companies established by the Board at the time of the grant of the awards. In accordance with the terms of the award agreements governing the awards, each of Oasis Petroleum, Inc., Cimarex Energy Co. and Parsley Energy, Inc. had been acquired during the period and were removed from the 2021 peer group and excluded from the relative total shareholder return calculation for the vesting of the 2021 PSUs. Based on our performance and after such adjustments, the Company’s total shareholder return percentile ranking was at the 89th percentile and the PSUs vested at 178% of target. +65 Matador Resources Company | 2024 Proxy Statement +Benefits +We offer a variety of health and welfare programs to eligible employees, including the Named Executive Officers. The health and welfare programs are intended to protect employees against catastrophic loss and encourage a healthy lifestyle. Our health and welfare programs include medical, pharmacy, dental, disability and life insurance. We also have a 401(k) plan for eligible employees, including the Named Executive Officers, to which we contribute 3% of the employee’s eligible compensation, which is subject to limits established by the U.S. Internal Revenue Code of 1986, as amended (the “Code”), and have the discretion to contribute up to an additional 4% of the employee’s eligible compensation as a dollar-for-dollar matching contribution with respect to his or her elective deferral contributions. The discretionary dollar-for-dollar match is subject to vesting based upon years of service to the Company and the limits on the compensation that may be considered under the Code. In addition, we provide long-term care insurance for certain of our executive officers. +Severance and Separation Arrangements +Employment Agreements +We have entered into employment agreements with each of our Named Executive Officers. Under the employment agreements, if a termination of employment occurs pursuant to one of the following events: +• the Named Executive Officer dies; +• the Named Executive Officer is totally disabled; +• we mutually agree to end the employment agreement; +• we dissolve and liquidate; or +• the term of the employment agreement ends, +we will pay the Named Executive Officer the average of his annual cash bonus, which includes non-equity incentive compensation, for the prior two years, pro-rated based on the number of complete or partial months completed during the year of termination. +Also, under the employment agreements, if one of the following occurs: +• the Named Executive Officer’s employment is terminated other than (i) as set forth above, (ii) by us for just cause or (iii) in connection with a “change in control” as described below; or +• the Named Executive Officer (other than Messrs. Willey and Frenzel) terminates his employment for “good reason,” +then, (i) for Mr. Foran, we will pay him twice his base salary and twice the average of his annual cash bonus for the prior two years; (ii) for Messrs. Singleton, Willey, Goodwin or Adams we will pay him 1.5 times his base salary and 1.5 times the average of his annual cash bonus for the prior two years; and (iii) for Mr. Frenzel, we will pay him one-half of his base salary and one-half of the average of his annual cash bonus for the prior two years. +Finally, under the employment agreement of Mr. Foran, which was entered into in 2011, if we terminate Mr. Foran within 30 days prior to the “change in control” or within 12 months after the “change in control” without just cause or Mr. Foran terminates his employment with or without “good reason” during such period, we will pay him three times his base salary and three times the average of his annual cash bonus for the prior two years. This agreement was entered into prior to our initial public offering. At that time, we believed a “modified single trigger” was appropriate given the Company’s size, early stage of development and strong growth aspirations. Since that time, however, we have ceased to use “modified single triggers” in executive employment agreements, and we intend to exclusively use “double triggers” going forward, as we have since 2014. The agreements entered into with Messrs. Singleton, Willey, Goodwin, Adams and Frenzel, each include a “double trigger” such that if we terminate either executive within 30 days prior to the “change in control” or within 12 months after the “change in control” without just cause or he terminates his employment with “good reason,” we will pay Messrs. Singleton, Willey, Goodwin and Adams three times his base salary and three times the average of his annual cash bonus for the prior two years and Mr. Frenzel two times his base salary and two times the average of his annual +66 Matador Resources Company | 2024 Proxy Statement +cash bonus for the prior two years. In addition, if any of our Named Executive Officers are terminated or terminate their employment as set forth above in connection with a “change in control,” all equity awards of such Named Executive Officer vest immediately prior to such termination. +For definitions of “change in control,” “good reason” and “just cause,” please see the employment agreement of each Named Executive Officer, each of which is included as an exhibit to the Company’s most recent Annual Report on Form 10-K or Quarterly Report on Form 10-Q. +Equity Plans +For equity grants under the Matador Resources Company 2019 Long-Term Incentive Plan (as amended, the “2019 Plan”), other than the PSUs, vesting upon a “change in control” for the Named Executive Officers mirrors the terms of their employment agreements. The PSUs vest upon a “change in control” based on performance achieved through the date of such change in control, as it is anticipated that a change in control would make achievement of relative total shareholder performance impractical to measure. +The “change in control” provisions in the employment agreements and the equity grants under the 2019 Plan help prevent management from being distracted by rumored or actual changes in control. The “change in control” provisions provide: +• incentives for those Named Executive Officers to remain with us despite the uncertainties of a potential or actual change in control; +• assurance of severance payments for terminated Named Executive Officers; and +• access to equity compensation after a change in control. +Stock Ownership Guidelines +We have adopted stock ownership guidelines for the following officers in the following designated amounts: +• Chairman and Chief Executive Officer—shares equal to five times base salary; +• President—shares equal to five times base salary; +• Executive Vice Presidents—shares equal to two and 1/2 times base salary; +• Senior Vice Presidents—shares equal to two times base salary; and +• Vice Presidents and Executive Directors—shares equal to one and 1/2 times base salary. +Newly appointed officers have until the fifth anniversary of his or her appointment as an officer of the Company within which to achieve the stock ownership position. Shares that count toward the stock ownership guidelines include time-based restricted shares. Shares that will not count toward the stock ownership guidelines include shares underlying unexercised stock options, unexercised stock appreciation rights, phantom units and performance-based awards for which the performance requirements have not been satisfied. +Until each of the above officers reaches the stock ownership level required of his or her position, such officer must hold at least 50% of all “net shares” received through restricted stock, PSU or RSU vesting or realized through stock option exercises. For this purpose, “net shares” means all shares retained after applicable withholding of any shares for tax purposes. Additionally, upon the vesting of restricted stock, PSUs or RSUs or the exercise of stock options, each officer must hold the net shares for a minimum of 12 months following such vesting or exercise, or until his earlier retirement. As of December 29, 2023, each Named Executive Officer owned shares in excess of the applicable minimum requirement set forth in the stock ownership guidelines, and Mr. Foran held shares with a value equal to approximately 225 times his base salary then in effect. +67 Matador Resources Company | 2024 Proxy Statement +Anti-Hedging and Anti-Pledging Policies +Pursuant to the Company’s insider trading policy, the Company prohibits hedging of its securities by directors, officers or employees. Specifically, no such person shall purchase or sell, or make any offer to purchase or offer to sell, derivative securities relating to the Company’s stock, whether or not issued by the Company, or financial instruments that are designed to hedge or offset any decrease in the market value of the Company’s stock (including but not limited to prepaid variable forward contracts, equity swaps, collars and exchange funds) or otherwise engage in transactions that hedge or offset, or are designed to hedge or offset, any decrease in the market value of Company equity securities (a) granted to such person by the Company as part of the compensation of such person; or (b) held, directly or indirectly, by such person. The insider trading policy also restricts directors and executive officers from pledging more than 25% of his or her holdings of the Company’s stock without the prior written consent of the Environmental, Social and Corporate Governance Committee. +Clawback Policy +In October 2023, the Company adopted a compensation clawback policy applicable to the Company’s executive officers in accordance with applicable NYSE listing rules, a copy of which is filed as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. The Company’s clawback policy requires recovery of incentive-based compensation received by executive officers during the three fiscal years preceding the date it is determined that the Company is required to prepare an accounting restatement of its financial statements (including any such correction recorded in the Company’s current period financial statements) due to material non-compliance with any financial reporting requirement under the federal securities laws. The amount required to be recovered is the excess of the amount of incentive-based compensation received over the amount that would have been received had it been determined or calculated based on the Company’s restated financial results. +Strategic Planning and Compensation Committee Report +We have reviewed and discussed with management the Compensation Discussion and Analysis required by Item +402(b) of Regulation S-K and based on such review and discussions, we recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement and incorporated by reference to the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. +Strategic Planning and Compensation Committee, +R. Gaines Baty, Chair +Reynald A. Baribault +Monika U. Ehrman +Timothy E. Parker +Kenneth L. Stewart +68 Matador Resources Company | 2024 Proxy Statement +Summary Compensation Table +The following table summarizes the total compensation awarded to, earned by or paid to the Named Executive Officers for 2023, 2022 and 2021. Messrs. Singleton and Frenzel were not Named Executive Officers prior to 2022 and Mr. Willey was not a Named Executive Officer prior to 2023. This table and the accompanying narrative should be read in conjunction with the CD&A, which sets forth the objectives and other information regarding our executive compensation program: +Name and Principal Position Year Salary +Stock Awards (1) +Non-Equity Incentive Plan Compensation (2) +All Other Compensation Total +Joseph Wm. Foran 2023 $1,350,000 $3,575,900 $3,105,000 +$25,699 (3) +$8,056,599 +Chairman of the Board and 2022 $1,350,000 $4,472,369 $3,105,000 $23,949 $8,951,318 +Chief Executive Officer 2021 $1,231,250 $5,203,040 $2,600,000 $22,899 $9,057,189 +Van H. Singleton, II 2023 $800,000 $1,787,950 $1,610,000 +$23,100 (4) +$4,221,050 +President-Land, Acquisitions 2022 $750,000 $2,140,604 $1,509,375 $21,350 $4,421,329 +and Divestitures and Planning +Brian J. Willey 2023 $600,000 $1,008,980 $1,365,000 +$23,100 (4) +$2,997,080 +Executive Vice President +and Chief Financial Officer +Billy E. Goodwin 2023 $800,000 $1,787,950 $1,610,000 +$23,100 (4) +$4,221,050 +Former President-Operations 2022 $750,000 $2,140,604 $1,509,375 $21,350 $4,421,329 +2021 $693,333 $2,349,760 $1,160,000 $20,300 $4,223,393 +Craig N. Adams 2023 $800,000 $1,787,950 $1,610,000 +$25,381 (5) +$4,223,331 +Former Executive Vice President, 2022 $750,000 $2,140,604 $1,509,375 $23,631 $4,423,610 +Co-Chief Operating Officer, Chief of Staff and Corporate Secretary 2021 $693,333 $2,349,760 $1,160,000 $22,581 $4,225,674 +Michael D. Frenzel 2023 $450,000 $801,205 $776,250 +$23,100 (4) +$2,050,555 +Executive Vice President, 2022 $463,540 $1,032,063 $450,000 $21,350 $1,966,953 +Treasurer and Former Principal Financial Officer +(1) Reflects the grant date fair value of phantom units, PSUs or restricted stock awards, as applicable, computed in accordance with FASB ASC Topic 718. The Company uses the Monte Carlo simulation method to measure the fair value of PSUs and the closing price of the Company's Common Stock on the trading day prior to the grant date to measure the fair value of restricted stock and phantom unit awards. For 2023, the portion of the amount reflected in this column relating to the PSUs is calculated based on probable outcome as of the grant date and assumes achievement between target and maximum. The grant date value of PSUs granted in 2023 assuming achievement of maximum performance is $3,324,400 for Mr. Foran, $1,662,200 for Messrs. Singleton, Goodwin and Adams, $997,320 for Mr. Willey and $581,770 for Mr. Frenzel. +(2) Represents awards pursuant to the Cash Incentive Plan. See “—Compensation Discussion and Analysis—2023 Annual Cash Incentive Compensation” above. +(3) Consists of $23,100 in 401(k) Company and matching contributions as described in “—Compensation Discussion and Analysis—Benefits” and $2,599 in long-term care insurance premiums. +(4) Reflects 401(k) Company and matching contributions as described in “—Compensation Discussion and Analysis—Benefits.” +(5) Consists of $23,100 in 401(k) Company and matching contributions as described in “—Compensation Discussion and Analysis—Benefits” and $2,281 in long-term care insurance premiums. +EXECUTIVE COMPENSATION +69 Matador Resources Company | 2024 Proxy Statement +Grants of Plan-Based Awards Table +The following table sets forth certain information regarding non-equity incentive awards granted by the Independent Board pursuant to the Cash Incentive Plan and awards of share-settled PSUs, cash-settled phantom units and restricted stock granted by the Independent Board to the Named Executive Officers pursuant to the 2019 Plan during the year ended December 31, 2023: +Estimated Future Payouts Under Non-Equity Incentive Plan Awards (1) +Estimated Future Payouts Under Equity Incentive Plan Awards (2) +All Other Stock Awards: Number of Shares of Stock or Units (3) +Grant Date Fair Value Stock Awards +Threshold Target Maximum Threshold Target Maximum +Name Grant Date ($) ($) ($) (#) (#) (#) (#) ($) +Joseph Wm. Foran - — 1,350,000 3,510,000 — — — — — +2/16/23 — — — — 20,000 40,000 — 1,662,200 +2/16/23 — — — — — — 30,000 1,913,700 +Van H. Singleton, II - — 800,000 1,820,000 — — — — — +2/16/23 — — — — 10,000 20,000 — 831,100 +2/16/23 — — — — — — 15,000 956,850 +Brian J. Willey - — 600,000 1,365,000 — — — — — +2/16/23 — — — — 6,000 12,000 — 498,660 +2/16/23 — — — — — — 8,000 510,320 +Billy E. Goodwin (4) +- — 800,000 1,820,000 — — — — — +2/16/23 — — — — 10,000 20,000 — 831,100 +2/16/23 — — — — — — 15,000 956,850 +Craig N. Adams (5) +- — 800,000 1,820,000 — — — — — +2/16/23 — — — — 10,000 20,000 — 831,100 +2/16/23 — — — — — — 15,000 956,850 +Michael D. Frenzel - — 450,000 843,750 — — — — — +2/16/23 — — — — 3,500 7,000 — 290,885 +2/16/23 — — — — — — 8,000 510,320 +(1) See “—Compensation Discussion and Analysis—2023 Annual Cash Incentive Compensation” and “—Summary Compensation Table— Non-Equity Incentive Plan Compensation” regarding the actual payments made to the Named Executive Officers pursuant to the Cash Incentive Plan. +(2) Represents PSUs that provide for settlement of between 0% and 200% of the total target shares subject to the award based on achievement of the relative total shareholder return performance metric over a three-year performance period from January 1, 2023 through December 31, 2025. If our absolute total shareholder return over such performance period is negative, no more than 100%, the target level, of the PSUs may vest. See “—Compensation Discussion and Analysis—2023 Long-Term Incentive Compensation.” The PSUs do not provide for a threshold number of shares that may be earned. +(3) For Messrs. Foran, Singleton, Goodwin and Adams, represents phantom units that provide for settlement in cash. For Messrs. Willey and Frenzel, represents restricted stock. See “—Compensation Discussion and Analysis—2023 Long-Term Incentive Compensation.” +(4) Mr. Goodwin's outstanding equity incentive plan awards are expected to be forfeited upon the end of his employment. +(5) Mr. Adams' outstanding equity incentive plan awards were forfeited upon the end of his employment. +70 Matador Resources Company | 2024 Proxy Statement +Outstanding Equity Awards at December 31, 2023 +The following table summarizes the total outstanding option awards at December 31, 2023 held by Mr. Frenzel. None of the other Named Executive Officers held any stock options as of such date. +Option Awards +Name Number of Securities Underlying Unexercised Stock Options (#) Exercisable Number of Securities Underlying Unexercised Stock Options (#) Unexercisable Option Exercise Price Option Expiration Date +Michael D. Frenzel 20,000 — $ 14.80 8/27/25 +5,439 — $ 29.68 2/15/24 +Option Awards +The following table summarizes the total outstanding cash-settled phantom units, restricted shares and share-settled PSUs held as of December 31, 2023 by each Named Executive Officer: +Stock Awards +Name Award Type Number of Shares or Units of Stock That Have Not Vested +(#) +Market Value of Shares or Units of Stock That Have Not Vested (1) +($) +Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (2) +(#) +Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested (2) +($) +Joseph Wm. Foran Phantom units 84,288 4,792,616 — — +PSUs — — 109,094 6,203,085 +Van H. Singleton, II Phantom units 39,426 2,241,762 — — +PSUs — — 53,070 3,017,560 +Brian J. Willey Phantom units — — — — +PSUs — — 27,944 1,588,896 +Restricted stock — — 19,926 1,132,992 +Billy E. Goodwin (3) +Phantom units 40,426 2,298,622 — — +PSUs — — 53,070 3,017,560 +Craig N. Adams (4) +Phantom units 40,426 2,298,622 — — +PSUs — — 53,070 3,017,560 +Michael D. Frenzel Phantom units — — — — +PSUs — — 22,944 1,304,596 +Restricted stock — — 19,926 1,132,992 +(1) The market value is calculated based upon the closing price of our Common Stock on December 29, 2023 of $56.86 per share. +(2) The number of unearned PSUs and market value presented are based upon achievement of the 100th percentile under the PSU award agreements with 200% of target units vesting, calculated based upon the closing price of our Common Stock on December 29, 2023 of $56.86 per share. +(3) Mr. Goodwin's outstanding cash-settled phantom units and share-settled PSUs are expected to be forfeited upon the end of his employment. +(4) Mr. Adams' outstanding cash-settled phantom units and share-settled PSUs were forfeited upon the end of his employment. +71 Matador Resources Company | 2024 Proxy Statement +The following table provides the vesting dates for restricted stock, cash-settled phantom units and PSUs outstanding as of December 31, 2023: +Vesting Date Award Type Joseph Wm. Foran Van H. Singleton Brian J. Willey Billy E. Goodwin Craig N. Adams Michael D. Frenzel +2/16/24 Restricted stock — — 2,666 — — 2,666 +2/16/24 Phantom units 10,000 5,000 — 5,000 5,000 — +2/17/24 Restricted stock — — 3,879 — — 3,879 +2/17/24 Phantom units 16,810 8,046 — 8,046 8,046 — +6/4/24 Restricted stock — — 4,167 — — 4,167 +6/4/24 Phantom units 20,667 8,334 — 9,334 9,334 — +12/31/24 +PSUs (1) +69,094 33,070 15,944 33,070 33,070 15,944 +2/16/25 Restricted stock — — 2,667 — — 2,667 +2/16/25 Phantom units 10,000 5,000 — 5,000 5,000 — +2/17/25 Restricted stock — — 3,880 — — 3,880 +2/17/25 Phantom units 16,811 8,046 — 8,046 8,046 — +12/31/25 +PSUs (1) +40,000 20,000 12,000 20,000 20,000 7,000 +2/16/26 Restricted stock — — 2,667 — — 2,667 +2/16/26 Phantom units 10,000 5,000 — 5,000 5,000 — +Total Unvested Shares and Units 193,382 92,496 47,870 93,496 93,496 42,870 +(1) The vesting date shown reflects the end of the performance period established by the PSU award agreements. The PSUs vest upon the Compensation Committee’s certification of the achievement of the performance goal, which must occur within 60 days of completion of the performance period. The number of units shown assumes achievement of the 100th percentile under the PSU award agreements with 200% of target units vesting. +Option Exercises and Stock Vested +The following table provides information on the stock awards (consisting of restricted stock, cash-settled phantom units and PSUs) that vested for each Named Executive Officer during 2023. None of the Named Executive Officers exercised any stock options during 2023. +Option Awards Stock Awards +Name Number of Shares Acquired on Exercise +(#) Value Realized on Exercise +Number of Shares Acquired on Vesting (1) +(#) +Value Realized on Vesting +Joseph Wm. Foran — $— 200,924 $11,094,710 +Van H. Singleton, II — $— 79,460 $4,403,355 +Brian J. Willey — $— 31,963 $1,786,607 +Billy E. Goodwin — $— 89,781 $4,964,195 +Craig N. Adams — $— 89,781 $4,964,195 +Michael D. Frenzel — $— 35,296 $1,953,823 +(1) Reflects the aggregate number of restricted shares, cash-settled phantom units and PSUs that vested. Pursuant to the terms thereof, the phantom units were settled in cash, and the grantee did not acquire any shares upon vesting. +72 Matador Resources Company | 2024 Proxy Statement +EXECUTIVE COMPENSATION +Potential Payments upon Termination or Change in Control +Long-Term Incentive Plans +Equity awards under the 2019 Plan, other than the PSUs, vest upon a “change in control” for the Named Executive Officers according to the terms of their employment agreements described below. +Pursuant to the terms of the PSU award agreements, upon a “change in control,” the Named Executive Officer would vest in the number of PSUs that would have otherwise vested based on the Company’s performance through an abbreviated performance period that ends immediately prior to the effective date of such change in control. For definition of “change in control,” please see the 2019 Plan, which is included as an exhibit to the Company’s most recent Annual Report on Form 10-K. +Employment Agreements +As described under “—Compensation Discussion and Analysis—Severance and Separation Arrangements—Employment Agreements,” in contemplation of our initial public offering, on August 9, 2011, we entered into an employment agreement with Mr. Foran. Effective February 2016, we entered into an employment agreement with Mr. Goodwin and, in August 2018, amended Mr. Goodwin’s employment agreement. In addition, in February 2015, we entered into an employment agreement with Mr. Singleton and, in March 2014, we entered into an employment agreement with Mr. Adams. In October 2022, we entered into an employment agreement with Mr. Frenzel. In April 2024, we entered into an employment agreement with Mr. Willey. The principal difference in Messrs. Goodwin, Singleton, Adams, Frenzel and Willey’s employment agreements as compared to the employment agreement of Mr. Foran is that their agreements do not include a “modified single trigger” that would have allowed them to receive “change in control” severance if they terminated their agreements without “good reason” within 30 days prior to or 12 months after a change in control. In addition to not including a “modified single trigger,” Messrs. Frenzel and Willey’s employment agreements do not include termination for good reason except following a change in control and include a longer non-compete, as discussed below. Pursuant to the terms of the employment agreements, we may be required to make certain payments to one or more of our Named Executive Officers upon the occurrence of certain events resulting in such Named Executive Officer’s termination. The employment agreements do not provide for gross-ups for excise taxes on severance or other payments in connection with a change in control. For a detailed description of the events that may trigger such payments, see “—Compensation Discussion and Analysis—Severance and Separation Arrangements—Employment Agreements.” +The employment agreements each contain a non-disclosure of confidential information provision that requires each Named Executive Officer to maintain, both during and after employment, the confidentiality of information used by such Named Executive Officer in the performance of his job duties. +Additionally, each of the employment agreements contains a non-competition provision, pursuant to which each Named Executive Officer has agreed that: (i) for six months following termination by us for total disability, or by such Named Executive Officer for good reason, or (ii) for 12 months, with respect to Messrs. Foran, Singleton, Goodwin and Adams and 18 months with respect to Messrs. Willey and Frenzel, following termination (a) by us for just cause, (b) by such Named Executive Officer other than for good reason (excluding Messrs. Willey and Frenzel) or (c) in connection with a change in control (24 months with respect to Messrs. Willey and Frenzel), such Named Executive Officer shall not, without our prior written consent (not to be unreasonably withheld if the Named Executive Officer’s employment is terminated by the Named Executive Officer other than for good reason (excluding Messrs. Willey and Frenzel)), directly or indirectly: (x) invest in (other than investments in publicly-owned companies which constitute not more than 1% of the voting securities of any such company) a competing business with significant assets in the restricted area (each as defined below), or (y) participate in a competing business as a manager, employee, director, officer, consultant, independent contractor or other capacity or otherwise provide, directly or indirectly, services or assistance to a competing business in a position that involves input into or direction of such competing business’s decisions within the restricted area. +73 Matador Resources Company | 2024 Proxy Statement +For purposes of the employment agreements: +• “competing business” means any person or entity engaged in oil and natural gas exploration, development, production and acquisition activities; +• “significant assets” means oil and natural gas reserves with an aggregate fair market value of $25 million or more (for Messrs. Willey and Frenzel, oil and natural gas reserves in excess of 10 million barrels of oil equivalent or midstream assets with an aggregate fair market value of $25 million or more); and +• “restricted area” means a one-mile radius of any oil and natural gas reserves held by us as of the end of the Named Executive Officer’s employment, plus any county or parish where we have significant assets as of the end of the Named Executive Officer’s employment (for Messrs. Willey and Frenzel, Eddy and Lea Counties, New Mexico and Loving County, Texas, plus any county or parish where we have significant assets as of the end of his employment). +For definitions of “change in control,” “good reason” and “just cause,” please see the employment agreement of each Named Executive Officer, each of which is included as an exhibit to the Company’s most recent Annual Report on Form 10-K or Quarterly Report on Form 10-Q. +Furthermore, other than Mr. Foran’s employment agreement, each employment agreement contains a non-solicitation provision, pursuant to which, during the restricted periods described above (except Messrs. Willey and Frenzel’s restricted period is six months for disability termination and 24 months for the other terminations specified above), subject to certain exceptions, Messrs. Singleton, Willey, Goodwin, Adams and Frenzel shall not, without our prior written consent, solicit for employment or a contracting relationship, or employ or retain any person who is or has been, within six months prior to such time, employed by or engaged as an individual independent contractor by us or our affiliates or induce or attempt to induce any such person to leave his or her employment or independent contractor relationship with us or our affiliates. +For the Named Executive Officer to receive any severance payments described below for termination by us without just cause, by the Named Executive Officer for good reason or, following a change in control, by us without cause or by the Named Executive Officer with good reason, with respect to Messrs. Singleton, Willey, Goodwin, Adams and Frenzel, or with or without good reason, with respect to Mr. Foran, the Named Executive Officer must comply with the applicable non-disclosure, non-competition and non-solicitation provisions described above. +Finally, as a condition to receiving any severance payments and other payments under their respective employment agreements, each Named Executive Officer is required to execute a separation agreement and release in favor of us. +To describe the payments and benefits that are triggered for each event of termination, we have created the following table estimating the payments and benefits that would be paid to each Named Executive Officer under each element of our compensation program assuming that such Named Executive Officer’s employment agreement terminated on December 31, 2023, the last day of our 2023 fiscal year. In all cases, the accelerated equity awards were valued as of December 29, 2023, based upon, where applicable, $56.86 per share (the closing price of our Common Stock on such date). The amounts in the table below are calculated as of December 31, 2023 pursuant to SEC rules and are not intended to reflect actual payments that may be made. Actual payments that may be made would be based on the dates and circumstances of the applicable event. +74 Matador Resources Company | 2024 Proxy Statement +Payment Upon Change in Control or Termination +Named Executive Officer Category of Payment +Upon Death or Total Disability ($) (1) +Upon Mutual Agreement or Dissolution/Liquidation ($) (1) +Termination by +Us Without Just Cause or by Named Executive Officer for Good Reason ($) (1) +Termination Following a Change in Control Without Cause or by Named Executive Officer With or Without Good Reason ($) (2) +Change in Control +Without Termination ($) (3) +Joseph Wm. Foran Salary — — +2,700,000 (4) +4,050,000 (5) +— +Bonus +3,105,000 (8) +3,105,000 (8) +6,210,000 (7) +9,315,000 (8) +— +Vesting equity: (9) +Phantom Units — — — 4,792,616 — +PSUs — — — 3,101,542 3,101,542 +Total 3,105,000 3,105,000 8,910,000 21,259,158 3,101,542 +Van H. Singleton, II Salary — — +1,200,000 (10) +2,400,000 (5) +— +Bonus +1,559,688 (6) +1,559,688 (6) +2,339,531 (11) +4,679,063 (8) +— +Vesting equity: (9) +Phantom Units — — — 2,241,762 — +PSUs — — — 1,508,780 1,508,780 +Total 1,559,688 1,559,688 3,539,531 10,829,605 1,508,780 +Brian J. Willey Salary — — +900,000 (10) +1,800,000 (5) +— +Bonus +970,000 (6) +970,000 (6) +1,455,000 (11) +2,910,000 (8) +— +Vesting equity: (9) +Phantom Units — — — — — +PSUs — — — 794,448 794,448 +Restricted stock 1,132,992 +Total 970,000 970,000 2,355,000 6,637,440 794,448 +Billy E. Goodwin Salary — — +1,200,000 (10) +2,400,000 (5) +— +Bonus +1,559,688 (6) +1,559,688 (6) +2,339,531 (11) +4,679,063 (8) +— +Vesting equity: (9) +Phantom Units — — — 2,298,622 — +PSUs — — — 1,508,780 1,508,780 +Total 1,559,688 1,559,688 3,539,531 10,886,465 1,508,780 +Craig N. Adams Salary — — +1,200,000 (10) +2,400,000 (5) +— +Bonus +1,559,688 (6) +1,559,688 (6) +2,339,531 (11) +4,679,063 (8) +— +Vesting equity: (9) +Phantom Units — — — 2,298,622 — +PSUs — — — 1,508,780 1,508,780 +Total 1,559,688 1,559,688 3,539,531 10,886,465 1,508,780 +Michael D. Frenzel Salary — — +225,000 (10) +900,000 (5) +— +Bonus +613,125 (6) +613,125 (6) +306,563 (11) +1,226,250 (8) +— +Vesting equity: (9) +Phantom Units — — — — — +PSUs — — — 652,298 652,298 +Restricted stock 1,132,992 +Total 613,125 613,125 531,563 3,911,540 652,298 +(1) Amounts due upon death, total disability, mutual agreement, dissolution or liquidation, termination by us without cause or termination by a Named Executive Officer for good reason are payable in a lump sum on the 60th day following the date of termination unless otherwise required by Section 409A of the Code. Messrs. Willey and Frenzel employment agreements do not include a provision allowing them to terminate for “good reason” except following a change in control. +(2) Amounts due following a change in control are payable in a lump sum on the date that immediately follows six months from the date of termination or, if earlier, within 30 days following such Named Executive Officer’s death. +75 Matador Resources Company | 2024 Proxy Statement +(3) Pursuant to the terms of the PSU award agreements, upon a “change in control,” the Named Executive Officer would vest in the number of PSUs that would have otherwise vested based on the Company’s performance through an abbreviated performance period that ends immediately prior to the effective date of such change in control. The amount shown assumes achievement of the 50th percentile with 100% of target units vesting. +(4) Represents two times such Named Executive Officer’s base salary as of the termination date. +(5) Represents three times, or in the case of Mr. Frenzel two times, such Named Executive Officer’s base salary as of the termination date. +(6) Represents an amount equal to the average annual cash bonus pursuant to the Cash Incentive Plan paid to such Named Executive Officer for 2023 and 2022, respectively. +(7) Represents two times an amount equal to the average annual cash bonus pursuant to the Cash Incentive Plan paid to such Named Executive Officer for 2023 and 2022, respectively. +(8) Represents three times, or in the case of Mr. Frenzel two times, an amount equal to the average annual cash bonus pursuant to the Cash Incentive Plan paid to such Named Executive Officer for 2023 and 2022, respectively. +(9) The employment agreements provide for accelerated and full vesting of unvested incentive awards held by the Named Executive Officers in the event that such Named Executive Officer is terminated without “Just Cause” or terminates his employment with or without “Good Reason,” with respect to Mr. Foran, within 30 days prior to, or 12 months following, a “change in control.” With respect to Messrs. Singleton, Willey, Goodwin, Adams and Frenzel, the employment agreements provide for accelerated and full vesting of unvested incentive awards held by these Named Executive Officers in the event that such Named Executive Officer is terminated without “Just Cause” or terminates his employment with “Good Reason,” within 30 days prior to, or 12 months following, a “change in control.” The amounts disclosed reflect the closing price of our Common Stock on December 29, 2023 of $56.86 per share multiplied by the number of unvested phantom units, restricted stock or PSUs, as applicable, held by such Named Executive Officer on December 31, 2023. Pursuant to the terms of the PSU award agreements, upon a change in control, the Named Executive Officer would vest in the number of PSUs that would have otherwise vested based on the Company’s performance through an abbreviated performance period that ends immediately prior to the effective date of such event. With respect to PSUs, the amount shown assumes achievement of the 50th percentile with 100% of target units vesting. +(10) Represents 1.5 times, or in the case of Mr. Frenzel 0.5 times, such Named Executive Officer’s base salary as of the termination date. +(11) Represents 1.5 times, or in the case of Mr. Frenzel 0.5 times, an amount equal to the average annual cash bonus pursuant to the Cash Incentive Plan paid to such Named Executive Officer for 2023 and 2022, respectively. +Mr. Adams retired as an executive officer effective March 6, 2024 and Mr. Goodwin retired as an executive officer effective April 10, 2024. Each of Messrs. Adams and Goodwin received or will receive all arrearages of their base salary, accrued but unused vacation and expenses as of the end of their employment. Each of Messrs. Adams and Goodwin forfeited or will forfeit their outstanding unvested equity awards as of the end of their employment. +76 Matador Resources Company | 2024 Proxy Statement +CHIEF EXECUTIVE OFFICER PAY RATIO +CHIEF EXECUTIVE OFFICER PAY RATIO +As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(u) of Regulation S-K (“Item 402(u)”), we are providing the following information regarding the ratio of the annual total compensation of our median-compensated employee (as described below) and that of our Chairman and Chief Executive Officer, Joseph Wm. Foran. We believe that the pay ratio reflected below is a reasonable estimate calculated in a manner consistent with Item 402(u). +The SEC’s rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices. As a result, the pay ratio reported by other companies may not be comparable to the pay ratio reported below, as other companies have different employee populations and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios. +Pursuant to Item 402(u), we identified the median-compensated employee of all our employees (other than Mr. Foran) using our employee population as of December 15, 2023, which consisted of 394 employees (all of which are located in the United States), and using a compensation measure of total cash compensation, consisting of total base pay and bonuses earned during the year ended December 31, 2023. This compensation measure was consistently applied to all employees. Compensation was annualized on a straight-line basis for employees who did not work all of 2023. +After identifying the median-compensated employee using this consistently applied compensation measure, we then calculated that employee’s 2023 annual total compensation in the same manner as the Named Executive Officers’ total compensation, as reported in the Summary Compensation Table. +For 2023, the annual total compensation of our median-compensated employee was $209,035, and the annual total compensation of Mr. Foran was $8,056,599, as reported in the Summary Compensation Table. Based on this information, for 2023, the ratio of Mr. Foran’s annual total compensation to the annual total compensation of our median-compensated employee was estimated to be 39 to 1. +77 Matador Resources Company | 2024 Proxy Statement +PAY VERSUS PERFORMANCE +PAY VERSUS PERFORMANCE +As required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(v) of Regulation S-K, we are providing the following information about the relationship between executive “compensation actually paid” and certain financial performance of the Company. For further information concerning the Company’s pay for performance philosophy and how the Company aligns executive compensation with the Company’s performance, see “Executive Compensation—Compensation Discussion and Analysis.” +Year (a) +Summary Compensation Table Total for Principal Executive Officer (“PEO”) (1) (b) +Compensation Actually Paid to PEO (2) +(c) +Average Summary Compensation Table Total for Non-PEO Named Executive Officers (3) +(d) +Average Compensation Actually Paid to Non-PEO Named Executive Officers (4) +(e) +Value of Initial Fixed $100 Investment Based On: +Net Income (thousands) (7) +(h) +Adj. EBITDA (thousands) (8) +(i) +Total Shareholder Return (5) +(f) +Peer Group Total Shareholder Return (6) +(g) +2023 $ 8,056,599 $ 7,633,074 $ 3,542,613 $ 3,274,057 $ 323.31 $ 208.67 $ 846,074 $ 1,849,547 +2022 $ 8,951,318 $ 21,872,248 $ 3,126,314 $ 7,943,940 $ 321.55 $ 196.87 $ 1,214,206 $ 2,127,156 +2021 $ 9,057,189 $ 27,355,621 $ 4,310,734 $ 12,883,431 $ 206.28 $ 140.32 $ 584,968 $ 1,051,973 +2020 $ 1,689,547 $ 4,092,405 $ 923,071 $ 2,032,796 $ 67.11 $ 102.23 $( 593,205 ) $ 519,277 +(1) The dollar amounts reported in column (b) are the amounts reported for Mr. Foran for each of the corresponding years in the “Total” +column of the Summary Compensation Table. See “Executive Compensation—Summary Compensation Table”. +(2) The dollar amounts reported in column (c) represent the amount of “compensation actually paid” to Mr. Foran, as computed in accordance with Item 402(v) of Regulation S-K and do not reflect the total compensation actually realized or received by Mr. Foran. In accordance +with these rules, these amounts reflect the amounts included in the “Total” column of the Summary Compensation Table for each year, adjusted for 2023 as shown below. Equity values are calculated in accordance with FASB ASC Topic 718, and the valuation assumptions used to calculate fair values did not materially differ from those disclosed at the time of grant. +Compensation Actually Paid to PEO 2023 +Summary Compensation Table Total $ 8,056,599 +Less, value of “Stock Awards” reported in Summary Compensation Table $( 3,575,900 ) +Plus, year-end fair value of outstanding and unvested equity awards granted in the year $ 2,916,800 +Plus (less), year over year change in fair value of outstanding and unvested equity awards granted in prior years $( 95,251 ) +Plus (less), change in fair value from prior year-end to vesting date of equity awards granted in prior years that vested in the year $ 330,826 +Compensation Actually Paid to Mr. Foran $ 7,633,074 +(3) The dollar amounts reported in column (d) represent the average of the amounts reported for the Named Executive Officers as a group (excluding Mr. Foran) in the “Total” column of the Summary Compensation Table in each applicable year. The names of each of the Named Executive Officers included for these purposes in each applicable year are as follows: (i) for 2023, Messrs. Singleton, Willey, Goodwin, Adams and Frenzel; (ii) for 2022, Messrs. Goodwin, Singleton, Adams, Frenzel and David E. Lancaster and (iii) for 2021 and 2020, Messrs. Adams, Goodwin, Lancaster and Matthew V. Hairford. +(4) The dollar amounts reported in column (e) represent the average amount of “compensation actually paid” to the Named Executive Officers as a group (excluding Mr. Foran), as computed in accordance with Item 402(v) of Regulation S-K. In accordance with these rules, these amounts reflect the amounts in the “Total” column of the Summary Compensation Table for each year, adjusted for 2023 as shown below. Equity values are calculated in accordance with FASB ASC Topic 718, and the valuation assumptions used to calculate fair values did not materially differ from those disclosed at the time of the grant. +78 Matador Resources Company | 2024 Proxy Statement +Average Compensation Actually Paid to Non-PEO Named Executive Officers 2023 +Average Summary Compensation Table Total $ 3,542,613 +Less, average value of "Stock Awards" reported in Summary Compensation Table $( 1,434,807 ) +Plus, average year-end fair value of outstanding and unvested equity awards granted in the year $ 976,698 +Plus (less), average year over year change in fair value of outstanding and unvested equity awards granted in prior years $( 35,851 ) +Plus (less), average change in fair value from prior year-end to vesting date of equity awards granted in prior years that vested in the year $ 225,404 +Average Compensation Actually Paid to Non-PEO Named Executive Officers $ 3,274,057 +(5) Total Shareholder Return (“TSR”) is calculated by dividing (a) the sum of (i) the cumulative amount of dividends for the measurement period, assuming dividend reinvestment, and (ii) the difference between the Company’s share price at the end of each fiscal year shown and the beginning of the measurement period by (b) the Company’s share price at the beginning of the measurement period. The beginning of the measurement period for each year in the table is December 31, 2019. +(6) The peer group used for this purpose is the following published industry index: Russell 2000 Energy Index. +(7) The dollar amounts reported represent the amount of net income reflected in the Company’s audited financial statements for the applicable year. +(8) We determined Adjusted EBITDA to be the most important financial performance measure used to link Company performance to Compensation Actually Paid to our PEO and Non-PEO Named Executive Officers in 2023. Adjusted EBITDA is a non-GAAP financial Measure. For a definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to Matador’s net income (loss) and net cash provided by operating activities, see Annex A to this Proxy Statement. This performance measure may not have been the most important financial performance measure for prior years and we may determine a different financial performance measure to be the most important financial performance measure in future years. +Description of Certain Relationships between Information Presented in the Pay versus Performance Table +As described in more detail in the section “Executive Compensation—Compensation Discussion and Analysis,” the Company’s executive compensation program reflects a variable pay-for-performance philosophy. While the Company utilizes several performance measures to align executive compensation with Company performance, all of those Company measures are not presented in the Pay versus Performance table. Moreover, the Company generally seeks to incentivize long-term performance, and therefore does not specifically align the Company’s performance measures with compensation that is actually paid (as computed in accordance with SEC rules) for a particular year. In accordance with SEC rules, the Company is providing the following descriptions of the relationships between information presented in the Pay versus Performance table. +79 Matador Resources Company | 2024 Proxy Statement +80 Matador Resources Company | 2024 Proxy Statement +Financial Performance Measures +As described in greater detail under “Executive Compensation—Compensation Discussion and Analysis,” the Company’s executive compensation program reflects a variable pay-for-performance philosophy. The metrics that the Company uses for both our long-term and short-term incentive awards are selected based on an objective of incentivizing our Named Executive Officers to increase the value of our enterprise for our shareholders. The most important financial performance measures used by the Company to link executive compensation actually paid to the Company’s Named Executive Officers, for the most recently completed fiscal year, to the Company’s performance are as follows: +1. Total Shareholder Return +2. Adjusted EBITDA +3. Net Debt / Adjusted EBITDA +4. Adjusted Operating Costs per BOE +5. Return on Average Capital Employed +81 Matador Resources Company | 2024 Proxy Statement +DIRECTOR COMPENSATION +DIRECTOR COMPENSATION +Name Fees Earned or Paid in Cash +Stock Awards (1) +All Other Compensation Total +Shelley F. Appel (2) +$67,333 $134,982 $— $202,315 +Reynald A. Baribault $170,000 $134,982 $— $304,982 +R. Gaines Baty (3) +$178,333 $134,982 $— $313,315 +William M. Byerley $120,000 $134,982 $— $254,982 +Monika U. Ehrman $90,833 $134,982 $— $225,815 +James M. Howard $90,833 $134,982 $— $225,815 +Timothy E. Parker (4) +$190,833 $134,982 $— $325,815 +Julia P. Forrester Rogers $105,000 $134,982 $— $239,982 +Kenneth L. Stewart $76,250 $134,982 $— $211,232 +(1) All stock awards represent RSUs with a value based on the fair market value of the RSUs on the date of grant. RSUs granted for 2023-2024 service vest immediately prior to the election of the nominees for director at the 2024 Annual Meeting. See “—Compensation for 2023-2024.” As of December 31, 2023, each individual who served as a director during 2023 held the following outstanding unvested stock awards, all of which were RSUs. +Name Outstanding Stock Awards +Shelley F. Appel 2,621 +Reynald A. Baribault 2,621 +R. Gaines Baty 2,621 +William M. Byerley 2,621 +Monika U. Ehrman 2,621 +James M. Howard 2,621 +Timothy E. Parker 2,621 +Julia P. Forrester Rogers 2,621 +Kenneth L. Stewart 2,621 +(2) Ms. Appel was elected to the Board at the 2023 Annual Meeting and serves as ESG coordinator. The ESG coordinator receives an additional cash retainer of $50,000 annually. +(3) Mr. Baty serves as deputy lead independent director. The deputy lead independent director receives an additional cash retainer of $50,000 annually. +(4) Mr. Parker serves as lead independent director. The lead independent director receives an additional cash retainer of $100,000 annually. +Ms. Ward was appointed to the Board on January 24, 2024 and did not receive any director compensation in 2023. Because Ms. Ward was appointed to the Board more than 180 days but fewer than 270 days after the 2023 Annual Meeting, upon her appointment, Ms. Ward was granted 1,311 RSUs, representing 50% of the RSUs that the other members of the Board received in 2023. +82 Matador Resources Company | 2024 Proxy Statement +Compensation for 2023-2024 +For the period commencing at the 2023 Annual Meeting and until the 2024 Annual Meeting, our non-employee directors’ compensation program was as set forth below: +• annual cash retainer of $70,000; +• the chair of each of the below committees received the following additional, annual cash retainer: +Committee Retainer +Operations and Engineering $50,000 +Prospect $50,000 +Audit $50,000 +Strategic Planning and Compensation $50,000 +Environmental, Social and Corporate Governance $35,000 +Nominating $25,000 +Capital Markets and Finance $25,000 +Marketing and Midstream $25,000 +• the lead independent director received an additional cash retainer of $100,000; +• the deputy lead independent director received an additional cash retainer of $50,000; +• the ESG coordinator received an additional cash retainer of $50,000 ; and +• at the meeting of the Board immediately following the 2023 Annual Meeting, each non-employee director received an annual grant of RSUs equal to approximately $135,000 in value, which vests on the earlier of the first anniversary of the 2023 Annual Meeting or immediately prior to the election of the nominees for director at the 2024 Annual Meeting (the “2023 RSU Award”). +If a director was appointed or elected to the Board at any time following the 2023 Annual Meeting but prior to the 2024 Annual Meeting, such director was granted the applicable percentage of the 2023 RSU Award detailed below, effective on the date of such director’s appointment: (i) if a director was appointed or elected to the Board within 90 days after the 2023 Annual Meeting, such director was entitled to receive 100% of the 2023 RSU Award; (ii) if a director was appointed or elected to the Board more than 90 days but 180 or fewer days after the 2023 Annual Meeting, such director was entitled to receive 75% of the 2023 RSU Award; (iii) if a director was appointed or elected to the Board more than 180 days but 270 or fewer days after the 2023 Annual Meeting, such director was entitled to receive 50% of the 2023 RSU Award; and (iv) if a director was appointed or elected to the Board more than 270 days after the 2023 Annual Meeting but prior to the 2024 Annual Meeting, such director was entitled to receive 25% of the 2023 RSU award. Ms. Ward was appointed to the Board effective January 24, 2024, which date was more than 180 days but fewer than 270 days after the 2023 Annual Meeting. As a result, Ms. Ward received a grant of 1,311 RSUs, representing 50% of the 2023 RSU Award. +In addition, we reimburse our directors for travel, lodging and related expenses incurred in attending Board and committee meetings. +Director Stock Ownership Guidelines +Our non-employee directors are expected to follow our voluntary stock ownership guidelines for non-employee directors. Within three years of becoming a director, each non-employee director is expected to own $250,000 of Common Stock and continue to hold such shares while serving as a director. As of December 31, 2023, all directors owned in excess of $250,000 of Common Stock. Shares that count toward the stock ownership guidelines include RSUs. +83 Matador Resources Company | 2024 Proxy Statement +SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS +The following table presents the securities authorized for issuance under our equity compensation plans as of December 31, 2023: +Committee +Number of Shares to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (2) +Weighted- Average Exercise Price of Outstanding Options, Warrants and Rights (3) +Number of Shares Remaining Available for Future Issuance Under Equity Compensation Plans +Equity compensation plans approved by security holders (1) +837,646 $18.03 8,422,916 +Equity compensation plans not approved by security holders — — — +Total 837,646 $18.03 8,422,916 +(1) Includes shares authorized under the Matador Resources Company Amended and Restated 2012 Long-Term Incentive Plan (as amended, the “2012 Plan”), the 2019 Plan and the Matador Resources Company 2023 Employee Stock Purchase Plan. No further awards may be made under the 2012 Plan, although awards remain outstanding thereunder. +(2) Includes the number of PSUs granted under the 2012 Plan and the 2019 Plan based on the maximum level of achievement, which may be more than the number of shares issued in settlement of PSUs that are ultimately earned. +(3) Reflects the weighted-average exercise price of stock options granted under the 2012 Plan and 2019 Plan. RSUs and PSUs are not reflected in this column as they do not have an exercise price. +84 Matador Resources Company | 2024 Proxy Statement +TRANSACTIONS WITH RELATED PERSONS +TRANSACTIONS WITH RELATED PERSONS +Except as disclosed below, during 2023, there was not, nor was there proposed as of December 31, 2023, any transaction or series of similar transactions to which we were or are a party in which the amount involved exceeded or exceeds $120,000 and in which any of our directors, nominees for directors, executive officers, beneficial owners of more than 5% of any class of our voting securities or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest, other than compensation arrangements with directors and executive officers, which are described in “Executive Compensation— Compensation Discussion and Analysis” and “Director Compensation” above. +Working Interest and Overriding Royalty Interest Owners +Joseph Wm. Foran, Chairman and Chief Executive Officer, Shelley F. Appel, director, and certain of their affiliated entities (collectively, the “Foran Entities”) are working interest owners and/or overriding royalty interest owners in certain properties operated by the Company. As working interest owners, the Foran Entities are required to pay their proportionate share of all costs and are entitled to receive their proportionate share of revenues in the normal course of business. As overriding royalty interest owners, the Foran Entities are entitled to receive their proportionate share of revenues from the wells in which they own an interest in the normal course of business. During 2023, revenues, net of costs, received by the Foran Entities in their capacity as working interest owners or overriding royalty interest owners were approximately $19.9 million (the “Related Net Revenue Payments”). The Related Net Revenue Payments represent less than 1% of our total third-party net revenue payments during 2023. +In our capacity as operator, we incur drilling and operating costs that are billed to our partners based on their respective working interests. During 2023, our joint interest billings to the Foran Entities attributable to their share of costs were approximately $23.3 million (the “Related Joint Interest Billings”). The Related Joint Interest Billings represent less than 1% of our total joint interest billings during 2023. As a result of this ownership by the Foran Entities, from time to time, we will be in a net receivable or net payable position with certain of the Foran Entities. We do not consider any net receivables from the Foran Entities to be uncollectible. +The Audit Committee reviewed the terms of the working interests and/or overriding royalty interests of the Foran Entities for potential conflicts of interest under the Related Person Transaction Policy, and, after being fully informed as to Mr. Foran’s and Ms. Appel's relationships and interests in such transactions and all other material facts related to the Related Net Revenue Payments and Related Joint Interest Billings, determined that such transactions and the Related Net Revenue Payments and Related Joint Interest Billings were fair to the Company and recommended such transactions and the Related Net Revenue Payments and Related Joint Interest Billings to the full Board for approval and ratification. The Board subsequently approved and ratified the transactions and the Related Net Revenue Payments and Related Joint Interest Billings. +Joint Venture Relationship +The Company has entered into a joint venture (the “Joint Venture”) with Spearpoint Resources Company (“Spearpoint”) to generate value through a well development program in our Twin Lakes asset area. An adult child of Mr. Foran and the sibling of Ms. Appel is the founder of Spearpoint and serves as the chief executive officer and chairman of the board of directors of Spearpoint. Mr. Foran’s child has a Bachelor of Arts degree in Economics from Princeton University, a Master’s of Science degree in Petroleum Engineering from Texas A&M University and a Master’s degree in Business Administration from Rice University. Mr. Foran’s child worked for a major oil and gas company as a petroleum petrophysicist. Prior to attending Texas A&M, Mr. Foran’s child served in the United States Marine Corp, including two tours of duty overseas, and has continued to serve in United State Marine Corp Reserve, recently achieving the rank of Major. Mr. Foran’s child may perform shared services to the Joint Venture, for which the Joint Venture would reimburse Spearpoint. In addition, Ms. Appel holds an ownership interest in Spearpoint. +85 Matador Resources Company | 2024 Proxy Statement +During 2023, the Company made capital contributions to the Joint Venture of approximately $3.1 million (the “Capital Contributions”) and was compensated approximately $0.9 million pursuant to the terms of the Joint Venture’s operating agreement for the provision of shared services to the Joint Venture in 2023 and Spearpoint made capital contributions to the Joint Venture of approximately $3.0 million and was compensated approximately $0.5 million in total pursuant to the terms of the Joint Venture’s operating agreement for the provision of shared services to the Joint Venture in 2021, 2022 and 2023. Neither the Company nor Spearpoint received any distributions from the Joint Venture in 2023, although such distributions may be received by the Company and/or Spearpoint in the future. +The Audit Committee reviewed the terms of the Joint Venture for potential conflicts of interest under the Related Person Transaction Policy, and, after being fully informed as to Mr. Foran’s and his adult child’s relationships and interests in such transactions and all other material facts related to the Joint Venture, determined that such transactions, including the Capital Contributions, were fair to the Company and recommended such transactions to the full Board for approval and ratification. The Board subsequently approved and ratified the transactions, including the Capital Contributions. +Certain Employment Relationships +Billy E. Goodwin served as an executive officer during 2023 until his retirement in April of 2024. During 2023, an adult child of Mr. Goodwin was an employee of the Company and has been an employee since 2015. Mr. Goodwin’s child earned in 2023, and is expected to be compensated in 2024, between $120,000 and $500,000. Mr. Goodwin’s child has a Bachelor of Science in Business Administration degree in Energy Management from the University of Tulsa and a Bachelor of Arts degree in General Business and Management from Oklahoma State University. He has over 13 years of industry experience, including as a drilling fluids engineer for a publicly traded oilfield services company and as a landman for a publicly traded exploration and production company. The Audit Committee reviewed the terms of the employment arrangement for potential conflicts of interest under the Company’s Related Person Transaction Policy and, after being fully informed as to the employment arrangement and historical and anticipated compensation of Mr. Goodwin’s adult child, and all other material facts related to the relationship, determined that the employment arrangement was fair to the Company and recommended the employment arrangement to the full Board for approval and ratification. The Board subsequently approved and ratified such employment arrangements. +Reynald A. Baribault is a member of the Board. Mr. Baribault’s sister-in-law has been an employee of the Company since 2016 and earned in 2023, and is expected to be compensated in 2024, between $120,000 and $250,000. Mr. Baribault’s sister-in-law has a diploma from the Executive Secretarial School and is a certified legal assistant, having completed the Southern Methodist University Legal Assistants Program. She has over 40 years of experience as a legal assistant. The Audit Committee reviewed the terms of the employment arrangement for potential conflicts of interest under the Company’s Related Person Transaction Policy and, after being fully informed as to the employment arrangement and historical and anticipated compensation of Mr. Baribault’s sister-in-law, and all other material facts related to the relationship, determined that the employment arrangement was fair to the Company and recommended the employment arrangement to the full Board for approval and ratification. The Board subsequently approved and ratified such employment arrangement. +An adult child of Mr. Foran and a sibling of Ms. Appel has been an employee of the Company since 2015 and earned in 2023, and is expected to be compensated in 2024, between $120,000 and $250,000. Mr. Foran’s child has a Bachelor of Science degree in Human Resource Development and a Master of Science degree in Human Resource Management, both from Texas A&M University. She has more than 12 years of industry experience, including with another publicly traded exploration and production company. The Audit Committee reviewed the terms of the employment arrangement for potential conflicts of interest under the Company’s Related Person Transaction Policy and, after being fully informed as to the employment arrangement and historical and anticipated compensation of Mr. Foran’s child, and all other material facts related to the relationship, determined that the employment arrangement was fair to the Company and recommended the employment arrangement to the full Board for approval and ratification. The Board subsequently approved and ratified such employment arrangement. +86 Matador Resources Company | 2024 Proxy Statement +In addition, Ms. Appel, a director and the daughter of Mr. Foran, served as the Company’s Environmental, Social and Governance Coordinator and as a Special Advisor to the Board in 2023 prior to her election to the Board in June 2023. For these services, Ms. Appel was compensated between $120,000 and $250,000. Ms. Appel has a degree from Yale University and a Master’s degree in Business Administration from the University of Chicago and also worked for a major oil and gas company for a number of years. For further details of Ms. Appel’s relationship with the Company and her background and experience, please see her biography on page 20 of this Proxy Statement. The Audit Committee reviewed the terms of the consulting arrangement for potential conflicts of interest under the Company’s Related Person Transaction Policy and, after being fully informed as to the consulting arrangement and historical and anticipated compensation of Ms. Appel, and all other material facts related to the relationship, determined that the consulting arrangement was fair to the Company and recommended the consulting arrangement to the full Board for approval and ratification. The Board subsequently approved and ratified such consulting arrangement. +Indemnification Agreements +We have entered into indemnification agreements with each of our directors and executive officers and expect to do so in the future for any new directors and executive officers. The indemnification agreements provide the directors and executive officers with contractual rights to indemnification, expense advancement and reimbursement to the fullest extent permitted by applicable law. +Procedures for Approval of Related Person Transactions +Pursuant to the Related Person Transaction Policy in effect as of December 31, 2023, a “Related Person Transaction” is defined as a transaction (including any financial transaction, arrangement or relationship (including any indebtedness or guarantee of indebtedness)), or series of related transactions, or any material amendment to any such transaction, in which a Related Person (as defined below) has or will have a direct or indirect material interest and in which we are a participant, other than: +• a transaction involving compensation of directors that is required to be reported in our proxy statement under Item 402 of the SEC’s compensation disclosure requirements (“Item 402”); +• any employment by us of an executive officer if: +◦ the related compensation is required to be reported in our proxy statement under Item 402; or +◦ the executive officer is not an “immediate family member” of another executive officer or director of the Company, the related compensation would be reported in our proxy statement under Item 402 if the executive officer was a “named executive officer” and the Compensation Committee approved (or recommended that the Board approve) such compensation; +• a transaction with a Related Person involving less than $120,000; +• a transaction in which the interest of the Related Person arises solely from the ownership of a class of our equity securities and all holders of that class receive the same benefit on a pro rata basis; +• a transaction in which a Related Person has an indirect interest solely as a result of being (a) a director or, together with all other Related Persons, a less than 10% beneficial owner of an equity interest in another entity, or both, or (b) a limited partner in a partnership in which the Related Person, together with all other Related Persons, has an interest of less than 10%; +• a transaction in which the rates or charges involved therein are determined by competitive bids, or a transaction that involves the rendering of services as a common or contract carrier, or public utility, at rates or charges fixed in conformity with law or governmental authority; +• any transaction with another company at which a Related Person’s only relationship is as an employee (other than an executive officer), if the aggregate amount involved does not exceed the greater of $1,000,000, or 2% of that company’s total annual revenues; +87 Matador Resources Company | 2024 Proxy Statement +• any charitable contribution, grant or endowment by us to a charitable organization, foundation or university at which a Related Person’s only relationship is as an employee (other than an executive officer), if the aggregate amount involved does not exceed the lesser of $1,000,000, or 2% of the charitable organization’s total annual receipts; +• any transaction with another publicly traded company where the Related Person’s interest arises solely from beneficial ownership of more than 5% of our Common Stock and ownership of a non-controlling interest in the other publicly traded company; +• reimbursement of business expenses incurred by a director, officer or employee of the Company in the performance of his or her duties and approved for reimbursement by the Company in accordance with the Company’s customary policies and practices; or +• indemnification and advancement of expenses made pursuant to the Certificate of Formation or the Bylaws or pursuant to any agreement. +“Related Person” means: +• any person who is, or at any time since the beginning of the Company’s last completed fiscal year was, one of our executive officers or one of our directors or nominees for director; +• any person (including any entity or group) who is known by us to be the beneficial owner of more than 5% of our Common Stock; +• any immediate family member of any of the foregoing persons, which means any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, sister-in-law or person residing (other than a tenant or employee) in the home of a director, nominee for director, executive officer or a beneficial owner of more than 5% of our Common Stock; and +• any entity that is owned or controlled by any of the foregoing persons or in which any of the foregoing persons is a general partner or executive officer or in which such person, together with all other of the foregoing persons, owns 10% or more of the equity interests thereof. +Pursuant to the Related Person Transaction Policy, the Audit Committee must review all material facts of each Related Person Transaction and recommend either approval or disapproval of the Related Person Transaction to the full Board, subject to certain limited exceptions. In determining whether to recommend approval or disapproval of the Related Person Transaction, the Audit Committee must, after reviewing all material facts of the Related Person Transaction and the Related Person’s relationship and interest, determine whether the Related Person Transaction is fair to the Company and in, or not consistent with, the interests of the Company and its shareholders. If a Related Person Transaction will be ongoing, the Audit Committee, on at least an annual basis, will review and assess ongoing relationships with the Related Persons to see that they are in compliance with Audit Committee guidelines. Further, the policy requires that all Related Person Transactions be disclosed in our filings with the SEC and/or our website in accordance with applicable laws, rules and regulations. +88 Matador Resources Company | 2024 Proxy Statement +Security Ownership of Certain Beneficial Owners and Management +The following table presents the beneficial ownership of our Common Stock as of April 16, 2024 for (i) each person beneficially owning more than 5% of the outstanding shares of our Common Stock, (ii) each director and nominee for director of the Company, (iii) each named executive officer of the Company listed in the Summary Compensation Table and (iv) all of our directors, nominees and executive officers as a group. Except pursuant to applicable community property laws and except as otherwise indicated, each shareholder possesses sole voting and investment power with respect to its, his or her shares. The business address of each of our directors and executive officers is c/o Matador Resources Company, One Lincoln Centre, 5400 LBJ Freeway, Suite 1500, Dallas, Texas 75240. The applicable percentage ownership is based on 124,780,249 shares of our Common Stock issued and outstanding as of April 16, 2024, plus, on an individual basis, the right of that individual to (i) obtain Common Stock upon exercise of stock options or (ii) obtain Common Stock upon the vesting or delivery of RSUs, in each case within 60 days of April 16, 2024. The information is based on Form 3s, Form 4s, Form 5s, Schedule 13Ds, Schedule 13Gs and Schedule 13G/As filed through April 16, 2024. +Name Amount and Nature of Ownership of Common Stock Percent of Class +Directors, Nominees and Named Executive Officers +Joseph Wm. Foran (1) +5,345,726 4.3% +Craig N. Adams (2) +332,056 * +Shelley F. Appel (3) +1,731,965 1.4% +Reynald A. Baribault (4) +138,113 * +R. Gaines Baty (5) +64,584 * +William M. Byerley (6) +49,199 * +Monika U. Ehrman (7) +33,249 * +Julia P. Forrester Rogers (8) +66,493 * +Michael D. Frenzel (9) +66,932 * +Billy E. Goodwin (10) +322,324 * +James M. Howard (11) +122,835 * +Timothy E. Parker (12) +79,257 * +Van H. Singleton, II (13) +271,121 * +Kenneth L. Stewart (14) +83,893 * +Susan M. Ward (15) +1,311 * +Brian J. Willey (16) +90,542 * +All Directors, Nominees and Executive Officers as a Group (19 persons) (17) +7,575,492 6.1% +Other 5% Owners +BlackRock, Inc. (18) +14,266,998 11.4% +The Vanguard Group (19) +11,020,992 8.8% +* Less than one percent (1%) +(1) Includes (i) 1,105,913 shares of Common Stock held of record by Sage Resources, Ltd., a limited partnership owned by the Foran family, including Mr. Foran; (ii) 43,995 shares of Common Stock held of record by each of the JWF 2022-2 GRAT and the NNF 2022-2 GRAT, for which Mr. Foran is the trustee and over which Mr. Foran has sole voting and investment power; (iii) 70,528 shares of Common Stock held of record by each of the JWF 2023-1 GRAT and the NNF 2023-1 GRAT, for which Mr. Foran is the trustee and over which Mr. Foran has sole voting and investment power; (iv) 83,137 shares of Common Stock held of record by each of the JWF 2023-2 GRAT and the NNF 2023-2 GRAT, for which Mr. Foran is the trustee and over which Mr. Foran has sole voting and investment power; (v) 198,400 shares of Common Stock held of record by each of the JWF 2024-1 GRAT and the NNF 2024-1 GRAT, for which Mr. Foran is the trustee and over which Mr. Foran has sole voting and investment power; (vi) 446,915 shares of Common Stock held of record by the Foran 2012 Security Trust, for which Mr. Foran is the trustee and over which Mr. Foran has sole voting and investment power; (vii) 482,659 shares of Common Stock held of record by the Foran 2012 Savings Trust, for which Mr. Foran’s spouse is a trustee; and (viii) 1,137,182 shares of Common Stock held of record, collectively, by the LRF 2011 Non-GST Trust, WJF 2011 Non-GST Trust, JNF 2011 Non-GST Trust, SIF 2011 Non-GST Trust and MCF 2011 Non-GST Trust (collectively, the “2011 Non-GST Trusts”), for which trusts Mr. Foran and his spouse, as settlors of each of the 2011 Non-GST Trusts, retain the power of substitution with respect to the property of the 2011 Non-GST Trusts; and (ix) 1,347,912 shares of Common Stock held of record, collectively, by the LRF 2020 Non-GST Trust, WJF 2020 Non-GST Trust, SIF 2020 Non-GST Trust and MCF 2020 Non-GST Trust (collectively, the “2020 Non-GST Trusts”), for which trusts Mr. Foran and his spouse, as settlors of each of the 2020 Non-GST Trusts, retain the power of substitution with respect to the property of the 2020 Non-GST Trusts. +(2) Includes 2,850 shares of Common Stock held of record by the 401(k) account of Mr. Adams. Information based solely on a Form 4 filed with the SEC on January 2, 2024. Mr. Adams retired from his roles as the Executive Vice President, Co-Chief Operating Officer and Corporate Secretary of the Company on March 6, 2024, at which time Mr. Adams was no longer an executive officer of the Company. +89 Matador Resources Company | 2024 Proxy Statement +(3) Includes (i) 1,105,913 shares of Common Stock held of record by Sage Resources, Ltd., a limited partnership owned by the Foran family, including Ms. Appel; (ii) 227,416 shares of Common Stock held of record by the SIF 2011 Non-GST Trust; (iii) 336,978 shares of Common Stock held of record by the SIF 2020 Non-GST Trust; (iv) 4,742 shares of Common Stock held of record by the Individual Retirement Account of Ms. Appel; (v) 2,150 shares of Common Stock held of record by the 401(k) account of Ms. Appel; (vi) 58 shares of Common Stock held of record by the Health Savings Account of Ms. Appel’s spouse; and (vii) 2,621 shares of Common Stock issuable to Ms. Appel upon the vesting of RSUs. +(4) Includes 6,515 shares of Common Stock held of record by the Individual Retirement Account of Mr. Baribault. Also includes 113,197 shares of Common Stock held of record by the Reynald A. Baribault Maritalized Revocable Living Trust and 7,518 shares of Common Stock held of record by the Sally K. Baribault Maritalized Revocable Living Trust, for which trusts both Mr. Baribault and his spouse are trustees and share voting and investment power. Also includes 10,883 shares of Common Stock issuable to Mr. Baribault upon the vesting and delivery of RSUs +(5) Includes 16,966 shares of Common Stock issuable to Mr. Baty upon the vesting and delivery of RSUs. +(6) Includes 25,361 shares of Common Stock issuable to Mr. Byerley upon the vesting and delivery of RSUs. +(7) Includes 2,621 shares of Common Stock issuable to Ms. Ehrman upon the vesting of RSUs. +(8) Includes 19,785 shares of Common Stock held of record by the Individual Retirement Account of Ms. Rogers and 5,800 shares of Common Stock held of record by Ms. Rogers’ spouse. Also includes 2,621 shares of Common Stock issuable to Ms. Rogers upon the vesting of RSUs. Ms. Rogers’ term as a director will expire at the 2024 Annual Meeting. +(9) Information based solely on a Form 4 filing with the SEC on May 3, 2022. Mr. Frenzel served as the Company’s principal financial officer from March 31, 2022 to February 16, 2023. +(10) Includes 5,000 shares of Common Stock held of record by the 401(k) account of Mr. Goodwin. Information based solely on a Form 4 filed with the SEC on January 2, 2024. Mr. Goodwin retired from his role as the President—Operations of the Company on April 10, 2024, at which time Mr. Goodwin was no longer an executive officer of the Company. +(11) Includes 50,000 shares of Common Stock held of record by the Individual Retirement Account of Mr. Howard and 50,000 shares of Common Stock held by PBH Family Partners, Ltd., a family limited partnership owned by Mr. Howard’s family, including Mr. Howard, and over which Mr. Howard and his spouse share voting and investment authority. Also includes 12,835 shares of Common Stock issuable to Mr. Howard upon the vesting and delivery of RSUs. +(12) Includes 2,621 shares of Common Stock issuable to Mr. Parker upon the vesting of RSUs. +(13) Includes 2,505 shares of Common Stock held of record by the 401(k) account of Mr. Singleton. +(14) Includes 15,153 shares of Common Stock issuable to Mr. Stewart upon the vesting and delivery of RSUs. +(15) Includes 1,311 shares of Common Stock issuable to Ms. Ward upon the vesting and delivery of RSUs. +(16) Includes 3,760 shares of Common Stock held of record by the Individual Retirement Account of Mr. Willey. Also Includes 13,381 shares of restricted stock. Pursuant to the terms of Mr. Willey's restricted stock grants, Mr. Willey has the right to vote such shares but may only dispose of such shares to the extent they have vested. +(17) Includes 36,762 shares of restricted stock held by our executive officers. Pursuant to the terms of such restricted stock grants, the executive officers have the right to vote such shares but may only dispose of such shares to the extent they have vested. Also includes 92,993 shares of Common Stock issuable to directors upon the vesting and delivery of RSUs. +(18) Information based solely on a Schedule 13G/A filed with the SEC on January 23, 2024. The Schedule 13G/A reports that BlackRock, Inc. (“BlackRock”) beneficially owns 14,266,998 shares of Common Stock, has sole voting power with respect to 13,937,390 shares of Common Stock and has sole dispositive power with respect to 14,266,998 shares of Common Stock. According to the Schedule 13G/A, BlackRock’s address is 50 Hudson Yards, New York, NY 10001. +(19) Information based solely on a Schedule 13G/A filed with the SEC on February 13, 2024. The Schedule 13G/A reports that The Vanguard Group (“Vanguard”) beneficially owns 11,020,992 shares of Common Stock, has shared voting power with respect to 117,264 shares of Common Stock, has sole dispositive power with respect to 10,797,714 shares of Common Stock and has shared dispositive power with respect to 223,278 shares of Common Stock. According to the Schedule 13G/A, Vanguard’s address is 100 Vanguard Blvd, Malvern, PA 19355. +90 Matador Resources Company | 2024 Proxy Statement +ADDITIONAL INFORMATION +Delinquent Section 16(a) Reports +Section 16(a) of the Exchange Act requires our directors, executive officers and persons who beneficially own more than 10% of the outstanding shares of our Common Stock to file with the SEC reports regarding their stock ownership and changes to their ownership. +Based solely on a review of the copies of such reports furnished to us and written representations of our directors and executive officers, we believe that all such Section 16(a) filing requirements were timely met during the year ended December 31, 2023, except that one of our directors, Reynald A. Baribault, did not timely file a Form 4 relating to three transactions in which shares of Common Stock were purchased by Mr. Baribault’s broker as a dividend reinvestment on September 1, 2023. Mr. Baribault discovered such transactions had occurred without his knowledge and the transactions were ultimately reported in a Form 5 filed on February 8, 2024. +Shareholder Proposals for the 2025 Proxy Statement +For shareholder proposals to be included in the Company’s proxy statement and form of proxy relating to the 2025 Annual Meeting, such proposals must be received by the Company at its offices in Dallas, Texas, addressed to the Corporate Secretary of the Company, no later than December 27, 2024. If the Company changes the date of the 2025 Annual Meeting by more than 30 days from the anniversary of the 2024 Annual Meeting, shareholder proposals must be received a reasonable time before the Company begins to print and mail the proxy materials for the 2025 Annual Meeting in order to be considered for inclusion in the Company’s proxy statement. Upon timely receipt of any such proposal, the Company will determine whether or not to include such proposal in the proxy statement and proxy in accordance with applicable regulations and provisions governing the solicitation of proxies. In addition, to comply with the universal proxy rules, shareholders who intend to solicit proxies in support of director nominees other than the Company’s nominees must provide notice to the Company that sets forth the information required by Rule 14a-19 under the Exchange Act, no later than April 14, 2025. +Director Nominations or Other Business for Presentation at the 2025 Annual Meeting +Alternatively, shareholders intending to place in nomination persons for election as directors at an annual meeting of shareholders or to introduce an item of business at an annual meeting of shareholders without having the nomination or proposal included in the Company’s proxy statement must comply with certain procedures set forth in the Bylaws. These procedures provide, generally, among other things, that shareholders desiring to place in nomination persons for election as directors, and/or bring a proper subject of business before an annual meeting, must do so by a written notice timely received (on or before March 12, 2025, but no earlier than February 10, 2025, for the 2025 Annual Meeting) to the Corporate Secretary of the Company containing the name and address of the shareholder and the number of shares of the Company’s Common Stock beneficially owned by the shareholder. If the notice relates to a nomination for director, it must also set forth the name, age, business and residence addresses of the candidate, the candidate’s résumé or a listing of his or her qualifications to be a director of the Company, the person’s written consent to be a director if selected by the Nominating Committee, nominated by the Board and elected by the shareholders and any other information that would be required to be disclosed in solicitations of proxies for the election of directors. The Company may require any proposed nominee to furnish such other information as may reasonably be required by the Company to determine the eligibility of such proposed nominee to serve as director. Notice of an item of business shall include a brief description of the proposed business and any material interest of the shareholder in such business. +The Chairman of the meeting may refuse to allow the transaction of any business not presented, or to acknowledge the nomination of any person not made, in compliance with the foregoing procedures. Copies of the Bylaws are available from the Corporate Secretary of the Company and on the Company’s website at www.matadorresources.com under the heading “Investor Relations—Corporate Governance.” +See “Corporate Governance—Board Committees—Nominating Committee” for the process for shareholders to follow to suggest a director candidate to the Nominating Committee for nomination by the Board. +91 Matador Resources Company | 2024 Proxy Statement +Annual Report on Form 10-K +The Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as filed with the SEC, including financial statements, is being made available to our shareholders concurrently with this Proxy Statement at www.proxyvote.com and does not form part of the proxy solicitation material. Shareholders may obtain without charge another copy of the Annual Report on Form 10-K, excluding certain exhibits, by writing to Investor Relations, Matador Resources Company, One Lincoln Centre, 5400 LBJ Freeway, Suite 1500, Dallas, Texas 75240. +92 Matador Resources Company | 2024 Proxy Statement +OTHER BUSINESS +Management of the Company is not aware of other business to be presented for action at the Annual Meeting; however, if other matters are presented for action, it is the intention of the persons named in the accompanying form of proxy to vote in accordance with their judgment on such matters. +By Order of the Board of Directors, +Joseph Wm. Foran +Chairman and Chief Executive Officer +April 26, 2024 +93 Matador Resources Company | 2024 Proxy Statement +ANNEX A +ANNEX A +Non-GAAP Financial Measures +Adjusted EBITDA +We define, on a consolidated basis and for San Mateo, Adjusted EBITDA as earnings before interest expense, income taxes, depletion, depreciation and amortization, accretion of asset retirement obligations, property impairments, unrealized derivative gains and losses, non-recurring transaction costs for certain acquisitions, non-recurring transaction costs for certain acquisitions, certain other non-cash items and non-cash stock-based compensation expense and net gain or loss on asset sales and impairment. Adjusted EBITDA is not a measure of net income (loss) or cash flows as determined by GAAP. Adjusted EBITDA is a supplemental non-GAAP financial measure that is used by management and external users of our consolidated financial statements, such as industry analysts, investors, lenders and rating agencies. All references to Matador’s Adjusted EBITDA are those values attributable to Matador Resources Company shareholders after giving effect to Adjusted EBITDA attributable to third-party non-controlling interests, including in San Mateo. +Management believes Adjusted EBITDA is necessary because it allows us to evaluate our operating performance and compare the results of operations from period to period without regard to our financing methods or capital structure. We exclude the items listed above from net income (loss) in calculating Adjusted EBITDA because these amounts can vary substantially from company to company within our industry depending upon accounting methods and book values of assets, capital structures and the method by which certain assets were acquired. +Adjusted EBITDA should not be considered an alternative to, or more meaningful than, net income (loss) or net cash provided by operating activities as determined in accordance with GAAP or as a primary indicator of our operating performance or liquidity. Certain items excluded from Adjusted EBITDA are significant components of understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure. Our Adjusted EBITDA may not be comparable to similarly titled measures of another company because all companies may not calculate Adjusted EBITDA in the same manner. +The following table presents our calculation of Adjusted EBITDA and the reconciliation of Adjusted EBITDA to the GAAP financial measures of net income and net cash provided by operating activities, respectively: +94 Matador Resources Company | 2024 Proxy Statement +Adjusted EBITDA—Matador Resources Company +Year Ended +December 31, 2023 +(In Thousands) +Unaudited Adjusted EBITDA Reconciliation to Net Income: +Net income attributable to Matador Resources Company shareholders $ 846,074 +Net income attributable to non-controlling interest in subsidiaries 64,285 +Net income 910,359 +Interest expense 121,520 +Total income tax provision 186,026 +Depletion, depreciation and amortization 716,688 +Accretion of asset retirement obligations 3,943 +Unrealized loss on derivatives 1,261 +Non-cash stock-based compensation expense 13,661 +Net loss on impairment 202 +Income related to contingent consideration and other (6,038) +Consolidated Adjusted EBITDA 1,947,622 +Adjusted EBITDA attributable to non-controlling interest in subsidiaries (98,075) +Adjusted EBITDA attributable to Matador Resources Company shareholders $ 1,849,547 +Year Ended +December 31, 2023 +(In Thousands) +Unaudited Adjusted EBITDA Reconciliation to Net Cash Provided by Operating Activities: +Net cash provided by operating activities $ 1,867,828 +Net change in operating assets and liabilities (50,027) +Interest expense, net of non-cash portion 114,473 +Current income tax provision 13,922 +Other non-cash and non-recurring expense 1,426 +Adjusted EBITDA attributable to non-controlling interest in subsidiaries (98,075) +Adjusted EBITDA attributable to Matador Resources Company shareholders $ 1,849,547 +Adjusted EBITDA - San Mateo (100%) +Year Ended +December 31, 2023 +(In Thousands) +Unaudited Adjusted EBITDA Reconciliation to Net Income: +Net income $ 131,196 +Depletion, depreciation and amortization 35,132 +Interest expense 33,489 +Accretion of asset retirement obligations 336 +Adjusted EBITDA $ 200,153 +95 Matador Resources Company | 2024 Proxy Statement +Year Ended +December 31, 2023 +(In Thousands) +Unaudited Adjusted EBITDA Reconciliation to Net Cash Provided by Operating Activities: +Net cash provided by operating activities $ 152,907 +Net change in operating assets and liabilities 14,771 +Interest expense, net of non-cash portion 32,475 +Adjusted EBITDA $ 200,153 +ANNEX +Adjusted Free Cash Flow +Adjusted free cash flow is measured, on a consolidated basis for the Company, as net cash provided by operating activities, adjusted for changes in working capital and cash performance incentives that are not included as operating cash flows, less cash flows used for capital expenditures, adjusted for changes in capital accruals. On a consolidated basis, these numbers are also adjusted for the cash flows related to non-controlling interest in subsidiaries that represent cash flows not attributable to Matador shareholders. Adjusted free cash flow should not be considered an alternative to, or more meaningful than, net cash provided by operating activities as determined in accordance with GAAP or an indicator of the Company’s liquidity. Adjusted free cash flow is used by the Company, securities analysts and investors as an indicator of the Company’s ability to manage its operating cash flow, internally fund its D/C/E capital expenditures, pay dividends and service or incur additional debt, without regard to the timing of settlement of either operating assets and liabilities or accounts payable related to capital expenditures. Additionally, this non-GAAP financial measure may be different than similar measures used by other companies. The Company believes the presentation of adjusted free cash flow provides useful information to investors, as it provides them an additional relevant comparison of the Company’s performance, sources and uses of capital associated with its operations across periods and to the performance of the Company’s peers. In addition, this non-GAAP financial measure reflects adjustments for items of cash flows that are often excluded by securities analysts and other users of the Company’s financial statements in evaluating the Company’s cash spend. +The table below reconciles adjusted free cash flow to its most directly comparable GAAP measure of net cash provided by operating activities. All references to Matador’s adjusted free cash flow are those values attributable to Matador shareholders after giving effect to adjusted free cash flow attributable to third-party non-controlling interests, including in San Mateo. +Adjusted Free Cash Flow—Matador Resources Company +Year Ended +December 31, 2023 +(In Thousands) +Net cash provided by operating activities $ 1,867,828 +Net change in operating assets and liabilities (50,027) +San Mateo discretionary cash flow attributable to non-controlling interest in subsidiaries (1) +(82,163) +Performance incentives received from Five Point 38,200 +Total discretionary cash flow $ 1,773,838 +Drilling, completion and equipping capital expenditures 1,192,800 +Midstream capital expenditures 165,719 +Expenditures for other property and equipment 3,636 +Net change in capital accruals (6,288) +San Mateo accrual-based capital expenditures related to non-controlling interest in subsidiaries (2) +(42,073) +Total accrual-based capital expenditures (3) +1,313,794 +Adjusted free cash flow $ 460,044 +(1) Represents Five Point’s 49% interest in San Mateo discretionary cash flow. +(2) Represents Five Point’s 49% interest in accrual-based San Mateo capital expenditures. +(3) Represents drilling, completion and equipping costs, Matador’s share of San Mateo capital expenditures plus 100% of other midstream capital expenditures not associated with San Mateo. +96 Matador Resources Company | 2024 Proxy Statement +MATADOR RESOURCES COMPANY +5400 LBJ FREEWAY, SUITE 1500 +DALLAS, TEXAS 75240 +VOTE BY INTERNET - www.proxyvote.com or scan the QR Barcode above +Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Time the day before the meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. +ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS +If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. +VOTE BY PHONE - 1-800-690-6093 +Use any touch-tone telephone to transmit your voting instructions up until +11:59 p.m. Eastern Time the day before the meeting date. Have your proxy card in hand when you call and then follow the instructions. +VOTE BY MAIL +Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, +51 Mercedes Way, Edgewood, NY 11717. +TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: +V34260-P07962 KEEP THIS PORTION FOR YOUR RECORDS +THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. DETACH AND RETURN THIS PORTION ONLY +MATADOR RESOURCES COMPANY +The Board of Directors recommends you vote FOR the following: +1. Election of Director Nominees: For Against Abstain +1a. William M. Byerley o o o The Board of Directors recommends you vote FOR the following proposal: For Against Abstain +1b. Monika U. Ehrman o o o +1c. Kenneth L. Stewart o o o +4. +Ratification of the appointment of KPMG LLP as the Company's independent registered public accounting firm for the year ending December 31, 2024. +o o o +1d. Susan M. Ward o o o +The Board of Directors recommends you vote FOR the following proposal: For Against Abstain +2. Advisory vote to approve the compensation of the Company's named executive officers. o o o +The Board of Directors recommends you vote 1 YEAR on the following proposal: 1 Year 2 Years 3 Years 4 Years +NOTE: The proxies are authorized to vote in their discretion on such other business as may properly come before the meeting or any adjournment thereof. +3. Advisory vote on the frequency of future advisory votes to approve named executive officer compensation. +o o o o +Yes No +Please indicate if you plan to attend this meeting: o o +Please sign as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. +Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date +Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: +The Annual Report for the year ended December 31, 2023 , Notice of Annual Meeting and Proxy Statement are available at www.proxyvote.com +V34261-P07962 +MATADOR RESOURCES COMPANY +Annual Meeting of Shareholders +June 13, 2024 9:30 A.M. +This proxy is solicited by the Board of Directors +As an alternative to completing this form, you may enter your vote instruction by telephone at 1-800-690-6093 or via the internet at www.proxyvote.com. Have your proxy card in hand and follow the instructions. +The shareholder hereby appoints Joseph Wm. Foran and Timothy E. Parker, or either of them, as proxies, each with the power to appoint his substitute, and hereby authorizes them to represent and to vote, as designated on the reverse side of this ballot, all of the shares of common stock of MATADOR RESOURCES COMPANY that the shareholder is entitled to vote at the Annual Meeting of Shareholders to be held at 9:30 A.M. CDT on June 13, 2024, at the Hilton Anatole, Imperial Ballroom, 2201 N. Stemmons Freeway, Dallas, Texas 75207, and any adjournment or postponement thereof. The shareholder hereby revokes any proxy or proxies heretofore given to vote upon or act with respect to such shares of stock. +This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the Board of Directors' recommendations. +Continued and to be signed on reverse side \ No newline at end of file diff --git a/raw/proxies/0001520006/0001520006-24-000106/proxy_rpt.txt b/raw/proxies/0001520006/0001520006-24-000106/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..2d5de659b2c6c457f1c705fa43dae2e8b663e31d --- /dev/null +++ b/raw/proxies/0001520006/0001520006-24-000106/proxy_rpt.txt @@ -0,0 +1,43 @@ +TRANSACTIONS WITH RELATED PERSONS +TRANSACTIONS WITH RELATED PERSONS +Except as disclosed below, during 2023, there was not, nor was there proposed as of December 31, 2023, any transaction or series of similar transactions to which we were or are a party in which the amount involved exceeded or exceeds $120,000 and in which any of our directors, nominees for directors, executive officers, beneficial owners of more than 5% of any class of our voting securities or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest, other than compensation arrangements with directors and executive officers, which are described in “Executive Compensation— Compensation Discussion and Analysis” and “Director Compensation” above. +Working Interest and Overriding Royalty Interest Owners +Joseph Wm. Foran, Chairman and Chief Executive Officer, Shelley F. Appel, director, and certain of their affiliated entities (collectively, the “Foran Entities”) are working interest owners and/or overriding royalty interest owners in certain properties operated by the Company. As working interest owners, the Foran Entities are required to pay their proportionate share of all costs and are entitled to receive their proportionate share of revenues in the normal course of business. As overriding royalty interest owners, the Foran Entities are entitled to receive their proportionate share of revenues from the wells in which they own an interest in the normal course of business. During 2023, revenues, net of costs, received by the Foran Entities in their capacity as working interest owners or overriding royalty interest owners were approximately $19.9 million (the “Related Net Revenue Payments”). The Related Net Revenue Payments represent less than 1% of our total third-party net revenue payments during 2023. +In our capacity as operator, we incur drilling and operating costs that are billed to our partners based on their respective working interests. During 2023, our joint interest billings to the Foran Entities attributable to their share of costs were approximately $23.3 million (the “Related Joint Interest Billings”). The Related Joint Interest Billings represent less than 1% of our total joint interest billings during 2023. As a result of this ownership by the Foran Entities, from time to time, we will be in a net receivable or net payable position with certain of the Foran Entities. We do not consider any net receivables from the Foran Entities to be uncollectible. +The Audit Committee reviewed the terms of the working interests and/or overriding royalty interests of the Foran Entities for potential conflicts of interest under the Related Person Transaction Policy, and, after being fully informed as to Mr. Foran’s and Ms. Appel's relationships and interests in such transactions and all other material facts related to the Related Net Revenue Payments and Related Joint Interest Billings, determined that such transactions and the Related Net Revenue Payments and Related Joint Interest Billings were fair to the Company and recommended such transactions and the Related Net Revenue Payments and Related Joint Interest Billings to the full Board for approval and ratification. The Board subsequently approved and ratified the transactions and the Related Net Revenue Payments and Related Joint Interest Billings. +Joint Venture Relationship +The Company has entered into a joint venture (the “Joint Venture”) with Spearpoint Resources Company (“Spearpoint”) to generate value through a well development program in our Twin Lakes asset area. An adult child of Mr. Foran and the sibling of Ms. Appel is the founder of Spearpoint and serves as the chief executive officer and chairman of the board of directors of Spearpoint. Mr. Foran’s child has a Bachelor of Arts degree in Economics from Princeton University, a Master’s of Science degree in Petroleum Engineering from Texas A&M University and a Master’s degree in Business Administration from Rice University. Mr. Foran’s child worked for a major oil and gas company as a petroleum petrophysicist. Prior to attending Texas A&M, Mr. Foran’s child served in the United States Marine Corp, including two tours of duty overseas, and has continued to serve in United State Marine Corp Reserve, recently achieving the rank of Major. Mr. Foran’s child may perform shared services to the Joint Venture, for which the Joint Venture would reimburse Spearpoint. In addition, Ms. Appel holds an ownership interest in Spearpoint. +85 Matador Resources Company | 2024 Proxy Statement +During 2023, the Company made capital contributions to the Joint Venture of approximately $3.1 million (the “Capital Contributions”) and was compensated approximately $0.9 million pursuant to the terms of the Joint Venture’s operating agreement for the provision of shared services to the Joint Venture in 2023 and Spearpoint made capital contributions to the Joint Venture of approximately $3.0 million and was compensated approximately $0.5 million in total pursuant to the terms of the Joint Venture’s operating agreement for the provision of shared services to the Joint Venture in 2021, 2022 and 2023. Neither the Company nor Spearpoint received any distributions from the Joint Venture in 2023, although such distributions may be received by the Company and/or Spearpoint in the future. +The Audit Committee reviewed the terms of the Joint Venture for potential conflicts of interest under the Related Person Transaction Policy, and, after being fully informed as to Mr. Foran’s and his adult child’s relationships and interests in such transactions and all other material facts related to the Joint Venture, determined that such transactions, including the Capital Contributions, were fair to the Company and recommended such transactions to the full Board for approval and ratification. The Board subsequently approved and ratified the transactions, including the Capital Contributions. +Certain Employment Relationships +Billy E. Goodwin served as an executive officer during 2023 until his retirement in April of 2024. During 2023, an adult child of Mr. Goodwin was an employee of the Company and has been an employee since 2015. Mr. Goodwin’s child earned in 2023, and is expected to be compensated in 2024, between $120,000 and $500,000. Mr. Goodwin’s child has a Bachelor of Science in Business Administration degree in Energy Management from the University of Tulsa and a Bachelor of Arts degree in General Business and Management from Oklahoma State University. He has over 13 years of industry experience, including as a drilling fluids engineer for a publicly traded oilfield services company and as a landman for a publicly traded exploration and production company. The Audit Committee reviewed the terms of the employment arrangement for potential conflicts of interest under the Company’s Related Person Transaction Policy and, after being fully informed as to the employment arrangement and historical and anticipated compensation of Mr. Goodwin’s adult child, and all other material facts related to the relationship, determined that the employment arrangement was fair to the Company and recommended the employment arrangement to the full Board for approval and ratification. The Board subsequently approved and ratified such employment arrangements. +Reynald A. Baribault is a member of the Board. Mr. Baribault’s sister-in-law has been an employee of the Company since 2016 and earned in 2023, and is expected to be compensated in 2024, between $120,000 and $250,000. Mr. Baribault’s sister-in-law has a diploma from the Executive Secretarial School and is a certified legal assistant, having completed the Southern Methodist University Legal Assistants Program. She has over 40 years of experience as a legal assistant. The Audit Committee reviewed the terms of the employment arrangement for potential conflicts of interest under the Company’s Related Person Transaction Policy and, after being fully informed as to the employment arrangement and historical and anticipated compensation of Mr. Baribault’s sister-in-law, and all other material facts related to the relationship, determined that the employment arrangement was fair to the Company and recommended the employment arrangement to the full Board for approval and ratification. The Board subsequently approved and ratified such employment arrangement. +An adult child of Mr. Foran and a sibling of Ms. Appel has been an employee of the Company since 2015 and earned in 2023, and is expected to be compensated in 2024, between $120,000 and $250,000. Mr. Foran’s child has a Bachelor of Science degree in Human Resource Development and a Master of Science degree in Human Resource Management, both from Texas A&M University. She has more than 12 years of industry experience, including with another publicly traded exploration and production company. The Audit Committee reviewed the terms of the employment arrangement for potential conflicts of interest under the Company’s Related Person Transaction Policy and, after being fully informed as to the employment arrangement and historical and anticipated compensation of Mr. Foran’s child, and all other material facts related to the relationship, determined that the employment arrangement was fair to the Company and recommended the employment arrangement to the full Board for approval and ratification. The Board subsequently approved and ratified such employment arrangement. +86 Matador Resources Company | 2024 Proxy Statement +In addition, Ms. Appel, a director and the daughter of Mr. Foran, served as the Company’s Environmental, Social and Governance Coordinator and as a Special Advisor to the Board in 2023 prior to her election to the Board in June 2023. For these services, Ms. Appel was compensated between $120,000 and $250,000. Ms. Appel has a degree from Yale University and a Master’s degree in Business Administration from the University of Chicago and also worked for a major oil and gas company for a number of years. For further details of Ms. Appel’s relationship with the Company and her background and experience, please see her biography on page 20 of this Proxy Statement. The Audit Committee reviewed the terms of the consulting arrangement for potential conflicts of interest under the Company’s Related Person Transaction Policy and, after being fully informed as to the consulting arrangement and historical and anticipated compensation of Ms. Appel, and all other material facts related to the relationship, determined that the consulting arrangement was fair to the Company and recommended the consulting arrangement to the full Board for approval and ratification. The Board subsequently approved and ratified such consulting arrangement. +Indemnification Agreements +We have entered into indemnification agreements with each of our directors and executive officers and expect to do so in the future for any new directors and executive officers. The indemnification agreements provide the directors and executive officers with contractual rights to indemnification, expense advancement and reimbursement to the fullest extent permitted by applicable law. +Procedures for Approval of Related Person Transactions +Pursuant to the Related Person Transaction Policy in effect as of December 31, 2023, a “Related Person Transaction” is defined as a transaction (including any financial transaction, arrangement or relationship (including any indebtedness or guarantee of indebtedness)), or series of related transactions, or any material amendment to any such transaction, in which a Related Person (as defined below) has or will have a direct or indirect material interest and in which we are a participant, other than: +• a transaction involving compensation of directors that is required to be reported in our proxy statement under Item 402 of the SEC’s compensation disclosure requirements (“Item 402”); +• any employment by us of an executive officer if: +◦ the related compensation is required to be reported in our proxy statement under Item 402; or +◦ the executive officer is not an “immediate family member” of another executive officer or director of the Company, the related compensation would be reported in our proxy statement under Item 402 if the executive officer was a “named executive officer” and the Compensation Committee approved (or recommended that the Board approve) such compensation; +• a transaction with a Related Person involving less than $120,000; +• a transaction in which the interest of the Related Person arises solely from the ownership of a class of our equity securities and all holders of that class receive the same benefit on a pro rata basis; +• a transaction in which a Related Person has an indirect interest solely as a result of being (a) a director or, together with all other Related Persons, a less than 10% beneficial owner of an equity interest in another entity, or both, or (b) a limited partner in a partnership in which the Related Person, together with all other Related Persons, has an interest of less than 10%; +• a transaction in which the rates or charges involved therein are determined by competitive bids, or a transaction that involves the rendering of services as a common or contract carrier, or public utility, at rates or charges fixed in conformity with law or governmental authority; +• any transaction with another company at which a Related Person’s only relationship is as an employee (other than an executive officer), if the aggregate amount involved does not exceed the greater of $1,000,000, or 2% of that company’s total annual revenues; +87 Matador Resources Company | 2024 Proxy Statement +• any charitable contribution, grant or endowment by us to a charitable organization, foundation or university at which a Related Person’s only relationship is as an employee (other than an executive officer), if the aggregate amount involved does not exceed the lesser of $1,000,000, or 2% of the charitable organization’s total annual receipts; +• any transaction with another publicly traded company where the Related Person’s interest arises solely from beneficial ownership of more than 5% of our Common Stock and ownership of a non-controlling interest in the other publicly traded company; +• reimbursement of business expenses incurred by a director, officer or employee of the Company in the performance of his or her duties and approved for reimbursement by the Company in accordance with the Company’s customary policies and practices; or +• indemnification and advancement of expenses made pursuant to the Certificate of Formation or the Bylaws or pursuant to any agreement. +“Related Person” means: +• any person who is, or at any time since the beginning of the Company’s last completed fiscal year was, one of our executive officers or one of our directors or nominees for director; +• any person (including any entity or group) who is known by us to be the beneficial owner of more than 5% of our Common Stock; +• any immediate family member of any of the foregoing persons, which means any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, sister-in-law or person residing (other than a tenant or employee) in the home of a director, nominee for director, executive officer or a beneficial owner of more than 5% of our Common Stock; and +• any entity that is owned or controlled by any of the foregoing persons or in which any of the foregoing persons is a general partner or executive officer or in which such person, together with all other of the foregoing persons, owns 10% or more of the equity interests thereof. +Pursuant to the Related Person Transaction Policy, the Audit Committee must review all material facts of each Related Person Transaction and recommend either approval or disapproval of the Related Person Transaction to the full Board, subject to certain limited exceptions. In determining whether to recommend approval or disapproval of the Related Person Transaction, the Audit Committee must, after reviewing all material facts of the Related Person Transaction and the Related Person’s relationship and interest, determine whether the Related Person Transaction is fair to the Company and in, or not consistent with, the interests of the Company and its shareholders. If a Related Person Transaction will be ongoing, the Audit Committee, on at least an annual basis, will review and assess ongoing relationships with the Related Persons to see that they are in compliance with Audit Committee guidelines. Further, the policy requires that all Related Person Transactions be disclosed in our filings with the SEC and/or our website in accordance with applicable laws, rules and regulations. +88 Matador Resources Company | 2024 Proxy Statement \ No newline at end of file diff --git a/raw/proxies/0001520006/0001520006-25-000125/proxy.txt b/raw/proxies/0001520006/0001520006-25-000125/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..8bbc6d48a0ab5088ff7ff9fc8c25e0bb3a3346b7 --- /dev/null +++ b/raw/proxies/0001520006/0001520006-25-000125/proxy.txt @@ -0,0 +1,4918 @@ +mtdr-20250428 +FALSE 0001520006 DEF 14A iso4217:USD 0001520006 2024-01-01 2024-12-31 0001520006 2023-01-01 2023-12-31 0001520006 2022-01-01 2022-12-31 0001520006 2021-01-01 2021-12-31 0001520006 2020-01-01 2020-12-31 0001520006 ecd:EqtyAwrdsInSummryCompstnTblForAplblYrMember ecd:PeoMember 2024-01-01 2024-12-31 0001520006 ecd:YrEndFrValOfEqtyAwrdsGrntdInCvrdYrOutsdngAndUnvstdMember ecd:PeoMember 2024-01-01 2024-12-31 0001520006 ecd:ChngInFrValOfOutsdngAndUnvstdEqtyAwrdsGrntdInPrrYrsMember ecd:PeoMember 2024-01-01 2024-12-31 0001520006 ecd:ChngInFrValAsOfVstngDtOfPrrYrEqtyAwrdsVstdInCvrdYrMember ecd:PeoMember 2024-01-01 2024-12-31 0001520006 ecd:EqtyAwrdsInSummryCompstnTblForAplblYrMember ecd:NonPeoNeoMember 2024-01-01 2024-12-31 0001520006 ecd:YrEndFrValOfEqtyAwrdsGrntdInCvrdYrOutsdngAndUnvstdMember ecd:NonPeoNeoMember 2024-01-01 2024-12-31 0001520006 ecd:ChngInFrValOfOutsdngAndUnvstdEqtyAwrdsGrntdInPrrYrsMember ecd:NonPeoNeoMember 2024-01-01 2024-12-31 0001520006 ecd:ChngInFrValAsOfVstngDtOfPrrYrEqtyAwrdsVstdInCvrdYrMember ecd:NonPeoNeoMember 2024-01-01 2024-12-31 0001520006 2 2024-01-01 2024-12-31 0001520006 1 2024-01-01 2024-12-31 0001520006 3 2024-01-01 2024-12-31 0001520006 4 2024-01-01 2024-12-31 0001520006 5 2024-01-01 2024-12-31 +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +Washington, D.C. 20549 +SCHEDULE 14A +Proxy Statement Pursuant to Section 14(a) of the +Securities Exchange Act of 1934 +(Amendment No. ) +Filed by the Registrant ☒ +Filed by a Party other than the Registrant ☐ +Check the appropriate box: +☐ Preliminary Proxy Statement +☐ Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +☒ Definitive Proxy Statement +☐ Definitive Additional Materials +☐ Soliciting Material Pursuant to §240.14a-12 +Matador Resources Company +(Name of Registrant as Specified In Its Charter) +(Name of Person(s) Filing Proxy Statement, if other than the Registrant) +Payment of Filing Fee (Check the appropriate box): +☒ No fee required. +☐ Fee paid previously with preliminary materials. +☐ Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11 +2025 +Notice of Annual Meeting of Shareholders +and +Proxy Statement +June 12, 2025 | Dallas, Texas +One Lincoln Centre +5400 LBJ Freeway, Suite 1500 +Dallas, Texas 75240 +www.matadorresources.com +NOTICE OF ANNUAL MEETING OF SHAREHOLDERS +To Be Held on June 12, 2025 +To the Matador Resources Company Shareholders: +Please join us for the 2025 Annual Meeting of Shareholders of Matador Resources Company. The meeting will be held at +The Westin Galleria Dallas , Fort Worth Ballroom , 13340 Dallas Parkway , Dallas, Texas 75240 , on Thursday , June 12, +2025 , at 9:30 a.m., Central Daylight Time . +At the meeting, you will hear a report on our business and act on the following matters: +(1) Election of the four nominees for director named in the attached Proxy Statement; +(2) Advisory vote to approve the compensation of our named executive officers as described in +the atta ched Proxy Statement; +(3) Ratification of the appointment of KPMG LLP as the Company’s independent registered +public accounting firm for the year ending December 31, 2025 ; and +(4) Any other matters that may properly come before the meeting. +All shareholders of record at the close of business on April 16, 2025 are entitled to vote at the meeting or any +postponement or adjournment of the meeting. A list of the shareholders of record is available at the Company’s +offices in Dallas, Texas. +By Order of the Board of Directors, +Joseph Wm. Foran +Chairman and Chief Executive Officer +April 28, 2025 +YOUR VOTE IS IMPORTANT! +Whether or not you will attend the meeting, please vote as promptly as possible by using the Internet +or telephone or by signing, dating and returning your proxy card to the address listed on the card. +Important Notice Regarding the Availability of Proxy Materials for the +Annual Meeting of Shareholders to Be Held on June 12, 2025 : +Our Proxy Statement and the Annual Report to Shareholders for the fiscal year ended December 31, 2024 are +available for viewing, printing and downloading at https://materials.proxyvote.com/576485 . +2025 Proxy Statement | Matador Resources Company 1 +TABLE OF CONTENTS +TABLE OF CONTENTS +Page +Page +Proxy Statement +2 +Letter to Shareholders +46 +Proxy Summary +4 +Executive Compensation +47 +Information About the Annual Meeting +9 +Compensation Discussion and Analysis +47 +Proposal 1 | Election of Directors +13 +Strategic Planning and Compensation Committee Report +65 +Director S kills & Experience +13 +Summary Compensation Table +65 +Nominees +14 +Grants of Plan-Based Awards Table +65 +Vote Required +17 +Outstanding Equity Awards at December 31, 2024 +67 +Directors Continuing in Office +18 +Option Exercises and Stock Vested +68 +Corporate Governance +24 +Potential Payments upon Termination or Change in +Control +69 +Independence of Directors +24 +Chief Executive Officer Pay Ratio +73 +Majority Vote in Director Elections +25 +Pay Versus Performance +74 +Board Leadership Structure +25 +Director Compensation +78 +Board Committees +27 +Compensation for 2024 - 2025 +79 +Board's Role in Risk Oversight +32 +Director Stock Ownership Guidelines +79 +Environmental, Social and Governance Practices +32 +Equity Compensation Plan Information +80 +Shareholder Engagement +34 +Transactions with Related Persons +81 +Communications with Directors +34 +Security Ownership of Certain Beneficial Owners and +Management +85 +Strategic Planning and Compensation Committee +Interlocks and Insider Participation +35 +Additional Information +87 +Executive Officers and Other Senior Officers of the +Company +35 +Shareholder Proposals for the 2026 Proxy Statement +87 +Proposal 2 | Advisory Vote to Approve Named Executive +Officer Compensation +42 +Director Nominations or Other Business for Presentation +at the 2026 Annual Meeting +87 +Vote Required +42 +Annual Report on Form 10-K +87 +Proposal 3 | Ratification of the Appointment of KPMG LLP +43 +Other Business +88 +Fees of Independent Registered Public Accounting Firm +for Fiscal Years 2024 and 2023 +43 +Annex A Non-GAAP Financial Measures +89 +Report of the Audit Committee +44 +Vote Required +45 +2 Matador Resources Company | 2025 Proxy Statement +PROXY STATEMENT +Matador Resources Company +One Lincoln Centre +5400 LBJ Freeway, Suite 1500 +Dallas, Texas 75240 +www.matadorresources.com +PROXY STATEMENT For +ANNUAL MEETING OF SHAREHOLDERS +To Be Held on June 12, 2025 +This Proxy Statement is being mailed on or about April 28, 2025 to the shareholders of Matador Resources Company +(“Matador” or the “Company”) in connection with the solicitation of proxies by the Board of Directors (the “Board”) of the +Company to be voted at the Annual Meeting of Shareholders of the Company to be held at The Westin Galleria Dallas , +Fort Worth Ballroom , 13340 Dallas Parkway , Dallas, Texas 75240 , on June 12, 2025 , at 9:30 a.m., Central Daylight Time +(the “Annual Meeting” or the “ 2025 Annual Meeting”), or at any postponement or adjournment thereof, for the purposes set +forth in the accompanying Notice of Annual Meeting of Shareholders. The address of the Company’s principal executive +office is One Lincoln Centre , 5400 LBJ Freeway, Suite 1500 , Dallas, Texas 75240 . +If you are a shareholder of record, you may vote in person by attending the meeting, by completing and returning a proxy +by mail or by using the Internet or telephone. You may vote your proxy by mail by marking your vote on the enclosed +proxy card and following the instructions on the card. To vote your proxy using the Internet or telephone, see the +instructions on the proxy form and have the proxy form available when you access the Internet website or place your +telephone call. +The named proxies will vote your shares according to your directions. If you sign and return your proxy but do not make +any of the selections, the named proxies will vote your shares: (i) FOR the election of the four nominees for director as set +forth in this Proxy Statement, (ii) FOR the approval, on an advisory basis, of the compensation of the Company’s named +executive officers as disclosed in this Proxy Statement and (iii) FOR the ratification of KPMG LLP as the independent +registered public accounting firm of the Company for the year ending December 31, 2025 . Your proxy may be revoked at +any time before it is exercised by filing with the Company a written revocation addressed to the Corporate Secretary, by +executing a proxy bearing a later date or by attending the Annual Meeting and voting in person. +The cost of soliciting proxies will be borne by the Company. In addition to the use of postal services and the Internet, +proxies may be solicited by directors, officers and employees of the Company (none of whom will receive any additional +compensation for any assistance they may provide in the solicitation of proxies) in person or by telephone. +The outstanding voting securities of the Company consist of issued and outstanding common stock, par value $0.01 per +share (the “Common Stock”). The record date for the determination of the shareholders entitled to notice of and to vote at +the Annual Meeting, or any postponement or adjournment thereof, has been established by the Board as the close of +business on April 16, 2025 (the “Record Date”). As of the Record Date, there were 125,201,846 shares of Common Stock +outstanding and entitled to vote. +The presence, in person or by proxy, of the holders of record of a majority of the outstanding shares entitled to vote is +necessary to constitute a quorum for the transaction of business at the Annual Meeting, but if a quorum should not be +present, the meeting may be adjourned from time to time until a quorum is obtained. A holder of Common Stock will be +entitled to one vote per share on each matter properly brought before the meeting. Cumulative voting is not permitted in +the election of directors. +The proxy card provides space for a shareholder to abstain with respect to any or all nominees for the Board. The +affirmative vote of a majority of the votes cast by holders of shares present in person or represented by proxy and entitled +to vote on the election of directors at the Annual Meeting is required for the election of each nominee for director. With +respect to the election of directors in an uncontested election, such as that being held at the Annual Meeting, “majority of +the votes cast” means the number of votes cast “for” the election of such nominee exceeds the number of votes cast +“against” such nominee. See “Corporate Governance—Majority Vote in Director Elections” for additional information +regarding election of directors. +The other proposals require the affirmative vote of a majority of the shares of Common Stock present in person or +represented by proxy and entitled to vote at the meeting. Shares held by a shareholder who abstains from voting on any +2025 Proxy Statement | Matador Resources Company 3 +or all proposals will be included for the purpose of determining the presence of a quorum. Other than with respect to the +election of directors, an abstention will effectively count as a vote cast against the remaining proposals. Broker non-votes +on any matter as to which the broker has indicated on the proxy that it does not have discretionary authority to vote will be +treated as shares not entitled to vote with respect to that matter. However, such shares will be considered present and +entitled to vote for quorum purposes so long as they are entitled to vote on at least one other matter. +4 Matador Resources Company | 2025 Proxy Statement +PROXY SUMMARY +This summary highlights information contained elsewhere in this Proxy Statement. This summary does not contain all of +the information that you should consider, and you should read the entire Proxy Statement carefully prior to voting. For +more complete information regarding our 2024 performance, please review our Annual Report on Form 10-K for the year +ended December 31, 2024 . +2025 Annual Meeting of Shareholders +DATE AND TIME +LOCATION +RECORD DATE +VOTING +June 12, 2025 at 9:30 a.m., +Central Daylight Time +The Westin Galleria Dallas +Fort Worth Ballroom +13340 Dallas Parkway +Dallas, Texas 75240 +April 16, 2025 +Shareholders as of the close +of business on the Record +Date are entitled to vote. Each +share of Common Stock is +entitled to one vote at the +Annual Meeting. +Proposal +Board Recommendation +Election of Four Director Nominees (page 13 ) +FOR +Advisory Vote to Approve Named Executive Officer Compensation (page 42 ) +FOR +Ratification of the Appointment of KPMG LLP as the Company’s Independent Registered Public +Accounting Firm for 2025 (page 43 ) +FOR +2024 Business Highlights +We are pleased to report that 2024 was another exceptional year for Matador, including record operational and financial +results, a growing Delaware Basin acreage position, record proved oil and natural gas reserves and a fixed dividend that +increased again in 2024. +Acquisition and Integration of Ameredev +A key highlight in 2024 was the acquisition of Ameredev Stateline II, LLC ("Ameredev") from affiliates of EnCap +Investments L.P. (“EnCap”) for cash consideration of approximately $1.8 billion, which amount is subject to customary +post-closing adjustments (the “Ameredev Acquisition”). The Ameredev Acquisition added approximately 33,500 contiguous +net acres in the core of the northern Delaware Basin, provided a significant increase in our drilling inventory with 431 +gross (371 net) operated locations, including prospective targets throughout the Wolfcamp and Bone Spring formations, +and more than 25,000 BOE per day in production. Since closing the transaction on September 18, 2024, we have been +hard at work integrating the Ameredev properties, and our efforts have already resulted in at least $4 million in drilling and +completion cost synergies. Over the next five years, we expect additional drilling and completion cost synergies of over +$150 million. In addition, we estimate that we have reduced lease operating expenses on the Ameredev acreage by 35%, +or more than $2 million per month, since we began operating the Ameredev assets. The Ameredev Acquisition also +included an approximate 19% equity interest in the parent company of Piñon Midstream, LLC (“Piñon”). Piñon was +acquired by Enterprise Products Partners L.P. on October 28, 2024, and Matador received approximately $115 million +from its share of the sale proceeds in 2024. +2025 Proxy Statement | Matador Resources Company 5 +Growing Midstream Business +In addition to significant upstream growth, our midstream business remains a critical part of Matador's success . In +December 2024, Matador contributed Pronto Midstream, LLC ("Pronto") to San Mateo Midstream, LLC ("San Mateo"), +which resulted in Matador receiving $219.8 million in cash and the ability to earn up to $75 million in additional +performance incentives (the "Pronto Transaction"). The Pronto Transaction included Pronto's interest in its existing Marlan +natural gas processing plant (the "Marlan Plant") with a designed inlet capacity of 60 million cubic feet per day of natural +gas. The Marlan Plant expansion will add an additional plant with a designed inlet capacity of 200 million cubic feet of +natural gas per day. The Marlan Plant expansion remains on time and on budget and is expected to be online in the +second quarter of 2025. In addition to the financial benefits mentioned above, the Pronto Transaction also provides +increased flow assurance for Matador’s production, primarily in Lea County, New Mexico, and accelerates filling the +Marlan Plant to capacity. +Operational Highlights +Matador achieved record growth in 2024 while continuing to demonstrate excellence in capital efficiency improvement and +technical innovation. +Production Growth +33% +26% +30% +increase in oil +production +increase in natural gas +production +increase in average +daily oil equivalent +production +Matador's operational highlights included: +• A 33% increase in oil production to a record 36.5 million barrels (“Bbl”) of oil produced in 2024 from 27.5 million Bbl of +oil produced in 2023 . +• A 26% increase in natural gas production to a record 155.8 billion cubic feet (“Bcf”) of natural gas produced in 2024 +from 123.4 Bcf of natural gas produced in 2023 . +• A 30% increase in average daily oil equivalent production to a record 170,751 BOE per day, including 99,808 Bbl of oil +per day and 425.7 million cubic feet (“MMcf”) of natural gas per day, in 2024 , from 131,813 BOE per day, including +75,457 Bbl of oil per day and 338.1 MMcf of natural gas per day, in 2023 . +• Continued drilling of longer laterals, with an average completed lateral length for operated wells turned to sales in +2024 of approximately 9,300 feet. +• Capital expenditures for drilling, completing and equipping wells (“D/C/E capital expenditures”) for 2024 of $1.32 +billion, which was within our estimated range for 2024 D/C/E capital expenditures of $1.15 billion to $1.35 billion as +provided on October 22, 2024. +• Increased efficiencies and capital savings through the introduction of “trimul-frac” operations and continued use of +“simul-frac” operations. +6 Matador Resources Company | 2025 Proxy Statement +Capital Resources and Financial Highlights +Matador finished 2024 in the best financial shape in its history with nearly $1.6 billion in liquidity under the Company's +reserved-based lending credit facility (the "Credit Agreement") and a leverage ratio of 1.05x. As a result of this financial +strength and our commitment to return value to shareholders, in the fourth quarter of 2024, the Board of Directors +increased Matador’s annual dividend to $1.00 per year from its prior annual dividend of $0.80 per year. +Financial Strength +$1.6 Billion +$1.00 +1.05x +Liquidity under our Credit +Agreement +annualized dividend per +share in the fourth quarter +Leverage Ratio +Matador's capital resources and financial highlights included: +• The generation of free cash flow in all four quarters of 2024 . +• The amendment of our dividend policy in the fourth quarter of 2024, pursuant to which we increased the quarterly +cash dividend from $0.20 per share of Common Stock to $0.25 per share of Common Stock. +• The receipt of $219.8 million in special distributions from San Mateo as a result of the Pronto Transaction. +• The receipt of $23.8 million in performance incentives directly from Five Point Energy, LLC, our joint venture partner in +San Mateo ("Five Point"). +• The underwritten public offering of 5,250,000 shares of Common Stock. +• The repurchase of all of the aggregate principal amount of approximately $699.2 million of outstanding senior notes +due 2026 (the "2026 Notes") through our cash tender offer and subsequent exercise of our optional redemption right +in April 2024. +• The issuance of $900.0 million in aggregate principal amount of our 6.50% senior notes due 2032 (the “2032 Notes”). +• The issuance of $750.0 million in aggregate principal amount of our 6.25% senior notes due 2033 (the “2033 Notes”). +• The spring and fall redeterminations under, and amendments of, our Credit Agreement to collectively (i) increase the +borrowing base to $3.25 billion, as compared to $2.50 billion at December 31, 2023, (ii) increase the elected +borrowing commitment to $2.25 billion, as compared to $1.325 billion at December 31, 2023, (iii) increase the +maximum facility amount to $3.50 billion, as compared to $2.00 billion at December 31, 2023, (iv) extend the maturity +date from October 31, 2026 to March 22, 2029 and (v) add five new banks to our lending group. +• The amendment of San Mateo's secured revolving credit facility (the "San Mateo Credit Facility") in November 2024 to +(i) increase the lender commitments from $535.0 million to $800.0 million, (ii) extend the maturity date from December +9, 2026 to November 26, 2029 and (iii) add six new banks to San Mateo’s lending group. +2025 Proxy Statement | Matador Resources Company 7 +Environmental, Social and Governance Practices (page 32 ) +At Matador, we are committed to creating long-term value in a responsible manner. Our aim is to reliably and profitably +provide the energy that society needs in a manner that is safe, protects the environment and is consistent with the +industry’s best practices and the highest applicable regulatory and legal standards. In alignment with this goal, Matador's +ESG-related initiatives are embedded into our operational plans and governance principles. Furthermore, they are +overseen and supported by senior management and the Board’s Environmental, Social and Corporate Governance +Committee. Each year we issue Matador’s Sustainability Report, which includes quantitative metrics aligned with +standards developed by the Sustainability Accounting Standards Board (“SASB”). For additional information on the +Company’s ESG-related efforts and performance, see “Corporate Governance—Environmental, Social and Governance +Practices” on page 32 . Information included in our Sustainability Report is not incorporated into this Proxy Statement. +Director Nominees (page 14 ) +Our Board currently has 11 members and is divided into three classes of directors, designated Class I, Class II and Class +III. Directors are elected for three-year terms. The table below provides certain summary information about each nominee +for director named in this Proxy Statement: +Name +Age +Director +Since +Principal Occupation +Committee +Memberships +Shelley F. Appel +35 +2023 +Former Senior Investors Relations Officer and Mergers & Acquisitions +Manager, Royal Dutch Shell PLC +CM,MM,P +R. Gaines Baty* +74 +2016 +CEO, R. Gaines Baty Associates, Inc. +ESG,E,SPC +Paul W. Harvey* +66 +2025 +Former Chief Investment Officer, Vaquero Private Wealth +A,CM,MM +Susan M. Ward* +66 +2024 +Former Head, M&A and Commercial Finance, Shell Oil Company +A,ESG,MM,O,P +* +Independent Director +A +Audit Committee +CM +Capital Markets and Finance Committee +E +Executive Committee +ESG +Environmental, Social and Corporate Governance Committee +MM +Midstream and Marketing Committee +O +Operations and Engineering Committee +P +Prospect Committee +SPC +Strategic Planning and Compensation Committee +8 Matador Resources Company | 2025 Proxy Statement +Executive Compensation Highlights (page 47 ) +Our Executive Compensation Philosophy +Our compensation program is designed to reward, in both the short term and the long term, performance that contributes +to the implementation of our business strategies, maintenance of our culture and values and achievement of our +objectives. We reward qualities that we believe help achieve our business strategies such as: +• teamwork; +• recruiting and mentoring future leaders within Matador to drive long-term shareholder value; +• individual performance in light of general economic and industry-specific conditions; +• relationships with shareholders and vendors; +• level of job responsibility; +• industry experience; +• general professional growth; and +• the ability to: +◦ manage and enhance production from our existing assets; +◦ explore new opportunities to increase oil and natural gas production; +◦ identify and acquire additional acreage; +◦ improve total shareholder returns; +◦ increase year-over-year proved reserves; +◦ control unit production costs; and +◦ pursue midstream opportunities. +For a discussion of our executive compensation program, see “Executive Compensation—Compensation Discussion +and Analysis” beginning on page 47 . +2025 Proxy Statement | Matador Resources Company 9 +INFORMATION ABOUT THE ANNUAL MEETING +We are furnishing you this Proxy Statement in connection with the solicitation of proxies by the Board to be used at the +Annual Meeting and any adjournment thereof. The Annual Meeting will be held on Thursday , June 12, 2025 , at 9:30 a.m., +Central Daylight Time . We are sending this Proxy Statement to our shareholders on or about April 28, 2025 . +All references in this Proxy Statement to “we,” “our,” “us,” “Matador” or the “Company” refer to Matador Resources +Company, including our subsidiaries and affiliates. +What is the purpose of the Annual Meeting? +At the Annual Meeting, shareholders will act upon the following matters outlined in the Annual Meeting notice: +• the election of the four nominees for director named in this Proxy Statement; +• an advisory vote to approve the compensation of our named executive officers as described herein; +• the ratification of the appointment of KPMG LLP as the Company’s independent registered public accounting firm for +the year ending December 31, 2025 ; and +• any other matters that may properly come before the meeting. +What are the Board’s voting recommendations? +• FOR the election of the four nominees for director named in this Proxy Statement; +• FOR the approval, on an advisory basis, of the compensation of the Company’s named executive officers; and +• FOR the ratification of the appointment of KPMG LLP as the Company’s independent registered public accounting +firm for the year ending December 31, 2025 . +Who is entitled to vote? +Shareholders as of the close of business on April 16, 2025 are eligible to vote their shares at the Annual Meeting. As of +the Record Date, there were 125,201,846 shares of our Common Stock outstanding. Each share of Common Stock is +entitled to one vote at the Annual Meeting. +Why did I receive a Notice Regarding the Internet Availability of Proxy Materials in the mail +instead of a full set of proxy materials? +Securities and Exchange Commission (“SEC”) rules allow companies to furnish proxy materials over the Internet. We +have elected to send a separate Notice of Internet Availability of Proxy Materials (the “Notice”) to most of our shareholders +instead of a paper copy of the proxy materials. This approach conserves natural resources and reduces the costs of +printing and distributing our proxy materials while providing shareholders with a convenient way to access our proxy +materials. Instructions on how to access the proxy materials over the Internet or to request a paper copy of proxy +materials, including a proxy card or voting instruction form, may be found in the Notice. In addition, shareholders may +request to receive future proxy materials in printed form by mail or electronically by email by following the instructions in +the Notice. A shareholder’s election to receive proxy materials by mail or email will remain in effect until the shareholder +terminates it. +10 Matador Resources Company | 2025 Proxy Statement +How do I vote? +You may: +• attend the Annual Meeting and vote in person; +• dial the toll-free number listed on the Notice, proxy card or voting instruction form provided by your broker. Easy-to- +follow voice prompts allow you to vote your shares and confirm that your voting instructions have been properly +recorded. Telephone voting will be available 24 hours a day and will close at 11:59 p.m., Eastern Daylight Time, on +June 11, 2025 ; +• go to the website www.proxyvote.com and follow the instructions, then confirm that your voting instructions have been +properly recorded. If you vote using the website, you can request electronic delivery of future proxy materials. Internet +voting will be available 24 hours a day and will close at 11:59 p.m., Eastern Daylight Time, on June 11, 2025 ; or +• if you received a paper copy of your proxy materials and elect to vote by written submission, mark your selections on +the proxy card, date and sign it, and return the card in the pre-addressed, postage-paid envelope provided. +Why did I receive paper copies of proxy materials? +We are providing certain shareholders with paper copies of the proxy materials instead of a separate Notice. If you +received a paper copy and would no longer like to receive printed proxy materials, you may consent to receive all future +proxy materials electronically via email or the Internet. To sign up for electronic delivery, please follow the instructions +provided in your proxy materials. When prompted, indicate that you agree to receive or access shareholder +communications electronically in the future. +Will each shareholder in our household receive proxy materials? +Generally, no. To the extent you are receiving printed proxy materials, we try to provide only one set of proxy materials to +be delivered to multiple shareholders sharing an address, unless you have given us other instructions. Any shareholder at +a shared address may request delivery of single or multiple copies of printed proxy materials for future meetings by +contacting us at: +Matador Resources Company +Attention: Investor Relations +5400 LBJ Freeway, Suite 1500 +Dallas, Texas 75240 +Email: investors@matadorresources.com +Telephone: (972) 371-5200 +We undertake to deliver promptly, upon written or oral request, a copy of proxy materials to a shareholder at a shared +address to which a single copy of the proxy materials was delivered. Requests should be directed to Investor Relations at +the address or phone number set forth above. +Who will be admitted to the Annual Meeting? +Admission to the Annual Meeting will be limited to our shareholders of record, persons holding proxies from our +shareholders, beneficial owners of our Common Stock and our employees. If your shares are registered in your name, we +will verify your ownership at the meeting in our list of shareholders as of the Record Date. If your shares are held through +a broker, bank or other nominee, you must bring proof of your ownership of the shares. This proof could consist of, for +example, a bank or brokerage firm account statement or a letter from your bank or broker confirming your ownership as of +the Record Date. You may also send proof of ownership to us at Matador Resources Company, Attention: Corporate +Secretary, 5400 LBJ Freeway, Suite 1500 , Dallas, Texas 75240 , or email: investors@matadorresources.com, before the +Annual Meeting, and we will send you an admission card. +2025 Proxy Statement | Matador Resources Company 11 +If I vote via telephone or the Internet or by mailing my proxy card, may I still attend the Annual +Meeting? +Yes. +What if I want to change my vote? +You may revoke your proxy before it is voted by submitting a new proxy with a later date (by mail, telephone or the +Internet), by voting at the Annual Meeting or by filing a written revocation with our Corporate Secretary. Your attendance at +the Annual Meeting will not automatically revoke your proxy. +What constitutes a quorum? +A majority of the shares entitled to vote, present in person or represented by proxy, constitutes a quorum. If you vote by +telephone or Internet or by returning your proxy card, you will be considered part of the quorum. The Inspector of Election +will treat shares represented by a properly executed proxy as present at the meeting. Abstentions and broker non-votes +will be counted for purposes of determining a quorum. A broker non-vote occurs when a nominee holding shares for a +beneficial owner submits a proxy but does not vote on a particular proposal because the nominee does not have +discretionary voting power for that item and has not received instructions from the beneficial owner. +How many votes will be required to approve a proposal? +The affirmative vote of a majority of the votes cast by holders of shares of Common Stock present in person or +represented by proxy and entitled to vote on the election of directors at the Annual Meeting is required for the election of +each nominee for director. With respect to the election of directors in an uncontested election, such as that being held at +the Annual Meeting, “majority of the votes cast” means the number of votes cast “for” such nominee exceeds the number +of votes cast “against” such nominee. +With respect to all other matters, the affirmative vote of the holders of a majority of the shares of Common Stock, present +in person or represented by proxy and entitled to vote at the Annual Meeting, is required. +Shares cannot be voted at the Annual Meeting unless the holder of record is present in person or represented by proxy. +Can brokers who hold shares in street name vote those shares if they have received no +instructions? +Under the rules of the New York Stock Exchange (“NYSE”), brokers may not vote the shares held by them in street name +for their customers and for which they have not received instructions, except with respect to a routine matter. The only +matter to be voted on at the Annual Meeting that is considered routine for these purposes is the ratification of the +appointment of our independent registered public accounting firm. Accordingly, brokers may not vote your shares on any +other matter if you have not given specific instructions as to how to vote. Please be sure to give specific voting instructions +to your broker so that your vote will be counted. +How will you treat abstentions and broker non-votes? +Shares of a shareholder who abstains from voting on any or all proposals will be included for the purpose of determining +the presence of a quorum. Other than with respect to the election of directors, an abstention will effectively count as a vote +cast against the remaining proposals. Broker non-votes on any matter, as to which the broker has indicated on the proxy +that it does not have discretionary authority to vote, will be treated as shares not entitled to vote with respect to that +matter. However, such shares will be considered present and entitled to vote for quorum purposes so long as they are +entitled to vote on at least one other matter. +12 Matador Resources Company | 2025 Proxy Statement +Who pays the solicitation expenses? +We will bear the cost of solicitation of proxies. Proxies may be solicited by mail or personally by our directors, officers or +employees, none of whom will receive additional compensation for such solicitation. Those holding shares of Common +Stock of record for the benefit of others, or nominee holders, are being asked to distribute proxy soliciting materials to, and +request voting instructions from, the beneficial owners of such shares. We will reimburse nominee holders for their +reasonable out-of-pocket expenses. +Where can I find the voting results of the Annual Meeting? +We will announce preliminary voting results at the Annual Meeting, and we will publish final results in a Current Report on +Form 8-K that will be filed with the SEC within four business days of the Annual Meeting. You may obtain a copy of this +and other reports free of charge at www.matadorresources.com, by contacting our Investor Relations Department at (972) +371-5200 or investors@matadorresources.com or by accessing the SEC’s website at www.sec.gov. +Will the Company’s independent registered public accounting firm be available at the Annual +Meeting to respond to questions? +Yes. The Audit Committee of the Board has appointed KPMG LLP to serve as our independent registered public +accounting firm for the year ending December 31, 2025 . Representatives of KPMG LLP will be present at the Annual +Meeting. They will have an opportunity to make a statement, if they desire to do so, and will be available to respond to +appropriate questions . +Where can I contact the Company? +Our mailing address is: +Matador Resources Company +Attention: Investor Relations +5400 LBJ Freeway, Suite 1500 +Dallas, Texas 75240 +Our telephone number is (972) 371-5200 . +2025 Proxy Statement | Matador Resources Company 13 +PROPOSAL 1 +PROPOSAL 1 | ELECTION OF DIRECTORS +The Board currently consists of 11 members and is divided into three classes of directors, designated Class I, Class II and +Class III, with the term of office of each director ending on the date of the third annual meeting following the annual +meeting at which such director’s class was elected. The number of directors in each class will be as nearly equal as +possible. The Class I directors are William M. Byerley, Monika U. Ehrman and Kenneth L. Stewart, the terms of whom will +each continue until the 2027 Annual Meeting of Shareholders or his or her earlier death, retirement, resignation or +removal. The Class II directors are Shelley F. Appel, R. Gaines Baty, Paul W. Harvey, James M. Howard and Susan M. +Ward. Each of Mmes. Appel and Ward and Messrs. Baty and Harvey is a Class II director nominee at the 2025 Annual +Meeting, in each case, to hold office until the 2028 Annual Meeting of Shareholders or his or her earlier death, retirement, +resignation or removal. Mr. Howard’s term will expire at the 2025 Annual Meeting. The Class III directors are Joseph Wm. +Foran, Reynald A. Baribault and Timothy E. Parker, the terms of whom will each continue until the 2026 Annual Meeting of +Shareholders or his earlier death, retirement, resignation or removal. +The Board believes that each of the director nominees possesses the qualifications described below in “Corporate +Governance—Board Committees—Nominating Committee.” That is, the Board believes that each nominee possesses: +• deep experience at the policy making level in business, government or education; +• the availability and willingness to devote adequate time to Board duties; +• the character, judgment and ability to make independent analytical, probing and other inquiries; +• a willingness to exercise independent judgment along with a willingness to listen and learn from others; +• business knowledge and experience that provides a balance with the other directors; +• financial independence; and +• excellent past performance on the Board. +Director Skills & Experience +Foran +Parker +Baty +Appel +Baribault +Byerley +Ehrman +Harvey +Howard +Stewart +Ward +Director Skills & Experience +Senior Leadership +• +• +• +• +• +• +• +• +• +• +Energy Industry +• +• +• +• +• +• +• +• +• +Finance & Accounting +• +• +• +• +• +• +• +• +• +Human Capital +Management +• +• +• +• +• +• +• +• +• +Legal, Regulatory & +Environmental +• +• +• +• +• +• +• +• +Risk Assessment & +Management +• +• +• +• +• +• +• +• +• +• +• +Strategic Planning +• +• +• +• +• +• +• +• +• +• +Corporate Governance & +Ethics +• +• +• +• +• +• +• +• +• +• +• +Capital Markets & M&A +• +• +• +• +• +• +• +• +• +Demographic Background +Board Tenure +22 +7 +9 +2 +11 +9 +6 +0 +4 +8 +1 +Age 1 +72 +50 +74 +35 +61 +71 +47 +66 +74 +71 +66 +(1) As of April 16, 2025 . +14 Matador Resources Company | 2025 Proxy Statement +PROPOSAL 1 +Nominees +The information provided below is biographical information about each of the nominees, as well as a description of the +experience, qualifications, attributes or skills that led the Board to conclude that the individual should be nominated for +election as a director of the Company. No director currently holds any other directorships with public companies. +M S. S HELLEY F. A PPEL +Former Senior Investors Relations Officer and Mergers & +Acquisitions Manager, Royal Dutch Shell PLC +Class II +Biographical Information: +Ms. Appel was appointed to the Board in 2023 after serving as a Special Advisor +to the Board since October 2022. Since January 2021, Ms. Appel has also served +as Matador’s ESG Coordinator. As ESG Coordinator, Ms. Appel is the primary +author of the Company’s annual sustainability report. Following her graduation +from business school at the University of Chicago, Ms. Appel joined Royal Dutch +Shell PLC in August 2017 in the Mergers & Acquisitions group, where she served +as a manager with responsibility for financial analysis—including valuation, +structuring, negotiation and due diligence—for over $18 billion of acquisition and +divestment opportunities. In December 2019, Ms. Appel was promoted to Senior +Investor Relations Officer. In this role, Ms. Appel had responsibility for Shell’s +global Upstream business narrative. She also served as an authorized +spokesperson for Shell at investor meetings and conferences and managed +relationships with North America based investors and research analysts. Following +graduation from Yale and prior to attending the University of Chicago, Ms. Appel +began her career at the parent company of the New York Stock Exchange, NYSE +Euronext, as a business analyst in its Corporate Strategy group. She participated +in the evaluation and implementation of its $11 billion merger with the +Intercontinental Exchange Group and continued in the Corporate Strategy group +of the combined company until June 2015. Ms. Appel holds a Bachelor of Arts +degree, with honors, in Cognitive Science from Yale University and a Master of +Business Administration degree from the Booth School of Business (University of +Chicago). Ms. Appel served as Co-Chair of the Energy Group while attending the +University of Chicago. +Director +Director since: 2023 +Independent: No +Age: 35 +Committees: +• Capital Markets and Finance +• Marketing and Midstream +• Prospect +Qualifications: +Ms. Appel’s extensive knowledge and experience with the Company’s ESG +initiatives and investor relations experience provides the Board valuable insight +and leadership on these matters. +2025 Proxy Statement | Matador Resources Company 15 +M R . R. G AINES B ATY +CEO, R. Gaines Baty Associates, Inc. +Class II +Biographical Information: +Mr. Baty was appointed to the Board in 2016. He serves as deputy lead +independent director and is chair of the Board’s Strategic Planning and +Compensation Committee. Mr. Baty is CEO of R. Gaines Baty Associates, Inc., a +leading executive search firm he founded in 1982 after working with the IBM +Corporation. With over 30 years of experience, Mr. Baty has provided companies +across the country and in a variety of industries with executive search and +advisory services. Mr. Baty has served as a two-term President of the Society of +Executive Recruiting Consultants and a two-term President of the Independent +Recruiter Group. Mr. Baty is also a published author. Mr. Baty received a Bachelor +of Business Administration degree from Texas Tech University, where he was a +football team letterman, captain and, later, graduate assistant coach. +Deputy Lead Independent +Director since: 2016 +Qualifications: +Independent: Yes +Mr. Baty’s experience and expertise in executive leadership and development +provide our Board with an important and unique perspective on these matters, and +Mr. Baty assists the Board and the Company with recruitment, board +administration, compensation and growth strategies. +Age: 74 +Committees: +• Strategic Planning and +Compensation (Chair) +• Executive +• Environmental, Social and +Corporate Governance +16 Matador Resources Company | 2025 Proxy Statement +M R . P AUL W. H ARVEY +Former Chief Investment Officer, Vaquero Private Wealth +Class II +Biographical Information: +Mr. Harvey was appointed to the Board in 2025. Mr. Harvey is a Private Wealth +Advisor and former Chief Investment Officer of Vaquero Private Wealth. Mr. +Harvey has more than four decades of investment experience as both a portfolio +manager and private wealth advisor with extensive experience in investment +selection, asset allocation and portfolio construction. Before joining Vaquero +Private Wealth, Mr. Harvey was a Managing Director of BlackRock, Inc., leading a +large team of investment professionals responsible for high-net-worth individuals +and institutions in twenty-nine states. In this capacity, he supported the design of +investment solutions that included multi-asset strategies combining active and +passive portfolios along with alternative investments. Previously, he served as +Regional Director and Portfolio Manager with Merrill Lynch Asset Management, +where he developed customized portfolios for individual clients and oversaw a +regional team of portfolio managers. Mr. Harvey earned his Master of Business +Administration degree with a concentration in Finance from Southern Methodist +University’s Cox School of Business and his Bachelor of Business Administration +degree in Finance from the University of Texas at Austin. He holds the Chartered +Financial Analyst designation and has earned the Certified Private Wealth Advisor +certification. +Director +Director since: 2025 +Independent: Yes +Age: 66 +Committees: +• Audit +• Capital Markets and Finance +• Marketing and Midstream +Qualifications: +Mr. Harvey's experience as an investment professional provides the Company +with valuable insight, particularly with respect to investor relations and capital +markets. +2025 Proxy Statement | Matador Resources Company 17 +M S . S USAN M. W ARD +Former Head, M&A and Commercial Finance, Shell Oil +Company +Class II +Biographical Information: +Ms. Ward was appointed to the Board in 2024 and is co-chair of the Board's +Marketing and Midstream Committee. Ms. Ward is a former 12-year Senior +Executive of Shell Oil Company (“Shell”) with over 20 years of service at +retirement in 2019. Her senior roles at Shell included Head, M&A and Commercial +Finance for all of Shell’s businesses in the Americas; Vice President, Chief +Financial Officer and Board member of Shell Midstream Partners, which she +helped take public for Shell in 2014; and Vice President, Upstream Commercial +Finance, Shell International Exploration & Production B.V. while based in The +Hague for Royal Dutch Shell. She also served as a Board member of Shell’s +deepwater drillship joint venture with Noble Corporation. Ms. Ward has been an +independent, non-executive Board member of Crescent Midstream (“Crescent”) +since July 2023. Crescent is an independent energy company providing offshore +and onshore crude oil services in the Gulf of Mexico and Louisiana. She also +served as an Independent Director of publicly traded TransAlta Renewables +headquartered in Calgary, Canada from May 2021 until October 2023 when it was +purchased by its parent, TransAlta Corporation. Prior to joining Shell in 1998, Ms. +Ward worked as an investment banker in the energy sector for 11 years, including +as a Managing Director in the Natural Resources and Energy investment banking +group of UBS Securities. She began her career working for Exxon as a refining +process engineer and subsequently worked in Mobil’s Finance organization at its +New York City headquarters. Ms. Ward earned a Bachelor of Chemical +Engineering degree from Villanova University with honors and a Master of +Business Administration in Finance with distinction from the Wharton School of the +University of Pennsylvania. She has served on Villanova’s Board of Trustees since +2018. She has been a member of the National Association of Corporate Directors +since 2016. +Director +Director since: 2024 +Independent: Yes +Age: 66 +Committees: +• Audit +• Environmental, Social and +Corporate Governance +• Marketing and Midstream +(Co-Chair) +• Operations and Engineering +• Prospect +Qualifications: +Ms. Ward’s extensive experience as a senior executive in the energy industry and +midstream experience in particular provide our Board with industry, management +and leadership insight. +Vote Required +The affirmative vote of a majority of the votes cast by holders of shares present in person or represented by proxy and +entitled to vote on the election of directors at the Annual Meeting is required for the election of each nominee for director. +With respect to the election of directors in an uncontested election, such as that being held at the Annual Meeting, +“majority of the votes cast” means the number of votes cast “for” such nominee exceeds the number of votes cast +“against” such nominee. If you hold your shares through a broker and you do not instruct the broker how to vote, your +broker will not have the authority to vote your shares. Abstentions and broker non-votes will each be counted as present +for purposes of determining the presence of a quorum. +The Board of Directors recommends that you vote FOR each of the nominees. +18 Matador Resources Company | 2025 Proxy Statement +PROPOSAL 1 +Directors Continuing in Office +Biographical information for our directors who are continuing in office is provided below. +M R . J OSEPH W M . F ORAN +Chairman and CEO, Matador Resources Company +Class III +Biographical Information: +Mr. Foran founded Matador Resources Company in July 2003 and since our +founding has served as Chairman of the Board and Chief Executive Officer and, +through March 31, 2022, Secretary. He is also chair of the Board’s Executive +Committee. Mr. Foran began his career as an oil and natural gas independent in +1983 when he and his wife, Nancy, founded Foran Oil Company with $270,000 in +contributed capital from 17 of his closest friends and neighbors. Foran Oil +Company was later contributed into Matador Petroleum Corporation upon its +formation by Mr. Foran in 1988, and Mr. Foran served as Chairman and Chief +Executive Officer of that company from inception until the time of its sale to Tom +Brown, Inc. in June 2003 for an enterprise value of $388 million in an all-cash +transaction on a Friday. On the following Monday, Mr. Foran founded Matador +Resources Company (Matador II). Today, Matador is one of the top 20 public +exploration and production companies in the country by market capitalization and +one of the top 10 oil and natural gas producers in New Mexico. Mr. Foran is +originally from Amarillo, Texas, where his family owned a pipeline construction +business. From 1980 to 1983, he was Vice President and General Counsel of J. +Cleo Thompson and James Cleo Thompson, Jr., Oil Producers, a large +independent producer. Prior to that time, he was a briefing attorney to Chief +Justice Joe R. Greenhill of the Supreme Court of Texas. Mr. Foran graduated with +a Bachelor of Science degree in Accounting from the University of Kentucky with +highest honors and a law degree from the Southern Methodist University Dedman +School of Law, where he was a Hatton W. Sumners scholar and the Leading +Articles Editor on the Southwestern Law Review. He is currently active as a +member of various industry and civic organizations, including his church and +various youth activities. In 2002, Mr. Foran was honored as the Ernst & Young +“Entrepreneur of the Year” for the Southwest Region. In 2015, he was inducted +into the University of Kentucky Gatton College of Business and Economics Hall of +Fame. In 2019, Mr. Foran received the SMU Dedman School of Law Distinguished +Alumni Award for Corporate Service and was named D CEO Magazine’s 2019 +Upstream CEO of the Year. In 2020, he was inducted into the Philosophical +Society of Texas. He was also named to Institutional Investors’ All-American +Executive Team as one of the top chief executive officers in the Small Cap Energy +Division in 2021. In 2024, at D CEO Magazine’s Energy Awards ceremony, Mr. +Foran was awarded the prestigious Legacy Award for lifetime achievement. +Chairman of the Board +Director since: 2003 +Independent: No +Age: 72 +Committees: +• Executive (Chair) +• Capital Markets and Finance +• Operations and Engineering +• Prospect +Qualifications: +As the founder, Chairman of the Board and Chief Executive Officer of Matador +Resources Company, Mr. Foran provides Board leadership, industry experience +and long relationships with many of our shareholders. +2025 Proxy Statement | Matador Resources Company 19 +M R . R EYNALD A. B ARIBAULT +President and CEO, IPR Energy Partners LLC +Class III +Biographical Information: +Mr. Baribault was elected to the Board in 2014 and is chair of the Board’s +Operations and Engineering Committee and Prospect Committee. He served as +lead independent director of the Board from 2016 to 2019. In 2007, he co-founded +North Plains Energy, LLC, which operated in the North Dakota Williston Basin, and +served as its Vice President until the successful sale of its assets in 2012. In 2014, +Mr. Baribault helped co-found NP Resources, LLC, which also operated in the +North Dakota Williston Basin, and served as its Executive Vice President / +Engineering, helping oversee the sale of its assets in late 2021. In addition, he co- +founded and serves as President and Chief Executive Officer of IPR Energy +Partners, LLC, a Plano, Texas-based oil and natural gas production operator with +current operations in the Fort Worth Basin. As the President and CEO of IPR +Energy Partners, LLC, Mr. Baribault is tasked with specific risk management +responsibilities. Prior to co-founding North Plains Energy, NP Resources and IPR +Energy Partners, Mr. Baribault served as Vice President, Supervisor and +Petroleum Engineering Consultant with Netherland, Sewell & Associates, Inc. in +their Dallas office from 1990 to 2002. Mr. Baribault began his professional career +as a reservoir engineer with Exxon Company in 1985 in the New Orleans Eastern +Division Office. Mr. Baribault received his Bachelor of Science degree in +Petroleum Engineering from Louisiana State University in 1985 and is a Licensed +Professional Engineer in the State of Texas. +Director +Director since: 2014 +Independent: Yes +Age: 61 +Committees: +• Operations and Engineering +(Chair) +• Prospect (Chair) +• Audit +• Executive +• Nominating +Qualifications: +• Strategic Planning and +Compensation +Mr. Baribault provides valuable insight to our Board on our drilling, completions, +production and reservoir engineering operations, as well as growth strategies, +midstream operations and administration. +20 Matador Resources Company | 2025 Proxy Statement +M R . W ILLIAM M. B YERLEY +Retired Partner, PricewaterhouseCoopers LLP (PwC) +Class I +Biographical Information: +Mr. Byerley was appointed to the Board in 2016 and is chair of the Board’s Audit +Committee. Mr. Byerley retired from PricewaterhouseCoopers LLP (PwC) in 2014. +From 1988 through 2014, Mr. Byerley was a Partner with PwC, serving as an +Assurance Partner on various audit engagements primarily for energy sector +clients. From 1988 through 1990, Mr. Byerley served in the PwC National Office +Accounting Services Group. Mr. Byerley received a Bachelor of Business +Administration degree in 1975 and a Master of Business Administration degree in +1976, both from Southern Methodist University. He is a licensed Certified Public +Accountant. +Director +Director since: 2016 +Qualifications: +Independent: Yes +Mr. Byerley’s extensive experience in public accounting and longtime service to +energy sector clients of PwC provide the Board with invaluable financial and +accounting expertise, particularly for oil and natural gas companies, as well as +strong accounting and financial oversight and risk management expertise. +Age: 71 +Committees: +• Audit (Chair) +• Environmental, Social and +Corporate Governance +• Marketing and Midstream +• Executive ( Ex Officio ) +2025 Proxy Statement | Matador Resources Company 21 +M S. M ONIKA U. E HRMAN +Professor of Law, Southern Methodist University Dedman +School of Law +Class I +Biographical Information: +Professor Ehrman was appointed to the Board in 2019 and is chair of the Board's +Environmental, Social and Corporate Governance Committee. She is Professor of +Law, Southern Methodist University Dedman School of Law, and a Professor of +Engineering (by courtesy), Southern Methodist University Lyle School of +Engineering. Prior to joining SMU, in 2023, she was Associate Professor of Law, +University of North Texas at Dallas College of Law and a tenured Professor of Law +at the University of Oklahoma College of Law, where she led the Oil & Gas, +Natural Resources, and Energy (ONE) Program and served as the Faculty +Director of the ONE Center. While at OU, she taught in the J.D. and graduate +programs at the College of Law and in the Executive Energy Management +Program at the Price College of Business. Professor Ehrman joined the University +of Oklahoma College of Law in 2013 as Associate Professor of Law. Prior to +teaching, she served as in-house legal counsel for two oil and natural gas +companies from 2008 to 2012 and as an associate oil and natural gas attorney at +an international law firm from 2005 to 2008. Before law school, Professor Ehrman +worked as a petroleum engineer in the upstream, midstream and pipeline sectors +of the energy industry. In addition to serving on various oil and natural gas law +committees, she also served as an Editor of the Oil and Gas Reporter for the +Institute for Energy Law. Professor Ehrman is currently Chair of the Association of +American Law Schools' Section on Natural Resources and Energy, a Trustee of +The Foundation for Natural Resources and Energy Law and she is on the Editorial +Board of the Journal of World Energy Law & Business (published by Oxford +University Press). Professor Ehrman received her Bachelor of Science degree in +Petroleum Engineering from the University of Alberta; J.D. from Southern +Methodist University Dedman School of Law; and Master of Laws degree from +Yale Law School. +Director +Director since: 2019 +Independent: Yes +Age: 47 +Committees: +• Environmental, Social and +Corporate Governance +(Chair) +• Marketing and Midstream +• Executive +• Nominating +• Operations and Engineering +• Prospect +• Strategic Planning and +Compensation +Qualifications: +Professor Ehrman provides valuable insight to our Board on our engineering and +midstream operations as well as legal and governance matters. +22 Matador Resources Company | 2025 Proxy Statement +M R . T IMOTHY E. P ARKER +Former Portfolio Manager and Analyst—Natural Resources, +T. Rowe Price & Associates +Class III +Biographical Information: +Mr. Parker was appointed to the Board in 2018, serves as lead independent +director and is chair of the Board’s Capital Markets and Finance Committee. Mr. +Parker currently serves as a contractor in charge of research for Brightworks +Wealth Management, LLC. Mr. Parker retired in 2017 as Portfolio Manager and +Analyst—Natural Resources for T. Rowe Price & Associates. Mr. Parker joined T. +Rowe Price in 2001 as an equity analyst before becoming a portfolio manager in +2010. He managed the New Era fund from 2010 to 2013 and managed the energy +and natural resources portions of T. Rowe Price’s Small Cap Value, Small Cap +Stock and New Horizons funds from 2013 to 2017. Prior to joining T. Rowe Price, +Mr. Parker was an investment banking analyst at Robert W. Baird & Co., Inc. Mr. +Parker holds a Bachelor of Science degree in Commerce from the University of +Virginia and a Master of Business Administration degree from the Darden School +of Graduate Business (University of Virginia). +Lead Independent Director +Director since: 2018 +Independent: Yes +Age: 50 +Committees: +Qualifications: +• Capital Markets and Finance +(Chair) +Mr. Parker’s experience with a large institutional shareholder and his extensive +familiarity with the oil and natural gas industry and capital markets provide the +Company with valuable insight. +• Audit +• Environmental, Social and +Corporate Governance +• Executive +• Nominating +• Prospect +• Strategic Planning and +Compensation +2025 Proxy Statement | Matador Resources Company 23 +M R . K ENNETH L. S TEWART +Retired EVP, Compliance and Legal Affairs, Children’s Health +System of Texas; Retired Partner, Chair—United States, +Norton Rose Fulbright US LLP +Class I +Biographical Information: +Mr. Stewart was appointed to the Board in 2017 and is chair of the Board's +Nominating Committee and Shareholder Advisory Committee for Board +Nominations. Mr. Stewart was most recently employed as Executive Vice +President, Compliance and Legal Affairs, for Children’s Health System of Texas +from January 1, 2019 until he retired on January 2, 2021. At that time, Children’s +Health System of Texas and its affiliates constituted one of the ten largest +pediatric hospital systems in the United States. Previously, effective December 31, +2018, Mr. Stewart retired from Norton Rose Fulbright US LLP, the United States +operations of Norton Rose Fulbright, an international legal practice, which then +had over 3,700 legal professionals in over 50 cities worldwide. At his retirement, +Mr. Stewart was a Partner with Norton Rose Fulbright and held the position of +Chair—United States. Mr. Stewart began his legal career with Fulbright & Jaworski +LLP, the predecessor to Norton Rose Fulbright US LLP, and previously held +positions of Global Chair of the international organization, Managing Partner of the +United States region and Partner-in-Charge of the Dallas office. Prior to entering +into full-time management for his firm in 2012, he engaged in a domestic and +international transactional legal practice, focusing principally on merger, +acquisition, financing and joint venture activities for both public and privately-held +entities. Mr. Stewart has extensive experience representing and advising +companies and their executive officers and boards of directors engaged in oil and +natural gas exploration and midstream activities. Since his retirement from Norton +Rose Fulbright, Mr. Stewart has acted, and from time to time continues to act, on a +limited basis as an independent contractor senior business consultant to family +offices for which he provided services during his legal career. Mr. Stewart +graduated from the University of Arkansas School of Business in 1976 with a +Bachelor of Science in Business Administration degree in Accounting and was +licensed as a Certified Public Accountant in Texas in 1981 (certificate now on non- +practice status). He graduated with honors from Vanderbilt Law School in 1979 +and was a member of the Order of the Coif. Mr. Stewart has been active in +numerous civic and professional organizations in the Dallas area in the past, +including among others, the Dallas Regional Chamber, The Center for American +and International Law and the Dallas Citizens Council. +Director +Director since: 2017 +Independent: Yes +Age: 71 +Committees: +• Nominating (Chair) +• Capital Markets and Finance +• Environmental, Social and +Corporate Governance +• Executive +• Strategic Planning and +Compensation +Qualifications: +Mr. Stewart’s extensive experience representing public companies, and +particularly oil and natural gas companies, along with his years of management +experience, provide our Board with important legal, corporate governance and +leadership insight. +24 Matador Resources Company | 2025 Proxy Statement +CORPORATE GOVERNANCE +CORPORATE GOVERNANCE +The business affairs of Matador are managed under the direction of the Board in accordance with the Texas Business +Organizations Code, the Company’s Amended and Restated Certificate of Formation (the “Certificate of Formation”) and +its Amended and Restated Bylaws (the “Bylaws”), each as amended to date. The Board has adopted Corporate +Governance Guidelines, which are reviewed annually by the Environmental, Social and Corporate Governance Committee +of the Board. The Company has a Code of Ethics and Business Conduct for Officers, Directors and Employees (“Code of +Ethics”), which is applicable to all officers, directors and employees of the Company. The Company intends to post any +amendments to, and may post any waivers of, its Code of Ethics on the Company’s website to the extent applicable to an +executive officer or a director of the Company. The Corporate Governance Guidelines and the Code of Ethics are +available on the Company’s website at www.matadorresources.com under the heading “Investor Relations—Corporate +Governance.” +The Board holds regular and special meetings and spends such time on the affairs of the Company as its duties require. +During 2024 , the Board held nine meetings. The Board also meets regularly in non-management executive sessions in +accordance with NYSE regulations. The Corporate Governance Guidelines provide that one of the Company’s +independent directors should serve as lead independent director at any time when the Chief Executive Officer serves as +the Chairman of the Board. The lead independent director presides over executive sessions of the non-management +directors and the independent members of the Board (the “Independent Board”), serves as a liaison between the +Chairman of the Board and the independent directors and performs such additional duties as the Board may otherwise +determine and delegate. Because Mr. Foran serves as Chairman of the Board and Chief Executive Officer, our +independent directors have appointed Mr. Parker to serve as lead independent director and Mr. Baty to serve as deputy +lead independent director. In 2024 , all incumbent directors of the Company attended at least 75% of the meetings of the +Board and the committees on which they served. It is our policy that each of our directors is expected to attend annual +meetings of shareholders, except if unusual circumstances make attendance impractical. All of our directors attended the +2024 Annual Meeting. +Independence of Directors +The Board makes all determinations with respect to director independence in accordance with the NYSE listing standards +and the rules and regulations promulgated by the SEC. The actual determination of whether a director is independent is +made by the Board on a case-by-case basis. +In connection with its preparation for the Annual Meeting, the Board undertook its annual review of director independence +and considered transactions and relationships between each director or any member of his or her immediate family and +the Company and its subsidiaries and affiliates. In making its determination, the Board applied the NYSE listing standards +and SEC rules and regulations. +The Board reviewed the independence of our directors and considered whether any director has a material relationship +with us that could compromise his or her ability to exercise independent judgment in carrying out his or her +responsibilities. After this review, our Board determined that nine of our 11 current directors are “independent directors” as +defined under the rules of the SEC and the NYSE: Mmes. Ehrman and Ward and Messrs. Baribault, Baty, Byerley, Harvey, +Howard, Parker and Stewart. No member of our Board other than Ms. Appel and Mr. Foran has a family relationship with +any executive officer or other members of our Board. +2025 Proxy Statement | Matador Resources Company 25 +Majority Vote in Director Elections +On December 21, 2016, the Board amended the Bylaws to implement a majority voting standard in uncontested director +elections. Pursuant to the Bylaws, in an election of directors at a meeting of shareholders at which a quorum is present, +(i) if the number of nominees exceeds the number of directors to be elected (a “contested election”), directors shall be +elected by a plurality of the votes cast by the holders of shares present in person or represented by proxy and entitled to +vote on the election of directors at such meeting and (ii) in an election of directors that is not a contested election (an +“uncontested election”), such as that being held at the Annual Meeting, directors shall be elected by a majority of the votes +cast by the holders of shares present in person or represented by proxy and entitled to vote on the election of directors at +such meeting. For purposes of the Bylaws, in an uncontested election, a “majority of the votes cast” means that the +number of shares voted “for” a director must exceed the number of votes cast “against” that director. Prior to the +amendment of the Bylaws, directors were elected by a plurality of the votes cast, whether or not the election was a +contested election. +In connection with the amendment to the Bylaws, the Board approved and adopted an amendment to the Company’s +Corporate Governance Guidelines to implement a resignation policy for directors who fail to receive the required number +of votes in an uncontested election in accordance with the Bylaws. Pursuant to the Corporate Governance Guidelines, as +amended, in an uncontested election, any nominee for director who receives a greater number of votes “against” his or +her election than votes “for” such election (a “majority against vote”) shall promptly tender his or her resignation following +certification of the shareholder vote. +The Nominating Committee shall promptly consider the resignation offer and a range of possible responses based on the +circumstances that led to the majority against vote, if known, and make a recommendation to the Board concerning +whether to accept or reject such resignation. The Board shall act on the Nominating Committee’s recommendation and +publicly disclose its decision with respect to such resignation offer within 90 days following certification of the shareholder +vote. The resignation, if accepted by the Board, will be effective at the time specified by the Board when it determines to +accept the resignation, which effective time may be deferred until a replacement director is identified and appointed to the +Board. +Board Leadership Structure +Mr. Foran serves as Chairman of the Board and Chief Executive Officer of the Company. As stated in the Corporate +Governance Guidelines, the Board does not believe that the offices of Chairman of the Board and Chief Executive Officer +must be separate. The members of the Board possess experience and unique knowledge of the challenges and +opportunities the Company faces. They are, therefore, in the best position to evaluate the current and future needs of the +Company and to judge how the capabilities of the directors and senior managers can be most effectively organized to +meet those needs. Given Mr. Foran’s deep knowledge of the Company and experience in leading it, the Board currently +believes that the most effective leadership structure for the Company is to have Mr. Foran serve as Chairman of the Board +and Chief Executive Officer. +Nine of our 11 directors are independent under the rules of the SEC and the NYSE. After considering the +recommendations of our Strategic Planning and Compensation Committee, the independent directors determine Mr. +Foran’s compensation. Further, the Company has five standing committees, a lead independent director (Mr. Parker) and +a deputy lead independent director (Mr. Baty). The Board believes that each of these measures counterbalances any risk +that may exist in having Mr. Foran serve as Chairman of the Board and Chief Executive Officer. For these reasons, the +Board believes that this leadership structure is effective for the Company. +26 Matador Resources Company | 2025 Proxy Statement +As lead independent director, Mr. Parker has the following roles and responsibilities: +• chairs the executive sessions of the non-management and independent directors; +• leads the independent directors in the evaluation of the Chief Executive Officer; +• facilitates communication among the independent directors; and +• acts as a liaison between the independent directors and the Chief Executive Officer. +Mr. Parker, as lead independent director, may also perform such other duties as the Board or the Environmental, Social +and Corporate Governance Committee from time to time may assign, which may include, but are not limited to, the +following: +• help develop Board agendas and ensure critical issues are included; +• determine quality, quantity and timeliness of information from management; +• make recommendations about retaining consultants or advisors for the Board; +• interview Board candidates; +• oversee Board and director evaluations; and +• help improve communications and processes by and between management and the Board and the Chief Executive +Officer. +Mr. Baty, as deputy lead independent director, may also carry out the above duties in the absence of or at the direction of +Mr. Parker, as lead independent director. +2025 Proxy Statement | Matador Resources Company 27 +Board Committees +The standing committees of the Board are the Audit Committee, Environmental, Social and Corporate Governance +Committee, Executive Committee, Nominating Committee and Strategic Planning and Compensation Committee. The +Board has also established the following advisory committees: Capital Markets and Finance Committee, Marketing and +Midstream Committee, Operations and Engineering Committee and Prospect Committee. Each of the standing +committees is governed by a charter, and a copy of the charters of each of these committees is available on the +Company’s website at www.matadorresources.com under the heading “Investor Relations—Corporate Governance.” +Director membership of all of our standing and advisory committees is identified below, as of April 16, 2025 . Mr. Howard's +term as a director, and as a member of the committees noted below, will expire at the 2025 Annual Meeting. +Director +Audit +Environmental, +Social and +Corporate +Governance +Executive +Nominating +Strategic +Planning and +Compensation +Capital +Markets +and Finance +Marketing +and +Midstream +Operations +and +Engineering +Prospect +Joseph Wm. Foran +C +• +• +• +Shelley F. Appel +• +• +• +Reynald A. Baribault +• +• +• +• +C +C +R. Gaines Baty +• +• +C +William M. Byerley +C +• +• +• +Monika U. Ehrman +C +• +• +• +• +• +• +Paul W. Harvey +• +• +• +James M. Howard +• +• +• +C +Timothy E. Parker +• +• +• +• +• +C +• +Kenneth L. Stewart +• +• +C +• +• +Susan M. Ward +• +• +C +• +• +C +Committee Chair +• +Committee Member +Audit Committee +The Audit Committee assists the Board in monitoring: +• the integrity of our financial statements and disclosures; +• our compliance with legal and regulatory requirements; +• the qualifications and independence of our independent auditor; +• the performance of our internal audit function and our independent auditor; and +• our internal control systems. +In addition, the Audit Committee is charged with the (i) review of compliance with our Code of Ethics and (ii) oversight of +the Company’s guidelines and policies to govern the process by which risk assessment and risk management are +undertaken by management, including with respect to corporate governance, financial, accounting, operational, +environmental, health and safety, regulatory and cybersecurity risks. +As of April 16, 2025 , the Audit Committee consisted of Ms. Ward and Messrs. Baribault, Byerley, Harvey, Howard and +Parker, each of whom is independent under the rules of the SEC and the NYSE. Mr. Byerley is the chair of the Audit +Committee. SEC rules require a public company to disclose whether or not its audit committee has an “audit committee +financial expert” as defined by applicable SEC rules and regulations. Our Board has determined that each of Ms. Ward +and Messrs. Byerley and Parker is an “audit committee financial expert.” Mr. Howard's term as a director, and as a +28 Matador Resources Company | 2025 Proxy Statement +member of the Audit Committee, will expire at the 2025 Annual Meeting. During 2024 , the Audit Committee met four +times . +Environmental, Social and Corporate Governance Committee +The Environmental, Social and Corporate Governance Committee is responsible for reviewing and evaluating our +Corporate Governance Guidelines and Code of Ethics and making recommendations for changes thereto to the Board, +assessing any other matters related to our corporate governance, unless the authority to conduct such assessment has +been retained by the Board or delegated to another committee, and overseeing the process for evaluation of the Board +and management. The Environmental, Social and Corporate Governance Committee (formerly the Corporate Governance +Committee), in conjunction with the Company’s Chief Executive Officer, also oversees and makes recommendations to +the Board regarding ESG-related matters relevant to the Company’s operations. +As of April 16, 2025 , the Environmental, Social and Corporate Governance Committee consisted of Mmes. Ehrman and +Ward and Messrs. Baty, Byerley, Howard, Parker and Stewart, each of whom is independent under the rules of the SEC +and the NYSE. Ms. Ehrman is the chair of the Environmental, Social and Corporate Governance Committee. Mr. Howard's +term as a director, and as a member of the Environmental, Social and Corporate Governance Committee, will expire at the +2025 Annual Meeting. During 2024 , the Environmental, Social and Corporate Governance Committee met two times. +Executive Committee +The Executive Committee has authority to discharge all the responsibilities of the Board in the management of the +business and affairs of the Company, except where action of the full Board is required by statute or by our Certificate of +Formation or Bylaws, each as amended to date. +As of April 16, 2025 , the Executive Committee consisted of Ms. Ehrman and Messrs. Foran, Baribault, Baty, Byerley ( ex +officio ), Parker and Stewart. Mr. Foran is the chair of the Executive Committee. During 2024 , the Executive Committee did +not meet. +Nominating Committee +The Nominating Committee has the following responsibilities: +• identifies and recommends to the Board individuals qualified to be nominated for election to the Board consistent with +criteria approved by the Board; and +• recommends to the Board the members and chair of each committee of the Board. +Pursuant to the Nominating Committee charter, no director may serve on the Nominating Committee if such director is +subject to re-election to the Board at the next annual meeting of shareholders. +As of April 16, 2025 , the Nominating Committee consisted of Ms. Ehrman and Messrs. Baribault, Parker and Stewart, +each of whom is independent under the rules of the SEC and the NYSE. Mr. Stewart is the chair of the Nominating +Committee. During 2024 , the Nominating Committee met five times. +The Board has also established a Shareholder Advisory Committee for Board Nominations (the “Advisory Committee”) +that is charged with receiving and considering possible nominees for election to the Board by shareholders. Pursuant to +the Advisory Committee charter, this committee is comprised of eight to 12 persons selected by the Nominating +Committee and consists of at least: +• two members of the Nominating Committee; +• two former members of or special advisors to the Board; +• two shareholders who beneficially own Common Stock having a market value of at least $1.0 million (such value to be +based on the market value of the Common Stock immediately prior to designation of such shareholders to the +Advisory Committee); and +2025 Proxy Statement | Matador Resources Company 29 +• two shareholders who have beneficially owned Common Stock continuously for at least the five years prior to such +shareholder’s designation to the Advisory Committee. +The current members of the Advisory Committee are Messrs. Stewart and Parker, Walter Fister, Julie Forrester Rogers, +Robert Garrett, Kevin Grevey, David Lancaster and George Yates. Mr. Stewart is the chair of the Advisory Committee. +During 2024 , the Advisory Committee met one time. +The Advisory Committee makes recommendations based on its conclusions to the Nominating Committee for its +consideration and review. +The Nominating Committee and the Advisory Committee consider individuals recommended by the Company’s +shareholders to serve on the Board in accordance with the advance notice provisions of the Bylaws and the applicable +rules and regulations of the SEC and the NYSE. In considering candidates submitted by shareholders, the Advisory +Committee and the Nominating Committee take into consideration the needs of the Board and the qualifications of the +candidate. To have a candidate considered by the Advisory Committee and the Nominating Committee, a shareholder +must submit the recommendation in writing and must include the following information: +• The name and address of the shareholder, evidence of the person’s ownership of Common Stock or derivatives, +including the number of shares owned, a description of all arrangements or understandings regarding the right to vote +shares of the Company, any short interest in any security of the Company, any rights to dividends that are separated +or separable from the underlying shares, any proportionate interest in shares or derivatives held by a general or +limited partnership whereby the shareholder is a general partner or beneficially owns an interest in the general +partner, any performance-related fees (other than an asset-based fee) that the shareholder is entitled to based on any +change in the value of the shares or derivatives, any other information relating to the shareholder that would be +required to be disclosed in connection with solicitations of proxies for the election of directors in a contested election +and a statement whether or not the shareholder will deliver a proxy to shareholders; and +• The name, age and business and residence addresses of the candidate, the candidate’s résumé or a listing of his or +her qualifications to be a director of the Company, the person’s consent to be a director if selected by the Nominating +Committee, nominated by the Board and elected by the shareholders and any other information that would be +required to be disclosed in solicitations of proxies for the election of directors. +The shareholder recommendation and information described above, and in more detail in our Bylaws, must be sent to the +Corporate Secretary at One Lincoln Centre , 5400 LBJ Freeway, Suite 1500 , Dallas, Texas 75240 and must be received by +the Corporate Secretary not fewer than 45 nor more than 75 days prior to the one year anniversary date of the date the +Company’s proxy statement was mailed in connection with the previous year’s annual meeting of shareholders. +The Nominating Committee believes that a potential director of the Company must demonstrate that such candidate has: +• relevant knowledge and a depth and diversity of background and experience at the policy-making level in business, +government or education; +• a balance of the business interest and experience of the incumbent or nominated directors; +• availability and willingness to devote adequate time to Board duties; +• any unfilled expertise needed on the Board or one of its committees; +• ability to make independent analytical, probing and other inquiries; +• personal qualities of leadership, character, judgment and a reputation in the community at large of integrity, trust, +respect, competence and adherence to the highest ethical standards; +• willingness to exercise independent judgment while remaining willing to listen and learn from the other directors and +the Company’s staff; and +30 Matador Resources Company | 2025 Proxy Statement +• financial independence to ensure such candidate will not be financially dependent on director compensation. +In the case of an incumbent director, the Nominating Committee will also consider such director’s past performance on the +Board. +The Nominating Committee or the Advisory Committee may identify potential nominees by asking, from time to time, +current directors and executive officers for their recommendation of persons meeting the criteria described above who +might be available to serve on the Board. The Nominating Committee or the Advisory Committee may also engage firms +that specialize in identifying director candidates. As described above, the Nominating Committee and Advisory Committee +will also consider candidates recommended by shareholders. +Once a person has been identified by the Nominating Committee or the Advisory Committee as a potential candidate, the +Nominating Committee or the Advisory Committee will make an initial determination regarding the need for additional +Board members to fill vacancies or expand the size of the Board. If the Nominating Committee or the Advisory Committee +determines that additional consideration is warranted, the Nominating Committee or the Advisory Committee will review +such information and conduct interviews as it deems necessary to fully evaluate each director candidate. In addition to the +qualifications of a candidate, the Nominating Committee or the Advisory Committee will consider such relevant factors as +it deems appropriate, including the current composition of the Board, the evaluations of other prospective nominees and +the need for any required expertise on the Board or one of its committees. Although the Nominating Committee does not +have a formal diversity policy, the Nominating Committee considers a number of factors to advance a diverse mix of +viewpoints, professional backgrounds, education, specialized skills and acumen, breadth of experience in oil and natural +gas exploration and production, midstream and marketing, executive leadership, accounting, finance or law and other +individual qualities and attributes that contribute to a variety of perspectives among the members of the Board. The +Nominating Committee does not discriminate based upon race, religion, gender, national origin, age, disability, citizenship +or any other legally protected status. The Nominating Committee’s evaluation process will not vary based on whether or +not a candidate is recommended by a shareholder. +Strategic Planning and Compensation Committee +The Strategic Planning and Compensation Committee (the “Compensation Committee”) has the following responsibilities: +• assists the Board and the Independent Board in the discharge of their fiduciary responsibilities relating to the fair and +competitive compensation of our executive officers; +• provides overall guidance with respect to the establishment, maintenance and administration of our compensation +programs, including stock and benefit plans; +• oversees and advises the Board and the Independent Board on the adoption of policies that govern our compensation +programs; +• recommends to the Board the strategic, tactical and performance goals of the Company, including those performance +and tactical goals that relate to performance-based compensation, including but not limited to goals for production, +reserves, cash flows and shareholder value; +• in conjunction with the Company’s CEO, oversees management succession planning; and +• produces and approves the annual Compensation Committee Report on executive compensation for inclusion in the +Company’s Annual Report on Form 10-K and/or annual proxy statement in accordance with applicable rules and +regulations of the SEC and the NYSE. +The Compensation Committee has the authority to form and delegate authority and responsibilities to subcommittees of +its members, so long as any subcommittee consists of at least two members of the Compensation Committee. +As of April 16, 2025 , the Compensation Committee consisted of Ms. Ehrman and Messrs. Baribault, Baty, Parker and +Stewart, each of whom is independent under the rules of the SEC and the NYSE and a “non-employee director” pursuant +to Rule 16b-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Mr. Baty is the chair of the +Compensation Committee. During 2024 , the Compensation Committee met six times. +2025 Proxy Statement | Matador Resources Company 31 +Capital Markets and Finance Committee +The Capital Markets and Finance Committee provides oversight of the Company’s financial objectives, financial policies, +capital structure and financing requirements. As of April 16, 2025 , the members of the Capital Markets and Finance +Committee were Ms. Appel and Messrs. Foran, Harvey, Howard, Parker and Stewart. Mr. Parker is the chair of the Capital +Markets and Finance Committee. Mr. Howard's term as a director, and as a member of the Capital Markets and Finance +Committee, will expire at the 2025 Annual Meeting. +Marketing and Midstream Committee +The Marketing and Midstream Committee provides oversight of the Company’s marketing and midstream activities, +projects, joint ventures and plans. As of April 16, 2025 , the members of the Marketing and Midstream Committee were +Mmes. Appel, Ehrman and Ward and Messrs. Byerley, Harvey and Howard. Ms. Ward and Mr. Howard serve as co-chairs +of the Marketing and Midstream Committee. Mr. Howard's term as a director, and as a member of the Marketing and +Midstream Committee, will expire at the 2025 Annual Meeting. +Operations and Engineering Committee +The Operations and Engineering Committee provides oversight of the development of our prospects, our drilling, +completions and production operations and associated costs. In addition, the Operations and Engineering Committee +provides oversight of the amount and classifications of our reserves and the design of our completion techniques and +hydraulic fracturing operations and various other reservoir engineering matters. As of April 16, 2025 , the members of the +Operations and Engineering Committee were Mmes. Ehrman and Ward and Messrs. Baribault and Foran. Mr. Baribault is +the chair of the Operations and Engineering Committee. +Prospect Committee +The Prospect Committee provides oversight of the technical analysis, evaluation and selection of our oil and natural gas +prospects. As of April 16, 2025 , the members of the Prospect Committee were Mmes. Appel, Ehrman and Ward and +Messrs. Baribault, Foran and Parker. Mr. Baribault is the chair of the Prospect Committee. +32 Matador Resources Company | 2025 Proxy Statement +CORPORATE GOVERNANCE +Board’s Role in Risk Oversight +The Audit Committee has the responsibility to oversee the Company’s guidelines and policies to govern the process by +which risk assessment and risk management are undertaken by management, including with respect to corporate +governance, financial, accounting, operational, environmental, health and safety, regulatory and cybersecurity risks. In +connection with the Audit Committee’s oversight responsibility, executive management regularly engages with employees +at various levels of seniority to identify risks facing the Company. The risks identified in these multidisciplinary reviews are +aggregated and evaluated to determine the appropriate set of key risks for that period. Management then, on a quarterly +basis, provides the Audit Committee with an assessment of these risks and a discussion of any new developments. Under +the Audit Committee’s oversight, management maintains a commercial insurance program for the Company’s benefit +covering casualty, property, workers’ compensation, well operations and cybersecurity risks, among others. The +Environmental, Social and Corporate Governance Committee further supports the Board's oversight role by monitoring +and assessing risks specifically related to environmental laws and regulations, corporate governance and other ESG- +related issues. The Compensation Committee has the responsibility to oversee that our incentive pay does not encourage +unnecessary risk taking and to review and discuss the relationship between risk management policies and practices, +corporate strategy and senior executive compensation. +Environmental, Social and Governance Practices +Affirmation of Our Commitment +At Matador, we are committed to creating long-term value in a responsible manner. This commitment extends across our +operations and includes a dedication to excellence with respect to environmental, social and governance matters. Our +guiding focus on good stewardship is reflected in our Code of Ethics and in our Corporate Governance Guidelines, which +are reviewed annually by the Environmental, Social and Corporate Governance Committee of the Board. See “Corporate +Governance” on page 24 for additional information. +Oversight and Coordination of ESG-Related Practices +Matador's management team is responsible for the day-to-day management of ESG-related matters and regularly updates +the full Board on Matador's efforts and performance in these areas. +The Environmental, Social and Corporate Governance Committee is responsible for overseeing sustainability-related +matters and monitoring the effectiveness of systems necessary to ensure compliance with ESG-related legislation, +regulatory requirements, industry standards and internal policies, programs and practices. In conjunction with senior +management, the committee has direct accountability to review and evaluate sustainability practices, risks and strategies +and to make recommendations to the full Board regarding sustainability matters. +The Audit Committee also has responsibility through its role overseeing risk assessment and risk management processes, +including with respect to operational, environmental, health and safety and regulatory risks. +Reporting on ESG-Related Practices and 2024 Performance Highlights +Matador issues an annual Sustainability Report that describes Matador's ESG-related policies and practices as well as +documents our ESG-related results with quantitative metrics aligned with standards developed by the Sustainability +Accounting Standards Board (SASB). Highlights from the Company’s 2024 ESG practices are shown below. +1 The data utilized in calculating these metrics is subject to certain reporting rules, regulatory reviews, definitions, calculation methodologies, estimates, +adjustments and other factors. As a result, these metrics are subject to change from time to time as updated data or other information becomes +available. The metrics provided reflect both Matador’s gross operated exploration & production operations and gross operated midstream operations on +a consolidated basis, except where otherwise noted or immaterial in scope. +2 Emissions and flared volumes are calculated in accordance with Environmental Protection Agency standards and reflect only Matador’s gross operated +exploration & production operations. +3 Fresh water is defined as <1,000 mg/L total dissolved solids and includes Matador’s gross operated volumes for hydraulic fracturing and completion +operations, as well as estimates for Matador’s other operations. +4 As of April 16, 2025 . +2025 Proxy Statement | Matador Resources Company 33 +ENVIRONMENTAL, SOCIAL & GOVERNANCE HIGHLIGHTS 1 +EMISSIONS 2 +>60% +Reduction in E&P direct +greenhouse gas intensity +from 2019 to 2024 +>85% +Reduction in E&P +methane intensity +from 2019 to 2024 +WATER +MANAGEMENT +>95% +of total water consumed +in 2024 was +non-fresh water 3 +>50% +of total hydraulic fracturing +fluid volume in 2024 was +recycled produced water +PIPELINE +TRANSPORTATION +96% +of operated produced oil +barrels transported by +pipeline in 2024 +99% +of operated produced water +barrels transported by +pipeline in 2024 +SAFETY & +WORKFORCE +ZERO +Employee lost time incidents +per 200,000 employee +man-hours in 2024 +50 +Approximate average hours +of continuing education +per employee in 2024 +SHAREHOLDER +ALIGNMENT +5.8% +of common stock +held by directors +and executive officers 4 +95% +of Matador employees +participating in Employee Stock +Purchase Plan (ESPP) in 2024 +SKILLED, +ENGAGED BOARD +• We continually assess whether our Board's composition appropriately relates to +Matador's current and evolving strategic needs. +• This extensive vetting process has yielded experienced and skilled directors who are +dedicated to Matador and do not serve on any other public company boards. +INDEPENDENT +OVERSIGHT +• Our lead independent director serves as a liaison between the Chairman of the Board +and the independent directors and fulfills other duties as set forth in our Corporate +Governance Guidelines. +• Our independent directors meet privately in executive session on a regular basis. +CANDID BOARD +EVALUATIONS +• Our Board and committees conduct annual evaluations of the Board, its committees +and directors, including self-evaluations. +• Our directors provide feedback on Board and committee effectiveness, including areas +such as Board composition. +34 Matador Resources Company | 2025 Proxy Statement +Shareholder Engagement +At Matador, we seek to maintain strong, transparent relationships with our investors. In 2024 , consistent with Matador's +regular practice, members of our Board and management team had conversations with investors on a variety of topics, +including our business, strategy, operational innovations, Company performance, executive compensation, risk +management and corporate governance matters. As a result of these engagement efforts, we met or reached out to +shareholders representing more than an estimated 70% of the outstanding shares of our Common Stock (excluding +shares held by our executive officers and directors) as of December 31, 2024 . In addition, members of our management +team attended 15 investor conferences, hosted nine roadshows and participated in various investor presentation events +and calls. Five conferences or roadshows were attended for either the first time or first time in several years. In total, we +hosted over 100 meetings in 2024 and met with over 175 investment professionals. +Feedback from these conversations was shared with the full Board and served as a valuable input to our corporate +practices. We appreciate the relationship building and insights into investors' priorities that result from cultivating these +open dialogues and remain committed to engaging shareholders regularly. +SHAREHOLDER ENGAGEMENT IN 2024 +(excluding shares held by our executive officers and directors) +We contacted shareholders +representing +We met with shareholders +representing +We met with shareholders +representing +> 70% +of shares +outstanding +> 65% +of shares +outstanding +> 80% +of our top +50 shareholders +Communications with Directors +The Board has established a process to receive communications from shareholders and other interested parties by mail. +Shareholders and other interested parties may contact any member of the Board, any Board committee or the entire +Board. To communicate with the Board, any individual director or any committee, correspondence should be addressed to +“c/o Corporate Secretary” at One Lincoln Centre , 5400 LBJ Freeway, Suite 1500 , Dallas, Texas 75240 . Shareholders +should mark the envelope containing any such communication as “Shareholder Communication with Directors” and clearly +identify the intended recipient or recipients of the communication. The Corporate Secretary will review and forward +correspondence to the appropriate person or persons as expeditiously as reasonably practicable. However, any such +communication will not be forwarded if it does not fall within the scope of matters generally considered by the Board or +otherwise fails to comply with the requirements of any applicable policy adopted by the Board relating to the subject +matter of communications. +Any communications to the Company from one of the Company’s officers or directors will not be considered “shareholder +communications.” Communications to the Company from one of the Company’s employees or agents will only be +considered “shareholder communications” if they are made solely in such employee’s or agent’s capacity as a +shareholder. Any shareholder proposal submitted pursuant to Rule 14a-8 promulgated under the Exchange Act will not be +viewed as “shareholder communications.” +2025 Proxy Statement | Matador Resources Company 35 +Strategic Planning and Compensation Committee Interlocks and Insider Participation +Ms. Ehrman and Messrs. Baribault, Baty, Parker and Stewart served on the Compensation Committee during 2024 . None +of these individuals is or was previously one of our officers or employees. None of our executive officers serve on the +board of directors or compensation committee of a company that has an executive officer that serves on our Board or the +Compensation Committee. No member of our Board serves as an executive officer of a company in which one of our +executive officers serves as a member of the board of directors or compensation committee of that company. There were +no compensation committee interlocks during 2024 . Mr. Baribault’s sister-in-law is an employee of the Company. For more +information on this related person transaction, see “Transactions with Related Persons.” +Executive Officers and Other Senior Officers of the Company +The following table sets forth the names, ages and positions of our executive officers and certain of our other senior +officers at April 16, 2025 : +Name +Age +Positions Held With Us +Executive Officers +Joseph Wm. Foran +72 +Chairman of the Board and Chief Executive Officer +Van H. Singleton, II +47 +President—Land, Acquisitions & Divestitures and Planning +Brian J. Willey +48 +Executive Vice President and Chief Financial Officer +G. Gregg Krug +64 +Executive Vice President—Marketing & Midstream Strategy +Christopher P. Calvert +46 +Executive Vice President and Chief Operating Officer +W. Thomas Elsener +40 +Executive Vice President—Reservoir Engineering and Senior Asset Manager +Bryan A. Erman +47 +Executive Vice President, General Counsel and Head of M&A +Glenn W. Stetson +40 +Executive Vice President—Production +Other Senior Officers +Michael D. Frenzel +43 +Executive Vice President and Treasurer +Robert T. Macalik +46 +Executive Vice President and Chief Accounting Officer +Jonathan J. Filbert +38 +Executive Vice President—Land +Jordan M. Ellington +33 +Executive Vice President and Asset Manager +M. Cliff Humphreys +35 +Executive Vice President—Completions +Joshua D. Passauer +39 +Executive Vice President—Drilling +36 Matador Resources Company | 2025 Proxy Statement +The following biographies describe the business experience of our executive officers and the senior officers listed above. +Each officer serves at the discretion of our Board. There are no family relationships among any of our executive officers. +Executive Officers +Mr. Joseph Wm. Foran +Chairman of the +Board and Chief +Executive Officer +Please see the biography of Mr. Foran on page 18 of this Proxy Statement. +Mr. Van H. Singleton, II +President—Land, +Acquisitions & +Divestitures and +Planning +Mr. Singleton joined Matador Resources Company in August 2007 as a Landman and was promoted +to Senior Staff Landman in 2009 and then to General Land Manager in 2011. In September 2013, +Mr. Singleton became Vice President of Land, and he was promoted to Executive Vice President of +Land in February 2015. He became the Company’s President—Land, Acquisitions & Divestitures and +Planning in March 2022. Prior to joining Matador, Mr. Singleton founded and was President of +VanBrannon and Associates, LLC and Southern Escrow and Title of Mississippi, LLC from 1998 to +2003, which provided full-spectrum land title work and title insurance in Mississippi, Louisiana, +Texas and Arkansas. From 2003 until joining Matador in 2007, he served as general manager of his +family’s real estate brokerage in Houston, Texas. Mr. Singleton received a Bachelor of Arts degree +from the University of Mississippi in 2000. He is an active member of the American Association of +Professional Landmen, the New Mexico Landman Association, the Permian Basin Landman +Association and the Dallas Association of Petroleum Landmen. +Mr. Brian J. Willey +Executive Vice +President and Chief +Financial Officer +Mr. Willey joined Matador Resources Company in February 2014 as its Deputy General Counsel. In +January 2016, Mr. Willey was appointed as Co-General Counsel, and in August 2016, he was +promoted to Vice President and Co-General Counsel. Mr. Willey became Senior Vice President and +Co-General Counsel in July 2018, and in March 2022, he was promoted to President of San Mateo +and Senior Vice President, President and General Counsel of Midstream. In October 2022, Mr. +Willey was promoted to President and General Counsel of Midstream Operations and Executive +Vice President. In February 2023, Mr. Willey was promoted to Executive Vice President and Chief +Financial Officer. Prior to joining Matador, Mr. Willey was an attorney with Dean Foods Company +where he most recently served as Vice President, Chief Counsel – Corporate. Before Dean Foods, +Mr. Willey served as a senior associate in the Dallas office of Baker Botts L.L.P. Mr. Willey’s practice +focused on corporate matters, including mergers and acquisitions, public and private securities +offerings, venture capital transactions and SEC compliance matters as well as board of director and +corporate governance matters. Mr. Willey received a Bachelor of Science degree in Accounting in +2002 from Brigham Young University. He received his law degree in 2005 from The University of +Texas School of Law, where he graduated with High Honors and was a member of the Order of the +Coif in addition to being named a Chancellor and an Associate Editor on the Texas Law Review. Mr. +Willey also served a church mission in the Philippines from 1995 to 1997. +2025 Proxy Statement | Matador Resources Company 37 +Mr. G. Gregg Krug +Executive Vice +President—Marketing +& Midstream Strategy +Mr. Krug joined Matador Resources Company in April 2012 as its Marketing Manager. In September +2013 he was named Vice President of Marketing for the Company and Vice President of Longwood +Gathering & Disposal Systems, LP, and he was promoted to Senior Vice President—Marketing and +Midstream in February 2016. He was promoted to Executive Vice President—Marketing and +Midstream Strategy in April 2019. He has overall responsibility for Matador’s marketing activities of +its oil and natural gas, as well as responsibility for all business aspects for Longwood Gathering & +Disposal Systems, LP. Previously, Mr. Krug was with Unit Petroleum Company, an exploration and +production company based in Tulsa, Oklahoma, as Marketing Manager, having joined in 2006. He +and his staff were responsible for marketing, gas measurement, contract administration and +production reporting in their core areas of Oklahoma, the Texas Panhandle, East Texas and +Northwestern Louisiana. From 2005 to 2006, Mr. Krug served as Marketing Manager with Matador +Resources Company. From 2000 to 2005, Mr. Krug served as Gas Scheduling Supervisor with +Samson Resources in Tulsa, Oklahoma where he and his staff were responsible for scheduling +natural gas sales as well as procurement of natural gas supply on Samson-owned gathering systems. +From 1983 to 2000, Mr. Krug served with The Williams Companies in various capacities including in +the Kansas Hugoton Field in Ulysses, Kansas and Tulsa, Oklahoma for Williams Natural Gas Pipeline +and on the trading floor in Tulsa, Oklahoma for Williams Energy Services Company. Mr. Krug +received a Bachelor of Business Administration degree from Oklahoma City University in 1996. +Mr. Christopher P. Calvert +Executive Vice +President and Chief +Operating Officer +Mr. Calvert joined Matador Resources Company in October 2014 as a Senior Completions Engineer. +In July 2018, he was named Vice President of Completions for the Company, and he was promoted +to Senior Vice President—Operations in October 2019. Mr. Calvert was promoted to Senior Vice +President and Co-Chief Operating Officer in April 2022. In February 2023, Mr. Calvert was +promoted to Executive Vice President and Co-Chief Operating Officer. In April 2024, Mr. Calvert +became Executive Vice President and Chief Operating Officer. Prior to joining Matador, Mr. Calvert +worked as a Staff Reservoir Engineer in Chesapeake Energy Corporation’s South Texas—Eagle Ford +group focusing on A&D evaluations and production and completions optimization. At Chesapeake, +Mr. Calvert also held roles as a Senior Asset Manager responsible for completions and operations in +the Niobrara Shale, a Senior Completions Engineer responsible for Bakken/Three Forks +development and a Senior Operations Engineer focused on production and facility optimization on +the Texas Gulf Coast. Prior to Chesapeake, Mr. Calvert worked as an Operations Engineer for +Williams Production Company. In addition to his oil and natural gas industry experience, Mr. Calvert +has worked in corporate financial controls as an internal Sarbanes-Oxley compliance auditor. Mr. +Calvert received Bachelor of Science degrees in Finance and Petroleum Engineering from the +University of Wyoming in 2002 and 2008, respectively. He is a member of the Society of Petroleum +Engineers. +38 Matador Resources Company | 2025 Proxy Statement +Mr. W. Thomas Elsener +Executive Vice +President—Reservoir +Engineering and +Senior Asset Manager +Mr. Elsener joined Matador Resources Company in April 2013 as an Engineer. In June 2017, he was +promoted to Vice President—Engineering and Asset Manager, and he was promoted to Senior Vice +President—Reservoir Engineering and Senior Asset Manager in October 2019. Mr. Elsener was +named Executive Vice President—Reservoir Engineering and Senior Asset Manager in April 2022. +Prior to joining Matador, Mr. Elsener served in various engineering roles at Encana Oil & Gas (USA) +in Dallas, Texas from 2007 to 2013, including reservoir, completions, drilling, business development +and new ventures. While at Encana, Mr. Elsener was involved with the exploration and +development of assets in the Barnett shale, Deep Bossier, Haynesville shale and other new +domestic ventures. Mr. Elsener received a Bachelor of Science degree in Petroleum Engineering +from Texas A&M University in 2007. He is a member of the Society of Petroleum Engineers. +Mr. Bryan A. Erman +Executive Vice +President, General +Counsel and Head of +M&A +Mr. Erman joined Matador Resources Company in January 2016 as its Co-General Counsel. In +August 2016, Mr. Erman was promoted to Vice President and Co-General Counsel. He became +Senior Vice President and Co-General Counsel in July 2018. In March 2022, Mr. Erman became +Senior Vice President and General Counsel and in October 2022, Mr. Erman was promoted to +Executive Vice President, General Counsel and Head of M&A. Prior to joining Matador, Mr. Erman +was a Partner at Carrington, Coleman, Sloman & Blumenthal, L.L.P. in Dallas, having joined the firm +in 2010. From 2003 to 2010, he was an associate in the Dallas and Washington, D.C. offices of Baker +Botts L.L.P. Mr. Erman’s practice focused on litigation matters, including oil and natural gas, +securities and other commercial litigation, as well as corporate governance matters. Before +attending law school, Mr. Erman worked for Oklahoma Governor Frank Keating. Mr. Erman received +a Bachelor of Arts degree in Political Science in 1999 from the University of Oklahoma. He received +his law degree in 2003 from Southern Methodist University Dedman School of Law, where he +graduated cum laude and was a Hatton W. Sumners Scholar, a member of the Order of the Coif and +an Articles Editor on the SMU Law Review. +Mr. Glenn W. Stetson +Executive Vice +President— +Production +Mr. Stetson joined Matador Resources Company in August 2014 as a Production Engineer, and in +July 2015, he was promoted to Asset Manager. Mr. Stetson was promoted to the role of Vice +President and Asset Manager in July 2018 and to Senior Vice President of Production and Asset +Manager in October 2019. Mr. Stetson was promoted to the role of Executive Vice President— +Production in April 2022. Prior to joining Matador, Mr. Stetson worked at Chesapeake Energy +Corporation from 2008 to 2014, holding multiple positions in both the production and completions +departments. Most of his time at Chesapeake was spent in the Barnett shale in North Texas, +although he also spent some time working in northern Pennsylvania managing the northeast +portion of Chesapeake’s Marcellus shale operated production. Mr. Stetson graduated Cum Laude +from Oklahoma State University in 2007, receiving a Bachelor of Science degree in Mechanical +Engineering Technology. Mr. Stetson is a Licensed Professional Engineer in the State of Oklahoma. +2025 Proxy Statement | Matador Resources Company 39 +Other Senior Officers +Mr. Michael D. Frenzel +Executive Vice +President and +Treasurer +Mr. Frenzel was named Executive Vice President and Treasurer in April 2022. Mr. Frenzel’s +responsibilities include treasury, financial planning and forecasting, budgeting, capital markets, +hedging, financial reporting and investor relations, and he has served as the primary financial officer +for San Mateo, Matador’s midstream joint venture, since San Mateo’s formation in 2017. In March +2022, Matador’s Board and CEO asked Mr. Frenzel to act as the Company’s principal financial officer +until a new CFO was appointed in February 2023. Mr. Frenzel first worked for Matador’s +predecessor company, Matador Petroleum Corporation, as an intern in the summers of 2000, 2001 +and 2002. From 2006 to 2010, Mr. Frenzel worked as a Senior Financial Analyst before leaving to +obtain his Master of Business Administration degree in 2010 from Duke University’s Fuqua School +of Business. Mr. Frenzel rejoined Matador in 2013 as its Senior Strategy and Financial Analyst and +Assistant Treasurer and was promoted to Finance Director and Assistant Treasurer in January 2017. +In August 2018, Mr. Frenzel was promoted to Vice President and Treasurer. Mr. Frenzel was +promoted to Senior Vice President and Treasurer in October 2020. Before rejoining Matador in +2013, Mr. Frenzel worked as an Investment Associate for Hamm Capital, LLC and as a Financial +Analyst and Assistant to the CEO at Continental Resources. In addition to his energy industry +experience, Mr. Frenzel also has consulting experience with Deloitte Consulting LLP. Mr. Frenzel +graduated summa cum laude from Vanderbilt University in 2004, receiving a Bachelor of Arts +degree in Economics and Mathematics, and earned the designation of Fuqua Scholar while +receiving a Master of Business Administration degree from Duke University’s Fuqua School of +Business in 2012. +Mr. Robert T. Macalik +Executive Vice +President and Chief +Accounting Officer +Mr. Macalik joined Matador Resources Company in July 2015 as Vice President and Chief +Accounting Officer. He was promoted to Senior Vice President and Chief Accounting Officer in +November 2017. Mr. Macalik was named Executive Vice President and Chief Accounting Officer in +April 2022. Prior to joining Matador, from 2012 to 2015, Mr. Macalik worked at Pioneer Natural +Resources Company as Corporate Controller and, previously, as Director of Technical Accounting +and Financial Reporting. At Pioneer, Mr. Macalik supervised corporate accounting and financial +reporting functions. Prior to joining Pioneer, he was a Senior Manager with +PricewaterhouseCoopers (PwC), joining the public accounting firm in 2002. During his tenure with +PwC, Mr. Macalik conducted and managed audits for various companies, primarily public +companies in the oil and natural gas industry, and managed numerous client relationships. Mr. +Macalik received a Bachelor of Arts degree in History, a Bachelor of Business Administration degree +and a Master of Professional Accounting degree all from The University of Texas at Austin in 2002. +He is a licensed Certified Public Accountant in the State of Texas. +40 Matador Resources Company | 2025 Proxy Statement +Mr. Jonathan J. Filbert +Executive Vice +President—Land +Mr. Filbert joined Matador Resources Company in February 2013 as a Senior Staff Landman. In April +2015, he was promoted to General Land Manager, and in December 2017, he was promoted to +General Land Manager and Director of Acquisitions. Mr. Filbert was promoted to the role of Vice +President of Land in July 2018 and to Senior Vice President—Land in October 2020. Mr. Filbert was +promoted to his current role of Executive Vice President—Land in October 2023. Prior to joining +Matador, Mr. Filbert worked as a landman at Chesapeake Energy Corporation from 2010 to 2013. +Most of his time at Chesapeake was spent working with the new ventures team on their Utica and +Marcellus shale assets in Ohio and northern Pennsylvania. Mr. Filbert graduated from the University +of Oklahoma in 2010, receiving a Bachelor of Business Administration degree in Energy +Management and Finance. He is an active member of the American Association of Professional +Landmen, the New Mexico Landman Association, the Permian Basin Landman Association and the +Dallas Association of Petroleum Landmen. +Mr. Jordan M. Ellington +Executive Vice +President and Asset +Manager +Mr. Ellington joined Matador Resources Company in November 2018 as a Drilling Engineer. In +October 2019, Mr. Ellington was promoted to Senior Drilling Engineer and MaxOps Coordinator. He +was promoted to Vice President and Asset Manager in April 2021, and then to Senior Vice Present +and Asset Manager in February 2023. Mr. Ellington was promoted to the role of Executive Vice +President and Asset Manager in February 2024. Prior to joining Matador, Mr. Ellington worked for +Chevron from 2014 to 2018 in various roles within the drilling and completions department. Most +of his time at Chevron was spent focusing on operations and the execution of major capital projects +and exploration and appraisal wells in the Deepwater Gulf of Mexico. Mr. Ellington graduated +summa cum laude from Texas A&M University in 2014, receiving a Bachelor of Science degree in +Mechanical Engineering. He is an active member of the Society of Petroleum Engineers and +American Association of Drilling Engineers. +Mr. M. Cliff Humphreys +Executive Vice +President— +Completions +Mr. Humphreys joined Matador Resources Company in March 2014 as a Completions Engineer. In +December 2018, Mr. Humphreys was promoted to Area Completions Manager. He was promoted to +Vice President—Completions in October 2019, and then to Senior Vice President—Completions in +April 2022. Mr. Humphreys was promoted to his current role of Executive Vice President— +Completions in October 2023. Prior to joining Matador, Mr. Humphreys was an Engineer for Encana +Oil & Gas (USA), primarily assisting with hydraulic fracturing operations in the company’s East Texas +and Louisiana developments. In his time at Matador, Mr. Humphreys has overseen completion +operations in both the Delaware Basin and Eagle Ford assets and has directed the company’s efforts +in recycling produced water for completion operations. Mr. Humphreys received a Bachelor of +Science degree in Mechanical Engineering from The University of Texas at Austin in 2013. He is an +active member of the Society of Petroleum Engineers and American Association of Drilling +Engineers, and serves on the scholarship selection committee for the Wichita Falls Area Community +Foundation. +2025 Proxy Statement | Matador Resources Company 41 +Mr. Joshua D. Passauer +Executive Vice +President—Drilling +Mr. Passauer joined Matador Resources Company in January 2012 as a Drilling Engineer. In his +initial role at Matador, he managed drilling rigs in the Eagle Ford and Austin Chalk plays. In 2013, he +was part of Matador’s transition to the Delaware basin. In January 2017, he was promoted to Area +Drilling Manager. In July 2018 he was promoted to Vice President of Drilling and then to Senior Vice +President of Drilling in April 2022. He also had the opportunity to work alongside management in +creating the MAXCOM team, including overseeing the technology and layout components of the +MAXCOM room. Mr. Passauer was promoted to his current role of Executive Vice President— +Drilling in October 2023. Prior to joining Matador, Mr. Passauer was an Advanced Services Engineer +with Schlumberger from 2010 to 2012, working in-house with Exco Resources in their drilling group. +While at Exco, he partnered with a team to create an innovative horizontal drill bit design that +optimized the most important portion of a horizontal well. This unique bit design won an innovation +award from British Gas, and he was honored to receive that award in London. He also co-authored +an associated article that was published in Oilfield Technology magazine. Prior to Schlumberger, Mr. +Passauer worked for Smith International in-house with Samson in Tulsa, Oklahoma. He began his +career in the oil and gas business in Midland, TX, spending two years in a field role with Smith. This +role with Smith gave him valuable field experience as he was able to visit a wide array of drilling rigs +throughout the Delaware and Midland basins. Mr. Passauer graduated from Baylor University in +2006 with a Bachelor of Science degree in Mechanical Engineering and a minor in mathematics. He +is an active member of the Society of Petroleum Engineers and the American Association of Drilling +Engineers. +Mr. Joseph Wm. Foran +42 Matador Resources Company | 2025 Proxy Statement +PROPOSAL 2 +PROPOSAL 2 | ADVISORY VOTE TO APPROVE NAMED EXECUTIVE +OFFICER COMPENSATION +In accordance with the requirements of Section 14A of the Exchange Act, the Company seeks a non-binding advisory vote +from its shareholders to approve the compensation of its Named Executive Officers (as defined below) as described in this +Proxy Statement. +We believe the Company’s future success and ability to create long-term value for our shareholders depends on our ability +to attract, retain and motivate highly qualified individuals in the oil and natural gas industry. Additionally, we believe that +our success also depends on the continued contributions of our Named Executive Officers. The Company’s compensation +system plays a significant role in its ability to attract, motivate and retain a high-quality workforce. As described in the +Compensation Discussion and Analysis (the "CD&A"), the Company’s compensation program for Named Executive +Officers is designed to reward, in both the short term and the long term, performance that contributes to the +implementation of our business strategies, maintenance of our culture and values and achievement of our objectives. +This proposal provides shareholders the opportunity to endorse or not endorse the Company’s executive compensation +program through approval of the following resolution: +“Resolved, that the compensation paid to the Company’s Named Executive Officers, as disclosed pursuant to Item +402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and related +narrative discussion, is hereby approved.” +The above-referenced CD&A and accompanying disclosures appear on pages 47 - 65 of this Proxy Statement. +Because this is an advisory vote, it will not be binding upon the Board. However, the Compensation Committee +and the Independent Board will take into account the outcome of the vote when considering future executive +compensation arrangements. +Vote Required +The affirmative vote of the holders of a majority of the shares present in person or represented by proxy and entitled to +vote at the Annual Meeting is required to approve this resolution on a non-binding advisory basis. If you hold your shares +through a broker and you do not instruct the broker how to vote, your broker will not have the authority to vote your +shares. Abstentions will have the effect as a vote cast against the proposal. Broker non-votes will be counted as present +for purposes of determining the presence of a quorum but will have no effect upon the outcome of the vote. +During our 2024 Annual Meeting of Shareholders, our shareholders approved a non-binding, advisory proposal to hold +advisory votes to approve our executive compensation every year. In consideration of the results of this advisory vote, the +Board has maintained its policy of providing for annual advisory votes to approve executive compensation. Unless the +Board modifies its current policy, the next advisory vote to approve executive compensation following this vote will be held +at our 2026 Annual Meeting of Shareholders. +The Board of Directors recommends that you vote FOR approval of this resolution. +2025 Proxy Statement | Matador Resources Company 43 +PROPOSAL 3 | RATIFICATION OF THE APPOINTMENT OF KPMG +LLP +The Audit Committee has appointed KPMG LLP (“ KPMG ”) as the independent registered public accounting firm of +the Company for the year ending December 31, 2025 , and the Board has directed that such appointment be +submitted to our shareholders for ratification at the Annual Meeting. +The Audit Committee concluded that KPMG ’s provision of non-audit services, such as tax services, does not +compromise KPMG ’s independence. +If the shareholders do not ratify the appointment of KPMG , the Audit Committee will consider whether to engage a +different independent registered public accounting firm but will not be obligated to do so. +The Company has been advised that representatives of KPMG will be present at the Annual Meeting and will be +available to respond to appropriate questions and make a statement if they desire to do so. +Fees of Independent Registered Public Accounting Firm for Fiscal Years 2024 and 2023 +The following table presents fees for professional audit services rendered by KPMG for the audit of the Company’s +annual financial statements for the years ended December 31, 2024 and 2023 , and fees for other services rendered +by KPMG during those periods: +2024 +2023 +Audit fees +$ 2,750,000 +$ 2,020,000 +Audit-related fees +$ 55,000 +$ 50,000 +Tax fees +$ 560,000 +$ 420,000 +All other fees +— +— +Total +$ 3,365,000 +$ 2,490,000 +Services rendered by KPMG in connection with the fees presented above were as follows: +Audit Fees +Audit fees for fiscal years 2024 and 2023 consisted of fees associated with the audit of the Company’s consolidated +financial statements, including the audit of the effectiveness of the Company’s internal control over financial +reporting, required reviews of our quarterly condensed consolidated financial statements and consultation on +significant accounting matters. Audit fees also included fees paid to KPMG by San Mateo for the audit of its 2024 +and 2023 financial statements. +Audit-Related Fees +Audit-related fees for fiscal years 2024 and 2023 related to fees for assurance and related services for subsidiary +audits that are not included in the audit fees listed above. +Tax Fees +Tax fees for fiscal years 2024 and 2023 related to permitted tax planning services. +All Other Fees +We did not incur any other fees in 2024 or 2023 . +The Audit Committee pre-approves all audit and permissible non-audit services provided by KPMG . These services +may include audit services, audit-related services, tax services and other services. The Audit Committee has +authorized the chair of the Audit Committee to pre-approve audit and permissible non-audit services provided by +44 Matador Resources Company | 2025 Proxy Statement +KPMG up to $750,000. Pursuant to this delegation, the decisions of the chair must be presented to the Audit +Committee at its next meeting. +Report of the Audit Committee +We are a standing committee comprised of independent directors as currently defined by SEC regulations and the +applicable listing standards of the NYSE. The Board has determined that at least one of the members of the Audit +Committee is an “audit committee financial expert” as defined by applicable SEC rules and regulations. We operate +under a written charter adopted by the Board. A copy of the charter is available free of charge on the Company’s +website at www.matadorresources.com under “Investor Relations—Corporate Governance.” +We annually select the Company’s independent registered public accounting firm. If the shareholders do not ratify +the appointment of KPMG at the Annual Meeting, the Audit Committee will consider whether to engage a different +independent registered public accounting firm but will not be obligated to do so. +Management is responsible for the Company’s internal controls and the financial reporting process. The +independent registered public accounting firm is responsible for performing an independent audit of the Company’s +consolidated financial statements in accordance with the standards of the United States Public Company Accounting +Oversight Board (the “PCAOB”) and issuing a report thereon. As provided in our charter, our responsibilities include +the monitoring and oversight of these processes. +Consistent with our charter responsibilities, we have met and held discussions with management and the +independent registered public accounting firm. In this context, management and the independent registered public +accounting firm represented to us that the Company’s consolidated financial statements for the fiscal year ended +December 31, 2024 were prepared in accordance with U.S. generally accepted accounting principles. We reviewed +and discussed the consolidated financial statements with management and the independent registered public +accounting firm and discussed with the independent registered public accounting firm matters required to be +discussed by the applicable requirements of the PCAOB and the SEC. +The Company’s independent registered public accounting firm has also provided to us the written disclosures and +the letter required by applicable requirements of the PCAOB regarding the independent registered public accounting +firm’s communications with the Audit Committee, and we discussed with the independent registered public +accounting firm that firm’s independence. +Based upon our reviews and discussions with management and the independent registered public accounting firm +and our review of the representation of management and the report of the independent registered public accounting +firm to the Audit Committee, we recommended that the Board include the audited consolidated financial statements +in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 filed with the SEC. +Audit Committee, +William M. Byerley, Chair +Reynald A. Baribault +Paul W. Harvey +James M. Howard +Timothy E. Parker +Susan M. Ward +2025 Proxy Statement | Matador Resources Company 45 +Vote Required +The affirmative vote of the holders of a majority of the shares present in person or represented by proxy and entitled +to vote at the Annual Meeting is required for the ratification of the appointment of KPMG as the Company’s +independent registered public accounting firm for the year ending December 31, 2025 . If the shareholders do not +ratify the appointment of KPMG , the Audit Committee will consider whether to engage a different independent +registered public accounting firm but will not be obligated to do so. Abstentions will have the effect as a vote cast +against the proposal. +The Board of Directors recommends that you vote FOR the ratification of the appointment +of KPMG as the Company’s independent registered public accounting firm for the +year ending December 31, 2025 . +46 Matador Resources Company | 2025 Proxy Statement +Dear Fellow Shareholders, +On behalf of the Board and the Compensation Committee, thank you for your continued support of Matador Resources +Company and for entrusting us with your investment. We are pleased to report that 2024 was another record year for +Matador, reflecting not only operational and financial excellence but also the strategic vision and leadership of our +executive team. +Thanks to their direction and execution, Matador achieved record oil and natural gas production, reaching an average of +over 170,000 barrels of oil equivalent per day. We reported net income of $885 million, delivered $2.3 billion of Adjusted +EBITDA (a non-GAAP financial measure) and generated free cash flow in all four quarters of 2024. These results +underscore the strength of our assets, the quality of our operations, and most importantly, the skill and dedication of our +management team and staff. While achieving these record results, our executive officers also drove meaningful +improvements in operational efficiency and innovation, including the increased use of 'simul-frac' and 'trimul-frac' +completions and drilling 'U-Turn' wells. +2024 also marked the successful closing of the Ameredev Acquisition, which significantly expanded our position in the +Delaware Basin and added high-quality inventory in the core of our operating area. Our ability to evaluate, close, and +begin integrating this large-scale transaction reflects the deep experience and coordination across Matador’s leadership +team. Additionally, our executive team led the strategic combination of Pronto, our wholly-owned midstream business, with +San Mateo, our midstream joint venture, into a unified platform—enhancing operational efficiencies, positioning our +midstream segment for future growth and reinforcing our long-term midstream advantage. +The Board was also pleased to approve a 25% increase in our quarterly dividend in 2024, which has been increased six +times in the last four years, further demonstrating our commitment to returning capital to shareholders. This achievement +is a direct result of our executive leadership’s disciplined capital management and long-term focus on profitable growth at +a steady pace. +As always, the Compensation Committee is guided by a “pay for performance” philosophy and believes that the +compensation of our executive officers should reflect the Company’s success and their individual contributions to it. We +are proud of what Matador accomplished in 2024 under their leadership and confident in the team’s ability to continue +driving value for shareholders. +We appreciate your trust and support and look forward to continuing our dialogue with you in the year ahead. We hope +you will join us at the 2025 Annual Meeting of Shareholders. +Sincerely, +Timothy E. Parker +R. Gaines Baty +Lead Independent Director +Chair, Strategic Planning and +Compensation Committee +2025 Proxy Statement | Matador Resources Company 47 +EXECUTIVE COMPENSATION +EXECUTIVE COMPENSATION +Compensation Discussion and Analysis +This Compensation Discussion and Analysis, or CD&A, provides a general description of our compensation program and +specific information about its various components for the following “Named Executive Officers” or "NEOs" for 2024 : +• Joseph Wm. Foran , Chairman of the Board and Chief Executive Officer ; +• Van H. Singleton, II , President—Land, Acquisitions & Divestitures and Planning ; +• Brian J. Willey , Executive Vice President and Chief Financial Officer ; +• G. Gregg Krug , Executive Vice President—Marketing & Midstream Strategy ; and +• Bryan A. Erman , Executive Vice President, General Counsel and Head of M&A . +2024 Highlights +The exceptional efforts of our executive officers and staff led to yet another record year for Matador in 2024. Highlights of +the year included significant upstream and midstream transactions, record operational and financial results and the +continued return of value to our shareholders through our fixed dividend, which increased again in 2024. +Acquisition and Integration of Ameredev +A key highlight in 2024 was the Ameredev Acquisition, which added approximately 33,500 contiguous net acres in the core +of the northern Delaware Basin, provided a significant increase in our drilling inventory with 431 gross (371 net) operated +locations, including prospective targets throughout the Wolfcamp and Bone Spring formations, and more than 25,000 BOE +per day in production. Since closing the transaction on September 18, 2024, we have been hard at work integrating the +Ameredev properties and our efforts have already resulted in at least $4 million in drilling and completion cost synergies. +Over the next five years, we expect additional drilling and completion cost synergies of over $150 million. In addition, we +estimate that we have reduced lease operating expenses on the Ameredev acreage by 35%, or more than $2 million per +month, since we began operating the Ameredev assets. The Ameredev Acquisition also included an approximate 19% +equity interest in the parent company of Piñon. Piñon was acquired by Enterprise Products Partners L.P. on October 28, +2024, and Matador received approximately $115 million in 2024 from its share of the sale proceeds. +Growing Midstream Business +In addition to significant upstream growth, our midstream business remains a critical part of Matador's success . In +December 2024, Matador contributed Pronto to San Mateo, which resulted in Matador receiving $219.8 million in cash +and the ability to earn up to $75 million in additional performance incentives. The Pronto Transaction included Pronto's +interest in the existing Marlan Plant with a designed inlet capacity of 60 million cubic feet per day of natural gas. The +Marlan Plant expansion will add an additional plant with a designed inlet capacity of 200 million cubic feet of natural gas +per day. The Marlan Plant expansion remains on time and on budget and is expected to be online in the second quarter of +2025. In addition to the financial benefits mentioned above, the Pronto Transaction also provides increased flow +assurance for Matador’s production, primarily in Lea County, New Mexico, and accelerates filling the Marlan Plant to +capacity. +48 Matador Resources Company | 2025 Proxy Statement +Record Operational and Financial Results +These transactions contributed to record operational and financial results in 2024. For the year ended December 31, +2024 , we achieved record oil, natural gas and average daily oil and natural gas equivalent production. In 2024 , we +produced 36.5 million Bbl of oil, an increase of 33% , as compared to 27.5 million Bbl of oil produced in 2023 . We also +produced 155.8 Bcf of natural gas, an increase of 26% from 123.4 Bcf of natural gas produced in 2023 . Our average +daily oil and natural gas equivalent production for the year ended December 31, 2024 was 170,751 BOE per day, +including 99,808 Bbl of oil per day and 425.7 MMcf of natural gas per day, an increase of 30% , as compared to 131,813 +BOE per day, including 75,457 Bbl of oil per day and 338.1 MMcf of natural gas per day, for the year ended December +31, 2023 . The increase in oil and natural gas production was primarily attributable to the Ameredev Acquisition and our +ongoing delineation and development drilling activities in the Delaware Basin throughout 2024 , which offset declining +production in the Eagle Ford shale and Northwest Louisiana. Oil production comprised 58% and 57% of our total oil and +natural gas production (using a conversion ratio of one Bbl of oil per six thousand cubic feet of natural gas) for the years +ended December 31, 2024 and 2023 , respectively. The charts below show the five-year growth experienced by both our +exploration and production business and our midstream business. +TOTAL OIL EQUIVALENT PRODUCTION +TOTAL PROVED OIL +THIRD-PARTY MIDSREAM SERVICES +(MMBOE) +EQUIVALENT RESERVES (MMBOE) +REVENUES ($ millions) +During 2024 , we achieved several operational milestones in the Delaware Basin. These milestones were each achieved +when we turned to sales: +• 21 Antelope Ridge wells on properties acquired in our 2023 acquisition of Advance Energy Partners Holdings, LLC in +the first half of 2024, which matched the largest single batch development project in our history; +• Five U-Turn wells in the second half of 2024, with significantly reduced drilling time as compared to our initial U-Turn +wells that we turned to sales in 2023; and +• increased efficiencies and capital savings through the introduction of "trimul-frac" operations and continued use of +"simul-frac" operations. +2025 Proxy Statement | Matador Resources Company 49 +In addition to achieving these key operational milestones, other operational highlights in the Delaware Basin in 2024 +included: +• continued drilling of longer laterals, with average completed lateral length for operated wells turned to sales in 2024 of +approximately 9,300 feet; and +• D/C/E capital expenditures for 2024 of $1.32 billion, which was within our estimated range for 2024 D/C/E capital +expenditures of $1.15 billion to $1.35 billion as provided on October 22, 2024. +Matador finished 2024 in the best financial shape in our history with nearly $1.6 billion in liquidity under our Credit +Agreement and a leverage ratio of 1.05x. We returned value to shareholders through the generation of free cash flow in all +four quarters of 2024 and an increase to our quarterly dividend, which we have increased six times in the last four years. +We also completed several important financing transactions in 2024 that increased our operational flexibility while +preserving the strength of our balance sheet and improving our liquidity position. +Highlights of 2024 value-generating items include: +• The generation of free cash flow in all four quarters of 2024 . +• The amendment of our dividend policy in the fourth quarter of 2024, pursuant to which we increased the quarterly +cash dividend from $0.20 per share of Common Stock to $0.25 per share of Common Stock. +• The receipt of $219.8 million in special distributions from San Mateo as a result of the Pronto Transaction. +• The receipt of $23.8 million in performance incentives directly from Five Point in 2024 . +• The underwritten public offering of 5,250,000 shares of Common Stock. +• The repurchase of all of the aggregate principal amount of approximately $699.2 million of our 2026 Notes through +our cash tender offer and subsequent exercise of our optional redemption right in April 2024. +• The issuance of $900.0 million in aggregate principal amount of our 2032 Notes. +50 Matador Resources Company | 2025 Proxy Statement +• The issuance of $750.0 million in aggregate principal amount of our 2033 Notes. +• The spring and fall redeterminations under, and amendments of, our Credit Agreement to collectively (i) increase the +borrowing base to $3.25 billion, as compared to $2.50 billion at December 31, 2023, (ii) increase the elected +borrowing commitment to $2.25 billion, as compared to $1.325 billion at December 31, 2023, (iii) increase the +maximum facility amount to $3.50 billion, as compared to $2.00 billion at December 31, 2023, (iv) extend the maturity +date from October 31, 2026 to March 22, 2029 and (v) add five new banks to our lending group. +• The amendment of the San Mateo Credit Facility in November 2024 to (i) increase the lender commitments from +$535.0 million to $800.0 million, (ii) extend the maturity date from December 9, 2026 to November 26, 2029 and (iii) +add six new banks to San Mateo’s lending group. +ESG Highlights +During 2024 , we also executed in key ESG-related performance areas and continued to publish voluntary ESG +disclosures. Among other items, our ESG achievements included the following: +• A low rate of per-barrel emissions, including the substantial reduction in direct greenhouse gas emissions intensity +from 2019 levels; the significant use of non-fresh water, including recycled water; and a high percentage of oil and +water transportation by pipeline. +• A conscientious safety record, including zero employee lost time incidents per 200,000 employee man-hours in 2024 +and net spill rates of 0.001% of our oil production and 0.003% of our water production. +• Approximately 22,500 hours of employee continuing education, equating to approximately 50 hours per employee in +2024 , and management’s continued focus on risk management and cybersecurity, including quarterly reports by +executive management to the Audit Committee. +• The publishing of our annual Sustainability Report, which provides Matador’s investors and other interested parties +with quantitative metrics for evaluating the Company’s sustainability practices and performance. +Compensation Program Objectives +Our Board has a “pay for performance” philosophy and recognizes the leadership of our executive officers in contributing +to the Company’s achievements. Our future success and ability to create long-term value for our shareholders depend on +our ability to attract, retain and motivate highly qualified individuals in the oil and natural gas industry. In furtherance of +these goals, our executive compensation program is designed to meet the following key objectives: +• to be fair to both the executive and the Company and be competitive with comparable positions at companies in our +peer group; +• to attract and retain talented and experienced executives in light of the intense competition for talent in our industry +and areas of operation, including from peers and larger industry competitors; +• to align the interests of our executives with the interests of our shareholders and with the performance of our +Company for long-term value creation; +• to provide financial incentives to our executives to achieve our key corporate and individual objectives with an +appropriate mix of fixed and variable pay ; +• to foster a shared commitment among executives by coordinating their corporate and individual goals; and +• to provide compensation that takes into consideration the education, professional experience, knowledge, +commitment and dedication that is specific to each job and the unique qualities each executive possesses. +2025 Proxy Statement | Matador Resources Company 51 +2024 Say-on-Pay Results +At our 2024 Annual Meeting, support for our executive compensation program remained strong with 94% approval. The +Compensation Committee took this support into account as one of many factors it considered in connection with the +discharge of its responsibilities in exercising its judgment in establishing and overseeing our executive compensation +arrangements throughout the year, but did not make any changes to our compensation program as a direct result of the +2024 vote. +Compensation Program Best Practices +What We Do: +What We Don't Do: +✓ +We pay for performance—approximately 78% of our CEO’s +target total compensation for 2024 was variable and at risk, +with approximately 50% performance-based +× +We do not permit hedging of Company stock +✓ +We maintain robust stock ownership guidelines for officers +× +We do not provide a gross-up for excise taxes for severance +or change in control payments +✓ +Our Compensation Committee engages an independent +compensation consultant +× +We do not guarantee bonuses +✓ +We use competitive benchmarking in setting compensation +× +We do not reprice stock options without shareholder +approval +✓ +We conduct annual risk assessments of compensation +practices +× +We have no defined benefit or supplemental executive +retirement plans +✓ +We conduct regular shareholder engagement to gather +feedback on compensation practices +× +We do not allow pledging of Company stock, except in +limited circumstances +✓ +We hold an annual say-on-pay vote +× +We do not pay dividends on unvested phantom units, +restricted stock units (“RSUs”) or performance stock units +(“PSUs”) +✓ +We cap PSU payouts at target if absolute total shareholder +return is negative +× +We do not pay dividends on unvested restricted stock, +which accumulate and only settle once the underlying +shares have vested +52 Matador Resources Company | 2025 Proxy Statement +Elements of 2024 Compensation Program +Our executive compensation program places a considerable amount of an executive’s compensation at risk in the form of +incentive or equity-based compensation, which can be variable from year to year. We also seek to provide an appropriate +balance between annual incentives and long-term incentives to ensure that each executive is motivated to consider +longer-term Company performance over short-term results. +For 2024 , our management compensation program was comprised of the following primary elements: +2024 Element +Key Features +Why We Include This Element +Base Salary +• Fixed level of cash compensation +• Compensates each executive for his assigned +responsibilities, experience, leadership and +expected future contributions +Annual Cash Incentive +Payments +• Variable, annual, performance-based cash +compensation +• Focuses and motivates management to +achieve key corporate and individual +objectives +• Rewards achievements over the prior year +Phantom Units +• Approximately 50% of target total annual long- +term equity award value +• Vests ratably in annual installments over three +years from grant date +• Phantom Units settle in cash +• Directly aligns executive and shareholder +interests by tying the cash received on +settlement to the Company’s stock price +• Retains executives over vesting period +• Cash settlement of Phantom Units avoids +dilution of Common Stock +Performance Stock Units +• Approximately 50% of target total annual long- +term equity award value +• Vests between 0% and 200% following a three- +year performance period ending December 31, +2026 based on the Company’s relative total +shareholder return ranking as compared to our +peers +• If absolute total shareholder return is negative, +payout is capped at target (100%) +• Focuses executives on the Company’s long- +term performance as award is tied to the +Company’s total shareholder return relative to +the total shareholder return of its peers over a +three-year performance period +• Settlement in shares of the Company’s stock +increases alignment between executives and +shareholders +• Retains executives over vesting period +Severance and Change of +Control Benefits +• Specified severance pay and benefits are +provided under each Named Executive +Officer’s employment agreement in +connection with termination events, including +after a change in control +• Provides an incentive for executives to remain +with the Company despite the uncertainties of +a potential or actual change in control +• Provides a measure of financial security in the +event an executive’s employment is +terminated without cause +Other Benefits +• Broad-based 401(k) retirement, employee +stock purchase plan and health and welfare +benefits offered to all eligible employees +• Provides market competitive benefits +• Protects employees against catastrophic loss +and encourages a healthy lifestyle +2025 Proxy Statement | Matador Resources Company 53 +Consistent with our compensation program objectives, we provide our executive officers with a significant portion of their +total compensation in the form of variable, rather than fixed, compensation. Importantly, a significant portion of total +compensation is also performance-based. The percentages shown below reflect each executive’s 2024 target +compensation opportunity determined by the Compensation Committee and the Independent Board and do not reflect +actual payments made to the executives for 2024 . +2024 CEO Target Compensation +2024 Average Other NEO Target Compensation +~ 50% +Performance- +based +~ 78% Variable Pay +~ 50% +Performance- +based +~ 76% V ariable Pay +Role of the Independent Board, Compensation Committee and Management +The Compensation Committee annually evaluates each of the Company’s executive officers, including Mr. Foran, and +recommends to the Independent Board the proposed compensation structure for each of the executives, including salary, +equity and non-equity incentive compensation. Based on such recommendations, the Independent Board sets Mr. Foran’s +compensation each year. Mr. Foran consults with and provides recommendations to the Compensation Committee and +Independent Board regarding the compensation structure for each of the other Named Executive Officers. Based on the +recommendations of the Compensation Committee and Mr. Foran, the Independent Board sets the other Named +Executive Officers’ compensation each year. The members of the Independent Board are independent pursuant to the +listing standards of the NYSE and the rules and regulations promulgated by the SEC. +As part of its annual evaluations, the Compensation Committee: +• conducts an analysis of the Company’s annual performance relative to any performance criteria or targets established +under the Company's annual cash incentive plan (the "Cash Incentive Plan") and recommends to the Independent +Board the amount of the annual cash incentive award payouts; +• reviews and recommends the form of and number of shares or share-based units to be awarded pursuant to long- +term incentive awards, including vesting terms, performance metrics, performance peer groups and other material +provisions of such awards; +• reviews executive officer compensation levels as compared to the Company’s peers; +• reviews and recommends any employment agreement, severance agreement, change in control agreement or +provision or separation agreement or amendment thereof; and +• reviews and recommends any deferred compensation arrangement, retirement plan and other benefits and +perquisites. +54 Matador Resources Company | 2025 Proxy Statement +In addition, the Compensation Committee confirms at least annually that our compensation policies and practices do not +encourage unnecessary risk taking and reviews the relationship between risk management, corporate strategy and +executive compensation. The Compensation Committee considers, in establishing and reviewing our compensation +program, whether the program encourages unnecessary or excessive risk taking and has concluded that it does not and is +not reasonably likely to have a material adverse effect on us. Many features of our program reflect sound risk +management practices. Base salaries are fixed in amount and thus do not encourage risk taking. While annual cash +incentive payments are tied to management’s achievements during the applicable fiscal year, they also take into account +multiple performance criteria based on the executive’s individual performance and are within the discretion of the +Independent Board, with payout limits for each participant. Thus, the Compensation Committee believes that our annual +cash incentive awards appropriately balance risk and the desire to focus executives on specific short-term goals important +to the Company’s success, and that they do not encourage unnecessary or excessive risk taking. In addition, the +Compensation Committee believes that our equity compensation program provides an appropriate balance between the +goals of increasing the price of our Common Stock and avoiding potential risks that could threaten our growth and stability +due to the fact that the phantom units and PSUs vest over three years and the PSUs vest based on our relative total +shareholder return, with an overall payout limit and a further limit if absolute total shareholder return is negative. We also +maintain policies prohibiting hedging and pledging (except in limited circumstances) and stock ownership guidelines and a +clawback policy, which we believe further mitigate the potential for unnecessary or excessive risk taking. +In addition, pursuant to its charter, the Compensation Committee reviews and recommends to the Independent Board any +proposals for the adoption, amendment, modification or termination of our incentive compensation, equity-based plans +and non-equity based plans. +Role of the Independent Compensation Consultant +The Compensation Committee has engaged Meridian Compensation Partners, LLC ("Meridian") as its independent +executive compensation advisory firm. Meridian provides assessments of the competitiveness of the Company’s executive +compensation levels and practices relative to relevant executive labor markets and performs other tasks as requested by +the Compensation Committee. For 2024 , the Compensation Committee assessed the independence of Meridian pursuant +to applicable SEC and NYSE rules and concluded that Meridian’s engagement by the Compensation Committee did not +raise any conflicts of interest. +Use of Peer Group Market Data +Our independent compensation consultant benchmarks the pay levels of our officers against a group of competitor +companies in the oil and natural gas exploration and production sector (the “Benchmarking Peer Group”). In connection +with its annual review, in February of 2024 , the Compensation Committee and Independent Board adopted the following +Benchmarking Peer Group in 2024 , which was used in setting 2024 compensation levels: +APA Resources Corp. +Magnolia Oil & Gas Corp. +Permian Resources Corp. +Civitas Resources, Inc. +Marathon Oil Corp. +SM Energy Co. +Coterra Energy Inc. +Murphy Oil Corp. +Vital Energy, Inc. +Diamondback Energy, Inc. +Ovintiv Inc. +In addition to considering companies in the oil and natural gas exploration and production sector, the Compensation +Committee also considered company size characteristics such as assets, enterprise value and market capitalization when +approving the Benchmarking Peer Group. The Benchmarking Peer Group also includes certain companies with operations +in the Permian Basin that face similar opportunities and challenges that we face. For the 2024 Benchmarking Peer Group, +the Compensation Committee removed Callon Petroleum Co. and PDC Energy, Inc. following the announcements of their +respective acquisitions and added Civitas Resources, Inc., Murphy Oil Corp. and Vital Energy, Inc. As of December 31, +2023 , the Benchmarking Peer Group had a median market capitalization of $ 8.6 billion, compared to the Company’s +market capitalization of $ 6.8 billion at such date, placing the Company at the 45th percentile of the Benchmarking Peer +Group. +2025 Proxy Statement | Matador Resources Company 55 +The Benchmarking Peer Group is used by the Compensation Committee and the Independent Board in setting Named +Executive Officer salaries, annual cash incentive award opportunities, long-term incentive awards and target total direct +compensation levels. The Compensation Committee and Independent Board use this data to inform their pay decisions as +one data point among many others, including Company performance, individual performance, experience and +responsibilities, leadership and professional growth. +2024 Base Salaries +The Compensation Committee recommended, and the Independent Board approved, effective January 1, 2024 , the base +salary levels for the Named Executive Officers as set forth below. +Executive Officer +2023 Base Salary (1) +2024 Base Salary +Joseph Wm. Foran +$ 1,350,000 +$ 1,500,000 +Van H. Singleton, II +$ 800,000 +$ 850,000 +Brian J. Willey +$ 600,000 +$ 850,000 +G. Gregg Krug +$ — +$ 850,000 +Bryan A. Erman +$ — +$ 700,000 +(1) Information is not provided for Messrs. Krug or Erman for 2023 as they were not Named Executive Officers in 2023 . +The Independent Board determined that the base salary levels for each of the Named Executive Officers effective January +1, 2024 were warranted based upon each Named Executive Officer’s individual contributions to, among other items: +• the Company’s operational performance during 2023 , including record oil and natural gas production; +• the Company’s financial performance during 2023 , including generation of free cash flow in all four quarters of 2023; +• the Company’s stock price during 2023 ; +• the Company's acquisition and divestiture ("A&D") activity, including the acquisition of Advance Energy Partners +Holdings, LLC; +• the Company’s continued innovation and improvement in operational efficiencies; +• the Company’s efforts and performance in its ESG-related initiatives and disclosure of such initiatives; and +• the continued growth of the Company’s midstream business throughout 2023 . +2024 Annual Cash Incentive Compensation +The Company’s 2024 annual cash incentive compensation was awarded pursuant to the Cash Incentive Plan, which is +designed to link executive decision making and performance with the Company’s goals, reinforce these goals and ensure +the highest level of accountability for the success of the Company as a whole. The Cash Incentive Plan advances +Company and shareholder interests by providing an additional means to (i) sustain and enhance the culture of personal +commitment on the part of executives, select managers and key employees to the continued growth, development and +financial success of the Company and (ii) encourage them to remain with, and devote their best efforts to, the Company. +The Cash Incentive Plan provides for the grant of cash incentive compensation awards that may be paid to a participant +based upon achievement with respect to specified performance goals for a particular performance period. In addition, the +Cash Incentive Plan provides that the Compensation Committee and Independent Board may make adjustments to the +payout for individual executive officers based upon exceptional performance and attainment of certain enumerated +strategic goals (the “Strategic Objectives Adjustment”). No specific weightings are applied to any individual performance +or strategic goals, and the Compensation Committee uses its judgment in calculating overall payouts. +56 Matador Resources Company | 2025 Proxy Statement +Performance Goals +The chair of the Compensation Committee met with Mr. Foran and certain members of the executive management team to +review and discuss potential criteria for the 2024 annual Cash Incentive Plan performance goals. Based on these +meetings, the chair of the Compensation Committee proposed certain preliminary performance goal categories for 2024 to +the full Compensation Committee for consideration. The Compensation Committee then met with our executive +management team to review the proposed performance goal categories. As a result of these discussions, and upon the +recommendation of the Compensation Committee, the Independent Board determined to use the following threshold, +target and maximum performance goals for 2024 , which were each achieved at or above the target level, as shown below. +Performance goals may be impacted by a variety of factors considered by the Compensation Committee, such as the +specific costs anticipated in the areas in which we plan to operate in a given year and macroeconomic factors, including +commodity prices and inflation. As a result, performance targets may not increase every year. +2024 Performance Goals +Threshold +Target +Maximum +Actual +Results +Assessment +Net Debt/Adjusted EBITDA (1)(2)(3) +1.55x +1.42x +1.29x +1.05x +Exceeded +Maximum +Adjusted operating costs per BOE, excluding +interest ($/BOE) (4) +$14.90 +$13.90 +$12.90 +$12.42 +Exceeded +Maximum +Return on Average Capital Employed +(ROACE) (5) +25% +28% +31% +32% +Exceeded +Maximum +Total Shareholder Return vs. Peer Group +— +Upper 50% +Upper 25% +Upper 50% +Achieved Target +Environmental, Social and Governance (ESG) (6) +— +— +— +— +— +(7) +(1) Adjusted EBITDA is a non-GAAP financial measure included herein solely as a reference point under the Cash Incentive Plan. It is +commonly used by similar companies in our industry. For a definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to +Matador’s net income (loss) and net cash provided by operating activities, see Annex A to this Proxy Statement. +(2) As a reference point under the Cash Incentive Plan, Net Debt as of December 31, 2024 is calculated as (i) $2.15 billion in senior notes +outstanding, plus (ii) $648.4 million in debt under the Credit Agreement, including outstanding borrowings and letters of credit, less (iii) +$23.0 million in available cash. +(3) Attributable to Matador Resources Company shareholders after giving effect to those values attributable to third-party non-controlling +interests, including in San Mateo. +(4) Cash operating costs per BOE, excluding interest and midstream operating costs, is a non-GAAP financial measure included herein solely +as a reference point and is commonly used by similar companies in our industry. The Strategic Planning & Compensation Committee and +the Independent Board believe cash operating costs per BOE, excluding interest and midstream operating costs, is an appropriate +performance metric because it allows them to compare and to evaluate the efficiency of the Company's operations and their impact on the +Company's unit cash flows and compare its cash operating costs to prior periods and to its peers' results without regard to financing +methods or capital structure. Cash operating costs per BOE, excluding interest and midstream operating costs, can be calculated from the +Company’s audited financial statements included in the Annual Report on Form 10-K for the applicable year by adding the following +expenses per BOE: production taxes, transportation and processing; lease operating; and general and administrative. +(5) ROACE is equal to Adjusted EBITDA attributable to the Company's shareholders plus or minus (x) a discretionary adjustment for the +estimated change in the value of the Company's Delaware Basin acreage plus (y) cash inflows from (i) asset sales and other transactions +and (ii) strategic midstream transactions divided by total capitalization. +(6) Based on a quantitative and qualitative assessment of the Company’s efforts and performance in several ESG-related areas, including a +review of the Company’s results in the areas of environmental stewardship, safety processes and procedures, training of personnel, risk +management, cybersecurity and human capital management. +(7) Among other items, the Compensation Committee and Independent Board noted the substantial reduction of per-barrel emissions versus a +2019 baseline, the significant use of non-fresh water, including recycled water, the high percentage of operated produced water and +operated produced oil transported by pipeline, the Company's safety performance as reflected in the low employee lost time incident rate +and net spill rate, the number of training hours conducted by Company personnel, the Company's extensive human capital recruiting and +training programs, the publication of the Company’s annual Sustainability Report, and management’s continued focus on risk management +and cybersecurity, including quarterly reports by executive management to the Audit Committee. +2025 Proxy Statement | Matador Resources Company 57 +In addition to setting the 2024 performance goals outlined above, the Compensation Committee identified certain annual +financial and strategic achievements to be considered by the Compensation Committee and the Independent Board in +connection with the assessment of the performance of the Named Executive Officers during 2024 and the Strategic +Objectives Adjustment component for 2024 . These additional factors included: +• Adjusted Free Cash Flow (1) of $807 million; +• percentage of oil production growth of 33% ; +• reserves growth to 612 MMBOE; +• drilling and completions cost per foot of $910 ; +• lease operating expenses per BOE of $5.47 ; +• San Mateo Adjusted EBITDA (2) of $253 million; and +• the completion of numerous quality acreage, mineral and midstream transactions, including the Ameredev Acquisition +and the Pronto Transaction. +(1) Adjusted Free Cash Flow is a non-GAAP financial measure included herein solely as a reference point under the Cash Incentive Plan. It is +commonly used by similar companies in our industry. For a definition of Adjusted Free Cash Flow and a reconciliation of Adjusted Free +Cash Flow to Matador’s net cash provided by operating activities, see Annex A to this Proxy Statement. +(2) Adjusted EBITDA is a non-GAAP financial measure included herein solely as a reference point under the Cash Incentive Plan. It is +commonly used by similar companies in our industry. For a definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to San +Mateo’s net income and net cash provided by operating activities, see Annex A to this Proxy Statement. +2024 Incentive Opportunities +In making recommendations regarding potential 2024 annual cash incentive opportunities for our Named Executive +Officers, the Compensation Committee reviewed Meridian’s recommendations and the recommendations of Mr. Foran +regarding proposed target opportunities. Based on such review, which considered the differing responsibilities of each +Named Executive Officer and Benchmarking Peer Group data, where available, for bonus levels for comparable positions, +the 2024 target annual incentive opportunities for each of our Named Executive Officers were as set forth below. Such +opportunities, as a percentage of base salary, remained unchanged from 2023 target opportunities. +Participant +2024 Target +Annual +Incentive +Opportunity +as % of 2024 +Base Salary +Joseph Wm. Foran +100% +Van H. Singleton, II +100% +Brian J. Willey +100% +G. Gregg Krug +100% +Bryan A. Erman +100% +The maximum award opportunity for Mr. Foran was capped at 200% and for Messrs. Singleton, Willey, Krug and Erman +was capped at 175%, in each case, prior to application of the Strategic Objectives Adjustment. Our Independent Board +also determined to cap the Strategic Objectives Adjustment for each of the Named Executive Officers at 30% of such +Named Executive Officer’s otherwise calculated 2024 annual cash incentive payment. +58 Matador Resources Company | 2025 Proxy Statement +2024 Performance Results +In early 2025 , the Compensation Committee assessed the Company’s 2024 results in light of the performance goals, +annual financial and strategic achievements and the following individual performance milestones for each Named +Executive Officer when determining annual cash incentive award payouts: +Named Executive Officer +Individual Performance Milestones +Joseph Wm. Foran +Chairman and Chief +Executive Officer +• Provided direction and leadership throughout Matador in developing and executing +Matador’s strategy and operational plan , which resulted in record operational and financial +results +• Directed the origination, negotiation, closing and integration of the Ameredev Acquisition +• Provided leadership to the Board on various matters, including with respect to returning +value to shareholders through our fixed dividend, which increased again in 2024 +• Led firmwide focus on attracting, training and retaining talent and encouraging employee +leadership development and director engagement +• Directed efforts to develop and maintain positive relationships with directors, shareholders, +vendors and other key stakeholders and aligned our strategy and operational plan +throughout the organization by effectively communicating to directors, staff, shareholders +and the public +Van H. Singleton, II +President - Land, +Acquisitions and Divestitures +and Planning +• Oversaw the Company’s land, land administration and acquisition and development activities, +including nearly 200 transactions completed in 2024 +• Led the negotiation of the Ameredev Acquisition +• Coordinated business development activities and opportunities +• Served as Chairman of Greyhound Resources, LLC , the Company's joint venture with +Spearpoint Resources Company ("Greyhound") +Brian J. Willey +Executive Vice President and +Chief Financial Officer +• Led the collective effort to manage the Company's balance sheet and improve the Company's +already strong financial position through: +◦ $2.0 billion in public debt and equity offerings +◦ The revision of our Credit Agreement to, among other items, increase the elected +borrowing commitment by $900.0 million to $2.25 billion and add five new banks to +our lending group +◦ The amendment of the San Mateo Credit Facility to, among other items, increase the +lender commitments from $535.0 million to $800.0 million and add six new banks to +San Mateo’s lending group +• Coordinated and oversaw the general financial matters of the Company through the +management of the Company’s finance staff +• Served as Chairman of San Mateo +• Shared primary responsibility for investor conferences and non-deal roadshows with Mr. +Foran +2025 Proxy Statement | Matador Resources Company 59 +G. Gregg Krug +Executive Vice President - +Marketing and Midstream +Strategy +• Led the Company’s Marketing and Midstream business units, including San Mateo and Pronto +• Overall responsibility for the Company's oil and natural gas marketing activities +• Directed the negotiation of the Pronto Transaction +• Served as a member of the Board of Directors of San Mateo +• Shared primary responsibility for the Company's Marketing and Midstream strategy with +Mr. Foran +Bryan A. Erman +Executive Vice President, +General Counsel and Head +of M&A, Corporate +Secretary +• Coordinated and oversaw the general legal matters of the Company through the +management of the Company’s legal staff +• Head of M&A and shared responsibility with Mr. Singleton for A&D activities, including nearly +200 transactions completed in 2024 +• Led the execution, closing and integration of the Ameredev Acquisition and Pronto +Transaction, including all legal documentation +• Oversaw the risk management activities of the Company, including the Company's +Environmental, Health and Safety group and the Company's insurance program +• Corporate Secretary and one of the Company's primary Board contacts +• Served as a member of the Board of Directors of Greyhound +In evaluating the Environmental, Social and Governance performance metric, the Compensation Committee performed a +qualitative assessment of the Company’s ESG record for the year. Among other items, the Compensation Committee and +Independent Board noted the publication of the Company’s 2024 Sustainability Report, the substantial reduction of per- +barrel emissions versus a 2019 baseline, the significant use of non-fresh water, including recycled water, the high +percentage of operated produced water and operated produced oil transported by pipeline, the Company's safety +performance as reflected in the low employee lost time incident rate and net spill rate, the Company’s extensive human +capital recruiting and training programs, the number of training hours conducted by Company personnel and +management’s continued focus on risk management and cybersecurity, including quarterly reports by executive +management to the Audit Committee. +In assessing performance under the Strategic Objectives Adjustment, the Compensation Committee reviewed the +individual performance milestones listed above as well as additional individual contributions to the achievement of the +Company-wide performance goals and certain financial and strategic achievements. Based on this review, the +Compensation Committee determined that each of the Named Executive Officers performed at a high level in 2024 in +contributing to the Company’s success. +60 Matador Resources Company | 2025 Proxy Statement +Based on such assessment, the Compensation Committee recommended to the Independent Board the annual cash +incentive awards listed below for each Named Executive Officer under the Cash Incentive Plan, including Strategic +Objectives Adjustments equal to 30% for each of Messrs. Foran, Singleton and Krug and 26% for Mr. Erman. The +Independent Board approved such annual cash awards, which were paid to the Named Executive Officers in February +2025 . +Named Executive Officer +Target Award +Payable for 2024 +Maximum Award +Payable for 2024 +Actual Award +for 2024 +Joseph Wm. Foran +$1,500,000 +$3,900,000 +$3,900,000 +Van H. Singleton, II +$850,000 +$1,933,750 +$1,933,750 +Brian J. Willey +$850,000 +$1,933,750 +$1,487,500 +G. Gregg Krug +$850,000 +$1,933,750 +$1,933,750 +Bryan A. Erman +$700,000 +$1,592,500 +$1,542,500 +2024 Long-Term Incentive Compensation +In February 2024 , the Independent Board granted awards to the Named Executive Officers comprised of approximately +50% service-based cash-settled phantom units and approximately 50% share-settled PSUs. These long-term equity- +based awards facilitate retention of our Named Executive Officers, incentivize producing positive future results and further +align the interests of our Named Executive Officers with those of the Company’s shareholders. The table below provides +the key terms of the February 2024 equity-based awards for our Named Executive Officers: +Key Terms +Phantom Units +Performance Stock Units +Targeted percentage +of total award value +Approximately 50% +Approximately 50% +Vesting terms +Three years ratably on each +anniversary +Following three-year performance period ending December 31, 2026 +Performance metric +N/A +Relative total shareholder return, with payout capped at target if +absolute total shareholder return is negative +The number of shares underlying each grant (assuming the target number of PSUs) and the target value of the 2024 +annual equity grants are set forth in the table below: +Named Executive Officer +Phantom Units +Target +Performance +Stock Units +Targeted Value +Joseph Wm. Foran +30,000 +20,000 +$3,500,000 +Van H. Singleton, II +15,000 +10,000 +$1,750,000 +Brian J. Willey +15,000 +10,000 +$1,750,000 +G. Gregg Krug +15,000 +10,000 +$1,750,000 +Bryan A. Erman +15,000 +10,000 +$1,750,000 +2025 Proxy Statement | Matador Resources Company 61 +The Independent Board approved the total targeted value for the year for each Named Executive Officer and then +converted that value into an approximate aggregate number of units based on the closing price of our Common Stock on +the date prior to the date of grant. The units were then granted approximately 50% in the form of phantom units and +approximately 50% in the form of PSUs (at target). The PSUs may settle between 0% and 200% of the total target PSUs +subject to the award based on our total shareholder return relative to the total shareholder return of the peer group over a +three-year performance period from January 1, 2024 through December 31, 2026 . If our absolute total shareholder return +over such performance period is negative, no more than 100% of the target PSUs may vest. The applicable percentage of +vested units is shown below with respect to each percentile ranking and results are interpolated for results between the +various rankings shown below . +Company’s Relative Total Shareholder +Return Percentile Ranking +Percentage of Target PSUs +That Will Vest +0 +0% +10th +20% +20th +40% +30th +60% +40th +80% +50th +100% +60th +120% +70th +140% +80th +160% +90th +180% +100th +200% +The Compensation Committee and Independent Board approved the following group of peer companies for purposes of +assessing the Company’s relative total shareholder return under the 2024 PSU grants: +APA Resources Corp. +Murphy Oil Corp. +Civitas Resources, Inc. +Ovintiv Inc. +Coterra Energy Inc. +Permian Resources Corp. +Diamondback Energy, Inc. +SM Energy Co. +Magnolia Oil & Gas Corp. +SPDR S&P OIL & GAS EXP & PR +Marathon Oil Corp. +Vital Energy, Inc. +Vesting of 2022 Performance Stock Units +The PSU awards granted to the Named Executive Officers in February 2022 vested based on the percentile level at which +the total shareholder return to the Company’s stockholders over the three-year period ending December 31, 2024 stood in +relation to the total shareholder return realized over that period by each member of a group of peer companies established +at the time of the grant of the awards. In accordance with the terms of the award agreements governing the awards, each +of Callon Petroleum Co., PDC Energy, Inc. and Marathon Oil Corp. had been acquired during the period and were +removed from the 2022 peer group and excluded from the relative total shareholder return calculation for the vesting of +the 2022 PSUs. In accordance with the terms of the award agreements, the Compensation Committee also determined +that Diamondback Energy, Inc. was no longer an appropriate comparator company and should be removed from the peer +group as a result of its acquisition of Endeavor Energy Resources, L.P. Based on our performance after such +adjustments, the Company’s total shareholder return percentile ranking was at the 86 th percentile and the PSUs vested at +172 % of target. +62 Matador Resources Company | 2025 Proxy Statement +Benefits +We offer a variety of health and welfare programs to eligible employees, including the Named Executive Officers. The +health and welfare programs are intended to protect employees against catastrophic loss and encourage a healthy +lifestyle. Our health and welfare programs include medical, pharmacy, dental, disability and life insurance. We also offer a +401(k) plan for eligible employees, including the Named Executive Officers, to which we contribute an amount equal to 3% +of the employee’s eligible compensation, which is subject to limits established by the U.S. Internal Revenue Code of 1986, +as amended (the “Code”), and have the discretion to contribute an amount equal to up to an additional 4% of the +employee’s eligible compensation as a dollar-for-dollar matching contribution with respect to his or her elective deferral +contributions. The discretionary dollar-for-dollar match is subject to vesting based upon years of service to the Company +and the limits on the compensation that may be considered under the Code. In addition, we provide long-term care +insurance for certain of our executive officers. +Severance and Separation Arrangements +Employment Agreements +We have entered into employment agreements with each of our Named Executive Officers. Under the employment +agreements, if a termination of employment occurs pursuant to one of the following events: +• the Named Executive Officer dies; +• the Named Executive Officer is totally disabled; +• we mutually agree to end the employment agreement; +• we dissolve and liquidate; or +• the term of the employment agreement ends, +we will pay the Named Executive Officer the average of his annual cash bonus, which includes non-equity incentive +compensation, for the prior two years, pro-rated based on the number of complete or partial months completed during the +year of termination. +Also, under the employment agreements, if one of the following occurs: +• the Named Executive Officer’s employment is terminated other than (i) as set forth above, (ii) by us for "just cause" or +(iii) in connection with a “change in control” as described below; or +• the Named Executive Officer terminates his employment for “good reason,” +then, (i) for Mr. Foran, we will pay him twice his base salary and twice the average of his annual cash bonus for the prior +two years; and (ii) for Messrs. Singleton, Willey, Krug and Erman we will pay him 1.5 times his base salary and 1.5 times +the average of his annual cash bonus for the prior two years. +Finally, under the employment agreement of Mr. Foran, which was entered into in 2011, if we terminate Mr. Foran within +30 days prior to the “change in control” or within 12 months after the “change in control” without “just cause” or Mr. Foran +terminates his employment with or without “good reason” during such period, we will pay him three times his base salary +and three times the average of his annual cash bonus for the prior two years. This agreement was entered into prior to our +initial public offering. At that time, we believed a “modified single trigger” was appropriate given the Company’s size, early +stage of development and strong growth aspirations. Since that time, however, we have ceased to use “modified single +triggers” in executive employment agreements, and we intend to exclusively use “double triggers” going forward, as we +have since 2014. The agreements entered into with each of the other Named Executive Officers include a “double trigger” +such that if we terminate such executive within 30 days prior to the “change in control” or within 12 months after the +“change in control” without “just cause” or he terminates his employment with “good reason,” we will pay him three times +his base salary and three times the average of his annual cash bonus for the prior two years. In addition, if any of our +2025 Proxy Statement | Matador Resources Company 63 +Named Executive Officers are terminated or terminate their employment as set forth above in connection with a “change +in control,” all equity awards held by such Named Executive Officer vest immediately prior to such termination. +For definitions of “change in control,” “good reason” and “just cause,” please see the employment agreement of each +Named Executive Officer, each of which is included as an exhibit to the Company’s most recent Annual Report on Form +10-K. +Equity Plans +For equity grants under the Matador Resources Company 2019 Long-Term Incentive Plan (as amended, the “2019 Plan”), +other than the PSUs, vesting upon a “change in control” for the Named Executive Officers mirrors the terms of their +employment agreements. The PSUs vest upon a “change in control” based on performance achieved through the date of +such change in control, as it is anticipated that a change in control would make achievement of relative total shareholder +performance impractical to measure. +The “change in control” provisions in the employment agreements and the equity grants under the 2019 Plan help prevent +management from being distracted by rumored or actual changes in control. The “change in control” provisions provide: +• incentives for those Named Executive Officers to remain with us despite the uncertainties of a potential or actual +change in control; +• assurance of severance payments for terminated Named Executive Officers; and +• access to equity compensation after a change in control. +Stock Ownership Guidelines +We have adopted stock ownership guidelines for the following officers in the following designated amounts: +• Chairman and Chief Executive Officer—shares equal to five times base salary; +• President—shares equal to five times base salary; +• Executive Vice Presidents—shares equal to two and 1/2 times base salary; +• Senior Vice Presidents—shares equal to two times base salary; and +• Vice Presidents and Executive Directors—shares equal to one and 1/2 times base salary. +Newly appointed officers have until the fifth anniversary of his or her appointment as an officer of the Company within +which to achieve the stock ownership position. Shares that count toward the stock ownership guidelines include time- +based shares of restricted stock. Shares that will not count toward the stock ownership guidelines include shares +underlying unexercised stock options, unexercised stock appreciation rights, phantom units and performance-based +awards for which the performance requirements have not been satisfied. +Until each of the above officers reaches the stock ownership level required of his or her position, such officer must hold at +least 50% of all “net shares” received through restricted stock, PSU or RSU vesting or realized through stock option +exercises. For this purpose, “net shares” means all shares retained after applicable withholding of any shares for tax +purposes. Additionally, upon the vesting of restricted stock, PSUs or RSUs or the exercise of stock options, each officer +must hold the net shares for a minimum of 12 months following such vesting or exercise, or until his earlier retirement. As +of December 31, 2024 , each Named Executive Officer owned shares in excess of the applicable minimum requirement set +forth in the stock ownership guidelines, and Mr. Foran held shares with a value equal to approximately 203 times his base +salary then in effect. +64 Matador Resources Company | 2025 Proxy Statement +Insider Trading Policy +The Board has adopted an insider trading policy (the “Insider Trading Policy”) governing purchases, sales and other +transactions in the Company’s securities by its insiders, including its directors, officers, employees and in-house direct +contractors. The Company believes the Insider Trading Policy is reasonably designed to promote compliance with insider +trading laws, rules and regulations, as well as applicable NYSE listing standards. A copy of the Insider Trading Policy has +been filed as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 . +Anti-Hedging and Anti-Pledging Policies +Pursuant to the Company’s Insider Trading Policy, the Company prohibits hedging of its securities by directors, officers or +employees. Specifically, no such person shall purchase or sell, or make any offer to purchase or offer to sell, derivative +securities relating to the Company’s stock, whether or not issued by the Company, or financial instruments that are +designed to hedge or offset any decrease in the market value of the Company’s stock (including but not limited to prepaid +variable forward contracts, equity swaps, collars and exchange funds) or otherwise engage in transactions that hedge or +offset, or are designed to hedge or offset, any decrease in the market value of Company equity securities (a) granted to +such person by the Company as part of the compensation of such person; or (b) held, directly or indirectly, by such +person. The Insider Trading Policy also restricts directors and executive officers from pledging more than 25% of his or +her holdings of the Company’s stock without the prior written consent of the Environmental, Social and Corporate +Governance Committee. +Equity Grant Practices +The Independent Board generally grants annual equity awards to executive officers at its regularly scheduled meeting +each February. Awards to non-executive employees are typically granted during the first half of the year. Although the +Company did not grant stock options or stock appreciation rights in 2024, eligible employees may enroll to purchase +shares of the Company’s Common Stock under the terms of the Matador Resources Company 2022 Employee Stock +Purchase Plan (the “ESPP”), with purchase dates generally in June and December of each year. In special circumstances, +including the hiring or promotion of an individual or where it is otherwise determined to be in the Company’s best interest, +the Company may approve grants to be effective at other times. The Company may change its equity grant practices in +the future. The Company does not approve grants in anticipation of the release of material nonpublic information and does +not time the disclosure of material nonpublic information for the purpose of affecting the value of executive compensation. +Clawback Policy +The Company maintains a compensation clawback policy applicable to the Company’s executive officers in accordance +with applicable NYSE listing rules, a copy of which is filed as an exhibit to the Company’s Annual Report on Form 10-K for +the year ended December 31, 2024 . The Company’s clawback policy generally requires recovery of incentive-based +compensation received by executive officers during the three fiscal years preceding the date it is determined that the +Company is required to prepare an accounting restatement of its financial statements (including any such correction +recorded in the Company’s current period financial statements) due to material non-compliance with any financial +reporting requirement under the federal securities laws. The amount required to be recovered is the excess of the amount +of incentive-based compensation received over the amount that would have been received had it been determined or +calculated based on the Company’s restated financial results. +2025 Proxy Statement | Matador Resources Company 65 +Strategic Planning and Compensation Committee Report +We have reviewed and discussed with management the Compensation Discussion and Analysis required by Item +402(b) of Regulation S-K and based on such review and discussions, we recommended to the Board that the +Compensation Discussion and Analysis be included in this Proxy Statement and incorporated by reference to the +Company’s Annual Report on Form 10-K for the year ended December 31, 2024 . +Strategic Planning and Compensation Committee, +R. Gaines Baty, Chair +Reynald A. Baribault +Monika U. Ehrman +Timothy E. Parker +Kenneth L. Stewart +Summary Compensation Table +The following table summarizes the total compensation awarded to, earned by or paid to the Named Executive Officers for +2024 , 2023 and 2022 . Mr. Willey was not a Named Executive Officer prior to 2023 and Messrs. Krug and Erman were not +Named Executive Officers prior to 2024. This table and the accompanying narrative should be read in conjunction with the +CD&A, which sets forth the objectives and other information regarding our executive compensation program: +Name and Principal Position +Year +Salary +Stock Awards (1) +Non-Equity +Incentive Plan +Compensation (2) +All Other +Compensation +Total +Joseph Wm. Foran +2024 +$1,500,000 +$3,010,300 +$3,900,000 +$26,749 (3) +$8,437,049 +Chairman of the Board and +2023 +$1,350,000 +$3,575,900 +$3,105,000 +$25,699 +$8,056,599 +Chief Executive Officer +2022 +$1,350,000 +$4,472,369 +$3,105,000 +$23,949 +$8,951,318 +Van H. Singleton, II +2024 +$850,000 +$1,505,150 +$1,933,750 +$24,150 (4) +$4,313,050 +President-Land, Acquisitions +2023 +$800,000 +$1,787,950 +$1,610,000 +$23,100 +$4,221,050 +and Divestitures and Planning +2022 +$750,000 +$2,140,604 +$1,509,375 +$21,350 +$4,421,329 +Brian J. Willey +2024 +$850,000 +$1,505,150 +$1,487,500 +$24,150 (4) +$3,866,800 +Executive Vice President +2023 +$600,000 +$1,008,980 +$1,365,000 +$23,100 +$2,997,080 +and Chief Financial Officer +G. Gregg Krug +2024 +$850,000 +$1,505,150 +$1,933,750 +$24,150 (4) +$4,313,050 +Executive Vice President-Marketing +and Midstream Strategy +Bryan A. Erman +2024 +$700,000 +$1,505,150 +$1,542,500 +$24,150 (4) +$3,771,800 +Executive Vice President, +General Counsel and Head of M&A +(1) Reflects the grant date fair value of phantom units, PSUs or restricted stock awards, as applicable, computed in accordance with Financial +Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718, excluding the effect of any estimated forfeitures. +The Company uses the Monte Carlo simulation method to measure the fair value of PSUs and the closing price of the Company's Common +Stock on the trading day prior to the grant date to measure the fair value of restricted stock and phantom unit awards. See Note 9 to the +Company’s consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2024 for additional +detail regarding assumptions underlying the value of these awards . For 2024 , the portion of the amount reflected in this column relating to the +PSUs is calculated based on probable outcome with respect to achievement of the applicable performance goals as of the grant date and +assumes achievement between target and maximum. The grant date fair value of PSUs granted in 2024 assuming achievement of maximum +performance is $2,243,600 for Mr. Foran and $1,121,800 for each of the other Named Executive Officers. +(2) Represents awards pursuant to the Cash Incentive Plan. See “—Compensation Discussion and Analysis— 2024 Annual Cash Incentive +Compensation” above. +(3) Consists of $24,150 in 401(k) Company and matching contributions as described in “—Compensation Discussion and Analysis—Benefits” +and $2,599 in long-term care insurance premiums. +(4) Reflects 401(k) Company and matching contributions as described in “—Compensation Discussion and Analysis—Benefits.” +EXECUTIVE COMPENSATION +66 Matador Resources Company | 2025 Proxy Statement +Grants of Plan-Based Awards Table +The following table sets forth certain information regarding non-equity incentive awards granted by the Independent Board +pursuant to the Cash Incentive Plan and awards of cash-settled phantom units and share-settled PSUs granted by the +Independent Board to the Named Executive Officers pursuant to the 2019 Plan during the year ended December 31, +2024 : +Estimated Future Payouts Under Non-Equity +Incentive Plan Awards (1) +Estimated Future Payouts Under Equity +Incentive Plan Awards (2) +All Other +Stock +Awards: +Number of +Shares of +Stock or +Units (3) +Grant Date +Fair Value of +Stock +Awards (4) +Threshold +Target +Maximum +Threshold +Target +Maximum +Name +Grant Date +($) +($) +($) +(#) +(#) +(#) +(#) +($) +Joseph Wm. Foran +- +— +1,500,000 +3,900,000 +— +— +— +— +— +2/14/24 +— +— +— +— +20,000 +40,000 +— +1,327,600 +2/14/24 +— +— +— +— +— +— +30,000 +1,682,700 +Van H. Singleton, II +- +— +850,000 +1,933,750 +— +— +— +— +— +2/14/24 +— +— +— +— +10,000 +20,000 +— +663,800 +2/14/24 +— +— +— +— +— +— +15,000 +841,350 +Brian J. Willey +- +— +850,000 +1,933,750 +— +— +— +— +— +2/14/24 +— +— +— +— +10,000 +20,000 +— +663,800 +2/14/24 +— +— +— +— +— +— +15,000 +841,350 +G. Gregg Krug +- +— +850,000 +1,933,750 +— +— +— +— +— +2/14/24 +— +— +— +— +10,000 +20,000 +— +663,800 +2/14/24 +— +— +— +— +— +— +15,000 +841,350 +Bryan A. Erman +- +— +700,000 +1,592,500 +— +— +— +— +— +2/14/24 +— +— +— +— +10,000 +20,000 +— +663,800 +2/14/24 +— +— +— +— +— +— +15,000 +841,350 +(1) Represents the target and maximum opportunities under the Cash Incentive Plan. See “—Compensation Discussion and Analysis— 2024 Annual +Cash Incentive Compensation” and “—Summary Compensation Table— Non-Equity Incentive Plan Compensation” regarding the actual +payments made to the Named Executive Officers pursuant to the Cash Incentive Plan. +(2) Represents PSUs that provide for settlement of between 0% and 200% of the total target shares subject to the award based on achievement of +the relative total shareholder return performance metric over a three-year performance period from January 1, 2024 through December 31, 2026 . +If our absolute total shareholder return over such performance period is negative, no more than 100%, the target level, of the PSUs may vest. +See “—Compensation Discussion and Analysis— 2024 Long-Term Incentive Compensation.” The PSUs do not provide for a threshold number of +shares that may be earned. +(3) Represents phantom units that provide for settlement in cash. See “—Compensation Discussion and Analysis— 2024 Long-Term Incentive +Compensation.” +(4) Represents the grant date fair value of phantom units or PSUs, as applicable, computed in accordance with FASB ASC Topic 718, excluding the +effect of any estimated forfeitures. The Company uses the Monte Carlo simulation method to measure the grant date fair value of PSUs and the +closing price of the Company's Common Stock on the trading day prior to the grant date to measure the grant date fair value of phantom unit +awards. See Note 9 to the Company’s consolidated financial statements included in its Annual Report on Form 10-K for the year ended +December 31, 2024 for additional detail regarding assumptions underlying the value of these awards. +2025 Proxy Statement | Matador Resources Company 67 +Outstanding Equity Awards at December 31, 2024 +Option Awards +The following table summarizes the total outstanding shares of restricted stock, cash-settled phantom units and share- +settled PSUs held as of December 31, 2024 by each Named Executive Officer. None of the Named Executive Officers +held any unexercised stock options as of such date. +Stock Awards +Name +Award Type +Number of +Shares or Units +of Stock That +Have Not +Vested +(#) +Market Value of Shares +or Units of Stock That +Have Not Vested (1) +($) +Equity Incentive Plan +Awards: Number of +Unearned Shares, Units +or Other Rights That +Have Not Vested (2) +(#) +Equity Incentive Plan +Awards: Market or +Payout Value of +Unearned Shares, Units +or Other Rights That +Have Not Vested (2) +($) +Joseph Wm. Foran +Phantom units +66,811 +3,758,787 +— +— +PSUs +— +— +60,000 +3,375,600 +Van H. Singleton, II +Phantom units +33,046 +1,859,168 +— +— +PSUs +— +— +30,000 +1,687,800 +Brian J. Willey +Phantom units +15,000 +843,900 +— +— +PSUs +— +— +26,000 +1,462,760 +Restricted stock +— +— +9,214 +518,380 +G. Gregg Krug +Phantom units +33,046 +1,859,168 +— +— +PSUs +— +— +30,000 +1,687,800 +Bryan A. Erman +Phantom units +15,000 +843,900 +— +— +PSUs +— +— +26,000 +1,462,760 +Restricted stock +— +— +9,214 +518,380 +(1) The market value is calculated based upon the closing price of our Common Stock on December 31, 2024 of $56.26 per share. +(2) In accordance with SEC rules, the number of unearned PSUs and market value presented assume: (i) vesting at the target level of 2023 PSUs +and (ii) vesting at the maximum level of 2024 PSUs, in each case calculated based upon the closing price of our Common Stock on December +31, 2024 of $56.26 per share . +The following table provides the vesting dates for restricted stock, cash-settled phantom units and share-settled PSUs +outstanding as of December 31, 2024 : +Vesting Date +Award Type +Joseph Wm. +Foran +Van H. Singleton +Brian J. Willey +G. Gregg Krug +Bryan A. Erman +2/14/25 +Phantom units +10,000 +5,000 +5,000 +5,000 +5,000 +2/16/25 +Restricted stock +— +— +2,667 +— +2,667 +2/16/25 +Phantom units +10,000 +5,000 +— +5,000 +— +2/17/25 +Restricted stock +— +— +3,880 +— +3,880 +2/17/25 +Phantom units +16,811 +8,046 +— +8,046 +— +12/31/25 +PSUs (1) +20,000 +10,000 +6,000 +10,000 +6,000 +2/14/26 +Phantom units +10,000 +5,000 +5,000 +5,000 +5,000 +2/16/26 +Restricted stock +— +— +2,667 +— +2,667 +2/16/26 +Phantom units +10,000 +5,000 +— +5,000 +— +12/31/26 +PSUs (1) +40,000 +20,000 +20,000 +20,000 +20,000 +2/14/27 +Phantom units +10,000 +5,000 +5,000 +5,000 +5,000 +Total Unvested Shares and Units +126,811 +63,046 +50,214 +63,046 +50,214 +(1) The vesting date shown reflects the end of the performance period established by the PSU award agreements. The PSUs settle following the +C ompensation Committee’s certification of the achievement of the performance goal, which must occur within 60 days of completion of the +performance period; however, continued employment is only required through the end of the performance period. The number of PSUs shown +assumes (i) vesting at the target level of 2023 PSUs and (ii) vesting at the maximum level of 2024 PSUs. +68 Matador Resources Company | 2025 Proxy Statement +Option Exercises and Stock Vested +The following table provides information on the stock awards (consisting of restricted stock, cash-settled phantom units +and share-settled PSUs) that vested for each Named Executive Officer during 2024 . None of the Named Executive +Officers exercised any stock options during 2024 . +Stock Awards +Name +Number of Shares Acquired on +Vesting (1) +(#) +Value Realized on Vesting (2) +($) +Joseph Wm. Foran +106,897 +6,277,987 +Van H. Singleton, II +49,820 +2,925,199 +Brian J. Willey +24,423 +1,434,147 +G. Gregg Krug +49,820 +2,925,199 +Bryan A. Erman +24,423 +1,434,147 +(1) Reflects the aggregate number of shares of restricted stock, cash-settled phantom units and share-settled PSUs that vested. Pursuant to the +terms thereof, the phantom units were settled in cash, and the grantee did not acquire any shares upon vesting. +(2) Reflects the number of shares of restricted stock, cash-settled phantom units and share-settled PSUs vested multiplied by the closing price of our +Common Stock on the applicable vesting date. +2025 Proxy Statement | Matador Resources Company 69 +EXECUTIVE COMPENSATION +Potential Payments upon Termination or Change in Control +Long-Term Incentive Plans +Equity awards under the 2019 Plan, other than the PSUs, vest upon a “change in control” for the Named Executive +Officers according to the terms of their employment agreements described below. +Pursuant to the terms of the PSU award agreements, upon a “change in control,” the Named Executive Officer would vest +in the number of PSUs that would have otherwise vested based on the Company’s performance through an abbreviated +performance period that ends immediately prior to the effective date of such change in control. For definition of “change in +control,” please see the 2019 Plan, which is included as an exhibit to the Company’s most recent Annual Report on Form +10-K. +Employment Agreements +As described under “—Compensation Discussion and Analysis—Severance and Separation Arrangements—Employment +Agreements,” in contemplation of our initial public offering, on August 9, 2011, we entered into an employment agreement +with Mr. Foran and, in each of October and December 2011, amended Mr. Foran’s employment agreement. Effective +February 2016, we entered into an employment agreement with Mr. Krug and, in July 2019, amended Mr. Krug's +employment agreement. In addition, in February 2015, we entered into an employment agreement with Mr. Singleton and, +in April 2024, we entered into employment agreements with Messrs. Willey and Erman. The principal difference in Messrs. +Singleton, Willey, Krug and Erman’s employment agreements as compared to the employment agreement of Mr. Foran is +that their agreements do not include a “modified single trigger” that would have allowed them to receive “change in +control” severance if they terminated their agreements without “good reason” within 30 days prior to or 12 months after a +change in control. In addition to not including a “modified single trigger,” Messrs. Willey and Erman's employment +agreements do not include termination for good reason as a trigger to receive severance payments and benefits except +following a change in control and include a longer non-compete covenant, as discussed below. Pursuant to the terms of +the employment agreements, we may be required to make certain payments to one or more of our Named Executive +Officers upon the occurrence of certain events resulting in such Named Executive Officer’s termination. The employment +agreements do not provide for gross-ups for excise taxes on severance or other payments in connection with a change in +control. For a detailed description of the events that may trigger such payments, see “—Compensation Discussion and +Analysis—Severance and Separation Arrangements—Employment Agreements.” +The employment agreements each contain a non-disclosure of confidential information provision that requires each +Named Executive Officer to maintain, both during and after employment, the confidentiality of information used by such +Named Executive Officer in the performance of his job duties. +Additionally, each of the employment agreements contains a non-competition provision, pursuant to which each Named +Executive Officer has agreed that: (i) for six months following termination by us for total disability, or by such Named +Executive Officer (excluding Messrs. Willey and Erman) for good reason or (ii) for 12 months, with respect to Messrs. +Foran, Singleton and Krug and 18 months with respect to Messrs. Willey and Erman, following termination (a) by us for +just cause, (b) by such Named Executive Officer other than for good reason (excluding Messrs. Willey and Erman, who +are subject to such 18-month restriction upon any voluntary resignation) or (c) upon a termination without just cause or for +good reason in connection with a change in control (24 months with respect to Messrs. Willey and Erman), such Named +Executive Officer shall not, without our prior written consent (not to be unreasonably withheld if the Named Executive +Officer’s employment is terminated by the Named Executive Officer other than for good reason (excluding Messrs. Willey +and Erman)), directly or indirectly: (x) invest in (other than investments in publicly-owned companies which constitute not +more than 1% of the voting securities of any such company) a competing business with significant assets in the restricted +area or (y) participate in a competing business as a manager, employee, director, officer, consultant, independent +contractor or other capacity or otherwise provide, directly or indirectly, services or assistance to a competing business in a +position that involves input into or direction of such competing business’s decisions within the restricted area. +For definitions of “change in control,” “good reason,” “just cause,” “competing business,” “significant assets” and “restricted +area,” please see the employment agreement of each Named Executive Officer, each of which is included as an exhibit to +the Company’s most recent Annual Report on Form 10-K . +70 Matador Resources Company | 2025 Proxy Statement +Furthermore, other than Mr. Foran’s employment agreement, each employment agreement contains a non-solicitation +provision, pursuant to which, during the restricted periods described above (except Messrs. Willey and Erman ’s restricted +period is six months for disability termination and 24 months for the other terminations specified above), subject to certain +exceptions, Messrs. Singleton, Willey, Krug and Erman shall not, without our prior written consent, solicit for employment +or a contracting relationship, or employ or retain any person who is or has been, within six months prior to such time, +employed by or engaged as an individual independent contractor by us or our affiliates or induce or attempt to induce any +such person to leave his or her employment or independent contractor relationship with us or our affiliates. +For the Named Executive Officer to receive any severance payments and benefits described below for termination by us +without just cause, by the Named Executive Officer for good reason or, following a change in control, by us without cause +or by the Named Executive Officer with good reason, with respect to Messrs. Singleton, Willey, Krug and Erman , or with or +without good reason, with respect to Mr. Foran, the Named Executive Officer must comply with the applicable non- +disclosure, non-competition and non-solicitation provisions described above. +Finally, as a condition to receiving any severance payments and benefits under their respective employment agreements, +each Named Executive Officer is required to execute a separation agreement and release in favor of us. +To describe the payments and benefits that are triggered for each event of termination, we have created the following +table estimating the payments and benefits that would be paid to each Named Executive Officer under each element of +our compensation program assuming that such Named Executive Officer’s employment agreement terminated on +December 31, 2024 , the last day of our 2024 fiscal year. In all cases, the accelerated equity awards were valued as of +December 31, 2024 , based upon, where applicable, $56.26 per share (the closing price of our Common Stock on such +date). The amounts in the table below are calculated as of December 31, 2024 pursuant to SEC rules and are not +intended to reflect actual payments that may be made. Actual payments that may be made would be based on the dates +and circumstances of the applicable event. +2025 Proxy Statement | Matador Resources Company 71 +Payment Upon Change in Control or Termination +Named Executive Officer +Category of Payment +Upon Mutual +Agreement, +Dissolution/ +Liquidation, Death +or Total Disability +($) (1) +Termination by +Us Without Just +Cause or by +Named Executive +Officer for Good +Reason ($) (1) +Termination +Following a +Change in Control +Without Cause or +by Named +Executive Officer +With or Without +Good Reason +($) (2)(3) +Change in Control +Without +Termination ($) (3) +Joseph Wm. Foran +Salary +— +3,000,000 (4) +4,500,000 (5) +— +Bonus +3,502,500 (6) +7,005,000 (7) +10,507,500 (8) +— +Vesting equity: (9) +Phantom Units +— +— +3,758,787 +— +PSUs +— +— +2,250,400 +2,250,400 +Total +3,502,500 +10,005,000 +21,016,687 +2,250,400 +Van H. Singleton, II +Salary +— +1,275,000 (10) +2,550,000 (5) +— +Bonus +1,771,875 (6) +2,657,813 (11) +5,315,625 (8) +— +Vesting equity: (9) +Phantom Units +— +— +1,859,168 +— +PSUs +— +— +1,125,200 +1,125,200 +Total +1,771,875 +3,932,813 +10,849,993 +1,125,200 +Brian J. Willey +Salary +— +1,275,000 (10) +2,550,000 (5) +— +Bonus +1,426,250 (6) +2,139,375 (11) +4,278,750 (8) +— +Vesting equity: (9) +Phantom Units +— +— +843,900 +— +PSUs +— +— +900,160 +900,160 +Restricted stock +— +— +518,380 +— +Total +1,426,250 +3,414,375 +9,091,190 +900,160 +G. Gregg Krug +Salary +— +1,275,000 (10) +2,550,000 (5) +— +Bonus +1,771,875 (6) +2,657,813 (11) +5,315,625 (8) +— +Vesting equity: (9) +Phantom Units +— +— +1,859,168 +— +PSUs +— +— +1,125,200 +1,125,200 +Total +1,771,875 +3,932,813 +10,849,993 +1,125,200 +Bryan A. Erman +Salary +— +1,050,000 (10) +2,100,000 (5) +— +Bonus +1,375,000 (6) +2,062,500 (11) +4,125,000 (8) +— +Vesting equity: (9) +Phantom Units +— +— +843,900 +— +PSUs +— +— +900,160 +900,160 +Restricted stock +— +— +518,380 +— +Total +1,375,000 +3,112,500 +8,487,440 +900,160 +(1) Amounts due upon death, total disability, mutual agreement, dissolution or liquidation, termination by us without cause or termination by a Named +Executive Officer for good reason are payable in a lump sum on the 60th day following the date of termination unless otherwise required by +Section 409A of the Code. Messrs. Willey and Erman's employment agreements do not provide for severance payments and benefits if they +terminate for “good reason” except following a change in control . +(2) Amounts due to Messrs. Foran, Singleton and Krug in the event that such Named Executive Officer is terminated without “just cause” or +terminates his employment for “good reason” (or by Mr. Foran without good reason) within 30 days prior to, or 12 months following, a “change in +control” are payable in a lump sum on the date that immediately follows six months from the date of termination or, if earlier, within 30 days +following such Named Executive Officer’s death. Amounts due to Messrs. Willey and Erman in the event that such Named Executive Officer is +terminated without “just cause” or terminates his employment for “good reason” within 30 days prior to, or 12 months following, a “change in +control” are payable in a lump sum on the 60th day following the date of termination unless otherwise required by Section 409A of the Code. +(3) Pursuant to the terms of the PSU award agreements, upon a “change in control,” the Named Executive Officer would vest in the number of PSUs +that would have otherwise vested based on the Company’s performance through an abbreviated performance period that ends immediately prior +to the effective date of such change in control. The amount shown assumes achievement of the 50th percentile in relative total shareholder return +performance with 100% of target units vesting. +(4) Represents two times such Named Executive Officer’s base salary as of the termination date. +(5) Represents three times such Named Executive Officer’s base salary as of the termination date. +72 Matador Resources Company | 2025 Proxy Statement +(6) Represents an amount equal to the average annual cash bonus pursuant to the Cash Incentive Plan paid to such Named Executive Officer for +2024 and 2023 , respectively. +(7) Represents two times an amount equal to the average annual cash bonus pursuant to the Cash Incentive Plan paid to such Named Executive +Officer for 2024 and 2023 , respectively. +(8) Represents three times an amount equal to the average annual cash bonus pursuant to the Cash Incentive Plan paid to such Named Executive +Officer for 2024 and 2023 , respectively. +(9) Mr. Foran’s employment agreement provides for accelerated and full vesting of unvested equity incentive awards held by him in the event that he +is terminated without “just cause” or terminates his employment with or without “good reason” within 30 days prior to, or 12 months following, a +“change in control.” Messrs. Singleton, Willey, Krug and Erman’s employment agreements provide for accelerated and full vesting of unvested +equity incentive awards held by these Named Executive Officers in the event that such Named Executive Officer is terminated without “just +cause” or terminates his employment with “good reason,” within 30 days prior to, or 12 months following, a “change in control.” The amounts +disclosed reflect the closing price of our Common Stock on December 31, 2024 of $56.26 per share multiplied by the number of unvested +phantom units, restricted stock or PSUs, as applicable, held by such Named Executive Officer on December 31, 2024 . +(10) Represents 1.5 times such Named Executive Officer’s base salary as of the termination date. +(11) Represents 1.5 times an amount equal to the average annual cash bonus pursuant to the Cash Incentive Plan paid to such Named Executive +Officer for 2024 and 2023 , respectively. +2025 Proxy Statement | Matador Resources Company 73 +CHIEF EXECUTIVE OFFICER PAY RATIO +CHIEF EXECUTIVE OFFICER PAY RATIO +As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(u) of +Regulation S-K (“Item 402(u)”), we are providing the following information regarding the ratio of the annual total +compensation of our median-compensated employee (as described below) and that of our Chairman and Chief Executive +Officer, Joseph Wm. Foran. We believe that the pay ratio reflected below is a reasonable estimate calculated in a manner +consistent with Item 402(u). +The SEC’s rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s +annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions and to make +reasonable estimates and assumptions that reflect their employee populations and compensation practices. As a result, +the pay ratio reported by other companies may not be comparable to the pay ratio reported below, as other companies +have different employee populations and compensation practices and may utilize different methodologies, exclusions, +estimates and assumptions in calculating their own pay ratios. +Pursuant to Item 402(u), we identified the median-compensated employee of all our employees (other than Mr. Foran) +using our employee population as of December 15, 2024 , which consisted of 450 employees (all of which are located in +the United States), and using a compensation measure of total cash compensation, consisting of total base pay and +bonuses earned during the year ended December 31, 2024 . This compensation measure was consistently applied to all +employees. Compensation was annualized on a straight-line basis for employees who did not work all of 2024 . +After identifying the median-compensated employee using this consistently applied compensation measure, we then +calculated that employee’s 2024 annual total compensation in the same manner used to calculate the Named Executive +Officers’ total compensation, as reported in the Summary Compensation Table. +For 2024 , the annual total compensation of our median-compensated employee was $227,238 , and the annual total +compensation of Mr. Foran was $8,437,049 , as reported in the Summary Compensation Table. Based on this information, +for 2024 , the ratio of Mr. Foran’s annual total compensation to the annual total compensation of our median-compensated +employee was estimated to be 37 to 1. +74 Matador Resources Company | 2025 Proxy Statement +PAY VERSUS PERFORMANCE +PAY VERSUS PERFORMANCE +As required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(v) of +Regulation S-K, we are providing the following information about the relationship between executive “compensation +actually paid” and certain financial performance of the Company. For further information concerning the Company’s pay +for performance philosophy and how the Company aligns executive compensation with the Company’s performance, see +“Executive Compensation—Compensation Discussion and Analysis.” +Year (a) +Summary +Compensation +Table Total for +Principal +Executive +Officer +(“PEO”) (1) (b) +Compensation +Actually Paid +to PEO (2) +(c) +Average +Summary +Compensation +Table Total for +Non-PEO +Named +Executive +Officers (3) +(d) +Average +Compensation +Actually Paid +to Non-PEO +Named +Executive +Officers (4) +(e) +Value of Initial Fixed $100 +Investment Based On: +Net Income +(thousands) (7) +(h) +Adj. EBITDA +(thousands) (8) +(i) +Total +Shareholder +Return (5) +(f) +Peer Group +Total +Shareholder +Return (6) +(g) +2024 +$ 8,437,049 +$ 9,339,737 +$ 4,066,175 +$ 4,385,440 +$ 320.30 +$ 192.16 +$ 885,322 +$ 2,298,777 +2023 +$ 8,056,599 +$ 7,633,074 +$ 3,542,613 +$ 3,274,057 +$ 323.31 +$ 208.67 +$ 846,074 +$ 1,849,547 +2022 +$ 8,951,318 +$ 21,872,248 +$ 3,126,314 +$ 7,943,940 +$ 321.55 +$ 196.87 +$ 1,214,206 +$ 2,127,156 +2021 +$ 9,057,189 +$ 27,355,621 +$ 4,310,734 +$ 12,883,431 +$ 206.28 +$ 140.32 +$ 584,968 +$ 1,051,973 +2020 +$ 1,689,547 +$ 4,092,405 +$ 923,071 +$ 2,032,796 +$ 67.11 +$ 102.23 +$( 593,205 ) +$ 519,277 +(1) The dollar amounts reported in column (b) are the amounts reported for Mr. Foran for each of the corresponding years in the “Total” +column of the Summary Compensation Table. See “Executive Compensation—Summary Compensation Table”. +(2) The dollar amounts reported in column (c) represent the amount of “compensation actually paid” to Mr. Foran, as computed in accordance with +Item 402(v) of Regulation S-K, and do not reflect the total compensation actually realized or received by Mr. Foran. These amounts reflect the +amounts included in the “Total” column of the Summary Compensation Table for each year, adjusted in accordance with these rules as shown +below for 2024 . Equity values are calculated in accordance with FASB ASC Topic 718, and the valuation assumptions used to calculate fair +values did not materially differ from those disclosed at the time of grant. +Compensation Actually Paid to PEO +2024 +Summary Compensation Table Total +$ 8,437,049 +Less, value of “Stock Awards” reported in Summary Compensation Table +$( 3,010,300 ) +Plus, year-end fair value of outstanding and unvested equity awards granted in +the year +$ 3,055,200 +Plus (less), year over year change in fair value of outstanding and unvested equity +awards granted in prior years +$( 135,887 ) +Plus (less), change in fair value from prior year-end to vesting date of equity +awards granted in prior years that vested in the year +$ 993,675 +Compensation Actually Paid to PEO +$ 9,339,737 +(3) The dollar amounts reported in column (d) represent the average of the amounts reported for the Named Executive Officers as a group (excluding +Mr. Foran) in the “Total” column of the Summary Compensation Table in each applicable year. Each of the Named Executive Officers included for +these purposes (the “Non-PEO Named Executive Officers”) in each applicable year are as follows: (i) for 2024 , Messrs. Singleton, Willey, Krug +and Erman; (ii) for 2023 , Messrs. Singleton, Willey, Billy E. Goodwin, Craig N. Adams and Michael D. Frenzel; (iii) for 2022 , Messrs. Goodwin, +Singleton, Adams, Frenzel and David E. Lancaster and (iv) for 2021 and 2020 , Messrs. Adams, Goodwin, Lancaster and Matthew V. Hairford. +(4) The dollar amounts reported in column (e) represent the average amount of “compensation actually paid” to the Non-PEO Named Executive +Officers, as computed in accordance with Item 402(v) of Regulation S-K. These amounts reflect the average of the amounts in the “Total” column +of the Summary Compensation Table for each year, adjusted in accordance with these rules as shown below for 2024 . Equity values are +calculated in accordance with FASB ASC Topic 718, and the valuation assumptions used to calculate fair values did not materially differ from +those disclosed at the time of the grant. +2025 Proxy Statement | Matador Resources Company 75 +Average Compensation Actually Paid to Non-PEO Named Executive Officers +2024 +Average Summary Compensation Table Total +$ 4,066,175 +Less, average value of "Stock Awards" reported in Summary Compensation Table +$( 1,505,150 ) +Plus, average year-end fair value of outstanding and unvested equity awards +granted in the year +$ 1,527,600 +Plus (less), average year over year change in fair value of outstanding and +unvested equity awards granted in prior years +$( 53,698 ) +Plus (less), average change in fair value from prior year-end to vesting date of +equity awards granted in prior years that vested in the year +$ 350,513 +Average Compensation Actually Paid to Non-PEO Named Executive Officers +$ 4,385,440 +(5) Total Shareholder Return is calculated by dividing (a) the sum of (i) the cumulative amount of dividends for the measurement period, assuming +dividend reinvestment, and (ii) the difference between the Company’s share price at the end of each fiscal year shown and the beginning of the +measurement period by (b) the Company’s share price at the beginning of the measurement period. The beginning of the measurement period +for each year in the table is December 31, 2019. +(6) The peer group used for this purpose is the following published industry index: Russell 2000 Energy Index. +(7) The dollar amounts reported represent the amount of net income reflected in the Company’s audited financial statements for the +applicable year. +(8) We determined Adjusted EBITDA to be the most important financial performance measure used to link Company performance to "compensation +actually paid" to our PEO and Non-PEO Named Executive Officers in 2024 . Adjusted EBITDA is a non-GAAP financial measure. For a definition +of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to Matador’s net income (loss) and net cash provided by operating activities, see +Annex A to this Proxy Statement. This performance measure may not have been the most important financial performance measure for prior +years and we may determine a different financial performance measure to be the most important financial performance measure in future years. +Description of Certain Relationships between Information Presented in the Pay Versus Performance Table +As described in more detail in the section “Executive Compensation—Compensation Discussion and Analysis,” the +Company’s executive compensation program reflects a variable pay-for-performance philosophy. While the Company +utilizes several performance measures to align executive compensation with Company performance, all of those +Company measures are not presented in the Pay Versus Performance table. Moreover, the Company generally seeks to +incentivize long-term performance, and therefore does not specifically align the Company’s performance measures with +compensation that is actually paid (as computed in accordance with SEC rules) for a particular year. In accordance with +SEC rules, the Company is providing the following descriptions of the relationships between information presented in the +Pay Versus Performance table. +76 Matador Resources Company | 2025 Proxy Statement +2025 Proxy Statement | Matador Resources Company 77 +Financial Performance Measures +As described in greater detail under “Executive Compensation—Compensation Discussion and Analysis,” the Company’s +executive compensation program reflects a variable pay-for-performance philosophy. The metrics that the Company uses +for both our long-term and short-term incentive awards are selected based on an objective of incentivizing our Named +Executive Officers to increase the value of our enterprise for our shareholders. The most important financial performance +measures used by the Company to link executive compensation actually paid to the Company’s Named Executive +Officers, for the most recently completed fiscal year, to the Company’s performance are as follows: +1. Total Shareholder Return +2. Adjusted EBITDA +3. Net Debt / Adjusted EBITDA +4. Adjusted Operating Costs per BOE +5. Return on Average Capital Employed +78 Matador Resources Company | 2025 Proxy Statement +DIRECTOR COMPENSATION +DIRECTOR COMPENSATION +The following table summarizes the total compensation awarded or paid to non-employee directors during the year +ended December 31, 2024. Mr. Foran did not receive any additional compensation for serving as a director in 2024. His +compensation for his services as our Chairman and Chief Executive Officer is reflected in the Summary Compensation +Table. +Name +Fees Earned or +Paid in Cash +Stock Awards (1) +Total +Shelley F. Appel (2) +$128,750 +$149,979 +$278,729 +Reynald A. Baribault +$178,750 +$149,979 +$328,729 +R. Gaines Baty (3) +$189,167 +$149,979 +$339,146 +William M. Byerley +$128,750 +$149,979 +$278,729 +Monika U. Ehrman +$109,583 +$149,979 +$259,562 +Julia P. Forrester Rogers +$52,500 +$— +$52,500 +James M. Howard +$103,750 +$149,979 +$253,729 +Timothy E. Parker (4) +$203,750 +$149,979 +$353,729 +Kenneth L. Stewart +$93,333 +$149,979 +$243,312 +Susan M. Ward +$89,005 +$149,979 +$238,984 +(1) Reflects the grant date fair value of RSUs, calculated in accordance with FASB ASC Topic 718, excluding the effect of any estimated forfeitures. +See Note 9 to the Company’s consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, +2024 for additional detail regarding assumptions underlying the value of these awards. RSUs granted for 2024 - 2025 service vest immediately +prior to the election of the nominees for director at the 2025 Annual Meeting. See “—Compensation for 2024 - 2025 .” As of December 31, 2024 , +each individual who served as a director during 2024 , other than Ms. Forrester Rogers, held the following outstanding unvested stock awards, +all of which were RSUs. Ms. Forrester Rogers did not hold any unvested RSUs at the end of 2024 as her term as director expired at the 2024 +Annual Meeting. +Name +Outstanding Stock Awards +Shelley F. Appel +2,533 +Reynald A. Baribault +2,533 +R. Gaines Baty +2,533 +William M. Byerley +2,533 +Monika U. Ehrman +2,533 +James M. Howard +2,533 +Timothy E. Parker +2,533 +Kenneth L. Stewart +2,533 +Susan M. Ward +2,533 +(2) Ms. Appel serves as ESG coordinator. The ESG coordinator receives an additional cash retainer of $50,000 annually. +(3) Mr. Baty serves as deputy lead independent director. The deputy lead independent director receives an additional cash retainer of $50,000 +annually. +(4) Mr. Parker serves as lead independent director. The lead independent director receives an additional cash retainer of $100,000 annually. +Mr. Harvey was appointed to the Board on January 27, 2025 and did not receive any director compensation in 2024. +2025 Proxy Statement | Matador Resources Company 79 +Compensation for 2024 - 2025 +For the period commencing at the 2024 Annual Meeting and ending at the 2025 Annual Meeting, our non-employee +directors’ compensation program was as set forth below: +• annual cash retainer of $85,000 ; +• the chair of each of the below committees received the following additional, annual cash retainer: +Committee +Retainer +Operations and Engineering +$50,000 +Prospect +$50,000 +Audit +$50,000 +Strategic Planning and Compensation +$50,000 +Environmental, Social and Corporate Governance +$35,000 +Nominating +$25,000 +Capital Markets and Finance +$25,000 +Marketing and Midstream +$25,000 +• the lead independent director received an additional cash retainer of $100,000 ; +• the deputy lead independent director received an additional cash retainer of $50,000 ; +• the ESG coordinator received an additional cash retainer of $50,000 ; and +• at the meeting of the Board immediately following the 2024 Annual Meeting, each non-employee director received an +annual grant of RSUs equal to approximately $150,000 in value, which vests on the earlier of the first anniversary of +the 2024 Annual Meeting or immediately prior to the election of the nominees for director at the 2025 Annual Meeting +(the “ 2024 RSU Award”). +If a director was appointed or elected to the Board at any time following the 2024 Annual Meeting but prior to the 2025 +Annual Meeting, such director was granted the applicable percentage of the 2024 RSU Award detailed below, effective on +the date of such director’s appointment: (i) if a director was appointed or elected to the Board within 90 days after the +2024 Annual Meeting, such director was entitled to receive 100% of the 2024 RSU Award; (ii) if a director was appointed +or elected to the Board more than 90 days but 180 or fewer days after the 2024 Annual Meeting, such director was entitled +to receive 75% of the 2024 RSU Award; (iii) if a director was appointed or elected to the Board more than 180 days but +270 or fewer days after the 2024 Annual Meeting, such director was entitled to receive 50% of the 2024 RSU Award and +(iv) if a director was appointed or elected to the Board more than 270 days after the 2024 Annual Meeting but prior to the +2025 Annual Meeting, such director was entitled to receive 25% of the 2024 RSU Award. +Mr. Harvey was appointed to the Board effective January 27, 2025, which date was more than 180 days but fewer than +270 days after the 2024 Annual Meeting. As a result, Mr. Harvey received a grant of 1,267 RSUs in early 2025, +representing 50% of the 2024 RSU Award. +In addition, we reimburse our directors for travel, lodging and related expenses incurred in attending Board and committee +meetings. +Director Stock Ownership Guidelines +Our non-employee directors are expected to follow our voluntary stock ownership guidelines for non-employee directors. +Within three years of becoming a director, each non-employee director is expected to own $350,000 of Common Stock +and continue to hold such shares while serving as a director. As of December 31, 2024 , all directors owned or were on +track to own within three years of becoming a director in excess of $350,000 of Common Stock. Shares that count toward +the stock ownership guidelines include RSUs. Until a director reaches the expected stock ownership level, such director +is expected to hold all shares received upon the vesting of RSUs. +80 Matador Resources Company | 2025 Proxy Statement +EQUITY COMPENSATION PLAN INFORMATION +The following table presents information with respect to our equity compensation plans as of December 31, 2024 : +Committee +Number of Shares to +be Issued Upon +Exercise of +Outstanding Options, +Warrants and Rights +(a) (2) +Weighted- Average +Exercise Price of +Outstanding Options, +Warrants and Rights +(b) (3) +Number of Shares +Remaining Available for +Future Issuance Under +Equity Compensation Plans +(Excluding Shares Reflected +in Column (a)) +(c) (4) +Equity compensation plans approved by security holders (1) +1,090,557 +$14.80 +7,850,907 +Equity compensation plans not approved by security holders +— +— +— +Total +1,090,557 +$14.80 +7,850,907 +(1) Includes shares authorized under the Matador Resources Company Amended and Restated 2012 Long-Term Incentive Plan (as amended, +the “2012 Plan”), the 2019 Plan and the ESPP. +(2) Reflects the number of PSUs granted under the 2019 Plan based on the maximum level of achievement, which may be more than the +number of shares issued in settlement of PSUs that are ultimately earned. +(3) Reflects the weighted-average exercise price of stock options granted under the 2019 Plan. Restricted stock, phantom units, RSUs and +PSUs are not reflected in this column as they do not have an exercise price. +(4) Includes 3,959,799 shares reserved for future issuance under the 2019 Plan and 3,891,108 shares reserved for future issuance under the +ESPP. No further awards may be granted under the 2012 Plan, although awards remain outstanding thereunder. +2025 Proxy Statement | Matador Resources Company 81 +TRANSACTIONS WITH RELATED PERSONS +TRANSACTIONS WITH RELATED PERSONS +Except as disclosed below, during 2024 , there was not, nor was there proposed as of December 31, 2024 , any transaction +or series of similar transactions to which we were or are a party in which the amount involved exceeded or exceeds +$120,000 and in which any of our directors, nominees for directors, executive officers, beneficial owners of more than 5% +of any class of our voting securities or any member of the immediate family of any of the foregoing persons had or will +have a direct or indirect material interest, other than compensation arrangements with directors and executive officers, +which are described in “Executive Compensation— Compensation Discussion and Analysis” and “Director Compensation” +above. +Working Interest and Overriding Royalty Interest Owners +Joseph Wm. Foran, Chairman and Chief Executive Officer, Shelley F. Appel, member of the Board, and certain of their +affiliated entities (collectively, the “Foran Entities”) are working interest owners and/or overriding royalty interest owners in +certain properties operated by the Company. As working interest owners, the Foran Entities are required to pay their +proportionate share of all costs and are entitled to receive their proportionate share of revenues in the normal course of +business. As overriding royalty interest owners, the Foran Entities are entitled to receive their proportionate share of +revenues from the wells in which they own an interest in the normal course of business. During 2024 , revenues, net of +costs, received by the Foran Entities in their capacity as working interest owners or overriding royalty interest owners were +approximately $17.2 million (the “Related Net Revenue Payments”). The Related Net Revenue Payments represent less +than 1% of our total third-party net revenue payments during 2024 . +In our capacity as operator, we incur drilling and operating costs that are billed to our partners based on their respective +working interests. During 2024 , our joint interest billings to the Foran Entities attributable to their share of costs were +approximately $13.7 million (the “Related Joint Interest Billings”). The Related Joint Interest Billings represent less than +1% of our total joint interest billings during 2024 . As a result of this ownership by the Foran Entities, from time to time, we +will be in a net receivable or net payable position with certain of the Foran Entities. We do not consider any net +receivables from the Foran Entities to be uncollectible. +The Audit Committee reviewed the terms of the working interests and/or overriding royalty interests of the Foran Entities +for potential conflicts of interest under the Company's Related Person Transaction Policy (the "Related Person +Transaction Policy"), and, after being fully informed as to Mr. Foran’s and Ms. Appel's relationships and interests in such +transactions and all other material facts related to the Related Net Revenue Payments and Related Joint Interest Billings, +determined that such transactions and the Related Net Revenue Payments and Related Joint Interest Billings were fair to +the Company and recommended such transactions and the Related Net Revenue Payments and Related Joint Interest +Billings to the full Board for approval and ratification. The Board subsequently approved and ratified the transactions and +the Related Net Revenue Payments and Related Joint Interest Billings. +Greyhound Joint Venture +The Company has entered into a joint venture, Greyhound, with Spearpoint Resources Company (“Spearpoint”) to +generate value through a well development program in our Twin Lakes asset area. An adult child of Mr. Foran and the +sibling of Ms. Appel is the founder of Spearpoint and serves as the chief executive officer and chairman of the board of +directors of Spearpoint. Mr. Foran’s child has a Bachelor of Arts degree in Economics from Princeton University, a Master +of Science degree in Petroleum Engineering from Texas A&M University and a Master of Business Administration degree +from Rice University. Mr. Foran’s child worked for a major oil and gas company as a petroleum petrophysicist. Prior to +attending Texas A&M, Mr. Foran’s child served in the United States Marine Corp, including two tours of duty overseas, and +has continued to serve in United States Marine Corp Reserve, recently achieving the rank of Major. Mr. Foran’s child may +perform shared services to Greyhound, for which Greyhound would reimburse Spearpoint. In addition, Ms. Appel holds an +ownership interest in Spearpoint. +During 2024 , the Company provided approximately $0.65 million of shared services to Greyhound and Spearpoint +provided approximately $0.30 million of shared services to Greyhound. Neither the Company nor Spearpoint made any +82 Matador Resources Company | 2025 Proxy Statement +capital contributions or received any distributions from Greyhound in 2024 , although such contributions and distributions +may be made or received by the Company and Spearpoint in the future. +The Audit Committee reviewed the terms of the joint venture for potential conflicts of interest under the Related Person +Transaction Policy, and, after being fully informed as to Mr. Foran’s, his adult child’s and Ms. Appel's relationships and +interests in such transactions and all other material facts related to Greyhound, determined that such transactions were +fair to the Company and recommended such transactions to the full Board for approval and ratification. The Board +subsequently approved and ratified the transactions. +Oilfield Equipment Purchase +The son-in-law of Mr. Foran and brother-in-law of Ms. Appel serves as the President of DCiii, LLC (“DC3”). During 2024, +the Company purchased certain oilfield equipment from DC3 for an aggregate amount of approximately $0.42 million (the +“Equipment Purchases”). The Audit Committee reviewed the terms of the Equipment Purchases for potential conflicts of +interest under the Related Person Transaction Policy and, after being fully informed as to Mr. Foran’s, his son-in-law’s and +Ms. Appel’s relationships and interests in such transactions and all other material facts related to the Equipment +Purchases, determined that the Equipment Purchases were fair to the Company and recommended the Equipment +Purchases to the full Board for approval and ratification. The Board subsequently approved and ratified the Equipment +Purchases. +Office Lease Renewal +R. Gaines Baty is a member of the Board. Mr. Baty’s son serves as the Vice Chairman and the Office Tenant +Representation Leader of Cushman & Wakefield’s Dallas-Fort Worth market. During 2024, Mr. Baty’s son provided tenant +representation services to the Company in connection with the Company’s renewal of its office lease for its Dallas, Texas +headquarters (the “Office Lease Renewal”). As a result of his services, Mr. Baty’s son is expected to have been +compensated in excess of $120,000. The Audit Committee reviewed the terms of the Office Lease Renewal for potential +conflicts of interest under the Related Person Transaction Policy and, after being fully informed as to Mr. Baty’s and his +son’s relationships and interests in such transactions and all other material facts related to the Office Lease Renewal, +determined that the Office Lease Renewal was fair to the Company and recommended the Office Lease Renewal to the +full Board for approval and ratification. The Board subsequently approved and ratified the Office Lease Renewal. +Certain Employment Relationships +Billy E. Goodwin served as an executive officer during 2024 until his retirement in April of 2024. During 2024 , an adult +child of Mr. Goodwin was an employee of the Company and has been an employee since 2015. In 2024, Mr. Goodwin’s +child was compensated between $120,000 and $750,000. Mr. Goodwin’s child has a Bachelor of Science in Business +Administration degree in Energy Management from the University of Tulsa and a Bachelor of Arts degree in General +Business and Management from Oklahoma State University. He has over 14 years of industry experience, including as a +drilling fluids engineer for a publicly traded oilfield services company and as a landman for a publicly traded exploration +and production company. The Audit Committee reviewed the terms of the employment arrangement for potential conflicts +of interest under the Related Person Transaction Policy and, after being fully informed as to the employment arrangement +and compensation of Mr. Goodwin’s adult child, and all other material facts related to the relationship, determined that the +employment arrangement was fair to the Company and recommended the employment arrangement to the full Board for +approval and ratification. The Board subsequently approved and ratified such employment arrangements. +Reynald A. Baribault is a member of the Board. Mr. Baribault’s sister-in-law has been an employee of the Company since +2016 and was compensated in 2024 , and is expected to be compensated in 2025 , between $120,000 and $500,000. Mr. +Baribault’s sister-in-law has a diploma from the Executive Secretarial School and is a certified legal assistant, having +completed the Southern Methodist University Legal Assistants Program. She has over 40 years of experience as a legal +assistant. The Audit Committee reviewed the terms of the employment arrangement for potential conflicts of interest under +the Related Person Transaction Policy and, after being fully informed as to the employment arrangement and historical +and anticipated compensation of Mr. Baribault’s sister-in-law, and all other material facts related to the relationship, +determined that the employment arrangement was fair to the Company and recommended the employment arrangement +2025 Proxy Statement | Matador Resources Company 83 +to the full Board for approval and ratification. The Board subsequently approved and ratified such employment +arrangement. +An adult child of Mr. Foran and a sibling of Ms. Appel has been an employee of the Company since 2015 and was +compensated in 2024 , and is expected to be compensated in 2025 , between $120,000 and $500,000. Mr. Foran’s child +has a Bachelor of Science degree in Human Resource Development and a Master of Science degree in Human Resource +Management, both from Texas A&M University. She has more than 13 years of industry experience, including with another +publicly traded exploration and production company. The Audit Committee reviewed the terms of the employment +arrangement for potential conflicts of interest under the Related Person Transaction Policy and, after being fully informed +as to the employment arrangement and historical and anticipated compensation of Mr. Foran’s child, and all other material +facts related to the relationship, determined that the employment arrangement was fair to the Company and +recommended the employment arrangement to the full Board for approval and ratification. The Board subsequently +approved and ratified such employment arrangement. +Indemnification Agreements +We have entered into indemnification agreements with each of our directors and executive officers and expect to do so in +the future for any new directors and executive officers. The indemnification agreements provide the directors and +executive officers with contractual rights to indemnification, expense advancement and reimbursement to the fullest extent +permitted by applicable law. +Procedures for Approval of Related Person Transactions +Pursuant to the Related Person Transaction Policy in effect as of December 31, 2024 , a “Related Person Transaction” is +defined as a transaction (including any financial transaction, arrangement or relationship (including any indebtedness or +guarantee of indebtedness)), or series of related transactions, or any material amendment to any such transaction, in +which a Related Person (as defined below) has or will have a direct or indirect material interest and in which we are a +participant, other than: +• a transaction involving compensation of directors that is required to be reported in our proxy statement under Item 402 +of the SEC’s compensation disclosure requirements (“Item 402”); +• any employment by us of an executive officer if: +◦ the related compensation is required to be reported in our proxy statement under Item 402; or +◦ the executive officer is not an “immediate family member” of another executive officer or director of the +Company, the related compensation would be reported in our proxy statement under Item 402 if the executive +officer was a “named executive officer” and the Compensation Committee approved (or recommended that +the Board approve) such compensation; +• a transaction with a Related Person involving less than $120,000; +• a transaction in which the interest of the Related Person arises solely from the ownership of a class of our equity +securities and all holders of that class receive the same benefit on a pro rata basis; +• a transaction in which a Related Person has an indirect interest solely as a result of being (a) a director or, together +with all other Related Persons, a less than 10% beneficial owner of an equity interest in another entity, or both, or (b) a +limited partner in a partnership in which the Related Person, together with all other Related Persons, has an interest of +less than 10%; +• a transaction in which the rates or charges involved therein are determined by competitive bids, or a transaction that +involves the rendering of services as a common or contract carrier, or public utility, at rates or charges fixed in +conformity with law or governmental authority; +84 Matador Resources Company | 2025 Proxy Statement +• any transaction with another company at which a Related Person’s only relationship is as an employee (other than an +executive officer), if the aggregate amount involved does not exceed the greater of $1,000,000, or 2% of that +company’s total annual revenues; +• any charitable contribution, grant or endowment by us to a charitable organization, foundation or university at which a +Related Person’s only relationship is as an employee (other than an executive officer), if the aggregate amount +involved does not exceed the lesser of $1,000,000, or 2% of the charitable organization’s total annual receipts; +• any transaction with another publicly traded company where the Related Person’s interest arises solely from beneficial +ownership of more than 5% of our Common Stock and ownership of a non-controlling interest in the other publicly +traded company; +• reimbursement of business expenses incurred by a director, officer or employee of the Company in the performance of +his or her duties and approved for reimbursement by the Company in accordance with the Company’s customary +policies and practices; or +• indemnification and advancement of expenses made pursuant to the Certificate of Formation or the Bylaws or +pursuant to any agreement. +“Related Person” means: +• any person who is, or at any time since the beginning of the Company’s last completed fiscal year was, one of our +executive officers or one of our directors or nominees for director; +• any person (including any entity or group) who is known by us to be the beneficial owner of more than 5% of our +Common Stock; +• any immediate family member of any of the foregoing persons, which means any child, stepchild, parent, +stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, sister-in-law or +person residing (other than a tenant or employee) in the home of a director, nominee for director, executive officer +or a beneficial owner of more than 5% of our Common Stock; and +• any entity that is owned or controlled by any of the foregoing persons or in which any of the foregoing persons is a +general partner or executive officer or in which such person, together with all other of the foregoing persons, owns +10% or more of the equity interests thereof. +Pursuant to the Related Person Transaction Policy, the Audit Committee must review all material facts of each Related +Person Transaction and recommend either approval or disapproval of the Related Person Transaction to the full Board, +subject to certain limited exceptions. In determining whether to recommend approval or disapproval of the Related Person +Transaction, the Audit Committee must, after reviewing all material facts of the Related Person Transaction and the +Related Person’s relationship and interest, determine whether the Related Person Transaction is fair to the Company and +in, or not consistent with, the interests of the Company and its shareholders. If a Related Person Transaction will be +ongoing, the Audit Committee, on at least an annual basis, will review and assess ongoing relationships with the Related +Persons to see that they are in compliance with Audit Committee guidelines. Further, the policy requires that all Related +Person Transactions be disclosed in our filings with the SEC and/or our website in accordance with applicable laws, rules +and regulations. +2025 Proxy Statement | Matador Resources Company 85 +SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND +MANAGEMENT +The following table presents the beneficial ownership of our Common Stock as of April 16, 2025 for (i) each person +beneficially owning more than 5% of the outstanding shares of our Common Stock, (ii) each director and nominee for +director of the Company, (iii) each named executive officer of the Company listed in the Summary Compensation Table +and (iv) all of our directors, nominees and executive officers as a group. Except pursuant to applicable community +property laws and except as otherwise indicated, each shareholder possesses sole voting and investment power with +respect to its, his or her shares. The business address of each of our directors and executive officers is c/o Matador +Resources Company, One Lincoln Centre , 5400 LBJ Freeway, Suite 1500 , Dallas, Texas 75240 . The applicable +percentage ownership is based on 125,201,846 shares of our Common Stock issued and outstanding as of April 16, 2025 , +plus, on an individual basis, the right of that individual to (i) obtain Common Stock upon exercise of stock options or (ii) +obtain Common Stock upon the vesting or delivery of RSUs, in each case within 60 days of April 16, 2025 . The +information is based on Form 3s, Form 4s, Form 5s, Schedule 13Ds, Schedule 13Gs and Schedule 13G/As filed through +April 16, 2025 . +Name +Amount and Nature of +Ownership of Common Stock +Percent of Class +Directors, Nominees and Named Executive Officers +Joseph Wm. Foran (1) +5,403,411 +4.3% +Shelley F. Appel (2) +1,735,698 +1.4% +Reynald A. Baribault (3) +141,246 +* +R. Gaines Baty (4) +68,317 +* +William M. Byerley (5) +51,732 +* +Monika U. Ehrman (6) +36,567 +* +Bryan A. Erman (7) +82,385 +* +Paul W. Harvey (8) +39,717 +* +James M. Howard (9) +125,368 +* +G. Gregg Krug +225,910 +* +Timothy E. Parker (10) +83,790 +* +Van H. Singleton, II (11) +292,640 +* +Kenneth L. Stewart (12) +86,426 +* +Susan M. Ward (13) +5,844 +* +Brian J. Willey (14) +97,861 +* +All Directors, Nominees and Executive Officers as a Group (19 persons) (15) +7,269,330 +5.8% +Other 5% Owners +The Vanguard Group (16) +12,498,860 +10.0% +BlackRock, Inc. (17) +10,511,588 +8.4% +* Less than one percent (1%) +(1) Includes (i) 1,105,913 shares of Common Stock held of record by Sage Resources, Ltd., a limited partnership owned by the Foran family, +including Mr. Foran; (ii) 1,137,182 shares of Common Stock held of record, collectively, by the LRF 2011 Non-GST Trust, WJF 2011 Non-GST +Trust, JNF 2011 Non-GST Trust, SIF 2011 Non-GST Trust and MCF 2011 Non-GST Trust (collectively, the “2011 Non-GST Trusts”) , for which +trusts Mr. Foran and his spouse, as settlors of each of the 2011 Non-GST Trusts, retain the power of substitution with respect to the property of +the 2011 Non-GST Trusts; (iii) 36,885 shares of Common Stock held of record by each of the JWF 2023-2 GRAT and the NNF 2023-2 GRAT, for +which Mr. Foran is the trustee and over which Mr. Foran has sole voting and investment power; (iv) 109,221 shares of Common Stock held of +record by each of the JWF 2024-1 GRAT and the NNF 2024-1 GRAT, for which Mr. Foran is the trustee and over which Mr. Foran has sole voting +and investment power; (v) 90,247 shares of Common Stock held of record by each of the JWF 2024-2 GRAT and the NNF 2024-2 GRAT, for +which Mr. Foran is the trustee and over which Mr. Foran has sole voting and investment power; (vi) 453,413 shares of Common Stock held of +record by the Foran 2012 Security Trust, for which Mr. Foran is the trustee and over which Mr. Foran has sole voting and investment power; (vii) +488,997 shares of Common Stock held of record by the Foran 2012 Savings Trust, for which Mr. Foran’s spouse is a trustee; (viii) 175,766 +shares of Common Stock held of record by each of the JWF 2025-1 GRAT and the NNF 2025-1 GRAT, for which Mr. Foran is the trustee and +over which Mr. Foran has sole voting and investment power; and (ix) 1,347,912 shares of Common Stock held of record, collectively, by the LRF +2020 Non-GST Trust, WJF 2020 Non-GST Trust, SIF 2020 Non-GST Trust and MCF 2020 Non-GST Trust (collectively, the “2020 Non-GST +Trusts”) , for which trusts Mr. Foran and his spouse, as settlors of each of the 2020 Non-GST Trusts, retain the power of substitution with respect +to the property of the 2020 Non-GST Trusts. +86 Matador Resources Company | 2025 Proxy Statement +(2) Includes (i) 1,105,913 shares of Common Stock held of record by Sage Resources, Ltd., a limited partnership owned by the Foran family, +including Ms. Appel; (ii) 227,416 shares of Common Stock held of record by the SIF 2011 Non-GST Trust; (iii) 336,978 shares of Common Stock +held of record by the SIF 2020 Non-GST Trust; (iv) 4,742 shares of Common Stock held of record by the Individual Retirement Account of Ms. +Appel; (v) 2,150 shares of Common Stock held of record by the 401(k) account of Ms. Appel; (vi) 58 shares of Common Stock held of record by +the Health Savings Account of Ms. Appel’s spouse; and (vii) 2,533 shares of Common Stock issuable to Ms. Appel upon the vesting of RSUs. +(3) Includes 6,515 shares of Common Stock held of record by the Individual Retirement Account of Mr. Baribault. Also includes 116,118 shares of +Common Stock held of record by the Reynald A. Baribault Maritalized Revocable Living Trust and 7,818 shares of Common Stock held of record +by the Sally K. Baribault Maritalized Revocable Living Trust, for which trusts both Mr. Baribault and his spouse are trustees and share voting and +investment power. Also includes 10,795 shares of Common Stock issuable to Mr. Baribault upon the vesting and delivery of RSUs +(4) Includes 19,499 shares of Common Stock issuable to Mr. Baty upon the vesting and delivery of RSUs. +(5) Includes 27,894 shares of Common Stock issuable to Mr. Byerley upon the vesting and delivery of RSUs. +(6) Includes 2,533 shares of Common Stock issuable to Ms. Ehrman upon the vesting of RSUs. +(7) Includes 3,750 shares of Common Stock held of record by the 401(k) account of Mr. Erman and 2,400 shares of Common Stock held of record +by the Individual Retirement Account of Mr. Erman. Also includes 2,667 shares of restricted stock. Pursuant to the terms of Mr. Erman's restricted +stock grants, Mr. Erman has the right to vote such shares but may only dispose of such shares to the extent they have vested. +(8) Includes 8,500 shares of Common Stock held of record by the Individual Retirement Account of Mr. Harvey, 3,000 shares of Common Stock held +of record by Wilson Peak Limo, LLC, a limited liability company owned by Mr. Harvey and his spouse and over which Mr. Harvey and his spouse +share voting and investment authority, and 300 shares of Common Stock held of record by Mr. Harvey's son. Also includes 1,267 shares of +Common Stock issuable to Mr. Harvey upon the vesting of RSUs. +(9) Includes 50,000 shares of Common Stock held of record by the Individual Retirement Account of Mr. Howard and 50,000 shares of Common +Stock held by PBH Family Partners, Ltd., a family limited partnership owned by Mr. Howard’s family, including Mr. Howard, and over which Mr. +Howard and his spouse share voting and investment authority. Also includes 15,368 shares of Common Stock issuable to Mr. Howard upon the +vesting and delivery of RSUs. Mr. Howard's term as a director will expire at the 2025 Annual Meeting. +(10) Includes 2,533 shares of Common Stock issuable to Mr. Parker upon the vesting of RSUs. +(11) Includes 2,505 shares of Common Stock held of record by the 401(k) account of Mr. Singleton. +(12) Includes 15,065 shares of Common Stock issuable to Mr. Stewart upon the vesting and delivery of RSUs. +(13) Includes 2,533 shares of Common Stock issuable to Ms. Ward upon the vesting and delivery of RSUs. +(14) Includes 3,760 shares of Common Stock held of record by the Individual Retirement Account of Mr. Willey and 2,950 shares of Common Stock +held of record by the 401(k) account of Mr. Willey. Also includes 2,667 shares of restricted stock. Pursuant to the terms of Mr. Willey's restricted +stock grants, Mr. Willey has the right to vote such shares but may only dispose of such shares to the extent they have vested. +(15) Includes 36,003 shares of restricted stock held by our executive officers. Pursuant to the terms of such restricted stock grants, the executive +officers have the right to vote such shares but may only dispose of such shares to the extent they have vested. Also includes 100,020 shares of +Common Stock issuable to directors upon the vesting and delivery of RSUs. +(16) Information based solely on a Schedule 13G/A filed with the SEC on November 7, 2024. The Schedule 13G/A reports that The Vanguard Group +(“Vanguard”) beneficially owns 12,498,860 shares of Common Stock, has shared voting power with respect to 61,152 shares of Common Stock, +has sole dispositive power with respect to 12,315,512 shares of Common Stock and has shared dispositive power with respect to 183,348 shares +of Common Stock. According to the Schedule 13G/A, Vanguard’s address is 100 Vanguard Blvd, Malvern, PA 19355. +(17) Information based solely on a Schedule 13G/A filed with the SEC on November 12, 2024. The Schedule 13G/A reports that BlackRock, Inc. +(“BlackRock”) beneficially owns 10,511,588 shares of Common Stock, has sole voting power with respect to 10,236,625 shares of Common +Stock and has sole dispositive power with respect to 10,511,588 shares of Common Stock. According to the Schedule 13G/A, BlackRock’s +address is 50 Hudson Yards, New York, NY 10001 . +2025 Proxy Statement | Matador Resources Company 87 +ADDITIONAL INFORMATION +Shareholder Proposals for the 2026 Proxy Statement +For shareholder proposals to be included in the Company’s proxy statement and form of proxy relating to the 2026 Annual +Meeting, such proposals must be received by the Company at its offices in Dallas, Texas, addressed to the Corporate +Secretary of the Company, no later than December 29, 2025 . If the Company changes the date of the 2026 Annual +Meeting by more than 30 days from the anniversary of the 2025 Annual Meeting, shareholder proposals must be received +a reasonable time before the Company begins to print and mail the proxy materials for the 2026 Annual Meeting in order +to be considered for inclusion in the Company’s proxy statement. Upon timely receipt of any such proposal, the Company +will determine whether or not to include such proposal in the proxy statement and proxy in accordance with applicable +regulations and provisions governing the solicitation of proxies. In addition, to comply with the universal proxy rules, +shareholders who intend to solicit proxies in support of director nominees other than the Company’s nominees must +provide notice to the Company that sets forth the information required by Rule 14a-19 under the Exchange Act, no later +than April 13, 2026 . +Director Nominations or Other Business for Presentation at the 2026 Annual Meeting +Alternatively, shareholders intending to place in nomination persons for election as directors at an annual meeting of +shareholders or to introduce an item of business at an annual meeting of shareholders without having the nomination or +proposal included in the Company’s proxy statement must comply with certain procedures set forth in the Bylaws. These +procedures provide, generally, among other things, that shareholders desiring to place in nomination persons for election +as directors, and/or bring a proper subject of business before an annual meeting, must do so by a written notice timely +received (on or before March 14, 2026 , but no earlier than February 12, 2026 , for the 2026 Annual Meeting) to the +Corporate Secretary of the Company containing the name and address of the shareholder and the number of shares of +the Company’s Common Stock beneficially owned by the shareholder. If the notice relates to a nomination for director, it +must also set forth the name, age, business and residence addresses of the candidate, the candidate’s résumé or a listing +of his or her qualifications to be a director of the Company, the person’s written consent to be a director if selected by the +Nominating Committee, nominated by the Board and elected by the shareholders and any other information that would be +required to be disclosed in solicitations of proxies for the election of directors. The Company may require any proposed +nominee to furnish such other information as may reasonably be required by the Company to determine the eligibility of +such proposed nominee to serve as director. Notice of an item of business shall include a brief description of the proposed +business and any material interest of the shareholder in such business. +The Chairman of the meeting may refuse to allow the transaction of any business not presented, or to acknowledge the +nomination of any person not made, in compliance with the foregoing procedures. Copies of the Bylaws are available from +the Corporate Secretary of the Company and on the Company’s website at www.matadorresources.com under the +heading “Investor Relations—Corporate Governance.” +See “Corporate Governance—Board Committees—Nominating Committee” for the process for shareholders to follow to +suggest a director candidate to the Nominating Committee for nomination by the Board. +Annual Report on Form 10-K +The Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024 , as filed with the SEC, +including financial statements, is being made available to our shareholders concurrently with this Proxy Statement at +www.proxyvote.com and does not form part of the proxy solicitation material. Shareholders may obtain without charge +another copy of the Annual Report on Form 10-K, excluding certain exhibits, by writing to Investor Relations, Matador +Resources Company, One Lincoln Centre , 5400 LBJ Freeway, Suite 1500 , Dallas, Texas 75240 . +88 Matador Resources Company | 2025 Proxy Statement +OTHER BUSINESS +Management of the Company is not aware of other business to be presented for action at the Annual Meeting; however, if +other matters are presented for action, it is the intention of the persons named in the accompanying form of proxy to vote +in accordance with their judgment on such matters. +By Order of the Board of Directors, +Joseph Wm. Foran +Chairman and Chief Executive Officer +April 28, 2025 +2025 Proxy Statement | Matador Resources Company 89 +ANNEX A +ANNEX A +Non-GAAP Financial Measures +Adjusted EBITDA +We define, on a consolidated basis and for San Mateo, Adjusted EBITDA as earnings before interest expense, +income taxes, depletion, depreciation and amortization, accretion of asset retirement obligations, property +impairments, unrealized derivative gains and losses, non-recurring transaction costs for certain acquisitions, certain +other non-cash items and non-cash stock-based compensation expense and net gain or loss on asset sales and +impairment. Adjusted EBITDA is not a measure of net income (loss) or net cash provided by operating activities as +determined by GAAP. Adjusted EBITDA is a supplemental non-GAAP financial measure that is used by +management and external users of our consolidated financial statements, such as industry analysts, investors, +lenders and rating agencies. “GAAP” means generally accepted accounting principles in the United States of +America. All references to Matador’s Adjusted EBITDA are those values attributable to Matador Resources +Company shareholders after giving effect to Adjusted EBITDA attributable to third-party non-controlling interests, +including in San Mateo. +Management believes Adjusted EBITDA is necessary because it allows us to evaluate our operating performance +and compare the results of operations from period to period without regard to our financing methods or capital +structure. We exclude the items listed above from net income (loss) in calculating Adjusted EBITDA because these +amounts can vary substantially from company to company within our industry depending upon accounting methods +and book values of assets, capital structures and the method by which certain assets were acquired. +Adjusted EBITDA should not be considered an alternative to, or more meaningful than, net income (loss) or net cash +provided by operating activities as determined in accordance with GAAP or as an indicator of our operating +performance or liquidity. Certain items excluded from Adjusted EBITDA are significant components of understanding +and assessing a company’s financial performance, such as a company’s cost of capital and tax structure. Our +Adjusted EBITDA may not be comparable to similarly titled measures of another company because all companies +may not calculate Adjusted EBITDA in the same manner. +The following table presents our calculation of Adjusted EBITDA and the reconciliation of Adjusted EBITDA to the +GAAP financial measures of net income and net cash provided by operating activities, respectively: +90 Matador Resources Company | 2025 Proxy Statement +Adjusted EBITDA—Matador Resources Company +Year Ended +December 31, 2024 +(In Thousands) +Unaudited Adjusted EBITDA Reconciliation to Net Income: +Net income attributable to Matador Resources Company shareholders +$ 885,322 +Net income attributable to non-controlling interest in subsidiaries +86,021 +Net income +971,343 +Interest expense +171,687 +Total income tax provision +292,364 +Depletion, depreciation and amortization +974,300 +Accretion of asset retirement obligations +6,027 +Unrealized gain on derivatives +(13,299) +Non-cash stock-based compensation expense +14,982 +Expense related to contingent consideration and other +5,420 +Consolidated Adjusted EBITDA +2,422,824 +Adjusted EBITDA attributable to non-controlling interest in subsidiaries +(124,047) +Adjusted EBITDA attributable to Matador Resources Company shareholders +$ 2,298,777 +Year Ended +December 31, 2024 +(In Thousands) +Unaudited Adjusted EBITDA Reconciliation to Net Cash Provided by Operating Activities: +Net cash provided by operating activities +$ 2,246,885 +Net change in operating assets and liabilities +(13,080) +Interest expense, net of non-cash portion +155,154 +Current income tax provision +27,059 +Other non-cash and non-recurring expense +6,806 +Adjusted EBITDA attributable to non-controlling interest in subsidiaries +(124,047) +Adjusted EBITDA attributable to Matador Resources Company shareholders +$ 2,298,777 +Adjusted EBITDA - San Mateo (100%) +Year Ended +December 31, 2024 +(In Thousands) +Unaudited Adjusted EBITDA Reconciliation to Net Income: +Net income +$ 175,557 +Depletion, depreciation and amortization +37,667 +Interest expense +37,368 +Accretion of asset retirement obligations +405 +Non-recurring expense +2,160 +Adjusted EBITDA +$ 253,157 +2025 Proxy Statement | Matador Resources Company 91 +Year Ended +December 31, 2024 +(In Thousands) +Unaudited Adjusted EBITDA Reconciliation to Net Cash Provided by Operating Activities: +Net cash provided by operating activities +$ 193,030 +Net change in operating assets and liabilities +21,825 +Interest expense, net of non-cash portion +36,142 +Non-recurring expense +2,160 +Adjusted EBITDA +$ 253,157 +ANNEX +Adjusted Free Cash Flow +Adjusted free cash flow is a supplemental non-GAAP financial measure that is defined, on a consolidated basis for +the Company, as net cash provided by operating activities, adjusted for changes in working capital and cash +performance incentives that are not included as operating cash flows, less cash flows used for capital expenditures, +adjusted for changes in capital accruals. On a consolidated basis, these numbers are also adjusted for the cash +flows related to non-controlling interest in subsidiaries that represent cash flows not attributable to Matador +shareholders. Adjusted free cash flow should not be considered an alternative to, or more meaningful than, net cash +provided by operating activities as determined in accordance with GAAP or an indicator of the Company’s liquidity. +Adjusted free cash flow is used by the Company, securities analysts and investors as an indicator of the Company’s +ability to manage its operating cash flow, internally fund its D/C/E capital expenditures, pay dividends and service or +incur additional debt, without regard to the timing of settlement of either operating assets and liabilities or accounts +payable related to capital expenditures. Additionally, this non-GAAP financial measure may be different than similar +measures used by other companies. The Company believes the presentation of adjusted free cash flow provides +useful information to investors, as it provides them an additional relevant comparison of the Company’s +performance, sources and uses of capital associated with its operations across periods and to the performance of +the Company’s peers. In addition, this non-GAAP financial measure reflects adjustments for items of cash flows that +are often excluded by securities analysts and other users of the Company’s financial statements in evaluating the +Company’s cash spend. +The table below reconciles adjusted free cash flow to its most directly comparable GAAP measure of net cash +provided by operating activities. All references to Matador’s adjusted free cash flow are those values attributable to +Matador shareholders after giving effect to adjusted free cash flow attributable to third-party non-controlling interests, +including in San Mateo. +Adjusted Free Cash Flow—Matador Resources Company +Year Ended +December 31, 2024 +(In Thousands) +Net cash provided by operating activities +$ 2,246,885 +Net change in operating assets and liabilities +(13,080) +San Mateo discretionary cash flow attributable to non-controlling interest in subsidiaries (1) +(105,279) +Proceeds from contribution of Pronto to San Mateo +219,760 +Performance incentives received from Five Point +23,800 +Total discretionary cash flow +$ 2,372,086 +Drilling, completion and equipping capital expenditures +1,222,831 +Midstream capital expenditures +283,881 +Expenditures for other property and equipment +5,691 +Net change in capital accruals +81,902 +San Mateo accrual-based capital expenditures related to non-controlling interest in subsidiaries (2) +(29,475) +Total accrual-based capital expenditures (3) +1,564,830 +Adjusted free cash flow +$ 807,256 +(1) Represents Five Point’s 49% interest in San Mateo discretionary cash flow. +(2) Represents Five Point’s 49% interest in accrual-based San Mateo capital expenditures. +92 Matador Resources Company | 2025 Proxy Statement +(3) Represents drilling, completion and equipping costs, Matador’s share of San Mateo capital expenditures plus 100% of other midstream +capital expenditures not associated with San Mateo. Pronto was wholly-owned by Matador until December 18, 2024, the date Pronto +was contributed to San Mateo in the Pronto Transaction. +MATADOR RESOURCES COMPANY +5400 LBJ FREEWAY, SUITE 1500 +DALLAS, TEXAS 75240 +VOTE BY INTERNET - www.proxyvote.com or scan the QR Barcode above +Use the Internet to transmit your voting instructions and for electronic delivery of +information up until 11:59 p.m. Eastern Time the day before the meeting date. +Have your proxy card in hand when you access the web site and follow the +instructions to obtain your records and to create an electronic voting instruction +form. +ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS +If you would like to reduce the costs incurred by our company in mailing proxy +materials, you can consent to receiving all future proxy statements, proxy cards +and annual reports electronically via e-mail or the Internet. To sign up for electronic +delivery, please follow the instructions above to vote using the Internet and, when +prompted, indicate that you agree to receive or access proxy materials +electronically in future years. +VOTE BY PHONE - 1-800-690-6093 +Use any touch-tone telephone to transmit your voting instructions up until +11:59 p.m. Eastern Time the day before the meeting date. Have your proxy card in +hand when you call and then follow the instructions. +VOTE BY MAIL +Mark, sign and date your proxy card and return it in the postage-paid envelope we +have provided or return it to Vote Processing, c/o Broadridge, +51 Mercedes Way, Edgewood, NY 11717. +TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: +V34260-P07962 +KEEP THIS PORTION FOR YOUR RECORDS +THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. +DETACH AND RETURN THIS PORTION ONLY +MATADOR RESOURCES COMPANY +The Board of Directors recommends you vote FOR the following: +1. +Election of Director Nominees: +For +Against +Abstain +1a. +Shelley F. Appel +o +o +o +1b. +R. Gaines Baty +o +o +o +1c. +Paul W. Harvey +o +o +o +1d. +Susan M. Ward +o +o +o +The Board of Directors recommends you vote FOR +the following proposal: +For +Against +Abstain +2. +Advisory vote to approve the compensation of +the Company's named executive officers +o +o +o +The Board of Directors recommends you +vote FOR the following proposal: +For +Against +Abstain +NOTE: The proxies are authorized to vote in their discretion on such +other business as may properly come before the meeting or any +adjournment thereof. +3. +Ratification of the appointment of +KPMG LLP as the Company's +independent registered public +accounting firm for the year ending +December 31, 2025 +o +o +o +Yes +No +Please indicate if you plan to attend this meeting: +o +o +Please sign as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full +title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full +corporate or partnership name by authorized officer. +Signature [PLEASE SIGN WITHIN BOX] +Date +Signature (Joint Owners) +Date +Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: +The Annual Report for the year ended December 31, 2024 , Notice of Annual Meeting and Proxy Statement are +available at www.proxyvote.com +V34261-P07962 +MATADOR RESOURCES COMPANY +Annual Meeting of Shareholders +June 12, 2025 9:30 A.M. +This proxy is solicited by the Board of Directors +As an alternative to completing this form, you may enter your vote instruction by telephone at 1-800-690-6093 or via the +internet at www.proxyvote.com. Have your proxy card in hand and follow the instructions. +The shareholder hereby appoints Joseph Wm. Foran and Timothy E. Parker, or either of them, as proxies, each with the +power to appoint his substitute, and hereby authorizes them to represent and to vote, as designated on the reverse side of +this ballot, all of the shares of common stock of MATADOR RESOURCES COMPANY that the shareholder is entitled to vote +at the Annual Meeting of Shareholders to be held at 9:30 A.M. CDT on June 12, 2025 , at The Westin Galleria Dallas , Fort +Worth Ballroom , 13340 Dallas Parkway , Dallas, Texas 75240 , and any adjournment or postponement thereof. The +shareholder hereby revokes any proxy or proxies heretofore given to vote upon or act with respect to such shares of stock. +This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this +proxy will be voted in accordance with the Board of Directors' recommendations. +Continued and to be signed on reverse side \ No newline at end of file diff --git a/raw/proxies/0001520006/0001520006-25-000125/proxy_rpt.txt b/raw/proxies/0001520006/0001520006-25-000125/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..e50131ad508527214558f598f5dd5654d7f0f658 --- /dev/null +++ b/raw/proxies/0001520006/0001520006-25-000125/proxy_rpt.txt @@ -0,0 +1,152 @@ +TRANSACTIONS WITH RELATED PERSONS +TRANSACTIONS WITH RELATED PERSONS +Except as disclosed below, during 2024 , there was not, nor was there proposed as of December 31, 2024 , any transaction +or series of similar transactions to which we were or are a party in which the amount involved exceeded or exceeds +$120,000 and in which any of our directors, nominees for directors, executive officers, beneficial owners of more than 5% +of any class of our voting securities or any member of the immediate family of any of the foregoing persons had or will +have a direct or indirect material interest, other than compensation arrangements with directors and executive officers, +which are described in “Executive Compensation— Compensation Discussion and Analysis” and “Director Compensation” +above. +Working Interest and Overriding Royalty Interest Owners +Joseph Wm. Foran, Chairman and Chief Executive Officer, Shelley F. Appel, member of the Board, and certain of their +affiliated entities (collectively, the “Foran Entities”) are working interest owners and/or overriding royalty interest owners in +certain properties operated by the Company. As working interest owners, the Foran Entities are required to pay their +proportionate share of all costs and are entitled to receive their proportionate share of revenues in the normal course of +business. As overriding royalty interest owners, the Foran Entities are entitled to receive their proportionate share of +revenues from the wells in which they own an interest in the normal course of business. During 2024 , revenues, net of +costs, received by the Foran Entities in their capacity as working interest owners or overriding royalty interest owners were +approximately $17.2 million (the “Related Net Revenue Payments”). The Related Net Revenue Payments represent less +than 1% of our total third-party net revenue payments during 2024 . +In our capacity as operator, we incur drilling and operating costs that are billed to our partners based on their respective +working interests. During 2024 , our joint interest billings to the Foran Entities attributable to their share of costs were +approximately $13.7 million (the “Related Joint Interest Billings”). The Related Joint Interest Billings represent less than +1% of our total joint interest billings during 2024 . As a result of this ownership by the Foran Entities, from time to time, we +will be in a net receivable or net payable position with certain of the Foran Entities. We do not consider any net +receivables from the Foran Entities to be uncollectible. +The Audit Committee reviewed the terms of the working interests and/or overriding royalty interests of the Foran Entities +for potential conflicts of interest under the Company's Related Person Transaction Policy (the "Related Person +Transaction Policy"), and, after being fully informed as to Mr. Foran’s and Ms. Appel's relationships and interests in such +transactions and all other material facts related to the Related Net Revenue Payments and Related Joint Interest Billings, +determined that such transactions and the Related Net Revenue Payments and Related Joint Interest Billings were fair to +the Company and recommended such transactions and the Related Net Revenue Payments and Related Joint Interest +Billings to the full Board for approval and ratification. The Board subsequently approved and ratified the transactions and +the Related Net Revenue Payments and Related Joint Interest Billings. +Greyhound Joint Venture +The Company has entered into a joint venture, Greyhound, with Spearpoint Resources Company (“Spearpoint”) to +generate value through a well development program in our Twin Lakes asset area. An adult child of Mr. Foran and the +sibling of Ms. Appel is the founder of Spearpoint and serves as the chief executive officer and chairman of the board of +directors of Spearpoint. Mr. Foran’s child has a Bachelor of Arts degree in Economics from Princeton University, a Master +of Science degree in Petroleum Engineering from Texas A&M University and a Master of Business Administration degree +from Rice University. Mr. Foran’s child worked for a major oil and gas company as a petroleum petrophysicist. Prior to +attending Texas A&M, Mr. Foran’s child served in the United States Marine Corp, including two tours of duty overseas, and +has continued to serve in United States Marine Corp Reserve, recently achieving the rank of Major. Mr. Foran’s child may +perform shared services to Greyhound, for which Greyhound would reimburse Spearpoint. In addition, Ms. Appel holds an +ownership interest in Spearpoint. +During 2024 , the Company provided approximately $0.65 million of shared services to Greyhound and Spearpoint +provided approximately $0.30 million of shared services to Greyhound. Neither the Company nor Spearpoint made any +82 Matador Resources Company | 2025 Proxy Statement +capital contributions or received any distributions from Greyhound in 2024 , although such contributions and distributions +may be made or received by the Company and Spearpoint in the future. +The Audit Committee reviewed the terms of the joint venture for potential conflicts of interest under the Related Person +Transaction Policy, and, after being fully informed as to Mr. Foran’s, his adult child’s and Ms. Appel's relationships and +interests in such transactions and all other material facts related to Greyhound, determined that such transactions were +fair to the Company and recommended such transactions to the full Board for approval and ratification. The Board +subsequently approved and ratified the transactions. +Oilfield Equipment Purchase +The son-in-law of Mr. Foran and brother-in-law of Ms. Appel serves as the President of DCiii, LLC (“DC3”). During 2024, +the Company purchased certain oilfield equipment from DC3 for an aggregate amount of approximately $0.42 million (the +“Equipment Purchases”). The Audit Committee reviewed the terms of the Equipment Purchases for potential conflicts of +interest under the Related Person Transaction Policy and, after being fully informed as to Mr. Foran’s, his son-in-law’s and +Ms. Appel’s relationships and interests in such transactions and all other material facts related to the Equipment +Purchases, determined that the Equipment Purchases were fair to the Company and recommended the Equipment +Purchases to the full Board for approval and ratification. The Board subsequently approved and ratified the Equipment +Purchases. +Office Lease Renewal +R. Gaines Baty is a member of the Board. Mr. Baty’s son serves as the Vice Chairman and the Office Tenant +Representation Leader of Cushman & Wakefield’s Dallas-Fort Worth market. During 2024, Mr. Baty’s son provided tenant +representation services to the Company in connection with the Company’s renewal of its office lease for its Dallas, Texas +headquarters (the “Office Lease Renewal”). As a result of his services, Mr. Baty’s son is expected to have been +compensated in excess of $120,000. The Audit Committee reviewed the terms of the Office Lease Renewal for potential +conflicts of interest under the Related Person Transaction Policy and, after being fully informed as to Mr. Baty’s and his +son’s relationships and interests in such transactions and all other material facts related to the Office Lease Renewal, +determined that the Office Lease Renewal was fair to the Company and recommended the Office Lease Renewal to the +full Board for approval and ratification. The Board subsequently approved and ratified the Office Lease Renewal. +Certain Employment Relationships +Billy E. Goodwin served as an executive officer during 2024 until his retirement in April of 2024. During 2024 , an adult +child of Mr. Goodwin was an employee of the Company and has been an employee since 2015. In 2024, Mr. Goodwin’s +child was compensated between $120,000 and $750,000. Mr. Goodwin’s child has a Bachelor of Science in Business +Administration degree in Energy Management from the University of Tulsa and a Bachelor of Arts degree in General +Business and Management from Oklahoma State University. He has over 14 years of industry experience, including as a +drilling fluids engineer for a publicly traded oilfield services company and as a landman for a publicly traded exploration +and production company. The Audit Committee reviewed the terms of the employment arrangement for potential conflicts +of interest under the Related Person Transaction Policy and, after being fully informed as to the employment arrangement +and compensation of Mr. Goodwin’s adult child, and all other material facts related to the relationship, determined that the +employment arrangement was fair to the Company and recommended the employment arrangement to the full Board for +approval and ratification. The Board subsequently approved and ratified such employment arrangements. +Reynald A. Baribault is a member of the Board. Mr. Baribault’s sister-in-law has been an employee of the Company since +2016 and was compensated in 2024 , and is expected to be compensated in 2025 , between $120,000 and $500,000. Mr. +Baribault’s sister-in-law has a diploma from the Executive Secretarial School and is a certified legal assistant, having +completed the Southern Methodist University Legal Assistants Program. She has over 40 years of experience as a legal +assistant. The Audit Committee reviewed the terms of the employment arrangement for potential conflicts of interest under +the Related Person Transaction Policy and, after being fully informed as to the employment arrangement and historical +and anticipated compensation of Mr. Baribault’s sister-in-law, and all other material facts related to the relationship, +determined that the employment arrangement was fair to the Company and recommended the employment arrangement +2025 Proxy Statement | Matador Resources Company 83 +to the full Board for approval and ratification. The Board subsequently approved and ratified such employment +arrangement. +An adult child of Mr. Foran and a sibling of Ms. Appel has been an employee of the Company since 2015 and was +compensated in 2024 , and is expected to be compensated in 2025 , between $120,000 and $500,000. Mr. Foran’s child +has a Bachelor of Science degree in Human Resource Development and a Master of Science degree in Human Resource +Management, both from Texas A&M University. She has more than 13 years of industry experience, including with another +publicly traded exploration and production company. The Audit Committee reviewed the terms of the employment +arrangement for potential conflicts of interest under the Related Person Transaction Policy and, after being fully informed +as to the employment arrangement and historical and anticipated compensation of Mr. Foran’s child, and all other material +facts related to the relationship, determined that the employment arrangement was fair to the Company and +recommended the employment arrangement to the full Board for approval and ratification. The Board subsequently +approved and ratified such employment arrangement. +Indemnification Agreements +We have entered into indemnification agreements with each of our directors and executive officers and expect to do so in +the future for any new directors and executive officers. The indemnification agreements provide the directors and +executive officers with contractual rights to indemnification, expense advancement and reimbursement to the fullest extent +permitted by applicable law. +Procedures for Approval of Related Person Transactions +Pursuant to the Related Person Transaction Policy in effect as of December 31, 2024 , a “Related Person Transaction” is +defined as a transaction (including any financial transaction, arrangement or relationship (including any indebtedness or +guarantee of indebtedness)), or series of related transactions, or any material amendment to any such transaction, in +which a Related Person (as defined below) has or will have a direct or indirect material interest and in which we are a +participant, other than: +• a transaction involving compensation of directors that is required to be reported in our proxy statement under Item 402 +of the SEC’s compensation disclosure requirements (“Item 402”); +• any employment by us of an executive officer if: +◦ the related compensation is required to be reported in our proxy statement under Item 402; or +◦ the executive officer is not an “immediate family member” of another executive officer or director of the +Company, the related compensation would be reported in our proxy statement under Item 402 if the executive +officer was a “named executive officer” and the Compensation Committee approved (or recommended that +the Board approve) such compensation; +• a transaction with a Related Person involving less than $120,000; +• a transaction in which the interest of the Related Person arises solely from the ownership of a class of our equity +securities and all holders of that class receive the same benefit on a pro rata basis; +• a transaction in which a Related Person has an indirect interest solely as a result of being (a) a director or, together +with all other Related Persons, a less than 10% beneficial owner of an equity interest in another entity, or both, or (b) a +limited partner in a partnership in which the Related Person, together with all other Related Persons, has an interest of +less than 10%; +• a transaction in which the rates or charges involved therein are determined by competitive bids, or a transaction that +involves the rendering of services as a common or contract carrier, or public utility, at rates or charges fixed in +conformity with law or governmental authority; +84 Matador Resources Company | 2025 Proxy Statement +• any transaction with another company at which a Related Person’s only relationship is as an employee (other than an +executive officer), if the aggregate amount involved does not exceed the greater of $1,000,000, or 2% of that +company’s total annual revenues; +• any charitable contribution, grant or endowment by us to a charitable organization, foundation or university at which a +Related Person’s only relationship is as an employee (other than an executive officer), if the aggregate amount +involved does not exceed the lesser of $1,000,000, or 2% of the charitable organization’s total annual receipts; +• any transaction with another publicly traded company where the Related Person’s interest arises solely from beneficial +ownership of more than 5% of our Common Stock and ownership of a non-controlling interest in the other publicly +traded company; +• reimbursement of business expenses incurred by a director, officer or employee of the Company in the performance of +his or her duties and approved for reimbursement by the Company in accordance with the Company’s customary +policies and practices; or +• indemnification and advancement of expenses made pursuant to the Certificate of Formation or the Bylaws or +pursuant to any agreement. +“Related Person” means: +• any person who is, or at any time since the beginning of the Company’s last completed fiscal year was, one of our \ No newline at end of file diff --git a/raw/proxies/0001680247/0001047469-18-003228/proxy.txt b/raw/proxies/0001680247/0001047469-18-003228/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..4a72812af47d8c15e3d99628c6646cee37435e84 --- /dev/null +++ b/raw/proxies/0001680247/0001047469-18-003228/proxy.txt @@ -0,0 +1,1970 @@ +DEF 14A +1 +a2235467zdef14a.htm +DEF 14A +QuickLinks +-- Click here to rapidly navigate through this document +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +Washington, D.C. 20549 +SCHEDULE 14A +Proxy +Statement Pursuant to Section 14(a) of +the Securities Exchange Act of 1934 (Amendment No. ) +Filed by the Registrant ý +Filed by a Party other than the Registrant o +Check the appropriate box: +o +Preliminary Proxy Statement +o +Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +ý +Definitive Proxy Statement +o +Definitive Additional Materials +o +Soliciting Material under §240.14a-12 +ProPetro Holding Corp. +(Name of Registrant as Specified In Its Charter) +(Name of Person(s) Filing Proxy Statement, if other than the Registrant) +Payment of Filing Fee (Check the appropriate box): +ý +No fee required. +o +Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. +(1) +Title of each class of securities to which transaction applies: +(2) +Aggregate number of securities to which transaction applies: +(3) +Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): +(4) +Proposed maximum aggregate value of transaction: +(5) +Total fee paid: +o +Fee paid previously with preliminary materials. +o +Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration +statement number, or the Form or Schedule and the date of its filing. +(1) +Amount Previously Paid: +(2) +Form, Schedule or Registration Statement No.: +(3) +Filing Party: +(4) +Date Filed: +ProPetro Holding Corp. +1706 S. Midkiff, Bldg. B +Midland, Texas 79701 +NOTICE OF ANNUAL MEETING OF STOCKHOLDERS +To Be Held June 15, 2018 +Dear Stockholders: +We +cordially invite you to attend our 2018 annual meeting of stockholders. The meeting will be held June 15, 2018 at 9:00 a.m. (Central time), at The Petroleum Museum of +Midland, 1500 W. Interstate 20, Midland, Texas 79701. At the meeting we will ask stockholders to: +1. Elect +the nine directors named in the proxy statement to the Board of Directors; +2. Ratify +the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending December 31, +2018; and +3. Transact +any other business as may properly come before the meeting. +Stockholders +who owned our common stock at the close of business on April 20, 2018 are entitled to notice of, and to vote at, the annual meeting, or any continuation, postponement +or adjournment thereof. A stockholders' list will be available at our offices at 1706 S. Midkiff, Bldg. B, Midland, Texas 79701 for a period of ten days prior to the meeting. We hope that you +will be able to attend the meeting in person. +Your +vote is important. Whether or not you plan to attend the meeting in person, we urge you to vote your shares via the toll-free telephone number or over the Internet, as described in +the enclosed materials. If you received a copy of the proxy card by mail, you may sign, date and mail the proxy card in the enclosed return envelope. The prompt return of proxies will ensure a quorum +and save us the expense of further solicitation. +We +look forward to seeing you at the meeting. +By +order of the Board of Directors, +Mark +Howell +General Counsel and Corporate Secretary +April 26, +2018 +YOUR VOTE IS IMPORTANT +Your vote is important. We urge you to review the accompanying Proxy Statement carefully and to submit your proxy as soon as possible so that your +shares will be represented at the meeting. +ProPetro Holding Corp. +1706 S. Midkiff, Bldg. B +Midland, Texas 79701 +PROXY STATEMENT +INFORMATION CONCERNING SOLICITATION AND VOTING +Our Board of Directors is soliciting proxies for the 2018 annual meeting of stockholders to be held on June 15, 2018 at 9:00 a.m. +(Central Time), at The Petroleum Museum of Midland at 1500 W. Interstate 20, Midland, Texas 79701, and at any continuations, adjournments or postponements of the meeting. This proxy +statement contains important information for you to consider when deciding how to vote on the matters brought before the meeting. Please read it carefully. +We +will pay the costs of soliciting proxies from stockholders. Our directors, officers and regular employees may solicit proxies on behalf of us, without additional compensation, +personally or by telephone. We will also request that brokers, nominees, custodians and other fiduciaries forward soliciting materials to the beneficial owners of shares held by such brokers, +nominees, custodians and other fiduciaries. We will reimburse such persons for their reasonable expenses in connection therewith. +This +proxy statement and our annual report on Form 10-K to stockholders for the year ended December 31, 2017 will be released on or about April 30, 2018 to our +stockholders on the record date. +IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON FRIDAY, JUNE 15, 2018 +This proxy statement and our 2017 Annual Report to stockholders are available at +http://www.viewproxy.com/propetro/2018. Stockholders may receive directions to attend the meeting in person by calling our Director of Investor Relations at 432-688-0012. +QUESTIONS AND ANSWERS +Q: Who can attend and vote at the meeting? +A: The +Board of Directors set April 20, 2018 as the record date for the meeting. You can attend and vote at the meeting if you were a common stockholder at the +close of business on the record date, April 20, 2018, or if you are a holder of a valid proxy for the meeting. If you would like to attend the meeting, you must call our Director of Investor +Relations at 432-688-0012 no later than 5:00 p.m. Central Time on June 13, 2018 to have your name placed on the attendance list. In order to be admitted into the meeting, your name must +appear on the attendance list and you must present government-issued photo identification (such as a driver's license). If your bank or broker holds your shares in street name, you will also be +required to present proof of beneficial ownership of our common stock on the record date, such as the Internet Notice you received from your bank or broker, or a bank or brokerage statement or a +letter from your bank or broker showing that you owned shares of our common stock at the close of business on the record date. On April 20, 2018, there were 83,412,189 shares of our common +stock outstanding and entitled to vote at the meeting. +Q: What proposals will be voted on at the meeting? +A: Two +proposals are scheduled to be voted upon at the meeting: +• To elect the nine directors named in this proxy statement as members of the Board of Directors to serve until our 2019 annual meeting of +stockholders; and +• To ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year +ending December 31, 2018. +Q: Why did I receive a Notice of Internet Availability of Proxy Materials? +A: As +permitted by SEC rules, we are making this proxy statement and our 2017 annual report to stockholders available electronically via the Internet. On or about +April 30, 2018, we mailed to our stockholders a Notice of Internet Availability of Proxy Materials (the "Internet Notice") containing instructions on how to access this proxy statement and our +2017 annual report and vote online. If you received an Internet Notice by mail, you will not receive a printed copy of the proxy materials in the mail unless you specifically request them. Instead, +the Internet Notice instructs you on how to access and review all of the important information contained in the proxy statement and 2017 annual report. The Internet Notice also instructs you on how +you may submit your proxy over the Internet. If you received an Internet Notice by mail and would like to receive a printed copy of our proxy materials, you should follow the instructions for +requesting such materials contained on the Internet Notice. +Q: How do I cast my vote? +A: We +recommend that stockholders vote by proxy even if they plan to attend the Annual Meeting and vote in person. If you are a stockholder of record, there are three +ways to vote by proxy: +• by Telephone—You can vote by telephone by calling 1-866-804-9616 and following the instructions on the proxy card; or +• by Internet—You can vote over the Internet at www.AALVote.com/PUMP by following the instructions on the Internet Notice or proxy +card; or +• by Mail—You can vote by mail by signing, dating and mailing the proxy card, which you may have received by mail. +Telephone +and Internet voting facilities for stockholders of record will be available 24 hours a day and will close at 11:59 p.m., Eastern Time, on June 14, 2018. +In +the event that you submit a proxy but do not indicate any voting instructions, your shares will be voted as recommended by the Board of Directors on all matters, and in the discretion of the proxy +holders as to any other matters that may properly come before the meeting or any continuation, postponement or adjournment of the meeting. We do not know of any other business to be considered at the +meeting other than the proposals noted herein. +If +your shares are registered in the name of a broker, bank or other nominee (typically referred to as being held in "street name"), you will receive instructions from your broker, bank or other +nominee that must be followed in order for your broker, bank or other nominee to vote your shares per your instructions. Many brokerage firms and banks have a process for their beneficial holders to +provide instructions via the Internet or over the telephone. If Internet or telephone voting is unavailable from your broker, bank or other nominee, please complete and return the voting +instruction card in the addressed, postage paid envelope provided by your broker, bank or other nominee. +In +the event you do not provide instructions on how to vote, your broker may have authority to vote your shares. Under the rules that govern brokers who are voting with respect to shares that are held +in street name, brokers have the discretion to vote such shares on routine matters, but not on non-routine matters. Routine matters include the ratification of the appointment of independent auditors, +but not the election of directors. +Your vote is especially important. If your shares are held by a broker, your broker cannot vote your shares for the election of directors +unless you provide voting instructions. Therefore, please instruct your broker regarding how to vote your shares on this matter promptly . See "Vote +Required" following each proposal for further information. +2 +If +you hold shares through a broker, bank or other nominee and wish to be able to vote in person at the meeting, you must obtain a legal proxy from your broker, bank or other nominee and present it to +the inspector of election with your ballot at the meeting. +Q: Can I revoke or change my proxy? +A: Yes. +You may revoke or change a previously delivered proxy at any time before the meeting by delivering another proxy with a later date, by voting again via the +Internet or by telephone, or by delivering written notice of revocation of your proxy to our Secretary at our principal executive offices before the beginning of the meeting. You may also revoke your +proxy by attending the meeting and voting in person, although attendance at the meeting will not, in and of itself, revoke a valid proxy that was previously delivered. If you hold shares through a +broker, bank or other nominee, you must contact that nominee to revoke any prior voting instructions. You also may revoke any prior voting instructions by voting in person at the meeting if you obtain +a legal proxy as described above. +Q: How does the Board recommend I vote on the proposals? +A: The +Board recommends you vote " FOR " each of the nine nominees named in this proxy statement to our Board of Directors +and " FOR " the ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal +year ending December 31, 2018. +Q: Who will count the vote? +A: The +inspector of election will count the vote. Alliance Advisors will act as the inspector of election. +Q: What is a "quorum?" +A: A +quorum is the number of shares that must be present to hold the meeting. The quorum requirement for the meeting is a majority of the outstanding shares as of the +record date, present in person or represented by proxy. Your shares will be counted for purposes of determining if there is a quorum if you are present and vote in person at the meeting; or have voted +on the Internet, by telephone or by properly submitting a proxy card or voting instruction card by mail. Votes withheld, abstentions and broker non-votes (discussed below) are counted as present and +entitled to vote for purposes of determining a quorum. +Q: What happens if there is not a quorum at the meeting? +A: Pursuant +to our bylaws, the meeting may be adjourned by a majority of the shares represented at the meeting to reconvene at the same or some other place. If the +adjournment is for more than 30 days, or if after the adjournment a new record date is fixed for the adjourned meeting, notice of the adjournment shall be given to each stockholder of record +entitled to vote at the meeting. If the adjournment is for less than 30 days, no additional notice will be delivered. +Q: What is an abstention and how will votes withheld and abstentions be treated? +A: A +"vote withheld," in the case of the proposal regarding the election of directors, or an "abstention," in the case of the proposal regarding the ratification of the +appointment of our independent registered public accounting firm, represents a stockholder's affirmative choice to decline to vote on a proposal. Votes withheld have no effect on the election of +directors and abstentions have the effect of a vote against the ratification of the appointment of our independent registered public accounting firm. +3 +Q: What are broker non-votes and how will they be treated? +A: Generally, +broker non-votes occur when shares held by a broker in "street name" for a beneficial owner are not voted with respect to a particular proposal because the +broker (1) has not received voting instructions from the beneficial owner and (2) lacks discretionary voting power to vote those shares. A broker is entitled to vote shares held for a +beneficial owner on routine matters, such as the ratification of the appointment of our independent registered public accounting firm, without instructions from the beneficial owner of those shares. +On the other hand, absent instructions from the beneficial owner of such shares, a broker is not entitled to vote shares held for a beneficial owner on non-routine matters, such as the election of +directors. Broker non-votes will have no effect on the election of directors. We do not expect any broker non-votes in connection with the ratification of our independent registered public accounting +firm. +Q: What vote is required to approve each item? +A: The +following table sets forth the voting requirement with respect to each of the proposals: +Proposal 1—Election of Members of the Board of Directors. +The plurality of the votes cast. This means that the nine nominees receiving the highest number of affirmative "FOR" votes will be elected as directors. +Proposal 2—Ratification of appointment of independent registered public accounting firm. +The affirmative "FOR" vote of the holders of a majority of the shares represented at the meeting, in person or by proxy, and entitled to vote. +Q: What does it mean if I get more than one Internet Notice or more than one set of proxy materials? +A: Your +shares are probably registered in more than one account. Please vote all of your shares. To ensure that all of your shares are voted, for each Internet Notice or +set of proxy materials, please submit your proxy by phone, via the Internet, or, if you received printed copies of the proxy materials, by signing, dating and returning the enclosed proxy card in the +enclosed envelope. +Q: How many votes can I cast? +A: On +all matters you are entitled to one vote per share of common stock that you held as of the record date. +Q: Where can I find the voting results of the meeting? +A: The +preliminary voting results will be announced at the meeting. The final results will be published in a current report on Form 8-K to be filed by us with the +SEC within four business days of the meeting. +4 +Proposal 1 +ELECTION OF DIRECTORS +At the Annual Meeting, nine directors are to be elected. All nominees are currently directors. Each director is to hold office until the next +annual meeting of stockholders or until his successor is elected and qualified. Directors hold office until their successors have been elected or qualified or until their earlier death, resignation, +removal or disqualification. The following table shows information for the directors as of April 20, 2018. +The +nominees have consented to being nominated and have expressed their intention to serve if elected. We believe that the nominees possess the professional and personal qualifications +necessary for board service, and have highlighted particularly noteworthy attributes for the nominee in their biographies below. We have no reason to believe that the nominees will be unable to serve +if elected to office and, to our knowledge, the nominees intend to serve the entire term for which election is sought. In the event any of the nominees should become unable to serve, or for good cause +will not serve, as a director, it is intended that votes will be cast for a substitute nominee designated by the Board of Directors or the Board may elect to reduce its size. Only the nominees or +substitute nominees designated by the Board will be eligible to stand for election as directors at the meeting. +We +have entered into a stockholders agreement with Energy Capital Partners that provides Energy Capital Partners and its affiliates who hold our shares certain rights to designate +nominees for election to our board of directors. Energy Capital Partners currently has the right to designate up to three nominees, however, in order to comply with NYSE requirements that our Board be +constituted of a majority of independent directors, it has designated only two nominees, Schuyler E. Coppedge and Peter Labbat, for election to our Board. +Nominees +All of the current members of the Board of Directors are listed in the following table, and certain information concerning those directors +follows the table: +Name +Age +Position with ProPetro Holding Corp. +Director +Since +Dale Redman +57 +Chief Executive Officer and Director +2005 +Spencer D. Armour, III +64 +Chairman of the Board of Directors +2013 +Steven Beal(1)(2) +59 +Director +2017 +Anthony Best(1)(2) +68 +Director +2018 +Pryor Blackwell(2)(3) +57 +Director +2017 +Schuyler E. Coppedge +44 +Director +2013 +Alan E. Douglas(1)(3) +59 +Director +2017 +Peter Labbat +53 +Director +2013 +Jack B. Moore(1)(3) +64 +Director +2017 +(1) Member +of the Audit Committee. +(2) Member +of the Compensation Committee. +(3) Member +of the Nominating and Corporate Governance Committee. +Dale Redman +Dale Redman is a co-founder of ProPetro and has been Chief Executive Officer since 2008, and he has been a member of our board of directors +since 2005. Mr. Redman has over 33 years of executive and entrepreneurial experience in the energy services industry. He was a co-founder and Chief +5 +Executive +Officer of Downhole Injection Systems, LLC, which was sold in 2004. Prior to that, Mr. Redman was President and CEO of Reef Chemical Company from 1993 to 1998. +Mr. Redman received a B.B.A. in Finance from Texas Tech University. We believe that Mr. Redman's industry experience and deep knowledge of our business and our customers makes him well +suited to serve as Chief Executive Officer and director. +Spencer D. Armour, III +Spencer D. Armour, III has served as chairman of our board of directors since February 2013. Mr. Armour has over 30 years of +executive and entrepreneurial experience in the energy services industry. Mr. Armour has served as President of PT Petroleum LLC in Midland, Texas since 2013. He was the Vice President +of Corporate Development for Basic Energy Services, Inc. from 2007 to 2008, which acquired Sledge Drilling Corp., a company Mr. Armour co-founded and served as Chief Executive Officer +for from 2005 to 2006. From 1998 through 2005, he served as Executive Vice President of Patterson-UTI Energy, Inc., which acquired Lone Star Mud, Inc., a company Mr. Armour +founded and served as President for from 1986 to 1997. He also served on the Patterson-UTI Board of Directors from 1999 through 2001, and he currently serves on the board of Viper Energy +Partners, LP. Mr. Armour received a B.S. in Economics from the University of Houston in 1977 and was appointed to the University of Houston System Board of Regents in 2011 by former +Texas Governor, Rick Perry. We believe that Mr. Armour's extensive experience in the energy services industry and his deep knowledge of the industry dynamics within the Permian Basin make him +well suited to serve as a director. +Steven Beal +Steven Beal has served as a member of our board of directors since April 2017. Mr. Beal has over 30 years of experience in energy +industry and accounting activities. Mr. Beal served as a consultant to Concho Resources Inc. from 2009 to 2013, and, prior to that, served as the President and Chief Operating Officer of +Concho Resources Inc. from its formation in 2004 until his retirement in 2009. Previously, Mr. Beal was a director and the Executive Vice President and Chief Financial Officer of Concho +Oil & Gas Corp. from its formation until becoming its President and Chief Operating Officer in 2002, a position he held until 2004. Prior to Concho Oil & Gas Corp., Mr. Beal was a +director and the Vice President and Chief Financial Officer of Concho Resources Inc., a predecessor company to Concho Resources Inc., from its formation in 1997 until its sale in 2001. +From 1988 to 1997, Mr. Beal was employed by Parker & Parsley Petroleum Company in a variety of capacities, including serving as Senior Vice President and Chief Financial Officer. From +1981 to 1988, Mr. Beal was employed by the +accounting firm currently known as PricewaterhouseCoopers. Mr. Beal currently serves on the board of directors of Concho Resources Inc. and First Financial Bankshares, Inc. +Mr. Beal received a Bachelor of Business Administration in accounting from the University of Texas. We believe that Mr. Beal's extensive knowledge of the energy industry, together with +his substantial experience with public company accounting matters make him well suited to serve as a director. +Anthony Best +Anthony Best has served as a member of our board of directors since January 2018. Mr. Best has over 35 years of experience in the +energy industry, and has served as a Senior Advisor for Quantum Energy Partners since August 2015. Prior to joining Quantum, Mr. Best served in various roles with SM Energy Company, +commencing in 2006 as its President and Chief Operating Officer, and as its Chief Executive Officer from February 2007 through January 2015. From 2003 to 2005, Mr. Best served as President and +Chief Executive Officer of Pure Resources, Inc., a Unocal development and exploration company. From 2000 to 2003, Mr. Best served as an independent consultant offering leadership and oil +and gas consultation to energy companies and volunteer organizations, and from +6 +1979 +through 2000, Mr. Best served in various roles of increasing responsibilities at Atlantic Richfield Company, culminating in the position of President, ARCO Latin America. Mr. Best +holds a Master's of Science in Engineering Management from the University of Alaska, and a Bachelor's of Science in Mechanical Engineering from Texas A&M University. Prior to beginning his business +career, Mr. Best served five years as an engineering officer in the United States Air Force. Mr. Best currently serves as a director of ExL Petroleum LP, Middle Fork Energy +Partners, and Newpark Resources. We believe that Mr. Best's experience in significant management roles with companies operating in the Permian Basin and his broad experience in the energy +industry make him well suited to serve as a director. +Pryor Blackwell +Pryor Blackwell has served as a member of our board of directors since December 2017. Mr. Blackwell has over 30 years of +experience as an entrepreneur and senior executive in the commercial real estate development and investment business. Mr. Blackwell is a partner with Bandera +Ventures, a private commercial real estate development and investment firm, which he co-founded in 2003. Prior to founding Bandera Ventures, Mr. Blackwell was employed by Trammell Crow Company +for 18 years where he served in numerous leadership capacities, including: President—Development & Investment Group from 2001 to 2003, Chief Operating Officer from 1998 to +2001, Chief Operating Officer—Western Operations from 1997 to 1998, Area President from 1996 to 1997, President/Chief Executive Officer—DFW from 1993 to 1997, President/Chief +Executive Officer—Central Office Group from 1991 to 1993, and Partner from 1987 to 1991. Mr. Blackwell was a member of the Trammell Crow Company Executive Committee, Operating +Committee, Investment Committee, and served on the Board of Directors from 1993 to 2002. Mr. Blackwell holds a Bachelor of Business Administration degree in Finance from Texas Tech University. +We believe that Mr. Blackwell's financial and investment experience provides a diverse perspective from outside the energy industry and makes him well suited to serve as a director. +Schuyler E. Coppedge +Schuyler E. Coppedge has served as a member of our board of directors since March 2013. Mr. Coppedge is a Partner at Energy Capital +Partners where he has worked since 2005. Mr. Coppedge has over 20 years of experience in energy industry finance and investment activities, with a particular emphasis on oil field +services, midstream oil and gas and renewable power generation. Prior to joining Energy Capital in 2005, Mr. Coppedge spent over six years at JP Morgan. In addition to ProPetro, +Mr. Coppedge currently serves on the boards of CIG Logistics, STEAG-SCR Tech, Terra-Gen, LLC and USD Partners LP and as an observer to NCSG Crane & Heavy Haul Corporation. +Mr. Coppedge also served on the board of FirstLight Power Enterprises, Inc. Mr. Coppedge received a B.A. in history from Middlebury College and an M.B.A. in finance from the +Wharton School at the University of Pennsylvania. Mr. Coppedge was selected to serve as a director on the board due to his affiliation with Energy Capital Partners and we believe his extensive +experience across the finance and energy sectors makes him well suited to serve as a director. +Alan E. Douglas +Alan E. Douglas has served as a member of our board of directors since March 2017. Mr. Douglas is a shareholder of Johnson, +Miller & Co. where he has worked for 25 years. Mr. Douglas is a Certified Public Accountant with over 37 years of experience in accounting and audit activities. +Prior to joining Johnson, Miller & Co., Mr. Douglas was a Certified Public Accountant at KPMG for twelve years. Mr. Douglas received a B.B.A. in accounting from Texas Tech +University. We believe that Mr. Douglas's extensive accounting and auditing experience make him well suited to serve as a director. +7 +Peter Labbat +Peter Labbat has served as a member of our board of directors since March 2013. Mr. Labbat has served as a Partner of Energy Capital +Partners since 2006. Mr. Labbat has over 27 years of financial and investment experience and specializes in the energy and power sectors. Prior to joining Energy Capital Partners in +2006, Mr. Labbat was a Managing Director at Goldman, Sachs & Co. He currently serves on the boards of ADA Carbon Solutions, LLC, Next Wave Energy Partners, LP, and +Summit Midstream Partners, LP. Mr. Labbat has also served on the boards of NextLight Renewable Power, LLC, Odessa Power Holdings, LLC, Ice Energy, Inc., Chieftain +Sand and Proppant, LLC and Red Oak Power Holdings, LLC. Mr. Labbat received a B.A. in Economics from Georgetown University and an M.B.A. from the Wharton School at the University +of Pennsylvania. Mr. Labbat was selected to serve as a director on the board due to his affiliation with Energy Capital Partners and we believe that Mr. Labbat's extensive experience +across the finance and energy sectors make him well suited to serve as a director. +Jack B. Moore +Jack B. Moore has served as a member of our board of directors since March 2017. Mr. Moore served as Chairman of the Board of Cameron +International Corporation from 2011 until it was acquired in April 2016. Mr. Moore worked at Cameron International Corporation from 1999 until 2014, serving as Chief Executive Officer from 2008 +to 2015 and as President from 2008 to 2014. Prior to that, he held various management positions at Baker Hughes Incorporated, where he was employed for 23 years. Mr. Moore currently +serves on the board of directors of Occidental Petroleum Corporation, Rowan Companies plc and KBR Inc. Mr. Moore also previously served on the board of directors of the American +Petroleum Institute, the National Ocean Industries Association, and the Petroleum Equipment Suppliers Association. Mr. Moore received a B.B.A. from the University of Houston and is a graduate +of the Advanced Management Program at Harvard Business School. We believe that Mr. Moore's wealth of experience in the oilfield service sector, including service as a director and executive +officer to various public corporations in the sector make him well suited to serve as a director. +Vote Required +The proposal regarding the election of directors requires the approval of a plurality of the votes cast. This means that the nine nominees +receiving the highest number of affirmative "FOR" votes will be elected as directors. Votes withheld and broker non-votes are not considered to be votes cast and, accordingly, will have no effect on +the outcome of the vote on this proposal. +Board Recommendation +Our Board of Directors recommends a vote " FOR " each of the nine director nominees named above. +8 +Proposal 2 +RATIFICATION OF APPOINTMENT OF +INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM +The Audit Committee has selected Deloitte & Touche LLP, independent registered public accounting firm, to audit our consolidated +financial statements for the fiscal year ending December 31, 2018. Deloitte & Touche LLP has served as our independent registered public accounting firm since 2013. We are asking +the stockholders to ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2018. +Deloitte & Touche LLP was appointed by the Audit Committee in accordance with its charter. +In +the event stockholders fail to ratify the appointment, the Audit Committee may reconsider this appointment. Even if the appointment is ratified, the Audit Committee, in its +discretion, may direct the appointment of a different independent accounting firm at any time during the year if the Audit Committee determines that such a change would be in our and our stockholders' +best interests. The Audit Committee has pre-approved all services provided by Deloitte & Touche LLP. +Vote Required +The approval of the ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm +for the fiscal year ending December 31, 2018 requires the affirmative vote of the holders of a majority of the shares represented at the meeting, in person or by proxy, and entitled to vote. As +a result, abstentions will have the same effect as votes against this proposal. We do not expect any broker non-votes in connection with this proposal. +Board Recommendation +The Board recommends that you vote " FOR " the ratification of the appointment of +Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2018. +9 +CORPORATE GOVERNANCE +Director Independence +The majority of the members of the Board of Director, at any given time, must qualify as "independent" under NYSE rules. +Our +Board of Directors has undertaken a review of the independence of each of our director nominees and has affirmatively determined that each of Messrs. Beal, Best, Blackwell, +Douglas, and Moore are "independent," as defined by the NYSE rules. Under the NYSE rules, a director can be independent only if (a) the director does not trigger a categorical bar to +independence and (b) our Board of Directors affirmatively determines that the director has no material relationship with the Company (either directly or as a partner, shareholder or officer of +an organization that has a relationship with the Company). +Based +on information provided by the directors and the director nominees concerning their background, employment and affiliations, our Board of Directors has determined that these +directors do not have a material relationship with the Company (either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company). In making this +determination, our Board of Directors considered the current and prior relationships that each of the directors has with us, and all other facts and circumstances our Board of Directors deemed +relevant in determining independence, including any beneficial ownership of our capital stock by each of the directors. +Board Leadership Structure +Our Board of Directors has adopted our Corporate Governance Guidelines, which is available on our website, www.propetroservices.com in the +"Corporate Governance" subsection of the "Investors" section. Our Corporate Governance Guidelines provide that if the +Chairman of the Board is a member of management or does not otherwise qualify as independent, the independent directors may elect a lead independent director. In considering whether to appoint a lead +independent director, the Board of Directors determined that although Mr. Armour does not qualify as an independent director, primarily as a result of bonus payments he received in connection +with assisting the company in the process of its initial public offering, he is a non-employee director that appropriately facilitates communication among directors and management and performs his +role as Chairman in a manner independent from management. Accordingly, the Board of Directors has determined that the appointment of a lead independent director is not appropriate for the company at +this time. The Board of Directors will continue to evaluate the need for a lead independent director from time to time. +Our +Board of Directors believes that Mr. Armour is best situated to serve as Chairman of the Board due to his familiarity with the oil and gas industry in the Permian Basin, his +ability to facilitate communication among directors and management, and his ability to assist the company in identifying strategic priorities and leading the board in the successful execution of the +company's long-term development. Independent directors and management have different perspectives and roles in strategy development. Our independent directors bring experience, oversight and expertise +from outside the company and the oil and gas industry. Our Board of Directors believes that Mr. Armour's role as the Chairman of the Board facilitates the flow of information and communication +between senior management and the Board of Directors, which is essential to effective governance. +One +of the key responsibilities of the Board of Directors is to develop a strategic direction for us and to hold management accountable for the execution of our strategy once it is +developed. The Board of Directors believes that its current structure provides an appropriate balance between the development of the company's strategy and independent oversight of management. +10 +Board of Directors and Risk Oversight +In the normal course of its business, we are exposed to a variety of risks, including market risks relating to changes in commodity prices, +interest rates, political risks and credit and investment risk. The Board oversees our strategic direction, and in doing so considers the potential rewards and risks of our business opportunities and +challenges, and monitors the development and management of risks that impact our strategic goals. The Audit Committee assists the Board in fulfilling its oversight responsibilities by monitoring the +effectiveness of our systems of financial reporting, auditing, internal controls and legal and regulatory compliance. The Nominating and Corporate Governance Committee assists the Board in fulfilling +its oversight responsibilities with respect to the management of risks associated with Board organization, membership and structure, succession planning for our directors and executive officers and +corporate governance. The Compensation Committee assists the Board in fulfilling its oversight responsibilities by overseeing our compensation policies and practices. The Board does not believe that +its role in the oversight of our risks affects the Board's leadership structure. +Communicating with our Board of Directors +Stockholders and other interested parties may communicate by writing to: ProPetro Holding Corp., P.O. Box 873, Midland, Texas +79702. Stockholders may submit their communications to the Board, the independent directors, any committee of the Board or individual directors on a confidential or anonymous basis by sending the +communication in a sealed envelope marked "Stockholder Communication with Directors" and clearly identify the intended recipient(s) of the communication. +Our +Secretary will review each communication and will forward the communication, as expeditiously as reasonably practicable, to the addressees if: (1) the communication complies +with the requirements of any applicable policy adopted by the Board relating to the subject matter of the communication; and (2) the communication falls within the scope of matters generally +considered by the Board. To the extent the subject matter of a communication relates to matters that have been delegated by the Board to a committee or to an executive officer of the Company, then our +Secretary may forward the communication to the executive officer or chairman of the committee to which the matter has been delegated. The acceptance and forwarding of communications to the members of +the Board or an executive officer does not imply or create any fiduciary duty of the Board members or executive officer to the person submitting the communications. +Information +may be submitted confidentially and anonymously, although the Company may be obligated by law to disclose the information or identity of the person providing the information +in connection with government or private legal actions and in other circumstances. The Company's policy is not to take any adverse action, and not to tolerate any retaliation, against any person for +asking questions or making good faith reports of possible violations of law, our policies or our Code of Ethics & Conduct. +Annual Meeting Attendance +This is our first annual meeting of stockholders since the completion of our initial public offering. Although we do not have a formal policy +regarding attendance by members of the Board at our annual meeting of stockholders, we encourage directors to attend. +Compensation Committee Interlocks and Insider Participation +During the fiscal year ended December 31, 2017, Messrs. Armour, Moore and Douglas served as members of the Compensation Committee. +No executive officer of the Company served as a member of the board of directors or compensation committee of any other entity that has one or more executive officers serving as a member of our Board +or Compensation Committee. +11 +Board and Committee Activity, Structure and Compensation +Our Board of Directors is governed by our certificate of incorporation, bylaws, stockholders agreement, charters of the standing committees of +the Board of Directors and the laws of the State of Delaware. +On +March 22, 2017, we entered into a stockholders agreement with Energy Capital Partners that provides Energy Capital Partners and its affiliates who hold our shares certain +rights to designate nominees for election to our board of directors. The stockholders agreement provides that, subject to compliance with applicable law and stock exchange rules, for so long as Energy +Capital Partners and its affiliates beneficially own at least 30% of our common stock then outstanding, it shall be entitled to designate a number of directors equal to one fewer than a majority of +the directors; for so long as Energy Capital Partners and its affiliates beneficially own at least 20% of our common stock then outstanding, it shall be entitled to designate the greater of three +directors and 25% of the total number of directors (rounded up to the next whole number); and for so long as Energy Capital Partners and its affiliates beneficially own at least 10% of our common +stock then outstanding, it shall be entitled to designate the greater of two directors and 15% of the total number of directors (rounded up to the next whole number); and for so long as Energy Capital +Partners and its affiliates beneficially own at least 5% of our common stock then outstanding, it shall be entitled to designate one director. Additionally, for as long as Energy Capital Partners and +its affiliates hold at least 10% of our outstanding common stock, any directors designated by Energy Capital Partners will have certain information and access rights to our management, including the +right to receive our annual budget, business plan and financial forecasts. +During +2017, our Board of Directors held three meetings. All directors attended 100% of the total meetings of the Board and the committees on which they served. There are currently three +standing committees of the Board: the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee. Members serve on these committees until their resignation or +until as otherwise determined by our Board of Directors. The composition of the Board committees comply with the applicable rules of the NYSE and applicable law. Our Board of Directors has adopted a +written charter for each of the standing committees, which can be found in the "Corporate Governance" subsection of the "Investors" section of our website at www.propetroservices.com . +In +addition to the above governing documents, our Code of Ethics & Conduct that applies to all of our employees, as well as each member of the Board, can also be found in the +"Corporate Governance" subsection of the "Investors" section of our website at www.propetroservices.com . The composition and responsibilities of each of +the standing committees of our Board of Directors are as follows: +Audit Committee. Our Audit Committee is comprised solely of "independent" directors, as defined under and required by Rule 10A-3 +of the +Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the NYSE rules. Our Audit Committee is directly responsible for, among other things, the appointment, compensation, retention and +oversight of our independent registered public accounting firm. The oversight of our independent public accounting firm includes reviewing the plans and results of the audit engagement with the firm, +approving any additional professional services provided by the firm and reviewing the independence of the firm. Commencing with our first report on internal controls over financial reporting, the +Committee will be responsible for discussing the effectiveness of the internal controls over financial reporting with our independent registered public accounting firm and relevant financial +management. During the year ended December 31, 2017, the members of this Committee were Mr. Beal, Mr. Douglas and Mr. Moore. In addition, Mr. Best was appointed to +the Committee upon joining the Board in January 2018. Mr. Beal serves as committee chair. Our Board of Directors has determined that each of Mr. Beal and Mr. Moore qualify as an +12 +"audit +committee financial expert," as defined by the rules under the Exchange Act. The Audit Committee held three meetings in 2017. +Nominating and Corporate Governance Committee. Our Nominating and Corporate Governance Committee consists solely of "independent" +directors, as +defined under and required by NYSE rules. The Nominating and Corporate Governance Committee is responsible for, among other things, identifying individuals qualified to become Board members; selecting +or recommending to the Board of Directors director-nominees for each election of directors; developing and recommending to the Board +of Directors criteria for selecting qualified director candidates; considering committee member qualifications, appointments and removals; recommending corporate governance principles, codes of +conduct and compliance mechanisms; providing oversight in the evaluation of the Board of Directors and each committee; and developing an appropriate succession plan for our chief executive officer +pursuant to our Corporate Governance Guidelines. Our Nominating and Corporate Governance Committee does not have a specific policy with regard to the consideration of director candidates recommended +by stockholders as the committee would expect to evaluate any such recommended candidate in light of the Board of Directors' needs at the time of such recommendation and the qualifications of the +candidate. During the year ended December 31, 2017, the members of this committee were Messrs. Coppedge, Douglas and Moore, with Mr. Moore serving as committee chair. In January +2018, the Board appointed Mr. Blackwell to the Committee in substitution for Mr. Coppedge in order to comply with the NYSE rules requiring a fully independent Nominating & +Corporate Governance Committee within one year of our initial public offering. The Nominating and Corporate Governance Committee held three meetings in 2017. +Compensation Committee. Our Compensation Committee consists solely "independent" directors, as defined under and required by the NYSE +rules and +"non-employee directors" under Section 16 of the Exchange Act. The Compensation Committee is responsible for, among other things, overseeing the discharge of the responsibilities of the Board +relating to compensation of the Company's officers and directors. In carrying out these responsibilities, the Compensation Committee reviews all components of executive compensation for consistency +with our compensation philosophy and with the interests of our stockholders. During the year ended December 31, 2017, the members of this Committee were Messrs. Armour, Moore and +Douglas, with Mr. Armour serving as committee chair. In January 2018, the Board appointed Messrs. Blackwell, Beal and Best to the Compensation Committee in replacement of the existing +members in order to better balance the number of committee assignments for each of the Board's independent directors, with Mr. Blackwell serving as chair. The Compensation Committee held four +meetings in 2017. +Role of the Board, Compensation Committee and our Executive Officers +Executive compensation decisions are typically made on an annual basis by the Compensation Committee with input from our Chief Executive +Officer. Specifically, after reviewing relevant market data and surveys within our industry, our CEO typically provides recommendations to the Compensation Committee regarding the compensation levels +for our existing named executive officers and our executive compensation program as a whole. Our CEO attends all Compensation Committee meetings. After considering these recommendations, the +Compensation Committee typically meets in executive session and adjusts base salary levels, cash bonus awards and determines the amount of any equity grants for each of our named executive officers. +In making executive compensation recommendations, our CEO considers each named executive officer's performance during the year, the company's performance during the year, as well as comparable company +compensation levels. While the Compensation Committee gives considerable weight to our CEO's recommendations on compensation matters, the Compensation Committee has the final decision-making authority +on all executive compensation matters. +13 +Role of External Advisors +The Compensation Committee engaged Meridian Compensation Advisors in early 2017 to assist the Compensation Committee and Board of Directors in +evaluating, designing and implementing compensation practices more in line with other public companies. In addition, the Nominating and Corporate Governance Committee retained Korn Ferry in 2017 to +assist the committee in the search and evaluation of potential candidates for the Board of Directors. No other external advisors were engaged by the Board or any of its committees during the years +ended December 31, 2016 or 2017. +Director Nominations Process +The Nominating and Corporate Governance Committee may utilize a variety of methods for identifying potential nominees for directors, including +considering potential candidates who come to their attention through current officers, directors, professional search firms or other persons. Once a potential nominee has been identified, the +Nominating and Corporate Governance Committee evaluates whether the nominee has the appropriate skills and characteristics required to become a director in light of the then current make-up of the +Board. This assessment includes an evaluation of the nominee's judgment and skills, such as experience at a strategy/policy setting level, financial sophistication, leadership and objectivity, all in +the context of the perceived needs of the Board at that point in time. Our Board of Directors believes that at a minimum all members of the Board should have the highest professional and personal +ethics and values. In addition, each member of the Board must be committed to increasing stockholder value and should have enough time to carry out his or her responsibilities as a member of the +Board. +Our +Board monitors the mix of specific experience, qualifications and skills of its directors in order to assure that the Board, as a whole, has the necessary tools to perform its +oversight function effectively in light of the Company's business and structure. +Stockholders +may recommend individuals to the Nominating and Corporate Governance Committee for consideration as potential director candidates by submitting the names of the recommended +individuals, together with appropriate biographical information and background materials, to the Nominating and Corporate Governance Committee, c/o Secretary, P.O. Box 873, Midland, +Texas 79702. In the event there is a vacancy, and assuming that appropriate biographical and background material has been provided on a timely basis, the Nominating and Corporate Governance Committee +will evaluate stockholder-recommended candidates by following substantially the same process, and applying substantially the same criteria, as it follows for candidates submitted by others. +14 +REPORT OF THE AUDIT COMMITTEE +The Audit Committee assists our Board of Directors in overseeing (i) the integrity of our financial statements, (ii) our +compliance with legal and regulatory requirements, (iii) the independent auditor's qualifications and independence, and (iv) the performance of our internal auditors (or other personnel +responsible for the internal audit function) and independent auditor. In so doing, it is the responsibility of the committee to maintain free and open communication between the directors, the +independent auditor and our financial management. The committee is directly responsible for the appointment, compensation, retention and oversight of the work of the independent auditor for the +purpose of preparing or issuing an audit report or performing other audit, review or attest services for us. The independent auditor reports directly to the committee. +Management +is responsible for the preparation, presentation, and integrity of our consolidated financial statements, accounting and financial reporting principles, internal control over +financial reporting, and procedures designed to ensure compliance with accounting standards, applicable laws, and regulations. Management is also responsible for objectively reviewing and evaluating +the adequacy, effectiveness, and quality of our system of internal control over financial reporting. Our independent auditor, Deloitte & Touche LLP, is responsible for performing an +independent audit of the consolidated financial statements. +The +committee's responsibility is to monitor and oversee these processes and the engagement, independence and performance of our independent auditor. The committee relies, without +independent +verification, on the information provided to it and on the representations made by management and the independent auditor. +The +committee has met with our independent auditor and discussed the overall scope and plans for their audit. The committee met with the independent auditor to discuss matters required +to be discussed with audit committees under generally accepted auditing standards, including, among other things, matters related to the conduct of the audit of our consolidated financial statements +and the matters required to be discussed by the statement on Auditing Standards No. 1301, as adopted by the Public Company Accounting Oversight Board. +Our +independent auditor also provided to the committee the written disclosures and the letter required by applicable standards of the Public Company Accounting Oversight Board regarding +the independent auditor's communications with the committee concerning independence, and the committee discussed with the independent auditor its independence. When considering the independence of +Deloitte & Touche LLP, the committee considered the non-audit services provided to the Company by the independent auditor and concluded that such services are compatible with maintaining +the auditor's independence. +The +committee has reviewed and discussed our audited consolidated financial statements for the fiscal year ended December 31, 2017 with management and Deloitte & +Touche LLP. Based on the committee's review of the audited consolidated financial statements and the meetings and discussions with management and the independent auditors, and subject to the +limitations on the committee's role and responsibilities referred to above and in the Audit Committee Charter, the committee recommended to our Board of Directors that our audited consolidated +financial statements be included in our Annual Report on Form 10-K as filed with the SEC. +By the Audit Committee of the Board of Directors, +Steven Beal +Anthony Best +Alan E. Douglas +Jack B. Moore +15 +Audit Fees +The following table sets forth the fees incurred by us in fiscal years 2017 and 2016 for services performed by Deloitte & +Touche LLP: +2017 +2016 +Audit Fees(1) +$ +1,703,870 +$ +1,474,626 +Tax Fees(2) +70,220 +40,560 +Total Fees +$ +1,774,090 +$ +1,515,186 +(1) Audit +Fees include fees billed for professional services rendered for the audit of our annual consolidated financial statements, the review of the interim +consolidated financial statements included in our quarterly reports, consents and comfort letters provided in connection with the filing of registration statements, and other related services that are +normally provided in connection with statutory and regulatory filings. +(2) Tax +fees consisted principally of fees for tax compliance and tax advice. +Policy on Audit Committee Pre-Approval of Audit and Non-Audit Services of Independent Registered Public +Accounting Firm +The charter of the Audit Committee and its pre-approval policy require that the Audit Committee review and pre-approve the Company's independent +registered public accounting firm's audit fees, audit-related fees, tax fees and fees for other services. The Chairman of the Audit Committee has the authority to grant pre-approvals that are within +the pre-approval policy and are presented to the Audit Committee at a subsequent meeting. For the year ended December 31, 2017, the Audit Committee approved 100% of the services described above +under the captions "Audit Fees" and "Tax Fees." +16 +EXECUTIVE COMPENSATION +Summary of Compensation Practices +Overview +This summary of our compensation practices describes the material elements of compensation awarded to, earned by, or paid to each of ProPetro's +named executive officers (the "Named Executive Officers") during the last completed fiscal year. Although we qualify as an "emerging growth company" pursuant to the provision of the Jumpstart Our +Business Startups Act of 2012, we have chosen to provide more fulsome disclosure of our compensation practices than required for an emerging growth company in order to provide a better understanding +of our overall compensation practices. +Named Executive Officers for 2017 +For the year ended December 31, 2017, our Named Executive Officers consisted of the following: +Dale Redman +Chief Executive Officer +Jeffrey Smith +Chief Financial Officer +David Sledge +Chief Operating Officer +Ian Denholm +Chief Accounting Officer +Mark Howell +General Counsel and Corporate Secretary +Compensation Philosophy and Overview +Our executive compensation program is designed to attract, motivate and retain the management talent that we believe is necessary to achieve our +financial and strategic goals. Further, we believe that our executive compensation program should be appropriately tailored to balance short term compensation with intermediate and long term +compensation that appropriately aligns the interests of our executives with the interests of our shareholders. In establishing and evaluating our executive compensation programs, the Compensation +Committee strives to achieve total compensation for our executives that reflects their individual contributions to the company, as well as their contributions to our overall success as part of the +management team. +Design and Implementation +Prior to 2017, we operated as a private company. As we began preparations for our initial public offering, the Board of Directors commenced the +process of designing a compensation program more in line with a traditional public company compensation structure. Accordingly, our Compensation Committee redesigned our executive compensation program +in 2017 around three principal elements: +• Annual Base Salary. Annual base +salary is the fixed cash component of our compensation program that we use to attract and retain executives intended to be competitive with our peer group. +• Annual Cash Incentives +Awards. Annual cash incentive awards provide our executives the opportunity to earn an annual cash payment based on the performance of the +company as a whole, as well as the individual performance of each executive. Commencing in 2018, annual cash incentive awards are primarily based on the company's performance relative to metrics +established by the Compensation Committee. +• Long-Term Equity +Incentives. Long term incentive awards consist of time-based restricted stock units and/or stock options, as well as performance share units that +will vest only if our total shareholder return outperforms the return of other companies in a peer group. +17 +Compensation Benchmarking and Compensation Consultant +As part of its evaluation of the company's executive compensation practices, the Compensation Committee performs an annual review of executive +compensation and makes decisions on each component thereof in order to ensure that individual compensation is aligned with an officer's responsibilities, experience and contributions to the company, +with target total compensation positioned within competitive market practices. In establishing a compensation structure more in line with public company practices, the Compensation Committee engaged +Meridian Compensation Partners, LLC ("Meridian"), an independent executive compensation advisory firm, in January 2017, to advise the Compensation Committee on executive compensation matters. +In 2017, Meridian assisted the Committee with a review of all elements of executive compensation, establishing a peer group of companies in the oilfield services industry to use in benchmarking pay +levels and pay practices (as detailed below, the "2017 Compensation Peer Group"), an assessment of competitive pay levels and incentive plan design. The 2017 Compensation Peer Group was comprised of +the following 15 companies: +Basic Energy Services, Inc. +C&J Energy Services, Inc. +CARBO Ceramics Inc. +Independence Contract Drilling, Inc. +Keane Group, Inc. +Key Energy Services, Inc. +Mammoth Energy Services, Inc. +Newpark Resources, Inc. +Parker Drilling Company +Patterson-UTI Energy Inc. +Pioneer Energy Services Corp. +RPC, Inc. +Smart Sand, Inc. +Tesco Corp. +TETRA Technologies Inc. +As +discussed below, following the assessment of market practices and competitive pay levels for the Named Executive Officers, the Compensation Committee began making adjustments to our +executive compensation program in 2017 in order to better align our compensation practices with public company compensation practices. +Elements of Compensation +Base Salary +As part of our executive compensation program, we pay a base salary to each of our executives in order to provide a consistent, minimum level of +pay that is sufficient to allow us to attract and retain executives with the appropriate skills and experience for their positions. +In +connection with the January 2017 benchmarking analysis conducted by Meridian, and effective as of June 1, 2017, the Compensation Committee adjusted the annual base salaries for +Messrs. Redman, Smith and Sledge from $250,000 each to $650,000, $500,000 and $425,000, respectively. Mr. Howell's annual base salary was set at $250,000 upon joining ProPetro in March +of 2017, and Mr. Denholm's annual base salary was increased from $160,000 to $192,000 upon promotion to the position of Chief Accounting Officer in August of 2017. In April 2018, the +Compensation Committee established base salaries for Messrs. Redman, Smith, Sledge, Denholm and Howell of $700,000, $500,000, $425,000, $225,000 and $300,000. The Compensation Committee intends +to monitor and adjust salaries for our Named Executive Officers over time as necessary to remain competitive with market rates for officers at similarly sized public companies. +Annual Cash Incentive Awards +Annual cash incentive awards are designed to provide participants with the opportunity to earn an annual cash payment based on the company's +overall performance and each officer's individual contributions to our success. For 2017, each of the Named Executive Officers received a discretionary +18 +bonus +payment, determined by the Compensation Committee with input from the CEO (except with respect to his own compensation). In determining bonus amounts, the Compensation Committee considered the +Company's financial results and overall performance during the year, including the achievement of record revenue for the year, the successful completion of our initial public offering, the delivery +and deployment of six additional pressure pumping units, additional cementing units and a coiled tubing unit, as well as the individual contributions of each of our officers in assisting the company +in the transition from a private company to a public company. Further, in determining the appropriate cash incentive to be awarded to each officer, the Compensation Committee considered the annual +cash incentive awards targeted for officers in similar positions within the 2017 Compensation Peer Group. In March of 2018, the Compensation Committee evaluated the 2017 performance of each Named +Executive Officer and authorized cash incentive awards to Messrs. Redman, Smith, Sledge, Denholm and Howell in the amounts of $780,000, $500,000, $500,000, $136,400 and $175,000, respectively. +With +respect to 2018, the Compensation Committee has adopted a set of performance metrics that will be used to measure performance and determine the annual incentive for each of our +Named Executive Officers. Under this approach, the Compensation Committee established financial and non-financial +goals that are important to the ongoing success of the company and will drive desired short-term business performance by focusing executives on key objectives that position the Company for sustained +growth. Further, the Compensation Committee believes that the metrics established for 2018 are closely aligned with the metrics that the market uses to evaluate the company's performance. +Under +the 2018 annual incentive program, 80% of each Named Executive Officer's annual bonus will be based on the achievement of the following performance measures: +Objective Incentive Compensation Component +Weighting +Adjusted EBITDA per Share +40 +% +Year-End Net Debt to Adjusted EBITDA Ratio +20 +% +Safety—Total Recordable Incident Rate (TRIR) +20 +% +Performance +goals and corresponding payouts were established for threshold, target and maximum performance levels. +The +remaining 20% of the annual incentive will be based upon attainment of individual development and operational performance goals. With respect to such goals, the Compensation +Committee will evaluate performance factors not included in the objective incentive compensation component, focused on the individual contributions of our Named Executive Officers, productivity, the +Named Executive Officers' evaluation of strategic growth opportunities and operational efficiency. The actual cash incentive award to be received by each Named Executive Officer for 2018 performance +will be based on the achievement of the performance metrics set forth above and the officer's target bonus for 2018. In April 2018, the Compensation Committee established target bonuses for each of +Messrs. Redman, Smith, Sledge, Denholm and Howell of $700,000, $375,000, $425,000, $112,500, and $200,000, respectively. +2017 Bonuses Tied to Initial Public Offering +In addition to the annual cash incentive award program described above, in April 2017, the Board of Directors awarded a one-time cash bonus to +each of Messrs. Redman, Smith and Sledge of $125,000, $75,000 and $435,000, respectively, associated with the successful completion of our initial public offering. In March 2017, Mr.Denholm +received a bonus payment of $171,127 in recognition of his extensive contributions in connection with the successful completion of our initial public offering. +19 +Long-Term Incentive Awards +In connection with our initial public offering, the Board of Directors adopted the 2017 Incentive Award Plan in order to facilitate the grant of +equity incentives to directors, employees (including the Named Executive Officers) and consultants of our company and certain of its affiliates and to enable our company and certain of its affiliates +to obtain and retain the services of these individuals, which is essential to our long-term success. In order to further align the interests of our Named Executive Officers with shareholders, the +Compensation Committee granted a combination of time-based and performance-based equity awards to Named Executive Officers in 2017. For each Named Executive Officer other than Mr. Denholm, the +Compensation Committee awarded 50% of the value of each Named Executive Officer's long-term incentive awards in the form of restricted stock units (RSUs) that vest in three substantially equal annual +installments commencing on the first anniversary of the grant date, subject to the Named Executive Officer's continued employment, and the remaining 50% of the value of each Named Executive Officer's +long-term incentive awards in the form of performance share units (PSUs) that vest, if earned, following the completion of the applicable performance period subject to the Named Executive Officer's +continued employment. With respect to Mr. Denholm, the Compensation Committee awarded 100% of the value of his long-term incentive award in the form of RSUs that vest in three substantially +equal annual installments commencing on the first anniversary of the grant date, subject to his continued employment. Following his appointment to the role of Chief Accounting Officer in August 2017, +Mr. Denholm is expected to receive future equity awards in accordance with the Compensation Committee's then-current practices with respect to other Named Executive Officers. +PSUs +vest following the completion of a designated performance period and provide the recipient with the opportunity to earn shares of common stock. For the 2017 award, the Compensation +Committee chose to use one performance measure—total shareholder return (TSR), as compared to the TSR of a designated peer group of companies—to determine payouts. For purposes +of the 2017 PSU awards, recipients of performance share units may earn between 0% and 200% of the target number of shares based on ProPetro's TSR, as indicated in the following table. If performance +falls between the specified performance levels, payouts will be determined via straight-line interpolation. +Performance Level +Payout (as a % of Target +Number of PSUs Granted) +Threshold +50 +% +Target +100 +% +Maximum +200 +% +The +performance period for the 2017 PSU awards commenced on the date of our initial public offering (March 17, 2017) and ends on December 31, 2019. The 2017 performance +peer group is comprised of the following 11 companies: +Basic Energy Services +C&J Energy Services +Calfrac Well Services +Keane Group Inc. +Mammoth Energy Services, Inc. +Patterson-UTI Energy, Inc. +Pioneer Energy Services Corp. +RPC Inc. +STEP Energy Services +Superior Energy Services, Inc. +Trican Well Service +20 +Accordingly, +in June 2017, we made awards of RSUs and PSUs to our Named Executive Officers as follows. +Name +Number of RSUs +Number of PSUs +Dale Redman +72,569 +72,569 +Jeffrey Smith +27,214 +27,214 +David Sledge +27,214 +27,214 +Ian Denholm +4,064 +— +Mark Howell +18,143 +18,143 +2017 Stock Option Grants +In connection with our initial public offering, we made a one-time grant of time-based stock options to certain key employees at an exercise +price equal to the initial public offering price of our common stock. In connection with this grant, Messrs. Redman, Smith, Sledge, Denholm and Howell received 119,988, 119,988, 119,988, +21,750, and 21,750 options, respectively. The stock options will vest in four equal annual installments commencing the first anniversary of the grant date, March 16, 2017, subject to the Named +Executive Officer's continued employment, and will expire upon the tenth anniversary of the date of grant. +Accelerated Vesting and Equity Cancellation in Connection with Initial Public Offering +On July 19, 2016, we granted stock options to Messrs. Redman, Smith and Sledge pursuant to our 2013 Stock Option Plan. These 2016 +options were primarily granted in order to prevent the equity ownership of the Messrs. Redman, Smith and Sledge from being diluted as a result of Energy Capital Partners' equity contribution to +the company on June 8, 2016. The options were also granted to reward these officers' contributions to the company and expected future contributions. In connection with our initial public +offering, we fully accelerated the vesting of the unvested portion of Messrs. Redman, Smith and Sledge's 2016 options. In connection with the acceleration of vesting for the 2016 options, the +Summary Compensation Table reflects an additional $4,714,476, $2,923,130, and $2,171,576 for Messrs. Redman, Smith and Sledge, respectively. +In +connection with our initial public offering, we also cancelled, as of the consummation of the initial public offering, 372,335 restricted stock units held by Mr. Redman and +26,943 options held by Mr. Denholm. Pursuant to the terms of such cancellations, Mr. Redman received 372,335 shares of our common stock on March 22, 2018, and Mr. Denholm +received $135,253 on March 22, 2018 and will be eligible to receive an additional $135,253 on March 22, 2019, subject to his continuous employment through such date. +21 +Summary Compensation Table +The following table summarizes the compensation provided by us to our Named Executive Officers for the fiscal years ended December 31, +2016 and 2017. +Name and Principal Position +Year +Salary +($) +Bonus +($) +Stock +Awards +($)(1) +Option +Awards +($)(1) +All Other +Compensation +($)(2) +Total +($) +Dale Redman +2017 +465,385 +905,000 +1,740,194 +5,116,436 +10,800 +8,237,815 +Chief Executive Officer +2016 +250,000 +750,000 +— +885,478 +10,800 +1,896,278 +2015 +250,000 +— +— +— +10,800 +260,800 +Jeffrey Smith +2017 +384,615 +575,000 +652,592 +3,325,090 +10,800 +4,948,097 +Chief Financial Officer +2016 +250,000 +500,000 +— +549,028 +10,800 +1,309,828 +2015 +250,000 +— +— +— +10,800 +260,800 +David Sledge +2017 +344,231 +935,000 +652,592 +2,573,526 +10,800 +4,516,159 +Chief Operating Officer +2016 +250,000 +500,000 +— +407,869 +10,800 +1,168,669 +2015 +250,000 +— +— +— +10,800 +260,800 +Ian Denholm +2017 +162,058 +307,527 +53,848 +72,863 +— +596,296 +Chief Accounting Officer +Mark Howell +2017 +197,116 +175,000 +435,069 +72,863 +28,626 +908,674 +General Counsel and Corporate Secretary +(1) Reflects +grant date fair value of stock awards and option awards granted in 2017 and incremental fair value of option awards modified in 2017, in each case as +computed in accordance with FASB ASC Topic 718. For information regarding assumptions underlying the valuation of equity awards, see Note 14 of the Consolidated Financial Statements in our +Annual Report on Form 10-K for the fiscal year ended December 31, 2017. If the maximum payout were to be achieved with respect to the performance stock unit awards, the grant date value +of such awards for Messrs. Redman, Smith, Sledge and Howell would be equal to $1,557,330, $584,012, $584,012 and $389,348, respectively +(2) With +respect to Messrs. Redman, Smith and Sledge, reflects amounts received pursuant to our Vehicle Allowance Program. With respect to Mr. Howell, +reflects the reimbursement of expenses incurred by Mr. Howell in relocating from Indianapolis, Indiana to Midland, Texas. +22 +Grant of Plan-Based Awards +Estimated Future Payouts +Under Equity Incentive +Plan Awards +All Other +Option Awards: +Number of +Securities +Underlying +Options (#) +All Other +Stock Awards: +Number of +Shares of Stock +(#) +Exercise +Price of +Option +Awards +($/sh) +Grant Date +Fair Value +of Stock +and Option +Awards ($)(5) +Name +Grant +Date +Threshold +(#) +Target +(#) +Maximum +(#) +Dale Redman +3/8/2017 +(1) +— +— +— +— +401,232 +$ +2.25 +4,714,476 +3/16/2017 +(2) +— +— +— +— +119,988 +$ +14.00 +401,960 +6/5/2017 +(3) +— +— +— +72,569 +— +— +961,539 +6/5/2017 +(4) +36,284 +72,569 +145,138 +— +— +— +778,665 +Jeffrey Smith +3/8/2017 +(1) +— +— +— +— +248,777 +$ +2.25 +2,923,130 +3/16/2017 +(2) +— +— +— +— +119,988 +$ +14.00 +401,960 +6/5/2017 +(3) +— +— +— +27,214 +— +— +360,586 +6/5/2017 +(4) +13,607 +27,214 +54,428 +— +— +— +292,006 +David Sledge +3/8/2017 +(1) +— +— +— +— +184,815 +$ +2.25 +2,171,576 +3/16/2017 +(2) +— +— +— +— +119,988 +$ +14.00 +401,960 +6/5/2017 +(3) +— +— +— +27,214 +— +— +360,586 +6/5/2017 +(4) +13,607 +27,214 +54,428 +— +— +— +292,006 +Ian Denholm +3/16/2017 +(2) +— +— +— +— +21,750 +$ +14.00 +72,863 +6/5/2017 +(3) +— +— +— +4,064 +— +— +53,848 +6/5/2017 +(4) +— +— +— +— +— +— +— +Mark Howell +3/16/2017 +(2) +— +— +— +— +21,750 +$ +14.00 +72,863 +6/5/2017 +(3) +— +— +— +18,143 +— +— +240,395 +6/5/2017 +(4) +9,071 +18,143 +36,286 +— +— +— +194,674 +(1) Reflects +option awards the vesting of which was accelerated on March 8, 2017 in connection with our initial public offering. +(2) Reflects +option awards that vest in four substantially equal installments commencing on the anniversary of the grant date. +(3) Reflects +RSUs that vest in three substantially equal installments commencing on the first anniversary of the grant date. +(4) Reflects +performance stock units (PSUs) that may vest, if at all, based on the performance of the company's stock relative to a peer group from the date of our +initial public offering through December 31, 2019. PSUs provide the recipient with the opportunity to earn a number of shares of stock between 0% and 200% of the number of shares granted. +(5) Reflects +grant date fair value of stock and option awards or, in the case of the option awards for which vesting was accelerated for Messrs. Redman, Smith and +Sledge, incremental fair value on the date of modification, in each case computed in accordance with FASB ASC Topic 718. For information regarding assumptions underlying the valuation of equity +awards, see Note 14 of the Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017. +Employment Agreements +We are party to employment agreements with each of Messrs. Redman, Smith, Sledge, and Howell, providing for their respective positions as +Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, and General Counsel and Corporate Secretary. We have not entered into an employment agreement with Mr. Denholm. The +employment agreements provide for an initial two-year term with an automatic renewal for successive one year terms unless either party gives notice of non-extension to the other no later than +90 days prior to the expiration of the then-applicable term. +For +Messrs. Redman, Smith and Sledge, the employment agreements provide that such executive will be eligible to receive an annual cash bonus in an amount up to 50% of the +executive's annual base +23 +salary, +based upon individual and Company annual performance targets established by the Board in its sole discretion. Mr. Howell's employment agreement provides that he will be eligible to +receive an annual cash bonus in an amount commensurate with other public company executive officers, based upon individual and company annual performance targets established by the Board of Directors +in its sole discretion, and equity awards on a basis commensurate with other public company executive +officers. In addition, Mr. Howell's employment agreement provided for a reimbursement for all reasonable expenses that he incurred in connection with his relocation to the Midland, Texas area. +Pursuant +to the employment agreements, upon termination of employment by the Company without Cause or by the executive for Good Reason, each executive will receive the sum of his then +current annual base salary and his annual bonus for the immediately preceding calendar year, payable over the year following termination, as well as subsidized COBRA premiums for such period. Each +executive will be required to execute a release of claims in favor of the Company in order to receive his severance benefits. +"Cause" +is defined in the employment agreements as (i) the executive's willful failure to substantially perform his duties, (ii) the executive's willful failure to carry +out, or comply with, in any material respect any lawful directive of our board of directors, (iii) the executive's commission at any time of any act or omission that results in, or may +reasonably be expected to result in, a conviction, a plea of no contest, plea of nolo contendere or imposition of unadjudicated probation for any felony or crime involving moral turpitude; +(iv) the executive's unlawful use (including being under the influence) or possession of illegal drugs on the Company's premises or while performing the executive's duties and responsibilities; +(v) the executive's commission at any time of any act of fraud, embezzlement, misappropriation, misconduct, conversion of assets of the Company or breach of fiduciary duty against the Company +or (vi) the executive's material breach of the employment agreement or any other agreement with the Company, subject to certain procedural requirements. +"Good +Reason" is defined in the employment agreements as (i) a material diminution in the executive's authority, duties or responsibilities, (ii) a material diminution in +base compensation or (iii) any other action or inaction that constitutes a material breach of the employment agreement by the Company, in each case subject to certain procedural requirements. +The +agreements contain noncompetition covenants that apply through one year following termination of employment and nonsolicitation covenants that apply through three years following +termination of employment. +Base Salaries +Each of our Named Executive Officers receive a base salary to compensate them for services rendered to our company. The base salary payable to +each Named Executive Officer is intended to provide a fixed component of compensation reflecting the executive's skill set, experience, role and responsibilities. Prior to our initial public offering, +each of Messrs. Redman, Smith, Sledge and Howell's salaries were established at $250,000. In June 2017, the Compensation Committee increased the annual base salaries payable to +Messrs. Redman, Smith and Sledge to $650,000, $500,000 and +$425,000, respectively in order to more appropriately reflect salaries for similar positions at other public companies. Mr. Denholm's annual base salary was increased to $192,000 from $160,000 +upon promotion to the position of Chief Accounting Officer in August of 2017. +Bonuses +For 2016 and 2017, each of the Named Executive Officers received discretionary bonus payments, determined by our Board of Directors and +Compensation Committee, respectively. In determining bonus amounts, the Board of Directors and Compensation Committee considered our performance +24 +during +the fiscal year, with 2017 bonuses based on a number of significant achievements including record revenue, substantial fleet growth, and the success of our initial public offering. +Retirement Plans +We currently maintain a 401(k) retirement savings plan for our employees who satisfy certain eligibility requirements. Our Named Executive +Officers are eligible to participate in the 401(k) plan on the same terms as other full-time employees, but currently do not participate in the 401(k) plan. The Internal Revenue Code, or the Code, +allows eligible employees to defer a portion of their compensation, within prescribed limits, on a pre-tax basis through contributions to the 401(k) plan. Currently, we match contributions made by +participants in the 401(k) plan up to a specified percentage of the employee contributions and we may make certain discretionary profit sharing contributions. Both the matching contributions and the +profit sharing contributions vest in equal installments over five years of service, with full vesting on retirement, death or disability. We believe that offering a vehicle for tax-deferred retirement +savings through our 401(k) plan, and making matching contributions and profit sharing contributions that vest over time, add to the overall desirability of our executive compensation package and +further incentivize our employees in accordance with our compensation policies. We do not maintain any defined benefit pension plans or deferred compensation plans. +Employee Benefits and Perquisites +Health/Welfare Plans. All of our full-time employees, including our Named Executive Officers, are eligible to participate in our health +and welfare +plans, including: +• medical, dental and vision benefits; +• medical and dependent care flexible spending accounts; +• short-term and long-term disability insurance; and +• life insurance. +Vehicle Allowance Program. In addition, Messrs. Redman, Smith and Sledge each participate in a vehicle allowance program. +We +believe the benefits and perquisites described above are necessary and appropriate to provide a competitive compensation package to our Named Executive Officers. +No Tax Gross - Ups +We do not make gross-up payments to cover our Named Executive Officers' personal income taxes that may pertain to any of the compensation or +perquisites paid or provided by our company. +25 +Outstanding Equity Awards for Year Ended December 31, 2017 +The following table summarizes the number of shares of common stock underlying outstanding equity incentive plan awards for each Named Executive +Officer as of December 31, 2017. +Option Awards +Stock Awards +Name +Number of +Securities +Underlying +Unexercised +Options +Exercisable (#) +Number of +Securities +Underlying +Unexercised +Options +Unexercisable +(#)(3) +Option +Exercise +Price +($) +Option +Expiration +Date +Number of +Shares or +Units of +Stock That +Have Not +Vested (#)(4) +Market Value +of Shares or +Units of +Stock That +Have Not +Vested ($)(5) +Equity +Incentive Plan +Awards: +Number of +Unearned +Shares That +Have Not +Vested (#)(6) +Equity +Incentive Plan +Awards: +Market Value +of Unearned +Shares That +Have Not +Vested ($)(5) +Dale Redman +699,852 +(1) +— +$ +3.96 +6/14/2023 +— +— +— +— +501,540 +(2) +— +$ +2.25 +7/19/2026 +— +— +— +— +— +119,988 +$ +14.00 +3/16/2027 +— +— +— +— +— +$ +— +72,569 +1,462,991 +— +— +— +— +$ +— +— +— +— +72,569 +1,462,991 +Jeffrey Smith +699,852 +(1) +— +$ +3.96 +6/14/2023 +— +— +— +— +310,971 +(2) +— +$ +2.25 +7/19/2026 +— +— +— +— +— +119,988 +$ +14.00 +3/16/2027 +— +— +— +— +— +— +$ +— +— +27,214 +548,634 +— +— +— +— +$ +— +— +— +— +27,214 +548,634 +David Sledge +586,755 +(1) +— +$ +3.96 +6/14/2023 +— +— +— +— +231,019 +(2) +— +$ +2.25 +7/19/2026 +— +— +— +— +— +119,988 +$ +14.00 +3/16/2027 +— +— +— +— +— +— +$ +— +— +27,214 +548,634 +— +— +— +— +$ +— +— +— +— +27,214 +548,634 +Ian Denholm +— +21,750 +$ +14.00 +3/16/2027 +— +— +— +— +— +— +$ +— +— +4,064 +81,930 +— +— +Mark Howell +— +21,750 +$ +14.00 +3/16/2017 +— +— +— +— +— +— +$ +— +— +18,143 +365,763 +— +— +— +— +$ +— +— +— +— +18,143 +365,763 +(1) On +June 14, 2013, Messrs. Redman, Smith and Sledge were each granted 699,852 options to purchase our common stock that vested in equal annual +installments on June 14, 2014, June 14, 2015, June 14, 2016 and June 14, 2017. Mr. Sledge cashlessly exercised a portion of such options. +(2) On +July 19, 2016, Messrs. Redman, Smith and Sledge were granted 501,540, 310,971 and 231,019 options to purchase our common stock, respectively, that +were originally scheduled to vest in equal installments December 31, 2016, June 30, 2017, December 31, 2017, June 30, 2018, and December 30, 2018. However, in +connection with our initial public offering, we fully accelerated the vesting of the unvested portions of these options. +(3) Reflects +option awards granted in connection with our initial public offering on March 16, 2017. Such awards vest in four substantially equal annual +installments commencing on the first anniversary of the grant date. +(4) Reflects +RSU awards granted on June 5, 2017. Such awards vest in three substantially equal installments commencing on the first anniversary of the grant date. +(5) Market +values reflect the closing price of our common stock on December 29, 2017, equal to $20.16 per share. +(6) Reflects +target amount of PSUs granted on June 5, 2017. Such awards may vest, if at all, based on the performance of the company's stock relative to a peer +group from the date of our initial public offering through December 31, 2019. Performance stock units provide the recipient to earn a number of shares of stock between 0% and 200% of the number +of shares granted. +26 +2017 Option Exercises and Stock Vested +Option Awards +Stock Awards +Name +Number of +Shares +Acquired on +Exercise (#) +Value +Realized on +Exercise ($) +Number of +Shares +Acquired on +Vesting (#) +Value +Realized on +Vesting ($) +Dale Redman +— +— +— +— +Jeffrey Smith +— +— +— +— +David Sledge +113,097 +(1) +1,135,493 +— +— +Ian Denholm +26,943 +(2) +270,506 +— +— +Mark Howell +— +— +— +— +(1) In +connection with our initial public offering, Mr. Sledge cashlessly exercised certain of his options. Following exercise, Mr. Sledge received a net +number of shares of our common stock equal to 81,106. +(2) In +connection with our initial public offering, we cancelled, as of the consummation of the initial public offering, 26,943 options held by Mr. Denholm. +Pursuant to the terms of such cancellations, Mr. Denholm received $135,253 on March 22, 2018 and will be eligible to receive an additional $135,253 on March 22, 2019, subject to +his continuous employment through such date. The $270,506 amount shown in the table represents the sum of these amounts. +Pension Benefits +We do not sponsor any qualified or non-qualified defined benefit pension plans. +Nonqualified Deferred Compensation +Name +Executive +Contributions +in Last FY +($) +Registrant +Contributions +in Last FY +($) +Aggregate +Earnings in +Last FY +($) +Aggregate +Withdrawals/ +Distributions +($) +Aggregate +Balance at +Last FYE +($) +Dale Redman(1) +— +5,212,970 +(2) +2,293,304 +— +7,506,274 +(3) +Jeffrey Smith +— +— +— +— +— +David Sledge +— +— +— +— +Ian Denholm +— +— +— +— +Mark Howell +— +— +— +— +(1) In +connection with our initial public offering, we cancelled, as of the consummation of the initial public offering, 372,335 restricted stock units held by +Mr. Redman. Pursuant to the terms of such cancellations, Mr. Redman received 372,335 shares of our common stock on March 22, 2018. +(2) Amount +reflects value of a share of our common stock on the consummation of our initial public offering, or $14.00. +(3) Amount +reflects value of a share of our common stock on December 29, 2017, or $20.16. +Director Compensation +Our employee directors and directors affiliated with Energy Capital Partners are not separately compensated for their service as a director. We +have adopted a non-employee director compensation policy applicable to our non-employee directors who are not affiliated with Energy Capital Partners. Under this policy, each eligible non-employee +director receives an annual cash retainer of $55,000. Further, the Chairperson of the Board receives an additional annual cash retainer of $15,000, and the +27 +Chairpersons +of the Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee receives an annual retainer of $15,000, $10,000, and $10,000, respectively. Also, pursuant +to the non-employee director compensation policy, each director is eligible to receive an annual grant of restricted stock units with a grant date fair value of $100,000, pro-rated for directors who +join during the year. Director awards of restricted stock units vest in full on the earliest to occur of the first anniversary of the grant date, the day immediately preceding the first annual meeting +of stockholders following the grant date, and the occurrence of a Change in Control, subject to continuous service through the applicable vesting date. The members of the Board are entitled to +reimbursement of expenses incurred in connection with attendance at Board and committee meetings in accordance with Company policy. +In +connection with our initial public offering, we adopted a non-employee director stock ownership policy that is applicable to all of our eligible non-employee directors who are not +affiliates of Energy Capital Partners. Pursuant to this policy, each eligible non-employee director who is not an affiliate of Energy Capital Partners is encouraged to hold, on and following the later +of the fifth anniversary of (i) the closing of our initial public offering and (ii) the non-employee director's election or appointment to the Board, shares of our common stock (valued +based on the closing price of our common stock) with a value equal to or in excess of 300% of the non-employee director's annual cash retainer, as such threshold may be amended by our Nominating and +Corporate Governance Committee from time to time. +The +following table summarizes the annual compensation for our non-employee directors during 2017. +Name +Fees Earned +or Paid in +Cash ($)(1) +Stock +Awards +($)(2) +All Other +Compensation +($) +Total ($) +Spencer Armour +90,000 +100,114 +435,000 +(3) +625,114 +Steven Beal +51,993 +100,114 +— +152,107 +Anthony Best(4) +— +— +— +— +Pryor Blackwell +4,633 +— +— +54,223 +Schuyler Coppedge(5) +— +— +— +— +Alan Douglas +43,546 +100,114 +— +143,660 +Peter Labbat(5) +— +— +— +— +Jack Moore +52,090 +100,114 +— +152,204 +Matt Himler(5) +— +— +— +— +Francesco Ciabatti(5) +— +— +— +— +(1) Reflects +retainer payments made pursuant to the Non-Employee Director Compensation Policy. With respect to Mr. Armour, includes retainer payments of $30,000 +earned prior to the effective date of our Non-Employee Director Compensation Policy. +(2) Reflects +grant date fair value of restricted stock unit award on the date of grant computed in accordance with FASB ASC Topic 718. For information regarding +assumptions underlying the valuation of equity awards, see Note 14 of the Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended +December 31, 2017. +28 +The +following table sets forth the aggregate number of stock awards and the aggregate number of option awards held by each of our non-employee directors on December 31, 2017. +Name +Aggregate +Number +of Stock +Awards (#) +Aggregate +Number +of Stock +Options (#) +Spencer Armour +7,558 +817,774 +Steven Beal +7,558 +— +Pryor Blackwell +— +— +Schuyler Coppedge +— +— +Alan Douglas +7,558 +— +Peter Labbat +— +— +Jack Moore +7,558 +— +Matt Himler +— +— +Francesco Ciabatti +— +— +(3) Reflects +discretionary bonus paid to Mr. Armour for his assistance with our initial public offering. +(4) Mr. Best +began his service as a director on January 29, 2018 and did not receive any compensation from us during 2017. +(5) Messrs. Ciabatti, +Coppedge, Himler and Labbat are affiliated with Energy Capital Partners and are not separately compensated for their service as a director. +Mr. Ciabatti resigned as a director effective as of April 4, 2017. Mr. Hilmer resigned as a director effective as of January 29, 2018. +29 +OTHER INFORMATION +Principal Stockholders +The following table presents certain information as of April 4, 2018, based on 83,412,189 shares of common stock outstanding as of such +date, as to: +• each stockholder known by us to be the beneficial owner of more than five percent of our outstanding shares of common stock, +• each director and director nominee, +• each named executive officer, and +• all current directors and executive officers as a group. +Shares Beneficially Owned +Name of Beneficial Owner(1) +Number +Percentage +5% Stockholders +Energy Capital Partners(2) +20,727,928 +24.8 +% +The Vanguard Group(3) +6,890,118 +8.3 +% +BlackRock, Inc.(4) +5,628,629 +6.8 +% +Wellington Management Group LLP(5) +4,503,300 +5.4 +% +Directors and Named Executive Officers(6) +Dale Redman +1,704,862 +2.0 +% +Jeffrey Smith +1,057,722 +1.3 +% +David Sledge +817,774 +* +Ian Denholm +5,437 +* +Mark Howell +5,437 +* +Spencer D. Armour +817,774 +* +Steven Beal +15,000 +* +Anthony Best +— +* +Pryor Blackwell +14,784 +* +Schuyler Coppedge +— +* +Alan Douglas +— +* +Peter Labbat +— +* +Jack Moore +— +* +All Directors, Director Nominees and Executive Officers as a group (13 persons) +4,438,790 +5.0 +% +* Less +than 1%. +(1) Unless +otherwise indicated, the address for each beneficial owners in this table is c/o ProPetro Holding Corp., 1706 S. Midkiff, Bldg. B, Midland, +Texas 79701. +(2) Based +on a Schedule 13G filed on February 12, 2018. Includes (i) 310,422 shares held by Energy Capital Partners II, LP +("ECP II"), (ii) 10,111,599 shares held by Energy Capital Partners II-A, LP ("ECP II-A"), (iii) 2,117,308 shares held by Energy Capital +Partners II-B, LP ("ECP II-B"), (iv) 3,719,251 shares held by Energy Capital Partners II-C (Direct IP), LP ("ECP II-C"), (v) 2,492,098 +shares held by Energy Capital Partners II-D, LP ("ECP II-D"), and (vi) 1,977,250 shares held by Energy Capital Partners II (Midland Co-Invest), LP +("ECP Co-Invest"). Each of ECP II, ECP II-A, ECP II-B, ECP II-C and ECP II-D is managed by its general partner, Energy Capital +Partners GP II, LP. Energy Capital Partners GP II, LP is managed by its general partner, +30 +Energy +Capital Partners II, LLC ("Energy Capital Partners"). As a result, each of Energy Capital Partners GP II, LP and Energy Capital Partners may be deemed to +share beneficial ownership of the shares held by ECP II, ECP II-A, ECP II-B, ECP II-C and ECP II-D. ECP Co-Invest is managed by its general partner, Energy +Capital Partners GP II Co-Investment (Midland), LLC, which is managed by its sole member, Energy Capital Partners. Douglas W. Kimmelman, Peter Labbat, Thomas K. Lane, Tyler Reeder +and Andrew D. Singer are the managing members of, and Rahman D'Argenio and Schuyler E. Coppedge are partners of, Energy Capital Partners and share the power to direct the voting and disposition of the +shares beneficially owned by Energy Capital Partners. Each such individual disclaims beneficial ownership of such shares. The address for Energy Capital Partners and each of the other persons and +entities in this footnote is 51 John F. Kennedy Parkway, Suite 200, Short Hills, New Jersey 07078. +(3) Based +on a Schedule 13G Filed on February 9, 2018. Represents (i) 3,400 shares over which The Vanguard Group has shared voting power, and +(ii) 94,100 over which The Vanguard Group has shared dispositive power. Vanguard Fiduciary Trust Company, a wholly-owned subsidiary of The Vanguard Group, Inc., is the beneficial owner +of 90,700 shares as a result of its serving as investment manager of collective trust accounts. Vanguard Investments Australia, Ltd., a wholly-owned subsidiary of The Vanguard +Group, Inc., is the beneficial owner of 7,582 shares as a result of its serving as investment manager of Australian investment offerings. The address for these entities is +100 Vanguard Blvd., Malvern, PA 19355. +(4) Based +on a Schedule 13G filed on February 1, 2018. Represents shares of our common stock held by BlackRock, Inc. and certain of its affiliates, +referred to as BlackRock. BlackRock has sole voting power over 5,448,496 shares and sole dispositive power over 5,628,629 shares. The address for BlackRock is 55 East 52nd Street, +New York, New York 10055. +(5) Based +on a Schedule 13G filed on February 8, 2018. Includes 4,503,300 shares owned beneficially by Wellington Management Group LLP, Wellington +Group Holdings LLP, and Wellington Investment Advisors Holdings LLP, and 4,432,559 owned beneficially by Wellington Management Company LLP. These securities are owned of record by +clients of the Wellington Investment Advisers. Wellington Investment Advisors Holdings LLP controls directly, or indirectly through Wellington Management Global Holdings, Ltd., the +Wellington Investment Advisers. Wellington Investment Advisors Holdings LLP is owned by Wellington Group Holdings LLP. Wellington Group Holdings LLP is owned by Wellington +Management Group LLP. The address for Wellington is 280 Congress Street, Boston, MA 02210. +(6) For +each officer and director, includes shares of common stock that are issuable pursuant to options that are currently exercisable or exercisable within +60 days. +31 +Executive Officers +Our executive officers serve at the direction of our Board of Directors. All of our executive officers are listed in the following table, and +certain information concerning those officers, except for Mr. Redman, who is a member of the Board of Directors, follows the table: +Name +Age +Position with ProPetro Holding Corp. +Dale Redman +57 +Chief Executive Officer and Director +Jeffrey Smith +58 +Chief Financial Officer +David Sledge +61 +Chief Operating Officer +Ian Denholm +30 +Chief Accounting Officer +Mark Howell +39 +General Counsel and Corporate Secretary +Jeffrey Smith +Jeffrey Smith is a co-founder of ProPetro and has been our Chief Financial Officer since 2005. Mr. Smith has over 33 years of +accounting and financial experience. Prior to joining the Company, Mr. Smith served as President of Nittany Enterprises from 1991 to 2005, and before that Mr. Smith served as Chief +Financial Officer for Southmark Commercial Management Inc., a national commercial real estate company. Mr. Smith is a licensed certified public accountant. Mr. Smith received a +B.B.A. in Finance from Penn State University and a M.B.A. from the University of Michigan. +David Sledge +David Sledge has served as our Chief Operating Officer since 2011. Mr. Sledge has over 37 years of experience in the energy +services industry, Mr. Sledge currently serves on the Board of Directors for Comstock Resources, Inc. where he has served since 1996. Prior to joining ProPetro Mr. Sledge was Vice +President—Drilling for Basic Energy Services from 2007 to 2009. Mr. Sledge was President and Chief Operating Officer of Sledge Drilling Corp., which was sold to Basic Energy +Services in 2007. Mr. Sledge received a B.B.A. in Management from Baylor University. +Ian Denholm +Ian Denholm has served as our Chief Accounting Officer since August 2017. Prior to his appointment, Mr. Denholm served as our Director of +Finance, and served as Chief Financial Officer of Academy Drilling from 2011 until its acquisition by ProPetro. Mr. Denholm holds both a Bachelor's and Master's degree in Accounting from Texas +Tech University. +Mark Howell +Mark Howell has served as our General Counsel and Corporate Secretary since March 2017. Prior to joining ProPetro, Mr. Howell served +Anthem, Inc. as Associate General Counsel—Corporate Securities and Finance from September 2015, and Vantage Drilling Company, an international oil and gas services company, in +various legal roles from 2010 to 2015, including as General Counsel from 2014. Prior to joining Vantage, Mr. Howell worked as an attorney focused on corporate and securities law and oil and gas +transactions at Burleson Cooke LLP and Andrews Kurth LLP. Mr. Howell holds a Doctorate of Jurisprudence from South Texas College of Law and a B.A. from the University of Texas. +Certain Relationships and Related Party Transactions +Related Party Transactions +We lease our corporate offices from South Midkiff Partners LLC, an entity owned jointly by Dale Redman, David Sledge, Spencer Armour and +Jeff Smith, pursuant to a five-year lease agreement with a +32 +five-year +extension option requiring a base rent of $72,000 per year. We also lease five properties adjacent to the corporate office from South Midkiff Partners LLC with annual base rents of +$30,000, $30,000, $90,000, $90,000 and $180,000. +We +paid Dale Redman, our Chief Executive Officer, $265,278 for the year ended December 31, 2017, for reimbursement of costs incurred through use of his aircraft. +We +rent certain flowback equipment from PD Properties, an entity jointly owned by Dale Redman, our Chief Executive Officer. For the year ended December 31, 2017, we paid $192,000 +under this lease. +We +lease a property adjacent to our corporate headquarters from Industrial Loop Partners, LLC, an entity wholly owned by an affiliate of Bandera Ventures. For the year ended +December 31, 2017, we paid $335,194 under the lease. The lease has a remaining term of approximately six years. Mr. Blackwell, one of our directors, through his approximately 33% +interest in Bandera Ventures, may be deemed an indirect beneficiary of this lease. +Jordan +Frosch is a corporate sales manager for the company and the son-in-law of Dale Redman. Mr. Frosch received total compensation of approximately $438,212 for his services for +the year ended December 31, 2017. +In +November 2017, we entered into a five-year extension to an existing sand supply agreement to provide Texas-sourced frac sand ("Texas sand"), which is in high demand from our +customers. Texas sand provided under the supply agreement will primarily be sourced from a mine located on land owned by an oil and gas exploration company in which our Chief Executive Officer, Dale +Redman, owns a 44% interest. Accordingly, Mr. Redman may be considered an indirect beneficiary of payments made under the lease between our supplier and the landowner. The supply agreement was +negotiated by officers of the Company without the involvement of Mr. Redman, and reviewed and approved by the Audit Committee pursuant to its authority under our Related Party Transactions +Policy. In considering the approval of the supply agreement, the Audit Committee retained independent legal and commercial expertise to assist in the evaluation of the agreement's commercial terms. +Following its evaluation, the Audit Committee determined that the pricing and other provisions of the agreement reflected market terms, that the agreement reflected an arm's length negotiation, and +that entry into the agreement was advisable and in the best interests of the Company. For the year ended December 31, 2017, the Company did not make any payments for Texas sand under the supply +agreement. +Policies and Procedures for Related Party Transactions +Any request for us to enter into a transaction with an executive officer, director, principal stockholder or any of such persons' immediate +family members or affiliates, among others, in which the amount involved exceeds $120,000, must first be presented to our audit committee for review, consideration and approval. All of our directors +and executive officers are required to report to the audit committee chair any such related person transaction. In approving or rejecting the proposed agreement, our audit committee shall consider the +facts and circumstances available and deemed relevant to the audit committee, including, but not limited to, whether the transaction is on terms comparable to those that could be obtained in +arm's-length dealings with an unrelated third party, the extent of the related party's interest in the transaction and the conflicts of interest and corporate opportunity provisions of our certificate +of incorporation. If we should discover related person transactions that have not been approved, the audit committee will be notified and will determine the appropriate action, including ratification, +revision or termination of such transaction. +33 +Section 16(a) Beneficial Ownership Reporting Compliance +Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than 10% of our equity +securities to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock. Officers, directors and greater than 10% stockholders are required by SEC +regulation to furnish us with copies of all Section 16(a) reports they file. +To +our knowledge, based solely on review of the copies of such reports furnished to us and written representations that no other reports were required, during the fiscal year ended +December 31, 2017, our officers, directors and greater than 10% beneficial owners timely filed all required Section 16(a) reports. +Other Matters +A copy of our Annual Report on Form 10-K for the year ended December 31, 2017, including financial statements and schedules +thereto but not including exhibits, as filed with the SEC, will be sent to any stockholder of record on April 20, 2018 without charge by calling Investor Relations at (432) 688-0012 or +writing to the address below: +ProPetro +Holding Corp. +P.O. Box 873 +Midland, Texas 79702 +A +reasonable fee will be charged for copies of exhibits. You may also access our Annual Report on Form 10-K for the year ended December 31, 2017 and our other filings with +the SEC at www.propetroservices.com. +The +persons designated to vote shares covered by our Board of Directors' proxies intend to exercise their judgment in voting such shares on other matters that may properly come before +the meeting. Management does not expect that any matters other than those referred to in this proxy statement will be presented for action at the meeting. +Deadline for Receipt of Stockholder Proposals +If you want to present a proposal from the floor at the 2019 annual meeting of stockholders or nominate a person for election to the Board at +such meeting, you must give us written notice no later than the close of business on March 17, 2019 and no earlier than the opening of business on February 15, 2019, and follow the +procedures outlined in our Bylaws. You may request a copy of the provisions of the Bylaws governing the requirements for notice at the below address. If the date of the 2019 annual meeting of +stockholders is more or less than 30 days from June 15, 2019, the one year anniversary of the 2018 annual meeting of stockholders, your notice of a proposal will be timely if we receive +it no earlier than the opening of business on the 120 th day before the actual date of such meeting and no later than the later of (i) the close of business on the +90 th day before the actual date of such meeting and (ii) the close of business on the tenth day following the date on which a written statement setting forth the date of +such meeting was mailed to the stockholders or the date on which it is first disclosed to the public. SEC rules permit management to vote proxies in its discretion in certain cases +if a stockholder does not comply with this deadline and, in certain other cases notwithstanding a stockholder's compliance with this deadline. +If +you wish to submit a proposal to be considered for inclusion in next year's proxy statement pursuant to Rule 14a-8 of the Exchange Act, you must submit the proposal so that it +is received by December 31, 2018. If the date of the 2019 annual meeting of stockholders is more than 30 days from June 15, 2019, the one year anniversary date of the 2018 annual +meeting of stockholders, a notice will +34 +be +timely if we receive it a reasonable time before we begin to print and send our proxy materials for such meeting. +In +each case, your notice should be sent in writing to our Secretary at our principal executive offices at 1706 S. Midkiff, Bldg. B, Midland, Texas 79701. +Sincerely, +Mark +Howell +General Counsel and Corporate Secretary +April 26, +2018 +35 +PROPETRO HOLDING CORP. PROXY FOR ANNUAL MEETING TO BE HELD ON JUNE 15, 2018 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS The undersigned stockholder hereby appoints each of Dale Redman and Jeffrey Smith as attorney and proxy for the undersigned, with the power to appoint his substitute, to represent and to vote all the shares of common stock of PROPETRO HOLDING CORP. (the “Company”), which the undersigned would be entitled to vote, at the Company’s Annual Meeting of Stockholders to be held at The Petroleum Museum of Midland, 1500 W. Interstate 20, Midland, TX 79701 on Friday, June 15, 2018 at 9:00 A.M. Central Time and at any postponements, continuations or adjournments thereof, (the “Annual Meeting”). In their discretion, the proxies are authorized to vote (i) for the election of any person to the Board of Directors if any nominee named herein becomes unable to serve or for good cause will not serve, (ii) on any matter that the Board of Directors of the Company did not know would be presented at the Annual Meeting by a reasonable time before the proxy solicitation was made and (iii) upon any other matter that may properly come before the Annual Meeting or any postponements, continuations or adjournments thereof. This proxy, when properly executed, will be voted in the manner directed on the reverse side by the undersigned stockholder. If no direction is made, this proxy will be voted “FOR” all nominees set forth in Proposal 1 and “FOR” PROPOSAL 2. PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE. (IMPORTANT — This Proxy must be signed and dated on the reverse side.) PLEASE DETACH ALONG PERFORATED LINE AND MAIL IN THE ENVELOPE PROVIDED. Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be held June 15, 2018. The Proxy Statement and our 2018 Annual Report to Stockholders are available at: http://www.viewproxy.com/propetro/2018 +Please mark your votes like this The Board of Directors recommends a vote FOR all nominees in Proposal 1 and FOR Proposal 2. Vote on Proposals 1. Election of Directors 01 Dale Redman 02 Spencer D. Armour, III 03 Steven Beal 04 Anthony Best 05 Pryor Blackwell 2. To ratify the appointment of Deloitte & Touche LLP to serve as the Company’s independent registered public accounting firm for the year ending December 31, 2018. FORAGAINSTABSTAIN Vote FOR all nominees (except as marked) Vote WITHHELD from all nominees 06 Schuyler E. Coppedge 07 Alan E. Douglas 08 Peter Labbat 09 Jack B. Moore INSTRUCTION: To withhold authority to vote for any indicated nominee, write the number(s) of the nominee(s) in the space provided below. Date Signature(s) NOTE: Please mark, date and sign this proxy card and return it in the accompanying envelope. Please sign as your name appears hereon. If shares are registered in more than one name, all owners should sign. If signing in a fiduciary or representative capacity, please give full title and attach evidence of authority. Corporations please sign with full corporate name by a duly authorized officer and affix corporate seal. CONTROL NUMBER Address Change/Comments: (If you noted any Address Changes and/or Comments above, please mark box.) Please indicate if you plan to attend this meeting PLEASE DETACH ALONG PERFORATED LINE AND MAIL IN THE ENVELOPE PROVIDED. PROPETRO HOLDING CORP. As a shareholder of ProPetro Holding Corp., you have the option of voting your shares electronically through the Internet or on the telephone, eliminating the need to return the proxy card. Your electronic vote authorizes the named proxies to vote your shares in the same manner as if you marked, signed, dated and returned the proxy card. Votes submitted electronically over the Internet or by telephone must be received by 11:59 p.m., Eastern Time, on June 14, 2018. CONTROL NUMBER PROXY VOTING INSTRUCTIONS Please have your 11-digit control number ready when voting by Internet or Telephone INTERNET Vote Your Proxy on the Internet: Go to www.AALVote.com/PUMP Have your proxy card available when you access the above -website. Follow the prompts to vote your shares. If you vote your proxy by Internet or by Telephone, you do NOT need to mail back your Proxy Card. MAIL Vote Your Proxy by Mail: Mark, sign, and date your proxy card, then detach it, and return it in the postage-paid envelope provided. TELEPHONE Vote Your Proxy by Phone: Call 1 (866) 804-9616 Use any touch-tone telephone to vote your proxy. Have your proxy card available when you call. Follow the voting instructions to vote your shares. DO NOT PRINT IN THIS AREA (Shareholder Name & Address Data) +QuickLinks +INFORMATION CONCERNING SOLICITATION AND VOTING +IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON FRIDAY, JUNE 15, 2018 +QUESTIONS AND ANSWERS +Proposal 1 ELECTION OF DIRECTORS +Nominees +Proposal 2 +RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM +CORPORATE GOVERNANCE +REPORT OF THE AUDIT COMMITTEE +EXECUTIVE COMPENSATION +OTHER INFORMATION \ No newline at end of file diff --git a/raw/proxies/0001680247/0001047469-18-003228/proxy_rpt.txt b/raw/proxies/0001680247/0001047469-18-003228/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..9559b39269a8e22f05a0ecf30203236d73cba4da --- /dev/null +++ b/raw/proxies/0001680247/0001047469-18-003228/proxy_rpt.txt @@ -0,0 +1,38 @@ +Certain Relationships and Related Party Transactions +Related Party Transactions +We lease our corporate offices from South Midkiff Partners LLC, an entity owned jointly by Dale Redman, David Sledge, Spencer Armour and +Jeff Smith, pursuant to a five-year lease agreement with a +32 +five-year +extension option requiring a base rent of $72,000 per year. We also lease five properties adjacent to the corporate office from South Midkiff Partners LLC with annual base rents of +$30,000, $30,000, $90,000, $90,000 and $180,000. +We +paid Dale Redman, our Chief Executive Officer, $265,278 for the year ended December 31, 2017, for reimbursement of costs incurred through use of his aircraft. +We +rent certain flowback equipment from PD Properties, an entity jointly owned by Dale Redman, our Chief Executive Officer. For the year ended December 31, 2017, we paid $192,000 +under this lease. +We +lease a property adjacent to our corporate headquarters from Industrial Loop Partners, LLC, an entity wholly owned by an affiliate of Bandera Ventures. For the year ended +December 31, 2017, we paid $335,194 under the lease. The lease has a remaining term of approximately six years. Mr. Blackwell, one of our directors, through his approximately 33% +interest in Bandera Ventures, may be deemed an indirect beneficiary of this lease. +Jordan +Frosch is a corporate sales manager for the company and the son-in-law of Dale Redman. Mr. Frosch received total compensation of approximately $438,212 for his services for +the year ended December 31, 2017. +In +November 2017, we entered into a five-year extension to an existing sand supply agreement to provide Texas-sourced frac sand ("Texas sand"), which is in high demand from our +customers. Texas sand provided under the supply agreement will primarily be sourced from a mine located on land owned by an oil and gas exploration company in which our Chief Executive Officer, Dale +Redman, owns a 44% interest. Accordingly, Mr. Redman may be considered an indirect beneficiary of payments made under the lease between our supplier and the landowner. The supply agreement was +negotiated by officers of the Company without the involvement of Mr. Redman, and reviewed and approved by the Audit Committee pursuant to its authority under our Related Party Transactions +Policy. In considering the approval of the supply agreement, the Audit Committee retained independent legal and commercial expertise to assist in the evaluation of the agreement's commercial terms. +Following its evaluation, the Audit Committee determined that the pricing and other provisions of the agreement reflected market terms, that the agreement reflected an arm's length negotiation, and +that entry into the agreement was advisable and in the best interests of the Company. For the year ended December 31, 2017, the Company did not make any payments for Texas sand under the supply +agreement. +Policies and Procedures for Related Party Transactions +Any request for us to enter into a transaction with an executive officer, director, principal stockholder or any of such persons' immediate +family members or affiliates, among others, in which the amount involved exceeds $120,000, must first be presented to our audit committee for review, consideration and approval. All of our directors +and executive officers are required to report to the audit committee chair any such related person transaction. In approving or rejecting the proposed agreement, our audit committee shall consider the +facts and circumstances available and deemed relevant to the audit committee, including, but not limited to, whether the transaction is on terms comparable to those that could be obtained in +arm's-length dealings with an unrelated third party, the extent of the related party's interest in the transaction and the conflicts of interest and corporate opportunity provisions of our certificate +of incorporation. If we should discover related person transactions that have not been approved, the audit committee will be notified and will determine the appropriate action, including ratification, +revision or termination of such transaction. +33 \ No newline at end of file diff --git a/raw/proxies/0001680247/0001047469-19-002506/proxy.txt b/raw/proxies/0001680247/0001047469-19-002506/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..183e5573ec3f8efbdb576008ce2def5f50f8073f --- /dev/null +++ b/raw/proxies/0001680247/0001047469-19-002506/proxy.txt @@ -0,0 +1,3261 @@ +DEF 14A +1 +a2238598zdef14a.htm +DEF 14A +QuickLinks +-- Click here to rapidly navigate through this document +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +Washington, D.C. 20549 +SCHEDULE 14A +Proxy +Statement Pursuant to Section 14(a) of +the Securities Exchange Act of 1934 (Amendment No. ) +Filed by the Registrant ý +Filed by a Party other than the Registrant o +Check the appropriate box: +o +Preliminary Proxy Statement +o +Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +ý +Definitive Proxy Statement +o +Definitive Additional Materials +o +Soliciting Material under §240.14a-12 +ProPetro Holding Corp. +(Name of Registrant as Specified In Its Charter) +(Name of Person(s) Filing Proxy Statement, if other than the Registrant) +Payment of Filing Fee (Check the appropriate box): +ý +No fee required. +o +Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. +(1) +Title of each class of securities to which transaction applies: +(2) +Aggregate number of securities to which transaction applies: +(3) +Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): +(4) +Proposed maximum aggregate value of transaction: +(5) +Total fee paid: +o +Fee paid previously with preliminary materials. +o +Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration +statement number, or the Form or Schedule and the date of its filing. +(1) +Amount Previously Paid: +(2) +Form, Schedule or Registration Statement No.: +(3) +Filing Party: +(4) +Date Filed: +ProPetro Holding Corp. +1706 S. Midkiff, Bldg. B +Midland, Texas 79701 +NOTICE OF ANNUAL MEETING OF STOCKHOLDERS +To Be Held June 14, 2019 +Dear Stockholders: +We +cordially invite you to attend the 2019 annual meeting of stockholders of ProPetro Holding Corp., a Delaware corporation ("ProPetro," "we," "our" or the "Company"). The meeting will +be held June 14, 2019 at 9:00 a.m. (Central time), at 2518 FM 307, Midland, Texas 79706. At the meeting we will ask stockholders to: +1. Elect +the nine directors named in the proxy statement to the Board of Directors; +2. Approve +an amendment of our Certificate of Incorporation to remove inoperative provisions related to our former majority stockholder (the "Inoperative Provisions +Amendment"); +3. Approve +an amendment of our Certificate of Incorporation to remove the supermajority voting requirement for stockholders to amend our Bylaws (the "Bylaws Voting +Amendment"); +4. Approve +an amendment of our Certificate of Incorporation to remove the supermajority voting requirement for stockholders to amend our Certificate of Incorporation +(the "Charter Voting Amendment," and together with the Inoperative Provisions Amendment and the Bylaws Amendment, the "Charter Amendments") +5. Approve, +on a non-binding, advisory basis, our named executive officer compensation; +6. Approve +an advisory vote on the frequency of future advisory votes on executive compensation; +7. Ratify +the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending December 31, +2019; and +8. Transact +any other business as may properly come before the meeting. +Stockholders +who owned our common stock at the close of business on April 22, 2019 are entitled to notice of, and to vote at, the annual meeting, or any continuation, postponement +or adjournment thereof. A stockholders' list will be available at our offices at 1706 S. Midkiff, Bldg. B, Midland, Texas 79701 for a period of ten days prior to the meeting. We hope that you +will be able to attend the meeting in person. +Your +vote is important. Regardless of whether you plan to attend the meeting in person, we urge you to vote your shares via the toll-free telephone number or over the Internet, as +described in the enclosed materials. If you received a copy of the proxy card by mail, you may sign, date and mail the proxy card in the enclosed return envelope. The prompt return of proxies will +ensure a quorum and save us the expense of further solicitation. +We +look forward to seeing you at the meeting. +By +order of the Board of Directors, +Mark +Howell +General Counsel and Corporate Secretary +April 23, 2019 +YOUR VOTE IS IMPORTANT +Your vote is important. We urge you to review the accompanying proxy statement carefully and to submit your proxy as soon as possible so that your shares will be represented at +the meeting. +ProPetro Holding Corp. +1706 S. Midkiff, Bldg. B +Midland, Texas 79701 +PROXY STATEMENT +INFORMATION CONCERNING SOLICITATION AND VOTING +Our Board of Directors (the "Board") is soliciting proxies for the 2019 annual meeting of stockholders to be held on June 14, 2019 at 9:00 a.m. +(Central Time), at 2518 FM 307, Midland, Texas 79706, and at any continuations, adjournments or postponements of the meeting. This proxy statement contains important information for you to +consider when deciding how to vote on the matters brought before the meeting. Please read it carefully. +We +will pay the costs of soliciting proxies from stockholders. Our directors, officers and regular employees may solicit proxies on behalf of us, without additional compensation, +personally or by telephone. We will also request that brokers, nominees, custodians and other fiduciaries forward soliciting materials to the beneficial owners of shares held by such brokers, +nominees, custodians and other fiduciaries. We will reimburse such persons for their reasonable expenses in connection therewith. +This +proxy statement and our annual report on Form 10-K to stockholders for the year ended December 31, 2018 will be released on or about April 30, 2019 to our +stockholders on the record date. +IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON FRIDAY, JUNE 14, 2019 +This proxy statement and our 2018 annual report on Form 10-K to stockholders are each available at +http://www.viewproxy.com/propetro/2019 . Stockholders may receive directions to attend the meeting in person by calling our Director of Investor Relations at (432) 688-0012. +QUESTIONS AND ANSWERS +Q: Who can attend and vote at the meeting? +A: The +Board set April 22, 2019 as the record date for the meeting. You can attend and vote at the meeting if you were a holder of our common stock at the close +of business on the record date, April 22, 2019, or if you are a holder of a valid proxy for the meeting. If you would like to attend the meeting, you must call our Director of Investor +Relations at (432) 688-0012 no later than 5:00 p.m. Central Time on June 12, 2019 to have your name placed on the attendance list. In order to be admitted into the meeting, your +name must appear on the attendance list and you must present government-issued photo identification (such as a driver's license or passport). If your bank or broker holds your shares in street name, +you will also be required to present proof of beneficial ownership of our common stock on the record date, such as the Internet Notice you received from your bank or broker, or a bank or brokerage +statement or a letter from your bank or broker showing that you owned shares of our common stock at the close of business on the record date. In addition, if your bank or broker holds your shares in +street name, you must obtain legal proxy from your broker, bank or other nominee and present it to the inspector of election with your ballot at the meeting. On April 22, 2019, there were +100,334,868 shares of our common stock outstanding and entitled to vote at the meeting. +Q: What proposals will be voted on at the meeting? +A: Seven +proposals are scheduled to be voted upon at the meeting. At the meeting we will ask stockholders to: +• Elect the nine directors named in this proxy statement as members of the Board to serve until our 2020 annual meeting of stockholders; +• Approve the Inoperative Provisions Amendment; +• Approve the Bylaws Voting Amendment; +• Approve the Charter Voting Amendment; +• Approve, on a non-binding, advisory basis, our named executive officer compensation; +• Approve an advisory vote on the frequency of future advisory votes on executive compensation; and +• Ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending +December 31, 2019. +Q: Why did I receive a Notice of Internet Availability of Proxy Materials? +A: As +permitted by the rules of the United States Securities and Exchange Commission (the "SEC"), we are making this proxy statement and our 2018 annual report to +stockholders available electronically via the Internet. On or about April 30, 2019, we mailed to our stockholders a Notice of Internet Availability of Proxy Materials (the "Internet Notice") +containing instructions on how to access this proxy statement and our 2018 annual report and vote online. If you received an Internet Notice by mail, you will not receive a printed copy of the proxy +materials in the mail unless you specifically request them. Instead, the Internet Notice instructs you on how to access and review all of the important information contained in the proxy statement and +2018 annual report. The Internet Notice also instructs you on how you may submit your proxy over the Internet. If you received an Internet Notice by mail and would like to receive a printed copy of +our proxy materials, you should follow the instructions for requesting such materials contained on the Internet Notice. +Q: How do I cast my vote? +A: We +recommend that stockholders vote by proxy even if they plan to attend the annual meeting and vote in person. If you are a stockholder of record, there are three +ways to vote by proxy: +• by Telephone—You can vote by telephone by calling 1-866-804-9616 and following the instructions on the proxy card; or +• by Internet—You can vote over the Internet at www.AALVote.com/PUMP by following the instructions on the Internet Notice or proxy +card; or +• by Mail—You can vote by mail by signing, dating and mailing the proxy card, which you may have received by mail. +Telephone +and Internet voting facilities for stockholders of record will be available 24 hours a day and will close at 11:59 p.m., Eastern Time, on June 13, 2019. +In +the event that you submit a proxy but do not indicate any voting instructions, your shares will be voted as recommended by the Board on all matters, and in the discretion of the proxy holders as to +any other matters that may properly come before the meeting or any continuation, postponement or adjournment of the meeting. We do not know of any other business to be considered at the meeting other +than the proposals noted herein. +If +your shares are registered in the name of a broker, bank or other nominee (typically referred to as being held in "street name"), you will receive instructions from your broker, bank or other +nominee that must be followed in order for your broker, bank or other nominee to vote your shares per your instructions. Many brokerage firms and banks have a process for their beneficial holders to +provide instructions via the Internet or over the telephone. If Internet or telephone voting is unavailable from your broker, bank or other nominee, please complete and return the +2 +voting +instruction card in the addressed, postage paid envelope provided by your broker, bank or other nominee. +In +the event you do not provide instructions on how to vote, your broker may have authority to vote your shares. Under the rules that govern brokers who are voting with respect to shares that are held +in street name, brokers have the discretion to vote such shares on "routine" matters, but not on non-routine matters. The only "routine" matter to be voted upon at the meeting is the ratification of +the appointment of independent auditors. +Your vote is especially important. If your shares are held by a broker, your broker cannot vote your shares for the election of directors, +the Charter Amendments, the non-binding advisory vote on our executive officer compensation or the frequency of an advisory vote on executive compensation unless you provide voting instructions. +Therefore, please instruct your broker regarding how to vote your shares on these matters promptly . See "Vote Required" following each proposal for +further information. +If +you hold shares through a broker, bank or other nominee and wish to be able to vote in person at the meeting, you must obtain a legal proxy from your broker, bank or other nominee and present it to +the inspector of election with your ballot at the meeting. +Q: Can I revoke or change my proxy? +A: Yes. +You may revoke or change a previously delivered proxy at any time before the meeting by delivering another proxy with a later date, by voting again via the +Internet or by telephone, or by delivering written notice of revocation of your proxy to our Secretary at our principal executive offices before the beginning of the meeting. You may also revoke your +proxy by attending the meeting and voting in person, although attendance at the meeting will not, in and of itself, revoke a valid proxy that was previously delivered. If you hold shares through a +broker, bank or other nominee, you must contact that nominee to revoke any prior voting instructions. You also may revoke any prior voting instructions by voting in person at the meeting if you obtain +a legal proxy as described above. +Q: How does the Board recommend I vote on the proposals? +A: The +Board recommends you vote (i) "FOR" each of the nine nominees named in this proxy statement to our Board, (ii) "FOR" the Inoperative Provisions +Amendment, (iii) "FOR" the Bylaws Voting Amendment, (iv) "FOR" the Charter Voting Amendment, (v) "FOR" the approval, on a non-binding advisory basis, of our named executive +officer compensation, (vi) "ONE YEAR", regarding the frequency of an advisory vote on executive compensation and (vii) "FOR" the ratification of the appointment of Deloitte & +Touche LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2019. +Q: Who will count the vote? +A: The +inspector of election will count the vote. Alliance Advisors will act as the inspector of election. +Q: What is a "quorum?" +A: A +quorum is the number of shares that must be present to hold the meeting. The quorum requirement for the meeting is a majority of the outstanding shares as of the +record date, present in person or represented by proxy. Your shares will be counted for purposes of determining if there is a quorum if you are present and vote in person at the meeting; or have voted +on the Internet, by telephone or by properly submitting a proxy card or voting instruction card by mail. +3 +Votes +withheld, abstentions and broker non-votes (discussed below) are counted as present and entitled to vote for purposes of determining a quorum. +Q: What happens if there is not a quorum at the meeting? +A: Pursuant +to our bylaws, the meeting may be adjourned by a majority of the shares represented at the meeting to reconvene at the same or some other place. If the +adjournment is for more than 30 days, or if after the adjournment a new record date is fixed for the adjourned meeting, notice of the adjournment shall be given to each stockholder of record +entitled to vote at the meeting. If the adjournment is for less than 30 days, no additional notice will be delivered. +Q: What is an abstention and how will votes withheld and abstentions be treated? +A: A +"vote withheld," in the case of proposals regarding the election of directors and the vote on the frequency of the advisory vote on executive compensation, or an +"abstention," in the case of the proposals regarding the Charter Amendments, the advisory vote on executive compensation and the ratification of the appointment of our independent registered public +accounting firm, represent a stockholder's affirmative choice to decline to vote on a proposal. Votes withheld have no effect on the election of directors or the vote on the frequency of the advisory +vote on executive compensation. Abstentions have the effect of a vote "AGAINST" in the case of the proposals regarding the Charter Amendments, the advisory vote on executive compensation and the +ratification of the appointment of our independent registered public accounting firm. +Q: What are broker non-votes and how will they be treated? +A: Generally, +broker non-votes occur when shares held by a broker in "street name" for a beneficial owner are not voted with respect to a particular proposal because the +broker (1) has not received voting instructions from the beneficial owner and (2) lacks discretionary voting power to vote those shares. A broker is entitled to vote shares held for a +beneficial owner on "routine" matters, such as the ratification of the appointment of our independent registered public accounting firm, without instructions from the beneficial owner of those shares. +On the other hand, absent instructions from the beneficial owner of such shares, a broker is not entitled to vote shares held for a beneficial owner on non-routine matters, such as the election of +directors. Broker non-votes will have the effect of a vote "AGAINST" the approval of the Charter Amendments and will have no effect on the election of directors, the advisory resolutions on executive +compensation or the vote on the frequency of the advisory vote on executive compensation. We do not expect any broker non-votes in connection with the ratification of our independent public accounting +firm. +4 +Q: What vote is required to approve each item? +A: The +following table sets forth the voting requirement with respect to each of the proposals: +Proposal 1—Election of members of the Board. +The plurality of the votes cast. This means that the nine nominees receiving the highest number of affirmative "FOR" votes will be elected as directors. +Proposal 2—Approval of the Inoperative Provisions Amendment. +The affirmative "FOR" vote of the holders of 66 2 / 3 % of the shares entitled to vote. +Proposal 3—Approval of the Bylaws Voting Amendment. +The affirmative "FOR" vote of the holders of 66 2 / 3 % of the shares entitled to vote. +Proposal 4—Approval of the Charter Voting Amendment. +The affirmative "FOR" vote of the holders of 66 2 / 3 % of the shares entitled to vote. +Proposal 5—Approval of our named executive officer compensation on an advisory basis. +The affirmative "FOR" vote of the holders of a majority of the shares represented at the meeting, in person or by proxy, and entitled to vote. +Proposal 6—A vote on the frequency of our named executive officer compensation on an advisory basis +The plurality of the votes cast. This means that the frequency option that receives the greatest number of votes cast will be considered the preference of ProPetro's stockholders. +Proposal 7—Ratification of appointment of independent registered public accounting firm. +The affirmative "FOR" vote of the holders of a majority of the shares represented at the meeting, in person or by proxy, and entitled to vote. +Q: What does it mean if I get more than one Internet Notice or more than one set of proxy materials? +A: Your +shares are probably registered in more than one account. Please vote all of your shares. To ensure that all of your shares are voted, for each Internet Notice or +set of proxy materials, please submit your proxy by phone, via the Internet, or, if you received printed copies of the proxy materials, by signing, dating and returning the enclosed proxy card in the +enclosed envelope. +Q: How many votes can I cast? +A: On +all matters you are entitled to one vote per share of common stock that you held as of the record date. +Q: Where can I find the voting results of the meeting? +A: The +preliminary voting results will be announced at our annual meeting. The final results will be published in a current report on Form 8-K to be filed by us +with the SEC within four business days of our annual meeting. +5 +Proposal 1 +ELECTION OF DIRECTORS +At the 2019 annual meeting, nine directors are to be elected. All nominees are currently directors. Each director is to hold office until the +next annual meeting of stockholders or until his successor is elected and qualified. Directors hold office until their successors have been elected or qualified or until their earlier death, +resignation, removal or disqualification. The following table shows information for the directors as of April 22, 2019. +The +nominees have consented to being nominated and have expressed their intention to serve if elected. We believe that the nominees possess the professional and personal qualifications +necessary for board service, and have highlighted particularly noteworthy attributes for the nominees in their biographies below. We have no reason to believe that the nominees will be unable to serve +if elected to office and, to our knowledge, the nominees intend to serve the entire term for which election is sought. In the event any of the nominees should become unable to serve, or for good cause +will not serve, as a director, it is intended that votes will be cast for a substitute nominee designated by the Board or the Board may elect to reduce its size. Only the nominees or substitute +nominees designated by the Board will be eligible to stand for election as directors at the meeting. +We +have entered into an investor rights agreement (the "Investor Rights Agreement") with an affiliate of Pioneer Natural Resources Company ("Pioneer") that provides Pioneer certain +rights to designate nominees for election to the Board. Under the Investor Rights Agreement, Pioneer was granted (i) the +one-time right to designate an independent director to the Board and (ii) the right to designate a non-independent director to the Board for so long as a certain affiliate of Pioneer owns 5% or +more of our outstanding common stock. Pioneer has designated Mark S. Berg, as the non-independent director, and Royce W. Mitchell, as the independent director, for election to our Board. +Nominees +All of the current members of the Board are listed in the following table, and certain information concerning those directors follows the table: +Name +Age +Position with ProPetro Holding Corp. +Director +Since +Dale Redman +58 +Chief Executive Officer and Director +2005 +Spencer D. Armour III +65 +Chairman of the Board of Directors +2013 +Steven Beal(1)(2) +60 +Director +2017 +Mark S. Berg +60 +Director +2019 +Anthony Best(1)(2) +69 +Director +2018 +Pryor Blackwell(2)(3) +58 +Director +2017 +Alan E. Douglas(1)(3) +60 +Director +2017 +Royce W. Mitchell(1) +64 +Director +2019 +Jack B. Moore(3) +65 +Director +2017 +(1) Member +of the Audit Committee. +(2) Member +of the Compensation Committee. +(3) Member +of the Nominating and Corporate Governance Committee. +6 +Dale Redman +Dale Redman is a co-founder of ProPetro and has been Chief Executive Officer since 2008 and a member of the Board since 2005. Mr. Redman +has over 33 years of executive and entrepreneurial experience in the energy services industry. He was a co-founder and Chief Executive Officer of Downhole Injection Systems, LLC, which +was sold in 2004. Prior to that, Mr. Redman was President and Chief Executive Officer of Reef Chemical Company from 1993 to 1998. Mr. Redman received a B.B.A. in Finance from Texas Tech +University. We believe that Mr. Redman's industry experience and deep knowledge of our business and our customers makes him well suited to serve as Chief Executive Officer and director. +Spencer D. Armour III +Spencer D. Armour III has served as chairman of the Board since February 2013. Mr. Armour has over 30 years of executive and +entrepreneurial experience in the energy services industry. Mr. Armour has served as President of PT Petroleum LLC in Midland, Texas since 2013. He was the Vice President of Corporate +Development for Basic Energy Services, Inc. from 2007 to 2008, which acquired Sledge Drilling Corp., a company Mr. Armour co-founded and served as Chief Executive Officer from 2005 to +2006. From 1998 through 2005, he served as Executive Vice President of Patterson-UTI Energy, Inc., which acquired Lone Star Mud, Inc., a company Mr. Armour founded and served as +President from 1986 to 1997. He currently serves on the board of Viper Energy Partners, LP and the board of CES Energy Solutions Corp. Mr. Armour received a B.S. in Economics from the +University of Houston in 1977 and served on the University of Houston System Board of Regents from 2011 until 2018. We believe that Mr. Armour's extensive experience in the energy services +industry and his deep knowledge of the industry dynamics within the Permian Basin make him well suited to serve as a director. +Steven Beal +Steven Beal has served as a member of the Board since April 2017. Mr. Beal has over 30 years of experience in energy industry and +accounting activities. Mr. Beal served as a consultant to Concho Resources Inc. ("Concho") from 2009 to 2013, and, prior to that, served as Concho's President and Chief Operating Officer +from its formation in 2004 until his retirement in 2009. Previously, Mr. Beal was a director and the Executive Vice President and Chief Financial Officer of Concho Oil & Gas Corp. from +its formation until becoming its President and Chief Operating Officer in 2002, a position he held until 2004. Prior to Concho Oil & Gas Corp., Mr. Beal was a director and the Vice +President and Chief Financial Officer of Concho Resources Inc., a predecessor company to Concho, from its formation in 1997 until its sale in 2001. From 1988 to 1997, Mr. Beal was +employed by Parker & Parsley Petroleum Company in a variety of capacities, including serving as Senior Vice President and Chief Financial Officer. From 1981 to 1988, Mr. Beal was +employed by the accounting firm currently known as PricewaterhouseCoopers LLP. Mr. Beal currently serves on the board of directors of Concho Resources Inc. and First Financial +Bankshares, Inc. Mr. Beal received a Bachelor of Business Administration in accounting from the University of Texas. We believe that Mr. Beal's extensive knowledge of the energy +industry, together with his substantial experience with public company accounting matters make him well suited to serve as a director. +Mark S. Berg +Mark. S. Berg has served as a member of the Board since February 2019. Mr. Berg has served as Executive Vice President, +Corporate/Vertically Integrated Operations for Pioneer since May 2017. Mr. Berg has over 14 years of experience with Pioneer in various roles, including as Executive Vice +President & General Counsel from April 2005 to January 2014, Executive Vice President, Corporate from January 2014 to August 2015, and as Executive Vice President, Corporate/Operations from +August 2015 until assuming his current role. He began his career in 1983 with the law firm Vinson & +7 +Elkins LLP, +and served as partner from 1990 to 1997. Further, Mr. Berg served as Executive Vice President, General Counsel and Secretary of American General Corporation, a Fortune 200 +diversified financial services company, from 1997 to 2001. Following the sale of American General to American International Group, he was appointed Senior Vice President, General Counsel and Secretary +of Hanover Compressor Company, a New York Stock Exchange listed natural gas compression and processing company. Mr. Berg holds a Juris Doctor, with honors, from the University of Texas School +of Law, and graduated magna cum laude and Phi Beta Kappa with a Bachelor of Arts in Public Policy from Tulane University. He is a member of the State Bar of Texas and has served as Chairman of the +Board of Dallas CASA. Mr. Berg has served as a member of the board of directors of HighPoint Resources Corporation since March 2018. We believe that Mr. Berg's experience in significant +management roles with Pioneer and his broad experience in the energy industry make him well suited to serve as a director. +Anthony Best +Anthony Best has served as a member of the Board since January 2018. Mr. Best has over 35 years of experience in the energy +industry, and has served as a Senior Advisor for Quantum Energy Partners ("Quantum") since August 2015. Prior to joining Quantum, Mr. Best served in various roles with SM Energy Company, +commencing in 2006 as its President and Chief Operating Officer, and as its Chief Executive Officer from February 2007 through January 2015. From 2003 to 2005, Mr. Best served as President and +Chief Executive Officer of Pure Resources, Inc., a Unocal development and exploration company. From 2000 to 2003, Mr. Best served as an independent consultant offering leadership and oil +and gas consultation to energy companies and volunteer organizations, and from 1979 through 2000, Mr. Best served in various roles of increasing responsibility at Atlantic Richfield +Company, culminating in the position of President, ARCO Latin America. Mr. Best holds a Master's of Science in Engineering Management from the University of Alaska, and a Bachelor's of Science +in Mechanical Engineering from Texas A&M University. Prior to beginning his business career, Mr. Best served five years as an engineering officer in the United States Air Force. Mr. Best +currently serves as a director of ExL Petroleum LP, Middle Fork Energy Partners and Newpark Resources. We believe that Mr. Best's experience in significant management roles with +companies operating in the Permian Basin and his broad experience in the energy industry make him well suited to serve as a director. +Pryor Blackwell +Pryor Blackwell has served as a member of the Board since December 2017. Mr. Blackwell has over 30 years of experience as an +entrepreneur and senior executive in the commercial real estate development and investment business. Mr. Blackwell is a partner with Bandera Ventures, a private commercial real estate +development and investment firm, which he co-founded in 2003. Prior to founding Bandera Ventures, Mr. Blackwell was employed by Trammell Crow Company for 18 years where he served in +numerous leadership capacities, including: President—Development & Investment Group from 2001 to 2003, Chief Operating Officer from 1998 to 2001, Chief Operating +Officer—Western Operations from 1997 to 1998, Area President from 1996 to 1997, President/Chief Executive Officer—DFW from 1993 to 1997, President/Chief Executive +Officer—Central Office Group from 1991 to 1993, and Partner from 1987 to 1991. Mr. Blackwell was a member of the Trammell Crow Company Executive Committee, Operating Committee, +Investment Committee, and served on the Board of Directors from 1993 to 2002. Mr. Blackwell holds a Bachelor of Business Administration degree in Finance from Texas Tech University. We believe +that Mr. Blackwell's financial and investment experience provides a diverse perspective from outside the energy industry and makes him well suited to serve as a director. +8 +Alan E. Douglas +Alan E. Douglas has served as a member of the Board since March 2017. Mr. Douglas is a shareholder of Johnson, Miller & Co. +where he has worked for 25 years. Mr. Douglas is a Certified Public Accountant with over 37 years of experience in accounting and audit activities. Prior to joining Johnson, +Miller & Co., Mr. Douglas was a Certified Public Accountant at KPMG LLP for twelve +years. Mr. Douglas received a B.B.A. in accounting from Texas Tech University. We believe that Mr. Douglas's extensive accounting and auditing experience make him well suited to serve as +a director. +Royce W. Mitchell +Royce W. Mitchell has served as a member of the Board since February 2019. Mr. Mitchell has been an Executive Consultant, focusing on +advising management teams and board audit committees of exploration and production companies, since January 2005, except for the period from April 2008 through December 2008 when he served as Chief +Financial Officer of Frac Tech Services, Ltd. Mr. Mitchell served as an Executive Vice President, Chief Financial Officer and Chief Accounting Officer of Key Energy Services, Inc. +("Key") from January 2002 to January 2005. Before joining Key, he was a Partner of KPMG LLP from April 1986 to December 2001 specializing in the oil and gas industry. Mr. Mitchell +received a BBA from Texas Tech University and is a Certified Public Accountant. Mr. Mitchell has served as a member of Pioneer's Board of Directors since July 2014. We believe that +Mr. Mitchell's extensive knowledge of the energy industry, together with his substantial experience with public company accounting matters make him well suited to serve as a director. +Jack B. Moore +Jack B. Moore has served as a member of the Board since March 2017. Mr. Moore served as Chairman of the Board of Cameron International +Corporation from 2011 until it was acquired in April 2016. Mr. Moore worked at Cameron International Corporation from 1999 until 2014, serving as Chief Executive Officer from 2008 to 2015 and +as President from 2008 to 2014. Prior to that, he held various management positions at Baker Hughes Incorporated, where he was employed for 23 years. Mr. Moore currently serves on the +board of directors of Occidental Petroleum Corporation and KBR, Inc., and served on the board of directors of Rowan Companies plc prior to its merger with Ensco plc in April 2019. +Mr. Moore also previously served on the board of directors of the American Petroleum Institute, the National Ocean Industries Association, and the Petroleum Equipment Suppliers Association. +Mr. Moore received a B.B.A. from the University of Houston and is a graduate of the Advanced Management Program at Harvard Business School. We believe that Mr. Moore's wealth of +experience in the oilfield service sector, including service as a director and executive officer to various public corporations in the sector make him well suited to serve as a director. +Vote Required +The proposal regarding the election of directors requires the approval of a plurality of the votes cast. This means that the nine nominees +receiving the highest number of affirmative "FOR" votes will be elected as directors. Votes withheld and broker non-votes are not considered to be votes cast and, accordingly, will have no effect on +the outcome of the vote on this proposal. +Board Recommendation +Our Board recommends a vote " FOR " each of the nine director nominees named above. +9 +CORPORATE GOVERNANCE +Director Independence +The majority of the members of the Board, at any given time, must qualify as "independent" under the rules of the NYSE. +Our +Board has undertaken a review of the independence of each of our director nominees and has affirmatively determined that each of Messrs. Beal, Best, Blackwell, Douglas, +Mitchell and Moore are "independent," as defined by the NYSE rules. Under the NYSE rules, a director can be independent only if (a) the director does not trigger a categorical bar to +independence and (b) our Board affirmatively determines that the director has no material relationship with the Company (either directly or as a partner, shareholder or officer of an +organization that has a relationship with the Company). +Based +on information provided by the directors and the director nominees concerning their background, employment and affiliations, our Board has determined that these directors do not +have a material relationship with the Company (either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company). In making this determination, our +Board considered the current and prior relationships that each of the directors has with us, and all other facts and circumstances our Board deemed relevant in determining independence, including any +beneficial ownership of our capital stock by each of the directors. +Board Leadership Structure +Our Board has adopted our Corporate Governance Guidelines, which is available on our website, www.propetroservices.com in the "Corporate +Governance" subsection of the "Investors" section. Our Corporate Governance Guidelines provide that if the +Chairman of the Board is a member of management or does not otherwise qualify as independent, the independent directors may elect a lead independent director. In considering whether to appoint a lead +independent director, the Board determined that although Mr. Armour does not qualify as an independent director, primarily as a result of bonus payments he received in connection with assisting +the Company in the process of its initial public offering, he is a non-employee director that appropriately facilitates communication among directors and management and performs his role as Chairman +in a manner independent from management. Accordingly, the Board has determined that the appointment of a lead independent director is not appropriate for the Company at this time. The Board will +continue to evaluate the need for a lead independent director from time to time. +Our +Board believes that Mr. Armour is best situated to serve as Chairman of the Board due to his familiarity with the oil and gas industry in the Permian Basin, his ability to +facilitate communication among directors and management, and his ability to assist the Company in identifying strategic priorities and leading the Board in the successful execution of the Company's +long-term development. Independent directors and management have different perspectives and roles in strategy development. Our independent directors bring experience, oversight and expertise from +outside the Company and the oil and gas industry. Our Board believes that Mr. Armour's role as the Chairman of the Board facilitates the flow of information and communication between senior +management and the Board, which is essential to effective governance. +One +of the key responsibilities of the Board is to develop a strategic direction for us and to hold management accountable for the execution of our strategy once it is developed. The +Board believes that its current structure provides an appropriate balance between the development of the Company's strategy and independent oversight of management. +10 +Board of Directors and Risk Oversight +In the normal course of its business, we are exposed to a variety of risks, including market risks relating to changes in commodity prices, +interest rates, political risks and credit and investment risk. The Board oversees our strategic direction, and in doing so considers the potential rewards and risks of our business opportunities and +challenges, and monitors the development and management of risks that impact our strategic goals. The Audit Committee assists the Board in fulfilling its oversight responsibilities by monitoring the +effectiveness of our systems of financial reporting, auditing, internal controls and legal and regulatory compliance. The Nominating and Corporate Governance Committee assists the Board in fulfilling +its oversight responsibilities with respect to the management of risks associated with Board organization, membership and structure, succession planning for our directors and executive officers and +corporate governance. The Compensation Committee assists the Board in fulfilling its oversight responsibilities by overseeing our compensation policies and practices. The Board does not believe that +its role in the oversight of our risks affects the Board's leadership structure. +Communicating with our Board of Directors +Stockholders and other interested parties may communicate with our Board by writing to: ProPetro Holding Corp., P.O. Box 873, +Midland, Texas 79702. Stockholders may submit their communications to the Board, the independent directors, any committee of the Board or individual directors on a confidential or anonymous basis by +sending the communication in a sealed envelope marked "Stockholder Communication with Directors" and clearly identifying the intended recipient(s) of the communication. +Our +Secretary will review each communication and will forward the communication, as expeditiously as reasonably practicable, to the addressees if: (1) the communication complies +with the requirements of any applicable policy adopted by the Board relating to the subject matter of the communication; and (2) the communication falls within the scope of matters generally +considered by the Board. To the extent the subject matter of a communication relates to matters that have been delegated by the Board to a committee or to an executive officer of the Company, then our +Secretary may forward the communication to the executive officer or chairman of the committee to which the matter has been delegated. The acceptance and forwarding of communications to the members of +the Board or an executive officer does not imply or create any fiduciary duty of the Board members or executive officer to the person submitting the communications. +Information +may be submitted confidentially and anonymously, although the Company may be obligated by law to disclose the information or identity of the person providing the information +in connection with government or private legal actions and in other circumstances. The Company's policy is not to take any adverse action, and not to tolerate any retaliation, against any person for +asking questions or making good faith reports of possible violations of law, our policies or our Code of Ethics & Conduct. +Annual Meeting Attendance +While the Company does not have a specific policy about director attendance at annual meetings of stockholders, all directors are expected to +attend meetings of the Board (and any committees thereof on which they serve) either in person or telephonically unless exigencies prevent them from attending. Each director attended at least 75% of +the aggregate of (1) the total number of meetings of the Board (held during the period for which he has been a director) and (2) the total number of meetings of committees of the Board +on which he served (during the periods that he served). Our non-employee directors meet at regularly scheduled executive sessions presided over by our Chairman. Additionally, our independent directors +meet at least once a year without members of management or +11 +non-independent +directors present. All of our directors attended our 2018 annual meeting of stockholders. +Compensation Committee Interlocks and Insider Participation +During the fiscal year ended December 31, 2018, the Compensation Committee was initially comprised of Messrs. Armour, Douglas, and +Moore. In connection with an evaluation of committee assignments by our Nominating & Corporate Governance Committee in January 2018, our committee memberships were modified and +Messrs. Beal, Best and Blackwell were appointed to, and continue to serve on, the Compensation Committee. No executive officer of the Company served as a member of the board of directors or +compensation committee of any other entity that has one or more executive officers serving as a member of our Board or Compensation Committee. During the fiscal year ended December 31, 2018, +Mr. Armour and Mr. Blackwell were the indirect beneficiaries of certain transactions with the Company in which the amount involved exceeded $120,000. See "Other Matters." +Board and Committee Activity, Structure and Compensation +Our Board is governed by our certificate of incorporation, bylaws, the Investor Rights Agreement, charters of the standing committees of the +Board and the laws of the State of Delaware. +On +December 31, 2018, we entered into the Investor Rights Agreement with an affiliate of Pioneer. The Investor Rights Agreement provides that Pioneer will be granted +(i) the one-time right to designate an independent director to the Board and (ii) the right to designate a non-independent director to the Board for so long as Pioneer owns 5% or more of +the Company's outstanding common stock. +During +2018, our Board held five meetings. There are currently three standing committees of the Board: the Audit Committee, the Compensation Committee and the Nominating and Corporate +Governance Committee. Members serve on these committees until their resignation or until as otherwise determined by our Board. The composition of the Board committees complies with the applicable +rules of the NYSE and applicable law. Our Board has adopted a written charter for each of the standing committees, which can be found in the "Corporate Governance" subsection of the "Investors" +section of our website at www.propetroservices.com . +In +addition to the above governing documents, our Code of Ethics & Conduct that applies to all of our employees, as well as each member of the Board, can also be found in the +"Corporate Governance" subsection of the "Investors" section of our website at www.propetroservices.com . The composition and responsibilities of each of +the standing committees of our Board are as follows: +Audit Committee. Our Audit Committee is comprised solely of "independent" directors, as defined under and required by the NYSE rules +and +Rule 10A-3 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Our Audit Committee is directly responsible for, among other things, the appointment, compensation, retention +and oversight of our independent registered public accounting firm. The oversight of our independent public accounting firm includes reviewing the plans and results of the audit engagement with the +firm, approving any additional professional services provided by the firm and reviewing the independence of the firm. The Audit Committee is also responsible for discussing the effectiveness of the +internal controls over financial reporting with our independent registered public accounting firm and relevant financial management. During the year ended December 31, 2018, the members of the +Audit Committee were Messrs. Beal, Best, Douglas and Moore. In addition, Mr. Mitchell was appointed to the Audit Committee upon joining the Board in February 2019 and Mr. Moore +stepped down from the Audit Committee. Mr. Beal serves as committee chair. Our Board has determined that each of Mr. Beal and Mr. Mitchell qualifies as an "audit committee +financial expert," as defined by the rules under the Exchange Act. The Audit Committee held four meetings in 2018. +12 +Nominating and Corporate Governance Committee. Our Nominating and Corporate Governance Committee consists solely of "independent" +directors, as +defined under and required by NYSE rules. The Nominating and Corporate Governance Committee is responsible for, among other things, identifying individuals qualified to become Board members; selecting +or recommending director-nominees for each election of directors to the Board; developing and recommending criteria for selecting qualified director candidates to the Board; considering committee +member qualifications, appointments and removals; recommending corporate governance principles, codes of conduct and compliance mechanisms; providing oversight in the evaluation of the Board and each +committee thereof; and developing an appropriate succession plan for our chief executive officer pursuant to our Corporate Governance Guidelines. During the year ended December 31, 2018, the +members of the Nominating and Corporate Governance Committee were Messrs. Blackwell, Douglas and Moore, with Mr. Moore serving as committee chair. The Nominating and Corporate Governance +Committee held four meetings in 2018. +Compensation Committee. Our Compensation Committee consists solely of "independent" directors, as defined under and required by the +NYSE rules and +"non-employee directors" under Section 16 of the Exchange Act. The Compensation Committee is responsible for, among other things, overseeing the discharge of the responsibilities of the Board +relating to compensation of the Company's officers and directors. In carrying out these responsibilities, the Compensation Committee reviews all components of executive compensation for consistency +with our compensation philosophy and with the interests of our +stockholders. During the fiscal year ended December 31, 2018, the Compensation Committee was initially comprised of Messrs. Armour, Douglas, and Moore. In connection with an evaluation +of committee assignments by our Nominating & Corporate Governance Committee in January 2018, our committee memberships were modified and Messrs. Beal, Best and Blackwell were appointed +to, and continue to serve on, the Compensation Committee, with Mr. Blackwell serving as committee chair. The Compensation Committee held four meetings in 2018. +Role of the Board, Compensation Committee and our Executive Officers +Executive compensation decisions are typically made on an annual basis by the Compensation Committee with input from our Chief Executive +Officer. Specifically, after reviewing relevant market data and surveys within our industry, our Chief Executive Officer typically provides recommendations to the Compensation Committee regarding the +compensation levels for our existing named executive officers and our executive compensation program as a whole. Our Chief Executive Officer attends all Compensation Committee meetings. After +considering these recommendations, the Compensation Committee typically meets in executive session and adjusts base salary levels and non-equity incentive plan award targets. In addition, the +Compensation Committee determines the achievement of non-equity incentive plan metrics and the amount of any equity grants for each of our named executive officers. In making executive compensation +recommendations, our Chief Executive Officer considers each named executive officer's performance during the year, the Company's performance during the year, as well as comparable company compensation +levels. While the Compensation Committee gives considerable weight to our Chief Executive Officer's recommendations on compensation matters, the Compensation Committee has the final decision-making +authority on all executive compensation matters. +Role of External Advisors +The Compensation Committee engaged Meridian Compensation Advisors in 2018 to assist the Compensation Committee and the Board in evaluating, +designing and implementing compensation practices. For the year ended December 31, 2018, Meridian Compensation Advisors received $190,595 for the services it provided to our Compensation +Committee. No other external advisors were engaged by the Board or any of its committees during the year ended December 31, 2018. +13 +The +Compensation Committee reviews and assesses the independence and performance of its executive compensation consultant in accordance with applicable SEC and NYSE rules and regulations +on an annual basis to confirm that the consultant is independent and meets all applicable statutory and regulatory requirements. +Director Nominations Process +The Nominating and Corporate Governance Committee may utilize a variety of methods for identifying potential nominees for directors, including +considering potential candidates who come to their attention through current officers, directors, professional search firms or other persons. Once a potential nominee has been identified, the +Nominating and Corporate Governance Committee evaluates whether the nominee has the appropriate skills and characteristics required to become a director in light of the then current make-up of the +Board. This assessment includes an evaluation of the nominee's judgment and skills, such as experience at a strategy/policy setting level, financial sophistication, leadership and objectivity, all in +the context of the perceived needs of the Board at that point in time. +In +February 2019, the Board amended our Corporate Governance Guidelines to specifically take the diversity of a potential director nominee's gender, race and ethnicity into account when +considering candidates for the Board, and the Nominating and Corporate Governance Committee and the Board are committed to increasing Board diversity. Two of the director nominees, Messrs. Berg +and Mitchell, were not recommended for nomination by the Nominating and Corporate Governance Committee, but rather pursuant to the Investor Rights Agreement. Our Board believes that at a minimum all +members of the Board should have the highest professional and personal ethics and values. In addition, each member of the Board must be committed to increasing stockholder value and should have enough +time to carry out his or her responsibilities as a member of the Board. +Our +Board monitors the mix of specific experience, qualifications and skills of its directors in order to assure that the Board, as a whole, has the necessary tools to perform its +oversight function effectively in light of the Company's business and structure. +Stockholders +may recommend individuals to the Nominating and Corporate Governance Committee for consideration as potential director candidates by submitting the names of the recommended +individuals, together with appropriate biographical information and background materials, to the Nominating and Corporate Governance Committee, c/o Secretary, P.O. Box 873, Midland, +Texas 79702. In the event there is a vacancy, and assuming that appropriate biographical and background material has been provided on a timely basis, the Nominating and Corporate Governance Committee +will evaluate stockholder-recommended candidates by following substantially the same process, and applying substantially the same criteria, as it follows for candidates submitted by others. +14 +REPORT OF THE AUDIT COMMITTEE +The Audit Committee assists our Board in overseeing (i) the integrity of our financial statements, (ii) our compliance with legal +and regulatory requirements, (iii) the independent auditor's qualifications and independence, and (iv) the performance of our internal auditors (or other personnel responsible for the +internal audit function) and independent auditor. In so doing, it is the responsibility of the Audit Committee to maintain free and open communication between the directors, the independent auditor +and our financial management. The Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the work of the independent auditor for the purpose of preparing +or issuing an audit report or performing other audit, review or attest services for us. The independent auditor reports directly to the Audit Committee. +Management +is responsible for the preparation, presentation, and integrity of our consolidated financial statements, accounting and financial reporting principles, internal control over +financial reporting, and procedures designed to ensure compliance with accounting standards, applicable laws, and regulations. Management is also responsible for objectively reviewing and evaluating +the adequacy, effectiveness, and quality of our system of internal control over financial reporting. Our independent auditor, Deloitte & Touche LLP, is responsible for performing an +independent audit of the consolidated financial statements. +The +Audit Committee's responsibility is to monitor and oversee these processes and the engagement, independence and performance of our independent auditor. The Audit Committee relies, +without +independent verification, on the information provided to it and on the representations made by management and the independent auditor. +The +Audit Committee has met with our independent auditor and discussed the overall scope and plans for their audit. The Audit Committee met with the independent auditor to discuss +matters required to be discussed with audit committees under generally accepted auditing standards, including, among other things, matters related to the conduct of the audit of our consolidated +financial statements and the matters required to be discussed by the statement on Auditing Standards No. 1301, as adopted by the Public Company Accounting Oversight Board. +Our +independent auditor also provided to the Audit Committee the written disclosures and the letter required by applicable standards of the Public Company Accounting Oversight Board +regarding the independent auditor's communications with the Audit Committee concerning independence, and the Audit Committee discussed with the independent auditor its independence. When considering +the independence of Deloitte & Touche LLP, the Audit Committee considered the non-audit services provided to the Company by the independent auditor and concluded that such services are +compatible with maintaining the auditor's independence. +The +Audit Committee has reviewed and discussed our audited consolidated financial statements for the fiscal year ended December 31, 2018 with management and Deloitte & +Touche LLP. Based on the Audit Committee's review of the audited consolidated financial statements and the meetings and discussions with management and the independent auditors, and subject to +the limitations on the Audit Committee's role and responsibilities referred to above and in the Audit Committee Charter, the Audit Committee recommended to our Board that our audited consolidated +financial statements be included in our Annual Report on Form 10-K as filed with the SEC. +By the Audit Committee of the Board, +Steven Beal (Chair) +Anthony Best +Alan E. Douglas +Royce W. Mitchell +15 +Deloitte & Touche LLP Fees for Fiscal Years 2018 and 2017 +The following table sets forth the fees incurred by us in fiscal years 2018 and 2017 for services performed by Deloitte & +Touche LLP: +2018 +2017 +Audit Fees(1) +$ +1,481,585 +$ +1,703,870 +Tax Fees(2) +49,359 +70,220 +Total Fees +$ +1,530,944 +$ +1,774,090 +(1) Audit +Fees include fees billed for professional services rendered for the audit of our annual consolidated financial statements, the audit of our system of internal +control over financial reporting, the review of interim consolidated financial statements included in our quarterly reports, consents and comfort letters provided in connection with the filing of +registration statements, other related services that are normally provided in connection with statutory and regulatory filings, and related out-of-pocket expenses. +(2) Tax +fees consisted principally of fees for tax compliance and tax advice. +Policy on Audit Committee Pre-Approval of Audit and Non-Audit Services of Independent Registered Public Accounting Firm +The charter of the Audit Committee and its pre-approval policy require that the Audit Committee review and pre-approve the Company's independent +registered public accounting firm's audit fees, audit-related fees, tax fees and fees for other services. The Chairman of the Audit Committee has the authority to grant pre-approvals that are within +the pre-approval policy and are presented to the Audit Committee at a subsequent meeting. For the year ended December 31, 2018, the Audit Committee approved 100% of the services described above +under the captions "Audit Fees" and "Tax Fees". +16 +COMPENSATION DISCUSSION AND ANALYSIS +Executive Summary of Compensation Practices +Overview +This Compensation Discussion and Analysis ("CD&A") describes the substantive elements of our compensation practices and the detailed elements of +the compensation awarded to, +earned by, or paid to each of our named executive officers (the "Named Executive Officers") during the last completed fiscal year. +Named Executive Officers for 2018 +For the year ended December 31, 2018, our Named Executive Officers consisted of the following: +Dale Redman +Chief Executive Officer +Jeffrey Smith +Chief Financial Officer +David Sledge +Chief Operating Officer +Ian Denholm +Chief Accounting Officer +Mark Howell +General Counsel and Corporate Secretary +Compensation Philosophy and Overview +Our executive compensation program is designed to attract, motivate and retain the management talent that we believe is necessary to achieve our +financial and strategic goals. Further, we believe that our executive compensation program should be appropriately tailored to balance short-term compensation with intermediate and long-term +compensation that appropriately aligns the interests of our executives with the interests of our stockholders. +In +establishing and evaluating our executive compensation programs, the Compensation Committee strives to achieve total compensation for our executives that reflects their individual +contributions to the Company, as well as their contributions to our overall success as part of the management team. +Design and Implementation +Prior to 2017, we operated as a private company and compensation for each of our Named Executive Officers, other than Mr. Denholm, was +established pursuant to the terms of each officer's employment agreement. Following our initial public offering in March 2017, the Board designed a compensation program more in line with a traditional +public company compensation structure, with a program focused on three principal elements of compensation: +• Annual Base Salary. Annual base +salary is the fixed cash component of our compensation program that we use to attract and retain executives intended to be competitive with our peer group. +• Annual Cash Incentives +Awards. Annual cash incentive awards provide our executives the opportunity to earn an annual cash payment based on the performance of the +Company as a whole, as well as the individual performance of each executive. Although for the year ended December 31, 2017, annual cash incentive award payments were made on a discretionary +basis, in 2018, the Compensation Committee established an annual cash incentive program based primarily on the Company's performance relative to the financial, safety, and strategic metrics. +• Long-Term Equity +Incentives. Long-term incentive awards consist of time-based restricted stock units, as well as performance share units that will vest only if +our total stockholder return outperforms the return of other companies in a peer group over a three-year performance period. +17 +Compensation Determinations, Benchmarking and Role of Compensation Consultant +As part of its evaluation of the Company's executive compensation practices, the Compensation Committee performs an annual review of executive +compensation and makes decisions on each component thereof in order to ensure that individual compensation is aligned with an executive's responsibilities, experience and contributions to the Company, +with target total compensation positioned within competitive market practices. +Executive +compensation decisions are typically made on an annual basis by the Compensation Committee with input from our Chief Executive Officer. In providing recommendations to the +Compensation Committee, our Chief Executive Officer typically reviews market data and other information and recommends changes to the current compensation levels of our Named Executive Officers and +our executive compensation program as a whole. After considering these recommendations, the Compensation Committee typically meets in executive session and adjusts base salary levels and non-equity +incentive plan award targets. While the Compensation Committee gives considerable weight to the Chief Executive Officer's recommendations on compensation matters, the Compensation Committee has the +final decision making authority. +In +establishing a compensation structure more in line with public company practices, the Compensation Committee engaged Meridian Compensation Partners, LLC ("Meridian"), an +independent executive +compensation advisory firm, in 2017, to advise the Compensation Committee on executive compensation matters. In December 2017, Meridian assisted the Compensation Committee with a review of all +elements of executive compensation, establishing a peer group of companies in the oilfield services industry similar to us in benchmarking pay levels and pay practices (as detailed below, the "2017 +Compensation Peer Group"), an assessment of competitive pay levels and incentive plan design. The 2017 Compensation Peer Group was comprised of the following 18 companies: +Basic Energy Services, Inc. +C&J Energy Services, Inc. +Calfrac Well Services Ltd. +CARBO Ceramics Inc. +Independence Contract Drilling, Inc. +Keane Group, Inc. +Key Energy Services, Inc. +Mammoth Energy Services, Inc. +Newpark Resources, Inc. +Parker Drilling Company +Patterson-UTI Energy Inc. +Pioneer Energy Services Corp. +RPC, Inc. +Smart Sand, Inc. +Select Energy Services, Inc. +Superior Energy Services +TETRA Technologies Inc. +Trican Well Services Ltd. +Based +on the Company's extensive growth during 2017 and anticipated growth for 2018, the Compensation Committee began making adjustments to our executive compensation program in 2018 in +order to maintain the alignment of our compensation practices with our revenue and market position as the Company continued to organically grow its pressure pumping operations, increasing deployed +horsepower ("HHP") from 420,000 HHP, or ten fleets, at December 31, 2016, to 905,000 HHP, or twenty fleets, at December 31, 2018. Further, on December 31, 2018, the Company +consummated its acquisition of Pioneer's pressure pumping assets, bringing company-wide horsepower to 1,415,000 HHP. +As +part of its process, the Compensation Committee worked with Meridian to review the 2017 Compensation Peer Group. Following this assessment, the Compensation Committee determined that +as a result of the Company's growth, changes to the Company's benchmarking peer group were necessary in order to keep pay levels and pay practices aligned with the market. In late 2018, the +Compensation Committee adjusted the peer group by removing several smaller companies and adding +larger companies to the compensation benchmarking peer group in order to more appropriately reflect the Company's increased revenue. As a result, the Company's compensation benchmarking peer group +18 +(the +"2019 Compensation Peer Group") for purposes of establishing 2019 compensation levels is comprised of the following companies: +Basic Energy Services, Inc. +Calfrac Well Services Ltd. +C&J Energy Services, Inc. +FTS International Inc. +Helmerich & Payne, Inc. +Keane Group, Inc. +Liberty Oilfield Services, Inc. +Mammoth Energy Services, Inc. +Newpark Resources, Inc. +Oceaneering International, Inc. +Patterson-UTI Energy Inc. +RPC, Inc. +Secure Energy Services, Inc. +Select Energy Services, Inc. +Superior Energy Services, Inc. +TETRA Technologies, Inc. +Trican Well Service Ltd. +As +discussed below, the Compensation Committee utilizes the assessment of market practices and competitive pay levels for purposes of establishing compensation for our Named Executive +Officers. +Elements of Compensation +Base Salary +As part of our executive compensation program, we pay a base salary to each of our executives in order to provide a consistent, minimum level of +pay that is sufficient to allow us to attract and retain executives with the appropriate skills and experience for their positions. +In +connection with the compensation benchmarking analysis conducted by Meridian following our initial public offering, and effective as of June 1, 2017, the Compensation Committee +set the annual base salaries for Messrs. Redman, Smith, and Sledge at $650,000, $500,000, and $425,000, respectively. +Mr. Howell's annual base salary was established at $250,000 prior to our initial public offering, and Mr. Denholm's annual base salary was established at $192,000 upon his promotion to +the position of Chief Accounting Officer in August 2017. Following its annual compensation benchmarking analysis, in April 2018 the Compensation Committee adjusted the base salaries for each of +Messrs. Redman, Denholm and Howell to $700,000, $225,000 and $300,000, respectively, and further adjusted the base salaries of Messrs. Denholm and Howell, effective in April 2019, to +$240,000 and $325,000, respectively, as part of its benchmarking analysis in connection with the adoption of the 2019 Compensation Peer Group. The Compensation Committee intends to monitor and adjust +salaries for our Named Executive Officers over time as necessary to remain competitive with market rates for officers at similarly sized public companies. +Annual Cash Incentive Awards +Annual cash incentive awards are designed to provide participants with the opportunity to earn an annual cash payment based on the Company's +overall performance and each officer's individual contributions to our success. In 2018, the Compensation Committee adopted a set of performance metrics to measure performance and determine the annual +incentive for each of our Named Executive Officers. Under this approach, the Compensation Committee established financial and non-financial goals that are important to the ongoing success of the +Company and were intended to drive desired short-term business performance by focusing executives on key objectives that position the Company for sustained growth. Further, the Compensation Committee +believes that the metrics established for 2018 were closely aligned with the metrics that the market uses to evaluate the Company's performance. In April 2018, the Compensation Committee established +target bonuses for each of Messrs. Redman, Smith, Sledge, Denholm and Howell of $700,000, $375,000, $425,000, $112,500, and $200,000, respectively. Each officer had the opportunity to earn a +maximum bonus equal to 200% of his target award. +19 +Under +the 2018 annual incentive program, 80% of each Named Executive Officer's annual bonus was based on the achievement of the following measures and threshold, target, and maximum +performance goals: +Measure +Weighting +Threshold +Target +Maximum +Adjusted EBITDA per Share(1) +40 +% +$ +2.45 +$ +3.22 +$ +3.66 +Year-End Net Debt to Adjusted EBITDA Ratio +20 +% +0.5 +.25 +.125 +Safety—Total Recordable Incident Rate (TRIR) +20 +% +1.5 +1.25 +1.0 +(1) We +define EBITDA as our net income (loss) before (i) interest expense, (ii) income taxes and (iii) depreciation and amortization. We define +Adjusted EBITDA as EBITDA, plus (i) loss/(gain) on disposal of assets, (ii) (gain) on extinguishment of debt, (iii) stock based compensation, and (iv) other unusual or +non-recurring (income)/expenses. +The +remaining 20% of the annual incentive were based upon attainment of individual and operational performance goals. With respect to such goals, the Compensation Committee evaluated +performance factors not included in the objective incentive compensation component, focused on the individual contributions of our Named Executive Officers, productivity, the Named Executive Officers' +evaluation of strategic growth opportunities and operational efficiency. +Potential +payouts under the 2018 annual incentive program range from 0% to 200% of the target. If performance falls between the specified performance levels, payments are determined via +straight-line interpolation. If performance falls below the threshold performance level, no payments will be awarded. +Performance Level +Payout +(as a % of +Target Bonus) +Threshold +50 +% +Target +100 +% +Maximum +200 +% +Achievement of 2018 Performance Measures and Determination of Payments +For the year ended December 31, 2018, the Company delivered record operational and financial performance, resulting in the achievement +of: +• Adjusted EBITDA per Share of $4.46; +• A Year-End Net Debt to Adjusted EBITDA Ratio of 0; and +• A Total Recordable Incident Rate of 0.84. +The +Company's performance in each of these categories exceeded the level required for the maximum level of performance under the Company's cash incentive award plan. +Further, +with respect to the individual and operational performance goals, the Compensation Committee determined that, in light of the substantial contributions of each of the Company's +Named Executive Officers in delivering superb operational and financial achievement during the year, the substantial contribution from each Named Executive Officer in completing the acquisition of +pressure +pumping assets from Pioneer, and the Company's achievement of a general and administrative expense ratio of 3.2%, which the Compensation Committee believes is substantially below the industry average, +that the maximum level of performance for the individual and operational had been achieved. +As +a result of the Company's substantial outperformance of the 2018 performance measures, the Compensation Committee authorized payments under the cash incentive award plan of +$1,400,000, +20 +$750,000, +$850,000, $250,000 and $400,000 to each of Messrs. Redman, Smith, Sledge, Denholm and Howell, respectively. +Long-Term Incentive Awards +In connection with our initial public offering, the Board adopted the 2017 Incentive Award Plan in order to facilitate the grant of equity +incentives to directors, employees (including the Named Executive Officers) and consultants of our Company and certain of its affiliates and to enable the Company and certain of its affiliates to +obtain and retain the services of these individuals, which is essential to our long-term success. In order to further align the interests of our Named Executive Officers with stockholders, the +Compensation Committee granted a combination of time-based and performance-based equity awards to Named Executive Officers in 2018. For each Named Executive Officer, the Compensation Committee awarded +50% of the value of each Named Executive Officer's long-term incentive awards in the form of restricted stock units (RSUs) that vest in three substantially equal annual installments commencing on the +first anniversary of the grant date, subject to the Named Executive Officer's continued employment, and the remaining 50% of the value of each Named Executive Officer's long-term incentive awards in +the form of performance share units (PSUs) that vest, if earned, following the completion of the applicable performance period subject to the Named Executive Officer's continued employment. The annual +value of each Named Executive Officer's long-term incentive award is determined in conjunction with the Compensation Committee's annual compensation benchmarking analysis, with the price per share +used for purposes of calculating the number of shares tied to a reference date used by the Compensation Committee in making compensation determinations. +PSUs +vest following the completion of a designated performance period and provide the recipient with the opportunity to earn shares of common stock. For the 2018 award, the Compensation +Committee chose to use one performance measure—total stockholder return (TSR), as compared to the TSR of a designated peer group of companies—to determine payouts. For purposes +of the 2018 PSU awards, recipients of PSUs may earn between 0% and 200% of the target number of shares based on ProPetro's TSR, as indicated in the following table. If performance falls between the +specified performance levels, payouts will be determined via straight-line interpolation. If performance falls below the threshold performance level, no payouts will be awarded. +Performance Level +Payout +(as a % of +Target Number +of PSUs Granted) +Threshold +50 +% +Target +100 +% +Maximum +200 +% +The +performance period for the 2018 PSU awards commenced on January 1, 2018 and ends on December 31, 2020. The 2018 performance peer group is comprised of the following 12 +companies: +Basic Energy Services +C&J Energy Services +Calfrac Well Services +FTS International, Inc. +Keane Group Inc. +Liberty Oilfield Services +Patterson-UTI Energy, Inc. +Pioneer Energy Services Corp. +RPC Inc. +STEP Energy Services +Superior Energy Services, Inc. +Trican Well Services +21 +Accordingly, +in April 2018, we made awards of RSUs and PSUs to our Named Executive Officers as follows. +Name +Number of +RSUs +Number of +PSUs +Dale Redman +72,254 +72,254 +Jeffrey Smith +28,902 +28,902 +David Sledge +26,012 +26,012 +Ian Denholm +5,058 +5,058 +Mark Howell +17,341 +17,341 +Other Compensation Policies +Consistent with our goal of aligning compensation practices with stockholder interests, the Board has adopted, and the Compensation Committee +administers, an Executive Compensation Claw-Back Policy and Executive Stock Ownership Policy. +Executive Compensation Claw-Back Policy. Under the terms of our Executive Compensation Claw-Back Policy, any incentive compensation, +including equity +awards, paid to an executive officer which was determined based on calculations of our performance against financial metrics will be subject to recovery by the Company in the event that the underlying +financial metrics are negatively impacted by a restatement of our financial statements. In addition, incentive compensation, including equity awards, is subject to recovery by the Company where an +executive engages in certain misconduct. +Executive Stock Ownership Policy. Under the Terms of our Executive Stock Ownership Policy, we have established equity ownership +guidelines for our +executive officers. Under these guidelines, the Chief Executive Officer must own shares of our common stock or certain equity awards with a value equal to not less than five times annual base pay, the +Chief Financial Officer and Chief Operating Officer must own shares of our common stock or certain equity awards with a value equal to not less than three times annual base pay, and all other +executive officers must own shares of our common stock or certain equity awards with a value equal to not less than one times their annual base pay. For our current Named Executive Officers, the +deadline for compliance with these guidelines is September 11, 2023. In the event of an internal promotion or new hire being named an executive, such executive officer will have five years from +the date of being named an executive officer to meet the share ownership guidelines. In calculating the value of shares of our common stock or certain equity awards held for purposes of determining +compliance with the policy, such value is equal to the closing price per share on the measurement date, based on shares owned outright and unvested RSUs, with the value of such RSUs discounted by 40%. +Option awards and PSUs are excluded from the calculation. +Retirement Plans +We currently maintain a 401(k) retirement savings plan for our employees who satisfy certain eligibility requirements. Our Named Executive +Officers are eligible to participate in the 401(k) plan on the same terms as other full-time employees. The Internal Revenue Code, or the Code, allows eligible employees to defer a portion of their +compensation, within prescribed limits, on a pre-tax basis through contributions to the 401(k) plan. Currently, we match contributions made by participants in the 401(k) plan up to a +specified percentage of the employee contributions and we may make certain discretionary profit sharing contributions. Both the matching contributions and the profit sharing contributions vest in +equal installments over five years of service, with accelerated vesting on retirement, death or disability. We believe that offering a vehicle for tax-deferred retirement savings through our +401(k) plan, and making matching contributions and profit sharing contributions that vest over time, add to the overall desirability of our executive compensation package and further +incentivize +22 +our +employees in accordance with our compensation policies. We do not maintain any defined benefit pension plans or deferred compensation plans. +Employee Benefits and Perquisites +Health/Welfare Plans. All of our full-time employees, including our Named Executive Officers, are eligible to participate in our health +and welfare +plans, including: +• medical, dental and vision benefits; +• medical and dependent care flexible spending accounts; +• short-term and long-term disability insurance; and +• life insurance. +Vehicle Allowance Program. In addition, Messrs. Redman, Smith and Sledge each participate in a vehicle allowance program. +We +believe the benefits and perquisites described above are necessary and appropriate to provide a competitive compensation package to our Named Executive Officers. +No Tax Gross-Ups +We do not make gross-up payments to cover our Named Executive Officers' personal income taxes that may pertain to any of the compensation or +perquisites paid or provided by our Company. +REPORT OF THE COMPENSATION COMMITTEE +The Compensation Committee has reviewed and discussed the above CD&A with management and, based on such review and discussions, the Compensation +Committee recommended to the Board that the CD&A be included in this proxy statement. +By the Compensation Committee of the Board of Directors, +Pryor Blackwell (Chair) +Steven Beal +Anthony Best +23 +EXECUTIVE COMPENSATION +Summary Compensation Table +The following table summarizes the compensation provided by us to our Named Executive Officers for the fiscal years ended December 31, +2016, 2017 and 2018. +Name and Principal Position +Year +Salary +($) +Bonus +($) +Stock +Awards +($)(1) +Option +Awards +($)(1) +Non-equity +incentive +plan +compensation +($) +All Other +Compensation +($)(2) +Total +($) +Dale Redman +2018 +684,615 +— +3,360,534 +— +1,400,000 +19,248 +5,464,397 +Chief Executive Officer +2017 +465,385 +905,000 +1,740,194 +5,116,436 +10,800 +8,237,815 +2016 +250,000 +750,000 +— +885,478 +10,800 +1,896,278 +Jeffrey Smith +2018 +500,000 +— +1,344,232 +— +750,000 +16,887 +2,611,119 +Chief Financial Officer +2017 +384,615 +575,000 +652,592 +3,325,090 +10,800 +4,948,097 +2016 +250,000 +500,000 +— +549,028 +10,800 +1,309,828 +David Sledge +2018 +425,000 +— +1,209,818 +— +850,000 +16,887 +2,501,705 +Chief Operating Officer +2017 +344,231 +935,000 +652,592 +2,573,526 +10,800 +4,516,159 +2016 +250,000 +500,000 +— +407,869 +10,800 +1,168,669 +Ian Denholm +2018 +214,846 +135,254 +(3) +235,248 +— +250,000 +— +835,348 +Chief Accounting Officer +2017 +162,058 +307,527 +53,848 +72,863 +— +596,296 +Mark Howell +2018 +284,616 +— +806,530 +— +400,000 +1,200 +1,492,346 +General Counsel and Corporate +2017 +197,116 +175,000 +435,069 +72,863 +28,626 +908,674 +Secretary +(1) Reflects +grant date fair value of stock awards granted in 2017 and 2018, option awards granted in 2016 and 2017 and incremental fair value of option awards modified +in 2017, in each case as computed in accordance with FASB ASC Topic 718. For information regarding assumptions underlying the valuation of equity awards, see Note 14 of the Consolidated +Financial Statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018. If the maximum payout were to be achieved with respect to the performance stock unit +awards, the grant date value of such awards for Messrs. Redman, Smith, Sledge, Denholm and Howell would be equal to $1,557,330, $584,012, $584,012, $0, and $389,348 for the 2017 awards and +$1,987,708, $795,094, $715,590, $139,146, and $477,051 for the 2018 awards, respectively. The actual amount realized upon settlement of PSU and RSU awards will depend upon the market price of the +Company's stock on the settlement date. +(2) Reflects +$10,800 received by Messrs. Redman, Smith and Sledge pursuant to our Vehicle Allowance Program in 2016, 2017 and 2018, $6,087 incurred by the Company +for spousal travel for each of Messrs. Redman, Smith and Sledge in 2018, and $2,361 incurred by the Company for a club membership for Mr. Redman in 2018. With respect to +Mr. Howell, reflects the Company's matching contribution under our 401(k) plan for 2018 and the reimbursement of relocation expenses incurred by Mr. Howell in 2017. +(3) Reflects +payment to Mr. Denholm, subject to his continuous employment with the Company through March 22, 2019, associated with the cancellation of +options held by Mr. Denholm in connection with our initial public offering. +24 +Grant of Plan-Based Awards +Grant +Date +Fair Value +of Stock +and +Option +Awards +($)(4) +Estimate Future Payouts +Under Non-Equity Incentive +Plan Awards(1) +Estimated Future Payouts +Under Equity Incentive Plan +Awards(2) +All Other +Stock Awards: +Number of +Shares of +Stock +(#)(3) +Name +Grant +Date +Threshold +($) +Target +($) +Maximum +($) +Threshold +(#) +Target +(#) +Maximum +(#) +Dale Redman +4/18/2018 +— +— +— +— +— +— +72,254 +1,372,826 +Chief Executive +4/18/2018 +— +— +— +36,127 +72,254 +144,508 +— +1,987,708 +Officer +— +350,000 +700,000 +1,400,000 +— +— +— +— +— +Jeffrey Smith +4/18/2018 +— +— +— +— +— +— +28,902 +549,138 +Chief Financial +4/18/2018 +— +— +— +14,451 +28,902 +57,804 +— +795,094 +Officer +— +187,500 +375,000 +750,000 +— +— +— +— +— +David Sledge +4/18/2018 +— +— +— +— +— +— +26,012 +494,228 +Chief Operating +4/18/2018 +— +— +— +13,006 +26,012 +52,024 +— +715,590 +Officer +— +212,500 +425,000 +850,000 +— +— +— +— +— +Ian Denholm +4/18/2018 +— +— +— +— +— +— +5,058 +96,102 +Chief Accounting +4/18/2018 +— +— +— +2,529 +5,058 +10,116 +— +139,146 +Officer +— +56,250 +112,500 +225,000 +— +— +— +— +— +Mark Howell +4/18/2018 +— +— +— +— +— +— +17,341 +329,479 +General Counsel and +4/18/2018 +— +— +— +8,670 +17,341 +34,682 +— +477,051 +Corporate Secretary +— +100,000 +200,000 +400,000 +— +— +— +— +— +(1) Messrs. Redman, +Smith, Sledge, Denholm and Howell each earned cash incentive awards equal to the maximum amount under this plan. +(2) Reflects +PSUs that may vest, if at all, based on the performance of the Company's stock relative to a peer group ending on December 31, 2020. PSUs provide the +recipient with the opportunity to earn a number of shares of stock between 0% and 200% of the number of shares granted. +(3) Reflects +RSUs that vest in three substantially equal annual installments commencing on April 18, 2019. +(4) Reflects +grant date fair value of stock computed in accordance with FASB ASC Topic 718. For information regarding assumptions underlying the valuation of equity +awards, see Note 14 of the Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018. +25 +Outstanding Equity Awards for Year Ended December 31, 2018 +The following table summarizes the number of shares of common stock underlying outstanding equity incentive plan awards for each Named Executive +Officer as of December 31, 2018. +Option Awards +Stock Awards +Name +Number of +Securities +Underlying +Unexercised +Options +Exercisable +(#) +Number of +Securities +Underlying +Unexercised +Options +Unexercisable +(#) +Option +Exercise +Price +($) +Option +Expiration +Date +Number of +Shares or +Units of +Stock That +Have Not +Vested +(#)(4) +Market +Value of +Shares or +Units of +Stock That +Have Not +Vested +($)(5) +Equity +Incentive +Plan Awards: +Number of +Unearned +Shares +That Have +Not Vested +(#)(6) +Equity +Incentive +Plan Awards: +Market Value +of Unearned +Shares +That Have +Not Vested +($)(5) +Dale Redman +699,852 +(1) +— +$ +3.96 +6/14/2023 +— +— +— +— +501,540 +(2) +— +$ +2.25 +7/19/2026 +— +— +— +— +29,997 +(3) +89,991 +$ +14.00 +3/16/2027 +— +— +— +— +— +— +$ +— +— +48,380 +596,042 +— +— +— +— +$ +— +— +72,254 +890,169 +— +— +— +— +$ +— +— +— +— +72,569 +894,050 +— +— +$ +— +— +— +— +72,254 +890,169 +Jeffrey Smith +699,852 +(1) +— +$ +3.96 +6/14/2023 +— +— +— +— +310,971 +(2) +— +$ +2.25 +7/19/2026 +— +— +— +— +29,997 +(3) +89,991 +$ +14.00 +3/16/2027 +— +— +— +— +— +— +$ +— +— +18,143 +223,522 +— +— +— +— +$ +— +— +28,902 +356,073 +— +— +— +— +$ +— +— +— +— +27,214 +335,276 +— +— +$ +— +— +— +— +28,902 +356,073 +David Sledge +586,755 +(1) +— +$ +3.96 +6/14/2023 +— +— +— +— +231,019 +(2) +— +$ +2.25 +7/19/2026 +— +— +— +— +29,997 +(3) +89,991 +$ +14.00 +3/16/2027 +— +— +— +— +— +— +$ +— +— +18,143 +223,522 +— +— +— +— +$ +— +— +26,012 +320,468 +— +— +— +— +$ +— +— +— +— +27,214 +335,276 +— +— +$ +— +— +— +— +26,012 +320,468 +Ian Denholm +5,437 +(3) +16,313 +$ +14.00 +3/16/2027 +— +— +— +— +— +— +$ +— +— +2,710 +33,387 +— +— +— +— +$ +— +— +5,058 +62,315 +— +— +$ +— +— +— +— +5,058 +62,315 +Mark Howell +5,437 +(3) +16,313 +$ +14.00 +3/16/2017 +— +— +— +— +— +— +$ +— +— +12,096 +149,023 +— +— +— +— +$ +— +— +17,341 +213,641 +— +— +— +— +$ +— +— +— +— +18,143 +223,522 +— +— +$ +— +— +— +— +17,341 +213,641 +(1) On +June 14, 2013, Messrs. Redman, Smith and Sledge were each granted 699,852 options to purchase our common stock that vested in equal annual +installments on June 14, 2014, June 14, 2015, June 14, 2016 and June 14, 2017. Mr. Sledge cashlessly exercised a portion of such options on March 16, 2017. +(2) On +July 19, 2016, Messrs. Redman, Smith and Sledge were granted 501,540, 310,971 and 231,019 options to purchase our common stock, respectively, that +were originally scheduled to vest in equal installments December 31, 2016, June 30, 2017, December 31, 2017, June 30, 2018, and December 30, 2018. However, in +connection with our initial public offering, we fully accelerated the vesting of the unvested portions of these options. +(3) Reflects +option awards granted in connection with our initial public offering on March 16, 2017. Such awards vest in four substantially equal annual +installments commencing on the first anniversary of the grant date. +(4) Reflects +RSU awards granted on June 5, 2017 and April 18, 2018, respectively. Such awards vest in three substantially equal installments commencing on +the first anniversary of the grant date. +(5) Market +values reflect the closing price of our common stock on December 31, 2018, equal to $12.32 per share. +(6) Reflects +target amount of PSUs granted on June 5, 2017 and April 18, 2018, respectively. Such awards may vest, if at all, based on the performance of +the Company's stock relative to a peer group during a specified period. PSUs provide the recipient to earn a number of shares of stock between 0% and 200% of the number of shares granted. +26 +2018 Option Exercises and Stock Vested +Option Awards +Stock Awards +Name +Number of +Shares +Acquired on +Exercise (#) +Value +Realized on +Exercise ($) +Number of +Shares +Acquired on +Vesting (#) +Value +Realized on +Vesting ($) +Dale Redman +— +— +24,189 +358,723 +Jeffrey Smith +— +— +9,071 +134,523 +David Sledge +— +— +9,071 +134,523 +Ian Denholm +— +— +1,354 +20,065 +Mark Howell +— +— +6,047 +89,677 +Pension Benefits +We do not sponsor any qualified or non-qualified defined benefit pension plans. +Nonqualified Deferred Compensation +Name +Executive +Contributions +in Last FY +($) +Registrant +Contributions +in Last FY +($) +Aggregate +Earnings +in Last FY +($) +Aggregate +Withdrawals/ +Distributions +($) +Aggregate +Balance at +Last FYE +($) +Dale Redman(1) +— +— +(804,244 +) +6,702,030 +(2) +— +Jeffrey Smith +— +— +— +— +— +David Sledge +— +— +— +— +— +Ian Denholm +— +— +— +— +— +Mark Howell +— +— +— +— +— +(1) In +connection with our initial public offering, we cancelled, as of the consummation of the initial public offering, 372,335 RSUs held by Mr. Redman. Pursuant +to the terms of such cancellations, Mr. Redman received 372,335 shares of our common stock on March 22, 2018. +(2) Reflects +the closing stock price for our common stock of $18.00 per share on March 21, 2018, the date immediately preceding the date Mr. Redman +received the shares described in footnote (1). +27 +Potential Payments upon Termination or Change in Control +Each of our Named Executive Officers, other than Mr. Denholm, is party to an employment agreement as described below. Pursuant to these +agreements, these officers are entitled to certain severance benefits. In addition, the grant agreements relating to our Named Executive Officers' PSU and RSU awards provide for accelerated vesting +under certain circumstances, including a "double-trigger" requirement in connection with a change in control. The table below quantifies amounts that would have been paid assuming the following events +took place on December 31, 2018. +Termination Without Cause or by Executive +with Good Reason(1)(2)(3) +Termination Without Cause Following +Change in Control(4) +Name +Salary +($)(5) +Bonus +($)(5) +Accelerated +Vesting of +Equity +Awards +($)(6) +COBRA +($)(7) +Total +($) +Salary +($)(5) +Bonus +($)(5) +Accelerated +Vesting of +Equity +Awards +($)(6) +COBRA +($)(7) +Total +($) +Dale Redman +700,000 +780,000 +1,488,773 +5,991 +2,974,764 +700,000 +780,000 +3,270,430 +5,991 +4,756,421 +Chief Executive Officer +Jeffrey Smith +500,000 +500,000 +565,722 +5,991 +1,571,713 +500,000 +500,000 +1,270,944 +5,991 +2,276,935 +Chief Financial Officer +David Sledge +425,000 +500,000 +553,846 +5,991 +1,484,837 +425,000 +500,000 +1,199,734 +5,991 +2,130,725 +Chief Operating Officer +Ian Denholm +— +— +37,453 +— +37,453 +— +— +158,016 +— +158,016 +Chief Accounting Officer(8) +Mark Howell +300,000 +175,000 +369,230 +5,991 +850,221 +300,000 +175,000 +799,827 +5,991 +1,280,818 +General Counsel and Corporate Secretary +(1) Reflects +payments made upon termination without cause, by an Executive with Good Reason, or as a result of death, Disability, or Retirement. "Disability" is defined +in each employment agreement as such executive's inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to +result in death or that can be expected to last for a continuous period of not less than twelve (12) months "Retirement" is defined for purposes of the equity award grants as such executive's +termination of employment after attaining age 60 and having accrued ten years of service with the Company or its subsidiaries. +(2) Cause. Under each Named Executive Officer's employment agreement and equity award agreement, "Cause" is defined as +(i) the executive's willful failure to substantially perform his duties, (ii) the executive's willful failure to carry out, or comply with, in any material respect any lawful directive +of our board of directors, (iii) the executive's commission at any time of any act or omission that results in, or may reasonably be expected to result in, a conviction, a plea of no contest, +plea of nolo contendere or imposition of unadjudicated probation for any felony or crime involving moral turpitude; (iv) the executive's unlawful use (including being under the influence) or +possession of illegal drugs on the Company's premises or while performing the executive's duties and responsibilities; (v) the executive's commission at any time of any act of fraud, +embezzlement, misappropriation, misconduct, conversion of assets of the Company or breach of fiduciary duty against the Company or (vi) the executive's material breach of the employment +agreement or any other agreement with the Company, subject to certain procedural requirements. +(3) Good Reason. Under each Named Executive Officer's employment agreement and equity award agreement, "Good Reason" is +defined as (i) a material diminution in the executive's authority, duties or responsibilities, (ii) a material diminution in base compensation or (iii) any other action or +inaction that constitutes a material breach of the employment agreement by the Company, in each case subject to certain procedural requirements. +(4) Change in Control. For purposes of the acceleration of unvested PSUs and RSUs, "Change in Control" has the same meaning +as defined in the Company's 2017 Incentive Award Plan. +(5) Cash Severance . Pursuant to the employment agreements, upon termination of employment by the Company without Cause or +by the executive for Good Reason, each Named Executive Officer will receive the sum of his then current annual base salary and his annual bonus for the immediately preceding calendar year, payable in +installments over the year following termination. +28 +(6) Long-Term Incentive. In the event of a termination of employment of a Named Executive Officer due to death, Retirement +or disability, (i) all unvested RSUs that would have vested had the Named Executive Officer continued his service during the 12 months following the termination will vest on such +termination or resignation date, and (ii) with respect to any unvested PSUs, if such termination of employment occurs within one year prior to the last date of the applicable performance +period, the Named Executive Officer's unvested PSUs will remain eligible to vest when such PSUs would have otherwise vested following the end of the applicable performance period. In the event of a +termination of the Named Executive Officer by the Company without Cause upon or within one year following a Change in Control, all unvested RSUs and PSUs will immediately vest based on performance as +of the date of the Change in Control. In the event of a termination of employment of a Named Executive Officer for any other reason, all unvested RSUs and PSUs will be forfeited immediately upon the +termination. +(7) Other Benefits and Perquisites. Pursuant to each Named Executive Officer's employment agreement, in addition to the +above cash severance benefits, upon termination of employment by the Company without Cause or by the executive for Good Reason, the Company will continue to provide each Named Executive Officer with +health benefits for up to one year upon termination. +(8) Mr. Denholm +is not a party to an employment agreement. Therefore, in the event of a termination of Mr. Denholm's employment by the Company without Cause or by +Mr. Denholm for Good Reason, he would not be able to receive the cash severance and other benefits and perquisites described in notes (5) and (7) above. +Employment Agreements +We are party to employment agreements with each of Messrs. Redman, Smith, Sledge, and Howell, providing for their respective positions as +Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, and General Counsel and Corporate Secretary. We have not entered into an employment agreement with Mr. Denholm. The +employment agreements provide for an initial two-year term with an automatic renewal for successive one year terms unless either party gives notice of non-extension to the other no later than +90 days prior to the expiration of the then-applicable term. +For +Messrs. Redman, Smith and Sledge, the employment agreements provide that such executive will be eligible to receive an annual cash bonus in an amount up to 50% of the +executive's annual base salary, based upon individual and Company annual performance targets established by the Board in its sole discretion. Mr. Howell's employment agreement provides that he +will be eligible to receive an annual cash bonus in an amount commensurate with other public company executive officers, based upon individual and Company annual performance targets established by the +Board in its sole discretion, and equity awards on a basis commensurate with other public company executive officers. In addition, Mr. Howell's employment agreement provided for a reimbursement +for all reasonable expenses that he incurred in connection with his relocation to the Midland, Texas area. +Pursuant +to the employment agreements, upon termination of employment by the Company without Cause or by the executive for Good Reason, each executive will receive the sum of his then +current annual base salary and his annual bonus for the immediately preceding calendar year, payable over the year following termination, as well as subsidized COBRA premiums for such period. Each +executive will be required to execute a release of claims in favor of the Company in order to receive his severance benefits. +The +agreements contain noncompetition covenants that apply through one year following termination of employment and non-solicitation covenants that apply through three years following +termination of employment. +Director Compensation +Our employee directors and our directors that were affiliated with Energy Capital Partners prior to their departures on May 18, 2018 are +not separately compensated for their service as a director. In addition, Mr. Berg has elected not to be compensated for his service as a director. We have adopted a non-employee director +compensation policy applicable to our non-employee directors who were not affiliated with Energy Capital Partners and who have elected to participate. Under this policy, each +29 +eligible +non-employee director receives an annual cash retainer of $55,000. Further, the Chairperson of the Board receives an additional annual cash retainer of $15,000, and the Chairpersons of the +Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee receives an additional annual cash retainer of $15,000, $10,000, and $10,000, respectively. Also, pursuant to +the non-employee director compensation policy, each director is eligible to receive an annual grant of RSUs with a grant date fair value of $100,000, pro-rated for directors who join during the year. +Director awards of RSUs vest in full on the earliest to occur of the first anniversary of the grant date, the day immediately preceding the first annual meeting of stockholders following the grant +date, and the occurrence of a Change in Control, subject to continuous service through the applicable vesting date. The members of the Board are entitled to reimbursement of expenses incurred in +connection with attendance at Board and committee meetings in accordance with Company policy. +In +connection with our initial public offering, we adopted a non-employee director stock ownership policy that is applicable to all of our eligible non-employee directors who are not +affiliates of Energy Capital Partners. Pursuant to this policy, each eligible non-employee director who is not affiliated with Energy Capital Partners is encouraged to hold, on and following the later +of the fifth anniversary of (i) the closing of our initial public offering and (ii) the non-employee director's election or appointment to the Board, shares of our common stock or +certain equity awards (valued based on the closing price of our common stock) with a value equal to or in excess of 300% of the non-employee director's annual cash retainer, as such threshold may be +amended by our Nominating and Corporate Governance Committee from time to time. In calculating the value of shares of our common stock or certain equity awards held for purposes of determining +compliance with the policy, such value is equal to the closing price per share on the measurement date, based on shares owned outright and unvested +RSUs with the value of such RSUs discounted by 40%. Option awards and PSUs are excluded from the calculation. +The +following table summarizes the annual compensation for our non-employee directors during 2018. +Name +Fees +Earned or +Paid in Cash +($)(1) +Stock Awards +($)(2) +All Other +Compensation +($) +Total +($) +Spencer D. Armour III +70,778 +99,999 +— +170,777 +Steven Beal +70,000 +99,999 +— +169,999 +Mark S. Berg(3) +— +— +— +— +Anthony Best(4) +50,721 +126,263 +— +176,984 +Pryor Blackwell(4) +64,222 +155,698 +— +219,920 +Schuyler Coppedge(5) +— +— +— +— +Alan E. Douglas +55,000 +99,999 +— +154,999 +Matt Himler(5) +— +— +— +— +Peter Labbatt(5) +— +— +— +— +Royce W. Mitchell(3) +— +— +— +— +Jack B. Moore +65,000 +99,999 +— +164,999 +(1) Reflects +retainer payments made pursuant to the Non-Employee Director Compensation Policy. With respect to Messrs. Armour and Blackwell, includes pro-rated +payments associated with each director's service as Chair of Compensation Committee during 2018. +(2) Reflects +grant date fair value of RSU award on the date of grant computed in accordance with FASB ASC Topic 718. For information regarding assumptions underlying the +valuation of equity awards, see Note 14 of the Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018. +30 +The +following table sets forth the aggregate number of stock awards and the aggregate number of option awards held by each of our non-employee directors on December 31, 2018. +Name +Aggregate +Number of Stock +Awards (#) +Aggregate +Number of Stock +Options (#) +Spencer D. Armour III +14,301 +772,774 +Steven Beal +14,301 +— +Mark S. Berg +— +— +Anthony Best +8,149 +— +Pryor Blackwell +9,384 +— +Alan E. Douglas +14,301 +— +Royce W. Mitchell +— +— +Jack B. Moore +14,301 +— +(3) Messrs. Berg +and Mitchell began their service as directors on February 11, 2019 and did not receive any compensation from us during 2018. +(4) With +respect to Mr. Blackwell and Mr. Best, stock awards reflect pro-rated award issued in 2018 in connection with joining our Board in December 2017 +and January 2018, respectively. +(5) Messrs. Coppedge, +Himler and Labbat were affiliated with Energy Capital Partners and were not separately compensated for their services as directors. +Mr. Himler resigned as a director effective as of January 29, 2018. Messrs. Labbat and Coppedge resigned as a director effective as of May 18, 2018. +CEO Pay Ratio +As of December 31, 2018 the Company employed 1,579 people, all in the United States. Using a consistently applied compensation measure, +we determined as of December 31, 2018 the total annual cash compensation of each of our employees (excluding our Chief Executive Officer), and then identified the "median employee" within our +employee population. +To +identify the median compensated employee, we used total annual cash compensation, including base salary, actual bonus paid and overtime and allowances as applicable. Salaries were +annualized for those full and part-time employees who did not work for the full year. Reasonable estimates of cash compensation were made for those employees who were hired during 2018 using current +base salary and target bonus amounts and any overtime or allowances paid during 2018. In determining the annual total compensation of the median employee, we calculated such employee's compensation in +accordance with Item 402(c)(2)(x) of Regulation S-K as required pursuant to SEC executive compensation rules, which resulted in annual total compensation for the median employee was +$90,148. This calculation is the same calculation used to determine total compensation for purposes of the 2018 Summary Compensation Table with respect to each of the Named Executive Officers. +Our +Chief Executive Officer's 2018 total compensation was $5,464,397. Therefore, the ratio of our Chief Executive Officer's compensation to the median employee's compensation was 61 to 1 +for 2018. +SEC +rules do not specify a single methodology for identification of the median employee, and other companies may use assumptions and methodologies that are different from those used by +us in calculating their pay ratio. Accordingly, the pay ratio disclosed by other companies may not be comparable to the Company's pay ratio as disclosed above. Neither the Compensation Committee nor +management of ProPetro used the pay ratio measure in making compensation decisions. +31 +SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT +Principal Stockholders +The following table presents certain information as of April 22, 2019, based on 100,334,868 shares of common stock outstanding as of such +date, as to: +• each stockholder known by us to be the beneficial owner of more than five percent of our outstanding shares of common stock, +• each director and director nominee, +• each Named Executive Officer, and +• all current directors and executive officers as a group. +Shares Beneficially Owned +Name of Beneficial Owner(1) +Number +Percentage +5% Stockholders +Pioneer Natural Resources Company(2) +16,600,000 +16.6 +% +BlackRock, Inc.(3) +11,550,385 +11.5 +% +The Vanguard Group(4) +9,863,243 +9.8 +% +Wellington Management Group LLP(5) +9,552,104 +9.5 +% +Directors and Named Executive Officers(6) +Dale Redman +1,707,673 +1.7 +% +Jeffrey Smith +1,142,513 +1.1 +% +David Sledge +901,602 +* +Ian Denholm +14,821 +* +Mark Howell +26,747 +* +Spencer D. Armour III +674,575 +* +Steven Beal +29,301 +* +Mark S. Berg +— +* +Anthony Best +8,149 +* +Pryor Blackwell +37,575 +* +Alan E. Douglas +14,301 +* +Royce W. Mitchell +1,958 +* +Jack B. Moore +14,301 +* +All Directors, Director Nominees and Executive Officers as a group (13 persons) +4,573,516 +4.4 +% +* Less +than 1%. +(1) Unless +otherwise indicated, the address for each beneficial owners in this table is c/o ProPetro Holding Corp., 1706 S. Midkiff, Bldg. B, Midland, Texas 79701. +(2) Based +on a Schedule 13D filed on January 7, 2019. Represents shares of our common stock beneficially owned by Pioneer Natural Resources Company +("Pioneer"). The shares of our common stock are directly owned by Pioneer Natural Resources Pumping Services LLC, a wholly owned subsidiary of Pioneer Natural Resources USA, Inc., which +is a wholly owned subsidiary of Pioneer. The address of Pioneer and its subsidiaries is 5205 N. O'Connor Blvd., Suite 200, Irving, Texas 75039-3746. +(3) Based +on a Schedule 13G filed on January 31, 2019. Represents shares of our common stock held by BlackRock, Inc. and certain of its affiliates, +referred to collectively as BlackRock. BlackRock +32 +has +sole voting power over 11,025,514 shares and sole dispositive power over 11,550,385 shares. The address for BlackRock is 55 East 52nd Street, New York, New York 10055. +(4) Based +on a Schedule 13G Filed on February 12, 2019. Represents (i) 12,081shares over which The Vanguard Group has shared voting power, and +(ii) 152,524 over which The Vanguard Group has shared dispositive power. Vanguard Fiduciary Trust Company, a wholly owned subsidiary of The Vanguard Group, Inc., is the beneficial owner +of 140,443 shares as a result of its serving as investment manager of collective trust accounts. Vanguard Investments Australia, Ltd., a wholly owned subsidiary of The Vanguard +Group, Inc., is the beneficial owner of 19,132 shares as a result of its serving as investment manager of Australian investment offerings. The address for these entities is 100 Vanguard Blvd., +Malvern, PA 19355. +(5) Based +on a Schedule 13G filed on February 12, 2019. Includes 9,552,104 shares owned beneficially by Wellington Management Group LLP, Wellington +Group Holdings LLP, and Wellington Investment Advisors Holdings LLP, and 9,278,236 owned beneficially by Wellington Management Company LLP. These securities are owned of record by +clients of the Wellington Investment Advisers. Wellington Investment Advisors Holdings LLP controls directly, or indirectly through Wellington Management Global Holdings, Ltd., the +Wellington Investment Advisers. Wellington Investment Advisors Holdings LLP is owned by Wellington Group Holdings LLP. Wellington Group Holdings LLP is owned by Wellington +Management Group LLP. The address for Wellington is 280 Congress Street, Boston, MA 02210. +(6) For +each officer and director, includes shares of common stock that are issuable pursuant to options that are currently exercisable or exercisable within +60 days, and RSUs that are eligible to vest within 60 days. +Executive Officers +Our executive officers serve at the direction of our Board. All of our executive officers are listed in the following table, and certain +information concerning those officers, except for Mr. Redman, who is a member of the Board, follows the table: +Name +Age +Position with ProPetro Holding Corp. +Dale Redman +58 +Chief Executive Officer and Director +Jeffrey Smith +59 +Chief Financial Officer +David Sledge +62 +Chief Operating Officer +Ian Denholm +30 +Chief Accounting Officer +Mark Howell +40 +General Counsel and Corporate Secretary +Jeffrey Smith +Jeffrey Smith is a co-founder of ProPetro and has been our Chief Financial Officer since 2005. Mr. Smith has over 33 years of +accounting and financial experience. Prior to joining the Company, Mr. Smith served as President of Nittany Enterprises from 1991 to 2005, and before that Mr. Smith served as Chief +Financial Officer for Southmark Commercial Management Inc., a national commercial real estate company. Mr. Smith is a licensed certified public accountant. Mr. Smith received a +B.B.A. in Finance from Penn State University and a M.B.A. from the University of Michigan. +David Sledge +David Sledge has served as our Chief Operating Officer since 2011. Mr. Sledge has over 37 years of experience in the energy +services industry, Mr. Sledge currently serves on the Board of Directors for Comstock Resources, Inc. where he has served since 1996. Prior to joining ProPetro Mr. Sledge was Vice +President—Drilling for Basic Energy Services from 2007 to 2009. Mr. Sledge was President and +33 +Chief +Operating Officer of Sledge Drilling Corp., which was sold to Basic Energy Services in 2007. Mr. Sledge received a B.B.A. in Management from Baylor University. +Ian Denholm +Ian Denholm has served as our Chief Accounting Officer since August 2017. Prior to his appointment, Mr. Denholm served as our Director of +Finance, and served as Chief Financial Officer of Academy Drilling from 2011 until its acquisition by ProPetro. Mr. Denholm holds both a Bachelor's and Master's degree in Accounting from Texas +Tech University. +Mark Howell +Mark Howell has served as our General Counsel and Corporate Secretary since March 2017. Prior to joining ProPetro, Mr. Howell served +Anthem, Inc. as Associate General Counsel—Corporate Securities and Finance from September 2015, and Vantage Drilling Company, an international oil and gas services company, in +various legal roles from 2010 to 2015, including as Legal Director from 2011 and General Counsel from 2014. Prior to joining Vantage, Mr. Howell worked as an attorney focused on corporate and +securities law and oil and gas transactions at Burleson Cooke LLP and Andrews Kurth LLP. Mr. Howell holds a Doctorate of Jurisprudence from South Texas College of Law and a B.A. +from the University of Texas. +34 +PROPOSAL 2 +REMOVAL OF INOPERATIVE PROVISIONS IN THE COMPANY'S CERTIFICATE OF INCORPORATION +Upon the recommendation of the Nominating and Corporate Governance Committee, the Board has approved, and recommends that the Company's +stockholders approve, a proposal to amend and restate the Company's Certificate of Incorporation to remove certain inoperative provisions (the "Inoperative Provisions Amendment"), as described in +further detail below. +Prior +to our initial public offering, the majority of our common stock was owned by Energy Capital Partners and certain of its affiliates. Further, the Company was a party to that +certain Stockholders Agreement, dated as of March 22, 2017, by and among the Company, on the one hand, and Energy Capital Partners II, LP and certain of its affiliates (the "ECP +Stockholders"), on the other hand. The Stockholders Agreement granted the ECP Stockholders the right to designate nominees for election to the Board, information and access rights and certain approval +rights, so long as the ECP Stockholders continued to own shares of our outstanding common stock above certain thresholds set forth in the Company's Certificate of Incorporation. The ECP Stockholders +no longer own shares of our outstanding common stock; therefore, the Stockholders Agreement is no longer effective and certain provisions of the Company's Certificate of Incorporation relating to the +ECP Stockholders have become inoperative. +In +addition, certain provisions of the Company's Certificate of Incorporation were adopted in connection with the Corporation's initial public offering, but have since become +inoperative. +The +full text of the proposed Amended and Restated Certification of Incorporation of the Company (without giving effect to the proposed amendments to the Certificate of Incorporation +that are the subject of Proposal No. 3 and Proposal No. 4) that would become effective upon its filing with the Secretary of State of the State of Delaware following stockholder approval +of this Proposal No. 2 is attached to this proxy statement as Appendix A, with additions of text indicated by underlining and deletions of text indicated by strike-outs. +In +general, the inoperative provisions of the Company's Certificate of Incorporation that would be removed in the proposed Amended and Restated Certification of Incorporation are as +follows: +• The references to the Company's conversion from a Texas corporation to a Delaware corporation. In connection with the Company's initial public +offering, the conversion occurred, and these provisions are now inoperative. +• The references to Series A Preferred Stock and the Common Stock Split. In connection with the Company's initial public offering, all +outstanding shares of the Company's Series A Preferred Stock were converted into common stock and the Common Stock Split (as defined in the Certificate of Incorporation) occurred. These +provisions are now inoperative. +• The right of the ECP Stockholders to call special meetings of the Company so long as the ECP Stockholders beneficially own at least 20% of the +voting power of the outstanding stock of the Company. The ECP Stockholders beneficially own less than 20% of the voting power of the outstanding stock of the Company; therefore, this provision is now +inoperative. +• The right of the Company's stockholders to amend the Company's bylaws by a majority vote so long as the ECP Stockholders beneficially own in +the aggregate at least 50% of the voting power of the outstanding stock of the Company. The ECP Stockholders beneficially own less than 50% of the voting power of the outstanding stock of the Company; +therefore, this provision is now inoperative. +35 +• The right of the ECP Stockholders to act by written consent so long as the ECP Stockholders beneficially own in the aggregate at least 50% of +the voting power of the outstanding stock of the Company. The ECP Stockholders beneficially own less than 50% of the voting power of the outstanding stock of the Company; therefore, this provision is +now inoperative. +• The right of the Company's stockholders to amend the Company's Certificate of Incorporation by a majority vote so long as the ECP Stockholders +beneficially own in the aggregate at least 50% of the voting power of the outstanding stock of the Company. The ECP Stockholders beneficially own less than 50% of the voting power of the outstanding +stock of the Company; therefore, this provision is now inoperative. +Subject +to stockholder approval of this Proposal No. 2, promptly following the annual meeting, the Board will make conforming changes to the Company's bylaws to eliminate similar +inoperative provisions. +Vote Required +The Inoperative Provisions Amendment requires the approval of the holders of at least 66 2 / 3 % of the outstanding shares of common +stock of the Corporation. Abstentions, broker non-votes and failures to vote will have the same effect as a vote "AGAINST" Proposal No. 2. +Board Recommendation +The Board unanimously recommends a vote " FOR " the Inoperative Provisions Amendment. +36 +PROPOSAL 3 +REMOVAL OF SUPERMAJORITY VOTING PROVISION IN THE COMPANY'S CERTIFICATE OF INCORPORATION TO AMEND THE BYLAWS +Upon the recommendation of the Nominating and Corporate Governance Committee, the Board has approved, and recommends that the Company's +stockholders approve, a proposal to amend and restate the Company's Certificate of Incorporation to remove the following supermajority voting requirement for the Company's stockholders to amend the +Company's Bylaws (the "Bylaws Voting Amendment"): +• Article Eighth of the Company's Certificate of Incorporation provides that the Company's stockholders may make new bylaws or alter, amend or +repeal the bylaws only with the affirmative vote of at least 66-2/3% of the voting power of the outstanding stock of the Company. +If +this Proposal No. 3 is approved, the supermajority voting requirement with respect to the Company's bylaws set forth in Article Eighth of the Corporation's Certificate of +Incorporation will be replaced with a provision that permits a majority of the voting power of the outstanding shares of the stock of the Company to make new bylaws or alter, amend or repeal the +bylaws. +The +Board believes that the Delaware General Corporation Law (the "DGCL"), other provisions in the Certificate of Incorporation, existing corporate governance practices, +and the adoption of a majority of the voting power of the outstanding shares voting standard adequately protect our stockholders and renders the Company's current supermajority vote requirement to +amend the Company's bylaws no longer necessary. +The +full text of the proposed amendment to Article Eighth of the Company's Certificate of Incorporation (without giving effect to the proposed amendments to the Certificate of +Incorporation that are the subject of Proposal No. 2 and Proposal No. 4) is attached to this proxy statement as Appendix B, with additions of text indicated by underlining and +deletions of text indicated by strike-outs. +Subject +to stockholder approval of this Proposal No. 3, promptly following the annual meeting, the Board will make conforming changes to the Company's bylaws to eliminate similar +supermajority voting provisions. +Vote Required +The Bylaws Voting Amendment requires the approval of the holders of at least 66-2/3% of the outstanding shares of common stock of the Company. +Abstentions, broker non-votes and failures to vote will have the same effect as a vote "AGAINST" Proposal No. 3. +Board Recommendation +The Board unanimously recommends a vote " FOR " the Bylaws Voting Amendment. +37 +PROPOSAL 4 +REMOVAL OF SUPERMAJORITY VOTING PROVISION IN THE COMPANY'S CERTIFICATE OF INCORPORATION TO AMEND THE CERTIFICATE OF INCORPORATION +Upon the recommendation of the Nominating and Corporate Governance Committee, the Board has approved, and recommends that the Company's +stockholders approve, a proposal to amend and restate the Company's Certificate of Incorporation to remove the following supermajority voting requirement for the Company's stockholders to amend the +Company's Certificate of Incorporation (the "Charter Voting Amendment"): +• Article Fourteenth of the Company's Certificate of Incorporation provides that the Company's stockholders may not alter, amend or repeal or +adopt any provisions of the Company's Certificate of Incorporation without the approval of the holders of at least 66-2/3% of the voting power of the outstanding stock of the Company. +If +this Proposal No. 4 is approved, then the supermajority voting requirement with respect to the Company's Certificate of Incorporation set forth in Article Fourteenth of the +Company's Certificate of Incorporation will be removed, and the rights of the Company's stockholders relating to their ability to alter, amend or repeal or adopt any provisions of the Company's +Certificate of Incorporation will be as +set forth in the DGCL. The DGCL currently provides that amendments to a Delaware corporation's certificate of incorporation must be approved by a majority of the outstanding stock entitled to vote +thereon and a majority of the outstanding stock of each class entitled to vote thereon, each voting as a separate class. +The +Board believes that the DGCL voting standard, other provisions in the Certificate of Incorporation and the Company's existing corporate governance practices adequately protect our +stockholders and renders the Company's current supermajority vote requirement to amend the Company's Certificate of Incorporation no longer necessary. +The +full text of the proposed amendment to Article Fourteenth of the Company's Certificate of Incorporation (without giving effect to the proposed amendments to the Certificate of +Incorporation that are the subject of Proposal No. 2 and Proposal No. 3) is attached to this proxy statement as Appendix C, with additions of text indicated by underlining and +deletions of text indicated by strike-outs. +Subject +to stockholder approval of this Proposal No. 4, promptly following the annual meeting, the Board will make conforming changes to the Company's Bylaws to eliminate similar +supermajority voting provisions. +Vote Required +The Charter Voting Amendment requires the approval of the holders of at least 66-2/3% of the outstanding shares of common stock of the Company. +Abstentions, broker non-votes and failures to vote will have the same effect as a vote "AGAINST" Proposal No. 4. +Board Recommendation +The Board unanimously recommends a vote " FOR " the Charter Voting Amendment. +38 +PROPOSAL 5 +ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION +We are asking stockholders to approve, on a non-binding advisory basis, the compensation of our Named Executive Officers as disclosed in this +proxy statement. As described above in "Compensation Discussion and Analysis," the Compensation Committee has structured our executive compensation program to achieve the following key +objectives: +• attract, reward and retain the highest quality executive officers; +• recognize individual performance and the performance of the Company relative to the performance of other companies of comparable size, +complexity and quality; +• provide motivation toward, and reward the accomplishment of, corporate annual objectives; +• align executive officers' compensation to stockholder interests; and +• align executive officers' incentives with both the short-term and long-term goals of the Company. +We +urge stockholders to read "Compensation Discussion and Analysis" beginning on page 17 of this proxy statement, which describes in more +detail how our executive compensation policies and procedures operate and are designed to achieve our compensation objectives, as well as "Executive Compensation" and the related compensation tables +and narrative therein beginning on page 24 , which provide detailed information on the compensation of our Named Executive Officers. The Compensation +Committee and the Board believe that the policies and procedures articulated in "Compensation Discussion and Analysis" are effective in achieving our goals and that the compensation of our Named +Executive Officers reported in this proxy statement has and will contribute to the Company's recent and long-term success. +In +accordance with Section 14A of the Exchange Act, and as a matter of good corporate governance, we are asking stockholders to approve the following resolution at the annual +meeting: +RESOLVED, +that the stockholders of ProPetro Holding Corp. (the "Company") approve, on a non-binding advisory basis, the compensation of the Company's Named Executive Officers as +disclosed in the Compensation Discussion and Analysis and Executive Compensation sections and the related compensation tables, notes and narrative in the proxy statement for the Company's 2019 annual +meeting. +Vote Required +This advisory resolution, commonly referred to as a "say-on-pay" resolution, is non-binding on the Board. Although non-binding, the Board and +the Compensation Committee will review and consider the voting results when making future decisions regarding our executive compensation program. +The +affirmative "FOR" vote of the holders of a majority of the shares represented at the meeting, in person or by proxy, and entitled to vote is required to approve this Proposal +No. 5. Brokers do not have discretion to vote on this proposal without your instruction. If you do not instruct your broker how to vote on this proposal, your broker will deliver a non-vote on +this proposal. Abstentions will have the same effect as a vote "AGAINST" Proposal No. 5. Broker non-votes will have no effect on Proposal No. 5. +We +currently intend to hold the next non-binding advisory vote to approve the compensation of our Named Executive Officers at our 2020 annual meeting of stockholders, unless our Board +modifies its policy of holding this vote on an annual basis, particularly after considering the results of the vote on Proposal 6. +Board Recommendation +The Board unanimously recommends a vote " FOR " this Proposal No. 5. +39 +PROPOSAL 6 +ADVISORY VOTE ON THE FREQUENCY OF +FUTURE ADVISORY VOTES ON EXECUTIVE COMPENSATION +Pursuant to Section 14A of the Exchange Act, we are asking the Company's stockholders to vote on whether future advisory votes on +executive compensation of the nature reflected in Proposal 5 above should occur every year, every two years or every three years. This is our first frequency vote and such frequency vote must occur at +least once every six years. +After +careful consideration, the Board concluded that an annual advisory vote on executive compensation is the most appropriate alternative for the Company. The Board considered various +factors in reaching its conclusion, including, among others, stockholders' ability to provide input on executive compensation and corporate governance matters, stockholder feedback and market +practices. The Board believes that an annual advisory vote on executive compensation will allow our stockholders to provide timely, direct input on the Company's executive compensation philosophy, +policies and practices as disclosed in the Company's proxy statement each year, which is consistent with the Company's efforts to engage in an ongoing dialogue with our stockholders on executive +compensation and corporate governance matters. +Prior +to voting on this proposal, we urge stockholders to read "Compensation Discussion and Analysis" beginning on page 17 of this proxy +statement, which describes in more detail how our executive compensation policies and procedures operate and +are designed to achieve our compensation objectives, as well as "Executive Compensation" and the related compensation tables and narrative therein beginning on +page 24 , which provide detailed information on the compensation of our Named Executive Officers. +Stockholders +will be able to specify one of four choices for this proposal on the proxy card: "ONE YEAR", "TWO YEARS", "THREE YEARS" or "ABSTAIN". Stockholders are not voting to approve +or disapprove the Board's recommendation. This advisory vote on the frequency of future advisory votes on executive compensation is not binding on the Board or the Company in any way. Notwithstanding +the Board's recommendation and the outcome of the stockholder vote, the Board may in the future decide to conduct advisory votes on a more or less frequent basis and may vary its practice based on +factors such as discussions with stockholders and the adoption of material changes to our executive compensation programs. +Vote Required +The proposal regarding the frequency of future advisory votes on executive compensation requires the approval of a plurality of the votes cast. +This means that the frequency option that receives the greatest number of votes cast will be considered the preference of the Company's stockholders. +Board Recommendation +The Board unanimously recommends a vote of " ONE YEAR " this Proposal No. 6. +40 +PROPOSAL 7 +RATIFICATION OF APPOINTMENT OF +INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM +The Audit Committee has selected Deloitte & Touche LLP, independent registered public accounting firm, to audit our consolidated +financial statements for the fiscal year ending December 31, 2019. Deloitte & Touche LLP has served as our independent registered public accounting firm since 2013. We are asking +the stockholders to ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2019. +Deloitte & Touche LLP was appointed by the Audit Committee in accordance with its charter. +In +the event stockholders fail to ratify the appointment, the Audit Committee may reconsider this appointment. Even if the appointment is ratified, the Audit Committee, in its +discretion, may direct the appointment of a different independent accounting firm at any time during the year if the Audit Committee determines that such a change would be in our and our stockholders' +best interests. The Audit Committee has pre-approved all services provided by Deloitte & Touche LLP. +It +is expected that one or more representatives of Deloitte & Touche LLP will be available to participate in the 2019 annual meeting and will be given the opportunity to +make a statement if they so desire. It also is expected that the representative(s) will be available to respond to appropriate questions from the stockholders. +Vote Required +The approval of the ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm +for the fiscal year ending December 31, 2019 requires the affirmative vote of the holders of a majority of the shares represented at the meeting, in person or by proxy, and entitled to vote. As +a result, abstentions will have the same effect as votes against this proposal. We do not expect any broker non-votes in connection with this proposal. +Board Recommendation +The Board unanimously recommends that you vote " FOR " the ratification of the appointment of +Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2019. +41 +OTHER MATTERS +Certain Relationships and Related Party Transactions +Related Party Transactions +We lease our corporate offices from PD Properties, an entity owned by Dale Redman, pursuant to a five-year lease agreement with a five-year +extension option requiring a base rent of $72,000 per year. We also lease five properties adjacent to the corporate office from South Midkiff Partners LLC, an entity owned jointly by Dale +Redman, David Sledge, Spencer Armour and Jeff Smith, with annual base rents of $30,000, $30,000, $90,000, $90,000 and $180,000. +We +paid Dale Redman, our Chief Executive Officer, $393,034 for the year ended December 31, 2018, for reimbursement of costs incurred through use of his aircraft. +We +rent certain flowback equipment from PD Properties, an entity owned by Dale Redman, our Chief Executive Officer. For the year ended December 31, 2017, we paid $192,000 under +this lease. +We +lease a property adjacent to our corporate headquarters from Industrial Loop Partners, LLC, an entity wholly owned by an affiliate of Bandera Ventures. For the year ended +December 31, 2018, we paid $345,250 under the lease. The lease has a remaining term of approximately six years. Mr. Blackwell, one of our directors, through his approximately 33% +interest in Bandera Ventures, may be deemed an indirect beneficiary of this lease. +Jordan +Frosch is our Sales Manager and the son-in-law of Dale Redman. Mr. Frosch received total compensation of approximately $530,511 for his services for the year ended +December 31, 2018. +Sam +Sledge is our Investor Relations Director and the son of David Sledge. Sam Sledge received total compensation of approximately $717,481 for his services for the year ended +December 31, 2018. +Morgan +Stovall is our Corporate Controller and the daughter of Jeffrey Smith. Ms. Stovall received total compensation of approximately $338,873 for her services for the year ended +December 31, 2018. +In +November 2017, we entered into a five-year extension to an existing sand supply agreement to provide Texas-sourced frac sand ("Texas sand"), which is in high demand from our +customers. Texas sand provided under the supply agreement will primarily be sourced from a mine located on land owned by an oil and gas exploration company in which our Chief Executive Officer, Dale +Redman, owns a 44% interest. Accordingly, Mr. Redman may be considered an indirect beneficiary of payments made under the lease between our supplier and the landowner. The supply agreement was +negotiated by officers of the Company without the involvement of Mr. Redman, and reviewed and approved by the Audit Committee pursuant to its authority under our Related Party Transactions +Policy. In considering the approval of the supply agreement, the Audit Committee retained independent legal and commercial expertise to assist in the evaluation of the agreement's commercial terms. +Following its evaluation, the Audit Committee determined that the pricing and other provisions of the agreement reflected market terms, that the agreement reflected an arm's length negotiation, and +that entry into the agreement was advisable and in the best interests of the Company. For the year ended December 31, 2018, the Company purchased $10,300,000 of Texas sand under the supply +agreement, and Mr. Redman was an indirect beneficiary of approximately $300,000 in royalty payments. +Policies and Procedures for Related Party Transactions +Any request for us to enter into a transaction with an executive officer, director, principal stockholder or any of such persons' immediate +family members or affiliates, among others, in which the amount involved exceeds $120,000, must first be presented to our Audit Committee for review, consideration and approval. All of our directors +and executive officers are required to report to the +42 +Audit +Committee chair any such related person transaction. In approving or rejecting the proposed agreement, our Audit Committee shall consider the facts and circumstances available and deemed +relevant to the Audit Committee, including, but not limited to, whether the transaction is on terms comparable to those that could be obtained in arm's-length dealings with an unrelated third party, +the extent of the related party's interest in the transaction and the conflicts of interest and corporate opportunity provisions of our certificate of incorporation. If we should discover related +person transactions that have not been approved, the Audit Committee will be notified and will determine the appropriate action, including ratification, revision or termination of such transaction. +Section 16(a) Beneficial Ownership Reporting Compliance +Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than 10% of our equity +securities to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock. Officers, directors and greater than 10% stockholders are required by SEC +regulation to furnish us with copies of all Section 16(a) reports they file. +To +our knowledge, based solely on review of the copies of such reports furnished to us and written representations that no other reports were required, during the fiscal year ended +December 31, 2018, our executive officers, directors and greater than 10% beneficial owners timely filed all required Section 16(a) reports. +Other Matters +A copy of our Annual Report on Form 10-K for the year ended December 31, 2018, including financial statements and schedules +thereto but not including exhibits, as filed with the SEC, will be sent to any stockholder of record on April 22, 2019 without charge by calling Investor Relations at (432) 688-0012 or +writing to the address below: +ProPetro +Holding Corp. +P.O. Box 873 +Midland, Texas 79702 +A +reasonable fee will be charged for copies of exhibits. You may also access our Annual Report on Form 10-K for the year ended December 31, 2018 and our other filings with +the SEC at www.propetroservices.com. +The +persons designated to vote shares covered by our Board's proxies intend to exercise their judgment in voting such shares on other matters that may properly come before the meeting. +Management does not expect that any matters other than those referred to in this proxy statement will be presented for action at the meeting. +Deadline for Receipt of Stockholder Proposals +If you want to present a proposal from the floor at the 2020 annual meeting of stockholders or nominate a person for election to the Board at +such meeting, you must give us written notice no later than the close of business on March 16, 2020 and no earlier than the opening of business on February 15, 2020, and follow the +procedures outlined in our Bylaws. You may request a copy of the provisions of the Bylaws governing the requirements for notice at the below address. If the date of the 2020 annual meeting of +stockholders is more or less than 30 days from June 14, 2020, the one year anniversary of the 2019 annual meeting of stockholders, your notice of a proposal will be timely if we receive +it no earlier than the opening of business on the 120 th day before the actual date of such meeting and no later than the later of (i) the close of business on the +90 th day before the actual date of such meeting and (ii) the close of business on the tenth day following the date on which a written +43 +statement +setting forth the date of such meeting was mailed to the stockholders or the date on which it is first disclosed to the public. SEC rules permit management to vote proxies in its discretion +in certain cases if a stockholder does not comply with this deadline and, in certain other cases notwithstanding a stockholder's compliance with this deadline. +If +you wish to submit a proposal to be considered for inclusion in next year's proxy statement pursuant to Rule 14a-8 of the Exchange Act, you must submit the proposal so that it +is received by December 31, 2019. If the date of the 2020 annual meeting of stockholders is more than 30 days from June 14, 2020, the one-year anniversary date of the 2019 annual +meeting of stockholders, a notice will be timely if we receive it a reasonable time before we begin to print and send our proxy materials for such meeting. +In +each case, your notice should be sent in writing to our Secretary at our principal executive offices at 1706 S. Midkiff, Bldg. B, Midland, Texas 79701. +Sincerely, +Mark +Howell +General Counsel and Corporate Secretary +April 23, 2019 +44 +Appendix A +AMENDED AND RESTATED +CERTIFICATE OF INCORPORATION +OF +PROPETRO HOLDING CORP. +(as amended and restated on [ • ], 2019 March 16, +2017 ) +I, the undersigned, for purposes of incorporating and organizing a corporation under the General Corporation Law of the State +of Delaware do hereby execute this Certificate of Incorporation and do hereby certify as follows: +ProPetro +Holding Corp., a corporation organized and existing under the General Corporation Law of the State of Delaware, does hereby certify as +follows: +1. The +name of the corporation is ProPetro Holding Corp. Its original Certificate of Incorporation was filed with the Secretary of State of the State of +Delaware on March 8, 2017. +2. This +Amended and Restated Certificate of Incorporation has been duly adopted by ProPetro Holding Corp. and its stockholders in accordance with +Section 242 and Section 245 of the General Corporation Law of the State of Delaware. +3. The +Certificate of Incorporation of ProPetro Holding Corp. is hereby amended and restated in its entirety to read as follows: +FIRST: The name of the c C orporation is ProPetro Holding Corp. (the +" Corporation "). +SECOND: The address of the Corporation's registered office in the State of Delaware is 1209 Orange Street, Wilmington, County of +New Castle, +Delaware, 19801, and the name of its registered agent at such address is The Corporation Trust Company. +THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the +General +Corporation Law of the State of Delaware, as it now exists or may hereafter be amended and supplemented (the " DGCL "). The Corporation +is being incorporated in connection with the conversion of ProPetro Holding Corp, a Texas corporation (the " Texas +Corporation "), to the Corporation (the +" Conversion ") and this Certificate of Incorporation is being filed +simultaneously with the Certificate of Conversion of the Texas Corporation to the Corporation. +FOURTH: The Corporation is authorized to issue two classes of stock to be designated, respectively, " Common +Stock " and " Preferred Stock ." The total number of shares of capital stock which the Corporation shall have authority to issue is +230,000,000. The total number of shares of Common Stock that the Corporation is authorized to issue is 200,000,000, having a par value of $0.001 per share, and the total number of shares of Preferred +Stock that the c C orporation is authorized to issue is 30,000,000, having a par value of $0.001 per share , of +which 20,000,000 shares have been designated as Series A Convertible Preferred Stock (the " Series A Preferred +Stock "). The designations and the powers, privileges +and rights, and the qualifications, limitations or restrictions of the Series A Preferred Stock are set forth on +Exhibit A hereto . Subject to the terms of +that certain Shareholders Agreement, dated March 4, 2013, as amended, and any other stockholders agreement binding +on the Corporation, whether or not in effect on the date hereof and as amended from time to time in accordance therewith (each, a " Stockholders +Agreement "), the board of directors of the Corporation (the " Board of Directors ") may, in its discretion, issue from time to +time authorized but unissued shares or treasury shares of the Corporation to such person or persons, and for such consideration, as the Board of Directors may determine. Upon the +filing of the Certificate of Conversion of the Texas Corporation to the +A-1 +Corporation +and this Certificate of Incorporation (the " Effective +Time "), (i) each share of common stock of the Texas Corporation outstanding immediately prior to the Effective Time will be deemed +to be one issued and outstanding, fully paid and nonassessable share of Common Stock, without any action required on the part of the corporation or the former holders of such common stock of the Texas +Corporation and (ii) each share of Series A Convertible Preferred Stock of the Texas Corporation outstanding immediately prior to the Effective Time will be deemed to be one issued and +outstanding, fully paid and nonassessable share of Series A Convertible Preferred Stock of the Corporation, without any action required on the part of the Corporation or the former holders of +such preferred stock of the Texas Corporation. +Upon +the effectiveness of this Certificate of Amendment to the Certificate of Incorporation of the Corporation (the +" Stock Split Effective Time "), each share of Common Stock issued and +outstanding (or held in treasury) immediately prior to the Stock Split Effective Time (" Old Common +Stock ") shall be automatically reclassified into 1.45 validly issued, fully paid and non-assessable shares of Common Stock without any +further action by the Corporation or the holder of such shares of Old Common Stock (the " Common Stock +Split "). Notwithstanding the foregoing, no fractions of a share of Common Stock shall be deliverable upon the Common Stock Split, and +stockholders who otherwise would have been entitled to receive any fractional share of Common Stock, in lieu of receipt of such fractional share, shall be entitled to receive from the Corporation an +amount in cash equal to the fair value of such fractional interest as of the Stock Split Effective Time as determined by the Board of Directors of the Corporation. From and after the Stock Split +Effective Time, each stock certificate representing shares of Old Common Stock shall thereafter represent the number of shares of Common Stock equal to the same number of shares of Old Common Stock +previously represented by such stock certificate, multiplied by 1.45 and rounded down to the nearest whole number; provided, however, that each person holding of record a stock certificate or +certificates that represented shares of Old Common Stock shall receive, upon surrender of such certificate or certificates, a new certificate or certificates evidencing and representing the number of +whole shares of Common Stock to which such person is entitled as a result of the Common Stock Split based on the aggregate number of shares of Old Common Stock held by such +person." +FIFTH: The designations and the powers, privileges and rights, and the qualifications, limitations or restrictions thereof in respect +of each class +of capital stock of the Corporation are as follows: +A. COMMON STOCK. +1. General. The rights of the holders of the Common Stock are subject to and qualified by the rights of the +holders of the Preferred Stock of any series as may be set forth in this Amended and Restated Certificate of Incorporation or as may be designated by the Board of +Directors upon any issuance of the Preferred Stock of any series. +2. Voting. Each holder of Common Stock shall be entitled to one (1) vote for each share of Common Stock +held by such holder. Each holder of Common Stock shall be entitled to notice of any stockholders' meeting in accordance with the Bylaws of the Corporation (as in effect at the time in question) (the +" Bylaws ") and applicable law on all matters put to a vote of the stockholders of the Corporation. No holder of Common Stock shall be entitled to +exercise any right of cumulative voting. +Notwithstanding +the foregoing, except as otherwise required by law, holders of Common Stock, as such, shall not be entitled to vote on any amendment to this Amended and +Restated Certificate of Incorporation (including any certificate of designations relating to any series of Preferred Stock) that relates solely to the terms of one or more outstanding +series of Preferred Stock if the holders of such affected series are entitled, either separately or together with the holders of one or more other such series, to vote thereon pursuant to this +Amended and Restated Certificate of Incorporation (including +A-2 +any +certificate of designations relating to any series of Preferred Stock) or pursuant to the DGCL (or any successor provision thereto). +The +number of authorized shares of Common Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a +majority of the voting power of the outstanding shares of stock of the Corporation entitled to vote thereon (the " Voting Stock "), irrespective of the +provisions of Section 242(b)(2) of the DGCL. +3. Dividends. Subject to the rights of any holders of any shares of Preferred Stock which may from time to time +come into existence and be outstanding, the holders of Common Stock shall be entitled to the payment of dividends if, when and as declared by the Board of Directors in accordance with applicable law. +Any dividends declared by the Board of Directors to the holders of the then outstanding Common Stock shall be paid to the holders thereof pro rata in accordance with the number of shares of Common +Stock held by each such holder as of the record date of such dividend. +4. Liquidation. Subject to the rights of any holders of any shares of Preferred Stock which may from time to +time come into existence and be outstanding, in the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the funds and assets of the Corporation +that may be legally distributed to the Corporation's stockholders shall be distributed among the holders of the then outstanding Common Stock pro rata in accordance with the number of shares of Common +Stock held by each such holder. +5. No Preemptive or Subscription Rights. No holder of Common Stock shall be entitled to preemptive or +subscription rights. +B. PREFERRED STOCK +Preferred +Stock may be issued from time to time in one or more series, each of such series to have such terms as stated or expressed herein and in the resolution or resolutions providing +for the issue of such series adopted by the Board of Directors as hereinafter provided. +Authority +is hereby expressly granted to and vested in the Board of Directors from time to time to issue the Preferred Stock in one or more series, and in connection with the creation of +any such series, by adopting a resolution or resolutions providing for the issuance of the shares thereof and by filing a certificate of designations relating thereto in accordance with the DGCL to +determine and fix the number of shares of such series and such voting powers, full or limited, or no voting powers, and such designations, preferences and relative participating, optional or other +special rights, and qualifications, limitations or restrictions thereof, including without limitation thereof, dividend rights, conversion rights, redemption privileges and liquidation preferences, as +shall be stated and expressed in such resolutions, all to the fullest extent now or hereafter permitted by the DGCL and any applicable Stockholders Agreement. Without limiting the generality of the +foregoing, the resolution or resolutions providing for the issuance of any series of Preferred Stock may provide that such series shall be superior or rank equally or be junior to any other series of +Preferred Stock to the extent permitted by law. +The +number of authorized shares of Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a +majority of the Voting Stock, irrespective of the provisions of Section 242(b)(2) of the DGCL. +SIXTH: Subject to any applicable Stockholders Agreement, the total number of directors of the Corporation shall be determined from time +to time +exclusively by resolution of the Board of Directors. Except as otherwise required by law and subject to any applicable Stockholders Agreement and the rights of any holders of any shares of Preferred +Stock, which may from time to time come into existence and be outstanding, any vacancies and newly created directorships shall be filled exclusively by +A-3 +the +affirmative vote of a majority of the Board of D d irectors then in office, even if less +than a quorum. No decrease in the number of directors shall shorten the term of any incumbent director. Unless and except to the extent that the Bylaws so provide, the election of directors need not +be by written ballot. Subject to any applicable Stockholders Agreement and the rights of any holders of any shares of Preferred Stock which may from time to time come into existence and be +outstanding, any director may only be removed upon the affirmative vote of the holders of at least 66 2 / 3 % of the Voting Stock entitled to vote thereon. +SEVENTH: Special meetings of stockholders of the Corporation may be called only by the Board of Directors pursuant to a resolution +approved by the +Board of Directors ; provided, however, that for so long as the ECP Stockholders (as defined in the Stockholders Agreement) collectively continue to beneficially own at least 20% of +the Voting Stock, the Secretary of the Corporation shall call a special meeting of stockholders upon the written request of the ECP Stockholders . Special meetings may not be called +by any other person or persons. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice. +EIGHTH: In furtherance and not in limitation of the rights, powers, privileges and discretionary authority granted or conferred by the +DGCL or other +statutes or laws of the State of Delaware, the Board of Directors is expressly authorized to make, alter, amend or repeal the Bylaws whether adopted by them or otherwise, without any action on the +part of the stockholders. The stockholders may also make new bylaws or alter, amend or repeal the Bylaws (i) in addition to any other vote otherwise required by law, prior +to the date the ECP Stockholders cease to beneficially own in aggregate at least 50% of the Voting Stock entitled to vote thereon (the +" Trigger Date "), by a majority of the Voting Stock entitled to vote +thereon, and (ii) in addition to any other vote otherwise require by law, from and after the Trigger Date, by the affirmative vote of the holders of at least +66 2 / 3 % of the Voting Stock entitled to vote thereon. +NINTH: The Corporation is authorized to indemnify, and to advance expenses to, each current, former or prospective director, officer, +employee or +agent of the Corporation to the fullest extent permitted by Section 145 of the DGCL as it now exists or may hereafter be amended (but, in the case of any +such amendment, only to the extent such amendment permits the Corporation to provide broader rights than permitted prior thereto). To the fullest extent permitted by the laws of the +State of Delaware DGCL as it now exists or may hereafter be amended, no director shall be liable to the Corporation or its stockholders for monetary +damages for breach of fiduciary duty as a director. No amendment to, or modification or repeal of, this Article Ninth shall adversely affect any right or protection of a director of the Corporation +existing hereunder with respect to any act or omission occurring prior to such amendment, modification or repeal. +The +Corporation may maintain insurance, at its expense, to protect itself and any current, former or prospective director, officer, employee or agent of the Corporation or another +corporation, partnership, limited liability company, joint venture, trust, enterprise or nonprofit entity against any expense, liability or loss, whether or not the Corporation would have the power to +indemnify such person against such expense, liability or loss under the DGCL. To the extent that the Corporation maintains any policy or policies providing such insurance, each such current, former or +prospective director or officer, and each such agent or employee to which rights to indemnification have been granted as provided in the Bylaws or elsewhere, shall be covered by such policy or +policies in accordance with its or their terms to the maximum extent of the coverage thereunder for any such current, former or prospective director, officer, employee or agent. +TENTH: The Corporation shall, to the fullest extent permitted by the DGCL, as the same exists or may hereafter be amended and +supplemented (but, in +the case of any such amendment, only to the extent such amendment permits the Corporation to provide broader rights than permitted prior thereto), indemnify, advance expenses to +and hold harmless any person who was or is a director or +A-4 +officer +of the Corporation or, while a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or +of a partnership, joint venture, trust, enterprise or nonprofit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses (including +attorneys' fees) reasonably incurred by such person. Notwithstanding the preceding sentence, except with respect to a proceeding to enforce such person's rights to indemnification or advancement of +expenses pursuant to this Article TENTH, the Corporation shall be required to indemnify such persons in connection with a proceeding (or part thereof) commenced by such person only if the commencement +of such proceeding (or part thereof) by such person was authorized in the specific case by the Board of Directors. The Corporation may, by action of the Board of Directors, provide rights to +indemnification and to advancement of expenses to such other employees or agents of the Corporation or its subsidiaries to +such extent and to such effect as the Board of Directors shall determine to be appropriate and authorized by the DGCL. Any amendment, repeal or modification of this Article Tenth shall not adversely +affect any rights or protection existing hereunder immediately prior to such repeal or modification. +ELEVENTH: In recognition and anticipation that (i) the principals, officers, members, managers and/or employees of the ECP +Stockholders (as defined in the Shareholders Agreement) or their respective Affiliated Companies (as defined below) may serve as directors or officers of the Corporation, +(ii) the ECP Stockholders and their respective Affiliated Companies engage and may continue to engage in the same or similar activities or related lines of business as those in which the +Corporation, directly or indirectly, may engage and/or other business activities that overlap with or compete with those in which the Corporation, directly or indirectly, may engage, and +(iii) that the Corporation and its Affiliated Companies may engage in material business transactions with the ECP Stockholders and their respective Affiliated Companies, and that the +Corporation is expected to benefit therefrom, the provisions of this Article Eleventh are set forth to regulate and define the conduct of certain affairs of the Corporation as they may involve the ECP +Stockholders and/or their respective Affiliated Companies and/or their respective principals, officers, members, managers and/or employees, including any of the foregoing who serve as officers or +directors of the Corporation (collectively, the " Covered Persons "), and the powers, rights, duties and liabilities of the Corporation and its officers, +directors and stockholders in connection therewith. As used in this Amended and Restated Certificate of Incorporation, " Affiliated +Companies " shall mean (a) in respect of any of the ECP Stockholders, any entity that controls, is controlled by or is under common control +with such ECP Stockholder (other than the Corporation and any entity that is controlled by the Corporation) and any investment funds managed by Energy Capital +Partners and (b) in respect of the Corporation, any company entity controlled by the Corporation. +To +the fullest extent permitted by law, none of the ECP Stockholders, any of their respective Affiliated Companies or any of their respective Covered Persons shall have any fiduciary +duty to refrain from (A) carrying on and conducting, whether directly, or as a partner in any partnership, or as a joint venturer in any joint venture, or as an officer, director or stockholder +of any corporation, or as a participant in any syndicate, pool, trust or association, any business of any kind, nature or description, whether or not such business is competitive with or in the same +or similar lines of business as the Corporation or its Affiliated Companies, (B) doing business with any client, customer, vendor or lessor of any of the Corporation or its Affiliated +Companies, or (C) making investments in any kind of property in which the Corporation may make investments. In the event that any of the ECP Stockholders, any of their respective Affiliated +Companies or any of their respective Covered Persons acquires knowledge of a potential transaction or matter which may constitute a corporate opportunity for both (1) (a) the Covered Person, in +his or her capacity with any of the ECP Stockholders or any of their respective Affiliated Companies, or (b) any of the ECP Stockholders or any of their respective Affiliated Companies and +(2) the Corporation or its Affiliated Companies, none of the ECP Stockholders, any of their respective Affiliated Companies or any of their respective Covered Persons +A-5 +shall, +to the fullest extent permitted by law, have any duty to offer or communicate information regarding such corporate opportunity to the Corporation or its Affiliated Companies. To the fullest +extent permitted by law, the Corporation and its Affiliated Companies hereby renounce, pursuant to Section 122(17) of the DGCL, any interest or expectancy of the Corporation and its Affiliated +Companies in any such corporate opportunity and waive any claim against each of the ECP Stockholders, each of their respective Affiliated Companies and each of their +respective Covered Persons and shall indemnify each of the ECP Stockholders, each of their respective Affiliated Companies and each of their respective Covered Persons against any claim that any ECP +Stockholder, any of its respective Affiliated Companies or any of its respective Covered Persons is liable to the Corporation, its Affiliated Companies or its stockholders for breach of any fiduciary +duty, as a director, officer or stockholder of the Corporation or its Affiliated Companies, solely by reason of the fact that any ECP Stockholder, any of its respective Affiliated Companies or any of +its respective Covered Persons (x) pursues or acquires any corporate opportunity for its own account or the account of any affiliate, (y) directs, recommends, sells, assigns, or +otherwise transfers such corporate opportunity to another person or (z) does not communicate information regarding such corporate opportunity to the Corporation or its Affiliated Companies. The +Corporation shall pay in advance any expenses incurred in defense of any such claim as provided in this Article Eleventh. +To +the fullest extent permitted by law, no potential transaction or business opportunity may be deemed to be a potential corporate opportunity of the Corporation or its Affiliated +Companies unless (i) the Corporation and its Affiliated Companies would be permitted to undertake such transaction or opportunity in accordance with this Amended and Restated +Certificate of Incorporation, (ii) the Corporation and its Affiliated Companies at such time have sufficient financial resources to undertake such transaction or opportunity and +(iii) such transaction or opportunity would be in the same or similar line of business in which the Corporation and its Affiliated Companies are then engaged or a line of business that is +reasonably related to, or a reasonable extension of, such line of business. +To +the fullest extent permitted by law, no Covered Person will be liable to the Corporation or its Affiliated Companies or stockholders for breach of any duty (at law or in equity, +contractual or otherwise) by reason of any activities or omissions of the types referred to in this Article Eleventh. +Any +person or entity purchasing or otherwise acquiring or holding any interest in any shares of capital stock of the Corporation shall be deemed to have notice of and to have consented +to the provisions of this Article Eleventh. +For +purposes of this Article Eleventh, the Corporation and its Affiliated Companies shall not be deemed Affiliated Companies of any of the ECP Stockholders. +In +addition to any vote required by applicable law, this Article Eleventh may not be amended, modified or repealed without the prior written consent of each of the ECP Stockholders. +TWELFTH: Any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual +or special +meeting of stockholders and , subject to the next sentence, may not be effected by any consent or consents in writing by stockholders. +Notwithstanding the foregoing, until the Trigger Date, any action required or permitted to be taken at any annual or special meeting of stockholders of the Corporation may be taken +without a meeting, without prior notice and without a vote, if (A) a consent or consents in writing, setting forth the action so taken, are signed by the holders of outstanding shares of the +relevant class(es) or series of stock of the Corporation representing not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all +shares of stock of the Corporation then issued and outstanding (other than treasury stock) entitled to vote thereon were present and voted and (B) the action to be taken and the taking of the +action by written consent are approved by the Board of Directors, including the directors designated by the ECP Stockholders. +A-6 +THIRTEENTH: Unless the Corporation consent s in writing to the selection of an alternative forum, the Court of Chancery +of the State of Delaware shall, to the fullest extent permitted by law, be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Corporation, +(ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer, employee or stockholder of the Corporation to the Corporation or the Corporation's stockholders, +(iii) any action asserting a claim against the Corporation arising pursuant to any provision of the DGCL or this Amended and Restated Certificate of Incorporation +or the Bylaws or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware , or (iv) any action asserting a claim against +the Corporation governed by the internal affairs doctrine, in each such case subject to said Court of Chancery having personal jurisdiction over the indispensable parties named as defendants therein. +Any person or entity purchasing or otherwise acquiring or holding any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of this +Article Thirteenth. +FOURTEENTH: From time to time, any of the provisions of this Amended and Restated Certificate of Incorporation may be +amended, altered, changed or repealed, and other provisions authorized by the laws of the State of Delaware at the time in force may be added or inserted in the manner and at the time prescribed by +said laws, and all rights at any time conferred upon the stockholders or directors of the Corporation by this Amended and Restated +Certificate of Incorporation are granted subject to the +provisions of this Article Fourteenth. The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Amended and Restated +Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted +subject to this reservation. Notwithstanding any other provision of this Amended and Restated Certificate of Incorporation, and notwithstanding the fact that a lesser +percentage or separate class vote may be specified by law or otherwise, but in addition to any affirmative vote of the holders of any particular class or series of the capital stock required by law or +otherwise, no provision of this Amended and Restated Certificate of Incorporation may be altered, amended or repealed in any respect, nor may any provision of this +Certificate of Incorporation or the Bylaws inconsistent therewith be adopted, unless, in addition to any other vote required by this Certificate of Incorporation or otherwise required by law, such +alteration, amendment, repeal or adoption is approved , (i) prior to the Trigger Date, by the affirmative vote of the holders of a majority of the outstanding Voting Stock +entitled to vote thereon, and (ii) from and after the Trigger Date, by the holders of at least 66 2 / 3 % of the outstanding Voting Stock entitled to vote +thereon. +FIFTEENTH: The Corporation elects not to be governed by Section 203 of the DGCL. +SIXTEENTH: The name of the incorporator is Dale Redman (the +" Incorporator "). The address of the Incorporator is 1706 S Midkiff +Building B, Midland, Texas 79701. +IN +WITNESS WHEREOF, ProPetro Holding Corp. has caused this Amended and Restated Certificate of Incorporation to be executed by its Chief Executive Officer this +[ • ], 2019. +Dale Redman +Chief Executive Officer +A-7 +Appendix B +AMENDED AND RESTATED +CERTIFICATE OF INCORPORATION +OF +PROPETRO HOLDING CORP. +(as amended and restated on [ • ], 2019 March 16, +2017 ) +I, +the undersigned, for purposes of incorporating and organizing a corporation under the General Corporation Law of the State of Delaware do hereby execute this +Certificate of Incorporation and do hereby certify as follows: +ProPetro +Holding Corp., a corporation organized and existing under the General Corporation Law of the State of Delaware, does hereby certify as +follows: +1. The +name of the corporation is ProPetro Holding Corp. Its original Certificate of Incorporation was filed with the Secretary of State of the State of +Delaware on March 8, 2017. +2. This +Amended and Restated Certificate of Incorporation has been duly adopted by ProPetro Holding Corp. and its stockholders in accordance with +Section 242 and Section 245 of the General Corporation Law of the State of Delaware. +3. The +Certificate of Incorporation of ProPetro Holding Corp. is hereby amended and restated in its entirety to read as follows: +FIRST: The name of the c C orporation is ProPetro Holding Corp. (the +" Corporation "). +SECOND: The address of the Corporation's registered office in the State of Delaware is 1209 Orange Street, Wilmington, County of +New Castle, +Delaware, 19801, and the name of its registered agent at such address is The Corporation Trust Company. +THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the +General +Corporation Law of the State of Delaware, as it now exists or may hereafter be amended and supplemented (the " DGCL "). The Corporation is being +incorporated in connection with the conversion of ProPetro Holding Corp, a Texas corporation (the " Texas Corporation "), to the Corporation (the +" Conversion ") and this Certificate of Incorporation is being filed simultaneously with the Certificate of Conversion of the Texas Corporation to the +Corporation. +FOURTH: The Corporation is authorized to issue two classes of stock to be designated, respectively, " Common +Stock " and " Preferred Stock ." The total number of shares of capital stock which the Corporation shall have authority to issue is +230,000,000. The total number of shares of Common Stock that the Corporation is authorized to issue is 200,000,000, having a par value of $0.001 per share, and the total number of shares of Preferred +Stock that the c C orporation is authorized to issue is 30,000,000, having a par value of $0.001 per share, of which 20,000,000 shares +have been designated as Series A Convertible Preferred Stock (the " Series A Preferred Stock "). The designations and the powers, privileges +and rights, and the qualifications, limitations or restrictions of the Series A Preferred Stock are set forth on Exhibit A hereto. Subject +to the terms of that certain Shareholders Agreement, dated March 4, 2013, as amended, and any other stockholders agreement binding on the Corporation, whether or not in effect on the date +hereof and as amended from time to time in accordance therewith (each, a +" Stockholders Agreement "), the board of directors of the Corporation (the " Board of Directors ") may, in +its discretion, issue from time to time authorized but unissued shares or treasury shares of the Corporation to such person or persons, and for such consideration, as the Board of Directors may +determine. Upon the filing of the Certificate of Conversion of the Texas Corporation to the Corporation and this Certificate of Incorporation (the " Effective +Time "), (i) each share of common +B-1 +stock +of the Texas Corporation outstanding immediately prior to the Effective Time will be deemed to be one issued and outstanding, fully paid and nonassessable share of Common Stock, without any +action required on the part of the corporation or the former holders of such common stock of the Texas Corporation and (ii) each share of Series A Convertible Preferred Stock of the +Texas Corporation outstanding immediately prior to the Effective Time will be deemed to be one issued and outstanding, fully paid and nonassessable share of Series A Convertible Preferred Stock +of the Corporation, without any action required on the part of the Corporation or the former holders of such preferred stock of the Texas Corporation. +Upon +the effectiveness of this Certificate of Amendment to the Certificate of Incorporation of the Corporation (the " Stock Split Effective +Time "), each share of Common Stock issued and outstanding (or held in treasury) immediately prior to the Stock Split Effective Time (" Old Common +Stock ") shall be automatically reclassified into 1.45 validly issued, fully paid and non-assessable shares of Common Stock without any further action by the Corporation or the +holder of such shares of Old Common Stock (the " Common Stock Split "). Notwithstanding the foregoing, no fractions of a share of Common Stock shall be +deliverable upon the Common Stock Split, and stockholders who otherwise would have been entitled to receive any fractional share of Common Stock, in lieu of receipt of such fractional share, shall be +entitled to receive from the Corporation an amount in cash equal to the fair value of such fractional interest as of the Stock Split Effective Time as determined by the Board of Directors of the +Corporation. From and after the Stock Split Effective Time, each stock certificate representing shares of Old Common Stock shall thereafter represent the number of shares of Common Stock equal to the +same number of shares of Old Common Stock previously represented by such stock certificate, multiplied by 1.45 and rounded down to the nearest whole number; provided, however, that each person holding +of record a stock certificate or certificates that represented shares of Old Common Stock shall receive, upon surrender of such certificate or certificates, a new certificate or certificates +evidencing and representing the number of whole shares of Common Stock to which such person is entitled as a result of the Common Stock Split based on the aggregate number of shares of Old Common +Stock held by such person." +FIFTH: The designations and the powers, privileges and rights, and the qualifications, limitations or restrictions thereof in respect +of each class +of capital stock of the Corporation are as follows: +A. COMMON STOCK. +1. General. The rights of the holders of the Common Stock are subject to and qualified by the rights of the +holders of the Preferred Stock of any series as may be set forth in this Amended and Restated Certificate of Incorporation or as may be designated by the Board of +Directors upon any issuance of the Preferred Stock of any series. +2. Voting. Each holder of Common Stock shall be entitled to one (1) vote for each share of Common Stock +held by such holder. Each holder of Common Stock shall be entitled to notice of any stockholders' meeting in accordance with the Bylaws of the Corporation (as in effect at the time in question) (the +" Bylaws ") and applicable law on all matters put to a vote of the stockholders of the Corporation. No holder of Common Stock shall be entitled to +exercise any right of cumulative voting. +Notwithstanding +the foregoing, except as otherwise required by law, holders of Common Stock, as such, shall not be entitled to vote on any amendment to this Amended and +Restated Certificate of Incorporation (including any certificate of designations relating to any series of Preferred Stock) that relates solely to the terms of one or more outstanding +series of Preferred Stock if the holders of such affected series are entitled, either separately or together with the holders of one or more other such series, to vote thereon pursuant to this +Amended and Restated Certificate of Incorporation (including any certificate of designations relating to any series of Preferred Stock) or pursuant to the DGCL (or any +successor provision thereto). +B-2 +The +number of authorized shares of Common Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a +majority of the voting power of the outstanding shares of stock of the Corporation entitled to vote thereon (the " Voting Stock "), irrespective of the +provisions of Section 242(b)(2) of the DGCL. +3. Dividends. Subject to the rights of any holders of any shares of Preferred Stock which may from time to time +come into existence and be outstanding, the holders of Common Stock shall be entitled to the payment of dividends if, when and as declared by the Board of Directors in accordance with applicable law. +Any dividends declared by the Board of Directors to the holders of the then outstanding Common Stock shall be paid to the holders thereof pro rata in accordance with the number of shares of Common +Stock held by each such holder as of the record date of such dividend. +4. Liquidation. Subject to the rights of any holders of any shares of Preferred Stock which may from time to +time come into existence and be outstanding, in the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the funds and assets of the Corporation +that may be legally distributed to the Corporation's stockholders shall be distributed among the holders of the then outstanding Common Stock pro rata in accordance with the number of shares of Common +Stock held by each such holder. +5. No Preemptive or Subscription Rights. No holder of Common Stock shall be entitled to preemptive or +subscription rights. +B. PREFERRED STOCK +Preferred +Stock may be issued from time to time in one or more series, each of such series to have such terms as stated or expressed herein and in the resolution or resolutions providing +for the issue of such series adopted by the Board of Directors as hereinafter provided. +Authority +is hereby expressly granted to and vested in the Board of Directors from time to time to issue the Preferred Stock in one or more series, and in connection with the creation of +any such series, by adopting a resolution or resolutions providing for the issuance of the shares thereof and by filing a certificate of designations relating thereto in accordance with the DGCL to +determine and fix the number of shares of such series and such voting powers, full or limited, or no voting powers, and such designations, preferences and relative participating, optional or other +special rights, and qualifications, limitations or restrictions thereof, including without limitation thereof, dividend rights, conversion rights, redemption privileges and liquidation preferences, as +shall be stated and expressed in such resolutions, all to the fullest extent now or hereafter permitted by the DGCL and any applicable Stockholders Agreement. Without limiting the generality of the +foregoing, the resolution or resolutions providing for the issuance of any series of Preferred Stock may provide that such series shall be superior or rank equally or be junior to any other series of +Preferred Stock to the extent permitted by law. +The +number of authorized shares of Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a +majority of the Voting Stock, irrespective of the provisions of Section 242(b)(2) of the DGCL. +SIXTH: Subject to any applicable Stockholders Agreement, the total number of directors of the Corporation shall be determined from time +to time +exclusively by resolution of the Board of Directors. Except as otherwise required by law and subject to any applicable Stockholders Agreement and the rights of any holders of any shares of Preferred +Stock, which may from time to time come into existence and be outstanding, any vacancies and newly created directorships shall be filled exclusively by the affirmative vote of a majority of the +Board of D d irectors then in office, even if less than a quorum. +No decrease in the number of directors shall shorten the term of any incumbent director. Unless and except to the extent that the Bylaws so provide, the election of directors need not be by written +ballot. +B-3 +Subject +to any applicable Stockholders Agreement and the rights of any holders of any shares of Preferred Stock which may from time to time come into existence and be outstanding, any director may +only be removed upon the affirmative vote of the holders of at least 66 2 / 3 % of the Voting Stock entitled to vote thereon. +SEVENTH: Special meetings of stockholders of the Corporation may be called only by the Board of Directors pursuant to a resolution +approved by the +Board of Directors; provided, however, that for so long as the ECP Stockholders (as defined in the Stockholders Agreement) collectively continue to beneficially own at least 20% of the Voting Stock, +the Secretary of the Corporation shall call a special meeting of stockholders upon the written request of the ECP Stockholders. Special meetings may not be called by any other person or persons. +Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice. +EIGHTH: In furtherance and not in limitation of the rights, powers, privileges and discretionary authority granted or conferred by the +DGCL or other +statutes or laws of the State of Delaware, the Board of Directors is expressly authorized to make, alter, amend or repeal the Bylaws whether adopted by them or otherwise, without any action on the +part of the stockholders. The stockholders may also make new bylaws or alter, amend or repeal the Bylaws (i) in addition to any other vote otherwise required by law, prior to the date the ECP +Stockholders cease to beneficially own in aggregate at least 50% of the Voting Stock entitled to vote thereon (the " Trigger Date "), by a majority of the +Voting Stock entitled to vote thereon . , and (ii) in addition to any other vote otherwise require by law, from and after the Trigger Date, by the affirmative vote of +the holders of a majority of the voting power at least 66 2 / 3 % of the Voting Stock entitled to vote +thereon . +NINTH: The Corporation is authorized to indemnify, and to advance expenses to, each current, former or prospective director, officer, +employee or +agent of the Corporation to the fullest extent permitted by Section 145 of the DGCL as it now exists or may hereafter be amended (but, in the case of any +such amendment, only to the extent such amendment permits the Corporation to provide broader rights than permitted prior thereto). To the fullest extent permitted by the laws of the +State of Delaware DGCL as it now exists or may hereafter be amended, no director shall be liable to the Corporation or its stockholders for monetary +damages for breach of fiduciary duty as a director. No +amendment to, or modification or repeal of, this Article Ninth shall adversely affect any right or protection of a director of the Corporation existing hereunder with respect to any act or omission +occurring prior to such amendment, modification or repeal. +The +Corporation may maintain insurance, at its expense, to protect itself and any current, former or prospective director, officer, employee or agent of the Corporation or another +corporation, partnership, limited liability company, joint venture, trust, enterprise or nonprofit entity against any expense, liability or loss, whether or not the Corporation would have the power to +indemnify such person against such expense, liability or loss under the DGCL. To the extent that the Corporation maintains any policy or policies providing such insurance, each such current, former or +prospective director or officer, and each such agent or employee to which rights to indemnification have been granted as provided in the Bylaws or elsewhere, shall be covered by such policy or +policies in accordance with its or their terms to the maximum extent of the coverage thereunder for any such current, former or prospective director, officer, employee or agent. +TENTH: The Corporation shall, to the fullest extent permitted by the DGCL, as the same exists or may hereafter be amended and +supplemented (but, in +the case of any such amendment, only to the extent such amendment permits the Corporation to provide broader rights than permitted prior thereto), indemnify, advance expenses to +and hold harmless any person who was or is a director or officer of the Corporation or, while a director or officer of the Corporation, is or was serving at the request of the +Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, enterprise or nonprofit entity, including service with respect to +B-4 +employee +benefit plans, against all liability and loss suffered and expenses (including attorneys' fees) reasonably incurred by such person. Notwithstanding the preceding sentence, except with respect +to a proceeding to enforce such person's rights to indemnification or advancement of expenses pursuant to this Article TENTH, the Corporation shall be required to indemnify such persons in connection +with a proceeding (or part thereof) commenced by such person only if the commencement of such proceeding (or part thereof) by such person was authorized in the specific case by the Board of Directors. +The Corporation may, by action of the Board of Directors, provide rights to indemnification and to advancement of expenses to such other employees or agents of the Corporation or its subsidiaries to +such extent and to such effect as the Board of Directors shall determine to be appropriate and authorized by the DGCL. Any amendment, repeal or modification of this Article Tenth shall not adversely +affect any rights or protection existing hereunder immediately prior to such repeal or modification. +ELEVENTH: In recognition and anticipation that (i) the principals, officers, members, managers and/or employees of the ECP +Stockholders or +their respective Affiliated Companies (as defined below) may serve as directors or officers of the Corporation, (ii) the ECP Stockholders and their respective Affiliated Companies engage and +may continue to engage in the same or similar activities or related lines of business as those in which the Corporation, directly or indirectly, may engage and/or other business activities that +overlap with or compete with those in which the Corporation, directly or indirectly, may engage, and (iii) that the Corporation and its Affiliated Companies may engage in material business +transactions with the ECP Stockholders and their respective Affiliated Companies, and that the Corporation is expected to benefit therefrom, the provisions of this Article Eleventh are set forth to +regulate and define the conduct of certain affairs of the Corporation as they may involve the ECP Stockholders and/or their respective Affiliated Companies and/or their respective principals, +officers, members, managers and/or employees, including any of the foregoing who serve as officers or directors of the Corporation (collectively, the " Covered +Persons "), and the powers, rights, duties and liabilities of the Corporation and its officers, directors and stockholders in connection therewith. As used in this +Amended and Restated Certificate of Incorporation, " Affiliated Companies " shall mean (a) in respect of any of the +ECP Stockholders, any entity that controls, is controlled by or is under common control with such ECP Stockholder (other than the Corporation and any entity +that is controlled by the Corporation) and any investment funds managed by Energy Capital Partners and (b) in respect of the Corporation, any +company entity company controlled by the Corporation. +To +the fullest extent permitted by law, none of the ECP Stockholders, any of their respective Affiliated Companies or any of their respective Covered Persons shall have any fiduciary +duty to refrain from (A) carrying on and conducting, whether directly, or as a partner in any partnership, or as a joint venturer in any joint venture, or as an officer, director or stockholder +of any corporation, or as a participant in any syndicate, pool, trust or association, any business of any kind, nature or description, whether or not such business is competitive with or in the same +or similar lines of business as the Corporation or its Affiliated Companies, (B) doing business with any client, customer, vendor or lessor of any of the Corporation or its Affiliated +Companies, or (C) making investments in any kind of property in which the Corporation may make investments. In the event that any of the ECP Stockholders, any of their respective Affiliated +Companies or any of their respective Covered Persons acquires knowledge of a potential transaction or matter which may constitute a corporate opportunity for both (1) (a) the Covered Person, in +his or her capacity with any of the ECP Stockholders or any of their respective Affiliated Companies, or (b) any of the ECP Stockholders or any of their respective Affiliated Companies and +(2) the Corporation or its Affiliated Companies, none of the ECP Stockholders, any of their respective Affiliated Companies or any of their respective Covered Persons shall, to the fullest +extent permitted by law, have any duty to offer or communicate information regarding such corporate opportunity to the Corporation or its Affiliated Companies. To the fullest extent permitted by law, +the Corporation and its Affiliated Companies hereby renounce, pursuant to Section 122(17) of the DGCL, any interest or expectancy of the Corporation and its Affiliated +B-5 +Companies +in any such corporate opportunity and waive any claim against each of the ECP Stockholders, each of their respective Affiliated Companies and each of their +respective Covered Persons and shall indemnify each of the ECP Stockholders, each of their respective Affiliated Companies and each of their respective Covered Persons against any claim that any ECP +Stockholder, +any of its respective Affiliated Companies or any of its respective Covered Persons is liable to the Corporation, its Affiliated Companies or its stockholders for breach of any fiduciary duty, as a +director, officer or stockholder of the Corporation or its Affiliated Companies, solely by reason of the fact that any ECP Stockholder, any of its respective Affiliated Companies or any of its +respective Covered Persons (x) pursues or acquires any corporate opportunity for its own account or the account of any affiliate, (y) directs, recommends, sells, assigns, or otherwise +transfers such corporate opportunity to another person or (z) does not communicate information regarding such corporate opportunity to the Corporation or its Affiliated Companies. The +Corporation shall pay in advance any expenses incurred in defense of any such claim as provided in this Article Eleventh. +To +the fullest extent permitted by law, no potential transaction or business opportunity may be deemed to be a potential corporate opportunity of the Corporation or its Affiliated +Companies unless (i) the Corporation and its Affiliated Companies would be permitted to undertake such transaction or opportunity in accordance with this Amended and Restated +Certificate of Incorporation, (ii) the Corporation and its Affiliated Companies at such time have sufficient financial resources to undertake such transaction or opportunity and +(iii) such transaction or opportunity would be in the same or similar line of business in which the Corporation and its Affiliated Companies are then engaged or a line of business that is +reasonably related to, or a reasonable extension of, such line of business. +To +the fullest extent permitted by law, no Covered Person will be liable to the Corporation or its Affiliated Companies or stockholders for breach of any duty (at law or in equity, +contractual or otherwise) by reason of any activities or omissions of the types referred to in this Article Eleventh. +Any +person or entity purchasing or otherwise acquiring or holding any interest in any shares of capital stock of the Corporation shall be deemed to have notice of and to have consented +to the provisions of this Article Eleventh. +For +purposes of this Article Eleventh, the Corporation and its Affiliated Companies shall not be deemed Affiliated Companies of any of the ECP Stockholders. +In +addition to any vote required by applicable law, this Article Eleventh may not be amended, modified or repealed without the prior written consent of each of the ECP Stockholders. +TWELFTH: Any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual +or special +meeting of stockholders and, subject to the next sentence, may not be effected by any consent or consents in writing by stockholders. Notwithstanding the foregoing, until the Trigger Date, any action +required or permitted to be taken at any annual or special meeting of stockholders of the Corporation may be taken without a meeting, without prior notice and without a vote, if (A) a consent +or consents in writing, setting forth the action so taken, are signed by the holders of outstanding shares of the relevant class(es) or series of stock of the Corporation +representing not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares of stock of the Corporation then issued and outstanding +(other than treasury stock) entitled to vote thereon were present and voted and (B) the action to be taken and the taking of the action by written consent are approved by the Board of +Directors, including the directors designated by the ECP Stockholders. +THIRTEENTH: Unless the Corporation consent s in writing to the selection of an alternative forum, the Court of Chancery +of the State of Delaware shall, to the fullest extent permitted by law, be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Corporation, +(ii) any action asserting a claim of breach of a fiduciary duty owed by any director, +B-6 +officer, +employee or stockholder of the Corporation to the Corporation or the Corporation's stockholders, (iii) any action asserting a claim against the Corporation arising pursuant to any +provision of the DGCL or this Amended and Restated Certificate of Incorporation or the Bylaws or as to which the DGCL confers jurisdiction on the Court of Chancery of the +State of Delaware, or (iv) any action asserting a claim against the Corporation governed by the internal affairs doctrine, in each such case subject to said Court of Chancery having personal +jurisdiction over the indispensable parties named as defendants therein. Any person or entity purchasing or otherwise acquiring or holding any interest in shares of capital stock of the Corporation +shall be deemed to have notice of and consented to the provisions of this Article Thirteenth. +FOURTEENTH: From time to time, any of the provisions of this Amended and Restated Certificate of Incorporation may be +amended, altered, changed or repealed, and other provisions authorized by the laws of the State of Delaware at the time in force may be added or inserted in the manner and at the time prescribed by +said laws, and all rights at any time conferred upon the stockholders or directors of the Corporation by this Amended and Restated +Certificate of Incorporation are granted subject to the provisions of this Article Fourteenth. The Corporation reserves the right to amend, alter, change or repeal any provision +contained in this Amended and Restated Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon +stockholders herein are granted subject to this reservation. Notwithstanding any other provision of this Amended and Restated Certificate of +Incorporation, and notwithstanding the fact that a lesser percentage or separate class vote may be specified by law or otherwise, but in addition to any affirmative vote of the holders of any +particular class or series of the capital stock required by law or otherwise, no provision of this Amended and Restated Certificate of Incorporation may be altered, +amended or repealed in any respect, nor may any provision of this Amended and Restated Certificate of Incorporation or the Bylaws inconsistent therewith be adopted, +unless, in addition to any other vote required by this Amended and Restated Certificate of Incorporation or otherwise required by law, such alteration, amendment, repeal +or adoption is approved, (i) prior to the Trigger Date, by the affirmative vote of the +holders of a majority of the outstanding Voting Stock entitled to vote thereon, and (ii) from and after the Trigger Date, by the holders of at least 66 2 / 3 % of the outstanding +Voting Stock entitled to vote thereon. +FIFTEENTH: The Corporation elects not to be governed by Section 203 of the DGCL. +SIXTEENTH: The name of the incorporator is Dale Redman (the +" Incorporator "). The address of the Incorporator is 1706 S Midkiff +Building B, Midland, Texas 79701. +IN +WITNESS WHEREOF, ProPetro Holding Corp. has caused this Amended and Restated Certificate of Incorporation to be executed by its Chief Executive Officer this +[ • ], 2019. +Dale Redman +Chief Executive Officer +B-7 +Appendix C +AMENDED AND RESTATED +CERTIFICATE OF INCORPORATION +OF +PROPETRO HOLDING CORP. +(as amended and restated on [ • ], 2019 March 16, 2017 ) +I, the undersigned, for purposes of incorporating and organizing a corporation under the General Corporation Law of the State of Delaware do +hereby execute this Certificate of Incorporation and do hereby certify as follows: +ProPetro +Holding Corp., a corporation organized and existing under the General Corporation Law of the State of Delaware, does hereby certify as +follows: +1. The +name of the corporation is ProPetro Holding Corp. Its original Certificate of Incorporation was filed with the Secretary of State of the State of +Delaware on March 8, 2017. +2. This +Amended and Restated Certificate of Incorporation has been duly adopted by ProPetro Holding Corp. and its stockholders in accordance with +Section 242 and Section 245 of the General Corporation Law of the State of Delaware. +3. The +Certificate of Incorporation of ProPetro Holding Corp. is hereby amended and restated in its entirety to read as follows: +FIRST: The name of the c C orporation is ProPetro Holding Corp. (the +" Corporation "). +SECOND: The address of the Corporation's registered office in the State of Delaware is 1209 Orange Street, Wilmington, County of +New Castle, +Delaware, 19801, and the name of its registered agent at such address is The Corporation Trust Company. +THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the +General +Corporation Law of the State of Delaware, as it now exists or may hereafter be amended and supplemented (the " DGCL "). The +c C orporation is being incorporated in connection with the conversion of ProPetro Holding Corp, a Texas corporation (the +" Texas Corporation "), to the Corporation (the " Conversion ") and this Certificate of Incorporation is +being filed simultaneously with the Certificate of Conversion of the Texas Corporation to the Corporation. +FOURTH: The Corporation is authorized to issue two classes of stock to be designated, respectively, " Common +Stock " and " Preferred Stock ." The total number of shares of capital stock which the Corporation shall have authority to issue is +230,000,000. The total number of shares of Common Stock that the Corporation is authorized to issue is 200,000,000, having a par value of $0.001 per share, and the total number of shares of Preferred +Stock that the corporation is authorized to issue is 30,000,000, having a par value of $0.001 per share, of which 20,000,000 shares have been designated as Series A Convertible Preferred Stock +(the " Series A Preferred Stock "). The designations and the powers, privileges and rights, and the qualifications, limitations or restrictions of +the Series A Preferred Stock are set forth on Exhibit A hereto. Subject to the terms of that certain Shareholders Agreement, dated +March 4, 2013, as amended, and any other stockholders agreement binding on the Corporation, whether or not in effect on the date hereof and as amended from time to time in accordance therewith +(each, a +" Stockholders Agreement "), the board of directors of the Corporation (the " Board of Directors ") may, in +its discretion, issue from time to time authorized but unissued shares or treasury shares of the Corporation to such person or persons, and for such consideration, as the Board of Directors may +determine. Upon the filing of the Certificate of Conversion of the Texas Corporation to the Corporation and this Certificate of Incorporation (the " Effective +Time "), (i) each share of common +C-1 +stock +of the Texas Corporation outstanding immediately prior to the Effective Time will be deemed to be one issued and outstanding, fully paid and nonassessable share of Common Stock, without any +action required on the part of the corporation or the former holders of such common stock of the Texas Corporation and (ii) each share of Series A Convertible Preferred Stock of the +Texas Corporation outstanding immediately prior to the Effective Time will be deemed to be one issued and outstanding, fully paid and nonassessable share of Series A Convertible Preferred Stock +of the Corporation, without any action required on the part of the Corporation or the former holders of such preferred stock of the Texas Corporation. +Upon +the effectiveness of this Certificate of Amendment to the Certificate of Incorporation of the Corporation (the " Stock Split Effective +Time "), each share of Common Stock issued and outstanding (or held in treasury) immediately prior to the Stock Split Effective Time (" Old Common +Stock ") shall be automatically reclassified into 1.45 validly issued, fully paid and non-assessable shares of Common Stock without any further action by the Corporation or the +holder of such shares of Old Common Stock (the " Common Stock Split "). Notwithstanding the foregoing, no fractions of a share of Common Stock shall be +deliverable upon the Common Stock Split, and stockholders who otherwise would have been entitled to receive any fractional share of Common Stock, in lieu of receipt of such fractional share, shall be +entitled to receive from the Corporation an amount in cash equal to the fair value of such fractional interest as of the Stock Split Effective Time as determined by the Board of Directors of the +Corporation. From and after the Stock Split Effective Time, each stock certificate representing shares of Old Common Stock shall thereafter represent the number of shares of Common Stock equal to the +same number of shares of Old Common Stock previously represented by such stock certificate, multiplied by 1.45 and rounded down to the nearest whole number; provided, however, that each person holding +of record a stock certificate or certificates that represented shares of Old Common Stock shall receive, upon surrender of such certificate or certificates, a new certificate or certificates +evidencing and representing the number of whole shares of Common Stock to which such person is entitled as a result of the Common Stock Split based on the aggregate number of shares of Old Common +Stock held by such person." +FIFTH: The designations and the powers, privileges and rights, and the qualifications, limitations or restrictions thereof in respect +of each class +of capital stock of the Corporation are as follows: +A. COMMON STOCK. +1. General. The rights of the holders of the Common Stock are subject to and qualified by the rights of the +holders of the Preferred Stock of any series as may be set forth in this Amended and Restated Certificate of Incorporation or as may be designated by the Board of +Directors upon any issuance of the Preferred Stock of any series. +2. Voting. Each holder of Common Stock shall be entitled to one (1) vote for each share of Common Stock +held by such holder. Each holder of Common Stock shall be entitled to notice of any stockholders' meeting in accordance with the Bylaws of the Corporation (as in effect at the time in question) (the +" Bylaws ") and applicable law on all matters put to a vote of the stockholders of the Corporation. No holder of Common Stock shall be entitled to +exercise any right of cumulative voting. +Notwithstanding +the foregoing, except as otherwise required by law, holders of Common Stock, as such, shall not be entitled to vote on any amendment to this Amended and +Restated Certificate of Incorporation (including any certificate of designations relating to any series of Preferred Stock) that relates solely to the terms of one or more outstanding +series of Preferred Stock if the holders of such affected series are entitled, either separately or together with the holders of one or more other such series, to vote thereon pursuant to this +Amended and Restated Certificate of Incorporation (including any certificate of designations relating to any series of Preferred Stock) or pursuant to the DGCL (or any +successor provision thereto). +C-2 +The +number of authorized shares of Common Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a +majority of the voting power of the outstanding shares of stock of the Corporation entitled to vote thereon (the " Voting Stock "), irrespective of the +provisions of Section 242(b)(2) of the DGCL. +3. Dividends. Subject to the rights of any holders of any shares of Preferred Stock which may from time to time +come into existence and be outstanding, the holders of Common Stock shall be entitled to the payment of dividends if, when and as declared by the Board of Directors in accordance with applicable law. +Any dividends declared by the Board of Directors to the holders of the then outstanding Common Stock shall be paid to the holders thereof pro rata in accordance with the number of shares of Common +Stock held by each such holder as of the record date of such dividend. +4. Liquidation. Subject to the rights of any holders of any shares of Preferred Stock which may from time to +time come into existence and be outstanding, in the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the funds and assets of the Corporation +that may be legally distributed to the Corporation's stockholders shall be distributed among the holders of the then outstanding Common Stock pro rata in accordance with the number of shares of Common +Stock held by each such holder. +5. No Preemptive or Subscription Rights. No holder of Common Stock shall be entitled to preemptive or +subscription rights. +B. PREFERRED STOCK +Preferred +Stock may be issued from time to time in one or more series, each of such series to have such terms as stated or expressed herein and in the resolution or resolutions providing +for the issue of such series adopted by the Board of Directors as hereinafter provided. +Authority +is hereby expressly granted to and vested in the Board of Directors from time to time to issue the Preferred Stock in one or more series, and in connection with the creation of +any such series, by adopting a resolution or resolutions providing for the issuance of the shares thereof and by filing a certificate of designations relating thereto in accordance with the DGCL to +determine and fix the number of shares of such series and such voting powers, full or limited, or no voting powers, and such designations, preferences and relative participating, optional or other +special rights, and qualifications, limitations or restrictions thereof, including without limitation thereof, dividend rights, conversion rights, redemption privileges and liquidation preferences, as +shall be stated and expressed in such resolutions, all to the fullest extent now or hereafter permitted by the DGCL and any applicable Stockholders Agreement. Without limiting the generality of the +foregoing, the resolution or resolutions providing for the issuance of any series of Preferred Stock may provide that such series shall be superior or rank equally or be junior to any other series of +Preferred Stock to the extent permitted by law. +The +number of authorized shares of Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a +majority of the Voting Stock, irrespective of the provisions of Section 242(b)(2) of the DGCL. +SIXTH: Subject to any applicable Stockholders Agreement, the total number of directors of the Corporation shall be determined from time +to time +exclusively by resolution of the Board of Directors. Except as otherwise required by law and subject to any applicable Stockholders Agreement and the rights of any holders of any shares of Preferred +Stock, which may from time to time come into existence and be outstanding, any vacancies and newly created directorships shall be filled exclusively by the affirmative vote of a majority of the +Board of D d irectors then in office, even if less than a quorum. +No decrease in the number of directors shall shorten the term of any incumbent director. Unless and except to the extent that the Bylaws so provide, the election of directors need not be by written +ballot. +C-3 +Subject +to any applicable Stockholders Agreement and the rights of any holders of any shares of Preferred Stock which may from time to time come into existence and be outstanding, any director may +only be removed upon the affirmative vote of the holders of at least 66 2 / 3 % of the Voting Stock entitled to vote thereon. +SEVENTH: Special meetings of stockholders of the Corporation may be called only by the Board of Directors pursuant to a resolution +approved by the +Board of Directors; provided, however, that for so long as the ECP Stockholders (as defined in the Stockholders Agreement) collectively continue to beneficially own at least 20% of the Voting Stock, +the Secretary of the Corporation shall call a special meeting of stockholders upon the written request of the ECP Stockholders. Special meetings may not be called by any other person or persons. +Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice. +EIGHTH: In furtherance and not in limitation of the rights, powers, privileges and discretionary authority granted or conferred by the +DGCL or other +statutes or laws of the State of Delaware, the Board of Directors is expressly authorized to make, alter, amend or repeal the Bylaws whether adopted by them or otherwise, without any action on the +part of the stockholders. The stockholders may also make new bylaws or alter, amend or repeal the Bylaws (i) in addition to any other vote otherwise required by law, prior to the date the ECP +Stockholders cease to beneficially own in aggregate at least 50% of the Voting Stock entitled to vote thereon (the " Trigger Date "), by a majority of the +Voting Stock entitled to vote thereon, and (ii) in addition to any other vote otherwise require by law, from and after the Trigger Date, by the affirmative vote of the holders of at least +66 2 / 3 % of the Voting Stock entitled to vote thereon. +NINTH: The Corporation is authorized to indemnify, and to advance expenses to, each current, former or prospective director, officer, +employee or +agent of the Corporation to the fullest extent permitted by Section 145 of the DGCL as it now exists or may hereafter be amended (but, in the case of any +such amendment, only to the extent such amendment permits the Corporation to provide broader rights than permitted prior thereto). To the fullest extent permitted by the laws of the +State of Delaware DGCL as it now exists or may hereafter be amended, no director shall be liable to the Corporation or its stockholders for monetary +damages for breach of fiduciary duty as a director. No +amendment to, or modification or repeal of, this Article Ninth shall adversely affect any right or protection of a director of the Corporation existing hereunder with respect to any act or omission +occurring prior to such amendment, modification or repeal. +The +Corporation may maintain insurance, at its expense, to protect itself and any current, former or prospective director, officer, employee or agent of the Corporation or another +corporation, partnership, limited liability company, joint venture, trust, enterprise or nonprofit entity against any expense, liability or loss, whether or not the Corporation would have the power to +indemnify such person against such expense, liability or loss under the DGCL. To the extent that the Corporation maintains any policy or policies providing such insurance, each such current, former or +prospective director or officer, and each such agent or employee to which rights to indemnification have been granted as provided in the Bylaws or elsewhere, shall be covered by such policy or +policies in accordance with its or their terms to the maximum extent of the coverage thereunder for any such current, former or prospective director, officer, employee or agent. +TENTH: The Corporation shall, to the fullest extent permitted by the DGCL, as the same exists or may hereafter be amended and +supplemented (but, in +the case of any such amendment, only to the extent such amendment permits the Corporation to provide broader rights than permitted prior thereto), indemnify, advance expenses to +and hold harmless any person who was or is a director or officer of the Corporation or, while a director or officer of the Corporation, is or was serving at the request of the +Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, enterprise or nonprofit entity, including service with respect to +C-4 +employee +benefit plans, against all liability and loss suffered and expenses (including attorneys' fees) reasonably incurred by such person. Notwithstanding the preceding sentence, except with respect +to a proceeding to enforce such person's rights to indemnification or advancement of expenses pursuant to this Article TENTH, the Corporation shall be required to indemnify such persons in connection +with a proceeding (or part thereof) commenced by such person only if the commencement of such proceeding (or part thereof) by such person was authorized in the specific case by the Board of Directors. +The Corporation may, by action of the Board of Directors, provide rights to indemnification and to advancement of expenses to such other employees or agents of the Corporation or its subsidiaries to +such extent and to such effect as the Board of Directors shall determine to be appropriate and authorized by the DGCL. Any amendment, repeal or modification of this Article Tenth shall not adversely +affect any rights or protection existing hereunder immediately prior to such repeal or modification. +ELEVENTH: In recognition and anticipation that (i) the principals, officers, members, managers and/or employees of the ECP +Stockholders (as defined in the Shareholders Agreement) or their respective Affiliated Companies (as defined below) may serve as directors or officers of the Corporation, +(ii) the ECP Stockholders and their respective Affiliated Companies engage and may continue to engage in the same or similar activities or related lines of business as those in which the +Corporation, directly or indirectly, may engage and/or other business activities that overlap with or compete with those in which the Corporation, directly or indirectly, may engage, and +(iii) that the Corporation and its Affiliated Companies may engage in material business transactions with the ECP Stockholders and their respective Affiliated Companies, and that the +Corporation is expected to benefit therefrom, the provisions of this Article Eleventh are set forth to regulate and define the conduct of certain affairs of the Corporation as they may involve the ECP +Stockholders and/or their respective Affiliated Companies and/or their respective principals, officers, members, managers and/or employees, including any of the foregoing who serve as officers or +directors of the Corporation (collectively, the " Covered Persons "), and the powers, rights, duties and liabilities of the Corporation and its officers, +directors and stockholders in connection therewith. As used in this Amended and Restated Certificate of Incorporation, " Affiliated +Companies " shall mean (a) in respect of any of the ECP Stockholders, any entity that controls, is controlled by or is under common control +with such ECP Stockholder (other than the Corporation and any entity that is controlled by the Corporation) and any investment funds managed by Energy Capital +Partners and (b) in respect of the Corporation, any company entity company controlled by the Corporation. +To +the fullest extent permitted by law, none of the ECP Stockholders, any of their respective Affiliated Companies or any of their respective Covered Persons shall have any fiduciary +duty to refrain from (A) carrying on and conducting, whether directly, or as a partner in any partnership, or as a joint venturer in any joint venture, or as an officer, director or stockholder +of any corporation, or as a participant in any syndicate, pool, trust or association, any business of any kind, nature or description, whether or not such business is competitive with or in the same +or similar lines of business as the Corporation or its Affiliated Companies, (B) doing business with any client, customer, vendor or lessor of any of the Corporation or its Affiliated +Companies, or (C) making investments in any kind of property in which the Corporation may make investments. In the event that any of the ECP Stockholders, any of their respective Affiliated +Companies or any of their respective Covered Persons acquires knowledge of a potential transaction or matter which may constitute a corporate opportunity for both (1) (a) the Covered Person, in +his or her capacity with any of the ECP Stockholders or any of their respective Affiliated Companies, or (b) any of the ECP Stockholders or any of their respective Affiliated Companies and +(2) the Corporation or its Affiliated Companies, none of the ECP Stockholders, any of their respective Affiliated Companies or any of their respective Covered Persons shall, to the fullest +extent permitted by law, have any duty to offer or communicate information regarding such corporate opportunity to the Corporation or its Affiliated Companies. To the fullest extent permitted by law, +the Corporation and its Affiliated Companies hereby renounce, pursuant to +C-5 +Section 122(17) +of the DGCL, any interest or expectancy of the Corporation and its Affiliated Companies in any such corporate opportunity and waive any claim +against each of the ECP Stockholders, each of their respective Affiliated Companies and each of their respective Covered Persons and shall indemnify each of the ECP Stockholders, each of their +respective Affiliated +Companies and each of their respective Covered Persons against any claim that any ECP Stockholder, any of its respective Affiliated Companies or any of its respective Covered Persons is liable to the +Corporation, its Affiliated Companies or its stockholders for breach of any fiduciary duty, as a director, officer or stockholder of the Corporation or its Affiliated Companies, solely by reason of +the fact that any ECP Stockholder, any of its respective Affiliated Companies or any of its respective Covered Persons (x) pursues or acquires any corporate opportunity for its own account or +the account of any affiliate, (y) directs, recommends, sells, assigns, or otherwise transfers such corporate opportunity to another person or (z) does not communicate information +regarding such corporate opportunity to the Corporation or its Affiliated Companies. The Corporation shall pay in advance any expenses incurred in defense of any such +claim as provided in this Article Eleventh. +To +the fullest extent permitted by law, no potential transaction or business opportunity may be deemed to be a potential corporate opportunity of the Corporation or its Affiliated +Companies unless (i) the Corporation and its Affiliated Companies would be permitted to undertake such transaction or opportunity in accordance with this Amended and Restated +Certificate of Incorporation, (ii) the Corporation and its Affiliated Companies at such time have sufficient financial resources to undertake such transaction or opportunity and +(iii) such transaction or opportunity would be in the same or similar line of business in which the Corporation and its Affiliated Companies are then engaged or a line of business that is +reasonably related to, or a reasonable extension of, such line of business. +To +the fullest extent permitted by law, no Covered Person will be liable to the Corporation or its Affiliated Companies or stockholders for breach of any duty (at law or in equity, +contractual or otherwise) by reason of any activities or omissions of the types referred to in this Article Eleventh. +Any +person or entity purchasing or otherwise acquiring or holding any interest in any shares of capital stock of the Corporation shall be deemed to have notice of and to have consented +to the provisions of this Article Eleventh. +For +purposes of this Article Eleventh, the Corporation and its Affiliated Companies shall not be deemed Affiliated Companies of any of the ECP Stockholders. +In +addition to any vote required by applicable law, this Article Eleventh may not be amended, modified or repealed without the prior written consent of each of the ECP Stockholders. +TWELFTH: Any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual +or special +meeting of stockholders and, subject to the next sentence, may not be effected by any consent or consents in writing by stockholders. Notwithstanding the foregoing, until the Trigger Date, any action +required or permitted to be taken at any annual or special meeting of stockholders of the Corporation may be taken without a meeting, without prior notice and without a vote, if (A) a consent +or consents in writing, setting forth the action so taken, are signed by +the holders of outstanding shares of the relevant class(es) or series of stock of the Corporation representing not less than the minimum number of votes that would be necessary to authorize or take +such action at a meeting at which all shares of stock of the Corporation then issued and outstanding (other than treasury stock) entitled to vote thereon were present and voted and (B) the +action to be taken and the taking of the action by written consent are approved by the Board of Directors, including the directors designated by the ECP Stockholders. +THIRTEENTH: Unless the Corporation consent s in writing to the selection of an alternative forum, the Court of Chancery +of the State of Delaware shall, to the fullest extent permitted by law, be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the +C-6 +Corporation, +(ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer, employee or stockholder of the Corporation to the Corporation or the Corporation's +stockholders, (iii) any action asserting a claim against the Corporation arising pursuant to any provision of the DGCL or this Amended and Restated Certificate of +Incorporation or the Bylaws or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware, or (iv) any action asserting a claim against the Corporation governed +by the internal affairs doctrine, in each such case subject to said Court of Chancery having personal jurisdiction over the indispensable parties named as defendants therein. Any person or entity +purchasing or otherwise acquiring or holding any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of this Article Thirteenth. +FOURTEENTH: From time to time, any of the provisions of this Amended and Restated Certificate of Incorporation may be +amended, altered, changed or repealed, and other provisions authorized by the laws of the State of Delaware at the time in force may be added or inserted in the manner and at the time prescribed by +said laws, and all rights at any time conferred upon the stockholders or directors of the Corporation by this Amended and Restated +Certificate of Incorporation are granted subject to the provisions of this Article Fourteenth. The Corporation reserves the right to amend, alter, change or repeal any provision +contained in this Amended and Restated Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon +stockholders herein are granted subject to this reservation. Notwithstanding any other provision of this Certificate of Incorporation, and notwithstanding the +fact that a lesser percentage or separate class vote may be specified by law or otherwise, but in addition to any affirmative vote of the holders of any particular class or series of the capital stock +required by law or otherwise, no provision of this Certificate of Incorporation may be altered, amended or repealed in any respect, nor may any provision of this Certificate of Incorporation or the +Bylaws inconsistent therewith be adopted, unless, in addition to any other vote required by this Certificate of Incorporation or otherwise required by law, such alteration, amendment, repeal or +adoption is approved, (i) prior to the Trigger Date, by the affirmative vote of the +holders of a majority of the outstanding Voting Stock entitled to vote thereon, and (ii) from and after the Trigger Date, by the holders of at least 66 2 / 3 % of the outstanding +Voting Stock entitled to vote thereon. +FIFTEENTH: The Corporation elects not to be governed by Section 203 of the DGCL. +SIXTEENTH: The name of the incorporator is Dale Redman (the +" Incorporator "). The address of the Incorporator is 1706 S Midkiff +Building B, Midland, Texas 79701. +IN +WITNESS WHEREOF, ProPetro Holding Corp. has caused this Amended and Restated Certificate of Incorporation to be executed by its Chief Executive Officer this +[ • ], 2019. +Dale Redman +Chief Executive Officer +C-7 +PROPETRO HOLDING CORP. PROXY FOR ANNUAL MEETING TO BE HELD ON JUNE 14, 2019 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS The undersigned stockholder hereby appoints each of Dale Redman and Jeffrey Smith as attorney and proxy for the undersigned, with the power to appoint his substitute, to represent and to vote all the shares of common stock of PROPETRO HOLDING CORP. (the “Company”), which the undersigned would be entitled to vote, at the Company’s Annual Meeting of Stockholders to be held at 2518 FM 307, Midland, Texas 79706 on Friday, June 14, 2019 at 9:00 A.M. Central Time and at any postponements, continuations or adjournments thereof (the “Annual Meeting”). In their discretion, the proxies are authorized to vote upon (i) the election of any person to the Board of Directors if any nominee named herein becomes unable to serve or for good cause will not serve, (ii) any matter that the Board of Directors of the Company did not know would be presented at the Annual Meeting by a reasonable time before the proxy solicitation was made and (iii) any other matter that may properly come before the Annual Meeting or any postponements, continuations or adjournments thereof. This proxy, when properly executed, will be voted in the manner directed on the reverse side by the undersigned stockholder. If no direction is made, this proxy will be voted “FOR” all nominees set forth in Proposal 1, “FOR” PROPOSALS 2, 3, 4, 5 and 7 and “ONE YEAR” for Proposal 6. PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE. (IMPORTANT — This Proxy must be signed and dated on the reverse side.) PLEASE DETACH ALONG PERFORATED LINE AND MAIL IN THE ENVELOPE PROVIDED. Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be held June 14, 2019. The Proxy Statement and our 2018 Annual Report to Stockholders are available at: http://www.viewproxy.com/propetro/2019 +Please mark your votes like this The Board of Directors recommends a vote FOR Proposals 2, 3, 4, 5 and 7. The Board of Directors recommends a vote of ONE YEAR for Proposal 6. 2. To approve an amendment of the Company’s Certificate of Incorporation to remove inoperative provisions related to the Company’s former majority stockholder. FORAGAINSTABSTAIN 3. To approve an amendment of the Company’s Certificate of Incorporation to remove the supermajority voting requirement for stockholders to amend the Company’s Bylaws. The Board of Directors recommends a vote FOR all nominees in Proposal 1. Vote on Proposals 1. Election of Directors Vote FOR all nominees (except as marked) Vote WITHHELD from all nominees 01 Dale Redman 06 Pryor Blackwell 07 Alan E. Douglas 08 Royce W. Mitchell 09 Jack B. Moore 02 Spencer D. Armour, III 03 Steven Beal 04 Mark S. Berg 05 Anthony Best FORAGAINSTABSTAIN 4. To approve an amendment of the Company’s Certificate of Incorporation to remove the supermajority voting requirement for stockholders to amend the Company’s Certificate of Incorporation. FORAGAINSTABSTAIN 5. To approve, on a non-binding advisory basis, the Company’s named executive officer compensation. FORAGAINSTABSTAIN 6. To approve an advisory vote on the frequency of future advisory votes on executive compensation. ONE YEARTWO YEARS THREE YEARSABSTAIN 7. To ratify the appointment of Deloitte & Touche LLP to serve as the Company’s independent registered public accounting firm for the year ending December 31, 2019. INSTRUCTION: To withhold authority to vote for any indicated nominee, write the number(s) of the nominee(s) in the space provided below. FORAGAINSTABSTAIN Date Address Change/Comments: (If you noted any Address Changes and/or Comments above, please mark box.) CONTROL NUMBER Please indicate if you plan to attend this meeting Signature(s) NOTE: Please mark, date and sign this proxy card and return it in the accompanying envelope. Please sign as your name appears hereon. If shares are registered in more than one name, all owners should sign. If signing in a fiduciary or representative capacity, please give full title and attach evidence of authority. Corporations please sign with full corporate name by a duly authorized officer and affix corporate seal. PLEASE DETACH ALONG PERFORATED LINE AND MAIL IN THE ENVELOPE PROVIDED. PROPETRO HOLDING CORP. As a stockholder of ProPetro Holding Corp., you have the option of voting your shares electronically through the Internet or on the telephone, eliminating the need to return the proxy card. Your electronic vote authorizes the named proxies to vote your shares in the same manner as if you marked, signed, dated and returned the proxy card. Votes submitted electronically over the Internet or by telephone must be received by 11:59 p.m., Eastern Time, on June 13, 2019. CONTROL NUMBER PROXY VOTING INSTRUCTIONS Please have your 11-digit control number ready when voting by Internet or Telephone If you vote your proxy by Internet or by Telephone, you do NOT need to mail back your Proxy Card. MAIL Vote Your Proxy by Mail: Mark, sign, and date your proxy card, then detach it, and return it in the postage-paid envelope provided. TELEPHONE Vote Your Proxy by Phone: Call 1 (866) 804-9616 Use any touch-tone telephone to vote your proxy. Have your proxy card available when you call. Follow the voting instructions to vote your shares. INTERNET Vote Your Proxy on the Internet: Go to www.AALVote.com/PUMP Have your proxy card available when you access the above website. Follow the prompts to vote your shares. DO NOT PRINT IN THIS AREA (Stockholder Name & Address Data) +QuickLinks +YOUR VOTE IS IMPORTANT +QUESTIONS AND ANSWERS +Proposal 1 ELECTION OF DIRECTORS +Nominees +CORPORATE GOVERNANCE +REPORT OF THE AUDIT COMMITTEE +COMPENSATION DISCUSSION AND ANALYSIS +REPORT OF THE COMPENSATION COMMITTEE +EXECUTIVE COMPENSATION +SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT +PROPOSAL 2 REMOVAL OF INOPERATIVE PROVISIONS IN THE COMPANY'S CERTIFICATE OF INCORPORATION +PROPOSAL 3 REMOVAL OF SUPERMAJORITY VOTING PROVISION IN THE COMPANY'S CERTIFICATE OF INCORPORATION TO AMEND THE BYLAWS +PROPOSAL 4 REMOVAL OF SUPERMAJORITY VOTING PROVISION IN THE COMPANY'S CERTIFICATE OF INCORPORATION TO AMEND THE CERTIFICATE OF INCORPORATION +PROPOSAL 5 ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION +PROPOSAL 6 ADVISORY VOTE ON THE FREQUENCY OF FUTURE ADVISORY VOTES ON EXECUTIVE COMPENSATION +PROPOSAL 7 RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM +OTHER MATTERS +Appendix A +AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF PROPETRO HOLDING CORP. (as amended and restated on [ • ], 2019 March 16, 2017 ) +Appendix B +Appendix C \ No newline at end of file diff --git a/raw/proxies/0001680247/0001047469-19-002506/proxy_rpt.txt b/raw/proxies/0001680247/0001047469-19-002506/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..cc639a10890d2d3202ef3bbe84dfcee82bcb0603 --- /dev/null +++ b/raw/proxies/0001680247/0001047469-19-002506/proxy_rpt.txt @@ -0,0 +1,42 @@ +Certain Relationships and Related Party Transactions +Related Party Transactions +We lease our corporate offices from PD Properties, an entity owned by Dale Redman, pursuant to a five-year lease agreement with a five-year +extension option requiring a base rent of $72,000 per year. We also lease five properties adjacent to the corporate office from South Midkiff Partners LLC, an entity owned jointly by Dale +Redman, David Sledge, Spencer Armour and Jeff Smith, with annual base rents of $30,000, $30,000, $90,000, $90,000 and $180,000. +We +paid Dale Redman, our Chief Executive Officer, $393,034 for the year ended December 31, 2018, for reimbursement of costs incurred through use of his aircraft. +We +rent certain flowback equipment from PD Properties, an entity owned by Dale Redman, our Chief Executive Officer. For the year ended December 31, 2017, we paid $192,000 under +this lease. +We +lease a property adjacent to our corporate headquarters from Industrial Loop Partners, LLC, an entity wholly owned by an affiliate of Bandera Ventures. For the year ended +December 31, 2018, we paid $345,250 under the lease. The lease has a remaining term of approximately six years. Mr. Blackwell, one of our directors, through his approximately 33% +interest in Bandera Ventures, may be deemed an indirect beneficiary of this lease. +Jordan +Frosch is our Sales Manager and the son-in-law of Dale Redman. Mr. Frosch received total compensation of approximately $530,511 for his services for the year ended +December 31, 2018. +Sam +Sledge is our Investor Relations Director and the son of David Sledge. Sam Sledge received total compensation of approximately $717,481 for his services for the year ended +December 31, 2018. +Morgan +Stovall is our Corporate Controller and the daughter of Jeffrey Smith. Ms. Stovall received total compensation of approximately $338,873 for her services for the year ended +December 31, 2018. +In +November 2017, we entered into a five-year extension to an existing sand supply agreement to provide Texas-sourced frac sand ("Texas sand"), which is in high demand from our +customers. Texas sand provided under the supply agreement will primarily be sourced from a mine located on land owned by an oil and gas exploration company in which our Chief Executive Officer, Dale +Redman, owns a 44% interest. Accordingly, Mr. Redman may be considered an indirect beneficiary of payments made under the lease between our supplier and the landowner. The supply agreement was +negotiated by officers of the Company without the involvement of Mr. Redman, and reviewed and approved by the Audit Committee pursuant to its authority under our Related Party Transactions +Policy. In considering the approval of the supply agreement, the Audit Committee retained independent legal and commercial expertise to assist in the evaluation of the agreement's commercial terms. +Following its evaluation, the Audit Committee determined that the pricing and other provisions of the agreement reflected market terms, that the agreement reflected an arm's length negotiation, and +that entry into the agreement was advisable and in the best interests of the Company. For the year ended December 31, 2018, the Company purchased $10,300,000 of Texas sand under the supply +agreement, and Mr. Redman was an indirect beneficiary of approximately $300,000 in royalty payments. +Policies and Procedures for Related Party Transactions +Any request for us to enter into a transaction with an executive officer, director, principal stockholder or any of such persons' immediate +family members or affiliates, among others, in which the amount involved exceeds $120,000, must first be presented to our Audit Committee for review, consideration and approval. All of our directors +and executive officers are required to report to the +42 +Audit +Committee chair any such related person transaction. In approving or rejecting the proposed agreement, our Audit Committee shall consider the facts and circumstances available and deemed +relevant to the Audit Committee, including, but not limited to, whether the transaction is on terms comparable to those that could be obtained in arm's-length dealings with an unrelated third party, +the extent of the related party's interest in the transaction and the conflicts of interest and corporate opportunity provisions of our certificate of incorporation. If we should discover related +person transactions that have not been approved, the Audit Committee will be notified and will determine the appropriate action, including ratification, revision or termination of such transaction. \ No newline at end of file diff --git a/raw/proxies/0001680247/0001104659-21-041952/proxy.txt b/raw/proxies/0001680247/0001104659-21-041952/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..cc53587124fcb1b3fc52e9155d03364fc21dc046 --- /dev/null +++ b/raw/proxies/0001680247/0001104659-21-041952/proxy.txt @@ -0,0 +1,2857 @@ +DEF 14A +1 +tm2110700-1_def14a.htm +DEF 14A +tm2110700-1_def14a - none - 11.0625566s +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +Washington, D.C. 20549 +SCHEDULE 14A +Proxy Statement Pursuant to Section 14(a) of +the Securities Exchange Act of 1934 (Amendment No.    ) +Filed by the Registrant ☒ +Filed by a Party other than the Registrant ☐ +Check the appropriate box: +☐ +Preliminary Proxy Statement +☐ +Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +☒ +Definitive Proxy Statement +☐ +Definitive Additional Materials +☐ +Soliciting Material under §240.14a-12 +ProPetro Holding Corp. +(Name of Registrant as Specified In Its Charter) +(Name of Person(s) Filing Proxy Statement, if other than the Registrant) +Payment of Filing Fee (Check the appropriate box): +☒ +No fee required. +☐ +Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. +(1) +Title of each class of securities to which transaction applies: +(2) +Aggregate number of securities to which transaction applies: +(3) +Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): +(4) +Proposed maximum aggregate value of transaction: +(5) +Total fee paid: +☐ +Fee paid previously with preliminary materials. +☐ +Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. +(1) +Amount Previously Paid: +(2) +Form, Schedule or Registration Statement No.: +(3) +Filing Party: +(4) +Date Filed: +ProPetro Holding Corp. +1706 S. Midkiff +Midland, Texas 79701 +NOTICE OF ANNUAL MEETING OF STOCKHOLDERS +To Be Held May 17, 2021 +Dear Stockholders: +We cordially invite you to attend the 2021 annual meeting of stockholders of ProPetro Holding Corp., a Delaware corporation (“ProPetro,” “we,” “our” or the “Company”) to be held May 17, 2021 at 10:00 a.m. (Central time). In light of the public health impact of the coronavirus, or COVID-19, outbreak and taking into account federal, state and local guidance that has been issued, ProPetro has determined that the annual meeting will be held in a virtual-only meeting format, with log-in beginning at 9:45 a.m. (Central time). At the meeting, we will ask stockholders to: +1. +Elect the eight directors named in the proxy statement to the Board of Directors; +2. +Approve on an advisory basis our named executive officers’ compensation; +3. +Ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2021; and +4. +Transact any other business as may properly come before the meeting. +Stockholders who owned our common stock at the close of business on March 22, 2021 are entitled to notice of, and to vote at, the annual meeting, or any continuation, postponement or adjournment thereof. A stockholders’ list will be available at our offices at 1706 S. Midkiff, Midland, Texas 79701 for a period of ten days prior to the meeting and on the virtual meeting website for the duration of the meeting. +The annual meeting will be completely virtual and conducted via live audio webcast because of the public health impact of the COVID-19 pandemic to enable our stockholders to participate from any location around the world that is convenient to them. You will be able to attend the meeting by first registering at http://www.viewproxy.com/propetro/2021. You will receive a meeting invitation by email with your unique join link along with a password prior to the meeting date. Stockholders will be able to listen, vote and submit questions. We believe that hosting a virtual meeting provides expanded access, improved communication and cost savings for our stockholders and the Company. You may vote during the meeting by following the instructions that will be available on the virtual meeting website during the meeting. +If you hold your shares beneficially through a bank or broker, you must provide a legal proxy from your bank or broker during registration and you will be assigned a virtual control number in order to vote your shares during the annual meeting. If you are unable to obtain a legal proxy to vote your shares, you will still be able to attend the 2021 annual meeting (but will not be able to vote your shares) so long as you demonstrate proof of stock ownership. Instructions on how to connect and participate via the Internet, including how to demonstrate proof of stock ownership, are posted at http://www.viewproxy.com/propetro/2021. On the day of the annual meeting, you may only vote during the meeting by emailing a copy of your legal proxy to virtualmeeting@viewproxy.com in advance of the meeting. +Your vote is important. Regardless of whether you plan to attend the virtual meeting, we urge you to vote your shares via the toll-free telephone number or over the Internet, as described in the enclosed materials. If you received a copy of the proxy card by mail, you may sign, date and mail the proxy card in the enclosed return envelope. The prompt return of proxies will ensure a quorum and save us the expense of further solicitation. +By order of the Board of Directors, +Newton W. Wilson III +General Counsel and Corporate Secretary +March 26, 2021 +YOUR VOTE IS IMPORTANT +Your vote is important. We urge you to review the accompanying proxy statement carefully and to submit your proxy as soon as possible so that your shares will be represented at the meeting. +ProPetro Holding Corp. +1706 S. Midkiff +Midland, Texas 79701 +PROXY STATEMENT +INFORMATION CONCERNING SOLICITATION AND VOTING +Our Board of Directors (the “Board”) is soliciting proxies for the 2021 annual meeting of stockholders to be held on May 17, 2021 at 10:00 a.m. (Central Time), via a virtual-only meeting format, and at any continuations, adjournments or postponements of the meeting. This proxy statement contains important information for you to consider when deciding how to vote on the matters brought before the meeting. Please read it carefully. +We will pay the costs of soliciting proxies from stockholders. Our directors, officers and regular employees may solicit proxies on behalf of us, without additional compensation, personally or by telephone. We will also request that brokers, nominees, custodians and other fiduciaries forward soliciting materials to the beneficial owners of shares held by such brokers, nominees, custodians and other fiduciaries. We will reimburse such persons for their reasonable expenses in connection therewith. +This proxy statement and our Annual Report on Form 10-K to stockholders for the year ended December 31, 2020 will be mailed on or about March 26, 2021 to our stockholders on the record date. +IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON MAY 17, 2021. +This proxy statement and our 2020 Annual Report on Form 10-K to stockholders are each available at http://www.viewproxy.com/propetro/2021. Stockholders may receive directions to attend the virtual meeting by calling 1 (866) 612-8937 or by e-mailing virtualmeeting@viewproxy.com. +QUESTIONS AND ANSWERS +Q: +Who can attend and vote at the meeting? +A: +The Board set March 22, 2021 as the record date for the meeting. You can attend and vote at the meeting if you were a holder of our common stock at the close of business on the record date, March 22, 2021, or if you are a holder of a valid proxy for the meeting. +Q: +How do I attend the meeting? +A: +To attend the annual meeting, you must register in advance at http://www.viewproxy.com/propetro/ 2021 by May 15, 2021 at 11:59 pm. +Stockholders of Record . If you are a stockholder of record or an appointed proxyholder of a stockholder of record, follow the instructions on the meeting website and enter the 11-digit control number found on your proxy card or voting instruction form you previously received along with the meeting password in order to be admitted to the meeting. You may vote during the meeting by following the instructions that will be available on the virtual meeting website during meeting. +Beneficial Holders . If you are a beneficial holder, meaning you hold your shares through a broker, bank or other nominee, you must provide a legal proxy from your bank or broker during registration and you will be assigned a virtual control number in order to vote your shares during the annual meeting. If you are unable to obtain a legal proxy to vote your shares, you will still be able to attend the 2021 annual meeting (but will not be able to vote your shares) so long as you demonstrate proof of stock ownership. Instructions on how to connect and participate via the Internet, including how to demonstrate proof of stock ownership, are posted at http://www.viewproxy.com/propetro/2021. You may only vote during the meeting by emailing a copy of your legal proxy to virtualmeeting@viewproxy.com in advance of the meeting. +1 +If you experience any technical difficulties during the check-in time or during the annual meeting or trouble accessing the annual meeting’s website, please call (US) 1 (866) 612-8937 or (international) 1 (973) 873-7684. You can also e-mail virtualmeeting@viewproxy.com for assistance. +Q: +What proposals will be voted on at the meeting? +A: +Three proposals are scheduled to be voted upon at the meeting. At the meeting we will ask stockholders to: +• +Elect the eight directors named in this proxy statement as members of the Board to serve until our 2022 annual meeting of stockholders; +• +Approve on an advisory basis our named executive officers’ compensation; and +• +Ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2021. +Q: +Why did I receive a Notice of Internet Availability of Proxy Materials? +A: +As permitted by the rules of the United States Securities and Exchange Commission (the “SEC”), we are making this proxy statement and our 2020 annual report to stockholders available electronically via the Internet. On or about March 26, 2021, we mailed to our stockholders a Notice of Internet Availability of Proxy Materials (the “Internet Notice”) containing instructions on how to access this proxy statement and our 2020 annual report and vote online. If you received an Internet Notice by mail, you will not receive a printed copy of the proxy materials in the mail unless you specifically request them. Instead, the Internet Notice instructs you on how to access and review all of the important information contained in the proxy statement and 2020 annual report. The Internet Notice also instructs you on how you may submit your proxy over the Internet. If you received an Internet Notice by mail and would like to receive a printed copy of our proxy materials, you should follow the instructions for requesting such materials contained on the Internet Notice. +Q: +How do I cast my vote? +A: +We recommend that stockholders vote by proxy even if they plan to attend the virtual annual meeting and vote during the meeting. If you are a stockholder of record, there are three ways to vote by proxy: +• +by Telephone — You can vote by telephone by calling 1 (866) 804-9616 and following the instructions on the proxy card; or +• +by Internet — You can vote over the Internet at www.AALVote.com/PUMP by following the instructions on the Internet Notice or proxy card; or +• +by Mail — You can vote by mail by signing, dating and mailing the proxy card, which you may have received by mail. +• +Telephone and Internet voting facilities for stockholders of record will be available 24 hours a day and will close at 11:59 p.m., Eastern Time, on May 16, 2021. +In the event that you submit a proxy but do not indicate any voting instructions, your shares will be voted as recommended by the Board on all matters, and in the discretion of the proxy holders as to any other matters that may properly come before the meeting or any continuation, postponement or adjournment of the meeting. We do not know of any other business to be considered at the meeting other than the proposals noted herein. +If your shares are registered in the name of a broker, bank or other nominee (typically referred to as being held in “street name”), you will receive instructions from your broker, bank or other nominee that must be followed in order for your broker, bank or other nominee to vote your shares per your instructions. Many brokerage firms and banks have a process for their beneficial holders to provide instructions via the Internet or over the telephone. If Internet or telephone voting is unavailable from your broker, bank or other nominee, please complete and return the voting instruction card in the addressed, postage paid envelope provided by your broker, bank or other nominee. +2 +In the event you do not provide instructions on how to vote, your broker may have authority to vote your shares. Under the rules that govern brokers who are voting with respect to shares that are held in street name, brokers have the discretion to vote such shares on “routine” matters, but not on non-routine matters. The only “routine” matter to be voted upon at the meeting is the ratification of the appointment of independent auditors. +Your vote is especially important . If your shares are held by a broker, your broker cannot vote your shares for the election of directors or the non-binding advisory vote on our executive officer compensation unless you provide voting instructions. Therefore, please instruct your broker regarding how to vote your shares on these matters promptly . See “Vote Required” following each proposal for further information. +If you hold shares through a broker, bank or other nominee and wish to be able to vote during the meeting, you must obtain a legal proxy from your broker, bank or other nominee and provide such legal proxy during registration, and you will be assigned a virtual control number in order to vote your shares during the annual meeting. You may only vote during the meeting by emailing a copy of your legal proxy to virtualmeeting@viewproxy.com in advance of the meeting. +Q: +Can I revoke or change my proxy? +A: +Yes. You may revoke or change a previously delivered proxy at any time before the meeting by delivering another proxy with a later date, by voting again via the Internet or by telephone, or by delivering written notice of revocation of your proxy to our General Counsel and Corporate Secretary at our principal executive offices before the beginning of the meeting. You may also revoke your proxy by attending the virtual meeting and voting during the meeting, although attendance at the meeting will not, in and of itself, revoke a valid proxy that was previously delivered. If you hold shares through a broker, bank or other nominee, you must contact that nominee to revoke any prior voting instructions. You also may revoke any prior voting instructions by voting during the virtual meeting if you obtain a legal proxy as described above. +Q: +How does the Board recommend I vote on the proposals? +A: +The Board recommends you vote (i) “FOR” each of the eight nominees named in this proxy statement to our Board, (ii) “FOR” the advisory approval of our named executive officers’ compensation and (iii) “FOR” the ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2021. +Q: +Can I ask questions before or during the annual meeting? +A: +Stockholders who wish to submit a question in advance may do so at http://www.viewproxy.com/ propetro/2021. Stockholders also may submit questions live during the annual meeting. The Company is committed to transparency. All questions received before or during the annual meeting, and the Company’s responses, will be posted to our Investor Relations website at https://ir.propetroservices.com/ promptly after the annual meeting. Personal details may be omitted for data protection purposes. If we receive substantially similar questions, we may group these questions together and provide a single response to avoid repetition. +Q: +Who will count the vote? +A: +The inspector of election will count the vote. Alliance Advisors will act as the inspector of election. +Q: +What is a “quorum?” +A: +A quorum is the number of shares that must be present to hold the meeting. The quorum requirement for the meeting is a majority of the outstanding shares as of the record date, present online or represented by proxy. A stockholder will be considered present at the virtual annual meeting by logging in to the annual meeting using their unique control number and meeting password or by appointing a proxy. Your shares will be counted for purposes of determining if there is a quorum if you are present and vote during the meeting; or have voted on the Internet, by telephone or by properly submitting a proxy card or voting instruction card by mail. +3 +Votes withheld, abstentions and broker non-votes (discussed below) are counted as present and entitled to vote for purposes of determining a quorum. +Q: +What happens if there is not a quorum at the meeting? +A: +Pursuant to our bylaws, the meeting may be adjourned by a majority of the shares represented at the meeting to reconvene at the same or some other place. If the adjournment is for more than 30 days, or if after the adjournment a new record date is fixed for the adjourned meeting, notice of the adjournment shall be given to each stockholder of record entitled to vote at the meeting. If the adjournment is for less than 30 days, no additional notice will be delivered. +Q: +What is an abstention and how will votes withheld and abstentions be treated? +A: +A “vote withheld,” in the case of the proposal regarding the election of directors, or an “abstention,” in the case of the proposals regarding the advisory approval of our named executive officers’ compensation and the ratification of the appointment of our independent registered public accounting firm, represent a stockholder’s affirmative choice to decline to vote on a proposal. Votes withheld have no effect on the election of directors. Abstentions have the effect of a vote “AGAINST” in the case of the advisory approval of our named executive officers’ compensation and the ratification of the appointment of our independent registered public accounting firm. +Q: +What are broker non-votes and how will they be treated? +A: +Generally, broker non-votes occur when shares held by a broker in “street name” for a beneficial owner are not voted with respect to a particular proposal because the broker (1) has not received voting instructions from the beneficial owner and (2) lacks discretionary voting power to vote those shares. A broker is entitled to vote shares held for a beneficial owner on “routine” matters, such as the ratification of the appointment of our independent registered public accounting firm, without instructions from the beneficial owner of those shares. On the other hand, absent instructions from the beneficial owner of such shares, a broker is not entitled to vote shares held for a beneficial owner on non-routine matters, such as the election of directors and the advisory approval of our named executive officers’ compensation. Broker non-votes will have no effect on the election of directors or the advisory approval of our named executive officers’ compensation. +Q: +What vote is required to approve each item? +A: +The following table sets forth the voting requirement with respect to each of the proposals: +Proposal 1 — Election of members of the Board. +The plurality of the votes cast. This means that the eight nominees receiving the highest number of affirmative “FOR” votes will be elected as directors. +Proposal 2 — Approval on an advisory basis of our named executive officers’ compensation. +The affirmative “FOR” vote of the holders of a majority of the shares represented at the meeting, online or by proxy, and entitled to vote. +Proposal 3 — Ratification of appointment of independent registered public accounting firm. +The affirmative “FOR” vote of the holders of a majority of the shares represented at the meeting, online or by proxy, and entitled to vote. +Q: +What does it mean if I get more than one Internet Notice or more than one set of proxy materials? +A: +Your shares are probably registered in more than one account. Please vote all of your shares. To ensure that all of your shares are voted, for each Internet Notice or set of proxy materials, please submit your proxy by phone, via the Internet, or, if you received printed copies of the proxy materials, by signing, dating and returning the enclosed proxy card in the enclosed envelope. +4 +Q: +How many votes can I cast? +A: +On all matters you are entitled to one vote per share of common stock that you held as of the record date. +Q: +Where can I find the voting results of the meeting? +A: +The preliminary voting results will be announced at our annual meeting. The final results will be published in a current report on Form 8-K to be filed by us with the SEC within four business days of our annual meeting. +5 +PROPOSAL 1 +ELECTION OF DIRECTORS +At the 2021 annual meeting, eight directors are to be elected. All nominees are currently directors. Each director is to hold office until the next annual meeting of stockholders or until his or her successor is elected and qualified. Directors hold office until their successors have been elected or qualified or until their earlier death, resignation, removal or disqualification. The following table shows information for the directors as of March 6, 2021. +The nominees have consented to being nominated and have expressed their intention to serve if elected. We believe that the nominees possess the professional and personal qualifications necessary for board service and have highlighted particularly noteworthy attributes for the nominees in their biographies below. We have no reason to believe that the nominees will be unable to serve if elected to office, and, to our knowledge, the nominees intend to serve the entire term for which election is sought. In the event any of the nominees should become unable to serve, or for good cause will not serve, as a director, it is intended that votes will be cast for a substitute nominee designated by the Board or the Board may elect to reduce its size. Only the nominees or substitute nominees designated by the Board will be eligible to stand for election as directors at the meeting. +In 2018, we entered into an investor rights agreement (the “Investor Rights Agreement”) with an affiliate of Pioneer Natural Resources Company (“Pioneer”) that provides Pioneer certain rights to designate nominees for election to the Board. Under the Investor Rights Agreement, Pioneer was granted (i) the one-time right to designate an independent director to the Board and (ii) the right to designate a non-independent director to the Board for so long as a certain affiliate of Pioneer owns 5% or more of our outstanding common stock. Pioneer has designated Mark S. Berg as the non-independent director and previously designated Royce W. Mitchell as the independent director. Mr. Mitchell resigned from the Board in July 2019, and Pioneer has no further rights to designate an independent director to the Board. +Nominees +All of the current members of the Board are listed in the following table, and certain information concerning those directors follows the table: +Name +Age +Position with ProPetro +Holding Corp. +Director +Since +Nominating +and Corporate +Governance +Committee +Audit +Committee +Compensation +Committee +Phillip A. Gobe +68 +Chief Executive Officer +and Chairman of the Board +2019 +Spencer D. Armour III +67 +Director +2013 +Member +Mark S. Berg +62 +Director +2019 +Anthony J. Best (4) +71 +Lead Independent Director +2018 +Chair +Member +Michele V. Choka (5) +61 +Director +2020 +Member +Chair +Alan E. Douglas +62 +Director +2017 +Member +Member +G. Larry Lawrence +69 +Director +2020 +Member +Jack B. Moore (6) +67 +Director +2017 +Chair +Member +Phillip A. Gobe +Phillip A. Gobe began serving as our Chairman of the Board in July of 2019. Mr. Gobe has served as Chief Executive Officer since March 13, 2020 and prior to that as our Executive Chairman since October 2019. Mr. Gobe has served as a director of Pioneer since July 2014. Mr. Gobe also serves as a director of Pantheon Resources plc and previously served as a director of Scientific Drilling International and Pioneer Southwest Energy Partners L.P. Mr. Gobe joined Energy Partners, Ltd. as Chief Operating Officer in December 2004 and became President in May 2005, and served in those capacities until his retirement in September 2007. +6 +Mr. Gobe also served as a director of Energy Partners, Ltd. from November 2005 until May 2008. Prior to that, Mr. Gobe served as Chief Operating Officer of Nuevo Energy Company from February 2001 until its acquisition by Plains Exploration & Production Company in May 2004. Prior to that time, he held numerous operations and human resources positions with Vastar Resources, Inc. and Atlantic Richfield Company and its subsidiaries. Mr. Gobe has a Bachelor of Arts degree from the University of Texas and a Master of Business Administration degree from the University of Louisiana in Lafayette. Mr. Gobe’s extensive experience in the energy industry, including service as a director to public corporations in the industry, makes him well suited to serve as Chief Executive Officer and Chairman of the Board of Directors. +Spencer D. Armour III +Spencer D. Armour III has served as a member of our Board since February 2013. Mr. Armour has over 30 years of executive and entrepreneurial experience in the energy services industry. Mr. Armour served as President of PT Petroleum LLC in Midland, Texas from 2011 to 2018. He was the Vice President of Corporate Development for Basic Energy Services, Inc. from 2007 to 2008, which acquired Sledge Drilling Corp., a company Mr. Armour co-founded and served as Chief Executive Officer from 2005 to 2006. From 1998 through 2005, he served as Executive Vice President of Patterson-UTI Energy, Inc., which acquired Lone Star Mud, Inc., a company Mr. Armour founded and served as President from 1986 to 1997. Mr. Armour also served on the board of Patterson-UTI Energy, Inc. from 1999 to 2001. He currently serves on the board of Viper Energy Partners, LP and the board of CES Energy Solutions Corp and is a partner at Geneses Investments. Mr. Armour received a B.S. in Economics from the University of Houston in 1977 and served on the University of Houston System Board of Regents from 2011 until 2018. We believe that Mr. Armour’s extensive experience in the energy services industry and his deep knowledge of industry dynamics within the Permian Basin make him well suited to serve as a director. +Mark S. Berg +Mark. S. Berg has served as a member of our Board since February 2019, and he was appointed to the Board by Pioneer pursuant to the Investor Rights Agreement. Mr. Berg currently serves as the Executive Vice President, Corporate Operations for Pioneer, where he serves on the Management Committee and oversees Business Development, Land, Water Management and Well Services, Government Affairs and Corporate Communications, Environmental and Sustainable Development and Facilities. Mr. Berg has fifteen years of experience with Pioneer in various roles, including as Executive Vice President & General Counsel from April 2005 to January 2014, Executive Vice President, Corporate from January 2014 to August 2015, and as Executive Vice President, Corporate/Vertically Integrated Operations until assuming his current role. He began his career in 1983 with the Houston-based law firm Vinson & Elkins L.L.P. and served as a partner from 1990 through 1997. He served as Executive Vice President, General Counsel and Secretary of American General Corporation, a Fortune 200 diversified financial services company, from 1997 through 2001. Subsequent to the sale of American General to American International Group, Mr. Berg was appointed Senior Vice President, General Counsel and Secretary of Hanover Compressor Company, a NYSE company specializing in natural gas compression and processing. Mr. Berg received his Juris Doctor, with honors, from the University of Texas School of Law, and graduated magna cum laude and Phi Beta Kappa with a Bachelor of Arts in Public Policy from Tulane University. Mr. Berg served as a member of the board of directors of HighPoint Resources Corporation from March 2018 to June 2020. We believe that Mr. Berg’s experience in significant management roles with Pioneer and his broad experience in the energy industry make him well suited to serve as a director. +Anthony J. Best +Anthony J. Best has served as a member of our Board since January 2018 and was elected to serve as Lead Independent Director in October 2019. Mr. Best has over 40 years of experience in the energy industry. Mr. Best is currently the Chairman of the board of Newpark Resources, is a director on the board of a Quantum Energy Partners (“Quantum”) portfolio company, ExL Petroleum, and has served as a Senior Advisor for Quantum since August 2015. Prior to joining Quantum, Mr. Best served in various roles with SM Energy Company, an oil and gas exploration company, commencing in 2006 as its President and Chief Operating Officer, and as its Chief Executive Officer from February 2007 through January 2015. From 2003 to 2005, Mr. Best served as President and Chief Executive Officer of Pure Resources, Inc., a Unocal +7 +development and exploration company. From 2000 to 2003, Mr. Best served as an independent consultant offering leadership and oil and gas consultation to energy companies and volunteer organizations, and from 1979 through 2000, Mr. Best served in various roles of increasing responsibility at Atlantic Richfield Company, culminating in the position of President, ARCO Latin America. Mr. Best holds a Master of Science in Engineering Management degree from the University of Alaska and a Bachelor of Science degree in Mechanical Engineering from Texas A&M University. Prior to beginning his business career, Mr. Best served five years as an engineering officer in the United States Air Force. We believe that Mr. Best’s experience in significant management roles with companies operating in the Permian Basin and his broad experience in the energy industry make him well suited to serve as a director. +Michele V. Choka +Michele V. Choka was appointed to our Board in February 2020. Ms. Choka previously served as Vice President, Human Resources at HighPoint Resources Corporation, a successor to the Bill Barrett Corporation, a development and exploratory property company, from August 2010 to September 2019. Ms. Choka was previously employed at Level 3 Communications, Inc., an international communications company, starting in 2006 and ultimately as Group Vice President of Human Resources up to January 2010. Ms. Choka also previously served as Vice President of Human Resources for Sun Microsystems, Inc., a computer networking company, for seven years. She also previously held senior human resource and client account management positions at Prudential Financial, Inc., an insurance and investment management company and JP Morgan, a global financial services firm. Prior to joining JP Morgan, Ms. Choka served in an accounting position as a Regional Controller for the Eastern Region at Sony Corporation of America. Ms. Choka also served on the board and as Chair of the Compensation Committee and as member of the Audit Committee and Nominating and Corporate Governance Committee of Callidus Software Inc., a publicly-traded cloud-based software company, from 2005 to 2016. Ms. Choka has served as a director of Boingo Wireless Inc., a publicly-traded Wi-Fi company, since December 2018, and currently serves as Chair of the Compensation Committee and as a member of the Audit Committee. Ms. Choka holds a B.A. in East Asian Studies and Economics from Wesleyan University, has attended Stanford University’s Director’s College and participated in the Financial Times’ Director Exchange. We believe that Ms. Choka is well suited to serve as a director based on her executive leadership experience in human resources and accounting and public company board and committee experience. +Alan E. Douglas +Alan E. Douglas became a member of our board of directors in March 2017. Mr. Douglas is a partner in the accounting firm Whitley Penn. Whitley Penn recently acquired the firm of Johnson, Miller & Co. where Mr. Douglas worked for over twenty-five years. Mr. Douglas is a Certified Public Accountant with over thirty-five years of experience in accounting and audit activities. Prior to joining Johnson, Miller & Co., Mr. Douglas was a Certified Public Accountant at KPMG for twelve years. Mr. Douglas received a Bachelor of Business Administration in Accounting from Texas Tech University. We believe that Mr. Douglas’s extensive accounting and auditing experience make him well suited to serve as a director. +Jack B. Moore +Jack B. Moore has served as a member of our Board since March 2017. Mr. Moore most recently served as President and Chief Executive Officer of Cameron International Corporation (“Cameron”), an oil and gas industry equipment manufacturer and provider, from April 2008 to October 2015 and served as Chairman of the Board of Cameron from May 2011 until it was acquired by Schlumberger in April 2016. Prior to his employment with Cameron, Mr. Moore various management positions at Baker Hughes Incorporated, where he was employed for 23 years. Mr. Moore currently serves on the board of directors of Occidental Petroleum Corporation, KBR Inc., and the University of Houston System Board of Regents. Mr. Moore previously served on the board of the American Petroleum Institute, the National Ocean Industries Association, Rowan Companies plc and the Petroleum Equipment Suppliers Association. Mr. Moore received a Bachelor of Business Administration from the University of Houston and attended the Advanced Management Program at Harvard Business School. We believe that Mr. Moore’s wealth of experience in the oilfield service sector, including service as a director and executive officer to various public corporations in the sector, makes him well suited to serve as a director. +8 +G. Larry Lawrence +G. Larry Lawrence was appointed to our Board in December 2020. Mr. Lawrence previously served as Audit Committee Chair of Legacy Reserves, LP’s Board of Directors, a role he held from 2006 to 2019. Mr. Lawrence currently serves as the interim Chief Financial Officer of Natural Gas Services Group, a natural gas compression equipment provider, where he previously served as Chief Financial Officer for nine years. He previously served as Chief Financial Officer for Lynx Operating Co. Inc., an oil and gas exploration company, for three years and as Chief Financial Officer for Pure Resources, Inc., an oil and gas exploration and production company, for two years. He has also held finance and management consulting positions for Parson Group, Atlantic Richfield Company and Crescent Consulting. Mr. Lawrence earned his bachelor’s degree with an accounting major from Dillard University in New Orleans. We believe that Mr. Lawrence’s broad experience in the energy industry, including his service as a director and executive officer with various companies, makes him well suited to serve as a director. +Vote Required +The proposal regarding the election of directors requires the approval of a plurality of the votes cast. This means that the eight nominees receiving the highest number of affirmative “FOR” votes will be elected as directors. Votes withheld and broker non-votes are not considered to be votes cast and, accordingly, will have no effect on the outcome of the vote on this proposal. +Board Recommendation +Our Board recommends a vote “FOR” each of the eight director nominees named above. +9 +CORPORATE GOVERNANCE +Director Independence +The majority of the members of the Board at any given time must qualify as “independent” under the rules of the NYSE. +Our Board has undertaken a review of the independence of each of our director nominees and has affirmatively determined that each of Messrs. Armour, Best, Douglas, Lawrence and Moore and Ms. Choka are “independent,” as defined by the NYSE rules. Under the NYSE rules, a director can be independent only if (a) the director does not trigger a categorical bar to independence and (b) our Board affirmatively determines that the director has no material relationship with the Company (either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company). +Based on information provided by the director nominees concerning their background, employment and affiliations, our Board has determined that these directors do not have a material relationship with the Company (either directly or as a partner, shareholder or officer of an organization that has a relationship with the Company). In making this determination, our Board considered the current and prior relationships that each of the directors has with us, and all other facts and circumstances our Board deemed relevant in determining independence, including any beneficial ownership of our capital stock by each of the directors. +Board Leadership Structure +Our Board has adopted our Corporate Governance Guidelines, which are available on our website, www.propetroservices.com, in the “Corporate Governance” subsection of the “Investors” section. Our Corporate Governance Guidelines provide that if the Chairman of the Board is a member of management or does not otherwise qualify as independent, the independent directors may elect a lead independent director. At present, the Board has chosen to combine the positions of Chairman and Chief Executive Officer. While the Board believes it is important to retain the flexibility to determine whether the roles of Chairman and Chief Executive Officer should be separated or combined in one individual, the Board believes that Mr. Gobe is the individual with the necessary experience, commitment and support of the other members of the Board to effectively carry out the role of Chairman. +The Board believes this structure promotes better alignment of strategic development and execution, more effective implementation of strategic initiatives and clearer accountability for the Company’s success or failure. Moreover, the Board believes that combining the Chairman and Chief Executive Officer positions does not impede independent oversight of the Company, particularly given the designation of a Lead Independent Director as discussed below. In addition, six of the eight members of the Board are independent under NYSE listing standards. +In October 2019, the Board designated Mr. Best, an independent director, to serve as the Lead Independent Director. In this capacity Mr. Best provides, in conjunction with the Chairman, leadership and guidance to the Board. The Lead Independent Director responsibilities are as follows: +• +Preside over all meetings of the Board at which the Chairman of the Board is not present, including any executive sessions of the independent directors. +• +Approve Board meeting schedules and agendas. +• +Act as the liaison between the independent directors and the Chief Executive Officer and Chairman of the Board. +• +Communicate the Chairman and Chief Executive Officer’s annual evaluation and compensation, after approval of the Compensation Committee. +Interested parties who wish to communicate with the Board, its committees, the Chairman, the Lead Independent Director or any other individual director should follow the procedures described below under “Communication with our Board of Directors.” +To facilitate candid discussion among the Company’s directors, the non-management directors meet at regularly scheduled executive sessions presided over by our Lead Independent Director. In addition, at least +10 +once a year, the non-management directors who are independent under NYSE listing standards meet in executive session in conjunction with a regular board meeting. +Board of Directors and Risk Oversight +In the normal course of business, we are exposed to a variety of risks, including market risks relating to changes in commodity prices, interest rates, political risks and credit and investment risk. The Board oversees our strategic direction and in doing so considers the potential rewards and risks of our business opportunities and challenges and monitors the development and management of risks that impact our strategic goals. The Audit Committee assists the Board in fulfilling its oversight responsibilities by monitoring the effectiveness of our systems of financial reporting, auditing, internal controls and legal and regulatory compliance. The Nominating and Corporate Governance Committee assists the Board in fulfilling its oversight responsibilities with respect to the management of risks associated with Board organization, membership and structure, succession planning for our directors and executive officers and corporate governance. The Compensation Committee assists the Board in fulfilling its oversight responsibilities by overseeing our compensation policies and practices. The Board does not believe that its role in the oversight of our risks affects the Board’s leadership structure. +Safety, Sustainability, Social and Environmental Stewardship +At ProPetro, our fundamental policy is to conduct business with honesty and integrity in accordance with the highest legal and ethical standards, along with a daily focus on safety and quality. We believe this is critical to our long-term success. Our Board and its committees oversee our Company’s strategy and governance, including our safety, sustainability and environmental stewardship efforts. We believe that the future of the oilfield is a cohesive and more environmentally friendly supply chain producing hydrocarbons in the safest and most efficient manner possible. +As part of our environmental, social and governance (“ESG”) initiatives, we aim to reduce the overall environmental impact of our services by focusing on flawless execution and superior service quality. We believe that a lower emissions profile is not only vital to aid in our competitiveness, but it is also a crucial component in developing the innovative tools necessary to aid our customers to both drive down costs and to do so while respecting the communities in which we work. We seek to provide a consistent, sustainable service solution that will in time replace diesel with cleaner burning fuels while utilizing lower emissions power sources for our operations over time, for the benefit of our workforce and community. With recent investments in Tier IV Dynamic Gas Blending (DGB), dual fuel equipment, we have taken action to reduce the carbon footprint in the Permian Basin. Integrating cleaner burning fuel sources, such as natural gas, is an important steppingstone to optimize our fuel consumption on our worksites. We are also focused on the next generation of technology by making strategic investments in DuraStim® electric powered hydraulic fracturing equipment to bring unconventional pumping innovations and electrically-powered fleet advancements to the field. Our DuraStim® equipment is still being tested and has only been deployed to our customers’ wellsites on a limited scale. The Company has set a goal to fully deploy its first DuraStim® fleet to a customer wellsite in the second half of 2021. +We also seek to give back to the area where we live and work by providing employment and supporting and encouraging our employees to commit to safety and investing in our community. We aspire to play a role in shaping the future of the Permian Basin by investing in education, donating to first responders and veterans, supporting health and wellness related organizations, and focusing on charities that support local children. We do this through various charities and other organizations that are heavily involved in the Permian Basin communities. Our employees created the P.U.M.P. (Positive United Morale Partners) committee to drive their humanitarian endeavors through wellness events, quarterly blood drives, Thanksgiving meal drives, school supply donation drives, and Habitat for Humanity Builds. Our safety record substantiates the close collaboration between our customers and our employees in completing each job safely. We pride ourselves on our commitment to safety and our commitment to each other. Our single basin strategy is crucial to delivering on these commitments, including advantages like a dedicated heavy haul team to reduce driving hazards, best-in-class training and development culture, and long-term relationships with teammates, customers and stakeholders. +11 +Additional information and updates regarding our safety, sustainability and environmental stewardship efforts can be found under the “Sustainability” tab of our website at www.propetroservices.com. +Communicating with our Board of Directors +Stockholders and other interested parties may communicate with our Board by writing to: ProPetro Holding Corp., P.O. Box 873, Midland, Texas 79702, Attention: General Counsel and Corporate Secretary. Stockholders may submit their communications to the Board, the independent directors, any committee of the Board or individual directors on a confidential or anonymous basis by sending the communication in a sealed envelope marked “Stockholder Communication with Directors” and clearly identifying the intended recipient(s) of the communication. +Our General Counsel and Corporate Secretary will review each communication and will forward the communication, as expeditiously as reasonably practicable, to the addressees if: (1) the communication complies with the requirements of any applicable policy adopted by the Board relating to the subject matter of the communication and (2) the communication falls within the scope of matters generally considered by the Board. To the extent the subject matter of a communication relates to matters that have been delegated by the Board to a committee or to an executive officer of the Company, our General Counsel and Corporate Secretary may forward the communication to the executive officer or chairman of the committee to which the matter has been delegated. The acceptance and forwarding of communications to the members of the Board or an executive officer does not imply or create any fiduciary duty of the Board members or executive officer to the person submitting the communications. +Information may be submitted confidentially and anonymously, although the Company may be obligated by law to disclose the information or identity of the person providing the information in connection with government or private legal actions and in other circumstances. The Company’s policy is not to take any adverse action, and not to tolerate any retaliation, against any person for asking questions or making good faith reports of possible violations of law, our policies or our Code of Ethics & Conduct. +Annual Meeting Attendance +While the Company does not have a specific policy about director attendance at annual meetings of stockholders, all directors are expected to attend meetings of the Board (and any committees thereof on which they serve) either in person or telephonically unless exigencies prevent them from attending. Each incumbent director attended at least 75% of the aggregate of (1) the total number of meetings of the Board (held during the period for which he or she has been a director) and (2) the total number of meetings of committees of the Board on which he or she served (during the periods that he or she served). Our non-employee directors meet at regularly scheduled executive sessions presided over by our Lead Independent Director. Additionally, our independent directors meet at least once a year without members of management or non-independent directors present. All of our directors who were members of the Board at the time of our 2020 annual meeting of stockholders attended the meeting. +Compensation Committee Interlocks and Insider Participation +During the year ended December 31, 2020, the Compensation Committee was initially comprised of Messrs. Blackwell, Moore, and Best. In connection with the resignation of Mr. Blackwell, an evaluation of committee assignments by our Nominating & Corporate Governance Committee in July 6, 2020 was performed, and our committee memberships were modified, and Messrs. Best, Moore and Ms. Choka were appointed to and served on the Compensation Committee for the remainder of 2020. Ms. Choka was appointed to serve as committee chair. No executive officer of the Company served as a member of the board of directors or compensation committee of any other entity that has one or more executive officers serving as a member of our Board or Compensation Committee. During the fiscal year ended December 31, 2020, Mr. Blackwell was the indirect beneficiary of certain transactions with the Company in which the amount involved exceeded $120,000. +Board and Committee Activity and Structure +Our Board is governed by our certificate of incorporation, bylaws, the Investor Rights Agreement, charters of the standing committees of the Board and the laws of the State of Delaware. +12 +On December 31, 2018, we entered into the Investor Rights Agreement with an affiliate of Pioneer. The Investor Rights Agreement provides that Pioneer will be granted (i) the one-time right to designate an independent director to the Board and (ii) the right to designate a non-independent director to the Board for so long as Pioneer owns 5% or more of the Company’s outstanding common stock. +During 2020, our Board held twelve meetings. There are currently three standing committees of the Board: the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee. Members serve on these committees until their resignation or until as otherwise determined by our Board. The composition of the Board committees complies with the applicable rules of the NYSE and applicable law. Our Board has adopted a written charter for each of the standing committees, which can be found in the “Corporate Governance” subsection of the “Investors” section of our website at www.propetroservices.com. +In addition to the above governing documents, our Code of Ethics & Conduct that applies to all of our employees, as well as each member of the Board, can also be found in the “Corporate Governance” subsection of the “Investors” section of our website at www.propetroservices.com. The composition and responsibilities of each of the standing committees of our Board are as follows: +Audit Committee . Our Audit Committee is comprised solely of “independent” directors, as defined under and required by the NYSE rules and Rule 10A-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Our Board has determined that each of Messrs. Armour, Douglas, Lawrence and Moore qualify as an “audit committee financial expert,” as defined by the rules under the Exchange Act. During the year ended December 31, 2020, the members of the Audit Committee were Messrs. Best, Douglas and Moore. The Audit Committee is presently comprised of Messrs. Best, Douglas and Lawrence. Mr. Best serves as committee chair. Our Audit Committee is directly responsible for, among other things, the appointment, compensation, retention and oversight of our independent registered public accounting firm. The oversight of our independent public accounting firm includes reviewing the plans and results of the audit engagement with the firm, approving any additional professional services provided by the firm and reviewing the independence of the firm. The Audit Committee is also responsible for discussing the effectiveness of the internal controls over financial reporting with our independent registered public accounting firm and relevant financial management. The Audit Committee held twelve meetings in 2020. +Nominating and Corporate Governance Committee . Our Nominating and Corporate Governance Committee consists solely of “independent” directors, as defined under and required by NYSE rules. The Nominating and Corporate Governance Committee is responsible for, among other things, identifying individuals qualified to become Board members; selecting or recommending director-nominees for each election of directors to the Board; developing and recommending criteria for selecting qualified director candidates to the Board; considering committee member qualifications, appointments and removals; recommending corporate governance principles, codes of conduct and compliance mechanisms; providing oversight in the evaluation of the Board and each committee thereof; and developing an appropriate succession plan for our chief executive officer pursuant to our Corporate Governance Guidelines. During the year ended December 31, 2020, the members of the Nominating and Corporate Governance Committee, at various times, were Messrs. Blackwell, Douglas and Moore and Ms. Choka, with Mr. Moore serving as committee chair. Mr. Blackwell stepped down from the Nominating and Corporate Governance Committee in connection with his resignation in July 2020. The Nominating and Corporate Governance Committee is presently comprised of Messrs. Armour, Douglas and Moore and Ms. Choka. The Nominating and Corporate Governance Committee held five meetings in 2020. +Compensation Committee . Our Compensation Committee consists solely of “independent” directors, as defined under and required by the NYSE rules and “non-employee directors” under Section 16 of the Exchange Act. The Compensation Committee is responsible for, among other things, overseeing the discharge of the responsibilities of the Board relating to compensation of the Company’s officers and directors. In carrying out these responsibilities, the Compensation Committee reviews all components of executive compensation for consistency with our compensation philosophy and with the interests of our stockholders. During the year ended December 31, 2020, the members of the Compensation Committee, at various times, were Messrs. Best, Moore and Blackwell and Ms. Choka. Mr. Blackwell served as committee chair until he stepped down from the Compensation Committee in connection with his resignation in July 2020, and +13 +Ms. Choka was appointed to serve as committee chair. The Compensation Committee is presently comprised of Messrs. Best and Moore and Ms. Choka. The Compensation Committee held twelve meetings in 2020. +Role of the Board, Compensation Committee and our Executive Officers +Executive compensation decisions are typically made on an annual basis by the Compensation Committee with input from our Chief Executive Officer. Specifically, after reviewing relevant market data and surveys within our industry, our Chief Executive Officer typically provides recommendations to the Compensation Committee regarding the compensation levels for our existing named executive officers and our executive compensation program as a whole. Our Chief Executive Officer generally attends all Compensation Committee meetings. After considering these recommendations, the Compensation Committee typically meets in executive session and adjusts base salary levels and non-equity award targets. In addition, the Compensation Committee determines the achievement of non-equity Incentive Award Plan metrics and the amount of equity awards from the Incentive Award Plan to be granted to each of our named executive officers. In making executive compensation recommendations, our Chief Executive Officer considers each named executive officer’s performance during the year, the Company’s performance during the year, as well as comparable company compensation levels. While the Compensation Committee gives considerable weight to our Chief Executive Officer’s recommendations on compensation matters, the Compensation Committee has the final decision-making authority on all executive compensation matters. +Role of External Advisors +The Compensation Committee engaged Meridian Compensation Partners, LLC (“Meridian”) and Pearl Meyer & Partners, LLC (“Pearl Meyer”) in 2020 to assist the Compensation Committee and the Board in evaluating, designing and implementing compensation practices. For the year ended December 31, 2020, Meridian and Pearl Meyer received $279,570 and $20,938 respectively, for the services they provided to our Compensation Committee. +The Compensation Committee reviews and assesses the independence and performance of its executive compensation consultant in accordance with applicable SEC and NYSE rules and regulations on an annual basis to confirm that the consultant is independent and meets all applicable statutory and regulatory requirements. Late in 2020, the Compensation Committee conducted an extensive evaluation of several independent compensation consultants and chose Pearl Meyer to replace Meridian as the Compensation Committee’s independent compensation consultant. +The Audit Committee engaged Brown Rudnick LLP (“Brown Rudnick”) to perform an internal review initially focused on the Company’s disclosure of agreements previously entered into with AFGlobal Corporation for the purchase of Durastim® hydraulic fracturing fleets and effective communications related thereto. The review was later expanded to, among other items, review expense reimbursements, certain transactions involving related parties or potential conflicts of interest, and certain transactions entered into by our former Chief Executive Officer. During the year ended December 31, 2020, the Company incurred approximately $1.1 million in costs associated with Brown Rudnick related to the internal review and other matters. The internal review concluded in June 2020. +Director Nominations Process +The Nominating and Corporate Governance Committee may utilize a variety of methods for identifying potential nominees for directors, including considering potential candidates who come to their attention through current officers, directors, professional search firms or other persons. Once a potential nominee has been identified, the Nominating and Corporate Governance Committee evaluates whether the nominee has the appropriate skills and characteristics required to become a director in light of the then current make-up of the Board. This assessment includes an evaluation of the nominee’s judgment and skills, such as experience at a strategy/policy setting level, financial sophistication, leadership and objectivity, all in the context of the perceived needs of the Board at that point in time. One of the director nominees, Mr. Berg, was not recommended for nomination by the Nominating and Corporate Governance Committee but rather was appointed pursuant to the Investor Rights Agreement. +14 +In February 2019, the Board amended our Corporate Governance Guidelines to specifically take the diversity of a potential director nominee’s gender, race and ethnicity into account when considering candidates for the Board, and the Nominating and Corporate Governance Committee and the Board are committed to increasing Board diversity. Our Board believes that at a minimum all members of the Board should have the highest professional and personal ethics and values. In addition, each member of the Board must be committed to increasing stockholder value and should have enough time to carry out his or her responsibilities as a member of the Board. +Our Board monitors the mix of specific experience, qualifications and skills of its directors in order to assure that the Board, as a whole, has the necessary tools to perform its oversight function effectively in light of the Company’s business and structure. +Stockholders may recommend individuals to the Nominating and Corporate Governance Committee for consideration as potential director candidates by submitting the names of the recommended individuals, together with appropriate biographical information and background materials, to the Nominating and Corporate Governance Committee, c/o General Counsel and Corporate Secretary, P.O. Box 873, Midland, Texas 79702. In the event there is a vacancy, and assuming that appropriate biographical and background material has been provided on a timely basis, the Nominating and Corporate Governance Committee will evaluate stockholder-recommended candidates by following substantially the same process, and applying substantially the same criteria, as it follows for candidates submitted by others. +Director Orientation and Education +We provide each new director with an orientation that consists of meeting with senior management and others on our business operations, strategic plans, significant accounting and risk management issues, corporate governance, compliance, and key policies and practices. The orientation sessions are tailored to the particular director depending on their orientation needs and generally include an overview of board fiduciary duties, board independence and public company reporting requirements. New directors are also provided the most recent reports presented to the Board and its committees by management and external advisors. +Each director is expected to participate in continuing educational programs as necessary to maintain expertise to perform his or her responsibilities as a director. In this regard, from time to time we provide pertinent articles, white papers and information relating to our business, financial affairs, risks, competitors, corporate governance, areas of focus in shareholder activism, ESG trends, proxy advisory firm ratings, and changes in legal and regulatory issues. We may also coordinate training and educational sessions for directors from outside experts and provide directors with tours of our facilities from time to time. +Director Compensation +Our Amended and Restated ProPetro Holding Corp. Non-Employee Director Compensation Policy (the “Amended Director Compensation Policy”) provides that each eligible non-employee director receives the following: +• +Annual cash retainer of $70,000; +• +Additional annual cash retainer for a non-employee director serving as the Chairperson of the Board of $50,000; +• +Additional annual cash retainer for the Lead Independent Director of the Board of $20,000 (new in 2020); +• +Additional annual cash retainer for the Chairpersons of the Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee of $15,000, $15,000 and $10,000, respectively; +• +Annual equity retainer with a grant date fair value of approximately $140,000. +All equity retainers consist of awards of restricted stock units (“RSUs”) that will vest in full on the earliest to occur of the first anniversary of the grant date, the day immediately preceding the first annual +15 +meeting of stockholders following the grant date, and the occurrence of a Change in Control, subject to continuous service through the applicable vesting date. The portion of the annual equity retainer that would have vested in the year following a non-employee director’s separation from service due to his or her death or disability will vest upon such separation from service. All annual retainers are pro-rated based on days of service for non-employee directors who join the Board during the applicable calendar year. +On February 1, 2020, after consulting with Meridian regarding market practices, we amended the Amended Director Compensation Policy to include an additional annual cash retainer of $20,000 for the Lead Independent Director of the Board, to be pro-rated and paid to Mr. Best in 2020 for his service as Lead Independent Director of the Board during the fourth quarter of 2019. The Lead Independent Director position was newly created in the fourth quarter of 2019. The members of the Board are also entitled to reimbursement of expenses incurred in connection with attendance at Board and committee meetings in accordance with Company policy. +The following table summarizes the compensation paid for services provided by our non-employee directors during 2020. +Name +Fees Earned or +Paid in Cash +($) (1) +Stock Awards +($) (2) +Total +($) +Spencer D. Armour III +64,094 +118,996 +183,090 +Mark S. Berg (3) +— +— +— +Anthony J. Best +98,914 +118,996 +217,910 +Pryor Blackwell +41,090 +118,996 +160,086 +Alan E. Douglas +64,094 +118,996 +183,090 +Jack B. Moore +74,094 +118,996 +193,090 +Michele V. Choka +65,306 +170,005 +235,311 +G. Larry Lawrence +2,853 +118,518 +121,371 +(1) +Reflects annual cash retainer payments made pursuant to the Amended Director Compensation Policy. With respect to Ms. Choka, this amount includes pro-rated payments associated with her service on the Board during first quarter 2020 and as Compensation Committee Chair, beginning third quarter 2020. With respect to Mr. Blackwell, this amount includes pro-rated payments associated with his service as Chairman of the Compensation Committee during 2020 until his resignation in the third quarter of 2020. Mr. Lawrence’s payment also includes a pro-rated payment made to him in 2020 for his service on the Board during the fourth quarter of 2020. +(2) +Reflects the grant date fair value of restricted stock units, or “RSU”, awards on the date of grant computed in accordance with FASB ASC Topic 718. For information regarding assumptions underlying the valuation of equity awards, see Note 11 to the Consolidated Financial Statements included in our 2020 Annual Report on Form 10-K. +The following table sets forth the aggregate number of outstanding stock awards and the aggregate number of outstanding stock option awards held by each of our non-employee directors on December 31, 2020. The aggregate number of Mr. Gobe’s outstanding awards is included in the table entitled “Executive Compensation — Outstanding Equity at 2020 Fiscal Year End.” +16 +Name +Aggregate Number +of Stock Awards +(#) +Aggregate +Number of Stock +Option Awards +(#) +Spencer D. Armour III +32,336 +592,774 +Mark S. Berg +— +— +Anthony J. Best +32,336 +— +Pryor Blackwell (a) +— +— +Alan E. Douglas +32,336 +— +Jack B. Moore +32,336 +— +Michele V. Choka +32,336 +— +G. Larry Lawrence +15,392 +— +(a) +Mr. Blackwell also forfeited all outstanding and unvested equity awards (32,336 RSUs granted in 2020) upon his resignation from the Board on July 6, 2020. +(3) +Mr. Berg has elected not to be compensated for his service as a director. +Responsiveness to Current Economic Environment +In light of market conditions, effective April 1, 2020, the Board approved a temporary 15% reduction in the annual cash retainers and annual equity retainers payable to the non-employee directors pursuant to the Amended Director Compensation Policy. The additional annual cash retainers payable to non-employee directors for their service as committee chairs or lead independent director were not reduced. The Board approved these reductions after reviewing market data and receiving advice from its independent compensation consultant, Meridian, regarding reductions in director compensation in the oilfield services industry as a result of market conditions at that time. Effective October 23, 2020, the Board approved the elimination of the temporary 15% reductions in the annual cash retainers and annual equity retainers and accordingly reinstated the original amounts due to improved market conditions. +Non-Employee Director Stock Ownership Guidelines +We maintain a non-employee director stock ownership policy that is applicable to all of our eligible non-employee directors. Pursuant to this policy, each non-employee director is encouraged to hold, on and following the later of the fifth anniversary of (i) the closing of our initial public offering (“IPO”) and (ii) the non-employee director’s election or appointment to the Board, shares of our common stock or certain equity awards (valued based on the closing price of our common stock) with a value equal to or in excess of 300% of the non-employee director’s annual cash retainer, as such threshold may be amended by the Nominating and Corporate Governance Committee from time to time. Our IPO closed in 2017. As a result, each of the directors still have additional time to fulfill the ownership levels provided in the policy. +During 2020, we amended our non-employee director compensation policy to incorporate certain clarifying and administrative changes and such that (i) a non-employee director who is not compensated for his or her services as non-employee director pursuant to the Amended Director Compensation Policy or any other plan, policy or agreement then in effect is not subject to the guidelines set forth in our director stock ownership policy and (ii) outstanding awards of unvested time-based RSUs granted to a non-employee director will count toward such non-employee director’s qualifying shareholdings to the extent the RSUs are not settled in cash. +Stockholder Rights Plan +On April 10, 2020, the Board adopted a short-term stockholder rights plan (the “Rights Plan”). The Rights Plan provides for the issuance of one right for each outstanding share of our common stock held by stockholders of record on April 24, 2020. In general, the rights will become exercisable only if a person or group acquires beneficial ownership of 10% (or 20% in the case of certain passive investors) or more of our outstanding common stock or announces a tender or exchange offer that would result in such ownership. +17 +If the rights become exercisable, all holders of rights (other than any triggering person) will be entitled to acquire shares of common stock at a 50% discount, or we may exchange each right held by such holders for one share of our common stock. +The Rights Plan will expire on March 31, 2021. The Rights Plan may also be terminated, or the rights may be redeemed, prior to the scheduled expiration of the Rights Plan under certain other circumstances. The full text of the Rights Plan was filed as an exhibit to the Company’s Form 8-K dated April 14, 2020. +18 +REPORT OF THE AUDIT COMMITTEE +The Audit Committee assists our Board in overseeing (i) the integrity of our consolidated financial statements, (ii) our compliance with legal and regulatory requirements, (iii) the independent auditor’s qualifications and independence, (iv) the performance of our independent auditor, and (v) the design and implementation of the Company’s internal audit function and the performance of the internal audit function after it has been established. In so doing, it is the responsibility of the Audit Committee to maintain free and open communication between the directors, the independent auditor and our financial management. The Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the work of the independent auditor for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for us. The independent auditor reports directly to the Audit Committee. +Management is responsible for the preparation, presentation, and integrity of our consolidated financial statements, accounting and financial reporting principles, internal control over financial reporting, and procedures designed to ensure compliance with accounting standards, applicable laws, and regulations. Management is also responsible for objectively reviewing and evaluating the adequacy, effectiveness, and quality of our system of internal control over financial reporting. Our independent auditor, Deloitte & Touche LLP, is responsible for performing an independent audit of the consolidated financial statements. +The Audit Committee’s responsibility is to monitor and oversee these processes and the engagement, independence and performance of our independent auditor. The Audit Committee relies, without independent verification, on the information provided to it and on the representations made by management and the independent auditor. +The Audit Committee has met with our independent auditor and discussed the overall scope and plans for their audit. The Audit Committee met with the independent auditor to discuss matters required to be discussed with audit committees under generally accepted auditing standards, including, among other things, matters related to the conduct of the audit of our consolidated financial statements and the matters required to be discussed by the statement on Auditing Standards No. 1301, as adopted by the Public Company Accounting Oversight Board. +Our independent auditor also provided to the Audit Committee the written disclosures and the letter required by applicable standards of the Public Company Accounting Oversight Board regarding the independent auditor’s communications with the Audit Committee concerning independence, and the Audit Committee discussed with the independent auditor its independence. When considering the independence of Deloitte & Touche LLP, the Audit Committee considered the non-audit services provided to the Company by the independent auditor and concluded that such services are compatible with maintaining the auditor’s independence. +The Audit Committee has reviewed and discussed our audited consolidated financial statements for the fiscal year ended December 31, 2020 with management and Deloitte & Touche LLP. Based on the Audit Committee’s review of the audited consolidated financial statements and the meetings and discussions with management and the independent auditors, and subject to the limitations on the Audit Committee’s role and responsibilities referred to above and in the Audit Committee Charter, the Audit Committee recommended to our Board that our audited consolidated financial statements be included in our Annual Report on Form 10-K as filed with the SEC. +By the Audit Committee of the Board of Directors, +Anthony J. Best (Chair) +Alan E. Douglas +G. Larry Lawrence +19 +Deloitte & Touche LLP Fees for Fiscal Years 2020 and 2019 +The following table sets forth the fees incurred by us in fiscal years 2020 and 2019 for services performed by Deloitte & Touche LLP: +Year Ended December 31, +2020 +2019 +Audit Fees (1) +$ +3,631,940 +$ +2,842,660 +Audit-Related Fees (2) +— +2,960,884 +All Other Fees (3) +140,665 +204,621 +Total Fees +$ +3,772,605 +$ +6,008,165 +(1) +Audit Fees include fees billed for professional services rendered for the audit of our annual consolidated financial statements, the audit of our system of internal control over financial reporting, the review of interim consolidated financial statements included in our quarterly reports, consents and comfort letters provided in connection with the filing of registration statements, other related services that are normally provided in connection with statutory and regulatory filings, and related out-of-pocket expenses. +(2) +Audit-Related Fees include fees billed for professional services rendered in connection with the expanded audit committee review, and related out-of-pocket expenses. +(3) +All Other fees consisted principally of fees for tax compliance and tax advice. +Policy on Audit Committee Pre-Approval of Audit and Non-Audit Services of Independent Registered Public Accounting Firm +The charter of the Audit Committee and its pre-approval policy require that the Audit Committee review and pre-approve the Company’s independent registered public accounting firm’s audit fees, audit-related fees, tax fees and fees for other services. The Chairman of the Audit Committee has the authority to grant pre-approvals that are within the pre-approval policy and are presented to the Audit Committee at a subsequent meeting. For the year ended December 31, 2020, the Audit Committee approved 100% of the services described above under the captions “Audit Fees,” “Audit-Related Fees” and “All Other Fees”. +20 +COMPENSATION DISCUSSION AND ANALYSIS +Overview +This Compensation Discussion and Analysis (“CD&A”) describes our compensation practices and the compensation awarded to, earned by, or paid to each of our named executive officers (the “Named Executive Officers”) during the last completed fiscal year. +Named Executive Officers for 2020 +For the year ended December 31, 2020, our Named Executive Officers consisted of the following: +Phillip A. Gobe (1) +Chief Executive Officer +Dale Redman (2) +Former Chief Executive Officer +Darin G. Holderness (3) +Former Chief Financial Officer +David S. Schorlemer (4) +Chief Financial Officer +Jeffrey D. Smith (5) +Former Chief Administrative Officer +David Sledge (6) +Former Chief Operating Officer +Adam Muñoz (7) +Chief Operating Officer +Newton W. “Trey” Wilson III +General Counsel and Corporate Secretary +(1) +Mr. Gobe was appointed as Chief Executive Officer, effective as of March 13, 2020. He has served as our principal executive officer throughout 2020 (initially in the position of Executive Chairman). +(2) +Mr. Redman resigned as Chief Executive Officer and a member of the Board on March 13, 2020. Mr. Redman ceased serving as our principal executive officer on October 3, 2019 when Mr. Gobe was appointed as Executive Chairman and principal executive officer. +(3) +Following his service as Interim Chief Financial Officer, Mr. Holderness was appointed to serve as Chief Financial Officer as of April 10, 2020 until his appointment as Special Advisor to the Chief Financial Officer on October 23, 2020, a position he held until his resignation effective October 30, 2020. +(4) +Mr. Schorlemer was appointed as Special Advisor to the Chief Financial Officer, effective October 12, 2020 until his appointment as Chief Financial Officer as of October 23, 2020. +(5) +Mr. Smith was appointed as a Special Advisor to the Chief Executive Officer on March 13, 2020 and ceased serving as Chief Administrative Officer as of that date. +(6) +Mr. Sledge resigned as Chief Operating Officer, effective as of December 31, 2020. +(7) +Mr. Muñoz was appointed to serve as Senior Vice President of Operations as of March 13, 2020 until December 31, 2020 when he was promoted and appointed to serve as Chief Operating Officer, effective as of January 1, 2021. +Executive Officer Transitions +As described in more detail in the footnotes to the table above, 2020 was a year of significant transition in the executive roles at the Company. While the context of every departure and shift to a new role is unique, in each case, the Company’s careful succession planning and thoughtful recruiting paid dividends, ensuring that each transition was smooth and the Company’s performance remained strong. For example, following the departure of our former Chief Executive Officer in March of 2020, our Executive Chairman, who has extensive experience in our industry and who was already serving as our principle executive officer, was able to seamlessly assume the role of Chief Executive Officer. Our current executives form a cohesive team and have worked exceptionally well together, showing exceptional leadership through a singularly difficult year for the global economy and the oil and gas industry, in particular. Our current executives are focused on strengthening the Company’s culture of compliance and continuing to improve the Company’s sustainability and environmental stewardship efforts. We believe the changes made during 2020 will strengthen management continuity going forward. We have used this year of change as an opportunity to: +21 +• +create new efficiencies, for example, the consolidation of the roles of Vice President of Operations and Chief Operating Officer; +• +enrich the Company’s depth of experience in public company finance and technology, through the hiring of Mr. Schorlemer; and +• +benefit from the new ideas and fresh perspectives that each of our officers have brought to their new role. +Compensation Philosophy and Objectives +Our executive compensation program is designed to attract, motivate and retain the management talent that we believe is necessary to achieve our financial and strategic goals. Further, we believe that our executive compensation program should be appropriately tailored to balance short-term compensation with intermediate and long-term compensation that appropriately aligns the interests of our executives with the interests of our stockholders. +In establishing and evaluating our executive compensation programs, the Compensation Committee strives to achieve total compensation for our executives that reflects their individual contributions to the Company, responsibilities, duties and experience and is competitive with the companies with which we compete for executive talent. +Objectives of Our Compensation Program +Our compensation program is based on the following objectives: +Reward for Exceptional Performance and Accountability for Poor Performance . Our Named Executive Officers should be rewarded for exceptional performance and held accountable for poor performance with respect to our annual and longer-term strategic goals. Our Named Executive Officers must work to achieve these goals in a manner that is consistent with our values and policies. We satisfy this objective by tying a significant portion of each Named Executive Officer’s compensation to the achievement of financial, strategic and operational goals based on both short- and long-term corporate performance measures while retaining sufficient flexibility to modify or clawback compensation if necessary. See “Annual Cash Incentive Awards” and “Long Term Equity Incentives” below. +Align Interests of Executives and Shareholders . Compensation for our Named Executive Officers should align their interests with those of our shareholders. Our compensation program aligns pay to performance by making a substantial portion of total executive compensation variable, or “at-risk,” through an annual bonus program based on our performance goals and the granting of long-term incentive equity awards, which include time-vested restricted stock units and performance-based restricted stock units. As performance goals are met, not met or exceeded, executives are rewarded commensurately. Our Stock Ownership Guidelines also require each Named Executive Officer to retain significant ownership in the Company’s common stock such that they are invested in our success over the long-term along with our shareholders. +Flexibility to Respond to Changing Circumstances . We are in a cyclical and volatile business. As a result, our Compensation Committee feels it is important to have a flexible compensation program that is responsive to unforeseen circumstances that arise during the year. To meet this objective, the Compensation Committee retains discretion to increase or decrease the bonuses paid to each Named Executive Officer pursuant to our annual bonus plan from the amount that would be indicated by the pre-established performance metrics if circumstances so warrant. +Industry Competitive . Total executive compensation should be industry-competitive so that we can attract, retain and motivate talented executives with the experience and skills necessary for our success. We satisfy this objective by staying apprised, with the assistance of the Compensation Committee’s independent compensation advisor, of the amounts and types of executive compensation paid to similarly situated executives by companies with which we compete for executive talent as well as general industry trends and best practices. +22 +Internally Consistent and Equitable . Executive compensation should be internally consistent and equitable. We satisfy this objective by considering not only the compensation paid by our peer companies, but also our Named Executive Officers’ capabilities, levels of experience, tenures, positions, responsibilities and contributions when setting their compensation. Additionally, our Compensation Committee feels that our Named Executive Officers should have a larger proportion of their compensation at risk and tied to corporate performance because they are typically in a position to have a more direct impact on the achievement of our performance goals. +How We Make Compensation Decisions +The Role of the Compensation Committee +Our Compensation Committee is comprised of independent, non-employee members of the Board. The Compensation Committee is responsible for establishing the elements, terms and target value of compensation paid or delivered to our Named Executive Officers but often consults the full Board with respect to material compensation actions. The Compensation Committee strives to develop a competitive, but not excessive, compensation program to recruit and retain Named Executive Officers that are among the most talented and experienced executives in our industry. An important element of the Compensation Committee’s decision making is the review of compensation data produced by its independent compensation consultant, including direct data from our peer group and other proprietary data developed by our independent compensation consultant. The Compensation Committee also considers information provided by our executive officers in designing and implementing our executive compensation program. This data assists the Compensation Committee in evaluating appropriate compensation levels for each Named Executive Officer in relation to market practice and in designing an effective executive compensation program for the Company. +The Role of Executive Officers in Compensation Decisions +In determining the compensation of our Named Executive Officers, the Compensation Committee considers the information and advice provided by its compensation consultant, our corporate goals, historic and projected performance, the current economic and commodities environment, individual performance of our Named Executive Officers, and other relevant factors. With respect to the compensation of the Named Executive Officers other than our principal executive officer, the Compensation Committee also considers the recommendations of our Chief Executive Officer. Additionally, in light of our Named Executive Officers’ integral role in establishing and executing the Company’s overall operational and financial objectives, the Compensation Committee requests that our Chief Executive Officer provide the initial recommendations on the appropriate goals for the performance metrics used under our Amended Annual Bonus Plan, and may choose to accept or modify these recommendations in its sole discretion. In addition, the Compensation Committee may invite any Named Executive Officer to attend Compensation Committee meetings to report on the Company’s progress with respect to the interim or final status of performance metrics. All Named Executive Officers are excluded from any decisions or discussions regarding their individual compensation. +The Role of the Independent Compensation Consultant +Meridian served as the Compensation Committee’s independent compensation consultant until November 2020, when the Compensation Committee engaged Pearl Meyer to replace Meridian as its independent compensation consultant following an extensive evaluation by the Compensation Committee of several independent compensation consultants. The compensation consultant provides advice to and works with the Compensation Committee in designing and implementing the structure and mechanics of the Company’s executive compensation program, as well as other matters related to officer, senior management, and director compensation and corporate governance. For example, our compensation consultant regularly updates the Compensation Committee on regulatory changes impacting executive compensation, proxy advisor policies, and compensation-related risks. In addition, they provide the Compensation Committee with relevant data, including market and peer-company compensation and performance surveys and information and advice regarding trends and developments in executive and director compensation practices in our industry. This information assists the Compensation Committee in making executive and director compensation decisions based on market pay levels and best practices. +23 +Our compensation consultant reports directly and exclusively to the Compensation Committee and does not provide any other services to management, the Company or its affiliates. While the Compensation Committee generally reviews and considers information and recommendations provided by the compensation consultant, they do not make compensation-related decisions for the Compensation Committee or otherwise with respect to the Company. The Compensation Committee has the discretion to allow our compensation consultant to work directly with management in preparing or reviewing materials for the Compensation Committee’s consideration. During 2020, and after taking into consideration the factors listed in Section 303A.05(c)(iv) of the “NYSE” Listed Company Manual, the Compensation Committee concluded that neither it nor the Company has any conflicts of interest with either Meridian or Pearl Meyer, and that Meridian and Pearl Meyer were both independent from management. Other than Meridian and Pearl Meyer, no other compensation consultants provided services to the Compensation Committee during 2020. +2020 Say-on-Pay Advisory Vote +At the Company’s 2020 annual meeting, the stockholders of the Company were asked to approve, on an advisory basis, the compensation of the Named Executive Officers. Advisory votes in favor of our executive compensation program were cast by over 98% of the shares of common stock of the Company represented at the meeting, online or by proxy, and entitled to vote. The Compensation Committee took the results of the “Say-on-Pay” vote in account when evaluating the compensation of the Named Executive Officers in 2020. We have continued, and plan to continue, engaging in ongoing shareholder outreach regarding corporate governance generally, including executive compensation programs. +Use of Peer Compensation Data +As part of its evaluation of the Company’s executive compensation practices, the Compensation Committee asked Meridian to establish a peer group of companies similar to us in industry, revenue and market capitalization and use data regarding compensation paid at each of those companies to assess competitive pay levels and executive compensation plan design. The same peer group was also used as the relative TSR peer group for the PSUs granted in 2020. +Meridian and the Compensation Committee determined that as a result of the Company’s substantial growth since the establishment of its prior compensation peer group in 2018, changes to the Company’s compensation peer group were necessary in order to keep pay levels and pay practices aligned with the compensation paid at Companies with which we now compete for executive talent. In early 2020, the Compensation Committee revised the Company’s peer group to ensure the companies included were as comparable as possible to the Company in terms of operations, revenue, market capitalization, and geographic location. As a result, the Company’s peer group for purposes of aiding in the evaluation of 2020 compensation levels and evaluating TSR performance for the PSUs granted in 2020 (the “2020 Peer Group”) was comprised of the following companies: +Apergy Corporation (1) +Helmerich & Payne, Inc. +Oil States International, Inc. +U.S. Silica Holdings. Inc. +Calfrac Well Services Ltd. +Liberty Oilfield Services Inc. +Patterson-UTI Energy, Inc. +Covia Holdings Corporation +Nabors Industries Ltd. +Precision Drilling Corporation +Ensign Energy Services Inc. +NexTier Oilfield Solutions Inc. +RPC, Inc. +(1) +On June 3, 2020 Apergy Corporation merged with ChampionX Holdings and changed its name to ChampionX Corporation. +In 2020, the Compensation Committee generally targeted total compensation for each of our Named Executive Officers and directors, as well as each element of compensation, at the 50 th percentile for similarly situated individuals in the 2020 Peer Group. However, the Compensation Committee also considered many other factors when establishing compensation levels, including, but not limited to, internal pay equity at the Company, each executive’s experience and responsibility, succession planning, and recruiting and retention concerns. As a result, the compensation of our Named Executive Officers and directors may be slightly higher or lower than the 50 th percentile of the 2020 Peer Group. +24 +Elements of Compensation +As shown below, a significant portion of the target compensation for our Chief Executive Officer is performance-based and an even larger portion is variable or “at risk,” meaning that it can be forfeited and its value is dependent upon factors such as our stock price or company performance. +Base Salary +We pay a base salary to each of our executives in order to provide a consistent, minimum level of pay that is sufficient to allow us to attract and retain executives with the appropriate skills and experience for their positions. The Compensation Committee monitors and adjusts salaries for our Named Executive Officers over time as necessary to remain competitive with market rates for officers at similarly sized public companies and to reflect changes in each Named Executive Officer’s role, duties and responsibilities. All salary adjustments implemented during 2020 are included in the table below and were approved by the Compensation Committee in early 2020, prior to the onset of the COVID-19 pandemic and after reviewing market data from Meridian. Each increase in base salary was in response to a change in role for the Named Executive Officer to ensure their compensation was commensurate with the additional duties and responsibilities of their new role. +December 2019 +Base Salary +December 2020 +Base Salary +Phillip A. Gobe (1) +$ +450,000 +$ +800,000 +Dale Redman (2) +$ +700,000 +N/A +Darin G. Holderness (3) +$ +500,000 +N/A +David S. Schorlemer (4) +N/A +$ +450,000 +Jeffrey D. Smith (5) +$ +425,000 +$ +425,000 +David Sledge +$ +425,000 +$ +425,000 +Adam Muñoz (6) +$ +375,000 +$ +425,000 +Newton W. “Trey” Wilson III +$ +400,000 +$ +400,000 +(1) +As of December 31, 2019 Mr. Gobe served as our Executive Chairman. Mr. Gobe was appointed as our Chief Executive Officer on March 13, 2020 and his base salary was increased in connection with that appointment. +(2) +Mr. Redman’s employment with us terminated on March 13, 2020. +(3) +Mr. Holderness’s employment with us terminated on October 30, 2020. +(4) +Mr. Schorlemer was appointed as Chief Financial Officer on October 23, 2020. +(5) +As of December 31, 2019, Mr. Smith served as Chief Administrative Officer. Mr. Smith was appointed as Special Advisor to the Chief Executive Officer on March 13, 2020. +25 +(6) +As of December 31, 2019, Mr. Muñoz served as Director of Business Development and Technical Services. On February 11, 2020 Mr. Muñoz was appointed as Vice President of Frac Services and on March 13, 2020 Mr. Muñoz was appointed to serve as Senior Vice President of Operations, at which time his base salary was increased to $425,000. On December 31, 2020 Mr. Muñoz was appointed to serve as Chief Operating Officer, effective as of January 1, 2021. +Our Named Executive Officers each volunteered for temporary reductions in base salary as a result of the market conditions in 2020. On April 2, 2020, the Compensation Committee approved the following temporary reductions to base salaries for our Named Executive Officers, effective April 13, 2020: +• +20% salary reduction for Mr. Gobe; +• +15% salary reduction for Messrs. Holderness, David Sledge and Wilson; and +• +10% salary reduction for Messrs. Smith and Muñoz. +Effective October 23, 2020, the Compensation Committee approved the elimination of the temporary executive salary reductions for our Named Executive Officers due to improved market conditions. +Annual Cash Incentive Awards +Amended Annual Bonus Plan +On February 11, 2020, the Board approved the Amended and Restated ProPetro Holding Corp. Executive Incentive Bonus Plan (the “Amended Annual Bonus Plan”), which amends and restates the ProPetro Holding Corp. Senior Executive Incentive Plan (the “Annual Bonus Plan”). +The Amended Annual Bonus Plan was approved to reflect changes made to the Code pursuant to federal tax legislation enacted by Congress in 2017. In addition, the Amended Annual Bonus Plan makes the following changes to the Annual Bonus Plan: (i) expands the definition of “Eligible Individual” to include not only the Company’s executive officers but also senior managers of the Company, (ii) enables the Compensation Committee, as the administrator of the Amended Annual Bonus Plan, to delegate certain administrative authorities under the Amended Annual Bonus Plan to the Company’s executive officers for those participants in the Amended Annual Bonus Plan that are not executive officers of the Company, and (iii) clarifies the applicable administrator’s discretion to modify the performance goals and bonus amounts under the Amended Annual Bonus Plan. +The Amended Annual Bonus Plan governs cash incentive awards made each year to key executives and senior management members of the Company, and is effective for awards made in 2020 and thereafter. Awards under the Amended Annual Bonus Plan are tied to the achievement of performance goals, which may be based on qualitative or quantitative measures, or both, as determined by the Compensation Committee or other applicable administrator. +Target Award Opportunities +In February 2020, the Compensation Committee established target bonuses under the Amended Annual Bonus Plan for each of Messrs. Gobe, Redman, Holderness, Smith, Sledge and Wilson of 100%, 110%, 75%, 65%, 100%, and 75% of base salary, respectively. In connection with his appointment as Special Adviser to the Chief Executive Officer, Mr. Smith entered into the Smith Letter Agreement (as defined below), which provided that he would no longer participate in the Amended Annual Bonus Plan. The Smith Letter Agreement did not foreclose the opportunity for the Compensation Committee to award Mr. Smith a discretionary bonus if they determined such a bonus was appropriate in the future. The target bonus for 2020 for Mr. Muñoz was established at 100% of base salary when he was promoted to Senior Vice President of Operations in the March of 2020. In connection with Mr. Schorlemer’s appointment as Chief Financial Officer he was promised the opportunity to earn an annual cash bonus with a target value for 2020 equal to 80% of his base salary (prorated for 2020 based on the portion of 2020 that he is employed by the Company). In sum, final target bonus opportunities for each Named Executive Officer for 2020 were as follows: +26 +Final 2020 Target +Bonus Award +Opportunity +Phillip A. Gobe +100 % +Dale Redman +110 % +Darin G. Holderness +75 % +David S. Schorlemer (1) +80 % +Jeffrey D. Smith +N/A +David Sledge +100 % +Adam Muñoz +100 % +Newton W. “Trey” Wilson III +75 % +(1) +Mr. Schorlemer’s 2020 bonus was pro-rated based on the portion of 2020 that he was employed with the Company. +Target bonus levels for each executive were established by the Compensation Committee after reviewing peer group data and, where peer data was not available or appropriate, compensation data found in Equilar General Industry Survey. The Compensation Committee also considered each Named Executive Officer’s responsibility and experience. +Performance Measures and Payout Results +Each year, the Compensation Committee establishes performance metrics and threshold, target, and maximum goals for each such metric. Potential payouts under the Amended Annual Bonus Plan depend on the actual performance level for each metric established by the Committee, as outlined below. +Performance Level +Payout (as a % of +Target Bonus) +Threshold +50 % +Target +100 % +Maximum +200 % +If performance falls between the specified performance levels, payments are generally determined via straight-line interpolation. If performance falls below the threshold performance level, no payments will be awarded. The Amended Annual Bonus Plan provides the Compensation Committee or the Board with the discretion to increase or decrease actual payout amounts otherwise resulting from the pre-established metrics, as it may deem necessary. +Under the 2020 annual incentive program, 80% of each Named Executive Officer’s annual bonus was based on the achievement of the quantitative performance goals enumerated in the table below. The remaining 20% of the annual incentive was based upon a qualitative analysis of individual and operational performance for the 2020 fiscal year. +27 +Measure +Weighting +Threshold +Target +Maximum +Actual 2020 +Performance +Payout as a +Percentage +of Target +Bonus (1) +Quantitative Measures +Adjusted EBITDA per +Share (2) +60 % +$ +3.01 +$ +3.69 +$ +4.11 +$ +1.40 +0% +Safety-Total Recordable Incident Rate +(TRIR) +20 % +1.1 +0.9 +0.75 +0.49 +40% +Quantitative Total +80 % +40% +Qualitative Measure (3) +Individual and Operational Performance +20 % +34 – 40% +Discretionary Increase (4) +0 – 26% +Overall Total +100 % +74 – 106% +(1) +These amounts have been rounded to the nearest whole number. +(2) +We define EBITDA as earnings before (i) interest expense, (ii) income taxes and (iii) depreciation and amortization. We define Adjusted EBITDA as EBITDA, plus (i) loss/(gain) on disposal of assets, (ii) loss/ (gain) on extinguishment of debt, (iii) stock based compensation, and (iv) other unusual or non-recurring (income)/expenses, such as impairment charges, severance, costs related to our IPO and costs related asset acquisition or one-time professional fees. +(3) +The Compensation Committee determined that the payout percentage for all eligible Named Executive Officers other than Mr. Wilson was 34% and the payout percentage for Mr. Wilson was 40%. +(4) +The Compensation Committee exercised its discretion to increase Mr. Wilson’s annual bonus payment an additional 26% of his target bonus over the maximum payout percentage calculated pursuant to the pre-established metrics. +The Compensation Committee selected these performance metrics because they are important to the ongoing success of the Company and were intended to drive short-term business performance by focusing executives on key objectives that position the Company for sustained growth. Specifically, Adjusted EBITDA per share is a measure of our financial performance and capital structure, and TRIR is an important measure of safety. The Qualitative component of the Amended Annual Bonus Plan allows the Committee to assess performance across a variety of individual and operational performance factors. +Overall, the Compensation Committee felt that the Company’s operational performance for 2020 was strong, particularly given the extraordinary challenges presented by depressed oil and gas prices, a global pandemic, several executive position transitions, and the need to successfully remediate material weaknesses in the Company’s financial controls and become current with SEC filings. Our Named Executive Officers have shown exceptional leadership throughout this difficult time, not allowing any of these obstacles to detract from achieving positive financial outcomes. The Compensation Committee made particular note of the following when setting the qualitative measure for our 2020 annual incentive program: +• +Successful executive position transitions; +• +The Company becoming current with its SEC filings; +• +The successful remediation of material weaknesses in the Company’s financial controls; +• +Successful implementation of cost-reduction strategies; and +• +Positive EBITDA in every quarter in 2020. +As a result, the Compensation Committee made the determination to make the following payments under the Amended Annual Bonus Plan: +28 +Final 2020 Target +Bonus Award +Opportunity as a +Percentage of +Base Salary +Value of Final +2020 Target +Bonus Award +Opportunity +Actual Payout as +a Percentage of +Target Bonus +Value of Actual +2020 Annual +Bonus +Phillip A. Gobe +100 % +$ +800,000 +74 % +$ +595,925 +David S. Schorlemer (1) +80 % +$ +79,200 +74 % +$ +59,348 +Adam Muñoz +100 % +$ +425,000 +74 % +$ +316,585 +Newton W. “Trey” Wilson III (2) +75 % +$ +300,000 +106 % +$ +319,102 +(1) +Mr. Schorlemer’s 2020 target bonus value and actual bonus payment were pro-rated based on the portion of 2020 that he was employed with the Company. +(2) +The Compensation Committee used its discretion to increase Mr. Wilson’s bonus payment above the maximum payable pursuant to the pre-established metrics. His payout percentage was 80% +For the executives in the table above, other than Mr. Wilson, the payout percentage for the individual and operational performance metric was 34%, resulting in a total payout of 74% of each executive’s target bonus. The amount awarded to Mr. Wilson was slightly in excess (by $79,102) of the maximum bonus resulting from the payout percentages based on actual performance under the pre-established metrics (i.e., a payout percentage of 40% for the operational performance metric and 80% of target bonus overall). The Committee determined that such additional amount was appropriate in recognition of the additional time and leadership required to implement the remediation and improvement plan initiated in 2019 and to address related legal matters. +The Compensation Committee also elected to pay annual cash bonuses to Messrs. Holderness, Smith and Sledge in the following amounts: $279,340, $158,293, and $316,585. The bonus paid to Mr. Sledge was required pursuant to the terms of the Sledge Separation Agreement, though the amount was discretionary and was calculated by applying a 74% payout percentage to his 2020 target annual bonus opportunity, without pro-ration. Payments to Messrs. Holderness, who resigned during 2020, and Smith were awarded on a discretionary basis for exemplary work during the year. The bonus paid to Mr. Holderness was also calculated by applying a 74% payout percentage to his 2020 target annual bonus opportunity, without pro-ration. +Long Term Incentive Awards +Adoption of 2020 LTIP +On October 22, 2020 our stockholders approved the ProPetro Holding Corp. 2020 Long Term Incentive Plan (the “2020 LTIP”). Prior to such date the Company maintained the ProPetro Holding Corp. 2017 Incentive Award Plan (the “2017 LTIP”), under which all equity awards were granted to our Named Executive Officers during 2020. No further awards were granted under the 2017 LTIP following approval of the 2020 LTIP. Going forward, all future awards will be granted under the 2020 LTIP, pursuant to which 4,650,000 shares of our common stock are authorized for issuance, subject to applicable share recycling and adjustment provisions. +2020 Long Term Incentive Awards +In 2020, 40% of the value of each Named Executive Officer’s long term incentive awards were granted in the form of RSUs that vest in three substantially equal annual installments commencing on the first anniversary of the grant date and the remaining 60% in the form of performance stock units (“PSUs”) that vest, if earned, following the completion of a three year performance period, in each case subject to the Named Executive Officer’s continued employment through the end of such period. +29 +This mix of time- and performance-based awards is intended to achieve the twin goals of ensuring retention and driving performance, while aligning the interests of our Named Executive Officers with those of our shareholders by providing an opportunity for increased share holdings. Both PSUs and RSUs may be settled in shares of our common stock or in the cash equivalent of the same. +The PSUs granted in 2020 vest based on the Company’s TSR as compared to the TSR of a designated peer group of companies. For purposes of the 2020 PSU awards, recipients of PSUs may earn between 0% and 200% of the target number of shares granted, as indicated in the following table. If performance falls between the specified performance levels, payouts will be determined via straight-line interpolation. If performance falls below the threshold performance level, no payouts will be awarded. Irrespective of the payout indicated by the table below, if the Company’s TSR is below zero on an absolute basis for the performance period, the number of PSUs earned shall not be greater than the target number of PSUs granted (i.e., the payout shall not be greater than 100%). +Company’s Percentile Rank in Peer Group +Payout (as a % of Target +Number of PSUs Granted) +Payout (as a % of Target +Number of PSUs Granted) +if TSR is Below Zero +Below 25th Percentile +0 % +0 % +25th Percentile +50 % +50 % +50th Percentile +100 % +100 % +75th Percentile +175 % +100 % +90th Percentile and Above +200 % +100 % +The performance period for the 2020 PSU awards commenced on January 1, 2020 and ends on December 31, 2022. The 2020 performance peer group is comprised of the same companies used in the 2020 Peer Group. +Should a peer company cease to exist as a separate publicly-traded company during the performance period (due to an acquisition or bankruptcy, for example), it will remain as a member of the Company’s peer group with any peer company filing for bankruptcy ranked last in the peer group and any peer company that is acquired ranked based on the stock price at which it was acquired. +The annual value of each Named Executive Officer’s long-term incentive award is generally determined in conjunction with the Compensation Committee’s annual compensation analysis or, if later, in connection with the Named Executive Officer’s promotion or hire date following the Compensation Committee’s review of peer compensation data and consideration of each Named Executive Officer’s position and associated responsibilities. In 2020, the Compensation Committee granted the RSUs and PSUs included in the table below to our Named Executive Officers. +30 +Name +Number +of RSUs +Granted +in 2020 +Value of +RSUs +Granted in +2020 (4) +Target +Number +of PSUs +Granted +in 2020 +Value of +PSUs +Granted in +2020 (4) +Phillip A. Gobe +275,839 +$ +1,279,995 +413,758 +$ +2,528,726 +Dale Redman (1) +83,594 +$ +799,995 +125,391 +$ +1,680,239 +Darin G. Holderness (2) +41,797 +$ +399,997 +62,695 +$ +840,113 +David S. Schorlemer +27,210 +$ +119,996 +40,816 +$ +267,753 +Jeffrey D. Smith +31,347 +$ +299,991 +47,021 +$ +630,081 +David Sledge (3) +37,617 +$ +359,995 +56,426 +$ +756,108 +Adam Muñoz +46,914 +$ +263,547 +70,372 +$ +531,764 +Newton W. “Trey” Wilson III +22,988 +$ +219,995 +34,482 +$ +462,059 +(1) +Mr. Redman forfeited all RSUs and PSUs granted to him in 2020 upon his resignation on March 13, 2020. +(2) +In connection with his resignation effective October 30, 2020, Mr. Holderness’s remaining unvested RSUs were accelerated to fully vest while, his PSUs were accelerated to vest from a service standpoint but remain subject to all applicable performance conditions and will vest, if at all, at the end of the performance period based on actual Company performance. +(3) +In connection with his resignation effective December 31, 2020, the vesting of 12,539 of Mr. Sledge’s RSUs granted in 2020 was accelerated. The remainder of the RSUs and PSUs that were granted to Mr. Sledge in 2020 were forfeited. +(4) +Amounts in these columns reflect the aggregate grant date fair value of the RSU and PSU awards granted in 2020 under the 2017 LTIP, calculated in accordance with FASB ASC Topic 718. +As part of the compensation package that the Compensation Committee negotiated to recruit Mr. Schorlemer, the Company promised to grant him awards under the 2020 LTIP with a grant date fair value of at least $900,000 in 2021. Details regarding the actual awards granted to each of our Named Executive Officers in 2021 will be discussed in our 2021 proxy statement, in accordance with applicable SEC rules. +Employee Benefits, Perquisites and Special Payments +Health/Welfare Plans +All of our full-time employees, including our Named Executive Officers, are eligible to participate in our health and welfare plans on the same basis, including: medical, dental and vision benefits; medical and dependent care flexible spending accounts; short-term and long-term disability insurance; and group life insurance. +Retirement Plans +We currently maintain a 401(k) retirement savings plan for our employees who satisfy certain eligibility requirements. Our Named Executive Officers are eligible to participate in the 401(k) plan on the same terms as other full-time employees. Currently, we match contributions made by participants in the 401(k) plan up to a specified percentage of the employee contributions and we may make certain discretionary profit sharing contributions. Both the matching contributions and the profit sharing contributions vest in equal installments over four years of service, with accelerated vesting on retirement, death or disability. We believe that offering a vehicle for tax-deferred retirement savings through our 401(k) plan and making matching contributions and profit sharing contributions that vest over time, add to the overall desirability of our compensation packages and further incentivize our employees in accordance with our compensation policies. We do not maintain any defined benefit pension plans or deferred compensation plans. +31 +Retention Bonuses +In 2020, Mr. Wilson received a $25,000 retention bonus, consistent with the terms of the Wilson Employment Agreement (as defined below). While the Company’s legal obligations pursuant to the Wilson Employment Agreement were canceled by Mr. Wilson’s entry into a participation agreement under the Amended Executive Severance Plan, the Compensation Committee elected to honor the payment of the retention bonus. Mr. Wilson is a key member of our executive team and payment of the retention bonus served to ensure he would continue to provide services to the Company. Mr. Schorlemer has extensive public company experience and his recruitment was one of the Company’s most important hiring actions during 2020. In connection with his recruitment, Mr. Schorlemer was also promised a retention bonus in the amount of $75,000, payable on the first anniversary of his employment with the Company. +Perquisites +Messrs. Redman, Smith, Sledge, Muñoz, and Wilson each participated in a vehicle allowance program during 2020. In addition, in 2020 we provided each of Messrs. Gobe, Holderness and Schorlemer with a Company vehicle for their use while in Midland, Texas. In 2020 the Company also provided other perquisites to its Named Executive Officers, including club memberships and dues. +In order to incentivize Mr. Schorlemer, who was a key hire during 2020, to accept the position as our Chief Financial Officer and relocate to Midland, Texas, we paid him a $125,000 relocation bonus and promised to pay for all costs associated with his relocation, including a tax gross-up on the portions of those expenses that Mr. Schorlemer recognizes as income. The portion of such relocation costs accrued through December 31, 2020 is reflected in the Summary Compensation Table below. See “Executive Compensation  —  Summary Compensation Table” for additional information. Relocation costs accrued in 2021 and any tax gross-up on those expenses will be reflected in the Summary Compensation Table for 2021, in accordance with applicable SEC rules. Total relocation costs and the associated gross-up payments for Mr. Schorlemer are not expected to exceed $300,000. +The Compensation Committee reviews the perquisites we provide to our Named Executive Officers periodically, including in 2020, to ensure that they are necessary to retain our executives, appropriate, and consistent with benefits offered by companies with which we compete for executive talent. +Other New Plans, Agreements and Arrangements +Executive Severance Plan +On March 13, 2020, the Board adopted the ProPetro Services, Inc. Executive Severance Plan (the “Executive Severance Plan”). The Compensation Committee and the Board adopted the Executive Severance Plan because they felt it was desirable to pivot away from individually negotiated employment agreements and towards a streamlined plan providing for more uniform treatment upon a termination of employment. The amounts of the severance and benefits established under the Executive Severance Plan were selected after the Compensation Committee received advice from Meridian regarding the types and amounts of severance that are market among the Company’s peers. The Compensation Committee also considered its members’ considerable experience in the industry when making this determination. The “Tier” level assigned to each participant in the plan was determined based on each participant’s position and responsibility. +On April 10, 2020, the Board adopted the ProPetro Services, Inc. Amended and Restated Executive Severance Plan (the “Amended Executive Severance Plan”), which amends the Executive Severance Plan such that any severance amounts that become payable will be calculated without taking into account any temporary reduction to a participant’s annualized base salary in connection with a general reduction in base salaries that affects all similarly situated employees of the Company in substantially the same proportions, as determined by the Compensation Committee in its sole discretion. +On October 23, 2020, the Board adopted the ProPetro Services, Inc. Second Amended and Restated Executive Severance Plan (the “Second Amended Executive Severance Plan”), which amends the Amended Executive Severance Plan such that (i) equity awards granted under the 2017 LTIP will continue to be governed by the terms of the 2017 LTIP and equity awards granted under the 2020 LTIP will be governed by the +32 +terms of the 2020 LTIP, (ii) certain defined terms are incorporated by reference to the 2020 LTIP rather than the 2017 LTIP and (iii) participants in the Second Amended Executive Incentive Plan are required to comply with certain obligations, including restrictive covenants, as set forth in the award agreements under both the 2017 LTIP and the 2020 LTIP, as applicable. +Each of Messrs. Gobe, Holderness, Schorlemer, Muñoz and Wilson were participants in the Amended Executive Severance Plan during 2020 as were certain other executives of the Company who are not Named Executive Officers. The participation agreements for each of Messrs. Gobe, Holderness and Wilson included the termination of the Gobe Letter Agreement, the Holderness Letter Agreement and the Wilson Employment Agreement (each as defined below), respectively, except for the provisions of those agreements containing restrictive covenants. The Second Amended Executive Severance Plan is described in detail below in the section entitled “Potential Payments upon Termination and Change of Control  —  Second Amended Executive Severance Plan.” +Letter Agreement with Jeffrey D. Smith +On March 13, 2020, Mr. Smith was appointed as a Special Advisor to the Chief Executive Officer and will no longer serve as the Chief Administrative Officer or an executive officer of the Company. Effective as of March 13, 2020, the Company and Mr. Smith entered into a letter agreement (the “2020 Smith Letter Agreement”) memorializing the terms of his role and related matters. Pursuant to the terms of the 2020 Smith Letter Agreement, Mr. Smith will continue to receive an annualized base salary of $425,000 but the Compensation Committee does not anticipate Mr. Smith receiving any future awards under the 2017 LTIP in his new role. Mr. Smith will no longer be eligible to receive an annual cash bonus under the Amended Annual Bonus Plan, including for the 2020 fiscal year. In addition, the 2020 Smith Letter Agreement terminated the employment agreement by and between Mr. Smith and the Company dated April 17, 2013 (the “Smith Employment Agreement”), effective as of March 13, 2020, except that the restrictive covenants set forth in Section 6 of the Smith Employment Agreement will continue in full force and effect. +In addition, the 2020 Smith Letter Agreement provides Mr. Smith with the following benefits in exchange for his agreement to additional restrictive covenants that result in a total of a five-year non-competition and non-solicitation obligation (an increase from the one-year non-competition and three-year non-solicitation obligation set forth in the Smith Employment Agreement and in the award agreements documenting Mr. Smith’s equity awards under the 2017 LTIP): +• +an extension of the exercise period applicable to the stock options granted under the Stock Option Plan of ProPetro Holding Corp., which was originally adopted in 2013 and subsequently amended (the “Stock Option Plan”) that are vested and outstanding as of the date of Mr. Smith’s “Termination of Employment” (as defined in the Stock Option Plan) (the “Smith Extended Options”) such that the Smith Extended Options remain exercisable until the one-year anniversary of the date of Mr. Smith’s Termination of Employment; and +• +“cashless exercise” of the stock options granted under the both the Stock Option Plan and 2017 LTIP that are outstanding as of March 13, 2020 (the “Smith Vested Options”) within the exercise periods described in the applicable award agreements and plans (as modified by the 2020 Smith Letter Agreement for the Smith Extended Options) such that Mr. Smith does not have to deliver any cash to exercise the Smith Vested Options but the number of shares of Stock delivered by the Company upon the exercise of the Smith Vested Options shall be reduced by the number of shares of Stock equal in value to the applicable exercise price and the associated tax withholding. +Letter Agreement with David Sledge +On April 9, 2020, the Company entered into a letter agreement with David Sledge (the “Sledge Letter Agreement”). The Sledge Letter Agreement describes a reduction in Mr. Sledge’s annualized base salary, effective April 13, 2020, which is consistent with the voluntary reduction in certain executives’ base salaries as a result of current market conditions. +The Sledge Letter Agreement also clarifies that, similar to the terms of the Amended Executive Severance Plan, Mr. Sledge’s revised annualized base salary will not be used for purposes of calculating any +33 +severance payment that Mr. Sledge may become eligible to receive pursuant to the terms of the employment agreement by and between the Company and Mr. Sledge, effective April 17, 2013 (the “Sledge Employment Agreement”). +The Sledge Letter Agreement contains Mr. Sledge’s acknowledgment of and consent to the aforementioned changes and provides that the Sledge Employment Agreement is deemed to be amended by the Sledge Letter Agreement to the extent that any provision of the Sledge Letter Agreement is inconsistent with the terms of the Sledge Letter Agreement. For additional information regarding the Sledge Employment Agreement please see the section below entitled “Executive Compensation  —  Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table  —  Employment Agreements with Messrs. Redman, Smith, and Sledge.” +Separation Agreement with Dale Redman +In connection with his resignation, on March 13, 2020, the Company and Mr. Redman entered into a separation agreement and release (the “Redman Separation Agreement”) pursuant to which, among other things, Mr. Redman (i) acknowledged his resignation from employment with the Company; (ii) agreed to additional restrictive covenants that result in a total of a five-year non-competition and non-solicitation obligation (an increase from the one-year non-competition and three-year non-solicitation obligation set forth in the Redman Employment Agreement (as defined below) and in the award agreements documenting Mr. Redman’s equity awards under the 2017 LTIP); and (iii) executed a release of claims in favor of the Company. The Company agreed to provide certain very limited separation benefits to Mr. Redman pursuant to the Redman Separation Agreement to which he was not otherwise entitled in order to obtain additional restrictive covenants and a release of claims and to show appreciation for his many years of service to the Company, each of which the Compensation Committee felt were important to the Company. For information regarding the limited separation benefits that Mr. Redman received in connection with his termination of employment pursuant to the Redman Separation Agreement, see the section below entitled “— Potential Payments Upon Termination or Change in Control  — Redman Separation Agreement.” +Separation Agreement with Darin Holderness +Effective as of October 23, 2020, the Company and Mr. Holderness entered into a separation agreement and release (the “Holderness Separation Agreement”) memorializing the terms of his transition from Chief Financial Officer to Special Advisor to the Chief Financial Officer and pursuant to which Mr. Holderness resigned as an employee on October 30, 2020. Pursuant to the terms of the Holderness Separation Agreement, during the time that Mr. Holderness served as the Special Advisor to the Chief Financial Officer, he continued to receive the base salary in place on October 23, 2020 and remained eligible to receive such other benefits for which he was eligible to receive prior to October 23, 2020, including use of a Company-provided vehicle. The Holderness Separation Agreement also included a release of claims in favor of the Company and some limited separation benefits. The Company agreed to provide Mr. Holderness with certain limited separation benefits pursuant to the Holderness Separation Agreement to which he was not otherwise entitled in order to obtain a release of claims and to show appreciation for the work he did in developing and implementing the Company’s remediation plan during 2019 and 2020, each of which the Compensation Committee felt were important to the Company. For information regarding the payments and benefits that Mr. Holderness received in connection with his termination of employment pursuant to the Holderness Separation Agreement, see the section below entitled “— Potential Payments Upon Termination or Change in Control  — Holderness Separation Agreement.” +Separation Agreement with David Sledge +On December 17, 2020, the Company and Mr. Sledge entered into a Separation Agreement and Release (the “Sledge Separation Agreement”) pursuant to which Mr. Sledge ceased to serve as the Chief Operating Officer of the Company, effective December 31, 2020. Pursuant to the Separation Agreement, Mr. Sledge (i) acknowledged his resignation from employment with the Company as of the Separation Date; (ii) agreed to additional restrictive covenants, which in combination with his previously existing restrictive covenant obligations extend Mr. Sledge’s total non-competition and non-solicitation period to five years following the Separation Date; and (iii) executed a release of claims in favor of the Company. The Company +34 +agreed to make certain severance payments and provide certain benefits to Mr. Sledge pursuant to the Sledge Separation Agreement to which he was not otherwise entitled in order to obtain additional restrictive covenants and a release of claims and to show appreciation for his many years of service to the Company, each of which the Compensation Committee felt were important to the Company. For information regarding the payments and benefits that Mr. Sledge received in connection with his termination of employment pursuant to the Holderness Separation Agreement, see the section below entitled “— Potential Payments Upon Termination or Change in Control  — Sledge Separation Agreement.” +Other Compensation Policies +Consistent with our goal of aligning compensation practices with stockholder interests, the Board has adopted, and the Compensation Committee administers, an Executive Compensation Claw-Back Policy and Executive Stock Ownership Policy. +Executive Compensation Claw-Back Policy +Under the terms of our Executive Compensation Claw-Back Policy, any incentive compensation, including equity awards, paid to an executive officer which was determined based on our performance against financial metrics will be subject to recovery by the Company in the event that the underlying financial metrics are negatively impacted by a restatement of our financial statements. In addition, incentive compensation, including equity awards, is subject to recovery by the Company where an executive engages in certain misconduct. +Executive Stock Ownership Policy +Under the terms of our Executive Stock Ownership Policy, we have established equity ownership guidelines for our executive officers. Under these guidelines, the Chief Executive Officer must own shares of our common stock or certain equity awards with a value equal to not less than five times annual base pay, the Chief Financial Officer and Chief Operating Officer must own shares of our common stock or certain equity awards with a value equal to not less than three times annual base pay, and all other executive officers must own shares of our common stock or certain equity awards with a value equal to not less than one times their annual base pay. Messrs. Gobe and Adam Muñoz, along with any individuals who became executive officers as a result of an internal promotion or a new hire, will have five years from the date of being named an executive officer to meet the stock ownership guidelines. Each of Messrs. Sledge and Holderness ceased to be subject to these guidelines on the date each ceased to be an executive officer of the Company. In calculating the value of shares of our common stock or certain equity awards held for purposes of determining compliance with the policy, such value is equal to the closing price per share on the measurement date, based on shares owned outright and unvested RSUs, with the value of such unvested RSUs discounted by 40%. Unexercised option awards and unvested PSUs are excluded from the calculation. +No Tax Gross-Ups +With the exception of gross-up payments provided in connection with Mr. Schorlemer’s relocation, we do not provide gross-up payments to cover our Named Executive Officers’ personal income taxes that may pertain to any of the compensation or perquisites paid or provided by our Company. +Insider Trading Compliance Policy +We believe that derivative transactions, including puts, calls and options, and hedging transactions for our securities carry a high risk of inadvertent securities laws violations and may lead to an officer, director or employee no longer having the same objectives as the Company’s other stockholders. For these reasons, we prohibit our directors, officers, and employees from engaging in any type of derivative or hedging transactions in respect of our securities pursuant to our Insider Trading Compliance Policy. +Company stock pledged as collateral, including shares held in a margin account, may be sold without the consent of the holder by the lender in a foreclosure or default event, which could lead to inadvertent securities laws violations. For this reason, pursuant to our Insider Trading Compliance Policy, we prohibit pledging Company securities as collateral to secure loans and purchasing Company securities on margin. +35 +Tax Implications +Section 162(m) (“Section 162(m)”) of the Internal Revenue Code of 1986, as amended (the “Code”) generally precludes a publicly held company from taking a federal income tax deduction for compensation paid in excess of $1 million per year to certain covered employees, which include our Named Executive Officers. There was an exception to the $1 million limitation for performance-based compensation meeting certain requirements. For taxable years beginning after December 31, 2017, this exemption has been repealed for all but certain grandfathered compensation arrangements. However, a privately held corporation that becomes a publicly held corporation before December 20, 2019 may rely on the transition rules provided in Treasury Regulation Section 1.162-27(f)(1) until the earliest of the events provided in Treasury Regulation Section 1.162-27(f)(2). Because our IPO occurred in 2017, certain compensation awarded or paid prior to the approval of our 2020 LTIP, the adoption of which terminated the transition period, may be fully tax deductible. To maintain flexibility in compensating the Company’s executive officers in a manner designed to promote achievement of corporate goals, retention and recruitment, the Compensation Committee has not adopted a policy requiring all compensation to be tax deductible and expects that the deductibility of certain compensation paid will be limited by Section 162(m). +Compensation Risk Assessment +We believe that any risks associated with our compensation policies and practices are mitigated in large part by the following factors and, therefore, that no such risk are likely to have a material adverse effect on us: +• +We pay a mix of compensation which includes short-term cash and long-term equity-based compensation. +• +We base the vesting and payment of our incentive compensation awards on several different performance metrics, which discourages our employees from placing undue emphasis on any one metric or aspect of our business at the expense of others. +• +We believe that our performance metrics are reasonably challenging yet should not require inappropriate risk-taking to achieve. +• +The performance metrics for awards under our Amended Annual Bonus Plan include quantitative financial and operational metrics as well as qualitative metrics related to our operations, strategy and other aspects of our business and our Compensation Committee retains discretion to modify payout amounts under the Amended Annual Bonus Plan as appropriate. +• +The performance periods under our PSUs overlap, and our time-vested RSUs generally vest over a three-year period. This mitigates the motivation to maximize performance in any one period at the expense of others. +• +Our Named Executive Officers are required to own our common stock at levels provided in our Executive Stock Ownership Guidelines. +• +We have instituted a clawback policy, which allows us to clawback compensation in the event of a financial restatement or certain misconduct. +• +We believe that we have an effective management process for developing and executing our short- and long-term business plans. +• +Our compensation policies and programs are overseen by the Compensation Committee. +• +The Compensation Committee retains an independent compensation consultant. +36 +REPORT OF THE COMPENSATION COMMITTEE +The Compensation Committee has reviewed and discussed the above CD&A with management and, based on such review and discussions, the Compensation Committee recommended to the Board that the CD&A be included in this proxy statement. +By the Compensation Committee of the Board of Directors, +Michele V. Choka (Chair) +Anthony J. Best +Jack B. Moore +37 +EXECUTIVE COMPENSATION +Summary Compensation Table +The following table summarizes the compensation provided by us to our Named Executive Officers for the fiscal years ended December 31, 2020, 2019 and 2018. +Name and Principal Position +Year +Salary (1) +($) +Bonus (2) +($) +Stock +Awards (3) +($) +Option +Awards (3) +($) +Non Equity +Incentive Plan +Compensation (4) +($) +All Other +Compensation (5) +($) +Total +($) +Phillip A. Gobe (6) +Chief Executive Officer +2020 +675,632 +— +3,808,721 +— +595,925 +15,450 +5,095,728 +2019 +142,078 +32,000 +422,370 (9) +— +118,000 +— +714,448 +Dale Redman (6) +Former Chief Executive Officer +2020 +199,755 +— +2,480,234 +679,239 +— +7,795 +3,367,023 +2019 +700,000 +— +4,975,572 +— +— +49,336 +5,724,908 +2018 +684,615 +— +3,360,534 +— +1,400,000 +304,863 +5,750,012 +Darin G. Holderness (7) +Former Chief Financial Officer +2020 +403,689 +— +1,730,354 +— +— +328,593 +2,462,636 +2019 +159,035 +35,000 +286,093 +— +165,000 +20,725 +665,853 +David S. Schorlemer (8) +Chief Financial Officer +2020 +101,435 +125,000 +387,749 +— +59,348 +69,218 +742,750 +Jeffrey D. Smith (6) +Former Chief Administrative Officer +2020 +418,578 +158,293 +930,072 +— +— +11,400 +1,518,343 +2019 +483,558 +— +1,658,543 +— +— +10,800 +2,152,901 +2018 +500,000 +— +1,344,232 +— +750,000 +22,732 +2,616,964 +David Sledge +Former Chief Operating Officer +2020 +450,512 +— +1,646,441 +1,400,783 +— +339,519 +3,837,255 +2019 +425,000 +— +1,492,699 +— +590,000 +10,800 +2,518,499 +2018 +425,000 +— +1,209,818 +— +850,000 +17,887 +2,502,705 +Adam Muñoz +Chief Operating Officer +2020 +407,232 +— +795,311 +— +316,585 +22,495 +1,541,623 +Newton W. “Trey” Wilson III +General Counsel and Corporate Secretary +2020 +383,242 +104,102 +682,054 +— +240,000 +28,900 +1,438,298 +2019 +96,923 +— +286,093 +— +120,000 +— +503,016 +(1) +The amounts in this column represent the base salary each Named Executive Officer earned for services provided during 2020. For Messrs. Redman, Holderness, and Sledge, it also includes the following values of paid time off paid to them in connection with their terminations of employment: $38,217, $11,175, and $44,952, respectively. +(2) +The amount in this column for Mr. Schorlemer reflects a relocation bonus paid in connection with his appointment and relocation. The amount in this column for Mr. Smith reflects a discretionary cash bonus awarded outside of the Amended Annual Bonus Plan. The amount for Mr. Wilson reflects (i) a $25,000 retention bonus and (ii) a $79,102 discretionary increase to his short-term cash incentive award paid pursuant to the Amended Annual Bonus Plan based upon his performance during 2020. See Note 3 below and “Elements of Compensation for the 2020 Fiscal Year — Annual Cash Incentive Awards,” “Elements of Compensation for the 2020 Fiscal Year — Employee Benefits and Perquisites — Retention Bonuses” and “Elements of Compensation for the 2020 Fiscal Year — Employee Benefits and Perquisites — Perquisites” above for additional information regarding these awards. +(3) +Amounts in these columns reflect the aggregate grant date fair value of the RSU and PSU awards granted in 2020 under the 2017 LTIP, calculated in accordance with FASB ASC Topic 718. For Messrs. Redman, Holderness, and Sledge, the amount also reflects the incremental fair value of the modified awards of RSUs, PSUs and stock options as described below in “Potential Payments Upon Termination +38 +or Change in Control — Redman/Holderness/Sledge Separation Agreement.” The FASB ASC Topic 718 value for the RSUs was calculated using the closing price per share of our common stock on the date of grant applied to the total number of RSUs granted. The FASB ASC Topic 718 grant date fair value of the PSUs was determined using a Monte Carlo simulation. For information regarding assumptions underlying the valuation of equity awards, see Note 11 of the Consolidated Financial Statements included in our 2020 Annual Report on Form 10-K. The actual amount realized upon settlement of PSU and RSU awards will depend upon the market price of the Company’s stock on the settlement date and the Company’s performance (with respect to the PSUs). +(4) +Amounts in this column represent the short-term cash incentive awards for performance during the 2020 fiscal year pursuant to the Amended Annual Bonus Plan, determined based on achievement of the applicable performance metrics. See “Compensation Discussion and Analysis — Elements of Compensation for the 2020 Fiscal Year — Annual Cash Incentive Awards” above for additional informational regarding these awards. +(5) +Amounts in this column are comprised of the payments and benefits enumerated in the table below. +Name +Vehicle +Allowance +Program +($) (a) +Contribution +to +401(k) Plan +($) (b) +Company +Vehicle +Use +($) (c) +Club Dues/ +Membership +Fees +($) (d) +Attorney +Fees +($) (e) +Relocation, +Housing +Allowance +& +Travel +Benefits +($) (f) +Tax +Gross-up +($) (g) +2020 +Annual +Bonus +Paid +Following +Termination +($) (h) +COBRA +($) (i) +Total +($) +Phillip A. Gobe (j) +— +15,450 +— +— +— +— +— +— +— +15,450 +Dale Redman (j) +— +— +— +— +— +— +— +— +7,795 +7,795 +Darin G. Holderness +— +— +10,409 +— +5,366 +33,478 +— +279,340 +— +328,593 +David S. Schorlemer +— +— +211 +16,787 +— +31,671 +20,549 +— +— +69,218 +Jeffrey D. Smith +11,400 +— +— +— +— +— +— +— +— +11,400 +David Sledge +11,400 +— +— +— +11,534 +— +— +316,585 +— +339,519 +Adam Muñoz +11,400 +3,462 +— +7,633 +— +— +— +— +— +22,495 +Newton W. “Trey” Wilson III +11,400 +13,824 +— +3,676 +— +— +— +— +— +28,900 +(a) +The amounts in this column reflect the cost of the Company’s vehicle allowance program. +(b) +Amounts in this column reflect the Company’s contribution to each Named Executive Officer’s account in the Company’s 401(k) plan. +(c) +Amounts in this column reflect the value of the Company vehicle provided to Messrs. Gobe, Redman, and Schorlemer for their use while in Midland, Texas, which was determined by multiplying the number of miles they each drove the vehicle in 2020 by $0.575, which is the Internal Revenue Service’s mileage reimbursement rate for business travel in 2020. +(d) +Amounts in this column reflect club dues or membership fees paid by the Company. +(e) +Amounts in this column reflect attorney’s fees paid on behalf of the Named Executive Officer in connection with his termination of employment. +(f) +For Mr. Holderness, the amount reported for 2020 includes reimbursements for travel to and from Midland, Texas and payment of his housing expenses in Midland, Texas. For Mr. Schorlemer, this amount includes costs associated with his relocation to Midland, Texas that were incurred in 2020, including travel and accommodation to and from Midland for Mr. Schorlemer and his family to purchase a home and locate a school for his children, travel to and from Waco, Texas to visit his family prior to their relocation to Midland, temporary housing in Midland prior to the purchase of his home, and relocation of the family vehicle to Midland. +(g) +Represents a tax gross-up for amounts reimbursed in connection with the purchase of Mr. Schorlemer’s home in Midland, Texas. +39 +(h) +Annual bonuses for 2020 were paid to Messrs. Holderness and Sledge following their termination of employment. The bonus paid to Mr. Holderness was required by the Sledge Separation Agreement, though the amount was in the discretion of the Compensation Committee. The bonus paid to Mr. Holderness was a discretionary bonus awarded after fiscal year end. +(i) +This amount reflects the cost of continued health coverage following Mr. Redman’s termination of employment pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), paid pursuant to the Redman Separation Agreement (as defined and described below in “Potential Payments upon Termination or Change in Control — Redman Separation Agreement”) +(j) +The value of any perquisites or personal benefits has been excluded in accordance with Instruction 4 to Item 402(c)(2)(ix) of Regulation S-K because the total value of all perquisites and personal benefits for the Named Executive Officer for 2020 was less than $10,000. +(6) +Mr. Redman resigned from his position as Chief Executive Officer on March 13, 2020, and Mr. Gobe was appointed Chief Executive Officer as of such date. Effective as of the same date, Mr. Smith was appointed Senior Advisor to the Chief Executive Officer and ceased to serve as Chief Administrative Officer. Mr. Gobe served as our sole principal financial officer during the entirety of 2020. +(7) +On April 10, 2020, Mr. Holderness was appointed Chief Financial Officer, removing the previous interim title. On October 23, 2020 Mr. Holderness ceased to serve as Chief Financial Officer and was appointed Special Advisor to the Chief Financial Officer until his resignation from the Company on October 30, 2020. +(8) +On October 23, 2020, Mr. Schorlemer was appointed Chief Financial Officer and ceased to be Special Advisor to the Chief Financial Officer, a position he had held since October 12, 2020. +40 +Grants of Plan-Based Awards +Estimated Possible Payouts Under +Non-Equity Incentive Plan Awards (1) +Estimated Future Payouts Under +Equity Incentive Plan Awards (2) +All Other +Stock +Awards: +Number of +Shares of +Stock +Grant Date Fair Value of +Stock and Option Awards +Name +Grant Date +Threshold +($) +Target +($) +Maximum +($) +Threshold +($) +Target +($) +Maximum +($) +(#) (3) +($) (4) +Phillip A. Gobe +400,000 +800,000 +1,600,000 +— +— +— +— +— +RSUs +2/11/2020 +— +— +— +— +— +— +41,797 +399,997 +RSUs +3/13/2020 +— +— +— +— +— +— +234,042 +879,998 +PSUs +2/11/2020 +— +— +— +31,348 +62,695 +125,390 +— +840,113 +PSUs +3/13/2020 +— +— +— +175,532 +351,063 +702,126 +— +1,688,613 +Dale Redman (5) +385,000 +770,000 +1,540,000 +— +— +— +— +— +RSUs +2/11/2020 +— +— +— +— +— +— +83,594 +799,995 +PSUs +2/11/2020 +— +— +— +62,696 +125,391 +250,782 +— +1,680,239 +Stock Options (6) +3/13/2020 +— +— +— +— +— +— +— +679,239 +Darin G. Holderness +187,500 +375,000 +750,000 +— +— +— +— +— +RSUs +2/11/2020 +— +— +— +— +— +— +41,797 +399,997 +PSUs +2/11/2020 +— +— +— +31,348 +62,695 +125,390 +— +840,113 +RSUs (6) +10/30/2020 +— +— +— +— +— +— +— +163,842 +PSUs (6) +10/30/2020 +— +— +— +— +— +— +— +326,401 +David S. Schorlemer +39,600 +79,200 +158,400 +— +— +— +— +— +RSUs +10/13/2020 +— +— +— +— +— +— +27,210 +119,996 +PSUs +10/13/2020 +— +— +— +20,408 +40,816 +81,632 +— +267,753 +Jeffrey D. Smith +138,125 +276,250 +552,500 +— +— +— +— +— +RSUs +2/11/2020 +— +— +— +— +— +— +31,347 +299,991 +PSUs +2/11/2020 +— +— +— +23,511 +47,021 +94,042 +— +630,081 +David Sledge (5) +212,500 +425,000 +850,000 +— +— +— +— +— +RSUs +2/11/2020 +— +— +— +— +— +— +37,617 +359,995 +PSUs +2/11/2020 +— +— +— +28,213 +56,426 +112,852 +— +756,108 +RSUs (6) +12/31/2020 +— +— +— +— +— +— +— +221,951 +PSUs (6) +12/31/2020 +— +— +— +— +— +— +— +308,387 +Stock Options (6) +12/31/2020 +— +— +— +— +— +— +— +1,400,783 +Adam Muñoz +212,500 +425,000 +850,000 +— +— +— +— +— +RSUs +2/11/2020 +— +— +— +— +— +— +15,000 +143,550 +RSUs +3/13/2020 +— +— +— +— +— +— +31,914 +119,997 +PSUs +2/11/2020 +— +— +— +11,250 +22,500 +45,000 +— +301,500 +PSUs +3/13/2020 +— +— +— +23,926 +47,872 +95,744 +— +230,264 +Newton W. “Trey” Wilson III +150,000 +300,000 +600,000 +— +— +— +— +— +RSUs +2/11/2020 +— +— +— +— +— +— +22,988 +219,995 +PSUs +2/11/2020 +— +— +— +17,241 +34,482 +68,964 +— +462,059 +41 +(1) +Amounts in these columns represent the estimated payouts for annual cash incentive awards under the Amended Annual Bonus Plan for 2020 assuming threshold, target and maximum performance achievement. For Mr. Schorlemer, these columns represent the pro-rata portion of his annual cash incentive awards for the portion of 2020 during which he was employed by the Company. While Mr. Smith was granted a 2020 annual cash incentive award under the Amended Annual Bonus Plan, pursuant to the terms of the 2020 Smith Letter Agreement, he subsequently forfeited such award. Following the fiscal year end, the Compensation Committee elected to pay Mr. Smith a discretionary cash bonus for 2020 in light of his substantial contributions to the Company in 2020. Messrs. Redman and Holderness forfeited their annual cash incentive awards under the Amended Annual Bonus Plan in connection with their respective terminations of employment on March 13, 2020 and October 30, 2020, respectively, though the Compensation Committee elected to pay Mr. Holderness a discretionary cash bonus for 2020 in light of his substantial contributions to the Company in 2020. The actual amounts paid to our Named Executive Officers for 2020 can be found in the “Bonus” and the “Non‑ Equity Incentive Plan Compensation” columns of the Summary Compensation Table above. See “ — Compensation Discussion and Analysis — Elements of Compensation for the 2020 Fiscal Year — Annual Cash Incentive Awards” above for additional information regarding these awards. +(2) +These amounts represent the threshold, target and maximum number of PSUs granted to the Named Executive Officers during 2020. The number of PSUs which ultimately vest is based on the performance of the Company’s TSR relative to the TSR of the companies in our performance peer group during the three-year performance period ending on December 31, 2022, subject to the Named Executive Officer’s continued employment through such date. The PSUs granted in 2020 were subsequently cancelled and regranted on June 4, 2020 in order to ensure the availability of an exemption from liability under Section 16(b) of Exchange Act with respect to these awards. No changes were made to the terms of the awards in connection with the cancellation and regranting of such awards other than the date of grant. +(3) +Other than as described in Note 5 below, amounts in this column reflect RSUs granted to the Named Executive Officers during 2020, which vest as to one-third on each of the first three anniversaries of the applicable date of grant, subject to the Named Executive Officer’s continued employment through each such date. +(4) +These amounts represent the aggregate grant date fair value of RSUs and PSUs granted in 2020 to the Named Executive Officers, computed in accordance with FASB ASC Topic 718, disregarding estimated forfeitures. The grant date fair value of the PSUs is based on probable outcome with regard to the applicable performance metrics. Additionally, the amounts in this column represent (i) for Messrs. Redman and Sledge, the incremental fair value of the modifications to the stock options previously granted to such Named Executive Officers in connection with their separations on March 13, 2020 and December 31, 2020, respectively, and (ii) for Messrs. Holderness and Sledge, the incremental fair value of the modifications to the RSUs and PSUs previously granted to such Named Executive Officers in connection with their separations on October 30, 2020 and December 31, 2020, respectively, in each case, computed in accordance with FASB ASC Topic 718 as of the applicable modification date. For information regarding assumptions underlying the valuation of equity awards, see Note 11 of the Consolidated Financial Statements in our 2020 Annual Report on Form 10-K. +(5) +Pursuant to the terms of the 2017 LTIP, Mr. Redman forfeited all of his unvested RSUs and PSUs in connection with his March 13, 2020 separation, as described below in “— Outstanding Equity Awards for Fiscal Year Ended December 31, 2020” and “— Potential Payments Upon Termination or Change in Control — Redman Separation Agreement.” Similarly, Mr. Sledge forfeited 25,078 of the RSUs and all of the PSUs granted to him in 2020 pursuant to the terms of the Sledge Separation Agreement. See “— Potential Payments Upon Termination or Change in Control — Sledge Separation Agreement.” +(6) +The terms of these awards were amended in connection with Messrs. Redman’s, Holderness’s and Sledge’s separations on March 13, 2020, October 30, 2020 and December 31, 2020, respectively, and such amendments resulted in an accounting modification for each of these awards under FASB ASC Topic 718. The amounts in the column entitled “Grant Date Fair Value of Stock and Option Awards” represent the incremental fair value of the modification of each such award as computed in accordance with FASB ASC Topic 718. For a description of the amendments to these awards, see +42 +“— Potential Payments Upon Termination or Change in Control — Redman Separation Agreement,” “— Potential Payments Upon Termination or Change in Control — Holderness Separation Agreement,” and “— Potential Payments Upon Termination or Change in Control — Sledge Separation Agreement.” +Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table +The Company historically had a practice of maintaining employment agreements and letters with its executives. Following the adoption of the Amended Executive Severance Plan, none of the Named Executive Officers other than Mr. Sledge had an employment agreement with the Company. Mr. Sledge’s employment with the Company terminated on December 31, 2020. As a result, none of the Named Executive Officers is currently a party to an employment agreement or letter agreement with us, except for Mr. Smith. The information below summarizes the 2020 Smith Letter Agreement as well as the employment agreements and arrangements as they existed prior to each Named Executive’s termination of employment or cancelation of the applicable employment agreement by way of letter agreement or participation agreement. +Employment Agreements with Messrs. Redman, Smith and Sledge +Prior to Mr. Redman’s March 13, 2020 resignation, entry into the 2020 Smith Letter Agreement with Mr. Smith, and Mr. Sledge’s December 31, 2020 resignation, we were party to employment agreements with each of Messrs. Redman, Smith, and Sledge. The 2020 Smith Letter Agreement terminated the Smith Employment Agreement, effective as of March 13, 2020, except that the restrictive covenants in the Smith Employment Agreement will continue in full force and effect. The employment agreements provided for an initial two-year term with an automatic renewal for successive one year terms unless either party gave notice of non-extension to the other no later than 90 days prior to the expiration of the then-applicable term. +The employment agreements provided for initial base salaries of $250,000 for each of Messrs. Redman, Smith, and Sledge. +The employment agreements also provided that such Named Executive Officers would be eligible to receive an annual cash bonus in an amount up to 50% of the Named Executive Officer’s annual base salary, based upon individual and Company annual performance targets established by the Board in its sole discretion, stock option awards in connection with the IPO of the Company and four weeks of paid vacation. Pursuant to the terms of the employment agreements, the Board had the discretion to determine the amount of the annual bonuses payable based on achievement of such performance goals. +Pursuant to the employment agreements with Messrs. Redman, Smith, and Sledge, upon termination of employment by the Company without Cause or by the Named Executive Officer for Good Reason, each Named Executive Officer was eligible to receive certain severance payments and benefits. Each Named Executive Officer was required to execute a release of claims in favor of the Company in order to receive his severance benefits. The agreements also contained noncompetition covenants that apply through one year following termination of employment and non-solicitation covenants that apply through three years following termination of employment. +Employment Agreement with Mr. Wilson +On September 25, 2019, the Company entered into an employment agreement with Mr. Wilson appointing him as General Counsel and Corporate Secretary, effective September 30, 2019 (the “Wilson Employment Agreement”). The Wilson Employment Agreement provided for an initial two-year term with an automatic renewal for successive one year terms unless either party gives notice of non-extension to the other no later than 30 days prior to the expiration of the then-applicable term. +The Wilson Employment Agreement provided for (i) an annualized base salary of $400,000, (ii) eligibility to receive an annual cash bonus with a target value of 75% of Mr. Wilson’s base salary under the Amended Annual Bonus Plan (prorated for 2019 based on months of service as General Counsel and Corporate Secretary), (iii) cash retention bonuses equal to $25,000 each, to be paid on the first and second anniversaries of the effective date and (iv) four weeks of paid vacation. +43 +Pursuant to the Wilson Employment Agreement, upon termination of employment by the Company without Cause or by Mr. Wilson for Good Reason, Mr. Wilson was eligible to receive certain severance payments and benefits. Mr. Wilson would have been required to execute a release of claims in favor of the Company in order to receive his severance benefits. The Wilson Employment Agreement also contained noncompetition and non-solicitation covenants that applied through one year following termination of employment. The Wilson Employment Agreement was canceled, with the exception of certain restrictive covenants thereunder, as a result of his entry into a participation agreement under the Amended Executive Severance Plan. +Letter Agreements with Messrs. Redman and Smith +In connection with Mr. Redman’s removal as principal executive officer, the Company entered into a letter agreement with Mr. Redman effective October 3, 2019 (the “Redman Letter Agreement”). The Redman Letter Agreement describes Mr. Redman’s responsibilities, outlines the reporting relationship of each of the Company’s executive officers and includes Mr. Redman’s acknowledgment of and consent to these changes. The Redman Letter Agreement also confirms that Mr. Redman’s base salary and annual cash bonus opportunity under the Amended Annual Bonus Plan will remain unchanged and subject to Board discretion, and that his annual equity awards under the 2017 LTIP will continue to be determined by the Compensation Committee in its sole discretion. The Redman Letter Agreement does not amend or supersede the employment agreement by and between the Company and Mr. Redman, effective April 17, 2013 (the “Redman Employment Agreement”), and confirms that the Redman Employment Agreement shall remain in full effect. +On October 3, 2019, the Company entered into a letter agreement with Mr. Smith memorializing the terms of his revised role as Chief Administrative Officer (the “Smith Letter Agreement”). The Smith Letter Agreement describes Mr. Smith’s responsibilities and compensation as Chief Administrative Officer, including (i) an annualized base salary of $425,000, (ii) eligibility to receive an annual cash bonus under the Amended Annual Bonus Plan with a target value of 65% of his base salary (provided, that his 2019 bonus opportunity will take into account his position, duties and compensation prior to and following his appointment as Chief Administrative Officer and will remain subject to Board discretion) and (iii) continued eligibility to receive annual equity awards under the 2017 LTIP as determined by the Compensation Committee of the Board in its sole discretion. The Smith Letter Agreement contains Mr. Smith’s acknowledgment of and consent to the aforementioned changes and provides that the Smith Employment Agreement, is deemed to be amended by the Smith Letter Agreement to the extent that any provision of the Smith Employment Agreement is inconsistent with the terms of the Smith Letter Agreement. The Smith Letter Agreement was superseded by the 2020 Smith Letter Agreement, which is described in more detail in the section entitled “— Compensation Discussion and Analysis — Letter Agreement with Jeffrey D. Smith,” above. +Letter Agreements with Messrs. Gobe and Holderness +On October 3, 2019, the Company entered into a letter agreement with Mr. Gobe memorializing the terms of his role as Executive Chairman (the “Gobe Letter Agreement”). Pursuant to the Gobe Letter Agreement, Mr. Gobe was entitled to receive an annualized base salary of $450,000 and was eligible (i) to receive an annual cash bonus with a target value of 60% of his base salary under the Amended Annual Bonus Plan (prorated for 2019 based on months of service as Executive Chairman) and (ii) in 2020, to receive an equity award under the 2017 LTIP with a grant date target value of approximately $637,500. +On October 3, 2019, the Company also entered into a letter agreement with Mr. Holderness memorializing the terms of his role as Interim Chief Financial Officer (the “Holderness Letter Agreement”). Pursuant to the Holderness Letter Agreement, Mr. Holderness was entitled to receive an annualized base salary of $500,000 and reimbursement by the Company for reasonable expenses for temporary housing and travel incurred while performing services as Interim Chief Financial Officer. The Holderness Letter Agreement also provided that Mr. Holderness would be eligible (i) to receive an annual cash bonus under the Amended Annual Bonus Plan with a target value of 75% of his base salary (prorated for 2019 based on months of service as Interim Chief Financial Officer) and (ii) in 2020, to receive an equity award under the 2017 LTIP with a grant date target value of approximately $1,000,000. So long as Mr. Holderness had +44 +aided in identifying, training and successfully transitioning his successor prior to his termination of employment, he would be eligible to receive a pro-rata bonus for the year in which his employment with the Company terminates, calculated based on the portion of such calendar year that he is employed by the Company and the performance of the Company for that full calendar year. +Both the Gobe Letter Agreement and the Holderness Letter Agreement were canceled as a result of Messrs. Gobe and Holderness entering into the participation agreement under the Amended Executive Severance Plan. +Amended Executive Severance Plan +Messrs. Gobe, Holderness, Schorlemer, Muñoz and Wilson are (or were, in the case of Mr. Holderness) participants in our Amended Executive Severance Plan. For additional information regarding the terms and conditions of this plan please see “— Potential Payments Upon Termination or Change in Control — Second Amended Executive Severance Plan.” +Severance Agreements +The Company entered into separation agreements in 2020 with each of Messrs. Redman, Holderness and Sledge in connection with their respective terminations of employment. For additional information regarding the terms and conditions of those agreements see “— Potential Payments Upon Termination or Change in Control — Redman Separation Agreement,” “— Potential Payments Upon Termination or Change in Control — Holderness Separation Agreement” and “— Potential Payments Upon Termination or Change in Control — Sledge Separation Agreement.” +Modification of Equity Awards +In connection with the termination of employment of each of Messrs. Redman, Holderness and Sledge and pursuant to the terms of their respective separation agreements, the Company modified certain equity awards that had previously been granted to them. For additional information regarding the terms of the modifications and the value thereof see the Summary Compensation Table and Grants of Plan Based Awards Table above, and the footnotes thereto as well as “— Potential Payments Upon Termination or Change in Control — Redman Separation Agreement,” “— Potential Payments Upon Termination or Change in Control — Holderness Separation Agreement” and “— Potential Payments Upon Termination or Change in Control — Sledge Separation Agreement.” The Company also modified the terms of stock options held by Mr. Smith pursuant to the terms of the 2020 Smith Letter Agreement, but there was no modification charge associated with such modifications. For more information regarding the modifications to Mr. Smith’s stock options see “— Compensation Discussion and Analysis — Letter Agreement with Jeffrey D. Smith.” +45 +Outstanding Equity Awards for Fiscal Year Ended December 31, 2020 +The following table reflects information regarding outstanding and unvested stock options, RSUs and PSUs held by our Named Executive Officers as of December 31, 2020. +Option Awards +Stock Awards +Name +Number of +Securities +Underlying +Unexercised +Options +Exercisable +(#) +Number of +Securities +Underlying +Unexercised +Options +Unexercisable +(#) +Option +Exercise +Price +($) +Option +Expiration +Date +Number of +Shares or +Units of +Stock +That Have +Not +Vested (4) +(#) +Market +Value of +Shares or +Units of +Stock +That Have +Not +Vested (5) +($) +Equity +Incentive +Plan +Awards: +Number of +Unearned +Shares +That Have +Not +Vested (6) +(#) +Equity +Incentive +Plan Awards: +Market +Value of +Unearned +Shares +That Have +Not +Vested (5) +($) +Phillip A. Gobe +— +— +— +— +282,024 +2,084,157 +— +— +— +— +— +— +— +— +846,070 +6,252,457 +Dale Redman +699,852 (1) +— +3.96 +3/13/2021 +— +— +— +— +501,540 (2) +— +2.25 +3/13/2021 +— +— +— +— +59,994 (3) +— +14.00 +3/13/2021 +— +— +— +— +— +— +— +— +— +— +— +— +— +— +— +— +— +— +— +— +Darin G. Holderness +— +— +— +— +— +— +— +— +— +— +— +— +— +— +154,494 +1,141,711 +David S. Schorlemer +— +— +— +— +27,210 +201,082 +— +— +— +— +— +— +— +— +81,632 +603,260 +Jeffrey D. Smith +699,852 (1) +— +3.96 +6/14/2023 +— +— +— +— +310,971 (2) +— +2.25 +7/19/2026 +— +— +— +— +89,991 (3) +29,997 +14.00 +3/16/2027 +— +— +— +— +— +— +— +— +60,589 +447,753 +— +— +— +— +— +— +— +— +152,866 +1,129,680 +David Sledge +586,755 (1) +— +3.96 +6/14/2023 +— +— +— +— +231,019 (2) +— +2.25 +6/14/2023 +— +— +— +— +119,988 (3) +— +14.00 +6/14/2023 +— +— +— +— +— +— +— +— +— +— +— +— +— +— +— +— +— +— +52,942 +391,241 +Adam Muñoz +36,703 (3) +12,235 +14.00 +3/16/2027 +— +— +— +— +— +— +— +— +55,519 +410,285 +— +— +— +— +— +— +— +— +158,392 +1,170,517 +Newton W. “Trey” Wilson III +— +— +— +— +32,690 +241,579 +— +— +— +— +— +— +— +— +98,068 +724,723 +(1) +On June 14, 2013, Messrs. Redman, Smith and Sledge were each granted 699,852 options to purchase our common stock that vested in equal annual installments on June 14, 2014, June 14, 2015, June 14, 2016 and June 14, 2017. Mr. Sledge exercised a portion of such options on March 16, 2017 via “cashless exercise” such that Mr. Sledge did not have to deliver any cash to exercise such stock options but the number of shares of common stock delivered by the Company upon the exercise of such stock options was reduced by the number of shares equal to the value of the exercise price and the applicable tax +46 +withholding. In connection with Mr. Redman’s separation and pursuant to the terms of the Redman Separation Agreement (as described below under “— Potential Payments Upon Termination or Change in Control — Redman Separation Agreement”), the exercise period for such stock options that were previously granted to Mr. Redman was extended until March 13, 2021, and in connection with Mr. Sledge’s separation and pursuant to the terms of the Sledge Separation Agreement (as described below under “— Potential Payments Upon Termination or Change in Control — Sledge Separation Agreement”), the exercise period for such stock options that were previously granted to Mr. Sledge was extended until June 14, 2023. +(2) +On July 19, 2016, Messrs. Redman, Smith and Sledge were granted 501,540, 310,971 and 231,019 options to purchase our common stock, respectively, that were originally scheduled to vest in equal installments December 31, 2016, June 30, 2017, December 31, 2017, June 30, 2018, and December 30, 2018. However, in connection with our IPO, we fully accelerated the vesting of the unvested portions of these options. In connection with Mr. Redman’s separation and pursuant to the terms of the Redman Separation Agreement (as described below under “— Potential Payments Upon Termination or Change in Control — Redman Separation Agreement”), the exercise period for such stock options that were previously granted to Mr. Redman was extended until March 13, 2021, and in connection with Mr. Sledge’s separation and pursuant to the terms of the Sledge Separation Agreement (as described below under “— Potential Payments Upon Termination or Change in Control — Sledge Separation Agreement”), the exercise period for such stock options that were previously granted to Mr. Sledge was extended until June 14, 2023. +(3) +These amounts reflect option awards granted under the 2017 LTIP in connection with our IPO on March 16, 2017. Such awards vest in four substantially equal annual installments commencing on the first anniversary of the grant date. In connection with Mr. Redman’s separation and pursuant to the terms of the Redman Separation Agreement (as described below in “— Potential Payments Upon Termination or Change in Control — Redman Separation Agreement”), the exercise period for the vested stock options granted to Mr. Redman under the 2017 LTIP was extended until March 13, 2021. The remainder of Mr. Redman’s unvested stock options were forfeited upon his separation, pursuant to the terms of the 2017 LTIP and the applicable award agreement thereunder. In connection with Mr. Sledge’s separation and pursuant to the terms of the Sledge Separation Agreement (as described below under “— Potential Payments Upon Termination or Change in Control — Sledge Separation Agreement”), the unvested stock options previously granted to Mr. Sledge under the 2017 LTIP were accelerated to fully vest upon his separation, and the exercise period for the vested stock options previously granted to Mr. Sledge under the 2017 LTIP was extended until June 14, 2023. +(4) +The amounts in this column represent RSU awards held by each Named Executive Officer vest pro-rata over the applicable remaining vesting dates as follows, subject to the Named Executive Officer’s continued employment: +Name +Number of +Unvested RSUs +on 12/31/2020 (a) +Remaining Vesting Dates +Phillip A. Gobe +6,185 +October 7, 2021 and October 7, 2022 +41,797 +February 11, 2021, February 11, 2022, and February 11, 2023 +234,042 +March 13, 2021, March 13, 2022, and March 13, 2023 +David S. Schorlemer +27,210 +October 13, 2021, October 13, 2022 and October 13, 2023 +Jeffrey D. Smith +9,634 +April 18, 2021 +19,608 +March 18, 2021 and March 18, 2022 +31,347 +February 11, 2021, February 11, 2022, and February 11, 2023 +Adam Muñoz +2,722 +April 18, 2021 +5,883 +March 18, 2021 and March 18, 2022 +15,000 +February 11, 2021, February 11, 2022, and February 11, 2023 +31,914 +March 13, 2021 and March 13, 2022, and March 13, 2023 +Newton W. “Trey” +Wilson III +9,702 +October 7, 2021 and October 7, 2022 +22,988 +February 11, 2021, February 11, 2022, and February 11, 2023 +47 +(a) +Any unvested RSUs held by Mr. Redman were forfeited and cancelled in accordance with the terms of such award and separation agreements in connection with his March 13, 2020 separation, as described below in “— Potential Payments Upon Termination or Change in Control — Redman Separation Agreement.” All unvested RSUs held by Mr. Holderness were accelerated and became fully vested upon his separation of employment on October 30, 2020 but will not be settled until the earlier to occur of (i) Mr. Holderness’s death and (ii) the day that is one day after the six-month anniversary of Mr. Holderness’s separation date pursuant to the terms of the Holderness Separation Agreement (described below under “— Potential Payments Upon Termination or Change in Control — Holderness Separation Agreement”). Further, in connection with Mr. Sledge’s separation and pursuant to the terms of the Sledge Separation Agreement (described below under “— Potential Payments Upon Termination or Change in Control — Sledge Separation Agreement”), a pro-rata portion of the RSUs granted to Mr. Sledge during the 2020 calendar year were vested on December 31, 2020, based on months of service during the applicable vesting period. The remainder of Mr. Sledge’s RSUs were forfeited and cancelled in accordance with the terms of such award and separation agreements in connection with his December 31, 2020 separation. +(5) +The amounts in this column were calculated by multiplying $7.39, the closing price of our common stock on December 31, 2020, by the number of awards reported. +(6) +Pursuant to the applicable SEC rules, the amounts in this column and in the table below reflect the maximum number of PSUs held by each Named Executive Officer which may vest, if at all, based on the performance of the Company’s stock relative to a peer group during the applicable three-year performance period as shown in the below table. The actual number of PSUs earned based on actual performance over the full performance period may range from 0% to 100% of the amount below. All outstanding PSUs, including PSUs granted in 2019 and 2020, were subsequently cancelled and regranted on June 4, 2020 in order to ensure the availability of an exemption from liability under Section 16(b) of the Exchange Act with respect to these awards. No changes were made to the terms of the awards in connection with the cancellation and regranting of such awards other than the date of grant. +Name +Maximum Number of +Unvested PSUs +on 12/31/2020 +Applicable Performance +Period End Date +Phillip A. Gobe +18,554 +December 31, 2021 +125,390 +December 31, 2022 +702,126 +December 31, 2022 +Darin G. Holderness +29,104 +December 31, 2021 +125,390 +December 31, 2022 +David S. Schorlemer +81,632 +December 31, 2022 +Jeffrey D. Smith +58,824 +December 31, 2021 +94,042 +December 31, 2022 +David Sledge +52,942 +December 31, 2021 +Adam Muñoz +17,648 +December 31, 2021 +45,000 +December 31, 2022 +95,744 +December 31, 2022 +Newton W. “Trey” Wilson III +29,104 +December 31, 2021 +68,964 +December 31, 2022 +(a) +Any unvested PSUs held by Mr. Redman were forfeited and cancelled in accordance with the terms of such award agreements in connection with his March 13, 2020 separation, as described below in “— Potential Payments Upon Termination or Change in Control — Redman Separation Agreement.” As described below under “— Potential Payments Upon Termination or Change in Control — Holderness Separation Agreement,” the service requirement applicable to all unvested +48 +PSUs held by Mr. Holderness was deemed satisfied as of the date of his separation, and such PSUs remain outstanding and eligible to vest following the end of the applicable performance period based on actual performance achieved. Further, in connection with Mr. Sledge’s separation and pursuant to the terms of the Sledge Separation Agreement (described below under “— Potential Payments Upon Termination or Change in Control — Sledge Separation Agreement”), the PSUs granted to Mr. Sledge in 2019 remain outstanding and eligible to vest following the end of the applicable performance period based on actual performance achieved and any unvested PSUs granted to Mr. Sledge in 2020 were forfeited and cancelled in accordance with the terms of such award agreements in connection with his December 31, 2020 separation. +2020 Option Exercises and Stock Vested +Option Awards +Stock Awards +Name +Number of +Shares +Acquired on +Exercise (#) +Value Realized +on Exercise ($) +Number of +Shares +Acquired on +Vesting (1) (#) +Value Realized +on Vesting (2) ($) +Phillip A. Gobe +— +— +15,274 +67,382 +Dale Redman +— +— +— +— +Darin G. Holderness +— +— +56,349 +224,082 +David S. Schorlemer +— +— +— +— +Jeffrey D. Smith +— +— +57,412 +319,807 +David Sledge +— +— +82,612 +515,549 +Adam Muñoz +— +— +16,550 +91,619 +Newton W. “Trey” Wilson III +— +— +4,850 +20,661 +(1) +This column reflects the RSUs and PSUs held by each Named Executive Officer that vested during 2020. The target number of PSUs granted to the Named Executive Officers in 2018 vested. For Mr. Sledge, this column reflects (i) the number of RSUs and the target number of PSUs that vested in 2020 in accordance with terms of the applicable award agreements underlying such awards and (ii) the number of stock options and RSUs that accelerated and became vested pursuant to the terms of the Sledge Separation Agreement (as described below under “— Potential Payments Upon Termination of Change in Control — Sledge Separation Agreement”). For Mr. Holderness, this column reflects (a) the number of RSUs that vested in accordance with terms of the applicable award agreements underlying such awards and (b) the number of RSUs that accelerated and became vested pursuant to the terms of the Holderness Separation Agreement (as described below under “— Potential Payments Upon Termination or Change in Control — Holderness Separation Agreement”). +(2) +This column reflects the aggregate market value realized by each Named Executive Officer upon vesting, calculated by multiplying the number of RSUs and PSUs that vested (including shares withheld for tax withholding purposes) by the closing price of our common stock on the applicable vesting date. For Mr. Sledge, this column does not include any value for the 29,997 stock options that accelerated and became vested pursuant to the terms of the Sledge Separation Agreement (as described below under “— Potential Payments Upon Termination or Change in Control — Sledge Separation Agreement”) because the exercise price applicable to such stock options exceeded the closing price of our common stock on the applicable vesting date. +Pension Benefits +We do not sponsor any qualified or non-qualified defined benefit pension plans. +Nonqualified Deferred Compensation +We do not have any non-qualified deferred compensation plans. +49 +Potential Payments upon Termination or Change in Control +Employment and Letter Agreements +On January 1, 2020, we were party to employment agreements with each of Messrs. Smith, Sledge and Wilson. Prior to his March 13, 2020 separation, we were also party to an employment agreement with Mr. Redman, but his severance amounts were not determined in accordance with his employment agreement and are described below under “— Redman Separation Agreement.” As of December 31, 2020, we were not a party to any employment or letter agreements with any of our Named Executive Officers, other than Mr. Sledge, that provide for severance payments or benefits. However, Mr. Sledge’s severance amounts payable in connection with his December 31, 2020 resignation were not determined in accordance with his employment agreement and are described below under “— Sledge Separation Agreement.” Certain of our Named Executive Officers are participants in the Second Amended Executive Severance Plan, which is described in detail below under “— Second Amended Executive Severance Plan.” +Agreement with Mr. Smith +The employment agreement with Mr. Smith provided him with certain severance payments and benefits upon his termination of employment without “Cause” or resignation for “Good Reason” (each as defined in his employment agreement). +Pursuant to the 2020 Smith Letter Agreement and in connection with Mr. Smith’s appointment as Senior Advisor to the Chief Executive Officer, Mr. Smith’s employment agreement was terminated as of March 13, 2020. Mr. Smith is no longer eligible to receive any cash severance benefits upon his termination of employment for any reason. As consideration for the removal of Mr. Smith’s employment agreement, Mr. Smith received the ability to exercise his (i) vested and outstanding stock options under the Stock Option Plan for up to one year following his termination of employment and (ii) vested and outstanding stock options under the 2017 LTIP for up to one year following the date he ceases to provide services to the Company, in each case, using a “cashless exercise” such that Mr. Smith does not have to deliver any cash to exercise such stock options but the number of shares of common stock delivered by the Company upon the exercise of such stock options shall be reduced by the number of shares equal to the value of the exercise price and the applicable withholding. Except as set forth in this subsection, the terms of Mr. Smith’s outstanding equity awards under the 2017 LTIP will continue to be governed by the terms of the award agreements and the 2017 LTIP, as described below under “— Incentive Plan Awards.” +Holderness Agreements +On October 3, 2019, we entered into the Holderness Letter Agreement that provided Mr. Holderness with the eligibility to receive certain severance payments and benefits upon his termination of employment as a “good leaver” (as defined below). Mr. Holderness executed a participation agreement as a Tier 2 Executive under the Amended Executive Severance Plan on April 10, 2020 that superseded and replaced the Holderness Letter Agreement in all respects except with respect to the restrictive covenants set forth in the Holderness Letter Agreement, which survived the termination of the Holderness Letter Agreement. +In addition, Mr. Holderness’s 2019 and 2020 award agreements under the 2017 LTIP provided Mr. Holderness with accelerated vesting of a portion of his RSUs and deemed satisfaction of the service requirement applicable to a portion of his PSUs upon his termination of employment if Mr. Holderness is deemed a good leaver. As used in the RSU and PSU award agreements with Mr. Holderness, “good leaver” generally meant that Mr. Holderness has aided in identifying, training and successfully transitioning his successor prior to his termination of service. +Although Mr. Holderness was a participant in the Amended Executive Severance Plan on the date of his resignation, the severance payments and benefits he received upon his resignation are described under “— Holderness Separation Agreement” rather than described herein with respect to his equity awards or under “— Second Amended Executive Severance Plan.” +Employment Agreement with Mr. Wilson +On September 25, 2019, we entered into the Wilson Employment Agreement that, prior to Mr. Wilson’s execution of a participation agreement under the Executive Severance Plan, provided Mr. Wilson with certain +50 +severance payments and benefits upon his termination of employment without “Cause” or resignation for “Good Reason” (each as defined in the Wilson Employment Agreement). However, Mr. Wilson executed a participation agreement as a Tier 3 Executive under the Executive Severance Plan on March 30, 2020 that superseded and replaced the Wilson Employment Agreement in all respects except with respect to the restrictive covenants set forth in the Wilson Employment Agreement, which survived the termination of the Wilson Employment Agreement. See “— Second Amended Executive Severance Plan” below for a description of the severance payments and benefits for which Mr. Wilson is now eligible. +Second Amended Executive Severance Plan +On March 13, 2020, the Board adopted the Executive Severance Plan, pursuant to which the Named Executive Officers are eligible to receive severance payments and benefits, as described in more detail below. On April 10, 2020, the Board adopted the Amended Executive Severance Plan such that the severance amounts payable upon certain terminations of employment are calculated without taking into account any temporary reduction to a participant’s annualized base salary in connection with a general reduction in base salaries that affects all similarly situated employees of the Company in substantially the same proportions, as determined by the Compensation Committee in its sole discretion. In connection with the approval of the 2020 LTIP, on October 23, 2020, the Board adopted the Second Amended Executive Severance Plan, which amends the Amended Executive Severance Plan such that (i) equity awards granted under the 2017 LTIP will continue to be governed by the terms of the 2017 LTIP and the equity awards granted under the 2020 LTIP will be governed by the terms of the 2020 LTIP, (ii) certain defined terms are incorporated by reference to the 2020 LTIP rather than the 2017 LTIP and (iii) participants in the Second Amended Executive Severance Plan are required to comply with certain obligations, including restrictive covenants, as set forth in the award agreements under both the 2017 LTIP and the 2020 LTIP, as applicable. +Following the approval of the Executive Severance Plan, the Amended Executive Severance Plan and the Second Amended Executive Severance Plan, none of the Named Executive Officers other than Mr. Sledge have an employment agreement with the Company, and Messrs. Gobe, Holderness, Schorlemer, Muñoz and Wilson each have entered into a participation agreement with the Company such that Mr. Gobe is a “Tier 1 Executive,” Mr. Holderness was a “Tier 2 Executive,” Mr. Schorlemer is a “Tier 2 Executive” and Messrs. Muñoz and Wilson are each “Tier 3 Executives” in the Second Amended Executive Severance Plan (each quoted term as defined in the Second Amended Executive Severance Plan and described below). +Upon the Named Executive Officer’s termination without “Cause” or a resignation for “Good Reason” (each as defined in the Second Amended Executive Severance Plan and described below), current participants in the Second Amended Executive Severance Plan will be eligible to receive the following benefits: +• +A lump sum cash payment equal to 2.0 (for Tier 1 Executives), 1.5 (for Tier 2 Executives) or 1.0 (for Tier 3 Executives) times the sum of the participant’s (i) annualized base salary then in effect and (ii) target annual bonus for the year in which the termination occurred; +• +Any earned but unpaid bonus for the year preceding the year of termination based on the Company’s actual performance, paid at the time such bonuses are paid to all other executives; and +• +Reimbursement for a portion of the cost of continuation coverage for the participant and his or her spouse and eligible dependents under the Company’s group health plans pursuant to COBRA for 12 months (or 18 months for Tier 1 Executives), unless such coverage is earlier terminated in accordance with the terms of the Second Amended Executive Severance Plan. +Upon a termination without Cause or a resignation for Good Reason within 12 months following a “Change in Control” (as defined in the Second Amended Executive Severance Plan), participants in the Second Amended Executive Severance Plan will be eligible to receive the following benefits: +• +A lump sum cash payment equal to 3.0 (for Tier 1 Executives), 2.0 (for Tier 2 Executives) or 1.5 (for Tier 3 Executives) times the sum of the participant’s (i) annualized base salary then in effect and (ii) target annual bonus as in effect immediately prior to the Change in Control; +• +Any earned but unpaid bonus for the year preceding the year of termination based on the Company’s actual performance, paid at the time such bonuses are paid to all other executives; +51 +• +A lump sum cash payment equal to a prorated target bonus for the year of termination based on days of service during the applicable calendar year; and +• +Full reimbursement of the cost of continuation coverage for the participant and his or her spouse and eligible dependents under the Company’s group health plans pursuant to the COBRA, for 12 months (or 18 months for Tier 1 Executives), unless such coverage is earlier terminated in accordance with the terms of the Second Amended Executive Severance Plan. +Additionally, if a participant’s employment with the Company terminates as a result of his or her death or “Disability” (as defined in the Second Amended Executive Severance Plan), then the participant will be eligible to receive the following benefits: +• +Any earned but unpaid bonus for the year preceding the year of termination based on the Company’s actual performance, paid at the time such bonuses are paid to all other executives; and +• +A lump sum cash payment equal to a prorated target bonus for the year of termination based on days of service during the applicable calendar year. +In order to receive any of the foregoing severance benefits under the Second Amended Executive Severance Plan, a participant must timely execute (and not revoke) a release of claims in favor of the Company and its affiliates. Further, the Second Amended Executive Severance Plan requires continued compliance with certain confidentiality, non-competition, non-solicitation and non-disparagement covenants as set forth in the award agreements under the 2017 LTIP and the 2020 LTIP. If the severance benefits under the Second Amended Executive Severance Plan would trigger an excise tax for a participant under Section 4999 or Section 280G of the Code (“Section 280G”) the Second Amended Executive Severance Plan provides that the participant’s severance benefits will be reduced to a level at which the excise tax is not triggered, unless the participant would receive a greater amount without such reduction after taking into account the excise tax and other applicable taxes. +As used in the Second Amended Executive Severance Plan, the following terms generally mean: +• +“Cause” generally means the Named Executive Officer’s (i) material breach of the employment agreement or any other agreement with the Company or its affiliates, subject to a 30-day notice and 15-day cure period, (ii) material breach of the Company’s or its affiliates’ policies or code of conduct applicable to the Named Executive Officer, (iii) violation of any law applicable to the workplace or employment relationship, (iv) gross negligence, material misconduct reflecting negatively on the Company, breach of fiduciary duty, fraud, theft or embezzlement, (v) conviction of or plea of nolo contendere to any felony (or state law equivalent) or any crime involving moral turpitude, (vi) material failure or refusal (other than due to Disability) to perform obligations or any lawful director from the Board or an officer of the Company, subject to a 30-day notice and 15-day cure period, (vii) unlawful use or possession of illegal drugs on the Company’s premises or while performing duties, (viii) failure to exercise the degree of care, skill and diligence as employees of ordinary skill and knowledge commonly possess and exercise, subject to a 30-day notice and 15-day cure period, or (ix) failure to act with undivided loyalty to the Company and its affiliates. +• +“Change in Control” has the meaning given to it under the 2020 LTIP, which is the same meaning given to such term under the 2017 LTIP and described below under “— Incentive Plan Awards.” +• +“Good Reason” generally means (i) the material diminution in the Named Executive Officer’s base salary, unless in connection with a general reduction in base salaries that affects all similarly situated employees, (ii) material diminution in the Named Executive Officer’s authority, duties, or responsibilities unless in connection with an internal investigation by the Company (provided that his removal from the board of directors or as an officer of any of the Company’s affiliates shall not constitute Good Reason), (iii) the material breach by the Company of any of its obligations under the agreement or (iv) the Named Executive Officer’s relocation by more than 50 miles from his current place of business, in each case, subject to a 30-day notice period, 15-day cure period and the Named Executive Officer’s resignation within 75 days of the end of the cure period. +• +“Disability” generally means the Named Executive Officer’s inability to perform the essential functions of his job due to physical or mental impairment for a period that exceeds 120 consecutive days or 180 total days in any 12-month period, as determined by the Board. +52 +Stock Option Plan Awards +The stock options granted under the Stock Option Plan are fully vested. The vested and outstanding stock options awarded under the Stock Option Plan will remain outstanding and exercisable for 90 days following a Named Executive Officer’s termination of service without “Cause” or due to his resignation for “Good Reason” and will remain outstanding and exercisable for 12 months following a Named Executive Officer’s termination of service due to his death or “Disability.” +Only Messrs. Redman, Smith and Sledge hold stock options under the Stock Option Plan, and the treatment of such stock options are now governed by their respective separation and letter agreements, as described under the following subsections “— Redman Separation Agreement,” “— Smith Agreements” and “— Sledge Separation Agreement,” respectively. +Incentive Plan Awards +Prior to his resignation, Mr. Holderness’s equity awards under the 2017 LTIP were governed by the terms of the award agreements for Mr. Holderness described above under “— Holderness Agreements.” Mr. Holderness’s equity awards are now governed by the terms of the Holderness Separation Agreement, as described below under “— Holderness Separation Agreement.” All other Named Executive Officers’ equity awards are subject to the following terms. None of the Named Executive Officers held awards under the 2020 LTIP as of December 31, 2020. +Pursuant to the 2017 LTIP, in the event of a termination of employment of a Named Executive Officer due to his death, “Disability” or “Retirement,” (i) all unvested RSUs and stock options that would have vested had the Named Executive Officer continued his service during the 12 months following the termination will vest on such termination or resignation date, and (ii) with respect to any unvested PSUs, if such termination of employment occurs within one year prior to the last day of the applicable performance period, the Named Executive Officer’s unvested PSUs will remain outstanding and eligible to vest at the end of the applicable performance period. +In the event of a termination of a Named Executive Officer by the Company without “Cause” upon or within one year following a “Change in Control,” all unvested RSUs, stock options and PSUs will immediately vest based on performance as of the date of the Change in Control. In the event of a termination of employment of a Named Executive Officer for any other reason, all unvested RSUs and PSUs will be forfeited immediately upon the termination. +To receive the above described severance payments and benefits, the Named Executive Officers must execute a release of claims in favor of the Company and comply with the terms of certain restrictive covenants, including a one-year non-competition and two-year non-solicitation obligation as well as a perpetual confidentiality and non-disparagement obligations. +As used in the 2017 LTIP and the award agreements thereunder, “Cause” and “Disability” generally have the meanings set forth below (except for Mr. Sledge, for whom such terms were defined in his employment agreement). In addition, “Retirement” and “Change in Control” generally have the meanings set forth below. +• +“Cause” generally means the Named Executive Officer’s (i) willful failure to substantially perform his duties, (ii) willful failure to carry out, or comply with, in any material respect any lawful directive of our board of directors, (iii) commission at any time of any act or omission that results in, or may reasonably be expected to result in, a conviction, a plea of no contest, plea of nolo contendere or imposition of unadjudicated probation for any felony or crime involving moral turpitude, (iv) unlawful use (including being under the influence) or possession of illegal drugs on the Company’s premises or while performing his duties and responsibilities, (v) commission at any time of any act of fraud, embezzlement, misappropriation, misconduct, conversion of assets of the Company or breach of fiduciary duty against the Company or (vi) material breach of the employment agreement or any other agreement with the Company, subject to certain procedural requirements. +• +“Change of Control” generally means (i) any transaction or series of transactions whereby any person, other than the Company, any of its subsidiaries or any Company benefit plan, acquires +53 +beneficial ownership of 30% or more of the total combined voting power of the Company’s securities, (ii) the current members of the Board cease to constitute a majority of the Board for any reason, (iii) the consummation by the Company of a merger, consolidation, reorganization or business combination or a sale of all or substantially all of the Company’s assets, unless (a) the Company controls the successor entity, (b) no person owns 50% or more of the combined voting power of the successor entity or (c) the current members of the Board represent the majority of the successor entity’s board or (iv) the tenth day following the complete dissolution of the Company. +• +“Disability” generally means the Named Executive Officer’s inability to engage in substantial gainful activity by reason of any medically determinable physical or mental impairment. +• +“Retirement” generally means the termination of the Named Executive Officer’s employment following his attainment of both (i) age 60 and (ii) ten years of service with the Company or one of its affiliates. +Quantification of Benefits on Termination +The table below quantifies the payments and benefits that would have been paid to our Named Executive Officers pursuant to the terms of the Second Amended Executive Severance Plan (or the 2020 Smith Letter Agreement for Mr. Smith) and the equity award agreements in the event of certain terminations of employment with us, had such terminations occurred on December 31, 2020. +54 +Name +Termination +without Cause or +Resignation for +Good Reason (1) +($) +Termination as a +Result of Death, +Disability (2) +($) +Termination as a +Result of +Retirement (3) +($) +Termination +Without Cause +Within +One Year +Following a +Change in +Control (4) +($) +Resignation for +Good Reason +Within +One Year +Following a +Change in +Control (4) +($) +Phillip A. Gobe +Cash Severance (5) +3,200,000 +— +— +4,800,000 +4,800,000 +Pro-Rata Bonus (6) +— +800,000 +— +800,000 +800,000 +COBRA Subsidy (7) +8,223 +— +— +20,045 +20,045 +RSU & PSU Acceleration (8) +— +770,888 +770,888 +5,210,386 +— +Total +3,208,223 +1,570,889 +770,888 +10,830,431 +5,620,045 +David S. Schorlemer +Cash Severance (5) +1,215,000 +— +— +1,620,000 +1,620,000 +Pro-Rata Bonus (6) +— +79,200 +— +79,200 +79,200 +COBRA Subsidy (7) +6,046 +— +— +18,126 +18,126 +RSU & PSU Acceleration (8) +— +67,027 +67,027 +502,712 +— +Total +1,221,046 +146,227 +67,072 +2,220,038 +1,717,326 +Jeffrey D. Smith +RSU & PSU Acceleration (8) +— +438,220 +438,220 +1,012,593 +— +Total +— +438,220 +438,220 +1,012,593 +— +Adam Muñoz +Cash Severance (5) +850,000 +— +— +1,275,000 +1,275,000 +Pro-Rata Bonus (6) +— +425,000 +— +425,000 +425,000 +COBRA Subsidy (7) +6,046 +— +— +18,126 +18,126 +RSU & PSU Acceleration (8) +— +222,624 +222,624 +995,544 +— +Total +856,046 +647,624 +222,624 +2,713,670 +1,718,126 +Newton W. “Trey” Wilson +Cash Severance (5) +700,000 +— +— +1,050,000 +1,050,000 +Pro-Rata Bonus (6) +— +300,000 +— +300,000 +300,000 +RSU & PSU Acceleration (8) +— +224,649 +224,649 +603,941 +— +Total +700,000 +524,649 +224,649 +1,953,941 +1,350,000 +(1) +Amounts in this column reflect payments made upon termination by the Company without “Cause” or by the Named Executive Officer for “Good Reason.” For Messrs. Gobe, Schorlemer, Muñoz and Wilson, such quoted terms are as defined in the Second Amended Executive Severance Plan, as described above. +(2) +Amounts in this column reflect payments made upon termination as a result of the Named Executive Officer’s death or “Disability.” For Messrs. Gobe, Schorlemer, Muñoz and Wilson, “Disability” is as defined in the Second Amended Executive Severance Plan for the pro-rata bonus payable upon such termination of employment and is as defined in the applicable award agreements for the equity award acceleration, each as described above. For Mr. Smith, “Disability” is as defined in the applicable award agreements, as described above. +(3) +Amounts in this column reflect payments made upon termination as a result of the Named Executive Officer’s “Retirement” (as defined in the applicable award agreements and described above). +(4) +Amounts in this column reflect payments made upon termination by the Company without Cause or by the Named Executive Officer for Good Reason, in each case, within 12 months following a “Change +55 +in Control.” As described above under “— Incentive Plan Awards,” RSUs, stock options and PSUs granted under the 2017 LTIP are accelerated in connection with a Named Executive Officer’s termination without Cause within 12 months following a Change in Control but are not accelerated in connection with a Named Executive Officer’s resignation for Good Reason, whether or not such resignation follows a Change in Control. +(5) +Pursuant to the Second Amended Executive Severance Plan, upon termination of employment by the Company without Cause or by the Named Executive Officer for Good Reason, each Named Executive Officer other than Mr. Smith, who is not a participant in the Second Amended Executive Severance Plan, will receive either 2.0 (for Mr. Gobe), 1.5 (for Mr. Schorlemer) or 1.0 (for Messrs. Muñoz and Wilson) times the sum of his annual base salary and the target amount of his annual bonus for the year in which the termination occurs, payable in a lump sum following the termination of employment. Mr. Smith is not a participant in the Second Amended Executive Severance Plan and is not entitled to any cash severance. +(6) +Pursuant to the terms of the Second Amended Executive Severance Plan, upon a termination of employment by the Company without Cause or by the Named Executive Officer for Good Reason, in each case, within one year following a Change in Control, or upon a termination of employment due to the Named Executive Officer’s death or Disability, each of Messrs. Gobe, Schorlemer, Muñoz and Wilson will receive a pro-rata bonus, based upon the number of days each such Named Executive Officer was employed by the Company during the applicable calendar year and achievement of target performance. The target bonuses payable to Messrs. Gobe, Schorlemer, Muñoz and Wilson are included in the table because (i) Messrs. Gobe, Muñoz and Wilson were employed for the full 2020 calendar year and (ii) Mr. Schorlemer’s target bonus was already prorated based upon his service from October 12, 2020 to December 31, 2020. Mr. Smith is not a participant in the Second Amended Executive Severance Plan and is not entitled to a pro-rata target bonus. +(7) +Pursuant to the terms of the Second Amended Executive Severance Plan, upon termination of employment by the Company without Cause or by the Named Executive Officer for Good Reason, the Company will reimburse each of Messrs. Gobe, Schorlemer, Muñoz and Wilson for the difference between the cost of the COBRA premiums and the cost for similarly-situated employees to effect such coverage under the Company’s group health plans for up to 12 months (or 18 months for Mr. Gobe) following such termination, and upon termination of employment by the Company without Cause or by the Named Executive Officer for Good Reason, in each case, within 12 months following a Change in Control, the Company will reimburse each of Messrs. Gobe, Schorlemer, Muñoz and Wilson for the full amount of the COBRA premiums for up to 12 months (or 18 months for Mr. Gobe). The COBRA reimbursement amount is based on the premiums in effect on December 31, 2020 and each applicable Named Executive Officer’s elections in place on such date, which are assumed for purposes of this table to remain the same throughout the period for which the COBRA reimbursement would be available. Mr. Wilson was not a participant in the Company’s medical plans as of December 31, 2020, so no value is included in this table for such benefit. Mr. Smith is not a participant in the Second Amended Executive Severance Plan and is not entitled to any COBRA reimbursements. +(8) +For the RSUs, these amounts are calculated by multiplying the number of RSUs that would have become vested upon the applicable event by $7.39, the closing price of our common stock on December 31, 2020. The unvested stock options have an exercise price of $14.00, which is $6.61 more than the market value of our common stock on December 31, 2020, so the value of any accelerated stock options has not been included in this table. These amounts are calculated for the PSUs by multiplying the number of PSUs that would become vested upon the applicable event by $7.39, the closing price of our common stock on December 31, 2020. The number of PSUs used in such calculation reflects actual performance as of December 31, 2020, which was at target for all outstanding PSUs such that target performance is used for purposes of calculating the value of the PSUs in this table. However, PSUs that vest as a result of a Named Executive Officer’s death, Disability or Retirement will vest based on actual performance as of the end of the applicable performance period, and, as a result, the amounts included reflect estimated payouts of such PSUs. +Redman Separation Agreement +On March 13, 2020, Mr. Redman and the Company entered into the Redman Separation Agreement, pursuant to which Mr. Redman’s employment with the Company terminated on March 13, 2020 (the +56 +“Redman Separation Date”). Under the Redman Separation Agreement, Mr. Redman became entitled to receive the following benefits, subject to his execution and non-revocation of a release of claims and continued compliance with certain restrictive covenants, including additional restrictive covenants that result in a total of a five-year non-competition and non-solicitation obligation (an increase from the one-year non-competition and three-year non-solicitation obligation set forth in Mr. Redman’s employment agreement): +• +Lump-sum cash payment equal to $38,217 for his accrued but unused vacation days; +• +Extension of the exercise period of Mr. Redman’s stock options granted under the Stock Option Plan and the 2017 LTIP that have become vested and are outstanding as of the Redman Separation Date such that they shall not be forfeited on the 91st day following the Redman Separation Date pursuant to the terms of the applicable plans but instead shall remain outstanding and eligible to vest until the one-year anniversary of the Redman Separation Date; +• +The ability to exercise his vested and unexercised stock options using a “cashless exercise” during the extended exercise period such that Mr. Redman does not have to deliver any cash to exercise such stock options but the number of shares of common stock delivered by the Company upon the exercise of such stock options shall be reduced by the number of shares equal to the value of the exercise price and the applicable tax withholding; and +• +Full reimbursement of the cost of continuation coverage for Mr. Redman, his spouse and his eligible dependents under the Company’s group health plans pursuant to COBRA for 18 months following the Redman Separation Date, or if earlier, the date Mr. Redman becomes covered under the group health plan of another employer. +Mr. Redman forfeited all unvested equity awards in connection with his separation pursuant to the terms of the 2017 LTIP. +The table below quantifies the value of the payments and benefits received by Mr. Redman pursuant to the Redman Separation Agreement. +Type of Benefits +Severance +Payments +($) +Vacation Payout +38,217 +Stock Option Extension (1) +679,239 +COBRA Subsidy (2) +20,045 +Total +737,501 +(1) +The value of the stock option extension is equal to the fair value upon modification of such awards, calculated in accordance with FASB ASC Topic 718. +(2) +The COBRA reimbursement amount is based on the premium in effect on the Redman Separation Date and Mr. Redman’s elections in place on such date, which are assumed for purposes of this table to remain the same throughout the 18-month period for which the COBRA reimbursement would be available. +Holderness Separation Agreement +On October 23, 2020, Mr. Holderness and the Company entered into the Holderness Separation Agreement, pursuant to which Mr. Holderness’s employment with the Company terminated on October 30, 2020 (the “Holderness Separation Date”). Under the Holderness Separation Agreement, Mr. Holderness was removed as a participant in the Second Amended Executive Severance Plan and became entitled to receive the following benefits, subject to his execution and non-revocation of a release of claims and continued compliance with certain restrictive covenants, including obligations with respect to confidentiality, non-competition, non-solicitation and non-disparagement: +• +Lump-sum cash payment equal to $11,175 for his accrued but unused vacation days; +57 +• +Accelerated vesting of the 9,702 RSUs granted on October 7, 2019 that remain outstanding as of the Holderness Separation Date and the 41,797 RSUs granted on February 11, 2020, in each case, under the 2017 LTIP, which will be settled upon the earlier to occur of (i) the date that is one day following the six-month anniversary of the Holderness Separation Date and (ii) Mr. Holderness’s death; +• +Deemed satisfaction of the service requirement with respect to all 14,552 target PSUs originally granted on October 7, 2019 and 41,797 target PSUs originally granted on February 11, 2020, in each case, under the 2017 LTIP, such that such PSUs will remain outstanding and eligible to vest based on the Company’s actual performance over the relevant performance period and such vested PSUs, if any, shall be settled at the time originally specified in the applicable award agreement; and +• +Payment of reasonable legal costs incurred by Mr. Holderness during the negotiation of the Holderness Separation Agreement. +In addition to the above described severance payments and benefits received by Mr. Holderness pursuant to the Holderness Separation Agreement, the Company also granted Mr. Holderness a discretionary cash bonus for 2020 in light of his exemplary work during 2020. +The table below quantifies the value of the payments and benefits received by Mr. Holderness pursuant to the Holderness Separation Agreement. +Type of Benefits +Severance +Payments +($) +Vacation Payout +11,175 +RSU Acceleration (1) +203,421 +PSU Acceleration (1) +222,579 +Attorneys’ Fees +5,366 +Discretionary Cash Bonus (2) +279,340 +Total +721,881 +(1) +For the RSUs and PSUs, this amount is calculated by multiplying the number of RSUs that were vested on the Holderness Separation Date by $3.95, the closing price of our common stock on the Holderness Separation Date. The number of PSUs used in such calculation reflects actual performance as of December 31, 2020, which was at target for all outstanding PSUs such that target performance is used for purposes of calculating the value of the PSUs in this table. However, Mr. Holderness’s PSUs will vest based on actual performance as of the end of the applicable performance period, and, as a result, the amounts included reflect estimated payouts of such PSUs. +(2) +The Company elected to pay a discretionary annual cash bonus to Mr. Holderness for his exemplary work during 2020. +Sledge Separation Agreement +On December 17, 2020, Mr. Sledge and the Company entered into the Sledge Separation Agreement pursuant to which Mr. Sledge’s employment with the Company terminated on December 31, 2020 (the “Sledge Separation Date”). Pursuant to the terms of the Sledge Separation Agreement, Mr. Sledge became entitled to receive the following benefits, subject to his execution and non-revocation of a release of claims and continued compliance with certain restrictive covenants, including additional restrictive covenants that result in a total of a five-year non-competition and non-solicitation obligation (an increase from the one-year non-competition and three-year non-solicitation obligation set forth in Mr. Sledge’s employment agreement):: +• +Lump-sum cash payment equal to $44,952 for his accrued but unused vacation days; +• +Cash severance equal to $1,015,000, payable in substantially equal installments in accordance with the Company’s normal payroll practices during the period beginning on the expiration of the release revocation period and ending on the first anniversary of the Sledge Separation Date; +58 +• +Satisfaction of the service requirement for his annual bonus under the Bonus Plan for the 2020 calendar year, such that Mr. Sledge’s 2020 bonus, equal to $316,585, was based on actual performance for the 2020 calendar year and paid to Mr. Sledge at the time such bonuses were paid to other participants in the Bonus Plan; +• +Reimbursement for the difference between the cost of continuation coverage for Mr. Sledge, his spouse and eligible dependents, if any, under the Company’s group health plans pursuant to COBRA and the employee contribution amount that current employees of the Company pay to elect the same or similar coverage under such group health plans for up to 18 months following the Sledge Separation Date; +• +Accelerated vesting as of the Sledge Separation Date of 29,997 stock options granted on March 16, 2017 under the 2017 LTIP that are scheduled to vest during the one-year period following the Sledge Separation Date in accordance with the terms of the applicable award agreements governing such awards; +• +Accelerated vesting as of the Sledge Separation Date of 30,034 RSUs granted under the 2017 LTIP that are scheduled to vest during the one-year period following the Sledge Separation Date in accordance with the terms of the applicable award agreements governing such awards; +• +Deemed satisfaction of the service requirement with respect to the 26,012 target PSUs originally granted on April 18, 2018 under the 2017 LTIP, such that such PSUs vested on December 31, 2020 in accordance with the terms of the applicable award agreement governing such award and were settled based on the Company’s actual performance over the applicable performance period at the time originally specified in the applicable award agreement; +• +Deemed satisfaction of the service requirement with respect to the 26,471 target PSUs originally granted on March 18, 2019 under the 2017 LTIP, such that such PSUs will remain outstanding and eligible to vest based on the Company’s actual performance over the relevant performance period and such vested PSUs, if any, shall be settled at the time originally specified in the applicable award agreement; +• +Extension of the exercise period of Mr. Sledge’s stock options granted under the Stock Option Plan and the 2017 LTIP that have become vested and are outstanding as of the Sledge Separation Date such that they shall not be forfeited on the 91st day following the Sledge Separation Date pursuant to the terms of the applicable plans but instead shall remain outstanding and eligible to vest until June 14, 2023; and +• +Payment of reasonable legal costs incurred by Mr. Sledge for a review of the Sledge Separation Agreement. +Upon the Sledge Separation Date, Mr. Sledge forfeited all other unvested equity awards in connection with his separation pursuant to the terms of the 2017 LTIP. +The table below quantifies the value of the payments and benefits received or to be received by Mr. Sledge pursuant to the Sledge Separation Agreement. +Type of Benefits +Severance +Payments +($) +Vacation Payout +44,952 +Cash Severance +1,015,000 +2020 Annual Bonus Payout +316,585 +COBRA Subsidy (1) +11,724 +RSU Acceleration (2) +221,951 +PSU Acceleration (2) +387,849 +Stock Option Extension (3) +1,400,783 +Attorneys’ Fees +11,534 +Total +3,410,378 +59 +(1) +The COBRA reimbursement amount is based on the premium in effect on the Sledge Separation Date and Mr. Sledge’s elections in place on such date, which are assumed for purposes of this table to remain the same throughout the 18-month period for which the COBRA reimbursement would be available. +(2) +For the RSUs and PSUs, these amounts are calculated by multiplying the number of RSUs and PSUs that were vested on the Sledge Separation Date by $7.39, the closing price of our common stock on the Sledge Separation Date. The number of PSUs that were granted in 2019 and remain outstanding and eligible to vest based on actual performance used in such calculation reflects actual performance as of December 31, 2020, which was at target such that target performance is used for purposes of calculating the value of the PSUs in this table. However, Mr. Sledge’s PSUs will vest based on actual performance as of the end of the applicable performance period, and, as a result, the amounts included reflect estimated payouts of such PSUs. The unvested stock options have an exercise price of $14.00, which is $6.61 more than the market value of our common stock on the Sledge Separation Date, so the value of any accelerated stock options has not been included in this table. +(3) +The value of the stock option extension is equal to the fair value upon modification of such awards, calculated in accordance with FASB ASC Topic 718. +CEO Pay Ratio +2020 CEO Pay Ratio +As of December 31, 2020, the Company employed approximately 1,100 people, all in the United States. Using a consistently applied compensation measure, we determined as of December 31, 2020 the total annual cash compensation of each of our employees (excluding our Former Chief Executive Officer), and then identified the “median employee” within our employee population. +To identify the median compensated employee, we used total annual cash compensation, including base salary, actual bonus paid and overtime and allowances, as applicable. Salaries were annualized for those full- and part-time employees who did not work for the full year. Reasonable estimates of cash compensation were made for those employees who were hired during 2020 using current base salary and target bonus amounts and any overtime or allowances paid during 2020. Once the median employee was identified, we determined his or her annual total compensation in accordance with Item 402(c)(2)(x) of Regulation S-K as required pursuant to SEC rules, which resulted in annual total compensation for the median employee equal to $86,000 for 2020. This calculation is the same calculation used to determine total compensation for purposes of the 2020 Summary Compensation Table with respect to each of the Named Executive Officers. +Our Chief Executive Officer’s 2020 total compensation was $5,105,198. Therefore, the ratio of our Chief Executive Officer’s compensation to the median employee’s compensation was approximately 59 to 1 for 2020. +SEC rules do not specify a single methodology for identification of the median employee, and other companies may use assumptions and methodologies that are different from those used by us in calculating their pay ratio. Accordingly, the pay ratio disclosed by other companies may not be comparable to the Company’s pay ratio as disclosed above. Neither the Compensation Committee nor management of the Company used the pay ratio measure in making compensation decisions. +Equity Compensation Plan Information +The table below sets forth information regarding awards outstanding under the Stock Option Plan, the 2017 LTIP, and the 2020 LTIP, as of December 31, 2020: +Plan Category +Number of securities +to be issued +upon exercise of +outstanding options, +warrants and rights (1) +Weighted average +exercise price of +outstanding options, +warrants and rights +Number of securities +remaining available for +future issuance under +equity compensation plans +(excluding securities +reflected in column (a)) (2) +(a) +(b) +(c) +Equity compensation plans approved by security holders +6,384,988 +$ +4.82 +4,749,831 +60 +Plan Category +Number of securities +to be issued +upon exercise of +outstanding options, +warrants and rights (1) +Weighted average +exercise price of +outstanding options, +warrants and rights +Number of securities +remaining available for +future issuance under +equity compensation plans +(excluding securities +reflected in column (a)) (2) +(a) +(b) +(c) +Equity compensation plans not approved by security holders +— +— +— +Total +6,384,988 +$ +4.82 +4,749,831 +(1) +Includes 3,622,763 option awards granted under the Stock Option Plan; 577,578 option awards, 1,165,369 RSU awards and 1,003,886 PSU awards (assuming achievement of target payout of 100%) granted under the 2017 LTIP; and 15,392 PSUs granted under the 2020 LTIP. The weighted average exercise price in column (b) does not take the RSU awards or PSU awards into account. +(2) +This column reflects the number of awards that remain available for future issuance pursuant to the 2020 LTIP as of December 31, 2020. No further awards may be granted under the Stock Option Plan or the 2017 LTIP. +61 +SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT +Principal Stockholders +The following table presents certain information as of March 22, 2021, based on 102,057,815 shares of common stock outstanding as of such date, as to: +• +each stockholder known by us to be the beneficial owner of more than five percent of our outstanding shares of common stock, +• +each director and director nominee, +• +each Named Executive Officer, and +• +all current directors and executive officers as a group. +Shares Beneficially Owned +Number +Percentage +Name of Beneficial Owner (1) +5% Stockholders +Pioneer Natural Resources Company (2) +16,600,000 +16.3 % +BlackRock, Inc. (3) +12,746,812 +12.5 % +THRC Holdings, L.P. (4) +7,601,133 +7.4 % +The Vanguard Group (5) +8,328,812 +8.2 % +Directors and Named Executive Officers (6) +Phillip A. Gobe +69,171 +* +David S. Schorlemer (7) +— +* +Darin G. Holderness (7) +54,440 +* +David Sledge (8) +1,038,472 +1.0 % +Adam Muñoz +66,872 +* +Newton W. “Trey” Wilson III +9,059 +* +Dale Redman (9) +371,200 +* +Jeffrey D. Smith (10) +370,080 +* +Spencer D. Armour III +647,289 +* +Mark S. Berg +12,274 +* +Anthony J. Best +48,363 +* +Michele V. Choka +37,573 +* +Alan E. Douglas +54,515 +* +G. Larry Lawrence +15,392 +* +Jack B. Moore +54,515 +* +All Directors and Executive Officers as a group (12 persons) +1,039,822 +1.0 % +* +Less than 1%. +(1) +Unless otherwise indicated, the address for each beneficial owners in this table is c/o ProPetro Holding Corp., 1706 S. Midkiff, Midland, Texas 79701. +(2) +Based on a Schedule 13D filed on January 7, 2019. Represents shares of our common stock beneficially owned by Pioneer. The shares of our common stock are directly owned by Pioneer Natural Resources Pumping Services LLC, a wholly owned subsidiary of Pioneer Natural Resources USA, Inc., which is a wholly owned subsidiary of Pioneer. The address of Pioneer and its subsidiaries is 5205 N. O’Connor Blvd., Suite 200, Irving, Texas 75039-3746. +(3) +Based on a Schedule 13G filed on January 26, 2021. Represents shares of our common stock held by +62 +BlackRock, Inc. and certain of its affiliates, referred to collectively as BlackRock. BlackRock has sole voting power over 12,564,718 shares and sole dispositive power over 12,746,812 shares. The address for BlackRock is 55 East 52nd Street, New York, New York 10055. +(4) +Based on a Schedule 13D Filed on January 19, 2021. Represents 7,601,133 shares over which THRC Holdings, L.P. has shared voting power and shared dispositive power. The address for THRC Holdings, L.P. is 17018 IH 20, Cisco, Texas 76437. +(5) +Based on a Schedule 13G/A Filed on February 10, 2021. Represents (i) 0 shares over which The Vanguard Group has sole voting power (ii) 81,314 shares over which The Vanguard Group has shared voting power, (iii) 8,185,561 over which The Vanguard Group has sole dispositive power, and (iv) 143,251 over which The Vanguard Group has shared dispositive power. The address for The Vanguard Group is 100 Vanguard Blvd., Malvern, Pennsylvania 19355. +(6) +For each officer and director, includes shares of common stock that are issuable pursuant to options that are currently exercisable or exercisable within 60 days, and RSUs that are eligible to vest within 60 days. +(7) +On October 23, 2020, Mr. Holderness resigned from his position as Chief Financial officer and Mr. Schorlemer was appointed as Chief Financial Officer. +(8) +Mr. Sledge resigned from his position as Chief Operating Officer on December 31, 2020. Based on information set forth in a Form 4 filed with the SEC on August 26, 2020. +(9) +Mr. Redman resigned from his position as Chief Executive Officer on March 13, 2020. Includes 371,200 shares of the Company’s common stock pledged by Mr. Redman pursuant to a pledge agreement dated January 18, 2017, as amended by a letter agreement dated August 18, 2020. +(10) +Mr. Smith ceased serving as an executive officer on March 13, 2020 but serves as a Special Advisor to the Chief Executive Officer. +Executive Officers +Our executive officers serve at the direction of our Board. All of our executive officers and certain other key officers are listed in the following table, and certain information concerning those officers, except for Mr. Gobe, who is a member of the Board, follows the table: +Name +Age +Position with ProPetro Holding Corp. +Executive +Officer Since +Phillip A. Gobe +68 +Chief Executive Officer and Chairman of the Board +2019 +David S. Schorlemer +54 +Chief Financial Officer +2020 +Adam Muñoz +38 +Chief Operating Officer +2020 +Newton W. “Trey” Wilson III +70 +General Counsel and Corporate Secretary +2019 +Elo Omavuezi +38 +Chief Accounting Officer +2019 +Samuel D. Sledge +34 +Chief Strategy and Administrative Officer +2020 +David S. Schorlemer +David S. Schorlemer began serving as a Special Advisor to the Chief Financial Officer on October 12, 2020 until his appointment as Chief Financial Officer as of October 23, 2020. Mr. Schorlemer has two decades of experience in senior level positions in public and private companies. He most recently served as Executive Vice President, Chief Financial Officer, Treasurer and Secretary of Basic Energy Services, Inc., a Fort Worth, Texas based oilfield services company, from September 2018 until joining the Company. Prior to that, he served as the Chief Financial Officer of Gulf Island Fabrication, Inc. from January 2017 to August 2018. His work history also includes serving as Chief Financial Officer for three oilfield services companies: GR Energy Services Management, LP from January 2016 to December 2016, Stallion Oilfield Holdings, Inc., September 2004 to December 2015 and Q Services, Inc. from July 1997 until its merger with Key Energy Services, Inc. in July 2002. He also held the role of vice president, marketing and strategic planning for Key Energy Services, Inc. from July 2002 to September 2004. Mr. Schorlemer earned his Bachelor of Business Administration degree in finance from The University of Texas, and his Master of +63 +Business Administration from Texas A&M University. Mr. Schorlemer serves as a director of Performance Multi-Flow Solutions, LLC and as an advisor to Luminous Biosciences. +Newton W. “Trey” Wilson III +Trey Wilson has served as our General Counsel and Corporate Secretary since September 2019. Mr. Wilson served as the Chief Executive Officer of WLP/Westex Well Services & Wilson Systems from April 2018 to September 2019. Mr. Wilson previously served as the President and Chief Executive Officer of MBI Energy Services from July 2016 to March 2018. From 2005 to May 2015, Mr. Wilson served in various roles for Key Energy Services, Inc., including Executive Vice President and Chief Operating Officer and, prior to that, Senior Vice President, General Counsel and Secretary. Mr. Wilson also served as Senior Vice President, General Counsel and Secretary of Forest Oil Corporation from 2000 to 2005. Mr. Wilson has completed the Harvard Business School Executive Leadership Program, holds a Bachelor of Business Administration from Southern Methodist University, and holds a Juris Doctor from the University of Texas. +Elo Omavuezi +Elo Omavuezi has served as our Chief Accounting Officer since October 2019. Mr. Omavuezi previously served as the Director of Financial Reporting and Technical Accounting of the Company from April 2017 to October 2019. Prior to that, Mr. Omavuezi had over 10 years of accounting, internal controls and management experience serving publicly listed companies in the oilfield service and construction industries during his time with Deloitte. Mr. Omavuezi was previously employed by Deloitte as an Audit Manager from June 2014 to April 2017 and an Audit Senior from January 2007 to April 2014. Mr. Omavuezi holds a Bachelor of Science in Accounting from the University of Benin and a Master’s degree in Finance and Investment with Distinction from Brunel University and is a Certified Public Accountant. +Samuel D. Sledge +Samuel D. Sledge has served as our Chief Strategy and Administrative Officer since March 2020. Mr. Sledge has significant experience with ProPetro, having joined the Company in 2011. Mr. Sledge has served in various capacities throughout his tenure such as a Frac Technical Specialist and Technical Operations Manager where his duties included quality control, planning and logistics, and the development of the engineering program. Mr. Sledge has most recently served as the Vice President of Finance, Corporate Development, and Investor Relations where his responsibilities included financial planning and analysis, strategic initiatives and investor relations. Mr. Sledge received a Bachelor of Business Administration and a Masters of Business Administration from Baylor University. +Adam Muñoz +Adam Muñoz has served as our Chief Operating Officer since January 2021, and prior to that, he served as Senior Vice President of Operations since March 2020. Mr. Muñoz joined the Company in 2010 to initiate ProPetro’s Permian pressure pumping operation. Prior to joining ProPetro, Mr. Muñoz held sales and operations roles at Frac Tech Services and Weatherford International. Since joining ProPetro, Mr. Muñoz has served as the Director of Business Development and Technical Services where he was responsible for overseeing the growth of the hydraulic fracturing operations as well as managing the department’s day-to-day technical services. Mr. Muñoz has most recently served as the Vice President of Frac Services where his duties included leading the hydraulic fracturing division through specific efforts to increase operational efficiencies and maximize financial productivity. Mr. Muñoz received a Bachelor of Business Marketing from the University of Texas at the Permian Basin. +64 +PROPOSAL 2 +ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION +We are asking stockholders to approve, on a non-binding advisory basis, the compensation of our Named Executive Officers as disclosed in this proxy statement. As described above in “Compensation Discussion and Analysis,” the Compensation Committee has structured our executive compensation program to achieve the following key objectives: +• +Reward our Named Executive Officers for exceptional performance and ensure there is accountability for poor performance. +• +Align the interests of our Named Executive Officers with those of our stockholders. +• +Provide flexibility to respond to changing circumstances. +• +Ensure the compensation we provide our Named Executive Officers is industry-competitive so that we can attract, retain and motivate talented executives with the experience and skills necessary for our success. +• +Design a compensation program that is internally consistent and equitable. +We urge stockholders to read the section entitled “Compensation Discussion and Analysis” beginning on page 21 of this proxy statement, which describes in more detail how our executive compensation policies and procedures operate and are designed to achieve our compensation objectives, as well as the section entitled “Executive Compensation” and the compensation tables and narrative included therein beginning on page 38, which provide detailed information on the compensation of our Named Executive Officers. The Compensation Committee and the Board believe that the policies and procedures articulated in the “Compensation Discussion and Analysis” are effective in achieving our goals and that the compensation of our Named Executive Officers reported in this proxy statement has and will contribute to the Company’s recent and long-term success. +In accordance with Section 14A of the Exchange Act, and as a matter of good corporate governance, we are asking stockholders to approve the following resolution at the annual meeting: +RESOLVED, that the stockholders of ProPetro Holding Corp. (the “Company”) approve, on a non-binding advisory basis, the compensation of the Company’s Named Executive Officers as disclosed in the Compensation Discussion and Analysis and Executive Compensation sections and the related compensation tables, notes and narrative in the proxy statement for the Company’s 2021 annual meeting. +Vote Required +This advisory resolution, commonly referred to as a “say-on-pay” resolution, is non-binding on the Board. Although non-binding, the Board and the Compensation Committee will review and consider the voting results when making future decisions regarding our executive compensation program. +The affirmative “FOR” vote of the holders of a majority of the shares represented at the meeting, online or by proxy, and entitled to vote is required to approve this Proposal No. 2. Brokers do not have discretion to vote on this proposal without your instruction. If you do not instruct your broker how to vote on this proposal, your broker will deliver a non-vote on this proposal. Abstentions will have the same effect as a vote “AGAINST” Proposal No. 2. Broker non-votes will have no effect on Proposal No. 2. +We currently intend to hold the next non-binding advisory vote to approve the compensation of our Named Executive Officers at our 2022 annual meeting of stockholders, unless our Board modifies its policy of holding this vote on an annual basis. +Board Recommendation +The Board unanimously recommends a vote “FOR” this Proposal No. 2. +65 +PROPOSAL 3 +RATIFICATION OF APPOINTMENT OF +INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM +The Audit Committee has selected Deloitte & Touche LLP, independent registered public accounting firm, to audit our consolidated financial statements for the fiscal year ending December 31, 2021. Deloitte & Touche LLP has served as our independent registered public accounting firm since 2013. We are asking the stockholders to ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2021. Deloitte & Touche LLP was appointed by the Audit Committee in accordance with its charter. +In the event stockholders fail to ratify the appointment, the Audit Committee may reconsider this appointment. Even if the appointment is ratified, the Audit Committee, in its discretion, may direct the appointment of a different independent accounting firm at any time during the year if the Audit Committee determines that such a change would be in our and our stockholders’ best interests. The Audit Committee has pre-approved all services provided by Deloitte & Touche LLP. +It is expected that one or more representatives of Deloitte & Touche LLP will be available to participate in the 2021 annual meeting and will be given the opportunity to make a statement if they so desire. It also is expected that the representative(s) will be available to respond to appropriate questions from the stockholders. +Vote Required +The approval of the ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2021 requires the affirmative vote of the holders of a majority of the shares represented at the meeting, online or by proxy, and entitled to vote. As a result, abstentions will have the same effect as votes against this proposal. We do not expect any broker non-votes in connection with this proposal. +Board Recommendation +The Board unanimously recommends that you vote “FOR” the ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2021. +66 +OTHER MATTERS +Certain Relationships and Related Party Transactions +Related Party Transactions +Corporate Office Building +The Company rented its corporate office building and the associated real property from PD Properties, an entity in which Dale Redman (our Former Chief Executive Officer) has an equity interest. The rent expense on our corporate office building was approximately $0.1 million per year. In April 2020, the Company acquired the corporate office building and associated real property for approximately $1.5 million. +Operations and Maintenance Yards +The Company also rents five yards from South Midkiff Partners, LLC, an entity jointly owned by Dale Redman, David Sledge (our Former Chief Operating Officer), Jeff Smith (our former executive officer), and Spencer Armour (a director) and total annual rent expense for each of the five yards was approximately $0.03 million, $0.03 million, $0.1 million, $0.1 million, and $0.2 million, respectively. The Company also leased a drilling yard from Sledge Ranches, LTD, in which David Sledge has an equity interest, and the lease expense during the year ended December 31, 2020 was approximately $0.11 million. In November 2020, we terminated the drilling yard lease. +We lease a property adjacent to our corporate headquarters from 4 Industrial Loop Partners, LLC, an entity wholly owned by an affiliate of Bandera Ventures. We paid approximately $0.4 million under the lease for the year ended December 31, 2020. The lease has a remaining term of approximately three years. Mr. Blackwell, one of our former directors, through his approximately 33% interest in Bandera Ventures, may be deemed an indirect beneficiary of this lease. +Transportation and Equipment Rental +Adam Muñoz, our Chief Operating Officer, has a family relationship with an officer of Pro Pump Inc., an entity that provides equipment maintenance and repair services to the Company. The Company incurred approximately $1.2 million for the year ended December 31, 2020 for equipment maintenance and repair services from Pro Pump Inc. +Adam Muñoz, our Chief Operating Officer, also has a family relationship with an employee of J&M Burns Transportation, an entity that provides transportation services to the Company. The employee receives a portion of his compensation from J&M Burns Transportation based on the amount of services sold by him to customers, including the Company. The Company incurred approximately $17.0 million in expense for the year ended December 31, 2020 for services provided to the Company by J&M Burns Transportation. +Executive Officer Family Members +Oscar J. Dominguez is our Vice President of Frac Technical Services and the father-in-law of Adam Muñoz. Mr. Dominguez received total compensation of approximately $896,000 for his services for the year ended December 31, 2020 (including $787,000 cash compensation and $109,000 non-cash equity compensation). +Oscar M. Dominguez is our Vice President of Frac Operations and the brother-in-law of Adam Muñoz. Mr. Dominguez received total compensation of approximately $1,000,000 for his services for the year ended December 31, 2020 (including $981,000 cash compensation and $109,000 non-cash equity compensation). +Roger Dominguez is our Acid Logistics Manager and the brother-in-law of Adam Muñoz. Mr. Dominguez received total compensation of approximately $209,000 for his services for the year ended December 31, 2020 (including $204,000 cash compensation and $5,000 non-cash equity compensation). +67 +Jordan Frosch was our Vice President of Sales and Marketing until October 26, 2020 and the son-in-law of Dale Redman. Mr. Frosch received total compensation of approximately $225,000 for his services for the year ended December 31, 2020 (including $206,000 cash compensation and $19,000 non-cash equity compensation). +Samuel D. Sledge is our Chief Strategy and Administrative Officer and the son of David Sledge, our former Chief Operating Officer. Samuel D. Sledge received total compensation of approximately $565,000 for his services for the year ended December 31, 2020 (including $550,000 cash compensation and $15,000 non-cash equity compensation). +Pioneer +On December 31, 2018, we consummated the purchase of certain pressure pumping assets and real property in connection with the Pioneer Pressure Pumping Acquisition. In connection with the consummation of the Pioneer Pressure Pumping Acquisition and effective January 1, 2019, we became a long-term service provider to Pioneer, providing pressure pumping and related services for a term of up to 10 years. Revenue from services provided to Pioneer (including idle fees) accounted for approximately $335.4 million during the year ended December 31, 2020. In connection with the Pioneer Pressure Pumping Acquisition, the Company agreed to reimburse Pioneer for our portion of the retention bonuses paid to former Pioneer employees that were subsequently employed by the Company. During year ended December 31, 2020, the Company fully reimbursed Pioneer approximately $2.7 million for our portion of the retention bonuses paid to former Pioneer employees that were subsequently employed by the Company. +Sand Supply Agreement +In November 2017, we entered into a five-year extension to an existing sand supply agreement to provide Texas-sourced frac sand (“Texas sand”). Texas sand provided under the supply agreement will primarily be sourced from a mine located on land owned by entity in which Dale Redman owns a 44% noncontrolling equity interest. Accordingly, Mr. Redman may be considered an indirect beneficiary of payments made under the lease between our supplier and the landowner. The supply agreement was negotiated by officers of the Company without the involvement of Mr. Redman and reviewed and approved by the Audit Committee pursuant to its authority under our Related Party Transaction Policy. In considering the approval of the supply agreement, the Audit Committee retained independent legal and commercial expertise to assist in the evaluation of the agreement’s commercial terms. Following its evaluation, the Audit Committee determined that the pricing and other provisions of the agreement reflected market terms, that the agreement reflected an arm’s length negotiation, and that entry into the agreement was advisable and in the best interests of the Company. For the year ended December 31, 2020, the Company purchased approximately $11.8 million of Texas sand under the supply agreement, and Mr. Redman was an indirect beneficiary of approximately $0.4 million in estimated royalty payments. +Policies and Procedures for Related Party Transactions +Any request for us to enter into a transaction with an executive officer, director, principal stockholder or any of such persons’ immediate family members or affiliates, among others, in which the amount involved exceeds $120,000, must first be presented to our Audit Committee for review, consideration and approval. All of our directors and executive officers are required to report to the Audit Committee chair any such related person transaction. In approving or rejecting the proposed agreement, our Audit Committee shall consider the facts and circumstances available and deemed relevant to the Audit Committee, including, but not limited to, whether the transaction is on terms comparable to those that could be obtained in arm’s-length dealings with an unrelated third party, the extent of the related party’s interest in the transaction and the conflicts of interest and corporate opportunity provisions of our certificate of incorporation. If we should discover related person transactions that have not been approved, the Audit Committee will be notified and will determine the appropriate action, including ratification, revision or termination of such transaction. +Other Matters +A copy of our Annual Report on Form 10-K for the year ended December 31, 2020, including financial statements and schedules thereto but not including exhibits, as filed with the SEC, will be sent to +68 +any stockholder of record on March 22, 2021 without charge by calling Investor Relations at (432) 688-0012 or writing to the address below: +ProPetro Holding Corp. +P.O. Box 873 +Midland, Texas 79702 +Attn: General Counsel and Corporate Secretary +A reasonable fee will be charged for copies of exhibits. You may also access our Annual Report on Form 10-K for the year ended December 31, 2020 and our other filings with the SEC at www.propetroservices.com. +The persons designated to vote shares covered by our Board’s proxies intend to exercise their judgment in voting such shares on other matters that may properly come before the meeting. Management does not expect that any matters other than those referred to in this proxy statement will be presented for action at the meeting. +Deadline for Receipt of Stockholder Proposals +If you want to present a proposal of business or nominate persons for election to the Board at the 2022 annual meeting of stockholders or nominate a person for election to the Board at such meeting, you must give us written notice no later than the close of business on February 16, 2022 and no earlier than the opening of business on January 17, 2022, and follow the procedures outlined in our Bylaws. You may request a copy of the provisions of the Bylaws governing the requirements for notice at the below address. If the date of the 2022 annual meeting of stockholders is more or less than 30 days from May 17, 2022, the one year anniversary of the 2021 annual meeting of stockholders, your notice of a proposal will be timely if we receive it no earlier than the opening of business on the 120th day before the actual date of such meeting and no later than the later of (i) the close of business on the 90th day before the actual date of such meeting and (ii) the close of business on the tenth day following the date on which a written statement setting forth the date of such meeting was mailed to the stockholders or the date on which it is first disclosed to the public. SEC rules permit management to vote proxies in its discretion in certain cases if a stockholder does not comply with this deadline and, in certain other cases notwithstanding a stockholder’s compliance with this deadline. +If you wish to submit a proposal to be considered for inclusion in next year’s proxy statement pursuant to Rule 14a-8 of the Exchange Act, you must submit the proposal so that it is received by November 26, 2021. If the date of the 2022 annual meeting of stockholders is more than 30 days from May 17, 2022, the one-year anniversary date of the 2021 annual meeting of stockholders, a notice will be timely if we receive it a reasonable time before we begin to print and send our proxy materials for such meeting. +In each case, your notice should be sent in writing to our General Counsel and Corporate Secretary at our principal executive offices at 1706 S. Midkiff, Midland, Texas 79701. +69 +PROPETRO HOLDING CORP.PROXY FOR ANNUAL MEETING TO BE HELD ON MAY 17, 2021 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORSThe undersigned stockholder hereby appoints each of Phillip A. Gobe and Newton W. Wilson III as attorney and proxy for the undersigned, with the power to appoint his substitute, to represent and to vote all the shares of common stock of PROPETRO HOLDING CORP. (the “Company”), which the undersigned would be entitled to vote, at the Company’s Annual Meeting of Stockholders to be held via virtual-only meeting format on Monday, May 17, 2021 at 10:00 A.M. Central Time and at any postponements, continuations or adjournments thereof (the “Annual Meeting”). In their discretion, the proxies are authorized to vote upon (i) the election of any person to the Board of Directors if any nominee named herein becomes unable to serve or for good cause will not serve, (ii) any matter that the Board of Directors of the Company did not know would be presented at the Annual Meeting by a reasonable time before the proxy solicitation was made and (iii) any other matter that may properly come before the Annual Meeting or any postponements, continuations or adjournments thereof.This proxy, when properly executed, will be voted in the manner directed on the reverse side by the undersigned stockholder. If no direction is made, this proxy will be voted “FOR” all nominees set forth in PROPOSAL 1 and “FOR” PROPOSALS 2 and 3. PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE. (IMPORTANT — This Proxy must be signed and dated on the reverse side.) PLEASE DETACH ALONG PERFORATED LINE AND MAIL IN THE ENVELOPE PROVIDED. Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be held May 17, 2021.The Proxy Statement and our 2020 Annual Report to Stockholders are available at: http://www.viewproxy.com/propetro/2021 +Please mark your votes like this The Board of Directors recommends a vote FOR all nominees in Proposal 1.The Board of Directors recommends a vote FOR Proposals Vote on Proposals Election of Directors 01 Phillip A. Gobe02 Spencer D. Armour III 03 Mark S. Berg04 Anthony J. Best05 Michele V. Choka 06 Alan E. Douglas 07 G. Larry Lawrence 08 Jack B. Moore Vote FOR all nominees (except as marked)Vote WITHHELDfrom all nominees To approve, on a non-binding advisory basis, the compensation of the Company’s named executive officers. FOR AGAINSTABS To ratify the appointment of Deloitte & Touche LLP to serve as the Company’s independent registered public accounting firm for the year ending December 31, 2021. FOR AGAINSTABSTAINTo withhold authority tovote for any individual nominee(s), mark “Vote FOR all nominees (except as marked)” and write the number(s) of the ominee(s) on the line below. ateSignatureAddress Change/Comments: (If you noted any Address Changes and/or Comments above, please mark box.) Please indicate if you plan to attend this meeting Signature (if held jointly) NOTE: Please mark, date and sign this proxy card and return it in the accompanying envelope. Please sign as your name appears hereon. If shares are registered in more than one name, all owners should sign. If signing in a fiduciary or representative capacity, please give full title and attach evidence of authority. Corporations please sign with full corporate name by a duly authorized officer and affix corporate seal.CONTROL NUMBERPLEASE DETACH ALONG RFORATED LINE AND MAIL IN THE ENVELOPE PROVIDED.PROPETRO HOLDING CORP.As a stockholder of ProPetro Holding Corp., you have the option of voting your shares electronically through the Internet or on the telephone, eliminating the need to return the proxy card. Your electronic vote authorizes the named proxies to vote your shares in the same manner as if you marked, signed, dated and returned the proxy card. Votes submitted electronically over the Internet or by telephone must be received by 11:59 p.m. Eastern Time, on May 16, 2021.CONTROL NUMBERPROXY VOTING INSTRUCTIONSPlease have your 11 digit control number ready when voting by Internet or Telephone INTERNET Vote Your Proxy on the Internet: www.AALVote.com/PUMP Have your proxy card available when you access the above website. Follow the prompts to vote your shares. If you vote your proxy by Internet or by Telephone, you do NOT need to mail back your Proxy Card. \ No newline at end of file diff --git a/raw/proxies/0001680247/0001104659-21-041952/proxy_rpt.txt b/raw/proxies/0001680247/0001104659-21-041952/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..717d30d4d4382e2fd3050c543fdb1196d2d37c5b --- /dev/null +++ b/raw/proxies/0001680247/0001104659-21-041952/proxy_rpt.txt @@ -0,0 +1,23 @@ +Certain Relationships and Related Party Transactions +Related Party Transactions +Corporate Office Building +The Company rented its corporate office building and the associated real property from PD Properties, an entity in which Dale Redman (our Former Chief Executive Officer) has an equity interest. The rent expense on our corporate office building was approximately $0.1 million per year. In April 2020, the Company acquired the corporate office building and associated real property for approximately $1.5 million. +Operations and Maintenance Yards +The Company also rents five yards from South Midkiff Partners, LLC, an entity jointly owned by Dale Redman, David Sledge (our Former Chief Operating Officer), Jeff Smith (our former executive officer), and Spencer Armour (a director) and total annual rent expense for each of the five yards was approximately $0.03 million, $0.03 million, $0.1 million, $0.1 million, and $0.2 million, respectively. The Company also leased a drilling yard from Sledge Ranches, LTD, in which David Sledge has an equity interest, and the lease expense during the year ended December 31, 2020 was approximately $0.11 million. In November 2020, we terminated the drilling yard lease. +We lease a property adjacent to our corporate headquarters from 4 Industrial Loop Partners, LLC, an entity wholly owned by an affiliate of Bandera Ventures. We paid approximately $0.4 million under the lease for the year ended December 31, 2020. The lease has a remaining term of approximately three years. Mr. Blackwell, one of our former directors, through his approximately 33% interest in Bandera Ventures, may be deemed an indirect beneficiary of this lease. +Transportation and Equipment Rental +Adam Muñoz, our Chief Operating Officer, has a family relationship with an officer of Pro Pump Inc., an entity that provides equipment maintenance and repair services to the Company. The Company incurred approximately $1.2 million for the year ended December 31, 2020 for equipment maintenance and repair services from Pro Pump Inc. +Adam Muñoz, our Chief Operating Officer, also has a family relationship with an employee of J&M Burns Transportation, an entity that provides transportation services to the Company. The employee receives a portion of his compensation from J&M Burns Transportation based on the amount of services sold by him to customers, including the Company. The Company incurred approximately $17.0 million in expense for the year ended December 31, 2020 for services provided to the Company by J&M Burns Transportation. +Executive Officer Family Members +Oscar J. Dominguez is our Vice President of Frac Technical Services and the father-in-law of Adam Muñoz. Mr. Dominguez received total compensation of approximately $896,000 for his services for the year ended December 31, 2020 (including $787,000 cash compensation and $109,000 non-cash equity compensation). +Oscar M. Dominguez is our Vice President of Frac Operations and the brother-in-law of Adam Muñoz. Mr. Dominguez received total compensation of approximately $1,000,000 for his services for the year ended December 31, 2020 (including $981,000 cash compensation and $109,000 non-cash equity compensation). +Roger Dominguez is our Acid Logistics Manager and the brother-in-law of Adam Muñoz. Mr. Dominguez received total compensation of approximately $209,000 for his services for the year ended December 31, 2020 (including $204,000 cash compensation and $5,000 non-cash equity compensation). +67 +Jordan Frosch was our Vice President of Sales and Marketing until October 26, 2020 and the son-in-law of Dale Redman. Mr. Frosch received total compensation of approximately $225,000 for his services for the year ended December 31, 2020 (including $206,000 cash compensation and $19,000 non-cash equity compensation). +Samuel D. Sledge is our Chief Strategy and Administrative Officer and the son of David Sledge, our former Chief Operating Officer. Samuel D. Sledge received total compensation of approximately $565,000 for his services for the year ended December 31, 2020 (including $550,000 cash compensation and $15,000 non-cash equity compensation). +Pioneer +On December 31, 2018, we consummated the purchase of certain pressure pumping assets and real property in connection with the Pioneer Pressure Pumping Acquisition. In connection with the consummation of the Pioneer Pressure Pumping Acquisition and effective January 1, 2019, we became a long-term service provider to Pioneer, providing pressure pumping and related services for a term of up to 10 years. Revenue from services provided to Pioneer (including idle fees) accounted for approximately $335.4 million during the year ended December 31, 2020. In connection with the Pioneer Pressure Pumping Acquisition, the Company agreed to reimburse Pioneer for our portion of the retention bonuses paid to former Pioneer employees that were subsequently employed by the Company. During year ended December 31, 2020, the Company fully reimbursed Pioneer approximately $2.7 million for our portion of the retention bonuses paid to former Pioneer employees that were subsequently employed by the Company. +Sand Supply Agreement +In November 2017, we entered into a five-year extension to an existing sand supply agreement to provide Texas-sourced frac sand (“Texas sand”). Texas sand provided under the supply agreement will primarily be sourced from a mine located on land owned by entity in which Dale Redman owns a 44% noncontrolling equity interest. Accordingly, Mr. Redman may be considered an indirect beneficiary of payments made under the lease between our supplier and the landowner. The supply agreement was negotiated by officers of the Company without the involvement of Mr. Redman and reviewed and approved by the Audit Committee pursuant to its authority under our Related Party Transaction Policy. In considering the approval of the supply agreement, the Audit Committee retained independent legal and commercial expertise to assist in the evaluation of the agreement’s commercial terms. Following its evaluation, the Audit Committee determined that the pricing and other provisions of the agreement reflected market terms, that the agreement reflected an arm’s length negotiation, and that entry into the agreement was advisable and in the best interests of the Company. For the year ended December 31, 2020, the Company purchased approximately $11.8 million of Texas sand under the supply agreement, and Mr. Redman was an indirect beneficiary of approximately $0.4 million in estimated royalty payments. +Policies and Procedures for Related Party Transactions +Any request for us to enter into a transaction with an executive officer, director, principal stockholder or any of such persons’ immediate family members or affiliates, among others, in which the amount involved exceeds $120,000, must first be presented to our Audit Committee for review, consideration and approval. All of our directors and executive officers are required to report to the Audit Committee chair any such related person transaction. In approving or rejecting the proposed agreement, our Audit Committee shall consider the facts and circumstances available and deemed relevant to the Audit Committee, including, but not limited to, whether the transaction is on terms comparable to those that could be obtained in arm’s-length dealings with an unrelated third party, the extent of the related party’s interest in the transaction and the conflicts of interest and corporate opportunity provisions of our certificate of incorporation. If we should discover related person transactions that have not been approved, the Audit Committee will be notified and will determine the appropriate action, including ratification, revision or termination of such transaction. \ No newline at end of file diff --git a/raw/proxies/0001680247/0001104659-22-031055/proxy.txt b/raw/proxies/0001680247/0001104659-22-031055/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..00945c97d31ba46d8e789d2071606080a7b0ffab --- /dev/null +++ b/raw/proxies/0001680247/0001104659-22-031055/proxy.txt @@ -0,0 +1,3232 @@ +DEF 14A +1 +tm2136161-2_def14a.htm +DEF 14A +tm2136161-2_def14a - none - 16.3750922s +TABLE OF CONTENTS +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +Washington, D.C. 20549 +SCHEDULE 14A +Proxy Statement Pursuant to Section 14(a) of +the Securities Exchange Act of 1934 (Amendment No.     ) +Filed by the Registrant ☒ +Filed by a Party other than the Registrant ☐ +Check the appropriate box: +☐ +Preliminary Proxy Statement +☐ +Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +☒ +Definitive Proxy Statement +☐ +Definitive Additional Materials +☐ +Soliciting Material under §240.14a-12 +ProPetro Holding Corp. +(Name of Registrant as Specified In Its Charter) +(Name of Person(s) Filing Proxy Statement, if other than the Registrant) +Payment of Filing Fee (Check all boxes that apply): +☒ +No fee required. +☐ +Fee paid previously with preliminary materials. +☐ +Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a6(i)(1) and 0-11 +TABLE OF CONTENTS +TABLE OF CONTENTS +2021 AT A GLANCE +1.4MM +Total Pumping Hydraulic Horsepower (HHP) +0.54 +Full Year TRIR +$875MM +Revenue +1500 +Employees +TEAMWORK AND +COLLABORATION +EXECUTION +CAPITAL DISCIPLINE +ProPetro Holding Corp. (NYSE) is a Midland, Texas-based oilfield services company providing pressure pumping and other complementary services to leading upstream oil and gas companies engaged in the exploration and production of North American unconventional oil and natural gas resources. +The Company was founded in 2005. In 2010, management strategically focused the Company’s efforts on establishing a best-in-class hydraulic fracturing platform targeting the Permian Basin. Our fleet has been designed to handle the highest-intensity, most complex hydraulic fracturing jobs. +ProPetro is known today as one of the most efficient and productive pressure pumping companies in the oilfield service industry. By successfully serving some of the largest and most demanding public and private E&P operating companies, we have established ourselves as a premium pressure pumping company. +UNIQUELY POSITIONED FOR SUCCESS +Permian Focus +Blue Chip Customers +Superior Performance +Sustainable Future +Positioned in the low-cost basin with sector leading operating scale +Large drilling inventories and sizeable rig programs +Consistently outperforming the competition on location and efficient Simul-Frac completions partner +Investing in lower emissions equipment to reduce our carbon footprint +Capital Discipline +Safety Culture +Technology +Social & Governance +Strong balance sheet with no debt; disciplined capital allocation and asset deployment +Full year 2021 Total Recordable Incident Rate of 0.54 +Focused on technological improvements to optimize our performance +Investing in our community and commitment to strong governance +TABLE OF CONTENTS +ProPetro Holding Corp. +1706 S. Midkiff +Midland, Texas 79701 +Message from Our Executive Chairman +Phillip A. Gobe +Executive Chairman and +Former Chief Executive Officer +Dear Stockholders, +While the continuing effects of the pandemic on our operating environment and supply chains presented challenges over the last year, 2021 was a year of significant accomplishments, driven by our amazing team. +2021 BUSINESS HIGHLIGHTS +• +We improved upon our outstanding performance in 2020, again realizing all-time company high operational efficiencies in 2021, and helping our customers maintain continued out-performance in their respective completions programs. +• +After a record year in 2020, we continued our strong safety performance, achieving a Full Year 2021 Total Recordable Incident Rate (TRIR) of 0.54. +• +Our continued strong performance in these areas following the significant market disruption caused by COVID-19 and the associated oil market downturn is a testament to our dedicated and loyal workforce and culture of excellence. +• +We commenced execution of our strategy to transition legacy Tier II equipment to lower-emissions equipment, including Tier IV Dynamic Gas Blending (DGB) pumping units. +• +We invested in a total of 86 Tier IV DGB pumping units, receiving 36 during 2021 and accelerating certain 2022 planned capital expenditures to mitigate supply chain challenges, thus advancing our ability to receive and commence deployment of the remaining 50 of these strategically important, next-generation assets for our customers into the first half of 2022. +• +We are one of the only companies among our public pressure pumping peers to have zero debt on the balance sheet as of year end 2021. +• +With our debt-free balance sheet and healthy cash position, we have strong liquidity to support further strategic investments as we enter a potential upcycle in 2022. +2021 LEADERSHIP CHANGES +Marking the culmination of our Board of Directors’ comprehensive succession planning process, I left my post as Chairman and Chief Executive Officer effective August 31, 2021 and assumed the Executive Chairman role. +To conclude the orderly transition of our executive leadership team, we made the following additional promotions, which became effective August 31, 2021. +• +Sam Sledge, the Company’s President, was promoted to Chief Executive Officer and he was also appointed to ProPetro’s Board of Directors; and +• +Adam Muñoz, our Chief Operating Officer, was promoted to President and Chief Operating Officer. +TABLE OF CONTENTS +Message from Our Executive Chairman +As in the past, our future focus will remain on providing our customers with excellent service quality that is backed by a differentiated team and culture, resulting in long-term value for our stockholders. +Both Sam and Adam are well-deserving of their expanded leadership roles, with each spending the last ten or more years at the Company. During that time they have developed a deep knowledge of the business and have been instrumental in developing our unique culture of teamwork, safety, and excellence. +Effective March 31, 2022, I will step down as Executive Chairman and my employment with the Company will end. Following March 31, 2022, I intend to continue serving the Company as Chairman of the Board. I, along with the full Board, look forward to supporting Sam, Adam and the rest of our talented leadership team and organization as they emphasize the stewardship of our business, while remaining squarely focused on the needs of our customers and stockholders. +LOOKING AHEAD +Notwithstanding the many challenges faced in 2021, we are excited for the opportunities ahead in 2022 as we work to capitalize on our competitive advantages of efficiency and collaboration. +Considering the global recovery in commodity prices, ProPetro is well-positioned to benefit from increasing activity and service pricing in the Permian Basin. +Importantly, we will strive to continue to enhance our efficiencies and leverage our strong customer relationships to implement mutually beneficial new technologies that improve the sustainability of our business. Our team is excited to prove, yet again, its ability to adapt and thrive in all conditions. Along with our customers, supply chain partners and other stakeholders, we look forward to the opportunity to develop our sustainable, efficient and resilient business model. +2022 ANNUAL MEETING +Thank you for your continued support of ProPetro. We look forward to you joining us, in person or virtually, at our annual meeting of stockholders on April 19, 2022. +Sincerely, +Phillip A. Gobe +Executive Chairman and Former Chief Executive Officer +March 7, 2022 +TABLE OF CONTENTS +ProPetro Holding Corp. +1706 S. Midkiff +Midland, Texas 79701 +NOTICE OF 2022 ANNUAL MEETING OF STOCKHOLDERS +Dear Stockholders, +We cordially invite you to attend the 2022 annual meeting of stockholders of ProPetro Holding Corp. +When +April 19, 2022 +10:00 a.m. Central Time +Where +2518 FM 307 +Midland, Texas 79706 +and +http://www.viewproxy.com/propetro/2022 +Record Date +Stockholders who owned our common stock at the close of business on February 22, 2022 are entitled to notice of, and to vote at, the annual meeting, or any continuation, postponement or adjournment thereof. +Items of Business +1 +Election of nine director nominees to serve for a one-year term +2 +Approval, on an advisory basis, of the compensation of our named executive officers +3 +Ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2022 +4 +Transaction of such other business as may properly come before the meeting +How to Vote +YOUR VOTE IS IMPORTANT. We urge you to review the accompanying proxy statement carefully and to submit your proxy as soon as possible so that your shares will be represented at the meeting. You may revoke your proxy if you so desire at any time before it is voted. Have your Notice, proxy card or voting instruction form with your 11-digit control number and follow the instructions. +INTERNET +TELEPHONE +MOBILE DEVICE +MAIL +AT THE MEETING +REGISTERED HOLDERS +www.AALVote.com/ +PUMP , 24/7 +Call +1 (866) 804-9616 +(toll-free), 24/7 +Scan the QR code +Sign, date and mail the proxy card, which you may have received by mail., using the postage-paid envelope provided +Attend the annual meeting and cast your ballot +BENEFICIAL OWNERS (HOLDERS IN STREET NAME) +Follow the instructions provided by your broker, bank +or other nominee +Return a properly executed voting instruction form by mail, depending upon the method(s) your broker, bank or other nominee makes available +To attend the annual meeting, you will need proof of ownership and a legal proxy from your broker, bank or other nominee +DEADLINE +11:59 p.m. Eastern Time on April 18, 2022, +if you are a registered holder +If you are a beneficial owner, please refer to the information provided by your broker, bank or other nominee +The annual meeting will be a “hybrid meeting,” which means stockholders will have the ability to attend the annual meeting either in-person or remotely. Stockholders will be able to vote and pose questions regardless of how they may choose to attend the meeting. Please be advised that we will monitor any further developments with COVID-19 and the impact on the annual meeting. If we determine that it is not advisable to hold the in-person option for the annual meeting, we will, as promptly as possible, announce details on changes to the annual meeting, including by issuing a press release, posting such information on our website and filing of additional proxy materials with the Securities and Exchange Commission. +A stockholders’ list will be available at our offices at 1706 S. Midkiff, Midland, Texas 79701 for a period of ten days prior to the meeting. We hope that you will be able to attend the meeting in person or virtually. +This proxy statement and our 2021 Annual +Report on Form 10-K to stockholders +are each available at +http://www.viewproxy.com/propetro/2022 +By Order of the Board of Directors, +Newton W. Wilson III +General Counsel and Corporate +Secretary +March 7, 2022 +TABLE OF CONTENTS +TABLE OF CONTENTS +1 +PROXY STATEMENT SUMMARY +6 +CORPORATE GOVERNANCE AND BOARD MATTERS +6 +Proposal 1 ―Election of Directors +7 +Nominees +12 +Director Independence +12 +Board Leadership Structure +13 +Board of Directors and Risk Oversight +13 +Sustainability and ESG Initiatives +14 +Communicating with Our Board of Directors +14 +Annual Meeting Attendance +15 +Compensation Committee Interlocks and Insider Participation +15 +Board and Committee Activity and Structure +17 +Role of the Board, Compensation Committee and Our Executive Officers +17 +Role of External Advisors +18 +Director Nominations Process +18 +Director Orientation and Education +19 +Certain Relationships and Related Party Transactions +20 +Director Compensation +21 +Non-Employee Director Stock Ownership Guidelines +22 +EXECUTIVE OFFICERS +24 +EXECUTIVE COMPENSATION +24 +Proposal 2 ―Advisory Vote to Approve Named Executive Officer Compensation +25 +Compensation Discussion and Analysis +40 +Report of the Compensation Committee +41 +Executive Compensation Tables +41 +Summary Compensation Table +43 +Grants of Plan-Based Awards Table +44 +Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table +44 +Outstanding Equity Awards for Fiscal Year Ended December 31, 2021 +46 +2021 Options Exercises and Stock Vested +46 +Pension Benefits +46 +Nonqualified Deferred Compensation +46 +Potential Payments Upon Termination or Change in Control +53 +CEO Pay Ratio +54 +Equity Compensation Plan Information +55 +AUDIT MATTERS +55 +Proposal 3 ―Ratification of Appointment of Independent Registered Public Accounting Firm +56 +Deloitte & Touche LLP Fees for Fiscal Years 2021 and 2020 +56 +Policy on Audit Committee Pre-Approval of Audit and Non-Audit Services of Independent Registered Public Accounting Firm +57 +Report of the Audit Committee +58 +STOCK OWNERSHIP INFORMATION +58 +Security Ownership of Certain Beneficial Owners and Management +60 +ADDITIONAL INFORMATION +60 +Information about the Annual Meeting and Voting +65 +Information about Stockholder Proposals +65 +Annual Report on Form 10-K +66 +Other Matters +TABLE OF CONTENTS +Proxy Statement Summary +The following section is only a summary of key elements of this proxy statement, and is intended to assist you in reviewing this proxy statement in advance of the 2022 annual meeting. This summary does not contain all of the information you should consider, and you are encouraged to read this entire proxy statement before submitting your votes. +2022 Annual Meeting +When +Where +Record Date +April 19, 2022 +10:00 a.m. Central Time +2518 FM 307 +Midland, Texas 79706 +and +http://www.viewproxy.com/propetro/2022 +February 22, 2022 +Voting Agenda +Board +Recommendation +For More Information, +See Page +1 +Election of nine director nominees to serve for a one-year term +FOR each +nominee +6 +2 +Approval, on an advisory basis, of the compensation of our named executive officers (Say-on-Pay) +FOR +24 +3 +Ratification of the Audit Committee’s selection of Deloitte and Touche LLP as our independent auditors for 2022 +FOR +55 +4 +Transaction of such other business as may properly come before the meeting or any adjournment thereof +Director Nominees +The Board of Directors (the “Board”) has nominated the nine director nominees shown below for a one-year term. +Committee Memberships +Nominees +Independent +Age +Director +Since +Audit +Compensation +Nominating & +Corporate +Governance +Spencer D. Armour III +67 +2013 +* +Mark S. Berg +63 +2019 +Anthony J. Best   +72 +2018 +Michele Vion +62 +2020 +1  |   ir.propetroservices.com +TABLE OF CONTENTS +Proxy Statement Summary +Committee Memberships +Nominees +Independent +Age +Director +Since +Audit +Compensation +Nominating & +Corporate +Governance +Alan E. Douglas +63 +2017 +* +Phillip A. Gobe   +69 +2019 +G. Larry Lawrence +70 +2020 +* +Jack B. Moore +68 +2017 +* +Samuel D. Sledge +35 +2021 +Meetings in 2021 +Board—9 +10 +6 +4 +Committee Chair +Committee Member +Executive Chairman of the Board +Lead Independent Director +* +Audit Committee financial expert +Corporate Governance Highlights +Corporate Governance Best Practices +Six of our nine directors are independent, including all Committee members +Lead Independent Director, with defined responsibilities +Two of our nine directors are gender or ethnically diverse +Balance of new and experienced directors +Stock ownership guidelines for directors and executives +Annual director self-evaluation and committee assessment to ensure board effectiveness +All directors attended over 75% of 2021 meetings +Regular executive sessions of independent directors +Robust risk oversight +Board review of company’s financial performance, strategy and succession plan +Code of Business Conduct and Ethics +Commitment to Corporate Social Responsibility +PROPETRO  2022 Proxy Statement   |  2 +TABLE OF CONTENTS +Proxy Statement Summary +DIRECTOR ATTRIBUTES +Our nine directors comprise a well-balanced Board. +BOARD EXPERTISE +Director Skills and Experience +Audit and financial reporting +●   ●   ●   ●   ●   ●   ●   ●   ● +8 +Corporate governance and ethics +●   ●   ●   ●   ●   ●   ●   ●   ● +8 +Executive leadership +●   ●   ●   ●   ●   ●   ●   ●   ● +8 +Exploration & Production, energy industry +●   ●   ●   ●   ●   ●   ●   ●   ● +8 +Finance and/or investment experience +●   ●   ●   ●   ●   ●   ●   ●   ● +8 +Human capital management, sustainability, or environmental stewardship +●   ●   ●   ●   ●   ●   ●   ●   ● +7 +Marketing, business development and investor relations +●   ●   ●   ●   ●   ●   ●   ●   ● +8 +Other public company board service +●   ●   ●   ●   ●   ●   ●   ●   ● +7 +Regulatory, government and compliance +●   ●   ●   ●   ●   ●   ●   ●   ● +6 +Risk management +●   ●   ●   ●   ●   ●   ●   ●   ● +7 +Strategic planning and operations +●   ●   ●   ●   ●   ●   ●   ●   ● +8 +Technology, engineering +●   ●   ●   ●   ●   ●   ●   ●   ● +4 +3  |   ir.propetroservices.com +TABLE OF CONTENTS +Proxy Statement Summary +Environmental, Social and Governance Highlights +SUSTAINABLY +COMPETING +COMMUNITY +INVESTMENT +SAFETY +FOCUS +We seek to meet our customers’ needs while also pursuing a consistent, sustainable service solution that will increasingly replace diesel with cleaner burning fuels while utilizing lower emissions power sources for our operations over time. +• +With continued investments in and deployment of Tier IV Dynamic Gas Blending ("DGB"), dual-fuel equipment, we have taken action to enhance our service offerings and reduce the carbon footprint of our operations. +• +We are also focused on the next generation of technology by working with our customers to evaluate strategic investments in electric powered hydraulic fracturing equipment and other pumping innovations in order to efficiently deploy such fleet advancements to the field. +• +We have studied available options for electric fracking fleets and will consider deploying electric fracking fleets in 2022, subject to customer demand. +We aspire to play a role in shaping the future of the Permian Basin by: +• +investing in education, +• +donating to first responders and veterans, +• +supporting health and wellness related organizations, and +• +focusing on charities that support local children. +We do this through various charities and other organizations that are heavily involved in the Permian Basin communities. Our employees created the P.U.M.P. ("Positive United Morale Partners") committee to drive their humanitarian endeavors through: +• +wellness events, +• +quarterly blood drives, +• +Thanksgiving meal drives, +• +school supply donation drives, and +• +Habitat for Humanity building projects. +Our safety record substantiates the close collaboration between our customers and our employees in completing each job safely. We pride ourselves on our commitment to safety and our commitment to each other, which we demonstrate and support through operational initiatives like our: +• +dedicated heavy haul team to reduce driving hazards, +• +culture of training, accountability, and consistent improvement, and +• +long-term relationships with teammates, customers and stakeholders. +2021 Performance Highlights +During 2021, we improved upon our outstanding performance in 2020, again realizing all-time company high operational efficiencies in 2021, helping our customers maintain continued out-performance in their completions programs. We generated $875 milion in revenue and $155 million of operating cash flow. Our operations continue to be focused almost entirely in the Permian Basin, where our pressure pumping footprint exists. Our team was able to accomplish these achievements amid dynamic market conditions while demand increased throughout most of the year. As a result, the Company averaged 12.4 effectively utilized fleets in 2021. Despite the volatility in commodity prices and completions activity, the Company maintained high levels of service quality and safety performance throughout the year. These achievements are a function of our employees’ commitment to excellence in efficient operations and safety. +$875MM +$155MM +Total Revenue +Net Cash Provided by Operating Activities +0.54 +12.4 +2021 Full-Year TRIR +Effectively Utilized Fleets +PROPETRO  2022 Proxy Statement   |  4 +TABLE OF CONTENTS +Proxy Statement Summary +Successful Execution of Our Leadership Succession Plan +PHILLIP A. +GOBE +SAMUEL D. +SLEDGE +ADAM +MUÑOZ +Executive Chairman of the Board and Former Chief Executive Officer +Chief Executive Officer +President and Chief Operating Officer +As described in more detail in the Compensation Discussion and Analysis, below, the Board’s succession planning came to fruition on August 31, 2021 when Samuel D. Sledge was appointed as Chief Executive Officer and Adam Muñoz was appointed as President and Chief Operating Officer of the Company. In order to ensure a smooth transition of the role, Phillip Gobe, who preceded Mr. Sledge as Chief Executive Officer and Chairman of the Board, will continue to support the Company and Mr. Sledge in the role of Executive Chairman of the Board until March 31, 2022. Thereafter, Mr. Gobe is expected to continue his service with the Company as the non-executive Chairman of the Board. Messrs. Sledge and Muñoz have each spent the last ten or more years at the Company during which time they have developed a deep knowledge of the business and our unique culture of teamwork. +5  |   ir.propetroservices.com +TABLE OF CONTENTS +Corporate Governance and Board Matters +Proposal 1 —Election of Directors +At the 2022 annual meeting, nine directors are to be elected. All nominees are currently directors. Each director is to hold office until the next annual meeting of stockholders or until his or her successor is elected and qualified. Directors hold office until their successors have been elected or qualified or until their earlier death, resignation, removal or disqualification. +The nominees have consented to being nominated and have expressed their intention to serve if elected. We believe that the nominees possess the professional and personal qualifications necessary for board service and have highlighted particularly noteworthy attributes for the nominees in their biographies below. We have no reason to believe that the nominees will be unable to serve if elected to office, and, to our knowledge, the nominees intend to serve the entire term for which election is sought. In the event any of the nominees should become unable to serve, or for good cause will not serve, as a director, it is intended that votes will be cast for a substitute nominee designated by the Board or the Board may elect to reduce its size. Only the nominees or substitute nominees designated by the Board will be eligible to stand for election as directors at the meeting. +In 2018, we entered into an investor rights agreement (the “Investor Rights Agreement”) with an affiliate of Pioneer Natural Resources Company (“Pioneer”) that provides Pioneer certain rights to designate nominees for election to the Board. Under the Investor Rights Agreement, Pioneer was granted: +(i) +the one-time right to designate an independent director to the Board and +(ii) +the right to designate a non-independent director to the Board for so long as a certain affiliate of Pioneer owns 5% or more of our outstanding common stock. +Pioneer has designated Mark S. Berg as the non-independent director and has no further rights to designate an independent director to the Board. +VOTE REQUIRED +The proposal regarding the election of directors requires the approval of a plurality of the votes cast. This means that the nine nominees receiving the highest number of affirmative “FOR” votes will be elected as directors. Votes withheld and broker non-votes are not considered to be votes cast and, accordingly, will have no effect on the outcome of the vote on this proposal. +The Board of Directors unanimously recommends a vote FOR the election of each of the nine director nominees named below. +PROPETRO  2022 Proxy Statement   |  6 +TABLE OF CONTENTS +Corporate Governance and Board Matters +Nominees +All of the current members of the Board are listed in the following table, and certain information concerning those directors follows the table: +ProPetro Board Committees +Name +Age +Director since +Independent +Audit +Compensation +Nominating & +Corporate Governance +Phillip A. Gobe (1) +69 +2019 +Samuel D. Sledge (2) +35 +2021 +Spencer D. Armour III +67 +2013 +* +Mark S. Berg +63 +2019 +Anthony J. Best (3) +72 +2018 +Michele Vion +62 +2020 +Alan E. Douglas +63 +2017 +* +G. Larry Lawrence +70 +2020 +* +Jack B. Moore +68 +2017 +* +Number of Meetings in 2021 +Board―9 +10 +6 +4 +Committee Chair +Committee Member +* +Audit Committee financial expert +(1) +Executive Chairman of the Board +(2) +Chief Executive Officer +(3) +Lead Independent Director +PHILLIP A. GOBE +Phillip A. Gobe began serving as our Chairman of the Board in July of 2019 and as Executive Chairman in October 2019. Mr. Gobe was appointed as our Chief Executive Officer on March 13, 2020 and served in that role until August 31, 2021, at which point he was re-appointed as Executive Chairman. Mr. Gobe will step down as Executive Chairman on March 31, 2022, and will continue serving the Company as Chairman of the Board. Mr. Gobe has served as a director of Pioneer since July 2014. Mr. Gobe also serves as a director of Pantheon Resources plc and previously served as a director of Scientific Drilling International and Pioneer Southwest Energy Partners L.P. Mr. Gobe joined Energy Partners, Ltd. as Chief Operating Officer in December 2004 and became President in May 2005, and served in those capacities until his retirement in September 2007. Mr. Gobe also served as a director of Energy Partners, Ltd. from November 2005 until May 2008. Prior to that, Mr. Gobe served as Chief Operating Officer of Nuevo Energy Company from February 2001 until its acquisition by Plains Exploration & Production Company in May 2004. Prior to that time, he held numerous operations and human resources positions with Vastar Resources, Inc. and Atlantic Richfield Company and its subsidiaries. Mr. Gobe has a Bachelor of Arts degree from The University of Texas and a Master of Business Administration degree from the University of Louisiana in Lafayette. Mr. Gobe’s extensive experience in the energy industry, including service as a director to public corporations in the industry, makes him well suited to serve as Executive Chairman. +AGE 69 +EXECUTIVE CHAIRMAN OF THE BOARD +DIRECTOR AND CHAIRMAN OF THE BOARD since July 2019 +7  |   ir.propetroservices.com +TABLE OF CONTENTS +Corporate Governance and Board Matters +SAMUEL D. SLEDGE +Samuel D. Sledge has served as our Chief Executive Officer and as a member of our Board since August 31, 2021. Mr. Sledge previously served as the Company’s President from April 2021 to August 2021, and prior to that, he served as Chief Strategy and Administrative Officer beginning in March 2020. Mr. Sledge has significant experience with ProPetro having joined the Company in 2011. Mr. Sledge has served in various capacities throughout his tenure such as a Frac Technical Specialist and Technical Operations Manager where his duties included quality control, planning and logistics, and the development of the engineering program. Mr. Sledge has also served as the Vice President of Finance, Corporate Development, and Investor Relations where his responsibilities included financial planning and analysis, strategic initiatives and investor relations. Mr. Sledge received a Bachelor of Business Administration and a Masters of Business Administration from Baylor University. We believe Mr. Sledge’s experience in the energy industry and his significant experience in management roles at the Company make him well suited to serve as a director. +AGE 35 +CEO AND DIRECTOR since August 31, 2021 +SPENCER D. ARMOUR III +Spencer D. Armour III has served as a member of our Board since February 2013. Mr. Armour has over 30 years of executive and entrepreneurial experience in the energy services industry. Mr. Armour served as President of PT Petroleum LLC in Midland, Texas from 2011 to 2018. He was the Vice President of Corporate Development for Basic Energy Services, Inc. from 2007 to 2008, which acquired Sledge Drilling Corp., a company Mr. Armour co-founded and served as Chief Executive Officer from 2005 to 2006. From 1998 through 2005, he served as Executive Vice President of Patterson-UTI Energy, Inc., which acquired Lone Star Mud, Inc., a company Mr. Armour founded and served as President from 1986 to 1997. Mr. Armour also served on the board of Patterson-UTI Energy, Inc. from 1999 to 2001. He currently serves on the board of Viper Energy Partners, LP and the board of CES Energy Solutions Corp and is a partner at Geneses Investments. Mr. Armour received a B.S. in Economics from the University of Houston in 1977 and served on the University of Houston System Board of Regents from 2011 until 2018. We believe that Mr. Armour’s extensive experience in the energy services industry and his deep knowledge of industry dynamics within the Permian Basin make him well suited to serve as a director. +AGE 67 +DIRECTOR since February 2013 +INDEPENDENT DIRECTOR since March 2020 +COMMITTEES +• +Nominating and Corporate Governance +PROPETRO  2022 Proxy Statement   |  8 +TABLE OF CONTENTS +Corporate Governance and Board Matters +MARK S. BERG +Mark. S. Berg has served as a member of our Board since February 2019, and he was appointed to the Board by Pioneer pursuant to the Investor Rights Agreement. Mr. Berg currently serves as the Executive Vice President, Corporate Operations for Pioneer, where he serves on the Management Committee and oversees Business Development, Land, Water Management and Well Services, Government Affairs and Corporate Communications, Environmental and Sustainable Development and Facilities. Mr. Berg has fifteen years of experience with Pioneer in various roles, including as Executive Vice President & General Counsel from April 2005 to January 2014, Executive Vice President, Corporate from January 2014 to August 2015, and as Executive Vice President, Corporate/Vertically Integrated Operations until assuming his current role. He began his career in 1983 with the Houston-based law firm Vinson & Elkins L.L.P. and served as a partner from 1990 through 1997. He served as Executive Vice President, General Counsel and Secretary of American General Corporation, a Fortune 200 diversified financial services company, from 1997 through 2001. Subsequent to the sale of American General to American International Group, Mr. Berg was appointed Senior Vice President, General Counsel and Secretary of Hanover Compressor Company, a NYSE company specializing in natural gas compression and processing. Mr. Berg received his Juris Doctor, with honors, from The University of Texas School of Law, and graduated magna cum laude and Phi Beta Kappa with a Bachelor of Arts in Public Policy from Tulane University. Mr. Berg served as a member of the board of directors of HighPoint Resources Corporation from March 2018 to June 2020. We believe that Mr. Berg’s experience in significant management roles with Pioneer and his broad experience in the energy industry make him well suited to serve as a director. +AGE 63 +DIRECTOR since February 2019 +Mr. Berg was appointed to the Board by Pioneer pursuant to the Investor Rights Agreement +ANTHONY J. BEST +Anthony J. Best has served as a member of our Board since January 2018 and was elected to serve as Lead Independent Director in October 2019. Mr. Best has over 40 years of experience in the energy industry. Mr. Best is currently the Chairman of the board of Newpark Resources. He was formerly a senior advisor with Quantum Energy Partners (“Quantum”) from August 2015 to February 2022. Prior to joining Quantum, Mr. Best served in various roles with SM Energy Company, an oil and gas exploration company, commencing in 2006 as its President and Chief Operating Officer, and as its Chief Executive Officer from February 2007 through January 2015. From 2003 to 2005, Mr. Best served as President and Chief Executive Officer of Pure Resources, Inc., a Unocal development and exploration company. From 2000 to 2003, Mr. Best served as an independent consultant offering leadership and oil and gas consultation to energy companies and volunteer organizations, and from 1979 through 2000, Mr. Best served in various roles of increasing responsibility at Atlantic Richfield Company, culminating in the position of President, ARCO Latin America. Mr. Best holds a Master of Science in Engineering Management degree from the University of Alaska and a Bachelor of Science degree in Mechanical Engineering from Texas A&M University. Prior to beginning his business career, Mr. Best served five years as an engineering officer in the United States Air Force. We believe that Mr. Best’s experience in significant management roles with companies operating in the Permian Basin and his broad experience in the energy industry make him well suited to serve as a director. +AGE 72 +INDEPENDENT DIRECTOR since January 2018 +LEAD INDEPENDENT DIRECTOR since October 2019 +COMMITTEES +• +Audit (Chair) +• +Compensation +9  |   ir.propetroservices.com +TABLE OF CONTENTS +Corporate Governance and Board Matters +ALAN E. DOUGLAS +Alan E. Douglas became a member of our board of directors in March 2017. Mr. Douglas is a partner in the accounting firm Whitley Penn. Whitley Penn recently acquired the firm of Johnson, Miller & Co. where Mr. Douglas worked for over twenty-five years. Mr. Douglas is a Certified Public Accountant with over thirty-five years of experience in accounting and audit activities. Prior to joining Johnson, Miller & Co., Mr. Douglas was a Certified Public Accountant at KPMG for twelve years. Mr. Douglas received a Bachelor of Business Administration in Accounting from Texas Tech University. We believe that Mr. Douglas’s extensive accounting and auditing experience make him well suited to serve as a director. +AGE 63 +INDEPENDENT DIRECTOR since March 2017 +COMMITTEES +• +Audit +• +Nominating and Corporate Governance +G. LARRY LAWRENCE +G. Larry Lawrence was appointed to our Board in December 2020. Mr. Lawrence previously served as Audit Committee Chair of Legacy Reserves, LP’s Board of Directors, a role he held from 2006 to 2019. Mr. Lawrence currently serves as the interim Chief Financial Officer of Natural Gas Services Group, a natural gas compression equipment provider, where he previously served as Chief Financial Officer for nine years. He previously served as Chief Financial Officer for Lynx Operating Co. Inc., an oil and gas exploration company, for three years and as Chief Financial Officer for Pure Resources, Inc., an oil and gas exploration and production company, for two years. He has also held finance and management consulting positions for Parson Group, Atlantic Richfield Company and Crescent Consulting. Mr. Lawrence earned his bachelor’s degree with an accounting major from Dillard University in New Orleans. We believe that Mr. Lawrence’s broad experience in the energy industry, including his service as a director and executive officer with various companies, makes him well suited to serve as a director. +AGE 70 +INDEPENDENT DIRECTOR since December 2020 +COMMITTEES +• +Audit +PROPETRO  2022 Proxy Statement   |  10 +TABLE OF CONTENTS +Corporate Governance and Board Matters +JACK B. MOORE +Jack B. Moore has served as a member of our Board since March 2017. Mr. Moore most recently served as President and Chief Executive Officer of Cameron International Corporation (“Cameron”), an oil and gas industry equipment manufacturer and provider, from April 2008 to October 2015 and served as Chairman of the Board of Cameron from May 2011 until it was acquired by Schlumberger in April 2016. Prior to his employment with Cameron, Mr. Moore various management positions at Baker Hughes Incorporated, where he was employed for 23 years. Mr. Moore currently serves on the board of directors of Occidental Petroleum Corporation, KBR Inc., and the University of Houston System Board of Regents. Mr. Moore previously served on the board of the American Petroleum Institute, the National Ocean Industries Association, Rowan Companies plc and the Petroleum Equipment Suppliers Association. Mr. Moore received a Bachelor of Business Administration from the University of Houston and attended the Advanced Management Program at Harvard Business School. We believe that Mr. Moore’s wealth of experience in the oilfield service sector, including service as a director and executive officer to various public corporations in the sector, makes him well suited to serve as a director. +AGE 68 +INDEPENDENT DIRECTOR since March 2017 +COMMITTEES +• +Compensation +• +Nominating and Corporate Governance (Chair) +MICHELE VION +Michele Vion was appointed to our Board in February 2020. Ms. Vion previously served as Vice President, Human Resources at HighPoint Resources Corporation, a successor to the Bill Barrett Corporation, an oil and gas exploration and production company, from August 2010 to September 2019. Ms. Vion was previously employed at Level 3 Communications, Inc., an international communications company, starting in 2006 and ultimately as Group Vice President of Human Resources up to January 2010. Ms. Vion also previously served as Vice President of Human Resources for Sun Microsystems, Inc., a computer networking company, for seven years. She also previously held senior human resource and client account management positions at Prudential Financial, Inc., an insurance and investment management company and JP Morgan, a global financial services firm. Prior to joining JP Morgan, Ms. Vion served in an accounting position as a Regional Controller for the Eastern Region at Sony Corporation of America. Ms. Vion also served on the board and as Chair of the Compensation Committee and as member of the Audit Committee and Nominating and Corporate Governance Committee of Callidus Software Inc., a publicly-traded cloud-based software company, from 2005 to 2016. Ms. Vion has served as a director of Boingo Wireless Inc., a publicly-traded Wi-Fi company, since December 2018, and currently serves as Chair of the Compensation Committee and as a member of the Audit Committee. Ms. Vion holds a B.A. in East Asian Studies and Economics from Wesleyan University, has attended Stanford University’s Director’s College and participated in the Financial Times’ Director Exchange. We believe that Ms. Vion is well suited to serve as a director based on her executive leadership experience in human resources and accounting and public company board and committee experience. +AGE 62 +INDEPENDENT DIRECTOR since February 2020 +COMMITTEES +• +Compensation (Chair) +• +Nominating and Corporate Governance +11  |   ir.propetroservices.com +TABLE OF CONTENTS +Corporate Governance and Board Matters +Director Independence +The majority of the members of the Board at any given time must qualify as “independent” under the rules of the NYSE. +Our Board has undertaken a review of the independence of each of our director nominees and has affirmatively determined that each of Messrs. Armour, Best, Douglas, Lawrence and Moore and Ms. Vion are “independent,” as defined by the NYSE rules. Under the NYSE rules, a director can be independent only if (a) the director does not trigger a categorical bar to independence and (b) our Board affirmatively determines that the director has no material relationship with the Company (either directly or as a partner, stockholder or officer of an organization that has a relationship with the Company). +Based on information provided by the director nominees concerning their background, employment and affiliations, our Board has determined that these directors do not have a material relationship with the Company (either directly or as a partner, stockholder or officer of an organization that has a relationship with the Company). In making this determination, our Board considered the current and prior relationships that each of the directors has with us, and all other facts and circumstances our Board deemed relevant in determining independence, including any beneficial ownership of our capital stock by each of the directors. +Board Leadership Structure +PHILLIP A. +GOBE +SAMUEL D. +SLEDGE +ANTHONY J. +BEST +Executive Chairman of the Board (and Former Chief Executive Officer) +Chief Executive Officer since August 31, 2021 +Lead Independent Director since October 2019 +Our Board has adopted our Corporate Governance Guidelines, which are available on our website, www.propetroservices.com , in the “Corporate Governance” subsection of the “Investors” section. Our Corporate Governance Guidelines provide that if the Chairman of the Board is a member of management or does not otherwise qualify as independent, the independent directors may elect a lead independent director. Our Board believes it is important to retain the flexibility to determine whether the roles of Chairman and Chief Executive Officer should be separated or combined depending on the circumstances and changing needs of the Company from time to time. +While our Board has previously combined the roles of Chairman and Chief Executive Officer, at present, the Board has chosen to separate the positions of Chairman and Chief Executive Officer. The Board believes this structure enhances corporate governance and allows each of our Chairman and Chief Executive Officer to remain focused on their distinct roles, which, for the Chairman, primarily involves Board and corporate governance and, for the Chief Executive Officer, primarily involves day-to-day management leadership and implementing our corporate strategy. +Although the roles of Chairman and Chief Executive Officer are currently separated, the Chairman is a member of management. As such, the Board believes the role of Lead Independent Director enhances independent oversight of the Company and that Mr. Best should continue to serve as the Lead Independent Director. In this capacity Mr. Best provides, in conjunction with the Chairman, leadership and guidance to the Board. The Lead Independent Director responsibilities are as follows: +• +Preside over all meetings of the Board at which the Chairman of the Board is not present, including any executive sessions of the independent directors +• +Approve Board meeting schedules and agendas +• +Act as the liaison between the independent directors and the Chairman of the Board +• +Communicate the Chief Executive Officer’s annual evaluation and compensation, after approval of the Compensation Committee +PROPETRO  2022 Proxy Statement   |  12 +TABLE OF CONTENTS +Corporate Governance and Board Matters +Interested parties who wish to communicate with the Board, its committees, the Chairman, the Lead Independent Director or any other individual director should follow the procedures described below under “Communication with our Board of Directors.” +To facilitate candid discussion among the Company’s directors, the non-management directors meet at regularly scheduled executive sessions presided over by our Lead Independent Director. In addition, at least once a year, the non-management directors who are independent under NYSE listing standards meet in executive session in conjunction with a regular board meeting. +Board of Directors and Risk Oversight +In the normal course of business, we are exposed to a variety of risks, including market risks relating to changes in commodity prices, interest rates, political risks and credit and investment risks. The Board oversees our strategic direction and in doing so considers the potential rewards and risks of our business opportunities and challenges and monitors the development and management of risks that impact our strategic goals. The Audit Committee assists the Board in fulfilling its oversight responsibilities by monitoring the effectiveness of our systems of financial reporting, auditing, internal controls and legal and regulatory compliance. The Nominating and Corporate Governance Committee assists the Board in fulfilling its oversight responsibilities with respect to the management of risks associated with Board organization, membership and structure, succession planning for our directors and executive officers and corporate governance. The Compensation Committee assists the Board in fulfilling its oversight responsibilities by overseeing our compensation policies and practices. The Board does not believe that its role in the oversight of our risks affects the Board’s leadership structure. +Sustainability and ESG Initiatives +At ProPetro, our fundamental policy is to conduct business with honesty and integrity in accordance with the highest legal and ethical standards, along with a daily focus on safety and quality. We believe this is critical to our long-term success. In 2021, the Company took steps to strategically enhance our environmental, social and governance (“ESG”) initiatives. We amended the charter of our Nominating and Corporate Governance Committee to vest it with the responsibility to oversee the Company’s ESG strategy and significant sustainability initiatives. Additionally, the Company established a cross-functional ESG Working Group with sponsorship by the Company’s executive management and representation across our operating and support functions. The ESG Working Group is charged with providing leadership and fostering a culture that aligns the Company’s business strategy and sustainability initiatives. We believe that the future of the oilfield is a cohesive and more environmentally friendly supply chain, which allows E&P and oilfield service companies to produce hydrocarbons in the safest and most efficient manner possible. We believe our services play a vital role in the broader energy value chain by meaningfully contributing to the delivery of low-cost, dependable energy to end users and that our ESG initiatives will enable us to continue to do so for years to come. +As part of our ESG initiatives, we aim to reduce the overall environmental impact of our services by focusing on flawless execution and superior service quality. We believe that a lower emissions profile is not only vital to aid in our competitiveness, but it is also a crucial component in developing the innovative tools necessary to support our customers’ efforts to be capital efficient while respecting the communities in which we work. We seek to meet our customers’ needs while also pursuing a consistent, sustainable service solution that will increasingly replace diesel with cleaner burning fuels while utilizing lower emissions power sources for our operations over time. With continued, significant investments in Tier IV Dynamic Gas Blending (“DGB”), dual-fuel equipment, we have taken action to enhance our service offerings and reduce the carbon footprint of our operations. Integrating cleaner burning fuel sources, such as natural gas, is an important steppingstone to optimize fuel consumption on our worksites. To better understand the emissions resulting from our operations, in 2021, the ESG Working Group commenced an emissions study. This work will continue into 2022 and will lay the foundation for guiding our strategy and assessing our performance in the years to come. We are also focused on the next generation of technology by working with our customers to evaluate strategic investments in electric powered hydraulic fracturing equipment and other pumping innovations to efficiently deploy such fleet advancements to the field. While substantial capital investments in new fleet technology must be commercially supported by our customers, our efforts in evaluation and testing are designed to ensure ProPetro is positioned to support an effective implementation of such new technologies at the appropriate time. +We also seek to give back to the area where we live and work by providing employment and supporting and encouraging our employees to commit to safety and investing in our community. We aspire to play a role in shaping +13  |   ir.propetroservices.com +TABLE OF CONTENTS +Corporate Governance and Board Matters +the future of the Permian Basin by investing in education, donating to first responders and veterans, supporting health and wellness related organizations, and focusing on charities that support local children. We do this through various charities and other organizations that are heavily involved in the Permian Basin communities. Our employees created the P.U.M.P. (“Positive United Morale Partners”) committee to drive their humanitarian endeavors through wellness events, quarterly blood drives, Thanksgiving meal drives, school supply donation drives, and Habitat for Humanity building projects. Our safety record substantiates the close collaboration between our customers and our employees in completing each job safely. We pride ourselves on our commitment to safety and our commitment to each other, which we demonstrate and support through operational initiatives like our dedicated heavy haul team to reduce driving hazards; our culture of training, accountability, and consistent improvement; and our long-term relationships with teammates, customers and stakeholders. +Additional information and updates regarding our sustainability and ESG initiatives can be found under the “Sustainability” tab of our website at www.propetroservices.com . +Communicating with Our Board of Directors +Stockholders and other interested parties may communicate with our Board by writing to: +ProPetro Holding Corp. +Attention: General Counsel and Corporate Secretary +P.O. Box 873 +Midland, Texas 79702 +Stockholders may submit their communications to the Board, the independent directors, any committee of the Board or individual directors on a confidential or anonymous basis by sending the communication in a sealed envelope marked “Stockholder Communication with Directors” and clearly identifying the intended recipient(s) of the communication. +Our General Counsel and Corporate Secretary will review each communication and will forward the communication, as expeditiously as reasonably practicable, to the addressees if: +(1) +the communication complies with the requirements of any applicable policy adopted by the Board relating to the subject matter of the communication and +(2) +the communication falls within the scope of matters generally considered by the Board. +To the extent the subject matter of a communication relates to matters that have been delegated by the Board to a committee or to an executive officer of the Company, our General Counsel and Corporate Secretary may forward the communication to the executive officer or chairman of the committee to which the matter has been delegated. The acceptance and forwarding of communications to the members of the Board or an executive officer does not imply or create any fiduciary duty of the Board members or executive officer to the person submitting the communications. +Information may be submitted confidentially and anonymously. However, the Company may be obligated by law to disclose the information or identity of the person providing the information in connection with government or private legal actions and in other circumstances. The Company’s policy is not to take any adverse action, and not to tolerate any retaliation against any person for asking questions or making good faith reports of possible violations of law, our policies or our Code of Ethics & Conduct. +Annual Meeting Attendance +While the Company does not have a specific policy about director attendance at annual meetings of stockholders, all directors are expected to attend meetings of the Board (and any committees thereof on which they serve) either in person or telephonically unless exigencies prevent them from attending. Each incumbent director attended at least 75% of the aggregate of  (1) the total number of meetings of the Board (held during the period for which he or she has been a director) and (2) the total number of meetings of committees of the Board on which he or she served (during the periods that he or she served). Our non-employee directors meet at regularly scheduled executive sessions presided over by our Lead Independent Director. Additionally, our independent directors meet at least once a year without members of management or non-independent directors present. All of our directors who were members of the Board at the time of our 2021 annual meeting of stockholders attended the meeting. +PROPETRO  2022 Proxy Statement   |  14 +TABLE OF CONTENTS +Corporate Governance and Board Matters +Compensation Committee Interlocks and Insider Participation +During the year ended December 31, 2021, the Compensation Committee was comprised of Ms. Vion and +Messrs. Moore and Best. Ms. Vion serves as committee chair. No executive officer of the Company served as a member of the board of directors or compensation committee of any other entity that has one or more executive officers serving as a member of our Board or Compensation Committee. +Board and Committee Activity and Structure +Our Board is governed by our certificate of incorporation, bylaws, the Investor Rights Agreement, charters of the standing committees of the Board and the laws of the State of Delaware. +On December 31, 2018, we entered into the Investor Rights Agreement with an affiliate of Pioneer. The Investor Rights Agreement provides that Pioneer was granted: +(i) +the one-time right to designate an independent director to the Board and +(ii) +the right to designate a non-independent director to the Board for so long as Pioneer owns 5% or more of the Company’s outstanding common stock. +Pioneer has designated Mark S. Berg as the non-independent director and has no further rights to designate an independent director to the Board. +During 2021, our Board held nine meetings. There are currently three standing committees of the Board: +• +the Audit Committee, +• +the Compensation Committee, and +• +the Nominating and Corporate Governance Committee. +Members serve on these committees until their resignation or until as otherwise determined by our Board. The composition of the Board committees complies with the applicable rules of the NYSE and applicable law. Our Board has adopted a written charter for each of the standing committees, which can be found in the “Corporate Governance” subsection of the “Investors” section of our website at www.propetroservices.com . +In addition to the above governing documents, our Code of Ethics & Conduct that applies to all of our employees, as well as each member of the Board, can also be found in the “Corporate Governance” subsection of the “Investors” section of our website at www.propetroservices.com . The composition and responsibilities of each of the standing committees of our Board are as follows: +15  |   ir.propetroservices.com +TABLE OF CONTENTS +Corporate Governance and Board Matters +AUDIT COMMITTEE +MEETINGS IN 2021: 10 +KEY RESPONSIBILITIES +Our Audit Committee is directly responsible for, among other things, the appointment, compensation, retention and oversight of our independent registered public accounting firm. +The oversight of our independent public accounting firm includes: +• +reviewing the plans and results of the audit engagement with the firm, +• +approving any additional professional services provided by the firm, and +• +reviewing the independence of the firm. +The Audit Committee is also responsible for discussing the effectiveness of the internal controls over financial reporting with our independent registered public accounting firm and relevant financial management. +REPORT +The Report of our Audit Committee appears on page 57 of this proxy statement. +MEMBERS +Anthony J. +Best, Chair +Alan E. +Douglas +G. Larry +Lawrence +During the year ended December 31, 2021, the members of the Audit Committee were Messrs. Best, Douglas and Lawrence. The Audit Committee is presently comprised of Messrs. Best, Douglas and Lawrence, with Mr. Best serving as committee chair. +QUALIFICATIONS +Our Audit Committee is comprised solely of “independent” directors, as defined under and required by the NYSE rules and Rule 10A-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). +Our Board has determined that each of Messrs. Armour, Douglas, Lawrence and Moore qualify as an “audit committee financial expert,” as defined by the rules under the Exchange Act. +COMPENSATION COMMITTEE +MEETINGS IN 2021: 6 +KEY RESPONSIBILITIES +The Compensation Committee is responsible for, among other things, overseeing the discharge of the responsibilities of the Board relating to compensation of the Company’s officers and directors and reviewing the succession planning strategies of the Company. +In carrying out these responsibilities, the Compensation Committee reviews all components of executive compensation for consistency with our compensation philosophy and with the interests of our stockholders. +REPORT +The Report of our Compensation Committee appears on +page 40 of this proxy statement. +MEMBERS +Michele +Vion, Chair +Anthony J. +Best +Jack B. +Moore +During the year ended December 31, 2021, the members of the Compensation Committee, were Messrs. Best and Moore and Ms. Vion, with Ms. Vion serving as committee chair. The Compensation Committee is presently comprised of Messrs. Best and Moore and Ms. Vion. +QUALIFICATIONS +Our Compensation Committee consists solely of “independent” directors, as defined under and required by the NYSE rules and “non-employee directors” under Section 16 of the Exchange Act. +PROPETRO  2022 Proxy Statement   |  16 +TABLE OF CONTENTS +Corporate Governance and Board Matters +NOMINATING AND CORPORATE GOVERNANCE COMMITTEE +MEETINGS IN 2021: 4 +KEY RESPONSIBILITIES +The Nominating and Corporate Governance Committee is responsible for, among other things: +• +identifying individuals qualified to become Board members; +• +selecting or recommending director nominees for each election of directors to the Board; +• +developing and recommending criteria for selecting qualified director candidates to the Board; +• +considering committee member qualifications, appointments and removals; +• +recommending corporate governance principles, codes of conduct and compliance mechanisms; +• +providing oversight in the evaluation of the Board and each committee thereof; +• +overseeing our ESG initiatives; and +• +developing an appropriate succession plan for our chief executive officer pursuant to our Corporate Governance Guidelines. +MEMBERS +Jack B. +Moore, Chair +Spencer D. +Armour III +Alan E. +Douglas +Michele +Vion +During the year ended December 31, 2021, the members of the Nominating and Corporate Governance Committee were Messrs. Armour, Douglas and Moore and Ms. Vion, with Mr. Moore serving as committee chair. The Nominating and Corporate Governance Committee is presently comprised of Messrs. Armour, Douglas and Moore and Ms. Vion. +QUALIFICATIONS +Our Nominating and Corporate Governance Committee consists solely of  “independent” directors, as defined under and required by the NYSE rules. +Role of the Board, Compensation Committee and Our Executive Officers +Executive compensation decisions are typically made on an annual basis by the Compensation Committee with input from our Chief Executive Officer. Specifically, after reviewing relevant market data and surveys within our industry, our Chief Executive Officer typically provides recommendations to the Compensation Committee regarding the compensation levels for our existing named executive officers and our executive compensation program as a whole. Our Chief Executive Officer generally attends all Compensation Committee meetings. After considering these recommendations, the Compensation Committee typically meets in executive session and adjusts base salary levels and non-equity award targets. In addition, the Compensation Committee determines the achievement of non-equity Incentive Award Plan metrics and the amount of equity awards from the Incentive Award Plan to be granted to each of our named executive officers. In making executive compensation recommendations, our Chief Executive Officer considers each named executive officer’s performance during the year, the Company’s performance during the year, as well as comparable company compensation levels. While the Compensation Committee gives considerable weight to our Chief Executive Officer’s recommendations on compensation matters, the Compensation Committee has the final decision-making authority on all executive compensation matters. +Role of External Advisors +The Compensation Committee engaged Pearl Meyer & Partners, LLC (“Pearl Meyer”) in 2021 to assist the Compensation Committee and the Board in evaluating, designing and implementing compensation practices. For the year ended December 31, 2021, Pearl Meyer received $231,741 for the services they provided to our Compensation Committee. +The Compensation Committee reviews and assesses the independence and performance of its executive compensation consultant in accordance with applicable SEC and NYSE rules and regulations on an annual basis to confirm that the consultant is independent and meets all applicable statutory and regulatory requirements. +17  |   ir.propetroservices.com +TABLE OF CONTENTS +Corporate Governance and Board Matters +Director Nominations Process +The Nominating and Corporate Governance Committee may utilize a variety of methods for identifying potential nominees for directors, including considering potential candidates who come to their attention through current officers, directors, professional search firms or other persons. Once a potential nominee has been identified, the Nominating and Corporate Governance Committee evaluates whether the nominee has the appropriate skills and characteristics required to become a director in light of the then current make-up of the Board. This assessment includes an evaluation of the nominee’s judgment and skills, such as experience at a strategy/policy setting level, financial sophistication, leadership and objectivity, all in the context of the perceived needs of the Board at that point in time. One of the director nominees, Mr. Berg, was not recommended for nomination by the Nominating and Corporate Governance Committee but rather was appointed pursuant to the Investor Rights Agreement. +In February 2019, the Board amended our Corporate Governance Guidelines to specifically take the diversity of a potential director nominee’s gender, race and ethnicity into account when considering candidates for the Board, and the Nominating and Corporate Governance Committee and the Board are committed to increasing Board diversity. Our Board believes that at a minimum all members of the Board should have the highest professional and personal ethics and values. In addition, each member of the Board must be committed to increasing stockholder value and should have enough time to carry out his or her responsibilities as a member of the Board. +Our Board monitors the mix of specific experience, qualifications and skills of its directors in order to assure that the Board, as a whole, has the necessary tools to perform its oversight function effectively in light of the Company’s business and structure. +Stockholders may recommend individuals to the Nominating and Corporate Governance Committee for consideration as potential director candidates by submitting the names of the recommended individuals, together with appropriate biographical information and background materials, to: +The Nominating and Corporate Governance Committee +ProPetro Holding Corp. +c/o General Counsel and Corporate Secretary +P.O. Box 873 +Midland, Texas 79702 +In the event there is a vacancy, and assuming that appropriate biographical and background material has been provided on a timely basis, the Nominating and Corporate Governance Committee will evaluate stockholder-recommended candidates by following substantially the same process, and applying substantially the same criteria, as it follows for candidates submitted by others. +Director Orientation and Education +We provide each new director with an orientation that consists of meeting with senior management and others on our business operations, strategic plans, significant accounting and risk management issues, corporate governance, compliance, and key policies and practices. +The orientation sessions are tailored to the particular director depending on their orientation needs and generally include an overview of board fiduciary duties, board independence and public company reporting requirements. New directors are also provided the most recent reports presented to the Board and its committees by management and external advisors. +Each director is expected to participate in continuing educational programs as necessary to maintain the expertise necessary to perform his or her responsibilities as a director. In this regard, from time to time we provide pertinent articles, white papers and information relating to our business, financial affairs, risks, competitors, corporate governance, areas of focus in shareholder activism, ESG trends, proxy advisory firm ratings, and changes in legal and regulatory issues. +We may also coordinate training and educational sessions for directors from outside experts and provide directors with tours of our facilities from time to time. +PROPETRO  2022 Proxy Statement   |  18 +TABLE OF CONTENTS +Corporate Governance and Board Matters +Certain Relationships and Related Party Transactions +RELATED PARTY TRANSACTIONS +Operations and Maintenance Yards +The Company also rents five yards from South Midkiff Partners, LLC, an entity partially owned by Spencer D. Armour III (a director) and David Sledge, the father of Sam Sledge, our Chief Executive Officer. Total annual rent expense for each of the five yards was approximately $0.03 million, $0.03 million, $0.1 million, $0.1 million, and $0.2 million, respectively. +Transportation and Equipment Rental +Adam Muñoz, our President and Chief Operating Officer, also has a family relationship with an employee of J&M Burns Transportation, an entity that provides transportation services to the Company. The employee receives a portion of his compensation from J&M Burns Transportation based on the amount of services sold by him to customers, including the Company. The Company incurred approximately $35.9 million in expense for the year ended December 31, 2021 for services provided to the Company by J&M Burns Transportation. +Executive Officer Family Members +J. Oscar Dominguez is our Vice President of Frac Technical Services and the father-in-law of Adam Muñoz. Mr. Dominguez received total compensation of approximately $788,000 for his services for the year ended December 31, 2021 (including $610,000 cash compensation and $178,000 non-cash equity compensation). +Oscar M. Dominguez is our Vice President of Frac Operations and the brother-in-law of Adam Muñoz. Mr. Dominguez received total compensation of approximately $948,000 for his services for the year ended December 31, 2021 (including $761,000 cash compensation and $187,000 non-cash equity compensation). +Roger Dominguez is our Supply Chain Logistics Manager and the brother-in-law of Adam Muñoz. Mr. Dominguez received total compensation of approximately $230,000 for his services for the year ended December 31, 2021 (including $203,000 cash compensation and $27,000 non-cash equity compensation). +Pioneer +On December 31, 2018, we consummated the purchase of certain pressure pumping assets and real property in connection with the Pioneer Pressure Pumping Acquisition. In connection with the consummation of the Pioneer Pressure Pumping Acquisition and effective January 1, 2019, we became a long-term service provider to Pioneer, providing pressure pumping and related services for a term of up to 10 years. Revenue from services provided to Pioneer (including idle fees) accounted for approximately $473.8 million during the year ended December 31, 2021. +POLICIES AND PROCEDURES FOR RELATED PARTY TRANSACTIONS +Any request for us to enter into a transaction with an executive officer, director, principal stockholder or any of such persons’ immediate family members or affiliates, among others, in which the amount involved exceeds $120,000, must first be presented to our Audit Committee for review, consideration and approval. All of our directors and executive officers are required to report to the Audit Committee chair any such related person transaction. In approving or rejecting the proposed agreement, our Audit Committee shall consider the facts and circumstances available and deemed relevant to the Audit Committee, including, but not limited to, whether the transaction is on terms comparable to those that could be obtained in arm’s length dealings with an unrelated third party, the extent of the related party’s interest in the transaction and the conflicts of interest and corporate opportunity provisions of our +19  |   ir.propetroservices.com +TABLE OF CONTENTS +Corporate Governance and Board Matters +certificate of incorporation. If we should discover related person transactions that have not been approved, the Audit Committee will be notified and will determine the appropriate action, including ratification, revision or termination of such transaction. +Director Compensation +Our Amended and Restated ProPetro Holding Corp. Non-Employee Director Compensation Policy (the “Director Compensation Policy”) provides that each eligible non-employee director receives the following: +All equity retainers consist of awards of restricted stock units (“RSUs”) that will vest in full on the earliest to occur of: (i) the first anniversary of the grant date, (ii) the day immediately preceding the first annual meeting of stockholders following the grant date, and (iii) the occurrence of a Change in Control, subject, in each case, to continuous service through the applicable vesting date. +The portion of the annual equity retainer that would have vested in the year following a non-employee director’s separation from service due to his or her death or disability will vest upon such separation from service. All annual retainers are pro-rated based on days of service for non-employee directors who join the Board during the applicable calendar year. The members of the Board are also entitled to reimbursement of expenses incurred in connection with attendance at Board and committee meetings in accordance with Company policy. +On July 26, 2021, after consulting with Pearl Meyer regarding market practices and the levels of compensation paid by companies with which we compete for director talent, we amended the Director Compensation Policy to increase the annual cash retainer from $70,000 to $90,000 beginning in the fourth quarter of 2021. +The following table summarizes the compensation paid for services provided by our non-employee directors during 2021. +Name +Fees Earned or Paid in Cash (1) +($) +Stock Awards (2) +($) +Total +($) +Spencer D. Armour III +75,000 +139,997 +214,997 +Mark S. Berg (3) +― +― +― +Anthony J. Best +110,000 +139,997 +249,997 +Alan E. Douglas +75,000 +139,997 +214,997 +G. Larry Lawrence +75,000 +139,997 +214,997 +Jack B. Moore +85,000 +139,997 +224,997 +Michele Vion +90,000 +139,997 +229,997 +(1) +Reflects annual cash retainer payments made pursuant to the Director Compensation Policy. +(2) +Reflects the grant date fair value of restricted stock units, or “RSU”, awards on the date of grant computed in accordance with FASB ASC Topic 718. For information regarding assumptions underlying the valuation of equity awards, see Note 11 to the Consolidated Financial Statements included in our 2021 Annual Report on +Form 10-K. +PROPETRO  2022 Proxy Statement   |  20 +TABLE OF CONTENTS +Corporate Governance and Board Matters +The following table sets forth the aggregate number of outstanding stock awards and the aggregate number of outstanding stock option awards held by each of our non-employee directors on December 31, 2021. The aggregate number of Mr. Gobe’s outstanding awards is included in the table entitled “Executive Compensation—Outstanding Equity at 2021 Fiscal Year End.” +Name +Aggregate Number of Stock +Awards +(#) +Aggregate Number of Stock Option +Awards +(#) +Spencer D. Armour III +13,384 +296,379 +Mark S. Berg (3) +― +― +Anthony J. Best +13,384 +― +Michele Vion +13,384 +― +Alan E. Douglas +13,384 +― +G. Larry Lawrence +13,384 +― +Jack B. Moore +13,384 +― +(3) +Mr. Berg has elected not to be compensated for his service as a director. +Non-Employee Director Stock Ownership Guidelines +We maintain a non-employee director stock ownership policy that is applicable to all of our eligible non-employee directors. Pursuant to this policy, each non-employee director is encouraged to hold, on and following the later of the fifth anniversary of: (i) the closing of our initial public offering (“IPO”) and (ii) the non-employee director’s election or appointment to the Board, shares of our common stock or certain equity awards (valued based on the closing price of our common stock) with a value equal to or in excess of 300% of the non-employee director’s annual cash retainer, as such threshold may be amended by the Nominating and Corporate Governance Committee from time to time. +Outstanding awards of unvested time-based RSUs will count toward a non-employee director’s qualifying shareholdings to the extent the RSUs are not settled in cash. A non-employee director who is not compensated for his or her services as non-employee director pursuant to the Director Compensation Policy or any other plan, policy or agreement then in effect is not subject to the guidelines set forth in our director stock ownership policy. +As of December 31, 2021, each of our non-employee directors were in compliance with these ownership guidelines except for Mr. Lawrence, who has additional time to fulfill the ownership levels provided in the policy because he has not served as a non-employee director for a period of five years. The stock ownership guidelines do not apply to Mr. Berg since he does not receive compensation for his services as a non-employee director. +21  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Officers +Our executive officers serve at the direction of our Board. All of our executive officers and certain other key officers are listed in the following table, and certain information concerning those officers, except for Messrs. Gobe and Sledge, who are members of the Board, follows the table. +Name +Age +Position with ProPetro Holding Corp +Executive Officer +since +Phillip A. Gobe (1) +69 +Executive Chairman +2019 +Samuel D. Sledge +35 +Chief Executive Officer and Director +2020 +David S. Schorlemer +55 +Chief Financial Officer +2020 +Adam Muñoz +39 +President and Chief Operating Officer +2020 +Newton W. “Trey” Wilson III +71 +General Counsel and Corporate Secretary +2019 +Elo Omavuezi ( 2 ) +39 +Chief Accounting Officer +2019 +(1) +Mr. Gobe resigned as Executive Chairman effective March 31, 2022, but will continue to serve as non-executive Chairman of the Board. +(2) +Mr. Omavuezi is a key officer but does not serve as an executive officer of the Company. +See “Corporate Governance and Board Matters—Nominees” for biographical information for Messrs. Gobe and Sledge. +DAVID S. SCHORLEMER +David S. Schorlemer began serving as a Special Advisor to the Chief Financial Officer on October 12, 2020 until his appointment as Chief Financial Officer as of October 23, 2020. Mr. Schorlemer has two decades of experience in senior level positions in public and private companies. He most recently served as Executive Vice President, Chief Financial Officer, Treasurer and Secretary of Basic Energy Services, Inc., a Fort Worth, Texas based oilfield services company, from September 2018 until joining the Company. Prior to that, he served as the Chief Financial Officer of Gulf Island Fabrication, Inc. from January 2017 to August 2018. His work history also includes serving as Chief Financial Officer for three oilfield services companies: GR Energy Services Management, LP from January 2016 to December 2016, Stallion Oilfield Holdings, Inc., September 2004 to December 2015 and Q Services, Inc. from July 1997 until its merger with Key Energy Services, Inc. in July 2002. He also held the role of vice president, marketing and strategic planning for Key Energy Services, Inc. from July 2002 to September 2004. Mr. Schorlemer earned his Bachelor of Business Administration degree in finance from The University of Texas, and his Master of Business Administration from Texas A&M University. Mr. Schorlemer serves as a director of Performance Multi-Flow Solutions, LLC and as an advisor to Luminous Biosciences. +AGE 55 +CHIEF FINANCIAL OFFICER since October 2020 +PROPETRO  2022 Proxy Statement   |  22 +TABLE OF CONTENTS +Executive Officers +ADAM MUÑOZ +Adam Muñoz has served as our President and Chief Operating Officer since August 2021, and prior to that, he served as Chief Operating Officer since January 2021 and served as Senior Vice President of Operations since March 2020. Mr. Muñoz joined the Company in 2010 to initiate ProPetro’s Permian pressure pumping operation. Prior to joining ProPetro, Mr. Muñoz held sales and operations roles at Frac Tech Services and Weatherford International. Since joining ProPetro, Mr. Muñoz has served as the Director of Business Development and Technical Services where he was responsible for overseeing the growth of the hydraulic fracturing operations as well as managing the department’s day-to-day technical services. Mr. Muñoz has most recently served as the Vice President of Frac Services where his duties included leading the hydraulic fracturing division through specific efforts to increase operational efficiencies and maximize financial productivity. Mr. Muñoz received a Bachelor of Business Marketing from The University of Texas at the Permian Basin. +AGE 39 +PRESIDENT AND CHIEF OPERATING OFFICER since August 2021 +NEWTON W. “TREY” +WILSON III +Trey Wilson has served as our General Counsel and Corporate Secretary since September 2019. Mr. Wilson served as the Chief Executive Officer of WLP/Westex Well Services & Wilson Systems from April 2018 to September 2019. Mr. Wilson previously served as the President and Chief Executive Officer of MBI Energy Services from July 2016 to March 2018. From 2005 to May 2015, Mr. Wilson served in various roles for Key Energy Services, Inc., including Executive Vice President and Chief Operating Officer and, prior to that, Senior Vice President, General Counsel and Secretary. Mr. Wilson also served as Senior Vice President, General Counsel and Secretary of Forest Oil Corporation from 2000 to 2005. Mr. Wilson has completed the Harvard Business School Executive Leadership Program, holds a Bachelor of Business Administration from Southern Methodist University, and holds a Juris Doctor from The University of Texas. +AGE 71 +GENERAL COUNSEL AND CORPORATE SECRETARY since September 2019 +ELO OMAVUEZI +Elo Omavuezi has served as our Chief Accounting Officer since October 2019. Mr. Omavuezi previously served as the Director of Financial Reporting and Technical Accounting of the Company from April 2017 to October 2019. Prior to that, Mr. Omavuezi had over 10 years of accounting, internal controls and management experience serving publicly listed companies in the oilfield service and construction industries during his time with Deloitte. Mr. Omavuezi was previously employed by Deloitte as an Audit Manager from June 2014 to April 2017 and an Audit Senior from January 2007 to April 2014. Mr. Omavuezi holds a Bachelor of Science in Accounting from the University of Benin and a Master’s degree in Finance and Investment with Distinction from Brunel University and is a Certified Public Accountant. +AGE 39 +CHIEF ACCOUNTING OFFICER since October 2019 +23  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +Proposal 2 —Advisory Vote to Approve Named Executive Officer Compensation +We are asking stockholders to approve, on a non-binding advisory basis, the compensation of our Named Executive Officers as disclosed in this proxy statement. As described below in “Compensation Discussion and Analysis,” the Compensation Committee has structured our executive compensation program to achieve the following guiding principles: +• +Reward executives for exceptional performance and hold them accountable for poor performance in a manner that adheres to our values +• +Align executive interests with those of our stockholders by making a substantial portion of compensation performance-based and at risk +• +Provide the necessary flexibility to respond to changing circumstances in our cyclical and volatile business +• +Remain competitive in our industry in order to attract, retain and motivate the talent that is necessary to achieve our financial and strategic goals +• +Be internally consistent and equitable +We urge stockholders to read the section entitled “Compensation Discussion and Analysis” beginning on page 25 of this proxy statement, which describes in more detail how our executive compensation policies and procedures operate and are designed to achieve our compensation objectives, as well as the compensation tables and narrative included therein beginning on page 41, which provide detailed information on the compensation of our Named Executive Officers. The Compensation Committee and the Board believe that the policies and procedures articulated in the “Compensation Discussion and Analysis” are effective in achieving our goals and that the compensation of our Named Executive Officers reported in this proxy statement has and will contribute to the Company’s recent and long-term success. +In accordance with Section 14A of the Exchange Act, and as a matter of good corporate governance, we are asking stockholders to approve the following resolution at the annual meeting: +RESOLVED , that the stockholders of ProPetro Holding Corp. (the “Company”) approve, on a non-binding advisory basis, the compensation of the Company’s Named Executive Officers as disclosed in the Compensation Discussion and Analysis section and the related compensation tables, notes and narrative in the proxy statement for the Company’s 2022 annual meeting. +VOTE REQUIRED +This advisory resolution, commonly referred to as a “say-on-pay” resolution, is non-binding on the Board. Although non-binding, the Board and the Compensation Committee will review and consider the voting results when making future decisions regarding our executive compensation program. +The affirmative “FOR” vote of the holders of a majority of the shares represented at the meeting (in person, online or by proxy) and entitled to vote is required to approve this Proposal No. 2. Brokers do not have discretion to vote on this proposal without your instruction. If you do not instruct your broker how to vote on this proposal, your broker will deliver a non-vote on this proposal. Abstentions will have the same effect as a vote “AGAINST” Proposal No. 2. Broker non-votes will have no effect on Proposal No. 2. +We currently intend to hold the next non-binding advisory vote to approve the compensation of our Named Executive Officers at our 2023 annual meeting of stockholders, unless our Board modifies its policy of holding this vote on an annual basis. +PROPETRO  2022 Proxy Statement   |  24 +TABLE OF CONTENTS +Executive Compensation +The Board of Directors unanimously recommends a vote FOR the approval of the compensation of our named executive officers. +Compensation Discussion and Analysis +CD&A Contents +25 +I. +EXECUTIVE COMPENSATION HIGHLIGHTS +25 +2021 Company Performance +26 +Successful Execution of Our Leadership Succession Plan +26 +Increased Focus on Free Cash Flow and ESG +27 +Named Executive Officers for 2021 +27 +Guiding Principles +28 +Performance-Based Compensation Philosophy +28 +Compensation Policies and Practices +29 +II. +WHAT GUIDES OUR PROGRAM +29 +Philosophy and Guiding Principles of Our Compensation Program +30 +How We Make Compensation Decisions +31 +Use of Peer Compensation Data +32 +Say-on-Pay Advisory Vote +32 +III. +ELEMENTS OF COMPENSATION AND 2021 DECISIONS IN DETAIL +32 +Base Salary +33 +Annual Cash Incentive Awards +36 +Long Term Incentive Awards +37 +Employee Benefits, Perquisites and Special Payments +38 +IV. +OTHER COMPENSATION PRACTICES, POLICIES AND GUIDELINES +38 +Executive Severance Plans +38 +Employee Compensation Claw-Back Policy +39 +Executive Stock Ownership Policy +39 +Prohibition on Hedging and Pledging +39 +No Tax Gross-Ups +39 +Regulatory Considerations +39 +Compensation Risk Assessment +This Compensation Discussion and Analysis (“CD&A”) describes our compensation practices and the compensation awarded to, earned by, or paid to each of our named executive officers (the “Named Executive Officers”) during the last completed fiscal year. +I. +EXECUTIVE COMPENSATION HIGHLIGHTS +2021 Company Performance +$875MM +$155MM +Total Revenue +Net Cash Provided by Operating Activities +0.54 +12.4 +2021 Full-Year TRIR +Effectively Utilized Fleets +25  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +Successful Execution of Our Leadership Succession Plan +PHILLIP A. +GOBE +SAMUEL D. +SLEDGE +ADAM +MUÑOZ +Executive Chairman of the Board +and Former Chief Executive Officer +Chief Executive Officer +President and Chief Operating Officer +On August 31, 2021, years of succession planning by the Compensation Committee and the Board came to fruition when Samuel D. Sledge, previously President, was appointed as Chief Executive Officer and Adam Muñoz, previously Chief Operating Officer, was appointed as President and Chief Operating Officer of the Company. Phillip A. Gobe, who preceded Mr. Sledge as Chief Executive Officer and Chairman of the Board, will continue to support the Company and Mr. Sledge in the role of Executive Chairman of the Board until March 31, 2022, and is expected to continue his service with the Company as the non-executive Chairman of the Board thereafter. +Messrs. Sledge and Muñoz have each spent the last ten or more years at the Company during which time they have developed a deep knowledge of the business and our unique culture of teamwork. The Board identified each of Messrs. Sledge and Muñoz early on as potential candidates for future executive roles and provided them with increasing responsibility and targeted training and leadership opportunities over the course of several years. For example, Mr. Sledge has served in the following roles at the Company prior to his appointment as Chief Executive Officer: +• +Frac Technical Specialist and Technical Operations Manager +• +Vice President of Finance, Corporate Development, and Investor Relations +• +Chief Strategy and Administrative Officer +• +President +Mr. Muñoz has served in the following roles at the Company prior to his appointment as President and Chief Operating Officer: +• +Vice President of Frac Services +• +Senior Vice President of Operations +• +Chief Operating Officer +In order to retain the next generation of our leaders and ensure they were motivated to achieve the company’s long- and short-term goals, the Compensation Committee provided them with compensation opportunities commensurate with their increasing responsibilities, a substantial portion of which was performance-based. +Mr. Gobe’s transition from Chief Executive Officer and Chairman of the Board to Executive Chairman of the Board was also an important part of the Board’s succession plan. The Board wanted to ensure that Mr. Sledge had sufficient support from the outgoing Chief Executive Officer to ensure a seamless transition for our customers, employee team, and stockholders. Mr. Gobe’s intent to transition from Executive Chairman of the Board to Chairman of the Board on March 31, 2022 will provide further continuity and stability of leadership for the Company. +Increased Focus on Free Cash Flow and ESG +For 2021, the Compensation Committee added Free Cash Flow (as defined below) and ESG as new performance metrics for the Company’s Annual Bonus Plan. +2020 was a difficult year for the global economy and the oil and gas industry, in particular. Our strong balance sheet was an important factor in our ability to successfully navigate the unprecedented challenges we faced in 2020. That experience highlighted the importance of spending discipline, particularly as we set out to navigate through the second year of the COVID-19 pandemic and the resulting supply chain challenges and economic uncertainty and volatility. The Compensation Committee added Free Cash Flow as a new performance metric representing 20% of the Named Executive Officer’s annual bonus for 2021 to motivate capital discipline. +PROPETRO  2022 Proxy Statement   |  26 +TABLE OF CONTENTS +Executive Compensation +Proactively addressing ESG issues is good for the Company, our employees, our customers, the communities in which we operate, and our investors. We believe that prioritizing ESG issues is critical to our long-term success and will help us to: +• +Meet our customers’ needs for lower emissions completions services; +• +Access additional capital and strengthen our share price over the long-term by attracting and retaining individual and institutional investors; +• +Contribute to the strength and health of the communities in which we operate; +• +Attract and retain the most qualified directors, executives, and employees; +• +Reduce the likelihood of hostile activist intervention, which could be costly for the Company and negatively impact the Company’s reputation; +• +Creatively solve problems by engaging individuals from different backgrounds and with different viewpoints; and +• +Strengthen our brand, thereby helping us to attract additional investors, customers and employees. +As a result, in 2021, the Compensation Committee allocated 10% of the Named Executive Officer’s annual bonus to the achievement of predetermined goals intended to identify and accomplish ESG priorities. +Named Executive Officers for 2021 +For the year ended December 31, 2021, our Named Executive Officers consisted of the following: +Phillip A. +Gobe +Samuel D. +Sledge +Adam +Muñoz +David S. +Schorlemer +Newton W. “Trey” +Wilson III +Executive Chairman and Former Chief Executive Officer +Chief Executive Officer +President and Chief Operating Officer +Chief Financial Officer +General Counsel and Corporate Secretary +Guiding Principles +Reward executives for exceptional performance and hold them accountable for poor performance in a manner that adheres to our values +Align executive interests with those of our stockholders by making a substantial portion of compensation performance-based and at risk +Provide the necessary flexibility to respond to changing circumstances in our cyclical and volatile business +Remain competitive in our industry in order to attract, retain and motivate the talent that is necessary to achieve our financial and strategic goals +Be internally consistent and equitable +27  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +Performance-Based Compensation Philosophy +Making a substantial portion of our Named Executive Officers’ compensation at-risk and performance-based ensures that their interests are strongly aligned with those of our stockholders and, as a result, is one of the guiding principles of our executive compensation philosophy. +CEO (1)(2) +Other NEOs Average (2)(3) +(1) +Reflects compensation for Mr. Sledge. +(2) +RSU and PSU figures reflect the aggregate grant date fair value of the RSU and PSU awards granted in 2021, calculated in accordance with FASB ASC Topic 718. Annual Incentive Bonus figures represent the 2021 target award opportunity under our Annual Bonus Plan (as defined below); provided, however, they reflect the target award opportunity approved for Mr. Sledge in his role as Chief Executive Officer at his base salary rate as of December 31, 2021, rather than his actual target award opportunity for 2021, which was pro-rated in 2021 to reflect the portion of the year during which his base salary was lower, prior to appointment to Chief Executive Officer. Base salary figures represent the base salary for each Named Executive Officer as of December 31, 2021. +(3) +Phillip Gobe served as Chief Executive Officer for a substantial portion of 2021. As a result, his compensation has been excluded from this chart as it caused the figures reported not to be representative of the compensation generally paid to Named Executive Officers not serving in the Chief Executive Officer position. +Compensation Policies and Practices +The following features of our executive compensation program promote sound compensation governance and are designed in the best interests of our stockholders and executives. +What We Do +What We Don’t Do +At least 50% of Long Term Incentive Awards are performance-based for Named Executive Officers +Use a mix of absolute and relative financial performance metrics (including relative TSR) in our incentive plans to avoid duplication of incentives across short- and long-term programs. +Use ESG metrics in our Annual Bonus Plan +Clawback policy +Independent compensation consultant +Independent Compensation Committee reviews and approves all compensation of our Named Executive Officers +Annual Say-on-Pay vote +Annual Compensation Committee assessment of compensation practices to eliminate any excessive risk +Significant stock ownership requirements +Single-trigger change in control payments +Tax gross-ups on severance or equity compensation +Repricing of stock options +Backdating of stock options +Employment agreements with executive officers +Derivative or hedging transactions or pledging of our securities by directors and executive officers +PROPETRO  2022 Proxy Statement   |  28 +TABLE OF CONTENTS +Executive Compensation +II. +WHAT GUIDES OUR PROGRAM +Our executive compensation program is designed to attract, motivate and retain the management talent that we believe is necessary to achieve our financial and strategic goals. Further, we believe that our executive compensation program should be appropriately tailored to balance short-term compensation with intermediate and long-term compensation that effectively aligns the interests of our executives with the interests of our stockholders. +In establishing and evaluating our executive compensation programs, the Compensation Committee strives to achieve total compensation for our executives that reflects their individual contributions to the Company, responsibilities, duties and experience and is competitive with the companies with which we compete for executive talent. +Philosophy and Guiding Principles of Our Compensation Program +Our compensation program is guided by the following principles: +1 +Reward for Exceptional Performance and Accountability for Poor Performance +Our Named Executive Officers should be rewarded for exceptional performance and held accountable for poor performance with respect to our annual and longer-term strategic goals. Our Named Executive Officers must work to achieve these goals in a manner that is consistent with our values and policies. We satisfy this objective by tying a significant portion of each Named Executive Officer’s compensation to the achievement of financial, strategic and operational goals based on both short- and long-term corporate performance measures while retaining sufficient flexibility to modify or clawback compensation if necessary. See “Annual Cash Incentive Awards” and “Long Term Incentive Awards” below. +2 +Align Interests of Executives and Stockholders +Compensation for our Named Executive Officers should align their interests with those of our stockholders. Our compensation program aligns pay to performance by making a substantial portion of total executive compensation variable, or “at-risk,” through an annual bonus program based on our performance goals and the granting of long-term incentive equity awards, which include time-vested restricted stock units and performance-based restricted stock units. As performance goals are met, not met or exceeded, executives are rewarded commensurately. Our Stock Ownership Guidelines also require each Named Executive Officer to retain significant ownership in the Company’s common stock such that they are invested in our success over the long-term along with our stockholders. +3 +Flexibility to Respond to Changing Circumstances +We are in a cyclical and volatile business and unprecedented economic times. As a result, our Compensation Committee feels it is important to have a flexible compensation program that is responsive to unforeseen circumstances that arise during the year. To meet this objective, the Compensation Committee retains discretion to increase or decrease the bonuses paid to each Named Executive Officer pursuant to our annual bonus plan from the amount that would be indicated by the pre-established performance metrics if circumstances so warrant. +4 +Industry Competitive +Total executive compensation should be industry-competitive so that we can attract, retain and motivate talented executives with the experience and skills necessary for our success. We satisfy this objective by staying apprised, with the assistance of the Compensation Committee’s independent compensation advisor, of the amounts and types of executive compensation paid to similarly situated executives by companies with which we compete for executive talent as well as general industry trends and best practices. +5 +Internally Consistent and Equitable +Executive compensation should be internally consistent and equitable. We satisfy this objective by considering not only the compensation paid by our peer companies, but also our Named Executive Officers’ capabilities, levels of experience, tenures, positions, responsibilities and contributions when setting their compensation. Additionally, our Compensation Committee feels that our Named Executive Officers should have a larger proportion of their compensation at risk and tied to corporate performance than our general employee population because they are typically in a position to have a more direct impact on the achievement of our performance goals. +29  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +How We Make Compensation Decisions +THE ROLE OF THE COMPENSATION COMMITTEE +Our Compensation Committee is comprised of independent, non-employee members of the Board. The Compensation Committee is responsible for establishing the elements, terms and target value of compensation paid or delivered to our Named Executive Officers but often consults the full Board with respect to material compensation actions. For example, the Compensation Committee typically makes a recommendation to the non-employee members of the Board, who in turn consider and approve the annual compensation of the Chief Executive Officer, based upon such recommendations. Our Compensation Committee is also involved in all executive succession planning. Details of the Compensation Committee’s authority and responsibilities are specified in its charter, which may be accessed at https://ir.propetroservices.com/compensation-committee-charter . In determining the compensation of our Named Executive Officers, the Compensation Committee considers: +• +the information and advice provided by its compensation consultant, +• +our corporate goals, +• +historic and projected performance, +• +the current economic and commodities environment, +• +individual performance of our Named Executive Officers, and +• +other relevant factors. +THE ROLE OF EXECUTIVE OFFICERS IN COMPENSATION DECISIONS +With respect to the compensation of the Named Executive Officers other than our principal executive officer, the Compensation Committee considers the recommendations of our Chief Executive Officer. Additionally, in light of our Named Executive Officers’ integral role in establishing and executing the Company’s overall operational and financial objectives, the Compensation Committee requests that our Chief Executive Officer provide the initial recommendations on the appropriate goals for the performance metrics used under our Annual Bonus Plan and may choose to accept or modify these recommendations in its sole discretion. In addition, the Compensation Committee may invite any Named Executive Officer to attend Compensation Committee meetings to report on the Company’s progress with respect to the interim or final status of performance metrics. All Named Executive Officers are excluded from any decisions or discussions regarding their individual compensation. +THE ROLE OF THE INDEPENDENT COMPENSATION CONSULTANT +Pearl Meyer served as the Compensation Committee’s independent compensation consultant in 2021. The compensation consultant provides advice to and works with the Compensation Committee in designing and implementing the structure and mechanics of the Company’s executive compensation program, as well as other matters related to officer, senior management, and director compensation and corporate governance. For example, our compensation consultant regularly updates the Compensation Committee on regulatory changes impacting executive compensation, proxy advisor policies, and compensation-related risks. In addition, they provide the Compensation Committee with relevant data, including market and peer-company compensation and performance surveys and information and advice regarding trends and developments in executive and director compensation practices in our industry. This information assists the Compensation Committee in making executive and director compensation decisions based on market pay levels and best practices. +Our compensation consultant reports directly and exclusively to the Compensation Committee and does not provide any other services to management, the Company or its affiliates. While the Compensation Committee generally reviews and considers information and recommendations provided by the compensation consultant, they do not make compensation-related decisions for the Compensation Committee or otherwise with respect to the Company. The Compensation Committee has the discretion to allow our compensation consultant to work directly with management in preparing or reviewing materials for the Compensation Committee’s consideration. During 2021, and after taking into consideration the factors listed in Section 303A.05(c)(iv) of the “NYSE” Listed Company Manual, the Compensation Committee concluded that neither it nor the Company has any conflicts of interest with Pearl Meyer, and that Pearl Meyer was independent from management. Other than Pearl Meyer, no other compensation consultants provided services to the Compensation Committee during 2021. +PROPETRO  2022 Proxy Statement   |  30 +TABLE OF CONTENTS +Executive Compensation +Use of Peer Compensation Data +The Company competes with business entities across multiple industries for top executive-level talent. To this end, the Compensation Committee evaluates, on an annual basis, industry-specific and general market compensation practices and trends to ensure that our program and Named Executive Officer pay opportunities remain appropriately competitive. As part of its evaluation, the Compensation Committee works with its independent consultant to validate that the companies included in its peer group are comparable as possible to the Company in terms of operations, revenue, market capitalization, and geographic location. +The 2021 Peer Group was determined by the Compensation Committee based on an in-depth review from its independent compensation consultant. This review included an assessment of potential comparators to evaluate the degree to which the current peers have kept pace with the Company’s growth and evolution, as well as an examination of the broader marketplace to identify appropriate and relevant additions and/or deletions to the peer group. In setting 2021 target compensation levels for the Named Executive Officers, as well as evaluating TSR performance for the PSUs granted in 2021, the Company used the 2021 Peer Group detailed below: +• +Archrock, Inc. +• +ChampionX Corporation +• +Helmerich & Payne, Inc. +• +Liberty Oilfield Services Inc. +• +Nabors Industries Ltd. +• +NexTier Oilfield Solutions Inc. +• +Nine Energy Services Inc. +• +Oil States International, Inc. +• +Patterson-UTI Energy, Inc. +• +Precision Drilling Corporation +• +RPC, Inc. +• +Select Energy Services, Inc. +• +U.S. Silica Holdings. Inc. +Archrock, Inc. and Nine Energy Services Inc. were added to the 2021 Peer Group to improve the overall comparability of the group to the Company. In addition, the following two companies were removed: Ensign Energy Services Inc. and National Energy Services Reunited Corp. +In 2021, the comparative compensation data reviewed by the Compensation Committee was created by Pearl Meyer based on data from a blend of the 2021 Peer Group and survey data collected by Pearl Meyer from companies in the energy industry with corporate revenues of approximately $1 billion (the “Peer Data”). Data from both sources was used to provide the best mix of authorities for competitive positions, and to help smooth volatility of changes in the peer group. The Compensation Committee generally targets total compensation for each of our Named Executive Officers and directors, as well as each element of compensation, at the 50th percentile of the Peer Data. However, the Compensation Committee also considers many other factors when establishing compensation levels, including, but not limited to internal pay equity at the Company, each executive’s experience and responsibility, succession planning, and recruiting and retention concerns. +As a result, the compensation of our Named Executive Officers and directors may be slightly higher or lower than the 50th percentile of the 2021 Peer Group or the Peer Data. +31  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +Say-on-Pay Advisory Vote +At the Company’s 2021 annual meeting, the stockholders of the Company were asked to approve, on an advisory basis, the compensation of the Named Executive Officers. Advisory votes in favor of our executive compensation program were cast by approximately 97% of the shares of common stock of the Company represented at the meeting (in person, online or by proxy) and entitled to vote. The Compensation Committee took the results of the “Say-on-Pay” vote in account when evaluating the compensation of the Named Executive Officers in 2021. In part because the result of the vote was overwhelmingly positive, the Compensation Committee decided to retain our overall approach to executive compensation. We have continued, and plan to continue, engaging in ongoing stockholder outreach regarding corporate governance generally, including executive compensation programs. +III. +ELEMENTS OF COMPENSATION AND 2021 DECISIONS IN DETAIL +As shown below, a significant portion of the target compensation for our Named Executive Officers in 2021 was performance-based and an even larger portion is variable or “at risk,” meaning that it can be forfeited, and its value is dependent upon factors such as our stock price or company performance. +Element +Purpose +Changes for 2021 +◄ FIXED ► +Short- +Term +BASE +SALARY +• +To provide a consistent, minimum level of pay that is sufficient to allow us to attract and retain executives with the appropriate skills and experience for their positions +• +Only modifications reflected changes in roles, duties and responsibilities +◄ AT RISK ► +ANNUAL +CASH +INCENTIVE +BONUS +• +To motivate and reward the achievement of our annual individual and operational performance goals +• +70% based on the achievement of quantitative performance goals and 30% was based upon a qualitative analysis of individual and operational performance for the fiscal year +• +Addition of Free Cash Flow and ESG as performance metrics +Long- +Term +LONG-TERM +INCENTIVE +AWARDS +• +To ensure retention and drive performance, while aligning the interests of our Named Executive Officers with those of our stockholders +• +40% RSUs that vest equally on each of the first three anniversaries of grant, and 60% performance stock units (“PSUs”) that vest, if earned, following the completion of a three-year performance period, in each case subject to continued employment +• +First annual grants awarded under 2020 LTIP (approved at the 2020 Annual Meeting of Stockholders) +Base Salary +The Compensation Committee monitors and adjusts salaries for our Named Executive Officers over time as necessary to remain competitive with market rates for similarly situated officers at our peer companies and to reflect changes in each Named Executive Officer’s role, duties and responsibilities. In some cases, the Board approves the base salary level for the Chief Executive Officer. +Base Salary as of +Name +December 2020 +($) +December 2021 +($) +Phillip A. Gobe (1) +800,000 +810,000 +Samuel D. Sledge (2) +375,000 +475,000 +David S. Schorlemer +450,000 +450,000 +Adam Muñoz (3) +425,000 +475,000 +Newton W. “Trey” Wilson III +400,000 +400,000 +(1) +Mr. Gobe was appointed as our Chief Executive Officer on March 13, 2020, a position he held until his resignation, effective August 31, 2021, at which point he was appointed Executive Chairman of the Board. Mr. Gobe’s base salary was increased to $900,000, effective January 1, 2021, to bring his pay closer to the median of the Peer Data for his +PROPETRO  2022 Proxy Statement   |  32 +TABLE OF CONTENTS +Executive Compensation +position. His base salary was decreased to $810,000 in connection with that resignation and appointment as Executive Chairman of the Board. +(2) +As of December 31, 2020, Mr. Sledge served as Chief Strategy and Administrative Officer. Mr. Sledge’s base compensation was increased to $425,000, effective January 1, 2021, to bring his pay closer to the median of the base salary paid to individuals serving in similar roles. Mr. Sledge was appointed as President in April of 2021. In connection with his appointment as President, Mr. Sledge’s base salary was increased to $475,000, retroactive to April 5, 2021. Mr. Sledge was appointed as Chief Executive Officer, effective August 31, 2021, at which time his base salary was not modified. +(3) +Mr. Muñoz was appointed to serve as Chief Operating Officer, effective January 1, 2021. In connection with his appointment as Chief Operating Officer, Mr. Muñoz’s base salary was increased to $475,000, retroactive to January 1, 2021. Mr. Muñoz was appointed as President and Chief Operating Officer, effective August 31, 2021, at which time no modifications were made to his base salary. +Annual Cash Incentive Awards +The Amended and Restated ProPetro Holding Corp. Executive Incentive Bonus Plan (the “Annual Bonus Plan”) governs cash incentive awards made each year to our Named Executive Officers. Awards under the Annual Bonus Plan are tied to the achievement of performance goals, which may be based on qualitative or quantitative measures, or both, as determined by the Compensation Committee. +TARGET AWARD OPPORTUNITIES +In February 2021, the Compensation Committee (or in the case of Mr. Gobe, the Board) established target bonuses under the Annual Bonus Plan for each of Messrs. Gobe, Sledge, Muñoz, Schorlemer, and Wilson of 100%, 75%, 100%, 80%, and 75% of base salary, respectively. Mr. Sledge’s target bonus was increased to 100% of base salary in connection with his appointment as President. The final target bonus opportunities for each Named Executive Officer for 2021 were as follows: +Name +Final 2021 Target Bonus +Award Opportunity +Phillip A. Gobe +100 % +Samuel D. Sledge +100 % +David S. Schorlemer +80 % +Adam Muñoz +100 % +Newton W. “Trey” Wilson III +75 % +Target bonus levels for each executive were established by the Compensation Committee after reviewing peer group data and considering each Named Executive Officer’s responsibility and experience. +PERFORMANCE MEASURES AND PAYOUT RESULTS +Each year, the Compensation Committee establishes performance metrics and threshold, target, and maximum goals for each such metric. Potential payouts under the Amended Annual Bonus Plan depend on the actual performance level for each metric established by the Committee, as outlined below. +Performance Level +Payout (as a % of +Target Bonus) +Threshold +50 % +Target +100 % +Maximum +200 % +If performance falls between the specified performance levels, payments are generally determined via straight-line interpolation. If performance falls below the threshold performance level, no payments will be awarded. The Annual Bonus Plan provides the Compensation Committee or the Board with the discretion to increase or decrease actual payout amounts otherwise resulting from the pre-established metrics, as it may deem necessary. +Under the 2021 annual incentive program, the Compensation Committee selected a mix of quantitative and qualitative performance metrics to incentivize achievement of specific pre-established financial and safety metrics, while enabling the Compensation Committee the ability to encourage performance with respect to areas that are important +33  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +to the growth and success of the Company but are harder to measure. While the Compensation Committee values qualitative metrics as a tool, it felt that the vast majority of the annual bonus should be calculated based on quantitative metrics, with a significant emphasis on financial metrics. To that end, 70% of each Named Executive Officer’s annual bonus for 2021 was based on the achievement of quantitative metrics (Adjusted EBITDA, Free Cash Flow and Safety), with 60% of that 70% dedicated to financial performance. The remaining 30% of the annual bonus was based upon a qualitative analysis of ESG (10%), Individual Performance (10%), and Overall Operational Performance (10%), in each case, for 2021. +The Compensation Committee selected these performance metrics because they are important to the ongoing success of the Company and were intended to drive short-term business performance by focusing executives on key objectives that position the Company for sustained growth. Specifically, Adjusted EBITDA and Free Cash Flow are measures of our financial performance and capital discipline, and TRIR is an important measure of safety. The qualitative component of the Annual Bonus Plan allows the Committee to assess performance across a variety of individual and operational performance factors, including specific progress towards a variety of ESG goals. +Measure +Weighting +Threshold +Target +Maximum +Actual 2021 +Performance +Payout as a +Percentage of +Target Bonus +QUANTITATIVE MEASURE +Adjusted EBITDA (1) +40 % +$ +115MM +$ +164MM +$ +197MM +$ +135MM +32.8 % +Free Cash Flow (2) +20 % +$ +30MM +$ +43MM +$ +52MM +$ +35MM +16.4 % +Safety—Total Recordable +Incident Rate (TRIR) (3) +10 % +0.90 +0.75 +0.50 +0.54 +18.4 % +Quantitative Total +70 % +67.6 % +QUALITATIVE MEASURE +ESG (4) +10 % +15 % +Overall Operational Performance +10 % +6.4 % +Individual Performance +10 % +10 % +Qualitative Total +30 % +31.4 % +Overall Total +100 % +99 % +(1) +We define EBITDA as earnings before (i) interest expense, (ii) income taxes and (iii) depreciation and amortization. We define Adjusted EBITDA as EBITDA, plus (i) loss/(gain) on disposal of assets, (ii) loss/(gain) on extinguishment of debt, (iii) stock-based compensation, and (iv) other unusual or non-recurring (income)/expenses, such as impairment charges, severance, costs related to our IPO and costs related asset acquisition or one-time professional fees. For a more detailed definition of the non-GAAP financial measure of Adjusted EBITDA and reconciliation of Adjusted EBITDA to our most directly comparable financial measures calculated in accordance with GAAP, please read “How We Evaluation Our Operations” in our Form 10-K filed for the year ended December 31, 2021. +(2) +We define Free Cash Flow as Adjusted EBITDA less Total Capital Expenditures, which are defined as costs incurred in connection with the growth and maintenance of our asset base. For a more detailed definition of Total Capital Expenditures please see Note 9—Reportable Segment Information in the Notes to Consolidated Financial Statements to our Form 10-K filed for the year ended December 31, 2021. Additionally, in October of 2021, the +PROPETRO  2022 Proxy Statement   |  34 +TABLE OF CONTENTS +Executive Compensation +Compensation Committee elected to exclude the portion of the cost paid in 2021 for purchase of 50 Tier IV DGB pumping units from the calculation of Free Cash Flow. The portion of such cost that was paid in 2021, and thus excluded from Free Cash Flow for 2021, was approximately $29.5 million (the “2021 Tier IV Expenditure”). The 2021 Tier IV Expenditure was originally planned for 2022 but was accelerated to mitigate supply chain and inflationary risks. The 2021 Tier IV Expenditure was approved by the Board and was strategically advantageous for the Company. Including the cost of this expenditure in the Free Cash Flow calculation would have had a significant negative impact on the Company’s performance with respect to this metric, a result that would not align with the Compensation Committee’s assessment of Free Cash Flow performance. In December of 2021, the Compensation Committee elected to include the proceeds from the sale of two large gas fired turbines for $36,000,000 in the calculation of Free Cash Flow to recognize the economic and strategic importance of this sale for the Company. +(3) +TRIR stands for Total Recordable Incident Rate and is a measurement of workplace safety calculated as follows: (total number of recordable incidents amongst covered personnel in the applicable period (here, 2021) multiplied by 200,000) divided by the total man hours worked by covered personnel in the applicable period. TRIR is a commonly accepted and utilized metric for both workplace safety regulation and for making safety performance comparisons amongst companies. The Company uses an annual TRIR metric in our compensation program to reflect aggregate safety performance across the year being reviewed. +(4) +We define ESG as Environmental Social and Governance. For 2021, the Compensation Committee established the following ESG goals: develop meaningful ESG content for our website; create a plan to convert Tier II (diesel) equipment to lower emission equipment instead of refurbishment; hire a dedicated ESG professional to guide the Company’s ESG initiatives; determine the most appropriate emissions, social, and governance metrics to track and evaluate; and enhance our public ESG disclosures. +The Compensation Committee determined that the Company had performed above expectations with respect to the ESG metric, awarding a 15% payout percentage (between target and maximum) for our ESG metric. The Compensation Committee made particular note of the following when setting the performance level for our qualitative ESG measure for 2021: +• +Exceeded expectations with respect to the conversation of our pumping units to environmentally friendly Tier IV units, including accelerating an order for 50 additional pump conversions into 2021 to mitigate supply chain and inflationary risks; +• +Executed preliminary studies to better understand our corporate emissions profile; +• +Identified several key areas to make additional disclosure and improve our ESG ratings profile, including the collection of data necessary to further improve such disclosure in 2022; and +• +Studied available options for electric fracking fleets and developed a strategy for deployment, subject to customer demand. +While the Company recognized significant achievements towards certain operational performance objectives implemented by the Board (e.g., successful executive team transition, and more than a 50% increase in effective fleet utilization), the Company did not fully achieve certain other objectives (e.g., management deferred an investment decision sought by the Board into 2022 and did not grow certain targeted fleet deployments as rapidly as expected). As a result, the Compensation Committee determined that the Company’s Overall Operational Performance was somewhat below expectations and awarded a performance payout of 6.4% for this metric. +The Compensation Committee determined that performance was at target level (a 10% payout percentage) for our Named Executive Officers’ Individual Performance metric, particularly given the exceptional leadership they have shown in the face of the extraordinary challenges presented by volatile oil and gas prices, a global pandemic, and supply chain disruption. +As a result, the Compensation Committee made the determination to make the following payments under the Annual Bonus Plan: +Name +Final 2021 Target Bonus +Award Opportunity as a +Percentage of Base Salary +Value of 2021 +Target Bonus +Award Opportunity +($) +Actual Payout +as a +Percentage of +Target Bonus +Value of Actual +2021 Annual +Bonus +($) (2) +Phillip A. Gobe (1) +100 % +869,900 +99 % +861,200 +Samuel D. Sledge (1) +100 % +462,100 +99 % +457,500 +David S. Schorlemer +80 % +360,000 +99 % +356,400 +Adam Muñoz +100 % +475,000 +99 % +470,300 +Newton W. “Trey” Wilson III +75 % +300,000 +99 % +297,000 +35  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +(1) +The value of the target bonus award opportunity for Messrs. Gobe and Sledge has been adjusted to reflect changes in his base salary throughout the year. +(2) +Bonus amounts were rounded up or down to the nearest hundred dollars. +Long Term Incentive Awards +In 2021, 40% of the value of each Named Executive Officer’s long term incentive awards were granted pursuant to the ProPetro Holding Corp. 2020 Long Term Incentive Plan (the “2020 LTIP”) in the form of RSUs that vest in three substantially equal annual installments commencing on the first anniversary of the grant date. The other 60% was granted in the form of performance stock units (“PSUs”) that vest, if earned, following the completion of a three-year performance period, in each case subject to the Named Executive Officer’s continued employment through the end of such period. +This mix of time- and performance-based awards is intended to achieve the twin goals of ensuring retention and driving performance, while aligning the interests of our Named Executive Officers with those of our stockholders by providing an opportunity for increased share holdings. Both PSUs and RSUs may be settled in shares of our common stock or in the cash equivalent of the same. +The PSUs granted in 2021 vest based on the Company’s TSR as compared to the TSR of the 2021 Peer Group. After careful review, the Compensation Committee chose to use the same 2021 Peer Group to set 2021 target compensation levels for our Named Executive Officers and evaluate TSR performance for the PSUs granted in 2021. Recipients of PSUs may earn between 0% and 200% of the target number of shares granted, as indicated in the following table. If performance falls between the specified performance levels, payouts will be determined via straight-line interpolation. If performance falls below the threshold performance level, no payouts will be awarded. Irrespective of the payout indicated by the table below, if the Company’s TSR is below zero on an absolute basis for the performance period, the number of PSUs earned shall not be greater than the target number of PSUs granted (i.e., the payout shall not be greater than 100%). +Payout (as a % of Target Number of +PSUs Granted) +Payout (as a % of Target Number of +PSUs Granted) if TSR is Below Zero +Company’s +Percentile +Rank in Peer +Group +≥ 90th Percentile +200 % +100 % +75th Percentile +175 % +100 % +50th Percentile +100 % +100 % +25th Percentile +50 % +50 % +< 25th Percentile +0 % +0 % +The performance period for the 2021 PSU awards commenced on January 1, 2021 and ends on December 31, 2023. +If a peer company is acquired by another peer company during the performance period, the acquirer will remain in the peer group but the acquired company will be excluded from the peer group entirely. If a peer company files for bankruptcy during the performance period, it will remain in the peer group but will be ranked last. Should a peer company cease to exist as a separate publicly traded company for any other reason during the performance period, it will be excluded from the peer group entirely. +The annual value of each Named Executive Officer’s long-term incentive award is generally determined in conjunction with the Compensation Committee’s annual compensation analysis or, if later, in connection with the Named Executive Officer’s promotion or hire date following the Compensation Committee’s review of peer compensation data and consideration of each Named Executive Officer’s position and associated responsibilities. In 2021, the +PROPETRO  2022 Proxy Statement   |  36 +TABLE OF CONTENTS +Executive Compensation +Compensation Committee granted the RSUs and PSUs included in the table below to our Named Executive Officers. All awards were granted in February of 2021 unless otherwise indicated. +Name +Number of RSUs +Granted in 2021 +Value of RSUs +Granted in 2021 (1) +($) +Target Number +of PSUs Granted +in 2021 +Value of PSUs +Granted in 2021 (1) +($) +Phillip A. Gobe +155,578 +1,519,977 +233,367 +3,582,183 +Samuel D. Sledge (2) +80,356 +679,993 +120,507 +1,536,606 +David S. Schorlemer +40,941 +399,994 +61,412 +942,674 +Adam Muñoz (2) +57,954 +539,985 +86,932 +1,256,115 +Newton W. “Trey” Wilson III +40,941 +399,994 +61,412 +942,674 +(1) +Amounts in these columns reflect the aggregate grant date fair value of the RSU and PSU awards granted in 2021 under the 2020 LTIP, calculated in accordance with FASB ASC Topic 718. +(2) +Amounts for Messrs. Sledge and Muñoz include the following awards granted on August 31, 2021 in connection with their promotions to Chief Executive Officer and President and Chief Operating Officer, respectively: 51,697 RSUs and 77,519 PSUs for Mr. Sledge and 12,919 RSUs and 19,379 PSUs for Mr. Muñoz. +Employee Benefits, Perquisites and Special Payments +HEALTH/WELFARE PLANS +All of our full-time employees, including our Named Executive Officers, are eligible to participate in our health and welfare plans on the same basis, including: medical, dental and vision benefits; medical and dependent care flexible spending accounts; short-term and long-term disability insurance; and group life insurance. +RETIREMENT PLANS +We currently maintain a 401(k) retirement savings plan for our employees who satisfy certain eligibility requirements. Our Named Executive Officers are eligible to participate in the 401(k) plan on the same terms as other full-time employees. Currently, we match contributions made by participants in the 401(k) plan up to a specified percentage of the employee contributions and we may make certain discretionary profit sharing contributions. Both the matching contributions and the profit sharing contributions vest in equal installments over four years of service, with accelerated vesting on retirement, death or disability. We believe that offering a vehicle for tax-deferred retirement savings through our 401(k) plan and making matching contributions and profit sharing contributions that vest over time, add to the overall desirability of our compensation packages and further incentivize our employees in accordance with our compensation policies. We do not maintain any defined benefit pension plans or deferred compensation plans. +RETENTION BONUSES +In 2021, Mr. Wilson received a $25,000 retention bonus, consistent with the terms of the employment agreement entered into between Mr. Wilson and the Company upon his commencement of employment. While the Company’s legal obligations pursuant to this agreement were canceled by Mr. Wilson’s entry into a participation agreement under the Executive Severance Plan, the Compensation Committee elected to honor the payment of the retention bonus, which was payable on each of the first and second anniversary of the effective date of the agreement. +Mr. Wilson is a key member of our executive team and payment of the retention bonus served to honor his hard work and ensure he would continue to provide services to the Company. Mr. Schorlemer received a $75,000 retention bonus, consistent with the terms of recruitment, payable on the first anniversary of his employment with the Company. +PERQUISITES +Messrs. Sledge, Muñoz, Schorlemer and Wilson each participated in a vehicle allowance program during 2021. In addition, in 2021 we provided Mr. Gobe with a Company vehicle for his use while in Midland, Texas. In 2021 the Company also provided other limited perquisites to its Named Executive Officers, including club memberships and dues. +37  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +In order to incentivize Mr. Schorlemer, who was a key hire during 2020, to accept the position as our Chief Financial Officer and relocate to Midland, Texas, we promised to pay for all costs associated with his relocation, including a tax gross-up on the portions of those expenses that Mr. Schorlemer recognizes as income. All such relocation costs are reflected in the Summary Compensation Table below, in the All Other Compensation column for the year in which the amounts were accrued. See “Executive Compensation Tables―Summary Compensation Table” for additional information. +The Compensation Committee reviews the perquisites we provide to our Named Executive Officers periodically, including in 2021, to ensure that they are necessary to retain our executives, appropriate, and consistent with benefits offered by companies with which we compete for executive talent. +IV. +OTHER COMPENSATION PRACTICES, POLICIES AND GUIDELINES +Executive Severance Plan +The Board adopted the Second Amended and Restated ProPetro Services, Inc. Executive Severance Plan and subsequently (the “Executive Severance Plan”) because they and the Compensation Committee felt it was desirable to pivot away from individually negotiated employment agreements and towards a streamlined plan providing for more uniform treatment upon a termination of employment. Each of our Named Executive Officers is a participant in the Executive Severance Plan. We believe the Executive Severance Plan serves to maintain the focus of our senior executives and ensure that their attention, efforts and commitment are aligned with maximizing the success of the Company and stockholder value. Further, providing market severance benefits is an important element of compensation that allows us to attract and retain talented executives, ensuring continuity of management, stability of the Company, and efficient execution of our business goals. +The amounts of the severance and benefits established for each “Tier” under the Executive Severance Plan were selected after the Compensation Committee received advice from its independent compensation consultant at the time of adoption regarding the types and amounts of severance that are market among the Company’s peers. The Compensation Committee also considered its members’ ample experience in the industry when making this determination. The Tier level assigned to each participant in the plan was determined based on each participant’s position and responsibility. In 2021, the Compensation Committee revised the Tier levels for Mr. Sledge from Tier 3 to Tier 2 in connection with his appointment to President April of 2021 and from Tier 2 to Tier 1 in connection with appointment as Chief Executive Officer. The Compensation Committee modified the Tier level for Mr. Muñoz from Tier 3 to Tier 2 following his appointment as Chief Operating Officer. The Tier level for Mr. Wilson was changed by the Compensation Committee from Tier 3 to Tier 2 to reflect the additional responsibilities he has assumed over the last year. The Tier levels for each of the Named Executive Officers and the terms of the Executive Severance Plan are described in detail below in the section entitled “Potential Payments upon Termination and Change of Control―Executive Severance Plan.” +Employee Compensation Claw-Back Policy +Under the terms of our Executive Compensation Claw-Back Policy, any incentive compensation, including equity awards, paid to an executive officer which was determined based on our performance against financial metrics will be subject to recovery by the Company in the event that the underlying financial metrics are negatively impacted by a restatement of our financial statements. In addition, incentive compensation, including equity awards, is subject to recovery by the Company where an executive engages in certain misconduct. +PROPETRO  2022 Proxy Statement   |  38 +TABLE OF CONTENTS +Executive Compensation +Executive Stock Ownership Policy +Under the terms of our Executive Stock Ownership Policy, our executive officers must own shares of our common stock or certain equity awards with a value equal to not less than the following multiples of base salary: +Office +Multiple of Base Pay +Chief Executive Officer +■ ■ ■ ■ ■ +5x +Chief Financial Officer and Chief Operating Officer +■ ■ ■ +3x +All other executive officers +■ +1x +Any individuals who became executive officers as a result of an internal promotion or a new hire, will have five years from the date of being named an executive officer to meet the stock ownership guidelines. As a result, all of our Named Executive Officers still have additional time in which to comply with these guidelines. In calculating the value of shares of our common stock or certain equity awards held for purposes of determining compliance with the policy, such value is equal to the closing price per share on the measurement date, based on shares owned outright and unvested RSUs, with the value of such unvested RSUs discounted by 40%. Unexercised option awards and unvested PSUs are excluded from the calculation. +Prohibition on Hedging and Pledging +We believe that derivative transactions, including puts, calls and options, and hedging transactions for our securities carry a high risk of inadvertent securities laws violations and may lead to an officer, director or employee no longer having the same objectives as the Company’s other stockholders. For these reasons, we prohibit our directors, officers, and employees from engaging in any type of derivative or hedging transactions in respect of our securities pursuant to our Insider Trading Compliance Policy. +Company stock pledged as collateral, including shares held in a margin account, may be sold without the consent of the holder by the lender in a foreclosure or default event, which could lead to inadvertent securities laws violations. For this reason, pursuant to our Insider Trading Compliance Policy, we prohibit pledging Company securities as collateral to secure loans and purchasing Company securities on margin. +No Tax Gross-Ups +With the exception of gross-up payments provided in connection with Mr. Schorlemer’s relocation, we do not provide gross-up payments to cover our Named Executive Officers’ personal income taxes that may pertain to any of the compensation or perquisites paid or provided by our Company. +Regulatory Considerations +The tax and accounting implications of utilizing various forms of compensation are considered when adopting new or modifying existing compensation programs. Section 162(m) (“Section 162(m)”) of the Internal Revenue Code of 1986, as amended (the “Code”) generally precludes a publicly held company from taking a federal income tax deduction for compensation paid in excess of  $1 million per year to certain covered employees, which include our Named Executive Officers. To maintain flexibility in compensating the Company’s executive officers in a manner designed to promote achievement of corporate goals, retention and recruitment, the Compensation Committee has not adopted a policy requiring all compensation to be tax deductible and expects that the deductibility of certain compensation paid will be limited by Section 162(m). +Compensation Risk Assessment +The Compensation Committee reviews our compensation policies and practices on an annual basis to identify any risks posed by these programs and to assess the appropriateness of any risks identified. We believe that any risks +39  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +associated with our compensation policies and practices are mitigated in large part by the following factors and, therefore, that no such risks are likely to have a material adverse effect on us: +We pay a mix of compensation which includes short-term cash and long-term equity-based compensation. +We base the vesting and payment of our incentive compensation awards on several different performance metrics, which discourages our employees from placing undue emphasis on any one metric or aspect of our business at the expense of others. +We believe that our performance metrics are reasonably challenging yet should not require inappropriate risk-taking to achieve. +The performance metrics for awards under our Annual Bonus Plan include quantitative financial and operational metrics as well as qualitative metrics related to our operations, strategy and other aspects of our business, and our Compensation Committee retains discretion to modify payout amounts under the Annual Bonus Plan, as appropriate. +The performance periods under our PSUs overlap, and our time-vested RSUs generally vest over a three-year period. This mitigates the motivation to maximize performance in any one period at the expense of others. +Our Named Executive Officers are required to own our common stock at levels provided in our Executive Stock Ownership Guidelines. +We have instituted a clawback policy, which allows us to clawback compensation in the event of a financial restatement or certain misconduct. +We believe that we have an effective management process for developing and executing our short- and long-term business plans. +Our compensation policies and programs are overseen by the Compensation Committee. +The Compensation Committee retains an independent compensation consultant. +Report of the Compensation Committee +The Compensation Committee has reviewed and discussed the above CD&A with management and, based on such review and discussions, the Compensation Committee recommended to the Board that the CD&A be included in this proxy statement. +The Compensation Committee of the Board of Directors +MICHELE +VION +ANTHONY J. +BEST +JACK B. +MOORE +Chair +PROPETRO  2022 Proxy Statement   |  40 +TABLE OF CONTENTS +Executive Compensation +Executive Compensation Tables +SUMMARY COMPENSATION TABLE +The following table summarizes the compensation provided by us to our Named Executive Officers for the fiscal years ended December 31, 2021, 2020 and 2019. +Name and +Principal Position +Year +Salary (1) +($) +Bonus (2) +($) +Stock +Awards (3) +($) +Option +Awards +($) +Non-Equity +Incentive Plan +Compensation (4) +($) +All Other +Compensation (5) +($) +Total +($) +Phillip A. Gobe (6) +Executive Chairman and Former Chief Executive Officer +2021 +869,923 +― +5,102,180 +― +861,200 +29,166 +6,862,469 +2020 +675,632 +― +3,808,721 +― +595,925 +15,450 +5,095,728 +2019 +142,078 +32,000 +422,370 +― +118,000 +― +714,448 +Samuel D. Sledge (7) +Chief Executive Officer +2021 +455,962 +― +2,216,599 +― +457,500 +34,588 +3,164,649 +David S. Schorlemer +Chief Financial Officer +2021 +450,000 +75,000 +1,342,668 +― +356,400 +282,713 +2,506,781 +2020 +101,435 +125,000 +387,749 +― +59,348 +69,218 +742,750 +Adam Muñoz (8) +President and Chief Operating Officer +2021 +475,193 +― +1,796,100 +― +470,300 +46,142 +2,787,735 +2020 +407,232 +― +795,311 +― +316,585 +22,495 +1,541,623 +Newton W. “Trey” Wilson III +General Counsel and Corporate Secretary +2021 +400,000 +25,000 +1,342,668 +― +297,000 +31,800 +2,096,468 +2020 +383,242 +104,102 +682,054 +― +240,000 +28,900 +1,438,298 +2019 +96,923 +― +286,093 +― +120,000 +― +503,016 +(1) +The amounts in this column represent the base salary each Named Executive Officer earned for the year indicated. +(2) +The amounts in this column for Messrs. Schorlemer and Wilson for 2021 reflect retention bonuses negotiated at the time of their appointment. The Company does not currently intend to pay any further retention bonuses for the foreseeable future. See “Compensation Discussion and Analysis—Elements of Compensation and 2021 Decisions in Detail—Employee Benefits, Perquisites and Special Payments—Retention Bonuses” above for additional information regarding these awards. +(3) +Amounts in this column for 2021 reflect the aggregate grant date fair value of the RSU and PSU awards granted in 2021 under the 2020 LTIP, calculated in accordance with FASB ASC Topic 718. The FASB ASC Topic 718 value for the RSUs was calculated using the closing price per share of our common stock on the date of grant applied to the total number of RSUs granted. The FASB ASC Topic 718 grant date fair value of the PSUs was determined using a Monte Carlo simulation. For information regarding assumptions underlying the valuation of equity awards, see Note 11 of the Consolidated Financial Statements included in our 2021 Annual Report on Form 10-K. The actual amount realized upon settlement of PSU and RSU awards will depend upon the market price of the Company’s stock on the settlement date and the Company’s performance (with respect to the PSUs). +(4) +Amounts in this column for 2021 represent the short-term cash incentive awards for performance during the 2021 fiscal year pursuant to the Annual Bonus Plan, determined based on achievement of the applicable performance metrics. See “Compensation Discussion and Analysis—Elements of Compensation and 2021 Decisions in Detail—Annual Cash Incentive Awards” above for additional informational regarding these awards. +(5) +Amounts in this column are comprised of the payments and benefits enumerated in the table below. +Name +Vehicle +Allowance +Program (a) +($) +Contribution +to 401(k) +Plan (b) +($) +Company +Vehicle +Use (c) +($) +Club Dues/ +Membership +Fees (d) +($) +Relocation, +Housing +Allowance & +Travel +Benefits (e) +($) +Tax +Gross-Up (f) +($) +Total +($) +Phillip A. Gobe +― +17,400 +5,780 +5,522 +464 +― +29,166 +Samuel D. Sledge +14,400 +9,817 +― +10,371 +― +― +34,588 +David S. Schorlemer +15,600 +11,165 +― +13,222 +147,213 +95,513 +282,713 +Adam Muñoz +14,400 +17,400 +― +14,342 +― +― +46,142 +Newton W. “Trey” Wilson III +14,400 +17,400 +― +3,026 +― +― +31,800 +(a) +The amounts in this column reflect the cost of the Company’s vehicle allowance program. +(b) +The amounts in this column reflect the Company’s contribution to each Named Executive Officer’s account in the Company’s 401(k) plan. +41  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +(c) +The amounts in this column reflect the value of the Company vehicle provided to Mr. Gobe for his use while in Midland, Texas, which was determined by multiplying the number of miles he drove the vehicle in 2021 by $0.56, which is the Internal Revenue Service’s mileage reimbursement rate for business travel in 2021. +(d) +The amounts in this column reflect club dues or membership fees paid by the Company. +(e) +For Mr. Gobe, this amount represents spousal travel to the 2021 Company holiday party paid for by the Company. For Mr. Schorlemer, this amount includes costs associated with his relocation to Midland, Texas that were incurred in 2021, including temporary housing in Midland prior to the purchase of his home, relocation of his belongings from Houston, Texas to Midland, Texas, and costs associated with the sale of his property in Houston, Texas. +(f) +Represents a tax gross-up for amounts reimbursed in connection with the purchase of Mr. Schorlemer’s home in Midland, Texas. +(6) +Mr. Gobe resigned from his position as Chief Executive Officer and Chairman of the Board and became Executive Chairman of the Board, effective August 31, 2021. Effective March 31, 2022, Mr. Gobe will step down as Executive Chairman and his employment with the Company will end. Following March 31, 2022, he intends to continue serving the Company as Chairman of the Board. +(7) +Mr. Sledge was appointed as President, effective April 5, 2021, and subsequently as Chief Executive Officer, effective August 31, 2021. +(8) +Mr. Muñoz was appointed as Chief Operating officer, effective January 1, 2021, and subsequently as President and Chief Operating Officer, effective August 31, 2021. +PROPETRO  2022 Proxy Statement   |  42 +TABLE OF CONTENTS +Executive Compensation +GRANTS OF PLAN-BASED AWARDS +Estimated Possible Payouts Under +Non-Equity Incentive Plan +Awards (1) +Estimated Future Payouts Under +Equity Incentive Plan Awards (2) +All Other +Stock +Awards: +Number of +Shares of +Stock (3) +(#) +Grant Date +Fair Value +of Stock +and Option +Awards (4) +($) +Name +Grant Date +Threshold +($) +Target +($) +Maximum +($) +Threshold +(#) +Target +(#) +Maximum +(#) +Phillip A. Gobe +Annual Bonus +― +434,950 +869,900 +1,739,800 +― +― +― +― +― +RSUs +2/17/2021 +― +― +― +― +― +― +155,578 +1,519,997 +PSUs +2/17/2021 +― +― +― +116,684 +233,367 +466,734 +3,582,183 +Samuel D. Sledge +Annual Bonus +― +231,050 +462,100 +924,200 +― +― +― +― +― +RSUs +2/17/2021 +― +― +― +― +― +― +28,659 +279,998 +RSUs +8/31/2021 +― +― +― +― +― +― +51,679 +399,995 +PSUs +2/17/2021 +― +― +― +21,494 +42,988 +85,976 +― +659,866 +PSUs +8/31/2021 +― +― +― +38,760 +77,519 +155,038 +― +876,740 +David S. Schorlemer +Annual Bonus +― +225,000 +450,000 +900,000 +― +― +― +― +RSUs +2/17/2021 +― +― +― +― +― +― +40,941 +399,994 +PSUs +2/17/2021 +― +― +― +30,706 +61,412 +122,824 +― +942,674 +Adam Muñoz +Annual Bonus +― +237,500 +475,000 +950,000 +― +― +― +― +― +RSUs +2/17/2021 +― +― +― +― +― +― +45,035 +439,992 +RSUs +8/31/2021 +― +― +― +― +― +― +12,919 +99,993 +PSUs +2/17/2021 +― +― +― +33,777 +67,553 +135,106 +― +1,036,939 +PSUs +8/31/2021 +― +― +― +9,690 +19,379 +38,758 +― +219,176 +Newton W. “Trey” Wilson III +Annual Bonus +― +200,000 +400,000 +800,000 +― +― +― +― +RSUs +2/17/2021 +― +― +― +― +― +― +40,941 +399,994 +PSUs +2/17/2021 +― +― +― +30,706 +61,412 +122,824 +― +942,674 +(1) +Amounts in these columns represent the estimated payouts for annual cash incentive awards under the Annual Bonus Plan for 2021 assuming threshold, target and maximum performance achievement. For Messrs. Gobe and Sledge, these columns have been adjusted to take into account the value of their potential annual cash incentive calculated in light of their salary, and for Mr. Sledge, target annual cash incentive, adjustments during 2021. The actual amounts paid to our Named Executive Officers for 2021 can be found in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table above. See “Compensation Discussion and Analysis—Elements of Compensation and 2021 Decisions in Detail—Annual Cash Incentive Awards” above for additional information regarding these awards. +(2) +These amounts represent the threshold, target and maximum number of PSUs granted to the Named Executive Officers during 2021. The number of PSUs which ultimately vest is based on the performance of the Company’s TSR relative to the TSR of the companies in our performance peer group during the three-year performance period ending on December 31, 2023, subject to the Named Executive Officer’s continued employment through such date. +(3) +Amounts in this column reflect RSUs granted to the Named Executive Officers during 2021. One-third of each such grant vests on each of the first three anniversaries of the applicable date of grant, subject to the Named Executive Officer’s continued employment through each such date. +(4) +These amounts represent the aggregate grant date fair value of RSUs and PSUs granted in 2021 to the Named Executive Officers, computed in accordance with FASB ASC Topic 718, disregarding estimated forfeitures. The grant date fair value of the PSUs is based on probable outcome with regard to the applicable performance metrics. For information regarding assumptions underlying the valuation of equity awards, see Note 11 of the Consolidated Financial Statements in our 2021 Annual Report on Form 10-K. +43  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +NARRATIVE DISCLOSURE TO SUMMARY COMPENSATION TABLE AND GRANTS OF PLAN-BASED AWARDS TABLE +Executive Severance Plan +None of the Named Executive Officers is currently a party to an employment agreement or letter agreement with us. Instead, they participate in the Executive Severance Plan. For additional information regarding the terms and conditions of this plan please see “— Potential Payments Upon Termination or Change in Control—Executive Severance Plan.” +OUTSTANDING EQUITY AWARDS FOR FISCAL YEAR ENDED DECEMBER 31, 2021 +The following table reflects information regarding outstanding and unvested stock options, RSUs and PSUs held by our Named Executive Officers as of December 31, 2021. +Option Awards +Stock Awards +Name +Number of +Securities +Underlying +Unexercised +Options +Exercisable +(#) +Number of +Securities +Underlying +Unexercised +Options +Unexercisable +(#) +Option +Exercise +Price +($) +Option +Expiration +Date +Number of +Shares or +Units of +Stock That +Have Not +Vested (1) +(#) +Market +Value of +Shares or +Units of +Stock That +Have Not +Vested (2) +($) +Equity +Incentive Plan +Awards: +Number of +Unearned +Shares That +Have Not +Vested (3) +(#) +Equity +Incentive Plan +Awards: +Market Value +of Unearned +Shares That +Have Not +Vested (2) +($) +Phillip A. Gobe +― +― +― +― +342,564 +2,774,768 +― +― +― +― +― +― +― +― +1,060,753 +8,592,099 +Samuel D. Sledge +21,750 +― +14.00 +3/16/2027 +― +― +― +― +― +― +― +― +108,019 +874,954 +― +― +― +― +― +― +― +― +237,567 +1,924,293 +David S. Schorlemer +― +― +― +― +59,081 +478,556 +― +― +― +― +― +― +― +― +143,044 +1,158,656 +Adam Muñoz +48,938 +― +14.00 +3/16/2027 +― +― +― +― +― +― +92,174 +746,609 +― +― +227,676 +1,844,176 +Newton W. “Trey” +Wilson III +― +― +― +― +61,118 +495,056 +― +― +― +― +― +― +130,376 +1,056,046 +(1) +The amounts in this column represent RSU awards held by each Named Executive Officer vest pro-rata over the applicable remaining vesting dates as follows, subject to the Named Executive Officer’s continued employment: +Name +Number of Unvested +RSUs on 12/31/2021 +Remaining Vesting Dates +Phillip A. Gobe +3,093 +October 7, 2022 +27,865 +February 11, 2022, and February 11, 2023 +156,028 +March 13, 2022, and March 13, 2023 +155,578 +February 17, 2022, February 17, 2023, and February 17, 2024 +Samuel D. Sledge +1,667 +March 18, 2022 +4,737 +February 11, 2022, and February 11, 2023 +21,277 +March 13, 2022, and March 13, 2023 +28,659 +February 17, 2022, February 17, 2023, and February 17, 2024 +51,679 +August 31, 2022, August 31, 2023, and August 31, 2024 +David S. Schorlemer +18,140 +October 13, 2022, and October 13, 2023 +40,941 +February 17, 2022, February 17, 2023, and February 17, 2024 +PROPETRO  2022 Proxy Statement   |  44 +TABLE OF CONTENTS +Executive Compensation +Name +Number of Unvested +RSUs on 12/31/2021 +Remaining Vesting Dates +Adam Muñoz +2,942 +March 18, 2022 +10,001 +February 11, 2022, and February 11, 2023 +21,277 +March 13, 2022, and March 13, 2023 +45,035 +February 17, 2022, February 17, 2023, and February 17, 2024 +12,919 +August 31, 2022, August 31, 2023, and August 31, 2024 +Newton W. “Trey” Wilson III +4,851 +October 7, 2022 +15,326 +February 11, 2022, and February 11, 2023 +40,941 +February 17, 2022, February 17, 2023, and February 17, 2024 +(2) +The amounts in this column were calculated by multiplying $8.10, the closing price of our common stock on December 31, 2021, by the number of awards reported. +(3) +Pursuant to the applicable SEC rules, the amounts in this column and in the table below reflect (i) the maximum number of PSUs held by each Named Executive Officer that were granted in 2020 because performance as of December 31, 2021 was at target for such awards and (ii) the target number of PSUs held by each Named Executive Officer that were granted in 2021 because performance as of December 31, 2021 was above threshold but below target for such awards. Both the PSUs granted to the Named Executive Officers in 2020 and 2021 may vest, if at all, based on the performance of the Company’s stock relative to a peer group during the applicable three-year performance period as shown in the below table. The actual number of PSUs earned based on actual performance over the full performance period may range from 0% to 100% of the amount below for the 2020 PSUs and from 0% to 200% of the amount below for the 2021 PSUs. +Name +Number of Unvested +PSUs on 12/31/2021 +Applicable Performance +Period End Date +Phillip A. Gobe +125,390 +December 31, 2022 +702,126 +December 31, 2022 +233,237 +December 31, 2023 +Samuel D. Sledge +21,316 +December 31, 2022 +95,744 +December 31, 2022 +42,988 +December 31, 2023 +77,519 +December 31, 2023 +David S. Schorlemer +81,632 +December 31, 2022 +61,412 +December 31, 2023 +Adam Muñoz +45,000 +December 31, 2022 +95,744 +December 31, 2022 +67,553 +December 31, 2023 +19,379 +December 31, 2023 +Newton W. “Trey” Wilson III +68,964 +December 31, 2022 +61,412 +December 31, 2023 +45  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +2021 OPTION EXERCISES AND STOCK VESTED +Option Awards (1) +Stock Awards +Name +Number of Shares +Acquired on +Exercise +(#) +Value Realized on +Exercise +($) +Number of Shares +Acquired on +Vesting (1) +(#) +Value Realized on +Vesting (2) +($) +Phillip A. Gobe +― +― +104,315 +1,225,073 +Samuel D. Sledge +― +― +21,310 +232,421 +David S. Schorlemer +― +― +9,070 +92,695 +Adam Muñoz +― +― +30,123 +312,857 +Newton W. “Trey” Wilson III +― +― +27,065 +236,764 +(1) +This column reflects the RSUs and PSUs held by each Named Executive Officer that vested during 2021. The target number of PSUs granted to the Named Executive Officers in 2019 vested. +(2) +This column reflects the aggregate market value realized by each Named Executive Officer upon vesting, calculated by multiplying the number of RSUs and PSUs that vested (including shares withheld for tax withholding purposes) by the closing price of our common stock on the applicable vesting date or, to the extent the vesting date was not a trading date, the closing price on the last trading date. +PENSION BENEFITS +We do not sponsor any qualified or non-qualified defined benefit pension plans. +NONQUALIFIED DEFERRED COMPENSATION +We do not have any non-qualified deferred compensation plans. +POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL +Executive Severance Plan +In 2020, the Board adopted the Executive Severance Plan, pursuant to which the Named Executive Officers are eligible to receive severance payments and benefits, as described in more detail below. None of the Named Executive Officers currently have an employment agreement with the Company. Pursuant to the terms of the Executive Severance Plan, the level of severance benefit for which a participant is eligible is determined based on their designated “Tier.” As of December 31, 2021, the Tier levels for each of the Named Executive Officers was as follows: +Name +Executive Severance Plan Tier Level +Phillip A. Gobe +Tier 1 +Samuel D. Sledge +Tier 1 +David S. Schorlemer +Tier 2 +Adam Muñoz +Tier 2 +Newton W. “Trey” Wilson III +Tier 2 +Upon the Named Executive Officer’s termination without “Cause” or a resignation for “Good Reason” (each as defined in the Executive Severance Plan and described below), current participants in the Executive Severance Plan will be eligible to receive the following benefits: +• +A lump sum cash payment equal to 2.0 (for Tier 1 Executives), 1.5 (for Tier 2 Executives) or 1.0 (for Tier 3 Executives) times the sum of the participant’s (i) annualized base salary then in effect and (ii) target annual bonus for the year in which the termination occurred; +• +Any earned but unpaid bonus for the year preceding the year of termination based on the Company’s actual performance, paid at the time such bonuses are paid to all other executives; and +• +Reimbursement for a portion of the cost of continuation coverage for the participant and his or her spouse and eligible dependents under the Company’s group health plans pursuant to COBRA for 12 months (or 18 months for Tier 1 Executives), unless such coverage is earlier terminated in accordance with the terms of the Executive Severance Plan. +PROPETRO  2022 Proxy Statement   |  46 +TABLE OF CONTENTS +Executive Compensation +Upon a termination without Cause or a resignation for Good Reason within 12 months following a “Change in Control” (as defined in the Executive Severance Plan), participants in the Executive Severance Plan will be eligible to receive the following benefits: +• +A lump sum cash payment equal to 3.0 (for Tier 1 Executives), 2.0 (for Tier 2 Executives) or 1.5 (for Tier 3 Executives) times the sum of the participant’s (i) annualized base salary then in effect and (ii) target annual bonus as in effect immediately prior to the Change in Control; +• +Any earned but unpaid bonus for the year preceding the year of termination based on the Company’s actual performance, paid at the time such bonuses are paid to all other executives; +• +A lump sum cash payment equal to a prorated target bonus for the year of termination based on days of service during the applicable calendar year; and +• +Full reimbursement of the cost of continuation coverage for the participant and his or her spouse and eligible dependents under the Company’s group health plans pursuant to the COBRA, for 12 months (or 18 months for Tier 1 Executives), unless such coverage is earlier terminated in accordance with the terms of the Executive Severance Plan. +Additionally, if a participant’s employment with the Company terminates as a result of his or her death or “Disability” (as defined in the Executive Severance Plan), then the participant will be eligible to receive the following benefits: +• +Any earned but unpaid bonus for the year preceding the year of termination based on the Company’s actual performance, paid at the time such bonuses are paid to all other executives; and +• +A lump sum cash payment equal to a prorated target bonus for the year of termination based on days of service during the applicable calendar year. +In order to receive any of the foregoing severance benefits under the Executive Severance Plan, a participant must timely execute (and not revoke) a release of claims in favor of the Company and its affiliates. Further, the Executive Severance Plan requires continued compliance with certain confidentiality, non-competition, non-solicitation and non-disparagement covenants as set forth in the award agreements under the 2017 LTIP and the 2020 LTIP. If the severance benefits under the Executive Severance Plan would trigger an excise tax for a participant under Section 4999 or Section 280G of the Code (“Section 280G”) the Executive Severance Plan provides that the participant’s severance benefits will be reduced to a level at which the excise tax is not triggered, unless the participant would receive a greater amount without such reduction after taking into account the excise tax and other applicable taxes. +As used in the Executive Severance Plan, the following terms generally mean: +“ Cause ” generally means the Named Executive Officer’s: +(i) +material breach of the employment agreement or any other agreement with the Company or its affiliates, subject to a 30-day notice and 15-day cure period, +(ii) +material breach of the Company’s or its affiliates’ policies or code of conduct applicable to the Named Executive Officer, +(iii) +violation of any law applicable to the workplace or employment relationship, +(iv) +gross negligence, material misconduct reflecting negatively on the Company, breach of fiduciary duty, fraud, theft or embezzlement, +(v) +conviction of or plea of nolo contendere to any felony (or state law equivalent) or any crime involving moral turpitude, +(vi) +material failure or refusal (other than due to Disability) to perform obligations or any lawful director from the Board or an officer of the Company, subject to a 30-day notice and 15-day cure period, +(vii) +unlawful use or possession of illegal drugs on the Company’s premises or while performing duties, +(viii) +failure to exercise the degree of care, skill and diligence as employees of ordinary skill and knowledge commonly possess and exercise, subject to a 30-day notice and 15-day cure period, or +(ix) +failure to act with undivided loyalty to the Company and its affiliates. +“ Change in Control ” has the meaning given to it under the 2020 LTIP, which is the same meaning given to such term under the 2017 LTIP and described below under “— 2017 LTIP.” +47  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +“ Good Reason ” generally means: +(i) +the material diminution in the Named Executive Officer’s base salary, unless in connection with a general reduction in base salaries that affects all similarly situated employees, +(ii) +material diminution in the Named Executive Officer’s authority, duties, or responsibilities unless in connection with an internal investigation by the Company (provided that his or her removal from the board of directors or as an officer of any of the Company’s affiliates shall not constitute Good Reason), +(iii) +the material breach by the Company of any of its obligations under the agreement, or +(iv) +the Named Executive Officer’s relocation by more than 50 miles from his or her current place of business, in each case, subject to a 30-day notice period, 15-day cure period and the Named Executive Officer’s resignation within 75 days of the end of the cure period. +“ Disability ” generally means the Named Executive Officer’s inability to perform the essential functions of his or her job due to physical or mental impairment for a period that exceeds 120 consecutive days or 180 total days in any 12-month period, as determined by the Board. +2017 LTIP +All equity awards granted to the Named Executive Officers prior to 2021 are subject to the following terms. +Only Messrs. Sledge and Muñoz hold stock options under the ProPetro Holding Corp. 2017 Incentive Award Plan (the “2017 LTIP”). The stock options granted under the 2017 LTIP are fully vested. The vested and outstanding stock options awarded under the 2017 LTIP will remain outstanding and exercisable for 90 days following a Named Executive Officer’s termination of service without “Cause” or due to his resignation for “Good Reason” and will remain outstanding and exercisable for 12 months following a Named Executive Officer’s termination of service due to his death, “Disability” or “Retirement.” +Pursuant to the 2017 LTIP, in the event of a termination of employment of a Named Executive Officer due to his death, Disability or Retirement, (i) all unvested RSUs that would have vested had the Named Executive Officer continued his service during the 12 months following the termination will vest on such termination or resignation date, and (ii) with respect to any unvested PSUs, if such termination of employment occurs within one year prior to the last day of the applicable performance period, the Named Executive Officer’s unvested PSUs will remain outstanding and eligible to vest at the end of the applicable performance period. +In the event of a termination of a Named Executive Officer by the Company without Cause upon or within one year following a “Change in Control,” all unvested RSUs and PSUs will immediately vest based on performance as of the date of the Change in Control. In the event of a termination of employment of a Named Executive Officer for any other reason, all unvested RSUs and PSUs will be forfeited immediately upon the termination. +To receive the above described severance payments and benefits, the Named Executive Officers must execute a release of claims in favor of the Company and comply with the terms of certain restrictive covenants, including a one-year non-competition and two-year non-solicitation obligation as well as a perpetual confidentiality and non-disparagement obligations. +As used in the 2017 LTIP and the award agreements thereunder, “Cause” and “Disability” generally have the meanings set forth below. In addition, “Retirement” and “Change in Control” generally have the meanings set forth below. +“ Cause ” generally means the Named Executive Officer’s: +(i) +willful failure to substantially perform his or her duties, +(ii) +willful failure to carry out, or comply with, in any material respect any lawful directive of our board of directors, +(iii) +commission at any time of any act or omission that results in, or may reasonably be expected to result in, a conviction, a plea of no contest, plea of nolo contendere or imposition of unadjudicated probation for any felony or crime involving moral turpitude, +(iv) +unlawful use (including being under the influence) or possession of illegal drugs on the Company’s premises or while performing his or her duties and responsibilities, +(v) +commission at any time of any act of fraud, embezzlement, misappropriation, misconduct, conversion of assets of the Company or breach of fiduciary duty against the Company, or +PROPETRO  2022 Proxy Statement   |  48 +TABLE OF CONTENTS +Executive Compensation +(vi) +material breach of the employment agreement or any other agreement with the Company, subject to certain procedural requirements. +“ Change of Control ” generally means: +(i) +any transaction or series of transactions whereby any person, other than the Company, any of its subsidiaries or any Company benefit plan, acquires beneficial ownership of 30% or more of the total combined voting power of the Company’s securities, +(ii) +the current members of the Board cease to constitute a majority of the Board for any reason, +(iii) +the consummation by the Company of a merger, consolidation, reorganization or business combination or a sale of all or substantially all of the Company’s assets, unless: +(a) +the Company controls the successor entity, +(b) +no person owns 50% or more of the combined voting power of the successor entity, or +(c) +the current members of the Board represent the majority of the successor entity’s board, or +(iv) +the tenth day following the complete dissolution of the Company. +“ Disability ” generally means the Named Executive Officer’s inability to engage in substantial gainful activity by reason of any medically determinable physical or mental impairment. +“ Retirement ” generally means the termination of the Named Executive Officer’s employment following his attainment of both (i) age 60 and (ii) ten years of service with the Company or one of its affiliates. +2020 LTIP +All equity awards granted to the Named Executive Officers’ during 2021 are subject to the following terms. +Pursuant to the ProPetro Holding Corp. 2020 Long Term Incentive Plan (the “2020 LTIP”), in the event of a termination of employment of a Named Executive Officer due to his or her death or “Disability,” (i) all unvested RSUs that would have vested had the Named Executive Officer continued his or her service during the 12 months following the termination will vest on such termination or resignation date, and (ii) with respect to any unvested PSUs, if such termination of employment occurs within one year prior to the last day of the applicable performance period, the Named Executive Officer’s unvested PSUs will remain outstanding and eligible to vest at the end of the applicable performance period. +In the event of a termination of a Named Executive Officer by the Company without “Cause” upon or within one year following a “Change in Control,” all unvested RSUs and PSUs will immediately vest based on performance as of the date of the Change in Control. In the event of a termination of employment of a Named Executive Officer for any other reason, all unvested RSUs and PSUs will be forfeited immediately upon the termination. +In the event of a Change in Control, the performance period for all unvested PSUs will be deemed to have ended as of the date of the Change in Control and the PSUs for which the performance goal was obtained as of the date of the Change in Control will remain outstanding and eligible to vest at the end of the applicable performance period, subject to the Named Executive Officer’s continued employment through such date. +To receive the above-described severance payments and benefits, the Named Executive Officers must execute a release of claims in favor of the Company and comply with the terms of certain restrictive covenants, including a one-year non-competition and two-year non-solicitation obligation as well as a perpetual confidentiality and non-disparagement obligations. +The 2020 LTIP further specifies that unless otherwise provided for in an award agreement, if any awards under the 2020 LTIP are not assumed or substituted by a successor entity in a Change in Control, then all outstanding awards will become fully vested as of the date of the Change in Control (for PSUs, based on the greater of  (i) target and (ii) actual performance as of the date of the “Change in Control”). +As used in the 2020 LTIP and the award agreements thereunder, “Cause,” “Change in Control” and “Disability” generally have the meanings set forth below. +“ Cause ” has the meaning given to it under the Executive Severance Plan, described above under “— Executive Severance Plan.” +“ Change of Control ” has the meaning given to it under the 2017 LTIP, described above under “— 2017 LTIP.” +49  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +“ Disability ” has the meaning given to it under the Executive Severance Plan, described above under “— Executive Severance Plan.” +Other Restrictive Covenants +On September 25, 2019, we entered into an employment agreement with Mr. Wilson (the “Wilson Employment Agreement”). However, Mr. Wilson executed a participation agreement as a Tier 3 Executive under the Executive Severance Plan on March 30, 2020 and subsequently on July 28, 2021 as a Tier 2 Executive, that superseded and replaced the Wilson Employment Agreement in all respects except with respect to the restrictive covenants set forth in the Wilson Employment Agreement, which survived the termination of the Wilson Employment Agreement. As a result, Mr. Wilson will still be subject to noncompetition and non-solicitation covenants through the first anniversary of his termination of employment. See “— Executive Severance Plan” below for a description of the severance payments and benefits for which Mr. Wilson is eligible. +PROPETRO  2022 Proxy Statement   |  50 +TABLE OF CONTENTS +Executive Compensation +Quantification of Benefits on Termination +The table below quantifies the payments and benefits that would have been paid to our Named Executive Officers pursuant to the terms of the Executive Severance Plan and the equity award agreements in the event of certain terminations of employment with us, had such terminations occurred on December 31, 2021. +Name +Payments and +Benefits +Termination +without Cause +or Resignation +for Good +Reason (1) +($) +Termination as +a Result of +Death, +Disability (2) +($) +Termination as +a Result of +Retirement (3) +($) +Termination +without Cause +within One +Year Following +a Change in +Control (4) +($) +Resignation +for Good +Reason within +One Year +Following a +Change in +Control (4) +($) +Phillip A. Gobe +Cash Severance (5) +3,240,000 +― +― +4,860,000 +4,860,000 +Pro-Rata Bonus (6) +― +861,200 +― +861,200 +861,200 +COBRA Subsidy (7) +7,483 +― +― +19,306 +19,306 +RSU and PSU +Acceleration (8) +― +4,541,314 +4,121,256 +7,864,290 +― +Total +3,247,843 +5,402,514 +4,121,256 +13,604,796 +5,740,506 +Samuel D. Sledge +Cash Severance (5) +1,900,000 +― +― +2,850,000 +2,850,000 +Pro-Rata Bonus (6) +― +457,500 +― +457,500 +457,500 +COBRA Subsidy (7) +8,097 +― +― +25,820 +25,820 +RSU and PSU +Acceleration (8) +― +670,324 +592,944 +2,255,153 +― +Total +1,908,097 +1,127,824 +592,944 +5,588,473 +3,333,320 +David S. Schorlemer +Cash Severance (5) +1,215,000 +― +― +1,620,000 +1,620,000 +Pro-Rata Bonus (6) +― +356,400 +― +356,400 +356,400 +COBRA Subsidy (7) +5,403 +― +― +17,459 +17,459 +RSU and PSU +Acceleration (8) +― +514,642 +404,101 +1,266,808 +― +Total +1,220,403 +871,042 +404,101 +3,260,667 +1,993,859 +Adam Muñoz +Cash Severance (5) +1,425,000 +― +― +1,900,000 +1,900,000 +Pro-Rata Bonus (6) +― +470,300 +― +470,300 +470,300 +COBRA Subsidy (7) +5,403 +― +― +17,459 +17,459 +RSU and PSU +Acceleration (8) +― +876,979 +720,511 +1,964,428 +― +Total +1,430,403 +1,347,279 +720,511 +4,352,187 +2,387,759 +Newton W. “Trey” Wilson III +Cash Severance (5) +1,050,000 +― +― +1,400,000 +1,400,000 +Pro-Rata Bonus (6) +― +297,000 +― +297,000 +297,000 +COBRA Subsidy (7) +― +― +― +― +― +RSU and PSU +Acceleration (8) +― +491,208 +380,668 +1,232,002 +― +Total +1,050,000 +788,208 +380,668 +2,929,002 +1,697,000 +(1) +Amounts in this column reflect payments made upon termination by the Company without “Cause” or by the Named Executive Officer for “Good Reason.” Such quoted terms are as defined in the Executive Severance Plan, as described above. +(2) +Amounts in this column reflect payments made upon termination as a result of the Named Executive Officer’s death or “Disability.” “Disability” is as defined in the Executive Severance Plan for the pro-rata bonus payable upon such termination of employment and is as defined in the applicable award agreements for the equity award acceleration, each as described above. +(3) +Amounts in this column reflect payments made upon termination as a result of the Named Executive Officer’s “Retirement” (as defined in the applicable award agreements and described above). +(4) +Amounts in this column reflect payments made upon termination by the Company without Cause or by the Named Executive Officer for Good Reason, in each case, within 12 months following a “Change in Control.” As described above under “— 2017 LTIP” and under “— 2020 LTIP,” RSUs and PSUs granted under the 2017 LTIP and the 2020 LTIP are accelerated in connection with a Named Executive Officer’s termination without Cause within 12 months +51  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +following a Change in Control but are not accelerated in connection with a Named Executive Officer’s resignation for Good Reason, whether or not such resignation follows a Change in Control. +(5) +Pursuant to the Executive Severance Plan, upon termination of employment by the Company without Cause or by the Named Executive Officer for Good Reason, each Named Executive Officer will receive either 2.0 (for Messrs. Gobe and Sledge) or 1.5 (for Messrs. Schorlemer, Muñoz and Wilson) times the sum of his annual base salary and the target amount of his annual bonus for the year in which the termination occurs, payable in a lump sum following the termination of employment. +(6) +Pursuant to the terms of the Executive Severance Plan, upon a termination of employment by the Company without Cause or by the Named Executive Officer for Good Reason, in each case, within one year following a Change in Control, or upon a termination of employment due to the Named Executive Officer’s death or Disability, each Named Executive Officer will receive a pro-rata bonus, based upon the number of days each such Named Executive Officer was employed by the Company during the applicable calendar year and achievement of target performance. The target bonuses payable to the Named Executive Officers are included in the table because the Named Executive Officers would have been employed for the full year if their termination occurred on December 31, 2021. +(7) +Pursuant to the terms of the Executive Severance Plan, upon termination of employment by the Company without Cause or by the Named Executive Officer for Good Reason, the Company will reimburse each of the Named Executive Officers for the difference between the cost of the COBRA premiums and the cost for similarly-situated employees to effect such coverage under the Company’s group health plans for up to 18 months for Messrs. Gobe and Sledge and up to 12 months for Messrs. Schorlemer, Muñoz and Wilson following such termination. Upon termination of employment by the Company without Cause or by the Named Executive Officer for Good Reason, in each case, within 12 months following a Change in Control, the Company will reimburse each of the Named Executive Officers for the full amount of the COBRA premiums for up to 18 months for Messrs. Gobe and Sledge and up to 12 months for Messrs. Schorlemer, Muñoz and Wilson. The COBRA reimbursement amount is based on the premiums in effect on December 31, 2021 and each applicable Named Executive Officer’s elections in place on such date, which are assumed for purposes of this table to remain the same throughout the period for which the COBRA reimbursement would be available. Mr. Wilson was not a participant in the Company’s medical plans as of December 31, 2021, so no value is included in this table for such benefit. +(8) +For the RSUs, these amounts are calculated by multiplying the number of RSUs that would have become vested upon the applicable event by $8.10, the closing price of our common stock on December 31, 2021. These amounts are calculated for the PSUs by multiplying the number of PSUs that would become vested upon the applicable event by $8.10, the closing price of our common stock on December 31, 2021. The number of PSUs used in such calculation reflects actual performance as of December 31, 2021, which was at 100% for the PSUs granted in 2020 and 92% for the PSUs granted in 2021. Such actual performance is used for purposes of calculating the value of the PSUs in this table. However, PSUs that vest as a result of a Named Executive Officer’s death, Disability or, for PSUs granted under the 2017 LTIP, Retirement will vest based on actual performance as of the end of the applicable performance period, and, as a result, the amounts included reflect estimated payouts of such PSUs. +PROPETRO  2022 Proxy Statement   |  52 +TABLE OF CONTENTS +Executive Compensation +CEO Pay Ratio +2021 CEO PAY RATIO +As of December 31, 2021, the Company employed approximately 1,500 people, all in the United States. Using a consistently applied compensation measure, we determined as of December 31, 2021 the total annual cash compensation of each of our employees (excluding our Chief Executive Officer), and then identified the “median employee” within our employee population. +To identify the median compensated employee, we used total annual cash compensation, including base salary, actual bonus paid and overtime and allowances, as applicable. Salaries were annualized for those full- and part-time employees who did not work for the full year. Reasonable estimates of cash compensation were made for those employees who were hired during 2021 using current base salary and target bonus amounts and any overtime or allowances paid during 2021. Once the median employee was identified, we determined his or her annual total compensation in accordance with Item 402(c)(2)(x) of Regulation S-K as required pursuant to SEC rules, which resulted in annual total compensation for the median employee equal to $95,007 for 2021. This calculation is the same calculation used to determine total compensation for purposes of the 2021 Summary Compensation Table with respect to each of the Named Executive Officers. +Our Chief Executive Officer’s 2021 total compensation was $3,164,649. Therefore, the ratio of our Chief Executive Officer’s compensation to the median employee’s compensation was approximately 33 to 1 for 2021. +Employee +2021 Annual Total +Compensation +($) +Estimated Pay +Ratio +Chief Executive Officer +3,164,649 +33:1 +Median employee, other than our CEO +95,007 +SEC rules do not specify a single methodology for identification of the median employee, and other companies may use assumptions and methodologies that are different from those used by us in calculating their pay ratio. Accordingly, the pay ratio disclosed by other companies may not be comparable to the Company’s pay ratio as disclosed above. Neither the Compensation Committee nor management of the Company used the pay ratio measure in making compensation decisions. +53  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +Equity Compensation Plan Information +The table below sets forth information regarding awards outstanding under the Stock Option Plan of ProPetro Holding Corp. (the “Stock Option Plan”), the 2017 LTIP, and the 2020 LTIP, as of December 31, 2021: +Plan Category +Number of Securities +to Be Issued Upon +Exercise of +Outstanding Options, +Warrants and Rights (1) +(#) +(a) +Weighted Average +Exercise Price of +Outstanding +Options, Warrants +and Rights +($) +(b) +Number of Securities +Remaining Available for +Future Issuance Under +Equity Compensation Plans +(Excluding Securities +Reflected in Column (a)) (2) +($) +(c) +Equity compensation plans approved by security +holders +3,670,358 +4.12 +3,548,689 +Equity compensation plans not approved by security holders +― +― +― +Total +3,670,358 +4.12 +3,548,689 +(1) +Includes 296,379 option awards granted under the Stock Option Plan; 501,272 option awards, 569,904 RSU awards and 808,638 PSU awards (assuming achievement of target payout of 100%) granted under the 2017 LTIP; and 843,391 RSU awards and 650,774 PSU awards (assuming achievement of target payout of 100%) granted under the 2020 LTIP. The weighted average exercise price in column (b) does not take the RSU awards or PSU awards into account. +(2) +This column reflects the number of awards that remain available for future issuance pursuant to the 2020 LTIP as of December 31, 2021. No further awards may be granted under the Stock Option Plan or the 2017 LTIP. +PROPETRO  2022 Proxy Statement   |  54 +TABLE OF CONTENTS +Audit Matters +Proposal 3 —Ratification of Appointment of Independent Registered Public Accounting Firm +The Audit Committee has selected Deloitte & Touche LLP, independent registered public accounting firm, to audit our consolidated financial statements for the fiscal year ending December 31, 2022. Deloitte & Touche LLP has served as our independent registered public accounting firm since 2013. We are asking the stockholders to ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2022. Deloitte & Touche LLP was appointed by the Audit Committee in accordance with its charter. +In the event stockholders fail to ratify the appointment, the Audit Committee may reconsider this appointment. Even if the appointment is ratified, the Audit Committee, in its discretion, may direct the appointment of a different independent accounting firm at any time during the year if the Audit Committee determines that such a change would be in our and our stockholders’ best interests. The Audit Committee has pre-approved all services provided by Deloitte & Touche LLP. +It is expected that one or more representatives of Deloitte & Touche LLP will be available to participate in the 2022 annual meeting and will be given the opportunity to make a statement if they so desire. It also is expected that the representative(s) will be available to respond to appropriate questions from the stockholders. +VOTE REQUIRED +The approval of the ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2022 requires the affirmative vote of the holders of a majority of the shares represented at the meeting (in person, online or by proxy) and entitled to vote. As a result, abstentions will have the same effect as votes against this proposal. We do not expect any broker non-votes in connection with this proposal. +The Board of Directors unanimously recommends a vote FOR the ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2022. +55  |   ir.propetroservices.com +TABLE OF CONTENTS +Audit Matters +Deloitte & Touche LLP Fees for Fiscal Years 2021 and 2020 +The following table sets forth the fees incurred by us in fiscal years 2021 and 2020 for services performed by Deloitte & Touche LLP: +Year Ended December 31, +Deloitte Fees +2021 +($) +2020 +($) +Audit fees (1) +2,363,746 +3,631,940 +All other fees (2) +195,758 +140,665 +Total fees +2,559,504 +3,772,605 +(1) +Audit fees include fees billed for professional services rendered for the audit of our annual consolidated financial statements, the audit of our system of internal control over financial reporting, the review of interim consolidated financial statements included in our quarterly reports, consents and comfort letters provided in connection with the filing of registration statements, other related services that are normally provided in connection with statutory and regulatory filings, and related out-of-pocket expenses. +(2) +All other fees consisted principally of fees for tax compliance and tax advice. +Policy on Audit Committee Pre-Approval of Audit and Non-Audit Services of Independent Registered Public Accounting Firm +The charter of the Audit Committee and its pre-approval policy require that the Audit Committee review and pre-approve the Company’s independent registered public accounting firm’s audit fees, audit-related fees, tax fees and fees for other services. The Chairman of the Audit Committee has the authority to grant pre-approvals that are within the pre-approval policy and are presented to the Audit Committee at a subsequent meeting. For the year ended December 31, 2021, the Audit Committee approved 100% of the services described above under the captions “Audit Fees” and “All Other Fees”. +PROPETRO  2022 Proxy Statement   |  56 +TABLE OF CONTENTS +Audit Matters +Report of the Audit Committee +The Audit Committee assists our Board in overseeing: +(i) +the integrity of our consolidated financial statements, +(ii) +our compliance with legal and regulatory requirements, +(iii) +the independent auditor’s qualifications and independence, +(iv) +the performance of our independent auditor, and +(v) +the design and implementation of the Company’s internal audit function and the performance of the internal audit function after it has been established. +In so doing, it is the responsibility of the Audit Committee to maintain free and open communication between the directors, the independent auditor and our financial management. The Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the work of the independent auditor for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for us. The independent auditor reports directly to the Audit Committee. +Management is responsible for the: +• +preparation, presentation and integrity of our consolidated financial statements, +• +accounting and financial reporting principles, +• +internal control over financial reporting, and +• +procedures designed to ensure compliance with accounting standards, applicable laws and regulations. +Management is also responsible for objectively reviewing and evaluating the adequacy, effectiveness, and quality of our system of internal control over financial reporting. Our independent auditor, Deloitte & Touche LLP, is responsible for performing an independent audit of the consolidated financial statements. +The Audit Committee’s responsibility is to monitor and oversee these processes and the engagement, independence and performance of our independent auditor. The Audit Committee relies, without independent verification, on the information provided to it and on the representations made by management and the independent auditor. +The Audit Committee has met with our independent auditor and discussed the overall scope and plans for their audit. The Audit Committee met with the independent auditor to discuss matters required to be discussed with audit committees under generally accepted auditing standards, including, among other things, matters related to the conduct of the audit of our consolidated financial statements and the matters required to be discussed by the statement on Auditing Standards No. 1301, as adopted by the Public Company Accounting Oversight Board. +Our independent auditor also provided to the Audit Committee the written disclosures and the letter required by applicable standards of the Public Company Accounting Oversight Board regarding the independent auditor’s communications with the Audit Committee concerning independence, and the Audit Committee discussed with the independent auditor its independence. When considering the independence of Deloitte & Touche LLP, the Audit Committee considered the non-audit services provided to the Company by the independent auditor and concluded that such services are compatible with maintaining the auditor’s independence. +The Audit Committee has reviewed and discussed our audited consolidated financial statements for the fiscal year ended December 31, 2021 with management and Deloitte & Touche LLP. Based on the Audit Committee’s review of the audited consolidated financial statements and the meetings and discussions with management and the independent auditors, and subject to the limitations on the Audit Committee’s role and responsibilities referred to above and in the Audit Committee Charter, the Audit Committee recommended to our Board that our audited consolidated financial statements be included in our Annual Report on Form 10-K as filed with the SEC. +The Audit Committee of the Board of Directors +ANTHONY J. +BEST +ALAN E. +DOUGLAS +G. LARRY +LAWRENCE +Chair +57  |   ir.propetroservices.com +TABLE OF CONTENTS +Stock Ownership Information +Security Ownership of Certain Beneficial Owners and Management +PRINCIPAL STOCKHOLDERS +The following table presents certain information as of February 22, 2022, based on 103,706,217 shares of common stock outstanding as of such date, as to: +• +each stockholder known by us to be the beneficial owner of more than five percent of our outstanding shares of common stock, +• +each director and director nominee, +• +each Named Executive Officer, and +• +all current directors and executive officers as a group. +Unless otherwise indicated, the address for each beneficial owners in this table is c/o ProPetro Holding Corp., 1706 S. Midkiff, Midland, Texas 79701. +Name and Address of Beneficial Owner +Number of Shares +Beneficially Owned +Percentage +Beneficially Owned +5% Stockholders +Pioneer Natural Resources Company (1) +5205 N. O’Connor Blvd., Suite 200, +Irving, Texas 75039-3746 +16,600,000 +16.0 % +BlackRock, Inc. (2) +55 East 52nd Street +New York, New York 10055 +16,654,104 +16.1 % +THRC Holdings, L.P. (3) +17018 IH 20 +Cisco, Texas 76437 +8,956,963 +8.6 % +The Vanguard Group (4) +100 Vanguard Boulevard, +Malvern, Pennsylvania 19355 +9,598,823 +9.3 % +Name of Beneficial Owner (5) +Number of Shares +Beneficially Owned +Percentage +Beneficially Owned +Directors +Phillip A. Gobe +194,265 +* +Samuel D. Sledge +25,740 +* +Spencer D. Armour III +298,416 +* +Mark S. Berg +12,274 +* +Anthony J. Best +61,747 +* +Michele Vion +50,957 +* +Alan E. Douglas +67,899 +* +G. Larry Lawrence +28,776 +* +Jack B. Moore +67,899 +* +Named Executive Officers +David S. Schorlemer +16,825 +* +Adam Muñoz +49,374 +* +Newton W. “Trey” Wilson III +39,478 +* +All Directors and Executive Officers as a Group (12 Persons) +913,650 +0.9 % +PROPETRO  2022 Proxy Statement   |  58 +TABLE OF CONTENTS +Stock Ownership Information +* +Less than 1%. +(1) +Based on a Schedule 13D filed on January 7, 2019. Represents shares of our common stock beneficially owned by Pioneer. The shares of our common stock are directly owned by Pioneer Natural Resources Pumping Services LLC, a wholly owned subsidiary of Pioneer Natural Resources USA, Inc., which is a wholly owned subsidiary of Pioneer. +(2) +Based on a Schedule 13G filed on January 27, 2022. Represents shares of our common stock held by BlackRock, Inc. and certain of its affiliates, referred to collectively as BlackRock. BlackRock has sole voting power over 16,151,967 shares and sole dispositive power over 16,654,104 shares. +(3) +Based on a Schedule 13D Filed on December 22, 2021. Represents 8,956,963 shares over which THRC Holdings, L.P. has shared voting power and shared dispositive power. +(4) +Based on a Schedule 13G/A Filed on February 10, 2022. Represents (i) 0 shares over which The Vanguard Group has sole voting power (ii) 126,040 shares over which The Vanguard Group has shared voting power, (iii) 9,429,939 over which The Vanguard Group has sole dispositive power, and (iv) 168,884 over which The Vanguard Group has shared dispositive power. +(5) +For each officer and director, includes shares of common stock that are issuable pursuant to options that are currently exercisable or exercisable within 60 days, and RSUs that are eligible to vest within 60 days. +59  |   ir.propetroservices.com +TABLE OF CONTENTS +Additional Information +Information about the Annual Meeting and Voting +Our Board of Directors is soliciting proxies for the 2022 annual meeting of stockholders, and at any continuations, adjournments or postponements of the meeting, to be held: +When +Where +Record Date +Date of Distribution +April 19, 2022 +10:00 a.m. Central Time +2518 FM 307 +Midland, Texas 79706 +and +http://www.viewproxy.com/ +propetro/2022 +February 22, 2022 +This proxy statement and our 2021 Annual Report on Form 10-K will be mailed on or about March 7, 2022 +This proxy statement contains important information for you to consider when deciding how to vote on the matters brought before the meeting. Please read it carefully. +IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS +FOR THE STOCKHOLDER MEETING TO BE HELD ON APRIL 19, 2022 +This proxy statement and our 2021 Annual Report on Form 10-K to stockholders are each available at +http://www.viewproxy.com/propetro/2022 +Who can attend and vote at the meeting? +The Board set February 22, 2022 as the record date for the meeting. You can attend and vote at the meeting if you were a holder of our common stock at the close of business on the record date, February 22, 2022, or if you are a holder of a valid proxy for the meeting. +How do I attend the meeting? +Due to the ongoing public health concerns regarding the COVID-19 pandemic, the Board has directed that the annual meeting be held as a hybrid meeting, meaning that we will host the meeting in person and via the Internet and stockholders can choose to attend either physically or remotely. +Given the ongoing public health and safety concerns related to COVID-19, we ask that each stockholder evaluate the relative benefits to them personally of in-person attendance at the annual meeting and take advantage of the ability to attend the meeting via the Internet. If you elect to attend the annual meeting in person, we ask that you follow recommended guidance and any applicable mandates or executive orders from federal and state authorities, particularly as they relate to social distancing and attendance at public gatherings. Further, please note that if you plan to attend in person, you will need to follow any masking and social distancing requirements of the venue at which the meeting will be held. If, on the date of the meeting, you are not feeling well or think you may have been exposed to COVID-19, we ask that you attend via the Internet and/or vote by proxy for the meeting. Please be advised that we will monitor any further developments with COVID-19 and the impact on the annual meeting. If we determine that it is not advisable to hold the in-person option for the Annual Meeting, we will, as promptly as possible, announce details on changes to the annual meeting, including by issuing a press release, posting such information on our website and filing of additional proxy materials with the United States Securities and Exchange Commission (the “SEC”). +In Person . To attend the annual meeting in person, you must call our Director of Finance at (432) 276-3389 no later than 5:00 p.m. Central Time on April 18, 2022 to have your name placed on the attendance list. In order to be admitted into the meeting, your name must appear on the attendance list and you must present government-issued photo identification (such as a driver’s license or passport). If your bank or broker holds your shares in street +PROPETRO  2022 Proxy Statement   |  60 +TABLE OF CONTENTS +Additional Information +name, you will also be required to present proof of beneficial ownership of our common stock on the record date, such as the Internet Notice you received from your bank or broker, or a bank or brokerage statement or a letter from your bank or broker showing that you owned shares of our common stock at the close of business on the record date. In addition, if your bank or broker holds your shares in street name, you must obtain legal proxy from your broker, bank or other nominee and present it to the inspector of election with your ballot at the meeting. +Virtually . To attend the annual meeting virtually, you must register in advance at http://www.viewproxy.com/propetro/ 2022 by April 17, 2022 at 11:59 p.m. If you are a stockholder of record or an appointed proxyholder of a stockholder of record, follow the instructions on the meeting website and enter the 11-digit control number found on your proxy card or voting instruction form you previously received along with the meeting password to be admitted to the meeting. You may vote during the meeting by following the instructions that will be available on the virtual meeting website during the meeting. If you are a beneficial holder, meaning you hold your shares through a broker, bank or other nominee, you must provide a legal proxy from your bank or broker during registration and you will be assigned a virtual control number in order to vote your shares during the annual meeting. If you are unable to obtain a legal proxy to vote your shares, you will still be able to attend the 2022 annual meeting (but will not be able to vote your shares) so long as you demonstrate proof of stock ownership. Instructions on how to connect and participate via the Internet, including how to demonstrate proof of stock ownership, are posted at http://www.viewproxy.com/propetro/2022 . You may only vote during the meeting by emailing a copy of your legal proxy to virtualmeeting@viewproxy.com in advance of the meeting. +If you experience any technical difficulties during the check-in time or during the annual meeting or trouble accessing the annual meeting’s website, please call (US) 1 (866) 612-8937 or (international) 1 (973) 873-7684. You can also e-mail virtualmeeting@viewproxy.com for assistance. +What proposals will be voted on at the meeting and how does the Board recommend that I vote? +Three proposals are scheduled to be voted upon at the meeting. At the meeting we will ask stockholders to: +Proposals +Board +Recommendation +Page +Reference +1 +Elect the nine directors named in this proxy statement as members of the Board to serve until our 2033 annual meeting of stockholders +FOR each +nominee +6 +2 +Approve, on an advisory basis, our named executive officers’ compensation (Say-on-Pay) +FOR +24 +3 +Ratify the appointment of Deloitte and Touche LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2022 +FOR +55 +Why did I receive a Notice of Internet Availability of Proxy Materials? +As permitted by the rules of the SEC, we are making this proxy statement and our 2021 annual report to stockholders available electronically via the Internet. On or about March 7, 2022, we mailed to our stockholders a Notice of Internet Availability of Proxy Materials (the “Internet Notice”) containing instructions on how to access this proxy statement and our 2021 annual report and vote online. If you received an Internet Notice by mail, you will not receive a printed copy of the proxy materials in the mail unless you specifically request them. Instead, the Internet Notice instructs you on how to access and review all of the important information contained in the proxy statement and 2021 annual report. The Internet Notice also instructs you on how you may submit your proxy over the Internet. If you received an Internet Notice by mail and would like to receive a printed copy of our proxy materials, you should follow the instructions for requesting such materials contained on the Internet Notice. +How do I cast my vote? +Even if you plan to attend the annual meeting, in person or virtually, we recommend that stockholders vote by proxy to ensure your vote is represented in the event you later decide not to attend, as well as to speed the tabulation of votes. Have your proxy card, Internet Notice or voting instruction form in hand and follow the instructions. +61  |   ir.propetroservices.com +TABLE OF CONTENTS +Additional Information +INTERNET +TELEPHONE +MOBILE DEVICE +MAIL +AT THE MEETING +REGISTERED HOLDERS +www.AALVote.com/ +PUMP , 24/7 +Call +1 (866) 804-9616 +(toll-free), 24/7 +Scan the QR code +Sign, date and mail the proxy card, which you may have received by mail., using the postage-paid envelope provided +Attend the annual meeting and cast your ballot +BENEFICIAL OWNERS +(HOLDERS IN +STREET NAME) +Follow the instructions provided by your broker, bank +or other nominee +Return a properly executed voting instruction form by mail, depending upon the method(s) your broker, bank or other nominee +makes available +To attend the annual meeting, you will need proof of ownership and a legal proxy from +your broker, bank or other nominee +DEADLINE +11:59 p.m. Eastern Time on April 18, 2022, +if you are a registered holder +If you are a beneficial owner, please refer to the information provided by your broker, bank or other nominee +In the event that you submit a proxy but do not indicate any voting instructions, your shares will be voted as recommended by the Board on all matters, and in the discretion of the proxy holders as to any other matters that may properly come before the meeting or any continuation, postponement or adjournment of the meeting. We do not know of any other business to be considered at the meeting other than the proposals noted herein. +If your shares are registered in the name of a broker, bank or other nominee (typically referred to as being held in “street name”), you will receive instructions from your broker, bank or other nominee that must be followed in order for your broker, bank or other nominee to vote your shares per your instructions. Many brokerage firms and banks have a process for their beneficial holders to provide instructions via the Internet or over the telephone. If Internet or telephone voting is unavailable from your broker, bank or other nominee, please complete and return the voting instruction card in the addressed, postage paid envelope provided by your broker, bank or other nominee. +In the event you do not provide instructions on how to vote, your broker may have authority to vote your shares. Under the rules that govern brokers who are voting with respect to shares that are held in street name, brokers have the discretion to vote such shares on “routine” matters, but not on non-routine matters. The only “routine” matter to be voted upon at the meeting is the ratification of the appointment of independent auditors. +Your vote is especially important . If your shares are held by a broker, your broker cannot vote your shares for the election of directors or the non-binding advisory vote on our executive officer compensation unless you provide voting instructions. Therefore, please instruct your broker regarding how to vote your shares on these matters promptly . See “Vote Required” following each proposal for further information. +If you hold shares through a broker, bank or other nominee and wish to be able to vote during the meeting, you must obtain a legal proxy from your broker, bank or other nominee and present such legal proxy to the inspector of election with your ballot at the meeting (if attending in person) or provide such legal proxy during registration, and you will be assigned a virtual control number in order to vote your shares during the annual meeting (if attending virtually). You may only vote during the meeting by emailing a copy of your legal proxy to virtualmeeting@viewproxy.com in advance of the meeting. +Can I revoke or change my proxy? +Yes. You may revoke or change a previously delivered proxy at any time before the meeting by delivering another proxy with a later date, by voting again via the Internet or by telephone, or by delivering written notice of revocation of your proxy to our General Counsel and Corporate Secretary at our principal executive offices before the beginning of the meeting. You may also revoke your proxy by attending the meeting, in person or virtually, and voting during the meeting, although attendance at the meeting will not, in and of itself, revoke a valid proxy that was previously delivered. If you hold shares through a broker, bank or other nominee, you must contact that nominee to revoke any prior voting instructions. You also may revoke any prior voting instructions by voting, in person or virtually, during the meeting if you obtain a legal proxy as described above. +PROPETRO  2022 Proxy Statement   |  62 +TABLE OF CONTENTS +Additional Information +Can I ask questions before or during the annual meeting? +Stockholders who wish to submit a question in advance may do so at http://www.viewproxy.com/propetro/2022 . Stockholders also may submit questions live during the annual meeting. The Company is committed to transparency. All questions received before or during the annual meeting, and the Company’s responses, will be posted to our Investor Relations website at https://ir.propetroservices.com/ promptly after the annual meeting. Personal details may be omitted for data protection purposes. If we receive substantially similar questions, we may group these questions together and provide a single response to avoid repetition. +Who pays the costs of solicitation? +We will pay the costs of soliciting proxies from stockholders. Our directors, officers and regular employees may solicit proxies on behalf of us, without additional compensation, personally or by telephone. We will also request that brokers, nominees, custodians and other fiduciaries forward soliciting materials to the beneficial owners of shares held by such brokers, nominees, custodians and other fiduciaries. We will reimburse such persons for their reasonable expenses in connection therewith. +Who will count the vote? +The inspector of election will count the vote. Alliance Advisors will act as the inspector of election. +What is a “quorum”? +A quorum is the number of shares that must be present to hold the meeting. The quorum requirement for the meeting is a majority of the outstanding shares as of the record date, present in person, online or represented by proxy. A stockholder will be considered present virtually at the annual meeting by logging in to the annual meeting using their unique control number and meeting password or by appointing a proxy. Your shares will be counted for purposes of determining if there is a quorum if you are present, in person or virtually, and vote during the meeting; or have voted on the Internet, by telephone or by properly submitting a proxy card or voting instruction card by mail. +Votes withheld, abstentions and, for “routine matters” broker non-votes (discussed below) are counted as present and entitled to vote for purposes of determining a quorum. +What happens if there is not a quorum at the meeting? +Pursuant to our bylaws, the meeting may be adjourned by a majority of the shares represented at the meeting to reconvene at the same or some other place. If the adjournment is for more than 30 days, or if after the adjournment a new record date is fixed for the adjourned meeting, notice of the adjournment shall be given to each stockholder of record entitled to vote at the meeting. If the adjournment is for less than 30 days, no additional notice will be delivered. +What is an abstention and how will votes withheld and abstentions be treated? +A “vote withheld,” in the case of the proposal regarding the election of directors, or an “abstention,” in the case of the proposals regarding the advisory approval of our named executive officers’ compensation and the ratification of the appointment of our independent registered public accounting firm, represent a stockholder’s affirmative choice to decline to vote on a proposal. Votes withheld have no effect on the election of directors. Abstentions have the effect of a vote “AGAINST” in the case of the advisory approval of our named executive officers’ compensation and the ratification of the appointment of our independent registered public accounting firm. +63  |   ir.propetroservices.com +TABLE OF CONTENTS +Additional Information +What are broker non-votes and how will they be treated? +Generally, broker non-votes occur when shares held by a broker in “street name” for a beneficial owner are not voted with respect to a particular proposal because the broker (1) has not received voting instructions from the beneficial owner and (2) lacks discretionary voting power to vote those shares. A broker is entitled to vote shares held for a beneficial owner on “routine” matters, such as the ratification of the appointment of our independent registered public accounting firm, without instructions from the beneficial owner of those shares. On the other hand, absent instructions from the beneficial owner of such shares, a broker is not entitled to vote shares held for a beneficial owner on non-routine matters, such as the election of directors and the advisory approval of our named executive officers’ compensation. Broker non-votes will have no effect on the election of directors or the advisory approval of our named executive officers’ compensation. +What vote is required to approve each item? +The following table sets forth the voting requirement with respect to each of the proposals: +Proposal +Vote Requirement +Effect of +Abstentions +Effect of Broker Non-Votes +1 +Election of Directors +The plurality of the votes cast. This means that the nine nominees receiving the highest number of affirmative “ FOR ” votes will be elected as directors. +No effect +No effect +2 +Say-on-Pay +The affirmative “ FOR ” vote of the holders of a majority of the shares represented at the meeting (in person, online or by proxy) and entitled to vote. +The effect of a vote “AGAINST” +No effect +3 +Ratification of the Appointment of Our Independent Auditor +The affirmative “ FOR ” vote of the holders of a majority of the shares represented at the meeting (in person, online or by proxy) and entitled to vote. +The effect of a vote “AGAINST” +A broker is entitled to vote shares held for a beneficial owner on “routine” matters, without instructions from the beneficial owner of those shares +What does it mean if I get more than one Internet Notice or more than one set of proxy materials? +Your shares are probably registered in more than one account. Please vote all of your shares. To ensure that all of your shares are voted, for each Internet Notice or set of proxy materials, please submit your proxy by phone, via the Internet, or, if you received printed copies of the proxy materials, by signing, dating and returning the enclosed proxy card in the enclosed envelope. +How many votes can I cast? +On all matters you are entitled to one vote per share of common stock that you held as of the record date. +Where can I find the voting results of the meeting? +The preliminary voting results will be announced at our annual meeting. The final results will be published in a current report on Form 8-K to be filed by us with the SEC within four business days of our annual meeting. +PROPETRO  2022 Proxy Statement   |  64 +TABLE OF CONTENTS +Additional Information +Information about Stockholder Proposals +If you want to present a proposal of business or nominate persons for election to the Board at the 2023 annual meeting of stockholders or nominate a person for election to the Board at such meeting, you must give us written notice no later than the close of business on January 19, 2023 and no earlier than the opening of business on December 20, 2022, and follow the procedures outlined in our Bylaws. You may request a copy of the provisions of the Bylaws governing the requirements for notice at the below address. If the date of the 2023 annual meeting of stockholders is more than 30 days before or more than 60 days after April 19, 2023, the one year anniversary of the 2022 annual meeting of stockholders, your notice of a proposal will be timely if we receive it no earlier than the opening of business on the 120th day before the actual date of such meeting and no later than the later of: +(i) +the close of business on the 90th day before the actual date of such meeting, and +(ii) +the close of business on the tenth day following the date on which a written statement setting forth the date of such meeting was mailed to the stockholders or the date on which it is first disclosed to the public. +SEC rules permit management to vote proxies in its discretion in certain cases if a stockholder does not comply with this deadline and, in certain other cases notwithstanding a stockholder’s compliance with this deadline. +If you wish to submit a proposal to be considered for inclusion in next year’s proxy statement pursuant to Rule 14a-8 of the Exchange Act, you must submit the proposal so that it is received by November 5, 2022. If the date of the 2023 annual meeting of stockholders is more than 30 days from April 19, 2023, the one-year anniversary date of the 2022 annual meeting of stockholders, a notice will be timely if we receive it a reasonable time before we begin to print and send our proxy materials for such meeting. +In each case, your notice should be sent in writing to: +ProPetro Holding Corp. +Attention: General Counsel and Corporate Secretary +P.O. Box 873 +Midland, Texas 79702 +Annual Report on Form 10-K +A copy of our Annual Report on Form 10-K for the year ended December 31, 2021, including financial statements and schedules thereto but not including exhibits, as filed with the SEC, will be sent to any stockholder of record on February 22, 2022 without charge by contacting: +INVESTOR RELATIONS +(432) 688-0012 +ProPetro Holding Corp. +Attention: General Counsel and Corporate Secretary +P.O. Box 873 +Midland, Texas 79702 +A reasonable fee will be charged for copies of exhibits. You may also access our Annual Report on Form 10-K for the year ended December 31, 2021 and our other filings with the SEC at www.propetroservices.com . +65  |   ir.propetroservices.com +TABLE OF CONTENTS +Additional Information +Other Matters +The persons designated to vote shares covered by our Board’s proxies intend to exercise their judgment in voting such shares on other matters that may properly come before the meeting. Management does not expect that any matters other than those referred to in this proxy statement will be presented for action at the meeting. +By Order of the Board of Directors, +Newton W. Wilson III +General Counsel and Corporate Secretary +Midland, Texas +March 7, 2022 +PROPETRO  2022 Proxy Statement   |  66 +TABLE OF CONTENTS +TABLE OF CONTENTS +PROPETRO HOLDING CORP. PROXY FOR ANNUAL MEETING TO BE HELD ON APRIL 19, 2022 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS The undersigned stockholder hereby appoints each of Samuel D. Sledge and Newton W. Wilson III as attorney and proxy for the undersigned, with the power to appoint his substitute, to represent and to vote all the shares of common stock of PROPETRO HOLDING CORP. (the “Company”), which the undersigned would be entitled to vote, at the Company’s Annual Meeting of Stockholders to be held in person and via the Internet on Tuesday, April 19, 2022 at 10:00 A.M. Central Time and at any postponements, continuations or adjournments thereof  (the “Annual Meeting”). In their discretion, the proxies are authorized to vote upon (i) the election of any person to the Board of Directors if any nominee named herein becomes unable to serve or for good cause will not serve, (ii) any matter that the Board of Directors of the Company did not know would be presented at the Annual Meeting by a reasonable time before the proxy solicitation was made and (iii) any other matter that may properly come before the Annual Meeting or any postponements, continuations or adjournments thereof. This proxy, when properly executed, will be voted in the manner directed on the reverse side by the undersigned stockholder. If no direction is made, this proxy will be voted “FOR” all nominees set forth in PROPOSAL 1 and “FOR” PROPOSALS 2 and 3. PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE. (IMPORTANT — This Proxy must be signed and dated on the reverse side.)PLEASE DETACH ALONG PERFORATED LINE AND MAIL IN THE ENVELOPE PROVIDED. Important Notice Regarding the Availability of Proxy Materials for theAnnual Meeting of Stockholders to be held April 19, 2022.The Proxy Statement and our 2021 Annual Report to Stockholders are available at:http://www.viewproxy.com/propetro/2022 +TABLE OF CONTENTS +The Board of Directors recommends a vote FOR all nominees in Proposal 1. Vote on Proposals 1. Election of Directors 01 Samuel D. Sledge 02 Phillip A. Gobe 03 Spencer D. Armour III04 Mark S. Berg 05 Anthony J. Best 06 Michele Vion07 Alan E. Douglas08 G. Larry Lawrence09 Jack B. Moore Vote FORallnominees(except asmarked) VoteWITHHELDfrom allnominees To withhold authority to vote for any individual nominee(s), mark “Vote FOR allnominees (except as marked)” and write the number(s) of the nominee(s) on the linebelow. Please mark your votes like this The Board of Directors recommends a vote FOR Proposals 2 and 3. 2. To approve, on a non-binding advisory basis, the compensation of theCompany’s named executive officers. FOR AGAINST ABSTAIN 3. To ratify the appointment of Deloitte & Touche LLP to serve as theCompany’s independent registered public accounting firm for the yearending December 31, 2022. FOR AGAINST ABSTAIN Date:SignatureAddress Change/Comments: (If you noted anyAddress Changes and/or Comments above, pleasemark box.) Please indicate if you plan to attendthis meeting Signature (if held jointly) NOTE: Please mark, date and sign this proxy card and return it in theaccompanying envelope. Please sign as your name appears hereon. If shares areregistered in more than one name, all owners should sign. If signing in a fiduciaryor representative capacity, please give full title and attach evidence of authority.Corporations please sign with full corporate name by a duly authorized officer andaffix corporate seal. CONTROL NUMBER PLEASE DETACH ALONG PERFORATED LINE AND MAIL IN THE ENVELOPE PROVIDED. PROPETRO HOLDING CORP.As a stockholder of ProPetro Holding Corp., you have the option of voting your shares electronically through the Internetor on the telephone, eliminating the need to return the proxy card. Your electronic vote authorizes the named proxiesto vote your shares in the same manner as if you marked, signed, dated and returned the proxy card. Votes submittedelectronically over the Internet or by telephone must be received by 11:59 p.m. Eastern Time, on April 18, 2022. CONTROL NUMBER PROXY VOTING INSTRUCTIONS Please have your 11 digit control number ready when voting by Internet or Telephone Vote Your Proxy on the Internet:www.AALVote.com/PUMPHave your proxy card availablewhen you access the abovewebsite. Follow the prompts tovote your shares. TELEPHONEVote Your Proxy byPhone: Call 1 (866) 804-9616Use any touch-tone telephone tovote your proxy. Have your proxycard available when you call.Follow the voting instructions tovote your shares MAILVote Your Proxy by Mail:Mark, sign, and date your proxycard, then detach it, and returnit in the postage-paid envelopeprovided. If you vote your proxy by Internet or by Telephone, you do NOT need to mail back your Proxy Card. \ No newline at end of file diff --git a/raw/proxies/0001680247/0001104659-22-031055/proxy_rpt.txt b/raw/proxies/0001680247/0001104659-22-031055/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..7d6f5406ea84d1a3c9a1ff5552045970216f1198 --- /dev/null +++ b/raw/proxies/0001680247/0001104659-22-031055/proxy_rpt.txt @@ -0,0 +1,15 @@ +Certain Relationships and Related Party Transactions +RELATED PARTY TRANSACTIONS +Operations and Maintenance Yards +The Company also rents five yards from South Midkiff Partners, LLC, an entity partially owned by Spencer D. Armour III (a director) and David Sledge, the father of Sam Sledge, our Chief Executive Officer. Total annual rent expense for each of the five yards was approximately $0.03 million, $0.03 million, $0.1 million, $0.1 million, and $0.2 million, respectively. +Transportation and Equipment Rental +Adam Muñoz, our President and Chief Operating Officer, also has a family relationship with an employee of J&M Burns Transportation, an entity that provides transportation services to the Company. The employee receives a portion of his compensation from J&M Burns Transportation based on the amount of services sold by him to customers, including the Company. The Company incurred approximately $35.9 million in expense for the year ended December 31, 2021 for services provided to the Company by J&M Burns Transportation. +Executive Officer Family Members +J. Oscar Dominguez is our Vice President of Frac Technical Services and the father-in-law of Adam Muñoz. Mr. Dominguez received total compensation of approximately $788,000 for his services for the year ended December 31, 2021 (including $610,000 cash compensation and $178,000 non-cash equity compensation). +Oscar M. Dominguez is our Vice President of Frac Operations and the brother-in-law of Adam Muñoz. Mr. Dominguez received total compensation of approximately $948,000 for his services for the year ended December 31, 2021 (including $761,000 cash compensation and $187,000 non-cash equity compensation). +Roger Dominguez is our Supply Chain Logistics Manager and the brother-in-law of Adam Muñoz. Mr. Dominguez received total compensation of approximately $230,000 for his services for the year ended December 31, 2021 (including $203,000 cash compensation and $27,000 non-cash equity compensation). +Pioneer +On December 31, 2018, we consummated the purchase of certain pressure pumping assets and real property in connection with the Pioneer Pressure Pumping Acquisition. In connection with the consummation of the Pioneer Pressure Pumping Acquisition and effective January 1, 2019, we became a long-term service provider to Pioneer, providing pressure pumping and related services for a term of up to 10 years. Revenue from services provided to Pioneer (including idle fees) accounted for approximately $473.8 million during the year ended December 31, 2021. +POLICIES AND PROCEDURES FOR RELATED PARTY TRANSACTIONS +Any request for us to enter into a transaction with an executive officer, director, principal stockholder or any of such persons’ immediate family members or affiliates, among others, in which the amount involved exceeds $120,000, must first be presented to our Audit Committee for review, consideration and approval. All of our directors and executive officers are required to report to the Audit Committee chair any such related person transaction. In approving or rejecting the proposed agreement, our Audit Committee shall consider the facts and circumstances available and deemed relevant to the Audit Committee, including, but not limited to, whether the transaction is on terms comparable to those that could be obtained in arm’s length dealings with an unrelated third party, the extent of the related party’s interest in the transaction and the conflicts of interest and corporate opportunity provisions of our +19  |   ir.propetroservices.com \ No newline at end of file diff --git a/raw/proxies/0001680247/0001104659-23-039128/proxy.txt b/raw/proxies/0001680247/0001104659-23-039128/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..6c0bab1edfc578f2d589ce32df28d2297b90bd6c --- /dev/null +++ b/raw/proxies/0001680247/0001104659-23-039128/proxy.txt @@ -0,0 +1,4120 @@ +tm2230435-1_nonfiling - none - 18.6095029s +TABLE OF CONTENTS +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +Washington, D.C. 20549 +SCHEDULE 14A +Proxy Statement Pursuant to Section 14(a) of +the Securities Exchange Act of 1934 (Amendment No.     ) +Filed by the Registrant ☒ +Filed by a Party other than the Registrant ☐ +Check the appropriate box: +☐ +Preliminary Proxy Statement +☐ +Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +☒ +Definitive Proxy Statement +☐ +Definitive Additional Materials +☐ +Soliciting Material under §240.14a-12 +ProPetro Holding Corp. +(Name of Registrant as Specified In Its Charter) +(Name of Person(s) Filing Proxy Statement, if other than the Registrant) +Payment of Filing Fee (Check all boxes that apply): +☒ +No fee required. +☐ +Fee paid previously with preliminary materials. +☐ +Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a6(i)(1) and 0-11 +TABLE OF CONTENTS +TABLE OF CONTENTS +2022 AT A GLANCE +1 +Strategic Acquisition of Silvertip Completion Services +4 +Electric Fleet Orders +5 +Tier IV Dynamic Gas Blending (“DGB”) Fleet Conversions +OPTIMIZE AND INDUSTRIALIZE +CAPITAL LIGHT ASSET TRANSITION +STRATEGIC EXECUTION +ProPetro Holding Corp. (NYSE) is a Midland, Texas-based oilfield services company providing hydraulic fracturing, wireline and cementing services to leading upstream oil and gas companies engaged in the exploration and production of North American unconventional oil and natural gas resources. +The Company was founded in 2005. In 2010, management strategically focused the Company’s efforts on establishing a best-in-class hydraulic fracturing platform targeting the Permian Basin. Our fleet has been designed to handle the highest-intensity, most complex hydraulic fracturing jobs. +By successfully serving some of the largest and most demanding public and private exploration and production (“E&P”) operating companies, we have established ourselves as a premium completion services company. +UNIQUELY POSITIONED FOR SUCCESS +Permian Focus +Blue Chip Customers +Superior Performance +Sustainable Future +Positioned in the low-cost basin with sector-leading operating scale +Large drilling inventories and sizeable rig programs +Consistently outperforming the competition on location and efficient completions partner +Investing in lower emissions equipment to reduce our carbon footprint +Capital Discipline +Safety Culture +Technology +Social & Governance +Strong balance sheet; disciplined capital allocation and asset deployment +Full year 2022 Total Recordable Incident Rate +of 0.67 +Focused on technological improvements to optimize our performance +Investing in our community and commitment to strong governance +TABLE OF CONTENTS +ProPetro Holding Corp. +1706 S. Midkiff +Midland, Texas 79701 +Message from Our Chief Executive Officer +SAMUEL D. SLEDGE +Chief Executive Officer and Director +Dear Stockholders, +2022 was a year of challenges and opportunities. The continuing effects of the pandemic and the impact of the Russia-Ukraine war on our operating environment and supply chains presented challenges over the last year. However, our strategic and operational execution as well as our ongoing investment in upgrading and transitioning fleet and service offerings allowed 2022 to be a year of significant accomplishments, driven by our amazing team. +2022 BUSINESS HIGHLIGHTS +• +We improved upon our outstanding performance in 2021 by again realizing excellent operational efficiencies and we helped our customers maintain continued outperformance in their respective completions programs. +• +We are proud of our financial performance in 2022, where our revenue increased 46% sequentially and we returned to profitability in a challenging year. +• +We continue to execute on our plan to transition our fleets to next generation equipment by converting five of our legacy Tier II diesel fleets to Tier IV DGB fleets. Additionally, we placed orders for four electric fleets that we expect to be delivered and placed into service beginning in the second half of 2023. +• +We instituted a strategic focus on developing a capital-light asset transition strategy that will facilitate the continued transition of our business and our industry into next generation equipment. Notably, the four electric fleets we ordered in 2022 were acquired through a capital-light long-term lease agreement that we expect will accelerate cash flow in the near term. We plan to place our first electric fleet into service immediately upon delivery under a long-term contractual agreement with a leading customer. +• +We demonstrated an ability to identify, evaluate, execute and integrate accretive transactions through our acquisition of Silvertip Completion Services Operating, LLC, a leading Permian Basin wireline company. We will leverage this experience as we continue to seek opportunities to grow our business organically and through strategic acquisitions. +• +We transitioned a significant percentage of our active frac fleets to new customers over the second half of 2022. This repositioning effort was a strategic focus of the management team to ensure we are able to capture current market rates. We believe that the success of this effort, together with our strong balance sheet, will set the Company up for another year of strong execution on our strategy and continued financial advancement in 2023. +TABLE OF CONTENTS +Message from Our Chief Executive Officer +Thanks to the hard work of our team throughout 2022, we have significantly advanced our strategy to industrialize the business, and are confident that ProPetro is well-positioned to execute on the many value-enhancing opportunities ahead in 2023 and beyond. +LOOKING AHEAD +As we look to continue to build on the successes of 2022, we are excited for the opportunities ahead in 2023. Our industry is in the midst of a transition that will be focused on efficiency in capital deployment, next generation equipment, and operational execution. We are well-positioned to be a leader in this transition as we work to provide the highest quality services for our customers. +Moreover, with the continuing international need for reliable, consistent, efficient, and secure sources of energy, our position as a leader in the prolific Permian Basin will remain a strategic advantage. +We will continue to strive to enhance our efficiencies and leverage our strong customer relationships to implement mutually beneficial technological advancements that improve the sustainability of our business. Our team is excited to prove, yet again, its ability to adapt and thrive in all conditions. Along with our customers, supply chain partners, and other stakeholders, we look forward to the opportunity to develop our sustainable, efficient, and resilient business model. +2023 ANNUAL MEETING +Thank you for your continued support of ProPetro. We look forward to you joining us at our annual meeting of stockholders on May 11, 2023. +Sincerely, +Samuel D. Sledge +Chief Executive Officer and Director +March 30, 2023 +TABLE OF CONTENTS +ProPetro Holding Corp. +1706 S. Midkiff +Midland, Texas 79701 +NOTICE OF 2023 ANNUAL MEETING OF STOCKHOLDERS +Dear Stockholders, +We cordially invite you to attend the 2023 annual meeting of stockholders of ProPetro Holding Corp. +When +May 11, 2023 +10:00 a.m. Central Time +Where +2518 FM 307 +Midland, Texas 79706 +Record Date +Stockholders who owned our common stock at the close of business on March 20, 2023 are entitled to notice of, and to vote at, the annual meeting, or any continuation, postponement or adjournment thereof. +Items of Business +1 +Election of nine director nominees to serve for a one-year term +2 +Approval, on an advisory basis, of the compensation of our named executive officers +3 +Approval of the Amended and Restated Long-Term Incentive Plan (LTIP) +4 +Ratification of the appointment of RSM US LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2023 +5 +Transaction of such other business as may properly come before the meeting +How to Vote +YOUR VOTE IS IMPORTANT. We urge you to review the accompanying proxy statement carefully and to submit your proxy as soon as possible so that your shares will be represented at the meeting. You may revoke your proxy if you so desire at any time before it is voted. Have your Notice, proxy card or voting instruction form with your 11-digit control number and follow the instructions. +INTERNET +TELEPHONE +MOBILE DEVICE +MAIL +AT THE MEETING +REGISTERED HOLDERS +www.AALVote.com/ +PUMP , 24/7 +Call +1 (866) 804-9616 +(toll-free), 24/7 +Scan the QR code +Sign, date and mail the proxy card, which you may have received by mail, using the postage-paid envelope provided +Attend the annual meeting and cast your ballot +BENEFICIAL OWNERS (HOLDERS IN STREET NAME) +Follow the instructions provided by your broker, bank +or other nominee +Return a properly executed voting instruction form by mail, depending upon the method(s) your broker, bank or other nominee makes available +To attend the annual meeting, you will need proof of ownership and a legal proxy from your broker, bank or other nominee +DEADLINE +11:59 p.m. Eastern Time on May 10, 2023, +if you are a registered holder +If you are a beneficial owner, please refer to the information provided by your broker, bank or other nominee +A stockholders’ list will be available at our offices at 1706 S. Midkiff, Midland, Texas 79701 for a period of ten days prior to the meeting. We hope that you will be able to attend the meeting in person. +This proxy statement and our 2022 Annual +Report on Form 10-K to stockholders are +each available at +http://www.viewproxy.com/propetro/2023 +By Order of the Board of Directors, +John J. Mitchell +General Counsel and Corporate +Secretary +March 30, 2023 +TABLE OF CONTENTS +TABLE OF CONTENTS +1 +PROXY STATEMENT SUMMARY +2 +CORPORATE GOVERNANCE AND BOARD MATTERS +5 +Proposal 1 ―Election of Directors +6 +Nominees +11 +Director Independence +11 +Board Leadership Structure +12 +Board of Directors and Risk Oversight +12 +Sustainability and ESG Initiatives +13 +Communicating with Our Board of Directors +14 +Annual Meeting Attendance +14 +Compensation Committee Interlocks and Insider Participation +14 +Board and Committee Activity and Structure +16 +Role of the Board, Compensation Committee and Our Executive Officers +16 +Role of External Advisors +17 +Director Nominations Process +17 +Director Orientation and Education +18 +Certain Relationships and Related Party Transactions +19 +Director Compensation +20 +Non-Employee Director Stock Ownership Guidelines +21 +EXECUTIVE OFFICERS +23 +EXECUTIVE COMPENSATION +23 +Proposal 2 ―Advisory Vote to Approve Named Executive Officer Compensation +24 +Compensation Discussion and Analysis +43 +Report of the Compensation Committee +44 +Executive Compensation Tables +44 +Summary Compensation Table +48 +Grants of Plan-Based Awards Table +49 +Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table +49 +Outstanding Equity Awards at Fiscal Year End +50 +2021 Options Exercises and Stock Vested +50 +Pension Benefits +50 +Nonqualified Deferred Compensation +51 +Potential Payments Upon Termination or Change in Control +57 +Pay Versus Performance +60 +CEO Pay Ratio +69 +Equity Compensation Plan Information +61 +Proposal 3 ―Approval of The Amended and Restated Long-Term Incentive Plan +70 +AUDIT MATTERS +70 +Proposal 4 ―Ratification of Appointment of Independent Registered Public Accounting Firm +72 +Auditor Fees for Fiscal Years 2022 and 2021 +72 +Policy on Audit Committee Pre-Approval of Audit and Non-Audit Services of Independent Registered Public Accounting Firm +72 +Report of the Audit Committee +74 +STOCK OWNERSHIP INFORMATION +74 +Security Ownership of Certain Beneficial Owners and Management +76 +ADDITIONAL INFORMATION +76 +Information about the Annual Meeting and Voting +81 +Information about Stockholder Proposals +81 +Annual Report on Form 10-K +82 +Other Matters +A-1 +APPENDIX A—AMENDED AND RESTATED LTIP +TABLE OF CONTENTS +Proxy Statement Summary +The following section is only a summary of key elements of this proxy statement, and is intended to assist you in reviewing this proxy statement in advance of the 2023 annual meeting. This summary does not contain all of the information you should consider, and you are encouraged to read this entire proxy statement before submitting your votes. +2023 Annual Meeting +When +Where +Record Date +May 11, 2023 +10:00 a.m. Central Time +2518 FM 307 +Midland, Texas 79706 +March 20, 2023 +Voting Agenda +Board +Recommendation +For More Information, +See Page +1 +Election of nine director nominees to serve for a one-year term +FOR each +nominee +5 +2 +Approval, on an advisory basis, of the compensation of our named executive officers (Say-on-Pay) +FOR +23 +3 +Approval of the Amended and Restated Long-Term Incentive Plan (LTIP) +FOR +61 +4 +Ratification of the Audit Committee’s selection of RSM US LLP as our independent auditors for 2023 +FOR +70 +5 +Transaction of such other business as may properly come before the meeting or any adjournment thereof +Director Nominees +The Board of Directors (the “Board”) has nominated the nine director nominees shown below for a one-year term. +Committee Memberships +Nominees +Independent +Age +Director +Since +Audit +Compensation +Nominating & +Corporate +Governance +Spencer D. Armour III +69 +2013 +* +Mark S. Berg +64 +2019 +Anthony J. Best   +73 +2018 +PROPETRO  2023 Proxy Statement   |  1 +TABLE OF CONTENTS +Proxy Statement Summary +Committee Memberships +Nominees +Independent +Age +Director +Since +Audit +Compensation +Nominating & +Corporate +Governance +Phillip A. Gobe   +70 +2019 +G. Larry Lawrence +71 +2020 +* +Jack B. Moore +69 +2017 +* +Samuel D. Sledge +36 +2021 +Mary P. Ricciardello +67 +2023 +* +Michele Vion +63 +2020 +Meetings in 2022 +Board—7 +8 +5 +4 +Committee Chair +Committee Member +Chairman of the Board +Lead Independent +Director +* +Audit Committee financial expert +Corporate Governance Highlights +Corporate Governance Best Practices +Six of our nine director nominees are independent, including all Committee members +Lead Independent Director, with defined responsibilities +Three of our nine director nominees are gender or ethnically diverse +Balance of new and experienced directors +Stock ownership guidelines for directors and executives +Code of Business Conduct and Ethics +Annual director self-evaluation and committee assessment to ensure board effectiveness +All directors serving in 2022 attended over 75% of 2022 meetings +Regular executive sessions of independent directors +Robust risk oversight +Board review of company’s financial performance, strategy and succession plan +Commitment to Corporate Social Responsibility +2  |   ir.propetroservices.com +TABLE OF CONTENTS +Proxy Statement Summary +DIRECTOR ATTRIBUTES +Our nine directors nominated for reelection at the 2023 annual meeting comprise a well-balanced Board. +BOARD EXPERTISE +Director Skills and Experience +Audit and financial reporting +●   ●   ●   ●   ●   ●   ●   ●   ● +7 +Corporate governance and ethics +●   ●   ●   ●   ●   ●   ●   ●   ●   +9 +Executive leadership +●   ●   ●   ●   ●   ●   ●   ●   ●   +9 +Exploration & Production, energy industry +●   ●   ●   ●   ●   ●   ●   ●   ● +7 +Finance and/or investment experience +●   ●   ●   ●   ●   ●   ●   ●   ● +7 +Human capital management, sustainability, or environmental stewardship +●   ●   ●   ●   ●   ●   ●   ●   ● +8 +Marketing, business development and investor relations +●   ●   ●   ●   ●   ●   ●   ●   ● +7 +Other public company board service +●   ●   ●   ●   ●   ●   ●   ●   ● +8 +Regulatory, government and compliance +●   ●   ●   ●   ●   ●   ●   ●   ● +6 +Risk management +●   ●   ●   ●   ●   ●   ●   ●   ● +8 +Strategic planning and operations +●   ●   ●   ●   ●   ●   ●   ●   ● +8 +Technology, engineering +●   ●   ●   ●   ●   ●   ●   ●   ● +4 +PROPETRO  2023 Proxy Statement   |  3 +TABLE OF CONTENTS +Proxy Statement Summary +Environmental, Social and Governance Highlights +SUSTAINABLY +COMPETING +COMMUNITY +INVESTMENT +SAFETY +FOCUS +In 2022, we made strides towards our goal to transition our fleet to more efficient and lower emissions equipment by making strategic investments, closing the year with approximately 33% of our fleets utilizing next generation Tier IV DGB equipment. We also entered into a strategic agreement to support our implementation of an electric fleet solution for our customers, and placed orders for four electric fleets that are expected to be delivered and placed into service beginning in the second half of 2023. +Our transitional efforts will continue in 2023 with additional Tier IV DGB fleet conversions and the commencement of operations of our electric fleets. We are excited to work with our customers to implement these solutions, which we believe will support greater capital efficiency and returns across the industry, while fostering a reduced emissions profile for our services. Moreover, our electric fleet solutions will be a step we take with our customers towards the increasing electrification of the oilfield. +Lastly, we built on the initial emissions study and testing performed in 2021 and developed a company-wide Scope 1 and Scope 2 greenhouse gas (“GHG”) emissions profile. This information will allow us to foster disclosure and alignment with our customers, investors and other stakeholders as we continue to advance our business. +We aspire to play a role in shaping the future of the Permian Basin by: +• +investing in education, +• +donating to first responders and veterans, +• +supporting health and wellness related organizations, and +• +focusing on charities that support local children. +We do this through various charities and other organizations that are heavily involved in the Permian Basin communities, where we live and work. +Additionally, our employees created the Positive United Morale Partners (“P.U.M.P.”) committee to drive their charitable endeavors through: +• +wellness events, +• +monthly events at our regional food bank, +• +quarterly blood drives, +• +Thanksgiving meal drives, +• +school supply donation drives, and +• +Habitat for Humanity building projects. +Additionally, in 2022, we sponsored our first signature community event—“Don’t Mess with the Permian”—a community-wide trash pick-up event focused on areas selected in collaboration with the P.U.M.P. committee. +Our safety record demonstrates the close collaboration between our customers and our employees in completing each job safely. +We pride ourselves on our commitment to safety and our commitment to each other, which we demonstrate and support through operational initiatives like our: +• +dedicated heavy haul team to reduce driving hazards, +• +culture of training, accountability, and consistent improvement, and +• +long-term relationships with teammates, customers, and stakeholders. +In 2022, we also implemented a new safety training system that will allow for the more efficient management of our safety training program. +2022 Performance Highlights +During 2022, we improved upon our outstanding performance in 2021, by, again, realizing excellent operational efficiencies, enhancing our commercial architecture, and continuing our fleet transition to natural gas powered equipment. Additionally, we executed on our strategy of making accretive acquisitions and driving value through a focus on completions services with our acquisition of Silvertip Completion Services, which established our wireline operating segment and service offering. Accordingly, we generated $1.3 billion in revenue and $300 million of operating cash flow. Our operations continue to be focused almost entirely in the Permian Basin, where our pressure pumping and wireline footprint exists. Our team was able to accomplish these achievements amid continued dynamic market conditions. Moreover, our reputation for providing high-quality service and our sustained performance for customers resulted in continuing strong demand for our services. As a result, the Company averaged 14.5 effectively utilized fleets in 2022. These achievements are a function of our employees’ commitment to excellence in efficient operations and safety. +$1.3 Billion +$300 Million +Total Revenue +Net Cash Provided by Operating Activities +4  |   ir.propetroservices.com +TABLE OF CONTENTS +Corporate Governance and Board Matters +Proposal 1 —Election of Directors +At the 2023 annual meeting, nine directors are to be elected. All nominees are currently directors. Each director is to hold office until the next annual meeting of stockholders or until his or her successor is elected and qualified. Directors hold office until their successors have been elected or qualified or until their earlier death, resignation, removal, or disqualification. +The nominees have consented to being nominated and have expressed their intention to serve if elected. We believe that the nominees possess the professional and personal qualifications necessary for board service and have highlighted particularly noteworthy attributes for the nominees in their biographies below. We have no reason to believe that the nominees will be unable to serve if elected to office, and, to our knowledge, the nominees intend to serve the entire term for which election is sought. In the event any of the nominees should become unable to serve, or for good cause will not serve, as a director, it is intended that votes will be cast for a substitute nominee designated by the Board or the Board may elect to reduce its size. Only the nominees or substitute nominees designated by the Board will be eligible to stand for election as directors at the meeting. +Our Nominating and Corporate Governance Committee did not nominate Alan E. Douglas for reelection as a director. Accordingly, Mr. Douglas is not included as a nominee for election at the 2023 annual meeting and his current term will expire at the 2023 annual meeting. Following the 2023 annual meeting, our authorized number of directors will be reduced to nine. +In 2018, we entered into an investor rights agreement (the “Investor Rights Agreement”) with an affiliate of Pioneer Natural Resources Company (“Pioneer”) that provides Pioneer certain rights to designate nominees for election to the Board. Under the Investor Rights Agreement, Pioneer was granted: +(i) +the one-time right to designate an independent director to the Board and +(ii) +the right to designate a non-independent director to the Board for so long as a certain affiliate of Pioneer owns 5% or more of our outstanding common stock. +Pioneer has designated Mark S. Berg as the non-independent director and has no further rights to designate an independent director to the Board. +VOTE REQUIRED +The proposal regarding the election of directors requires the approval of a plurality of the votes cast. This means that the nine nominees receiving the highest number of affirmative “FOR” votes will be elected as directors. Votes withheld and broker non-votes are not considered to be votes cast and, accordingly, will have no effect on the outcome of the vote on this proposal. +The Board of Directors unanimously recommends a vote FOR the election of each of the nine director nominees named below. +PROPETRO  2023 Proxy Statement   |  5 +TABLE OF CONTENTS +Corporate Governance and Board Matters +Nominees +All of the current members of the Board being nominated for reelection at the 2023 annual meeting are listed in the following table, and certain information concerning those directors follows the table: +ProPetro Board Committees +Name +Age +Director since +Independent +Audit +Compensation +Nominating & +Corporate Governance +Phillip A. Gobe (1) +70 +2019 +Samuel D. Sledge (2) +36 +2021 +Spencer D. Armour III +69 +2013 +* +Mark S. Berg +64 +2019 +Anthony J. Best (3) +73 +2018 +G. Larry Lawrence +71 +2020 +* +Jack B. Moore +69 +2017 +* +Mary P. Ricciardello +67 +2023 +* +Michele Vion +63 +2020 +Number of Meetings in 2022 +Board—7 +8 +5 +4 +Committee Chair +Committee Member +* +Audit Committee financial expert +(1) +Chairman of the Board +(2) +Chief Executive Officer +(3) +Lead Independent Director +PHILLIP A. GOBE +Phillip A. Gobe began serving as our Chairman of the Board in July of 2019 and as Executive Chairman in October 2019. Mr. Gobe was appointed as our Chief Executive Officer on March 13, 2020 and served in that role until August 31, 2021, at which point he was re-appointed as Executive Chairman. Mr. Gobe stepped down as Executive Chairman on March 31, 2022, and continues serving the Company as Chairman of the Board. Mr. Gobe has served as a director of Pioneer since July 2014. Mr. Gobe also serves as a director of Pantheon Resources plc and previously served as a director of Scientific Drilling International and Pioneer Southwest Energy Partners L.P. Mr. Gobe joined Energy Partners, Ltd. as Chief Operating Officer in December 2004 and became President in May 2005, and served in those capacities until his retirement in September 2007. Mr. Gobe also served as a director of Energy Partners, Ltd. from November 2005 until May 2008. Prior to that, Mr. Gobe served as Chief Operating Officer of Nuevo Energy Company from February 2001 until its acquisition by Plains Exploration & Production Company in May 2004. Prior to that time, he held numerous operations and human resources positions with Vastar Resources, Inc. and Atlantic Richfield Company and its subsidiaries. Mr. Gobe has a Bachelor of Arts degree from The University of Texas and a Master of Business Administration degree from the University of Louisiana in Lafayette. Mr. Gobe’s extensive experience in the energy industry, including service as a director to public corporations in the industry, makes him well suited to serve as Chairman of the Board. +AGE 70 +CHAIRMAN OF THE BOARD +DIRECTOR AND CHAIRMAN OF THE BOARD since July 2019 +6  |   ir.propetroservices.com +TABLE OF CONTENTS +Corporate Governance and Board Matters +SAMUEL D. SLEDGE +Samuel D. Sledge has served as our Chief Executive Officer and as a member of our Board since August 31, 2021. Mr. Sledge previously served as the Company’s President from April 2021 to August 2021, and prior to that, he served as Chief Strategy and Administrative Officer beginning in March 2020. Mr. Sledge has significant experience with ProPetro having joined the Company in 2011. Mr. Sledge has served in various capacities throughout his tenure such as a Frac Technical Specialist and Technical Operations Manager where his duties included quality control, planning and logistics, and the development of the engineering program. Mr. Sledge has also served as the Vice President of Finance, Corporate Development, and Investor Relations where his responsibilities included financial planning and analysis, strategic initiatives and investor relations. Mr. Sledge received a Bachelor of Business Administration and a Masters of Business Administration from Baylor University. We believe Mr. Sledge’s experience in the energy industry and his significant experience in management roles at the Company make him well suited to serve as a director. +AGE 36 +CEO AND DIRECTOR since August 2021 +SPENCER D. ARMOUR III +Spencer D. Armour III has served as a member of our Board since February 2013. Mr. Armour has over 30 years of executive and entrepreneurial experience in the energy services industry. Mr. Armour served as President of PT Petroleum LLC in Midland, Texas from 2011 to 2018. He was the Vice President of Corporate Development for Basic Energy Services, Inc. from 2007 to 2008, which acquired Sledge Drilling Corp., a company Mr. Armour co-founded and served as Chief Executive Officer from 2005 to 2006. From 1998 through 2005, he served as Executive Vice President of Patterson-UTI Energy, Inc., which acquired Lone Star Mud, Inc., a company Mr. Armour founded and served as President from 1986 to 1997. Mr. Armour also served on the board of Patterson-UTI Energy, Inc. from 1999 to 2001. He currently serves on the board of Viper Energy Partners, LP and the board of CES Energy Solutions Corp and is a partner at Geneses Investments. Mr. Armour received a B.S. in Economics from the University of Houston in 1977 and served on the University of Houston System Board of Regents from 2011 until 2018. We believe that Mr. Armour’s extensive experience in the energy services industry and his deep knowledge of industry dynamics within the Permian Basin make him well suited to serve as a director. +AGE 69 +DIRECTOR since February 2013 +INDEPENDENT DIRECTOR since March 2020 +COMMITTEES +• +Nominating and Corporate Governance +PROPETRO  2023 Proxy Statement   |  7 +TABLE OF CONTENTS +Corporate Governance and Board Matters +MARK S. BERG +Mark. S. Berg has served as a member of our Board since February 2019, and he was appointed to the Board by Pioneer pursuant to the Investor Rights Agreement. Mr. Berg currently serves as the Executive Vice President, Corporate Operations for Pioneer, where he serves on the Executive Committee and oversees Business Development, Land, Water Management, Facilities and ESG. Mr. Berg has fifteen years of experience with Pioneer in various roles, including as Executive Vice President & General Counsel from April 2005 to January 2014, Executive Vice President, Corporate from January 2014 to August 2015, and as Executive Vice President, Corporate/Vertically Integrated Operations until assuming his current role. He began his career in 1983 with the Houston-based law firm Vinson & Elkins L.L.P. and served as a partner from 1990 through 1997. He served as Executive Vice President, General Counsel and Secretary of American General Corporation, a Fortune 200 diversified financial services company, from 1997 through 2001. Subsequent to the sale of American General to American International Group, Mr. Berg was appointed Senior Vice President, General Counsel and Secretary of Hanover Compressor Company, a NYSE company specializing in natural gas compression and processing. Mr. Berg received his Juris Doctor, with honors, from The University of Texas School of Law, and graduated magna cum laude and Phi Beta Kappa with a Bachelor of Arts in Public Policy from Tulane University. Mr. Berg served as a member of the board of directors of HighPoint Resources Corporation from March 2018 to June 2020. We believe that Mr. Berg’s experience in significant management roles with Pioneer and his broad experience in the energy industry make him well suited to serve as a director. +AGE 64 +DIRECTOR since February 2019 +Mr. Berg was appointed to the Board by Pioneer pursuant to the Investor Rights Agreement +ANTHONY J. BEST +Anthony J. Best has served as a member of our Board since January 2018 and was elected to serve as Lead Independent Director in October 2019. Mr. Best has over 43 years of experience in the energy industry. Mr. Best is currently the Chairman of the board of Newpark Resources. He was previously a director with Quantum Energy Partners’ (“Quantum”) portfolio company, ExL Petroleum, and served as Senior Advisor for Quantum since August 2015. Prior to joining Quantum, Mr. Best served in various roles with SM Energy Company, an oil and gas exploration company, commencing in 2006 as its President and Chief Operating Officer, and as its Chief Executive Officer from February 2007 through January 2015. From 2003 to 2005, Mr. Best served as President and Chief Executive Officer of Pure Resources, Inc., a Unocal development and exploration company. From 2000 to 2003, Mr. Best served as an independent consultant offering leadership and oil and gas consultation to energy companies and volunteer organizations, and from 1979 through 2000, Mr. Best served in various roles of increasing responsibility at Atlantic Richfield Company, culminating in the position of President, ARCO Latin America. Mr. Best holds a Master of Science in Engineering Management degree from the University of Alaska and a Bachelor of Science degree in Mechanical Engineering from Texas A&M University. Prior to beginning his business career, Mr. Best served five years as an engineering officer in the United States Air Force. We believe that Mr. Best’s experience in significant management roles with companies operating in the Permian Basin and his broad experience in the energy industry make him well suited to serve as a director. +AGE 73 +INDEPENDENT DIRECTOR since January 2018 +LEAD INDEPENDENT DIRECTOR since October 2019 +COMMITTEES +• +Audit (Chair) +• +Compensation +8  |   ir.propetroservices.com +TABLE OF CONTENTS +Corporate Governance and Board Matters +G. LARRY LAWRENCE +G. Larry Lawrence was appointed to our Board in December 2020. Mr. Lawrence previously served as Audit Committee Chair of Legacy Reserves, LP’s Board of Directors, a role he held from 2006 to 2019. From January 2021 until June 2021, Mr. Lawrence served as the interim Chief Financial Officer of Natural Gas Services Group, a natural gas compression equipment provider, where he previously served as Chief Financial Officer for nine years. Prior to Natural Gas Services Group, Mr. Lawrence served as Chief Financial Officer for Lynx Operating Co. Inc., an oil and gas exploration company, for three years and as Chief Financial Officer for Pure Resources, Inc., an oil and gas exploration and production company, for two years. He has also held finance and management consulting positions for Parson Group, Atlantic Richfield Company and Crescent Consulting. Mr. Lawrence earned his bachelor’s degree with an accounting major from Dillard University in New Orleans. We believe that Mr. Lawrence’s broad experience in the energy industry, including his service as a director and executive officer with various companies, makes him well suited to serve as a director. +AGE 71 +INDEPENDENT DIRECTOR since December 2020 +COMMITTEES +• +Audit +JACK B. MOORE +Jack B. Moore has served as a member of our Board since March 2017. Mr. Moore most recently served as President and Chief Executive Officer of Cameron International Corporation (“Cameron”), an oil and gas industry equipment manufacturer and provider, from April 2008 to October 2015 and served as Chairman of the Board of Cameron from May 2011 until it was acquired by Schlumberger in April 2016. Prior to his employment with Cameron, Mr. Moore held various management positions at Baker Hughes Incorporated, where he was employed for 23 years. Mr. Moore currently serves on the board of directors of Occidental Petroleum Corporation, KBR Inc., and the University of Houston System Board of Regents. Mr. Moore previously served on the board of the American Petroleum Institute, the National Ocean Industries Association, Rowan Companies plc and the Petroleum Equipment Suppliers Association. Mr. Moore received a Bachelor of Business Administration from the University of Houston and attended the Advanced Management Program at Harvard Business School. We believe that Mr. Moore’s wealth of experience in the oilfield service sector, including service as a director and executive officer to various public corporations in the sector, makes him well suited to serve as a director. +AGE 69 +INDEPENDENT DIRECTOR since March 2017 +COMMITTEES +• +Compensation +• +Nominating and Corporate Governance (Chair) +PROPETRO  2023 Proxy Statement   |  9 +TABLE OF CONTENTS +Corporate Governance and Board Matters +Mary P. Ricciardello +Ms. Ricciardello currently serves as a director, Audit Committee member and Corporate Governance & Nominating Committee member at Eagle Materials Inc. Ms. Ricciardello previously served as a director at Devon Energy, Noble Corporation, Enlink Midstream, Midstates Petroleum and U.S. Concrete. Ms. Ricciardello enjoyed a distinguished, two-decade career at Reliant Energy, where she served in key roles including Chief Accounting Officer. She earned a Bachelor of Science degree from the University of South Dakota and an MBA from the University of Houston. She is also a Texas licensed CPA. +AGE 67 +INDEPENDENT DIRECTOR since January 2023 +COMMITTEES +• +Audit +• +Nominating and +Corporate Governance +MICHELE VION +Michele Vion was appointed to our Board in February 2020. Ms. Vion previously served as Vice President, Human Resources at HighPoint Resources Corporation, a successor to the Bill Barrett Corporation, an oil and gas exploration and production company, from August 2010 to September 2019. Ms. Vion was previously employed at Level 3 Communications, Inc., an international communications company, starting in 2006 and ultimately as Group Vice President of Human Resources up to January 2010. Ms. Vion also previously served as Vice President of Human Resources for Sun Microsystems, Inc., a computer networking company, for seven years. She also previously held senior human resource and client account management positions at Prudential Financial, Inc., an insurance and investment management company and JP Morgan, a global financial services firm. Prior to joining JP Morgan, Ms. Vion served in an accounting position as a Regional Controller for the Eastern Region at Sony Corporation of America. Ms. Vion also served on the board and as Chair of the Compensation Committee and as member of the Audit Committee and Nominating and Corporate Governance Committee of Callidus Software Inc., a publicly-traded cloud-based software company, from 2005 to 2016. Ms. Vion has served as a director of Boingo Wireless Inc., a publicly-traded Wi-Fi company, since December 2018, and currently serves as Chair of the Compensation Committee and as a member of the Audit Committee. Ms. Vion holds a B.A. in East Asian Studies and Economics from Wesleyan University, has attended Stanford University’s Director’s College and participated in the Financial Times’ Director Exchange. We believe that Ms. Vion is well suited to serve as a director based on her executive leadership experience in human resources and accounting and public company board and committee experience. +AGE 63 +INDEPENDENT DIRECTOR since February 2020 +COMMITTEES +• +Compensation (Chair) +• +Nominating and Corporate Governance +10  |   ir.propetroservices.com +TABLE OF CONTENTS +Corporate Governance and Board Matters +Director Independence +The majority of the members of the Board at any given time must qualify as “independent” under the rules of the NYSE. +Our Board has undertaken a review of the independence of each of our director nominees and has affirmatively determined that each of Messrs. Armour, Best, Lawrence, and Moore and Mss. Ricciardello and Vion are “independent,” as defined by the NYSE rules. Under the NYSE rules, a director can be independent only if  (a) the director does not trigger a categorical bar to independence and (b) our Board affirmatively determines that the director has no material relationship with the Company (either directly or as a partner, stockholder or officer of an organization that has a relationship with the Company). +Based on information provided by the director nominees concerning their background, employment and affiliations, our Board has determined that these directors do not have a material relationship with the Company (either directly or as a partner, stockholder or officer of an organization that has a relationship with the Company). In making this determination, our Board considered the current and prior relationships that each of the directors has with us, and all other facts and circumstances our Board deemed relevant in determining independence, including any beneficial ownership of our capital stock by each of the directors. +Board Leadership Structure +PHILLIP A. +GOBE +SAMUEL D. +SLEDGE +ANTHONY J. +BEST +Chairman of the Board +Chief Executive Officer +Lead Independent Director +Our Board has adopted our Corporate Governance Guidelines, which are available on our website, www.propetroservices.com , in the “Corporate Governance” subsection of the “Investors” section. Our Corporate Governance Guidelines provide that if the Chairman of the Board is a member of management or does not otherwise qualify as independent, the independent directors may elect a lead independent director. Our Board believes it is important to retain the flexibility to determine whether the roles of Chairman and Chief Executive Officer should be separated or combined depending on the circumstances and changing needs of the Company from time to time. +While our Board has previously combined the roles of Chairman and Chief Executive Officer, at present, the Board has chosen to separate the positions of Chairman and Chief Executive Officer. The Board believes this structure enhances corporate governance and allows each of our Chairman and Chief Executive Officer to remain focused on their distinct roles, which, for the Chairman, primarily involves Board and corporate governance and, for the Chief Executive Officer, primarily involves day-to-day management leadership and implementing our corporate strategy. +Although the roles of Chairman and Chief Executive Officer are currently separated, the Chairman previously served as a member of management and does not currently qualify as independent. As such, the Board believes the role of Lead Independent Director enhances independent oversight of the Company and that Mr. Best should continue to serve as the Lead Independent Director. In this capacity Mr. Best provides, in conjunction with the Chairman, leadership and guidance to the Board. The Lead Independent Director responsibilities are as follows: +• +Preside over all meetings of the Board at which the Chairman of the Board is not present, including any executive sessions of the independent directors +• +Approve Board meeting schedules and agendas +• +Act as the liaison between the independent directors and the Chairman of the Board +• +Communicate the Chief Executive Officer’s annual evaluation and compensation, after approval of the Compensation Committee +Interested parties who wish to communicate with the Board, its committees, the Chairman, the Lead Independent Director, or any other individual director should follow the procedures described below under “Communication with our Board of Directors.” +PROPETRO  2023 Proxy Statement   |  11 +TABLE OF CONTENTS +Corporate Governance and Board Matters +To facilitate candid discussion among the Company’s directors, the non-management directors meet at regularly scheduled executive sessions presided over by our Chairman. In addition, at least once a year, the non-management directors who are independent under NYSE listing standards meet in executive session presided over by the Lead Independent Director, in conjunction with a regular board meeting. +Board of Directors and Risk Oversight +In the normal course of business, we are exposed to a variety of risks, including market risks relating to changes in commodity prices, interest rates, political risks and credit and investment risks. The Board oversees our strategic direction and in doing so considers the potential rewards and risks of our business opportunities and challenges and monitors the development and management of risks that impact our strategic goals. The Audit Committee assists the Board in fulfilling its oversight responsibilities by monitoring the effectiveness of our systems of financial reporting, auditing, internal controls and legal and regulatory compliance. The Nominating and Corporate Governance Committee assists the Board in fulfilling its oversight responsibilities with respect to the management of risks associated with Board organization, membership and structure, succession planning for our directors and executive officers, and corporate governance. The Compensation Committee assists the Board in fulfilling its oversight responsibilities by overseeing our compensation policies and practices. The Board does not believe that its role in the oversight of our risks affects the Board’s leadership structure. +Sustainability and ESG Initiatives +At ProPetro, our fundamental policy is to conduct business with honesty and integrity in accordance with the highest legal and ethical standards, along with a daily focus on safety and quality. Guided by these values, we pursue the pillars of our strategy—(1) optimizing operations and industrializing our business; (2) pursuing a more capital-light asset profile and next generation fleet by developing and integrating innovative technologies; (3) pursuing opportunistic strategic transactions to accelerate value creation and distribution; and (4) maintaining a strong balance sheet. Our strategic approach is designed to support ProPetro’s core goals of generating robust earnings, increasing free cash flow, and building towards enhanced shareholder returns. Achievement of these strategic objectives is a key to our long-term success, and our sustainability and environmental, social, and governance (“ESG”) initiatives are designed to support and enhance our pursuit of these goals. +In 2022, the Company focused on several core sustainability and ESG goals to support our corporate strategy and the continued development of our employees. We believe that the future of the oilfield and the success of businesses in the oilfield services sector will grow from the successful integration of a cohesive and more environmentally friendly supply chain, which allows E&P and oilfield service companies to produce hydrocarbons in the safest and most efficient manner possible. We believe our services play a vital role in the broader energy value chain by meaningfully contributing to the delivery of low-cost, dependable energy to end users and that our sustainability and ESG initiatives will enable us to continue to do so for years to come. +As part of our sustainability and ESG initiatives, we aim to reduce the overall environmental impact of our services by focusing on excellent execution and superior service quality. We believe that a lower emissions profile is not only vital to aid in our competitiveness but it is also a crucial component in deploying the innovative tools necessary to support our customers’ efforts to be capital efficient while respecting the communities in which we work. We seek to meet our customers’ needs while also pursuing a consistent, sustainable service solution that will increasingly replace diesel with cleaner burning and cost-advantaged fuels. With continued, significant investments in and the successful deployment of five fleets of Tier IV DGB, dual-fuel equipment, 2022 was a milestone in our approach to enhance our service offerings and reduce the carbon footprint of our operations. Integrating cleaner burning fuel sources, such as natural gas, is important to optimizing fuel consumption on our worksites. +In addition to investing in our Tier IV DGB service offering, we remained focused on the next generation of technology by working with our customers to evaluate electric powered hydraulic fracturing equipment and other pumping innovations. This work culminated in the execution of our strategic long-term lease agreement through which we have agreed to acquire four electric frac fleets with expected delivery through the second half of 2023. We believe this strategically important technology will help advance our customers’ efforts to reduce costs and greenhouse gas emissions, while enhancing our competitiveness and free cash flow profile. Further, the lease agreement was in line with our strategic plan of transitioning to emissions-friendly services in a capital efficient manner. +As a key initiative in 2022, we built on the preliminary emissions study conducted in 2021 to develop a Scope 1 and Scope 2 emissions profile for our business, which we plan to utilize to better understand and optimize our operations. More details on our progress in this area will be disclosed in 2023 through the publication of our inaugural sustainability report. +12  |   ir.propetroservices.com +TABLE OF CONTENTS +Corporate Governance and Board Matters +An additional focus of our sustainability and ESG initiatives is to give back to the area where we live and work by providing employment and supporting and encouraging our employees to commit to safety and investing in our community. We aspire to play a role in shaping the future of the Permian Basin by investing in education, donating to first responders and veterans, supporting health and wellness related organizations, and focusing on charities that support local children. We do this through various charities and other organizations that are heavily involved in the Permian Basin communities. Our employees created the P.U.M.P. committee to drive their humanitarian endeavors through wellness events, monthly events with a local foodbank, quarterly blood drives, Thanksgiving meal drives, school supply donation drives, and other important initiatives. +Additionally, in 2022, the Company sponsored our initial signature community event—Don’t Mess with the Permian—a community-wide trash pickup event, which resulted in the participation of more than 220 volunteers working over 400 hours and collecting approximately 5.85 tons of trash from local roadways, schools and public areas. We are excited to build on this success in 2023. +2022 also saw increased investment in our employee base as we invested in new training resources and systems and commenced a leadership training initiative across all functions to support the enhancement of over 250 of our existing managers and senior leaders along with a class of developing leaders. +Our safety record substantiates the close collaboration between our customers and our employees in completing each job safely. We pride ourselves on our commitment to safety and our commitment to each other, which we demonstrate and support through operational initiatives like our dedicated heavy haul team to reduce driving hazards; our culture of training, accountability, and consistent improvement; and our long-term relationships with teammates, customers and stakeholders. +Additional information and updates regarding our sustainability and ESG initiatives can be found under the “Sustainability” tab of our website at www.propetroservices.com . +Communicating with Our Board of Directors +Stockholders and other interested parties may communicate with our Board by writing to: +ProPetro Holding Corp. +Attention: General Counsel and Corporate Secretary +P.O. Box 873 +Midland, Texas 79702 +Stockholders may submit their communications to the Board, the independent directors, any committee of the Board or individual directors on a confidential or anonymous basis by sending the communication in a sealed envelope marked “Stockholder Communication with Directors” and clearly identifying the intended recipient(s) of the communication. +Our General Counsel and Corporate Secretary will review each communication and will forward the communication, as expeditiously as reasonably practicable, to the addressees if: +(1) +the communication complies with the requirements of any applicable policy adopted by the Board relating to the subject matter of the communication and +(2) +the communication falls within the scope of matters generally considered by the Board. +To the extent the subject matter of a communication relates to matters that have been delegated by the Board to a committee or to an executive officer of the Company, our General Counsel and Corporate Secretary may forward the communication to the executive officer or chairman of the committee to which the matter has been delegated. The acceptance and forwarding of communications to the members of the Board or an executive officer does not imply or create any fiduciary duty of the Board members or executive officer to the person submitting the communications. +Information may be submitted confidentially and anonymously. However, the Company may be obligated by law to disclose the information or identity of the person providing the information in connection with government or private legal actions and in other circumstances. The Company’s policy is not to take any adverse action, and not to tolerate any retaliation against any person for asking questions or making good faith reports of possible violations of law, our policies or our Code of Ethics & Conduct. +PROPETRO  2023 Proxy Statement   |  13 +TABLE OF CONTENTS +Corporate Governance and Board Matters +Annual Meeting Attendance +While the Company does not have a specific policy about director attendance at annual meetings of stockholders, all directors are expected to attend meetings of the Board (and any committees thereof on which they serve) either in person or telephonically unless exigencies prevent them from attending. Each incumbent director, with the exception of Ms. Ricciardello, who was not appointed until January 2023, attended at least 75% of the aggregate of   (1) the total number of meetings of the Board (held during the period for which he or she has been a director) and (2) the total number of meetings of committees of the Board on which he or she served (during the periods that he or she served). Our non-employee directors meet at regularly scheduled executive sessions presided over by our Lead Independent Director. Additionally, our independent directors meet at least once a year without members of management or non-independent directors present. All of our directors who were members of the Board at the time of our 2022 annual meeting of stockholders attended the meeting. +Compensation Committee Interlocks and Insider Participation +During the year ended December 31, 2022, the Compensation Committee was comprised of Ms. Vion and Messrs. Moore and Best. Ms. Vion serves as committee chair. No executive officer of the Company served as a member of the board of directors or compensation committee of any other entity that has one or more executive officers serving as a member of our Board or Compensation Committee. +Board and Committee Activity and Structure +Our Board is governed by our certificate of incorporation, bylaws, the Investor Rights Agreement, charters of the standing committees of the Board, and the laws of the State of Delaware. +On December 31, 2018, we entered into the Investor Rights Agreement with an affiliate of Pioneer. The Investor Rights Agreement provides that Pioneer was granted: +(i) +the one-time right to designate an independent director to the Board and +(ii) +the right to designate a non-independent director to the Board for so long as Pioneer owns 5% or more of the Company’s outstanding common stock. +Pioneer has designated Mark S. Berg as the non-independent director and has no further rights to designate an independent director to the Board. +During 2022, our Board held seven meetings. There are currently three standing committees of the Board: +• +the Audit Committee, +• +the Compensation Committee, and +• +the Nominating and Corporate Governance Committee. +Members serve on these committees until their resignation or until as otherwise determined by our Board. The composition of the Board committees complies with the applicable rules of the NYSE and applicable law. Our Board has adopted a written charter for each of the standing committees, which can be found in the “Corporate Governance” subsection of the “Investors” section of our website at www.propetroservices.com . +In addition to the above governing documents, our Code of Ethics & Conduct that applies to all of our employees, as well as each member of the Board, can also be found in the “Corporate Governance” subsection of the “Investors” section of our website at www.propetroservices.com . The composition and responsibilities of each of the standing committees of our Board are as follows: +14  |   ir.propetroservices.com +TABLE OF CONTENTS +Corporate Governance and Board Matters +AUDIT COMMITTEE +MEETINGS IN 2022: 8 +KEY RESPONSIBILITIES +Our Audit Committee is directly responsible for, among other things, the appointment, compensation, retention and oversight of our independent registered public accounting firm. +The oversight of our independent public accounting firm includes: +• +reviewing the plans and results of the audit engagement with the firm, +• +approving any additional professional services provided by the firm, and +• +reviewing the independence of the firm. +The Audit Committee is also responsible for discussing the effectiveness of the internal controls over financial reporting with our independent registered public accounting firm and relevant financial management. +REPORT +The Report of our Audit Committee appears on page 72 of this proxy statement. +MEMBERS +Anthony J. +Best, Chair +Alan E. +Douglas +G. Larry +Lawrence +Mary P. Ricciardello +During the year ended December 31, 2022, the members of the Audit Committee were Messrs. Best, Douglas, and Lawrence. The Audit Committee is presently comprised of Messrs. Best, Douglas (until the expiration of his term at the 2023 annual meeting), and Lawrence and Ms. Ricciardello, with Mr. Best serving as committee chair. +QUALIFICATIONS +Our Audit Committee is comprised solely of  “independent” directors, as defined under and required by the NYSE rules and Rule 10A-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). +Our Board has determined that each of Messrs. Armour, Douglas, Lawrence, and Moore and Ms. Ricciardello qualify as an “audit committee financial expert,” as defined by the rules under the Exchange Act. +COMPENSATION COMMITTEE +MEETINGS IN 2022: 5 +KEY RESPONSIBILITIES +The Compensation Committee is responsible for, among other things, overseeing the discharge of the responsibilities of the Board relating to compensation of the Company’s officers and directors and reviewing the succession planning strategies of the Company. +In carrying out these responsibilities, the Compensation Committee reviews all components of executive compensation for consistency with our compensation philosophy and with the interests of our stockholders. +REPORT +The Report of our Compensation Committee appears on page 43 of this proxy statement. +MEMBERS +Michele +Vion, Chair +Anthony J. +Best +Jack B. +Moore +During the year ended December 31, 2022, the members of the Compensation Committee, were Messrs. Best and Moore and Ms. Vion, with Ms. Vion serving as committee chair. The Compensation Committee is presently comprised of Messrs. Best and Moore and Ms. Vion. +QUALIFICATIONS +Our Compensation Committee consists solely of  “independent” directors, as defined under and required by the NYSE rules and “non-employee directors” under Section 16 of the Exchange Act. +PROPETRO  2023 Proxy Statement   |  15 +TABLE OF CONTENTS +Corporate Governance and Board Matters +NOMINATING AND CORPORATE +GOVERNANCE COMMITTEE +MEETINGS IN 2022: 4 +KEY RESPONSIBILITIES +The Nominating and Corporate Governance Committee is responsible for, among other things: +• +identifying individuals qualified to become Board members; +• +selecting or recommending director nominees for each election of directors to the Board; +• +developing and recommending criteria for selecting qualified director candidates to the Board; +• +considering committee member qualifications, appointments and removals; +• +recommending corporate governance principles, codes of conduct and compliance mechanisms; +• +providing oversight in the evaluation of the Board and each committee thereof; +• +overseeing our ESG initiatives; and +• +developing an appropriate succession plan for our chief executive officer pursuant to our Corporate Governance Guidelines. +MEMBERS +Jack B. +Moore, Chair +Spencer D. +Armour III +Alan E. +Douglas +Michele +Vion +Mary P. +Ricciardello +During the year ended December 31, 2022, the members of the Nominating and Corporate Governance Committee were Messrs. Armour, Douglas, and Moore and Ms. Vion, with Mr. Moore serving as committee chair. The Nominating and Corporate Governance Committee is presently comprised of Messrs. Armour, Douglas (until the expiration of his term at the 2023 annual meeting), and Moore and Mss. Ricciardello and Vion. +QUALIFICATIONS +Our Nominating and Corporate Governance Committee consists solely of  “independent” directors, as defined under and required by the NYSE rules. +Role of the Board, Compensation Committee and Our Executive Officers +Executive compensation decisions are typically made on an annual basis by the Compensation Committee with input from our Chief Executive Officer. Specifically, after reviewing relevant market data and surveys within our industry, our Chief Executive Officer typically provides recommendations to the Compensation Committee regarding the compensation levels for our existing named executive officers and our executive compensation program as a whole. Our Chief Executive Officer generally attends all Compensation Committee meetings. After considering these recommendations, the Compensation Committee typically meets in executive session and adjusts base salary levels and non-equity award targets. In addition, the Compensation Committee determines the achievement of non-equity Incentive Award Plan metrics and the amount of equity awards from the Incentive Award Plan to be granted to each of our named executive officers. In making executive compensation recommendations, our Chief Executive Officer considers each named executive officer’s performance during the year, the Company’s performance during the year, as well as comparable company compensation levels. While the Compensation Committee gives considerable weight to our Chief Executive Officer’s recommendations on compensation matters, the Compensation Committee has the final decision-making authority on all executive compensation matters. +Role of External Advisors +The Compensation Committee engaged Pearl Meyer & Partners, LLC (“Pearl Meyer”) in 2021 to assist the Compensation Committee and the Board in evaluating, designing and implementing compensation practices. +The Compensation Committee reviews and assesses the independence and performance of its executive compensation consultant in accordance with applicable SEC and NYSE rules and regulations on an annual basis to confirm that the consultant is independent and meets all applicable statutory and regulatory requirements. +16  |   ir.propetroservices.com +TABLE OF CONTENTS +Corporate Governance and Board Matters +Director Nominations Process +The Nominating and Corporate Governance Committee may utilize a variety of methods for identifying potential nominees for directors, including considering potential candidates who come to their attention through current officers, directors, professional search firms or other persons. Once a potential nominee has been identified, the Nominating and Corporate Governance Committee evaluates whether the nominee has the appropriate skills and characteristics required to become a director in light of the then current make-up of the Board. This assessment includes an evaluation of the nominee’s judgment and skills, such as experience at a strategy/policy setting level, financial sophistication, leadership and objectivity, all in the context of the perceived needs of the Board at that point in time. One of the director nominees, Mr. Berg, was not recommended for nomination by the Nominating and Corporate Governance Committee but rather was appointed pursuant to the Investor Rights Agreement. +In February 2019, the Board amended our Corporate Governance Guidelines to specifically take the diversity of a potential director nominee’s gender, race, and ethnicity into account when considering candidates for the Board, and the Nominating and Corporate Governance Committee and the Board are committed to increasing Board diversity. Our Board believes that at a minimum all members of the Board should have the highest professional and personal ethics and values. In addition, each member of the Board must be committed to increasing stockholder value and should have enough time to carry out his or her responsibilities as a member of the Board. +Our Board monitors the mix of specific experience, qualifications, and skills of its directors in order to assure that the Board, as a whole, has the necessary tools to perform its oversight function effectively in light of the Company’s business and structure. +Stockholders may recommend individuals to the Nominating and Corporate Governance Committee for consideration as potential director candidates by submitting the names of the recommended individuals, together with appropriate biographical information and background materials, to: +The Nominating and Corporate Governance Committee +ProPetro Holding Corp. +c/o General Counsel and Corporate Secretary +P.O. Box 873 +Midland, Texas 79702 +In the event there is a vacancy, and assuming that appropriate biographical and background material has been provided on a timely basis, the Nominating and Corporate Governance Committee will evaluate stockholder-recommended candidates by following substantially the same process, and applying substantially the same criteria, as it follows for candidates submitted by others. +Director Orientation and Education +We provide each new director with an orientation that consists of meeting with senior management and others on our business operations, strategic plans, significant accounting and risk management issues, corporate governance, compliance, and key policies and practices. +The orientation sessions are tailored to the particular director depending on their orientation needs and generally include an overview of board fiduciary duties, board independence and public company reporting requirements. New directors are also provided the most recent reports presented to the Board and its committees by management and external advisors. +Each director is expected to participate in continuing educational programs as necessary to maintain the expertise necessary to perform his or her responsibilities as a director. In this regard, from time to time we provide pertinent articles, white papers, and information relating to our business, financial affairs, risks, competitors, corporate governance, areas of focus in shareholder activism, ESG trends, proxy advisory firm ratings, and changes in legal and regulatory issues. +We may also coordinate training and educational sessions for directors from outside experts and provide directors with tours of our facilities from time to time. +PROPETRO  2023 Proxy Statement   |  17 +TABLE OF CONTENTS +Corporate Governance and Board Matters +Certain Relationships and Related Party Transactions +RELATED PARTY TRANSACTIONS +Operations and Maintenance Yards +The Company also rents five yards from South Midkiff Partners, LLC, an entity partially owned by Spencer D. Armour III (a director) and David Sledge, the father of Sam Sledge, our Chief Executive Officer. Total annual rent expense in 2022 for each of the five yards was approximately $0.03 million, $0.03 million, $0.1 million, $0.1 million, and $0.2 million, respectively. +Transportation and Equipment Rental +Adam Muñoz, our President and Chief Operating Officer, has a family relationship with an employee of J&M Burns Transportation, an entity that provides transportation services to the Company. The employee receives a portion of his compensation from J&M Burns Transportation based on the amount of services sold by him to customers, including the Company. The Company incurred approximately $36.8 million in expense for the year ended December 31, 2022 for services provided to the Company by J&M Burns Transportation. +Executive Officer Family Members +J. Oscar Dominguez is our former Vice President of Frac Technical Services and the father-in-law of Adam Muñoz. Mr. Dominguez received total compensation of approximately $2.1 million for his services for the year ended December 31, 2022 (including $459,000 cash compensation, $286,000 non-cash equity compensation, $1.3 million cash as a severance payment and $15,000 cash payout for accrued paid time off). +Oscar M. Dominguez is our Vice President of Frac Operations and the brother-in-law of Adam Muñoz. Mr. Dominguez received total compensation of approximately $1.1 million for his services for the year ended December 31, 2022 (including $781,000 cash compensation and $276,000 non-cash equity compensation). +Roger Dominguez is our Supply Chain Logistics Manager and the brother-in-law of Adam Muñoz. Mr. Dominguez received total compensation of approximately $312,000 for his services for the year ended December 31, 2022 (including $260,000 cash compensation and $52,000 non-cash equity compensation). +Pioneer +On December 31, 2018, we consummated the purchase of certain pressure pumping assets and real property in connection with the Pioneer Pressure Pumping Acquisition. In connection with the consummation of the Pioneer Pressure Pumping Acquisition and effective January 1, 2019, we became a long-term service provider to Pioneer, providing pressure pumping and related services. In March, 2022, we amended and restated our agreement to provide pressure pumping and related services to Pioneer, which reduced the number of contracted fleets to six fleets from eight fleets, modified the pressure pumping scope of work and pricing mechanism for contracted fleets, replaced the idle fees arrangement with equipment reservation fees and provided for an initial term from January 1, 2022 through December 31, 2022, subject to extension and termination as described therein. On October 31, 2022, we entered into (i) a certain Pressure Pumping Services Agreement—Fleet One Simulfrac (the “Fleet One Pressure Pumping Agreement”) and (ii) a certain Pressure Pumping Services Agreement—Fleet Two (the “Fleet Two Pressure Pumping Agreement”), which replaced all previous agreements with Pioneer and reduced the number of contracted fleets to two fleets. The Fleet One Pressure Pumping Agreement is effective as of January 1, 2023 and will terminate on August 31, 2023 and is subject to certain extension, termination and release rights as described therein. The Fleet Two Pressure Pumping Agreement is effective as of January 1, 2023. In February 2023, we mutually agreed with Pioneer to terminate the Fleet Two Pressure Pumping Agreement, effective on or about May 12, 2023. Revenue from services provided to Pioneer (including reservation fees) accounted for approximately $422.8 million during the year ended December 31, 2022. +18  |   ir.propetroservices.com +TABLE OF CONTENTS +Corporate Governance and Board Matters +POLICIES AND PROCEDURES FOR RELATED PARTY TRANSACTIONS +Any request for us to enter into a transaction with an executive officer, director, principal stockholder or any of such persons’ immediate family members or affiliates, among others, in which the amount involved exceeds $120,000, must first be presented to our Audit Committee for review, consideration and approval. All of our directors and executive officers are required to report to the Audit Committee chair any such related person transaction. In approving or rejecting the proposed agreement, our Audit Committee shall consider the facts and circumstances available and deemed relevant to the Audit Committee, including, but not limited to, whether the transaction is on terms comparable to those that could be obtained in arm’s length dealings with an unrelated third party, the extent of the related party’s interest in the transaction and the conflicts of interest and corporate opportunity provisions of our certificate of incorporation. If we should discover related person transactions that have not been approved, the Audit Committee will be notified and will determine the appropriate action, including ratification, revision or termination of such transaction. +Director Compensation +Our Amended and Restated ProPetro Holding Corp. Non-Employee Director Compensation Policy (the “Director Compensation Policy”) provides that each eligible non-employee director receives the following: +All equity retainers consist of awards of restricted stock units (“RSUs”) that will vest in full on the earliest to occur of: (i) the first anniversary of the grant date, (ii) the day immediately preceding the first annual meeting of stockholders following the grant date, and (iii) the occurrence of a Change in Control, subject, in each case, to continuous service through the applicable vesting date. +The portion of the annual equity retainer that would have vested in the year following a non-employee director’s separation from service due to his or her death or disability will vest upon such separation from service. All annual retainers are pro-rated based on days of service for non-employee directors who join the Board during the applicable calendar year. The members of the Board are also entitled to reimbursement of expenses incurred in connection with attendance at Board and committee meetings in accordance with Company policy. +The following table summarizes the compensation paid for services provided by our non-employee directors during 2022. Mr. Gobe’s compensation paid for services provided as a non-employee director is summarized in the table entitled “Executive Compensation—Summary Compensation Table.” +Name +Fees Earned or Paid in Cash (1) +($) +Stock Awards (2) +($) +Total +($) +Spencer D. Armour III +90,000 +139,992 +229,992 +Mark S. Berg (3) +― +― +― +Anthony J. Best +125,000 +139,992 +264,992 +Alan E. Douglas +90,000 +139,992 +229,992 +G. Larry Lawrence +90,000 +139,992 +229,992 +Jack B. Moore +100,000 +139,992 +239,992 +Michele Vion +105,000 +139,992 +244,992 +(1) +Reflects annual cash retainer payments made pursuant to the Director Compensation Policy. +(2) +Reflects the grant date fair value of RSU awards on the date of grant computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 (“FASB ASC Topic 718”). For information +PROPETRO  2023 Proxy Statement   |  19 +TABLE OF CONTENTS +Corporate Governance and Board Matters +regarding assumptions underlying the valuation of equity awards, see Note 13 to the Consolidated Financial Statements included in our 2022 Annual Report on Form 10-K. +(3) +Mr. Berg has elected not to be compensated for his service as a director. +The following table sets forth the aggregate number of outstanding stock awards held by each of our non-employee directors on December 31, 2022. With the exception of Mr. Sledge who held 21,750 stock options as of December 31, 2022, none of our directors held stock options as of December 31, 2022. The aggregate number of Mr. Gobe’s outstanding awards is included in the table entitled “Executive Compensation—Outstanding Equity Awards at Fiscal Year End.” +Name +Aggregate Number of Stock +Awards +(#) +Spencer D. Armour III +10,137 +Mark S. Berg (1) +― +Anthony J. Best +10,137 +Michele Vion +10,137 +Alan E. Douglas +10,137 +G. Larry Lawrence +10,137 +Jack B. Moore +10,137 +(1) +Mr. Berg has elected not to be compensated for his service as a director. +Non-Employee Director Stock Ownership Guidelines +We maintain a non-employee director stock ownership policy that is applicable to all of our eligible non-employee directors. Pursuant to this policy, each non-employee director is encouraged to hold, on and following the later of the fifth anniversary of: (i) the closing of our initial public offering (“IPO”) and (ii) the non-employee director’s election or appointment to the Board, shares of our common stock or certain equity awards (valued based on the closing price of our common stock) with a value equal to or in excess of 300% of the non-employee director’s annual cash retainer, as such threshold may be amended by the Nominating and Corporate Governance Committee from time to time. +Outstanding awards of unvested time-based RSUs will count toward a non-employee director’s qualifying shareholdings to the extent the RSUs are not settled in cash. A non-employee director who is not compensated for his or her services as non-employee director pursuant to the Director Compensation Policy or any other plan, policy or agreement then in effect is not subject to the guidelines set forth in our director stock ownership policy. +As of December 31, 2022, each of our non-employee directors was in compliance with these ownership guidelines. The stock ownership guidelines do not apply to Mr. Berg since he does not receive compensation for his services as a non-employee director. A description of each non-employee director’s beneficial ownership of the Company’s common stock is included in the section entitled “Security Ownership of Certain Beneficial Owners and Management.” +20  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Officers +Our executive officers serve at the direction of our Board. All of our executive officers and certain other key officers are listed in the following table, and certain information concerning those officers, except for Mr. Sledge, who is a member of the Board, follows the table. +Name +Age +Position with ProPetro Holding Corp +Executive Officer +since +Samuel D. Sledge +36 +Chief Executive Officer and Director +2020 +David S. Schorlemer +56 +Chief Financial Officer +2020 +Adam Muñoz +40 +President and Chief Operating Officer +2020 +John J. “Jody” Mitchell +40 +General Counsel and Corporate Secretary +2023 +Elo Omavuezi (1) +40 +Chief Accounting Officer +2019 +(1) +Mr. Omavuezi is a key officer but does not serve as an executive officer of the Company. He has served as the Chief Accounting Officer since 2019. +See “Corporate Governance and Board Matters—Nominees” for biographical information for Mr. Sledge. +DAVID S. SCHORLEMER +David S. Schorlemer began serving as a Special Advisor to the Chief Financial Officer on October 12, 2020 until his appointment as Chief Financial Officer on October 23, 2020. Mr. Schorlemer has two decades of experience in senior level positions in public and private companies. He most recently served as Executive Vice President, Chief Financial Officer, Treasurer and Secretary of Basic Energy Services, Inc., a Fort Worth, Texas based oilfield services company, from September 2018 until joining the Company. Prior to that, he served as the Chief Financial Officer of Gulf Island Fabrication, Inc. from January 2017 to August 2018. His work history also includes serving as Chief Financial Officer for three oilfield services companies: GR Energy Services Management, LP from January 2016 to December 2016, Stallion Oilfield Holdings, Inc., September 2004 to December 2015 and Q Services, Inc. from July 1997 until its merger with Key Energy Services, Inc. in July 2002. He also held the role of vice president, marketing and strategic planning for Key Energy Services, Inc. from July 2002 to September 2004. Prior to entering the energy services industry, Mr. Schorlemer was a technology consultant and project manager with Accenture’s Technology Practice where he worked on various domestic and international projects with Fortune 500 Companies in industries including: telecommunications, transportation, automotive and manufacturing and oil and gas. Mr. Schorlemer earned his Bachelor of Business Administration degree in finance from The University of Texas, and his Master of Business Administration from Texas A&M University. +AGE 56 +CHIEF FINANCIAL OFFICER since October 2020 +PROPETRO  2023 Proxy Statement   |  21 +TABLE OF CONTENTS +Executive Officers +ADAM MUÑOZ +Adam Muñoz has served as our President and Chief Operating Officer since August 2021, and prior to that, he served as Chief Operating Officer since January 2021 and served as Senior Vice President of Operations since March 2020. Mr. Muñoz joined the Company in 2010 to initiate ProPetro’s Permian pressure pumping operation. Prior to joining ProPetro, Mr. Muñoz held sales and operations roles at Frac Tech Services and Weatherford International. Since joining ProPetro, Mr. Muñoz has served as the Director of Business Development and Technical Services where he was responsible for overseeing the growth of the hydraulic fracturing operations as well as managing the department’s day-to-day technical services. Mr. Muñoz has most recently served as the Vice President of Frac Services where his duties included leading the hydraulic fracturing division through specific efforts to increase operational efficiencies and maximize financial productivity. Mr. Muñoz received a Bachelor of Business Marketing from The University of Texas at the Permian Basin. +AGE 40 +PRESIDENT AND CHIEF OPERATING OFFICER since August 2021 +JOHN J. “JODY” +MITCHELL +Jody Mitchell has served as our General Counsel and Corporate Secretary of the Company since January 2023. Prior to his appointment as General Counsel, Mr. Mitchell served as the Company’s Vice President and Deputy General Counsel since April 2021. Before joining the Company, Mr. Mitchell served in various roles at Concho Resources Inc., a hydrocarbon exploration company acquired by ConocoPhillips in 2021, from 2014 to 2021, including Director of Marketing and Midstream and, prior to that, Associate General Counsel. Before joining Concho, Mr. Mitchell served as counsel supporting the upstream and midstream businesses at Petrohawk Energy Corporation and at BHP Billiton following BHP Billiton’s acquisition of Petrohawk. Mr. Mitchell began his career as an associate at Locke Lord Bissell & Liddell LLP, where he concentrated on oil, gas and energy litigation and construction litigation. Mr. Mitchell holds a Bachelor of Arts from the University of Texas and a Juris Doctor from the University of Houston Law Center. +AGE 40 +GENERAL COUNSEL AND CORPORATE SECRETARY since January 2023 +ELO OMAVUEZI +Elo Omavuezi has served as our Chief Accounting Officer since October 2019. Mr. Omavuezi previously served as the Director of Financial Reporting and Technical Accounting of the Company from April 2017 to October 2019. Prior to that, Mr. Omavuezi had over 10 years of accounting, internal controls and management experience serving publicly listed companies in the oilfield service and construction industries during his time with Deloitte. Mr. Omavuezi was previously employed by Deloitte as an Audit Manager from June 2014 to April 2017 and an Audit Senior from January 2007 to April 2014. Mr. Omavuezi holds a Bachelor of Science in Accounting from the University of Benin and a Master’s degree in Finance and Investment with Distinction from Brunel University and is a Certified Public Accountant. +AGE 40 +CHIEF ACCOUNTING OFFICER since October 2019 +22  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +Proposal 2 —Advisory Vote to Approve Named Executive Officer Compensation +We are asking stockholders to approve, on a non-binding advisory basis, the compensation of our Named Executive Officers as disclosed in this proxy statement. As described below in “Compensation Discussion and Analysis,” the Compensation Committee has structured our executive compensation program to achieve the following guiding principles: +• +Reward executives for exceptional performance and hold them accountable for poor performance in a manner that adheres to our values +• +Align executive interests with those of our stockholders by making a substantial portion of compensation performance-based and “at risk” +• +Provide the necessary flexibility to respond to varying market conditions and changing circumstances with a structure that ensures accountability in our cyclical and volatile business +• +Remain competitive in our industry in order to attract, retain, and motivate the talent that is necessary to achieve our financial and strategic goals +• +Be internally consistent and equitable +We urge stockholders to read the section entitled “Compensation Discussion and Analysis” beginning on page 24 of this proxy statement, which describes in more detail how our executive compensation policies and procedures operate and are designed to achieve our compensation objectives, as well as the compensation tables and narrative included therein beginning on page 44, which provide detailed information on the compensation of our Named Executive Officers. The Compensation Committee and the Board believe that the policies and procedures articulated in the “Compensation Discussion and Analysis” are effective in achieving our goals and that the compensation of our Named Executive Officers reported in this proxy statement has and will contribute to the Company’s recent and long-term success. +In accordance with Section 14A of the Exchange Act, and as a matter of good corporate governance, we are asking stockholders to approve the following resolution at the annual meeting: +RESOLVED , that the stockholders of the Company approve, on a non-binding advisory basis, the compensation of the Company’s Named Executive Officers as disclosed in the Compensation Discussion and Analysis section and the related compensation tables, notes and narrative in the proxy statement for the Company’s 2023 annual meeting. +VOTE REQUIRED +This advisory resolution, commonly referred to as a “say-on-pay” resolution, is non-binding on the Board. Although non-binding, the Board and the Compensation Committee will review and consider the voting results when making future decisions regarding our executive compensation program. +The affirmative “FOR” vote of the holders of a majority of the shares represented at the meeting (in person or by proxy) and entitled to vote is required to approve this Proposal No. 2. Brokers do not have discretion to vote on this proposal without your instruction. If you do not instruct your broker how to vote on this proposal, your broker will deliver a non-vote on this proposal. Abstentions and broker non-votes will have no effect on Proposal No. 2. +We currently intend to hold the next non-binding advisory vote to approve the compensation of our Named Executive Officers at our 2024 annual meeting of stockholders, unless our Board modifies its policy of holding this vote on an annual basis. +The Board of Directors unanimously recommends a vote FOR the approval of the compensation of our named executive officers. +PROPETRO  2023 Proxy Statement   |  23 +TABLE OF CONTENTS +Executive Compensation +Compensation Discussion and Analysis +CD&A Contents +25 +I. +EXECUTIVE COMPENSATION HIGHLIGHTS +25 +Named Executive Officers for 2022 +25 +2022 Company Performance +25 +Successful Execution of Our Leadership Succession Plan +26 +Fleet Transition Investments, Strategic Growth and ESG Advancement +27 +Guiding Principles +27 +Performance-Based Compensation Philosophy +28 +Compensation Policies and Practices +28 +Say on Pay Advisory Vote +29 +II. +WHAT GUIDES OUR PROGRAM +29 +Philosophy and Guiding Principles of Our Compensation Program +30 +How We Make Compensation Decisions +31 +Use of Peer Compensation Data +32 +III. +ELEMENTS OF COMPENSATION AND 2022 DECISIONS IN DETAIL +33 +Base Salary +33 +Annual Cash Incentive Awards +37 +Long Term Incentive Awards +38 +Employee Benefits, Perquisites and Special Payments +39 +IV. +OTHER COMPENSATION PRACTICES, POLICIES AND GUIDELINES +39 +Succession and Additional Agreements +40 +Executive Severance Plan +41 +Employee Compensation Claw-Back Policy +41 +Executive Stock Ownership Policy +41 +Prohibition on Hedging and Pledging +42 +No Tax Gross-Ups +42 +Regulatory Considerations +42 +Compensation Risk Assessment +24  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +I. +EXECUTIVE COMPENSATION HIGHLIGHTS +This Compensation Discussion and Analysis (“CD&A”) describes our compensation practices and the compensation awarded to, earned by, or paid to each of our named executive officers (the “Named Executive Officers”) during the last completed fiscal year. +Named Executive Officers for 2022 +For the year ended December 31, 2022, our Named Executive Officers consisted of the following: +Samuel D. +Sledge +Adam +Muñoz +David S. +Schorlemer +Newton W. “Trey” +Wilson III +Phillip A. +Gobe +Chief Executive Officer +President and Chief Operating Officer +Chief Financial Officer +Former General Counsel and Corporate Secretary +Former Executive Chairman +2022 Company Performance +$1.3 Billion +$300 Million +Total Revenue +Net Cash Provided by Operating Activities +Successful Execution of Our Leadership Succession Plan +PHILLIP A. +GOBE +SAMUEL D. +SLEDGE +ADAM +MUÑOZ +Chairman of the Board and Former Executive Chairman of the Board +Chief Executive Officer +President and Chief Operating Officer +NEWTON W. +“TREY” +WILSON III +JOHN J. “JODY” +MITCHELL +Former General Counsel and Corporate Secretary +General Counsel and Corporate Secretary +The Board and the Compensation Committee have built and seamlessly executed a strong and successful succession plan for the Company over the last several years. +On August 31, 2021, years of succession planning by the Compensation Committee and the Board came to fruition when Samuel D. Sledge, previously President, was appointed as Chief Executive Officer and Adam Muñoz, previously Chief Operating Officer, was appointed as President and Chief Operating Officer of the Company. Phillip A. +PROPETRO  2023 Proxy Statement   |  25 +TABLE OF CONTENTS +Executive Compensation +Gobe, who preceded Mr. Sledge as Chief Executive Officer, continued to support the Company and Mr. Sledge in the role of Executive Chairman of the Board until March 31, 2022, when he resigned from that position. Mr. Gobe has continued his service with the Company as the non-executive Chairman of the Board. +Effective as of December 31, 2022, Newton W. Wilson III retired from the Company and resigned from his positions as General Counsel and Corporate Secretary of the Company. Effective January 1, 2023, John J. Mitchell was appointed to succeed Mr. Wilson as General Counsel and Corporate Secretary. Mr. Mitchell has over a decade of in-house legal experience at companies in the energy industry in Texas. Prior to his appointment, Mr. Mitchell served as Vice President and Deputy General Counsel of the Company, during which time he gained a deep knowledge of our business and became an integral member of our team. The Board, the Compensation Committee, and Mr. Wilson identified Mr. Mitchell as a strong candidate for succeeding to the role of General Counsel and Corporate Secretary at the time of his hiring in April of 2021. As a result, the Company provided Mr. Mitchell with increasing responsibility and leadership opportunities over the course of his tenure in that role, ensuring a smooth transition to his new role and a successful execution of the Company’s succession plan. +Fleet Transition Investments, Strategic Growth and ESG Advancement +For 2022, the Compensation Committee structured the performance metrics for the Amended and Restated ProPetro Holding Corp. Executive Incentive Bonus Plan (the “Annual Bonus Plan”) to align with and incentivize the Company’s strategic fleet transition initiatives. The Company’s business plan for 2022 included a significant reinvestment cycle as the Company sought to revitalize its legacy fleet and undertake meaningful investments to acquire and deploy next generation Tier IV DGB and electric fleet equipment in order to allow the Company to provide a more competitive and sustainable service offering for its customers. The Compensation Committee therefore structured the Annual Bonus Plan metrics to allow the Company’s executives to focus on important long-term and revenue generating capital investments and improvements while motivating the executives to continue to protect the balance sheet. +The implementation of these goals resulted in Annual Bonus Plan metrics that focused on growing the Company’s Adjusted EBITDA by increasing the weighting of this metric from 40% to 50% and increasing target level achievement by over 50% from the 2021 target and by over 85% from the Company’s actual performance in 2021. By setting an aggressive target for the Adjusted EBITDA metric, the Company’s executives would be incentivized to grow earnings to support the necessary capital investments. Additionally, to further strengthen the focus on and accountability for protecting the Company’s balance sheet during this reinvestment period, the Compensation Committee elected to retain the free cash flow (“FCF”) metric that had been originally instituted in the 2021 plan. Due to the strategic investments planned for 2022, the Committee rebalanced the weighting of the Adjusted EBITDA and FCF metrics and set the achievement goals as necessary to align with the Company’s plan. The definitions of Adjusted EBITDA and FCF and other details regarding the use of these metrics in the Annual Bonus Plan can be found in Section III under the discussion of Annual Cash Incentive Awards in the description of Performance Measures and Payout Results beginning on page 33 below. +After initially instituting specific sustainability and ESG compensation metrics in the 2021 plan, the 2022 Annual Bonus Plan was designed to include specific metrics that were tailored to align with the Company’s strategic initiatives, with a focus on the following: +• +Identify, organize, and prepare to report on the Company’s greenhouse gas emissions profile, +• +Align with the Company’s business objectives for fleet transition and strategic customer contracts, +• +Provide for continued development of the Company’s employee base and current and future leaders through training on ESG and personal development topics, and +• +Increase community involvement through a Company-sponsored initiative and policy implementation to facilitate individual employee community engagement. +In addition, the Compensation Committee evaluated the treatment of the Company’s strategic acquisition of Silvertip Completion Services (“Silvertip”), which was executed in 2022, and decided that because the acquisition was completed in November 2022, the Adjusted EBITDA, FCF and Safety metrics of the Annual Bonus Plan should not be adjusted to account for the incremental results of the performance of this new operating segment. Rather, the Compensation Committee determined that the performance attributable to Silvertip should be excluded from the assessment of performance with respect to these metrics and that the successful completion of the transaction should be included as a factor in assessing the Individual and Operational performance metric in connection with the +26  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +execution of the Company’s strategic objective of expanding its service offering of complementary completion services, as further described below, beginning on page 33. +Guiding Principles +Reward executives for exceptional performance and hold them accountable for poor performance in a manner that adheres to our values +Align executive interests with those of our stockholders by making a substantial portion of compensation performance-based and “at risk” +Provide the necessary flexibility to respond to varying market conditions and changing circumstances with a structure that ensures accountability in our cyclical and volatile business +Remain competitive in our industry in order to attract, retain and motivate the talent that is necessary to achieve our financial and strategic goals +Be internally consistent and equitable +Performance-Based Compensation Philosophy +Making a substantial portion of our Named Executive Officers’ compensation “at risk” and performance-based ensures that their interests are strongly aligned with those of our stockholders and, as a result, is one of the guiding principles of our executive compensation philosophy. +CEO (1)(2) +Other NEOs Average (2)(3) +(1) +Reflects compensation for Mr. Sledge. +(2) +RSU and performance share unit (“PSU”) figures reflect the aggregate grant date fair value of the RSU and PSU awards granted in 2022, calculated in accordance with FASB ASC Topic 718. Annual Incentive Bonus figures represent the 2022 target award opportunity under our Annual Bonus Plan. +(3) +Phillip Gobe served as Executive Chairman of the Board for a portion of 2022. As a result, his compensation has been excluded from this chart as it caused the figures reported not to be representative of the compensation generally paid to Named Executive Officers not serving in the Chief Executive Officer position both because of his former position (which no longer exists) and his partial year of service in that role. +PROPETRO  2023 Proxy Statement   |  27 +TABLE OF CONTENTS +Executive Compensation +Compensation Policies and Practices +The following features of our executive compensation program promote sound compensation governance and are designed in the best interests of our stockholders and executives. +What We Do +What We Don’t Do +At least 50% of Long Term Incentive Awards are performance-based for Named Executive Officers +Use a mix of absolute and relative financial performance metrics (including relative total shareholder return (“TSR”)) in our incentive plans to avoid duplication of incentives across short- and long-term programs +Use ESG metrics in our Annual Bonus Plan +Claw-back Policy +Independent compensation consultant +Independent Compensation Committee reviews and approves (or, for the CEO and Executive Chairman, recommends for Board approval) the compensation of our Named Executive Officers +Annual Say-on-Pay vote +Annual Compensation Committee assessment of compensation practices to eliminate any excessive risk +Significant stock ownership requirements +Single-trigger change in control payments +Tax gross-ups on severance or equity compensation +Repricing of stock options +Backdating of stock options +Employment agreements with executive officers +Derivative or hedging transactions or pledging of our securities by directors and executive officers +Say-on-Pay Advisory Vote +At the Company’s 2022 annual meeting, the stockholders of the Company were asked to approve, on an advisory basis, the compensation of the Named Executive Officers. Advisory votes in favor of our executive compensation program were cast by over 98% of the shares of common stock of the Company represented at the meeting (in person or by proxy) and entitled to vote. The Compensation Committee took the results of the “Say-on-Pay” vote in account when evaluating the compensation of the Named Executive Officers in 2022. In part because the result of the vote was overwhelmingly positive, the Compensation Committee decided to retain our overall approach to executive compensation. We have continued, and plan to continue, engaging in ongoing stockholder outreach regarding corporate governance generally, including executive compensation programs. +28  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +II. WHAT GUIDES OUR PROGRAM +Our executive compensation program is designed to attract, motivate, and retain the management talent that we believe is necessary to achieve our financial and strategic goals. Further, we believe that our executive compensation program should be appropriately tailored to balance short-term compensation with intermediate and long-term compensation while allowing for measurement of and accountability for strategic goals in varying market conditions. We believe this structure effectively aligns the interests of our executives with the interests of our stockholders. +In establishing and evaluating our executive compensation programs, the Compensation Committee strives to achieve total compensation for our executives that reflects their individual contributions to the Company, responsibilities, duties, and experience and is competitive with the companies with which we compete for executive talent. +Philosophy and Guiding Principles of Our Compensation Program +Our compensation program is guided by the following principles: +1 +Reward for Exceptional Performance and Accountability for Poor Performance +Our Named Executive Officers should be rewarded for exceptional performance and held accountable for poor performance with respect to our annual and longer-term strategic goals. Our Named Executive Officers must work to achieve these goals in a manner that is consistent with our values and policies. We satisfy this objective by tying a significant portion of each Named Executive Officer’s compensation to the achievement of financial, strategic, and operational goals based on both short- and long-term corporate performance measures while retaining sufficient flexibility to modify or claw-back compensation if necessary. We also retain the flexibility to structure the performance measures to respond to the changing needs of the business through varying market cycles. See “Annual Cash Incentive Awards” and “Long Term Incentive Awards” below. +2 +Align Interests of Executives and Stockholders +Compensation for our Named Executive Officers should align their interests with those of our stockholders. Our compensation program aligns pay to performance by making a substantial portion of total executive compensation variable, or “at risk,” through an annual bonus program based on our performance goals and the granting of long-term incentive equity awards, which include time-vested RSUs and performance-based RSUs. As performance goals are met, not met, or exceeded, executives are rewarded commensurately. Our Stock Ownership Guidelines also require each Named Executive Officer to retain significant ownership in the Company’s common stock such that they are invested in our success over the long term along with our stockholders. +3 +Flexibility to Respond to Changing Circumstances +We are in a cyclical and volatile business and unprecedented economic times. As a result, our Compensation Committee feels it is important to have a flexible compensation program that is responsive to unforeseen circumstances that arise during the year. To meet this objective, the Compensation Committee retains discretion to increase or decrease the bonuses paid to each Named Executive Officer pursuant to our Annual Bonus Plan from the amount that would be indicated by the pre-established performance metrics if circumstances so warrant. +4 +Industry Competitive +Total executive compensation should be industry-competitive so that we can attract, retain, and motivate talented executives with the experience and skills necessary for our success. We satisfy this objective by staying apprised, with the assistance of the Compensation Committee’s independent compensation advisor, of the amounts and types of executive compensation paid to similarly situated executives by companies with which we compete for executive talent as well as general industry trends and best practices. +5 +Internally Consistent and Equitable +Executive compensation should be internally consistent and equitable. We satisfy this objective by considering not only the compensation paid by our peer companies, but also our Named Executive Officers’ capabilities, levels of experience, tenures, positions, responsibilities, and contributions when setting their compensation. Additionally, our Compensation Committee feels that our Named Executive Officers should have a larger proportion of their compensation “at risk” and tied to corporate performance than our general employee population because they are typically in a position to have a more direct impact on the achievement of our performance goals. +PROPETRO  2023 Proxy Statement   |  29 +TABLE OF CONTENTS +Executive Compensation +How We Make Compensation Decisions +THE ROLE OF THE COMPENSATION COMMITTEE +Our Compensation Committee is comprised of independent, non-employee members of the Board. The Compensation Committee is responsible for establishing the elements, terms, and target value of compensation paid or delivered to our Named Executive Officers but often consults the full Board with respect to material compensation actions. For example, the Compensation Committee typically makes a recommendation to the non-employee members of the Board, who in turn consider and approve the annual compensation of the Chief Executive Officer and, when applicable, Executive Chairman, based upon such recommendations. Our Compensation Committee is also involved in all executive succession planning. Details of the Compensation Committee’s authority and responsibilities are specified in its charter, which may be accessed at https://ir.propetroservices.com/compensation-committee-charter . In determining the compensation of our Named Executive Officers, the Compensation Committee considers: +• +the information and advice provided by its compensation consultant, +• +our corporate goals, +• +historic and projected performance, +• +the current economic and commodities environment, +• +individual performance, experience, and responsibilities of each of our Named Executive Officers, +• +the results of the “Say-on-Pay” vote and feedback received from stockholders through our outreach and engagement efforts, and +• +other relevant factors. +THE ROLE OF EXECUTIVE OFFICERS IN COMPENSATION DECISIONS +With respect to the compensation of the Named Executive Officers other than our Chief Executive Officer, the Compensation Committee considers the recommendations of our Chief Executive Officer. Additionally, in light of our Named Executive Officers’ integral role in establishing and executing the Company’s overall operational and financial objectives, the Compensation Committee requests that our Chief Executive Officer provide the initial recommendations on the appropriate goals for the performance metrics used under our Annual Bonus Plan and may choose to accept or modify these recommendations in its sole discretion. In addition, the Compensation Committee may invite any Named Executive Officer to attend Compensation Committee meetings to report on the Company’s progress with respect to the interim or final status of performance metrics. All Named Executive Officers are excluded from any decisions or discussions regarding their individual compensation. +THE ROLE OF THE INDEPENDENT COMPENSATION CONSULTANT +Pearl Meyer served as the Compensation Committee’s independent compensation consultant in 2022. The compensation consultant provides advice to and works with the Compensation Committee in designing and implementing the structure and mechanics of the Company’s executive compensation program, as well as other matters related to officer, senior management, and director compensation and corporate governance. For example, our compensation consultant regularly updates the Compensation Committee on regulatory changes impacting executive compensation, proxy advisor policies, and compensation-related risks. In addition, they provide the Compensation Committee with relevant data, including market and peer-company compensation and performance surveys and information and advice regarding trends and developments in executive and director compensation practices in our industry. This information assists the Compensation Committee in making executive and director compensation decisions based on market pay levels and best practices. +Our compensation consultant reports directly and exclusively to the Compensation Committee and does not provide any other services to management, the Company, or its affiliates. While the Compensation Committee generally reviews and considers information and recommendations provided by the compensation consultant, they do not make compensation-related decisions for the Compensation Committee or otherwise with respect to the Company. The Compensation Committee has the discretion to allow our compensation consultant to work directly with management in preparing or reviewing materials for the Compensation Committee’s consideration. During 2022, and after taking into consideration the factors listed in Section 303A.05(c)(iv) of the “NYSE” Listed Company Manual, the Compensation Committee concluded that neither it nor the Company has any conflicts of interest with +30  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +Pearl Meyer, and that Pearl Meyer was independent from management. Other than Pearl Meyer, no other compensation consultants provided services to the Compensation Committee during 2022. +Use of Peer Compensation Data +The Company competes with business entities across multiple industries for top executive-level talent. To this end, the Compensation Committee evaluates, on an annual basis, industry-specific and general market compensation practices and trends to ensure that our program and Named Executive Officer pay opportunities remain appropriately competitive. As part of its evaluation, the Compensation Committee works with its independent consultant to validate that the companies included in its peer group are as comparable as possible to the Company in terms of operations, revenue, market capitalization, and geographic location. +The 2022 peer group was determined by the Compensation Committee based on an in-depth review from its independent compensation consultant. This review included an assessment of potential comparators to evaluate the degree to which the current peers have kept pace with the Company’s growth and evolution, as well as an examination of the broader marketplace. Following such review and with input and support from the Company’s management, Pearl Meyer recommended, and the Compensation Committee agreed, that no modifications were necessary and that the 2022 peer group should remain the same as the 2021 peer group. In setting 2022 target compensation levels for the Named Executive Officers, as well as evaluating TSR performance for the PSUs granted in 2022, the Company used the 2022 peer group detailed below (such companies, the “2022 Peer Group”): +• +Archrock, Inc. +• +ChampionX Corporation +• +Helmerich & Payne, Inc. +• +Liberty Oilfield Services Inc. +• +Nabors Industries Ltd. +• +NexTier Oilfield Solutions Inc. +• +Nine Energy Services Inc. +• +Oil States International, Inc. +• +Patterson-UTI Energy, Inc. +• +Precision Drilling Corporation +• +RPC, Inc. +• +Select Energy Services, Inc. +• +U.S. Silica Holdings. Inc +In 2022, the comparative compensation data reviewed by the Compensation Committee was created by Pearl Meyer based on data from a blend of the 2022 Peer Group and survey data collected by Pearl Meyer from companies in the energy industry with corporate revenues of approximately $1 billion (the “Peer Data”). Data from both sources was used to provide the best mix of authorities for competitive positions, and to help smooth volatility of changes in the peer group. The Compensation Committee generally targets total compensation for each of our Named Executive Officers and directors, as well as each element of compensation, at the 50th percentile of the Peer Data. However, the Compensation Committee also considers many other factors when establishing compensation levels, including, but not limited to internal pay equity at the Company, each executive’s experience and responsibility, succession planning, and recruiting and retention concerns. +As a result, the compensation of our Named Executive Officers and directors may be higher or lower than the 50th percentile of the 2022 Peer Group or the Peer Data. +PROPETRO  2023 Proxy Statement   |  31 +TABLE OF CONTENTS +Executive Compensation +III. ELEMENTS OF COMPENSATION AND 2022 DECISIONS IN DETAIL +As shown below, a significant portion of the target compensation for our Named Executive Officers in 2022 was performance-based and an even larger portion is variable or “at risk,” meaning that it can be forfeited, and its value is dependent upon factors such as our stock price or company performance. +Element +Purpose +Changes for 2022 +◄ FIXED ► +Short-Term +BASE +SALARY +• +To provide a consistent, minimum level of pay that is sufficient to allow us to attract and retain executives with the appropriate skills and experience for their positions +• +Material modifications reflected changes in roles, duties, and responsibilities +◄ AT RISK ► +ANNUAL +CASH +INCENTIVE +BONUS +• +To motivate and reward the achievement of our annual individual and operational performance goals +• +70% was based on the achievement of quantitative performance goals and 30% was based upon a qualitative analysis of individual and operational performance for the fiscal year +• +Increased focus on Adjusted EBITDA to support capital reinvestment program; more specific goals established for ESG +Long- +Term +LONG-TERM +INCENTIVE +AWARDS +• +To ensure retention and drive performance, while aligning the interests of our Named Executive Officers with those of our stockholders +• +50% RSUs that vest equally on each of the first three anniversaries of grant, and 50% PSUs that vest, if earned, following the completion of a three-year performance period, in each case subject to continued employment +• +Moved from 40/60 in 2021 to 50/50 in 2022 division between RSUs and PSUs in order to better reflect market practices +• +Revised PSU agreement terms to ensure continued motivation to exceed peer company performance, even in a negative TSR environment +32  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +Base Salary +The Compensation Committee monitors and adjusts salaries for our Named Executive Officers over time as necessary to remain competitive with market rates for similarly situated officers at our peer companies and to reflect changes in each Named Executive Officer’s role, duties and responsibilities. In some cases, the Board approves the base salary level for the Chief Executive Officer and Executive Chairman of the Board. +Base Salary as of +Name +December 2021 +($) +December 2022 +($) +Samuel D. Sledge (1) +475,000 +700,000 +David S. Schorlemer (2) +450,000 +477,000 +Adam Muñoz (3) +475,000 +550,000 +Newton W. “Trey” Wilson III (2) +400,000 +420,000 +Phillip A. Gobe (4) +810,000 +n/a +(1) +Mr. Sledge was appointed as Chief Executive Officer, effective August 31, 2021, but his base salary was not modified. In February of 2022, Mr. Sledge’s base salary was increased to reflect his position as Chief Executive Officer. +(2) +Slight increases in base salary for Messrs. Schorlemer and Wilson were to ensure their compensation remained competitive with individuals in similar positions at members of the 2022 Peer Group. +(3) +Mr. Muñoz was appointed as President and Chief Operating Officer, effective August 31, 2021, at which time no modifications were made to his base salary. In February of 2022, Mr. Muñoz’s base salary was increased to reflect his position as President and Chief Operating Officer. +(4) +Mr. Gobe’s base salary was decreased to $810,000 in connection with his resignation as Chief Executive Officer and appointment as Executive Chairman of the Board. Upon his resignation as Executive Chairman of the Board he began receiving the compensation specified in the Director Compensation Policy and outlined above in the section of this proxy statement entitled “—Director Compensation.” +Annual Cash Incentive Awards +The Annual Bonus Plan governs cash incentive awards made each year to our Named Executive Officers. Awards under the Annual Bonus Plan are tied to the achievement of performance goals, which may be based on qualitative or quantitative measures, or both, as determined by the Compensation Committee. +TARGET AWARD OPPORTUNITIES +In February 2022, the Compensation Committee (or in the case of Messrs. Gobe and Sledge, the Board) established the following target bonuses under the Annual Bonus Plan for each of the Named Executive Officers, which are unchanged from the target bonuses in place at the end of 2022: +Name +2022 Target Bonus +Award Opportunity +Samuel D. Sledge +100 % +David S. Schorlemer +80 % +Adam Muñoz +100 % +Newton W. “Trey” Wilson III +75 % +Phillip A. Gobe +100 % +Target bonus levels for each executive were established or recommended, as applicable, by the Compensation Committee after reviewing peer group data and considering each Named Executive Officer’s responsibility and experience. +PROPETRO  2023 Proxy Statement   |  33 +TABLE OF CONTENTS +Executive Compensation +PERFORMANCE MEASURES AND PAYOUT RESULTS +Each year, the Compensation Committee establishes performance metrics and threshold, target, and maximum goals for each such metric. Potential payouts under the Annual Bonus Plan depend on the actual performance level for each metric established by the Committee, as outlined below. +Performance Level +Payout (as a % of +Target Bonus) +Threshold +50 % +Target +100 % +Maximum +200 % +If performance falls between the specified performance levels, payments are generally determined via straight-line interpolation. If performance falls below the threshold performance level, no payments will be awarded. The Annual Bonus Plan provides the Compensation Committee or the Board with the discretion to increase or decrease actual payout amounts otherwise resulting from the pre-established metrics, as it may deem necessary. +Under the 2022 Annual Bonus Plan, as in prior years, the Compensation Committee selected a mix of quantitative and qualitative performance metrics to incentivize achievement of specific pre-established financial and safety metrics, while enabling the Compensation Committee the ability to encourage performance with respect to areas that are important to the growth and success of the Company but are harder to measure. While the Compensation Committee values qualitative metrics as a tool, it felt that the vast majority of the annual bonus should be calculated based on quantitative metrics, with a significant emphasis on financial metrics. To that end, 70% of each Named Executive Officer’s annual bonus for 2022 was based on the achievement of quantitative metrics (Adjusted EBITDA, FCF and safety), with 60% of that 70% dedicated to financial performance. The remaining 30% of the annual bonus for 2022 was based upon a qualitative analysis of ESG (10%) and “Individual and Operational Performance” (20%). +The Compensation Committee selected these performance metrics because they are important to the ongoing success of the Company and were intended to drive short-term business performance by focusing executives on key objectives that position the Company for sustained growth. Specifically, Adjusted EBITDA and FCF are measures of our financial performance and capital discipline, and total recordable incident rate (“TRIR”) is an important measure of safety. The qualitative component of the Annual Bonus Plan allows the Committee to assess individual performance of the Named Executive Officers as well as specific progress towards a variety of ESG goals. +The Compensation Committee knew that an important component of the Company’s financial plan for 2022 was to make significant planned capital reinvestments in the Company by transitioning over half of our pumping fleet from diesel pumps to electric or dual fuel pumps. The Company believes this investment is key to retaining existing clients, gaining new clients, and achieving our ESG goals. Knowing that this important investment would occur in 2022 and would significantly reduce FCF, the Compensation Committee reduced the weighting for the FCF metric from 20% to 10% and reduced the threshold, target, and maximum performance levels for that metric as compared to 2021 in order to ensure that the Company’s annual bonus program was aligned with and supported the Company’s business plan for the year. The Compensation Committee retained the FCF metric, increased the weighting of the Adjusted EBITDA metric from 40% to 50%, and substantially increased each of the threshold, target, and maximum performance levels for Adjusted EBITDA for 2022 to encourage continued focus on financial measures and protection of the Company’s balance sheet during this transformational year. The Compensation Committee also established more concrete goals for the ESG metric in order to drive the achievement of specific goals across the spectrum of ESG issues, including achievement of environmental goals, employee education, and community service. Finally, during 2022, the Compensation Committee chose to exclude the Silvertip transaction from the actual calculation of the qualitative metrics for the 2022 annual incentive program and, instead, elected to take it into consideration when evaluating the Company’s operational performance. +34  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +Measure +Weighting +Threshold +Target +Maximum +Actual 2022 +Performance +Payout as a +Percentage of +Target Bonus +QUANTITATIVE MEASURE +Adjusted EBITDA (1)(3) +50 % +$ +175MM +$ +250MM +$ +300MM +$ +308.7MM +100% +FCF (2)(3) +10 % +$ +-53MM +$ +-41MM +$ +-33MM +$ +-52.7MM +5.1% +Safety—TRIR (4) +10 % +0.80 +0.65 +0.50 +0.67 +9.3% +Quantitative Total +70 % +114.4% +QUALITATIVE MEASURE +ESG (5) +10 % +13.3% +Individual and Operational +Performance +20 % +20 − 38.7% +Qualitative Total +30 % +33.3 – 52% +Overall Total +100 % +148 – 166.4% +(1) +We define EBITDA as earnings before (i) interest expense, (ii) income taxes, and (iii) depreciation and amortization. We define Adjusted EBITDA as EBITDA, plus (i) loss/(gain) on disposal of assets, (ii) loss/(gain) on extinguishment of debt, (iii) stock-based compensation, and (iv) other unusual or non-recurring (income)/expenses, such as impairment charges, severance, costs related to our IPO and costs related asset acquisition or one-time professional fees. For a more detailed definition of the non-GAAP financial measure of Adjusted EBITDA and reconciliation of Adjusted EBITDA to our most directly comparable financial measures calculated in accordance with GAAP, please read “How We Evaluation Our Operations” in our Form 10-K filed for the year ended December 31, 2022. +(2) +We define FCF as Adjusted EBITDA less Total Capital Expenditures, which are defined as costs incurred in connection with the growth and maintenance of our asset base. For a more detailed definition of Total Capital Expenditures please see Note 11—Reportable Segment Information in the Notes to Consolidated Financial Statements to our Form 10-K filed for the year ended December 31, 2022. +(3) +The Compensation Committee may provide for the manner in which actual performance and the performance goal(s) with regard to these metrics will reflect the impact of specified events or occurrences during the year, which may mean including or excluding the impact of one or more events or occurrences, as specified by the Compensation Committee, for the year. +(4) +TRIR stands for Total Recordable Incident Rate and is a measurement of workplace safety calculated as follows: (total number of recordable incidents amongst covered personnel in the applicable period (here, 2022) multiplied by 200,000) divided by the total man hours worked by covered personnel in the applicable period. TRIR is a commonly accepted and utilized metric for both workplace safety regulation and for making safety performance comparisons amongst companies. The Company uses an annual TRIR metric in our compensation program to reflect aggregate safety performance across the year being reviewed. +(5) +We define ESG as Environmental, Social, and Governance. For 2022, the Compensation Committee established the following ESG goals: (i) complete a reportable Scope 1 and Scope 2 GHG emissions profile and develop and implement applicable emissions testing protocols to verify and support emissions profile, (ii) enter into a long-term customer contract for one or more lower emissions NextGen fleets, (iii) successfully deploy all Tier IV units from the 2021-22 conversion plan as they are delivered and continue execution of the long-term strategy for conversion of our legacy diesel pumps to cleaner Tier IV DGB units, (iv) coordinate and execute on a Company led signature community/charity event that will maximize employee involvement and community impact, (v) encourage community engagement for all employees including designing and implementing a policy to provide eight-hours paid time off for qualifying community involvement, and (vi) highlight and present a key governance topic each quarter at regular management meetings, all employee town hall meetings, and on the company intranet. +PROPETRO  2023 Proxy Statement   |  35 +TABLE OF CONTENTS +Executive Compensation +The Compensation Committee determined that the Company had performed above expectations with respect to the ESG metric, awarding a 13.3% payout percentage for this metric. The Compensation Committee recognized the Company’s success in accomplishing its ESG goals for 2022, noting that the Company outperformed its goals with respect to strategic agreements for next generation fleet equipment and establishing a signature community event and achieved the four additional ESG goals at target performance. +In particular, the Compensation Committee recognized the Company’s successful negotiation and execution of its strategically impactful long-term equipment lease agreement through which the Company acquired four electric fleets while mitigating required capital expenditures and protecting the Company’s balance sheet. Additionally, the Compensation Committee found that the Company’s success in obtaining a three-year service agreement with a leading Permian Basin operator for the Company’s first electric fleet was a significant commercial and strategic achievement. +The Compensation Committee also credited the Company’s success with its first annual signature community event, a community beautification event named “Don’t Mess with the Permian,” which resulted in the participation of over 220 employee and community volunteers and the removal of approximately 5.85 tons of trash from roadways, schools and other public areas in and around Midland, Texas, the Company’s headquarters and operating base. The Compensation Committee also highlighted the importance of the Company’s successful completion of its initial Scope 1 and Scope 2 corporate greenhouse gas emissions profile. This goal was successfully completed through the leadership of the Company’s executives and the participation of multiple individuals and departments throughout the organization, and provides a platform for the Company to plan and publish its first sustainability report in 2023. +Lastly, the Compensation Committee recognized the Company’s successful execution on the goals +• +to deploy all Tier IV DGB units from its 2021-2022 equipment conversion plan, +• +establish a policy authorizing paid time off for qualifying community involvement, and +• +heighten employee awareness of the Company’s sustainability and ESG initiatives by reviewing key topics at employee town hall meetings. +In connection with these achievements, the Compensation Committee certified one hundred thirty-three percent (133%) achievement of the Company’s 2022 ESG goals. +The Company recognized significant achievements towards operational performance objectives in 2022. The Company’s ongoing internal optimization program, designed to drive meaningful and sustainable improvements in operations and maintenance procedures and achieve associated financial improvements, saw new organization changes and procedures, which resulting in over $15 million in annualized FCF value being captured. The Company expects that it will reap meaningful and operational benefits from the efforts associated with the internal optimization program in 2023 and beyond. The Compensation Committee determined that performance was at the target level for Messrs. Gobe and Sledge. For Messrs. Schorlemer, Muñoz, and Wilson, the Compensation Committee determined that their individual performance exceeded the target level. Each of Messrs. Schorlemer, Muñoz, and Wilson were given significant credit for their roles in the ongoing internal optimization program. Additionally, the Compensation Committee made particular note of Mr. Schorlemer’s role in overseeing the Company’s mergers and acquisitions efforts, which resulted in the divestiture of the Company’s coiled tubing business and the Silvertip acquisition and implementing pricing policies and cost control efforts. Mr. Muñoz was recognized for overseeing the successful operational execution of significant equipment and customer transition. Mr. Wilson was also credited with successful transition and succession planning in connection with his retirement. +As a result, the Compensation Committee approved the following payments under the Annual Bonus Plan: +Name +2022 Target Bonus +Award Opportunity as a +Percentage of Base Salary +Value of 2022 +Target Bonus +Award Opportunity +($) +Actual Payout +as a +Percentage of +Target Bonus +Value of Actual +2022 Annual +Bonus +($) (1) +Samuel D. Sledge +100 % +700,000 +148 % +1,036,000 +David S. Schorlemer +80 % +381,600 +166.4 % +634,800 +Adam Muñoz +100 % +550,000 +157.1 % +864,000 +Newton W. “Trey” Wilson III +75 % +315,000 +163.9 % +516,200 +Phillip A. Gobe (2) +100 % +202,500 +148 % +299,700 +(1) +Bonus amounts were rounded up or down to the nearest hundred dollars. +(2) +Mr. Gobe remained eligible for a pro-rated bonus award based on the number of days he served as Executive Chairman in 2022, and the target bonus award opportunity reflects such pro-rated bonus amount. +36  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +Long Term Incentive Awards +This mix of time- and performance-based awards is intended to achieve the twin goals of ensuring retention and driving performance, while aligning the interests of our Named Executive Officers with those of our stockholders by providing an opportunity for increased share holdings. Both RSUs and PSUs may be settled in shares of our common stock or in the cash equivalent of the same. In 2021, we granted 40% RSUs and 60% PSUs to our Named Executive Officers but after consultation with Pearl Meyer, we determined that the distribution of time- and performance-based awards on a 50/50 basis is more common in the market and would better align with the retentive goal of the long-term incentive program. As a result, the Compensation Committee adopted that approach for our 2022 awards. +In 2022, 50% of the value of each Named Executive Officer’s long term incentive awards were granted pursuant to the ProPetro Holding Corp. 2020 Long Term Incentive Plan (the “2020 LTIP”) in the form of RSUs that vest in three substantially equal annual installments commencing on the first anniversary of the grant date. The other 50% was granted in the form of PSUs that vest, if earned, following the completion of a three-year performance period, in each case subject to the Named Executive Officer’s continued employment through the end of such period. +The PSUs granted in 2022 vest based on the Company’s TSR as compared to the TSR of the 2022 Peer Group. After careful review, the Compensation Committee chose to use the same 2022 Peer Group to set 2022 target compensation levels for our Named Executive Officers and evaluate TSR performance for the PSUs granted in 2022. Recipients of PSUs may earn between 0% and 200% of the target number of shares granted, as indicated in the following table. If performance falls between the specified performance levels, payouts will be determined via straight-line interpolation. If performance falls below the threshold performance level, no payouts will be awarded. If the Company’s TSR is below zero on an absolute basis for the performance period, the number of PSUs earned shall be reduced in accordance with the table below. For PSU awards granted in 2021, if the Company’s TSR was below zero, the awards would not vest in excess of the target number of PSUs granted. The Compensation Committee modified its approach for 2022 in order to ensure the Named Executive Officers will continue to be strongly motivated to outperform the Company’s peers, even in a negative TSR environment, while retaining a meaningful reduction in the number of PSUs settled if absolute TSR was negative for the performance period so that the Named Executive Officers’ continue to be motivated to achieve a positive absolute TSR. +Payout (as a % of Target Number of +PSUs Granted) +Payout (as a % of Target Number of +PSUs Granted) if TSR is Below Zero +Company’s +Percentile Rank +in Peer Group +≥ 90th Percentile +200 % +175 % +75th Percentile +175 % +150 % +50th Percentile +100 % +80 % +25th Percentile +50 % +40 % +< 25th Percentile +0 % +0 % +The performance period for the 2022 PSU awards commenced on January 1, 2022 and ends on December 31, 2024. +If a peer company is acquired by another peer company during the performance period, the acquirer will remain in the peer group but the acquired company will be excluded from the peer group entirely. If a peer company files for bankruptcy during the performance period, it will remain in the peer group but will be ranked last. Should a peer company cease to exist as a separate publicly traded company for any other reason during the performance period, it will be excluded from the peer group entirely. +The annual value of each Named Executive Officer’s long-term incentive award is generally determined in conjunction with the Compensation Committee’s annual compensation analysis or, if later, in connection with the Named Executive Officer’s promotion or hire date following the Compensation Committee’s review of peer compensation data and consideration of each Named Executive Officer’s position and associated responsibilities. In 2022, the Compensation Committee granted the RSUs and PSUs included in the table below to our Named Executive Officers. Except as specified below, all awards were granted in February of 2022. +PROPETRO  2023 Proxy Statement   |  37 +TABLE OF CONTENTS +Executive Compensation +Name +Number of RSUs +Granted in 2022 +Value of RSUs +Granted in 2022 (1) +($) +Target Number +of PSUs Granted +in 2022 +Value of PSUs +Granted in 2022 (1) +($) +Samuel D. Sledge +100,482 +1,249,996 +100,482 +2,008,635 +David S. Schorlemer +48,231 +599,994 +48,231 +964,138 +Adam Muñoz +68,327 +849,988 +68,327 +1,365,857 +Newton W. “Trey” Wilson III +40,192 +499,988 +40,192 +803,438 +Phillip A. Gobe (2) +10,137 +139,992 +— +— +(1) +Amounts in these columns reflect the aggregate grant date fair value of the RSU and PSU awards granted in 2022 under the 2020 LTIP, calculated in accordance with FASB ASC Topic 718. Because the grant date fair value is calculated different for time-based and performance-based awards under FASB ASC Topic 718, the value of the awards reported is different even though the number of RSUs and PSUs granted to each Named Executive Officer is the same. The number of awards granted by the Compensation Committee and the Board were calculated based on the closing price on the date of grant, rather than the accounting grant date fair value, which is the standard practice. +(2) +These RSUs were granted in April of 2022 pursuant to the Director Compensation Policy as compensation for Mr. Gobe’s service as Chairman of the Board during 2022. Mr. Gobe did not receive a grant of RSUs or PSUs in 2022 in his role as Executive Chairman of the Board prior to his resignation on March 31, 2022. +Employee Benefits, Perquisites, and Special Payments +HEALTH/WELFARE PLANS +All of our full-time employees, including our Named Executive Officers, are eligible to participate in our health and welfare plans on the same basis, including: medical, dental and vision benefits, medical and dependent care flexible spending accounts, short-term and long-term disability insurance, and group life insurance. +RETIREMENT PLANS +We currently maintain a 401(k) retirement savings plan for our employees who satisfy certain eligibility requirements. Our Named Executive Officers are eligible to participate in the 401(k) plan on the same terms as other full-time employees. Currently, we match contributions made by participants in the 401(k) plan up to a specified percentage of the employee contributions, and we may make certain discretionary profit sharing contributions. Both the matching contributions and the profit sharing contributions vest immediately. We believe that offering a vehicle for tax-deferred retirement savings through our 401(k) plan and making matching contributions and profit sharing contributions that vest over time add to the overall desirability of our compensation packages and further incentivize our employees in accordance with our compensation policies. We do not maintain any defined benefit pension plans or deferred compensation plans. +PERQUISITES +Messrs. Sledge, Muñoz, Schorlemer, and Wilson each participated in a vehicle allowance program during 2022. In addition, in 2022 we provided Mr. Gobe with a Company vehicle for his use while in Midland, Texas. In 2022, the Company also provided other limited perquisites to its Named Executive Officers, including club memberships and dues and use of a Company chartered aircraft to attend a professional sporting event hosted by an important vendor of the Company. The lodging, food, and tickets to such professional sporting event were provided to those of our executives in attendance at no cost and paid for by the vendor of the Company. The sporting event was attended by certain of our executives primarily in order to strengthen the relationship between the Company and the vendor. +The Compensation Committee reviews the perquisites we provide to our Named Executive Officers periodically, including in 2022, to ensure that they are necessary to retain our executives, appropriate, and consistent with benefits offered by companies with which we compete for executive talent. +38  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +IV. OTHER COMPENSATION PRACTICES, POLICIES AND GUIDELINES +Succession and Additional Agreements +SUCCESSION PLAN +The Board and the Compensation Committee have built and seamlessly executed a strong and successful succession plan for the Company over the last several years. +2020 was a year of significant transition in the executive roles at the Company. While the context of every departure and shift to a new role was unique, in each case, the Company’s careful succession planning and thoughtful recruiting paid dividends, ensuring that each transition was smooth and the Company’s performance remained strong. For example, Mr. Gobe joined the Company in 2019 as director and Chairman of the Board. Because of his extensive experience in our industry and exceptional leadership skills the Board quickly identified him as someone who could take on a larger leadership role with the Company, if needed. As it became clear in late 2019 and early 2020 that there would be significant changes to the Company’s management team and that the Company needed to strengthen its culture of compliance, the Board appointed Mr. Gobe to roles of increasing responsibility until he assumed the position of Chief Executive Officer in early 2020. Similarly, Mr. Wilson was hired as General Counsel and Corporate Secretary of the Company during this period because of his industry experience and compliance expertise. Messrs. Gobe and Wilson had both set aside retirement from their prior roles with other companies to help the Company recover from the challenges it faced in 2019 and 2020 and to build the new and stronger culture in which it has flourished. The Board knew that Messrs. Gobe and Wilson would want to resume their retirement at some point in the years following their appointment and that the creation and execution of a plan for succession for both of their roles was key to ensuring management continuity going forward. Messrs. Gobe and Wilson worked closely with the Board during the formulation and execution of the succession plan and devoted significant time and expertise to training and mentoring the individuals who would eventually succeed to their roles as well as the rest of the Company’s management team. +On August 31, 2021, years of succession planning by the Compensation Committee and the Board came to fruition when Samuel D. Sledge, previously President, was appointed as Chief Executive Officer and Adam Muñoz, previously Chief Operating Officer, was appointed as President and Chief Operating Officer of the Company. Phillip A. Gobe, who preceded Mr. Sledge as Chief Executive Officer, continued to support the Company and Mr. Sledge in the role of Executive Chairman of the Board until March 31, 2022, when he resigned from that position. Mr. Gobe has continued his service with the Company as the non-executive Chairman of the Board. +Effective as of December 31, 2022, Newton W. Wilson III retired from the Company and resigned from his positions as General Counsel and Corporate Secretary of the Company. Effective January 1, 2023, John J. Mitchell was appointed to succeed Mr. Wilson as General Counsel and Corporate Secretary. Mr. Mitchell has over a decade of in-house legal experience at companies in the energy industry in Texas. Prior to his appointment, Mr. Mitchell served as Vice President and Deputy General Counsel of the Company, during which time he gained a deep knowledge of our business and became an integral member of our team. The Board, the Compensation Committee, and Mr. Wilson identified Mr. Mitchell as a strong candidate for succeeding to the role of General Counsel and Corporate Secretary at the time of his hiring in April of 2021. As a result, the Company provided Mr. Mitchell with increasing responsibility and leadership opportunities over the course of his tenure in that role, ensuring a smooth transition to his new role and a successful execution of the Company’s succession plan. +AGREEMENTS WITH MESSRS. GOBE AND WILSON +The Compensation Committee and the Board determined that the terms of the Gobe Resignation Agreement and the Wilson Resignation Agreement (each as defined below) appropriately reflect the important contributions that Messrs. Gobe and Wilson have made to the Company during their tenures as Chief Executive Officer and Executive Chairman of the Board and General Counsel and Corporate Secretary of the Company, respectively. Both executives joined the Company during a challenging time and were tasked with leading the Company through the implementation of a remediation and improvement plan to address internal and control deficiencies discovered during an internal review. Their expertise, steady hands, and wise leadership was invaluable during this turbulent chapter and it is in very large part thanks to them that the Company emerged from that period stronger than ever. They each played an active role with the Board in the development of the Company’s succession plan and were instrumental in ensuring a smooth transition of their roles to their successors. As a result, the Compensation Committee determined +PROPETRO  2023 Proxy Statement   |  39 +TABLE OF CONTENTS +Executive Compensation +that it was particularly important to afford Messrs. Gobe and Wilson with the opportunity to realize the value, if any, from their outstanding PSUs since their hard work prior to their separation had already greatly contributed toward the achievement of the applicable Company performance goals. Further, seventy-four percent (146,899 RSUs) of Mr. Gobe’s RSUs were scheduled to vest within one year of the Gobe Separation Date (defined below) and forty-six percent (34,707 RSUs) of Mr. Wilson’s RSUs were scheduled to vest within the two-month period following the Wilson Separation Date (defined below). +Mr. Gobe resigned from his position as Executive Chairman of the Company, effective March 31, 2022 (the “Gobe Separation Date”), but continues to serve as a non-employee Chairman of the Board. Effective as of the Gobe Separation Date, the Company and Mr. Gobe entered into a Resignation from Employment agreement (the “Gobe Resignation Agreement”) memorializing the terms of his termination of employment. The Gobe Resignation Agreement does not provide Mr. Gobe with the opportunity to receive any cash severance payments or benefits but instead provides that Mr. Gobe shall receive the following benefits after the Gobe Separation Date, subject to his execution and non-revocation of the Gobe Resignation Agreement and his compliance with certain restrictive covenants, including obligations regarding confidentiality, non-competition, non-solicitation and non-disparagement: (i) the 198,759 RSUs held by Mr. Gobe immediately prior to the Gobe Separation Date vested as of the Gobe Separation Date and (ii) the service requirement associated with the 647,125 PSUs held by Mr. Gobe immediately prior to the Gobe Separation Date was deemed to be fulfilled and the PSUs will remain outstanding and will vest, if at all, based on the Company’s actual performance over the applicable performance period. The Gobe Resignation Agreement specifies that the RSUs will be settled following the date that the Gobe Resignation Agreement becomes irrevocable but no later than 30 days following the Gobe Separation Date. If applicable performance metrics are achieved, the PSUs will be settled at the time originally specified in the applicable award agreement. For the avoidance of doubt, all PSUs held by Mr. Gobe continue to be subject to Company performance through the end of the applicable performance period and will only settle if performance in excess of the thresholds specified at the time of grant is achieved. In addition, the Gobe Resignation Agreement provides that the Company will pay for the reasonable attorneys’ fees incurred by Mr. Gobe in connection with the negotiation of the Gobe Resignation Agreement. +Mr. Wilson retired from the Company and resigned from his position as General Counsel and Corporate Secretary, effective December 31, 2022 (the “Wilson Separation Date”). Effective as of the Wilson Separation Date, the Company and Mr. Wilson entered into a Resignation from Employment Agreement (the “Wilson Resignation Agreement”), memorializing the terms of his termination of employment. The Wilson Resignation Agreement does not provide Mr. Wilson with the opportunity to receive any cash severance payments or benefits but instead provides that Mr. Wilson shall receive the following benefits after the Wilson Separation Date, subject to his execution and non-revocation of the Wilson Resignation Agreement, which includes a release of claims, and his compliance with certain restrictive covenants, including obligations regarding confidentiality, non-competition, non-solicitation and non-disparagement: (i) the 75,149 RSUs held by Mr. Wilson on the Wilson Separation Date vested as of the Wilson Separation Date and (ii) the service requirement associated with the 101,604 PSUs held by Mr. Wilson on the Wilson Separation Date was deemed to be fulfilled and the PSUs will remain outstanding and will vest, if at all, based on the Company’s actual performance over the applicable performance period. The RSUs were required to be settled following the date that the Wilson Resignation Agreement becomes irrevocable but no later than 30 days following the Wilson Separation Date. If applicable performance metrics are achieved, the PSUs will be settled at the time originally specified in the applicable award agreement. For the avoidance of doubt, all unvested PSUs held by Mr. Wilson at the Wilson Separation Date continue to be subject to Company performance through the end of the applicable performance period and will only settle if performance in excess of the thresholds specified at the time of grant is achieved. In addition, the Wilson Resignation Agreement provides that the Company will pay for the reasonable attorneys’ fees incurred by Mr. Wilson in connection with the negotiation of the Wilson Resignation Agreement. The Wilson Resignation Agreement also clarifies that Mr. Wilson will be entitled to receive a full annual bonus for the 2022 fiscal year. +On the Gobe Separation Date, Mr. Gobe held unvested PSUs that had originally been granted in each of 2020 and 2021. On the Wilson Separation Date, Mr. Wilson held unvested PSUs that had originally been granted in each of 2021 and 2022. Since the modification to Mr. Gobe’s and Mr. Wilson’s PSUs, the PSUs granted in 2020 vested at 61% and performance for the PSUs granted in 2021 and 2022 is currently tracking to vest at 0%. +Executive Severance Plan +The Board adopted the Second Amended and Restated ProPetro Services, Inc. Executive Severance Plan and subsequently (the “Executive Severance Plan”) because they and the Compensation Committee felt it was desirable to pivot away from individually negotiated employment agreements and towards a streamlined plan providing for +40  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +more uniform treatment upon a termination of employment. Each of our Named Executive Officers is a participant in the Executive Severance Plan. We believe the Executive Severance Plan serves to maintain the focus of our senior executives and ensure that their attention, efforts and commitment are aligned with maximizing the success of the Company and stockholder value. Further, providing market severance benefits is an important element of compensation that allows us to attract and retain talented executives, ensuring continuity of management, stability of the Company, and efficient execution of our business goals. +The amounts of the severance and benefits established for each “Tier” under the Executive Severance Plan were selected after the Compensation Committee received advice from its independent compensation consultant at the time of adoption regarding the types and amounts of severance that are market among the Company’s peers. The Compensation Committee also considered its members’ ample experience in the industry when making this determination. The Tier level assigned to each participant in the plan was determined based on each participant’s position and responsibility. No changes were made to the Tier levels for the Named Executive Officers in 2022, except that Mr. Gobe ceased to participate in the Executive Severance Plan upon his resignation as Executive Chairman of the Board on March 31, 2022 and Mr. Wilson ceased to participate in the Executive Severance Plan upon his resignation as General Counsel and Corporate Secretary of the Company on December 31, 2022. The Tier levels for each of the Named Executive Officers and the terms of the Executive Severance Plan are described in detail below in the section entitled “Potential Payments upon Termination and Change of Control―Executive Severance Plan.” +Employee Compensation Claw-Back Policy +Under the terms of our Executive Compensation Claw-Back Policy, any incentive compensation, including all types of equity awards, paid to an executive officer (including all of our Named Executive Officers) which was determined based on our performance against financial metrics will be subject to recovery by the Company in the event that the underlying financial metrics are negatively impacted by a restatement of our financial statements. In addition, incentive compensation, including all types of equity awards, is subject to recovery by the Company where an executive engages in certain misconduct. The Company expects to adopt a revised Claw-Back policy in accordance with the SEC’s adoption of new rules to implement Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 in connection with the implemented of such final rule by the NYSE. +Executive Stock Ownership Policy +Under the terms of our Executive Stock Ownership Policy, our executive officers must own shares of our common stock or certain equity awards with a value equal to not less than the following multiples of base salary: +Office +Multiple of Base Pay +Chief Executive Officer +■ ■ ■ ■ ■ +5x +Chief Financial Officer and Chief Operating Officer +■ ■ ■ +3x +All other executive officers +■ +1x +Any individuals who became executive officers as a result of an internal promotion or a new hire, will have five years from the date of being named an executive officer to meet the stock ownership guidelines. As a result, all of our Named Executive Officers still have additional time in which to comply with these guidelines. In calculating the value of shares of our common stock or certain equity awards held for purposes of determining compliance with the policy, such value is equal to the closing price per share on the measurement date, based on shares owned outright and unvested RSUs, with the value of such unvested RSUs discounted by 40%. Unexercised option awards and unvested PSUs are excluded from the calculation. +Prohibition on Hedging and Pledging +We believe that derivative transactions, including puts, calls, and options, and hedging transactions for our securities carry a high risk of inadvertent securities laws violations and may lead to an officer, director, or employee no longer having the same objectives as the Company’s other stockholders. For these reasons, we prohibit our directors, officers, and employees from engaging in any type of derivative or hedging transactions in respect of our securities pursuant to our Insider Trading Compliance Policy. +PROPETRO  2023 Proxy Statement   |  41 +TABLE OF CONTENTS +Executive Compensation +Company stock pledged as collateral, including shares held in a margin account, may be sold without the consent of the holder by the lender in a foreclosure or default event, which could lead to inadvertent securities laws violations. For this reason, pursuant to our Insider Trading Compliance Policy, we prohibit pledging Company securities as collateral to secure loans and purchasing Company securities on margin. +No Tax Gross-Ups +We do not provide gross-up payments to cover our Named Executive Officers’ personal income taxes that may pertain to any of the compensation or perquisites paid or provided by our Company. +Regulatory Considerations +The tax and accounting implications of utilizing various forms of compensation are considered when adopting new or modifying existing compensation programs. Section 162(m) (“Section 162(m)”) of the Internal Revenue Code of 1986, as amended (the “Code”) generally precludes a publicly held company from taking a federal income tax deduction for compensation paid in excess of  $1 million per year to certain covered employees, which include our Named Executive Officers. To maintain flexibility in compensating the Company’s executive officers in a manner designed to promote achievement of corporate goals, retention and recruitment, the Compensation Committee has not adopted a policy requiring all compensation to be tax deductible and expects that the deductibility of certain compensation paid will be limited by Section 162(m). +Compensation Risk Assessment +The Compensation Committee reviews our compensation policies and practices on an annual basis to identify any risks posed by these programs and to assess the appropriateness of any risks identified. We believe that any risks associated with our compensation policies and practices are mitigated in large part by the following factors and, therefore, that no such risks are likely to have a material adverse effect on us: +We pay a mix of compensation which includes short-term cash and long-term equity-based compensation. +We base the vesting and payment of our incentive compensation awards on several different performance metrics, which discourages our employees from placing undue emphasis on any one metric or aspect of our business at the expense of others. +We believe that our performance metrics are reasonably challenging yet should not require inappropriate risk-taking to achieve. +The performance metrics for awards under our Annual Bonus Plan include quantitative financial and operational metrics as well as qualitative metrics related to our operations, strategy, and other aspects of our business, as well as the individual performance of our executives, and our Compensation Committee retains discretion to modify payout amounts under the Annual Bonus Plan, as appropriate. +The performance periods under our PSUs overlap, and our time-vested RSUs generally vest over a three-year period. This mitigates the motivation to maximize performance in any one period at the expense of others. +Our Named Executive Officers are required to own our common stock at levels provided in our Executive Stock Ownership Guidelines. +We have instituted a claw-back policy, which allows us to claw-back compensation in the event of a financial restatement or certain misconduct. +We believe that we have an effective management process for developing and executing our short- and long-term business plans. +Our compensation policies and programs are overseen by the Compensation Committee. +The Compensation Committee retains an independent compensation consultant. +42  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +Report of the Compensation Committee +The Compensation Committee has reviewed and discussed the above CD&A with management and, based on such review and discussions, the Compensation Committee recommended to the Board that the CD&A be included in this proxy statement. +The Compensation Committee of the Board of Directors +MICHELE +VION +ANTHONY J. +BEST +JACK B. +MOORE +Chair +PROPETRO  2023 Proxy Statement   |  43 +TABLE OF CONTENTS +Executive Compensation +Executive Compensation Tables +SUMMARY COMPENSATION TABLE +The following table summarizes the compensation provided by us to our Named Executive Officers for the fiscal years ended December 31, 2022, 2021, and 2020. +Name and +Principal Position +Year +Salary (1) +($) +Bonus (2) +($) +Stock +Awards (3) +($) +Option +Awards +($) +Non-Equity +Incentive Plan +Compensation (4) +($) +All Other +Compensation (5) +($) +Total +($) +Samuel D. Sledge +Chief Executive Officer +2022 +700,000 +― +3,258,631 +― +1,036,000 +33,663 +5,028,294 +2021 +455,962 +― +2,216,599 +― +457,500 +34,588 +3,164,649 +David S. Schorlemer +Chief Financial Officer +2022 +477,000 +― +1,564,132 +― +634,800 +79,928 +2,755,860 +2021 +450,000 +75,000 +1,342,668 +― +356,400 +282,713 +2,506,781 +2020 +101,435 +125,000 +387,749 +― +59,348 +69,218 +742,750 +Adam Muñoz +President and Chief Operating Officer +2022 +550,000 +― +2,215,845 +― +864,000 +58,608 +3,688,453 +2021 +475,193 +― +1,796,100 +― +470,300 +46,142 +2,787,735 +2020 +407,232 +― +795,311 +― +316,585 +22,495 +1,541,623 +Newton W. “Trey” Wilson III (6) +General Counsel and Corporate Secretary +2022 +421,615 +― +2,701,426 (7) +― +516,200 +77,792 +3,717,033 +2021 +400,000 +25,000 +1,342,668 +― +297,000 +31,800 +2,096,468 +2020 +383,242 +104,102 +682,054 +― +240,000 +28,900 +1,438,298 +Phillip A. Gobe ( 8) Chairman of the Board and Former Executive Chairman +2022 +304,385 +― +14,278,805 (9) +― +299,700 +62,232 +14,945,122 +2021 +869,923 +― +5,102,180 +― +861,200 +29,166 +6,862,469 +2020 +675,632 +― +3,808,721 +― +595,925 +15,450 +5,095,728 +(1) +The amounts in this column represent the base salary each Named Executive Officer earned for the year indicated, except for Mr. Gobe. The amount reported for Mr. Gobe represents $199,385 of base salary received for service as Executive Chairman of the Board prior to his resignation on March 31, 2022 and $105,000 of cash retainer for services as Chairman of the Board pursuant to the Director Compensation Policy for the period from April 1, 2022 through December 31, 2022. +(2) +The amounts in this column for Messrs. Schorlemer and Wilson for 2021 reflect retention bonuses negotiated at the time of their appointment. The Company does not currently intend to pay any further retention bonuses for the foreseeable future. +(3) +Amounts in this column for 2022 reflect the aggregate grant date fair value of the RSU and PSU awards granted in 2022 under the 2020 LTIP, calculated in accordance with FASB ASC Topic 718. The FASB ASC Topic 718 value for the RSUs was calculated using the closing price per share of our common stock on the date of grant applied to the total number of RSUs granted. The FASB ASC Topic 718 grant date fair value of the PSUs was determined using a Monte Carlo simulation. Amounts in this column for 2022 also reflect the incremental fair value of the modifications to Messrs. Wilson’s and Gobe’s RSUs and PSUs, calculated in accordance with FASB ASC Topic 718, which were modified in accordance with the Wilson Resignation Agreement and Gobe Resignation Agreement. See footnotes 7 and 9 for further discussion of the modifications. For information regarding assumptions underlying the valuation of equity awards, see Note 13 of the Consolidated Financial Statements included in our 2022 Annual Report on Form 10-K. The actual amount realized upon settlement of RSU and PSU awards will depend upon the market price of the Company’s stock on the settlement date and the Company’s performance (with respect to the PSUs). +(4) +Amounts in this column for 2022 represent the short-term cash incentive awards for performance during the 2022 fiscal year pursuant to the Annual Bonus Plan, determined based on achievement of the applicable performance metrics. See “Compensation Discussion and Analysis—Elements of Compensation and 2022 Decisions in Detail—Annual Cash Incentive Awards” above for additional informational regarding these awards. +44  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +(5) +Amounts in this column are comprised of the payments and benefits enumerated in the table below. +Name +Vehicle +Allowance +Program (a) +($) +Contribution +to 401(k) +Plan (b) +($) +Club Dues/ +Membership +Fees (c) +($) +Legal +Fees (d) +($) +Vacation +Payout (e) +($) +Chartered +Aircraft (f) +($) +Total +($) +Samuel D. Sledge +14,400 +15,441 +3,822 +— +— +— +33,663 +David S. Schorlemer +16,823 +18,300 +31,860 +— +— +12,945 +79,928 +Adam Muñoz +14,400 +18,300 +11,637 +— +— +14,271 +58,608 +Newton W. “Trey” Wilson III +14,400 +18,300 +3,368 +— +27,453 +14,271 +77,792 +Phillip A. Gobe +— +18,300 +1,502 +3,484 +38,946 +— +62,232 +(a) +The amounts in this column reflect the cost of the Company’s vehicle allowance program. +(b) +The amounts in this column reflect the Company’s contribution to each Named Executive Officer’s account in the Company’s 401(k) plan. +(c) +The amounts in this column reflect club dues or membership fees paid by the Company. +(d) +The amount in this column for Mr. Gobe reflects $3,484 in legal fees paid by the Company for Mr. Gobe in connection with his resignation as Executive Chairman. +(e) +The amounts in this column for Messrs. Wilson and Gobe reflect $27,453 and $38,946, respectively, for payout of unused paid-time off in connection with his resignation as Executive Chairman. +(f) +The amounts for Messrs. Schorlemer, Muñoz, and Wilson reflect the cost of personal use of Company chartered aircraft for themselves and their spouses based on the actual invoiced amount from the charter company for costs incurred on a trip to a professional sporting event at the invitation of an important Company vendor. Each of Messrs. Schorlemer, Muñoz, and Wilson also received lodging, food, and tickets to such professional sporting event, which were paid for by the vendor. The perquisites described in the preceding sentence did not result in any additional cost to the Company and therefore no amount is being reported in connection with these perquisites. +(6) +Effective December 31, 2022, Mr. Wilson retired from his position as General Counsel and Corporate Secretary of the Company, and his employment with the Company ended. +(7) +$1,398,000 of the figure reported for Mr. Wilson represents the incremental fair value of the modification to his RSUs and PSUs, calculated in accordance with FASB ASC Topic 718, which were modified in accordance with the Wilson Resignation Agreement (as described under the section of this proxy statement entitled “—Potential Payments Upon Termination or Change in Control—Wilson Resignation Agreement”). $1,303,426 of the figure reported for Mr. Wilson represents the value of the RSUs and PSUs granted to him in 2022. The table below provides the grant date fair value of the RSUs and PSUs granted in 2022 and the incremental fair value of the modifications in 2022 to the previously granted RSUs and PSUs. +Name +Award Type +Grant Date/ +Incremental +Fair Value ($) +Newton W. “Trey” Wilson III +RSUs and PSUs Granted in 2022 +1,303,426 +Modified 2020, 2021 and 2022 RSUs +779,295 +Modified 2021 and 2022 PSUs +618,705 +TOTAL +2,701,426 +The service requirement associated with the outstanding unvested PSUs held by Mr. Wilson was deemed fulfilled in connection with the modification to these awards. Such PSUs will vest, if at all, based on the Company’s performance over the original performance period. Since the modification, the PSUs granted in 2020 have vested at 61% and the PSUs granted in 2021 and 2022 are currently tracking to vest at 0%. Because Mr. Wilson was employed through the end of 2022, he fulfilled the service period associated with the 2020 PSUs and those awards were fully vested prior to the Wilson Separation Date. +(8) +Effective March 31, 2022, Mr. Gobe stepped down as Executive Chairman, and his employment with the Company ended. Following March 31, 2022, Mr. Gobe continued serving the Company as Chairman of the Board. +(9) +$14,138,813 of the figure reported for Mr. Gobe represents the incremental fair value of the modification to his RSUs and PSUs, calculated in accordance with FASB ASC Topic 718, which were modified in accordance with the Gobe Resignation Agreement (as described under the section of this proxy statement entitled “—Potential Payments Upon Termination or Change in Control—Gobe Resignation Agreement”). $139,992 of the figure reported for Mr. Gobe represents the value of the RSUs granted to him pursuant to the Director Compensation Policy for his service as Chairman of the Board during 2022. Mr. Gobe was not granted any RSUs or PSUs for his service as Executive +PROPETRO  2023 Proxy Statement   |  45 +TABLE OF CONTENTS +Executive Compensation +Chairman of the Board prior to his resignation on March 31, 2022. The table below provides the grant date fair value of the RSUs granted in 2022 and the incremental fair value of the modifications in 2022 to the previously granted RSUs and PSUs. +Name +Award Type +Grant Date/ +Incremental +Fair Value ($) +Phillip A. Gobe +RSUs Granted in 2022 +139,992 +Modified 2019, 2020 and 2021 RSUs +2,768,713 +Modified 2020 PSUs +7,323,517 +Modified 2021 PSUs +4,046,584 +TOTAL +14,278,806 +The service requirement associated with the outstanding unvested PSUs held by Mr. Gobe was deemed fulfilled in connection with the modification to these awards. Such PSUs will vest, if at all, based on the Company’s performance over the original performance period. Since the modification, the PSUs granted in 2020 have vested at 61% and the PSUs granted in 2021 are currently tracking to vest at 0%. +2022 Alternative Summary Compensation Table Using Alternative Values for Awards Modified at Termination +In connection with Mr. Wilson’s retirement and Mr. Gobe’s resignation, the Company accelerated each of their outstanding RSUs and deemed the service requirement associated with their outstanding PSUs fulfilled, with such PSUs remaining outstanding and eligible to vest, if at all, based on the Company’s actual performance over the applicable performance period. In accordance with FASB ASC Topic 718, the Company was required to recognize an accounting charge for the modifications to the RSUs and PSUs, which amount is disclosed in the Summary Compensation Table and Grants of Plan-Based Awards Table. The Company believes that the incremental fair value of the accounting modification associated with modifications to PSUs and RSUs held by Messrs. Wilson and Gobe at the time of their termination of employment obscures an understanding of the compensation that Messrs. Wilson and Gobe will ultimately recognize. The table below compares the components of the Stock Awards column from the Summary Compensation Table, above, to the components of the Stock Awards column from the Alternative Summary Compensation Table, below. As illustrated below, the Stock Awards column of the Alternative Summary Compensation Table (i) sets forth the value of the modifications to the PSUs based on actual performance as of December 31, 2022 and (ii) excludes the modification charge for Mr. Wilson’s 2022 RSUs since the full grant date fair value of those awards is already included in the table (thus eliminating inclusion of that award twice). +Name +Award +Summary +Compensation +Table Values +Based on +Grant Date/ +Modification +Fair Value ($) +Alternative Summary +Compensation Table Values +Based on Eliminating Double +Counting of 2022 RSUs and +Including PSUs at Actual +Performance as of +December 31, 2022 ($) +Newton W. “Trey” Wilson III +RSUs and PSUs Granted in 2022 +1,303,426 +1,303,426 +Modified 2020 and 2021 RSUs +779,295 +362,504 +Modified 2021 and 2022 PSUs +618,705 +0 +Total +2,701,426 +1,665,930 +Phillip A. Gobe +RSUs Granted in 2022 for Board Service +139,992 +139,992 +Modified 2019, 2020 and 2021 RSUs +2,768,713 +2,768,713 +Modified 2020 PSUs +7,323,517 +2,617,315 +Modified 2021 PSUs +4,046,584 +0 +Total +14,278,806 +5,526,020 +The table below sets forth the total compensation of each of Messrs. Wilson and Gobe for the 2022 fiscal year, excluding the incremental fair value of the accounting modification associated with such acceleration and providing, instead, (i) the value of the PSUs based on actual performance as of December 31, 2022 and (ii) the same modification value as is reported in the Summary Compensation Table for modified RSUs except that no value is attributed to the acceleration of Mr. Wilson’s 2022 RSUs since the full grant date fair value of those awards is already included. This table is supplemental to, and not a substitute for, the compensation information reported in the +46  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +Summary Compensation Table. For additional information regarding the modifications, please see “Compensation Discussion and Analysis—Other Compensation Practices, Policies and Guidelines—Succession and Additional Agreements.” +Name +Year +Salary ($) +Stock +Awards (1) ($) +Non-Equity +Incentive Plan +Compensation ($) +All Other +Compensation ($) +Total ($) +Newton W. “Trey” Wilson III +2022 +421,615 +1,665,930 +516,200 +77,792 +2,681,537 +Phillip A. Gobe +2022 +304,385 +5,526,020 +299,700 +62,232 +6,192,337 +(1) +Amounts in this column for 2022 reflect the aggregate grant date fair value of the RSU and PSU awards granted in 2022 under the 2020 LTIP, calculated in accordance with FASB ASC Topic 718. The FASB ASC Topic 718 value for the RSUs was calculated using the closing price per share of our common stock on the date of grant applied to the total number of RSUs granted. The FASB ASC Topic 718 grant date fair value of the PSUs was determined using a Monte Carlo simulation. As noted above, the amounts do not include the incremental fair value of the modifications to the outstanding unvested PSUs held by Messrs. Gobe and Wilson on their separation dates and instead reflect actual performance of such PSUs as of December 31, 2022. The figures also exclude the modification value of Mr. Wilson’s 2022 RSUs to avoid inclusion of the value of that award twice in this column. The PSUs granted in 2020 vested at 61% and the PSUs granted in 2021 and 2022 were tracking to vest at 0% as of December 31, 2022. +PROPETRO  2023 Proxy Statement   |  47 +TABLE OF CONTENTS +Executive Compensation +GRANTS OF PLAN-BASED AWARDS +Name +Grant Date +Estimated Possible Payouts Under +Non-Equity Incentive Plan +Awards (1) +Estimated Future Payouts Under +Equity Incentive Plan Awards (2) +All Other +Stock +Awards: +Number of +Shares of +Stock (3) +(#) +Grant Date +Fair Value +of Stock +and Option +Awards (4) +($) +Threshold +($) +Target +($) +Maximum +($) +Threshold +(#) +Target +(#) +Maximum +(#) +Samuel D. Sledge +Annual Bonus +― +350,000 +700,000 +1,400,000 +― +― +― +― +― +RSUs +2/16/2022 +― +― +― +― +― +― +100,482 +1,249,996 +PSUs +2/16/2022 +― +― +― +50,241 +100,482 +200,964 +― +2,008,635 +David S. Schorlemer +Annual Bonus +― +190,800 +381,600 +763,200 +― +― +― +― +― +RSUs +2/16/2022 +― +― +― +― +― +― +48,231 +599,994 +PSUs +2/16/2022 +― +― +― +24,116 +48,231 +96,462 +― +964,138 +Adam Muñoz +Annual Bonus +― +275,000 +550,000 +1,100,000 +― +― +― +― +― +RSUs +2/16/2022 +― +― +― +― +― +― +68,327 +849,988 +PSUs +2/16/2022 +― +― +― +34,164 +68,327 +136,654 +― +1,365,857 +Newton W. “Trey” Wilson III +Annual Bonus +― +157,500 +315,000 +630,000 +― +― +― +― +― +RSUs +2/16/2022 +― +― +― +― +― +― +40,192 +499,988 +PSUs +2/16/2022 +― +― +― +20,096 +40,192 +80,384 +― +803,438 +Modification +12/31/2022 +1,398,000 +Phillip A. Gobe +Annual Bonus +― +405,000 +810,000 +1,620,000 +― +― +― +― +― +RSUs (5) +4/26/2022 +― +― +― +― +― +― +10,137 +139,992 +Modification +3/31/2022 +14,138,813 +(1) +Amounts in these columns represent the estimated payouts for annual cash incentive awards under the Annual Bonus Plan for 2022 assuming threshold, target, and maximum performance achievement. The actual amounts paid to our Named Executive Officers for 2022 can be found in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table above. See “Compensation Discussion and Analysis—Elements of Compensation and 2022 Decisions in Detail—Annual Cash Incentive Awards” above for additional information regarding these awards. +(2) +These amounts represent the threshold, target, and maximum number of PSUs granted to the Named Executive Officers during 2022. The number of PSUs which ultimately vest is based on the performance of the Company’s TSR relative to the TSR of the companies in our Peer Group during the three-year performance period ending on December 31, 2024, subject to the Named Executive Officer’s continued employment through such date. +(3) +Amounts in this column reflect RSUs granted to the Named Executive Officers during 2022. One-third of each such grant vests on each of the first three anniversaries of the applicable date of grant, subject to the Named Executive Officer’s continued employment through each such date. +(4) +These amounts represent the aggregate grant date fair value of RSUs and PSUs granted in 2022 to the Named Executive Officers, computed in accordance with FASB ASC Topic 718, disregarding estimated forfeitures. The grant date fair value of the PSUs is based on probable outcome with regard to the applicable performance metrics. For information regarding assumptions underlying the valuation of equity awards, see Note 13 of the Consolidated Financial Statements in our 2022 Annual Report on Form 10-K. For Messrs. Gobe and Wilson, the amounts also represent the incremental fair value of the modification to their RSUs and PSUs, calculated in accordance with FASB ASC Topic 718, which were modified in connection with Mr. Gobe’s resignation on March 31, 2022 and Mr. Wilson’s resignation on December 31, 2022. +(5) +This award of RSUs was granted to Mr. Gobe in accordance with the Director Compensation Policy for his service as Chairman of the Board in 2022. Mr. Gobe was not granted any RSUs or PSUs for his service as Executive Chairman of the Board prior to his resignation from that position in March 31, 2022. +48  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +NARRATIVE DISCLOSURE TO SUMMARY COMPENSATION TABLE AND GRANTS OF PLAN-BASED AWARDS TABLE +Executive Severance Plan +None of the Named Executive Officers is currently a party to an employment agreement or letter agreement with us. Instead, they participate in the Executive Severance Plan. For additional information regarding the terms and conditions of this plan please see “— Potential Payments Upon Termination or Change in Control—Executive Severance Plan.” +Outstanding Equity Awards at Fiscal Year End +The following table reflects information regarding outstanding and unvested stock options, RSUs, and PSUs held by our Named Executive Officers as of December 31, 2022. +Option Awards +Stock Awards +Name +Number of +Securities +Underlying +Unexercised +Options +Exercisable +(#) +Number of +Securities +Underlying +Unexercised +Options +Unexercisable +(#) +Option +Exercise +Price +($) +Option +Expiration +Date +Number of +Shares or +Units of +Stock That +Have Not +Vested (1) +(#) +Market +Value of +Shares or +Units of +Stock That +Have Not +Vested (2) +($) +Equity +Incentive Plan +Awards: +Number of +Unearned +Shares That +Have Not +Vested (3) +(#) +Equity +Incentive Plan +Awards: +Market Value +of Unearned +Shares That +Have Not +Vested (2) +($) +Samuel D. Sledge +21,750 +― +14.00 +3/16/2027 +― +― +― +― +― +― +― +― +167,049 +1,732,298 +― +― +― +― +― +― +― +― +110,495 +1,145,833 +David S. Schorlemer +― +― +― +― +84,595 +887,250 +― +― +― +― +― +― +― +― +54,822 +568,504 +Adam Muñoz +48,938 +― +14.00 +3/16/2027 +― +― +― +― +― +― +― +― +122,604 +1,271,403 +― +― +― +― +― +― +― +― +77,631 +805,033 +Newton W. “Trey” +Wilson III +― +― +― +― +― +― +50,802 +526,817 +Phillip A. Gobe +― +― +― +― +10,137 +105,121 +― +― +― +― +― +― +― +― +116,619 +1,209,339 +(1) +The amounts in this column represent RSU awards held by each Named Executive Officer vest pro-rata over the applicable remaining vesting dates as follows, subject to the Named Executive Officer’s continued employment: +Name +Number of Unvested +RSUs on 12/31/2022 +Remaining Vesting Dates +Samuel D. Sledge +2,369 +February 11, 2023 +10,639 +March 13, 2023 +19,106 +February 17, 2023 and February 17, 2024 +34,453 +August 31, 2023, and August 31, 2024 +100,482 +February 16, 2023, February 16, 2024, and February 16, 2025 +David S. Schorlemer +9,070 +October 13, 2023 +40,941 +February 17, 2023 and February 17, 2024 +48,231 +February 16, 2023, February 16, 2024, and February 16, 2025 +Adam Muñoz +5,001 +February 11, 2023 +10,639 +March 13, 2023 +30,024 +February 17, 2023 and February 17, 2024 +8,613 +August 31, 2023 and August 31, 2024 +68,327 +February 16, 2023, February 16, 2024, and February 16, 2025 +Phillip A. Gobe +10,137 +Earlier to occur of  (i) day immediately preceding the 2023 +annual meeting and (ii) April 26, 2023 +PROPETRO  2023 Proxy Statement   |  49 +TABLE OF CONTENTS +Executive Compensation +(2) +The amounts in this column were calculated by multiplying $10.37, the closing price of our common stock on December 30, 2022, by the number of awards reported. +(3) +Pursuant to the applicable rules, the amounts in this column and in the table below reflect the threshold number of PSUs held by each Named Executive Officer that were granted in 2021 and 2022 because performance as of December 31, 2022 was below threshold for such awards. Both the PSUs granted to the Named Executive Officers in 2021 and 2022 may vest, if at all, based on the performance of the Company’s stock relative to a peer group during the applicable three-year performance period as shown in the below table. The actual number of PSUs earned based on actual performance over the full performance period may range from 0% to 200% of the target amount (i.e. up to 400% of the amounts below, since the amounts below represent threshold performance). +Name +Number of Unvested +PSUs on 12/31/2022 +Applicable Performance +Period End Date +Samuel D. Sledge +21,494 +December 31, 2023 +38,760 +December 31, 2023 +50,241 +December 31, 2024 +David S. Schorlemer +30,706 +December 31, 2023 +24,116 +December 31, 2024 +Adam Muñoz +33,777 +December 31, 2023 +9,690 +December 31, 2023 +34,164 +December 31, 2024 +Newton W. “Trey” Wilson III +30,706 (a) +December 31, 2023 +20,096 (a) +December 31, 2024 +Phillip A. Gobe +116,619 (b) +December 31, 2023 +(a) +In connection with Mr. Wilson’s resignation as General Counsel and Corporate Secretary on December 31, 2022, the service requirement associated with the outstanding PSUs held by Mr. Wilson immediately prior to December 31, 2022 was deemed to be fulfilled and the PSUs will remain outstanding and will vest, if at all, based on the Company’s actual performance over the applicable performance period. +(b) +In connection with Mr. Gobe’s resignation as Executive Chairman on March 31, 2022, the service requirement associated with the outstanding PSUs held by Mr. Gobe immediately prior to the Separation Date was deemed to be fulfilled and the PSUs will remain outstanding and will vest, if at all, based on the Company’s actual performance over the applicable performance period. +2022 OPTION EXERCISES AND STOCK VESTED +Option Awards +Stock Awards +Name +Number of Shares +Acquired on +Exercise +(#) +Value Realized on +Exercise +($) +Number of Shares +Acquired on +Vesting (1) +(#) +Value Realized on +Vesting (2) +($) +Samuel D. Sledge +― +― +41,452 +854,071 +David S. Schorlemer +― +― +47,615 +518,392 +Adam Muñoz +― +― +80,824 +928,924 +Newton W. “Trey” Wilson III +― +― +122,345 +1,312,969 +Phillip A. Gobe +— +— +594,957 +7,357,606 +(1) +This column reflects the RSUs and PSUs held by each Named Executive Officer that vested during 2022. Sixty one percent of the target number of PSUs granted to the Named Executive Officers in 2020 vested. +(2) +This column reflects the aggregate market value realized by each Named Executive Officer upon vesting, calculated by multiplying the number of RSUs and PSUs that vested (including shares withheld for tax withholding purposes) by the closing price of our common stock on the applicable vesting date or, to the extent the vesting date was not a trading date, the closing price on the last trading date. +PENSION BENEFITS +We do not sponsor any qualified or non-qualified defined benefit pension plans. +NONQUALIFIED DEFERRED COMPENSATION +We do not have any non-qualified deferred compensation plans. +50  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL +Executive Severance Plan +In 2020, the Board adopted the Executive Severance Plan, pursuant to which the Named Executive Officers are eligible to receive severance payments and benefits, as described in more detail below. None of the Named Executive Officers currently have an employment agreement with the Company. Pursuant to the terms of the Executive Severance Plan, the level of severance benefit for which a participant is eligible is determined based on their designated “Tier.” As of December 31, 2022, the Tier levels for each of the Named Executive Officers was as follows: +Name +Executive Severance Plan Tier Level +Samuel D. Sledge +Tier 1 +David S. Schorlemer +Tier 2 +Adam Muñoz +Tier 2 +Upon the Named Executive Officer’s termination without “Cause” or a resignation for “Good Reason” (each as defined in the Executive Severance Plan and described below), current participants in the Executive Severance Plan will be eligible to receive the following benefits: +• +A lump sum cash payment equal to 2.0 (for Tier 1 Executives), 1.5 (for Tier 2 Executives) or 1.0 (for Tier 3 Executives) times the sum of the participant’s (i) annualized base salary then in effect and (ii) target annual bonus for the year in which the termination occurred, +• +Any earned but unpaid bonus for the year preceding the year of termination based on the Company’s actual performance, paid at the time such bonuses are paid to all other executives, and +• +Reimbursement for a portion of the cost of continuation coverage for the participant and his or her spouse and eligible dependents under the Company’s group health plans pursuant to COBRA for 12 months (or 18 months for Tier 1 Executives), unless such coverage is earlier terminated in accordance with the terms of the Executive Severance Plan. +Upon a termination without Cause or a resignation for Good Reason within 12 months following a “Change in Control” (as defined in the Executive Severance Plan), participants in the Executive Severance Plan will be eligible to receive the following benefits: +• +A lump sum cash payment equal to 3.0 (for Tier 1 Executives), 2.0 (for Tier 2 Executives) or 1.5 (for Tier 3 Executives) times the sum of the participant’s (i) annualized base salary then in effect and (ii) target annual bonus as in effect immediately prior to the Change in Control, +• +Any earned but unpaid bonus for the year preceding the year of termination based on the Company’s actual performance, paid at the time such bonuses are paid to all other executives, +• +A lump sum cash payment equal to a prorated target bonus for the year of termination based on days of service during the applicable calendar year, and +• +Full reimbursement of the cost of continuation coverage for the participant and his or her spouse and eligible dependents under the Company’s group health plans pursuant to the COBRA, for 12 months (or 18 months for Tier 1 Executives), unless such coverage is earlier terminated in accordance with the terms of the Executive Severance Plan. +Additionally, if a participant’s employment with the Company terminates as a result of his or her death or “Disability” (as defined in the Executive Severance Plan), then the participant will be eligible to receive the following benefits: +• +Any earned but unpaid bonus for the year preceding the year of termination based on the Company’s actual performance, paid at the time such bonuses are paid to all other executives, and +• +A lump sum cash payment equal to a prorated target bonus for the year of termination based on days of service during the applicable calendar year. +In order to receive any of the foregoing severance benefits under the Executive Severance Plan, a participant must timely execute (and not revoke) a release of claims in favor of the Company and its affiliates. Further, the Executive Severance Plan requires continued compliance with certain confidentiality, non-competition, non-solicitation and non-disparagement covenants as set forth in the award agreements under the ProPetro Holding Corp. 2017 Incentive Award Plan (the “2017 LTIP”) and the 2020 LTIP. If the severance benefits under the Executive Severance Plan would trigger an excise tax for a participant under Section 4999 or Section 280G of the Code (“Section 280G”) the +PROPETRO  2023 Proxy Statement   |  51 +TABLE OF CONTENTS +Executive Compensation +Executive Severance Plan provides that the participant’s severance benefits will be reduced to a level at which the excise tax is not triggered, unless the participant would receive a greater amount without such reduction after taking into account the excise tax and other applicable taxes. +As used in the Executive Severance Plan, the following terms generally mean: +“ Cause ” generally means the Named Executive Officer’s: +(i) +material breach of the employment agreement or any other agreement with the Company or its affiliates, subject to a 30-day notice and 15-day cure period, +(ii) +material breach of the Company’s or its affiliates’ policies or code of conduct applicable to the Named Executive Officer, +(iii) +violation of any law applicable to the workplace or employment relationship, +(iv) +gross negligence, material misconduct reflecting negatively on the Company, breach of fiduciary duty, fraud, theft, or embezzlement, +(v) +conviction of or plea of nolo contendere to any felony (or state law equivalent) or any crime involving moral turpitude, +(vi) +material failure or refusal (other than due to Disability) to perform obligations or any lawful director from the Board or an officer of the Company, subject to a 30-day notice and 15-day cure period, +(vii) +unlawful use or possession of illegal drugs on the Company’s premises or while performing duties, +(viii) +failure to exercise the degree of care, skill, and diligence as employees of ordinary skill and knowledge commonly possess and exercise, subject to a 30-day notice and 15-day cure period, or +(ix) +failure to act with undivided loyalty to the Company and its affiliates. +“ Change in Control ” has the meaning given to it under the 2020 LTIP, which is the same meaning given to such term under the 2017 LTIP and described below under “— 2017 LTIP.” +“ Good Reason ” generally means: +(i) +the material diminution in the Named Executive Officer’s base salary, unless in connection with a general reduction in base salaries that affects all similarly situated employees, +(ii) +material diminution in the Named Executive Officer’s authority, duties, or responsibilities unless in connection with an internal investigation by the Company (provided that his or her removal from the board of directors or as an officer of any of the Company’s affiliates shall not constitute Good Reason), +(iii) +the material breach by the Company of any of its obligations under the agreement, or +(iv) +the Named Executive Officer’s relocation by more than 50 miles from his or her current place of business, in each case, subject to a 30-day notice period, 15-day cure period and the Named Executive Officer’s resignation within 75 days of the end of the cure period. +“ Disability ” generally means the Named Executive Officer’s inability to perform the essential functions of his or her job due to physical or mental impairment for a period that exceeds 120 consecutive days or 180 total days in any 12-month period, as determined by the Board. +2017 LTIP +All equity awards granted to the Named Executive Officers prior to 2021 are subject to the following terms. +Only Messrs. Sledge and Muñoz hold stock options under the 2017 LTIP. The stock options granted under the 2017 LTIP are fully vested. The vested and outstanding stock options awarded under the 2017 LTIP will remain outstanding and exercisable for 90 days following a Named Executive Officer’s termination of service without “Cause” or due to his resignation for “Good Reason” and will remain outstanding and exercisable for 12 months following a Named Executive Officer’s termination of service due to his death, “Disability” or “Retirement.” +Pursuant to the 2017 LTIP, in the event of a termination of employment of a Named Executive Officer due to his death, Disability or Retirement, (i) all unvested RSUs that would have vested had the Named Executive Officer +52  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +continued his service during the 12 months following the termination will vest on such termination or resignation date, and (ii) with respect to any unvested PSUs, if such termination of employment occurs within one year prior to the last day of the applicable performance period, the Named Executive Officer’s unvested PSUs will remain outstanding and eligible to vest at the end of the applicable performance period. +In the event of a termination of a Named Executive Officer by the Company without Cause upon or within one year following a “Change in Control,” all unvested RSUs and PSUs will immediately vest based on performance as of the date of the Change in Control. In the event of a termination of employment of a Named Executive Officer for any other reason, all unvested RSUs and PSUs will be forfeited immediately upon the termination. +To receive the above described severance payments and benefits, the Named Executive Officers must execute a release of claims in favor of the Company and comply with the terms of certain restrictive covenants, including a one-year non-competition and two-year non-solicitation obligation as well as a perpetual confidentiality and non-disparagement obligations. +As used in the 2017 LTIP and the award agreements thereunder, “Cause” and “Disability” generally have the meanings set forth below. In addition, “Retirement” and “Change in Control” generally have the meanings set forth below. +“ Cause ” generally means the Named Executive Officer’s: +(i) +willful failure to substantially perform his or her duties, +(ii) +willful failure to carry out, or comply with, in any material respect any lawful directive of our board of directors, +(iii) +commission at any time of any act or omission that results in, or may reasonably be expected to result in, a conviction, a plea of no contest, plea of nolo contendere, or imposition of unadjudicated probation for any felony or crime involving moral turpitude, +(iv) +unlawful use (including being under the influence) or possession of illegal drugs on the Company’s premises or while performing his or her duties and responsibilities, +(v) +commission at any time of any act of fraud, embezzlement, misappropriation, misconduct, conversion of assets of the Company, or breach of fiduciary duty against the Company, or +(vi) +material breach of the employment agreement or any other agreement with the Company, subject to certain procedural requirements. +“ Change of Control ” generally means: +(i) +any transaction or series of transactions whereby any person, other than the Company, any of its subsidiaries or any Company benefit plan, acquires beneficial ownership of 30% or more of the total combined voting power of the Company’s securities, +(ii) +the current members of the Board cease to constitute a majority of the Board for any reason, +(iii) +the consummation by the Company of a merger, consolidation, reorganization or business combination or a sale of all or substantially all of the Company’s assets, unless: +(a) +the Company controls the successor entity, +(b) +no person owns 50% or more of the combined voting power of the successor entity, or +(c) +the current members of the Board represent the majority of the successor entity’s board, or +(iv) +the tenth day following the complete dissolution of the Company. +“ Disability ” generally means the Named Executive Officer’s inability to engage in substantial gainful activity by reason of any medically determinable physical or mental impairment. +“ Retirement ” generally means the termination of the Named Executive Officer’s employment following his attainment of both (i) age 60 and (ii) ten years of service with the Company or one of its affiliates. +PROPETRO  2023 Proxy Statement   |  53 +TABLE OF CONTENTS +Executive Compensation +2020 LTIP +All equity awards granted to the Named Executive Officers’ during or following 2021 are subject to the following terms. +Pursuant to the 2020 LTIP, in the event of a termination of employment of a Named Executive Officer due to his or her death or “Disability,” (i) all unvested RSUs that would have vested had the Named Executive Officer continued his or her service during the 12 months following the termination will vest on such termination or resignation date, and (ii) with respect to any unvested PSUs, if such termination of employment occurs within one year prior to the last day of the applicable performance period, the Named Executive Officer’s unvested PSUs will remain outstanding and eligible to vest at the end of the applicable performance period. +In the event of a termination of a Named Executive Officer by the Company without “Cause” upon or within one year following a “Change in Control,” all unvested RSUs and PSUs will immediately vest based on performance as of the date of the Change in Control. In the event of a termination of employment of a Named Executive Officer for any other reason, all unvested RSUs and PSUs will be forfeited immediately upon the termination. +In the event of a Change in Control, the performance period for all unvested PSUs will be deemed to have ended as of the date of the Change in Control and the PSUs for which the performance goal was obtained as of the date of the Change in Control will remain outstanding and eligible to vest at the end of the applicable performance period, subject to the Named Executive Officer’s continued employment through such date. +To receive the above-described severance payments and benefits, the Named Executive Officers must execute a release of claims in favor of the Company and comply with the terms of certain restrictive covenants, including a one-year non-competition and two-year non-solicitation obligation as well as a perpetual confidentiality and non-disparagement obligations. +The 2020 LTIP further specifies that unless otherwise provided for in an award agreement, if any awards under the 2020 LTIP are not assumed or substituted by a successor entity in a Change in Control, then all outstanding awards will become fully vested as of the date of the Change in Control (for PSUs, based on the greater of   (i) target and (ii) actual performance as of the date of the “Change in Control”). +As used in the 2020 LTIP and the award agreements thereunder, “Cause,” “Change in Control” and “Disability” generally have the meanings set forth below. +“ Cause ” has the meaning given to it under the Executive Severance Plan, described above under “— Executive Severance Plan.” +“ Change of Control ” has the meaning given to it under the 2017 LTIP, described above under “— 2017 LTIP.” +“ Disability ” has the meaning given to it under the Executive Severance Plan, described above under “— Executive Severance Plan.” +Other Restrictive Covenants +On September 25, 2019, we entered into an employment agreement with Mr. Wilson (the “Wilson Employment Agreement”). However, Mr. Wilson executed a participation agreement as a Tier 3 Executive under the Executive Severance Plan on March 30, 2020 and subsequently on July 28, 2021 as a Tier 2 Executive, that superseded and replaced the Wilson Employment Agreement in all respects except with respect to the restrictive covenants set forth in the Wilson Employment Agreement, which survived the termination of the Wilson Employment Agreement. As a result, Mr. Wilson will still be subject to noncompetition and non-solicitation covenants through the first anniversary of his termination of employment. For more information regarding the terms of the Wilson Resignation Agreement please see the section of this proxy statement entitled “—Other Compensation Practices, Policies and Guidelines—Succession and Additional Agreements.” +54  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +Quantification of Benefits on Termination +The table below quantifies the payments and benefits that would have been paid to our Named Executive Officers pursuant to the terms of the Executive Severance Plan and the equity award agreements in the event of certain terminations of employment with us, had such terminations occurred on December 31, 2022. +Name +Payments and +Benefits +Termination +without Cause +or Resignation +for Good +Reason (1) +($) +Termination as +a Result of +Death, +Disability (2) +($) +Termination as +a Result of +Retirement (3) +($) +Termination +without Cause +within One +Year Following +a Change in +Control (4) +($) +Resignation +for Good +Reason within +One Year +Following a +Change in +Control (4) +($) +Samuel D. Sledge +Cash Severance (5) +2,800,000 +― +― +4,200,000 +4,200,000 +Pro-Rata Bonus (6) +― +700,000 +― +700,000 +700,000 +COBRA Subsidy (7) +12,678 +― +― +27,430 +27,430 +RSU and PSU +Acceleration (8) +― +759,727 +134,893 +1,732,298 +― +Total +2,812,678 +1,459,727 +134,893 +6,659,728 +4,927,430 +David S. Schorlemer +Cash Severance (5) +1,287,900 +― +― +1,717,200 +1,717,200 +Pro-Rata Bonus (6) +― +381,600 +― +381,600 +381,600 +COBRA Subsidy (7) +8,452 +― +― +18,287 +18,287 +RSU and PSU +Acceleration (8) +― +412,477 +94,056 +877,250 +― +Total +1,296,352 +794,077 +94,056 +2,994,337 +2,117,087 +Adam Muñoz +Cash Severance (5) +1,650,000 +― +― +2,200,000 +2,200,000 +Pro-Rata Bonus (6) +― +550,000 +― +550,000 +550,000 +COBRA Subsidy (7) +8,452 +― +― +18,287 +18,287 +RSU and PSU +Acceleration (8) +― +612,940 +162,187 +1,271,403 +― +Total +1,658,452 +1,162,940 +162,187 +4,039,690 +2,768,287 +(1) +Amounts in this column reflect payments made upon termination by the Company without “Cause” or by the Named Executive Officer for “Good Reason.” Such quoted terms are as defined in the Executive Severance Plan, as described above. +(2) +Amounts in this column reflect payments made upon termination as a result of the Named Executive Officer’s death or “Disability.” “Disability” is as defined in the Executive Severance Plan for the pro-rata bonus payable upon such termination of employment and is as defined in the applicable award agreements for the equity award acceleration, each as described above. +(3) +Amounts in this column reflect payments made upon termination as a result of the Named Executive Officer’s “Retirement” (as defined in the applicable award agreements and described above). +(4) +Amounts in this column reflect payments made upon termination by the Company without Cause or by the Named Executive Officer for Good Reason, in each case, within 12 months following a “Change in Control.” As described above under “— 2017 LTIP” and under “— 2020 LTIP,” RSUs and PSUs granted under the 2017 LTIP and the 2020 LTIP are accelerated in connection with a Named Executive Officer’s termination without Cause within 12 months following a Change in Control but are not accelerated in connection with a Named Executive Officer’s resignation for Good Reason, whether or not such resignation follows a Change in Control. +(5) +Pursuant to the Executive Severance Plan, upon termination of employment by the Company without Cause or by the Named Executive Officer for Good Reason, each Named Executive Officer will receive either 2.0 (for Mr. Sledge) or 1.5 (for Messrs. Schorlemer and Muñoz) times the sum of his annual base salary and the target amount of his annual bonus for the year in which the termination occurs, payable in a lump sum following the termination of employment. +(6) +Pursuant to the terms of the Executive Severance Plan, upon a termination of employment by the Company without Cause or by the Named Executive Officer for Good Reason, in each case, within one year following a Change in Control, or upon a termination of employment due to the Named Executive Officer’s death or Disability, each Named Executive Officer will receive a pro-rata bonus, based upon the number of days each such Named Executive Officer was employed by the Company during the applicable calendar year and achievement of target performance. The target bonuses payable to the Named Executive Officers are included in the table because the Named Executive Officers would have been employed for the full year if their termination occurred on December 31, 2022. +(7) +Pursuant to the terms of the Executive Severance Plan, upon termination of employment by the Company without Cause or by the Named Executive Officer for Good Reason, the Company will reimburse each of the Named Executive +PROPETRO  2023 Proxy Statement   |  55 +TABLE OF CONTENTS +Executive Compensation +Officers for the difference between the cost of the COBRA premiums and the cost for similarly-situated employees to effect such coverage under the Company’s group health plans for up to 18 months for Mr. Sledge and up to 12 months for Messrs. Schorlemer and Muñoz following such termination. Upon termination of employment by the Company without Cause or by the Named Executive Officer for Good Reason, in each case, within 12 months following a Change in Control, the Company will reimburse each of the Named Executive Officers for the full amount of the COBRA premiums for up to 18 months for Mr. Sledge and up to 12 months for Messrs. Schorlemer and Muñoz. The COBRA reimbursement amount is based on the premiums in effect on December 31, 2022 and each applicable Named Executive Officer’s elections in place on such date, which are assumed for purposes of this table to remain the same throughout the period for which the COBRA reimbursement would be available. +(8) +For the RSUs, these amounts are calculated by multiplying the number of RSUs that would have become vested upon the applicable event by $10.37 the closing price of our common stock on December 30, 2022. For the PSUs, actual performance is used and, as of December 31, 2022, the actual performance was at 0% for the PSUs granted in 2021 and 2022. As a result, no value for the PSUs is reflected in the calculations. However, PSUs that vest as a result of a Named Executive Officer’s death or Disability will vest based on actual performance as of the end of the applicable performance period, and, as a result, the amounts included reflect estimated payouts of such PSUs. +Gobe Resignation Agreement +In connection with Mr. Gobe’s resignation from his position as Executive Chairman of the Board, he and the Company entered into the Gobe Resignation Agreement, which provided for the acceleration of his outstanding RSUs and the deemed fulfillment of the service requirement with respect to his outstanding PSUs. For more information regarding the terms of the Gobe Resignation Agreement please see the section of this proxy statement entitled “—Other Compensation Practices, Policies and Guidelines—Succession and Additional Agreements.” +The table below quantifies the value of the payments and benefits received by Mr. Gobe pursuant to the Gobe Resignation Agreement. +Type of Benefit +Value of Benefit +($) +RSUs Acceleration (1) +2,768,713 +PSU Acceleration (1) +7,389,057 +Attorney’s Fees +3,484 +Total +10,161,254 +(1) +For the RSUs and PSUs, this amount is calculated by multiplying the number of RSUs that were vested and the PSUs for which the service requirement was waived on the Gobe Separation Date by $13.93, the closing price of our common stock on the Gobe Separation Date. The number of PSUs used in such calculation reflects actual performance as of December 31, 2022, which was above threshold, but below target for the 2020 PSUs and below threshold for the 2021 PSUs such that target and threshold performance is are used for purposes of calculating the value of the 2020 PSUs and 2021 PSUs, respectively, in this table. However, Mr. Gobe’s PSUs will vest based on actual performance as of the end of the applicable performance period, and, as a result, the amounts included reflect estimated payouts of such PSUs. +Wilson Resignation Agreement +In connection with Mr. Wilson’s retirement and resignation from his position as General Counsel and Corporate Secretary of the Company, he and the Company entered into the Wilson Resignation Agreement, which provided for the acceleration of his outstanding RSUs and the deemed fulfillment of the service requirement with respect to his outstanding PSUs. For more information regarding the terms of the Wilson Resignation Agreement please see the section of this proxy statement entitled “—Other Compensation Practices, Policies and Guidelines—Succession and Additional Agreements.” +The table below quantifies the value of the payments and benefits received by Mr. Wilson pursuant to the Wilson Resignation Agreement. +Type of Benefit +Value of Benefit +($) +RSUs Acceleration (1) +779,295 +PSU Acceleration (1) +526,817 +Attorney’s Fees +0 +Total +1,306,112 +56  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +(1) +For the RSUs and PSUs, this amount is calculated by multiplying the number of RSUs that were vested and the PSUs for which the service requirement was waived on the Wilson Separation Date by $10.37, the closing price of our common stock on the last trading day immediately preceding the Wilson Separation Date. The number of PSUs used in such calculation reflects actual performance as of December 31, 2022, which was below threshold for all outstanding PSUs such that threshold performance is used for purposes of calculating the value the PSUs in this table. However, Mr. Wilson’s PSUs will vest based on actual performance as of the end of the applicable performance period, and, as a result, the amounts included reflect estimated payouts of such PSUs. +Pay versus Performance +As required by Item 402(v) of Regulation S-K, the Company is providing the following information regarding the relationship between executive compensation and the Company’s financial performance for each of the three years in the period ended December 31, 2022. In accordance with the applicable SEC rules, the adjustments described and quantified below were made to the values reported in the Summary Compensation Table for each applicable year to determine the “actual” compensation paid to our Principal Executive Officers (“PEOs”) and the average “actual” compensation paid to our other Named Executive Officers (“NEOs”). +The following table summarizes compensation values reported in the Summary Compensation Table for our PEO and the average for our other NEOs, as compared to “compensation actually paid” or “CAP” and the Company’s financial performance for the years ended December 31, 2022, 2021, and 2020: +Year +Summary +Compensation +Table Total for +First PEO (1) +Summary +Compensation +Table Total for +Second +PEO (1) (2) +Compensation +Actually Paid +to First PEO +(1) (2) +Compensation +Actually Paid +to Second +PEO (1) (2) +Average +Summary +Compensation +Table Total for +Non-PEO +NEOs (1) (2) +Average +Compensation +Actually Paid +to Non-PEO +NEOs (1) +Value of +Initial +Fixed $100 +Investment +Based On: +Net +Income +(Loss) +Adjusted +EBITDA (3) +TSR +Peer +Group +TSR +(a) +(b) +(b) +(c) +(c) +(d) +(e) +(f) +(g) +(h) +(i) +2022 N/A $ 5,028,294 N/A $ 3,096,235 $ 6,276,617 $ 1,773,093 92.18 148.21 $ 2,030,000 $ 316,590,000 +2021 $ 6,862,469 $ 3,164,649 $ 5,192,291 $ 2,999,764 $ 2,463,661 $ 2,133,954 72.00 73.63 $ ( 54,185,000 ) $ 135,007,000 +2020 $ 5,095,728 N/A $ 7,962,437 N/A $ 2,129,704 $ 370,329 (4 ) 65.69 60.89 $ ( 107,020,000 ) $ 141,463,000 +(1) +The first and second PEOs reflected in columns (b) and (c) represent Phillip Gobe and Samuel Sledge, respectively. The non-PEO named executive officers reflected in column (d) and (e) represent the following individuals by year: +2022 –  Phillip Gobe , David Schorlemer, Adam Muñoz, and Newton W. Wilson III +2021 – David Schorlemer, Adam Munoz, and Newton W. Wilson III +2020 –  +Dale Redman, Darin G. Holderness, David Schorlemer, Jeffrey Smith, David Sledge, Adam Munoz, and Newton W. Wilson III +(2) +The Company deducted from and added to the Summary Compensation Table total compensation the following amounts to calculate compensation actually paid in accordance with Item 402(v) of Regulation S-K as disclosed in columns (c) and (e) for each PEO and Non-PEO NEOs in each respective year. As the Company’s NEOs do not participate in any defined benefit plans, no adjustments were required to amounts reported in the Summary Compensation Table totals related to the value of benefits under such plans. +PROPETRO  2023 Proxy Statement   |  57 +TABLE OF CONTENTS +Executive Compensation +2021 +2020 +FIRST PEO SUMMARY COMPENSATION TABLE TOTALS $ 6,862,469 $ 5,095,728 +Add (Subtract): +Fair value of equity awards granted during the year from the Summary Compensation Table +( 5,102,180 ) ( 3,808,721 ) +Fair value at year end of equity awards granted during the year +3,975,060 6,854,593 +Fair value of equity awards granted and vested during the year +— — +Change in fair value of equity awards granted in prior years that were unvested as of the end of the year +( 520,978 ) ( 74,712 ) +Change in fair value of equity awards granted in prior years that vested during the year +( 22,080 ) ( 104,451 ) +Equity awards granted in prior years that were forfeited during the year +— — +Dividends or other earnings paid on equity awards during the year +— — +Total Equity Award Related Adjustments +( 1,670,178 ) 2,866,709 +COMPENSATION ACTUALLY PAID TOTALS $ 5,192,291 $ 7,962,437 +2022 +2021 +SECOND PEO SUMMARY COMPENSATION TABLE TOTALS $ 5,028,294 $ 3,164,649 +Add (Subtract): +Fair value of equity awards granted during the year from the Summary Compensation Table +( 3,258,631 ) ( 2,216,599 ) +Fair value at year end of equity awards granted during the year +1,799,633 2,053,439 +Fair value of equity awards granted and vested during the year +— — +Change in fair value of equity awards granted in prior years that were unvested as of the end of the year +( 632,188 ) ( 72,824 ) +Change in fair value of equity awards granted in prior years that vested during the year +159,127 71,099 +Equity awards granted in prior years that were forfeited during the year +— — +Dividends or other earnings paid on equity awards during the year +— — +Total Equity Award Related Adjustments +( 1,932,059 ) ( 164,885 ) +COMPENSATION ACTUALLY PAID TOTALS $ 3,096,235 $ 2,999,764 +2022 +2021 +2020 +NON-PEO NEOS SUMMARY COMPENSATION TABLE TOTALS $ 6,276,617 $ 2,463,661 $ 2,129,704 +Add (Subtract): +Fair value of equity awards granted during the year from the Summary Compensation Table +( 5,190,052 ) ( 1,493,812 ) ( 1,533,177 ) +Fair value at year end of equity awards granted during the year +623,931 1,191,410 641,894 +Fair value of equity awards granted and vested during the year +104,198 — — +Change in fair value of equity awards granted in prior years that were unvested as of the end of the year +( 668,425 ) ( 59,552 ) ( 100,948 ) +Change in fair value of equity awards granted in prior years that vested during the year +626,824 32,247 ( 255,785 ) +Equity awards granted in prior years that were forfeited during the year +— — ( 808,505 ) +Dividends or other earnings paid on equity awards during the year +— — — +Fair value of modifications to options during the year +— — 297,146 +Total Equity Award Related Adjustments +( 4,503,524 ) ( 329,707 ) ( 1,759,375 ) +AVERAGE COMPENSATION ACTUALLY PAID TOTALS $ 1,773,093 $ 2,133,954 $ 370,329 +(3) +The Company defines EBITDA as earnings before (i) interest expense, (ii) income taxes, and (iii) depreciation and amortization. The Company defines Adjusted EBITDA as EBITDA, plus (a) loss/(gain) on disposal of assets, (b) loss/(gain) on extinguishment of debt, (c) stock-based compensation, and (d) other unusual or non-recurring (income)/expenses, such as impairment charges, severance, costs related to our IPO and costs related asset acquisition or one-time professional fees. For a more detailed definition of the non-GAAP financial measure of Adjusted EBITDA and reconciliation of Adjusted EBITDA to our most directly comparable financial measures calculated in accordance with GAAP, please read “How We Evaluation Our Operations” in our Form 10-K filed for the year ended December 31, 2022. +58  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +(4) +The CAP for non-PEO NEOs for fiscal year 2020 is significantly lower than fiscal years 2021 and 2022 due to Dale Redman, the Company’s former Chief Executive Officer and an NEO for fiscal year 2020, forfeiting all outstanding and unvested equity awards in connection with his resignation on March 13, 2020. Pursuant to Item 402(v) of Regulation S-K, the fair value of such forfeited equity awards as of the end of the prior fiscal year is taken as a deduction in calculating CAP, which fair value was equal to $ 5,278,134 . +NARRATIVE DISCLOSURE TO PAY versus PERFORMANCE TABLE +CAP and Company TSR +The PEOs’ and other NEOs’ CAP generally align with the Company’s TSR over the three years presented in the table. This is primarily because a significant portion of the CAP to the PEOs and other NEOs is comprised of equity awards. The Company targets approximately 70% for the PEO and 65% for other NEOs of the value of total compensation to be comprised of equity-based awards, including RSUs and PSUs. For more detail regarding the Company’s equity awards, please see “Compensation Discussion and Analysis—What Guides Our Program” in this proxy statement. +Company TSR vs. Peer Group TSR +The Company’s cumulative TSR over the three year period was -7.82%, which underperformed the Peer Group TSR over the three period of 48.21%. Pursuant to Item 402(v) of Regulation S-K, the Company used the same peer group used for purposes of Item 201(e) of Regulation S-K, which is different than the peer group used for measuring performance of PSUs. The Company’s PSUs vest based on the performance of the Company’s TSR relative to the TSR of the companies in our performance peer group during three-year performance periods. For more information of the performance peer group used for PSUs please see “Compensation Discussion and Analysis—What Guides Our Program—Use of Peer Compensation Data” in this proxy statement. +CAP vs. Net Income +The Company’s net income has steadily increased while the PEOs’ and other NEOs’ CAP has varied significantly each year. This is due to the emphasis the Company places on equity-based awards, which are sensitive to changes in the price of the Company’s common stock. In addition, the Company does not use net income to determine compensation levels or equity-based award payouts. +CAP vs. Adjusted EBITDA (the Company-Selected Measure) +The Company’s Adjusted EBITDA has steadily increased while the PEOs’ and other NEOs’ CAP has varied significantly each year. This is due to the emphasis the Company places on equity-based awards, which are sensitive to changes in the price of the Company’s common stock. The Company uses Adjusted EBITDA as a performance metric for annual cash incentive awards granted under the Annual Bonus Plan. For fiscal year 2022, 50% of each NEO’s annual cash incentive was based on the achievement of Adjusted EBITDA. +Tabular Disclosure of Most Important Measures to Determine FY2022 CAP +The measures listed below represent the most important financial performance measures that we used to determine CAP for fiscal year 2022. For more detail regarding these financial performance measures, please see “Compensation Discussion and Analysis—What Guides Our Program” in this proxy statement. +Most Important Financial Performance Measures +Adjusted EBITDA +Relative TSR +Free Cash Flow +PROPETRO  2023 Proxy Statement   |  59 +TABLE OF CONTENTS +Executive Compensation +CEO Pay Ratio +As of December 31, 2022, the Company employed approximately 1,683 people, all in the United States. Using a consistently applied compensation measure, we determined as of December 31, 2022 the total annual cash compensation of each of our employees (excluding our Chief Executive Officer), and then identified the “median employee” within our employee population. +To identify the median compensated employee, we used total annual cash compensation, including base salary, actual bonus paid and overtime and allowances, as applicable. Salaries were annualized for those full- and part-time employees who did not work for the full year. Reasonable estimates of cash compensation were made for those employees who were hired during 2022 using current base salary and target bonus amounts and any overtime or allowances paid during 2022. Once the median employee was identified, we determined his or her annual total compensation in accordance with Item 402(c)(2)(x) of Regulation S-K as required pursuant to SEC rules, which resulted in annual total compensation for the median employee equal to $108,458 for 2022. This calculation is the same calculation used to determine total compensation for purposes of the 2022 Summary Compensation Table with respect to each of the Named Executive Officers. +Our Chief Executive Officer’s 2022 total compensation was $5,028,294. Therefore, the ratio of our Chief Executive Officer’s compensation to the median employee’s compensation was approximately 46 to 1 for 2022. +Employee +2022 Annual Total +Compensation +($) +Estimated Pay +Ratio +Chief Executive Officer +5,028,294 +46:1 +Median employee, other than our CEO +108,458 +SEC rules do not specify a single methodology for identification of the median employee, and other companies may use assumptions and methodologies that are different from those used by us in calculating their pay ratio. Accordingly, the pay ratio disclosed by other companies may not be comparable to the Company’s pay ratio as disclosed above. Neither the Compensation Committee nor management of the Company used the pay ratio measure in making compensation decisions. +60  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +Proposal 3 —Approval of The Amended and Restated 2020 Long Term Incentive Plan +The use of equity-based awards under the 2020 LTIP has been a key component of our compensation program since its adoption in 2020. The ability to grant equity-based compensation awards is critical to attracting and retaining highly qualified individuals. The Board believes that it is in the best interest of our stockholders for those individuals to have an ownership interest in the Company in recognition of their present and potential contributions and to align their interests with those of our future stockholders. +The Board has determined that the current number of shares available for grant under the 2020 LTIP (which is our only active equity-based plan) is not sufficient to meet the objectives of our compensation program going forward. Accordingly, the Board has adopted, subject to shareholder approval, and proposes that our stockholders approve the Amended and Restated ProPetro Holding Corp. 2020 Long Term Incentive Plan (“Amended 2020 LTIP”) in order to increase the number of shares of our common stock available for future grants by 3,400,000, from 4,650,000 to 8,050,000, as described below, and to extend the term of the plan to the tenth anniversary of the 2023 annual meeting. +At the 2023 annual meeting, our stockholders will be asked to approve the Amended 2020 LTIP. If approved by our stockholders, the Amended 2020 LTIP will be effective as of the date of the 2023 annual meeting. If the Amended 2020 LTIP is not approved by our stockholders, then the 2020 LTIP will remain in effect without any increase in the number of shares of our common stock available for future grants. +Background and Purpose of the Proposal +The 2020 LTIP authorizes awards to be granted covering up to 4,650,000 shares of our common stock, subject to the share recycling and adjustment provisions described below. As of March 20, 2023, there were approximately 2,136,881 shares of our common stock available for new awards under the 2020 LTIP (counting performance-based awards at the target payout level). +On March 27, 2023, subject to approval by our stockholders, the Board determined that it is in the Company’s best interest to adopt the Amended 2020 LTIP to increase the number of shares of common stock available for issuance by 3,400,000, from 4,650,000 to 8,050,000. The number of shares authorized for issuance under the Amended 2020 LTIP is expected to provide flexibility to enable the continued use of stock-based compensation consistent with the objectives of our compensation program for approximately two to three years (based on our historical grant practices) while attempting to minimize dilution to our stockholders. The actual length of time that the Amended 2020 LTIP share pool will support our incentive compensation program will depend on numerous factors that cannot be fully anticipated by us at this time including our share price, executive retention rate, and changes in compensation practices of companies with which we compete for executive talent. +Of the 4,650,000 shares currently authorized for issuance under the 2020 LTIP, a total of 830,186 shares have been issued as of March 20, 2023 upon the settlement of RSUs. As of March 20, 2023, under the 2020 LTIP, a total of 1,734,270 shares remained subject to unsettled restricted stock units and 1,403,021 shares remained subject to unsettled PSUs (based on target performance). As of March 20, 2023, under the 2017 LTIP, a total of 9,070 shares remain subject to unsettled restricted stock units and a total of 361,998 shares remain subject to outstanding stock options with a weighted average remaining term of 2.25 years and a weighted average exercise price of  $14.00. No other equity awards are outstanding under the 2017 LTIP and 2020 LTIP as of such date. For additional information regarding stock-based awards previously granted by us under the 2017 LTIP and 2020 LTIP, please see Note 13 to our consolidated financial statements on Form 10-K for the year ended December 31, 2022. As of March 20, 2023, there were 115,170,545 shares of our common stock outstanding. The closing price per share of common stock on the New York Stock Exchange as of March 20, 2023 was $7.38. +The proposed Amended 2020 LTIP is included as Appendix A hereto. If our stockholders approve this Proposal No. 3, we intend to file, pursuant to the Securities Act of 1933, as amended, a registration statement on Form S-8 to register the additional shares made available for delivery under the Amended 2020 LTIP. +PROPETRO  2023 Proxy Statement   |  61 +TABLE OF CONTENTS +Executive Compensation +Summary of the Amended 2020 LTIP +The following summary provides a general description of the material features of the Amended 2020 LTIP but is not a complete description of all provisions of the Amended 2020 LTIP and is qualified in its entirety by reference to the full text of the Amended 2020 LTIP included as Appendix A, which is incorporated by reference into this Proposal No. 3. +The purpose of the Amended 2020 LTIP is to attract, retain, and motivate qualified persons as employees, directors, and consultants of the Company and its affiliates. The Amended 2020 LTIP also provides a means through which such persons can acquire and maintain stock ownership or awards, the value of which is tied to the performance of the Company, thereby strengthening their concern for the Company and its affiliates. +The Amended 2020 LTIP provides for potential grants of: (i) incentive stock options qualified as such under U.S. federal income tax laws (“ISOs”), (ii) stock options that do not qualify as ISOs (“Nonstatutory Options,” and together with ISOs, “Options”), (iii) stock appreciation rights (“SARs”), (iv) restricted stock awards (“Restricted Stock Awards”), (v) RSUs; (vi) awards of vested stock (“Stock Awards”), (vii) dividend equivalents, (viii) other stock-based or cash awards, and (ix) substitute awards (“Substitute Awards” and together with Options, SARs, Restricted Stock Awards, RSUs, Stock Awards, dividend equivalents and other stock-based or cash awards, the “Awards”). +Key features of the Amended 2020 LTIP include: +• +No automatic Award grants are promised to any eligible individual;, +• +Shares (i) withheld or surrendered in payment of the exercise or purchase price or taxes related to an Option or SAR or (ii) repurchased on the open market with the proceeds from the exercise price of an Option, in each case, granted under the Amended 2020 LTIP, will not be available for new Awards under the Amended 2020 LTIP, +• +Shares (i) withheld or surrendered in payment of the exercise or purchase price related to a stock option or stock appreciation right that is an Existing Award (as defined below), (ii) repurchased on the open market with the proceeds from the exercise price of a stock option that is an Existing Award, or (iii) withheld or surrendered to satisfy a tax withholding obligation with respect to any Existing Award, will not be available for new Awards under the Amended 2020 LTIP, +• +Awards assumed by a successor in connection with a change in control will not vest solely as a result of the change in control, +• +No Section 280G gross-ups, +• +No evergreen for the share reserve, +• +Ten year term, +• +Except as permitted in the grant of Substitute Awards, no discounted options or related Awards may be granted, +• +No repricing, replacement, or re-granting of Options, SARS or other stock awards without shareholder approval if the effect would be to reduce the exercise price of the Award (except in the event of certain equitable adjustments or a change in control, as further described below), +• +Any Award (or portion thereof) granted under the Amended 2020 LTIP will vest no earlier than the first anniversary of the date the Award is granted (subject to an exception equal to no more than 5% of the shares reserved for issuance under the Amended 2020 LTIP), +• +Awards are subject to potential reduction, cancellation or forfeiture pursuant to any claw-back policy adopted by the Company, +• +Awards are generally non-transferrable, +• +Meaningful annual limits on total director compensation, and +• +Dividends and dividend equivalents are subject to restrictions and risk of forfeiture to the same extent as the Award with respect to which such dividends or dividend equivalents are accrued and will not be paid unless and until such Award has vested. +62  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +Eligibility to Participate +Employees, non-employee directors, and other service providers of the Company and its affiliates are eligible to receive awards under the Amended 2020 LTIP. Eligible individuals to whom an Award is granted under the Amended 2020 LTIP are referred to as “Participants.” As of March 20, 2023, the Company and its affiliates have approximately 4 executive officers, 9 non-employee directors, 2,052 employees (other than the 4 executive officers), and approximately 30 other service providers who will be eligible to participate in the Amended 2020 LTIP. The Company engages consultants from time to time who could be eligible for awards and the number of employees employed by the Company and its affiliates varies over time, hence these numbers may change during the life of the Amended 2020 LTIP. +Securities to be Offered +Subject to adjustment, in the event of any distribution, recapitalization, stock split, merger, consolidation or other corporate event, the aggregate number of shares of our common stock that may be issued pursuant to Awards under the Amended 2020 LTIP is equal to 8,060,000, and all such shares will be available for issuance upon the exercise of ISOs. The number of shares that may be issued pursuant to the Amended 2020 LTIP is also subject to the share recycling and adjustment provisions described below. +Of the 4,650,000 shares currently authorized for issuance under the 2020 LTIP, a total of 830,186 shares have been issued as of March 20, 2023 upon the settlement of RSUs. As of March 20, 2023, under the 2020 LTIP, a total of 1,734,270 shares remained subject to unsettled RSUs and 1,403,021 shares remained subject to unsettled PSUs. No other equity awards are outstanding under the 2020 LTIP as of such date. +Consistent with the 2020 LTIP, if all or any portion of an Award, including an award granted under the 2017 LTIP that is outstanding as of October 22, 2020 (an “2017 Plan Award”), expires or is cancelled, forfeited, exchanged, settled for cash or otherwise terminated without the actual delivery of shares, any shares subject to such Award or 2017 Plan Award will again be available for new Awards under the Amended 2020 LTIP. As of March 20, 2023, there were 371,068 2017 Plan Awards outstanding and thus a maximum of 371,068 shares of our common stock could become available for new Awards under the 2020 LTIP as a result of 2017 Plan Awards in addition to the 8,060,000 shares reserved under the Amended 2020 LTIP in the unlikely event that all 2017 Plan Awards outstanding as of March 20, 2023 are cancelled, forfeited, exchanged, settled for cash, or otherwise terminated without delivery of shares. +Any shares withheld or surrendered in payment of any taxes relating to Awards granted under the Amended 2020 LTIP (other than Options or SARs) will be again available for new Awards under the Amended 2020 LTIP. However, any shares (i) withheld or surrendered in payment of the exercise or purchase price or taxes related to an Option or SAR or (ii) repurchased on the open market with the proceeds from the exercise price of an Option, in each case, granted under the Amended 2020 LTIP, will not be available for new Awards under the Amended 2020 LTIP. Further, shares (x) withheld or surrendered in payment of the exercise or purchase price related to a stock option or stock appreciation right that is an Existing Award, (y) repurchased on the open market with the proceeds from the exercise price of a stock option that is an Existing Award, or (z) withheld or surrendered to satisfy a tax withholding obligation with respect to any Existing Award, will not be available for new Awards under the Amended 2020 LTIP. +Director Compensation Limits +Under the Amended 2020 LTIP, in a single calendar year, a non-employee director may not be paid compensation, whether denominated in cash or Awards, for such individual’s service on the Board in excess of  $500,000. Additional cash amounts or Awards may be paid for any calendar year in which a non-employee director (i) first joins the Board, (ii) serves on a special committee of the Board, or (iii) serves as lead director or non-executive Chairman of the Board. The limit on non-employee director compensation described above does not apply to compensation paid for any period in which the individual served as our employee or an employee of our affiliates or was otherwise providing services to us or our affiliates other than in the capacity as a director. +Administration +The Board (or a committee of two or more directors appointed by the Board) will administer the Amended 2020 LTIP (as applicable, the “Administrator”). Subject to the terms of the Amended 2020 LTIP and applicable law, the Administrator has broad authority to select Participants to receive awards, determine the types of awards and terms and conditions of awards and interpret provisions of the Amended 2020 LTIP. Subject to applicable law, the Administrator is also authorized to interpret the Amended 2020 LTIP, to establish, amend and rescind any rules and regulations relating to the Amended 2020 LTIP, to delegate duties under the Amended 2020 LTIP, to terminate, modify +PROPETRO  2023 Proxy Statement   |  63 +TABLE OF CONTENTS +Executive Compensation +or amend the Amended 2020 LTIP (except for certain amendments that require stockholder approval as described below), and to make any other determinations that it deems necessary or desirable for the administration of the Amended 2020 LTIP. The Administrator may correct any defect, supply any omission or reconcile any inconsistency in the Amended 2020 LTIP in the manner and to the extent the Administrator deems necessary or desirable. +Source of Shares +Shares of our common stock issued under the Amended 2020 LTIP may come from authorized but unissued shares, from treasury stock held by the Company or from previously issued shares of our common stock reacquired by the Company, including shares purchased on the open market. +Prohibition on Repricing +Except as may be related to Substitute Awards or in the event of certain equitable adjustments or a change in control, as described in the Amended 2020 LTIP, without the approval of the stockholders of the Company, the terms of outstanding Awards may not be amended to (i) reduce the exercise price or grant price of an outstanding Option or SAR, (ii) grant a new Option, SAR or other Award in substitution for, or upon the cancellation of, any previously granted Option or SAR that has the effect of reducing the exercise price or grant price, (iii) exchange any Option or SAR for Stock, cash or other consideration when the exercise price or grant price per share of stock under such Option or SAR exceeds the fair market value of a share of our common stock, or (iv) take any other action that would be considered a “repricing” of an Option or SAR under the applicable listing standards of the national securities exchange on which our common stock is listed. +Awards Under the Amended 2020 LTIP +Options +An Option represents a right to purchase our common stock at a fixed exercise price. The Company may grant Options to eligible persons including: (i) ISOs which comply with the requirements of Section 422 of the Code; and (ii) Nonstatutory Options. The exercise price of each Option granted under the Amended 2020 LTIP will be stated in the option agreement and may vary; however, the exercise price for an Option must not be less than the fair market value per share of our common stock as of the date of grant (or 110% of the fair market value for certain ISOs). Options may be exercised as the Administrator determines, but not later than ten years from the date of grant. The Administrator determines the methods and form of payment for the exercise price of an Option (including, in the discretion of the Administrator, payment in shares of our common stock, other Awards or other property) and the methods and forms in which our common stock will be delivered to a Participant. +SARs +A SAR is the right to receive an amount equal to the excess of the fair market value of one share of our common stock on the date of exercise over the grant price of the SAR, payable in either cash or shares of our common stock or any combination thereof as determined by the Administrator. The grant price of a share of our common stock subject to the SAR will be determined by the Administrator, but in no event will that grant price be less than the fair market value of a share of our common stock on the date of grant. The Administrator has the discretion to determine the other terms and conditions of a SAR award. +Restricted Stock Awards +A Restricted Stock Award is a grant of shares of our common stock subject to a risk of forfeiture, performance conditions, restrictions on transferability and any other restrictions imposed by the Administrator in its discretion. Restrictions may lapse at such times and under such circumstances as determined by the Administrator. Except as otherwise provided under the terms of an Award Agreement, the holder of a Restricted Stock Award will generally have rights as a stockholder, including the right to vote the common stock subject to the Restricted Stock Award and to receive dividends on the common stock subject to the Restricted Stock Award during the restriction period (subject to limitations on payment of dividends on unvested Awards, as described below). Common stock distributed in connection with a stock split or stock dividend, and other property (other than cash) distributed as a dividend, will be subject to restrictions and a risk of forfeiture to the same extent as the Restricted Stock Award with respect to which such common stock or other property has been distributed. In addition, any cash dividends will be subject to restrictions and risk of forfeiture to the same extent as the Restricted Stock with respect to which such dividends were paid and will not be paid unless and until such Restricted Stock has vested and been earned. +RSUs +RSUs are rights to receive our common stock, cash, or a combination of both equal in value to the number of shares of our common stock covered by the RSUs at the end of a specified period or upon the occurrence of a +64  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +specified event. The Administrator will subject RSUs to restrictions to be specified in the Award Agreement, and those restrictions may lapse at such times or upon such conditions determined by the Administrator. +Stock Awards +The Administrator is authorized to grant vested common stock as a Stock Award as a bonus, as additional compensation, or in lieu of cash compensation the individual is otherwise entitled to receive. +Dividend Equivalents +Dividend equivalents entitle a Participant to receive cash, shares of our common stock, other Awards, or other property equal in value to dividends or other distributions paid with respect to a specified number of shares of our common stock. Dividend equivalents must be awarded in connection with another Award (other than a Restricted Stock Award or Stock Award). The terms and conditions applicable to dividend equivalents will be determined by the Administrator and set forth in an Award Agreement, provided, however, that dividend equivalents will be subject to restrictions and a risk of forfeiture to the same extent as the Award with respect to which such dividends accrue and will not be paid unless and until such Award has vested and been earned. +Other Stock-Based or Cash Awards +Other stock-based Awards are awards denominated in or payable in, valued in whole or in part by reference to, or otherwise based on or related to, the value of our common stock. Cash awards may be granted on a free-standing basis, as an element of or a supplement to, or in lieu of any other Award. +Substitute Awards +The Company may grant Awards in substitution for any other Award granted under the Amended 2020 LTIP or another plan of the Company or its affiliates or any other right of a person to receive payment from the Company or its affiliates. Awards may also be granted in substitution for awards held by individuals who become eligible individuals as a result of certain business transactions, in which case, (i) subject to applicable stock exchange requirements, shares of our common stock subject to such Awards will not be added to or subtracted from the number of shares of our common stock authorized to be granted under the Amended 2020 LTIP and (ii) any Options or SARs so granted may have an exercise price per share that is less than the fair market value of a share of our common stock on the date of substitution if the substitution complies with the requirements of Section 409A of the Code and the guidance and regulations promulgated thereunder and other applicable laws. +Other Provisions +Dividends and Dividend Equivalents +Dividends and dividend equivalents are subject to restrictions and risk of forfeiture to the same extent as the Award with respect to which such dividends or dividend equivalents are accrued and will not be paid unless and until such Award has vested. +Recapitalization +In the event of any “equity restructuring” event (such as a stock dividend, stock split, reverse stock split, or similar event) with respect to our common stock, the Administrator will equitably adjust (i) the aggregate number or kind of shares that may be delivered under the Amended 2020 LTIP, (ii) the number or kind of shares or amount of cash subject to an Award, (iii) the terms and conditions of Awards, including the purchase price or exercise price of Awards and performance goals, and (iv) the applicable share-based limitations with respect to Awards provided in the Amended 2020 LTIP, in each case, to equitably reflect such event. +Change in Control +The Amended 2020 LTIP does not provide for the automatic acceleration of vesting of outstanding awards upon a change in control event solely with respect to the occurrence of the change in control unless the successor company fails to assume or replace the awards in connection with that change in control event. If the successor company does assume the awards, unless the individual award agreement provides otherwise, then vesting of the award will be accelerated in the event of an involuntary termination that occurs in connection with or 12 months following the change in control. +Tax Withholding +The Company and any of its affiliates have the right to withhold, or require payment of, the amount of any applicable taxes due or potentially payable upon exercise, award, or lapse of restrictions of an Award. The Administrator will determine, in its sole discretion, the form of payment acceptable for such tax withholding obligations, including the delivery of cash or cash equivalents, our common stock (including previously owned shares, net settlement, a broker-assisted sale, or other cashless withholding or reduction of the amount of shares otherwise issuable or delivered pursuant to the Award), other property, or any other legal consideration the Administrator deems appropriate. +PROPETRO  2023 Proxy Statement   |  65 +TABLE OF CONTENTS +Executive Compensation +Limitations on Transfer of Awards +Participants may not assign, alienate, pledge, attach, sell, or otherwise transfer or encumber any Award, other than a Stock Award. Options and SARs may only be exercised by a Participant during that Participant’s lifetime or by the person to whom the Participant’s rights pass by will or the laws of descent and distribution. Notwithstanding these restrictions, to the extent specifically provided by the Administrator, a Participant may assign or transfer, without consideration, an Award, other than an ISO, on such terms and conditions as the Administrator may from time to time establish; however, no Award (other than a Stock Award, which is a fully vested share of our common stock) may be transferred to a third-party financial institution for value. +All shares of our common stock subject to an Award and evidenced by a stock certificate may contain a legend restricting the transferability of the shares pursuant to the terms of the Amended 2020 LTIP, which can be removed once the restrictions have terminated, lapsed or been satisfied. If shares are issued in book entry form, a notation to the same restrictive effect will be placed on the transfer agent’s books in connection with such shares. +Claw-back +All Awards under the Amended 2020 LTIP will be subject to any claw-back policy adopted by the Company, as in effect from time to time. +Plan Amendment and Termination +The Administrator may amend or terminate any Award or Award Agreement or amend the Amended 2020 LTIP at any time and the Board may amend or terminate the Amended 2020 LTIP at any time; however, stockholder approval will be required for any amendment to the extent necessary to comply with applicable law or exchange listing standards. As discussed in more detail above, the Administrator does not have the authority, without the approval of stockholders to amend any outstanding Option or SAR to reduce its exercise price per share or take any other action that would be considered a repricing under the applicable exchange listing standards. Without the consent of an affected Participant, no action by the Administrator or the Board to amend or terminate any Award, Award Agreement or the Amended 2020 LTIP, as applicable, may materially and adversely affect the rights of such Participant under any previously granted and outstanding Award. +Term of the Amended 2020 LTIP +If our stockholders approve this proposal, the Amended 2020 LTIP will become effective as of the date of the 2023 annual meeting. Unless earlier terminated by action of the Board, the Amended 2020 LTIP will terminate on the tenth anniversary of the 2023 annual meeting. Awards granted before the termination date of the Amended 2020 LTIP will continue to be effective according to their terms and conditions. +Federal Income Tax Consequences +The following discussion is for general information only and is intended to briefly summarize the United States federal income tax consequences to Participants arising from participation in the Amended 2020 LTIP. This description is based on current law, which is subject to change (possibly retroactively). The tax treatment of a Participant in the Amended 2020 LTIP may vary depending on his or her particular situation and may, therefore, be subject to special rules not discussed below. No attempt has been made to discuss any potential foreign, state, or local tax consequences. In addition, Nonstatutory Options and SARs with an exercise price less than the fair market value of shares of our common stock on the date of grant (which may only be granted in limited circumstances in connection with a transaction), SARs payable in cash, RSUs, and certain other Awards that may be granted pursuant to the Amended 2020 LTIP, could be subject to additional taxes unless they are designed to comply with certain restrictions set forth in Section 409A of the Code and guidance promulgated thereunder. +Tax Consequences to Participants +Options and SARs +Participants will not realize taxable income upon the grant of an Option or SAR. Upon the exercise of a Nonstatutory Option or an SAR, a Participant will recognize ordinary compensation income (subject to the Company’s withholding obligations if an employee) in an amount equal to the excess of  (i) the amount of cash and the fair market value of the common stock received, over (ii) the exercise price of the Award. A Participant will generally have a tax basis in any shares of common stock received pursuant to the exercise of a Nonstatutory Option or SAR that equals the fair market value of such shares on the date of exercise. Subject to the discussion under “Tax Consequences to the Company” below, the Company will be entitled to a deduction for federal income tax purposes that corresponds as to timing and amount with the compensation income recognized by a Participant under the foregoing rules. When a Participant sells the common stock acquired as a result of the exercise of a Nonstatutory Option or SAR, any appreciation (or depreciation) in the value of the common stock after the exercise date is treated as long- or short-term capital gain (or +66  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +loss) for federal income tax purposes, depending on the holding period. The common stock must be held for more than 12 months to qualify for long-term capital gain treatment. +Participants eligible to receive an ISO will not recognize taxable income on the grant of an ISO. Upon the exercise of an ISO, a Participant will not recognize taxable income, although the excess of the fair market value of the shares of common stock received upon exercise of the ISO (“ISO Stock”) over the exercise price will increase the alternative minimum taxable income of the Participant, which may cause such Participant to incur alternative minimum tax. The payment of any alternative minimum tax attributable to the exercise of an ISO would be allowed as a credit against the Participant’s regular tax liability in a later year to the extent the Participant’s regular tax liability is in excess of the alternative minimum tax for that year. +Upon the disposition of ISO Stock that has been held for the required holding period (generally, at least two years from the date of grant and one year from the date of exercise of the ISO), a Participant will generally recognize capital gain (or loss) equal to the excess (or shortfall) of the amount received in the disposition over the exercise price paid by the Participant for the ISO Stock. However, if a Participant disposes of ISO Stock that has not been held for the requisite holding period (a “Disqualifying Disposition”), the Participant will recognize ordinary compensation income in the year of the Disqualifying Disposition in an amount equal to the amount by which the fair market value of the ISO Stock at the time of exercise of the ISO (or, if less, the amount realized in the case of an arm’s length disposition to an unrelated party) exceeds the exercise price paid by the Participant for such ISO Stock. A Participant would also recognize capital gain to the extent the amount realized in the Disqualifying Disposition exceeds the fair market value of the ISO Stock on the exercise date. If the exercise price paid for the ISO Stock exceeds the amount realized (in the case of an arm’s-length disposition to an unrelated party), such excess would ordinarily constitute a capital loss. +The Company will generally not be entitled to any federal income tax deduction upon the grant or exercise of an ISO, unless a Participant makes a Disqualifying Disposition of the ISO Stock. If a Participant makes a Disqualifying Disposition, the Company will then, subject to the discussion below under “Tax Consequences to the Company,” be entitled to a tax deduction that corresponds as to timing and amount with the compensation income recognized by a Participant under the rules described in the preceding paragraph. +Under current rulings, if a Participant transfers previously held shares of our common stock (other than ISO Stock that has not been held for the requisite holding period) in satisfaction of part or all of the exercise price of an Option, whether a Nonstatutory Option or an ISO, no additional gain will be recognized on the transfer of such previously held shares in satisfaction of the Nonstatutory Option or ISO exercise price (although a Participant would still recognize ordinary compensation income upon exercise of a Nonstatutory Option in the manner described above). Moreover, that number of shares of common stock received upon exercise which equals the number of shares of previously held common stock surrendered in satisfaction of the Nonstatutory Option or ISO exercise price will have a tax basis that equals, and a capital gains holding period that includes, the tax basis and capital gains holding period of the previously held shares of common stock surrendered in satisfaction of the Nonstatutory Option or ISO exercise price. Any additional shares of common stock received upon exercise will have a tax basis that equals the amount of cash (if any) paid by the Participant, plus the amount of compensation income recognized by the Participant under the rules described above. +The Amended 2020 LTIP generally prohibits the transfer of Awards, but the Amended 2020 LTIP allows the Administrator to permit the transfer of Awards (other than ISOs) in limited circumstances, in its discretion. For income and gift tax purposes, certain transfers of Nonstatutory Options should generally be treated as completed gifts, subject to gift taxation. +The IRS has not provided formal guidance on the income tax consequences of a transfer of Nonstatutory Options (other than in the context of divorce) or SARs. However, the IRS has informally indicated that after a transfer of stock options (other than in the context of divorce pursuant to a domestic relations order), the transferor will recognize income, which will be subject to withholding, and employment or payroll taxes will be collectible at the time the transferee exercises the stock options. If a Nonstatutory Option is transferred pursuant to a domestic relations order, the transferee will recognize ordinary income upon exercise by the transferee, which will be subject to withholding, and employment or payroll taxes (attributable to and reported with respect to the transferor) will be collectible from the transferee at such time. +In addition, if a Participant transfers a vested Nonstatutory Option to another person and retains no interest in or power over it, the transfer is treated as a completed gift. The amount of the transferor’s gift (or generation-skipping transfer, if the gift is to a grandchild or later generation) equals the value of the Nonstatutory Option at the time of the gift. The value of the Nonstatutory Option may be affected by several factors, including the difference between the +PROPETRO  2023 Proxy Statement   |  67 +TABLE OF CONTENTS +Executive Compensation +exercise price and the fair market value of the stock, the potential for future appreciation or depreciation of the stock, the time period of the Nonstatutory Option and the illiquidity of the Nonstatutory Option. The transferor will be subject to a federal gift tax, which will be limited by (i) the annual exclusion of  $17,000 per donee (for 2023, subject to adjustment in future years), (ii) the transferor’s lifetime unified credit, or (iii) the marital or charitable deductions. The gifted Nonstatutory Option will not be included in the Participant’s gross estate for purposes of the federal estate tax or the generation-skipping transfer tax. +This favorable tax treatment for vested Nonstatutory Options has not been extended to unvested Nonstatutory Options. Whether such consequences apply to unvested Nonstatutory Options or to SARs is uncertain and the gift tax implications of such a transfer is a risk the transferor will bear upon such a disposition. +Restricted Stock Awards; RSUs; Stock Awards; Other Stock-Based or Cash Awards +A Participant will recognize ordinary compensation income upon receipt of cash pursuant to a cash award or, if earlier, at the time the cash is otherwise made available for the Participant to draw upon. Individuals will not have taxable income at the time of grant of an RSU, but rather, will generally recognize ordinary compensation income at the time he or she receives cash or a share of our common stock in settlement of the RSU, as applicable, in an amount equal to the cash or the fair market value of the common stock received. +A recipient of a Restricted Stock Award or Stock Award generally will be subject to tax at ordinary income tax rates on the fair market value of the common stock when it is received, reduced by any amount paid by the recipient; however, if the common stock is not transferable and is subject to a substantial risk of forfeiture when received, a Participant will recognize ordinary compensation income in an amount equal to the fair market value of the common stock (i) when the common stock first becomes transferable and is no longer subject to a substantial risk of forfeiture, in cases where a Participant does not make a valid election under Section 83(b) of the Code, or (ii) when the Award is received, in cases where a Participant makes a valid election under Section 83(b) of the Code. If a Section 83(b) election is made and the shares are subsequently forfeited, the recipient will not be allowed to take a deduction for the value of the forfeited shares. If a Section 83(b) election has not been made, any dividends received with respect to a Restricted Stock Award that is subject at that time to a risk of forfeiture or restrictions on transfer generally will be treated as compensation that is taxable as ordinary income to the recipient; otherwise the dividends will be treated as dividends. +A Participant who is an employee will be subject to withholding for federal, and generally for state and local, income taxes at the time he or she recognizes income under the rules described above. The tax basis in the common stock received by a Participant will equal the amount recognized by the Participant as compensation income under the rules described in the preceding paragraph, and the Participant’s capital gains holding period in those shares will commence on the later of the date the shares are received or the restrictions lapse. Subject to the discussion below under “Tax Consequences to the Company,” the Company will be entitled to a deduction for federal income tax purposes that corresponds as to timing and amount with the compensation income recognized by a Participant under the foregoing rules. +Tax Consequences to the Company +Reasonable Compensation +In order for the amounts described above to be deductible by the Company (or its subsidiary), such amounts must constitute reasonable compensation for services rendered or to be rendered and must be ordinary and necessary business expenses. +Golden Parachute Payments +Our ability (or the ability of one of our subsidiaries) to obtain a deduction for future payments under the Amended 2020 LTIP could also be limited by the golden parachute rules of Section 280G, which prevent the deductibility of certain excess parachute payments made in connection with a change in control of an employer-corporation. +68  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +Compensation of Covered Employees +The ability of the Company (or its subsidiary) to obtain a deduction for amounts paid under the Amended 2020 LTIP could be limited by Section 162(m). Section 162(m) limits the Company’s ability to deduct compensation, for federal income tax purposes, paid during any year to a “covered employee” (within the meaning of Section 162(m)) in excess of  $1,000,000. +New Plan Benefits +The future awards, if any, that will be made to eligible persons under the Amended 2020 LTIP are subject to the discretion of the Administrator, and therefore, the benefits or number of shares subject to awards that may be granted in the future to our executive officers, employees and directors is not currently determinable. Therefore, a New Plan Benefits Table is not provided. +Equity Compensation Plan Information +The table below sets forth information regarding awards outstanding under the 2017 LTIP and the 2020 LTIP, as of December 31, 2022: +Plan Category +Number of Securities +to Be Issued Upon +Exercise of +Outstanding Options, +Warrants and Rights (1) +(#) +(a) +Weighted Average +Exercise Price of +Outstanding +Options, Warrants +and Rights +($) +(b) +Number of Securities +Remaining Available for +Future Issuance Under +Equity Compensation Plans +(Excluding Securities +Reflected in Column (a)) (2) +($) +(c) +Equity compensation plans approved +by security holders +3,513,102 +14.00 +2,250,869 +Equity compensation plans not approved by security holders +― +― +― +Total +3,513,102 +14.00 +2,250,869 +(1) +Includes 488,076 option awards, 135,334 RSU awards and 808,638 PSU awards (assuming achievement of target payout of 100%) granted under the 2017 LTIP; and 1,132,821 RSU awards and 948,233 PSU awards (assuming achievement of target payout of 100%) granted under the 2020 LTIP. The weighted average exercise price in column (b) does not take the RSU awards or PSU awards into account. +(2) +This column reflects the number of awards that remain available for future issuance pursuant to the 2020 LTIP as of December 31, 2022. No further awards may be granted under the 2017 LTIP. +Consequences of Failing to Approve the Proposal +The Amended 2020 LTIP will not be implemented unless approved by our stockholders. If the Amended 2020 LTIP is not approved by the Stockholders, the 2020 LTIP will remain in effect, and the Company will continue to grant awards under the 2020 LTIP until the share reserve under the 2020 LTIP is exhausted or the term of the 2020 LTIP expires. Once the remaining share reserve is exhausted, the Company may elect to provide compensation through other means, such as cash-settled awards or other cash compensation, to assure that the Company and its affiliates can attract and retain qualified personnel. +VOTE REQUIRED +The affirmative “FOR” vote of the holders of a majority of the shares represented at the meeting (in person or by proxy) and entitled to vote is required to approve this Proposal No. 3. Brokers do not have discretion to vote on this proposal without your instruction. If you do not instruct your broker how to vote on this proposal, your broker will deliver a non-vote on this proposal. Abstentions and broker non-votes will have no effect on Proposal No. 3. +The Board of Directors unanimously recommends a vote FOR the approval of the Amended 2020 LTIP. +PROPETRO  2023 Proxy Statement   |  69 +TABLE OF CONTENTS +Audit Matters +Proposal 4 —Ratification of Appointment of Independent Registered Public Accounting Firm +The Audit Committee has selected RSM US LLP, independent registered public accounting firm, to audit our consolidated financial statements for the fiscal year ending December 31, 2023. We are asking the stockholders to ratify the appointment of RSM US LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2023. RSM US LLP was appointed by the Audit Committee in accordance with its charter. +In the event stockholders fail to ratify the appointment, the Audit Committee may reconsider this appointment. Even if the appointment is ratified, the Audit Committee, in its discretion, may direct the appointment of a different independent accounting firm at any time during the year if the Audit Committee determines that such a change would be in our and our stockholders’ best interests. +It is expected that one or more representatives of RSM US LLP will be available to participate in the 2023 annual meeting and will be given the opportunity to make a statement if they so desire. It also is expected that the representative(s) will be available to respond to appropriate questions from the stockholders. Representatives of Deloitte & Touche LLP, our independent registered public accounting firm for the year ended December 31, 2022, will not be present at the annual meeting and will not have an opportunity to make a statement, if they desire to do so, or to respond to appropriate questions from the stockholders. +Change in Independent Registered Public Accounting Firm +On February 24, 2023, the Audit Committee dismissed Deloitte & Touche LLP as our independent registered public accounting firm. Deloitte & Touche LLP served as our independent registered public accounting firm since 2013. +During our two most recent fiscal years ended December 31, 2022 and December 31, 2021 and during the subsequent interim period from January 1, 2023 through February 24, 2023, (i) there were no disagreements with Deloitte & Touche LLP on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedures that, if not resolved to Deloitte & Touche LLP’s satisfaction, would have caused Deloitte & Touche LLP to make reference to the subject matter of the disagreement in connection with its reports and (ii) there were no “reportable events” as defined in Item 304(a)(1)(v) of Regulation S-K. +The audit reports of Deloitte & Touche LLP on our consolidated financial statements for each of the two most recent fiscal years ended December 31, 2022 and December 31, 2021 did not contain an adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles. +On February 24, 2023, the Audit Committee approved the engagement and appointment of RSM US LLP, independent registered public accounting firm, to audit our consolidated financial statements for the fiscal year ending December 31, 2023. +During our two most recent fiscal years ended December 31, 2022 and December 31, 2021, and for the subsequent interim period through February 24, 2023, neither the Company nor anyone on its behalf consulted RSM US LLP regarding (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the consolidated financial statements of the Company, in connection with which either a written report or oral advice was provided to the Company that RSM US LLP concluded was an important factor considered by the Company in reaching a decision as to the accounting, auditing or financial reporting issue; or (ii) any matter that was either the subject of a disagreement as defined in Item 304(a)(1)(iv) of Regulation S-K or a reportable event as described in Item 304(a)(1)(v) of Regulation S-K. +70  |   ir.propetroservices.com +TABLE OF CONTENTS +Audit Matters +VOTE REQUIRED +The approval of the ratification of the appointment of RSM US LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2023 requires the affirmative vote of the holders of a majority of the shares represented at the meeting (in person or by proxy) and entitled to vote. As a result, abstentions will have the same effect as votes “AGAINST” this proposal. We do not expect any broker non-votes in connection with this proposal. +The Board of Directors unanimously recommends a vote FOR the ratification of the appointment of RSM US LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2023. +PROPETRO  2023 Proxy Statement   |  71 +TABLE OF CONTENTS +Audit Matters +Auditor Fees for Fiscal Years 2022 and 2021 +The following table sets forth the fees incurred by us in fiscal years 2022 and 2021 for services performed by Deloitte & Touche LLP: +Year Ended December 31, +Deloitte Fees +2022 +($) +2021 +($) +Audit fees (1) +1,871,069 +2,363,746 +All other fees (2) +96,337 +195,758 +Total fees +1,967,406 +2,559,504 +(1) +Audit fees include fees billed for professional services rendered for the audit of our annual consolidated financial statements, the audit of our system of internal control over financial reporting, the review of interim consolidated financial statements included in our quarterly reports, consents and comfort letters provided in connection with the filing of registration statements, other related services that are normally provided in connection with statutory and regulatory filings, and related out-of-pocket expenses. +(2) +All other fees consisted principally of fees for tax compliance and tax advice. +Policy on Audit Committee Pre-Approval of Audit and Non-Audit Services of Independent Registered Public Accounting Firm +The charter of the Audit Committee and its pre-approval policy require that the Audit Committee review and pre-approve the Company’s independent registered public accounting firm’s audit fees, audit-related fees, tax fees and fees for other services. The Chairman of the Audit Committee has the authority to grant pre-approvals that are within the pre-approval policy and are presented to the Audit Committee at a subsequent meeting. For the year ended December 31, 2022, the Audit Committee approved 100% of the services described above under the captions “Audit Fees” and “All Other Fees”. +Report of the Audit Committee +The Audit Committee assists our Board in overseeing: +(i) +the integrity of our consolidated financial statements, +(ii) +our compliance with legal and regulatory requirements, +(iii) +the independent auditor’s qualifications and independence, +(iv) +the performance of our independent auditor, and +(v) +the design and implementation of the Company’s internal audit function and the performance of the internal audit function after it has been established. +In so doing, it is the responsibility of the Audit Committee to maintain free and open communication between the directors, the independent auditor and our financial management. The Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the work of the independent auditor for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for us. The independent auditor reports directly to the Audit Committee. +Management is responsible for the: +• +preparation, presentation and integrity of our consolidated financial statements, +• +accounting and financial reporting principles, +• +internal control over financial reporting, and +• +procedures designed to ensure compliance with accounting standards, applicable laws and regulations. +Management is also responsible for objectively reviewing and evaluating the adequacy, effectiveness, and quality of our system of internal control over financial reporting. Our independent auditor is responsible for performing an independent audit of the consolidated financial statements. +72  |   ir.propetroservices.com +TABLE OF CONTENTS +Audit Matters +The Audit Committee’s responsibility is to monitor and oversee these processes and the engagement, independence and performance of our independent auditor. The Audit Committee relies, without independent verification, on the information provided to it and on the representations made by management and the independent auditor. +The Audit Committee met with Deloitte & Touche LLP, our independent auditor for the fiscal year ended December 31, 2022, and discussed the overall scope and plans for their audit and matters required to be discussed with audit committees under generally accepted auditing standards, including, among other things, matters related to the conduct of the audit of our consolidated financial statements and the matters required to be discussed by the statement on Auditing Standards No. 1301, as adopted by the Public Company Accounting Oversight Board. +Deloitte & Touche LLP also provided to the Audit Committee the written disclosures and the letter required by applicable standards of the Public Company Accounting Oversight Board regarding the independent auditor’s communications with the Audit Committee concerning independence, and the Audit Committee discussed Deloitte & Touche LLP’s independence with Deloitte & Touche LLP. When considering the independence of Deloitte & Touche LLP, the Audit Committee considered the non-audit services provided to the Company by the independent auditor and concluded that such services are compatible with maintaining the auditor’s independence. +The Audit Committee has reviewed and discussed our audited consolidated financial statements for the fiscal year ended December 31, 2022 with management and Deloitte & Touche LLP. Based on the Audit Committee’s review of the audited consolidated financial statements and the meetings and discussions with management and Deloitte & Touche LLP, and subject to the limitations on the Audit Committee’s role and responsibilities referred to above and in the Audit Committee Charter, the Audit Committee recommended to our Board that our audited consolidated financial statements be included in our Annual Report on Form 10-K as filed with the SEC. +The Audit Committee of the Board of Directors +ANTHONY J. +BEST +ALAN E. +DOUGLAS +G. LARRY +LAWRENCE +Mary P. +Ricciardello +Chair +PROPETRO  2023 Proxy Statement   |  73 +TABLE OF CONTENTS +Stock Ownership Information +Security Ownership of Certain Beneficial Owners and Management +PRINCIPAL STOCKHOLDERS +The following table presents certain information as of March 20, 2023, based on 115,170,545 shares of common stock outstanding as of such date, as to: +• +each stockholder known by us to be the beneficial owner of more than five percent of our outstanding shares of common stock, +• +each director and director nominee, +• +each Named Executive Officer, and +• +all current directors and executive officers as a group. +Unless otherwise indicated, the address for each beneficial owners in this table is c/o ProPetro Holding Corp., 1706 S. Midkiff, Midland, Texas 79701. +Name and Address of Beneficial Owner +Number of Shares +Beneficially Owned +Percentage +Beneficially Owned +5% Stockholders +Pioneer Natural Resources Company (1) +5205 N. O’Connor Blvd., Suite 200 +Irving, Texas 75039-3746 +16,600,000 +14.4 % +BlackRock, Inc. (2) +55 East 52nd Street +New York, New York 10055 +20,294,884 +17.6 % +The Vanguard Group (3) +100 Vanguard Boulevard +Malvern, Pennsylvania 19355 +12,111,403 +10.5 % +SCS Spur Holdco, LLC (4) +1111 Bagby Street, Suite 4600 +Houston, Texas 77002 +10,077,168 +8.7 % +Name of Beneficial Owner +Number of Shares +Beneficially Owned (5)(6) +Percentage +Beneficially Owned +Directors +Phillip A. Gobe ( 7) +278,629 +* +Samuel D. Sledge +119,657 +* +Spencer D. Armour III +78,036 +* +Mark S. Berg +12,274 +* +Anthony J. Best +71,884 +* +Michele Vion +61,094 +* +Alan E. Douglas +78,036 +* +G. Larry Lawrence +38,913 +* +Jack B. Moore +78,036 +* +Mary P. Ricciardello +3,629 +* +Named Executive Officers +David S. Schorlemer +65,788 +* +Adam Muñoz +118,692 +* +John J. Mitchell +5,741 +* +Newton W. “Trey” Wilson III ( 8) +500 +* +All Directors and Executive Officers as a Group (14 Persons) +1,010,909 +* +74  |   ir.propetroservices.com +TABLE OF CONTENTS +Stock Ownership Information +* +Less than 1%. +(1) +Based on a Schedule 13D filed on January 7, 2019. Represents shares of our common stock beneficially owned by Pioneer. The shares of our common stock are directly owned by Pioneer Natural Resources Pumping Services LLC, a wholly owned subsidiary of Pioneer Natural Resources USA, Inc., which is a wholly owned subsidiary of Pioneer. +(2) +Based on a Schedule 13G/A filed on January 23, 2023. Represents shares of our common stock held by BlackRock, Inc. and certain of its affiliates, referred to collectively as BlackRock. BlackRock has sole voting power over 19,415,883 shares and sole dispositive power over 20,294,884 shares. +(3) +Based on a Schedule 13G/A filed on February 9, 2023. Represents (i) 0 shares over which The Vanguard Group has sole voting power (ii) 185,849 shares over which The Vanguard Group has shared voting power, (iii) 11,848,005 over which The Vanguard Group has sole dispositive power, and (iv) 263,398 over which The Vanguard Group has shared dispositive power. +(4) +The shares of our common stock are directly owned by New SCS Spur Holdco, LLC (“Spur Holdco”). Spur Holdco is a wholly owned subsidiary of SCS Spur, LLC (“SCS Spur”). Lime Rock Partners VIII, L.P. is the general partner of LR-Permian Wireline Holdings, L.P., which owns a majority of the equity interests of SCS Spur and has the ability to control voting and investment decisions by SCS Spur. LRP GP VIII, Inc. is the general partner of Lime Rock Partners GP VIII, L.P., which is the general partner of Lime Rock Partners VIII, L.P. LRP GP VIII, Inc. is managed by its board of directors, consisting of John Reynolds, Jonathan Farber and J. McLane. As a result of these relationships, each of the foregoing entities and individuals may be deemed to share beneficial ownership of the securities held directly by Spur Holdco, however, each of Messrs. Reynolds, Farber and McLane disclaim any such beneficial ownership. Represents (i) 0 shares over which Spur Holdco has sole voting power (ii) 10,077,168 shares over which Spur Holdco has shared voting power, (iii) 0 shares over which Spur Holdco has sole dispositive power, and (iv) 10,077,168 shares over which Spur Holdco has shared dispositive power. +(5) +Includes the following number of shares of common stock that are issuable upon the exercise of options that are currently exercisable or exercisable within 60 days: Mr. Sledge (21,750 shares) and Mr. Munoz (48,938 shares). +(6) +Includes the following number of shares of common stock that are issuable upon the vesting of RSUs that are eligible to vest within 60 days: Mr. Gobe (10,137 shares), Mr. Armour (10,137 shares), Mr. Best (10,137 shares), Ms. Vion (10,137 shares), Mr. Douglas (10,137 shares), Mr. Lawrence (10,137 shares), Mr. Moore (10,137 shares), Ms. Ricciardello (3,629 shares) and Mr. Mitchell (1,542 shares). +(7) +Mr. Gobe retired from the position of Executive Chairman of the Board, effective March 31, 2022, but continues to serve as Chairman of the Board. +(8) +Mr. Wilson retired from the Company and resigned as General Counsel and Corporate Secretary, effective December 31, 2022. +PROPETRO  2023 Proxy Statement   |  75 +TABLE OF CONTENTS +Additional Information +Information about the Annual Meeting and Voting +Our Board of Directors is soliciting proxies for the 2023 annual meeting of stockholders, and at any continuations, adjournments or postponements of the meeting, to be held: +When +Where +Record Date +Date of Distribution +May 11, 2023 +10:00 a.m. Central Time +2518 FM 307 +Midland, Texas 79706 +March 20, 2023 +This proxy statement and our 2022 Annual Report on Form 10-K will be mailed on or about March 30, 2023 +This proxy statement contains important information for you to consider when deciding how to vote on the matters brought before the meeting. Please read it carefully. +IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS +FOR THE STOCKHOLDER MEETING TO BE HELD ON MAY 11, 2023 +This proxy statement and our 2022 Annual Report on Form 10-K to stockholders are each available at +http://www.viewproxy.com/propetro/2023 +Who can attend and vote at the meeting? +The Board set March 20, 2023 as the record date for the meeting. You can attend and vote at the meeting if you were a holder of our common stock at the close of business on the record date, March 20, 2023, or if you are a holder of a valid proxy for the meeting. +How do I attend the meeting? +To attend the annual meeting in person, you must call our Director of Corporate Development and Investor Relations at (432) 848-0871 no later than 5:00 p.m. Central Time on May 10, 2023 to have your name placed on the attendance list. In order to be admitted into the meeting, your name must appear on the attendance list and you must present government-issued photo identification (such as a driver’s license or passport). If your bank or broker holds your shares in street name, you will also be required to present proof of beneficial ownership of our common stock on the record date, such as the Internet Notice you received from your bank or broker, or a bank or brokerage statement or a letter from your bank or broker showing that you owned shares of our common stock at the close of business on the record date. In addition, if your bank or broker holds your shares in street name, you must obtain legal proxy from your broker, bank or other nominee and present it to the inspector of election with your ballot at the meeting. +76  |   ir.propetroservices.com +TABLE OF CONTENTS +Additional Information +What proposals will be voted on at the meeting and how does the Board recommend that I vote? +Five proposals are scheduled to be voted upon at the meeting. At the meeting we will ask stockholders to: +Proposals +Board +Recommendation +Page +Reference +1 +Elect the nine directors named in this proxy statement as members of the Board to serve until our 2024 annual meeting of stockholders +FOR each +nominee +5 +2 +Approve, on an advisory basis, our named executive officers’ compensation (Say-on-Pay) +FOR +23 +3 +Approval of the Amended and Restated 2020 Long Term Incentive Plan +FOR +61 +4 +Ratify the appointment of RSM US LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2023 +FOR +70 +Why did I receive a Notice of Internet Availability of Proxy Materials? +As permitted by the rules of the SEC, we are making this proxy statement and our 2022 annual report to stockholders available electronically via the Internet. On or about March 30, 2023, we mailed to our stockholders a Notice of Internet Availability of Proxy Materials (the “Internet Notice”) containing instructions on how to access this proxy statement and our 2022 annual report. If you received an Internet Notice by mail, you will not receive a printed copy of the proxy materials in the mail unless you specifically request them. Instead, the Internet Notice instructs you on how to access and review all of the important information contained in the proxy statement and 2022 annual report. The Internet Notice also instructs you on how you may submit your proxy over the Internet. If you received an Internet Notice by mail and would like to receive a printed copy of our proxy materials, you should follow the instructions for requesting such materials contained on the Internet Notice. +How do I cast my vote? +Even if you plan to attend the annual meeting in person, we recommend that stockholders vote by proxy to ensure your vote is represented in the event you later decide not to attend, as well as to speed the tabulation of votes. Have your proxy card, Internet Notice or voting instruction form in hand and follow the instructions. +INTERNET +TELEPHONE +MOBILE DEVICE +MAIL +AT THE MEETING +REGISTERED HOLDERS +www.AALVote.com/ +PUMP , 24/7 +Call +1 (866) 804-9616 +(toll-free), 24/7 +Scan the QR code +Sign, date and mail the proxy card, which you may have received by mail, using the postage-paid envelope provided +Attend the annual meeting and cast your ballot +BENEFICIAL OWNERS (HOLDERS IN STREET NAME) +Follow the instructions provided by your broker, bank +or other nominee +Return a properly executed voting instruction form by mail, depending upon the method(s) your broker, bank or other nominee makes available +To attend the annual meeting, you will need proof of ownership and a legal proxy from your broker, bank or other nominee +DEADLINE +11:59 p.m. Eastern Time on May 10, 2023, +if you are a registered holder +If you are a beneficial owner, please refer to the information provided by your broker, bank or other nominee +In the event that you submit a proxy but do not indicate any voting instructions, your shares will be voted as recommended by the Board on all matters, and in the discretion of the proxy holders as to any other matters that may properly come before the meeting or any continuation, postponement or adjournment of the meeting. We do not know of any other business to be considered at the meeting other than the proposals noted herein. +PROPETRO  2023 Proxy Statement   |  77 +TABLE OF CONTENTS +Additional Information +If your shares are registered in the name of a broker, bank or other nominee (typically referred to as being held in “street name”), you will receive instructions from your broker, bank or other nominee that must be followed in order for your broker, bank or other nominee to vote your shares per your instructions. Many brokerage firms and banks have a process for their beneficial holders to provide instructions via the Internet or over the telephone. If Internet or telephone voting is unavailable from your broker, bank or other nominee, please complete and return the voting instruction card in the addressed, postage paid envelope provided by your broker, bank or other nominee. +In the event you do not provide instructions on how to vote, your broker may have authority to vote your shares. Under the rules that govern brokers who are voting with respect to shares that are held in street name, brokers have the discretion to vote such shares on “routine” matters, but not on non-routine matters. The only “routine” matter to be voted upon at the meeting is the ratification of the appointment of independent auditors. +Your vote is especially important . If your shares are held by a broker, your broker cannot vote your shares for the election of directors, the non-binding advisory vote on our executive officer compensation or the approval of the Amended and Restated LTIP unless you provide voting instructions. Therefore, please instruct your broker regarding how to vote your shares on these matters promptly . See “Vote Required” following each proposal for further information. +If you hold shares through a broker, bank or other nominee and wish to be able to vote during the meeting, you must obtain a legal proxy from your broker, bank or other nominee and present such legal proxy to the inspector of election with your ballot at the meeting if attending in person. You may only vote during the meeting by emailing a copy of your legal proxy to investors@propetroservices.com in advance of the meeting. +Can I revoke or change my proxy? +Yes. You may revoke or change a previously delivered proxy at any time before the meeting by delivering another proxy with a later date, by voting again via the Internet or by telephone, or by delivering written notice of revocation of your proxy to our General Counsel and Corporate Secretary at our principal executive offices before the beginning of the meeting. You may also revoke your proxy by attending the meeting in person and voting during the meeting, although attendance at the meeting will not, in and of itself, revoke a valid proxy that was previously delivered. If you hold shares through a broker, bank or other nominee, you must contact that nominee to revoke any prior voting instructions. You also may revoke any prior voting instructions by voting in person during the meeting if you obtain a legal proxy as described above. +Can I ask questions before or during the annual meeting? +Stockholders who wish to submit a question in advance may do so at investors@propetroservices.com . Stockholders also may submit questions live during the annual meeting. The Company is committed to transparency. All questions received before or during the annual meeting, and the Company’s responses, will be posted to our Investor Relations website at https://ir.propetroservices.com/ promptly after the annual meeting. Personal details may be omitted for data protection purposes. If we receive substantially similar questions, we may group these questions together and provide a single response to avoid repetition. +Who pays the costs of solicitation? +We will pay the costs of soliciting proxies from stockholders. Our directors, officers and regular employees may solicit proxies on behalf of us, without additional compensation, personally or by telephone. We will also request that brokers, nominees, custodians and other fiduciaries forward soliciting materials to the beneficial owners of shares held by such brokers, nominees, custodians and other fiduciaries. We will reimburse such persons for their reasonable expenses in connection therewith. +Who will count the vote? +The inspector of election will count the vote. Alliance Advisors will act as the inspector of election. +78  |   ir.propetroservices.com +TABLE OF CONTENTS +Additional Information +What is a “quorum”? +A quorum is the number of shares that must be present to hold the meeting. The quorum requirement for the meeting is a majority of the outstanding shares as of the record date, present in person or represented by proxy. Your shares will be counted for purposes of determining if there is a quorum if you are present in person and vote during the meeting; or have voted on the Internet, by telephone or by properly submitting a proxy card or voting instruction card by mail. +Votes withheld, abstentions and, for “routine matters” broker non-votes (discussed below) are counted as present and entitled to vote for purposes of determining a quorum. +What happens if there is not a quorum at the meeting? +Pursuant to our bylaws, the meeting may be adjourned by a majority of the shares represented at the meeting to reconvene at the same or some other place. If the adjournment is for more than 30 days, or if after the adjournment a new record date is fixed for the adjourned meeting, notice of the adjournment shall be given to each stockholder of record entitled to vote at the meeting. If the adjournment is for less than 30 days, no additional notice will be delivered. +What is an abstention and how will votes withheld and abstentions be treated? +A “vote withheld,” in the case of the proposal regarding the election of directors, or an “abstention,” in the case of the proposals regarding the advisory approval of our named executive officers’ compensation, the approval of the Amended and Restated LTIP and the ratification of the appointment of our independent registered public accounting firm represent a stockholder’s affirmative choice to decline to vote on a proposal. Votes withheld have no effect on the election of directors. Abstentions have the effect of a vote “AGAINST” in the case of the ratification of the appointment of our independent registered public accounting firm. +What are broker non-votes and how will they be treated? +Generally, broker non-votes occur when shares held by a broker in “street name” for a beneficial owner are not voted with respect to a particular proposal because the broker (1) has not received voting instructions from the beneficial owner and (2) lacks discretionary voting power to vote those shares. A broker is entitled to vote shares held for a beneficial owner on “routine” matters, such as the ratification of the appointment of our independent registered public accounting firm, without instructions from the beneficial owner of those shares. On the other hand, absent instructions from the beneficial owner of such shares, a broker is not entitled to vote shares held for a beneficial owner on non-routine matters, such as the election of directors, the advisory approval of our named executive officers’ compensation and the approval of the Amended and Restated LTIP. Broker non-votes will have no effect on the election of directors, the advisory approval of our named executive officers’ compensation or approval of the Amended and Restated LTIP. +PROPETRO  2023 Proxy Statement   |  79 +TABLE OF CONTENTS +Additional Information +What vote is required to approve each item? +The following table sets forth the voting requirement with respect to each of the proposals: +Proposal +Vote Requirement +Effect of +Abstentions +Effect of Broker Non-Votes +1 +Election of Directors +The plurality of the votes cast. This means that the nine nominees receiving the highest number of affirmative “ FOR ” votes will be elected as directors. +No effect +No effect +2 +Say-on-Pay +The affirmative “ FOR ” vote of the holders of a majority of the shares represented at the meeting (in person or by proxy) and entitled to vote. +No effect +No effect +3 +Amended and Restated Long-Term Incentive Plan +The affirmative “ FOR ” vote of the holders of a majority of the shares represented at the meeting (in person or by proxy) and entitled to vote. +No effect +No effect +4 +Ratification of the Appointment of Our Independent Auditor +The affirmative “ FOR ” vote of the holders of a majority of the shares represented at the meeting (in person or by proxy) and entitled to vote. +The effect of a vote “AGAINST” +A broker is entitled to vote shares held for a beneficial owner on “routine” matters, without instructions from the beneficial owner of those shares +What does it mean if I get more than one Internet Notice or more than one set of proxy materials? +Your shares are probably registered in more than one account. Please vote all of your shares. To ensure that all of your shares are voted, for each Internet Notice or set of proxy materials, please submit your proxy by phone, via the Internet, or, if you received printed copies of the proxy materials, by signing, dating and returning the enclosed proxy card in the enclosed envelope. +How many votes can I cast? +On all matters you are entitled to one vote per share of common stock that you held as of the record date. +Where can I find the voting results of the meeting? +The preliminary voting results will be announced at our annual meeting. The final results will be published in a current report on Form 8-K to be filed by us with the SEC within four business days of our annual meeting. +80  |   ir.propetroservices.com +TABLE OF CONTENTS +Additional Information +Information about Stockholder Proposals +If you want to present a proposal of business or nominate persons for election to the Board at the 2024 annual meeting of stockholders or nominate a person for election to the Board at such meeting, you must give us written notice no later than the close of business on February 9, 2024 and no earlier than the opening of business on January 12, 2024, and follow the procedures outlined in our Bylaws. You may request a copy of the provisions of the Bylaws governing the requirements for notice at the below address. If the date of the 2024 annual meeting of stockholders is more than 30 days before or more than 60 days after May 11, 2024, the one year anniversary of the 2023 annual meeting of stockholders, your notice of a proposal will be timely if we receive it no earlier than the opening of business on the 120th day before the actual date of such meeting and no later than the later of: +(i) +the close of business on the 90th day before the actual date of such meeting, and +(ii) +the close of business on the tenth day following the date on which a written statement setting forth the date of such meeting was mailed to the stockholders or the date on which it is first disclosed to the public. +SEC rules permit management to vote proxies in its discretion in certain cases if a stockholder does not comply with this deadline and, in certain other cases notwithstanding a stockholder’s compliance with this deadline. +If you wish to submit a proposal to be considered for inclusion in next year’s proxy statement pursuant to Rule 14a-8 of the Exchange Act, you must submit the proposal so that it is received by November 29, 2023. If the date of the 2024 annual meeting of stockholders is more than 30 days from May 11, 2024, the one-year anniversary date of the 2023 annual meeting of stockholders, a notice will be timely if we receive it a reasonable time before we begin to print and send our proxy materials for such meeting. +In each case, your notice should be sent in writing to: +ProPetro Holding Corp. +Attention: General Counsel and Corporate Secretary +P.O. Box 873 +Midland, Texas 79702 +Annual Report on Form 10-K +A copy of our Annual Report on Form 10-K for the year ended December 31, 2022, including financial statements and schedules thereto but not including exhibits, as filed with the SEC, will be sent to any stockholder of record on March 20, 2023 without charge by contacting: +INVESTOR RELATIONS +(432) 844-0871 +ProPetro Holding Corp. +Attention: General Counsel and Corporate Secretary +P.O. Box 873 +Midland, Texas 79702 +A reasonable fee will be charged for copies of exhibits. You may also access our Annual Report on Form 10-K for the year ended December 31, 2022 and our other filings with the SEC at www.propetroservices.com . +PROPETRO  2023 Proxy Statement   |  81 +TABLE OF CONTENTS +Additional Information +Other Matters +The persons designated to vote shares covered by our Board’s proxies intend to exercise their judgment in voting such shares on other matters that may properly come before the meeting. Management does not expect that any matters other than those referred to in this proxy statement will be presented for action at the meeting. +By Order of the Board of Directors, +John J. Mitchell +General Counsel and Corporate Secretary +Midland, Texas +March 30, 2023 +82  |   ir.propetroservices.com +TABLE OF CONTENTS +APPENDIX A +AMENDED AND RESTATED PROPETRO HOLDING CORP. 2020 LONG TERM INCENTIVE PLAN +1. Purpose . The purpose of the Amended and Restated ProPetro Holding Corp. 2020 Long Term Incentive Plan (the “ Plan ”) is to provide a means through which (a) ProPetro Holding Corp., a Delaware corporation (the “ Company ”), and the Affiliates may attract, retain and motivate qualified persons as employees, directors and consultants, thereby enhancing the profitable growth of the Company and the Affiliates and (b) persons upon whom the responsibilities of the successful administration and management of the Company and the Affiliates rest, and whose present and potential contributions to the Company and the Affiliates are of importance, can acquire and maintain stock ownership or awards the value of which is tied to the performance of the Company, thereby strengthening their concern for the Company and the Affiliates. Accordingly, the Plan provides for the grant of Options, SARs, Restricted Stock, Restricted Stock Units, Stock Awards, Dividend Equivalents, Other Stock-Based Awards, Cash Awards, Substitute Awards, or any combination of the foregoing, as determined by the Committee in its sole discretion. +2. Definitions . For purposes of the Plan, the following terms shall be defined as set forth below: +(a) +“ Affiliate ” means any corporation, partnership, limited liability company, limited liability partnership, association, trust or other organization that, directly or indirectly, controls, is controlled by, or is under common control with, the Company. For purposes of the preceding sentence, “control” (including, with correlative meanings, the terms “controlled by” and “under common control with”), as used with respect to any entity or organization, shall mean the possession, directly or indirectly, of the power (i) to vote more than 50% of the securities having ordinary voting power for the election of directors of the controlled entity or organization or (ii) to direct or cause the direction of the management and policies of the controlled entity or organization, whether through the ownership of voting securities, by contract, or otherwise. +(b) +“ ASC Topic 718 ” means the Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation—Stock Compensation , as amended or any successor accounting standard. +(c) +“ Award ” means any Option, SAR, Restricted Stock, Restricted Stock Unit, Stock Award, Dividend Equivalent, Other Stock-Based Award, Cash Award, or Substitute Award, together with any other right or interest, granted under the Plan. +(d) +“ Award Agreement ” means any written instrument (including any employment, severance or change in control agreement) that sets forth the terms, conditions, restrictions and/or limitations applicable to an Award, in addition to those set forth under the Plan. +(e) +“ Board ” means the Board of Directors of the Company. +(f) +“ Cash Award ” means an Award denominated in cash granted under Section 6(i) . +(g) +“ Change in Control ” means, except as otherwise provided in an Award Agreement, each of the following: +(i) +A transaction or series of transactions (other than an offering of Stock to the general public through a registration statement filed with the SEC) whereby any Person directly or indirectly acquires beneficial ownership (within the meaning of Rules 13d-3 and 13d-5 under the Exchange Act) of securities of the Company possessing more than 30% of the total combined voting power of the Company’s securities outstanding immediately after such acquisition; provided, however, that the following acquisitions shall not constitute a Change in Control: +(A) +any acquisition by the Company or any of its Subsidiaries; +(B) +any acquisition by an employee benefit plan maintained by the Company or any of its Subsidiaries; +(C) +any acquisition which complies with Sections 2(g)(iii)(A), 2(g)(iii)(B), and 2(g)(iii)(C); or +(D) +in respect of an Award held by a particular Participant, any acquisition by the Participant or any group of Persons including the Participant (or any entity controlled by the Participant or any group of Persons including the Participant); or +(ii) +The Incumbent Directors cease for any reason to constitute a majority of the Board; +PROPETRO  2023 Proxy Statement   |  A-1 +TABLE OF CONTENTS +(iii) +The consummation by the Company (whether directly involving the Company or indirectly involving the Company through one or more intermediaries) of  (x) a merger, consolidation, reorganization, or business combination, (y) a sale or other disposition of all or substantially all of the Company’s assets in any single transaction or series of related transactions or (z) the acquisition of assets or stock of another entity, in each case other than a transaction: +(A) +which results in the Company’s voting securities outstanding immediately before the transaction continuing to represent (either by remaining outstanding or by being converted into voting securities of the Company or the Person that, as a result of the transaction, controls, directly or indirectly, the Company or owns, directly or indirectly, all or substantially all of the Company’s assets or otherwise succeeds to the business of the Company (the Company or such Person, the “ Successor Entity ”)) at least a majority of the combined voting power of the Successor Entity’s outstanding voting securities immediately after the transaction, and +(B) +after which no Person beneficially owns voting securities representing 50% or more of the combined voting power of the Successor Entity; provided , however , that no Person shall be treated for purposes of this Section 2(g)(iii) as beneficially owning 50% or more of the combined voting power of the Successor Entity solely as a result of the voting power held in the Company prior to the consummation of the transaction; and +(C) +after which at least a majority of the members of the board of directors (or the analogous governing body) of the Successor Entity were Board members at the time of the Board’s approval of the execution of the initial agreement providing for such transaction; or +(iv) +The date which is 10 business days prior to the completion of a liquidation or dissolution of the Company. +Notwithstanding the foregoing, if a Change in Control constitutes a payment event with respect to any Award (or any portion of an Award) that provides for the deferral of compensation that is subject to the Nonqualified Deferred Compensation Rules, to the extent required to avoid the imposition of additional taxes under such rules, the transaction or event described in subsection (i), (ii), (iii) or (iv) with respect to such Award (or portion thereof) shall only constitute a Change in Control for purposes of the payment timing of such Award if such transaction also constitutes a “change in control event,” as defined in Treasury Regulation § 1.409A-3(i)(5). +The Board shall have full and final authority, which shall be exercised in its sole discretion, to determine conclusively whether a Change in Control has occurred pursuant to the above definition, the date of the occurrence of such Change in Control and any incidental matters relating thereto; provided that any exercise of authority in conjunction with a determination of whether a Change in Control is a “change in control event” as defined in Treasury Regulation Section 1.409A-3(i)(5) shall be consistent with such regulation. +(h) +“ Code ” means the Internal Revenue Code of 1986, as amended from time to time, including the guidance and regulations promulgated thereunder and successor provisions, guidance and regulations thereto. +(i) +“ Committee ” means a committee of two or more directors designated by the Board to administer the Plan; provided , however , that, unless otherwise determined by the Board, the Committee shall consist solely of two or more Qualified Members. +(j) +“ Dividend Equivalent ” means a right, granted to an Eligible Person under Section 6(g) , to receive cash, Stock, other Awards or other property equal in value to dividends paid with respect to a specified number of shares of Stock. +(k) +“ Effective Date ” means May 11, 2023. +(l) +“ Eligible Person ” means any individual who, as of the date of grant of an Award, is an officer or employee of the Company or of any Affiliate, and any other person who provides services to the Company or any Affiliate, including directors of the Company; provided , however , that, any such individual must be an “employee” of the Company or any of its parents or subsidiaries within the meaning of General Instruction A.1(a) to Form S-8 if such individual is granted an Award that may be settled in Stock. An employee on leave of absence may be an Eligible Person. +(m) +“ Exchange Act ” means the Securities Exchange Act of 1934, as amended from time to time, including the guidance, rules and regulations promulgated thereunder and successor provisions, guidance, rules and regulations thereto. +A-2  |   ir.propetroservices.com +TABLE OF CONTENTS +(n) +“ Fair Market Value ” of a share of Stock means, as of any specified date, (i) if the Stock is listed on a national securities exchange, the closing sales price of the Stock, as reported on the stock exchange composite tape on that date (or if no sales occur on such date, on the last preceding date on which such sales of the Stock are so reported); (ii) if the Stock is not traded on a national securities exchange but is traded over the counter on such date, the average between the reported high and low bid and asked prices of Stock on the most recent date on which Stock was publicly traded on or preceding the specified date; or (iii) in the event Stock is not publicly traded at the time a determination of its value is required to be made under the Plan, the amount determined by the Committee in its discretion in such manner as it deems appropriate, taking into account all factors the Committee deems appropriate, including the Nonqualified Deferred Compensation Rules. Notwithstanding this definition of Fair Market Value, with respect to one or more Award types, or for any other purpose for which the Committee must determine the Fair Market Value under the Plan, the Committee may elect to choose a different measurement date or methodology for determining Fair Market Value so long as the determination is consistent with the Nonqualified Deferred Compensation Rules and all other applicable laws and regulations. +(o) +“ Incumbent Directors ” shall mean for any period of 12 consecutive months, individuals who, at the beginning of such period, constitute the Board together with any new members of the Board (other than a member of the Board designated by a Person who shall have entered into an agreement with the Company to effect a transaction described in Section 2(g)(i) or 2(g)(iii)) whose election or nomination for election to the Board was approved by a vote of at least a majority (either by a specific vote or by approval of the proxy statement of the Company in which such Person is named as a nominee for member of the Board without objection to such nomination) of the members of the Board then still in office who either were members of the Board at the beginning of the 12-month period or whose election or nomination for election was previously so approved. No individual initially elected or nominated as a member of the Board of the Company as a result of an actual or threatened election contest with respect to members of the Board or as a result of any other actual or threatened solicitation of proxies by or on behalf of any Person other than the Board shall be an Incumbent Director. +(p) +“ ISO ” means an Option intended to be and designated as an “incentive stock option” within the meaning of Section 422 of the Code. +(q) +“ Nonqualified Deferred Compensation Rules ” means the limitations and requirements of Section 409A of the Code, as amended from time to time, including the guidance and regulations promulgated thereunder and successor provisions, guidance and regulations thereto. +(r) +“ Nonstatutory Option ” means an Option that is not an ISO. +(s) +“ Option ” means a right, granted to an Eligible Person under Section 6(b) , to purchase Stock at a specified price during specified time periods, which may either be an ISO or a Nonstatutory Option. +(t) +“ Other Stock-Based Award ” means an Award granted to an Eligible Person under Section 6(h) . +(u) +“ Participant ” means a person who has been granted an Award under the Plan that remains outstanding, including a person who is no longer an Eligible Person. +(v) +“ Person ” means any individual, entity or group within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act. +(w) +“ Prior Plan ” means the ProPetro Holding Corp. 2017 Incentive Award Plan. +(x) +“ Qualified Member ” means a member of the Board who is (i) a “non-employee director” within the meaning of Rule 16b-3(b)(3), and (ii) “independent” under the listing standards or rules of the securities exchange upon which the Stock is traded, but only to the extent such independence is required in order to take the action at issue pursuant to such standards or rules. +(y) +“ Restricted Stock ” means Stock granted to an Eligible Person under Section 6(d) that is subject to certain restrictions and to a risk of forfeiture. +(z) +“ Restricted Stock Unit ” means a right, granted to an Eligible Person under Section 6(e) , to receive Stock, cash or a combination thereof at the end of a specified period (which may or may not be coterminous with the vesting schedule of the Award). +(aa) +“ Rule 16b-3 ” means Rule 16b-3, promulgated by the SEC under Section 16 of the Exchange Act. +PROPETRO  2023 Proxy Statement   |  A-3 +TABLE OF CONTENTS +(bb) +“ SAR ” means a stock appreciation right granted to an Eligible Person under Section 6(c) . +(cc) +“ SEC ” means the Securities and Exchange Commission. +(dd) +“ Securities Act ” means the Securities Act of 1933, as amended from time to time, including the guidance, rules and regulations promulgated thereunder and successor provisions, guidance, rules and regulations thereto. +(ee) +“ Stock ” means the Company’s Common Stock, par value $0.001 per share, and such other securities as may be substituted (or re-substituted) for Stock pursuant to Section 8 . +(ff) +“ Stock Award ” means unrestricted shares of Stock granted to an Eligible Person under Section 6(f) . +(gg) +“ Subsidiary ” shall mean any entity (other than the Company), whether domestic or foreign, in an unbroken chain of entities beginning with the Company if each of the entities other than the last entity in the unbroken chain beneficially owns, at the time of the determination, securities or interests representing at least fifty percent (50%) of the total combined voting power of all classes of securities or interests in one of the other entities in such chain. +(hh) +“ Substitute Award ” means an Award granted under Section 6(j) . +3. +Administration . +(a) +Authority of the Committee . The Plan shall be administered by the Committee except to the extent the Board elects to administer the Plan, in which case references herein to the “Committee” shall be deemed to include references to the “Board.” Subject to the express provisions of the Plan, Rule 16b-3 and other applicable laws, the Committee shall have the authority, in its sole and absolute discretion, to: +(i) +designate Eligible Persons as Participants; +(ii) +determine the type or types of Awards to be granted to an Eligible Person; +(iii) +determine the number of shares of Stock or amount of cash to be covered by Awards; +(iv) +determine the terms and conditions of any Award, including whether, to what extent and under what circumstances Awards may be vested, settled, exercised, cancelled or forfeited (including conditions based on continued employment or service requirements or the achievement of one or more performance goals); +(v) +modify, waive or adjust any term or condition of an Award that has been granted, which may include the acceleration of vesting, waiver of forfeiture restrictions, modification of the form of settlement of the Award (for example, from cash to Stock or vice versa), early termination of a performance period, or modification of any other condition or limitation regarding an Award; +(vi) +determine the treatment of an Award upon a termination of employment or other service relationship; +(vii) +impose a holding period with respect to an Award or the shares of Stock received in connection with an Award; +(viii) +interpret and administer the Plan and any Award Agreement; +(ix) +correct any defect, supply any omission or reconcile any inconsistency in the Plan, in any Award, or in any Award Agreement; and +(x) +make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the Plan. +The express grant of any specific power to the Committee, and the taking of any action by the Committee, shall not be construed as limiting any power or authority of the Committee. Any action of the Committee shall be final, conclusive and binding on all persons, including the Company, Affiliates, stockholders, Participants, beneficiaries, and permitted transferees under Section 7(a) or other persons claiming rights from or through a Participant. +(b) +Exercise of Committee Authority . At any time that a member of the Committee is not a Qualified Member, any action of the Committee relating to an Award granted or to be granted to an Eligible Person who is then subject to Section 16 of the Exchange Act in respect of the Company where such action is not taken by +A-4  |   ir.propetroservices.com +TABLE OF CONTENTS +the full Board may be taken either (i) by a subcommittee, designated by the Committee, composed solely of two or more Qualified Members, or (ii) by the Committee but with each such member who is not a Qualified Member abstaining or recusing himself or herself from such action; provided , however , that upon such abstention or recusal, the Committee remains composed solely of two or more Qualified Members. Such action, authorized by such a subcommittee or by the Committee upon the abstention or recusal of such non-Qualified Member(s), shall be the action of the Committee for purposes of the Plan. For the avoidance of doubt, the full Board may take any action relating to an Award granted or to be granted to an Eligible Person who is then subject to Section 16 of the Exchange Act in respect of the Company. +(c) +Delegation of Authority . The Committee may delegate any or all of its powers and duties under the Plan to a subcommittee of directors or to any officer of the Company, including the power to perform administrative functions and grant Awards; provided , that such delegation does not (i) violate state or corporate law, or (ii) result in the loss of an exemption under Rule 16b-3(d)(1) for Awards granted to Participants subject to Section 16 of the Exchange Act in respect of the Company. Upon any such delegation, all references in the Plan to the “Committee,” other than in Section 8 , shall be deemed to include any subcommittee or officer of the Company to whom such powers have been delegated by the Committee. Any such delegation shall not limit the right of such subcommittee members or such an officer to receive Awards; provided , however , that such subcommittee members and any such officer may not grant Awards to himself or herself, a member of the Board, or any executive officer of the Company or an Affiliate, or take any action with respect to any Award previously granted to himself or herself, a member of the Board, or any executive officer of the Company or an Affiliate. The Committee may also appoint agents who are not executive officers of the Company or members of the Board to assist in administering the Plan, provided , however , that such individuals may not be delegated the authority to grant or modify any Awards that will, or may, be settled in Stock. +(d) +Limitation of Liability . The Committee and each member thereof shall be entitled to, in good faith, rely or act upon any report or other information furnished to him or her by any officer or employee of the Company or any Affiliate, the Company’s legal counsel, independent auditors, consultants or any other agents assisting in the administration of the Plan. Members of the Committee and any officer or employee of the Company or any Affiliate acting at the direction or on behalf of the Committee shall not be personally liable for any action or determination taken or made in good faith with respect to the Plan, and shall, to the fullest extent permitted by law, be indemnified and held harmless by the Company with respect to any such action or determination. +(e) +Participants in Non-U.S. Jurisdictions . Notwithstanding any provision of the Plan to the contrary, to comply with applicable laws in countries other than the United States in which the Company or any Affiliate operates or has employees, directors or other service providers from time to time, or to ensure that the Company complies with any applicable requirements of foreign securities exchanges, the Committee, in its sole discretion, shall have the power and authority to: (i) determine which of the Affiliates shall be covered by the Plan; (ii) determine which Eligible Persons outside the United States are eligible to participate in the Plan; (iii) modify the terms and conditions of any Award granted to Eligible Persons outside the United States to comply with applicable foreign laws or listing requirements of any foreign exchange; (iv) establish sub-plans and modify exercise procedures and other terms and procedures, to the extent such actions may be necessary or advisable (any such sub-plans and/or modifications shall be attached to the Plan as appendices), provided , however , that no such sub-plans and/or modifications shall increase the share limitations contained in Section 4(a) ; and (v) take any action, before or after an Award is granted, that it deems advisable to comply with any applicable governmental regulatory exemptions or approval or listing requirements of any such foreign securities exchange. For purposes of the Plan, all references to foreign laws, rules, regulations or taxes shall be references to the laws, rules, regulations and taxes of any applicable jurisdiction other than the United States or a political subdivision thereof. +4. Stock Subject to the Plan . +(a) +Number of Shares Available for Delivery . Subject to adjustment in a manner consistent with Section 8 , (i) 8,050,000 shares of Stock are reserved and available for delivery with respect to Awards, and such total shall be available for the issuance of shares upon the exercise of ISOs, plus (ii) the number of shares of Stock that become available for Awards under this Plan pursuant to Section 4(d) below. +(b) +Application of Limitation to Grants of Awards . Subject to Section 4(c) , no Award may be granted if the number of shares of Stock that may be delivered in connection with such Award exceeds the number of shares of Stock remaining available under the Plan minus the number of shares of Stock issuable in settlement of or relating to then-outstanding Awards. The Committee may adopt reasonable counting procedures to +PROPETRO  2023 Proxy Statement   |  A-5 +TABLE OF CONTENTS +ensure appropriate counting, avoid double counting (as, for example, in the case of tandem or Substitute Awards) and make adjustments if the number of shares of Stock actually delivered differs from the number of shares previously counted in connection with an Award. +(c) +Availability of Shares Not Delivered under Awards . Shares of Stock subject to an Award under the Plan that expires or is cancelled, forfeited, exchanged, settled in cash or otherwise terminated without the actual delivery of shares will again be available for Awards. For the avoidance of doubt, Awards of Restricted Stock shall not be considered “delivered shares” for this purpose until vesting. Notwithstanding the foregoing, (i) the number of shares tendered or withheld in payment of any exercise or purchase price of an Option or an SAR or taxes relating to an Option or an SAR, including shares that were subject to an Option or an SAR but were not issued or delivered as a result of the net settlement or net exercise of such Option or SAR and (ii) shares repurchased on the open market with the proceeds of an Option’s exercise price, will be considered “delivered shares” and will not, in each case, be again available for Awards. The number of shares of Stock withheld in payment of the tax withholding obligation related an Award other than an Option or an SAR will be again available for Awards under the Plan. For the avoidance of doubt, if an Award may be settled only in cash, such Award need not ever be counted against any share limit under this Section 4 . +(d) +Shares Available Under the Prior Plan . In addition, shares of Stock subject to an award granted under the Prior Plan and outstanding as of October 22, 2020 (a “ Prior Award ”) that are forfeited or expire, are converted to shares of another Person in connection with a spin-off or other similar event, or if such Prior Award is settled for cash (in whole or in part) (including shares repurchased by the Company under Section 8.4 of the Prior Plan at the same price paid by the holder of such Prior Award), the shares of Stock subject to such Prior Award shall, to the extent of such forfeiture, expiration, conversion or cash settlement, become available for future grants of Awards under the Plan. For the avoidance of doubt, a number of shares of Stock equal to the difference between (i) the maximum number of shares of Stock that could have been settled pursuant to performance-based Prior Awards, and (ii) the actual number of shares of Stock delivered upon settlement of performance-based Prior Awards, shall become available for future grants of Awards under the Plan. Notwithstanding anything to the contrary contained herein, the following shares of Stock subject to Prior Awards shall not be added to the shares of Stock authorized for grant under Section 4(a) and shall not be available for future grants of Awards: (i) shares tendered by a Holder (as such term is defined in the Prior Plan) or withheld by the Company in payment of the exercise price of a stock option; (ii) shares of Stock tendered by the Holder or withheld by the Company to satisfy any tax withholding obligation with respect to a Prior Award; (iii) shares of Stock subject to a stock appreciation right that are not issued in connection with the stock settlement of the stock appreciation right on exercise thereof; and (iv) shares of Stock purchased on the open market by the Company with the cash proceeds received from the exercise of stock options. For the avoidance of doubt, no awards will be granted under the Prior Plan on or following October 22, 2020. +(e) +Shares Available Following Certain Transactions . Substitute Awards granted in accordance with applicable stock exchange requirements and in substitution or exchange for awards previously granted by a company acquired by the Company or any Subsidiary or with which the Company or any Subsidiary combines shall not reduce the shares authorized for issuance under the Plan or the limitations on grants to non-employee members of the Board under Section 5(b) , nor shall shares subject to such Substitute Awards be added to the shares available for issuance under the Plan as provided above (whether or not such Substitute Awards are later cancelled, forfeited or otherwise terminated). +(f) +Stock Offered . The shares of Stock to be delivered under the Plan shall be made available from (i) authorized but unissued shares of Stock, (ii) Stock held in the treasury of the Company, or (iii) previously issued shares of Stock reacquired by the Company, including shares purchased on the open market. +5. Eligibility; Award Limitations for Non-Employee Members of the Board . +(a) +Awards may be granted under the Plan only to Eligible Persons. +(b) +In each calendar year during any part of which the Plan is in effect, a non-employee member of the Board may not be paid compensation, whether denominated in cash or Awards, for such individual’s service on the Board in excess of  $500,000; provided, however, that for any calendar year in which a member of the Board (i) first commences service on the Board, (ii) serves on a special committee of the Board, (iii) serves as lead director, or (iv) serves as non-executive Chairman of the Board, additional compensation, whether denominated in cash or Awards may be paid. For purposes of this Section 5(b) , the value of Awards shall be determined, if applicable, pursuant to ASC Topic 718 on the date of grant and attributed to the compensation limit for the year in which the Award is granted. For the avoidance of doubt, the limits set +A-6  |   ir.propetroservices.com +TABLE OF CONTENTS +forth in this Section 5(b) shall be without regard to grants of Awards or other payments, if any, made to a non-employee member of the Board during any period in which such individual was an employee of the Company or of any of its Affiliates or was otherwise providing services to the Company or to any of its Affiliates other than in the capacity as a director of the Company. For the avoidance of doubt, any cash compensation that is deferred shall be counted toward this limit for the year in which it was first earned, and not when paid or settled, if later. +6. Specific Terms of Awards . +(a) +General . +(i) +Awards may be granted on the terms and conditions set forth in this Section 6 . Awards granted under the Plan may, in the discretion of the Committee, be granted either alone, in addition to, or in tandem with any other Award. In addition, the Committee may impose on any Award or the exercise thereof, at the date of grant or thereafter (subject to Section 10 ), such additional terms and conditions, not inconsistent with the provisions of the Plan, as the Committee shall determine, including subjecting such awards to service- or performance-based vesting conditions. Except as otherwise provided in an Award Agreement, the Committee may exercise its discretion to reduce or increase the amounts payable under any Award. +(ii) +Without limiting the scope of Section 6(a)(i), with respect to any performance-based conditions, (i) the Committee may use one or more business criteria or other measures of performance as it may deem appropriate in establishing any performance goals applicable to an Award, (ii) any such performance goals may relate to the performance of the Participant, the Company (on a consolidated basis), or to specified Subsidiaries, business or geographical units or operating areas of the Company, (iii) the performance period or periods over which performance goals will be measured shall be established by the Committee, and (iv) any such performance goals and performance periods may differ among Awards granted to any one Participant or to different Participants. +(iii) +Subject to Section 8(e) of the Plan, any Award (or portion thereof) granted under the Plan shall vest no earlier than the first anniversary of the date the Award is granted; provided , however , that, notwithstanding the foregoing, Awards that result in the issuance of an aggregate of up to 5% of the shares of Stock available pursuant to Section 4 may be granted to any one or more Eligible Persons without respect to and/or administered without regard for this minimum vesting provision. For the avoidance of doubt, the grant of Stock Awards will count against the 5% limit described in the immediately preceding sentence. No Award Agreement shall be permitted to reduce or eliminate the requirements of this Section 6(a)(iii). Nothing in this Section 6(a)(iii) shall preclude the Committee from taking action, in its sole discretion, to accelerate the vesting of any Award for any reason. +(b) +Options . The Committee is authorized to grant Options, which may be designated as either ISOs or Nonstatutory Options, to Eligible Persons on the following terms and conditions: +(i) +Exercise Price . Each Award Agreement evidencing an Option shall state the exercise price per share of Stock (the “ Exercise Price ”) established by the Committee; provided , however , that except as provided in Section 6(j) or in Section 8 , the Exercise Price of an Option shall not be less than the greater of (A) the par value per share of the Stock or (B) 100% of the Fair Market Value per share of the Stock as of the date of grant of the Option (or in the case of an ISO granted to an individual who owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or its parent or any of its Subsidiaries, 110% of the Fair Market Value per share of the Stock on the date of grant). +(ii) +Time and Method of Exercise; Other Terms . The Committee shall determine the methods by which the Exercise Price may be paid or deemed to be paid, the form of such payment, including cash or cash equivalents, Stock (including previously owned shares or through a cashless exercise, i.e., “net settlement”, a broker-assisted exercise, or other reduction of the amount of shares otherwise issuable pursuant to the Option), other Awards or awards granted under other plans of the Company or any Affiliate, other property, or any other legal consideration the Committee deems appropriate, the methods by or forms in which Stock will be delivered or deemed to be delivered to Participants, including the delivery of Restricted Stock subject to Section 6(d) , and any other terms and conditions of any Option. In the case of an exercise whereby the Exercise Price is paid with Stock, such Stock shall be valued based on the Stock’s Fair Market Value as of the date of exercise. No Option may be exercisable for a period of more than ten years following the date of grant of the Option (or in the case of an ISO +PROPETRO  2023 Proxy Statement   |  A-7 +TABLE OF CONTENTS +granted to an individual who owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or its parent or any of its Subsidiaries, for a period of more than five years following the date of grant of the ISO). +(iii) +ISOs . The terms of any ISO granted under the Plan shall comply in all respects with the provisions of Section 422 of the Code. ISOs may only be granted to Eligible Persons who are employees of the Company or employees of a parent or any Subsidiary corporation of the Company. Except as otherwise provided in Section 8 , no term of the Plan relating to ISOs (including any SAR in tandem therewith) shall be interpreted, amended or altered, nor shall any discretion or authority granted under the Plan be exercised, so as to disqualify either the Plan or any ISO under Section 422 of the Code, unless notice has been provided to the Participant that such change will result in such disqualification. ISOs shall not be granted more than ten years after the earlier of the adoption of the Plan or the approval of the Plan by the Company’s stockholders. Notwithstanding the foregoing, to the extent that the aggregate Fair Market Value of shares of Stock subject to an ISO and the aggregate Fair Market Value of shares of stock of any parent or Subsidiary corporation (within the meaning of Sections 424(e) and (f) of the Code) subject to any other incentive stock options of the Company or a parent or Subsidiary corporation (within the meaning of Sections 424(e) and (f) of the Code) that are exercisable for the first time by a Participant during any calendar year exceeds $100,000, or such other amount as may be prescribed under Section 422 of the Code, such excess shall be treated as Nonstatutory Options in accordance with the Code. As used in the previous sentence, Fair Market Value shall be determined as of the date the ISO is granted. If a Participant shall make any disposition of shares of Stock issued pursuant to an ISO under the circumstances described in Section 421(b) of the Code (relating to disqualifying dispositions), the Participant shall notify the Company of such disposition within the time provided to do so in the applicable award agreement. +(c) +SARs . The Committee is authorized to grant SARs to Eligible Persons on the following terms and conditions: +(i) +Right to Payment . An SAR is a right to receive, upon exercise thereof, the excess of  (A) the Fair Market Value of one share of Stock on the date of exercise over (B) the grant price of the SAR as determined by the Committee. +(ii) +Grant Price . Each Award Agreement evidencing an SAR shall state the grant price per share of Stock established by the Committee; provided , however , that except as provided in Section 6(j) or in Section 8 , the grant price per share of Stock subject to an SAR shall not be less than the greater of  (A) the par value per share of the Stock or (B) 100% of the Fair Market Value per share of the Stock as of the date of grant of the SAR. +(iii) +Method of Exercise and Settlement; Other Terms . The Committee shall determine the form of consideration payable upon settlement, the method by or forms in which Stock (if any) will be delivered or deemed to be delivered to Participants, and any other terms and conditions of any SAR. SARs may be either free-standing or granted in tandem with other Awards. No SAR may be exercisable for a period of more than ten years following the date of grant of the SAR. +(iv) +Rights Related to Options . An SAR granted in connection with an Option shall entitle a Participant, upon exercise, to surrender that Option or any portion thereof, to the extent unexercised, and to receive payment of an amount determined by multiplying (A) the difference obtained by subtracting the Exercise Price with respect to a share of Stock specified in the related Option from the Fair Market Value of a share of Stock on the date of exercise of the SAR, by (B) the number of shares as to which that SAR has been exercised. The Option shall then cease to be exercisable to the extent surrendered. SARs granted in connection with an Option shall be subject to the terms and conditions of the Award Agreement governing the Option, which shall provide that the SAR is exercisable only at such time or times and only to the extent that the related Option is exercisable and shall not be transferable except to the extent that the related Option is transferrable. +(d) +Restricted Stock . The Committee is authorized to grant Restricted Stock to Eligible Persons on the following terms and conditions: +(i) +Restrictions . Restricted Stock shall be subject to such restrictions on transferability, risk of forfeiture and other restrictions, if any, as the Committee may impose. Except as provided in Section 7(a)(iii) and Section 7(a)(iv) , during the restricted period applicable to the Restricted Stock, the Restricted Stock may not be sold, transferred, pledged, hedged, hypothecated, margined or otherwise encumbered by the Participant. Except as otherwise provided in the applicable Award Agreement and this Section 6(d) , +A-8  |   ir.propetroservices.com +TABLE OF CONTENTS +the holder of a Restricted Stock Award will generally have the same rights as a stockholder, including the right to vote the Stock subject to the Restricted Stock Award and to receive dividends on the Stock subject to the Restricted Stock Award during the restriction period (subject, in all cases, to the limitations on payment of dividends on unvested Awards, as described in Section 6(d)(ii) below). +(ii) +Dividends and Splits . As a condition to the grant of an Award of Restricted Stock, the Committee may allow a Participant to elect, or may require, that any cash dividends paid on a share of Restricted Stock be automatically reinvested in additional shares of Restricted Stock, applied to the purchase of additional Awards or deferred without interest to the date of vesting of the associated Award of Restricted Stock, provided that in all events such cash dividends shall be subject to restrictions and a risk of forfeiture to the same extent as the Restricted Stock with respect to which such dividends were paid and shall not be paid unless and until such Restricted Stock has vested and been earned. Stock distributed in connection with a Stock split or Stock dividend, and other property (other than cash) distributed as a dividend, shall be subject to restrictions and a risk of forfeiture to the same extent as the Restricted Stock with respect to which such Stock or other property has been distributed and shall not be delivered unless and until such Restricted Stock has vested and been earned. +(e) +Restricted Stock Units . The Committee is authorized to grant Restricted Stock Units to Eligible Persons on the following terms and conditions: +(i) +Award and Restrictions . Restricted Stock Units shall be subject to such restrictions (which may include a risk of forfeiture) as the Committee may impose. +(ii) +Settlement . Settlement of vested Restricted Stock Units shall occur upon vesting or upon expiration of the deferral period specified for such Restricted Stock Units by the Committee (or, if permitted by the Committee, as elected by the Participant). Restricted Stock Units shall be settled by delivery of  (A) a number of shares of Stock equal to the number of Restricted Stock Units for which settlement is due, or (B) cash in an amount equal to the Fair Market Value of the specified number of shares of Stock equal to the number of Restricted Stock Units for which settlement is due, or a combination thereof, as determined by the Committee at the date of grant or thereafter. +(f) +Stock Awards . The Committee is authorized to grant Stock Awards to Eligible Persons as a bonus, as additional compensation, or in lieu of cash compensation any such Eligible Person is otherwise entitled to receive, in such amounts and subject to such other terms as the Committee in its discretion determines to be appropriate. +(g) +Dividend Equivalents . The Committee is authorized to grant Dividend Equivalents to Eligible Persons, entitling any such Eligible Person to receive cash, Stock, other Awards, or other property equal in value to dividends or other distributions paid with respect to a specified number of shares of Stock. Dividend Equivalents may be awarded in connection with another Award (other than an Award of Restricted Stock or Stock Award). Dividend Equivalents shall be subject to restrictions and a risk of forfeiture to the same extent as the Award with respect to which such dividends accrue and shall not be paid unless and until such Award has vested and been earned. +(h) +Other Stock-Based Awards . The Committee is authorized, subject to limitations under applicable law, to grant to Eligible Persons such other Awards that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, Stock, as deemed by the Committee to be consistent with the purposes of the Plan, including convertible or exchangeable debt securities, other rights convertible or exchangeable into Stock, purchase rights for Stock, Awards with value and payment contingent upon performance of the Company or any other factors designated by the Committee, and Awards valued by reference to the book value of Stock or the value of securities of, or the performance of, specified Affiliates. The Committee shall determine the terms and conditions of such Other Stock-Based Awards. Stock delivered pursuant to an Other-Stock Based Award in the nature of a purchase right granted under this Section 6(h) shall be purchased for such consideration, paid for at such times, by such methods, and in such forms, including cash, Stock, other Awards, or other property, as the Committee shall determine. +(i) +Cash Awards . The Committee is authorized to grant Cash Awards, on a free-standing basis or as an element of, a supplement to, or in lieu of any other Award under the Plan to Eligible Persons in such amounts and subject to such other terms as the Committee in its discretion determines to be appropriate, including for purposes of any annual or short-term incentive or other bonus program. +(j) +Substitute Awards; No Repricing . Awards may be granted in substitution or exchange for any other Award +PROPETRO  2023 Proxy Statement   |  A-9 +TABLE OF CONTENTS +granted under the Plan or under another plan of the Company or an Affiliate or any other right of an Eligible Person to receive payment from the Company or an Affiliate. Awards may also be granted under the Plan in substitution for awards held by individuals who become Eligible Persons as a result of a merger, consolidation or acquisition of another entity or the assets of another entity by or with the Company or an Affiliate. Such Substitute Awards referred to in the immediately preceding sentence that are Options or SARs may have an exercise price that is less than the Fair Market Value of a share of Stock on the date of the substitution if such substitution complies with the Nonqualified Deferred Compensation Rules and other applicable laws and exchange rules. Except as provided in this Section 6(j) or in Section 8 , without the approval of the stockholders of the Company, the terms of outstanding Awards may not be amended to (i) reduce the Exercise Price or grant price of an outstanding Option or SAR, (ii) grant a new Option, SAR or other Award in substitution for, or upon the cancellation of, any previously granted Option or SAR that has the effect of reducing the Exercise Price or grant price thereof, (iii) exchange any Option or SAR for Stock, cash or other consideration when the Exercise Price or grant price per share of Stock under such Option or SAR exceeds the Fair Market Value of a share of Stock or (iv) take any other action that would be considered a “repricing” of an Option or SAR under the applicable listing standards of the national securities exchange on which the Stock is listed (if any). +7. Certain Provisions Applicable to Awards . +(a) +Limit on Transfer of Awards . +(i) +Except as provided in Sections 7(a)(iii) and (iv) , each Option and SAR shall be exercisable only by the Participant during the Participant’s lifetime, or by the person to whom the Participant’s rights shall pass by will or the laws of descent and distribution. Notwithstanding anything to the contrary in this Section 7(a) , an ISO shall not be transferable other than by will or the laws of descent and distribution. +(ii) +Except as provided in Sections 7(a)(i) , (iii) and (iv) , no Award, other than a Stock Award, and no right under any such Award, may be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by a Participant and any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall be void and unenforceable against the Company or any Affiliate. +(iii) +To the extent specifically provided by the Committee and permitted pursuant to Form S-8 and the instructions thereto, an Award may be transferred by a Participant on such terms and conditions as the Committee may from time to time establish; provided , however , that no Award (other than a Stock Award) may be transferred to a third-party financial institution for value. +(iv) +An Award may be transferred pursuant to a domestic relations order entered or approved by a court of competent jurisdiction upon delivery to the Company of a written request for such transfer and a certified copy of such order. +(b) +Form and Timing of Payment under Awards; Deferrals . Subject to the terms of the Plan and any applicable Award Agreement, payments to be made by the Company or any Affiliates upon the exercise or settlement of an Award may be made in such forms as the Committee shall determine in its discretion, including cash, Stock, other Awards or other property, and may be made in a single payment or transfer, in installments, or on a deferred basis (which may be required by the Committee or permitted at the election of the Participant on terms and conditions established by the Committee); provided , however , that any such deferred or installment payments will be set forth in the Award Agreement. Payments may include, without limitation, provisions for the payment or crediting of reasonable interest on installment or deferred payments or the grant or crediting of Dividend Equivalents or other amounts in respect of installment or deferred payments denominated in Stock. +(c) +Evidencing Stock . The Stock or other securities of the Company delivered pursuant to an Award may be evidenced in any manner deemed appropriate by the Committee in its sole discretion, including in the form of a certificate issued in the name of the Participant or by book entry, electronic or otherwise, and shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan or the rules, regulations, and other requirements of the SEC, any stock exchange upon which such Stock or other securities are then listed, and any applicable federal, state or other laws, and the Committee may cause a legend or legends to be inscribed on any such certificates to make appropriate reference to such restrictions. Further, if certificates representing Restricted Stock are registered in the name of the Participant, the Company may retain physical possession of the certificates and may require that the Participant deliver a stock power to the Company, endorsed in blank, related to the Restricted Stock. +A-10  |   ir.propetroservices.com +TABLE OF CONTENTS +(d) +Consideration for Grants . Awards may be granted for such consideration, including services, as the Committee shall determine, but shall not be granted for less than the minimum lawful consideration. +(e) +Additional Agreements . Each Eligible Person to whom an Award is granted under the Plan may be required to agree in writing, as a condition to the grant of such Award or otherwise, to subject an Award that is exercised or settled following such Eligible Person’s termination of employment or service to a general release of claims and/or a noncompetition or other restricted covenant agreement in favor of the Company and the Affiliates, with the terms and conditions of such agreement(s) to be determined in good faith by the Committee. +(f) +Dividends and Dividend Equivalents Subject to Forfeiture . Any dividend or Dividend Equivalent credited with respect to any Award (except for dividends paid following the grant of a Stock Award, which is an Award of unrestricted (i.e., fully vested) shares of Stock) shall be subject to restrictions and a risk of forfeiture to the same extent as the Award with respect to which such Stock or other property has been distributed and shall not be delivered unless and until such Award has vested and been earned. +8. Subdivision or Consolidation; Recapitalization; Change in Control; Reorganization . +(a) +Existence of Plans and Awards . The existence of the Plan and the Awards granted hereunder shall not affect in any way the right or power of the Company, the Board or the stockholders of the Company to make or authorize any adjustment, recapitalization, reorganization or other change in the Company’s capital structure or its business, any merger or consolidation of the Company, any issue of debt or equity securities ahead of or affecting Stock or the rights thereof, the dissolution or liquidation of the Company or any sale, lease, exchange or other disposition of all or any part of its assets or business or any other corporate act or proceeding. +(b) +Additional Issuances . Except as expressly provided herein, the issuance by the Company of shares of stock of any class, including upon conversion of shares or obligations of the Company convertible into such shares or other securities, and in any case whether or not for fair value, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number of shares of Stock subject to Awards theretofore granted or the purchase price per share of Stock, if applicable. +(c) +Subdivision or Consolidation of Shares . The terms of an Award and the share limitations under the Plan shall be subject to adjustment by the Committee from time to time, in accordance with the following provisions: +(i) +If at any time, or from time to time, the Company shall subdivide as a whole (by reclassification, by a Stock split, by the issuance of a distribution on Stock payable in Stock, or otherwise) the number of shares of Stock then outstanding into a greater number of shares of Stock or in the event the Company distributes an extraordinary cash dividend, then, as appropriate (A) the maximum number of shares of Stock available for delivery with respect to Awards and applicable limitations with respect to Awards provided in Section 4 and Section 5 (other than cash limits) shall be increased proportionately, and the kind of shares or other securities available for the Plan shall be appropriately adjusted, (B) the number of shares of Stock (or other kind of shares or securities) that may be acquired under any then-outstanding Award shall be increased proportionately, and (C) the price (including the Exercise Price or grant price) for each share of Stock (or other kind of shares or securities) subject to then-outstanding Awards shall be reduced proportionately, without changing the aggregate purchase price or value as to which outstanding Awards remain exercisable or subject to restrictions; provided , however , that in the case of an extraordinary cash dividend that is not an Adjustment Event, the adjustment to the number of shares of Stock and the Exercise Price or grant price, as applicable, with respect to an outstanding Option or SAR may be made in such other manner as the Committee may determine that is permitted pursuant to applicable tax and other laws, rules and regulations. Notwithstanding the foregoing, Awards that already have a right to receive extraordinary cash dividends as a result of Dividend Equivalents or other dividend rights will not be adjusted as a result of an extraordinary cash dividend. +(ii) +If at any time, or from time to time, the Company shall consolidate as a whole (by reclassification, by reverse Stock split, or otherwise) the number of shares of Stock then outstanding into a lesser number of shares of Stock, then, as appropriate (A) the maximum number of shares of Stock available for delivery with respect to Awards and applicable limitations with respect to Awards provided in Section 4 and Section 5 (other than cash limits) shall be decreased proportionately, and the kind of shares or other securities available for the Plan shall be appropriately adjusted, (B) the number of shares of Stock (or other kind of shares or securities) that may be acquired under any then-outstanding Award shall be +PROPETRO  2023 Proxy Statement   |  A-11 +TABLE OF CONTENTS +decreased proportionately, and (C) the price (including the Exercise Price or grant price) for each share of Stock (or other kind of shares or securities) subject to then-outstanding Awards shall be increased proportionately, without changing the aggregate purchase price or value as to which outstanding Awards remain exercisable or subject to restrictions. +(d) +Recapitalization . In the event of any change in the capital structure or business of the Company or other corporate transaction or event that would be considered an “equity restructuring” within the meaning of ASC Topic 718 and, in each case, that would result in an additional compensation expense to the Company pursuant to the provisions of ASC Topic 718, if adjustments to Awards with respect to such event were discretionary or otherwise not required (each such an event, an “ Adjustment Event ”), then the Committee shall equitably adjust (i) the aggregate number or kind of shares that thereafter may be delivered under the Plan, (ii) the number or kind of shares or other property (including cash) subject to an Award, (iii) the terms and conditions of Awards, including the purchase price or Exercise Price of Awards and performance goals, as applicable, and (iv) the applicable limitations with respect to Awards provided in Section 4 and Section 5 (other than cash limits) to equitably reflect such Adjustment Event (“ Equitable Adjustments ”). In the event of any change in the capital structure or business of the Company or other corporate transaction or event that would not be considered an Adjustment Event, and is not otherwise addressed in this Section 8 , the Committee shall have complete discretion to make Equitable Adjustments (if any) in such manner as it deems appropriate with respect to such other event. +(e) +Change in Control and Other Events . +(i) +Treatment of Awards Assumed or Substituted by a Successor Entity . +(A) +Except as otherwise provided in an Award Agreement, in the event of a Change in Control, in which any successor entity assumes outstanding Awards or substitutes similar awards under the successor entity’s equity compensation plan for outstanding Awards on the same terms and conditions as the original Awards, such Awards that are assumed or substituted shall not vest solely with respect to the occurrence of the Change in Control. +(B) +Except as otherwise provided in an Award Agreement, if, in connection with or within twelve (12) months following a Change in Control, a Participant’s service, consulting relationship, or employment with the Company, an Affiliate, and the Successor Entity and its affiliates is terminated without cause (as defined in the Award Agreement evidencing such Award or substitute award), the vesting and exercisability of all Awards, including substitute awards, then held by such Participant will be accelerated in full and be settled, as applicable, no later than sixty (60) days following the conclusion of the service or employment relationship (unless the Nonqualified Deferred Compensation Rules would prohibit such acceleration of settlement, in which case such Awards shall vest but will be settled at date(s) of settlement specified in the applicable Award Agreement) and the expiration date of any Options shall be the day three months following the date the Participant ceases to be an employee or service provider to the Company, an Affiliate of the Company and the Successor Entity and its affiliates. For Awards that vest based on performance, the number of performance Awards that shall vest and be settled in accordance with this Section 8(e)(i)(B) , notwithstanding the terms of the applicable Award Agreement, shall be calculated assuming the attainment of the target level of performance as set forth in a performance Award. +(ii) +Treatment of Awards not Assumed or Substituted . Unless otherwise provided in an Award Agreement, if, upon a Change in Control, the successor entity does not assume outstanding Awards or substitute similar awards under the successor entity’s equity compensation plan for outstanding Awards on the same terms and conditions as the original Awards, then the vesting of all outstanding Awards will be accelerated in full with effect immediately prior to the occurrence of the Change in Control and shall be settled, as applicable, no later than sixty (60) days following the Change in Control (unless the Nonqualified Deferred Compensation Rules would prohibit such acceleration of settlement, in which case such Awards will be settled at the originally specified date(s) of settlement). The Participant shall be permitted to conditionally redeem or exercise any or all Options, as applicable, effective immediately prior to the completion of any such transaction for the sole purpose of participating in such transaction. For Awards that vest based on performance, for the purpose of determining the achievement performance criteria, as set forth in the particular Award Agreement, and calculating the number of performance Awards that shall vest in accordance with this Section 8(e)(ii) , notwithstanding the terms of the Award Agreement, and unless otherwise provided by the Committee, such performance Awards shall be settled at the greater of  (A) the target level of performance as set forth in the performance Award, +A-12  |   ir.propetroservices.com +TABLE OF CONTENTS +and (B) the actual performance achieved, measured and calculated as of the date of the Change in Control pursuant to shortened performance period ending on the occurrence of the Change in Control. +If an Adjustment Event occurs, this Section 8(e) shall only apply to the extent it is not in conflict with Section 8(d) . +9. General Provisions . +(a) +Tax Withholding . The Company and any Affiliate are authorized to withhold from any Award granted, or any payment relating to an Award, including from a distribution of Stock, taxes due or potentially payable in connection with any transaction involving an Award, and to take such other action as the Committee may deem advisable to enable the Company, the Affiliates and Participants to satisfy the payment of withholding taxes and other tax obligations relating to any Award in such amounts as may be determined by the Committee. The Committee shall determine, in its sole discretion, the form of payment acceptable for such tax withholding obligations, including the delivery of cash or cash equivalents, Stock (including through delivery of previously owned shares, net settlement, a broker-assisted sale, or other cashless withholding or reduction of the amount of shares otherwise issuable or delivered pursuant to the Award), other property, or any other legal consideration the Committee deems appropriate. Any determination made by the Committee to allow a Participant who is subject to Rule 16b-3 to pay taxes with shares of Stock through net settlement or previously owned shares shall be approved by either a committee made up of solely two or more Qualified Members or the full Board. If such tax withholding amounts are satisfied through net settlement or previously owned shares, the maximum number of shares of Stock that may be so withheld or surrendered shall be the number of shares of Stock that have an aggregate Fair Market Value on the date of withholding or surrender equal to the aggregate amount of such tax liabilities determined based on the greatest withholding rates for federal, state, foreign and/or local tax purposes, including payroll taxes, that may be utilized without creating adverse accounting treatment for the Company with respect to such Award, as determined by the Committee. +(b) +Limitation on Rights Conferred under Plan . Neither the Plan nor any action taken hereunder shall be construed as (i) giving any Eligible Person or Participant the right to continue as an Eligible Person or Participant or in the employ or service of the Company or any Affiliate, (ii) interfering in any way with the right of the Company or any Affiliate to terminate any Eligible Person’s or Participant’s employment or service relationship at any time, (iii) giving an Eligible Person or Participant any claim to be granted any Award under the Plan or to be treated uniformly with other Participants and/or employees and/or other service providers, or (iv) conferring on a Participant any of the rights of a stockholder of the Company unless and until the Participant is duly issued or transferred shares of Stock in accordance with the terms of an Award. +(c) +Governing Law; Submission to Jurisdiction . All questions arising with respect to the provisions of the Plan and Awards shall be determined by application of the laws of the State of Delaware, without giving effect to any conflict of law provisions thereof, except to the extent Delaware law is preempted by federal law. The obligation of the Company to sell and deliver Stock hereunder is subject to applicable federal and state laws and to the approval of any governmental authority required in connection with the authorization, issuance, sale, or delivery of such Stock. With respect to any claim or dispute related to or arising under the Plan, the Company and each Participant who accepts an Award hereby consent to the exclusive jurisdiction, forum and venue of the state and federal courts located in Houston, Texas. +(d) +Severability and Reformation . If any provision of the Plan or any Award is or becomes or is deemed to be invalid, illegal, or unenforceable in any jurisdiction or as to any person or Award, or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to the applicable law or, if it cannot be construed or deemed amended without, in the determination of the Committee, materially altering the intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction, person or Award and the remainder of the Plan and any such Award shall remain in full force and effect. If any of the terms or provisions of the Plan or any Award Agreement conflict with the requirements of Rule 16b-3 (as those terms or provisions are applied to Eligible Persons who are subject to Section 16 of the Exchange Act) or Section 422 of the Code (with respect to ISOs), then those conflicting terms or provisions shall be deemed inoperative to the extent they so conflict with the requirements of Rule 16b-3 (unless the Board or the Committee, as appropriate, has expressly determined that the Plan or such Award should not comply with Rule 16b-3) or Section 422 of the Code, in each case, only to the extent Rule 16b-3 and Section 422 of the Code are applicable. With respect to ISOs, if the Plan does not contain any provision required to be included herein under Section 422 of the Code, that provision shall be deemed to be incorporated herein with the same force and effect as if that provision had been set +PROPETRO  2023 Proxy Statement   |  A-13 +TABLE OF CONTENTS +out at length herein; provided , further , that, to the extent any Option that is intended to qualify as an ISO cannot so qualify, that Option (to that extent) shall be deemed a Nonstatutory Option for all purposes of the Plan. +(e) +Unfunded Status of Awards; No Trust or Fund Created . The Plan is intended to constitute an “unfunded” plan for certain incentive awards. Neither the Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or any Affiliate and a Participant or any other person. To the extent that any person acquires a right to receive payments from the Company or any Affiliate pursuant to an Award, such right shall be no greater than the right of any general unsecured creditor of the Company or such Affiliate. +(f) +Nonexclusivity of the Plan . Neither the adoption of the Plan by the Board nor its submission to the stockholders of the Company for approval shall be construed as creating any limitations on the power of the Board or a committee thereof to adopt such other incentive arrangements as it may deem desirable. Nothing contained in the Plan shall be construed to prevent the Company or any Affiliate from taking any corporate action which is deemed by the Company or such Affiliate to be appropriate or in its best interest, whether or not such action would have an adverse effect on the Plan or any Award made under the Plan. No employee, beneficiary or other person shall have any claim against the Company or any Affiliate as a result of any such action. +(g) +Fractional Shares . No fractional shares of Stock shall be issued or delivered pursuant to the Plan or any Award, and the Committee shall determine in its sole discretion whether cash, other securities, or other property shall be paid or transferred in lieu of any fractional shares of Stock or whether such fractional shares of Stock or any rights thereto shall be cancelled, terminated, or otherwise eliminated with or without consideration. +(h) +Interpretation . Headings are given to the Sections and subsections of the Plan solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of the Plan or any provision thereof. Words in the masculine gender shall include the feminine gender, and, where appropriate, the plural shall include the singular and the singular shall include the plural. In the event of any conflict between the terms and conditions of an Award Agreement and the Plan, the provisions of the Plan shall control. The use herein of the word “including” following any general statement, term or matter shall not be construed to limit such statement, term or matter to the specific items or matters set forth immediately following such word or to similar items or matters, whether or not non-limiting language (such as “without limitation”, “but not limited to”, or words of similar import) is used with reference thereto, but rather shall be deemed to refer to all other items or matters that could reasonably fall within the broadest possible scope of such general statement, term or matter. References herein to any agreement, instrument or other document means such agreement, instrument or other document as amended, supplemented and modified from time to time to the extent permitted by the provisions thereof and not prohibited by the Plan. +(i) +Facility of Payment . Any amounts payable hereunder to any individual under legal disability or who, in the judgment of the Committee, is unable to manage properly his financial affairs, may be paid to the legal representative of such individual, or may be applied for the benefit of such individual in any manner that the Committee may select, and the Company shall be relieved of any further liability for payment of such amounts. +(j) +Conditions to Delivery of Stock . Nothing herein or in any Award Agreement shall require the Company to issue any shares with respect to any Award if that issuance would, in the opinion of counsel for the Company, constitute a violation of the Securities Act, any other applicable statute or regulation, or the rules of any applicable securities exchange or securities association, as then in effect. In addition, each Participant who receives an Award under the Plan shall not sell or otherwise dispose of Stock that is acquired upon grant, exercise or vesting of an Award in any manner that would constitute a violation of any applicable federal or state securities laws, the Plan or the rules, regulations or other requirements of the SEC or any stock exchange upon which the Stock is then listed. At the time of any exercise of an Option or SAR, or at the time of any grant of any other Award, the Company may, as a condition precedent to the exercise of such Option or SAR or settlement of any other Award, require from the Participant (or in the event of his or her death, his or her legal representatives, heirs, legatees, or distributees) such written representations, if any, concerning the holder’s intentions with regard to the retention or disposition of the shares of Stock being acquired pursuant to the Award and such written covenants and agreements, if any, as to the manner of disposal of such shares as, in the opinion of counsel to the Company, may be necessary to ensure that any disposition by that +A-14  |   ir.propetroservices.com +TABLE OF CONTENTS +holder (or in the event of the holder’s death, his or her legal representatives, heirs, legatees, or distributees) will not involve a violation of the Securities Act, any other applicable state or federal statute or regulation, or any rule of any applicable securities exchange or securities association, as then in effect. Stock or other securities shall not be delivered pursuant to any Award until payment in full of any amount required to be paid pursuant to the Plan or the applicable Award Agreement (including any Exercise Price, grant price, or tax withholding) is received by the Company. +(k) +Section 409A of the Code . It is the general intention, but not the obligation, of the Committee to design Awards to comply with or to be exempt from the Nonqualified Deferred Compensation Rules, and Awards will be operated and construed accordingly. Neither this Section 9(k) nor any other provision of the Plan is or contains a representation to any Participant regarding the tax consequences of the grant, vesting, exercise, settlement, or sale of any Award (or the Stock underlying such Award) granted hereunder, and should not be interpreted as such. In no event shall the Company be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by the Participant on account of non-compliance with the Nonqualified Deferred Compensation Rules. Notwithstanding any provision in the Plan or an Award Agreement to the contrary, in the event that a “specified employee” (as defined under the Nonqualified Deferred Compensation Rules) becomes entitled to a payment under an Award that would be subject to additional taxes and interest under the Nonqualified Deferred Compensation Rules if the Participant’s receipt of such payment or benefits is not delayed until the earlier of  (i) the date of the Participant’s death, or (ii) the date that is six months after the Participant’s “separation from service,” as defined under the Nonqualified Deferred Compensation Rules (such date, the “ Section 409A Payment Date ”), then such payment or benefit shall not be provided to the Participant until the Section 409A Payment Date. Any amounts subject to the preceding sentence that would otherwise be payable prior to the Section 409A Payment Date will be aggregated and paid in a lump sum without interest on the Section 409A Payment Date. The applicable provisions of the Nonqualified Deferred Compensation Rules are hereby incorporated by reference and shall control over any Plan or Award Agreement provision in conflict therewith. +(l) +Clawback . The Plan and all Awards granted hereunder are subject to any written clawback policies that the Company, with the approval of the Board or an authorized committee thereof, may adopt either prior to or following the Effective Date, including any policy adopted to conform to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and rules promulgated thereunder by the SEC and that the Company determines should apply to Awards. Any such policy may subject a Participant’s Awards and amounts paid or realized with respect to Awards to reduction, cancelation, forfeiture or recoupment if certain specified events or wrongful conduct occur, including an accounting restatement due to the Company’s material noncompliance with financial reporting regulations or other events or wrongful conduct specified in any such clawback policy. +(m) +Status under ERISA . The Plan shall not constitute an “employee benefit plan” for purposes of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended. +(n) +Plan Effective Date and Term . The Plan was adopted by the Board to be effective on the Effective Date. No Awards may be granted under the Plan on and after the tenth anniversary of the Effective Date, which is May 11, 2033. However, any Award granted prior to such termination (or any earlier termination pursuant to Section 10 ), and the authority of the Board or Committee to amend, alter, adjust, suspend, discontinue, or terminate any such Award or to waive any conditions or rights under such Award in accordance with the terms of the Plan, shall extend beyond such termination until the final disposition of such Award. +10. Amendments to the Plan and Awards. The Committee may amend, alter, suspend, discontinue or terminate any Award or Award Agreement, the Plan or the Committee’s authority to grant Awards without the consent of stockholders or Participants, except that any amendment or alteration to the Plan, including any increase in any share limitation, shall be subject to the approval of the Company’s stockholders not later than the annual meeting next following such Committee action if such stockholder approval is required by any federal or state law or regulation or the rules of any stock exchange or automated quotation system on which the Stock may then be listed or quoted, and the Committee may otherwise, in its discretion, determine to submit other changes to the Plan to stockholders for approval; provided , that, without the consent of an affected Participant, no such Committee action may materially and adversely affect the rights of such Participant under any previously granted and outstanding Award. For purposes of clarity, any adjustments made to Awards pursuant to Section 8 will be deemed not to materially and adversely affect the rights of any Participant under any previously granted and outstanding Award and therefore may be made without the consent of affected Participants. +PROPETRO  2023 Proxy Statement   |  A-15 +TABLE OF CONTENTS +TABLE OF CONTENTS +PROPETRO HOLDING CORP.PROXY FOR ANNUAL MEETING TO BE HELD ON MAY 11, 2023THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORSThe undersigned stockholder hereby appoints each of Samuel D. Sledge and John J. Mitchell as attorney and proxy for the undersigned, with the power to appoint his substitute, to represent and to vote all the shares of common stock of PROPETRO HOLDING CORP., which the undersigned would be entitled to vote, at the Company’s Annual Meeting of Stockholders to be held in person on Thursday, May 11, 2023 at 10:00 A.M. Central Time 2518 FM 307 Midland, Texas 79706 and at any postponements, continuations or adjournments thereof  (the “Annual Meeting”).In their discretion, the proxies are authorized to vote upon (i) the election of any person to the Board of Directors if any nominee named herein becomes unable to serve or for good cause will not serve, (ii) any matter that the Board of Directors of the Company did not know would be presented at the Annual Meeting by a reasonable time before the proxy solicitation was made and (iii) any other matter that may properly come before the Annual Meeting or any postponements, continuations or adjournments thereof.This proxy, when properly executed, will be voted in the manner directed on the reverse side by the undersigned stockholder. If no direction is made, this proxy will be voted “FOR” all nominees set forth in PROPOSAL 1 and “FOR” PROPOSALS 2, 3, and 4.PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.(IMPORTANT — This Proxy must be signed and dated on the reverse side.) PLEASE DETACH ALONG PERFORATED LINE AND MAIL IN THE ENVELOPE PROVIDED. Important Notice Regarding the Availability of Proxy Materials for theAnnual Meeting of Stockholders to be held May 11, 2023.The Proxy Statement and our 2022 Annual Report to Stockholders are available at:http://www.viewproxy.com/propetro/202322 +TABLE OF CONTENTS +Please mark your votes like this xThe Board of Directors recommends a vote FOR all nominees in Proposal 1.The Board of Directors recommends a vote FOR Proposals 2, 3, and 4. Vote on Proposals1. Election of Directors01 Samuel D. Sledge02 Phillip A. Gobe03 Spencer D. Armour III04 Mark S. Berg05 Anthony J. Best06 Michele Vion07 Mary Ricciardello08 G. Larry Lawrence09 Jack B. MooreVote FOR all nominees (except as marked)oVote WITHHELD from all nomineesoTo withhold authority to vote for any individual nominee(s), mark “Vote FOR all nominees (except as marked)” and write the number(s) of the nominee(s) on the line below. 2. To approve, on a non-binding advisory basis, the compensation of the Company’s named executive officers.o FOR o AGAINST o ABSTAIN3. To approve the Amended and Restated Long-Term Incentive Plan.o FOR o AGAINST o ABSTAIN4. To ratify the appointment of RSM US LLP to serve as the Company’s independent registered public accounting firm for the year endingDecember 31, 2023.o FOR o AGAINST o ABSTAIN Address Change/Comments: (If you noted anyAddress Changes and/or Comments above, pleasemark box.) oPlease indicate if you plan to attend this meeting o Date: _____________Signature______________Signature (if held jointly)NOTE: Please mark, date and sign this proxy card and return it in the accompanying envelope. Please sign as your name appears hereon. If shares are registered in more than one name, all owners should sign. If signing in a fiduciary or representative capacity, please give full title and attach evidence of authority. Corporations please sign with full corporate name by a duly authorized officer and affix corporate seal. CONTROL NUMBER PLEASE DETACH ALONG PERFORATED LINE AND MAIL IN THE ENVELOPE PROVIDED.ttPROPETRO HOLDING CORP. As a stockholder of ProPetro Holding Corp., you have the option of voting your shares electronically through the Internet or on the telephone, eliminating the need to return the proxy card. Your electronic vote authorizes the named proxies to vote your shares in the same manner as if you marked, signed, dated and returned the proxy card. Votes submitted electronically over the Internet or by telephone must be received by 11:59 p.m. Eastern Time, on May 10, 2023. SCAN TO VIEW MATERIALS & VOTE CONTROL NUMBER PROXY VOTING INSTRUCTIONS Please have your 11 digit control number ready when voting by Internet or Telephone INTERNETVote Your Proxy on the Internet:www.AALVote.com/PUMPHave your proxy card available when you access the above website. Follow the prompts to vote your shares. TELEPHONEVote Your Proxy by Phone:Call 1 (866) 804-9616Use any touch-tone telephone to vote your proxy. Have your proxy card available when you call. Follow the voting instructions to vote your shares. MAILVote Your Proxy by Mail:Mark, sign, and date your proxy card, then detach it, and return it in the postage-paid envelope provided. 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Armour III (a director) and David Sledge, the father of Sam Sledge, our Chief Executive Officer. Total annual rent expense in 2022 for each of the five yards was approximately $0.03 million, $0.03 million, $0.1 million, $0.1 million, and $0.2 million, respectively. +Transportation and Equipment Rental +Adam Muñoz, our President and Chief Operating Officer, has a family relationship with an employee of J&M Burns Transportation, an entity that provides transportation services to the Company. The employee receives a portion of his compensation from J&M Burns Transportation based on the amount of services sold by him to customers, including the Company. The Company incurred approximately $36.8 million in expense for the year ended December 31, 2022 for services provided to the Company by J&M Burns Transportation. +Executive Officer Family Members +J. Oscar Dominguez is our former Vice President of Frac Technical Services and the father-in-law of Adam Muñoz. Mr. Dominguez received total compensation of approximately $2.1 million for his services for the year ended December 31, 2022 (including $459,000 cash compensation, $286,000 non-cash equity compensation, $1.3 million cash as a severance payment and $15,000 cash payout for accrued paid time off). +Oscar M. Dominguez is our Vice President of Frac Operations and the brother-in-law of Adam Muñoz. Mr. Dominguez received total compensation of approximately $1.1 million for his services for the year ended December 31, 2022 (including $781,000 cash compensation and $276,000 non-cash equity compensation). +Roger Dominguez is our Supply Chain Logistics Manager and the brother-in-law of Adam Muñoz. Mr. Dominguez received total compensation of approximately $312,000 for his services for the year ended December 31, 2022 (including $260,000 cash compensation and $52,000 non-cash equity compensation). +Pioneer +On December 31, 2018, we consummated the purchase of certain pressure pumping assets and real property in connection with the Pioneer Pressure Pumping Acquisition. In connection with the consummation of the Pioneer Pressure Pumping Acquisition and effective January 1, 2019, we became a long-term service provider to Pioneer, providing pressure pumping and related services. In March, 2022, we amended and restated our agreement to provide pressure pumping and related services to Pioneer, which reduced the number of contracted fleets to six fleets from eight fleets, modified the pressure pumping scope of work and pricing mechanism for contracted fleets, replaced the idle fees arrangement with equipment reservation fees and provided for an initial term from January 1, 2022 through December 31, 2022, subject to extension and termination as described therein. On October 31, 2022, we entered into (i) a certain Pressure Pumping Services Agreement—Fleet One Simulfrac (the “Fleet One Pressure Pumping Agreement”) and (ii) a certain Pressure Pumping Services Agreement—Fleet Two (the “Fleet Two Pressure Pumping Agreement”), which replaced all previous agreements with Pioneer and reduced the number of contracted fleets to two fleets. The Fleet One Pressure Pumping Agreement is effective as of January 1, 2023 and will terminate on August 31, 2023 and is subject to certain extension, termination and release rights as described therein. The Fleet Two Pressure Pumping Agreement is effective as of January 1, 2023. In February 2023, we mutually agreed with Pioneer to terminate the Fleet Two Pressure Pumping Agreement, effective on or about May 12, 2023. Revenue from services provided to Pioneer (including reservation fees) accounted for approximately $422.8 million during the year ended December 31, 2022. +18  |   ir.propetroservices.com \ No newline at end of file diff --git a/raw/proxies/0001680247/0001104659-24-037294/proxy.txt b/raw/proxies/0001680247/0001104659-24-037294/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..a6b3dff51c91210a00d766230dae5c9c33e58875 --- /dev/null +++ b/raw/proxies/0001680247/0001104659-24-037294/proxy.txt @@ -0,0 +1,3412 @@ +tm242622-1_nonfiling - none - 13.1039434s +TABLE OF CONTENTS +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +Washington, D.C. 20549 +SCHEDULE 14A +Proxy Statement Pursuant to Section 14(a) of +the Securities Exchange Act of 1934 (Amendment No.     ) +Filed by the Registrant ☒ +Filed by a Party other than the Registrant ☐ +Check the appropriate box: +☐ +Preliminary Proxy Statement +☐ +Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +☒ +Definitive Proxy Statement +☐ +Definitive Additional Materials +☐ +Soliciting Material under §240.14a-12 +ProPetro Holding Corp. +(Name of Registrant as Specified In Its Charter) +(Name of Person(s) Filing Proxy Statement, if other than the Registrant) +Payment of Filing Fee (Check all boxes that apply): +☒ +No fee required. +☐ +Fee paid previously with preliminary materials. +☐ +Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a6(i)(1) and 0-11 +TABLE OF CONTENTS +TABLE OF CONTENTS +2023 AT A GLANCE +1 +Bolt-on acquisition to support growth of our cementing division +2 +First Two FORCE SM Electric Fleets Deployed Under Committed Customer Agreements +7 +Tier IV Dynamic Gas +Blending (“DGB”) Fleets Deployed +1 +Published Inaugural ProPetro ProEnergy ProPeople Sustainability Report +OPTIMIZE AND INDUSTRIALIZE +CAPITAL LIGHT ASSET TRANSITION +STRATEGIC EXECUTION +ProPetro Holding Corp. (NYSE) is a Midland, Texas-based provider of premium completion services to leading upstream oil and gas companies engaged in the exploration and production (“E&P”) of North American unconventional oil and natural gas resources. +The Company was founded in 2005. In 2010, management strategically focused the Company’s efforts on establishing a best-in-class hydraulic fracturing platform targeting the Permian Basin. In 2017, we consummated the initial public offering of shares of our common stock. Our fleet has been designed to handle the highest-intensity, most complex hydraulic fracturing jobs. +By successfully serving some of the largest and most demanding public and private E&P operating companies, we have established ourselves as a premium completion services company. +UNIQUELY POSITIONED FOR SUCCESS +Permian Focus +Blue Chip Customers +Superior Performance +Sustainable Future +Positioned in a low-cost +basin with sector-leading operating scale +Large drilling inventories and sizeable rig programs +Consistently outperforming the competition on location and serving as an efficient completions partner +Investing in lower emissions equipment to reduce our carbon footprint +Capital Discipline +Safety Culture +Technology +Social & Governance +Strong balance sheet; disciplined capital allocation and asset deployment +Full year 2023 Total Recordable Incident Rate +of 0.68 +Focused on technological improvements to optimize our performance +Continued investment in our community and commitment to strong governance +TABLE OF CONTENTS +ProPetro Holding Corp. +303 W. Wall Street, Suite 102 +Midland, Texas 79701 +Message from Our Chief Executive Officer +SAMUEL D. SLEDGE +Chief Executive Officer and Director +Dear Stockholders, +2023 was a year of challenges and opportunities. Thanks to the hard work of our team throughout 2023, we improved profitability, executed a disciplined approach to asset deployment, successfully pursued accretive growth, and implemented a sustainable capital allocation plan. We have transformed ProPetro into a leading dual-fuel and electric frac provider with a complement of premium completion services, primarily offered in the Permian Basin. Our continued strategic and operational execution as well as our ongoing investment in upgrading and transitioning our fleet and service offerings, including the deployment of our first two electric FORCE SM fleets to customers under contracts, support the conviction we have that our strategy will continue to make our business resilient through the cycles and position us for success in a disciplined market. +2023 BUSINESS HIGHLIGHTS +• +We saw significant improvement in our financial performance compared to 2022 with revenues growing 27% to $1.63 billion and net income increasing to $86 million versus $2 million in 2022. +• +As part of our disciplined and sustainable capital allocation plan, we initiated a share repurchase program, and repurchased and retired approximately 5.8 million shares, representing approximately 5% of our outstanding common stock at the time the plan commenced in May 2023. +• +We continued the execution of our fleet transition, deploying our first two FORCE SM fleets and we expect two additional FORCE SM fleets to be deployed in the first half of 2024. +• +The FORCE SM electric fleet deployments, along with our Tier IV DGB Dual-fuel fleets will represent approximately 65% of our hydraulic fracturing capacity. +• +Realized continued benefits from our optimization program which supported lower capital expenditures and our capital returns program in 2023 and is expected to support further reduced capital expenditures in 2024. +• +We published our first ProPetro ProEnergy ProPeople Sustainability Report. +• +We completed another accretive acquisition, adding strong teammates and expanding our cementing services into the Delaware Basin. +TABLE OF CONTENTS +Message from Our Chief Executive Officer +Thanks to the hard work of our team throughout 2023, we have significantly advanced our strategy to industrialize the business and are confident that ProPetro is well-positioned to execute on the many value-enhancing opportunities in 2024 and beyond. +LOOKING AHEAD +2023 showed again the strength and operational excellence of our team. As we look ahead to 2024, we expect the service sector to remain bifurcated and that demand for top tier service providers like ProPetro will remain strong. Our industry and sector remain in transition, but despite a disciplined and consolidating customer base and a low-to-no-growth market, demand for our service offerings has remained strong. We believe ProPetro is uniquely positioned to deliver high-quality service to our blue-chip customers at competitive rates, through our young, next-generation equipment offering and operational density in the Permian Basin. +The world continues to need reliable, cost-effective, efficient and secure sources of energy, and our track record of performance and continuing investment in our fleet will position us to be a go-to service provider for our customers. +As we continue to optimize and industrialize our business, modernize our fleet, and seek opportunistic transactions in line with our commitment to disciplined capital deployment, we are confident in our strategy and earnings potential. The industrialized model ProPetro has implemented will support our ability to continue to build a durable business and to produce benefits for years to come. +2024 ANNUAL MEETING +Thank you for your continued support of ProPetro. We look forward to you joining us at our annual meeting of stockholders on April 23, 2024. +Sincerely, +Samuel D. Sledge +Chief Executive Officer and Director +March 21, 2024 +TABLE OF CONTENTS +ProPetro Holding Corp. +303 W. Wall Street, Suite 102 +Midland, Texas 79701 +NOTICE OF 2024 ANNUAL MEETING OF STOCKHOLDERS +Dear Stockholders, +We cordially invite you to attend the 2024 annual meeting of stockholders of ProPetro Holding Corp. +When +April 23, 2024 +10:00 a.m. Central Time +Where +2518 FM 307 +Midland, Texas 79706 +Record Date +Stockholders who owned our common stock at the close of business on February 26, 2024 are entitled to notice of, and to vote at, the annual meeting, or any continuation, postponement, or adjournment thereof. +Items of Business +1 +Election of nine director nominees to serve for a one-year term +2 +Approval, on an advisory basis, of the compensation of our named executive officers +3 +Ratification of the appointment of RSM US LLP as our independent, registered public accounting firm for the fiscal year ending December 31, 2024 +4 +Transaction of such other business as may properly come before the meeting +How to Vote +YOUR VOTE IS IMPORTANT. We urge you to review the accompanying proxy statement carefully and to submit your proxy as soon as possible so that your shares will be represented at the meeting. You may revoke your proxy if you so desire at any time before it is voted. Have your Notice, proxy card or voting instruction form with your 11-digit control number and follow the instructions. +INTERNET +TELEPHONE +MOBILE DEVICE +MAIL +AT THE MEETING +REGISTERED HOLDERS +www.AALVote.com/ +PUMP , 24/7 +Call +1 (866) 804-9616 +(toll-free), 24/7 +Scan the QR code +Sign, date and mail the proxy card, which you received by mail, using the postage-paid envelope provided +Attend the annual meeting and cast your ballot +BENEFICIAL OWNERS (HOLDERS IN STREET NAME) +Follow the instructions provided by your broker, bank +or other nominee +Return a properly executed voting instruction form by mail, depending upon the method(s) your broker, bank or other nominee makes available +To attend the annual meeting, you will need proof of ownership and a legal proxy from your broker, bank or other nominee +DEADLINE +11:59 p.m. Eastern Time on April 22, 2024, +if you are a registered holder +If you are a beneficial owner, please refer to the information provided by your broker, bank or other nominee +A stockholders’ list will be available at our offices at 303 W. Wall Street, Suite 102, Midland, Texas 79701 for a period of ten days prior to the meeting. We hope that you will be able to attend the meeting in person. +This notice and the accompanying proxy statement, proxy card and our 2023 Annual Report on Form 10-K are first being mailed to stockholders on or about March 21, 2024. The proxy statement and our +2023 Annual Report on Form 10-K +are also available at +http://www.viewproxy.com/propetro/2024 +By Order of the Board of Directors, +John J. Mitchell +General Counsel and Corporate +Secretary +March 21, 2024 +TABLE OF CONTENTS +TABLE OF CONTENTS +1 +PROXY STATEMENT SUMMARY +6 +CORPORATE GOVERNANCE AND BOARD +MATTERS +6 +Proposal 1 ―Election of Directors +7 +Nominees +12 +Director Independence +12 +Board Leadership Structure +13 +Board of Directors and Risk Oversight +13 +Sustainability and ESG Initiatives +14 +Communicating with Our Board of Directors +15 +Annual Meeting Attendance +15 +Compensation Committee Interlocks and Insider Participation +15 +Board and Committee Activity and Structure +18 +Role of the Board, Compensation Committee and Our Executive Officers +18 +Role of External Advisors +19 +Director Nominations Process +19 +Director Orientation and Education +20 +Certain Relationships and Related Party Transactions +21 +Director Compensation +22 +Non-Employee Director Stock Ownership +Guidelines +24 +EXECUTIVE OFFICERS +27 +EXECUTIVE COMPENSATION +27 +Proposal 2 ―Advisory Vote to Approve Named Executive Officer Compensation +28 +Compensation Discussion and Analysis +45 +Report of the Compensation Committee +46 +Executive Compensation Tables +46 +Summary Compensation Table +48 +Grants of Plan-Based Awards Table +49 +Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table +49 +Outstanding Equity Awards at Fiscal Year End +50 +2022 Options Exercises and Stock Vested +50 +Pension Benefits +50 +Nonqualified Deferred Compensation +51 +Potential Payments Upon Termination or Change in Control +56 +Pay Versus Performance +60 +CEO Pay Ratio +60 +Equity Compensation Plan Information +61 +AUDIT MATTERS +61 +Proposal 3 ―Ratification of Appointment of Independent Registered Public Accounting Firm +63 +Auditor Fees for Fiscal Years 2023 and 2022 +63 +Policy on Audit Committee Pre-Approval of Audit and Non-Audit Services of Independent Registered Public Accounting Firm +63 +Report of the Audit Committee +65 +STOCK OWNERSHIP INFORMATION +65 +Security Ownership of Certain Beneficial Owners and Management +67 +ADDITIONAL INFORMATION +67 +Information about the Annual Meeting and Voting +72 +Information about Stockholder Proposals +72 +Annual Report on Form 10-K +73 +Other Matters +TABLE OF CONTENTS +Proxy Statement Summary +The following section is only a summary of key elements of this proxy statement, and is intended to assist you in reviewing this proxy statement in advance of the 2024 annual meeting. This summary does not contain all of the information you should consider, and you are encouraged to read this entire proxy statement before submitting your votes. +2024 Annual Meeting +When +Where +Record Date +April 23, 2024 +10:00 a.m. Central Time +2518 FM 307 +Midland, Texas 79706 +February 26, 2024 +Voting Agenda +Board +Recommendation +For More Information, +See Page +1 +Election of nine director nominees to serve for a one-year term +FOR each +nominee +6 +2 +Approval, on an advisory basis, of the compensation of our named executive officers (Say-on-Pay) +FOR +27 +3 +Ratification of the Audit Committee’s selection of RSM US LLP as our independent auditors for 2024 +FOR +61 +4 +Transaction of such other business as may properly come before the meeting or any adjournment thereof +Director Nominees +The Board of Directors (the “Board”) has nominated the nine director nominees shown below for a one-year term. +Committee Memberships +Nominees +Independent +Age +Director +Since +Audit +Compensation +Nominating & +Corporate +Governance +Spencer D. Armour III +70 +2013 +* +Mark S. Berg +65 +2019 +Anthony J. Best   +74 +2018 +Phillip A. Gobe   +71 +2019 +G. Larry Lawrence +72 +2020 +* +PROPETRO  2024 Proxy Statement   |  1 +TABLE OF CONTENTS +Proxy Statement Summary +Committee Memberships +Nominees +Independent +Age +Director +Since +Audit +Compensation +Nominating & +Corporate +Governance +Jack B. Moore +70 +2017 +* +Samuel D. Sledge +37 +2021 +Mary P. Ricciardello +68 +2023 +* +Michele Vion +64 +2020 +Meetings in 2023 +Board—7 +9 +7 +4 +Committee Chair +Committee Member +Chairman of the Board +Lead Independent +Director +* +Audit Committee financial expert +Corporate Governance Highlights +Corporate Governance Best Practices +Six of our nine director nominees are independent, including all Committee members +Oversight in establishing and review of execution of the Company’s strategic objectives +Lead Independent Director, with defined responsibilities +Three of our nine director nominees are gender or ethnically diverse +Balance of new and experienced directors +Stock ownership guidelines for directors and executives +Code of Business Conduct and Ethics +Annual director self-evaluation and committee assessment to ensure board effectiveness +All directors serving in 2023 attended over 75% of 2023 meetings +Regular executive sessions of independent directors +Board review of company’s financial performance and succession plans +Robust risk oversight +Commitment to Corporate Social Responsibility +2  |   ir.propetroservices.com +TABLE OF CONTENTS +Proxy Statement Summary +DIRECTOR ATTRIBUTES +Our nine directors nominated for reelection at the 2024 annual meeting comprise a well-balanced Board. +BOARD EXPERTISE +Director Skills and Experience +Audit and financial reporting +●   ●   ●   ●   ●   ●   ●   ●   ● +8 +Corporate governance and ethics +●   ●   ●   ●   ●   ●   ●   ●   ●   +9 +Executive leadership +●   ●   ●   ●   ●   ●   ●   ●   ●   +9 +Exploration & Production, energy industry +●   ●   ●   ●   ●   ●   ●   ●   ● +7 +Finance and/or investment experience +●   ●   ●   ●   ●   ●   ●   ●   ● +7 +Human capital management, sustainability, or environmental stewardship +●   ●   ●   ●   ●   ●   ●   ●   ● +7 +Marketing, business development and investor relations +●   ●   ●   ●   ●   ●   ●   ●   ● +7 +Other public company board service +●   ●   ●   ●   ●   ●   ●   ●   ● +8 +Regulatory, government and compliance +●   ●   ●   ●   ●   ●   ●   ●   ● +5 +Risk management +●   ●   ●   ●   ●   ●   ●   ●   ● +7 +Strategic planning and operations +●   ●   ●   ●   ●   ●   ●   ●   ● +8 +Technology, engineering +●   ●   ●   ●   ●   ●   ●   ●   ● +3 +PROPETRO  2024 Proxy Statement   |  3 +TABLE OF CONTENTS +Proxy Statement Summary +Sustainability Highlights +In October 2023, ProPetro published its inaugural ProPetro ProEnergy ProPeople Sustainability Report , advancing our goals of increased disclosure and transparency regarding our operations. The report, which may be accessed on our website, highlights our commitment and approach to sustainability, and it provides an overview of our governance, oversight, programs, policies, and performance around sustainability matters that are important to ProPetro and its stakeholders. The scope of the report includes all businesses, assets, and joint ventures that were owned and operated by ProPetro at the time of its publishing. +More details on our progress in this area will be disclosed in 2024 through the publication of our 2024 sustainability report. We expect to continue publishing sustainability reports annually. +SUSTAINABLY +COMPETING +COMMUNITY +INVESTMENT +SAFETY +FOCUS +In 2023, we saw results from our efforts to transition our fleet to more efficient and lower emissions equipment, closing the year with approximately 60% of our fleets utilizing next generation FORCE SM electric equipment or Tier IV DGB equipment. We also continued our efforts to support the implementation of an electric fleet solution for our customers and placed our first two FORCE SM electric fleets into service with two additional FORCE SM electric fleets expected to be delivered and placed into service in the first half of 2024. +During 2023, the impact of these investments was reflected in our performance, as our Tier IV DGB equipment displaced almost 20 million gallons of diesel over the last three quarters of the year, resulting in an 8.1% reduction in CO 2 e emissions for operations with this equipment. We believe these investments and our focus on continued improvements in operating performance for these assets will support our continued competitiveness, while fostering a reduced emissions profile for our services. Moreover, the initial success and continued deployment of our FORCE SM electric fleet solutions reflect the collaborative approach we take with our customers towards the increasing industrialization and electrification of the oilfield. +We aspire to play a role in shaping the future of the Permian Basin by: +• +investing in education, +• +donating to first responders and veterans, +• +supporting health and wellness related organizations, and +• +focusing on charities that support local children. +We do this through various charities and other organizations that are heavily involved in the Permian Basin communities where we live and work. +The employee-created Positive United Morale Partners (“P.U.M.P.”) committee continued its charitable endeavors throughout 2023 by organizing and participating in: +• +wellness events, +• +monthly events at our regional food bank, +• +quarterly blood drives, +• +Thanksgiving meal drives, +• +school supply donation drives, and +• +Habitat for Humanity building projects. +Our safety record demonstrates the close collaboration between our customers and our employees in completing each job safely. +2023 saw consistent performance, and we continue to pride ourselves on our commitment to safety and our commitment to each other, which we demonstrate and support through operational initiatives like our: +• +dedicated heavy haul team to reduce driving hazards, +• +culture of training, accountability, and consistent improvement, and +• +long-term relationships with teammates, customers, and stakeholders. +4  |   ir.propetroservices.com +TABLE OF CONTENTS +Proxy Statement Summary +2023 Performance Highlights +During 2023, we improved upon our outstanding performance in 2022, by again, realizing excellent operational efficiencies, enhancing our commercial architecture, and continuing our fleet transition to natural gas-powered equipment. Importantly, we deployed our first two FORCE SM electric fleets to customers under committed contracts. These successful deployments mark an important step in our continued fleet evolution as we deploy next generation equipment to better serve our customers. Additionally, we executed on our strategy of making accretive acquisitions that increase our free cash flow generation with our acquisition of Par Five Energy Services LLC, a provider of cementing services located solely in the Delaware Basin area of the Permian Basin, expanding the service offering we can provide to our customers and creating a leading cementing services company in the greater Permian Basin. We generated $1.63 billion in revenue, $86 million in net income and $375 million of operating cash flow. +Our operations continue to be focused almost entirely in the Permian Basin, where we provide pressure pumping, cementing and wireline services. Our team was able to accomplish these achievements amid continued dynamic market conditions. Moreover, our reputation for providing high-quality service and our sustained performance for our customers resulted in continuing strong demand for our services despite the challenging market. These achievements are a function of our employees’ commitment to excellence in efficient operations and safety. +$1.63 Billion +$86 Million +Total Revenue +Net Income +$375 Million +5.8 Million +Net Cash Provided by Operating Activities +Shares Repurchased and Retired +PROPETRO  2024 Proxy Statement   |  5 +TABLE OF CONTENTS +Corporate Governance and Board Matters +Proposal 1 —Election of Directors +At the 2024 annual meeting, nine directors are nominated for election. All nominees are currently directors. Each director is to hold office until the next annual meeting of stockholders or until his or her successor is elected and qualified. Directors hold office until their successors have been elected or qualified or until their earlier death, resignation, removal, or disqualification. +The nominees have consented to being nominated and have expressed their intention to serve if elected. We believe that the nominees possess the professional and personal qualifications necessary for board service and have highlighted particularly noteworthy attributes for the nominees in their biographies below. We have no reason to believe that the nominees will be unable to serve if elected to office, and, to our knowledge, the nominees intend to serve the entire term for which election is sought. In the event any of the nominees should become unable to serve, or for good cause will not serve, as a director, it is intended that votes will be cast for a substitute nominee designated by the Board or the Board may elect to reduce its size. Only the nominees or substitute nominees designated by the Board will be eligible to stand for election as directors at the meeting. +In 2018, we entered into an investor rights agreement (the “Investor Rights Agreement”) with an affiliate of Pioneer Natural Resources Company (“Pioneer”) that provides Pioneer certain rights to designate nominees for election to the Board. Under the Investor Rights Agreement, Pioneer was granted: +(i) +the one-time right to designate an independent director to the Board and +(ii) +the right to designate a non-independent director to the Board for so long as a certain affiliate of Pioneer owns 5% or more of our outstanding common stock. +Pioneer has designated Mark S. Berg as the non-independent director and has no further rights to designate an independent director to the Board. +VOTE REQUIRED +The proposal regarding the election of directors requires the approval of a plurality of the votes cast. This means that the nine nominees receiving the highest number of affirmative “FOR” votes will be elected as directors. Votes withheld and broker non-votes are not considered to be votes cast and, accordingly, will have no effect on the outcome of the vote on this proposal. +The Board of Directors unanimously recommends a vote FOR the election of each of the nine director nominees named below. +6  |   ir.propetroservices.com +TABLE OF CONTENTS +Corporate Governance and Board Matters +Nominees +All of the current members of the Board being nominated for reelection at the 2023 annual meeting are listed in the following table, and certain information concerning those directors follows the table: +ProPetro Board Committees +Name +Age +Director since +Independent +Audit +Compensation +Nominating & +Corporate Governance +Phillip A. Gobe (1) +71 +2019 +Samuel D. Sledge (2) +37 +2021 +Spencer D. Armour III +70 +2013 +* +Mark S. Berg +65 +2019 +Anthony J. Best (3) +74 +2018 +G. Larry Lawrence +72 +2020 +* +Jack B. Moore +70 +2017 +* +Mary P. Ricciardello +68 +2023 +* +Michele Vion +64 +2020 +Number of Meetings in 2023 +Board—7 +9 +7 +4 +Committee Chair +Committee Member +* +Audit Committee financial expert +(1) +Chairman of the Board +(2) +Chief Executive Officer +(3) +Lead Independent Director +PHILLIP A. GOBE +Phillip A. Gobe began serving as our Chairman of the Board in July of 2019 and as Executive Chairman in October 2019. Mr. Gobe was appointed as our Chief Executive Officer on March 13, 2020 and served in that role until August 31, 2021, at which point he was re-appointed as Executive Chairman. Mr. Gobe stepped down as Executive Chairman on March 31, 2022, and continues serving the Company as Chairman of the Board. Mr. Gobe has served as a director of Pioneer since July 2014. Mr. Gobe previously served as Chairman of the Board for Pantheon Resources plc until his June 2023 retirement. He also previously served as a director of Scientific Drilling International and Pioneer Southwest Energy Partners L.P. Mr. Gobe joined Energy Partners, Ltd. as Chief Operating Officer in December 2004 and became President in May 2005, and served in those capacities until his retirement in September 2007. Mr. Gobe also served as a director of Energy Partners, Ltd. from November 2005 until May 2008. Prior to that, Mr. Gobe served as Chief Operating Officer of Nuevo Energy Company from February 2001 until its acquisition by Plains Exploration & Production Company in May 2004. Prior to that time, he held numerous operations and human resources positions with Vastar Resources, Inc. and Atlantic Richfield Company (“ARCO”) and its subsidiaries. Mr. Gobe has a Bachelor of Arts degree from The University of Texas and a Master of Business Administration degree from the University of Louisiana in Lafayette. Mr. Gobe’s extensive experience in the energy industry, including service as a director to public corporations in the industry, makes him well suited to serve as Chairman of the Board. +AGE 71 +CHAIRMAN OF THE BOARD +DIRECTOR AND CHAIRMAN OF THE BOARD since July 2019 +PROPETRO  2024 Proxy Statement   |  7 +TABLE OF CONTENTS +Corporate Governance and Board Matters +SAMUEL D. SLEDGE +Samuel D. Sledge has served as our Chief Executive Officer and as a member of our Board since August 31, 2021. Mr. Sledge previously served as the Company’s President from April 2021 to August 2021, and prior to that, he served as Chief Strategy and Administrative Officer beginning in March 2020. Mr. Sledge has significant experience with ProPetro having joined the Company in 2011. Mr. Sledge has served in various capacities throughout his tenure such as a Frac Technical Specialist and Technical Operations Manager where his duties included quality control, planning and logistics, and the development of the engineering program. Mr. Sledge has also served as ProPetro’s Vice President of Finance, Corporate Development, and Investor Relations where his responsibilities included financial planning and analysis, strategic initiatives, and investor relations. Mr. Sledge received a Bachelor of Business Administration and a Masters of Business Administration from Baylor University. We believe Mr. Sledge’s experience in the energy industry and his significant experience in management roles at the Company make him well suited to serve as a director. +AGE 37 +CEO AND DIRECTOR since August 2021 +SPENCER D. ARMOUR III +Spencer D. Armour III has served as a member of our Board since February 2013. Mr. Armour has over 30 years of executive and entrepreneurial experience in the energy services industry. Mr. Armour served as President of PT Petroleum LLC in Midland, Texas from 2011 to 2018. He was the Vice President of Corporate Development for Basic Energy Services, Inc. from 2007 to 2008, which acquired Sledge Drilling Corp., a company Mr. Armour co-founded and served as Chief Executive Officer from 2005 to 2006. From 1998 through 2005, he served as Executive Vice President of Patterson-UTI Energy, Inc., which acquired Lone Star Mud, Inc., a company Mr. Armour founded and served as President from 1986 to 1997. Mr. Armour also served on the board of Patterson-UTI Energy, Inc. from 1999 to 2001. He currently serves on the boards of Viper Energy, Inc. and CES Energy Solutions Corp and is a partner at Geneses Investments. Mr. Armour received a B.S. in Economics from the University of Houston in 1977 and served on the University of Houston System Board of Regents from 2011 until 2018. We believe that Mr. Armour’s extensive experience in the energy services industry and his deep knowledge of industry dynamics within the Permian Basin make him well suited to serve as a director. +AGE 70 +DIRECTOR since February 2013 +INDEPENDENT DIRECTOR since March 2020 +COMMITTEES +• +Nominating and Corporate Governance +8  |   ir.propetroservices.com +TABLE OF CONTENTS +Corporate Governance and Board Matters +MARK S. BERG +Mark Berg currently serves as the Executive Vice President, Corporate Operations for Pioneer Natural Resources Company (“Pioneer”), where he serves on the Executive Committee and oversees Business Development, Strategy, Land, Water Management, and Facilities. Mr. Berg has almost nineteen years of experience with Pioneer in various roles, including as Executive Vice President & General Counsel from April 2005 to January 2014, Executive Vice President, Corporate from January 2014 to August 2015, and as Executive Vice President, Corporate/Vertically Integrated Operations until assuming his current role. He began his career in 1983 with the Houston-based law firm Vinson & Elkins L.L.P. and served as a partner from 1990 through 1997, focused on mergers, acquisitions and international project development. In 1997, he joined American General Corporation, a Fortune 200 diversified financial services company, as Executive Vice President, General Counsel and Secretary, and ultimately oversaw its merger with American International Group (“AIG”) in 2001. Following the AIG merger, Mr. Berg joined Hanover Compressor Company, a NYSE company specializing in natural gas compression and processing, as Senior Vice President, General Counsel and Secretary. Mr. Berg received his Juris Doctor, with honors, from the University of Texas School of Law, and graduated magna cum laude and Phi Beta Kappa with a Bachelor of Arts in Public Policy from Tulane University. Mr. Berg is the founding Vice Chairman of the Permian Strategic Partnership, established in 2019, a position in which he still serves, and he served as a member of the Board of Directors of HighPoint Resources Corporation from March 2018 to June 2020. Mr. Berg’s experience in significant management roles and his broad experience in the energy industry make him well suited to serve as a director. +AGE 65 +DIRECTOR since February 2019 +Mr. Berg was appointed to the Board by Pioneer pursuant to the Investor Rights Agreement. +ANTHONY J. BEST +Anthony J. Best has served as a member of our Board since January 2018 and was elected to serve as Lead Independent Director in October 2019. Mr. Best has over 40 years of experience in the energy industry. Mr. Best retired as the Chairman of the board of Newpark Resources in May 2023. He was previously a director with Quantum Energy Partners’ (“Quantum”) portfolio companies, ExL Petroleum and Middle Fork Energy Partners, and also served as Senior Advisor for Quantum. Prior to joining Quantum, Mr. Best served in various roles with SM Energy Company, an oil and gas exploration company, commencing in 2006 as its President and Chief Operating Officer, and as its Chief Executive Officer from February 2007 through January 2015. From 2003 to 2005, Mr. Best served as President and Chief Executive Officer of Pure Resources, Inc., a Unocal development and exploration company. From 2000 to 2003, Mr. Best served as an independent consultant offering leadership and oil and gas consultation to energy companies and volunteer organizations, and from 1979 through 2000, Mr. Best served in various roles of increasing responsibility at Atlantic Richfield Company (“ARCO”), culminating in the position of President, ARCO Latin America. Mr. Best holds a Master of Science in Engineering Management degree from the University of Alaska and a Bachelor of Science degree in Mechanical Engineering from Texas A&M University. Prior to beginning his business career, Mr. Best served five years as an engineering officer in the United States Air Force. We believe that Mr. Best’s experience in significant management roles with companies operating in the Permian Basin and his broad experience in the energy industry make him well suited to serve as a director. +AGE 74 +INDEPENDENT DIRECTOR since January 2018 +LEAD INDEPENDENT DIRECTOR since October 2019 +COMMITTEES +• +Audit (Chair) +• +Compensation +PROPETRO  2024 Proxy Statement   |  9 +TABLE OF CONTENTS +Corporate Governance and Board Matters +G. LARRY LAWRENCE +G. Larry Lawrence was appointed to our Board in December 2020. Mr. Lawrence previously served as Audit Committee Chair of Legacy Reserves, LP’s Board of Directors, a role he held from 2006 to 2019. From January 2021 until June 2021, Mr. Lawrence served as the interim Chief Financial Officer of Natural Gas Services Group, a natural gas compression equipment provider, where he previously served as Chief Financial Officer for nine years. Prior to Natural Gas Services Group, Mr. Lawrence served as Chief Financial Officer for Lynx Operating Co. Inc., an oil and gas exploration company, for three years and as Chief Financial Officer for Pure Resources, Inc., an oil and gas E&P company, for two years. He has also held finance and management consulting positions for Parson Group, ARCO and Crescent Consulting. Mr. Lawrence earned his bachelor’s degree with an accounting major from Dillard University in New Orleans. We believe that Mr. Lawrence’s broad experience in the energy industry, including his service as a director and executive officer with various companies, makes him well suited to serve as a director. +AGE 72 +INDEPENDENT DIRECTOR since December 2020 +COMMITTEES +• +Audit +JACK B. MOORE +Jack B. Moore has served as a member of our Board since March 2017. Mr. Moore most recently served as President and Chief Executive Officer of Cameron International Corporation (“Cameron”), an oil and gas industry equipment manufacturer and provider, from April 2008 to October 2015 and served as Chairman of the Board of Cameron from May 2011 until it was acquired by Schlumberger in April 2016. Prior to his employment with Cameron, Mr. Moore held various management positions at Baker Hughes Incorporated, where he was employed for 23 years. Mr. Moore currently serves on the Board of Directors of Occidental Petroleum Corporation, KBR Inc., and the University of Houston System Board of Regents. Mr. Moore previously served on the board of the American Petroleum Institute, the National Ocean Industries Association, Rowan Companies plc, and the Petroleum Equipment Suppliers Association. Mr. Moore received a Bachelor of Business Administration from the University of Houston and attended the Advanced Management Program at Harvard Business School. We believe that Mr. Moore’s wealth of experience in the oilfield service sector, including service as a director and executive officer to various public corporations in the sector, makes him well suited to serve as a director. +AGE 70 +INDEPENDENT DIRECTOR since March 2017 +COMMITTEES +• +Compensation +• +Nominating and Corporate Governance (Chair) +10  |   ir.propetroservices.com +TABLE OF CONTENTS +Corporate Governance and Board Matters +MARY P. RICCIARDELLO +Ms. Ricciardello has served as a member of our Board since January 2023. Ms. Ricciardello currently serves as a director, Audit Committee member and Corporate Governance, Nominating and Sustainability Committee member at Eagle Materials Inc. Ms. Ricciardello previously served as a director at Devon Energy from 2008 to 2021, Noble Corporation from 2003 to 2020, Enlink Midstream from 2014 to 2018, Midstates Petroleum from 2010 to 2013 and U.S. Concrete from 2003 to 2010. Beginning in 1982, Ms. Ricciardello enjoyed a distinguished, two-decade career at Reliant Energy Inc. (“Reliant”) and its predecessor, Houston Lighting & Power Company, an electricity generation and retail services company, where she held several roles of increasing responsibility in the financial services and treasury functions. In 1996, Ms. Ricciardello was appointed as Reliant’s Vice President and Comptroller and she served as its Senior Vice President and Chief Accounting Officer from 1999 until her retirement in 2002. Ms. Ricciardello earned a Bachelor of Science degree in Business Administration from the University of South Dakota and an MBA from the University of Houston. She is also a Texas licensed Certified Public Accountant and earned a CERT Certificate in Cybersecurity from Carnegie Mellon University. We believe that Ms. Ricciardello is well suited to serve as a director based on her accounting and financial expertise and public company board and committee experience. +AGE 68 +INDEPENDENT DIRECTOR since January 2023 +COMMITTEES +• +Audit +• +Nominating and Corporate Governance +MICHELE VION +Michele Vion was appointed to our Board in February 2020. Ms. Vion previously served as Vice President, Human Resources at HighPoint Resources Corporation, a successor to the Bill Barrett Corporation, an oil and gas E&P company, from August 2010 to September 2019. Ms. Vion was previously employed at Level 3 Communications, Inc., an international communications company, starting in 2006 and ultimately as Group Vice President of Human Resources up to January 2010. Ms. Vion also previously served as Vice President of Human Resources for Sun Microsystems, Inc., a computer networking company, for seven years. She also previously held senior human resource and client account management positions at Prudential Financial, Inc., an insurance and investment management company and JP Morgan, a global financial services firm. Prior to joining JP Morgan, Ms. Vion served in an accounting position as a Regional Controller for the Eastern Region at Sony Corporation of America. Ms. Vion previously served as Compensation Committee Chair and as a member of the Audit Committee of Boingo Wireless, Inc.’s Board of Directors, roles she held from 2018 until Boingo’s acquisition by Digital Colony Management, LLC in June 2021. Ms. Vion also served on the board and as Chair of the Compensation Committee and as member of the Audit Committee and Nominating and Corporate Governance Committee of Callidus Software Inc., a publicly-traded, cloud-based software company, from 2005 to 2016. Ms. Vion holds a Bachelor of Arts in East Asian Studies and Economics from Wesleyan University, has attended Stanford University’s Director’s College, and participated in the Financial Times’ Director Exchange. We believe that Ms. Vion is well suited to serve as a director based on her executive leadership experience in human resources and accounting and public company board and committee experience. +AGE 64 +INDEPENDENT DIRECTOR since February 2020 +COMMITTEES +• +Compensation (Chair) +• +Nominating and Corporate Governance +PROPETRO  2024 Proxy Statement   |  11 +TABLE OF CONTENTS +Corporate Governance and Board Matters +Director Independence +The majority of the members of the Board at any given time must qualify as “independent” under the rules of the NYSE. +Our Board has undertaken a review of the independence of each of our director nominees and has affirmatively determined that each of Messrs. Armour, Best, Lawrence, and Moore and Mss. Ricciardello and Vion are “independent,” as defined by the NYSE rules. Under the NYSE rules, a director can be independent only if  (a) the director does not trigger a categorical bar to independence and (b) our Board affirmatively determines that the director has no material relationship with the Company (either directly or as a partner, stockholder or officer of an organization that has a relationship with the Company). +Based on information provided by the director nominees concerning their background, employment and affiliations, our Board has determined that these directors do not have a material relationship with the Company (either directly or as a partner, stockholder or officer of an organization that has a relationship with the Company). In making this determination, our Board considered the current and prior relationships that each of the directors has with us, and all other facts and circumstances our Board deemed relevant in determining independence, including any beneficial ownership of our capital stock by each of the directors. +Board Leadership Structure +PHILLIP A. +GOBE +SAMUEL D. +SLEDGE +ANTHONY J. +BEST +Chairman of the Board +Chief Executive Officer +Lead Independent Director +Our Board has adopted our Corporate Governance Guidelines, which are available on our website, www.propetroservices.com , in the “Governance” subsection of the “Investor Relations” section under “Governance Documents.” Our Corporate Governance Guidelines provide that if the Chairman of the Board is a member of management or does not otherwise qualify as independent, the independent directors may elect a lead independent director. Our Board believes it is important to retain the flexibility to determine whether the roles of Chairman and Chief Executive Officer should be separated or combined depending on the circumstances and changing needs of the Company from time to time. +While our Board has previously combined the roles of Chairman and Chief Executive Officer, at present, the Board has chosen to separate the positions of Chairman and Chief Executive Officer. The Board believes this structure enhances corporate governance and allows each of our Chairman and Chief Executive Officer to remain focused on their distinct roles, which, for the Chairman, primarily involves Board and corporate governance and, for the Chief Executive Officer, primarily involves day-to-day management leadership and implementing our corporate strategy. +Although the roles of Chairman and Chief Executive Officer are currently separated, the Chairman previously served as a member of management and does not currently qualify as independent. As such, the Board believes the role of Lead Independent Director enhances independent oversight of the Company and that Mr. Best should continue to serve as the Lead Independent Director. In this capacity, Mr. Best provides, in conjunction with the Chairman, leadership and guidance to the Board. The Lead Independent Director responsibilities are as follows: +• +Preside over all meetings of the Board at which the Chairman of the Board is not present, including any executive sessions of the independent directors +• +Approve Board meeting schedules and agendas +• +Act as the liaison between the independent directors and the Chairman of the Board +• +Communicate the Chief Executive Officer’s annual evaluation and compensation, after Compensation Committee approval +12  |   ir.propetroservices.com +TABLE OF CONTENTS +Corporate Governance and Board Matters +Furthermore, our Board believes that service on the boards of other public companies provides valuable governance and leadership experience that ultimately benefits the Company, but also recognizes that outside public board service requires a significant commitment of time and attention. This year, our Board updated our Corporate Governance Guidelines to limit the number of public company boards on which a director may sit in accordance with best governance practices. As a result, under our Corporate Governance Guidelines: +• +our Chief Executive Officer may sit on no more than one additional outside public company board; +• +the Chairman of the Board and the Lead Independent Director may sit on no more than two additional outside public company boards; +• +non-management directors who are active executive officers of other public companies may sit on no more than one additional outside public board (including their own company board); and +• +all other directors may sit on no more than three additional outside public boards. +This practice helps ensure that our directors can give appropriate time and attention to the affairs of the Company. +Interested parties who wish to communicate with the Board, its committees, the Chairman, the Lead Independent Director, or any other individual director should follow the procedures described below under “Communication with our Board of Directors.” +To facilitate candid discussion among the Company’s directors, the non-management directors meet at regularly scheduled executive sessions presided over by our Chairman. In addition, at least once a year and in conjunction with a regular board meeting, the non-management directors who are independent under NYSE listing standards meet in executive session presided over by the Lead Independent Director. +Board of Directors and Risk Oversight +In the normal course of business, we are exposed to a variety of risks, including market risks relating to changes in commodity prices, interest rates, political risks and credit and investment risks. The Board oversees our strategic direction and in doing so considers the potential rewards and risks of our business opportunities and challenges and monitors the development and management of risks that impact our strategic goals. The Audit Committee assists the Board in fulfilling its oversight responsibilities by monitoring the effectiveness of our systems of financial reporting, auditing, internal controls and legal and regulatory compliance. The Nominating and Corporate Governance Committee assists the Board in fulfilling its oversight responsibilities with respect to the management of risks associated with Board organization, membership and structure, succession planning for our directors and executive officers, and corporate governance. The Compensation Committee assists the Board in fulfilling its oversight responsibilities by overseeing our compensation policies and practices. The Board does not believe that its role in the oversight of our risks affects the Board’s leadership structure. +Sustainability and ESG Initiatives +In October 2023, we published our inaugural ProPetro ProEnergy ProPeople Sustainability Report , advancing our goals of increased disclosure and transparency regarding our operations. We encourage you to review this report, which may be accessed in the sustainability section of our website, for detailed information regarding our commitment and approach to sustainability. The report provides an overview of our sustainability initiatives and strategy, our governance, oversight, programs, and policies, and our performance on certain sustainability matters that are important to ProPetro and its stakeholders. The scope of the report includes all businesses, assets, and joint ventures that were owned and operated by ProPetro at the time of its publishing. The report was developed through the contributions of many employees from multiple functions across our Company, an effort that we believe reflects our culture of collaboration. +At ProPetro, our fundamental policy is to conduct business with honesty and integrity in accordance with the highest legal and ethical standards, along with a daily focus on safety and quality. As detailed in our sustainability report, we believe sustainability in our industry is created by offering competitive and effective services for our customers, while providing a value-generating enterprise for our shareholders, teammates, and community and minimizing negative environmental impacts from our operations. Guided by these values, and with a focus on creating a durable and sustainable business in our sector we pursue the pillars of our strategy—(1) optimizing operations and industrializing our business; (2) pursuing a more capital-light asset profile and next generation fleet by developing and integrating innovative technologies; (3) pursuing opportunistic strategic transactions to accelerate value creation and distribution; and (4) maintaining a strong balance sheet. Our strategic approach is designed to +PROPETRO  2024 Proxy Statement   |  13 +TABLE OF CONTENTS +Corporate Governance and Board Matters +support ProPetro’s core goals of generating robust earnings, increasing free cash flow, and building towards enhanced shareholder returns. Achievement of these strategic objectives is a key to our long-term success, and our sustainability and environmental, social, and governance (“ESG”) initiatives are designed to support and enhance our pursuit of these goals. We believe our services play a vital role in the broader energy value chain by meaningfully contributing to the delivery of low-cost, dependable energy to end users and that our sustainability and ESG initiatives will enable us to continue to do so for years to come. +As part of our sustainability and ESG initiatives, we aim to reduce the overall environmental impact of our services by focusing on excellent execution and superior service quality. We believe that a lower emissions profile is not only vital to aid in our competitiveness but it is also a crucial component in deploying the innovative tools necessary to support our customers’ efforts to be capital efficient while respecting the communities in which we work. We seek to meet our customers’ needs while also pursuing a consistent, sustainable service solution that will increasingly replace diesel with cleaner burning and cost-advantaged fuels. With continued, significant investments in and the successful initial deployment of our first two FORCE SM electric fleets and the continued improvement and strong operational performance of our Tier IV DGB, dual-fuel equipment, 2023 reflected the continued execution of our fleet transition strategy. During 2023, the impact of these investments was reflected in our performance, as our Tier IV DGB equipment displaced almost 20 million gallons of diesel over the last three quarters of the year, resulting in an 8.1% reduction in CO 2 e emissions for operations with this equipment. We believe these investments and our focus on continued improvements in operating performance for these assets will support our continued competitiveness, while fostering a reduced emissions profile for our services. Moreover, the initial success and continued deployment of our FORCE SM electric fleet solutions reflect the collaborative approach we take with our customers towards the increasing industrialization and electrification of the oilfield. +An additional focus of our sustainability and ESG initiatives is to give back to the area where we live and work by providing employment and supporting and encouraging our employees to commit to safety and investing in our community. We aspire to play a role in shaping the future of the Permian Basin by investing in education, donating to first responders and veterans, supporting health and wellness related organizations, and focusing on charities that support local children. We do this through various charities and other organizations that are heavily involved in the Permian Basin communities. The employee created P.U.M.P. committee continues to participate in wellness events, monthly events with a local foodbank, quarterly blood drives, Thanksgiving meal drives, school supply donation drives, and other important initiatives. +2023 also saw increased focus and further improvement in our human capital development initiatives. We are particularly proud of our increased investment in our employee base as we implemented new training resources and systems and continued a leadership training initiative across all functions to support the enhancement of over 250 of our existing managers and senior leaders along with a class of developing leaders. We further sought to identify ways to better align with our employees and improve our overall work environment by conducting our first ever employee engagement survey. This survey provided key insights into areas of strength as well as employee concerns and allowed us to develop and begin to implement action plans to positively impact our employee experience. +Our safety record substantiates the close collaboration between our customers and our employees in completing each job safely. We pride ourselves on our commitment to safety and our commitment to each other, which we demonstrate and support through operational initiatives like our dedicated heavy haul team to reduce driving hazards; our culture of training, accountability, and consistent improvement; and our long-term relationships with teammates, customers and stakeholders. +Additional information and updates regarding our sustainability and ESG initiatives can be found under the “Sustainability” tab of our website at www.propetroservices.com . Additionally, more details on our progress in this area will be disclosed in 2024 through the publication of our 2024 sustainability report. +Communicating with Our Board of Directors +Stockholders and other interested parties may communicate with our Board by writing to: +ProPetro Holding Corp. +Attention: General Counsel and Corporate Secretary +P.O. Box 873 +Midland, Texas 79702 +14  |   ir.propetroservices.com +TABLE OF CONTENTS +Corporate Governance and Board Matters +Stockholders may submit their communications to the Board, the independent directors, any committee of the Board or individual directors on a confidential or anonymous basis by sending the communication in a sealed envelope marked “Stockholder Communication with Directors” and clearly identifying the intended recipient(s) of the communication. +Our General Counsel and Corporate Secretary will review each communication and will forward the communication, as expeditiously as reasonably practicable, to the addressees if: +(1) +the communication complies with the requirements of any applicable policy adopted by the Board relating to the subject matter of the communication and +(2) +the communication falls within the scope of matters generally considered by the Board. +To the extent the subject matter of a communication relates to matters that have been delegated by the Board to a committee or to an executive officer of the Company, our General Counsel and Corporate Secretary may forward the communication to the executive officer or chairman of the committee to which the matter has been delegated. The acceptance and forwarding of communications to the members of the Board or an executive officer does not imply or create any fiduciary duty of the Board members or executive officer to the person submitting the communications. +Information may be submitted confidentially and anonymously. However, the Company may be obligated by law to disclose the information or identity of the person providing the information in connection with government or private legal actions and in other circumstances. The Company’s policy is not to take any adverse action, and not to tolerate any retaliation against any person for asking questions or making good faith reports of possible violations of law, our policies or our Code of Ethics & Conduct. +Annual Meeting Attendance +While the Company does not have a specific policy about director attendance at annual meetings of stockholders, all directors are expected to attend meetings of the Board (and any committees thereof on which they serve) either in person or telephonically unless exigencies prevent them from attending. Each incumbent director attended at least 75% of the aggregate of  (1) the total number of meetings of the Board (held during the period for which he or she has been a director) and (2) the total number of meetings of committees of the Board on which he or she served (during the periods that he or she served). Our non-employee directors meet at regularly scheduled executive sessions presided over by our Lead Independent Director. Additionally, our independent directors meet at least once a year without members of management or non-independent directors present. All of our directors who were members of the Board at the time of our 2023 annual meeting of stockholders attended the meeting. +Compensation Committee Interlocks and Insider Participation +During the year ended December 31, 2023, the Compensation Committee was comprised of Ms. Vion and Messrs. Moore and Best. Ms. Vion serves as committee chair. No executive officer of the Company served as a member of the board of directors or compensation committee of any other entity that has one or more executive officers serving as a member of our Board or Compensation Committee. +Board and Committee Activity and Structure +Our Board is governed by our certificate of incorporation, bylaws, the Investor Rights Agreement, charters of the standing committees of the Board, and the laws of the State of Delaware. +On December 31, 2018, we entered into the Investor Rights Agreement with an affiliate of Pioneer. The Investor Rights Agreement provides that Pioneer was granted: +(i) +the one-time right to designate an independent director to the Board and +(ii) +the right to designate a non-independent director to the Board for so long as Pioneer owns 5% or more of the Company’s outstanding common stock. +Pioneer has designated Mark S. Berg as the non-independent director and has no further rights to designate an independent director to the Board. +During 2023, our Board held seven meetings. There are currently three standing committees of the Board: +PROPETRO  2024 Proxy Statement   |  15 +TABLE OF CONTENTS +Corporate Governance and Board Matters +• +the Audit Committee, +• +the Compensation Committee, and +• +the Nominating and Corporate Governance Committee. +Members serve on these committees until their resignation or until as otherwise determined by our Board. The composition of the Board committees complies with the applicable rules of the NYSE and applicable law. Our Board has adopted a written charter for each of the standing committees, which can be found under “Governance Documents” in the “Governance” subsection of the “Investors” section of our website at www.propetroservices.com . +In addition to the above governing documents, our Code of Ethics & Conduct that applies to all of our employees, as well as each member of the Board, can also be found under “Governance Documents” in the “Governance” subsection of the “Investors” section of our website at www.propetroservices.com . The composition and responsibilities of each of the standing committees of our Board are as follows: +AUDIT COMMITTEE +MEETINGS IN 2023: 9 +KEY RESPONSIBILITIES +Our Audit Committee is directly responsible for, among other things, the appointment, compensation, retention and oversight of our independent registered public accounting firm. +The oversight of our independent public accounting firm includes: +• +reviewing the plans and results of the audit engagement with the firm, +• +approving any additional professional services provided by the firm, and +• +reviewing the independence of the firm. +The Audit Committee is also responsible for discussing the effectiveness of the internal controls over financial reporting with our independent registered public accounting firm and relevant financial management. +REPORT +The Report of our Audit Committee appears on page 45 of this proxy statement. +MEMBERS +Anthony J. +Best, Chair +G. Larry +Lawrence +Mary P. +Ricciardello +During the year ended December 31, 2023, the members of the Audit Committee were Ms. Ricciardello and Messrs. Best, Douglas (until the expiration of his term at the 2023 annual meeting), and Lawrence. The Audit Committee is presently comprised of Ms. Ricciardello and Messrs. Best and Lawrence, with Mr. Best serving as committee chair. +QUALIFICATIONS +Our Audit Committee is comprised solely of  “independent” directors, as defined under and required by the NYSE rules and Rule 10A-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). +Our Board has determined that each of Ms. Ricciardello and Messrs. Armour, Lawrence, and Moore qualify as an “audit committee financial expert,” as defined by the rules under the Exchange Act. +16  |   ir.propetroservices.com +TABLE OF CONTENTS +Corporate Governance and Board Matters +COMPENSATION COMMITTEE +MEETINGS IN 2023: 7 +KEY RESPONSIBILITIES +The Compensation Committee is responsible for, among other things, overseeing the discharge of the responsibilities of the Board relating to compensation of the Company’s officers and directors, reviewing and assessing the Company’s initiatives relating to human capital management, and reviewing the succession planning strategies of the Company. +In carrying out these responsibilities, the Compensation Committee reviews all components of executive compensation for consistency with our compensation philosophy and with the interests of our stockholders. +REPORT +The Report of our Compensation Committee appears on page 45 of this proxy statement. +MEMBERS +Michele +Vion, Chair +Anthony J. +Best +Jack B. +Moore +During the year ended December 31, 2023, the members of the Compensation Committee were Ms. Vion and Messrs. Best and Moore, with Ms. Vion serving as committee chair. The Compensation Committee is presently comprised of Ms. Vion and Messrs. Best and Moore. +QUALIFICATIONS +Our Compensation Committee consists solely of  “independent” directors, as defined under and required by the NYSE rules and “non-employee directors” under Section 16 of the Exchange Act. +PROPETRO  2024 Proxy Statement   |  17 +TABLE OF CONTENTS +Corporate Governance and Board Matters +NOMINATING AND CORPORATE +GOVERNANCE COMMITTEE +MEETINGS IN 2023: 4 +KEY RESPONSIBILITIES +The Nominating and Corporate Governance Committee is responsible for, among other things: +• +identifying individuals qualified to become Board members; +• +selecting or recommending director nominees for each election of directors to the Board; +• +developing and recommending criteria for selecting qualified director candidates to the Board; +• +considering committee member qualifications, appointments and removals; +• +recommending corporate governance principles, codes of conduct and compliance mechanisms; +• +providing oversight in the evaluation of the Board and each committee thereof; +• +overseeing our ESG initiatives; and +• +developing an appropriate succession plan for our chief executive officer pursuant to our Corporate Governance Guidelines. +MEMBERS +Jack B. +Moore, Chair +Spencer D. +Armour III +Alan E. +Douglas +Michele +Vion +Mary P. +Ricciardello +During the year ended December 31, 2023, the members of the Nominating and Corporate Governance Committee were Messrs. Armour, Douglas (until the expiration of his term at the 2023 annual meeting), and Moore and Mss. Ricciardello and Vion, with Mr. Moore serving as committee chair. The Nominating and Corporate Governance Committee is presently comprised of Messrs. Armour and Moore and Mss. Ricciardello and Vion. +QUALIFICATIONS +Our Nominating and Corporate Governance Committee consists solely of  “independent” directors, as defined under and required by the NYSE rules. +Role of the Board, Compensation Committee and Our Executive Officers +Executive compensation decisions are typically made on an annual basis by the Compensation Committee with input from our Chief Executive Officer. Specifically, after reviewing relevant market data and surveys within our industry, our Chief Executive Officer typically provides recommendations to the Compensation Committee regarding the compensation levels for our existing named executive officers (the “Named Executive Officers”) and our executive compensation program as a whole. Our Chief Executive Officer generally attends all Compensation Committee meetings. After considering these recommendations, the Compensation Committee typically meets in executive session and adjusts base salary levels and non-equity award targets. In addition, the Compensation Committee determines the achievement of non-equity Incentive Award Plan metrics and the amount of equity awards from the Incentive Award Plan to be granted to each of our Named Executive Officers. In making executive compensation recommendations, our Chief Executive Officer considers each Named Executive Officer’s performance during the year, the Company’s performance during the year, as well as comparable company compensation levels. While the Compensation Committee gives considerable weight to our Chief Executive Officer’s recommendations on compensation matters, the Compensation Committee has the final decision-making authority on all executive compensation matters. +Role of External Advisors +The Compensation Committee engaged Pearl Meyer & Partners, LLC (“Pearl Meyer”) in 2021 to assist the Compensation Committee and the Board in evaluating, designing, and implementing compensation practices. +The Compensation Committee reviews and assesses the independence and performance of its executive compensation consultant in accordance with applicable U.S. Securities and Exchange Commission (“SEC”) and +18  |   ir.propetroservices.com +TABLE OF CONTENTS +Corporate Governance and Board Matters +NYSE rules and regulations on an annual basis to confirm that the consultant is independent and meets all applicable statutory and regulatory requirements. +Director Nominations Process +The Nominating and Corporate Governance Committee may utilize a variety of methods for identifying potential nominees for directors, including considering potential candidates who come to their attention through current officers, directors, professional search firms, or other persons. Once a potential nominee has been identified, the Nominating and Corporate Governance Committee evaluates whether the nominee has the appropriate skills and characteristics required to become a director considering the then current make-up of the Board. This assessment includes an evaluation of the nominee’s judgment and skills, such as experience at a strategy and policy setting level, financial sophistication, leadership, and objectivity—all in the context of the perceived needs of the Board at that point in time. One of the director nominees, Mr. Berg, was not recommended for nomination by the Nominating and Corporate Governance Committee but rather was appointed pursuant to the Investor Rights Agreement. +Our updated corporate governance guidelines, effective as of February 2024, reflect the Nominating and Corporate Governance Committee and the Board are committed to considering diversity when identifying candidates for nomination to the Board. Our Board believes that at a minimum all members of the Board should have the highest professional and personal ethics and values. In addition, each member of the Board must be committed to increasing stockholder value and should have enough time to carry out his or her responsibilities as a member of the Board. +Our Board monitors the mix of specific experience, qualifications, and skills of its directors to assure that the Board, as a whole, has the necessary tools to perform its oversight function effectively in light of the Company’s business and structure. +Stockholders may recommend individuals to the Nominating and Corporate Governance Committee for consideration as potential director candidates by submitting the names of the recommended individuals, together with appropriate biographical information and background materials, to: +The Nominating and Corporate Governance Committee +ProPetro Holding Corp. +c/o General Counsel and Corporate Secretary +P.O. Box 873 +Midland, Texas 79702 +In the event there is a vacancy, and assuming that appropriate biographical and background material has been provided on a timely basis, the Nominating and Corporate Governance Committee will evaluate stockholder-recommended candidates by following substantially the same process, and applying substantially the same criteria, as it follows for candidates submitted by others. +Director Orientation and Education +We provide each new director with an orientation that consists of meeting with senior management and others on our business operations, strategic plans, significant accounting and risk management issues, corporate governance, compliance, and key policies and practices. +The orientation sessions are tailored to the particular director depending on their orientation needs and generally include an overview of board fiduciary duties, board independence, and public company reporting requirements. New directors are also provided the most recent reports presented to the Board and its committees by management and external advisors. +Each director is expected to participate in continuing educational programs as necessary to maintain the expertise necessary to perform his or her responsibilities as a director. In this regard, from time to time we provide pertinent articles, white papers, and information relating to our business, financial affairs, risks, competitors, corporate governance, areas of focus in shareholder activism, ESG trends, proxy advisory firm ratings, and changes in legal and regulatory issues. +We may also coordinate training and educational sessions for directors from outside experts and provide directors with tours of our facilities. +PROPETRO  2024 Proxy Statement   |  19 +TABLE OF CONTENTS +Corporate Governance and Board Matters +Certain Relationships and Related Party Transactions +RELATED PARTY TRANSACTIONS +Operations and Maintenance Yards +The Company rents three yards from South Midkiff Partners, LLC, an entity partially owned by Spencer D. Armour III, a director, and David Sledge, the father of Sam Sledge, our Chief Executive Officer. Total annual rent expense in 2023 for each of the three yards was approximately $0.03 million, $0.1 million, and $0.1 million, respectively. The Company previously rented two yards from this entity and incurred rent expense of  $0.02 million and $0.1 million, respectively during the year ended December 31, 2023; these leases were terminated in June 2023. +Transportation and Equipment Rental +Adam Muñoz, our President and Chief Operating Officer, has a family relationship with an employee of J&M Burns Transportation, an entity that provides transportation services to the Company. The employee receives a portion of his compensation from J&M Burns Transportation based on the amount of services sold by him to customers, including the Company. The Company incurred approximately $38.6 million in expense for the year ended December 31, 2023 for services provided to the Company by J&M Burns Transportation. +Executive Officer Family Members +Oscar M. Dominguez is our Vice President of Hydraulic Fracturing Operations and the brother-in-law of Adam Muñoz. Mr. Dominguez received total compensation of approximately $1.3 million for his services for the year ended December 31, 2023 (including $959,000 cash compensation and $298,000 non-cash equity compensation). +Roger Dominguez is our Supply Chain Logistics Manager and the brother-in-law of Adam Muñoz. Mr. Dominguez received total compensation of approximately $294,000 for his services for the year ended December 31, 2023 (including $231,000 cash compensation and $63,000 non-cash equity compensation). +Pioneer +On December 31, 2018, we consummated the purchase of certain pressure pumping assets and real property in connection with the Pioneer Pressure Pumping Acquisition. In connection with the consummation of the Pioneer Pressure Pumping Acquisition and effective January 1, 2019, we became a long-term service provider to Pioneer, providing pressure pumping and related services. In March, 2022, we amended and restated our agreement to provide pressure pumping and related services to Pioneer, which reduced the number of contracted fleets to six fleets from eight fleets, modified the pressure pumping scope of work and pricing mechanism for contracted fleets, replaced the idle fees arrangement with equipment reservation fees and provided for an initial term from January 1, 2022 through December 31, 2022, subject to extension and termination as described therein. On October 31, 2022, we entered into (i) a certain Pressure Pumping Services Agreement—Fleet One Simulfrac (the “Fleet One Pressure Pumping Agreement”) and (ii) a certain Pressure Pumping Services Agreement—Fleet Two (the “Fleet Two Pressure Pumping Agreement”), which replaced all previous agreements with Pioneer and reduced the number of contracted fleets to two fleets. The Fleet One Pressure Pumping Agreement was effective as of January 1, 2023 and terminated in August 2023. The Fleet Two Pressure Pumping Agreement was effective as of January 1, 2023. In February 2023, we mutually agreed with Pioneer to terminate the Fleet Two Pressure Pumping Agreement, effective on or about May 12, 2023. Revenue from services provided to Pioneer (including reservation fees) accounted for approximately $125.1 million during the year ended December 31, 2023. +20  |   ir.propetroservices.com +TABLE OF CONTENTS +Corporate Governance and Board Matters +POLICIES AND PROCEDURES FOR RELATED PARTY TRANSACTIONS +Any request for us to enter into a transaction with an executive officer, director, principal stockholder or any of such persons’ immediate family members or affiliates, among others, in which the amount involved exceeds $120,000, must first be presented to our Audit Committee for review, consideration and approval. All our directors and executive officers are required to report to the Audit Committee chair any such related person transaction. In approving or rejecting the proposed agreement, our Audit Committee shall consider the facts and circumstances available and deemed relevant to the Audit Committee, including, but not limited to, whether the transaction is on terms comparable to those that could be obtained in arm’s length dealings with an unrelated third party, the extent of the related party’s interest in the transaction and the conflicts of interest and corporate opportunity provisions of our certificate of incorporation. If we should discover related person transactions that have not been approved, the Audit Committee will be notified and will determine the appropriate action, including ratification, revision, or termination of such transaction. +Director Compensation +Our Amended and Restated ProPetro Holding Corp. Non-Employee Director Compensation Policy (the “Director Compensation Policy”) provides that each eligible non-employee director receives the following, effective as of July 1, 2023: +The amendment and restatement of the Director Compensation Policy in July of 2023 provided for the following modest increases in compensation for our non-employee directors: (i) the annual cash retainer for the Chairperson of the Audit Committee was increased from $15,000 to $20,000; (ii) the annual cash retainer for the Chairperson for the Nominating and Corporate Governance Committee was increased from $10,000 to $15,000; and (iii) the annual equity retainer for all non-employee directors was increased from $140,000 to $155,000, which will be effective for awards granted in 2024 since this modification was approved after the date of the annual grant to directors in 2023. These changes were implemented in order to align our director compensation with that paid at companies with whom we compete for director talent. +All equity retainers consist of awards of restricted stock units (“RSUs”) that will vest in full on the earliest to occur of: (i) the first anniversary of the grant date, (ii) the day immediately preceding the first annual meeting of stockholders following the grant date, and (iii) the occurrence of a Change in Control, subject, in each case, to continuous service through the applicable vesting date. +The portion of the annual equity retainer that would have vested in the year following a non-employee director’s separation from service due to his or her death or disability will vest upon such separation from service. All annual retainers are pro-rated based on days of service for non-employee directors who join the Board during the applicable calendar year. The members of the Board are also entitled to reimbursement of expenses incurred in connection with attendance at Board and committee meetings in accordance with Company policy. +PROPETRO  2024 Proxy Statement   |  21 +TABLE OF CONTENTS +Corporate Governance and Board Matters +The following table summarizes the compensation paid for services provided by our non-employee directors during 2023. +Name +Fees Earned or Paid in Cash (1) +($) +Stock Awards (2) +($) +Total +($) +Spencer D. Armour III +90,000 +139,999 +229,999 +Mark S. Berg (3) +― +― +― +Anthony J. Best +127,500 +139,999 +267,499 +Phillip A. Gobe +140,000 +139,999 +279,999 +G. Larry Lawrence +90,000 +139,999 +229,999 +Jack B. Moore +102,500 +139,999 +242,499 +Mary P. Ricciardello +85,700 +139,999 +224,999 +Michele Vion +105,000 +139,999 +244,999 +(1) +Reflects annual cash retainer payments made pursuant to the Director Compensation Policy. +(2) +Reflects the grant date fair value of RSU awards on the date of grant computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 (“FASB ASC Topic 718”). For information regarding assumptions underlying the valuation of equity awards, see Note 14 to the Consolidated Financial Statements included in our 2023 Annual Report on Form 10-K. +(3) +In 2023, Mr. Berg has elected not to be compensated for his service as a director. Beginning in 2024, Mr. Berg will be compensated for his service as a director. +The following table sets forth the aggregate number of outstanding stock awards held by each of our non-employee directors on December 31, 2023. With the exception of Mr. Sledge who held 21,750 stock options as of December 31, 2023, none of our directors held stock options as of December 31, 2023. +Name +Aggregate Number of Stock +Awards +(#) +Spencer D. Armour III +21,116 +Mark S. Berg (1) +― +Anthony J. Best +21,116 +Phillip A. Gobe +21,116 +G. Larry Lawrence +21,116 +Jack B. Moore +21,116 +Michele Vion +21,116 +(1) +In 2023, Mr. Berg elected not to be compensated for his service as a director. Beginning in 2024, Mr. Berg will be compensated for his service as a director. +Non-Employee Director Stock Ownership Guidelines +We maintain a non-employee director stock ownership policy that is applicable to all our eligible non-employee directors. Pursuant to this policy, each non-employee director is encouraged to hold, on and following the later of the fifth anniversary of: (i) the closing of our initial public offering (“IPO”) and (ii) the non-employee director’s election or appointment to the Board, shares of our common stock or certain equity awards (valued based on the closing price of our common stock) with a value equal to or in excess of 300% of the non-employee director’s annual cash retainer, as such threshold may be amended by the Nominating and Corporate Governance Committee from time to time. +Outstanding awards of unvested time-based RSUs will count toward a non-employee director’s qualifying shareholdings to the extent the RSUs are not settled in cash. A non-employee director who is not compensated for his or her services as non-employee director pursuant to the Director Compensation Policy or any other plan, policy or agreement then in effect is not subject to the guidelines set forth in our director stock ownership policy. +As of December 31, 2023, each of our non-employee directors was in compliance with these ownership guidelines except for Ms. Ricciardello, who has additional time to fulfill the ownership levels provided in the policy because she has not served as a non-employee director for a period of five years. The stock ownership guidelines have historically not applied to Mr. Berg since he did not receive compensation for his services as a non-employee director. However, because Mr. Berg will begin receiving compensation for his services as a director in 2024, he will become subject +22  |   ir.propetroservices.com +TABLE OF CONTENTS +Corporate Governance and Board Matters +to the stock ownership guidelines in 2024 and will have five years thereafter to accumulate holdings in order to comply with the ownership guidelines. A description of each non-employee director’s beneficial ownership of the Company’s common stock is included in the section entitled “Security Ownership of Certain Beneficial Owners and Management.” +PROPETRO  2024 Proxy Statement   |  23 +TABLE OF CONTENTS +Executive Officers +Our executive officers serve at the direction of our Board. All of our executive officers and certain other key officers are listed in the following table, and certain information concerning those officers, except for Mr. Sledge, who is a member of the Board, follows the table. +Name +Age +Position with ProPetro Holding Corp +Executive Officer +since +Samuel D. Sledge +37 +Chief Executive Officer and Director +2020 +David S. Schorlemer +57 +Chief Financial Officer +2020 +Adam Muñoz +41 +President and Chief Operating Officer +2020 +John J. “Jody” Mitchell +41 +General Counsel and Corporate Secretary +2023 +Shelby Fietz +42 +Chief Commercial Officer +2023 +Celina A. Davila (1) +43 +Chief Accounting Officer +2023 +(1) +Ms. Davila is a key officer but does not serve as an executive officer of the Company. +See “Corporate Governance and Board Matters—Nominees” for biographical information for Mr. Sledge. +DAVID S. SCHORLEMER +David S. Schorlemer began serving as a Special Advisor to the Chief Financial Officer on October 12, 2020 until his appointment as Chief Financial Officer on October 23, 2020. Mr. Schorlemer has two decades of experience in senior level positions in public and private companies. He most recently served as Executive Vice President, Chief Financial Officer, Treasurer and Secretary of Basic Energy Services, Inc., a Fort Worth, Texas based oilfield services company, from September 2018 until joining the Company. Prior to that, he served as the Chief Financial Officer of Gulf Island Fabrication, Inc. from January 2017 to August 2018. His work history also includes serving as Chief Financial Officer for three oilfield services companies: GR Energy Services Management, LP from January 2016 to December 2016, Stallion Oilfield Holdings, Inc., September 2004 to December 2015 and Q Services, Inc. from July 1997 until its merger with Key Energy Services, Inc. in July 2002. He also held the role of vice president, marketing and strategic planning for Key Energy Services, Inc. from July 2002 to September 2004. Prior to entering the energy services industry, Mr. Schorlemer was a technology consultant and project manager with Accenture’s Technology Practice where he worked on various domestic and international projects with Fortune 500 Companies in industries including: telecommunications, transportation, automotive and manufacturing and oil and gas. Mr. Schorlemer earned his Bachelor of Business Administration degree in finance from The University of Texas, and his Master of Business Administration from Texas A&M University. +AGE 57 +CHIEF FINANCIAL OFFICER since October 2020 +24  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Officers +ADAM MUÑOZ +Adam Muñoz has served as our President and Chief Operating Officer since August 2021, and prior to that, he served as Chief Operating Officer since January 2021 and served as Senior Vice President of Operations since March 2020. Mr. Muñoz joined the Company in 2010 to initiate ProPetro’s Permian pressure pumping operation. Prior to joining ProPetro, Mr. Muñoz held sales and operations roles at Frac Tech Services and Weatherford International. Since joining ProPetro, Mr. Muñoz has served as the Director of Business Development and Technical Services where he was responsible for overseeing the growth of the hydraulic fracturing operations as well as managing the department’s day-to-day technical services. Mr. Muñoz has most recently served as the Vice President of Frac Services where his duties included leading the hydraulic fracturing division through specific efforts to increase operational efficiencies and maximize financial productivity. Mr. Muñoz received a Bachelor of Business Marketing from The University of Texas at the Permian Basin. +AGE 41 +PRESIDENT AND CHIEF OPERATING OFFICER since August 2021 +JOHN J. “JODY” +MITCHELL +Jody Mitchell has served as our General Counsel and Corporate Secretary of the Company since January 2023. Prior to his appointment as General Counsel, Mr. Mitchell served as the Company’s Vice President and Deputy General Counsel since April 2021. Before joining the Company, Mr. Mitchell served in various roles at Concho Resources Inc., a hydrocarbon exploration company acquired by ConocoPhillips in 2021 (“Concho”), from 2014 to 2021, including Director of Marketing and Midstream and, prior to that, Associate General Counsel. Before joining Concho, Mr. Mitchell served as counsel supporting the upstream and midstream businesses at Petrohawk Energy Corporation (“Petrohawk”) and at BHP Billiton following BHP Billiton’s acquisition of Petrohawk. Mr. Mitchell began his career as an associate at Locke Lord Bissell & Liddell LLP, where he concentrated on oil, gas and energy litigation and construction litigation. Mr. Mitchell holds a Bachelor of Arts from the University of Texas and a Juris Doctor from the University of Houston Law Center. +AGE 41 +GENERAL COUNSEL AND CORPORATE SECRETARY since January 2023 +SHELBY K. FIETZ +Shelby Fietz has served as our Chief Commercial Officer of the Company since November 2023. Mr. Fietz joined ProPetro in 2012, and prior to his appointment as Chief Commercial Officer, Mr. Fietz served as the Company’s Vice President of Commercial, leading the business development, sales, supply chain, and marketing functions. He also previously held the position of Vice President of Business Development, Sales and Marketing, while also leading our supply chain organization. Prior to his appointment as an officer, Mr. Fietz held roles of increasing responsibility within ProPetro in both operations and business development. Mr. Fietz also serves in a leadership capacity with the Permian Basin Chapter of the Energy Workforce and Technology Council. Mr. Fietz holds a Bachelor of Science from Angelo State University. +AGE 42 +CHIEF COMMERCIAL OFFICER since November 2023 +PROPETRO  2024 Proxy Statement   |  25 +TABLE OF CONTENTS +Executive Officers +CELINA A. DAVILA +Celina Davila has served as our Chief Accounting Officer since November 2023. Prior to her appointment as Chief Accounting Officer, Ms. Davila served as the Company’s Director of Accounting and Corporate Controller since August 2022 and as Corporate Controller since October 2019. Ms. Davila joined the Company in January 2019 as Hydraulic Fracturing Controller. Prior to joining the Company, Ms. Davila served in various roles at Pioneer, a leading independent natural resources company, from 2012 to 2018, including Accounting Manager and, prior to that, Accounting Supervisor. Ms. Davila began her career as a Senior Auditor at Johnson, Miller, and Co. Ms. Davila is a Certified Public Accountant and holds a Bachelor of Arts in Accounting and a Master in Business Administration degree from Texas Tech University. +AGE 43 +CHIEF ACCOUNTING OFFICER since November 2023 +26  |   ir.propetroservices.com +TABLE OF CONTENTS +EXECUTIVE COMPENSATION +Proposal 2 —Advisory Vote to Approve Named Executive Officer Compensation +We are asking stockholders to approve, on a non-binding advisory basis, the compensation of our Named Executive Officers as disclosed in this proxy statement. As described below in “Compensation Discussion and Analysis,” the Compensation Committee has structured our executive compensation program to achieve the following guiding principles: +• +Reward executives for exceptional performance and hold them accountable for poor performance in a manner that adheres to our values +• +Align executive interests with those of our stockholders by making a substantial portion of compensation performance-based and “at risk” +• +Provide the necessary flexibility to respond to varying market conditions and changing circumstances with a structure that ensures accountability in our cyclical and volatile business +• +Remain competitive in our industry to attract, retain, and motivate the talent that is necessary to achieve our financial and strategic goals +• +Be internally consistent and equitable +We urge stockholders to read the section entitled “Compensation Discussion and Analysis” beginning on page 28 of this proxy statement, which describes in more detail how our executive compensation policies and procedures operate and are designed to achieve our compensation objectives, as well as the compensation tables and narrative included therein beginning on page 46, which provide detailed information on the compensation of our Named Executive Officers. The Compensation Committee and the Board believe that the policies and procedures articulated in the “Compensation Discussion and Analysis” are effective in achieving our goals and that the compensation of our Named Executive Officers reported in this proxy statement has and will contribute to the Company’s recent and long-term success. +In accordance with Section 14A of the Exchange Act, and as a matter of good corporate governance, we are asking stockholders to approve the following resolution at the annual meeting: +RESOLVED , that the stockholders of the Company approve, on a non-binding advisory basis, the compensation of the Company’s Named Executive Officers as disclosed in the Compensation Discussion and Analysis section and the related compensation tables, notes and narrative in the proxy statement for the Company’s 2024 annual meeting. +VOTE REQUIRED +This advisory resolution, commonly referred to as a “say-on-pay” resolution, is non-binding on the Board. Although non-binding, the Board and the Compensation Committee will review and consider the voting results when making future decisions regarding our executive compensation program. +The affirmative “FOR” vote of the holders of a majority of the shares represented at the meeting (in person or by proxy) and entitled to vote is required to approve this Proposal No. 2. Brokers do not have discretion to vote on this proposal without your instruction. If you do not instruct your broker how to vote on this proposal, your broker will deliver a non-vote on this proposal. Abstentions will have the same effect as a vote “AGAINST” Proposal No. 2. Broker non-votes will have no effect on Proposal No. 2. +We currently intend to hold the next non-binding advisory vote to approve the compensation of our Named Executive Officers at our 2024 annual meeting of stockholders unless our Board modifies its policy of holding this vote on an annual basis. +The Board of Directors unanimously recommends a vote FOR the approval of the compensation of our Named Executive Officers. +PROPETRO  2024 Proxy Statement   |  27 +TABLE OF CONTENTS +Executive Compensation +Compensation Discussion and Analysis +CD&A Contents +29 +I. +EXECUTIVE COMPENSATION HIGHLIGHTS +29 +Named Executive Officers for 2023 +29 +2023 Company Performance +0 +Successful Execution of Our Leadership Succession Plan +0 +Fleet Transition Investments, Strategic Growth and ESG Advancement +30 +Guiding Principles +30 +Performance-Based Compensation Philosophy +31 +Compensation Policies and Practices +31 +Say on Pay Advisory Vote +33 +II. +WHAT GUIDES OUR PROGRAM +33 +Philosophy and Guiding Principles of Our Compensation Program +34 +How We Make Compensation Decisions +35 +Use of Peer Compensation Data +35 +III. +ELEMENTS OF COMPENSATION AND 2023 DECISIONS IN DETAIL +36 +Base Salary +36 +Annual Cash Incentive Awards +40 +Long Term Incentive Awards +42 +Employee Benefits, Perquisites and Special Payments +42 +IV. +OTHER COMPENSATION PRACTICES, POLICIES AND GUIDELINES +0 +Succession and Additional Agreements +42 +Executive Severance Plan +43 +Employee Compensation Claw-Back Policy +43 +Executive Stock Ownership Policy +43 +Prohibition on Hedging and Pledging +43 +No Tax Gross-Ups +44 +Regulatory Considerations +44 +Compensation Risk Assessment +28  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +I. +EXECUTIVE COMPENSATION HIGHLIGHTS +This Compensation Discussion and Analysis (“CD&A”) describes our compensation practices and the compensation awarded to, earned by, or paid to each of our Named Executive Officers during the last completed fiscal year. +Named Executive Officers for 2023 +For the year ended December 31, 2023, our Named Executive Officers consisted of the following: +Samuel D. +Sledge +Adam +Muñoz +David S. +Schorlemer +Shelby K. Fietz +John J. “Jody” +Mitchel +Chief Executive Officer +President and Chief Operating Officer +Chief Financial Officer +Chief Commercial Officer +General Counsel and Corporate Secretary +2023 Company Performance +$1.63 Billion +$86 Million +Total Revenue +Net Income +$375 Million +5.8 Million +Net Cash Provided by Operating Activities +Shares Repurchased and Retired +Strong Financial Performance and Continued Strategic Execution +2022 was a transitional year for the Company. Our 2022 business plan focused on making capital investments to support the Company’s implementation of next generation Tier IV DGB and electric fleet equipment designed to increase the Company’s competitiveness and earning power. +Following the Company’s investments in 2022, the Compensation Committee’s approach for 2023 was designed to align with the Company’s ongoing strategy to effectively implement its transformed, next generation fleet and continue to optimize its operations, an approach that supports the Company’s commitment to sustainability. In consideration of the Company’s ongoing transitional strategy and with a strong market outlook for 2023, the Compensation Committee designed the 2023 performance metrics for the Amended and Restated ProPetro Holding Corp. Executive Incentive Bonus Plan (the “Annual Bonus Plan”) to incentivize the achievement of improved financial and operating results that were expected to be achieved from the Company’s recent investments, strategic priorities and operational improvement initiatives. The Committee retained the core financial metrics of Adjusted EBITDA and free cash flow (“FCF”) and set robust goals to incentivize a focus on improving the Company’s financial performance in what was expected to be a strong market cycle. During the course of 2023, the market for the Company’s services did not meet the expectations used to set the Company’s Annual Bonus Plan goals. As a result, the Company adjusted its public financial guidance to address these changed circumstances but despite the macro challenges faced by the Company and the associated adjustments in public guidance, the Compensation Committee elected not to change the goals established in the 2023 Annual Bonus Plan. As a result, the Company’s performance under the 2023 Annual Bonus Plan with respect to Adjusted EBITDA was below target and our performance with respect to Free Cash Flow was below threshold. However, our actual Adjusted EBITDA and FCF performance was substantially improved from 2022. The definitions of Adjusted EBITDA and FCF and other details regarding the use of these and other metrics in the Annual Bonus Plan can be found in Section III under the discussion of Annual Cash Incentive Awards in the description of Performance Measures and Payout Results beginning on page 36 below. +PROPETRO  2024 Proxy Statement   |  29 +TABLE OF CONTENTS +Executive Compensation +To recognize the ongoing importance of advancing the Company’s approach to sustainability and ESG, which is aligned with the Company’s core strategy and fleet transition approach, the Committee refined the Company’s Sustainability and ESG objectives to align with the Company’s operational, human capital development and stakeholder engagement strategy and to increase the specificity of such goals. +Guiding Principles +Reward executives for exceptional performance and hold them accountable for poor performance in a manner that adheres to our values +Align executive interests with those of our stockholders by making a substantial portion of compensation performance-based and “at risk” +Provide the necessary flexibility to respond to varying market conditions and changing circumstances with a structure that ensures accountability in our cyclical and volatile business +Remain competitive in our industry in order to attract, retain and motivate the talent that is necessary to achieve our financial and strategic goals +Be internally consistent and equitable +Performance-Based Compensation Philosophy +Making a substantial portion of our Named Executive Officers’ compensation “at risk” and performance-based ensures that their interests are strongly aligned with those of our stockholders and, as a result, is one of the guiding principles of our executive compensation philosophy. +CEO (1) +Other NEOs Average (1)(2) +(1) +RSU and performance share unit (“PSU”) figures reflect the aggregate grant date fair value of the RSU and PSU awards granted in 2023, calculated in accordance with FASB ASC Topic 718. Annual Incentive Bonus figures represent the 2023 target award opportunity under our Annual Bonus Plan. +(2) +Our long-term incentive program is designed to grant 50% RSUs and 50% PSUs on an annual basis. The grant date fair value of these awards calculated in accordance with FASB ASC Topic 718, which is what is reported above, can differ substantially from the method used by the Compensation Committee to evaluate value at the time of grant. Much like our Chief Executive Officer’s compensation, the percentage of compensation for our Named Executive Officers comprised of PSUs far exceeds the percentage of compensation comprised of RSUs for all of our Named Executive Officers except for Mr. Fietz when calculated in accordance with FASB ASC Topic 718. The average compensation composition was as follows for the non-CEO Named Executive Officers other than Mr. Fietz: Base Salary 20%; Annual Incentive Bonus 18%; PSUs 37%; RSUs 25%. Mr. Fietz received a substantial grant of RSUs in connection with his promotion, which resulted in the increased percentage of compensation comprised of RSUs reported above. We do not have a practice of granting a greater number or value of RSUs than PSUs as part of our normal annual grant practices. +30  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +Compensation Policies and Practices +The following features of our executive compensation program promote sound compensation governance and are designed in the best interests of our stockholders and executives. +What We Do +What We Don’t Do +At least 50% of Long Term Incentive Awards are performance-based for Named Executive Officers +Use a mix of absolute and relative financial performance metrics (including relative total shareholder return (“TSR”)) in our incentive plans to avoid duplication of incentives across short- and long-term programs +Use ESG / sustainability metrics in our Annual Bonus Plan +Claw-back Policy +Independent compensation consultant +Independent Compensation Committee reviews and approves the compensation of our Named Executive Officers +Annual Say-on-Pay vote +Annual Compensation Committee assessment of compensation practices to eliminate any excessive risk +Significant stock ownership requirements +Single-trigger change in control payments +Tax gross-ups on severance or equity compensation +Repricing of stock options +Backdating of stock options +Employment agreements with executive officers +Derivative or hedging transactions or pledging of our securities by directors and executive officers +Say-on-Pay Advisory Vote +At the Company’s 2023 annual meeting, the stockholders of the Company were asked to approve, on an advisory basis, the compensation of the Named Executive Officers. Advisory votes in favor of our executive compensation program were cast by over 76% of the shares of common stock of the Company represented at the meeting (in person or by proxy) and entitled to vote. +Historically Strong Say-on-Pay Support +PROPETRO  2024 Proxy Statement   |  31 +TABLE OF CONTENTS +Executive Compensation +The Compensation Committee strives to ensure that our executive compensation program aligns with the interests of our stockholders and adheres to our pay-for-performance philosophy. Historically, our executive compensation program has received very strong stockholder support (averaging over 97% approval in the three years prior to 2023). We were disappointed with the 76% stockholder support for our 2023 Say-on-Pay vote. In connection with and following the 2023 Annual Meeting of Stockholders, the Compensation Committee sought to better understand the views of our stockholders and address their concerns. +Stockholder Engagement in 2023 +We believe that discussions with a broad range of our stockholders help ensure that the Board and our management team understand our stockholders’ priorities and can work to address those priorities effectively. Accordingly, the Board and our management team undertook an extensive stockholder engagement effort in 2023, with a specific focus on reviewing our strategy and value proposition and getting feedback on the Company’s corporate governance structure, including our executive compensation program, approach to human capital management and sustainability matters. As part of our stockholder outreach, we engaged with stockholders representing 90% of our total shares outstanding. The stockholders with whom we interacted in 2023 represent holdings both large and small. Meetings with our stockholders occurred both before and following our 2023 Annual Meeting of Stockholders, though most occurred following the meeting. The chair of our Compensation Committee participated in meetings with stockholders representing 49% of our total shares outstanding. Our Board, Compensation Committee and management team take our stockholders’ concerns seriously and are committed to listening and incorporating changes to our compensation program when warranted. We asked for and received meaningful stockholder feedback on specific elements of our executive compensation program. The stockholders we spoke with almost universally indicated that they were supportive of our executive compensation program but would prefer not to see the Company accelerate the vesting of equity awards in the event of a retirement (or other voluntary departure) by our executives in future years. The Compensation Committee took this feedback and the results of the “Say-on-Pay” vote in account when evaluating the compensation of the Named Executive Officers in 2023 but did not make any material changes to our compensation program as a result since the decrease in support for our “Say-on-Pay” vote in 2023 appears to be almost entirely the result of a specific 2022 action and not as a result of the structure of our ongoing annual compensation program. We have continued, and plan to continue, engaging in ongoing stockholder outreach regarding corporate governance generally, including executive compensation programs. +32  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +II. WHAT GUIDES OUR PROGRAM +Our executive compensation program is designed to attract, motivate, and retain the management talent that we believe is necessary to achieve our financial and strategic goals. Further, we believe that our executive compensation program should be appropriately tailored to balance short-term compensation with intermediate and long-term compensation while allowing for measurement of and accountability for strategic goals in varying market conditions. We believe this structure effectively aligns the interests of our executives with the interests of our stockholders. +In establishing and evaluating our executive compensation programs, the Compensation Committee strives to achieve total compensation for our executives that reflects their individual contributions to the Company, responsibilities, duties, and experience and is competitive with the companies with which we compete for executive talent. +Philosophy and Guiding Principles of Our Compensation Program +Our compensation program is guided by the following principles: +1 +Reward for Exceptional Performance and Accountability for Poor Performance +Our Named Executive Officers should be rewarded for exceptional performance and held accountable for poor performance with respect to our annual and longer-term strategic goals. Our Named Executive Officers must work to achieve these goals in a manner that is consistent with our values and policies. We tie a significant portion of each Named Executive Officer’s compensation to the achievement of financial, strategic, and operational goals based on both short- and long-term corporate performance measures while retaining sufficient flexibility to modify or claw-back compensation if necessary. We also retain the flexibility to structure the performance measures to respond to the changing needs of the business through varying market cycles. See “Annual Cash Incentive Awards” and “Long Term Incentive Awards” below. +2 +Align Interests of Executives and Stockholders +Compensation for our Named Executive Officers should align their interests with those of our stockholders. Our compensation program aligns pay to performance by making a substantial portion of total executive compensation variable, or “at risk,” through an annual bonus program based on our performance goals and the granting of long-term incentive equity awards, which include time-vested RSUs and performance-based RSUs. As performance goals are met, not met, or exceeded, executives are rewarded commensurately. Our Stock Ownership Guidelines also require each Named Executive Officer to retain significant ownership in the Company’s common stock such that they are invested in our success over the long term along with our stockholders. +3 +Flexibility to Respond to Changing Circumstances +We are in a cyclical and volatile business. As a result, our Compensation Committee feels it is important to have a flexible compensation program that is responsive to unforeseen circumstances that arise during the year. To meet this objective, the Compensation Committee retains discretion to increase or decrease the bonuses paid to each Named Executive Officer pursuant to our Annual Bonus Plan from the amount that would be indicated by the pre-established performance metrics if circumstances so warrant. +4 +Industry Competitive +Total executive compensation should be industry-competitive so that we can attract, retain, and motivate talented executives with the experience and skills necessary for our success. We stay apprised, with the assistance of the Compensation Committee’s independent compensation advisor, of the amounts and types of executive compensation paid to similarly situated executives by companies with which we compete for executive talent as well as general industry trends and best practices. +5 +Internally Consistent and Equitable +Executive compensation should be internally consistent and equitable. We consider not only the compensation paid by our peer companies, but also our Named Executive Officers’ capabilities, levels of experience, tenures, positions, responsibilities, and contributions when setting their compensation. Additionally, our Compensation Committee feels that our Named Executive Officers should have a larger proportion of their compensation “at risk” and tied to corporate performance than our general employee population because they are typically in a position to have a more direct impact on the achievement of our performance goals. +PROPETRO  2024 Proxy Statement   |  33 +TABLE OF CONTENTS +Executive Compensation +How We Make Compensation Decisions +THE ROLE OF THE COMPENSATION COMMITTEE +Our Compensation Committee is comprised of independent, non-employee members of the Board. The Compensation Committee is responsible for establishing the elements, terms, and target value of compensation paid or delivered to our Named Executive Officers but often consults the full Board with respect to material compensation actions. Our Compensation Committee is also involved in all executive succession planning. Details of the Compensation Committee’s authority and responsibilities are specified in its charter, which may be accessed at https://ir.propetroservices.com/compensation-committee-charter . In determining the compensation of our Named Executive Officers, the Compensation Committee considers: +• +the information and advice provided by its compensation consultant, +• +our corporate goals, +• +historic and projected performance, +• +the current economic and commodities environment, +• +individual performance, experience, and responsibilities of each of our Named Executive Officers, +• +the results of the “Say-on-Pay” vote and feedback received from stockholders through our outreach and engagement efforts, and +• +other relevant factors. +THE ROLE OF EXECUTIVE OFFICERS IN COMPENSATION DECISIONS +With respect to the compensation of the Named Executive Officers other than our Chief Executive Officer, the Compensation Committee considers the recommendations of our Chief Executive Officer. Additionally and taking into consideration our Named Executive Officers’ integral role in establishing and executing the Company’s overall operational and financial objectives, the Compensation Committee requests that our Chief Executive Officer provide the initial recommendations on the appropriate goals for the performance metrics used under our Annual Bonus Plan and may choose to accept or modify these recommendations in its sole discretion. In addition, the Compensation Committee may invite any Named Executive Officer to attend Compensation Committee meetings to report on the Company’s progress with respect to the interim or final status of performance metrics. All Named Executive Officers are excluded from any decisions or discussions regarding their individual compensation. +THE ROLE OF THE INDEPENDENT COMPENSATION CONSULTANT +Pearl Meyer served as the Compensation Committee’s independent compensation consultant in 2023. The compensation consultant provides advice to and works with the Compensation Committee in designing and implementing the structure and mechanics of the Company’s executive compensation program, as well as other matters related to officer, senior management, and director compensation and corporate governance. For example, our compensation consultant regularly updates the Compensation Committee on regulatory changes impacting executive compensation, proxy advisor policies, and compensation-related risks. In addition, they provide the Compensation Committee with relevant data, including market and peer-company compensation and performance surveys and information and advice regarding trends and developments in executive and director compensation practices in our industry. This information assists the Compensation Committee in making executive and director compensation decisions based on market pay levels and best practices. +Our compensation consultant reports directly and exclusively to the Compensation Committee and does not provide any other services to management, the Company, or its affiliates. While the Compensation Committee generally reviews and considers information and recommendations provided by the compensation consultant, they do not make compensation-related decisions for the Compensation Committee or otherwise with respect to the Company. The Compensation Committee has the discretion to allow our compensation consultant to work directly with management in preparing or reviewing materials for the Compensation Committee’s consideration. During 2023, and after taking into consideration the factors listed in Section 303A.05(c)(iv) of the “NYSE” Listed Company Manual, the Compensation Committee concluded that neither it nor the Company has any conflicts of interest with Pearl Meyer and that Pearl Meyer was independent from management. Other than Pearl Meyer, no other compensation consultants provided services to the Compensation Committee during 2023. +34  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +Use of Peer Compensation Data +The Company competes with business entities across multiple industries for top executive-level talent. To this end, the Compensation Committee evaluates, on an annual basis, industry-specific and general market compensation practices and trends to ensure that our program and Named Executive Officer pay opportunities remain appropriately competitive. As part of its evaluation, the Compensation Committee works with its independent consultant to validate that the companies included in its peer group are as comparable as possible to the Company in terms of operations, revenue, market capitalization, and geographic location. +The 2023 peer group was determined by the Compensation Committee based on an in-depth review from its independent compensation consultant. This review included an assessment of potential comparators to evaluate the degree to which the current peers have kept pace with the Company’s growth and evolution, as well as an examination of the broader marketplace. Following such review and with input and support from the Company’s management, Pearl Meyer recommended, and the Compensation Committee agreed, that no modifications were necessary and that the 2023 peer group should remain the same as the 2022 peer group. In setting 2023 target compensation levels for the Named Executive Officers, as well as evaluating TSR performance for the PSUs granted in 2023, the Company used the 2023 peer group detailed below (such companies, the “2023 Peer Group”): +• +Archrock, Inc. +• +ChampionX Corporation +• +Helmerich & Payne, Inc. +• +Liberty Oilfield Services Inc. +• +Nabors Industries Ltd. +• +NexTier Oilfield Solutions Inc. +• +Nine Energy Services Inc. +• +Oil States International, Inc. +• +Patterson-UTI Energy, Inc. +• +Precision Drilling Corporation +• +RPC, Inc. +• +Select Energy Services, Inc. +• +U.S. Silica Holdings. Inc +In 2023, the comparative compensation data reviewed by the Compensation Committee was created by Pearl Meyer based on data from a blend of the 2023 Peer Group and survey data collected by Pearl Meyer from companies in the energy industry with corporate revenues of approximately $1 billion (the “Peer Data”). Data from both sources was used to provide the best mix of authorities for competitive positions and to help smooth volatility of changes in the peer group. The Compensation Committee generally targets total compensation for each of our Named Executive Officers and directors, as well as each element of compensation, at or about the 50th percentile of the Peer Data. However, the Compensation Committee also considers many other factors when establishing compensation levels, including but not limited to, internal pay equity at the Company, each executive’s experience and responsibility, succession planning, and recruiting and retention concerns. +As a result, the compensation of our Named Executive Officers and directors may be higher or lower than the 50th percentile of the 2023 Peer Group or the Peer Data. +III. ELEMENTS OF COMPENSATION AND 2023 DECISIONS IN DETAIL +As shown below, a significant portion of the target compensation for our Named Executive Officers in 2023 was performance-based and an even larger portion is variable or “at risk,” meaning that it can be forfeited, and its value is dependent upon factors such as our stock price or company performance. +PROPETRO  2024 Proxy Statement   |  35 +TABLE OF CONTENTS +Executive Compensation +Element +Purpose +Changes for 2023 +◄ FIXED ► +Short-Term +BASE +SALARY +• +To provide a consistent, minimum level of pay that is sufficient to allow us to attract and retain executives with the appropriate skills and experience for their positions +• +Increases as needed to reflect new position appointments or misalignment with market +◄ AT RISK ► +ANNUAL +CASH +INCENTIVE +BONUS +• +To motivate and reward the achievement of our annual individual and operational performance goals +• +70% was based on the achievement of quantitative performance goals and 30% was based upon a qualitative analysis of individual and operational performance for the fiscal year +• +Further aligned bonus targets, including Sustainability and ESG performance, with the execution of the Company’s strategic transitional investments +Long- +Term +LONG-TERM +INCENTIVE +AWARDS +• +To ensure retention and drive performance, while aligning the interests of our Named Executive Officers with those of our stockholders +• +Generally, 50% RSUs that vest equally on each of the first three anniversaries of grant, and 50% PSUs that vest, if earned, following the completion of a three-year performance period, in each case subject to continued employment +• +No material changes +Base Salary +The Compensation Committee monitors and adjusts salaries for our Named Executive Officers over time as necessary to remain competitive with market rates for similarly situated officers at our peer companies and to reflect changes in each Named Executive Officer’s role, duties and responsibilities. +Base Salary as of +Name +December 2022 +($) +December 2023 +($) +Samuel D. Sledge (1) +700,000 +800,000 +David S. Schorlemer ( 1) +477,000 +515,000 +Adam Muñoz ( 1) +550,000 +572,000 +Shelby Fietz ( 2) +n/a +495,000 +John J. Mitchell ( 3) +n/a +387,000 +(1) +Increases in base salary for Messrs. Sledge, Schorlemer and Muñoz were to ensure their compensation remained competitive with individuals in similar positions at members of the 2023 Peer Group. +(2) +Mr. Fietz was appointed as Chief Commercial Officer on November 26, 2023 and did not serve as a Named Executive Officer in 2022. As a result, his base salary for 2022 is not reflected above. Mr. Fietz’s base salary was increased from $345,000 to $495,000 in connection with his promotion to reflect the added responsibilities of his new role. +(3) +Mr. Mitchell was appointed as General Counsel and Corporate Secretary on January 1, 2023 and did not serve as a Named Executive Officer in 2022. As a result, his base salary for 2022 is not reflected above. His base salary for 2023 reflects his experience, position, and responsibility level in his new role. +Annual Cash Incentive Awards +The Annual Bonus Plan governs cash incentive awards made each year to our Named Executive Officers. Awards under the Annual Bonus Plan are tied to the achievement of performance goals, which may be based on qualitative or quantitative measures, or both, as determined by the Compensation Committee. +TARGET AWARD OPPORTUNITIES +In February 2023, the Compensation Committee established the following target bonuses under the Annual Bonus Plan for each of the Named Executive Officers: +36  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +Name +2023 Target Bonus +Award Opportunity +(% of base salary) +Samuel D. Sledge (1) +105 % +Adam Muñoz +100 % +David S. Schorlemer ( 1) +90 % +Shelby Fietz ( 1) +90 % +John J. Mitchell +75 % +(1) +The target bonuses for Messrs. Sledge, Schorlemer and Fietz were increased from 2022 targets of 100%, 80% and 60% to 2023 targets of 105%, 90% and 90%, respectively, to better align with market and to reflect Mr. Fietz’s promotion. +Target bonus levels for each executive were established by the Compensation Committee after reviewing peer group data and considering each Named Executive Officer’s responsibility and experience. +PERFORMANCE MEASURES AND PAYOUT RESULTS +Each year, the Compensation Committee establishes performance metrics and threshold, target, and maximum goals for each such metric. Potential payouts under the Annual Bonus Plan depend on the actual performance level for each metric established by the Committee, as outlined below. +Performance Level +Payout (as a % of +Target Bonus) +Threshold +50 % +Target +100 % +Maximum +200 % +If performance falls between the specified performance levels, payments are generally determined via straight-line interpolation. If performance falls below the threshold performance level, no payments will be awarded. The Annual Bonus Plan provides the Compensation Committee or the Board with the discretion to increase or decrease actual payout amounts otherwise resulting from the pre-established metrics, as it may deem necessary. +Under the 2023 Annual Bonus Plan, as in prior years, the Compensation Committee selected a mix of quantitative and qualitative performance metrics to incentivize achievement of specific pre-established financial and safety metrics, while enabling the Compensation Committee the ability to encourage performance with respect to areas that are important to the growth and success of the Company but are harder to measure. While the Compensation Committee values qualitative metrics as a tool, it felt that the vast majority of the annual bonus should be calculated based on quantitative metrics, with a significant emphasis on financial metrics. To that end, 70% of each Named Executive Officer’s annual bonus for 2023 was based on the achievement of quantitative metrics (Adjusted EBITDA, FCF and safety), with 60% of that 70% dedicated to financial performance. The remaining 30% of the annual bonus for 2023 was based upon a qualitative analysis of sustainability and ESG initiatives (10%) and individual and operational performance (20%). +The Compensation Committee maintained consistency in the performance metrics because they remain important to the ongoing success of the Company and serve to focus executives on key objectives that position the Company for sustained growth and consistent operational performance. Specifically, the Compensation Committee continues to see Adjusted EBITDA and FCF as effective measures of the Company’s financial performance and capital discipline and measures that support the Company’s ability to generate enhanced shareholder returns, while total recordable incident rate (“TRIR”) is an important measure of safety. +In 2022 the Committee adjusted the weighting of the FCF metric, expecting that FCF performance would be significantly impacted in 2022 as a result of the Company’s strategic capital reinvestment program driving a conversion of the Company’s fleets to electric and Tier IV DGB (dual fuel) equipment. This strategic fleet transition was designed to position the Company to provide a more competitive and sustainable service offering for its customers. The most significant capital investments associated with this program were successfully completed in 2022 and the Company now has an updated fleet of next generation Tier IV DGB equipment and a growing fleet of electric equipment, allowing it to maintain a strong competitive position in the market, pursue its sustainability goals and meet customer demand. With the capital reinvestment program complete, in 2023, the Adjusted EBITDA and FCF metrics were rebalanced to increase the weighting of the FCF metric. +PROPETRO  2024 Proxy Statement   |  37 +TABLE OF CONTENTS +Executive Compensation +The qualitative component of the Annual Bonus Plan allows the Committee to assess the Company’s progress towards the achievement of strategic goals, each Named Executive Officer’s specific contribution to the achievement of those strategic goals, and progress towards selected sustainability and ESG goals, which continued to be refined. +Measure +Weighting +Threshold +Target +Maximum +Actual 2023 +Performance +Payout as a +Percentage of +Target Bonus +QUANTITATIVE MEASURE +Adjusted EBITDA (1)(3) +40 % +$ +333MM +$ +477MM +$ +572MM +$ +404MM +30% +FCF (2)(3) +20 % +$ +126MM +$ +181MM +$ +217MM +$ +94MM +0% +Safety—TRIR (4) +10 % +0.75 +0.65 +0.50 +0.68 +8.5% +Quantitative Total +70 % +38.5% +QUALITATIVE MEASURE +ESG (5) +10 % +15% +Individual and Operational +Performance (6) +20 % +34.1 − 39.5% +Qualitative Total +30 % +49.1 – 54.5% +Overall Total +100 % +87.6 – 93% +(1) +We define EBITDA as earnings before (i) interest expense, (ii) income taxes, and (iii) depreciation and amortization. We define Adjusted EBITDA as EBITDA, plus (i) loss/(gain) on disposal of assets, (ii) loss/(gain) on extinguishment of debt, (iii) stock-based compensation, and (iv) other unusual or non-recurring (income)/expenses, such as impairment charges, severance, costs related to our IPO and costs related asset acquisition or one-time professional fees. For a more detailed definition of the non-GAAP financial measure of Adjusted EBITDA and reconciliation of Adjusted EBITDA to our most directly comparable financial measures calculated in accordance with GAAP, please read “How We Evaluation Our Operations” in our Form 10-K filed for the year ended December 31, 2023. +(2) +We define FCF as Adjusted EBITDA less Total Capital Expenditures, which are defined as costs incurred in connection with the growth and maintenance of our asset base. For a more detailed definition of Total Capital Expenditures please see Note 11—Reportable Segment Information in the Notes to Consolidated Financial Statements to our Form 10-K filed for the year ended December 31, 2023. +(3) +The Compensation Committee may provide for the manner in which actual performance and the performance goal(s) with regard to these metrics will reflect the impact of specified events or occurrences during the year, which may mean including or excluding the impact of one or more events or occurrences, as specified by the Compensation Committee, for the year. +(4) +TRIR stands for Total Recordable Incident Rate and is a measurement of workplace safety calculated as follows: (total number of recordable incidents amongst covered personnel in the applicable period (here, 2023) multiplied by 200,000) divided by the total man hours worked by covered personnel in the applicable period. TRIR is a commonly accepted and utilized metric for both workplace safety regulation and for making safety performance comparisons amongst companies. The Company uses an annual TRIR metric in our compensation program to reflect aggregate safety performance across the year being reviewed. +(5) +We define ESG as Environmental, Social, and Governance. For 2023, the Compensation Committee established the following ESG goals: (i) publish the Company’s inaugural Sustainability Report in the third quarter of 2023; (ii) achieve reduced greenhouse gas (“GHG”) emissions through Tier IV DGB fleet equipment diesel displacement performance, measured over the last three quarters of 2023 as follows: threshold: 6.1% CO 2 e emissions reduction; target: 8.9% CO 2 e emissions reduction; maximum: 11.7% CO 2 e emissions reduction; and (iii) complete a company-wide employee engagement survey. +38  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +(6) +The corporate strategic goals for 2023 were focused on execution on goals to advance the Company’s strategic priorities of  (i) optimizing and industrializing operations; (ii) pursuing a more capital light asset profile and next generation fleet; (iii) implement and integrate innovative technologies, (iv) pursuing opportunistic strategic acquisitions; and (v) maintaining a strong balance sheet. +After considering the Company’s performance with respect to all three ESG goals, in the aggregate, the Compensation Committee determined that the Company had performed above expectations with respect to the ESG metric, awarding a 15% payout percentage for this metric. In the Compensation Committee’s judgment, the Company exceeded its goals for the breadth of the initial report and the robust data and qualitative disclosures included in the report. The Committee noted that the report was issued before the Company’s third quarter earnings release and was well received during the Company’s fall investor engagement meetings. +The Compensation Committee established a GHG reduction goal focused on the Company’s operational performance in diesel displacement utilizing its strategically important Tier IV DGB (dual fuel) fleet equipment. This equipment is designed to displace diesel with lower-emission, more cost effective natural gas, and, when operated effectively, allows the Company to provide a more competitive service offering while lowering the GHG and particulate emissions associated with its operations. In reviewing the Company’s accomplishments in connection with this goal, the Committee credited the Company’s success, noting that the Company displaced almost 19.5 million gallons of diesel over the measurement period, resulting in an 8.1% reduction in CO 2 e emissions for operations with this equipment. In assessing performance on this metric, the Committee recognized that the Company exhibited strong overall performance with a significant improvement from 2022 and consistent advancement over the measurement period with the best performance in the fourth quarter and a high-water mark in December to close the year. The Committee also considered the impact of several unanticipated challenges that it determined were outside the Company’s control related to customer fuel-type choices and equipment performance limitations in high ambient summer temperatures, as well as positive feedback from Company’s customers regarding its performance. +Lastly, the Compensation Committee recognized successful execution of an initial Company-wide employee engagement survey, which resulted in key actions to improve job training and overall work environment. +In connection with these achievements, the Compensation Committee certified one hundred fifty percent (150%) achievement of the Company’s 2023 ESG goals. +The Committee determined that 2023 was a year of notable achievements towards the Company’s strategic operational performance objectives during what remains a transitional period for the Company. In particular, the Company saw significant improvement in its financial results and continued progress in the execution of its strategic priorities. During 2023, the Company achieved revenue of  $1.6 billion and net income of  $86 million, each representing significant improvements over 2022 results. The Company also deployed its first two FORCE SM electric fleets, demonstrated improvement in the performance of its next generation Tier IV DGB hydraulic fracturing equipment, instituted a share repurchase plan that resulted in 5.8 million shares being repurchased and retired, representing approximately 5% of the shares outstanding when the program commenced, realized results from its internal optimization program, which supported the improved financial performance, completed the integration of Silvertip Completion Services (“Silvertip”), and closed an acquisition of Par Five Energy Services (“Par Five”), a cementing services company. These results were achieved despite a challenging macro market for the Company’s services with customers remaining disciplined and demand trending downwards in the second half of the year. The Compensation Committee determined that performance exceeded the target level for each Named Executive Officer. Mr. Sledge was credited with leadership in driving the improvement in the Company’s performance in 2023 when compared to 2022, the successful Silvertip integration and the Company’s progress in its fleet transition strategy; Messrs. Muñoz and Schorlemer were recognized for the continued success of the Company’s internal optimization program, which supported the Company’s significant increase in FCF. Messrs. Fietz, Mitchell and Muñoz were credited for the successful commercial negotiations and operational deployment related to the Company’s first two FORCE SM electric fleets. Mr. Mitchell and Mr. Schorlemer were recognized for their leadership in executing the Par Five acquisition. The Committee also noted the leadership provided by Mr. Schorlemer in establishing the Company’s share repurchase plan and Mr. Mitchell in the development of the Company’s sustainability report and its corporate office relocation. +As a result of its assessment of performance, the Compensation Committee certified a range of attainment of one hundred seventy and one-half percent (170.5%) to one hundred ninety-five percent (195%) achievement for the individual and operational performance metric. +PROPETRO  2024 Proxy Statement   |  39 +TABLE OF CONTENTS +Executive Compensation +As a result, the Compensation Committee approved the following payments under the Annual Bonus Plan: +Name +2023 Target Bonus +Award Opportunity as a +Percentage of Base Salary +Value of 2023 +Target Bonus +Award Opportunity +($) +Actual Payout +as a +Percentage of +Target Bonus +Value of Actual +2023 Annual +Bonus +($) (1) +Samuel D. Sledge +105 % +840,000 +87.6 % +735,800 +David S. Schorlemer +90 % +463,500 +87.6 % +406,200 +Adam Muñoz +100 % +572,000 +87.6 % +501,100 +Shelby Fietz (2) +90 % +445,500 +93 % +414,500 +John J. Mitchell +75 % +290,250 +93 % +270,000 +(1) +Bonus amounts were rounded up or down to the nearest hundred dollars. +(2) +The target bonus for Mr. Fietz for 2023 was adjusted in connection with his promotion, and his Base Salary and target bonus as of December 31, 2023 were utilized for determining his award under the 2023 Annual Bonus Plan. +Long Term Incentive Awards +AWARDS GRANTED IN 2023 +Our mix of time- and performance-based awards is intended to achieve the twin goals of ensuring retention and driving performance, while aligning the interests of our Named Executive Officers with those of our stockholders by providing an opportunity for increased share holdings. Both RSUs and PSUs may be settled in shares of our common stock or in the cash equivalent of the same. +In 2023, 50% of the value of each Named Executive Officer’s long term incentive awards were granted pursuant to the ProPetro Holding Corp. 2020 Long Term Incentive Plan (the “2020 LTIP”) in the form of RSUs that vest in three substantially equal annual installments commencing on the first anniversary of the grant date. The other 50% was granted in the form of PSUs that vest, if earned, following the completion of a three-year performance period, in each case subject to the Named Executive Officer’s continued employment through the end of such period. +The PSUs granted in 2023 vest based on the Company’s TSR as compared to the TSR of the 2023 Peer Group. After careful review, the Compensation Committee chose to use the same 2023 Peer Group to set 2023 target compensation levels for our Named Executive Officers and evaluate TSR performance for the PSUs granted in 2023. Recipients of PSUs may earn between 0% and 200% of the target number of shares granted, as indicated in the following table. If performance falls between the specified performance levels, payouts will be determined via straight-line interpolation. If performance falls below the threshold performance level, no payouts will be awarded. If the Company’s TSR is below zero on an absolute basis for the performance period, the number of PSUs earned shall be reduced in accordance with the table below. For PSU awards granted in 2021, if the Company’s TSR was below zero, the awards would not vest in excess of the target number of PSUs granted. As illustrated in the table below, beginning in 2022, the Compensation Committee modified the approach for the PSU awards to provide the potential for an over target award if TSR is negative. The Committee’s goal was to ensure the Named Executive Officers will continue to be strongly motivated to outperform the Company’s peers, even in a negative TSR environment, while retaining a meaningful reduction in the number of PSUs settled if absolute TSR was negative for the performance period so that the Named Executive Officers’ continue to be motivated to achieve a positive absolute TSR. +Payout (as a % of Target Number of +PSUs Granted) +Payout (as a % of Target Number of +PSUs Granted) if TSR is Below Zero +Company’s +Percentile Rank +in Peer Group +≥ 90th Percentile +200 % +175 % +75th Percentile +175 % +150 % +50th Percentile +100 % +90 % +25th Percentile +50 % +40 % +< 25th Percentile +0 % +0 % +The performance period for the 2023 PSU awards commenced on January 1, 2023 and ends on December 31, 2025. +40  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +If a peer company is acquired by another peer company during the performance period, the acquirer will remain in the peer group but the acquired company will be excluded from the peer group entirely. If a peer company files for bankruptcy during the performance period, it will remain in the peer group but will be ranked last. Should a peer company cease to exist as a separate publicly traded company for any other reason during the performance period, it will be excluded from the peer group entirely. +The annual value of each Named Executive Officer’s long-term incentive award is generally determined in conjunction with the Compensation Committee’s annual compensation analysis or, if later, in connection with the Named Executive Officer’s promotion or hire date following the Compensation Committee’s review of peer compensation data and consideration of each Named Executive Officer’s position and associated responsibilities. In 2023, the Compensation Committee granted the RSUs and PSUs included in the table below to our Named Executive Officers. Except as specified below, all awards were granted in February of 2023. +Name +Number of RSUs +Granted in 2023 +Value of RSUs +Granted in 2023 (1) +($) +Target Number +of PSUs Granted +in 2023 +Value of PSUs +Granted in 2023 (1) +($) +Samuel D. Sledge +174,358 +1,699,991 +174,358 +2,510,755 +David S. Schorlemer +61,538 +599,996 +61,538 +886,147 +Adam Muñoz +87,179 +849,995 +87,179 +1,255,378 +Shelby Fietz (2) +354,536 +3,297,018 +10,615 +152,856 +John J. Mitchell +34,564 +336,999 +34,564 +497,722 +(1) +Amounts in these columns reflect the aggregate grant date fair value of the RSU and PSU awards granted in 2023 under the 2020 LTIP, calculated in accordance with FASB ASC Topic 718. Because the grant date fair value is calculated differently for time-based and performance-based awards under FASB ASC Topic 718, the value of the awards reported is different even though the number of RSUs and PSUs granted to each Named Executive Officer is the same. The number of awards granted by the Compensation Committee and the Board in 2023 were calculated based on the closing price on the date of grant, which is the standard practice, rather than the accounting grant date fair value. +(2) +Mr. Fietz was granted 10,615 RSUs and 10,615 PSUs during the annual grant cycle in February of 2023. He was also granted 30,769 RSUs as a special retention award in February of 2023. The retention RSUs Mr. Fietz received vest 33.33% on May 31, 2024 and 66.67% on May 31, 2025. This targeted award was granted before Mr. Fietz was promoted and was intended to recognize Mr. Fietz’s vital role in the Company’s leadership, strong contributions to the Company’s business development and supply chain functions, and to provide Mr. Fietz with a strong incentive to remain with the Company for several years. Mr. Fietz also received a grant of 313,152 RSUs in connection with his promotion to Chief Commercial Officer in November of 2023, which vest ratably over three years, consistent with the Company’s normal RSU vesting schedule. The number of RSUs awarded to Mr. Fietz in connection with his promotion and the determination that this award should consist of RSUs instead of a combination of RSUs and PSUs were made after reviewing (i) a market analysis by Pearl Meyer for awards made in connection with comparable commercial roles, (ii) the value of his unique skill set and relationships with the Company’s customers, and (iii) the competitiveness in our local market for similar executives. The special retention award and the award in connection with Mr. Fietz’s promotion were non-routine. Mr. Fietz’s annual equity grant for 2024 was substantially smaller than his aggregate grants in 2023 and consisted 50% of RSUs and 50% of PSUs. The Compensation Committee does not anticipate granting any special retention or other non-routine equity awards to named executive officers in 2024. +AWARDS SETTLED FOLLOWING THE END OF 2023 +Much like the PSUs granted in 2023, the PSUs granted in 2021 vested based on performance over a three-year performance period. In accordance with the compensation philosophy and designs adopted by the Compensation Committee, the PSUs granted in 2021 resulted in an award of zero shares. Our philosophy is that these long-term incentive awards should drive strong alignment between our stockholders and executives and pay for positive performance. For this assessment period, performance was below expectations and the PSUs yielded a result reflective of this performance. +PROPETRO  2024 Proxy Statement   |  41 +TABLE OF CONTENTS +Executive Compensation +Employee Benefits, Perquisites, and Special Payments +HEALTH/WELFARE PLANS +All of our full-time employees, including our Named Executive Officers, are eligible to participate in our health and welfare plans on the same basis, including: medical, dental and vision benefits, medical and dependent care flexible spending accounts, short-term and long-term disability insurance, and group life insurance. +RETIREMENT PLANS +We currently maintain a 401(k) retirement savings plan for our employees who satisfy certain eligibility requirements. Our Named Executive Officers are eligible to participate in the 401(k) plan on the same terms as other full-time employees. Currently, we match contributions made by participants in the 401(k) plan up to a specified percentage of the employee’s contributions, and we may make certain discretionary profit-sharing contributions. Both the matching contributions and the profit-sharing contributions vest immediately. We believe that offering a vehicle for tax-deferred retirement savings through our 401(k) plan and making matching contributions and profit-sharing contributions that vest over time add to the overall desirability of our compensation packages and further incentivize our employees in accordance with our compensation policies. We do not maintain any defined benefit pension plans or deferred compensation plans. +PERQUISITES +Messrs. Sledge, Muñoz, Schorlemer, Fietz and Mitchell each participated in a vehicle allowance program during 2023. In 2023, the Company also provided other limited perquisites to its Named Executive Officers, including club memberships and dues, and also permitted Mr. Sledge’s and Mr. Fietz’s spouses, respectively, to accompany them on certain business trips via Company chartered aircraft that resulted in no incremental cost to the Company. The Compensation Committee reviews the perquisites we provide to our Named Executive Officers periodically, including in 2023, to ensure that they are necessary to retain our executives, appropriate, and consistent with benefits offered by companies with which we compete for executive talent. +IV. OTHER COMPENSATION PRACTICES, POLICIES AND GUIDELINES +Executive Severance Plan +The Board adopted the Second Amended and Restated ProPetro Services, Inc. Executive Severance Plan and subsequently (the “Executive Severance Plan”) because they and the Compensation Committee felt it was desirable to pivot away from individually negotiated employment agreements and towards a streamlined plan providing for more uniform treatment upon a termination of employment. Each of our Named Executive Officers is a participant in the Executive Severance Plan. We believe the Executive Severance Plan serves to maintain the focus of our senior executives and ensure that their attention, efforts and commitment are aligned with maximizing the success of the Company and stockholder value. Further, providing market severance benefits is an important element of compensation that allows us to attract and retain talented executives, ensuring continuity of management, stability of the Company, and efficient execution of our business goals. +The amounts of the severance and benefits established for each “Tier” under the Executive Severance Plan were selected after the Compensation Committee received advice from its independent compensation consultant at the time of adoption regarding the types and amounts of severance that are market among the Company’s peers. The Compensation Committee also considered its members’ ample experience in the industry when making this determination. The Tier level assigned to each participant in the plan was determined based on each participant’s position and responsibility. No changes were made to the Tier levels for the Named Executive Officers in 2022, except that Messrs. Fietz and Mitchell both became Tier 2 participants in connection with their promotions in 2023. Mr. Fietz had previously been designated as a Tier 3 participant in the Severance plan. The Tier levels for each of the Named Executive Officers and the terms of the Executive Severance Plan are described in detail below in the section entitled “Potential Payments upon Termination and Change of Control―Executive Severance Plan.” +42  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +Employee Compensation Claw-Back Policy +Effective October 11, 2023, we adopted the ProPetro Holding Corp. Incentive-Based Compensation Recovery (Clawback) Policy (the “Clawback Policy”). The Clawback Policy is intended to comply with the requirements of Section 10D of the Exchange Act and Section 303A.14 of the NYSE Listing Company Manual. Under the terms of the Clawback Policy, in the event of a restatement of our financial statements due to material non-compliance with any financial reporting requirement under applicable securities laws, the Compensation Committee shall take reasonably prompt action to cause the Company to recover from any covered executive the amount of any incentive-based compensation granted, earned or vested within the three preceding completed fiscal years, to the extent the value of such compensation was in excess of the amount of incentive compensation that would have been granted, earned, or vested had the financial statements been in compliance with the financial reporting requirements. Each executive officer, including our Named Executive Officers and former executive officers, are considered “covered executives” for purposes of the Clawback Policy. Incentive-based compensation is not subject to the Clawback Policy if it is received (i) prior to the date a covered executive becomes an executive officer or (ii) prior to October 2, 2023. +Executive Stock Ownership Policy +Under the terms of our Executive Stock Ownership Policy, our executive officers must own shares of our common stock or certain equity awards with a value equal to not less than the following multiples of base salary: +Office +Multiple of Base Pay +Chief Executive Officer +■ ■ ■ ■ ■ +5x +Chief Financial Officer and Chief Operating Officer +■ ■ ■ +3x +All other executive officers +■ +1x +Any individuals who became executive officers as a result of an internal promotion or a new hire, will have five years from the date of being named an executive officer to meet the stock ownership guidelines. As a result, all of our Named Executive Officers still have additional time in which to comply with these guidelines. In calculating the value of shares of our common stock or certain equity awards held for purposes of determining compliance with the policy, such value is equal to the closing price per share on the measurement date, based on shares owned outright and unvested RSUs, with the value of such unvested RSUs discounted by 40%. Unexercised option awards and unvested PSUs are excluded from the calculation. +Prohibition on Hedging and Pledging +We believe that derivative transactions, including puts, calls, and options, and hedging transactions for our securities carry a high risk of inadvertent securities laws violations and may lead to an officer, director, or employee no longer having the same objectives as the Company’s other stockholders. For these reasons, we prohibit our directors, officers, and employees from engaging in any type of derivative or hedging transactions in respect of our securities pursuant to our Insider Trading Compliance Policy. Company stock pledged as collateral, including shares held in a margin account, may be sold without the consent of the holder by the lender in a foreclosure or default event, which could lead to inadvertent securities laws violations. For this reason, pursuant to our Insider Trading Compliance Policy, we prohibit pledging Company securities as collateral to secure loans and purchasing Company securities on margin. +No Tax Gross-Ups +We do not provide gross-up payments to cover our Named Executive Officers’ personal income taxes that may pertain to any of the compensation or perquisites paid or provided by our Company. +PROPETRO  2024 Proxy Statement   |  43 +TABLE OF CONTENTS +Executive Compensation +Regulatory Considerations +The tax and accounting implications of utilizing various forms of compensation are considered when adopting new or modifying existing compensation programs. Section 162(m) (“Section 162(m)”) of the Internal Revenue Code of 1986, as amended (the “Code”) generally precludes a publicly held company from taking a federal income tax deduction for compensation paid in excess of  $1 million per year to certain covered employees, which include our Named Executive Officers. To maintain flexibility in compensating the Company’s executive officers in a manner designed to promote achievement of corporate goals, retention and recruitment, the Compensation Committee has not adopted a policy requiring all compensation to be tax deductible and expects that the deductibility of certain compensation paid will be limited by Section 162(m). +Compensation Risk Assessment +The Compensation Committee reviews our compensation policies and practices on an annual basis to identify any risks posed by these programs and to assess the appropriateness of any risks identified. We believe that any risks associated with our compensation policies and practices are mitigated in large part by the following factors and, therefore, that no such risks are likely to have a material adverse effect on us: +We pay a mix of compensation which includes short-term cash and long-term equity-based compensation. +We base the vesting and payment of our incentive compensation awards on several different performance metrics, which discourages our employees from placing undue emphasis on any one metric or aspect of our business at the expense of others. +We believe that our performance metrics are reasonably challenging yet should not require inappropriate risk-taking to achieve. +The performance metrics for awards under our Annual Bonus Plan include quantitative financial and operational metrics as well as qualitative metrics related to our operations, strategy, and other aspects of our business, as well as the individual performance of our executives, and our Compensation Committee retains discretion to modify payout amounts under the Annual Bonus Plan, as appropriate. +The performance periods under our PSUs overlap, and our time-vested RSUs generally vest over a three-year period. This mitigates the motivation to maximize performance in any one period at the expense of others. +Our Named Executive Officers are required to own our common stock at levels provided in our Executive Stock Ownership Guidelines. +We have instituted a claw-back policy, which allows us to claw-back compensation in the event of a financial restatement or certain misconduct. +We believe that we have an effective management process for developing and executing our short- and long-term business plans. +Our compensation policies and programs are overseen by the Compensation Committee. +The Compensation Committee retains an independent compensation consultant. +44  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +Report of the Compensation Committee +The Compensation Committee has reviewed and discussed the above CD&A with management, and, based on such review and discussions, the Compensation Committee recommended to the Board that the CD&A be included in this proxy statement. +The Compensation Committee of the Board of Directors +MICHELE +VION +ANTHONY J. +BEST +JACK B. +MOORE +Chair +PROPETRO  2024 Proxy Statement   |  45 +TABLE OF CONTENTS +Executive Compensation +Executive Compensation Tables +SUMMARY COMPENSATION TABLE +The following table summarizes the compensation provided by us to our Named Executive Officers for the fiscal years ended December 31, 2023, 2022, and 2021. +Name and +Principal Position +Year +Salary (1) +($) +Bonus (2) +($) +Stock +Awards (3) +($) +Option +Awards +($) +Non-Equity +Incentive Plan +Compensation (4) +($) +All Other +Compensation (5) +($) +Total +($) +Samuel D. Sledge +Chief Executive Officer +2023 +800,000 +― +4,210,746 +― +735,800 +41,414 +5,787,960 +2022 +700,000 +― +3,258,631 +― +1,036,000 +33,663 +5,028,294 +2021 +455,962 +― +2,216,599 +― +457,500 +34,588 +3,164,649 +Shelby Fietz (6) +Chief Commercial Officer +2023 +365,193 +― +3,449,874 +― +414,500 +56,729 +4,286,296 +Adam Muñoz +President and Chief Operating Officer +2023 +572,000 +― +2,105,373 +― +501,100 +52,359 +3,230,832 +2022 +550,000 +― +2,215,845 +― +864,000 +58,608 +3,688,453 +2021 +475,193 +― +1,796,100 +― +470,300 +46,142 +2,787,735 +David S. Schorlemer +Chief Financial Officer +2023 +515,000 +― +1,486,143 +― +406,200 +72,509 +2,479,852 +2022 +477,000 +― +1,564,132 +― +634,800 +79,928 +2,755,860 +2021 +450,000 +75,000 +1,342,668 +― +356,400 +282,713 +2,506,781 +John J. “Jody” Mitchell (6) +General Counsel +2023 +387,000 +― +834,721 +― +270,000 +51,414 +1,543,135 +(1) +The amounts in this column represent the base salary of each Named Executive Officer earned for the year indicated. The amount included herein for Mr. Fietz reflects the prorated base salary Mr. Fietz received during 2023 based on his promotion to Chief Commercial Officer of the Company effective November 26, 2023. +(2) +The amounts in this column for Mr. Schorlemer for 2021 reflects a retention bonus negotiated at the time of his appointment. The Company does not currently intend to pay any further retention bonuses for the foreseeable future. +(3) +Amounts in this column for 2023 reflect the aggregate grant date fair value of the RSU and PSU awards granted in 2023 under the 2020 LTIP, calculated in accordance with FASB ASC Topic 718. The FASB ASC Topic 718 value for the RSUs was calculated using the closing price per share of our common stock on the date of grant applied to the total number of RSUs granted. The FASB ASC Topic 718 grant date fair value of the PSUs was determined using a Monte Carlo simulation. For information regarding assumptions underlying the valuation of equity awards, see Note 14 of the Consolidated Financial Statements included in our 2023 Annual Report on Form 10-K. The actual amount realized upon settlement of RSU and PSU awards will depend upon the market price of the Company’s stock on the settlement date and the Company’s performance (with respect to the PSUs). +(4) +Amounts in this column for 2023 represent the short-term cash incentive awards for performance during the 2023 fiscal year pursuant to the Annual Bonus Plan, determined based on achievement of the applicable performance metrics. See “Compensation Discussion and Analysis—Elements of Compensation and 2023 Decisions in Detail—Annual Cash Incentive Awards” above for additional informational regarding these awards. +(5) +Amounts in this column are comprised of the payments and benefits enumerated in the table below. +Name +Vehicle +Allowance +Program (a) +($) +Contribution +to 401(k) +Plan (b) +($) +Club Dues/ +Membership +Fees (c) +($) +Total +($) (d) +Samuel D. Sledge +14,400 +22,500 +4,514 +41,414 +Shelby Fietz +14,400 +22,500 +19,829 +56,729 +Adam Muñoz +14,400 +22,500 +15,459 +52,359 +David S. Schorlemer +14,400 +30,000 +28,109 +72,509 +John J. “Jody” Mitchell +14,400 +22,500 +14,514 +51,414 +(a) +The amounts in this column reflect the cost of the Company’s vehicle allowance program. +(b) +The amounts in this column reflect the Company’s contribution to each Named Executive Officer’s account in the Company’s 401(k) plan. +(c) +The amounts in this column reflect club dues or membership fees paid by the Company. +46  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +(d) +In addition to the amounts included herein, Mr. Sledge’s spouse and Mr. Fietz’s spouse, respectively, accompanied Mr. Sledge and Mr. Fietz on certain business trips via Company chartered aircraft, but such travel resulted in no incremental cost to the Company. +(6) +Mr. Mitchell was appointed as the General Counsel of the Company effective January 1, 2023, and Mr. Fietz was appointed as the Chief Commercial Officer of the Company effective November 26, 2023. Because Messrs. Fietz and Mitchell became Named Executive Officers in fiscal year 2023, their compensation is not disclosed for fiscal years 2022 and 2021. +PROPETRO  2024 Proxy Statement   |  47 +TABLE OF CONTENTS +Executive Compensation +GRANTS OF PLAN-BASED AWARDS +Name +Grant Date +Estimated Possible Payouts Under +Non-Equity Incentive Plan +Awards (1) +Estimated Future Payouts Under +Equity Incentive Plan Awards (2) +All Other +Stock +Awards: +Number of +Shares of +Stock (3) +(#) +Grant Date +Fair Value +of Stock +and Option +Awards (4) +($) +Threshold +($) +Target +($) +Maximum +($) +Threshold +(#) +Target +(#) +Maximum +(#) +Samuel D. Sledge +Annual Bonus +― +420,000 +840,000 +1,680,000 +― +― +― +― +― +Annual RSUs (5) +2/1/2023 +― +― +― +― +― +― +174,358 +1,699,991 +PSUs +2/1/2023 +― +― +― +87,179 +174,358 +348,716 +― +2,510,755 +Shelby Fietz +Annual Bonus +― +222,750 +445,000 +891,000 +― +― +― +― +― +Annual RSUs (5) +2/1/2023 +― +― +― +― +― +― +10,615 +103,496 +Retention RSUs (6) +2/1/2023 +― +― +― +― +― +― +30,769 +299,998 +Promotion RSUs (7) +11/26/2023 +― +― +― +― +― +― +313,152 +2,893,524 +PSUs +2/1/2023 +― +― +― +5,307 +10,615 +21,230 +― +152,856 +Adam Muñoz +Annual Bonus +― +286,000 +572,000 +1,144,000 +― +― +― +― +― +Annual RSUs (5) +2/1/2023 +― +― +― +― +― +― +87,179 +849,995 +PSUs +2/1/2023 +― +― +― +43,589 +87,179 +174,358 +― +1,255,378 +David S. Schorlemer +Annual Bonus +― +231,750 +463,500 +927,000 +― +― +― +― +― +Annual RSUs (5) +2/1/023 +― +― +― +― +― +― +61,538 +599,996 +PSUs +2/1/2023 +― +― +― +30,769 +61,538 +123,076 +― +886,147 +John J. “Jody” Mitchell +Annual Bonus +― +145,125 +290,250 +580,500 +― +― +― +― +― +Annual RSUs (5) +2/1/2023 +― +― +― +― +― +― +34,564 +336,999 +PSUs +2/1/2023 +― +― +― +17,282 +34,564 +69,128 +― +497,722 +(1) +Amounts in these columns represent the estimated payouts for annual cash incentive awards under the Annual Bonus Plan for 2023 assuming threshold, target, and maximum performance achievement. The actual amounts paid to our Named Executive Officers for 2023 can be found in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table above. See Compensation Discussion and Analysis—Elements of Compensation and 2023 Decisions in Detail—“Annual Cash Incentive Awards” above for additional information regarding these awards. +(2) +These amounts represent the threshold, target, and maximum number of PSUs granted to the Named Executive Officers during 2023. The number of PSUs which ultimately vest is based on the performance of the Company’s TSR relative to the TSR of the companies in our Peer Group during the three-year performance period ending on December 31, 2025, subject to the Named Executive Officer’s continued employment through such date. +(3) +Amounts in this column reflect RSUs granted to the Named Executive Officers during 2023. +(4) +These amounts represent the aggregate grant date fair value of RSUs and PSUs granted in 2023 to the Named Executive Officers, computed in accordance with FASB ASC Topic 718, disregarding estimated forfeitures. The grant date fair value of the PSUs is based on probable outcome with regard to the applicable performance metrics. For information regarding assumptions underlying the valuation of equity awards, see Note 14 of the Consolidated Financial Statements in our 2023 Annual Report on Form 10-K. +(5) +Amounts in these rows reflect annual RSUs granted to the Named Executive Officers during 2023. One-third of each such grant vests on each of the first three anniversaries of the applicable date of grant, subject to the Named Executive Officer’s continued employment through each such date. +(6) +This award of RSUs was granted to Mr. Fietz as an additional retention mechanism in 2023. One-third of such grant vests on May 31, 2024, and two-thirds of such grant vests on May 31, 2025, subject to Mr. Fietz’s continued employment through each such date. +(7) +This award of RSUs was granted to Mr. Fietz in connection with his promotion to Chief Commercial Officer of the Company on November 26, 2023. One-third of such grant vests on each of the first three anniversaries of the date of grant, subject to Mr. Fietz’s continued employment through each such date. +48  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +NARRATIVE DISCLOSURE TO SUMMARY COMPENSATION TABLE AND GRANTS OF PLAN-BASED AWARDS TABLE +Executive Severance Plan +None of the Named Executive Officers is currently a party to an employment agreement or letter agreement with us. Instead, they participate in the Executive Severance Plan. For additional information regarding the terms and conditions of this plan please see “—Potential Payments Upon Termination or Change in Control—Executive Severance Plan.” +OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END +The following table reflects information regarding outstanding and unvested stock options, RSUs, and PSUs held by our Named Executive Officers as of December 31, 2023. +Option Awards +Stock Awards +Name +Number of +Securities +Underlying +Unexercised +Options +Exercisable +(#) +Number of +Securities +Underlying +Unexercised +Options +Unexercisable +(#) +Option +Exercise +Price +($) +Option +Expiration +Date +Number of +Shares or +Units of +Stock That +Have Not +Vested (1) +(#) +Market +Value of +Shares or +Units of +Stock That +Have Not +Vested (2) +($) +Equity +Incentive Plan +Awards: +Number of +Unearned +Shares That +Have Not +Vested (3) +(#) +Equity +Incentive Plan +Awards: +Market Value +of Unearned +Shares That +Have Not +Vested (2) +($) +Samuel D. Sledge +21,750 +― +14.00 +3/16/2027 +― +― +― +― +― +― +― +― +268,126 +2,246,896 +― +― +― +― +― +― +― +― +224,599 +1,882,140 +Shelby Fietz +6,090 +― +14.00 +3/16/2017 +361,631 +3,030,468 +― +― +― +― +― +― +― +― +14,232 +119,264 +Adam Muñoz +48,938 +― +14.00 +3/16/2027 +― +― +― +― +― +― +― +― +152,050 +1,274,179 +― +― +― +― +― +― +― +― +121,342 +1,016,846 +David S. Schorlemer +― +― +― +― +107,339 +899,501 +― +― +― +― +― +― +― +― +85,653 +717,772 +John J. “Jody” Mitchell +― +― +― +― +43,678 +366,022 +― +― +― +― +― +― +― +― +39,869 +334,102 +(1) +The amounts in this column represent RSU awards held by each Named Executive Officer, which, except as noted below, vest pro-rata over the applicable remaining vesting dates as follows, subject to the Named Executive Officer’s continued employment: +Name +Number of Unvested +RSUs on 12/31/2023 +Remaining Vesting Dates +Samuel D. Sledge +9,553 +February 17, 2024 +17,227 +August 31, 2024 +66,988 +February 16, 2024, and February 16, 2025 +174,358 +February 1, 2024, February 1, 2025, and February 1, 2026 +Shelby Fietz +2,272 +February 17, 2024 +4,823 +February 16, 2024 and February 16, 2025 +10,615 +February 1, 2024, February 1, 2025, and February 1, 2026 +30,769 +One-third on May 31, 2024 and two-thirds on May 31, 2025 +313,152 +November 26, 2024, November 26, 2025, and November 26, 2026 +Adam Muñoz +15,012 +February 17, 2024 +4,307 +August 31, 2024 +45,552 +February 16, 2024 and February 16, 2025 +87,179 +February 1, 2024, February 1, 2025, and February 1, 2026 +PROPETRO  2024 Proxy Statement   |  49 +TABLE OF CONTENTS +Executive Compensation +Name +Number of Unvested +RSUs on 12/31/2023 +Remaining Vesting Dates +David S. Schorlemer +13,647 +February 17, 2024 +32,154 +February 16, 2024 and February 16, 2025 +61,538 +February 1, 2024, February 1, 2025, and February 1, 2026 +John J. “Jody” Mitchell +2,040 +May 18, 2024 +7,074 +February 16, 2024 and February 16, 2025 +34,564 +February 1, 2024, February 1, 2025, and February 1, 2026 +(2) +The amounts in this column were calculated by multiplying $8.38, the closing price of our common stock on December 29, 2023, by the number of awards reported. +(3) +Pursuant to the applicable rules, the amounts in this column and in the table below reflect the threshold number of PSUs held by each Named Executive Officer that were granted in 2022 and the target number of PSUs held by each Named Executive Officer that were granted in 2023 because performance as of December 31, 2023 was below threshold for the 2022 PSUs and above threshold but below target for the 2023 PSUs. Both the PSUs granted to the Named Executive Officers in 2022 and 2023 may vest, if at all, based on the performance of the Company’s stock relative to a peer group during the applicable three-year performance period as shown in the below table. The actual number of PSUs earned based on actual performance over the full performance period may range from 0% to 200% of the target amount. +Name +Number of Unvested +PSUs on 12/31/2023 +Applicable Performance +Period End Date +Samuel D. Sledge +50,241 +December 31, 2024 +174,358 +December 31, 2025 +Shelby Fietz +3,617 +December 31, 2024 +10,615 +December 31, 2025 +Adam Muñoz +34,163 +December 31, 2024 +87,179 +December 31, 2025 +David S. Schorlemer +24,115 +December 31, 2024 +61,538 +December 31, 2025 +John J. “Jody” Mitchell +5,305 +December 31, 2024 +34,564 +December 31, 2025 +2023 OPTION EXERCISES AND STOCK VESTED +Option Awards +Stock Awards +Name +Number of Shares +Acquired on +Exercise +(#) +Value Realized on +Exercise +($) +Number of Shares +Acquired on +Vesting (1) +(#) +Value Realized on +Vesting (2) +($) +Samuel D. Sledge +― +― +73,281 +696,028 +Shelby Fietz +― +― +6,334 +61,334 +Adam Muñoz +― +― +57,733 +542,864 +David S. Schorlemer +― +― +38,794 +380,674 +John J. “Jody” Mitchell +— +— +5,575 +49,831 +(1) +This column reflects the RSUs held by each Named Executive Officer that vested during 2023. Threshold performance was not met with respect to the PSUs granted to the Named Executive Officers in 2021 for which the performance period ended on December 31, 2023, and as such, no such awards were earned or are included in this table. +(2) +This column reflects the aggregate market value realized by each Named Executive Officer upon vesting, calculated by multiplying the number of RSUs and PSUs that vested (including shares withheld for tax withholding purposes) by the closing price of our common stock on the applicable vesting date or, to the extent the vesting date was not a trading date, the closing price on the last trading date. +PENSION BENEFITS +We do not sponsor any qualified or non-qualified defined benefit pension plans. +NONQUALIFIED DEFERRED COMPENSATION +We do not have any non-qualified deferred compensation plans. +50  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL +Executive Severance Plan +In 2020, the Board adopted the Executive Severance Plan, pursuant to which the Named Executive Officers are eligible to receive severance payments and benefits, as described in more detail below. None of the Named Executive Officers currently have an employment agreement with the Company. Pursuant to the terms of the Executive Severance Plan, the level of severance benefit for which a participant is eligible is determined based on their designated “Tier.” As of December 31, 2023, the Tier levels for each of the Named Executive Officers was as follows: +Name +Executive Severance Plan Tier Level +Samuel D. Sledge +Tier 1 +Shelby Fietz +Tier 2 +Adam Muñoz +Tier 2 +David S. Schorlemer +Tier 2 +John J. “Jody” Mitchell +Tier 2 +Upon the Named Executive Officer’s termination without “Cause” or a resignation for “Good Reason” (each as defined in the Executive Severance Plan and described below), current participants in the Executive Severance Plan will be eligible to receive the following benefits: +• +A lump sum cash payment equal to 2.0 (for Tier 1 Executives), 1.5 (for Tier 2 Executives) or 1.0 (for Tier 3 Executives) times the sum of the participant’s (i) annualized base salary then in effect and (ii) target annual bonus for the year in which the termination occurred, +• +Any earned but unpaid bonus for the year preceding the year of termination based on the Company’s actual performance, paid at the time such bonuses are paid to all other executives, and +• +Reimbursement for a portion of the cost of continuation coverage for the participant and his or her spouse and eligible dependents under the Company’s group health plans pursuant to COBRA for 12 months (or 18 months for Tier 1 Executives), unless such coverage is earlier terminated in accordance with the terms of the Executive Severance Plan. +Upon a termination without Cause or a resignation for Good Reason within 12 months following a “Change in Control” (as defined in the Executive Severance Plan), participants in the Executive Severance Plan will be eligible to receive the following benefits: +• +A lump sum cash payment equal to 3.0 (for Tier 1 Executives), 2.0 (for Tier 2 Executives) or 1.5 (for Tier 3 Executives) times the sum of the participant’s (i) annualized base salary then in effect and (ii) target annual bonus as in effect immediately prior to the Change in Control, +• +Any earned but unpaid bonus for the year preceding the year of termination based on the Company’s actual performance, paid at the time such bonuses are paid to all other executives, +• +A lump sum cash payment equal to a prorated target bonus for the year of termination based on days of service during the applicable calendar year, and +• +Full reimbursement of the cost of continuation coverage for the participant and his or her spouse and eligible dependents under the Company’s group health plans pursuant to the COBRA, for 12 months (or 18 months for Tier 1 Executives), unless such coverage is earlier terminated in accordance with the terms of the Executive Severance Plan. +Additionally, if a participant’s employment with the Company terminates as a result of his or her death or “Disability” (as defined in the Executive Severance Plan), then the participant will be eligible to receive the following benefits: +• +Any earned but unpaid bonus for the year preceding the year of termination based on the Company’s actual performance, paid at the time such bonuses are paid to all other executives, and +• +A lump sum cash payment equal to a prorated target bonus for the year of termination based on days of service during the applicable calendar year. +In order to receive any of the foregoing severance benefits under the Executive Severance Plan, a participant must timely execute (and not revoke) a release of claims in favor of the Company and its affiliates. Further, the Executive Severance Plan requires continued compliance with certain confidentiality, non-competition, non-solicitation and non-disparagement covenants as set forth in the award agreements under the ProPetro Holding Corp. 2017 Incentive +PROPETRO  2024 Proxy Statement   |  51 +TABLE OF CONTENTS +Executive Compensation +Award Plan (the “2017 LTIP”) and the 2020 LTIP. If the severance benefits under the Executive Severance Plan would trigger an excise tax for a participant under Section 4999 or Section 280G of the Code (“Section 280G”) the Executive Severance Plan provides that the participant’s severance benefits will be reduced to a level at which the excise tax is not triggered, unless the participant would receive a greater amount without such reduction after taking into account the excise tax and other applicable taxes. +As used in the Executive Severance Plan, the following terms generally mean: +“ Cause ” generally means the Named Executive Officer’s: +(i) +material breach of the employment agreement or any other agreement with the Company or its affiliates, subject to a 30-day notice and 15-day cure period, +(ii) +material breach of the Company’s or its affiliates’ policies or code of conduct applicable to the Named Executive Officer, +(iii) +violation of any law applicable to the workplace or employment relationship, +(iv) +gross negligence, material misconduct reflecting negatively on the Company, breach of fiduciary duty, fraud, theft, or embezzlement, +(v) +conviction of or plea of nolo contendere to any felony (or state law equivalent) or any crime involving moral turpitude, +(vi) +material failure or refusal (other than due to Disability) to perform obligations or any lawful director from the Board or an officer of the Company, subject to a 30-day notice and 15-day cure period, +(vii) +unlawful use or possession of illegal drugs on the Company’s premises or while performing duties, +(viii) +failure to exercise the degree of care, skill, and diligence as employees of ordinary skill and knowledge commonly possess and exercise, subject to a 30-day notice and 15-day cure period, or +(ix) +failure to act with undivided loyalty to the Company and its affiliates. +“ Change in Control ” has the meaning given to it under the 2020 LTIP, which is the same meaning given to such term under the 2017 LTIP and described below under “—2017 LTIP.” +“ Good Reason ” generally means: +(i) +the material diminution in the Named Executive Officer’s base salary, unless in connection with a general reduction in base salaries that affects all similarly situated employees, +(ii) +material diminution in the Named Executive Officer’s authority, duties, or responsibilities unless in connection with an internal investigation by the Company (provided that his or her removal from the board of directors or as an officer of any of the Company’s affiliates shall not constitute Good Reason), +(iii) +the material breach by the Company of any of its obligations under the agreement, or +(iv) +the Named Executive Officer’s relocation by more than 50 miles from his or her current place of business, in each case, subject to a 30-day notice period, 15-day cure period and the Named Executive Officer’s resignation within 75 days of the end of the cure period. +“ Disability ” generally means the Named Executive Officer’s inability to perform the essential functions of his or her job due to physical or mental impairment for a period that exceeds 120 consecutive days or 180 total days in any 12-month period, as determined by the Board. +2017 LTIP +Only Messrs. Sledge, Fietz and Muñoz hold stock options under the 2017 LTIP. The stock options granted under the 2017 LTIP are fully vested. The vested and outstanding stock options awarded under the 2017 LTIP will remain outstanding and exercisable for 90 days following a Named Executive Officer’s termination of service without “Cause” or due to his resignation for “Good Reason” and will remain outstanding and exercisable for 12 months following a Named Executive Officer’s termination of service due to his death, “Disability” or “Retirement.” +52  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +To receive the above described severance payments and benefits, the Named Executive Officers must execute a release of claims in favor of the Company and comply with the terms of certain restrictive covenants, including a one-year non-competition and two-year non-solicitation obligation as well as a perpetual confidentiality and non-disparagement obligations. +As used in the 2017 LTIP and the award agreements thereunder, “Cause” and “Disability” generally have the meanings set forth below. In addition, “Retirement” and “Change in Control” generally have the meanings set forth below. +“ Cause ” generally means the Named Executive Officer’s: +(i) +willful failure to substantially perform his or her duties, +(ii) +willful failure to carry out, or comply with, in any material respect any lawful directive of our board of directors, +(iii) +commission at any time of any act or omission that results in, or may reasonably be expected to result in, a conviction, a plea of no contest, plea of nolo contendere, or imposition of unadjudicated probation for any felony or crime involving moral turpitude, +(iv) +unlawful use (including being under the influence) or possession of illegal drugs on the Company’s premises or while performing his or her duties and responsibilities, +(v) +commission at any time of any act of fraud, embezzlement, misappropriation, misconduct, conversion of assets of the Company, or breach of fiduciary duty against the Company, or +(vi) +material breach of the employment agreement or any other agreement with the Company, subject to certain procedural requirements. +“ Change of Control ” generally means: +(i) +any transaction or series of transactions whereby any person, other than the Company, any of its subsidiaries or any Company benefit plan, acquires beneficial ownership of 30% or more of the total combined voting power of the Company’s securities, +(ii) +the current members of the Board cease to constitute a majority of the Board for any reason, +(iii) +the consummation by the Company of a merger, consolidation, reorganization or business combination or a sale of all or substantially all of the Company’s assets, unless: +(a) +the Company controls the successor entity, +(b) +no person owns 50% or more of the combined voting power of the successor entity, or +(c) +the current members of the Board represent the majority of the successor entity’s board, or +(iv) +the tenth day following the complete dissolution of the Company. +“ Disability ” generally means the Named Executive Officer’s inability to engage in substantial gainful activity by reason of any medically determinable physical or mental impairment. +“ Retirement ” generally means the termination of the Named Executive Officer’s employment following his attainment of both (i) age 60 and (ii) ten years of service with the Company or one of its affiliates. +2020 LTIP +All equity awards granted to the Named Executive Officers’ during or following 2021 are subject to the following terms. +Pursuant to the 2020 LTIP, in the event of a termination of employment of a Named Executive Officer due to his or her death or “Disability,” (i) all unvested RSUs that would have vested had the Named Executive Officer continued his or her service during the 12 months following the termination will vest on such termination or resignation date, and (ii) with respect to any unvested PSUs, if such termination of employment occurs within one year prior to the last day of the applicable performance period, the Named Executive Officer’s unvested PSUs will remain outstanding and eligible to vest at the end of the applicable performance period. +PROPETRO  2024 Proxy Statement   |  53 +TABLE OF CONTENTS +Executive Compensation +In the event of a termination of a Named Executive Officer by the Company without “Cause” upon or within one year following a “Change in Control,” all unvested RSUs and PSUs will immediately vest based on performance as of the date of the Change in Control. In addition, in the event of a Named Executive Officer’s resignation for “Good Reason” upon or within one year following a Change in Control, all unvested RSUs and PSUs granted in 2023 (but, for the avoidance of doubt, not 2021 or 2022) will immediately vest based on performance as of the date of the Change in Control. In the event of a termination of employment of a Named Executive Officer for any other reason, all unvested RSUs and PSUs will be forfeited immediately upon the termination. +In the event of a Change in Control, the performance period for all unvested PSUs will be deemed to have ended as of the date of the Change in Control and the PSUs for which the performance goal was obtained as of the date of the Change in Control will remain outstanding and eligible to vest at the end of the applicable performance period, subject to the Named Executive Officer’s continued employment through such date. +To receive the above-described severance payments and benefits, the Named Executive Officers must execute a release of claims in favor of the Company and comply with the terms of certain restrictive covenants, including a one-year non-competition and two-year non-solicitation obligation as well as a perpetual confidentiality and non-disparagement obligations. +The 2020 LTIP further specifies that unless otherwise provided for in an award agreement, if any awards under the 2020 LTIP are not assumed or substituted by a successor entity in a Change in Control, then all outstanding awards will become fully vested as of the date of the Change in Control (for PSUs, based on the greater of   (i) target and (ii) actual performance as of the date of the “Change in Control”). +As used in the 2020 LTIP and the award agreements thereunder, “Cause,” “Change in Control,” “Disability” and “Good Reason” generally have the meanings set forth below. +“ Cause ” has the meaning given to it under the Executive Severance Plan, described above under “—Executive Severance Plan.” +“ Change in Control ” has the meaning given to “Change of Control” under the 2017 LTIP, described above under “—2017 LTIP.” +“ Disability ” has the meaning given to it under the Executive Severance Plan, described above under “—Executive Severance Plan.” +“ Good Reason ” has the meaning given to it under the Executive Severance Plan, described above under “—Executive Severance Plan.” +54  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +Quantification of Benefits on Termination +The table below quantifies the payments and benefits that would have been paid to our Named Executive Officers pursuant to the terms of the Executive Severance Plan and the equity award agreements in the event of certain terminations of employment with us, had such terminations occurred on December 31, 2023. +Name +Payments and +Benefits +Termination +without Cause +or Resignation +for Good +Reason (1) +($) +Termination as +a Result of +Death, +Disability (2) +($) +Termination as +a Result of +Retirement (3) +($) +Termination +without Cause +within One +Year Following +a Change in +Control (4) +($) +Resignation +for Good +Reason within +One Year +Following a +Change in +Control (4) +($) +Samuel D. Sledge +Cash Severance (5) +3,280,000 +― +― +4,920,000 +4,920,000 +Pro-Rata Bonus (6) +― +840,000 +― +840,000 +840,000 +COBRA Subsidy (7) +16,992 +― +― +29,927 +29,927 +RSU and PSU +Acceleration (8) +― +992,133 +― +3,318,335 +2,532,559 +Total +3,296,992 +1,832,133 +― +9,108,262 +8,322,486 +Shelby Fietz +Cash Severance (5) +1,410,750 +― +― +1,881,000 +1,881,000 +Pro-Rata Bonus (6) +― +445,500 +― +445,500 +445,500 +COBRA Subsidy (7) +11,328 +― +― +19,951 +19,951 +RSU and PSU +Acceleration (8) +― +1,029,575 +― +3,095,698 +3,036,241 +Total +1,422,078 +1,475,075 +― +5,442,149 +5,382,692 +Adam Muñoz +Cash Severance (5) +1,716,000 +― +― +2,288,000 +2,288,000 +Pro-Rata Bonus (6) +― +572,000 +― +572,000 +572,000 +COBRA Subsidy (7) +11,328 +― +― +19,951 +19,951 +RSU and PSU +Acceleration (8) +― +596,271 +― +1,809,899 +1,266,280 +Total +1,727,328 +1,168,271 +― +4,689,850 +4,146,231 +David S. Schorlemer +Cash Severance (5) +1,467,750 +― +― +1,957,000 +1,957,000 +Pro-Rata Bonus (6) +― +463,500 +― +463,500 +463,500 +COBRA Subsidy (7) +11,328 +― +― +19,951 +19,951 +RSU and PSU +Acceleration (8) +― +420,978 +― +1,277,655 +893,843 +Total +1,479,078 +884,478 +― +3,718,106 +3,334,294 +John J. “Jody” Mitchell +Cash Severance (5) +1,015,875 +― +― +1,354,500 +1,354,500 +Pro-Rata Bonus (6) +― +290,250 +― +290,250 +290,250 +COBRA Subsidy (7) +5,520 +― +― +6,242 +6,242 +RSU and PSU +Acceleration (8) +― +143,281 +― +578,420 +502,044 +Total +1,021,395 +433,531 +― +2,229,412 +2,153,036 +(1) +Amounts in this column reflect payments made upon termination by the Company without “Cause” or by the Named Executive Officer for “Good Reason.” Such quoted terms are as defined in the Executive Severance Plan, as described above. +(2) +Amounts in this column reflect payments made upon termination as a result of the Named Executive Officer’s death or “Disability.” “Disability” is as defined in the Executive Severance Plan for the pro-rata bonus payable upon such termination of employment and is as defined in the applicable award agreements for the equity award acceleration, each as described above. +(3) +Amounts in this column reflect payments made upon termination as a result of the Named Executive Officer’s “Retirement” (as defined in the applicable award agreements and described above). As described above, neither the Executive Severance Plan nor the 2020 LTIP (or any of the award agreements thereunder) provide any severance payments or benefits upon a Named Executive Officer’s “Retirement.” As of December 31, 2023, there were no RSUs or PSUs outstanding under the 2017 LTIP, and the exercise price applicable to the stock options held by Messrs. Sledge, Fietz and Muñoz under the 2017 LTIP exceeded the closing price of our common stock on December 29, 2023. Therefore, no value is included in this column. +PROPETRO  2024 Proxy Statement   |  55 +TABLE OF CONTENTS +Executive Compensation +(4) +Amounts in this column reflect payments made upon termination by the Company without Cause or by the Named Executive Officer for Good Reason, in each case, within 12 months following a “Change in Control” (as defined in the 2020 LTIP and described above). As described above under “—2020 LTIP,” RSUs and PSUs granted in 2021 and 2022 under the 2020 LTIP are accelerated in connection with a Named Executive Officer’s termination without Cause within 12 months following a Change in Control but are not accelerated in connection with a Named Executive Officer’s resignation for Good Reason, whether or not such resignation follows a Change in Control, and RSUs and PSUs granted in 2023 under the 2020 LTIP are accelerated in connection with a Named Executive Officer’s termination without Cause or resignation for Good Reason, in each case, within 12 months following a Change in Control. +(5) +Pursuant to the Executive Severance Plan, upon termination of employment by the Company without Cause or by the Named Executive Officer for Good Reason, each Named Executive Officer will receive either 2.0 (for Mr. Sledge) or 1.5 (for Messrs. Schorlemer, Fietz, Muñoz and Mitchell) times the sum of his annual base salary and the target amount of his annual bonus for the year in which the termination occurs, payable in a lump sum following the termination of employment. If such termination of employment occurs within one year following a Change in Control, each Named Executive Officer will receive either 3.0 (for Mr. Sledge) or 2.0 (for Messrs. Schorlemer, Fietz, Muñoz and Mitchell) times the sum of his annual base salary and the target amount of his bonus for the year in which the Change in Control occurs. +(6) +Pursuant to the terms of the Executive Severance Plan, upon a termination of employment by the Company without Cause or by the Named Executive Officer for Good Reason, in each case, within one year following a Change in Control, or upon a termination of employment due to the Named Executive Officer’s death or Disability, each Named Executive Officer will receive a pro-rata bonus, based upon the number of days each such Named Executive Officer was employed by the Company during the applicable calendar year and achievement of target performance. The target bonuses payable to the Named Executive Officers are included in the table because the Named Executive Officers would have been employed for the full year if their termination occurred on December 31, 2023. +(7) +Pursuant to the terms of the Executive Severance Plan, upon termination of employment by the Company without Cause or by the Named Executive Officer for Good Reason, the Company will reimburse each of the Named Executive Officers for the difference between the cost of the COBRA premiums and the cost for similarly-situated employees to effect such coverage under the Company’s group health plans for up to 18 months for Mr. Sledge and up to 12 months for Messrs. Schorlemer, Muñoz, Fietz and Mitchell following such termination. Upon termination of employment by the Company without Cause or by the Named Executive Officer for Good Reason, in each case, within 12 months following a Change in Control, the Company will reimburse each of the Named Executive Officers for the full amount of the COBRA premiums for up to 18 months for Mr. Sledge and up to 12 months for Messrs. Schorlemer, Muñoz, Fietz and Mitchell. The COBRA reimbursement amount is based on the premiums in effect on December 31, 2023 and each applicable Named Executive Officer’s elections in place on such date, which are assumed for purposes of this table to remain the same throughout the period for which the COBRA reimbursement would be available. +(8) +For the RSUs, these amounts are calculated by multiplying the number of RSUs that would have become vested upon the applicable event by $8.38 the closing price of our common stock on December 29, 2023. PSUs that vest as a result of a Named Executive Officer’s death or Disability will vest based on actual performance as of the end of the applicable performance period, and, as a result, the amounts included reflect estimated payouts of such PSUs. As of December 31, 2023, actual performance for the 2022 PSUs was below threshold such that 0% of such PSUs would become earned upon a Named Executive Officer’s death or Disability, so no value is included in this table for such award. For PSUs that vest upon termination of employment by the Company without Cause or by the Named Executive Officer for Good Reason, in each case, within one year following a Change in Control, actual performance as of the date of the Change in Control is used and, as a result, the amounts included reflect estimated payouts of such PSUs. As of December 31, 2023, the actual performance was at 0% for the PSUs granted in 2022 and approximately 73.33% for the PSUs granted in 2023, such that 0% of the 2022 PSUs would become earned upon such a termination of employment, so no value is included in this table for such award. +Pay versus Performance +As required by Item 402(v) of Regulation S-K, the Company is providing the following information regarding the relationship between executive compensation and the Company’s financial performance for each of the four years in the period ended December 31, 2023. In accordance with the applicable SEC rules, the adjustments described and quantified below were made to the values reported in the Summary Compensation Table for each applicable year to determine the “actual” compensation paid to our Principal Executive Officers (“PEOs”) and the average “actual” compensation paid to our other Named Executive Officers (“NEOs”). +56  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +The following table summarizes compensation values reported in the Summary Compensation Table for our PEO and the average for our other NEOs, as compared to “compensation actually paid” or “CAP” and the Company’s financial performance for the years ended December 31, 2023, 2022, 2021, and 2020: +Year +Summary +Compensation +Table Total for +First PEO (1) +Summary +Compensation +Table Total for +Second +PEO (1) (2) +Compensation +Actually Paid +to First +PEO (1) (2) +Compensation +Actually Paid +to Second +PEO (1) (2) +Average +Summary +Compensation +Table Total for +Non-PEO +NEOs (1) (2) +Average +Compensation +Actually Paid +to Non-PEO +NEOs (1) +Value of +Initial +Fixed $100 +Investment +Based On: +Net +Income +(Loss) +(in thousands) +Adjusted +EBITDA +(in thousands) (3) +TSR +Peer +Group +TSR (3) +(a) +(b) +(b) +(c) +(c) +(d) +(e) +(f) +(g) +(h) +(i) +2023 N/A $ 5,787,960 N/A $ 3,198,910 $ 2,885,029 $ 1,983,266 $ 74.49 $ 129.96 $ 86,000 $ 404,000 +2022 N/A $ 5,028,294 N/A $ 3,096,235 $ 6,276,617 $ 1,773,093 $ 92.18 $ 153.12 $ 2,030 $ 316,590 +2021 $ 6,862,469 $ 3,164,649 $ 5,192,291 $ 2,999,764 $ 2,463,661 $ 2,133,954 $ 72.00 $ 80.32 $ ( 54,185 ) $ 135,007 +2020 $ 5,095,728 N/A $ 7,962,437 N/A $ 2,129,704 $ 370,329 $ 65.69 $ 64.05 $ ( 107,020 ) $ 141,463 +(1) +The first and second PEOs reflected in columns (b) and (c) represent Phillip Gobe and Samuel Sledge , respectively. The non-PEO Named Executive Officers reflected in column (d) and (e) represent the following individuals by year: +2023 – David S. Schorlemer, Adam Muñoz, Shelby Fietz, and John J. “Jody” Mitchell +2022 – Phillip Gobe, David S. Schorlemer, Adam Muñoz, and Newton W. Wilson III +2021 – David S. Schorlemer, Adam Munoz, and Newton W. Wilson III +2020 – Dale Redman, Darin G. Holderness, David S. Schorlemer, Jeffrey Smith, David Sledge, Adam Munoz, and Newton W. Wilson III +(2) +The Company deducted from and added to the Summary Compensation Table total compensation the following amounts to calculate compensation actually paid in accordance with Item 402(v) of Regulation S-K as disclosed in columns (c) and (e) for the PEO (Samuel Sledge) and Non-PEO NEOs in 2023. As the Company’s NEOs do not participate in any defined benefit plans, no adjustments were required to amounts reported in the Summary Compensation Table totals related to the value of benefits under such plans. +2023 +PEO SUMMARY COMPENSATION TABLE TOTALS $ 5,787,960 +Add (Subtract): +Fair value of equity awards granted during the year from the Summary Compensation Table +( 4,210,746 ) +Fair value at year end of equity awards granted during the year +3,216,905 +Fair value of equity awards granted and vested during the year +— +Change in fair value of equity awards granted in prior years that were unvested as of the end of the year +( 622,690 ) +Change in fair value of equity awards granted in prior years that vested during the year +( 63,896 ) +Equity awards granted in prior years that were forfeited during the year +( 908,623 ) +Dividends or other earnings paid on equity awards during the year +Total Equity Award Related Adjustments +( 2,589,050 ) +COMPENSATION ACTUALLY PAID TOTALS $ 3,198,910 +2023 +NON-PEO NEOS SUMMARY COMPENSATION TABLE TOTALS $ 2,885,029 +Add (Subtract): +Fair value of equity awards granted during the year from the Summary Compensation Table +( 1,969,028 ) +Fair value at year end of equity awards granted during the year +1,614,860 +Fair value of equity awards granted and vested during the year +— +Change in fair value of equity awards granted in prior years that were unvested as of the end of the year +( 208,949 ) +Change in fair value of equity awards granted in prior years that vested during the year +( 22,445 ) +Equity awards granted in prior years that were forfeited during the year +( 316,201 ) +Dividends or other earnings paid on equity awards during the year +— +Total Equity Award Related Adjustments +( 901,764 ) +AVERAGE COMPENSATION ACTUALLY PAID TOTALS $ 1,983,266 +(3) +The Peer Group in this column consists of Liberty Energy Inc., RPC, Inc., Calfrac Wells Services Ltd., Patterson-UTI Energy, Inc. and Mammoth Energy Services, Inc. Nextier Oilfield Solutions Inc. was included in last year’s Peer Group, but was omitted from this year because it merged with Patterson-UTI Energy, Inc. in September 2023. +PROPETRO  2024 Proxy Statement   |  57 +TABLE OF CONTENTS +Executive Compensation +(4) +The Company defines EBITDA as earnings before (i) interest expense, (ii) income taxes, and (iii) depreciation and amortization. The Company defines Adjusted EBITDA as EBITDA, plus (a) loss/(gain) on disposal of assets, (b) loss/(gain) on extinguishment of debt, (c) stock-based compensation, and (d) other unusual or non-recurring (income)/expenses, such as impairment charges, severance, costs related to our IPO and costs related asset acquisition or one-time professional fees. For a more detailed definition of the non-GAAP financial measure of Adjusted EBITDA and reconciliation of Adjusted EBITDA to our most directly comparable financial measures calculated in accordance with GAAP, please read “How We Evaluation Our Operations” in our Form 10-K filed for the year ended December 31, 2023. +(5) +The CAP for non-PEO NEOs for fiscal year 2020 is significantly lower than fiscal years 2021, 2022 and 2023 due to Dale Redman, the Company’s former Chief Executive Officer and an NEO for fiscal year 2020, forfeiting all outstanding and unvested equity awards in connection with his resignation on March 13, 2020. Pursuant to Item 402(v) of Regulation S-K, the fair value of such forfeited equity awards as of the end of the prior fiscal year is taken as a deduction in calculating CAP, which fair value was equal to $ 5,278,134 . +58  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +NARRATIVE DISCLOSURE TO PAY VERSUS PERFORMANCE TABLE +CAP and Company TSR +The PEOs’ and other NEOs’ CAP generally align with the Company’s TSR over the three years presented in the table. This is primarily because a significant portion of the CAP to the PEOs and other NEOs is comprised of equity awards. The Company targets approximately 72% for the PEO and 68% for other NEOs of the value of total compensation to be comprised of equity-based awards, including RSUs and PSUs. For more detail regarding the Company’s equity awards, please see “Compensation Discussion and Analysis—What Guides Our Program” in this proxy statement. +Company TSR vs. Peer Group TSR +The Company’s cumulative TSR over the four year period was -25.51%, which underperformed the Peer Group TSR over the four period of 29.96%. Pursuant to Item 402(v) of Regulation S-K, the Company used the same peer group used for purposes of Item 201(e) of Regulation S-K, which is different than the peer group used for measuring performance of PSUs. The Company’s PSUs vest based on the performance of the Company’s TSR relative to the TSR of the companies in our performance peer group during three-year performance periods. For more information of the performance peer group used for PSUs please see “Compensation Discussion and Analysis—What Guides Our Program—Use of Peer Compensation Data” in this proxy statement. +CAP vs. Net Income +The Company’s net income has steadily increased while the PEOs’ and other NEOs’ CAP has varied significantly each year. This is due to the emphasis the Company places on equity-based awards, which are sensitive to changes in the price of the Company’s common stock. In addition, the Company does not use net income to determine compensation levels or equity-based award payouts. +CAP vs. Adjusted EBITDA (the Company-Selected Measure) +The Company’s Adjusted EBITDA has steadily increased while the PEOs’ and other NEOs’ CAP has varied significantly each year. This is due to the emphasis the Company places on equity-based awards, which are sensitive to changes in the price of the Company’s common stock. The Company uses Adjusted EBITDA as a performance metric for annual cash incentive awards granted under the Annual Bonus Plan. For fiscal year 2023, 40% of each NEO’s annual cash incentive was based on the achievement of Adjusted EBITDA. +Tabular Disclosure of Most Important Measures to Determine FY2023 CAP +The measures listed below represent the most important financial performance measures that we used to determine CAP for fiscal year 2023. For more detail regarding these financial performance measures, please see “Compensation Discussion and Analysis—What Guides Our Program” in this proxy statement. +Most Important Financial Performance Measures +Adjusted EBITDA +Relative TSR +Free Cash Flow +PROPETRO  2024 Proxy Statement   |  59 +TABLE OF CONTENTS +Executive Compensation +CEO Pay Ratio +As of December 31, 2023, the Company employed approximately 1,997 people, all in the United States. Using a consistently applied compensation measure, we determined as of December 31, 2023 the total annual cash compensation of each of our employees (excluding our Chief Executive Officer), and then identified the “median employee” within our employee population. +To identify the median compensated employee, we used total annual cash compensation, including base salary, actual bonus paid and overtime and allowances, as applicable. Salaries were annualized for those full- and part-time employees who did not work for the full year. Reasonable estimates of cash compensation were made for those employees who were hired during 2023 using current base salary and target bonus amounts and any overtime or allowances paid during 2023. Once the median employee was identified, we determined his or her annual total compensation in accordance with Item 402(c)(2)(x) of Regulation S-K as required pursuant to SEC rules, which resulted in annual total compensation for the median employee equal to $106,876 for 2023. This calculation is the same calculation used to determine total compensation for purposes of the 2023 Summary Compensation Table with respect to each of the Named Executive Officers. +Our Chief Executive Officer’s 2023 total compensation was $5,787,960. Therefore, the ratio of our Chief Executive Officer’s compensation to the median employee’s compensation was approximately 54 to 1 for 2023. +Employee +2023 Annual Total +Compensation +($) +Estimated Pay +Ratio +Chief Executive Officer +5,787,960 +54:1 +Median employee, other than our CEO +106,876 +SEC rules do not specify a single methodology for identification of the median employee, and other companies may use assumptions and methodologies that are different from those used by us in calculating their pay ratio. Accordingly, the pay ratio disclosed by other companies may not be comparable to the Company’s pay ratio as disclosed above. Neither the Compensation Committee nor management of the Company used the pay ratio measure in making compensation decisions. +Equity Compensation Plan Information +The table below sets forth information regarding awards outstanding under the 2017 LTIP and the Amended 2020 LTIP, as of December 31, 2023: +Plan Category +Number of Securities +to Be Issued Upon +Exercise of +Outstanding Options, +Warrants and Rights (1) +(#) +(a) +Weighted Average +Exercise Price of +Outstanding +Options, Warrants +and Rights +($) +(b) +Number of Securities +Remaining Available for +Future Issuance Under +Equity Compensation Plans +(Excluding Securities +Reflected in Column (a)) (2) +($) +(c) +Equity compensation plans approved +by security holders +3,807,705 +14.00 +5,113,735 +Equity compensation plans not approved by security holders +― +― +― +Total +3,807,705 +14.00 +5,113,735 +(1) +Includes 179,804 option awards and 2,263,876 RSU awards and 1,364,025 PSU awards (assuming achievement of target payout of 100%) granted under the 2020 LTIP. The weighted average exercise price in column (b) does not take the RSU awards or PSU awards into account. +(2) +This column reflects the number of awards that remain available for future issuance pursuant to the 2020 LTIP as of December 31, 2023. No further awards may be granted under the 2017 LTIP. +60  |   ir.propetroservices.com +TABLE OF CONTENTS +Audit Matters +Proposal 3 —Ratification of Appointment of Independent Registered Public Accounting Firm +The Audit Committee has selected RSM US LLP, independent registered public accounting firm, to audit our consolidated financial statements for the fiscal year ending December 31, 2024. We are asking the stockholders to ratify the appointment of RSM US LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2024. RSM US LLP was appointed by the Audit Committee in accordance with its charter. +In the event stockholders fail to ratify the appointment, the Audit Committee may reconsider this appointment. Even if the appointment is ratified, the Audit Committee, in its discretion, may direct the appointment of a different independent accounting firm at any time during the year if the Audit Committee determines that such a change would be in our and our stockholders’ best interests. +It is expected that one or more representatives of RSM US LLP will be available to participate in the 2024 annual meeting and will be given the opportunity to make a statement if they so desire. It also is expected that the representative(s) will be available to respond to appropriate questions from the stockholders. Representatives of Deloitte & Touche LLP, our independent registered public accounting firm for the year ended December 31, 2022, will not be present at the annual meeting and will not have an opportunity to make a statement, if they desire to do so, or to respond to appropriate questions from the stockholders. +Change in Independent Registered Public Accounting Firm +On February 24, 2023, the Audit Committee dismissed Deloitte & Touche LLP as our independent registered public accounting firm. Deloitte & Touche LLP served as our independent registered public accounting firm since 2013. +During our two most recent fiscal years ended December 31, 2022 and December 31, 2021 and during the subsequent interim period from January 1, 2023 through February 24, 2023, (i) there were no disagreements with Deloitte & Touche LLP on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedures that, if not resolved to Deloitte & Touche LLP’s satisfaction, would have caused Deloitte & Touche LLP to make reference to the subject matter of the disagreement in connection with its reports and (ii) there were no “reportable events” as defined in Item 304(a)(1)(v) of Regulation S-K. +The audit reports of Deloitte & Touche LLP on our consolidated financial statements for each of the two most recent fiscal years ended December 31, 2022 and December 31, 2021 did not contain an adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles. +On February 24, 2023, the Audit Committee approved the engagement and appointment of RSM US LLP, independent registered public accounting firm, to audit our consolidated financial statements for the fiscal year ending December 31, 2023. +During our two most recent fiscal years ended December 31, 2022 and December 31, 2021, and for the subsequent interim period through February 24, 2023, neither the Company nor anyone on its behalf consulted RSM US LLP regarding (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the consolidated financial statements of the Company, in connection with which either a written report or oral advice was provided to the Company that RSM US LLP concluded was an important factor considered by the Company in reaching a decision as to the accounting, auditing or financial reporting issue; or (ii) any matter that was either the subject of a disagreement as defined in Item 304(a)(1)(iv) of Regulation S-K or a reportable event as described in Item 304(a)(1)(v) of Regulation S-K. +PROPETRO  2024 Proxy Statement   |  61 +TABLE OF CONTENTS +Audit Matters +VOTE REQUIRED +The approval of the ratification of the appointment of RSM US LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2024 requires the affirmative vote of the holders of a majority of the shares represented at the meeting (in person or by proxy) and entitled to vote. As a result, abstentions will have the same effect as votes “AGAINST” this proposal. We do not expect any broker non-votes in connection with this proposal. +The Board of Directors unanimously recommends a vote FOR the ratification of the appointment of RSM US LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2024. +62  |   ir.propetroservices.com +TABLE OF CONTENTS +Audit Matters +Auditor Fees for Fiscal Years 2023 and 2022 +The following table sets forth the fees incurred by us in fiscal years 2023 and 2022 for services performed by RSM US LLP and Deloitte & Touche LLP: +Deloitte & Touche LLP +Year Ended December 31, +2023 +($) +2022 +($) +Audit fees (1) +265,746 +1,871,069 +All other fees (2) +135,782 +96,337 +Total fees +401,528 +1,967,406 +RSM US LLP +Year Ended December 31, +2023 +($) +2022 +($) +Audit fees (1) +1,476,626 +n/a +All other fees (2) +n/a +n/a +Total fees +1,476,626 +n/a +(1) +Audit fees include fees billed for professional services rendered for the audit of our annual consolidated financial statements, the audit of our system of internal control over financial reporting, the review of interim consolidated financial statements included in our quarterly reports, consents and comfort letters provided in connection with the filing of registration statements, other related services that are normally provided in connection with statutory and regulatory filings, and related out-of-pocket expenses. +(2) +All other fees consisted principally of fees for tax compliance and tax advice. +Policy on Audit Committee Pre-Approval of Audit and Non-Audit Services of Independent Registered Public Accounting Firm +The charter of the Audit Committee and its pre-approval policy require that the Audit Committee review and pre-approve the Company’s independent registered public accounting firm’s audit fees, audit-related fees, tax fees and fees for other services. The Chairman of the Audit Committee has the authority to grant pre-approvals that are within the pre-approval policy and are presented to the Audit Committee at a subsequent meeting. For the year ended December 31, 2023, the Audit Committee approved 100% of the services described above under the captions “Audit Fees” and “All Other Fees”. +Report of the Audit Committee +The Audit Committee assists our Board in overseeing: +(i) +the integrity of our consolidated financial statements, +(ii) +our compliance with legal and regulatory requirements, +(iii) +the independent auditor’s qualifications and independence, +(iv) +the performance of our independent auditor, and +(v) +the design and implementation of the Company’s internal audit function and the performance of the internal audit function after it has been established. +In so doing, it is the responsibility of the Audit Committee to maintain free and open communication between the directors, the independent auditor and our financial management. The Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the work of the independent auditor for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for us. The independent auditor reports directly to the Audit Committee. +PROPETRO  2024 Proxy Statement   |  63 +TABLE OF CONTENTS +Audit Matters +Management is responsible for the: +• +preparation, presentation and integrity of our consolidated financial statements, +• +accounting and financial reporting principles, +• +internal control over financial reporting, and +• +procedures designed to ensure compliance with accounting standards, applicable laws and regulations. +Management is also responsible for objectively reviewing and evaluating the adequacy, effectiveness, and quality of our system of internal control over financial reporting. Our independent auditor is responsible for performing an independent audit of the consolidated financial statements. +The Audit Committee’s responsibility is to monitor and oversee these processes and the engagement, independence, and performance of our independent auditor. The Audit Committee relies, without independent verification, on the information provided to it and on the representations made by management and the independent auditor. +The Audit Committee met with RSM US LLP, our independent auditor for the fiscal year ended December 31, 2023, and discussed the overall scope and plans for their audit and matters required to be discussed with audit committees under generally accepted auditing standards, including, among other things, matters related to the conduct of the audit of our consolidated financial statements and the matters required to be discussed by the statement on Auditing Standards No. 1301, as adopted by the Public Company Accounting Oversight Board. +RSM US LLP also provided to the Audit Committee the written disclosures and the letter required by applicable standards of the Public Company Accounting Oversight Board regarding the independent auditor’s communications with the Audit Committee concerning independence, and the Audit Committee discussed RSM US LLP’s independence with RSM US LLP. When considering the independence of RSM US LLP, the Audit Committee considered the non-audit services provided to the Company by the independent auditor and concluded that such services are compatible with maintaining the auditor’s independence. +The Audit Committee has reviewed and discussed our audited consolidated financial statements for the fiscal year ended December 31, 2023 with management and RSM US LLP. Based on the Audit Committee’s review of the audited consolidated financial statements and the meetings and discussions with management and RSM US LLP, and subject to the limitations on the Audit Committee’s role and responsibilities referred to above and in the Audit Committee Charter, the Audit Committee recommended to our Board that our audited consolidated financial statements be included in our Annual Report on Form 10-K as filed with the SEC. +The Audit Committee of the Board of Directors +ANTHONY J. +BEST +G. LARRY +LAWRENCE +Mary P. +Ricciardello +Chair +64  |   ir.propetroservices.com +TABLE OF CONTENTS +STOCK OWNERSHIP INFORMATION +Security Ownership of Certain Beneficial Owners and Management +PRINCIPAL STOCKHOLDERS +The following table presents certain information as of February 26, 2024, based on 109,523,281 shares of common stock outstanding as of such date, as to: +• +each stockholder known by us to be the beneficial owner of more than five percent of our outstanding shares of common stock, +• +each director and director nominee, +• +each Named Executive Officer, and +• +all current directors and executive officers as a group. +Unless otherwise indicated, the address for each beneficial owners in this table is c/o ProPetro Holding Corp., 303 W. Wall Street, Suite 102, Midland, Texas 79701. +Name and Address of Beneficial Owner +Number of Shares +Beneficially Owned +Percentage +Beneficially Owned +5% Stockholders +Pioneer Natural Resources Company (1) +5205 N. O’Connor Blvd., Suite 200 +Irving, Texas 75039-3746 +16,600,000 +15.2 % +BlackRock, Inc. (2) +50 Hudson Yards +New York, New York 10001 +19,062,570 +17.4 % +The Vanguard Group (3) +100 Vanguard Boulevard +Malvern, Pennsylvania 19355 +11,491,781 +10.5 % +Dimensional Fund Advisors LP (4) +6300 Bee Cave Road, Building One +Austin, TX 78746 +7,293,490 +6.7 % +Name of Beneficial Owner +Number of Shares +Beneficially Owned (5) +Percentage +Beneficially Owned +Directors +Phillip A. Gobe +189,745 +* +Samuel D. Sledge +184,236 +* +Spencer D. Armour III +99,152 +* +Mark S. Berg +12,274 +* +Anthony J. Best +93,000 +* +Michele Vion +46,784 +* +G. Larry Lawrence +55,029 +* +Jack B. Moore +99,152 +* +Mary P. Ricciardello +24,745 +* +Named Executive Officers +David S. Schorlemer +108,492 +* +Adam Muñoz +100,707 +* +John J. Mitchell +16,352 +* +Shelby Fietz +23,848 +* +Celina A. Davila +11,249 +* +All Directors and Executive Officers as a Group (13 Persons) +1,066,804 +* +* +Less than 1%. +PROPETRO  2024 Proxy Statement   |  65 +TABLE OF CONTENTS +Stock Ownership Information +(1) +Based on a Schedule 13D filed on January 7, 2019. Represents shares of our common stock beneficially owned by Pioneer. The shares of our common stock are directly owned by Pioneer Natural Resources Pumping Services LLC, a wholly owned subsidiary of Pioneer Natural Resources USA, Inc., which is a wholly owned subsidiary of Pioneer. +(2) +Based on a Schedule 13G/A filed on January 22, 2024. Represents shares of our common stock held by BlackRock, Inc. and certain of its affiliates, referred to collectively as BlackRock. BlackRock has sole voting power over 17,945,551 shares and sole dispositive power over 19,062,570 shares. +(3) +Based on a Schedule 13G/A filed on February 13, 2024. Represents (i) 0 shares over which The Vanguard Group has sole voting power (ii) 157,045 shares over which The Vanguard Group has shared voting power, (iii) 11,259,091 over which The Vanguard Group has sole dispositive power, and (iv) 232,690 over which The Vanguard Group has shared dispositive power. +(4) +Based on Schedule 13G filed on February 9, 2024. Represents shares of our common stock beneficially owned by Dimensional Fund Advisors LP’s commingled funds, group trusts and separate accounts (such investment companies, trusts and certain accounts, collectively referred to as the “Funds”). Represents (i) 7,175,590 shares over which the Funds have sole voting power (ii) 0 shares over which the Funds have shared voting power, (iii) 7,293,490 shares over which the Funds have sole dispositive power and (iv) 0 shares over which the Funds have shared dispositive power. +(5) +Includes the following number of shares of common stock that are issuable upon the vesting of RSUs that are eligible to vest within 60 days: Mr. Gobe (21,116 shares), Mr. Armour (21,116 shares), Mr. Best (21,116 shares), Ms. Vion (21,116 shares), Mr. Lawrence (21,116 shares), Mr. Moore (21,116 shares), Ms. Ricciardello (21,116 shares) and Mr. Mitchell (2,039 shares). +66  |   ir.propetroservices.com +TABLE OF CONTENTS +ADDITIONAL INFORMATION +Information about the Annual Meeting and Voting +Our Board of Directors is soliciting proxies for the 2024 annual meeting of stockholders, and at any continuations, adjournments or postponements of the meeting, to be held: +When +Where +Record Date +Date of Distribution +April 23, 2024 +10:00 a.m. Central Time +2518 FM 307 +Midland, Texas 79706 +February 26, 2024 +This proxy statement and our 2023 Annual Report on Form 10-K will be mailed on or about March 21, 2024 +This proxy statement contains important information for you to consider when deciding how to vote on the matters brought before the meeting. Please read it carefully. +IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS +FOR THE STOCKHOLDER MEETING TO BE HELD ON APRIL 23, 2024 +This notice and the accompanying proxy statement, proxy card and our 2023 Annual Report on Form 10-K are first being mailed to stockholders on or around March 21, 2024. The proxy statement and our 2023 Annual Report on Form 10-K are also available at +http://www.viewproxy.com/propetro/2024 +Who can attend and vote at the meeting? +The Board set February 26, 2024 as the record date for the meeting. You can attend and vote at the meeting if you were a holder of our common stock at the close of business on the record date, February 26, 2024, or if you are a holder of a valid proxy for the meeting. +How do I attend the meeting? +To attend the annual meeting in person, you must call our Director of Corporate Development and Investor Relations at (432) 848-0871 no later than 5:00 p.m. Central Time on April 22, 2024 to have your name placed on the attendance list. To be admitted into the meeting, your name must appear on the attendance list, and you must present government-issued photo identification (such as a driver’s license or passport). If your bank or broker holds your shares in street name, you will also be required to present proof of beneficial ownership of our common stock on the record date, such as a bank or brokerage statement or a letter from your bank or broker showing that you owned shares of our common stock at the close of business on the record date. In addition, if your bank or broker holds your shares in street name, you must obtain legal proxy from your broker, bank or other nominee and present it to the inspector of election with your ballot at the meeting. +PROPETRO  2024 Proxy Statement   |  67 +TABLE OF CONTENTS +Additional Information +What proposals will be voted on at the meeting and how does the Board recommend that I vote? +Three proposals are scheduled to be voted upon at the meeting. At the meeting we will ask stockholders to: +Proposals +Board +Recommendation +Page +Reference +1 +Elect the nine directors named in this proxy statement as members of the Board to serve until our 2024 annual meeting of stockholders +FOR each +nominee +6 +2 +Approve, on an advisory basis, our named executive officers’ compensation (Say-on-Pay) +FOR +27 +3 +Ratify the appointment of RSM US LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2024 +FOR +61 +How do I cast my vote? +Even if you plan to attend the annual meeting in person, we recommend that stockholders vote by proxy to ensure your vote is represented in the event you later decide not to attend, as well as to speed the tabulation of votes. Have your proxy card or voting instruction form in hand and follow the instructions. +INTERNET +TELEPHONE +MOBILE DEVICE +MAIL +AT THE MEETING +REGISTERED HOLDERS +www.AALVote.com/ +PUMP , 24/7 +Call +1 (866) 804-9616 +(toll-free), 24/7 +Scan the QR code +Sign, date and mail the proxy card, which you received by mail, using the postage-paid envelope provided +Attend the annual meeting and cast your ballot +BENEFICIAL OWNERS (HOLDERS IN STREET NAME) +Follow the instructions provided by your broker, bank +or other nominee +Return a properly executed voting instruction form by mail, depending upon the method(s) your broker, bank or other nominee makes available +To attend the annual meeting, you will need proof of ownership and a legal proxy from your broker, bank or other nominee +DEADLINE +11:59 p.m. Eastern Time on April 22, 2024, +if you are a registered holder +If you are a beneficial owner, please refer to the information provided by your broker, bank or other nominee +In the event that you submit a proxy but do not indicate any voting instructions, your shares will be voted as recommended by the Board on all matters, and in the discretion of the proxy holders as to any other matters that may properly come before the meeting or any continuation, postponement or adjournment of the meeting. We do not know of any other business to be considered at the meeting other than the proposals noted herein. +68  |   ir.propetroservices.com +TABLE OF CONTENTS +Additional Information +If your shares are registered in the name of a broker, bank or other nominee (typically referred to as being held in “street name”), you will receive instructions from your broker, bank or other nominee that must be followed in order for your broker, bank or other nominee to vote your shares per your instructions. Many brokerage firms and banks have a process for their beneficial holders to provide instructions via the Internet or over the telephone. If Internet or telephone voting is unavailable from your broker, bank or other nominee, please complete and return the voting instruction card in the addressed, postage paid envelope provided by your broker, bank or other nominee. +In the event you do not provide instructions on how to vote, your broker may have authority to vote your shares. Under the rules that govern brokers who are voting with respect to shares that are held in street name, brokers have the discretion to vote such shares on “routine” matters, but not on non-routine matters. The only “routine” matter to be voted upon at the meeting is the ratification of the appointment of independent auditors. +Your vote is especially important . If your shares are held by a broker, your broker cannot vote your shares for the election of directors or the non-binding advisory vote on our executive officer compensation. Therefore, please instruct your broker regarding how to vote your shares on these matters promptly . See “Vote Required” following each proposal for further information. +If you hold shares through a broker, bank or other nominee and wish to be able to vote during the meeting, you must obtain a legal proxy from your broker, bank or other nominee and present such legal proxy to the inspector of election with your ballot at the meeting if attending in person. You may only vote during the meeting by emailing a copy of your legal proxy to investors@propetroservices.com in advance of the meeting. +Can I revoke or change my proxy? +Yes. You may revoke or change a previously delivered proxy at any time before the meeting by delivering another proxy with a later date, by voting again via the Internet or by telephone, or by delivering written notice of revocation of your proxy to our General Counsel and Corporate Secretary at our principal executive offices before the beginning of the meeting. You may also revoke your proxy by attending the meeting in person and voting during the meeting, although attendance at the meeting will not, in and of itself, revoke a valid proxy that was previously delivered. If you hold shares through a broker, bank or other nominee, you must contact that nominee to revoke any prior voting instructions. You also may revoke any prior voting instructions by voting in person during the meeting if you obtain a legal proxy as described above. +Can I ask questions before or during the annual meeting? +Stockholders who wish to submit a question in advance may do so at investors@propetroservices.com . Stockholders also may submit questions live during the annual meeting. The Company is committed to transparency. All questions received before or during the annual meeting, and the Company’s responses, will be posted to our Investor Relations website at https://ir.propetroservices.com/ promptly after the annual meeting. Personal details may be omitted for data protection purposes. If we receive substantially similar questions, we may group these questions together and provide a single response to avoid repetition. +Who pays the costs of solicitation? +We will pay the costs of soliciting proxies from stockholders. Our directors, officers and regular employees may solicit proxies on behalf of us, without additional compensation, personally or by telephone. We will also request that brokers, nominees, custodians and other fiduciaries forward soliciting materials to the beneficial owners of shares held by such brokers, nominees, custodians and other fiduciaries. We will reimburse such persons for their reasonable expenses in connection therewith. +Who will count the vote? +The inspector of election will count the vote. Alliance Advisors will act as the inspector of election. +PROPETRO  2024 Proxy Statement   |  69 +TABLE OF CONTENTS +Additional Information +What is a “quorum”? +A quorum is the number of shares that must be present to hold the meeting. The quorum requirement for the meeting is a majority of the outstanding shares as of the record date, present in person or represented by proxy. Your shares will be counted for purposes of determining if there is a quorum if you are present in person and vote during the meeting; or have voted on the Internet, by telephone or by properly submitting a proxy card or voting instruction card by mail. +Votes withheld, abstentions and, for “routine matters” broker non-votes (discussed below) are counted as present and entitled to vote for purposes of determining a quorum. +What happens if there is not a quorum at the meeting? +Pursuant to our bylaws, the meeting may be adjourned by a majority of the shares represented at the meeting to reconvene at the same or some other place. If the adjournment is for more than 30 days, or if after the adjournment a new record date is fixed for the adjourned meeting, notice of the adjournment shall be given to each stockholder of record entitled to vote at the meeting. If the adjournment is for less than 30 days, no additional notice will be delivered. +What is an abstention and how will votes withheld and abstentions be treated? +A “vote withheld,” in the case of the proposal regarding the election of directors, or an “abstention,” in the case of the proposals regarding the advisory approval of our Named Executive Officers’ compensation and the ratification of the appointment of our independent registered public accounting firm represent a stockholder’s affirmative choice to decline to vote on a proposal. Votes withheld have no effect on the election of directors. Abstentions have the effect of a vote “AGAINST” in the case of the advisory approval of our Named Executive Officers’ compensation and ratification of the appointment of our independent registered public accounting firm. +What are broker non-votes and how will they be treated? +Generally, broker non-votes occur when shares held by a broker in “street name” for a beneficial owner are not voted with respect to a particular proposal because the broker (1) has not received voting instructions from the beneficial owner and (2) lacks discretionary voting power to vote those shares. A broker is entitled to vote shares held for a beneficial owner on “routine” matters, such as the ratification of the appointment of our independent registered public accounting firm, without instructions from the beneficial owner of those shares. On the other hand, absent instructions from the beneficial owner of such shares, a broker is not entitled to vote shares held for a beneficial owner on non-routine matters, such as the election of directors and the advisory approval of our Named Executive Officers’ compensation. Broker non-votes will have no effect on the election of directors or the advisory approval of our Named Executive Officers’ compensation. +70  |   ir.propetroservices.com +TABLE OF CONTENTS +Additional Information +What vote is required to approve each item? +The following table sets forth the voting requirement with respect to each of the proposals: +Proposal +Vote Requirement +Effect of +Abstentions +Effect of Broker Non-Votes +1 +Election of Directors +The plurality of the votes cast. This means that the nine nominees receiving the highest number of affirmative “ FOR ” votes will be elected as directors. +No effect +No effect +2 +Say-on-Pay +The affirmative “ FOR ” vote of the holders of a majority of the shares represented at the meeting (in person or by proxy) and entitled to vote. +The effect of a vote “AGAINST” +No effect +3 +Ratification of the Appointment of Our Independent Auditor +The affirmative “ FOR ” vote of the holders of a majority of the shares represented at the meeting (in person or by proxy) and entitled to vote. +The effect of a vote “AGAINST” +A broker is entitled to vote shares held for a beneficial owner on “routine” matters, without instructions from the beneficial owner of those shares +What does it mean if I get more than one set of proxy materials? +Your shares are probably registered in more than one account. Please vote all of your shares. To ensure that all of your shares are voted, for each set of proxy materials, please submit your proxy by phone, via the Internet, or by signing, dating and returning the enclosed proxy card in the enclosed envelope. +How many votes can I cast? +On all matters you are entitled to one vote per share of common stock that you held as of the record date. +Where can I find the voting results of the meeting? +The preliminary voting results will be announced at our annual meeting. The final results will be published in a current report on Form 8-K to be filed by us with the SEC within four business days of our annual meeting. +PROPETRO  2024 Proxy Statement   |  71 +TABLE OF CONTENTS +Additional Information +Information about Stockholder Proposals +If you want to present a proposal of business or nominate persons for election to the Board at the 2025 annual meeting of stockholders or nominate a person for election to the Board at such meeting, you must give us written notice no later than the close of business on January 23, 2025 and no earlier than the opening of business on December 23, 2025, and follow the procedures outlined in our Bylaws. You may request a copy of the provisions of the Bylaws governing the requirements for notice at the below address. If the date of the 2025 annual meeting of stockholders is more than 30 days before or more than 60 days after April 23, 2025, the one year anniversary of the 2024 annual meeting of stockholders, your notice of a proposal will be timely if we receive it no earlier than the opening of business on the 120th day before the actual date of such meeting and no later than the later of: +(i) +the close of business on the 90th day before the actual date of such meeting, and +(ii) +the close of business on the tenth day following the date on which a written statement setting forth the date of such meeting was mailed to the stockholders or the date on which it is first disclosed to the public. +SEC rules permit management to vote proxies in its discretion in certain cases if a stockholder does not comply with this deadline and, in certain other cases notwithstanding a stockholder’s compliance with this deadline. +If you wish to submit a proposal to be considered for inclusion in next year’s proxy statement pursuant to Rule 14a-8 of the Exchange Act, you must submit the proposal so that it is received by November 11, 2024. If the date of the 2025 annual meeting of stockholders is more than 30 days from April 23, 2025, the one-year anniversary date of the 2024 annual meeting of stockholders, a notice will be timely if we receive it a reasonable time before we begin to print and send our proxy materials for such meeting. +In each case, your notice should be sent in writing to: +ProPetro Holding Corp. +Attention: General Counsel and Corporate Secretary +P.O. Box 873 +Midland, Texas 79702 +Annual Report on Form 10-K +A copy of our Annual Report on Form 10-K for the year ended December 31, 2023, including financial statements and schedules thereto but not including exhibits, as filed with the SEC, will be sent to any stockholder of record on February 26, 2024 without charge by contacting: +INVESTOR RELATIONS +(432) 844-0871 +ProPetro Holding Corp. +Attention: General Counsel and Corporate Secretary +P.O. Box 873 +Midland, Texas 79702 +A reasonable fee will be charged for copies of exhibits. You may also access our Annual Report on Form 10-K for the year ended December 31, 2023 and our other filings with the SEC at www.propetroservices.com . +72  |   ir.propetroservices.com +TABLE OF CONTENTS +Additional Information +Other Matters +The persons designated to vote shares covered by our Board’s proxies intend to exercise their judgment in voting such shares on other matters that may properly come before the meeting. Management does not expect that any matters other than those referred to in this proxy statement will be presented for action at the meeting. +By Order of the Board of Directors, +John J. Mitchell +General Counsel and Corporate Secretary +Midland, Texas +March 21, 2024 +PROPETRO  2024 Proxy Statement   |  73 +TABLE OF CONTENTS +TABLE OF CONTENTS +PROPETRO HOLDING CORP.PROXY FOR ANNUAL MEETING TO BE HELD ON APRIL 23, 2024 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORSThe undersigned stockholder hereby appoints each of Samuel D. Sledge and John J. Mitchell as attorney and proxy for the undersigned, with the power to appoint his substitute, to represent and to vote all the shares of common stock of PROPETRO HOLDING CORP., which the undersigned would be entitled to vote, at the Company’s Annual Meeting of Stockholders to be held in person on Tuesday, April 23, 2024 at 10:00 A.M. Central Time 2518 FM 307 Midland, Texas 79706 and at any postponements, continuations or adjournments thereof  (the “Annual Meeting”).In their discretion, the proxies are authorized to vote upon (i) the election of any person to the Board of Directors if any nominee named herein becomes unable to serve or for good cause will not serve, (ii) any matter that the Board of Directors of the Company did not know would be presented at the Annual Meeting by a reasonable time before the proxy solicitation was made and (iii) any other matter that may properly come before the Annual Meeting or any postponements, continuations or adjournments thereof.This proxy, when properly executed, will be voted in the manner directed on the reverse side by the undersigned stockholder. If no direction is made, this proxy will be voted “FOR” all nominees set forth in PROPOSAL 1 and “FOR” PROPOSALS 2, and 3.PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.(IMPORTANT — This Proxy must be signed and dated on the reverse side.)PLEASE DETACH ALONG PERFORATED LINE AND MAIL IN THE ENVELOPE PROVIDED.Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be held April 23, 2024.The Proxy Statement and our 2023 Annual Report to Stockholders are available at: http://www.viewproxy.com/propetro/2024 +TABLE OF CONTENTS +The Board of Directors recommends a vote FOR all nominees in Proposal 1.Vote on ProposalsVote FOR allVote1. Election of DirectorsnomineesWITHHELD(except asfrom all01Samuel D. Sledge06Michele Vionmarked)nominees02Phillip A. Gobe07Mary Ricciardello03Spencer D. Armour III08G. Larry Lawrence04Mark S. Berg09Jack B. Moore05Anthony J. BestTo withhold authority to vote for any individual nominee(s), mark “Vote FOR all nominees (except as marked)” and write the number(s) of the nominee(s) on the line below. Please mark your votes like this The Board of Directors recommends a vote FOR Proposals 2 and 3.2.To approve, on a non-binding advisory basis, the compensation of the Company’s named executive officers. FORAGAINSTABSTAIN3.To ratify the appointment of RSM US LLP to serve as the Company’s independent registered public accounting firm for the year ending December 31, 2024. FORAGAINSTABSTAINDate: Signature_Signature (if held jointly)NOTE: Please mark, date and sign this proxy card and return it in the accompanying envelope. Please sign as your name appears hereon. If shares are registered in more than one name, all owners should sign. If signing in a fiduciary or representative capacity, please give full title and attach evidence of authority. Corporations please sign with full corporate name by a duly authorized officer and affix corporate seal.CONTROL NUMBER Address Change/Comments: (If you noted any Address Changes and/or Comments above, please mark box.) Please indicate if you plan to attend this meeting PLEASE DETACH ALONG PERFORATED LINE AND MAIL IN THE ENVELOPE PROVIDED. PROPETRO HOLDING CORP.As a stockholder of ProPetro Holding Corp., you have the option of voting your shares electronically through the Internet or on the telephone, eliminating the need to return the proxy card. Your electronic vote authorizes the named proxies to vote your shares in the same manner as if you marked, signed, dated and returned the proxy card. Votes submitted electronically over the Internet or by telephone must be received by 11:59 p.m. Eastern Time, on April 22, 2024. SCAN TO VIEW MATERIALS & VOTE CONTROL NUMBER PROXY VOTING INSTRUCTIONSPlease have your 11 digit control number ready when voting by Internet or Telephone INTERNETVote Your Proxy on the Internet: www.AALVote.com/PUMPHave your proxy card available when you access the above -website. Follow the prompts to vote your shares. TELEPHONEMAILVote Your Proxy by Phone:Vote Your Proxy by Mail:Call 1 (866) 804-9616Use any touch-tone telephone toMark, sign, and date your proxyvote your proxy. Have your proxycard, then detach it, and returncard available when you call.it in the postage-paid envelopeFollow the voting instructions toprovided.vote your shares. If you vote your proxy by Internet or by Telephone, you do NOT need to mail back your Proxy Card. +DEF 14A +false +0001680247 +0001680247 +2023-01-01 +2023-12-31 +0001680247 +pump:SamuelSledgeMember +2023-01-01 +2023-12-31 +0001680247 +pump:SamuelSledgeMember +2022-01-01 +2022-12-31 +0001680247 +2022-01-01 +2022-12-31 +0001680247 +pump:PhillipGobeMember +2021-01-01 +2021-12-31 +0001680247 +pump:SamuelSledgeMember +2021-01-01 +2021-12-31 +0001680247 +2021-01-01 +2021-12-31 +0001680247 +pump:PhillipGobeMember +2020-01-01 +2020-12-31 +0001680247 +2020-01-01 +2020-12-31 +0001680247 +pump:EquityAwardsValueInCompensationTableForTheApplicableYearMember +ecd:PeoMember +pump:SamuelSledgeMember +2023-01-01 +2023-12-31 +0001680247 +pump:EquityAwardsAdjustmentsYearEndFairValueOfAwardsGrantedInCurrentYearMember +ecd:PeoMember +pump:SamuelSledgeMember +2023-01-01 +2023-12-31 +0001680247 +pump:EquityAwardsAdjustmentsChangeInFairValueAsOfVestingDateOfVestedAwardsDuringCurrentYearMember +ecd:PeoMember +pump:SamuelSledgeMember +2023-01-01 +2023-12-31 +0001680247 +pump:EquityAwardsAdjustmentsChangeInFairValueAsOfYearEndOfOutstandingAndUnvestedAwardsGrantedInPriorYearsMember +ecd:PeoMember +pump:SamuelSledgeMember +2023-01-01 +2023-12-31 +0001680247 +pump:EquityAwardsAdjustmentsChangeInFairValueAsOfVestingDateOfPriorYearAwardsVestedDuringCurrentYearMember +ecd:PeoMember +pump:SamuelSledgeMember +2023-01-01 +2023-12-31 +0001680247 +pump:EquityAwardsGrantedInPriorYearsThatWereForfeitedDuringTheYearMember +ecd:PeoMember +pump:SamuelSledgeMember +2023-01-01 +2023-12-31 +0001680247 +pump:NetAdjustmentsForEquityAwardsMember +ecd:PeoMember +pump:SamuelSledgeMember +2023-01-01 +2023-12-31 +0001680247 +pump:EquityAwardsValueInCompensationTableForTheApplicableYearMember +ecd:NonPeoNeoMember +2023-01-01 +2023-12-31 +0001680247 +pump:EquityAwardsAdjustmentsYearEndFairValueOfAwardsGrantedInCurrentYearMember +ecd:NonPeoNeoMember +2023-01-01 +2023-12-31 +0001680247 +pump:EquityAwardsAdjustmentsChangeInFairValueAsOfVestingDateOfVestedAwardsDuringCurrentYearMember +ecd:NonPeoNeoMember +2023-01-01 +2023-12-31 +0001680247 +pump:EquityAwardsAdjustmentsChangeInFairValueAsOfYearEndOfOutstandingAndUnvestedAwardsGrantedInPriorYearsMember +ecd:NonPeoNeoMember +2023-01-01 +2023-12-31 +0001680247 +pump:EquityAwardsAdjustmentsChangeInFairValueAsOfVestingDateOfPriorYearAwardsVestedDuringCurrentYearMember +ecd:NonPeoNeoMember +2023-01-01 +2023-12-31 +0001680247 +pump:EquityAwardsGrantedInPriorYearsThatWereForfeitedDuringTheYearMember +ecd:NonPeoNeoMember +2023-01-01 +2023-12-31 +0001680247 +pump:EquityAwardsAdjustmentsDividendsOrOtherEarningsPaidOnEquityAwardsNotOtherwiseReflectedInFairValueMember +ecd:NonPeoNeoMember +2023-01-01 +2023-12-31 +0001680247 +pump:NetAdjustmentsForEquityAwardsMember +ecd:NonPeoNeoMember +2023-01-01 +2023-12-31 +0001680247 +1 +2023-01-01 +2023-12-31 +0001680247 +2 +2023-01-01 +2023-12-31 +0001680247 +3 +2023-01-01 +2023-12-31 +iso4217:USD \ No newline at end of file diff --git a/raw/proxies/0001680247/0001104659-24-037294/proxy_rpt.txt b/raw/proxies/0001680247/0001104659-24-037294/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..e3d3049cfa9ee5930085237768c1cab0abe8b9fa --- /dev/null +++ b/raw/proxies/0001680247/0001104659-24-037294/proxy_rpt.txt @@ -0,0 +1,12 @@ +Certain Relationships and Related Party Transactions +RELATED PARTY TRANSACTIONS +Operations and Maintenance Yards +The Company rents three yards from South Midkiff Partners, LLC, an entity partially owned by Spencer D. Armour III, a director, and David Sledge, the father of Sam Sledge, our Chief Executive Officer. Total annual rent expense in 2023 for each of the three yards was approximately $0.03 million, $0.1 million, and $0.1 million, respectively. The Company previously rented two yards from this entity and incurred rent expense of  $0.02 million and $0.1 million, respectively during the year ended December 31, 2023; these leases were terminated in June 2023. +Transportation and Equipment Rental +Adam Muñoz, our President and Chief Operating Officer, has a family relationship with an employee of J&M Burns Transportation, an entity that provides transportation services to the Company. The employee receives a portion of his compensation from J&M Burns Transportation based on the amount of services sold by him to customers, including the Company. The Company incurred approximately $38.6 million in expense for the year ended December 31, 2023 for services provided to the Company by J&M Burns Transportation. +Executive Officer Family Members +Oscar M. Dominguez is our Vice President of Hydraulic Fracturing Operations and the brother-in-law of Adam Muñoz. Mr. Dominguez received total compensation of approximately $1.3 million for his services for the year ended December 31, 2023 (including $959,000 cash compensation and $298,000 non-cash equity compensation). +Roger Dominguez is our Supply Chain Logistics Manager and the brother-in-law of Adam Muñoz. Mr. Dominguez received total compensation of approximately $294,000 for his services for the year ended December 31, 2023 (including $231,000 cash compensation and $63,000 non-cash equity compensation). +Pioneer +On December 31, 2018, we consummated the purchase of certain pressure pumping assets and real property in connection with the Pioneer Pressure Pumping Acquisition. In connection with the consummation of the Pioneer Pressure Pumping Acquisition and effective January 1, 2019, we became a long-term service provider to Pioneer, providing pressure pumping and related services. In March, 2022, we amended and restated our agreement to provide pressure pumping and related services to Pioneer, which reduced the number of contracted fleets to six fleets from eight fleets, modified the pressure pumping scope of work and pricing mechanism for contracted fleets, replaced the idle fees arrangement with equipment reservation fees and provided for an initial term from January 1, 2022 through December 31, 2022, subject to extension and termination as described therein. On October 31, 2022, we entered into (i) a certain Pressure Pumping Services Agreement—Fleet One Simulfrac (the “Fleet One Pressure Pumping Agreement”) and (ii) a certain Pressure Pumping Services Agreement—Fleet Two (the “Fleet Two Pressure Pumping Agreement”), which replaced all previous agreements with Pioneer and reduced the number of contracted fleets to two fleets. The Fleet One Pressure Pumping Agreement was effective as of January 1, 2023 and terminated in August 2023. The Fleet Two Pressure Pumping Agreement was effective as of January 1, 2023. In February 2023, we mutually agreed with Pioneer to terminate the Fleet Two Pressure Pumping Agreement, effective on or about May 12, 2023. Revenue from services provided to Pioneer (including reservation fees) accounted for approximately $125.1 million during the year ended December 31, 2023. +20  |   ir.propetroservices.com \ No newline at end of file diff --git a/raw/proxies/0001680247/0001104659-25-033020/proxy.txt b/raw/proxies/0001680247/0001104659-25-033020/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..e86f910bf5d47f5d476c7406c52b3f31098ff237 --- /dev/null +++ b/raw/proxies/0001680247/0001104659-25-033020/proxy.txt @@ -0,0 +1,3940 @@ +tm252317-3_nonfiling - none - 14.0102065s +TABLE OF CONTENTS +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +Washington, D.C. 20549 +SCHEDULE 14A +Proxy Statement Pursuant to Section 14(a) of +the Securities Exchange Act of 1934 (Amendment No.     ) +Filed by the Registrant ☒ +Filed by a Party other than the Registrant ☐ +Check the appropriate box: +☐ +Preliminary Proxy Statement +☐ +Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +☒ +Definitive Proxy Statement +☐ +Definitive Additional Materials +☐ +Soliciting Material under §240.14a-12 +ProPetro Holding Corp. +(Name of Registrant as Specified In Its Charter) +(Name of Person(s) Filing Proxy Statement, if other than the Registrant) +Payment of Filing Fee (Check all boxes that apply): +☒ +No fee required. +☐ +Fee paid previously with preliminary materials. +☐ +Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a6(i)(1) and 0-11 +TABLE OF CONTENTS +TABLE OF CONTENTS +2024 AT A GLANCE +1 +Established PROPWR SM Power Generation Business +2 +Four FORCE ® Electric Fleets Deployed Under Committed Customer Agreements +3 +Completed the Acquisition of Aqua Prop, LLC (“AquaProp SM ”) +4 +75% of our Hydraulic Fracturing Capacity consists of FORCE ® Electric Fleets and Tier IV DGB Dual-Fuel Equipment +OPTIMIZE AND INDUSTRIALIZE +CAPITAL LIGHT ASSET TRANSITION +STRATEGIC EXECUTION +ProPetro Holding Corp. (NYSE: PUMP) is a Midland, Texas-based provider of premium completion and power services to leading upstream oil and gas companies engaged in the exploration and production (“E&P”) of North American unconventional oil and natural gas resources. +The Company was founded in 2005. In 2010, management strategically focused the Company’s efforts on establishing a best-in-class hydraulic fracturing platform targeting the Permian Basin. In 2017, we consummated the initial public offering of shares of our common stock. Our fleet has been designed to handle the highest-intensity, most complex hydraulic fracturing jobs. +By successfully serving some of the largest and most demanding public and private E&P operating companies, we have established ourselves as a premium completion services company with a goal of helping to bring reliable energy to the world. +UNIQUELY POSITIONED FOR SUCCESS +Permian Focus +Blue Chip Customers +Superior Performance +Sustainable Future +Positioned in a low-cost +basin with sector-leading operating scale +Large drilling inventories and sizeable rig programs +Consistently outperforming the competition on location and serving as an efficient completions partner +Investing in lower emissions equipment to reduce our carbon footprint +Capital Discipline +Safety Culture +Technology +Social & Governance +Strong balance sheet; disciplined capital allocation and asset deployment +Full year 2024 Total Recordable Incident Rate +of 0.74 +Focused on technological improvements to optimize our performance +Continued investment in our community and commitment to strong governance +TABLE OF CONTENTS +ProPetro Holding Corp. +303 W. Wall Street, Suite 102 +Midland, Texas 79701 +Message from Our Chief Executive Officer +SAMUEL D. SLEDGE +Chief Executive Officer and Director +Dear Stockholders, +2024 was a pivotal year for ProPetro. Thanks to the hard work of our team, we continued to see the benefits of our strategic execution, with further fleet transition, the establishment of our PROPWR SM power generation business, disciplined capital allocation and consistent operational excellence in our existing service lines. Our continued execution as well as our ongoing investments in upgrading and transitioning our fleet and service offerings and our commitment to supporting the development of our new PROPWR SM business all support our conviction that our business will remain resilient through the cycles and that we will be positioned for success in what remains a disciplined market for oilfield services. +2024 BUSINESS HIGHLIGHTS +• +Realized continued benefits from our optimization program which together with disciplined capital management allowed us to realize almost 60% lower capital expenditures compared to 2023 +• +Established our PROPWR SM power generation business and placed initial orders for approximately 140 megawatts (MW) of power generation equipment +• +Repurchased and retired approximately 7.2 million shares in 2024, with total repurchases of approximately 13 million shares representing approximately 11% of our outstanding common stock at the time the repurchase plan commenced in May 2023 +• +Continued the execution of our fleet transition, deploying two additional FORCE ® fleets and we expect one additional FORCE ® fleet to be deployed in 2025 +• +Our FORCE ® electric fleets, along with our Tier IV DGB Dual-fuel fleets, now represent approximately 75% of our hydraulic fracturing capacity +• +We published our second ProPetro ProEnergy ProPeople Sustainability Report +• +Completed the acquisition of AquaProp SM , expanding our service offering to include wet sand operations within our hydraulic fracturing business +TABLE OF CONTENTS +Message from Our Chief Executive Officer +Thanks to the continued hard work of our team, we remain positioned to execute on our strategic objectives and to support the development of reliable, consistent, efficient and secure sources of energy. We believe this approach will drive value creation for our stockholders. +LOOKING AHEAD +2024 showed again the strength and operational excellence of our team. As we look ahead to 2025, we expect our customers to remain disciplined. We believe ProPetro is well positioned to see continued success in this environment and that demand for top tier service providers like ProPetro will remain stable in a challenging market. +To support our success, ProPetro will remain focused on its disciplined and dynamic capital allocation strategy. As we look to 2025, we expect our approach to focus on four key elements: +• +First, launching and scaling PROPWR SM , which we believe will be a key pillar of future growth; +• +Second, investing in our next-generation fleet transition, helping to ensure we remain the premier provider of low-emission, high-efficiency pressure pumping services; +• +Third, executing on accretive M&A transactions and optimizing our portfolio; and +• +Fourth, returning capital to shareholders through our share repurchase program. +We began 2025 with great momentum, a strong foundation and a clear vision for the future. Despite the recent tariff announcements, OPEC+ production increases, and potential other challenges the year may present, we believe opportunities lie ahead and that we are well positioned to weather these challenges and capitalize on available opportunities. Our fleet modernization efforts will continue to drive efficiencies for our customers while enhancing our competitive positioning. At the same time, the introduction of PROPWR SM offers an exciting opportunity for growth using our existing operational strengths and customer network to support the development of this new business line. With a strong balance sheet, disciplined capital allocation and management, and an unwavering focus on operational excellence, we believe 2025 will be another positive year for ProPetro. +2025 ANNUAL MEETING +Thank you for your continued support of ProPetro. We look forward to you joining us at our annual meeting of stockholders on May 20, 2025. +Sincerely, +Samuel D. Sledge +Chief Executive Officer and Director +April 8, 2025 +TABLE OF CONTENTS +ProPetro Holding Corp. +303 W. Wall Street, Suite 102 +Midland, Texas 79701 +NOTICE OF 2025 ANNUAL MEETING OF STOCKHOLDERS +Dear Stockholders, +We cordially invite you to attend the 2025 annual meeting of stockholders of ProPetro Holding Corp. +When +May 20, 2025 +10:00 a.m. Central Time +Where +2518 FM 307 +Midland, Texas 79706 +Record Date +Stockholders who owned our common stock at the close of business on March 24, 2025 are entitled to notice of, and to vote at, the annual meeting, or any continuation, postponement, or adjournment thereof. +Items of Business +1 +Election of nine director nominees to serve for a one-year term +2 +Approval, on an advisory basis, of the compensation of our named executive officers +3 +Approval, on an advisory basis, of the frequency of future advisory votes on compensation of our named executive officers +4 +Approval of the Second Amended and Restated 2020 Long-Term Incentive Plan +5 +Ratification of the appointment of RSM US LLP as our independent, registered public accounting firm for the fiscal year ending December 31, 2025 +6 +Transaction of such other business as may properly come before the meeting +How to Vote +YOUR VOTE IS IMPORTANT. We urge you to review the accompanying proxy statement carefully and to submit your proxy as soon as possible so that your shares will be represented at the meeting. You may revoke your proxy if you so desire at any time before it is voted. Have your Notice, proxy card or voting instruction form with your 11-digit control number and follow the instructions. +INTERNET +TELEPHONE +MOBILE DEVICE +MAIL +AT THE MEETING +REGISTERED HOLDERS +www.AALVote.com/ +PUMP , 24/7 +Call +1 (866) 804-9616 +(toll-free), 24/7 +Scan the QR code +Sign, date and mail the proxy card, which you may have received by mail, using the postage-paid envelope provided +Attend the annual meeting and cast your ballot +BENEFICIAL OWNERS (HOLDERS IN STREET NAME) +Follow the instructions provided by your broker, bank +or other nominee +Return a properly executed voting instruction form by mail, depending upon the method(s) your broker, bank or other nominee makes available +To attend the annual meeting, you will need proof of ownership and a legal proxy from your broker, bank or other nominee +DEADLINE +11:59 p.m. Eastern Time on May 19, 2025, if you are a registered holder +If you are a beneficial owner, please refer to the information provided by your broker, bank or other nominee +A stockholders’ list will be available at our offices at 303 W. Wall Street, Suite 102, Midland, Texas 79701 for a period of ten days prior to the meeting. We hope that you will be able to attend the meeting in person. +This proxy statement and our +2024 Annual Report on Form 10-K +are also available at https://web.viewproxy.com/propetro/2025. +By Order of the Board of Directors, +John J. Mitchell +General Counsel and Corporate +Secretary +April 8, 2025 +TABLE OF CONTENTS +TABLE OF CONTENTS +1 +PROXY STATEMENT SUMMARY +6 +CORPORATE GOVERNANCE AND BOARD MATTERS +6 +Proposal 1 —Election of Directors +7 +Nominees +13 +Director Independence +13 +Board Leadership Structure +14 +Board of Directors and Risk Oversight +14 +Sustainability Initiatives +15 +Communicating with Our Board of Directors +16 +Annual Meeting Attendance +16 +Compensation Committee Interlocks and Insider Participation +16 +Board and Committee Activity and Structure +19 +Role of the Board, Compensation Committee and Our Executive Officers +19 +Role of External Advisors +20 +Director Nominations Process +20 +Director Orientation and Education +21 +Certain Relationships and Related Party Transactions +22 +Director Compensation +24 +Non-Employee Director Stock Ownership +Guidelines +25 +EXECUTIVE OFFICERS +27 +EXECUTIVE COMPENSATION +27 +Proposal 2 —Advisory Vote to Approve Named Executive Officer Compensation +28 +Proposal 3 —Advisory Vote on the Frequency of Future Advisory Votes on Named Executive Officer Compensation +29 +Compensation Discussion and Analysis +46 +Report of the Compensation Committee +47 +Executive Compensation Tables +47 +SUMMARY COMPENSATION TABLE +48 +GRANTS OF PLAN-BASED AWARDS +49 +NARRATIVE DISCLOSURE TO SUMMARY COMPENSATION TABLE AND GRANTS OF PLAN-BASED AWARDS TABLE +49 +OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END +50 +2024 OPTION EXERCISES AND STOCK VESTED +50 +PENSION BENEFITS +50 +NONQUALIFIED DEFERRED COMPENSATION +51 +POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL +57 +Pay versus Performance +59 +NARRATIVE DISCLOSURE TO PAY VERSUS PERFORMANCE TABLE +60 +CEO Pay Ratio +61 +Proposal 4 —Approval of The Second Amended and Restated 2020 Long Term Incentive Plan +61 +Background and Purpose of the Proposal +62 +Summary of the Second A&R LTIP +66 +Federal Income Tax Consequences +66 +Tax Consequences to Participants +69 +New Plan Benefits +69 +Equity Compensation Plan Information +70 +Consequences of Failing to Approve the Proposal +71 +AUDIT MATTERS +71 +Proposal 5 —Ratification of Appointment of Independent Registered Public Accounting Firm +73 +Auditor Fees for Fiscal Years 2024 and 2023 +73 +Policy on Audit Committee Pre-Approval of Audit and Non-Audit Services of Independent Registered Public Accounting Firm +73 +Report of the Audit Committee +75 +STOCK OWNERSHIP INFORMATION +75 +Security Ownership of Certain Beneficial Owners and Management +77 +ADDITIONAL INFORMATION +77 +Information about the Annual Meeting and Voting +82 +Information about Stockholder Proposals +82 +Annual Report on Form 10-K +83 +Other Matters +TABLE OF CONTENTS +Proxy Statement Summary +The following section is only a summary of key elements of this proxy statement, and is intended to assist you in reviewing this proxy statement in advance of the 2025 annual meeting. This summary does not contain all of the information you should consider, and you are encouraged to read this entire proxy statement before submitting your votes. +2025 Annual Meeting +When +Where +Record Date +May 20, 2025 +10:00 a.m. Central Time +2518 FM 307 +Midland, Texas 79706 +March 24, 2025 +Voting Agenda +Board +Recommendation +For More Information, +See Page +1 +Election of nine director nominees to serve for a one-year term +FOR each +nominee +** +2 +Approval, on an advisory basis, of the compensation of our named executive officers (Say-on-Pay) +FOR +** +3 +Approval, on an advisory basis, of the frequency of future advisory votes on compensation of our named executive officers (Say-on-Pay Frequency) +ONE YEAR +** +4 +Approval of the Second Amended and Restated 2020 Long-Term Incentive Plan (LTIP) +FOR +** +5 +Ratification of the Audit Committee’s selection of RSM US LLP as our independent auditors for 2025 +FOR +** +6 +Transaction of such other business as may properly come before the meeting or any adjournment thereof +FOR +** +Director Nominees +The Board of Directors (the “Board”) has nominated the nine director nominees shown below for a one-year term. +Committee Memberships +Nominees +Independent +Age +Director +Since +Audit +Compensation +Nominating & +Corporate +Governance (1) +Spencer D. Armour III +71 +2013 +* +Mark S. Berg +66 +2019 +Anthony J. Best   +75 +2018 +PROPETRO  2025 Proxy Statement   |  1 +TABLE OF CONTENTS +Proxy Statement Summary +Committee Memberships +Nominees +Independent +Age +Director +Since +Audit +Compensation +Nominating & +Corporate +Governance (1) +Phillip A. Gobe   +72 +2019 +G. Larry Lawrence +73 +2020 +* +Samuel D. Sledge +38 +2021 +Mary P. Ricciardello +69 +2023 +* +Michele Vion +65 +2020 +Alex V. Volkov +52 +2024 +Meetings in 2024 +Board—10 +10 +5 +4 +Committee Chair +Committee Member +Chairman of the Board +Lead Independent Director +* +Audit Committee financial expert +(1) +During 2024, Jack B. Moore served as the chair of the Nominating and Corporate Governance Committee. He is expected to continue in that role until the expiration of this term as a member of the Board effective as of the conclusion of the Annual Meeting. We intend to decrease the size of the Board from ten to nine directors following Mr. Moore’s retirement at the end of the Annual Meeting. +Corporate Governance Highlights +Corporate Governance Best Practices +Seven of our nine director nominees are independent +Oversight in establishing and review of execution of the Company’s strategic objectives +Lead Independent Director, with defined responsibilities +Three of our nine director nominees are gender or ethnically diverse +Balance of new and experienced directors +Stock ownership guidelines for directors and executives +Code of Business Conduct and Ethics +Annual director self-evaluation and committee assessment to ensure board effectiveness +All directors serving in 2024 attended over 75% of 2024 meetings (held during the period for which he or she was a director) +Regular executive sessions of independent directors +Board review of company’s financial performance and succession plans +Robust risk oversight +Commitment to Corporate Social Responsibility +2  |   ir.propetroservices.com +TABLE OF CONTENTS +Proxy Statement Summary +DIRECTOR ATTRIBUTES +Our nine directors nominated for reelection at the 2025 annual meeting comprise a well-balanced Board. +BOARD EXPERTISE +Director Skills and Experience +Audit and financial reporting +●   ●   ●   ●   ●   ●   ●   ●   ● +7 +Corporate governance and ethics +●   ●   ●   ●   ●   ●   ●   ●   ● +8 +Executive leadership +●   ●   ●   ●   ●   ●   ●   ●   ●   +9 +Exploration & Production, energy industry +●   ●   ●   ●   ●   ●   ●   ●   ● +7 +Finance and/or investment experience +●   ●   ●   ●   ●   ●   ●   ●   ● +8 +Human capital management, sustainability, or environmental stewardship +●   ●   ●   ●   ●   ●   ●   ●   ● +5 +Marketing, business development and investor relations +●   ●   ●   ●   ●   ●   ●   ●   ● +4 +Other public company board service +●   ●   ●   ●   ●   ●   ●   ●   ● +7 +Regulatory, government and compliance +●   ●   ●   ●   ●   ●   ●   ●   ● +5 +Risk management +●   ●   ●   ●   ●   ●   ●   ●   ● +7 +Strategic planning and operations +●   ●   ●   ●   ●   ●   ●   ●   ●   +9 +Technology, engineering +●   ●   ●   ●   ●   ●   ●   ●   ● +3 +Cybersecurity risk management +●   ●   ●   ●   ●   ●   ●   ●   ● +3 +PROPETRO  2025 Proxy Statement   |  3 +TABLE OF CONTENTS +Proxy Statement Summary +Sustainability Highlights +In October 2024, ProPetro published its second ProPetro ProEnergy ProPeople Sustainability Report, advancing our goals of increased disclosure and transparency regarding our operations. The report, which may be accessed on our website, highlights our commitment and approach to sustainability, and it provides an overview of our governance, oversight, programs, policies, and performance around sustainability matters that are important to ProPetro and its stakeholders. The scope of the report includes all businesses, assets, and joint ventures that were owned and operated by ProPetro at the time of its publishing. +SUSTAINABLY +COMPETING +COMMUNITY +INVESTMENT +SAFETY +FOCUS +In 2024, we saw continued results from our efforts to transition our fleet to more efficient and lower emissions equipment, closing the year with approximately 75% of our fleets utilizing next generation FORCE ® electric equipment or Tier IV DGB equipment. We now have four FORCE ® electric fleets in service with customers under contract with at least one additional FORCE ® fleet expected to be placed into service in 2025. During 2024, the impact of these investments was reflected in our performance, as our FORCE ® electric and Tier IV DGB equipment displaced almost 63 million gallons of diesel through the use of natural gas. +Additionally, in 2024, we established our new PROPWR SM power generation business, which we expect to continue to drive progress in this area, while also filling a need to supply reliable, dispatchable electric power services to support our customers’ operations. +We believe these investments and our focus on continued improvements in operating performance for these assets will support our competitiveness, while fostering a reduced emissions profile for our services. +We aspire to play a role in shaping the future of the Permian Basin by: +• +investing in education, +• +donating to first responders and veterans, +• +supporting health and wellness related organizations, and +• +focusing on charities that support local children. +We do this through various charities and other organizations that are heavily involved in the Permian Basin communities where we live and work. +The employee-created Positive United Morale Partners (“P.U.M.P.”) committee continued its charitable endeavors throughout 2024 by organizing and participating in: +• +wellness events, +• +monthly events at our regional food bank, +• +quarterly blood drives, +• +Thanksgiving meal drive, +• +school supply donation drive, and +• +Christmas in Action renovation project. +Our approach to safety is based on close collaboration between our customers and our employees in completing each job safely. +2024 saw consistent performance, and we continue to pride ourselves on our commitment to safety and our commitment to each other, which we demonstrate and support through operational initiatives like our: +• +dedicated heavy haul team to reduce driving hazards, +• +culture of training, accountability, and consistent improvement, and +• +long-term relationships with teammates, customers, and stakeholders. +4  |   ir.propetroservices.com +TABLE OF CONTENTS +Proxy Statement Summary +2024 Performance Highlights +2024 was a pivotal year for ProPetro. Despite a challenging market environment, we gained market share in our hydraulic fracturing and cementing segments, provided strong operational performance for our customers, and continued the implementation of our fleet transition—finishing 2024 with four FORCE ® electric fleets operating under contract with customers. Our FORCE ® electric fleets, along with our Tier IV DGB Dual-fuel fleets, now represent approximately 75% of our hydraulic fracturing capacity. The Company also demonstrated the flexibility of its dynamic capital allocation strategy by opportunistically executing on its share repurchase program, completing the strategic AquaProp SM acquisition and starting its new PROPWR SM business line. Importantly, the Company’s accomplished these goals while significantly reducing capital expenditures as compared to 2023. +As of the end of 2024, following the divestiture of our Vernal, Utah cementing operations, our operations are focused in the Permian Basin, where we provide pressure pumping, cementing and wireline services and power. Our team’s performance in 2024 was achieved despite market headwinds, including continued customer consolidation and capital discipline, pressure on pricing and lower activity across the broader oilfield services industry. Our reputation for providing high-quality service, our adoption of leading technologies such as our FORCE ® electric fleets and our Tier IV DGB Dual-fuel equipment, and our sustained, top-tier performance for our customers resulted in continuing strong demand for our services despite the challenging market. These achievements are a function of our employees’ commitment to excellence in efficient operations and safety and we intend to use the same attributes to drive the development of our new PROPWR SM power generation business in 2025 and beyond. +$1.4 Billion +140 Megawatts +Total Revenue +Mobile Power Generation Equipment +Ordered for PROPWR SM +$252 Million +7.2 Million +Net Cash Provided by Operating Activities +Shares Repurchased and Retired +PROPETRO  2025 Proxy Statement   |  5 +TABLE OF CONTENTS +Corporate Governance and Board Matters +Proposal 1 —Election of Directors +At the 2025 annual meeting, nine directors are nominated for election. Jack Moore was not nominated for re-election and accordingly, will retire from the Board effective as of the conclusion of the Annual Meeting. We intend to decrease the size of the Board from ten to nine directors following Mr. Moore’s retirement at the end of the Annual Meeting. All nominees are currently directors. Each director is to hold office until the next annual meeting of stockholders or until his or her successor is elected and qualified. Directors hold office until their successors have been elected or qualified or until their earlier death, resignation, removal, or disqualification. +The nominees have consented to being nominated and have expressed their intention to serve if elected. We believe that the nominees possess the professional and personal qualifications necessary for board service and have highlighted particularly noteworthy attributes for the nominees in their biographies below. We have no reason to believe that the nominees will be unable to serve if elected to office, and, to our knowledge, the nominees intend to serve the entire term for which election is sought. In the event any of the nominees should become unable to serve, or for good cause will not serve, as a director, it is intended that votes will be cast for a substitute nominee designated by the Board or the Board may elect to reduce its size. Only the nominees or substitute nominees designated by the Board will be eligible to stand for election as directors at the meeting. +In 2018, we entered into an investor rights agreement (the “Investor Rights Agreement”) with an affiliate of Pioneer Natural Resources Company (“Pioneer”) that provides Pioneer certain rights to designate nominees for election to the Board. Under the Investor Rights Agreement, Pioneer was granted: +(i) +the one-time right to designate an independent director to the Board and +(ii) +the right to designate a non-independent director to the Board for so long as a certain affiliate of Pioneer owns 5% or more of our outstanding common stock. +Pioneer, which is now a wholly owned subsidiary of Exxon Mobil Corporation (“ExxonMobil”), has designated Alex V. Volkov as a director. Mark S. Berg, who has served on the Board since February 2019 and was previously appointed as Pioneer’s designee, remained on the Board as an independent director. +VOTE REQUIRED +The proposal regarding the election of directors requires the approval of a plurality of the votes cast. This means that the nine nominees receiving the highest number of affirmative “FOR” votes will be elected as directors. Votes withheld and broker non-votes are not considered to be votes cast and, accordingly, will have no effect on the outcome of the vote on this proposal. +The Board of Directors unanimously recommends a vote FOR the election of each of the nine director nominees named below. +6  |   ir.propetroservices.com +TABLE OF CONTENTS +Corporate Governance and Board Matters +Nominees +All of the current members of the Board being nominated for reelection at the 2025 annual meeting are listed in the following table, and certain information concerning those directors follows the table: +ProPetro Board Committees +Age +Director since +Independent +Audit +Compensation +Nominating & +Corporate Governance +Phillip A. Gobe (1) +72 +2019 +Samuel D. Sledge (2) +38 +2021 +Spencer D. Armour III +71 +2013 +* +Mark S. Berg +66 +2019 +Anthony J. Best (3) +75 +2018 +G. Larry Lawrence +73 +2020 +* +Mary P. Ricciardello +69 +2023 +* +Michele Vion +65 +2020 +Alex V. Volkov +52 +2024 +Number of Meetings in 2024 +Board—10 +10 +5 +4 +Committee Chair +Committee Member +* +Audit Committee financial expert +(1) +Chairman of the Board +(2) +Chief Executive Officer +(3) +Lead Independent Director +PHILLIP A. GOBE +Phillip A. Gobe began serving as our Chairman of the Board in July of 2019 and as Executive Chairman in October 2019. Mr. Gobe was appointed as our Chief Executive Officer on March 13, 2020 and served in that role until August 31, 2021, at which point he was re-appointed as Executive Chairman. Mr. Gobe stepped down as Executive Chairman on March 31, 2022, and continues serving the Company as Chairman of the Board. Mr. Gobe served as a director of Pioneer from July 2014 until Pioneer’s merger with ExxonMobil in May 2024. Mr. Gobe previously served as Chairman of the Board for Pantheon Resources plc until his June 2023 retirement. He also previously served as a director of Scientific Drilling International and Pioneer Southwest Energy Partners L.P. Mr. Gobe joined Energy Partners, Ltd. as Chief Operating Officer in December 2004 and became President in May 2005, and served in those capacities until his retirement in September 2007. Mr. Gobe also served as a director of Energy Partners, Ltd. from November 2005 until May 2008. Prior to that, Mr. Gobe served as Chief Operating Officer of Nuevo Energy Company from February 2001 until its acquisition by Plains Exploration & Production Company in May 2004. Prior to that time, he held numerous operations and human resources positions with Vastar Resources, Inc. and Atlantic Richfield Company (“ARCO”) and its subsidiaries. Mr. Gobe has a Bachelor of Arts degree from The University of Texas and a Master of Business Administration degree from the University of Louisiana in Lafayette. Mr. Gobe’s extensive experience in the energy industry, including service as a director to public corporations in the industry, makes him well suited to serve as Chairman of the Board. +AGE 72 +CHAIRMAN OF THE BOARD +DIRECTOR AND CHAIRMAN OF THE BOARD since July 2019 +PROPETRO  2025 Proxy Statement   |  7 +TABLE OF CONTENTS +Corporate Governance and Board Matters +SAMUEL D. SLEDGE +Samuel D. Sledge has served as our Chief Executive Officer and as a member of our Board since August 31, 2021. Mr. Sledge previously served as the Company’s President from April 2021 to August 2021, and prior to that, he served as Chief Strategy and Administrative Officer beginning in March 2020. Mr. Sledge has significant experience with ProPetro having joined the Company in 2011. Mr. Sledge has served in various capacities throughout his tenure such as a Frac Technical Specialist and Technical Operations Manager where his duties included quality control, planning and logistics, and the development of the engineering program. Mr. Sledge has also served as ProPetro’s Vice President of Finance, Corporate Development, and Investor Relations where his responsibilities included financial planning and analysis, strategic initiatives, and investor relations. Mr. Sledge received a Bachelor of Business Administration and a Master of Business Administration from Baylor University. We believe Mr. Sledge’s experience in the energy industry and his significant experience in management roles at the Company make him well suited to serve as a director. +AGE 38 +CEO AND DIRECTOR since August 2021 +SPENCER D. ARMOUR III +Spencer D. Armour III has served as a member of our Board since February 2013. Mr. Armour has over 30 years of executive and entrepreneurial experience in the energy services industry. Mr. Armour served as President of PT Petroleum LLC in Midland, Texas from 2011 to 2018. He was the Vice President of Corporate Development for Basic Energy Services, Inc. from 2007 to 2008, which acquired Sledge Drilling Corp., a company Mr. Armour co-founded and served as Chief Executive Officer from 2005 to 2006. From 1998 through 2005, he served as Executive Vice President of Patterson-UTI Energy, Inc., which acquired Lone Star Mud, Inc., a company Mr. Armour founded and served as President from 1986 to 1997. Mr. Armour also served on the board of Patterson-UTI Energy, Inc. from 1999 to 2001. He currently serves on the boards of Viper Energy, Inc. and CES Energy Solutions Corp and is a partner at Geneses Investments. Mr. Armour received a B.S. in Economics from the University of Houston in 1977 and served on the University of Houston System Board of Regents from 2011 until 2018. We believe that Mr. Armour’s extensive experience in the energy services industry and his deep knowledge of industry dynamics within the Permian Basin make him well suited to serve as a director. +AGE 71 +DIRECTOR since February 2013 +INDEPENDENT DIRECTOR since March 2020 +COMMITTEES +• +Nominating and Corporate Governance +8  |   ir.propetroservices.com +TABLE OF CONTENTS +Corporate Governance and Board Matters +MARK S. BERG +Mark S. Berg has served as a member of our Board since February 2019. Mr. Berg is a senior energy industry executive with extensive commercial and operational experience, including leadership of strategic planning, business development, land, water management, completion and well services, environmental, sustainability, legal, government relations and communications. During his 20-year career with Pioneer, then an NYSE-listed independent oil and gas exploration and production company, first as Executive Vice President & General Counsel from 2005 to 2014 and then as Executive Vice President, Corporate Operations from 2014 until its merger with ExxonMobil in 2024, he played a key role in transforming the company into a major U.S. shale resource developer. He led the negotiating team for the $65 billion merger with ExxonMobil as well as multiple multibillion-dollar mergers, global divestitures, and cross-border joint ventures. Prior to joining Pioneer, Mr. Berg served from 2002 to 2004 as Senior Vice President, General Counsel & Secretary of Hanover Compressor Company, then an NYSE-listed company specializing in natural gas compression and processing, where he instituted disciplined internal controls, resolved a U.S. Securities and Exchange Commission (“SEC”) investigation, and settled securities class action litigation. From 1997 to 2002 he served as Executive Vice President & General Counsel of American General Corporation, a Fortune 200 diversified financial services company, and oversaw its $27 billion merger with American International Group. Mr. Berg began his career with the Houston based law firm Vinson & Elkins L.L.P. and served as a partner from 1990 through 1997, focused on mergers, acquisitions and international project development. From 2018 to 2020, he served on the board of directors of HighPoint Resources, an exploration and production company then listed on the NYSE. Mr. Berg currently serves as the Chairman of the Board of Crystal Clearwater Resources, a leading wastewater solutions company. Mr. Berg also serves on the boards of Oncor Electric Delivery Holdings Company LLC and Oncor Electric Delivery Company LLC, a regulated electricity transmission and distribution company. Additionally, Mr. Berg serves as the founding Vice Chairman of the Permian Strategic Partnership, a coalition of Permian Basin energy companies and higher education institutions focused on supporting public education, healthcare, road safety and workforce development in the Permian Basin region. +AGE 66 +DIRECTOR since February 2019 +INDEPENDENT DIRECTOR since May 2024 +Mr. Berg was initially appointed to the Board by Pioneer pursuant to the Investor Rights Agreement. +COMMITTEES +• +Nominating and Corporate Governance +• +Compensation +PROPETRO  2025 Proxy Statement   |  9 +TABLE OF CONTENTS +Corporate Governance and Board Matters +ANTHONY J. BEST +Anthony J. Best has served as a member of our Board since January 2018 and was elected to serve as Lead Independent Director in October 2019. Mr. Best has over 40 years of experience in the energy industry. Mr. Best retired as the Chairman of the board of Newpark Resources in May 2023. He was previously a director with Quantum Energy Partners’ (“Quantum”) portfolio companies, ExL Petroleum and Middle Fork Energy Partners, and also served as Senior Advisor for Quantum. Prior to joining Quantum, Mr. Best served in various roles with SM Energy Company, an oil and gas exploration company, commencing in 2006 as its President and Chief Operating Officer, and as its Chief Executive Officer from February 2007 through January 2015. From 2003 to 2005, Mr. Best served as President and Chief Executive Officer of Pure Resources, Inc., a Unocal development and exploration company. From 2000 to 2003, Mr. Best served as an independent consultant offering leadership and oil and gas consultation to energy companies and volunteer organizations, and from 1979 through 2000, Mr. Best served in various roles of increasing responsibility at ARCO, culminating in the position of President, ARCO Latin America. Mr. Best holds a Master of Science in Engineering Management degree from the University of Alaska and a Bachelor of Science degree in Mechanical Engineering from Texas A&M University. Prior to beginning his business career, Mr. Best served five years as an engineering officer in the United States Air Force. We believe that Mr. Best’s experience in significant management roles with companies operating in the Permian Basin and his broad experience in the energy industry make him well suited to serve as a director. +AGE 75 +INDEPENDENT DIRECTOR since January 2018 +LEAD INDEPENDENT DIRECTOR since October 2019 +COMMITTEES +• +Audit (Chair) +• +Compensation +G. LARRY LAWRENCE +G. Larry Lawrence was appointed to our Board in December 2020. Mr. Lawrence previously served as Audit Committee Chair of Legacy Reserves, LP’s Board of Directors, a role he held from 2006 to 2019. From January 2021 until June 2021, Mr. Lawrence served as the interim Chief Financial Officer of Natural Gas Services Group, a natural gas compression equipment provider, where he previously served as Chief Financial Officer for nine years. Prior to Natural Gas Services Group, Mr. Lawrence served as Chief Financial Officer for Lynx Operating Co. Inc., an oil and gas exploration company, for three years and as Chief Financial Officer for Pure Resources, Inc., an oil and gas E&P company, for two years. He has also held finance and management consulting positions for Parson Group, ARCO and Crescent Consulting. Mr. Lawrence earned his bachelor’s degree with an accounting major from Dillard University in New Orleans. We believe that Mr. Lawrence’s broad experience in the energy industry, including his service as a director and executive officer with various companies, makes him well suited to serve as a director. +AGE 73 +INDEPENDENT DIRECTOR since December 2020 +COMMITTEES +• +Audit +10  |   ir.propetroservices.com +TABLE OF CONTENTS +Corporate Governance and Board Matters +MARY P. RICCIARDELLO +Mary P. Ricciardello has served as a member of our Board since January 2023. Ms. Ricciardello currently serves as a director, Audit Committee member and Corporate Governance, Nominating and Sustainability Committee member at Eagle Materials Inc. Ms. Ricciardello previously served as a director at Devon Energy from 2008 to 2021, Noble Corporation from 2003 to 2020, Enlink Midstream from 2014 to 2018, Midstates Petroleum from 2010 to 2013 and U.S. Concrete from 2003 to 2010. Beginning in 1982, Ms. Ricciardello enjoyed a distinguished, two-decade career at Reliant Energy Inc. (“Reliant”) and its predecessor, Houston Lighting & Power Company, an electricity generation and retail services company, where she held several roles of increasing responsibility in the financial services and treasury functions. In 1996, Ms. Ricciardello was appointed as Reliant’s Vice President and Comptroller and she served as its Senior Vice President and Chief Accounting Officer from 1999 until her retirement in 2002. Ms. Ricciardello earned a Bachelor of Science degree in Business Administration from the University of South Dakota and an MBA from the University of Houston. She is also a Texas licensed Certified Public Accountant and earned a CERT Certificate in Cybersecurity from Carnegie Mellon University. We believe that Ms. Ricciardello is well suited to serve as a director based on her accounting and financial expertise and public company board and committee experience. +AGE 69 +INDEPENDENT DIRECTOR since January 2023 +COMMITTEES +• +Audit +• +Compensation +MICHELE VION +Michele Vion has served as a member of our Board since February 2020. Ms. Vion previously served as Vice President, Human Resources at HighPoint Resources Corporation, a successor to the Bill Barrett Corporation, an oil and gas E&P company, from August 2010 to September 2019. Ms. Vion was previously employed at Level 3 Communications, Inc., an international communications company, starting in 2006 and ultimately as Group Vice President of Human Resources up to January 2010. Ms. Vion also previously served as Vice President of Human Resources for Sun Microsystems, Inc., a computer networking company, for seven years. She also previously held senior human resource and client account management positions at Prudential Financial, Inc., an insurance and investment management company and JP Morgan, a global financial services firm. Prior to joining JP Morgan, Ms. Vion served in an accounting position as a Regional Controller for the Eastern Region at Sony Corporation of America. Ms. Vion previously served as Compensation Committee Chair and as a member of the Audit Committee of Boingo Wireless, Inc.’s Board of Directors, roles she held from 2018 until Boingo’s acquisition by Digital Colony Management, LLC in June 2021. Ms. Vion also served on the board and as Chair of the Compensation Committee and as member of the Audit Committee and Nominating and Corporate Governance Committee of Callidus Software Inc., a publicly-traded, cloud-based software company, from 2005 to 2016. Ms. Vion holds a Bachelor of Arts in East Asian Studies and Economics from Wesleyan University, has attended Stanford University’s Director’s College, and participated in the Financial Times’ Director Exchange. We believe that Ms. Vion is well suited to serve as a director based on her executive leadership experience in human resources and accounting and public company board and committee experience. +AGE 65 +INDEPENDENT DIRECTOR since February 2020 +COMMITTEES +• +Compensation (Chair) +• +Nominating and Corporate Governance +PROPETRO  2025 Proxy Statement   |  11 +TABLE OF CONTENTS +Corporate Governance and Board Matters +ALEX V. VOLKOV +Alex V. Volkov has served as a member of our Board since May 2024. Mr. Volkov is a seasoned executive with almost three decades of experience in various roles within ExxonMobil. Beginning his journey with the company in 1997, Mr. Volkov has navigated through diverse assignments spanning marketing, business development, supply chain logistics, and strategy development. His international experience includes serving as Vice President of Exxon Neftegas Limited in Moscow, overseeing commercial activities in Russia, and later moving to the United Kingdom to lead international natural gas marketing and trading efforts. In 2019, Mr. Volkov transitioned to Houston as Vice President, Global LNG Marketing, overseeing ExxonMobil’s LNG portfolio globally, a position he held until 2021. Between 2021 and 2023, he held positions as Vice President, Commercial & Power and then as Vice President, Strategy and Business Development, culminating in his current role the Vice President of Commercial & Integration overseeing Unconventional business development, land management, and midstream infrastructure activities. Mr. Volkov is a graduate of The University of Nizhni Novgorod, Russia, and holds an MBA from The University of Alabama. +AGE 52 +INDEPENDENT DIRECTOR since May 2024 +Mr. Volkov was appointed to the Board by Pioneer pursuant to the Investor Rights Agreement. +COMMITTEES +• +Nominating and Corporate Governance +12  |   ir.propetroservices.com +TABLE OF CONTENTS +Corporate Governance and Board Matters +Director Independence +The majority of the members of the Board at any given time must qualify as “independent” under the rules of the NYSE. +Our Board has undertaken a review of the independence of each of our directors and director nominees and has affirmatively determined that each of Messrs. Armour, Berg, Best, Lawrence, Moore and Volkov and Mses. Ricciardello and Vion are “independent,” as defined by the NYSE rules. Under the NYSE rules, a director can be independent only if  (a) the director does not trigger a categorical bar to independence and (b) our Board affirmatively determines that the director has no material relationship with the Company (either directly or as a partner, stockholder or officer of an organization that has a relationship with the Company). +Based on information provided by the directors and director nominees concerning their background, employment and affiliations, our Board has determined that these directors do not have a material relationship with the Company (either directly or as a partner, stockholder or officer of an organization that has a relationship with the Company). In making this determination, our Board considered the current and prior relationships that each of the directors has with us, and all other facts and circumstances our Board deemed relevant in determining independence, including any beneficial ownership of our capital stock by each of the directors. +Board Leadership Structure +PHILLIP A. +GOBE +SAMUEL D. +SLEDGE +ANTHONY J. +BEST +Chairman of the Board +Chief Executive Officer +Lead Independent Director +Our Board has adopted our Corporate Governance Guidelines, which are available on our website, www.propetroservices.com , in the “Governance” subsection of the “Investor Relations” section under “Governance Documents.” Our Corporate Governance Guidelines provide that if the Chairman of the Board is a member of management or does not otherwise qualify as independent, the independent directors may elect a lead independent director. Our Board believes it is important to retain the flexibility to determine whether the roles of Chairman and Chief Executive Officer should be separated or combined depending on the circumstances and changing needs of the Company from time to time. +While our Board has previously combined the roles of Chairman and Chief Executive Officer, at present, the Board has chosen to separate the positions of Chairman and Chief Executive Officer. The Board believes this structure enhances corporate governance and allows each of our Chairman and Chief Executive Officer to remain focused on their distinct roles, which, for the Chairman, primarily involves Board and corporate governance and, for the Chief Executive Officer, primarily involves day-to-day management leadership and implementing our corporate strategy. +Although the roles of Chairman and Chief Executive Officer are currently separated, the Chairman previously served as a member of management and does not currently qualify as independent. As such, the Board believes the role of Lead Independent Director enhances independent oversight of the Company and that Mr. Best should continue to serve as the Lead Independent Director. In this capacity, Mr. Best provides, in conjunction with the Chairman, leadership and guidance to the Board. The Lead Independent Director responsibilities are as follows: +• +Preside over all meetings of the Board at which the Chairman of the Board is not present, including any executive sessions of the independent directors +• +Approve Board meeting schedules and agendas +• +Act as the liaison between the independent directors and the Chairman of the Board +• +Communicate the Chief Executive Officer’s annual evaluation and compensation, after Compensation Committee approval +PROPETRO  2025 Proxy Statement   |  13 +TABLE OF CONTENTS +Corporate Governance and Board Matters +Furthermore, our Board believes that service on the boards of other public companies provides valuable governance and leadership experience that ultimately benefits the Company, but also recognizes that outside public board service requires a significant commitment of time and attention. Last year, our Board updated our Corporate Governance Guidelines to limit the number of public company boards on which a director may sit in accordance with best governance practices. As a result, under our Corporate Governance Guidelines: +• +our Chief Executive Officer may sit on no more than one additional outside public company board; +• +the Chairman of the Board and the Lead Independent Director may sit on no more than two additional outside public company boards; +• +non-management directors who are active executive officers of other public companies may sit on no more than one additional outside public board (including their own company board); and +• +all other directors may sit on no more than three additional outside public boards. +This practice helps ensure that our directors can give appropriate time and attention to the affairs of the Company. +Interested parties who wish to communicate with the Board, its committees, the Chairman, the Lead Independent Director, or any other individual director should follow the procedures described below under “Communication with our Board of Directors.” +To facilitate candid discussion among the Company’s directors, the non-management directors meet at regularly scheduled executive sessions presided over by our Chairman. In addition, at least once a year and in conjunction with a regular board meeting, the non-management directors who are independent under NYSE listing standards meet in executive session presided over by the Lead Independent Director. +Board of Directors and Risk Oversight +In the normal course of business, we are exposed to a variety of risks, including market risks relating to changes in commodity prices, interest rates, political risks and credit and investment risks. The Board oversees our strategic direction and in doing so considers the potential rewards and risks of our business opportunities and challenges and monitors the development and management of risks that impact our strategic goals. The Audit Committee assists the Board in fulfilling its oversight responsibilities by monitoring the effectiveness of our systems of financial reporting, auditing, internal controls and legal and regulatory compliance. The Nominating and Corporate Governance Committee assists the Board in fulfilling its oversight responsibilities with respect to the management of risks associated with Board organization, membership and structure, succession planning for our directors and executive officers, and corporate governance. The Compensation Committee assists the Board in fulfilling its oversight responsibilities by overseeing our compensation policies and practices. The Board does not believe that its role in the oversight of our risks affects the Board’s leadership structure. +Sustainability Initiatives +In October 2024, we published our second ProPetro ProEnergy ProPeople Sustainability Report, continuing our approach to disclosure and transparency regarding our operations. We encourage you to review this report, which may be accessed in the sustainability section of our website, for detailed information regarding our commitment and approach to sustainability. The report provides an overview of our sustainability initiatives and strategy, our governance, oversight, programs, and policies, and our performance on certain sustainability matters that are important to ProPetro and its stakeholders. The scope of the report includes all businesses, assets, and joint ventures that were owned and operated by ProPetro at the time of its publishing. The report was developed through the contributions of many employees from multiple functions across our Company, an effort that we believe reflects our culture of collaboration. +At ProPetro, our fundamental policy is to conduct business with honesty and integrity in accordance with the highest legal and ethical standards, along with a daily focus on safety and quality. As detailed in our sustainability report, we believe sustainability in our industry is created by offering competitive and effective services for our customers, while providing a value-generating enterprise for our shareholders, teammates, and community and minimizing negative environmental impacts from our operations. Guided by these values, and with a focus on creating a durable and sustainable business in our sector we pursue the pillars of our strategy—(1) optimizing operations and industrializing our business; (2) pursuing a more capital-light asset profile and next generation fleet by developing and integrating innovative technologies; (3) pursuing opportunistic strategic transactions to accelerate value creation and distribution; and (4) maintaining a strong balance sheet. Our strategic approach is designed to +14  |   ir.propetroservices.com +TABLE OF CONTENTS +Corporate Governance and Board Matters +support ProPetro’s core goals of generating robust earnings, increasing free cash flow, and building towards enhanced shareholder returns. Achievement of these strategic objectives is a key to our long-term success, and our sustainability initiatives are designed to support and enhance our pursuit of these goals. We believe our services play a vital role in the broader energy value chain by meaningfully contributing to the delivery of low-cost, dependable energy to end users and that our sustainability initiatives will enable us to continue to do so for years to come. +As part of our sustainability initiatives, we aim to reduce the overall environmental impact of our services by focusing on excellent execution and superior service quality. We also believe that the lower emissions profile generated by our next generation FORCE ® electric fleets and Tier IV DGB, Dual-fuel equipment aids in our competitiveness and represents an example of our continuing evolution and commitment to deploying the innovative tools necessary to support our customers’ efforts to be capital efficient while respecting the communities in which we work. We seek to meet our customers’ needs while also pursuing a consistent, sustainable service solution that will increasingly replace diesel with cleaner burning and cost-advantaged fuels. With continued, significant investments in and the successful deployments of our FORCE ® electric fleets and the consistently strong operational performance of our Tier IV DGB Dual-fuel equipment, 2024 reflected the sustained execution of our fleet transition strategy. Additionally, in 2024, we established our new PROPWR SM power generation business, which we expect to continue to drive progress in this area, while also filling a need to supply reliable, dispatchable electric power services to support our customers’ operations. During 2024, the impact of these investments was reflected in our performance, as our FORCE ® electric and Tier IV DGB equipment displaced almost 63 million gallons of diesel through the use of natural gas. We believe these investments and our focus on continued improvements in operating performance for these assets will support our competitiveness, while fostering a reduced emissions profile for our services. The initial success and continued deployment of our FORCE ® electric fleet solutions and the investment in our new PROPWR SM power generation business reflect the collaborative approach we take with our customers towards the increasing industrialization and electrification of the oilfield. +An additional focus of our sustainability initiatives is to give back to the area where we live and work by providing employment and supporting and encouraging our employees to commit to safety and investing in our community. We aspire to play a role in shaping the future of the Permian Basin by investing in education, donating to first responders and veterans, supporting health and wellness related organizations, and focusing on charities that support local children. We do this through various charities and other organizations that are heavily involved in the Permian Basin communities. The employee created P.U.M.P. committee continues to participate in wellness events, monthly events with a local foodbank, quarterly blood drives, Thanksgiving meal drives, school supply donation drives, and other important initiatives. +2024 also saw increased focus and further improvement in our human capital initiatives. We are particularly proud of our continued investment in our employee base as we implemented new training resources and systems and continued a leadership training initiative across all functions to support further development of existing front-line managers and senior leaders along with a class of developing leaders. Additionally, in 2024, we established a training and qualification program to allow employees to earn a commercial drivers’ license, developing a valuable skillset and qualification for the employees and filling a key need for the Company through internal growth and promotion. This program is yet another example of how we partner with our employees to foster development opportunities and drive our culture of collaboration and operational excellence. +Our safety approach is designed to foster close collaboration between our customers and our employees in completing each job safely. We pride ourselves on our commitment to safety and our commitment to each other, which we demonstrate and support through operational initiatives like our dedicated heavy haul team to reduce driving hazards; our culture of training, accountability, and consistent improvement; and our long-term relationships with teammates, customers and stakeholders. +Additional information and updates regarding our sustainability initiatives can be found under the “Sustainability” tab of our website at www.propetroservices.com . +Communicating with Our Board of Directors +Stockholders and other interested parties may communicate with our Board by writing to: +ProPetro Holding Corp. +Attention: General Counsel and Corporate Secretary +P.O. Box 873 +Midland, Texas 79702 +PROPETRO  2025 Proxy Statement   |  15 +TABLE OF CONTENTS +Corporate Governance and Board Matters +Stockholders may submit their communications to the Board, the independent directors, any committee of the Board or individual directors on a confidential or anonymous basis by sending the communication in a sealed envelope marked “Stockholder Communication with Directors” and clearly identifying the intended recipient(s) of the communication. +Our General Counsel and Corporate Secretary will review each communication and will forward the communication, as expeditiously as reasonably practicable, to the addressees if: +(1) +the communication complies with the requirements of any applicable policy adopted by the Board relating to the subject matter of the communication and +(2) +the communication falls within the scope of matters generally considered by the Board. +To the extent the subject matter of a communication relates to matters that have been delegated by the Board to a committee or to an executive officer of the Company, our General Counsel and Corporate Secretary may forward the communication to the executive officer or chairman of the committee to which the matter has been delegated. The acceptance and forwarding of communications to the members of the Board or an executive officer does not imply or create any fiduciary duty of the Board members or executive officer to the person submitting the communications. +Information may be submitted confidentially and anonymously. However, the Company may be obligated by law to disclose the information or identity of the person providing the information in connection with government or private legal actions and in other circumstances. The Company’s policy is not to take any adverse action, and not to tolerate any retaliation against any person for asking questions or making good faith reports of possible violations of law, our policies or our Code of Ethics & Conduct. +Annual Meeting Attendance +While the Company encourages, but does not require, directors to attend annual meetings of stockholders, all directors are expected to attend meetings of the Board (and any committees thereof on which they serve) either in person or telephonically unless exigencies prevent them from attending. Each incumbent director attended at least 75% of the aggregate of   (1) the total number of meetings of the Board (held during the period for which he or she has been a director) and (2) the total number of meetings of committees of the Board on which he or she served (during the periods that he or she served). Our non-employee directors meet at regularly scheduled executive sessions presided over by our Lead Independent Director. Additionally, our independent directors meet at least once a year without members of management or non-independent directors present. All of our directors who were members of the Board at the time of our 2024 annual meeting of stockholders attended the meeting. +Compensation Committee Interlocks and Insider Participation +During the year ended December 31, 2024, the Compensation Committee was comprised of Ms. Vion and Messrs. Moore and Best from January 1, 2024 until November 13, 2024, and was comprised of Mses. Vion and Ricciardello and Messrs. Berg and Best from November 13, 2024 until December 31, 2024. Ms. Vion serves as committee chair. No executive officer of the Company served as a member of the board of directors or compensation committee of any other entity that has one or more executive officers serving as a member of our Board or Compensation Committee. +Board and Committee Activity and Structure +Our Board is governed by our certificate of incorporation, bylaws, the Investor Rights Agreement, charters of the standing committees of the Board, and the laws of the State of Delaware. +On December 31, 2018, we entered into the Investor Rights Agreement with an affiliate of Pioneer. The Investor Rights Agreement provides that Pioneer was granted: +(i) +the one-time right to designate an independent director to the Board and +(ii) +the right to designate a non-independent director to the Board for so long as Pioneer owns 5% or more of the Company’s outstanding common stock. +Pioneer, which is now a wholly owned subsidiary of ExxonMobil, has designated Alex V. Volkov as a director. Mark S. Berg, who has served on the Board since February 2019 and was previously appointed as Pioneer’s designee, remained on the Board as an independent director. +16  |   ir.propetroservices.com +TABLE OF CONTENTS +Corporate Governance and Board Matters +During 2024, our Board held 10 meetings. There are currently three standing committees of the Board: +• +the Audit Committee, +• +the Compensation Committee, and +• +the Nominating and Corporate Governance Committee. +Members serve on these committees until their resignation or until as otherwise determined by our Board. The composition of the Board committees complies with the applicable rules of the NYSE and applicable law. Our Board has adopted a written charter for each of the standing committees, which can be found under “Governance Documents” in the “Governance” subsection of the “Investors” section of our website at www.propetroservices.com . +In addition to the above governing documents, our Code of Ethics & Conduct that applies to all of our employees, as well as each member of the Board, can also be found under “Governance Documents” in the “Governance” subsection of the “Investors” section of our website at www.propetroservices.com . The composition and responsibilities of each of the standing committees of our Board are as follows: +AUDIT COMMITTEE +MEETINGS IN 2024 : 10 +KEY RESPONSIBILITIES +Our Audit Committee is directly responsible for, among other things, the appointment, compensation, retention and oversight of our independent registered public accounting firm. +The oversight of our independent public accounting firm includes: +• +reviewing the plans and results of the audit engagement with the firm, +• +approving any additional professional services provided by the firm, and +• +reviewing the independence of the firm. +The Audit Committee is also responsible for discussing the effectiveness of the internal controls over financial reporting with our independent registered public accounting firm and relevant financial management. +REPORT +The Report of our Audit Committee appears on page 73 of this proxy statement. +MEMBERS +Anthony J. +Best, Chair +G. Larry +Lawrence +Mary P. +Ricciardello +During the year ended December 31, 2024, the members of the Audit Committee were Ms. Ricciardello and Messrs. Best and Lawrence. The Audit Committee is presently comprised of Ms. Ricciardello and Messrs. Best and Lawrence, with Mr. Best serving as committee chair. +QUALIFICATIONS +Our Audit Committee is comprised solely of  “independent” directors, as defined under and required by the NYSE rules and Rule 10A-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). +Our Board has determined that each of Messrs. Armour and Lawrence, and Ms. Ricciardello qualify as an “audit committee financial expert,” as defined by the rules under the Exchange Act. +PROPETRO  2025 Proxy Statement   |  17 +TABLE OF CONTENTS +Corporate Governance and Board Matters +COMPENSATION COMMITTEE +MEETINGS IN 2024 : 5 +KEY RESPONSIBILITIES +The Compensation Committee is responsible for, among other things, overseeing the discharge of the responsibilities of the Board relating to compensation of the Company’s officers and directors, reviewing and assessing the Company’s initiatives relating to human capital management, and reviewing the succession planning strategies of the Company. +In carrying out these responsibilities, the Compensation Committee reviews all components of executive compensation for consistency with our compensation philosophy and with the interests of our stockholders. +REPORT +The Report of our Compensation Committee appears on page 46 of this proxy statement. +MEMBERS +Michele +Vion, Chair +Mark S. Berg +Mary P. +Ricciardello +Anthony J. +Best +From January 1, 2024 to November 13, 2024, the members of the Compensation Committee were Ms. Vion and Messrs. Best and Moore. The Compensation Committee is presently comprised of Mses. Ricciardello and Vion and Messrs. Berg and Best, with Ms. Vion serving as committee chair. +QUALIFICATIONS +Our Compensation Committee consists solely of  “independent” directors, as defined under and required by the NYSE rules and “non-employee directors” under Section 16 of the Exchange Act. +18  |   ir.propetroservices.com +TABLE OF CONTENTS +Corporate Governance and Board Matters +NOMINATING AND CORPORATE +GOVERNANCE COMMITTEE +MEETINGS IN 2024: 4 +KEY RESPONSIBILITIES +The Nominating and Corporate Governance Committee is responsible for, among other things: +• +identifying individuals qualified to become Board members; +• +selecting or recommending director nominees for each election of directors to the Board; +• +developing and recommending criteria for selecting qualified director candidates to the Board; +• +considering committee member qualifications, appointments and removals; +• +recommending corporate governance principles, codes of conduct and compliance mechanisms; +• +providing oversight in the evaluation of the Board and each committee thereof; +• +overseeing our sustainability initiatives; and +• +developing an appropriate succession plan for our chief executive officer pursuant to our Corporate Governance Guidelines. +MEMBERS +Jack B. +Moore, Chair +Spencer D. +Armour III +Mark S. +Berg +Michele +Vion +Alex V. +Volkov +From January 1, 2024 to November 13, 2024, the members of the Nominating and Corporate Governance Committee were Messrs. Armour and Moore and Mses. Ricciardello and Vion. The Nominating and Corporate Governance Committee is presently comprised of Messrs. Armour, Berg, Moore and Volkov and Ms. Vion, with Mr. Moore serving as committee chair. The Board will elect a new chair of the Nominating and Corporate Governance Committee following the expiration of Mr. Moore’s term as a member of the Board effective as of the conclusion of the Annual Meeting. +QUALIFICATIONS +Our Nominating and Corporate Governance Committee consists solely of  “independent” directors, as defined under and required by the NYSE rules. +Role of the Board, Compensation Committee and Our Executive Officers +Executive compensation decisions are typically made on an annual basis by the Compensation Committee with input from our Chief Executive Officer. Specifically, after reviewing relevant market data and surveys within our industry, our Chief Executive Officer typically provides recommendations to the Compensation Committee regarding the compensation levels for our existing named executive officers (the “Named Executive Officers”) and our executive compensation program as a whole. Our Chief Executive Officer generally attends all Compensation Committee meetings. After considering these recommendations, the Compensation Committee typically meets in executive session and adjusts base salary levels and non-equity award targets. In addition, the Compensation Committee determines the achievement of non-equity Incentive Award Plan metrics and the amount of equity awards from the Incentive Award Plan to be granted to each of our Named Executive Officers. In making executive compensation recommendations, our Chief Executive Officer considers each Named Executive Officer’s performance during the year, the Company’s performance during the year, as well as comparable company compensation levels. While the Compensation Committee gives considerable weight to our Chief Executive Officer’s recommendations on compensation matters, the Compensation Committee has the final decision-making authority on all executive compensation matters. +Role of External Advisors +The Compensation Committee engaged Pearl Meyer & Partners, LLC (“Pearl Meyer”) in 2021 to assist the Compensation Committee and the Board in evaluating, designing, and implementing compensation practices. +PROPETRO  2025 Proxy Statement   |  19 +TABLE OF CONTENTS +Corporate Governance and Board Matters +The Compensation Committee reviews and assesses the independence and performance of its executive compensation consultant in accordance with applicable SEC and NYSE rules and regulations on an annual basis to confirm that the consultant is independent and meets all applicable statutory and regulatory requirements. +Director Nominations Process +The Nominating and Corporate Governance Committee may utilize a variety of methods for identifying potential nominees for directors, including considering potential candidates who come to their attention through current officers, directors, professional search firms, or other persons. Once a potential nominee has been identified, the Nominating and Corporate Governance Committee evaluates whether the nominee has the appropriate skills and characteristics required to become a director considering the then current make-up of the Board. This assessment includes an evaluation of the nominee’s judgment and skills, such as experience at a strategy and policy setting level, financial sophistication, leadership, and objectivity—all in the context of the perceived needs of the Board at that point in time. One of the director nominees, Mr. Volkov, was not recommended for nomination by the Nominating and Corporate Governance Committee but rather was appointed pursuant to the Investor Rights Agreement. +Our updated corporate governance guidelines, effective as of February 2024, reflect the Nominating and Corporate Governance Committee and the Board are committed to considering diversity when identifying candidates for nomination to the Board. Our Board believes that at a minimum all members of the Board should have the highest professional and personal ethics and values. In addition, each member of the Board must be committed to increasing stockholder value and should have enough time to carry out his or her responsibilities as a member of the Board. +Our Board monitors the mix of specific experience, qualifications, and skills of its directors to assure that the Board, as a whole, has the necessary tools to perform its oversight function effectively in light of the Company’s business and structure. +Stockholders may recommend individuals to the Nominating and Corporate Governance Committee for consideration as potential director candidates by submitting the names of the recommended individuals, together with appropriate biographical information and background materials, to: +ProPetro Holding Corp. +The Nominating and Corporate Governance Committee +ProPetro Holding Corp. +c/o General Counsel and Corporate Secretary +P.O. Box 873 +Midland, Texas 79702 +In the event there is a vacancy, and assuming that appropriate biographical and background material has been provided on a timely basis, the Nominating and Corporate Governance Committee will evaluate stockholder-recommended candidates by following substantially the same process, and applying substantially the same criteria, as it follows for candidates submitted by others. +Director Orientation and Education +We provide each new director with an orientation that consists of meeting with senior management and others on our business operations, strategic plans, significant accounting and risk management issues, corporate governance, compliance, and key policies and practices. +The orientation sessions are tailored to the particular director depending on their orientation needs and generally include an overview of board fiduciary duties, board independence, and public company reporting requirements. New directors are also provided the most recent reports presented to the Board and its committees by management and external advisors. +Each director is expected to participate in continuing educational programs as necessary to maintain the expertise necessary to perform his or her responsibilities as a director. In this regard, from time to time we provide pertinent articles, white papers, and information relating to our business, financial affairs, risks, competitors, corporate governance, areas of focus in shareholder activism, sustainability, environmental and social trends, proxy advisory firm ratings, and changes in legal and regulatory issues. +We may also coordinate training and educational sessions for directors from outside experts and provide directors with tours of our facilities. +20  |   ir.propetroservices.com +TABLE OF CONTENTS +Corporate Governance and Board Matters +Certain Relationships and Related Party Transactions +RELATED PARTY TRANSACTIONS +Operations and Maintenance Yards +The Company rents three yards from South Midkiff Partners, LLC, an entity partially owned by Spencer D. Armour III, a director, and David Sledge, the father of Sam Sledge, our Chief Executive Officer. Total annual rent expense in 2024 for each of the three yards was approximately $0.03 million, $0.1 million, and $0.1 million, respectively. +Transportation and Equipment Rental +Adam Muñoz, our President and Chief Operating Officer, has a family relationship with an employee of J&M Burns Transportation, an entity that provides transportation services to the Company. The employee receives a portion of his compensation from J&M Burns Transportation based on the amount of services sold by him to customers, including the Company. The Company incurred approximately $14.2 million in expense for the year ended December 31, 2024 for services provided to the Company by J&M Burns Transportation. +Executive Officer Family Members +Oscar M. Dominguez is our Vice President of Hydraulic Fracturing Operations and the brother-in-law of Adam Muñoz. Mr. Dominguez received total compensation of approximately $983,000 for his services for the year ended December 31, 2024 (including approximately $841,000 cash compensation and approximately $142,000 non-cash equity compensation). +Roger Dominguez is our Supply Chain Logistics Manager and the brother-in-law of Adam Muñoz. Mr. Dominguez received total compensation of approximately $292,000 for his services for the year ended December 31, 2024 (including approximately $249,000 cash compensation and approximately $43,000 non-cash equity compensation). +Pioneer +On December 31, 2018, we consummated the purchase of certain pressure pumping assets and real property from Pioneer and Pioneer Pumping Services (the “Pioneer Pressure Pumping Acquisition”) in exchange for 16.6 million shares of our common stock and $110.0 million in cash. In May 2024, Pioneer merged with and into a wholly owned subsidiary of ExxonMobil after which ExxonMobil became the owner of these shares. We currently provide pressure pumping, wireline and other services to ExxonMobil and previously provided such services to Pioneer. +On April 22, 2024, we entered into a sub-agreement for Hydraulic Fracturing Services with XTO Energy Inc., (“XTO”) a wholly owned subsidiary of ExxonMobil, pursuant to which we provide hydraulic fracturing, wireline and pumpdown services with two committed FORCE® electric-powered hydraulic fracturing fleets with the option to add a third FORCE® fleet (also with wireline and pumpdown services) for a period of three years or for contracted hours, whichever occurs last with respect to each fleet, subject to certain termination and release rights. +Revenue from services provided to ExxonMobil (including Pioneer and XTO) subsequent to Pioneer’s merger with ExxonMobil was approximately $187.7 million during the year ended December 31, 2024. Revenue from services provided to Pioneer (including equipment reservation fees) prior to its merger with ExxonMobil was approximately $6.8 million during the year ended December 31, 2024. +As of December 31, 2024, the total accounts receivable due from ExxonMobil (including Pioneer and XTO), including estimated unbilled receivable for services we provided, amounted to $70.8 million and the amount due to ExxonMobil (including Pioneer and XTO) was $0. +PROPETRO  2025 Proxy Statement   |  21 +TABLE OF CONTENTS +Corporate Governance and Board Matters +POLICIES AND PROCEDURES FOR RELATED PARTY TRANSACTIONS +Any request for us to enter into a transaction with an executive officer, director, principal stockholder or any of such persons’ immediate family members or affiliates, among others, in which the amount involved exceeds $120,000, must first be presented to our Audit Committee for review, consideration and approval. All our directors and executive officers are required to report to the Audit Committee chair any such related person transaction. In approving or rejecting the proposed agreement, our Audit Committee shall consider the facts and circumstances available and deemed relevant to the Audit Committee, including, but not limited to, whether the transaction is on terms comparable to those that could be obtained in arm’s length dealings with an unrelated third party, the extent of the related party’s interest in the transaction and the conflicts of interest and corporate opportunity provisions of our certificate of incorporation. If we should discover related person transactions that have not been approved, the Audit Committee will be notified and will determine the appropriate action, including ratification, revision, or termination of such transaction. +Insider Trading Compliance Policy +The Company has an Insider Trading Compliance Policy (“Insider Trading Policy”) governing the purchase, sale and other dispositions of the Company’s securities that applies to directors, officers (as defined therein), employees and to the Company itself in connection with such transactions of its own securities. We believe our Insider Trading Policy and repurchase procedures are reasonably designed to promote compliance with insider trading laws, rules and regulations, and the listing standards applicable to the Company. A copy of the Company’s Insider Trading Policy was filed as Exhibit 19.1 to its Annual Report on Form 10-K for the year ended December 31, 2024. +Director Compensation +Our Amended and Restated ProPetro Holding Corp. Non-Employee Director Compensation Policy (the “Director Compensation Policy”) provides that each eligible non-employee director receives the following annually: +No changes were made to the Director Compensation Policy during 2024. All equity retainers consist of awards of restricted stock units (“RSUs”) that will vest in full on the earliest to occur of: (i) the first anniversary of the grant date, (ii) the day immediately preceding the first annual meeting of stockholders following the grant date, and (iii) the occurrence of a Change in Control, subject, in each case, to continuous service through the applicable vesting date. +The portion of the annual equity retainer that would have vested in the year following a non-employee director’s separation from service due to his or her death or disability will vest upon such separation from service. All annual retainers are pro-rated based on days of service for non-employee directors who join the Board during the applicable calendar year. The members of the Board are also entitled to reimbursement of expenses incurred in connection with attendance at Board and committee meetings in accordance with Company policy. +22  |   ir.propetroservices.com +TABLE OF CONTENTS +Corporate Governance and Board Matters +The following table summarizes the compensation paid for services provided by our non-employee directors during 2024. +Name +Fees Earned or Paid in Cash (1) +($) +Stock Awards (2)(3) +($) +Total +($) +Spencer D. Armour III +90,000 +154,993 +244,993 +Mark S. Berg (4) +59,588 +154,997 +214,585 +Anthony J. Best +130,000 +154,993 +284,993 +Phillip A. Gobe +140,000 +154,993 +294,993 +G. Larry Lawrence +90,000 +154,993 +244,993 +Jack B. Moore +105,000 +154,993 +259,993 +Mary P. Ricciardello +90,000 +154,993 +244,993 +Michele Vion +105,000 +154,993 +259,993 +Alex V. Volkov (5) +― +― +― +(1) +Reflects annual cash retainer payments made pursuant to the Director Compensation Policy. +(2) +Reflects the grant date fair value of RSU awards on the date of grant computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 (“FASB ASC Topic 718”). For information regarding assumptions underlying the valuation of equity awards, see Note 14 to the Consolidated Financial Statements included in our 2024 Annual Report on Form 10-K. +(3) +The following table sets forth the aggregate number of outstanding stock awards held by each of our non-employee directors on December 31, 2024. With the exception of Mr. Sledge who held 21,750 stock options as of December 31, 2024, none of our directors held stock options as of December 31, 2024. +Name +Aggregate Number of Stock +Awards +(#) +Spencer D. Armour III +17,939 +Mark S. Berg (a) +16,454 +Anthony J. Best +17,939 +Phillip A. Gobe +17,939 +G. Larry Lawrence +17,939 +Jack B. Moore +17,939 +Mary P. Ricciardello +17,939 +Michele Vion +17,939 +Alex V. Volkov (b) +― +(a) +Mr. Berg’s awards were granted at a later date than the awards to other directors. As a result of a change in the stock price between grant dates he received fewer awards but the value of his awards for 2024 is approximately the same as that of other non-employee directors. +(b) +Mr. Volkov elected not to be compensated for his service as a director. +(4) +Mr. Berg received a prorated cash retainer for 2024, effective May 3, 2024. Mr. Berg began receiving compensation for his role as a director of the Company following the completion of Pioneer’s merger with ExxonMobil, after which he was no longer serving as the Pioneer designee to the Board. +(5) +Mr. Volkov has elected not to be compensated for his service as a director. +PROPETRO  2025 Proxy Statement   |  23 +TABLE OF CONTENTS +Corporate Governance and Board Matters +Non-Employee Director Stock Ownership Guidelines +We maintain a non-employee director stock ownership policy that is applicable to all our eligible non-employee directors. Pursuant to this policy, each non-employee director is encouraged to hold, on and following the later of the fifth anniversary of: (i) the closing of our initial public offering (“IPO”) and (ii) the non-employee director’s election or appointment to the Board, shares of our common stock or certain equity awards (valued based on the closing price of our common stock) with a value equal to or in excess of 300% of the non-employee director’s annual cash retainer, as such threshold may be amended by the Nominating and Corporate Governance Committee from time to time. +Outstanding awards of unvested time-based RSUs will count toward a non-employee director’s qualifying shareholdings to the extent the RSUs are not settled in cash. A non-employee director who is not compensated for his or her services as non-employee director pursuant to the Director Compensation Policy or any other plan, policy or agreement then in effect is not subject to the guidelines set forth in our director stock ownership policy. +As of December 31, 2024, each of our non-employee directors was in compliance with these ownership guidelines. The stock ownership guidelines have historically not applied to Mr. Berg since he did not receive compensation for his services as a non-employee director until 2024. However, because Mr. Berg began receiving compensation for his services as a director in 2024, he is subject to the stock ownership guidelines as of 2024 and will have five years thereafter to accumulate holdings in order to comply with the ownership guidelines. A description of each non-employee director’s beneficial ownership of the Company’s common stock is included in the section entitled “Security Ownership of Certain Beneficial Owners and Management.” +24  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Officers +Our executive officers serve at the direction of our Board. All of our executive officers and certain other key officers are listed in the following table, and certain information concerning those officers, except for Mr. Sledge, who is a member of the Board, follows the table. +Name +Age +Position with ProPetro Holding Corp +Executive Officer +since +Samuel D. Sledge +38 +Chief Executive Officer and Director +2020 +Adam Muñoz +42 +President and Chief Operating Officer +2020 +John J. “Jody” Mitchell +42 +General Counsel and Corporate Secretary +2023 +Shelby Fietz +43 +Chief Commercial Officer +2023 +Celina A. Davila +44 +Chief Accounting Officer +2023 +See “Corporate Governance and Board Matters—Nominees” for biographical information for Mr. Sledge. +ADAM MUÑOZ +Adam Muñoz has served as our President and Chief Operating Officer since August 2021, and prior to that, he served as Chief Operating Officer since January 2021 and served as Senior Vice President of Operations since March 2020. Mr. Muñoz joined the Company in 2010 to initiate ProPetro’s Permian pressure pumping operation. Prior to joining ProPetro, Mr. Muñoz held sales and operations roles at Frac Tech Services and Weatherford International. Since joining ProPetro, Mr. Muñoz has served as the Director of Business Development and Technical Services where he was responsible for overseeing the growth of the hydraulic fracturing operations as well as managing the department’s day-to-day technical services. Mr. Muñoz has most recently served as the Vice President of Frac Services where his duties included leading the hydraulic fracturing division through specific efforts to increase operational efficiencies and maximize financial productivity. Mr. Muñoz received a Bachelor of Business Marketing from The University of Texas at the Permian Basin. +AGE 42 +PRESIDENT AND CHIEF OPERATING OFFICER since October 2020 +PROPETRO  2025 Proxy Statement   |  25 +TABLE OF CONTENTS +Executive Officers +JOHN J. “JODY” +MITCHELL +Jody Mitchell has served as our General Counsel and Corporate Secretary since January 2023. Prior to his appointment as General Counsel, Mr. Mitchell served as the Company’s Vice President and Deputy General Counsel since April 2021. Before joining the Company, Mr. Mitchell served in various roles at Concho Resources Inc., a hydrocarbon exploration company acquired by ConocoPhillips in 2021 (“Concho”), from 2014 to 2021, including Director of Marketing and Midstream and, prior to that, Associate General Counsel. Before joining Concho, Mr. Mitchell served as counsel supporting the upstream and midstream businesses at Petrohawk Energy Corporation (“Petrohawk”) and at BHP Billiton following BHP Billiton’s acquisition of Petrohawk. Mr. Mitchell began his career as an associate at Locke Lord Bissell & Liddell LLP, where he concentrated on oil, gas and energy litigation and construction litigation. Mr. Mitchell holds a Bachelor of Arts from the University of Texas and a Juris Doctor from the University of Houston Law Center. +AGE 42 +GENERAL COUNSEL AND CORPORATE SECRETARY since January 2023 +SHELBY K. FIETZ +Shelby Fietz has served as our Chief Commercial Officer since November 2023. Mr. Fietz joined ProPetro in 2012, and prior to his appointment as Chief Commercial Officer, Mr. Fietz served as the Company’s Vice President of Commercial, leading the business development, sales, supply chain, and marketing functions. He also previously held the position of Vice President of Business Development, Sales and Marketing, while also leading our supply chain organization. Prior to his appointment as an officer, Mr. Fietz held roles of increasing responsibility within ProPetro in both operations and business development. Mr. Fietz also serves in a leadership capacity with the Permian Basin Chapter of the Energy Workforce and Technology Council. Mr. Fietz holds a Bachelor of Science from Angelo State University. +AGE 43 +CHIEF COMMERCIAL SECRETARY since November 2023 +CELINA M. DAVILA +Celina Davila has served as our Chief Accounting Officer since November 2023. Prior to her appointment as Chief Accounting Officer, Ms. Davila served as the Company’s Director of Accounting and Corporate Controller since August 2022 and as Corporate Controller since October 2019. Ms. Davila joined the Company in January 2019 as Hydraulic Fracturing Controller. Prior to joining the Company, Ms. Davila served in various roles at Pioneer, a leading independent natural resources company, from 2012 to 2018, including Accounting Manager and, prior to that, Accounting Supervisor. Ms. Davila began her career as a Senior Auditor at Johnson, Miller, and Co. Ms. Davila is a Certified Public Accountant and holds a Bachelor of Arts in Accounting and a Master of Business Administration degree from Texas Tech University. +AGE 44 +CHIEF ACCOUNTING OFFICER since November 2023 +26  |   ir.propetroservices.com +TABLE OF CONTENTS +EXECUTIVE COMPENSATION +Proposal 2 —Advisory Vote to Approve Named Executive Officer Compensation +We are asking stockholders to approve, on a non-binding advisory basis, the compensation of our Named Executive Officers as disclosed in this proxy statement. As described below in “Compensation Discussion and Analysis,” the Compensation Committee has structured our executive compensation program to achieve the following guiding principles: +• +Reward executives for exceptional performance and hold them accountable for underperformance in a manner that adheres to our values +• +Align executive interests with those of our stockholders by making a substantial portion of compensation performance-based and “at risk” +• +Provide the necessary flexibility to respond to varying market conditions and changing circumstances with a structure that ensures accountability in our cyclical and volatile business +• +Remain competitive in our industry to attract, retain, and motivate the talent that is necessary to achieve our financial and strategic goals +• +Be internally consistent and equitable +We urge stockholders to read the section entitled “Compensation Discussion and Analysis” beginning on page 29 of this proxy statement, which describes in more detail how our executive compensation policies and procedures operate and are designed to achieve our compensation objectives, as well as the compensation tables and narrative included therein beginning on page 47 , which provide detailed information on the compensation of our Named Executive Officers. The Compensation Committee and the Board believe that the policies and procedures articulated in the “Compensation Discussion and Analysis” are effective in achieving our goals and that the compensation of our Named Executive Officers reported in this proxy statement has and will contribute to the Company’s recent and long-term success. +In accordance with Section 14A of the Exchange Act, and as a matter of good corporate governance, we are asking stockholders to approve the following resolution at the annual meeting: +RESOLVED , that the stockholders of the Company approve, on a non-binding advisory basis, the compensation of the Company’s Named Executive Officers as disclosed in the Compensation Discussion and Analysis section and the related compensation tables, notes and narrative in the proxy statement for the Company’s 2025 annual meeting. +Vote Required +This advisory resolution, commonly referred to as a “say-on-pay” resolution, is non-binding on the Board. Although non-binding, the Board and the Compensation Committee will review and consider the voting results when making future decisions regarding our executive compensation program. +The affirmative “FOR” vote of the holders of a majority of the shares represented at the meeting (in person or by proxy) and entitled to vote is required to approve this Proposal No. 2. Brokers do not have discretion to vote on this proposal without your instruction. If you do not instruct your broker how to vote on this proposal, your broker will deliver a non-vote on this proposal. Abstentions will have the same effect as a vote “AGAINST” Proposal No. 2. Broker non-votes will have no effect on Proposal No. 2. +We currently intend to hold the next non-binding advisory vote to approve the compensation of our Named Executive Officers at our 2026 annual meeting of stockholders unless our Board modifies its policy of holding this vote on an annual basis. +The Board of Directors unanimously recommends a vote FOR the approval of the compensation of our Named Executive Officers. +PROPETRO  2025 Proxy Statement   |  27 +TABLE OF CONTENTS +EXECUTIVE COMPENSATION +Proposal 3 —Advisory Vote on the Frequency of Future Advisory Votes on Named Executive Officer Compensation +Pursuant to Section 14A of the Exchange Act, we are asking the Company’s stockholders to vote on whether future advisory votes on executive compensation of the nature reflected in Proposal 2 above should occur every year, every two years or every three years. Such frequency vote must occur at least once every six years. +After careful consideration, the Board concluded that an annual advisory vote on executive compensation is the most appropriate alternative for the Company. The Board considered various factors in reaching its conclusion, including, among others, stockholders’ ability to provide input on executive compensation and corporate governance matters, stockholder feedback and market practices. The Board believes that an annual advisory vote on executive compensation will allow our stockholders to provide timely, direct input on the Company’s executive compensation philosophy, policies and practices as disclosed in the Company’s proxy statement each year, which is consistent with the Company’s efforts to engage in an ongoing dialogue with our stockholders on executive compensation and corporate governance matters. +Prior to voting on this proposal, we urge stockholders to read “Compensation Discussion and Analysis” beginning on page 29 of this proxy statement, which describes in more detail how our executive compensation policies and procedures operate and are designed to achieve our compensation objectives, as well as the “Executive Compensation Tables” and the related narrative beginning on page 47 , which provide detailed information on the compensation of our Named Executive Officers. +Stockholders will be able to specify one of four choices for this proposal on the proxy card: “ONE YEAR”, “TWO YEARS”, “THREE YEARS” or “ABSTAIN”. Stockholders are not voting to approve or disapprove the Board’s recommendation. This advisory vote on the frequency of future advisory votes on executive compensation will be considered by the Board but is not binding on the Board or the Company in any way. Notwithstanding the Board’s recommendation and the outcome of the stockholder vote, the Board may in the future decide to conduct advisory votes on a more or less frequent basis and may vary its practice based on factors such as discussions with stockholders and the adoption of material changes to our executive compensation programs. +Vote Required +Generally, approval of any matter presented to stockholders requires a majority of the votes cast on the proposal. However, because this vote is advisory and non-binding, if none of the frequency options being voted on by stockholders receives a majority of the votes cast on the proposal, the option receiving the greatest number of votes will be considered the frequency recommended by the Company’s stockholders. +Board Recommendation +The Board unanimously recommends a vote of  “ ONE YEAR ” for this Proposal No. 3. +28  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +Compensation Discussion and Analysis +CD&A Contents +30 +I. +EXECUTIVE COMPENSATION HIGHLIGHTS +30 +2024 Company Performance +30 +Strong Operational Performance, Dynamic Capital Management and Establishment of PROPWR SM Business +31 +Guiding Principles +31 +Performance-Based Compensation Philosophy and Pay Mix +32 +Compensation Policies and Practices +32 +SAY-ON-PAY ADVISORY VOTE AND STOCKHOLDER ENGAGEMENT +33 +II. +WHAT GUIDES OUR PROGRAM +33 +Philosophy and Guiding Principles of Our Compensation Program +34 +How We Make Compensation Decisions +35 +Use of Peer Compensation Data +35 +III. +ELEMENTS OF COMPENSATION AND 2024 DECISIONS IN DETAIL +36 +Base Salary +36 +Annual Cash Incentive Awards +41 +Long Term Incentive Awards +42 +Employee Benefits, Perquisites, and Special Payments +43 +IV. +OTHER COMPENSATION PRACTICES, POLICIES AND GUIDELINES +43 +Executive Severance Plan +43 +Employee Compensation Claw-Back Policy +44 +Executive Stock Ownership Policy +44 +No Tax Gross-Ups +44 +Regulatory Considerations +45 +Compensation Risk Assessment +PROPETRO  2025 Proxy Statement   |  29 +TABLE OF CONTENTS +Executive Compensation +I. EXECUTIVE COMPENSATION HIGHLIGHTS +This Compensation Discussion and Analysis (“CD&A”) describes our compensation practices, and the compensation awarded to, earned by, or paid to each of our Named Executive Officers during the last completed fiscal year. +Named Executive Officers for 2024 +For the year ended December 31, 2024, our Named Executive Officers consisted of the following: +Samuel D. +Sledge +Adam +Muñoz +David S. +Schorlemer +Shelby K. Fietz +John J. “Jody” +Mitchel +Chief Executive Officer +President and Chief Operating Officer +Former Chief Financial Officer (1) +Chief Commercial Officer +General Counsel and Corporate Secretary +(1) +David S. Schorlemer’s employment with the Company terminated on March 3, 2025. +2024 Company Performance +$1.4 Billion +Formed PROPWR SM +Total Revenue +and Ordered 140 MW of +Mobile Power Generation Equipment +$252 Million +7.2 Million +Net Cash Provided by Operating Activities +Shares Repurchased and Retired +Strong Operational Performance, Dynamic Capital Management and Establishment of PROPWR SM Business +2024 reflected the strength of the Company’s strategic approach in action. The Company gained market share in our hydraulic fracturing and cementing segments, provided strong operational performance for our customers, and continued the implementation of our fleet transition efforts—finishing 2024 with four FORCE ® electric fleets operating under contract with customers. Additionally, the Company demonstrated the flexibility of its dynamic capital allocation strategy by opportunistically executing on our share repurchase program, completing the strategic AquaProp SM acquisition and starting our new PROPWR SM business line. Importantly, the Company’s reduced capital expenditures demonstrated proactive capital management and supported the strategic initiatives the Company pursued in 2024. All of these achievements were accomplished despite facing multiple headwinds in the markets for our services. +The Compensation Committee’s approach for 2024 was designed to incentivize continued effective financial performance and capital allocation, while also recognizing the anticipated market conditions for the Company’s services and increasing the Company’s use of quantitative performance metrics that reinforce the Company’s operational and sustainability priorities. Through this approach, the Compensation Committee established metrics for the Amended and Restated ProPetro Holding Corp. Executive Incentive Bonus Plan (the “Annual Bonus Plan”) that retained the Company’s traditional focus on the financial metrics of Adjusted EBITDA and free cash flow (“FCF”) and defined quantitative metrics to incentivize successful implementation and operational performance with the Company’s next generation FORCE ® electric fleets and employee development efforts. The Company’s performance +30  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +under the Annual Bonus Plan with respect to Adjusted EBITDA was just below target, despite the Company increasing its market share in its hydraulic fracturing and cementing segments, reflecting the challenging market conditions for the Company’s services. Although the Company just missed its target for Adjusted EBITDA, through its proactive capital management approach, the Company significantly outperformed the goal set for its FCF metric, achieving the maximum level of performance for that metric. The definitions of Adjusted EBITDA and FCF and other details regarding the use of these and other metrics in the Annual Bonus Plan can be found in Section III under the discussion of Annual Cash Incentive Awards in the description of Performance Measures and Payout Results beginning on page 36 below. +Guiding Principles +Reward executives for exceptional performance and hold them accountable for underperformance in a manner that adheres to our values +Align executive interests with those of our stockholders by making a substantial portion of compensation performance-based and “at risk” +Provide the necessary flexibility to respond to varying market conditions and changing circumstances with a structure that ensures accountability in our cyclical and volatile business +Remain competitive in our industry in order to attract, retain and motivate the talent that is necessary to achieve our financial and strategic goals +Be internally consistent and equitable +Performance-Based Compensation Philosophy and Pay Mix +Making a substantial portion of our Named Executive Officers’ compensation “at risk” and performance-based ensures that their interests are strongly aligned with those of our stockholders and, as a result, is one of the guiding principles of our executive compensation philosophy. +CEO (1) +Other NEOs Average (1) +(1) +The RSU and performance share unit (“PSU”) amounts shown reflect the aggregate grant date fair value of 2024 awards, calculated in accordance with FASB ASC Topic 718. These awards are granted annually as part of our long-term incentive program, which currently targets a 50/50 mix of RSUs and PSUs. The values reported here may differ from how the Compensation Committee assesses award value at the time of grant. Annual Incentive Bonus amounts represent the target opportunity under our 2024 Annual Bonus Plan. +PROPETRO  2025 Proxy Statement   |  31 +TABLE OF CONTENTS +Executive Compensation +Compensation Policies and Practices +The following features of our executive compensation program promote sound compensation governance and are designed in the best interests of our stockholders and executives. +What We Do +What We Don’t Do +At least 50% of Long Term Incentive Awards are performance-based for Named Executive Officers +Use a mix of absolute and relative financial performance metrics (including relative total shareholder return (“TSR”)) in our incentive plans to avoid duplication of incentives across short- and long-term programs +Use sustainability and safety metrics in our Annual Bonus Plan +Claw-back Policy +Independent compensation consultant +Independent Compensation Committee reviews and approves the compensation of our Named Executive Officers +Annual Say-on-Pay vote +Annual Compensation Committee assessment of compensation practices to eliminate any excessive risk +Significant stock ownership requirements +Single-trigger change in control payments +Tax gross-ups on severance or equity compensation +Repricing of stock options +Backdating of stock options +Employment agreements with executive officers +Derivative or hedging transactions or pledging of our securities by directors and executive officers +SAY-ON-PAY ADVISORY VOTE AND STOCKHOLDER ENGAGEMENT +At the Company’s 2024 annual meeting, the stockholders of the Company were asked to approve, on an advisory basis, the compensation of the Named Executive Officers. Advisory votes in favor of our executive compensation program were cast by over 98% of the shares of common stock of the Company represented at the meeting (in person or by proxy) and entitled to vote. The Compensation Committee took the results of the “Say-on-Pay” vote in account when evaluating the compensation of the Named Executive Officers in 2024. In part because the result of the vote was overwhelmingly positive, the Compensation Committee decided to retain our overall approach to executive compensation. We have continued, and plan to continue, engaging in ongoing stockholder outreach regarding corporate governance generally, including executive compensation programs. +We believe that discussions with a broad range of our stockholders help ensure that the Board and our management team understand our stockholders’ priorities and can work to address those priorities effectively. Our management team continued its proactive and broad-based stockholder engagement efforts in 2024, with a specific focus on reviewing our strategy and value proposition and getting feedback on the Company’s strategic priorities and execution, including the new PROPWR SM business line, corporate governance structure, and approach to human capital management and sustainability matters. As part of our stockholder outreach, we engaged with 9 out of 10 of our largest stockholders during 2024. The stockholders with whom we interacted in 2024 represent holdings both large and small, and included stockholders that established new positions in 2024. Meetings with our stockholders occurred both before and following our 2024 Annual Meeting of Stockholders, though most occurred following the meeting. Our Board, Compensation Committee and management team take our stockholders’ concerns seriously and pursue this proactive engagement approach to seek and receive stockholder feedback. +32  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +II. WHAT GUIDES OUR PROGRAM +Our executive compensation program is designed to attract, motivate, and retain the management talent that we believe is necessary to achieve our financial and strategic goals. Further, we believe that our executive compensation program should be appropriately tailored to balance short-term compensation with intermediate and long-term compensation while allowing for measurement of and accountability for strategic goals in varying market conditions. We believe this structure effectively aligns the interests of our executives with the interests of our stockholders. +In establishing and evaluating our executive compensation programs, the Compensation Committee strives to achieve total compensation for our executives that reflects their individual contributions to the Company, responsibilities, duties, and experience and is competitive with the companies with which we compete for executive talent. +Philosophy and Guiding Principles of Our Compensation Program +Our compensation program is guided by the following principles: +1 +Reward for Exceptional Performance and Accountability for Underperformance +Our Named Executive Officers should be rewarded for exceptional performance and held accountable for underperformance relative to our annual and longer-term strategic goals. Our Named Executive Officers must work to achieve these goals in a manner that is consistent with our values and policies. We tie a significant portion of each Named Executive Officer’s compensation to the achievement of financial, strategic, and operational goals based on both short- and long-term corporate performance measures while retaining sufficient flexibility to modify or claw-back compensation if necessary. We also retain the flexibility to structure the performance measures to respond to the changing needs of the business through varying market cycles. See “Annual Cash Incentive Awards” and “Long Term Incentive Awards” below. +2 +Align Interests of Executives and Stockholders +Compensation for our Named Executive Officers should align their interests with those of our stockholders. Our compensation program aligns pay to performance by making a substantial portion of total executive compensation variable, or “at risk,” through an annual bonus program based on our performance goals and the granting of long-term incentive equity awards, which include time-vested RSUs and performance-based RSUs. As performance goals are met, not met, or exceeded, executives are rewarded commensurately. Our Stock Ownership Guidelines also require each Named Executive Officer to retain significant ownership in the Company’s common stock such that they are invested in our success over the long term along with our stockholders. +3 +Flexibility to Respond to Changing Circumstances +We are in a cyclical and volatile business. As a result, our Compensation Committee feels it is important to have a flexible compensation program that is responsive to unforeseen circumstances that arise during the year. To meet this objective, the Compensation Committee retains discretion to increase or decrease the bonuses paid to each Named Executive Officer pursuant to our Annual Bonus Plan from the amount that would be indicated by the pre-established performance metrics if circumstances so warrant. +4 +Industry Competitive +Total executive compensation should be industry-competitive so that we can attract, retain, and motivate talented executives with the experience and skills necessary for our success. We stay apprised, with the assistance of the Compensation Committee’s independent compensation advisor, of the amounts and types of executive compensation paid to similarly situated executives by companies with which we compete for executive talent as well as general industry trends and best practices. +5 +Internally Consistent and Equitable +Executive compensation should be internally consistent and equitable. We consider not only the compensation paid by our peer companies, but also our Named Executive Officers’ capabilities, levels of experience, tenures, positions, responsibilities, and contributions when setting their compensation. Additionally, our Compensation Committee feels that our Named Executive Officers should have a larger proportion of their compensation “at risk” and tied to corporate performance than our general employee population because they are typically in a position to have a more direct impact on the achievement of our performance goals. +PROPETRO  2025 Proxy Statement   |  33 +TABLE OF CONTENTS +Executive Compensation +How We Make Compensation Decisions +THE ROLE OF THE COMPENSATION COMMITTEE +Our Compensation Committee is comprised of independent, non-employee members of the Board. The Compensation Committee is responsible for establishing the elements, terms, and target value of compensation paid or delivered to our Named Executive Officers but often consults the full Board with respect to material compensation actions. Our Compensation Committee is also responsible for oversight of executive succession planning. Details of the Compensation Committee’s authority and responsibilities are specified in its charter, which may be accessed at https://ir.propetroservices.com/compensation-committee-charter . In determining the compensation of our Named Executive Officers, the Compensation Committee considers: +• +the information and advice provided by its compensation consultant, +• +our corporate goals, +• +historic and projected performance, +• +the current economic and commodities environment, +• +individual performance, experience, and responsibilities of each of our Named Executive Officers, +• +the results of the “Say-on-Pay” vote and feedback received from stockholders through our outreach and engagement efforts, and +• +other relevant factors. +THE ROLE OF EXECUTIVE OFFICERS IN COMPENSATION DECISIONS +With respect to the compensation of the Named Executive Officers other than our Chief Executive Officer, the Compensation Committee considers the recommendations of our Chief Executive Officer. Additionally, and taking into consideration our Named Executive Officers’ integral role in establishing and executing the Company’s overall operational and financial objectives, the Compensation Committee requests that our Chief Executive Officer provide the initial recommendations on the appropriate goals for the performance metrics used under our Annual Bonus Plan and may choose to accept or modify these recommendations in its sole discretion. In addition, the Compensation Committee may invite any Named Executive Officer to attend Compensation Committee meetings to report on the Company’s progress with respect to the interim or final status of performance metrics. All Named Executive Officers are excluded from any decisions or discussions regarding their individual compensation. +THE ROLE OF THE INDEPENDENT COMPENSATION CONSULTANT +Pearl Meyer served as the Compensation Committee’s independent compensation consultant in 2024. The compensation consultant provides advice to and works with the Compensation Committee in designing and implementing the structure and mechanics of the Company’s executive compensation program, as well as other matters related to officer, senior management, and director compensation and corporate governance. For example, our compensation consultant regularly updates the Compensation Committee on regulatory changes impacting executive compensation, proxy advisor policies, and compensation-related risks. In addition, they provide the Compensation Committee with relevant data, including market and peer-company compensation and performance surveys and information and advice regarding trends and developments in executive and director compensation practices in our industry. This information assists the Compensation Committee in making executive and director compensation decisions based on market pay levels and best practices. +Our compensation consultant reports directly and exclusively to the Compensation Committee and does not provide any other services to management, the Company, or its affiliates. While the Compensation Committee generally reviews and considers information and recommendations provided by the compensation consultant, they do not make compensation-related decisions for the Compensation Committee or otherwise with respect to the Company. The Compensation Committee has the discretion to allow our compensation consultant to work directly with management in preparing or reviewing materials for the Compensation Committee’s consideration, and in 2024, Management worked with Pearl Meyer to provide information and otherwise support the development of materials and recommendations for the Compensation Committee’s consideration. During 2024, and after taking into consideration the factors listed in Section 303A.05(c)(iv) of the “NYSE” Listed Company Manual, the Compensation Committee concluded that neither it nor the Company has any conflicts of interest with Pearl Meyer and that Pearl Meyer was independent from management. Other than Pearl Meyer, no other compensation consultants provided services to the Compensation Committee during 2024. +34  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +Use of Peer Compensation Data +The Company competes with business entities across multiple industries for top executive-level talent. To this end, the Compensation Committee evaluates, on an annual basis, industry-specific and general market compensation practices and trends to ensure that our program and Named Executive Officer pay opportunities remain appropriately competitive. As part of its evaluation, the Compensation Committee works with its independent consultant to validate that the companies included in its peer group are as comparable as possible to the Company in terms of operations, revenue, market capitalization, and geographic location. +The 2024 peer group was determined by the Compensation Committee based on an in-depth review from its independent compensation consultant. This review included an assessment of potential comparators to evaluate the degree to which the current peers have kept pace with the Company’s growth and evolution, as well as an examination of the broader marketplace. Following such review and with input and support from the Company’s management, Pearl Meyer recommended, and the Compensation Committee agreed, that (i) NexTier Oilfield Solutions Inc. should be removed from the peer group for 2024 as a result of its merger with Patterson-UTI Energy, Inc., which was already a member of the peer group and (ii) ProFrac Holding Corp., which is reasonably similar to the Company in terms of operations, revenue, market capitalization and geographic location, should be added to the peer group to replace NexTier Oilfield Solutions Inc.. In setting 2024 target compensation levels for the Named Executive Officers, as well as evaluating TSR performance for the PSUs granted in 2024, the Company used the 2024 peer group detailed below (such companies, the “2024 Peer Group”): +• +Archrock, Inc. +• +ChampionX Corporation +• +Helmerich & Payne, Inc. +• +Liberty Oilfield Services Inc. +• +Nabors Industries Ltd. +• +Nine Energy Services Inc. +• +Oil States International, Inc. +• +Patterson-UTI Energy, Inc. +• +Precision Drilling Corporation +• +ProFrac Holding Corp. +• +RPC, Inc. +• +Select Energy Services, Inc. +• +U.S. Silica Holdings. Inc. +In 2024, the comparative compensation data reviewed by the Compensation Committee was created by Pearl Meyer based on data from a blend of the 2024 Peer Group and survey data collected by Pearl Meyer from companies in the energy industry with corporate revenues comparable to the companies included in the 2024 Peer Group (the “Peer Data”). Data from both sources was used to provide the best mix of sources for competitive positions and to help smooth volatility of changes in the peer group. The Compensation Committee generally targets total compensation for each of our Named Executive Officers and directors, as well as each element of compensation, at or about the 50th percentile of the Peer Data. However, the Compensation Committee also considers many other factors when establishing compensation levels, including but not limited to, internal pay equity at the Company, each executive’s experience and responsibility, succession planning, and recruiting and retention concerns, which may result in pay above or below the 50 th percentile of our Peer Data. +As a result, the compensation of our Named Executive Officers and directors may be higher or lower than the 50th percentile of the 2024 Peer Group or the Peer Data. +III. ELEMENTS OF COMPENSATION AND 2024 DECISIONS IN DETAIL +As shown below, a significant portion of the target compensation for our Named Executive Officers in 2024 was performance-based and an even larger portion is variable or “at risk,” meaning that it can be forfeited, and its value is dependent upon factors such as our stock price or company performance. +PROPETRO  2025 Proxy Statement   |  35 +TABLE OF CONTENTS +Executive Compensation +Element +Purpose +Changes for 2024 +◄ FIXED ► +Short- +Term +BASE +SALARY +• +To provide a consistent, fixed level of pay that is sufficient to allow us to attract and retain executives with the appropriate skills and experience for their positions +• +Immaterial cost of living adjustments for most Named Executive Officers; additional increases to align with market for Messrs. Sledge and Mitchell. +◄ AT RISK ► +ANNUAL +CASH +INCENTIVE +BONUS +• +To motivate and reward the achievement of our annual individual and operational performance goals +• +80% was based on the achievement of quantitative performance goals utilizing financial, safety and sustainability metrics, and 20% was based upon a qualitative analysis of individual performance for the fiscal year +• +Increased emphasis on quantitative metrics and refinement of environmental and employee-related metrics. Qualitative metric based on individually tailored executive goals. +Long- +Term +LONG-TERM +INCENTIVE +AWARDS +• +To drive performance and support retention, while aligning the interests of our Named Executive Officers with those of our stockholders +• +Generally, 50% PSUs that vest, if earned, following the completion of a three-year performance period, in each case subject to continued employment, and 50% RSUs that vest equally on each of the first three anniversaries of grant +• +No material changes +Base Salary +The Compensation Committee monitors and adjusts salaries for our Named Executive Officers over time as necessary to remain competitive with market rates for similarly situated officers at our peer companies and to reflect changes in each Named Executive Officer’s role, duties and responsibilities. +Base Salary as of +Name +December 2023 +($) +December 2024 +($) +Samuel D. Sledge (1) +800,000 +946,000 +Adam Muñoz (2) +572,000 +600,000 +David S. Schorlemer (2) +515,000 +540,000 +Shelby Fietz (3) +495,000 +495,000 +John J. Mitchell (1) +387,000 +450,000 +(1) +The increase in base salary for Messrs. Sledge and Mitchell was to ensure their compensation remained competitive with individuals in the same position at members of the 2024 Peer Group. +(2) +The increases in base salary for Messrs. Schorlemer and Muñoz were to address general cost of living increases. +(3) +Mr. Fietz did not receive a cost of living increase in 2024 because he received a material increase in base compensation at the end of 2023 in connection with his appointment as Chief Commercial Officer on November 26, 2023. +Annual Cash Incentive Awards +The Annual Bonus Plan governs cash incentive awards made each year to our Named Executive Officers. Awards under the Annual Bonus Plan are tied to the achievement of performance goals, which may be based on qualitative or quantitative measures, or both, as determined by the Compensation Committee. +TARGET AWARD OPPORTUNITIES +In February 2024, the Compensation Committee established the following award opportunities under the Annual Bonus Plan for each of the Named Executive Officers: +36  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +Name +2024 Target Award +Opportunity +(% of base salary) +Samuel D. Sledge (1) +110 % +Adam Muñoz +100 % +David S. Schorlemer +90 % +Shelby Fietz +90 % +John J. Mitchell +75 % +(1) +The target award opportunity for Mr. Sledge was increased by 5% from his 2023 target of 105% to better align with market. All other target award opportunities for the Named Executive Officers remain unchanged from 2023 levels. +Target award opportunities for each executive were established by the Compensation Committee after reviewing peer group data and considering each Named Executive Officer’s responsibility and experience. +PERFORMANCE MEASURES AND PAYOUT RESULTS +Each year, the Compensation Committee establishes performance metrics and threshold, target, and maximum goals for each such metric. Potential payouts under the Annual Bonus Plan depend on the actual performance level for each metric established by the Compensation Committee, as outlined below. +Performance Level +Payout (as a % of +Target Award) +Threshold +50 % +Target +100 % +Maximum +200 % +If performance falls between the specified performance levels, payments are generally determined via straight-line interpolation. If performance falls below the threshold performance level, no payments will be awarded. The Annual Bonus Plan provides the Compensation Committee or the Board with the discretion to increase or decrease actual payout amounts otherwise resulting from the pre-established metrics, as it may deem necessary. +Under the 2024 Annual Bonus Plan, as in prior years, the Compensation Committee selected a mix of quantitative and qualitative performance metrics. The quantitative metrics were selected to incentivize achievement of specific pre-established financial, safety and operational metrics. While the qualitative metrics were included to enable the Compensation Committee to encourage performance with respect to areas that are important to the growth and success of the Company but are harder to measure. While the Compensation Committee values qualitative metrics as a tool, it felt that the vast majority of the annual award should be calculated based on quantitative metrics, with a significant emphasis on financial metrics. To that end, 80% of each Named Executive Officer’s annual award for 2024 was based on the achievement of quantitative metrics (Adjusted EBITDA, FCF and sustainability and safety), with 60% of that 80% dedicated to financial performance. The remaining 20% of the annual award for 2024 was based upon a qualitative analysis of individual and operational performance. +The Compensation Committee maintained consistency in most of the performance metrics because they remain important to the ongoing success of the Company and serve to focus executives on key objectives that position the Company for sustained growth and consistent operational performance. Specifically, the Compensation Committee continues to see Adjusted EBITDA and FCF as effective measures of the Company’s financial performance and capital discipline and measures that support the Company’s ability to generate enhanced shareholder returns, while total recordable incident rate (“TRIR”) is an important measure of safety. For some of the metrics used consistently between 2023 and 2024, like Adjusted EBITDA and FCF, the Compensation Committee set threshold, target, and maximum goals that were lower in 2024 than 2023 primarily as a result of the expectation for a softer overall market for our services due to multiple factors, including, customer consolidation, capital discipline and a general reduction in activity. Additional factors include the impact of our E-Fleet leases, which reduce Adjusted EBITDA. All of these factors were also taken into consideration in setting lower expectations for the Company’s general budget and earnings expectations for 2024 as compared to 2023. While we always strive for growth year-over-year, we want the performance levels established for our Annual Bonus Plan to be challenging, but achievable so that the program effectively drives results. +PROPETRO  2025 Proxy Statement   |  37 +TABLE OF CONTENTS +Executive Compensation +In 2024, the Compensation Committee combined the 2023 “ESG” metric, which had previously represented a 10% weighting and been a qualitative measure, with our safety metric under a performance category called “Safety and Sustainability”. The Safety and Sustainability performance category is made up of three quantitative measures: Safety at 10% overall weighting (measured based on TRIR metric, with the weighting and performance levels unchanged from 2023), diesel displacement at 5% overall weighting (new for 2024 and measured based on gallons of diesel displaced by the Company’s next-generation, natural gas dual-fuel and electric equipment), and employee training at 5% overall weighting (new for 2024 and measured based on hours of employee training in three pre-established key areas). The Compensation Committee felt this pivot towards more quantitative measures was in line with increasing market practices and would help our Named Executive Officers focus on the achievement of these specific and strategic operational/environmental and workforce strengthening goals. +Notwithstanding an increased focus on quantitative metrics, retaining a qualitative component of the Annual Bonus Plan allows the Compensation Committee to assess the Company’s progress towards the achievement of a number of strategic goals and responses to dynamic developments and to assess each Named Executive Officer’s specific contribution to the achievement of those strategic goals. In 2024, the Compensation Committee set individually tailored strategic and growth goals for each Named Executive Officer rather than Company-wide goals. +Measure +Weighting +Threshold +Target +Maximum +Actual 2024 +Performance +Payout as a +Percentage of +Target Bonus +QUANTITATIVE MEASURE +Adjusted EBITDA (1)(3) +40 % +$ +150MM +$ +300MM +$ +330MM +$ +283MM +37.7% +FCF (2)(3) +Safety and Sustainability +20 % +$ +40MM +$ +79MM +$ +87MM +$ +150MM +40% +Safety (TRIR) (4) +10 % +0.75 +0.65 +0.50 +0.74 +-0.5% (8) +Diesel Displacement (gallons) (5) +5 % +46,800,000 +58,500,000 +64,350,000 +62,895,391 +8.8% +Employee Training +(hours) (6) +5 % +8,000 +10,000 +11,000 +9,473 +4.3% +Quantitative Total +80 % +90.3% +QUALITATIVE MEASURE +Individual Performance (7) +20 % +82% – 149% +16% – 30% +Qualitative Total +20 % +16% – 30% +Overall Total +100 % +106.3% – 120.3% +(1) +We define EBITDA as earnings before (i) interest expense, (ii) income taxes, and (iii) depreciation and amortization. We define Adjusted EBITDA as EBITDA, plus (i) loss/(gain) on disposal of assets and businesses, (ii) stock-based compensation, (iii) business acquisition contingent consideration adjustments, (iv) other expense/(income), (v) other unusual or nonrecurring (income)/expenses, such as impairment expenses, costs related to asset acquisitions, insurance recoveries, one-time professional fees and legal settlements and (vi) retention bonuses and severance expense. For a more detailed definition of the non-GAAP financial measure of Adjusted EBITDA and reconciliation of Adjusted EBITDA to our most directly comparable financial measures calculated in accordance with GAAP, please read “How We Evaluation Our Operations” in our Form 10-K filed for the year ended December 31, 2024. +38  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +(2) +We define FCF as Adjusted EBITDA less Total Capital Expenditures, which are defined as costs incurred in connection with the growth and maintenance of our asset base. For a more detailed definition of Total Capital Expenditures please see Note 11— Reportable Segment Information in the Notes to Consolidated Financial Statements to our Form 10-K filed for the year ended December 31, 2024. +(3) +The Compensation Committee may provide for the manner in which actual performance and the performance goal(s) with regard to these metrics will reflect the impact of specified events or occurrences during the year, which may mean including or excluding the impact of one or more events or occurrences, as specified by the Compensation Committee, for the year. +(4) +TRIR stands for Total Recordable Incident Rate and is a measurement of workplace safety calculated as follows: (total number of recordable incidents amongst covered personnel in the applicable period (here, 2024) multiplied by 200,000) divided by the total man hours worked by covered personnel in the applicable period. TRIR is a commonly accepted and utilized metric for both workplace safety regulation and for making safety performance comparisons amongst companies. The Company uses an annual TRIR metric in our compensation program to reflect aggregate safety performance across the year being reviewed. +(5) +This metric measures gallons of diesel displaced in 2024 through the use of natural gas in lieu of diesel in the Company’s completion services as a result of the execution of the Company’s transition to Tier IV DGB Dual-fuel and electric equipment for the performance its hydraulic fracturing services using the following formula: MMBtu / 0.137381. +(6) +Employee training measures the number of hours of employee training the following three key areas: (i) industry- and leadership-related subject-matter programs from the Energy Workforce and Technology Council, (ii) in-house commercial driver’s license certifications, and (iii) leadership development initiatives. +(7) +Additional information regarding strategic goals for each Named Executive Officer is included below. +(8) +While our actual performance for TRIR would have resulted in a payout percentage of 5.5%, our Compensation Committee used their discretion to reduce the payout percentage by 6% as a result of a significant accident that occurred in early 2025. While the 2024 Annual Bonus Plan is generally intended to reflect performance during the 2024 fiscal year, the Compensation Committee felt it was important, in this instance, to consider the 2025 safety event promptly and therefor elected to make an adjustment in connection with the determination of the 2024 Annual Bonus Plan attainment. +For 2024, the Compensation Committee established individual strategic qualitative goals for each of our Named Executive Officers, as follows: +Named Executive +Officer +2024 Strategic Qualitative Goals +Actual 2024 +Performance +Level (max of +200%) +Payout as a +Percentage of +Target Bonus +for Strategic +Qualitative Goal +Samuel D. Sledge +Operational (60%) +• +Achieve and exceed quantitative AIP metrics +• +Deploy and contract additional FORCE ® electric fleets +• +Refresh corporate strategy and drive strategic execution +• +Assess and improve overall cost structure +Individual (40%) +• +Improve prioritization +• +Focus on delegation and accountability amongst executive team +140% +28% +PROPETRO  2025 Proxy Statement   |  39 +TABLE OF CONTENTS +Executive Compensation +Named Executive +Officer +2024 Strategic Qualitative Goals +Actual 2024 +Performance +Level (max of +200%) +Payout as a +Percentage of +Target Bonus +for Strategic +Qualitative Goal +Adam Muñoz +Operational (60%) +• +Implementation of project management office to support strategic execution +• +Reduce maintenance cost +• +Increase frac efficiencies +• +Drive improvement in equipment life +Individual (40%) +• +Foster “continuous improvement” +• +Improve communication approach +149% +30% +David S. Schorlemer +Operational (60%) +• +Address and remediate all control deficiencies +• +Implementation of certain administrative software systems +• +Establish Office of Controllers +Individual (40%) +• +Improve communication approach +• +Support new strategic analysis and approach +82% +16% +Shelby Fietz +Operational (60%) +• +Guide and support execution of strategic supply chain initiative +• +Improve cross-functional business line commercialization +Individual (40%) +• +Support a new strategic analysis and approach +• +Improve organization, prioritization and delegation +140% +28% +John J. Mitchell +Operational (60%) +• +Support e-fleet contract negotiation and commercial management +• +Support M&A strategy and execution +• +Support effective engagement with the Board and its Committees +Individual (40%) +• +Support a new strategic analysis and approach +• +Provide effective and timely counsel to the leadership team +143% +29% +As a result of its assessment of performance, the Compensation Committee certified a range of 82% to 149% achievement for the individual and operational performance metric. +40  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +As a result, the Compensation Committee approved the following payments under the Annual Bonus Plan: +Name +2024 Target Award +Opportunity as a +Percentage of Base Salary +Value of 2024 +Target Award +Opportunity +($) +Actual Payout +as a Percentage +of Target Award +Value of Actual +2024 Annual Award +($) +Samuel D. Sledge +110 % +1,040,600 +118.3 % +1,231,030 +Adam Muñoz +100 % +600,000 +120.3 % +721,800 +David S. Schorlemer +90 % +486,000 +106.3 % +516,618 +Shelby Fietz +90 % +445,500 +118.3 % +527,027 +John J. Mitchell +75 % +337,500 +118.9 % +401,288 +Long Term Incentive Awards +AWARDS GRANTED IN 2024 +Our mix of time- and performance-based awards is intended to achieve the twin goals of ensuring retention and driving performance, while aligning the interests of our Named Executive Officers with those of our stockholders by providing an opportunity for increased share holdings. Both RSUs and PSUs may be settled in shares of our common stock or in the cash equivalent of the same. +In 2024, 50% of the value of each Named Executive Officer’s long term incentive awards was granted pursuant to the Amended and Restated ProPetro Holding Corp. 2020 Long Term Incentive Plan (the “2020 LTIP”) in the form of RSUs that vest in three substantially equal annual installments commencing on the first anniversary of the grant date. The other 50% was granted in the form of PSUs that vest, if earned, following the completion of a three-year performance period, in each case generally subject to the Named Executive Officer’s continued employment through the end of such period. +Consistent with 2023, the PSUs granted in 2024 vest based on the Company’s TSR as compared to the TSR of the 2024 Peer Group. After careful review, the Compensation Committee chose to use the same 2024 Peer Group to set 2024 target compensation levels for our Named Executive Officers and evaluate TSR performance for the PSUs granted in 2024. Recipients of PSUs may earn between 0% and 200% of the target number of shares granted, as indicated in the following table. If performance falls between the specified performance levels, payouts will be determined via straight-line interpolation. If performance falls below the threshold performance level, no payouts will be awarded. If the Company’s TSR is below zero on an absolute basis for the performance period, the number of PSUs earned shall be reduced in accordance with the table below. The Compensation Committee selected a modified relative TSR performance metric for these awards to motivate our Named Executive Officers to outperform the Company’s peers, even in a negative TSR environment, while retaining a meaningful reduction in the number of PSUs settled if absolute TSR is negative for the performance period, thus driving the Named Executive Officers to push for a positive absolute TSR and aligning their interests with those of our stockholders. +Payout (as a % of Target Number of +PSUs Granted) +Payout (as a % of Target Number of +PSUs Granted) if TSR is Below Zero +Company’s +Percentile Rank +in Peer Group +≥ 90th Percentile +200 % +175 % +75th Percentile +175 % +150 % +50th Percentile +100 % +90 % +25th Percentile +50 % +40 % +< 25th Percentile +0 % +0 % +The performance period for the 2024 PSU awards commenced on January 1, 2024 and ends on December 31, 2026. +If a peer company ceases to exist as a separate publicly-traded company during the performance period because it is acquired outside of the Company’s peer group or for any other reason not described elsewhere in this paragraph, then the company will be excluded from the peer group entirely. If a peer company is acquired by another peer company during the performance period, the acquirer will remain in the peer group, but the acquired company will +PROPETRO  2025 Proxy Statement   |  41 +TABLE OF CONTENTS +Executive Compensation +be excluded from the peer group entirely. If a peer company files for bankruptcy during the performance period, it will remain in the peer group but be ranked last. +The annual value of each Named Executive Officer’s long-term incentive award is generally determined in conjunction with the Compensation Committee’s annual compensation analysis or, if later, in connection with the Named Executive Officer’s promotion or hire date following the Compensation Committee’s review of peer compensation data and consideration of each Named Executive Officer’s position and associated responsibilities. In 2024, the Compensation Committee granted awards to our Named Executive Officers as shown in the table below. Except as specified below, all awards were granted in February of 2024. +Name +Number of RSUs +Granted in 2024 +Value of RSUs +Granted in 2024 (1) +($) +Target Number +of PSUs Granted +in 2024 +Value of PSUs +Granted in 2024 (1) +($) +Samuel D. Sledge +242,830 +1,775,087 +242,830 +1,996,063 +David S. Schorlemer +100,628 +735,591 +100,628 +827,162 +Adam Muñoz +125,786 +919,496 +125,786 +1,033,961 +Shelby Fietz +56,603 +413,768 +56,603 +465,277 +John J. Mitchell +61,006 +445,954 +61,006 +501,469 +(1) +Amounts in these columns reflect the aggregate grant date fair value of the RSU and PSU awards granted in 2024 under the 2020 LTIP, calculated in accordance with FASB ASC Topic 718. Because the grant date fair value is calculated differently for time-based and performance-based awards under FASB ASC Topic 718, the value of the awards reported is different even though the number of RSUs and PSUs granted to each Named Executive Officer is the same. The number of awards granted by the Compensation Committee and the Board in 2024 was made after considering the then current market value of the Company’s shares, which is the standard practice across the industry, rather than the accounting grant date fair value. +AWARDS SETTLED FOLLOWING THE END OF 2024 +Much like the PSUs granted in 2024, the PSUs granted in 2022 vested based on performance over a three-year performance period. In accordance with the compensation philosophy and designs adopted by the Compensation Committee, the PSUs granted in 2022 resulted in a payout of 73% of the target PSUs. The Company’s TSR over the three-year performance period was 6%, resulting in a relative TSR of the 36 th percentile of the relevant peer group. Our philosophy is that these long-term incentive awards should drive strong alignment between our stockholders and executives and pay for positive performance. For this assessment period, performance was between the 25th and 50th percentile as compared to the performance peer group and the PSUs yielded a result reflective of this performance. +Employee Benefits, Perquisites, and Special Payments +HEALTH/WELFARE PLANS +All of our full-time employees, including our Named Executive Officers, are eligible to participate in our health and welfare plans on the same basis, including: medical, dental and vision benefits, medical and dependent care flexible spending accounts, short-term and long-term disability insurance, and group life insurance. +RETIREMENT PLANS +We currently maintain a 401(k) retirement savings plan for our employees who satisfy certain eligibility requirements. Our Named Executive Officers are eligible to participate in the 401(k) plan on the same terms as other full-time employees. Currently, we match contributions made by participants in the 401(k) plan up to a specified percentage of the employee’s contributions, and we may make certain discretionary profit-sharing contributions (though no profit-sharing contributions were made to any participants in 2024). Both the matching contributions and the profit-sharing contributions vest immediately. We believe that offering a vehicle for tax-deferred retirement savings through our 401(k) plan and making matching contributions and profit-sharing contributions that vest over time add to the overall desirability of our compensation packages and further incentivize our employees in accordance with our compensation policies. We do not maintain any defined benefit pension plans or deferred compensation plans. +42  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +PERQUISITES +Messrs. Sledge, Muñoz, Schorlemer, Fietz and Mitchell each participated in a vehicle allowance program during 2024. In 2024, the Company also provided other limited perquisites to its Named Executive Officers, including club memberships and dues, and also permitted Messrs. Sledge’s, Schorlemer’s, Fietz’s, and Mitchell’s spouses, respectively, to accompany them on certain business trips via Company chartered aircraft that resulted in no incremental cost to the Company. The Compensation Committee reviews the perquisites we provide to our Named Executive Officers periodically to ensure that they are necessary to retain our executives, appropriate, and consistent with benefits offered by companies with which we compete for executive talent. +IV. OTHER COMPENSATION PRACTICES, POLICIES AND GUIDELINES +Executive Severance Plan +The Board adopted the Second Amended and Restated ProPetro Services, Inc. Executive Severance Plan (the “Executive Severance Plan”) because they and the Compensation Committee felt it was desirable to pivot away from individually negotiated employment agreements and towards a streamlined plan providing for more uniform treatment upon a termination of employment. Each of our Named Executive Officers is a participant in the Executive Severance Plan. We believe the Executive Severance Plan serves to maintain the focus of our senior executives and ensure that their attention, efforts and commitment are aligned with maximizing the success of the Company and stockholder value. Further, providing market severance benefits is an important element of compensation that allows us to attract and retain talented executives, ensuring continuity of management, stability of the Company, and efficient execution of our business goals. +The amounts of the severance and benefits established for each “Tier” under the Executive Severance Plan were selected after the Compensation Committee received advice from its independent compensation consultant at the time of adoption regarding the types and amounts of severance that are market among the Company’s peers. The Compensation Committee also considered its members’ ample experience in the industry when making this determination. The Tier level assigned to each participant in the plan was determined based on each participant’s position and responsibility. No changes were made to the Tier levels or the Executive Severance Plan for the Named Executive Officers in 2024. The Tier levels for each of the Named Executive Officers and the terms of the Executive Severance Plan are described in detail below in the section entitled “Potential Payments upon Termination and Change of Control―Executive Severance Plan.” +Employee Compensation Claw-Back Policy +Effective October 11, 2023, we adopted the ProPetro Holding Corp. Incentive-Based Compensation Recovery (Clawback) Policy (the “Clawback Policy”). The Clawback Policy is intended to comply with the requirements of Section 10D of the Exchange Act and Section 303A.14 of the NYSE Listing Company Manual. Under the terms of the Clawback Policy, in the event of a restatement of our financial statements due to material non-compliance with any financial reporting requirement under applicable securities laws, the Compensation Committee shall take reasonably prompt action to cause the Company to recover from any covered executive the amount of any incentive-based compensation granted, earned or vested within the three preceding completed fiscal years, to the extent the value of such compensation was in excess of the amount of incentive compensation that would have been granted, earned, or vested had the financial statements been in compliance with the financial reporting requirements. Each executive officer, including our Named Executive Officers and former executive officers, are considered “covered executives” for purposes of the Clawback Policy. Incentive-based compensation is not subject to the Clawback Policy if it is received (i) prior to the date a covered executive becomes an executive officer or (ii) prior to October 2, 2023. +PROPETRO  2025 Proxy Statement   |  43 +TABLE OF CONTENTS +Executive Compensation +Executive Stock Ownership Policy +Under the terms of our Executive Stock Ownership Policy, our executive officers must own shares of our common stock or certain equity awards with a value equal to not less than the following multiples of base salary: +Office +Multiple of Base Pay +Chief Executive Officer +■ ■ ■ ■ ■ +5x +Chief Financial Officer and Chief Operating Officer +■ ■ ■ +3x +All Other Executive Officers +■  +1x +Any individuals who became executive officers as a result of an internal promotion or a new hire, will have five years from the date of being named an executive officer to meet the stock ownership guidelines. As a result, all of our Named Executive Officers still have additional time in which to comply with these guidelines. In calculating the value of shares of our common stock or certain equity awards held for purposes of determining compliance with the policy, such value is equal to the closing price per share on the measurement date, based on shares owned outright and unvested RSUs, with the value of such unvested RSUs discounted by 40%. Unexercised option awards and unvested PSUs are excluded from the calculation. +Prohibition on Hedging and Pledging +We believe that derivative transactions, including puts, calls, and options, and hedging transactions for our securities carry a high risk of inadvertent securities laws violations and may lead to an officer, director, or employee no longer having the same objectives as the Company’s other stockholders. For these reasons, we prohibit our directors, officers, and employees from engaging in any type of derivative or hedging transactions in respect of our securities pursuant to our Insider Trading Compliance Policy. Company stock pledged as collateral, including shares held in a margin account, may be sold without the consent of the holder by the lender in a foreclosure or default event, which could lead to inadvertent securities laws violations. For this reason, pursuant to our Insider Trading Compliance Policy, we prohibit pledging Company securities as collateral to secure loans and purchasing Company securities on margin. +No Tax Gross-Ups +We do not provide gross-up payments to cover our Named Executive Officers’ personal income taxes that may pertain to any of the compensation or perquisites paid or provided by our Company. +Regulatory Considerations +The tax and accounting implications of utilizing various forms of compensation are considered when adopting new or modifying existing compensation programs. Section 162(m) (“Section 162(m)”) of the Internal Revenue Code of 1986, as amended (the “Code”) generally precludes a publicly held company from taking a federal income tax deduction for compensation paid in excess of  $1 million per year to certain covered employees, which include our Named Executive Officers. To maintain flexibility in compensating the Company’s executive officers in a manner designed to promote achievement of corporate goals, retention and recruitment, the Compensation Committee has not adopted a policy requiring all compensation to be tax deductible and expects that the deductibility of certain compensation paid will be limited by Section 162(m). +44  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +Compensation Risk Assessment +The Compensation Committee reviews our compensation policies and practices on an annual basis to identify any risks posed by these programs and to assess the appropriateness of any risks identified. We believe that any risks associated with our compensation policies and practices are mitigated in large part by the following factors and, therefore, that no such risks are likely to have a material adverse effect on us: +We pay a mix of compensation which includes short-term cash and long-term equity-based compensation. +We base the vesting and payment of our incentive compensation awards on several different performance metrics, which discourages our employees from placing undue emphasis on any one metric or aspect of our business at the expense of others. +We believe that our performance metrics are reasonably challenging yet should not require inappropriate risk-taking to achieve. +The performance metrics for awards under our Annual Bonus Plan include quantitative financial and operational metrics as well as qualitative metrics related to our operations, strategy, and other aspects of our business, as well as the individual performance of our executives, and our Compensation Committee retains discretion to modify payout amounts under the Annual Bonus Plan, as appropriate. +The performance periods under our PSUs overlap, and our time-vested RSUs generally vest over a three-year period. This mitigates the motivation to maximize performance in any one period at the expense of others. +Our Named Executive Officers are required to own our common stock at levels provided in our Executive Stock Ownership Guidelines. +We have instituted a claw-back policy, which allows us to claw-back compensation in the event of a financial restatement. +We believe that we have an effective management process for developing and executing our short- and long-term business plans. +Our compensation policies and programs are overseen by the Compensation Committee. +The Compensation Committee retains an independent compensation consultant. +PROPETRO  2025 Proxy Statement   |  45 +TABLE OF CONTENTS +Executive Compensation +Report of the Compensation Committee +The Compensation Committee has reviewed and discussed the above CD&A with management, and, based on such review and discussions, the Compensation Committee recommended to the Board that the CD&A be included in this proxy statement. +The Compensation Committee of the Board of Directors +MICHELE +VION +MARK S. BERG +Chair +ANTHONY J. +BEST +MARY P. +RICCIARDELLO +46  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +Executive Compensation Tables +SUMMARY COMPENSATION TABLE +The following table summarizes the compensation provided by us to our Named Executive Officers for the fiscal years ended December 31, 2024, 2023, and 2022. +Name and +Principal Position +Year +Salary (1) +($) +Bonus +($) +Stock +Awards (2) +($) +Option +Awards +($) +Non-Equity +Incentive Plan +Compensation (3) +($) +All Other +Compensation (4) +($) +Total +($) +Samuel D. Sledge +Chief Executive Officer +2024 +946,000 +― +3,771,150 +― +1,231,030 +39,267 +5,987,447 +2023 +800,000 +― +4,210,746 +― +735,800 +41,414 +5,787,960 +2022 +700,000 +― +3,258,631 +― +1,036,000 +33,663 +5,028,294 +David S. Schorlemer (5) +Former Chief Financial Officer +2024 +540,000 +― +1,562,753 +― +516,618 +50,780 +2,670,151 +2023 +515,000 +― +1,486,143 +― +406,200 +72,509 +2,479,852 +2022 +477,000 +― +1,564,132 +― +634,800 +79,928 +2,755,860 +Adam Muñoz +President and Chief +Operating Officer +2024 +600,000 +― +1,953,457 +― +721,800 +49,809 +3,325,066 +2023 +572,000 +― +2,105,373 +― +501,100 +52,359 +3,230,832 +2022 +550,000 +― +2,215,845 +― +864,000 +58,608 +3,688,453 +Shelby Fietz (5) +Chief Commercial Officer +2024 +495,000 +― +879,045 +― +527,027 +53,580 +1,954,652 +2023 +365,193 +― +3,449,874 +― +414,500 +56,729 +4,286,296 +John J. “Jody” Mitchell (5) +General Counsel +2024 +450,000 +― +947,423 +― +401,288 +48,107 +1,846,818 +2023 +387,000 +― +834,721 +― +270,000 +51,414 +1,543,135 +(1) +The amounts in this column represent the base salary of each Named Executive Officer earned for the year indicated. +(2) +Amounts in this column for 2024 reflect the aggregate grant date fair value of the RSU and PSU awards granted in 2024 under the 2020 LTIP, calculated in accordance with FASB ASC Topic 718. The FASB ASC Topic 718 value for the RSUs was calculated using the closing price per share of our common stock on the date of grant applied to the total number of RSUs granted. The FASB ASC Topic 718 grant date fair value of the PSUs was determined using a Monte Carlo simulation. For information regarding assumptions underlying the valuation of equity awards, see Note 14 of the Consolidated Financial Statements included in our 2024 Annual Report on Form 10-K. The actual amount realized upon settlement of RSU and PSU awards will depend upon the market price of the Company’s stock on the settlement date and the Company’s performance (with respect to the PSUs). +(3) +Amounts in this column for 2024 represent the short-term cash incentive awards for performance during the 2024 fiscal year pursuant to the Annual Bonus Plan, determined based on achievement of the applicable performance metrics. See “Compensation Discussion and Analysis—Elements of Compensation and 2024 Decisions in Detail—Annual Cash Incentive Awards” above for additional informational regarding these awards. +(4) +Amounts in this column are comprised of the payments and benefits enumerated in the table below. +Name +Vehicle +Allowance +Program (a) +($) +Contribution +to 401(k) +Plan (b) +($) +Club Dues/ +Membership +Fees (c) +($) +Total +($) (d) +Samuel D. Sledge +14,400 +20,700 +4,167 +39,267 +David S. Schorlemer +14,400 +20,700 +15,680 +50,780 +Adam Muñoz +14,400 +20,700 +14,709 +49,809 +Shelby Fietz +14,400 +20,700 +18,480 +53,580 +John J. “Jody” Mitchell +14,400 +20,700 +13,007 +48,107 +(a) +The amounts in this column reflect the cost of the Company’s vehicle allowance program. +(b) +The amounts in this column reflect the Company’s contribution to each Named Executive Officer’s account in the Company’s 401(k) plan. +(c) +The amounts in this column reflect club dues or membership fees paid by the Company. +(d) +In addition to the amounts included herein, the spouses of Messrs. Sledge, Schorlemer, Fietz and Mitchell, respectively, accompanied them on certain business trips via Company chartered aircraft, but such travel resulted in no incremental cost to the Company. +(5) +Mr. Mitchell was appointed as the General Counsel of the Company effective January 1, 2023, and Mr. Fietz was appointed as the Chief Commercial Officer of the Company effective November 26, 2023. Because Messrs. Fietz and Mitchell became Named Executive Officers in fiscal year 2023, their compensation is not disclosed for fiscal year 2022. Mr. Schorlemer’s employment with the Company terminated on March 3, 2025. +PROPETRO  2025 Proxy Statement   |  47 +TABLE OF CONTENTS +Executive Compensation +GRANTS OF PLAN-BASED AWARDS +Name +Grant Date +Estimated Possible Payouts Under +Non-Equity Incentive Plan +Awards (1) +Estimated Future Payouts Under +Equity Incentive Plan +Awards (2) +All Other +Stock +Awards: +Number of +Shares of +Stock (3) +(#) +Grant Date +Fair Value +of Stock +and Option +Awards (4) +($) +Threshold +($) +Target +($) +Maximum +($) +Threshold +(#) +Target +(#) +Maximum +(#) +Samuel D. Sledge +Annual Bonus +― +520,300 +1,040,600 +2,081,200 +― +― +― +― +― +Annual RSUs (5) +2/28/2024 +― +― +― +― +― +― +242,830 +1,775,087 +PSUs +2/28/2024 +― +― +― +121,415 +242,830 +485,660 +― +1,996,063 +David S. Schorlemer +Annual Bonus +― +243,000 +486,000 +972,000 +― +― +― +― +― +Annual RSUs (5) +2/28/2024 +― +― +― +― +― +― +100,628 +735,591 +PSUs +2/28/2024 +― +― +― +50,314 +100,628 +201,256 +― +827,162 +Adam Muñoz +Annual Bonus +― +300,000 +600,000 +1,200,000 +― +― +― +― +― +Annual RSUs (5) +2/28/2024 +― +― +― +― +― +― +125,786 +919,496 +PSUs +2/28/2024 +― +― +― +62,893 +125,786 +251,572 +― +1,033,961 +Shelby Fietz +Annual Bonus +― +222,750 +445,500 +891,000 +― +― +― +― +― +Annual RSUs (5) +2/28/2024 +― +― +― +― +― +― +56,603 +413,768 +PSUs +2/28/2024 +― +― +― +28,302 +56,603 +113,206 +― +465,277 +John J. “Jody” Mitchell +Annual Bonus +― +168,750 +337,500 +675,000 +― +― +― +― +― +Annual RSUs (5) +2/28/2024 +― +― +― +― +― +― +61,006 +445,954 +PSUs +2/28/2024 +― +― +― +30,503 +61,006 +122,012 +― +501,469 +(1) +Amounts in these columns represent the estimated payouts for annual cash incentive awards under the Annual Bonus Plan for 2024 assuming threshold, target, and maximum performance achievement. The actual amounts paid to our Named Executive Officers for 2024 can be found in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table above. See Compensation Discussion and Analysis—Elements of Compensation and 2024 Decisions in Detail—“Annual Cash Incentive Awards” above for additional information regarding these awards. +(2) +These amounts represent the threshold, target, and maximum number of PSUs granted to the Named Executive Officers during 2024. The number of PSUs which ultimately vest is based on the performance of the Company’s TSR relative to the TSR of the companies in our Peer Group during the three-year performance period ending on December 31, 2026, subject to the Named Executive Officer’s continued employment through such date. +(3) +Amounts in this column reflect RSUs granted to the Named Executive Officers during 2024. +(4) +These amounts represent the aggregate grant date fair value of RSUs and PSUs granted in 2024 to the Named Executive Officers, computed in accordance with FASB ASC Topic 718, disregarding estimated forfeitures. The grant date fair value of the PSUs is based on probable outcome with regard to the applicable performance metrics. For information regarding assumptions underlying the valuation of equity awards, see Note 14 of the Consolidated Financial Statements in our 2024 Annual Report on Form 10-K. +(5) +Amounts in these rows reflect annual RSUs granted to the Named Executive Officers during 2024. One-third of each such grant vests on each of the first three anniversaries of the applicable date of grant, subject to the Named Executive Officer’s continued employment through each such date. +48  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +NARRATIVE DISCLOSURE TO SUMMARY COMPENSATION TABLE AND GRANTS OF PLAN-BASED AWARDS TABLE +Executive Severance Plan +None of the Named Executive Officers is currently a party to an employment agreement or letter agreement with us. Instead, they participate in the Executive Severance Plan. For additional information regarding the terms and conditions of this plan please see “— Potential Payments Upon Termination or Change in Control—Executive Severance Plan.” +OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END +The following table reflects information regarding outstanding and unvested stock options, RSUs, and PSUs held by our Named Executive Officers as of December 31, 2024. +Option Awards +Stock Awards +Name +Number of +Securities +Underlying +Unexercised +Options +Exercisable +(#) +Number of +Securities +Underlying +Unexercised +Options +Unexercisable +(#) +Option +Exercise +Price +($) +Option +Expiration +Date +Number of +Shares or +Units of +Stock That +Have Not +Vested (1) +(#) +Market +Value of +Shares or +Units of +Stock That +Have Not +Vested (2) +($) +Equity +Incentive Plan +Awards: +Number of +Unearned +Shares That +Have Not +Vested (3) +(#) +Equity +Incentive Plan +Awards: +Market Value +of Unearned +Shares That +Have Not +Vested (2) +($) +Samuel D. Sledge +21,750 +― +14.00 +3/16/2027 +― +― +― +― +― +― +― +― +392,564 +3,662,622 +― +― +― +― +― +― +― +― +834,376 +7,784,728 +David S. Schorlemer +― +― +― +― +157,731 +1,471,630 +― +― +― +― +― +― +― +― +324,332 +3,026,018 +Adam Muñoz +48,938 +― +14.00 +3/16/2027 +― +― +― +― +― +― +― +― +206,682 +1,928,343 +― +― +― +― +― +― +― +― +425,930 +3,973,927 +Shelby Fietz +6,090 +― +14.00 +3/16/2027 +— +— +― +― +― +― +― +― +295,373 +2,755,830 +― +― +― +― +― +― +― +― +134,436 +1,254,288 +John J. “Jody” Mitchell +― +― +― +― +87,586 +817,177 +― +― +― +― +― +― +― +― +191,140 +1,783,336 +(1) +The amounts in this column represent RSU awards held by each Named Executive Officer, which vest pro-rata over the applicable remaining vesting dates as follows, subject to the Named Executive Officer’s continued employment: +Name +Number of Unvested +RSUs on 12/31/2024 +Remaining Vesting Dates +Samuel D. Sledge +33,494 +February 16, 2025 +116,240 +February 1, 2025 and February 1, 2026 +242,830 +February 28, 2025, February 28, 2026, and February 28, 2027 +David S. Schorlemer +16,077 +February 16, 2025 +41,026 +February 1, 2025 and February 1, 2026 +100,628 +February 28, 2025, February 28, 2026, and February 28, 2027 +Adam Muñoz +22,776 +February 16, 2025 +58,120 +February 1, 2025 and February 1, 2026 +125,786 +February 28, 2025, February 28, 2026, and February 28, 2027 +Shelby Fietz +2,412 +February 16, 2025 +7,077 +February 1, 2025 and February 1, 2026 +20,513 +May 31, 2025 +208,768 +November 26, 2025 and November 26, 2026 +56,603 +February 28, 2025, February 28, 2026, and February 28, 2027 +PROPETRO  2025 Proxy Statement   |  49 +TABLE OF CONTENTS +Executive Compensation +Name +Number of Unvested +RSUs on 12/31/2024 +Remaining Vesting Dates +John J. “Jody” Mitchell +3,537 +February 16, 2025 +24,043 +February 1, 2025 and February 1, 2026 +61,006 +February 28, 2025, February 28, 2026, and February 28, 2027 +(2) +The amounts in this column were calculated by multiplying $9.33, the closing price of our common stock on December 31, 2024, by the number of awards reported. +(3) +Pursuant to the applicable rules, the amounts in this column and in the table below reflect the maximum number of PSUs held by each Named Executive Officer that were granted in 2023 and 2024 because performance as of December 31, 2024 was above target for both the 2023 and 2024 PSUs. Both the PSUs granted to the Named Executive Officers in 2023 and 2024 may vest, if at all, based on the performance of the Company’s stock relative to a peer group during the applicable three-year performance period as shown in the below table. The actual number of PSUs earned based on actual performance over the full performance period may range from 0% to 200% of the target amount. +Name +Number of Unvested +PSUs on 12/31/2024 +Applicable Performance +Period End Date +Samuel D. Sledge +348,716 +December 31, 2025 +485,660 +December 31, 2026 +David S. Schorlemer +123,076 +December 31, 2025 +201,256 +December 31, 2026 +Adam Muñoz +174,358 +December 31, 2025 +251,572 +December 31, 2026 +Shelby Fietz +21,230 +December 31, 2025 +113,206 +December 31, 2026 +John J. “Jody” Mitchell +69,128 +December 31, 2025 +122,012 +December 31, 2026 +2024 OPTION EXERCISES AND STOCK VESTED +Option Awards +Stock Awards +Name +Number of Shares +Acquired on +Exercise +(#) +Value Realized on +Exercise +($) +Number of Shares +Acquired on +Vesting (1) +(#) +Value Realized on +Vesting (2) +($) +Samuel D. Sledge +― +― +191,743 +1,660,236 +David S. Schorlemer +― +― +85,444 +745,244 +Adam Muñoz +― +― +121,032 +1,054,099 +Shelby Fietz +― +― +128,141 +1,093,583 +John J. “Jody” Mitchell +— +— +24,843 +216,874 +(1) +This column reflects the RSUs and PSUs held by each Named Executive Officer that vested during 2024. Performance for the 2022 PSUs for which the performance period ended on December 31, 2024 resulted in a relative total shareholder return of the 36 th percentile of the relevant peer group, providing a payout of 73% of target performance. +(2) +This column reflects the aggregate market value realized by each Named Executive Officer upon vesting, calculated by multiplying the number of RSUs and PSUs that vested (including shares withheld for tax withholding purposes) by the closing price of our common stock on the applicable vesting date or, to the extent the vesting date was not a trading date, the closing price on the last trading date. +PENSION BENEFITS +We do not sponsor any qualified or non-qualified defined benefit pension plans. +NONQUALIFIED DEFERRED COMPENSATION +We do not have any non-qualified deferred compensation plans. +50  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL +Executive Severance Plan +In 2020, the Board adopted the Executive Severance Plan, pursuant to which the Named Executive Officers are eligible to receive severance payments and benefits, as described in more detail below. None of the Named Executive Officers currently have an employment agreement with the Company. Pursuant to the terms of the Executive Severance Plan, the level of severance benefit for which a participant is eligible is determined based on their designated “Tier.” As of December 31, 2024, the Tier levels for each of the Named Executive Officers was as follows: +Name +Executive Severance Plan Tier Level +Samuel D. Sledge +Tier 1 +David S. Schorlemer +Tier 2 +Adam Muñoz +Tier 2 +Shelby Fietz +Tier 2 +John J. “Jody” Mitchell +Tier 2 +Upon the Named Executive Officer’s termination without “Cause” or a resignation for “Good Reason” (each as defined in the Executive Severance Plan and described below), current participants in the Executive Severance Plan will be eligible to receive the following benefits: +• +A lump sum cash payment equal to 2.0 (for Tier 1 Executives), 1.5 (for Tier 2 Executives) or 1.0 (for Tier 3 Executives) times the sum of the participant’s (i) annualized base salary then in effect and (ii) target annual bonus for the year in which the termination occurred, +• +Any earned but unpaid bonus for the year preceding the year of termination based on the Company’s actual performance, paid at the time such bonuses are paid to all other executives, and +• +Reimbursement for a portion of the cost of continuation coverage for the participant and his or her spouse and eligible dependents under the Company’s group health plans pursuant to COBRA for 12 months (or 18 months for Tier 1 Executives), unless such coverage is earlier terminated in accordance with the terms of the Executive Severance Plan. +Upon a termination without Cause or a resignation for Good Reason within 12 months following a “Change in Control” (as defined in the Executive Severance Plan), participants in the Executive Severance Plan will be eligible to receive the following benefits: +• +A lump sum cash payment equal to 3.0 (for Tier 1 Executives), 2.0 (for Tier 2 Executives) or 1.5 (for Tier 3 Executives) times the sum of the participant’s (i) annualized base salary then in effect and (ii) target annual bonus as in effect immediately prior to the Change in Control, +• +Any earned but unpaid bonus for the year preceding the year of termination based on the Company’s actual performance, paid at the time such bonuses are paid to all other executives, +• +A lump sum cash payment equal to a prorated target bonus for the year of termination based on days of service during the applicable calendar year, and +• +Full reimbursement of the cost of continuation coverage for the participant and his or her spouse and eligible dependents under the Company’s group health plans pursuant to the COBRA, for 12 months (or 18 months for Tier 1 Executives), unless such coverage is earlier terminated in accordance with the terms of the Executive Severance Plan. +Additionally, if a participant’s employment with the Company terminates as a result of his or her death or “Disability” (as defined in the Executive Severance Plan), then the participant will be eligible to receive the following benefits: +• +Any earned but unpaid bonus for the year preceding the year of termination based on the Company’s actual performance, paid at the time such bonuses are paid to all other executives, and +• +A lump sum cash payment equal to a prorated target bonus for the year of termination based on days of service during the applicable calendar year. +In order to receive any of the foregoing severance benefits under the Executive Severance Plan, a participant must timely execute (and not revoke) a release of claims in favor of the Company and its affiliates. Further, the Executive Severance Plan requires continued compliance with certain confidentiality, non-competition, non-solicitation and non-disparagement covenants as set forth in the award agreements under the ProPetro Holding Corp. 2017 Incentive +PROPETRO  2025 Proxy Statement   |  51 +TABLE OF CONTENTS +Executive Compensation +Award Plan (the “2017 LTIP”) and the 2020 LTIP. If the severance benefits under the Executive Severance Plan would trigger an excise tax for a participant under Section 4999 or Section 280G of the Code (“Section 280G”) the Executive Severance Plan provides that the participant’s severance benefits will be reduced to a level at which the excise tax is not triggered, unless the participant would receive a greater amount without such reduction after taking into account the excise tax and other applicable taxes. +As used in the Executive Severance Plan, the following terms generally mean: +“ Cause ” generally means the Named Executive Officer’s: +(i) +material breach of the employment agreement or any other agreement with the Company or its affiliates, subject to a 30-day notice and 15-day cure period, +(ii) +material breach of the Company’s or its affiliates’ policies or code of conduct applicable to the Named Executive Officer, +(iii) +violation of any law applicable to the workplace or employment relationship, +(iv) +gross negligence, material misconduct reflecting negatively on the Company, breach of fiduciary duty, fraud, theft, or embezzlement, +(v) +conviction of or plea of nolo contendere to any felony (or state law equivalent) or any crime involving moral turpitude, +(vi) +material failure or refusal (other than due to Disability) to perform obligations or any lawful director from the Board or an officer of the Company, subject to a 30-day notice and 15-day cure period, +(vii) +unlawful use or possession of illegal drugs on the Company’s premises or while performing duties, +(viii) +failure to exercise the degree of care, skill, and diligence as employees of ordinary skill and knowledge commonly possess and exercise, subject to a 30-day notice and 15-day cure period, or +(ix) +failure to act with undivided loyalty to the Company and its affiliates. +“ Change in Control ” has the meaning given to it under the 2020 LTIP, which is the same meaning given to such term under the 2017 LTIP and described below under “—2017 LTIP.” +“ Good Reason ” generally means: +(i) +the material diminution in the Named Executive Officer’s base salary, unless in connection with a general reduction in base salaries that affects all similarly situated employees, +(ii) +material diminution in the Named Executive Officer’s authority, duties, or responsibilities unless in connection with an internal investigation by the Company (provided that his or her removal from the board of directors or as an officer of any of the Company’s affiliates shall not constitute Good Reason), +(iii) +the material breach by the Company of any of its obligations under the agreement, or +(iv) +the Named Executive Officer’s relocation by more than 50 miles from his or her current place of business, in each case, subject to a 30-day notice period, 15-day cure period and the Named Executive Officer’s resignation within 75 days of the end of the cure period. +“ Disability ” generally means the Named Executive Officer’s inability to perform the essential functions of his or her job due to physical or mental impairment for a period that exceeds 120 consecutive days or 180 total days in any 12-month period, as determined by the Board. +2017 LTIP +Only Messrs. Sledge, Fietz and Muñoz hold stock options under the 2017 LTIP. The stock options granted under the 2017 LTIP are fully vested. The vested and outstanding stock options awarded under the 2017 LTIP will remain outstanding and exercisable for 90 days following a Named Executive Officer’s termination of service without “Cause” or due to his resignation for “Good Reason” and will remain outstanding and exercisable for 12 months following a Named Executive Officer’s termination of service due to his death, “Disability” or “Retirement.” +52  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +To receive the above described severance payments and benefits, the Named Executive Officers must execute a release of claims in favor of the Company and comply with the terms of certain restrictive covenants, including a one-year non-competition and two-year non-solicitation obligation as well as a perpetual confidentiality and non-disparagement obligations. +As used in the 2017 LTIP and the award agreements thereunder, “Cause” and “Disability” generally have the meanings set forth below. In addition, “Retirement” and “Change in Control” generally have the meanings set forth below. +“ Cause ” generally means the Named Executive Officer’s: +(i) +willful failure to substantially perform his or her duties, +(ii) +willful failure to carry out, or comply with, in any material respect any lawful directive of our board of directors, +(iii) +commission at any time of any act or omission that results in, or may reasonably be expected to result in, a conviction, a plea of no contest, plea of nolo contendere, or imposition of unadjudicated probation for any felony or crime involving moral turpitude, +(iv) +unlawful use (including being under the influence) or possession of illegal drugs on the Company’s premises or while performing his or her duties and responsibilities, +(v) +commission at any time of any act of fraud, embezzlement, misappropriation, misconduct, conversion of assets of the Company, or breach of fiduciary duty against the Company, or +(vi) +material breach of the employment agreement or any other agreement with the Company, subject to certain procedural requirements. +“ Change of Control ” generally means: +(i) +any transaction or series of transactions whereby any person, other than the Company, any of its subsidiaries or any Company benefit plan, acquires beneficial ownership of 30% or more of the total combined voting power of the Company’s securities, +(ii) +the current members of the Board cease to constitute a majority of the Board for any reason, +(iii) +the consummation by the Company of a merger, consolidation, reorganization or business combination or a sale of all or substantially all of the Company’s assets, unless: +(a) +the Company controls the successor entity, +(b) +no person owns 50% or more of the combined voting power of the successor entity, or +(c) +the current members of the Board represent the majority of the successor entity’s board, or +(iv) +the tenth day following the complete dissolution of the Company. +“ Disability ” generally means the Named Executive Officer’s inability to engage in substantial gainful activity by reason of any medically determinable physical or mental impairment. +“ Retirement ” generally means the termination of the Named Executive Officer’s employment following his attainment of both (i) age 60 and (ii) ten years of service with the Company or one of its affiliates. +2020 LTIP +All equity awards granted to the Named Executive Officers’ during or following 2021 are subject to the following terms. +Pursuant to the 2020 LTIP, in the event of a termination of employment of a Named Executive Officer due to his or her death or “Disability,” (i) all unvested RSUs that would have vested had the Named Executive Officer continued his or her service during the 12 months following the termination will vest on such termination or resignation date, and (ii) with respect to any unvested PSUs, if such termination of employment occurs within one year prior to the last day of the applicable performance period, the Named Executive Officer’s unvested PSUs will remain outstanding and eligible to vest at the end of the applicable performance period. +PROPETRO  2025 Proxy Statement   |  53 +TABLE OF CONTENTS +Executive Compensation +In the event of a termination of a Named Executive Officer by the Company without “Cause” upon or within one year following a “Change in Control,” all unvested RSUs and PSUs will immediately vest based on performance as of the date of the Change in Control. In addition, in the event of a Named Executive Officer’s resignation for “Good Reason” upon or within one year following a Change in Control, all unvested RSUs and PSUs granted in 2023 and 2024 (but, for the avoidance of doubt, not 2022) will immediately vest based on performance as of the date of the Change in Control. In the event of a termination of employment of a Named Executive Officer for any other reason, all unvested RSUs and PSUs will be forfeited immediately upon the termination. +In the event of a Change in Control, the performance period for all unvested PSUs will be deemed to have ended as of the date of the Change in Control. For the PSUs granted in 2023, performance will be determined as of the date of the Change in Control, and for the PSUs granted in 2024, performance will be determined as of the date of the Change in Control and then deemed to be achieved at the greater of the target number of PSUs or performance determined as of the date of the Change in Control. Then, the PSUs for which the performance goal was obtained as described above will remain outstanding and eligible to vest at the end of the applicable performance period, subject to the Named Executive Officer’s continued employment through such date. +To receive the above-described severance payments and benefits, the Named Executive Officers must execute a release of claims in favor of the Company and comply with the terms of certain restrictive covenants, including a one-year non-competition and two-year non-solicitation obligation as well as a perpetual confidentiality and non-disparagement obligations. +The 2020 LTIP further specifies that unless otherwise provided for in an award agreement, if any awards under the 2020 LTIP are not assumed or substituted by a successor entity in a Change in Control, then all outstanding awards will become fully vested as of the date of the Change in Control (for PSUs, based on the greater of  (i) target and (ii) actual performance as of the date of the “Change in Control”). +As used in the 2020 LTIP and the award agreements thereunder, “Cause,” “Change in Control,” “Disability” and “Good Reason” generally have the meanings set forth below. +“ Cause ” has the meaning given to it under the Executive Severance Plan, described above under “— Executive Severance Plan.” +“ Change in Control ” has the meaning given to “Change of Control” under the 2017 LTIP, described above under “—2017 LTIP.” +“ Disability ” has the meaning given to it under the Executive Severance Plan, described above under “— Executive Severance Plan.” +“ Good Reason ” has the meaning given to it under the Executive Severance Plan, described above under “— Executive Severance Plan.” +54  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +Quantification of Benefits on Termination +The table below quantifies the payments and benefits that would have been paid to our Named Executive Officers pursuant to the terms of the Executive Severance Plan and the equity award agreements in the event of certain terminations of employment with us, had such terminations occurred on December 31, 2024. +Name +Payments and +Benefits +Termination +without Cause +or Resignation +for Good +Reason (1) +($) +Termination as +a Result of +Death, +Disability (2) +($) +Termination +as a Result of +Retirement (3) +($) +Termination +without Cause +within One +Year Following +a Change in +Control (4) +($) +Resignation +for Good +Reason within +One Year +Following a +Change in +Control (4) +($) +Samuel D. Sledge +Cash Severance (5) +3,973,200 +― +― +5,959,800 +5,959,800 +Pro-Rata Bonus (6) +― +1,040,600 +― +1,040,600 +1,040,600 +COBRA Subsidy (7) +18,141 +― +― +32,039 +32,039 +RSU and PSU +Acceleration (8) +― +3,610,862 +― +9,628,344 +9,315,845 +Total +3,991,341 +4,651,462 +― +16,660,783 +16,348,284 +David S. Schorlemer +Cash Severance (5) +1,539,000 +― +― +2,052,000 +2,052,000 +Pro-Rata Bonus (6) +― +486,000 +― +486,000 +486,000 +COBRA Subsidy (7) +12,098 +― +― +21,547 +21,547 +RSU and PSU +Acceleration (8) +― +1,360,535 +― +3,820,838 +3,670,839 +Total +1,551,098 +1,846,535 +― +6,380,385 +6,230,386 +Adam Muñoz +Cash Severance (5) +1,800,000 +― +― +2,400,000 +2,400,000 +Pro-Rata Bonus (6) +― +600,000 +― +600,000 +600,000 +COBRA Subsidy (7) +12,098 +― +― +21,547 +21,547 +RSU and PSU +Acceleration (8) +― +1,875,276 +― +4,982,571 +4,770,071 +Total +1,812,098 +2,475,276 +― +8,004,118 +7,791,618 +Shelby Fietz +Cash Severance (5) +1,410,750 +― +― +1,881,000 +1,881,000 +Pro-Rata Bonus (6) +― +445,500 +― +445,500 +445,500 +COBRA Subsidy (7) +12,098 +― +― +21,547 +21,547 +RSU and PSU +Acceleration (8) +― +1,518,658 +― +3,801,832 +3,779,328 +Total +1,422,848 +1,964,158 +― +6,149,879 +6,127,375 +John J. “Jody” Mitchell +Cash Severance (5) +1,181,250 +― +― +1,575,000 +1,575,000 +Pro-Rata Bonus (6) +― +337,500 +― +337,500 +337,500 +COBRA Subsidy (7) +12,098 +― +― +21,547 +21,547 +RSU and PSU +Acceleration (8) +― +726,870 +― +2,209,906 +2,176,906 +Total +1,193,348 +1,064,370 +― +4,143,953 +4,110,953 +(1) +Amounts in this column reflect payments made upon termination by the Company without “Cause” or by the Named Executive Officer for “Good Reason.” Such quoted terms are as defined in the Executive Severance Plan, as described above. +(2) +Amounts in this column reflect payments made upon termination as a result of the Named Executive Officer’s death or “Disability.” “Disability” is as defined in the Executive Severance Plan for the pro-rata bonus payable upon such termination of employment and is as defined in the applicable award agreements for the equity award acceleration, each as described above. +(3) +Amounts in this column reflect payments made upon termination as a result of the Named Executive Officer’s “Retirement” (as defined in the applicable award agreements and described above). As described above, neither the Executive Severance Plan nor the 2020 LTIP (or any of the award agreements thereunder) provide any severance payments or benefits upon a Named Executive Officer’s “Retirement.” As of December 31, 2024, there were no RSUs or PSUs outstanding under the 2017 LTIP, and the exercise price applicable to the stock options held by Messrs. Sledge, Fietz and Muñoz under the 2017 LTIP exceeded the closing price of our common stock on December 31, 2024. Therefore, no value is included in this column. +PROPETRO  2025 Proxy Statement   |  55 +TABLE OF CONTENTS +Executive Compensation +(4) +Amounts in this column reflect payments made upon termination by the Company without Cause or by the Named Executive Officer for Good Reason, in each case, within 12 months following a “Change in Control” (as defined in the 2020 LTIP and described above). As described above under “— 2020 LTIP,” RSUs and PSUs granted in 2022 under the 2020 LTIP are accelerated in connection with a Named Executive Officer’s termination without Cause within 12 months following a Change in Control but are not accelerated in connection with a Named Executive Officer’s resignation for Good Reason, whether or not such resignation follows a Change in Control, and RSUs and PSUs granted in 2023 and 2024 under the 2020 LTIP are accelerated in connection with a Named Executive Officer’s termination without Cause or resignation for Good Reason, in each case, within 12 months following a Change in Control. +(5) +Pursuant to the Executive Severance Plan, upon termination of employment by the Company without Cause or by the Named Executive Officer for Good Reason, each Named Executive Officer will receive either 2.0 (for Mr. Sledge) or 1.5 (for Messrs. Schorlemer, Fietz, Muñoz and Mitchell) times the sum of his annual base salary and the target amount of his annual bonus for the year in which the termination occurs, payable in a lump sum following the termination of employment. If such termination of employment occurs within one year following a Change in Control, each Named Executive Officer will receive either 3.0 (for Mr. Sledge) or 2.0 (for Messrs. Schorlemer, Fietz, Muñoz and Mitchell) times the sum of his annual base salary and the target amount of his bonus for the year in which the Change in Control occurs. +(6) +Pursuant to the terms of the Executive Severance Plan, upon a termination of employment by the Company without Cause or by the Named Executive Officer for Good Reason, in each case, within one year following a Change in Control, or upon a termination of employment due to the Named Executive Officer’s death or Disability, each Named Executive Officer will receive a pro-rata bonus, based upon the number of days each such Named Executive Officer was employed by the Company during the applicable calendar year and achievement of target performance. The target bonuses payable to the Named Executive Officers are included in the table because the Named Executive Officers would have been employed for the full year if their termination occurred on December 31, 2024. +(7) +Pursuant to the terms of the Executive Severance Plan, upon termination of employment by the Company without Cause or by the Named Executive Officer for Good Reason, the Company will reimburse each of the Named Executive Officers for the difference between the cost of the COBRA premiums and the cost for similarly-situated employees to effect such coverage under the Company’s group health plans for up to 18 months for Mr. Sledge and up to 12 months for Messrs. Schorlemer, Muñoz, Fietz and Mitchell following such termination. Upon termination of employment by the Company without Cause or by the Named Executive Officer for Good Reason, in each case, within 12 months following a Change in Control, the Company will reimburse each of the Named Executive Officers for the full amount of the COBRA premiums for up to 18 months for Mr. Sledge and up to 12 months for Messrs. Schorlemer, Muñoz, Fietz and Mitchell. The COBRA reimbursement amount is based on the premiums in effect on December 31, 2024 and each applicable Named Executive Officer’s elections in place on such date, which are assumed for purposes of this table to remain the same throughout the period for which the COBRA reimbursement would be available. +(8) +For the RSUs, these amounts are calculated by multiplying the number of RSUs that would have become vested upon the applicable event by $9.33, the closing price of our common stock on December 31, 2024. PSUs that vest as a result of a Named Executive Officer’s death or Disability will vest based on actual performance as of the end of the applicable performance period, and, as a result, the amounts included reflect estimated payouts of such PSUs. For PSUs that vest upon termination of employment by the Company without Cause or by the Named Executive Officer for Good Reason, in each case, within one year following a Change in Control, actual performance as of the date of the Change in Control is used and, as a result, the amounts included reflect estimated payouts of such PSUs. As of December 31, 2024, the actual performance was at 123% for the PSUs granted in 2023 and 175% for the PSUs granted in 2024. +Termination of Employment—Former Chief Financial Officer +Effective March 3, 2025, Mr. Schorlemer’s employment with the Company ended (the “Separation”). In connection with the Separation, the Company entered into a separation and release agreement with Mr. Schorlemer pursuant to which he released the Company and its affiliates from certain liabilities and affirmed the restrictive covenants with which he had an obligation to comply and the Company, in turn, confirmed that it would provide Mr. Schorlemer with the payments and benefits that he had a legal right to under the existing terms of the Executive Severance Plan and the terms of the award agreements pursuant to which his outstanding equity awards were originally granted. +The payments and benefits Mr. Schorlemer had a right to receive upon a qualifying termination without cause for a Tier 2 participant under the Executive Severance Plan were as follows: (A) a lump-sum cash payment equal to $1,553,595 for his severance payment and COBRA subsidy and (B) a payment in the amount of  $516,618 for his earned but unpaid bonus for the 2024 fiscal year. Additionally, the Company paid Mr. Schorlemer a cash payment for his paid time off accrued and unused as of March 3, 2025. No new or additional benefits or compensation in excess of what Mr. Schorlemer had a legal right to under the Executive Severance Plan were provided in connection with the Separation. +56  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +Pay versus Performance +As required by Item 402(v) of Regulation S-K, the Company is providing the following information regarding the relationship between executive compensation and the Company’s financial performance for each of the five years in the period ended December 31, 2024. In accordance with the applicable SEC rules, the adjustments described and quantified below were made to the values reported in the Summary Compensation Table for each applicable year to determine the “actual” compensation paid to our Principal Executive Officers (“PEOs”) and the average “actual” compensation paid to our other Named Executive Officers (“NEOs”). +The following table summarizes compensation values reported in the Summary Compensation Table for our PEO and the average for our other NEOs, as compared to “compensation actually paid” or “CAP” and the Company’s financial performance for the years ended December 31, 2024, 2023, 2022, 2021, and 2020: +Year +Summary +Compensation +Table Total for +First PEO (1) +Summary +Compensation +Table Total for +Second +PEO (1) (2) +Compensation +Actually Paid +to First +PEO (1) (2) +Compensation +Actually Paid +to Second +PEO (1) (2) +Average +Summary +Compensation +Table Total for +Non-PEO +NEOs (1) (2) +Average +Compensation +Actually Paid +to Non-PEO +NEOs (1) +Value of +Initial +Fixed $100 +Investment +Based On: +Net +Income +(Loss) +(in thousands) +Adjusted +EBITDA +(in thousands) (3) +TSR +Peer +Group +TSR (3) +(a) +(b) +(b) +(c) +(c) +(d) +(e) +(f) +(g) +(h) +(i) +2024 N/A $ 5,987,447 N/A $ 8,359,307 $ 2,449,172 $ 3,340,367 $ 82.93 $ 95.72 $ ( 137,859 ) $ 283,243 +2023 N/A $ 5,787,960 N/A $ 3,198,910 $ 2,885,029 $ 1,983,266 $ 74.49 $ 106.43 $ 86,000 $ 404,000 +2022 N/A $ 5,028,294 N/A $ 3,096,235 $ 6,276,617 $ 1,773,093 $ 92.18 $ 153.12 $ 2,030 $ 316,590 +2021 $ 6,862,469 $ 3,164,649 $ 5,192,291 $ 2,999,764 $ 2,463,661 $ 2,133,954 $ 72.00 $ 80.32 $ ( 54,185 ) $ 135,007 +2020 $ 5,095,728 N/A $ 7,962,437 N/A $ 2,129,704 $ 370,329 $ 65.69 $ 64.05 $ ( 107,020 ) $ 141,463 +(1) +The first and second PEOs reflected in columns (b) and (c) represent Phillip Gobe and Samuel Sledge , respectively. The non-PEO Named Executive Officers reflected in column (d) and (e) represent the following individuals by year: +2024 – Adam Muñoz, David S. Schorlemer, Shelby Fietz, and John J. “Jody” Mitchell +2023 – Adam Muñoz, David S. Schorlemer, Shelby Fietz, and John J. “Jody” Mitchell +2022 – Phillip Gobe, Adam Muñoz, David S. Schorlemer, and Newton W. Wilson III +2021 – Adam Munoz, David S. Schorlemer, and Newton W. Wilson III +2020 – Dale Redman, Darin G. Holderness, David S. Schorlemer, Jeffrey Smith, David Sledge, Adam Munoz, and Newton W. Wilson III +(2) +The Company deducted from and added to the Summary Compensation Table total compensation the following amounts to calculate compensation actually paid in accordance with Item 402(v) of Regulation S-K as disclosed in columns (c) and (e) for the PEO (Samuel Sledge) and Non-PEO NEOs in 2024. As the Company’s NEOs do not participate in any defined benefit plans, no adjustments were required to amounts reported in the Summary Compensation Table totals related to the value of benefits under such plans. +2024 +PEO SUMMARY COMPENSATION TABLE TOTALS $ 5,987,447 +Add (Subtract): +Fair value of equity awards granted during the year from the Summary Compensation Table +( 3,771,150 ) +Fair value at year end of equity awards granted during the year +5,512,241 +Fair value of equity awards granted and vested during the year +— +Change in fair value of equity awards granted in prior years that were unvested as of the end of the year +520,604 +Change in fair value of equity awards granted in prior years that vested during the year +433,387 +Equity awards granted in prior years that were forfeited during the year +( 323,222 ) +Dividends or other earnings paid on equity awards during the year +Total Equity Award Related Adjustments +2,371,860 +COMPENSATION ACTUALLY PAID TOTALS $ 8,359,307 +PROPETRO  2025 Proxy Statement   |  57 +TABLE OF CONTENTS +Executive Compensation +2024 +NON-PEO NEOS SUMMARY COMPENSATION TABLE TOTALS $ 2,449,172 +Add (Subtract): +Fair value of equity awards granted during the year from the Summary Compensation Table +( 1,335,670 ) +Fair value at year end of equity awards granted during the year +1,952,331 +Fair value of equity awards granted and vested during the year +— +Change in fair value of equity awards granted in prior years that were unvested as of the end of the year +200,984 +Change in fair value of equity awards granted in prior years that vested during the year +150,178 +Equity awards granted in prior years that were forfeited during the year +( 76,628 ) +Dividends or other earnings paid on equity awards during the year +— +Total Equity Award Related Adjustments +891,195 +AVERAGE COMPENSATION ACTUALLY PAID TOTALS $ 3,340,367 +(3) +The Peer Group in this column consists of Liberty Energy Inc., RPC, Inc., Calfrac Wells Services Ltd., Patterson-UTI Energy, Inc., Mammoth Energy Services, Inc. and ProFrac Holding Corp. Nextier Oilfield Solutions Inc. was included in last year’s Peer Group, but was omitted from this year because it merged with Patterson-UTI Energy, Inc. in September 2023. +(4) +The Company defines EBITDA as earnings before (i) interest expense, (ii) income taxes, and (iii) depreciation and amortization. The Company defines Adjusted EBITDA as EBITDA, plus (a) loss/(gain) on disposal of assets, (b) loss/(gain) on extinguishment of debt, (c) stock-based compensation, and (d) other unusual or non-recurring (income)/expenses, such as impairment charges, severance, costs related to our IPO and costs related asset acquisition or one-time professional fees. For a more detailed definition of the non-GAAP financial measure of Adjusted EBITDA and reconciliation of Adjusted EBITDA to our most directly comparable financial measures calculated in accordance with GAAP, please read “How We Evaluation Our Operations” in our Form 10-K filed for the year ended December 31, 2024. +(5) +The CAP for non-PEO NEOs for fiscal year 2020 is significantly lower than fiscal years 2021, 2022, 2023 and 2024 due to Dale Redman, the Company’s former Chief Executive Officer and an NEO for fiscal year 2020, forfeiting all outstanding and unvested equity awards in connection with his resignation on March 13, 2020. Pursuant to Item 402(v) of Regulation S-K, the fair value of such forfeited equity awards as of the end of the prior fiscal year is taken as a deduction in calculating CAP, which fair value was equal to $ 5,278,134 . +58  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +NARRATIVE DISCLOSURE TO PAY VERSUS PERFORMANCE TABLE +CAP and Company TSR +The PEOs’ and other NEOs’ CAP generally align with the Company’s TSR over the three years presented in the table. This is primarily because a significant portion of the CAP to the PEOs and other NEOs is comprised of equity awards. The Company targets approximately 62% for the PEO and 57% for other NEOs of the value of total compensation to be comprised of equity-based awards, including RSUs and PSUs. For more detail regarding the Company’s equity awards, please see “Compensation Discussion and Analysis—What Guides Our Program” in this proxy statement. +Company TSR vs. Peer Group TSR +The Company’s cumulative TSR over the five year period was -17.07%, which underperformed the Peer Group TSR over the five period of  -4.28%. Pursuant to Item 402(v) of Regulation S-K, the Company used the same peer group used for purposes of Item 201(e) of Regulation S-K, which is different than the peer group used for measuring performance of PSUs. The Company’s PSUs vest based on the performance of the Company’s TSR relative to the TSR of the companies in our performance peer group during three-year performance periods. For more information of the performance peer group used for PSUs please see “Compensation Discussion and Analysis—What Guides Our Program—Use of Peer Compensation Data” in this proxy statement. +CAP vs. Net Income +The Company’s net income has steadily increased through 2023 and then significantly decreased in 2024 while the PEOs’ and other NEOs’ CAP has varied significantly each year. This is due to the emphasis the Company places on equity-based awards, which are sensitive to changes in the price of the Company’s common stock. In addition, the Company does not use net income to determine compensation levels or equity-based award payouts. +CAP vs. Adjusted EBITDA (the Company-Selected Measure) +The Company’s Adjusted EBITDA has steadily increased through 2023 with a slight decrease in 2024 while the PEOs’ and other NEOs’ CAP has varied significantly each year. This is due to the emphasis the Company places on equity-based awards, which are sensitive to changes in the price of the Company’s common stock. The Company uses Adjusted EBITDA as a performance metric for annual cash incentive awards granted under the Annual Bonus Plan. For fiscal year 2024, 40% of each NEO’s annual cash incentive was based on the achievement of Adjusted EBITDA. +Tabular Disclosure of Most Important Measures to Determine FY2024 CAP +The measures listed below represent the most important financial performance measures that we used to determine CAP for fiscal year 2024. For more detail regarding these financial performance measures, please see “Compensation Discussion and Analysis—What Guides Our Program” in this proxy statement. +Most Important Financial Performance Measures +Adjusted EBITDA +Relative TSR +Free Cash Flow +PROPETRO  2025 Proxy Statement   |  59 +TABLE OF CONTENTS +Executive Compensation +CEO Pay Ratio +As of December 31, 2024, the Company employed approximately 1,900 people, all in the United States. Using a consistently applied compensation measure, we determined as of December 31, 2024 the total annual cash compensation of each of our employees (excluding our Chief Executive Officer), and then identified the “median employee” within our employee population. +To identify the median compensated employee, we used total annual compensation, including base salary, actual bonus paid, value of equity awards vested, overtime and allowances, as applicable. Salaries were annualized for those full- and part-time employees who did not work for the full year. Reasonable estimates of cash compensation were made for those employees who were hired during 2024 using current base salary and target bonus amounts and any overtime or allowances paid during 2024. Once the median employee was identified, we determined his or her annual total compensation in accordance with Item 402(c)(2)(x) of Regulation S-K as required pursuant to SEC rules, which resulted in annual total compensation for the median employee equal to $123,943 for 2024. This calculation is the same calculation used to determine total compensation for purposes of the 2024 Summary Compensation Table with respect to each of the Named Executive Officers. +Our Chief Executive Officer’s 2024 total compensation was $5,987,447. Therefore, the ratio of our Chief Executive Officer’s compensation to the median employee’s compensation was approximately 48 to 1 for 2024. +Employee +2023 Annual Total +Compensation +($) +Estimated Pay +Ratio +Chief Executive Officer +5,987,447 +48:1 +Median employee, other than our CEO +123,943 +SEC rules do not specify a single methodology for identification of the median employee, and other companies may use assumptions and methodologies that are different from those used by us in calculating their pay ratio. Accordingly, the pay ratio disclosed by other companies may not be comparable to the Company’s pay ratio as disclosed above. Neither the Compensation Committee nor management of the Company used the pay ratio measure in making compensation decisions. +60  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +Proposal 4 —Approval of The Second Amended and Restated 2020 Long Term Incentive Plan +The use of equity-based awards under the 2020 LTIP has been a key component of our compensation program since its adoption. The ability to grant equity-based compensation awards is critical to attracting and retaining highly qualified individuals. The Board believes that it is in the best interest of our stockholders for those individuals to have an ownership interest in the Company in recognition of their present and potential contributions and to align their interests with those of our future stockholders. +The ProPetro Holding Corp. 2020 Long Term Incentive Plan was originally adopted and approved by shareholders, effective October 22, 2020, and subsequently amended and restated as the 2020 LTIP, effective May 11, 2023. The Board has determined that the current number of shares available for grant under the 2020 LTIP (which is our only active equity-based plan) is not sufficient to meet the objectives of our compensation program going forward. Accordingly, the Board has adopted, subject to shareholder approval, and proposes that our stockholders approve the Second Amended and Restated ProPetro Holding Corp. 2020 Long Term Incentive Plan (“Second A&R LTIP”) in order to increase the number of shares of our common stock available for future grants by 2,470,000, from 8,050,000 to 10,520,000, as described below, and to extend the term of the plan to the tenth anniversary of the 2025 annual meeting. +The Second A&R LTIP also makes certain other non-material changes to the 2020 LTIP, including the updating the default treatment of performance-based awards upon an involuntary termination in connection with a change in control. +At the 2025 annual meeting, our stockholders will be asked to approve the Second A&R LTIP. If approved by our stockholders, the Second A&R LTIP will be effective as of the date of the 2025 annual meeting. If the Second A&R LTIP is not approved by our stockholders, then the 2020 LTIP will remain in effect without any increase in the number of shares of our common stock available for future grants. +Background and Purpose of the Proposal +The 2020 LTIP authorizes awards to be granted covering up to 8,050,000 shares of our common stock, subject to the share recycling and adjustment provisions described below. As of March 24, 2025, there were approximately 1,323,121 shares of our common stock available for new awards under the 2020 LTIP (counting performance-based awards at the maximum payout level). +On April 7, 2025, subject to approval by our stockholders, the Board determined that it is in the Company’s best interest to adopt the Second A&R LTIP to increase the number of shares of common stock available for issuance by 2,470,000, from 8,050,000 to 10,520,000. The length of time that the Second A&R LTIP share pool will support our incentive compensation program will depend on numerous factors that cannot be fully anticipated by us at this time including our share price, executive retention rate, and changes in compensation practices of companies with which we compete for executive talent. +Of the 8,050,000 shares currently authorized for issuance under the 2020 LTIP, a total of 2,609,818 shares have been issued as of March 24, 2025 upon the settlement of RSUs. As of March 24, 2025, under the 2020 LTIP, a total of 3,315,248 shares remained subject to unsettled RSUs and 2,878,410 shares remained subject to unsettled PSUs (based on maximum performance). As of March 24, 2025, under the 2017 LTIP, a total of 166,536 shares remain subject to outstanding stock options with a weighted average remaining term of 2.01 years and a weighted average exercise price of  $14.00. No other equity awards are outstanding under the 2017 LTIP and 2020 LTIP as of such date. For additional information regarding stock-based awards previously granted by us under the 2017 LTIP and 2020 LTIP, please see Note 14 to our consolidated financial statements on Form 10-K for the year ended December 31, 2024. As of March 24, 2025, there were 103,168,656 shares of our common stock outstanding. The closing price per share of common stock on the New York Stock Exchange as of March 24, 2025 was $7.59. +The proposed Second A&R LTIP is included as Appendix A hereto. If our stockholders approve this Proposal No. 4, we intend to file, pursuant to the Securities Act of 1933, as amended, a registration statement on Form S-8 to register the additional shares made available for delivery under the Second A&R LTIP. +PROPETRO  2025 Proxy Statement   |  61 +TABLE OF CONTENTS +Executive Compensation +Summary of the Second A&R LTIP +The following summary provides a general description of the material features of the Second A&R LTIP but is not a complete description of all provisions of the Second A&R LTIP and is qualified in its entirety by reference to the full text of the Second A&R LTIP included as Appendix A, which is incorporated by reference into this Proposal No. 4. +The purpose of the Second A&R LTIP is to attract, retain, and motivate qualified persons as employees, directors, and consultants of the Company and its affiliates. The Second A&R LTIP also provides a means through which such persons can acquire and maintain stock ownership or awards, the value of which is tied to the performance of the Company, thereby strengthening their concern for the Company and its affiliates. +The Second A&R LTIP provides for potential grants of: (i) incentive stock options qualified as such under U.S. federal income tax laws (“ISOs”), (ii) stock options that do not qualify as ISOs (“Nonstatutory Options,” and together with ISOs, “Options”), (iii) stock appreciation rights (“SARs”), (iv) restricted stock awards (“Restricted Stock Awards”), (v) RSUs; (vi) awards of vested stock (“Stock Awards”), (vii) dividend equivalents, (viii) other stock-based or cash awards, and (ix) substitute awards (“Substitute Awards” and together with Options, SARs, Restricted Stock Awards, RSUs, Stock Awards, dividend equivalents and other stock-based or cash awards, the “Awards”). +Key features of the Second A&R LTIP include: +• +No automatic Award grants are promised to any eligible individual; +• +Shares (i) withheld or surrendered in payment of the exercise or purchase price or taxes related to an Option or SAR or (ii) repurchased on the open market with the proceeds from the exercise price of an Option, in each case, granted under the Second A&R LTIP, will not be available for new Awards under the Second A&R LTIP; +• +Shares (i) withheld or surrendered in payment of the exercise or purchase price related to a stock option or stock appreciation right that is a 2017 Plan Award (as defined below), (ii) repurchased on the open market with the proceeds from the exercise price of a stock option that is an 2017 Plan Award, or (iii) withheld or surrendered to satisfy a tax withholding obligation with respect to any 2017 Plan Award, will not be available for new Awards under the Second A&R LTIP; +• +Awards assumed by a successor in connection with a change in control will not vest solely as a result of the change in control; +• +No Section 280G gross-up; +• +No evergreen for the share reserve; +• +Ten year term; +• +Except as permitted in the grant of Substitute Awards, no discounted options or related Awards may be granted; +• +No repricing, replacement, or re-granting of Options, SARS or other stock awards without shareholder approval if the effect would be to reduce the exercise price of the Award (except in the event of certain equitable adjustments or a change in control, as further described below); +• +Any Award (or portion thereof) granted under the Second A&R LTIP will vest no earlier than the first anniversary of the date the Award is granted (subject to an exception equal to no more than 5% of the shares reserved for issuance under the Second A&R LTIP); +• +Awards are subject to potential reduction, cancellation or forfeiture pursuant to any claw-back policy adopted by the Company; +• +Awards are generally non-transferrable; +• +Meaningful annual limits on total director compensation; and +• +Dividends and dividend equivalents are subject to restrictions and risk of forfeiture to the same extent as the Award with respect to which such dividends or dividend equivalents are accrued and will not be paid unless and until such Award has vested. +Eligibility to Participate +Employees, non-employee directors, and other service providers of the Company and its affiliates are eligible to receive awards under the Second A&R LTIP. Eligible individuals to whom an Award is granted under the Second A&R LTIP are referred to as “Participants.” As of March 24, 2025, the Company and its affiliates have approximately 5 +62  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +executive officers, 9 non-employee directors, 1,917 employees (other than the 5 executive officers), and approximately 15 other service providers who will be eligible to participate in the Second A&R LTIP. The Company engages consultants from time to time who could be eligible for awards and the number of employees employed by the Company and its affiliates varies over time, hence these numbers may change during the life of the Second A&R LTIP. +Securities to be Offered +Subject to adjustment, in the event of any distribution, recapitalization, stock split, merger, consolidation or other corporate event, the aggregate number of shares of our common stock that may be issued pursuant to Awards under the Second A&R LTIP is equal to 10,520,000, and all such shares will be available for issuance upon the exercise of ISOs. The number of shares that may be issued pursuant to the Second A&R LTIP is also subject to the share recycling and adjustment provisions described below. +Of the 8,050,000 shares currently authorized for issuance under the 2020 LTIP, a total of 2,609,818 shares have been issued as of March 24, 2025 upon the settlement of RSUs. As of March 24, 2025, under the 2020 LTIP, a total of 3,315,248 shares remained subject to unsettled RSUs and 2,878,410 shares remained subject to unsettled PSUs (measured at maximum). No other equity awards are outstanding under the 2020 LTIP as of such date. +Consistent with the 2020 LTIP, if all or any portion of an Award, including an award granted under the 2017 LTIP that is outstanding as of October 22, 2020 (a “2017 Plan Award”), expires or is cancelled, forfeited, exchanged, settled for cash or otherwise terminated without the actual delivery of shares, any shares subject to such Award or 2017 Plan Award will again be available for new Awards under the Second A&R LTIP. As of March 24, 2025, there were 166,536 2017 Plan Awards outstanding and thus a maximum of 166,536 shares of our common stock could become available for new Awards under the Second A&R LTIP as a result of 2017 Plan Awards, in addition to the 10,520,000 shares reserved under the Second A&R LTIP, in the unlikely event that all 2017 Plan Awards outstanding as of March 24, 2025 are cancelled, forfeited, exchanged, settled for cash, or otherwise terminated without delivery of shares. +Any shares withheld or surrendered in payment of any taxes relating to Awards granted under the Second A&R LTIP (other than Options or SARs) will be again available for new Awards under the Second A&R LTIP. However, any shares (i) withheld or surrendered in payment of the exercise or purchase price or taxes related to an Option or SAR or (ii) repurchased on the open market with the proceeds from the exercise price of an Option, in each case, granted under the Second A&R LTIP, will not be available for new Awards under the Second A&R LTIP. Further, shares (x) withheld or surrendered in payment of the exercise or purchase price related to a stock option or stock appreciation right that is an 2017 Plan Award, (y) repurchased on the open market with the proceeds from the exercise price of a stock option that is an 2017 Plan Award, or (z) withheld or surrendered to satisfy a tax withholding obligation with respect to any 2017 Plan Award, will not be available for new Awards under the Second A&R LTIP. +Director Compensation Limits +Under the Second A&R LTIP, in a single calendar year, a non-employee director may not be paid compensation, whether denominated in cash or Awards, for such individual’s service on the Board in excess of  $500,000. Additional cash amounts or Awards may be paid for any calendar year in which a non-employee director (i) first joins the Board, (ii) serves on a special committee of the Board, or (iii) serves as lead director or non-executive Chairman of the Board. The limit on non-employee director compensation described above does not apply to compensation paid for any period in which the individual served as our employee or an employee of our affiliates or was otherwise providing services to us or our affiliates other than in the capacity as a director. +Administration +The Board (or a committee of two or more directors appointed by the Board) will administer the Second A&R LTIP (as applicable, the “Administrator”). Subject to the terms of the Second A&R LTIP and applicable law, the Administrator has broad authority to select Participants to receive awards, determine the types of awards and terms and conditions of awards and interpret provisions of the Second A&R LTIP. Subject to applicable law, the Administrator is also authorized to interpret the Second A&R LTIP, to establish, amend and rescind any rules and regulations relating to the Second A&R LTIP, to delegate duties under the Second A&R LTIP, to terminate, modify or amend the Second A&R LTIP (except for certain amendments that require stockholder approval as described below), and to make any other determinations that it deems necessary or desirable for the administration of the Second A&R LTIP. The Administrator may correct any defect, supply any omission or reconcile any inconsistency in the Second A&R LTIP in the manner and to the extent the Administrator deems necessary or desirable. +PROPETRO  2025 Proxy Statement   |  63 +TABLE OF CONTENTS +Executive Compensation +Source of Shares +Shares of our common stock issued under the Second A&R LTIP may come from authorized but unissued shares, from treasury stock held by the Company or from previously issued shares of our common stock reacquired by the Company, including shares purchased on the open market. +Prohibition on Repricing +Except as may be related to Substitute Awards or in the event of certain equitable adjustments or a change in control, as described in the Second A&R LTIP, without the approval of the stockholders of the Company, the terms of outstanding Awards may not be amended to (i) reduce the exercise price or grant price of an outstanding Option or SAR, (ii) grant a new Option, SAR or other Award in substitution for, or upon the cancellation of, any previously granted Option or SAR that has the effect of reducing the exercise price or grant price, (iii) exchange any Option or SAR for Stock, cash or other consideration when the exercise price or grant price per share of stock under such Option or SAR exceeds the fair market value of a share of our common stock, or (iv) take any other action that would be considered a “repricing” of an Option or SAR under the applicable listing standards of the national securities exchange on which our common stock is listed. +Awards Under the Second A&R LTIP +Options +An Option represents a right to purchase our common stock at a fixed exercise price. The Company may grant Options to eligible persons including: (i) ISOs which comply with the requirements of Section 422 of the Code; and (ii) Nonstatutory Options. The exercise price of each Option granted under the Second A&R LTIP will be stated in the option agreement and may vary; however, the exercise price for an Option must not be less than the fair market value per share of our common stock as of the date of grant (or 110% of the fair market value for certain ISOs). Options may be exercised as the Administrator determines, but not later than ten years from the date of grant. The Administrator determines the methods and form of payment for the exercise price of an Option (including, in the discretion of the Administrator, payment in shares of our common stock, other Awards or other property) and the methods and forms in which our common stock will be delivered to a Participant. +SARs +A SAR is the right to receive an amount equal to the excess of the fair market value of one share of our common stock on the date of exercise over the grant price of the SAR, payable in either cash or shares of our common stock or any combination thereof as determined by the Administrator. The grant price of a share of our common stock subject to the SAR will be determined by the Administrator, but in no event will that grant price be less than the fair market value of a share of our common stock on the date of grant. The Administrator has the discretion to determine the other terms and conditions of a SAR award. +Restricted Stock Awards +A Restricted Stock Award is a grant of shares of our common stock subject to a risk of forfeiture, performance conditions, restrictions on transferability and any other restrictions imposed by the Administrator in its discretion. Restrictions may lapse at such times and under such circumstances as determined by the Administrator. Except as otherwise provided under the terms of an Award Agreement, the holder of a Restricted Stock Award will generally have rights as a stockholder, including the right to vote the common stock subject to the Restricted Stock Award and to receive dividends on the common stock subject to the Restricted Stock Award during the restriction period (subject to limitations on payment of dividends on unvested Awards, as described below). Common stock distributed in connection with a stock split or stock dividend, and other property (other than cash) distributed as a dividend, will be subject to restrictions and a risk of forfeiture to the same extent as the Restricted Stock Award with respect to which such common stock or other property has been distributed. In addition, any cash dividends will be subject to restrictions and risk of forfeiture to the same extent as the Restricted Stock with respect to which such dividends were paid and will not be paid unless and until such Restricted Stock has vested and been earned. +RSUs +RSUs are rights to receive our common stock, cash, or a combination of both equal in value to the number of shares of our common stock covered by the RSUs at the end of a specified period or upon the occurrence of a specified event. The Administrator will subject RSUs to restrictions to be specified in the Award Agreement, and those restrictions may lapse at such times or upon such conditions determined by the Administrator. +64  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +Stock Awards +The Administrator is authorized to grant vested common stock as a Stock Award as a bonus, as additional compensation, or in lieu of cash compensation the individual is otherwise entitled to receive. +Dividend Equivalents +Dividend equivalents entitle a Participant to receive cash, shares of our common stock, other Awards, or other property equal in value to dividends or other distributions paid with respect to a specified number of shares of our common stock. Dividend equivalents must be awarded in connection with another Award (other than a Restricted Stock Award or Stock Award). The terms and conditions applicable to dividend equivalents will be determined by the Administrator and set forth in an Award Agreement, provided, however, that dividend equivalents will be subject to restrictions and a risk of forfeiture to the same extent as the Award with respect to which such dividends accrue and will not be paid unless and until such Award has vested and been earned. +Other Stock-Based or Cash Awards +Other stock-based Awards are awards denominated in or payable in, valued in whole or in part by reference to, or otherwise based on or related to, the value of our common stock. Cash awards may be granted on a free-standing basis, as an element of or a supplement to, or in lieu of any other Award. +Substitute Awards +The Company may grant Awards in substitution for any other Award granted under the Second A&R LTIP or another plan of the Company or its affiliates or any other right of a person to receive payment from the Company or its affiliates. Awards may also be granted in substitution for awards held by individuals who become eligible individuals as a result of certain business transactions, in which case, (i) subject to applicable stock exchange requirements, shares of our common stock subject to such Awards will not be added to or subtracted from the number of shares of our common stock authorized to be granted under the Second A&R LTIP and (ii) any Options or SARs so granted may have an exercise price per share that is less than the fair market value of a share of our common stock on the date of substitution if the substitution complies with the requirements of Section 409A of the Code and the guidance and regulations promulgated thereunder and other applicable laws. +Other Provisions +Dividends and Dividend Equivalents +Dividends and dividend equivalents are subject to restrictions and risk of forfeiture to the same extent as the Award with respect to which such dividends or dividend equivalents are accrued and will not be paid unless and until such Award has vested. +Recapitalization +In the event of any “equity restructuring” event (such as a stock dividend, stock split, reverse stock split, or similar event) with respect to our common stock, the Administrator will equitably adjust (i) the aggregate number or kind of shares that may be delivered under the Second A&R LTIP, (ii) the number or kind of shares or amount of cash subject to an Award, (iii) the terms and conditions of Awards, including the purchase price or exercise price of Awards and performance goals, and (iv) the applicable share-based limitations with respect to Awards provided in the Second A&R LTIP, in each case, to equitably reflect such event. +Change in Control +The Second A&R LTIP does not provide for the automatic acceleration of vesting of outstanding awards upon a change in control event solely with respect to the occurrence of the change in control unless the successor company fails to assume or replace the awards in connection with that change in control event. If the successor company does assume the awards, unless the individual award agreement provides otherwise, then vesting of the award will be accelerated in the event of an involuntary termination that occurs in connection with or 12 months following the change in control. +Tax Withholding +The Company and any of its affiliates have the right to withhold, or require payment of, the amount of any applicable taxes due or potentially payable upon exercise, award, or lapse of restrictions of an Award. The Administrator will determine, in its sole discretion, the form of payment acceptable for such tax withholding obligations, including the +PROPETRO  2025 Proxy Statement   |  65 +TABLE OF CONTENTS +Executive Compensation +delivery of cash or cash equivalents, our common stock (including previously owned shares, net settlement, a broker-assisted sale, or other cashless withholding or reduction of the amount of shares otherwise issuable or delivered pursuant to the Award), other property, or any other legal consideration the Administrator deems appropriate. +Limitations on Transfer of Awards +Participants may not assign, alienate, pledge, attach, sell, or otherwise transfer or encumber any Award, other than a Stock Award. Options and SARs may only be exercised by a Participant during that Participant’s lifetime or by the person to whom the Participant’s rights pass by will or the laws of descent and distribution. Notwithstanding these restrictions, to the extent specifically provided by the Administrator, a Participant may assign or transfer, without consideration, an Award, other than an ISO, on such terms and conditions as the Administrator may from time to time establish; however, no Award (other than a Stock Award, which is a fully vested share of our common stock) may be transferred to a third-party financial institution for value. +All shares of our common stock subject to an Award and evidenced by a stock certificate may contain a legend restricting the transferability of the shares pursuant to the terms of the Second A&R LTIP, which can be removed once the restrictions have terminated, lapsed or been satisfied. If shares are issued in book entry form, a notation to the same restrictive effect will be placed on the transfer agent’s books in connection with such shares. +Clawback +All Awards under the Second A&R LTIP will be subject to any clawback policy adopted by the Company, as in effect from time to time, including the Clawback Policy. +Plan Amendment and Termination +The Administrator may amend or terminate any Award or Award Agreement or amend the Second A&R LTIP at any time and the Board may amend or terminate the Second A&R LTIP at any time; however, stockholder approval will be required for any amendment to the extent necessary to comply with applicable law or exchange listing standards. As discussed in more detail above, the Administrator does not have the authority, without the approval of stockholders to amend any outstanding Option or SAR to reduce its exercise price per share or take any other action that would be considered a repricing under the applicable exchange listing standards. Without the consent of an affected Participant, no action by the Administrator or the Board to amend or terminate any Award, Award Agreement or the Second A&R LTIP, as applicable, may materially and adversely affect the rights of such Participant under any previously granted and outstanding Award. +Term of the Second A&R LTIP +If our stockholders approve this proposal, the Second A&R LTIP will become effective as of the date of the 2025 annual meeting. Unless earlier terminated by action of the Board, the Second A&R LTIP will terminate on the tenth anniversary of the 2025 annual meeting. Awards granted before the termination date of the Second A&R LTIP will continue to be effective according to their terms and conditions. +Federal Income Tax Consequences +The following discussion is for general information only and is intended to briefly summarize the United States federal income tax consequences to Participants arising from participation in the Second A&R LTIP. This description is based on current law, which is subject to change (possibly retroactively). The tax treatment of a Participant in the Second A&R LTIP may vary depending on his or her particular situation and may, therefore, be subject to special rules not discussed below. No attempt has been made to discuss any potential foreign, state, or local tax consequences. In addition, Nonstatutory Options and SARs with an exercise price less than the fair market value of shares of our common stock on the date of grant (which may only be granted in limited circumstances in connection with a transaction), SARs payable in cash, RSUs, and certain other Awards that may be granted pursuant to the Second A&R LTIP, could be subject to additional taxes unless they are designed to comply with certain restrictions set forth in Section 409A of the Code and guidance promulgated thereunder. +Tax Consequences to Participants +Options and SARs +Participants will not realize taxable income upon the grant of an Option or SAR. Upon the exercise of a Nonstatutory Option or an SAR, a Participant will recognize ordinary compensation income (subject to the Company’s withholding +66  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +obligations if an employee) in an amount equal to the excess of  (i) the amount of cash and the fair market value of the common stock received, over (ii) the exercise price of the Award. A Participant will generally have a tax basis in any shares of common stock received pursuant to the exercise of a Nonstatutory Option or SAR that equals the fair market value of such shares on the date of exercise. Subject to the discussion under “Tax Consequences to the Company” below, the Company will be entitled to a deduction for federal income tax purposes that corresponds as to timing and amount with the compensation income recognized by a Participant under the foregoing rules. When a Participant sells the common stock acquired as a result of the exercise of a Nonstatutory Option or SAR, any appreciation (or depreciation) in the value of the common stock after the exercise date is treated as long- or short-term capital gain (or loss) for federal income tax purposes, depending on the holding period. The common stock must be held for more than 12 months to qualify for long-term capital gain treatment. +Participants eligible to receive an ISO will not recognize taxable income on the grant of an ISO. Upon the exercise of an ISO, a Participant will not recognize taxable income, although the excess of the fair market value of the shares of common stock received upon exercise of the ISO (“ISO Stock”) over the exercise price will increase the alternative minimum taxable income of the Participant, which may cause such Participant to incur alternative minimum tax. The payment of any alternative minimum tax attributable to the exercise of an ISO would be allowed as a credit against the Participant’s regular tax liability in a later year to the extent the Participant’s regular tax liability is in excess of the alternative minimum tax for that year. +Upon the disposition of ISO Stock that has been held for the required holding period (generally, at least two years from the date of grant and one year from the date of exercise of the ISO), a Participant will generally recognize capital gain (or loss) equal to the excess (or shortfall) of the amount received in the disposition over the exercise price paid by the Participant for the ISO Stock. However, if a Participant disposes of ISO Stock that has not been held for the requisite holding period (a “Disqualifying Disposition”), the Participant will recognize ordinary compensation income in the year of the Disqualifying Disposition in an amount equal to the amount by which the fair market value of the ISO Stock at the time of exercise of the ISO (or, if less, the amount realized in the case of an arm’s length disposition to an unrelated party) exceeds the exercise price paid by the Participant for such ISO Stock. A Participant would also recognize capital gain to the extent the amount realized in the Disqualifying Disposition exceeds the fair market value of the ISO Stock on the exercise date. If the exercise price paid for the ISO Stock exceeds the amount realized (in the case of an arm’s-length disposition to an unrelated party), such excess would ordinarily constitute a capital loss. +The Company will generally not be entitled to any federal income tax deduction upon the grant or exercise of an ISO, unless a Participant makes a Disqualifying Disposition of the ISO Stock. If a Participant makes a Disqualifying Disposition, the Company will then, subject to the discussion below under “Tax Consequences to the Company,” be entitled to a tax deduction that corresponds as to timing and amount with the compensation income recognized by a Participant under the rules described in the preceding paragraph. +Under current rulings, if a Participant transfers previously held shares of our common stock (other than ISO Stock that has not been held for the requisite holding period) in satisfaction of part or all of the exercise price of an Option, whether a Nonstatutory Option or an ISO, no additional gain will be recognized on the transfer of such previously held shares in satisfaction of the Nonstatutory Option or ISO exercise price (although a Participant would still recognize ordinary compensation income upon exercise of a Nonstatutory Option in the manner described above). Moreover, that number of shares of common stock received upon exercise which equals the number of shares of previously held common stock surrendered in satisfaction of the Nonstatutory Option or ISO exercise price will have a tax basis that equals, and a capital gains holding period that includes, the tax basis and capital gains holding period of the previously held shares of common stock surrendered in satisfaction of the Nonstatutory Option or ISO exercise price. Any additional shares of common stock received upon exercise will have a tax basis that equals the amount of cash (if any) paid by the Participant, plus the amount of compensation income recognized by the Participant under the rules described above. +The Second A&R LTIP generally prohibits the transfer of Awards, but the Second A&R LTIP allows the Administrator to permit the transfer of Awards (other than ISOs) in limited circumstances, in its discretion. For income and gift tax purposes, certain transfers of Nonstatutory Options should generally be treated as completed gifts, subject to gift taxation. +The IRS has not provided formal guidance on the income tax consequences of a transfer of Nonstatutory Options (other than in the context of divorce) or SARs. However, the IRS has informally indicated that after a transfer of stock options (other than in the context of divorce pursuant to a domestic relations order), the transferor will recognize income, which will be subject to withholding, and employment or payroll taxes will be collectible at the time the transferee exercises the stock options. If a Nonstatutory Option is transferred pursuant to a domestic relations order, +PROPETRO  2025 Proxy Statement   |  67 +TABLE OF CONTENTS +Executive Compensation +the transferee will recognize ordinary income upon exercise by the transferee, which will be subject to withholding, and employment or payroll taxes (attributable to and reported with respect to the transferor) will be collectible from the transferee at such time. +In addition, if a Participant transfers a vested Nonstatutory Option to another person and retains no interest in or power over it, the transfer is treated as a completed gift. The amount of the transferor’s gift (or generation-skipping transfer, if the gift is to a grandchild or later generation) equals the value of the Nonstatutory Option at the time of the gift. The value of the Nonstatutory Option may be affected by several factors, including the difference between the exercise price and the fair market value of the stock, the potential for future appreciation or depreciation of the stock, the time period of the Nonstatutory Option and the illiquidity of the Nonstatutory Option. The transferor will be subject to a federal gift tax, which will be limited by (i) the annual exclusion of  $19,000 per donee (for 2025, subject to adjustment in future years), (ii) the transferor’s lifetime unified credit, or (iii) the marital or charitable deductions. The gifted Nonstatutory Option will not be included in the Participant’s gross estate for purposes of the federal estate tax or the generation-skipping transfer tax. +This favorable tax treatment for vested Nonstatutory Options has not been extended to unvested Nonstatutory Options. Whether such consequences apply to unvested Nonstatutory Options or to SARs is uncertain and the gift tax implications of such a transfer is a risk the transferor will bear upon such a disposition. +Restricted Stock Awards; RSUs; Stock Awards; Other Stock-Based or Cash Awards +A Participant will recognize ordinary compensation income upon receipt of cash pursuant to a cash award or, if earlier, at the time the cash is otherwise made available for the Participant to draw upon. Individuals will not have taxable income at the time of grant of an RSU, but rather, will generally recognize ordinary compensation income at the time he or she receives cash or a share of our common stock in settlement of the RSU, as applicable, in an amount equal to the cash or the fair market value of the common stock received. +A recipient of a Restricted Stock Award or Stock Award generally will be subject to tax at ordinary income tax rates on the fair market value of the common stock when it is received, reduced by any amount paid by the recipient; however, if the common stock is not transferable and is subject to a substantial risk of forfeiture when received, a Participant will recognize ordinary compensation income in an amount equal to the fair market value of the common stock (i) when the common stock first becomes transferable and is no longer subject to a substantial risk of forfeiture, in cases where a Participant does not make a valid election under Section 83(b) of the Code, or (ii) when the Award is received, in cases where a Participant makes a valid election under Section 83(b) of the Code. If a Section 83(b) election is made and the shares are subsequently forfeited, the recipient will not be allowed to take a deduction for the value of the forfeited shares. If a Section 83(b) election has not been made, any dividends received with respect to a Restricted Stock Award that is subject at that time to a risk of forfeiture or restrictions on transfer generally will be treated as compensation that is taxable as ordinary income to the recipient; otherwise the dividends will be treated as dividends. +A Participant who is an employee will be subject to withholding for federal, and generally for state and local, income taxes at the time he or she recognizes income under the rules described above. The tax basis in the common stock received by a Participant will equal the amount recognized by the Participant as compensation income under the rules described in the preceding paragraph, and the Participant’s capital gains holding period in those shares will commence on the later of the date the shares are received or the restrictions lapse. Subject to the discussion below under “Tax Consequences to the Company,” the Company will be entitled to a deduction for federal income tax purposes that corresponds as to timing and amount with the compensation income recognized by a Participant under the foregoing rules. +68  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +Tax Consequences to the Company +Reasonable Compensation +In order for the amounts described above to be deductible by the Company (or its subsidiary), such amounts must constitute reasonable compensation for services rendered or to be rendered and must be ordinary and necessary business expenses. +Golden Parachute Payments +Our ability (or the ability of one of our subsidiaries) to obtain a deduction for future payments under the Second A&R LTIP could also be limited by the golden parachute rules of Section 280G, which prevent the deductibility of certain excess parachute payments made in connection with a change in control of an employer-corporation. +Compensation of Covered Employees +The ability of the Company (or its subsidiary) to obtain a deduction for amounts paid under the Second A&R LTIP could be limited by Section 162(m). Section 162(m) limits the Company’s ability to deduct compensation, for federal income tax purposes, paid during any year to a “covered employee” (within the meaning of Section 162(m)) in excess of  $1,000,000. +New Plan Benefits +The future awards, if any, that will be made to eligible persons under the Second A&R LTIP are subject to the discretion of the Administrator, and therefore, the benefits or number of shares subject to awards that may be granted in the future to our executive officers, employees and directors is not currently determinable. Therefore, a New Plan Benefits Table is not provided. +Equity Compensation Plan Information +The table below sets forth information regarding awards outstanding under the 2017 LTIP and the 2020 LTIP, as of December 31, 2024: +Plan Category +Number of Securities +to Be Issued Upon +Exercise of +Outstanding Options, +Warrants and Rights (1) +(#) +(a) +Weighted Average +Exercise Price of +Outstanding +Options, Warrants +and Rights +($) +(b) +Number of Securities +Remaining Available for +Future Issuance Under +Equity Compensation Plans +(Excluding Securities +Reflected in Column (a)) (2) +($) +(c) +Equity compensation plans approved +by security holders +5,910,515 +14.00 +2,574,261 +Equity compensation plans not approved by security holders +― +― +― +Total +5,910,515 +14.00 +2,574,261 +(1) +Includes 178,716 option awards granted under the 2017 LTIP and 3,000,783 RSU awards and 2,731,016 PSU awards (assuming achievement of maximum payout of 200%) granted under the 2020 LTIP. The weighted average exercise price in column (b) does not take the RSU awards or PSU awards into account. +(2) +This column reflects the number of awards that remain available for future issuance pursuant to the 2020 LTIP as of December 31, 2024. No further awards may be granted under the 2017 LTIP. +PROPETRO  2025 Proxy Statement   |  69 +TABLE OF CONTENTS +Executive Compensation +Consequences of Failing to Approve the Proposal +The Second A&R LTIP will not be implemented unless approved by our stockholders. If the Second A&R LTIP is not approved by the Stockholders, the 2020 LTIP will remain in effect, and the Company will continue to grant awards under the 2020 LTIP until the share reserve under the 2020 LTIP is exhausted or the term of the 2020 LTIP expires. Once the remaining share reserve is exhausted, the Company may elect to provide compensation through other means, such as cash-settled awards or other cash compensation, to assure that the Company and its affiliates can attract and retain qualified personnel. +VOTE REQUIRED +The affirmative “FOR” vote of the holders of a majority of the shares represented at the meeting (in person or by proxy) and entitled to vote is required to approve this Proposal No. 4. Brokers do not have discretion to vote on this proposal without your instruction. If you do not instruct your broker how to vote on this proposal, your broker will deliver a non-vote on this proposal. Abstentions and broker non-votes will have no effect on Proposal No. 4. +The Board of Directors unanimously recommends a vote FOR the approval of the Second A&R LTIP. +70  |   ir.propetroservices.com +TABLE OF CONTENTS +Audit Matters +Proposal 5 —Ratification of Appointment of Independent Registered Public Accounting Firm +The Audit Committee has selected RSM US LLP, independent registered public accounting firm, to audit our consolidated financial statements for the fiscal year ending December 31, 2025. We are asking the stockholders to ratify the appointment of RSM US LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2025. RSM US LLP was appointed by the Audit Committee in accordance with its charter. +In the event stockholders fail to ratify the appointment, the Audit Committee may reconsider this appointment. Even if the appointment is ratified, the Audit Committee, in its discretion, may direct the appointment of a different independent accounting firm at any time during the year if the Audit Committee determines that such a change would be in our and our stockholders’ best interests. +It is expected that one or more representatives of RSM US LLP will be available to participate in the 2025 annual meeting and will be given the opportunity to make a statement if they so desire. It also is expected that the representative(s) will be available to respond to appropriate questions from the stockholders. Representatives of Deloitte & Touche LLP, our independent registered public accounting firm for the interim period from January 1, 2023 through February 24, 2023 and our fiscal year ended December 31, 2022, will not be present at the annual meeting and will not have an opportunity to make a statement, if they desire to do so, or to respond to appropriate questions from the stockholders. +Change in Independent Registered Public Accounting Firm +On February 24, 2023, the Audit Committee dismissed Deloitte & Touche LLP as our independent registered public accounting firm. Deloitte & Touche LLP served as our independent registered public accounting firm since 2013. +During the interim period from January 1, 2023 through February 24, 2023 and our fiscal year ended December 31, 2022, (i) there were no disagreements with Deloitte & Touche LLP on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedures that, if not resolved to Deloitte & Touche LLP’s satisfaction, would have caused Deloitte & Touche LLP to make reference to the subject matter of the disagreement in connection with its reports and (ii) there were no “reportable events” as defined in Item 304(a)(1)(v) of Regulation S-K. +The audit reports of Deloitte & Touche LLP on our consolidated financial statements for each of the interim period from January 1, 2023 through February 24, 2023 and our fiscal year ended December 31, 2022 did not contain an adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles. +During the interim period from January 1, 2023 through February 24, 2023 and our fiscal year ended December 31, 2022, neither the Company nor anyone on its behalf consulted RSM US LLP regarding (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the consolidated financial statements of the Company, in connection with which either a written report or oral advice was provided to the Company that RSM US LLP concluded was an important factor considered by the Company in reaching a decision as to the accounting, auditing or financial reporting issue; or (ii) any matter that was either the subject of a disagreement as defined in Item 304(a)(1)(iv) of Regulation S-K or a reportable event as described in Item 304(a)(1)(v) of Regulation S-K. +PROPETRO  2025 Proxy Statement   |  71 +TABLE OF CONTENTS +Audit Matters +VOTE REQUIRED +The approval of the ratification of the appointment of RSM US LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2025 requires the affirmative vote of the holders of a majority of the shares represented at the meeting (in person or by proxy) and entitled to vote. As a result, abstentions will have the same effect as votes “AGAINST” this proposal. We do not expect any broker non-votes in connection with this proposal. +The Board of Directors unanimously recommends a vote FOR the ratification of the appointment of RSM US LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2025. +72  |   ir.propetroservices.com +TABLE OF CONTENTS +Audit Matters +Auditor Fees for Fiscal Years 2024 and 2023 +The following table sets forth the fees incurred by us in fiscal years 2024 and 2023 for services performed by RSM US LLP: +RSM US LLP +Year Ended December 31, +2024 +($) +2023 +($) +Audit fees (1) +1,686,741 +1,476,626 +All other fees (2) +n/a +n/a +Total fees +1,686,741 +1,476,626 +(1) +Audit fees include fees billed for professional services rendered for the audit of our annual consolidated financial statements, the audit of our system of internal control over financial reporting, the review of interim consolidated financial statements included in our quarterly reports, consents and comfort letters provided in connection with the filing of registration statements, other related services that are normally provided in connection with statutory and regulatory filings, and related out-of-pocket expenses. +(2) +The Company did not incur any audit-related fees, tax fees or other fees during the period. +Policy on Audit Committee Pre-Approval of Audit and Non-Audit Services of Independent Registered Public Accounting Firm +The charter of the Audit Committee and its pre-approval policy require that the Audit Committee review and pre-approve the Company’s independent registered public accounting firm’s audit fees, audit-related fees, tax fees and fees for other services. The Chairman of the Audit Committee has the authority to grant pre-approvals that are within the pre-approval policy and are presented to the Audit Committee at a subsequent meeting. For the year ended December 31, 2024, the Audit Committee approved 100% of the services described above under the captions “Audit Fees” and “All Other Fees”. +Report of the Audit Committee +The Audit Committee assists our Board in overseeing: +(i) +the integrity of our consolidated financial statements, +(ii) +our compliance with legal and regulatory requirements, +(iii) +the independent auditor’s qualifications and independence, +(iv) +the performance of our independent auditor, and +(v) +the design and implementation of the Company’s internal audit function and the performance of the internal audit function after it has been established. +In so doing, it is the responsibility of the Audit Committee to maintain free and open communication between the directors, the independent auditor and our financial management. The Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the work of the independent auditor for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for us. The independent auditor reports directly to the Audit Committee. +PROPETRO  2025 Proxy Statement   |  73 +TABLE OF CONTENTS +Audit Matters +Management is responsible for the: +• +preparation, presentation and integrity of our consolidated financial statements, +• +accounting and financial reporting principles, +• +internal control over financial reporting, and +• +procedures designed to ensure compliance with accounting standards, applicable laws and regulations. +Management is also responsible for objectively reviewing and evaluating the adequacy, effectiveness, and quality of our system of internal control over financial reporting. Our independent auditor is responsible for performing an independent audit of the consolidated financial statements. +The Audit Committee’s responsibility is to monitor and oversee these processes and the engagement, independence, and performance of our independent auditor. The Audit Committee relies, without independent verification, on the information provided to it and on the representations made by management and the independent auditor. +The Audit Committee met with RSM US LLP, our independent auditor for the fiscal year ended December 31, 2024, and discussed the overall scope and plans for their audit and matters required to be discussed with audit committees under generally accepted auditing standards, including, among other things, matters related to the conduct of the audit of our consolidated financial statements and the matters required to be discussed by the statement on Auditing Standards No. 1301, as adopted by the Public Company Accounting Oversight Board. +RSM US LLP also provided to the Audit Committee the written disclosures and the letter required by applicable standards of the Public Company Accounting Oversight Board regarding the independent auditor’s communications with the Audit Committee concerning independence, and the Audit Committee discussed RSM US LLP’s independence with RSM US LLP. When considering the independence of RSM US LLP, the Audit Committee considered the non-audit services provided to the Company by the independent auditor and concluded that such services are compatible with maintaining the auditor’s independence. +The Audit Committee has reviewed and discussed our audited consolidated financial statements for the fiscal year ended December 31, 2024 with management and RSM US LLP. Based on the Audit Committee’s review of the audited consolidated financial statements and the meetings and discussions with management and RSM US LLP, and subject to the limitations on the Audit Committee’s role and responsibilities referred to above and in the Audit Committee Charter, the Audit Committee recommended to our Board that our audited consolidated financial statements be included in our Annual Report on Form 10-K as filed with the SEC. +The Audit Committee of the Board of Directors +ANTHONY J. +BEST +G. LARRY +LAWRENCE +Mary P. +Ricciardello +Chair +74  |   ir.propetroservices.com +TABLE OF CONTENTS +STOCK OWNERSHIP INFORMATION +Security Ownership of Certain Beneficial Owners and Management +PRINCIPAL STOCKHOLDERS +The following table presents certain information as of March 24, 2025, based on 103,784,239 shares of common stock outstanding as of such date, as to: +• +each stockholder known by us to be the beneficial owner of more than five percent of our outstanding shares of common stock, +• +each director and director nominee, +• +each Named Executive Officer, and +• +all current directors and executive officers as a group. +Unless otherwise indicated, the address for each beneficial owners in this table is c/o ProPetro Holding Corp., 303 W. Wall Street, Suite 102, Midland, Texas 79701. +Name and Address of Beneficial Owner +Number of Shares +Beneficially Owned +Percentage +Beneficially Owned +5% Stockholders +Exxon Mobil Corporation (1) +22777 Springwoods Village Parkway +Spring, Texas 77389 +16,600,000 +16.0 % +BlackRock, Inc. (2) +50 Hudson Yards +New York, New York 10001 +16,081,523 +15.5 % +The Vanguard Group (3) +100 Vanguard Boulevard +Malvern, Pennsylvania 19355 +11,491,781 +11.1 % +Dimensional Fund Advisors LP (4) +6300 Bee Cave Road, Building One +Austin, Texas 78746 +7,293,490 +7.0 % +Jeal Intec, S.L. (5) +Calle Velazquez 57 +6 Derecha, 28010 Madrid +6,440,979 +6.2 % +PROPETRO  2025 Proxy Statement   |  75 +TABLE OF CONTENTS +Stock Ownership Information +Name of Beneficial Owner +Number of Shares +Beneficially Owned (6) +Percentage +Beneficially Owned +Directors +Phillip A. Gobe +207,684 +* +Samuel D. Sledge +357,739 +* +Spencer D. Armour III +117,091 +* +Mark S. Berg +28,728 +* +Anthony J. Best +110,939 +* +Michele Vion +51,945 +* +G. Larry Lawrence +62,831 +* +Jack B. Moore (7) +117,091 +* +Mary P. Ricciardello +42,684 +* +Alex V. Volkov +— +Named Executive Officers +David S. Schorlemer (8) +191,902 +* +Adam Muñoz +163,376 +* +John J. Mitchell +49,799 +* +Shelby Fietz +117,095 +* +Celina A. Davila (9) +19,771 +* +All Directors and Executive Officers as a Group (15 Persons) +1,638,675 +1.6 % +* +Less than 1%. +(1) +Based on a Schedule 13D/A filed on May 3, 2024. Represents shares of our common stock beneficially owned by ExxonMobil. The shares of our common stock are directly owned by Pioneer Natural Resources Pumping Services LLC, a wholly owned subsidiary of Pioneer Natural Resources USA, Inc., which is a wholly owned subsidiary of Pioneer, which is a wholly owned subsidiary of ExxonMobil. +(2) +Based on a Schedule 13G/A filed on February 5, 2025. Represents shares of our common stock held by BlackRock, Inc. and certain of its affiliates, referred to collectively as BlackRock. BlackRock has sole voting power over 15,621,542 shares and sole dispositive power over 16,081,523 shares. +(3) +Based on a Schedule 13G/A filed on February 13, 2024. Represents (i) 0 shares over which The Vanguard Group has sole voting power (ii) 157,045 shares over which The Vanguard Group has shared voting power, (iii) 11,259,091 over which The Vanguard Group has sole dispositive power, and (iv) 232,690 over which The Vanguard Group has shared dispositive power. +(4) +Based on Schedule 13G filed on February 9, 2024. Represents shares of our common stock beneficially owned by Dimensional Fund Advisors LP’s commingled funds, group trusts and separate accounts (such investment companies, trusts and certain accounts, collectively referred to as the “Funds”). Represents (i) 7,175,590 shares over which the Funds have sole voting power (ii) 0 shares over which the Funds have shared voting power, (iii) 7,293,490 shares over which the Funds have sole dispositive power and (iv) 0 shares over which the Funds have shared dispositive power. +(5) +Based on Schedule 13G filed on May 28, 2024. Represents shares of our common stock beneficially owned by Jeal Intec, S.L. Jean Intec, S.L. is the record holder of 6,440,979 shares of common stock. Jesus Alonso Villaron is the beneficial owner of the 6,440,979 shares of common stock held by Jeal Intec. S.L. Jesus Alonso Villaron has the sole investment and dispositive power over the securities held of record by Jeal Intec, S.L. +(6) +Includes the following number of shares of common stock that are issuable upon the vesting of RSUs that are eligible to vest within 60 days: Mr. Berg (16,454 shares), Mr. Gobe (17,939 shares), Mr. Armour (17,939 shares), Mr. Best (17,939 shares), Ms. Vion (17,939 shares), Mr. Lawrence (17,939 shares), Mr. Moore (17,939 shares) and Ms. Ricciardello (17,939 shares). +(7) +Mr. Moore was not nominated for re-election and accordingly, will retire from the Board effective as of the conclusion of the Annual Meeting. We intend to decrease the size of the Board from ten to nine directors following Mr. Moore’s retirement at the end of the Annual Meeting. +(8) +Mr. Schorlemer’s employment with the Company terminated on March 3, 2025. +(9) +Ms. Davila is an executive officer but does not serve as a named executive officer of the Company. +76  |   ir.propetroservices.com +TABLE OF CONTENTS +ADDITIONAL INFORMATION +Information about the Annual Meeting and Voting +Our Board of Directors is soliciting proxies for the 2025 annual meeting of stockholders, and at any continuations, adjournments or postponements of the meeting, to be held: +When +Where +Record Date +Date of Distribution +May 20, 2025 +10:00 a.m. Central Time +2518 FM 307 +Midland, Texas 79706 +March 24, 2025 +This proxy statement and our 2024 Annual Report on Form 10-K will be mailed on or about April 8, 2025 +This proxy statement contains important information for you to consider when deciding how to vote on the matters brought before the meeting. Please read it carefully. +IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS +FOR THE STOCKHOLDER MEETING TO BE HELD ON MAY 20, 2025 +This proxy statement and our 2024 Annual Report on Form 10-K are each available at +https://web.viewproxy.com/propetro/2025 . +Who can attend and vote at the meeting? +The Board set March 24, 2025 as the record date for the meeting. You can attend and vote at the meeting if you were a holder of our common stock at the close of business on the record date, March 24, 2025, or if you are a holder of a valid proxy for the meeting. +How do I attend the meeting? +To attend the annual meeting in person, you must call our Director of Corporate Development and Investor Relations at (432) 848-0871 no later than 5:00 p.m. Central Time on May 19, 2025 to have your name placed on the attendance list. To be admitted into the meeting, your name must appear on the attendance list, and you must present government-issued photo identification (such as a driver’s license or passport). If your bank or broker holds your shares in street name, you will also be required to present proof of beneficial ownership of our common stock on the record date, such as the Internet Notice you received from your bank or broker, or a bank or brokerage statement or a letter from your bank or broker showing that you owned shares of our common stock at the close of business on the record date. In addition, if your bank or broker holds your shares in street name, you must obtain legal proxy from your broker, bank or other nominee and present it to the inspector of election with your ballot at the meeting. +PROPETRO  2025 Proxy Statement   |  77 +TABLE OF CONTENTS +Additional Information +What proposals will be voted on at the meeting and how does the Board recommend that I vote? +Four proposals are scheduled to be voted upon at the meeting. At the meeting we will ask stockholders to: +Proposals +Board +Recommendation +Page +Reference +1 +Election of nine director nominees to serve for a one-year term +FOR each +nominee +** +2 +Approval, on an advisory basis, of the compensation of our named executive officers (Say-on-Pay) +FOR +** +3 +Approval, on an advisory basis, of the frequency of future advisory votes on compensation of our named executive officers (Say-on-Pay Frequency) +ONE YEAR +** +4 +Approval of the Second Amended and Restated 2020 Long Term Incentive Plan (LTIP) +FOR +** +5 +Ratification of the Audit Committee’s selection of RSM US LLP as our independent auditors for 2025 +FOR +** +Why did I receive a Notice of Internet Availability of Proxy Materials? +As permitted by the rules of the SEC, we are making this proxy statement and our 2024 Annual Report on form 10-K to stockholders available electronically via the Internet. On or about April 8, 2025, we mailed to our stockholders a Notice of Internet Availability of Proxy Materials (the “Internet Notice”) containing instructions on how to access this proxy statement and our 2024 Annual Report on form 10-K. If you received an Internet Notice by mail, you will not receive a printed copy of the proxy materials in the mail unless you specifically request them. Instead, the Internet Notice instructs you on how to access and review all of the important information contained in the proxy statement and 2024 Annual Report on form 10-K. The Internet Notice also instructs you on how you may submit your proxy over the Internet. If you received an Internet Notice by mail and would like to receive a printed copy of our proxy materials, you should follow the instructions for requesting such materils contained on the Internet Notice. +How do I cast my vote? +Even if you plan to attend the annual meeting in person, we recommend that stockholders vote by proxy to ensure your vote is represented in the event you later decide not to attend, as well as to speed the tabulation of votes. Have your proxy card, Internet Notice or voting instruction form in hand and follow the instructions. +INTERNET +TELEPHONE +MOBILE DEVICE +MAIL +AT THE MEETING +REGISTERED HOLDERS +www.AALVote.com/ +PUMP , 24/7 +Call +1 (866) 804-9616 +(toll-free), 24/7 +Scan the QR code +Sign, date and mail the proxy card, which you may have received by mail, using the postage-paid envelope provided +Attend the annual meeting and cast your ballot +BENEFICIAL OWNERS (HOLDERS IN STREET NAME) +Follow the instructions provided by your broker, bank +or other nominee +Return a properly executed voting instruction form by mail, depending upon the method(s) your broker, bank or other nominee makes available +To attend the annual meeting, you will need proof of ownership and a legal proxy from your broker, bank or other nominee +DEADLINE +11:59 p.m. Eastern Time on May 19, 2025, +if you are a registered holder +If you are a beneficial owner, please refer to the information provided by your broker, bank or other nominee +In the event that you submit a proxy but do not indicate any voting instructions, your shares will be voted as recommended by the Board on all matters, and in the discretion of the proxy holders as to any other matters that +78  |   ir.propetroservices.com +TABLE OF CONTENTS +Additional Information +may properly come before the meeting or any continuation, postponement or adjournment of the meeting. We do not know of any other business to be considered at the meeting other than the proposals noted herein. +If your shares are registered in the name of a broker, bank or other nominee (typically referred to as being held in “street name”), you will receive instructions from your broker, bank or other nominee that must be followed in order for your broker, bank or other nominee to vote your shares per your instructions. Many brokerage firms and banks have a process for their beneficial holders to provide instructions via the Internet or over the telephone. If Internet or telephone voting is unavailable from your broker, bank or other nominee, please complete and return the voting instruction card in the addressed, postage paid envelope provided by your broker, bank or other nominee. +In the event you do not provide instructions on how to vote, your broker may have authority to vote your shares. Under the rules that govern brokers who are voting with respect to shares that are held in street name, brokers have the discretion to vote such shares on “routine” matters, but not on non-routine matters. The only “routine” matter to be voted upon at the meeting is the ratification of the appointment of independent auditors. +Your vote is especially important. If your shares are held by a broker, your broker cannot vote your shares for the election of directors, the non-binding advisory vote on our executive officer compensation or the non-binding advisory vote on the frequency of the advisory vote on our executive officer compensation. Therefore, please instruct your broker regarding how to vote your shares on these matters promptly . See “Vote Required” following each proposal for further information. +If you hold shares through a broker, bank or other nominee and wish to be able to vote during the meeting, you must obtain a legal proxy from your broker, bank or other nominee and present such legal proxy to the inspector of election with your ballot at the meeting if attending in person. You may only vote during the meeting by emailing a copy of your legal proxy to investors@propetroservices.com in advance of the meeting. +Can I revoke or change my proxy? +Yes. You may revoke or change a previously delivered proxy at any time before the meeting by delivering another proxy with a later date, by voting again via the Internet or by telephone, or by delivering written notice of revocation of your proxy to our General Counsel and Corporate Secretary at our principal executive offices before the beginning of the meeting. You may also revoke your proxy by attending the meeting in person and voting during the meeting, although attendance at the meeting will not, in and of itself, revoke a valid proxy that was previously delivered. If you hold shares through a broker, bank or other nominee, you must contact that nominee to revoke any prior voting instructions. You also may revoke any prior voting instructions by voting in person during the meeting if you obtain a legal proxy as described above. +Can I ask questions before or during the annual meeting? +Stockholders who wish to submit a question in advance may do so at investors@propetroservices.com . Stockholders also may submit questions live during the annual meeting. The Company is committed to transparency. All questions received before or during the annual meeting, and the Company’s responses, will be posted to our Investor Relations website at https://ir.propetroservices.com/ promptly after the annual meeting. Personal details may be omitted for data protection purposes. If we receive substantially similar questions, we may group these questions together and provide a single response to avoid repetition. +Who pays the costs of solicitation? +We will pay the costs of soliciting proxies from stockholders. Our directors, officers and regular employees may solicit proxies on behalf of us, without additional compensation, personally or by telephone. We will also request that brokers, nominees, custodians and other fiduciaries forward soliciting materials to the beneficial owners of shares held by such brokers, nominees, custodians and other fiduciaries. We will reimburse such persons for their reasonable expenses in connection therewith. +Who will count the vote? +The inspector of election will count the vote. Alliance Advisors will act as the inspector of election. +PROPETRO  2025 Proxy Statement   |  79 +TABLE OF CONTENTS +Additional Information +What is a “quorum”? +A quorum is the number of shares that must be present to hold the meeting. The quorum requirement for the meeting is a majority of the outstanding shares as of the record date, present in person or represented by proxy. Your shares will be counted for purposes of determining if there is a quorum if you are present in person and vote during the meeting; or have voted on the Internet, by telephone or by properly submitting a proxy card or voting instruction card by mail. +Votes withheld, abstentions and, for “routine matters” broker non-votes (discussed below) are counted as present and entitled to vote for purposes of determining a quorum. +What happens if there is not a quorum at the meeting? +Pursuant to our bylaws, the meeting may be adjourned by a majority of the shares represented at the meeting to reconvene at the same or some other place. If the adjournment is for more than 30 days, or if after the adjournment a new record date is fixed for the adjourned meeting, notice of the adjournment shall be given to each stockholder of record entitled to vote at the meeting. If the adjournment is for less than 30 days, no additional notice will be delivered. +What is an abstention and how will votes withheld and abstentions be treated? +A “vote withheld,” in the case of the proposals regarding the election of directors and vote on the frequency of the advisory vote on Named Executive Officers’ compensation, or an “abstention,” in the case of the proposals regarding the advisory approval of our Named Executive Officers’ compensation, the vote on the approval of the LTIP and the ratification of the appointment of our independent registered public accounting firm represent a stockholder’s affirmative choice to decline to vote on a proposal. Votes withheld have no effect on the election of directors or the vote on the frequency of the advisory vote on Named Executive Officers’ compensation. Abstentions have the effect of a vote “AGAINST” in the case of the advisory approval of our Named Executive Officers’ compensation and ratification of the appointment of our independent registered public accounting firm and have no effect on the vote on the approval of the LTIP. +What are broker non-votes and how will they be treated? +Generally, broker non-votes occur when shares held by a broker in “street name” for a beneficial owner are not voted with respect to a particular proposal because the broker (1) has not received voting instructions from the beneficial owner and (2) lacks discretionary voting power to vote those shares. A broker is entitled to vote shares held for a beneficial owner on “routine” matters, such as the ratification of the appointment of our independent registered public accounting firm, without instructions from the beneficial owner of those shares. On the other hand, absent instructions from the beneficial owner of such shares, a broker is not entitled to vote shares held for a beneficial owner on non-routine matters, such as the election of directors, the advisory approval of our Named Executive Officers’ compensation, the advisory approval of the frequency of the advisory vote on our Named Executive Officers’ compensation and the vote on the approval of the LTIP. Broker non-votes will have no effect on the election of directors, the advisory approval of our Named Executive Officers’ compensation, the advisory approval of the frequency of the advisory vote on our Named Executive Officers’ compensation or the vote on the approval of the LTIP. +80  |   ir.propetroservices.com +TABLE OF CONTENTS +Additional Information +What vote is required to approve each item? +The following table sets forth the voting requirement with respect to each of the proposals: +Proposal +Vote Requirement +Effect of +Abstentions +Effect of Broker Non-Votes +1 +Election of Directors +The plurality of the votes cast. This means that the nine nominees receiving the highest number of affirmative “ FOR ” votes will be elected as directors. +No effect +No effect +2 +Say-on-Pay +The affirmative “ FOR ” vote of the holders of a majority of the shares represented at the meeting (in person or by proxy) and entitled to vote. +The effect of a vote “AGAINST” +No effect +3 +Say-on-Pay Frequency +The plurality of the votes cast. This means that the frequency option that receives the greatest number of votes will be considered the preference of the Company’s stockholders. +No effect +No effect +4 +LTIP +The affirmative “ FOR ” vote of the holders of a majority of the shares represented at the meeting (in person or by proxy) and entitled to vote. +No effect +No effect +5 +Ratification of the Appointment of Our Independent Auditor +The affirmative “ FOR ” vote of the holders of a majority of the shares represented at the meeting (in person or by proxy) and entitled to vote. +The effect of a vote “AGAINST” +A broker is entitled to vote shares held for a beneficial owner on “routine” matters, without instructions from the beneficial owner of those shares +What does it mean if I get more than one Internet Notice or more than one set of proxy materials? +Your shares are probably registered in more than one account. Please vote all of your shares. To ensure that all of your shares are voted, for each Internet Notice or set of proxy materials, please submit your proxy by phone, via the Internet, or, if you received printed copies of the proxy materials, by signing, dating and returning the enclosed proxy card in the enclosed envelope. +How many votes can I cast? +On all matters you are entitled to one vote per share of common stock that you held as of the record date. +Where can I find the voting results of the meeting? +The preliminary voting results will be announced at our annual meeting. The final results will be published in a current report on Form 8-K to be filed by us with the SEC within four business days of our annual meeting. +PROPETRO  2025 Proxy Statement   |  81 +TABLE OF CONTENTS +Additional Information +Information about Stockholder Proposals +If you want to present a proposal of business or nominate persons for election to the Board at the 2026 annual meeting of stockholders or nominate a person for election to the Board at such meeting, you must give us written notice no later than the close of business on February 19, 2026 and no earlier than the opening of business on January 20, 2026, and follow the procedures outlined in our Bylaws. You may request a copy of the provisions of the Bylaws governing the requirements for notice at the below address. If the date of the 2026 annual meeting of stockholders is more than 30 days before or more than 60 days after May 20, 2026, the one year anniversary of the 2025 annual meeting of stockholders, your notice of a proposal will be timely if we receive it no earlier than the opening of business on the 120th day before the actual date of such meeting and no later than the later of: +(i) +the close of business on the 90th day before the actual date of such meeting, and +(ii) +the close of business on the tenth day following the date on which a written statement setting forth the date of such meeting was mailed to the stockholders or the date on which it is first disclosed to the public. +SEC rules permit management to vote proxies in its discretion in certain cases if a stockholder does not comply with this deadline and, in certain other cases notwithstanding a stockholder’s compliance with this deadline. +If you wish to submit a proposal to be considered for inclusion in next year’s proxy statement pursuant to Rule 14a-8 of the Exchange Act, you must submit the proposal so that it is received by November 21, 2025. If the date of the 2026 annual meeting of stockholders is more than 30 days from May 20, 2026, the one-year anniversary date of the 2025 annual meeting of stockholders, a notice will be timely if we receive it a reasonable time before we begin to print and send our proxy materials for such meeting. +In each case, your notice should be sent in writing to: +ProPetro Holding Corp. +Attention: General Counsel and Corporate Secretary +P.O. Box 873 +Midland, Texas 79702 +Annual Report on Form 10-K +A copy of our Annual Report on Form 10-K for the year ended December 31, 2024, including financial statements and schedules thereto but not including exhibits, as filed with the SEC, will be sent to any stockholder of record on March 24, 2025 without charge by contacting: +INVESTOR RELATIONS +(432) 844-0871 +ProPetro Holding Corp. +Attention: General Counsel and Corporate Secretary +P.O. Box 873 +Midland, Texas 79702 +A reasonable fee will be charged for copies of exhibits. You may also access our Annual Report on Form 10-K for the year ended December 31, 2024 and our other filings with the SEC at www.propetroservices.com . +82  |   ir.propetroservices.com +TABLE OF CONTENTS +Additional Information +Other Matters +The persons designated to vote shares covered by our Board’s proxies intend to exercise their judgment in voting such shares on other matters that may properly come before the meeting. Management does not expect that any matters other than those referred to in this proxy statement will be presented for action at the meeting. +By Order of the Board of Directors, +John J. Mitchell +General Counsel and Corporate Secretary +Midland, Texas +April 8, 2025 +PROPETRO  2025 Proxy Statement   |  83 +TABLE OF CONTENTS +APPENDIX A +SECOND AMENDED AND RESTATED +PROPETRO HOLDING CORP. +2020 LONG TERM INCENTIVE PLAN +1. Purpose . The purpose of the Second Amended and Restated ProPetro Holding Corp. 2020 Long Term Incentive Plan (the “ Plan ”) is to provide a means through which (a) ProPetro Holding Corp., a Delaware corporation (the “ Company ”), and the Affiliates may attract, retain and motivate qualified persons as employees, directors and consultants, thereby enhancing the profitable growth of the Company and the Affiliates and (b) persons upon whom the responsibilities of the successful administration and management of the Company and the Affiliates rest, and whose present and potential contributions to the Company and the Affiliates are of importance, can acquire and maintain stock ownership or awards the value of which is tied to the performance of the Company, thereby strengthening their concern for the Company and the Affiliates. Accordingly, the Plan provides for the grant of Options, SARs, Restricted Stock, Restricted Stock Units, Stock Awards, Dividend Equivalents, Other Stock-Based Awards, Cash Awards, Substitute Awards, or any combination of the foregoing, as determined by the Committee in its sole discretion. +2. Definitions . For purposes of the Plan, the following terms shall be defined as set forth below: +(a) “ Affiliate ” means any corporation, partnership, limited liability company, limited liability partnership, association, trust or other organization that, directly or indirectly, controls, is controlled by, or is under common control with, the Company. For purposes of the preceding sentence, “control” (including, with correlative meanings, the terms “controlled by” and “under common control with”), as used with respect to any entity or organization, shall mean the possession, directly or indirectly, of the power (i) to vote more than 50% of the securities having ordinary voting power for the election of directors of the controlled entity or organization or (ii) to direct or cause the direction of the management and policies of the controlled entity or organization, whether through the ownership of voting securities, by contract, or otherwise. +(b) “ ASC Topic 718 ” means the Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation—Stock Compensation , as amended or any successor accounting standard. +(c) “ Award ” means any Option, SAR, Restricted Stock, Restricted Stock Unit, Stock Award, Dividend Equivalent, Other Stock-Based Award, Cash Award, or Substitute Award, together with any other right or interest, granted under the Plan. +(d) “ Award Agreement ” means any written instrument (including any employment, severance or change in control agreement) that sets forth the terms, conditions, restrictions and/or limitations applicable to an Award, in addition to those set forth under the Plan. +(e) “ Board ” means the Board of Directors of the Company. +(f) “ Cash Award ” means an Award denominated in cash granted under Section 6(i) . +(g) “ Change in Control ” means, except as otherwise provided in an Award Agreement, each of the following: +(i) A transaction or series of transactions (other than an offering of Stock to the general public through a registration statement filed with the SEC) whereby any Person directly or indirectly acquires beneficial ownership (within the meaning of Rules 13d-3 and 13d-5 under the Exchange Act) of securities of the Company possessing more than 30% of the total combined voting power of the Company’s securities outstanding immediately after such acquisition; provided, however, that the following acquisitions shall not constitute a Change in Control: +(A) any acquisition by the Company or any of its Subsidiaries; +(B) any acquisition by an employee benefit plan maintained by the Company or any of its Subsidiaries; +(C) any acquisition which complies with Sections 2(g)(iii)(A), 2(g)(iii)(B), and 2(g)(iii)(C); or +PROPETRO  2025 Proxy Statement   |  A-1 +TABLE OF CONTENTS +(D) in respect of an Award held by a particular Participant, any acquisition by the Participant or any group of Persons including the Participant (or any entity controlled by the Participant or any group of Persons including the Participant); or +(ii) The Incumbent Directors cease for any reason to constitute a majority of the Board; +(iii) The consummation by the Company (whether directly involving the Company or indirectly involving the Company through one or more intermediaries) of  (x) a merger, consolidation, reorganization, or business combination, (y) a sale or other disposition of all or substantially all of the Company’s assets in any single transaction or series of related transactions or (z) the acquisition of assets or stock of another entity, in each case other than a transaction: +(A) which results in the Company’s voting securities outstanding immediately before the transaction continuing to represent (either by remaining outstanding or by being converted into voting securities of the Company or the Person that, as a result of the transaction, controls, directly or indirectly, the Company or owns, directly or indirectly, all or substantially all of the Company’s assets or otherwise succeeds to the business of the Company (the Company or such Person, the “ Successor Entity ”)) at least a majority of the combined voting power of the Successor Entity’s outstanding voting securities immediately after the transaction, and +(B) after which no Person beneficially owns voting securities representing 50% or more of the combined voting power of the Successor Entity; provided , however , that no Person shall be treated for purposes of this Section 2(g)(iii) as beneficially owning 50% or more of the combined voting power of the Successor Entity solely as a result of the voting power held in the Company prior to the consummation of the transaction; and +(C) after which at least a majority of the members of the board of directors (or the analogous governing body) of the Successor Entity were Board members at the time of the Board’s approval of the execution of the initial agreement providing for such transaction; or +(iv) The date which is 10 business days prior to the completion of a liquidation or dissolution of the Company. +Notwithstanding the foregoing, if a Change in Control constitutes a payment event with respect to any Award (or any portion of an Award) that provides for the deferral of compensation that is subject to the Nonqualified Deferred Compensation Rules, to the extent required to avoid the imposition of additional taxes under such rules, the transaction or event described in subsection (i), (ii), (iii) or (iv) with respect to such Award (or portion thereof) shall only constitute a Change in Control for purposes of the payment timing of such Award if such transaction also constitutes a “change in control event,” as defined in Treasury Regulation § 1.409A-3(i)(5). +The Board shall have full and final authority, which shall be exercised in its sole discretion, to determine conclusively whether a Change in Control has occurred pursuant to the above definition, the date of the occurrence of such Change in Control and any incidental matters relating thereto; provided that any exercise of authority in conjunction with a determination of whether a Change in Control is a “change in control event” as defined in Treasury Regulation Section 1.409A-3(i)(5) shall be consistent with such regulation. +(h) “ Code ” means the Internal Revenue Code of 1986, as amended from time to time, including the guidance and regulations promulgated thereunder and successor provisions, guidance and regulations thereto. +(i) “ Committee ” means a committee of two or more directors designated by the Board to administer the Plan; provided , however , that, unless otherwise determined by the Board, the Committee shall consist solely of two or more Qualified Members. +(j) “ Dividend Equivalent ” means a right, granted to an Eligible Person under Section 6(g) , to receive cash, Stock, other Awards or other property equal in value to dividends paid with respect to a specified number of shares of Stock. +(k) “ Effective Date ” means May 20, 2025. +(l) “ Eligible Person ” means any individual who, as of the date of grant of an Award, is an officer or employee of the Company or of any Affiliate, and any other person who provides services to the Company or any Affiliate, including directors of the Company; provided , however , that, any such individual must be an “employee” of +A-2  |   ir.propetroservices.com +TABLE OF CONTENTS +the Company or any of its parents or subsidiaries within the meaning of General Instruction A.1(a) to Form S-8 if such individual is granted an Award that may be settled in Stock. An employee on leave of absence may be an Eligible Person. +(m) “ Exchange Act ” means the Securities Exchange Act of 1934, as amended from time to time, including the guidance, rules and regulations promulgated thereunder and successor provisions, guidance, rules and regulations thereto. +(n) “ Fair Market Value ” of a share of Stock means, as of any specified date, (i) if the Stock is listed on a national securities exchange, the closing sales price of the Stock, as reported on the stock exchange composite tape on that date (or if no sales occur on such date, on the last preceding date on which such sales of the Stock are so reported); (ii) if the Stock is not traded on a national securities exchange but is traded over the counter on such date, the average between the reported high and low bid and asked prices of Stock on the most recent date on which Stock was publicly traded on or preceding the specified date; or (iii) in the event Stock is not publicly traded at the time a determination of its value is required to be made under the Plan, the amount determined by the Committee in its discretion in such manner as it deems appropriate, taking into account all factors the Committee deems appropriate, including the Nonqualified Deferred Compensation Rules. Notwithstanding this definition of Fair Market Value, with respect to one or more Award types, or for any other purpose for which the Committee must determine the Fair Market Value under the Plan, the Committee may elect to choose a different measurement date or methodology for determining Fair Market Value so long as the determination is consistent with the Nonqualified Deferred Compensation Rules and all other applicable laws and regulations. +(o) “ Incumbent Directors ” shall mean for any period of 12 consecutive months, individuals who, at the beginning of such period, constitute the Board together with any new members of the Board (other than a member of the Board designated by a Person who shall have entered into an agreement with the Company to effect a transaction described in Section 2(g)(i) or 2(g)(iii)) whose election or nomination for election to the Board was approved by a vote of at least a majority (either by a specific vote or by approval of the proxy statement of the Company in which such Person is named as a nominee for member of the Board without objection to such nomination) of the members of the Board then still in office who either were members of the Board at the beginning of the 12-month period or whose election or nomination for election was previously so approved. No individual initially elected or nominated as a member of the Board of the Company as a result of an actual or threatened election contest with respect to members of the Board or as a result of any other actual or threatened solicitation of proxies by or on behalf of any Person other than the Board shall be an Incumbent Director. +(p) “ ISO ” means an Option intended to be and designated as an “incentive stock option” within the meaning of Section 422 of the Code. +(q) “ Nonqualified Deferred Compensation Rules ” means the limitations and requirements of Section 409A of the Code, as amended from time to time, including the guidance and regulations promulgated thereunder and successor provisions, guidance and regulations thereto. +(r) “ Nonstatutory Option ” means an Option that is not an ISO. +(s) “ Option ” means a right, granted to an Eligible Person under Section 6(b) , to purchase Stock at a specified price during specified time periods, which may either be an ISO or a Nonstatutory Option. +(t) “ Other Stock-Based Award ” means an Award granted to an Eligible Person under Section 6(h) . +(u) “ Participant ” means a person who has been granted an Award under the Plan that remains outstanding, including a person who is no longer an Eligible Person. +(v) “ Person ” means any individual, entity or group within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act. +(w) “ Prior Plan ” means the ProPetro Holding Corp. 2017 Incentive Award Plan. +(x) “ Qualified Member ” means a member of the Board who is (i) a “non-employee director” within the meaning of Rule 16b-3(b)(3), and (ii) “independent” under the listing standards or rules of the securities exchange upon which the Stock is traded, but only to the extent such independence is required in order to take the action at issue pursuant to such standards or rules. +(y) “ Restricted Stock ” means Stock granted to an Eligible Person under Section 6(d) that is subject to certain restrictions and to a risk of forfeiture. +PROPETRO  2025 Proxy Statement   |  A-3 +TABLE OF CONTENTS +(z) “ Restricted Stock Unit ” means a right, granted to an Eligible Person under Section 6(e) , to receive Stock, cash or a combination thereof at the end of a specified period (which may or may not be coterminous with the vesting schedule of the Award). +(aa) “ Rule 16b-3 ” means Rule 16b-3, promulgated by the SEC under Section 16 of the Exchange Act. +(bb) “ SAR ” means a stock appreciation right granted to an Eligible Person under Section 6(c) . +(cc) “ SEC ” means the Securities and Exchange Commission. +(dd) “ Securities Act ” means the Securities Act of 1933, as amended from time to time, including the guidance, rules and regulations promulgated thereunder and successor provisions, guidance, rules and regulations thereto. +(ee) “ Stock ” means the Company’s Common Stock, par value $0.001 per share, and such other securities as may be substituted (or re-substituted) for Stock pursuant to Section 8 . +(ff) “ Stock Award ” means unrestricted shares of Stock granted to an Eligible Person under Section 6(f) . +(gg) “ Subsidiary ” shall mean any entity (other than the Company), whether domestic or foreign, in an unbroken chain of entities beginning with the Company if each of the entities other than the last entity in the unbroken chain beneficially owns, at the time of the determination, securities or interests representing at least fifty percent (50%) of the total combined voting power of all classes of securities or interests in one of the other entities in such chain. +(hh) “ Substitute Award ” means an Award granted under Section 6(j) . +3. Administration . +(a) Authority of the Committee . The Plan shall be administered by the Committee except to the extent the Board elects to administer the Plan, in which case references herein to the “Committee” shall be deemed to include references to the “Board.” Subject to the express provisions of the Plan, Rule 16b-3 and other applicable laws, the Committee shall have the authority, in its sole and absolute discretion, to: +(i) designate Eligible Persons as Participants; +(ii) determine the type or types of Awards to be granted to an Eligible Person; +(iii) determine the number of shares of Stock or amount of cash to be covered by Awards; +(iv) determine the terms and conditions of any Award, including whether, to what extent and under what circumstances Awards may be vested, settled, exercised, cancelled or forfeited (including conditions based on continued employment or service requirements or the achievement of one or more performance goals); +(v) modify, waive or adjust any term or condition of an Award that has been granted, which may include the acceleration of vesting, waiver of forfeiture restrictions, modification of the form of settlement of the Award (for example, from cash to Stock or vice versa), early termination of a performance period, or modification of any other condition or limitation regarding an Award; +(vi) determine the treatment of an Award upon a termination of employment or other service relationship; +(vii) impose a holding period with respect to an Award or the shares of Stock received in connection with an Award; +(viii) interpret and administer the Plan and any Award Agreement; +(ix) correct any defect, supply any omission or reconcile any inconsistency in the Plan, in any Award, or in any Award Agreement; and +(x) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the Plan. +The express grant of any specific power to the Committee, and the taking of any action by the Committee, shall not be construed as limiting any power or authority of the Committee. Any action of the Committee shall be final, conclusive and binding on all persons, including the Company, Affiliates, stockholders, Participants, beneficiaries, and permitted transferees under Section 7(a) or other persons claiming rights from or through a Participant. +A-4  |   ir.propetroservices.com +TABLE OF CONTENTS +(b) Exercise of Committee Authority . At any time that a member of the Committee is not a Qualified Member, any action of the Committee relating to an Award granted or to be granted to an Eligible Person who is then subject to Section 16 of the Exchange Act in respect of the Company where such action is not taken by the full Board may be taken either (i) by a subcommittee, designated by the Committee, composed solely of two or more Qualified Members, or (ii) by the Committee but with each such member who is not a Qualified Member abstaining or recusing himself or herself from such action; provided , however , that upon such abstention or recusal, the Committee remains composed solely of two or more Qualified Members. Such action, authorized by such a subcommittee or by the Committee upon the abstention or recusal of such non-Qualified Member(s), shall be the action of the Committee for purposes of the Plan. For the avoidance of doubt, the full Board may take any action relating to an Award granted or to be granted to an Eligible Person who is then subject to Section 16 of the Exchange Act in respect of the Company. +(c) Delegation of Authority . The Committee may delegate any or all of its powers and duties under the Plan to a subcommittee of directors or to any officer of the Company, including the power to perform administrative functions and grant Awards; provided , that such delegation does not (i) violate state or corporate law, or (ii) result in the loss of an exemption under Rule 16b-3(d)(1) for Awards granted to Participants subject to Section 16 of the Exchange Act in respect of the Company. Upon any such delegation, all references in the Plan to the “Committee,” other than in Section 8 , shall be deemed to include any subcommittee or officer of the Company to whom such powers have been delegated by the Committee. Any such delegation shall not limit the right of such subcommittee members or such an officer to receive Awards; provided , however , that such subcommittee members and any such officer may not grant Awards to himself or herself, a member of the Board, or any executive officer of the Company or an Affiliate, or take any action with respect to any Award previously granted to himself or herself, a member of the Board, or any executive officer of the Company or an Affiliate. The Committee may also appoint agents who are not executive officers of the Company or members of the Board to assist in administering the Plan, provided , however , that such individuals may not be delegated the authority to grant or modify any Awards that will, or may, be settled in Stock. +(d) Limitation of Liability . The Committee and each member thereof shall be entitled to, in good faith, rely or act upon any report or other information furnished to him or her by any officer or employee of the Company or any Affiliate, the Company’s legal counsel, independent auditors, consultants or any other agents assisting in the administration of the Plan. Members of the Committee and any officer or employee of the Company or any Affiliate acting at the direction or on behalf of the Committee shall not be personally liable for any action or determination taken or made in good faith with respect to the Plan, and shall, to the fullest extent permitted by law, be indemnified and held harmless by the Company with respect to any such action or determination. +(e) Participants in Non-U.S. Jurisdictions . Notwithstanding any provision of the Plan to the contrary, to comply with applicable laws in countries other than the United States in which the Company or any Affiliate operates or has employees, directors or other service providers from time to time, or to ensure that the Company complies with any applicable requirements of foreign securities exchanges, the Committee, in its sole discretion, shall have the power and authority to: (i) determine which of the Affiliates shall be covered by the Plan; (ii) determine which Eligible Persons outside the United States are eligible to participate in the Plan; (iii) modify the terms and conditions of any Award granted to Eligible Persons outside the United States to comply with applicable foreign laws or listing requirements of any foreign exchange; (iv) establish sub-plans and modify exercise procedures and other terms and procedures, to the extent such actions may be necessary or advisable (any such sub-plans and/or modifications shall be attached to the Plan as appendices), provided , however , that no such sub-plans and/or modifications shall increase the share limitations contained in Section 4(a) ; and (v) take any action, before or after an Award is granted, that it deems advisable to comply with any applicable governmental regulatory exemptions or approval or listing requirements of any such foreign securities exchange. For purposes of the Plan, all references to foreign laws, rules, regulations or taxes shall be references to the laws, rules, regulations and taxes of any applicable jurisdiction other than the United States or a political subdivision thereof. +4. Stock Subject to the Plan . +(a) Number of Shares Available for Delivery . Subject to adjustment in a manner consistent with Section 8 , (i) 10,520,000 shares of Stock are reserved and available for delivery with respect to Awards, and such total shall be available for the issuance of shares upon the exercise of ISOs, plus (ii) the number of shares of Stock that become available for Awards under this Plan pursuant to Section 4(d) below. +(b) Application of Limitation to Grants of Awards . Subject to Section 4(c) , no Award may be granted if the number of shares of Stock that may be delivered in connection with such Award exceeds the number of shares +PROPETRO  2025 Proxy Statement   |  A-5 +TABLE OF CONTENTS +of Stock remaining available under the Plan minus the number of shares of Stock issuable in settlement of or relating to then-outstanding Awards. The Committee may adopt reasonable counting procedures to ensure appropriate counting, avoid double counting (as, for example, in the case of tandem or Substitute Awards) and make adjustments if the number of shares of Stock actually delivered differs from the number of shares previously counted in connection with an Award. +(c) Availability of Shares Not Delivered under Awards . Shares of Stock subject to an Award under the Plan that expires or is cancelled, forfeited, exchanged, settled in cash or otherwise terminated without the actual delivery of shares will again be available for Awards. For the avoidance of doubt, Awards of Restricted Stock shall not be considered “delivered shares” for this purpose until vesting. Notwithstanding the foregoing, (i) the number of shares tendered or withheld in payment of any exercise or purchase price of an Option or an SAR or taxes relating to an Option or an SAR, including shares that were subject to an Option or an SAR but were not issued or delivered as a result of the net settlement or net exercise of such Option or SAR and (ii) shares repurchased on the open market with the proceeds of an Option’s exercise price, will be considered “delivered shares” and will not, in each case, be again available for Awards. The number of shares of Stock withheld in payment of the tax withholding obligation related an Award other than an Option or an SAR will be again available for Awards under the Plan. For the avoidance of doubt, if an Award may be settled only in cash, such Award need not ever be counted against any share limit under this Section 4 . +(d) Shares Available Under the Prior Plan . In addition, shares of Stock subject to an award granted under the Prior Plan and outstanding as of October 22, 2020 (a “ Prior Award ”) that are forfeited or expire, are converted to shares of another Person in connection with a spin-off or other similar event, or if such Prior Award is settled for cash (in whole or in part) (including shares repurchased by the Company under Section 8.4 of the Prior Plan at the same price paid by the holder of such Prior Award), the shares of Stock subject to such Prior Award shall, to the extent of such forfeiture, expiration, conversion or cash settlement, become available for future grants of Awards under the Plan. For the avoidance of doubt, a number of shares of Stock equal to the difference between (i) the maximum number of shares of Stock that could have been settled pursuant to performance-based Prior Awards, and (ii) the actual number of shares of Stock delivered upon settlement of performance-based Prior Awards, shall become available for future grants of Awards under the Plan. Notwithstanding anything to the contrary contained herein, the following shares of Stock subject to Prior Awards shall not be added to the shares of Stock authorized for grant under Section 4(a) and shall not be available for future grants of Awards: (i) shares tendered by a Holder (as such term is defined in the Prior Plan) or withheld by the Company in payment of the exercise price of a stock option; (ii) shares of Stock tendered by the Holder or withheld by the Company to satisfy any tax withholding obligation with respect to a Prior Award; (iii) shares of Stock subject to a stock appreciation right that are not issued in connection with the stock settlement of the stock appreciation right on exercise thereof; and (iv) shares of Stock purchased on the open market by the Company with the cash proceeds received from the exercise of stock options. For the avoidance of doubt, no awards will be granted under the Prior Plan on or following October 22, 2020. +(e) Shares Available Following Certain Transactions . Substitute Awards granted in accordance with applicable stock exchange requirements and in substitution or exchange for awards previously granted by a company acquired by the Company or any Subsidiary or with which the Company or any Subsidiary combines shall not reduce the shares authorized for issuance under the Plan or the limitations on grants to non-employee members of the Board under Section 5(b) , nor shall shares subject to such Substitute Awards be added to the shares available for issuance under the Plan as provided above (whether or not such Substitute Awards are later cancelled, forfeited or otherwise terminated). +(f) Stock Offered . The shares of Stock to be delivered under the Plan shall be made available from (i) authorized but unissued shares of Stock, (ii) Stock held in the treasury of the Company, or (iii) previously issued shares of Stock reacquired by the Company, including shares purchased on the open market. +5. Eligibility; Award Limitations for Non-Employee Members of the Board . +(a) Awards may be granted under the Plan only to Eligible Persons. +(b) In each calendar year during any part of which the Plan is in effect, a non-employee member of the Board may not be paid compensation, whether denominated in cash or Awards, for such individual’s service on the Board in excess of  $500,000; provided, however, that for any calendar year in which a member of the Board (i) first commences service on the Board, (ii) serves on a special committee of the Board, (iii) serves as lead director, or (iv) serves as non-executive Chairman of the Board, additional compensation, whether denominated in cash or Awards may be paid. For purposes of this Section 5(b) , the value of Awards shall be determined, if +A-6  |   ir.propetroservices.com +TABLE OF CONTENTS +applicable, pursuant to ASC Topic 718 on the date of grant and attributed to the compensation limit for the year in which the Award is granted. For the avoidance of doubt, the limits set forth in this Section 5(b) shall be without regard to grants of Awards or other payments, if any, made to a non-employee member of the Board during any period in which such individual was an employee of the Company or of any of its Affiliates or was otherwise providing services to the Company or to any of its Affiliates other than in the capacity as a director of the Company. For the avoidance of doubt, any cash compensation that is deferred shall be counted toward this limit for the year in which it was first earned, and not when paid or settled, if later. +6. Specific Terms of Awards . +(a) General . +(i) Awards may be granted on the terms and conditions set forth in this Section 6 . Awards granted under the Plan may, in the discretion of the Committee, be granted either alone, in addition to, or in tandem with any other Award. In addition, the Committee may impose on any Award or the exercise thereof, at the date of grant or thereafter (subject to Section 10 ), such additional terms and conditions, not inconsistent with the provisions of the Plan, as the Committee shall determine, including subjecting such awards to service- or performance-based vesting conditions. Except as otherwise provided in an Award Agreement, the Committee may exercise its discretion to reduce or increase the amounts payable under any Award. +(ii) Without limiting the scope of Section 6(a)(i), with respect to any performance-based conditions, (i) the Committee may use one or more business criteria or other measures of performance as it may deem appropriate in establishing any performance goals applicable to an Award, (ii) any such performance goals may relate to the performance of the Participant, the Company (on a consolidated basis), or to specified Subsidiaries, business or geographical units or operating areas of the Company, (iii) the performance period or periods over which performance goals will be measured shall be established by the Committee, and (iv) any such performance goals and performance periods may differ among Awards granted to any one Participant or to different Participants. +(iii) Subject to Section 8(e) of the Plan, any Award (or portion thereof) granted under the Plan shall vest no earlier than the first anniversary of the date the Award is granted; provided , however , that, notwithstanding the foregoing, Awards that result in the issuance of an aggregate of up to 5% of the shares of Stock available pursuant to Section 4 may be granted to any one or more Eligible Persons without respect to and/or administered without regard for this minimum vesting provision. For the avoidance of doubt, the grant of Stock Awards will count against the 5% limit described in the immediately preceding sentence. No Award Agreement shall be permitted to reduce or eliminate the requirements of this Section 6(a)(iii). Nothing in this Section 6(a)(iii) shall preclude the Committee from taking action, in its sole discretion, to accelerate the vesting of any Award for any reason. +(b) Options . The Committee is authorized to grant Options, which may be designated as either ISOs or Nonstatutory Options, to Eligible Persons on the following terms and conditions: +(i) Exercise Price . Each Award Agreement evidencing an Option shall state the exercise price per share of Stock (the “ Exercise Price ”) established by the Committee; provided , however , that except as provided in Section 6(j) or in Section 8 , the Exercise Price of an Option shall not be less than the greater of  (A) the par value per share of the Stock or (B) 100% of the Fair Market Value per share of the Stock as of the date of grant of the Option (or in the case of an ISO granted to an individual who owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or its parent or any of its Subsidiaries, 110% of the Fair Market Value per share of the Stock on the date of grant). +(ii) Time and Method of Exercise; Other Terms . The Committee shall determine the methods by which the Exercise Price may be paid or deemed to be paid, the form of such payment, including cash or cash equivalents, Stock (including previously owned shares or through a cashless exercise, i.e., “net settlement”, a broker-assisted exercise, or other reduction of the amount of shares otherwise issuable pursuant to the Option), other Awards or awards granted under other plans of the Company or any Affiliate, other property, or any other legal consideration the Committee deems appropriate, the methods by or forms in which Stock will be delivered or deemed to be delivered to Participants, including the delivery of Restricted Stock subject to Section 6(d) , and any other terms and conditions of any Option. In the case of an exercise whereby the Exercise Price is paid with Stock, such Stock shall be valued based on the Stock’s Fair Market Value as of the date of exercise. No Option may be exercisable for a period of more than ten years following the date of grant of the Option (or in the case of an ISO granted to an individual who owns stock possessing +PROPETRO  2025 Proxy Statement   |  A-7 +TABLE OF CONTENTS +more than 10% of the total combined voting power of all classes of stock of the Company or its parent or any of its Subsidiaries, for a period of more than five years following the date of grant of the ISO). +(iii) ISOs . The terms of any ISO granted under the Plan shall comply in all respects with the provisions of Section 422 of the Code. ISOs may only be granted to Eligible Persons who are employees of the Company or employees of a parent or any Subsidiary corporation of the Company. Except as otherwise provided in Section 8 , no term of the Plan relating to ISOs (including any SAR in tandem therewith) shall be interpreted, amended or altered, nor shall any discretion or authority granted under the Plan be exercised, so as to disqualify either the Plan or any ISO under Section 422 of the Code, unless notice has been provided to the Participant that such change will result in such disqualification. ISOs shall not be granted more than ten years after the earlier of the adoption of the Plan or the approval of the Plan by the Company’s stockholders. Notwithstanding the foregoing, to the extent that the aggregate Fair Market Value of shares of Stock subject to an ISO and the aggregate Fair Market Value of shares of stock of any parent or Subsidiary corporation (within the meaning of Sections 424(e) and (f) of the Code) subject to any other incentive stock options of the Company or a parent or Subsidiary corporation (within the meaning of Sections 424(e) and (f) of the Code) that are exercisable for the first time by a Participant during any calendar year exceeds $100,000, or such other amount as may be prescribed under Section 422 of the Code, such excess shall be treated as Nonstatutory Options in accordance with the Code. As used in the previous sentence, Fair Market Value shall be determined as of the date the ISO is granted. If a Participant shall make any disposition of shares of Stock issued pursuant to an ISO under the circumstances described in Section 421(b) of the Code (relating to disqualifying dispositions), the Participant shall notify the Company of such disposition within the time provided to do so in the applicable award agreement. +(c) SARs . The Committee is authorized to grant SARs to Eligible Persons on the following terms and conditions: +(i) Right to Payment . An SAR is a right to receive, upon exercise thereof, the excess of  (A) the Fair Market Value of one share of Stock on the date of exercise over (B) the grant price of the SAR as determined by the Committee. +(ii) Grant Price . Each Award Agreement evidencing an SAR shall state the grant price per share of Stock established by the Committee; provided , however , that except as provided in Section 6(j) or in Section 8 , the grant price per share of Stock subject to an SAR shall not be less than the greater of  (A) the par value per share of the Stock or (B) 100% of the Fair Market Value per share of the Stock as of the date of grant of the SAR. +(iii) Method of Exercise and Settlement; Other Terms . The Committee shall determine the form of consideration payable upon settlement, the method by or forms in which Stock (if any) will be delivered or deemed to be delivered to Participants, and any other terms and conditions of any SAR. SARs may be either free-standing or granted in tandem with other Awards. No SAR may be exercisable for a period of more than ten years following the date of grant of the SAR. +(iv) Rights Related to Options . An SAR granted in connection with an Option shall entitle a Participant, upon exercise, to surrender that Option or any portion thereof, to the extent unexercised, and to receive payment of an amount determined by multiplying (A) the difference obtained by subtracting the Exercise Price with respect to a share of Stock specified in the related Option from the Fair Market Value of a share of Stock on the date of exercise of the SAR, by (B) the number of shares as to which that SAR has been exercised. The Option shall then cease to be exercisable to the extent surrendered. SARs granted in connection with an Option shall be subject to the terms and conditions of the Award Agreement governing the Option, which shall provide that the SAR is exercisable only at such time or times and only to the extent that the related Option is exercisable and shall not be transferable except to the extent that the related Option is transferrable. +(d) Restricted Stock . The Committee is authorized to grant Restricted Stock to Eligible Persons on the following terms and conditions: +(i) Restrictions . Restricted Stock shall be subject to such restrictions on transferability, risk of forfeiture and other restrictions, if any, as the Committee may impose. Except as provided in Section 7(a)(iii) and Section 7(a)(iv) , during the restricted period applicable to the Restricted Stock, the Restricted Stock may not be sold, transferred, pledged, hedged, hypothecated, margined or otherwise encumbered by the Participant. Except as otherwise provided in the applicable Award Agreement and this Section 6(d) , the holder of a Restricted Stock Award will generally have the same rights as a stockholder, including the right +A-8  |   ir.propetroservices.com +TABLE OF CONTENTS +to vote the Stock subject to the Restricted Stock Award and to receive dividends on the Stock subject to the Restricted Stock Award during the restriction period (subject, in all cases, to the limitations on payment of dividends on unvested Awards, as described in Section 6(d)(ii) below). +(ii) Dividends and Splits . As a condition to the grant of an Award of Restricted Stock, the Committee may allow a Participant to elect, or may require, that any cash dividends paid on a share of Restricted Stock be automatically reinvested in additional shares of Restricted Stock, applied to the purchase of additional Awards or deferred without interest to the date of vesting of the associated Award of Restricted Stock, provided that in all events such cash dividends shall be subject to restrictions and a risk of forfeiture to the same extent as the Restricted Stock with respect to which such dividends were paid and shall not be paid unless and until such Restricted Stock has vested and been earned. Stock distributed in connection with a Stock split or Stock dividend, and other property (other than cash) distributed as a dividend, shall be subject to restrictions and a risk of forfeiture to the same extent as the Restricted Stock with respect to which such Stock or other property has been distributed and shall not be delivered unless and until such Restricted Stock has vested and been earned. +(e) Restricted Stock Units . The Committee is authorized to grant Restricted Stock Units to Eligible Persons on the following terms and conditions: +(i) Award and Restrictions . Restricted Stock Units shall be subject to such restrictions (which may include a risk of forfeiture) as the Committee may impose. +(ii) Settlement . Settlement of vested Restricted Stock Units shall occur upon vesting or upon expiration of the deferral period specified for such Restricted Stock Units by the Committee (or, if permitted by the Committee, as elected by the Participant). Restricted Stock Units shall be settled by delivery of  (A) a number of shares of Stock equal to the number of Restricted Stock Units for which settlement is due, or (B) cash in an amount equal to the Fair Market Value of the specified number of shares of Stock equal to the number of Restricted Stock Units for which settlement is due, or a combination thereof, as determined by the Committee at the date of grant or thereafter. +(f) Stock Awards . The Committee is authorized to grant Stock Awards to Eligible Persons as a bonus, as additional compensation, or in lieu of cash compensation any such Eligible Person is otherwise entitled to receive, in such amounts and subject to such other terms as the Committee in its discretion determines to be appropriate. +(g) Dividend Equivalents . The Committee is authorized to grant Dividend Equivalents to Eligible Persons, entitling any such Eligible Person to receive cash, Stock, other Awards, or other property equal in value to dividends or other distributions paid with respect to a specified number of shares of Stock. Dividend Equivalents may be awarded in connection with another Award (other than an Award of Restricted Stock or Stock Award). Dividend Equivalents shall be subject to restrictions and a risk of forfeiture to the same extent as the Award with respect to which such dividends accrue and shall not be paid unless and until such Award has vested and been earned. +(h) Other Stock-Based Awards . The Committee is authorized, subject to limitations under applicable law, to grant to Eligible Persons such other Awards that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, Stock, as deemed by the Committee to be consistent with the purposes of the Plan, including convertible or exchangeable debt securities, other rights convertible or exchangeable into Stock, purchase rights for Stock, Awards with value and payment contingent upon performance of the Company or any other factors designated by the Committee, and Awards valued by reference to the book value of Stock or the value of securities of, or the performance of, specified Affiliates. The Committee shall determine the terms and conditions of such Other Stock-Based Awards. Stock delivered pursuant to an Other-Stock Based Award in the nature of a purchase right granted under this Section 6(h) shall be purchased for such consideration, paid for at such times, by such methods, and in such forms, including cash, Stock, other Awards, or other property, as the Committee shall determine. +(i) Cash Awards . The Committee is authorized to grant Cash Awards, on a free-standing basis or as an element of, a supplement to, or in lieu of any other Award under the Plan to Eligible Persons in such amounts and subject to such other terms as the Committee in its discretion determines to be appropriate, including for purposes of any annual or short-term incentive or other bonus program. +(j) Substitute Awards; No Repricing . Awards may be granted in substitution or exchange for any other Award granted under the Plan or under another plan of the Company or an Affiliate or any other right of an Eligible Person to receive payment from the Company or an Affiliate. Awards may also be granted under the Plan in +PROPETRO  2025 Proxy Statement   |  A-9 +TABLE OF CONTENTS +substitution for awards held by individuals who become Eligible Persons as a result of a merger, consolidation or acquisition of another entity or the assets of another entity by or with the Company or an Affiliate. Such Substitute Awards referred to in the immediately preceding sentence that are Options or SARs may have an exercise price that is less than the Fair Market Value of a share of Stock on the date of the substitution if such substitution complies with the Nonqualified Deferred Compensation Rules and other applicable laws and exchange rules. Except as provided in this Section 6(j) or in Section 8 , without the approval of the stockholders of the Company, the terms of outstanding Awards may not be amended to (i) reduce the Exercise Price or grant price of an outstanding Option or SAR, (ii) grant a new Option, SAR or other Award in substitution for, or upon the cancellation of, any previously granted Option or SAR that has the effect of reducing the Exercise Price or grant price thereof, (iii) exchange any Option or SAR for Stock, cash or other consideration when the Exercise Price or grant price per share of Stock under such Option or SAR exceeds the Fair Market Value of a share of Stock or (iv) take any other action that would be considered a “repricing” of an Option or SAR under the applicable listing standards of the national securities exchange on which the Stock is listed (if any). +7. Certain Provisions Applicable to Awards . +(a) Limit on Transfer of Awards . +(i) Except as provided in Sections 7(a)(iii) and (iv) , each Option and SAR shall be exercisable only by the Participant during the Participant’s lifetime, or by the person to whom the Participant’s rights shall pass by will or the laws of descent and distribution. Notwithstanding anything to the contrary in this Section 7(a) , an ISO shall not be transferable other than by will or the laws of descent and distribution. +(ii) Except as provided in Sections 7(a)(i) , (iii) and (iv) , no Award, other than a Stock Award, and no right under any such Award, may be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by a Participant and any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall be void and unenforceable against the Company or any Affiliate. +(iii) To the extent specifically provided by the Committee and permitted pursuant to Form S-8 and the instructions thereto, an Award may be transferred by a Participant on such terms and conditions as the Committee may from time to time establish; provided , however , that no Award (other than a Stock Award) may be transferred to a third-party financial institution for value. +(iv) An Award may be transferred pursuant to a domestic relations order entered or approved by a court of competent jurisdiction upon delivery to the Company of a written request for such transfer and a certified copy of such order. +(b) Form and Timing of Payment under Awards; Deferrals . Subject to the terms of the Plan and any applicable Award Agreement, payments to be made by the Company or any Affiliates upon the exercise or settlement of an Award may be made in such forms as the Committee shall determine in its discretion, including cash, Stock, other Awards or other property, and may be made in a single payment or transfer, in installments, or on a deferred basis (which may be required by the Committee or permitted at the election of the Participant on terms and conditions established by the Committee); provided , however , that any such deferred or installment payments will be set forth in the Award Agreement. Payments may include, without limitation, provisions for the payment or crediting of reasonable interest on installment or deferred payments or the grant or crediting of Dividend Equivalents or other amounts in respect of installment or deferred payments denominated in Stock. +(c) Evidencing Stock . The Stock or other securities of the Company delivered pursuant to an Award may be evidenced in any manner deemed appropriate by the Committee in its sole discretion, including in the form of a certificate issued in the name of the Participant or by book entry, electronic or otherwise, and shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan or the rules, regulations, and other requirements of the SEC, any stock exchange upon which such Stock or other securities are then listed, and any applicable federal, state or other laws, and the Committee may cause a legend or legends to be inscribed on any such certificates to make appropriate reference to such restrictions. Further, if certificates representing Restricted Stock are registered in the name of the Participant, the Company may retain physical possession of the certificates and may require that the Participant deliver a stock power to the Company, endorsed in blank, related to the Restricted Stock. +(d) Consideration for Grants . Awards may be granted for such consideration, including services, as the Committee shall determine, but shall not be granted for less than the minimum lawful consideration. +(e) Additional Agreements . Each Eligible Person to whom an Award is granted under the Plan may be required to agree in writing, as a condition to the grant of such Award or otherwise, to subject an Award that is +A-10  |   ir.propetroservices.com +TABLE OF CONTENTS +exercised or settled following such Eligible Person’s termination of employment or service to a general release of claims and/or a noncompetition or other restricted covenant agreement in favor of the Company and the Affiliates, with the terms and conditions of such agreement(s) to be determined in good faith by the Committee. +(f) Dividends and Dividend Equivalents Subject to Forfeiture . Any dividend or Dividend Equivalent credited with respect to any Award (except for dividends paid following the grant of a Stock Award, which is an Award of unrestricted (i.e., fully vested) shares of Stock) shall be subject to restrictions and a risk of forfeiture to the same extent as the Award with respect to which such Stock or other property has been distributed and shall not be delivered unless and until such Award has vested and been earned. +8. Subdivision or Consolidation; Recapitalization; Change in Control; Reorganization . +(a) Existence of Plans and Awards . The existence of the Plan and the Awards granted hereunder shall not affect in any way the right or power of the Company, the Board or the stockholders of the Company to make or authorize any adjustment, recapitalization, reorganization or other change in the Company’s capital structure or its business, any merger or consolidation of the Company, any issue of debt or equity securities ahead of or affecting Stock or the rights thereof, the dissolution or liquidation of the Company or any sale, lease, exchange or other disposition of all or any part of its assets or business or any other corporate act or proceeding. +(b) Additional Issuances . Except as expressly provided herein, the issuance by the Company of shares of stock of any class, including upon conversion of shares or obligations of the Company convertible into such shares or other securities, and in any case whether or not for fair value, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number of shares of Stock subject to Awards theretofore granted or the purchase price per share of Stock, if applicable. +(c) Subdivision or Consolidation of Shares . The terms of an Award and the share limitations under the Plan shall be subject to adjustment by the Committee from time to time, in accordance with the following provisions: +(i) If at any time, or from time to time, the Company shall subdivide as a whole (by reclassification, by a Stock split, by the issuance of a distribution on Stock payable in Stock, or otherwise) the number of shares of Stock then outstanding into a greater number of shares of Stock or in the event the Company distributes an extraordinary cash dividend, then, as appropriate (A) the maximum number of shares of Stock available for delivery with respect to Awards and applicable limitations with respect to Awards provided in Section 4 and Section 5 (other than cash limits) shall be increased proportionately, and the kind of shares or other securities available for the Plan shall be appropriately adjusted, (B) the number of shares of Stock (or other kind of shares or securities) that may be acquired under any then-outstanding Award shall be increased proportionately, and (C) the price (including the Exercise Price or grant price) for each share of Stock (or other kind of shares or securities) subject to then-outstanding Awards shall be reduced proportionately, without changing the aggregate purchase price or value as to which outstanding Awards remain exercisable or subject to restrictions; provided , however , that in the case of an extraordinary cash dividend that is not an Adjustment Event, the adjustment to the number of shares of Stock and the Exercise Price or grant price, as applicable, with respect to an outstanding Option or SAR may be made in such other manner as the Committee may determine that is permitted pursuant to applicable tax and other laws, rules and regulations. Notwithstanding the foregoing, Awards that already have a right to receive extraordinary cash dividends as a result of Dividend Equivalents or other dividend rights will not be adjusted as a result of an extraordinary cash dividend. +(ii) If at any time, or from time to time, the Company shall consolidate as a whole (by reclassification, by reverse Stock split, or otherwise) the number of shares of Stock then outstanding into a lesser number of shares of Stock, then, as appropriate (A) the maximum number of shares of Stock available for delivery with respect to Awards and applicable limitations with respect to Awards provided in Section 4 and Section 5 (other than cash limits) shall be decreased proportionately, and the kind of shares or other securities available for the Plan shall be appropriately adjusted, (B) the number of shares of Stock (or other kind of shares or securities) that may be acquired under any then-outstanding Award shall be decreased proportionately, and (C) the price (including the Exercise Price or grant price) for each share of Stock (or other kind of shares or securities) subject to then-outstanding Awards shall be increased proportionately, without changing the aggregate purchase price or value as to which outstanding Awards remain exercisable or subject to restrictions. +(d) Recapitalization . In the event of any change in the capital structure or business of the Company or other corporate transaction or event that would be considered an “equity restructuring” within the meaning of ASC Topic 718 and, in each case, that would result in an additional compensation expense to the Company pursuant +PROPETRO  2025 Proxy Statement   |  A-11 +TABLE OF CONTENTS +to the provisions of ASC Topic 718, if adjustments to Awards with respect to such event were discretionary or otherwise not required (each such an event, an “ Adjustment Event ”), then the Committee shall equitably adjust (i) the aggregate number or kind of shares that thereafter may be delivered under the Plan, (ii) the number or kind of shares or other property (including cash) subject to an Award, (iii) the terms and conditions of Awards, including the purchase price or Exercise Price of Awards and performance goals, as applicable, and (iv) the applicable limitations with respect to Awards provided in Section 4 and Section 5 (other than cash limits) to equitably reflect such Adjustment Event (“ Equitable Adjustments ”). In the event of any change in the capital structure or business of the Company or other corporate transaction or event that would not be considered an Adjustment Event, and is not otherwise addressed in this Section 8 , the Committee shall have complete discretion to make Equitable Adjustments (if any) in such manner as it deems appropriate with respect to such other event. +(e) Change in Control and Other Events . +(i) Treatment of Awards Assumed or Substituted by a Successor Entity . +(A) Except as otherwise provided in an Award Agreement, in the event of a Change in Control, in which any successor entity assumes outstanding Awards or substitutes similar awards under the successor entity’s equity compensation plan for outstanding Awards on the same terms and conditions as the original Awards, such Awards that are assumed or substituted shall not vest solely with respect to the occurrence of the Change in Control. +(B) Except as otherwise provided in an Award Agreement, if, in connection with or within twelve (12) months following a Change in Control, a Participant’s service, consulting relationship, or employment with the Company, an Affiliate, and the Successor Entity and its affiliates is terminated without cause (as defined in the Award Agreement evidencing such Award or substitute award), the vesting and exercisability of all Awards, including substitute awards, then held by such Participant will be accelerated in full and be settled, as applicable, no later than sixty (60) days following the conclusion of the service or employment relationship (unless the Nonqualified Deferred Compensation Rules would prohibit such acceleration of settlement, in which case such Awards shall vest but will be settled at date(s) of settlement specified in the applicable Award Agreement) and the expiration date of any Options shall be the day three months following the date the Participant ceases to be an employee or service provider to the Company, an Affiliate of the Company and the Successor Entity and its affiliates. Except as otherwise provided in an Award Agreement, for Awards that vest based on performance, the number of performance Awards that shall vest and be settled in accordance with this Section 8(e)(i)(B) , shall be calculated assuming the attainment of the target level of performance as set forth in a performance Award. +(ii) Treatment of Awards not Assumed or Substituted . Unless otherwise provided in an Award Agreement, if, upon a Change in Control, the successor entity does not assume outstanding Awards or substitute similar awards under the successor entity’s equity compensation plan for outstanding Awards on the same terms and conditions as the original Awards, then the vesting of all outstanding Awards will be accelerated in full with effect immediately prior to the occurrence of the Change in Control and shall be settled, as applicable, no later than sixty (60) days following the Change in Control (unless the Nonqualified Deferred Compensation Rules would prohibit such acceleration of settlement, in which case such Awards will be settled at the originally specified date(s) of settlement). The Participant shall be permitted to conditionally redeem or exercise any or all Options, as applicable, effective immediately prior to the completion of any such transaction for the sole purpose of participating in such transaction. For Awards that vest based on performance, for the purpose of determining the achievement performance criteria, as set forth in the particular Award Agreement, and calculating the number of performance Awards that shall vest in accordance with this Section 8(e)(ii) , notwithstanding the terms of the Award Agreement, and unless otherwise provided by the Committee, such performance Awards shall be settled at the greater of  (A) the target level of performance as set forth in the performance Award, and (B) the actual performance achieved, measured and calculated as of the date of the Change in Control pursuant to shortened performance period ending on the occurrence of the Change in Control. +If an Adjustment Event occurs, this Section 8(e) shall only apply to the extent it is not in conflict with Section 8(d) . +9. General Provisions . +(a) Tax Withholding . The Company and any Affiliate are authorized to withhold from any Award granted, or any payment relating to an Award, including from a distribution of Stock, taxes due or potentially payable in +A-12  |   ir.propetroservices.com +TABLE OF CONTENTS +connection with any transaction involving an Award, and to take such other action as the Committee may deem advisable to enable the Company, the Affiliates and Participants to satisfy the payment of withholding taxes and other tax obligations relating to any Award in such amounts as may be determined by the Committee. The Committee shall determine, in its sole discretion, the form of payment acceptable for such tax withholding obligations, including the delivery of cash or cash equivalents, Stock (including through delivery of previously owned shares, net settlement, a broker-assisted sale, or other cashless withholding or reduction of the amount of shares otherwise issuable or delivered pursuant to the Award), other property, or any other legal consideration the Committee deems appropriate. Any determination made by the Committee to allow a Participant who is subject to Rule 16b-3 to pay taxes with shares of Stock through net settlement or previously owned shares shall be approved by either a committee made up of solely two or more Qualified Members or the full Board. If such tax withholding amounts are satisfied through net settlement or previously owned shares, the maximum number of shares of Stock that may be so withheld or surrendered shall be the number of shares of Stock that have an aggregate Fair Market Value on the date of withholding or surrender equal to the aggregate amount of such tax liabilities determined based on the greatest withholding rates for federal, state, foreign and/or local tax purposes, including payroll taxes, that may be utilized without creating adverse accounting treatment for the Company with respect to such Award, as determined by the Committee. +(b) Limitation on Rights Conferred under Plan . Neither the Plan nor any action taken hereunder shall be construed as (i) giving any Eligible Person or Participant the right to continue as an Eligible Person or Participant or in the employ or service of the Company or any Affiliate, (ii) interfering in any way with the right of the Company or any Affiliate to terminate any Eligible Person’s or Participant’s employment or service relationship at any time, (iii) giving an Eligible Person or Participant any claim to be granted any Award under the Plan or to be treated uniformly with other Participants and/or employees and/or other service providers, or (iv) conferring on a Participant any of the rights of a stockholder of the Company unless and until the Participant is duly issued or transferred shares of Stock in accordance with the terms of an Award. +(c) Governing Law; Submission to Jurisdiction . All questions arising with respect to the provisions of the Plan and Awards shall be determined by application of the laws of the State of Delaware, without giving effect to any conflict of law provisions thereof, except to the extent Delaware law is preempted by federal law. The obligation of the Company to sell and deliver Stock hereunder is subject to applicable federal and state laws and to the approval of any governmental authority required in connection with the authorization, issuance, sale, or delivery of such Stock. With respect to any claim or dispute related to or arising under the Plan, the Company and each Participant who accepts an Award hereby consent to the exclusive jurisdiction, forum and venue of the state and federal courts located in Houston, Texas. +(d) Severability and Reformation . If any provision of the Plan or any Award is or becomes or is deemed to be invalid, illegal, or unenforceable in any jurisdiction or as to any person or Award, or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to the applicable law or, if it cannot be construed or deemed amended without, in the determination of the Committee, materially altering the intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction, person or Award and the remainder of the Plan and any such Award shall remain in full force and effect. If any of the terms or provisions of the Plan or any Award Agreement conflict with the requirements of Rule 16b-3 (as those terms or provisions are applied to Eligible Persons who are subject to Section 16 of the Exchange Act) or Section 422 of the Code (with respect to ISOs), then those conflicting terms or provisions shall be deemed inoperative to the extent they so conflict with the requirements of Rule 16b-3 (unless the Board or the Committee, as appropriate, has expressly determined that the Plan or such Award should not comply with Rule 16b-3) or Section 422 of the Code, in each case, only to the extent Rule 16b-3 and Section 422 of the Code are applicable. With respect to ISOs, if the Plan does not contain any provision required to be included herein under Section 422 of the Code, that provision shall be deemed to be incorporated herein with the same force and effect as if that provision had been set out at length herein; provided , further , that, to the extent any Option that is intended to qualify as an ISO cannot so qualify, that Option (to that extent) shall be deemed a Nonstatutory Option for all purposes of the Plan. +(e) Unfunded Status of Awards; No Trust or Fund Created . The Plan is intended to constitute an “unfunded” plan for certain incentive awards. Neither the Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or any Affiliate and a Participant or any other person. To the extent that any person acquires a right to receive payments from the Company or any Affiliate pursuant to an Award, such right shall be no greater than the right of any general unsecured creditor of the Company or such Affiliate. +PROPETRO  2025 Proxy Statement   |  A-13 +TABLE OF CONTENTS +(f) Nonexclusivity of the Plan . Neither the adoption of the Plan by the Board nor its submission to the stockholders of the Company for approval shall be construed as creating any limitations on the power of the Board or a committee thereof to adopt such other incentive arrangements as it may deem desirable. Nothing contained in the Plan shall be construed to prevent the Company or any Affiliate from taking any corporate action which is deemed by the Company or such Affiliate to be appropriate or in its best interest, whether or not such action would have an adverse effect on the Plan or any Award made under the Plan. No employee, beneficiary or other person shall have any claim against the Company or any Affiliate as a result of any such action. +(g) Fractional Shares . No fractional shares of Stock shall be issued or delivered pursuant to the Plan or any Award, and the Committee shall determine in its sole discretion whether cash, other securities, or other property shall be paid or transferred in lieu of any fractional shares of Stock or whether such fractional shares of Stock or any rights thereto shall be cancelled, terminated, or otherwise eliminated with or without consideration. +(h) Interpretation . Headings are given to the Sections and subsections of the Plan solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of the Plan or any provision thereof. Words in the masculine gender shall include the feminine gender, and, where appropriate, the plural shall include the singular and the singular shall include the plural. In the event of any conflict between the terms and conditions of an Award Agreement and the Plan, the provisions of the Plan shall control. The use herein of the word “including” following any general statement, term or matter shall not be construed to limit such statement, term or matter to the specific items or matters set forth immediately following such word or to similar items or matters, whether or not non-limiting language (such as “without limitation”, “but not limited to”, or words of similar import) is used with reference thereto, but rather shall be deemed to refer to all other items or matters that could reasonably fall within the broadest possible scope of such general statement, term or matter. References herein to any agreement, instrument or other document means such agreement, instrument or other document as amended, supplemented and modified from time to time to the extent permitted by the provisions thereof and not prohibited by the Plan. +(i) Facility of Payment . Any amounts payable hereunder to any individual under legal disability or who, in the judgment of the Committee, is unable to manage properly his financial affairs, may be paid to the legal representative of such individual, or may be applied for the benefit of such individual in any manner that the Committee may select, and the Company shall be relieved of any further liability for payment of such amounts. +(j) Conditions to Delivery of Stock . Nothing herein or in any Award Agreement shall require the Company to issue any shares with respect to any Award if that issuance would, in the opinion of counsel for the Company, constitute a violation of the Securities Act, any other applicable statute or regulation, or the rules of any applicable securities exchange or securities association, as then in effect. In addition, each Participant who receives an Award under the Plan shall not sell or otherwise dispose of Stock that is acquired upon grant, exercise or vesting of an Award in any manner that would constitute a violation of any applicable federal or state securities laws, the Plan or the rules, regulations or other requirements of the SEC or any stock exchange upon which the Stock is then listed. At the time of any exercise of an Option or SAR, or at the time of any grant of any other Award, the Company may, as a condition precedent to the exercise of such Option or SAR or settlement of any other Award, require from the Participant (or in the event of his or her death, his or her legal representatives, heirs, legatees, or distributees) such written representations, if any, concerning the holder’s intentions with regard to the retention or disposition of the shares of Stock being acquired pursuant to the Award and such written covenants and agreements, if any, as to the manner of disposal of such shares as, in the opinion of counsel to the Company, may be necessary to ensure that any disposition by that holder (or in the event of the holder’s death, his or her legal representatives, heirs, legatees, or distributees) will not involve a violation of the Securities Act, any other applicable state or federal statute or regulation, or any rule of any applicable securities exchange or securities association, as then in effect. Stock or other securities shall not be delivered pursuant to any Award until payment in full of any amount required to be paid pursuant to the Plan or the applicable Award Agreement (including any Exercise Price, grant price, or tax withholding) is received by the Company. +(k) Section 409A of the Code . It is the general intention, but not the obligation, of the Committee to design Awards to comply with or to be exempt from the Nonqualified Deferred Compensation Rules, and Awards will be operated and construed accordingly. Neither this Section 9(k) nor any other provision of the Plan is or contains a representation to any Participant regarding the tax consequences of the grant, vesting, exercise, settlement, or sale of any Award (or the Stock underlying such Award) granted hereunder, and should not be interpreted as such. In no event shall the Company be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by the Participant on account of non-compliance with the Nonqualified Deferred Compensation Rules. Notwithstanding any provision in the Plan or an Award Agreement to the contrary, in the event that a “specified employee” (as defined under the Nonqualified Deferred Compensation Rules) becomes +A-14  |   ir.propetroservices.com +TABLE OF CONTENTS +entitled to a payment under an Award that would be subject to additional taxes and interest under the Nonqualified Deferred Compensation Rules if the Participant’s receipt of such payment or benefits is not delayed until the earlier of  (i) the date of the Participant’s death, or (ii) the date that is six months after the Participant’s “separation from service,” as defined under the Nonqualified Deferred Compensation Rules (such date, the “ Section 409A Payment Date ”), then such payment or benefit shall not be provided to the Participant until the Section 409A Payment Date. Any amounts subject to the preceding sentence that would otherwise be payable prior to the Section 409A Payment Date will be aggregated and paid in a lump sum without interest on the Section 409A Payment Date. The applicable provisions of the Nonqualified Deferred Compensation Rules are hereby incorporated by reference and shall control over any Plan or Award Agreement provision in conflict therewith. +(l) Clawback . The Plan and all Awards granted hereunder are subject to any written clawback policies that the Company, with the approval of the Board or an authorized committee thereof, may adopt either prior to or following the Effective Date, including any policy adopted to conform to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and rules promulgated thereunder by the SEC and that the Company determines should apply to Awards. Any such policy may subject a Participant’s Awards and amounts paid or realized with respect to Awards to reduction, cancelation, forfeiture or recoupment if certain specified events or wrongful conduct occur, including an accounting restatement due to the Company’s material noncompliance with financial reporting regulations or other events or wrongful conduct specified in any such clawback policy. +(m) Status under ERISA . The Plan shall not constitute an “employee benefit plan” for purposes of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended. +(n) Plan Effective Date and Term . The Plan was adopted by the Board to be effective on the Effective Date. No Awards may be granted under the Plan on and after the tenth anniversary of the Effective Date, which is May 20, 2035. However, any Award granted prior to such termination (or any earlier termination pursuant to Section 10 ), and the authority of the Board or Committee to amend, alter, adjust, suspend, discontinue, or terminate any such Award or to waive any conditions or rights under such Award in accordance with the terms of the Plan, shall extend beyond such termination until the final disposition of such Award. +10. Amendments to the Plan and Awards. The Committee may amend, alter, suspend, discontinue or terminate any Award or Award Agreement, the Plan or the Committee’s authority to grant Awards without the consent of stockholders or Participants, except that any amendment or alteration to the Plan, including any increase in any share limitation, shall be subject to the approval of the Company’s stockholders not later than the annual meeting next following such Committee action if such stockholder approval is required by any federal or state law or regulation or the rules of any stock exchange or automated quotation system on which the Stock may then be listed or quoted, and the Committee may otherwise, in its discretion, determine to submit other changes to the Plan to stockholders for approval; provided , that, without the consent of an affected Participant, no such Committee action may materially and adversely affect the rights of such Participant under any previously granted and outstanding Award. For purposes of clarity, any adjustments made to Awards pursuant to Section 8 will be deemed not to materially and adversely affect the rights of any Participant under any previously granted and outstanding Award and therefore may be made without the consent of affected Participants. +PROPETRO  2025 Proxy Statement   |  A-15 +TABLE OF CONTENTS +TABLE OF CONTENTS +PROPETRO HOLDING CORP. PROXY FOR ANNUAL MEETING TO BE HELD ON MAY 20, 2025 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS The undersigned stockholder hereby appoints each of Samuel D. Sledge and John J. Mitchell as attorney and proxy for the undersigned, with the power to appoint his substitute, to represent and to vote all the shares of common stock of PROPETRO HOLDING CORP., which the undersigned would be entitled to vote, at the Company’s Annual Meeting of Stockholders to be held in person on Tuesday, May 20, 2025 at 10:00 A.M. Central Time 2518 FM 307 Midland, Texas 79706 and at any postponements, continuations or adjournments thereof   (the “Annual Meeting”). In their discretion, the proxies are authorized to vote upon (i) the election of any person to the Board of Directors if any nominee named herein becomes unable to serve or for good cause will not serve, (ii) any matter that the Board of Directors of the Company did not know would be presented at the Annual Meeting by a reasonable time before the proxy solicitation was made and (iii) any other matter that may properly come before the Annual Meeting or any postponements, continuations or adjournments thereof. This proxy, when properly executed, will be voted in the manner directed on the reverse side by the undersigned stockholder. If no direction is made, this proxy will be voted “FOR” all nominees set forth in PROPOSAL 1, “FOR” PROPOSALS 2, 4 and 5 and “ONE YEAR” for Proposal 3. PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE. (IMPORTANT—This Proxy must be signed and dated on the reverse side.) PLEASE DETACH ALONG PERFORATED LINE AND MAIL IN THE ENVELOPE PROVIDED. Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be held May 20, 2025. The Proxy Statement and our 2024 Annual Report to Stockholders are available at: https://web.viewproxy.com/propetro/2025. +TABLE OF CONTENTS +Annual Meeting of StockholdersImportant Notice Regarding the Availability of Proxy Materials for theAnnual Meeting of Stockholders to be held May 20, 2025.The Proxy Statement and our 2024 Annual Report to Stockholders are available at: https://web.viewproxy.com/propetro/2025Internet:www.AALVote.com/PUMP• Cast your vote online• Have your Proxy Card ready• Follow the simple instructions to record your votePhone: 1-866-804-9616 • Use any touch tone telephone• Have your Proxy Card ready• Follow the simple recorded instructionsMail:• Mark, sign and date your Proxy Card• Fold and return your Proxy Card in the Prepaid Envelope providedIn Person:• Annual Meeting of Stockholders to be held in person on Tuesday, May 20, 2025 at 10:00 A.M. Central Time 2518 FM 307 Midland, Texas 79706Scan QR Codefor Digital VotingCONTROL NUMBERPROPETRO HOLDING CORP.FOLD HEREPROXYANNUAL MEETING OF STOCKHOLDERSPROPETRO HOLDING CORP.MAY 20, 2025This Proxy is solicited by the Board of Directors of ProPetro Holding Corp.,which recommends that you vote “FOR” all nominees set forth inProposal 1, “FOR” Proposals 2, 4 and 5 and “ONE YEAR” for Proposal 3.The undersigned stockholder hereby appoints each of Samuel D. Sledge and John J. Mitchell as attorney and proxy for the undersigned, with the power to appoint his substitute, to represent and to vote all the shares of common stock of PROPETRO HOLDING CORP., which the undersigned would be entitled to vote, at the Company’s Annual Meeting of Stockholders to be held in person on Tuesday, May 20, 2025, at 10:00 A.M. Central Time 2518 FM 307 Midland, Texas 79706 and at any postponements, continuations or adjournments thereof  (the “Annual Meeting”).In their discretion, the proxies are authorized to vote upon (i) the election of any person to the Board of Directors if any nominee named herein becomes unable to serve or for good cause will not serve, (ii) any matter that the Board of Directors of the Company did not know would be presented at the Annual Meeting by a reasonable time before the proxy solicitation was made and (iii) any other matter that may properly come before the Annual Meeting or any postponements, continuations or adjournments thereof.This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the Board of Directors’ recommendations.HAVE YOUR PROXY CARD READY AND PLEASE USEONE OF THE EASY VOTING METHODS BELOWMr AB SampleSample StreetSample TownSampleshire, XXX XXX +TABLE OF CONTENTS +ProposalsPLEASE MARK YOUR VOTE AS THIS EXAMPLE THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” ALL NOMINEES SET FORTH IN PROPOSAL 1, “FOR” PROPOSALS 2, 4 AND 5 AND “ONE YEAR” FOR PROPOSAL 3.Proposal 1: Election of nine director nominees to serve for a one-year term.o FOR ALL NOMINEES LISTED BELOW(except as marked to the contrary below)o WITHHOLD AUTHORITY TO VOTE FOR ALL NOMINEES LISTED BELOWINSTRUCTION: TO WITHOLD AUTHORITY TO VOTE FOR ONE OR MORE INDIVIDUAL NOMINEES STRIKE A LINE THROUGH THE NOMINEES NAMES BELOW:NOMINEES:NOMINEES:1. Phillip A. Gobe6. G. Larry Lawrence2. Samuel D. Sledge7. Mary P. Ricciardello3. Spencer D. Armour III8. Michele Vion4. Mark S. Berg9. Alex V. Volkov5. Anthony J. BestProposal 2: Approval, on an advisory basis, of the compensation of our Named Executive Officers. (recommend FOR)FORoAGAINSToABSTAIN oProposal 3: Approval, on an advisory basis, of the frequency of future advisory votes on the compensation of our Named Executive Officers. (recommend One Year)1 YEARo2 YEARSo 3 YEARSoABSTAIN oProposal 4: Approval of the Second Amended and Restated 2020 Long-Term Incentive Plan. (recommend FOR)FORoAGAINSToABSTAIN oProposal 5: Ratification of the appointment of RSM US LLP as our independent, registered public accounting firm for the fiscal year ending December 31, 2025. (recommend FOR)FORoAGAINSToABSTAIN oFOLD HERESignatures2025DateSignature(s) of StockholdersTitle (if applicable)Note: Please sign exactly as name appears hereon. When shares are held by joint owners, both should sign. When signing as an attorney, executor, administrator, trustee, guardian, or corporate officer, please give title as such.I PLAN TO ATTEND THE GENERAL MEETING oAddress change/Comments: If you noted any Address Changes and/or Comments, please mark box. oCONTROL NUMBER +DEF 14A +0001680247 +false +0001680247 +2024-01-01 +2024-12-31 +0001680247 +pump:SamuelSledgeMember +2024-01-01 +2024-12-31 +0001680247 +pump:SamuelSledgeMember +2023-01-01 +2023-12-31 +0001680247 +2023-01-01 +2023-12-31 +0001680247 +pump:SamuelSledgeMember +2022-01-01 +2022-12-31 +0001680247 +2022-01-01 +2022-12-31 +0001680247 +pump:PhillipGobeMember +2021-01-01 +2021-12-31 +0001680247 +pump:SamuelSledgeMember +2021-01-01 +2021-12-31 +0001680247 +2021-01-01 +2021-12-31 +0001680247 +pump:PhillipGobeMember +2020-01-01 +2020-12-31 +0001680247 +2020-01-01 +2020-12-31 +0001680247 +ecd:EqtyAwrdsInSummryCompstnTblForAplblYrMember +ecd:NonPeoNeoMember +2024-01-01 +2024-12-31 +0001680247 +ecd:YrEndFrValOfEqtyAwrdsGrntdInCvrdYrOutsdngAndUnvstdMember +ecd:PeoMember +pump:SamuelSledgeMember +2024-01-01 +2024-12-31 +0001680247 +ecd:VstngDtFrValOfEqtyAwrdsGrntdAndVstdInCvrdYrMember +ecd:PeoMember +pump:SamuelSledgeMember +2024-01-01 +2024-12-31 +0001680247 +ecd:ChngInFrValOfOutsdngAndUnvstdEqtyAwrdsGrntdInPrrYrsMember +ecd:PeoMember +pump:SamuelSledgeMember +2024-01-01 +2024-12-31 +0001680247 +ecd:ChngInFrValAsOfVstngDtOfPrrYrEqtyAwrdsVstdInCvrdYrMember +ecd:PeoMember +pump:SamuelSledgeMember +2024-01-01 +2024-12-31 +0001680247 +pump:EquityAwardsGrantedInPriorYearsThatWereForfeitedDuringTheYearMember +ecd:NonPeoNeoMember +2024-01-01 +2024-12-31 +0001680247 +ecd:EqtyAwrdsAdjsMember +ecd:PeoMember +pump:SamuelSledgeMember +2024-01-01 +2024-12-31 +0001680247 +ecd:EqtyAwrdsInSummryCompstnTblForAplblYrMember +ecd:PeoMember +2024-01-01 +2024-12-31 +0001680247 +ecd:YrEndFrValOfEqtyAwrdsGrntdInCvrdYrOutsdngAndUnvstdMember +ecd:NonPeoNeoMember +2024-01-01 +2024-12-31 +0001680247 +ecd:VstngDtFrValOfEqtyAwrdsGrntdAndVstdInCvrdYrMember +ecd:NonPeoNeoMember +2024-01-01 +2024-12-31 +0001680247 +ecd:ChngInFrValOfOutsdngAndUnvstdEqtyAwrdsGrntdInPrrYrsMember +ecd:NonPeoNeoMember +2024-01-01 +2024-12-31 +0001680247 +ecd:ChngInFrValAsOfVstngDtOfPrrYrEqtyAwrdsVstdInCvrdYrMember +ecd:NonPeoNeoMember +2024-01-01 +2024-12-31 +0001680247 +pump:EquityAwardsGrantedInPriorYearsThatWereForfeitedDuringTheYearMember +ecd:PeoMember +2024-01-01 +2024-12-31 +0001680247 +ecd:DvddsOrOthrErngsPdOnEqtyAwrdsNtOthrwsRflctdInTtlCompForCvrdYrMember +ecd:NonPeoNeoMember +2024-01-01 +2024-12-31 +0001680247 +ecd:EqtyAwrdsAdjsMember +ecd:NonPeoNeoMember +2024-01-01 +2024-12-31 +0001680247 +1 +2024-01-01 +2024-12-31 +0001680247 +2 +2024-01-01 +2024-12-31 +0001680247 +3 +2024-01-01 +2024-12-31 +iso4217:USD \ No newline at end of file diff --git a/raw/proxies/0001680247/0001104659-25-033020/proxy_rpt.txt b/raw/proxies/0001680247/0001104659-25-033020/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..b5585d2d5dd601887e6cc6e4a432f221b9814ac0 --- /dev/null +++ b/raw/proxies/0001680247/0001104659-25-033020/proxy_rpt.txt @@ -0,0 +1,15 @@ +Certain Relationships and Related Party Transactions +RELATED PARTY TRANSACTIONS +Operations and Maintenance Yards +The Company rents three yards from South Midkiff Partners, LLC, an entity partially owned by Spencer D. Armour III, a director, and David Sledge, the father of Sam Sledge, our Chief Executive Officer. Total annual rent expense in 2024 for each of the three yards was approximately $0.03 million, $0.1 million, and $0.1 million, respectively. +Transportation and Equipment Rental +Adam Muñoz, our President and Chief Operating Officer, has a family relationship with an employee of J&M Burns Transportation, an entity that provides transportation services to the Company. The employee receives a portion of his compensation from J&M Burns Transportation based on the amount of services sold by him to customers, including the Company. The Company incurred approximately $14.2 million in expense for the year ended December 31, 2024 for services provided to the Company by J&M Burns Transportation. +Executive Officer Family Members +Oscar M. Dominguez is our Vice President of Hydraulic Fracturing Operations and the brother-in-law of Adam Muñoz. Mr. Dominguez received total compensation of approximately $983,000 for his services for the year ended December 31, 2024 (including approximately $841,000 cash compensation and approximately $142,000 non-cash equity compensation). +Roger Dominguez is our Supply Chain Logistics Manager and the brother-in-law of Adam Muñoz. Mr. Dominguez received total compensation of approximately $292,000 for his services for the year ended December 31, 2024 (including approximately $249,000 cash compensation and approximately $43,000 non-cash equity compensation). +Pioneer +On December 31, 2018, we consummated the purchase of certain pressure pumping assets and real property from Pioneer and Pioneer Pumping Services (the “Pioneer Pressure Pumping Acquisition”) in exchange for 16.6 million shares of our common stock and $110.0 million in cash. In May 2024, Pioneer merged with and into a wholly owned subsidiary of ExxonMobil after which ExxonMobil became the owner of these shares. We currently provide pressure pumping, wireline and other services to ExxonMobil and previously provided such services to Pioneer. +On April 22, 2024, we entered into a sub-agreement for Hydraulic Fracturing Services with XTO Energy Inc., (“XTO”) a wholly owned subsidiary of ExxonMobil, pursuant to which we provide hydraulic fracturing, wireline and pumpdown services with two committed FORCE® electric-powered hydraulic fracturing fleets with the option to add a third FORCE® fleet (also with wireline and pumpdown services) for a period of three years or for contracted hours, whichever occurs last with respect to each fleet, subject to certain termination and release rights. +Revenue from services provided to ExxonMobil (including Pioneer and XTO) subsequent to Pioneer’s merger with ExxonMobil was approximately $187.7 million during the year ended December 31, 2024. Revenue from services provided to Pioneer (including equipment reservation fees) prior to its merger with ExxonMobil was approximately $6.8 million during the year ended December 31, 2024. +As of December 31, 2024, the total accounts receivable due from ExxonMobil (including Pioneer and XTO), including estimated unbilled receivable for services we provided, amounted to $70.8 million and the amount due to ExxonMobil (including Pioneer and XTO) was $0. +PROPETRO  2025 Proxy Statement   |  21 \ No newline at end of file diff --git a/raw/proxies/0001680247/0001104659-26-040891/proxy.txt b/raw/proxies/0001680247/0001104659-26-040891/proxy.txt new file mode 100644 index 0000000000000000000000000000000000000000..10d706608871a34d1f5f4ec6b05839adaf7a65c4 --- /dev/null +++ b/raw/proxies/0001680247/0001104659-26-040891/proxy.txt @@ -0,0 +1,4172 @@ +tm261395-1_nonfiling - none - 18.1181863s +TABLE OF CONTENTS +UNITED STATES +SECURITIES AND EXCHANGE COMMISSION +Washington, D.C. 20549 +SCHEDULE 14A +Proxy Statement Pursuant to Section 14(a) of +the Securities Exchange Act of 1934 (Amendment No.     ) +Filed by the Registrant ☒ +Filed by a Party other than the Registrant ☐ +Check the appropriate box: +☐ +Preliminary Proxy Statement +☐ +Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) +☒ +Definitive Proxy Statement +☐ +Definitive Additional Materials +☐ +Soliciting Material under §240.14a-12 +ProPetro Holding Corp. +(Name of Registrant as Specified In Its Charter) +(Name of Person(s) Filing Proxy Statement, if other than the Registrant) +Payment of Filing Fee (Check all boxes that apply): +☒ +No fee required. +☐ +Fee paid previously with preliminary materials. +☐ +Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a6(i)(1) and 0-11 +TABLE OF CONTENTS +TABLE OF CONTENTS +2025 AT A GLANCE +1 +Scaled PROPWR SM , ending 2025 with approximately 550MW of capacity received or on-order +2 +Approximately 230 MW committed to customer contracts +3 +Continued successful execution with our FORCE ® electric fleets +4 +Growing responsibly with strategic financing and leasing structures to support PROPWR SM equipment purchases +OPTIMIZE AND INDUSTRIALIZE +ADDING SCALE AND GROWTH POTENTIAL THROUGH PROPWR SM +STRATEGIC EXECUTION +ProPetro Holding Corp. (NYSE: PUMP) is a Midland, Texas-based provider of innovative completion services to leading upstream oil and gas companies engaged in the exploration and production (“E&P”) of North American unconventional oil and natural gas resources. Through its PROPWR SM division, ProPetro also delivers reliable, adaptable power services using a modern, standardized fleet of gas-to-power solutions, serving oil and gas, data center, and industrial customers in the United States. +ProPetro was founded in 2005. In 2010, management strategically focused the Company’s efforts on establishing a best-in-class hydraulic fracturing platform targeting the Permian Basin. In 2017, we consummated the initial public offering of shares of our common stock. In 2024, we established our PROPWR SM , power generation business, which rapidly scaled throughout 2025 and at year-end was in the field providing turnkey power generation services to its customers. +Today, ProPetro serves a diverse portfolio of leading public and private operators across multiple service platforms and businesses. Through continued execution and a strong team, the Company remains dedicated to its goal of helping to bring reliable energy to the world. +UNIQUELY POSITIONED FOR SUCCESS +Permian Focus +Blue Chip Customers +Superior Performance +PROPWR SM Investments +Completions Business positioned in a low-cost basin with sector-leading operating scale +Consistent completions and rig programs; capable of capturing PROPWR SM micro-grid efficiencies +Consistently outperforming the competition on location and serving as an efficient completions partner +Power generation investments providing pathway for growth and strong commercial pipeline +Capital Discipline +Safety Culture +Technology +Social & Governance +Strong balance sheet; disciplined capital allocation and asset deployment +Adopting leading safety processes to drive safe work performance +Focused on technological improvements to optimize our performance +Continued investment in our community and commitment to strong corporate governance +TABLE OF CONTENTS +ProPetro Holding Corp. +One Marienfeld Place +110 N. Marienfeld Street, Suite 300 +Midland, Texas 79701 +MESSAGE FROM OUR CHIEF EXECUTIVE OFFICER +SAMUEL D. SLEDGE +Chief Executive Officer and Director +Dear Stockholders, +2025 was a defining year for ProPetro. In a challenging and dynamic market environment, our team delivered resilient financial performance, advanced our strategic priorities, and laid a strong foundation for long-term growth. Through disciplined execution, prudent capital allocation, and a continued focus on operational excellence, we demonstrated the durability of our legacy completions businesses and saw meaningful development in our PROPWR SM power generation business that was launched in late 2024. +Throughout the year, our completions businesses continued to perform, providing stability and flexibility. Despite reduced activity levels across the Permian Basin, we maintained operational and financial discipline, managing our cost structure and fleet utilization to protect margins and liquidity. We believe this planning will position us to capture opportunities if the completions market improves. +At the same time, a key element of our strategy in 2025 was the development of our PROPWR SM business, which saw rapid advancement throughout the year. During the year, we secured multiple customer contracts, deployed our first mobile power generation equipment into the field, and increased total delivered or on-order generation capacity to approximately 550 megawatts. This portfolio is intentionally diversified and capable of effectively serving the data center, industrial, and oil and gas markets, with approximately 70% high-efficiency natural gas reciprocating engine generators and 30% low-emission modular turbines. As of early 2026, we had approximately 240 megawatts committed to customer contracts, underscoring strong and growing customer demand for reliable, low-emission power solutions. +To support the scale-up of PROPWR SM while maintaining financial flexibility, we executed several important financing initiatives in 2025. We secured dedicated financing arrangements, including equipment financing with Caterpillar Financial Services Corporation that was originally entered into in April 2025 and subsequently expanded in early 2026, and an equipment leasing facility with Stonebriar Commercial Finance designed to ensure available funding for future PROPWR equipment purchases. In addition, we completed an equity offering in early 2026 that further strengthened our balance sheet and enhanced our ability to pursue growth opportunities. +2025 BUSINESS HIGHLIGHTS +• +Demonstrated the strength and resilience of our industrialized model, delivering consistent performance despite challenging market conditions. Our completions business generated strong financial results, fueling ongoing investments in PROPWR SM +• +Launched and scaled PROPWR SM , deploying initial assets and increasing total delivered or on-order capacity to approximately 550 megawatts +• +Secured long-term financing solutions to facilitate PROPWR SM capital investments while maintaining a strong balance sheet that will support continued growth +• +Executed multiple customer contracts, including our first data center contract, demonstrating our ability to compete and win business outside the oil and gas service space +• +Detailed our PROPWR SM five-year development plan, establishing our strategic outlook for the growth of the PROPWR SM business +TABLE OF CONTENTS +Message from Our Chief Executive Officer +Driven by the dedication of our team, our strategic focus and the exciting growth potential of our PROPWR SM business, ProPetro is positioned to deliver services that support the development of reliable, efficient and secure sources of energy. We believe this approach will continue to drive value creation for our stockholders. +LOOKING AHEAD +As we enter 2026, we do so with momentum, clarity of purpose, and confidence in our strategic direction. We remain excited about the opportunities ahead for PROPWR SM , where we believe our speed to market solutions provide a competitive advantage in a strong market. For our completions business, despite the ongoing turbulence in the oil and gas markets resulting from the conflict in Iran, we expect our customers to remain disciplined. In this environment, we believe our focus on operational excellence, capital discipline, cost control and differentiated service offerings position us well to capture opportunities in the current market. +This year, our priorities remain clear. +• +we will continue to invest in and scale PROPWR SM , focusing on operational execution for our existing customers and capturing the growth opportunities in our robust commercial pipeline; and +• +we will leverage our next-generation completions fleet and reputation for operational excellence to ensure we remain a premier provider of efficient, lower-emission completions services +With a resilient core business, a growing power generation platform, a disciplined capital allocation and management program, and a talented and committed team that is focused on consistent execution, we believe ProPetro is well positioned to navigate industry cycles and create value for our stockholders. +2026 ANNUAL MEETING +Thank you for your continued support of ProPetro. We look forward to you joining us at our annual meeting of stockholders on May 19, 2026. +Sincerely, +Samuel D. Sledge +Chief Executive Officer and Director +April 8, 2026 +TABLE OF CONTENTS +ProPetro Holding Corp. +One Marienfeld Place +110 N. Marienfeld Street, Suite 300 +Midland, Texas 79701 +NOTICE OF 2026 ANNUAL MEETING OF STOCKHOLDERS +Dear Stockholders, +We cordially invite you to attend the 2026 annual meeting of stockholders of ProPetro Holding Corp. +When +May 19, 2026 +10:00 a.m. Central Time +Where +2518 FM 307 +Midland, Texas 79706 +Record Date +Stockholders who owned our common stock at the close of business on March 25, 2026 are entitled to notice of, and to vote at, the annual meeting, or any continuation, postponement, or adjournment thereof. +Items of Business +1 +Election of eight director nominees to serve for a one-year term +2 +Approval, on an advisory basis, of the compensation of our named executive officers +3 +Approval of the Third Amended and Restated 2020 Long-Term Incentive Plan +4 +Ratification of the appointment of RSM US LLP as our independent, registered public accounting firm for the fiscal year ending December 31, 2026 +5 +Transaction of such other business as may properly come before the meeting +How to Vote +YOUR VOTE IS IMPORTANT. We urge you to review the accompanying proxy statement carefully and to submit your proxy as soon as possible so that your shares will be represented at the meeting. You may revoke your proxy if you so desire at any time before it is voted. Have your Notice, proxy card or voting instruction form with your 11-digit control number and follow the instructions. +INTERNET +TELEPHONE +MOBILE DEVICE +MAIL +AT THE MEETING +REGISTERED HOLDERS +www.AALVote.com/ +PUMP , 24/7 +Call +1 (866) 804-9616 +(toll-free), 24/7 +Scan the QR code +Sign, date and mail the proxy card, which you may have received by mail, using the postage-paid envelope provided +Attend the annual meeting and cast your ballot +BENEFICIAL OWNERS (HOLDERS IN STREET NAME) +Follow the instructions provided by your broker, bank +or other nominee +Return a properly executed voting instruction form by mail, depending upon the method(s) your broker, bank or other nominee makes available +To attend the annual meeting, you will need proof of ownership and a legal proxy from your broker, bank or other nominee +DEADLINE +11:59 p.m. Eastern Time on May 18, 2026, if +you are a registered holder +If you are a beneficial owner, please refer to the information +provided by your broker, bank or other nominee +A stockholders’ list will be available at our offices at One Marienfeld Place, 110 N. Marienfeld Street, Suite 300, Midland, Texas 79701 for a period of ten days prior to the meeting. We hope that you will be able to attend the meeting in person. +This proxy statement and our +2025 Annual Report on Form 10-K +are also available at +https://web.viewproxy.com/propetro/2026. +By Order of the Board of Directors, +John J. Mitchell +General Counsel and Corporate +Secretary +April 8, 2026 +TABLE OF CONTENTS +TABLE OF CONTENTS +1 +PROXY STATEMENT SUMMARY +2 +CORPORATE GOVERNANCE AND BOARD MATTERS +5 +Proposal 1 —Election of Directors +6 +Nominees +12 +Director Independence +12 +Board Leadership Structure +13 +Board of Directors and Risk Oversight +13 +Sustainability Initiatives +14 +Communicating with Our Board of Directors +15 +Annual Meeting Attendance +15 +Compensation Committee Interlocks and Insider Participation +15 +Board and Committee Activity and Structure +18 +Role of the Board, Compensation Committee and Our Executive Officers +19 +Role of External Advisors +19 +Director Nominations Process +19 +Director Orientation and Education +20 +Certain Relationships and Related Party Transactions +21 +Director Compensation +23 +Non-Employee Director Stock Ownership Guidelines +24 +EXECUTIVE OFFICERS +26 +EXECUTIVE COMPENSATION +26 +Proposal 2 —Advisory Vote to Approve Named Executive Officer Compensation +27 +Compensation Discussion and Analysis +45 +Report of the Compensation Committee +46 +Executive Compensation Tables +46 +SUMMARY COMPENSATION TABLE +48 +GRANTS OF PLAN-BASED AWARDS +49 +NARRATIVE DISCLOSURE TO SUMMARY COMPENSATION TABLE AND GRANTS OF PLAN-BASED AWARDS TABLE +49 +OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END +50 +2025 OPTION EXERCISES AND STOCK VESTED +51 +PENSION BENEFITS +51 +NONQUALIFIED DEFERRED COMPENSATION +51 +POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL +57 +Pay versus Performance +59 +NARRATIVE DISCLOSURE TO PAY VERSUS PERFORMANCE TABLE +60 +CEO Pay Ratio +61 +Proposal 3 —Approval of the Third Amended and Restated 2020 Long Term Incentive Plan +61 +Background and Purpose of the Proposal +63 +Summary of the Third A&R LTIP +67 +Federal Income Tax Consequences +68 +Tax Consequences to Participants +70 +New Plan Benefits +70 +Equity Compensation Plan Information +71 +Consequences of Failing to Approve the Proposal +72 +AUDIT MATTERS +72 +Proposal 4 —Ratification of Appointment of Independent Registered Public Accounting Firm +73 +Auditor Fees for Fiscal Years 2025 and 2024 +73 +Policy on Audit Committee Pre-Approval of Audit and Non-Audit Services of Independent Registered Public Accounting Firm +73 +Report of the Audit Committee +75 +STOCK OWNERSHIP INFORMATION +75 +Security Ownership of Certain Beneficial Owners and Management +77 +ADDITIONAL INFORMATION +77 +Information about the Annual Meeting and Voting +82 +Information about Stockholder Proposals +82 +Annual Report on Form 10-K +83 +Other Matters +TABLE OF CONTENTS +Proxy Statement Summary +The following section is only a summary of key elements of this proxy statement, and is intended to assist you in reviewing this proxy statement in advance of the 2026 annual meeting. This summary does not contain all of the information you should consider, and you are encouraged to read this entire proxy statement before submitting your votes. +2026 Annual Meeting +When +Where +Record Date +May 19, 2026 +10:00 a.m. Central Time +2518 FM 307 +Midland, Texas 79706 +March 25, 2026 +Voting Agenda +Board +Recommendation +For More Information, +See Page +1 +Election of eight director nominees to serve for a one-year term +FOR each +nominee +5 +2 +Approval, on an advisory basis, of the compensation of our named executive officers (Say-on-Pay) +FOR +26 +3 +Approval of the Third Amended and Restated 2020 Long Term Incentive Plan (LTIP) +FOR +61 +4 +Ratification of the Audit Committee’s selection of RSM US LLP as our independent auditors for 2026 +FOR +72 +5 +Transaction of such other business as may properly come before the meeting or any adjournment thereof +FOR +** +Director Nominees +The Board of Directors (the “Board”) has nominated the eight director nominees shown below for a one-year term. Mr. Spencer D. Armour, currently a director of the Company, having expressed his preference not to be renominated to the Board, will retire from the Board effective at the expiration of his term as of the conclusion of the Annual Meeting and has not been nominated for a new term. The Board expresses its sincere appreciation to Mr. Armour for his dedicated service and valuable contributions to the Company during his tenure. +Committee Memberships +Nominees +Independent +Age +Director +Since +Audit +Compensation +Nominating & +Corporate +Governance +Mark S. Berg +67 +2019 +Anthony J. Best +76 +2018 +Phillip A. Gobe   +73 +2019 +PROPETRO  2026 Proxy Statement   |  1 +TABLE OF CONTENTS +Proxy Statement Summary +Committee Memberships +Nominees +Independent +Age +Director +Since +Audit +Compensation +Nominating & +Corporate +Governance +G. Larry Lawrence +74 +2020 +* +Samuel D. Sledge +39 +2021 +Mary P. Ricciardello +70 +2023 +* +Michele Vion +66 +2020 +Alex V. Volkov +53 +2024 +Meetings in 2025 +Board 12 +8 +5 +4 +Committee Chair +Committee Member +Chairman of the Board +* +Audit Committee financial expert +Corporate Governance Highlights +Corporate Governance Best Practices +Seven of our eight director nominees are independent +Oversight in establishing and review of execution of the Company’s strategic objectives +Three of our eight director nominees are gender or ethnically diverse +Balance of new and experienced directors +Stock ownership guidelines for directors and executives +Code of Business Conduct and Ethics +Annual director self-evaluation and committee assessment to ensure board effectiveness +All directors serving in 2025 attended over 75% of 2025 meetings (held during the period for which he or she was a director) +Regular executive sessions of independent directors +Board review of company’s financial performance and succession plans +Robust risk oversight +Commitment to Corporate Social Responsibility +2  |   ir.propetroservices.com +TABLE OF CONTENTS +Proxy Statement Summary +DIRECTOR ATTRIBUTES +Our eight directors nominated for reelection at the 2026 annual meeting comprise a well-balanced Board. +BOARD EXPERTISE +Director Nominees Skills and Experience +Audit and financial reporting +●   ●   ●   ●   ●   ●   ●   ● +5 +Corporate governance and ethics +●   ●   ●   ●   ●   ●   ●   ● +7 +Cybersecurity risk management +●   ●   ●   ●   ●   ●   ●   ● +5 +Executive leadership +●   ●   ●   ●   ●   ●   ●   ●   +8 +Exploration & Production, energy industry +●   ●   ●   ●   ●   ●   ●   ● +5 +Finance and/or investment experience +●   ●   ●   ●   ●   ●   ●   ● +6 +Human capital management, sustainability, or environmental stewardship +●   ●   ●   ●   ●   ●   ●   ● +6 +Marketing, business development and investor relations +●   ●   ●   ●   ●   ●   ●   ● +5 +Other public company board service +●   ●   ●   ●   ●   ●   ●   ● +6 +Regulatory, government and compliance +●   ●   ●   ●   ●   ●   ●   ● +6 +Risk management +●   ●   ●   ●   ●   ●   ●   ● +6 +Strategic planning and operations +●   ●   ●   ●   ●   ●   ●   ●   +8 +Technology, engineering +●   ●   ●   ●   ●   ●   ●   ● +3 +PROPETRO  2026 Proxy Statement   |  3 +TABLE OF CONTENTS +Proxy Statement Summary +2025 Performance Highlights +2025 was a transformational year for ProPetro as we saw our strategic pivot to our PROPWR SM power generation business take shape and accelerate throughout the year. PROPWR SM was launched in late 2024, with an initial equipment order placed in December of that year. Throughout 2025, the PROPWR SM business gained momentum as it secured contracts with multiple customers. In the third quarter PROPWR SM deployed its first mobile power generation equipment into the field, and in October, it announced its first data center contract, demonstrating our ability to compete and win business outside the oil and gas service space. By year end, total delivered and on-order generation capacity had increased to approximately 550 megawatts, with approximately 230 megawatts committed to customer contracts. With a diversified equipment mix, PROPWR SM enters 2026 well positioned to serve oil and gas, industrial, and data center customers. +Additionally, despite a challenging completions market environment characterized by lower activity across the North American oilfield services industry, pricing pressure, and continued customer consolidation and capital discipline, the Company delivered resilient operational performance and maintained strong market share. Our completions businesses continued to perform reliably for customers across the Permian Basin, supported by disciplined cost management, fleet rationalization, and a continued emphasis on operational excellence and safety. To support our operations and the planned growth of our PROPWR SM business, the Company pursued a disciplined capital sourcing and allocation strategy throughout 2025. We actively managed the capital requirements of our completions business, while investing aggressively to support PROPWR SM development. This approach was bolstered by our achievement of dedicated financing arrangements, including equipment financing with Caterpillar Financial Services Corporation that was originally entered into in April 2025 and subsequently expanded in early 2026, and an equipment leasing facility with Stonebriar Commercial Finance designed to ensure available funding for future PROPWR SM equipment purchases. Including the Caterpillar expansion, these financings secured in excess of $500 million of available capital to support investment in PROPWR SM . In addition, we completed an equity offering in early 2026 that further strengthened our balance sheet and enhanced our ability to pursue growth opportunities. +These achievements are all built on the foundation of our employees’ commitment to working safely, continuously improving and striving for operational excellence in all facets of our business. Moreover, we remain committed to strengthening and augmenting our leadership team and to continued investment in the talent needed to support the planned growth in our PROPWR SM division and disciplined execution across our business lines. We intend to use the same attributes to drive continued performance in 2026 and beyond. +$1.3 Billion +550 Megawatts +Total Revenue +Power Generation Equipment Received and +on Order for PROPWR SM at Year-End +$232 Million +230 Megawatts +Net Cash Provided by Operating Activities +Committed Under PROPWR SM +Customer Contracts at Year-End +4  |   ir.propetroservices.com +TABLE OF CONTENTS +Corporate Governance and Board Matters +Proposal 1 —Election of Directors +At the 2026 annual meeting, eight directors are nominated for election. All nominees are currently directors. Each director is to hold office until the next annual meeting of stockholders or until his or her successor is elected and qualified. Directors hold office until their successors have been elected or qualified or until their earlier death, resignation, removal, or disqualification. Mr. Spencer D. Armour, currently a director of the Company, having expressed his preference not to be renominated to the Board, will retire from the Board effective at the expiration of his term as of the conclusion of the Annual Meeting and has not been nominated for a new term. The Board expresses its sincere appreciation to Mr. Armour for his dedicated service and valuable contributions to the Company during his tenure. Effective as of the end of the Annual Meeting, our authorized number of directors on the Board will be reduced to eight. +The nominees have consented to being nominated and have expressed their intention to serve if elected. We believe that the nominees possess the professional and personal qualifications necessary for board service and have highlighted particularly noteworthy attributes for the nominees in their biographies below. We have no reason to believe that the nominees will be unable to serve if elected to office, and, to our knowledge, the nominees intend to serve the entire term for which election is sought. In the event any of the nominees should become unable to serve, or for good cause will not serve, as a director, it is intended that votes will be cast for a substitute nominee designated by the Board or the Board may elect to reduce its size. Only the nominees or substitute nominees designated by the Board will be eligible to stand for election as directors at the meeting. +In 2018, we entered into an investor rights agreement (the “Investor Rights Agreement”) with an affiliate of Pioneer Natural Resources Company (“Pioneer”) that provides Pioneer certain rights to designate nominees for election to the Board. Under the Investor Rights Agreement, Pioneer was granted: +(i) +the one-time right to designate an independent director to the Board and +(ii) +the right to designate a non-independent director to the Board for so long as a certain affiliate of Pioneer owns 5% or more of our outstanding common stock. +Pioneer, which is now a wholly owned subsidiary of Exxon Mobil Corporation (“ExxonMobil”), has designated Alex V. Volkov as a director. +VOTE REQUIRED +The proposal regarding the election of directors requires the approval of a plurality of the votes cast. This means that the eight nominees receiving the highest number of affirmative “FOR” votes will be elected as directors. Votes withheld and broker non-votes are not considered to be votes cast and, accordingly, will have no effect on the outcome of the vote on this proposal. +The Board of Directors unanimously recommends a vote FOR the election of each of the eight director nominees named below. +PROPETRO  2026 Proxy Statement   |  5 +TABLE OF CONTENTS +Corporate Governance and Board Matters +Nominees +All of the current members of the Board being nominated for reelection at the 2026 annual meeting are listed in the following table, and certain information concerning those directors follows the table: +ProPetro Board Committees +Age +Director since +Independent +Audit +Compensation +Nominating & +Corporate Governance +Phillip A. Gobe (1) +73 +2019 +Samuel D. Sledge (2) +39 +2021 +Mark S. Berg +67 +2019 +Anthony J. Best +76 +2018 +G. Larry Lawrence +74 +2020 +* +Mary P. Ricciardello +70 +2023 +* +Michele Vion +66 +2020 +Alex V. Volkov +53 +2024 +Number of Meetings in 2025 +Board 12 +8 +5 +4 +Committee Chair +Committee Member +* +Audit Committee financial expert +(1) +Chairman of the Board +(2) +Chief Executive Officer +PHILLIP A. GOBE +Phillip A. Gobe began serving as our Chairman of the Board in July of 2019 and as Executive Chairman in October 2019. Mr. Gobe was appointed as our Chief Executive Officer on March 13, 2020 and served in that role until August 31, 2021, at which point he was re-appointed as Executive Chairman. Mr. Gobe stepped down as Executive Chairman on March 31, 2022, and continues serving the Company as Chairman of the Board. Mr. Gobe served as a director of Pioneer from July 2014 until Pioneer’s merger with ExxonMobil in May 2024. Mr. Gobe previously served as Chairman of the Board for Pantheon Resources PLC until his June 2023 retirement. He also previously served as a director of Scientific Drilling International and Pioneer Southwest Energy Partners L.P. Mr. Gobe joined Energy Partners, Ltd. as Chief Operating Officer in December 2004 and became President in May 2005, and served in those capacities until his retirement in September 2007. Mr. Gobe also served as a director of Energy Partners, Ltd. from November 2005 until May 2008. Prior to that, Mr. Gobe served as Chief Operating Officer of Nuevo Energy Company from February 2001 until its acquisition by Plains Exploration & Production Company in May 2004. Prior to that time, he held numerous operations and human resources positions with Vastar Resources, Inc. and Atlantic Richfield Company (“ARCO”) and its subsidiaries. Mr. Gobe has a Bachelor of Arts degree from The University of Texas and a Master of Business Administration degree from the University of Louisiana in Lafayette. Mr. Gobe’s extensive experience in the energy industry, including service as a director to public corporations in the industry, makes him well suited to serve as Chairman of the Board. +AGE 73 +CHAIRMAN OF THE BOARD +DIRECTOR AND CHAIRMAN OF THE BOARD since July 2019 +INDEPENDENT DIRECTOR since +May 2025 +6  |   ir.propetroservices.com +TABLE OF CONTENTS +Corporate Governance and Board Matters +SAMUEL D. SLEDGE +Samuel D. Sledge has served as our Chief Executive Officer and as a member of our Board since August 31, 2021. Mr. Sledge previously served as the Company’s President from April 2021 to August 2021, and prior to that, he served as Chief Strategy and Administrative Officer beginning in March 2020. Mr. Sledge has significant experience with ProPetro having joined the Company in 2011. Mr. Sledge has served in various capacities throughout his tenure such as a Frac Technical Specialist and Technical Operations Manager where his duties included quality control, planning and logistics, and the development of the engineering program. Mr. Sledge has also served as ProPetro’s Vice President of Finance, Corporate Development, and Investor Relations where his responsibilities included financial planning and analysis, strategic initiatives, and investor relations. Mr. Sledge also serves on the Board of the Energy Workforce and Technology Council (“EWTC”), an industry association for energy service companies and currently serves as the Chair of the EWTC Board. Mr. Sledge received a Bachelor of Business Administration and a Master of Business Administration from Baylor University. We believe Mr. Sledge’s experience in the energy industry and his significant experience in management roles at the Company make him well suited to serve as a director. +AGE 39 +CEO AND DIRECTOR since +August 2021 +PROPETRO  2026 Proxy Statement   |  7 +TABLE OF CONTENTS +Corporate Governance and Board Matters +MARK S. BERG +Mark S. Berg has served as a member of our Board since February 2019. Mr. Berg is a senior energy industry executive with extensive commercial and operational experience, including leadership of strategic planning, business development, land, water management, completion and well services, environmental, sustainability, legal, government relations and communications. During his 20-year career with Pioneer, then an NYSE-listed independent oil and gas exploration and production company, first as Executive Vice President & General Counsel from 2005 to 2014 and then as Executive Vice President, Corporate Operations from 2014 until its merger with ExxonMobil in 2024, he played a key role in transforming the company into a major U.S. shale resource developer. He led the negotiating team for the $65 billion merger with ExxonMobil as well as multiple multibillion-dollar mergers, global divestitures, and cross-border joint ventures. Prior to joining Pioneer, Mr. Berg served from 2002 to 2004 as Senior Vice President, General Counsel & Secretary of Hanover Compressor Company, then an NYSE-listed company specializing in natural gas compression and processing, where he instituted disciplined internal controls, resolved a U.S. Securities and Exchange Commission (“SEC”) investigation, and settled securities class action litigation. From 1997 to 2002 he served as Executive Vice President & General Counsel of American General Corporation, a Fortune 200 diversified financial services company, and oversaw its $27 billion merger with American International Group. Mr. Berg began his career with the Houston-based law firm Vinson & Elkins L.L.P. and served as a partner from 1990 through 1997, focused on mergers, acquisitions and international project development. From 2018 to 2020, he served on the board of directors of HighPoint Resources, an exploration and production company then listed on the NYSE. Mr. Berg currently serves as the Chairman of the Board of Crystal Clearwater Resources, a leading wastewater solutions company. Mr. Berg also serves on the boards of Oncor Electric Delivery Holdings Company LLC and Oncor Electric Delivery Company LLC, a regulated electricity transmission and distribution company. Additionally, Mr. Berg serves as the founding Vice Chairman of the Permian Strategic Partnership, a coalition of Permian Basin energy companies and higher education institutions focused on supporting public education, healthcare, road safety and workforce development in the Permian Basin region. Mr. Berg earned a Bachelor of Arts degree in Public Policy from Tulane University and a Juris Doctor from the University of Texas. We believe that Mr. Berg’s vast leadership experience in the energy industry and his experience serving on other public and private company boards make him well suited to serve as a director. +AGE 67 +DIRECTOR since February 2019 +INDEPENDENT DIRECTOR since May 2024 +Mr. Berg was initially appointed to the Board by Pioneer pursuant to the Investor Rights Agreement. +COMMITTEES +• +Nominating and Corporate Governance (Chair) +• +Compensation +8  |   ir.propetroservices.com +TABLE OF CONTENTS +Corporate Governance and Board Matters +ANTHONY J. BEST +Anthony J. Best has served as a member of our Board since January 2018 and served as Lead Independent Director from October 2019 through August 2025. Mr. Best has over 40 years of experience in the energy industry. Mr. Best retired as the Chairman of the board of Newpark Resources in May 2023. He was previously a director with Quantum Energy Partners’ (“Quantum”) portfolio companies, ExL Petroleum and Middle Fork Energy Partners, and also served as Senior Advisor for Quantum. Prior to joining Quantum, Mr. Best served in various roles with SM Energy Company, an oil and gas exploration company, commencing in 2006 as its President and Chief Operating Officer, and as its Chief Executive Officer from February 2007 through January 2015. From 2003 to 2005, Mr. Best served as President and Chief Executive Officer of Pure Resources, Inc., a Unocal development and exploration company. From 2000 to 2003, Mr. Best served as an independent consultant offering leadership and oil and gas consultation to energy companies and volunteer organizations, and from 1979 through 2000, Mr. Best served in various roles of increasing responsibility at ARCO, culminating in the position of President, ARCO Latin America. Mr. Best holds a Master of Science in Engineering Management degree from the University of Alaska and a Bachelor of Science degree in Mechanical Engineering from Texas A&M University. Prior to beginning his business career, Mr. Best served five years as an engineering officer in the United States Air Force. We believe that Mr. Best’s experience in significant management roles with companies operating in the Permian Basin and his broad experience in the energy industry make him well suited to serve as a director. +AGE 76 +INDEPENDENT DIRECTOR since January 2018 +COMMITTEES +• +Audit (Chair) +• +Compensation +G. LARRY LAWRENCE +G. Larry Lawrence was appointed to our Board in December 2020. Mr. Lawrence previously served as Audit Committee Chair of Legacy Reserves, LP’s Board of Directors, a role he held from 2006 to 2019. From January 2021 until June 2021, Mr. Lawrence served as the interim Chief Financial Officer of Natural Gas Services Group, a natural gas compression equipment provider, where he previously served as Chief Financial Officer for nine years. Prior to Natural Gas Services Group, Mr. Lawrence served as Chief Financial Officer for Lynx Operating Co. Inc., an oil and gas exploration company, for three years and as Chief Financial Officer for Pure Resources, Inc., an oil and gas E&P company, for two years. He has also held finance and management consulting positions for Parson Group, ARCO and Crescent Consulting. Mr. Lawrence earned his bachelor’s degree with an accounting major from Dillard University in New Orleans. We believe that Mr. Lawrence’s broad experience in the energy industry, including his service as a director and executive officer with various companies, makes him well suited to serve as a director. +AGE 74 +INDEPENDENT DIRECTOR since December 2020 +COMMITTEES +• +Audit +PROPETRO  2026 Proxy Statement   |  9 +TABLE OF CONTENTS +Corporate Governance and Board Matters +MARY P. RICCIARDELLO +Mary P. Ricciardello has served as a member of our Board since January 2023. Ms. Ricciardello currently serves as a director, Audit Committee member and Corporate Governance, Nominating and Sustainability Committee member at Eagle Materials Inc. Ms. Ricciardello previously served as a director at Devon Energy from 2008 to 2021, Noble Corporation from 2003 to 2020, EnLink Midstream from 2014 to 2018, Midstates Petroleum from 2010 to 2013 and U.S. Concrete from 2003 to 2010. Beginning in 1982, Ms. Ricciardello enjoyed a distinguished, two-decade career at Reliant Energy Inc. (“Reliant”) and its predecessor, Houston Lighting & Power Company, an electricity generation and retail services company, where she held several roles of increasing responsibility in the financial services and treasury functions. In 1996, Ms. Ricciardello was appointed as Reliant’s Vice President and Comptroller and she served as its Senior Vice President and Chief Accounting Officer from 1999 until her retirement in 2002. Ms. Ricciardello earned a Bachelor of Science degree in Business Administration from the University of South Dakota and an MBA from the University of Houston. She is also a Texas licensed Certified Public Accountant and earned a CERT Certificate in Cybersecurity from Carnegie Mellon University. We believe that Ms. Ricciardello is well suited to serve as a director based on her accounting and financial expertise and public company board and committee experience. +AGE 70 +INDEPENDENT DIRECTOR since January 2023 +COMMITTEES +• +Audit +• +Compensation +MICHELE VION +Michele Vion has served as a member of our Board since February 2020. Ms. Vion previously served as Vice President, Human Resources at HighPoint Resources Corporation, a successor to the Bill Barrett Corporation, an oil and gas E&P company, from August 2010 to September 2019. Ms. Vion was previously employed at Level 3 Communications, Inc., an international communications company, starting in 2006 and ultimately as Group Vice President of Human Resources up to January 2010. Ms. Vion also previously served as Vice President of Human Resources for Sun Microsystems, Inc., a computer networking company, for seven years. She also previously held senior human resource and client account management positions at Prudential Financial, Inc., an insurance and investment management company and JP Morgan, a global financial services firm. Prior to joining JP Morgan, Ms. Vion served in an accounting position as a Regional Controller for the Eastern Region at Sony Corporation of America. Ms. Vion previously served as Compensation Committee Chair and as a member of the Audit Committee of Boingo Wireless, Inc.’s Board of Directors, roles she held from 2018 until Boingo’s acquisition by Digital Colony Management, LLC in June 2021. Ms. Vion also served on the board and as Chair of the Compensation Committee and as member of the Audit Committee and Nominating and Corporate Governance Committee of Callidus Software Inc., a publicly-traded, cloud-based software company, from 2005 to 2016. Currently, Ms. Vion serves as the Chief Human Resources Officer for Stored Energy Systems, a privately held company. Ms. Vion holds a Bachelor of Arts in East Asian Studies and Economics from Wesleyan University, has attended Stanford University’s Director’s College, and participated in the Financial Times’ Director Exchange. We believe that Ms. Vion is well suited to serve as a director based on her executive leadership experience in human resources and accounting and public company board and committee experience. +AGE 66 +INDEPENDENT DIRECTOR since February 2020 +COMMITTEES +• +Compensation (Chair) +• +Nominating and Corporate Governance +10  |   ir.propetroservices.com +TABLE OF CONTENTS +Corporate Governance and Board Matters +ALEX V. VOLKOV +Alex V. Volkov has served as a member of our Board since May 2024. Mr. Volkov has almost three decades of experience in various roles within ExxonMobil. Since 1997, Mr. Volkov has navigated through diverse assignments spanning marketing, business development, supply chain logistics, and strategy development. His international experience includes serving as Vice President of Exxon Neftegas Limited in Moscow, overseeing commercial activities in Russia, and later moving to the United Kingdom to lead international natural gas marketing and trading efforts. In 2019, Mr. Volkov transitioned to Houston as Vice President, Global LNG Marketing, overseeing ExxonMobil’s LNG portfolio globally, a position he held until 2021. Between 2021 and 2023, he held positions as Vice President, Commercial & Power and then as Vice President, Strategy and Business Development, culminating in his current role the Vice President of Commercial & Integration overseeing unconventional business development, land management, and midstream infrastructure activities. Mr. Volkov is a graduate of the University of Nizhni Novgorod, Russia, and holds a Master of Business Administration from the University of Alabama. We believe Mr. Volkov’s broad experience in the energy industry, including various roles at ExxonMobil leading business development and strategy functions, makes him well suited to serve as a director. +AGE 53 +INDEPENDENT DIRECTOR since May 2024 +Mr. Volkov was appointed to the Board by Pioneer pursuant to the Investor Rights Agreement. +COMMITTEES +• +Nominating and Corporate Governance +PROPETRO  2026 Proxy Statement   |  11 +TABLE OF CONTENTS +Corporate Governance and Board Matters +Director Independence +The majority of the members of the Board at any given time must qualify as “independent” under the rules of the NYSE. +Our Board has undertaken a review of the independence of each of our directors and director nominees and has affirmatively determined that each of Messrs. Armour, Berg, Best, Gobe, Lawrence and Volkov and Mses. Ricciardello and Vion are “independent,” as defined by the NYSE rules. Under the NYSE rules, a director can be independent only if (a) the director does not trigger a categorical bar to independence and (b) our Board affirmatively determines that the director has no material relationship with the Company (either directly or as a partner, stockholder or officer of an organization that has a relationship with the Company). +Based on information provided by the directors and director nominees concerning their background, employment and affiliations, our Board has determined that these directors do not have a material relationship with the Company (either directly or as a partner, stockholder or officer of an organization that has a relationship with the Company). +In making this determination, our Board considered the current and prior relationships that each of the directors has with us, and all other facts and circumstances our Board deemed relevant in determining independence, including any beneficial ownership of our capital stock by each of the directors. +Board Leadership Structure +PHILLIP A. +GOBE +SAMUEL D. +SLEDGE +Chairman of the Board +Chief Executive Officer +Our Board has adopted our Corporate Governance Guidelines, which are available on our website, www.propetroservices.com , in the “Governance” subsection of the “Investor Relations” section under “Governance Documents.” Our Corporate Governance Guidelines provide that if the Chairman of the Board is a member of management or does not otherwise qualify as independent, the independent directors may elect a lead independent director. Our Board believes it is important to retain the flexibility to determine whether the roles of Chairman and Chief Executive Officer should be separated or combined depending on the circumstances and changing needs of the Company from time to time. +While our Board has previously combined the roles of Chairman and Chief Executive Officer, at present, the Board has chosen to separate the positions of Chairman and Chief Executive Officer. The Board believes this structure enhances corporate governance and allows each of our Chairman and Chief Executive Officer to remain focused on their distinct roles, which, for the Chairman, primarily involves Board and corporate governance and, for the Chief Executive Officer, primarily involves day-to-day management leadership and implementing our corporate strategy. +The roles of Chairman and Chief Executive Officer are currently separated and the Chairman currently qualifies as independent. As such, the Board believes that there is not a current need for the role of Lead Independent Director, and therefore removed Mr. Best from such role and eliminated the position of Lead Independent Director in August 2025. +Furthermore, our Board believes that service on the boards of other public companies provides valuable governance and leadership experience that ultimately benefits the Company, but also recognizes that outside public board service requires a significant commitment of time and attention. In 2024, our Board updated our Corporate Governance Guidelines to limit the number of public company boards on which a director may sit in accordance with best governance practices. As a result, under our Corporate Governance Guidelines: +• +our Chief Executive Officer may sit on no more than one additional outside public company board; +• +the Chairman of the Board and the Lead Independent Director (if applicable) may sit on no more than two additional outside public company boards; +12  |   ir.propetroservices.com +TABLE OF CONTENTS +Corporate Governance and Board Matters +• +non-management directors who are active executive officers of other public companies may sit on no more than one additional outside public board (including their own company board); and +• +all other directors may sit on no more than three additional outside public boards. +This practice helps ensure that our directors can give appropriate time and attention to the affairs of the Company. +Interested parties who wish to communicate with the Board, its committees, the Chairman, or any other individual director should follow the procedures described below under “Communication with our Board of Directors.” +To facilitate candid discussion among the Company’s directors, the non-management directors meet at regularly scheduled executive sessions presided over by our Chairman. In addition, at least once a year and in conjunction with a regular board meeting, the non-management directors who are independent under NYSE listing standards meet in executive session presided over by our Lead Independent Director prior to August 2025 and our Chairman from and after August 2025. +Board of Directors and Risk Oversight +In the normal course of business, we are exposed to a variety of risks, including market risks relating to changes in commodity prices, interest rates, political risks and credit and investment risks. The Board oversees our strategic direction and in doing so considers the potential rewards and risks of our business opportunities and challenges and monitors the development and management of risks that impact our strategic goals. The Audit Committee assists the Board in fulfilling its oversight responsibilities by monitoring the effectiveness of our systems of financial reporting, auditing, internal controls and legal and regulatory compliance. The Nominating and Corporate Governance Committee assists the Board in fulfilling its oversight responsibilities with respect to the management of risks associated with Board organization, membership and structure, succession planning for our directors and executive officers, and corporate governance. The Compensation Committee assists the Board in fulfilling its oversight responsibilities by overseeing our compensation policies and practices. The Board does not believe that its role in the oversight of our risks affects the Board’s leadership structure. +Sustainability Initiatives +At ProPetro, our fundamental policy is to conduct business with honesty and integrity in accordance with the highest legal and ethical standards, along with a daily focus on safety and quality. We believe sustainability in our industry is created by offering competitive and effective services for our customers, while providing a value-generating enterprise for our shareholders, teammates, and community and minimizing negative environmental impacts from our operations. Guided by these values, and with a focus on creating a durable and sustainable business in our sector, we believe 2025 is an example of the resilience of our business. In a challenging market for our completions services, we successfully launched our new PROPWR SM , power generation business, and saw that business sign multiple customer contracts, receive its first equipment orders and commence operations in the field. Our strategic focus as we enter 2026 is to continue to optimize our completions businesses and continue to operationally and commercially scale our PROPWR SM business. We believe this approach will support our goals of generating earnings, increasing free cash flow, and building towards enhanced shareholder returns. Achievement of these strategic objectives is a key to our long-term success, and our sustainability initiatives are designed to support and enhance our pursuit of these goals. We believe our services play a vital role in the broader energy value chain by meaningfully contributing to the delivery of low-cost, dependable energy to end users and that our sustainability initiatives will enable us to continue to do so for years to come. +As part of our sustainability initiatives, we aim to reduce the overall environmental impact of our services by focusing on excellent execution and superior service quality. We also believe that the lower emissions profile generated by our next generation FORCE ® electric fleets and Tier IV DGB, Dual-fuel equipment aids in our competitiveness and represents an example of our continuing evolution and commitment to deploying the innovative tools necessary to support our customers’ efforts to be capital efficient while respecting the communities in which we work. We seek to meet our customers’ needs while also pursuing a consistent, sustainable service solution that will increasingly replace diesel with cleaner burning and cost-advantaged fuels. 2025 saw the continued successful deployments of our FORCE ® electric fleets and continued strong operational performance of our Tier IV DGB Dual-fuel equipment. We believe these high-performing assets fill a need to supply reliable, dispatchable electric power services to support our customers’ operations. We believe these investments and our focus on continued improvements in operating performance for these assets will support our competitiveness, while fostering a reduced emissions profile for our services. The success and continued deployment of our FORCE ® electric fleet solutions and the investment in our +PROPETRO  2026 Proxy Statement   |  13 +TABLE OF CONTENTS +Corporate Governance and Board Matters +PROPWR SM power generation business reflect the collaborative approach we take with our customers towards the increasing industrialization and electrification of the oilfield. +An additional focus of our sustainability initiatives is to give back to the area where we live and work by providing employment and supporting our employees in giving back to our community. We aspire to play a role in shaping the future of the Permian Basin by investing in local charities and other organizations that are heavily involved in the Permian Basin communities. The employee-created P.U.M.P. Committee continues to participate in wellness events, bi-monthly events with a local foodbank, quarterly blood drives, Thanksgiving meal drives, school supply donation drives, and other important initiatives. +2025 also saw increased focus and further improvement in our human capital initiatives. We believe our employees are a key asset for the Company. Our primary human capital management objectives are to effectively engage, develop, retain and reward our employees. We are particularly proud of our continued investment in our employee base as we took steps to measure employee engagement, including conducting a pulse employee engagement survey. The survey confirmed continued strong overall employee engagement results with improvement over the 2024 survey in several categories, including future vision, leadership trust and belonging. These improvements reflect the action planning and follow-up undertaken by department leadership and improved communication by the senior leadership team. +In addition to our employee engagement efforts, in 2025, the Company continued its focus on leadership development, targeting leadership positions including frontline supervisors and above. Internal facilitators were trained and certified to deliver content to drive program efficiency and better associate the topics and importance of the training to the business. The Company launched the Workday Learning Management System (the “LMS”) in 2025 to support the leadership development program and make more resources available to employees to support general development. The materials in the LMS are readily available to employees, and supervisors are able to assign specific training through the LMS to emphasize position specific training, which we hope will support employee development and improve performance. +Our safety approach is designed to foster close collaboration between our customers and our employees in completing each job safely. We pride ourselves on our commitment to safety and our commitment to each other, which we demonstrate and support through operational initiatives like our dedicated heavy haul team to reduce driving hazards; our culture of training, accountability, and consistent improvement; and our long-term relationships with teammates, customers and stakeholders. We offer in-depth, role-appropriate safety training upon hiring and as part of the continuous development of our employees. We track and evaluate safety incidents at wellsites and offices, and if an accident does occur, we aim to take actions to mitigate similar incidents from recurring in the future. The Company seeks to incentivize employees to focus on conducting operations in accordance with our strict safety standards, as well as to immediately report any breach of safety protocol. Employees receive training to reinforce reporting rights and responsibilities, as well as emphasizing our non-retaliation policies. +Additional information and updates regarding our sustainability initiatives, including our most recent Sustainability Report, which was published in October 2024, can be found under the “Sustainability” tab of our website at www.propetroservices.com . Nothing on our website, including our Sustainability Report and any sections thereof, shall be deemed incorporated by reference into this proxy statement or other filings that we make with the SEC. Statements about sustainability goals or objectives are aspirational and may change and are not guarantees or promises that those goals will be met or will not change over time. +Communicating with Our Board of Directors +Stockholders and other interested parties may communicate with our Board by writing to: +ProPetro Holding Corp. +Attention: General Counsel and Corporate Secretary +P.O. Box 873 +Midland, Texas 79702 +Stockholders may submit their communications to the Board, the independent directors, any committee of the Board or individual directors on a confidential or anonymous basis by sending the communication in a sealed envelope marked “Stockholder Communication with Directors” and clearly identifying the intended recipient(s) of the communication. +14  |   ir.propetroservices.com +TABLE OF CONTENTS +Corporate Governance and Board Matters +Our General Counsel and Corporate Secretary will review each communication and will forward the communication, as expeditiously as reasonably practicable, to the addressees if: +(1) +the communication complies with the requirements of any applicable policy adopted by the Board relating to the subject matter of the communication and +(2) +the communication falls within the scope of matters generally considered by the Board. +To the extent the subject matter of a communication relates to matters that have been delegated by the Board to a committee or to an executive officer of the Company, our General Counsel and Corporate Secretary may forward the communication to the executive officer or chairman of the committee to which the matter has been delegated. The acceptance and forwarding of communications to the members of the Board or an executive officer does not imply or create any fiduciary duty of the Board members or executive officer to the person submitting the communications. +Information may be submitted confidentially and anonymously. However, the Company may be obligated by law to disclose the information or identity of the person providing the information in connection with government or private legal actions and in other circumstances. The Company’s policy is not to take any adverse action, and not to tolerate any retaliation against any person for asking questions or making good faith reports of possible violations of law, our policies or our Code of Ethics & Conduct. +Annual Meeting Attendance +While the Company encourages, but does not require, directors to attend annual meetings of stockholders, all directors are expected to attend meetings of the Board (and any committees thereof on which they serve) either in person or telephonically unless exigencies prevent them from attending. Each incumbent director attended at least 75% of the aggregate of (1) the total number of meetings of the Board (held during the period for which he or she has been a director) and (2) the total number of meetings of committees of the Board on which he or she served (during the periods that he or she served). Our non-employee directors meet at regularly scheduled executive sessions presided over by our Lead Independent Director prior to August 2025 or our Chairman from and after August 2025. Additionally, our independent directors meet at least once a year without members of management or non-independent directors present. All of our directors who were members of the Board at the time of our 2025 annual meeting of stockholders attended the meeting. +Compensation Committee Interlocks and Insider Participation +During the year ended December 31, 2025, the Compensation Committee was comprised of Mses, Vion and Ricciardello and Messrs. Berg and Best. Ms. Vion serves as committee chair. No executive officer of the Company served as a member of the board of directors or compensation committee of any other entity that has one or more executive officers serving as a member of our Board or Compensation Committee. +Board and Committee Activity and Structure +Our Board is governed by our certificate of incorporation, bylaws, the Investor Rights Agreement, charters of the standing committees of the Board, and the laws of the State of Delaware. +On December 31, 2018, we entered into the Investor Rights Agreement with an affiliate of Pioneer. The Investor Rights Agreement provides that Pioneer was granted: +(i) +the one-time right to designate an independent director to the Board and +(ii) +the right to designate a non-independent director to the Board for so long as Pioneer owns 5% or more of the Company’s outstanding common stock. +PROPETRO  2026 Proxy Statement   |  15 +TABLE OF CONTENTS +Corporate Governance and Board Matters +Pioneer, which is now a wholly owned subsidiary of ExxonMobil, has designated Alex V. Volkov as a director. +During 2025, our Board held 12 meetings. There are currently three standing committees of the Board: +• +the Audit Committee, +• +the Compensation Committee, and +• +the Nominating and Corporate Governance Committee. +Members serve on these committees until their resignation or until as otherwise determined by our Board. The composition of the Board committees complies with the applicable rules of the NYSE and applicable law. Our Board has adopted a written charter for each of the standing committees, which can be found under “Governance Documents” in the “Governance” subsection of the “Investors” section of our website at www.propetroservices.com . +In addition to the above governing documents, our Code of Ethics & Conduct that applies to all of our employees, as well as each member of the Board, can also be found under “Governance Documents” in the “Governance” subsection of the “Investors” section of our website at www.propetroservices.com . The composition and responsibilities of each of the standing committees of our Board are as follows: +AUDIT COMMITTEE +MEETINGS IN 2025 : 8 +KEY RESPONSIBILITIES +Our Audit Committee is directly responsible for, among other things, the appointment, compensation, retention and oversight of our independent registered public accounting firm. +The oversight of our independent public accounting firm includes: +• +reviewing the plans and results of the audit engagement with the firm, +• +approving any additional professional services provided by the firm, and +• +reviewing the independence of the firm. +The Audit Committee is also responsible for discussing the effectiveness of the internal controls over financial reporting with our independent registered public accounting firm and relevant financial management. +REPORT +The Report of our Audit Committee appears on page 73 of this proxy statement. +MEMBERS +Anthony J. +Best, Chair +G. Larry +Lawrence +Mary P. +Ricciardello +From January 1, 2025 to May 20, 2025, the members of the Audit Committee were Ms. Ricciardello and Messrs. Best and Lawrence. From May 21, 2025 until April 6, 2026, the members of the Audit Committee were Ms. Ricciardello and Messrs. Best, Gobe and Lawrence. The Audit Committee is presently comprised of Ms. Ricciardello and Messrs. Best and Lawrence, with Mr. Best serving as committee chair. +QUALIFICATIONS +Our Audit Committee is comprised solely of “independent” directors, as defined under and required by the NYSE rules and Rule 10A-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). +Our Board has determined that each of Mr. Lawrence and Ms. Ricciardello qualify as an “audit committee financial expert,” as defined by the rules under the Exchange Act. +16  |   ir.propetroservices.com +TABLE OF CONTENTS +Corporate Governance and Board Matters +COMPENSATION COMMITTEE +MEETINGS IN 2025 : 5 +KEY RESPONSIBILITIES +The Compensation Committee is responsible for, among other things, overseeing the discharge of the responsibilities of the Board relating to compensation of the Company’s officers and directors, reviewing and assessing the Company’s initiatives relating to human capital management, and reviewing the succession planning strategies of the Company. +In carrying out these responsibilities, the Compensation Committee reviews all components of executive compensation for consistency with our compensation philosophy and with the interests of our stockholders. +REPORT +The Report of our Compensation Committee appears on page 45 of this proxy statement. +MEMBERS +Michele +Vion, Chair +Mark S. Berg +Mary P. +Ricciardello +Anthony J. +Best +During the year ended December 31, 2025, the members of the Compensation Committee were Mses. Vion and Ricciardello and Messrs. Best and Berg. The Compensation Committee is presently comprised of Mses. Ricciardello and Vion and Messrs. Berg and Best, with Ms. Vion serving as committee chair. +QUALIFICATIONS +Our Compensation Committee consists solely of “independent” directors, as defined under and required by the NYSE rules and “non-employee directors” under Section 16 of the Exchange Act. +PROPETRO  2026 Proxy Statement   |  17 +TABLE OF CONTENTS +Corporate Governance and Board Matters +NOMINATING AND CORPORATE +GOVERNANCE COMMITTEE +MEETINGS IN 2025: 4 +KEY RESPONSIBILITIES +The Nominating and Corporate Governance Committee is responsible for, among other things: +• +identifying individuals qualified to become Board members; +• +selecting or recommending director nominees for each election of directors to the Board; +• +developing and recommending criteria for selecting qualified director candidates to the Board; +• +considering committee member qualifications, appointments and removals; +• +recommending corporate governance principles, codes of conduct and compliance mechanisms; +• +providing oversight in the evaluation of the Board and each committee thereof; +• +overseeing our sustainability initiatives; and +• +developing an appropriate succession plan for our chief executive officer pursuant to our Corporate Governance Guidelines. +MEMBERS +Mark S. +Berg, Chair +Spencer D. +Armour III +Michele +Vion +Alex V. +Volkov +From January 1, 2025 to May 20, 2025, the members of the Nominating and Corporate Governance Committee were Messrs. Armour, Berg, Moore (until the expiration of Mr. Moore’s term at the 2025 annual meeting) and Volkov and Ms. Vion. From May 21, 2025 until April 6, 2026, the members of the Nominating and Corporate Governance Committee were Messrs. Armour, Berg, Gobe and Volkov and Ms. Vion, with Mr. Berg serving as committee chair. The Nominating and Corporate Governance Committee is presently comprised of Messrs. Armour (until the expiration of his term at the conclusion of the 2026 annual meeting), Berg and Volkov and Ms. Vion, with Mr. Berg serving as committee chair. +QUALIFICATIONS +Our Nominating and Corporate Governance Committee consists solely of “independent” directors, as defined under and required by the NYSE rules. +Role of the Board, Compensation Committee and Our Executive Officers +Executive compensation decisions are typically made on an annual basis by the Compensation Committee with input from our Chief Executive Officer. Specifically, after reviewing relevant market data and surveys within our industry, our Chief Executive Officer typically provides recommendations to the Compensation Committee regarding the compensation levels for our existing named executive officers (the “Named Executive Officers”) and our executive compensation program as a whole. Our Chief Executive Officer generally attends all Compensation Committee meetings. After considering these recommendations, the Compensation Committee typically meets in executive session and adjusts base salary levels and non-equity award targets. In addition, the Compensation Committee determines the achievement of non-equity Incentive Award Plan metrics and the amount of equity awards from the Incentive Award Plan to be granted to each of our Named Executive Officers. In making executive compensation recommendations, our Chief Executive Officer considers each Named Executive Officer’s performance during the year, the Company’s performance during the year, as well as comparable company compensation levels. While the Compensation Committee gives considerable weight to our Chief Executive Officer’s recommendations on compensation matters with respect to the other Named Executive Officers, the Compensation Committee is responsible for organizing the Board’s annual performance evaluation of the CEO and has the final decision-making authority on all executive compensation matters. +18  |   ir.propetroservices.com +TABLE OF CONTENTS +Corporate Governance and Board Matters +Role of External Advisors +The Compensation Committee engaged Pearl Meyer & Partners, LLC (“Pearl Meyer”) in 2021 to assist the Compensation Committee and the Board in evaluating, designing, and implementing compensation practices. +The Compensation Committee reviews and assesses the independence and performance of its executive compensation consultant in accordance with applicable SEC and NYSE rules and regulations on an annual basis to confirm that the consultant is independent and meets all applicable statutory and regulatory requirements. +Director Nominations Process +The Nominating and Corporate Governance Committee may utilize a variety of methods for identifying potential nominees for directors, including considering potential candidates who come to their attention through current officers, directors, professional search firms, or other persons. Once a potential nominee has been identified, the Nominating and Corporate Governance Committee evaluates whether the nominee has the appropriate skills and characteristics required to become a director considering the then current make-up of the Board. This assessment includes an evaluation of the nominee’s judgment and skills, such as experience at a strategy and policy setting level, financial sophistication, leadership, and objectivity—all in the context of the perceived needs of the Board at that point in time. One of the director nominees, Mr. Volkov, was not recommended for nomination by the Nominating and Corporate Governance Committee but rather was appointed by Pioneer, which is now a wholly owned subsidiary of ExxonMobil, pursuant to the Investor Rights Agreement. +Our updated corporate governance guidelines, effective as of February 2025, reflect the Nominating and Corporate Governance Committee and the Board are committed to considering diversity of experience and background when identifying candidates for nomination to the Board. Our Board believes that at a minimum all members of the Board should have the highest professional and personal ethics and values. In addition, each member of the Board must be committed to increasing stockholder value and should have enough time to carry out his or her responsibilities as a member of the Board. +Our Board monitors the mix of specific experience, qualifications, and skills of its directors to assure that the Board, as a whole, has the necessary tools to perform its oversight function effectively in light of the Company’s business and structure. +Stockholders may recommend individuals to the Nominating and Corporate Governance Committee for consideration as potential director candidates by submitting the names of the recommended individuals, together with appropriate biographical information and background materials, to: +ProPetro Holding Corp. +The Nominating and Corporate Governance Committee +ProPetro Holding Corp. +c/o General Counsel and Corporate Secretary +P.O. Box 873 +Midland, Texas 79702 +In the event there is a vacancy, and assuming that appropriate biographical and background material has been provided on a timely basis, the Nominating and Corporate Governance Committee will evaluate stockholder- recommended candidates by following substantially the same process, and applying substantially the same criteria, as it follows for candidates submitted by others. +Director Orientation and Education +We provide each new director with an orientation that consists of meeting with senior management and others on our business operations, strategic plans, significant accounting and risk management issues, corporate governance, compliance, and key policies and practices. +The orientation sessions are tailored to the particular director depending on their orientation needs and generally include an overview of board fiduciary duties, board independence, and public company reporting requirements. New directors are also provided the most recent reports presented to the Board and its committees by management and external advisors. +PROPETRO  2026 Proxy Statement   |  19 +TABLE OF CONTENTS +Corporate Governance and Board Matters +Each director is expected to participate in continuing educational programs as necessary to maintain the expertise necessary to perform his or her responsibilities as a director. In this regard, from time to time we provide pertinent articles, white papers, and information relating to our business, financial affairs, risks, competitors, corporate governance, areas of focus in shareholder activism, sustainability, environmental and social trends, proxy advisory firm ratings, and changes in legal and regulatory issues. +We may also coordinate training and educational sessions for directors from outside experts and provide directors with tours of our facilities. +Certain Relationships and Related Party Transactions +RELATED PARTY TRANSACTIONS +Operations and Maintenance Yards +The Company previously rented three yards from South Midkiff Partners, LLC, an entity partially owned by Spencer D. Armour III, a director, and David Sledge, the father of Sam Sledge, our Chief Executive Officer. Total annual rent expense in 2025 for each of the three yards was approximately $0.02 million, $0.1 million, and $0.1 million, respectively. +Transportation and Equipment Rental +Adam Muñoz, our President and Chief Operating Officer, has a family relationship with an employee of J&M Burns Transportation, an entity that provides transportation services to the Company. The employee receives a portion of his compensation from J&M Burns Transportation based on the amount of services sold by him to customers, including the Company. The Company incurred approximately $18.8 million in expense for the year ended December 31, 2025 for services provided to the Company by J&M Burns Transportation. +Executive Officer Family Members +Oscar M. Dominguez is our Vice President of Hydraulic Fracturing Operations and the brother-in-law of Adam Muñoz. Mr. Dominguez received total compensation of approximately $1,555,000 for his services for the year ended December 31, 2025 (including approximately $1,143,000 cash compensation and approximately $412,000 non-cash equity compensation). +Roger Dominguez was formerly our Supply Chain Logistics Manager and the brother-in-law of Adam Muñoz. Mr. Dominguez received total compensation of approximately $336,000 for his services for the year ended December 31, 2025 (including approximately $286,000 cash compensation and approximately $50,000 non-cash equity compensation). +Pioneer +On December 31, 2018, we consummated the purchase of certain pressure pumping assets and real property from Pioneer and Pioneer Pumping Services (the “Pioneer Pressure Pumping Acquisition”) in exchange for 16.6 million shares of our common stock and $110.0 million in cash. In May 2024, Pioneer merged with and into a wholly owned subsidiary of ExxonMobil after which ExxonMobil became the owner of these shares. We currently provide pressure pumping, wireline and other services to ExxonMobil and previously provided such services to Pioneer. +On April 22, 2024, we entered into a sub-agreement for Hydraulic Fracturing Services with XTO Energy Inc., (“XTO”) a wholly owned subsidiary of ExxonMobil, pursuant to which we agreed to provide hydraulic fracturing, wireline and pumpdown services with two committed FORCE ® electric-powered hydraulic fracturing fleets and the option to add a third FORCE ® fleet (also with wireline and pumpdown services) for a certain number of contracted hours with respect to each fleet, subject to certain termination and release rights. +20  |   ir.propetroservices.com +TABLE OF CONTENTS +Corporate Governance and Board Matters +Revenue from services provided to ExxonMobil (including Pioneer and XTO) subsequent to Pioneer’s merger with ExxonMobil was approximately $315.9 million during the year ended December 31, 2025. +As of December 31, 2025, the total accounts receivable due from ExxonMobil (including Pioneer and XTO), including estimated unbilled receivable for services we provided, amounted to $51.2 million and the amount due to ExxonMobil (including Pioneer and XTO) was $0. +POLICIES AND PROCEDURES FOR RELATED PARTY TRANSACTIONS +Any request for us to enter into a transaction with an executive officer, director, principal stockholder or any of such persons’ immediate family members or affiliates, among others, in which the amount involved exceeds $120,000, must first be presented to our Audit Committee for review, consideration and approval. All our directors and executive officers are required to report to the Audit Committee chair any such related person transaction. In approving or rejecting the proposed agreement, our Audit Committee shall consider the facts and circumstances available and deemed relevant to the Audit Committee, including, but not limited to, whether the transaction is on terms comparable to those that could be obtained in arm’s length dealings with an unrelated third party, the extent of the related party’s interest in the transaction and the conflicts of interest and corporate opportunity provisions of our certificate of incorporation. If we should discover related person transactions that have not been approved, the Audit Committee will be notified and will determine the appropriate action, including ratification, revision, or termination of such transaction. +Insider Trading Compliance Policy +The Company has an Insider Trading Compliance Policy (“Insider Trading Policy”) governing the purchase, sale and other dispositions of the Company’s securities that applies to directors, officers (as defined therein), employees and to the Company itself in connection with such transactions of its own securities. We believe our Insider Trading Policy and repurchase procedures are reasonably designed to promote compliance with insider trading laws, rules and regulations, and the listing standards applicable to the Company. A copy of the Company’s Insider Trading Policy was filed as Exhibit 19.1 to its Annual Report on Form 10-K for the year ended December 31, 2025. +Director Compensation +Our Third Amended and Restated ProPetro Holding Corp. Non-Employee Director Compensation Policy (the “Director Compensation Policy”) provides that each eligible non-employee director receives the following annually: +The following changes were made to the Director Compensation Policy, effective July 1, 2025, to better align director compensation with peer and broader market practices: (i) the annual cash retainer for service on the Board was increased from $90,000 to $100,000, (ii) the additional annual retainer payable to the Chairperson of the Board was increased from $50,000 to $75,000, and (iii) the additional annual retainer payable to the Chairperson of the Audit Committee was increased from $20,000 to $25,000. Further, beginning in 2026, a Non-Employee Director serving as Chairperson of the Board who is otherwise eligible for an Annual Award will now also receive an additional grant of restricted stock units (“RSUs”) with an aggregate fair value of $35,000 on the date of grant. +All equity retainers consist of awards of RSUs that will vest in full on the earliest to occur of: (i) the first anniversary of the grant date, (ii) the day immediately preceding the first annual meeting of stockholders following the grant date, and (iii) the occurrence of a Change in Control, subject, in each case, to continuous service through the applicable vesting date. +PROPETRO  2026 Proxy Statement   |  21 +TABLE OF CONTENTS +Corporate Governance and Board Matters +The portion of the annual equity retainer that would have vested in the year following a non-employee director’s separation from service due to his or her death or disability will vest upon such separation from service. All annual retainers are pro-rated based on days of service for non-employee directors who join the Board during the applicable calendar year. The members of the Board are also entitled to reimbursement of expenses incurred in connection with attendance at Board and committee meetings in accordance with Company policy. +The following table summarizes the compensation paid for services provided by our non-employee directors during 2025. +Name +Fees Earned or Paid in Cash (1) +($) +Stock Awards (2)(3) +($) +Total +($) +Spencer D. Armour III +95,000 +154,996 +249,996 +Mark S. Berg (4) +104,190 +154,996 +259,186 +Anthony J. Best (5) +129,946 +154,996 +284,942 +Phillip A. Gobe +157,500 +154,996 +312,496 +G. Larry Lawrence +95,000 +154,996 +249,996 +Jack B. Moore +40,673 +― +40,673 +Mary P. Ricciardello +95,000 +154,996 +249,996 +Michele Vion +110,000 +154,996 +264,996 +Alex V. Volkov (6) +― +― +― +(1) +Reflects annual cash retainer payments made pursuant to the Director Compensation Policy. +(2) +Reflects the grant date fair value of RSU awards computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 (“FASB ASC Topic 718”). For information regarding assumptions underlying the valuation of equity awards, see Note 14 to the Consolidated Financial Statements included in our 2025 Annual Report on Form 10-K. +(3) +The following table sets forth the aggregate number of outstanding stock awards held by each of our non-employee directors on December 31, 2025. With the exception of Mr. Sledge, who held 21,750 stock options as of December 31, 2025, none of our directors held stock options as of December 31, 2025. +Name +Aggregate Number of Stock +Awards +(#) +Spencer D. Armour III +28,181 +Mark S. Berg +28,181 +Anthony J. Best +28,181 +Phillip A. Gobe +28,181 +G. Larry Lawrence +28,181 +Jack B. Moore (a) +― +Mary P. Ricciardello +28,181 +Michele Vion +28,181 +Alex V. Volkov (b) +― +(a) +Mr. Moore’s term as a director concluded on the date of the 2025 annual meeting. As a result, he did not receive an equity grant during 2025. +(b) +Mr. Volkov has elected not to be compensated for his service as a director. +(4) +Mr. Berg’s cash compensation includes a pro-rata portion of the annual retainer payable to the Chairperson of the Nominating and Corporate Governance Committee for his partial year of service in such role. +(5) +Mr. Best’s cash compensation includes a pro-rata portion of the annual retainer payable to the Lead Independent Director for his partial year of service in such role. +(6) +Mr. Volkov has elected not to be compensated for his service as a director. +22  |   ir.propetroservices.com +TABLE OF CONTENTS +Corporate Governance and Board Matters +Non-Employee Director Stock Ownership Guidelines +We maintain a non-employee director stock ownership policy that is applicable to all our eligible non-employee directors. Pursuant to this policy, each non-employee director is encouraged to hold, on and following the later of the fifth anniversary of: (i) the closing of our initial public offering (“IPO”) and (ii) the non-employee director’s election or appointment to the Board, shares of our common stock or certain equity awards (valued based on the closing price of our common stock) with a value equal to or in excess of 300% of the non-employee director’s annual cash retainer, as such threshold may be amended by the Nominating and Corporate Governance Committee from time to time. +Outstanding awards of unvested time-based RSUs will count toward a non-employee director’s qualifying shareholdings to the extent the RSUs are not settled in cash. A non-employee director who is not compensated for his or her services as non-employee director pursuant to the Director Compensation Policy or any other plan, policy or agreement then in effect is not subject to the guidelines set forth in our director stock ownership policy. +As of December 31, 2025, each of our non-employee directors was in compliance with these ownership guidelines. The stock ownership guidelines have historically not applied to Mr. Berg since he did not receive compensation for his services as a non-employee director until 2024. However, because Mr. Berg began receiving compensation for his services as a director in 2024, he is subject to the stock ownership guidelines as of 2024 and will have five years thereafter to accumulate holdings in order to comply with the ownership guidelines. A description of each non- employee director’s beneficial ownership of the Company’s common stock is included in the section entitled “Security Ownership of Certain Beneficial Owners and Management.” +PROPETRO  2026 Proxy Statement   |  23 +TABLE OF CONTENTS +Executive Officers +Our executive officers serve at the direction of our Board. All of our executive officers and certain other key officers are listed in the following table, and certain information concerning those officers, except for Mr. Sledge, who is a member of the Board, follows the table. +Name +Age +Position with ProPetro Holding Corp +Executive Officer +since +Samuel D. Sledge +39 +Chief Executive Officer and Director +2020 +Adam Muñoz +43 +President and Chief Operating Officer +2020 +Caleb L. Weatherl +39 +Chief Financial Officer +2025 +John J. “Jody” Mitchell +43 +General Counsel and Corporate Secretary +2023 +Shelby Fietz +44 +Chief Commercial Officer +2023 +Celina A. Davila +45 +Chief Accounting Officer +2023 +See “Corporate Governance and Board Matters—Nominees” for biographical information for Mr. Sledge. +ADAM MUÑOZ +Adam Muñoz has served as our President and Chief Operating Officer since August 2021, and prior to that, he served as Chief Operating Officer since January 2021 and served as Senior Vice President of Operations since March 2020. Mr. Muñoz joined the Company in 2010 to initiate ProPetro’s Permian pressure pumping operation. Prior to joining ProPetro, Mr. Muñoz held sales and operations roles at Frac Tech Services and Weatherford International. Since joining ProPetro, Mr. Muñoz has served as the Director of Business Development and Technical Services where he was responsible for overseeing the growth of the hydraulic fracturing operations as well as managing the department’s day-to-day technical services. Mr. Muñoz has most recently served as the Vice President of Frac Services where his duties included leading the hydraulic fracturing division through specific efforts to increase operational efficiencies and maximize financial productivity. Mr. Muñoz received a Bachelor of Business Marketing from The University of Texas at the Permian Basin. +AGE 43 +PRESIDENT AND CHIEF OPERATING OFFICER since October 2020 +CALEB L. WEATHERL +Caleb Weatherl has served as our Chief Financial Officer since July 2025. Mr. Weatherl has over a decade of experience in senior level positions in private companies. Prior to joining ProPetro, Mr. Weatherl served as the Chief Executive Officer and as a Board Member of Garrison Energy, a Midland, Texas-based oil and gas exploration and production company, from May 2023 until September 2024. Prior to that, he served as the President and Chief Financial Officer of Stronghold Energy II Holdings, a Midland, Texas-based oil and gas exploration and production company, from December 2017 to October 2022, and as a Board Member from October 2021 to October 2022. His work history also includes serving as Chief Financial Officer for Desert Royalty Company from June 2016 to December 2017, Vice President, Co-Founder and Board Member of Stronghold Energy Partners from May 2014 to June 2016 and Vice President of Weatherl Energy Investments from August 2013 to June 2016. Earlier in his career, Mr. Weatherl held positions at Bain Capital and McKinsey & Company. Mr. Weatherl holds a Bachelor of Arts degree in Economics from Harvard College and a Master of Business Administration degree from Harvard Business School. +AGE 39 +CHIEF FINANCIAL OFFICER since July 2025 +24  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Officers +JOHN J. “JODY” +MITCHELL +Jody Mitchell has served as our General Counsel and Corporate Secretary since January 2023. Prior to his appointment as General Counsel, Mr. Mitchell served as the Company’s Vice President and Deputy General Counsel since April 2021. Before joining the Company, Mr. Mitchell served in various roles at Concho Resources Inc., a hydrocarbon exploration company acquired by ConocoPhillips in 2021 (“Concho”), from 2014 to 2021, including Director of Marketing and Midstream and, prior to that, Associate General Counsel. Before joining Concho, Mr. Mitchell served as counsel supporting the upstream and midstream businesses at Petrohawk Energy Corporation (“Petrohawk”) and at BHP Billiton following BHP Billiton’s acquisition of Petrohawk. Mr. Mitchell began his career as an associate at Locke Lord Bissell & Liddell LLP, where he concentrated on oil, gas and energy litigation and construction litigation. Mr. Mitchell holds a Bachelor of Arts from the University of Texas and a Juris Doctor from the University of Houston Law Center. +AGE 43 +GENERAL COUNSEL AND CORPORATE SECRETARY since January 2023 +SHELBY K. FIETZ +Shelby Fietz has served as our Chief Commercial Officer since November 2023. Mr. Fietz joined ProPetro in 2012, and prior to his appointment as Chief Commercial Officer, Mr. Fietz served as the Company’s Vice President of Commercial, leading the business development, sales, supply chain, and marketing functions. He also previously held the position of Vice President of Business Development, Sales and Marketing, while also leading our supply chain organization. Prior to his appointment as an officer, Mr. Fietz held roles of increasing responsibility within ProPetro in both operations and business development. Mr. Fietz also serves in a leadership capacity with the Permian Basin Chapter of the Energy Workforce and Technology Council. Mr. Fietz holds a Bachelor of Science from Angelo State University. +AGE 44 +CHIEF COMMERCIAL OFFICER since November 2023 +CELINA A. DAVILA +Celina Davila has served as our Chief Accounting Officer since November 2023. Prior to her appointment as Chief Accounting Officer, Ms. Davila served as the Company’s Director of Accounting and Corporate Controller since August 2022 and as Corporate Controller since October 2019. Ms. Davila joined the Company in January 2019 as Hydraulic Fracturing Controller. Prior to joining the Company, Ms. Davila served in various roles at Pioneer, a leading independent natural resources company acquired by ExxonMobil, from 2012 to 2018, including Accounting Manager and, prior to that, Accounting Supervisor. Ms. Davila also served as Controller for Natural Gas Services Group and Accounting Manager at Total Electrical Service and Supply Co. Ms. Davila began her career as a Senior Auditor at Johnson, Miller, and Co., CPAs (acquired by Whitley Penn). Ms. Davila is a Certified Public Accountant and holds a Bachelor of Business Administration in Accounting and a Master of Business Administration, both from Texas Tech University. +AGE 45 +CHIEF ACCOUNTING OFFICER since November 2023 +PROPETRO  2026 Proxy Statement   |  25 +TABLE OF CONTENTS +EXECUTIVE COMPENSATION +Proposal 2 —Advisory Vote to Approve Named Executive Officer Compensation +We are asking stockholders to approve, on a non-binding advisory basis, the compensation of our Named Executive Officers as disclosed in this proxy statement. As described below in “Compensation Discussion and Analysis,” the Compensation Committee has structured our executive compensation program to achieve the following guiding principles: +• +Reward executives for exceptional performance and hold them accountable for underperformance in a manner that adheres to our values +• +Align executive interests with those of our stockholders by making a substantial portion of compensation performance-based and “at risk” +• +Provide the necessary flexibility to respond to varying market conditions and changing circumstances with a structure that ensures accountability in our cyclical and volatile business +• +Remain competitive in our industry to attract, retain, and motivate the talent that is necessary to achieve our financial and strategic goals +• +Be internally consistent and equitable +We urge stockholders to read the section entitled “Compensation Discussion and Analysis” beginning on page 27 of this proxy statement, which describes in more detail how our executive compensation policies and procedures operate and are designed to achieve our compensation objectives, as well as the compensation tables and narrative included therein beginning on page 46 , which provide detailed information on the compensation of our Named Executive Officers. The Compensation Committee and the Board believe that the policies and procedures articulated in the “Compensation Discussion and Analysis” are effective in achieving our goals and that the compensation of our Named Executive Officers reported in this proxy statement has and will contribute to the Company’s recent and long-term success. +In accordance with Section 14A of the Exchange Act, and as a matter of good corporate governance, we are asking stockholders to approve the following resolution at the annual meeting: +RESOLVED , that the stockholders of the Company approve, on a non-binding advisory basis, the compensation of the Company’s Named Executive Officers as disclosed in the Compensation Discussion and Analysis section and the related compensation tables, notes and narrative in the proxy statement for the Company’s 2026 annual meeting. +VOTE REQUIRED +This advisory resolution, commonly referred to as a “say-on-pay” resolution, is non-binding on the Board. Although non-binding, the Board and the Compensation Committee will review and consider the voting results when making future decisions regarding our executive compensation program. +The affirmative “FOR” vote of the holders of a majority of the shares represented at the meeting (in person or by proxy) and entitled to vote is required to approve this Proposal No. 2. Brokers do not have discretion to vote on this proposal without your instruction. If you do not instruct your broker how to vote on this proposal, your broker will deliver a non-vote on this proposal. Abstentions will have the same effect as a vote “AGAINST” Proposal No. 2. Broker non-votes will have no effect on Proposal No. 2. +We currently intend to hold the next non-binding advisory vote to approve the compensation of our Named Executive Officers at our 2027 annual meeting of stockholders unless our Board modifies its policy of holding this vote on an annual basis. +The Board of Directors unanimously recommends a vote FOR the approval of the compensation of our Named Executive Officers. +26  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +Compensation Discussion and Analysis +CD&A Contents +28 +I. +EXECUTIVE COMPENSATION HIGHLIGHTS +28 +2025 Company Performance +28 +Significant PROPWR SM Growth, Strong Operational Performance, and Strategic Capital Management +30 +Guiding Principles +30 +Performance-Based Compensation Philosophy and Pay Mix +31 +Compensation Policies and Practices +31 +SAY-ON-PAY AND SAY-ON-FREQUENCY ADVISORY VOTE AND STOCKHOLDER ENGAGEMENT +32 +II. +WHAT GUIDES OUR PROGRAM +32 +Philosophy and Guiding Principles of Our Compensation Program +32 +How We Make Compensation Decisions +33 +Use of Peer Compensation Data +34 +III. +ELEMENTS OF COMPENSATION AND 2025 DECISIONS IN DETAIL +35 +Base Salary +35 +Annual Cash Incentive Awards +39 +Long Term Incentive Awards +41 +Employee Benefits, Perquisites, and Special Payments +42 +IV. +OTHER COMPENSATION PRACTICES, POLICIES AND GUIDELINES +42 +Executive Severance Plan +42 +Employee Compensation Claw-Back Policy +43 +Executive Stock Ownership Policy +43 +No Tax Gross-Ups +43 +Regulatory Considerations +44 +Compensation Risk Assessment +PROPETRO  2026 Proxy Statement   |  27 +TABLE OF CONTENTS +Executive Compensation +I. EXECUTIVE COMPENSATION HIGHLIGHTS +This Compensation Discussion and Analysis (“CD&A”) describes our compensation practices, and the compensation awarded to, earned by, or paid to each of our Named Executive Officers (“NEOs”) during the last completed fiscal year. +Named Executive Officers for 2025 (1) +For the year ended December 31, 2025, our Named Executive Officers consisted of the following: +Samuel D. +Sledge +Adam +Muñoz +Caleb L. +Weatherl +Shelby K. Fietz +John J. “Jody” +Mitchell +Chief Executive Officer +President and Chief Operating Officer +Chief Financial +Officer +Chief Commercial Officer +General Counsel and Corporate Secretary +Celina A. Davila +Former Interim Principal +Financial Officer (2)  +(1) +David S. Schorlemer, the Company’s former Chief Financial Officer, was also a Named Executive Officer for 2025. Mr. Schorlemer’s employment with the Company was terminated without cause on March 3, 2025. +(2) +Celina Davila served as interim principal financial officer from March 3, 2025 through July 31, 2025. +2025 Company Performance +$1.3 Billion +550 Megawatts +Total Revenue +Power Generation Equipment Received and on Order for PROPWR SM at Year-End +$232 Million +230 Megawatts +Net Cash Provided by Operating Activities +Committed Under PROPWR SM +Customer Contracts at Year-End +Significant PROPWR SM Growth, Strong Operational Performance, and Strategic Capital Management +2025 was a transformational year for ProPetro where Company’s PROPWR SM business saw significant growth and commercial development. Throughout 2025, PROPWR SM gained momentum, securing contracts with multiple customers and deploying its first power generation assets into the field. In October, it announced its first data center +28  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +contract, a turning point in winning business outside the oil and gas service space. By year end, total delivered and on-order generation capacity had was approximately 550 megawatts, with approximately 230 megawatts committed to customer contracts. +Additionally, despite a challenging completions market environment characterized by lower activity across the North American oilfield services industry, pricing pressure, and continued customer consolidation and capital discipline, the Company delivered resilient operational performance and maintained strong market share. Our completions businesses continued to perform reliably for customers across the Permian Basin, supported by disciplined cost management, fleet rationalization, and a continued emphasis on operational excellence and safety. +To support our operations and the planned growth of our PROPWR SM business, the Company pursued a disciplined capital sourcing and allocation strategy throughout 2025. We actively managed the capital requirements of our completions business, while investing aggressively to support PROPWR SM development. This approach was bolstered by our achievement of dedicated financing arrangements, that ensure available funding for PROPWR equipment purchases. +The Compensation Committee’s approach for 2025 was designed to incentivize continued effective financial performance and capital allocation, while focusing on the growth of the Company’s PROPWR SM business and driving an emphasis on working safely. At the same time, the Committee recognized the anticipated market conditions for the Company’s services and further increased the Company’s use of quantitative performance metrics when compared to the 2024 plan. Through this approach, the Compensation Committee established metrics for the Amended and Restated ProPetro Holding Corp. Executive Incentive Bonus Plan (the “Annual Bonus Plan”) that retained the Company’s traditional focus on the financial metrics of Adjusted EBITDA and free cash flow (“FCF”) for the Company’s completions businesses, highlighted the need for commercial growth and securing customer contracts in the Company’s PROPWR SM business and added a new safety metric to recognize the emphasis on working safely. +The Company’s performance under the Annual Bonus Plan with respect to Adjusted EBITDA was below target, reflecting the challenging market conditions for the Company’s completions services. Although the Company missed its target for Adjusted EBITDA, through its proactive capital management approach, the Company significantly outperformed the goal set for its FCF metric, achieving the maximum level of performance for that metric. The Company’s performance on the PROPWR SM commercial development metric also saw performance at the maximum level, reflecting outstanding execution to capture customer commitments for the Company’s new service line. Performance on the safety metrics fell below expectations with the Company missing the threshold on each metric, resulting in no payout credit. The definitions of Adjusted EBITDA and FCF and other details regarding the use of these and other metrics in the Annual Bonus Plan can be found in Section III under the discussion of Annual Cash Incentive Awards in the description of Performance Measures and Payout Results beginning on page 35 below. +Successful Leadership Transition +Caleb L. Weatherl was appointed as Chief Financial Officer of the Company, effective July 14, 2025. Ms. Celina A. Davila continued to serve as the Company’s principal financial officer through the filing of the Company’s Quarterly Report on Form 10-Q for the three months ended June 30, 2025, at which time Mr. Weatherl assumed the role of principal financial officer. Ms. Davila continues to serve in her role as Chief Accounting Officer and principal accounting officer. Mr. Weatherl brings extensive experience in the energy and financial sectors. Most recently, he served as the Chief Executive Officer and member of the board of directors at Garrison Energy, where he led efforts to secure a significant equity commitment to pursue upstream oil and gas opportunities. His industry expertise and leadership experience align well with the Company’s culture, strategic priorities and long-term vision. The Company looks forward to the continued contributions of both Mr. Weatherl and Ms. Davila as it further strengthens its operational and financial foundation, with a sharp focus on driving long-term shareholder value. +PROPETRO  2026 Proxy Statement   |  29 +TABLE OF CONTENTS +Executive Compensation +Guiding Principles +Reward executives for exceptional performance and hold them accountable for underperformance in a manner that adheres to our values +Align executive interests with those of our stockholders by making a substantial portion of compensation performance-based and “at risk” +Provide the necessary flexibility to respond to varying market conditions and changing circumstances with a structure that ensures accountability in our cyclical and volatile business +Remain competitive in our industry in order to attract, retain and motivate the talent that is necessary to achieve our financial and strategic goals +Be internally consistent and equitable +Performance-Based Compensation Philosophy and Pay Mix +We emphasize performance-based, “at risk” pay to align executives’ interests with those of stockholders. +CEO (1) +Other NEOs Average (1) +(1) +The RSU and performance share unit (“PSU”) amounts shown reflect the aggregate grant date fair value of 2025 awards, calculated in accordance with FASB ASC Topic 718. These awards are granted annually as part of our long-term incentive program, which currently targets a 50/50 mix of RSUs and PSUs. The values reported here may differ from how the Compensation Committee assesses award value at the time of grant. Annual Incentive Bonus amounts represent the target annual award opportunity for each executive. “Other NEOs Average” includes Caleb L. Weatherl (with his base salary annualized) but excludes other individuals who served as Chief Financial Officer or Principal Financial Officer during 2025 (David S. Schorlemer and Celina A. Davila). +30  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +Compensation Policies and Practices +The following features of our executive compensation program promote sound compensation governance and are designed in the best interests of our stockholders and executives. +What We Do +What We Don’t Do +At least 50% of Long Term Incentive Awards are performance-based for Named Executive Officers +Use a mix of absolute and relative financial performance metrics (including relative total shareholder return (“TSR”)) in our incentive plans to avoid duplication of incentives across short- and long-term programs +Use safety metrics in our Annual Bonus Plan +Claw-back Policy +Independent compensation consultant +Independent Compensation Committee reviews and approves the compensation of our Named Executive Officers +Annual Say-on-Pay vote +Annual Compensation Committee assessment of compensation practices to eliminate any excessive risk +Significant stock ownership requirements +Single-trigger change in control payments +Tax gross-ups on severance or equity compensation +Repricing of stock options +Backdating of stock options +Employment agreements with executive officers +Derivative or hedging transactions or pledging of our securities by directors and executive officers +SAY-ON-PAY AND SAY-ON-FREQUENCY ADVISORY VOTE AND STOCKHOLDER ENGAGEMENT +At the Company’s 2025 annual meeting, the stockholders of the Company were asked to approve, on an advisory basis, the compensation of the Named Executive Officers (the “Say-on-Pay Vote”). Advisory votes in favor of our executive compensation program were cast by 95% of the shares of common stock of the Company represented at the meeting (in person or by proxy) and entitled to vote. The Compensation Committee considered this strong support and maintained the overall executive compensation approach. We continued broad stockholder outreach on executive compensation and governance. +At the Company’s 2025 annual meeting, the stockholders of the Company were also asked to vote, on an advisory basis, for the frequency with which we should seek a Say-on-Pay Vote (a “Say-on-Pay Vote”). Our stockholders overwhelmingly voted to hold a Say-on-Pay Vote annually, the frequency recommended by our Board and Compensation Committee. We intend to hold a Say-on-Pay vote annually at least until our next Say-on-Frequency Vote, which will occur no later than our 2031 annual meeting of stockholders. +We believe that discussions with a broad range of our stockholders help ensure that the Board and our management team understand our stockholders’ priorities and can work to address those priorities effectively. Our management team continued proactive stockholder engagement in 2025, focusing on strategy and execution, our new PROPWR SM business line, and governance and sustainability priorities. We engaged 8 of our 10 largest stockholders and a broad range of other holders, including new investors, primarily following the Company’s 2024 annual meeting. The Board, Compensation Committee, and management value these perspectives and pursue ongoing outreach. +PROPETRO  2026 Proxy Statement   |  31 +TABLE OF CONTENTS +Executive Compensation +II. WHAT GUIDES OUR PROGRAM +Our executive compensation program is designed to attract, motivate, and retain the talent needed to achieve our financial and strategic goals and to balance short-, intermediate-, and long-term compensation while measuring strategic objectives in varying market conditions. This structure aligns executive and stockholder interests. The Compensation Committee aims for total compensation that reflects individual responsibilities and contributions and is competitive in the talent market. +Philosophy and Guiding Principles of Our Compensation Program +Our compensation program is guided by the following principles: +1 +Reward for Exceptional Performance and Accountability for Underperformance +Our Named Executive Officers should be rewarded for exceptional performance and held accountable for underperformance. Our Named Executive Officers must work to achieve these goals in a manner that is consistent with our values and policies. We tie a significant portion of Named Executive Officer compensation to financial, strategic, and operational performance over short- and long-term horizons and may modify or claw back compensation if necessary. +2 +Align Interests of Executives and Stockholders +Compensation for our Named Executive Officers should align their interests with those of our stockholders. A substantial portion of pay is variable and “at risk,” including annual bonuses tied to performance goals and long-term equity awards (time-vested RSUs and PSUs). Our Stock Ownership Guidelines also require each Named Executive Officer to retain significant ownership in the Company’s common stock such that they are invested in our success over the long term along with our stockholders. +3 +Flexibility to Respond to Changing Circumstances +We are in a cyclical and volatile business. As a result, our Compensation Committee retains discretion to adjust Annual Bonus Plan payouts up or down from the amount that would be indicated by the pre- established performance metrics if circumstances so warrant. +4 +Industry Competitive +With support from an independent compensation consultant, we both monitor market practices among companies competing for executive talent to remain competitive in pay levels and design and regularly evaluate our peer group as our business and strategy evolve. +5 +Internally Consistent and Equitable +Executive compensation should be internally consistent and equitable. We consider peer pay, internal consistency and equity, and the experience, tenure, responsibilities, and contributions of each Named Executive Officer. +How We Make Compensation Decisions +THE ROLE OF THE COMPENSATION COMMITTEE +Our Compensation Committee is comprised of independent, non-employee members of the Board. Our independent Compensation Committee establishes elements, terms, and target values of Named Executive Officer compensation and oversees executive succession planning. It consults the full Board on material actions. The Compensation Committee’s authority is defined in its charter, available at https://ir.propetroservices.com/compensation-committee-charter . In determining the compensation of our Named Executive Officers, the Compensation Committee considers: +• +the information and advice provided by its compensation consultant, +• +our corporate goals, +• +historic and projected performance, +• +the current economic and commodities environment, +• +individual performance, experience, and responsibilities of each of our Named Executive Officers, +• +the results of the “Say-on-Pay” vote and feedback received from stockholders through our outreach and engagement efforts, and +• +other relevant factors. +32  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +THE ROLE OF EXECUTIVE OFFICERS IN COMPENSATION DECISIONS +The Compensation Committee considers the Chief Executive Officer’s recommendations with respect to the compensation of the Named Executive Officers other than our Chief Executive Officer. The Chief Executive Officer also provides initial recommendations for Annual Bonus Plan goals, which the Compensation Committee may accept or modify in its sole discretion. In order to assist the Chief Executive Officer in developing his recommendations for the Compensation Committee, the Company engaged Meridian Compensation Partners, LLC (“Meridian”) in late 2025. As part of its engagement, Meridian did not directly advise the Compensation Committee on any matters with respect to the compensation of our Named Executive Officers and did not serve as the independent compensation consultant for the Compensation Committee. The Compensation Committee may invite any officer to attend Compensation Committee meetings to report on performance progress, but Named Executive Officers are excluded from discussions or decisions about their own compensation. +THE ROLE OF THE INDEPENDENT COMPENSATION CONSULTANT +In 2025, Pearl Meyer served as independent consultant, advising on program design and implementation, regulatory changes, proxy advisor policies, compensation risks, market and peer data, and trends. Pearl Meyer reports exclusively to the Compensation Committee and does not provide services to management. The Compensation Committee has the discretion to allow Pearl Meyer to work directly with management in preparing or reviewing materials for the Compensation Committee’s consideration, and in 2025, management worked with Pearl Meyer to provide information and otherwise support the development of materials and recommendations for the Compensation Committee’s consideration. After taking into consideration the factors listed in Section 303A.05(c)(iv) of the “NYSE” Listed Company Manual, the Compensation Committee concluded that neither it nor the Company has any conflicts of interest with Pearl Meyer and that Pearl Meyer was independent from management. Other than Pearl Meyer, no other compensation consultants provided services to the Compensation Committee during 2025. +Use of Peer Compensation Data +The Company competes with business entities across multiple industries for top executive-level talent. To this end, the Compensation Committee evaluates, on an annual basis, industry-specific and general market compensation practices and trends to ensure that our program and Named Executive Officer pay opportunities remain appropriately competitive. As part of its evaluation, the Compensation Committee works with its independent consultant to validate that the companies included in its peer group are as comparable as possible to the Company in terms of operations, revenue, market capitalization, and geographic location. +The 2025 peer group for target compensation levels was determined by the Compensation Committee based on an in-depth review from its independent compensation consultant. This review included an assessment of potential comparators to evaluate the degree to which the current peers have kept pace with the Company’s growth and evolution, as well as an examination of the broader marketplace. Following such review and with input and support from the Company’s management, Pearl Meyer recommended, and the Compensation Committee agreed, that the peer group for use in setting the 2025 target compensation levels for the Named Executive Officers would be as detailed below (such companies, the “2025 Compensation Peer Group”): +• +Archrock, Inc. +• +ChampionX Corporation +• +Helmerich & Payne, Inc. +• +Liberty Energy, Inc. +• +Nabors Industries Ltd. +• +Nine Energy Services Inc. +• +Oil States International, Inc. +• +Patterson-UTI Energy, Inc. +• +Precision Drilling Corporation +• +ProFrac Holding Corp. +• +RPC, Inc. +• +Select Energy Services, Inc. +• +U.S. Silica Holdings, Inc. +Additionally, when determining the peer group for that would be appropriate to use for evaluating TSR performance for the PSUs granted in 2025, which occurred after setting the 2025 target compensation levels for the Named Executive Officers, the Compensation Committee elected to remove ChampionX Corporation and U.S. Silica Holdings, Inc. from the peer group used for such purpose. ChampionX Corporation was removed from the peer group because it was acquired by SLB N.V. (SLB Limited) in a transaction announced in 2024 and completed after PSUs were granted in 2025. U.S. Silica Holdings, Inc. was also removed from the peer group because it ceased to be publicly traded when it was acquired by affiliates of Apollo Global Management Inc. in a take-private transaction in 2024. As a result, for evaluating TSR performance for the PSUs granted in 2025, the Company used the 2025 peer group detailed below (such companies, the “2025 Performance Peer Group”): +PROPETRO  2026 Proxy Statement   |  33 +TABLE OF CONTENTS +Executive Compensation +• +Archrock, Inc. +• +Helmerich & Payne, Inc. +• +Liberty Energy, Inc. +• +Nabors Industries Ltd. +• +Nine Energy Services Inc. +• +Oil States International, Inc. +• +Patterson-UTI Energy, Inc. +• +Precision Drilling Corporation +• +ProFrac Holding Corp. +• +RPC, Inc. +• +Select Energy Services, Inc. +For 2025, the Compensation Committee reviewed comparative compensation data prepared by Pearl Meyer. This data, defined as the “Peer Data,” is a blend of information from the 2025 Compensation Peer Group and survey data from comparable energy companies. Using both sources provides a comprehensive view of competitive pay and helps smooth market volatility. While the Compensation Committee generally targets compensation around the 50th percentile of the Peer Data, it also considers other factors, including internal pay equity, executive experience, executive development and performance, succession planning, and retention. This may result in compensation above or below the 50 th percentile. +III. ELEMENTS OF COMPENSATION AND 2025 DECISIONS IN DETAIL +As shown below, a significant portion of the target compensation for our Named Executive Officers in 2025 was performance-based and an even larger portion is variable or “at risk,” meaning that it can be forfeited, and its value is dependent upon factors such as our stock price or company performance. +Element +Purpose +Changes for 2025 +◄ FIXED ► +Short- +Term +BASE +SALARY +• +Provides consistent pay that is sufficient to attract and retain executives with the appropriate skills and experience for their positions +• +Immaterial cost of living adjustments for most Named Executive Officers; additional increases to align with market for Messrs. Sledge and Mitchell. +◄ AT RISK ► +ANNUAL +CASH +INCENTIVE +BONUS +• +Motivates and rewards the achievement of our annual individual and operational performance goals +• +90% was based on the achievement of quantitative performance goals utilizing financial, commercial and sustainability and safety metrics, and 10% was based upon a qualitative analysis of individual performance for the fiscal year +• +Increased emphasis on quantitative metrics (from 80% in 2024 to 90% in 2025), addition of a second safety metric and addition of a PROPWR committed megawatts metric. +Long- +Term +LONG-TERM +INCENTIVE +AWARDS +• +Drives performance and supports retention, while aligning the interests of our Named Executive Officers with those of our stockholders +• +Generally, 50% PSUs that vest, if earned, following the completion of a three-year performance period, in each case subject to continued employment, and 50% RSUs that vest equally on each of the first three anniversaries of grant +• +No material changes +34  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +Base Salary +The Compensation Committee monitors and adjusts salaries for our Named Executive Officers over time as necessary to remain competitive with market rates for similarly situated officers at our peer companies and to reflect changes in each Named Executive Officer’s role, duties and responsibilities. +Base Salary as of +Name +December 2024 +($) +December 2025 +($) +Samuel D. Sledge (1) +946,000 +975,000 +Caleb L. Weatherl (2) +— +525,000 +Adam Muñoz (3) +600,000 +612,000 +Shelby Fietz (3) +495,000 +505,000 +John J. Mitchell (1) +450,000 +500,000 +Celina A. Davila (4) +— +320,000 +David S. Schorlemer +540,000 +— +(1) +The increase in base salary for Messrs. Sledge and Mitchell was to ensure their compensation remained competitive with that of individuals in the same positions within the 2025 Compensation Peer Group. +(2) +Mr. Weatherl’s base salary was established when he was hired in 2025, in line with market levels and to reflect internal equity. +(3) +The increases in base salary for Messrs. Muñoz and Fietz were to address general cost of living increases. +(4) +Ms. Davila was not an NEO in 2024. +Annual Cash Incentive Awards +The Annual Bonus Plan governs cash incentive awards made each year to our Named Executive Officers. Awards under the Annual Bonus Plan are tied to the achievement of performance goals, which may be based on qualitative or quantitative measures, or both, as determined by the Compensation Committee. +TARGET AWARD OPPORTUNITIES +In February 2025, the Compensation Committee established the following award opportunities under the Annual Bonus Plan for each of the Named Executive Officers: +Name +2025 Target Award +Opportunity +(% of base salary) +Samuel D. Sledge (1) +115 % +Caleb L. Weatherl (1) +90 % +Adam Muñoz +100 % +Shelby Fietz +90 % +John J. Mitchell (1) +90 % +Celina A. Davila +65 % +David S. Schorlemer +— +(1) +The target award opportunity for (i) Mr. Sledge was increased by 5% from his 2024 target of 110% and (ii) Mr. Mitchell was increased by 15% from his 2024 target of 75%, in each case, to better align with market and to reflect each executive’s continued development. All other target award opportunities for returning Named Executive Officers remain unchanged from 2024 levels. Mr. Weatherl’s target bonus was established when he was hired in 2025, in line with market levels and to reflect internal equity. +Target award opportunities for each executive were established by the Compensation Committee after reviewing peer group data and considering each Named Executive Officer’s responsibility and experience. +PERFORMANCE MEASURES AND PAYOUT RESULTS +Each year, the Compensation Committee establishes performance metrics and threshold, target, and maximum goals for each such metric. Potential payouts under the Annual Bonus Plan depend on the actual performance level for each metric established by the Compensation Committee, as outlined below. +PROPETRO  2026 Proxy Statement   |  35 +TABLE OF CONTENTS +Executive Compensation +Performance Level +Payout (as % of +Target Award) +Threshold +50 % +Target +100 % +Maximum +200 % +If performance falls between the specified performance levels, payments are generally determined via straight-line interpolation. If performance falls below the threshold performance level, no payments will be awarded. The Annual Bonus Plan provides the Compensation Committee or the Board with the discretion to increase or decrease actual payout amounts otherwise resulting from the pre-established metrics, as it may deem necessary. +Consistent with prior years, under the 2025 Annual Bonus Plan, the Compensation Committee selected a mix of quantitative and qualitative performance metrics. For 2025, the Compensation Committee emphasized objective, measurable performance, with 90% of each Named Executive Officer’s 2025 annual incentive opportunity (up from 80% in 2024) tied to quantitative metrics. These metrics were selected to incentivize achievement of specific pre-established financial, safety and operational metrics, and included Adjusted EBITDA, FCF, PROPWR committed megawatts, and a Sustainability and Safety metric that incorporated two safety-related goals. Financial performance represented the majority of this component accounting for 60% of the award opportunity. +The remaining 10% of the annual incentive award opportunity for 2025 was based on qualitative factors, reflecting individual and operational performance. The Committee included this component to retain discretion to assess performance in areas important to the Company’s growth and long-term success that are not fully captured by quantitative measures. +The Compensation Committee maintained consistency in most performance metrics because they remain important to the Company’s ongoing success and help focus executives on key objectives that support sustained growth and consistent operational performance. Specifically, the Compensation Committee continues to view Adjusted EBITDA and FCF as effective measures of the Company’s financial performance and capital discipline that support the Company’s ability to generate shareholder returns. In addition, total recordable incident rate (“TRIR”) and lost time incident rate (“LTIR”) are important measures of safety. +The Compensation Committee set threshold, target, and maximum goals for Adjusted EBITDA for 2025 at levels lower than 2024 primarily to reflect expectations for a softer overall market for the Company’s services. This outlook was driven by multiple factors, including, customer consolidation, increased capital discipline and a general reduction in activity. Additional factors, including the impact of our E-Fleet leases, which reduce Adjusted EBITDA, were considered in setting this goal. In setting the 2025 goals for FCF, the Committee considered the relationship between Adjusted EBITDA and that lower Adjusted EBITDA would drive lower FCF. Moreover, when planning its 2025 budget, the Company expected to require increased capital expenditures for maintenance and replacement of equipment reaching the end of its useful life than the Company experienced in 2024. As a result, the Committee increased the threshold, target and maximum goals for FCF above the levels set for these goals in 2024 and determined that setting a 2025 target goal that was lower than 2024 performance was appropriate in light of the Company’s expectations for 2025. The same factors were also reflected in lower overall budget and earnings expectations for 2025 compared to 2024. While we always strive for year-over-year growth, the Compensation Committee seeks to establish performance goals for our Annual Bonus Plan that are both challenging and achievable to help ensure the Annual Bonus Plan effectively drives results. +In 2025, for the Sustainability and Safety Metric, the Compensation Committee eliminated the diesel displacement (5% in 2024) and employee training (5% in 2024) metrics used in 2024 in favor of a second safety metric, LTIR, representing 10% of the 2025 program. This change reflects the importance of safety to our success, growth and culture and the Committee’s desire to further incentivize improved safety performance in 2025. +The Compensation Committee also reduced the program’s qualitative metric for individual performance from 20% to 10% to allow for the incorporation of a new metric measuring PROPWR SM committed megawatts (10% in 2025). The Committee’s goal in introducing this new metric was to recognize the strategic importance of the Company’s PROPWR SM business and incentivize growth in this area. In addition, the Compensation Committee also determined that increasing the emphasis on quantitative measures aligns with evolving market practices and helps focus our Named Executive Officers on the achievement of specific financial, commercial / operational and sustainability and safety goals. +Notwithstanding the increased focus on quantitative metrics, retaining a qualitative component of the Annual Bonus Plan allows the Compensation Committee to assess the Company’s progress towards key strategic goals, respond to dynamic developments and evaluate each Named Executive Officer’s specific contributions to those strategic goals. In 2025, the Compensation Committee set individually tailored strategic and growth goals for each Named Executive Officer rather than Company-wide goals. +36  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +Measure +Weighting (8) +Threshold +Target +Maximum +Actual 2025 +Performance +Payout as a +Percentage of +Target Bonus +QUANTITATIVE MEASURE +Adjusted +EBITDA +40 % +$ +138MM +$ +276MM +$ +304MM +$ +208MM +30.2% +FCF +20 % +$ +43MM +$ +85MM +$ +94MM +$ +126MM +40% +PROPWR +Committed +Megawatts (MW) (4) +10 % +70MW +140MW +160MW +>220MW +20% +Sustainability and Safety +TRIR (5) +10 % +0.75 +0.65 +0.50 +0.91 +0% (8) +LTIR (6) +10 % +0.30 +0.25 +0.22 +0.37 +0% +Quantitative Total +90 % +90.2% +QUALITATIVE MEASURE +Qualitative Total +Individual and +Operational +Performance (7) +10 % +10 – 15% +Overall Total +100 % +100.2 – 115.2% +(1) +We define EBITDA as earnings before (i) interest expense, (ii) income taxes, and (iii) depreciation and amortization. We define Adjusted EBITDA as EBITDA, plus (i) loss/(gain) on disposal of assets and businesses, (ii) stock-based compensation, (iii) business acquisition contingent consideration adjustments, (iv) other expense/(income), (v) other unusual or nonrecurring (income)/expenses, such as impairment expenses, costs related to asset acquisitions, insurance recoveries, one-time professional fees and legal settlements and (vi) retention bonuses and severance expense. For a more detailed definition of the non-GAAP financial measure of Adjusted EBITDA and reconciliation of Adjusted EBITDA to our most directly comparable financial measures calculated in accordance with GAAP, please read “How We Evaluate Our Operations” in our Form 10-K filed for the year ended December 31, 2025. +(2) +We define FCF as Adjusted EBITDA less Capital Expenditures Incurred, which are defined as costs incurred in connection with the growth and maintenance of our asset base. For more detailed information regarding Capital Expenditures Incurred, please see Note 11—Reportable Segment Information in the Notes to Consolidated Financial Statements and Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Investing Activities section under Liquidity and Capital Resources) to our Form 10-K filed for the year ended December 31, 2025. For 2025, FCF excludes capital expenditures for the PROPWR business. +(3) +The Compensation Committee may provide for the manner in which actual performance and the performance goal(s) with regard to these metrics will reflect the impact of specified events or occurrences during the year, which may mean including or excluding the impact of one or more events or occurrences, as specified by the Compensation Committee, for the year. +(4) +Committed Megawatts (MW) is measured by the number of MW of power generation equipment committed during 2025 to customers under commercial contracts (i.e., power purchase agreement(s), power service agreement(s), e-fleet service agreements, including power supplied to support a ProPetro FORCE e-fleet contract, or other agreement(s). The target value for this metric was selected based on the equipment planned to be ordered by the Company as part of its original 2025 budget. +PROPETRO  2026 Proxy Statement   |  37 +TABLE OF CONTENTS +Executive Compensation +(5) +TRIR stands for Total Recordable Incident Rate and is a measurement of workplace safety calculated as follows: (total number of recordable incidents amongst covered personnel in the applicable period (here, 2025) multiplied by 200,000) divided by the total hours worked by covered personnel in the applicable period. TRIR is a commonly accepted and utilized metric for both workplace safety regulation and for making safety performance comparisons amongst companies. The Company uses an annual TRIR metric in our compensation program to reflect aggregate safety performance across the year being reviewed. +(6) +LTIR stands for Lost Time Incident Rate and is a measurement of workplace safety calculated as follows: (number of lost-time incidents amongst covered personnel in the applicable period (here, 2025) multiplied by 200,000) divided by the total hours worked by covered personnel in the applicable period. LTIR is a commonly accepted and utilized metric for both workplace safety regulation and for making safety performance comparisons amongst companies. The Company uses an annual LTIR metric in our compensation program to reflect aggregate safety performance across the year being reviewed. +(7) +Additional information regarding strategic goals for each Named Executive Officer is included below. +(8) +Because Ms. Davila participated in a non-executive bonus program, notwithstanding her interim service as principal financial officer, her 2025 annual bonus metrics were weighted (a) 50% on individual performance, with an individual payout percentage of 100% (see below for more information) and (b) 50% on Company performance using the executive plan’s quantitative metrics, resulting in a 45.1% payout percentage. Ms. Davila’s combined total payout percentage was 145.1%. +For 2025, the Compensation Committee established individual strategic qualitative goals for each of our Named Executive Officers, as follows: +Named Executive +Officer +2025 Strategic Individual and +Operational Qualitative Goals +Actual 2025 +Performance +Level (max of +200%) +Payout as a +Percentage of +Target Bonus +for Individual +Performance +Samuel D. Sledge +Strategy (50%) (1) +• +Strategy execution. +• +Holding the organization accountable to our key success metrics. +PROPWR (50%) +• +Successful PROPWR launch, including commercial, operational and safety measures. +112.5% +11.25% +Caleb L. Weatherl +Finance Team Development (50%) +• +Successful transition into finance and executive teams. +• +Identify and execute on finance organizational improvement opportunities. +PROPWR (50%) +• +Identify and execute strategy for effectively funding the PROPWR growth strategy while maintaining a healthy balance sheet +133% +13.25% +Adam Muñoz +Maintaining Optimization (50%) +• +Maintaining and extending optimization gains, including driving execution of goals established for members of his team. +Safety Leadership (50%) (1) +• +Lead with a culture of safety +100% +10% +Shelby Fietz +Organizational Revitalization (50%) +• +Evolving his team and organization to best support strategic execution, including Silvertip integration, customer account quality control, and commercial organization skills assessment +Pricing Discipline (50%) +• +Increasing efficiencies and identifying cost reduction opportunities while maintaining strong customer relationships. +150% +15% +38  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +Named Executive +Officer +2025 Strategic Individual and +Operational Qualitative Goals +Actual 2025 +Performance +Level (max of +200%) +Payout as a +Percentage of +Target Bonus +for Individual +Performance +John J. Mitchell +Strategic M&A Support (50%) +• +Supporting the Company and management team through strategic acquisitions. +PROPWR SUPPORT (50%) +• +Support the establishment and growth of this new contract-heavy business. +150% +15% +Celina Davila (2) +Facilitate CFO Transition (50%) +• +Take on additional responsibilities in connection with the transition and help new CFO integrate into team and workstream seamlessly. +Transition to new ERP system (50%) +• +Coordinate and successfully execute implementation of new ERP system. +200% +100% +(1) +In evaluating the performance of Messrs. Sledge and Muñoz with respect to their Individual and Operational performance objectives, the Committee exercised its discretion to reduce their respective 2025 performance levels to reflect the Committee’s assessment of these executives’ accountability for the Company’s safety performance objectives, which were not met in 2025. +(2) +The individual performance component represented 50% of Ms. Davila’s total 2025 annual bonus opportunity. +Consistent with the above findings, the Compensation Committee certified a range of 100.2% to 115.2% achievement for the individual and operational performance metric and approved the following payments under the Annual Bonus Plan: +Name +2025 Target Award +Opportunity as a +Percentage of Base Salary +Value of 2025 +Target Award +Opportunity +($) +Actual Payout +as a Percentage +of Target Award +Value of Actual +2025 Annual Award +($) +Samuel D. Sledge +115 % +1,121,250 +101.5 % +1,137,500 +Caleb L. Weatherl +90 % +221,363 (1 ) +103.5 % +229,000 +Adam Muñoz +100 % +612,000 +100.2 % +613,200 +Shelby Fietz +90 % +454,500 +105.2 % +478,150 +John J. Mitchell +90 % +450,000 +105.2 % +473,400 +Celina A. Davila +65 % +208,000 +145.1 % +301,800 +David S. Schorlemer (2) +0 % +0 +0 % +0 +(1) +Mr. Weatherl’s 2025 target award opportunity has been pro-rated from his date of hire to reflect his partial year of service. +(2) +Mr. Schorlemer was not eligible to receive a 2025 annual cash incentive award because his employment was terminated without cause in March of 2025. +Long Term Incentive Awards +AWARDS GRANTED IN 2025 +Our mix of time- and performance-based awards is intended to achieve the dual objectives of supporting retention and driving performance, while aligning the interests of our Named Executive Officers with those of our stockholders by providing an opportunity for increased share ownership. Both RSUs and PSUs may be settled in shares of our common stock or in cash equivalent of the same. +PROPETRO  2026 Proxy Statement   |  39 +TABLE OF CONTENTS +Executive Compensation +Except as provided below, in 2025, 50% of the value of each Named Executive Officer’s long term incentive awards was granted pursuant to the Amended and Restated ProPetro Holding Corp. 2020 Long Term Incentive Plan (the “2020 LTIP”) in the form of RSUs that vest in three substantially equal annual installments commencing on the first anniversary of the grant date. The other 50% was granted in the form of PSUs that vest, if earned, following the completion of a three-year performance period, in each case generally subject to the Named Executive Officer’s continued employment through the end of such period. +Equity-based awards to our non-executive employees are weighted more heavily towards RSUs because their actions are less likely to directly and materially impact the Company’s stock price. Because Ms. Davila’s service as interim principal financial officer was temporary, the Compensation Committee elected to maintain her 2025 award mix and value as they would have been absent this interim appointment, reflecting a 4:1 ratio of RSUs to PSUs in 2025. +Consistent with 2024, the PSUs granted in 2025 vest based on the Company’s TSR relative to the TSR of the 2025 Peer Group. After careful review, the Compensation Committee determined to generally use the same peer group companies to set both the 2025 target compensation levels for our Named Executive Officers and evaluate TSR performance for the PSUs granted in 2025. However, due to transactions that resulted in ChampionX Corporation and U.S. Silica Holdings, Inc. ceasing to be independent publicly traded companies, those two companies, which had been included in the 2025 Compensation Peer Group, used to set 2025 target compensation levels for our Named Executive Officers, were not included in the 2025 Performance Peer Group, which will be used to evaluate TSR performance for the PSUs granted in 2025. For more information on the 2025 Compensation Peer Group and the 2025 Performance Peer Group, see the section entitled “Use of Peer Compensation Data” in Section II of the “Compensation Discussion and Analysis” beginning on page 33 of this proxy statement. +Recipients of PSUs may earn between 0% and 200% of the target number of shares granted, as indicated in the following table. If performance falls between the specified performance levels, payouts will be determined via straight-line interpolation. No payouts will be awarded if performance falls below the threshold level, which is the 25th percentile. +Additionally, if the Company’s TSR is below zero on an absolute basis for the performance period, the number of PSUs earned shall be reduced in accordance with the table below. The Compensation Committee selected a modified relative TSR performance metric for these awards to motivate our Named Executive Officers to outperform the Company’s peers, even in a negative TSR environment, while maintaining a meaningful reduction in the PSU payout percentages if absolute TSR is negative. This structure is intended to bolster alignment between our Named Executive Officers and our stockholders by encouraging the achievement of a positive absolute TSR. +Payout (as a% of Target Number of +PSUs Granted) +Payout (as a% of Target Number of +PSUs Granted) if TSR is Below Zero +Company’s Percentile Rank in Peer Group +≥ 90th Percentile +200 % +175 % +75th Percentile +175 % +150 % +50th Percentile +100 % +90 % +25th Percentile +50 % +40 % +< 25th Percentile +0 % +0 % +The performance period for the 2025 PSU awards commenced on January 1, 2025 and ends on December 31, 2027. +If a peer company ceases to exist as a separate publicly-traded company during the performance period because it is acquired outside of the Company’s peer group or for any other reason not described elsewhere in this paragraph, then the company will be excluded from the peer group entirely. If a peer company is acquired by another peer company during the performance period, the acquirer will remain in the peer group, but the acquired company will be excluded from the peer group entirely. If a peer company files for bankruptcy during the performance period, it will remain in the peer group but be ranked last. +The annual value of each Named Executive Officer’s long-term incentive award is generally determined in conjunction with the Compensation Committee’s annual compensation analysis or, if later, in connection with the Named Executive Officer’s promotion or hire date following the Compensation Committee’s review of peer compensation data and consideration of each Named Executive Officer’s position and associated responsibilities. In 2025, the Compensation Committee granted awards to our Named Executive Officers as shown in the table below. Except as specified below, all awards were granted in February of 2025. +40  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +Name +Number of RSUs +Granted in 2025 +Value of RSUs +Granted in 2025 (1) +($) +Target Number +of PSUs Granted +in 2025 +Value of PSUs +Granted in 2025 (1) +($) +Samuel D. Sledge +252,525 +1,898,988 +252,525 +2,492,422 +Caleb L. Weatherl (2) +100,482 +509,444 +100,482 +504,420 +Adam Muñoz +112,233 +843,992 +112,233 +1,107,740 +Shelby Fietz +56,117 +422,000 +56,117 +553,875 +John J. Mitchell +56,117 +422,000 +56,117 +553,875 +Celina A. Davila +17,957 +135,037 +4,489 +44,306 +David S. Schorlemer +0 +0 +0 +0 +(1) +Amounts in these columns reflect the aggregate grant date fair value of the RSU and PSU awards granted in 2025 under the 2020 LTIP, calculated in accordance with FASB ASC Topic 718. Because the grant date fair value is calculated differently for time-based and performance-based awards under FASB ASC Topic 718, the value of the awards reported is different even though the number of RSUs and PSUs granted to each Named Executive Officer is the same. The number of awards granted by the Compensation Committee and the Board in 2025 was made after considering the then current market value of the Company’s shares, which is the standard practice across the industry, rather than the accounting grant date fair value. +(2) +Mr. Weatherl’s awards were granted to him in connection with his commencement of service as the Company’s principal financial officer. +AWARDS SETTLED FOLLOWING THE END OF 2025 +Much like the PSUs granted in 2025, the PSUs granted in 2023 vested based on performance over a three-year performance period. In accordance with the compensation philosophy and designs adopted by the Compensation Committee, the PSUs granted in 2023 resulted in a payout of 130% of the target PSUs. The Company’s TSR over the three-year performance period was 0.03%, resulting in a relative TSR of the 60 th percentile of the relevant peer group. +Employee Benefits, Perquisites, and Special Payments +HEALTH/WELFARE PLANS +All of our full-time employees, including our Named Executive Officers, are eligible to participate in our health and welfare plans on the same basis, including: medical, dental and vision benefits, medical and dependent care flexible spending accounts, short-term and long-term disability insurance, and group life insurance. +RETIREMENT PLANS +We currently maintain a 401(k) retirement savings plan for our employees who satisfy certain eligibility requirements. Our Named Executive Officers are eligible to participate in the 401(k) plan on the same terms as other full-time employees. Currently, we match contributions made by participants in the 401(k) plan up to a specified percentage of the employee’s contributions, and we may make certain discretionary profit-sharing contributions (though no profit- sharing contributions were made to any participants in 2025). Both the matching contributions and the profit- sharing contributions vest immediately. We believe that offering a vehicle for tax-deferred retirement savings through our 401(k) plan and making matching contributions and profit-sharing contributions that vest over time add to the overall desirability of our compensation packages and further incentivize our employees in accordance with our compensation policies. We do not maintain any defined benefit pension plans or deferred compensation plans. +PERQUISITES +Each of the Named Executive Officers participated in a vehicle allowance program during 2025. In 2025, the Company also provided other limited perquisites to its Named Executive Officers, including club memberships and dues, and also permitted Messrs. Sledge and Fietz’s spouses, respectively, to accompany them on certain business trips via Company chartered aircraft that resulted in no incremental cost to the Company. The Compensation Committee reviews the perquisites we provide to our Named Executive Officers periodically to ensure that they are necessary to retain our executives, appropriate, and consistent with benefits offered by companies with which we compete for executive talent. +PROPETRO  2026 Proxy Statement   |  41 +TABLE OF CONTENTS +Executive Compensation +IV. OTHER COMPENSATION PRACTICES, POLICIES AND GUIDELINES +Executive Severance Plan +The Board adopted the Third Amended and Restated ProPetro Services, Inc. Executive Severance Plan (the “Executive Severance Plan”) because they and the Compensation Committee felt it was desirable to pivot away from individually negotiated employment agreements and towards a streamlined plan providing for more uniform treatment upon a termination of employment. Each of our Named Executive Officers is a participant in the Executive Severance Plan. We believe the Executive Severance Plan serves to maintain the focus of our senior executives and ensure that their attention, efforts and commitment are aligned with maximizing the success of the Company and stockholder value. Further, providing market severance benefits is an important element of compensation that allows us to attract and retain talented executives, ensuring continuity of management, stability of the Company, and efficient execution of our business goals. +The amounts of the severance and benefits established for each “Tier” under the Executive Severance Plan were selected after the Compensation Committee received advice from its independent compensation consultant at the time of adoption regarding the types and amounts of severance that are market among the Company’s peers. The Compensation Committee also considered its members’ ample experience in the industry when making this determination. The Tier level assigned to each participant in the plan was determined based on each participant’s position and responsibility. No changes were made to the Tier levels or the Executive Severance Plan for the Named Executive Officers in 2025. The Tier levels for each of the Named Executive Officers and the terms of the Executive Severance Plan are described in detail below in the section entitled “Potential Payments upon Termination and Change of Control ― Executive Severance Plan.” +Retention Bonus for Interim Principal Financial Officer +Effective as of March 3, 2025, Celina A. Davila, then the Chief Accounting Officer and principal accounting officer of the Company, assumed the role of principal financial officer of the Company on an interim basis until a new principal financial officer was appointed on July 31, 2025. In connection with her appointment as interim principal financial officer of the Company, the Company entered into a retention bonus agreement (the “Retention Agreement”) with Ms. Davila whereby she is entitled to a cash payment of $100,000 (the “Retention Bonus”). The Retention Bonus will be paid in two installments as follows: (i) 35% will be paid no later than fifteen (15) days following March 3, 2026 and (ii) the remaining 65% will be paid no later than fifteen (15) days following September 3, 2026, in each case, subject to the applicable terms and conditions of the Retention Agreement. The Retention Agreement is intended to retain Ms. Davila during a period of leadership transition in her department and to compensate her for the additional time and responsibility required of her for her service as interim principal financial officer. +Employee Compensation Claw-Back Policy +Effective October 11, 2023, we adopted the ProPetro Holding Corp. Incentive-Based Compensation Recovery (Clawback) Policy (the “Clawback Policy”). The Clawback Policy is intended to comply with the requirements of Section 10D of the Exchange Act and Section 303A.14 of the NYSE Listing Company Manual. Under the terms of the Clawback Policy, in the event of a restatement of our financial statements due to material non-compliance with any financial reporting requirement under applicable securities laws, the Compensation Committee shall take reasonably prompt action to cause the Company to recover from any covered executive the amount of any incentive- based compensation granted, earned or vested within the three preceding completed fiscal years, to the extent the value of such compensation was in excess of the amount of incentive compensation that would have been granted, earned, or vested had the financial statements been in compliance with the financial reporting requirements. Each executive officer, including our Named Executive Officers and former executive officers, are considered “covered executives” for purposes of the Clawback Policy. Incentive-based compensation is not subject to the Clawback Policy if it is received (i) prior to the date a covered executive becomes an executive officer or (ii) prior to October 2, 2023. +42  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +Executive Stock Ownership Policy +Under the terms of our Executive Stock Ownership Policy, our executive officers must own shares of our common stock or certain equity awards with a value equal to not less than the following multiples of base salary: +Office +Multiple of Base Pay +Chief Executive Officer +■ ■ ■ ■ ■ +5x +Chief Financial Officer and Chief Operating Officer +■ ■ ■ +3x +All Other Executive Officers +■  +1x +Any individuals who became executive officers as a result of an internal promotion or a new hire, will have five years from the date of being named an executive officer to meet the stock ownership guidelines. As a result, all of our Named Executive Officers except for Mr. Muñoz still have additional time in which to comply with these guidelines. As of December 31, 2025, Mr. Muñoz was in compliance with these ownership guidelines. In calculating the value of shares of our common stock or certain equity awards held for purposes of determining compliance with the policy, such value is equal to the closing price per share on the measurement date, based on shares owned outright and unvested RSUs, with the value of such unvested RSUs discounted by 40%. Unexercised option awards and unvested PSUs are excluded from the calculation. +Prohibition on Hedging and Pledging +We believe that derivative transactions, including puts, calls, and options, and hedging transactions for our securities carry a high risk of inadvertent securities laws violations and may lead to an officer, director, or employee no longer having the same objectives as the Company’s other stockholders. For these reasons, we prohibit our directors, officers, and employees from engaging in any type of derivative or hedging transactions in respect of our securities pursuant to our Insider Trading Compliance Policy. Company stock pledged as collateral, including shares held in a margin account, may be sold without the consent of the holder by the lender in a foreclosure or default event, which could lead to inadvertent securities laws violations. For this reason, pursuant to our Insider Trading Compliance Policy, we prohibit pledging Company securities as collateral to secure loans and purchasing Company securities on margin. +Grant Practices Specific to Stock Options and Similar Awards +We do not currently grant stock options or similar awards as part of our equity compensation programs and did not grant any such awards in 2025. We do not currently have a formal grant policy in place for equity-based awards , but if stock options or similar awards were to be granted in the future, the Company would not grant such options in anticipation of the release of material nonpublic information that is likely to result in changes to the price of our common stock. During fiscal year 2025, we did not time the disclosure of material nonpublic information for the purpose of affecting the value of executive compensation. +No Tax Gross-Ups +We do not provide gross-up payments to cover our Named Executive Officers’ personal income taxes that may pertain to any of the compensation or perquisites paid or provided by our Company. +Regulatory Considerations +The tax and accounting implications of utilizing various forms of compensation are considered when adopting new or modifying existing compensation programs. Section 162(m) (“Section 162(m)”) of the Internal Revenue Code of 1986, as amended (the “Code”) generally precludes a publicly held company from taking a federal income tax deduction for compensation paid in excess of $1 million per year to certain covered employees, which include our Named Executive Officers. To maintain flexibility in compensating the Company’s executive officers in a manner designed to promote achievement of corporate goals, retention and recruitment, the Compensation Committee has not adopted a policy requiring all compensation to be tax deductible and expects that the deductibility of certain compensation paid will be limited by Section 162(m). +PROPETRO  2026 Proxy Statement   |  43 +TABLE OF CONTENTS +Executive Compensation +Compensation Risk Assessment +The Compensation Committee reviews our compensation policies and practices on an annual basis to identify any risks posed by these programs and to assess the appropriateness of any risks identified. We believe that any risks associated with our compensation policies and practices are mitigated in large part by the following factors and, therefore, that no such risks are likely to have a material adverse effect on us: +We pay a mix of compensation which includes short-term cash and long-term equity-based compensation. +We base the vesting and payment of our incentive compensation awards on several different performance metrics, which discourages our employees from placing undue emphasis on any one metric or aspect of our business at the expense of others. +We believe that our performance metrics are reasonably challenging yet should not require inappropriate risk-taking to achieve. +The performance metrics for awards under our Annual Bonus Plan include quantitative financial and operational metrics as well as qualitative metrics related to our operations, strategy, and other aspects of our business, as well as the individual performance of our executives, and our Compensation Committee retains discretion to modify payout amounts under the Annual Bonus Plan, as appropriate. +The performance periods under our PSUs overlap, and our time-vested RSUs generally vest over a three-year period. This mitigates the motivation to maximize performance in any one period at the expense of others. +Our Named Executive Officers are required to own our common stock at levels provided in our Executive Stock Ownership Guidelines. +We have instituted a claw-back policy, which allows us to claw-back compensation in the event of a financial restatement. +We believe that we have an effective management process for developing and executing our short- and long-term business plans. +Our compensation policies and programs are overseen by the Compensation Committee. +The Compensation Committee retains an independent compensation consultant. +44  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +Report of the Compensation Committee +The Compensation Committee has reviewed and discussed the above CD&A with management, and, based on such review and discussions, the Compensation Committee recommended to the Board that the CD&A be included in this proxy statement. +The Compensation Committee of the Board of Directors +MICHELE +VION +MARK S. BERG +Chair +ANTHONY J. +BEST +MARY P. +RICCIARDELLO +PROPETRO  2026 Proxy Statement   |  45 +TABLE OF CONTENTS +Executive Compensation +Executive Compensation Tables +SUMMARY COMPENSATION TABLE +The following table summarizes the compensation provided by us to our Named Executive Officers for the fiscal years ended December 31, 2025, 2024, and 2023. +Name and +Principal Position +Year +Salary (1) +($) +Bonus +($) +Stock +Awards (2) +($) +Option +Awards +($) +Non-Equity +Incentive Plan +Compensation (3) +($) +All Other +Compensation (4) +($) +Total +($) +Samuel D. Sledge +Chief Executive Officer +2025 +975,000 +― +4,391,410 +― +1,137,500 +35,802 +6,539,712 +2024 +946,000 +― +3,771,150 +― +1,231,030 +39,267 +5,987,447 +2023 +800,000 +― +4,210,746 +― +735,800 +41,414 +5,787,960 +Caleb L. Weatherl (5) +Chief Financial Officer +2025 +245,959 +― +1,013,864 +― +229,000 +57,991 +1,546,814 +Adam Muñoz +President and +Chief Operating Officer +2025 +612,000 +― +1,951,732 +― +613,200 +67,622 +3,244,554 +2024 +600,000 +― +1,953,457 +― +721,800 +49,809 +3,325,066 +2023 +572,000 +― +2,105,373 +― +501,100 +52,359 +3,230,832 +Shelby Fietz +Chief Commercial Officer +2025 +505,000 +― +975,875 +― +478,150 +62,311 +2,021,336 +2024 +495,000 +― +879,045 +― +527,027 +53,580 +1,954,652 +2023 +365,193 +― +3,449,874 +― +414,500 +56,729 +4,286,296 +John J. “Jody” Mitchell +General Counsel +2025 +500,000 +― +975,875 +― +473,400 +53,539 +2,002,814 +2024 +450,000 +― +947,423 +― +401,288 +48,107 +1,846,818 +2023 +387,000 +― +834,721 +― +270,000 +51,414 +1,543,135 +Celina A. Davila (5) +Former Interim Principal +Financial Officer +2025 +320,000 +― +179,343 +― +301,800 +52,132 +853,275 +David S. Schorlemer (5) +Former Chief Financial Officer +2025 +91,726 +― +― +― +― +1,607,479 +1,699,205 +2024 +540,000 +― +1,562,753 +― +516,618 +50,780 +2,670,151 +2023 +515,000 +― +1,486,143 +― +406,200 +72,509 +2,479,852 +(1) +The amounts in this column represent the base salary of each Named Executive Officer earned for the year indicated. +(2) +Amounts in this column for 2025 reflect the aggregate grant date fair value of the RSU and PSU awards granted in 2025 under the 2020 LTIP, calculated in accordance with FASB ASC Topic 718. The FASB ASC Topic 718 value for the RSUs was calculated using the closing price per share of our common stock on the date of grant multiplied by the total number of RSUs granted. The FASB ASC Topic 718 grant date fair value of the PSUs was determined using a Monte Carlo simulation. For information regarding assumptions underlying the valuation of equity awards, see Note 14 of the Consolidated Financial Statements included in our 2025 Annual Report on Form 10-K. The actual amount realized upon settlement of RSU and PSU awards will depend upon the market price of the Company’s stock on the settlement date and the Company’s performance (with respect to the PSUs). +(3) +Amounts in this column for 2025 represent the short-term cash incentive awards for performance during the 2025 fiscal year pursuant to the Annual Bonus Plan, determined based on achievement of the applicable performance metrics. See “Compensation Discussion and Analysis—Elements of Compensation and 2025 Decisions in Detail— Annual Cash Incentive Awards” above for additional informational regarding these awards. +(4) +Amounts in this column are comprised of the payments and benefits enumerated in the table below. +Name +Vehicle +Allowance +Program (a) +($) +Contribution to +401(k) Plan (b) +($) +Club Dues/ +Membership +Fees (c) +($) +Severance (d) +($) +PTO +Payout (e) +($) +Total (f) +($) +Samuel D. Sledge +9,969 +21,000 +4,833 +― +― +35,802 +Caleb L. Weatherl +6,646 +10,222 +41,123 +― +― +57,991 +Adam Muñoz +14,400 +21,000 +32,222 +― +― +67,622 +Shelby Fietz +14,400 +21,000 +26,911 +― +― +62,311 +John J. “Jody” Mitchell +14,400 +21,000 +18,139 +― +― +53,539 +Celina A. Davila +14,400 +21,000 +16,732 +― +― +52,132 +David S. Schorlemer +3,323 +21,000 +1,867 +1,553,595 +27,694 +1,607,479 +(a) +The amounts in this column reflect the cost of the Company’s vehicle allowance program. +46  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +(b) +The amounts in this column reflect the Company’s contribution to each Named Executive Officer’s account in the Company’s 401(k) plan. +(c) +The amounts in this column reflect club dues or membership fees paid by the Company. +(d) +The amounts in this column reflect the cash severance paid to Mr. Schorlemer in connection with the termination of his employment with the Company on March 3, 2025. The amounts paid were amounts Mr. Schorlemer had a legal right to receive pursuant to the terms of the Company’s Executive Severance Plan as a result of his involuntary termination without cause. No new or additional benefits were provided in connection with his separation. +(e) +The amounts in this column reflect the value of the accrued but unused paid time off paid to Mr. Schorlemer in connection with the termination of his employment with the Company on March 3, 2025. +(f) +In addition to the amounts included herein, the spouses of Messrs. Sledge and Fietz, respectively, accompanied them on certain business trips via Company chartered aircraft, but such travel resulted in no incremental cost to the Company. +(5) +Ms. Davila was appointed as the Interim Principal Financial Officer of the Company effective March 3, 2025, and Mr. Weatherl was appointed as the Chief Financial Officer of the Company effective July 14, 2025 and Principal Financial Officer July 31, 2025. Because Ms. Davila and Mr. Weatherl became Named Executive Officers in fiscal year 2025, their compensation is not disclosed for fiscal years 2024 or 2023. Ms. Davila continues to serve as the Chief Accounting Officer of the Company. Mr. Schorlemer’s employment with the Company was terminated without cause on March 3, 2025. +PROPETRO  2026 Proxy Statement   |  47 +TABLE OF CONTENTS +Executive Compensation +GRANTS OF PLAN-BASED AWARDS +Name +Grant Date +Estimated Possible Payouts Under +Non-Equity Incentive Plan +Awards (1) +Estimated Future Payouts Under +Equity Incentive Plan +Awards (2) +All Other +Stock +Awards: +Number of +Shares of +Stock (3) +(#) +Grant Date +Fair Value +of Stock +and Option +Awards (4) +($) +Threshold +($) +Target +($) +Maximum +($) +Threshold +($) +Target +(#) +Maximum +(#) +Samuel D. Sledge +Annual Bonus +― +560,625 +1,121,250 +2,242,500 +― +― +― +― +― +Annual RSUs (5) +3/4/2025 +― +― +― +― +― +― +252,525 +1,898,988 +PSUs +3/4/2025 +― +― +― +101,010 +252,525 +505,050 +― +2,492,422 +Caleb L. Weatherl +Annual Bonus +― +110,682 +221,363 +442,726 +― +― +― +― +― +Annual RSUs (5) +8/1/2025 +― +― +― +― +― +― +100,482 +509,444 +PSUs +8/1/2025 +― +― +― +40,193 +100,482 +200,964 +― +504,420 +Adam Muñoz +Annual Bonus +― +306,000 +612,000 +1,224,000 +― +― +― +― +― +Annual RSUs (5) +3/4/2025 +― +― +― +― +― +― +112,233 +843,992 +PSUs +3/4/2025 +― +― +― +44,893 +112,233 +224,466 +― +1,107,740 +Shelby Fietz +Annual Bonus +― +227,250 +454,500 +909,000 +― +― +― +― +― +Annual RSUs (5) +3/4/2025 +― +― +― +― +― +― +56,117 +422,000 +PSUs +3/4/2025 +― +― +― +22,447 +56,117 +112,234 +― +553,875 +John J. “Jody” Mitchell +Annual Bonus +― +225,000 +450,000 +900,000 +― +― +― +― +― +Annual RSUs (5) +3/4/2025 +― +― +― +― +― +― +56,117 +422,000 +PSUs +3/4/2025 +― +― +― +22,447 +56,117 +112,234 +― +553,875 +Celina A. Davila +Annual Bonus +― +104,000 +208,000 +416,000 +― +― +― +― +― +Annual RSUs (5) +3/4/2025 +― +― +― +― +― +― +17,957 +135,037 +PSUs +3/4/2025 +― +― +― +1,796 +4,489 +8,978 +― +44,306 +David S. Schorlemer +Annual Bonus (6) +― +― +― +― +― +― +― +― +― +Annual RSUs +― +― +― +― +― +― +― +― +― +PSUs +― +― +― +― +― +― +― +― +― +(1) +Amounts in these columns represent the estimated payouts for annual cash incentive awards under the Annual Bonus Plan for 2025 assuming threshold, target, and maximum performance achievement. The amounts for Mr. Weatherl are pro-rated based on his hire date of July 14, 2025. The actual amounts paid to our Named Executive Officers for 2025 can be found in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table above. See “Compensation Discussion and Analysis—Elements of Compensation and 2025 Decisions in Detail—Annual Cash Incentive Awards” above for additional information regarding these awards. +(2) +These amounts represent the threshold, target, and maximum number of PSUs granted to the Named Executive Officers during 2025. The number of PSUs which ultimately vest is based on the performance of the Company’s TSR relative to the TSR of the companies in our 2025 Performance Peer Group during the three-year performance period ending on December 31, 2027, subject to the Named Executive Officer’s continued employment through such date. +(3) +Amounts in this column reflect RSUs granted to the Named Executive Officers during 2025. +(4) +These amounts represent the aggregate grant date fair value of RSUs and PSUs granted in 2025 to the Named Executive Officers, computed in accordance with FASB ASC Topic 718, disregarding estimated forfeitures. The grant date fair value of the PSUs is based on probable outcome with regard to the applicable performance metrics. For information regarding assumptions underlying the valuation of equity awards, see Note 14 of the Consolidated Financial Statements in our 2025 Annual Report on Form 10-K. +(5) +Amounts in these rows reflect annual RSUs granted to the Named Executive Officers during 2025. One-third of each such grant vests on each of the first three anniversaries of the applicable date of grant, subject to the Named Executive Officer’s continued employment through each such date. +(6) +Mr. Schorlemer’s employment with the Company was terminated without cause on March 3, 2025. Accordingly, no annual cash incentive eligibility was established for Mr. Schorlemer for 2025. +48  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +NARRATIVE DISCLOSURE TO SUMMARY COMPENSATION TABLE AND GRANTS OF PLAN-BASED AWARDS TABLE +Executive Severance Plan +None of the Named Executive Officers is currently a party to an employment agreement with us. Instead, they participate in the Executive Severance Plan. For additional information regarding the terms and conditions of this plan please see “Potential Payments Upon Termination or Change in Control—Executive Severance Plan.” +OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END +The following table reflects information regarding outstanding and unvested stock options, RSUs, and PSUs held by our Named Executive Officers as of December 31, 2025. +Option Awards +Stock Awards +Name +Number of +Securities +Underlying +Unexercised +Options +Exercisable +(#) +Number of +Securities +Underlying +Unexercised +Options +Unexercisable +(#) +Option +Exercise +Price +($) +Option +Expiration +Date +Number of +Shares or +Units of +Stock That +Have Not +Vested (1) +(#) +Market +Value of +Shares or +Units of +Stock That +Have Not +Vested (2) +($) +Equity +Incentive Plan +Awards: +Number of +Unearned +Shares That +Have Not +Vested (3) +(#) +Equity +Incentive Plan +Awards: +Market Value +of Unearned +Shares That +Have Not +Vested (2) +($) +Samuel D. Sledge +21,750 +― +14.00 +3/16/2027 +― +― +― +― +― +― +― +― +472,533 +4,493,789 +― +― +― +― +― +― +― +― +990,710 +9,421,652 +Caleb L. +Weatherl +― +― +― +― +100,482 +955,584 +― +― +― +― +― +― +― +― +200,964 +1,911,168 +Adam Muñoz +48,938 +― +14.00 +3/16/2027 +― +― +― +― +― +― +― +― +225,152 +2,141,196 +― +― +― +― +― +― +― +― +476,038 +4,527,121 +Shelby Fietz +6,090 +― +14.00 +3/16/2027 +— +— +― +― +― +― +― +― +201,776 +1,918,890 +― +― +― +― +― +― +― +― +225,440 +2,143,934 +John J. “Jody” +Mitchell +― +― +― +― +108,310 +1,030,028 +― +― +― +― +― +― +― +― +234,246 +2,227,679 +Celina A. Davila +― +― +― +― +33,354 +317,197 +― +― +― +― +― +― +16,524 +157,143 +David S. Schorlemer (4) +― +― +― +― +― +― +― +― +(1) +The amounts in this column represent RSU awards held by each Named Executive Officer, which vest pro-rata over the applicable remaining vesting dates as follows, subject to the Named Executive Officer’s continued employment: +Name +Number of Unvested +RSUs on 12/31/2025 +Remaining Vesting Dates +Samuel D. Sledge +58,121 +February 1, 2026 +161,887 +February 28, 2026 and February 28, 2027 +252,525 +March 4, 2026, March 4, 2027, and March 4, 2028 +Caleb L. Weatherl +100,482 +August 1, 2026, August 1, 2027, and August 1, 2028 +Adam Muñoz +29,061 +February 1, 2026 +83,858 +February 28, 2026 and February 28, 2027 +112,233 +March 4, 2026, March 4, 2027, and March 4, 2028 +Shelby Fietz +3,539 +February 1, 2026 +104,384 +November 26, 2026 +37,736 +February 28, 2026 and February 28, 2027 +56,117 +March 4, 2026, March 4, 2027, and March 4, 2028 +PROPETRO  2026 Proxy Statement   |  49 +TABLE OF CONTENTS +Executive Compensation +Name +Number of Unvested +RSUs on 12/31/2025 +Remaining Vesting Dates +John J. “Jody” Mitchell +11,522 +February 1, 2026 +40,671 +February 28, 2026 and February 28, 2027 +56,117 +March 4, 2026, March 4, 2027, and March 4, 2028 +Celina A. Davila +3,344 +February 1, 2026 +1,990 +September 4, 2026 +10,063 +February 28, 2026 and February 28, 2027 +17,957 +March 4, 2026, March 4, 2027, and March 4, 2028 +(2) +The amounts in this column were calculated by multiplying $9.51, the closing price of our common stock on December 31, 2025, by the number of awards reported. +(3) +Pursuant to the applicable rules, the amounts in this column and in the table below reflect the maximum number of PSUs held by each Named Executive Officer that were granted in 2024 and 2025 because performance as of December 31, 2025 was above target for both the 2024 and 2025 PSUs. Both the PSUs granted to the Named Executive Officers in 2024 and 2025 may vest, if at all, based on the performance of the Company’s stock relative to a peer group during the applicable three-year performance period as shown in the below table. The actual number of PSUs earned based on actual performance over the full performance period may range from 0% to 200% of the target amount. +Name +Number of Unvested +PSUs on 12/31/2025 +Applicable Performance +Period End Date +Samuel D. Sledge +485,660 +December 31, 2026 +505,050 +December 31, 2027 +Caleb L. Weatherl +200,964 +December 31, 2027 +Adam Muñoz +251,572 +December 31, 2026 +224,466 +December 31, 2027 +Shelby Fietz +113,206 +December 31, 2026 +112,234 +December 31, 2027 +John J. “Jody” Mitchell +122,012 +December 31, 2026 +112,234 +December 31, 2027 +Celina A. Davila +7,546 +December 31, 2026 +8,978 +December 31, 2027 +(4) +Mr. Schorlemer’s employment with the Company was terminated without cause on March 3, 2025. Accordingly, all outstanding RSUs and PSUs held by Mr. Schorlemer at the time of his termination of employment were forfeited in accordance with the terms of the applicable awards. +2025 OPTION EXERCISES AND STOCK VESTED +Option Awards +Stock Awards +Name +Number of Shares +Acquired on +Exercise +(#) +Value Realized on +Exercise +($) +Number of Shares +Acquired on +Vesting (1) +(#) +Value Realized on +Vesting (2) +($) +Samuel D. Sledge +― +― +399,221 +3,649,922 +Caleb L. Weatherl +― +― +― +― +Adam Muñoz +― +― +207,095 +1,890,360 +Shelby Fietz +― +― +163,513 +1,437,201 +John J. “Jody” Mitchell +— +— +80,326 +732,408 +Celina A. Davila +― +― +11,966 +96,092 +David S. Schorlemer (3) +― +― +70,131 +606,879 +(1) +This column reflects the RSUs and PSUs held by each Named Executive Officer that vested during 2025. Performance for the 2023 PSUs for which the performance period ended on December 31, 2025 resulted in a relative total shareholder return of the 60 th percentile of the relevant peer group, providing a payout of 130% of target performance. +(2) +This column reflects the aggregate market value realized by each Named Executive Officer upon vesting, calculated by multiplying the number of RSUs and PSUs that vested (including shares withheld for tax withholding purposes) by the closing price of our common stock on the applicable vesting date or, to the extent the vesting date was not a trading date, the closing price on the last preceding trading date. +50  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +(3) +Mr. Schorlemer’s employment with the Company was terminated without cause on March 3, 2025. Accordingly, all outstanding RSUs and PSUs held by Mr. Schorlemer at the time of his termination of employment were forfeited in accordance with the terms of the applicable awards. The amounts included in this table with respect to Mr. Schorlemer vested prior to his termination of employment. +PENSION BENEFITS +We do not sponsor any qualified or non-qualified defined benefit pension plans. +NONQUALIFIED DEFERRED COMPENSATION +We do not have any non-qualified deferred compensation plans. +POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL +Executive Severance Plan +In 2020, the Board adopted the Executive Severance Plan, pursuant to which the Named Executive Officers are eligible to receive severance payments and benefits, as described in more detail below. None of the Named Executive Officers currently have an employment agreement with the Company. Pursuant to the terms of the Executive Severance Plan, the level of severance benefit for which a participant is eligible is determined based on their designated “Tier.” As of December 31, 2025, the Tier levels for each of the Named Executive Officers was as follows: +Name +Executive Severance Plan Tier Level +Samuel D. Sledge +Tier 1 +Caleb L. Weatherl +Tier 2 +Adam Muñoz +Tier 2 +Shelby Fietz +Tier 2 +John J. “Jody” Mitchell +Tier 2 +Celina A. Davila +Tier 2 +David S. Schorlemer (1) +N/A +(1) +Mr. Schorlemer was Tier 2 at the time of his termination on March 3, 2025. In connection with his termination without cause, he received the payments and benefits that he had a legal right to under the existing terms of the Executive Severance Plan. No new or additional benefits or compensation in excess of what Mr. Schorlemer had a legal right to under the Executive Severance Plan were provided in connection with the Separation. +Upon the Named Executive Officer’s termination without “Cause” or a resignation for “Good Reason” (each as defined in the Executive Severance Plan and described below), current participants in the Executive Severance Plan will be eligible to receive the following benefits: +• +A lump sum cash payment equal to 2.0 (for Tier 1 Executives), 1.5 (for Tier 2 Executives) or 1.0 (for Tier 3 Executives) times the sum of the participant’s (i) annualized base salary then in effect and (ii) target annual bonus for the year in which the termination occurred, +• +Any earned but unpaid bonus for the year preceding the year of termination based on the Company’s actual performance, paid at the time such bonuses are paid to all other executives, and +• +Reimbursement for a portion of the cost of continuation coverage for the participant and his or her spouse and eligible dependents under the Company’s group health plans pursuant to COBRA for 12 months (or 18 months for Tier 1 Executives), unless such coverage is earlier terminated in accordance with the terms of the Executive Severance Plan. +Upon a termination without Cause or a resignation for Good Reason within 12 months following a “Change in Control” (as defined in the Executive Severance Plan), participants in the Executive Severance Plan will be eligible to receive the following benefits: +• +A lump sum cash payment equal to 3.0 (for Tier 1 Executives), 2.0 (for Tier 2 Executives) or 1.5 (for Tier 3 Executives) times the sum of the participant’s (i) annualized base salary then in effect and (ii) target annual bonus as in effect immediately prior to the Change in Control, +• +Any earned but unpaid bonus for the year preceding the year of termination based on the Company’s actual performance, paid at the time such bonuses are paid to all other executives, +PROPETRO  2026 Proxy Statement   |  51 +TABLE OF CONTENTS +Executive Compensation +• +A lump sum cash payment equal to a prorated target bonus for the year of termination based on days of service during the applicable calendar year, and +• +Full reimbursement of the cost of continuation coverage for the participant and his or her spouse and eligible dependents under the Company’s group health plans pursuant to the COBRA, for 12 months (or 18 months for Tier 1 Executives), unless such coverage is earlier terminated in accordance with the terms of the Executive Severance Plan. +Additionally, if a participant’s employment with the Company terminates as a result of his or her death or “Disability” (as defined in the Executive Severance Plan), then the participant will be eligible to receive the following benefits: +• +Any earned but unpaid bonus for the year preceding the year of termination based on the Company’s actual performance, paid at the time such bonuses are paid to all other executives, and +• +A lump sum cash payment equal to a prorated target bonus for the year of termination based on days of service during the applicable calendar year. +In order to receive any of the foregoing severance benefits under the Executive Severance Plan, a participant must timely execute (and not revoke) a release of claims in favor of the Company and its affiliates. Further, the Executive Severance Plan requires continued compliance with certain confidentiality, non-competition, non-solicitation and non-disparagement covenants as set forth in the award agreements under the ProPetro Holding Corp. 2017 Incentive Award Plan (the “2017 LTIP”) and the 2020 LTIP. If the severance benefits under the Executive Severance Plan would trigger an excise tax for a participant under Section 4999 or Section 280G of the Code (“Section 280G”) the Executive Severance Plan provides that the participant’s severance benefits will be reduced to a level at which the excise tax is not triggered, unless the participant would receive a greater amount without such reduction after taking into account the excise tax and other applicable taxes. +As used in the Executive Severance Plan, the following terms generally mean: +“ Cause ” generally means the Named Executive Officer’s: +(i) +material breach of the employment agreement or any other agreement with the Company or its affiliates, subject to a 30-day notice and 15-day cure period, +(ii) +material breach of the Company’s or its affiliates’ policies or code of conduct applicable to the Named Executive Officer, +(iii) +violation of any law applicable to the workplace or employment relationship, +(iv) +gross negligence, material misconduct reflecting negatively on the Company, breach of fiduciary duty, fraud, theft, or embezzlement, +(v) +conviction of or plea of nolo contendere to any felony (or state law equivalent) or any crime involving moral turpitude, +(vi) +material failure or refusal (other than due to Disability) to perform obligations or any lawful director from the Board or an officer of the Company, subject to a 30-day notice and 15-day cure period, +(vii) +unlawful use or possession of illegal drugs on the Company’s premises or while performing duties, +(viii) +failure to exercise the degree of care, skill, and diligence as employees of ordinary skill and knowledge commonly possess and exercise, subject to a 30-day notice and 15-day cure period, or +(ix) +failure to act with undivided loyalty to the Company and its affiliates. +“ Change in Control ” has the meaning given to it under the 2020 LTIP, which is the same meaning given to such term under the 2017 LTIP and described below under “— 2017 LTIP.” +“ Good Reason ” generally means: +(i) +the material diminution in the Named Executive Officer’s base salary, unless in connection with a general reduction in base salaries that affects all similarly situated employees, +(ii) +material diminution in the Named Executive Officer’s authority, duties, or responsibilities unless in connection with an internal investigation by the Company (provided that his or her removal from the board of directors or as an officer of any of the Company’s affiliates shall not constitute Good Reason), +52  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +(iii) +the material breach by the Company of any of its obligations under the agreement, or +(iv) +the Named Executive Officer’s relocation by more than 50 miles from his or her current place of business, in each case, subject to a 30-day notice period, 15-day cure period and the Named Executive Officer’s resignation within 75 days of the end of the cure period. +“ Disability ” generally means the Named Executive Officer’s inability to perform the essential functions of his or her job due to physical or mental impairment for a period that exceeds 120 consecutive days or 180 total days in any 12- month period, as determined by the Board. +2017 LTIP +Only Messrs. Sledge, Fietz and Muñoz hold stock options under the 2017 LTIP. The stock options granted under the 2017 LTIP are fully vested. The vested and outstanding stock options awarded under the 2017 LTIP will remain outstanding and exercisable for 90 days following a Named Executive Officer’s termination of service without “Cause” or due to his resignation for “Good Reason” and will remain outstanding and exercisable for 12 months following a Named Executive Officer’s termination of service due to his death, “Disability” or “Retirement.” +To receive the above described severance payments and benefits, the Named Executive Officers must execute a release of claims in favor of the Company and comply with the terms of certain restrictive covenants, including a one- year non-competition and two-year non-solicitation obligation as well as a perpetual confidentiality and non- disparagement obligations. +As used in the 2017 LTIP and the award agreements thereunder, “Cause” and “Disability” generally have the meanings set forth below. In addition, “Retirement” and “Change in Control” generally have the meanings set forth below. +“ Cause ” generally means the Named Executive Officer’s: +(i) +willful failure to substantially perform his or her duties, +(ii) +willful failure to carry out, or comply with, in any material respect any lawful directive of our board of directors, +(iii) +commission at any time of any act or omission that results in, or may reasonably be expected to result in, a conviction, a plea of no contest, plea of nolo contendere, or imposition of unadjudicated probation for any felony or crime involving moral turpitude, +(iv) +unlawful use (including being under the influence) or possession of illegal drugs on the Company’s premises or while performing his or her duties and responsibilities, +(v) +commission at any time of any act of fraud, embezzlement, misappropriation, misconduct, conversion of assets of the Company, or breach of fiduciary duty against the Company, or +(vi) +material breach of the employment agreement or any other agreement with the Company, subject to certain procedural requirements. +“ Change of Control ” generally means: +(i) +any transaction or series of transactions whereby any person, other than the Company, any of its subsidiaries or any Company benefit plan, acquires beneficial ownership of 30% or more of the total combined voting power of the Company’s securities, +(ii) +the current members of the Board cease to constitute a majority of the Board for any reason, +(iii) +the consummation by the Company of a merger, consolidation, reorganization or business combination or a sale of all or substantially all of the Company’s assets, unless: +(a) +the Company controls the successor entity, +(b) +no person owns 50% or more of the combined voting power of the successor entity, or +(c) +the current members of the Board represent the majority of the successor entity’s board, or +(iv) +the tenth day following the complete dissolution of the Company. +PROPETRO  2026 Proxy Statement   |  53 +TABLE OF CONTENTS +Executive Compensation +“ Disability ” generally means the Named Executive Officer’s inability to engage in substantial gainful activity by reason of any medically determinable physical or mental impairment. +“ Retirement ” generally means the termination of the Named Executive Officer’s employment following his attainment of both (i) age 60 and (ii) ten years of service with the Company or one of its affiliates. +2020 LTIP +All equity awards granted to the Named Executive Officers’ during or following 2021 are subject to the following terms. +Pursuant to the 2020 LTIP, in the event of a termination of employment of a Named Executive Officer due to his or her death or “Disability,” (i) all unvested RSUs that would have vested had the Named Executive Officer continued his or her service during the 12 months following the termination will vest on such termination or resignation date, and (ii) with respect to any unvested PSUs, if such termination of employment occurs within one year prior to the last day of the applicable performance period, the Named Executive Officer’s unvested PSUs will remain outstanding and eligible to vest at the end of the applicable performance period. +In the event of a termination of a Named Executive Officer by the Company without “Cause” upon or within one year following a “Change in Control,” all unvested RSUs and PSUs will immediately vest based on performance as of the date of the Change in Control. In addition, in the event of a Named Executive Officer’s resignation for “Good Reason” upon or within one year following a Change in Control, all unvested RSUs and PSUs will immediately vest based on performance as of the date of the Change in Control. In the event of a termination of employment of a Named Executive Officer for any other reason, all unvested RSUs and PSUs will be forfeited immediately upon the termination. +In the event of a Change in Control, the performance period for all unvested PSUs will be deemed to have ended as of the date of the Change in Control. Performance will be determined as of the date of the Change in Control and then deemed to be achieved at the greater of the target number of PSUs or performance determined as of the date of the Change in Control. Then, the PSUs for which the performance goal was obtained as described above will remain outstanding and eligible to vest at the end of the applicable performance period, subject to the Named Executive Officer’s continued employment through such date. +To receive the above-described severance payments and benefits, the Named Executive Officers must execute a release of claims in favor of the Company and comply with the terms of certain restrictive covenants, including a one- year non-competition and two-year non-solicitation obligation as well as a perpetual confidentiality and non- disparagement obligations. +The 2020 LTIP further specifies that unless otherwise provided for in an award agreement, if any awards under the 2020 LTIP are not assumed or substituted by a successor entity in a Change in Control, then all outstanding awards will become fully vested as of the date of the Change in Control (for PSUs, based on the greater of (i) target and (ii) actual performance as of the date of the “Change in Control”). +As used in the 2020 LTIP and the award agreements thereunder, “Cause,” “Change in Control,” “Disability” and “Good Reason” generally have the meanings set forth below. +“ Cause ” has the meaning given to it under the Executive Severance Plan, described above under “— Executive Severance Plan.” +“ Change in Control ” has the meaning given to “Change of Control” under the 2017 LTIP, described above under “— 2017 LTIP.” +“ Disability ” has the meaning given to it under the Executive Severance Plan, described above under “— Executive Severance Plan.” +“ Good Reason ” has the meaning given to it under the Executive Severance Plan, described above under “— Executive Severance Plan.” +54  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +Quantification of Benefits on Termination +The table below quantifies the payments and benefits that would have been paid to our Named Executive Officers pursuant to the terms of the Executive Severance Plan and the equity award agreements in the event of certain terminations of employment with us, had such terminations occurred on December 31, 2025. +Name +Payments and +Benefits +Termination +without Cause +or Resignation +for Good +Reason (1) +($) +Termination as +a Result of +Death, +Disability (2) +($) +Termination +as a Result of +Retirement (3) +($) +Termination +without Cause +within One +Year Following +a Change in +Control (4) +($) +Resignation +for Good +Reason within +One Year +Following a +Change in +Control (4) +($) +Samuel D. Sledge +Cash Severance (5) +4,192,500 +― +― +6,288,750 +6,288,750 +Pro-Rata Bonus (6) +― +1,121,250 +― +1,121,250 +1,121,250 +COBRA Subsidy (7) +23,766 +― +― +38,653 +38,653 +RSU and PSU +Acceleration (8) +― +6,002,649 +― +12,840,249 +12,840,249 +Total +4,216,266 +7,123,899 +― +20,288,902 +20,288,902 +Caleb L. Weatherl +Cash Severance (5) +1,496,250 +― +― +1,995,000 +1,995,000 +Pro-Rata Bonus (6) +― +472,500 +― +472,500 +472,500 +COBRA Subsidy (7) +15,847 +― +― +25,937 +25,937 +RSU and PSU +Acceleration (8) +― +318,528 +― +2,732,970 +2,732,970 +Total +1,512,097 +791,028 +― +5,226,407 +5,226,407 +Adam Muñoz +Cash Severance (5) +1,836,000 +― +― +2,448,000 +2,448,000 +Pro-Rata Bonus (6) +― +612,000 +― +612,000 +612,000 +COBRA Subsidy (7) +15,847 +― +― +25,937 +25,937 +RSU and PSU +Acceleration (8) +― +3,040,551 +― +6,136,098 +6,136,098 +Total +1,851,847 +3,652,551 +― +9,222,035 +9,222,035 +Shelby Fietz +Cash Severance (5) +1,439,250 +― +― +1,919,000 +1,919,000 +Pro-Rata Bonus (6) +― +454,500 +― +454,500 +454,500 +COBRA Subsidy (7) +15,847 +― +― +25,937 +25,937 +RSU and PSU +Acceleration (8) +― +2,288,011 +― +3,815,856 +3,815,856 +Total +1,455,097 +2,742,511 +― +6,215,293 +6,215,293 +John J. “Jody” Mitchell +Cash Severance (5) +1,425,000 +― +― +1,900,000 +1,900,000 +Pro-Rata Bonus (6) +― +450,000 +― +450,000 +450,000 +COBRA Subsidy (7) +15,847 +― +― +25,937 +25,937 +RSU and PSU +Acceleration (8) +― +1,455,525 +― +2,997,340 +2,997,340 +Total +1,440,847 +1,905,525 +― +5,373,277 +5,373,277 +Celina A. Davila +Cash Severance (5) +792,000 +― +― +1,056,000 +1,056,000 +Pro-Rata Bonus (6) +― +208,000 +― +208,000 +208,000 +COBRA Subsidy (7) +15,847 +― +― +25,937 +25,937 +RSU and PSU +Acceleration (8) +― +215,769 +― +456,881 +456,881 +Total +807,847 +423,769 +― +1,746,818 +1,746,818 +(1) +Amounts in this column reflect payments made upon termination by the Company without “Cause” or by the Named Executive Officer for “Good Reason.” Such quoted terms are as defined in the Executive Severance Plan, as described above. +(2) +Amounts in this column reflect payments made upon termination as a result of the Named Executive Officer’s death or “Disability.” “Disability” is as defined in the Executive Severance Plan for the pro-rata bonus payable upon such termination of employment and is as defined in the applicable award agreements for the equity award acceleration, each as described above. +PROPETRO  2026 Proxy Statement   |  55 +TABLE OF CONTENTS +Executive Compensation +(3) +Amounts in this column reflect payments made upon termination as a result of the Named Executive Officer’s “Retirement” (as defined in the applicable award agreements and described above). As described above, neither the Executive Severance Plan nor the 2020 LTIP (or any of the award agreements thereunder) provide any severance payments or benefits upon a Named Executive Officer’s “Retirement.” As of December 31, 2025, there were no RSUs or PSUs outstanding under the 2017 LTIP, and the exercise price applicable to the stock options held by Messrs. Sledge, Fietz and Muñoz under the 2017 LTIP exceeded the closing price of our common stock on December 31, 2025. Therefore, no value is included in this column. +(4) +Amounts in this column reflect payments made upon termination by the Company without Cause or by the Named Executive Officer for Good Reason, in each case, within 12 months following a “Change in Control” (as defined in the 2020 LTIP and described above). As described above under “— 2020 LTIP,” RSUs and PSUs granted in 2023 and 2024 under the 2020 LTIP are accelerated in connection with a Named Executive Officer’s termination without Cause or resignation for Good Reason, in each case, within 12 months following a Change in Control. +(5) +Pursuant to the Executive Severance Plan, upon termination of employment by the Company without Cause or by the Named Executive Officer for Good Reason, each Named Executive Officer will receive either 2.0 (for Mr. Sledge) or 1.5 (for Messrs. Fietz, Muñoz, Mitchell, Weatherl, and Ms. Davila) times the sum of his annual base salary and the target amount of his/her annual bonus for the year in which the termination occurs, payable in a lump sum following the termination of employment. If such termination of employment occurs within one year following a Change in Control, each Named Executive Officer will receive either 3.0 (for Mr. Sledge) or 2.0 (for Messrs. Fietz, Muñoz, Mitchell, Weatherl and Ms. Davila) times the sum of his/her annual base salary and the target amount of his/her bonus for the year in which the Change in Control occurs. +(6) +Pursuant to the terms of the Executive Severance Plan, upon a termination of employment by the Company without Cause or by the Named Executive Officer for Good Reason, in each case, within one year following a Change in Control, or upon a termination of employment due to the Named Executive Officer’s death or Disability, each Named Executive Officer will receive a pro-rata bonus, based upon the number of days each such Named Executive Officer was employed by the Company during the applicable calendar year and achievement of target performance. The target bonuses payable to the Named Executive Officers are included in the table because the Named Executive Officers would have been employed for the full year if their termination occurred on December 31, 2025. +(7) +Pursuant to the terms of the Executive Severance Plan, upon termination of employment by the Company without Cause or by the Named Executive Officer for Good Reason, the Company will reimburse each of the Named Executive Officers for the difference between the cost of the COBRA premiums and the cost for similarly-situated employees to effect such coverage under the Company’s group health plans for up to 18 months for Mr. Sledge and up to 12 months for Messrs. Muñoz, Fietz, Mitchell, Weatherl and Ms. Davila following such termination. Upon termination of employment by the Company without Cause or by the Named Executive Officer for Good Reason, in each case, within 12 months following a Change in Control, the Company will reimburse each of the Named Executive Officers for the full amount of the COBRA premiums for up to 18 months for Mr. Sledge and up to 12 months for Messrs. Muñoz, Fietz, Mitchell, Weatherl and Ms. Davila. The COBRA reimbursement amount is based on the premiums in effect on December 31, 2025 and each applicable Named Executive Officer’s elections in place on such date, which are assumed for purposes of this table to remain the same throughout the period for which the COBRA reimbursement would be available. +(8) +For the RSUs, these amounts are calculated by multiplying the number of RSUs that would have become vested upon the applicable event by $9.51, the closing price of our common stock on December 31, 2025. PSUs that vest as a result of a Named Executive Officer’s death or Disability will vest based on actual performance as of the end of the applicable performance period, and, as a result, the amounts included reflect estimated payouts of such PSUs. For PSUs that vest upon termination of employment by the Company without Cause or by the Named Executive Officer for Good Reason, in each case, within one year following a Change in Control, actual performance as of the date of the Change in Control is used and, as a result, the amounts included reflect estimated payouts of such PSUs. As of December 31, 2025, the actual performance was at 168% for the PSUs granted in 2024 and 186% for the PSUs granted in 2025. +Termination of Employment—Former Chief Financial Officer +Effective March 3, 2025, Mr. Schorlemer’s employment with the Company was terminated without cause (the “Separation”). In connection with the Separation, the Company entered into a separation and release agreement with Mr. Schorlemer pursuant to which he released the Company and its affiliates from certain liabilities and affirmed the restrictive covenants with which he had an obligation to comply and the Company, in turn, confirmed that it would provide Mr. Schorlemer with the payments and benefits that he had a legal right to under the existing terms of the Executive Severance Plan and the terms of the award agreements pursuant to which his outstanding equity awards were originally granted. +The payments and benefits Mr. Schorlemer had a right to receive upon a qualifying termination without cause for a Tier 2 participant under the Executive Severance Plan were as follows: (A) a lump-sum cash payment equal to $1,553,595 for his severance payment and COBRA subsidy and (B) a payment in the amount of $516,618 for his earned but unpaid bonus for the 2024 fiscal year. Additionally, the Company paid Mr. Schorlemer a cash payment +56  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +for his paid time off accrued and unused as of March 3, 2025. No new or additional benefits or compensation in excess of what Mr. Schorlemer had a legal right to under the Executive Severance Plan were provided in connection with the Separation. +Pay versus Performance +As required by Item 402(v) of Regulation S-K, the Company is providing the following information regarding the relationship between executive compensation and the Company’s financial performance for each of the five years in the period ended December 31, 2025. In accordance with the applicable SEC rules, the adjustments described and quantified below were made to the values reported in the Summary Compensation Table for each applicable year to determine the “actual” compensation paid to our Principal Executive Officers (“PEOs”) and the average “actual” compensation paid to our other Named Executive Officers (“NEOs”). +The following table summarizes compensation values reported in the Summary Compensation Table for our PEO and the average for our other NEOs, as compared to “compensation actually paid” or “CAP” and the Company’s financial performance for the years ended December 31, 2025, 2024, 2023, 2022, and 2021: +Year +Summary +Compensation +Table Total for +First PEO (1) +Summary +Compensation +Table Total for +Second +PEO (1) (2) +Compensation +Actually Paid +to First +PEO (1) (2) +Compensation +Actually Paid +to Second +PEO (1) (2) +Average +Summary +Compensation +Table Total for +Non-PEO +NEOs (1) (2) +Average +Compensation +Actually Paid +to Non-PEO +NEOs (1) +Value of +Initial +Fixed $100 +Investment +Based On: +Net +Income +(Loss) +(in thousands) +Adjusted +EBITDA +(in thousands) (3) +TSR +Peer +Group +TSR (3) +(a) +(b) +(b) +(c) +(c) +(d) +(e) +(f) +(g) +(h) +(i) +2025 N/A $ 6,539,712 N/A $ 7,639,696 $ 1,894,666 $ 1,807,069 $ 128.69 $ 124.42 $ 824 $ 208,443 +2024 N/A $ 5,987,447 N/A $ 8,359,307 $ 2,449,172 $ 3,340,367 $ 82.93 $ 95.72 $ ( 137,859 ) $ 283,243 +2023 N/A $ 5,787,960 N/A $ 3,198,910 $ 2,885,029 $ 1,983,266 $ 74.49 $ 106.43 $ 86,000 $ 404,000 +2022 N/A $ 5,028,294 N/A $ 3,096,235 $ 6,276,617 $ 1,773,093 $ 92.18 $ 153.12 $ 2,030 $ 316,590 +2021 $ 6,862,469 $ 3,164,649 $ 5,192,291 $ 2,999,764 $ 2,463,661 $ 2,133,954 $ 72.00 $ 80.32 $ ( 54,185 ) $ 135,007 +(1) +The first and second PEOs reflected in columns (b) and (c) represent Phillip Gobe and Samuel Sledge , respectively. The non-PEO Named Executive Officers reflected in column (d) and (e) represent the following individuals by year: +2025 – Adam Muñoz, David S. Schorlemer, Caleb L. Weatherl, Celina A. Davila, Shelby Fietz, and John J. “Jody” Mitchell +2024 – Adam Muñoz, David S. Schorlemer, Shelby Fietz, and John J. “Jody” Mitchell +2023 – Adam Muñoz, David S. Schorlemer, Shelby Fietz, and John J. “Jody” Mitchell +2022 – Phillip Gobe, Adam Muñoz, David S. Schorlemer, and Newton W. Wilson III +2021 – Adam Munoz, David S. Schorlemer, and Newton W. Wilson III +(2) +The Company deducted from and added to the Summary Compensation Table total compensation the following amounts to calculate compensation actually paid in accordance with Item 402(v) of Regulation S-K as disclosed in columns (c) and (e) for the PEO (Samuel Sledge) and Non-PEO NEOs in 2025. As the Company’s NEOs do not participate in any defined benefit plans, no adjustments were required to amounts reported in the Summary Compensation Table totals related to the value of benefits under such plans. +2025 +PEO SUMMARY COMPENSATION TABLE TOTALS $ 6,539,712 +Add (Subtract):       +Fair value of equity awards granted during the year from the Summary Compensation Table +( 4,391,410 ) +Fair value at year end of equity awards granted during the year +5,979,792 +Fair value of equity awards granted and vested during the year +— +Change in fair value of equity awards granted in prior years that were unvested as of the end of the year +246,007 +Change in fair value of equity awards granted in prior years that vested during the year +( 734,405 ) +Equity awards granted in prior years that were forfeited during the year +— +Dividends or other earnings paid on equity awards during the year +— +Total Equity Award Related Adjustments +1,099,984 +COMPENSATION ACTUALLY PAID TOTALS $ 7,639,696 +PROPETRO  2026 Proxy Statement   |  57 +TABLE OF CONTENTS +Executive Compensation +2025 +NON-PEO NEOS SUMMARY COMPENSATION TABLE TOTALS $ 1,894,666 +Add (Subtract):       +Fair value of equity awards granted during the year from the Summary Compensation Table +( 849,448 ) +Fair value at year end of equity awards granted during the year +1,321,529 +Fair value of equity awards granted and vested during the year +— +Change in fair value of equity awards granted in prior years that were unvested as of the end of the year +44,801 +Change in fair value of equity awards granted in prior years that vested during the year +( 118,491 ) +Equity awards granted in prior years that were forfeited during the year +( 485,988 ) +Dividends or other earnings paid on equity awards during the year +— +Total Equity Award Related Adjustments +( 87,597 ) +AVERAGE COMPENSATION ACTUALLY PAID TOTALS $ 1,807,069 +(3) +The Peer Group in this column consists of Calfrac Well Services Ltd, Liberty Energy Inc., Mammoth Energy Services Inc., Patterson-UTI Energy Inc., RPC Inc., and ProFrac Holding Corp. +(4) +We define EBITDA as earnings before (i) interest expense, (ii) income taxes, and (iii) depreciation and amortization. We define Adjusted EBITDA as EBITDA, plus (a) loss/(gain) on disposal of assets and businesses, (b) stock-based compensation, (c) business acquisition contingent consideration adjustments, (d) other expense/(income), (e) other unusual or nonrecurring (income)/expenses, such as impairment expenses, costs related to asset acquisitions, insurance recoveries, one-time professional fees and legal settlements and (f) retention bonuses and severance expense. For a more detailed definition of the non-GAAP financial measure of Adjusted EBITDA and reconciliation of Adjusted EBITDA to our most directly comparable financial measures calculated in accordance with GAAP, please read “How We Evaluate Our Operations” in our Form 10-K filed for the year ended December 31, 2025. +58  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +NARRATIVE DISCLOSURE TO PAY VERSUS PERFORMANCE TABLE +CAP and Company TSR +The PEOs’ and other NEOs’ CAP generally align with the Company’s TSR over the three years presented in the table. This is primarily because a significant portion of the CAP to the PEOs and other NEOs is comprised of equity awards. Over the three years presented in the table, the total compensation of the PEO has been comprised of approximately 70% equity-based awards, while approximately 65% of the total compensation of the other NEOs has been comprised of equity-based awards. For more detail regarding the Company’s equity awards, please see “Compensation Discussion and Analysis — What Guides Our Program” in this proxy statement. +Company TSR vs. Peer Group TSR +The Company’s cumulative TSR over the five year period was +28.69%, which outperformed the Peer Group TSR over the five period of +24.42%. Pursuant to Item 402(v) of Regulation S-K, the Company used the same peer group used for purposes of Item 201(e) of Regulation S-K, which is different than the peer group used for measuring performance of PSUs. The Company’s PSUs vest based on the performance of the Company’s TSR relative to the TSR of the companies in our performance peer group during three-year performance periods. For more information of the performance peer group used for PSUs please see “Compensation Discussion and Analysis—What Guides Our Program—Use of Peer Compensation Data” in this proxy statement. +CAP vs. Net Income +The Company’s net income has steadily increased through 2023 and then significantly decreased in 2024 and 2025 while the PEOs’ and other NEOs’ CAP has varied significantly each year. This is due to the emphasis the Company places on equity-based awards, which are sensitive to changes in the price of the Company’s common stock. In addition, the Company does not use net income to determine compensation levels or equity-based award payouts. +CAP vs. Adjusted EBITDA (the Company-Selected Measure) +The Company’s Adjusted EBITDA declined in 2024 and 2025 from a high in 2023 while the PEOs’ and other NEOs’ CAP has varied significantly each year. This is due to the emphasis the Company places on equity-based awards, which are sensitive to changes in the price of the Company’s common stock. The Company uses Adjusted EBITDA as a performance metric for annual cash incentive awards granted under the Annual Bonus Plan. For fiscal year 2025, 40% of each NEO’s annual cash incentive was based on the achievement of Adjusted EBITDA. +Tabular Disclosure of Most Important Measures to Determine FY2025 CAP +The measures listed below represent the most important financial performance measures that we used to determine CAP for fiscal year 2025. For more detail regarding these financial performance measures, please see “Compensation Discussion and Analysis—What Guides Our Program” in this proxy statement. +Most Important Financial Performance Measures +Adjusted EBITDA +Relative TSR +Free Cash Flow +PROPETRO  2026 Proxy Statement   |  59 +TABLE OF CONTENTS +Executive Compensation +CEO Pay Ratio +As of December 31, 2025, the Company employed approximately 1,700 people, all in the United States. Using a consistently applied compensation measure, we determined as of December 31, 2025 the total annual cash compensation of each of our employees (excluding our Chief Executive Officer), and then identified the “median employee” within our employee population. +To identify the median compensated employee, we used total annual compensation, including base salary, actual bonus paid, value of equity awards vested, overtime and allowances, as applicable. Salaries were annualized for those full- and part-time employees who did not work for the full year. Reasonable estimates of cash compensation were made for those employees who were hired during 2025 using current base salary and target bonus amounts and any overtime or allowances paid during 2025. Once the median employee was identified, we determined his or her annual total compensation in accordance with Item 402(c)(2)(x) of Regulation S-K as required pursuant to SEC rules, which resulted in annual total compensation for the median employee equal to $121,523 for 2025. This calculation is the same calculation used to determine total compensation for purposes of the 2025 Summary Compensation Table with respect to each of the Named Executive Officers. +Our Chief Executive Officer’s 2025 total compensation was $6,539,712. Therefore, the ratio of our Chief Executive Officer’s compensation to the median employee’s compensation was approximately 54 to 1 for 2025. +Employee +2025 Annual Total +Compensation +($) +Estimated Pay +Ratio +Chief Executive Officer +6,539,712 +54:1 +Median employee, other than our CEO +121,523 +SEC rules do not specify a single methodology for identification of the median employee, and other companies may use assumptions and methodologies that are different from those used by us in calculating their pay ratio. Accordingly, the pay ratio disclosed by other companies may not be comparable to the Company’s pay ratio as disclosed above. Neither the Compensation Committee nor management of the Company used the pay ratio measure in making compensation decisions. +60  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +Proposal 3 —Approval of the Third +Amended and Restated 2020 Long Term Incentive Plan +The use of equity-based awards under the 2020 LTIP has been a key component of our compensation program since its adoption. The ability to grant equity-based compensation awards is critical to attracting and retaining highly qualified individuals. The Board believes that it is in the best interest of our stockholders for those individuals to have an ownership interest in the Company in recognition of their present and potential contributions and to align their interests with those of our future stockholders. +The ProPetro Holding Corp. 2020 Long Term Incentive Plan was originally adopted and approved by shareholders, effective October 22, 2020, and subsequently amended and restated effective on each of May 11, 2023 and May 20, 2025 (the latter amendment and restatement, the “Second A&R LTIP”). The Board has determined that the current number of shares available for grant under the Second A&R LTIP (which is our only active equity-based plan) is not sufficient to meet the objectives of our compensation program going forward. Accordingly, the Board has adopted, subject to shareholder approval, and proposes that our stockholders approve the Third Amended and Restated ProPetro Holding Corp. 2020 Long Term Incentive Plan (“Third A&R LTIP”) in order to increase the number of shares of our common stock available for future grants by 3,540,000, from 10,520,000 to 14,060,000, as described below, and to extend the term of the plan to the tenth anniversary of the 2026 annual meeting. +At the 2026 annual meeting, our stockholders will be asked to approve the Third A&R LTIP. If approved by our stockholders, the Third A&R LTIP will be effective as of the date of the 2026 annual meeting. If the Third A&R LTIP is not approved by our stockholders, then the Second A&R LTIP will remain in effect without any increase in the number of shares of our common stock available for future grants. +BACKGROUND AND PURPOSE OF THE PROPOSAL +The Second A&R LTIP authorizes awards to be granted covering up to 10,520,000 shares of our common stock, subject to the share recycling and adjustment provisions described below. As of March 25, 2026, there were approximately 1,637,678 shares of our common stock available for new awards under the Second A&R LTIP (counting performance-based awards at the maximum payout level). +On April 7, 2026, subject to approval by our stockholders, the Board determined that it is in the Company’s best interest to adopt the Third A&R LTIP to increase the number of shares of common stock available for issuance by 3,540,000, from 10,520,000 to 14,060,000. The length of time that the Third A&R LTIP share pool will support our incentive compensation program will depend on numerous factors that cannot be fully anticipated by us at this time including our share price, executive retention rate, and changes in compensation practices of companies with which we compete for executive talent. +Of the 10,520,000 shares currently authorized for issuance under the Second A&R LTIP, a total of 5,212,543 shares have been issued as of March 25, 2026 upon the settlement of RSUs and PSUs. As of March 25, 2026, under the Second A&R LTIP, a total of 3,053,811 shares remained subject to unsettled RSUs and 3,715,832 shares remained subject to unsettled PSUs (based on maximum performance). As of March 25, 2026, under the 2017 LTIP, a total of 160,446 shares remain subject to outstanding stock options with a weighted average remaining term of 0.98 years and a weighted average exercise price of $14.00. No other equity awards are outstanding under the 2017 LTIP and Second A&R LTIP as of such date. For additional information regarding stock-based awards previously granted by us under the 2017 LTIP and Second A&R LTIP, please see Note 14 to our consolidated financial statements on Form 10-K for the year ended December 31, 2025. As of March 25, 2026, there were 122,616,976 shares of our common stock outstanding. The closing price per share of common stock on the New York Stock Exchange as of March 25, 2026 was $14.55. +The proposed Third A&R LTIP is included as Appendix A hereto. If our stockholders approve this Proposal No. 3, we intend to file, pursuant to the Securities Act of 1933, as amended, a registration statement on Form S-8 to register the additional shares made available for delivery under the Third A&R LTIP. +PROPETRO  2026 Proxy Statement   |  61 +TABLE OF CONTENTS +Executive Compensation +Historical Award Information and Equity Use +Summarized below is the total number of shares outstanding pursuant to awards granted and shares available for issuance for future equity awards under the Second A&R LTIP (prior to the effect of the Third A&R LTIP) as of March 25, 2026. Also shown are the number of shares that would be available for future grant if the Third A&R LTIP is approved. +Shares Subject to +Outstanding RSUs +and PSUs as of +March 25, 2026 (1) +Shares Subject to +Outstanding +Options as of +March 25, 2026 (2) +Shares Remaining +Available for Future +Grant as of +March 25, 2026 (3) +As of March 25, 2026 Under All Plans (Before Third +A&R LTIP is Approved by Stockholders) +6,769,643 +160,446 +1,637,678 +Shares Available for Future Grant if Third A&R LTIP +is Approved +5,177,678 +(1) +This column reflects the maximum number of shares of our common stock subject to performance share units and the number of shares of our common stock subject to restricted stock units granted under the Second A&R LTIP, outstanding and unvested as of March 25, 2026. Because the number of shares of common stock to be issued upon settlement of outstanding performance share unit awards is subject to performance conditions, the number of shares of common stock actually issued may be substantially less than the number reflected in this column. +(2) +This column reflects the number of shares of our common stock subject to stock options under the 2017 LTIP outstanding as of March 25, 2026, with a weighted average remaining term of 0.98 years and a weighted average exercise price of $14.00. +(3) +The Company has not made any grants under the Second A&R LTIP since March 25, 2026. +The following table sets forth information regarding stock-settled, time-vested equity awards granted, and performance-based equity awards earned, over each of the last three fiscal years: +2025 +2024 +2023 +Stock Options/Stock Appreciation Rights (SARs) Granted +0 +0 +0 +Stock-Settled Time-Vested Restricted Shares/Units Granted +1,785,354 +1,806,956 +1,704,189 +Stock-Settled Performance-Based Shares/Units Earned* +219,660 +0 +493,275 +Weighted-Average Basic Common Shares Outstanding +103,838,000 +105,469,000 +113,004,000 +3-Year Average +Share Usage Rate +1.86% +* +With respect to performance-based shares/units in the table above, we calculate the share usage rate based on the applicable number of shares settled each year. +62  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +SUMMARY OF THE THIRD A&R LTIP +The following summary provides a general description of the material features of the Third A&R LTIP but is not a complete description of all provisions of the Third A&R LTIP and is qualified in its entirety by reference to the full text of the Third A&R LTIP included as Appendix A, which is incorporated by reference into this Proposal No. 3. +The purpose of the Third A&R LTIP is to attract, retain, and motivate qualified persons as employees, directors, and consultants of the Company and its affiliates. The Third A&R LTIP also provides a means through which such persons can acquire and maintain stock ownership or awards, the value of which is tied to the performance of the Company, thereby strengthening their concern for the Company and its affiliates. +The Third A&R LTIP provides for potential grants of: (i) incentive stock options qualified as such under U.S. federal income tax laws (“ISOs”), (ii) stock options that do not qualify as ISOs (“Nonstatutory Options,” and together with ISOs, “Options”), (iii) stock appreciation rights (“SARs”), (iv) restricted stock awards (“Restricted Stock Awards”), (v) RSUs; (vi) awards of vested stock (“Stock Awards”), (vii) dividend equivalents, (viii) other stock-based or cash awards, and (ix) substitute awards (“Substitute Awards” and together with Options, SARs, Restricted Stock Awards, RSUs, Stock Awards, dividend equivalents and other stock-based or cash awards, the “Awards”). +Key features of the Third A&R LTIP include: +• +No automatic Award grants are promised to any eligible individual; +• +Shares (i) withheld or surrendered in payment of the exercise or purchase price or taxes related to an Option or SAR or (ii) repurchased on the open market with the proceeds from the exercise price of an Option, in each case, granted under the Third A&R LTIP, will not be available for new Awards under the Third A&R LTIP; +• +Shares (i) withheld or surrendered in payment of the exercise or purchase price related to a stock option or stock appreciation right that is a 2017 Plan Award (as defined below), (ii) repurchased on the open market with the proceeds from the exercise price of a stock option that is an 2017 Plan Award, or (iii) withheld or surrendered to satisfy a tax withholding obligation with respect to any 2017 Plan Award, will not be available for new Awards under the Third A&R LTIP; +• +Awards assumed by a successor in connection with a change in control will not vest solely as a result of the change in control; +• +No Section 280G gross-up; +• +No evergreen for the share reserve; +• +Ten year term; +• +Except as permitted in the grant of Substitute Awards, no discounted options or related Awards may be granted; +• +No repricing, replacement, or re-granting of Options, SARS or other stock awards without shareholder approval if the effect would be to reduce the exercise price of the Award (except in the event of certain equitable adjustments or a change in control, as further described below); +• +Any Award (or portion thereof) granted under the Third A&R LTIP will vest no earlier than the first anniversary of the date the Award is granted (subject to an exception equal to no more than 5% of the shares reserved for issuance under the Third A&R LTIP); +• +Awards are subject to potential reduction, cancellation or forfeiture pursuant to any claw-back policy adopted by the Company; +• +Awards are generally non-transferrable; +• +Meaningful annual limits on total director compensation; and +• +Dividends and dividend equivalents are subject to restrictions and risk of forfeiture to the same extent as the Award with respect to which such dividends or dividend equivalents are accrued and will not be paid unless and until such Award has vested. +Eligibility to Participate +Employees, non-employee directors, and other service providers of the Company and its affiliates are eligible to receive awards under the Third A&R LTIP. Eligible individuals to whom an Award is granted under the Third A&R LTIP are referred to as “Participants.” As of March 25, 2026, the Company and its affiliates have approximately 5 executive +PROPETRO  2026 Proxy Statement   |  63 +TABLE OF CONTENTS +Executive Compensation +officers, 8 non-employee directors, 1,700 employees (other than the 5 executive officers), and approximately 15 other service providers who will be eligible to participate in the Third A&R LTIP. The Company engages consultants from time to time who could be eligible for awards and the number of employees employed by the Company and its affiliates varies over time, hence these numbers may change during the life of the Third A&R LTIP. +Securities to be Offered +Subject to adjustment, in the event of any distribution, recapitalization, stock split, merger, consolidation or other corporate event, the aggregate number of shares of our common stock that may be issued pursuant to Awards under the Third A&R LTIP is equal to 14,060,000, and all such shares will be available for issuance upon the exercise of ISOs. The number of shares that may be issued pursuant to the Third A&R LTIP is also subject to the share recycling and adjustment provisions described below. +Of the 10,520,000 shares currently authorized for issuance under the Second A&R LTIP, a total of 5,212,543 shares have been issued as of March 25, 2026 upon the settlement of RSUs and PSUs. As of March 25, 2026, under the Second A&R LTIP, a total of 3,053,811 shares remained subject to unsettled RSUs and 3,715,832 shares remained subject to unsettled PSUs (measured at maximum). No other equity awards are outstanding under the Second A&R LTIP as of such date. +Consistent with the Second A&R LTIP, if all or any portion of an Award, including an award granted under the 2017 LTIP that is outstanding as of October 22, 2020 (a “2017 Plan Award”), expires or is cancelled, forfeited, exchanged, settled for cash or otherwise terminated without the actual delivery of shares, any shares subject to such Award or 2017 Plan Award will again be available for new Awards under the Third A&R LTIP. As of March 25, 2026, there were 160,446 2017 Plan Awards outstanding and thus a maximum of 160,446 shares of our common stock could become available for new Awards under the Third A&R LTIP as a result of 2017 Plan Awards, in addition to the 14,060,000 shares reserved under the Third A&R LTIP, in the unlikely event that all 2017 Plan Awards outstanding as of March 25, 2026 are cancelled, forfeited, exchanged, settled for cash, or otherwise terminated without delivery of shares. +Any shares withheld or surrendered in payment of any taxes relating to Awards granted under the Third A&R LTIP (other than Options or SARs) will be again available for new Awards under the Third A&R LTIP. However, any shares (i) withheld or surrendered in payment of the exercise or purchase price or taxes related to an Option or SAR or (ii) repurchased on the open market with the proceeds from the exercise price of an Option, in each case, granted under the Third A&R LTIP, will not be available for new Awards under the Third A&R LTIP. Further, shares (x) withheld or surrendered in payment of the exercise or purchase price related to a stock option or stock appreciation right that is an 2017 Plan Award, (y) repurchased on the open market with the proceeds from the exercise price of a stock option that is an 2017 Plan Award, or (z) withheld or surrendered to satisfy a tax withholding obligation with respect to any 2017 Plan Award, will not be available for new Awards under the Third A&R LTIP. +Director Compensation Limits +Under the Third A&R LTIP, in a single calendar year, a non-employee director may not be paid compensation, whether denominated in cash or Awards, for such individual’s service on the Board in excess of $500,000. Additional cash amounts or Awards may be paid for any calendar year in which a non-employee director (i) first joins the Board, (ii) serves on a special committee of the Board, or (iii) serves as lead director or non-executive Chairman of the Board. The limit on non-employee director compensation described above does not apply to compensation paid for any period in which the individual served as our employee or an employee of our affiliates or was otherwise providing services to us or our affiliates other than in the capacity as a director. +Administration +The Board (or a committee of two or more directors appointed by the Board) will administer the Third A&R LTIP (as applicable, the “Administrator”). Subject to the terms of the Third A&R LTIP and applicable law, the Administrator has broad authority to select Participants to receive awards, determine the types of awards and terms and conditions of awards and interpret provisions of the Third A&R LTIP. Subject to applicable law, the Administrator is also authorized to interpret the Third A&R LTIP, to establish, amend and rescind any rules and regulations relating to the Third A&R LTIP, to delegate duties under the Third A&R LTIP, to terminate, modify or amend the Third A&R LTIP (except for certain amendments that require stockholder approval as described below), and to make any other determinations that it deems necessary or desirable for the administration of the Third A&R LTIP. The Administrator may correct any defect, supply any omission or reconcile any inconsistency in the Third A&R LTIP in the manner and to the extent the Administrator deems necessary or desirable. +64  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +Source of Shares +Shares of our common stock issued under the Third A&R LTIP may come from authorized but unissued shares, from treasury stock held by the Company or from previously issued shares of our common stock reacquired by the Company, including shares purchased on the open market. +Prohibition on Repricing +Except as may be related to Substitute Awards or in the event of certain equitable adjustments or a change in control, as described in the Third A&R LTIP, without the approval of the stockholders of the Company, the terms of outstanding Awards may not be amended to (i) reduce the exercise price or grant price of an outstanding Option or SAR, (ii) grant a new Option, SAR or other Award in substitution for, or upon the cancellation of, any previously granted Option or SAR that has the effect of reducing the exercise price or grant price, (iii) exchange any Option or SAR for Stock, cash or other consideration when the exercise price or grant price per share of stock under such Option or SAR exceeds the fair market value of a share of our common stock, or (iv) take any other action that would be considered a “repricing” of an Option or SAR under the applicable listing standards of the national securities exchange on which our common stock is listed. +Awards Under the Third A&R LTIP +Options +An Option represents a right to purchase our common stock at a fixed exercise price. The Company may grant Options to eligible persons including: (i) ISOs which comply with the requirements of Section 422 of the Code; and (ii) Nonstatutory Options. The exercise price of each Option granted under the Third A&R LTIP will be stated in the option agreement and may vary; however, the exercise price for an Option must not be less than the fair market value per share of our common stock as of the date of grant (or 110% of the fair market value for certain ISOs). Options may be exercised as the Administrator determines, but not later than ten years from the date of grant. The Administrator determines the methods and form of payment for the exercise price of an Option (including, in the discretion of the Administrator, payment in shares of our common stock, other Awards or other property) and the methods and forms in which our common stock will be delivered to a Participant. +SARs +A SAR is the right to receive an amount equal to the excess of the fair market value of one share of our common stock on the date of exercise over the grant price of the SAR, payable in either cash or shares of our common stock or any combination thereof as determined by the Administrator. The grant price of a share of our common stock subject to the SAR will be determined by the Administrator, but in no event will that grant price be less than the fair market value of a share of our common stock on the date of grant. The Administrator has the discretion to determine the other terms and conditions of a SAR award. +Restricted Stock Awards +A Restricted Stock Award is a grant of shares of our common stock subject to a risk of forfeiture, performance conditions, restrictions on transferability and any other restrictions imposed by the Administrator in its discretion. Restrictions may lapse at such times and under such circumstances as determined by the Administrator. Except as otherwise provided under the terms of an Award Agreement, the holder of a Restricted Stock Award will generally have rights as a stockholder, including the right to vote the common stock subject to the Restricted Stock Award and to receive dividends on the common stock subject to the Restricted Stock Award during the restriction period (subject to limitations on payment of dividends on unvested Awards, as described below). Common stock distributed in connection with a stock split or stock dividend, and other property (other than cash) distributed as a dividend, will be subject to restrictions and a risk of forfeiture to the same extent as the Restricted Stock Award with respect to which such common stock or other property has been distributed. In addition, any cash dividends will be subject to restrictions and risk of forfeiture to the same extent as the Restricted Stock with respect to which such dividends were paid and will not be paid unless and until such Restricted Stock has vested and been earned. +RSUs +RSUs are rights to receive our common stock, cash, or a combination of both equal in value to the number of shares of our common stock covered by the RSUs at the end of a specified period or upon the occurrence of a specified event. The Administrator will subject RSUs to restrictions to be specified in the Award Agreement, and those restrictions may lapse at such times or upon such conditions determined by the Administrator. +PROPETRO  2026 Proxy Statement   |  65 +TABLE OF CONTENTS +Executive Compensation +Stock Awards +The Administrator is authorized to grant vested common stock as a Stock Award as a bonus, as additional compensation, or in lieu of cash compensation the individual is otherwise entitled to receive. +Dividend Equivalents +Dividend equivalents entitle a Participant to receive cash, shares of our common stock, other Awards, or other property equal in value to dividends or other distributions paid with respect to a specified number of shares of our common stock. Dividend equivalents must be awarded in connection with another Award (other than a Restricted Stock Award or Stock Award). The terms and conditions applicable to dividend equivalents will be determined by the Administrator and set forth in an Award Agreement, provided, however, that dividend equivalents will be subject to restrictions and a risk of forfeiture to the same extent as the Award with respect to which such dividends accrue and will not be paid unless and until such Award has vested and been earned. +Other Stock-Based or Cash Awards +Other stock-based Awards are awards denominated in or payable in, valued in whole or in part by reference to, or otherwise based on or related to, the value of our common stock. Cash awards may be granted on a free-standing basis, as an element of or a supplement to, or in lieu of any other Award. +Substitute Awards +The Company may grant Awards in substitution for any other Award granted under the Third A&R LTIP or another plan of the Company or its affiliates or any other right of a person to receive payment from the Company or its affiliates. Awards may also be granted in substitution for awards held by individuals who become eligible individuals as a result of certain business transactions, in which case, (i) subject to applicable stock exchange requirements, shares of our common stock subject to such Awards will not be added to or subtracted from the number of shares of our common stock authorized to be granted under the Third A&R LTIP and (ii) any Options or SARs so granted may have an exercise price per share that is less than the fair market value of a share of our common stock on the date of substitution if the substitution complies with the requirements of Section 409A of the Code and the guidance and regulations promulgated thereunder and other applicable laws. +Other Provisions +Dividends and Dividend Equivalents +Dividends and dividend equivalents are subject to restrictions and risk of forfeiture to the same extent as the Award with respect to which such dividends or dividend equivalents are accrued and will not be paid unless and until such Award has vested. +Recapitalization +In the event of any “equity restructuring” event (such as a stock dividend, stock split, reverse stock split, or similar event) with respect to our common stock, the Administrator will equitably adjust (i) the aggregate number or kind of shares that may be delivered under the Third A&R LTIP, (ii) the number or kind of shares or amount of cash subject to an Award, (iii) the terms and conditions of Awards, including the purchase price or exercise price of Awards and performance goals, and (iv) the applicable share-based limitations with respect to Awards provided in the Third A&R LTIP, in each case, to equitably reflect such event. +Change in Control +The Third A&R LTIP does not provide for the automatic acceleration of vesting of outstanding awards solely as a result of the occurrence of a change in control unless the successor company fails to assume or replace the awards in connection with that change in control event. If the successor company does assume the awards, unless the individual award agreement provides otherwise, then vesting of the award will be accelerated in the event of an involuntary termination that occurs in connection with or 12 months following the change in control. +66  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +Tax Withholding +The Company and any of its affiliates have the right to withhold, or require payment of, the amount of any applicable taxes due or potentially payable upon exercise, award, or lapse of restrictions of an Award. The Administrator will determine, in its sole discretion, the form of payment acceptable for such tax withholding obligations, including the delivery of cash or cash equivalents, our common stock (including previously owned shares, net settlement, a broker- assisted sale, or other cashless withholding or reduction of the amount of shares otherwise issuable or delivered pursuant to the Award), other property, or any other legal consideration the Administrator deems appropriate. +Limitations on Transfer of Awards +Participants may not assign, alienate, pledge, attach, sell, or otherwise transfer or encumber any Award, other than a Stock Award. Options and SARs may only be exercised by a Participant during that Participant’s lifetime or by the person to whom the Participant’s rights pass by will or the laws of descent and distribution. Notwithstanding these restrictions, to the extent specifically provided by the Administrator, a Participant may assign or transfer, without consideration, an Award, other than an ISO, on such terms and conditions as the Administrator may from time to time establish; however, no Award (other than a Stock Award, which is a fully vested share of our common stock) may be transferred to a third-party financial institution for value. +All shares of our common stock subject to an Award and evidenced by a stock certificate may contain a legend restricting the transferability of the shares pursuant to the terms of the Third A&R LTIP, which can be removed once the restrictions have terminated, lapsed or been satisfied. If shares are issued in book entry form, a notation to the same restrictive effect will be placed on the transfer agent’s books in connection with such shares. +Clawback +All Awards under the Third A&R LTIP will be subject to any clawback policy adopted by the Company, as in effect from time to time, including the Clawback Policy. +Plan Amendment and Termination +The Administrator may amend or terminate any Award or Award Agreement or amend the Third A&R LTIP at any time and the Board may amend or terminate the Third A&R LTIP at any time; however, stockholder approval will be required for any amendment to the extent necessary to comply with applicable law or exchange listing standards. As discussed in more detail above, the Administrator does not have the authority, without the approval of stockholders to amend any outstanding Option or SAR to reduce its exercise price per share or take any other action that would be considered a repricing under the applicable exchange listing standards. Without the consent of an affected Participant, no action by the Administrator or the Board to amend or terminate any Award, Award Agreement or the Third A&R LTIP, as applicable, may materially and adversely affect the rights of such Participant under any previously granted and outstanding Award. +Term of the Third A&R LTIP +If our stockholders approve this proposal, the Third A&R LTIP will become effective as of the date of the 2026 annual meeting. Unless earlier terminated by action of the Board, the Third A&R LTIP will terminate on the tenth anniversary of the 2026 annual meeting. Awards granted before the termination date of the Third A&R LTIP will continue to be effective according to their terms and conditions. +FEDERAL INCOME TAX CONSEQUENCES +The following discussion is for general information only and is intended to briefly summarize the United States federal income tax consequences to Participants arising from participation in the Third A&R LTIP. This description is based on current law, which is subject to change (possibly retroactively). The tax treatment of a Participant in the Third A&R LTIP may vary depending on his or her particular situation and may, therefore, be subject to special rules not discussed below. No attempt has been made to discuss any potential foreign, state, or local tax consequences. In addition, Nonstatutory Options and SARs with an exercise price less than the fair market value of shares of our common stock on the date of grant (which may only be granted in limited circumstances in connection with a transaction), SARs payable in cash, RSUs, and certain other Awards that may be granted pursuant to the Third A&R LTIP, could be subject to additional taxes unless they are designed to comply with certain restrictions set forth in Section 409A of the Code and guidance promulgated thereunder. +PROPETRO  2026 Proxy Statement   |  67 +TABLE OF CONTENTS +Executive Compensation +TAX CONSEQUENCES TO PARTICIPANTS +Options and SARs +Participants will not realize taxable income upon the grant of an Option or SAR. Upon the exercise of a Nonstatutory Option or an SAR, a Participant will recognize ordinary compensation income (subject to the Company’s withholding obligations if an employee) in an amount equal to the excess of (i) the amount of cash and the fair market value of the common stock received, over (ii) the exercise price of the Award. A Participant will generally have a tax basis in any shares of common stock received pursuant to the exercise of a Nonstatutory Option or SAR that equals the fair market value of such shares on the date of exercise. Subject to the discussion under “Tax Consequences to the Company” below, the Company will be entitled to a deduction for federal income tax purposes that corresponds as to timing and amount with the compensation income recognized by a Participant under the foregoing rules. When a Participant sells the common stock acquired as a result of the exercise of a Nonstatutory Option or SAR, any appreciation (or depreciation) in the value of the common stock after the exercise date is treated as long- or short-term capital gain (or loss) for federal income tax purposes, depending on the holding period. The common stock must be held for more than 12 months to qualify for long-term capital gain treatment. +Participants eligible to receive an ISO will not recognize taxable income on the grant of an ISO. Upon the exercise of an ISO, a Participant will not recognize taxable income, although the excess of the fair market value of the shares of common stock received upon exercise of the ISO (“ISO Stock”) over the exercise price will increase the alternative minimum taxable income of the Participant, which may cause such Participant to incur alternative minimum tax. The payment of any alternative minimum tax attributable to the exercise of an ISO would be allowed as a credit against the Participant’s regular tax liability in a later year to the extent the Participant’s regular tax liability is in excess of the alternative minimum tax for that year. +Upon the disposition of ISO Stock that has been held for the required holding period (generally, at least two years from the date of grant and one year from the date of exercise of the ISO), a Participant will generally recognize capital gain (or loss) equal to the excess (or shortfall) of the amount received in the disposition over the exercise price paid by the Participant for the ISO Stock. However, if a Participant disposes of ISO Stock that has not been held for the requisite holding period (a “Disqualifying Disposition”), the Participant will recognize ordinary compensation income in the year of the Disqualifying Disposition in an amount equal to the amount by which the fair market value of the ISO Stock at the time of exercise of the ISO (or, if less, the amount realized in the case of an arm’s length disposition to an unrelated party) exceeds the exercise price paid by the Participant for such ISO Stock. A Participant would also recognize capital gain to the extent the amount realized in the Disqualifying Disposition exceeds the fair market value of the ISO Stock on the exercise date. If the exercise price paid for the ISO Stock exceeds the amount realized (in the case of an arm’s-length disposition to an unrelated party), such excess would ordinarily constitute a capital loss. +The Company will generally not be entitled to any federal income tax deduction upon the grant or exercise of an ISO, unless a Participant makes a Disqualifying Disposition of the ISO Stock. If a Participant makes a Disqualifying Disposition, the Company will then, subject to the discussion below under “Tax Consequences to the Company,” be entitled to a tax deduction that corresponds as to timing and amount with the compensation income recognized by a Participant under the rules described in the preceding paragraph. +Under current rulings, if a Participant transfers previously held shares of our common stock (other than ISO Stock that has not been held for the requisite holding period) in satisfaction of part or all of the exercise price of an Option, whether a Nonstatutory Option or an ISO, no additional gain will be recognized on the transfer of such previously held shares in satisfaction of the Nonstatutory Option or ISO exercise price (although a Participant would still recognize ordinary compensation income upon exercise of a Nonstatutory Option in the manner described above). Moreover, that number of shares of common stock received upon exercise which equals the number of shares of previously held common stock surrendered in satisfaction of the Nonstatutory Option or ISO exercise price will have a tax basis that equals, and a capital gains holding period that includes, the tax basis and capital gains holding period of the previously held shares of common stock surrendered in satisfaction of the Nonstatutory Option or ISO exercise price. Any additional shares of common stock received upon exercise will have a tax basis that equals the amount of cash (if any) paid by the Participant, plus the amount of compensation income recognized by the Participant under the rules described above. +The Third A&R LTIP generally prohibits the transfer of Awards, but the Third A&R LTIP allows the Administrator to permit the transfer of Awards (other than ISOs) in limited circumstances, in its discretion. For income and gift tax purposes, certain transfers of Nonstatutory Options should generally be treated as completed gifts, subject to gift taxation. +68  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +The IRS has not provided formal guidance on the income tax consequences of a transfer of Nonstatutory Options (other than in the context of divorce) or SARs. However, the IRS has informally indicated that after a transfer of stock options (other than in the context of divorce pursuant to a domestic relations order), the transferor will recognize income, which will be subject to withholding, and employment or payroll taxes will be collectible at the time the transferee exercises the stock options. If a Nonstatutory Option is transferred pursuant to a domestic relations order, the transferee will recognize ordinary income upon exercise by the transferee, which will be subject to withholding, and employment or payroll taxes (attributable to and reported with respect to the transferor) will be collectible from the transferee at such time. +In addition, if a Participant transfers a vested Nonstatutory Option to another person and retains no interest in or power over it, the transfer is treated as a completed gift. The amount of the transferor’s gift (or generation-skipping transfer, if the gift is to a grandchild or later generation) equals the value of the Nonstatutory Option at the time of the gift. The value of the Nonstatutory Option may be affected by several factors, including the difference between the exercise price and the fair market value of the stock, the potential for future appreciation or depreciation of the stock, the time period of the Nonstatutory Option and the illiquidity of the Nonstatutory Option. The transferor will be subject to a federal gift tax, which will be limited by (i) the annual exclusion of $19,000 per donee (for 2026, subject to adjustment in future years), (ii) the transferor’s lifetime unified credit, or (iii) the marital or charitable deductions. The gifted Nonstatutory Option will not be included in the Participant’s gross estate for purposes of the federal estate tax or the generation-skipping transfer tax. +This favorable tax treatment for vested Nonstatutory Options has not been extended to unvested Nonstatutory Options. Whether such consequences apply to unvested Nonstatutory Options or to SARs is uncertain and the gift tax implications of such a transfer is a risk the transferor will bear upon such a disposition. +Restricted Stock Awards; RSUs; Stock Awards; Other Stock-Based or Cash Awards +A Participant will recognize ordinary compensation income upon receipt of cash pursuant to a cash award or, if earlier, at the time the cash is otherwise made available for the Participant to draw upon. Individuals will not have taxable income at the time of grant of an RSU, but rather, will generally recognize ordinary compensation income at the time he or she receives cash or a share of our common stock in settlement of the RSU, as applicable, in an amount equal to the cash or the fair market value of the common stock received. +A recipient of a Restricted Stock Award or Stock Award generally will be subject to tax at ordinary income tax rates on the fair market value of the common stock when it is received, reduced by any amount paid by the recipient; however, if the common stock is not transferable and is subject to a substantial risk of forfeiture when received, a Participant will recognize ordinary compensation income in an amount equal to the fair market value of the common stock (i) when the common stock first becomes transferable and is no longer subject to a substantial risk of forfeiture, in cases where a Participant does not make a valid election under Section 83(b) of the Code, or (ii) when the Award is received, in cases where a Participant makes a valid election under Section 83(b) of the Code. If a Section 83(b) election is made and the shares are subsequently forfeited, the recipient will not be allowed to take a deduction for the value of the forfeited shares. If a Section 83(b) election has not been made, any dividends received with respect to a Restricted Stock Award that is subject at that time to a risk of forfeiture or restrictions on transfer generally will be treated as compensation that is taxable as ordinary income to the recipient; otherwise the dividends will be treated as dividends. +A Participant who is an employee will be subject to withholding for federal, and generally for state and local, income taxes at the time he or she recognizes income under the rules described above. The tax basis in the common stock received by a Participant will equal the amount recognized by the Participant as compensation income under the rules described in the preceding paragraph, and the Participant’s capital gains holding period in those shares will commence on the later of the date the shares are received or the restrictions lapse. Subject to the discussion below under “Tax Consequences to the Company,” the Company will be entitled to a deduction for federal income tax purposes that corresponds as to timing and amount with the compensation income recognized by a Participant under the foregoing rules. +PROPETRO  2026 Proxy Statement   |  69 +TABLE OF CONTENTS +Executive Compensation +Tax Consequences to the Company +Reasonable Compensation +In order for the amounts described above to be deductible by the Company (or its subsidiary), such amounts must constitute reasonable compensation for services rendered or to be rendered and must be ordinary and necessary business expenses. +Golden Parachute Payments +Our ability (or the ability of one of our subsidiaries) to obtain a deduction for future payments under the Third A&R LTIP could also be limited by the golden parachute rules of Section 280G, which prevent the deductibility of certain excess parachute payments made in connection with a change in control of an employer-corporation. +Compensation of Covered Employees +The ability of the Company (or its subsidiary) to obtain a deduction for amounts paid under the Third A&R LTIP could be limited by Section 162(m). Section 162(m) limits the Company’s ability to deduct compensation, for federal income tax purposes, paid during any year to a “covered employee” (within the meaning of Section 162(m)) in excess of $1,000,000. +NEW PLAN BENEFITS +The future awards, if any, that will be made to eligible persons under the Third A&R LTIP are subject to the discretion of the Administrator, and therefore, the benefits or number of shares subject to awards that may be granted in the future to our executive officers, employees and directors is not currently determinable. Therefore, a New Plan Benefits Table is not provided. +EQUITY COMPENSATION PLAN INFORMATION +The table below sets forth information regarding awards outstanding under the 2017 LTIP and the Second A&R LTIP, as of December 31, 2025: +Plan Category +Number of Securities to +Be Issued Upon Exercise +of Outstanding Options, +Warrants and Rights (1) +(#) +(a) +Weighted Average +Exercise Price of +Outstanding +Options, Warrants +and Rights +($) +(b) +Number of Securities +Remaining Available for +Future Issuance Under +Equity Compensation Plans +(Excluding Securities +Reflected in Column (a)) (2) +($) +(c) +Equity compensation plans approved by security holders +6,412,016 +14.00 +3,212,461 +Equity compensation plans not approved by security holders +― +― +― +Total +6,412,016 +14.00 +3,212,461 +(1) +Includes 160,446 option awards granted under the 2017 LTIP and 2,877,736 RSU awards and 3,373,834 PSU awards (assuming achievement of maximum payout of 200%) granted under the Second A&R LTIP. The weighted average exercise price in column (b) does not take the RSU awards or PSU awards into account. +(2) +This column reflects the number of awards that remain available for future issuance pursuant to the Second A&R LTIP as of December 31, 2025. No further awards may be granted under the 2017 LTIP. +70  |   ir.propetroservices.com +TABLE OF CONTENTS +Executive Compensation +CONSEQUENCES OF FAILING TO APPROVE THE PROPOSAL +The Third A&R LTIP will not be implemented unless approved by our stockholders. If the Third A&R LTIP is not approved by the Stockholders, the Second A&R LTIP will remain in effect, and the Company will continue to grant awards under the Second A&R LTIP until the share reserve under the Second A&R LTIP is exhausted or the term of the Second A&R LTIP expires. Once the remaining share reserve is exhausted, the Company may elect to provide compensation through other means, such as cash-settled awards or other cash compensation, to assure that the Company and its affiliates can attract and retain qualified personnel. +VOTE REQUIRED +The affirmative “FOR” vote of the holders of a majority of the shares represented at the meeting (in person or by proxy) and entitled to vote is required to approve this Proposal No. 3. Brokers do not have discretion to vote on this proposal without your instruction. If you do not instruct your broker how to vote on this proposal, your broker will deliver a non-vote on this proposal. Broker non-votes will have no effect on Proposal No. 3. Abstentions will have the effect of a vote “AGAINST” this Proposal No. 3. +The Board of Directors unanimously recommends a vote FOR the approval of the Third A&R LTIP. +PROPETRO  2026 Proxy Statement   |  71 +TABLE OF CONTENTS +Audit Matters +Proposal 4 —Ratification of Appointment of Independent Registered Public Accounting Firm +The Audit Committee has selected RSM US LLP, independent registered public accounting firm, to audit our consolidated financial statements for the fiscal year ending December 31, 2026. We are asking the stockholders to ratify the appointment of RSM US LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2026. RSM US LLP was appointed by the Audit Committee in accordance with its charter. +In the event stockholders fail to ratify the appointment, the Audit Committee may reconsider this appointment. Even if the appointment is ratified, the Audit Committee, in its discretion, may direct the appointment of a different independent accounting firm at any time during the year if the Audit Committee determines that such a change would be in our and our stockholders’ best interests. +It is expected that one or more representatives of RSM US LLP will be available to participate in the 2026 annual meeting and will be given the opportunity to make a statement if they so desire. It also is expected that the representative(s) will be available to respond to appropriate questions from the stockholders. +VOTE REQUIRED +The approval of the ratification of the appointment of RSM US LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2026 requires the affirmative vote of the holders of a majority of the shares represented at the meeting (in person or by proxy) and entitled to vote. As a result, abstentions will have the same effect as votes “AGAINST” this proposal. We do not expect any broker non-votes in connection with this proposal. +The Board of Directors unanimously recommends a vote FOR the ratification of the appointment of RSM US LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2026. +72  |   ir.propetroservices.com +TABLE OF CONTENTS +Audit Matters +Auditor Fees for Fiscal Years 2025 and 2024 +The following table sets forth the fees incurred by us in fiscal years 2025 and 2024 for services performed by RSM US LLP: +RSM US LLP +Year Ended December 31, +2025 +($) +2024 +($) +Audit fees (1) +1,627,607 +1,686,741 +Audit related fees (2) +244,386 +n/a +All other fees (3) +n/a +n/a +Total fees +1,871,993 +1,686,741 +(1) +Audit fees include fees billed for professional services rendered for the audit of our annual consolidated financial statements, the audit of our system of internal control over financial reporting, the review of interim consolidated financial statements included in our quarterly reports, consents and comfort letters provided in connection with the filing of registration statements, other related services that are normally provided in connection with statutory and regulatory filings, and related out-of-pocket expenses. +(2) +Audit-related fees for the year-ended December 31, 2025 include fees billed for professional services rendered that reasonably relate to the audit but are not required by statute or regulation. For 2025, such services consisted of the issuance of comfort letters and consents related to securities filings. The Company did not incur any audit-related fees during the year-ended December 31, 2024. +(3) +The Company did not incur any tax fees or other fees during the period. +Policy on Audit Committee Pre-Approval of Audit and Non-Audit Services of Independent Registered Public Accounting Firm +The charter of the Audit Committee and its pre-approval policy require that the Audit Committee review and pre-approve the Company’s independent registered public accounting firm’s audit fees, audit-related fees, tax fees and fees for other services. The Chairman of the Audit Committee has the authority to grant pre-approvals that are within the pre-approval policy and are presented to the Audit Committee at a subsequent meeting. For the year ended December 31, 2025, the Audit Committee approved 100% of the services described above under the captions “Audit Fees” and “All Other Fees”. +Report of the Audit Committee +The Audit Committee assists our Board in overseeing: +(i) +the integrity of our consolidated financial statements, +(ii) +our compliance with legal and regulatory requirements, +(iii) +the independent auditor’s qualifications and independence, +(iv) +the performance of our independent auditor, and +(v) +the design and implementation of the Company’s internal audit function and the performance of the internal audit function after it has been established. +In so doing, it is the responsibility of the Audit Committee to maintain free and open communication between the directors, the independent auditor and our financial management. The Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the work of the independent auditor for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for us. The independent auditor reports directly to the Audit Committee. +PROPETRO  2026 Proxy Statement   |  73 +TABLE OF CONTENTS +Audit Matters +Management is responsible for the: +• +preparation, presentation and integrity of our consolidated financial statements, +• +accounting and financial reporting principles, +• +internal control over financial reporting, and +• +procedures designed to ensure compliance with accounting standards, applicable laws and regulations. +Management is also responsible for objectively reviewing and evaluating the adequacy, effectiveness, and quality of our system of internal control over financial reporting. Our independent auditor is responsible for performing an independent audit of the consolidated financial statements. +The Audit Committee’s responsibility is to monitor and oversee these processes and the engagement, independence, and performance of our independent auditor. The Audit Committee relies, without independent verification, on the information provided to it and on the representations made by management and the independent auditor. +The Audit Committee met with RSM US LLP, our independent auditor for the fiscal year ended December 31, 2025, and discussed the overall scope and plans for their audit and matters required to be discussed with audit committees under generally accepted auditing standards, including, among other things, matters related to the conduct of the audit of our consolidated financial statements and the matters required to be discussed by the statement on Auditing Standards No. 1301, as adopted by the Public Company Accounting Oversight Board. +RSM US LLP also provided to the Audit Committee the written disclosures and the letter required by applicable standards of the Public Company Accounting Oversight Board regarding the independent auditor’s communications with the Audit Committee concerning independence, and the Audit Committee discussed RSM US LLP’s independence with RSM US LLP. When considering the independence of RSM US LLP, the Audit Committee considers the effects of any non-audit services provided to the Company by the independent auditor and concluded that such services are compatible with maintaining the auditor’s independence. +The Audit Committee has reviewed and discussed our audited consolidated financial statements for the fiscal year ended December 31, 2025 with management and RSM US LLP. Based on the Audit Committee’s review of the audited consolidated financial statements and the meetings and discussions with management and RSM US LLP, and subject to the limitations on the Audit Committee’s role and responsibilities referred to above and in the Audit Committee Charter, the Audit Committee recommended to our Board that our audited consolidated financial statements be included in our Annual Report on Form 10-K as filed with the SEC. +The Audit Committee of the Board of Directors +ANTHONY J. +BEST +G. LARRY +LAWRENCE +MARY P. +RICCIARDELLO +Chair +74  |   ir.propetroservices.com +TABLE OF CONTENTS +STOCK OWNERSHIP INFORMATION +Security Ownership of Certain Beneficial Owners and Management +The following table presents certain information as of March 25, 2026, based on 122,616,976 shares of common stock outstanding as of such date, as to: +• +each stockholder known by us to be the beneficial owner of more than five percent of our outstanding shares of common stock, +• +each director and director nominee, +• +each Named Executive Officer, and +• +all current directors and executive officers as a group. +Unless otherwise indicated, the address for each beneficial owners in this table is c/o ProPetro Holding Corp., One Marienfeld Place, 110 N. Marienfeld Street, Suite 300, Midland, Texas 79701. +Name and Address of Beneficial Owner +Number of Shares +Beneficially Owned +Percentage +Beneficially Owned +5% Stockholders +Exxon Mobil Corporation (1) +22777 Springwoods Village Parkway +Spring, Texas 77389 +16,600,000 +13.54 % +Sourcerock Group LLC (2) +210 University Blvd., Suite 330 +Denver, CO 80206 +6,846,650 +5.58 % +Jeal Intec, S.L. (3) +Calle Velazquez 57 +6 Deracha, 28010 Madrid +6,440,979 +5.25 % +The Vanguard Group (4) +100 Vanguard Boulevard +Malvern, Pennsylvania 19355 +6,417,153 +5.23 % +BlackRock, Inc. (5) +50 Hudson Yards +New York, New York 10001 +6,190,537 +5.05 % +PROPETRO  2026 Proxy Statement   |  75 +TABLE OF CONTENTS +Stock Ownership Information +Name of Beneficial Owner +Number of Shares +Beneficially Owned (6) +Percentage +Beneficially Owned +Directors +Phillip A. Gobe +235,865 +* +Samuel D. Sledge +649,336 +* +Mark S. Berg +56,909 +* +Anthony J. Best +139,120 +* +Michele Vion +73,210 +* +G. Larry Lawrence +64,012 +* +Mary P. Ricciardello +70,865 +* +Alex V. Volkov +— +— +Named Executive Officers +Adam Muñoz +219,387 +* +John J. Mitchell +118,396 +* +Shelby Fietz +233,901 +* +Celina A. Davila (7) +31,694 +* +Caleb L. Weatherl +2,000 +* +All Directors and Executive Officers as a Group (13 Persons) +1,894,695 +1.55 % +* +Less than 1%. +(1) +Based on a Schedule 13D/A filed on May 3, 2024. Represents shares of our common stock beneficially owned by ExxonMobil. The shares of our common stock are directly owned by Pioneer Natural Resources Pumping Services LLC, a wholly owned subsidiary of Pioneer Natural Resources USA, Inc., which is a wholly owned subsidiary of Pioneer, which is a wholly owned subsidiary of ExxonMobil. +(2) +Based on a Schedule 13G/A filed on February 13, 2026. Represents (i) 6,846,650 shares over which Sourcerock Group LLC has sole voting power (ii) 0 shares over which Sourerock Group LLC has shared voting power, (iii) 6,846,650 shares over which Sourcerock Group LLC has sole dispositive power, and (iv) 0 shares over which Sourcerock Group LLC has shared dispositive power. +(3) +Based on Schedule 13G filed on May 28, 2024. Represents shares of our common stock beneficially owned by Jeal Intec, S.L. Jean Intec, S.L. is the record holder of 6,440,979 shares of common stock. Jesus Alonso Villaron is the beneficial owner of the 6,440,979 shares of common stock held by Jeal Intec. S.L. Jesus Alonso Villaron has the sole investment and dispositive power over the securities held of record by Jeal Intec, S.L. +(4) +Based on a Schedule 13G/A filed on October 30, 2025. Represents (i) 0 shares over which The Vanguard Group has sole voting power (ii) 612,646 shares over which The Vanguard Group has shared voting power, (iii) 5,723,970 shares over which The Vanguard Group has sole dispositive power, and (iv) 693,183 shares over which The Vanguard Group has shared dispositive power. +(5) +Based on a Schedule 13G/A filed on October 2, 2025. Represents shares of our common stock held by BlackRock, Inc. and certain of its affiliates, referred to collectively as BlackRock. Represents (i) 5,995,448 shares over which BlackRock has sole voting power, (ii) 0 shares over which BlackRock has shared voting power, (iii) 6,190,537 shares over which BlackRock has sole dispositive power, and (iv) 0 shares over which BlackRock has shared dispositive power. +(6) +Includes the following number of shares of common stock that are issuable upon the vesting of RSUs that are eligible to vest within 60 days: Mr. Berg (28,181 shares), Mr. Gobe (28,181 shares), Mr. Best (28,181 shares), Ms. Vion (28,181 shares), Mr. Lawrence (28,181 shares) and Ms. Ricciardello (28,181 shares). +(7) +Ms. Davila is an executive officer but does not serve as a named executive officer of the Company. +76  |   ir.propetroservices.com +TABLE OF CONTENTS +ADDITIONAL INFORMATION +Information about the Annual Meeting and Voting +Our Board of Directors is soliciting proxies for the 2026 annual meeting of stockholders, and at any continuations, adjournments or postponements of the meeting, to be held: +When +Where +Record Date +Date of Distribution +May 19, 2026 +10:00 a.m. Central Time +2518 FM 307 +Midland, Texas 79706 +March 25, 2026 +This proxy statement and our 2025 Annual Report on Form 10-K will be mailed on or about +April 8, 2026 +This proxy statement contains important information for you to consider when deciding how to vote on the matters brought before the meeting. Please read it carefully. +IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS +FOR THE STOCKHOLDER MEETING TO BE HELD ON M ay 19, 2026 +This proxy statement and our 2025 Annual Report on Form 10-K are each available at +https://web.viewproxy.com/propetro/2026 . +Who can attend and vote at the meeting? +The Board set March 25, 2026 as the record date for the meeting. You can attend and vote at the meeting if you were a holder of our common stock at the close of business on the record date, March 25, 2026, or if you are a holder of a valid proxy for the meeting. +How do I attend the meeting? +To attend the annual meeting in person, you must call our Vice President of Finance and Investor Relations at (432) 219-7620 no later than 5:00 p.m. Central Time on May 18, 2026 to have your name placed on the attendance list. To be admitted into the meeting, your name must appear on the attendance list, and you must present government-issued photo identification (such as a driver’s license or passport). If your bank or broker holds your shares in street name, you will also be required to present proof of beneficial ownership of our common stock on the record date, such as the Internet Notice you received from your bank or broker, or a bank or brokerage statement or a letter from your bank or broker showing that you owned shares of our common stock at the close of business on the record date. In addition, if your bank or broker holds your shares in street name, you must obtain legal proxy from your broker, bank or other nominee and present it to the inspector of election with your ballot at the meeting. +PROPETRO  2026 Proxy Statement   |  77 +TABLE OF CONTENTS +Additional Information +What proposals will be voted on at the meeting and how does the Board recommend that I vote? +Four proposals are scheduled to be voted upon at the meeting. At the meeting we will ask stockholders to: +Proposals +Board +Recommendation +Page +Reference +1 +Election of eight director nominees to serve for a one-year term +FOR each +nominee +5 +2 +Approval, on an advisory basis, of the compensation of our named executive officers (Say-on-Pay) +FOR +26 +3 +Approval of the Third Amended and Restated 2020 Long Term Incentive Plan (LTIP) +FOR +61 +4 +Ratification of the Audit Committee’s selection of RSM US LLP as our independent auditors for 2026 +FOR +72 +Why did I receive a Notice of Internet Availability of Proxy Materials? +As permitted by the rules of the SEC, we are making this proxy statement and our 2025 Annual Report on form 10-K to stockholders available electronically via the Internet. On or about April 8, 2026, we mailed to our stockholders a Notice of Internet Availability of Proxy Materials (the “Internet Notice”) containing instructions on how to access this proxy statement and our 2025 Annual Report on form 10-K. If you received an Internet Notice by mail, you will not receive a printed copy of the proxy materials in the mail unless you specifically request them. Instead, the Internet Notice instructs you on how to access and review all of the important information contained in the proxy statement and 2025 Annual Report on form 10-K. The Internet Notice also instructs you on how you may submit your proxy over the Internet. If you received an Internet Notice by mail and would like to receive a printed copy of our proxy materials, you should follow the instructions for requesting such materials contained on the Internet Notice. +How do I cast my vote? +Even if you plan to attend the annual meeting in person, we recommend that stockholders vote by proxy to ensure your vote is represented in the event you later decide not to attend, as well as to speed the tabulation of votes. Have your proxy card, Internet Notice or voting instruction form in hand and follow the instructions. +INTERNET +TELEPHONE +MOBILE DEVICE +MAIL +AT THE MEETING +REGISTERED HOLDERS +www.AALVote.com/ +PUMP , 24/7 +Call +1 (866) 804-9616 +(toll-free), 24/7 +Scan the QR code +Sign, date and mail the proxy card, which you may have received by mail, using the postage-paid envelope provided +Attend the annual meeting and cast your ballot +BENEFICIAL OWNERS (HOLDERS IN STREET NAME) +Follow the instructions provided by your broker, bank or other nominee +Return a properly executed voting instruction form by mail, depending upon the method(s) your broker, bank or other nominee makes available +To attend the annual meeting, you will need proof of ownership and a legal proxy from your broker, bank or other nominee +DEADLINE +11:59 p.m. Eastern Time on May 18, 2026, if you are a registered holder +If you are a beneficial owner, please refer to the information provided by your broker, bank or other nominee +In the event that you submit a proxy but do not indicate any voting instructions, your shares will be voted as recommended by the Board on all matters, and in the discretion of the proxy holders as to any other matters that may properly come before the meeting or any continuation, postponement or adjournment of the meeting. We do not know of any other business to be considered at the meeting other than the proposals noted herein. +78  |   ir.propetroservices.com +TABLE OF CONTENTS +Additional Information +If your shares are registered in the name of a broker, bank or other nominee (typically referred to as being held in “street name”), you will receive instructions from your broker, bank or other nominee that must be followed in order for your broker, bank or other nominee to vote your shares per your instructions. Many brokerage firms and banks have a process for their beneficial holders to provide instructions via the Internet or over the telephone. If Internet or telephone voting is unavailable from your broker, bank or other nominee, please complete and return the voting instruction card in the addressed, postage paid envelope provided by your broker, bank or other nominee. +In the event you do not provide instructions on how to vote, your broker may have authority to vote your shares. Under the rules that govern brokers who are voting with respect to shares that are held in street name, brokers have the discretion to vote such shares on “routine” matters, but not on non-routine matters. The only “routine” matter to be voted upon at the meeting is the ratification of the appointment of independent auditors. +Your vote is especially important. If your shares are held by a broker, your broker cannot vote your shares for the election of directors, the non-binding advisory vote on our executive officer compensation or approval of the Third Amended and Restated 2020 Long Term Incentive Plan without your permission. Therefore, please instruct your broker regarding how to vote your shares on these matters promptly . See “Vote Required” following each proposal for further information. +If you hold shares through a broker, bank or other nominee and wish to be able to vote during the meeting, you must obtain a legal proxy from your broker, bank or other nominee and present such legal proxy to the inspector of election with your ballot at the meeting if attending in person. You may only vote during the meeting by emailing a copy of your legal proxy to investors@propetroservices.com in advance of the meeting. +Can I revoke or change my proxy? +Yes. You may revoke or change a previously delivered proxy at any time before the meeting by delivering another proxy with a later date, by voting again via the Internet or by telephone, or by delivering written notice of revocation of your proxy to our General Counsel and Corporate Secretary at our principal executive offices before the beginning of the meeting. You may also revoke your proxy by attending the meeting in person and voting during the meeting, although attendance at the meeting will not, in and of itself, revoke a valid proxy that was previously delivered. If you hold shares through a broker, bank or other nominee, you must contact that nominee to revoke any prior voting instructions. You also may revoke any prior voting instructions by voting in person during the meeting if you obtain a legal proxy as described above. +Can I ask questions before or during the annual meeting? +Stockholders who wish to submit a question in advance may do so at investors@propetroservices.com . Stockholders also may submit questions live during the annual meeting. The Company is committed to transparency. All questions received before or during the annual meeting, and the Company’s responses, will be posted to our Investor Relations website at https://ir.propetroservices.com/ promptly after the annual meeting. Personal details may be omitted for data protection purposes. If we receive substantially similar questions, we may group these questions together and provide a single response to avoid repetition. +Who pays the costs of solicitation? +We will pay the costs of soliciting proxies from stockholders. Our directors, officers and regular employees may solicit proxies on behalf of us, without additional compensation, personally or by telephone. We will also request that brokers, nominees, custodians and other fiduciaries forward soliciting materials to the beneficial owners of shares held by such brokers, nominees, custodians and other fiduciaries. We will reimburse such persons for their reasonable expenses in connection therewith. +Who will count the vote? +The inspector of election will count the vote. Alliance Advisors will act as the inspector of election. +PROPETRO  2026 Proxy Statement   |  79 +TABLE OF CONTENTS +Additional Information +What is a “quorum”? +A quorum is the number of shares that must be present to hold the meeting. The quorum requirement for the meeting is a majority of the outstanding shares as of the record date, present in person or represented by proxy. Your shares will be counted for purposes of determining if there is a quorum if you are present in person and vote during the meeting; or have voted on the Internet, by telephone or by properly submitting a proxy card or voting instruction card by mail. +Votes withheld, abstentions and, for “routine matters” broker non-votes (discussed below) are counted as present and entitled to vote for purposes of determining a quorum. +What happens if there is not a quorum at the meeting? +Pursuant to our bylaws, the meeting may be adjourned by a majority of the shares represented at the meeting to reconvene at the same or some other place. If the adjournment is for more than 30 days, or if after the adjournment a new record date is fixed for the adjourned meeting, notice of the adjournment shall be given to each stockholder of record entitled to vote at the meeting. If the adjournment is for less than 30 days, no additional notice will be delivered. +What is an abstention and how will votes withheld and abstentions be treated? +A “vote withheld,” in the case of the proposal regarding the election of directors, or an “abstention,” in the case of the proposals regarding the advisory approval of our Named Executive Officers’ compensation, the vote on the approval of the LTIP and the ratification of the appointment of our independent registered public accounting firm represent a stockholder’s affirmative choice to decline to vote on a proposal. Votes withheld have no effect on the election of directors. Abstentions have the effect of a vote “AGAINST” in the case of the advisory approval of our Named Executive Officers’ compensation, ratification of the appointment of our independent registered public accounting firm, and approval of the LTIP. +What are broker non-votes and how will they be treated? +Generally, broker non-votes occur when shares held by a broker in “street name” for a beneficial owner are not voted with respect to a particular proposal because the broker (1) has not received voting instructions from the beneficial owner and (2) lacks discretionary voting power to vote those shares. A broker is entitled to vote shares held for a beneficial owner on “routine” matters, such as the ratification of the appointment of our independent registered public accounting firm, without instructions from the beneficial owner of those shares. On the other hand, absent instructions from the beneficial owner of such shares, a broker is not entitled to vote shares held for a beneficial owner on non-routine matters, such as the election of directors, the advisory approval of our Named Executive Officers’ compensation and the vote on the approval of the LTIP. Broker non-votes will have no effect on the election of directors, the advisory approval of our Named Executive Officers’ compensation or the vote on the approval of the LTIP. +80  |   ir.propetroservices.com +TABLE OF CONTENTS +Additional Information +What vote is required to approve each item? +The following table sets forth the voting requirement with respect to each of the proposals: +Proposal +Vote Requirement +Effect of +Abstentions +Effect of Broker Non-Votes +1 +Election of Directors +The plurality of the votes cast. This means that the eight nominees receiving the highest number of affirmative “ FOR ” votes will be elected as directors. +No effect +No effect +2 +Say-on-Pay +The affirmative “ FOR ” vote of the holders of a majority of the shares represented at the meeting (in person or by proxy) and entitled to vote. +The effect of a vote “AGAINST” +No effect +3 +LTIP +The affirmative “ FOR ” vote of the holders of a majority of the shares represented at the meeting (in person or by proxy) and entitled to vote. +The effect of a vote “AGAINST” +No effect +4 +Ratification of the Appointment of Our Independent Auditor +The affirmative “ FOR ” vote of the holders of a majority of the shares represented at the meeting (in person or by proxy) and entitled to vote. +The effect of a vote “AGAINST” +A broker is entitled to vote shares held for a beneficial owner on “routine” matters, without instructions from the beneficial owner of those shares +What does it mean if I get more than one Internet Notice or more than one set of proxy materials? +Your shares are probably registered in more than one account. Please vote all of your shares. To ensure that all of your shares are voted, for each Internet Notice or set of proxy materials, please submit your proxy by phone, via the Internet, or, if you received printed copies of the proxy materials, by signing, dating and returning the enclosed proxy card in the enclosed envelope. +How many votes can I cast? +On all matters you are entitled to one vote per share of common stock that you held as of the record date. +Where can I find the voting results of the meeting? +The preliminary voting results will be announced at our annual meeting. The final results will be published in a current report on Form 8-K to be filed by us with the SEC within four business days of our annual meeting. +PROPETRO  2026 Proxy Statement   |  81 +TABLE OF CONTENTS +Additional Information +Information about Stockholder Proposals +If you want to present a proposal of business or nominate persons for election to the Board at the 2027 annual meeting of stockholders or nominate a person for election to the Board at such meeting, you must give us written notice no later than the close of business on February 18, 2027 and no earlier than the opening of business on January 19, 2027, and follow the procedures outlined in our Bylaws. You may request a copy of the provisions of the Bylaws governing the requirements for notice at the below address. If the date of the 2027 annual meeting of stockholders is more than 30 days before or more than 60 days after May 19, 2027, the one year anniversary of the 2026 annual meeting of stockholders, your notice of a proposal will be timely if we receive it no earlier than the opening of business on the 120th day before the actual date of such meeting and no later than the later of: +(i) +the close of business on the 90th day before the actual date of such meeting, and +(ii) +the close of business on the tenth day following the date on which a written statement setting forth the date of such meeting was mailed to the stockholders or the date on which it is first disclosed to the public. +SEC rules permit management to vote proxies in its discretion in certain cases if a stockholder does not comply with this deadline and, in certain other cases notwithstanding a stockholder’s compliance with this deadline. +If you wish to submit a proposal to be considered for inclusion in next year’s proxy statement pursuant to Rule 14a-8 of the Exchange Act, you must submit the proposal so that it is received by December 9, 2026. If the date of the 2027 annual meeting of stockholders is more than 30 days from May 19, 2027, the one-year anniversary date of the 2026 annual meeting of stockholders, a notice will be timely if we receive it a reasonable time before we begin to print and send our proxy materials for such meeting. +In each case, your notice should be sent in writing to: +ProPetro Holding Corp. +Attention: General Counsel and Corporate Secretary +P.O. Box 873 +Midland, Texas 79702 +Annual Report on Form 10-K +A copy of our Annual Report on Form 10-K for the year ended December 31, 2025, including financial statements and schedules thereto but not including exhibits, as filed with the SEC, will be sent to any stockholder of record on March 25, 2026 without charge by contacting: +INVESTOR RELATIONS +(432) 844-0871 +ProPetro Holding Corp. +Attention: General Counsel and Corporate Secretary +P.O. Box 873 +Midland, Texas 79702 +A reasonable fee will be charged for copies of exhibits. You may also access our Annual Report on Form 10-K for the year ended December 31, 2025 and our other filings with the SEC at www.propetroservices.com . +82  |   ir.propetroservices.com +TABLE OF CONTENTS +Additional Information +Other Matters +The persons designated to vote shares covered by our Board’s proxies intend to exercise their judgment in voting such shares on other matters that may properly come before the meeting. Management does not expect that any matters other than those referred to in this proxy statement will be presented for action at the meeting. +By Order of the Board of Directors, +John J. Mitchell +General Counsel and Corporate Secretary +Midland, Texas +April 8, 2026 +PROPETRO  2026 Proxy Statement   |  83 +TABLE OF CONTENTS +APPENDIX A +THIRD AMENDED AND RESTATED +PROPETRO HOLDING CORP. +2020 LONG TERM INCENTIVE PLAN +1. Purpose . The purpose of the Third Amended and Restated ProPetro Holding Corp. 2020 Long Term Incentive Plan (the “ Plan ”) is to provide a means through which (a) ProPetro Holding Corp., a Delaware corporation (the “ Company ”), and the Affiliates may attract, retain and motivate qualified persons as employees, directors and consultants, thereby enhancing the profitable growth of the Company and the Affiliates and (b) persons upon whom the responsibilities of the successful administration and management of the Company and the Affiliates rest, and whose present and potential contributions to the Company and the Affiliates are of importance, can acquire and maintain stock ownership or awards the value of which is tied to the performance of the Company, thereby strengthening their concern for the Company and the Affiliates. Accordingly, the Plan provides for the grant of Options, SARs, Restricted Stock, Restricted Stock Units, Stock Awards, Dividend Equivalents, Other Stock-Based Awards, Cash Awards, Substitute Awards, or any combination of the foregoing, as determined by the Committee in its sole discretion. +2. Definitions . For purposes of the Plan, the following terms shall be defined as set forth below: +(a) “ Affiliate ” means any corporation, partnership, limited liability company, limited liability partnership, association, trust or other organization that, directly or indirectly, controls, is controlled by, or is under common control with, the Company. For purposes of the preceding sentence, “control” (including, with correlative meanings, the terms “controlled by” and “under common control with”), as used with respect to any entity or organization, shall mean the possession, directly or indirectly, of the power (i) to vote more than 50% of the securities having ordinary voting power for the election of directors of the controlled entity or organization or (ii) to direct or cause the direction of the management and policies of the controlled entity or organization, whether through the ownership of voting securities, by contract, or otherwise. +(b) “ ASC Topic 718 ” means the Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation—Stock Compensation , as amended or any successor accounting standard. +(c) “ Award ” means any Option, SAR, Restricted Stock, Restricted Stock Unit, Stock Award, Dividend Equivalent, Other Stock-Based Award, Cash Award, or Substitute Award, together with any other right or interest, granted under the Plan. +(d) “ Award Agreement ” means any written instrument (including any employment, severance or change in control agreement) that sets forth the terms, conditions, restrictions and/or limitations applicable to an Award, in addition to those set forth under the Plan. +(e) “ Board ” means the Board of Directors of the Company. +(f) “ Cash Award ” means an Award denominated in cash granted under Section 6(i) . +(g) “ Change in Control ” means, except as otherwise provided in an Award Agreement, each of the following: +(i) A transaction or series of transactions (other than an offering of Stock to the general public through a registration statement filed with the SEC) whereby any Person directly or indirectly acquires beneficial ownership (within the meaning of Rules 13d-3 and 13d-5 under the Exchange Act) of securities of the Company possessing more than 30% of the total combined voting power of the Company’s securities outstanding immediately after such acquisition; provided, however, that the following acquisitions shall not constitute a Change in Control: +(A) any acquisition by the Company or any of its Subsidiaries; +(B) any acquisition by an employee benefit plan maintained by the Company or any of its Subsidiaries; +(C) any acquisition which complies with Sections 2(g)(iii)(A), 2(g)(iii)(B), and 2(g)(iii)(C); or +PROPETRO  2026 Proxy Statement   |  A-1 +TABLE OF CONTENTS +(D) in respect of an Award held by a particular Participant, any acquisition by the Participant or any group of Persons including the Participant (or any entity controlled by the Participant or any group of Persons including the Participant); or +(ii) The Incumbent Directors cease for any reason to constitute a majority of the Board; +(iii) The consummation by the Company (whether directly involving the Company or indirectly involving the Company through one or more intermediaries) of (x) a merger, consolidation, reorganization, or business combination, (y) a sale or other disposition of all or substantially all of the Company’s assets in any single transaction or series of related transactions or (z) the acquisition of assets or stock of another entity, in each case other than a transaction: +(A) which results in the Company’s voting securities outstanding immediately before the transaction continuing to represent (either by remaining outstanding or by being converted into voting securities of the Company or the Person that, as a result of the transaction, controls, directly or indirectly, the Company or owns, directly or indirectly, all or substantially all of the Company’s assets or otherwise succeeds to the business of the Company (the Company or such Person, the “ Successor Entity ”)) at least a majority of the combined voting power of the Successor Entity’s outstanding voting securities immediately after the transaction, and +(B) after which no Person beneficially owns voting securities representing 50% or more of the combined voting power of the Successor Entity; provided , however , that no Person shall be treated for purposes of this Section 2(g)(iii) as beneficially owning 50% or more of the combined voting power of the Successor Entity solely as a result of the voting power held in the Company prior to the consummation of the transaction; and +(C) after which at least a majority of the members of the board of directors (or the analogous governing body) of the Successor Entity were Board members at the time of the Board’s approval of the execution of the initial agreement providing for such transaction; or +(iv) The date which is 10 business days prior to the completion of a liquidation or dissolution of the Company. +Notwithstanding the foregoing, if a Change in Control constitutes a payment event with respect to any Award (or any portion of an Award) that provides for the deferral of compensation that is subject to the Nonqualified Deferred Compensation Rules, to the extent required to avoid the imposition of additional taxes under such rules, the transaction or event described in subsection (i), (ii), (iii) or (iv) with respect to such Award (or portion thereof) shall only constitute a Change in Control for purposes of the payment timing of such Award if such transaction also constitutes a “change in control event,” as defined in Treasury Regulation § 1.409A-3(i)(5). +The Board shall have full and final authority, which shall be exercised in its sole discretion, to determine conclusively whether a Change in Control has occurred pursuant to the above definition, the date of the occurrence of such Change in Control and any incidental matters relating thereto; provided that any exercise of authority in conjunction with a determination of whether a Change in Control is a “change in control event” as defined in Treasury Regulation Section 1.409A-3(i)(5) shall be consistent with such regulation. +(h) “ Code ” means the Internal Revenue Code of 1986, as amended from time to time, including the guidance and regulations promulgated thereunder and successor provisions, guidance and regulations thereto. +(i) “ Committee ” means a committee of two or more directors designated by the Board to administer the Plan; provided , however , that, unless otherwise determined by the Board, the Committee shall consist solely of two or more Qualified Members. +(j) “ Dividend Equivalent ” means a right, granted to an Eligible Person under Section 6(g) , to receive cash, Stock, other Awards or other property equal in value to dividends paid with respect to a specified number of shares of Stock. +(k) “ Effective Date ” means May 19, 2026. +(l) “ Eligible Person ” means any individual who, as of the date of grant of an Award, is an officer or employee of the Company or of any Affiliate, and any other person who provides services to the Company or any Affiliate, including directors of the Company; provided , however , that, any such individual must be an “employee” of +A-2  |   ir.propetroservices.com +TABLE OF CONTENTS +the Company or any of its parents or subsidiaries within the meaning of General Instruction A.1(a) to Form S-8 if such individual is granted an Award that may be settled in Stock. An employee on leave of absence may be an Eligible Person. +(m) “ Exchange Act ” means the Securities Exchange Act of 1934, as amended from time to time, including the guidance, rules and regulations promulgated thereunder and successor provisions, guidance, rules and regulations thereto. +(n) “ Fair Market Value ” of a share of Stock means, as of any specified date, (i) if the Stock is listed on a national securities exchange, the closing sales price of the Stock, as reported on the stock exchange composite tape on that date (or if no sales occur on such date, on the last preceding date on which such sales of the Stock are so reported); (ii) if the Stock is not traded on a national securities exchange but is traded over the counter on such date, the average between the reported high and low bid and asked prices of Stock on the most recent date on which Stock was publicly traded on or preceding the specified date; or (iii) in the event Stock is not publicly traded at the time a determination of its value is required to be made under the Plan, the amount determined by the Committee in its discretion in such manner as it deems appropriate, taking into account all factors the Committee deems appropriate, including the Nonqualified Deferred Compensation Rules. Notwithstanding this definition of Fair Market Value, with respect to one or more Award types, or for any other purpose for which the Committee must determine the Fair Market Value under the Plan, the Committee may elect to choose a different measurement date or methodology for determining Fair Market Value so long as the determination is consistent with the Nonqualified Deferred Compensation Rules and all other applicable laws and regulations. +(o) “ Incumbent Directors ” shall mean for any period of 12 consecutive months, individuals who, at the beginning of such period, constitute the Board together with any new members of the Board (other than a member of the Board designated by a Person who shall have entered into an agreement with the Company to effect a transaction described in Section 2(g)(i) or 2(g)(iii)) whose election or nomination for election to the Board was approved by a vote of at least a majority (either by a specific vote or by approval of the proxy statement of the Company in which such Person is named as a nominee for member of the Board without objection to such nomination) of the members of the Board then still in office who either were members of the Board at the beginning of the 12-month period or whose election or nomination for election was previously so approved. No individual initially elected or nominated as a member of the Board of the Company as a result of an actual or threatened election contest with respect to members of the Board or as a result of any other actual or threatened solicitation of proxies by or on behalf of any Person other than the Board shall be an Incumbent Director. +(p) “ ISO ” means an Option intended to be and designated as an “incentive stock option” within the meaning of Section 422 of the Code. +(q) “ Nonqualified Deferred Compensation Rules ” means the limitations and requirements of Section 409A of the Code, as amended from time to time, including the guidance and regulations promulgated thereunder and successor provisions, guidance and regulations thereto. +(r) “ Nonstatutory Option ” means an Option that is not an ISO. +(s) “ Option ” means a right, granted to an Eligible Person under Section 6(b) , to purchase Stock at a specified price during specified time periods, which may either be an ISO or a Nonstatutory Option. +(t) “ Other Stock-Based Award ” means an Award granted to an Eligible Person under Section 6(h) . +(u) “ Participant ” means a person who has been granted an Award under the Plan that remains outstanding, including a person who is no longer an Eligible Person. +(v) “ Person ” means any individual, entity or group within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act. +(w) “ Prior Plan ” means the ProPetro Holding Corp. 2017 Incentive Award Plan. +(x) “ Qualified Member ” means a member of the Board who is (i) a “non-employee director” within the meaning of Rule 16b-3(b)(3), and (ii) “independent” under the listing standards or rules of the securities exchange upon which the Stock is traded, but only to the extent such independence is required in order to take the action at issue pursuant to such standards or rules. +(y) “ Restricted Stock ” means Stock granted to an Eligible Person under Section 6(d) that is subject to certain restrictions and to a risk of forfeiture. +PROPETRO  2026 Proxy Statement   |  A-3 +TABLE OF CONTENTS +(z) “ Restricted Stock Unit ” means a right, granted to an Eligible Person under Section 6(e) , to receive Stock, cash or a combination thereof at the end of a specified period (which may or may not be coterminous with the vesting schedule of the Award). +(aa) “ Rule 16b-3 ” means Rule 16b-3, promulgated by the SEC under Section 16 of the Exchange Act. +(bb) “ SAR ” means a stock appreciation right granted to an Eligible Person under Section 6(c) . +(cc) “ SEC ” means the Securities and Exchange Commission. +(dd) “ Securities Act ” means the Securities Act of 1933, as amended from time to time, including the guidance, rules and regulations promulgated thereunder and successor provisions, guidance, rules and regulations thereto. +(ee) “ Stock ” means the Company’s Common Stock, par value $0.001 per share, and such other securities as may be substituted (or re-substituted) for Stock pursuant to Section 8 . +(ff) “ Stock Award ” means unrestricted shares of Stock granted to an Eligible Person under Section 6(f) . +(gg) “ Subsidiary ” shall mean any entity (other than the Company), whether domestic or foreign, in an unbroken chain of entities beginning with the Company if each of the entities other than the last entity in the unbroken chain beneficially owns, at the time of the determination, securities or interests representing at least fifty percent (50%) of the total combined voting power of all classes of securities or interests in one of the other entities in such chain. +(hh) “ Substitute Award ” means an Award granted under Section 6(j) . +3. Administration . +(a) Authority of the Committee . The Plan shall be administered by the Committee except to the extent the Board elects to administer the Plan, in which case references herein to the “Committee” shall be deemed to include references to the “Board.” Subject to the express provisions of the Plan, Rule 16b-3 and other applicable laws, the Committee shall have the authority, in its sole and absolute discretion, to: +(i) designate Eligible Persons as Participants; +(ii) determine the type or types of Awards to be granted to an Eligible Person; +(iii) determine the number of shares of Stock or amount of cash to be covered by Awards; +(iv) determine the terms and conditions of any Award, including whether, to what extent and under what circumstances Awards may be vested, settled, exercised, cancelled or forfeited (including conditions based on continued employment or service requirements or the achievement of one or more performance goals); +(v) modify, waive or adjust any term or condition of an Award that has been granted, which may include the acceleration of vesting, waiver of forfeiture restrictions, modification of the form of settlement of the Award (for example, from cash to Stock or vice versa), early termination of a performance period, or modification of any other condition or limitation regarding an Award; +(vi) determine the treatment of an Award upon a termination of employment or other service relationship; +(vii) impose a holding period with respect to an Award or the shares of Stock received in connection with an Award; +(viii) interpret and administer the Plan and any Award Agreement; +(ix) correct any defect, supply any omission or reconcile any inconsistency in the Plan, in any Award, or in any Award Agreement; and +(x) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the Plan. +The express grant of any specific power to the Committee, and the taking of any action by the Committee, shall not be construed as limiting any power or authority of the Committee. Any action of the Committee shall be final, conclusive and binding on all persons, including the Company, Affiliates, stockholders, Participants, beneficiaries, and permitted transferees under Section 7(a) or other persons claiming rights from or through a Participant. +A-4  |   ir.propetroservices.com +TABLE OF CONTENTS +(b) Exercise of Committee Authority . At any time that a member of the Committee is not a Qualified Member, any action of the Committee relating to an Award granted or to be granted to an Eligible Person who is then subject to Section 16 of the Exchange Act in respect of the Company where such action is not taken by the full Board may be taken either (i) by a subcommittee, designated by the Committee, composed solely of two or more Qualified Members, or (ii) by the Committee but with each such member who is not a Qualified Member abstaining or recusing himself or herself from such action; provided , however , that upon such abstention or recusal, the Committee remains composed solely of two or more Qualified Members. Such action, authorized by such a subcommittee or by the Committee upon the abstention or recusal of such non-Qualified Member(s), shall be the action of the Committee for purposes of the Plan. For the avoidance of doubt, the full Board may take any action relating to an Award granted or to be granted to an Eligible Person who is then subject to Section 16 of the Exchange Act in respect of the Company. +(c) Delegation of Authority . The Committee may delegate any or all of its powers and duties under the Plan to a subcommittee of directors or to any officer of the Company, including the power to perform administrative functions and grant Awards; provided , that such delegation does not (i) violate state or corporate law, or (ii) result in the loss of an exemption under Rule 16b-3(d)(1) for Awards granted to Participants subject to Section 16 of the Exchange Act in respect of the Company. Upon any such delegation, all references in the Plan to the “Committee,” other than in Section 8 , shall be deemed to include any subcommittee or officer of the Company to whom such powers have been delegated by the Committee. Any such delegation shall not limit the right of such subcommittee members or such an officer to receive Awards; provided , however , that such subcommittee members and any such officer may not grant Awards to himself or herself, a member of the Board, or any executive officer of the Company or an Affiliate, or take any action with respect to any Award previously granted to himself or herself, a member of the Board, or any executive officer of the Company or an Affiliate. The Committee may also appoint agents who are not executive officers of the Company or members of the Board to assist in administering the Plan, provided , however , that such individuals may not be delegated the authority to grant or modify any Awards that will, or may, be settled in Stock. +(d) Limitation of Liability . The Committee and each member thereof shall be entitled to, in good faith, rely or act upon any report or other information furnished to him or her by any officer or employee of the Company or any Affiliate, the Company’s legal counsel, independent auditors, consultants or any other agents assisting in the administration of the Plan. Members of the Committee and any officer or employee of the Company or any Affiliate acting at the direction or on behalf of the Committee shall not be personally liable for any action or determination taken or made in good faith with respect to the Plan, and shall, to the fullest extent permitted by law, be indemnified and held harmless by the Company with respect to any such action or determination. +(e) Participants in Non-U.S. Jurisdictions . Notwithstanding any provision of the Plan to the contrary, to comply with applicable laws in countries other than the United States in which the Company or any Affiliate operates or has employees, directors or other service providers from time to time, or to ensure that the Company complies with any applicable requirements of foreign securities exchanges, the Committee, in its sole discretion, shall have the power and authority to: (i) determine which of the Affiliates shall be covered by the Plan; (ii) determine which Eligible Persons outside the United States are eligible to participate in the Plan; (iii) modify the terms and conditions of any Award granted to Eligible Persons outside the United States to comply with applicable foreign laws or listing requirements of any foreign exchange; (iv) establish sub-plans and modify exercise procedures and other terms and procedures, to the extent such actions may be necessary or advisable (any such sub-plans and/or modifications shall be attached to the Plan as appendices), provided , however , that no such sub-plans and/or modifications shall increase the share limitations contained in Section 4(a) ; and (v) take any action, before or after an Award is granted, that it deems advisable to comply with any applicable governmental regulatory exemptions or approval or listing requirements of any such foreign securities exchange. For purposes of the Plan, all references to foreign laws, rules, regulations or taxes shall be references to the laws, rules, regulations and taxes of any applicable jurisdiction other than the United States or a political subdivision thereof. +4. Stock Subject to the Plan . +(a) Number of Shares Available for Delivery . Subject to adjustment in a manner consistent with Section 8 , (i) 14,060,000 shares of Stock are reserved and available for delivery with respect to Awards, and such total shall be available for the issuance of shares upon the exercise of ISOs, plus (ii) the number of shares of Stock that become available for Awards under this Plan pursuant to Section 4(d) below. +(b) Application of Limitation to Grants of Awards . Subject to Section 4(c) , no Award may be granted if the number of shares of Stock that may be delivered in connection with such Award exceeds the number of shares +PROPETRO  2026 Proxy Statement   |  A-5 +TABLE OF CONTENTS +of Stock remaining available under the Plan minus the number of shares of Stock issuable in settlement of or relating to then-outstanding Awards. The Committee may adopt reasonable counting procedures to ensure appropriate counting, avoid double counting (as, for example, in the case of tandem or Substitute Awards) and make adjustments if the number of shares of Stock actually delivered differs from the number of shares previously counted in connection with an Award. +(c) Availability of Shares Not Delivered under Awards . Shares of Stock subject to an Award under the Plan that expires or is cancelled, forfeited, exchanged, settled in cash or otherwise terminated without the actual delivery of shares will again be available for Awards. For the avoidance of doubt, Awards of Restricted Stock shall not be considered “delivered shares” for this purpose until vesting. Notwithstanding the foregoing, (i) the number of shares tendered or withheld in payment of any exercise or purchase price of an Option or an SAR or taxes relating to an Option or an SAR, including shares that were subject to an Option or an SAR but were not issued or delivered as a result of the net settlement or net exercise of such Option or SAR and (ii) shares repurchased on the open market with the proceeds of an Option’s exercise price, will be considered “delivered shares” and will not, in each case, be again available for Awards. The number of shares of Stock withheld in payment of the tax withholding obligation related to an Award other than an Option or an SAR will be again available for Awards under the Plan. For the avoidance of doubt, if an Award may be settled only in cash, such Award need not ever be counted against any share limit under this Section 4 . +(d) Shares Available Under the Prior Plan . In addition, shares of Stock subject to an award granted under the Prior Plan and outstanding as of October 22, 2020 (a “ Prior Award ”) that are forfeited or expire, are converted to shares of another Person in connection with a spin-off or other similar event, or if such Prior Award is settled for cash (in whole or in part) (including shares repurchased by the Company under Section 8.4 of the Prior Plan at the same price paid by the holder of such Prior Award), the shares of Stock subject to such Prior Award shall, to the extent of such forfeiture, expiration, conversion or cash settlement, become available for future grants of Awards under the Plan. For the avoidance of doubt, a number of shares of Stock equal to the difference between (i) the maximum number of shares of Stock that could have been settled pursuant to performance-based Prior Awards, and (ii) the actual number of shares of Stock delivered upon settlement of performance-based Prior Awards, shall become available for future grants of Awards under the Plan. Notwithstanding anything to the contrary contained herein, the following shares of Stock subject to Prior Awards shall not be added to the shares of Stock authorized for grant under Section 4(a) and shall not be available for future grants of Awards: (i) shares tendered by a Holder (as such term is defined in the Prior Plan) or withheld by the Company in payment of the exercise price of a stock option; (ii) shares of Stock tendered by the Holder or withheld by the Company to satisfy any tax withholding obligation with respect to a Prior Award; (iii) shares of Stock subject to a stock appreciation right that are not issued in connection with the stock settlement of the stock appreciation right on exercise thereof; and (iv) shares of Stock purchased on the open market by the Company with the cash proceeds received from the exercise of stock options. For the avoidance of doubt, no awards will be granted under the Prior Plan on or following October 22, 2020. +(e) Shares Available Following Certain Transactions . Substitute Awards granted in accordance with applicable stock exchange requirements and in substitution or exchange for awards previously granted by a company acquired by the Company or any Subsidiary or with which the Company or any Subsidiary combines shall not reduce the shares authorized for issuance under the Plan or the limitations on grants to non-employee members of the Board under Section 5(b) , nor shall shares subject to such Substitute Awards be added to the shares available for issuance under the Plan as provided above (whether or not such Substitute Awards are later cancelled, forfeited or otherwise terminated). +(f) Stock Offered . The shares of Stock to be delivered under the Plan shall be made available from (i) authorized but unissued shares of Stock, (ii) Stock held in the treasury of the Company, or (iii) previously issued shares of Stock reacquired by the Company, including shares purchased on the open market. +5. Eligibility; Award Limitations for Non-Employee Members of the Board . +(a) Awards may be granted under the Plan only to Eligible Persons. +(b) In each calendar year during any part of which the Plan is in effect, a non-employee member of the Board may not be paid compensation, whether denominated in cash or Awards, for such individual’s service on the Board in excess of $500,000; provided, however, that for any calendar year in which a member of the Board (i) first commences service on the Board, (ii) serves on a special committee of the Board, (iii) serves as lead director, or (iv) serves as non-executive Chairman of the Board, additional compensation, whether denominated in cash or Awards may be paid. For purposes of this Section 5(b) , the value of Awards shall be determined, if +A-6  |   ir.propetroservices.com +TABLE OF CONTENTS +applicable, pursuant to ASC Topic 718 on the date of grant and attributed to the compensation limit for the year in which the Award is granted. For the avoidance of doubt, the limits set forth in this Section 5(b) shall be without regard to grants of Awards or other payments, if any, made to a non-employee member of the Board during any period in which such individual was an employee of the Company or of any of its Affiliates or was otherwise providing services to the Company or to any of its Affiliates other than in the capacity as a director of the Company. For the avoidance of doubt, any cash compensation that is deferred shall be counted toward this limit for the year in which it was first earned, and not when paid or settled, if later. +6. Specific Terms of Awards . +(a) General . +(i) Awards may be granted on the terms and conditions set forth in this Section 6 . Awards granted under the Plan may, in the discretion of the Committee, be granted either alone, in addition to, or in tandem with any other Award. In addition, the Committee may impose on any Award or the exercise thereof, at the date of grant or thereafter (subject to Section 10 ), such additional terms and conditions, not inconsistent with the provisions of the Plan, as the Committee shall determine, including subjecting such awards to service- or performance-based vesting conditions. Except as otherwise provided in an Award Agreement, the Committee may exercise its discretion to reduce or increase the amounts payable under any Award. +(ii) Without limiting the scope of Section 6(a)(i), with respect to any performance-based conditions, (i) the Committee may use one or more business criteria or other measures of performance as it may deem appropriate in establishing any performance goals applicable to an Award, (ii) any such performance goals may relate to the performance of the Participant, the Company (on a consolidated basis), or to specified Subsidiaries, business or geographical units or operating areas of the Company, (iii) the performance period or periods over which performance goals will be measured shall be established by the Committee, and (iv) any such performance goals and performance periods may differ among Awards granted to any one Participant or to different Participants. +(iii) Subject to Section 8(e) of the Plan, any Award (or portion thereof) granted under the Plan shall vest no earlier than the first anniversary of the date the Award is granted; provided , however , that, notwithstanding the foregoing, Awards that result in the issuance of an aggregate of up to 5% of the shares of Stock available pursuant to Section 4 may be granted to any one or more Eligible Persons without respect to and/or administered without regard for this minimum vesting provision. For the avoidance of doubt, the grant of Stock Awards will count against the 5% limit described in the immediately preceding sentence. No Award Agreement shall be permitted to reduce or eliminate the requirements of this Section 6(a)(iii). Nothing in this Section 6(a)(iii) shall preclude the Committee from taking action, in its sole discretion, to accelerate the vesting of any Award for any reason. +(b) Options . The Committee is authorized to grant Options, which may be designated as either ISOs or Nonstatutory Options, to Eligible Persons on the following terms and conditions: +(i) Exercise Price . Each Award Agreement evidencing an Option shall state the exercise price per share of Stock (the “ Exercise Price ”) established by the Committee; provided , however , that except as provided in Section 6(j) or in Section 8 , the Exercise Price of an Option shall not be less than the greater of (A) the par value per share of the Stock or (B) 100% of the Fair Market Value per share of the Stock as of the date of grant of the Option (or in the case of an ISO granted to an individual who owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or its parent or any of its Subsidiaries, 110% of the Fair Market Value per share of the Stock on the date of grant). +(ii) Time and Method of Exercise; Other Terms . The Committee shall determine the methods by which the Exercise Price may be paid or deemed to be paid, the form of such payment, including cash or cash equivalents, Stock (including previously owned shares or through a cashless exercise, i.e., “net settlement”, a broker-assisted exercise, or other reduction of the amount of shares otherwise issuable pursuant to the Option), other Awards or awards granted under other plans of the Company or any Affiliate, other property, or any other legal consideration the Committee deems appropriate, the methods by or forms in which Stock will be delivered or deemed to be delivered to Participants, including the delivery of Restricted Stock subject to Section 6(d) , and any other terms and conditions of any Option. In the case of an exercise whereby the Exercise Price is paid with Stock, such Stock shall be valued based on the Stock’s Fair Market Value as of the date of exercise. No Option may be exercisable for a period of more than ten years following the date of grant of the Option (or in the case of an ISO granted to an individual who owns stock possessing +PROPETRO  2026 Proxy Statement   |  A-7 +TABLE OF CONTENTS +more than 10% of the total combined voting power of all classes of stock of the Company or its parent or any of its Subsidiaries, for a period of more than five years following the date of grant of the ISO). +(iii) ISOs . The terms of any ISO granted under the Plan shall comply in all respects with the provisions of Section 422 of the Code. ISOs may only be granted to Eligible Persons who are employees of the Company or employees of a parent or any Subsidiary corporation of the Company. Except as otherwise provided in Section 8 , no term of the Plan relating to ISOs (including any SAR in tandem therewith) shall be interpreted, amended or altered, nor shall any discretion or authority granted under the Plan be exercised, so as to disqualify either the Plan or any ISO under Section 422 of the Code, unless notice has been provided to the Participant that such change will result in such disqualification. ISOs shall not be granted more than ten years after the earlier of the adoption of the Plan or the approval of the Plan by the Company’s stockholders. Notwithstanding the foregoing, to the extent that the aggregate Fair Market Value of shares of Stock subject to an ISO and the aggregate Fair Market Value of shares of stock of any parent or Subsidiary corporation (within the meaning of Sections 424(e) and (f) of the Code) subject to any other incentive stock options of the Company or a parent or Subsidiary corporation (within the meaning of Sections 424(e) and (f) of the Code) that are exercisable for the first time by a Participant during any calendar year exceeds $100,000, or such other amount as may be prescribed under Section 422 of the Code, such excess shall be treated as Nonstatutory Options in accordance with the Code. As used in the previous sentence, Fair Market Value shall be determined as of the date the ISO is granted. If a Participant shall make any disposition of shares of Stock issued pursuant to an ISO under the circumstances described in Section 421(b) of the Code (relating to disqualifying dispositions), the Participant shall notify the Company of such disposition within the time provided to do so in the applicable award agreement. +(c) SARs . The Committee is authorized to grant SARs to Eligible Persons on the following terms and conditions: +(i) Right to Payment . An SAR is a right to receive, upon exercise thereof, the excess of (A) the Fair Market Value of one share of Stock on the date of exercise over (B) the grant price of the SAR as determined by the Committee. +(ii) Grant Price . Each Award Agreement evidencing an SAR shall state the grant price per share of Stock established by the Committee; provided , however , that except as provided in Section 6(j) or in Section 8 , the grant price per share of Stock subject to an SAR shall not be less than the greater of (A) the par value per share of the Stock or (B) 100% of the Fair Market Value per share of the Stock as of the date of grant of the SAR. +(iii) Method of Exercise and Settlement; Other Terms . The Committee shall determine the form of consideration payable upon settlement, the method by or forms in which Stock (if any) will be delivered or deemed to be delivered to Participants, and any other terms and conditions of any SAR. SARs may be either free-standing or granted in tandem with other Awards. No SAR may be exercisable for a period of more than ten years following the date of grant of the SAR. +(iv) Rights Related to Options . An SAR granted in connection with an Option shall entitle a Participant, upon exercise, to surrender that Option or any portion thereof, to the extent unexercised, and to receive payment of an amount determined by multiplying (A) the difference obtained by subtracting the Exercise Price with respect to a share of Stock specified in the related Option from the Fair Market Value of a share of Stock on the date of exercise of the SAR, by (B) the number of shares as to which that SAR has been exercised. The Option shall then cease to be exercisable to the extent surrendered. SARs granted in connection with an Option shall be subject to the terms and conditions of the Award Agreement governing the Option, which shall provide that the SAR is exercisable only at such time or times and only to the extent that the related Option is exercisable and shall not be transferable except to the extent that the related Option is transferrable. +(d) Restricted Stock . The Committee is authorized to grant Restricted Stock to Eligible Persons on the following terms and conditions: +(i) Restrictions . Restricted Stock shall be subject to such restrictions on transferability, risk of forfeiture and other restrictions, if any, as the Committee may impose. Except as provided in Section 7(a)(iii) and Section 7(a)(iv) , during the restricted period applicable to the Restricted Stock, the Restricted Stock may not be sold, transferred, pledged, hedged, hypothecated, margined or otherwise encumbered by the Participant. Except as otherwise provided in the applicable Award Agreement and this Section 6(d) , the holder of a Restricted Stock Award will generally have the same rights as a stockholder, including the right +A-8  |   ir.propetroservices.com +TABLE OF CONTENTS +to vote the Stock subject to the Restricted Stock Award and to receive dividends on the Stock subject to the Restricted Stock Award during the restriction period (subject, in all cases, to the limitations on payment of dividends on unvested Awards, as described in Section 6(d)(ii) below). +(ii) Dividends and Splits . As a condition to the grant of an Award of Restricted Stock, the Committee may allow a Participant to elect, or may require, that any cash dividends paid on a share of Restricted Stock be automatically reinvested in additional shares of Restricted Stock, applied to the purchase of additional Awards or deferred without interest to the date of vesting of the associated Award of Restricted Stock, provided that in all events such cash dividends shall be subject to restrictions and a risk of forfeiture to the same extent as the Restricted Stock with respect to which such dividends were paid and shall not be paid unless and until such Restricted Stock has vested and been earned. Stock distributed in connection with a Stock split or Stock dividend, and other property (other than cash) distributed as a dividend, shall be subject to restrictions and a risk of forfeiture to the same extent as the Restricted Stock with respect to which such Stock or other property has been distributed and shall not be delivered unless and until such Restricted Stock has vested and been earned. +(e) Restricted Stock Units . The Committee is authorized to grant Restricted Stock Units to Eligible Persons on the following terms and conditions: +(i) Award and Restrictions . Restricted Stock Units shall be subject to such restrictions (which may include a risk of forfeiture) as the Committee may impose. +(ii) Settlement . Settlement of vested Restricted Stock Units shall occur upon vesting or upon expiration of the deferral period specified for such Restricted Stock Units by the Committee (or, if permitted by the Committee, as elected by the Participant). Restricted Stock Units shall be settled by delivery of (A) a number of shares of Stock equal to the number of Restricted Stock Units for which settlement is due, or (B) cash in an amount equal to the Fair Market Value of the specified number of shares of Stock equal to the number of Restricted Stock Units for which settlement is due, or a combination thereof, as determined by the Committee at the date of grant or thereafter. +(f) Stock Awards . The Committee is authorized to grant Stock Awards to Eligible Persons as a bonus, as additional compensation, or in lieu of cash compensation any such Eligible Person is otherwise entitled to receive, in such amounts and subject to such other terms as the Committee in its discretion determines to be appropriate. +(g) Dividend Equivalents . The Committee is authorized to grant Dividend Equivalents to Eligible Persons, entitling any such Eligible Person to receive cash, Stock, other Awards, or other property equal in value to dividends or other distributions paid with respect to a specified number of shares of Stock. Dividend Equivalents may be awarded in connection with another Award (other than an Award of Restricted Stock or Stock Award). Dividend Equivalents shall be subject to restrictions and a risk of forfeiture to the same extent as the Award with respect to which such dividends accrue and shall not be paid unless and until such Award has vested and been earned. +(h) Other Stock-Based Awards . The Committee is authorized, subject to limitations under applicable law, to grant to Eligible Persons such other Awards that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, Stock, as deemed by the Committee to be consistent with the purposes of the Plan, including convertible or exchangeable debt securities, other rights convertible or exchangeable into Stock, purchase rights for Stock, Awards with value and payment contingent upon performance of the Company or any other factors designated by the Committee, and Awards valued by reference to the book value of Stock or the value of securities of, or the performance of, specified Affiliates. The Committee shall determine the terms and conditions of such Other Stock-Based Awards. Stock delivered pursuant to an Other- Stock Based Award in the nature of a purchase right granted under this Section 6(h) shall be purchased for such consideration, paid for at such times, by such methods, and in such forms, including cash, Stock, other Awards, or other property, as the Committee shall determine. +(i) Cash Awards . The Committee is authorized to grant Cash Awards, on a free-standing basis or as an element of, a supplement to, or in lieu of any other Award under the Plan to Eligible Persons in such amounts and subject to such other terms as the Committee in its discretion determines to be appropriate, including for purposes of any annual or short-term incentive or other bonus program. +(j) Substitute Awards; No Repricing . Awards may be granted in substitution or exchange for any other Award granted under the Plan or under another plan of the Company or an Affiliate or any other right of an Eligible Person to receive payment from the Company or an Affiliate. Awards may also be granted under the Plan in +PROPETRO  2026 Proxy Statement   |  A-9 +TABLE OF CONTENTS +substitution for awards held by individuals who become Eligible Persons as a result of a merger, consolidation or acquisition of another entity or the assets of another entity by or with the Company or an Affiliate. Such Substitute Awards referred to in the immediately preceding sentence that are Options or SARs may have an exercise price that is less than the Fair Market Value of a share of Stock on the date of the substitution if such substitution complies with the Nonqualified Deferred Compensation Rules and other applicable laws and exchange rules. Except as provided in this Section 6(j) or in Section 8 , without the approval of the stockholders of the Company, the terms of outstanding Awards may not be amended to (i) reduce the Exercise Price or grant price of an outstanding Option or SAR, (ii) grant a new Option, SAR or other Award in substitution for, or upon the cancellation of, any previously granted Option or SAR that has the effect of reducing the Exercise Price or grant price thereof, (iii) exchange any Option or SAR for Stock, cash or other consideration when the Exercise Price or grant price per share of Stock under such Option or SAR exceeds the Fair Market Value of a share of Stock or (iv) take any other action that would be considered a “repricing” of an Option or SAR under the applicable listing standards of the national securities exchange on which the Stock is listed (if any). +7. Certain Provisions Applicable to Awards . +(a) Limit on Transfer of Awards . +(i) Except as provided in Sections 7(a)(iii) and (iv) , each Option and SAR shall be exercisable only by the Participant during the Participant’s lifetime, or by the person to whom the Participant’s rights shall pass by will or the laws of descent and distribution. Notwithstanding anything to the contrary in this Section 7(a) , an ISO shall not be transferable other than by will or the laws of descent and distribution. +(ii) Except as provided in Sections 7(a)(i) , (iii) and (iv) , no Award, other than a Stock Award, and no right under any such Award, may be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by a Participant and any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall be void and unenforceable against the Company or any Affiliate. +(iii) To the extent specifically provided by the Committee and permitted pursuant to Form S-8 and the instructions thereto, an Award may be transferred by a Participant on such terms and conditions as the Committee may from time to time establish; provided , however , that no Award (other than a Stock Award) may be transferred to a third-party financial institution for value. +(iv) An Award may be transferred pursuant to a domestic relations order entered or approved by a court of competent jurisdiction upon delivery to the Company of a written request for such transfer and a certified copy of such order. +(b) Form and Timing of Payment under Awards; Deferrals . Subject to the terms of the Plan and any applicable Award Agreement, payments to be made by the Company or any Affiliates upon the exercise or settlement of an Award may be made in such forms as the Committee shall determine in its discretion, including cash, Stock, other Awards or other property, and may be made in a single payment or transfer, in installments, or on a deferred basis (which may be required by the Committee or permitted at the election of the Participant on terms and conditions established by the Committee); provided , however , that any such deferred or installment payments will be set forth in the Award Agreement. Payments may include, without limitation, provisions for the payment or crediting of reasonable interest on installment or deferred payments or the grant or crediting of Dividend Equivalents or other amounts in respect of installment or deferred payments denominated in Stock. +(c) Evidencing Stock . The Stock or other securities of the Company delivered pursuant to an Award may be evidenced in any manner deemed appropriate by the Committee in its sole discretion, including in the form of a certificate issued in the name of the Participant or by book entry, electronic or otherwise, and shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan or the rules, regulations, and other requirements of the SEC, any stock exchange upon which such Stock or other securities are then listed, and any applicable federal, state or other laws, and the Committee may cause a legend or legends to be inscribed on any such certificates to make appropriate reference to such restrictions. Further, if certificates representing Restricted Stock are registered in the name of the Participant, the Company may retain physical possession of the certificates and may require that the Participant deliver a stock power to the Company, endorsed in blank, related to the Restricted Stock. +(d) Consideration for Grants . Awards may be granted for such consideration, including services, as the Committee shall determine, but shall not be granted for less than the minimum lawful consideration. +(e) Additional Agreements . Each Eligible Person to whom an Award is granted under the Plan may be required to agree in writing, as a condition to the grant of such Award or otherwise, to subject an Award that is +A-10  |   ir.propetroservices.com +TABLE OF CONTENTS +exercised or settled following such Eligible Person’s termination of employment or service to a general release of claims and/or a noncompetition or other restricted covenant agreement in favor of the Company and the Affiliates, with the terms and conditions of such agreement(s) to be determined in good faith by the Committee. +(f) Dividends and Dividend Equivalents Subject to Forfeiture . Any dividend or Dividend Equivalent credited with respect to any Award (except for dividends paid following the grant of a Stock Award, which is an Award of unrestricted (i.e., fully vested) shares of Stock) shall be subject to restrictions and a risk of forfeiture to the same extent as the Award with respect to which such Stock or other property has been distributed and shall not be delivered unless and until such Award has vested and been earned. +8. Subdivision or Consolidation; Recapitalization; Change in Control; Reorganization . +(a) Existence of Plans and Awards . The existence of the Plan and the Awards granted hereunder shall not affect in any way the right or power of the Company, the Board or the stockholders of the Company to make or authorize any adjustment, recapitalization, reorganization or other change in the Company’s capital structure or its business, any merger or consolidation of the Company, any issue of debt or equity securities ahead of or affecting Stock or the rights thereof, the dissolution or liquidation of the Company or any sale, lease, exchange or other disposition of all or any part of its assets or business or any other corporate act or proceeding. +(b) Additional Issuances . Except as expressly provided herein, the issuance by the Company of shares of stock of any class, including upon conversion of shares or obligations of the Company convertible into such shares or other securities, and in any case whether or not for fair value, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number of shares of Stock subject to Awards theretofore granted or the purchase price per share of Stock, if applicable. +(c) Subdivision or Consolidation of Shares . The terms of an Award and the share limitations under the Plan shall be subject to adjustment by the Committee from time to time, in accordance with the following provisions: +(i) If at any time, or from time to time, the Company shall subdivide as a whole (by reclassification, by a Stock split, by the issuance of a distribution on Stock payable in Stock, or otherwise) the number of shares of Stock then outstanding into a greater number of shares of Stock or in the event the Company distributes an extraordinary cash dividend, then, as appropriate (A) the maximum number of shares of Stock available for delivery with respect to Awards and applicable limitations with respect to Awards provided in Section 4 and Section 5 (other than cash limits) shall be increased proportionately, and the kind of shares or other securities available for the Plan shall be appropriately adjusted, (B) the number of shares of Stock (or other kind of shares or securities) that may be acquired under any then-outstanding Award shall be increased proportionately, and (C) the price (including the Exercise Price or grant price) for each share of Stock (or other kind of shares or securities) subject to then-outstanding Awards shall be reduced proportionately, without changing the aggregate purchase price or value as to which outstanding Awards remain exercisable or subject to restrictions; provided , however , that in the case of an extraordinary cash dividend that is not an Adjustment Event, the adjustment to the number of shares of Stock and the Exercise Price or grant price, as applicable, with respect to an outstanding Option or SAR may be made in such other manner as the Committee may determine that is permitted pursuant to applicable tax and other laws, rules and regulations. Notwithstanding the foregoing, Awards that already have a right to receive extraordinary cash dividends as a result of Dividend Equivalents or other dividend rights will not be adjusted as a result of an extraordinary cash dividend. +(ii) If at any time, or from time to time, the Company shall consolidate as a whole (by reclassification, by reverse Stock split, or otherwise) the number of shares of Stock then outstanding into a lesser number of shares of Stock, then, as appropriate (A) the maximum number of shares of Stock available for delivery with respect to Awards and applicable limitations with respect to Awards provided in Section 4 and Section 5 (other than cash limits) shall be decreased proportionately, and the kind of shares or other securities available for the Plan shall be appropriately adjusted, (B) the number of shares of Stock (or other kind of shares or securities) that may be acquired under any then-outstanding Award shall be decreased proportionately, and (C) the price (including the Exercise Price or grant price) for each share of Stock (or other kind of shares or securities) subject to then-outstanding Awards shall be increased proportionately, without changing the aggregate purchase price or value as to which outstanding Awards remain exercisable or subject to restrictions. +(d) Recapitalization . In the event of any change in the capital structure or business of the Company or other corporate transaction or event that would be considered an “equity restructuring” within the meaning of ASC Topic 718 and, in each case, that would result in an additional compensation expense to the Company pursuant +PROPETRO  2026 Proxy Statement   |  A-11 +TABLE OF CONTENTS +to the provisions of ASC Topic 718, if adjustments to Awards with respect to such event were discretionary or otherwise not required (each such an event, an “ Adjustment Event ”), then the Committee shall equitably adjust (i) the aggregate number or kind of shares that thereafter may be delivered under the Plan, (ii) the number or kind of shares or other property (including cash) subject to an Award, (iii) the terms and conditions of Awards, including the purchase price or Exercise Price of Awards and performance goals, as applicable, and (iv) the applicable limitations with respect to Awards provided in Section 4 and Section 5 (other than cash limits) to equitably reflect such Adjustment Event (“ Equitable Adjustments ”). In the event of any change in the capital structure or business of the Company or other corporate transaction or event that would not be considered an Adjustment Event, and is not otherwise addressed in this Section 8 , the Committee shall have complete discretion to make Equitable Adjustments (if any) in such manner as it deems appropriate with respect to such other event. +(e) Change in Control and Other Events . +(i) Treatment of Awards Assumed or Substituted by a Successor Entity . +(A) Except as otherwise provided in an Award Agreement, in the event of a Change in Control, in which any successor entity assumes outstanding Awards or substitutes similar awards under the successor entity’s equity compensation plan for outstanding Awards on the same terms and conditions as the original Awards, such Awards that are assumed or substituted shall not vest solely with respect to the occurrence of the Change in Control. +(B) Except as otherwise provided in an Award Agreement, if, in connection with or within twelve (12) months following a Change in Control, a Participant’s service, consulting relationship, or employment with the Company, an Affiliate, and the Successor Entity and its affiliates is terminated without cause (as defined in the Award Agreement evidencing such Award or substitute award), the vesting and exercisability of all Awards, including substitute awards, then held by such Participant will be accelerated in full and be settled, as applicable, no later than sixty (60) days following the conclusion of the service or employment relationship (unless the Nonqualified Deferred Compensation Rules would prohibit such acceleration of settlement, in which case such Awards shall vest but will be settled at date(s) of settlement specified in the applicable Award Agreement) and the expiration date of any Options shall be the day three months following the date the Participant ceases to be an employee or service provider to the Company, an Affiliate of the Company and the Successor Entity and its affiliates. Except as otherwise provided in an Award Agreement, for Awards that vest based on performance, the number of performance Awards that shall vest and be settled in accordance with this Section 8(e)(i)(B) , shall be calculated assuming the attainment of the target level of performance as set forth in a performance Award. +(ii) Treatment of Awards not Assumed or Substituted . Unless otherwise provided in an Award Agreement, if, upon a Change in Control, the successor entity does not assume outstanding Awards or substitute similar awards under the successor entity’s equity compensation plan for outstanding Awards on the same terms and conditions as the original Awards, then the vesting of all outstanding Awards will be accelerated in full with effect immediately prior to the occurrence of the Change in Control and shall be settled, as applicable, no later than sixty (60) days following the Change in Control (unless the Nonqualified Deferred Compensation Rules would prohibit such acceleration of settlement, in which case such Awards will be settled at the originally specified date(s) of settlement). The Participant shall be permitted to conditionally redeem or exercise any or all Options, as applicable, effective immediately prior to the completion of any such transaction for the sole purpose of participating in such transaction. For Awards that vest based on performance, for the purpose of determining the achievement performance criteria, as set forth in the particular Award Agreement, and calculating the number of performance Awards that shall vest in accordance with this Section 8(e)(ii) , notwithstanding the terms of the Award Agreement, and unless otherwise provided by the Committee, such performance Awards shall be settled at the greater of (A) the target level of performance as set forth in the performance Award, and (B) the actual performance achieved, measured and calculated as of the date of the Change in Control pursuant to shortened performance period ending on the occurrence of the Change in Control. +If an Adjustment Event occurs, this Section 8(e) shall only apply to the extent it is not in conflict with Section 8(d) . +9. General Provisions . +(a) Tax Withholding . The Company and any Affiliate are authorized to withhold from any Award granted, or any payment relating to an Award, including from a distribution of Stock, taxes due or potentially payable in +A-12  |   ir.propetroservices.com +TABLE OF CONTENTS +connection with any transaction involving an Award, and to take such other action as the Committee may deem advisable to enable the Company, the Affiliates and Participants to satisfy the payment of withholding taxes and other tax obligations relating to any Award in such amounts as may be determined by the Committee. The Committee shall determine, in its sole discretion, the form of payment acceptable for such tax withholding obligations, including the delivery of cash or cash equivalents, Stock (including through delivery of previously owned shares, net settlement, a broker-assisted sale, or other cashless withholding or reduction of the amount of shares otherwise issuable or delivered pursuant to the Award), other property, or any other legal consideration the Committee deems appropriate. Any determination made by the Committee to allow a Participant who is subject to Rule 16b-3 to pay taxes with shares of Stock through net settlement or previously owned shares shall be approved by either a committee made up of solely two or more Qualified Members or the full Board. If such tax withholding amounts are satisfied through net settlement or previously owned shares, the maximum number of shares of Stock that may be so withheld or surrendered shall be the number of shares of Stock that have an aggregate Fair Market Value on the date of withholding or surrender equal to the aggregate amount of such tax liabilities determined based on the greatest withholding rates for federal, state, foreign and/or local tax purposes, including payroll taxes, that may be utilized without creating adverse accounting treatment for the Company with respect to such Award, as determined by the Committee. +(b) Limitation on Rights Conferred under Plan . Neither the Plan nor any action taken hereunder shall be construed as (i) giving any Eligible Person or Participant the right to continue as an Eligible Person or Participant or in the employ or service of the Company or any Affiliate, (ii) interfering in any way with the right of the Company or any Affiliate to terminate any Eligible Person’s or Participant’s employment or service relationship at any time, (iii) giving an Eligible Person or Participant any claim to be granted any Award under the Plan or to be treated uniformly with other Participants and/or employees and/or other service providers, or (iv) conferring on a Participant any of the rights of a stockholder of the Company unless and until the Participant is duly issued or transferred shares of Stock in accordance with the terms of an Award. +(c) Governing Law; Submission to Jurisdiction . All questions arising with respect to the provisions of the Plan and Awards shall be determined by application of the laws of the State of Delaware, without giving effect to any conflict of law provisions thereof, except to the extent Delaware law is preempted by federal law. The obligation of the Company to sell and deliver Stock hereunder is subject to applicable federal and state laws and to the approval of any governmental authority required in connection with the authorization, issuance, sale, or delivery of such Stock. With respect to any claim or dispute related to or arising under the Plan, the Company and each Participant who accepts an Award hereby consent to the exclusive jurisdiction, forum and venue of the state and federal courts located in Houston, Texas. +(d) Severability and Reformation . If any provision of the Plan or any Award is or becomes or is deemed to be invalid, illegal, or unenforceable in any jurisdiction or as to any person or Award, or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to the applicable law or, if it cannot be construed or deemed amended without, in the determination of the Committee, materially altering the intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction, person or Award and the remainder of the Plan and any such Award shall remain in full force and effect. If any of the terms or provisions of the Plan or any Award Agreement conflict with the requirements of Rule 16b-3 (as those terms or provisions are applied to Eligible Persons who are subject to Section 16 of the Exchange Act) or Section 422 of the Code (with respect to ISOs), then those conflicting terms or provisions shall be deemed inoperative to the extent they so conflict with the requirements of Rule 16b-3 (unless the Board or the Committee, as appropriate, has expressly determined that the Plan or such Award should not comply with Rule 16b-3) or Section 422 of the Code, in each case, only to the extent Rule 16b-3 and Section 422 of the Code are applicable. With respect to ISOs, if the Plan does not contain any provision required to be included herein under Section 422 of the Code, that provision shall be deemed to be incorporated herein with the same force and effect as if that provision had been set out at length herein; provided , further , that, to the extent any Option that is intended to qualify as an ISO cannot so qualify, that Option (to that extent) shall be deemed a Nonstatutory Option for all purposes of the Plan. +(e) Unfunded Status of Awards; No Trust or Fund Created . The Plan is intended to constitute an “unfunded” plan for certain incentive awards. Neither the Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or any Affiliate and a Participant or any other person. To the extent that any person acquires a right to receive payments from the Company or any Affiliate pursuant to an Award, such right shall be no greater than the right of any general unsecured creditor of the Company or such Affiliate. +PROPETRO  2026 Proxy Statement   |  A-13 +TABLE OF CONTENTS +(f) Nonexclusivity of the Plan . Neither the adoption of the Plan by the Board nor its submission to the stockholders of the Company for approval shall be construed as creating any limitations on the power of the Board or a committee thereof to adopt such other incentive arrangements as it may deem desirable. Nothing contained in the Plan shall be construed to prevent the Company or any Affiliate from taking any corporate action which is deemed by the Company or such Affiliate to be appropriate or in its best interest, whether or not such action would have an adverse effect on the Plan or any Award made under the Plan. No employee, beneficiary or other person shall have any claim against the Company or any Affiliate as a result of any such action. +(g) Fractional Shares . No fractional shares of Stock shall be issued or delivered pursuant to the Plan or any Award, and the Committee shall determine in its sole discretion whether cash, other securities, or other property shall be paid or transferred in lieu of any fractional shares of Stock or whether such fractional shares of Stock or any rights thereto shall be cancelled, terminated, or otherwise eliminated with or without consideration. +(h) Interpretation . Headings are given to the Sections and subsections of the Plan solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of the Plan or any provision thereof. Words in the masculine gender shall include the feminine gender, and, where appropriate, the plural shall include the singular and the singular shall include the plural. In the event of any conflict between the terms and conditions of an Award Agreement and the Plan, the provisions of the Plan shall control. The use herein of the word “including” following any general statement, term or matter shall not be construed to limit such statement, term or matter to the specific items or matters set forth immediately following such word or to similar items or matters, whether or not non-limiting language (such as “without limitation”, “but not limited to”, or words of similar import) is used with reference thereto, but rather shall be deemed to refer to all other items or matters that could reasonably fall within the broadest possible scope of such general statement, term or matter. References herein to any agreement, instrument or other document means such agreement, instrument or other document as amended, supplemented and modified from time to time to the extent permitted by the provisions thereof and not prohibited by the Plan. +(i) Facility of Payment . Any amounts payable hereunder to any individual under legal disability or who, in the judgment of the Committee, is unable to manage properly his financial affairs, may be paid to the legal representative of such individual, or may be applied for the benefit of such individual in any manner that the Committee may select, and the Company shall be relieved of any further liability for payment of such amounts. +(j) Conditions to Delivery of Stock . Nothing herein or in any Award Agreement shall require the Company to issue any shares with respect to any Award if that issuance would, in the opinion of counsel for the Company, constitute a violation of the Securities Act, any other applicable statute or regulation, or the rules of any applicable securities exchange or securities association, as then in effect. In addition, each Participant who receives an Award under the Plan shall not sell or otherwise dispose of Stock that is acquired upon grant, exercise or vesting of an Award in any manner that would constitute a violation of any applicable federal or state securities laws, the Plan or the rules, regulations or other requirements of the SEC or any stock exchange upon which the Stock is then listed. At the time of any exercise of an Option or SAR, or at the time of any grant of any other Award, the Company may, as a condition precedent to the exercise of such Option or SAR or settlement of any other Award, require from the Participant (or in the event of his or her death, his or her legal representatives, heirs, legatees, or distributees) such written representations, if any, concerning the holder’s intentions with regard to the retention or disposition of the shares of Stock being acquired pursuant to the Award and such written covenants and agreements, if any, as to the manner of disposal of such shares as, in the opinion of counsel to the Company, may be necessary to ensure that any disposition by that holder (or in the event of the holder’s death, his or her legal representatives, heirs, legatees, or distributees) will not involve a violation of the Securities Act, any other applicable state or federal statute or regulation, or any rule of any applicable securities exchange or securities association, as then in effect. Stock or other securities shall not be delivered pursuant to any Award until payment in full of any amount required to be paid pursuant to the Plan or the applicable Award Agreement (including any Exercise Price, grant price, or tax withholding) is received by the Company. +(k) Section 409A of the Code . It is the general intention, but not the obligation, of the Committee to design Awards to comply with or to be exempt from the Nonqualified Deferred Compensation Rules, and Awards will be operated and construed accordingly. Neither this Section 9(k) nor any other provision of the Plan is or contains a representation to any Participant regarding the tax consequences of the grant, vesting, exercise, settlement, or sale of any Award (or the Stock underlying such Award) granted hereunder, and should not be interpreted as such. In no event shall the Company be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by the Participant on account of non-compliance with the Nonqualified Deferred Compensation Rules. Notwithstanding any provision in the Plan or an Award Agreement to the contrary, in the event that a “specified employee” (as defined under the Nonqualified Deferred Compensation Rules) becomes +A-14  |   ir.propetroservices.com +TABLE OF CONTENTS +entitled to a payment under an Award that would be subject to additional taxes and interest under the Nonqualified Deferred Compensation Rules if the Participant’s receipt of such payment or benefits is not delayed until the earlier of (i) the date of the Participant’s death, or (ii) the date that is six months after the Participant’s “separation from service,” as defined under the Nonqualified Deferred Compensation Rules (such date, the “ Section 409A Payment Date ”), then such payment or benefit shall not be provided to the Participant until the Section 409A Payment Date. Any amounts subject to the preceding sentence that would otherwise be payable prior to the Section 409A Payment Date will be aggregated and paid in a lump sum without interest on the Section 409A Payment Date. The applicable provisions of the Nonqualified Deferred Compensation Rules are hereby incorporated by reference and shall control over any Plan or Award Agreement provision in conflict therewith. +(l) Clawback . The Plan and all Awards granted hereunder are subject to any written clawback policies that the Company, with the approval of the Board or an authorized committee thereof, may adopt either prior to or following the Effective Date, including any policy adopted to conform to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and rules promulgated thereunder by the SEC and that the Company determines should apply to Awards. Any such policy may subject a Participant’s Awards and amounts paid or realized with respect to Awards to reduction, cancelation, forfeiture or recoupment if certain specified events or wrongful conduct occur, including an accounting restatement due to the Company’s material noncompliance with financial reporting regulations or other events or wrongful conduct specified in any such clawback policy. +(m) Status under ERISA . The Plan shall not constitute an “employee benefit plan” for purposes of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended. +(n) Plan Effective Date and Term . The Plan was adopted by the Board to be effective on the Effective Date. No Awards may be granted under the Plan on and after the tenth anniversary of the Effective Date, which is May 19, 2036. However, any Award granted prior to such termination (or any earlier termination pursuant to Section 10 ), and the authority of the Board or Committee to amend, alter, adjust, suspend, discontinue, or terminate any such Award or to waive any conditions or rights under such Award in accordance with the terms of the Plan, shall extend beyond such termination until the final disposition of such Award. +10. Amendments to the Plan and Awards. The Committee may amend, alter, suspend, discontinue or terminate any Award or Award Agreement, the Plan or the Committee’s authority to grant Awards without the consent of stockholders or Participants, except that any amendment or alteration to the Plan, including any increase in any share limitation, shall be subject to the approval of the Company’s stockholders not later than the annual meeting next following such Committee action if such stockholder approval is required by any federal or state law or regulation or the rules of any stock exchange or automated quotation system on which the Stock may then be listed or quoted, and the Committee may otherwise, in its discretion, determine to submit other changes to the Plan to stockholders for approval; provided , that, without the consent of an affected Participant, no such Committee action may materially and adversely affect the rights of such Participant under any previously granted and outstanding Award. For purposes of clarity, any adjustments made to Awards pursuant to Section 8 will be deemed not to materially and adversely affect the rights of any Participant under any previously granted and outstanding Award and therefore may be made without the consent of affected Participants. +PROPETRO  2026 Proxy Statement   |  A-15 +TABLE OF CONTENTS +TABLE OF CONTENTS +PROPETRO HOLDING CORP. Mr AB Sample Sample Street Sample Town Sampleshire, XXX XXX HAVE YOUR PROXY CARD READY AND PLEASE USE ONE OF THE EASY VOTING METHODS BELOW Internet: www.AALVote.com/PUMP • Cast your vote online • Have your Proxy Card ready • Follow the simple instructions to record your vote Phone: Call 1-866-804-9616 • Use any touch tone telephone • Have your Proxy Card ready • Follow the simple recorded instructions Mail: • Mark, sign and date your Proxy Card • Fold and return your Proxy Card in the Prepaid Envelope provided In Person: • Annual Meeting of Stockholders to be held in person on Tuesday, May 19, 2026 at 10:00 A.M. Central Time 2518 FM 307 Midland, Texas 79706 Scan QR Code for Digital Voting PLEASE DETACH ALONG PERFORATED LINE AND MAIL IN THE ENVELOPE PROVIDED. t t PROPETRO HOLDING CORP. ANNUAL MEETING OF STOCKHOLDERS MAY 19, 2026, AT 10:00 A.M. CENTRAL TIME THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF PROPETRO HOLDING CORP. The undersigned stockholder hereby appoints each of Samuel D. Sledge and John J. Mitchell as attorney and proxy for the undersigned, with the power to appoint his substitute, to represent and to vote all the shares of common stock of PROPETRO HOLDING CORP., which the undersigned would be entitled to vote, at the Company’s Annual Meeting of Stockholders to be held in person on Tuesday, May 19, 2026, at 10:00 A.M. Central Time 2518 FM 307 Midland, Texas 79706 and at any postponements, continuations or adjournments thereof (the “Annual Meeting”). In their discretion, the proxies are authorized to vote upon (i) the election of any person to the Board of Directors if any nominee named herein becomes unable to serve or for good cause will not serve, (ii) any matter that the Board of Directors of the Company did not know would be presented at the Annual Meeting by a reasonable time before the proxy solicitation was made and (iii) any other matter that may properly come before the Annual Meeting or any postponements, continuations or adjournments thereof. This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the Board of Directors’ recommendations. Signature_____________________________________________________ Date_________________________________________________________ Title__________________________________________________________ Signature (Joint Owners)______________________________________ NOTE: Please sign exactly as name appears hereon. When shares are held by joint owners, both should sign. When signing as an attorney, executor, administrator, trustee, guardian, or corporate officer, please give title as such I PLAN TO ATTEND THE GENERAL MEETING o Address change/Comments: If you noted any Address Changes and/ or Comments, please mark box. o CONTROL NUMBER CONTROL NUMBER Mr AB Sample Sample Street Sample Town Sampleshire, XXX XXX As a stockholder of PROPETRO HOLDING CORP., you have the option of voting your shares electronically through the Internet or by telephone, eliminating the need to return the proxy card. Your electronic or telephonic vote authorizes the named proxies to vote your shares in the same manner as if you marked, signed, dated, and returned the proxy card. Votes submitted electronically over the Internet or by telephone must be received by May 18, 2026 at 11:59 P.M. Eastern Time. +TABLE OF CONTENTS +2. Approval, on an advisory basis, of the compensation of our named executive officers FORoAGAINSToABSTAIN o 3. Approval of the Third Amended and Restated 2020 Long-Term Incentive Plan FORoAGAINSToABSTAIN o 4. Ratification of the appointment of RSM US LLP as our independent, registered public accounting firm for the fiscal year ending December 31, 2026 FORoAGAINSToABSTAIN o 5. Transaction of such other business as may properly come before the meeting Please mark your votes like this  1. Election of eight director nominees to serve for a one-year term. o FOR ALL NOMINEES LISTED BELOW (except as marked to the contrary below) o WITHHOLD AUTHORITY TO VOTE FOR ALL NOMINEES LISTED BELOW INSTRUCTION: TO WITHOLD AUTHORITY TO VOTE FOR ONE OR MORE INDIVIDUAL NOMINEES STRIKE A LINE THROUGH THE NOMINEES NAMES BELOW: _______________________________________________________________________ _______________________________________________________________________ ELECTION OF DIRECTORS: 1. Mark S. Berg 2. Anthony J. Best 3. Phillip A. Gobe 4. G. Larry Lawrence 5. Samuel D. Sledge 6. Mary P. Ricciardello 7. Michele Vion 8. Alex V. Volkov When properly executed, your proxy card/voting instruction form will be voted in the manner you direct. If you do not specify your choices, your shares will be voted FOR all nominees set forth in Proposal 1, “FOR” Proposals 2, 3 and 4. PLEASE DETACH ALONG PERFORATED LINE AND MAIL IN THE ENVELOPE PROVIDED. t t Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be held on May 19, 2026: The Proxy Statement and our 2025 Annual Report to Stockholders are available at: https://web.viewproxy.com/propetro/2026 +DEF 14A +0001680247 +false +0001680247 +2025-01-01 +2025-12-31 +0001680247 +pump:SamuelSledgeMember +2025-01-01 +2025-12-31 +0001680247 +pump:SamuelSledgeMember +2024-01-01 +2024-12-31 +0001680247 +2024-01-01 +2024-12-31 +0001680247 +pump:SamuelSledgeMember +2023-01-01 +2023-12-31 +0001680247 +2023-01-01 +2023-12-31 +0001680247 +pump:SamuelSledgeMember +2022-01-01 +2022-12-31 +0001680247 +2022-01-01 +2022-12-31 +0001680247 +pump:PhillipGobeMember +2021-01-01 +2021-12-31 +0001680247 +pump:SamuelSledgeMember +2021-01-01 +2021-12-31 +0001680247 +2021-01-01 +2021-12-31 +0001680247 +ecd:EqtyAwrdsInSummryCompstnTblForAplblYrMember +ecd:PeoMember +pump:SamuelSledgeMember +2025-01-01 +2025-12-31 +0001680247 +ecd:YrEndFrValOfEqtyAwrdsGrntdInCvrdYrOutsdngAndUnvstdMember +ecd:PeoMember +pump:SamuelSledgeMember +2025-01-01 +2025-12-31 +0001680247 +ecd:VstngDtFrValOfEqtyAwrdsGrntdAndVstdInCvrdYrMember +ecd:PeoMember +pump:SamuelSledgeMember +2025-01-01 +2025-12-31 +0001680247 +ecd:ChngInFrValOfOutsdngAndUnvstdEqtyAwrdsGrntdInPrrYrsMember +ecd:PeoMember +pump:SamuelSledgeMember +2025-01-01 +2025-12-31 +0001680247 +ecd:ChngInFrValAsOfVstngDtOfPrrYrEqtyAwrdsVstdInCvrdYrMember +ecd:PeoMember +pump:SamuelSledgeMember +2025-01-01 +2025-12-31 +0001680247 +pump:EquityAwardsGrantedInPriorYearsThatWereForfeitedDuringTheYearMember +ecd:PeoMember +pump:SamuelSledgeMember +2025-01-01 +2025-12-31 +0001680247 +ecd:DvddsOrOthrErngsPdOnEqtyAwrdsNtOthrwsRflctdInTtlCompForCvrdYrMember +ecd:PeoMember +pump:SamuelSledgeMember +2025-01-01 +2025-12-31 +0001680247 +ecd:EqtyAwrdsAdjsMember +ecd:PeoMember +pump:SamuelSledgeMember +2025-01-01 +2025-12-31 +0001680247 +ecd:EqtyAwrdsInSummryCompstnTblForAplblYrMember +ecd:NonPeoNeoMember +2025-01-01 +2025-12-31 +0001680247 +ecd:YrEndFrValOfEqtyAwrdsGrntdInCvrdYrOutsdngAndUnvstdMember +ecd:NonPeoNeoMember +2025-01-01 +2025-12-31 +0001680247 +ecd:VstngDtFrValOfEqtyAwrdsGrntdAndVstdInCvrdYrMember +ecd:NonPeoNeoMember +2025-01-01 +2025-12-31 +0001680247 +ecd:ChngInFrValOfOutsdngAndUnvstdEqtyAwrdsGrntdInPrrYrsMember +ecd:NonPeoNeoMember +2025-01-01 +2025-12-31 +0001680247 +ecd:ChngInFrValAsOfVstngDtOfPrrYrEqtyAwrdsVstdInCvrdYrMember +ecd:NonPeoNeoMember +2025-01-01 +2025-12-31 +0001680247 +pump:EquityAwardsGrantedInPriorYearsThatWereForfeitedDuringTheYearMember +ecd:NonPeoNeoMember +2025-01-01 +2025-12-31 +0001680247 +ecd:DvddsOrOthrErngsPdOnEqtyAwrdsNtOthrwsRflctdInTtlCompForCvrdYrMember +ecd:NonPeoNeoMember +2025-01-01 +2025-12-31 +0001680247 +ecd:EqtyAwrdsAdjsMember +ecd:NonPeoNeoMember +2025-01-01 +2025-12-31 +0001680247 +1 +2025-01-01 +2025-12-31 +0001680247 +2 +2025-01-01 +2025-12-31 +0001680247 +3 +2025-01-01 +2025-12-31 +iso4217:USD \ No newline at end of file diff --git a/raw/proxies/0001680247/0001104659-26-040891/proxy_rpt.txt b/raw/proxies/0001680247/0001104659-26-040891/proxy_rpt.txt new file mode 100644 index 0000000000000000000000000000000000000000..f93fc5cadedf2c40b5a7a751fba07e51b568721c --- /dev/null +++ b/raw/proxies/0001680247/0001104659-26-040891/proxy_rpt.txt @@ -0,0 +1,13 @@ +Certain Relationships and Related Party Transactions +RELATED PARTY TRANSACTIONS +Operations and Maintenance Yards +The Company previously rented three yards from South Midkiff Partners, LLC, an entity partially owned by Spencer D. Armour III, a director, and David Sledge, the father of Sam Sledge, our Chief Executive Officer. Total annual rent expense in 2025 for each of the three yards was approximately $0.02 million, $0.1 million, and $0.1 million, respectively. +Transportation and Equipment Rental +Adam Muñoz, our President and Chief Operating Officer, has a family relationship with an employee of J&M Burns Transportation, an entity that provides transportation services to the Company. The employee receives a portion of his compensation from J&M Burns Transportation based on the amount of services sold by him to customers, including the Company. The Company incurred approximately $18.8 million in expense for the year ended December 31, 2025 for services provided to the Company by J&M Burns Transportation. +Executive Officer Family Members +Oscar M. Dominguez is our Vice President of Hydraulic Fracturing Operations and the brother-in-law of Adam Muñoz. Mr. Dominguez received total compensation of approximately $1,555,000 for his services for the year ended December 31, 2025 (including approximately $1,143,000 cash compensation and approximately $412,000 non-cash equity compensation). +Roger Dominguez was formerly our Supply Chain Logistics Manager and the brother-in-law of Adam Muñoz. Mr. Dominguez received total compensation of approximately $336,000 for his services for the year ended December 31, 2025 (including approximately $286,000 cash compensation and approximately $50,000 non-cash equity compensation). +Pioneer +On December 31, 2018, we consummated the purchase of certain pressure pumping assets and real property from Pioneer and Pioneer Pumping Services (the “Pioneer Pressure Pumping Acquisition”) in exchange for 16.6 million shares of our common stock and $110.0 million in cash. In May 2024, Pioneer merged with and into a wholly owned subsidiary of ExxonMobil after which ExxonMobil became the owner of these shares. We currently provide pressure pumping, wireline and other services to ExxonMobil and previously provided such services to Pioneer. +On April 22, 2024, we entered into a sub-agreement for Hydraulic Fracturing Services with XTO Energy Inc., (“XTO”) a wholly owned subsidiary of ExxonMobil, pursuant to which we agreed to provide hydraulic fracturing, wireline and pumpdown services with two committed FORCE ® electric-powered hydraulic fracturing fleets and the option to add a third FORCE ® fleet (also with wireline and pumpdown services) for a certain number of contracted hours with respect to each fleet, subject to certain termination and release rights. +20  |   ir.propetroservices.com \ No newline at end of file